The 77 Bank aims to be
the “Best Consulting Bank”
that responds to customersʼ needs
by oﬀering the optimum solutions

Official Character

Shichishika-kun

CONTENTS
About The 77 Bank, Ltd.
The Trajectory of Trust and Growth

Becoming the “Best Consulting Bank” that responds to customers’ needs by offering the optimum solutions

Financial and Non-financial Highlights
The Economy and Potential of Miyagi Prefecture
Growth Vision of The 77 Bank, Ltd.
Message from the President

3
5
7
9
11

Strategies of The 77 Bank, Ltd.
Best Consulting Bank

17

Human Resources Development

18
19
22
23
25
27

【Growth Strategy】
Business Evaluation Initiatives

Bank Creed

Collaboration with 77 Research and Consulting

The Bank’s mission is to absorb funds and create credit by exercising its own
creativity based on the principle of self-responsibility, in a spirit of maintaining
orderly credit conditions and protecting depositors, and thereby contribute to
the growth of the national economy.
In light of such public mission, the Bank shallcontribute to the local community while seeking aharmonious balance between self-interest and public interest as a regional bank.
Based on the aforementioned principles, the code of conduct to be observedby any and all persons employed by the Bank is set forth as follows.
1. Elevate the Spirit of Voluntary Service
Acknowledge that the Bank’s progress goes hand inhand with prosperity in the local community, and seek to elevate the spirit ofvoluntary service at all times.
2. Improve Creditworthiness
Bear in mind that credit is the Bank’s lifeblood, and endeavor to improve credit
at all times.
3. Nurture the Spirit of Harmony
Recognize that the spirit of harmony is fundamental to the execution of duties,
and strive to nurture such spirit at all times.

Collaboration with 77 Securities

Overseas Business Support
Initiatives for Retail Customers

S

S
E

S

S
S
S
S

【Regional Economy Vitalization Strategy】
Initiatives of the COVID-19 Emergency Support Team andEarthquake Reconstruction Support
Initiatives for Regional Revitalization

29
31

S

35
39
40

E

41
43
45
46

G

47

E

S

【Productivity Enhancement Strategy】
Paperwork-free × Digital
Message from an Outside Director
Working Style Reform Efforts

S

S
S【Governance Strategy】
Board of Directors and Audit &Supervisory Committee Members
Corporate Governance Initiatives
Social Responsibility
Risk Management

G
G
G

Social Contribution Activities
Social Contribution Activities

Financial

SectionConsolidated Five-Year Summary
Consolidated Balance SheetBank image sought by The 77 Bank

Consolidated Statement of Income
Consolidated Statement of Comprehensive Income“Best Consulting Bank” that responds to customers’ needs by offering
the optimum solutions

Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements

Become a bank that is truly supported by customers through differentiation fromother banks and new contenders (other business formats) entering the financial
field and establish a robust business foundation for the future by abandoning
the low-earnings model.

S

Independent Auditors’ Report
Capital Adequacy Ratios
Non-Consolidated Balance Sheet
Non-Consolidated Statement of Income
Loan Portfolio

51
52
53
53
54
55
56
74
77
78
79
80

Bank Data
Service Network81

ESG Information
Editorial Policy
The 77 Bank has prepared “THE 77 BANK
stakeholders understand the Bank’s efforts for
In editing this report, we have referred to theInternational Integrated Reporting Council (IIRC) andof Economy, Trade and Industry (METI) to provide anvalue creation mechanism. For detailed financial dataon the Bank’s website at https://www.77bank.co.jp).

Note regarding forward-looking statements

This document contains forward-looking statements that
believed to be reasonable by The 77 Bank. However, The
significantly from forecasts, due to a variety of factors.

1

THE 77 BANK INTEGRATED REPORTINTEGRATED REPORT 2020” to help investors and othersustainable value creation.
“International Integrated Reporting Framework” proposed by thethe “ Guidance for Collaborative Value Creation” issued by the Ministry
integrated explanation of the Bank’s business model and sustainable
and other information, please refer to DISCLOSURE 2020 (available

are based on the information available at the time of disclosure, along with certain assumptions
77 Bank makes no guarantee that these forecasts will be achieved. Actual results may differ

ESG is a word that combines the first letters of the three words,
environment, social, and governance, and is a concept that
advocates the use of non-financial aspects as factors formeasuring corporate value. The 77 Bank actively addresses
issues related to ESG based on the policies outlined on the above.

E
S
G

Environment

The 77 Bank’s stance towards the environment has been formulated
as the Environmental Policy, and The 77 Bank conducts initiatives toreduce its environmental footprint, while supporting the environmental
conservation efforts of customers.

SocialThe Bank Creed explains our stance on service for the prosperity of
the local community. We will contribute to business partners and the
local community and work to improve community value through ourcore business as a regional financial institution.

Governance

The 77 Bank will work continuously to strengthen and enhance
corporate governance, in order to promote sustained growth andimprovements in corporate value over the medium- to long-term.

THE 77 BANK INTEGRATED REPORT

2

About The 77 Bank, Ltd.

1878.12The Trajectory ofTrust and Growth

1972.10

Started operations as
The 77th National Bank

1985.10

Established Miyagi SavingsBank（Renamed Gojo Bank in
1921）

Current Head Office

1910.6

Established Tohoku
Jitsugyo Bank, Ltd.

1980
1978.10

1961.5

Established 77 Shin-Yo Hosyo
Co., Ltd.

The Bank Creed establishedas the basic principle of management

1898.3

1978.12Name changed to The 77 Bank, Ltd.

1973.8Celebrated the 100th anniversaryof our founding. Increased capitalto ¥12.0 billion

Share listing changed to the Firs Sectionof the Tokyo Stock Exchanget

1882.7

Opened theTokyo BranchTransitioned to a Company with an
Audit & Supervisory Committee

2018.4

1999.8

1990
1988.4Opened the New York
Representative Office

1988.10

Increased capital to ¥22.2 billion

2018.7

Established 77 Research andConsulting Co., Ltd.

2000

2010
2006.11

1998.4

Established the Aomori
Corporate Sales Office

Established 77 BusinessSupport Foundation

Established The 77 Card Co., Ltd.

Started operation of the common use system（MEJAR）

2016.5Opened the Singapore
Representative Office

Established 77 Capital Co., Ltd.

1997.12

Established 77 Credit
Services Co., Ltd.

1983.2

2016.1

2016.72016.7
Building housing theShanghai Representative
Office2005.7

Tokyo Branch
Shibusawa warehouse during the Meiji era, where the first
Tokyo Branch of The 77th National Bank was locatedStart of the Medium-term Management Plan
“For The Customer & For The Future”—Best Consulting Bank Project—

Merged The 77 Card Co., Ltd. and
77 Credit Services Co., Ltd., with The 77th Card Co., Ltd.
as the surviving company

Upgrade the New York
Representative Office
to the New York Branch

Head Office relocatedto a new building at
Sendai Chuo 3-chome1970

2017.6

1990.111977.9The current The 77 Bank, Ltd. was established throughthe merger of The 77 Bank,
Tohoku Jitsugyo Bank, and Gojo Bank

1960

Opened the London
Representative Office

Established 77
Lease Co., Ltd.

1932.1

Started business of 77 Securities Co., Ltd.

Abolished the New York Branch andLondon Representative Office

1974.11
1893.52017.4

1999.3

Shares listed(Second Section of theTokyo Stock Exchange
and the Sapporo Securities
Exchange)

Head Office at the time of our foundationin 1878 (former Hinoya site)

Since its foundation in 1878, based on our management philosophy of dedication to serve
the local community for the prosperity of the local community, throughout the four
generations of Meiji, Taisho, Showa, and Heisei, The 77 Bank, Ltd. has developed steadily
by overcoming many difficulties while pursuing sound management. In this generationof Reiwa, we will continue to walk together with the region.

Opened the Shanghai
Representative Office

Building housing theSingapore
Representative Office

Established 77 Securities Preparatory
Establishment Co., Ltd.（trading name was changed to
77 Securities Co., Ltd. in January 2017）2016.9Established the Hachinohe Corporate Sales Office2016.11

Converted 77 Lease Co., Ltd., 77 Shin-Yo Hosyo Co., Ltd.,and The 77 Card Co., Ltd. into wholly-owned subsidiaries,
The roots of the 77 Bank s uniqueness3

1. Deep connection with Eiichi Shibusawa

2. Trust relationship with the Tokyo Stock Exchange

Eiichi Shibusawa, a businessman who was known as “the father of Japanese capitalism,”
had a strong interest in the Tohoku region through Munenari Date, who provided him withthe opportunity to enter the Ministry of Finance. At the time, there was no bank based in
Miyagi Prefecture and for this reason, when The 77th National Bank was established,
Shibusawa not only provided investment and various advice regarding such matters as thenature of the banking business and basic management concepts, he also seconded
exceptional talent including Keishi Endo (the second and fourth President) and Seikei Onofrom The Dai-Ichi Bank Limited. Furthermore, Shibusawa provided both mental and practicalsupport to the Bank over many years, including his transfer of The Dai-Ichi Bank Limited’sbanking business in Miyagi Prefecture to The 77th National Bank and his appointment as
Advisor in 1908. Eiichi Shibusawa’s spirit of “harmony of morality and the economy” lives ontoday in the line from the Bank Creed, which describes the Bank’s management philosophy,that states “the Bank’s progress goes hand in hand with prosperity in the local community.”

The Tokyo Stock Exchange (currently Tokyo Stock Exchange, Inc.), which wasestablished in May 1878, along with an increase in trading volume, in 1894 designated
The 77th National Bank as the only bank among many banks to handle receipts anddisbursements operations (*) for all trades of shares cleared. The reasons for thisdesignation include a recommendation from Eiichi Shibusawa and the provision of relief
financing to the Tokyo Stock Exchange during a stock market crash caused by arecession when Seikei Ono, who became the fifth president, was manager of the Tokyo
Branch, which rescued the exchange. Over the next 120 years and to the present,
The 77 Bank, Ltd. remains the only regional bank designated as a funds settlementbank, alongside the mega banks.

THE 77 BANK INTEGRATED REPORT

Eiichi Shibusawa（The photograph in the possessionof Fukaya City.）* Receipts and disbursements operations refers to account processing for the trading floor of a stock exchange

Seikei Ono
5th President

THE 77 BANK INTEGRATED REPORT

4

Financial and Non-financial Highlights■ Financial information■ Non-financial information￥7, 888.5 billion

Balance of deposits and certificates of deposit(Billions of yen)

￥4 , 894.6 billion

Balance of loans and bills discounted(Loans to SMEs / ¥ 1,915.2 billion / Loans to retail customers / ¥ 1,176.3 billion)■Balance of loans and bills discounted■ Balance of loans to SMEs

■Balance of loans to retail customers(Billions of yen)

7,964.3

8,000.0

7,891.8

7,888.5

6,000.0(clients)

2,000.0

1,096.5

1,825.4
1,134.2

1,915.2
1,176.3

March 31,2018

March 31,2019

0March 31,2020

Balance of assets in custody (the Group)￥600.4 billion

March 31,2018

Securities balance■77 Securities■Structured bonds, etc. (brokerage)■Foreign currency deposits (excluding deposits by financial institutions and offshore accounts)■Public bonds ■Insurance■Investment trusts■Stocks(Billions of yen)(Billions of yen)

800.0
606.2
133.8

33.2

619.3

14.2
18.1

600.4

24.9
107.6

400.0

0

4,000.0
58.2
13.4

77.4

309.8

324.4

97.1

90.8

72.0

March 31,2018

March 31,2019

March 31,2020

Net income (consolidated)

81.5■Others

2,000.0

March 31,2020

￥2 , 913.4 billion

17.6

18.2

March 31,2019

■ Share succession measures

2,330.6

2,964.9
137.8

591cases

2,169.5

657.6

640.9

March 31,2018

March 31,2019

March 31,2020

Core OHR(core gross operating income expense ratio)

71.4 %

591
600
367

404

15

341

349

FY2018FY201919

18

0

FY2020326 Cases /￥134.9 billion(Billions of yen)

(Cases)

60.0

60
43
38

40
32.8

40

26.0

FY2019FY2020FY2018FY2019FY2020

310
66
65

11

168
FY201873238
FY2019

14

37
36

178
137
265
FY2020ESG

70FY2018

400

69
84

200

■Insurance

631
500

ESG-based investment and lending

Cumulative results(until March 31, 2020)

71.4

631case■Estate liquidation/Inheritance trouble support services■Rough evaluation of inheritance tax

600

504

Renewable energy-related funding

40.0

0

■Will trust■Apartment loans(Cases)

68

37

11

0

80

73.3

FY2020800

2,155.9635.9

FY2019Number of inheritance and asset succession
support recipients■Rough evaluation of own shares

2,913.4
116.6

FY2018* Start-up plan formulation support, financing clients in the start-up stage, introduction of
government-affiliated financial institutions and start-up support organizations, subsidies,financing, and investment in venture companies

March 31,2020

900
3,126.0

69.5
15.0

March 31,2018

Number of business succession support cases

(%)

18.3

800

0
0

■Referral of external experts

327.2￥18.2 billion

2,713

300

0

818

(Cases)

159.5

27.5
14.8

(Billions of yen)

20.0

■BondsMarch 31,
2019

877

864

1,469

2,000.0
0

900

3,447

3,255

4,000.0877cases(Cases)

5,835
4,978

4,000.0
1,751.5

Number of start-up support projects (*)■ Issue resolution measure agreement by entities

6,000.0
7,000.0

Issue resolution measure agreement by entities

5 , 835 clients 3 , 447clients■Number of clients evaluated

4,894.6

4,725.0

4,627.1

Consulting
Number of clients evaluated

20.0

15.0

20

15 cases /￥12.5 billion
8 cases / 9.0 billion
3 cases / 1.3 billion
3 cases / 1.1billion
1cases / 1.1billion

Cumulative results(until March 31, 2020)

Green bond

Sustainability bondSocial bond

Sustainability Linked Loan
0

3.9 %

ROE (consolidated)

10.3 %

(%)

(%)

5

Capital adequacy ratio(domestic standards / consolidated)

3.8

3.6

3.9

FY2019FY20200Privately placed corporate bonds

Percentage of women in management positions

77 Privately Placed Corporate Bonds for Social Contribution (Donation-Type)

20

10.4
2.5

FY2018

10.4

10.3

10

253 cases /￥19.5 billion
10 cases / ￥0.5 billion
28 cases / ￥2.9 billion

13.4 ％(%)

20

77 Privately Placed Corporate Bonds for Local Professional Sports Support (Donation-Type)

12.8

13.2

13.4

March 31,2018

March 31,2019

March 31,2020

1077 ESG Privately Placed Corporate Bonds
05

FY2018

THE 77 BANK INTEGRATED REPORTFY2019FY20200March 31,2018

March 31,2019

March 31,
2020

Cumulative results(until March 31, 2020)0

THE 77 BANK INTEGRATED REPORT

6

The Economy and Potential of Miyagi Prefecture■ Industrial transformation

Miyagi Prefecture, where further potential lies unnoticed

・ Accumulation of manufacturing industry

Although Miyagi Prefecture experienced significant damage due to the Great East Japan Earthquake,

Expansion of manufacturing
Company has created new jobs
and grown peripheral industries

particularly in coastal areas, reconstruction projects have now reached the final phase thanks
to joint efforts by the public and private sectors.

● Toyota Motor East Japan(Integration of production of small cars)● Tokyo Electron Miyagi, etc.

・ Number of offices

In addition, with the expansion of major automotive and electronics companies,
the manufacturing industry is expected to become a driver for post-recovery economic growth while economic

Growth rate +3.9%(Offices)

concentration is advancing owing to active construction investment related to redevelopment projects in Sendai.

120,000
80,00040,000No.1 in Japan in terms of the growth rate

98,190

0

2012

2016

Source: Statistics Bureau, Ministry of Internal Affairs and Communications

・ Manufactured good shipment amounts（JPY th）

102,026

since the last survey (2012)

Increasing for six consecutive years since the Great East Japan Earthquake

6.00
4.00
2.00
0.00

3.42

3.73

3.97

4.02

2012

2013

2014

2015

4.47

4.11
2016

2017

Source: Tohoku Bureau of Economy, Trade and Industry■ Progress of regional development projects
・Sendai Urban Restructuring Project（launched by Sendai City in October 2019）* Project period : through FY2031
First measure for thereconstruction of obsolete
buildings and promotion of
corporate relocation into the city

■ Basic data of Miyagi prefecture［Area / Population / Living］
Total area

7,282km2

Population

2,303,098 Persons

Number of households

997,384

Number of new housing starts

17,591Gross Prefectural Product(nominal)¥9,475.5billion

Number of private sector offices

102,026

Agricultural output

Fisheries and aquaculture
production amount

Manufactured goods shipment amountWholesale/retail annual product sales¥190.0billion¥4,469.6billion¥81.9billion¥11,554.9billion* Reprinted from “2020 Shape of Miyagi（Miyagi Prefectural Handbook）”

7

THE 77 BANK INTEGRATED REPORT・Next-generation synchrotron radiation facility maintenance project（Scheduled for completion at the end of March 2023）

Economic ripple effects ofthe synchrotron radiation
facility（estimated by Tohoku
Economic Federation）[Industry / Economy]

Concentrated
industrial area

Miyagi Prefecture
Economic
concentrationis advancing
in Sendai● Establishment of “Subsidy System for Promoting Building Reconstruction in
Sendai City Center”● Relaxation of floor-area ratio with a view toward “developing highly functional office”● Enhancement of business attraction framework and subsidy systems, etc.

● JPY 1,901.7 billion in ten years after the commencementof operation（including JPY 1,624.0 billion of market
creation effects across Japan such as new productdevelopment utilizing the research results）● Local ripple effects within Miyagi Prefecture is JPY
277.7 billion● The project is believed to contribute particularly in theareas such as fuel cell, gene drugs and nanocarbon
materials

Next-generation synchrotron
radiation facility (image)

Provided by: Photon Science Innovation Center・Publicly assessed land prices (change in percentage) in Miyagi Prefecture
（%）
8.0
6.0

Commercial district : Increasing for seven consecutive years
Residential district : Increasing for eight consecutive years

4.0
2.0
0.0

0.0

1.4

2013

1.7 2.5

2.3 2.3

2014

2015

3.2

4.7

1.9
2016

2.4
2017

Commercial district

4.8

Residential district

6.2

5.9
2.7
2018

3.5

2019

3.5

2020

THE 77 BANK INTEGRATED REPORT

8

Growth Vision of The 77 Bank, Ltd.
As the regional market is expected to contract due to a declining population over the medium to long term, competition has become
institutions. Within this business environment, the Bank will overcome management issues through efforts under the Medium-term

Business

The 77 Bank Group's Strengths (Source of Value Creation)

increasingly intense, with the entry of other business formats and FinTech companies into the financial field, in addition to traditional financial
Management Plan and aim to establish a robust business foundation that is resistant to changes in the external environment.

