Annual Report 2019

英文

ANNUAL REPORT 2019

ブランドマーク

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1-1, Hakata-ekimae 3-chome, Hakata-ku,
Fukuoka, 812-0011, Japan
Phone: +81-92-461-1867

和文

Printed in Japan英文

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Organization Chart of Banking Subsidiaries
International Network of

The Nishi-Nippon City Bank, Ltd.

The Nishi-Nippon City Bank, Ltd. Internal Audit Division

GeneralShareholders’ Meeting

Corporate Planning DivisionCorporate Risk Management Division
Compliance Risk Supervisory Division

Directors(Audit and Supervisory
Committee Members)

IT Strategy Division
Public Relations Division
Executive Secretariat
Human Resources Division

Audit and Supervisory
Committee Members’
OfficeCorporate Administration Division

3-6, Hakata-ekimae 1-chome, Hakata-ku,
Fukuoka 812-0011, Japan
Phone: +81-92-476-2481
SWIFT: NISIJPJTFKK
Fax: +81-92-476-2488

Operations Planning & Management Division
Treasury & Portfolio Investment Division
Treasury & Securities Transaction Division

Board of Directors

Branches

Contents

Credit Risk Management Division
Credit Supervision Division

Message from the President������������������������������������ 01
1
2
Profile of the Company (Joint Holding Company)/Organization Chart������������������ 02

INTERNATIONAL BUSINESSDIVISION

Business Planning Division
Business Promotion Division

Executive Committee

Retail Business Division

TREASURY & PORTFOLIOINVESTMENT DIVISION
4th Fl., Nittetsu Nihonbashi Bldg,
13-1, Nihonbashi 1-chome, Chuo-ku, Tokyo
103-0027, Japan
Phone: +81-3-6262-7957
SWIFT: NISIJPJTFax: +81-3-3273-2255

International Business Division

3
Board of Directors of Nishi-Nippon Financial Holdings Inc.����������������������� 03

Overseas Representative Offices
Hong Kong Representative Office4
Outline of Nishi-Nippon Financial Holdings Group�������������������������� 04

Seoul Representative Office
Shanghai Representative Office

Outline of Medium-Term Business Plan������������������������������� 05
5

Representative Office
Registered in Singapore

6
Financial Highlights���������������������������������������� 06

Personal Loan Transaction Division

7
Toward a Sounder Financial Position�������������������������������� 07

Private Banking Division

8
Financial Results����������������������������������������� 08

Kita-Kyushu General Headquarters

9
Initiatives for Improvement of Management at SMEs and Regional Revitalization������������� 09

Chikugo Regional Headquarters

Providing Broader/Deeper Support for International Business��������������������� 12
12Tokyo Headquarters

Corporate Business Solution Division
Regional Relationship Management Division
Chikuho Regional Headquarters
Kyushu Regional Headquarters

TREASURY & SECURITIESTRANSACTION DIVISION
3-6, Hakata-ekimae 1-chome, Hakata-ku,
Fukuoka 812-0011, Japan
Phone: +81-92-476-2540, +81-92-476-2484
SWIFT: NISIJPJT, NISIJPJTFKK
Fax: +81-92-441-6106

HONG KONG REPRESENTATIVEOFFICE
Suite 3112, Tower 6, The Gateway, Harbour
City, 9 Canton Road, Tsim Sha Tsui, Kowloon,
Hong Kong
Phone: +852-2526-2259
Fax: +852-2845-9264(As of 30th June, 2019)13
ESG/SDGs Initiatives��������������������������������������� 13
15
Risk Management Systems������������������������������������ 15
17
Financial Section����������������������������������������� 17
72
Outline of Banking Subsidiaries����������������������������������� 70
Organization Chart of Banking Subsidiaries����������������������������� 71
73
Notes: 1. In this report, Japanese yen figures are rounded down to the nearest million yen.
2. Conversion into U.S, dollars (solely for the convenience of readers outside Japan) has been made at the exchange rate of ¥110.99 to $1.

SEOUL REPRESENTATIVE OFFICE
6th Fl., The Exchange Seoul Bldg, 21
Mugyo-ro, Chung-ku, Seoul 04520, Republicof Korea
Phone: +82-2-755-0670
Fax: +82-2-756-2160

The Bank of Nagasaki, Ltd.
Audit and Supervisory Board Members
GeneralShareholders’ Meeting

Board of Directors
Executive Committee
Corporate Planning Division
Human Resources & Corporate
Administration Division
Business Management Division
Credit Supervision Division
Operations Planning &Management DivisionInternal Audit Division(As of 30th June, 2019)

SHANGHAI REPRESENTATIVEOFFICE
Room No. 2209 Shanghai International Trade
Center, 2201 Yan-An Road (West), Chang
Ning District,Shanghai, People’s Republic of
China
Phone: +86-21-6219-0600
Fax: +86-21-6278-5940

REPRESENTATIVE OFFICEREGISTERED IN SINGAPORE
1 Marina Boulevard Unit#25-07
One Marina Boulevard, Singapore 018989
Phone: +65-6222-0115
Fax: +65-6222-0171

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 201971

Message from the President
I am pleased to report on the business performance ofThe economy in our host region of Kyushu also remained

Nishi-Nippon Financial Holdings, Inc. (NNFH) for the fiscal

solid in the first half of the year but gradually began toyear ended 31st March 2019.

weaken afterwards due in part to the heavy rains andIn line with the current Medium-Term Business Plan,

typhoons that hit southwestern Japan.

“Leaping Forward 2020 - Innovating Ideas for Our Clients,”

The management environment in which the Group finds

NNFH Group (the Group) is pushing ahead with various

itself continues to see dramatic changes. These have been

initiatives under the concept of “enhancement of thebrought about by the continuation of extremely low interest

Group’s comprehensive financial strengths” stage when we

rates, rapid progress in information and communications

accelerate our drive to become customers’ preferredtechnology, and deregulation due to revision of the Banking

regional financial group by focusing on expansion of our

Act and other regulations. Against this backdrop, we willbusiness foundations for a greater leap forward.

further cement relationships within the Group in order toDuring the fiscal year ended 31st March, 2019, theJapanese economy followed a moderate recovery trend,deliver financial services that exceed customers’
expectations.

primarily on the back of a pickup in private consumption

Going forward, we will continue to aim to become theand an increase in capital expenditures. However, it

regional financial group with “No. 1” collective strength thatexperienced a slowdown during the second half of the year

grows together with its customers and local communities.

under review as the outlook of the overseas economy

Your continued support for and cooperation in our future

became increasingly uncertain.

endeavors would be most greatly appreciated.

July 2019

Hiromichi Tanigawa
President
Nishi-Nippon Financial Holdings, Inc.

(Concurrently President of The Nishi-Nippon City Bank, Ltd.)

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 20191

Profile of the Company (Joint Holding Company)
Name: Nishi-Nippon Financial Holdings, Inc.
Location

1-1, Hakata-ekimae 3-chome, Hakata-ku, Fukuoka, Japan

Business

Management and operation of banks and other companies that NNFH may have as
subsidiaries under the Banking Act and any all businesses incidental or related thereto.

Capital50 billion yen

Date of establishment

October 3, 2016

Fiscal year end

March 31

Stock exchangeTokyo Stock Exchange and Fukuoka Stock Exchange

Share-trading unit

100 shares

Credit Ratings

R&I: A (Stable)
JCR: A (Stable)(As of 30th June, 2019)

Organization Chart

Nishi-Nippon Financial Holdings, Inc.
General Shareholders’ Meeting

Nomination and Remuneration
Advisory Committee

Board of Directors

Audit and Supervisory
Committee
Audit and Supervisory
Committee Members Office

Executive Committee

Group Strategy Planning
Division

Compliance & Risk
Management DivisionCorporate Planning
DivisionInternal Audit Division(As of 30th June, 2019)2

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2019

Board of Directors of Nishi-Nippon Financial Holdings Inc.

ChairmanPresident

Deputy President

Isao Kubota

Hiromichi Tanigawa

Souichi Kawamoto

Chairman���������������������� Isao Kubota
President���������������������� Hiromichi Tanigawa
Deputy President������������������� Souichi Kawamoto
Directors����������������������� Kiyota Takata
Hideyuki Murakami
Directors (Audit and Supervisory Committee Members)��� Kiyotaka Tomoike
Hirohiko Okumura (outside)
Nobuko Takahashi (outside)
Toshio Sakemi (outside)(As of 30th June, 2019)* Directors/Audit and Supervisory Committee Members Hirohiko Okumura, Nobuko Takahashi, and Toshio Sakemi are Outside Directors as prescribed in Article 2 (xv) of theCompanies Act of Japan.

Major Shareholders (Common Stock)
Name
Japan Trustee Services Bank, Ltd. (Trust Account)

Shares held (thousands) (Note 1)(%) (Note 2)

15,330

10.06

Japan Trustee Services Bank, Ltd. (Trust Account No.4)

9,727

6.38

Japan Trustee Services Bank, Ltd. (Trust Account No.9)

5,834

3.83

The Master Trust Bank of Japan, Ltd. (Trust Account)

5,792

3.80

Nippon Life Insurance Company

3,861

2.53

Meiji Yasuda Life Insurance Company

2,765

1.81

J.P. MORGAN BANK LUXEMBOURG S.A. 380578

2,577

1.69

Japan Trustee Services Bank, Ltd. (Trust Account No.5)

2,474

1.62

JP MORGAN CHASE BANK 385151

2,415

1.58

The Nishi-Nippon City Bank Employee Shareholding Association

2,265

1.48

Total

53,044

34.83(As of 31st March, 2019)

Notes: 1. The figures are rounded down to the nearest thousand.
2. Shareholding ratio (excluding treasury Shares)

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 20193

Outline of Nishi-Nippon Financial Holdings Group
Group Management Philosophy
Aiming high and motivated by pride in our services, we are committed to becoming a leading financial group through our ability
to respond to change and to grow with our customers

Group Brand Slogan

Sincere Relationships, Best Solutions
Meaning behind Our Logo
英文

Our logo uses the motif of the “Sun,” the energy which creates our future, and the vibrant image of“Wings.” The radiating wings symbolize the infinite future. And the color gradation from light to darkorange expresses the Nishi-Nippon Financial Holdings Group’s commitment to evolving andtransforming itself toward the future.
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Strengths as a “Comprehensive Financial Group”
The Group has adopted a “parallel” structure whereby NNFH serves as a “control tower”to direct and guide each Group
company whilst also assuming a birds-eye perspective in order to oversee them across the board, thereby building amanagement framework that allows this comprehensive financial group to best exploit its strengths.
Banking
The Nishi-Nippon City Bank, Ltd.

Information system service
NTT Data NCB Corporation

Banking
The Bank of Nagasaki, Ltd.
Credit cards, credit guarantee
The Kyushu Card Co., Ltd.

Holding company
Nishi-Nippon Financial Holdings, Inc.

Payment Service
Japan Payment service CO., LTD.

Financial instruments exchange
Nishi-Nippon City Tokai Tokyo Securities Co., Ltd.
Research studies, management consultancy
NCB Research & Consulting Co., Ltd.
Claims servicing
Kyushu Servicer
Credit guarantee
Nishi-Nippon Credit Guarantee Co.

NTT Data NCB Corporation
is an equity-method affiliate.
Japan Payment Services CO.,LTD. is a non-consolidated,
non-equity method subsidiary.

Group Management Strategy
Under the holding company structure, we will promote two Group Management Strategies: “Development of comprehensive
financial services that exceed the expectations of customers and host communities (Realization of matrix management)” and“Advancement of a group management framework and risk management system (Realization of a monitoring model).”Development of comprehensive financial services
that exceed the expectations of customers and host

Matrix management

communities (Realization of matrix management)

The holding company, from the

The holding company will demonstrate

standpoint of meeting individual

its oversight function over thecustomer needs, will develop strategies

subsidiaries while continuouslythat embrace the entire group.

Advancement of a group management framework andrisk management system(Realization of a monitoring model)

4

Monitoring model

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2019

monitoring their business execution.

Outline of Medium-Term Business Plan
Framework
Group Management Philosophy“Aiming high and motivated by pride in our services, we are committed to becoming a leading financial group throughour ability to respond to change and to grow with our customers”

Medium-Term Business Plan

Leaping Forward 2020—Innovating Ideas for Our Clients—(for the three-year period April 2017–March 2020)

The Group’s strengths

Concept

Challenges for the Group

Solid customer base andrelationships of trust with customers

Difficult earnings environment
owing to the negative interest policy

High consulting skills“Enhancement of the Group’s comprehensive financial strengths” stage,
when we accelerate our drive to become customers’ preferred regional
financial group by focusing on expansion of our business foundations for agreater leap forward

Spirit of regional industry
development and businesspromotion handed down from theformer entities

Enhancement of customer-oriented,
Basic Strategy 1 comprehensive financial services —Service innovation—

Advanced and diverse products/
services

Basic Strategy 2

Establishment of robust earnings structure—Behavioral innovation—

Ample real channels and highly
convenient digital channels

Basic Strategy 3

Empowerment of trustworthy human resources andorganizations —Human resources innovation—

Changing lifestyles and needs ofcustomers

Broad networks with central/overseas organizations

Basic Strategy 4

Advancement of group management—Corporate governance innovation—

Economic uncertainty both
domestically and abroad

Basic Strategy 1

Four Basic Strategies

Enhancement of customer-oriented,
comprehensive financial services- Service innovation -Aiming to become customers’ preferred comprehensive
financial group•We will aim to become acomprehensive financial groupthat customers choose byproviding products/services thattap into the merits/strengths ofeach Group company andbuilding a sales system/channel
capable of catering tocustomers’ diverse needs.

Basic Strategy 3

Priority Measures
Developing “comprehensive
support” through concerted
efforts of the Group
Advancing “business promotion with optimal solutions
for each customer”
Achieving “best mix channel”

Empowerment of trustworthy humanresources and organizations- Human resources innovation -Further developing trustworthiness in human resources andconsolidating “individual” strengths into “organizational” power•We will aim to consolidate“individual” strengths into
“organizational” power by
establishing all employees’
behavioral patterns as “amember of the Group,” while
also further developing
trustworthiness in humanresources, which is the very
source of our competitiveness.

Priority Measures
Developing human resources
so that everyone can play anactive role
Establishing behavioral
patterns as “a member of
the Group”

Basic Strategy 2

Changing markets due to theshrinking and aging population
with a low birthrate
Intensifying competition against
other regional banks and newentrants from other industries
Remarkable progress in FinTech

Establishment of robust earnings structure- Behavioral innovation -Realizing sustainable growth•We will build up staying powerthat ensures sustainable growth
into the future by further raising
all employees’ earnings/costs
awareness, expanding thecustomer base for the entire
Group, and becoming ourcustomers’ house bank.

Basic Strategy 4

Priority Measures
Generating synergies
through collaboration among
Group companies
Forging efforts to improveearnings and reduce costs

Advancement of group management- Corporate governance innovation -Becoming able to respond to any environmental change both
appropriately and flexibly•We will build an advanced risk

management system for the entire
Group and allocate the Group’s
resources in an optimal mannerthat takes into account businessfields meriting attention and theconditions of each regional market,
so that we can flexibly respond tothe various environmental changes
and risks that may lie ahead.

Priority Measures
Establishing a functioning
governance structure
Advancing the Group’s risk
management system
Allocating the Group’s
resources optimally

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 20195

Financial Highlights
The year-end balance of deposits was ¥8,508.8 billion

On a consolidated basis, profit attributable to owners of parent for
the year ended March 31, 2019 increased by ¥1.4 billion year-on-($76.7 billion) ; the year-end balance of loans and bills

year to ¥22.9 billion ($0.2 billion), due primarily to an improvement in

discounted was ¥7,341.2 billion ($66.1 billion); and the year-end

the balance of the net interest income, increases in interest andbalance of securities was ¥1,372.4 billion ($12.4 billion) .

dividends on securities, and a decrease in expenses.
On a consolidated basis, total assets at the end of the fiscal
year period under review were ¥10,449.1 billion ($94.1 billion) ;total liabilities were ¥ 9,939.3 billion ($89.6 billion) ; and total net
assets stood at ¥509.7 billion ($4.6 billion).

Consolidated
Total income
Total expenses
Profit (loss) before income taxes
Profit (loss) attributable to owners of parent

Profit (loss) attributable to owners of parent per share

Total assets
Total liabilities
Deposits
Loans and bills discounted
Securities
Capital stock
Total net assets

Thousands of US dollars

Millions of yen

143,799
109,744
34,05422,8991,295,609
988,782
306,827
206,323

142,824
110,401
32,422
21,467Yen

US dollars

Yen

148.79

1.340

Millions of yen

Thousands of US dollars

10,449,051
9,939,317
8,508,767
7,341,204
1,372,367
50,000509,734

94,144,082
89,551,465
76,662,472
66,142,939
12,364,788
450,491
4,592,617

The Nishi-Nippon City Bank, Ltd.

