hokuetsu bank 2014 · hokuetsu bank 2014 annual report hokuetsu bank 2014 april 1, 2013 - march 31,...

HOKUETSUBANK 2014ANNUAL REPORT HOKUETSU BANK 2014

April 1, 2013 - March 31, 2014

01_005_9338201372701.indd 1 2015/01/26 10:07:55

Contents

ANNUAL REPORT

HOKUETSU BANK 2014 April 1, 2013 ― March 31, 2014

Contents

Review of 2013 Fiscal Results P1～5

Trend of Key Management Indicators P6

Overview of Consolidated Settlement

Consolidated Financial Statements P7～12

Important Items Used as Basis for Preparing Consolidated Financial Statements P13～15 Notes to Consolidated Settlement P16～30

Overview of Non-consolidated Settlement

Non-consolidated Financial Statements P31～33

Subsidiaries P34

Corporate Data P35

Board of Directors and Auditors Basic Data Service Network

Review of 2013 Fiscal Result

1

Review of 2013 Fiscal Result ①

In the fiscal year under review, the Hokuetsu Bank’s core net operating income, which indicates profits from core banking operations, ended up with 7.1 billion yen, due primarily to a decrease in gross financial margins resulting mainly from the continuation of long-standing low interest rate, despite reduction of costs.

Meanwhile, net income also decreased to 4.4 billion yen due primarily to an increase in credit costs.

②

The capital adequacy ratio of the Bank as of March 31, 2014 is 11.02% on a consolidated basis and 10.53% on a non-consolidated basis based on newly adopted Basel III norms.

③

Information on non-performing loans disclosed in accordance with the Financial Revitalization Law (The Law concerning Emergency Measures for the Revitalization of the Financial Functions) is represented in this section. The amount of loans subject to disclosure is calculated reflecting results of self assessment.

Loans subject to disclosure are general loans subject to credit including customers’ liabilities for acceptances and guarantees, securities lent, foreign exchange and accrued interest in addition to loans and bills discounted.

Non-performing loans disclosed in accordance with the Financial Revitalization Law have decreased to 35.7 billion yen, with the ratio of non-performing loans standing at 2.45%, as of March 31, 2014, because of the Bank’s enforcement in provision of support for its customers to improve their business conditions, amount of non-performing loans and its ratio both remained at low level.

Status of the preservation is sufficient, as 90.01% of the non-performing loans disclosed under the Law is covered by collateral, guarantee and reserve for possible loan losses.

④

Although an increase of unrealized holding gains on valuation of stocks, the Bank’s unrealized holding gains on valuation of securities decreased to 19.7 billion yen due primarily to a decrease of unrealized holding gains on valuation of bonds.

Management Policy ⑤

The Hokuetsu Bank has implemented a new long-term management plan covering the three-year period from April 2014 to March 2017.

Under this plan, we are aiming at becoming one of the valuable regional banks by truly meeting expectations of local customers and contribution to the region. To meet this goal, we are working on the following three challenges: ◇ Development of human resources and strengthening of organizational power. ◇ Realization of low cost management and restructuring of efficient sales structures. ◇ Thorough expansion and deepening of the foundation of customers for strengthening of sales capabilities,

and innovation of earnings structures.


2

Risk Management ⑥

While banking operations are becoming more diverse and earnings opportunities are expanding, there have been more risks than ever before at the same time. In keeping with changes in the financial environment and the rapid progress of financial techniques, increasingly complex and advanced risks have greater impact on bank management.

The Bank fully recognizes the crucially important role of risk management, which is positioned as one of the primary tasks in its management. In accordance with the General Rules on Risk Management, the Bank has implemented a risk-management structure whereby the organizations responsible for the management of individual types of risks are specified and the Risk Control Division oversees the management of these diverse risks to ensure overall risk control.

The Audit Division, which is independent of sales operations and credit-assessment operations, conducts stringent internal audits of branches and divisions at the head office regarding their overall risk management.

Management Condition of Each Risk

⑦

[1] Capital Adequacy Management Capital adequacy management involves the use of measures aimed at improving capital adequacy, the

evaluation of the sufficiency of capital adequacy, and the calculation of an accurate capital adequacy ratio. The Bank’s basic policy includes: [1] maintain an appropriate capital adequacy level to ensure sound

management while allocating management resources efficiently to improve earning power and build a strong management constitution; and [2] ensure a proper response to increasingly diverse customer needs by monitoring changes in the environment of economics and finance while controlling total risks at levels according to the amount of capital.

To calculate an accurate capital adequacy ratio, the Bank also employs a system to ensure that the numbers calculated by related divisions are checked by other divisions. The Internal Audit Group of the Audit Division verifies the appropriateness and accuracy of this calculation process.

[2] Credit Risk Management Credit risk is a condition in which the value of loans and other assets of a financial institution decrease or are

lost due to the bankruptcies and deteriorating financial conditions of customers, leading to a loss on the part of the financial institution.

The Bank always conducts a loan assessment based on the strict assessment standards before approving any loan, and it operates on the basic policy of managing its funds on a widely diversified basis without providing excessive loans to certain customers, in order to enhance the soundness of its assets.

For appropriate risk management corresponding to the degree of credit risk, in addition to the “credit rating” system based on objective criteria, we also put in place assessment and management structures based on the authorization system according to credit ratings.

[3] Market Risk Management Market risk is a two-fold risk. It consists of the risk that the value of assets and liabilities held by a bank

fluctuates due to market fluctuations of interest rates, exchange rates, share prices, etc., and also of a risk that the profits generated by the assets and liabilities held by the bank will fluctuate and result in a loss.

The Bank’s Market and Capital Division is engaged in the market-capital-related activities. In addition to the segregation of duties between front-office operations and back-office operations, the Administration Group of the Risk Control Division is engaged in the management and control of market-related risks to ensure cross-checking.

Furthermore, the BPV (Basis Point Value) and VAR (Value at Risk) approaches are applied to measure market risks, and the results are reported monthly to the board of directors.


3

[4] Liquidity Risk Management Liquidity risk is a risk that a financial institution becomes unable to secure necessary funds and faces a

cash-flow crunch or is forced to procure funds at significantly higher interest rates than normal due to the deterioration of its financial condition, etc., and eventually generates a loss.

The Market and Capital Division is engaged in daily cash-flow management and administration, while the Administration Group of the Risk Control Division monitors liquidity risk management indicators in order to continually clarify the cash-flow position.

[5] Operational Risk Management Operational risk is a condition that emerges due to the inappropriateness or non-functioning of any of the

Bank’s operation processes or systems, due to the inappropriate action of any officer or employee of the Bank, or from the occurrence of any external event.

The Bank defines the six operational risks to be managed. They are: [1] administrative risk [2] system risk [3] reputation risk [4] legal risk [5] human risk [6] tangible asset risk

In managing operational risks, the Operation Administration Department centrally identifies and manages all operational risks, while each divisions subject to operational risks manages the applicable risks from a more detailed standpoint.

[6] Administrative Risk Management Administrative risk is a condition in which an administrative error or inadvertent action by an officer or

employee results in a loss to the financial institution. The Bank’s basic policy is to establish a reliable administrative structure with emphasis on the management of

administrative risks in order to prevent administrative errors and inadvertent actions related to administration. Accordingly, the Bank promotes the streamlining and enhancement of efficiency in administrative operations,

the strengthening of training and provision of on-site guidance to staff at branches, and the review of procedures and establishment of internal regulations and rules.

The Bank, in addition to complying with the Act on the Protection of Personal Information, is vigorously enacting measures to prevent any damage due to criminal acts, such as fraudulent withdrawals using stolen bankbooks and fraudulent bank transfers, which have emerged as significant problems in society.

[7] System Risk Management System risk is a condition that occurs due to an earthquake, flood or other act of God; a hardware failure,

program error, fire or other accident; or due to computer crime, a detonation or other willful conduct. In addition to the aforementioned system risks, the risks of unauthorized or illicit disclosure of personal information and trade secrets must be fully addressed.

The Bank has relocated its mission-critical systems to the Regional Bank Integrated Services Center operated by NTT Data Corp. in May 2009.

The Center, which employs the cutting-edge, next-generation system “BeSTA,” is one of the country’s largest integrated service centers for regional banks. The Hokuetsu Bank is one of 15 institutions that participate.

The Center also has backup facilities so that smooth recovery can be achieved in the event a natural disaster occurs.

Additionally, the Bank is strengthening its risk-management structures based on the review of computer systems planning and development processes and administrative processes. Moreover, the Bank is implementing measures to prevent fraudulent withdrawals using fake cards and phishing scams, in order to prevent these emerging societal problems from affecting its customers and operations.

[8] Reputation Risk Management Reputation risk is a condition involving the potential occurrence of a false reputation contrary to reality--such as


4

the dissemination of rumor or innuendo--that could negatively affect a company’s business status. The Bank is strengthening the management of reputation risks together with a basic management policy of

acting in a timely and appropriate manner to maintain calm and minimize damage should any reputation risk be generated.

We are stepping up the management of reputation risks through appropriate disclosure, the establishment of systems for gathering and reporting information on the Bank’s reputation, and the implementation of contingency plans.

[9] Legal Risk Management Legal risk is a condition in which a failure to strictly comply with any law, ordinance, the Bank’s internal

regulation or other social norm could result in a loss. The Bank’s Legal Affairs Office of the Risk Control Division oversees all compliance matters. It implements

proper measures to prevent these risks and thereby reinforce the management of legal risks.

[10] Human Risk Management Human risk is a condition in which any discriminatory action of the Bank’s officer or employee, such as fraud,

crime or sexual harassment, results in a loss. The Bank’s Human Resource Group, which is part of the Human Resource Division, implements proper

measures to prevent these risks to step up the management of human risks.

[11] Tangible Asset Risk Management Tangible asset risk is a condition in which any external events, such as natural disasters, stop of social

infrastructure and terrorism or destruction of tangible assets could result in a loss. The Bank is striving to avoid or reduce these risks by conducting regular inspections and practices for

prevention of accidents and disasters.


5

Compliance

Efforts Regarding Legal Compliance

⑧

Financial institutions, in view of their responsibilities and roles with respect to society, are required to have corporate cultures characterized by the transparency of management and thorough legal compliance.

