FINANCIAL REPORT 2022

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Contents

Contents
Nishi-Nippon Financial Holdings, Inc. and Subsidiaries
Consolidated Balance Sheet ...................................................................... 2
Consolidated Statement of Income ............................................................ 3
Consolidated Statement of Comprehensive Income ................................... 3
Consolidated Statement of Changes in Net Assets .................................... 4
Consolidated Statement of Cash Flows ...................................................... 6
Notes to Consolidated Financial Statements .............................................. 7
Quarterly Information (Unaudited).............................................................. 48
The Nishi-Nippon City Bank, Ltd.
Non-Consolidated Balance Sheet (Unaudited) .......................................... 49
Non-Consolidated Statement of Income (Unaudited)................................. 50
Non-Consolidated Statement of Changes in Net Assets (Unaudited) ........ 51
The Bank of Nagasaki, Ltd.
Non-Consolidated Balance Sheet (Unaudited) .......................................... 54
Non-Consolidated Statement of Income (Unaudited) ................................ 55
Non-Consolidated Statement of Changes in Net Assets (Unaudited) ........ 56
Notes to Non-Consolidated Financial Statements (Unaudited) ...................... 57
Independent Auditor’s Report ....................................................................... 58

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 20221

Consolidated Balance Sheet
Nishi-Nippon Financial Holdings, Inc. and Subsidiaries
31st March, 2022 and 2021
Thousands of
U.S. dollars (Note 1)

Millions of yen

2022

2021

2022

¥2,614,747¥1,738,761$21,364,060

39,62136,722

323,728—131—

11,682

11,273

95,451

Assets:Cash and due from banks (Note 6)
Commercial paper and other debt purchased
Trading account assets (Notes 3 and 27)
Money held in trust (Note 28)
Securities (Notes 4, 6, 26 and 27)

1,773,344

1,506,834

14,489,291

Loans and bills discounted (Notes 5, 6, 7 and 26)

8,470,861

8,543,946

69,212,040

Foreign exchange assets (Note 8)

22,757

11,074

185,940

Other assets (Notes 6, 9)

90,311

115,565

737,902

Tangible fixed assets (Notes 10 and 16)

949,201

116,172

117,551

Intangible fixed assets

4,160

3,542

33,993

Asset for retirement benefits (Note 30)

7,548

17,77061,674

Deferred tax assets (Note 31)

2,109

473

17,237

Customers’ liabilities for acceptances and guarantees

17,63916,565

144,126

Reserve for possible loan losses (Note 26)(42,473)(44,068)(347,033)

Reserve for devaluation of securities
Total assets

(577)

(577)

(4,717)¥13,127,906¥12,075,567$107,262,897$80,354,907

Liabilities and net assets:
Liabilities:
Deposits (Notes 6, 11, and 26)¥9,834,637¥9,484,009

Call money and bills sold (Note 6)

510,000

208,128

4,167,007

Payables under repurchase agreements (Note 6)

251,120

194,294

2,051,805

Guarantee deposits received under securities lending transactions (Note 6)
Borrowed money (Notes 6, 12 and 26)

87,18841,135712,380

1,755,240

1,437,688

14,341,375

Foreign exchange liabilities (Note 8)

201

210

1,645

Borrowed money from trust account

4,794

3,205

39,177

113,952

107,648

931,061

4,773

477

39,001

Reserve for retirement benefits for directors and corporate auditors

201

256

1,643

Reserve for reimbursement of deposits

825

1,185

6,741
8,960

Other liabilities (Note 13)
Liability for retirement benefits (Note 30)

1,096

1,254

Reserve under the special laws

Reserve for other contingent losses

12

12

105

Deferred tax liabilities (Note 31)844

13,841

6,896

Deferred tax liabilities on revaluation of premises (Note 16)

14,652

14,746

119,718

Acceptances and guarantees

17,63916,565

144,126

12,597,181

11,524,660

102,926,555

Total liabilities
Net assets:
Capital stock (Note 14)

50,00050,000408,530

Capital surplus

121,123

127,202989,654

Earned surplus

304,236

284,535

2,485,792(5,522)(8,597)(45,123)

469,837

453,140

3,838,853

38,616

65,238315,522(8)(1,428)(67)

Revaluation of premises, net of taxes (Note 16)

29,43829,592

240,534

Retirement benefits liability adjustments, net of taxes (Note 30)(15,715)(3,751)(128,402)

52,33289,651

427,587

8,555

8,114

69,901

530,724

550,906

4,336,342¥13,127,906¥12,075,567$107,262,897

Treasury stock (Note 15)
Total shareholders’ equity
Net unrealized gains on securities available for sale, net of taxes (Note 27)
Net deferred gains (losses) on hedging instruments, net of taxes

Total accumulated other comprehensive income
Non-controlling interests
Total net assets (Note 37)
Total liabilities and net assets
See accompanying Notes to Consolidated Financial Statements.

2

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

Consolidated Statement of Income
Nishi-Nippon Financial Holdings, Inc. and Subsidiaries
Years ended 31st March, 2022 and 2021
Thousands of
U.S. dollars (Note 1)

Millions of yen

2022

2021

¥81,109
12,8934,225
032,468
1,919
3,069
2,941
138,627¥82,193
9,985
1,911
0
30,879
1,842
4,972
3,585
135,371$662,716
105,346
34,5220265,287
15,67925,07924,033
1,132,666

443
(113)
383

699
(39)
911

3,627
(926)
3,131

13
52
75
11,536
1,654
79,173
8,253
101,472
37,15444253
194
11,832
1,855
81,272
12,446
109,472
25,898111431
612
94,25813,514
646,892
67,437
829,093
303,572

10,824
1,518
12,342
24,811

6,719
552
7,272
18,62688,443
12,404
100,847
202,725575¥24,236537¥18,088

4,698$198,026

2022

Income:Interest and dividend income:Interest on loans and discounts
Interest and dividends on securities
Other interest income (Note 17)
Trust fees
Fees and commissions
Trading income
Other operating income (Note 18)
Other income (Note 19)
Total income
Expenses:
Interest expenses:
Interest on deposits
Interest on call money and bills soldInterest on payables under repurchase agreements
Interest on guarantee deposits received under securities lendingtransactions
Interest on borrowings
Other interest expenses (Note 20)
Fees and commissions
Other operating expenses (Note 21)
General and administrative expenses (Note 22)
Other expenses (Note 23)
Total expenses
Profit (loss) before income taxes
Income taxes (Note 31)
Current
Deferred
Total income taxes
Profit (loss)
Profit (loss) attributable to:Non-controlling interests
Owners of parent (Note 37)
See accompanying Notes to Consolidated Financial Statements.

Consolidated Statement of Comprehensive Income
Nishi-Nippon Financial Holdings, Inc. and Subsidiaries
Years ended 31st March, 2022 and 2021
Thousands of
U.S. dollars (Note 1)

Millions of yen

2022

2021

2022

¥24,811¥18,626$202,725

Net unrealized gains on securities available for sale

(26,560)

18,329(217,015)

Net deferred gains (losses) on hedging instruments

1,419

413

11,600(11,963)

10,735(97,752)(¥37,104)¥29,478($303,167)(¥12,293)¥48,104($100,442)(¥12,928)¥47,443($105,636)

¥635

¥661

$5,194

Profit (loss)
Other comprehensive income:Retirement benefits liability adjustments
Total other comprehensive income (Note 24)
Comprehensive income
Comprehensive income attributable to owners of parent
Comprehensive income attributable to non-controlling interests
See accompanying Notes to Consolidated Financial Statements.

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 20223

Consolidated Statement of Changes in Net Assets
Nishi-Nippon Financial Holdings, Inc. and Subsidiaries
Years ended 31st March, 2022 and 2021
Thousands of
U.S. dollars (Note 1)

Millions of yen

2022

2021

2022

¥50,000¥50,000$408,530———¥50,000¥50,000$408,530¥127,202¥129,477$1,039,321

Shareholders’ equity:
Capital stock (Note 14)
Balance at beginning of the year
Changes during the year
Total changes during the year
Balance at end of the year
Capital surplus
Balance at beginning of the year
Changes during the year
Sale of treasury stock
Retirement of treasury stock
Total changes during the year
Balance at end of the year

(0)

(0)

(1)

(6,078)(2,274)(49,666)(6,078)(2,274)(49,667)¥121,123¥127,202$989,654¥284,535¥270,954$2,324,825

(244)

—

(1,998)¥284,290¥270,954$2,322,827

Earned surplus
Balance at beginning of the year
Cumulative effects of changes in accounting policies
Restated balance
Changes during the year
Cash dividends paid (Note 38)(4,445)(4,861)(36,319)

Profit (loss) attributable to owners of parent

24,23618,088198,026

Reversal of revaluation of premises

153

353

1,257

Total changes during the year

19,945

13,580162,964¥304,236¥284,535$2,485,792(¥8,597)(¥9,868)($70,247)(3,004)(1,004)(24,546)

0

0

3

6,078

2,274

49,666

Balance at end of the year
Treasury stock (Note 15)
Balance at beginning of the year
Changes during the year
Acquisition of treasury stock
Sale of treasury stock
Retirement of treasury stock
Total changes during the year
Balance at end of the year

3,074

1,270

25,123(¥5,522)(¥8,597)($45,123)¥453,140¥440,563$3,702,430

(244)

—

(1,998)¥452,895¥440,563$3,700,431

Total shareholders’ equity
Balance at beginning of the year
Cumulative effects of changes in accounting policies
Restated balance
Changes during the year
Cash dividends paid (Note 38)(4,445)(4,861)(36,319)

Profit (loss) attributable to owners of parent

24,23618,088198,026

Acquisition of treasury stock(3,004)(1,004)(24,546)

0

0

2

153

353

1,257

Sale of treasury stockReversal of revaluation of premises
Total changes during the year
Balance at end of the year

4

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

16,941

12,577

138,421¥469,837¥453,140$3,838,853

Consolidated Statement of Changes in Net Assets
Nishi-Nippon Financial Holdings, Inc. and Subsidiaries
Years ended 31st March, 2022 and 2021

Thousands of
U.S. dollars (Note 1)

Millions of yen

2022

2021

2022

¥65,238¥47,032$533,033(26,621)

18,205(217,511)

Accumulated other comprehensive income:Net unrealized gains on securities available for sale, net of taxes
Balance at beginning of the year
Changes during the year
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the year

(26,621)

18,205(217,511)¥38,616¥65,238$315,522(¥1,428)(¥1,841)($11,667)

1,419

413

11,6001,419

413

11,600(¥8)(¥1,428)($67)¥29,592¥29,946$241,792

(153)

(353)

(1,257)

Net deferred gains (losses) on hedging instruments, net of taxes
Balance at beginning of the year
Changes during the year
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the year
Revaluation of premises, net of taxes
Balance at beginning of the year
Changes during the year
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the year

(153)

(353)

(1,257)¥29,438¥29,592$240,534(¥3,751)(¥14,486)($30,650)(11,963)

10,735(97,752)(11,963)

10,735(97,752)(¥15,715)(¥3,751)($128,402)¥89,651¥60,650$732,508(37,319)

29,000(304,920)

Retirement benefits liability adjustments
Balance at beginning of the year
Changes during the year
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the year
Total accumulated other comprehensive income
Balance at beginning of the year
Changes during the year
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the year

(37,319)

29,000(304,920)¥52,332¥89,651$427,587¥8,114¥7,544$66,301

(32)

—

(268)

¥8,081¥7,544$66,032

473

570

3,869

Non-controlling interests:
Balance at beginning of the year
Cumulative effects of changes in accounting policies
Restated balance
Changes during the year
Net changes in items other than shareholders’ equity
Total changes during the year

473

570

3,869

¥8,555¥8,114$69,901¥550,906¥508,758$4,501,239

(277)

—

(2,266)¥550,629¥508,758$4,498,972

Cash dividends paid (Note 38)(4,445)(4,861)(36,319)

Profit (loss) attributable to owners of parent

24,23618,088198,026

Acquisition of treasury stock(3,004)(1,004)(24,546)

0

0

2

153

353

1,257

(36,845)

29,571(301,051)(19,904)

42,148(162,630)¥530,724¥550,906$4,336,342

Balance at end of the year
Total net assets:
Balance at beginning of the year
Cumulative effects of changes in accounting policies
Restated balance
Changes during the year

Sale of treasury stockReversal of revaluation of premises
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the year
See accompanying Notes to Consolidated Financial Statements.

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 20225

Consolidated Statement of Cash Flows
Nishi-Nippon Financial Holdings, Inc. and Subsidiaries
Years ended 31st March, 2022 and 2021
Thousands of
U.S. dollars (Note 1)

Millions of yen

2021

2022

¥37,154
5,674
465
(56)
(1,595)0
10,222
4,295¥25,898
5,729
818
(86)
2,933
5
(12,490)(3,230)$303,572
46,3663,806(457)(13,035)
1
83,52235,097. Cash flows from operating activities:
Profit (loss) before income taxes
Depreciation
Losses on impairment of fixed assets
Equity in gains of nonconsolidated subsidiaries and affiliate(Decrease) increase in reserve for possible loan losses
Increase in reserve for devaluation of securities
Decrease (increase) in asset for retirement benefits
Increase (decrease) in liability for retirement benefits(Decrease) increase in reserve for retirement benefits for directors andcorporate auditors
Decrease in reserve for reimbursement of deposits
Decrease in reserve for other contingent losses
Income from lending activities
Funding costs
Gains on securities
Losses on money held in trust
Net foreign exchange gains
Losses on sale of tangible fixed assets
Net decrease in trading account assets
Net decrease (increase) in loans and bills discounted
Net increase in deposits
Net increase (decrease) in certificates of deposit
Net increase in borrowed money, exclusive of subordinated borrowings
Net increase in due from banks, exclusive of central bank
Net (increase) decrease in call loans
Net increase in call money
Net increase (decrease) in guarantee deposits received under securities
lending transactions
Net (increase) decrease in foreign exchange assets
Net (decrease) increase in foreign exchange liabilities
Net increase in borrowed money from trust accountInterest and dividends received
Interest paid
OthersSubtotal
Income taxes paid
Net cash provided by operating activities

(55)
(360)
(158)
(98,228)
855
(45)
5
(674)
248
131
73,084
274,854
75,772
317,552(979)(2,898)358,698

9
(444)
(175)
(94,090)
2,064(4,698)
11
(589)
34
1,254
(989,802)
813,917(160,955)
443,513(1,368)1,423
156,403(452)(2,945)(1,292)(802,585)
6,988
(370)
41
(5,510)2,029
1,071
597,1442,245,726
619,1092,594,596(8,001)(23,682)2,930,779

46,053(11,682)(9)
1,589
99,359(1,080)(32,145)
1,156,049(4,950)¥1,151,099(47,973)
3,332
92
2,369
96,159(3,318)16,025
252,774(9,717)¥243,056

376,282(95,452)(74)
12,989811,830(8,825)(262,650)
9,445,620(40,445)$9,405,175. Cash flows from investing activities:
Payments for purchase of securities
Proceeds from sale of securities
Proceeds from redemption of securities
Payments for increase in money held in trust
Payments for purchase of tangible fixed assets
Proceeds from sale of tangible fixed assets
Payments for purchase of intangible fixed assets
Net cash provided by investing activities(¥500,365)
126,185
111,026(426)(3,339)419(1,995)(¥268,495)(¥551,762)
116,648
240,120(5,930)(3,701)
1,376(1,132)(¥204,381)($4,088,285)
1,031,007
907,153(3,482)(27,289)
3,426(16,302)($2,193,772). Cash flows from financing activities:
Redemption of subordinated bonds
Dividends paid
Dividends paid to non-controlling shareholders
Payments for acquisition of treasury stock
Proceeds from sale of treasury stock
Net cash used in financing activities¥—(4,444)(162)(3,004)0(¥7,610)(¥10,000)(4,860)(91)(1,004)0(¥15,955)$—(36,315)(1,325)(24,546)2($62,183)

¥13

¥8

$112

¥875,006¥22,728$7,149,331. Cash and cash equivalents at beginning of the year

¥1,733,067¥1,710,338$14,160,208. Cash and cash equivalents at end of the year (Note 37)¥2,608,074¥1,733,067$21,309,539. Effects of changes in exchange rates on cash and cash equivalents. Net increase in cash and cash equivalents

See accompanying Notes to Consolidated Financial Statements.

6

2022

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

Notes to Consolidated Financial Statements
Nishi-Nippon Financial Holdings, Inc. and Subsidiaries

1. Basis of Presentation of Consolidated Financial Statements
The accompanying consolidated financial statements of Nishi-Nippon Financial Holdings, Inc. (the “Company”), and its consolidated
subsidiaries have been prepared in conformity with accounting principles generally accepted in Japan, which are different in certain respects
as to the application and disclosure requirements of International Financial Reporting Standards, and are compiled from the consolidated
financial statements prepared by the Company as required by the Financial Instruments and Exchange Law of Japan.
In addition, the notes to the consolidated financial statements include information which is not required under accounting principles
generally accepted in Japan but is presented herein as additional information.
Solely for the convenience of readers outside Japan, certain items in the original Japanese financial statements have been reclassified
for presentation.
As permitted by the Financial Instruments and Exchange Law, amounts of less than one million yen have been omitted by theCompany.
Consequently, the totals shown in the accompanying consolidated financial statements (both in yen and U.S. dollars) do not necessarily
agree with the sum of the individual amounts.
The amounts in U.S. dollars are included solely for the convenience of readers outside Japan. A rate of ¥122.39= U.S.$ 1.00, theexchange rate on 31st March, 2022, has been used in translation. The translation is not intended to imply that the assets and liabilities
which originated in yen have been or could be readily converted, realized or settled in U.S. dollars at the above or any other rate.
In the consolidated financial statements, “—” is used to denote “nil” and “0” is used to denote rounding down to zero.

2. Summary of Significant Accounting Policies(1) Scope of Consolidation
The consolidated financial statements include the accounts of the Company and its consolidated subsidiaries (the “Group”).
The number of consolidated and non-consolidated subsidiaries for the years ended 31st March, 2022 and 2021 is as follows:
2022

2021

i) Number of consolidated subsidiaries:77ii) Number of non-consolidated subsidiaries:44(2) Application of Equity Method
The number of non-consolidated subsidiaries and affiliates, which are accounted for by the equity method, for the years ended 31st
March, 2022 and 2021 is as follows:
2022

2021

i) Number of non-consolidated subsidiaries accounted for by the equity method:00ii) Number of affiliates accounted for by the equity method:11iii) Number of non-consolidated subsidiaries not accounted for by the equity method:

44iv) Number of affiliates not accounted for by the equity method:10(3) Fiscal Years of Consolidated Subsidiaries
The closing dates of consolidated subsidiaries are the same as the closing date for the consolidated financial statements.
(4) Trading Account Assets and Liabilities
Transactions that seek gains on short-term fluctuations and arbitrage in interest rates, currency prices, market prices of financial
instruments (trading transactions) are recognized on a trade date basis. They are recorded as trading assets or trading liabilities on the
consolidated balance sheets and gains or losses on these transactions are recorded in trading income or trading expenses on the
consolidated statements of income.
The Company’s consolidated subsidiaries engaged in the banking business value securities, monetary claims, etc. held for trading
purpose at the market price prevailing at the balance sheet date. Derivatives, such as swaps, futures, and option transactions, are statedat the amount assuming that they were terminated or settled at the balance sheet date.
Trading income and expenses include interest income or expenses as well as changes in unrealized gains or losses on securities,
monetary claims and derivative financial products during the fiscal year.