137.78Millions of yen

9,961,663
9,426,768
8,345,294
7,041,558
1,563,859
50,000534,895

20182019
Millions of yen

Thousands of US dollars

Millions of yen

Total income
Total expenses
Income before income taxes
Net income

128,298
99,121
29,177
19,9701,155,948
893,063
262,885
179,930

140,168
100,554
39,614
31,671

Total assets
Total liabilities
Deposits
Loans and bills discounted
Securities
Capital stock
Total net assets

10,218,746
9,709,971
8,309,734
7,132,208
1,365,544
85,745
508,775

92,069,075
87,485,098
74,869,213
64,259,920
12,303,313
772,552
4,583,976

9,682,635
9,166,010
8,145,409
6,836,291
1,556,641
85,745
516,625

The Bank of Nagasaki, Ltd.

2018

2019
Millions of yen

6

2018

2019
Millions of yen

Thousands of US dollars

Millions of yen

Total income
Total expenses
Income before income taxes
Net income

4,883
4,607
275
225

43,99941,516
2,483
2,031

5,432
4,751
680
551

Total assets
Total liabilities
Deposits
Loans and bills discountedCapital stock
Total net assets

286,972
271,985
235,483
246,791
6,121
14,986

2,585,569
2,450,541
2,121,668
2,223,543
55,155135,028

278,090
263,304
237,606
242,536
6,121
14,786

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2019

Toward a Sounder Financial Position
Pursuit of a sounder financial position is ranked as one of the Group’s key priorities. Accordingly, we are strengthening our capital adequacy
and reducing non-performing loans (NPLs) .

NPL Ratio Improved by 0.07 Percentage Points to
1.90% (On a Consolidated Basis)

Capital Ratio at 9.36% (On a Consolidated Basis)*
The capital ratio as of 31st March, 2019, stood at 9.36% on aconsolidated basis, 9.61% for The Nishi-Nippon City Bank, Ltd.

The Group carries out write-offs and provision of reserves for its(“Nishi-Nippon City Bank”) and 8.54% for The Bank of Nagasaki,

NPLs according to strict standards, based on self-assessment

Ltd. (“Bank of Nagasaki”)

of assets.

These figures are significantly higher than the minimum level

As of 31st March, 2019, the Group’s NPL ratio (subject toof 4.0% required of banks operating in Japan.

mandatory disclosure of claims under the Financial

We will be implementing measures to further strengthen our

Reconstruction Law) declined to 1.90%, compared to 1.97% at

capital adequacy and raise the capital ratio.

the end of the previous fiscal year.
On a consolidated basis, the coverage ratio for loans*Minimum level required of banks operating in Japan : 4%

subject to mandatory disclosure of claims under the Financial
Reconstruction Law, mainly through collateral and guarantees,is 83.70% and the coverage ratio for bankrupt and quasibankrupt assets remains at 100%.

Capital ratio
Consolidated

Nishi-Nippon City Bank(¥ billion)

9.53%

9.67%

9.91%

9.36%

Bank of Nagasaki
9.61%

9.30%

8.65%

4,300.6

4,307.8

4,205.5

409.8

2017/03406.8

2018/03

Risk-weighted assets, etc.

4,143.3

403.6

2019/03
Shareholders’ equity

4,083.5

3,978.6

385.6

2017/03

392.5

2018/03

2019/03

8.54%

162.9

161.1

159.6

394.4

8.72%

14.0

13.8

2017/032018/03

13.9

2019/03

Capital ratio

Note: The following approaches are adopted to calculate risk-weighted assets, etc.
Amount of credit risk-weighted assets: Foundation Internal Ratings-Based (FIRB) approach
Operational risk equivalent amounts: The Standardized Approach (TSA)

Balance of NPLs and ratio of loans subject to mandatory disclosure of claims under the Financial Reconstruction Law
Consolidated

Nishi-Nippon City Bank

Bank of Nagasaki(¥ billion)

2.18%

2.14%
1.97%

2.07%
1.92%

1.90%

1.86%
1.72%

1.51%
150.2

97.4

18.3

2017/03

141.7

140.8

140.1
34.4

29.3

95.4

15.3

2018/03

132.4

27.5

34.2

97.0

90.1

16.2

2019/03

4.9

133.7
29.1

4.1

27.3

4.2

17.3

2017/03

88.7

14.5

2018/03

3.6

90.9

0.6

15.4

2019/032017/03

3.7

0.5
2018/03

3.3

0.3

2019/03

Substandard loans
Claims on potentially bankrupt borrowers
Bankrupt and quasi-bankrupt assets (unrecoverable claims)
Ratio of loans subject to mandatory disclosure of claims under the Financial Reconstruction Law

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 20197

Financial Results
Balance of loans to small andmedium-sized enterprises, etc.

Balance of loans

Balance of deposits/NCD

Nishi-Nippon City Bank

Nishi-Nippon City Bank

Nishi-Nippon City Bank

Total outstanding loans

Total outstanding loans to SMEs, etc.

Total outstanding deposits/NCD(¥ billion)[ ] YoY change(¥ billion)[ ] YoY change(¥ billion)[ ] YoY change[+5.7%]
6,574.6[+4.0%]
6,836.2
252.2

206.9

[+4.3%]
7,132.2[+4.9%]
5,426.3[+6.7%]
5,172.9282.0

2,439.6

2,490.5

1,865.3

4,144.3

4,359.5

3,307.5[+3.2%]
5,601.0

1,919.3

1,959.9

3,506.9

3,641.0[+3.5%]
7,812.7[+4.3%]
8,145.4[+2.0%]
8,309.7

304.2

355.1

337.2

2,410.7

2,550.6

2,634.2

5,097.7

5,239.5

5,338.2

2,372.9

3,994.8

2017/032018/03

2019/032017/03

2019/032017/032018/03

Bank of Nagasaki

Bank of Nagasaki

Bank of Nagasaki

Total outstanding loans

Total outstanding loans to SMEs, etc.

Total outstanding deposits/NCD[+3.4%]
237.0
15.2

140.8

80.9

2017/03
Consumer loans[+2.3%]
242.5
15.0

140.3

87.0

[+2.6%]
204.2[+1.8%]
246.7

92.5

2018/03

2019/03
Business loans

2017/03
Individuals

Investment trusts[-0.3%]
991.7

262.2

255.4

23.1
26.8

20.3
21.4

21.0
17.4

444.9

469.4

246.0

228.3

460.7

259.8

2017/032018/03

2019/03* Group total = Nishi-Nippon City Bank + Bank ofNagasaki + Nishi-Nippon City Tokai Tokyo
Securities

Nishi-Nippon Financial Holdings Group

68.3

68.5

Nishi-Nippon City Tokai Tokyo Securities Co.,Ltd.
(¥ billion)
Foreign currency deposits[ ] YoY change(term-end balance)
Public bonds
Insurance

237.2

137.0

135.6

139.3

Housing loans[-1.3%]
995.0[-0.2%]
204.9[-2.3%]
246.1
16.5

Group total[+5.6%]
1,007.7[+0.6%]
205.4

14.8

Management of client assets

8

2018/03

ANNUAL REPORT 20192018/03SMEs[-3.5%]
237.6

40.4

15.5
39.7

189.0

182.3

2019/03[-0.9%]
235.4 17.3
41.6

137.6

176.4

67.2

2019/032017/032018/03

Financial institutions and municipality
Retail customers

2019/03
Enterprises

Initiatives for Improvement of Management at SMEs and Regional Revitalization
Support for Customers Starting Businesses
The Group offers a range of services designed specifically for customers who are planning to start up
new businesses or diversify their existing ones. These services include helping to meet their funding andconsulting needs at the time of startup through financing, venture fund investment and other means,provision of information on government subsidies and public loans, and arrangement of partnerships
with external organizations for the purposes of commercializing and marketing new technologies.
[Startup/second startup* projects assisted by the banking subsidiaries (fiscal year ended March 2019)](Cases)Nishi-Nippon City Bank

Bank of Nagasaki

Startup

3,736

15

Second startup

99

1* Definition of “second startup”- Commencement of a new business by a successor, etc. to an existing company- Commencement of a new business by a manager, etc. who has transferred (handed over) an existing business- Restructuring of a company to make a drastic business turnaround (change of business)

Establishment of “NCB Startup Support Salons”
Nishi-Nippon City Bank operates an “NCB Startup Support Salon” within its small business funds
consulting service centers, BSC (Business Support Center) Fukuoka and BSC Kita-Kyushu. Thesesalons offer consulting services on everything to do with starting a business, including support for prestartup business plan formulation, financing at the time of startup, post-startup management guidance/
consultation, and organization of seminars. They also provide entrepreneurs with opportunities to
network with their peers.
At these salons, customers can avail themselves of in-depth consultations with consultants
specializing in startup support, covering everything from pre-startup business plan formulation andfinancing at the time of startup through post-startup management consultation.
“NCB Startup Support Salons”
Fukuoka
Kita-Kyushu

5,333 visitors in total
30 startup consultants(As of 31st March, 2019)

Establishment of a consulting officeIn April 2019, Nishi-Nippon City Bank established a section providing consulting services for corporate
customers under the Corporate Business Solution Division with a view to further reinforcing its function ofproviding high-value-added services.
Personnel in this new office listen carefully to managerial issues that customers have and offer solutions.

Entry into employment agency business
In April 2019, NCB Research & Consulting was granted a license to operate a fee-charging employment
agency, making the NNFH Group the first regional banking group in Kyushu to enter the employment
agency business. The Group helps customers to resolve human resources-related issues, which are on therise as the population ages and the birthrate declines.
Nishi-Nippon Financial Holdings GroupANNUAL REPORT 20199

Initiatives for Improvement of Management at SMEs and Regional Revitalization
Business Feasibility Assessment
The Group has always believed that, in order to fulfill its social responsibility, facilitation of regional
financing is its single most important role. In line with this principle, the Group continues to proactively
enhance its support services for small- and medium-sized enterprises.
By fairly and adequately evaluating feasibility of the contents and growth potential of enterprises’
businesses, the Group helps these clients to find solutions to any management issues and enhance thevalue of their businesses.
[Financing based on Business feasibility assessment]
Nishi-Nippon City Bank

Bank of Nagasaki

Total number of businesses assessed (instances)(Percentage share in all borrowers)

4,824(11.6%)

406(15.8%)

Total outstanding loans to businesses assessed (¥ billion)(Percentage share in loan balance)

2,499.3(47.4%)

30.0(40.1%)(As of 31st March, 2019)[Improvement of management at main customers]
Nishi-Nippon City Bank

Bank of Nagasaki

Total number of main customers (instances)

16,996

1,430

Total outstanding loans to main customers (¥ billion)

2,679.6

43.5

Total number of businesses improved (instances)

13,466798

Total outstanding loans to businesses improved (¥ billion)

2,285.2

31.0(As of 31st March, 2019)* Main customer refers to the customer we have the largest share in their borrowings.
* Number of businesses showing year-on-year improvement of net sales, operating income margin, etc.

Provision of Funds and Various Other Financing Means
The Group makes capital commitments to a variety of funds for businesses in various stages, including
support for startups and new businesses, business growth, business succession, shift to “sixth-orderindustrialization,” and commercialization of business seeds, as well as improvement of management
and support for business turnaround. In addition to lending, which is the Group’s main business activity
as a financial institution, it financially supports the growth of regional businesses by tapping into those
funds.
[Cases where funds issued by Nishi-Nippon City
Bank were utilized](Cases)fiscal year ended
March 2019

cumulative
total

NCB Kyushu Six-Order
Industrialization Support Fund*1

0

11

NCB Kyushu Revitalization Fund*2

4

10

QB Fund No. 1*

12

20

Total

16

41

3

10

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2019*1	Established to create new business opportunities in Kyushu
through collaboration among those in the primary,secondary, and tertiary industries, with the aim of creating
added value. To date, a total of ¥722 million from this fundhas been invested in 11 cases (as of 31st March, 2019),
which places the Group in the leading position among
regional banks.
*2	By providing growth capital in various forms, this fund is
aimed at supporting local businesses contributing torevitalization of the local economy and creation of jobs.
*3	Managed by QB Capital, LLC, which was established jointlywith Kyushu TLO Company, Limited, this fund is aimed atrevitalizing the regional economy in Kyushu by creating new
industries through use of research outcomes fromuniversities in Kyushu.

Range of Settlement Solutions
The Group taps into its collective strengths to offer a diverse range of payment methods, such as credit
cards, debit cards, electronic money, and QR codes, thereby supporting the transition to a cashless society.

Nishi-Nippon City Bank
✓ Ordinary savings accounts (individuals)

4.16 million✓ Nishi-Nippon City Bank’s app

504,000 downloads(As of June 30, 2019)

Individual customers

Kyushu Card
✓ Membership✓ Member stores

890,000

56,000(services for consumers)(As of June 30, 2019)Japan Payment Service✓ Offering multiple

Largest membershipamong regionalbank-affiliatedcredit card companies

means of settlement(credit cards, branded debit cards,
electronic money, QR codes)

Corporate/businessowner customers

First regionalbank-affiliatedpayment service
provider in Kyushu(services for member stores)

Proposals on Asset Management in Compliance with Fiduciary Duty
In June 2017, the Group formulated and published the “Basic Policy for Duties Concerning
Management and Building of Customers’ Assets (Basic Policy for Fiduciary Duty).”
In order to appropriately respond to customer needs in respect of asset building/management, weconstantly work to develop a customer-oriented operational system (Fiduciary Duty) by offering
customer-friendly products that leverage our range of financial instruments and information andcommunication technology (ICT), while actively cultivating the principle of “customer-first” among oursales force.

“NCB Inheritance Plaza” and “NCB Premium Lounge”
At “NCB Inheritance Plaza” and “NCB Premium Lounge,” Nishi-Nippon City
Bank offers consultation services specifically focused on inheritance. There,
specialists with good knowledge and experience of inheritance matters offer
total support, from provision of basic information on inheritance throughmore advanced technical advice.
Customer booth at “NCB Inheritance Plaza”

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 201911

Providing Broader/Deeper Support for International Business
The NNFH Group supports local businesses by addressing their requirements for doing business in
Asia and other parts of the world. To this end, the Group offers consulting services that go beyond thedefinition of financial support, together with advanced products/services, through alliances with local
partners and specialists with experience in international business.
Multifaceted windows for international business support

Nishi-Nippon
City Bank• International Business Support Office, International Business Div.
Support for international business provided by personnel with professional skills and know-how• “World Business Square (WBS)”
Total support for international business, including forex trading such as foreign remittance and letter of credit
transactions• “NCB Forex Super Direct”, “NCB Direct Forward Exchange Contracts”
A broad range of forex transactions, including foreign remittance and application/inquiry on import letters of credit
via the Internet• International Consultation Office
Finely tuned support for overseas expansion offered by personnel with extensive international experience throughcollaboration with international partner financial institutions, lawyers, insurance companies, etc.
NCB Research &• “Door to Asia” (website)
Consulting
Detailed information provision• Asia Business Seminars
Sponsorship of seminars on international business
Kyushu Card

• A variety of credit cards
Support for all major cards, including VISA, MasterCard, JCB, AMEX, UnionPay, and Shinhan

Broad area coverage by our overseas bases and partner institutions(China)Shanghai Representative Office
Shanghai Branch
Hong Kong Representative OfficeHong Kong Representative Office(Thailand)(Singapore)(Indonesia)(Japan)JBIC
The Bank of Yokohama

Bank of China

Bangkok Bank
Bangkok Representative Office

DBS Bank
Representative Office Registeredin Singapore
Bank Resona Perdania(South Korea)
Seoul Representative Office
Shinhan Bank

(Vietnam)
OCB / BNP Paribas
Nishi-Nippon City Bank’s overseas operations(4 in Asia)
Bank of Yokohama’s overseas operations(3 in Asia, 1 each in London and New York)*
Partner foreign financial institutions(7 foreign banks)(As of 30th June, 2019)* Nishi-Nippon City Bank concluded Basic Agreement for Overseas Business Support Services with The Bank of Yokohama in September 2016.

12

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2019

ESG/SDGs Initiatives
With the aim of enhancing corporate value and realizing a sustainable society, the Group is actively
engaged in ESG/SDGs initiatives in ways that only a regional financial institution can accomplish.