Based on this understanding, the Bank, in accordance with the Hokuetsu Bank Ethics Charter and its principles established for the purpose of establishing corporate ethics, endeavors to ensure thorough compliance with the laws, regulations and rules. Additionally, the Bank has positioned the reinforcement of compliance as a top-priority management issue and is actively and organizationally applying measures based on the Bank’s compliance plan.

In the area of organizations and systems, important issues relating to compliance are decided by the Board of Directors, while the Legal Affairs Office of the Risk Control Division, which oversees compliance matters, the operations divisions and legal compliance coordinators in the respective divisions and branches are making thorough efforts for the sake of compliance. The efficiency of these processes is ensured through the audits performed by corporate auditors as well as verifications by the Audit Division, which is responsible for internal controls.

The Legal Affairs Office of the Risk Control Division, in order to enhance the cross-checking function for legal risks, is conducting legal checks of the various documents and contracts used internally. Meanwhile, the twice-monthly Legal Consultation Meeting on Operations is one in which preliminary consultation and advice is sought on legal matters from our corporate counsel and various measures are examined according to the principles of compliance. If any legal matter requires further examination, a Compliance Conference Meeting is held, with attendance by the head of each related division and corporate counsel, to discuss a proper course of action in compliance with the law.

The Bank is implementing other measures to ensure compliance within the organization, such as the inclusion of compliance lectures as part of various seminars, the issuance of “Legal News,” and self-compliance checks conducted by all Bank personnel. Additionally, the Bank hands out its compliance manual to all personnel to make sure each person understands the key points and items to note regarding regulations related to banking operations. These are only a few examples of how the Bank is working to enhance its compliance system.

Trend of Key Management Indicators

6

Trend of Key Management Indicators ⑨

Consolidated Basis (Unit: Million yen, %)

Year ended March 31,

2010


2011


2012


2013


2014

in thousand U.S. dollars

Consolidated total income 49,219 50,342 53,539 48,940 51,413 $520,361

Consolidated ordinary profit (consolidated loss in parentheses)

4,658 7,422 8,965 10,477 9,242 $89,797

Consolidated net income (consolidated net loss in parentheses)

3,474 5,314 5,457 5,854 4,838 $47,007

Consolidated comprehensive income － 2,642 8,995 13,020 2,209 $21,463

Consolidated net assets 76,964 78,059 84,932 95,846 93,125 $904,828

Consolidated total assets 2,231,084 2,255,920 2,318,491 2,363,447 2,495,717 $24,249,096

Consolidated capital adequacy ratio (based on Japanese domestic standards, Basel III)

－－－－ 11.02 11.02

Consolidated capital adequacy ratio (based on Japanese domestic standards, Basel II)

11.13 10.77 11.00 11.39 －－

Non-consolidated Basis (Unit: Million yen, Thousand shares, %, persons)


2010


2011


2012


2013


2014

in thousand U.S. dollars

Total income 42,535 44,149 47,667 43,602 46,281 $449,679

Ordinary profit (Ordinary loss in parentheses)

3,897 6,711 8,045 9,085 8,214 $79,809

Net income (Net loss in parentheses) 3,324 4,928 5,184 5,312 4,467 $43,402

Common stock 24,538 24,538 24,538 24,538 24,538 $260,903

Total number of outstanding shares 254,062 254,062 250,562 247,142 245,142 238,418

Total net assets 73,815 74,303 80,669 90,638 90,151 $875,932

Total assets 2,222,116 2,248,932 2,312,487 2,355,899 2,489,268 $24,186,436

Deposits 2,004,062 2,041,726 2,089,874 2,146,143 2,164,734 $21,033,171

Loans and bills discounted 1,283,146 1,306,793 1,333,365 1,386,722 1,423,505 $13,831,179

Securities 762,879 769,816 858,457 831,468 854,354 $8,301,146

Non-consolidated capital adequacy ratio (based on Japanese domestic standards, Basel III)

－－－－ 10.53 10.53

Non-consolidated capital adequacy ratio (based on Japanese domestic standards, Basel II)

10.74 10.44 10.61 10.94 －－

Dividend payout ratio 45.84 30.90 29.10 28.12 32.94 32.94

Number of employees 1,262 1,256 1,267 1,262 1,429 1,429

(Note) The number of employees does not include seconded employees, employees on a short-term contract, and temporary employees.

Note： 1.Yen amounts of less than one million yen are omitted.

2.U.S.dollar amount is translated from Yen, solely for convenience, at the rate of 102.92 per US$1.00,

the rate prevailing on March 31, 2014.


7

Overview of Consolidated Settlement Consolidated Financial Statements Consolidated Balance Sheet

(Unit: Million yen) Period

Item

End of previous consolidated

accounting year March 31, 2013

Amount

End of current consolidated


Amount

End of current consolidated


Amount in Thousand USD

ASSETS Cash and due from banks *(6) ¥ 87,665 ¥ 156,476 $ 1,520,365Call loans and bills purchased 362 ― ―Trading account securities 1,534 193 1,875Securities *(6)(13) 831,921 854,885 8,306,305Loans and bills discounted *(1)(2)(3)(4)(5)(7) 1,380,623 1,416,631 13,764,389Foreign exchange *(5) 6,721 10,719 71,461Lease claims and lease investment assets *(6) 9,475 10,269 104,148Other assets *(6) 13,388 14,252 138,476Tangible fixed assets *(9)(10) 29,339 29,699 288,563

Buildings 7,423 7,518 73,047Land *(8) 20,544 20,392 198,134Lease assets 279 152 1,476Constructions in progress 86 456 4,430Other tangible fixed assets *(6)(8) 1,005 1,180 11,465

Intangible fixed assets 859 693 6,733Software 747 529 5,139Lease assets 25 45 437Other intangible fixed assets 87 118 1,146

Net defined benefit assets ― 1,059 10,289Deferred tax assets 1,371 2,888 28,060Customers' liabilities for acceptances and guarantees 8,003 7,729 75,097Reserve for possible loan losses (7,819) (9,780) (95,025)Total assets ¥ 2,363,447 ¥ 2,495,717 $ 24,249,096LIABILITIES Deposits *(6) 2,141,346 2,159,314 20,980,509Certificates of deposits 44,590 122,320 1,188,495Payables under repurchase agreements *(6) 1,826 6,712 65,215Borrowed money *(6)(11) 36,466 59,620 579,284Foreign exchange 199 115 1,117Bonds *(12) 10,000 10,000 97,162Other liabilities 19,419 29,823 289,768Accrued bonuses 814 801 7,782Allowance for bonuses to directors and corporate auditors 25 25 242Accrued retirement benefits 19 ― ―Net defined benefit liabilities ― 1,350 13,116Allowance for retirement benefits to directors and corporate auditors

17 13 126

Reserve for reimbursement of deposits 394 448 4,352Reserve for contingencies 563 468 4,547Reserve for losses on return of interest 47 40 388Deferred income taxes 136 194 1,884Deferred income taxes for revaluation *(8) 3,729 3,613 35,104Acceptances and guarantees 8,003 7,729 75,097Total liabilities ¥ 2,267,600 ¥ 2,402,591 $ 23,344,257NET ASSETS Common stock 24,538 24,538 238,418Capital surplus 16,965 16,965 164,836Retained earnings 33,182 36,315 352,846Treasury stock (137) (290) (2,817)Total stockholders' equity 74,548 77,529 753,293Unrealized holding gains (losses) on securities 16,891 14,151 137,495Deferred gains or losses on hedges (492) (629) (6,111)Unrealized gains from revaluation of land held for use *(8) 2,780 2,588 24,854Remeasurements of defined benefit plans ― (2,888) Accumulated total of other comprehensive income 19,178 13,222 128,468Stock subscription rights 73 81 787Minority interests 2,045 2,293 22,279Total net assets 95,846 93,125 904,828Total liabilities and net assets ¥ 2,363,447 ¥ 2,495,717 $ 24,249,096


8

Consolidated Statement of Income (Unit: Million yen)

Period

Item

Previous consolidatedaccounting year

(April 1, 2012 through March 31, 2013)

Amount

Current consolidated accounting year


Amount

Current consolidatedaccounting year



Total income ¥ 48,940 ¥ 51,413 $ 499,543 Interest and dividends income 28,610 27,638 268,538 Loans and bills discounted 21,181 20,134 195,627 Interest and dividends on securities 7,361 7,433 72,221 Call loans and bills purchased 16 19 184 Receivables under resale agreements 0 ― ― Deposits 2 5 48 Other 47 45 437 Fees and commission 6,463 6,729 65,380 Other operating income 11,435 12,650 122,910 Other income 2,430 4,394 42,693 Gains from recovery of written-off debts 440 559 5,431 Other income 1,989 3,835 37,261Expenses 38,462 42,170 409,735 Interest expenses 1,732 1,704 16,556 Deposits 1,155 886 8,608 Certificates of deposits 27 38 369 Call money and bills sold 7 3 29 Securities lending 5 5 48 Borrowed money 179 186 1,807 Bonds 231 232 2,254 Other 126 352 3,420 Fees 2,836 3,090 30,023 Other operating expenses 6,958 9,800 95,219 General and administrative expenses 24,412 23,966 232,860 Other expenses 2,522 3,608 35,056 Provision of allowance for doubtful accounts 374 2,406 23,377 Other expenses *(1) 2,148 1,201 11,669Ordinary profit 10,477 9,242 89,797Extraordinary gains － 1 9 Gains from disposal of fixed assets － 1 9Extraordinary losses 250 601 5,839 Losses on disposal of fixed assets 77 97 942 Losses on impairment of fixed assets *(2) 173 503 4,887Income before income taxes and minority interests 10,227 8,643 83,977Corporate tax, corporate inhabitant tax and business tax 1,865 2,207 21,443Adjustment of corporate taxes, etc. 2,193 1,365 13,262Total corporate taxes, etc. 4,059 3,572 34,706Net income before adjustment of minority interests 6,168 5,070 49,261Minority interests 313 231 2,244Net income ¥ 5,854 ¥ 4,838 $ 47,007


9

Consolidated Statement of Comprehensive Income (Unit: Million yen)

Period

Item



Amount



Amount




Net income before adjustment of minority interests ¥ 6,168 ¥ 5,070 $ 49,261Other comprehensive income *(1) 6,852 (2,860) (27,788) Unrealized holding gains (losses) on securities 7,345 (2,723) (26,457) Deferred gains or losses on hedges (492) (136) (1,321)Comprehensive Income ¥ 13,020 ¥ 2,209 $ 21,463 Comprehensive income related to shareholders of parent company 12,681 1,961 19,053 Comprehensive income related to minority shareholders 339 247 2,399