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

7

Notes to Consolidated Financial Statements(5) Securities
Securities held to maturity are carried at amortized cost using the straight-line method with cost determined by the moving averagemethod. Investments in non-consolidated subsidiaries not accounted for by the equity method are valued at cost determined by themoving average method. Securities available for sale are carried at fair value with cost of sales determined by the moving averagemethod. However, shares, etc. that do not have a market value are valued at cost determined by the moving average method.
The difference between the acquisition cost and the carrying amount of securities available for sale, representing unrealized gains
and losses, is recognized as unrealized gains (losses) on securities available for sale, net of taxes, and included directly in net assets.
Securities held as components of individually managed money trusts whose principal objective is investments in securities are stated
at fair value.
(6) Derivatives
Derivatives held or written are stated at fair value.
(7) Tangible Fixed Assets (excluding leased assets)
Tangible fixed assets of the Company and its consolidated subsidiaries engaged in the banking business are depreciated by the
declining-balance method; however, buildings (excluding facilities attached to buildings) acquired on or after 1st April, 1998 aredepreciated by the straight-line method. The useful lives for buildings and equipment are as follows:
Buildings:

3 to 60 years

Equipment:

2 to 20 years

Tangible fixed assets of other consolidated subsidiaries are depreciated mainly using the declining-balance method, based on theirestimated useful lives.
(8) Intangible Fixed Assets
Intangible fixed assets are amortized using the straight-line method. Software for internal use is amortized based on the estimated usefullife determined by the Group (5 years).
(9) Leased Assets
The tangible fixed assets capitalized under the finance lease transactions entered into on and after 1st April, 2008 where ownership ofleased assets is not transferred to lessees are depreciated by the straight-line method over the lease term with their residual value ofzero.
(10) Reserve for Possible Loan Losses
Major consolidated subsidiaries record the reserve for possible loan losses as follows:
For loans to insolvent customers who are undergoing bankruptcy or special liquidation, etc. (hereinafter, “borrowers underbankruptcy proceedings”) or who are in a similar financial condition although not yet in bankruptcy (hereinafter, “borrowers substantiallyin bankruptcy”), the reserve for possible loan losses is provided at the full amount of the book value of such loans after deducting theamount of direct write-offs (as defined below), and excluding the amounts deemed collectible from sale of the collateral pledged andthe guarantees that are deemed recoverable. For the unsecured and unguaranteed portion of loans to customers not presently in theabove circumstances, but with a high probability of becoming so (hereinafter “customers with high probability of becoming insolvent”),
the reserve for possible loan losses is provided at the amounts deemed necessary after deduction of the estimated realizable value ofcollateral and guarantees based on the customer’s overall financial condition.
For loans to borrowers with a rescheduled or restructuring plan, which exceed a certain amount, the discounted cash flow (DCF)
method is applied to provide for doubtful accounts, if cash flows from collection of principal and receipts of interest can be reasonably
estimated. Under the DCF method a reserve for possible loan losses is provided at the difference between the cash flows discounted
by the original interest rate and the carrying value of the loan.
For other loans, the reserve for possible loan losses is provided mainly at an anticipated amount of losses over the next one or
three years. The anticipated amount of losses was calculated by obtaining the loss rate based on the mean for a certain period of
actual loss rates calculated from actual losses for one or three years and then by making necessary adjustments in accordance with
future projections and other factors.
Regarding each loan, the Credit Review Office, which is independent of the operating divisions, reviews the operating divisions’evaluation of each loan for collectibility based on self-assessment standards.
For loans to borrowers under bankruptcy proceedings and borrowers substantially in bankruptcy that are secured by collateral andguarantees, the unrecoverable portion of such loans is determined by subtracting the estimated recoverable amounts from the disposalof the collateral and the amounts deemed recoverable from the guarantors. The unrecoverable amount is written off directly against thevalue of the loan (“direct write-off”). The amounts of such direct write-offs at 31st March, 2022 and 2021 were ¥11,425 million ($93,355

8

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

Notes to Consolidated Financial Statements

thousand) and ¥9,590 million, respectively.
Other consolidated subsidiaries record a general reserve for possible loan losses by applying the historical loan-loss ratio observed
over specific periods, and record a specific reserve for certain loans at the estimated uncollectible amount based on assessment ofeach borrower’s ability to repay.
(11) Reserve for Devaluation of Securities
In order to provide for a loss on investments, the Group estimates the amount deemed necessary based on a review of financial
position, etc. of the companies issuing securities or golf club membership.
(12) Reserve for Retirement Benefits for Directors and Corporate Auditors
Reserve for retirement benefits for directors and corporate auditors is provided at the amount that would be paid in accordance with
the internally established rule at the balance sheet date if they were retired on that date.
(13) Reserve for Reimbursement of Deposits
Reserve for reimbursement of deposits is provided for possible losses on the future claims for withdrawal of the deposits, which wasderecognized, at an amount deemed necessary based on the estimates of the consolidated subsidiaries engaged in the banking
business.
(14) Reserve for Other Contingent Losses
Reserve for other contingent losses is provided for possible losses on loans under the shared responsibility system with the Credit
Guarantee Corporation as well as for possible losses resulting from other contingencies not covered by the other reserves, at an
amount deemed necessary based on the estimates of the future possible payments by the Group.
(15) Reserve under the Special Laws
Reserve under the special laws is a legal reserve for financial instruments exchange, which is provided for possible losses arising fromthe purchase or sale of securities or other securities-related trading activities by the Company’s consolidated subsidiary engaged in the
securities business at an amount estimated pursuant to Article 46, Item 5 of the Financial Instruments and Exchange Law as well as
Article 175 of the Cabinet Office Ordinance relating to the financial instruments services.
(16) Accounting for Retirement Benefits
For the consolidated subsidiaries engaged in the banking business, the retirement benefit obligation for employees is attributed to eachperiod by the benefit formula method.
Actuarial gain/loss is amortized using the straight-line method mainly over a period of 10 years following the year it arises, which iswithin the average remaining years of service of the current employees.
For other consolidated subsidiaries, liability for retirement benefits and retirement benefit expenses are calculated using thesimplified method, which assumes the retirement benefit obligation to be equal to the benefits payable if all eligible employees voluntarily
terminated their employment at fiscal year end.
(17) Recognition of earnings
The Company recognizes revenues from contracts with customers when control of a promised good or service is transferred to acustomer in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods andservices. For fees and commissions that may be refunded, the Company posts refund liabilities and deducts such amounts fromrevenues.
(18) Foreign Currency Translation
Foreign currency-denominated assets and liabilities are translated into Japanese yen primarily at the exchange rate prevailing at thebalance sheet date.
(19) Accounting for Leases
Finance lease transactions which were initially engaged by the consolidated subsidiaries prior to 1st April, 2008 where there is notransfer of ownership are accounted for by the same method as applicable to ordinary operating lease contracts.

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

9

Notes to Consolidated Financial Statements(20) Hedge Accountingi) Hedge accounting for interest rate risks
The consolidated subsidiaries engaged in the banking business apply the deferred method as hedge accounting for interest raterisks of certain financial assets and liabilities by using the individual hedging, which directly matches hedged items and hedging
instruments. With regard to hedging transactions to offset fluctuations in the fair value of fixed-rate bonds classified as available-forsale securities, in accordance with operational rules concerning hedge accounting, hedged items are distinguished by identical typeof bonds and interest rate swaps are used as hedging instruments. Since significant terms related to those hedged items andhedging instruments are nearly identical, such hedging transactions are deemed highly effective in terms of evaluation of hedge
effectiveness. No evaluation is performed for hedge effectiveness of qualifying interest rate swaps accounted for by the special
treatment, as it is ascertained that the criteria for the special treatment are continually met.
ii) Hedge accounting for foreign exchange rate risk
The consolidated subsidiaries engaged in the banking business apply the deferred method as hedge accounting for foreign exchangerisks of various foreign currency-denominated financial assets and liabilities in accordance with the “Accounting and Auditing
Treatment for Accounting for Foreign Currency Transactions in Banking Industry” (JICPA Industry-specific Committee Practical
Guideline No. 25 of 8th October, 2020). The consolidated subsidiaries treat foreign exchange swap transactions as hedging
instruments for the purpose of the hedge of foreign currency-denominated financial assets and liabilities, and the subsidiaries test
hedge effectiveness by matching the foreign currency swap position as hedging instruments with the related foreign currencydenominated financial assets and liabilities as hedged items.
iii) Internal contract
For internal contracts, the consolidated subsidiaries engaged in the banking business manage the foreign currency swaps that aredesignated as hedging instruments in accordance with the strict criteria for external transactions stipulated in the JICPA Industryspecific Committee Practical Guideline No. 25. Therefore, the subsidiaries either recognizes gains or losses that arise from suchcurrency swaps as earnings or defers them, rather than eliminating them.
(21) Cash and Cash Equivalents in the Consolidated Statement of Cash Flows
Cash and Cash Equivalents in the consolidated statement of cash flows are composed of cash and due from central bank.
(22) Application of the Consolidated Tax Payment System
The Company and some of its consolidated subsidiaries have adopted the consolidated tax payment system, where the Company isdesignated as a parent company.
(23) Accounting Principles and Procedures when related Accounting Standards are not clear
Gains/losses from cancellation/redemption of investment trusts are recorded under “Interest and dividends on securities,” provided,
however, that the amount of interim dividends from investment trusts is recorded in “Loss on redemption of bonds” under “Other
operating expenses” if such is negative overall.
(24) Significant Accounting Estimates
Reserve for possible loan losses:
Amount recorded on the consolidated financial statements for the fiscal year under review:Thousands of
U.S. dollars

Millions of yen

Reserve for possible loan losses

2022

2021

2022

¥42,473¥44,068$347,033

Information about the content of significant accounting estimates concerning disclosure items identified:(1) Calculation method
For the calculation method of reserve for possible loan losses, see “(10) Reserve for Possible Loan Losses,” under the “Summaryof Significant Accounting Policies.”(2) Key assumptions
Key assumptions include: i) Future outlook of debtors’ business in the assessment of debtor companies; ii) Period when theeconomy is stagnant due to the spread of the novel coronavirus disease <COVID-19>; and iii) Future transition in theassessment of debtor companies and the amount to be collected in the cash flow estimation method.
Details of each assumption are as follows:

10

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

Notes to Consolidated Financial Statementsi) Future outlook of debtors’ business in the assessment of debtor companies
The future outlook of debtors’ business is determined by evaluating the repayment situation, financial position, businessperformance, etc., of each debtor.
ii) Period when the economy is stagnant due to the spread of COVID-19
Under the assumption that the impact will continue to be felt into the following fiscal year (year ending 31st March, 2023),
specified debtor companies have been re-classified in consideration of recent business performance, the possible impact
of COVID-19 on their future business performance, etc. for the consolidated fiscal year under review (year ended 31st
March, 2022).
iii) Future transition in the assessment of debtor companies and the amount to be collected in the cash flow estimation
methodThe future transition in the assessment of debtor companies and the amount to be collected are set by evaluating eachdebtor based on their repayment situation and future plans.
(3) Possible impact on consolidated financial statements for the following fiscal year
All of the key assumptions are surrounded by uncertainty. As such, a change in the assumptions based on which the original
estimates were made can have a material impact on reserve for possible loan losses on consolidated financial statements forthe following fiscal year.
(25) Changes in Accounting Policies• Application of accounting standards related to revenue recognition, etc.
The Company has applied the “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29 of 31st March, 2020;
hereinafter “Revenue Recognition Standard”) and other standards from the beginning of the reporting period. The Company
recognizes revenue when control of a promised good or service is transferred to a customer in an amount that reflects theconsideration to which the Company expects to be entitled in exchange for those goods and services. Accordingly, the Company
now recognizes revenue from some fees and commissions when a good or service is provided, rather than at the point in time
when such fees and commissions were received. For fees and commissions that may be refunded, the Company has started
posting refund liabilities from the reporting period.
The Company applies the Revenue Recognition Standard, etc. in accordance with the transitional treatment provided for in theproviso to paragraph 84 of the Revenue Recognition Standard. The cumulative impact of retrospectively applying the new
accounting policies to prior periods is adjusted to retained earnings at the beginning of the reporting period, with the new
accounting policies applied from the beginning balance.
As a result of this change, ordinary revenues, ordinary profit, and profit before income taxes increased by ¥13 million ($106
thousand), respectively and basic earnings per share increased by ¥0.06 ($0.00) in the consolidated state of income for the year
ended 31st March, 2022. Furthermore, because the cumulative impact of this change has been reflected on net assets at the
beginning of the reporting period, the beginning balance of retained earnings decreased by ¥248 million ($2,032 thousand) and net
assets per share decreased by ¥1.68 ($0.01) in the consolidated statement of changes in net assets.
In accordance with the transitional treatment set forth in paragraph 89-3 of the Revenue Recognition Standard, notes onrevenue recognition for the previous period are not presented.
• Application of the accounting standards for fair value measurement, etc.
The Company has applied the “Accounting Standard for Fair Value Measurement” (ASBJ Statement No. 30 of 4th July, 2019;
hereinafter “Fair Value Measurement Standard”) and other standards from the beginning of the reporting period. In accordancewith paragraph 8 of the Fair Value Measurement Standard, the risk adjustment method applied to determine the fair value ofderivatives was modified to use as much as possible observable inputs estimated by reference to derivatives and other instruments
traded in the market. This modification was made due to the application of the Fair Value Measurement Standard. In accordancewith the transitional measures set forth in paragraph 20 of the Fair Value Measurement Standard, the cumulative impact inretroactively applying the new accounting policy to prior periods was recognized as adjustments to retained earnings at the
beginning of the year ended 31st March, 2022. The application of the Fair Value Measurement Standard and other standards has
a negligible effect on the Company’s consolidated financial statements.
In addition, the Company will include notes on fair value information by level within the fair value hierarchy in the notes on
financial instruments. However, in accordance with the transitional treatment provided in paragraph 7-4 of the “Implementation
Guidance on Disclosures about Fair Value of Financial Instruments” (ASBJ Guidance No. 19 of 4th July, 2019), notes pertaining to
the previous period are not presented.

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

11

Notes to Consolidated Financial Statements(26) Accounting Standards Issued but Not Yet Effective“Implementation Guidance on Accounting Standard for Fair Value Measurement” (ASBJ Guidance No. 31 of 17th June, 2021)
i) Overview
Treatment of fair value measurement of and notes on investment trusts and treatment of notes on fair value of investments inpartnerships and other similar entities, for which equity interests are recorded on a net basis on the consolidated balance sheet,
have been provided.
ii) Scheduled date of adoption
The Company plans to adopt the above-mentioned accounting standard and implementation guidance from the beginning of
the fiscal year ending 31st March, 2023.
iii) Impact of the adoption of the accounting standard and implementation guidance
The adoption of the accounting standard and implementation guidance has no effect on the Company’s consolidated financial
statements.
Additional information• Tax effect accounting for the transition from the Consolidated Taxation System to the Group Tax Sharing System
The Company and some of its consolidated subsidiaries will transition from the Consolidated Taxation System to theGroup Tax Sharing System from the year ending 31st March, 2022. In determining the amounts of deferred tax assets
and deferred tax liabilities with respect to a transition to the Group Tax Sharing System which was created in the “Act on
Partial Revision of the Income Tax Act, etc.” (Act No. 8 of 2020) and corresponding revisions made to the Nonconsolidated
Taxation System, however, the Company and those consolidated subsidiaries that are affected by this transition do not
apply the provisions in paragraph 44 of the “Implementation Guidance on Tax Effect Accounting” (ASBJ Guidance No. 28
of 16th February, 2018), but follow the provisions in the Income Tax Act, etc. before the revision pursuant to paragraph 3of the “Practical Solution on the Treatment of Tax Effect Accounting for the Transition from the Consolidated Taxation
System to the Group Tax Sharing System” (ASBJ Practical Solution No. 39 of 31st March, 2020).
From the beginning of the year ending 31st March, 2023, the Company and those consolidated subsidiaries that are
affected by this transition will apply the “Practical Solution on the Accounting and Disclosure Under the Group Tax Sharing
System” (ASBJ Practical Solution No. 42 of 12th August, 2021), which establishes the accounting treatment and thedisclosure of national and local income tax, as well as treatment of tax effect accounting, when the Group Tax Sharing
System is applied.

3. Trading Account Assets
Trading account assets at 31st March, 2022 and 2021 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2021

2022

2022

Trading securities

¥—

¥131

Other trading assets

—

—

—

¥—

¥131

$—

Total

$—

4. Securities
Securities at 31st March, 2022 and 2021 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2022

2021

Japanese government bonds¥500,561¥365,537$4,089,889

Japanese municipal bonds

400,698

332,141

3,273,951

Corporate bonds (including government-guaranteed bonds)*

221,488259,233

1,809,693

Stock**

126,367

142,409

1,032,496

Other securities***524,228

407,5124,283,260¥1,773,344¥1,506,834$14,489,291

Total

2022

* Corporate bonds included bonds offered through private placement. The guarantee obligation of Nishi-Nippon City Bank for such private placement bonds at 31st
March, 2022 and 2021 were ¥19,228 million ($157,108 thousand) and ¥17,386 million, respectively.
** Stock included stock of affiliates of ¥702 million ($5,739 thousand) and ¥802 million at 31st March, 2022 and 2021, respectively.
*** Other securities included investments in non-consolidated subsidiaries of ¥161 million ($1,319 thousand) and ¥163 million at 31st March, 2022 and 2021, respectively.

