Year ended March 31, 2017 - 個人のお客さま : 滋賀銀行œMay 1951 Commenced foreign exchange business ˜October 1977 Listed stocks on the Osaka Securities Exchange (the Second

発行　2017年7月編集　滋賀銀行　総合企画部広報室〒520-8686 大津市浜町 1番 38 号

電話 077(521)2202

http:// www.shigagin.com

表紙［本誌］

SHIGA BANK ANNUAL REPORT 2017

Year ended March 31, 2017


電話 077(521)2202


表紙［本誌］



The Shiga Bank has its own motto of “Be tough on

ourselves, kind to others and serve society,” which

forms the starting point for corporate social

responsibility (CSR). As a member of society, the

Bank will work for mutual prosperity with society.

The Bank’s motto carries on the “Sampo yoshi”

philosophy, a management philosophy embraced

by Merchants in the Omi region of central Japan,

which means to bring happiness to three sides:

being good for the seller, the buyer, and society.

CSR Charter (Management Principles) (Instituted in April 2007)

As a bank that advances hand-in-hand with society, in order to win customer confidence and meet customer expectations, we maintain a sound and enterprising bank and work for the development of regional communities.

Mutual prosperity with the regional community

Respecting the human rights and individuality of each and every executive and regular employee, we will build a satisfying workplace, and turn our bank into “Clean Bank Shigagin.”

Mutual prosperity with all employees

The social mission of our company, which is headquartered next to Lake Biwa, is environ-mental management. We are committed to protection of the global environment and the building of a sustainable society.

Harmonious coexistence with the environment

Editorial Policy

Shiga Bank has compiled the integrated report SHIGA BANK ANNUAL REPORT 2017. This report

links financial information to non-financial information, such as the Management Principles,

environmental, social and governance (ESG) information by reference to the framework proposed

by International Integrated Reporting Council (IIRC). It serves as an integrated review of measures

for creation of sustainable value for the Bank and in regional communities.

This report serves also as disclosure materials (briefing documents of status of operations and

assets) pursuant to Article 21 of the Banking Act. The reader is recommended, when using this

document for disclosure purposes, to refer also to “Financial Data, Basel III, Column 3 of SHIGA BANK

ANNUAL REPORT 2017” (viewable over the counter at Bank branches and on our website

(http://www.shigagin.com). (Japanese only)

Cautionary Statement with Respect to Forward-Looking StatementsThis material contains statements regarding future earnings forecasts and targets, etc. relating to

the Bank. These statements are based on information available at the time of compilation of these

materials and forecasts or certain conditions (assumptions) that could affect business performance.

They are not guarantees of future performance of the Bank, and involve various risks and

uncertainties.

Corporate Name: THE SHIGA BANK, LTD.

Head Office: 1-38, Hamamachi, Otsu, Shiga

520-8686, Japan

Established: October 1, 1933

Total Assets: ¥5,517.3 billion

Deposits (including negotiable certificates of

deposits): ¥4,617.4 billion

Loans: ¥3,472.4 billion

Common Stock: ¥33.0 billion

Employees: 2,125

Offices and Branches: 137 (including 18 agents)

Pro�le (As of March 31, 2017, on non-consolidated)

04

12

15

22

30

38

42

50

60

Top Message

Financial / Non-financial Highlights

Trends in major business performance indicators, etc. (consolidated)

Five Challenges

1. Challenge to regional revitalization

2. Challenge to strengthening top line

3. Challenge to increasing productivity

4. Challenge to constructing a robust management foundation

5. Challenge to a strategic CSR

Financial Section

• • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •

• • • • • •

• • • • • • • • • • • • •

• • •

• • •

• • •

• • • • • •

• • • • • • • • • • •

• • • • • • • • • • • • • • • • • • • • • • • • • • •

Contents

The Shiga Bank has its own motto of “Be tough on

ourselves, kind to others and serve society,” which

forms the starting point for corporate social

responsibility (CSR). As a member of society, the

Bank will work for mutual prosperity with society.

The Bank’s motto carries on the “Sampo yoshi”

philosophy, a management philosophy embraced

by Merchants in the Omi region of central Japan,

which means to bring happiness to three sides:

being good for the seller, the buyer, and society.

CSR Charter (Management Principles) (Instituted in April 2007)

As a bank that advances hand-in-hand with society, in order to win customer confidence and meet customer expectations, we maintain a sound and enterprising bank and work for the development of regional communities.


Respecting the human rights and individuality of each and every executive and regular employee, we will build a satisfying workplace, and turn our bank into “Clean Bank Shigagin.”

Mutual prosperity with all employees

The social mission of our company, which is headquartered next to Lake Biwa, is environ-mental management. We are committed to protection of the global environment and the building of a sustainable society.

Harmonious coexistence with the environment

Editorial Policy

Shiga Bank has compiled the integrated report SHIGA BANK ANNUAL REPORT 2017. This report

links financial information to non-financial information, such as the Management Principles,

environmental, social and governance (ESG) information by reference to the framework proposed

by International Integrated Reporting Council (IIRC). It serves as an integrated review of measures

for creation of sustainable value for the Bank and in regional communities.

This report serves also as disclosure materials (briefing documents of status of operations and

assets) pursuant to Article 21 of the Banking Act. The reader is recommended, when using this

document for disclosure purposes, to refer also to “Financial Data, Basel III, Column 3 of SHIGA BANK

ANNUAL REPORT 2017” (viewable over the counter at Bank branches and on our website

(http://www.shigagin.com). (Japanese only)

Cautionary Statement with Respect to Forward-Looking StatementsThis material contains statements regarding future earnings forecasts and targets, etc. relating to

the Bank. These statements are based on information available at the time of compilation of these

materials and forecasts or certain conditions (assumptions) that could affect business performance.

They are not guarantees of future performance of the Bank, and involve various risks and

uncertainties.

Corporate Name: THE SHIGA BANK, LTD.

Head Office: 1-38, Hamamachi, Otsu, Shiga

520-8686, Japan

Established: October 1, 1933

Total Assets: ¥5,517.3 billion

Deposits (including negotiable certificates of

deposits): ¥4,617.4 billion

Loans: ¥3,472.4 billion

Common Stock: ¥33.0 billion

Employees: 2,125

Offices and Branches: 137 (including 18 agents)

Pro�le (As of March 31, 2017, on non-consolidated)

04

12

15

22

30

38

42

50

60

Top Message

Financial / Non-financial Highlights

Trends in major business performance indicators, etc. (consolidated)

Five Challenges

1. Challenge to regional revitalization

2. Challenge to strengthening top line

3. Challenge to increasing productivity

4. Challenge to constructing a robust management foundation

5. Challenge to a strategic CSR

Financial Section

• • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •

• • • • • •

• • • • • • • • • • • • •

• • •

• • •

• • •

• • • • • •

• • • • • • • • • • •

• • • • • • • • • • • • • • • • • • • • • • • • • • •

Contents

SHIGA BANK ANNUAL REPORT 2017 01

The philosophy of the Shiga Bank Measures to modernize theBank’s management Environmental management

1933

1941

1951

1966

1977

1991

2000

2010

1984●January 1966 Announced the Bank’s motto

The Shiga Bank was born in 1933 through the merger of the

133rd National Bank (Hyakusanjusan Bank), which prided itself

on “sound management,” and the Hachiman Bank, which

emphasized a culture of “enterprise.” Since then we have forged

ahead with ful�lling our mission of helping business partners

and local communities to �ourish. The “Sampo yoshi” manage-

ment philosophy, embraced by merchants in the Omi region of

central Japan, was upheld through our motto of “being tough

on ourselves, kind to others and serving society.” The Bank has

made this motto and the “CSR Charter (Management

Principles)” the starting point for our activities.

We believe that the ultimate role of the management of a Bank

is to “take on risk.” For us, this means the risk assumed on behalf

of the development of the regional communities. To contribute

to the development of regional communities, the Bank is

pioneering measures to modernize its management through

adoption of an “in-house corporate credit ratings system,”

“pricing system,” and Basel II’s Foundation Internal Ratings

Based-Approach (FIRB).

The Bank sees CSR as the role of the Bank as a corporate citizen

in fostering sustainable growth of society. The Bank has been

developing CSR activities based on the three key concepts of

“environment,” “welfare,” and “culture.” By implementing

“environmental management” which contributes to the

creation of a sustainable society through “�nance,” the life

blood of the economy, the Bank has taken measures to

reconcile the twin imperatives of safeguarding the “environ-

ment” and providing “�nance.”

The History of

the Shiga Bank

CSR Charter, the Bank’s motto which carries on the “Sampo yoshi” philosophy

For the development of the regional communities

Aiming to reconcile environmental and economic needs

●October 1933 Established the Shiga Bank, Ltd.

●October 1938 Opened Kyoto Branch

●March 1941 Opened Osaka Branch

●July 1946 Opened Tokyo Branch

●May 1951 Commenced foreign exchange business

●October 1977 Listed stocks on the Osaka Securities Exchange (the Second Section) and the Kyoto Stock Exchange (moved to the First Section of the Osaka Securities Exchange in March 1979)

●August 1984 Established the Shigagin Welfare Fund

●October 1987 Listed stocks on the Tokyo Stock Exchange (the First Section)

●March 1988 Opened New York Representa-tive O�ce

●July 1988 The new head o�ce building was completed

●May 1989 Opened Hong Kong Represen-tative O�ce

●May 1991 New York Representative O�ce was promoted to New York Branch (closed down in 1998)

●September 1993 Hong Kong Representative O�ce was promoted to Hong Kong Branch

●April 1998 Launch of “∞ (Mugen) Net” on trial basis●December 1998 Commenced “In-house corporate credit ratings system”●February 1999 Launch of “Pricing system” operations on trial basis●October 1999 Established the “Environment Committee” and the “Environmental

Policy”●December 1999 Launch of “DBM (Database Marketing)” operations

●March 2000 Acquired ISO 14001 Certi�cation●July 2000 Commenced Shigagin New Business Forum “Saturday School for Entrepreneur-

ship”●October 2001 Became the �rst commercial bank in Japan to sign the United Nations

Environment Programme (“UNEP”) Statement by Financial Institutions●April 2003 Established “Shigagin Nonohana Prize,” an incentive system through industri-

al-academic cooperation●December 2003 Opened Shanghai Representative O�ce●April 2004 Established “CSR Committee” and “CSR O�ce”●December 2005 Established Shiga Bank Principles for Lake Biwa (PLB) and commenced “PLB

rating”●March 2007 Basel II’s Foundation Internal Ratings Based-Approach (FIRB) was approved by

the Financial Services Agency●April 2007 Established the “CSR Charter” and the “Code of Conduct”●August 2007 Commenced “Shigagin Ratings Communication Service (Ratings CS)”●July 2008 Became the �rst �nancial institution to be certi�ed as “Eco-First Enterprise”●July 2008 Held the �rst “Eco Business Matching Fair”●November 2009 Commenced “biodiversity rating (PLB rating BD)”

●August 2010 Established the “policies for biodiversity preservation”

●February 2012 Opened Bangkok Representative O�ce

●April 2013 Established the “Regional Promo-tion O�ce”

●June 2014 Established the “ICT Strategy O�ce”●December 2015 Commenced the “Ratings Simula-

tion Service (Ratings SS)”●April 2016 Started the 6th Medium-Term

Business Plan



1933

1941

1951

1966

1977

1991

2000

2010






























The History of

the Shiga Bank






























Business Plan


1933

1941

1951

1966

1977

1991

2000

2010






























The History of

the Shiga Bank






























Business Plan


Contributing to a sustainable society through “creation of shared values”

President



The Shiga Bank’s mission is deeply rooted in the sustainable development and realization of prosperous living for regional communities and business partners to develop the future for all stakeholders.

The Shiga Bank was born in 1933 through the merger of the 133rd National Bank (Hyakusanjusan Bank), which prided itself on “sound management,” and the Hachiman Bank, which emphasized a culture of “enterprise.” The Bank dates back to 1877, truly a history of one century and forty years. Over that time, we have always forged ahead with local communities.

“Being tough on ourselves, kind to others and serving society.” The motto of the Shiga Bank upholds the spirit of “Sampo yoshi” management philosophy, embraced by

merchants in the Omi region of central Japan, which means to bring happiness to three sides: the seller, the buyer and society. The Bank has made this motto the starting point for CSR, and has established the “CSR Charter (Management Principles)” to pursue mutual prosperity with the “regional community,” “all employees,” and “the environment.” In today’s terms, this means creation of shared values, that is, resolving social issues (social value) and enhancing our client’s corporate competitiveness (economic value) at the same time. Our motto and CSR Charter (Management Principles) form a code of conduct for all employees of the Bank as well as embody our vision.

In future years, explosive population growth is expected, centered on the developing countries. This will bring not only serious problems such as food and water shortages, depletion of energy resources and destruction of the environment, but also growing inequality and expansion of regional conflicts as globalization progresses. Meanwhile, Japan now faces a period of entrenched population decline. A mountain of problems is piling up in front of us, including the changing demographic profile due to the rising dependency ratio (fewer children and more elderly people), the decline in the number of productive population and deepening disparities between regions due the extreme concentration of population in metropolitan areas as well as the rebuilding of state finances.

Against this backdrop, in September 2015, the “Transforming our world: the 2030 Agenda for Sustainable Development” was unanimously adopted by the 193 member states of the United Nations. Incorporated into this are 17 Sustainable Development Goals (SDGs) and 169 specific targets, to be achieved by the international community by 2030 as a matter of priority to ensure a sustainable society. Each country is sounding alarms about the need for global sustainability and is showing a tireless commitment to its realization. I believe that the achievement of sustainability is not just a shared value of the world, but also a major business opportunity for us.

We expect the policy of “quantitative and qualitative monetary easing with negative interest rates,” the so-called negative interest rate policy introduced in January 2016, to be continued for the moment. It is also clear that the business environment for financial institutions is set to become more difficult, as interest margins shrink amid intensified competition with other sectors and needs for compliance with artificial intelligence, financial technology and other challenges arise. However, we see precisely this kind of scenario as a major opportunity to make a great leap forward, through generation of new innovation and enhancement of corporate value.

The Bank has started the 6th Medium-Term Business Plan in April 2016 with the main theme of “Change & Challenge”

and the long-term vision of “The Regional Bank that innovates the future.” For us, offering conventional banking services is not the most important thing, but rather developing high value-added businesses that are deeply rooted in the local community. In other words, we will identify the various issues of our customers and latent needs that they themselves were unaware of, and deliver targeted, high-quality solutions to those issues. This is the business model—that of a “comprehensive financial and information services”—that we are transforming ourselves into. We are committed to building a sustainable society through creation of shared values with business partners.

Shojiro Takahashi

C

S

TTransforming ourselves into a provider of comprehensive financial and information services

Sustainability is a big business opportunity

“Creation of shared values”̶Developing the future for all stakeholders̶



President



The Shiga Bank’s mission is deeply rooted in the sustainable development and realization of prosperous living for regional communities and business partners to develop the future for all stakeholders.

The Shiga Bank was born in 1933 through the merger of the 133rd National Bank (Hyakusanjusan Bank), which prided itself on “sound management,” and the Hachiman Bank, which emphasized a culture of “enterprise.” The Bank dates back to 1877, truly a history of one century and forty years. Over that time, we have always forged ahead with local communities.

“Being tough on ourselves, kind to others and serving society.” The motto of the Shiga Bank upholds the spirit of “Sampo yoshi” management philosophy, embraced by

merchants in the Omi region of central Japan, which means to bring happiness to three sides: the seller, the buyer and society. The Bank has made this motto the starting point for CSR, and has established the “CSR Charter (Management Principles)” to pursue mutual prosperity with the “regional community,” “all employees,” and “the environment.” In today’s terms, this means creation of shared values, that is, resolving social issues (social value) and enhancing our client’s corporate competitiveness (economic value) at the same time. Our motto and CSR Charter (Management Principles) form a code of conduct for all employees of the Bank as well as embody our vision.

In future years, explosive population growth is expected, centered on the developing countries. This will bring not only serious problems such as food and water shortages, depletion of energy resources and destruction of the environment, but also growing inequality and expansion of regional conflicts as globalization progresses. Meanwhile, Japan now faces a period of entrenched population decline. A mountain of problems is piling up in front of us, including the changing demographic profile due to the rising dependency ratio (fewer children and more elderly people), the decline in the number of productive population and deepening disparities between regions due the extreme concentration of population in metropolitan areas as well as the rebuilding of state finances.

Against this backdrop, in September 2015, the “Transforming our world: the 2030 Agenda for Sustainable Development” was unanimously adopted by the 193 member states of the United Nations. Incorporated into this are 17 Sustainable Development Goals (SDGs) and 169 specific targets, to be achieved by the international community by 2030 as a matter of priority to ensure a sustainable society. Each country is sounding alarms about the need for global sustainability and is showing a tireless commitment to its realization. I believe that the achievement of sustainability is not just a shared value of the world, but also a major business opportunity for us.

We expect the policy of “quantitative and qualitative monetary easing with negative interest rates,” the so-called negative interest rate policy introduced in January 2016, to be continued for the moment. It is also clear that the business environment for financial institutions is set to become more difficult, as interest margins shrink amid intensified competition with other sectors and needs for compliance with artificial intelligence, financial technology and other challenges arise. However, we see precisely this kind of scenario as a major opportunity to make a great leap forward, through generation of new innovation and enhancement of corporate value.

The Bank has started the 6th Medium-Term Business Plan in April 2016 with the main theme of “Change & Challenge”

and the long-term vision of “The Regional Bank that innovates the future.” For us, offering conventional banking services is not the most important thing, but rather developing high value-added businesses that are deeply rooted in the local community. In other words, we will identify the various issues of our customers and latent needs that they themselves were unaware of, and deliver targeted, high-quality solutions to those issues. This is the business model—that of a “comprehensive financial and information services”—that we are transforming ourselves into. We are committed to building a sustainable society through creation of shared values with business partners.

Shojiro Takahashi

C

S

TTransforming ourselves into a provider of comprehensive financial and information services

Sustainability is a big business opportunity

“Creation of shared values”̶Developing the future for all stakeholders̶


Growth image of the Bank[Business model]

Comprehensive �nancial andinformation service provider

The Regional Bank that innovatesthe future “The Regional Bank”

“Three Changes and Five Challenges”Basic strategies are the Three Changes and Five Challenges.

Through day-to-day interaction with customers, we aim to be the “first communication bank” that responds fastest and in the most friendly and immediate way, by prioritizing customer consultation. (The borrowed English “fa-suto” implies both the meanings of first and fast).

The second change is “speeding up the pace of management.” Under the slogan “faster, more boldly,” we plan to speed up all stages between decision-making and execution, and ensure that decisions are resolutely carried out no matter what it takes.

The third change is “improving the cost structure.” Aiming to be a more robust institution, we are committed to radical structural reform that leaves no stone unturned, to boost the management efficiency of the whole Shigagin Group.

The “Five Challenges” are (1) challenge to regional revitalization, (2) challenge to strengthening top line, (3) challenge to increasing productivity, (4) challenge to constructing a robust management foundation, and (5) challenge to a strategic CSR.

With the end of the first year of the 6th Medium-Term Business Plan, we are facing headwinds as we build up results.

To meet our “challenge to regional revitalization,” we are promoting bank financing that does not depend unduly on collateral and guarantees, based on our “business assessments,” which evaluate future viability based on analysis of sector trends and the client’s business. Regarding the Moriyama rose branding project, in partnership with local governments, government and local financial institutions, we were involved from the first stages in building a Dutch-style glasshouse for rose cultivation. It took three years for the construction of the glasshouse which was completed in January 2017. Looking ahead, we expect this project to generate related businesses and create new employment

opportunities. (Page 23) We have also signed an agreement for business cooperation with West Japan Railway Company and Farm Alliance Management Co., Ltd. with the purpose of reinvigorating regional economies and industry through development of agriculture. At the same time, we are taking measures for regional revitalization through encouragement of sustainable farming and the development of regional agriculture, through measures such as the launch of the “GAP accreditation support plan,” a main-business support loan facility for producers who have acquired international agricultural certification such as GLOBAL G.A.P. We are the first regional bank in the Kinki region to offer such a facility. (Page 32)

Progress in the 6th Medium-Term Business Plan

Sustainable development

CSR Charter (Management Principles)and the motto

Potential needsSocial issues

Innovatingthe future

The Regional

Bank

A vigorous human group

that emphasizesinterpersonal

relations

A self-su�cient, robust institution that will shape the future of the region

Further deepening relationship banking based on the concept of mutual prosperity, a tradition that we have long carried on, and aiming to be a “regional bank among regional banks” that emphasizes face-to-face contact and meetings of minds

Becoming an organization that enables maximized self-realization (making dreams come true) by giving free rein to the individuality and ability of individual bank employees

Respondingmore promptly

to customerneeds

Speeding upthe pace of

management

Improvingthe cost

structure

ThreeChanges

Challenge toa strategic

CSR

5

Challenge toregional

revitalization

1

Challenge toconstructing

a robustmanagement

foundation

4Challenge to

increasingproductivity

3

Challenge tostrengthening

top line

2

FiveChallenges

Creation of shared values


Growth image of the Bank[Business model]

Comprehensive �nancial andinformation service provider

The Regional Bank that innovatesthe future “The Regional Bank”

“Three Changes and Five Challenges”Basic strategies are the Three Changes and Five Challenges.

Through day-to-day interaction with customers, we aim to be the “first communication bank” that responds fastest and in the most friendly and immediate way, by prioritizing customer consultation. (The borrowed English “fa-suto” implies both the meanings of first and fast).

The second change is “speeding up the pace of management.” Under the slogan “faster, more boldly,” we plan to speed up all stages between decision-making and execution, and ensure that decisions are resolutely carried out no matter what it takes.

The third change is “improving the cost structure.” Aiming to be a more robust institution, we are committed to radical structural reform that leaves no stone unturned, to boost the management efficiency of the whole Shigagin Group.

The “Five Challenges” are (1) challenge to regional revitalization, (2) challenge to strengthening top line, (3) challenge to increasing productivity, (4) challenge to constructing a robust management foundation, and (5) challenge to a strategic CSR.

With the end of the first year of the 6th Medium-Term Business Plan, we are facing headwinds as we build up results.

To meet our “challenge to regional revitalization,” we are promoting bank financing that does not depend unduly on collateral and guarantees, based on our “business assessments,” which evaluate future viability based on analysis of sector trends and the client’s business. Regarding the Moriyama rose branding project, in partnership with local governments, government and local financial institutions, we were involved from the first stages in building a Dutch-style glasshouse for rose cultivation. It took three years for the construction of the glasshouse which was completed in January 2017. Looking ahead, we expect this project to generate related businesses and create new employment

opportunities. (Page 23) We have also signed an agreement for business cooperation with West Japan Railway Company and Farm Alliance Management Co., Ltd. with the purpose of reinvigorating regional economies and industry through development of agriculture. At the same time, we are taking measures for regional revitalization through encouragement of sustainable farming and the development of regional agriculture, through measures such as the launch of the “GAP accreditation support plan,” a main-business support loan facility for producers who have acquired international agricultural certification such as GLOBAL G.A.P. We are the first regional bank in the Kinki region to offer such a facility. (Page 32)

Progress in the 6th Medium-Term Business Plan

Sustainable development

CSR Charter (Management Principles)and the motto

Potential needsSocial issues

Innovatingthe future

The Regional

Bank

A vigorous human group

that emphasizesinterpersonal

relations

A self-su�cient, robust institution that will shape the future of the region

Further deepening relationship banking based on the concept of mutual prosperity, a tradition that we have long carried on, and aiming to be a “regional bank among regional banks” that emphasizes face-to-face contact and meetings of minds

Becoming an organization that enables maximized self-realization (making dreams come true) by giving free rein to the individuality and ability of individual bank employees

Respondingmore promptly

to customerneeds

Speeding upthe pace of

management

Improvingthe cost

structure

ThreeChanges

Challenge toa strategic

CSR

5


revitalization

1


a robustmanagement

foundation

4Challenge to


3


top line

2

FiveChallenges

Creation of shared values


Business strategies through �ve challenges

To meet the “challenge to strengthening top line,” we aim

to strengthen non-interest income by contributing to

enhanced customer corporate value and development of

regional communities by leveraging our financial

intermediary functions, with strengthened consulting

functions and sound but aggressive risk-taking. The Bank

is developing a solutions business geared to problem-

solving by using channels such as the Ratings Communi-

ication Service (Ratings CS), in which the Bank informs

clients of their respective strengths and weaknesses

based on analysis of the client’s past financial condition,

and the Ratings Simulations Service (Ratings SS), in which

the Bank aims to improve corporate value by forecasting

and sharing details of future financial position based on

client business strategy. (Page 24) As a result, final-year

targets for corporate-customer fees and commissions in

the 6th Medium-Term Business Plan (from April 2016 to

March 2019) were achieved in the first year. (Page 31)

To meet the “challenge to increasing productivity,” we are implementing measures to ensure enhanced customer convenience and efficient business management by considering the creation of new financial services by utilizing ICT and FinTech and strengthening the role of indirect (non face-to-face) channels as well as adopting an omni-channel strategy.

During the current fiscal year, we decided to take part in the Japan Bank Consortium, to deepen our exploration of

new remittance and settlement services using blockchain technology. (Page 39)

In addition, we converted some consolidated subsidiaries into wholly owned subsidiaries this year. Through this move, we aimed to enhance productivity by speeding up the Group’s decision-making processes and strengthening governance, enabling us to provide comprehensive financial services as an integrated Group. (Page 40)

To address our “challenge to constructing a robust management foundation,” we are taking measures to substantively strengthen corporate governance through vigorous discussion at the Board of Directors.

In the strong belief that the mission of the regional financial institutions is to take on risk for the development of the regional communities, the Bank has taken measures to strengthen its financial position. In addition, the Bank has

adopted the in-house corporate credit ratings system and moved quickly to adopt the Foundation Internal Ratings Based-Approach (FIRB), in measures to achieve more sophisticated risk management. Additionally, the Bank has taken measures to improve the transparency of business planning and to generate revenue opportunities by introducing a “risk appetite framework,” while taking measures to ensure management that can control risk. (Page 43)

To meet the “challenge to a strategic CSR,” we have developed initiatives that contribute to resolution of social issues by creating shared values with our customers and regional communities through our main business. For example, in 2014, we became the first regional bank in the Kinki region to begin handling “CSR private placement bonds.” To commemorate an entity’s issuance of CSR private placement bonds, an amount equivalent to 0.2% of the total issue price will be contributed by the Bank to donate items that support children’s learning and growth, such as books

and sports equipment, to schools. This is an initiative aimed at realizing a sustainable society by adopting the “Shiho yoshi” approach, that is, a philosophy that further incorporates local companies into the “Sampo yoshi” philosophy of merchants in the Omi region of central Japan.

By May 2017, these private placement bonds had been issued 230 times, in a total amount of ¥20.3 billion. This allowed the Bank to donate goods equivalent to ¥30.32 million to a total of 182 organizations. (Page 51)

Challenge to astrategic CSR

5


revitalization

1


top line

2


a robustmanagement

foundation

4Challenge to


3Creation of growth industriesBusiness assessment

Improving capital adequacy

Risk appetite frameworkActive risk-taking

Ratings Communication ServiceRatings Simulation Service

Increasing loans and bills discountedImproving pro�t margins

Initiatives for regional revitalization

Creation of new business models

Overhauling branch operationsExpanding ICT infrastructure


Business strategies through �ve challenges

To meet the “challenge to strengthening top line,” we aim

to strengthen non-interest income by contributing to

enhanced customer corporate value and development of

regional communities by leveraging our financial

intermediary functions, with strengthened consulting

functions and sound but aggressive risk-taking. The Bank

is developing a solutions business geared to problem-

solving by using channels such as the Ratings Communi-

ication Service (Ratings CS), in which the Bank informs

clients of their respective strengths and weaknesses

based on analysis of the client’s past financial condition,

and the Ratings Simulations Service (Ratings SS), in which

the Bank aims to improve corporate value by forecasting

and sharing details of future financial position based on

client business strategy. (Page 24) As a result, final-year

targets for corporate-customer fees and commissions in

the 6th Medium-Term Business Plan (from April 2016 to

March 2019) were achieved in the first year. (Page 31)

To meet the “challenge to increasing productivity,” we are implementing measures to ensure enhanced customer convenience and efficient business management by considering the creation of new financial services by utilizing ICT and FinTech and strengthening the role of indirect (non face-to-face) channels as well as adopting an omni-channel strategy.

During the current fiscal year, we decided to take part in the Japan Bank Consortium, to deepen our exploration of

new remittance and settlement services using blockchain technology. (Page 39)

In addition, we converted some consolidated subsidiaries into wholly owned subsidiaries this year. Through this move, we aimed to enhance productivity by speeding up the Group’s decision-making processes and strengthening governance, enabling us to provide comprehensive financial services as an integrated Group. (Page 40)

To address our “challenge to constructing a robust management foundation,” we are taking measures to substantively strengthen corporate governance through vigorous discussion at the Board of Directors.

In the strong belief that the mission of the regional financial institutions is to take on risk for the development of the regional communities, the Bank has taken measures to strengthen its financial position. In addition, the Bank has

adopted the in-house corporate credit ratings system and moved quickly to adopt the Foundation Internal Ratings Based-Approach (FIRB), in measures to achieve more sophisticated risk management. Additionally, the Bank has taken measures to improve the transparency of business planning and to generate revenue opportunities by introducing a “risk appetite framework,” while taking measures to ensure management that can control risk. (Page 43)

To meet the “challenge to a strategic CSR,” we have developed initiatives that contribute to resolution of social issues by creating shared values with our customers and regional communities through our main business. For example, in 2014, we became the first regional bank in the Kinki region to begin handling “CSR private placement bonds.” To commemorate an entity’s issuance of CSR private placement bonds, an amount equivalent to 0.2% of the total issue price will be contributed by the Bank to donate items that support children’s learning and growth, such as books

and sports equipment, to schools. This is an initiative aimed at realizing a sustainable society by adopting the “Shiho yoshi” approach, that is, a philosophy that further incorporates local companies into the “Sampo yoshi” philosophy of merchants in the Omi region of central Japan.

By May 2017, these private placement bonds had been issued 230 times, in a total amount of ¥20.3 billion. This allowed the Bank to donate goods equivalent to ¥30.32 million to a total of 182 organizations. (Page 51)

Challenge to astrategic CSR

5


revitalization

1


top line

2


a robustmanagement

foundation

4Challenge to


3Creation of growth industriesBusiness assessment

Improving capital adequacy

Risk appetite frameworkActive risk-taking

Ratings Communication ServiceRatings Simulation Service

Increasing loans and bills discountedImproving pro�t margins

Initiatives for regional revitalization

Creation of new business models

Overhauling branch operationsExpanding ICT infrastructure


With “mutual prosperity with the regional community” as a pillar, the Bank works to secure the health and transparency of management while aiming to enrich internal reserves and strengthen the financial structure in preparation for a management environment that will be increasingly harsh and future investment. The Bank also has a basic policy of continuing to provide stable dividends to shareholders while

making payment of dividends as great as possible according to performance trends. For fiscal year 2016, to respond to the support of our shareholders, the Bank added special dividends of ¥1 to ordinary dividends of ¥7 for a total amount of dividends for the full year of ¥8 per share.

