Financial Section
Consolidated Five-Year Summary

Consolidated Balance Sheet

THE 77 BANK, LTD. AND CONSOLIDATED SUBSIDIARIESAs of March 31

THE 77 BANK, LTD. AND CONSOLIDATED SUBSIDIARIESMarch 31, 2020

Millions of Yen
2020

For the fiscal year
Net interest income
Net fees and commissions
Net other operating (loss) income
Net income attributable to owners of
the parent
At the fiscal year-end
Total assets
Deposits
Loans and bills discounted
Trading account securities andinvestment securities
EquityCommon stock

¥

2019

2018

2017

2016

67,886 ¥65,217 ¥69,644 ¥67,678 ¥70,908
11,458
11,345
10,963
10,973
11,519(2,186)(3,104)(7,869)(5,213)(2,988)18,261

17,67018,314

16,11415,857¥8,770,037 ¥8,627,510 ¥8,718,097 ¥8,649,396 ¥8,598,583
7,865,991
7,872,834
7,946,100
7,805,860
7,963,738
4,886,221
4,718,942
4,621,062
4,443,883
4,350,795
2,922,506
447,436
24,6582,978,130
489,077
24,6583,146,865
490,737
24,6583,262,638
468,195
24,6583,519,568
452,310
24,658Yen

Per share of common stock
Basic net income
Diluted net income
EquityCash dividends
Capital adequacy ratio (%)
Domestic standard

2020

2019

2018

2017

2016

¥ 246.97¥237.90

6,057.30
50.00

6,582.31
47.50¥246.87
246.45
6,613.28
45.00¥215.73
214.74
6,306.73
45.00¥42.3742.18
1,165.83
9.00

10.31

10.38

10.43

10.73

11.21

Notes: 1. The national consumption tax and the local consumption tax are excluded from transaction amounts.
2. The Bank’s capital adequacy ratio on the domestic standard is accompanied by the revision of Article 14, Paragraph 2, of the Banking
Law of Japan, in line with enforcement of the related law for financial system reform.
3. On October 1, 2017, the Bank conducted consolidation of shares at a ratio of five shares to one share. Per share information iscomputed as if the share consolidation was conducted on April 1, 2016.

2020

2019

Thousands of
U.S. Dollars(Note 1)2020

¥747,105
429
4,000
18,87382,3442,903,632
4,886,221
9,528¥711,025
511
4,071
19,848
115,6132,958,281
4,718,942
4,734$6,864,881
3,941
36,754
173,417756,629
26,680,437
44,897,739
87,54919,261

17,622

176,982

8,208
19,315
56
282
4,388

8,319
19,321
70
138
4,592

75,420177,478
514
2,591
40,319

120
264
4,173

50
267
1,136

1,102
2,425
38,34445,25879,792(63,220)¥8,770,037

24,622
79,208(60,868)¥8,627,510

415,859
733,180(580,906)$80,584,737

LIABILITIES:
Deposits (Notes 11, 13 and 26)¥7,865,991
Call money and bills sold8,706
Payables under securities lending transactions (Note 11)11,986
Borrowed money (Notes 11, 14 and 26)
285,901
Foreign exchange liabilities (Note 7)
116
Liability for employees’ retirement benefits (Note 15)
25,539Reserve for stock-based benefits (Note 17)735
Reserve for reimbursement of deposits
337
Reserve for contingent losses
860
Deferred tax liabilities (Note 23)
Acceptances and guarantees (Notes 10 and 28)
45,258Other liabilities (Notes 16 and 27)
77,167
Total liabilities
8,322,600¥7,872,834
16,104
17,414
116,643339
23,902750
464
781
20,462
24,622
44,1118,138,432$72,277,781
79,996110,135
2,627,042
1,065
234,668
6,753
3,096
7,902

24,65820,517
346,926

226,573
188,523
3,321,345(6,391)(64,688)111,108

516,466(1,451)(6,290)
489,077¥8,627,510(7,589)(69,291)
4,111,329$80,584,737

Millions of Yen

ASSETS:Cash and due from banks (Notes 3 and 26)
Call loans and bills bought
Debt purchased
Trading account securities (Note 4)
Money held in trust (Notes 5 and 26)
Investment securities (Notes 4, 10, 11, 26 and 27)
Loans and bills discounted (Notes 6, 12, 26, 27 and 28)
Foreign exchange assets (Note 7)
Lease receivables and investments in leases(Notes 25 and 28)
Tangible fixed assets (Notes 8, 9 and 16):
Buildings
Land
Lease assets
Construction in progress
Other tangible fixed assets
Intangible fixed assets:
Software
Other intangible fixed assets
Deferred tax assets (Note 23)
Customers’ liabilities for acceptances andguarantees (Notes 10 and 28)
Other assets (Notes 11, 27 and 28)
Reserve for possible loan lossesTOTAL

EQUITY (Notes 17,18 and 31):
Common stock—authorized, 268,800,000 shares;
issued, 76,655,746 shares in 2020 and 201924,658
Capital surplus
20,517Retained earnings
361,462
Less: treasury stock—at cost, 2,788,464 shares and2,353,956 shares in 2020 and 2019, respectively(7,040)
Accumulated other comprehensive income:Unrealized gains on available-for-sale securities (Note 4)
56,207
Deferred losses on derivatives under hedge accounting(Note 27)
(826)
Defined retirement benefit plans (Note 15)(7,541)
Total equity
447,436
TOTAL¥8,770,037

415,859
709,060
76,473,398

See notes to consolidated financial statements.

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52

Consolidated Statement of Income

Consolidated Statement of Changes in Equity

THE 77 BANK, LTD. AND CONSOLIDATED SUBSIDIARIES
Year Ended March 31, 2020

THE 77 BANK, LTD. AND CONSOLIDATED SUBSIDIARIES
Year Ended March 31, 2020

2020

2019

Thousands of
U.S. Dollars(Note 1)2020

¥41,956¥42,131$385,518

28,031242
17,801
12,025
4,967
10,392
1,510
116,926

26,381
266
17,705
10,832257,566
2,223
163,567
110,493
45,63995,48813,874
1,074,391

Millions of Yen

INCOME:Interest income:Interest on loans and discounts
Interest and dividends on trading account andinvestment securities
Other
Fees and commissions (Note 28)
Other operating income (Note 19)
Gains on sales of stocks and other securities
Gains on sales of money held in trust
Other income (Note 20)
Total income
EXPENSES:Interest expense:
Interest on deposits
Interest on borrowings and rediscounts
Other
Fees and commissions
Other operating expenses (Note 21)
General and administrative expenses
Provision for reserve for possible loan losses
Other expenses (Notes 9 and 22)
Total expenses
INCOME BEFORE INCOME TAXESINCOME TAXES (Note 23):
Current
Deferred
Total income taxes
NET INCOME
NET INCOME ATTRIBUTABLE TO OWNERS OF THE PARENT

5,989
3,908

2,268
109,483

1,490
610
1,460
6,360
13,93758,735
1,521
2,777
86,893
22,590

762
399
1,182
6,343
14,211
58,141
6,644
3,066
90,751
26,175
8,047
(133)
7,913

5,809
(889)
4,919

73,941(1,222)72,70918,261¥18,261

17,670¥17,670

167,793$167,793

Yen

PER SHARE OF COMMON STOCK (Note 30):
Basic net income
Cash dividends applicable to the year

7,001
3,666
10,86058,283
130,579
534,236
61,04928,172
833,878
240,512

Thousands
Number of
Shares ofCommonStock
Outstanding

CommonStock

BALANCE, APRIL 1, 2018
Net income attributableto owners of the parent
Cash dividends, ¥45.00
per share
Purchase of treasury stock
Sales of treasury stock
Net change in the year

74,205¥24,658

BALANCE, MARCH 31, 2019
Net income attributableto owners of the parent
Cash dividends, ¥50.00
per share
Purchase of treasury stock
Sales of treasury stock
Net change in the year
BALANCE, MARCH 31, 2020

74,302

U.S. Dollars¥237.9047.50¥246.97
50.00

$2.26
0.45

See notes to consolidated financial statements.

Consolidated Statement of Comprehensive Income
THE 77 BANK, LTD. AND CONSOLIDATED SUBSIDIARIES
Year Ended March 31, 2020

2020

2019

Thousands of
U.S. Dollars(Note 1)2020

NET INCOME
OTHER COMPREHENSIVE LOSS (Note 24):
Unrealized losses on available-for-sale securities
Deferred gains on derivatives under hedge accounting
Defined retirement benefit plans
Total other comprehensive loss¥18,261¥17,670$167,793(54,901)624(1,251)(55,528)(16,174)22(80)(16,233)(504,465)
5,733(11,494)(510,226)

COMPREHENSIVE (LOSS) INCOME¥(37,267)¥1,437$(342,433)

TOTAL COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO—
Owners of the parent¥(37,267)¥1,437$(342,433)

Millions of Yen

BALANCE, MARCH 31, 2019
Net income attributableto owners of the parent
Cash dividends, $0.45
per share
Purchase of treasury stock
Sales of treasury stock
Net change in the year
BALANCE, MARCH 31, 2020

CapitalSurplusRetained
Earnings¥20,517¥332,619¥(6,658)¥127,283¥(1,473)¥(6,209)20,517(3,364)(3,364)

346,926(6,391)(16,174)

22

(80)

(4)
271
(16,233)

111,108(1,451)(6,290)

489,077

18,261

18,261(3,725)(3,725)

(490)
56

(802)
153
¥24,658¥(7,040)(54,901)¥56,207624¥(826)(1,251)¥(7,541)¥20,517¥361,462

CommonStockCapitalSurplusThousands of U.S. Dollars (Note 1)
Accumulated Other Comprehensive Income
Deferred
Unrealized Losses on
Gains on Derivatives
DefinedRetained
Treasury Available-for- under Hedge Retirement
Earnings
Stock
Sale Securities Accounting Benefit Plans$226,573$188,523$3,187,779$(58,724) $1,020,931$(13,332)$188,523(802)
153(55,528)¥447,436

Total
Equity$(57,796) $4,493,953

167,793

167,793(34,227)(34,227)(7,369)1,405$226,573¥490,737
17,670(4)271

24,658Total
Equity17,670(1)
98

73,867

Millions of Yen
Accumulated Other Comprehensive Income
Deferred
Unrealized Losses on
Gains onDerivatives
DefinedTreasury Available-for- under Hedge Retirement
Stock
Sale Securities Accounting Benefit Plans$3,321,345(504,465)$(64,688) $516,466

5,733$(7,589)(7,369)1,405(11,494)(510,226)$(69,291) $4,111,329

See notes to consolidated financial statements.

See notes to consolidated financial statements.