12

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

Notes to Consolidated Financial Statements

5. Loans and Bills Discounted
Loans and bills discounted at 31st March, 2022 and 2021 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2022

2021

Bills discounted*¥15,418¥17,915$125,976

Loans on notes

169,458

178,913

1,384,578

Loans on deed

61,780,491

2022

7,561,314

7,638,927

Overdraft

724,670

708,189

5,920,993

Total¥8,470,861¥8,543,946$69,212,040*

Bills discounted are recorded as cash lending / borrowing transactions in accordance with the “Accounting and Auditing Treatments for Application of AccountingStandard for Financial Instruments in Banking Industry” (JICPA Industry-specific Committee Practical Guideline No. 24). The consolidated subsidiaries engaged in thebanking business have right to sell or collateralize such bills at its discretion. Total face value of commercial bills and bills of exchange acquired through discounting
amounted to ¥15,434 million ($126,111 thousand) and ¥18,172 million at 31st March, 2022 and 2021, respectively.

The following table shows the claims classfied under the Banking Act and the Act on Emergency Measures for the Revitalization of the
Financial Functions. Claims include corporate bonds included in “Securities” in the consolidated balance sheet (limited to corporate bonds
for which the redemption of principal or interest payments, whether wholly or partly, is guaranteed by the financial institution that owns thecorporate bonds, and for which the issuance is implemented through the private placement of securities as defined in Article 2, Item 3 of the
Financial Instruments and Exchange Act), loans and bills discounted, foreign exchanges, amounts recorded in outstanding interest,
temporary payments, and consideration for acceptance of payment under “Other assets” on the balance sheet, and, if securities are loaned(noted), such securities (limited to those via loan for use or lease contract).
Thousands of
U.S. dollars

Millions of yen

2022

2021

2022

Claims in bankruptcy, reorganization, etc.**¥14,575¥14,248$119,091

Claims with risks***

95,81595,478782,867

374

128

3,063

32,51434,762

265,665¥143,280¥144,618$1,170,688

Claims in arrears for three months or more****Loans with altered lending conditions*****
Total
**

Claims held against debtors with failed business status due to circumstances such as the commencement of bankruptcy proceedings, the commencement ofcorporate reorganization proceedings, or rehabilitation proceedings, and any other type of claims that are similar or equivalent thereto.
*** Claims whose debtor is not yet in the status of failure in business although such debtor’s financial status and business performance have deteriorated and for which it
is highly unlikely that the collection of principal or receipt of interest in accordance with the contract will be possible but that do not fall under claims in bankruptcy,
reorganization, etc.
**** Claims in arrears for which the principal or interest is delinquent for three months or more from the date immediately following the contractual due date, and that do
not fall under claims in bankruptcy, reorganization, etc. or claims with risks***** Loans for which there is a reduction in or an exemption of the interest rate, a grace period for the payment of interests, a grace period for the reimbursement of theprincipal, a waiver of the loan claim or any other arrangement that might be considered advantageous to a debtor are made for the purpose of the reconstruction of,or support to, the management of the debtor, and that do not fall under claims in bankruptcy, reorganization, etc., claims with risks, or claims in arrears for threemonths or more.
The amounts given above are gross amounts before the deduction of amounts of the allowance for loan losses.
Changes in methods of representation
As a result of the enforcement of the Cabinet Office Ordinance relating to partial amendments to the Regulation for Enforcement of the Banking Act (Cabinet Office
Ordinance No. 3, 24th January, 2020) on 31st March, 2022, Claims in the above table which were previously classified and disclosed as Risk Management Loans
under Banking Act, are presented in comformity with classifications, etc. of bad debts subject to mandatory disclosure as provided in the Act on Emergency
Measures for the Revitalization of the Financial Functions.

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

13

Notes to Consolidated Financial Statements

6. Assets Pledged as Collateral
Assets pledged as collateral by the Group at 31st March, 2022 and 2021 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2021

2022

2022

Assets pledged as collateral
¥35

¥35

$292

1,288,242

1,059,343

10,525,717

Cash and due from banks
Securities
Loans

1,231,046

1,456,647

10,058,390

Total¥2,519,324¥2,516,027$20,584,400

Deposits¥14,215¥16,917$116,148

Call money and bills sold

40,10039,300327,641

Payables under repurchase agreements

251,120

194,294

2,051,805

Guarantee deposits received under securities lending transactions

87,18841,135712,380

1,753,174

1,434,420

14,324,495

Liabilities secured by the above assets

Borrowed money

Other than the items shown above, the following items were pledged as collateral for foreign exchange transactions and/or as substitutes
for initial margin on futures at 31st March, 2022 and 2021:
Thousands of
U.S. dollars

Millions of yen

2021

2022

2022

Securities¥1,141¥1,141$9,325

Other assets¥1,400¥1,500$11,438

Additionally, the following was included in other assets at 31st March, 2022 and 2021:
Thousands of
U.S. dollars

Millions of yen

Cash collateral paid for financial instruments
Deposits included in other assets

2022

2021

2022

¥48,746¥46,683$398,289

2,474

2,270

20,218

7. Contracts for Commitment Lines of Credit
Contracts for commitment lines of credit related to overdraft agreements and loan credit facilities represent a promise on a lending bank at a
specified credit limit, to a customer upon request for funds, unless there is a violation of the contractual conditions.
The aggregate amounts under commitment contracts not yet drawn down at 31st March, 2022 and 2021 are as follows:
Thousands of
U.S. dollars

Millions of yen

Aggregate amount under commitment contracts not yet drawn down
Of the above amount, those with original maturity of less than one year or cancellable at any time
without penalty

2022

2021

2022

¥2,074,368¥2,194,895$16,948,837

1,980,801

2,109,259

16,184,338

As many of these contracts expire without the right to extend the loans being exercised, the aggregate total of the undrawn amount does
not necessarily affect the future cash flows of the Group. Many of these contracts have stipulations that allow the consolidated subsidiaries
to turn down a loan request or reduce the amount of the credit line if there is a change in financial conditions, a need to secure their credit,or other similar reasons. In addition to obtaining necessary collateral (real estate, securities, etc.) at the time the contract is entered into, theconsolidated subsidiaries assess the condition of the customer’s business operations, and analyze other information, based on internal
procedures and standards. If necessary, the contract is reviewed and revised, or additional steps are taken to secure the credit extended tothe customer.

14

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

Notes to Consolidated Financial Statements

8. Foreign Exchange
Foreign exchange assets and liabilities at 31st March, 2022 and 2021 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2021

2022

2022

Assets:Foreign exchange bills bought

¥16

¥257

$135

Foreign exchange bills receivable

315

129

2,579

Due from foreign banks (their accounts)

—

—

—

Due from foreign banks (our accounts)

22,424

10,687183,225¥22,757¥11,074$185,940

Total
Liabilities:
Foreign exchange bills sold

¥—

¥5

$—

Foreign exchange bills payable

201

205

1,645

¥201

¥210

$1,645Total

9. Other Assets
Other assets at 31st March, 2022 and 2021 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2021

2022

2022

¥35

¥16

$290

6,359

5,753

51,961

Income tax refund receivable, etc.

—

205

—

Prepaid expenses

344

460

2,816

Domestic exchange settlement account*
Accrued income

Financial derivative products

1,936

4,661

15,825

Cash collateral paid for financial instruments

48,746

46,683398,289

Other
Total

32,88857,785

268,719¥90,311¥115,565$737,902* Domestic exchange settlement account represents unsettled debit balances arising from inter-bank domestic exchange transfers.

10. Tangible Fixed Assets
Tangible fixed assets at 31st March, 2022 and 2021 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2022

2021

2022

Land

¥74,273¥74,282$606,858

Buildings

32,54232,491

265,893

Construction in progress

55

354

449

Leased assets

324

391

2,650

8,977

10,031

73,349¥116,172¥117,551$949,201

Other tangible fixed assets
Total

Note: 	The amounts of accumulated depreciation for tangible fixed assets at 31st March, 2022 and 2021 were ¥66,755 million ($545,431 thousand) and ¥65,657 million,
respectively.

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

15

Notes to Consolidated Financial Statements

The accelerated depreciation entry amounts for tangible fixed assets at 31st March, 2022 and 2021 are as follows:
Thousands of
U.S. dollars

Millions of yen

2021

2022

2022

¥6,629¥6,614$54,043

11. Deposits
Deposits at 31st March, 2022 and 2021 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2022

2021

Current deposits¥438,071¥444,207$3,579,307

Ordinary deposits

6,481,429

6,078,238

52,957,182

Deposits at notice

18,412

17,528150,4422,475,642

2,603,150

20,227,492

Negotiable certificates of deposit

264,293

188,520

2,159,437

Other deposits

156,787

152,364

1,281,046¥9,834,637¥9,484,009$80,354,907

Time deposits

Total

2022

12. Borrowed Money
The weighted average interest rates on borrowed money is 0.00% at 31st March, 2022.
The aggregate annual maturity amounts within five years of borrowed money after 31st March, 2022 are as follows:
Millions of yen

Thousands of
U.S. dollars¥1,212,856$9,909,767

Year ending 31st March
2023
2024

45,278369,9562025

245,088

2,002,523

2026

252,004

2,059,031

2027

4

40

13. Other Liabilities
Other liabilities at 31st March, 2022 and 2021 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2021

2022

16

2022

¥41

¥36

$337

Accrued income taxes

7,393

1,420

60,407

Accrued expenses

6,327

6,739

51,701

Unearned income

4,981

3,263

40,699Financial derivative products

7,287

9,238

59,541

Lease obligations

341

411

2,793

Cash collateral received for financial instruments

496

595

4,052

Asset retirement obligations

1,069

813

8,740

Others86,014

85,129702,787

Total¥113,952¥107,648$931,061

Domestic exchange settlement accountNishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

Notes to Consolidated Financial Statements

14. Capital Stock
Capital stock during the year ended 31st March, 2022 consisted of the following:
Common stock

1st April, 2021
Increase
Decrease*
31st March, 2022

Capital stock

Issued shares

Millions of yen

Thousands of
U.S. dollars

159,596,955¥50,000$408,530———

8,000,000——

151,596,955¥50,000$408,530* The decrease of 8,000,000 shares is due to retirement of treasury shares.

Capital stock during the year ended 31st March, 2021 consisted of the following:

1st April, 2020
Increase
Decrease*
31st March, 2021

Common stock

Capital stock

Issued shares

Millions of yen

162,596,955¥50,000——

3,000,000—

159,596,955¥50,000* The decrease of 3,000,000 shares is due to retirement of treasury shares.

15. Treasury Stock
Treasury stock during the year ended 31st March, 2022 consisted of the following:
Common stock

Treasury stock

Number of shares

Millions of yen

Thousands of
U.S. dollars

1st April, 2021

11,443,334(¥8,597)($70,247)

Increase*

3,846,145(3,004)(24,546)

Decrease**

8,000,568

6,079

49,67031st March, 2022

7,288,911(¥5,522)($45,123)* The increase of 3,846,145 shares is due to acquisition of treasury shares of 3,839,800 and purchase of fractional shares of 6,345.
** The decrease of 8,000,568 shares is due to retirement of treasury shares of 8,000,000 and sale of fractional shares of 568.

Treasury stock during the year ended 31st March, 2021 consisted of the following:
Common stock

Treasury stock

Number of shares

Millions of yen

13,035,479(¥9,868)(1,004)

1st April, 2020
Increase*

1,408,448

Decrease**

3,000,593

2,275

31st March, 2021

11,443,334(¥8,597)* The increase of 1,408,448 shares is due to acquisition of treasury shares of 1,402,500 and purchase of fractional shares of 5,948.
** The decrease of 3,000,593 shares is due to retirement of treasury shares of 3,000,000 and sale of fractional shares of 593.

16. Revaluation of Premises AccountBased on the Law Concerning Land Revaluation (Law No. 34, promulgated on 31st March, 1998), the consolidated subsidiaries engaged in
the banking business have revalued land used for business purposes. The deferred taxes on revaluation differences are presented in theaccount, “Deferred tax liabilities on revaluation of premises” in the liabilities of the consolidated balance sheet. The amount of revaluationdifferences, net of tax, is presented as “Revaluation of premises, net of taxes” in net assets.
The differences at 31st March, 2022 and 2021 are not presented as the aggregate market value of land subject to revaluation exceeded
the book value after revaluation.

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

17

Notes to Consolidated Financial Statements

17. Other Interest Income
Other interest income for the years ended 31st March, 2022 and 2021 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2021

2022
¥0

¥2

$3

2,852

546

23,303

Interest on call loans and bills boughtInterest on deposits with banks

2022

Others

1,372

1,362

11,215

Total¥4,225¥1,911$34,522

18. Other Operating Income
Other operating income for the years ended 31st March, 2022 and 2021 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2021

2022

2022

Gains on foreign exchange transactions

¥674

¥589

$5,510Gains on sale of bonds

1,670

3,997

13,651Others

724

386

5,917

Total

¥3,069¥4,972$25,079

19. Other Income
Other income for the years ended 31st March, 2022 and 2021 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2021

2022

2022

¥1,448¥2,059Gains on money held in trust

10

14

88

Equity in earnings of affiliates

56

86

457

Gains on disposition of fixed assets

142

401

1,162

Recoveries of written-off claims

378

239

3,088

Rental income on land and buildings

542

538

4,432

Gains on sale of stock and other securities$11,837

Others

362

246

2,965

Total

¥2,941¥3,585$24,033

20. Other Interest Expenses
Other interest expenses for the years ended 31st March, 2022 and 2021 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2021

2022

18

2022

Bonds

¥—

¥61

$—

Others

75

133

612

Total

¥75

¥194

$612

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

Notes to Consolidated Financial Statements

21. Other Operating Expenses
Other operating expenses for the years ended 31st March, 2022 and 2021 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2021

2022

2022

Losses on sale of bonds

¥417

¥846

$3,409Losses on redemption of bonds

273

336

2,233

Losses on devaluation of bonds

51

88

418

Expenses for derivatives other than trading derivatives

912

584

7,452

¥1,654¥1,855$13,514Total

22. General and Administrative Expenses
General and administrative expenses for the years ended 31st March, 2022 and 2021 consisted of the following:Thousands of
U.S. dollars

Millions of yen

Salaries and allowances

2022

2021

2022

¥30,893¥31,300$252,419

245

2,321

2,005

Employee retirement benefits

54

54

442

Depreciation

5,674

5,729

46,366

Rental expenses

3,245

3,008

26,517

Taxes

5,731

5,596

46,828Others33,32833,261

272,312

Total¥79,173¥81,272$646,892

Retirement benefits for directors and corporate auditors

23. Other Expenses
Other expenses for the years ended 31st March, 2022 and 2021 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2021

2022

2022

Provision for possible loan losses¥1,939¥6,218$15,844

Losses on write-offs of claims

2,430

1,989

19,859

0

94

3

2,358

18

19,268Losses on sale of stock and other securities
Losses on devaluation of stock and other securities
Losses on disposition of tangible fixed assets

390

436

3,192

Impairment losses

465

818

3,806

Losses on sale of loans

20

1,105

166

Others

648

1,764

5,295

Total

¥8,253¥12,446$67,437

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

19

Notes to Consolidated Financial Statements

24. Other Comprehensive Income
Reclassification adjustments and tax effects related to other comprehensive income for the years ended 31st March, 2022 and 2021 are as
follows:
Thousands of
U.S. dollars

Millions of yen

2022

2021

2022

(¥37,415)¥30,557($305,704)(639)(4,350)(5,225)

Amount before tax effect(38,054)

26,206(310,929)

Tax effect

11,494(7,876)

93,914(¥26,560)¥18,329($217,015)

Amount arising during the year

¥1,220¥32$9,972

Reclassification adjustments

822

562

6,718

2,042

595

16,691

Net unrealized gains on securities available for sale:Amount arising during the year
Reclassification adjustments

Net unrealized gains on securities available for saleNet deferred gains (losses) on hedging instruments:

Amount before tax effect

(623)

(181)

(5,091)¥1,419¥413$11,600(¥17,934)¥13,117($146,538)

720

2,328

5,887

(17,214)

15,445(140,651)

5,250(4,710)42,898Retirement benefits liability adjustments(¥11,963)¥10,735($97,752)

Total other comprehensive income(¥37,104)¥29,478($303,167)

Tax effect
Net deferred gains (losses) on hedging instruments
Retirement benefits liability adjustments
Amount arising during the year
Reclassification adjustments
Amount before tax effectTax effect

25. Lease Transactions(1) Finance leasesi)	Information on finance lease transactions which are accounted for as operating leases at 31st March, 2022 and 2021 is summarized
as follows:
Thousands of
U.S. dollars

Millions of yen

2021

2022

2022

Amounts equivalent to acquisition cost
Tangible fixed assets
Total

¥970

¥970

$7,930¥970¥970$7,930

Amounts equivalent to accumulated depreciation
Tangible fixed assets
Total

¥890

¥858

$7,279¥890¥858$7,279

¥79

¥112

$651

¥79

¥112

$651

Amounts equivalent to carrying value
Tangible fixed assets
Total

Note: The amount equivalent to acquisition cost includes an interest element as the total future finance lease payments are not significant to the balance of tangible
fixed assets at the end of the year.

20

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

Notes to Consolidated Financial Statementsii) Future lease payments of finance leases which are accounted for as operating leases at 31st March, 2022 and 2021 are as follows:
Thousands of
U.S. dollars

Millions of yen

2021

2022

2022

Future finance lease payments
Due within one year

¥32

¥32

Due after one year

47

79

387

¥79

¥112

$651

Total

$264

Note: The amount of the future finance lease payments at the end of the year includes an interest element as the total future finance lease payments are not significant
to the balance of tangible fixed assets at the end of the year.

iii)	Total lease payments during the year and the amount equivalent to depreciation expenses for the years ended 31st March, 2022 and2021 are as follows:
Thousands of
U.S. dollars

Millions of yen

2021

2022

2022

Total lease payments during the year

¥32

¥32

$264

The amount equivalent to depreciation expenses *

32

32

264

* The amount equivalent to depreciation expenses was calculated using the straight-line method with no residual value over the lease term.