Creation value

model

Financial capital・Capital adequacy ratio (domestic standards,
consolidated) : 10.31%
・Ratings : AA (JCR), A (R&I), A3 (Moody's)(As of June 30, 2020)

Growth strategy

Manufactured capital

・Number of branches : 143(Head office / Branches : 137, Sub-branches : 6)
・Corporate Sales Offices : 2・Overseas Representative Offices : 2(Shanghai and Singapore)・ATM locations : 398

Intellectual capital・Group companies: 6 companies(77 Lease, 77 Shin-Yo Hosyo, 77 Card, 77 Securities,
77 Research and Consulting, 77 Capital)

・MEJAR system(Shared with Bank of Yokohama, Hokuriku Bank,
Hokkaido Bank, and Higashi-Nippon Bank)

・Know-how on business reform and corporate
rehabilitation support through the recovery from theGreat East Japan Earthquake

Human capital

・Number of employees (consolidated) : 2,836
・Number of employees with qualifications :105 1st grade Certified Financial Planner, CFP,
36 Small and Medium enterprise Management
Consultants, 20 Movables Valuation Advisors,
21 Agricultural Management Advisors,
2 In-house attorneys, 1 In-house certified public
accountant

Social capital・Deposit share in Miyagi Prefecture : 55.6%
Ranked No. 1 in Japan for 23 consecutive years interms of the share of deposits in the prefecture(FY3/1997–FY3/2019) (Source: KINYU JOURNAL)・Loans and bills discounted share in Miyagi Prefecture:
43.0%
・Number of signing of a cooperation agreement with
regional public bodies : 33 (as of June 30, 2020)
・Certifred"Platinum Kurumin," "Gold Certified
Company," "Eruboshi (Grade 3)," and “Health andProductivity Management Organization 2020 (White
500)”
・Chosen as a constituent of MSCI Japan Empowering
Women Index
・Management Philosophy that inherits the spirit ofEiichi Shibusawa’s “harmony of morality and theeconomy”* As of March 31, 2020, for those without a date9

THE 77 BANK INTEGRATED REPORT

2

1

Social Issues

・Training of specialists
・Consulting through businessevaluation
・Support for asset formation
and asset succession

・Lack of successors for SMEs
・Labor shortage
・Advance of an aging society
・Continued low economic growth・Progress in globalization
・Diversification of lifestyle
・The occurrence of large-scale disasters
due to global warming
・Drop in demand related to reconstruction
from the Great East Japan Earthquake
・Outflow of students to Tokyo area

Business
Further enhance thesatisfaction andthrough consulting
solutions by identifying
i s s u e s . M o r e o v e r,
employee satisfaction

4
Governancestrategy

Regional economy
vitalization strategy
・Response to COVID-19
・Earthquake reconstruction
support・Initiatives for regional
revitalization

model

degree of customer
confidence in the Bank
offering the optimum
customers’ needs andenhance profitability andthrough these initiatives.

Medium-termManagement Plan

“For The Customer& For The Future”—Best Consulting

Bank Project—[from April 1, 2018

・Strengthening and enhancementof corporate governance・Dialogue with shareholders

3
Productivity
enhancement strategy
to March 31, 2021]

・Promotion of paperwork-free・Utilization of digital technology
・Promote Work Style Reform

Customers

・Improving customer satisfaction
through problem solving
・Sustained growth of clientcompanies
・Stable asset formation andasset succession for customers

Local
community

・Realization of a sustainable
society

Employees

・A workplace where eachand every employee can engage
in a diverse range of activities
・Improvement of employee
satisfaction( job accomplishment
and sense of fulfillment)

Shareholders

・Improvement of shareholder value
over the medium to long term

Realization of our management philosophy andcontribution to the achievement of the SDGs
Bank Creed
1. Elevate the Spirit of Voluntary Service
Acknowledge that the Bank’s progress goes hand inhand with prosperity in the local community, and seek
to elevate the spirit of voluntary service at all times.
2. Improve Creditworthiness
Bear in mind that credit is the Bank’s lifeblood, andendeavor to improve credit at all times.
3. Nurture the Spirit of Harmony
Recognize that the spirit of harmony is fundamental tothe execution of duties, and strive to nurture suchspirit at all times.

Management
Issues・Shrinking interest margins due to theintroduction of negative interest rates
・Decrease in revenue opportunities
through the emergence of other businessformats and FinTech companies
・Increasing difficulty in securing humanresources due to a deterioration ofbank performance

THE 77 BANK INTEGRATED REPORT

10

Message from the President

A bank’s mission is to serve its customers.
We Aiming aim to further improve
our its services through enhanced
utilization of “digital” and “human” elements.
President

Hidefumi Kobayashi

Introduction
We would like to express our deepest sympathy to all
those who have been affected by the spread of COVID-19
infection.
In addition to setting up a loan consultation desk andproviding information on government and prefectural
systematic loans, the Bank has made it a priority fromearly on to hear directly from customers about theircircumstances and requests. Moreover, we have set up
support teams and dispatched specialized personnel tobranches to enable speedy decision-making on loans.
The contents of our consultations have become more
complex as time goes by. We are now entering a phase
where we need to provide multifaceted advice not only on

11 THE 77 BANK INTEGRATED REPORT

cash flow but also on how to continue our clients’businesses.
We will continue to work hand in hand with our customers
to solve their problems by providing as much support as
possible, including by improving BS and PL.
In the midst of these activities, we have reaffirmed ourrole as a bank. Each and every one of us feels strongly that
our mission is to support the development of all people,
including local businesses, individuals, and local
governments, in a way that can only be done by aregional financial institution that deeply understands
the characteristics and background of this community.

THE 77 BANK INTEGRATED REPORT

12

Message from the President
Consulting services for survival in this challenging environment
In addition to the impact of the novel coronavirus, theenvironment surrounding banks is becoming more severe
every year. Regional financial institutions are faced with thechallenge of coping with new threats, such as declining
profitability due to negative interest rate policies and otherfactors, a shrinking market over the medium to long term
due to the declining birth rate and aging population, andreduced profit opportunities due to competition with otherbanks and industries.
In Miyagi Prefecture, which is our main business base, therecovery is slowing down, as production and housing
investment are weakening in a rebound to the demand forpost-disaster reconstruction following the Great East Japan
Earthquake.
In order for us to survive in this local economy, we needto make a firm commitment to each and every customer andprovide them with effective business services. This means
providing services not only in the traditional areas of deposits,loans, and foreign exchange but also in nonfinancial areas,
including consulting services, which is also the aim of our
medium-term management plan, concluding this year “‘For
The Customer & For The Future’: The Best Consulting Bank
Project.”“For The Customer & For The Future” -Best Consulting Bank ProjectKey strategies

April 1, 2018March 31, 2021

Main efforts
・Establish systems and structures for strengthening consulting capabilities
・Strengthen and demonstrate consulting-based sales capabilities throughout the Group・Strengthen the channel strategy utilizing digital technologies
・Promote sophisticated management of securities

Growth strategy~Strengthening of profitability~

Regional economy
vitalization strategy~Enhancement of value of the region~

Productivity enhancement
strategy~Effective and efficient allocation of resources~

Governance strategy~Strengthening of governance forsustainable growth~・Continue earthquake reconstruction support
・Contribute to regional revitalization
・Promotion and improvement of regional public bodies trade・Strengthen support for corporate rehabilitation and business reform

Continuity and collaboration among regional public bodies

・Strategic allocation of management resources
・Streamline and increase sophistication of operations
・Promote working style reform

are the keys to regional revitalization.

・Enhancement and strengthening of governance・Initiatives to enhance corporate value

Targets
Item

FY2020 results¥18.2 billion¥ 19.0 billion or more

● Fees and commissions¥ 9.7 billion¥ 11.5 billion or more

Enhancement of profitability ● Interest on loans and bills discounted
Pursuit of efficiency
Pursuit of soundness
Strengthening of corporate
sales capabilites
Strengthening of retailsales capabilities

FY2021 targets● Net income (consolidated)¥41.9 billion● Core OHR (core gross operating income expense ratio)¥ 45.0 billion or more

71.4%

● ROE (consolidated)

70% or less

3.9%

3.7% or more

● Capital adequacy ratio (consolidated)

10.3%

10% or more

● Balance of corporate loans (term-end)¥ 3,027.2 billion¥3,000.0 billion or more

¥ 1,306.6 billion¥1,370.0 billion or more

Of which, Miyagi Prefecture
Of which, Sendai City● Balance of assets in custody, Group (term-end) *● Balance of consumer loans (term-end)¥ 1,778.2 billion¥ 600.4 billion¥ 1,181.6 billion¥1,900.0 billion or more
¥ 740.0 billion or more

¥1,200.0 billion or more

* Sum of assets in custody of The 77 Bank and those of 77 Securities (foreign currency deposits exclude deposits by financial institutions and offshore accounts)

Key performance indicators (KPIs) for strengthening consulting capabilities
Item
Enhancement of consulting
capabilities● No. of employees with qualifications(1st grade Certified
Financial Planner, CFP, and Small and Medium EnterpriseManagement Consultant) (final year)

Strengthening of consulting
for retail customers

700 people or more

12,106 borrowers

13,000 borrowers or more

● No. of clients who signed contracts for customized
solutions based on business evaluation (cumulative total
for 3 years)

1,978 clients

2,000 clients or more

● Fees and commissions from corporate clients (final year)*¥1.5 billion¥1.8 billion or more

● No. of business succession, inheritance, and asset succession
support recipients (cumulative total for 3 years)

2,126 recipients

3,300 recipients or more

● No. of increases in contracts for installment-type assets
in custody [compared with FY2018 term-end]

28,921 contracts

40,000 contracts or more

927 times

1,100 times or more

● No. of seminars for customers(cumulative total for 3 years)

In our medium-term management plan, we are working on
f o u r strategies: a growth strategy, a regional economy
vitalization strategy, a productivity enhancement strategy, anda governance strategy.
Of these, the major theme of regional revitalization includedin the regional economy vitalization strategy contains many
issues that must be addressed continuously in the future.
The main objective of regional revitalization is to disperse thepopulation from the Tokyo metropolitan area to other regions ofJapan. The four pillars of regional revitalization are efforts tohalt the current situation of the increasing concentration ofpeople in Tokyo. In order to make the most of these four pillars,
two major points are continuity over the medium to long term
and cooperation with local governments.
Regional revitalization cannot be achieved unless each ofthese efforts not only bears fruit but also continues to beconnected to the others, becoming an extensive “plane.” To
this end, we are doing our best to support as many start-ups
and new businesses as possible as well as to support andfoster core companies that will support the region and create
jobs.
The other key point, cooperation with local governments,
can be realized by resolving issues such as differences in thesystems and equipment environment of each local
government. Currently, we are at the stage of creating aplatform for cooperation, with the 77 Bank acting as asecretariat, holding study sessions, supporting matching withprivate companies, and offering our videoconference system.
We would like to overcome these issues while looking at
both the short term and the long term to realize regional
revitalization.

FY2021 target

141 people● No. of corporate loan borrowers (final year)

Strengthening of consulting
for corporate clients

FY2020 results

Advancement towards becoming the “Best Consulting Bank”
and continuing efforts for regional revitalization

Prioritized Areas for Regional Revitalization:

Four Pillars

Support for starting newcompanies or businesses

Support and developmentof regional core companies

Promotion ofurban development

Support for promotion of
tourism, etc.

* Fees and commissions for syndicated loans, commitment lines, business matching, M&A, privately placed corporate bonds, manager insurance products, etc.

13 THE 77 BANK INTEGRATED REPORT

THE 77 BANK INTEGRATED REPORT

14

Message from the President
Digitalization and human resource development to create ideal services for the future of banking
Due in part to the impact of COVID-19, the need for internet
banking and cashless payment has increased, anddigitalization is accelerating. For example, the 77 Bank
application for smartphones has become dramatically moreconvenient, as all customers can now use it without having tofill out an application form. I believe that not only individual but
also corporate customers will be able to make more use ofdigitalization as a way to solve a shortage of manpower andeliminate waste in business operations.
The ideal is to be able to choose between face-to-face anddigital services at any given time, taking advantage of the
security, adjustability, and flexibility of human services and theconvenience and efficiency of digital services. We are working
to achieve this ideal model.
I n t h i s s e n s e , h u m a n re s o u rc e d e v e l o p m e n t i s a n
indispensable backbone for us to approach the best consulting
bank. We believe that we need people in order to be mostuseful to our customers and that we can improve our services
by providing both human and digital services.
In order to further enhance the expertise of our consulting
sales staff, we have created an environment where many ofthem can take advantage of training programs and online
courses. The “President’s School,” which will be launched thisyear for mid-career employees in their 30s, is one of theinitiatives.
We are also working to create an organization where all
generations can play an active role, regardless of gender orenvironment. I believe that if we can provide a workplace where
people can work even when they have limited working hours,
such as while raising a child or caring for a family member, we
will be able to understand the feelings of our customers more,which will eventually lead to higher productivity.

77 Bank Group SDG Declaration to achieve goals together with local communities
In July 2020, we announced the 77 Bank Group SDG
Declaration. This is in support of the purpose of the SDGs
(Sustainable Development Goals), which are in line with ourphilosophy of desiring communal prosperity and serving local
communities.
I believe this declaration will help unify the consciousness ofthe entire organization and our group as well as help us
discipline ourselves. From the perspective of the SDGs, banks
have the potential to influence the direction of society throughtheir investments and loans. Therefore, we are also disclosing
our lending policy, which states that we will not take any actionthat would have a negative impact on society.

In the future, we would liketo restructure our social
contributions from theperspective of this declaration
and work together with local
communities toward therealization of a sustainable
society without turning a blindeye to our societal role.

About Corporate Slogan and Logo
SloganLogo

More than ever, and forever,with our region.
Concept

Our slogan expresses our commitment to our customers. We arecommitted to moving forward with our region, growing with our region,and creating the future with our region. We will do this by providing
highly specialized solutions that harness the collective strengths of theGroup while valuing the traditions, trust, and regional foundations that wehave established over the years.

A simple design that can be recognized at a glanceas representing the 77 Bank Group, with a ring
symbolizing our connections with our regionand our strong group ties and sense of unity.
The logo also promotes the Group’s proactive
work on SDG-related initiatives.

Underlying
meaning“More than ever” expresses the mission and shared values of the 77
Bank Group to always seek to deliver better solutions for customers andmake greater contributions to the prosperity of local communities than
we have made before, by providing the highly specialized solutions that
customers have come to expect from us.
“And forever” includes the dual meaning of “from now on” and “uptill now” and expresses the 77 Bank Group’s commitment to building
everlasting relations with local communities and customers.
“With our region” expresses the Group’s commitments to contributeto regional development and always put customers first in corporated
in the principle “Elevation ofthe Spirit of Service” stated in our Bank Creed.

The colorful ring, which expands as it turns, iscomposed of the 17 colors used to represent
the SDGs and symbolizes the comprehensive
capabilities and solutions customers havecome to expect from the 77 Bank Group as
well as the Group’s constant tackling of newchallenges to create a bright future for theregion, in line with the principle in our Bank
Creed of “Elevation of the Spirit of Service”.

77 Bank Group SDG Declaration〜More than ever, and forever, with our region.〜
The 77 Bank Group, in keeping with the philosophy of the Bank Creed passed down from ourfounders—“The Bank’s progress goes hand in hand with prosperity in the local community”—aims tocontribute to the future of the region and the realization of a sustainable society by working toward theachievement of the Sustainable Development Goals(SDGs) on a Group-wide basis.
1. Revitalization of the regional economy
We aim to contribute to the realization of a sustainable society
through consulting with, and building partnerships with, local
public organizations and corporate and individual customers.

3. Encouraging and supporting the activities ofour employees

Exploring ways to provide support
beyond the framework of finance

We are creating an organization where each and every employee
and director can engage in diverse range of activities.

Connecting “change at the Bank” to trust, security, and regional development
2. Responding to global warming and climate change

4. Advancing corporate governanceThrough our responses to climate change, we will contribute to theprotection of Earth from destruction and contribute to urban
development that is more in harmony with nature.

We will collaborate appropriately with our stakeholders tostrengthen and enhance corporate governance.

15 THE 77 BANK INTEGRATED REPORT

Going forward, we will continue to go back to the basics of “the role of a bank” and pursue how we can meet customer needs, generate
sustainable profits, and be useful to our customers while maintaining soundness. We believe that by responding quickly to the changing
times and upgrading our organization, individuals, and initiatives, we will be able to contribute to our local communities.
The recent response to COVID-19 has made me keenly aware of the importance of corporate financial strength. I also feel that it isimportant to continue to devise and make efforts to increase profits even in a difficult environment, and to work on improving productivity
through efficiency.
The Bank’s role is to provide the local community with management resources in the form of people, goods, money, information, andtime. In September 2020, we plan to enter the recruitment business, and we hope to develop together with the local community while
exploring ways to provide support beyond the framework of finance.
We will continue to deepen our relationship with the local community, and as a local financial institution, we will contribute to thedevelopment of the local economy by providing created value to the local community, customers, employees, and shareholders. Your
continued support will be most appreciated.
THE 77 BANK INTEGRATED REPORT

16

Strategies of The 77 Bank, Ltd

Grow th S trategy

Best Consulting Bank

Human Resource Development

In order to become a bank that is truly supported by its customers and to establish a solid management base for the future, we have
set the image of the bank we aspire to become as the following, and actively trained specialist resources.

Interview 01“Best Consulting Bank” that responds to customersʼ needs by offering the optimum solutions

Striving to solve the issues of quality assurance
and manpower shortage on the front line of manufacturing.

Consulting approach targeted by The 77 Bank"Consulting services"at The 77 Bank

"Scope of consulting"at The 77 Bank"Consulting service providers"at The 77 Bank

"Purpose of strengthening
consulting capabilities"at The 77 Bank

"Requirements for strengthening
consulting capabilities"at The 77 Bank

Refers to services in which we identify the needs and issues of customers, andpropose optimum solutions by bringing together the collective strength of theGroup, while supporting problem solving and customer development by supporting
the implementation of these solutions.
Consulting covers a broad range of services. We receive consultation requests fromall of our customers, including corporate customers, individuals, and regional publicbodies, in areas requiring specialized expertise such as business succession and
M&As, problem solving through business evaluations, and acceptance of deposits.

Kei Akama

Tohoku Electronics Industry has about 1,000 employees in theentire group, I was forced to be keenly aware of the issue of theshortage of manpower at the manufacturing front line. I believethat these valuable experiences as a trainee at a local company
can be utilized in my current work. I am currently working in the
Corporate Support Office, providing support mainly to customers in the fishery processing industry in the coastal areas of theprefecture that are still on the road to recovery from the Great
East Japan Earthquake. Although the fields and products wehandle are different from those of the company to which I was
assigned, I believe that the fundamentals of manufacturing are
the same. In addition, there are many customers who are facing
issues such as quality assurance and labor shortage in the fieldof fishery processing. My future goal is to contribute to suchcustomers with the specialized knowledge I have acquired on
the program and to solve their problems by making proposals
that take into account their front line of manufacturing behindthe numbers.

As a banking service professional, each and every Bank employee serves as aconsultant, and all Bank employees provide consulting services in their areas of
responsibility.
We will strengthen our consulting capabilities, and work to improve customer
satisfaction and revitalize the regional economy, in order to realize the bank image
sought by The 77 Bank of being the “Best Consulting Bank.”
We will rebuild our structures at Headquarters and branches, as well as human resource
development frameworks, in order to gain an understanding of customer needs andissues, propose solutions, and provide implementation support. In this process, it isnecessary to improve the skills and skill levels of each and every employee.