Environment
In April 2019 Nishi-Nippon City Bank signed a partnership agreement with
Sagawa Express Co., Ltd. and SynaBiz Co., Ltd. to introduce services that help
business customers to curb inventory control/disposal costs and reduce
disposal losses. (First among regional banking groups in Japan)
Distribution platform
Nishi-Nippon City Bank’sbusiness customers

Assets (inventory)(2) Visit(3) Agreement(buy-out or putting
items up for sale)(4) Payment(for buy-out orsales fees)

Website: NETSEA(putting things up for sale)

300,000 buyers
Website: ReValue(buy-out)

Closed sales channels,
overseas(5) Transporting products(1) Apply(2) Visit(5) Delivery

Website: Otameshi(buy-out)

Consumers(6) Donate percentage of sale proceeds
Social service organizations

Financing for Environment-Related Businesses- We began handling private placement bonds for businesses with eco-friendly management,
as certified by national and local governments (first case underwritten in February 2008).
Rebuilding as Eco-Friendly Offices- We are rebuilding existing offices as “eco-friendly offices” equipped with solar power
generators, rainwater recycling systems, eco-friendly glass, LED lighting, and energyconserving air conditioners.

Social“Tsunagu Kokoro (Connecting Hearts)” Private Placement Bonds in Support of Local Community
How the Donations Work
Nishi-Nippon City Bank began
handling “Tsunagu Kokoro” private
Press release
Nishi-Nippon
Mass media
placement bonds in support of theCity Bank
local community, under which donations are(1)Issuance(2)Requests(3)Coordination of giftsof private
offered for the purchase of books and sports
for recipientsplacement
and gifts
gear for local schools in support of learningbonds
and the personal growth of the children who
Local schools, etc. will play an important role in the future of theIssuers(recipients)
Kyushu region. A total ¥6.77 billion in bonds(4)Donated under the issuer’s
have been underwritten for 61 companies asname or joint names (up to 0.2%
of 31st March, 2019 (first case underwrittenof the amount of the bonds)
in March 2017).
Intellectual Contributions to Local Community
Since 2008, Chairman Isao Kubota has regularly given lectures on economic
matters to share the latest economic and financial information collected from both
Japanese and overseas sources.
In an effort to help improve financial literacy, we also organize the “School of Money,” an event for
students from local elementary schools, as well as financial lectures for university students.

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 201913

Governance

General share holder’sMeeting
Audit and Supervisory
Committee

Nomination and Remuneration
Advisory Committee

Board of Directors
Executive Committee

PDCA cycle for the Group’s business administration
Group strategies arereviewed

NNFH draws up
Group strategies

NNFH monitors
the status of businessexecution by each company

DO

A C T I ON

PLAN

C

HECK

Each Group company
conducts business according
to Group strategies

Group companies
PDCA Cycle for Group Business Administration
With NNFH (holding company) focusing on business administration and Group companies
concentrating on business execution, further advancement of the Group’s business administration is
aimed at.
Company with Audit and Supervisory Committee
Reinforcing governance and building a prompt and efficient decision-making system
Ensuring effectiveness of auditing and oversight functions by ensuring that outside directors comprise amajority of board members.
Establishment of “Nomination and Remuneration Advisory Committee”
Nomination and Remuneration Advisory Committee has been established to discuss appointment anddismissal of, and a remuneration scheme for, management executives in response to an inquiry made in
Board of Directors.

14

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2019

Risk Management Systems
With accelerating liberalization and globalization of finance and advances in information and communication technology, the risks attendanton financial services are becoming ever more diverse and complex. Against that backdrop, the Group is making concerted efforts toadvance risk management, which is one of its key priority issues for management, by establishing a Basic Policy on Risk Management to beobserved by the entire Group, with the goals of building a sound management foundation and ensuring stable revenue flow.

Integrated Risk Management:

Liquidity Risk Management:

We evaluate and manage risks by comprehensively identifying
potential risk situations that are inherent to a group organization
and, thus, are difficult for individual Group companies to deal
with, such as the statuses of risks in each category, and thelikelihood of them adversely affecting the Group, and thenassessing them against the Group’s financial resilience (equity
capital).

NNFH established a Liquidity Risk Management Policy under its
Risk Management Regulations in an effort to reinforce theliquidity risk management system.
In order to prevent tight finances, the Group maintains thesoundness of its assets so that it can ensure market liquidity
and stabilize cash flows.

Operational Risk Management:
NNFH established an Operational Risk Management Policy
under its Risk Management Regulations, thereby strengthening
its operational risk management system.
Given that operational risks are so extensive, varied, anddiverse that they concern every single operation and section andthus must be avoided as far as possible in business
management, the Group has developed an organizational setup
and system that properly manage such risks, in order to prevent
them from becoming actualized and to minimize their impacts
should any such risks occur.

Credit Risk Management:
Recognizing credit risk as the most important type of risk for theGroup, NNFH established a Credit Risk Management Policy
under its Risk Management Regulations, thereby reinforcing thecredit risk management system.
The Group objectively and quantitatively monitors the risks
of individual borrowers and feeds any findings back to its credit
portfolio management, thereby managing the entire Group in an
integrated manner.

Crisis Management:

Market Risk Management:

As a basic policy for developing a system to ensure that theminimum operations necessary for maintaining the financial
system’s functions can continue without interruption in the eventof a large-scale disaster, IT system failure, or other contingency,
NNFH established the Business Continuity Regulations. NNFH’s
subsidiaries then formulated Business Continuity Plans (BCPs)
in accordance with this basic policy, and they work to enhance
effectiveness of the business continuity management system bycarrying out various types of drills.

NNFH established a Market Risk Management Policy under its
Risk Management Regulations to reinforce its market risk
management system.
The Group sets limits on market risks so as to enable
adequate management of such risks and undertakes themwithin the range of those limits in order to achieve stable flow ofrevenue.

Internal Audit Division
Credit risk (Compliance & Risk Management Division)
Market risk (Compliance & Risk Management Division)
Liquidity risk (Compliance & Risk Management Division)
Board of Directors

Audit and Supervisory
Committee

Operational risk (Compliance & Risk Management Division)

Executive Committee
Compliance &Risk Management
Committee for AML/CFTDivision
Risk Management

Administrative risk (Compliance & Risk Management Division)
System risk (Compliance & Risk Management Division)

Head Office
Divisions

Legal risk (Compliance & Risk Management Division)
Human error risk (Corporate Planning Division)
Tangible asset risk (Corporate Planning Division)
Reputational risk (Compliance & Risk Management Division)

Consolidated Subsidiaries and Affiliates

NNFH established a Compliance & Risk Management Division to manage all matters concerning credit risk management under one umbrella. This Division periodically monitors the status of risk management within the Group and issues directives for improvement as necessary, thereby ensuring that the risk management system is effective.

Commitment to Anti-Money Laundering (AML) Compliance
In order to reinforce its commitment to prevention of money laundering and financing of terrorism, which is being demanded on aninternational level, special organizations for this task were established within the Compliance & Risk Management Department of NNFH andthe Compliance Risk Supervisory Division of The Nishi-Nippon City Bank, Ltd. on 1st August , 2018.
Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2019

15

16

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2019

Financial Section

Contents
Nishi-Nippon Financial Holdings, Inc. and Subsidiaries
Consolidated Balance Sheet .................................................................... 18
Consolidated Statement of Income .......................................................... 19
Consolidated Statement of Comprehensive Income ................................. 19
Consolidated Statement of Changes in Net Assets .................................. 20
Consolidated Statement of Cash Flows .................................................... 22
Notes to Consolidated Financial Statements ............................................ 23
Quarterly Information (Unaudited).............................................................. 59
The Nishi-Nippon City Bank, Ltd.
Non-Consolidated Balance Sheet (Unaudited) .......................................... 60
Non-Consolidated Statement of Income (Unaudited)................................. 61
Non-Consolidated Statement of Changes in Net Assets (Unaudited) ........ 62
The Bank of Nagasaki, Ltd.
Non-Consolidated Balance Sheet (Unaudited) .......................................... 64
Non-Consolidated Statement of Income (Unaudited) ................................ 65
Non-Consolidated Statement of Changes in Net Assets (Unaudited) ........ 66
Notes to Non-Consolidated Financial Statements (Unaudited) ...................... 68
Independent Auditor’s Report ....................................................................... 69

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 201917

Consolidated Balance Sheet
Nishi-Nippon Financial Holdings, Inc. and Subsidiaries
31st March, 2019 and 2018
Thousands of
U.S. dollars (Note 1)

Millions of yen

2019

2018

¥1,474,517¥1,076,592

471

—

4,251

Commercial paper and other debt purchased

37,43635,993

337,296

Trading account assets (Notes 3 and 28)

1,166

1,142

10,512

2019

Assets:Cash and due from banks (Notes 6 and 27)
Call loans and bills bought

Money held in trust (Note 29)$13,285,139

4,870

2,850

43,877

Securities (Notes 4, 6, 27 and 28)

1,372,367

1,563,859

12,364,788

Loans and bills discounted (Notes 5, 6, 7 and 27)

66,142,939

7,341,204

7,041,558

Foreign exchange assets (Note 8)

8,396

8,359

75,647

Other assets (Notes 6, 9)

94,023

96,070847,132

Tangible fixed assets (Notes 10 and 17)

1,116,592

123,930

124,793

Intangible fixed assets

4,525

4,198

40,775

Asset for retirement benefits (Note 31)

6,162

25,652

55,521

645

631

5,818

Customers’ liabilities for acceptances and guarantees

Deferred tax assets (Note 32)

23,25423,537

209,517

Reserve for possible loan losses (Note 27)(43,343)(42,958)(390,514)

(578)

(618)

(5,213)¥10,449,051¥9,961,663$94,144,082$76,662,472

Reserve for devaluation of securities
Total assets
Liabilities and net assets:
Liabilities:¥8,508,767¥8,345,294

Call money and bills sold (Notes 6 and 27)

Deposits (Notes 6, 11, and 27)

109,084

64,387

982,833

Payables under repurchase agreements (Notes 6 and 27)

166,666

100,753

1,501,634

Guarantee deposits received under securities lending transactions (Note 6)

145,718

27,6301,312,896

Borrowed money (Notes 6, 13 and 27)

891,921748,876

8,036,054

172

113

1,551

Bonds (Notes 12 and 27)

Foreign exchange liabilities (Note 8)

10,00020,00090,098Other liabilities (Note 14)

55,52255,006500,247

Liability for retirement benefits (Note 31)

2,864

751

25,806

246

232

2,223

Reserve for reimbursement of deposits

2,151

2,539

19,386

Reserve for other contingent losses

12,441

Reserve for retirement benefits for directors and corporate auditors

1,380

1,409

Reserve under the special laws

10

9

97

Deferred tax liabilities (Note 32)

6,571

21,224

59,211

Deferred tax liabilities on revaluation of premises (Note 17)

14,982

15,000134,993

Acceptances and guarantees

23,25423,537

209,5179,939,317

9,426,768

89,551,465

Total liabilities
Net assets:
Capital stock (Note 15)

50,00050,000450,491

Capital surplus

132,510

134,791

1,193,893

Earned surplus

255,229

236,924

2,299,570

Treasury stock (Note 16)(10,896)(10,668)(98,171)426,843

411,048

3,845,783

57,20079,474515,368

(205)

(33)

(1,849)

Revaluation of premises, net of taxes (Note 17)

30,01730,058

270,452

Retirement benefits liability adjustments, net of taxes (Note 31)(11,612)

6,927(104,629)

75,400116,426

679,341

7,490

7,420

67,492509,734

534,895

4,592,617¥10,449,051¥9,961,663$94,144,082

Total shareholders’ equity
Net unrealized gains on securities available for sale, net of taxes (Note 28)
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.

18

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2019

Consolidated Statement of Income
Nishi-Nippon Financial Holdings, Inc. and Subsidiaries
Year ended 31st March, 2019 and 2018
Thousands of
U.S. dollars (Note 1)

Millions of yen

2019

2018

¥84,400
16,7991,626
32,631
1,433
1,285
5,621
143,799¥84,759
14,086
1,573
32,584
2,489
1,241
6,090
142,824$760,437
151,360
14,658294,002
12,918
11,58050,651
1,295,609

1,304
57
2,640

2,381
180
932

11,748518
23,789

250
708
1,113
11,786
3,378
81,002
7,503
109,744
34,054206
455
931
11,5092,14885,238
6,417
110,401
32,422

2,258
6,384
10,032
106,193
30,435729,816
67,602
988,782
306,827

9,036
1,874
10,91023,144

9,609
546
10,15522,266

81,414
16,88498,299208,527244¥22,899

798¥21,4672,204$206,323

2019

Income:Interest and dividend income:Interest on loans and discounts
Interest and dividends on securities
Other interest income (Note 18)
Fees and commissions
Trading income
Other operating income (Note 19)
Other income (Note 20)
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 21)
Fees and commissions
Other operating expenses (Note 22)
General and administrative expenses (Note 23)
Other expenses (Note 24)
Total expenses
Profit (loss) before income taxes
Income taxes (Note 32)
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
Year ended 31st March, 2019 and 2018
Thousands of
U.S. dollars (Note 1)

Millions of yen

2019

2018

2019

¥23,144¥22,266$208,527

Net unrealized gains on securities available for sale

(22,268)

17,424(200,633)

Net deferred gains (losses) on hedging instruments

(171)

350

(1,546)(18,540)

7,119(167,043)(¥40,980)¥24,894($369,223)(¥17,835)¥47,161($160,695)(¥18,085)¥46,290($162,951)

¥250

¥870

$2,255

Profit (loss)
Other comprehensive income:Retirement benefits liability adjustments
Total other comprehensive income (Note 25)
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 GroupANNUAL REPORT 201919

Consolidated Statement of Changes in Net Assets
Nishi-Nippon Financial Holdings, Inc. and Subsidiaries
Year ended 31st March, 2019 and 2018
Thousands of
U.S. dollars (Note 1)

Millions of yen

2019

2018

2019

¥50,000¥50,000$450,491———¥50,000¥50,000$450,491¥134,791¥141,868$1,214,449

Shareholders’ equity:
Capital stock (Note 15)
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

0

0

2

(2,281)(7,076)(20,557)(2,281)(7,076)(20,555)¥132,510¥134,791$1,193,893¥236,924¥219,793$2,134,648

Cash dividends paid (Note 38)(4,635)(4,679)(41,765)

Profit (loss) attributable to owners of parent

22,89921,467

206,323

40

342

364

18,304

17,131

164,921¥255,229¥236,924$2,299,570(¥10,668)(¥15,829)($96,120)(2,509)(1,916)(22,612)

0

0

3

2,281

7,076

20,557

Balance at end of the year
Earned surplus
Balance at beginning of the year
Changes during the year

Reversal of revaluation of premises
Total changes during the year
Balance at end of the year
Treasury stock (Note 16)
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

(227)

5,161

(2,051)(¥10,896)(¥10,668)($98,171)¥411,048¥395,831$3,703,469

Total shareholders’ equity
Balance at beginning of the year
Changes during the year
Cash dividends paid (Note 38)(4,635)(4,679)(41,765)

Profit (loss) attributable to owners of parent

22,89921,467

206,323

Acquisition of treasury stock(22,612)(2,509)(1,916)

Sale of treasury stock

0

0

5

Reversal of revaluation of premises

40

342

364

Total changes during the year
Balance at end of the year

20

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 201915,795

15,216142,314¥426,843¥411,048$3,845,783

Consolidated Statement of Changes in Net Assets
Nishi-Nippon Financial Holdings, Inc. and Subsidiaries
Year ended 31st March, 2019 and 2018

Thousands of
U.S. dollars (Note 1)

Millions of yen

2019

2018

2019

¥79,474¥62,122$716,052(22,273)

17,352(200,684)

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

(22,273)

17,352(200,684)¥57,200¥79,474$515,368(¥33)(¥384)($303)(171)

350(1,546)

(171)

350

(1,546)(¥205)(¥33)($1,849)¥30,058¥30,400$270,817

(40)

(342)

(364)

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

(40)

(342)

(364)

¥30,017¥30,058$270,452¥6,927(¥192)$62,414(18,540)

7,119(167,043)(18,540)

7,119(167,043)(¥11,612)¥6,927($104,629)¥116,426¥91,946$1,048,981(41,026)

24,479(369,639)

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

(41,026)

24,479(369,639)¥75,400¥116,426$679,341¥7,420¥23,899$66,86170(16,479)630

70(16,479)

630¥7,490¥7,420$67,492¥534,895¥511,678$4,819,311

Non-controlling interests:
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
Cash dividends paid (Note 38)(4,635)(4,679)(41,765)

Profit (loss) attributable to owners of parent

22,89921,467

206,323

Acquisition of treasury stock(22,612)(2,509)(1,916)

Sale of treasury stock

0

0

5

Reversal of revaluation of premises

40

342

364

(40,956)

8,000(369,008)(25,160)

23,216(226,694)¥509,734¥534,895$4,592,617

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 GroupANNUAL REPORT 201921

Consolidated Statement of Cash Flows
Nishi-Nippon Financial Holdings, Inc. and Subsidiaries
Year ended 31st March, 2019 and 2018
Thousands of
U.S. dollars (Note 1)

Millions of yen

2019

2018

2019

¥34,054
5,669
98
283
(84)
384
(39)
19,4902,113¥32,422
6,861
1,135
283
(233)
(1,381)
0(13,324)(60)$306,827
51,080
889
2,555
(757)
3,462
(360)
175,605
19,040