10

Consolidated Statement of Changes in Stockholders’ Equity (Unit: Million yen)



Amount



Amount




Stockholders’ equity Capital Balance at end of previous period ¥ 24,538 ¥ 24,538 $ 238,418Change during current period Total change during current period ― ― ―Balance at end of current period 24,538 24,538 238,418Capital surplus Balance at end of previous period 16,965 16,965 164,836Change during current period Total change during current period ― ― ―Balance at end of current period 16,965 16,965 164,836Earned surplus Balance at end of previous period 29,359 33,182 322,405Change during current period Dividends from surplus (1,495) (1,473) (14,312)Net income (loss) 5,854 4,838 47,007Disposal of treasury stock (0) (13) (126)Retirement of treasury stock (624) (409) (3,973)Reversal of unrealized gains from revaluation of land 88 191 1,855Total change during current period 3,822 3,133 30,441Balance at end of current period 33,182 36,315 352,846Treasury stock Balance at end of previous period (114) (137) (1,331)Change during current period Acquisition of treasury stock (650) (611) (5,936)Disposal of treasury stock 2 49 476Retirement of treasury stock 624 409 (3,973)Total change during current period (23) (152) (1,476)Balance at end of current period (137) (290) (2,817)Total stockholders' equity Balance at end of previous period 70,749 74,548 724,329Change during current period Dividends from surplus (1,495) (1,473) (14,312)Net income (loss) 5,854 4,838 47,007Acquisition of treasury stock (650) (611) (5,936)Disposal of treasury stock 2 35 340Retirement of treasury stock ― ― ―Reversal of unrealized gains from revaluation of land 88 191 1,855Total change during current period 3,799 2,980 28,954Balance at end of current period 74,548 77,529 753,293


11

(Unit: Million yen)



Amount



Amount




Other accumulated comprehensive income Unrealized holding gains (losses) on securities Balance at end of previous period ¥ 9,571 ¥ 16,891 $ 164,117Change during current period Net changes of items other than stockholders’ equity during current period (net amount)

7,319 (2,739) (26,612)

Total change during current period 7,319 (2,739) (26,612)Balance at end of current period 16,891 14,151 137,495Deferred gains or losses on hedges Balance at end of previous period ― (492) (4,780)Change during current period Net changes of items other than stockholders’ equity during current period (net amount)

(492) (136) (1,321)

Total change during current period (492) (136) (1,321)Balance at end of current period (492) (629) (6,111)Unrealized gains from revaluation of land held for use Balance at end of previous period 2,868 2,780 27,011Change during current period Net changes of items other than stockholders’ equity during current period (net amount)

(88) (191) (1,855)

Total change during current period (88) (191) (1,855)Balance at end of current period 2,780 2,588 25,145Remeasurements of defined benefit plans Balance at end of previous period ― ― ―Change during current period Net changes of items other than stockholders’ equity during current period (net amount)

― (2,888) (28,060)

Total change during current period ― (2,888) (28,060)Balance at end of current period ― (2,888) (28,060)Total of other accumulated comprehensive income Balance at end of previous period 12,440 19,178 186,338Change during current period Net changes of items other than stockholders’ equity during current period (net amount)

6,738 (5,956) (57,870)

Total change during current period 6,738 (5,956) (57,870)Balance at end of current period 19,178 13,222 128,468Stock subscription rights Balance at end of previous period 36 73 709Change during current period Net changes of items other than stockholders’ equity during current period (net amount)

36 7 68

Total change during current period 36 7 68Balance at end of current period 73 81 787Minority interest Balance at end of previous period 1,706 2,045 19,869Change during current period Net changes of items other than stockholders’ equity during current period (net amount)

339 247 2,399

Total change during current period 339 247 2,399Balance at end of current period 2,045 2,293 22,279Total net assets Balance at end of previous period 84,932 95,846 931,267Change during current period Dividends from surplus (1,495) (1,473) (14,312)Net income (loss) 5,854 4,838 47,007Acquisition of treasury stock (650) (611) (5,936)Disposal of treasury stock 2 35 340Reversal of unrealized gains from revaluation of land 88 191 1,855Net changes of items other than stockholders’ equity during current period (net amount)

7,114 (5,701) (55,392)

Total change during current period 10,914 (2,720) (26,428)Balance at end of current period ¥ 95,846 ¥ 93,125 $ 904,828


12

Consolidated Statement of Cash Flows (Unit: Million yen)

Period

Item



Amount



Amount




Cash flows from operating activities: Income (loss) before income taxes and minority interests ¥ 10,227 ¥ 8,643 $ 83,977Depreciation 1,765 1,667 16,197Impairment losses on fixed assets 173 503 4,887Net increase (decrease) in reserve for possible loan losses 549 2,514 24,426Net increase (decrease) in accrued bonuses 8 (13) (126)Net increase (decrease) in accrued retirement benefits (4) (19) (184)Net increase (decrease) in defined benefit liabilities ― 1,350 13,116Net increase (decrease) in defined benefit assets ― (1,059) (10,289)Net increase (decrease) in allowance for retirement benefits to directors and corporate auditors

2 (3) (29)

Net increase in reserve for reimbursement of deposits (decrease) 60 54 524Net increase in reserve for contingencies (decrease) 190 (94) (913)Increase (decrease) in interest repayment loss allowance (decrease)

(24) (7) (68)

Interest and dividends income (28,610) (27,638) (268,538)Interest expense 1,732 1,704 175,375Net losses on securities transactions (decrease) (735) 1,348 13,097Net foreign exchange loss (gain ) 17 15 145Net losses on disposal of premises and equipment (gain) 77 96 932Net decrease (increase) in loans and bills purchased (55,820) (36,560) (355,227)Net increase (decrease) in deposits 55,787 17,967 174,572Net decrease in certificates of deposits (decrease) (27,780) 77,730 755,246Net decrease in borrowings (other than subordinated borrowings) (decrease)

11,219 23,154 224,970

Net decrease (increase) in due from banks (other than The Bank of Japan)

(53) 209 2,030

Net decrease (increase) in call loans, etc. (362) 362 3,517Net increase (decrease) in payable under repurchase agreement (1,397) 4,885 47,464Net decrease (increase) in foreign exchange (assets) (621) (3,997) (38,835)Net increase (decrease) in foreign exchange (liabilities) (14) (84) (816)Net decrease (increase) in lease claims and lease investment assets

114 (793) (7,705)

Interest and dividends received 30,276 29,852 290,050Interest paid (5,657) (1,684) (16,362)Other 62 10,139 98,513Subtotal (8,816) 110,241 (1,071,132)Income taxes paid (879) (2,305) (22,396)Net cash provided by (used in) operating activities (9,696) 107,935 1,048,727Cash flows from investing activities: Expenditures on purchases of securities (868,957) (986,858) (9,588,593)Proceeds from sales of securities 831,383 889,357 8,641,245Proceeds from redemption of securities 75,832 63,058 612,689Purchase of tangible fixed assets (2,312) (2,087) (20,277)Proceeds from sales of tangible fixed assets 0 55 534Purchase of intangible fixed assets (99) (388) (3,769)Other 10 46 446Net cash provided by (used in) investing activities 35,856 (36,816) (357,714)Cash flows from financing activities: Dividends paid (1,494) (1,471) (14,292)Dividends paid to minority shareholders (0) (0) (0)Expenditures on purchases of treasury stock (650) (611) (5,936)Proceeds from sale of treasury stock 2 0 0Net cash provided by (used in) financing activities (2,142) (2,082) (20,229)Translation adjustments of cash and cash equivalents (17) (15) (145)Increase (decrease) in cash and cash equivalents 24,000 69,020 670,617Cash and cash equivalents at beginning of year 63,089 87,089 846,181Cash and cash equivalents at end of year *(1) ¥ 87,089 ¥ 156,109 $ 1,516,799

Important Items Used as Basis for Preparing Consolidated Financial Statements

13

Important Items Used as Basis for Preparing Consolidated Financial Statements 1. Items Relating to Scope of Consolidation

(1) Consolidated subsidiaries 5 The names of consolidated subsidiaries are omitted because they are listed in “Consolidated Subsidiaries

of The Hokuetsu Bank, Ltd.” (2) Non-consolidated subsidiaries None

2. Items Relating to Application of Equity Method

Not applicable. 3. Items Relating to Business Years of Consolidated Subsidiaries and Other

All the consolidated subsidiaries have their settlement day on March 31. 4. Items Relating to Special Purpose Companies to be Disclosed

Not applicable. 5. Items Relating to Accounting Standards

(1) Valuation standards and methods for trading account securities Trading account securities are valued by the fair market value method (cost of products sold is primarily

calculated by the moving average method). (2) Valuation standards and methods for securities

Among securities, held-to-maturity bonds are valued by the moving average method on amortized cost basis (straight line depreciation), while other securities with a market price are valued by the fair market value method based on the market price, etc., on the consolidated settlement day (cost of products sold is primarily calculated by the moving average method), and other securities whose market value is not readily determinable are valued by the moving average method on cost basis or amortized cost basis.

Note that the total amount of unrealized holding gains (losses) on valuation of securities is included in valuation under the net assets.

(3) Valuation standards and methods for traded derivatives Traded derivatives are valued by the fair market value method.

(4) Depreciation/amortization methods [1] Tangible fixed assets (excluding lease assets)

Tangible fixed assets of the Bank are depreciated by the declining balance method. The durable years of key assets are as follows:

Buildings: 10 to 50 years Others: 3 to 15 years

Tangible fixed assets of consolidated subsidiaries are depreciated primarily by the declining balance method based on the estimated durable years of assets.

[2] Intangible fixed assets (excluding lease assets) Intangible fixed assets are amortized by the straight line method. Internal-use software is amortized based

on its useful period (primarily five years) determined by the Bank or its consolidated subsidiary. [3] Lease assets

Lease assets among “tangible fixed assets” and “intangible fixed assets” pertaining to finance lease transactions in which the ownership is not transferred, are amortized by the straight line method by assuming that the term of lease corresponds to the durable years. Note that the residual value is equal to the assured residual value if the lease agreement specifies assurance of residual value, or zero (0) in all other cases.