(2) Operating leases
Future lease payments required under operating leases that are non-cancelable at 31st March, 2022 and 2021 are as follows:
Thousands of
U.S. dollars

Millions of yen

2021

2022

2022

Future operating lease payments
Due within one year

¥238

¥263

$1,947

Due after one year

227

422

1,861

¥466

¥686

$3,808Total

26. Financial Instruments(1) Matters related to status of financial instrumentsi)

Policies for financial instruments
The Group is engaged in the financial service business, with a primary focus on banking businesses such as deposits, loans,securities, and domestic and foreign currency exchange businesses. The Group manages and raises funds, taking into accountmarket conditions and balancing duration. To conduct these businesses, the Company comprehends the risks arising from all of its
assets and liabilities, including off-balance-sheet transactions, through the proper controls over these risks, and builds reasonable
and effective portfolios. Thus the Company operates a comprehensive asset and liability management (ALM) system with the aim of
maximizing and stabilizing its profits.
In addition, some of the Company’s consolidated subsidiaries are engaged in banking, credit card, credit guarantee services,credit management, restructuring support services, claims servicing businesses and financial instruments and exchange services.

ii) Types of financial instruments and related risks
Loans, which comprise 70% of the Group’s total assets, are primarily made to domestic corporations and individuals and are
exposed to credit risks resulting from non-performance of contracts. Should the creditworthiness of major borrowers deteriorate, thevalue of collateral sharply decline, or other unanticipated problems arise, it could cause an increase in the cost of credit such as an
unexpected write-off or rise in reserve for possible loan losses. Moreover, considering the relative weight of the invested assets, theimpact of any such problems could be substantial and could have a negative effect on the financial position and performance of theGroup.
Securities are mainly stocks, debt securities, and investment trusts and are exposed to the credit risk of each issuer and the riskof interest rate fluctuation. Stocks that are marketable are exposed to price volatility risks that a decline in their market prices cause
impairment losses and valuation losses on the stocks. Debt securities are also subject to price volatility risks that an increase in themarket interest rates following economic recovery may cause valuation losses on the securities.
Borrowed money and bonds are exposed to liquidity risks that, if some problems arise in cash management due to deteriorationin financial positions at the Group, the Group is forced to raise funds at higher interest rates than usual, market transactions are

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

21

Notes to Consolidated Financial Statements

suspended as a result of market turmoil, or it is forced to make transactions at a drastically unfavorable price than usual, it could
impact future operations of the Group.
Derivative transactions include interest rate swaps, forward exchange transactions, currency swaps, and currency options. These
derivatives are utilized primarily as hedging instruments to manage and mitigate the market risks of on-balance-sheet assets andliabilities. In addition, some of the derivative transactions in trading operations are used for the purpose of making profits throughshort-term fluctuations in the market rates, arbitrage transactions and others. Hedge transactions consist mainly of interest rate
swaps as a hedge against interest rate fluctuation risks arising from loans with fixed interest rates, and forward exchange transactions
and currency options as a hedge against exchange rate fluctuation risks arising from foreign currency-denominated assets andliabilities. The Company assesses the hedge effectiveness based on the difference between accumulated changes in cash flows ofhedged items and hedging instruments. However, no evaluation is performed for the hedge effectiveness of qualifying interest rate
swaps accounted for by the special treatment under the Accounting Standard for Financial Instruments, as it is ascertained that suchderivatives continually meet the criteria for special treatment. Risks related to these derivatives transactions include the market risk ofa potential loss in the fair value of financial instruments or portfolios resulting from fluctuations in interest rates, foreign exchange
rates, stock prices and other factors as well as the credit risk of a potential loss in the value of a transaction due to default by
counterparties to the contracts.
iii) Risk management system for financial instruments(a) Credit risk management
Recognizing the credit risk as our highest priority, the Group is working on strengthening controls over the credit risk in accordancewith the Group’s credit risk management policy and credit policy.
The Group applies its strict standards to the screening of individual credit extension, and credits that exceed certain thresholds
are reviewed further by specialized staff in its Credit Supervision Division. In this way, the Group is working to maintain thesoundness of its assets.
Regarding its loan portfolios, the Group tries to diversify risks to ensure that there is no concentration on any particularindustrial sectors or customers, through its systems of credit risk quantification and portfolio management by sector based on thecredit rating system.
In addition, in order to properly carry out write-offs and set provisions, the Group conducts self-assessments of its assets anduses an independent audit department to constantly monitor the status of the self-assessment procedures and adequacy of writeoffs and provisions.
(b) Market risk management
The Group clearly separates the department responsible for conducting market transactions (front office) from the department
responsible for business administration (back office). Furthermore, the division which is independent from the market divisions has
been put in charge of risk management (middle office) to monitor conditions of the market transactions and their compliance withthe market risk-related regulations.
The Group thus has a system of mutual controls among offices.
In addition, the Group is working to achieve stable profits by improving its management methods through a variety oftechniques for measuring risks such as VaR (Value at Risk) and BPV(Basis Point Value) methods, and by establishing a maximum
acceptable level for market risks and controlling the risks within the certain acceptable range.
(Quantitative information on market risks)
The measured quantity of market risks of the Group as a whole at 31st March, 2022 and 2021 were ¥69,811 million ($570,400
thousand) and ¥53,172 million, respectively.
Financial instruments of the consolidated subsidiaries engaged in the banking business which are subject to the measurement
include loans, deposits, securities and derivatives. The Group measures market risks using historical VaR method with anobservation period of five years, a confidence interval of 99% and a holding period of 6 months.
The Group performs backtesting, which compares VaR calculated by the model with actual performance (gain or loss). Basedon the results of the testing, we believe that the risk measurement model which we use captures market risks with sufficientaccuracy. However, since VaR measures market risks at a certain probability which is statistically calculated, it is not always
possible for the model to capture market risks in situations where market conditions change drastically.
(c) Liquidity risk management
The Group recognizes the liquidity risk as one of the most significant risks, because there are concerns over potential businessfailures and systemic risks when the liquidity risk rises. The Group provides against the liquidity risks by ensuring an adequate
reserve for outstanding claims and developing a contingency plan that assumes various scenarios.
As for the day-to-day cash management of the Group, a system of mutual controls among divisions has been put into place.
As a part of this system, the divisions responsible for the Group’s day-to-day cash management raise and manage marketable
funds, while the divisions responsible for managing the liquidity risk monitor the Group’s cash position. In this way, the Group
maintains a fluid and stable cash position.

22

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

Notes to Consolidated Financial Statements(d) Risk management for derivative transactions
The Group’s derivative transactions are entered into using operational rules prepared in accordance with the Group’s internal
regulations. The rules stipulate the scope of derivative usage, authorization, responsibility, procedure, credit line, loss-cut rule, andreporting system. Each business line is responsible for each relevant risk management and for reporting to management, including
the ALM Committee, on a monthly basis.
iv) Supplementary explanation of the estimated fair value of financial instruments
Because various assumptions are used in the estimation of the fair value of financial instruments, the fair value may vary whendifferent assumptions are used.
(2) Estimated fair value of financial instruments
Carrying value of financial instruments in the consolidated balance sheets at 31st March, 2022 and 2021 and their fair values andvaluation differences are as follows.
Stocks, etc. that do not have a market value and investments in partnerships are excluded from the table below (refer to Note 1).
Notes on cash and due from banks, negotiable certificates of deposit, call money and bills sold, securities sold under repurchaseagreements, and cash collateral received for securities sent are omitted, because they comprise short-term instruments whose carrying
amounts approximate their fair value.
<At 31st March, 2022>
Millions of yen
Carrying value

Fair value

Valuationdifferences

Assets:i) Securities:
Held-to-maturity securities¥15,989¥16,341¥351

Available-for-sale securities

1,734,539

1,734,539—

ii) Loans and bills discounted

8,470,861

Reserve for possible loan losses*
Total assets(41,148)
8,429,713

8,520,495

90,782¥10,180,242¥10,271,376¥91,134¥9,570,343¥9,570,513¥169

Liabilities:i) Depositsii) Borrowed money

1,755,240

1,747,863(7,377)

Total liabilities¥11,325,584¥11,318,376(¥7,207)

Derivatives**
Hedge accounting not applied
Hedge accounting applied
Total derivatives

¥22

¥22

¥—

(5,373)(5,373)—(¥5,350)(¥5,350)¥—

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

23

Notes to Consolidated Financial Statements

Thousands of U.S. dollars
Carrying value

Fair value

Valuationdifferences

Assets:i) Securities:
Held-to-maturity securities$130,641$133,515$2,874

Available-for-sale securities

14,172,231

14,172,231—

ii) Loans and bills discounted

69,212,040

Reserve for possible loan losses*
Total assets(336,205)
68,875,834

69,617,582

741,747$83,178,707$83,923,329$744,621

Liabilities:i) Deposits$78,195,470$78,196,858$1,388ii) Borrowed money

14,341,375

14,281,094(60,280)

Total liabilities$92,536,845$92,477,952($58,892)

$185

$185

$—

Derivatives**
Hedge accounting not applied
Hedge accounting applied
Total derivatives(43,901)(43,901)—($43,715)($43,715)$—* The general reserve for possible loan losses and the specific reserve for possible loan losses, which correspond to loans and bills discounted, have been deducted.
** Derivative transactions recorded in Other assets and Other liabilities are presented in total.
The value of assets and liabilities arising from derivative transactions is shown at net value, and with the amount in parentheses representing net liability position.

<At 31st March, 2021>
Millions of yen
Carrying value

Fair value

Valuationdifferences

Assets:i) Securities:
Held-to-maturity securities¥15,971¥16,341¥369

Available-for-sale securities

1,469,229

1,469,229—

ii) Loans and bills discounted

8,543,946
8,501,298

8,610,739

109,440¥9,986,499¥10,096,310¥109,810i) Deposits¥9,295,489¥9,295,720¥231ii) Borrowed money

1,437,688

1,431,487(6,200)Total liabilities¥10,733,177¥10,727,207(¥5,969)¥—

Reserve for possible loan losses*
Total assets(42,647)

Liabilities:

Derivatives**
Hedge accounting not applied

¥100

¥100

Hedge accounting applied(2,315)(2,315)—(¥2,215)(¥2,215)¥—

Total derivatives* The general reserve for possible loan losses and the specific reserve for possible loan losses, which correspond to loans and bills discounted, have been deducted.
** Derivative transactions recorded in Other assets and Other liabilities are presented in total. The value of assets and liabilities arising from derivative transactions isshown at net value, and with the amount in parentheses representing net liability position.

(Note 1) The carrying amount of stocks, etc. that do not have a market value and investments in partnerships recorded on the
consolidated balance sheet are as follows, and are not included in “Available for sale securities” of fair value information offinancial instruments.
Thousands of
U.S. dollars

Millions of yen

Non-listed stocks
Investments in partnerships
Total

24

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

2022

2021

2022

¥19,249¥18,605$157,281

3,566

3,027

29,136¥22,815¥21,633$186,418

Notes to Consolidated Financial Statements

Notes: 1. Non-listed stocks are not within the scope of disclosures about fair value in accordance with paragraph 5 of the “Implementation Guidance on Disclosuresabout Fair Value of Financial Instruments” (ASBJ Guidance No. 19, 31st March, 2020).
2. In the years ended 31st March, 2022 and 2021, impairment losses of ¥353 million ($2,885 thousand) and ¥1 million were recorded for non-listed stocks,
respectively.
3. Investments in partnerships are not within the scope of disclosures about fair value in accordance with paragraph 27 of the “Implementation Guidance on
Accounting Standard for Fair Value Measurement” (ASBJ Guidance No. 31, 4th July, 2019).

(Note 2) Repayment schedules for monetary claims and securities with stated maturity at 31st March, 2022 and 2021
<At 31st March, 2022>
Millions of yen
Due in1 year or lessDue from
1 year to 3 years¥2,502,865

¥—

¥—

¥—

¥—

¥—

Held-to-maturity securities

10,000

6,000

—

—

—

—

Government bonds

10,000

6,000

—

—

—

—

Municipal bonds

—

—

—

—

—

—

Corporate bonds

—

—

—

—

—

—

Others

—

—

—

—

—

—

145,254

223,733

237,953

276,189455,656

197,034

Due from banks

Due from
Due from
Due from
3 years to 5 years 5 years to 7 years 7 years to 10 years

Due after
10 years

Securities:

Securities available for sale with maturity
Government bonds

25,00026,000——291,000

150,000

Municipal bonds

14,00566,460145,839

136,560

35,990—

Corporate bonds

81,56757,314

21,48829,95130,178—Others

24,682

73,95770,626109,677

98,48747,034

1,905,692

1,302,410

1,147,579

842,791

961,745

2,131,679¥4,563,812¥1,532,143¥1,385,532¥1,118,980¥1,417,402¥2,328,713

Due in1 year or lessDue from
1 year to 3 years$20,449,918

$—

$—

$—

$—

$—

Held-to-maturity securities

81,70649,023————Government bonds

81,70649,023————

Municipal bonds

—

—

—

—

—

—

Corporate bonds

—

—

—

—

—

—

Others

—

—

—

—

—

—

1,186,820

1,828,033

1,944,223

2,256,637

3,722,987

1,609,889

Government bonds

204,265

212,435——

2,377,645

1,225,590

Municipal bonds

114,429543,026

1,191,592

1,115,781

294,059—

Corporate bonds

666,454468,296

175,569

244,722

246,576—

Others201,670

604,275

577,060

896,133

804,706

384,299

Loans and bills discounted
Total

Thousands of U.S. dollars

Due from banks

Due from
Due from
Due from
3 years to 5 years 5 years to 7 years 7 years to 10 years

Due after
10 years

Securities:

Securities available for sale with maturity

Loans and bills discounted
Total

15,570,653

10,641,474

9,376,412

6,886,110

7,858,040

17,417,101$37,289,098$12,518,532$11,320,636$9,142,748$11,581,027$19,026,990

Note: Excluded from Loans and bills discounted are ¥109,949 million ($898,355 thousand) relating to those whose repayment is not reasonably estimable because
the debtors are borrowers under bankruptcy proceedings, borrowers substantially in bankruptcy, or customers with high probability of becoming insolvent and¥69,014 million ($563,890 thousand) relating to those that do not have contractual maturity.

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

25

Notes to Consolidated Financial Statements<At 31st March, 2021>
Millions of yen
Due in1 year or lessDue from
1 year to 3 years¥1,630,402

¥—

¥—

¥—

¥—

¥—

Held-to-maturity securities—

16,000————Government bonds—

16,000————

Municipal bonds

—

—

—

—

—

—

Corporate bonds

—

—

—

—

—

—

Due from banks

Due from
Due from
Due from
3 years to 5 years 5 years to 7 years 7 years to 10 years

Due after
10 years

Securities:

—

—

—

—

—

—

84,253245,349

275,884

210,410

308,750

135,226

Government bonds

13,00033,00018,0005,000

183,000

97,000

Municipal bonds

4,860

37,515

121,988

114,578

50,093—

Corporate bonds

54,679119,373

21,78538,73921,938—OthersSecurities available for sale with maturity

OthersLoans and bills discounted
Total

11,71455,461

114,110

52,09253,71938,226

2,091,900

1,295,872

1,106,892

829,239

963,135

2,073,284¥3,806,555¥1,557,222¥1,382,777¥1,039,649¥1,271,886¥2,208,511

Note: Excluded from Loans and bills discounted are ¥109,034 million relating to those whose repayment is not reasonably estimable because the debtors areborrowers under bankruptcy proceedings, borrowers substantially in bankruptcy, or customers with high probability of becoming insolvent and ¥74,587 million
relating to those that do not have contractual maturity.

(Note 3) Repayment schedules for bonds, borrowed money and other interest-bearing debts at 31st March, 2022 and 2021
<At 31st March, 2022>
Millions of yen
Due in1 year or lessDue from
1 year to 3 years

Due from
Due from
Due from
3 years to 5 years 5 years to 7 years 7 years to 10 years

Due after
10 years¥9,540,804¥232,008¥49,405¥6,838¥5,580¥0Call money and bills sold

510,000

—

—

—

—

—

Payables under repurchase agreements

251,120

—

—

—

—

—

Deposits

Guarantee deposits received under
securities lending transactions
Borrowed money
Total

87,188

—

—

—

—

—

1,212,856

290,367

252,0096——¥11,601,969¥522,376¥301,415¥6,845¥5,580¥0

Due in1 year or lessDue from
1 year to 3 years

Thousands of U.S. dollars
Due after
10 years$77,954,115$1,895,647$403,674$55,874$45,595$0Call money and bills sold4,167,007

—

—

—

—

—

Payables under repurchase agreements

2,051,805

—

—

—

—

—
—

Deposits

Guarantee deposits received under
securities lending transactions
Borrowed money
Total

712,380

—

—

—

—

9,909,767

2,372,480

2,059,071

55

—

—

$94,795,077$4,268,128$2,462,746$55,929$45,595$0Note: Demand deposits are included under “Due in 1 year or less.”

26

Due from
Due from
Due from
3 years to 5 years 5 years to 7 years 7 years to 10 years

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

Notes to Consolidated Financial Statements<At 31st March, 2021>
Millions of yen
Due in1 year or lessDue from
1 year to 3 years

Due from
Due from
Due from
3 years to 5 years 5 years to 7 years 7 years to 10 years

Due after
10 years¥9,175,332¥233,055¥61,967¥7,147¥6,507¥0Call money and bills sold208,128

—

—

—

—

—

Payables under repurchase agreements

194,294

—

—

—

—

—

Deposits

Guarantee deposits received under
securities lending transactions

41,135

—

—

—

—

—

Borrowed money

807,025

335,559

295,0928

1—¥10,425,914¥568,614¥357,060¥7,156¥6,509¥0

Total

Note: Demand deposits are included under “Due in 1 year or less.”(3) Fair value information by level within the fair value hierarchy
The fair value of financial instruments is classified into the following three levels according to the observability and materiality of inputs
used to measure fair value:
Level 1 fair value: Fair value measured using observable inputs, i.e., quoted prices in active markets for assets or liabilities that are thesubject of the measurement.
Level 2 fair value: Fair value measured using observable inputs other than Level 1 inputs
Level 3 fair value: Fair value measured using unobservable inputs
If multiple inputs are used that are significant to the fair value measurement, the fair value measurement is categorized in its entirety in thelevel of the lowest level input that is significant to the entire measurement.
i)	Financial instruments measured at fair value<At 31st March, 2022>
Millions of yen
Fair value
Category

Level 1

Level 2

Level 3

Total

Securities:
Available for sales securities:
Government bonds, municipal bonds, etc.
Corporate bonds¥472,474¥412,796¥—¥885,271—

140,969

19,693

160,663—

60,824—60,824

Shares107,117——

107,117

Other

70,308263,081

9,516

342,906

Residential mortgage-backed securities

Derivative transactions:Interest rates

—

732

—

732

Currencies

—

1,203

—

1,203

Shares

—

—

—

—

Bonds

—

—

—

—

Merchandise

—

—

—

—

Credit derivatives

—

—

—

—

¥649,901¥879,609¥29,209¥1,558,720

Total assets
Derivative transactions:Interest rates

—

574

—

574

Currencies

—

6,712

—

6,712

Shares

—

—

—

—

Bonds

—

—

—

—

Merchandise

—

—

—

—

Credit derivatives

—

—

—

—

Total liabilities¥—¥7,287¥—¥7,287

Note: Investment trusts, etc. to which the transitional treatment provided for in Article 5, Item 6 of the Supplementary Provisions to the “Cabinet Office Ordinance on
Partial Amendment of the Regulations on Terminology, Format and Preparation Method of Financial Statements, etc.” (Cabinet Office Ordinance No. 9, 6th
March, 2020) is applied are not represented in the above table.
The amount of such investment trust, etc. on the consolidated balance sheet is 177,755 million ($1,452,371 thousand).