For the year ending March 31, 2018, we expect earnings to decline, due in part to increased credit costs associated

Total deposit assets (end of year balance) (total deposits + investment trust + public bond + �nancial instruments intermediary) ¥5,000.0 billion

¥3,500.0 billion

50%

30%

¥4,825.7 billion

¥3,472.4 billion

47.81%*

30.87%

Items Targets for the year ended March 31, 2019 Results for the year ended March 31, 2017

* Figures as of September 2016

Ordinary income

Net income*

19,230

13,939

(5,730)

(3,939)

13,500

10,000

Forecast for the year endingMarch 31, 2018

Results for the year endedMarch 31, 2017

Year-on-yeardi�erence



Non-consolidated Consolidated


* Net income attributable to owners of parent for columns under “Consolidated.”

21,231

14,895

(5,731)

(3,895)

15,500

11,000

Share of loans made within Shiga Prefecture (excluding Shoko Chukin Bank and some other �nancial institutions)

Total loans (end of year balance)

Numerical targets for the 6th Medium-Term Business Plan and the results as of March 31, 2017

Return on equity ROE

OHR

5.0% or more

Less than 65%

6.20%

72.39%

Items Long-term benchmark challenges Results for the year ended March 31, 2017

Long-term benchmark challenges (long-term benchmarks in a time-frame unrelated to the 6th Medium-Term Business Plan)

Returns to shareholders

Earnings forecasts for the year ending March 31, 2018

Earnings results for the fiscal year ended March 31, 2017: Favorable performance of both loans and deposits

Looking ahead, we expect to see a deepening impact on the real economy from the dependency ratio issue and population decline. We also expect significant changes in social and economic structure against a background of technological innovation including progress in the Internet of Things (IoT) and artificial intelligence (AI). Amid these revolutionary developments, the Bank faces a wide range of challenges. At the moment, our efforts are focused on the following three priority issues.

First is the strengthening of our consulting functions. In addition to acquiring specialist knowledge and building up external networks, we will foster human resources that can create shared values with our customers based on a thorough-going customer orientation.

The second point is improvement of profitability. Corporate-customer fees and commissions greatly surpassed our targets in the 6th Medium-Term Business Plan but remain inadequate as a proportion of overall earnings. The Bank’s policy is to further use our consulting functions to build up non-interest income.

Third is the improvement of productivity. In the year ended March 31, 2017, we trimmed the total expenses by ¥1.0 billion year-on-year to ¥41.4 billion through a cost-cutting drive that left no stone unturned, but the OHR deteriorated by 2.42% to 72.39%. Looking ahead, we believe it will take some time to improve the OHR, given our planned forward-looking investments in system infrastructure. However, we will improve productivity through overhauling the roles of our branches and streamlining administration.

Future prospects and issues

Since our founding, the Bank has held the belief that without development of the regional community, we cannot develop ourselves either. In this spirit, we have contributed to the growth of the regional community. Emphasizing the impact of environmental issues on sustainability of society, we have also responded quickly in the areas of environmental management and environmental finance.

For future business management, what is needed is creation of shared values, that is, resolving social issues (social value) and enhancing our client’s corporate competitiveness (economic value) at the same time. Looking ahead, Shiga Bank is fully committed to realizing a sustainable society by creating shared values for all of our stakeholders, including regional communities, business partners, shareholders, and employees. I look forward for the continued understanding and support of all stakeholders in this endeavor.


Items

(Millions of yen)

Reduction in greenhouse gas emissions (an average 30% reduction compared to �scal year 2006 over the three years from �scal year 2016 to �scal year 2018)

primarily with system development costs for software and uncertain prospects for the Japanese economy.

Though net income (non-consolidated) in the fiscal year ended March 31, 2017 decreased by ¥0.8 billion year-on-year to ¥13.9 billion due primarily to the impact of negative interest rate policies, we were able to record our second-highest earnings after last year’s record performance. Deposits and loans both performed well, with deposits, including negotiable certificates of deposits, as of March 31, 2017 increasing by ¥187.3 billion year-on-year to ¥4,617.4 billion and loans increasing by ¥204.9 billion year-on-year to ¥3,472.4 billion. In particular, the average balance of loans and bills discounted during the period increased by ¥207.4 billion year-on-year, principally on financing for small and medium-sized enterprises. This not only surpassed

substantially the increase in the average balance of deposits during the period of ¥87.1 billion, but also marked a record high for the last 10 years in terms of a single-year increase. The total capital ratio (consolidated) increased by 0.22% year-on-year to 16.67%, easily clearing the uniform international standards. The parent-only total of risk-monitored loans decreased by ¥8.2 billion year-on-year to ¥57.6 billion, and accounted for 1.66% of total loans and bills discounted, a decrease of 0.35%. Due mainly to a decrease in the yield on loans amid prolonged low interest rates, interest income decreased by ¥1.1 billion year-on-year to ¥48.3 billion.


With “mutual prosperity with the regional community” as a pillar, the Bank works to secure the health and transparency of management while aiming to enrich internal reserves and strengthen the financial structure in preparation for a management environment that will be increasingly harsh and future investment. The Bank also has a basic policy of continuing to provide stable dividends to shareholders while

making payment of dividends as great as possible according to performance trends. For fiscal year 2016, to respond to the support of our shareholders, the Bank added special dividends of ¥1 to ordinary dividends of ¥7 for a total amount of dividends for the full year of ¥8 per share.

For the year ending March 31, 2018, we expect earnings to decline, due in part to increased credit costs associated

Total deposit assets (end of year balance) (total deposits + investment trust + public bond + �nancial instruments intermediary) ¥5,000.0 billion

¥3,500.0 billion

50%

30%

¥4,825.7 billion

¥3,472.4 billion

47.81%*

30.87%

Items Targets for the year ended March 31, 2019 Results for the year ended March 31, 2017

* Figures as of September 2016

Ordinary income

Net income*

19,230

13,939

(5,730)

(3,939)

13,500

10,000






Non-consolidated Consolidated


* Net income attributable to owners of parent for columns under “Consolidated.”

21,231

14,895

(5,731)

(3,895)

15,500

11,000

Share of loans made within Shiga Prefecture (excluding Shoko Chukin Bank and some other �nancial institutions)

Total loans (end of year balance)

Numerical targets for the 6th Medium-Term Business Plan and the results as of March 31, 2017

Return on equity ROE

OHR

5.0% or more

Less than 65%

6.20%

72.39%

Items Long-term benchmark challenges Results for the year ended March 31, 2017

Long-term benchmark challenges (long-term benchmarks in a time-frame unrelated to the 6th Medium-Term Business Plan)

Returns to shareholders

Earnings forecasts for the year ending March 31, 2018

Earnings results for the fiscal year ended March 31, 2017: Favorable performance of both loans and deposits

Looking ahead, we expect to see a deepening impact on the real economy from the dependency ratio issue and population decline. We also expect significant changes in social and economic structure against a background of technological innovation including progress in the Internet of Things (IoT) and artificial intelligence (AI). Amid these revolutionary developments, the Bank faces a wide range of challenges. At the moment, our efforts are focused on the following three priority issues.

First is the strengthening of our consulting functions. In addition to acquiring specialist knowledge and building up external networks, we will foster human resources that can create shared values with our customers based on a thorough-going customer orientation.

The second point is improvement of profitability. Corporate-customer fees and commissions greatly surpassed our targets in the 6th Medium-Term Business Plan but remain inadequate as a proportion of overall earnings. The Bank’s policy is to further use our consulting functions to build up non-interest income.

Third is the improvement of productivity. In the year ended March 31, 2017, we trimmed the total expenses by ¥1.0 billion year-on-year to ¥41.4 billion through a cost-cutting drive that left no stone unturned, but the OHR deteriorated by 2.42% to 72.39%. Looking ahead, we believe it will take some time to improve the OHR, given our planned forward-looking investments in system infrastructure. However, we will improve productivity through overhauling the roles of our branches and streamlining administration.

Future prospects and issues

Since our founding, the Bank has held the belief that without development of the regional community, we cannot develop ourselves either. In this spirit, we have contributed to the growth of the regional community. Emphasizing the impact of environmental issues on sustainability of society, we have also responded quickly in the areas of environmental management and environmental finance.

For future business management, what is needed is creation of shared values, that is, resolving social issues (social value) and enhancing our client’s corporate competitiveness (economic value) at the same time. Looking ahead, Shiga Bank is fully committed to realizing a sustainable society by creating shared values for all of our stakeholders, including regional communities, business partners, shareholders, and employees. I look forward for the continued understanding and support of all stakeholders in this endeavor.


Items

(Millions of yen)

Reduction in greenhouse gas emissions (an average 30% reduction compared to �scal year 2006 over the three years from �scal year 2016 to �scal year 2018)

primarily with system development costs for software and uncertain prospects for the Japanese economy.

Though net income (non-consolidated) in the fiscal year ended March 31, 2017 decreased by ¥0.8 billion year-on-year to ¥13.9 billion due primarily to the impact of negative interest rate policies, we were able to record our second-highest earnings after last year’s record performance. Deposits and loans both performed well, with deposits, including negotiable certificates of deposits, as of March 31, 2017 increasing by ¥187.3 billion year-on-year to ¥4,617.4 billion and loans increasing by ¥204.9 billion year-on-year to ¥3,472.4 billion. In particular, the average balance of loans and bills discounted during the period increased by ¥207.4 billion year-on-year, principally on financing for small and medium-sized enterprises. This not only surpassed

substantially the increase in the average balance of deposits during the period of ¥87.1 billion, but also marked a record high for the last 10 years in terms of a single-year increase. The total capital ratio (consolidated) increased by 0.22% year-on-year to 16.67%, easily clearing the uniform international standards. The parent-only total of risk-monitored loans decreased by ¥8.2 billion year-on-year to ¥57.6 billion, and accounted for 1.66% of total loans and bills discounted, a decrease of 0.35%. Due mainly to a decrease in the yield on loans amid prolonged low interest rates, interest income decreased by ¥1.1 billion year-on-year to ¥48.3 billion.


Shiga Bank’s earnings results

As of March 31, 2017, unless otherwise indicated

1.00%1.00%

0.03%0.03%

1.14%1.14%

1.461.37

1.27

1.58

0.91 0.92 0.930.93

0.07 0.06 0.05 0.05

Income before income taxes

Deposits(average balance during the period)

including negotiable certi�cates of deposits

Total balance of deposit assets(total deposits + investment trusts + public

bonds + �nancial instruments intermediary)

0

Loans and bills discounted(average balance during the period)

0

5

3

2

1

0

100

80

90

70

60

50

41.443.0 42.9

42.443.2

Expenses/OHR

70.18 72.3669.9768.89

OHRTotal expenses

165.4

103.0

162.6

145.8

82.5

Gain (loss) on valuation ofavailable-for-sale securities

18.0

16.0

14.0

12.0

10.0

8.0

6.0

14.46

16.67

14.80

15.9416.45

14.14

10.50

11.82

13.28

9.44

Capital ratio Ratings

AA+AA

AA－

AA－

BBB+BBB

BBB－BB+ BB

BB－ B+B

CD

AAA

・・・・・・

A+

Rating and InvestmentInformation, Inc. (R&I)

Japan Credit RatingAgency, Ltd. (JCR)

57.257.2 billion of yenbillion of yen

billion of yenbillion of yen



15.815.815.815.8

19.219.219.219.2 13.913.913.913.9

45.07%45.07%

4,467.14,467.14,467.14,467.1 4,825.74,825.74,825.74,825.7

2,310.92,310.92,310.92,310.9

165.4165.4165.4165.4

1.661.661.661.66

57.657.657.657.6

3,331.63,331.63,331.63,331.6

48.05%48.05%

14.46%14.46%14.46%14.46%

16.67%16.67%16.67%16.67%

72.3972.3972.3972.39OHROHR

41.441.441.441.4Total expensesTotal expenses

A+A+A+A+Rating and InvestmentInformation, Inc. (R&I)Rating and InvestmentInformation, Inc. (R&I)

Japan Credit RatingAgency, Ltd. (JCR)Japan Credit RatingAgency, Ltd. (JCR)

Financial Highlights

A+High creditworthiness supported by a few excellent factors

　 A+A high level of certainty to honor the financial obligations

Gross operating income Net operating income

Net income Balance of loans to SMEs, etc. Status of risk management loans

Yield on loans and bills discounted,deposits and securities

Deposits (share within Shiga Prefecture)

Loans and bills discounted(share within Shiga Prefecture)

(billion of yen) (billion of yen)65 20

(billion of yen) (billion of yen)(billion of yen)5,000 3,500

3,000

2,500

2,000

0

4,500

4,000

3,500

0

4,500

4,000

3,500

0

(billion of yen)

(%)

Yield on loans and bills discounted

Risk management loans

Total capital ratio

Common Equity Tier 1 capital ratio

Ratio to balance of total loans and bills discounted

Yield on securities Yield on deposits, etc.


Yield on securities

Yield on deposits, etc.

(billion of yen)25

1.8

1.6

1.4

1.2

1.0

0.8

0.6

0.4

1.2

0

20

15

10

5

0

15

10

5

0

15

10

5

0

62.8

2013 2014 2015 2016 2017

2013 2014 2015 2016 2017

2013 2014 2015 2016 2017

2013 2014 2015 2016 2017

2013 2014 2015 2016 2017 2013 2014 2015 2016 2017

2013 2014 2015 2016 2017

2013 2014 2015 2016 2017 2013 2014 2015 2016 2017

2013 2014 2015 2016 2017 2013 2014 2015 2016 2017

2013 2014 2015 2016 2017 2013 2014 2015 2016 2017

61.3

59.360.6

18.9 18.4

16.4 16.2

57.2

17.4

12.5

22.220.8

4.8

10.1

12.5

14.7

19.213.9

15.8




billion of yenbillion of yen billion of yenbillion of yen

%%%%


4,114.54,222.8 4,278.4

4,379.9

1,989.41,965.82,054.9

2,174.6

85.5

71.765.9

90.4

3.192.92

2.342.01

4,444.4

2,752.52,848.2

2,950.0

3,124.24,621.64,508.1

4,644.1

4,467.1

(billion of yen)2,500

(billion of yen) (%)200

150

100

50

0



44

42

40

38

36

0

90

80

70

60

50

40

30

20

10

0

2,000

1,500

0

2,310.9

57.6

1.661.66

72.3972.39

4,825.7 3,331.6

60

55

0

Second-tierregional banks

11.82


15.31

Shinkin banksand credit unions

16.43


17.87

Others21.15

Others7.88

Otherregional banks

3.21

City banks2.31

Otherregional banks

8.53

City banks2.36

Shiga BankShiga Bank Shiga BankShiga Bank

Risk management loansRisk management loans

Ratio to balance of total loans and bills discountedRatio to balance of total loans and bills discounted

Total capital ratioTotal capital ratio

Common Equity Tier 1 capital ratioCommon Equity Tier 1 capital ratio

4

* JAPAN POST BANK Co., Ltd. and The Shoko Chukin Bank, Ltd. are excluded.

* JAPAN POST BANK Co., Ltd., The Shoko Chukin Bank, Ltd., and Japan Finance Corporation are excluded.


Shiga Bank’s earnings results


1.00%1.00%

0.03%0.03%

1.14%1.14%

1.461.37

1.27

1.58

0.91 0.92 0.930.93

0.07 0.06 0.05 0.05


Deposits(average balance during the period)

including negotiable certi�cates of deposits

Total balance of deposit assets(total deposits + investment trusts + public

bonds + �nancial instruments intermediary)

0

Loans and bills discounted(average balance during the period)

0

5

3

2

1

0

100

80

90

70

60

50

41.443.0 42.9

42.443.2

Expenses/OHR

70.18 72.3669.9768.89

OHRTotal expenses

165.4

103.0

162.6

145.8

82.5

Gain (loss) on valuation ofavailable-for-sale securities

18.0

16.0

14.0

12.0

10.0

8.0

6.0

14.46

16.67

14.80

15.9416.45

14.14

10.50

11.82

13.28

9.44

Capital ratio Ratings

AA+AA

AA－

AA－

BBB+BBB

BBB－BB+ BB

BB－ B+B

CD

AAA

・・・・・・

A+

Rating and InvestmentInformation, Inc. (R&I)

Japan Credit RatingAgency, Ltd. (JCR)

57.257.2 billion of yenbillion of yen




15.815.815.815.8

19.219.219.219.2 13.913.913.913.9

45.07%45.07%

4,467.14,467.14,467.14,467.1 4,825.74,825.74,825.74,825.7

2,310.92,310.92,310.92,310.9

165.4165.4165.4165.4

1.661.661.661.66

57.657.657.657.6

3,331.63,331.63,331.63,331.6

48.05%48.05%

14.46%14.46%14.46%14.46%

16.67%16.67%16.67%16.67%

72.3972.3972.3972.39OHROHR

41.441.441.441.4Total expensesTotal expenses

A+A+A+A+Rating and InvestmentInformation, Inc. (R&I)Rating and InvestmentInformation, Inc. (R&I)

Japan Credit RatingAgency, Ltd. (JCR)Japan Credit RatingAgency, Ltd. (JCR)

Financial Highlights

A+High creditworthiness supported by a few excellent factors

　 A+A high level of certainty to honor the financial obligations

Gross operating income Net operating income

Net income Balance of loans to SMEs, etc. Status of risk management loans

Yield on loans and bills discounted,deposits and securities

Deposits (share within Shiga Prefecture)

Loans and bills discounted(share within Shiga Prefecture)

(billion of yen) (billion of yen)65 20

(billion of yen) (billion of yen)(billion of yen)5,000 3,500

3,000

2,500

2,000

0

4,500

4,000

3,500

0

4,500

4,000

3,500

0

(billion of yen)

(%)


Risk management loans

Total capital ratio

Common Equity Tier 1 capital ratio

Ratio to balance of total loans and bills discounted

Yield on securities Yield on deposits, etc.


Yield on securities

Yield on deposits, etc.

(billion of yen)25

1.8

1.6

1.4

1.2

1.0

0.8

0.6

0.4

1.2

0

20

15

10

5

0

15

10

5

0

15

10

5

0

62.8

2013 2014 2015 2016 2017

2013 2014 2015 2016 2017

2013 2014 2015 2016 2017

2013 2014 2015 2016 2017

2013 2014 2015 2016 2017 2013 2014 2015 2016 2017

2013 2014 2015 2016 2017

2013 2014 2015 2016 2017 2013 2014 2015 2016 2017

2013 2014 2015 2016 2017 2013 2014 2015 2016 2017

2013 2014 2015 2016 2017 2013 2014 2015 2016 2017

61.3

59.360.6

18.9 18.4

16.4 16.2

57.2

17.4

12.5

22.220.8

4.8

10.1

12.5

14.7

19.213.9

15.8





%%%%


4,114.54,222.8 4,278.4

4,379.9

1,989.41,965.82,054.9

2,174.6

85.5

71.765.9

90.4

3.192.92

2.342.01

4,444.4

2,752.52,848.2

2,950.0

3,124.24,621.64,508.1

4,644.1

4,467.1

(billion of yen)2,500


150

100

50

0



44

42

40

38

36

0

90

80

70

60

50

40

30

20

10

0

2,000

1,500

0

2,310.9

57.6

1.661.66

72.3972.39

4,825.7 3,331.6

60

55

0


11.82


15.31


16.43


17.87

Others21.15

Others7.88

Otherregional banks

3.21

City banks2.31

Otherregional banks

8.53

City banks2.36

Shiga BankShiga Bank Shiga BankShiga Bank

Risk management loansRisk management loans

Ratio to balance of total loans and bills discountedRatio to balance of total loans and bills discounted

Total capital ratioTotal capital ratio

Common Equity Tier 1 capital ratioCommon Equity Tier 1 capital ratio

4

* JAPAN POST BANK Co., Ltd. and The Shoko Chukin Bank, Ltd. are excluded.

* JAPAN POST BANK Co., Ltd., The Shoko Chukin Bank, Ltd., and Japan Finance Corporation are excluded.


Reduction in greenhouse gas emissions

Shiga Bank Principles for Lake Biwa (PLB)

Non-�nancial Highlights Trends in major business performance indicators, etc. (consolidated)

Trends in environmental accounting data – reconciling environmental and economic needs

5,000

10,000

15,000

0

20,000

Number of customers approved for PLB(As of May 31, 2017)

Green purchasing rate (paper)

Number of employees with Financial Planning Grade 1 certi�cation

(As of May 31, 2017)

Hiring rate for peoplewith disabilities

40

20

60

80

100

0

(Persons)

82

4752

86

53

Number of employees whohave taken childcare leaveWomen managers ratio

(3.3%)(3.3%)Year-on-year di�erenceYear-on-year di�erence

10,82610,826Customer ratio 58.0%Customer ratio 58.0% 99.70%99.70% 156 persons156 persons

2.331%2.331%

Target: An average 30% reduction compared to �scal 2006 over the three years from �scal 2016 to �scal 2018

FY2012 FY2013 FY2014 FY2015 FY2016

53 4751

60

26

66

161

FemaleMale

40

60

80

20

120

140

100

160

180

200

0

(Persons)

168166 171 172160

FY2012 FY2013 FY2014 FY2015 FY2016

Sub-Assistant General ManagerAssistant General Manager

General Manager and Deputy General Manager

86

13

61 61

18

93

61

17

9088

58

20

91

60

20

Total in FY2016Total in FY2016

19.76%19.76%

82 persons82 persons

Rate of reduction 30.87%Rate of reduction 30.87%

Reduction in CO2 in �scal 2016Reduction in CO2 in �scal 2016

2,713.9t2,713.9t

Trends in electricity usage

FY2012 FY2013 FY2014 FY2015 FY2016

(Thousand kWh)

17,86116,775 16,180 15,640

17,777

FY2012(From April 1, 2012 to

March 31, 2013)

FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015

(Millions of yen)


March 31, 2014)


March 31, 2015)


March 31, 2016)


March 31, 2017)

Ordinary revenue


Net income attributable to owners of the parent

Comprehensive income

Net assets

Total assets

Net assets per share

Net income per share

Diluted net income per share

Capital ratio

ROE

Price-earnings ratio

Cash �ow from operating activities

Cash �ow from investing activities

Cash �ow from �nancing activities

Cash and cash equivalents, end of year

Number of employees[Excluding average number of temporary employees]

88,815

14,357

5,544

21,086

267,535

4,662,055

998.62

21.00

——

5.65

2.18

30.57

76,969

(44,354)

(1,599)

72,798

2,530

〔1,187〕

88,290

19,531

11,027

25,058

292,466

4,777,483

1,091.45

41.79

41.78

6,02

3.99

13.40

96,812

98,842

(11,604)

256,862

2,508

〔1,215〕

88,499

24,576

13,675

63,162

349,851

4,996,976

1,324.63

51.87

51.68

6.90

4.32

11.56

55,568

(46,447)

(10,324)

255,680

2,479

〔1,235〕

95,844

22,535

15,508

(1,465)

346,714

5,025,426

1,310.98

59.57

52.73

6.79

4.52

7.95

(133,403)

66,781

(1,700)

187,348

2,468

〔1,247〕

90,151

21,231

14,895

31,484

374,246

5,539,561

1,425.41

57.21

50.61

6.69

4.18

9.98

286,223

(352)

(3,967)

469,250

2,401

〔1,226〕

Millions of yen

Millions of yen

Millions of yen

Millions of yen

Millions of yen

Millions of yen

Yen

Yen

Yen

Environmental preservation costs

Investment amount

Total

RevenuesInterest income from environmental �nancing products

Reduced energy expensesReducedexpenses

Expenses amount

Greenhouse gas (CO2) emissions (t-CO2)

Balance of environmental �nancing products

Environmental preservation bene�ts

Economic bene�ts from environmental preservation

%

%

Times

Millions of yen

Millions of yen

Millions of yen

Millions of yen

Persons

215

132

8,792

68,658

(38)

1

13

(24)

134

224

8,982

79,084

(100)

43

(35)

(92)

671

380

8,812

85,258

33

5

14

52

49

332

7,132

82,750

313

4

32

350

31

299

6,714

93,030

453

14

8

475

36

288

6,452

90,222

468

14

21

503

43

282

8,297

126,343

366

13

16

396

12

270

7,255

147,814

339

48

(51)

336

20

261

6,873

168,689

313

48

28

390

59

290

6,710

185,819

322

50

30

402


Fees and commissions, etc. from sale of eco-related business matching funds


Reduction in greenhouse gas emissions

Shiga Bank Principles for Lake Biwa (PLB)

Non-�nancial Highlights Trends in major business performance indicators, etc. (consolidated)

Trends in environmental accounting data – reconciling environmental and economic needs

5,000

10,000

15,000

0

20,000

Number of customers approved for PLB(As of May 31, 2017)

Green purchasing rate (paper)

Number of employees with Financial Planning Grade 1 certi�cation

(As of May 31, 2017)

Hiring rate for peoplewith disabilities

40

20

60

80

100

0

(Persons)

82

4752

86

53

Number of employees whohave taken childcare leaveWomen managers ratio

(3.3%)(3.3%)Year-on-year di�erenceYear-on-year di�erence

10,82610,826Customer ratio 58.0%Customer ratio 58.0% 99.70%99.70% 156 persons156 persons

2.331%2.331%

Target: An average 30% reduction compared to �scal 2006 over the three years from �scal 2016 to �scal 2018

FY2012 FY2013 FY2014 FY2015 FY2016

53 4751

60

26

66

161

FemaleMale

40

60

80

20

120

140

100

160

180

200

0

(Persons)

168166 171 172160

FY2012 FY2013 FY2014 FY2015 FY2016

Sub-Assistant General ManagerAssistant General Manager

General Manager and Deputy General Manager

86

13

61 61

18

93

61

17

9088

58

20

91

60

20

Total in FY2016Total in FY2016

19.76%19.76%

82 persons82 persons

Rate of reduction 30.87%Rate of reduction 30.87%

Reduction in CO2 in �scal 2016Reduction in CO2 in �scal 2016

2,713.9t2,713.9t

Trends in electricity usage

FY2012 FY2013 FY2014 FY2015 FY2016

(Thousand kWh)

17,86116,775 16,180 15,640

17,777


March 31, 2013)

FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015

(Millions of yen)


March 31, 2014)


March 31, 2015)


March 31, 2016)


March 31, 2017)

Ordinary revenue


Net income attributable to owners of the parent

Comprehensive income

Net assets

Total assets

Net assets per share

Net income per share

Diluted net income per share

Capital ratio

ROE

Price-earnings ratio

Cash �ow from operating activities

Cash �ow from investing activities

Cash �ow from �nancing activities

Cash and cash equivalents, end of year

Number of employees[Excluding average number of temporary employees]

88,815

14,357

5,544

21,086

267,535

4,662,055

998.62

21.00

——

5.65

2.18

30.57

76,969

(44,354)

(1,599)

72,798

2,530

〔1,187〕

88,290

19,531

11,027

25,058

292,466

4,777,483

1,091.45

41.79

41.78

6,02

3.99

13.40

96,812

98,842

(11,604)

256,862

2,508

〔1,215〕

88,499

24,576

13,675

63,162

349,851

4,996,976

1,324.63

51.87

51.68

6.90

4.32

11.56

55,568

(46,447)

(10,324)

255,680

2,479

〔1,235〕

95,844

22,535

15,508

(1,465)

346,714

5,025,426

1,310.98

59.57

52.73

6.79

4.52

7.95

(133,403)

66,781

(1,700)

187,348

2,468

〔1,247〕

90,151

21,231

14,895

31,484

374,246

5,539,561

1,425.41

57.21

50.61

6.69

4.18

9.98

286,223

(352)

(3,967)

469,250

2,401

〔1,226〕

Millions of yen

Millions of yen

Millions of yen

Millions of yen

Millions of yen

Millions of yen

Yen

Yen

Yen

Environmental preservation costs

Investment amount

Total

RevenuesInterest income from environmental �nancing products

Reduced energy expensesReducedexpenses

Expenses amount

Greenhouse gas (CO2) emissions (t-CO2)

Balance of environmental �nancing products

Environmental preservation bene�ts

Economic bene�ts from environmental preservation

%

%

Times

Millions of yen

Millions of yen

Millions of yen

Millions of yen

Persons

215

132

8,792

68,658

(38)

1

13

(24)

134

224

8,982

79,084

(100)

43

(35)

(92)

671

380

8,812

85,258

33

5

14

52

49

332

7,132

82,750

313

4

32

350

31

299

6,714

93,030

453

14

8

475

36

288

6,452

90,222

468

14

21

503

43

282

8,297

126,343

366

13

16

396

12

270

7,255

147,814

339

48

(51)

336

20

261

6,873

168,689

313

48

28

390

59

290

6,710

185,819

322

50

30

402


Fees and commissions, etc. from sale of eco-related business matching funds

Scope: Shiga Bank (non-consolidated) Method of compilation: With reference to “Environmental Accounting Guidelines 2005” published by the Ministry of the Environment

*Note … In fiscal 2012, 1) and 2) were revised, and in fiscal 2013, 3) was revised. 1) Solar power generation-related financing was recorded due to the feed-in tariff system for renewable energy. 2) Energy-saving, environment-friendly houses have been increasing, and for recording purposes, partial revisions have been made to eligibility criteria for eco- and

earthquake-resistant housing loans. 3) In line with the rising CO2 emission coefficients at electric power companies, calculations use fixed emission coefficients using values as of base year 2006 to duly re-

flect activities to reduce CO2 emissions.

(Notes) 1. Figures do not include consumption and local taxes payable by the Bank and its consolidated subsidiaries. 2. For fiscal 2012, “Diluted net income per share” is not recorded because no potentially dilutive shares had been issued. 3. The capital adequacy ratio is calculated exclusive of assets at the end of the fiscal year under review (total of net assets – share subscription rights – non-controlling

interests, all at the end of the term). 4. Number of employees excludes seconded staff, and the figures in parentheses are the average numbers of contracted and temporary employees during the term.


Basic views on corporate governance

Internal control system status

Timely and appropriate disclosure

Response to internal control reporting system

As a regional bank headquartered in Shiga Prefecture, the Bank has a motto which carries on “Sampo yoshi” philosophy, a management philosophy embraced by Merchants in the Omi region of central Japan, which means to bring happiness to three sides: being good for the seller, the buyer, and society. The Bank made the motto “Be tough on ourselves, kind to others and serve society” the starting point for corporate social responsibility (CSR), making effort to realize mutual prosperity with the “regional community,” “all employees,” and the “environment” as in the Bank’s Management Principles. For the purposes of ensuring sustainable growth and improvement in corporate value for the Bank over the medium and long term, we will expand and constantly upgrade our corporate governance standards based on the following basic views.

