Gunma Bank : Consolidated Financial Statements (567KB)

The Gunma Bank, Ltd. and Consolidated Subsidiaries

Consolidated Balance Sheets

									Thousands of
			Millions of yen	U.S. dollars (Note 2)
As at March 31,			2022			2023		2023
Assets
Cash and due from banks	¥	2,651,118		¥	1,833,043	$13,727,576
Call Loans and bills bought			6,119			-		-
Monetary claims bought			5,706			-		-
Trading account securities			942			541	4,056
Money held in trust			8,268			9,854	73,796
Securities			2,501,019			2,617,250	19,600,464
Loans and bills discounted			5,758,096			5,991,297	44,868,547
Foreign exchanges			34,244			10,045	75,230
Lease receivables and investment assets			60,191			60,554	453,489
Other assets			78,824			74,120	555,088
Property and equipment			66,191			65,013	486,883
Intangible assets			9,236			8,053	60,310
Net defined benefit asset			10,813			16,963	127,039
Deferred tax assets			1,488			13,003	97,381
Customers' liabilities for acceptances and guarantees			8,764			8,527	63,862
Allowance for loan losses			(52,485)		(45,967)	(344,251)
Total assets		¥	11,148,539		¥	10,662,300	$79,849,475
Liabilities
Deposits	¥	8,168,591		¥	8,244,257	$61,740,864
Call money and bills sold			70,496			28,708	215,000
Payables under repurchase agreements			8,153			86,565	648,284
Payables under securities lending transactions			732,995			723,449	5,417,883
Borrowed money			1,500,795			926,993	6,942,207
Foreign exchanges			534			338	2,533
Bonds payable			50,000			50,000	374,447
Borrowed money from trust account			12,056			12,988	97,267
Other liabilities			57,106			55,774	417,695
Provision for directors' bonuses			59			56	426
Net defined benefit liability			362			358	2,682
Provision for directors' retirement benefits			204			167	1,252
Provision for reimbursement of deposits			367			264	1,977
Provision for point loyalty programs			155			-		-
Provision for contingent loss			900			926	6,937
Reserves under special laws			0			0	5
Deferred tax liabilities			359			-		-
Deferred tax liabilities for land revaluation			7,377			7,112	53,266
Acceptances and guarantees			8,764			8,527	63,862
Total liabilities			10,619,283			10,146,489	75,986,594
Net assets
Capital stock			48,652			48,652	364,354
Capital surplus			29,581			29,581	221,537
Retained earnings			407,300			429,438	3,216,047
Treasury shares			(7,352)		(9,233)	(69,148)
Total shareholders' equity			478,181			498,439	3,732,791
Valuation difference on available-for-sale securities			33,379			(2,920)	(21,873)
Deferred gains or losses on hedges			(137)		250	1,878
Revaluation reserve for land			13,415			13,022	97,523
Remeasurements of defined benefit plans			4,417			7,018	52,561
Total accumulated other comprehensive income			51,074			17,370	130,090
Total net assets			529,256			515,810	3,862,881
Total liabilities and net assets		¥	11,148,539		¥	10,662,300	$79,849,475

The accompanying notes are an integral part of these statements.

8

The Gunma Bank, Ltd. and Consolidated Subsidiaries

Consolidated Statements of Income

										Thousands of
			Millions of yen				U.S. dollars (Note 2)
Years ended March 31,	2022			2023				2023
Income
Interest income:
Interest on loans and discounts	¥	53,281		¥	58,544	$	438,436
Interest and dividends on securities			18,765				26,381			197,569
Other interest income			1,822				2,150			16,103
Trust fees			52				36			275
Fees and commissions			21,544				22,763			170,473
Other ordinary income			38,399				37,385			279,974
Other income			18,825				30,926			231,605
Total income		152,690			178,187			1,334,439
Expenses
Interest expenses:
Interest on deposits			465				2,769			20,737
Interest on call money and borrowing			108				2,259			16,917
Other interest expenses			1,294				10,592			79,328
Fees and commissions payments			8,222				8,357			62,591
Other ordinary expenses			32,459				59,603			446,364
General and administrative expenses			55,503				51,549			386,053
Other expenses			14,852				4,154			31,113
Total expenses		112,907			139,286			1,043,107
Profit before income taxes			39,783				38,901			291,331
Income taxes:
Current			8,062				8,426			63,102
Deferred			5,284				2,542			19,037
Profit			26,436				27,933			209,191
Profit attributable to owners of parent		¥	26,436		¥	27,933	$	209,191
				Yen						U.S. dollars
Per share amounts
Profit - primary	¥	63.33		¥	68.19	$	0.51

Diluted earnings per share of common stock for the fiscal year ended March 31, 2023 and 2022 are omitted as there are no dilutive shares.

The accompanying notes are an integral part of these statements.