14
(387)
(28)
(102,827)
6,074(2,891)
(10)
(653)
258
(23)
(299,646)
225,860(62,387)
143,044(373)(1,915)
110,610

(15)
118
(88)
(100,419)
5,087(2,343)
(4)
(691)
376
(273)
(237,730)
268,620
57,661
118,214(88)(2,258)36,041127(3,490)(258)(926,456)
54,733(26,055)(91)(5,886)2,328(214)(2,699,760)
2,034,963(562,101)
1,288,807(3,367)(17,254)
996,580

118,087(36)
58
104,219(6,349)(32,920)
259,746(10,400)¥249,346

8,916
(819)
24
101,776(5,565)(59,777)
212,463(7,634)¥204,828

1,063,948(331)
527
938,998(57,210)(296,606)
2,340,273(93,704)$2,246,569(¥170,544)
113,604
229,525(2,020)(3,452)172(1,766)(¥241,402)
55,252296,928(2,000)(10,071)966(958)($1,536,577)
1,023,552
2,067,984(18,199)(31,102)
1,557(15,915)—¥165,519(181)¥98,535—$1,491,298(¥10,000)(4,635)(180)—(2,509)0(¥17,325)(¥10,000)(4,678)(349)(17,000)(1,916)
0(¥33,943)($90,098)(41,764)(1,625)—(22,612)5($156,095)

¥10

(¥12)

$92

¥397,551¥269,407$3,581,864. Cash and cash equivalents at beginning of the year

¥1,073,168¥803,760$9,669,052. Cash and cash equivalents at end of the year (Note 36)¥1,470,719¥1,073,168$13,250,917. Cash flows from operating activities:
Profit (loss) before income taxes
Depreciation
Losses on impairment of fixed assets
Amortization of goodwill
Equity in gains of nonconsolidated subsidiaries and affiliate
Increase (decrease) in reserve for possible loan losses(Decrease) increase in reserve for devaluation of securities
Decrease (increase) in asset for retirement benefits
Increase (decrease) in liability for retirement benefits
Increase (decrease) in reserve for retirement benefits for directors andcorporate auditors(Decrease) increase in reserve for reimbursement of deposits
Decrease in reserve for other contingent losses
Income from lending activities
Funding costs
Gains on securities
Gains on money held in trust
Net foreign exchange gains
Losses on sale of tangible fixed assets
Net increase in trading account assets
Net increase in loans and bills discounted
Net increase in deposits
Net (decrease) increase 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 in call loans
Net increase in call money
Net increase in guarantee deposits received under securities lendingtransactions
Net increase in foreign exchange assets
Net increase in foreign exchange liabilities
Interest and dividends received
Interest paid
OthersSubtotal
Income taxes paid
Net cash provided by operating activities. 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
Payments for acquisition of subsidiaries’ shares resulting in changes
in scope of consolidation
Net cash provided by investing activities. Cash flows from financing activities:
Redemption of subordinated bonds
Dividends paid
Dividends paid to non-controlling shareholders
Payments for distribution to non-controlling shareholders
Payments for acquisition of treasury stock
Proceeds from sale of treasury stock
Net cash used in financing activities. 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.

22

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2019

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 ¥110.99= U.S.$ 1.00, theexchange rate on 31st March, 2019, has been used in translation.
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 number of consolidated and non-consolidated subsidiaries for the years ended 31st March, 2019 and 2018 is as follows:
2019

2018

i) Number of consolidated subsidiaries:77ii) Number of non-consolidated subsidiaries:22(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, 2019 and 2018 is as follows:
2019

2018

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:22iv) Number of affiliates not accounted for by the equity method:00(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 futures and option transactions, are stated at theamount 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 GroupANNUAL REPORT 201923

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. In principle, securities available for sale are carried at fair value with cost of sales determined by the moving
average method. However, securities available for sale, for which it is extremely difficult to determine the fair 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.
(8) Intangible Fixed Assets (excluding leased 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 Company and its consolidated subsidiaries (5 years).
(9) Leased Assets
The tangible and intangible fixed assets capitalized under the finance lease transactions entered into on and after 1st April, 2008 where
ownership of leased assets is not transferred to lessees are depreciated by the straight-line method over the lease term with their residual
value of zero.
(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 the above circumstances, but with a highprobability of becoming so (hereinafter “customers with high probability of becoming insolvent”), the reserve for possible loan losses isprovided at the amounts deemed necessary after deduction of the estimated realizable value of collateral and guarantees based on thecustomer’s overall financial condition.
For other loans, the reserve for possible loan losses is provided at an amount based on the anticipated loss rates calculated fromthe actual losses for a certain period.
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, 2019 and 2018 were ¥5,813 million($52,375thousand) and ¥5,193 million, respectively.
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.

24

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2019

Notes to Consolidated Financial Statements

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 Company and its consolidated subsidiaries estimate 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 Company and its consolidated subsidiaries.
(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) Foreign Currency Translation
Foreign currency-denominated assets and liabilities are translated into Japanese yen primarily at the exchange rate prevailing at thebalance sheet date.
(18) 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.
(19) 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-for-salesecurities, in accordance with operational rules concerning hedge accounting, hedged items are distinguished by identical type ofbonds and interest rate swaps are used as hedging instruments. Since significant terms related to those hedged items and hedging
instruments are nearly identical, such hedging transactions are deemed highly effective in terms of evaluation of hedge effectiveness.

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 201925

Notes to Consolidated Financial Statements

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 Audit Committee Report No. 25 of
29th July, 2002).
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 currency-denominated financial assets and liabilities ashedged 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 Industry
Audit Committee Report No. 25. Therefore, the subsidiaries either recognizes gains or losses that arise from such currency swaps as
earnings or defers them, rather than eliminating them.
(20) Amortization of Goodwill
Goodwill is amortized using the straight-line method over five years.
(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) Accounting Treatment for Consumption Taxes
The tax excluded method is used as the accounting treatment for consumption taxes and local consumption taxes for the Company
and its consolidated subsidiaries.
(23) 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.
(Accounting Standards Issued but Not Yet Effective)“Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29 of 30th March, 2018)“Implementation Guidance on Accounting Standard for Revenue Recognition” (ASBJ Guidance No. 30 of 30th March, 2018)
Overview
This is a comprehensive accounting standard for revenue recognition. Specifically, the accounting standard establishes thefollowing five-step model that will apply to revenue from customers:
Step 1: Identify the contract(s) with a customer.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligations in the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.
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, 2022.
Impact of the adoption of the accounting standard and implementation guidance
The Company is currently evaluating the effect of the adoption of this accounting standard and implementation guidance on its
consolidated financial statements.

26

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2019

Notes to Consolidated Financial Statements

3. Trading Account Assets
Trading account assets at 31st March, 2019 and 2018 consisted of the following:Thousands of
U.S. dollars

Millions of yen

Trading securities
Other trading assets
Total

2019

2018

2019

¥1,166¥1,142$10,512———¥1,166¥1,142$10,512

4. Securities
Securities at 31st March, 2019 and 2018 consisted of the following:Thousands of
U.S. dollars

Millions of yen

Japanese government bonds

2019

2018

¥381,450¥472,435

2019$3,436,801

Japanese municipal bonds

77,433

88,204

697,657

Corporate bonds (including government-guaranteed bonds)*

374,498

447,9213,374,164

Stock**

132,421

162,398

1,193,093

Other securities***
Total

406,564

392,900

3,663,071¥1,372,367¥1,563,859$12,364,788* Corporate bonds included bonds offered through private placement. The guarantee obligation of Nishi-Nippon City Bank for such private placement bonds at 31st
March, 2019 and 2018 were ¥11,951 million ($107,676 thousand) and ¥8,619 million, respectively.
** Stock included stock of affiliates of ¥748 million ($6,741 thousand) and ¥739 million at 31st March, 2019 and 2018, respectively.
*** Other securities included investments in non-consolidated subsidiaries of ¥206 million ($1,858 thousand) and ¥211 million at 31st March, 2019 and 2018, respectively.

5. Loans and Bills Discounted
Loans and bills discounted at 31st March, 2019 and 2018 consisted of the following:Thousands of
U.S. dollars

Millions of yen

Bills discounted*

2019

2018

2019

¥27,617¥30,287$248,831

Loans on notes

236,420

236,589

2,130,103

Loans on deed

6,331,9786,066,631

57,049,990

Overdraft

745,188

708,050

6,714,012

Total¥7,341,204¥7,041,558$66,142,939*

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 Audit Committee Report No. 24). The consolidated subsidiaries engaged in the banking
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 ¥28,182 million ($253,920 thousand) and ¥31,142 million at 31st March, 2019 and 2018, respectively.

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 201927

Notes to Consolidated Financial Statements

Non-performing loans included in the loans at 31st March, 2019 and 2018 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2018

2019

2019

Loans to legally bankrupt entities**¥2,764¥2,214$24,905

Delinquent loans***

109,808108,218

989,359

Loans past due for three months or more****

884

1,624

7,969

Loans with altered lending conditions*****

26,471

27,558238,499¥139,928¥139,615$1,260,733

Total
**

Loans to legally bankrupt entities are loans on which interest is placed on a non-accrual status (“non- accrual loans”), excluding loans written off, as principal orinterest has not been paid for a substantial period or for other reasons and there are no prospects for recovery or repayment of principal or interest, and to which
certain circumstances apply as stated in the Implementation Ordinances for the Corporation Tax Law.
*** Delinquent loans are non-accrual loans other than (i) loans to legally bankrupt entities and (ii) loans for which interest payments have been rescheduled in order toassist the restructuring of these borrowers.
**** Loans past due for three months or more are loans for which principal or interest has not been paid for a period of three months or more from the next business dayof the last due date, and that are not included in loans to legally bankrupt entities or delinquent loans.
***** Loans with altered lending conditions are loans restructured to provide relief to borrowers, such as reducing interest rates, rescheduling interest and principal
payment, or waiving the claims, in order to assist the restructuring of these borrowers. Such loans exclude loans to legally bankrupt entities, delinquent loans, andloans past due for three months or more.

6. Assets Pledged as Collateral
Assets pledged as collateral by the Company and its consolidated subsidiaries at 31st March, 2019 and 2018 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2018

2019

2019

Assets pledged as collateral
¥36

¥37

$329

Securities

929,308

967,933

8,372,903

Loans

781,585—

7,041,949

Total¥1,710,931¥967,970$15,415,182¥18,814¥11,672$169,515

Cash and due from banks

Liabilities secured by the above assets
Deposits
Call money and bills sold

38,20038,200$344,175

Payables under repurchase agreements

166,666

100,753

1,501,634

Guarantee deposits received under securities lending transactions

145,718

27,6301,312,896

Borrowed money

885,269

740,116

7,976,117

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, 2019 and 2018:
Thousands of
U.S. dollars

Millions of yen

2018

2019
¥2,644

Securities¥2,6442019$23,823

Additionally, the following was included in other assets at 31st March, 2019 and 2018:
Thousands of
U.S. dollars

Millions of yen

Cash collateral paid for financial instruments
Deposits included in other assets

28

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2019

2019

2018

2019

¥45,827¥47,303$412,900

2,267

2,176

20,427

Notes to Consolidated Financial Statements

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, 2019 and 2018 are as follows:
Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

Aggregate amount under commitment contracts not yet drawn down

¥1,935,369¥2,016,916$17,437,332

Of the above amount, those with original maturity of less than one year or cancellable at any time
without penalty

1,900,535

1,978,716

17,123,480

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 Company and its consolidated subsidiaries. Many of these contracts havestipulations 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, the consolidated 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 to the customer.

8. Foreign Exchange
Foreign exchange assets and liabilities at 31st March, 2019 and 2018 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2018

2019

2019

Assets:Foreign exchange bills bought

¥564

¥855

$5,088Foreign exchange bills receivable

169

187

1,530

Due from foreign banks (their accounts)

—

—

—

7,661

7,316

69,028¥8,396¥8,359$75,647

Foreign exchange bills sold

¥3

¥38

$29

Foreign exchange bills payable

168

74

1,521

¥172

¥113

$1,551

Due from foreign banks (our accounts)
Total
Liabilities:

Total

9. Other Assets
Other assets at 31st March, 2019 and 2018 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2018

2019

2019

¥24

¥19

$220

Accrued income

6,585

6,783

59,338Prepaid expenses

114

90

1,032

Financial derivative products

5,046

7,330

45,465

Cash collateral paid for financial instruments

45,82747,303412,900

Other

36,42434,543

328,175¥94,023¥96,070$847,132

Domestic exchange settlement account*

Total* Domestic exchange settlement account represents unsettled debit balances arising from inter-bank domestic exchange transfers.

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 201929

Notes to Consolidated Financial Statements

10. Tangible Fixed Assets
Tangible fixed assets at 31st March, 2019 and 2018 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

Land

¥75,549¥75,821$680,688

Buildings

35,40636,939319,009

Construction in progress

1,649

267

14,858

300

265

2,709

11,024

11,501

99,326¥123,930¥124,793$1,116,592

Leased assets
Other tangible fixed assets
Total* The amounts of accumulated depreciation for tangible fixed assets at 31st March, 2019 and 2018 were ¥74,887 million ($674,727 thousand) and ¥72,651, respectively.

The accelerated depreciation entry amounts for tangible fixed assets at 31st March, 2019 and 2018 are as follows:
Thousands of
U.S. dollars

Millions of yen

2018

2019

¥7,305¥7,142

2019$64,354

11. Deposits
Deposits at 31st March, 2019 and 2018 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2018

2019

2019

Current deposits¥385,520¥380,573$3,473,469

Ordinary deposits

4,791,230

4,458,586

43,168,124

13,062

14,713

117,6932,779,485

2,902,618

25,042,663

Negotiable certificates of deposit

416,232

478,620

3,750,184

Other deposits

123,236

110,182

1,110,337¥8,508,767¥8,345,294$76,662,472

Deposits at noticeTime deposits

Total

12. Bonds
Bonds at 31st March, 2019 and 2018 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2018

2019

2019

Bonds:
0.67% Japanese yen callable subordinated bonds due 2023¥—

¥10,000$—

0.87% Japanese yen callable subordinated bonds due 2025

10,00010,00090,098¥10,000¥20,000$90,098

Total

30

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2019

Notes to Consolidated Financial Statements

13. Borrowed Money
The weighted average interest rates on borrowed money is 0.09% at 31st March, 2019.
The aggregate annual maturity amounts within five years of borrowed money after 31st March, 2019 are as follows:
Millions of yen

Thousands of
U.S. dollars

2020¥36,180$325,977

2021

65,274

588,1092022

345,144

3,109,694

2023

445,106

4,010,331

2024

104

938

Year ending 31st March

14. Other Liabilities
Other liabilities at 31st March, 2019 and 2018 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2018

2019

2019

¥63

¥43

$571

Accrued income taxes

3,485

5,571

31,406

Accrued expenses

7,974

8,301

71,848

Unearned income

2,361

2,440

21,274

Financial derivative products

5,684

4,958

51,220

Lease obligations

304

282

2,741

Cash collateral received for financial instruments

364

1,345

3,279

Domestic exchange settlement account

778

785

7,018

Others34,50531,278310,886

Total¥55,522¥55,006$500,247

Asset retirement obligations

15. Capital Stock
Capital stock during the year ended 31st March, 2019 consisted of the following:
Common stock

1st April, 2018
Increase
Decrease*
31st March, 2019

Capital stock

Issued shares

Millions of yen

Thousands of
U.S. dollars

169,596,955¥50,000$450,491———

3,000,000——

166,596,955¥50,000$450,491* The decrease of 3,000,000 shares is due to retirement of treasury shares.

Capital stock during the year ended 31st March, 2018 consisted of the following:
Common stock

Capital stock

Issued shares

Millions of yen

179,596,955¥50,000——

Decrease*

10,000,000—

31st March, 2018

169,596,955¥50,000

1st April, 2017
Increase* The decrease of 10,000,000 shares is due to retirement of treasury shares.

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 201931

Notes to Consolidated Financial Statements

16. Treasury Stock
Treasury stock during the year ended 31st March, 2019 consisted of the following:
Common stock

Treasury stock

Number of shares

Millions of yen

Thousands of
U.S. dollars

1st April, 201815,095,538(¥10,668)($96,120)

Increase*

2,251,709(2,509)(22,612)

Decrease*

3,000,484

2,282

20,561

31st March, 2019

14,346,763(¥10,896)($98,171)* The increase of 2,251,709 shares is due to acquisition of treasury shares of 2,243,600 and purchase of fractional shares of 8,109.
The decrease of 3,000,484 shares is due to retirement of treasury shares of 3,000,000 and sale of fractional shares of 484.