(5) Recording standards for reserves for possible loan losses Reserves for possible loan losses of the Bank are recorded as follows according to the pre-determined

depreciation/reserve standards. As for claims pertaining to a debtor which filed for a special liquidation or otherwise became legally

bankrupt (hereinafter referred to as “Bankrupt Entity”) or debtor in a similar situation (hereinafter referred to “Virtually Bankrupt Entity”), the amounts of securities that are likely disposable and amounts that are likely recoverable through guarantees are deducted from the book value of claims after the direct deduction explained in the paragraph starting with “Note…” below, and the balance is recorded. As for claims pertaining to a debtor which is not yet bankrupt but is highly likely to bankrupt (hereinafter referred to as


14

“Potentially Bankrupt Entity”), the amounts of securities that are likely disposable and amounts that are likely recoverable through guarantees are deducted from the claims and of the balance, the necessary amount determined after considering all aspects of the payment ability of the debtor is recorded.

All other claims are recorded based on the actual loan loss ratio, etc., calculated from the actual loan losses incurred over a specific period in the past. There are no specified overseas claims.

All claims undergo a primary assessment by sales offices and Corporate Sales Department, and a secondary assessment by Corporate Loan Approval Department, etc, based on the Bank’s internal rules for self-assessment of asset quality. The Bank’s Asset Appraisal Department, which is independent from those departments, subsequently conducts audits of these assessments, and the reserve is provided based on such audit results.

Note that regarding secured/guaranteed claims, etc., on a bankrupt entity or virtually bankrupt entity, the balance of claims less the values of securities and amounts that are likely recoverable through guarantees is deemed uncollectible and thus directly deducted from the claims. The applicable amount stands at 5,562 million yen.

The general reserve for possible loan losses of consolidated subsidiaries is provided based on the past loan loss ratio, etc. Additionally, the specific reserve for possible loan losses is provided by determining the possible collectability of individual receivables judging from the financial position of the debtors who are not currently bankrupt but are likely to become so.

(6) Recording standards for accrued bonuses As for reserve for accrued bonuses, the part of estimated bonuses payable to employees which is

attributable to the current consolidated accounting year is set aside to pay for employee bonuses. (7) Recording standards for allowance for bonuses to directors and corporate auditors

As for reserve for allowance for bonuses to directors and corporate auditors, the part of estimated bonuses payable to directors and corporate auditors which is attributable to the current consolidated accounting year is set aside to pay for directors’ and corporate auditors’ bonuses.

(8) Recording standards for accrued retirement benefits to directors and corporate auditors As for accrued retirement benefits to directors and corporate auditors, the amount payable at the end of

the current consolidated accounting period is calculated under an internal standard and recorded, to pay for retirement bonuses to directors and corporate auditors.

(9) Recording standards for reserves for reimbursement of deposits As for reserves for reimbursement of deposits, the necessary amount determined by considering the past

reimbursements, etc., is recorded at an estimated amount to be required to reimburse the customer’s claims on the derecognized sleeping deposit accounts.

(10) Recording standards for reserves for contingencies As for reserves for contingencies, the necessary amount determined by estimating future potential losses

is recorded to pay for the burden money to the Credit Guarantee Corporations. (11) Recording standards for reserves for losses on return of interest

As for reserves for losses on return of interest, the reserve amount to be returned is rationally estimated by considering the past refund, etc., to put aside enough fund for consolidated subsidiaries to provide for the customer’s claims to refund the interests exceeding the maximum limit of interest rate stipulated by the Maximum Interest Rate Law, and the aforementioned estimated reserve amount to be returned is recorded.

(12) Changes in accounting standards for retirement benefits The Bank records the necessary amount of accrued retirement benefits based on the retirement benefit

obligations and estimated pension assets at the end of the current consolidated accounting year, to pay for employee retirement benefits. Note that the expense accounting method applicable to actuarial gain or loss is as explained below, and there are no past service obligations.

Actuarial gain or loss: The amount prorated by the straight line method over a certain number of years (12 years) during the average remaining service years of employees at the time of occurrence of actuarial gain or loss in each consolidated accounting year is expensed in the consolidated accounting year immediately following the one in which the actuarial gain or loss occurred.

As for accrued retirement benefits of consolidated subsidiaries, the compendium method is applied at the end of the current consolidated accounting year.

(13) Conversion standards for foreign-currency denominated assets and liabilities Foreign-currency denominated assets and liabilities of the Bank are converted to yen based on the foreign

exchange rates on the consolidated settlement day. (14) Recording standards for income and expenses from lease transactions

Income and expenses pertaining to finance lease transactions are recorded in the form of recording the sale and cost of sale when the lease charges are received.


15

(15) Important items for hedge accounting Hedging interest rate risk The Bank applies the deferral method to account for financial instruments that hedge the interest rate risk

on financial assets and liabilities of the Bank. To avoid for interest risk that arises from financial assets and liabilities of the Bank, micro hedging is applied for each interest-swap transaction.

(16) Scope of cash in consolidated cash flow statement Cash in the consolidated cash flow statement covers cash and due from the Bank of Japan among “Cash

and due from banks” in the Consolidated Balance Sheet. (17) Accounting for consumption taxes, etc.

National and local consumption taxes of the Bank and its consolidated subsidiaries are accounted for by the net-of-tax method.

(Changes in Accounting Policies) Effective from March 31, 2014, the Bank adopted the “Accounting Standard for Retirement Benefits” (ASBJ Statement No.26, May17, 2012; hereinafter the “Retirement Benefits Accounting Standard”) and the ”Guidance on Accounting Standard for Retirement Benefits” (ASBJ Guidance No.25, May 17, 2012; hereinafter the “”Guidance on Retirement Benefits”) (except for provisions stated in the main clause of Paragraph 35 of the retirement Benefits Accounting Standard and Paragraph 67 of the Guidance on Retirement Benefits), as a result of this change, the amount of plan assets exceeding the retirement benefit obligation for a pension plan was recorded in net defined benefit assets, and the retirement benefit obligation exceeding the plan assets for a retirement lump-sum payment plan was recorded in net defined benefit liabilities. In accordance with the transitional treatment stated in Paragraph 37 of the Retirement Benefits Accounting Standard, unrecognized actuarial gain and loss was recognized in remeasurements of defined benefit plans within accumulated other comprehensive income at the end of the fiscal accounting year. As a result, net defined benefit assets of 1,059 million yen and net defined liabilities of 1,350 million yen are recorded at the end of the fiscal accounting year ended in March 31, 2014. In addition, deferred income tax assets increased by 1,575 million yen, and accumulated other comprehensive income decreased by 2,888 million yen respectively. The effect on per share amounts is presented in the relevant section. (Accounting Standards, etc. Not Yet Adopted) 1. “ Retirement Benefit Accounting Standard and Guidance” (May 17, 2012)

(1) Outline The above accounting standard and guidance were revised aiming primarily at changing the accounting

method for unrecognized actuarial gain and loss and unrecognized prior service cost, revising the method to calculate retirement benefit obligation and service cost and extending disclosure items, in terms of improving financial reporting and in view of international trends.

(2) Planned date of adoption The Bank plans to adopt the above accounting standard and guidance from the beginning of the fiscal

accounting year commencing on April 1, 2014 with respect to revising the method to calculate retirement benefit obligation and service cost.

(3) Impact of adoption of the above accounting standard and guidance As a result of the adoption of the above accounting standard and guidance, retained earnings at the

beginning of the fiscal accounting year commencing on April 1, 2014 is expected to increase by 213 million yen.

2. “Accounting Standards, etc. for Business Combinations” (September 13, 2013) (1) Outline

Under the above accounting standards, etc., the followings were mainly revised: [1] accounting treatment for changes in a parent’s equity interest in a subsidiary in the case where the parent retains control over the subsidiary in the additional acquisition of shares in the subsidiary; [2] accounting treatment for acquisition related costs; [3] transitional provisions for accounting treatment; and [4] amendment of presentation method of net income as well as the change from the minority interests to non-controlling interests.

(2) Planned date of adoption The Bank plans to adopt the above accounting standards, etc. from the beginning of the fiscal accounting

year commencing on April 1, 2015. (3) Impact of adoption of the above accounting standards, etc.

The impact of the adoption of the above accounting standard, etc. is not yet determined.

Notes to Consolidated Settlement

16


〔Relating to Consolidated Balance Sheets〕 * (1) Of loans and bills discounted, claims on bankrupt entities amount to 707 million yen, while delinquent

loans amount to 33,107 million yen. Claims on bankrupt entities represent, among the loans for which accrued interests payable are not

recorded by assuming that their principal or interest is unlikely to be collected or repaid due to continuation over a substantial period of a delayed payment of the principal or interest (excluding portions that have been written down; hereinafter referred to as “Loans without Accrued Interest Receivable”), those loans subject to any of the reasons specified in Items 3-a through e or Item 4 under Article 96-1 of the Enforcement Ordinance for Corporate Income Tax Law (1965 Government Ordinance No. 97).

Delinquent loans represent loans without accrued interest receivable, except for those whose interest payment was postponed for the purpose of restructuring or supporting the bankrupt entity pertaining to claims on the bankrupt entity.

* (2) Of loans and bills discounted, delinquent loans overdue by 3 months or more amount to 141 million yen. Note that delinquent loans overdue by 3 months or more represent loans whose principal or interest

payment was delayed by 3 months or more from the day immediately following the fixed payment date, and which do not qualify as claims on bankrupt entities or delinquent loans.

* (3) Of loans and bills discounted, restructured loans amount to 2,117 million yen. Note that restructured loans represent loans subject to reduction/exemption of interest, postponement of

interest payment, postponement of principal repayment, abandonment of claim or other arrangement beneficial to the debtor made for the purpose of restructuring or supporting the debtor, and which do not qualify as claims on bankrupt entities, delinquent loans or delinquent loans overdue by 3 months or more.

* (4) The total sum of claims on bankrupt entities, delinquent loans, delinquent loans overdue by 3 months or more, and restructured loans, is 36,072 million yen.

Note that the claims in (1) to (4) above are amounts before deduction of reserves for possible loan losses.

* (5) Bills discounted are accounted for as financial transactions based on “Treatment of Accounting and Auditing in Applying Accounting Standard for Financial Instruments in the Banking Industry” (JICPA Industry Audit Committee Report No. 24).