The Gunma Bank, Ltd. and Consolidated Subsidiaries

Consolidated Statements of Comprehensive Income

			Millions of yen					Thousands of
						U.S. dollars (Note 2)
Years ended March 31,	2022			2023		2023
Profit	¥	26,436		¥	27,933	$	209,191
Other comprehensive income
Valuation difference on available-for-sale securities			(38,371)			(36,479)			(273,195)
Deferred gains or losses on hedges			93				388			2,910
Foreign currency translation adjustment			98				-			-
Remeasurements of defined benefit plans			2,029				2,601			19,482
Share of other comprehensive income of entities accounted for by the
equity method			209				179			1,341
Total other comprehensive income			(35,940)			(33,310)			(249,461)
Comprehensive income			(9,504)			(5,377)			(40,269)
(Details)
Comprehensive income attributable to owners of parent	¥	(9,504)		¥	(5,377)	$	(40,269)

The accompanying notes are an integral part of these statements.

9

The Gunma Bank, Ltd. and Consolidated Subsidiaries

Consolidated Statements of Changes in Net Assets

																Millions of yen
																Shareholders' equity
				Capital stock		Capital							Retained		Treasury			Total shareholders'
					surplus							earnings		shares						equity
Balance as of March 31, 2021							¥48,652			¥29,581					¥391,382			¥(8,838)			¥460,778
Cumulative effects of changes in accounting policies								-				-				(38)						-	(38)
Restated balance
						48,652			29,581					391,344			(8,838)			460,740
Changes of items during the year
Dividends of surplus								-				-				(5,886)						-	(5,886)
Profit attributable to owners of parent								-				-				26,436								-	26,436
Purchase of treasury shares								-				-					-	(3,500)			(3,500)
Disposal of treasury shares								-				-				(55)	147				92
Retirement of treasury shares								-				-				(4,838)	4,838					-
Reversal of revaluation reserve for land								-				-				299								-	299
Net changes of items other than shareholders' equity								-				-					-						-		-
Total changes of items during the year
							-				-				15,955			1,486				17,441
Balance as of March 31, 2022
						¥48,652			¥29,581					¥407,300			¥(7,352)			¥478,181
								Accumulated other comprehensive income
		Valuation																		Total
		difference on		Deferred				Foreign		Remeasure-	accumulated	Share
		available-		gains or	Revaluation	currency		ments of		other
		for-sale		losses on	reserve for	translation	defined benefit	comprehensi-	subscripti-		Total net
		securities		hedges		land	adjustment		plans	ve income	on rights		assets
Balance as of March 31, 2021	¥ 71,541		¥(231)	¥13,715	¥	(98)	¥2,387	¥ 87,314				¥-	¥548,093
Cumulative effects of changes in accounting policies				-	0		-			-		-	0							(37)
Restated balance
71,541		(231)	13,715			(98)	2,387	87,315							548,055
Changes of items during the year
Dividends of surplus				-		-		-			-		-		-		-	(5,886)
Profit attributable to owners of parent				-		-		-			-		-		-		-	26,436
Purchase of treasury shares				-		-		-			-		-		-		-	(3,500)
Disposal of treasury shares				-		-		-			-		-		-		-	92
Retirement of treasury shares				-		-		-			-		-		-		-		-
Reversal of revaluation reserve for land				-		-		-			-		-		-		-	299
Net changes of items other than shareholders' equity	(38,161)	93	(299)			98	2,029	(36,240)				-	(36,240)
Total changes of items during the year
(38,161)	93	(299)			98	2,029	(36,240)				-	(18,799)
Balance as of March 31, 2022
¥ 33,379		¥(137)	¥13,415	¥	-	¥4,417	¥ 51,074				¥-	¥529,256

The accompanying notes are an integral part of these statements.