Training of specialists personnel through external secondments.
Digital field

Japan Digital Design,Inc., MEJAR Digital Innovation Hub (MDIH) ,etc.

3 people

International business/market field

Japan External Trade Organization (UK), Bangkok Bank (Thailand),Vietcom Bank (Vietnam) ,etc.

10 people

Solutions business field

Mizuho Bank, MUFG Bank, Nihon M&A Center ,etc.

11 people

Regional revitalization field

Regional public bodies (Miyagi Prefecture and Sendai City) ,(General Incorporated Association)Tohoku Tourism Promotion Organization

3 people

27 people as of May 31, 2020

17 THE 77 BANK INTEGRATED REPORTI was assigned to Tohoku Electronics Industry Co., Ltd. with
headquarters in Ishinomaki City, Miyagi Prefecture for one year
under the Local Company Trainee program that started in 2018.
I was assigned to the Quality Assurance Department, where I
dealt with automobile manufacturers and interacted with manufacturing sites to ensure the quality of automobile-related parts.
I was interested in the manufacturing industry, including
automobiles and machinery, and I thought I had acquired someprior knowledge before I was transferred to the company, but I
had to make a series of discoveries in the field and gained a lotof insights.
One of the things that left a deep impression on me was thestrictness of quality control. The automobile manufacturer
required us to improve quality down to the smallest invisible
details and to thoroughly eliminate unnecessary costs. In order
to meet these demands, we repeatedly reviewed and improved
our processes and other aspects of our operations while
listening to feedback from the front line. In addition, althoughCorporate Support Department

Service development from the user’s point of view,
learned in the cutting-edge field.
From December 2017 to December 2019, I was assigned for
two years to Japan Digital Design ,Inc., a FinTech company thatprovides services that integrate finance and IT, where I worked
on two major tasks. The first was system development. I
oversaw the programming of the business automation system
RPA, which is also being introduced at our bank, and designed
the process for managing it.
The other task was the service planning for digital currency.
We worked together with external organizations to design
products, procedures for payment, user screen transitions, andlegal and regulatory checks. In particular, 2019 is the first yearof the “cashless era” in Japan, a time of large-scale initiatives,and it was a great learning experience for me to be able toexperience this major turning point firsthand. Cashless is one ofAssistant Manager, Digital Strategy Department

Junya Segawa

the major themes at our bank, and I hope to make use of myexperience.
I learned a lot about digital technology by working in the fieldof FinTech, but the most important thing I realized was to thinkfrom the user’s perspective first. For example, if the system isfor internal use, it must be easy for employees to use, and if it isfor digital currency, it must be easy for customers to use
otherwise, the equipment alone is meaningless. In particular,
I feel that until now, some systems have been designed primarily
for the convenience of the bank, and I would like to review themonce again and change them to systems that focus on theconvenience of customers. I also believe that more open
discussions involving other departments and more flexible
ideas will lead to better services for our customers.
THE 77 BANK INTEGRATED REPORT

18

Image of Business evaluation

Business Evaluation Initiatives
We conduct appropriate business evaluations of the business content and growth potential of clients in various life stages, while
appropriately grasping and analyzing the current state and issues of the regional economy and industry as we actively engage inbusiness evaluations that provide funds smoothly and proposals for solutions to resolve issues.

Major external
support organizations
Development Bankof JapanJapan FinanceCorporation
The Shoko Chukin BankInterview 02

Nihon M&A Center
Miyagi Organization
for Industry Promotion

Tokyo Stock Exchange

The 77 Bank Group
77 Bank
77 Lease
77 Shin-Yo Hosyo

77 Securities

REVIC

77 Researchand Consulting

Miyagi University

Kosuke Takeo

CEO, MAKABE GIKEN Co., Ltd.

Masahiro Makabe

Supporting the company’s development by encouraging expansion
to the private sector, backed up by business strategies.
We interviewed Mr. Makabe, CEO of MAKABE GIKEN Co.,
Ltd. which manufactures equipment for developing newmaterials using Japan’s leading technology, about his
impressions and results of our consulting services.

Makabe: MAKABE GIKEN is mainly engaged in the development and manufacture of equipment for researching metalmaterials and the materials themselves. One of our main
products in recent years has been gas atomized powder
production equipment for use in 3D printers for metals. We
have been manufacturing these products for more than 30
years and provide high-quality powder production equipment.
This is a very niche field, but Mr. Takeo has been visiting ourcompany since before I became the CEO in 2019 to deepen his
understanding.

19 THE 77 BANK INTEGRATED REPORT

Takeo: Even though I was young and not knowledgeable, you
took a lot of time to teach me in detail. It helped me understandthe value of your company, which I could not understand justEquipment for manufacturing gas atomized powder, which is the material for metal 3D
printers. The demand for this material has been increasing in recent years, and MAKABE
GIKEN has been developing and manufacturing it for over 30 years.

Business plan formulation
Financial position improvement
Funding

77 CapitalBusiness succession

Offer solutions bydemonstrating
consulting
functionsby looking at numbers on a desk. I feel that I was able to provide
funding and other support thanks to that. In particular, I wasconvinced that the development and technological capabilities
that you have cultivated over your long history are unrivaled
and will be required in a variety of fields in the coming digitalage. I have been working with Mr. Makabe for about a year anda half on the succession of the business, and we are only in the
final stages of transferring assets and developing the internalmanagement system, but the first thing we did was to develop
the financial foundation of the company.

Sendai Haranomachi Branch

Clients

Issues for enhancementof corporate value

Securing of HR
77 CardSendai Chamber ofCommerce and Industry

Tohoku University

Cultivate andcapture diverse
customer needsby businessevaluations

Makabe: That was one of the issues that I felt we needed toaddress. Since the company’s founding, we have been verymuch a manufacturing-driven company, and we have never
had a solid business strategy in place. In addition, thecompany is currently going through a transition period. For along time, our company has been receiving most of its orders
from universities and other research institutions, but with the
reduction of research expenses, we must now accelerate our
expansion into the private sector. Thus, we asked the 77 Bank
to help us develop a strategy for financial management andsales channel development necessary for this initiative. You
even went so far as to suggest cost setting.

Ｍ＆Ａ
Broader marketing channels
Overseas development
Productivity enhancement

and other foreign countries in the future, and to receive help in
the areas of compliance and legal affairs overseas.
Takeo: Our bank has an extensive platform for overseas
business, from credit inquiries to legal risk management, so we
can provide a one-stop service. We are no longer in an era
when banks only deal with funds. We will continue to meet ourclients’ expectations based on our day-to-day relationship withthem.

The company’s technology is attracting attention both domestically and internationally.
Recently, the company’s excellent powder manufacturing technology has been highly
evaluated, and the company has been conducting R&D and developing new businesses
in cooperation with major private companies.

Takeo: As we started working with Mr. Makabe on formulating
the business strategy, we felt his enthusiasm for the kind ofcompany he wanted MAKABE GIKEN to be in the future, andthis strengthened our desire to respond as the main bank to his
expectations. As for the cost setting, I think it has been difficult
to determine the appropriate price in the absence of competingproducts, but after we estimated the value from various
perspectives, we suggested that it would be possible to set ahigher price for such an excellent and rare technology.
Makabe: In the past, we often took on projects based on theprice offered by research institutes, but now that we have an
objective evaluation from the outside, we have one standard. In
addition, the visualization of our finances has helped us toclarify the path to our sales targets, which has motivated our
employees and made them more cost-conscious. Recently, we
received an order for manufacturing equipment from France,
and we hope to increase our business with Europe, the U.S.,

MAKABE GIKEN Co., Ltd.

Established in 1922, MAKABE GIKEN develops andmanufactures research equipment for developing newmaterials and new materials themselves with abundantknow-how and advanced technology.

THE 77 BANK INTEGRATED REPORT

20

Collaboration with 77 Research and Consulting■ M&A Cases
In order to meet the needs of our customers, we utilize our extensive network to provide support from consultation to the closing of M&Atransactions.
At Branch A, the M&A specialist took the lead in proposing to Company A, a fishery processor that was considering closing down its
business due to the absence of a successor, that the company hand over its business through M&A with a view to utilizing outside
specialized organizations. However, there was no progress on selecting a candidate, and the decision to close the business was being
made.
At that point, Branch B identified the needs of Company B, another fishery processor, to expand sales channels and secure humanresources through M&A with a business feasibility assessment, and information coordination (needs matching) between the two
branches and the head office was speedily carried out to realize the M&A.
As a result of this M&A, Company B was able to expand its seafood processing business by acquiring Company A’s raw material
suppliers and sales routes, and Company A was able to maintain its business and employment rather than simply closing down.
Company B is currently preparing to further expand its overseas business of Tohoku’s food culture (processed marine products, etc.).

M&A fees and commissions/Number of M&A advisory contract clients■M&A fees and commissions
ーNumber of M&A advisory contract clients(JPYmn)49
FY201783
FY2018125
FY2019Brancha

10Information coordination(Needs matching)

Branchb

We interviewed Mr. Sato, CEO of Arces Inc.,
which is working to establish its corporate philosophy
and improve its personnel system through consulting
by 77 Research and Consulting (77 R&C),
a 77 Bank Group company.

Support5
FY2020

Wish to acquire
a company
and expand
its business

The 77 Bank Group members
join forces to help customers
realize their wishes.

Financing

10308

Fishery processing company B(Buying needs)

g

15

15

M＆A
transfer
price

HearinNo choice but
to closethe business

g

0

25
20

200

100

25

Hearin23

300

Fishery processing company A(Sales needs)

30※Funds to acquire
shares of Company A

400

Relationship diagram of M&A cases(Clients )Headquarters

0

External specialist institution■ Signing a Project Finance Agreement for a Wind Power Generation Project in Kami District,
Miyagi Prefecture
We have arranged syndicated loan project finance forthe largest wind power generation project in Miyagi
Prefecture.
JRE Miyagi Kami, a limited liability company in which
Japan Renewable Energy Corporation has an equity
stake, will be the main contractor for the project, which
will construct 10 large wind turbines in Kami, Kami
District, Miyagi Prefecture. After the start of commercial
operation, all electricity will be sold to Tohoku ElectricPower Co., Inc.
We believe that this project will contribute to the“Renewable Energy and Energy Conservation Plan”
formulated by Miyagi Prefecture with the aim ofincreasing the introduction of renewable energy andimproving the self-sufficiency ratio of electricity. In
order to support the promotion of renewable energy
projects and the revitalization of the local economy, a
syndicated loan will be formed by regional banks in
Tohoku to provide project finance for this 42.0
MW-class wind power generation project—one of thelargest in scale in Miyagi Prefecture.
Banks in the six prefectures of Tohoku (Aomori Bank,
Akita Bank, Bank of Iwate , Toho Bank, and Yamagata
Bank, in addition to The 77 Bank) will participate in the
project and work toward the scheduled start ofcommercial operations in April 2023.

21 THE 77 BANK INTEGRATED REPORT

Completion image * This is the completed image at the moment and may differ from the actual appearance of the wind turbine.

Fees and commissions for syndicated loans and commitment lines
Number of transactions handled which involve structured finance(Millions of yen)
800

■Fees and commissions for syndicated loans
and commitment lines

ーNumber of transactions handled which involve
structured finance(Cases)

35

600

400

200

0

Arces Inc., is a company that develops systems such as
weather-related ones. The data provided by our client, theJapan Weather Association, is used in a wide range of fields,
including ministries, local governments, media, railroad
companies, and road management companies. Recently, we
have also developed a system for rockets.
Our company wa s e s t ablishe d in 2010 by be coming
independent from a system company headquartered in Tokyo,
and we inherited the personnel system as it was. However, as
we signed a partnership agreement with a company that wasleading the way in Working Style Reform initiatives, and as thenumber of employees increased, changing the working
environment, we began to feel the need to improve our HR
system. It was right around this time that Mr. Yamazaki, deputy
branch manager of 77 Bank’s Nakakecho branch (currently
deputy manager of the Higashi-Sendai branch), introduced us
to 77 R&C. So we decided to ask their support.
At first, what we wanted to consult on was the HR system,but 77 R&C suggested that we go beyond that area and firstcreate a corporate philosophy, establish a business strategy,
and then develop the HR system accordingly. I was quite
convinced by that proposal.

40

30

15
264
FY201714319
FY2018

16

650

437

FY201920

I think the reason we were able to create a corporate
philosophy based on the thoughts of our employees was that
we were provided with tailor-made solutions to meet thechallenges of our organization. Through the process of
consulting, including employee surveys and hearings, we wereable to deepen communication with our employees and realizethat our company was chosen because of the emotional
connection between our employees and customers. In the
future, we will work with customers to solve various issues on
the basis of our corporate philosophy, striving to gain trust by
focusing on proposal-based system development while valuing
the strong relationship of trust that we have built through ourbusiness activities.

From 77 R&C Staff

We were introduced to Arces Inc., by the Nakakecho
branch and had several meetings with the CEO, Mr. Sato.
After it had been about 10 years since the transfer of thebusiness, he wanted to improve the personnel system
and working environment for further growth. Thus, we
proposed the creation of a plan to promote Working Style
Reform and a Revision of the Personnel System.
As we interacted with the employees throughquestionnaires and interviews, we were convinced that
we could promote their growth and enhance their senseof fulfillment by facilitating communication between them,which would lead to growth as a company. We discussed
various measures with Mr. Sato, and we have supported
the presentation of the Working Style Reform Promotion
Plan to employees and the Revision of the Personnel
System as the next step.
As one of the members of the 77 Bank Group, we willcontinue to support our customers with solving theirbusiness issues in order to live up to their trust.

77 Research and Consulting Co., Ltd.
10

FY2020

Mr. Kaoru Sato, CEO of Arces Inc. (center)
Hirafu Yamazaki, 77 Bank (left)
Katsushi Saiki, 77 Research and Consulting (right)0

A display system of weather data, such as typhoon information andwarnings, in accordance with the requirements of the Japan Weather
Association was developed

77 Research and Consulting conducts research and consulting by leveraging the
network and information-gathering capabilities of the 77 Group. In the consulting
field, we provide business succession, business strategy planning, financial
advice, and various other management issues and requests.

THE 77 BANK INTEGRATED REPORT

22

Overseas Business Support

Interview 03

The Bank provides overseas business support, including support for overseas expansion, development of overseas marketing
channels, and various trade transactions of clients using a broad network led by the Asia Business Support Department, and incoordination with our two representative offices (Shanghai and Singapore), employees deployed abroad in nine cities located inseven countries (regions), and partner overseas financial institutions.

■ Expansion of overseas network【Mexico】
Aguascalientes State(February 2016)

Nuevo León State(September 2016)
Guanajuato State(September 2016)

The Shanghai Representative

Jalisco State(February 2016)

Office covers all of China

Responding to the diverse needs of overseas businesses
with flexible capabilities in cooperation
with local correspondences

Banamex (September 2016)②①【South Korea】
Shinhan Bank and SBJ Bank (December 2015)①②【China】,
Miyagi Prefecture s Dalian Office (February 2011)

Shanghai Representative Office
Established in July 2005③【Taiwan】
CTBC Financial Holding (December 2014)④【Hong Kong】
Hong Kong Trade Development Council (November 2010)
The Bank of East Asia(April 2017)⑦⑧⑨⑥【India】
State Bank of India (February 2013)⑧【Philippines】
Metropolitan Bank(June 2013)

Asia Business Support Dept.
Established in March 2011⑤⑥⑤【Vietnam】
Vietcombank(January 2014)⑦【Myanmar】
Co-operative Bank (July 2017)

The 77 Bank Head Office Building,
6th Floor③④

Singapore Representative Office
Established in May 2016⑩⑪⑨【Thailand】
Bangkok Bank (April 2011)

The Singapore Representative Officecovers the entire ASEAN region⑩【Singapore】
United Overseas Bank
(June 2014)⑪【Indonesia】
Bank Negara Indonesia(November 2012)

Major partner institutions, etc.
*The year and month in parentheses next to each institution indicate the start of partnership■ Number of employees deployed overseas
Dalian, China,
Miyagi Prefecture s Dalian Office1

Shanghai, China

Oversees representative office, etc.

3

Hong Kong

Financial institution

1

Hanoi, Vietnam

Financial institution

1

Bangkok, Thailand

Financial institutions, etc.

2Singapore

Oversees representative office2

London, United Kingdom Japan External Trade Organization

1

New York, United States
total

Financial institution

1
13* As of June 30, 2020

400

300 offices

300

200

151 offices

100

0

2011
2005
Opened Shanghai
Established Asia Business
Representative Office
Support Department

2016

Opened Singapore
Representative Office

2020

been accelerating their overseas business development,
especially in Southeast Asia, and their expansion into
Vietnam particularly has been increasing. We dispatch ourstaff to major financial institutions and Japanese consulting
companies in Vietnam to provide the best solutions to ourcustomers’ needs, including support for local financing andsales channel development.
The spread of the novel coronavirus has become a major
issue in considering future overseas business development.
When facing a situation such as this, especially in overseas
markets, it is important to respond flexibly according to thesituation at the time, rather than sticking to one particularapproach. We are also working on such response, making
ef for ts to utilize more non-face-to-face approaches inoverseas business development, which was based on trafficof p e o p l e. Fo r exa m p l e, in th e a re a of s a l e s c h a n n e ldevelopment, we are actively creating overseas contact
points using online channels. In cooperation with majorcross-border EC management companies and specializedorganizations such as the Japan External Trade Organizationand SME Support, Japan, we are supporting our customers
in introducing non-face-to-face channels and building
systems for overseas business development.
D e s p i te th e c o n s t a nt n e e d fo r c h a n g e i n ove r s e a sbusiness suppor t, our fundamental stance remains
unchanged. Unlike megabanks, we have a long history ofworking with customers who operate businesses in the
Miyagi and Tohoku regions. For this reason, we are able not
only to track numerical information but also to act on thebasis of our firsthand understanding of what our customers
are struggling with and what they want to do about it. We willcontinue to provide the necessary services while keeping
pace with each of our customers.

■ Outline of the Tohoku Food Culture Export Promotion Cooperative Association
Supportfor the development ofoverseas sales channels

Construction of optimaltransportation network

Trade risk measures

Creating productsthat sell

The Tohoku Food Sola Michi Council*
will provide support.