At the Bank, in accordance with Companies Act and the Regulations for

Enforcement of the Companies Act, the fundamental policy of our

internal control structure was discussed and determined by the Board of

Directors. As detailed below, the Bank has a system to ensure appropri-

ate practices in the execution of its daily business.

According to the Internal Control Reporting System provided in the

Financial Instruments and Exchange Law, listed companies are obliged

to submit an “Internal Control Report,” after receiving external audits and

conducting self-evaluation of the validity of internal control systems, to

ensure appropriate disclosure on financial matters.

The Bank Group, in order to improve the reliability of its end-of-year

financial reporting, established an Internal Controls & Asset Assessment

Group in its Assets & Liabilities Managing Department to plan, supervise

and evaluate the internal controls reports.

We have made every effort to establish more transparent management

and improve communications with customers, shareholders, and

regional communities by positively and fairly disclosing management

and other information. With the aim of ensuring that information is

disclosed in a fair, appropriate and timely manner, Shiga Bank

established its “Regulations on the Disclosure of Management Informa-

tion” and a system overseen by the General Planning Department.

(1) Respect shareholder rights and safeguard shareholder equality

(2) Cooperate appropriately with stakeholders

(3) Duly disclose information, including non-�nancial data, and ensure transparency and fairness of decision-making

(4) Create an environment for allowing appropriate levels of risk-taking by management team members

(5) Contribute to sustainable growth and the medium and long term improvement in corporate value, by prioritizing dialogue with shareholders

Corporate Governance


Board of Directors

Executive Committee

Meeting of Audit &Supervisory Board Members

Accounting Auditors

Audit & Inspection Dept.

Internal AuditBrie�ng Sessions

Audit &Inspection

Audit &Inspection

Internal Audit &Inspection

Appointment/dismissal

Coordination

CSR Committee

Compliance Committee

ALM Committee

Headquarters Branches

Appointment/dismissal Appointment/dismissal

Coordination

Coordination

General Meeting of Stockholders

Shiga Bank’s corporate governance system (as of the end of June 2017) is shown in the chart below.

O�ce of Audit & Supervisory Board

Members

Company Organizations (as of the end of June 2017)

1. Board of DirectorsThe Board of Directors, with 13 members, including two from outside the Bank, meets once a month in principle. At the meetings, decisions are made on important business matters for conduct business. Audit & Supervisory Board Members attend all such meetings to monitor the performance of Directors.

2. Meeting of Audit & Supervisory Board Members

Meeting of Audit & Supervisory Board Members has four Audit & Supervisory Board Members, including two from outside the Bank. The Board meets once a month, in principle. Audit & Supervisory Board Members also attend other important meetings, including those of the Board of Directors and Executive Committee, as well as internal audit briefing sessions. They also audit the performance of Directors in their duties through ongoing examination of the Bank’s business performance and financial position. Audit & Supervisory Board Members and Account-ing Auditors hold regular meetings. Through these and other platforms, they maintain close partnership relations and exchange opinions and information. Audits are duly carried out in partnership with internal audit offices.

3. Executive Committee

The Executive Committee consists of the Chairman, President, Deputy President, Senior Managing Directors, and Managing Directors. It meets as necessary to make swift decisions about overall operations, including investment plans, new product development, business structural changes and monitoring the risk environment. Important items related to the execution of business are submitted to the Board of Directors.

4. Internal Audit SystemSeeking to conduct its business in a sound and appropriate manner, the Bank established the Audit & Inspection Department to undertake internal audits. The Department performs audits of the Bank’s branches to ensure that their internal control mechanisms are functioning properly and effectively, in accordance with annual internal audit plans approved each year by the Board of Directors. The internal Audit briefing sessions meets as a rule once a month with the attendance of the management team including the President of the Bank, and holds discussions on reported audit findings and on the status, problem points and issues of departments and branches subject to auditing. This ensures that risk is minimized, administrative duties are carried out reliably and business management is appropriate.


1. Systems to ensure the most appropriate work practices

As a regional bank headquartered in Shiga Prefecture, the Bank has a motto which carries on “Sampo yoshi” philosophy, a management philosophy embraced by merchants in the Omi region of central Japan, which means to bring happiness to three sides: the seller, the buyer, and society. We uphold the spirit of this tradition through our motto of “being tough on ourselves, kind to others and serving society,” and made this the starting point for corporate social responsibility (CSR), making efforts to realize mutual prosperity with the “regional community,” “all employees,” and the “environment” as in the Bank’s Management Principles. Based on this approach, the following (Internal Control System) structure has been put in place to ensure the most appropriate work practices of the Bank Group. Moreover, in order for the Bank Group to flexibly change its operational system in line with changes in the business environment, it will review the following systems as needed.

2. Outline of the operational status of the systems to ensure the most appropriate work practices

The outline of the operational status of the systems to ensure the most appropriate work practices during the fiscal year ended March 31, 2017 (from April 1, 2016 to March 31, 2017) is as follows:

(4) A system to ensure that the Directors of the Bank and its subsidiaries execute their duties in an effective manner

To ensure the effective performance of duties by Directors, the Group has clarified what items should be subject to resolution by the Board of Directors meeting under the “Board of Directors Regulations.” The Executive Committee, comprising Executive Directors is vested with dealing with the detail of the matters to be decided by the Board of Directors of the Bank and with daily operational decision-making.

To ensure efficiency, duties are assigned to the Executive Directors based on their field of responsibility.

By setting consolidated-basis business targets in the Medium-Term Business Plan, we are working to improve efficiency on a Groupwide basis.

(5) A reporting system on the matters related to the execution of duties of the Directors of the Bank’s subsidiaries to the Bank and auxiliary system to ensure that the Shiga Bank Group, consisting of the parent Bank and its subsidiaries uses the most appropriate work practices in the execution of their business

To ensure that operations are carried out appropriately across the Group, internal management treats the Group as a single entity, and the same unified standards have been set Groupwide for legal and regulatory compliance and risk management.

The Bank Group has defined “Management and Operational Regulations for Affiliates,” and aims to create a cross-organizational integrated management system for compliance, customer protection, risk management and other issues.

The Representative Directors of Group companies attend the branch and section managers’ meeting, CSR Committee, and other important meetings.

Regular operational audits are also carried out by the Bank’s Audit & Supervisory Board Members and Audit & Inspection Dept. into Group companies.

Group companies are required to report on certain matters if so demanded by the Bank, in addition to releasing quarterly financial and business statements and year-end results reports.

(6) Matters related to the employees in the event that the Bank’s Audit & Supervisory Board Members request the appointment of employees of the Bank to assist in their tasks, matters related to the independence of such employees from the Directors, and matters related to ensuring the effectiveness of the instructions of the Audit & Supervisory Board Members with regard to the employees

The Bank creates permanent posts for employees independent from Executive Directors, who assist the Audit & Supervisory Board Members in the performance of their duties, ensuring adequate mechanisms are in place for performance of duties by Audit & Supervisory Board Members.

(7) A system to facilitate reporting to the Audit & Supervisory Board Members of the Bank by the Directors and employees of the Bank and the Directors, the Audit & Supervisory Board Members, and employees of subsidiaries (including those who are receive reports from the above-mentioned officials), an auxiliary system for reports to other Audit & Supervisory Board Members, a system to ensure the effective execution of any audit carried out by the Audit & Supervisory Board Members, and a system to ensure that persons who make reports do not receive disadvantageous treatment as a result of making such reports

The Audit & Supervisory Board Members of the Bank also attend important meetings of each Group company to gain a clear picture of the Bank Group’s business status and to ensure the effectiveness of Audit & Supervisory Board Members in the performance of their duties.

Audit & Supervisory Board Members of the Bank likewise hold regular meetings to exchange opinions with Representative Directors of the Bank.

To ensure reporting to Audit & Supervisory Board Members, the Bank also has in place a system whereby Audit & Supervisory Board Members are included in the circulars of requests for managerial decision and other important reporting materials compiled by group companies.

The Bank Group has set up an internal reporting system (compliance helpline) that can be used by all employees of the group companies, for reporting of issues to the Bank’s Audit & Supervisory Board Members. No prejudicial measures may be taken against anybody on grounds of their making use of this facility.

(8) Matters related to policies on advance payments, the reimbursement of expenses incurred in the execution of duties of the Bank’s Audit & Supervisory Board Members, expenses incurred in relation to the execution of other duties, or the disposal of debts

If Audit & Supervisory Board Members make requests to the Bank for advance payments for expenses in relation to the execution of their duties based on the Article 388 of the Companies Act, the Bank shall promptly pay the relevant expenses, except in cases where the relevant expenses are not necessary for the execution of the duties of the Audit & Supervisory Board Members.

(1) Compliance system

The Bank follows a compliance program compiled every six months and worked to raise awareness of employees related to relief for victims of remittance fraud, management of customer information and prevention of money laundering.

In preparation for an amendment of the Act on Prevention of Transfer of Criminal Proceeds, the Bank has also revised “Suspicious transaction notification” and “Verification at the time of transaction”.

(2) Risk management system(2) Risk management system

Based on the Bank’s “Risk Management Rules,” a resolution is passed at the Board of Directors’ meeting held semiannually regarding “Polices on Capital Management and Risk Management,” which relate to management of specific risk associated with strategic targets.

The ALM Committee meets eight times a year and confirms the risk status in each category and a quarterly report is also submitted to the Board of Directors on matters relating to various regulatory benchmarks for meeting capital adequacy requirements and matters of status of at-risk amounts.

(3) A system to ensure that the Directors execute their duties in an effective manner

At the Bank, a regular meeting of the Board of Directors is held 12 times a year and an Executive Committee, entrusted with decision-making regarding the details of resolutions of the Board of Directors and regarding day-to-day administrative operations, is held 69 times.

Executive Directors of the Bank have specific duties and areas of competence allocated to them based on a division of responsibility, for greater efficiency.

(4) A system to ensure the most appropriate work practices in the Bank Group

The Representative Directors of the Group companies attend the Bank branch and section managers’ meeting and CSR Committee meeting.

A meeting of presidents of affiliated companies attended by Executive Directors and Representative Directors is held, and discussions are held to clarify management issues and develop responses measures.

In addition, operational audits are carried out by Audit & Supervisory Board Members of the Bank and the Audit & Inspection Department at each Group company as part of measures to create a system ensuring propriety in performance of operations across the Bank Group.

(5) Performance of duties by Audit & Supervisory Board Members

The Audit & Supervisory Board Members carry out audits based on auditing plans compiled at the Meeting of Audit & Supervisory Board. The audit and inspection offices and accounting auditors proactively and regularly exchange opinions and information (under the “three-pillar” audit system), enhancing the effectiveness of auditing.

The Audit & Supervisory Board Members proactively exchange opinions with Representative Directors on a regular basis.

(1) A system to ensure that Directors of the Bank and its subsidiaries are executing their duties in accordance with the laws and regulations as well as the Bank Group’s Articles of Incorporation and a system to ensure that employees of the Bank and its subsidiaries are executing their duties in accordance with the laws and regulations as well as the Bank Group’s Articles of Incorporation

We have established a Groupwide integrated compliance program, under which companies of the Group has established compliance frameworks, rules, and educational and training programs. As the overall coordinating office for compliance, the Bank’s Assets & Liabilities Managing Department provides advice and guidance as needed in the establishment of compliance frameworks at Group companies, compilation of regulations and education and training of employees.

The General Planning Department of the Bank and the subordinate offices form a clear picture of day-to-day compliance at Group companies, and when necessary provide advice and guidance.

The Bank’s Audit & Supervisory Board Members and Audit & Inspection Dept. carry out audits for the purpose of contributing to sound and proper banking operations at the Group.

Also in place is an internal reporting system (compliance helpline) for use by all employees of the Group.

The Bank Group has established a system to eliminate and resolutely cut off any relations with antisocial forces that threaten the order and security of civil society.

(2) A system to store and maintain information related to the Bank’s Directors and the execution of their duties

The Bank ensures appropriate document management by following its “Administrative Guidance Outline” regarding methods of storage and management of important documents and data, comprising the minutes of meetings of the Board of Directors, Executive Committee, and other documents from meetings of importance to business operations.

(3) A system to ensure that regulations related to risk management of the Bank and its subsidiaries are being followed

The Bank has compiled a basic set of Risk Management Rules. Based on this, the Bank has established specific management systems for each major category of risk and designated the Assets & Liabilities Managing Department as the unit in charge of overall risk management. This ensures comprehensive risk management. Important matters relating to risk management are subject to agenda discussion and reporting at the Board of Directors meeting.

With regard to risk management of Group companies, based on the Risk Management Rules, the General Planning Department of the Bank ensures appropriate management of each category of risk in partnership with the affected departments.

Based on the reports from Group companies, or the findings of monitoring, etc., the General Planning Department forms a clear idea of risk situations, and if it considers that such risk could impact the management of the Bank, measures are in place for their reporting to the Executive Committee or if necessary, the Board of Directors.

Systems to ensure the most appropriate work practices and outline of the operational status of the systems (as of the end of March 2017)

Compensation for employees who act as assistants to Audit & Supervisory Board Members in the performance of their duties is decided in consultation with the meeting of the Audit & Supervisory Board.

Under Bank policy, employees who assist Audit & Supervisory Board Members perform their duties in line with directions given by the Audit & Supervisory Board Members.


Motoko Tsujita Director

Against a backdrop of dramatic change in the socio-economic structure of regional communities, the role expected of regional banks is changing enormously. The decline of regional communities is a critical issue that places management pressure on regional banks as well. I believe that regional communities and regional banks have a shared destiny, and the slogan upheld by Shiga Bank to become “the Regional Bank that innovates the future” embodies the firm conviction of all employees to contribute to the development of regional communities in order to open up the future of themselves as well.

One of the roles expected of regional banks is providing support for the companies that underpin the regional economy. We support their growth by providing finance within certain risk tolerance parameters, and by liaising closely with their managements, so as to fully appreciate the problems that they face and provide appropriate advice and problem-solving proposals.

The Bank upholds the “Sampo yoshi (being good for the seller, the buyer, and society)” philosophy embraced by merchants in the Omi region of central Japan, and from early on, the Bank has prioritized longer-term relationships with business partners and worked to improve the management at companies by using our proprietary “In-house Corporate Credit Ratings System.” We also have a track-record stretching back many years in providing finance based on evaluation of a clients’ business and growth potential, rather than depending unduly on collateral and guarantees—as the Japanese financial regulatory authorities have recently recommended. We have created a range of support options corresponding to the various stages of a company’s development, from start-up through growth and maturity, and have developed support and intermediary services in areas such as business matching, overseas expansion, business succession and M&As. Customer-rooted finance is a major strength of the Bank, and it also strengthens our own profitability, through expansion of loans to SMEs and increased income from fees and commissions.

However, well-versed professionals capable of giving sophisticated advice are indispensable for corporate productivity improvement and value creation. For us too, it is an urgent task to foster and secure specialist talent. We need to further strengthen our partnerships with external experts and specialist institutions. Even without consulting corporate management, we are also strongly expected to discern the true needs of a company at an early stage, treat customer issues as our own issues, and provide comprehensive follow-up.

For sustainable development of the overall regional economy—in other words, for regional revitalization—one priority is development of mechanisms that encourage corporate “metabolism” spanning regeneration or closure of established businesses, start-ups, and creation of new businesses. As a rule, it is said that around half of all start-ups fail within 20 years. The corporate survival rate is low, and there is also a feast-and-famine cycle in major industries that serve as the driving force for regional economies. Regional banks are now also expected to outline the future profile of the regional economy, develop strategies, and serve as command towers creating systems for their realization. This should overlap heavily with the image of “the Regional Bank” that we are promoting.

Shiga is one of the leading manufacturing prefectures in Japan. It is home to clusters of plants and research institutes of major manufacturers, mid-sized research and development-type companies, and SMEs with significant technological capabilities. The question is how can this excellent manufacturing profile be leveraged? What changes will arise in the industries of Shiga Prefecture due to the advent of new technologies: the Internet of Things, big data, and artificial intelligence? How will the prefecture foster industries with strong growth prospects, such as the environmental and energy sectors, medicine and healthcare, tourism, and agriculture? In these regional economy sectors, there is a vast amount of highly detailed information concerning the financial position, technological capabilities, and trading relationships of local companies. The strengths of the Bank— accumulation of detailed data including the financial position, technical capability, and transactional relationships of local companies, its team of talent that understands economic and industrial trends, its purview ranging beyond prefectural and urban administrative divisions and into Asian markets, where we have offices—are clear. The Bank needs not only to meet requests for support from concerned parties such as local governments and economic organizations, but must build up the potential of the whole regional economy by taking a leading position, engaging with partners, bringing intellectual resources to bear and applying hard work.

If we repeatedly overhaul the way we do things to better respond to companies and regional communities, the value of such companies and the whole regional community will certainly improve. As “the Regional Bank that innovates the future,” we will work to create new financial service businesses rooted in the community.

Message from the Outside Director


Managing Director Takahiro SaitoApril 1983 Joined the Bank

February 2014 General Manager of Credit Supervision Dept.

June 2014 Director and General Manager of Credit

Supervision Dept.

June 2017 Managing Director (current position)

Outside Audit & Supervisory Board Member Yasuhito MatsuiApril 2000 Registered as a LawyerApril 2000 Joined Karasuma Law OfficeJanuary 2005 Registered as a lawyer in New York StateApril 2005 Resigned from Karasuma Law OfficeMay 2005 Joined Miyake & PartnersMay 2009 Appointed Partner, Miyake & Partners (current position)May 2012 Registered as a Patent AttorneyJune 2017 Outside Audit & Supervisory Board Member, the Bank (current position)

Koji KawaguchiGeneral Manager of Financial Markets & International Dept.

Katsumi HoriuchiGeneral Manager of Business Promotion Dept.

Audit & Supervisory Board Members

Executive O�cers

Directors and Executive O�cers (as of June 27, 2017)

Chairman Yoshio DaidoApril 1972 Joined the Bank

May 2000 General Manager of Credit Supervision Dept.

June 2001 Director and General Manager of Credit Supervision Dept.

June 2002 Director and General Manager of Business Promotion Dept.

June 2003 Managing Director and General Manager of Business Promotion Dept.

June 2004 Managing Director

April 2006 Senior Managing Director

June 2007 Deputy President

June 2008 President

April 2016 Chairman (current position)

Managing Director Kazuyoshi HayashiApril 1980 Joined the Bank

June 2010 General Manager of Assets & Liabilities

Managing Dept.

June 2011 Director and General Manager of Assets & Liabilities

Managing Dept.


Managing Director Iwao WakabayashiApril 1980 Joined the Bank

June 2009 General Manager of Financial Markets Dept.

June 2011 Director and General Manager of Financial

Markets Dept.


Director and Manager of Head O�ce Business Dept. Masaru Morimoto

April 1981 Joined the Bank

June 2011 General Manager of Osaka Branch

June 2012 Director and General Manager of Osaka Branch

June 2013 Director and General Manager of Kyoto Branch

April 2016 Director and General Manager of Head Office

Business Dept. (current position)

Directors

Representative Director and President Shojiro Takahashi


June 2006 General Manager of Business Promotion Dept.

June 2008 Director and General Manager of Business

Promotion Dept.



June 2014 Senior Managing Director


April 2016 President (current position)

Senior Managing Director Etsuo Imai


June 2006 General Manager of Kusatsu Branch


Supervision Dept.



June 2016 Senior Managing Director (current position)

Managing Director Yasunaga Ono




Promotion Dept.


Managing Director and General Manager of Kyoto Branch Motohiro Nishi




April 2016 Director and General Manager of Kyoto Branch

June 2016 Managing Director and General Manager of

Kyoto Branch (current position)

Director and General Manager of Tokyo Branch Masayoshi Kitagawa




Promotion Dept. (current position)

June 2017 Director and General Manager of Tokyo Branch

(current position)

Outside Director Motoko TsujitaApril 1988 Joined The Yomiuri Shimbun, Osaka

June 1998 Retired from The Yomiuri Shimbun, Osaka

April 2006 Associate Professor, Faculty of Economics, Ryukoku University

April 2014 Professor, Faculty of Economics, Ryukoku University

(current position)

June 2015 Outside Director, the Bank (current position)

Outside Director Hajime Yasui

April 1975 Joined the Bank of JapanMarch 2003 Retired from the Bank of JapanApril 2003 Director, ChuoAoyama Audit CorporationJuly 2006 Director, Financial Assurance Division, PricewaterhouseCoopers Aarata LLCJuly 2007 Manager of Risk Regulatory Advisory and Chief of PricewaterhouseCoopers Aarata InstituteApril 2008 Chief of PricewaterhouseCoopers Aarata Institute, PricewaterhouseCoopers Aarata LLCJanuary 2014 Advisor of Integrated Financial Services Promotion Division and Chief of PricewaterhouseCoopers Aarata Institute, PricewaterhouseCoopers Aarata LLCJanuary 2014 President and Representative Director, Yasui Associates Co., Ltd. (current position)June 2014 Outside Audit & Supervisory Board Member, the Bank (current position)July 2014 Advisor, PricewaterhouseCoopers Aarata LLCJuly 2014 Advisor, Japan Business Assurance Co., Ltd. (current position)June 2017 Outside Director, the Bank (current position)


June 2007 General Manager of General Planning Dept.

June 2008 Director and General Manager of General

Planning Dept.


June 2014 Audit & Supervisory Board Member

(current position)

Outside Audit & Supervisory Board Member Satoshi NishikawaApril 1971 Joined the Ministry of FinanceJuly 1998 Deputy Director-General of the Financial Bureau in charge of Tobacco and Salt IndustriesJune 2000 Retired from the Ministry of FinanceJuly 2000 Director, Urban Development Corporation (currently Urban Renaissance Agency)June 2004 Director & Vice President, Nagoya Stock Exchange, Inc.June 2009 Managing Director, SHiDAX CORPORATIONJune 2012 Outside Audit & Supervisory Board Member, the Bank (current position)

Audit & Supervisory Board Member Masato HasegawaApril 1981 Joined the Bank

April 2010 General Manager of Administration Dept.

June 2012 Director and General Manager of Audit &

Inspection Dept.


(current position)

Tetsuya KonishiGeneral Manager of Personnel A�airs Dept.

Hiroyuki NakajimaGeneral Manager of Computer System Dept.and Counselor of ICT Strategy O�ce,General Planning Dept.

Masato TakemuraGeneral Manager of Credit Supervision Dept.

Kazuo AokiGeneral Manager of Osaka Branch


April 2013 General Manager of Moriyama Branch



Planning Dept. (current position)

Director and General Manager of General Planning Dept. Shinya Kubota

Audit & Supervisory Board Member Yukio Nishizawa


Managing Director Takahiro SaitoApril 1983 Joined the Bank

February 2014 General Manager of Credit Supervision Dept.


Supervision Dept.


Outside Audit & Supervisory Board Member Yasuhito MatsuiApril 2000 Registered as a LawyerApril 2000 Joined Karasuma Law OfficeJanuary 2005 Registered as a lawyer in New York StateApril 2005 Resigned from Karasuma Law OfficeMay 2005 Joined Miyake & PartnersMay 2009 Appointed Partner, Miyake & Partners (current position)May 2012 Registered as a Patent AttorneyJune 2017 Outside Audit & Supervisory Board Member, the Bank (current position)

Koji KawaguchiGeneral Manager of Financial Markets & International Dept.

Katsumi HoriuchiGeneral Manager of Business Promotion Dept.


Executive O�cers

Directors and Executive O�cers (as of June 27, 2017)

Chairman Yoshio DaidoApril 1972 Joined the Bank

May 2000 General Manager of Credit Supervision Dept.

June 2001 Director and General Manager of Credit Supervision Dept.

June 2002 Director and General Manager of Business Promotion Dept.

June 2003 Managing Director and General Manager of Business Promotion Dept.


April 2006 Senior Managing Director


June 2008 President

April 2016 Chairman (current position)

Managing Director Kazuyoshi HayashiApril 1980 Joined the Bank

June 2010 General Manager of Assets & Liabilities

Managing Dept.

June 2011 Director and General Manager of Assets & Liabilities

Managing Dept.


Managing Director Iwao WakabayashiApril 1980 Joined the Bank

June 2009 General Manager of Financial Markets Dept.

June 2011 Director and General Manager of Financial

Markets Dept.


Director and Manager of Head O�ce Business Dept. Masaru Morimoto


June 2011 General Manager of Osaka Branch



April 2016 Director and General Manager of Head Office

Business Dept. (current position)

Directors

Representative Director and President Shojiro Takahashi




Promotion Dept.



June 2014 Senior Managing Director


April 2016 President (current position)

Senior Managing Director Etsuo Imai


June 2006 General Manager of Kusatsu Branch


Supervision Dept.



June 2016 Senior Managing Director (current position)

Managing Director Yasunaga Ono




Promotion Dept.


Managing Director and General Manager of Kyoto Branch Motohiro Nishi




April 2016 Director and General Manager of Kyoto Branch

June 2016 Managing Director and General Manager of

Kyoto Branch (current position)

Director and General Manager of Tokyo Branch Masayoshi Kitagawa




Promotion Dept. (current position)

June 2017 Director and General Manager of Tokyo Branch

(current position)

Outside Director Motoko TsujitaApril 1988 Joined The Yomiuri Shimbun, Osaka

June 1998 Retired from The Yomiuri Shimbun, Osaka

April 2006 Associate Professor, Faculty of Economics, Ryukoku University

April 2014 Professor, Faculty of Economics, Ryukoku University

(current position)

June 2015 Outside Director, the Bank (current position)

Outside Director Hajime Yasui

April 1975 Joined the Bank of JapanMarch 2003 Retired from the Bank of JapanApril 2003 Director, ChuoAoyama Audit CorporationJuly 2006 Director, Financial Assurance Division, PricewaterhouseCoopers Aarata LLCJuly 2007 Manager of Risk Regulatory Advisory and Chief of PricewaterhouseCoopers Aarata InstituteApril 2008 Chief of PricewaterhouseCoopers Aarata Institute, PricewaterhouseCoopers Aarata LLCJanuary 2014 Advisor of Integrated Financial Services Promotion Division and Chief of PricewaterhouseCoopers Aarata Institute, PricewaterhouseCoopers Aarata LLCJanuary 2014 President and Representative Director, Yasui Associates Co., Ltd. (current position)June 2014 Outside Audit & Supervisory Board Member, the Bank (current position)July 2014 Advisor, PricewaterhouseCoopers Aarata LLCJuly 2014 Advisor, Japan Business Assurance Co., Ltd. (current position)June 2017 Outside Director, the Bank (current position)




Planning Dept.



(current position)

Outside Audit & Supervisory Board Member Satoshi NishikawaApril 1971 Joined the Ministry of FinanceJuly 1998 Deputy Director-General of the Financial Bureau in charge of Tobacco and Salt IndustriesJune 2000 Retired from the Ministry of FinanceJuly 2000 Director, Urban Development Corporation (currently Urban Renaissance Agency)June 2004 Director & Vice President, Nagoya Stock Exchange, Inc.June 2009 Managing Director, SHiDAX CORPORATIONJune 2012 Outside Audit & Supervisory Board Member, the Bank (current position)

Audit & Supervisory Board Member Masato HasegawaApril 1981 Joined the Bank

April 2010 General Manager of Administration Dept.

June 2012 Director and General Manager of Audit &

Inspection Dept.


(current position)

Tetsuya KonishiGeneral Manager of Personnel A�airs Dept.

Hiroyuki NakajimaGeneral Manager of Computer System Dept.and Counselor of ICT Strategy O�ce,General Planning Dept.

Masato TakemuraGeneral Manager of Credit Supervision Dept.

Kazuo AokiGeneral Manager of Osaka Branch


April 2013 General Manager of Moriyama Branch



Planning Dept. (current position)

Director and General Manager of General Planning Dept. Shinya Kubota

Audit & Supervisory Board Member Yukio Nishizawa


Developing regional economies by tapping the strength of the region

Challenge to regional

revitalization

1

It appears suddenly in Moriyama, a huge glasshouse. In this glasshouse, one of Japan’s largest with an area of 18,720 square meters and a height of 7 meters, a riot of beautiful roses bloom. The operator of this facility is the largest rose-cultivation company in the prefecture, Kunieda Co., Ltd.

The Bank provided financing for the construction of this glasshouse based on a “business assessment,” since it was expected that this will significantly lead to developing Moriyama Rose as a local brand.

Moriyama is a leading rose-producing area of Japan. Today, the industry faces a range of issues, including a decline in the number of producers due to aging population, a fall in quality associated with weather factors and a decline in the production volume. To solve these problems, Kunieda, which considers itself a guardian of Japan’s horticulture and agriculture, decided to construct a giant glasshouse using cutting-edge systems, drawing on the expertise of the Netherlands, a leading rose producing country.

In this system, temperature, atmospheric pressure, amount of sunshine, and other variables are controlled and are not dependent on

The Bank aims to ensure shared prosperity with regional communities as laid down in our CSR Charter and will work to ensure regional revitalization and a sustainable society by providing financing and solutions based on “business assessments.*”

Regional revitalization through Moriyama Roses

Declining birthrate, aging population, and depopulating society Creation of growth industries Local brandingAdvancement of globalization

Regional vitalization Resolution of social issuesSustainable development of business clients and regional community

● Profound business assessment● Regional Economic Innovation Cycle● ABL (asset based lending)● Crowdfunding

● Support for business creation and development of new businesses, Saturday School for Entrepreneurship, and Nonohana Support Group

● Demonstrating consulting functions (business succession, M&A, etc.)● Industry-academic-government cooperation

Issues

Initiatives

Main theme the Bankshould aim for

Challenge to regional revitalization

* Business assessmentsDue evaluation of business portfolio and growth potential at companies without depending unduly on financial data, collateral or guarantees. We form a full understanding of our business customers by taking a multifaceted perspective that includes the business philosophy and the strengths and weaknesses of the business, as well as visions and action plans for the future.

the weather. It is possible to harvest high-quality roses round the year. Another advantage is reduced use of agricultural chemicals thanks to rigorous air-conditioning management to keep out harmful insects. This also opened up the prospect of edible roses and other possibilities envisaged by the “Sixth industry” policy.

The Bank has supported this concept from the planning stage. We judged that by creating a regional brand out of Moriyama Roses, it would be possible to boost employment and tourism and so vitalize the region. The Bank held multiple dialogues with Kunieda to achieve this.

For construction funding, the Bank teamed up with local authorities and financial institutions. The Bank recognized the future and growth prospects of the business, supported as it is by the company’s expertise in agriculture, the know-how and technology it has built up, and its marketing channels and provided financing based on our “business assessments.”

Looking ahead, we will continue to contribute to regional revitalization by providing multifaceted advice that leverages not only the Bank’s financial resources but also its business know-how and networks.