10

														Millions of yen
												Shareholders' equity
			Capital stock	Capital		Retained					Treasury		Total shareholders'
			surplus		earnings					shares					equity
Balance as of March 31, 2022	¥48,652				¥29,581			¥407,300		¥(7,352)				¥478,181
Cumulative effects of changes in accounting policies					-		-			-					-					-
Restated balance	48,652				29,581			407,300					(7,352)				478,181
Changes of items during the year
Dividends of surplus					-		-	(6,161)					-				(6,161)
Profit attributable to owners of parent					-		-	27,933						-				27,933
Purchase of treasury shares					-		-			-				(2,000)				(2,000)
Disposal of treasury shares					-		-	(25)				119					94
Retirement of treasury shares					-		-			-					-					-
Reversal of revaluation reserve for land					-		-	393						-				393
Net changes of items other than shareholders' equity					-		-			-					-					-
Total changes of items during the year					-		-	22,138					(1,880)				20,257
Balance as of March 31, 2023	¥48,652				¥29,581			¥429,438		¥(9,233)				¥498,439
							Accumulated other comprehensive income
		Valuation																		Total
		difference on	Deferred						Foreign			Remeasure-		accumulated
		available	gains or		Revaluation		currency				ments of		other					Total net
		-for-sale	losses on		reserve for		translation		defined benefit		comprehensi-
		securities	hedges		land		adjustment				plans		ve income		assets
Balance as of March 31, 2022	¥ 33,379		¥(137)	¥13,415		¥-				¥4,417		¥ 51,074	¥529,256
Cumulative effects of changes in accounting policies		-			-			-		-					-				-		-
Restated balance	33,379		(137)	13,415		-				4,417		51,074		529,256
Changes of items during the year
Dividends of surplus		-			-		-		-					-				-	(6,161)
Profit attributable to owners of parent		-			-			-		-					-				-	27,933
Purchase of treasury shares		-			-			-		-					-				-	(2,000)
Disposal of treasury shares		-			-			-		-					-				-	94
Retirement of treasury shares		-			-			-		-					-				-		-
Reversal of revaluation reserve for land		-			-			-		-					-				-	393
Net changes of items other than shareholders' equity	(36,300)	388		(393)		-				2,601		(33,703)	(33,703)
Total changes of items during the year	(36,300)	388		(393)		-				2,601		(33,703)	(13,445)
Balance as of March 31, 2023	¥ (2,920)	¥ 250		¥13,022		¥-				¥7,018		¥ 17,370	¥515,810

The accompanying notes are an integral part of these statements.

11

										Thousands of U.S. dollars (Note 2)
											Shareholders' equity
		Capital stock				Capital		Retained				Treasury	Total shareholders'
					surplus		earnings					shares		equity
Balance as of March 31, 2022	$364,354			$221,537			$3,050,251		$(55,062)			$3,581,080
Cumulative effects of changes in accounting policies					-					-					-					-		-
Restated balance	364,354				221,537			3,050,251				(55,062)			3,581,080
Changes of items during the year
Dividends of surplus					-					-	(46,146)					-		(46,146)
Profit attributable to owners of parent					-					-	209,191						-		209,191
Purchase of treasury shares					-					-					-			(14,983)			(14,983)
Disposal of treasury shares					-					-	(193)					898				704
Retirement of treasury shares					-					-					-					-		-
Reversal of revaluation reserve for land					-					-	2,944						-		2,944
Net changes of items other than shareholders' equity					-					-					-					-		-
Total changes of items during the year					-					-	165,795				(14,085)			151,710
Balance as of March 31, 2023	$364,354			$221,537			$3,216,047		$(69,148)			$3,732,791
							Accumulated other comprehensive income
	Valuation																			Total
	difference	Deferred							Foreign	Remeasure-		accumulated
	on available	gains or		Revaluation		currency	ments of			other
	-for-sale	losses on		reserve for		translation	defined benefit		comprehensi-		Total net
	securities		hedges			land	adjustment			plans			ve income		assets
Balance as of March 31, 2022	$ 249,980		$	(1,031)	$	100,467			$-	$33,078	$	382,495		$3,963,576
Cumulative effects of changes in accounting policies		-			-				-		-				-				-		-
Restated balance	249,980			(1,031)		100,467			-			33,078			382,495		3,963,576
Changes of items during the year
Dividends of surplus		-			-				-		-				-				-		(46,146)
Profit attributable to owners of parent		-			-				-		-				-				-		209,191
Purchase of treasury shares		-			-				-		-				-				-		(14,983)
Disposal of treasury shares		-			-				-		-				-				-		704
Retirement of treasury shares		-			-				-		-				-				-		-
Reversal of revaluation reserve for land		-			-				-		-				-				-		2,944
Net changes of items other than shareholders' equity	(271,853)		2,910			(2,944)		-			19,482			(252,405)	(252,405)
Total changes of items during the year	(271,853)		2,910			(2,944)		-			19,482			(252,405)	(100,694)
Balance as of March 31, 2023	$ (21,873)	$	1,878		$	97,523			$-	$52,561	$	130,090		$3,862,881

The accompanying notes are an integral part of these statements.