Accordingly, the Bank has the right, without any restriction, to dispose of bank bills, commercial bills, documentary bills and purchased foreign currencies underwritten by means of sale or (re)collateralizing. The total face value of these bills amounts to 15,265 million yen.

* (6) The assets pledged as collateral are as follows: Pledged assets

Cash and due from banks 0 million yen Securities 108,504 million yen Lease claims and lease investment assets 1,199 million yen Other assets 440 million yen Other tangible fixed assets 18 million yen

Total 110,163 million yen Liabilities related to the above pledged assets

Deposits 3,812 million yen Payables under repurchase agreements 6,712 million yen Borrowed money 52,421 million yen

In addition to the above, 47,580 million yen of securities are pledged as collateral for transactions involving foreign exchange settlement, etc., or for use as margin money for futures trading.

Note that, among other assets, guarantees amount to 76 million yen, while deposits amount to 63 million yen.

* (7) An overdraft facility agreement or commitment line agreement pertaining to loan is an agreement that promises to loan money to the customer until a specified limit is reached when a request for loan is received from the customer, unless there is a breach of any of the terms of the agreement. There is a balance of loans not yet drawn under these agreements amounting to 547,183 million yen. Of this amount, 543,633 million yen pertains to agreements whose original term is within a year or which can be cancelled at any time without condition.


17

Note that many of these agreements will expire without customer’s request for loan, and thus the balance of loans not yet drawn does not necessarily impact the future cash flows of the Bank or its consolidated subsidiaries. Many of these agreements include a provision that permits the Bank or its consolidated subsidiaries to deny any loan request or reduce the maximum loan limit under the agreement if there is a change in financial climate, to safeguard claims, or when any other reason exists. In addition, at the time of executing such agreement the Bank collects real estate, securities or other collateral as necessary, and after the execution of the agreement the Bank also periodically checks the business condition of the customer, etc., according to the pre-defined internal procedures, while revising the agreement and implementing measures to safeguard credit, etc., as necessary.

* (8) Based on the Law Concerning the Revaluation of Land (Law No. 34 promulgated on March 31, 1998), the Bank revalued its land held for operation and any losses on valuation are recorded under “Liabilities” as “Deferred income taxes for revaluation” which corresponds to taxes pertaining to the applicable losses on valuation, and the amount after deducting these losses are recorded under “Net assets” as “Unrealized gains or losses from revaluation of land held for use.”

Date of revaluation March 31, 1998

Method of revaluation pursuant to Article 3-3 of the Law Calculate by making rational adjustments such as the price correction based on depth, based on the

method published by the Director of Tax Administration Agency for calculating the value of land to be used as the basis for calculating the taxable value for land value tax as specified in Article 16 of the Land Value Tax Law pursuant to Article 2-4 of the Enforcement Ordinance for the Law Concerning the Revaluation of Land (Government Ordinance No. 119 promulgated on March 31, 1998).

Difference between the total market value as of the end of the current consolidated accounting year of all the land for operations revalued under Article 10 of the Law, and the total book value of the same land after revaluation

10,932 million yen * (9) Accumulated depreciation of tangible fixed assets

34,190 million yen * (10) Compacted book value of tangible fixed assets

1,807 million yen (Compacted book value in the current consolidated accounting year --- XXX million yen)

* (11) Borrowed money includes 7,000 million yen of subordinated borrowings which are subject to a special clause specifying that the performance of the applicable liability is lower priority than other liabilities.

* (12) The entire amount of bonds consists of subordinated bonds. * (13) Among securities, bonds due to private placements of securities (pursuant to Article 2-3 of the Financial

Instruments and Exchange Law) account for 23,108 million yen of guarantee liabilities.


18

〔Relating to Consolidated Statement of Income〕 * (1) Other expenses include 691 million yen of amortized loans, and 116 million yen of amortized shares, etc. * (2) Now that the property investment is unlikely to be recovered because of the continuously sliding land

prices, the Bank has reduced the book value of the following assets to a recoverable level, and recorded such reduction amounting to 503 million yen (comprising 420 million yen for land and 82 million yen for buildings) on extraordinary losses as losses on impairment of fixed assets.

Location Primary use Description Losses on impairment of

fixed assets (million yen)

Inside Niigata Prefecture

Five (5) branches Land and buildings 342

(Of which, land 285)(Of which, buildings 56)

Ten (10) idle assets Land and buildings 49 and assets planed to

be disposed (Of which, land 25)

(Of which, buildings 23)Outside Niigata Prefecture Three (3) branches Land and buildings 34

Five (5) idle assets and assets planed to be disposed

Land and buildings

(Of which, land 34)(Of which, buildings 0)

77(Of which, land 75)

(Of which, buildings 2)Total 503 (Of which, land 420) (Of which, buildings 82)

Under the Bank’s assets grouping policies, each branch or each branch area covered by jointly operating business offices, serving as the smallest unit for the purpose of management accounting is also the smallest unit for the purpose of assets grouping, while, each idle asset and asset planed to be disposed is treated as the smallest unit on its own.

Meanwhile, each consolidated subsidiary is basically treated as the smallest unit for the purpose of assets grouping.

The higher of net selling price or value in use was used as recoverable amount for the purpose of measuring losses on impairment of fixed assets in the current consolidated accounting year. Net selling price was calculated based on the appraisal value of the property after deduction of estimated disposal cost, while value in use was calculated based on the amount of future cash flows discounted by the rate of 1.5%.

〔Relating to Consolidated Statement of Comprehensive Income〕

※(1) Other comprehensive income of previous consolidating accounting year

Unrealized holding gains on securities: Amount accrued for current accounting year (4,880) million yen Conversion adjustment 866 million yen

Amount before tax-consequence adjustment (4,013) million yen Current tax consequence 1,289 million yen

Unrealized holding gains on securities (2,723) million yen Deferred gains or losses on hedges: Amount accrued for current accounting year (211) million yen Conversion adjustment － million yen Amount before tax-consequence adjustment (211) million yen Current tax consequence 74 million yen

Deferred gains or losses on hedges (136) million yen Total of other comprehensive income (2,860) million yen


19

〔Relating to Consolidated Statement of Changes in Net Assets〕

(1) Items relating to type and total number of outstanding shares and type and number of shares of treasury stock

(Unit: Thousand shares)

Number of shares at end of previous

consolidated accounting year

Number of shares increased during

current consolidated

accounting year

Number of shares decreased during

current consolidated

accounting year

Number of shares at end of current

consolidated accounting year

Remarks

Shares outstanding

Common stock 247,142 ― 2,000 245,142 (Note) 1

Total 247,142 ― 2,000 245,142

Treasury stock

Common stock 693 2,973 2,248 1,418 (Note) 2

Total 693 2,973 2,248 1,418

(Note) 1 Breakdown of decrease is as follows:

Decrease resulting from retiring of shares 2,000 Thousand shares

(Note) 2 Breakdown of increase is as follows:

Increase resulting from buyback of shares 2,953 Thousand shares Increase resulting from buyback of shares below one tradable unit 20 Thousand shares

Breakdown of decrease is as follows: Decrease resulting from retiring of shares 2,000 Thousand sharesDecrease resulting from sale of shares below one tradable unit 2 Thousand sharesDecrease resulting from exercising stock subscription rights 246 Thousand shares

(2) Items relating to stock subscription rights and treasury stock subscription rights

Type

of stocks

Number of shares for stock subscription rights Amount

(million yen) RemarksAt beginning

Current consolidated accounting yearAt end Increase Decrease

Stock subscription

rights － 81

Total － 81

(3) Items relating to dividends

[1] Dividend paid during the current consolidated accounting year

(Resolution) Type of stock Total dividend (in millions of

yen)

Amount per share (in yen) Reference date Effective date

Annual general meeting of shareholders on June 21, 2013

Common stock 739 3.00 March 31, 2013 June 24, 2013

Board of Directors’ meeting on November 8, 2013

Common stock 734 3.00 September 30, 2013

December 10, 2013

[2] Dividends whose reference date falls in the current consolidated accounting year, but where the effective date of dividend occurs after the last day of the current consolidated accounting year

(Resolution) Type of stock

Total dividend

(in millions of yen)

Fund for dividend

Amount per share (in yen)

Reference date

Effective date

Annual general meeting of shareholders on June 24, 2014

Common stock

731 Retained earnings

3.00 March 31,

2014 June 25, 2014


20

〔Relating to Consolidated Statement of Cash Flows〕

* (1) Relationship between the balance of cash and cash equivalents at end of year and the amounts of account items stated in the Consolidated Balance Sheets

(Unit: Million yen) As of March 31, 2014

Cash and due from banks 156,476Time deposits (50)Current deposits (10)Ordinary deposits (102)Special deposits (3)Postal savings deposits (200)Cash and cash equivalents 156,109

〔Relating to Lease Transactions〕 (Lessee)

Finance lease transactions where the ownership is not transferred (1) Details of lease assets

[1] Tangible fixed assets Vehicles, etc.

[2] Intangible fixed assets Software

(2) Depreciation methods for lease assets As explained in (4), “Depreciation/amortization methods” under 5, “Items Relating to Accounting Standards” specifying important items used as the basis for preparing consolidated financial statements.


21

〔Financial Instruments〕 1. Items relating to status of financial instruments (1) The Group’s policies for financial instruments

The Group engages primarily in banking, along with businesses relating to other financial services including leasing, credit guarantee and credit card businesses.

The Group implements Asset Liability Management (ALM) in which its assets and liabilities are managed in an integrated manner, with the purpose primarily to avoid adverse impact of the interest rate volatility on some of its financial assets and liabilities subjected to variable interest rates, while secondarily to accommodate customers’ needs that are increasingly diversifying in a changing economic/financial environment.

Meanwhile, the Group is using traded derivatives, primarily hedging transactions to respond to the diversifying customers’ financial needs, as well as to minimize the Group’s own exposure to interest rate risk and exchange risk.

(2) Description of financial instruments and the risks associated with them Main financial assets held by the Group are loans and bills discounted mainly provided to corporate and

individual customers in Japan, which are exposed to the credit risk involving losses associated with the difficulty in recovering principal and interest resulting from customers’ bankruptcies or deteriorated financial conditions. In addition, the Group holds securities including shares, bonds and investment trusts, either on a held-to-maturity or purely portfolio investment basis, or for the purpose of strategic long-term investment. These assets are exposed to each issuer’s credit risk, interest rate risk and market risk.