Overall view of the glass house

Creating the future of the region together — �nancing and solutions based on “business assessments”

Items that correspond to benchmarks for �nancial intermediary function

Finance benchmark


Developing regional economies by tapping the strength of the region

Challenge to regional

revitalization

1

It appears suddenly in Moriyama, a huge glasshouse. In this glasshouse, one of Japan’s largest with an area of 18,720 square meters and a height of 7 meters, a riot of beautiful roses bloom. The operator of this facility is the largest rose-cultivation company in the prefecture, Kunieda Co., Ltd.

The Bank provided financing for the construction of this glasshouse based on a “business assessment,” since it was expected that this will significantly lead to developing Moriyama Rose as a local brand.

Moriyama is a leading rose-producing area of Japan. Today, the industry faces a range of issues, including a decline in the number of producers due to aging population, a fall in quality associated with weather factors and a decline in the production volume. To solve these problems, Kunieda, which considers itself a guardian of Japan’s horticulture and agriculture, decided to construct a giant glasshouse using cutting-edge systems, drawing on the expertise of the Netherlands, a leading rose producing country.

In this system, temperature, atmospheric pressure, amount of sunshine, and other variables are controlled and are not dependent on

The Bank aims to ensure shared prosperity with regional communities as laid down in our CSR Charter and will work to ensure regional revitalization and a sustainable society by providing financing and solutions based on “business assessments.*”

Regional revitalization through Moriyama Roses

Declining birthrate, aging population, and depopulating society Creation of growth industries Local brandingAdvancement of globalization

Regional vitalization Resolution of social issuesSustainable development of business clients and regional community

● Profound business assessment● Regional Economic Innovation Cycle● ABL (asset based lending)● Crowdfunding

● Support for business creation and development of new businesses, Saturday School for Entrepreneurship, and Nonohana Support Group

● Demonstrating consulting functions (business succession, M&A, etc.)● Industry-academic-government cooperation

Issues

Initiatives



* Business assessmentsDue evaluation of business portfolio and growth potential at companies without depending unduly on financial data, collateral or guarantees. We form a full understanding of our business customers by taking a multifaceted perspective that includes the business philosophy and the strengths and weaknesses of the business, as well as visions and action plans for the future.

the weather. It is possible to harvest high-quality roses round the year. Another advantage is reduced use of agricultural chemicals thanks to rigorous air-conditioning management to keep out harmful insects. This also opened up the prospect of edible roses and other possibilities envisaged by the “Sixth industry” policy.

The Bank has supported this concept from the planning stage. We judged that by creating a regional brand out of Moriyama Roses, it would be possible to boost employment and tourism and so vitalize the region. The Bank held multiple dialogues with Kunieda to achieve this.

For construction funding, the Bank teamed up with local authorities and financial institutions. The Bank recognized the future and growth prospects of the business, supported as it is by the company’s expertise in agriculture, the know-how and technology it has built up, and its marketing channels and provided financing based on our “business assessments.”

Looking ahead, we will continue to contribute to regional revitalization by providing multifaceted advice that leverages not only the Bank’s financial resources but also its business know-how and networks.

Overall view of the glass house

Creating the future of the region together — �nancing and solutions based on “business assessments”


Finance benchmark



To demonstrate our consulting function, we provide a wide range of financing options corresponding to the development stage of the customer.In particular, we aim to create a virtuous circle that can grow together with customers by emphasizing problem-solving through supporting

customers in their main business.

Believing that you have to “defend your own castle yourself,” the Bank

was a pioneer among banks in adopting the Foundation Internal

Ratings Based-Approach (FIRB) and other measures as a means of

increasing the sophistication of its risk management. It has also made

available its expertise as a FIRB bank for raising management standards

at clients. Through the “Ratings Communication Service” and the

“Ratings Simulation Service,” the Bank is committed to resolving issues

and promoting growth by talking and listening to the client over time.

Using the “Ratings Communication Service,” the Bank shares

with its clients their respective “strengths” and “weaknesses” which were

discovered through the rating process. The service also aims to support

the clients in building sustainable management infrastructures and

increasing their corporate value, by working together with them to

solve their problems and improve their financial condition.

By creating a Bank’s unique credit-rating process, the Bank enables

simulations of quantitative credit ratings based on predicted future

financial position. This mechanism is used by our “Ratings Simulation

Service,” which was launched in December 2015. In the “Ratings

Communication Service,” the Bank translates the business vision of the

customer into specifics within the financial statements, and engages in

dialogue with the customer about the future of the business through a

process of predicting quantitative ratings. Based on what the Bank has

learned in this way, we can offer support to business customers for

measures to secure their future.

FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016

4,500

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0

2,2832,109

2,476

2,231

2,644

2,326

2,805

2,469

2,953

2,521

3,496

2,948

4,153

3,502

Ratings Communication Service clients (cumulative total)

Borrowers (No. of customers)

Measures in the Ratings Communication Service and Ratings Simulation Service

Ratings Communication Service clients (No. of customers)

Customers subject to ongoing Ratings Communication Service

Customers showing improvement

FY2016FY2015Items

1,341

1,007

1,359

1,042

Improvement at customers subject to ongoing Ratings Communication Service

Businesslaunch

Startupperiod

Growthperiod

Period ofoperational

stability Period ofrecession

Relaunchstage1,528 customers

¥93.1 billion

1,518 customers¥186.1 billion

11,458 customers¥1,428.1 billion

828 customers¥57.9 billion

1,410 customers¥131.1 billionNo. of borrowers and balance of loans, by stage of corporate development (as of March 2017)

Crowdfunding

Shigagin Hometown Investment Fund, etc.

Business matchingPrivate placement bonds,

syndicated loan, etc.

Business succession, asset succession, and M&ALarge-scale subsidies, etc.

New Business Support Loan

Shigagin Growth Strategy Fund, etc.

Demonstrating consulting functions and providing diversified methods of financing

Providing solutions tailored to corporate development stages

Finance benchmark

Finance benchmark

Finance benchmark


The “Saturday School for Entrepreneurship” supports a strong spirit of entrepreneurship, through lectures by business executives currently active in fields and by experts in support for compilation of business plans, based on themes such as healthcare, regional resources, tourism, AI and IoT.

Fiscal 2017’s “Saturday School for Entrepreneurship,” which began in May, will be its eighteenth year. The school will be held on Saturdays, five times a year.

The “New Business Support Loan” series (familiarly known as Nonohana Loans) provides funding support needed for entry into new business fields and development of new businesses. So far, over ¥4.0 billion has been invested in a cumulative total of 201 companies.

Due to the increasing need for financing for entry into new businesses, the amount of loans made in fiscal 2016 was the highest ever.

The Nonohana Prize is given to commend initiatives for new businesses produced by “Saturday School for Entrepreneurship” students. In fiscal 2016, we gave individualized support to companies entered in alliance with Leave a Nest Co., Ltd. as part of our support for the customer’s main business through business assessment. Additionally, we established the “Sponsors’ Prize” with the cooperation of seven listed companies. A total of 42 companies were entered in the competition and eight companies reached the final screening after a multiple-stage selection process. Business plans were presented by those eight companies and were awarded respective prizes.

0

4,000

3,000

1,000

2,000

2,2512,475

2,894

3,440

103118

138170

4,041

201

In April 2014, the Bank and the Regional Economy Vitalization Corporation of Japan founded the “Shigagin Growth Strategy Fund” together. The Bank aims to improve the corporate value of the companies it invests in by making investments in startups as well as small and medium-sized enterprises and providing hands-on support for growth.

No. of cases of start-ups involving the Bank

No. of cases of relaunch involving the Bank

Fiscal year ended March 31, 2017

Fiscal year ended March 31, 2016Items

57 222

32 31

Cooperative Funds with Regional Economy Vitalization Corporation of Japan

In order to create new businesses that will lead the future, we started the “Saturday School for Entrepreneurship,” which offers business tips, offers industry-academic-government cooperation support through the new business support network “Nonohana Support Group,” and offers financing and other services for a wide variety of funding needs through initiatives such as “Shigagin New Business Support Loan” and “Shigagin Growth Strategy Fund.”

“Sowing Seeds of New Businesses, Cultivatingtheir Buds, and Making Flowers Bloom”

Business Forum: Saturday School for Entrepreneurship

Shigagin Nonohana Prize

Support for Business Creation andDevelopment of New Businesses

Shigagin New Business Support Loan

Shigagin New Business Support Loans made to date (cumulative)

Office of Society-AcademiaCollaboration for Innovation,

Kyoto University

Advanced Science, Technology& Management Research

Institute of KYOTO (ASTEM)

Japan Science andTechnology Agency (JST)

Research & StrategyPromotion Center, KyotoInstitute of Technology

Research Center forCooperation with Society,

Shiga University

Research Collaboration andPromotion Center, Shiga

University of Medical Science

Shiga Prefecture

Industrial ResearchCenter of Shiga Prefecture

Northeastern IndustrialResearch Center of

Shiga Prefecture

Shiga PrefectureIndustrial Support Center

Collaborative ResearchCenter, The University

of Shiga Prefecture

University IndustryLiaison Office,

Doshisha University

Research Promotion Center,Nagahama Institute of

Bio-Science and Technology

BKC Research Office,Division of Research,

RitsumeikanUniversity

Ryukoku ExtensionCenter (REC),

Ryukoku University

Shigagin new business support network Nonohana Support Group

Promising new businesses

(Title omitted)(As of April 2017)

Shigagin Growth Strategy FundInvestment Business Limited

Liability PartnershipGrowth and Industrializationof Shiga Agriculture, Forestry

and Fisheries BusinessesInvestment Business Limited

Liability Partnership

Industrial-Academic-Financial-GovernmentalTechnical Advisory Board

Deloitte Touche Tohmatsu LLC

Nomura Securities Co., Ltd.

Future Venture Capital Co., Ltd.

AGP CORPORATION

Tokyo Stock Exchange

PricewaterhouseCoopers Kyoto

Nippon VentureCapital Co., Ltd.

Osaka Small and Medium BusinessInvestment & Consultation Co., Ltd

Mizuho Securities Co., Ltd.

SMBC Nikko Securities Inc.

DevelopmentBank of Japan Inc.

Shiga EconomicIndustrial Association

Kansai Head Office, Organizationfor Small & Medium Enterprises and

Regional Innovation, JAPAN

Ant Capital Partners Co., Ltd.

Industrial-Academic-Financial-Governmental Technical Advisory Board

Masashi Yasuda (Professor at Collaborative Research Center, The University of Shiga Prefecture)Keisuke Makino (Professor Emeritus at Kyoto University)Yoshihiko Nakatani (Deputy General Manager of Industry-Academia-GovernmentCollaboration Strategy Board, Ritsumeikan University)Masahiro Yoshimoto (Director of Academia-Industry-Government CooperationPromotion Office, Research & Strategy Promotion Center, Kyoto Institute of Technology)Masataka Fukao (Director of Ryukoku Extension Center (REC), Ryukoku University)

ShigaginLease Capital

Executive OfficeBusiness Promotion

Dept.

Shiga BankThe Shigagin

Economic & CulturalCenter Co., Ltd.

Amount (millions of yen)

200

150

100

50

0

250

Number of instances (instances)

FY2012 FY2013 FY2014 FY2015 FY2016

Finance benchmark

Finance benchmark

Finance benchmark

Finance benchmark

Finance benchmark



Finest saba-zushi (mackerel sushi)from Santoku

NagamahaCity

Finest garlic, the blessing

of Kohoku

TakashimaCity

Restaurant fund directlymanaged by farms

TakashimaCity

Furosen by Uehara Syuzou

TakashimaCity

Funazushi fermented sushi, an exquisitedelicacy of Japan’s lake country

Otsu City

Kyoto “SAKE TO SAKANA TO

OTOKOMAE-SHOKUDO”

Kyoto City

The Bank is supporting entrepreneurs via crowdfunding methods to offer new products and services that

increase the regional brand attractiveness or use regional resources. In accordance with the areas of need and

characteristics, we collaborate with multiple crowdfunding business operators.

Shigagin Hometown Investment Fund

Developing regional brand through crowdfunding

In February 2015, the Bank established the “Shigagin Hometown

Investment Fund,” which invests primarily in specified funds

established by crowdfunding. The Bank supports crowdfunding,

having made five investments using this platform to date in small

funds for which the Hometown Investment Fund can be expected

to have a “pump-priming” effect.

(as of March 31, 2017)


No. of cases

Balance (billions of yen)

Fiscal year endedMarch 31, 2017

Fiscal year endedMarch 31, 2016Items

91 139

7.8 12.2

ABL

With over 5,800 client companies registered as users, the Bank has handled Densai drawing (accrual records) in 29,000 instances to date, with a total value of more than ¥120.0 billion.

Electronically recorded monetary claims

● “Shigagin” Densai Service (commenced from February 2013)

This is a new kind of fund procurement method, an independently developed service using Densai. Densai received by the supplier are purchased by the Bank on a non-recourse basis (= no obligation to buy back).

● Densai Factoring Service

Electronically recorded monetary claim (electronic bill) purchase is a service we offer in which non-recourse purchase is undertaken (= with no buyback obligation).

● Electronic bill purchase service

Credit payable Credit payable

Providing diversified methods of financing

● Kyoto Regional Revitalization Comprehensive Special Zone

Within the zone, we offer interest subsidies of up to 0.7% for as long as five years for a business program to develop industrial tourism facilities such as accommodation facilities and commercial facilities to encourage tourist visits and stays.

By utilizing the Asset Based Lending (ABL) method, the Bank offers flexible funding without real estate collateral or guarantees.

BANKBANK

BANK

Paying company

1) Request for record of accrual

Supplier(subcontractor)

Supplier(sub-subcontractor)

Sale and deliveryof goods

Sale and deliveryof goods

2) Request for record of assignment

Remittancebetween accounts

Automatic remittanceon the due date!

Financialinstitution



densai.netdensai.net Co., Ltd.[Electronic monetary claim registration organization]

1) Record of accrual

Originalrecord

3) Record of payment, etc.

2) Record of assignment

Company APaying company

Company BSupplier

1) Conclusion of basic agreementon Densai Factoring Service

densai.net

2) Delivery andbilling request

10) Settlementfunds

Payment

3) Record ofaccrual

Data submission

6) Request forpurchase

(FAX)

5) Record of accrualNotification

8) Record ofassignmentNotification

4) Record of accrualRequest

Shiga Bank

7) Record of assignmentRequest

9) Purchasecharge

Payment

We support client growth by arranging coordinated funding involving large sums and multiple financial institutions.

Syndicated loan

Because issues of private placement bonds are limited to top-level companies that meet certain creditworthiness criteria, evidence that the issuing entity is a blue chip is needed. Additionally, it is possible to procure long-term, stable funding, as it is a direct-financing method.

Being entrusted with private placement bonds

Within the zone, we offer interest subsidies of up to 0.7% for as long as five years for companies involved in medical and health management device development and commercialization, and in businesses creating health support services.

Interest subsidy program

● “Shiga Health Creation” zone

The Bank has been designated as a financial institution eligible to handle interest subsidies to promote environment-friendly financing, a program being organized by the Ministry of the Environment.

● Initiative providing interest subsidies to promoteenvironment-friendly financing

Clients

Bank B Bank C

Bank A Bank D

Arranger(Shiga Bank)

Syndicate Group

Government (Ministry of the Environment)Subsidy grant

Status and benefitreport/approval

Interest subsidyApplication forand approval

of grant

Environment-friendlyfinance

RepaymentConfirmation ofuse of fundingMonitoring

Japan Environment Association

Shiga Bank

Business clients

Finance benchmark



The Bank sees “business assessments” as an important part of day-to-day communication with the business client. Based on evaluations of future viability after an analysis of sector trends and the clients’ business, it believes it vital to provide financing and solutions based on business assessments, without depending unduly on collateral or guarantees. Additionally, it sees its role as contributing to the development of the regional economy by providing financing based on business assessments and proposing optimal solutions tailored to corporate development stages.

In partnership with branches, and the Business Promotion Department, Credit Supervision Department, General Planning Department and Financial Markets & International Department, the Bank proactively takes measures to “support main business” and “support management improvement” at business customers in accordance with their requests and corporate development stages. Specifically, the Bank leverages partnerships with external experts and organizations when needed in areas such as boosting sales, cutting costs, advice on shoring up the financial position, organizational restructuring, business transfers, M&A, and a wide range of other business regeneration measures.

The Bank supports its customers with compilation of “business improvement plans” as a measure to resolve issues which have been identified in the Ratings Communication Service. Due follow-up of progress in the proposed plan is also offered as part of our support for improving business of the customer.

Analysis is undertaken of the client’s past financial condition, in addition to industry trends and client

business, and the Bank informs clients of their respective strengths and weaknesses.

Ratings Communication Service

Providing �nancing and solutions based onbusiness assessments(Ratings CS)

Past

By forecasting and sharing details of future financial position based on client business strategy (targets),

we support improvement of corporate value.

Ratings Simulation Service (Ratings SS)

Future

Development of regional econom

y

[Qualitative Surface]Low ← Business assessments (future) → High

[Quantitative Surface]

↑ Past �nancial information and ratings

↓

Support for “businesstransformation” and

“improvement ofmanagement functions”

Support for growth

Support forliquidations and

business closures, etc.

Support forturnarounds

(+ growth support)

Customers who formulated business improvement plans (accumulated total)

1,223

1,4071,463

1,340

1,087

926

759

FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016

1,600

1,400

1,200

1,000

800

600

400

200

0

Customers who formulated business improvement plans (No. of customers)

Backup system for our customers

Customers

Providing financing and solutions based on business assessments

Branches

Shigagin group

Branch support, queries, and consultation measures

Business Promotion Dept. Credit Supervision Dept.

Financial Markets & International Dept.General Planning Dept.

The Shigagin Economic & Cultural Center Co., Ltd.

Support system for SMEs

Regional Banks Association of Japan

Liaison Council for Certi�ed Supporting Institutions

SME Revitalization Support Councils

Nonohana Support Group

Regional Economy Vitalization Corporation of Japan

Shiga Prefecture Industrial Support Center

National Federation of Small BusinessAssociations for Shiga Prefecture

Shiga Prefecture Regeneration Support Liaison Committee

Kyoto Regeneration Network Committee

Business Improvement Support Center

Accredited supporting institutions(certi�ed tax accountants and

certi�ed public accountants, etc.)

Utilization and cooperation

Cooperation

Cooperation

Cooperation

Information sharing

Cooperation

High

Low

・Credit Guarantee Association・Organization for Small & Medium Enterprises

and Regional Innovation, JAPAN・Japan Finance Corporation

Trends in the total and regional number of customers and comparison with the total number of companies in the region

No. of customers by region

Total no. of customers

LocalItems

Non-local Local Non-local Local Non-local




22,470

15,348(SPC:1)

6,738(SPC:7)

14,909

48,9141,807,84548,914 1,807,845 48,914 1,807,845

7,109(SPC:9)

15,526(SPC:1)

7,488(SPC:18)

22,443 23,496

No. of companies by region

The Bank’s main customers as a proportion of total customers





21,872 22,470 22,443 23,496

8,672 9,087 9,109 9,268

39.6% 40.4% 40.6% 39.4%

A Total customers

B The Bank’s main customers (non-consolidated)

Percentage (B/A)

Business improvement at the Bank’s main customers and trends in balance of loans



7,758 7,820

784.1 829.1

3,570 4,198 565.1 566.7

A The Bank’s main customers (group)

Balance of loans at the Bank’s main customers (billions of yen)

B Customers showing improvement in management benchmarks

46.0% 53.7%

526.9

Percentage (B/A)




Revisedconditions

Very strongperformers

Goodperformers

Weakperformers *

1,296 53 221 1,022Progress in business improvement plans for SMEs with revised conditions

Customers who compiled fundamental and feasible plans among recipients of business rehabilitation support, and ratio of those that have achieved their targets

Progress in business improvement plans at SMEs subject to revised lending conditions

No. of customerswho have compiled

fundamental andfeasible plans

No. of customersthat achieved

targetsNo. of customers

that missed targets

94 81 13

86.2% 13.8%

No. of customers who compiled fundamental and feasible plans and their achievement ratio

Item

Providing �nancing and solutions based on business assessments

Backup system for our customers

Supporting compilation of business improvement plans

Items

Items

Item

Finance benchmark

Finance benchmark

Finance benchmark

Finance benchmark

Finance benchmark

Balance of loans at customers showing improvement in management benchmarks (billions of yen)

* Included in weak performers are businesses that have not yet devised business improvement plans and customers that have compiled consultation sheets (simplified plans)


For customers that need fundamental overhauls including financial rehabilitation, we offer fundamental support measures including financial support such as debt-debt swap arrangements.

178

155

112

8977

137

171

FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016

160

180

200

140

120

100

80

60

40

20

0

Cumulative total of cases proposed by the Bank after the launch of SME Business Rehabilitation Support Co-operative

Number of cases (customers) proposed by the Bank after the launch of SME Business Rehabilitation Support Co-operative in fiscal 2003

Results for �scal 2016(From April 1, 2016 to March 31, 2017)

No. of instances

17,411

3,260

Items

18.7%

Major external specialist partners (excluding SME Business Rehabilitation Support Co-operative)

25

7

7

Consulting companies

Lawyers and law o�ces

Other experts

Financial support given based on business improvement plans: 35 customers (includes repeat recipients)

24

3

10

Debt-debt swap (debt subordination)

Debt-equity swap (converting debt into equity)

Discounted payo� (transfer of credits)

FY2016

7No. of customers using SME Business Rehabilitation Support Co-operative

Results of measures to support corporate rehabilitation

17

3

14

M&A scheme

Involving Civil Rehabilitation Act

M&A by private arrangement

7“Secondary corporation” method

We offer extensive support to customers working to improve their management. The Company Management Support Office in the Credit Supervision Department is at the center of these activities. This Office comprises employees highly specialized in business support. The Office members provide management support to our corporate customers by collaborating with external experts, such as lawyers, certified public accountants, tax accountants and consulting companies.

Backing up the corporate management of our customersRegarding business rehabilitation including financial support, we strengthen alliances with SME Business Rehabilitation Support Co-operative and other public, neutral third-party organizations, and commit fully to turning around businesses in difficulty.

Measures to support fundamental business rehabilitation

In Manager Guarantee Guideline Measures, we take measures to encourage financing that does not depend on manager guarantees, by respecting and complying with the guidelines for manager guarantees under the Financial Facilitation Management Policy provided in the basic policy on financial facilitation. Based on the guidelines for manager guarantees, we will continue to act in good faith in concluding guarantee agreements with customers and arranging guarantee obligations.

Manager Guarantee Guideline Measures

Item

Finance benchmark Finance

benchmark

No. of new loans

Of which no. of loans without guarantees

Percentage of loans not dependent on manager guarantees




top line

Targeted support that generates trust and reassurance

Mar.2013

17,849

Sep.2012

17,674

Sep.2013

17,904

Mar.2014

18,205

Sep.2014

18,409

Mar.2015

18,691

Sep.2015

18,897

19,143

Mar.2016

19,193

Sep.2016

19,259

Mar.2017

No. of customers receiving business succession support


Fiscal year endedMarch 31, 2016Item

218 343

No. of customers receiving M&A support



33 28

19,500

19,000

18,000

17,500

18,500

(Business clients)

Shiga BankExpert knowledge

Information networksBranch network

Partner organization External experts

Seller Buyer

In our corporate business strategy, the business model we are aiming for is “strengthening interest income from loans and bills discounted while establishing a profitability model that is not governed by the financial environment aiming for sound management structure that is capable of contributing to regional revitalization and regional economic development” through measures such as “building close relations with business partners through comprehensive understanding of business partners” and “understanding the strengths of regional financial institutions to contribute to the growth of business partners.”

Corporate business strategy for strengthening top line

We have teamed up with business partners, the Branches and Corporate Promotion Group in the Business Promotion Department to strengthen consulting functions regarding business and asset succession measures, M&A, “domestic-market solutions” in the field of insurance for corporations, crowdfunding, new energy, medical care, “support for growth areas” in the sixth-sector industrialization initiative, CSR private placement bonds, electronically recorded monetary claims, syndicated loans and use of PFI, and other “diversified funding methods” and business-matching measures. By working hand-in-hand with the client, we aim to raise corporate value at customers and commit ourselves to contribute to the sustainable growth of regional economies and regional revitalization.

Resolution of management issues through main business support: A key role of a regional �nancial institution

Aiming to create an earnings structure that is not unduly governed by the financial environment, which remains harsh due to persistently low interest rates, we are strengthening corporate-customer fees and commissions by leveraging our consulting functions, to generate new earnings opportunities. By developing highly specialized personnel such as Small and Medium Enterprise Management Consultants and financial planning experts through main business support for customers, the Bank aims to strengthen its earning power and transform corporate-customer fees and commissions into a core source of income to create new business models.

The Banks offers optimized proposals for business and asset succession through skilled staff with the Small and Medium Enterprise Management Consultants and the Grade 1 financial planning qualifications.

Corporate merger and acquisition (M&A) has gained attention as a corporate business strategy, and is generally thought to have the following merits.

FY2014 FY2015 FY2016 Targeted level

Transition of corporate-customer fees and commissions

0

500

1000

1500

2000

・・・(Millions of yen)

Improvement of pro�tability Improvement of corporate value

Pro�tability Asset management capabilities Consulting capabilities

● Profound “business assessment”● Sound but active risk-taking● Demonstrating consulting functions (business

succession, M&A, etc.)

● Leveraging our Asia expertise● Diversifying asset management, strengthening market trading capabilities● Expanding business with wealthy clients, and with customers over

their lifetimes

Issues

Initiatives


Expansion of business area

Strengthening of main businesses

Diversi�cation of revenue sources

Access to human resources

Resolves issues of succession

Realizes earnings for the founder

Enables sustainable growth

Concentrates resources in main businesses

Buyer Seller

Challenge for creation of new business models

Business and asset succession measures

M&A

Trends in the number of customers with business loans

Challenge to strengthening top line


Finance benchmark

Business matching

Private placement bonds (fees and commissions, guarantee charges)

Syndicated loans, etc.

M&A

Cross-selling, etc.

Finance benchmark

Finance benchmark



top line

Targeted support that generates trust and reassurance

Mar.2013

17,849

Sep.2012

17,674

Sep.2013

17,904

Mar.2014

18,205

Sep.2014

18,409

Mar.2015

18,691

Sep.2015

18,897

19,143

Mar.2016

19,193

Sep.2016

19,259

Mar.2017

No. of customers receiving business succession support



218 343

No. of customers receiving M&A support



33 28

19,500

19,000

18,000

17,500

18,500

(Business clients)

Shiga BankExpert knowledge

Information networksBranch network

Partner organization External experts

Seller Buyer

In our corporate business strategy, the business model we are aiming for is “strengthening interest income from loans and bills discounted while establishing a profitability model that is not governed by the financial environment aiming for sound management structure that is capable of contributing to regional revitalization and regional economic development” through measures such as “building close relations with business partners through comprehensive understanding of business partners” and “understanding the strengths of regional financial institutions to contribute to the growth of business partners.”


We have teamed up with business partners, the Branches and Corporate Promotion Group in the Business Promotion Department to strengthen consulting functions regarding business and asset succession measures, M&A, “domestic-market solutions” in the field of insurance for corporations, crowdfunding, new energy, medical care, “support for growth areas” in the sixth-sector industrialization initiative, CSR private placement bonds, electronically recorded monetary claims, syndicated loans and use of PFI, and other “diversified funding methods” and business-matching measures. By working hand-in-hand with the client, we aim to raise corporate value at customers and commit ourselves to contribute to the sustainable growth of regional economies and regional revitalization.

Resolution of management issues through main business support: A key role of a regional �nancial institution

Aiming to create an earnings structure that is not unduly governed by the financial environment, which remains harsh due to persistently low interest rates, we are strengthening corporate-customer fees and commissions by leveraging our consulting functions, to generate new earnings opportunities. By developing highly specialized personnel such as Small and Medium Enterprise Management Consultants and financial planning experts through main business support for customers, the Bank aims to strengthen its earning power and transform corporate-customer fees and commissions into a core source of income to create new business models.

The Banks offers optimized proposals for business and asset succession through skilled staff with the Small and Medium Enterprise Management Consultants and the Grade 1 financial planning qualifications.

Corporate merger and acquisition (M&A) has gained attention as a corporate business strategy, and is generally thought to have the following merits.

FY2014 FY2015 FY2016 Targeted level

Transition of corporate-customer fees and commissions

0

500

1000

1500

2000

・・・(Millions of yen)

Improvement of pro�tability Improvement of corporate value

Pro�tability Asset management capabilities Consulting capabilities

● Profound “business assessment”● Sound but active risk-taking● Demonstrating consulting functions (business

succession, M&A, etc.)

● Leveraging our Asia expertise● Diversifying asset management, strengthening market trading capabilities● Expanding business with wealthy clients, and with customers over

their lifetimes

Issues

Initiatives


Expansion of business area

Strengthening of main businesses

Diversi�cation of revenue sources

Access to human resources

Resolves issues of succession

Realizes earnings for the founder

Enables sustainable growth

Concentrates resources in main businesses

Buyer Seller

Challenge for creation of new business models

Business and asset succession measures

M&A

Trends in the number of customers with business loans



Finance benchmark

Business matching

Private placement bonds (fees and commissions, guarantee charges)

Syndicated loans, etc.

M&A

Cross-selling, etc.

Finance benchmark

Finance benchmark



Proposal

Branches

The Headquarters person in charge

Customers who are not borrowers

Interviews to ascertain needs

Bring up to the Headquarters

Preparing funds for the future using life insurance1) Retirement bene�ts2) Fund for business succession measures3) Fund for business security measures4) Fund for inheritance measures

We provide solutions tailored to the stage of development of an

organization such as clinics, hospitals, or care providers. Consultation

on the opening of clinics can also be requested from the Bank’s

website. We provide comprehensive business support spanning

market research, provision of real estate information and formulation of

business plans, proposals for establishment of medical corporations

and medical business succession (business succession and M&A)

measures, as well as partnerships with external specialist organizations.

With the aim of revitalizing regional economies and industries through

development of agriculture, on April 28, 2017, we signed an agreement

for business cooperation with West Japan Railway Company (JR West)

and Farm Alliance Management Co., Ltd., in which JR West has a stake.

At the same time, we began to offer the “GAP* accreditation support

plan,” a main-business support loan facility for producers, which

incorporates international agriculture certification into business

assessments. We are the first regional bank in the Kinki region to take

such a measure.

The Bank regards it as its mission as a regional financial institution

to support the revitalization of sustainable agriculture through regional

revitalization and CSR activities. Our aims include improving food,

environmental and workplace safety, strengthening the international

competitiveness of Japanese agriculture, encouraging the spread of

international certification that contributes to revitalization of regional

economies and protection of regional environment, supporting the

development of young farmers and encouraging companies to enter

the agriculture sector.

As part of moves to strengthen relationships with customers who are not borrowers, we are providing business owners with life insurance, to prepare them for management issues of the future such as retirement benefits and funding for business succession.