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54

Consolidated Statement of Cash Flows

Notes to Consolidated Financial Statements

THE 77 BANK, LTD. AND CONSOLIDATED SUBSIDIARIES
Year Ended March 31, 2020

THE 77 BANK, LTD. AND CONSOLIDATED SUBSIDIARIES
Year Ended March 31, 2020

2020

Millions of Yen
2019

Thousands of
U.S. Dollars(Note 1)
2020

OPERATING ACTIVITIES:
Income before income taxes
Adjustments for:
Income taxes—paidDepreciation and amortization
Losses on impairment of fixed assets
Net change in reserve for possible loan losses
Net change in reserve for reimbursement of deposits
Net change in reserve for contingent losses
Net change in reserve for stock-based benefits
Net change in liability for employees’ retirement benefits
Interest income
Interest expense
Gains on investment securities—net
Gains on money held in trust—net
Foreign exchange losses (gains) —net
Losses (gains) on sales and disposals of fixed assets—net
Net change in loans and bills discounted
Net change in deposits
Net change in borrowed money (except for subordinated loans)
Net change in due from banks (except for the Bank of Japan)
Net change in call loans and bills bought
Net change in call money and bills soldNet change in payables under securities lending transactions
Net change in trading account securities
Net change in foreign exchange assets
Net change in foreign exchange liabilities
Net change in lease receivables and investments in leases
Interest received
Interest paid
Other—net
Total adjustments
Net cash provided by (used in) operating activities—(Forward)¥26,175¥22,590$240,512(7,075)
3,227
126
2,351
(127)
79
(15)
(161)
(70,229)
2,343(2,191)(8,967)3,022
49(167,278)(6,843)
169,257(3,656)152(7,398)(5,428)974(4,793)(222)(1,638)75,035(2,425)22,326(9,507)¥16,667(3,823)
4,378
761(1,668)985(125)(9,963)(68,779)
3,561(3,012)(3,110)(7,187)(91)(97,879)(73,265)
4,939(2,414)
843
1,762
4,528
5,127
1,221
226
(1,497)73,299(3,669)(41,209)(216,954)¥(194,364)(65,009)29,651
1,157
21,602(1,166)725(137)(1,479)(645,309)
21,528(20,132)(82,394)
27,768450(1,537,057)(62,877)
1,555,242(33,593)
1,396(67,977)(49,875)
8,949(44,041)(2,039)(15,050)
689,469(22,282)
205,145(87,356)$153,147

INVESTING ACTIVITIES:
Purchases of investment securities
Proceeds from sales of investment securities
Proceeds from maturity of investment securities
Proceeds from dispositions of money held in trust
Purchases of tangible fixed assets
Proceeds from sales of tangible fixed assets
Purchases of intangible fixed assets
Payment for execution of asset retirement obligations
Net cash provided by investing activities(645,953)
37,056
601,904
30,508(3,144)
32
(96)
(19)
20,289(344,105)
32,581
461,174
53,510(2,520)
169
(8)
(28)
200,773(5,935,431)
340,494
5,530,680
280,327(28,889)
294
(882)
(174)
186,428

FINANCING ACTIVITIES:
Purchases of treasury stock(802)
Dividends paid
(3,718)Net cash used in financing activities(4,521)
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON CASH AND CASH EQUIVALENTS(12)NET INCREASE IN CASH AND CASH EQUIVALENTS
32,423
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
704,983
CASH AND CASH EQUIVALENTS, END OF YEAR (Note 3)¥737,406(4)(3,362)(3,366)5
3,047
701,935¥704,983(7,369)(34,163)(41,541)(110)
297,923
6,477,836$6,775,760

1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL
STATEMENTS
The accompanying consolidated financial statements have been
prepared in accordance with the provisions set forth in theJapanese Financial Instruments and Exchange Act and its
related accounting regulations and the Enforcement Regulation
for the Banking Law of Japan (the “Banking Law”), and inaccordance with accounting principles generally accepted inJapan, which are different in certain respects as to theapplication and disclosure requirements of International
Financial Reporting Standards.
In preparing these consolidated financial statements, certain
reclassifications and rearrangements have been made to theconsolidated financial statements issued domestically in orderto present them in a form which is more familiar to readers
outside Japan. In addition, certain reclassifications have been
made to the 2019 consolidated financial statements to conformto the classifications used in 2020.
In accordance with the Japanese Financial Instruments andExchange Act and other relevant regulations, all Japanese yen
figures in the consolidated financial statements have beenrounded down to the nearest million yen, except for per sharedata. Accordingly, the total of each account may not be equal tothe combined total of individual items. Also, U.S. dollar
amounts have been rounded down to the nearest thousand
dollars.
The consolidated financial statements are stated in Japaneseyen, the currency of the country in which The 77 Bank, Ltd.
(the “Bank”) is incorporated and operates. The translations ofJapanese yen amounts into U.S. dollar amounts are included
solely for the convenience of readers outside Japan and havebeen made at the rate of ¥108.83 to U.S.$1, the approximate
rate of exchange as of March 31, 2020. Such translations
should not be construed as representations that the Japanese
yen amounts could be converted into U.S. dollars at that or any
other rate.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Consolidation—The consolidated financial statements
include the accounts of the Bank and its significant subsidiaries(collectively, the “Companies”). There were five consolidated
subsidiaries as of March 31, 2020 and 2019.
Under the control and influence concepts, those companies
in which the Bank, directly or indirectly, is able to exercise
control over operations are fully consolidated.
All significant intercompany balances and transactions havebeen eliminated in consolidation. All material unrealized profits
included in assets resulting from transactions within the
Companies are eliminated in consolidation.
(1) Scope of consolidation
Consolidated Subsidiaries
There was no change in the scope of consolidation during
the fiscal year ended March 31, 2020.

Unconsolidated Subsidiaries
77 Capital Co., Ltd.
77 New Business Investment Limited Partnership
77 Strategic Investment Limited Partnership
Unconsolidated subsidiaries are excluded from the scope of
consolidation because they are not material to the consolidated
financial statements in terms of total assets, income, net income(corresponding to the Bank’s share), retained earnings(corresponding to the Bank’s share) and accumulated othercomprehensive income (corresponding to the Bank’s share).
(2) Equity method
Unconsolidated Subsidiaries Not Accounted for by the
Equity Method
77 Capital Co., Ltd.
77 New Business Investment Limited Partnership
77 Strategic Investment Limited Partnership
These companies are excluded from the scope of equity
method accounting because they are not material to theconsolidated financial statements in terms of net income(corresponding to the Bank’s share), retained earnings(corresponding to the Bank’s share) and accumulated othercomprehensive income (corresponding to the Bank’s share).
b. Business Combinations—Business combinations areaccounted for using the purchase method. Acquisition-related
costs, such as advisory fees or professional fees, are accounted
for as expenses in the periods in which the costs are incurred.
If the initial accounting for a business combination isincomplete by the end of the reporting period in which thebusiness combination occurs, an acquirer shall report in its
financial statements provisional amounts for the items forwhich the accounting is incomplete. During the measurement
period, which shall not exceed one year from the acquisition,
the acquirer shall retrospectively adjust the provisional amounts
recognized at the acquisition date to reflect new information
obtained about facts and circumstances that existed as of theacquisition date and that would have affected the measurementof the amounts recognized as of that date. Such adjustments
shall be recognized as if the accounting for the businesscombination had been completed at the acquisition date. A
parent’s ownership interest in a subsidiary might change if theparent purchases or sells ownership interests in its subsidiary.
The carrying amount of noncontrolling interest is adjusted toreflect the change in the parent’s ownership interest in its
subsidiary while the parent retains its controlling interest in its
subsidiary. Any difference between the fair value of theconsideration received or paid and the amount by which thenoncontrolling interest is adjusted is accounted for as capitalsurplus as long as the parent retains control over its subsidiary.
c. Cash and Cash Equivalents—For the purpose of theconsolidated statement of cash flows, cash and cash equivalents
represent cash and amounts due from the Bank of Japan.

See notes to consolidated financial statements.

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56

d. Trading Account Securities, Investment Securities andMoney Held in Trust—Securities other than investments inaffiliates are classified into three categories, based principallyon the Companies’ intent, as follows: (1) trading accountsecurities, which are held for the purpose of earning capitalgains in the near term, are reported at fair value and the related
unrealized gains and losses are included in earnings; (2) heldto-maturity debt securities, which are expected to be held tomaturity with the positive intent and ability to hold to maturity,
are reported at amortized cost; and (3) available-for-salesecurities, which are not classified as either of theaforementioned securities, are reported at fair value withunrealized gains and losses, net of applicable taxes, reported ina separate component of equity.
The cost of trading account securities and available-for-salesecurities sold is determined based on the moving-averagemethod.
In addition, investments in unconsolidated subsidiaries notaccounted for by the equity method are reported at cost
determined by the moving-average method.
Available-for-sale securities for which fair value is extremely
difficult to determine are reported at cost determined by themoving-average method.
For other-than-temporary declines in fair value, investment
securities are reduced to net realizable value by a charge toincome.
Securities included in money held in trust are also classified
and accounted for using the same method as above.
The components of trust assets are accounted for based on
the standard appropriate for each asset type. Instruments heldin trust for trading purposes are recorded at fair value andunrealized gains and losses are recorded in other income/expenses. Instruments held in trust classified as available-forsale are recorded at fair value with the corresponding unrealized
gains/losses recorded directly in a separate component ofequity. Instruments held in trust classified as held to maturity
are carried at amortized cost.
e. Tangible Fixed Assets—Tangible fixed assets are stated atcost less accumulated depreciation and gains deferred on thesale and replacement of certain assets. Depreciation of tangible
fixed assets, except for lease assets, is mainly computed using
the declining-balance method at rates based on the estimateduseful lives of the assets. The range of useful lives is principallyfrom 5 to 31 years for buildings and from 4 to 20 years forequipment. Lease assets under finance lease transactions, inwhich substantial ownership is not deemed to have beentransferred, are depreciated using the straight-line method overthe lease term. The salvage value is zero or the guaranteedamounts if specified in the lease contracts (see Note 2.o).
f. Intangible Fixed Assets—The amortization of intangible
fixed assets is calculated using the straight-line method.
Capitalized costs of computer software developed/obtained forinternal use are amortized using the straight-line method overthe estimated useful lives of five years.
g. Long-Lived Assets—The Companies review their long-lived
assets for impairment whenever events or changes incircumstances indicate the carrying amount of an asset or asset
group may not be recoverable. An impairment loss would berecognized if the carrying amount of an asset or asset groupexceeds the sum of the undiscounted future cash flows
expected to result from the continued use and eventual
disposition of the asset or asset group. The impairment loss
would be measured as the amount by which the carrying
amount of the asset exceeds its recoverable amount, which is
the higher of the discounted cash flows (“DCFs”) from thecontinued use and eventual disposition of the asset or the net
selling price at disposition.

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THE 77 BANK INTEGRATED REPORT

h. Foreign Currency Items—Assets and liabilities denominatedin foreign currencies held by the Bank at year-end are translated
into Japanese yen at the current exchange rates in effect at eachconsolidated balance sheet date. Exchange gains and losses arerecognized in the fiscal periods in which they occur.

In addition, the Bank is making the accounting estimates
based on the information available at the time of preparing
consolidated financial statements, including worsening businessconditions caused from the impact of the novel coronavirus
infectious disease.

i. Reserve for Possible Loan Losses—The Bank determines theamount of the reserve for possible loan losses by means ofmanagement’s judgment and assessment of future losses basedon a self-assessment system. This system reflects past experienceof credit losses, possible future credit losses, business andeconomic conditions, the character, quality and performance ofthe portfolio, and other pertinent indicators.
As part of the Bank’s self-assessment system, the quality of allloans is assessed by branches and the credit supervisorydivision with a subsequent audit by the Bank’s asset review andinspection division in accordance with the Bank’s policy andrules for self-assessment of asset quality.
The Bank has established a credit rating system under which
its debtors are classified into five categories. The credit rating
system is used in the self-assessment of asset quality. All loans
are classified into one of the following five categories for selfassessment purposes: “normal,” “caution,” “possible
bankruptcy,” “virtual bankruptcy,” and “legal bankruptcy.”
For loans to borrowers classified as legal bankruptcy or
virtual bankruptcy, the Bank fully provides the net amount ofloans and estimated collectible amounts by collateral or
guarantees. Regarding loans to borrowers classified as possible
bankruptcy, a specific reserve is provided to the necessary
extent for the net amount of loans and estimated collectible
amounts by collateral or guarantees.
For large debtors who are likely to become bankrupt anddebtors with restructured loans, if the cash flows fromcollection of the principal and interest can be reasonably
estimated, the reserve is provided based on the difference
between the relevant cash flows discounted by the initial
contractual interest rates and the carrying amounts of the loans(the “DCF method”).
The reserve for other possible loan losses is recorded
principally at the amount of estimated losses over the next twoor three years. Estimated losses are determined by calculating aloss rate based on the average of actual loss ratio over the pastcertain period, which is calculated with credit loss experience
over two or three years. Adjustments are to be made asnecessary in light of future outlook and other factors.
All the loans are assessed by sales related department inaccordance with the self-assessment standard and the results
are audited by asset audit department independent from thesales related department.
The Bank’s subsidiaries determine the reserve for possible
loan losses by a similar self-assessment system as that of theBank.

j. Reserve for Stock-Based Benefits—Reserve for stock-based
benefits is provided for the grants of the Bank’s shares todirectors, etc. in accordance with the stock grant program
based on the estimated stock-based benefits liabilities as of the
fiscal year end.