12

The Gunma Bank, Ltd. and Consolidated Subsidiaries

Consolidated Statements of Cash Flows

									Thousands of
			Millions of yen			U.S. dollars (Note 2)
Years ended March 31,			2022			2023				2023
Cash flows from operating activities
Profit before income taxes	¥	39,783		¥	38,901	$	291,331
Depreciation			6,863			6,572			49,224
Impairment loss			1,382			409			3,069
Share of loss (profit) of entities accounted by the equity method			(146)		(221)			(1,661)
Increase (decrease) in allowance for loan losses			(10,543)		(6,517)			(48,806)
Increase (decrease) in provision for directors' bonuses			2			(2)			(16)
Decrease (increase) in net defined benefit asset			(4,181)		(6,150)			(46,058)
Increase (decrease) in net defined benefit liability			(5)		(4)			(30)
Increase (decrease) in provision for directors' retirement benefits			(40)		(36)			(276)
Increase (decrease) in provision for reimbursement of deposits			(165)		(103)			(777)
Increase (decrease) in provision for point loyalty programs			11			-			-
Increase (decrease) in provision for contingent loss			0			25			193
Interest and dividend income			(73,869)		(87,076)			(652,109)
Interest expenses			1,868			15,620			116,984
Loss (gain) related to securities			(9,616)		1,772			13,277
Loss (gain) on money held in trust			(6)		11			84
Foreign exchange losses (gains)			(1,510)		(2,554)			(19,134)
Loss (gain) on disposal of non-current assets			(2,055)		(994)			(7,448)
Net decrease (increase) in trading account securities			(118)		400			3,001
Net decrease (increase) in loans and bills discounted			(69,248)		(233,200)			(1,746,430)
Net increase (decrease) in deposits			217,672			85,504			640,336
Net increase (decrease) in negotiable certificates of deposit			41,583			(9,838)			(73,677)
Net increase (decrease) in borrowed money (excluding subordinated borrowings)			209,714			(573,802)			(4,297,182)
Net decrease (increase) in due from banks (excluding deposits placed with
Bank of Japan)			(1,834)		523			3,918
Net decrease (increase) in call loans			(6,203)		6,119			45,828
Net increase (decrease) in call money			36,570			36,623			274,275
Net increase (decrease) in payables under securities lending transactions			63,970			(9,545)			(71,488)
Net decrease (increase) in foreign exchanges - assets			(19,296)		24,199			181,225
Net increase (decrease) in foreign exchanges - liabilities			372			(196)			(1,470)
Net decrease (increase) in lease receivables and investment assets			(662)		(363)			(2,719)
Net increase(decrease) in borrowed money from trust account			3,102			931			6,976
Interest and dividend received			79,092			90,335			676,521
Interest paid			(1,897)		(14,451)			(108,230)
Other - net			(26,764)		(13,296)			(99,579)
Subtotal			473,822			(650,404)			(4,870,851)
Income taxes paid			(14,233)		(5,761)			(43,146)
Net cash provided by (used in) operating activities			459,588			(656,166)			(4,913,998)
Cash flows from investing activities
					(823,174)			(6,164,714)
Purchases of securities			(909,311)
Proceeds from sales of securities			570,154			519,392			3,889,702
Proceeds from redemption of securities			210,372			151,062			1,131,300
Increase in money held in trust			-		(1,600)			(11,982)
Decrease in money held in trust			2,999			14			107
Purchases of property and equipment			(3,157)		(3,775)			(28,276)
Purchases of intangible assets			(2,820)		(2,031)			(15,217)
Proceeds from sales of property and equipment			3,954			2,356			17,645
Proceeds from business transfer			-		4,437			33,230
Net cash provided by (used in) investing activities			(127,807)		(153,319)			(1,148,204)
Cash flows from financing activities
					10,000			74,889
Issuance of subordinated bonds			10,000
Redemption of subordinated bonds			(10,000)		(10,000)			(74,889)
Cash dividends paid			(5,872)		(6,159)			(46,128)
Purchases of treasury shares			(3,500)		(2,000)			(14,983)
Proceeds from sales of treasury shares			92			94			704
Net cash provided by (used in) financing activities			(9,281)		(8,066)			(60,407)
Effect of exchange rate change on cash and cash equivalents			103			-			-
Net increase (decrease) in cash and cash equivalents			322,602			(817,552)			(6,122,610)
Cash and cash equivalents at beginning of the year			2,324,903			2,647,506			19,827,053
Cash and cash equivalents at end of the year	¥	2,647,506		¥	1,829,954	$	13,704,442

The accompanying notes are an integral part of these statements.

13

The Gunma Bank, Ltd. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements

1. Summary of Significant Accounting Policies

1. Basis of Presentation
   The accompanying consolidated financial statements of The Gunma Bank, Ltd. (the "Bank") and its consolidated subsidiaries (the "Group") have been prepared from the accounts maintained by the Bank in accordance with the provisions set forth in the Banking Law, the Financial Instruments and Exchange Act of Japan and other applicable rules and regulations and in conformity with accounting principles generally accepted in Japan, which are different in certain respects as to application and disclosure requirements of International Financial Reporting Standards.
   In addition, the notes to the consolidated financial statements include information which is not required under accounting principles generally accepted in Japan but is presented herein as additional information.
   Certain items have been reclassified from the original consolidated financial statements filed with the Prime Minister as required by the Financial Instruments and Exchange Act for the convenience of readers outside Japan. Certain prior year amounts have been reclassified to comply with the current year presentation.
2. Consolidation
   The accompanying consolidated financial statements include the accounts of the Bank and its significant subsidiaries. The number of consolidated subsidiaries as of March 31, 2023 is 6.
   The remaining unconsolidated subsidiaries have been excluded from the scope of consolidation because, judging from their assets, ordinary profit, net income or loss (amounts corresponding to the Bank's equity interest), retained earnings (amounts corresponding to the Bank's equity interest) and accumulated other comprehensive income (amounts corresponding to the Bank's equity interest), they do not have a material effect on the

accompanying consolidated financial statements.