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

27

Notes to Consolidated Financial Statements<At 31st March, 2022>
Thousands of U.S. dollars
Fair value
Category

Level 1

Level 2

Level 3

Total

Securities:
Available for sales securities:$3,860,404$3,372,795$—$7,233,199

Corporate bonds—

1,151,809

160,910

1,312,719

Residential mortgage-backed securities—

496,974—

496,974

Shares875,214——875,214

Other

574,464

2,149,535

77,7522,801,752

Interest rates

—

5,988

—

5,988

Currencies

—

9,837

—

9,837

Shares

—

—

—

—

Bonds

—

—

—

—

Merchandise

—

—

—

—

Credit derivatives

—

—

—

—

$5,310,083$7,186,940$238,662$12,735,686

Government bonds, municipal bonds, etc.

Derivative transactions:

Total assets
Derivative transactions:Interest rates

—

4,692

—

4,692

Currencies—

54,848—54,848

Shares

—

—

—

—

Bonds

—

—

—

—

Merchandise

—

—

—

—

Credit derivatives

—

—

—

—

Total liabilities$—$59,541$—$59,541ii)	Financial instruments other than financial instruments measured at fair value<At 31st March, 2022>
Millions of yen
Fair value
Category

Level 1

Level 2

Level 3

Total

Securities:
Securities Held-to-maturity:
Government bonds, municipal bonds, etc.

¥—

¥16,341¥—¥16,341

Corporate bonds

—

—

—

—

Other

—

—

—

—

—

—

8,520,495

8,520,495¥—¥16,341¥8,520,495¥8,536,836—

9,570,513—

9,570,513

Loans and bills discounted
Total assets
Deposits
Borrowings
Total liabilities

28

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022—

1,747,863—

1,747,863¥—¥11,318,376¥—¥11,318,376

Notes to Consolidated Financial Statements<At 31st March, 2022>
Thousands of U.S. dollars
Fair value
Category

Level 1

Level 2

Level 3

Total

Securities:
Securities Held-to-maturity:
Government bonds, municipal bonds, etc.

$—

$133,515$—$133,515

Corporate bonds

—

—

—

—

Other

—

—

—

—

Loans and bills discounted
Total assets——

69,617,582

69,617,582$—$133,515$69,617,582$69,751,098

Deposits—

78,196,858—

78,196,858

Borrowings—

14,281,094—

14,281,094$—$92,477,952$—$92,477,952

Total liabilities(Note 1) Description of the valuation technique(s) and inputs used in the fair value measurements
Assets:i)

Securities
Fair value of securities that may be measured using non-adjusted quoted prices in active markets is classified as Level 1. Listed
shares and government bonds are typically included here. Fair value of securities that are measured using quoted prices and whose
respective markets are not very active is classified as Level 2. Local government bonds, corporate bonds, and residential mortgagebacked securities are typically included here. If quoted prices are not available, fair value is measured using the discounted cash flow
method and other valuation techniques. For valuation, observable inputs are used in the best manner. Such inputs include TIBOR,
government bond yields, conditional prepayment rates, credit spreads, the probability of bankruptcy, and the rate of loss at the timeof bankruptcy. Fair value of securities that are measured using significant unobservable inputs is classified as Level 3.

ii) Loans and bills discount
The fair value of loans and bills discounted is based on the present value of the total amount of principal and interest as categorized
by loan type, internal rating, and term, discounted by the credit-risk-adjusted market interest rate. Because the fair value of loans withfloating interest rates approximates their carrying value if a borrower’s credit capability does not differ markedly from the borrower’s
credit capability after execution (since they reflect the prevailing interest rates in the short term), the carrying value is treated as the fairvalue. Regarding loans to borrowers under bankruptcy proceedings, borrowers substantially in bankruptcy and customers with highprobability of becoming insolvent, since the fair value of such loans approximates their carrying value after deducing the reserve forpossible loan losses, which is calculated based on the present value of estimated future cash flows or the estimated amounts
collectible from the sale of collateral and guarantees, the carrying value is treated as the fair value. Their fair value is classified as
Level 3.
Liabilities:i)

Deposits
For demand deposits, the amount which would be paid if its repayment was demanded on the consolidated balance sheet date isdeemed to be the fair value. The fair value of time deposits is based on the discounted present value of future cash flows as
categorized by term duration. The prevailing interest rates are used to calculate the discount rate. Because the fair value of thosedemand deposits having short terms (one year or less) approximates their carrying value, the carrying value is treated as the fairvalue. Their fair value is classified as Level 2.

ii) Borrowed money
The fair value of borrowed money is based on the present value of the total amount of the principal and interest of the borrowed
money as categorized by term duration, discounted by the remaining period of such borrowings and the credit-risk-adjusted market
interest rate. For borrowed money with floating interest rates, because its fair value is deemed to approximate the carrying value, thecarrying value is treated as the fair value. Because the fair value of borrowed money with a short-term original contractual maturity(one year or less) approximates its carrying value, the carrying value is treated as the fair value. Their fair value is classified as Level 2.

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

29

Notes to Consolidated Financial Statementsiii) Derivative transactions:
The fair value of derivative transactions for which unadjusted quoted prices in active markets may be used is classified as Level 1.
Bond futures and interest rate futures are typically included here, provided, however, because the majority of derivative transactions
are made over-the-counter and thus no published quoted prices exist, their fair value is measured by using valuation techniques suchas the discounted cash flow method or the Black-Sholes model in accordance with the transaction type and the period until maturity.
Among key inputs used for these valuation techniques are interest rates, foreign exchange rates, and volatility. The fair price isadjusted based on the credit risk of the transaction partner and the credit risk of consolidated subsidiaries engaged in the banking
business. If unobservable inputs are not used or if the impact of such inputs, in the event that such inputs are used, is not significant,the fair value is classified as Level 2. Interest swaps, foreign exchange transactions, etc. are typically included here. If significant
unobservable inputs are used, the fair value is classified as Level 3.

(Note 2) Information on financial instruments measured at fair value whose fair value is classified as Level 3i)	Quantitative information on significant unobservable inputs<At 31st March, 2022>
Category

Valuation techniqueSignificant unobservable inputs

Range of inputs

Weighted average inputs

Discounted cash flow

Default rates
by credit rating

0.03%—1.48%

0.07%

Coverage ratio
by credit rating

5.55%—80.86%

38.54%

Default rates
by credit rating

0.11%

0.11%

Coverage ratio
by credit rating

49.12%

49.12%

Securities:
Available for sale securities:
Private placement bonds

Discounted cash flow

Preferred equity securitiesii)	A reconciliation from the beginning balances to the ending balances and gains or losses on valuation of financial assets and financial
liabilities held at the end of the reporting period included in profit or loss for the period<At 31st March, 2022>
Millions of yen
Profit or loss or other comprehensive
income for the period
Category

Beginningbalance

Gains or losses on
valuation of financial
assets and financial
liabilities heldat the end of thereporting period
included in profit orloss for the period*

Purchases, sales,issuances, andsettlements, net

Transfer into
Level 3

Transfer out of
Level 3(¥48)

¥1,930¥—¥—¥19,693

¥—

4,960

4,556

—

—

9,516

—

Recorded in
profit or loss

Recorded in othercomprehensive
incomefor the period¥17,836

(¥24)

—

—

EndingbalanceSecurities:
Available sales
securities:
Privateplacement
bonds
Preferred equity
securities

30

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

Notes to Consolidated Financial Statements<At 31st March, 2022>
Thousands of U.S. dollars
Profit or loss or other comprehensive
income for the period
Beginningbalance

Category

Purchases, sales,issuances, andsettlements, net

Transfer into
Level 3

Transfer out of
Level 3

Gains or losses on
valuation of financial
assets and financial
liabilities heldat the end of thereporting period
included in profit orloss for the period*

Endingbalance

Recorded in
profit or loss*

Recorded in othercomprehensive
incomefor the period**$145,737($202)($396)$15,771$—$—$160,910$———

40,52737,225——77,752—

Securities:
Available sales
securities:
Privateplacement
bonds
Preferred equity
securities***

Included in “Other ordinary expenses” of the consolidated statements of income
Included in “Valuation difference on available-for-sale securities” under “Other comprehensive income” in the consolidated statement of comprehensive incomeiii)	Description of valuation processes used for fair value measurements
In its manual, the Group has established policies and procedures for measuring fair value, and back-office departments measure fairvalue accordingly. Whether the fair value thus obtained is measured using valid valuation techniques and inputs as well as whether
they are classified into an appropriate level of the fair value hierarchy is then verified to ensure that the polices and procedures formeasuring fair value are appropriate.
In measuring fair value, the Group uses a valuation model that most accurately reflects the nature, characteristics, and risks ofeach asset. In addition, when using quoted prices obtained from third parties, the Group verifies whether the prices are valid using
the methods deemed such as confirming the valuation techniques and inputs used.
iv)	Narrative description of sensitivity of the fair value measurement to changes in significant unobservable inputs
Significant unobservable inputs used in measuring the fair value of private placement bonds, etc. are default rates by credit rating andcoverage ratios measured by consolidated subsidiaries. The default rate indicates a probability of default, that is, borrowers falling
into arrears within a certain period. A significant increase (decrease) of this input can cause a significant decline (rise) in the fair value.

27. Securities(1) Trading securities and commercial papers (including those included in “Trading account assets”)
Thousands of
U.S. dollars

Millions of yen

2021

2022
Holding gains (losses) recognized in income

¥—

2022
(¥0)

$—

(2) Held-to-maturity securities
i)

Securities whose fair value exceeds their carrying value<At 31st March, 2022>
Millions of yen
Carrying value

Valuationdifferences

Fair value

Bonds:
Government bonds
Municipal bonds
Corporate bonds¥15,989¥16,341

¥351

—

—

—

—

—

—

15,98916,341

351

Others

—

—

—

Total

¥15,989¥16,341¥351

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

31

Notes to Consolidated Financial Statements

Thousands of U.S. dollars
Carrying value

Valuationdifferences

Fair value

Bonds:$130,641$133,515$2,874

Municipal bonds

—

—

—

Corporate bonds

—

—

—

130,641

133,515

2,874

Others

—

—

—

Total

$130,641$133,515$2,874Government bonds<At 31st March, 2021>
Millions of yen
Carrying value

Valuationdifferences

Fair value

Bonds:¥15,971¥16,341¥369

Municipal bonds

—

—

—

Corporate bonds

—

—

—

15,971

16,341

369

Government bonds

Others

—

—

—

Total

¥15,971¥16,341¥369ii) Securities whose carrying value exceeds their fair value<At 31st March, 2022>
None<At 31st March, 2021>
None(3) Available-for-sale securities (including negotiable due from banks included in “Cash and due from banks”)i)Securities whose carrying value exceeds their acquisition cost
<At 31st March, 2022>
Millions of yen

StocksValuationdifferences

Carrying value

Acquisition cost

¥95,272¥30,206¥65,065
331

Bonds:

32

Government bonds

51,49751,165

Municipal bonds

19,93519,89837

Corporate bonds

130,862

129,891971

202,295

200,955

1,340

Others221,322205,364

15,958

Total¥518,891¥436,526¥82,364

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

Notes to Consolidated Financial Statements

Thousands of U.S. dollars
Valuationdifferences

Carrying value

Acquisition cost

$778,436$246,808$531,628

Government bonds

420,764

418,055

2,708

Municipal bonds

162,886

162,579306

Corporate bonds

1,069,223

1,061,288

7,934

1,652,874

1,641,924

10,950StocksBonds:

Others1,808,342

1,677,952

130,389

Total$4,239,653$3,566,684$672,968<At 31st March, 2021>
Millions of yen

StocksValuationdifferences

Carrying value

Acquisition cost

¥112,859¥34,060¥78,799
861

Bonds:
Government bonds

98,274

97,412

Municipal bonds

105,396105,219

176

Corporate bonds

216,625

215,0091,616

420,296

417,642

2,654

Others283,370

263,100

20,269

Total¥816,526¥714,803¥101,723

ii) Securities whose acquisition cost exceeds their carrying value<At 31st March, 2022>
Millions of yen
Valuationdifferences

Carrying value

Acquisition cost

¥11,844¥14,324(¥2,479)

Government bonds

433,075

441,519(8,444)

Municipal bonds

380,763382,508(1,745)

Corporate bonds

90,626

91,160(534)

904,464

915,188(10,723)

StocksBonds:

Others299,339

312,295(12,955)

Total¥1,215,648¥1,241,807(¥26,159)

Thousands of U.S. dollars
Valuationdifferences

Carrying value

Acquisition cost

$96,777$117,036($20,258)

Government bonds

3,538,483

3,607,479(68,996)

Municipal bonds

3,111,065

3,125,322(14,257)

Corporate bonds

740,470

744,835(4,365)

7,390,019

7,477,638(87,619)

StocksBonds:

Others2,445,781

2,551,639(105,857)

Total$9,932,578$10,146,314($213,736)

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

33

Notes to Consolidated Financial Statements<At 31st March, 2021>
Millions of yen
Valuationdifferences

Carrying value

Acquisition cost

¥10,944¥12,981(¥2,036)

Government bonds

251,292

252,880(1,587)

Municipal bonds

226,744

227,232(487)

Corporate bonds

42,60742,733(126)

520,644522,845(2,200)StocksBonds:

Others121,113

124,339(3,225)

Total¥652,703¥660,166(¥7,463)(4) Available-for-sale securities sold for the years ended 31st March, 2022 and 2021 are as follows:<At 31st March, 2022>
Millions of yen
Proceeds
from sale¥870

Stocks

Gains

Losses¥766(¥0)

Bonds:
Government bonds

30,20448(118)

Municipal bonds

2,600

47

—

Corporate bonds

8,577

81

—

41,382

177(118)

Others54,026

2,137

(299)

Total

¥96,279¥3,081(¥417)

Thousands of U.S. dollars
Proceeds
from sale

Gains

Losses$7,113$6,264($4)

Government bonds

246,792

396

(965)

Municipal bonds

21,243390—

Corporate bonds

70,080662—

338,117

1,449

(965)

StocksBonds:

Others441,427

17,466(2,444)

Total$786,658$25,180($3,413)<At 31st March, 2021>
Millions of yen
Proceeds
from sale

Stocks

Gains

Losses

¥190

¥280

¥—

Bonds:
13,146—(267)

Municipal bonds

—

—

—

Corporate bonds

95

1

—

13,241

1(267)

Government bonds

34

Others59,414

5,754

(578)

Total

¥72,846¥6,036(¥846)

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

Notes to Consolidated Financial Statements(5) Devaluation of securities
Securities other than trading securities (excluding shares, etc. that do not have market prices and investments in partnerships) aredevalued to the fair value, and the difference between the acquisition cost and the fair value is treated as the loss for the fiscal year(“devaluation”), if the fair value (primarily the closing market price at the consolidated balance sheet date) has significantly deteriorated
compared with the acquisition cost (including amortized cost) unless it is deemed that there is a possibility of a recovery in the fair value.
The amount of devaluation was ¥2,056 million ($16,801 thousand), of which ¥2,005 million ($16,383 thousand) for stocks and¥51 million ($418 thousand) for bonds, for the year ended 31st March,2022.
The amount of devaluation was ¥104 million, of which ¥16 million for stocks and ¥88 million for bonds, for the year ended 31st
March,2021.
The criteria for determining whether the fair value of a security has “significantly deteriorated” are outlined as follows:
1. The fair value is 50% or less of the acquisition cost, or
2.	The fair value exceeds 50% but is 70% or less of the acquisition cost and the security meets certain conditions such as the quoted
market price for a certain period in the past and financial conditions of the issuer.
(6) Unrealized gains/losses on securities available for sale
The components of the unrealized gains/losses on securities available for sale at 31st March, 2022 and 2021 are as follows:<At 31st March, 2022>
Millions of yen

Thousands of
U.S. dollars

Revaluation difference¥56,205$459,232

Deferred tax liability(17,050)(139,309)

Revaluation difference (before non-controlling interest adjustment), net of taxes

39,155319,922(538)(4,399)Amount corresponding to non-controlling interests
Amount corresponding to the parent’s share of net unrealized gains on available-for-sale securities owned
by affiliates
Unrealized gains on securities available for sale, net of taxes——¥38,616$553,725<At 31st March, 2021>
Millions of yen

Revaluation difference¥94,260

Deferred tax liability(28,538)

Revaluation difference (before non-controlling interest adjustment), net of taxes

65,721(483)

Amount corresponding to non-controlling interests
Amount corresponding to the parent’s share of net unrealized gains on available-for-sale securities owned
by affiliates—¥65,238

Unrealized gains on securities available for sale, net of taxes

28. Money Held in Trust
Money held in trust at 31st March, 2022 and 2021 are as follows:
Thousands of
U.S. dollars

Millions of yen

2021

2022

2022

Money held in trust for investment purposes¥4,982¥4,973$40,708———

Acquisition Cost

¥6,700¥6,300$54,743

Carrying value

6,700

6,300

54,743———Carrying value
Unrealized gains/losses
Money held in trust for other purposes than investment purposes and held-to-maturity purposes:

Unrealized gains/losses

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

35

Notes to Consolidated Financial Statements

29. Derivatives(1) Derivative transactions to which hedge accounting is not applied
Summarized below are the contract value or the notional principal and the fair value of the derivative transactions at 31st March, 2022
and 2021, to which hedge accounting is not applied. The amounts of the contract value are not necessarily indicative of the actual
market risk of derivative transactions.
i)Interest related transactions<At 31st March, 2022>
Millions of yen
Contract value
Type of transactions

Total

Over one year

Unrealized
gain (loss)

Fair value

Over-the-counter transactions:Interest rate swaps:
Receive-fixed and pay-floating¥29,540¥27,940¥496

Receive-floating and pay-fixed

29,54027,940

(310)

(310)

—

—

¥185

¥185

Total

¥496

Thousands of U.S. dollars
Contract value
Type of transactions

Total

Over one year

Unrealized
gain (loss)

Fair value

Over-the-counter transactions:Interest rate swaps:
Receive-fixed and pay-floating$241,361$228,288$4,055

Receive-floating and pay-fixed

241,361

228,288(2,540)(2,540)——$1,515$1,515

Total
Note:

$4,055The above transactions are marked to market and unrealized gains/losses are included in the consolidated statement of income.