Treasury stock during the year ended 31st March, 2018 consisted of the following:

1st April, 2017

Common stock

Treasury stock

Number of shares

Millions of yen

23,641,266(¥15,829)(1,916)

Increase*

1,454,907

Decrease*

10,000,595

7,077

31st March, 201815,095,538(¥10,668)* The increase of 1,454,907 shares is due to acquisition of treasury shares of 1,441,700 and purchase of fractional shares of 13,207.
The decrease of 10,000,595 shares is due to retirement of treasury shares of 10,000,000 and sale of fractional shares of 595.

17. 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 the account, “Deferred tax liabilities on revaluation of premises” in theliabilities of the consolidated balance sheet. The amount of revaluation differences, net of tax, is presented as “Revaluation of premises, netof taxes” in net assets.
The difference between the aggregate market value of land for business use revalued in accordance with Article 10 of the Law
Concerning Land Revaluation and the book value after revaluation at 31st March, 2018 is as follows:
Millions of yen

2018¥6,862* The difference at 31st March, 2019 is not presented as the aggregate market value of land subject to revaluation exceeded the book value after revaluation.

18. Other Interest Income
Other interest income for the years ended 31st March, 2019 and 2018 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2018

2019
Interest on call loans and bills bought

2019
¥8

$92

179

181

1,616

Others

1,437

1,383

12,949Total¥1,626¥1,573$14,658

Interest on deposits with banks

32

¥10

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2019

Notes to Consolidated Financial Statements

19. Other Operating Income
Other operating income for the years ended 31st March, 2019 and 2018 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2018

2019

2019

Gains on foreign exchange transactions

¥653

¥691

$5,886

Gains on sale of bonds

141

129

1,273

Others

490

419

4,420

Total

¥1,285¥1,241$11,580

20. Other Income
Other income for the years ended 31st March, 2019 and 2018 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2018

2019

2019

¥3,770¥2,656

Gains on money held in trust

10

4

91

Equity in earnings of affiliates

84

233

757

Gains on disposition of fixed assets

58

211

529

Reversal of reserve for possible loan losses

—

102

—

Recoveries of written-off claims

433

161

3,907

Rental income on land and buildings

403

390

3,635

Others

860

2,329

7,755

Total

¥5,621¥6,090$50,651

Gains on sale of stock and other securities$33,974

21. Other Interest Expenses
Other interest expenses for the years ended 31st March, 2019 and 2018 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2018

2019
Bonds

¥136

2019

¥166

$1,231Others

976

764

8,801

Total

¥1,113¥931$10,032

22. Other Operating Expenses
Other operating expenses for the years ended 31st March, 2019 and 2018 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2018

2019

2019

Losses on sale of bonds

¥783

¥298

$7,061

Losses on redemption of bonds

108

125

979

Losses on devaluation of bonds

7

12

69

2,477

1,712

22,324¥3,378¥2,148$30,435

Expenses for derivatives other than trading derivatives
Total

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 201933

Notes to Consolidated Financial Statements

23. General and Administrative Expenses
General and administrative expenses for the years ended 31st March, 2019 and 2018 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

¥32,111¥32,439$289,315

(355)

1,895

(3,205)

48

38

437

Depreciation

5,669

6,861

51,080Rental expenses

3,156

3,288

28,440

Salaries and allowances
Employee retirement benefits
Retirement benefits for directors and corporate auditors

Taxes

5,491

5,411

49,475

Others34,88135,304314,272

Total¥81,002¥85,238$729,816

24. Other Expenses
Other expenses for the years ended 31st March, 2019 and 2018 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2018

2019

34

2019

Provision for possible loan losses¥2,735¥—$24,643

Losses on write-offs of claims

2,503

2,727

22,558Losses on sale of stock and other securities

100

0

904

Losses on devaluation of stock and other securities

19

5

176

Losses on disposition of tangible fixed assets

317

587

2,858

Impairment losses

98

1,135

889

Losses on sale of loans

300

136

2,708

Others

1,427

1,823

12,863

Total¥7,503¥6,417$67,602

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2019

Notes to Consolidated Financial Statements

25. Other Comprehensive Income
Reclassification adjustments and tax effects related to other comprehensive income for the years ended 31st March, 2019 and 2018 are as
follows:
Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

Amount arising during the year(¥24,050)¥28,834($216,690)

Reclassification adjustments(6,564)(3,154)(59,146)

Amount before tax effect(30,615)

25,679(275,837)

8,346(8,255)75,204(¥22,268)¥17,424($200,633)

Amount arising during the year(¥1,270)(¥436)($11,451)

Reclassification adjustments

1,023

940

9,225

Amount before tax effect

(246)

504

(2,225)Net unrealized gains on securities available for sale:Tax effectNet unrealized gains on securities available for saleNet deferred gains (losses) on hedging instruments:

75

(153)

678

(¥171)¥350($1,546)(¥26,604)¥8,633($239,697)

(72)

1,609

(653)

(26,676)

10,243(240,350)

8,136(3,123)73,306Retirement benefits liability adjustments(¥18,540)¥7,119($167,043)

Total other comprehensive income(¥40,980)¥24,894($369,223)

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

26. Lease Transactions(1) Finance leases
Information on finance lease transactions which are accounted for as operating leases at 31st March, 2019 and 2018 is summarized asfollows:
Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

Amounts equivalent to acquisition cost
Tangible fixed assets
Total¥1,867¥1,867$16,827¥1,867¥1,867$16,827¥1,605¥1,527$14,460¥1,605¥1,527$14,460

¥262

¥339

$2,367¥262¥339$2,367

Amounts equivalent to accumulated depreciation
Tangible fixed assets
Total
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.

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 201935

Notes to Consolidated Financial Statements

Future lease payments of finance leases which are accounted for as operating leases at 31st March, 2019 and 2018 are as follows:
Thousands of
U.S. dollars

Millions of yen

2018

2019

2019

Future finance lease payments
Due within one year

¥77

¥77

$695

Due after one year

185

262

1,671

¥262

¥339

$2,367

Total

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.

Total lease payments during the year and the amount equivalent to depreciation expenses for the years ended 31st March, 2019 and2018 are as follows:
Thousands of
U.S. dollars

Millions of yen

2018

2019

2019

Total lease payments during the year

¥77

¥77

$695

The amount equivalent to depreciation expenses *

77

77

695

* 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, 2019 and 2018 are as follows:
Thousands of
U.S. dollars

Millions of yen

2018

2019

2019

Future operating lease payments
Due within one year

¥345

¥355

$3,112

Due after one year

264

347

2,381

¥609

¥702

$5,494Total

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

Policies for financial instruments
Nishi-Nippon Financial Holdings, Inc. Group (the “Group”) is engaged in the financial service business, with a primary focus onbanking businesses such as deposits, loans, securities, and domestic and foreign currency exchange businesses. The Groupmanages and raises funds, taking into account market conditions and balancing duration. To conduct these businesses, theCompany comprehends the risks arising from all of its assets and liabilities, including off-balance-sheet transactions, through theproper 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

36

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2019

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, 2019 and 2018 were ¥33,368 million ($300,643
thousand) and ¥32,745 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.

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 201937

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
The fair value of financial instruments includes the value based on the market price as well as a reasonably estimated value in casethere is no market price. Because various assumptions are used in the estimation of the fair value, 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, 2019 and 2018 and their fair values andvaluation differences are as follows. Non-listed stocks and others whose fair value is extremely difficult to be estimated are excluded fromthe table below (refer to Note 2).
<At 31st March, 2019>
Millions of yen
Valuationdifferences

Carrying value

Fair value¥1,474,517¥1,474,517¥—

Assets:i) Cash and due from banksii) Securities:
Held-to-maturity securities

48,26749,064796

Available-for-sale securities

1,306,469

1,306,469—

iii) Loans and bills discounted

7,341,204

Reserve for possible loan losses*
Total assets(41,729)7,299,475

7,408,041

108,566¥10,128,730¥10,238,093¥109,362

Liabilities:¥8,508,767¥8,509,043¥275ii) Call money and bills sold

109,084

109,084—iii) Payables under repurchase agreements

166,666

166,666—iv) Guarantee deposits received under securities lending transactions

145,718

145,718—v) Borrowed money

891,921885,759(6,162)

Total liabilities¥9,822,158¥9,816,272(¥5,886)¥—i) Deposits

Derivatives**
Hedge accounting not applied

¥51

¥51

Hedge accounting applied

(478)

(478)

—

(¥426)(¥426)¥—

Total derivatives

38

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2019

Notes to Consolidated Financial Statements

Thousands of U.S. dollars
Valuationdifferences

Carrying value

Fair value$13,285,139$13,285,139$—

434,882442,058

7,176

Available-for-sale securities

11,771,056

11,771,056—

iii) Loans and bills discounted

66,142,939

Assets:i) Cash and due from banksii) Securities:
Held-to-maturity securities

Reserve for possible loan losses*(375,972)
65,766,966

66,745,128

978,161$91,258,045$92,243,383$985,337$76,662,472$76,664,952$2,479982,833

982,833—iii) Payables under repurchase agreements

1,501,634

1,501,634—iv) Guarantee deposits received under securities lending transactions

1,312,896

1,312,896—

Total assets
Liabilities:i) Depositsii) Call money and bills soldv) Borrowed money

8,036,054

7,980,535(55,518)

Total liabilities$88,495,890$88,442,850($53,039)$—

Derivatives**
Hedge accounting not applied

$465

$465

Hedge accounting applied(4,310)(4,310)—($3,844)($3,844)$—

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.

<At 31st March, 2018>
Millions of yen
Valuationdifferences

Carrying value

Fair value¥1,076,592¥1,076,592¥—

Assets:i) Cash and due from banksii) Securities:
Held-to-maturity securities

57,36458,533

1,168

Available-for-sale securities

1,490,487

1,490,487—

iii) Loans and bills discounted

7,041,558
7,000,301

7,106,552

106,250¥9,624,746¥9,732,166¥107,419

Reserve for possible loan losses*
Total assets(41,256)

Liabilities:¥8,345,294¥8,345,745¥450ii) Call money and bills sold

64,38764,387—iii) Payables under repurchase agreements

100,753

100,753—iv) Guarantee deposits received under securities lending transactions

27,63027,630—v) Borrowed money

748,876

742,424(6,451)vi) Bonds

20,00020,113113¥9,306,943¥9,301,055(¥5,887)

¥189

¥189

¥—

i) Deposits

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

771

771

—

¥960

¥960

¥—

* 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.

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 201939

Notes to Consolidated Financial Statements(Note 1) Methods for estimating the market value of financial instruments
Assets:i)Cash and due from banks
Because the fair value of due from banks that does not have stated maturity approximates its carrying value, the carrying value istreated as the fair value. The fair value of due from banks that has stated maturity is based on the present value of the totals by
maturity bucket discounted by the interest rate that would be applied if similar deposits were placed. As the fair value of due frombanks with a short-term original contractual maturity (one year or less) approximates its carrying value, its carrying value is treatedas the fair value.

ii) Securities
The fair value of stocks is based on their market price on the stock exchange, while the fair value of debt securities is based on the
Reference Prices (Yields) for OTC Bond Transactions published by the Japan Securities Dealers Association, the price quoted by
the correspondent financial institutions or the value reasonably calculated by the Group. The fair value of investment trusts is basedon the announced reference price or the price quoted by the correspondent financial institutions. The fair value of foreign securities
is based on the price quoted by the correspondent financial institutions or the financial information vendors.
The fair value of private placement bonds with the Company’s own guarantee is based on the present value of future cash
flows discounted by the market interest rate adjusted for credit risk.
Notes concerning securities by each carrying purpose are presented in “28. Securities” of “Notes to Consolidated Financial
Statements.”iii) Loans and bills discountBecause loans and bills discounted with floating interest rates reflect market interest rates in a short period of time, the fair value ofsuch loans approximates their carrying value as long as the credit standing of the borrower has not changed significantly sinceorigination. Thus, the carrying value of such loans is treated as the fair value. The fair value of loans and bills discounted with fixedinterest rates is based on the present value of the total amount of principal and interest categorized by the type of loans, internalrating and term, discounted by the market interest rate adjusted for credit risk. Because the fair value of loans with a short-term
contractual maturity (one year or less) approximates their carrying value, the carrying value is treated as the fair value.
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 deducting the reservefor possible 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.
With respect to loans and bills discounted that have no due date because of special attributes such as limiting the borrowings
to the amounts secured by collateral, because it is assumed that the fair value approximates the carrying value from the estimatedrepayment period and interest rate conditions, the carrying value is treated as the fair value.
Liabilities:i)

Deposits
For demand deposits, the amount which would be paid if its repayment were demanded on the consolidated balance sheet date(carrying value) is deemed to be the fair value. The fair value of time deposits is based on the discounted present value of the future
cash flows categorized by term. The discount rate is the interest rate that would be applied when new deposits were taken.
Because the fair value of those with a short-term original contractual maturity (one year or less) approximates their carrying value,
the carrying value is treated as the fair value.

ii)	Call money and bills sold, iii) Payables under repurchase agreements, and iv) Guarantee deposits received under securities lendingtransactions
Since call money and bills sold, payables under repurchase agreements and guarantee deposits received under securities lendingtransactions have short-term original contractual maturity (one year or less) and their fair value approximates the carrying value, thecarrying value is treated as the fair value.
v) Borrowed money
Because borrowed money with floating interest rates reflects market interest rates in a short period of time and the credit standingof the Company and its consolidated subsidiaries has not changed significantly since the borrowing, the fair value of suchborrowed money is deemed to approximate the carrying value. Therefore, the carrying value is treated as the fair value. The fairvalue of borrowed money with fixed interest rates is based on the present value of the total amount of principal and interest of theborrowed money categorized by term, discounted by the market interest rate adjusted for credit risk. Because the fair value ofborrowed 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.
vi) Bonds
The fair value of bonds is based on the Reference Price (Yields) for OTC Bond Transactions published by the Japan Securities
Dealers Association or the price quoted by the securities company.

40

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2019

Notes to Consolidated Financial Statements

Derivative transactions:
Derivative transactions are presented in “30. Derivatives” of “Notes to Consolidated Financial Statements.”(Note 2) Financial instruments whose fair value is extremely difficult to be estimated are as stated below.
They are not included in “Assets: ii) Available-for-sale securities” presented in “Estimated fair value of financial instruments.”
Thousands of
U.S. dollars

Millions of yen

Non-listed stocks

2019

2018

2019

¥14,109¥14,470$127,125

3,520

1,537

31,723¥17,630¥16,007$158,849

Investments in partnerships
Total

Notes: 1. Because non-listed stocks have no market price and because it is extremely difficult to estimate their fair value, they are not subject to the fairvalue disclosure.
2. In the years ended 31st March, 2019 and 2018, impairment losses of ¥0 million ($0 thousand) and ¥5 million were recorded for non-listed stocks,
respectively.
3. Investments in partnerships whose fair value is extremely difficult to be estimated because the partnership’s assets are non-listed stocks, etc. are
not subject to the fair value disclosure.

(Note 3) Repayment schedules for monetary claims and securities with stated maturity at 31st March, 2019 and 2018
<At 31st March, 2019>
Millions of yen
Due in1 year or lessDue from
1 year to 3 years¥1,366,516

¥—

¥—

¥—

¥—

¥—

Held-to-maturity securities

17,597

15,00016,000———Government bonds

10,00015,00016,000———

Municipal bonds

5,290

—

—

—

—

—

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:

2,307

—

—

—

—

—

282,051

288,349

212,054

194,394

148,980

42,265Government bonds

185,700

88,50033,00018,00012,000—

Municipal bonds

6,650

11,444

14,505

21,491

17,150—

Corporate bonds

47,083

132,788

108,036

47,93929,757—

Corporate bonds
Securities available for sale with maturity

42,61855,61656,512

106,963

90,07342,2651,510,930

1,170,414

1,000,781

707,904

778,678

1,969,763¥3,177,095¥1,473,763¥1,228,835¥902,298¥927,659¥2,012,029

Due in1 year or lessDue from
1 year to 3 years$12,312,071

$—

$—

$—

$—

$—

Held-to-maturity securities

158,545

135,147

144,157———

Government bonds

90,098135,147

144,157———

Municipal bonds

47,661

—

—

—

—

—

Corporate bonds

20,785

—

—

—

—

—

OthersLoans 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:

2,541,234

2,597,976

1,910,569

1,751,461

1,342,289

380,804

Government bonds

1,673,123

797,369

297,324

162,176108,117—

Municipal bonds

59,915

103,108

130,687

193,630

154,518—

Corporate bonds

424,213

1,196,403

973,389

431,928

268,105—

Others383,981

501,095

509,168

963,725

811,547

380,804

Securities available for sale with maturity

Loans and bills discounted
Total

13,613,210

10,545,224

9,016,857

6,378,088

7,015,757

17,747,219$28,625,062$13,278,348$11,071,584$8,129,550$8,358,046$18,128,023

Note: Excluded from Loans and bills discounted are ¥112,490 million ($1,013,519 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¥90,241 million ($813,062 thousand) relating to those that do not have contractual maturity.