As of March 31, 2023, the Bank has 2 unconsolidated subsidiaries, which are accounted by the equity method, and 1 affiliate, which is accounted by the equity method.

In reference to the consolidated subsidiaries' closing dates, six companies close accounts at the end of March.

c. Trading Account Securities

Trading securities purchased for trading purpose are stated at market value at the fiscal year end with its related cost of sales being determined mainly by the moving average method.

1. Securities
   Securities are classified into four categories: trading, held-to- maturity bonds, equity of unconsolidated subsidiaries and affiliates or securities available for sale. Trading securities are carried at market value and held-to-maturity bonds are carried at amortized cost. Equity of unconsolidated subsidiaries and affiliates are stated at cost and accounted by the equity method, respectively. Marketable securities classified as securities available for sale are carried at market value with changes in unrealized holding gain or loss, net of the applicable income taxes, recorded as a component of net assets.
   Stocks and others without a quoted market price are stated at acquisition cost and determined by the moving average method.
   Securities comprising the trust asset in money held in trust which is solely managed primarily for the purpose of securities operations are stated at market value.
   Regarding foreign currency-denominatedavailable-for-sale debt securities, translation differences arising from changes fair value are treated as valuation differences, and the remainder is treated as foreign exchange gains or losses.

e. Derivatives

Derivatives are stated at market value.

f. Non-current assets

(1) Property and equipment

Depreciation of Property and equipment of the Bank are computed by the straight line method.

The estimated useful lives principally applied are as follows.

Buildings	6 to 50 years
Equipment and furniture	3 to 20 years

Depreciation of Property and equipment of the consolidate subsidiaries are principally computed by the straight line method based on the estimated useful lives of the respective assets.

(2) Intangible assets

Intangible assets are depreciated using the straight line method. Software used internally is depreciated over its estimated useful life (mainly five years).

(3) Leased assets

Leased assets in "Property and equipment" subject to finance lease transactions other than those under which the title of the leased equipment is transferred to the lessee are depreciated using the straight line method assuming that the lease period is equal to the useful life. If a guarantee for residual value is prescribed by the lease contract, the residual value is equal to such guaranteed residual value; otherwise, the residual value is zero.

g. Foreign Currency Translation

Assets and liabilities denominated in foreign currencies are translated into Japanese yen at the exchange rates prevailing at the balance sheet date.

h. Allowance for loan losses

An allowance for loan losses is provided in accordance with the internal guidelines regarding write-offs and allowance for loan losses.

1. For loans to debtors that are legally bankrupt under the Bankruptcy Law, Special Liquidation under the Commercial Code or other similar laws, and to debtors that are effectively in similar conditions, the allowance is provided at the amount of loan balance less the amount recoverable from the disposal of collateral and/or guarantees.
2. For loans to debtors that are not yet legally or substantially bankrupt but are likely to go bankrupt (the "potentially bankrupt debtors"), the allowance is provided at the amount deemed necessary against the credit balance less the amount recoverable from the disposal of collateral and/or guarantees.(the "uncovered amount").
   A For loans to large loan balance debtors with credit exceeding a certain amount, the allowance is provided at the amount calculated by the method whereby the amount of the allowance is set at the uncovered account plus the amount reasonably estimated recoverable from the cash flows ("cash flow deduction method").
   B For loans to other debtors, the allowance is provided at the amount of losses expected to be incurred from the uncovered amount over the next three years. The amount of expected losses is determined by calculating the long-term average of the ratio of loan losses observed over three years in the past, with the addition of the adjustment based on the recent loan-loss ratio and other necessary adjustments.
3. For loans to debtors requiring careful management in the future, such as those with restructured loans (the "debtors requiring caution"), the allowance is provided at the amount deemed necessary against the loan balance.

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A For loans to large loan balance debtors with credit exceeding a certain amount, the allowance is provided at the amount calculated by the method whereby the amount of the allowance is set at the difference between the sum of the reasonably estimated cash flows, discounted by the original contractual interest rate and the book value of the loan (the "DCF method").

B For loans to other debtors, the allowance is provided at the amount of losses expected to be incurred over the next three years. The amount of expected loss is determined by calculating the long-term average of the ratio of loan losses observed over three years in the past, with the addition of the adjustment based on the recent loan-loss ratio and other necessary adjustments.

1. For loans to debtors other than those in 1) to 3) above, the allowance is provided at the amount of losses expected to be incurred over the next year. The amount of expected loss is determined by calculating the long-term average of the ratio of loan losses observed over one year in the past, with the addition of the adjustment based on the recent loan-loss ratio and other necessary adjustments.