Tohoku Food Culture Export Promotion Cooperative Association (Exporter)
1. Provide overseas sales opportunities
2. Provide opportunities for business interactions(business meetings, etc.)
3. Acting as an agent for export trade administrations
4. Settlement of payment
5. Reduction of logistics costs

Businesses wishing to export overseas
For fruit andvegetables Business

For marine products For livestock products For processed goods
Business
Business
Business︵ Importers︶
Overseas buyers

1407 offices

Akinori Chiba

Export sales

Japanese consulting company

494 offices

500

Main role

Ho Chi Minh,Vietnam■ Number of overseas offices of local companies

One of the strengths of our overseas business support is that
we are able to provide a one-stop service from start to finish
for consultations with customers whose needs vary greatly
depending on the type of business and the target country.
Our goal is to be a “one-stop shop for all your overseas
needs” in our consulting business. In addition to overseas
expansion and development of sales channels, we also
receive many consultations on the acquisition of overseas
human resources due to the declining birth rate and aging
population in the Tohoku region.
In recent years, some of the contents that have been
attracting attention from overseas are the high-quality foodproducts of Tohoku. This has been driven by the registrationof washoku (Japanese food) as a UNESCO Intangible
Cultural Heritage in 2013. However, many customers of
Tohoku’s primary industry said that it was difficult for them tomove forward on a single-company basis when they wereaiming to expand overseas. In response to this, we haveo r g a n i ze d t h e “ To h o k u Fo o d S o l a M i c h i C o u n c i l ” i ncooperation with specialized organizations in various fields,such as logistics and insurance, to support the promotion ofexports of high-quality and safe food, agriculture, forestry,
and fisheries products from Tohoku. From a long-term
perspective, we believe that by connecting the dots that are
products of Tohoku companies and expanding them into aplane of the Tohoku brand as well as by promoting Tohoku’s
food culture to the world, we can help businesses increase
their sales.
We also have one of the largest overseas networks among
regional banks in the Tohoku region, which enables us top r ov i d e d e t a i l e d s u p p o r t f o r t h e ove r s e a s b u s i n e s sdevelopment of customers in a wide range of industries
throughout the region. In recent years, our customers have

Assistant Manager,
Asia Business Support Department

Overseas
sales channel
Department
store
Restaurant

Other* Tohoku Food Sola Michi Council
Established with Sendai International Airport Co., Ltd., TOPPAN PRINTING CO., LTD., NIPPON EXPRESS CO., LTD., and Mitsui Sumitomo Insurance Co., Ltd., this council aims to connect Tohoku andthe world through food, bringing revitalization of the community.

23 THE 77 BANK INTEGRATED REPORT

THE 77 BANK INTEGRATED REPORT

24

Initiatives for Retail Customers

Interview 04

We provide support for asset
succession and asset formationfrom the perspective of our clients,
especially senior citizens.
Deputy Manager,
Consulting Promotion Department

Takayuki EndoAs the role of banks shifts from saving to supporting
asset building, we provide services that are necessary
for customers at various stages of their lives, from cradle
to grave. In the Tohoku region, where the population isaging, we are receiving an increasing number ofconsultations from senior customers, so we use balance
sheets to visualize their assets, such as insurance anddeposits, as well as consider the life events expected fortheir families, and we make proposals to help themspend their lives in a more fulfilling manner. In addition,
we are also working on inheritance measures. Many
customers used to be reluctant to even talk about
inheritance planning, but the Great East Japan
Earthquake made them to reconsider their ways of life,and I have the impression that the number of customers
asking for advice has been increasing for about 10 years.
As an agent, we offer “testamentary trust” services,which include the preparation and storage of wills and■ Customer's life event image

the execution of wills prior to the occurrence of inheritance,and “estate liquidation services,” which include the preparationof an inventory of assets after the occurrence of inheritance, tohelp ensure an amicable and smooth inheritance.
In the midst of these developments, two specific needs are
growing: inheritance tax countermeasures and asset
management for the age of the 100-year life cycle.
With the inheritance tax revision in 2015, we are receiving
many requests for inheritance tax planning, especially from
customers who are newly subject to the tax. We provide
detailed support for everything from the basic concept ofinheritance to succession measures such as the allocation ofassets.
As for “asset management in the age of the 100-year life
cycle,” more and more clients are becoming aware of theirhealth expectancy and asking for advice on how to manage
their assets while they are still healthy. One of the services thathas recently become popular with these customers is the “civil
trust” system, which allows them to set up a successor
administrator for their real estate in advance in case something
happens to them. The number of people using this service isincreasing because it is a smooth procedure.
One of our major themes is to develop human resources
within the bank so that we can offer the best solutions to ourcustomers. At our bank, we try to acquire the necessary
knowledge and experience through training sessions,role-playing based on case studies, and discussions in which awide range of people, from branch managers to young
employees, participate. In addition, we visit our branches on a

■ Expansion of handling of deposit accounts and so forth based on civil trust agreements,
Child s marriage

Marriage

A civil trust is a method that allows an aging trustee to entrust the management of assets (real estate,
deposits, etc.) to a trusted family member (trustee) in case the trustee loses the ability to makedecisions due to dementia, etc. It is also commonly referred to as a “family trust.” In 2018, we started
handling deposit accounts based on civil trust agreements, and in 2019, we started handling “77Apartment Loans (Civil Trust Account).”

Close
up

Home purchase

Succession to thenext generation

Five Steps from consideration to execution of a civil trust

1
Consultation and hearing→ composition Judgment of trust

Under20

20 s

daily basis and visit customers
with our staff members in orderto develop human resources. At
this time, we repeatedly tell our
employees to always think about
whether the proposals from thebank side are really beneficial tothe customers and whether theywould recommend them to theirpar en t s o r fam i l y m em ber s.
Customers are well aware thatthey cannot grow their funds
only by making deposits, but inJapan, where there are few opportunities for investment
education, there is still a lack of understanding about asset
management. That’s why we try to provide them with detailed
and easy-to-understand explanations. Our bank also holds
investment seminars and study groups for customers, to which
we invite them to stimulate their interest in and understandingof asset management.
My mission as a banker is to give back to my hometown. In
particular, I believe that providing support for fulfilling lifestyles
in old age and smooth succession of property to the next
generation are important missions, and I would like to continue
to provide honest assistance from the perspective of acustomers.

30 s

40 s

50 s

60 s

70 s

80 s

2

3

4

5

Trust design and quotation

To the parties and related parties
Explanation and approval(consulting Contract and casting
settings)

Execution, Expert coordination,
and Progress management(trust agreement, notarization,
registration)

On going follow-up in accordancewith the trust agreement(supervision, accounting, advice)

Over

Judicial scrivener
Administrative
scrivener
LawyerTrustee

Trust

Family trust specialist
Tax accountant //Specialist Accountant
Real estate appraiser /Notary, etc

Employment

25 THE 77 BANK INTEGRATED REPORT

Birth of children

Going to school for children

PensionOther

Insurance / Real estate
Construction / FP, etc.

■ Consultation service ■ Hearing■ Coordination Experts andrelated vendors

Family trust
coordinators

・ Consultation
Advice■ Trust contract■ Notarization ■ Registration

Settlor andbeneficiary
FatherPost-formation
Trust supervisor■ Trust management for the
benefit of beneficiaries

Accounting■ Accounting report to parties
and relatives■ Tax returns, etc.

Family / relatives

FamilyConsultation advice■ Consultation and advice for
Settlor and trustees■ Various execution support

THE 77 BANK INTEGRATED REPORT26

Collaboration with 77 Securities
most suitable proposals, we strive to share information closely
between bank and securities companies within the group, suchas by having the 77 Bank provide us with information based on
its long relationship with customers and by sharing customer
needs identified by 77 Securities.

Interview 05

Focus on training employees to improve the quality of
proposals.

77 Securities Co., Ltd.

Assistant Manager, Minamimachi-dori Branch

Orie, Kobayashi (left)

Ami Hoshi (right)

Strengthening of bank-brokerage partnership

Synergistic effects of cooperation between a bankand a securities company in developing products
and intra-bank training
Committed to providing customer-oriented services asa member of the 77 Bank Group

Results(branches / participants)

Item

Holding of bank-brokerage workshops
by 77 Securities for the 77 Bank
77 Securities
Shichiken-kun

The 77 Bank
Shichimi-chan

makes investment proposals to the customer, if necessary. In
the event of a major change in the market, we will promptly
provide the necessary information in cooperation with our staff
at 77 Securities.

Hoshi: With the establishment of 77 Securities, I now have many
opportunities to propose asset management to customers who
have not been active in asset management. Since there are manycustomers who have no experience in securities investment, I try
to explain the difference between deposits and investments andthe risks involved in investment in simple terms, avoiding too
much technicality, and try to provide more understandable andcareful explanations, thereby practicing the philosophy of“customer-oriented business management” set forth by the 77
Bank Group.
If customers have a need to invest in securities, we will
introduce the customer to 77 Securities after confirming thecustomer’s intentions. Even after introducing the customer to 77
Securities, our staff will be present when the staff of 77 Securities

Hoshi: At our bank, there are more and more opportunities foreducation, such as training sessions within the bank to improve
the quality of proposals to customers. At the Minamimachi-doribranch, where I work, we hold study sessions twice a month,
inviting speakers from 77 Securities, to learn about the market
and share information about our customers. In addition, theBank encourages employees to obtain qualifications related tothe sale of financial products, such as FP and CFP, and many
employees participate in in-house study sessions to raise theirawareness of the need to acquire specialized knowledge. Mostof the employees at the branch are also studying hard for the
next exam.
In addition, there is a training program called the Trainee
Program from the Bank to 77 Securities, in which trainees
attend the on-site proposal sessions of 77 Securities sales staff
to acquire skills in proposing and explaining products tocustomers. Based on the knowledge gained through the trainee

Kobayashi: In the three years since 77 Securities opened, we
have been making investment proposals to customers andproviding after-sales services under the motto “Customer First.”
Against the backdrop of social trends such as the “shift fromsavings to asset formation” and the government’s encouragementof asset formation through stock investment, we have seen an
increase in customer interest in asset management, and wehave also seen an increase in requests for products with highly
specialized themes, such as investment trusts related to thenext-generation 5G communication standard. In order to meetthe diverse needs of our customers and provide them with the

Bank-brokerage workshops instructed by 77
Securities sales personnel are held for the
purpose of improving financial product sales
skills among employees of the 77 Bank.

The 77 Bank and 77 Securities collaborate
to hold asset management seminars
The 77 Bank and 77 Securities jointly hold mutual fundseminars to provide customers with opportunities toreceive reports on the investment status of investment
trust products.

FY2019 1H

18 branches

FY2019 2H

42 branches

FY2020 1H

31 branches

FY2020 2H

25 branches

August 2018

69 people

February 2019145 people

August 2019122 people

February 2020

101 people

The Bank and 77 Securities regularly holds seminars for customers in order to provide information on asset management that is easy-to-understand for customers.

〈The 77 Bank〉Number of seminars held for customers and number of participants(Times)500
400(People)Number of seminars(Left scale)
Number of participants(Right scale)

8,807

100
0

417

458

2,198

6,000
4,000
2,000

71
FY201810,000
8,000

300
200

8,686

FY201927 THE 77 BANK INTEGRATED REPORTFY20200〈77 Securities〉

Item

Results(participants)

First anniversary seminar (April 2018)

143 people

Mutual fund seminar (July 2018)

54 people

New Year’s seminar (January 2019)110 people〈77〉Corporate briefings/Investment seminar(September 2019)Market Seminar “Seven Salon” (June 2019-February 2020)
77 Securities New Year’s seminar and 77 Bank Corporate
briefings (January 2020)〈77 Securities〉Market Seminar (February 2020)

103 people
9times/126 people

110 people
30 people

Kobayashi: I also visit the branches I am in charge of and holdstudy sessions on a regular basis, and I have the impressionthat the number of motivated employees is increasing. We also
hold a newspaper reading session every morning, and I haveheard that some employees who went through the Trainees
Program from the 77 Bank have been gathering their staff
members to read the newspaper after returning to their own
branches. I hope that this kind of movement will spread more
widely.

Deepening cooperation to even better meet customers’
needs

Hoshi: Originally, as a bank, we made comprehensive
proposals based on the asset status of our customers,
including life plans for not only them but also their families. In
particular, the Minamimachi-dori branch is surrounded by manyother banks and securities companies and has manycustomers with strong interest in investments, so we willcontinue to deepen our cooperation with 77 Securities to meeta variety of needs.
Kobayashi: In general, I feel that we are cooperating well withthe 77 Bank, but the degree of cooperation varies from branch
to branch, so I think there is room for the 77 Bank Group as awhole to further deepen cooperation. Through our study
sessions, daily sales activities, and other communication with
our employees, we will continue to educate them on theimportance of cooperation between the Bank and the securities
company, and we will do our best to be of further assistance to
our customers.

Provision of services that are appropriate for customers

The Bank actively propose the 77 Savings Investment Trust and tax-exempt accounts such as NISA, which are useful for asset formation by customers.

Number of 77 Savings Investment Trust contract holders(people)16,67916,0008,000

33,48935,00030,00014,861

30,554
26,871

25,00014,00012,000

Number of tax-exempt accounts (NISA, etc.) opened(cases)

18,00020,00011,83815,00010,000

Provision of information that is easy-to-understand for customers

experience, the salespersons make proposals from a newperspective, which draws out the needs of customers and often
leads to contracts.

10,000March 2018

March 2019

March 2020

5,000

March 2018

March 2019

March 2020〈77〉Initiatives for Operations that Put Customers FirstThe Bank and 77 Securities Co., Ltd. have established the 77 Basic Policy on Operations that Put Customer
First in order to promote the provision of quality financial products and service to customers. This policy iscomplied with executives and employees, and the status of initiatives is announced regularly.
* The 77 Basic Policy on Operations that Put Customers First can be viewed here.

77 Securities Co., Ltd.

The 77 Bank

77 Securities* Japanese Language only

As the only securities company headquartered in Miyagi Prefecture, our bank-brokerage partnership with The
77 Bank allows us to support a broad range of needs through the provision of high-quality services from acustomer perspective as well as highly specialized products.

THE 77 BANK INTEGRATED REPORT28

Regional Economy Vitalization Strategy
Initiatives of the COVID-19 Emergency Support Team and Earthquake Reconstruction Support
financial intermediary services but also consulting services tohelp our customers solve their various problems. We willcontinue to make initiatives to promote these initiatives widely
so that our customers can make effective use of us.

Interview 06

Mohri: In our initiatives to support the recovery from theearthquake and tsunami, we often said that we wanted to “build
back better, not just restore.” This means not just restoring

companies and stores to the state they were in before thedisaster, but revitalizing them into a better state with an eye tothe future. In response to the current situation, I would like towork with customers to create business revitalization andimprovement plans that take into account the next few years
and work together with them toward building back better.

■ COVID-19-related loan performance
Status of loan provision to businesses affected by COVID-19(cumulative total up to June 2020, including changes in loan conditions)

3,248 cases / ¥245.5 billion■ Information provision to regional public bodies through public-private collaboration

Utilizing our experience in earthquake and tsunami reconstruction support,
we will support our customers with swift countermeasures against the spreadof the novel coronavirus.
Deputy General Manager,
Consulting Promotion Division

Takuya Kyono (left)

Senior Credit Officer,
Credit Supervision Division

Masashi Mohri (right)

Responding to the changing needs after COVID-19

Kyono: Six months have passed since the COVID-19
Emergency Support Team was established, and I have theimpression that the number of consultations about immediate
cash flow—which were overwhelmingly common when theteam was first established—have peaked out. Since May, there
has been an increase in needs related to post-pandemic
services, such as employment-related consultations and thesearch for ways to change existing business models.
In the Consulting Sales Department, to which I belong, liaison
officers from the headquarters are stationed at core branches
in the region, and we try to respond quickly and proactively
while strengthening cooperation with the field.

Speedy decision-making and provision of information
are essential for responding to emergencies

Mohri: It has been about eight years since I started working onreconstruction support, and we have developed a variety ofmeasures. We have been able to make full use of theseexperiences in our countermeasures against the spread of thenovel coronavirus. For example, the “on-site evaluation”
system that we have developed to conduct evaluation close tocustomers in the affected areas has been reappropriated for us
to make quick decisions on the spot. In the future, as in theprocess of reconstruction support, it is expected that there will
be many aspects of making business plans and management
improvement plans. In such cases, we will utilize the know-how
we have accumulated so far and respond quickly in cooperation
with external experts and organizations.
29 THE 77 BANK INTEGRATED REPORTIn addition, it is important to not only wait for consultations
from customers but also proactively approach them andprovide information. This time, the unforeseen outbreak of
COVID-19 caused even latent needs to erupt at once. We willcontinue to build close relationships with our customers sothat we can respond flexibly to their needs even in such an
emergency situation.

The true value of our bank is being tested. This iswhere our support activities really begin.

Kyono: As a member of the Consulting Sales Department, I am
determined to do everything I can to help our customers.
I believe that this is a phase in which the true value of regionalbanks will be at stake, with regard to what kind of companionshipand support we can provide from a long-term perspective, evenwhen the future is uncertain.
Mohri: I feel that this incident has broadened our customer baseby, for example, allowing us to support sole proprietorshipcustomers with whom we had no previous relationship. From
this point on, we will be even closer to the people in thecommunity, and we will become a bank that people can consult
about anything.

Together with our customers, we aim not at recovery
but at reconstruction.
Kyono: In the activities of the COVID-19 Emergency Support
Team, I believe that what we should do is essentially the sameas what we do on a daily basis, which is to contribute to thegrowth and development of local economies by providing
optimal solutions that meet the needs of our customers. In
recent years, the business model of banks has changed
dramatically, and we are striving to provide not only traditional

By utilizing the video conference system of the Bank, Miyagi Prefecture,
Sendai City, Tohoku Bureau of Economy, Trade and Industry, Miyagi
Labour Bureau, and Miyagi Guarantee collectively provided information to
all regional public bodies in Miyagi Prefecture as well as some of theregional public bodies in Fukushima Prefecture, on the topics including the
emergency economic measures, employment support measures, andfinancial support measures.

■ Reconstruction Support Policy
In view of the massive damage inflicted by the Great East Japan Earthquake, The 77 Bank formulated its“Reconstruction Support Policy” to contribute to the reconstruction and development of the regional
economy. The objective of this policy is to fulfill the Bank’s responsibility as a regional financial institutionthat should work hand-in-hand with the local region, through the provision of financial services and financial
intermediary functions aimed at supporting reconstruction efforts of the region and customers.
All executives and employees of the Bank are working to support the region and the Bank’s customers
by tackling various challenges in order to restore Miyagi and the wider Tohoku region to their original statesof places brimming with vitality, affluence and kindness.

In "Reconstruction
Support Policy" Click here
for more information
You can see it.
* Japanese Language only

■ Efforts toward earthquake reconstruction
Earthquake-related loan performance(cumulative total after the earthquake to March 31, 2020)[Corprate][Retail]
OperatingNumber of cases
Amount26,750 cases / ¥743.6 billion

Capital expenditure

6,044

2,605

Total

8,649

¥273.5 billion ¥166.5 billion ¥440.0 billion

Results of Loans related to Recovery
and Development Subsidy Projectfor SME Group Facilities, etc.
(Miyagi Prefecture)
Results of response to the double
debt problems of businesses affectedby the disaster
77 Earthquake Reconstruction Support
Housing Loans (for collective relocation/leased land type) disbursements

Results of response to the double debt
problems of retail customers affectedby the disaster

Unsecured
Number of cases
AmountBridge financing results
Principal investment results

Housing

Total

4,389
18,101
13,712¥7.6 billion ¥296.0 billion ¥303.6 billion

860 cases / ¥61.9 billion
175 cases / ¥12.8 billion

Businesses affected by the Great East Japan Earthquake designatedby the Corporation for Revitalizing Earthquake-Affected Business

188 cases

Organization for Industry Reconstruction support clients

75 cases

943 cases / ¥21.1 billion

Number of housing rebuilding
consultation meetings held

Personal voluntary liquidation guideline support results
Consultations received
Applications received
Repayment plan proposals received
Repayment plan proposals agreed to

226 times
507 cases
258 cases
216 cases
216 cases(Zero refused plans)

THE 77 BANK INTEGRATED REPORT30

Initiatives for Regional Revitalization
Support for startingnew companies
or businesses

In order to create new industries and new businesses in the region,
we actively support startups, second startups, and efforts to enter
growth fields.