(Additional Information)
The Bank records the reserve for possible loan losses for therisk of future economic recession but specifically increased thereserve for certain loans considering the worsening businessconditions due to the impact of the novel coronavirus infectious
disease. This accounting estimate is based on the assumptionthat the domestic economy is prospected to continue to be
weak for the time being because of the impact of the novel
coronavirus infectious disease, and therefore, is judged to bereasonable.
The economy is in the situation that further economic
downside risk is concerned due to the impact of the disruptionof supply chains on production activities and continued
sluggish personal consumption with consumers refraining fromgoing out, and accordingly, the reserve for possible loan losses
may possibly fluctuate in future.

k. Reserve for Reimbursement of Deposits—Reserve forreimbursement of deposits which were derecognized asliabilities is provided for the future estimated payments forreimbursement claims on dormant deposit accounts based on
the historical reimbursement experience.
l. Reserve for Contingent Losses—Reserve for contingent
losses is provided for the future estimated payments of burdenmoney to the Credit Guarantee Corporations based on thehistorical experience of subrogation.
m. Employees’ Retirement and Pension Plans—In calculationof projected benefit obligations, expected benefits are attributed
to periods on a benefit formula basis. Treatment of prior service
cost and actuarial gains and losses is as follows:
Prior service cost is charged to expenses when incurred.
Unrecognized actuarial gains and losses are amortized by thestraight-line method from the following fiscal year after the
fiscal year when they were incurred over a definite period (10years) with the employees’ average remaining service period
when incurred.
Consolidated subsidiaries apply a shortcut method whereby
the amount of the retirement benefits required to be paid if all
the employees voluntarily retired at the end of the fiscal year isregarded as projected benefit obligations in determining theliability for employees’ retirement benefits and net periodic
retirement benefit costs.
n. Asset Retirement Obligations—The asset retirement
obligation is recognized as the sum of the DCFs required forthe future asset retirement and is recorded in the period inwhich the obligation is incurred if a reasonable estimate can be
made. If a reasonable estimate of the asset retirement obligation
cannot be made in the period the asset retirement obligation isincurred, the liability should be recognized when a reasonableestimate of the asset retirement obligation can be made. Upon
initial recognition of a liability for an asset retirement obligation,
an asset retirement cost is capitalized by increasing the carrying
amount of the related fixed asset by the amount of the liability.
The asset retirement cost is subsequently allocated to expense
through depreciation over the remaining useful life of the asset.
Over time, the liability is accreted to its present value eachperiod. Any subsequent revisions to the timing or the amountof the original estimate of undiscounted cash flows are reflected
as an increase or a decrease in the carrying amount of theliability and the capitalized amount of the related asset
retirement cost.

p. Income Taxes—The provision for income taxes is computed
based on the pretax income included in the consolidated
statement of income. The asset and liability approach is used torecognize deferred tax assets and liabilities for the expected
future tax consequences of temporary differences between the
carrying amounts and the tax bases of assets and liabilities.
Deferred taxes are measured by applying currently enacted tax
laws to the temporary differences.
q. Derivatives and Hedging Activities—It is the Bank’s policy
to use derivative financial instruments (“derivatives”) primarily
for the purpose of reducing market risks associated with its
assets and liabilities. The Bank also utilizes derivatives to meetthe needs of its clients while entering into derivatives as a partof its trading activities. The Bank enters into interest rate swaps
and interest rate swaptions as a means of hedging its interest
rate risk on certain loans and investment securities and to meetthe needs of its clients. The Bank also enters into currency
swaps, foreign exchange forward contracts, and currency
options to hedge foreign currency exchange risk associatedwith its assets and liabilities denominated in foreign currencies
and to meet the needs of its clients.
Derivatives are recognized as either assets or liabilities andmeasured at fair value. Gains or losses on derivativetransactions are recognized in the consolidated statement ofincome. If derivatives qualify for hedge accounting because ofhigh correlation and effectiveness between the hedging
instruments and the hedged items, the gains or losses onderivatives are deferred until maturity of the hedgedtransactions.
The interest rate swaps which qualify for hedge accounting
and meet specific matching criteria are not remeasured atmarket value, but the differential paid or received under theswap agreements is recognized and included in interest expense
or income.
r. Per Share Information—Basic net income per share iscomputed by dividing net income attributable to common
stockholders by the weighted-average number of commonshares outstanding for the period, retroactively adjusted forstock splits or share consolidation.
Cash dividends per share presented in the consolidated
statement of income are dividends applicable to the respective
years including dividends to be paid after the end of the year.
s. New Accounting Pronouncements—On March 31, 2020, the
Accounting Standards Board of Japan (“ASBJ”) issued ASBJ
Statement No. 31, “Accounting Standard for Disclosure of
Accounting Estimates.”
The standard aims to disclose useful information for thereaders of the financial statements about the contents ofaccounting estimates of the items which may be exposed to arisk that may have a significant impact to the financial
statements for the following fiscal year, in cases where theamount recorded in the financial statements for the current
fiscal year is based on accounting estimate.
The Companies will apply this accounting standard from theend of the fiscal year beginning on April 1, 2020.

o. Leases
As a lessee
Finance lease transactions are capitalized to recognize leaseassets and lease obligations in the consolidated balance sheet.
As a lessor
All finance leases that are deemed to transfer ownership of theleased property to the lessee are recognized as lease receivables,
and all finance leases that are deemed not to transfer ownershipof the leased property to the lessee are recognized as
investments in leases.

THE 77 BANK INTEGRATED REPORT

58

3. CASH AND CASH EQUIVALENTS

Millions of Yen

The reconciliation of cash and cash equivalents at the end of
the year and cash and due from banks in the consolidatedbalance sheet as of March 31, 2020 and 2019, was as follows:
Millions of Yen
2020
2019

Thousands of
U.S. Dollars
2020

Cash and due from banks¥747,105 ¥711,025 $6,864,881
Due from banks, excluding due(9,698)(6,042)(89,111)from the Bank of Japan
Cash and cash equivalents at¥737,406 ¥704,983 $6,775,760
the end of year

Cost

Securities classified as:
Trading
Available-for-sale:
Equity securities* ¥51,936
Debt securities
2,146,590
Other securities*
603,455
Held to maturity
4,099

Unrealized
Gains

Unrealized
LossesFair
Value¥19,848¥73,735
22,93757,3933¥ 611 125,061
54 2,169,473
8,184 652,664
4,103

Thousands of U.S. Dollars

Trading account securities as of March 31, 2020 and 2019,consisted of the following:
Millions of Yen
2020
2019

National government bonds
Local government bonds
Other securities
Total

¥590
8,257
11,000¥19,848¥649
12,222
6,000¥18,873

Thousands of
U.S. Dollars
2020$5,963
112,303
55,131$173,417

Investment securities as of March 31, 2020 and 2019,consisted of the following:
Millions of Yen
2020
2019

National government bonds
Local government bonds
Corporate bonds
Equity securities
Other securities
Total

Thousands of
U.S. Dollars
2020¥ 453,343 ¥ 712,606 $ 4,165,606
744,437
516,074
6,840,365
959,084
944,892
8,812,680
105,845
127,056
972,571
640,922657,651
5,889,203¥2,903,632 ¥2,958,281 $26,680,437

Securities loaned under securities lending agreements areincluded in the above national government bonds in theamount of nil and ¥61,439 million as of March 31, 2020 and
2019, respectively.
Investment in an unconsolidated subsidiary in the amount of¥25 million ($229 thousand) and ¥25 million and investment
in interest in partnership in the amount of ¥2,771 million($25,461 thousand) and ¥1,871 million are included in theabove equity securities and other securities as of March 31,
2020 and 2019, respectively.
The carrying amounts and aggregate fair values of securities
as of March 31, 2020 and 2019, were as follows:
Securities below include trading account securities andinvestment securities:
Millions of Yen

2020
Cost

Securities classified as:
Trading
Available-for-sale:
Equity securities* ¥52,054
Debt securities
2,146,298
Other securities*
617,863
Held to maturity
1,000

59

THE 77 BANK INTEGRATED REPORT

Unrealized
Gains

Unrealized
LossesFair
Value¥18,873¥54,647
13,036
42,635¥ 2,724 103,977
3,471 2,155,864
25,176 635,321
1,000

Cost

Securities classified as:
Trading
Available-for-sale:
Equity securities* $478,305
Debt securities
19,721,565
Other securities* 5,677,322
9,188
Held to maturity

Unrealized
Gains

Unrealized
LossesValuation differences:
Available-for-sale securities
Available-for-sale money
held in trust
Deferred tax liabilities
Unrealized gains on availablefor-sale securities

Thousands of
U.S. Dollars
2020¥ 78,690¥144,958 $ 723,054

919(23,401)

12,644
8,444(46,494) (215,023)¥ 56,207¥111,108 $ 516,466

Bills discounted are accounted for as financial transactions inaccordance with “Treatment of Accounting and Auditing ofApplication of Accounting Standard for Financial Instrumentsin the Banking Industry” (the Japanese Institute of Certified
Public Accountants (the “JICPA”) Industry Audit Committee
Report No. 24). The Bank has rights to sell or pledge these bills
discounted. The total of the face value of bills discounted was¥8,417 million ($77,340 thousand) and ¥11,530 million as ofMarch 31, 2020 and 2019, respectively.
Loans and bills discounted as of March 31, 2020 and 2019,
included the following loans:

Fair
Value

The carrying amounts and aggregate fair values of money heldin trust as of March 31, 2020 and 2019, were as follows:
Millions of Yen$173,417$502,131 $ 25,029
955,407
119,783
31,893 19,809,464
391,757
231,333 5,837,737
9,188* Unlisted equity securities for which the fair value is extremely
difficult to determine are not included.
Securities, other than trading account securities, with readily
determinable fair value, whose fair value significantly declined
compared with the acquisition cost and whose fair value is notconsidered likely to recover to their acquisition cost, are written
down to the respective fair value. The related losses onrevaluation are charged to income for the fiscal year.
Impairment losses were recognized for available-for-salesecurities in the amount of ¥201 million ($1,846 thousand),consisting of ¥201 million ($1,846 thousand) of equity
securities, and ¥44 million, consisting of ¥44 million of equity
securities for the years ended March 31, 2020 and 2019,respectively.
The criteria for determining whether the fair value has“significantly declined” are defined based on the asset
classification of the issuer in the internal standards for asset
quality self-assessment as follows:(a) Normal issuer: Fair value declined by 50% or more of theacquisition cost or fair value declined between 30% and
50% and average fair value during the past one monthdeclined by 50% or more (30% or more for issuers who
have credit risk more than a certain level).
(b) Caution issuers: Fair value declined by 30% or more of
the acquisition cost.
(c) Legally bankrupt, virtually bankrupt, and possibly
bankrupt issuers: Fair value is lower than the acquisition
cost.
Proceeds from sales of available-for-sale securities for theyears ended March 31, 2020 and 2019, were ¥37,056 million($340,494 thousand) and ¥32,581 million, respectively. Grossrealized gains and losses on these sales, computed on a moving
average cost basis, were ¥5,077 million ($46,650 thousand)and ¥136 million ($1,249 thousand), respectively, for the year
ended March 31, 2020, and ¥6,051 million and ¥932 million,
respectively, for the year ended March 31, 2019.
Unrealized gains on available-for-sale securities as of March
31, 2020 and 2019, consisted of the following:2020
Unrealized
Gains

Cost

Money held in trustclassified as:
Trading
Available-for-sale
Total¥21,581¥21,581

Unrealized
LossesFair
Value¥59,843
22,500¥82,344¥919¥919
Millions of Yen

2019
Unrealized
Gains

Cost

Money held in trustclassified as:
Trading
Available-for-sale
Total¥21,581¥21,581

Unrealized
LossesFair
Value¥ 81,387
34,225¥115,613¥12,644¥12,644
Thousands of U.S. Dollars

2020
Unrealized
Gains

Cost

Money held in trustclassified as:
Trading
Available-for-saleTotal$198,300$198,300

Unrealized
LossesFair
Value$549,875
206,744$756,629$8,444$8,444

Available-for-sale securities held in trust, whose fair value
significantly declined compared with the acquisition cost andwhose fair value is not considered likely to recover to theiracquisition cost, are written down to the respective fair value.
No impairment loss was recognized for money held in trust
for the years ended March 31, 2020 and 2019.