*GAP: Continuous improvement activities through accurate implementation, record-keeping, inspection, and evaluation of each process in agricultural production, in accordance with each inspection item pursuant to applicable laws and regulations required for agricultural production activities.

● Agribusiness loansIn May 2014, the Bank started “Agribusiness Loans,” guaranteed loans provided by Shiga Agriculture Credit Guarantee Fund Association. We offer a wide range of options to service the funding needs of agricultural business owners.

Business alliance for encouraging sustainable agricultureLaunch of �nancing for producers who have acquired international agricultural certi�cation

Producers, etc.

Farm Alliance Management

● Streamlining agricultural business on the back of acquisition of GAP certi�cation

● Improvement of production technologies and expansion of marketing channels

Measures taken● Joint sponsoring of seminars, etc.● Introduction of individual producers, etc.● Consultancy services for agricultural

issues (consultation on agricultural business, study sessions, etc.)

● Utilization of IT in the provision of system service for acquiring "GLOBAL G.A.P." international authentication, environment maintenance and education

● Wholesale of farm products to retail traders, etc.

JR West● Reinvigoration of regional

agriculture● Promotion of farm alliance

businesses o�ering production and marketing support

Shiga Bank

Business alliance● Regional networks of industry,

academia, and government● Funding for GAP-certi�ed

practitioners● Support for businesses seeking

GAP certi�cation

Financial supportIntroduction of

marketing channels

Acquisition of GLOBALG.A.P. certi�cation

and introduction ofmarketing channels

Capital participation

● Regional Bank Food SelectionA total of 52 regional banks jointly held “Regional Bank Food Selection 2016” at Tokyo Big Sight from November 8 to 9, 2016. A total of 687 food-related companies exhibited from all over Japan, and 11 clients of the Bank exhibited at the fair.

● Shiga Sixth-Sector Industrialization FundIn September 2014, the Bank established the Limited Liability Partnership for Investment in Growth and Industrialization of Shiga Agriculture, Forestry and Fisheries Businesses (total of ¥0.5 billion) in cooperation with Shigachuou Shinkin Bank, Nagahama Shinkin Bank, Koto Shinkin Bank, Shigaken Shinyoukumiai, and Agriculture, forestry and fisheries Fund corporation for Innovation, Value-chain and Expansion Japan. As of March 31, 2017, we have invested in one company.

Through investments in Sixth-Sector Industrialization businesses, the Bank is supporting initiatives that help raise productivity, etc. of agriculture, forestry, and fisheries, leading to establishment of new processing and logistics businesses.


Healthcare support

Life insurance for business owners


We held the “Eco Business Matching Fair 2017 in Kyoto” on June 16,

2017 to provide a forum for business discussions focusing on

environmental businesses. This was

the tenth time we have held this

annual event. A total of 122

companies and organizations,

largely exceeding the number in

past years, presented exhibits. We

expanded our booth in the

agribusiness support corner and

simultaneously arranged Asia

seminars. In the financial support

corner, we showcased measures to

support acquisition of GLOBAL G.A.P.

certification, an international

standard for agricultural produce.

No. of customers receiving support for developing marketing channels



62 59

We use our branch network to set up effective business-matching

meetings, with a view to improving sales and expanding marketing

channels for all of our corporate and individual customers.

The Bank is involved as a core financial institution in the Intellectual

Property Business Matching Mart Project organized by the Kansai

Bureau of Economy, Trade and Industry. Leveraging the open patents

owned by major companies, this initiative encourages new product

development by SMEs.

The Bank provides opportunities for interviews with major

corporations, and a full spectrum of support from conclusion of

licensing agreements through to commercialization.

Aiming to revitalize the region and give further impetus to the regional

economy, and by using alliances with personnel strategy headquarters

and specialist businesses, the Bank supports creation of stable

employment and attraction of personnel into the region for business

clients with personnel needs.

The Bank proposes solutions using the New Power to meet clients’

needs to stabilize business operations and save power.

Supporting development of sales channels

Business Matching

Eco Business Matching Fair

Intellectual Property Business Matching Mart Project

Business-matching Support for Professional Personnel

New Power Initiatives

Eco Business Matching Fair

Finance benchmark

Finance benchmark



In our strategy for individual customers, we uphold the fiduciary duty

policy (business approach that puts the customer first) as part of

measures to best act in the interests of the customer and aim to “estab-

lish a consultation framework that provides satisfaction to the custom-

er.” We aim to provide appropriate products and services by

understanding customers’ needs at different stages of their life.

* Please see the Bank’s website for more details about the policy for customer-first business operation.

Demand for inheritance and

donation has been on an increase

and the Bank offers consultation

using its guidebook on inheritance

issues.

Our Head Office or branches are

now able to offer testamentary trust,

etc. and other inheritance-related

services. We encourage customers

to enquire at their local branch

about this.

We are making proposals tailored to different life stages with a focus

on meeting the needs of particular age groups.

We will approach younger customers to open lifelong main

accounts with us as a means of securing a core deposit base.

By offering asset management and insurance products to custom-

er segments involved in asset formation, we aim to increase the

balance of assets under custody and grow revenues from stockhold-

ings, as well as expand individual loans to individuals.

For customers in retirement, we will work to expand transactions

in throughout their lifetimes.

Strategies for Individual Customers

Our Services for Individual Customers

Expansion of transactions with wealthy customers

Measures involving the integration of corporate and

individual customers

Inheritance and donation measures

Strengthen products and services

Development of new customers

Comprehensive asset management/proposals for inheritance measures

Corporate customers/owners Individual investors

• Asset management proposals based on a firm grasp of overall assets (corporate and individual)

• Leverage insurance and trust products

• Inheritance measures including use of real estate

• More branches to offer consultancy on weekends and holidays

• Strengthen proposals for structured and foreign bonds

• Develop new customers based mainly on asset-management proposals

Strengthen consulting system for assets under custody and develop human resources

Strategies for Individual Customers (1)Expansion of transactions with wealthy customersTo expand transactions with wealthy clients, we are strengthening

consulting for general asset management and inheritance measures,

etc. on an integrated basis after developing a full picture of corporate

and individual assets.

In addition to creating a wide-ranging lineup of asset-manage-

ment products including both investment trusts and insurance

products as well as structured bonds and foreign bonds, in line with

customer needs, we are creating a system enabling comprehensive

proposals for inheritance and other matters effectively leveraging real

estate and insurance and trust products.

Position “Shigagin” to offer inheritance consultancy services

Through these activities, we aim to deepen the trust of regional customers. In the 6th Medium-term Business Plan, we have set a numerical target of “total assets under management (term-end balance) < total deposits + investment trusts + public securities + financial product intermediary > 5 trillion yen.”

Proposals tailored to life-cycles

Younger customers

Asset formation custom

er segments

Customers in

retirement

Expand transactions throughout lifetime

• Proposals for management of severance assets (customers in retirement)

• Increase in pension accounts

Encouraging lifelong main accounts (building up core deposits)

• Increase in accounts held by younger people

• Leveraging Junior NISA accounts• Mainstreaming settlement services (STIO Card, brand debit)

• Increase in salary transfer accounts

• Omni-channel strategy• Online banking, more

advanced ATMs etc.

Approach to asset management and insurance

Step up personal loan

• Asset formation product proposals tailored to lifestyle and age group

• Step up mortgage loan • Step up unsecured loan

• Offer comprehensive consulting services including guarantee-based insurance and asset management to mortgage loan customers

• Expansion of products through regulatory system changes (NISA, expansion of individual-type defined contribution accounts)

Strategies for Individual Customers (2)Expand transactions with customers over their lifetimes


Introduced in 2015, unsecured loan contracts which can be completed

by smartphones (hereafter “Smartphone Contracts”) have seen a steady

increase due to the improved customer convenience they offer.

Targeted loan, free loan (the “Just Support”) and card loan (the “Satto

Cash”) transactions can be carried out under Smartphone Contracts.

The Smartphone Contract

service enables completion of

contract procedures on a smart-

phone terminal, by logging into a

dedicated contract website followed

by consent to and confirmation of

contract terms. There is no need to

come to a branch. The Smartphone

Contract application service is

offered not only online, but also over

the counter and via fax, ATM, and

telephone.

Reduction of commissions

Call centers open on weekends and

holidays

Expansion of product lineup

Launch of receipt by regular mail

Individual-type defined contribu-

tion (iDeCo) plan

“iDeCo-chan”

The individual-type defined contribution (iDeCo) plan is a pension plan that enables setting aside funds for old age while offering significant tax incentives. Since the system has been open to almost everybody from January 2017, the Bank has taken measures to publicize and promote the system by enhancing the product features in order to foster the usage by as many people as possible.

The Bank held a campaign encouraging people to join iDeCo through

Shiga Bank between November 25, 2016 and March 31, 2017 and was

well-received by all.

Since the launch of the Individual-type defined contribution

pension plan in April 2002, the Bank has handled iDeCo procedures at

all of its branches (except representative offices). (As of March 31, 2017,

the total number of subscribers was around 6,400).

Measures for iDeCo program offering major asset-formation benefits

Steady growth in customers for unsecured loans with smart-phone contracts

Call centers Smart phonesBranches

Customers

ATM

PhoneFax Internet

Direct (face-to-face)-based services(optimized proposals and advice)

Services without face-to-face contact(convenience, self-completion)

Strategies for Individual Customers (3)Expansion of unsecured loan transactionsWe are taking measures to develop direct marketing, by leveraging ICT platforms, stepping up promotions, promot-ing contracts without direct (face-to-face) contact and strengthening relations with the customer. By enabling financial services demanded by the customer through an integration of “direct (face-to-face)” and “indirect” communi-cation, the Bank aims to boost the balance of unsecured loans to ¥50.0 billion at the end of fiscal 2018.

A campaign encouraging people to join iDeCo through Shiga Bank



In the international financial strategy of the 6th Medium-Term Business

Plan, the watchword is “spread Asia expertise overseas.” We plan to

leverage the Asia business know-how we have built up through

cooperation with our overseas bases — the Hong Kong Branch, Shang-

hai Representative Office, and Bangkok Representative Office — and

support our business customers, with a focus on “strengthening the

top line” and “regional revitalization.”

To step up its support for customers expanding overseas, the Bank is

strengthening alliances with local government, public organizations,

and private companies.

In fiscal 2016, we signed agreements for business alliance with

Japan International Cooperation Agency (JICA), a Japanese overseas

development aid organization with bases in 96 locations overseas. We

also signed a business-matching services agreement with Alibaba.com

Japan Co., Ltd., which supports online development of overseas

marketing channels, trade negotiation and commerce.

Business alliance with JICA

Support for overseas business expansion through business alliances and business matching.

Consulting services (overseas advisory)

Stability/maturity

Closure of bases

M&A

Establishment of overseas bases

Arrangement of site visitsDiscussion of feasibility of

market entryAdvice for drafting plans

Exhibiting at trade showsBusiness matching

Growth

Implementation

Planning

Spread Asia expertise overseas

International financial strategy measures

To strengthen the top line, we are focusing on stepping up loaning to

non-Japanese borrowers, principally loans and structured finance for

overseas corporate customers. Assuming a certain level of risk, we aim

to build up a portfolio of assets offering high returns and transform the

Headquarters into a profit center.

Stepping up loaning to non-Japanese borrowers

Challenge of developing the overseas loan market

We aim to expand revenues by building up deposits and loans

denominated in foreign currencies.

Demand for foreign-currency denominated funding has grown

due to globalization of Japanese companies. In response, we plan to

step up our foreign-currency-based loan operations by securing stable

foreign-currency-based funding and leveraging overseas fund procure-

ment through cooperation with alliance partners in Japan and over-

seas.

We also propose foreign-currency deposits as a tool for asset

management in a negative interest-rate environment.

Demonstrating financial intermediary functions

Increase deposits and loans denominated in foreign currencies

The mission of a regional bank is to unleash the potential “earning pow-

er” of its region. The way international operations meet the challenge

of “regional revitalization” is through unleashing the earning power of

regional corporations. For that reason, we aim to deepen our support

role for customers’ overseas business development.

Overseas business development at our business customers is

diversified, and trading is becoming more brisk year by year. The Bank

has so far offered integrated support of our branches, overseas bases

and our Headquarters to get a clear idea of the needs and ideas of our

business customers regarding overseas operations.

The Bank will provide more thorough-going services by leveraging

the overseas business know-how the Bank has built up over the years,

its track record in supporting overseas expansion, and the dynamism of

branches. The Bank will also contribute to solving issues that customers

face in their overseas businesses through “paid consulting services.”

Demonstrating information intermediary functions

Strengthening our consulting functions


Maximize earnings by taking on risks boldly using all resources

0

60

40

20

80

100

Trends in ratio of balance of securities

Build up the balance of foreign securities + investment trusts, etc.

FY2016 (result)FY2015 (result)(%) FY2018 (plan)

Foreign securities &investment trust, etc.

Stocks

Bonds

Investment by category

Domestic bonds

Foreign securities

Investment trusts,

etc.

While guarding against future interest-rate rises and curbing our sensitivity to the interest-rate environment, further diversify the investment with asset-swap, option transactions and investments in inflation-linked government bonds, etc.

With the risk from foreign currency-based fund procurement controlled, build up the balance of mainly European and US securities while giving due consideration to interest-rate trends overseas.

While taking measures to diversify investment targets (assets), accumulate a balance of investments with relatively low correlation to interest rates in Japan and overseas.

Market investment strategy

Diversification of investment

Strengthening trading capabilities

Given an unprecedented environment of low interest rates, we aim to

improve our capabilities in preemptive management to prepare the

Bank for future market changes. We will control market risk in such a

way as to be able to cope with dramatic changes in the market.

Improve ability to manage preemptively

Diversify securities investments by building up a balance of “Other

securities” (foreign securities + investment trusts, etc.), and at the same

time maximize revenues through diversified investment in “bonds +

stocks + other” instruments.

Given the negative interest-rate policy environment, the Bank will work

to strengthen its trading capabilities in various classes of investment

assets, and will make effective use of derivative transactions (futures,

options and interest rate swaps, etc.) in addition to carried interest and

capital gains (proceeds from sales), aiming for a stable revenues based

on an earnings structure of the trinity.

Strengthen monitoring posture

Given the accelerating difficulties of asset management with a nega-tive interest-rate policy, we will deepen investment diversification and step up our monitoring posture in support of a better spread of investments.

Diversification of foreign currency procurement

By taking measures to accumulate a balance of foreign-currency

denominated bonds and diversifying into foreign currency procure-

ment, we will control foreign-currency liquidity risk and spur diversifica-

tion of the investment portfolio.

Responding to regulations and systems, streamlining administration

In January 2017, we reviewed the front/middle systems for securities

operations. The aim is to streamline administration through centralized

database management with the back system and streamline adminis-

tration and respond to financial regulations and regimes.

Develop human resources

Amid a dramatically changing financial market, we will train employees

to be able to respond to market change very quickly, and employees

who are versed in the financial markets to respond to diversifying

customer needs.

To support maximization of revenues, develop risk management systems and evolve human resources

Boldly take on risk using all resourcesChallenge to maximization of profitability

Diversify investments

Refine risk management posture

Develop human resources

Responding to systemsStreamline administration

Strengthen trading capabilities

Maximize revenues



Challenge to increasing

productivity

Increasing productivity through effective business operations

Strengthening relations with our customers More muscular organization

Profitability Asset management capabilities Consulting capabilities

● Reform of branch operations

● IT strategy

● ICT strategy

● Strengthening indirect

(non-face-to-face) channels

● FinTech

Issues

Initiatives


For some customer services,

we have adopted the “Pepper”

robot developed and provided

by SoftBank Robotics Corp. It

has been deployed at some of

our branches as we develop

new ways of communicating

with our customers, to provide

excellent services using

robotics and artificial

intelligence.

A heartfelt welcome

The “Pepper” robot is at our branches!

Measures for online settlement and

electronic money charge

One year has passed since the launch of “Money Forward for SHIGA

BANK” automated bookkeeping and asset management services. The

number of downloads is increasingly steadily.

We will continue to consider cooperation aimed at providing new

financial services in the FinTech business field.

Whenever, wherever! Useful new features

The number of downloads for “Money

Forward for SHIGA BANK” is increasing

The Bank has announced its participation in “Japan Bank Consortium,”

in a move to promote discussion of new remittance and settlement

services using blockchain technologies (distributed ledger

technology).

Currently, 56 financial institutions including the Bank participate in

this consortium (as of April 2017).

Blockchain is a revolutionary core financial technology of FinTech.

It is expected to improve the stability of computer systems at financial

institutions and enable creation of flexible and efficient systems.

Consideration for use of blockchain technology

Announcement of participation in

“Japan Bank Consortium” To meet diversifying customer settlement needs, the Bank has enabled

online settlement from Shiga Bank accounts and e-money charging

(making deposits).

This enables users to immediately withdraw sums for purchase

payments directly from their bank accounts and make online deposits

to e-money accounts.

We are taking further measures to improve customer convenience

by forming partnerships with companies that provide settlement

services, which are in strong demand.

Compliant services

This service enables the use of a Shiga Bank account for settlement of transactions with “Yahoo! Auctions” and “Yahoo! Shopping.”

Customers can credit “LINE Pay” e-money accounts from their bank accounts using our service.

Customers can credit “Rakuten Edy” e-money accounts from their bank accounts using our service.

Yahoo! Wallet

Yahoo! Money

Rakuten Edy

LINE Pay

Challenge to increasing productivity


Challenge to increasing

productivity

Increasing productivity through effective business operations

Strengthening relations with our customers More muscular organization

Profitability Asset management capabilities Consulting capabilities

● Reform of branch operations

● IT strategy

● ICT strategy

● Strengthening indirect

(non-face-to-face) channels

● FinTech

Issues

Initiatives


For some customer services,

we have adopted the “Pepper”

robot developed and provided

by SoftBank Robotics Corp. It

has been deployed at some of

our branches as we develop

new ways of communicating

with our customers, to provide

excellent services using

robotics and artificial

intelligence.

A heartfelt welcome

The “Pepper” robot is at our branches!

Measures for online settlement and

electronic money charge

One year has passed since the launch of “Money Forward for SHIGA

BANK” automated bookkeeping and asset management services. The

number of downloads is increasingly steadily.

We will continue to consider cooperation aimed at providing new

financial services in the FinTech business field.

Whenever, wherever! Useful new features

The number of downloads for “Money

Forward for SHIGA BANK” is increasing

The Bank has announced its participation in “Japan Bank Consortium,”

in a move to promote discussion of new remittance and settlement

services using blockchain technologies (distributed ledger

technology).

Currently, 56 financial institutions including the Bank participate in

this consortium (as of April 2017).

Blockchain is a revolutionary core financial technology of FinTech.

It is expected to improve the stability of computer systems at financial

institutions and enable creation of flexible and efficient systems.

Consideration for use of blockchain technology

Announcement of participation in

“Japan Bank Consortium” To meet diversifying customer settlement needs, the Bank has enabled

online settlement from Shiga Bank accounts and e-money charging

(making deposits).

This enables users to immediately withdraw sums for purchase

payments directly from their bank accounts and make online deposits

to e-money accounts.

We are taking further measures to improve customer convenience

by forming partnerships with companies that provide settlement

services, which are in strong demand.

Compliant services

This service enables the use of a Shiga Bank account for settlement of transactions with “Yahoo! Auctions” and “Yahoo! Shopping.”

Customers can credit “LINE Pay” e-money accounts from their bank accounts using our service.

Customers can credit “Rakuten Edy” e-money accounts from their bank accounts using our service.

Yahoo! Wallet

Yahoo! Money

Rakuten Edy

LINE Pay




Against a background of changes in the economic environment and in

customer trends (linked with population decrease, aging population,

the spread of convenience stores and smartphones, etc.), the operating

environment surrounding our branches is about to change significant-

ly due in part to the remarkable progress in recent years in ICT.

To respond to the increasingly diversifying needs of customers

and to provide them with tailored services, it is necessary to under-

stand accurately the expected functions of our branches and to switch

to administration methods and facilities as well as systems better

adapted to the times.

Against this backdrop, the Bank launched “Operational Overhaul

Project Team” and, driven by a radical awareness of the need for

reform, is taking measures to improve productivity and enhance the

satisfaction of both customers and employees.

Reform of branches

The number of customers coming to our established branches is falling

due to population decline, declining birthrate, aging population, the

rapid development of online business and social interaction, increased

usage of smartphones and similar devices and other trends. At the

same time, with greater use of online banking and ATMs, customer

expectations of bank branches as a marketing channel have also

changed greatly.

Under these circumstances, the Bank is making adjustments to

branch functions to address new market characteristics and trends. By

specifying clearer roles for individual branches, the Bank aims to

improve customer convenience and upgrade services as well as

strengthen its business posture and optimize its use of corporate

resources.

In branch initiatives within Shiga Prefecture, the Bank will take

measures to further improve services by creating a business posture

that better meets customer needs, while duly noting changing

demographics and regional characteristics and growth potential. This

means shifting from branches of offering full branch banking services

to branches with specific functions including sub-branches and

representative offices.

In business initiatives outside the prefecture, the Bank opened

Kyoto Branch in 1938, Osaka Branch in 1941, and Tokyo Branch in 1946,

becoming one of the earliest “wide-area regional banks.”

In new branch openings outside the prefecture in recent years, the

Bank has established branches specializing in corporate business.

These chiefly target SMEs, as part of the new “exuding strategy” for

branches, in which a certain volume of business is achieved through

business approaches that make maximum use of local and interper-

sonal connections and knowledge – rather than growing through rapid

openings of a string of new branches with the sole object of boosting

volumes.

Going forward, we consider it strategically necessary to focus on

the software rather than the hardware given expectations of further

change in the social and economic structure against a background of

declining population and innovation in the technologies of AI and the

IoT. We are committed to equipping branches with smart technologies

using FinTech and expanding services that enable completion of

procedures without coming to a branch, to position us to better meet

diversifying customer needs.

Branch strategy

In the past, while shares of some of the consolidated subsidiaries of the

Bank had been part-owned by companies outside the Group, we have

converted these subsidiaries into wholly-owned subsidiaries by

purchasing those shares from these external entities.

We aim to continue to speed up decision-making and strengthen

corporate governance at the Group and will provide comprehensive

financial services on an even more integrated basis through strength-

ened partnerships within the Group.

Reform of affiliates

As a measure for improving productivity of the Headquarters organiza-

tion, on June 27, 2017, the Financial Markets & International Depart-

ment was newly established by integrating the Financial Markets

Department and International Department. By concentrating the

investment and international finance expertise we have built up over

the years in the Financial Markets & International Department, we aim

to foster a talent team with enhanced competence in markets and

create an organization that can generate earnings by proactively taking

on risks.

Through its partnership with the Business Promotion Department,

the Financial Markets & International Department is focusing on

offering a one-stop consultancy service for corporations, and making

efforts in “the reinforcement of the overall proposal capability “

including the overseas development support of the business partner.

Financial Markets & International Department

Organizational reform at the Headquarters

As the importance of non-face-to-face channels grows, on June 27,

2017, we transformed the direct channel group of the Business

Promotion Department to the Direct Sales Office of the same Depart-

ment. Through this move, we aim to improve customer convenience

by stepping up direct sales using call centers.

Direct Sales Office of the Business Promotion Department


Basic policies of ICT strategy

Improving conve-nience and custom-

er satisfaction

Improving the pro-ductivity of business

operations

Providing wor-ry-free, secure ICT

services

Leveraging ICT

Expanding financial services

Streamlining business operations and ensuring risk control

Creating a system enabling implementation of strategic management policies

Contributing to greater convenience and customer satisfaction using ICT

Mutual emergencybackup

West Japan main center

East Japan sub-center Administrative building

Mainframe platforms

Mainframe platforms Open platforms

Open platforms

Accounts-related systems

Accounts-related systems

Information-related systems

Cluster of systems for various operations

SUCCESSsystem

Internetbanking

ATM, etc.

Concentration of information

Concentration of information

Leveraging data

Providing worry-free and secure ICT services

Expan

din

g IC

T services provid

ed to th

e custo

mer

Bu

siness ap

pro

ach ro

oted

in cu

stom

er need

s

The rapid spread of the smartphone has made it possible to use many

services at “anytime” and “anywhere,” with greater speed and ease of use

than ever. Going forward, we also expect accelerating development in

ICT with improvements in transmission speed and wider use of AI.

In response to the development of ICT, the financial industry has

likewise begun to develop new services through FinTech measures.

Under these circumstances, the Bank attaches even more impor-

tance as management issues to providing new services that meet

customer needs by leveraging ICT and improving the productivity of

conventional operations.

Meanwhile, the Bank’s computer system is one of the important

parts of public infrastructure, and is expected to have a robust ICT

platform to ensure provision of secure and reliable financial services.

To ensure the Bank keeps one step ahead while ensuring reliability,

it has designated ICT is one of the pivots of its business strategy. It has

basic policies of ICT strategy: (1) contributing to greater convenience

and customer satisfaction through ICT; (2) improving the productivity

of business operations; and (3) working to provide worry-free, secure

ITC services.

In line with its basic policies of ICT strategy, the Bank is committed

to proactively mobilizing ICT to understand our customers even better

and provide high value-added services by aiming for (1) “expanding

financial services” to provide accurate responses to customer needs; (2)

further “streamlining business operations and ensuring risk control”;

and (3) “creating a system to realize strategic management policies” in

a flexible and scalable way.

ICT strategy



Challenge to constructing a robust

management foundation

Challenge to constructing a robust management foundation

For more solid organizational management

The risk appetite framework refers to frameworks for business and risk

management that enable clarification of risk by type and level that the

Bank is prepared to take on, as well as sharing and monitoring of it for

the purposes of accomplishing business strategy and financial targets.

Regarding the formulation of financial targets, the Bank first

identifies a risk-taking policy based on current-status analysis and risk

profiling, and confirms the consistency of strategy in the sales and

market departments. Then we carry out various simulations to test the

strategy, and sets target earnings and risk benchmarks. After

confirming through stress testing that the plan will remain reasonably

sound under a certain amount of stress, we allocate capital

accordingly and seek out the best balance among earnings, risk, and

capital. Stress testing is also used to originate countermeasures in the

event of strategy failure.

We monitor financial targets that have been prepared, and every

six months consider revisions to the risk-taking policy and financial

targets. This enables us to clarify the relationship between analysis of

current status and risk profile; risk-taking policy; strategy; and financial

targets. We ensure the effective functioning of the PDCA cycle for

achievement of appropriate risk management and strategy

attainment that can quickly respond to changes in the financial

environment.

Robust business foundation

● Expanding corporate governance

● Expanding risk management system

● Compliance

● BCP

● Developing human resources

Responding to a changing environmentIssues

Initiatives


Financial targets

Risk-taking policyClarifying risks that can be proactively taken,

and risks that need to be minimized

Analysis of current statusProfitability/efficiency, etc.

StrategyConfirmation of consistency

with risk-taking policy

(Business department)

(Market department)

Risk controls(Business department)

(Market department)

Tolerable level of risk (Basel regulations, etc.)

Confirming level of risk indicators

through stress-testing

Discussion of methods of

controlling risk

Risk profile

Monitoring/PDCA cycle

Process of developing financial targets

Stresstesting

capitalallocation

SimulationEarnings and risk

benchmarks

Review

The risks faced by the Bank in the performance of its operations have

been growing more complex and diversified.

Based on the Bank’s policy that “Shiga Bank must be sound in

order for the local community to be healthy,” we are building Internal

Rating System and Comprehensive Risk Management System in order

to accurately assess and control risk using rational criteria without

undue reliance on personal intuition or experience.

We have also introduced a “risk appetite framework” that will

incorporate business strategy in an integrated risk management

model, to generate sustainable earnings opportunities.

Continuing the initiatives we have launched so far, we plan to

improve our risk management capabilities based on the principle of

self-responsibility.

Basic views

Risk Appetite Framework

Capital allocation The Bank uses VaR, etc. to quantify the various risks it faces. Amounts of capital corresponding to risk amounts (economic capital) are allocated for individual categories of risk and for individual departments and other units, within the scope of own capital. At Shiga Bank, business department and market department are subject to capital allocation measures.

Glossary


Challenge to constructing a robust

management foundation

Challenge to constructing a robust management foundation

For more solid organizational management

The risk appetite framework refers to frameworks for business and risk

management that enable clarification of risk by type and level that the

Bank is prepared to take on, as well as sharing and monitoring of it for

the purposes of accomplishing business strategy and financial targets.

Regarding the formulation of financial targets, the Bank first

identifies a risk-taking policy based on current-status analysis and risk

profiling, and confirms the consistency of strategy in the sales and

market departments. Then we carry out various simulations to test the

strategy, and sets target earnings and risk benchmarks. After

confirming through stress testing that the plan will remain reasonably

sound under a certain amount of stress, we allocate capital

accordingly and seek out the best balance among earnings, risk, and

capital. Stress testing is also used to originate countermeasures in the

event of strategy failure.

We monitor financial targets that have been prepared, and every

six months consider revisions to the risk-taking policy and financial

targets. This enables us to clarify the relationship between analysis of

current status and risk profile; risk-taking policy; strategy; and financial

targets. We ensure the effective functioning of the PDCA cycle for

achievement of appropriate risk management and strategy

attainment that can quickly respond to changes in the financial

environment.

Robust business foundation

● Expanding corporate governance

● Expanding risk management system

● Compliance

● BCP

● Developing human resources

Responding to a changing environmentIssues

Initiatives


Financial targets

Risk-taking policyClarifying risks that can be proactively taken,

and risks that need to be minimized

Analysis of current statusProfitability/efficiency, etc.

StrategyConfirmation of consistency

with risk-taking policy

(Business department)

(Market department)

Risk controls(Business department)

(Market department)

Tolerable level of risk (Basel regulations, etc.)

Confirming level of risk indicators

through stress-testing

Discussion of methods of

controlling risk

Risk profile

Monitoring/PDCA cycle

Process of developing financial targets

Stresstesting

capitalallocation

SimulationEarnings and risk

benchmarks

Review

The risks faced by the Bank in the performance of its operations have

been growing more complex and diversified.

Based on the Bank’s policy that “Shiga Bank must be sound in

order for the local community to be healthy,” we are building Internal

Rating System and Comprehensive Risk Management System in order

to accurately assess and control risk using rational criteria without

undue reliance on personal intuition or experience.

We have also introduced a “risk appetite framework” that will

incorporate business strategy in an integrated risk management

model, to generate sustainable earnings opportunities.

Continuing the initiatives we have launched so far, we plan to

improve our risk management capabilities based on the principle of

self-responsibility.

Basic views

Risk Appetite Framework

Capital allocation The Bank uses VaR, etc. to quantify the various risks it faces. Amounts of capital corresponding to risk amounts (economic capital) are allocated for individual categories of risk and for individual departments and other units, within the scope of own capital. At Shiga Bank, business department and market department are subject to capital allocation measures.