Four priority items for regional revitalization have been set as the following: “Support for starting new companies or businesses,”“Support and development of regional core companies,” “Promotion of urban development,” and “Support for promotion of tourism,etc.” The 77 Bank Group aims to achieve regional revitalization by contributing to the growth of local economies and the developmentof industries through cooperation with regional public bodies.

Support anddevelopment ofregional core companies

The 77 Bank

Cooperation with Tomiya school, an entrepreneur development project
conducted by Tomiya City
We are cooperating with the Tomiya school, an entrepreneur development
project conducted by Tomiya City. The Bank provides hands-on support
for this program, including seminars based on our expertise and individual
consultations, in order to make it a highly effective program that leads tothe further growth of business seeds for those who aspire to start abusiness in Tomiya City.

Collaboration with Tohoku University and
the Tokyo Stock Exchange

77 Research and Consulting
77 Capital, etc.

In collabration with Tohoku University and the Tokyo Stock Exchange, we are working to develop
the regional economy by making individual visits to companies seeking to list their shares andproposing the use of the stock market operated by the Tokyo Stock Exchange, holding events forventure companies, and collaborating with Tohoku University’s Business Innovation Promotion
Program for regional companies.

Tohoku University
Miyagi University
Tohoku Gakuin University,

Cooperation with
regional public bodies

support (IPOs, etc.)
1. Project plan formulation andexecution support
2. Share listing promotion andsupport
3. Distribution of information to
the region▶ Creation of innovation〈Part 2〉
Information exchange
meeting

Private companies
that want to contributeto the community

Regional public bodies
with issues and challenges

Proposals forsolving problems

Business
matching

Formation of Miyagi wide-area PPP platform
As part of the efforts to promote urban development projects based on the “Agreement on Comprehensive
cooperation for Regional Revitalization” and other agreements with local governments, we have formeda regional platform as a place to continuously share information and promote dialogue between the
public and private sectors in order to promote the use of private capital and know-how in the provision of
public facilities and services.

Support Members
Financial institutions thathave signed cooperationagreements
And universities, etc.

Core member

Development Bank of Japan
Regional Planning Department,
Tohoku Branch

The 77bank
Secretariat: Regional
Development Promotion
Division

Think tank

Dissemination andawareness-raising function
Human resource
development function

Tohoku PPP/PFI Association

Information
dissemination function

Tohoku University and
Miyagi University

Municipal governments

Public-private
dialogue function

Iwanuma
City

Zao
Town

ShinchiTown

MurataTown

Ogawara
Town

Taiwa
Town

Shiogama
City

Shichigahama
Town

KakudaCity

Kawasaki
Town

SendaiCity

Kesennuma
City

MisatoTown

Matsushima
Town

Yamamoto
Town

31 THE 77 BANK INTEGRATED REPORTMinamisoma Tomiya
City
City

Regional public bodies

The 77 Bank

Construction
Lease
etc.

Ishinomaki
City

Marumori
Town

Onagawa
Town

Higashi Matsushima
City

Watari
Town

Tome
City

Osaki
City

Shibata
Town

Rifu
Town

NatoriCity

Kurihara
City

Shiroishi
City

WakuyaTown

Minamisanriku
Town

Creation of listed companies
that generate high added value
for the region and high-quality
employment

Tohoku University

・Serve as a conduit for excellent
students
・Exit for investee companies

We support tourism promotion projects that contribute to the
expansion of the exchange population in order to revitalize theregion.

Supporting the revitalization of a local railroad line
through industry-academia-government-finance collaboration

With the aim of revitalizing the areas along the Abukuma Express Line between Fukushima
City in Fukushima Prefecture and Shibata-machi in Miyagi Prefecture, we worked on a
project to raise funds for the production of “Honey beer” through crowdfunding incooperation with universities, private businesses, and related regional public bodies
along the Abukuma Express Line.
Decline in thenumber of passengers
on the Abukuma Express,
a local train that runs
through both
Fukushima andMiyagi PrefectureWith the goal of making the area
along the railway line more lively
through industry-academiagovernment-finance collaboration

Forum on regional revitalization along
the Abukuma Express Line (December 2016–)
With 16 constituent organizations for revitalization,
5 working discussions were held
[report on collaborative project was produced].

Real estate

Regional public bodies with which 77 Bank has concluded Comprehensive Cooperation Agreements
for Regional Revitalization (33 as of June 30, 2020)

Kami
Town

Tokyo Stock Exchange
Development Bank of Japan
Japan Finance Corporation
SME Support, JAPANTokeiren Business Center
Sendai Start-up Assistance Network ,etc.

Listing
Tokyo Stock Exchange

・Survey report on the area along the railway line
・Proposals for tourism PR methods

The 77 Bank

Trading

Execution support
function

77 Research andConsulting ,etc

Support for
promotion of
tourism, etc.

[Private companies]
Individual market
soundings
for each projectExchangefunction

MiyagiPrefecture▶ Regional company growth〈Part 1〉
Presentations byregional public bodies

We held the “77 Regional Revitalization Business Matching Event,”
an information exchange meeting between regional public bodies
that had concluded comprehensive cooperation agreements with
us and private companies. The purpose of this event was topromote collaboration between regional public bodies and privatecompanies, which can provide solutions to the challenges regional
public bodies are facing. The event saw a very lively exchange of
information.

Sharing ofRegional Issues

The 77 Bank x Tohoku University x Tokyo Stock Exchange Collaboration Scheme

etc.

First “77 Regional Revitalization Business
Matching Event” Held

We promote business evaluations and provide
various solutions to meet the life stages ofcompanies.

Promotion of urban development
We are actively participating in public-private
partnership projects and providing support
for the redevelopment of public infrastructure.

Support for Onagawa Town’s public-private
partnership organization through crowdfunding
In June 2020, we cooperated in the formation of a crowdfundingbased fundraising project by an organization to promote community
development in Onagawa Town, Miyagi Prefecture, through a publicprivate partnership, with the aim of revitalizing the town’s industry
in the face of the novel coronavirus.
In addition to providing support for
the launch of the crowdfunding
project and participating in theorganization, we have also renderedfinancial support by contributing to
the project’s costs.

[Honey beer production project]
SennanSinken Factory

Marusho
Sake Store

Consolidation of local
resources along
the Abukuma Express Line

IshizukayohoenFukushima College(student)

・Proposal for the use of crowdfunding
・Introduction of collaborators and asking them toparticipate in the project
Raised more funds
・Financial planning support than the target amountand succeeded in creatinga new local product

Disseminating thecharm of the railway
line area!

Start the projectto make Honey beer

Initiatives of the Financial Networkof TOHOKU Tourism

With the aim of revitalizing the tourism industry in the Tohoku region andcommunicating its attractiveness, the 2nd FINE+ Tohoku Instagram PhotoContest was held as a part of the efforts of the Financial Network of
TOHOKU Tourism*. The contest was open until the end of March 2020, andthe initiative was a continuation of the first event held from April to the endof August 2019, which was very well received and decided to continue.

*The Network consists of Aomori Bank, Akita Bank, the Bank of Iwate, Yamagata Bank,
Toho Bank, and the Development Bank of Japan

Hitome Senbon Zakura,(One thousand cherry trees in one view)
Miyagi Prefecture

Mt. Kattadake summit,
Miyagi Prefecture

THE 77 BANK INTEGRATED REPORT

32

Support for startingnew companies or businesses

Support and developmentof regional core companies■ Launch of the Sendai Startup
Ecosystem Promotion Committee■ Cooperation with the "Sendai Future
Generating Company Creation Program"

In December 2019, the Sendai Startup
Ecosystem Promotion Committee wasestablished with local industry, government,
academia, and financial organizations.
In July 2020, Sendai was selected by the
Cabinet Office as a “Hub City for the
Promotion of a Startup Ecosystem” inrecognition of these and other efforts.

The Bank works together with Sendai City towards intensive
support for the listing of local companies, through cooperationin the Sendai Future Generating Company Creation Program
implemented by Sendai City.
This program provides intensive support for stock listing,after recruiting and selecting local companies that could
possibly be listed within roughly five years, and certifying
them as Sendai Future Generating Companies.
(eight companies were certified in FY 2020).

■ Provision of the 77 Business Startup
Support Package
We are providing the 77 Business Startup Support Package,
which covers our menu of business launch support services,in an aim to satisfy customers in the foundation stage withneeds to optimize their operation, including for accounting
and payment.
This is a package of products
and services provided by the 77
Bank Group and business
partners that can be used to
improve the efficiency of operation
including for accounting andpayment. We support for a startup
with a variety of services.

"Sendai Future Generating Company Creation Program” cooperation schemes

Listing
Certified company
Project partner
The 77 BankTokyo Stock Exchange

Sendai city

Tohoku University

Operation

Cooperatingcompanies /organizations■ Support for Y.K. Sugawara
Y. K. Sugawara(Taiwa Town, Miyagi Prefecture), which cultivates
Date Iwana, a specialty fish product of Miyagi Prefecture,suffered extensive damage from Typhoon No. 19 in 2019,making it difficult to continue cultivating the fish. The Bank
proposed that Sugawara raise funds by crowdfunding forrestoration of the aquaculture facility and of communicating
the appeal of the product to a wide audience. For that
purpose, we introduced our business matching partner,
Music Securities Inc.

Support for the post-disaster business restoration,
by utilizing crowd-funding■ The 77 New Business Subsidy
Since 1998, THE 77 Business Support Foundation has been
awarding and subsidizing companies that are actively
developing their businesses by utilizing new and originaltechnologies and know-how. To date, a total of 76 companies
have been selected and subsidized.

Securing funds for Business continuity
business continuity at regional industries

Publicity for the valueof “Date Iwana(Japanese char)”

Scenes ofdamage in
the aftermath

Date Iwana,
Miyagi Prefecture’s
local specialty

Photograph Source: Project pages by Music Securities, Inc.

■ Supply of funds by 77 Capital Co., Ltd.
The 77 New Business Fund, which The 77 Bank established with its group company 77 Capital Co., Ltd. supports the growth of companies
in various life stages, mainly by providing capital funds.
Kakiya Co., Ltd. (Shiroishi City, Miyagi Prefecture) manufactures processed marine products such as salmon flakes and squid okra as
well as daikon garnish to accompany sashimi made from locally grown Zao Kogen Daikon and cut vegetables made from its own produce,
and it sells them widely throughout Japan. The company is working on the succession of the business from the founding owner and ismaking efforts to expand products that meet consumer needs and to enhance manufacturing facilities to increase supply volume. The 77
Bank and 77 Capital Co., Ltd. proposed raising funds through equity as part of efforts to strengthen their management structure. The
company aims to achieve further growth by utilizing the obtained funds.
Investment and Operation

77 Capital

Growth capital supply

Venture company

77 Capital Co., Ltd.

33 THE 77 BANK INTEGRATED REPORTThe 77 New Business Funds( Total fund amount : ¥ 1 billion)
Management support

Companies in foundationand growth stage

Investment

The 77 Bank

Promotion of urban development

Support for promotion of tourism, etc.

■ Promotion of PPP / PFI project■ Initiatives of the Mutsumeku TOHOKU
Laboratory

In response to an expected increase in PPP/PFI projects led bymunicipal governments stemming from a declining population
and aging public facilities, The Bank has further strengthened
relationships with municipal governments, through initiatives
including involvement in the project from the formulation stage.
To date, the Bank has participated as a financing financial
institution for 13 PPP/PFI projects in Miyagi Prefecture, and has
conducted arranger services as the main bank for seven ofthese projects.

Track record of the Bank’s PPP/PFI project in Miyagi Prefecture
ownerProject

Sendai City

Matsumori Plant Related Civic Facilities
Development Project “Spopark Matsumori”

Sendai City

Observatory Development and Operation Project

Tohoku University

Sanjo Student Dormitory Development Project

Ishinomaki District Integrated
Administration of a Large Region
Office Work Association

Fire Department Headquarters Transfer andDevelopment Project

Sendai City

Nomura School Lunch Center Development Project

Ishinomaki District Integrated
Administration of a Large Region

Office Work Association/ Nursing Home Improvement
Project “Mansei-en”

Miyagi Prefecture

Fire Academy Transfer and Development Project

Miyagi Prefecture

Education and Welfare Complex Development Project

Higashimatsushima City

School Lunch Center Development Operation Project

Onagawa Town

Onagawa Seafood Processing Complex
Wastewater Treatment Facility Development Project“Fishery Support Ogawa”

Ministry of Land, Infrastructure,
Transport and Tourism

Sendai Airport Special Operation Project

Sendai City

Minamiyoshinari School Lunch Center
Development Project

Tohoku University

Aobayama University House Development Project■ Support for the Kawa Machi Terasu
Yuriage Co., Ltd.,It was established in September 2017 by a group of local
businesses to build, operate, and promote new commercial
facilities as part of the reconstruction and local development
efforts in the Yuriage area of Natori, which was severely
damaged by the Great East Japan Earthquake.
The new commercial facility, located near the mouth of theNatori River, is the first permanent commercial facility on theembankment in Japan and an attractive spot integrated withthe waterfront, with restaurants and stores.
As a member of the local Town Revitalization Council, The 77
Bank has been involved from the business planning stage, andin addition to providing funds and business matching services,
we have also provided funds and support to install cashless
payment for companies that have opened their stores in Kawa
Machi Terasu.
National
goverment

plan application
and approval

Yuriage area
revitalization council

77 Capital’s main business activities include the formation and management of investment limited
partnerships (funds). In addition to providing a wide range of funding in response to the businesscharacteristics and needs of companies, the company is actively engaged in company development
and company support through investment and is working to improve regional value.

・Identify and collect information on brand development needs of local companies
・Business matching, sales channel development, and expansion support
・Support for industry-government-academia collaboration and inbound tourism development

・Provide market data and trends
・Support for product concept andbrand strategy
・Product naming and design creation

・Provide test marketing opportunities
・Support for product development by
utilizing buyers’ expertise
・Sales data provision, sales planning,and pricing support■ Support for the Akiu Tourism Factory Co., Ltd.

Business owners and business representatives of several
companies in Miyagi Prefecture have been working together tomake use of traditional Japanese houses and to attract tourists
to the prefecture. A 160-year-old traditional Japanese house in
the Akiu district of Sendai has been renovated into a tourist
exchange center, which also houses a restaurant.
The 77 Bank has been providing support for efforts topromote the attractiveness of the region as a tourist destinationand to revitalize the local community, such as by obtaining adesignated financial institution for the use of the angel tax
system in Sendai using the national strategic special zone toencourage diversification of fund procurement.
Wish to create a tourist
destination that utilizes
the charm of the region

Sharing challenges
Business planning
Financial consultation

Akiu Tourism Factory Co., Ltd.
Funded and establishedby people from within
and outside the Akiu district〈Reconstruction
Agency〉〈Ministry of Economy,
Trade and Industry〉

Kawamachi Terrace
Yuriage Co., Ltd.
Subsidy

Cooperation

・Planningsupport・Funding

The 77 BankJapan’s first permanent commercial facility
on an embankment
A place of relaxation where tourists andlocal residents can enjoy a stroll
Businesses in and outside of Natori
opened restaurants, stores, a processedseafood shop, anda beauty salon andlaundromat for theconvenience of local
residents.

Facility name:
AkiushaSendai City

（Sendai Ctiy, Miyagi Prefecture）

・Renovation of a 160-year
old house
・Provision of food using
local agricultural products
・Introduction of local
culture, hands-on
experiences
・Setting up a bicycle
touring course

Funded and establishedby Natori City,
local companies, etc.

Facility Name :Kawa Machi Terrace Yuriage

The 77 Bank

Funding

Town Revitalization Planfor the Yuriage area, Natori（Natori City, Miyagi Prefecture）

Companies in the second
startup

Participationin the council

In March 2018, the Financial Network of TOHOKU Tourism,
Sendai Mitsukoshi, and Tohoku Hakuhodo signed a businesscooperation agreement with the aim of developing regional
industries and so on, launching the Mutsumeku TOHOKU
Laboratory.
We are working on the development of local industries andthe promotion of tourism by discovering processed products
and handicrafts that utilize the local resources of Tohoku,
refining them into new local brands, and promoting theirsales.

・Businessmatching
・Various financial
support for companies
opening stores

Information
sharing

Obtained certification
as a designatedfinancial institution
under the angel tax
systemSpecial application

First inJapan

Utilization of the National Strategic Special
Zone version of the Angel Tax System (*)
an individual invests in a small business less than three* Ifyears
old that is engaged in a business startup or
employment promotion, he or she will receive preferential
tax treatment, and the amount of investment minus ¥2,000
will be deducted from his or her gross income for the year.

Funding

Miyagi
Organization
for Industry
Promotion

Photograph Source: Kawamachi Terrace Yuriage Co., Ltd.

Discovering and disseminating
the attractiveness of the Akiu
District in cooperation withvarious parts of Tohoku

Easier to solicit investment from individual investors,
expanding the scope of fundraising
Photograph Source: Akiu Tourism Factory Co., Ltd.

THE 77 BANK INTEGRATED REPORT

34

Productivity Enhancement Strategy

Paperwork - free × DigitalStrengthening consulting capabilities based on humanservices through Paperwork - free × digital

Paperwork- free

DigitalReduction, centralization,and simplification of branch officeadministrative work

Promotion of Paperwork-freethrough the digitalization andexpansion of non-face-to-face channels

・Abolition of excessive administrative work
・Centralization of branch operations at headquarters
・Simplification of the remaining paperwork at branches

・Automation and streamlining of branch office operations
・Realization of paperless, seal-less, passbook-less, and cash-handling-less
・Provision of full banking functionality through personal apps

Interview 07

Reducing administrative work at branch offices
and increasing the time spent with customers
In order to improve the Bank’s profitability, we must increase the amount of time we

Society is changing toward digitalization, so our bank also must change its businessspend on customer-facing consulting. To achieve this goal, we have started full-scalemodel. In order to achieve this, we must first eliminate inefficient administrative work,“Paperwork-free” initiatives to reduce inefficient work and inefficient desk-bound hours.

which will lead to our digital transformation. This will strengthen consulting sales, which

One initiative with which we are currently experimenting is Centralization to

Hiroaki Takahashi
35 THE 77 BANK INTEGRATED REPORT

are close to customers and unique to regional banks.