Loans and bills discounted as of March 31, 2020 and 2019,consisted of the following:Thousands ofMillions of Yen
U.S. Dollars
2020

Loans to borrowers inbankruptcy
Past due loans
Past due loans (three months
or more)Restructured loans
Total¥  9,976
65,808¥ 4,974
64,970$ 91,665
604,686867
28,536¥105,188

1,842
24,917¥96,704

7,966
262,207$966,534

Loans to borrowers in bankruptcy represent nonaccrual loans
to debtors who are legally bankrupt, as defined in the
Enforcement Ordinance for the Corporation Tax Law.
Past due loans are nonaccrual loans which include loansclassified as “possible bankruptcy” and “virtual bankruptcy.”
Nonaccrual loans are defined as loans for which the Bank has
discontinued accruing interest income due to substantial doubt
existing about the ultimate collection of principal and/orinterest. Such loans are classified either as “possible
bankruptcy” or “virtual bankruptcy” under the Bank’s selfassessment guidelines.
In addition to past due loans, certain other loans classified as“caution” under the Bank’s self-assessment guidelines include
past due loans (three months or more) which consist of loans
for which the principal and/or interest is three months or morepast due, but exclude loans to borrowers in bankruptcy andpast due loans.
Restructured loans are loans where the Bank and its
subsidiaries relax lending conditions by reducing the original
interest rate or by forbearing interest payments or principal
repayments to support the borrower’s reorganization.
Restructured loans exclude loans to borrowers in bankruptcy,
past due loans or past due loans (three months or more).

7. FOREIGN EXCHANGES
Foreign exchange assets and liabilities as of March 31, 2020
and 2019, consisted of the following:
Millions of Yen
2020
2019

6. LOANS AND BILLS DISCOUNTED

Bills discounted
Loans on bills
Loans on deeds
Overdrafts
Total

Thousands of
U.S. Dollars
2020

Millions of Yen
2020
2019

5. MONEY HELD IN TRUST

2020

4. TRADING ACCOUNT SECURITIES AND INVESTMENT
SECURITIESMillions of Yen
2020
2019

2019

2019

2020

¥8,417 ¥11,530 $77,340
134,989
133,908 1,240,365
4,126,107 4,033,494 37,913,323
616,705
540,008 5,666,681¥4,886,221 ¥4,718,942 $44,897,739

Thousands of
U.S. Dollars
2020

AssetsForeign exchange bills receivable
Due from foreign correspondentaccounts
Total¥9,528¥9,528

4,663¥4,734$87,549$87,549

Liabilities
Foreign exchange bills sold
Foreign exchange bills payable
Total

¥ 38
78
¥116

¥ 66
273
¥339

$ 349
716
$1,065¥71

THE 77 BANK INTEGRATED REPORT

60

8. TANGIBLE FIXED ASSETS

11. ASSETS PLEDGED

13. DEPOSITSThe accumulated depreciation of tangible fixed assets as ofMarch 31, 2020 and 2019, amounted to ¥85,053 million($781,521 thousand) and ¥82,684 million, respectively.
As of March 31, 2020 and 2019, deferred gains for tax
purposes of ¥7,695 million ($70,706 thousand) and ¥7,695
million, respectively, on tangible fixed assets sold and replacedwith similar assets have been deducted from the cost of newly
acquired tangible fixed assets.

Assets pledged as collateral and their relevant liabilities as ofMarch 31, 2020 and 2019, were as follows:

Deposits as of March 31, 2020 and 2019, consisted of thefollowing:

9. LONG-LIVED ASSETS
The Bank recognized impairment losses of ¥126 million($1,157 thousand) and ¥761 million on certain operating
branches, business premises, branches to be closed, and unused
facilities for the years ended March 31, 2020 and 2019,respectively.
The impairment losses were composed of ¥67 million ($615
thousand) on buildings and ¥59 million ($542 thousand) onother fixed assets for the year ended March 31, 2020, and ¥165
million on buildings, ¥525 million on land and ¥70 million onother fixed assets for the year ended March 31, 2019.
For the purpose of testing for impairment, the Bank
recognizes each individual branch office as a cash-generating
unit for which it continues to manage and monitor identifiable
cash flows. Branch offices to be closed and facilities not in
operation are individually assessed for impairment. Subsidiaries
recognize each company as a cash-generating unit. An
impairment loss would be recognized if the carrying amount ofan asset or asset group exceeds the sum of the undiscounted
future cash flows expected to result from the continued use andeventual disposition of the asset or asset group.
The impairment loss would be measured as the amount bywhich the carrying amount of the asset exceeds its recoverable
amount, which is the higher of the DCFs from the continued
use and eventual disposition of the asset or the net selling priceat disposition. The DCFs were calculated using discount rates
of 5.7% and 8.0% for the years ended March 31, 2020 and
2019, respectively, and the net selling price was determined byquotation from a third-party vendor.

10. CUSTOMERS’ LIABILITIES FOR ACCEPTANCES AND
GUARANTEESAll contingent liabilities arising from acceptances andguarantees are reflected in “Acceptances and guarantees.”“Customers’ liabilities for acceptances and guarantees” areshown as assets, representing the Bank’s right to receive
indemnity from the applicants.
The amount of guarantee obligations for privately placed
corporate bonds included in securities as of March 31, 2020
and 2019, was ¥25,859 million ($237,609 thousand) and¥14,993 million, respectively.

Thousands of
U.S. Dollars

Millions of Yen

2019

2020

Assets pledged as collateral:
Investment securities¥628,124
Other assets
144
Relevant liabilities to above assets:
Deposits
50,630
Payables under securities
lending transactions
11,986
Borrowed money
279,1892020¥245,060 $5,771,607
144
1,323
53,818465,220

17,414
110,129

110,135
2,565,368

In addition to the above, the following assets were offered ascollateral for exchange settlement transactions, or as substitutes
for future transaction initial margin and others:
Thousands of
U.S. Dollars

Millions of Yen

Investment securities
Other assets
Of which:
Cash collateral paid
for financial instruments
Guarantee deposits forleased tangible fixed assets

2020

2019

2020

¥   100
50,000¥   100
50,000$    918
459,432

Millions of Yen
2020
2019

Current deposits¥203,474 ¥212,207 $1,869,649
Ordinary deposits
5,041,623 4,756,017 46,325,673
Deposits at notice
14,922
15,377137,112
Time deposits
2,097,525 2,197,737 19,273,408
Negotiable certificates of deposit
289,000
440,220 2,655,517
Other deposits
219,445251,274 2,016,401
Total¥7,865,991 ¥7,872,834 $72,277,781

3,700

37,057

93

92

854

12. LOAN COMMITMENTS
Contracts of overdraft facilities and loan commitments arecontracts with customers to lend up to the prescribed limits in
response to customers’ applications for a loan, as long as there
is no violation of any condition within the contracts. As of
March 31, 2020, the unused amount of such contracts totaled¥1,617,531 million ($14,862,914 thousand), of which amounts
with original agreement terms of less than one year were
¥1,512,502 million ($13,897,840 thousand). As of March 31,
2019, the unused amount of such contracts totaled ¥1,647,277
million, of which amounts with original agreement terms ofless than one year were ¥1,564,783 million.
Since many of the commitments expire without being drawn
upon, the unused amount does not necessarily represent a
future cash requirement. Most of these contracts haveconditions allowing the Companies to refuse customers’applications for a loan or decrease the contract limits based on
proper reasons (e.g., changes in financial situation, deteriorationin customers’ creditworthiness). At the inception of thecontracts, the Companies obtain collateral real estate, securities,
etc., if considered to be necessary. Subsequently, the Companies
perform a periodic review of the customers’ business results
based on internal rules and take necessary measures toreconsider conditions in contracts and require additional
collateral and guarantees.

Millions of Yen
2020
2019

Balance at beginning of year
Expected return on plan assets
Actuarial losses
Contributions from theemployer
Establishment of retirement
benefit trust
Benefits paid
OthersBalance at end of year

As of March 31, 2020 and 2019, the weighted-average annualinterest rates applicable to borrowed money were 0.056% and0.094%, respectively.
Borrowed money consisted of borrowings from the Bank ofJapan and other financial institutions. Annual maturities ofborrowed money as of March 31, 2020, were as follows:

THE 77 BANK INTEGRATED REPORT¥45,879 ¥36,778 $421,565
1,455
1,287
13,369(2,539)(1,128) (23,329)
761

763

6,992

10,000(2,028)(2,002) (18,634)
180
181
1,653
¥43,708 ¥45,879 $401,617

2021
2022
2023
2024
2025
2026 and thereafter
Total

Thousands of
U.S. Dollars

Millions of Yen¥128,991
1,343
1,021
153,425325
794¥285,901$1,185,252
12,3409,381
1,409,767
2,986
7,295
$2,627,042

15. LIABILITY FOR EMPLOYEES’ RETIREMENT BENEFITSThe Bank has severance payment plans as defined benefit plansconsisting of corporate pension fund plans and lump-sum
retirement payment plans for employees. In addition, the Bank
has established corporate defined contribution pension plans as
defined contribution plans. The Bank has also established aretirement benefit trust under the lump-sum retirement
payment plan.
The consolidated subsidiaries have lump-sum retirement
payment plans and calculate liability for retirement benefit andretirement benefit costs using a shortcut method.
(1) The changes in projected benefit obligations for the years
ended March 31, 2020 and 2019, were as follows:
Millions of Yen
2020
2019

Balance at beginning of year
Service cost
Interest cost
Actuarial losses
Benefits paid
Prior service cost
OthersBalance at end of year

Thousands of
U.S. Dollars
2020¥69,781 ¥70,527 $641,192
1,677
1,782
15,409
443
447
4,070
455
523
4,180
(3,289)(3,680) (30,221)
180¥69,248(3) Reconciliation between the liability recorded in the
consolidated balance sheet and the balances of projected
benefit obligations and plan assets as of March 31, 2020
and 2019, was as follows:
Millions of Yen
2020
2019

Thousands of
U.S. Dollars
2020

Funded projected benefit obligations ¥ 69,110 ¥ 69,643 $ 635,027
Plan assets(43,708) (45,879) (401,617)
Total
25,401
23,764 233,400
1,258
137
137
Unfunded projected benefit obligations
Net liability arising from projected
benefit obligations¥ 25,539 ¥ 23,902 $ 234,668
Millions of Yen
2020
2019

Liability for employees’ retirement
benefits
Asset for employees’ retirement
benefits
Net liability arising from projected
benefit obligations

Thousands of
U.S. Dollars
2020¥25,539¥23,902 $234,668¥25,539¥23,902 $234,668(4) The components of net periodic retirement benefit costs forthe years ended March 31, 2020 and 2019, were as follows:
Millions of Yen
2020
2019

Service cost
Interest cost
Expected return on plan assets
Recognized actuarial losses
Net periodic retirement benefit costs¥ 1,677443(1,455)
1,196¥ 1,861

Thousands of
U.S. Dollars
2020¥ 1,784 $ 15,409
447
4,070
(1,287) (13,369)
1,535
10,989¥ 2,480 $ 17,100

Note:Employees’ contribution to corporate pension funds isdeducted.
(5) Amounts recognized in other comprehensive income(before income tax effect) in respect of defined retirement
benefit plans for the years ended March 31, 2020 and 2019,were as follows:

181
1,653
¥69,781 $636,295

Millions of Yen
2020
2019

Actuarial losses
Total

61

Thousands of
U.S. Dollars
2020

14. BORROWED MONEY

Year Ending March 31
4,033

Thousands of
U.S. Dollars
2020(2) The changes in plan assets for the years ended March 31,
2020 and 2019, were as follows:¥(1,798)¥(1,798)