The Group’s financial liabilities are mainly deposits which are exposed to interest rate risk. The Group conducts derivative transactions including forward exchange transactions along with currency

option transactions in respect of currency, and bond futures transactions along with OTC bond options in respect of bond. These transactions are meant primarily to accommodate customers’ needs as well as to avoid interest rate risk and exchange risk, while the Group also engages in certain trading transactions in an effort to diversify its opportunities of earnings.

Risks associated with these derivative transactions include credit risk in the event of the counterparties’ contractual default and market risk involving loss resulting from fluctuations in interest rate and foreign exchange.

Furthermore, some of the Group’s subsidiaries have financial assets and liabilities that are exposed to credit risk, interest rate risk and price fluctuation risk.

(3) Risk management system for financial instruments [1] Credit risk management

To ensure adequate control of credit risk under the loan provision rules and other internal rules concerning credit risk management, the Bank conducts a loan assessment on case-by-case basis according to the strict assessment standards. For this purpose, the Bank has developed and maintains structures for credit management including “maximum credit limits” to avoid providing excessive loans to certain customers, “credit rating” system for appropriate credit risk management and provision of support for its customers to improve their business conditions. Each branch office along with Loan Division and Loan Division No.2, are engaged in this credit risk management.

Meanwhile, in an effort to develop optimum credit portfolio based on adequate risk distribution, Risk Control Division identifies and analyzes the risk distribution of loan assets on a regular basis.

[2] Market risk management With the purpose to adequately control market risk, the Bank’s Executive Committee semi-annually sets

out the standard risk amount (risk limits) not exceeding the Bank’s risk capital, according to the General Rules on Risk Management as well as Rules on Market Risk Management, while setting out position limit for each business unit (upper limits for investment or holdings) within the range of the entire Bank’s risk tolerance, as well as alarm points in respect of risk limits and unrealized holding gains (losses) on valuation of securities. Market Business Department is engaged in market transactions in a flexible and efficient way, within these risk limits. (i) Management of interest rate risk

The Bank manages its interest rate risk under the ALM, in which investment is made according to the investments and loans policies developed at the ALM Committee, while interest rate risk associated with such investment is monitored by Risk Control Division.

In addition, rigorous risk management is in place against future fluctuation in interest rate, under the principle to control the amount of interest rate risk at a level commensurate with the Bank’s capital adequacy.

The amount of interest rate risk for the market sector and that for the entire bank account are calculated


22

on a daily basis and on a monthly basis, respectively. (ii) Management of exchange risk

The Bank manages exchange fluctuation risk by adopting market value measurement on case-by-case basis. (iii) Management of price fluctuation risk

The Bank manages price fluctuation risks not least in stocks by setting out risk limits and loss-cutting rules with particular attention to the downside risk in stock prices, whereby avoiding excessive risk-taking.

Meanwhile, Executive Committee decides investment amount, on the basis of the discussions at the ALM Committee, in consideration of expected earnings versus market fluctuation risk based on the outlook of interest rate, stock market and other factors. (iv) Derivative transactions

The Bank conducts derivative transactions according to the investment management standards, while ensuring internal control by separating transaction execution function from back office function.

(V) Quantitative information related to market risk The Bank conducts quantitative analysis on banking transactions including deposits and loans and securities, etc., measures market risk amount mainly by VaR (Value at Risk) method. The Bank adopts delta method (possession period: 6 months; confidence interval: 99%; observing period 5 years) for calculation of VaR. For overall VaR, The Bank considers inverse effects of some securities, between the risk of interests and stock prices.

The Bank’s VaR on March 31, 2014 is 16.2 billion yen (inverse effects: 7.6 billion yen), excluding some stocks which are considered to be extremely difficult to calculate the current price. For interest rate risk of deposits and loans, it is calculated by core deposits using internal models, and the Bank allocates current deposits to each period based on the result and recognizes the average life of 3.7 years for interest rate risk.

The Bank tests the validity of measurement models by conducting a back-testing of the comparison of calculated VaR with actual profit and loss. As a result of the back-testing, the Bank considers that the measurement models in use acquire market risks with enough accuracy. But there might be a possibility to acquire adequate risks under unexpected market turmoil.

[3] Funding liquidity risk management The Rules on Liquidity Risk Management is in place within the Bank, on the basis of which Market and

Capital Division is managing daily cash flow, while Risk Control Division keeps a good grasp of liquidity risk situation at all times by closely checking the amount of immediately available fund based on securities holding as well as by monitoring liquidity risk management indicators.

(4) Supplementary explanations on items relating to the market value of financial instruments Market value of financial instruments are measured based on the quoted market price if available, or

reasonably assessed value if a quoted market price is not available. Such reasonably assessed value is derived by calculations based on certain assumptions, and the value might differ if different assumptions are adopted.


23

2. Items relating to the market value of financial instruments The consolidated balance-sheet values and market values of financial instruments as of March 31, 2014,

along with the differences between these two are as follows. Financial instruments such as unlisted stocks whose market values appear to be extremely difficult to determine are not included in the table (See (Note2) below). Those items with insignificant consolidated balance-sheet values are omitted here.

(Unit: Million yen)

Consolidated

balance-sheet valueMarket value Difference

(1) Cash and due from banks 156,476 156,476 ―(2) Securities

Other securities 853,161 853,161 ―(3) Loans and bills discounted 1,416,631

Reserve for possible loan losses (*1) (9,609) 1,407,021 1,426,790 19,768Total assets 2,416,659 2,436,428 19,768(1) Deposits 2,159,314 2,159,664 349(2) Certificates of deposits (3) Borrowed money

122,32059,620

122,320 59,736

0116

Total liabilities 2,341,254 2,341,720 465Traded derivatives (*2)

Traded derivatives for which hedge accounting is not applied

(586) (586) ―

Traded derivatives for which hedge accounting is applied

(973) (973) ―

Total traded derivatives (1,559) (1,559) ―(*1) This represents deduction of general reserve for possible loan losses as well as individual reserve for possible

loan losses which are corresponding to loans and bills discounted. (*2) This represents the whole of derivative transactions recorded in other assets and other liabilities.

Net receivables and payables generated as a result of traded derivatives are presented in net amounts, where items amounting to net receivables after summations of receivables and payables, are presented within parentheses.

(Note 1) Calculation method for the market value of financial instruments Assets (1) Cash and due from banks

Due from banks without maturity as well as those with shorter agreed term (one year or less) are stated at their book values, as their market values approximate book values. Due from banks on a longer term with maturity are stated at their market values calculated by discounting their future cash flow using the interest rate reflecting credit risk of the deposit-taking institutions. (2) Securities

Shares are stated at the stock exchange quoted price and bonds are stated at either the price published by institutions such as Japan Securities Dealers Association or the price presented by transacting financial institutions, while investment trusts are stated at either the official reference price or the price presented by transacting financial institutions.

Privately-offered bonds with the Bank’s guarantee are stated at their market value, calculated by discounting the expected future cash flow reflecting the issuer’s credit risk, using the risk-free interest rate.

Floating-rate government bonds whose market prices are not believed to represent fair valuation, indicating significant discrepancy between their market prices and rationally assessed prices, are stated at the rationally assessed prices of floating-rate government bonds, which are calculated by discounting the future cash flow estimated on the basis of government bond yield, using the discount rate based on such yield, in which the government bond yield and its volatility are the primary determinant parameters. (3) Loans and bills discounted

Loans and bills discounted on variable interest rates reflect market interest rate at shorter intervals, and thus are stated at book value because of its proximity to the book value, unless there are significant changes meanwhile in the borrowers’ creditworthiness. Loans and bills discounted on fixed interest rate are stated at their market value as calculated by discounting their expected future cash flows reflecting credit risks involved, using risk-free interest rate, for each category of cases classified by nature of loans, by grade of internal credit rating and by term. For


24

loans and bills with short enough agreed term (1 year or less), book value is recorded as its market value because of the proximity between the two.

Loan receivables in respect of Bankrupt Entities, Virtually Bankrupt Entities and Potentially Bankrupt Entities, are stated at their consolidated balance sheet values at the closing date less the currently expected amount of possible loan losses because of the proximity between their market values, since expected amount of possible loan losses for these receivables are calculated based on the expected recoverable amount through their collateral securities or credit guarantee.

Loans and bills discounted without due dates thanks to their specific attributes such as loan amount being limited within the value of collateral assets, are stated at book value which are deemed to approximate their market value thanks to the factors including estimated payment periods and interest rates conditions. Liabilities (1) Deposits, and (2) Certificates of deposits

For demand funds, market value is deemed to be the amount payable to meet a call on the consolidation date (book value). For time deposits, market value is the present value calculated by discounting future cash flow per each section of period of time, using discount rate that are interest rate applicable to new deposits. For deposits with short enough deposit term (1 year or less), book value is recorded as its market value because of the proximity between the two. (3) Borrowed money

Borrowed money is stated at present market value calculated by discounting the total amount of its principal and interest per each section of period of time, using the interest rate assumed to be applicable to borrowings on similar conditions. For borrowed money with short enough agreed term (1 year or less), book value is recorded as its market value because of the proximity between the two. Derivative Transactions

Derivative transactions are the transactions concerning currency such as forward exchange contracts and currency options, which are stated at the value calculated based on their discounted present values. (Note 2) Financial instruments whose market values appears to be extremely difficult to determine, are as follows:

These are not included in “Assets (2) Other securities,” of the information on the market values of financial instruments.

(Unit: Million yen)

Classification Consolidated balance-sheet value [1] Unlisted stocks (*1) (*2) 1,665[2] Investments in limited investment partnerships (*3) 58

Total 1,724(*1) Market values of unlisted stocks are not disclosed as they have no market prices, thus their market values are not readily determinable. (*2) In the fiscal year under review, 116 million yen impairment adjustment has been made to unlisted stocks. (*3) Market values of the investments in limited investment partnerships are not disclosed in the cases where assets of such partnerships comprise investments whose market values are not readily determinable, such as unlisted stocks.