<At 31st March, 2021>
Millions of yen
Contract value
Type of transactions

Total

Over one year

Unrealized
gain (loss)

Fair value

Over-the-counter transactions:Interest rate swaps:
Receive-fixed and pay-floating¥31,860¥31,860

Receive-floating and pay-fixed

31,86031,860

(586)

(586)

—

—

¥206

¥206

Total

¥792

¥792

Note: The above transactions are marked to market and unrealized gains/losses are included in the consolidated statement of income.

ii) Currency related transactions<At 31st March, 2022>
Millions of yen
Contract value
Type of transactions

Total

Over one year

Unrealized
gain (loss)

Fair value

Over-the-counter transactions:¥18,469¥14,757

¥7

¥7

Sell

10,793

2

(335)

(335)

Buy

8,036

—

167

167

Sell

29,597

19,666

(502)

(143)

Buy

29,597

19,666

499

284

—

—

(¥162)(¥19)

Currency swaps
Forward foreign:

Currency option:

Total

36

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

Notes to Consolidated Financial Statements

Thousands of U.S. dollars
Contract value
Type of transactions

Total

Over one year

Unrealized
gain (loss)

Fair value

Over-the-counter transactions:$150,905$120,577

$62

$62

Sell

88,19018(2,741)(2,741)

Buy

65,660

—

1,371

1,371

Sell

241,831

160,687(4,102)(1,172)

Buy

241,831

160,687

4,080

2,321

—

—

($1,329)($157)

Currency swaps
Forward foreign:

Currency option:

Total

Note: The above transactions are marked to market and unrealized gains/losses are included in the consolidated statement of income.

<At 31st March, 2021>
Millions of yen
Contract value
Type of transactions

Total

Over one year

Unrealized
gain (loss)

Fair value

Over-the-counter transactions:¥67,903¥17,485

(¥17)

(¥17)

Sell

5,671

—

(217)

(217)

Buy

4,245

—

129

129

Sell

72,47644,260(1,564)423

Buy72,47644,260

1,564

42

—

—

(¥105)¥360

Currency swaps
Forward foreign:

Currency option:

Total

Note: The above transactions are marked to market and unrealized gains/losses are included in the consolidated statement of income.

(2) Derivative transactions to which hedge accounting is applied
Summarized below are the contract value or the notional principal and the fair value of the derivative transactions at 31st March, 2022
and 2021, to which hedge accounting is applied. The amounts of the contract value are not necessarily indicative of the actual market
risk of derivative transactions.
i)Interest related transactions<At 31st March, 2022>
Millions of yen
Hedge accounting
methodContract value
Type of transactions

Hedged item

Principle hedge
accounting method

Interest rate swaps:

Available-forsale securities

Special treatment forinterest rate swaps

Interest rate swaps:

Receive-floating and pay-fixed
Receive-floating and pay-fixedInterest rate options

Total

Loans and bills
discounted,
and deposits

TotalOver one year

¥37,677¥35,229

42,76010,000————

Nishi-Nippon Financial Holdings Group

Fair value(¥26)(Note)(¥26)

FINANCIAL REPORT 2022

37

Notes to Consolidated Financial Statements

Thousands of U.S. dollars
Contract value

Hedge accounting
methodType of transactions

Hedged item

Principle hedge
accounting method

Interest rate swaps:

Available-forsale securities

Special treatment forinterest rate swaps

Interest rate swaps:

Receive-floating and pay-fixed
Receive-floating and pay-fixed

Loans and bills
discounted,
and deposits

TotalOver one year

$307,847$287,847

349,374

81,706————

Interest rate options
Total

Fair value($219)(Note)($219)

Note:	Since the interest rate swaps, to which the special treatments are applied, are accounted for as synthetic products composed of loans and bills discounted
and deposits, their fair value is included in the fair value of the said loans and bills discounted and deposits which are disclosed in “Financial Instruments(Note 26)”.

<At 31st March, 2021>
Millions of yen
Contract value

Hedge accounting
methodType of transactions

Hedged item

Principle hedge
accounting method

Interest rate swaps:

Available-forsale securities

Special treatment forinterest rate swaps

Interest rate swaps:

Receive-floating and pay-fixed
Receive-floating and pay-fixed

Loans and bills
discounted,
and deposits

TotalOver one year

¥34,081¥34,081

112,780

43,944————

Interest rate options
Total

Fair value(¥2,054)(Note)(¥2,054)

Note: Since the interest rate swaps, to which the special treatments are applied, are accounted for as synthetic products composed of loans and bills discounted
and deposits, their fair value is included in the fair value of the said loans and bills discounted and deposits which are disclosed in “Financial Instruments(Note 26)”.

ii) Currency related transactions<At 31st March, 2022>
Millions of yen
Contract value

Hedge accounting
methodPrinciple hedge
accounting method

Hedged item

Total

Forward foreign

Securities denominated inforeign currencies¥103,484¥—(¥5,346)——(¥5,346)

Total

Over one year

Fair value

Type of transactions

Thousands of U.S. dollars
Contract value

Hedge accounting
methodPrinciple hedge
accounting method

Hedged item

Total

Forward foreign

Securities denominated inforeign currencies$845,528$—($43,682)——($43,682)

Total

Over one year

Fair value

Type of transactions

Note: The deferred method is applied as hedge accounting in accordance primarily with “Accounting and Auditing Treatment for Accounting for Foreign Currency
Transactions in Banking Industry” (JICPA Industry-specific Committee Practical Guideline No. 25).

<At 31st March, 2021>
Millions of yen
Contract value

Hedge accounting
methodPrinciple hedge
accounting method

Hedged item

Total

Forward foreign

Securities denominated inforeign currencies¥12,293¥—(¥260)——(¥260)

Total

Over one year

Fair value

Type of transactions

Note: The deferred method is applied as hedge accounting in accordance primarily with “Accounting and Auditing Treatment for Accounting for Foreign Currency
Transactions in Banking Industry” (JICPA Industry-specific Committee Practical Guideline No. 25).

38

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

Notes to Consolidated Financial Statements

30. Employee Retirement Benefits(1) Description of the retirement benefit plans
The Company’s consolidated subsidiaries adopt funded or unfunded defined benefit plans and/or the defined contribution plan toprovide for employee retirement benefits.
Under the defined benefit corporate pension plans (all funded), lump-sum or annuity payments are made at the amounts based onsalaries and the length of service periods of the covered employees. Nishi-Nippon City Bank, a consolidated subsidiary, has establisheda retirement benefit trust for its defined benefit corporate pension plan.
Under the lump-sum payment plans (principally unfunded, however, some plans have a funded status as a result of theestablishment of a retirement benefit trust), retirement benefits are paid in the form of a lump sum at the amounts based on salaries andthe length of service periods of the covered employees.
The consolidated subsidiaries may also pay additional retirement benefits that are not subject to actuarial calculation.
As of 31st March, 2022, the lump-sum payment plans have been adopted by 6 consolidated subsidiaries. The corporate pension
fund plans have been adopted by 2 consolidated subsidiaries. The defined contribution plan has been adopted by 1 consolidated
subsidiary.
For the lump-sum payment plans that certain consolidated subsidiaries have adopted, liability for retirement benefits and retirement
benefit expenses are calculated using the simplified method which assumes the retirement benefit obligation to be equal to the benefits
payable if all the eligible employees voluntarily terminated their employment at fiscal year end.
(2) Defined benefit plansi)	Reconciliation between the balances of retirement benefit obligation at the beginning and end of the year for the years ended 31st
March, 2022 and 2021
Thousands of
U.S. dollars

Millions of yen

2022

2021

2022

¥73,948¥75,297$604,203

Service cost

2,285

2,323

18,673

Interest cost

87

89

716

Actuarial gain and loss

185

265

1,513

Retirement benefits paid

(4,250)(4,028)(34,729)———¥72,256¥73,948$590,376

Retirement benefit obligation at beginning of the year

OthersRetirement benefit obligation at end of the yearii) 	Reconciliation between the balances of plan assets at the beginning and end of the year for the years ended 31st March, 2022 and2021
Thousands of
U.S. dollars

Millions of yen

Plan assets at beginning of the year
Expected return on plan assets
Actuarial gain and loss
Contributions by employer
Contributions by employees
Retirement benefits paid
OthersPlan assets at end of the year

2022

2021

2022

¥91,241¥76,869$745,496

3,002

2,529

24,536(17,749)

13,383(145,025)

728

734

5,953

144

146

1,178

(2,336)(2,421)(19,090)———¥75,031¥91,241$613,049

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

39

Notes to Consolidated Financial Statementsiii)	Reconciliation between the balances of retirement benefit obligation and plan assets at the end of the year and the amounts of theliability and asset for retirement benefits recognized in the consolidated balance sheets at 31st March, 2022 and 2021
Thousands of
U.S. dollars

Millions of yen

2022

2021

2022

Retirement benefit obligation (funded)¥71,796¥73,483$586,616

Fair value of plan assets(75,031)(91,241)(613,049)(3,235)(17,757)(26,432)

460

464

3,759

(¥2,774)(¥17,292)($22,672)

Retirement benefit obligation (unfunded)
Net liability (asset) for retirement benefits in the balance sheet

Thousands of
U.S. dollars

Millions of yen

2021

2022

2022

Liability for retirement benefits¥4,773¥477$39,001

Asset for retirement benefits(7,548)(17,770)(61,674)

Net liability (asset) for retirement benefits in the balance sheet(¥2,774)(¥17,292)($22,672)

iv) Components of retirement benefit expenses for the years ended 31st March, 2022 and 2021
Thousands of
U.S. dollars

Millions of yen

2021

2022

2022

Service cost

¥2,141¥2,177

Interest cost

87

89

716

(3,002)(2,529)(24,536)

Amortization of unrecognized actuarial gain and loss

720

2,328

5,887

Others

299

255

2,443

Retirement benefit expenses¥245¥2,321$2,005

Expected return on plan assets$17,494

Notes: 1. Contributions by employees to corporate pension funds, etc. have been deducted from the service cost.
2. Retirement benefit expenses of consolidated subsidiaries that have adopted the simplified method are reported in total under “Service cost.”v)	Items recorded in retirement benefits liability adjustments included in other comprehensive income (gross of income tax effects) for
the years ended 31st March, 2022 and 2021
Thousands of
U.S. dollars

Millions of yen

Actuarial gain and loss

2022

2021

2022

¥17,214¥15,445$140,651vi)	Items recorded in retirement benefits liability adjustments included in accumulated other comprehensive income (gross of income tax
effects) at 31st March, 2022 and 2021
Thousands of
U.S. dollars

Millions of yen

Unrecognized actuarial gain and loss

2022

2021

2022

(¥22,620)(¥5,405)($184,820)vii) Matters concerning plan assets(a) Percentages of each main category of the total plan assets at 31st March, 2022 and 2021 are as follows:
2021

2022
Bonds

24%

24%

Stocks51%

60%

Cash and deposits

0%0%Others

25%

16%

Total

100%

100%

Note: Retirement benefit trusts established for the corporate pension plans accounted for 21% and 28% of the total plan assets at 31st March, 2022 and 2021,
respectively. Retirement benefit trusts established for the lump-sum payment plans accounted for 17% and 20% of the total plan assets at 31st March,2022 and 2021, respectively.

40

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

Notes to Consolidated Financial Statements(b) The expected long-term rate of return on plan assets has been estimated by taking into account the current and expected
allocation of the plan assets and the current and anticipated long-term rate of return on diverse assets that constitute the plan
assets.
viii) Assumptions for actuarial calculation
Major assumptions for actuarial calculation as of 31st March, 2022 and 2021
2022

2021

1) Discount rates:

0.117%(principally)

0.117%(principally)

2) Expected long-term rate of return on plan assets:

3.30%(principally)

3.30%(principally)

3) Expected rate of pay increase:

2.74%(principally)

2.81%(principally)(3) Defined contribution plans
Contributions of ¥0 million ($1 thousand) and ¥0 million have been made to the defined contribution plan by the consolidated subsidiaryfor the years ended 31st March, 2022 and 2021, respectively.

31. Income Taxes
The tax effect of temporary differences and tax loss carryforwards that give rise to the deferred tax assets and liabilities at 31st March, 2022
and 2021 are as follows:
Thousands of
U.S. dollars

Millions of yen

2022

2021

2022

Reserve for possible loan losses¥14,229¥14,771$116,266

Liability for retirement benefits

7,429

2,820

60,702

Accumulated depreciation

1,957

1,971

15,990

59

142

486

7,439

6,837

60,784Sub-total

31,11526,542

254,230

Valuation allowance(7,808)(6,767)(63,801)

23,306

19,775

190,428

Deferred tax assets:

Loss carryforwards for tax purposes
OthersTotal deferred tax assets
Deferred tax liabilities:
Reserve fund for deferred income of fixed assets

(0)

(1)

(6)

Unrealized losses on securities attributable to partition of corporation, net

(22)

(23)

(187)

(3,647)(3,647)(29,803)

Asset retirement obligations

(131)

(60)

(1,071)

Capital gain adjustments(1,081)(1,081)(8,840)

(103)

(98)

(846)

(17,050)(28,229)(139,309)

Gains on establishment of a retirement benefit trust

Share of retained earnings of affiliates accounted for by the equity method
Unrealized gains on securities available for sale, net

(2)

(1)

(22)

Total deferred tax liabilities(22,040)(33,143)(180,087)

Net deferred tax assets (liabilities)(¥1,265)(¥13,368)($10,340)

Others

The reconciliation between the statutory tax rate and the effective tax rate reflected in the consolidated statement of income for the year
ended 31st March, 2022 is as follows:
2022
Statutory tax rate

30.5%

2021
30.5%

(Adjustments)
Items permanently not deductible for tax purposes such as entertainment expenses

0.3

0.5

Non-taxable dividend income and others

(0.7)

(0.8)

Inhabitant tax on per capita basis

0.3

0.4

Increase in valuation allowance

2.8

(2.8)

Others(0.0)

0.3

Effective tax rate

33.2%

28.1%

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

41

Notes to Consolidated Financial Statements

32. Asset Retirement Obligations
Information on asset retirement obligations is as follows:
Asset retirement obligations that are recorded in the consolidated balance sheet(1) Outline of asset retirement obligations
The Group recognizes asset retirement obligations for restoration obligations resulting from real estate lease agreements such as thoseof the Group branch offices and commercial fixed-term leasehold agreements. The Group also recognizes asset retirement obligations
pertaining to obligations to remove hazardous substances used in some of their branch offices in accordance with the Ordinance on
Prevention of Health Impairment due to Asbestos.
(2) Method for calculating the value of asset retirement obligations
An asset retirement obligation is calculated by first estimating the period of expected use of the asset, which is the relevant building’s
depreciation period (principally 39 years), and then discounting the value of the relevant liability using the government bond’s market rate
(principally 2.304%) that matches said depreciation period as the discount rate.
(3) Changes in total asset retirement obligations for the years ended 31st March, 2022 and 2021
Thousands of
U.S. dollars

Millions of yen

2021

2022

2022

¥813

¥804

$6,649

Increase due to acquisition of tangible fixed assets

250

6

2,046

Adjustment for passage of time

11

10

94

Decrease due to fulfillment of asset retirement obligation

6

7

50

¥1,069¥813$8,740

Balance at beginning of the year

Balance at end of the year

33. Revenue recognition(1) Disaggregation of revenue from contracts with customers<In 2022>
Millions of yen
Reporting segment
Banking

Other

Total

¥22,205¥7,469¥29,674

Deposit-taking and lending

7,936

4,186

12,122Forex businesses

7,292

—

7,292

Securities-related businesses

3,378

2,960

6,338

Agency transactions

1,865

6

1,872

27

14

41

22,232

7,483

29,716

Fees and commissions

Ordinary revenues other than fees and commissions
Revenue from contracts with customers
Ordinary revenues other than the above

103,159

5,609

108,768

Ordinary revenues from third party customers¥125,391¥13,093¥138,484

Note: “Other” is a business segment that is not included in reporting segments and includes credit guarantees, credit cards, financial instruments transactions, andother financial businesses.

42

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

Notes to Consolidated Financial Statements<In 2022>
Thousands of U.S. dollars
Reporting segment
Banking

Other

Total

$181,428$61,028$242,457

Deposit-taking and lending

64,841

34,202

99,044Forex businesses

59,585—59,585

Securities-related businesses

27,601

24,18951,790Agency transactions

15,24253

15,296

223

119

342

Revenue from contracts with customers

181,651

61,148242,799

Ordinary revenues other than the above

842,873

45,829888,703$1,024,525$106,977$1,131,503

Fees and commissions

Ordinary revenues other than fees and commissions

Ordinary revenues from third party customers(2) Useful information in understanding revenue from contracts with customers
Useful information in understanding revenue is as presented in “2. Summary of Significant Accounting Policies, (17) Recognition of
earnings.”(3) Balance of contract liabilities and the transaction price allocated to the remaining performance obligationsi)

Balance of contract liabilities, etc.

<In 2022>
Millions of yen

Thousands of
U.S. dollars

Receivables from contracts with customers (beginning balance)¥844$6,896

Receivables from contracts with customers (ending balance)

810

6,623

Contract liabilities (beginning balance)

445

3,640

Contract liabilities (ending balance)

348

2,845

Notes: 1. Contract liabilities are mainly related to advances received from customers and their balance decreases as they are appropriated when recognizing earnings.
2. Of the amount of revenue recognized in the reporting period, ¥445 million ($3,640 thousand) was included in the balance of contract liabilities (beginningbalance).

ii) Transaction price allocated to the remaining performance obligations
The Group does not have significant transactions with an original expected duration of one year or more. Accordingly, the Group has
applied the practical expedient and omitted information on the remaining performance obligations.

34. Business Segment Information(1) Segment Informationi)

Segment information summary
Financial information can be individually obtained for each of the Group’s reportable segments. This information is regularly reviewed
by the board of directors in order to determine how to allocate business resources and to evaluate business performance.
The Group consists of 7 consolidated subsidiaries and 1 affiliate. The Group is engaged in the financial services business, with a
primary focus on the banking business.
Thus, while the Group is composed of business segments offering different financial services, the Group’s reportable segment is
the “banking business” which Nishi-Nippon City Bank and The Bank of Nagasaki are engaged in.
The “banking business” is a wide range of services including services for deposits, loans, securities investment, domestic andforeign currency exchange, and other incidental services.

ii) Method for calculating the amount of ordinary income, profit or loss, assets, liabilities and other items
The accounting policies of reported business segments are the same as those described in “2. Summary of Significant Accounting
Policies”. The segment income is reported on an ordinary income basis. In addition, internal ordinary income among segments isbased on the same transaction terms as used in ordinary transactions with third parties.