Headquarters. This work can be broadly divided into that of the Operations Group andOne of the things we are currently focusing on in our digitalization efforts is expandingthat of the Loan Group. In the Operations Group, much of the administrative work andour non-face-to-face channels. By using non-face-to-face channels, we can collect

time-consuming tasks generated at the branches are transferred to a specialized

data that cannot be obtained through face-to-face conversations, which can be used

department at the headquarters for centralized administrative processing. In addition,

for analysis and research to uncover needs that even customers are unaware of and to

the Loan Group at headquarters handles the examination and storage of approval

propose optimal services. In particular, the penetration rate of Internet banking using

documents and contracts related to transactions with customers, execution operations,smartphones and PCs is increasing rapidly, and we are making ground-up efforts toforeign exchange operations, and other tasks that used to be handled by staff at

upgrade and enhance the functions of our Web services and applications.

branches. Centralizing these operations will allow branch employees to spend moreOn the other hand, RPA has been introduced at the headquarters to automate routine

time with customers, which will lead to proposals that are more highly specialized astasks. We also plan to greatly promote the use of AI in the future. For example, in thewell as tailored support. We are gradually expanding this initiative to cover all parts ofpast, when we proposed services to customers, we contacted them based on their

the Bank while checking for improvements and problems. So far, the feedback has beenbalance sheet at the end of the month. Ideally, it would be more effective to check thepositive, and I am confident about the success of this initiative.

trends on a daily basis, but this was not possible, considering the time and workload

Eliminating paperwork will also have a significant impact on the digital strategy we are

involved. However, with the use of AI, we can acquire customer data automatically andpursuing. We can maximize our digital strategy’s effectiveness by thoroughly reducing

cross-analyze the data with other information, making it possible to propose theinefficient operations and then identifying operations that can be replaced by digitalnecessary services at more precise times.

ones. In order to go seal-less, passbook-less, paperless, and so forth, we must form a

We would also like to enhance our equipment. For example, by having our employees

new framework through the power of digital technology. To this end, we are working

use tablets, we can provide our customers with timely information on industry trends

closely with the Digital Strategy Division on each initiative.

and highly specialized content. This will be a great help, especially for young employees

There is no end to reducing administrative work. In each era, technology evolves, andSenior Officer, General Planning& Coordination Division

Seeking to strengthen consulting sales
by promoting digitalization within the organization

who are still inexperienced.

customers’ needs change. We must constantly review our style and adapt to changes.

While promoting these initiatives, we must be aware that digital technology is not a

In the past, we have been too busy to address many issues in day-to-day operations,panacea. In particular, unlike megabanks and Internet banks, our bank is rooted in thiseven if we found them to be wasteful or inefficient. With this initiative, we have received

region and has a mission to work together with the community. In this sense, we must

many opinions and ideas from branches toward the realization of Paperwork- free.

take advantage of digital technology to enhance our convenience as a bank; at the same

In order to accurately respond to societal changes, we will continue to foster a culture

time, we must value our unique qualities, such as the fact that our employees will

within the Bank in which each employee is always conscious about the efficiency ofcontinue to visit our customers and provide face-to-face support. I believe that our

office work and proactively seeks to improve it.

mission going forward will be to transform our business model by skillfully integrating
digital with non-digital and face-to-face with non-face-to-face.

Manager, Digital Strategy Divsion

Hiraku Nakatsugawa

THE 77 BANK INTEGRATED REPORT36

■ Automating and Streamlining Branch Office Operations with Digital Technologies■ Expansion of Non-face-to-face Channels
The Bank is making efforts to expand its non-face-to-face channels, such as the 77 Bank App.

We are creating more time to focus on
consulting by consolidating the remaining
administrative work at the branches tothe headquar ter s and automating it
through the use of RPA and other digitaltechnologies.

Headquarters

Branchwork〈Compression〉

Branchwork〈Case Study〉
Credit rating operations in the financing
business, etc.

work

Consolidating
operations

BranchDigitalwork

77 Bank App▶

Balance, deposit, and withdrawal details

work

work

● Utilization of AI-OCR (converting written text on forms into data)● Utilization of RPA (automation of registration work)

PayPaypring

merpaydocomo Kouza

J‐Coin Pay

Bank Pay

The 77 Bank Website
for Our Customers’ Employees
77 Web Relations

Customers can log into
their Internet banking
account to make transfersand other transactions.*

Cashless payments are spreading around the world. The central government’s goal is to increase the domestic cashless payment ratio
from the current 25% to 80% in the future in order to improve payment efficiency and attract inbound tourism consumption.
In order to enhance customer convenience through cashless transactions, we support debit cards as well as a wide variety ofsmartphone-based cashless-payment services provided by external companies.

LINE Pay

We will send out special
coupons.

Transfers and other transactions(Internet Banking)■ Realization of a Cashless Society

Rakuten Edy

CouponYou can check youraccount balance anddeposit/withdrawal details
in real time.

BranchImproved efficiency
through digitization

App that enables retail customers to use various services whenever they want without visiting ateller, including viewing balances, or having fun saving for preset goals like buying a car or going ona trip.

We are constantly updating this site with
exclusive information, such as about
campaigns and products that are available
only to employees of our customer
companies.

Lifetime Passbook by Moneytree
By linking up to Moneytree, apersonal-asset-management
app, users can manage theirbank, securities, credit cardand point services balancesand so forth all in one place.*

77 JCB Debit

77 Bank app can provide links toother companies’ websites in orderto enhance convenience by
providing local information andconvenient information from othercompanies' services, and the list oflinks is expanding.

Deposit by Purpose■ Collaboration with 77 Card

Clients can set a target
amount and deadline forsaving for each purpose,such as purchasing a car
or taking a trip.

MORI-NO-MIYAKO CASHLESS TOWN initiative of Sendai’s Central Shopping District is aimed at making the
district the most convenient place to shop in Japan.

With the aim of further promoting the use of cashless payments, The 77 Bank, together with 77 Card, is working with the Sendai
City and other organizations to revitalize shopping areas. We aim to increase sales at local stores by utilizing the data obtained
from the spread of cashless payments.

* To use this service, users must sign up for the 77 Direct Service and register on first use.

▶

Using data to help improve the business environment

77 BANK Pay B▶

App that enables payments to be madeanytime, anywhere without going to an ATM
or convenience store, as long as you have asmartphone and payment handling slip.

Central shopping district
SupportCollaboration

Collaboration
Promote of cashless payments
Operation of a bulk duty-free counter

Sendai City
Central Shopping District
Revitalization Council

Campaign announcement

Payment terminal
deployment

Installation ofcontracted
terminals

Internet Insurance
Internet insurance is an
insurance product that can becompleted from application tocontract via smartphone. One
can also use the Insurance
Robot Advisor
for detailed
simulations.

100% Web based Loans"Future Vision"
77 Card Co., Ltd.

To increase store sales by utilizing the obtained data

77 Card issues credit cards for retail and corporate customers and is also engaged in the card loan guarantee business. In addition,
the company is working together with goverment agencies to support the introduction of cashless terminals to promote the further
spread of cashless payments.

37 THE 77 BANK INTEGRATED REPORT

Links to Other Companies’
Websites

100% Web based loans are aloan product that can becompleted from application tocontract via smartphone.
〈Lineup〉●77 Car Loan ●77 Wide Loan
●77 Educational Loan
●77 Card Loan
●77 multi-purpose Loan

Insurance Review
Simulation
With nine questions, customers
can get a solid quote andautomatically calculate theirpremiums.

77 Bank app account opening

App that enables a user to apply to open
an ordinary deposit account or investment
trust trading account from the comfort oftheir home, etc. at any time without visitinga teller.

IB Investment Trust
The fees are more reasonable
than over the counter. Users
can also set goals with theemail function.

口座開設

Investment Trust
Information
Distribution Service

You will receive information
about funds (NAV, distributions
and so forth), stock market
information andrecommendations fromus according to yoursettings.

WEB Passbook
WEB Passbook is anenvironmentally friendly andconvenient service that allows users
to inquire about their balance,
deposits, and withdrawals
without providing a paper
passbook. Users cancheck transactions fromthe past 13 months.

THE 77 BANK INTEGRATED REPORT

38

Message from an Outside Director

Working Style Reform Efforts
The Bank is committed to creating a highly productive organization where each and every employee can perform
to their full potential in a healthy state of mind and body, and with a greater sense of fulfillment and job
accomplishment. By allowing our employees and the organization to continue to grow together while enhancing
our consulting capabilities, we aim to be the bank chosen by customers in the region.

Develop promising human capital

Realize work-life balance—People make companies——From work-work to work-life—

1.Fostering an organizational culture of self-education
2.Enhancement of consulting capabilities through human resources
development programs, etc.
3.Initiatives aimed at career development support
4.Initiatives aimed at improving abundantpersonal capabilities

Interview 08

Outside Director

Emiko Okuyama

39 THE 77 BANK INTEGRATED REPORT

Establish an environment
where diverse humanresources can demonstrate
their full potential

Become the bankchosenby customers—A healthy body is capital—
1. Formulation of the Health andProductivity Management Declaration
2. Strengthening health management
measures3. Improving the work environment
4. Raising employee awareness ofhealth management

As an outside director, she makes proposals for the further promotionof Working Style Reform from an objective standpoint.
I believe that the role of outside directors is to confirm
various initiatives and make recommendations from an
objective perspective to allow The 77 Bank to contribute to
the development of the regional economy in Tohoku andbecome customers’ preferred bank. There is a wide range ofissues I can confirm, including those that are difficult to
notice from within the bank and determining the balance
between risk and safety. One of the things I am focusing on
is Working Style Reform through promoting diversity.
I believe that if each of our diverse employees can performtheir duties with a sense of satisfaction and fulfillment, it willlead to the improvment of productivity and services.
In 2015, while serving as the mayor of Sendai, I gave aspeech at a symposium on the promotion of women’s
advancement hosted by the Bank, and I got the impressionthat the Bank is enthusiastic about promoting diversity. In
fact, it has been proactive in its efforts to date, including theestablishment of the Working Group for the Promotion of
Women’s Participation in 2013 and the Diversity Promotion
Office in 2016. When I met female employees at symposiums
and seminars, I found that many of them were active andtalented, and I felt the need to create an organization thatwould put them in positions that prompt them to demonstrate
their abilities. Compared to 10 years ago, the percentage ofwomen in management positions has increased significantly,
but I believe we can increase it further.
One of the themes I am focusing on as an inseparable partof this issue is young employees’ visualization of their careerplans, including female employees. If too many employees
leave the bank within a few years, the investment in humanresources will not be worthwhile, and the transfer of businessknow-how may be hindered. To prevent such a situation, we
need to communicate the job’s attractiveness to employees andevolve into a workplace that appeals to long-term employees;
the job of a banker is enticing and significant. With the financial
crisis of 2007–2008, the Great East Japan Earthquake,
COVID-19, and other unimaginable events happening one after

Vision aimed for by the Bank
through working style reform

Promote health andproductivity management

In 1975, she was hired as a Sendai City official. After working
on the Citizens’ Affairs Bureau and the Education Bureau, she
ran for Sendai mayor in 2009 and first elected. Served two
terms as mayor, which ended in 2017.

1.Strengthen efforts aimed at reducing
total working hours
2.Supporting employees to balance workand childcare/nursing, etc.

—Rewarding working environments—
1.Strengthening initiatives to promote
the active participation of women
2.Utilizing seniors, part-timers, etc.
3.Revision of personnel evaluation
systems

through improvements
in productivity and service

Working Style Reform Efforts
Promote Health and Productivity Management

another, banks are playing an extremely important role insociety and the economy. Being involved in a job that supports
the social economy is highly rewarding and helps employees
grow as people.
To address the issues of female managers and careeradvancement, I think it is important “to deepen the perspectiveof employees” and “to share information within the bank.” InFY2020, we will continue to hold a number of career seminars
and round-table talks for childcare leave participants, andI hope that employees will take advantage of these opportunities
to learn management skills based on accepting diversity andcommunication skills for improving the work environment.
Also, to motivate young employees, it is necessary for
management to present a clear vision of their policies and what
they are thinking. For example, to make young employees feelthat there is a connection between the headquarters and thefront line in the field, it is necessary not only to disclose
information formally, but also to devise ways to disseminate
information that is easy for young employees to understand.
Through the Board of Directors and various events, I feel thatPresident Kobayashi is also focusing on Working Style Reform,
and our efforts are making steady progress, such as receiving
awards from the Ministry of Health, Labor and Welfare andMiyagi Prefecture as a model company for promoting diversity.
I will continue to support the company in its efforts to makefurther progress.

IIn December 2018, the Bank issued the Health andProductivity Management Declaration and has beenstrengthening its efforts accordingly. As for specific initiatives for
Health and Productivity Management, based on the results of the previous fiscal year,
we have established a system in which the Personnel Division plays a central role in the
management of the program and implements it in cooperation with the health insurance
association, industrial physicians and public health nurses.
President
Manager of Personnel Division
Personnel Division(Formulated in December 2018)

HealthInsurance
Association

Industrial
physicians
and publichealth nurses

Labor
Union

Held "Career Seminar / Exchange Meeting"with Outside Director Okuyama
External
experts

46 female employees participatedExternal evaluations on the Bank’s initiatives
Certified “Platinum Kurumin”,
a special certification pursuant
to the Act on Advancement of
Measures to Support Raising
Next-Generation Children

Certified “Gold Certified
Company” for successfully
fulfilling potential of female
talents in Miyagi Prefecture

Certified “Eruboshi (Grade 3),”commending general businessproprietors meeting the requirementsfor promoting female participation,
pursuant to the Act on Promotionof Women's Participation andAdvancement in the Workplace

Chosen as a constituent of MSCI Japan
Empowering Women Index, which recognizes
companies with outstanding efforts inpromoting the participation and advancementof women in the workplace

Received “Commendation for a Model BusinessCommitted to Creating Attractive Workplace”
from Miyagi Prefecture and Miyagi Labour Bureau

Percentage and number of women in managerial positions（ People）

150
100
ー ％
■ People
50
0

13.4
7.7
90
March 31,
2010

149
March 31,
2020

（%）

12

Certified as “Health and Productivity Management
Organization 2020 (White 500)”

840* Notes on MSCI indexes and logos, etc..
THE INCLUSION OF The 77 Bank, Ltd., IN ANY MSCI INDEX, AND THE USE OF MSCI LOGOS, TRADEMARKS, SERVICE MARKS OR INDEX NAMES HEREIN, DO NOT CONSTITUTE A SPONSORSHIP,
ENDORSEMENT OR PROMOTION OF The 77 Bank, Ltd., BY MSCI OR ANY OF ITS AFFILIATES. THE MSCI INDEXES ARE THE EXCLUSIVE PROPERTY OF MSCI. MSCI AND THE MSCI INDEX NAMES AND LOGOSARE TRADEMARKS OR SERVICE MARKS OF MSCI OR ITS AFFILIATES.

THE 77 BANK INTEGRATED REPORT

40

Governance Strategy
Board of Directors and Audit & Supervisory Committee Members

Koichi Suzuki

Managing Director
Apr. 1984
Mar. 2005
Sep. 2007
Jun. 2009
Jun. 2013
Jun. 2014（As of July 31, 2020）

Jun. 2015
Jun. 2018

Managing Director

Joined the Bank
General Manager, Wakuya Branch, the Bank
General Manager, Masuda Branch, the Bank
General Manager, General Affairs Div., the Bank
General Manager, Business Promotion Div., the Bank
Executive Officer and General Manager,
Business Promotion Div., the Bank
Director, Executive Officer and General Manager,
Oroshimachi Branch, the BankManaging Director, the Bank (current position)

Apr. 1985
Jun. 2005
Jun. 2008
Jun. 2010
Jun. 2012
Jun. 2014
Jun. 2016
Jun. 2018
Jun. 2019

Atsushi Shitoh

Joined the Bank
Chief Secretary, the Bank
General Manager, Fukushima Branch, the Bank
General Manager, Izumi Branch, the Bank
General Manager, Treasury
Administration & International Div., the Bank
Executive Officer and General Manager,
Tokyo Branch, the Bank
Director, Executive Officer and General Manager,
Head Office Business Div., the BankManaging Director and General Manager,
Head Office Business Div., the BankManaging Director, the Bank (current position)

Sep.

Managing Director
Apr. 1985
Sep. 2007
Mar. 2009
Jun. 2011
Jun. 2013
Jun. 2014
Jun. 2016
Jun. 2018

Yoshikazu Onodera

Outside Director
Apr. 1967
May. 1996
Jun. 1998
Sep. 1999
Dec. 2003
Jun. 2006
Jun. 2007
Oct. 2009
Jun. 2013

Apr. 1975
Aug. 2009
Jun. 2018

Apr. 1986
Sep. 2007
Jun. 2009
Jun. 2012
Jun. 2015
Jun. 2016
Jun. 2018
Jun. 2019

Masahiro Sugita

Apr. 1974
Sep. 1977
Jun. 1996
Nov. 2004
Jun. 2007
Jun. 2013
Jun. 2015
Jun. 2016

Emiko Okuyama

Oct. 1987
Apr. 1992
Apr. 1999

Jul. 2014
Jun. 2016
Nov. 2016
Apr. 2018
Jun. 2020

Director, Audit & Supervisory
Yoshiaki Nagayama
Committee Member

Jun. 2003
Nov. 2003
Jun. 2004
Jun. 2006
Jun. 2008
Jun. 2010
Jun. 2017

Hidefumi Kobayashi

Teruhiko Ujiie

Makoto Igarashi

President

Chairman

Senior Managing Director

Apr. 1981
Jun. 2006
Jun. 2008
Jun. 2010

Jun. 2013
Jun. 2014

Jun. 2015
May. 2016

Jun. 2016
Jun. 2017
Jun. 2018

Joined the Bank
General Manager, Treasury Div., the Bank
General Manager, General Planning& Coordination Div., the Bank
Director and General Manager,
General Planning & Coordination
Div., the Bank
Director and General Manager, Head
Office Business Div., the BankManaging Director and General
Manager, Head Office Business Div.,the Bank
Managing Director, the BankManaging Director, the Bank,
General Manager, Ishinomaki
Branch and Minato BranchManaging Director, the Bank
Representative Director and Deputy
President, the Bank
Representative Director andPresident, the Bank (current position)

Apr. 1969
Aug. 1992

Jun. 1993
Jun. 1995
Jun. 1997
Jun. 1998
Jun. 1999
Mar. 2000
Jun. 2002
Jun. 2005
Jun. 2010
Jun. 2018

41 THE 77 BANK INTEGRATED REPORT

Joined The Industrial Bank of Japan,
LimitedAssociate Director-General, Related
Business Department, The Industrial
Bank of Japan, Limited
Director and General Manager,
Business Development Div., the Bank
Director and General Manager,
Business Promotion Div., the Bank
Director and General Manager, Head
Office Business Div., the BankManaging Director and General Manager,
Head Office Business Div., the BankManaging Director and General
Manager, Investigation Div., the BankManaging Director, the Bank
Senior Managing Director, the Bank
Representative Director and Deputy
President, the Bank
Representative Director andPresident, the Bank
Representative Director andChairman, the Bank (current position)

Apr. 1980
Sep. 2000
Jun. 2002
Jun. 2004
Jun. 2005
Jun. 2006
Jun. 2009
Jun. 2012
Jun. 2013
Jun. 2017
Jun. 2018