Glossary


Challenge to constructing a robust managem

ent foundation

Outline of Risk Management SystemThe Shiga Bank’s Board of Directors have established Risk Management

Rules, specified the types of risk that should be managed, and defined

the roles and responsibilities of the sections responsible for those risks.

At the same time, Risk Management Rules prescribe risk management

methods.

Furthermore, “Risk Management Policies” are instituted semiannu-

ally at the Board of Directors’ meeting after clarifying “risk appetite” in

light of the Bank’s strategic goals and risk status.

These statuses of risk and return are properly managed by having

it reported to management through the ALM Committee, the Meeting

of Managing Directors, and the Board of Directors.

Comprehensive Risk Management Comprehensive risk management means to appropriately manage risks

by looking at various types of risk as a whole, and comparing them to

capital adequacy which represents the strength of the financial institu-

tion.

The Bank’s Assets & Liabilities Managing Department is responsible

for unified monitoring of all risks, including quantitative monitoring and

management of loan concentration risk, which is outside the scope of

capital adequacy requirements, and interest rate risk in the Bank’s own

accounts.

For risk that cannot be quantitatively measured using statistical

methods, such as operational and reputational risks, we take measures

to minimize occurrence and impact in monetary terms.

Additionally, as a comprehensive risk management method, we

have created an integrative risk management system which measures

and manages various types of risk using such integrated yardsticks as

the (maximum) Value at Risk (VaR) formula applied to each risk catego-

ry.

The Bank conducts its business based on the capital allocation

system, controlling risk by keeping it within the specified ratio to both 1)

regulatory capital (own capital needed to satisfy capital adequacy reg-

ulations) and 2) economic capital (risk amounts calculated using VaR,

etc.).

In addition, the Bank has created a system that appropriately com-

plements the capital allocation system by controlling 3) price change

risk in investments in securities by keeping it within a specified range.

VaR (Value at risk)VaR uses a statistical technique to measure the losses that

could potentially be incurred in a fixed period of time (for

example one year). The Bank uses risk amounts measured

with a confidence interval of 99% and a holding period of

one year in its internal management.

Glossary

Board of Directors

ALM Committee

Meeting of Audit & Supervisory Board Members /Audit & Supervisory Board Members

Internal Audit Brie�ng Sessions

O�ce of Audit & Supervisory Board Members

LiquidityRisk

CreditSupervision

Dept.

Branches and Head O�ce

Assets & LiabilitiesManaging Dept.Risk ManagementDept.

Riskcategories

Dept.responsiblefor risk

Executive Committee

Assets & Liabilities Managing Dept.

Administration Dept.

Operational Risk

Financial Markets &International Dept.

CreditRisk

MarketRisk

InformationTechnology Risk

LegalRisk

TangibleAsset Risk

ProcessingRisk

ReputationalRisk

HumanRisk

Risk Management System

Audit &

Inspection Dept.

(Internal Audit D

ept.)

Computer System Dept

Assets & LiabilitiesManaging Dept.

GeneralA�airs Dept.

GeneralPlanning Dept.

AdministrationDept.

PersonnelA�airs Dept.


Credit Risk Management SystemCredit risk is the risk that the Bank will suffer losses due to the worsen-

ing financial conditions of clients, etc.

Recognizing credit risk as the most important risk to business man-

agement from the standpoint of its size and scope, the Bank believes

that it is necessary to establish a credit risk management system and

control the risk using rational yardsticks.

For this reason, in December 1998 the Bank introduced its own

corporate credit ratings system, and then it adopted Basel II’s “Founda-

tion Internal Ratings Based-Approach” beginning from the fiscal year

ended March 31, 2007.

Reasons for adopting Basel II’s Foundation Internal Ratings Based-Approach (FIRB)Based on its conviction to adhere to our “responsible management” system, and with the aim of sophisticating credit risk management, the Bank introduced its own corporate credit ratings system in December 1998 as a rational communication tool for the Bank and its customers to use together to raise enterprise value.

Based on its belief that Basel II is ultimately a tool for pursuing mutual prosperity with regional communities, the Bank recognizes that the building of a solid internal ratings system is essential for consistent implementation of the responsible management model. Therefore, it will do its utmost to further improve its risk management system.

From this viewpoint, the Bank, in adopting Basel II, has selected the Internal Ratings-Based Approach founded on the principle of account-ability, has proactively committed itself to a credit-based business and its own credit ratings system, and wants to contribute on a broad basis to the further development of regional communities.

The Signi�cance and Purpose of the Corporate Credit Rating System

Strengthening theoperating foundation

Perceiving issues andstudying solutions

Improving �nancialcondition

Raising enterprisevalue

Customers Shiga Bank

Upgrading ratingssystems

Raising abilityto take risks

Raisingenterprise value

Appropriaterisk evaluation

Stable supplyof capital

Activating localeconomies

Ratings disclosure as an e�ectivecommunications tool

Coexistence andpartners in prosperity

Rating

Local communitydevelopment

Signi�cance and purpose of the ratings system

The Bank implements financial analyses (quantitative evaluations) us-

ing statistical rating models based on the financial statements of the

customers, and decides the corporate credit rating taking into account

qualitative evaluations using the unique screening know-how of the

Bank, and the condition of the company.

Based on this Corporate Credit Rating System, the Bank conducts

“Shigagin Ratings Communication Service” which discloses the ratings

of customers and “Shigagin Ratings Simulation Service” as rational com-

munication tools that connect our customers to the Bank. A shared

recognition is reached regarding issues and risks faced by a business

customer, and the Bank provides proposals to strengthen the manage-

ment foundation of customers and support for compilation of plans for

management improvement.

Changes in the financial status of the customers are reflected as

changes in the credit risk of the Bank through the credit rating system.

In order to more precisely implement credit risk management the

Bank does not merely analyze the results of the measurements of the

amount of credit risk; it implements credit risk management while be-

ing aware at all times of the risks faced by its customers.

In recent years, linkage between the economy and the financial

capital market has deepened on a worldwide scale. Using compilations

of multiple economic scenarios on a global basis, the Bank predicts the

extent of impact of such scenarios on the regional economy and on

our business customers. Specifically, we forecast rates of sales growth

or decline for individual business customers under these different

economic scenarios, and possible changes in credit rating after a trial

calculation of financial impact. This enables us to manage credit risk

and capital ratio status for the whole Bank.

Outline of the Corporate Credit Rating System

Outline of Credit Risk Management



ent foundation

Through these initiatives, we are working to establish a credit risk

management system using rational risk control that contribute to the

mutual prosperity of the Bank and regional community for creation and

sharing of new value. At the same time, we are proactively working to

achieve a level of pricing (setting of loan rates) duly corresponding to

credit risk to ensure an appropriate level of returns in relation to the risk.

Market Risk Management SystemMarket risk refers to the risk that the Bank will incur a loss because the

value of the assets and liabilities it holds changes due to fluctuations in

a variety of risk factors in the market, including interest rates, prices of

securities and currency exchange rates.

Fully recognizing the possibility of unexpected risk arising during

the course of business operations due to uncertainties accompanying

market changes and the necessity of responding promptly and in

accordance with the nature of the risk, the Bank aims to ensure stable

profits by controlling market risk within a fixed scope based on quanti-

tative methods.

Regarding market risk for overall banking operations, adjustments

are made to financial targets every six months concerning all assets

and liabilities including deposits, loans, and securities, and capital is

allocated after consideration of the expected earnings and risk balance.

The amount of interest rate risk is controlled based on the “interest rate

risk in the banking book” (outlier criteria). Furthermore, in risk measure-

ment the Bank takes into account the type, size, and characteristics of

the positions held, and uses VaR and sensitivity (duration, BPV) and oth-

er factors for multiple management. With regard to “interest rate risk in

the banking book,” the Bank also works to establish a risk management

system based on revised international standards.

Of the market risks, for the risk arising from fluctuations in the

prices of securities and other financial instruments the Bank sets risk

tolerance amounts and other limits so as to ensure that the loss due

to market fluctuations does not have an effect on the operation of the

regulated capital base.

For items for which limits are set using risk amount measurement

methods such as VaR, the Bank performs back-testing in order to verify

Liquidity Risk Management SystemLiquidity risk is the risk of losses arising due to the necessity of trad-

ing at significantly adverse prices compared with usual levels, due to

upheaval in markets causing inability to secure sufficient funding and

hindering fund-raising.

The Bank views liquidity risk as a fundamental risk faced by the

Bank. We take measures to ensure accurate understanding of fund-rais-

ing and stable fund procurement and investment, and have a basic

policy in place for rigorous risk management that fully emphasizes

market liquidity.

In managing the flows of funds, the Financial Markets Department

as fund-raising management department monitors fund-raising factors

including the financial environment, balance of liquid assets, expected

cash outflows, and events that are expected to have an impact on

fund-raising on a daily basis, and acts as appropriate. In addition, the

Assets & Liabilities Managing Department keeps track of day-to-day

risk management by the fund-raising management department, and

ensures appropriate management of liquidity risk through regular re-

porting to the ALM Committee regarding the status of fund-raising.

For the liquidity coverage ratio regulation implemented from the

end of March 2015, which is the standard for judging soundness of the

liquidity, the Bank takes appropriate action.

that the risk amounts are being ascertained appropriately, and reports

the results of the verifications to the ALM Committee.

As a general rule, the organizational system related to market risk

management is divided into the market transaction sector (front office),

business management sector (back office), and risk management sector

(middle office), each of which checks the operations of the other. Fur-

thermore, The Audit & Inspection Dept., the internal audit department,

performs audits of the state of compliance with related laws, related

regulations, the operational plan, and other requirements and reports

the audit results to the Internal Audit Briefing Sessions comprised of the

President and the responsible directors and to the Board of Directors.


Operational Risk Management SystemOperational risk refers to the risk that the Bank will incur a loss due to a

work-related accident at the bank, a flaw in the systems of the Bank, or

external factors such as earthquakes or other disasters.

The Bank has formulated the Operational Risk Management Regu-

lations, divided operational risk into five kinds of risk: (i) processing risk,

(ii) information technology risk, (iii) legal risk, (iv) tangible asset risk, and

(v) human risk, and is carrying out integrated management of these

risks in the Administration Dept.

Processing risk refers to the risk that the Bank will incur a loss, or the

credibility of the Bank will be damaged, due to dishonesty or scandals,

processing accidents, flaws in the processing management system,

executives and employees failing to perform accurate processing, or

other problems of this kind.

The Bank is deeply aware that sound processing is the foundation

of its credibility, and of the importance of information management, so

in order to reduce processing risk and eliminate accidents and dishon-

esty it is focusing on human resources development, strengthening our

organization, development of regulations and manuals, and compli-

ance, while also working on strengthening daily processing instruction

and training systems and endeavoring to improve processing quality.

The Bank has put in place a risk management system in compliance

with capital adequacy requirements, and carries out regular in-house

RCSA. The Bank identifies and evaluates risk independently.

The Bank also engages in collation and analysis of operational risk

information (accident data, etc.) to ensure implementation of the PDCA

cycle to increase the efficiency of risk management. These measures

for risk control, transfer and avoidance further raise risk management

standards.

The Bank uses the “Standardized Approach” in the calculation of

amounts equivalent to the operational risk under the capital adequacy

ratio requirements.

Information technology risk is the risk of losses being caused to cus-

tomers or the Bank due to problems such as computer system failure,

malfunction, defect, or illegal abuse.

The Bank has installed an earthquake-proof structure enabling

computer systems to continue functioning even in an earthquake di-

saster, and also has in place administrative offices that can operate for

up to 72 hours using in-house power generation systems. In addition,

Reputational Risk Management SystemReputational risk is the risk of unexpected tangible or intangible losses

arising for damage to the Bank’s good name due to rumors or slanders

spreading in abnormal circumstances.

The Bank has formulated the “Reputational Risk Management

Rules” and is committed to prior prevention of abnormal situations that

could lead to reputational risk arising.

we use data centers located in East and West Japan that enable mutual

backup with the latest technology. The Bank carries out various safety

measures for the assumed system risk including virus entry measures

and unauthorized access measures to prevent information leakage and

strive for the stable operation and information protection of the sys-

tem.

With compilation of its contingency plan, the Bank has further tak-

en every precaution against any kind of accident or large-scale disaster.

Processing risk management

Implementation of RCSA

Information Technology Risk Management

* RCSA is an abbreviation for Risk & Control Self-Assessment.This is a method for independent risk management, involving compilation and implementa-tion of necessary risk reduction measures based on identification of risks inherent in all busi-ness processes and operational systems and in fixed tangible assets, etc., with an evaluation and full appraisal of risk that remains even after counter-measures have been taken.



ent foundation

Led by the Legal Affairs Office of the Assets and Liabilities Managing

Department the Bank is building systems for maintaining compliance

with laws and regulations and proper bank management, and is mak-

ing efforts to foster employees with a heightened awareness of expec-

tations placed by the public in banks, and with a strong sense of ethics.

In order to promote compliance management, we have established a

legal compliance help line (24 hours a day) for employees to contact

when they have discovered a violation of laws, regulations, or rules in

the workplace and cannot discuss their concerns with their superiors

or colleagues.

We have also jointly established a system that allows employees

to consult with lawyers and solve problems early when they face legal

problems outside the workplace.

The Bank has stipulated the Code of Conduct based on the CSR

Charter, our management principles. A Legal Compliance Committee

chaired by the senior managing director of the Bank takes the lead in

observation of this Code of Conduct and thorough compliance with

laws and regulations, and once every six months we draw up a Compli-

ance Program and endeavor to implement it.

Specifically, training is conducted every year at each department,

branch and affiliate in accordance with set themes, and the extent to

which the training has been understood is monitored by the Head Office.

Departments, branches and affiliates which are determined not to under-

stand it sufficiently redouble their efforts and try to strengthen their legal

compliance system by continuously implementing the PDCA cycle.

In fiscal 2017, we will run training programs with the themes of com-

pliance and prevention of harassment.

Instead of conventional lecture-type training, participatory training

with a focus on discussion is being adopted.Poster publicizing the Bank’swhistleblowing system

Enhancing Legal Compliance

Legal compliance system

Whistle-blowing system established

Legal compliance system

President


CustomerConsultation O�ce

Assets & LiabilitiesManaging Dept.

Legal checks for newproducts and services

Business PromotionDept.

Legal Compliance Committee(Bureau: Assets & Liabilities Managing Dept.)

Compliance Program

(Branches and Departments of Head O�ce)

Legal A�airs O�ce of the Assets& Liabilities Managing Dept.

Board of Directors

Discussion andreporting

Discussion and reporting

Internal Audit Brie�ng Sessions

Legal Compliance H

elp Line(w

histle-blowing

system by em

ployees)

Audit andinstruction

Audit & Supervisory Board Members/Meeting of Audit & Supervisory

Board Members

O�ce of Audit & SupervisoryBoard Members


Personnel A�airs Dept.

Compliance O�cers


“Business continuity” refers to measures by a company to avoid any in-

terruptions to its important business, or if there is an interruption being

able to recover from it as quickly as possible, even after suffering dam-

age from a large-scale disaster such as an earthquake or an outbreak of

an infectious disease such as a new strain of influenza.

Due to the highly public character of banks, the Banking Act also

requires measures for “continuity of operations.” Shiga Bank considers

“business continuity” to be one important management issue from the

perspective of corporate social responsibility (CSR) as well, so we have

constructed a system which enables us to operate smoothly and con-

tinuously even when a crisis occurs.

The Bank has taken measures to develop in-house infrastructure so

that even when a disaster such as a major earthquake occurs, it can still

fulfill its role as a financial institution and maintain the functions neces-

sary for the livelihoods of its customers, the economic activities of the

region, and settlements.

The Bank formulated its Business Continuity Plan (BCP) based on the

scenario of the occurrence of a major earthquake and its Business

Continuity Plan “Infectious Diseases Countermeasures” based on the

scenario of an outbreak of a new strain of influenza in March 2007 and

December 2009 respectively.

Based on these business continuity plans (BCPs), learning from

the Great East Japan Earthquake, the Bank formulated the “Earthquake

Disaster Initial Response Manual” and the “Nuclear Power Facility Acci-

dent Initial Response Manual” to make initial responses at the time of a

disaster clear, and the Bank also established regulations, manuals and

procedures for crisis management, disaster prevention and other areas.

Moreover, we ran training and education based on our annual

schedule that included initial response and decision-making drills for the

Crisis Response Division, working to ensure and enhance its effectiveness

for all employees. Moreover we regularly hold meetings of the BCP Com-

mittee chaired by the Senior Managing Director, keep everyone in the

bank informed, and continuously revise our in-house systems.

Training at Emergency Headquarters

The core element of business continuity is maintaining the functions of

on-line systems. We have installed an earthquake-proof structure en-

abling computer systems to continue functioning even in an earthquake

disaster, administrative offices that can operate for up to 72 hours using

in-house power generation systems and data centers located in East and

West Japan that enable mutual backup with the latest technology.

The Bank distributed safety helmets for all employees and visitors to our

branches as well as flashlights, emergency toilets and water carriage bags

in case of water supply failure and

emergency food and drinking wa-

ter to all our branches. Furthermore,

our branches in metropolitan areas

are enhancing stockpile of emer-

gency food and drinking water for

the case where commuters are

stranded at times of disasters.

In September 2015, seven regional banks with their head offices in the

six prefectures making up the Kinki region (Shiga Bank, The Bank of

Kyoto, Ltd., Kinki Osaka Bank, Limited, The Senshu Ikeda Bank, Ltd., The

Nanto Bank, Ltd., The Kiyo Bank, Ltd., and The Tajima Bank, Ltd.) signed a

mutual assistance agreement to take measures to keep financial services

operational or promptly restore them in the event of a major disaster.

At each of the branches, we carry out seismic diagnoses and anti-seismic

reinforcement, and in the main branches within a certain area, we have

installed equipment that will enable business to continue even when a

disaster occurs, including emergency-use power-generating equipment.

Emergency supplies

BCP (Business Continuity Plan)A business continuity plan is a plan for deciding on mea-sures to be taken at normal times and methods and tools to be used in an emergency to ensure continuation of business. It is intended to minimize damage to business assets and enables continuation of core business opera-tions or their rapid restoration in the event of an emergen-cy caused by a natural or other kind of major disaster.

Glossary

BCP

Business continuity Disaster measures

Toward operation of an effective “Business Continuity Plan”

Maintaining the functions of on-line systems

Maintaining the functions of branches

Distribution of Emergency Supplies

Conclusion of agreement on mutual support in the event of large-scale disasters



ent foundation

Challenge to a strategic CSR

Issues

Initiatives


CSR private placement bonds “Tsunagari”

With “Tsunagari” CSR private placement bonds, an amount equivalent to 0.2% of total issue price is contributed by the Bank, and items that support children’s learning and growth are donated to schools, to foster sound development of the next generation and build up links between regional communities and children.

This year marks approximately three years since the launch of CSR private placement bonds in 2014, a first for a regional bank in the Kinki region. With the support of a large number of companies, these private placement bonds have been issued 230 times, in a total issue amount of ¥20.3 billion. This allowed the Bank to donate goods equivalent to ¥30.32 million to 182 elementary and junior high schools and other organizations.

Through CSR private placement bonds, we received a bookcase that all the students can use. Receiving this gift

made me think about the importance of valuing things. Instead of treating the gift simply as a thing but

appreciating the thoughts of others. I felt that this was what it was like to value something. The spirit of valuing

things is what is enabling us to have a pleasant school life.

I am grateful that there are people who extend support for our future. I will try to make the most of my school

life, holding the belief that working hard in your given situation is the best way of making repayment. I will try to

inspire my juniors to the same as well. Thank you very much.

Merchants in the Omi region had a philosophy called “Sampo yoshi” which means to bring happiness to three sides: the seller, the buyer, and society. Through CSR private placement bonds, we aim to add a fourth dimension — “good for local companies” — to our “Sampo yoshi” philosophy and so promote joint prosperity with the regional community.

By continuing to supply a wide range of financial products, the Bank will work to realize the cherished goal of development of regional communities and a brighter future, and contribute to a better society.

Merits of introducing CSR private placement bonds for issuing companies

● Able to make contributions to society through school education

● Able to publicize the company’s stance regarding CSR measures

● Leads to evidence of excellence as an enterprise and improvement of corporate image

Extending thanks to people who create hope for the future

Sora Hamanaka, Student Council President of Moriyama Junior High School

[The seller] Shiga Bank　　→Excavation of the fund needs[The buyer] The issuing company　　→Social contributions to the community, evidence of excellence as an enterprise, and improvement of corporate image[Public interest] Schools and children　　→Donating items to support children’s learning and growth[Something extra] Local companies　　→Regional economic vitalization (purchase of donation items from local companies)

Structure of CSR bonds o�ered through private placement

Issuing company

Issuance of CSR private placement bonds

Donation

Schools

Shiga Bank

*As of May 31, 2017

Mutual prosperity with “all employees”Mutual prosperity with the “regional community”

Regional vitalization

“Shiho yoshi”Good for Shiga Bank

The seller

Good for schools and children

Public interest

Good for the issuing company

The buyer

Good for local companies

Something extra

“Shiho yoshi” with the regional community

Toward a society that can connect by prioritizing children’s future

¥20.3 billion

Donations enabled by CSR private placement bonds

Harmonious coexistence with the “environment”

Challenge to a strategic CSRPrevention of global warming and biodiversity preservation

Declining birthrate, aging population, and depopulating society

● “Environmental management” which incorporates environment into our main businesses

● Environmentally-friendly products and services

● Drawing on the distinctive strengths of a regional bank to mobilize the community

● Regional prosperity, volunteering, welfare, and development of young people

● Positive action● Work-life balance● Employment of senior citizens● Employment of people with disabilities● Development of human resources

Finance benchmark

Total issue price of private placement bonds:

Donating gifts equivalent to 0.2% of total issue price are donated by the Shiga Bank


Finance benchmark

Building a prosperous society where people and communities can grow



Issues

Initiatives


CSR private placement bonds “Tsunagari”

With “Tsunagari” CSR private placement bonds, an amount equivalent to 0.2% of total issue price is contributed by the Bank, and items that support children’s learning and growth are donated to schools, to foster sound development of the next generation and build up links between regional communities and children.

This year marks approximately three years since the launch of CSR private placement bonds in 2014, a first for a regional bank in the Kinki region. With the support of a large number of companies, these private placement bonds have been issued 230 times, in a total issue amount of ¥20.3 billion. This allowed the Bank to donate goods equivalent to ¥30.32 million to 182 elementary and junior high schools and other organizations.

Through CSR private placement bonds, we received a bookcase that all the students can use. Receiving this gift

made me think about the importance of valuing things. Instead of treating the gift simply as a thing but

appreciating the thoughts of others. I felt that this was what it was like to value something. The spirit of valuing

things is what is enabling us to have a pleasant school life.

I am grateful that there are people who extend support for our future. I will try to make the most of my school

life, holding the belief that working hard in your given situation is the best way of making repayment. I will try to

inspire my juniors to the same as well. Thank you very much.

Merchants in the Omi region had a philosophy called “Sampo yoshi” which means to bring happiness to three sides: the seller, the buyer, and society. Through CSR private placement bonds, we aim to add a fourth dimension — “good for local companies” — to our “Sampo yoshi” philosophy and so promote joint prosperity with the regional community.

By continuing to supply a wide range of financial products, the Bank will work to realize the cherished goal of development of regional communities and a brighter future, and contribute to a better society.

Merits of introducing CSR private placement bonds for issuing companies

● Able to make contributions to society through school education

● Able to publicize the company’s stance regarding CSR measures

● Leads to evidence of excellence as an enterprise and improvement of corporate image

Extending thanks to people who create hope for the future

Sora Hamanaka, Student Council President of Moriyama Junior High School

[The seller] Shiga Bank　　→Excavation of the fund needs[The buyer] The issuing company　　→Social contributions to the community, evidence of excellence as an enterprise, and improvement of corporate image[Public interest] Schools and children　　→Donating items to support children’s learning and growth[Something extra] Local companies　　→Regional economic vitalization (purchase of donation items from local companies)

Structure of CSR bonds o�ered through private placement

Issuing company

Issuance of CSR private placement bonds

Donation

Schools

Shiga Bank

*As of May 31, 2017

Mutual prosperity with “all employees”Mutual prosperity with the “regional community”

Regional vitalization

“Shiho yoshi”Good for Shiga Bank

The seller

Good for schools and children

Public interest

Good for the issuing company

The buyer

Good for local companies

Something extra

“Shiho yoshi” with the regional community

Toward a society that can connect by prioritizing children’s future

¥20.3 billion

Donations enabled by CSR private placement bonds

Harmonious coexistence with the “environment”

Challenge to a strategic CSRPrevention of global warming and biodiversity preservation

Declining birthrate, aging population, and depopulating society

● “Environmental management” which incorporates environment into our main businesses

● Environmentally-friendly products and services

● Drawing on the distinctive strengths of a regional bank to mobilize the community

● Regional prosperity, volunteering, welfare, and development of young people

● Positive action● Work-life balance● Employment of senior citizens● Employment of people with disabilities● Development of human resources

Finance benchmark

Total issue price of private placement bonds:

Donating gifts equivalent to 0.2% of total issue price are donated by the Shiga Bank


Finance benchmark

Building a prosperous society where people and communities can grow



Creation of shared valuesThe CSR Charter

Challenge to a strategic CSR— NEXT STAGE —

• Deepening of environmental �nance• Resolution of social issues (declining birthrate

and aging population, depopulation, etc.)• Support for the discovery of local resources

(tourism, specialty products and culture)• Strengthening networks and relationships

(industry, government, academy and NPO)

“Eco-o�ce creation”• Reduction in greenhouse gas emissions• Environment-conscious branches and

facilities, resource saving• Improvement of business e�ciency,

risk reduction (ISO 14001)

• Legal compliance, BCP, supply chain• Human resources development,

empowering female employees and work-life balance

• Environmental volunteering and dialogue with the community

• CSR private placement bonds “Tsunagari”: Realizing “Shiho yoshi” (Page 51)• CSR medical institution bonds “Hagukumi”: Support for medical institutions• Support for GAP accreditation Environmental protection (Page 55) Food safety Support for agricultural training• Purchase of JICA bonds (ESG investment)• Crowdfunding: Regional revitalization (Page 26)• Business alliance with Shiga University Solving regional issues• Multilingual QR code: Support for overseas visitors to Japan

• Shift to the �scal 2015 version of ISO 14001:Improvement of operations in the main business

• Repair work of the administrative center: Reduction in CO2 emissions Power usage reduction Improvement of operational e�ciency• Carbon-neutral branch: Reduction in CO2 emissions (Page 55)• Reduction in paper resources• Environmental cost management and

environmental accounting

• Work process reforms: empowering female employees (Page 57)

• Environmental volunteering:Improvement of environmental awareness (Page 55)

• Measures for compliance• Welfare: Grant awards (Page 56)• Raising awareness of human rights• BCP measures

Strategy

Results

Main theme the Bank should

aim for

Issues

Harmonious coexistencewith the environment

Mutual prosperitywith all employees

Mutual prosperitywith the regional

community

SDGs

Social issuesDepopulation, aging population, and global warming

Biodiversity and regional vitalization

ISO26000(7 core issues)

6th Medium-Term Business PlanBusiness environment/risk/management capital

Strategy1

Strategy2

Strategy3

Resolution of social issues through our main business

Resolution of environmental issues in our operations

Strengthening the CSR foundations that support our main business

Resolution of social issues

Sustainable society

① Strategy for resolution of social issues through our main business② Consideration for the environment and society in our main banking processes③ Dissemination of non-�nancial information

Strategic CSR (NEXT STAGE)


We established a CSR Committee headed by the President of the Bank

for cross-organizational discussion of longer-term planning, and annual

initiatives in CSR.

CSR basic information External communication

CSR promotional stance

Organization Chart of Environmental Management

Certified as Eco-First Enterprise

As a regional bank in Shiga Prefecture, home to Lake Biwa, an

“asset to be held in custody for future generations,” the Shiga Bank

has reaffirmed its mission of contributing to a sustainable society

by further expanding applications for “environmental finance” and

taking measures to ensure “prevention of global warming” and

“biodiversity preservation” in the spirit of “protecting the global

environment through the circulation of money.”

1) Conservation of resources and energy usage

2) Environmental protection through financial services

3) Complying with environmental laws and regulations, etc.

4) Participation of, and awareness-raising among, all employees

5) Disclosure of environmental policy

Environmental policy(established in October 1999 and revised in April 2010)

Policies for biodiversity preservation (established in August 2010)

The social mission of the Shiga Bank, whose headquarters is

located next the Lake Biwa, one of the world’s great ancient lakes

and home to a wide range of wildl i fe, is “environmental

management.” We are committed to protection of the “blessings

of the earth” in all their biodiversity and to building a sustainable

society in partnership with local communities.

1) Activities for protection of biodiversity launched by employees of all grades

2) Creating networks in partnership with all stakeholders across the region

3) Enhancement of environmentally-responsive financial products and services

In July 2008, the Bank submitted its “Eco-First Commitments” to the

Minister of the Environment, the first in the financial industry in Japan

and was certified as “Eco-First Enterprise.” As an environmental

front-runner, we will set challenging targets, and commit ourselves to

fulfilment of pledges.

In addition, we are working in collaboration

with staff members in charge of CSR/environment

from the ten “Eco-First Enterprises” headquartered

in Kansai as “Eco First in Kansai.”

In 2001, we became the first commercial bank in Japan

to sign the “UNEP Statement of Commitment by

Financial Institutions (FI) on Sustainable Development.”

Signed the UNEP FI Statement

The Bank has operated an env i ronmenta l

management system over the eighteen years

since obtaining ISO 14001 certification in 2000. In

fiscal 2016, we completed the transition to the

fiscal 2015 version and will take further steps to

streamline our main business through integration

of EMS into business processes.

Initiatives for ISO 14001

As the Shiga Headquarter of the Small Kindness

Movement, we will contribute to the regional

community through local environmental protection

activities and donations of wheelchairs.

As a member of “Small Kindness Movement”

We have been selected for 14 consecutive

years as a component stock of the FTSE4Good

Index Series. FTSE is a joint venture of The

Financial Times Ltd. and the London Stock

Exchange.

Selected as an SRI fund target stock

The Bank has signed the “Principles for Finance Action towards a

Sustainable Society (Principles for

Financia l Act ion for the 21st

Century)” which was established

in October 2011.

Signed the Principles for Financial Action for the 21st Century

We p a r t i c i p a te i n S h i g a G re e n

Purchasing Network, which aims at

“creating green economy from Shiga.”

As a member of Shiga Green Purchasing Network

President

Internal Audit Team

Environment Management Officer

CSR Committee

ISO Office

Associated companies

Advisors in charge of productsAdvisors in charge of legal affairs

Various departments and offices



The social mission of our company, which is headquartered by Lake Biwa, is to pursue CSR based around “environmental management” which incorporates the environment in management. We are also committed to prevention of global warming and biodiversity preservation as well as building of a sustainable society.