25

(Note 3) The scheduled redemption amount of monetary claims and securities with maturity (Unit: Million yen)

1 year or less

More than 1 year but not exceeding 3

years

More than 3 years but not exceeding 5

years


years


years

More than 10 years

Deposits 130,743 ― ― ― ― ―Securities 58,060 141,153 183,929 201,969 196,180 2,887

Other securities with maturity 58,060 141,153 183,929 201,969 196,180 2,887National government bonds 15,105 32,606 103,835 138,426 169,239 ―Municipal bonds Short-term corporate bonds

28,756 ―

51,524―

16,549―

13,018―

8,707 ―

――

Corporate bonds 13,131 35,870 20,909 29,627 13,555 2,887Other 1,067 21,151 42,634 20,896 4,678 ―

Loans and bills discounted (*) 302,595 314,386 189,618 94,787 126,237 209,789

Total 491,399 455,540 373,548 296,757 322,417 212,676

(*) 33,814 million yen loan receivable which schedule of redemption amount cannot be established, such as those in respect of Bankrupt Entities, Virtually Bankrupt Entities and Potentially Bankrupt Entities, as well as 145,401 million yen loan receivables without defined terms are not included in loans and bills discounted. (Note 4) Repayment amounts of bonds, borrowed money and other interest-bearing liabilities scheduled after the consolidation date

(Unit: Million yen)

1 year or less

More than 1 year but not exceeding 3

years


years


years


years

More than 10 years

Deposits (*) 1,909,082 181,022 68,157 488 563 ―Certificates of deposits 122,320 ― ― ― ― ―Borrowed money 40,468 12,152 ― 5,000 2,000 ―

Total 2,071,870 193,174 68,157 5,488 2,563 ―

(*) Of deposits, demand funds are disclosed, as included in “1 year or less” above.

〔Items Relating to Retirement Benefits〕 (1) Overview of retirement benefit plan adopted

The Bank has a corporate pension fund and lump-sum retirement allowance scheme, while its consolidated subsidiaries have a lump-sum retirement allowance scheme. An additional retirement allowance may be payable upon retirement of employees, etc.

The Bank has a retirement benefit trust. Liabilities for retirement benefits and retirement benefit expense at consolidated subsidiaries are calculated

by simplified method. (2) Defined benefit plans

[1] Changes in retirement benefit obligation

Classification Amount

(in millions of yen) Retirement benefit obligation at the end of previous period 28,019 Service cost 794 Interest cost 336 Actuarial loss (80) Retirement benefits paid (1,522) Prior service cost ―

Other ― Retirement benefit obligation at the end of current period 27,546


26

[2] Changed in plan assets

Classification Amount (in millions of yen)

Plan assets at the end of previous period 25,500 Expected return on plan assets 510 Actuarial loss 1,226 Contributions by the Bank 887 Retirement benefits paid (868) Other ― Retirement benefit obligation at the end of current period 27,255

[3] Changed in retirement benefit obligations and plan assets, and reconciliations of liability for retirement benefits and assets for retirement benefits recorded on the consolidated balance sheets


(in millions of yen) Funded retirement benefit obligation Plan assets at fair value

27,545 (27,255)

Unfunded retirement benefit obligation

289 0

Net liabilities (assets) for retirement benefits in the balance sheets 290


Liabilities for retirement benefits Assets for retirement benefits

1,350 (1,059)

Net liabilities (assets) for retirement benefits in the balance sheets 290 [4] Components of severance benefit expenses


(in millions of yen) Service cost Interest cost Expected return on plan assets Amortization of actuarial loss Prior service cost Other

794 336

(510) 1,397

― 8

Retirement benefit expense associated with defined benefit plans 2,026 [5] Remeasurements of defined benefit plans


Unrecognized prior service cost Unrecognized actuarial loss Other

― (4,464)

―

Total (4,464) [6] The fair value of plan assets by major category

Bonds Stocks Cash and due from banks Other

50.4% 29.4% 0.9%

19.3%

Total 100.0% [7] Items related to actuarial assumptions Discount rate: 1.2%

Expected long-term return on plan assets: 2.0% (3) Defined contribution plans

Not applicable.


27

〔Items Relating to Stock Subscription Rights, etc.〕

(1) Amount and type of account listed 42 million yen (2) Details of Stock Subscription Rights (i) Contents of Stock Subscription Rights

Stock subscription rights for the fiscal 2011



Entitled persons 11 directors of the Bank 11 directors of the Bank 11 directors of the Bank Type of stock subscription rights (Note)

239,100 shares of common stocks



Given date July 26, 2011 July 26, 2012 July 26, 2013 Fix conditions Not decided Not decided Not decided Employment period Not decided Not decided Not decided Exercise period July 27, 2011 to July 26,

2041 July 27, 2012 to July 26, 2042

July 27, 2013 to July 26, 2043

(Note) Calculated in terms of number of shares. (ii) Number of Stock Subscription Rights




Number of unfixed shares At the end of previous consolidated accounting year

222,600 295,000 －

Of which, given shares －－ 240,700Of which, expired shares －－－Of which, fixed shares 110,400 136,000 －

Of which, unfixed shares 112,200 159,000 240,700Number of fixed shares At the end of previous consolidated accounting year

－－－

Of which, fixed shares 110,400 136,000 －Of which, exercised shares 110,400 136,000 －Of which, expired shares －－－Of which dormant shares －－－

Unit–price Information Stock subscription rights

for the fiscal 2011 Stock subscription rights

for the fiscal 2012 Stock subscription rights

for the fiscal 2013 Exercise price (yen) 1 1 1Average stock price upon exercise (yen)

185 185 －

Fair evaluation price at the given date (yen)

152 133 178

(Note) Calculated in terms of per-share price. (3)Method of Estimation for Fair Evaluation Price of Stock Subscription Rights (i) Method used Black-Scholes option pricing model

(ii) Principal data and method of estimation Stock subscription rights for the fiscal 2013 Volatility (Note) 1 27.0%Expected remaining period (Note) 2 4.7 yearsExpected dividends (Note) 3 6 yen per shareRisk-free interest rate (Note) 4 0.27%

(Note) 1 Calculated by actual stock prices from November 3, 2008 to July 22, 2013. (Note) 2 Estimated by the difference between average tenure of retired directors and that of current directors.


28

(Note) 3 Actual dividends for the fiscal 2013. (Note) 4 Yield of government bonds for the expected remaining period.

(4) Method of Estimation for Fixed Subscription Rights Reasonable estimation is so difficult that actual number of expired shares are reflected.


29

〔Relating to Tax Effect Accounting〕 (1) Breakdown of key causes of deferred tax assets and deferred tax liabilities

(Unit: Million yen)

Deferred tax assets Reserve for possible loan losses 4,895Net defined benefit liabilities 4,338Retirement of shares, etc. 1,287Depreciation 644Tax loss carried forward 21Other

Subtotal of deferred tax assets Valuation allowance Total of deferred tax assets Deferred tax liabilities

Valuation difference on available-for-sale securities

2,15713,345(3,220)10,125

(7,422)Other (9)

Total of deferred tax liabilities (7,431) Net deferred tax assets

2,693

(2) Breakdown of key items that generated a significant discrepancy, if any, between the effective statutory tax rate applicable to the company submitting the consolidated financial statements and the burden ratio of corporate taxes, etc., after application of tax effect accounting

Effective statutory tax rate 37.7%(Adjustment) Increase in valuation allowance 0.9Items, such as entertainment expenses that are not deductible for the purpose of income tax on a permanent basis

0.5

Items, such as dividends on securities that are not included in revenues on a permanent basis Inhabitants’ per capita taxes

(1.5) 0.4

Reduction of deffered income tax assets at the end of fiscal year due to changes in tax rate 2.0 Others 1.3 Burden ratio of corporate taxes, etc., after application of tax effect accounting 41.3 %

(3) Revisions to the amount of deffered income tax asset and deffered income tax liability due to changes in tax rate With the promulgation of the “Act for Partial Revision of the Income Tax Act, etc.” (Act No.10 of 2014) on

March 31, 2014, the Special Corporation Tax for Reconstruction will be abolished from the fiscal years commencing on or after April 1, 2014. As a result, the statutory tax rate used for the calculation of deffered income tax assets and deffered income tax liabilities has been changed from 37.7% to 35.3% for the temporary differences expected to be settled in the fiscal year commencing on April 1, 2014. As a result of this change, deffered income tax assets decreased by 158 million yen, valuation difference on available-for-sale securities increased by 10 million yen, and adjustment of corporate taxes, etc. increased by 169 million yen respectively.


30

〔Per-share Information〕

Previous consolidated

accounting year (April 1, 2012 through

March 31, 2013)



Net assets per share Yen 380.31 372.35Net income per share (Net loss per share in parentheses) Yen 23.51 19.72

Diluted earnings per share Yen 23.47 19.68

(Note) 1. The basis of calculation of net assets per share is as follows.

End of previous consolidated

accounting year (March 31, 2013)

End of current consolidated accounting year

(March 31, 2014)Total net assets (in millions of yen) 95,846 93,125

Deduction from total net assets (in millions of yen) 2,118 2,374

(Of which, stock subscription rights) 73 81

(Of which, minority interests) 2,045 2,293Net assets attributable to common stock shareholders at end of year (in millions of yen) 93,727 90,751

Number of shares of common stock at end of year used for calculation of net assets per share (in 1,000s of shares) 246,449 243,724

(Note) 2. The calculation basis for net income or net loss per share and diluted earnings per share is as follows.

Previous consolidated

accounting year (April 1, 2012 through

March 31, 2013)



Net income per share (Net loss per share in parentheses)

Net income (Net loss in parentheses) In millions

of yen 5,854 4,838

Amount not attributable to common stock shareholders

In millions of yen

― ―

Net income attributable to common stock shareholders (Net loss attributable to common stock shareholders in parentheses)

In millions of yen

5,854 4,838

Weighted average number of shares of common stock

In 1,000s of shares

248,996 245,309

Diluted earnings per share

Adjusted for net income In millions

of yen ― ―

Number of the shares of common stock to be increased

In 1,000s of shares

424 489

Of which, stock subscription rights In 1,000s of shares

424 489

Overview of diluted shares having no dilution effect and thus not included in calculation of diluted earnings per share

― ―

(Changes in accounting policies) Effective from March 31, 2014 the Bank adopted the “Retirement Benefits Accounting Standard” and the “Guidance on Accounting Standard for Retirement Benefits,” which are applied in accordance with the transitional treatment stated in Paragraph 37 of the Retirement Benefits Accounting Standard. As a result oh this, net assets per share at the end of this fiscal year decreased by 11.85 yen. 〔U.S. dollar Amount〕

Amount in U.S. dollars is translated from Japanese yen, solely for convenience, at ¥102.92 = U.S. $1.00, the exchange rate prevailing on March 31, 2014.