Joined the Bank
General Manager, Onahama Branch,
the Bank
General Manager, Bashonotsuji
Branch, the Bank
General Manager, Shiroishi Branch,
the Bank
General Manager, General Affairs
Div., the Bank
General Manager, Personnel Div.,the Bank
Director and General Manager,
Tokyo Branch, the Bank
Director and General Manager,
Business Promotion Div., the BankManaging Director, the Bank
Senior Managing Director, the Bank
Representative Director and Senior
Managing Director, the Bank
(current position)

Apr. 1970
Jun. 2001
Jun. 2005
Jun. 2006
Jun. 2007
Jun. 2009
Jun. 2010
Jun. 2013
Jun. 2013
Jun. 2015
Jun. 2017

Apr. 1975
Jul. 2010
Jun. 2017
Jun. 2017
Jun. 2017

Kenji Kikuchi

Oct. 1973
Sep. 2005
Apr. 2006
Jun. 2007
Jun. 2008
Apr. 2014
Jun. 2015
Jun. 2017

General Manager, Head Office Business
Division, and Basho no Tsuji Branch

Joined the Sendai City Government
Vice Mayor, Sendai City
Chief Director, Sendai Green Association
President and Representative Director,
Sendai Software Center Co., Ltd.
Auditor, Sendai Meat Wholesale Market Co., Ltd.
(current position)
Chairman, Sendai Council of Social Welfare(current position)
Audit & Supervisory Board Member, the Bank
Director, Audit & Supervisory Committee Member,the Bank (current position)

Director, Audit & Supervisory
Committee Member (Outside Director)

Masahiro Wako

General Manager,
Personnel Division

Mitsuo Chubachi

Joined the Bank
General Manager, Nihonbashi Branch, the Bank
General Manager, Risk Management Div., the Bank
Audit & Supervisory Board Member, MIYAGI SYOJI Co., ltd.
Director and General Manager, Administration Div.,
77 Securities Co., Ltd.
Director, Audit & Supervisory Committee Member, the Bank
(current position)

Director, Audit & Supervisory
Committee Member (Outside Director) Masai Yamaura

Toshio Suzuki

May. 2001
May. 2003
Jan. 2011
Apr. 2012
Apr. 2016
Jun. 2019

Executive Officers

General Manager,
Audit & Inspection Division

General Manager,
Business Promotion DivisionJun. 2019

Joined the Miyagi Prefectural Government
Vice Governor, Miyagi Prefecture
President and Representative Director,
TECHNO PLAZA Miyagi, Inc.
President, Miyagi Organization for Industry Promotion(current position)
Director, Audit & Supervisory Committee Member,the Bank (current position)

Senior Executive Officers

General Manager,
Tokyo Branch

Apr. 1985
Mar. 2011
Jun. 2013
Jun. 2015
Jul. 2016

Joined Tohoku Electric Power Co. Inc.
Deputy Director and General Manager, Human Resources Division,
Tohoku Electric Power Co. Inc.
Director and General Manager, Human Resources Division,
Tohoku Electric Power Co. Inc.
Director and General Manager, Miyagi Branch, Tohoku Electric Power Co. Inc.
Senior Executive Officer and General Manager, Miyagi Branch,
Tohoku Electric Power Co. Inc.
Standing Statutory Auditor, Tohoku Electric Power Co. Inc.
Corporate Auditor, The Daishi Bank, Ltd.
Audit & Supervisory Board Member, the Bank
Chairman and Representative Director, Tohoku Intelligent
Telecommunication Co., Inc.
Advisor, Tohoku Intelligent Telecommunication Co., Inc.
Director, Audit & Supervisory Committee Member, the Bank (current position)

Director, Audit & Supervisory
Committee Member (Outside Director)

Seiichi Ohtaki

Assistant Professor, Faculty of Economics, Tohoku university
Professor, Faculty of Economics, Tohoku university
Professor, Graduate School of Economics and Management,
Tohoku university
Dean Graduate School of Economics and Management /Faculty of Economics, Tohoku University
President, The Sanaburi Foundation(current position)
Auditor, Yurtec Corporation
President, Organization for Creating LocalGood(current position)
Vice-President, Shizenkan University (current position)
Director, the Bank (current position)

Director, Audit & Supervisory
Committee Member

Joined the Bank
General Manager, New York Branch, the Bank
General Manager, International Div., the Bank
Director and General Manager, Business Promotion Div., the Bank
Director and General Manager, Tokyo Branch, the Bank
Director and General Manager, General Planning & Coordination Div.,the Bank
Managing Director, the BankManaging Director and General Manager, International Div., the BankManaging Director, the Bank
Senior Managing Director, the Bank
Representative Director and Senior Managing Director, the Bank
Representative Director and Deputy President, the Bank
Director, Audit & Supervisory Committee Member, the Bank
(current position)

Director, Audit & Supervisory
Committee Member (Outside Director)

Ken Nakamura

Registered as Attorney-at-Law (Sendai Bar Association)
Opened Nakamura Ken Law Office (current position)
Audit & Supervisory Board Member,
KOHSOKU CORPORATION
Auditor, HOKUSHU Co., Ltd.(current position)
Audit & Supervisory Board Member, the Bank
Director, KOHSOKU CORPORATION
Director, the Bank (current position)
Director (Audit & Supervisory Committee Member),
KOHSOKU CORPORATION (current position)

Outside Director

Joined the Sendai City Government
Mayor, Sendai City
Director, the Bank (current position)

Apr. 2011

Apr. 1971
Jun. 1993
Jun. 1995
Jun. 1997
Jun. 1999
Apr. 2001

Joined the Bank
General Manager, Koriyama Branch, the Bank
General Manager, Tokyo Liaison Office, the Bank
General Manager, Treasury Div., the Bank
General Manager, Credit Supervision Div., the Bank
Executive Officer and General Manager, Credit SupervisionDiv., the Bank
Senior Executive Officer and General Manager, Credit
Supervision Div., the BankManaging Director, the Bank (current position)

Outside Director

Joined the Bank of Japan
General Manager, International Dept., the Bank of Japan
Director, Research Institute of Overseas Investment,
the Export-Import Bank of Japan
Auditor, the Bank of Japan
Standing Audit & Supervisory Board Member, Banyu
Pharmaceutical Co., Ltd. (currently MSD K.K.)
Director, Horiba, Ltd. (current position)
Audit & Supervisory Board Member, the Bank
Audit & Supervisory Board Member, Banyu
Pharmaceutical Co., Ltd. (currently MSD K.K.)
Director, the Bank (current position)

Outside Director

Takuji Tabata

Managing Director

Joined the Bank
General Manager, Hachimanmachi Branch, the Bank
General Manager, Yoshioka Branch, the Bank
General Manager, Operations Management Div., the Bank
General Manager, General Planning & Coordination Div.,the Bank
Executive Officer and General Manager, General Planning &Coordination Div., the Bank
Director, Executive Officer and General Manager, Ishinomaki
Branch and Minato Branch, the BankManaging Director, the Bank (current position)

Yoko Ushio

Senior Managing Director and General Manager, Fujisaki
Comfortable Lifestyle Research Institute Co., Ltd.
Director, Department Store Fujisaki Co., Ltd.
Advisory Fellow, Tohoku Regional
Advancement Center
Fellow, Tohoku Regional Advancement Center
Auditor, Tohoku University (current position)
Director, Audit & Supervisory Committee Member,the Bank (current position)

Naoshi Aoyagi

General Manager,
Credit Supervision Division

Kazutoshi Saito

Kazuhito Chida

General Manager,
Digital Strategy Division

Masahide Kato

General Manager,
Consulting Promotion Division

Takashi Kuroda

Atsushi Kobayashi

General Manager,
Oroshimachi Branch

Masanori Muranushi

General Manager,
Ishinomaki Branch

Shuichi Ibuka

Yoshihiro Endo

General Manager,
Treasury Division

Hirokimi Fukushi

General Manager,
Compliance Management Division

Kuniaki Endo

THE 77 BANK INTEGRATED REPORT

42

Corporate Governance Initiatives■ Basic stance toward corporate governance■ Improvements in governance

We will work to strengthen and enhance corporate governance in accordance with the following basic stance.
• In accordance with the Bank Creed, which is our basic principle of management, we will operate business that give
constant consideration to the public mission of a regional bank — contributing to the development of the regional
economy and society — through banking operations.
• We will improve the transparency of management and the appropriateness of processes and work together
appropriately with stakeholders including the regional society, clients, and shareholders for the Bank’s sustained
growth and improvements in corporate value over the medium- to long-term.

The Bank transitioned in June 2017 from a company with the Board of Corporate Auditors to a company with an Audit &Supervisory Committee to improve corporate value through further enhancement of corporate governance, which was
followed by initiatives for developing further effective corporate governance structure through appointing Outside Directors
and female Directors.

General Meeting ofStockholders

3 personsAudit & Supervisory
Committee Members

Board of Directors

4 persons

・
・
・
・

・
・
・
・

9 persons

8 personsAudit & Supervisory
Committee

2 persons

Directors(Excluding Directors Serving as Audit& Supervisory Committee Members)

4 persons

Chairman

Executive Committee

President

Directors and General
Managers Liaison Committee
Compliance Committee

Deputy President

Directors

Director

Jun.
2017

■ Corporate Governance Structure

Corporate Governance Committee

Director・・・・

Audit & Supervisory
Committee Member

Outside Director

12 persons

Director

Jun.
2018

・
・
・
・

8 persons

3 personsAudit & Supervisory
Committee Member

2 persons

3 persons

Director

Jun.
2019

Ratio of Outside Directors

19 persons

26.3%
5/19 persons

Outside Director

・
・
・
・

8 persons

3 personsAudit & Supervisory
Committee Member

2 persons

4 personsRemarks

Total number of Directors

Ratio of Outside Directors

Remarks

16 persons

37.5%
6/16 persons

Addition of one Outside Director(female)(Ratio of female Directors: 6.2%)

Total number of Directors

Ratio of Outside Directors

Remarks

17 persons

41.1%
7/17 persons

Addition of one Outside Director
who is an Audit & Supervisory
Committee Member (female)(Ratio of female Directors: 11.7%)

Total number of Directors

Ratio of Outside Directors

Remarks

17 persons

47.0%
8/17 persons

Addition of one Outside Director

Transition to a company
with an audit & supervisorycommittee

3 personsOutside Director

Female Director

Total number of Directors

2 persons

2 personsOutside Director

Senior Managing
Director

Outside Directors

Director

Managing Director

Jun.
2020

■ Main members by organization
Title

Name

Board of Directors

Executive Committee

Corporate GovernanceCommittee（Representative Director）
Chairman

Teruhiko Ujiie○（Chairperson）○○（Representative Director）
Hidefumi Kobayashi
President○○（Chairperson）○○（Chairperson）（Representative Director）
Senior Managing Director

Makoto Igarashi

○

○

○

○

Managing Director

Koichi Suzuki

○

○

○

Managing Director

Atsushi Shitoh

○

○

○

Managing Director

Yoshikazu Onodera

○

○

○

Managing Directo

Takuji Tabata

○

○

○

Director

Masahiro Sugita

Director

Ken Nakamura

Director

Emiko Okuyama

Director

Seiichi Ohtaki

Director, Audit & Supervisory
Committee Member
Director, Audit & Supervisory
Committee Member
Director, Audit & Supervisory
Committee Member
Director, Audit & Supervisory
Committee Member
Director, Audit & Supervisory
Committee Member
Director, Audit & Supervisory
Committee Member

Yoshiaki Nagayama
Mitsuo Chubachi
Toshio Suzuki
Masai Yamaura
Masahiro Wako
Yoko Ushio

Other members○○（Chairperson）

○

○

○

Audit & Supervisory
Committee

Compliance
Committee

Audit & Supervisory
Committee Member

7 persons
2 persons

4 persons
4 persons■ Evaluating the Effectiveness of the Board of Directors
The Bank’s “Corporate Governance Policy” stipulates that the effectiveness of the Board of Directors as a whole isanalyzed and evaluated at the end of each fiscal year, and a summary of the results is disclosed.
After deliberation by the Corporate Governance Committee, the Board of Directors conducted an analysis and evaluationof the overall effectiveness of the Board of Directors for FY2019 at its annual meeting on May 15, 2020.
In this context, we have confirmed that the effectiveness of the Board of Directors as a whole has been ensured.
On the other hand, with the aim of further improving the effectiveness of the Board of Directors, the following matters havebeen confirmed and shared, and we intend to make improvements in the future.
・To strive to diversify the composition of the Board of Directors.
・To review the management of the Board of Directors to further invigorate discussions.

○○○△（Note 3）○△（Note 3）○○（Chairperson）△（Note 3）○△（Note 3）

○

○

○

○

○

○

○

○
General Manager of General
Planning & Coordination
Division

Enhancement of IR activities
The Bank is actively involved in IR activities including the holding of corporate
briefings for institutional investors and individual investors so that stakeholders
such as customers, the local community, and shareholders can understand the
management conditions of the Bank.
Results for FY2020

General Manager of General Planning &Coordination Division,
General Manager of Compliance Management
Division,
General Manager of Audit & Inspection Division*1 A Deputy President has not been appointed.
*2 Directors Masahiro Sugita, Ken Nakamura, Emiko Okuyama, Seiichi Ohtaki, Toshio Suzuki, Masai Yamaura, Masahiro Wako, and Yoko Ushio are Outside Directors prescribed in Article 2, Item
15 of the Companies Act.
*3 Standing Directors who are Audit & Supervisory Committee Members attend the Executive Committee and Compliance Committee, and state their opinions as necessary.
*4 The Chairperson of the Audit & Supervisory Committee observes the Corporate Governance Committee.

43 THE 77 BANK INTEGRATED REPORT

・
・
・
・

Outside Director

Corporate briefings for institutional investors

2 times/approximately 270 participants

Corporate briefings for individual investors

4 times/approximately 360 participants

Corporate briefings for clients by region

5 times/approximately 400 participants

Visits to foreign investors

February 2018: North America,
April 2019: Asia

THE 77 BANK INTEGRATED REPORT

44

Social Responsibility

Risk Management■ Compliance structure■ Strengthening of comprehensive risk management

The Bank formulated the Compliance Policies in order to clarify its stance on compliance and to ensure theeffectiveness thereof. Further, the Bank established the Compliance Guidelines (Compliance Standards) to articulate
specific guidelines and a code of conduct so that the executives and employees place importance on compliance,
thereby ensuring the lawful conduct of business.

The operating environment surrounding financial institutions has significantly changed in recent years, exposing themto an unprecedented variety of risks. In this environment, financial institutions are required more than ever before toaccurately identify, analyze and appropriately control risks.
From the viewpoint of increasing the soundness of management, the risks the Bank faces are assessed by category,and comprehensive risk management systems are established for self-control type risk management throughcomprehensive assessment, and by comparison and contrast with the Bank’s capital. At the same time, efforts arebeing made to improve risk management methods through means such as the enhancement of risk measurement
techniques.
We have implemented risk capital management as a specific framework for comprehensive risk management.
Risk capital management is a management method where a risk capital budget, which represent risk tolerance,is allocated by risk category to each unit (domestic business units, funds and securities units, and other units),
and the risks measured for each unit are monitored to ensure that they do not exceed their respective budgets.
Risk capital management is also utilized to monitor whether the expected profits that are suitable for the risks taken
are being secured.

Compliance Guidelines（Compliance Standards）【 Basic Direction】

1. Ensure sound management and pay the utmost attention to sustaining the Bank’s credibility and its
ability to maintain smooth financing.
2. Comply with laws and the code of corporate ethics and maintain fair and honest practices.
3. Take a principled stand with regard to issues that threaten social order or public peace.
4. Provide financial services that the region, customers, and society broadly trust and endeavor to achievesustainable development together with them as a good corporate citizen.
5. Foster a flexible and constructive working environment conducive to the well-being of all employees.

【 Code of Conduct】

Risk management structure
Board of Directors
Audit & Supervisory
Committee

Independent Auditors

1. We will comply with laws, ordinances, the Articles of Incorporation, the Rules of Employment, andinternal rules of the Bank.
2. We will not force unfair transaction on our customers.
3. We will not divulge confidential information of our customers or the Bank, or material information thathas not been made public.
4. We will not neglect to provide reports required by laws, ordinances, and internal rules of the Bank,or provide false reports.
5. We recognize the public nature and the large social responsibility of the Bank and will devote ourselves
to our duties.
6. We will not follow instructions or orders given by an individual that go beyond or deviate from theauthorities given to said individual.
7. We will not engage in such conduct as will undermine the credibility or honor of the Bank.
8. We will not do favors for our customers in violation of law, ordinances, or internal rules of the Bank.
9. We will not seek to make unfair profits by taking advantage of our duties or position.
10. We will not borrow from or mediate for someone to borrow from our customers, other executives,or other employees without legitimate reason.
11. We will not engage in socially unacceptable entertaining or gift giving.
12. We will make efforts to maintain order in the workplace.

Directors Responsible for Each Type of Risk

Compliancesupervisors(Major Roles)
Compliance-related education, inspection,
monitoring and the like within each company

Compliance management

Compliance Management Division
Audit & Inspection
Division(Complaints, antisocial inﬂuences,money laundering)Compliance Monitor (Senior Auditor)(Dishonest actions, internal audits)

Compliance Committee(Chaired by President)

General Planning &Coordination Division(Risk management, disclosure)Compliance Departments

Personnel Division(Maintenance of discipline andwork discipline)

General Affairs Division(General meeting ofstockholders, trafﬁc accidents)

Operations Management
Division(Operational accidents)(Chaired by General Manager ofCompliance Management Division)

Audit & Supervisory
Committee(Audit & Supervisory
Committee Members)

Compliance Manager(General Manager of Compliance Management Division)
Chief Compliance Ofﬁcer(Manager of Legal Affairs Section)

Headquarters and
BranchesCompliancepromotioncommittees(Chaired by General Managers)

Divisions and Main Branch:Compliance Ofﬁcer

Other:
Compliance liaison ofﬁcers

Note: Compliance ofﬁcers and compliance liaisons maintain their independence in the performance of their duties related to compliance and do
not follow the instructions of higher-ranking individuals.

45 THE 77 BANK INTEGRATED REPORT

Risk Management Division

Comprehensive Risk Management
Credit Risk
Management

Market Risk
Management

Liquidity Risk
Management

Comprehensive Operational Risk Management
Administrative
Risk
Management

Risk Management Division

Compliance

Information
Technology Risk
Management

Legal Risk
Management

Human Risk
Management

Tangible
Asset Risk
Management

Reputational
Risk
Management

Disaster and Other
Contingency Risk
Management

ComplianceManagement
Division

Personnel
Division

GeneralAffairs
Division

Risk
Management
Division

Digital Strategy Division
General Affairs Division
Operations
Management Division

Outsourcing Risk
Management
Operations
Management
Division

DigitalStrategy
Division

ComplianceManagement Division

Head Ofﬁce, Branches and Group Companies
Audit & Inspection Division

Subsidiaries
President =Director
responsible forcomplianceDirectors Responsible for Compliance

Capital management

Compliance structure

Board ofDirectors(Directors)

Executive Committee/Directors and General Managers Liaison Committee/Compliance Committee

Asset Assessment Audit

Internal Audit

Verification of the risk management system by the Audit & Inspection Division: The Audit & Inspection Division is the auditing unit for internal processes and asset status, and is independent of all business units. This division audits branches, Headquarters and Group
companies through comprehensive audits focusing on the verification of internal management systems (financial facilitation, compliance, customer protection, governance and management, and risk management systems) and physical inspections with the primary aimof preventing illegality.