The Bank operates “environmental management” as a cycle in

story-telling.

We are helping create a sustainable society through our role as a financial inst i tut ion, such as development and provis ion of environmentally-responsive financial products and services.

Environmental awareness has been established as a “screening cr iter ion” in the Bank ’s “corporate credit rat ings.” Customers’ environmental protection measures are reflected in these ratings.

The Bank was selected as a financial institution that offers the “Environmentally-Friendly Loan Interest Subsidy and Grant Program” which is implemented by the Ministry of Environment.

The Bank has established its own unique “Shiga Bank Principles for Lake

Biwa (PLB)” to protect Lake Biwa and the global environment, and is

enlisting support for these principles.

In addition, the Bank rates customers who have agreed with the

principles of the PLB, using the “environmental rating (PLB rating)”

based on the Bank’s unique evaluation standards. This is used as a tool

for raising awareness of environmental management.

Customers who develop products or services that are practically

useful in preserving the environment or introduce energy-saving

facilities, etc. are eligible for funding under the “Principles for Lake Biwa

support fund (PLB Fund).” The Bank offers a discount of up to 0.5% on

annual interest rates on loans depending on degree of environmental

commitment shown in the rating.

The “Mirai Yoshi (Bright Future) Carbon Neutral Loan” is a service that

aims to promote introduction of natural energy and restore the

environment and ecosystem of Lake Biwa.

Preserving the environment and biodiversity through �nancial services

Financing

Funding(Total amount of ¥14,700 thousand from fiscal 2007 to 2016)

Broadening the uptake of renewable energy

Shiga Prefecture FisheriesPromotion Association

Discount 0.1% from the interest rate applied

Shiga Bank Customers

Shigagin CSR Charter (2007) Corporate philosophy of the Bank

Shiga Bank Principles for Lake Biwa (PLB) Approval Certi�cate (Year 2005) <10,826 cases>

PLB FundPLB rating 80

(for subsidized interest paymentsby the Ministry of Environment)

CSR privateplacement bonds

PLB rating <10,434 cases> PLB rating BD <5,569 cases>(Year 2009)

Environmental policy (October 1999) Policies for biodiversity preservation (August 2010)

SDGsUnited Nations Conference on Environment and Development (Earth Summit) in June 1992

“Two-pillar” pact to preserve the global environmentUnited Nations Framework

Convention on Climate Change

Harmonious coexistence with the environment — environmental management—

*As of May 31, 2017

Example of “environmental management” cycle

“Environmental �nance”

Corporate credit ratings system

Corporations and proprietors

Transaction policy matrix

Transaction policy

Self-assessment

Qualitative evaluations Industry trends Business foundation Care for the environment, etc.

Quantitative evaluations Pro�tability Safety Growth potential, etc.

Transaction pro�tabilityMaintainabilityFamiliarityCare for the environment

Credit ratings

Transaction evaluations

Sharing of areas needing improvem

ent and other issues uncovered by rating process

Proposal measures for improvement of corporate value

[Environmental �nance]

“Environmental management” cycle

[Eco-o�ce creation]

[Environmental volunteering]

Utilization of interest subsidies

Corporate credit ratings that take account of customer environmental awareness

The Bank’s original environmental rating (PLB)

United Nations Convention onBiological Diversity

Three principles in Shigagin Principles for Lake Biwa (PLB)1) We compile standards for production, marketing and

services that are useful for environmental protection.2) We aim to ensure environmentally-friendly corporate

conduct without missing business opportunities.3) We reduce environmental risk and realize a sustainable

regional society.

Converting the reduced amount of CO2 emission into monetary value

Protection, breeding and release program for Nigorobuna fish (carassius auratus grandoculis) and Wataka fish (ischikauia steenackeri) (In certain cases, such releases form part of volunteer activities of Bank employees.)

● Preserving biodiversity in Lake Biwa(Protection of Nigorobuna �sh (carassius auratus grandoculis) and Wataka �sh (ischikauia steenackeri), species threatened with extinction that are unique to Lake Biwa)

● Preserving the environment around Lake Biwa(Wataka �sh (ischikauia steenackeri) eats water weeds and prevent their over-proliferation)

● Protection of the dining culture of Japan’s Lake Country(Nigorobuna �sh (carassius auratus grandoculis) is a raw ingredient in crucian carp sushi)


In 2011, the Bank was certified for excellence in eco-commuting. The

Bank aims to raise awareness of eco-commuting in every employee,

and encourages them to shift to commutation modes of low

environmental impact such as trains, buses, bicycles, and walking.

We are recommending to our employees the “One Coin Eco Pass,”

an initiative led by the Shiga Bus Association, and are urging a shift

from commuting in private cars to using public transport for

environmental protection.

Recommending eco-commuting and One Coin Eco Pass system

We are committed to environmental protection and reduction of

greenhouse-gas emission volumes through inclusion at new branches

of “solar panels,” “solar street-lights,” “LED lighting,” “rainwater- harvesting

equipment,” “rooftop-greening” and other measures.

Ritto Branch was opened in 2015 as a “carbon-neutral store,” which

realize practically zero CO2 emissions. We aim to raise environmental

awareness among employees at our branches and the customers who

use them.

Development of environment-conscious branches

The “Shigagin Eco Style” summer campaign between May and October

a n d w i n te r c a m p a i gn b e t we e n D e c e m b e r a n d M a rc h a re

implemented, while lighting is reduced and overtime is discouraged.

In fiscal 2016, we conducted repair works of the Headquarter

administrative center installing the latest energy-saving facility and

realized significant power usage reduction.

Recycle system in the Bank

We have established recycling systems within Bank premises and are

taking measures to promote paper recycling and prevent data leakage.

Headquarters andassociated companies

Recycle systemin the Headquarters

Branches

Confidential documents containingcustomer information, etc.

As they are installed within Bank premises, leakage of confidential data is prevented

Paper resources

Paper recyclingplant

We are proactively involved in regional activities to improve the

environmental awareness of employees, promote exchange among

different areas and strengthen our links with the community.

Initiatives rooted in the community

Project to bring tea back to Mt. Kodakami Project to bring fish life into rice paddies

* Image of a carbon-neutral system in Ritto Branch

Reducing CO2 emissions by 34% using the energy-saving equipment, and the remaining

66% is covered by solar power generation.

Collection

Collection

Recycle

“Ikimonogatari”activities

The Bank is actively promoting resource and energy usage reduction in

accordance with the “Shigagin environmental policy.”

Eco-office creation

Power-saving measures

We are committed to protection of the environment and biodiversity

so as to pass on to future generations the bountiful blessings that the

global environment brings to us.

The Bank’s “Ikimonogatari” activities, unique to Shiga Prefecture, are all about protecting the quality of water in Lake Biwa and protecting and developing spawning grounds and reed beds to protect, nurture and release Nigorobuna fish (carassius auratus grandoculis) and Wataka fish (ischikauia), endangered species unique to the Lake, and to eliminate invading alien fish species.

Environmental volunteering

Elimination of foreign origin and fishing

Large-scale campaign to eliminate ludwigia stipulacea (water plant)

Biwa trout upstream project

Releasing Nigorobuna fish (carassius auratus grandoculis) and Wataka fish (ischikauia)

Reed-cuttingPlanting reed seedlings

“Ikimonogatari” (Tales of Life) activities with a story




We are taking measures to support welfare activities and development

of young people’s talents.

Regional contribution through financing Social contributions rooted in the community

The “Shigagin Welfare Fund,” a social welfare corporation, was

established in 1984 to commemorate the 50th anniversary of the

foundation of the Bank. It is a unique fund in Japan, making a wide

range of grants for experimental and pioneering welfare initiatives

being developed within the prefecture. Grants are limited to Shiga

Prefecture.

In fiscal 2017, the 33rd round of grants was paid out, with a total of

¥8,597 thousand approved for nine projects. A total of 473 projects

have been approved to date, and cumulative grants totaled ¥355.07

million.

Grants for innovative and pioneering regional welfare activities

Supporting athletes related to Shiga prefecture through time deposits

An amount equivalent to 0.005% of customer time deposit balances is

donated to the “Lakes Sports Fund,” which supports amateur sports.

In September 2016, the Bank donated ¥1,330 thousand. With an

eye to the 2020 Tokyo Olympics and Paralympics and the National

Sports Festival in 2024 in Shiga Prefecture, the Bank seeks to support

sports within the prefecture and revitalize the region.

Aiming to improve customer satisfaction

Ensuring worry-free services for as many customers as possible

From the perspective of CSR, the Bank organizes “training courses for

dementia support personnel” (as of April 30, 2017, enrolments totaled

459), “classes simulating the experience of the aged,” “AED training” and

other measures for all employees to improve employee skills in service

provision. We are also making branch facilities barrier-free.

Services for the hard of hearing, writing boards and illustrated guidance panels

AED (Automated external defibrillator) Convex glasses and magnifying glasses

The Bank arranges financial education including study of the

mechanisms of banking and the roles of money to foster self-reliance

in children and help them interact with society.

In addition to arranging visiting lecturers and “challenge week”

work-experience sessions for junior high school students, the Bank in

fiscal 2016 held Shigagin Junior Learning Team financial classes for

children of employees.

Financial education for the next generation

As a bank that advances hand-in-hand with community


We arrange “human resource” training based on learning daily communication skills, so as to further develop all employees and equip them with the skills to optimally serve the customer.

Personnel development policy for fiscal 2017 is geared to “fostering an awareness of corporate good citizenship and professionalism in banking.”

Developing “human resources”In 2006, the Bank established its “Committee for Advancing Women’s Success” as part of measures to ensure meaningful equality of opportunity and build a society in which men and women participate together. We promote the empowerment of women of ambition and ability.

Positive action

As a company that supports good parenting based on the Act on Advancement of Measures to Support Raising Next-Generation Children, the Bank was awarded “Platinum Kurumin certification,” the first for a regional bank in the Kinki area, on April 20, 2016.

We have introduced systems for maternity and childcare, and created a parent-friendly workplace with easy-to-use systems. We also provided mental health care follow-up and career development support. In the fourth period (April 2014 to March 2016), the Bank took further measures for promotion of men’s participation in childcare.

Looking ahead, we will continue to expand our support for childcare and to create a better workplace environment.

Expanding systems to support childcare

Empowering female employees

To cultivate human rights sensitivity, the Bank organizes employee training sessions to deepen understanding of sexual harassment, power harassment, Dowa discrimination and other human rights issues.

In fiscal 2017, the Bank organized a range of training courses with the theme of creating a “workplace where every individual is valued.” Other human rights initiatives included displays of various kinds of posters and asking a wide range of employees to come up with slogans.

Raising awareness of human rights

To promote a better work-life balance, we have established a “half-day annual paid leave system,” a mechanism enabling half-day units of leave to be taken from annual paid leave, and a “spouse maternity special leave system” for enabling male employees whose wives are in maternity to take special leave.

As an organization that is committed to home education for children, the Bank has likewise signed the “Shiga Prefecture Home Education Corporate Enterprise Agreement” with the Shiga Prefecture Board of Education, and encourages use of this system.

Work-life balance

The Bank’s action plan in response to the Act on Promotion of Women’s Participation and Advancement in the WorkplacePeriod of the plan: April 1, 2016 to March 31, 2020

● Proportion of women in management (general manager level or higher): more than 5%● Proportion of women in management (sub-assistant general manager level or higher): more than 25%● Percentage of women involved in corporate PR: more than 20%

Mutual prosperity with all employees — Work process reforms —

We support women’s advancement in the workplace through seminars and other events. We will take further measures to develop the roles of women in the workplace.

We were awarded the Award for Companies that Support Future Generations, a competition held by the Alliance of Governors for Supporting the Next Generation to Revive Japan, which comprise governors from 13 prefectures including Shiga. The Bank was recognized for its proactive support for childcare, women, and young employees, such as its initiative toward providing extensive childcare leave and those aimed at increasing the number of male employees taking such leave.

Award for Companies that Support Future Generations

Training for new employees of the Bank

Group training, O

JT, and instructor system

Fostering an awareness of corporate good citizenship and professionalism in banking

[Skill improvement]

● Training by job grade

● Training by duties

● Recruitment system

Respecting the human rights and individuality of each and every executive and regular employee, we are working to build a satisfying workplace.

[Expanding career programs]

● Reemployment system for early retirees and senior citizens

● Employment of people with disabilities

[Mental health care]

● Training for management-level employees

● Follow-up training for nurses at Bank health offices

● Partnerships with external experts

[System for discussion]

● Semi-annual interviews

with managers



“Grand Prize” in the “Shiga Biodiversity Award”

We adopted a storytelling approach in conveying the activities related

to the environmental issues at Lake Biwa and continued initiatives

distinctive of a financial institution that links those environmental

activities with our main business. Through these, our employees have

become more aware of environmental issues and more active in

participating in community activities, which led to us being highly

evaluated for the growing scope of our activities.

Hosts: Shiga Prefecture and

Shiga Committee for

Economic Development

Awards ceremony: March 2,

2017

We were awarded for being the first regional bank in Japan to compile

both an integrated report and a CSR report.

The Bank was highly evaluated for the following points: its CSR

orientation and strategy in the integrated report underpinned by the

Bank’s stance toward positioning environmental measures as a

management priority; the composition of the CSR report full of

illustrations and images that conveys the

Bank’s activities in an easy-to-understand

manner; its ideal balance between the two

reports.

Host: Global Environmental Forum of the Ministry

of the Environment

Awards ceremony: February 22, 2017

Environmental Communication AwardsWon the “Prize for Excellence” in Environmental Report Category

Particularly appreciated were initiatives unique to the Bank, such as

CSR private placement bonds enabling our “Shiho yoshi” philosophy

through finance, and our proprietary environmental rating (PLB rating)

system.

Host: Research Institute

for Environmental

Finance

Awards ceremony:

January 23, 2017

“Regional Finance Prize” in the “Sustainable Finance Awards”

CSR initiatives –evaluation from society-

● Awarded the Environmental Management Pearl Prize at the “1st Japan Environmental Management Award”

● Awarded the Financial Institution Category Prize at the “2nd Integrity Award”

● Awarded the Fujisankei Communications Group Prize at the “13th Global Environment Award”

● Awarded the Shiga Labor Bureau’s Award

● Certified as “FTSE4Good Global Index”

● Awarded the “Manager of the Year Award” of ZAIKAI for fiscal 2006

● Awarded Minister of the Environment Prize at the “9th Green Purchasing Award”

● Awarded the Chairman’s Prize from the New Energy Foundation at the “12th New Energy Award”

● Awarded the Grand Prize at the “5th Corporate Philanthropy Award”

● Registered as a “Work-Life Balance Promotion Company”

● Awarded the Grand Prize at the “BCAO Awards 2007”

● Certified as a company that proactively works to support childcare based on the “Act on

Advancement of Measures to Support Raising Next-Generation Children”

● Certified as “Eco-First Enterprise” by the Ministry of the Environment

● Awarded the “Kansai Eco Office Prize” for fiscal 2007

● Awarded the “Minister of the Environment’s Commendation for Global Warming Prevention Activity” for fiscal 2008

● Awarded the Prize for Encouragement at the “12th Environmental Communication Award”

● Awarded the Special Excellence Award in the Environmental Report Category at the “13th

Environmental Communication Award”

● Awarded the Environmental Management Pearl Prize at the “8th Japan Environmental Management Award”

● Ranked first in the nonmanufacturing sector/financial institutions category in the “14th

Environmental Management Survey” by Nikkei Inc.

● Awarded the judges’ special award at the “Stop Global Warming Award –Low Carbon Cup 2011–”

● Awarded the Prize for Excellence in the Environmental Television Commercial Category at the

“14th Environmental Communication Award”

● Certified for the second time as a company that proactively works to support childcare based on

the “Act on Advancement of Measures to Support Raising Next-Generation Children”

● Awarded the Minister of Agriculture, Forestry and Fisheries Prize at the “2nd Contest for Corporate Activities on Biodiversity”

● “Ikimonogatari activities” were included in the 2012 “Environmental White Paper”

● Certified as Good Practice in the “Principles for Finance Action towards a Sustainable Society”

● Awarded Grand Prize at the “15th Green Purchasing Award”

● CSR activities of the Bank were included in the Contemporary Ethics textbook for high schools

published by Shimizu Shoin

● Earned double commendations at the “17th Environmental Communication Award”

Environmental Report Grand Prize in the Environmental Report Category (Minister of the Environment Prize)

Prize for Excellence in the Environmental Television Commercial Category (President of Global Environmental Forum Prize)

● Certified again as “Eco-First Enterprise” by the Ministry of the Environment

● Certified for a third time as a company that proactively works to support childcare based on the

“Act on Advancement of Measures to Support Raising Next-Generation Children”

● Awarded the Minister of Health, Labour and Welfare Prize at the “50th National Convention of the Blood Donation Drive”

● Awarded the Prize for Encouragement at the 2nd “‘Miyako Environmentally Friendly Building’ Reward System” (Kyoto Branch)

● Awarded the Prize for Excellence at the “1st Kaueco GRAND PRIX”

● Awarded the Prize for Excellence in the Environmental Report Category at the “18th

Environmental Communication Award”

● Won the Outstanding Performance Award at the first “Low Carbon ‘Towns and Buildings’ Contest” (Ritto Branch)

● Won the Outstanding Performance Award at the “Integrity Award 2015”

● Awarded the first prize at the “Kankyo Hito-zukuri Kigyo Taisho 2014”

● Awarded the Shiga Labor Bureau Director’s award for promotion of equality and a better

work-life balance for fiscal 2015 in the family-friendly corporate category

● Awarded the first prize in the “2015 UCDA Award”

● Certified as Good Practice at the 4th “Principles for Finance Action towards a Sustainable Society”

● Adopted “Ikuboss declaration” (239 persons)

● Awarded “Platinum Kurumin certification” based on the “Act on Advancement of Measures to

Support Raising Next-Generation Children”

● Commended as a business operator that excels in environmental protection at the Shiga

Prefecture’s “Environment Protection Chairman’s Prize”

’03’04

’07

’08

’09’10

’11

’12

’13’14

’15

’16


Organization Chart

Consolidated Subsidiary

As of June 30, 2017

Company NameThe Shigagin Business Service Co.,Ltd.The Shigagin Agency Co.,Ltd.The Shigagin Cash Service Co.,Ltd.The Shiga Home Loan Guarantee Service Co.,Ltd.The Shigagin Computer Service Co.,Ltd.

The Shigagin Economic & Cultural Center Co.,Ltd.The Shiga DC Card Co.,Ltd.Shigagin Lease & Capital Co.,Ltd.The Shigagin JCB Co.,Ltd.

General Meeting of Stockholders

Board of Directors

Executive Committee


•Head Office Business Department•Domestic Branches•Sub-Branches

General Planning Dept.

Assets & Liabilities Managing Dept.


Secretariat

General Affairs Dept.

Personnel Affairs Dept.

Business Promotion Dept.

Credit Supervision Dept.

Financial Markets & International Dept.

Computer System Dept.


Hong Kong Branch

Shanghai Representative Office

Bangkok Representative Office

Chairman President Deputy President

Senior Managing Directors

Managing Directors

Office of Audit & Supervisory Board Members

Directors

The Shigagin Business Service Co., Ltd.

The Shigagin Agency Co., Ltd.

The Shigagin Cash Service Co., Ltd.

The Shiga Home Loan Guarantee Service Co., Ltd.

The Shigagin Computer Service Co., Ltd.

The Shigagin Economic & Cultural Center Co., Ltd.

The Shiga DC Card Co., Ltd.

Shigagin Lease & Capital Co., Ltd.

The Shigagin JCB Co., Ltd.

Meeting of Audit & Supervisory Board Members


The Shiga Bank, Ltd. and Consolidated Subsidiaries

Consolidated Five-year Summary

Millions of yen

2017 2016 2015 2014 2013

As of March 31

Total assets ¥5,539,561 ¥5,025,426 ¥4,996,976 ¥4,777,483 ¥4,662,055

Investment securities 1,467,592 1,428,917 1,542,013 1,422,210 1,486,497

Loans and bills discounted 3,461,905 3,257,723 3,051,704 2,916,953 2,822,561

Deposits 4,516,648 4,331,151 4,281,984 4,163,311 4,090,014

Total equity 374,246 346,714 349,851 292,466 267,535

Years ended March 31

Total income 90,162 95,940 88,499 88,519 88,872

Total expenses 69,412 73,621 64,439 69,072 74,991

Income before income taxes 20,749 22,319 24,060 19,447 13,880

Net income attributable to owners of the parent 14,895 15,508 13,675 11,027 5,544

Per share data (in yen)

Cash dividends ¥ 8.00 ¥ 8.00 ¥ 6.00 ¥ 7.00 ¥ 6.00

Net income 57.21 59.57 51.87 41.79 21.00

Net equity 1,425.41 1,310.98 1,324.63 1,091.45 998.62

Ratio

Capital ratio 16.67% 16.45% 15.94% 14.80% 14.14%

ROE 4.18% 4.52% 4.32% 3.99% 2.18%

Financial Section

Financial review (Consolidated basis)

During the fiscal year under review, the Japanese economy showed

a trend of moderate recovery as corporate profits, the employment

and earnings environment recovered as a result of government

economic policies and monetary easing policies by the Bank of

Japan. However, many concerns about the prospects for a fully

fledged economic remain, with strengthening uncertainty about

the administration of the United States.

Within the prefecture, despite signs of slowing growth in

certain areas of demand, there is positive momentum in corporate

production and employment, and the overall economy can be

considered to be in a moderate recovery stage.

In the financial sector, measures to provide customer-oriented,

high-quality services and to develop financial intermediary roles

were strengthened.

Balance sheets

Deposits, including negotiable certificates of deposit, rose ¥187,253

million during the fiscal year under review and the balance stood

at ¥4,603,126 million, of which ¥4,516,648 million were deposits, at

the end of the fiscal year under review. The balance of loans and

bills discounted increased ¥204,182 million to ¥3,461,905 million,

while securities increased ¥38,674 million to ¥1,467,592 million.

Total assets at fiscal year-end stood at ¥5,539,561 million, a year-on-

year increase of ¥514,135 million. Total equity amounted to

¥374,246 million, an increase of ¥27,531 million from the end of the

previous fiscal year.


Statements of operations

Regarding income, total income posted a year-on-year decrease of

¥5,693 million to ¥90,151 million. Meanwhile, due to a decrease in

credit costs, total expenses decreased by ¥4,389 million to ¥68,919

million. As a result, the Bank posted income before income taxes for

the fiscal year under review of ¥20,749 million, down ¥1,570 million

year-on-year, and net income attributable to owners of parent of

¥14,895 million, down ¥613 million year-on-year.

Additionally, as the Group consists of a single segment in the

banking business, business results by segment are not provided.

Cash flows

Cash and cash equivalents as of the end of the fiscal year under

review amounted to ¥469,250 million, an increase of ¥281,901

million year-on-year.

Cash flows from operating activities

Net cash provided by operating activities during the fiscal year

under review amounted to ¥286,223 million, an increase in pro-

ceeds of ¥419,626 million year-on-year, due primarily to increases

of the borrowed money, deposits, and payables under securities

lending transactions.

Cash flows from investing activities

Net cash used in investing activities amounted to ¥352 million, an

increase in outflows of ¥67,134 million year-on-year. This was

mainly the result of an increase in outflows from purchases of

securities.

Cash flows from financing activities

Net cash used in financing activities amounted to ¥3,967 million,

an increase of ¥2,266 million year-on-year. The main factor is

payments from changes in ownership interests in subsidiaries that

do not result in change in scope of consolidation.

3695

3654

3781

4,000

3,000

2,000

2551

2710

2714

1,000

20142013 2015 2016

Loans and bills discounted(Billions of yen)

0

1,500

1,000

1225

1113

1339

500

20142013 2015 2016

Investment securities(Billions of yen)

0

120

80

116.2 106.1

96.1 113.5

98.2 88.4

40

100

60

20

20142013 2015 2016

Total income and expenses(Billions of yen)

0

Total incomeTotal expenses5,000

4,000

3,000

2,000

1,000

20142013 2015 2016 2017 2017 20172017

Deposits(Billions of yen)

0



Consolidated Balance SheetAs of March 31, 2017 and 2016

Millions of yenThousands of

U.S. dollars

2017 2016 2017Assets

Cash and due from banks (Notes 3 and 31) ............................................................................................................. ¥ 470,106 ¥ 187,959 $ 4,190,266Call loans and bills bought .................................................................................................................................................. 2,506 642 22,337Debt purchased.......................................................................................................................................................................... 5,574 5,769 49,683Trading securities (Note 4) ................................................................................................................................................... 316 201 2,816Money held in trust (Note 5) .............................................................................................................................................. 10,831 8,724 96,541Investment securities (Notes 4, 12, 19 and 31) ....................................................................................................... 1,467,592 1,428,917 13,081,308Loans and bills discounted (Notes 7, 13 and 31) ................................................................................................... 3,461,905 3,257,723 30,857,518Foreign exchange assets (Note 8) ................................................................................................................................... 5,254 8,778 46,831Other assets (Notes 9 and 12)............................................................................................................................................ 58,747 70,381 523,638Tangible fixed assets (Notes 10, 11, and 14) ............................................................................................................. 57,924 58,626 516,302Intangible fixed assets ............................................................................................................................................................ 3,674 3,479 32,748Deferred tax assets (Note 30) ............................................................................................................................................. 641 697 5,713Customers’ liabilities for acceptances and guarantees (Note 19) ................................................................ 23,930 25,862 213,298Allowance for possible loan losses ................................................................................................................................. (29,445) (32,339) (262,456)

Total assets ........................................................................................................................................................................................... 5,539,561 5,025,426 49,376,602

LiabilitiesDeposits (Notes 12, 15 and 31) ......................................................................................................................................... 4,516,648 4,331,151 40,258,917Negotiable certificates of deposit (Note 31) ............................................................................................................ 86,478 84,722 770,817Call money and bills sold (Note 31) ............................................................................................................................... 90,276 51,284 804,670Payables under securities lending transactions (Notes 12 and 31) ............................................................ 137,947 26,937 1,229,583Borrowed money (Notes 12, 16 and 31) ..................................................................................................................... 206,830 50,509 1,843,568Foreign exchange liabilities (Note 8) ............................................................................................................................. 61 54 543Bonds with stock acquisition rights (Note 17) ........................................................................................................ 22,438 22,536 200,000Other liabilities (Note 18) ...................................................................................................................................................... 28,909 37,143 257,678Liability for employees’ retirement benefits (Note 29) ....................................................................................... 8,831 13,417 78,714Liability for retirement benefits of directors and Audit & Supervisory Board Members ............... 12 12 106Liability for reimbursement of deposits ...................................................................................................................... 504 911 4,492Allowance for repayment of excess interest ............................................................................................................ 61 73 543Reserve for other contingent losses .............................................................................................................................. 168 217 1,497Deferred tax liabilities (Note 30) ....................................................................................................................................... 35,007 26,539 312,033Deferred tax liabilities for land revaluation (Note 14) ......................................................................................... 7,208 7,337 64,248Acceptances and guarantees (Note 19) ...................................................................................................................... 23,930 25,862 213,298

Total liabilities..................................................................................................................................................................................... 5,165,315 4,678,711 46,040,779

Equity (Notes 20, 21 and 36)Common stock, authorized, 500,000,000 shares; issued, 265,450,406 shares as of March 31, 2017 and 2016 .......................................................................... 33,076 33,076 294,821Capital surplus ............................................................................................................................................................................. 24,577 23,966 219,065Stock acquisition rights ......................................................................................................................................................... 113 98 1,007Retained earnings ..................................................................................................................................................................... 185,201 172,152 1,650,779Treasury stock – at cost 5,144,295 shares and 5,137,718 shares as of March 31, 2017 and 2016, respectively ......................................................................................................... (3,490) (3,490) (31,107)Accumulated other comprehensive income:

Net unrealized gains on available-for-sale securities (Notes 4 and 6) .............................................. 120,103 106,243 1,070,532Deferred losses on derivatives under hedge accounting ........................................................................ (1,206) (1,660) (10,749)Land revaluation surplus (Note 14) ........................................................................................................................ 11,561 11,798 103,048Defined retirement benefit plans............................................................................................................................ 1,220 (820) 10,874

Total ................................................................................................................................................................................................... 371,158 341,363 3,308,298Noncontrolling interests ....................................................................................................................................................... 3,088 5,350 27,524

Total equity .......................................................................................................................................................................................... 374,246 346,714 3,335,823Total liabilities and equity .......................................................................................................................................................... ¥ 5,539,561 ¥ 5,025,426 $ 49,376,602

See Notes to Consolidated Financial Statements.