(Note)

Classification for the ratio of expected loss

The ratio of expected loss is calculated based on the ratio of loan losses, which is based on actual loan losses over a set period of time, and is classified into the following four categories: one category for normal debtors, two categories as described below for debtors requiring caution, and one category for potentially bankrupt debtors.

• The debtors requiring caution include those for whom all or part of the loans are substandard loans (loans past due for 3 months or more, or restructured loans) (the "substandard debtors") as well as those who modified contractual terms of loans, but are not considered substandard debtors because their loans are not regarded as restructured loans due to business improvement plans, etc.
• Loans to other debtors requiring caution

All credit is subject to self-assessment of assets by marketing related departments in accordance with the internal guidelines for the self-assessment of assets, and the results of the self- assessment are audited by the department in charge of asset auditing that is independent of the marketing-related departments.

Consolidated subsidiaries record a general reserve for loan losses by applying the historical loan-loss ratio observed over specific periods, and the specific reserve for certain loans at the estimated uncollectible amount based on an assessment of each debtor's ability to repay loans.

i. Provision for directors' bonuses

A provision is provided for the payments of bonuses to directors and the Board of Corporate Auditors Members at the amount of the estimated bonus payments corresponding to the end of the fiscal year.

j. Accounting method for retirement benefits

In calculating retirement benefit obligation, the Bank uses the benefit formula basis for the purpose of attributing expected retirement benefit payment to the period up to the end of the fiscal year. In addition, the accounting method for actuarial gain and loss is as follows:

Actuarial gain and loss

Actuarial gain and loss are amortized from the year following the occurrence primarily by the straight line method over a fixed period (mainly 10 years) that is shorter than the average remaining service years of the eligible employees.

Certain consolidated subsidiaries calculate liability for retirement benefits and retirement benefit expenses by the simplified method, whereby retirement benefit obligation is recognized at the amount that would be paid if eligible employees retired at the end of the fiscal year.

k. Provision for directors' retirement benefits

To prepare for the payment of retirement benefits to directors and the Board of Corporate Auditors Members, a reserve is provided at the amount deemed to have accrued at the end of the fiscal year (the estimated amount payable on the balance sheet date based on the bylaws) out of the estimated amount payable as retirement benefits to directors and the Board of Corporate Auditors Members.

l. Provision for reimbursement of deposits

A provision for reimbursement of deposits accounts is provided for the repayment of dormant deposits which are no longer recorded as liabilities, based on the estimated reimbursement losses that may be incurred should the deposits be withdrawn.

m. Provision for point loyalty programs

A provision for point loyalty programs is provided for the future usage of points granted to credit card members at the amount estimated to be used in the future periods.

n. Provision for Contingent Loss

A provision for contingent loss is provided for the payment of charges related to the responsibility-sharing system to Credit Guarantee Corporations at the amount expected to be paid based on the past payment experience.

o. Reserves under Special Laws

Reserves under the special laws represents a reserve for financial products transaction liabilities and is provided for compensation for losses from securities-related accidents in the amount computed in accordance with Article 46-5 of the Financial Instruments and Exchange Act and Article 175 of the related cabinet ordinance.

p. Income Taxes

Deferred tax assets and liabilities are determined based on the differences between financial reporting and the tax basis of the assets and liabilities and are measured using the enacted tax rates and laws which will be in effect when the differences are expected to be reversed.

q. Earnings Per Share

Earnings per share was computed based on the profit available for distribution to shareholders and the number of shares of common stock outstanding during the fiscal year.

r. Hedge Accounting

Hedge Accounting for Interest Rate Risks

The Bank adopted the "Accounting and Auditing Treatment of Accounting Standard for Financial Instruments in the Banking Industry" (Practical Guidance No.24 by the Japanese Institute of Certified Public Accountants (JICPA) Industry- specific Special Committee, March 17, 2022;"Industry- specific Special Committee Practical Guidance No.24").

Under the Industry-specific Special Committee Practical Guidance No.24, the Bank applies the deferred method of hedge accounting for qualifying derivative instruments to mitigate the interest rate risks arising from various financial assets and liabilities.

Hedge effectiveness is assessed for each designated group of hedged items (such as deposits) and the corresponding group of hedging instruments (such as interest rate swaps). Both of the hedged items and hedging instruments are grouped based on their durations and compared for the testing of effectiveness.

In addition to the above, the Bank applies exceptional treatment for certain interest swap contracts that meet the criteria for the exceptional treatment, under which eligible interest rate swap contracts are accounted for on an accrual basis.

Hedge Accounting for Foreign Exchange Risks

For foreign exchange risks arising from financial assets and

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liabilities denominated in foreign currencies, the Bank adopted the "Accounting and Auditing Treatment of Accounting for Foreign Currency Denominated Transactions, etc. in the Banking Industry" (Practical Guidance No.25 by the JICPA Industry-specific Special Committee, October 8, 2020;"Industry-specific Special Committee Practical Guidance No.25"). Under the Industry-specific Special Committee Practical Guidance No.25, the Bank applies the deferred method of hedge accounting.