Responding to increasing
cyberattacks

Development of business continuity systems in
response to the occurrence of large-scale disasters

In order to respond to cyberattacks, which arebecoming increasingly advanced and sophisticatedon a daily basis, the Bank has established Cyber
Security Management Regulations, and has
implemented multi-layer technical measures,
including the prevention of unauthorized intrusions
and blocking of information leakage, as well as
detection of malicious viruses.
In addition, the Bank has undertaken organizational
measures such as drills and exercises that assume
the occurrence of a cyberattack, and is continuously
working to strengthen systems for swiftly responding
to cyberattacks.

The Bank has developed a Disaster Emergency Response Plan that clarifies the basic
principles of action for times of emergency, such as earthquakes or other disasters
and systems failures.
Under the Disaster Emergency Response Plan, we have worked
to develop systems to ensure business continuity through the establishment ofbusiness continuity plans for continuing the minimum operations required to maintainthe finance function, and to achieve the prompt resumption or recovery of this function,in the event that the Bank incurs sufficient damage that it becomes impossible to fulfill
normal bank operations, due to an unforeseen disaster. In addition, in order to confirm
the effectiveness of the Disaster Emergency Response Plan, we conduct regulardisaster drills and business continuity drills and conduct revisions to make our
preparations for disaster more robust in consideration of the damage caused by theGreat East Japan Earthquake in an effort to strengthen the Bank’s crisis response
capabilities.

THE 77 BANK INTEGRATED REPORT

46

Social Contribution Activities
We will continue to walk together
with the people of the region.

■ Supporting Financial Education
We support financial education by utilizing the The 77 Bank Currency and Banking Museum in the head office and experiential programs.

We will achieve co-prosperity with the region and dedicate ourselves toserving the region by deepening interaction with regional society as amember of the local community and through our ongoing social contribution
activities, including support for cultural and educational promotion as well associal welfare activities.

Basic Policy on Social
Contribution Activities

The 77 Bank Currency and Banking Museum■ Interaction with the Region

As a member of the local community, we actively participate in community events to deepen our interaction with
regional society.

Participation in regional events
During the Sendai Aoba Festival held every May, we participate in the
Yamaboko Parade, which is the highlight of the festival. At the traditional
Dontosai Festival that marks koshogatsu every January, we make thetraditional hadakamairi (naked shrine visit) to Osaki Hachimangu Shrine
wearing only light clothing.

The 77 Bank Currency and Banking Museum was opened in celebration of the 120th
anniversary of our founding and in gratitude for the many years of support we havereceived from people in the region. The museum introduces topics, including the history
and roles of money, the birth and development of banks, and the industry and economy
in Miyagi Prefecture and Japan in a manner that is fun and easy to understand.
The museum was partly renewed in March 2019 as part of the 140th Anniversary
Project, and new features, including a projection mapping and a children’s area, havebeen added to introduce the relationship between The 77 Bank and the community, therelationship between money and daily life, and The three major business operations ofbanks. In FY2020, approximately 2,960 people, including students from a total of 72
elementary and junior high schools, visited the museum.

One Branch, One Social Contribution Campaign
The One Branch, One Social Contribution Campaign is in an effort to deepen
interactions with the region as a member of the local community andraise the awareness of the Bank employees regarding social contribution.
These activities were conducted at all of the Bank’s 142 branches(excluding branches that only offer transfers) after selecting social
contribution activities in accordance with the Bank’s six themes.

■ Supporting Cultural Activities
To contribute to the promotion of region culture, we sponsor many cultural activities, festivals, and events.
77 Starlight Symphony
The Bank has held a charity concert named the 77 Starlight Symphony since 1991 in order toenhance the experience of the Sendai Pageant of Starlight, which is becoming established as a
winter tradition, as a member of the city.
In December 2019, Kohmi Hirose was invited as a guest, and performed various hit songs
with the backing of the Sendai Philharmonic Orchestra. In addition, fundraising activities wereconducted to support earthquake reconstruction and operation of the Sendai Pageant ofStarlight.

77 Fureai Concert
The 77 Fureai Concert has been held continuously since FY1993 in cooperation with the Sendai
Philharmonic Orchestra, in order to give students from regional elementary schools and juniorhigh schools the opportunity to experience a live orchestra.
Concerts were held at Wakuya Junior High School (Wakuya Town) and Kakuda Citizen’s
Center (Kakuda City) in FY2020, where approximately 970 people including children, students,and family members viewed a powerful musical performance and enjoyed introductions of theorchestral instruments and conductor experiences.
47 THE 77 BANK INTEGRATED REPORT

Course provided at Tohoku Gakuin University
A course provided by The 77 Bank has been held at the Faculty ofBusiness Administration at Tohoku Gakuin University since FY2012 for the
purpose of promoting social contributions to the region through education
and research contributing to the development of the regional economy
and human resources.
This course is taught by an employee of the Bank, and covers topics
such as specific details of bank operations, recent financial trends, andthe role of regional financial institutions. The course was held for the 9thtime in FY2020, and the course in September 2019 was participated byapproximately 290 students.

National High School Student Finance and Economics QuizChampionship “Economics Koshien” Miyagi Tournament
The Miyagi Tournament of the National High School Student Finance andEconomics Quiz Championship “Economics Koshien” has been held
since FY2010 through joint sponsorship with the Association for the
Promotion of Financial Literacy, in an effort to make social
contributions to the region through an educational project for acquiring
the financial and economics knowledge that is essential for life planningand safeguarding one’s lifestyle. In December 2019, the 11th Miyagi
Tournament was held at the Head Office of the Bank.
THE 77 BANK INTEGRATED REPORT48

■ Promoting Sports■ Responding to Environmental Issues

We promote sports in this region through sport club activities.

The 77 Bank is actively participating in activities to tackle environmental issues, such as forest conservation andinstallation of energy-efficient facilities.
Environmental Policy【 Basic Principle】【 Action Guidelines】

The 77 Bank believes that it has a social responsibility to protect the
beautiful and abundant natural environment and to pass it down to
the next generation in an improved state as a good corporate citizen.
Based on the mindset to “Elevate the Spirit of Voluntary Service,”
which is the first item in the Bank Creed, our basic principle ofmanagement, the Bank aims to be a company that coexists with
regional society, and for this reason the Bank is actively andcontinuously engaged in environmental conservation activities aimed
at creation of a sustainable society.

1. We will comply with laws and regulations, agreements, and other matters related to the environment
to which the Bank has agreed.
2. We will promote energy conservation, resource conservation and recycling activities, and work to
reduce our environmental burden.
3. We will support customers involved in environmental conservation through the provision ofenvironmentally-friendly financial products and services.
4. We will conduct awareness raising activities to deepen the awareness of each and every executive
and employee regarding the environment and promote environmental conservation activities inregional society.

Forest conservation activities
The Bank’s executives and new employees from FY2019 planted 1,000 black pine seedlings in the
Arahama District of Sendai City, based on the “Citizens’ Reforestation Activities to Restore the Miyagi
Coastal Forests” agreement that was entered into with Miyagi Prefecture, etc. in September 2018 aspart of the 140th Anniversary Project. The tree planting area has been named the “77 Forest for the
Future,” and will be managed as a coastal disaster prevention forest to protect the region fromdisaster.

Environmental conservation activities through financial products and services
The Bank supports companies and individual customers actively involved in social contribution
activities, such as those for environmental conservation through the provision of environmentallyfriendly financial products and services.
・Products for Businesses
We offer the 77 Social Contribution Activities Support Loan and the77 ESG Privately Placed
Corporate Bond for companies engaged in efforts such as the prevention of global warming andthe introduction of recycling-related equipment.
・Products for Individual Customers
We started offering the 77 ESG Japanese Equities Open (Alias:Miyagi no Kizuna) to commemorate
the 140th Anniversary of our foundation. The fund donates a portion of the trust fees that the Bank
has received to restore the coastal disaster prevention forest, which suffered catastrophic damage
from the Great East Japan Earthquake.

Close-up

Para-badminton playeron the World Stage
The baseball team, track and field team, and badminton team participate in national-level competitions, suchas the Intercity Baseball Tournament, JAAF Athletics Championships, and THE BADMINTON S/J LEAGUE,
while also holding training workshops as part of their everyday activities to contribute to the promotion of sports
in the community. We interviewed Ayako Suzuki of the Badminton team.
Badminton team

Ayako Suzuki“The best part of playing badminton is that you don't have to use all
your strength, but use your brain to play. I enjoy working on tactics
observing the opponent’s moves,” says Ayako Suzuki, who is amember of our badminton club. She won the 2017 Para-Badminton
World Championships’ upper limb impairment SU5 class, in addition
to winning many other international competitions, and she has beenranked high in the world for several years. She is expected to be oneof the leading para-sport athletes in Japan.
Although she once retired, she returned after a five-year absence
when para-badminton was adopted as an official sporting event in
the global para-sport competition. After winning her first domestic
tournament following her return, she became a member of theBank's badminton club, as her high school coach was coaching at

the Bank at the time.
She usually works at the head office in the morning and practices
at our Nakayama Gymnasium in the afternoon. “This is the first time
for me to belong to a company's sports club, but I am grateful for theenvironment that allows me to concentrate on competition. I hope tolive up to the expectations of those around me," says Suzuki. On theteam, she sometimes plays together with local junior high school
students and ladies' teams. Turning such experience she had never
had in her career as an athlete into energy, she strives everyday.
Suzuki’s goal is to be selected for Japan’s national team and to
win the gold medal by defeating the Chinese rival. “I'm confident that
I can win the gold medal," Suzuki expresses her confidence.

77 Kids Challenge—Run! Hit! Throw!—joint sports workshops held by three sports clubs
We are actively offering technical trainings, etc.,with the hope of helping with the recovery from theGreat East Japan Earthquake through the promotionof sports.
In September 2019, the Bank’s three sport clubs held
joint workshops for first- and second-grade elementary
school children and their parents. Approximately 300
participants enjoyed trying baseball, track and field, andbadminton.

49 THE 77 BANK INTEGRATED REPORT

Conducting Material Recycling
We participated in the BRING project that the JEPLAN, INC. organized to recycle the used
office uniforms of female employees, which were disposed of as industrial waste, into materials
that can be reused as new resources.
Material recycling is a system of collecting used clothing and reusing them as materials or raw
materials for new products. It is considered to be effective in combating global warming because
it can reduce CO2 emissions by about 55% when one uses recycled materials to manufacture
clothing.

■ Contribution to Social Welfare
We contribute to social welfare by cooperating with fundraising activities and blood donation projects.
77 Caring Fund Raising Committee
The 77 Caring Fund Raising Committee was established in 1994 by the executives andemployees of the Bank for the purpose of donating to social welfare projects and facilities
in appreciation of the support received from the local community to that time.
During FY2020, a total of ¥3.33 million was donated to 10 social welfare facilities
recommended by the Miyagi Prefecture Social Welfare Council and 14 volunteer groups.
The donated funds are used to cover facility repair costs, running costs for volunteer
activities, and other expenses. In addition, a total of ¥1.71 million was donated to theJapanese Red Cross Society in response to Typhoon No. 19 in 2019.

Small Kindness Movement
Since the establishment of the Miyagi Prefecture Headquarters of the Small Kindness
Movement, the Bank has been involved in the planning and operation of these activities, whileserving as the secretariat for 44 years.
The Summer Sendai Cleaning Campaign is conducted each year prior to opening of the
Sendai Tanabata Festival. Each year, we donate wheelchairs to social welfare facilities in
the prefecture, and make visits to welfare facilities for the elderly and hold entertainment
performances. In addition, we donate flower seeds to elementary schools in the prefecture,and gather used stamps and donate them to stamp collection organizations.
THE 77 BANK INTEGRATED REPORT

50

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.

51

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THE 77 BANK INTEGRATED REPORT

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.

53

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THE 77 BANK INTEGRATED REPORT

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.

55

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THE 77 BANK INTEGRATED REPORT

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.

57

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 REPORT

80

Bank Data
Service Network□□□□□□□□□□□□□□（As of July 6, 2020）

Hokkaido
1 Branch

Overseas

Shanghai 1 Representative Office
Singapore 1 Representative Office

Iwate

2 Branches

Aomori

Corporate Sales Offices
2 Locations

Yamagata● Naruko

1 Branch

Minamifurukawa ●Ishinomaki

9 Branches, 1 Sub-Branch●(Matsuyama Sub-Branch)● Kashimadai

Furukawatokamachi ●● Yoshioka

Fukushima

Matsushima●

Tomiya ●6 Branches

Akaishidai ●●Rifu

Sendai61 Branches, 2 Sub-Branches
Masuda ●● Zao

Onagawa ●● (Naruse Sub-Branch)

Shiogama
3 Branches

Scan the QR code to read the branches and cash service corners

Total number of theBank’s locations

Of which branches
within branches* Japanese Language only

Number of ATMs

35

31

128

7

764

14

14

109

7

668

［ 63］

［ 4］

［ 420］

Towns

20

17

19

̶

95

Villages

1

̶

̶

̶

1

15

̶

28

Within Tokyo

2

̶

3

Other prefectures

13 * 1̶

25

Outside of Miyagi Prefecture

Total

35 municipalities

31 cities and towns

Total Assets¥8,751.9 billion

Deposits and Certificates of Deposits¥7,888.5 billion

Loans and Bills Discounted¥4,894.6 billion（As of March 31, 2020）

2. 77 Shin-Yo Hosyo Co., Ltd. (Guaranty and credit investigation services)

Shichirisu-kun

Shichitora-kun

Shichisai-kun

77 Lease Co., Ltd.

77 Shin-Yo Hosyo
Co., Ltd.

The 77 Card
Co., Ltd.

Shichimi-chan

Shichishika-kun

Shichiken-kun

Shichisaru-kun

Shichiushi-kun

77 Securities
Co., Ltd.

77 Research andConsulting Co., Ltd.

77 Capital Co., Ltd.

143 locations*2■ Disclosure materials
Introduction of Disclosure

Introduction of Mini DisclosureThis small pamphlet provides a summary
overview of our business results and stateof operations, in consideration of ourrelationship with the local community, ina manner that is easy to understand. It isavailable at both The 77 Bank’s Head
Office and branches, and The 77 Bank’s
website.
* Japanese Language only

In addition to this document, The 77 Bank has prepared disclosures including DISCLOSURE based on the Banking Act, the Securities
Report based on the Financial Instruments and Exchange Act, Mini DISCLOSURE for the general public and shareholders, and the INTEGRATEDREPORT for countries overseas.
In addition, we are continuously working to provide investors with a better understanding of The 77 Bank, Ltd. through means such as the timely
disclosure of management information through our website, etc. and the holding of corporate IR briefings twice per year.
Going forward, The 77 Bank, Ltd. will pursue sound management and work towards timely and appropriate disclosure.

●Yamashita[Of which, Sendai City]

non-consolidated 10.14% /consolidated 10.31%

Group companies● Iwanuma● Ogawara
Watari ●● Marumori

Cities2,791● (Sendai Airport Sub-Branch)● Kakuda

1 BranchWithin Miyagi Prefecture¥24.6 billion

Number of Employees

This is a disclosure document based on Article 21of the Banking Act (explanatory document
regarding our business and financial condition).
It states financial data and matters related to thestatus of capital adequacy, and is available on The
77 Bank’s website.
* Japanese Language only

● Takasago● Mori-sekinoshita/Yuriage

Natori-nishi ●Iwanuma-nishi ●● Murata
Tsukinoki ●Funaoka ●● Shiroishi

Yamoto●● Shichigahama● Geba● Tagajo● Kawasaki

Of which, areas with theBank’s location

Paid-in Capital

Capital Adequacy Ratio(domestic standards)● Shizugawa

●
Tome

●
Wakuya●KogotaNakaniida

Number of municipalities(within Miyagi Prefecture)

December 9, 1878

Kesennuma●● Maiya● Sanuma

Furukawa● Tajiri
●

●
●
Onoda

■ Service Network Data

Founded

Wakayanagi ●● Ichihasama● Tsukidate● Iwadeyama

Osaka

3-20, Chuo 3-chome, Aobaku,
Sendai, Miyagi 980-8777, Japan

143(Head Office/Branches: 137,
Sub-Branches: 6)

6. 77 Capital Co., Ltd. (Fund management)

Nainowaki ●●Iwagasaki

1 Branch

Head Office

Number of Branches

5. 77 Research and Consulting Co., Ltd. (Research studies, consulting business, and computer-based contract services such as calculations for other companies)

Miyagi Prefecture

1 Branch

NagoyaThe 77 Bank, Ltd.

3. The 77 Card Co., Ltd. (Credit card business) 4. 77 Securities Co., Ltd. (Financial instruments business )Akita

2 Branches

Company Name

1. 77 Lease Co., Ltd. (Leasing business)

Head Ofﬁce/Branches: 122, Sub-Branches: 6

Tokyo

Profile7 locations

792 ATMs■ Customer feedback
Customer Feedback Cards areavailable at lobbies and ATM
corners at our branches, as a toolfor gathering insights and feedback
regarding products and services, aswell as opinions and requests from
customers.
We also accept opinions andrequests from customers throughour website. Please feel free tocontact us.

Designated dispute resolution organization for
The 77 Bank under the Banking Act
Japanese Bankers Association
Contact point: Japanese Bankers Association Customer
Relations Center
Address: 2-6-1 Otemachi, Chiyoda-ku, Tokyo
19F, Asahi Seimei Otemachi Bldg.
(within the Japanese Bankers Association)
Telephone number: +81-570-017109 or +81-3-5252-3772<What is a designated dispute resolution organization?>A d esig nat ed d isp ut e res o lu ti on organi zati on i s anorganization designated by the Financial Services Agency thatworks to resolve complaints submitted by customers orrequests for dispute resolution (mediation) related to banking
services, etc. from a fair and neutral position.

(N o te )* 1 O t h e r b r a n c h l o c a t i o n s : S a p p o r o C i t y, M o r i o k a C i t y, K i t a k a m i C i t y, A k i t a C i t y, Ya m a g a t a C i t y, F u k u s h i m a C i t y, K o r i y a m a C i t y, S o m a C i t y, M i n a m i s o m a C i t y, I w a k i C i t y ( 2 b r a n c h e s ) ,Nagoya City, and Osaka City
* 2 The total number of 143 locations includes one branch that only offers transfers, and the number of locations is 135, taking into account seven branches within branches.

81 THE 77 BANK INTEGRATED REPORT

THE 77 BANK INTEGRATED REPORT

82

The 77 Bank, Ltd
August 2020
Issued by The 77 Bank, Ltd.
General Planning & Coordination Division
3-20, Chuo 3-chome, Aoba-ku, Sendai, Miyagi 980-8777, Japan
Phone: +81-22-267-1111
https://www.77bank.co.jp/english/top.htm