Thousands of
U.S. Dollars
2020¥(115) $(16,521)¥(115) $(16,521)

THE 77 BANK INTEGRATED REPORT

62

(6) Amounts recognized in accumulated other comprehensive
income (before income tax effect) in respect of defined
retirement benefit plans as of March 31, 2020 and 2019,were as follows:
Millions of Yen
2020
2019

Unrecognized actuarial losses
Total¥10,836¥10,836¥9,037¥9,037

Thousands of
U.S. Dollars
2020$99,568$99,568(7) Plan assets as of March 31, 2020 and 2019a. Components of plan assets
Plan assets consisted of the following:
Debt investments
Equity investments
Cash and cash equivalents
Life insurance company accounts (general accounts)
Call loans, etc.
Others
Total

2020

2019

23%
23
11
24
19

41%
24
5
23
7

100%

100%

Note: Total plan assets as of March 31, 2020 and 2019, include
retirement benefit trust established under lump-sum
payment plans by 22%.
b. Method of determining the long-term expected rate of
return on plan assets
The expected rate of return on plan assets is determinedconsidering allocation of plan assets which are expectedcurrently and in the future and the long-term rates of return
which are expected currently and in the future from the various
components of the plan assets.
(8) Assumptions used for the years ended March 31, 2020 and
2019, were set forth as follows:
Discount rateLong-term expected rate of return on plan assets
Expected rate of salary increase

2020

2019

0.6%
3.2
4.5

0.6%
3.5
4.5

(9) Defined contribution
The amount required to be contributed to the defined
contribution plan of the Bank was ¥268 million ($2,462
thousand) and ¥275 million for the fiscal years ended March
31, 2020 and 2019, respectively.

16. ASSET RETIREMENT OBLIGATIONS
Asset retirement obligations which were recognized on the
consolidated balance sheet as of March 31, 2020 and 2019,were as follows:a. Overview of asset retirement obligations
Asset retirement obligations are recognized for obligations ofrestoring leased buildings, such as branch premises, to their
original state, based on the real estate lease contracts andasbestos removal costs.
b. Calculation of asset retirement obligations
Asset retirement obligations are calculated based on theestimated available periods of 16 to 31 years depending on the
expected useful lives of buildings using discount rates from
0.139% to 2.324%.
c. The changes in asset retirement obligations for the years
ended March 31, 2020 and 2019, were as follows:63

THE 77 BANK INTEGRATED REPORT

Thousands of
U.S. Dollars

Millions of Yen

2019

2020

Balance at beginning of year
Increase due to acquisition of
tangible assets
Reconciliation associated withpassage of time
Decrease due to execution ofasset retirement obligations
Other
Balance at end of year

¥662

2020

¥678

$6,082

17

4

156

5

6

45

(15)
(9)
¥661

(22)
(4)
¥662

(137)
(82)
$6,073

17. PERFORMANCE-LINKED STOCK COMPENSATIONSYSTEM
The Bank has introduced a performance-linked stockcompensation system (the “System”) based on the Board
Incentive Plan (“BIP”) trust from the perspective of enhancing
motivation to make contributions to improving the medium- tolong-term performance and corporate value by further
clarifying the linkage between compensation to directors, etc.
and stock value of the Bank.
Under the System, the Bank’s shares are acquired using thefunds contributed by the Bank as compensation to directors,
etc. through the trust and such shares are granted to directors,
etc. through the trust according to their ranks and achievementof management plans. Said transactions are related to the
System.
The Bank’s shares remaining in the trust are recorded astreasury stock under “Equity” and the carrying amount of suchtreasury stock was ¥1,089 million ($10,006 thousand) and¥1,243 million and the number of shares was 396 thousand
shares and 452 thousand shares as of March 31, 2020 and
2019, respectively.

b. Increases/Decreases and Transfer of Common Stock,
Reserve and Surplus
The Banking Law requires that an amount equal to 20% of
dividends must be appropriated as a legal reserve (a componentof retained earnings) or as additional paid-in capital (acomponent of capital surplus) depending on the equity accountcharged upon the payment of such dividends until the total of
the aggregate amount of the legal reserve and additional paid-in
capital equals 100% of stated capital.
Under the Companies Act and the Banking Law, theaggregate amount of additional paid-in capital and the legal
reserve that exceeds 100% of the stated capital may be madeavailable for dividends by resolution of the stockholders after
transferring such excess to retained earnings in accordance with
the Companies Act. Under the Companies Act, the total
amount of additional paid-in capital and the legal reserve may
be reversed without limitation. The Companies Act also
provides that stated capital, legal reserve, additional paid-in
capital, other capital surplus, and retained earnings can betransferred among the accounts under certain conditions upon
resolution of the stockholders.
c. Treasury Stock and Treasury Stock Acquisition Rights
The Companies Act also provides for companies to purchasetreasury stock and dispose of such treasury stock by resolutionof the Board of Directors. The amount of treasury stock
purchased cannot exceed the amount available for distribution
to the stockholders which is determined by a specific formula.
Under the Companies Act, stock acquisition rights arepresented as a separate component of equity. The Companies
Act also provides that companies can purchase both treasury
stock acquisition rights and treasury stock. Such treasury stockacquisition rights are presented as a separate component ofequity or deducted directly from stock acquisition rights.

Other operating expenses for the years ended March 31, 2020
and 2019, consisted of the following:
Millions of Yen
2020
2019

Losses on sales, redemption anddevaluation of bonds and othersecurities
Lease costs
Other
Total

Thousands of
U.S. Dollars
2020¥ 2,595¥ 2,858$ 23,844

6,746
4,869
¥14,211

6,457
4,620
¥13,937

61,98644,739$130,579

22. OTHER EXPENSES
Other expenses for the years ended March 31, 2020 and 2019,consisted of the following:
Millions of Yen
2020
2019

Bad debt losses
Losses on dispositions of money
held in trust
Losses on sales of loans
Losses on impairments anddisposals of fixed assets
Provision for reserve forreimbursement of deposits
Other
Total

Thousands of
U.S. Dollars
2020

¥60

¥29

$551

1,546
452

798
434

14,205
4,153

188

777

1,727

118
701
¥3,066245
491¥2,7771,084
6,441$28,172

19. OTHER OPERATING INCOME
Other operating income for the years ended March 31, 2020
and 2019, consisted of the following:

18. EQUITY
Japanese banks are subject to the Banking Law and to theCompanies Act of Japan (the “Companies Act”). The significant
provisions in the Companies Act and the Banking Law that
affect financial and accounting matters are summarized below:
a. Dividends
Under the Companies Act, companies can pay dividends at any
time during the fiscal year in addition to the year-end dividend
upon resolution at the general meeting of stockholders. For
companies that meet certain criteria such as (1) having a Boardof Directors, (2) having independent auditors, (3) having an
Audit & Supervisory Board, and (4) the term of service of thedirectors being prescribed as one year rather than two years ofnormal term by its articles of incorporation, the Board of
Directors may declare dividends (except for dividends-in-kind)at any time during the fiscal year if the company has prescribedso in its articles of incorporation. The Bank meets all the above
criteria. The Companies Act permits companies to distributedividends-in-kind (noncash assets) to stockholders subject tocertain limitations and additional requirements. Semiannualinterim dividends may also be paid once a year upon resolution
by the Board of Directors if the articles of incorporation of thecompany so stipulate. The Bank can do so because it stipulates
this in its articles of incorporation. The Companies Act provides
certain limitations on the amounts available for dividends or
the purchase of treasury stock. The limitation is defined as theamount available for distribution to the stockholders, but theamount of net assets after dividends must be maintained at noless than ¥3 million.

21. OTHER OPERATING EXPENSES

Millions of Yen
2020
2019

Gain on sales and redemption ofbonds and other securities
Lease receipts
Other
Total

¥   110
7,341
4,573¥12,025¥   113
7,028
3,690¥10,832

Thousands of
U.S. Dollars
2020$  1,010
67,45342,019$110,493

20. OTHER INCOME
Other income for the years ended March 31, 2020 and 2019,consisted of the following:
Millions of Yen
2020
2019

Gains on sales of tangible fixed assets
Other
Total

¥   12
1,497¥1,510¥ 107
2,160¥2,268

Thousands of
U.S. Dollars
2020$   110
13,755$13,874

THE 77 BANK INTEGRATED REPORT64

23. INCOME TAXES

24. OTHER COMPREHENSIVE LOSSThe Companies are subject to Japanese national and local
income taxes which, in the aggregate, resulted in a normal
effective statutory tax rate of approximately 30.5% for the years
ended March 31, 2020 and 2019.
The tax effects of significant temporary differences which
resulted in deferred tax assets and liabilities as of March 31,
2020 and 2019, were as follows:

The components of other comprehensive loss for the years
ended March 31, 2020 and 2019, were as follows:

Millions of Yen
2020
2019

Thousands of
U.S. Dollars
2020

Deferred tax assets:
Reserve for possible loan losses ¥14,388 ¥14,113 $132,206
Liability for employees’
10,746
10,31898,741
retirement benefits
Fixed assets (depreciation)
5,850
6,002
53,753Losses on devaluation of stocks
3,264
3,272
29,991and other securities
Other
6,406
6,554
58,862Less valuation allowance(12,754) (12,758) (117,191)(see Note below)
Total
27,90327,501
256,390
Deferred tax liabilities:
Unrealized gains on available23,401
46,494215,023
for-sale securities
Fixed assets (deferred gain on
sales and replacements)
309
319
2,839
Other
17
14
156
Total
23,72946,828218,037
Net deferred tax assets¥4,173 ¥(19,326) $38,344(liabilities)
Note: Valuation allowance for the fiscal year ended March 31,
2019, decreased by ¥1,177 million. This decrease wasmainly due to a decrease of ¥1,328 million in valuation
allowance for reserve for possible loan losses at the Bankand consolidated subsidiaries.
A reconciliation between the normal effective statutory tax
rate and the actual effective tax rate reflected in theaccompanying consolidated statement of income for the year
ended March 31, 2019, was as follows, whereas a reconciliation
for the year ended March 31, 2020, is not required underJapanese accounting standards, since the difference is less than
5% of the normal effective statutory tax rate.
2019

Normal effective statutory tax rate
30.5%
Expenses not deductible for income tax purposes 0.4
Nontaxable dividend income(2.0)
Inhabitants taxes
0.3
Valuation allowance(5.2)
Consolidation adjustment on gain on sales(2.7)
of shares of consolidated subsidiaries
Other—net
0.5
Actual effective tax rate
21.8%

65

THE 77 BANK INTEGRATED REPORT

Millions of Yen
2020
2019

Unrealized losses on available-forsale securities:
Loss arising during the year
Reclassification adjustment toprofit or loss
Amount before income tax effect
Income tax effect
Total

Thousands of
U.S. Dollars
2020¥(65,730) ¥(16,741) $(603,969)(12,263)(6,431) (112,680)(77,994) (23,173) (716,659)
23,092
6,998 212,184¥(54,901) ¥(16,174) $(504,465)

Deferred gains on derivatives underhedge accounting:
Gain (loss) arising during the year ¥25 ¥(795) $229
Reclassification adjustment to
871
827
8,003
profit or loss
Amount before income tax effect
897
31
8,242
Income tax effect
(272)
(9)
(2,499)Total¥624 ¥22 $5,733
Defined retirement benefit plans:
Loss arising during the year
Reclassification adjustment toprofit or loss
Amount before income tax effect
Income tax effectTotal
Total other comprehensive loss¥(2,994) ¥(1,651) $(27,510)
1,196

1,535

10,989(1,798)(115) (16,521)
546
35
5,016
¥(1,251) ¥(80) $(11,494)¥(55,528) ¥(16,233) $(510,226)

25. LEASES
Finance Leases
LessorA subsidiary leases certain equipment and other assets tovarious customers.
The net investments in leases as of March 31, 2020 and
2019, are summarized as follows:
Millions of Yen
2020
2019