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 201941

Notes to Consolidated Financial Statements<At 31st March, 2018>
Millions of yen
Due in1 year or lessDue from
1 year to 3 years¥971,364

¥—

¥—

¥—

¥—

¥—

9,309

32,597

10,000

6,000

—

—

—

25,00010,000

6,000

—

—

Municipal bonds

1,000

5,290

—

—

—

—

Corporate bonds

8,309

2,307

—

—

—

—

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:
Held-to-maturity securities
Government bonds

216,617

501,035

216,515

157,482

195,155

29,332Government bonds

97,000261,200

38,00026,0005,000—

Municipal bonds

15,08013,034

10,36518,99023,651—

Corporate bonds

76,775

132,325

116,042

58,192

46,786—

Others

27,762

94,47652,10854,299119,717

29,332

Securities available for sale with maturity

Loans and bills discounted
Total

1,414,042

1,135,524

984,423

660,639

793,015

1,848,052¥2,611,334¥1,669,157¥1,210,938¥824,121¥988,171¥1,877,384

Note: Excluded from Loans and bills discounted are ¥109,997 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 ¥95,862 million
relating to those that do not have contractual maturity.

(Note 4) Repayment schedules for bonds, borrowed money and other interest-bearing debts at 31st March, 2019 and 2018
<At 31st March, 2019>
Millions of yen
Due in1 year or lessDue from
1 year to 3 years¥8,191,986¥252,957¥49,138¥6,683¥8,001¥0Call money and bills sold

109,084

—

—

—

—

—

Payables under repurchase agreements

166,666

—

—

—

—

—

Guarantee deposits received under
securities lending transactions

145,718

—

—

—

—

—

Borrowed money

36,180410,419445,210

100

10

—

Bonds

—

—

—

10,000

—

—

Total

¥8,649,636¥663,376¥494,348¥16,784¥8,012¥0

Due in1 year or lessDue from
1 year to 3 years$73,808,330$2,279,101$442,726$60,221$72,093$0982,833

—

—

—

—

—

Payables under repurchase agreements

1,501,634

—

—

—

—

—

Guarantee deposits received under
securities lending transactions

1,312,896

—

—

—

—

—

325,977

3,697,804

4,011,269

908

95

—

Bonds

—

—

—

90,098

—

—

Total

$77,931,670$5,976,905$4,453,995$151,227$72,188$0

Deposits

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

Due after
10 yearsThousands of U.S. dollars

Deposits
Call money and bills soldBorrowed money

Note: Demand deposits are included under “Due in 1 year or less.”

42

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2019

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Notes to Consolidated Financial Statements<At 31st March, 2018>
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¥8,024,310¥265,564¥41,643¥6,288¥7,487¥0Call money and bills sold

64,387

—

—

—

—

—

Payables under repurchase agreements

100,753

—

—

—

—

—

Guarantee deposits received under
securities lending transactions

27,630

—

—

—

—

—

Borrowed money

35,186180,255

533,251

157

26

—

Deposits

Bonds

—

—

—

10,00010,000—Total¥8,252,268¥445,819¥574,894¥16,445¥17,514¥0Note: Demand deposits are included under “Due in 1 year or less.”

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

Millions of yen

2018

2019
Holding gains (losses) recognized in income

¥2

2019
(¥7)

$19

(2) Held-to-maturity securities
i)

Securities whose fair value exceeds their carrying value<At 31st March, 2019>
Millions of yen
Carrying value

Valuationdifferences

Fair value

Bonds:
Government bonds¥40,659¥41,421¥761

Municipal bonds

5,299

5,326

27

Corporate bonds

2,309

2,316

7

48,26749,064796

Others

—

—

—

Total

¥48,267¥49,064¥796

Thousands of U.S. dollars
Carrying value

Valuationdifferences

Fair value

Bonds:
Government bonds$366,334$373,195$6,861
247

Municipal bonds

47,74447,992

Corporate bonds

20,803

20,87067

434,882442,058

7,176

Others

—

—

—

Total

$434,882$442,058$7,176

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 201943

Notes to Consolidated Financial Statements<At 31st March, 2018>
Millions of yen
Carrying value

Valuationdifferences

Fair value

Bonds:
Government bonds¥40,410¥41,421¥1,010

Municipal bonds

6,319

6,403

84

Corporate bonds

10,634

10,70873

57,36458,533

1,168

Others

—

—

—

Total

¥57,364¥58,533¥1,168ii) Securities whose carrying value exceeds their fair value<At 31st March, 2019>
None<At 31st March, 2018>
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, 2019>
Millions of yen
Valuationdifferences

Carrying value

Acquisition cost

¥112,397¥44,125¥68,272

Government bonds

340,791

338,2122,579

Municipal bonds

50,11849,869248

Corporate bonds

364,759

361,0753,684

755,668

749,157

6,511

StocksBonds:

Others212,201

198,394

13,806

Total¥1,080,267¥991,676¥88,591

Thousands of U.S. dollars
Valuationdifferences

Carrying value

Acquisition cost

$1,012,682$397,559$615,122

Government bonds

3,070,467

3,047,229

23,237

Municipal bonds

451,555449,3172,237

Corporate bonds

3,286,418

3,253,223

33,194

6,808,440

6,749,771

58,669StocksBonds:

44

Others1,911,896

1,787,497

124,398

Total$9,733,019$8,934,828$798,190

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2019

Notes to Consolidated Financial Statements<At 31st March, 2018>
Millions of yen
Valuationdifferences

Carrying value

Acquisition cost

¥142,540¥47,215¥95,324

Government bonds

432,024

428,908

3,116

Municipal bonds

38,53338,393140

Corporate bonds

366,527

363,3073,220

837,086

830,609

6,476

StocksBonds:

Others122,842

105,514

17,327

Total¥1,102,468¥983,340¥119,128ii) Securities whose acquisition cost exceeds their carrying value<At 31st March, 2019>
Millions of yen

StocksCarrying value

Acquisition cost

¥5,914¥7,391

Valuationdifferences(¥1,477)

Bonds:
Government bonds
Municipal bonds
Corporate bonds

—

—

—

22,01522,029

(13)

7,429

7,432

(2)

29,44529,461(16)

Others190,841

195,967(5,125)

Total¥226,201¥232,821(¥6,619)

Thousands of U.S. dollars

StocksCarrying value

Acquisition cost

$53,284$66,599

Valuationdifferences($13,314)

Bonds:
Government bonds
Municipal bonds
Corporate bonds

—

—

—

198,357

198,481(123)

66,942

66,964(21)

265,300

265,445(145)

Others1,719,451

1,765,630(46,178)

Total$2,038,037$2,097,676($59,638)<At 31st March, 2018>
Millions of yen

StocksCarrying value

Acquisition cost

¥5,387¥6,138Valuationdifferences(¥751)

Bonds:
Government bonds
Municipal bonds
Corporate bonds

—

—

—

43,351

43,563(211)

70,75970,867(107)

114,110

114,430(319)

Others268,520274,295(5,775)

Total¥388,018¥394,865(¥6,846)

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 201945

Notes to Consolidated Financial Statements(4) Available-for-sale securities sold for the years ended 31st March, 2019 and 2018 are as follows:<At 31st March, 2019>
Millions of yen
Proceeds
from sale

Gains

Losses¥3,283¥3,364(¥100)

Government bonds

—

—

—

Municipal bonds

—

—

—

Corporate bonds

30

0

—

30

0

—

StocksBonds:

Others52,895

547

(784)

Total

¥56,208¥3,912(¥884)

Thousands of U.S. dollars
Proceeds
from sale

Stocks

Gains

Losses$29,586$30,314($903)

Bonds:
Government bonds

—

—

—

Municipal bonds

—

—

—

Corporate bonds

270

1

—

270

1

—

Others476,575

4,931(7,064)

Total$506,432$35,247($7,966)<At 31st March, 2018>
Millions of yen
Proceeds
from sale

Gains

Losses¥1,991¥2,662(¥0)

Government bonds

—

—

—

Municipal bonds

—

—

—

Corporate bonds

120

1

—

120

1

—

StocksBonds:

Others

14,670

107

(298)

Total

¥16,782¥2,771(¥298)(5) Devaluation of securities
Securities other than trading securities (excluding securities whose fair value is extremely difficult to be estimated) are devalued to the fairvalue, and the difference between the acquisition cost and the fair value is treated as the loss for the fiscal year (“devaluation”), if the fairvalue (primarily the closing market price at the consolidated balance sheet date) has significantly deteriorated compared with theacquisition cost (including amortized cost) unless it is deemed that there is a possibility of a recovery in the fair value. The amount ofdevaluation was ¥27 million ($245 thousand), of which ¥19 million ($176 thousand) for stocks and ¥7 million ($69 thousand) for bonds,
for the year ended 31st March, 2019.
The amount of devaluation was ¥12 million for bonds for the year ended 31st March, 2018.
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.

46

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2019

Notes to Consolidated Financial Statements(6) Unrealized gains/losses on securities available for sale
The components of the unrealized gains/losses on securities available for sale at 31st March, 2019 and 2018 are as follows:<At 31st March, 2019>
Millions of yen

Thousands of
U.S. dollars

Revaluation difference¥81,971$738,552

Deferred tax liability(24,091)(217,056)

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

57,880521,496(680)(6,128)——¥57,200$553,725

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<At 31st March, 2018>
Millions of yen

Revaluation difference¥112,282

Deferred tax liability(32,437)

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

79,844(369)

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—¥79,474

Unrealized gains on securities available for sale, net of taxes

29. Money Held in Trust
Money held in trust at 31st March, 2019 and 2018 are as follows:
Thousands of
U.S. dollars

Millions of yen

2018

2019

2019

Money held in trust for other purposes than investment
purposes and held-to-maturity purposes:
Acquisition cost

¥4,870¥2,850$43,877

Carrying value

4,870

2,850

43,877———

Unrealized gains/losses

30. 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, 2019and 2018, 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, 2019>
Millions of yen
Contract value
Type of transactions

Total

Over one year

Fair value

Unrealized
gain (loss)

Over-the-counter transactions:Interest rate swaps:
Receive-fixed and pay-floating¥35,048¥32,463¥963

Receive-floating and pay-fixed

35,04832,463

(776)

(776)

—

—

¥187

¥187

Total

Nishi-Nippon Financial Holdings Group¥963

ANNUAL REPORT 201947

Notes to Consolidated Financial Statements

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

Total

Over one year

Fair value

Unrealized
gain (loss)

Over-the-counter transactions:Interest rate swaps:
Receive-fixed and pay-floating$315,784$292,493

Receive-floating and pay-fixed

315,784

292,493(6,994)(6,994)——$1,686$1,686

Total$8,680$8,680Notes: 1. The above transactions are marked to market and unrealized gains/losses are included in the consolidated statement of income.
2. Calculation of fair value is based on the discounted cash flows and others.

<At 31st March, 2018>
Millions of yen
Contract value
Type of transactions

Total

Over one year

Fair value

Unrealized
gain (loss)

Over-the-counter transactions:Interest rate swaps:
Receive-fixed and pay-floating¥37,793¥37,529

Receive-floating and pay-fixed

37,79337,529

(589)

(589)

—

—

¥225

¥225

Total

¥814

¥814

Notes: 1. The above transactions are marked to market and unrealized gains/losses are included in the consolidated statement of income.
2. Calculation of fair value is based on the discounted cash flows and others.

ii. Currency related transactions<At 31st March, 2019>
Millions of yen
Contract value
Type of transactions

Total

Over one year

Fair value

Unrealized
gain (loss)

Over-the-counter transactions:¥82,241¥25,576(¥149)(¥149)

Sell

4,749

—

(28)

(28)

Buy

8,867

—

41

41

Sell

69,774

39,204(2,116)

207

Buy

69,774

39,204

2,116

357

—

—

(¥135)¥428

Currency swaps
Forward foreign:

Currency option:

Total

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

Total

Over one year

Fair value

Unrealized
gain (loss)

Over-the-counter transactions:$740,983

Currency swaps$230,435($1,342)($1,342)

Forward foreign:Sell

42,792

—

(254)

(254)

Buy

79,896

—

376

376

Sell

628,655

353,227(19,071)

1,866

Buy

628,655

353,227

19,071

3,218

—

—

($1,220)$3,864Currency option:

Total

Notes: 1. The above transactions are marked to market and unrealized gains/losses are included in the consolidated statement of income.
2. Calculation of fair value is based on the discounted cash flows and others.

48

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2019

Notes to Consolidated Financial Statements<At 31st March, 2018>
Millions of yen
Contract value
Type of transactions

Total

Over one year

Unrealized
gain (loss)

Fair value

Over-the-counter transactions:¥141,010¥24,802(¥209)(¥209)

Sell

12,219

182

258

258

Buy

7,671

127

(84)

(84)

Sell

77,457

46,951(2,824)

(225)

Buy

77,457

46,951

2,824

884

—

—

(¥35)

¥623

Currency swaps
Forward foreign:

Currency option:

Total

Notes: 1. The above transactions are marked to market and unrealized gains/losses are included in the consolidated statement of income.
2. Calculation of fair value is based on the discounted cash flows and others.

(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, 2019and 2018, 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, 2019>
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-fixed

Loans and bills
discounted,
and deposits

Total¥16,093¥13,873

165,336

157,836

—

—

—

—

Interest rate options
Total

Fair valueOver one year(¥299)(Note 2)(¥299)

Thousands of U.S. dollars
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

$145,000$125,000

1,489,647

1,422,074

—

—

—

—

Fair value($2,695)(Note 2)($2,695)

Notes: 1. Calculation of fair value is based on the discounted cash flows and others.
2. 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 27)”.

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 201949

Notes to Consolidated Financial Statements<At 31st March, 2018>
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

¥15,404¥15,404

170,769

167,364

—

—

—

—

Interest rate options
Total

Fair value(¥54)(Note 2)(¥54)

Notes: 1. Calculation of fair value is based on the discounted cash flows and others.
2. 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 27)”.

ii) Currency related transactions<At 31st March, 2019>
Millions of yen
Contract value

Hedge accounting
methodPrinciple hedge
accounting method

Hedged item

Total

Forward foreign

Securities denominated inforeign currencies¥49,145¥—(¥179)——(¥179)

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$442,790$—($1,615)——($1,615)

Total

Over one year

Fair value

Type of transactions

Notes: 1. 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 Audit Committee Report No. 25 of 29th July, 2002).
2. Calculation of fair value is based on the discounted cash flows and others.

<At 31st March, 2018>
Millions of yen
Contract value

Hedge accounting
methodPrinciple hedge
accounting method

Hedged item

Total

Forward foreign

Securities denominated inforeign currencies¥38,481

¥—

¥825

—

—

¥825

Total

Over one year

Fair value

Type of transactions

Notes: 1. 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 Audit Committee Report No. 25 of 29th July, 2002).
2. Calculation of fair value is based on the discounted cash flows and others.

31. 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.

50

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2019

Notes to Consolidated Financial Statements

The consolidated subsidiaries may also pay additional retirement benefits that are not subject to actuarial calculation.
As of 31st March, 2019, 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, 2019 and 2018
Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

¥69,142¥70,357$622,963

Service cost

2,068

2,129

18,637

Interest cost

605

616

5,459

Actuarial gain and loss

7,544

(104)

67,977Retirement benefits paid

(3,782)(3,856)(34,075)———¥75,580¥69,142$680,963

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, 2019 and2018
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

2019

2018

2019

¥94,044¥81,875$847,324

3,096

2,694

27,894(19,059)

8,529(171,719)

2,901

2,914

26,140

149

152

1,347

(2,254)(2,122)(20,309)

Contributions by employees
Retirement benefits paid

—

—

—

¥78,878¥94,044$710,677

OthersPlan assets at end of the yeariii)	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, 2019 and 2018
Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

Retirement benefit obligation (funded)¥75,116¥68,686$676,786

Fair value of plan assets(78,878)(94,044)(710,677)(3,761)(25,358)(33,891)

463

456

4,176

(¥3,298)(¥24,901)($29,714)

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

Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

Liability for retirement benefits¥2,864¥751

Asset for retirement benefits(6,162)(25,652)(55,521)Net liability (asset) for retirement benefits in the balance sheet(¥3,298)(¥24,901)($29,714)

Nishi-Nippon Financial Holdings Group$25,806

ANNUAL REPORT 201951

Notes to Consolidated Financial Statementsiv) Components of retirement benefit expenses for the years ended 31st March, 2019 and 2018
Thousands of
U.S. dollars

Millions of yen

2018

2019

2019

Service cost

¥1,919¥1,976

Interest cost

605

616

5,459

(3,096)(2,694)(27,894)

Amortization of unrecognized actuarial gain and loss

(72)

1,609

(653)

Others

287

387

2,590

(¥356)¥1,895($3,207)

Expected return on plan assets

Retirement benefit expenses$17,290

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, 2019 and 2018
Thousands of
U.S. dollars

Millions of yen

Actuarial gain and loss

2019

2018

2019

(¥26,676)¥10,243($240,350)vi)	Items recorded in retirement benefits liability adjustments included in accumulated other comprehensive income (gross of income tax
effects) at 31st March, 2019 and 2018
Thousands of
U.S. dollars

Millions of yen

2018

2019
Unrecognized actuarial gain and loss(¥16,717)

2019¥9,959($150,620)

vii) Matters concerning plan assets
1) Percentages of each main category of the total plan assets at 31st March, 2019 and 2018 are as follows:
2018

2019
Bonds

28%

25%

Stocks52%

63%

Cash and deposits

1%

1%

Others

19%

11%

Total

100%

100%

* Retirement benefit trusts established for the corporate pension plans accounted for 23% and 30% of the total plan assets at 31st March, 2019 and 2018,
respectively. Retirement benefit trusts established for the lump-sum payment plans accounted for 21% and 25% of the total plan assets at 31st March, 2019 and2018, respectively.