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

43

Notes to Consolidated Financial Statementsiii) Ordinary income, profit or loss, assets, liabilities and other items by reportable segments<In 2022>
Millions of yen
Reportable segment
Banking

Other

Total

Adjustments

Consolidated¥138,484

Ordinary income
Ordinary income from third party customers¥125,391¥13,093¥138,484¥—

Internal ordinary income among segments

1,534

11,671

13,205(13,205)—

126,925

24,764

151,690(13,205)

138,484

Total ordinary income

32,367

11,68144,049(6,180)37,868Segment assets

13,106,794

501,223

13,608,017(480,111)

13,127,906

Segment liabilities

12,578,718

89,10012,667,818(70,637)

12,597,181

Segment profit

Other items
Depreciation

5,472

202

5,674

—

5,674

Interest and dividend income

96,301

8,289

104,591(6,363)

98,228

848

130

979

(123)

855

4,849

486

5,335

—

5,335

Adjustments

Consolidated$—$1,131,503

Interest expenses
Increase in tangible and intangible fixed assets

Thousands of U.S. dollars
Reportable segment
Banking

Other

Total

Ordinary income
Ordinary income from third party customers
Internal ordinary income among segments
Total ordinary income$1,024,525$106,977$1,131,503

12,533

95,362

107,896(107,896)—

1,037,059

202,340

1,239,399(107,896)

1,131,503

264,463

95,447359,910(50,502)309,408

Segment assets

107,090,406

4,095,294

111,185,701(3,922,803)

107,262,897

Segment liabilities

102,775,703

728,001

103,503,705(577,150)

102,926,555

Segment profit

Other items
Depreciation

44,7151,650

46,366—46,366

Interest and dividend income

786,842

67,734

854,577(51,991)

802,585

Interest expenses

6,931

1,069

8,001

(1,012)

6,988

Increase in tangible and intangible fixed assets

39,6193,972

43,592—

43,592

Notes: 1. Ordinary income is presented instead of net sales.
2. The category of “other” includes business segments which are not reportable segments, such as financial-related services for credit guarantee, credit
card and financial instruments exchange.
3. Adjustments for segment profit, segment assets, segment liabilities, interest and dividend income and interest expenses are primarily eliminations ofinternal transactions among segments.

44

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

Notes to Consolidated Financial Statements<In 2021>
Millions of yen
Reportable segment
Banking

Other

Total

Adjustments

Consolidated¥134,949

Ordinary income
Ordinary income from third party customers¥122,757¥12,192¥134,949¥—

Internal ordinary income among segments

1,328

10,17911,508(11,508)—

124,085

22,372

146,457(11,508)

134,949

Total ordinary income

21,167

10,02331,191(4,427)

26,763

Segment assets

12,054,300

489,276

12,543,576(468,009)

12,075,567

Segment liabilities

11,506,845

79,340

11,586,186(61,525)

11,524,660

Segment profit

Other items
Depreciation

5,526

202

5,729

—

5,729

Interest and dividend income

92,1596,568

98,727(4,637)

94,090Interest expenses

2,052

125

2,178

(113)

2,064

Increase in tangible and intangible fixed assets

4,748

84

4,833

—

4,833

Notes: 1. Ordinary income is presented instead of net sales.
2. The category of “other” includes business segments which are not reportable segments, such as financial-related services for credit guarantee, credit
card and financial instruments exchange.
3. Adjustments for segment profit, segment assets, segment liabilities, interest and dividend income and interest expenses are primarily eliminations ofinternal transactions among segments.

(2) Related Information
Ordinary income by services:<In 2022>
Millions of yen
Loan

Ordinary income from third party customers

Securities¥87,420¥17,969

Other

Total

¥33,094¥138,484

Thousands of U.S. dollars

Ordinary income from third party customers

Loan

Securities

Other

Total

$714,278$146,819$270,404

Loan

Securities$1,131,503

Note: Ordinary income is presented instead of net sales.

<In 2021>
Millions of yen

Ordinary income from third party customers¥87,683¥17,924

Other

Total

¥29,341¥134,949

Note: Ordinary income is presented instead of net sales.

(3) Impairment Losses on Tangible Fixed Assets by Reportable Segments<In 2022>
Millions of yen
Reportable segment
Banking

Impairment losses

Other

¥465

Total

¥—

¥465

Thousands of U.S. dollars
Reportable segment
Banking

Impairment losses$3,806

Other

Total

$—

Nishi-Nippon Financial Holdings Group

$3,806

FINANCIAL REPORT 2022

45

Notes to Consolidated Financial Statements<In 2021>
Millions of yen
Reportable segment
Banking

Other

¥818

Impairment losses

Total

¥—

¥818

(4) Amortization and Balance of Goodwill by Reportable Segments
Not applicable

35. Related Party Transactions
There are no related party transactions to report for the years ended 31st March, 2022 and 2021.

36. Reconciliation of Cash and Cash Equivalents
The reconciliation between “Cash and cash equivalents” in the consolidated statement of cash flows and each account in the consolidatedbalance sheet is as follows:
Thousands of
U.S. dollars

Millions of yen

Cash and due from banks on the consolidated balance sheet
Due from banks, exclusive of central bank
Cash and cash equivalents on the consolidated statement of cash flows

2022

2021

2022

¥2,614,747¥1,738,761$21,364,060(6,672)(5,693)(54,520)¥2,608,074¥1,733,067$21,309,539

37. Per Share Information
Yen

Net assets per share at end of the year
Profit (loss) attributable to owners of parent per share*

U.S. dollars

2022

2021

2022

¥3,618.43¥3,663.71$29.564

164.31121.03

1.342(Note 1) Basis for net assets per share as of 31st March, 2022 and 2021 are as follows:
Thousands of
U.S. dollars

Millions of yen

Net assets
Items to be deducted from net assets
Non-controlling interests
Net assets attributable to common stock

2022

2021

¥530,724¥550,906$4,336,342

8,555

8,114

69,901

8,555

8,114

69,901

522,169

542,792

4,266,440

SharesNumber of shares of common stock outstanding at end of the year

46

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

2022

2021

144,308,044

148,153,621

2022

Notes to Consolidated Financial Statements(Note 2) Basis for profit (loss) attributable to owners of parent per share for the years ended 31st March, 2022 and 2021 are as follows:
Thousands of
U.S. dollars

Millions of yen

2021

2022

2022

Basis:
Profit (loss) attributable to owners of parent¥24,236¥18,088———

24,23618,088198,026

Items not attributable to common stock
Profit (loss) attributable to owners of parent available for shareholders of common stock$198,026

SharesAverage number of shares of common stock outstanding during the year

2022

2021

147,500,789

149,450,688(Note 3) Diluted profit (loss) attributable to owners of parent per share for the years ended 31st March, 2022 and 2021 was not presented
because the Group had no dilutive shares during the years.

38. Cash Dividends
Cash dividends paid during the years ended 31st March, 2022 and 2021 are as follows:<In 2022>
Types

Millions of yen

Thousands of
U.S. dollars

Cut-off date

Effective date

29th June, 2021
Ordinary General Meeting of Shareholders

Cash dividends(¥15.0 per share)¥2,222$18,160

31st March,2021

30th June,
2021

9th November, 2021
Meeting of Board of Directors

Cash dividends(¥15.0 per share)¥2,222$18,159

30th September,2021

10th December,
2021

Resolution<In 2021>
Types

Millions of yen

Cut-off date

Effective date

26th June, 2020
Ordinary General Meeting of Shareholders

Resolution

Cash dividends(¥17.5 per share)¥2,617

31st March,2020

29th June,2020

6th November, 2020
Meeting of Board of Directors

Cash dividends(¥15.0 per share)¥2,24330th September,2020

10th December,
2020

39. Subsequent Event
The following appropriation of earned surplus for the year ended 31st March, 2022 was approved at the shareholders’ meeting held on
29th June, 2022:
Resolution

29th June, 2022
Ordinary General Meeting of Shareholders

Types

Millions of yen

Thousands of
U.S. dollars

Cash dividends(¥20.0 per share)¥2,886$23,585

Cut-off date

Effective date

31st March,2022

30th June,
2022

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

47

Quarterly Information (Unaudited)
Nishi-Nippon Financial Holdings, Inc. and Subsidiaries
Year ended 31st March, 2022
Millions of yen
First Quarter
from 1st April, 2021
to 30th June, 2021

Ordinary income

Second Quarter

Third Quarter

from 1st April, 2021
from 1st April, 2021
to 30th September, 2021 to 31st December, 2021

Fourth Quarter
from 1st April, 2021
to 31st March, 2022

¥36,558¥70,040¥105,168¥138,484

Profit (loss) before income taxes

14,26923,02930,497

37,154

Profit (loss) attributable to owners of parent

9,678

15,65520,04024,236First Quarter

Second Quarter

Yen
from 1st April, 2021
to 30th June, 2021

Profit (loss) attributable to owners of parent per share

Third Quarter

from 1st April, 2021
from 1st April, 2021
to 30th September, 2021 to 31st December, 2021

¥65.33¥105.67

First Quarter

Second Quarter

Fourth Quarter
from 1st April, 2021
to 31st March, 2022

¥135.33¥164.31

Third Quarter

Fourth Quarter

Yen
from 1st April, 2021
to 30th June, 2021

Profit (loss) attributable to owners of parent per sharefrom 1st July, 2021
from 1st October, 2021
to 30th September, 2021 to 31st December, 2021

¥65.33¥40.33First Quarter

Second Quarter¥29.64from 1st January, 2022
to 31st March, 2022

¥28.79Thousands of U.S. dollars
from 1st April, 2021
to 30th June, 2021

Ordinary income

Third Quarter

from 1st April, 2021
from 1st April, 2021
to 30th September, 2021 to 31st December, 2021

Fourth Quarter
from 1st April, 2021
to 31st March, 2022

$298,704$572,269$859,285$1,131,503

Profit (loss) before income taxes

116,586

188,163

249,183

303,572

Profit (loss) attributable to owners of parent

79,083

127,913

163,746

198,026First Quarter

Second Quarter

Third Quarter

Fourth Quarter

U.S. dollars
from 1st April, 2021
to 30th June, 2021

Profit (loss) attributable to owners of parent per sharefrom 1st April, 2021
from 1st April, 2021
to 30th September, 2021 to 31st December, 2021

$0.53

$0.86

First Quarter

Second Quarter$1.10

from 1st April, 2021
to 31st March, 2022

$1.34

U.S. dollars
from 1st April, 2021
to 30th June, 2021

Profit (loss) attributable to owners of parent per share

48

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

$0.53

Third Quarter

from 1st July, 2021
from 1st October, 2021
to 30th September, 2021 to 31st December, 2021

$0.32

$0.24

Fourth Quarter
from 1st January, 2022
to 31st March, 2022

$0.23

Non-Consolidated Balance Sheet (Unaudited)
The Nishi-Nippon City Bank, Ltd.
31st March, 2022 and 2021
Thousands of
U.S. dollars

Millions of yen

2022

2021

2022

Cash and due from banks¥2,559,666¥1,710,262$20,914,020

Call loans and bills bought

40,00030,000326,824

Assets:Trading account assets

—

131

—

11,682

11,273

95,451

Securities

1,753,670

1,489,922

14,328,541

Loans and bills discounted

8,236,035

8,318,793

67,293,369

Foreign exchange assets

22,757

11,074

185,940

Other assets

78,110102,551

638,208

Tangible fixed assets

111,825

113,463

913,683

Money held in trust

Intangible fixed assets

3,706

2,998

30,282

Prepaid pension cost

25,862

23,276211,312

Customers’ liabilities for acceptances and guarantees

15,84914,600129,496

Reserve for possible loan losses(36,995)(38,432)(302,277)

Reserve for devaluation of securities
Total assets

(458)

(458)

(3,750)¥12,821,711¥11,789,458$104,761,102

Liabilities and Net assets:
Liabilities:¥9,591,957¥9,262,757$78,372,069

Call money and bills sold

Deposits

510,000

208,128

4,167,007

Payables under repurchase agreements

251,120

194,294

2,051,805

Guarantee deposits received under securities lending transactions
Borrowed money
Foreign exchange liabilities

87,18841,135712,380

1,732,473

1,419,110

14,155,350

201

210

1,645

Borrowed money from trust account

4,794

3,205

39,177

Other liabilities

79,13875,920646,610

Reserve for employee retirement benefits

192

212

1,570

Reserve for reimbursement of deposits

775

1,129

6,332

Reserve for other contingent losses

1,082

1,220

8,840

Deferred tax liabilities

5,938

15,66948,524

Deferred tax liabilities on revaluation of premises

14,381

14,476

117,508

Acceptances and guarantees

15,84914,600129,496

12,295,093

11,252,071

100,458,320

85,74585,745700,593

85,68485,684700,090502

Total liabilities
Net assets:
Capital stock
Capital surplus
Capital reserve
Earned surplus
Legal reserve

61

61

Reserve for deferred capital gains

1

2

15

Unappropriated retained earnings

289,868

275,004

2,368,403

Total shareholders’ equity

461,362446,498

3,769,605

Net unrealized gains on securities available for sale, net of taxes

35,82462,724

292,709

Net deferred gains (losses) on hedging instruments, net of taxes(8)(1,428)(67)

29,43829,592

240,534

Revaluation of premises, net of taxes
Total valuation and translation adjustments

65,25590,888533,176

Total net assets

526,617537,386

4,302,781¥12,821,711¥11,789,458$104,761,102

Total liabilities and net assets
See accompanying Notes to Non-Consolidated Financial Statements.

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 202249

Non-Consolidated Statement of Income (Unaudited)
The Nishi-Nippon City Bank, Ltd.
Years ended 31st March, 2022 and 2021
Thousands of
U.S. dollars

Millions of yen

2022

2021

2022

Income:Interest income:Interest on loans and discounts¥77,121¥78,091$630,130Interest and dividends on securities

12,546

9,761

102,511

Other interest income

2,800

529

22,878Trust fees
Fees and commissions
Trading income
Other operating income
Other income
Total income

0

0

0

24,817

23,727

202,772

0

—

0

2,373

4,614

19,393

2,827

3,303

23,103

122,486

120,027

1,000,792

3,721

Expenses:
Interest expenses:
Interest on deposits

455

774

Interest on call money and bills sold

(113)

(39)

(926)

Interest on payables under repurchase agreements

383

911

3,131

Interest on borrowings

47

241

390

Interest on guarantee deposits received under securities lending transactions

13

44

111

Other interest expenses

72

194

594

14,694

15,313120,065—

4—

Other operating expenses

1,653

1,854

13,506

General and administrative expenses

67,08469,366548,122

Other expenses

6,827

11,13755,782

Total expenses

91,11999,804

744,500

Income before income taxes

31,367

20,223

256,291

Current

9,056

5,229

74,000

Deferred

1,267

155

10,354

Fees and commissions
Trading expenses

Income taxes

Total income taxes

10,324

5,384

84,355

Net income¥21,043¥14,838$171,935

See accompanying Notes to Non-Consolidated Financial Statements.

50

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

Non-Consolidated Statement of Changes in Net Assets (Unaudited)
The Nishi-Nippon City Bank, Ltd.
Years ended 31st March, 2022 and 2021
Thousands of
U.S. dollars

Millions of yen

2022

2021

2022

¥85,745¥85,745$700,593———¥85,745¥85,745$700,593¥85,684¥85,684$700,090

Shareholders’ equity
Capital stock
Balance at beginning of the year
Changes during the year
Total changes during the year
Balance at end of the year
Capital surplus:
Capital reserve
Balance at beginning of the year
Changes during the year
Total changes during the year
Balance at end of the year

—

—

—

¥85,684¥85,684$700,090¥85,684¥85,684$700,090

Total capital surplus
Balance at beginning of the year
Changes during the year
Total changes during the year
Balance at end of the year

—

—

—

¥85,684¥85,684$700,090

¥61

¥61

$502

Earned surplus:
Legal reserve
Balance at beginning of the year
Changes during the year
Total changes during the year
Balance at end of the year

—

—

—

¥61

¥61

$502

¥2

¥2

$22

Other earned surplus:
Reserve for deferred capital gains
Balance at beginning of the year
Changes during the year
Transfer from reserve for deferred capital gains
Total changes during the year
Balance at end of the year

(0)

(0)

(7)

(0)

(0)

(7)

¥1

¥2

$15

¥275,004¥264,335$2,246,948

(93)

—

(766)

¥274,910¥264,335$2,246,182(6,239)(4,523)(50,979)0

0

7

21,043

14,838

171,935

Unappropriated retained earnings
Balance at beginning of the year
Cumulative effect of change in accounting principle
Restated balance at beginning of the year
Changes during the year
Cash dividends paid
Transfer from reserve for deferred capital gains
Net income
Reversal of revaluation of premises

153

353

1,257

Total changes during the year

14,958

10,668122,221¥289,868¥275,004$2,368,403

Balance at end of the year

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

51

Non-Consolidated Statement of Changes in Net Assets (Unaudited)
The Nishi-Nippon City Bank, Ltd.
Years ended 31st March, 2022 and 2021

Thousands of
U.S. dollars

Millions of yen

2021

2022

2022

Total earned surplus
Balance at beginning of the year
Cumulative effect of change in accounting principle
Restated balance at beginning of the year

¥275,068¥264,399

(93)

—

(766)

¥274,974¥264,399$2,246,707$2,247,474

Changes during the year
Cash dividends paid

(6,239)(4,523)(50,979)

Net income

21,043

14,838

171,935

Reversal of revaluation of premises

153

353

1,257

Total changes during the year

14,957

10,668122,214¥289,932¥275,068$2,368,922¥446,498¥435,829$3,648,157

(93)

—

(766)

¥446,404¥435,829$3,647,391

Balance at end of the year
Total shareholders’ equity
Balance at beginning of the year
Cumulative effect of change in accounting principle
Restated balance at beginning of the year
Changes during the year
Cash dividends paid

(6,239)(4,523)(50,979)

Net income

21,043

14,838

171,935

Reversal of revaluation of premises

153

353

1,257

Total changes during the year

14,957

10,668122,214¥461,362¥446,498$3,769,605¥62,724¥45,263$512,492(26,899)

17,460(219,783)(26,899)

17,460(219,783)¥35,824¥62,724$292,709(¥1,428)(¥1,841)($11,667)

Balance at end of the year
Valuation and translation adjustments
Net unrealized gains on securities available for sale, net of taxes
Balance at beginning of the year
Changes during the year
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the year
Net deferred gains (losses) on hedging instruments, net of taxes
Balance at beginning of the year
Changes during the year
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the year

1,419

413

11,6001,419

413

11,600(¥8)(¥1,428)($67)¥29,592¥29,946$241,792

Revaluation of premises, net of taxes
Balance at beginning of the year
Changes during the year
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the year

(153)

(353)

(1,257)

(153)

(353)

(1,257)¥29,438¥29,592$240,534¥90,888¥73,368$742,617(25,633)

17,520(209,440)(25,633)

17,520(209,440)¥65,255¥90,888$533,176

Total valuation and translation adjustments
Balance at beginning of the year
Changes during the year
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the year

52

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

Non-Consolidated Statement of Changes in Net Assets (Unaudited)
The Nishi-Nippon City Bank, Ltd.
Years ended 31st March, 2022 and 2021

Thousands of
U.S. dollars

Millions of yen

2021

2022

2022

Total net assets
Balance at beginning of the year
Cumulative effect of change in accounting principle
Restated balance at beginning of the year

¥537,386¥509,197

(93)

—

(766)

¥537,293¥509,197$4,390,008$4,390,774

Changes during the year
Cash dividends paid

(6,239)(4,523)(50,979)

Net income

21,043

14,838

171,935

Reversal of revaluation of premises
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the year

153

353

1,257

(25,633)

17,520(209,440)(10,675)

28,189(87,226)¥526,617¥537,386$4,302,781

See accompanying Notes to Non-Consolidated Financial Statements.