Gross lease receivables
Estimated residual values
Unearned interest income
Investments in leases

Thousands of
U.S. Dollars
2020¥19,744 ¥18,147 $181,420
1,310
1,194
12,037(1,901) (1,847) (17,467)¥19,153 ¥17,494 $175,990

Maturities of lease receivables for finance leases as of March
31, 2020, are as follows:Year Ending March 31
2021
2022
2023
2024
2025
2026 and thereafter
Total

Millions of Yen

¥ 60
15
9
6
6
14
¥113

Thousands of
U.S. Dollars

$ 551
137
82
55
55
128
$1,038Maturities of investment in leases for finance leases as ofMarch 31, 2020, are as follows:Year Ending March 31
2021
2022
2023
2024
2025
2026 and thereafter
Total

Millions of Yen¥ 5,967
4,875
3,758
2,620
1,358
1,163
¥19,744

Thousands of
U.S. Dollars$ 54,828
44,79434,53024,074
12,478
10,686$181,420

26. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES(1) Group Policy for Financial Instruments
The Companies provide financial services such as credit cardbusiness and leasing operations in addition to banking
operations. In the course of these operations, the Companies
raise funds principally through deposit taking and invest funds
in loans, securities, and others. As such, the Bank holds
financial assets and liabilities which are subject to fluctuation ininterest rates and conducts comprehensive Asset and Liability
Management (“ALM”) to avoid unfavorable effects from interest
rate fluctuations. Derivatives are also employed by the Bank aspart of ALM.
(2) Nature and Extent of Risks Arising from Financial
Instruments
Financial assets held by the Companies mainly consist of loans
to domestic corporations, local government agencies, andindividual customers which are exposed to credit risk that theCompanies may suffer from losses resulting from
nonperformance of borrowers and interest rate risk that theCompanies may suffer from losses resulting from fluctuationsin interest rates.
Securities, mainly debt securities, equity securities, andinvestment trusts are held to maturity and for other purposes
and also certain debt securities are held for the purpose of
selling to customers. These securities are exposed to credit riskof issuers and market risks of fluctuations in interest rates andmarket prices. In addition, they are exposed to market liquidity
risk that the Companies may suffer from losses resulting fromdifficulties in executing financial transactions in certain
environments such as market turmoil.
Financial liabilities, mainly consisting of liquid deposits ortime deposits taken from corporate and individual customers,
are exposed to cash flow risk that the Bank may experience asituation where unexpected cash flows are incurred in certain
environments where the credit rating of the Bank may belowered and, accordingly, necessary funding may become
difficult.
Foreign currency denominated assets and liabilities are
exposed to foreign exchange risk that the Bank may suffer fromlosses resulting from fluctuations in foreign exchange rates.
Derivatives mainly include interest rate swaps and bondfutures, which are used to manage exposure to market risks
from changes in interest rates of loans and investment
securities, and foreign exchange forward contracts, which areused to hedge foreign exchange risk associated with foreign
currency-denominated assets and liabilities. Hedge accounting
is applied to certain hedging activities related to loans andinvestment securities as hedged items.
(3) Risk Management for Financial Instruments
Credit risk management
The Bank has established the “Credit Risk Control Policy” as abasic policy for credit risk management and various rules
concerning credit risk management. Based on these policies
and rules, the Companies clarify fundamental approaches tosecure the soundness of assets and control procedures for

identifying, monitoring, and controlling credit risk.
Additionally, the Bank utilizes the “Credit Rating System”
applied to counterparties granted with credit from theviewpoint of identifying credit risk objectively and enhancing
credit risk control.
In addition, as an organization responsible for credit risk
management, credit risk control functions and review functions
have been established to secure the effectiveness of credit risk
management.
The Risk Management Division, as a credit risk control
function, is engaged in identifying the level of future possible
credit risk and the status of credit concentration in major
borrowers through measurement of the level of credit risk andanalysis of credit portfolios.
The Credit Supervision Division, as a review control
function, is engaged in reviewing lending operations based onstrict examination standards, system development forstrengthening the daily control of loan receivables, andappropriate maintenance of operational procedures.
Market risk management
a. Market Risk Management System
The Bank has established the “Market Risk Control Policy” as abasic policy for market risk management and various rules
concerning market risk management. Based on these policies
and rules, the Bank clarifies fundamental approaches forappropriate market risk control operations and control
procedures for identifying, monitoring and controlling market
risk.
As an organization responsible for market risk management,a market risk control function (middle office) has been
established and furthermore, the operating function (front
office) and the administration function (back office) have been
separated. Additionally, market risk control function staffs are
assigned to the operating function to secure the effectiveness ofmarket risk management.
The Risk Management Division, as a market risk control
function, measures the level of market risk of the Bank as awhole using Value-at-Risk (“VaR”) approach models and othermodels and regularly monitors the status of compliance withposition limits and loss limits established according to the typeand characteristics of transactions to control the level of market
risk within a certain range.
In addition, an ALM and Income Control Committee wasestablished for the purpose of analyzing flexible investment
strategies in order to prevent risks resulting from fluctuationsin interest rates and market prices, while forecasting futureinterest rates, market prices, and trends of fund and businessconditions. The committee is also responsible for securing thesoundness of management and also improving profitability at
the same time based on appropriate asset and liability
management through the unification of risk management andearnings control.
b. Quantitative Information about Market Risk
The Bank adopts the variance-covariance method (holding
period: 125 business days for strategic equity securities and 60
business days for others; confidence interval: 99.0%;
observation period: 250 business days) in computing the VaRwith respect to money held in trust, securities, Japanese yen
deposits and loans, and Japanese yen money market funds. The
volume of market risk (estimated losses) that the Bank is
exposed to as of March 31, 2020, amounts to ¥146,420 million($1,345,401 thousand) (¥76,667 million in 2019) as a whole.
However, the risk under certain abnormal market fluctuations
may not be captured since, under the VaR method, the volume
of market risk under a definite probability of statisticallycomputed incidence is measured based on historical market
fluctuations.
The Bank implements back testing to compare the VaR
computed by the model with actual profit and loss in the
securities and confirms that the measurement model in use
captures the market risk with sufficient precision.

THE 77 BANK INTEGRATED REPORT

66

Liquidity risk management
The Bank has established the “Liquidity Risk Control Policy” asa basic policy for liquidity risk management and various rules
concerning liquidity risk management. Based on these policies
and rules, the Bank clarifies fundamental approaches for stable
funding of operations and control procedures for identifying,monitoring and controlling liquidity risk. In addition, the Bank
has established the “Contingency Plan for Liquidity” to enable
it to make quick and correct responses to unexpected events.
Furthermore, as an organization responsible for liquidity risk
management, a liquidity risk control function has been
established and a cash management function and a settlement
control function have been established to control daily cash
management and settlement related to cash and securities.
The Risk Management Division, as a liquidity risk control
function, manages the liquidity risk of the Bank as a whole byidentifying, monitoring and controlling liquidity risk.
The Treasury Administration and International Division, as acash management control function and settlement control
function, prepares daily or monthly cash flow projections andconducts cash management by identifying possible funds andliquidity of assets and verifying the concentration of settlementof major account funds to a certain date. The Division also
controls settlement by identifying the status of settlement
through systems such as the BOJ-NET and among financial
institutions.
Risk management system of subsidiaries
The subsidiaries have a risk management system similar to thatof the Bank.
(4) Supplementary Explanation about Fair Values ofFinancial Instruments
The fair values of financial instruments include, in addition to
the value determined based on market prices, valuations
calculated on a reasonable basis if no market prices areavailable. Since certain assumptions are used in calculating thevalue, the outcome of such calculation may vary if different
assumptions are used.
(5) Fair Values of Financial Instruments
The carrying amount, the fair value, and the differences thereof
as of March 31, 2020 and 2019, are disclosed below. Note thatunlisted equity securities for which fair value is extremely
difficult to determine are not included in the following table(see Note 2 below) and insignificant accounts in terms of thecarrying amount are omitted:
Millions of Yen
Carrying Amount Fair Value
March 31, 2020
(1) Cash and due from banks ¥747,105 ¥747,105(2) Investment securities
2,896,163 2,896,164
Held-to-maturity securities
1,000
1,000
Available-for-sale securities 2,895,163 2,895,163(3) Loans and bills discounted 4,886,221
Reserve for possible(61,450)
loan losses*
4,824,770 4,860,491
Total assets¥8,468,039 ¥8,503,760(1) Deposits¥7,865,991 ¥7,866,162(2) Borrowed money
285,901
285,903
Total liabilities¥8,151,893 ¥8,152,066

67

THE 77 BANK INTEGRATED REPORT

Difference¥35,720¥35,721
¥171
1
¥173

Millions of Yen
Carrying Amount Fair Value
March 31, 2019(1) Cash and due from banks ¥711,025 ¥711,025(2) Money held in trust
115,613
115,613(3) Investment securities
2,951,299 2,951,303
Held-to-maturity securities
4,099
4,103
Available-for-sale securities 2,947,199 2,947,199(4) Loans and bills discounted 4,718,942
Reserve for possible(59,183)
loan losses*
4,659,758 4,680,944
Total assets¥8,437,697 ¥8,458,886(1) Deposits¥7,872,834 ¥7,873,063(2) Borrowed money
116,643
116,617
Total liabilities¥7,989,478 ¥7,989,681

Difference¥3
3

21,185¥21,189
¥228
(26)
¥202

Thousands of U.S. Dollars
Carrying Amount Fair Value
March 31, 2020
(1) Cash and due from banks $6,864,881 $6,864,881(2) Investment securities
26,611,807 26,611,816
Held-to-maturity securities
9,188
9,188
Available-for-sale securities 26,602,618 26,602,618(3) Loans and bills discounted 44,897,739
Reserve for possible(564,642)
loan losses*
44,333,088 44,661,315
Total assets$77,809,785 $78,138,013(1) Deposits$72,277,781 $72,279,353(2) Borrowed money
2,627,042 2,627,060
Total liabilities$74,904,833 $74,906,422

Difference$328,218$328,227$1,5719$1,589

The carrying amount is presented as the fair value if thematurity is within a short time period (less than one year)
and the fair value approximates the carrying amount.
For receivables from “legally bankrupt,” “virtuallybankrupt,” and “possibly bankrupt” borrowers, possible
loan losses are estimated based on the DCF method or
factors such as the expected amounts to be collected fromcollateral and guarantees. Since the fair value of these items
approximates the carrying amount, net of the currently
expected loan losses, such carrying amount is presented as
the fair value.
For loans for which the repayment due date is notdefined because of the characteristics that the loan amountis limited within the pledged assets, the carrying amount ispresented as the fair value since the fair value is assumed toapproximate the carrying amount considering the expected
repayment schedule and terms of the interest rates.
Liabilities(1) Deposits
Regarding demand deposits, the amount payable as of thebalance sheet date (i.e., the carrying amount) is considered
to be the fair value. Time deposits and negotiable certificatesof deposit are grouped by maturity length, and the fairvalue is determined using the present value of the aggregate
amounts of principal and interest discounted at an interest
rate that would be applied to newly accepted deposits. For
deposits with maturities within a short time period (lessthan one year) and whose fair value approximates the
carrying amount, the carrying amount is presented as thefair value.

*General and specific reserves for possible loan losses
corresponding to loans and bills discounted are deducted.
Notes:
1. Calculation method for the fair value of financial instruments
Assets(1) Cash and due from banks
For due from banks, the carrying amount is presented as
the fair value since the fair value approximates the carrying
amount.
(2) Investment securities
The fair values of equity securities and debt securities are
determined using the quoted price of the stock exchange,
Japan Securities Dealers Association, or the price calculated
by financial institutions. The fair value of investment trust
is determined using the published standard quotation or
the standard quotation offered by the securities investment
advisors. With respect to privately placed guaranteedbonds, the fair value is determined using the future cash
flows (coupons, redemption of principal, guarantee fees)
discounted at an interest rate considering the market
interest rates and issuers’ credit risk.
(3) Loans and bills discounted
With respect to loans with floating interest rates, thecarrying amount is presented as the fair value since the fairvalue approximates the carrying amount as they reflect themarket interest rates over a short period, unless thecreditworthiness of the borrower has changed significantly
since the loan origination. With respect to loans with fixedinterest rates, for each category of loan based on the type ofloan, internal ratings, and maturity length, the fair value isdetermined based on the present value of expected cash
flows of aggregated amounts of principal and interest
discounted at a rate which is the rate assumed if a new loan
was made, or market interest rate, which is adjusted by thestandard spread (including overhead ratio) by credit rating.