2) 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, 2019 and 2018
1) Discount rates:

2019

2018

0.117% (principally)

0.893% (principally)

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

3.3% (principally)

3.3% (principally)

3) Expected rate of pay increase:

3.08% (principally)

3.36% (principally)(3) Defined contribution plans
Contributions of ¥0 million ($1thousand) and ¥0 million have been made to the defined contribution plan by the consolidated subsidiaryfor the years ended 31st March, 2019 and 2018, respectively.

52

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2019

Notes to Consolidated Financial Statements

32. 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, 2019and 2018 are as follows:
Thousands of
U.S. dollars

Millions of yen

2019

2018

Reserve for possible loan losses¥14,079¥13,768

Liability for retirement benefits

6,790

57

0

Accumulated depreciation

2,086

2,024

18,794

121

115

1,097

2019

Deferred tax assets:

Loss carryforwards for tax purposes
OthersSub-total
Valuation allowance
Total deferred tax assets$126,849

7,954

8,425

71,66631,031

24,391

279,590(7,979)(7,657)(71,896)

23,051

16,733

207,693

Deferred tax liabilities:
Reserve fund for deferred income of fixed assets

(1)

(1)

(11)

Unrealized losses on securities attributable to partition of corporation, net

(23)

(35)

(216)
(32,864)(3,647)(3,647)

Asset retirement obligations

(36)

(38)

(325)

Capital gain adjustments(1,081)(1,081)(9,748)

Gains on establishment of a retirement benefit trust

(91)

(83)

(828)

(24,091)(32,437)(217,056)

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

(3)

—

(35)

Total deferred tax liabilities(28,978)(37,326)(261,086)

Net deferred tax assets (liabilities)(¥5,926)(¥20,592)($53,393)

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, 2019 is as follows:
2019
Statutory tax rate

30.5%

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

0.7

Non-taxable dividend income and others(0.7)

Inhabitant tax on per capita basis

0.3

Increase in valuation allowance

0.9

Others0.3

Effective tax rate

32.0%

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, 2018 is not presented since the difference between those rates was not more than 5% of the statutory tax rate.

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 201953

Notes to Consolidated Financial Statements

33. 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 Company and its consolidated subsidiaries recognize asset retirement obligations for restoration obligations resulting from realestate lease agreements such as those of the Group branch offices and commercial fixed-term leasehold agreements. The Company
and its consolidated subsidiaries also recognize asset retirement obligations pertaining to obligations to remove hazardous substancesused 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, 2019 and 2018
Thousands of
U.S. dollars

Millions of yen

2018

2019

2019

¥785

¥849

Increase due to acquisition of tangible fixed assets

5

10

51

Adjustment for passage of time

11

11

103

Decrease due to fulfillment of asset retirement obligation

23

86

209

¥778

¥785

$7,018

Balance at beginning of the year

Balance at end of the year

$7,073

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.

54

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2019

Notes to Consolidated Financial Statementsiii) Ordinary income, profit or loss, assets, liabilities and other items by reportable segments<In 2019>
Millions of yen
Reportable segment
Banking

Other

Total

Adjustments

Consolidated¥143,740

Ordinary income
Ordinary income from third party customers¥131,713¥12,027¥143,740¥—Internal ordinary income among segments

1,085

11,752

12,837(12,837)—

132,798

23,780156,578(12,837)

143,740

Total ordinary income

29,810

10,152

39,962(5,549)34,412

Segment assets

10,435,496

484,765

10,920,261(471,210)

10,449,051

Segment liabilities

9,924,659

79,683

10,004,342(65,025)

9,939,317

Segment profit

Other items
5,464

204

5,669

—

5,669

100,650

7,976

108,626(5,799)102,827

Interest expenses

6,045

149

6,195

(120)

6,074

Increase in tangible and intangible fixed assets

5,008

210

5,218

—

5,218

Adjustments

Consolidated$1,295,079$—$1,295,079

Depreciation
Interest and dividend income

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$1,186,715$108,363

9,776

105,889

115,666(115,666)—

1,196,492

214,253

1,410,746(115,666)

1,295,079

Segment profit

268,583

91,474360,058(50,003)

310,054

Segment assets

94,021,950

4,367,650

98,389,601(4,245,518)

94,144,082

Segment liabilities

89,419,400

717,930

90,137,331(585,866)

89,551,465

Other items
Depreciation

49,235

1,844

51,080—51,080Interest and dividend income

906,841

71,868

978,709(52,253)

926,456

Interest expenses

54,4701,346

55,816(1,082)

54,733

Increase in tangible and intangible fixed assets

45,124

1,893

47,018—47,018Notes: 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.

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 201955

Notes to Consolidated Financial Statements<In 2018>
Millions of yen
Reportable segment
Banking

Other

Total

Adjustments

Consolidated¥142,613

Ordinary income
Ordinary income from third party customers¥129,286¥13,326¥142,613¥—

Internal ordinary income among segments

15,32911,34926,678(26,678)—

144,616

24,676

169,292(26,678)

142,613

Total ordinary income
Segment profit

41,801

11,143

52,945(19,007)

33,937

Segment assets

9,947,861

485,941

10,433,803(472,139)

9,961,663

Segment liabilities

9,410,723

81,2689,491,992(65,224)

9,426,768

Other items
Depreciation

6,630

230

6,861

—

6,861

Interest and dividend income

98,671

7,524

106,196(5,777)

100,419

Interest expenses

5,255

126

5,382

(295)

5,087

Increase in tangible and intangible fixed assets

10,780248

11,029—11,029Notes: 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 2019>
Millions of yen
Loan

Ordinary income from third party customers¥90,215

Securities¥22,155

Other

Total

¥31,369¥143,740

Thousands of U.S. dollars

Ordinary income from third party customers

Loan

Securities

Other

Total

$812,826$199,618$282,634

Loan

Securities$1,295,079

Note: Ordinary income is presented instead of net sales.

<In 2018>
Millions of yen

Ordinary income from third party customers¥90,055¥19,366

Other

Total

¥33,191¥142,613

Note: Ordinary income is presented instead of net sales.

(3) Impairment Losses on Tangible Fixed Assets by Reportable Segments<In 2019>
Millions of yen
Reportable segment
Banking

Other

¥98

Impairment losses

Total

¥—

¥98

Thousands of U.S. dollars
Reportable segment
Banking$889

Impairment losses

56

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2019

Other

Total

$—

$889

Notes to Consolidated Financial Statements<In 2018>
Millions of yen
Reportable segment
Banking

Impairment losses

Other¥1,135

Total¥—¥1,135(4) Amortization and Balance of Goodwill by Reportable Segments<In 2019>
Millions of yen
Reportable segment
Banking

Other

Total

Goodwill
Amortization of goodwill

¥—

¥283

¥283

Balance at end of the year

¥—

¥661

¥661

Thousands of U.S. dollars
Reportable segment
Banking

Other

Total

Goodwill
Amortization of goodwill$—$2,555$2,555

Balance at end of the year$—

$5,961$5,961<In 2018>
Millions of yen
Reportable segment
Banking

Other

Total

Goodwill
Amortization of goodwill

¥—

¥283

¥283

Balance at end of the year

¥—

¥945

¥945

35. Related Party Transactions
There are no related party transactions to report for the years ended 31st March, 2019 and 2018.

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

2019

2018

2019

¥1,474,517¥1,076,592$13,285,139(3,798)(3,424)(34,222)¥1,470,719¥1,073,168$13,250,917

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

2019

2018

2019

¥3,298.80¥3,414.04$29.721148.79137.78

1.340

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 201957

Notes to Consolidated Financial Statements

Basis for net assets per share as of 31st March, 2019 and 2018 are as follows:
Thousands of
U.S. dollars

Millions of yen

Net assets

2019

2018

¥509,734¥534,895$4,592,617

7,490

7,420

67,492

7,490

7,420

67,492502,243

527,474

4,525,125

Items to be deducted from net assets
Non-controlling interests
Net assets attributable to common stock2019

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

2019

2018

152,250,192

154,501,417

Basis for profit (loss) attributable to owners of parent per share for the years ended 31st March, 2019 and 2018 are as follows:
Thousands of
U.S. dollars

Millions of yen

2018

2019

2019

Basis:
Profit (loss) attributable to owners of parent¥22,899¥21,467———

22,89921,467

206,323

Items not attributable to common stock
Profit (loss) attributable to owners of parent available for shareholders of common stock$206,323

SharesAverage number of shares of common stock outstanding during the year

2019

2018

153,903,301

155,811,275*	Diluted profit (loss) attributable to owners of parent per share for the years ended 31st March, 2019 and 2018 was not presented because the Company and its
consolidated subsidiaries had no dilutive shares during the years.

38. Cash Dividends
Cash dividends paid during the years ended 31st March, 2019 and 2018 are as follows:<In 2019>
Types

Millions of yen

Thousands of
U.S. dollars

Cut-off date

Effective date

28th June, 2018
Ordinary General Meeting of Shareholders

Cash dividends(¥17.5 per share)¥2,704$24,363

31st March,2018

29th June,
2018

8th November, 2018
Meeting of Board of Directors

Cash dividends(¥12.5 per share)¥1,931$17,402

30th September,
2018

10th December,
2018

Resolution<In 2018>
Types

Millions of yen

Cut-off date

Effective date

29th June, 2017
Ordinary General Meeting of Shareholders

Resolution

Cash dividends(¥17.5 per share)¥3,14231st March,
2017

30th June,2017

9th November, 2017
Meeting of Board of Directors

Cash dividends(¥12.5 per share)¥1,94930th September,2017

8th December,
2017

39. Subsequent Event
The following appropriation of earned surplus for the year ended 31st March, 2019 was approved at the shareholders’ meeting held on
27th June, 2019:
Resolution

27th June, 2019
Ordinary General Meeting of Shareholders

58

Nishi-Nippon Financial Holdings Group

Types

Millions of yen

Thousands of
U.S. dollars

Cash dividends(¥17.5 per share)¥2,664$24,008

ANNUAL REPORT 2019

Cut-off date

Effective date

31st March,2019

28th June,2019

Quarterly Information (Unaudited)
Nishi-Nippon Financial Holdings, Inc. and Subsidiaries
Year ended 31st March, 2019
Millions of yen

Ordinary income

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

from 1st April, 2018
to 30th June, 2018from 1st April, 2018
to 30th September, 2018from 1st April, 2018
to 31st December, 2018from 1st April, 2018
to 31st March, 2019¥36,344¥70,942¥108,462¥143,740

Profit (loss) before income taxes

11,611

18,686

28,774

34,054

Profit (loss) attributable to owners of parent

7,823

12,743

19,52722,899First Quarter

Second Quarter

Third Quarter

Fourth Quarter

from 1st April, 2018
to 30th June, 2018from 1st April, 2018
to 30th September, 2018from 1st April, 2018
to 31st December, 2018from 1st April, 2018
to 31st March, 2019

Yen

Profit (loss) attributable to owners of parent per share¥50.63¥82.48¥126.56¥148.79

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

from 1st April, 2018
to 30th June, 2018from 1st July, 2018
to 30th September, 2018from 1st October, 2018
to 31st December, 2018from 1st January, 2019
to 31st March, 2019

Yen

Profit (loss) attributable to owners of parent per share¥50.63¥31.84¥44.08¥22.07First Quarter

Second Quarter

Third Quarter

Fourth Quarter

from 1st April, 2018
to 30th June, 2018from 1st April, 2018
to 30th September, 2018from 1st April, 2018
to 31st December, 2018from 1st April, 2018
to 31st March, 2019$1,295,079

Thousands of U.S. dollars$327,453$639,179$977,230

Profit (loss) before income taxes

Ordinary income

104,614168,364

259,251

306,827

Profit (loss) attributable to owners of parent

70,484

114,818

175,941

206,323First Quarter

Second Quarter

Third Quarter

Fourth Quarter

from 1st April, 2018
to 30th June, 2018from 1st April, 2018
to 30th September, 2018from 1st April, 2018
to 31st December, 2018from 1st April, 2018
to 31st March, 2019

U.S. dollars

Profit (loss) attributable to owners of parent per share

$0.45

$0.74

$1.14

$1.34

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

from 1st April, 2018
to 30th June, 2018from 1st July, 2018
to 30th September, 2018from 1st October, 2018
to 31st December, 2018from 1st January, 2019
to 31st March, 2019

U.S. dollars

Profit (loss) attributable to owners of parent per share

$0.45

$0.28

$0.39

Nishi-Nippon Financial Holdings Group$0.19

ANNUAL REPORT 201959

Non-Consolidated Balance Sheet (Unaudited)
The Nishi-Nippon City Bank, Ltd.
31st March, 2019 and 2018
Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

Cash and due from banks¥1,458,178¥1,064,236$13,137,931

Call loans and bills bought

34,471—

310,585

Trading account assets

1,166

1,142

10,512

Money held in trust

4,870

2,850

43,877

Securities

1,365,544

1,556,641

12,303,313

Loans and bills discounted

7,132,208

6,836,291

64,259,920

Assets:Foreign exchange assets

8,396

8,359

75,647

Other assets

86,827

88,830782,300

Tangible fixed assets

119,473

120,435

1,076,437

Intangible fixed assets

3,266

3,001

29,434

Prepaid pension cost

20,774

16,954

187,176

Customers’ liabilities for acceptances and guarantees

20,592

20,512

185,536

Reserve for possible loan losses(36,564)(36,120)(329,442)

Reserve for devaluation of securities

(461)

(501)

(4,156)¥10,218,746¥9,682,635$92,069,075¥8,309,734¥8,145,409$74,869,213

Call money and bills sold

109,084

41,387

982,833

Payables under repurchase agreements

166,666

100,753

1,501,634

Guarantee deposits received under securities lending transactions

145,718

27,6301,312,896

Borrowed money

885,101

740,104

7,974,607

172

113

1,551

Bonds

10,00020,00090,098Other liabilities

32,08331,195

289,066

Reserve for employee retirement benefits

216

1,358

1,948

Reserve for reimbursement of deposits

2,116

2,503

19,072

Reserve for other contingent losses

1,328

1,348

11,972

Deferred tax liabilities

12,443

18,961

112,110Deferred tax liabilities on revaluation of premises

14,712

14,730132,556

Acceptances and guarantees

20,592

20,512

185,536

9,709,971

9,166,010

87,485,098

85,74585,745772,552

85,68485,684

771,997554

Total assets
Liabilities and Net assets:
Liabilities:
Deposits

Foreign exchange liabilities

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

61

61

Reserve for deferred capital gains

3

3

27

Unappropriated retained earnings

252,405

238,0492,274,129

Total shareholders’ equity

423,899409,543

3,819,261

55,06377,057496,111

Net unrealized gains on securities available for sale, net of taxes
Net deferred gains (losses) on hedging instruments, net of taxes

(205)

(33)

(1,849)30,01730,058

270,452

Total valuation and translation adjustments

84,875

107,082764,714

Total net assets

508,775

516,625

4,583,976¥10,218,746¥9,682,635$92,069,075

Revaluation of premises, net of taxes

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

60

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2019

Non-Consolidated Statement of Income (Unaudited)
The Nishi-Nippon City Bank, Ltd.
Years ended 31st March, 2019 and 2018
Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

Interest on loans and discounts¥79,840¥79,929$719,349

Interest and dividends on securities

16,724

14,453

150,682

Other interest income

221

228

1,995

Fees and commissions

232,569

Income:Interest income:

25,81225,476

Trading income

10

5

96

Other operating income

806

841

7,264

Other income
Total income

4,882

19,23443,990128,298

140,168

1,155,948

1,432

2,451

12,902

Expenses:
Interest expenses:
Interest on deposits
Interest on call money and bills sold

59

181

540

2,640

932

23,789Interest on borrowings

678

621

6,111

Interest on guarantee deposits received under securities lending transactions

250

206

2,258

1,113

931

10,032
138,763Interest on payables under repurchase agreements

Other interest expenses
Fees and commissions

15,401

14,951Other operating expenses

3,377

2,148

30,431

General and administrative expenses

68,75673,065

619,481

Other expenses

5,410

5,066

48,750Total expenses

99,121

100,554

893,063

Income before income taxes

29,17739,614

262,885

Current

7,445

7,611

67,084

Deferred

1,761

330

15,870

Income taxes

Total income taxes
Net income

9,207

7,942

82,955¥19,970¥31,671$179,930

See accompanying Notes to Non-Consolidated Financial Statements.