The Bank enters into currency-swaps and foreign exchange swaps to mitigate the foreign exchange risks arising from financial assets and liabilities denominated in foreign currencies and assesses, both at the hedge's inception and on an ongoing basis, whether these derivatives are highly effective in offsetting changes in cash flows of hedged items (financial assets and liabilities). Hedge effectiveness is assessed by ensuring that the foreign currency position of the hedging instruments that are designated to hedge foreign exchange risk of the foreign currency-denominated receivables and payables exceeds that of the hedged foreign currency-denominated receivables and payables.

In addition, for available-for-sale securities (except for bonds) denominated in foreign currencies, the Bank applies the fair value hedge accounting for a portfolio hedge on the conditions that the issues of foreign currency denominated securities are designated as hedged items in advance and that the amount of foreign currency payables of spot and forward foreign exchange contracts exceeds the amount of acquisition cost of the hedged items denominated in foreign currencies.

s. Recognition for Income and Expenses

Income and expenses associated with finance lease transactions are recognized when lease fees are receivable and payable.

t. Cash and Cash Equivalents

Cash and cash equivalents in the consolidated statements of cash flows consist of cash and deposit with the Bank of Japan which are included in "Cash and due from banks" on the consolidated balance sheets.

(Significant accounting estimates)

Of the items for which amounts based on accounting estimates were recorded in the consolidated financial statements for the fiscal year ended March 31, 2023, the following items may have a material impact on the consolidated financial statements for the fiscal year ended March 31, 2024.

Allowance for loan losses

1. Amount recorded in the consolidated financial statements for the fiscal year ended March 31, 2022 and 2023.

Allowance for loan losses	¥52,485 million
as of March 31, 2022
Allowance for loan losses	¥45,967 million
as of March 31, 2023	U.S.$344,251 thousand

1. Information on the details of significant accounting estimates for items identified

1. Calculation method
   The calculation method for allowance for loan losses is presented in Notes to Consolidated Financial Statements 1. Summary of Significant Accounting Policies h.
2. Major assumptions
   Major assumption is the "outlook for debtors' future business performance used to determine the debtor classification." The "outlook for debtors' future business performance used to determine the debtor classification" is established through the individual evaluation of each debtor's earning generating ability, after taking into account the impact of the COVID-19 pandemic.
   The Bank considers that loan losses due to the impact of

the COVID-19 pandemic will not escalate significantly, due to the economic countermeasures implemented by the Japanese government and local government bodies, as well as the cash flow support provided by financial institutions, etc. We also consider that the situation is beginning to converge, as COVID-19 is expected to be reclassified as a Class 5 infection which imposes no special restrictions in May.

However, there are still debtors whose financial results have been significantly affected by COVID-19, as well as debtors whose future financial results may be affected by the infection. Among them, Reasonable estimates of future cash flows are used in the DCF method and the cash flow deduction method.

Reasonable estimates of future cash flows:

•The estimated amount recoverable in case of a radical and feasible business improvement plan or the like and this amount can be reasonably estimated

•The estimated amount recoverable with reference to factors such as past repayments

1. Impact on the consolidated financial statements for the next fiscal year ended March 31, 2023.
   If the assumptions used for calculating the original estimates change due to factors such as changes in the business performance of individual debtors, then this may have a significant impact on allowance for loan losses in the consolidated financial statements for the fiscal year ended March 31, 2023.

(Adoption of Implementation Guidance on Accounting Standard for Fair Value Measurement)

The Group has adopted Implementation Guidance on Accounting Standard for Fair Value Measurement (ASBJ Guidance No. 31, June 17, 2021) effective April 1, 2022.

The Group has adopted new accounting policies set forth in Implementation Guidance on Accounting Standard for Fair Value Measurement prospectively in accordance with the transitional treatment prescribed under Paragraph 27-2 of Implementation Guidance on Accounting Standard for Fair Value Measurement. There is no impact of the adoption of Implementation Guidance on Accounting Standard for Fair Value Measurement on the consolidated financial statements for the fiscal year ended March 31, 2023.

In accordance with Paragraph 27-3 of Implementation Guidance on Accounting Standard for Fair Value Measurement, the notes to the 5. "Financial Instruments" section on items such as a breakdown by level of the fair value of financial instruments do not include notes on investment trusts for the previous fiscal year.

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2. Yen and U.S. Dollar Amounts

The Bank maintains its accounting records in yen. The yen amounts included in the accompanying consolidated financial statements are stated in millions of yen, truncating amounts of less than one million yen. Therefore, the totals or subtotals presented in the accompanying consolidated financial statements may not always add up to the sum of the respective account balances. "-" is used to denote nil and "0" is used to denote rounding down to zero.