(2) Borrowed money
For each type of borrowed money financed, the fair value isdetermined based on the present value of the aggregatedamounts of principal and interest discounted at a rate whichis the rate assumed if a new financing was made. The
carrying amount is presented as the fair value if the maturity
is within a short time period (less than one year) and thefair value approximates the carrying amount.
2. The financial instruments whose fair value is extremely
difficult to determine are as follows. These items are notincluded in (2) “Available-for-sale securities” under “Assets”
in the above table of fair value information of financial
instruments.

Category
Unlisted equity securities*1,*2
Capital subscription in investment
business partnerships*3
Total

Carrying AmountThousands ofMillions of Yen
U.S. Dollars
2020
2019
2020

¥1,868¥1,995$17,164

5,600¥7,4694,986¥6,98251,456$68,629*1 Unlisted equity securities are not treated as instruments whose
fair value is required to be disclosed since there is no market priceand it is extremely difficult to determine the fair value.
*2 Impairment losses in the amount of ¥57 million ($523 thousand)were recognized for unlisted equity securities for the year ended
March 31, 2020. No impairment losses were recognized in theyear ended March 31, 2019.
*3 Capital subscription in investment business partnerships, whose
assets (i.e., unlisted equity securities) consist of those whose fairvalues are extremely difficult to determine, is not treated as
instruments whose fair value is required to be disclosed.

3. Maturity analysis for financial assets and securities with contractual maturities as of March 31, 2020
Millions of Yen

Due from banks
Investment securities
Held-to-maturity securities
National government bonds
Local government bonds
Available-for-sale securities with
contractual maturities
National government bonds
Local government bonds
Corporate bonds
Other
Loans and bills discounted*
Total

Due in 1 Year or
Less

Due after 1 Yearthrough 3 Years

Due after 3 Years
through 5 Years

Due after 5 Years
through 7 Years

Due after 7 Years
through 10 Years¥ 694,383
437,986
1,000¥ 656,068¥ 584,930¥417,842¥ 519,350

656,068
180,700
51,400297,958
126,010773,173¥1,429,241

584,930
26,000124,500
289,674
144,756
704,400¥1,289,331

417,842
5,000
218,900
119,900
74,041
438,295¥856,137

519,350
9,000
333,800
107,600
68,950481,803¥1,001,154

Due after 10
Years

1,000
436,986
227,350
6,500
135,869
67,267
1,164,160¥2,296,531¥1,204,439¥1,204,439

THE 77 BANK INTEGRATED REPORT

68

The Bank has the following derivatives contracts outstanding as of March 31, 2020 and 2019:

Thousands of U.S. Dollars

Due from banks
Investment securities
Held-to-maturity securities
National government bonds
Local government bonds
Available-for-sale securities with
contractual maturities
National government bonds
Local government bonds
Corporate bonds
Other
Loans and bills discounted*
Total

Due in 1 Year or
Less

Due after 1 Yearthrough 3 Years

Due after 3 Years
through 5 Years

Due after 5 Years
through 7 Years

Due after 7 Years
through 10 Years$ 6,380,437
4,024,496
9,188$ 6,028,374$ 5,374,712$3,839,400$4,772,121

Due after 10
Years

6,028,374
1,660,387
472,296
2,737,829
1,157,860
7,104,410$13,132,785

5,374,712
238,904
1,143,986
2,661,710
1,330,111
6,472,480$11,847,202

3,839,400
45,9432,011,393
1,101,718
680,336
4,027,336$7,866,737

4,772,121
82,697
3,067,168
988,697
633,556
4,427,115$9,199,246

Total$11,067,159$11,067,159

4. Repayment schedule of bonds, borrowed money, and other interest-bearing liabilities subsequent to March 31, 2020
Millions of Yen
Due in 1 Year or
Less

Due after 1 Yearthrough 3 Years

Due after 3 Years
through 5 Years¥7,475,191
128,991¥7,604,183¥340,076
2,365¥342,441¥ 50,723
153,750¥204,474

Due after 5 Years
through 7 Years

Due after 7 Years
through 10 Years

¥145
¥145

¥190
¥190

Due after 10
Years

¥458
¥458

Thousands of U.S. Dollars

Deposits*
Borrowed money
Total

Due in 1 Year or
Less

Due after 1 Yearthrough 3 Years

Due after 3 Years
through 5 Years

Due after 5 Years
through 7 Years

Due after 7 Years
through 10 Years$68,686,860
1,185,252$69,872,121$3,124,836
21,731$3,146,568$ 466,075
1,412,753$1,878,838$1,332$1,332$1,745$1,745Due after 10
Years$4,208$4,208* Demand deposits included in deposits are presented under “Due in 1 year or less.”

27. DERIVATIVES
It is the Bank’s policy to use derivatives primarily for the purposeof reducing market risks associated with its assets and liabilities.
The Bank also utilizes derivatives to meet the needs of its clients
while entering into derivatives as a part of its trading activities.
The Bank enters into interest rate swaps and interest rate
swaptions as a means of hedging its interest rate risk on certain
loans and investment securities while entering into interest rate
swaps and interest rate swaptions to meet the needs of its clients.
The Bank also enters into currency swaps, foreign exchange
forward contracts, and currency options to hedge foreignexchange risk associated with its assets and liabilities
denominated in foreign currencies and to meet the needs of its
clients.
Derivatives are subject to market risk and credit risk. Market
risk is the exposure created by potential fluctuations of market
conditions, including interest or foreign exchange rates. Credit
risk is the possibility that a loss may result from a counterparty’s
failure to perform its obligations under a contract.

69

THE 77 BANK INTEGRATED REPORT

2019
Contract or Notional
Amount2020
Contract or Notional
Amount* Of loans and bills discounted, the portion whose timing of collection is unforeseeable, such as loans to “legally bankrupt” borrowers, loans to “virtually bankrupt”
borrowers, and loans to “possibly bankrupt” borrowers, amounting to ¥75,784 million ($696,352 thousand) are not included in the above table. Loans that do nothave a contractual maturity, amounting to ¥44,162 million ($405,788 thousand), are not included either.

Deposits*
Borrowed money
Total

Thousands of
U.S. Dollars
2020
Contract or Notional
AmountMillions of Yen

9,188
4,015,308
2,089,037
59,726
1,248,451
618,092
10,697,050$21,102,003

Derivative Transactions to Which Hedge Accounting Is Not AppliedWith respect to derivatives to which hedge accounting is not applied, contract or notional amount, fair value, and unrealized gains/losses, and the calculation method of fair value are as shown below. Note that the contract or notional amounts of the derivatives which
are shown in the table do not represent the amounts of the Bank’s exposure to credit or market risk.

The Bank sets limits on credit risk for those derivatives bylimiting the counterparties to major financial institutions andsecurities companies and establishing maximum risk exposures
to the counterparties.
The Bank has established a standard of risk management
including management approaches for each type of risk.
Derivative transactions entered into by the Bank have been madein accordance with internal policies which regulate trading
activities and credit risk management including maximum risk
exposures and loss-cutting rules. Concerning risk management
associated with derivative transactions, the front and back officesof the trading divisions are clearly separated and risk managers
are assigned to the trading divisions, while the Risk Management
Division synthetically manages the Bank’s market risks. In thismanner, an internal control system is effectively secured.
The Bank’s positions, gain and loss, risk amount, and otherconditions are periodically reported to the executive committee.

Due after
One YearInterest rate-related overthe-counter (“OTC”)
transactions:Interest rate swaps:
Fixed rate receipt/¥10,431 ¥10,431
floating rate payment
Floating rate receipt/
10,638 10,636
fixed rate payment
Currency-related OTC
transactions:46,908 10,295
Currency swaps
Foreign exchange
forward contracts:
101,751
Selling
Buying2,170
Currency option:
Selling
19,738 15,147
Buying
19,738 15,147

Fair
Value

Unrealized
Gains/
LossesDue after
One Year

Fair
Value

Unrealized
Gains/
Losses

¥375

¥375

¥11,167 ¥10,867

¥287

¥287

(284)

(284)

11,22010,920

(183)

(183)

97,74897,730104

104

41,36521,654

(498)

(498)

431,020

94,597

14
(16)

14
(16)

138,940
4,742

198
198

(541)
2

(541)
2

(271)
271

365
(148)

6,379
6,379

4,146
4,146

(149)
149

160
(81)

Total

Total

Due after
One Year

Fair
Value

Unrealized
Gains/
Losses$95,846 $95,846 $3,445 $3,445(2,609) (2,609)
955

955

934,953
19,939

128
(147)

128
(147)

181,365 139,180
181,365 139,180(2,490) 3,353
2,490 (1,359)

Notes:
1. The above transactions are stated at fair value and unrealized gains (losses) for the years ended March 31, 2020 and 2019, arerecognized in the consolidated statement of income.
2. The fair value of interest rate-related OTC transactions is determined using the discounted present value or option-pricing models,
and the fair value of currency-related OTC transactions is determined using the discounted present value.
Derivative Transactions to Which Hedge Accounting Is AppliedWith respect to derivatives to which hedge accounting is applied, contract or notional amount, fair value, and the calculation method offair value are as shown below. Note that the contract or notional amounts of the derivatives which are shown in the table do not
represent the amounts of the Bank’s exposure to market risk.
At March 31, 2020
Millions of Yen
Contract or Notional AmountDue after One Fair Value
Hedge Accounting Method
Type of Derivatives
Major Hedged Item
Total
Year
Normal method
Interest rate swaps—
Loans and
Floating rate receipt/
investment
fixed rate payment
securities¥224,744¥94,777¥(1,341)
Special matching criteria
Interest rate swaps—
Floating rate receipt/
fixed rate payment
Loans
54,965
48,135(636)
Other–
Buying
Loans
416
416
(1)
Total
¥(1,979)

THE 77 BANK INTEGRATED REPORT70

At March 31, 2019
Hedge Accounting Method
Normal method

Special matching criteria

Type of Derivatives
Interest rate swaps—
Floating rate receipt/
fixed rate payment
Interest rate swaps—
Floating rate receipt/
fixed rate payment
Other–
BuyingMajor Hedged Item
Loans andinvestment
securities

Millions of Yen
Contract or Notional AmountDue after One
Total
Year

¥227,920¥226,608

Normal method

Special matching criteria

Interest rate swaps—
Floating rate receipt/
fixed rate payment
Interest rate swaps—
Floating rate receipt/
fixed rate payment
Other–
BuyingFair Value

Loans

69,832

58,080

(893)

Loans

583

583

(3)
¥(3,151)

Millions of Yen
Related Party

Account Classification*2

2020

2019

Department Store Fujisaki Co., Ltd.*1

Fees and commissions
Lease receivables andinvestments in leases
Other assets

¥30

¥28

Fuji Styling Co., Ltd.*1

2020

2

18

¥15

$137

46

$(12,321)

Since the reportable segments of the Companies consist only of the “Banking” segment and since the “Other” segment isimmaterial, segment information is omitted.

Loans

505,053442,295(5,843)

Loans

3,822

3,822

(9)
$(18,184)

Description of Reportable Segments
The Companies are principally engaged in the banking business and also leasing business and other financial services. The
reportable segments of the Bank are the segments for which separate financial information is available, and are subject to periodic
review by the chief operating decision maker to determine the allocation of management resources and assess performance.