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 201961

Non-Consolidated Statement of Changes in Net Assets (Unaudited)
The Nishi-Nippon City Bank, Ltd.
Years ended 31st March, 2019 and 2018
Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

¥85,745¥85,745$772,552———¥85,745¥85,745$772,552¥85,684¥85,684$771,997

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$771,997¥85,684¥85,684$771,997

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$771,997

¥61

¥61

$554

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

$554

¥3

¥3

$28

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)

(1)

(0)

(0)

(1)

¥3

¥3

$27

¥238,049¥211,041$2,144,779(5,654)(5,007)(50,945)00

1

19,97031,671

179,930

Unappropriated retained earnings
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
Total changes during the year
Balance at end of the year

62

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2019

40

342

364

14,35627,007

129,350¥252,405¥238,049$2,274,129

Non-Consolidated Statement of Changes in Net Assets (Unaudited)
The Nishi-Nippon City Bank, Ltd.
Years ended 31st March, 2019 and 2018

Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

¥238,113¥211,106$2,145,362

Total earned surplus
Balance at beginning of the year
Changes during the year
Cash dividends paid

(5,654)(5,007)(50,945)

Net income

19,97031,671

179,930

Reversal of revaluation of premises
Total changes during the year
Balance at end of the year

40

342

364

14,35627,007

129,349¥252,470¥238,113$2,274,711¥409,543¥382,536$3,689,912

Total shareholders’ equity
Balance at beginning of the year
Changes during the year
Cash dividends paid

(5,654)(5,007)(50,945)

Net income

19,97031,671

179,930

Reversal of revaluation of premises
Total changes during the year
Balance at end of the year

40

342

364

14,35627,007

129,349¥423,899¥409,543$3,819,261¥77,057¥67,429$694,275(21,994)

9,628(198,164)(21,994)

9,628(198,164)¥55,063¥77,057$496,111(¥33)(¥384)($303)(171)

350(1,546)

(171)

350

(1,546)(¥205)(¥33)($1,849)¥30,058¥30,400$270,817

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
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

(40)

(342)

(364)

(40)

(342)

(364)

¥30,017¥30,058$270,452¥107,082¥97,445$964,789(22,206)

9,636(200,075)(22,206)

9,636(200,075)¥84,875¥107,082$764,714¥516,625¥479,981$4,654,702

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
Cash dividends paid

(5,654)(5,007)(50,945)

Net income

19,97031,671

179,930

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

40

342

364

(22,206)

9,636(200,075)(7,849)36,643(70,725)¥508,775¥516,625$4,583,976

See accompanying Notes to Non-Consolidated Financial Statements.

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 201963

Non-Consolidated Balance Sheet (Unaudited)
The Bank of Nagasaki, Ltd.
31st March, 2019 and 2018
Thousands of
U.S. dollars

Millions of yen

2018

2019

2019

Assets:Cash and due from banks¥33,832¥29,65398

84

246,791

242,536

2,223,543

Other assets

1,091

1,038

9,832
43,659Securities
Loans and bills discounted$304,828

Tangible fixed assets

4,845

4,766

Intangible fixed assets

558

253

5,034

Deferred tax assets

389

458

3,511

Customers’ liabilities for acceptances and guarantees

28

44

256

(575)

(668)

(5,182)¥286,972¥278,090$2,585,569¥235,483¥237,606$2,121,668

34,00023,000306,333

Borrowed money

600

600

5,405

Other liabilities

876

960

7,895
2,695

Reserve for possible loan losses
Total assets
Liabilities and net assets:
Liabilities:
Deposits
Call money and bills soldReserve for employee retirement benefits

299

405

Reserve for retirement benefits for directors and corporate auditors

101

82

915

Reserve for reimbursement of deposits

34

35

313

Reserve for other contingent losses

52

60

468

Deferred tax liabilities on revaluation of premises

509

509

4,587

Acceptances and guarantees
Total liabilities

28

44

256

271,985

263,3042,450,541

6,121

6,121

55,155

Net assets:
Capital stock
Capital surplus
Capital reserve

2,000

2,000

18,019Other capital surplus

2,463

2,463

22,199Earned surplus
205

200

1,852

Unappropriated retained earnings

Legal reserve

3,102

2,908

27,950Total shareholders’ equity

13,893

13,694125,177

Revaluation of premises, net of taxes
Total valuation and translation adjustments
Total net assets
Total liabilities and net assets
See accompanying Notes to Non Consolidated Financial Statements.

64

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2019

1,093

1,091

9,850

1,093

1,091

9,850

14,986

14,786135,028¥286,972¥278,090$2,585,569

Non-Consolidated Statement of Income (Unaudited)
The Bank of Nagasaki, Ltd.
Years ended 31st March, 2019 and 2018
Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

$34,749

Income:Interest and dividend income:¥3,856¥4,055

Other interest income

Interest on loans and discounts

251

251

2,262

Fees and commissions

582

710

5,243

Other income

193

415

1,743

Total income

4,883

5,432

43,999

Expenses:
Interest expenses:
116

175

1,047

Interest on call money and bills soldInterest on deposits

(4)

(0)

(36)

Interest on borrowings

0

0

0

Other interest expenses

2

2

22

1,036

1,215

9,337

0

0

3

3,423

3,314

30,842Fees and commissions
Other operating expenses
General and administrative expenses
Other expenses

33

43

298

Total expenses

4,607

4,751

41,516

275

680

2,483
(164)

Income before income taxes
Income taxes
Current

(18)

(30)

Deferred

68

159

616

50

128

451

¥225

¥551

$2,031

Total income taxes
Net income
See accompanying Notes to Non Consolidated Financial Statements.

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 201965

Non-Consolidated Statement of Changes in Net Assets (Unaudited)
The Bank of Nagasaki, Ltd.
Years ended 31st March, 2019 and 2018
Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

¥6,121¥6,121$55,155

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

—

—

—

¥6,121¥6,121$55,155¥2,000¥2,000$18,019

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

—

—

—

¥2,000¥2,000$18,019¥2,463¥2,463$22,199

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$22,199¥4,463¥4,463$40,219

Total capital surplus
Balance at beginning of the year
Changes during the year———

¥4,463¥4,463$40,219

¥200

¥195

$1,807

Reserve of legal retained earnings

5

5

45

Total changes during the year

5

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

Balance at end of the year

5

45

¥205

¥200

$1,852¥2,908¥2,387$26,206

Other earned surplus:
Unappropriated retained earnings
Balance at beginning of the year
Changes during the year
Reserve of legal retained earnings

(5)

(5)

(45)

Cash dividends paid

(25)

(25)

(225)

Net income

2,031

225

551

Reversal of revaluation of premises

(2)

—

(18)

Total changes during the year

193

521

1,743

¥3,102¥2,908$27,950¥3,109¥2,582$28,014

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

(25)

(25)

(225)

Net income

225

551

2,031

Reversal of revaluation of premises

(2)

—

(18)

Total changes during the year

198

526

1,788

¥3,307¥3,109$29,802

Balance at end of the year

66

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2019

Non-Consolidated Statement of Changes in Net Assets (Unaudited)
The Bank of Nagasaki, Ltd.
Years ended 31st March, 2019 and 2018

Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

¥13,694¥13,168$123,389

Total shareholders’ equity
Balance at beginning of the year
Changes during the year
Cash dividends paid

(25)

(25)

(225)

Net income

225

551

2,031

Reversal of revaluation of premises

(2)

—

(18)

Total changes during the year

198

526

1,788

¥13,893¥13,694$125,177¥1,091¥1,091$9,832

2

—

18

2

—

18

¥1,093¥1,091$9,850¥1,091¥1,091$9,832

2

—

18

2

—

18

¥1,093¥1,091$9,850¥14,786¥14,259$133,221

Cash dividends paid

(25)

(25)

(225)

Net income

Balance at end of the year
Valuation and translation adjustments
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

225

551

2,031

Reversal of revaluation of premises

(2)

—

(18)

Net changes in items other than shareholders’ equity

2

—

18

200

526

1,806

¥14,986¥14,786$135,028

Total changes during the year
Balance at end of the year
See accompanying Notes to Non-Consolidated Financial Statements.

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 201967

Notes to Non-Consolidated Financial Statements (Unaudited)
The Nishi-Nippon City Bank, Ltd. and The Bank of Nagasaki, Ltd.
31st March, 2019 and 2018

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. (the Banks)
have been prepared from the accounts maintained by the Banks in accordance with the provisions set forth in the Japanese Corporation
Law, the Banking Law, and accounting principles generally accepted in Japan, which are different in certain respects as to the applicationand 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 have significant
effects thereon, are explained in Note 2 of the Notes to Consolidated Financial Statements.

68

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2019

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 201969

Outline of Banking Subsidiaries
As of 31st March, 2019, the Group has a nationwide network of 175 branches of Nishi-Nippon City Bank, and 23 branches of Bank ofNagasaki, and 4 overseas representative offices of Nishi-Nippon City Bank, in Hong Kong, Seoul, Shanghai, and Singapore.

The Nishi-Nippon City Bank, Ltd.
Business

Banking

Established

1st December, 1944

Headquarters

1-1, Hakata-ekimae 3-chome, Hakata-ku, Fukuoka 812-0011, Japan

Number of Employees

3,703

Number of Domestic Offices

175

Number of Correspondent Banks

86

Parent Company

Nishi-Nippon Financial Holdings, Inc. (NNFH’s share of voting rights 100%)(As of 31st March, 2019)

Board of Directors

Chairman�������������������� Isao Kubota
President�������������������� Hiromichi Tanigawa
Deputy Presidents����������������� Souichi Kawamoto
Kiyota Takata
Representative Executive Director���������� Shigeru Urayama
Executive Directors���������������� Hiroyuki Irie
Shinya Hirota
Hideyuki Murakami
Managing Directors���������������� Hiroyuki Takeo
Masaru Ikeda
Hideki Nakazuru
Directors (Audit and Supervisory Committee Members)� Seiji Ino
Michiaki Uriu (outside)
Hiroshi Fujioka (outside)

(As of 30th June, 2019)*Directors/Audit and Supervisory Committee Members Michiaki Uriu and Hiroshi Fujioka are Outside Directors as prescribed in Article 2 (xv) of the Companies Act of Japan.

The Bank of Nagasaki, Ltd.
Business

Banking

Established

11th November, 1912

Headquarters

3-14, Sakaemachi, Nagasaki 850-8666, Japan

Number of Employees

241

Number of Domestic Offices

23

Parent Company

Nishi-Nippon Financial Holdings, Inc. (NNFH’s share of voting rights 100%)(As of 31st March, 2019)

Board of Directors and Audit and Supervisory Board Members

President�������������������� Ryutaro KaichiManaging Directors���������������� Yutaka Matsuyama
Tetsuhisa Matsumoto
Naoshi Taguchi
Yasuyuki Shigetomi
Directors��������������������� Hiroji MochidaToshihiro Takaki
Hideyuki Murakami (part-time)
Audit and Supervisory Board Members�������� Kouji Nozu
Mitsuru Kawatani (part-time)
Junichi Sakaguchi (part-time)
70

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 2019

(As of 30th June, 2019)

Organization Chart of Banking Subsidiaries
International Network of

The Nishi-Nippon City Bank, Ltd.

The Nishi-Nippon City Bank, Ltd. Internal Audit Division

GeneralShareholders’ Meeting

Corporate Planning DivisionCorporate Risk Management Division
Compliance Risk Supervisory Division

Directors(Audit and Supervisory
Committee Members)

IT Strategy Division
Public Relations Division
Executive Secretariat
Human Resources Division

Audit and Supervisory
Committee Members’
OfficeCorporate Administration Division

3-6, Hakata-ekimae 1-chome, Hakata-ku,
Fukuoka 812-0011, Japan
Phone: +81-92-476-2481
SWIFT: NISIJPJTFKK
Fax: +81-92-476-2488

Operations Planning & Management Division
Treasury & Portfolio Investment Division
Treasury & Securities Transaction Division

Board of Directors

Branches

Contents

Credit Risk Management Division
Credit Supervision Division

Message from the President������������������������������������ 01
1
2
Profile of the Company (Joint Holding Company)/Organization Chart������������������ 02

INTERNATIONAL BUSINESSDIVISION

Business Planning Division
Business Promotion Division

Executive Committee

Retail Business Division

TREASURY & PORTFOLIOINVESTMENT DIVISION
4th Fl., Nittetsu Nihonbashi Bldg,
13-1, Nihonbashi 1-chome, Chuo-ku, Tokyo
103-0027, Japan
Phone: +81-3-6262-7957
SWIFT: NISIJPJTFax: +81-3-3273-2255

International Business Division

3
Board of Directors of Nishi-Nippon Financial Holdings Inc.����������������������� 03

Overseas Representative Offices
Hong Kong Representative Office4
Outline of Nishi-Nippon Financial Holdings Group�������������������������� 04

Seoul Representative Office
Shanghai Representative Office

Outline of Medium-Term Business Plan������������������������������� 05
5

Representative Office
Registered in Singapore

6
Financial Highlights���������������������������������������� 06

Personal Loan Transaction Division

7
Toward a Sounder Financial Position�������������������������������� 07

Private Banking Division

8
Financial Results����������������������������������������� 08

Kita-Kyushu General Headquarters

9
Initiatives for Improvement of Management at SMEs and Regional Revitalization������������� 09

Chikugo Regional Headquarters

Providing Broader/Deeper Support for International Business��������������������� 12
12Tokyo Headquarters

Corporate Business Solution Division
Regional Relationship Management Division
Chikuho Regional Headquarters
Kyushu Regional Headquarters

TREASURY & SECURITIESTRANSACTION DIVISION
3-6, Hakata-ekimae 1-chome, Hakata-ku,
Fukuoka 812-0011, Japan
Phone: +81-92-476-2540, +81-92-476-2484
SWIFT: NISIJPJT, NISIJPJTFKK
Fax: +81-92-441-6106

HONG KONG REPRESENTATIVEOFFICE
Suite 3112, Tower 6, The Gateway, Harbour
City, 9 Canton Road, Tsim Sha Tsui, Kowloon,
Hong Kong
Phone: +852-2526-2259
Fax: +852-2845-9264(As of 30th June, 2019)13
ESG/SDGs Initiatives��������������������������������������� 13
15
Risk Management Systems������������������������������������ 15
17
Financial Section����������������������������������������� 17
72
Outline of Banking Subsidiaries����������������������������������� 70
Organization Chart of Banking Subsidiaries����������������������������� 71
73
Notes: 1. In this report, Japanese yen figures are rounded down to the nearest million yen.
2. Conversion into U.S, dollars (solely for the convenience of readers outside Japan) has been made at the exchange rate of ¥110.99 to $1.

SEOUL REPRESENTATIVE OFFICE
6th Fl., The Exchange Seoul Bldg, 21
Mugyo-ro, Chung-ku, Seoul 04520, Republicof Korea
Phone: +82-2-755-0670
Fax: +82-2-756-2160

The Bank of Nagasaki, Ltd.
Audit and Supervisory Board Members
GeneralShareholders’ Meeting

Board of Directors
Executive Committee
Corporate Planning Division
Human Resources & Corporate
Administration Division
Business Management Division
Credit Supervision Division
Operations Planning &Management DivisionInternal Audit Division(As of 30th June, 2019)

SHANGHAI REPRESENTATIVEOFFICE
Room No. 2209 Shanghai International Trade
Center, 2201 Yan-An Road (West), Chang
Ning District,Shanghai, People’s Republic of
China
Phone: +86-21-6219-0600
Fax: +86-21-6278-5940

REPRESENTATIVE OFFICEREGISTERED IN SINGAPORE
1 Marina Boulevard Unit#25-07
One Marina Boulevard, Singapore 018989
Phone: +65-6222-0115
Fax: +65-6222-0171

Nishi-Nippon Financial Holdings GroupANNUAL REPORT 201971

ANNUAL REPORT
2019

Annual Report 2019

英文ブランドマーク

最小使用サイズ

最小使用サイズ

6mm

6mm

1-1, Hakata-ekimae 3-chome, Hakata-ku,
Fukuoka, 812-0011, Japan
Phone: +81-92-461-1867

和文

Printed in Japan英文

最小使用サイズ

最小使用サイズ

6mm

6mm