Amounts in U.S. dollars are included solely for the convenience of the reader. The rate of ¥133.53 = U.S.$1.00, the approximate exchange rate prevailing on March 31, 2023, has been used. The inclusion of such amounts is not intended to imply that yen have been or could be readily converted, realized or settled in U.S. dollars at that or any other rate.

3. Loans and Bills Discounted

1. Loans based on the Banking Act and the Act on Emergency Measures for the Revitalization of the Financial Functions are as follows. Loans refer to the following items listed on the consolidated balance sheets: corporate bonds shown under "Securities" (limited to bonds for which all or part of the redemption of principal and the payment of interest are guaranteed, and the issuance of the corporate bond takes place via private offering of the securities in accordance with Article 2, Paragraph 3 of the Financial Instruments and Exchange Act); loans and bills discounted; foreign exchanges; items recorded in each account under "Other assets" such as accrued interest, suspense payments and customers' liabilities for acceptances and guarantees; available-for-sale securities indicated in the notes in case of loan of securities (limited to those under a loan-for-use or lease agreement).

									Thousands of
			Millions of yen				U.S. Dollars
		2022			2023	2023
	Loans to bankrupt and substantially bankrupt debtors	¥ 28,094			¥	25,504	$190,999
	Loans with collection risk	48,397				41,706	312,341
	Loans past due for 3 months or more	1,522				3,645	27,303
	Restructured loans		49,341				45,122		337,920
	Total		¥127,356			¥	115,979		$868,565
Loans to bankrupt and substantially bankrupt debtors refer
4. Loan Commitments
to loans held by debtors who have fallen into bankruptcy
due to having initiated bankruptcy procedures,		Contracts of overdraft facilities and loan commitments are
reorganization procedures, or filed applications to begin		contracts that require the Bank to extend credit to customers
rehabilitation procedures, and other similar loans.		up to the prescribed limits in response to customers'
	Loans with collection risk refer to loans that are not		application of loan as long as there is no violation of any
classified as Loans to bankrupt and substantially bankrupt		condition in the contracts. The unused amount relating to
debtors and in which the debtor has not yet fallen into		these contracts within the limits was ¥1,399,156 million,
bankruptcy, but their financial situation and business		¥1,348,997 million (U.S.$10,102,581 thousand), respectively
performance have worsened such that there is a high risk		at March 31, 2022 and 2023. ¥1,325,888 million, ¥1,275,270
that the principal will not be redeemed, and interest will		million (U.S. $9,550,439 thousand), respectively, at March
not be received according to contractual terms of loan.		31, 2022 and 2023 out of these unused balances were for the
	Loans past due for 3 months or more refer to loans and		contracts of which original contractual term are one year or
		less, or unconditionally cancelable at any time.
bills discounted that are not classified as either loans to		Since many of these commitments expire without being
bankrupt and substantially bankrupt debtors or Loans with		drawn down, the unused amount does not necessarily
collection risk, and for which the repayment of principal or		represent a future cash requirement. Most of these contracts
interest has been delayed by three months or more from the		have conditions that the Bank can refuse customers' loan
day after the agreed-upon payment date.		application or decrease the contract limits with proper
	Restructured loans refer to loans and bills discounted that		reasons (e.g., changes in financial situation, deterioration in
are not classified as loans to bankrupt and substantially		customers' creditworthiness). At the inception of contracts,
bankrupt debtors, loans with collection risk, or loans past		the Bank obtains real estate, securities, etc. as collateral if
due for 3 months or more, and for which the terms of the		considered to be necessary. Subsequently, the Bank performs
loan have been restructured to the benefit of the debtor with		periodic review of the customers' business results based on
the goal of reorganizing the debtor's management or		internal rules, and takes necessary measures to reconsider
supporting the debtor by means such as the reduction or		conditions in contracts and/or require additional collateral
waiving of interest, the deferment of interest payments, the		and guarantees.
deferment of principal repayment, and debt forgiveness.
	The loan amounts above show the amounts before the	5. Financial Instruments
deduction of the allowance for loan losses.
(2) Bills discounted are accounted for as financial transactions		(1) The financial instruments and related disclosures
	a. Policy for financial instruments
in accordance with Industry-specific Special Committee		The Group provides mainly banking services and other
Practical Guidance No.24. The Bank has rights to sell or		financial services including leasing. The Bank engages in
pledge bank acceptances bought, commercial bills		fund management including investment in securities and
discounted, documentary bills and foreign exchange bought		funding in the call market, in addition to the business of
without restrictions. Their total face value as of March 31,		accepting deposits and negotiable certificates of deposit as
2022 and 2023 were ¥22,750 million and ¥23,195 million		well as provision of loans. With its financial assets and
(U.S.$173,708 thousand), respectively.		liabilities exposed to interest rate risk, the Bank adopts asset
			liability management (ALM) to avoid incurring unexpected
			loss due to fluctuations in interest rates. Thus, the Bank's

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