Related Information for the Years Ended March 31, 2020 and 2019
Information by Service Line
Millions of Yen
2020
Loan

External customers¥41,944

Millions of Yen
Related Party

Account Classification*3

2020

2019

Department Store Fujisaki Co., Ltd*1

Loans and bills discounted ¥4,731
Customers’ liabilities for
acceptances and guarantees
437
Loans and bills discounted
151
Customers’ liabilities for
acceptances and guarantees 1,000
Loans and bills discounted
538¥4,636¥42,119

Securities
Investment¥36,342

Lease

Other

Total

¥8,706¥22,773¥116,926

Lease

Other

Total

¥8,127¥22,894¥109,483

Thousands of U.S. Dollars
Balance at End of Year
Millions of Yen

2020

Thousands of
U.S. Dollars

2020

2019

2020

$43,471 ¥4,827¥4,699$44,3532020¥43,5012019
Loan

Thousands of
U.S. Dollars

Securities
Investment

Millions of Yen

External customers

Transactions for the Year*4

356
274

4,015
1,387

437
143

351
158

4,015
1,313

1,000
518

9,188
4,943

1,000
538

1,000
538

9,188
4,943

Notes: *1 Company whose voting rights are majority owned by a director or his close relatives (including subsidiaries of such company)*2 Mr. Minokichi Akaizawa, a close relative of a director, passed away on November 14, 2018. Since the director, who is his related party,
retired from the position of the Bank’s director due to expiration of his term of office effective June 27, 2019, and the inheritanceprocedures were underway, the transaction in the above table is shown in the name of the deceased, and the transaction amount isrecorded at the relevant amount until that date and the balance at end of year is recorded at the balance on that date.
*3 Terms are substantially the same as for similar transactions with third parties.
*4 Amounts of transactions were reported at the average balance for the period.

THE 77 BANK INTEGRATED REPORT

2019

$275

$870,872

Loans andinvestment
securities

Related-party transactions for the years ended March 31, 2020 and 2019, were as follows:a. Transactions between the Bank and Its Related Parties

71

2020

Thousands of
U.S. Dollars

Notes: *1 Company whose voting rights are majority owned by a director or his close relatives (including subsidiaries of such company)*2 Terms are substantially the same as for similar transactions with third parties.

28. RELATED-PARTY TRANSACTIONS

Mr. Minokichi Akaizawa*2

2020

Millions of Yen$2,065,092

Major Hedged Item

Notes:
1. These are principally accounted for under the deferral hedge method in accordance with the JICPA Industry Audit Committee Report
No. 24, “Treatment of Accounting and Auditing of Application of Accounting Standard for Financial Instruments in the Banking
Industry.”
2. Fair value is determined using the discounted present value, option-pricing models, etc.

Fujisaki Agency Co., Ltd.*1

Thousands of
U.S. Dollars

29. SEGMENT INFORMATION

Total

Fuji Styling Co., Ltd.*1

Balance at End of Year

Thousands of U.S. Dollars
Contract or Notional AmountDue after One Fair Value
Total
Year

At March 31, 2020
Type of Derivatives

Transactions for the Year¥(2,255)

Total

Hedge Accounting Methodb. Transactions between Consolidated Subsidiaries and Their Related Parties

External customers

Loan

Securities
Investment

Lease

Other

$385,408$399,715$79,996$209,252

Total$1,074,391

Information about Geographical Area
Information about geographical areas is omitted because the Companies conduct banking and other related activities only in Japanand do not have foreign subsidiaries or foreign branches.
Information about Major Customers
Information about major customers is not presented because there are no customers who account for over 10% of ordinary
income.
Information about Asset Impairment Losses
Information about asset impairment losses for the years ended March 31, 2020 and 2019, is omitted because the only reportablesegment is “Banking” and “Other” is immaterial.

THE 77 BANK INTEGRATED REPORT

72

Independent Auditors’ Report

30. NET INCOME PER SHARE
Basic net income per share (“EPS”) for the years ended March 31, 2020 and 2019, is as follows:Year Ended March 31, 2020
Basic EPS—Net income attributable
to common stockholders

Millions of Yen
Net Income
Attributable to
Owners of the Parent

Thousands of Shares¥18,261

73,941¥246.97¥17,670

74,275¥237.90

Weighted-Average
SharesYen

U.S. Dollars
EPS
$2.26

Year Ended March 31, 2019
Basic EPS—Net income attributable
to common stockholders

The Bank’s shares held by the directors’ compensation BIP trust that are recorded as treasury stock under “Equity” are included in
the treasury stock to be deducted when computing the average number of shares during the fiscal year for the calculation of basic
net income per share.
The average number of shares of the treasury stock deducted in computing basic EPS was 412 thousand shares and 479
thousand shares, for the years ended March 31, 2020 and 2019, respectively.
Diluted EPS for the years ended March 31, 2020 and 2019, is not shown because there were no potential shares.

31. SUBSEQUENT EVENT
Cash Dividends
At the Bank’s general meeting of stockholders held on June 26, 2020, the Bank’s stockholders approved the following appropriationsof retained earnings:
Thousands ofMillions of Yen
U.S. Dollars
Year-end cash dividends, ¥25.00 ($0.229)
per share¥1,856$17,054
Note: Above total amount of cash dividends includes dividends for the Bank’s shares held by BIP trust in an amount of ¥9 million ($82
thousand).

73

THE 77 BANK INTEGRATED REPORT

THE 77 BANK INTEGRATED REPORT

74

75

THE 77 BANK INTEGRATED REPORT

THE 77 BANK INTEGRATED REPORT76

Capital Adequacy Ratios

Non-Consolidated Balance Sheet (Parent Company)

THE 77 BANK, LTD. AND CONSOLIDATED SUBSIDIARIESMarch 31, 2020

THE 77 BANK, LTD.
March 31, 2020

Thousands of
U.S. Dollars

Millions of Yen

Consolidated (Domestic standard)

2020

2019

Capital adequacy ratio (Domestic standard) = (A)/(B) x 100 (%)

10.31

10.38

(A)

422,268

408,4943,880,069

Risk-adjusted assets: (B)4,095,358

3,934,181

37,630,781

Capital:2020

Thousands of
U.S. Dollars

Millions of Yen

Non-Consolidated (Domestic standard)

2020

2019

Capital adequacy ratio (Domestic standard) = (A)/(B) x 100 (%)

10.14

10.20

(A)

412,272

398,082

3,788,220

Risk-adjusted assets: (B)4,062,387

3,902,624

37,327,823

Capital:Millions of Yen
2020
2019

2020

Assets:Cash and due from banks
Call loans and bills bought
Debt purchased
Trading account securities
Money held in trust
Investment securities
Loans and bills discounted
Foreign exchange assets
Tangible fixed assets:
Buildings
Land
Lease assets
Construction in progress
Other tangible fixed assets
Intangible fixed assets
Customers’ liabilities for acceptances and guarantees
Other assets
Reserve for possible loan losses
Total¥747,051
429
4,000
18,87382,3442,913,386
4,894,634
9,528¥710,996
511
4,071
19,848
115,6132,964,936
4,724,954
4,734$6,864,384
3,941
36,754
173,417756,629
26,770,063
44,975,043
87,5498,187
19,315
73
282
4,053
259
45,25862,405(58,226)¥8,751,857

8,294
19,321
81
138
4,194
263
24,622
63,198(55,511)¥8,610,271

75,227
177,478
670
2,591
37,241
2,379
415,859
573,417(535,017)$80,417,688

Liabilities:
Deposits
Call money
Payables under securities lending transaction
Borrowed money
Foreign exchange liabilities
Liability for retirement benefits
Reserve for stock compensation
Reserve for reimbursement of deposits
Reserve for contingent losses
Acceptances and guarantees
Deferred tax liabilities
Other liabilities
Total liabilities¥7,888,480
8,706
11,986280,257
116
14,565735
337
860
45,258229
60,434
8,311,967¥7,891,848
16,104
17,414111,228339
14,726750
464
781
24,622
23,23827,5278,129,047$72,484,425
79,996110,135
2,575,181
1,065
133,832
6,753
3,096
7,902
415,8592,104
555,306
76,375,696

24,658
8,937
357,402(6,200)384,798
55,917(826)
55,091

24,658
8,937
343,810(5,551)
371,855
110,820(1,451)
109,368

226,573
82,1183,284,039(56,969)
3,535,771
513,801(7,589)506,211439,889¥8,751,857

481,223¥8,610,271

4,041,982$80,417,688

Equity:Common stock
Capital surplus
Retained earnings
Treasury stock
Total stockholders’ equity
Unrealized gains on available-for-sale securities
Deferred losses on derivatives under hedge accounting
Total valuation adjustments
Stock acquisition rights
Total equity
Total

77

THE 77 BANK INTEGRATED REPORT

Thousands of
U.S. Dollars
2020

THE 77 BANK INTEGRATED REPORT78

Non-Consolidated Statement of Income (Parent Company)

Loan Portfolio

THE 77 BANK, LTD.
Year Ended March 31, 2020

Millions of Yen
2020
2019

Income:Interest income:Interest on loans and discounts
Interest on dividends on trading account andinvestment securities
Other
Fees and commissions
Other operating income
Other income
Total income

Thousands of
U.S. Dollars
2020¥ 41,881¥42,044$384,829

28,732242
16,968113
16,935
104,873

27,139266
16,742
115
13,54499,853

264,008
2,223
155,912
1,038
155,609
963,640

Expenses:
Interest expense:
Interest on deposits
Interest on call money
Other
Fees and commissions
Other operating expenses
General and administrative expenses
Other expenses
Total expenses

764
277
1,284
7,279
6,181
55,016
9,532
80,335

1,491
584
1,472
7,171
6,411
55,734
4,289
77,154

7,020
2,545
11,79866,88456,795505,52287,586738,169

Income before income taxes

24,53822,699225,470

Income taxes:
Current
Deferred
Total income taxes

7,408
(188)
7,220

4,984
(253)
4,730

68,069(1,727)
66,342¥ 17,317¥17,968$159,119

Net income

Loan Portfolio by Industry

Billions of Yen
2020

Millions of
U.S. Dollars
2020¥4,894
445
6
5
3
146
203
21
121
398
360
1,041
340
623
1,176

$44,975
4,097
60
46
30
1,343
1,868
195
1,115
3,661
3,309
9,574
3,132
5,725
10,812

Domestic offices (Excluding Japan offshore banking accounts)
Manufacturing

Agriculture and forestry
Fisheries
Mining and quarrying of stone and gravel
Construction
Electricity, gas, heat supply and water
Information and communications
Transport and postal activities
Wholesale and retail trade
Finance and insurance
Real estate and goods rental and leasing
Services, N.E.C.
Government, except elsewhere classified
Other

Japan’s offshore banking accounts
Financial institutions
Total

Domestic offices (Excluding Japan offshore banking accounts)
Manufacturing¥4,724
420
6
5
3
153
192
29
127
384
305
979
341
640
1,134

Agriculture and forestry
Fisheries
Mining and quarrying of stone and gravel
Construction
Electricity, gas, heat supply and water
Information and communications
Transport and postal activities
Wholesale and retail trade
Finance and insurance
Real estate and goods rental and leasing
Services, N.E.C.
Government, except elsewhere classified
Other

Japan’s offshore banking accounts
Financial institutions
Total

79

THE 77 BANK INTEGRATED REPORT—¥4,724Loans by Collateral

2020

Securities
Commercial claims
Real estate
Subtotal
Guaranteed
Unsecured
Total

¥5
19
826
851
1,283
2,759
¥4,894General reserve for loan losses
Specific reserve for estimated loan losses on certain doubtful loans
Total—$44,975

Billions of Yen
2019

Loan Portfolio by Industry

Reserve for Loan Losses—¥4,894

2020

¥28
29
¥58

Billions of Yen
2019

¥

5
20
794
820
1,259
2,645
¥4,724

Billions of Yen
2019

¥27
28
¥55

Millions of
U.S. Dollars
2020

$46
182
7,594
7,823
11,79325,357$44,975
Millions of
U.S. Dollars
2020

$263
271
$535

THE 77 BANK INTEGRATED REPORT80