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 202253

Non-Consolidated Balance Sheet (Unaudited)
The Bank of Nagasaki, Ltd.
31st March, 2022 and 2021
Thousands of
U.S. dollars

Millions of yen

2022

2021

2022

¥52,921¥38,703$432,398

9,029

6,758

73,778275,993

263,067

2,255,037

Other assets

1,834

2,348

14,98936,688Assets:Cash and due from banks
Securities
Loans and bills discounted
Tangible fixed assets

4,490

4,633

Intangible fixed assets

285

358

2,336

Deferred tax assets

132

233

1,083

Customers’ liabilities for acceptances and guarantees
Reserve for possible loan losses
Reserve for devaluation of securities
Total assets

12

18

98

(396)

(379)

(3,235)

(43)

(43)

(354)

¥344,261¥315,699$2,812,820$2,148,688

Liabilities and net assets:
Liabilities:¥262,977¥252,918

Call money and bills sold

Deposits

40,00030,000326,824

Borrowed money

20,90015,600170,765

Other liabilities

9,676

1,184

1,207

Reserve for employee retirement benefits

14

118

115

Reserve for retirement benefits for directors and corporate auditors

100

98

823

Reserve for reimbursement of deposits

50

55

409

Reserve for other contingent losses

14

34

119

Deferred tax liabilities on revaluation of premises

509

509

4,160

Acceptances and guarantees

12

18

98

325,763

300,559

2,661,681

7,621

6,121

62,273

Total liabilities
Net assets:
Capital stock
Capital surplus
Capital reserve

3,500

2,000

28,597

Other capital surplus

2,463

2,463

20,131

Earned surplus
210

210

1,720

Unappropriated retained earnings

Legal reserve

3,380

3,201

27,618

Total shareholders’ equity

17,17613,997140,342

169

44

1,385

1,151

1,097

9,412

Net unrealized gains on securities available for sale, net of taxes (Note 30)
Revaluation of premises, net of taxes
Total valuation and translation adjustments

1,321

1,141

10,797

Total net assets

18,497

15,139151,139¥344,261¥315,699$2,812,820

Total liabilities and net assets
See accompanying Notes to Non Consolidated Financial Statements.

54

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

Non-Consolidated Statement of Income (Unaudited)
The Bank of Nagasaki, Ltd.
Years ended 31st March, 2022 and 2021
Thousands of
U.S. dollars

Millions of yen

2022

2021

2022

Income:Interest and dividend income:¥3,525¥3,576$28,805

Interest and dividends on securities

Interest on loans and discounts

239

164

1,956

Other interest income

115

150

943
5,724

Fees and commissions

700

631

Other income

57

208

470

Total income

4,638

4,731

37,901

Expenses:
Interest expenses:
Interest on deposits

55

60

453

Interest on call money and bills sold

(23)

(22)

(192)

0

0

0

Interest on borrowings
Other interest expenses
Fees and commissions
Other operating expenses
General and administrative expenses

3

2

31

969

991

7,924

0

0

7

3,262

3,310

26,654

Other expenses

59

263

485

Total expenses

4,328

4,606

35,364

310

125

2,536

Current

32

(18)

262

Deferred

45

64

372

Income before income taxes
Income taxes

Total income taxes
Net income

77

45

635

¥232

¥79

$1,901

See accompanying Notes to Non Consolidated Financial Statements.

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 202255

Non-Consolidated Statement of Changes in Net Assets (Unaudited)
The Bank of Nagasaki, Ltd.
Years ended 31st March, 2022 and 2021
Thousands of
U.S. dollars

Millions of yen

2022

2021

2022

¥6,121¥6,121$50,017
12,255

Shareholders’ equity
Capital stock
Balance at beginning of the year
Changes during the year
Issuance of new shares
Total changes during the year
Balance at end of the year

1,500

—

1,500

—

12,255¥7,621¥6,121$62,273¥2,000¥2,000$16,341
12,255

Capital surplus:
Capital reserve
Balance at beginning of the year
Changes during the year
Issuance of new shares
Total changes during the year
Balance at end of the year

1,500

—

1,500

—

12,255¥3,500¥2,000$28,597¥2,463¥2,463$20,131

Other capital surplus
Balance at beginning of the year
Changes during the year
Total changes during the year
Balance at end of the year

—

—

—

¥2,463¥2,463$20,131¥4,463¥4,463$36,473

Total capital surplus
Balance at beginning of the year
Changes during the year
Issuance of new shares
Total changes during the year
Balance at end of the year

1,500

—

12,2551,500—

12,255¥5,963¥4,463$48,729

¥210

¥210

$1,720Earned surplus:
Legal reserve
Balance at beginning of the year
Changes during the year
—

—

—

¥210

¥210

$1,720¥3,201¥3,122$26,159

Net income

232

79

1,901

Reversal of revaluation of premises

(54)

—

(442)

Total changes during the year

178

79

1,458

¥3,380¥3,201$27,618¥3,412¥3,332$27,880

Net income

232

79

1,901

Reversal of revaluation of premises

(54)

—

(442)

Total changes during the year

178

79

1,458

¥3,590¥3,412$29,339

Total changes during the year
Balance at end of the year
Other earned surplus:
Unappropriated retained earnings
Balance at beginning of the year
Changes during the year

Balance at end of the year
Total earned surplus
Balance at beginning of the year
Changes during the year

Balance at end of the year

56

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

Non-Consolidated Statement of Changes in Net Assets (Unaudited)
The Bank of Nagasaki, Ltd.
Years ended 31st March, 2022 and 2021

Thousands of
U.S. dollars

Millions of yen

Total shareholders’ equity
Balance at beginning of the year
Changes during the year
Issuance of new shares
Net income
Reversal of revaluation of premises
Total changes during the year
Balance at end of the year
Valuation and translation adjustments
Net unrealized gains on securities available for sale, net of taxes
Balance at beginning of the year
Changes during the year
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the year
Revaluation of premises, net of taxes
Balance at beginning of the year
Changes during the year
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the year
Total valuation and translation adjustments
Balance at beginning of the year
Changes during the year
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the year
Total net assets
Balance at beginning of the year
Changes during the year
Issuance of new shares
Net income
Reversal of revaluation of premises
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the year

2022

2021

2022

¥13,997¥13,918$114,371

3,000
232
(54)
3,178
¥17,176—
79—
79¥13,997

24,511
1,901(442)
25,970$140,342

¥44

¥—

$361

125
125
¥169

44
44
¥44

1,023
1,023
$1,385¥1,097¥1,097$8,96954
54¥1,151——¥1,097442
442$9,412¥1,141¥1,097$9,330179
179¥1,32144
44¥1,141

1,466
1,466$10,797¥15,139¥15,016$123,702

3,000
232
(54)
179
3,357
¥18,497

—
79
—
44
123
¥15,139

24,511
1,901
(442)
1,466
27,436$151,139

See accompanying Notes to Non-Consolidated Financial Statements.

Notes to Non-Consolidated Financial Statements (Unaudited)
The Nishi-Nippon City Bank, Ltd. and The Bank of Nagasaki, Ltd.
31st March, 2022 and 2021

1. Basis of Presentation of Financial Statements
The accompanying non-consolidated financial statements of The Nishi-Nippon City Bank, Ltd. and The Bank of Nagasaki, Ltd. (theBanks) have been prepared from the accounts maintained by the Banks in accordance with the provisions set forth in the JapaneseCorporation Law, the Banking Law, and accounting principles generally accepted in Japan, which are different in certain respects as tothe application and disclosure requirements of International Financial Reporting Standard.

2. Other Accounting Principles and Practices Employed by the Bank
Accounting principles employed by the Banks in preparing the accompanying non-consolidated financial statements which havesignificant effects thereon, are explained in Note 2 of the Notes to Consolidated Financial Statements.

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

57

Independent Auditor’s Report

The Board of Directors
Nishi-Nippon Financial Holdings, Inc.
OpinionWe have audited the accompanying consolidated financial statements of Nishi-Nippon Financial
Holdings, Inc. and its consolidated subsidiaries (the Group), which comprise the consolidatedbalance sheet as at March 31, 2022, and the consolidated statements of income, comprehensive
income, changes in net assets, and cash flows for the year then ended, and notes to the consolidated
financial statements.
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Group as at March 31, 2022, and its consolidated
financial performance and its consolidated cash flows for the year then ended in accordance withaccounting principles generally accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for
the Audit of the Consolidated Financial Statements section of our report. We are independent of
the Group in accordance with the ethical requirements that are relevant to our audit of the consolidated
financial statements in Japan, and we have fulfilled our other ethical responsibilities in accordancewith these requirements. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significancein our audit of the consolidated financial statements of the current period. These matters wereaddressed in the context of the audit of the consolidated financial statements as a whole, and informing the auditor’s opinion thereon, and we do not provide a separate opinion on these matters.

58

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

Determination of debtor classification in self-assessments of debtors that have formulated business
improvement plans and debtors affected by the COVID-19 pandemic and calculation of thereserve for possible loan losses for debtors for which the cash flow estimation method is applied
Description of Key Audit Matter
The Group recorded loans and bills discountedof ¥8,470,861 million and reserve for possible
loan losses of ¥42,473 million on its
consolidated balance sheet as of March 31,
2022.
The Group has as its core subsidiary The
Nishi-Nippon City Bank, Ltd., and is engaged
in the loan business mainly in Fukuoka. Loansand bills discounted is a significant part of theGroup’s business as it accounts forapproximately 70% of the total assets on the
consolidated balance sheet, and loan losses may
arise if, for example, the creditworthiness ofdebtors deteriorates or the value of collateralsuch as real estate declines.
Accordingly, the Group records the amountof expected losses that won’t be collected as areserve for possible loan losses, and the detailsof this process are noted in Note 2 “Significant
Accounting Policies (10) Reserve for Possible
Loan Losses,” and “(24) Significant Accounting
Estimates.”
The reserve for possible loan losses iscalculated in line with the write-offs andallowances method for each debtor class basedon the determination of the debtor classification
through self-assessment.
The determination of the debtor classification
through self-assessment is made by evaluating
the relevant debtor’s ability to repay loans basedon the debtor’s repayment status, financial
position, business performance, and future
prospects thereof.

Auditor’s Response
We mainly performed the following audit
procedures:(1) Overall procedures
In order to confirm that the Group’s policies
comply with generally accepted corporate
accounting standards, we verified the Group’s
self-assessment standards and write-offs
and allowances standards with reference to
Accounting Standards for Financial
Instruments.
We evaluated whether the Group’s internal
controls ensure the accuracy andcompleteness of the calculation of the reservefor possible loan losses, determinations of
the debtor classification and credit ratings
relevant to such determinations, as well as
debtor information upon which suchdeterminations are made.
We sampled debtors that formulated highly
feasible drastic business improvement plans(or reasonable and highly feasible business
improvement plans) for which the impactof the change in debtor classification on thereserve for possible loan losses exceeded acertain amount. We also sampled debtors
that were affected by the COVID-19
pandemic from the standpoint of the industry
to which they belong or their operating
results, and debtors for which the cash flow
estimation method is applied to test
management’s classification of the sampled
debtor.

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

59

In particular, categorizing debtors as Requiring
With regard to the determination of the
Caution when the debtor formulates ‘highly
debtor classification, we inspected a set of
feasible drastic business improvement plans’materials related to the Group’s selfor ‘reasonable and highly feasible businessassessment, that included a description of
improvement plans’ requires validation of
the debtor’s business, borrowing andreasonableness and feasibility of such businessrepayment status, research materials that
improvement plans. ‘Highly feasible drastic
provide details of the actual financial position,business improvement plans’ (or ‘reasonablefinancial statements, and the trial balance toand highly feasible business improvement
gain an understanding of the sampled debtors’plans’) are formulated based on significant
status of recent repayments, financial position,
assumptions such as expected future sales andand business performance. In addition, we
future earnings levels, including profit or loss,
made inquiries as necessary of the Creditof debtors, and are affected by factors such as
Supervision Division and Credit Managementchanges in the operating environment
Division and evaluated the responses wesurrounding debtors and the outcome ofreceived.
business strategies. Therefore, the determination(2) Procedures addressing key audit mattersof the debtor classification is highly dependent
To examine the reasonableness and feasibility
on judgement by the Group’s management.
of highly feasible drastic business
Additionally, these determinations become
improvement plans (or reasonable and highly
even more dependent on judgement by thefeasible business improvement plans), weGroup’s management in cases where theanalyzed trends from past results of major
COVID-19 pandemic has had a significant
plan items such as sales and future earnings
impact on the business conditions of the debtor.
levels, including profit or loss, of debtors
The Group includes a discussion of theand compared the assumptions used in these
impact of the COVID-19 pandemic in “(24)business improvement plans with the actual
Significant Accounting Estimates” in Notes 2.
results to evaluate whether the debtor had
historically achieved its previous business
Further, calculation of the reserve for possible
improvement plans. We also made inquiries
loan losses for debtors for which the cash flow
as necessary of the Credit Supervision
estimation method is applied is highly dependent
Division and Credit Management Division
on judgement by the Group’s management
regarding items such as progress of businesssince such calculation is based on significant
improvement plans and evaluated theassumptions, such as future changes in debtor
responses we received. In addition, weclassification and amounts expected to beinspected the contact history between thecollected in the future.
Group and its debtor as well as materials
Therefore, we determined that thesuch as minutes of meetings and interim
reasonableness and feasibility of highly feasible
trial balances to confirm whether there weredrastic business improvement plans
new information and indications that targets(reasonable and highly feasible businessset out in plans will significantly fall short
improvement plans) and outlook on recovery
of being achieved.
of the operating results of debtors after the
To examine the recoverability of future
COVID-19 pandemic, which have a significant
operating results of debtors affected by the
impact on determination of debtor classification
COVID-19 pandemic, we inspected materials
in self-assessments conducted by The Nishiregarding the extent of the deterioration in
Nippon City Bank, Ltd., a consolidated
their business performance compared tosubsidiary of the Group, and future changes
past operating results and future actions toin debtor classification and amounts expected
be taken by debtors, and made inquiries as
to be collected in the future, which are usednecessary of the Credit Supervision Divisionin the cash flow estimation method and haveand Credit Management Division anda significant impact on the calculation of theevaluated the responses we received.
reserve for possible loan losses, are key audit
matters.

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Regarding debtors for which the cash flow
estimation method is applied in thecalculation of the reserve for possible loan
losses, in order to confirm whether future
expectations for debtors identified throughself-assessment are reflected in the calculationof the reserve for possible loan losses, we
agreed the future changes of debtor
classification and amounts expected to becollected in the future to supporting
documentation, and made inquiries asnecessary of the Credit Supervision Division
and Credit Management Division about thelatest information and considered theconsistency of the responses we received
with the basis for determination of the reservefor possible loan losses.
Other Information
The other information comprises the information included in Financial Report that contains audited
consolidated financial statements but does not include the consolidated financial statements andour auditor’s report thereon. Management is responsible for preparation and disclosure of the otherinformation. The Audit and Supervisory Committee is responsible for overseeing the Group’sreporting process of the other information.
Our opinion on the consolidated financial statements does not cover the other information and
we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is toread the other information and, in doing so, consider whether the other information is materiallyinconsistent with the consolidated financial statements or our knowledge obtained in the audit orotherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of
this other information, we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of Management and the Audit and Supervisory Committee for the Consolidated
Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with accounting principles generally accepted in Japan, and for suchinternal control as management determines is necessary to enable the preparation of consolidated
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing theGroup’s ability to continue as a going concern and disclosing, as required by accounting principles
generally accepted in Japan, matters related to going concern.
The Audit and Supervisory Committee is responsible for overseeing the Group’s financial reporting
process.

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

61

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue anauditor’s report that includes our opinion. Misstatements can arise from fraud or error and areconsidered material if, individually or in the aggregate, they could reasonably be expected toinfluence the economic decisions of users taken on the basis of these consolidated financial
statements.
As part of an audit in accordance with auditing standards generally accepted in Japan, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks,and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
Consider internal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances for our risk assessments, while the purpose of the audit of
the consolidated financial statements is not expressing an opinion on the effectiveness of theGroup’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related toevents or conditions that may cast significant doubt on the Group’s ability to continue as agoing concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the consolidated financial statements
or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on
the audit evidence obtained up to the date of our auditor’s report. However, future events orconditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent theunderlying transactions and events in a manner that achieves fair presentation in accordancewith accounting principles generally accepted in Japan.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the groupaudit. We remain solely responsible for our audit opinion.
We communicate with the Audit and Supervisory Committee regarding, among other matters,
the planned scope and timing of the audit and significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.
We also provide the Audit and Supervisory Committee with a statement that we have compliedwith the ethical requirements regarding independence that are relevant to our audit of theconsolidated financial statements in Japan, and to communicate with them all relationships andother matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards.

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Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

From the matters communicated with the Audit and Supervisory Committee, we determine thosematters that were of most significance in the audit of the consolidated financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in our auditor’sreport unless law or regulation precludes public disclosure about the matter or when, in extremelyrare circumstances, we determine that a matter should not be communicated in our report because
the adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
Interest Required to Be Disclosed by the Certified Public Accountants Act of Japan
Our firm and its designated engagement partners do not have any interest in the Group which is
required to be disclosed pursuant to the provisions of the Certified Public Accountants Act ofJapan.
Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect tothe year ended March 31, 2022 are presented solely for convenience. Our audit also included thetranslation of Japanese yen amounts into U.S. dollar amounts and, in our opinion, such translation
has been made on the basis described in Note 1 to the consolidated financial statements.
Ernst & Young ShinNihon LLC
Tokyo, Japan
August 10, 2022/s/
Yuji Ozawa
Designated Engagement Partner
Certified Public Accountant/s/Motoki Nagao
Designated Engagement Partner
Certified Public Accountant/s/Takuya Ishikawa
Designated Engagement Partner
Certified Public Accountant

Nishi-Nippon Financial Holdings GroupFINANCIAL REPORT 2022

63

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