31

Overview of Non-Consolidated Settlement Financial Statements

Balance Sheet (Unit: Million yen)

Period

Item

End of 108th periodMarch 31, 2013

Amount

End of 109th period March 31, 2014

Amount



(Assets) Cash and due from banks ¥ 87,613 ¥ 156,423 $ 1,519,850Cash 22,620 25,732 250,019Deposits 64,992 130,691 1,269,830Call loans 362 －－Trading account securities 1,534 193 1,875National government bonds 914 7 68Municipal bonds 619 186 1,807Securities 831,468 854,354 8,301,146National government bonds 477,625 459,214 4,461,853Municipal bonds 141,505 118,556 1,151,923Corporate bonds 140,745 115,981 1,126,904Stocks 25,003 25,060 243,490Other securities 46,589 135,542 1,316,964Loans and bills discounted 1,386,722 1,423,505 13,831,179Bills discounted 14,573 12,692 123,319Loans on bill 54,453 54,988 534,279Loans on deed 1,161,372 1,204,741 11,705,606Overdrafts 156,323 151,082 1,467,955Foreign exchange 6,721 10,719 104,148Deposits with other foreign branches 4,489 8,146 79,148Foreign exchange purchased 2,231 2,572 24,990Other assets 5,558 10,767 104,615Accrued income 2,705 2,394 23,260Financial derivatives 1,238 1,450 14,088Other assets 1,615 6,922 67,256Tangible fixed assets 28,124 28,519 277,098Buildings 7,291 7,393 71,832Land 19,855 19,702 191,430Lease assets 112 16 155Constructions in progress 86 456 4,430Other tangible fixed assets 778 950 9,230Intangible fixed assets 829 631 6,130Software 744 515 5,003Other intangible fixed assets 85 116 1,127Prepaid pension cost 4,669 4,174 40,555Deferred tax assets 872 898 8,725Customers' liabilities for acceptances and guarantees 7,995 7,723 75,038Reserve for possible loan losses (6,574) (8,644) (83,987)Total assets ¥ 2,355,899 ¥ 2,489,268 $ 24,186,436


32

(Unit: Million yen) Period

Item


Amount

End of 109th period March 31, 2014

Amount



(Liabilities) Deposits ¥ 2,146,143 ¥ 2,164,734 $ 21,033,171Current deposits 105,689 99,508 966,848Ordinary deposits 956,909 1,022,997 9,939,729Savings deposits 28,705 28,763 279,469Demand deposits 56,304 6,905 67,090Time deposits 945,302 945,598 9,187,699Time savings deposits 129 107 1,039Other deposits 53,103 60,852 591,255Certificates of deposits 44,590 122,320 1,188,495Payables under repurchase agreements 1,826 6,712 65,215Borrowed money 34,267 58,732 570,656Borrowings 34,267 58,732 570,656Foreign exchange 199 115 1,117Foreign exchange sold 41 24 233Foreign exchange payable 157 91 884Bonds 10,000 10,000 97,162Other liabilities 14,747 23,439 227,739Corporate taxes, etc. payable 1,450 1,044 10,143Unpaid expenses 1,065 1,091 10,600Unearned income 631 814 7,909Benefit compensation reserve 0 0 0Financial derivatives 2,021 3,009 29,236Payables under financial instruments, etc. 4 ― ―Lease obligations 125 18 174Asset retirement obligations 52 72 699Other liabilities 9,396 17,388 168,946Accrued bonuses 777 782 7,598Allowance for bonuses to directors and corporate auditors 25 25 242Reserve for reimbursement of deposits 394 448 4,352Reserve for contingencies 563 468 4,547Deferred income taxes for revaluation 3,729 3,613 35,104Acceptances and guarantees 7,995 7,723 75,038Total liabilities 2,265,260 2,399,117 23,310,503(Net assets) Common stock 24,538 24,538 238,418Capital surplus 16,964 16,964 164,827Capital reserve 16,964 16,964 164,827Retained earnings 30,255 33,017 320,802Legal reserve 1,058 1,353 13,146Other retained earnings 29,197 31,664 307,656Net retained earnings forwarded 29,197 31,664 307,656Treasury stock (137) (290) (2,817)Total stockholders' equity 71,620 74,229 721,230Unrealized holding gains (losses) on securities 16,657 13,881 134,871Deferred gains or losses on hedges (492) (629) (6,111)Unrealized gains from revaluation of land held for use 2,780 2,588 25,145Total valuation and translation adjustments 18,944 15,840 153,905Stock subscription rights 73 81 787Total net assets 90,638 90,151 875,932Total liabilities and net assets ¥ 2,355,899 ¥ 2,489,268 $ 24,186,436


33

Income Statement (Unit: Million yen)

Period

Item

108th period (April 1, 2012 through

March 31, 2013) Amount


March 31, 2014) Amount


March 31, 2014) Amount in Thousand USD

Income: ¥ 43,602 ¥ 46,281 $ 449,679Interest and dividends income 28,548 27,572 267,897Loans and bills discounted 21,135 20,084 195,141Interest and dividends on securities 7,347 7,419 72,085Call loans and bills purchased 16 19 184Receivables under resale agreements 0 ― ―Deposits 0 3 29Other 47 45 437Fees and commission 5,847 6,066 58,938Foreign exchange commissions receivable 2,323 2,332 22,658Income from other services 3,524 3,734 36,280Other operating income 6,971 8,434 81,947Gain on foreign exchange trading 179 438 4,255Gain on securities trading 195 76 738Income from government and other bonds 3,086 1,643 15,963Income from financial derivatives 3,509 6,275 60,969Other operating income 0 0 0Other income 2,235 4,207 40,876Gains from recovery of written-off debts 440 558 5,421Gain on sale of stocks, etc. 949 3,133 30,441Other income 844 515 5,003Expenses: 34,516 38,067 369,869Interest expenses 1,718 1,687 16,391Deposits 1,156 887 8,618Certificates of deposits 27 38 369Call money and bills sold 7 3 29Securities lending 5 5 48Borrowed money 156 165 1,603Bonds 231 232 2,254Interest swaps 124 351 3,410Other 8 4 38Fees 3,399 3,645 35,415Foreign exchange commissions payable 373 376 3,653Other service expenses 3,025 3,268 31,752Other operating expenses 2,993 6,007 58,365Loss on sale of government and other bonds 2,993 6,007 58,365General and administrative expenses 23,623 23,135 224,786Other expenses 2,782 3,591 34,891Provision of allowance for doubtful accounts 664 2,443 23,736Loans amortized 1,221 666 6,471Loss on sale of stocks, etc. 144 1 9Amortization of stocks, etc. 163 113 1,097Other expenses 589 367 3,565Income 9,085 8,214 79,809Extraordinary gains ― 1 9Gains from sales of fixed assets ― 1 9Extraordinary Losses 250 601 5,839Losses on disposal of fixed assets 77 97 942Losses on impairment of fixed assets 173 503 4,887Income before income taxes and minority interests 8,835 7,614 73,979Corporate tax, corporate inhabitant tax and business tax 1,694 1,893 18,392Adjustment of corporate taxes, etc. 1,827 1,253 12,174Total corporate taxes, etc. 3,522 3,147 30,577Net income ¥ 5,312 ¥ 4,467 $ 43,402

Subsidiaries

34

Subsidiaries

Consolidated Subsidiaries of The Hokuetsu Bank, Ltd.

Name of Companies Type of Business Capital

(Million in yen)

Voting Share

(%)

The Hokuetsu Business Co., Ltd. Banking 10 100.0

The Hokuetsu Leasing Co., Ltd. Leasing 100 50.0

The Hokuetsu Card, Ltd. Credit Card Business Credit Guarantee Business

20 2.6

The Hokuetsu Credit Guarantee Co., Ltd. Credit Guarantee Business 210 47.8

The Hokugin Economic Research

Institute, Ltd.

Research and investigation as well as provision of information on socioeconomic issues

30 5.0

Corporate Data

35

Corporate Data

BOARD OF DIRECTORS AND AUDITORS

President Satoru Araki Senior Managing Directors Yoshifumi Matsunaga Kiyoshi Nakamura Managing Directors Nobuo Saito Yukio Maruyama Minoru Kurihara Katsuya Sato Directors Atsushi Sato Ichiro Muromoto Tateo Yamana Kiyoshi Ishida Hiroshi Fukuhara Standing Corporate Auditors Masashi Kurei Toshiaki Sakai Corporate Auditors Toshio Kitamura Shiro Watanabe (as of June 24, 2014)

BASIC DATA

Date of Foundation December 20, 1878 Date of Incorporation December 7, 1942 Authorized Shares (in thousands) 600,000 Outstanding Shares (in thousands) 245,142 Paid-in Capital ¥24,538 million Number of Shareholders 9,926 Employees 1,429 Stock Listing First Section of the Tokyo Stock Exchange (as of March 31, 2014)

SERVICE NETWORK

Head Office 2-14, Otedori 2-chome, Nagaoka City, Niigata 940-8650 Phone: (0258) 35-3111 International Business Department Address: same as Head Office SWIFT: HETSJPJT Phone: (0258) 39-7371 Foreign Exchange Offices The following are the major branches providing a full range of foreign exchange banking services: Head Office Ichinokido Branch 3-21, Hayashicho 1-chome, Sanjo City, Niigata 955-0061 Ken-oh Tsubame Branch 1-2 Butsuryu Center, Tsubame City, Niigata 959-1277 Niigata Branch 1300, Hachibancho, kamiookawamaedori, Chuo-ku, Niigata City, Niigata 951-8602 Sanjo Branch 2-21, Honcho 4-chome, Sanjo City, Niigata 955-0071 Tokyo Branch 16-1, Nihonbashi Koamicho Chuo-ku, Tokyo 104-0016 Tsubame Branch 2-10, Kokucho, Tsubame City, Niigata 959-1200

Number of Branches by Area Niigata Prefecture 83 Gunma Prefecture 2 Saitama Prefecture 2 Tokyo 1 Total 88

(as of July 1, 2014)

hokuetsu bank 2014 · hokuetsu bank 2014 annual report hokuetsu bank 2014 april 1, 2013 - march 31,...

Documents