Consolidated Statement of IncomeYears ended March 31, 2017 and 2016


Consolidated Statement of Comprehensive IncomeYears ended March 31, 2017 and 2016


U.S. dollars

2017 2016 2017Income

Interest income:Interest on loans and discounts ............................................................................................................................... ¥ 38,075 ¥ 39,875 $ 339,379Interest and dividends on securities ..................................................................................................................... 13,651 12,805 121,677Other interest income .................................................................................................................................................... 232 250 2,067

Fees and commissions ........................................................................................................................................................... 13,923 13,992 124,101Other operating income (Note 22) ................................................................................................................................ 18,562 23,957 165,451Other income (Note 23) ........................................................................................................................................................ 5,716 5,059 50,949

Total income ........................................................................................................................................................................................ 90,162 95,940 803,654

ExpensesInterest expenses:

Interest on deposits ......................................................................................................................................................... 1,652 2,218 14,725Interest on borrowing and rediscounts .............................................................................................................. 1,234 889 10,999Other interest expenses ................................................................................................................................................ 704 374 6,275

Fees and commissions ........................................................................................................................................................... 4,627 4,430 41,242Other operating expenses (Note 24) ............................................................................................................................ 14,850 18,182 132,364General and administrative expenses .......................................................................................................................... 43,999 43,605 392,182Other expenses (Note 25) .................................................................................................................................................... 2,344 3,919 20,893

Total expenses ................................................................................................................................................................................... 69,412 73,621 618,700

Income before income taxes ................................................................................................................................................. 20,749 22,319 184,945

Income taxes (Note 30)Current ............................................................................................................................................................................................. 4,052 6,357 36,117Deferred .......................................................................................................................................................................................... 1,527 103 13,610

Net income .......................................................................................................................................................................................... 15,168 15,858 135,199Net income attributable to noncontrolling interests ........................................................................................ 273 349 2,433Net income attributable to owners of the parent ................................................................................................ ¥ 14,895 ¥ 15,508 $ 132,765

Yen U.S. dollars

2017 2016 2017Per share information (Notes 2 (u) and 35)Basic net income ................................................................................................................................................................................ ¥ 57.21 ¥ 59.57 $ 0.510Diluted net income .......................................................................................................................................................................... 50.61 52.73 0.451Cash dividends applicable to the year ................................................................................................................................. 8.00 8.00 0.071



U.S. dollars

2017 2016 2017Net income .......................................................................................................................................................................................... ¥ 15,168 ¥ 15,858 $ 135,199

Other comprehensive income (Note 33):Net unrealized gains (losses) on available-for-sale securities ................................................................ 13,819 (9,694) 123,174Deferred gains (losses) on derivatives under hedge accounting ....................................................... 454 (955) 4,046Land revaluation surplus .............................................................................................................................................. — 387 —Defined retirement benefit plans............................................................................................................................ 2,041 (7,062) 18,192

Total other comprehensive income (loss) ................................................................................................................. 16,315 (17,323) 145,422Comprehensive income (loss) ................................................................................................................................................... ¥ 31,484 ¥ (1,465) $ 280,631Attributable to

Owners of the parent .............................................................................................................................................................. ¥ 31,250 ¥ (1,866) $ 278,545Noncontrolling interests ....................................................................................................................................................... 233 401 2,076




Consolidated Statement of Changes in EquityYears ended March 31, 2017 and 2016

Millions of yen

AccumulatedOther Comprehensive Income

Common stock

Capital surplus

Stock acquisition

rightsRetained earnings

Treasury stock

Net unrealized gains on available-

for-sale securities

Deferred losses on

derivatives under hedge

accounting

Land revaluation

surplus

Definedretirement

benefit plans Total

Non-controlling

interestsTotal

equityBalance as of April 1, 2015 ............. ¥33,076 ¥23,968 ¥ 69 ¥157,989 ¥(3,486) ¥115,988 ¥ (704) ¥11,756 ¥6,241 ¥344,900 ¥4,951 ¥349,851Changes during the year:

Net income attributable to owners of the parent .................. 15,508 15,508 15,508

Cash dividends, ¥6.50 per share ...................................................... (1,692) (1,692) (1,692)

Purchase of treasury stock ......... (17) (17) (17)Sales of treasury stock .................. (2) 14 11 11

Reversal of land revaluation surplus ................................................. 346 346 346Other changes................................... 28 (9,745) (955) 41 (7,062) (17,693) 398 (17,294)

Net change in the year..................... — (2) 28 14,163 (3) (9,745) (955) 41 (7,062) (3,536) 398 (3,137)Balance as of March 31, 2016 ....... 33,076 23,966 98 172,152 (3,490) 106,243 (1,660) 11,798 (820) 341,363 5,350 346,714Changes during the year:


Cash dividends, ¥8.00 per share ...................................................... (2,082) (2,082) (2,082)Purchase of treasury stock ......... (27) (27) (27)Sales of treasury stock .................. (3) (0) 27 23 23Change in the parent’s ownership interest due to transactions with noncontrolling interests .................. 615 615 615

Reversal of land revaluation surplus ................................................. 236 236 236Other changes................................... 14 13,859 454 (236) 2,041 16,133 (2,262) 13,871

Net change in the year..................... — 611 14 13,048 0 13,859 454 (236) 2,041 29,794 (2,262) 27,531Balance as of March 31, 2017 ....... ¥33,076 ¥24,577 ¥113 ¥185,201 ¥(3,490) ¥120,103 ¥(1,206) ¥11,561 ¥1,220 ¥371,158 ¥3,088 ¥374,246

Thousands of U.S. dollars

AccumulatedOther Comprehensive Income

Common stock

Capital surplus

Stock acquisition

rightsRetained earnings

Treasury stock

Net unrealized gains on available-

for-sale securities

Deferred losses on

derivatives under hedge

accounting

Land revaluation

surplus

Definedretirement

benefit plans Total

Non-controlling

interestsTotal

equity

Balance as of March 31, 2016 ....... $294,821 $213,619 $ 873 $1,534,468 $(31,107) $ 946,991 $(14,796) $105,160 $ (7,309) $3,042,722 $47,686 $3,090,418Changes during the year:


Cash dividends, $0.07 per share ...................................................... (18,557) (18,557) (18,557)Purchase of treasury stock ......... (240) (240) (240)Sales of treasury stock .................. (26) (0) 240 205 205Change in the parent’s ownership interest due to transactions with noncontrolling interests .................. 5,481 5,481 5,481

Reversal of land revaluation surplus ................................................. 2,103 2,103 2,103Other changes................................... 124 123,531 4,046 (2,103) 18,192 143,800 (20,162) 123,638

Net change in the year..................... — 5,446 124 116,302 0 123,531 4,046 (2,103) 18,192 265,567 (20,162) 245,396Balance as of March 31, 2017 ....... $294,821 $219,065 $1,007 $1,650,779 $(31,107) $1,070,532 $(10,749) $103,048 $10,874 $3,308,298 $27,524 $3,335,823




Consolidated Statement of Cash FlowsYears ended March 31, 2017 and 2016


U.S. dollars

2017 2016 2017Operating activities:

Income before income taxes ............................................................................................................................................. ¥ 20,749 ¥ 22,319 $ 184,945Depreciation ................................................................................................................................................................................. 2,905 2,813 25,893Losses on impairment of long-lived assets ............................................................................................................... 430 210 3,832Increase (decrease) in allowance for possible loan losses ............................................................................... (2,893) 1,267 (25,786)Decrease in reserve for other contingent losses ................................................................................................... (49) (25) (436)Increase (decrease) in liability for retirement benefits ....................................................................................... (4,585) 7,553 (40,868)Increase (decrease) in liability for retirement benefits of directors and Audit & Supervisory Board Members ......................................................................................................................... 0 (2) 0Increase (decrease) in liability for reimbursement of deposits ..................................................................... (407) 110 (3,627)Increase (decrease) in allowance for repayment of excess interest ........................................................... (12) 26 (106)Interest income........................................................................................................................................................................... (51,959) (52,930) (463,133)Interest expense ......................................................................................................................................................................... 3,591 3,482 32,008Gains on sales and write-down of investment securities ................................................................................ (3,604) (10,824) (32,124)Gains on money held in trust ............................................................................................................................................ (160) (129) (1,426)Foreign exchange losses ....................................................................................................................................................... 1 9 8Losses (gains) on disposals of fixed assets – net .................................................................................................... 52 (13) 463Net increase in loans and bills discounted ................................................................................................................ (204,182) (206,019) (1,819,966)Net increase in deposits ........................................................................................................................................................ 185,497 49,166 1,653,418Net increase (decrease) in negotiable certificate of deposits ....................................................................... 1,755 (8,781) 15,643Net increase (decrease) in borrowed money (excluding subordinated loans) .................................. 156,321 (11,108) 1,393,359Net increase in due from banks (excluding deposits in Bank of Japan) .................................................. (245) (212) (2,183)Net decrease (increase) in call loans and others .................................................................................................... (1,669) 31,779 (14,876)Net increase in call money and bills sold ................................................................................................................... 38,991 8,732 347,544Net increase (decrease) in payables under securities lending transactions ......................................... 111,009 (8,428) 989,473Net decrease (increase) in foreign exchange assets ............................................................................................ 3,523 (3,150) 31,402Net increase (decrease) in foreign exchange liabilities ...................................................................................... 6 (316) 53Interest received (cash basis) ............................................................................................................................................. 51,622 52,912 460,130Interest paid (cash basis) ....................................................................................................................................................... (3,023) (3,099) (26,945)Other ................................................................................................................................................................................................. (9,908) (5,565) (88,314)

Subtotal ................................................................................................................................................................................... 293,757 (130,221) 2,618,388Income taxes – paid ................................................................................................................................................................ (7,534) (3,181) (67,153)

Net cash provided by (used in) operating activities....................................................................... 286,223 (133,403) 2,551,234

Investing activities:Purchases of securities ........................................................................................................................................................... (798,611) (760,925) (7,118,379)Proceeds from sales of securities ..................................................................................................................................... 644,638 672,978 5,745,948Proceeds from redemptions of securities .................................................................................................................. 158,863 160,692 1,416,017Increase in money held in trust ........................................................................................................................................ (2,149) — (19,155)Purchases of tangible fixed assets .................................................................................................................................. (2,062) (4,219) (18,379)Proceeds from sales of tangible fixed assets ............................................................................................................ 38 545 338Purchases of intangible fixed assets .............................................................................................................................. (1,070) (2,289) (9,537)

Net cash provided by (used in) investing activities ........................................................................ (352) 66,781 (3,137)

Financing activities:Purchase of treasury stock ................................................................................................................................................... (27) (17) (240)Proceeds from sales of treasury stock........................................................................................................................... 23 11 205Dividends paid ............................................................................................................................................................................ (2,082) (1,692) (18,557)Dividends paid to noncontrolling interests .............................................................................................................. (2) (2) (17)Payments from changes in ownership interests in subsidiaries that do not result in change in scope of consolidation .......................................................................................................................... (1,878) — (16,739)

Net cash used in financing activities ......................................................................................................... (3,967) (1,700) (35,359)Foreign currency translation adjustments on cash and cash equivalents ............................................. (0) (9) (0)Net increase (decrease) in cash and cash equivalents .......................................................................................... 281,901 (68,331) 2,512,710Cash and cash equivalents, beginning of year ........................................................................................................... 187,348 255,680 1,669,917Cash and cash equivalents, end of year (Note 3) ...................................................................................................... ¥ 469,250 ¥ 187,348 $ 4,182,636




Notes to Consolidated Financial StatementsYears ended March 31, 2017 and 2016

1. Basis of presenting consolidated financial statements

The accompanying consolidated financial statements have been prepared based on the accounts maintained by THE SHIGA BANK, LTD. (the “Bank”) and its significant subsidiaries (together the “Group”) in accordance with the provisions set forth in the Companies Act of Japan, the Japanese Financial Instruments and Exchange Act, and the Japanese Banking Act and in conformity with accounting principles generally accepted in Japan, which are different in certain respects as to the application and disclosure require-ments of International Financial Reporting Standards. Certain items presented in the consolidated financial statements submitted to the Director of the Kanto Finance Bureau in Japan have been reclassified in these accounts for the convenience of readers outside Japan. Amounts in yen of respective accounts included in the accompanying consolidated financial statements and notes thereto are stated in millions of yen by discarding fractional amounts less than ¥1 million. Therefore, total or subtotal amounts do not necessarily tie in with the aggregation of such account balances. Amounts in U.S. dollars are included solely for the convenience of readers outside Japan. The rate of ¥112.19 to U.S.$1, the rate of exchange at March 31, 2017, has been used in translation. The inclusion of such amounts is not intended to imply that Japanese yen amounts have been or could be readily converted, realized or settled in U.S. dollar amounts at this rate or any other rates.

2. Summary of significant accounting policies(a) Principles of consolidationThe accompanying consolidated financial statements for the year ended March 31, 2017 include the accounts of the Bank and nine consolidated subsidiaries. The consolidated subsidiaries’ respective fiscal periods end March 31 for the year ended March 31, 2017. The Bank has five other nonconsolidated subsidiaries in which invest-ments are not accounted for by the equity method because their net income (the portion corresponding to the Bank’s equity), retained earnings (as above) and accumulated other comprehensive income (as above) have no material impact on the Group’s financial position or business perfor-mance. All significant intercompany transactions have been eliminated in consolidation. All material unrealized profit included in assets resulting from transactions within the Group is eliminated.

(b) Cash equivalentsFor the purpose of reporting cash flows, cash and cash equivalents are defined as cash and due from the Bank of Japan.

(c) Trading securitiesTrading securities held by the Bank are stated at fair value at the fiscal year end (cost of sales, in principle, is computed by the moving-average method).

(d) Investment securitiesi. Marketable securities held for trading purposes are stated at fair value (cost of sales, in principle, is computed by the moving-average method). Securities held to maturity are stated at amortized cost (straight-line method) using the moving-average method. Securities available-for-sale for which current value can be estimated are stated at fair value at the fiscal year end. Securities whose fair value cannot be reliably determined are stated at cost using the moving-average method. Valuation gains/losses on securities available for sale are included in net assets, net of income taxes (cost of sales, in principle, is computed by the moving-average method).

ii. Marketable securities included in money held in trust by the Bank are treated as trust assets and are stated at fair value at the fiscal year-end.

iii. Beneficiary rights included in “debt purchased” are stated using the same methods described in (i) above.

(e) Derivatives and hedging activitiesUnder the Accounting Standards for Financial Instruments, derivatives are stated at fair value unless they are used for hedging purposes.

i. Interest rate risk hedgesThe Bank applies deferred hedge accounting to hedge transactions against interest rate risk arising from financial assets and liabilities. For the hedges that offset the fluctuations in the fair value of fixed interest rates classified as available-for-sale securities, interest rate swaps are assigned to hedged items collectively by bond type as the hedging instrument. The Bank designates the hedges so as to ensure that the important conditions related to the hedged items and hedging instruments are largely identical; therefore the hedges are considered to be highly effective, and the assessment of the effectiveness is based on the similarity of the conditions.

ii. Currency exchange risk hedgesRegarding the hedge accounting method applied to hedging transactions against currency exchange risk arising from assets and liabilities in foreign currencies, the Bank applies deferred hedge accounting stipulated in “Accounting and Auditing Concerning Accounting for Foreign Currency Transactions in Banking Industry” (JICPA Industry Audit Committee Report No. 25, July 29, 2002). The Bank assesses the effectiveness of exchange swaps executed to reduce the risk of changes in currency exchange rates with fund swap transactions by verifying that there exist foreign currency positions of the hedging instruments corresponding to the foreign currency monetary claims and debts to be hedged. Fund swap transactions are foreign exchange transactions that are contracted for the purpose of lending or borrowing funds in different currencies. These transactions consist of spot foreign exchange either bought or sold and forward foreign exchange either bought or sold.

(f) Bills discountedBills discounted are accounted for as financial transactions in accordance with JICPA Industry Audit Committee Report No. 24 (February 13, 2002), “Treatment for Accounting and Auditing of Application of Accounting Standard for Financial Instruments in Banking Industry.” The Bank has rights to sell or pledge bank acceptances bought, commercial bills discounted, documentary bills and foreign exchanges bought without restrictions. The total face value at March 31, 2017 and 2016 was ¥13,509 million ($120,411 thousand) and ¥14,490 million, respectively.

(g) Tangible fixed assets (except for lease assets)Tangible fixed assets are stated at cost less accumulated depreciation. Depreciation for buildings and equipment of the Bank is computed using the declining-balance method at a rate principally based on the estimated useful lives of the assets. However, buildings purchased on or after April 1, 1998 (excluding fittings and equipment), and fittings and equipment and structures purchased on or after April 1, 2016, are depreciated using the straight-line method. The range of useful lives is principally from 3 to 50 years for buildings and from 3 to 20 years for equipment. Depreciation of tangible fixed assets owned by subsidiaries is computed principally using the declining-balance method over the estimated useful lives of the assets. Under certain conditions such as exchanges of fixed assets of similar kinds and sales and purchases resulting from expropriation, Japanese tax acts permit companies to defer the profit arising from such transactions by reducing the cost of the assets acquired or by providing a special reserve in the equity section. The Bank adopted the former treatment and reduced the cost of the assets acquired by ¥3,572 million ($31,838 thousand) and ¥3,572 million at March 31, 2017 and 2016, respectively. Pursuant to an amendment to the Corporate Tax Act, the Group adopted Accounting Standards Board of Japan Practical Issues Task Force No. 32 “Practical Solution on a change in depreciation method due to Tax Reform 2016” and changed the depreciation method for building improvements and structures acquired on or after April 1, 2016, from the declining-balance method to the straight-line method. The impact on profit or loss for the year ended March 31, 2017 was immaterial.


(h) Long-lived assetsThe Group reviews its long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset or asset group may not be recoverable. An impairment loss would be recognized if the carrying amount of an asset or asset group exceeds the sum of the undiscounted future cash flows expected to result from the continued use and eventual disposition of the asset or asset group. The impairment loss would be measured as the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of the discounted cash flows from the continued use and eventual disposition of the asset or the net selling price at disposition. Accumulated impairment losses are directly deducted from the respec-tive fixed assets.

(i) Intangible fixed assets (except for lease assets)Depreciation for intangible fixed assets is computed under the straight-line method. Development costs for internally used software are capitalized and depreciated using the straight-line method over the estimated useful lives of 5 years.

(j) Lease assetsLease assets in “Tangible fixed assets” or “Intangible fixed assets” of the finance leases other than those that were deemed to transfer the ownership of the leased property to the lessee are computed under the straight-line method over the lease term with zero residual value unless residual value is guaranteed by the corresponding lease contracts.

(k) Allowance for possible loan lossesAllowance for possible loan losses of the Bank is provided as detailed below, pursuant to internal rules for write-offs and allowances. For debtors who are legally bankrupt (bankrupt, under special liquida-tion, or subject to legal bankruptcy proceedings) or virtually bankrupt (in a similar situation), an allowance is provided based on the amount of claims, after the write-off stated below, net of amounts expected to be collected through disposal of collateral or execution of guarantees. For loans to debtors who are likely to go bankrupt, an allowance is provided for the amount considered to be necessary based on an overall solvency assess-ment performed for the amount of such loans, net of amounts deemed collectible through disposal of collateral or execution of guarantees. For other loans, an allowance is provided based on historical loan loss experi-ence over a certain period of time. All loans are assessed by the branches and the operating divisions based on the Bank’s internal rules for self-assessment of assets. The Asset Assess-ment Division, which is independent from the branches and the operating divisions, subsequently conducts audits of their assessments, and an allowance is provided based on the audit results. For collateralized or guaranteed claims to debtors who are legally bankrupt or virtually bankrupt, the amount deemed unrecoverable, which is the amount of claims exceeding the estimated value of collateral or guaran-tees, has been written off and amounted to ¥12,960 million ($115,518 thousand) and ¥15,485 million as of March 31, 2017 and 2016, respectively. Allowance for possible loan losses of the Bank’s consolidated subsidiaries is provided based on historical loan loss experience in addition to amounts deemed necessary based on estimation of the collectibility of specific claims.

(l) Retirement and Pension PlansThe Bank has a contributory funded pension plan and lump-sum severance payment plan. Consolidated subsidiaries have unfunded lump-sum sever-ance payment plans. The projected benefit obligations are attributed to periods on a benefit formula basis. Past service costs are amortized on a straight-line basis over 10 years within the average remaining service period. Actuarial gains and losses are amortized on a straight-line basis over 10 years within the average remaining service period from the fiscal year follow-ing the respective fiscal year in which the difference is recognized. Consolidated subsidiaries adopt a simplified method where the amount to be required for voluntary termination at the fiscal year end is recorded as projected benefit obligations in the calculation of their liability for retirement benefits and retirement benefit costs.

(m) Liability for retirement of directors and Audit & Supervisory Board Members

Consolidated subsidiaries provide Liability for retirement benefits of directors and Audit & Supervisory Board Members at the amount required if they all retired at fiscal year end, calculated based on the internal rules of the Group.

(n) Liability for reimbursement of depositsLiability for reimbursement of deposits that were derecognized as liabilities under certain conditions is provided for possible losses on the future claims of withdrawal based on historical reimbursement experience.

(o) Allowance for repayment of excess interestAllowance for repayment of excess interest is provided at the estimated amount based on payment experience that the Bank’s consolidated subsidiaries may be required to refund upon customers’ claims.

(p) Reserve for other contingent lossesThe Bank provides reserves for contingent liabilities not covered by other reserves in an amount deemed necessary based on estimated losses in the future.

(q) Foreign currency transactionsReceivables and payables in foreign currencies and foreign branch accounts are translated into Japanese yen principally at the rates prevailing at the balance sheet dates.

(r) Accounting for leasesIn March 2007, the ASBJ issued ASBJ Statement No. 13, “Accounting Standard for Lease Transactions,” which revised the previous accounting standard for lease transactions.

i. As lesseeFinance lease transactions are capitalized by recognizing lease assets and lease obligations in the balance sheet.

ii. As lessorUnder the previous accounting standard, finance leases that were deemed to transfer ownership of the leased property to the lessee were to be treated as sales. However, other finance leases were permitted to be accounted for as operating lease transactions if certain “as if sold” information is disclosed in the notes to the lessor’s financial statements. The revised accounting standard requires that all finance leases that are deemed to transfer owner-ship of the leased property to the lessee should be recognized as lease receivables and all finance leases that are deemed not to transfer ownership of the leased property to the lessee should be recognized as investments in leases. Lease revenue and lease costs are recognized over the lease period.

(s) Income taxesThe provision for income taxes is computed based on the pretax income included in the consolidated statements of income. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred taxes are measured by applying currently enacted tax rates to the temporary differences. The Bank applied ASBJ Guidance No. 26, “Guidance on Recoverability of Deferred Tax Assets,” effective April 1, 2016. There was no impact from this for the year ended March 31, 2017.

(t) Appropriations of retained earningsThe consolidated statements of changes in equity reflect the appropriation resolved by the general shareholders’ meeting when duly resolved and paid.

(u) Per share informationBasic net income per share is computed by dividing net income attributable to common shareholders by the weighted-average number of common shares outstanding for the period, retroactively adjusted for stock splits.


Diluted net income per share reflects the potential dilution that could occur if securities were exercised or converted into common stock. Diluted net income per share of common stock assumes full conversion of the outstanding convertible notes and bonds at the beginning of the year (or at the time of issuance) with an applicable adjustment for related interest expense, net of tax, and full exercise of outstanding warrants. Cash dividends per share presented in the accompanying consolidated statements of income are dividends applicable to the respective fiscal years, including dividends to be paid after the end of the fiscal year.

3. Cash and cash equivalentsThe reconciliation of “Cash and cash equivalents” and “Cash and due from banks” in the consolidated balance sheets at March 31, 2017 and 2016, is as follows:


U.S. dollars

2017 2016 2017

Cash and due from banks .................... ¥470,106 ¥187,959 $4,190,266Other due from banks ............................ (855) (610) (7,621)

Cash and cash equivalents.......... ¥469,250 ¥187,348 $4,182,636

4. SecuritiesSecurities at March 31, 2017 and 2016 consisted of the following:


U.S. dollars

2017 2016 2017

Japanese government bonds ............ ¥ 402,200 ¥ 418,273 $ 3,584,989Japanese local government bonds ............................................................. 239,353 255,475 2,133,461Japanese corporate bonds .................. 373,345 391,557 3,327,792Corporate stocks ........................................ 221,673 179,273 1,975,871Other securities ........................................... 231,019 184,337 2,059,176

Total ............................................................. ¥1,467,592 ¥1,428,917 $ 13,081,308

Fair value and other information on securities at March 31, 2017 and 2016 were as follows. Securities include “Trading securities” and trust beneficiary right under “Debt purchased,” in addition to “Securities,” which are presented on the consolidated balance sheets.

Securities(1) Trading securities


U.S. dollars

2017 2016 2017

Losses included in lossduring the fiscal year

Trading securities ....................................... ¥(5) ¥(33) $(44)

(2) Held-to-maturity securitiesNo securities were classified as held to maturity as of March 31, 2017 and 2016.

(3) Available-for-sale securitiesAvailable-for-sale securities as of March 31, 2017 and 2016 were as follows:

Millions of yen

2017

Consolidatedbalance sheet

amount CostUnrealized

gains (losses)

Consolidated balance sheet amount exceeding cost:

Stocks .............................................................. ¥ 214,472 ¥ 59,004 ¥ 155,467Bonds: ............................................................. 861,933 845,243 16,689

Japanese government bonds ... 319,364 312,566 6,797Japanese local government bonds .....................................................

225,278 220,733 4,545

Japanese corporate bonds .......... 317,290 311,944 5,346Others ............................................................. 83,317 82,046 1,270Subtotal ........................................................ ¥1,159,723 ¥ 986,295 ¥173,427

Consolidated balance sheet amount not exceeding cost:

Stocks .............................................................. ¥ 3,195 ¥ 3,430 ¥ (235)Bonds: ............................................................. 152,965 156,139 (3,173)

Japanese government bonds ... 82,836 85,178 (2,342)Japanese local government bonds ..................................................... 14,074 14,308 (234)Japanese corporate bonds .......... 56,054 56,651 (597)

Others ............................................................. 141,825 145,703 (3,877)Subtotal ........................................................ 297,986 305,273 (7,287)Total ................................................................. ¥ 1,457,709 ¥ 1,291,569 ¥ 166,140

Millions of yen

2016



gains (losses)


Stocks .............................................................. ¥ 174,328 ¥ 55,683 ¥ 118,645

Bonds: ............................................................. 1,040,578 1,014,769 25,809

Japanese government bonds ... 398,051 386,841 11,210Japanese local government bonds ..................................................... 255,335 248,962 6,373Japanese corporate bonds .......... 387,191 378,966 8,224

Others ............................................................. 146,217 142,754 3,463

Subtotal ........................................................ ¥ 1,361,125 ¥ 1,213,207 ¥ 147,918


Stocks .............................................................. ¥ 1,549 ¥ 2,136 ¥ (586)

Bonds: ............................................................. 24,727 24,997 (269)

Japanese government bonds ... 20,221 20,399 (178)Japanese local government bonds ..................................................... 139 140 (0)Japanese corporate bonds .......... 4,366 4,457 (91)

Others ............................................................. 32,757 33,272 (514)

Subtotal ........................................................ 59,034 60,406 (1,371)

Total ................................................................. ¥ 1,420,160 ¥ 1,273,613 ¥ 146,546



2017



gains (losses)


Stocks .............................................................. $ 1,911,685 $ 525,929 $1,385,747Bonds: ............................................................. 7,682,797 7,534,031 148,756

Japanese government bonds ... 2,846,635 2,786,041 60,584Japanese local government bonds ..................................................... 2,008,004 1,967,492 40,511Japanese corporate bonds .......... 2,828,148 2,780,497 47,651

Others ............................................................. 742,641 731,312 11,320Subtotal ........................................................ $ 10,337,133 $ 8,791,291 $1,545,832


Stocks .............................................................. $ 28,478 $ 30,573 $ (2,094)Bonds: ............................................................. 1,363,445 1,391,737 (28,282)

Japanese government bonds ... 738,354 759,229 (20,875)Japanese local government bonds ..................................................... 125,447 127,533 (2,085)Japanese corporate bonds .......... 499,634 504,955 (5,321)

Others ............................................................. 1,264,150 1,298,716 (34,557)Subtotal ........................................................ 2,656,083 2,721,035 (64,952)Total ................................................................. $ 12,993,216 $ 11,512,336 $ 1,480,880

(4) Bonds classified as held to maturity were not sold for the years ended March 31, 2017 and 2016.

(5) Available-for-sale securities sold

Millions of yen

2017

Sales amount

Gains on sales

Losses on sales

Stocks .................................................................... ¥ 6,098 ¥ 1,365 ¥ —Bonds: ................................................................... 499,799 3,551 2,492

Japanese government bonds.......... 486,898 3,467 2,405Japanese local government bonds ........................................................... — — —Japanese corporate bonds ................ 12,901 83 86

Others ................................................................... 88,828 1,222 3Total ................................................................. ¥ 594,727 ¥ 6,139 ¥2,495

Millions of yen

2016

Sales amount

Gains on sales

Losses on sales

Stocks .................................................................... ¥ 4,615 ¥ 2,836 ¥ 2Bonds: ................................................................... 518,410 6,412 139

Japanese government bonds.......... 502,713 6,365 139Japanese local government bonds ........................................................... — — —Japanese corporate bonds ................ 15,697 46 0

Others ................................................................... 122,037 2,542 73

Total ................................................................. ¥ 645,063 ¥ 11,791 ¥215


2017

Sales amount

Gains on sales

Losses on sales

Stocks .................................................................... $ 54,354 $ 12,166 $ —Bonds: ................................................................... 4,454,933 31,651 22,212

Japanese government bonds.......... 4,339,941 30,902 21,436Japanese local government bonds ........................................................... — — —Japanese corporate bonds ................ 114,992 739 766

Others ................................................................... 791,763 10,892 26Total ................................................................. $ 5,301,069 $ 54,719 $ 22,239

6) Reclassification of investment securities due to change in intent of holding

Bonds classified as held to maturity of ¥70,011 million were reclassified to available-for-sale securities due to change in the operation policy during the year ended March 31, 2016. As a result of this change, investment securities, deferred tax liabilities and net unrealized gains on available-for-sale securi-ties as of March 31, 2016 increased by ¥3,417 million, ¥1,040 million and ¥2,377 million, respectively. No reclassification was made during the year ended March 31, 2017.

(7) Impairment losses on securitiesFor available-for-sale securities with market quotations (other than securities whose fair value cannot be reliably determined), in cases where the fair value has fallen substantially from the acquisition cost and there is believed to be little likelihood of a recovery in the acquisition cost level, said securities are shown on the balance sheets at fair value and the difference between the fair value and the acquisition cost is posted as a loss (hereinafter “impairment loss”). No impairment losses were recognized for the years ended March 31, 2017 and 2016. In addition, the Bank recognizes that fair value has fallen significantly based on standards that have been set out in the self-assessment standards for assets by the issuing companies of securities. The details are as follows: The Bank recognizes that the fair value of available-for-sale securities of legally bankrupt debtors, virtually bankrupt debtors, or debtors who are likely to go bankrupt, has fallen significantly when the fair value of such instruments as of the consolidated balance sheet date has decreased from the acquisition cost. For debtors on close watch, the Bank recognizes that the fair value has fallen significantly when the fair value as of the consoli-dated balance sheet date has decreased 30% or more from the acquisition cost. For normal debtors, it recognizes this when the fair value as of the consolidated balance sheet date has fallen 50% or more from the acquisition cost or when the fair value as of the consolidated balance sheet date has fallen 30% or more from the acquisition cost and the market prices remain below certain levels. Debtors on close watch are defined as those who will require close moni-toring in the future and normal debtors are defined as those other than legally bankrupt debtors, virtually bankrupt debtors, debtors who are likely to go bankrupt, or debtors on close watch.


5. Money held in trust(1) Money held in trust classified as trading

Millions of yen

2017 2016


amount

Gains (losses) included inprofit (loss)

duringthe fiscal year


amount



Money held in trust classified as trading ...... ¥10,831 ¥(42) ¥8,724 ¥3


2017


amount



Money held in trust classified as trading ...... $96,541 $(374)

(2) No money held in trust was classified as held to maturity.(3) No other money held in trust (other than money held in trust for trading

purposes and money in trust held to maturity).

6. Net unrealized gains/losses on available-for-sale securities

Available-for-sale securities were valued at market and net unrealized gains/losses on valuation were as follows:


U.S. dollars

2017 2016 2017

Net unrealized gains on investment securities............................ ¥166,140 ¥146,546 $1,480,880Deferred tax liabilities ............................. (45,748) (39,974) (407,772)Noncontrolling interests ....................... (288) (328) (2,567)Net unrealized gains on available-for-sale securities ...............

¥120,103 ¥106,243 $1,070,532

7. Loans and bills discountedLoans and bills discounted at March 31, 2017 and 2016, consisted of the following:


U.S. dollars

2017 2016 2017

Bills discounted ........................................... ¥ 13,374 ¥ 14,347 $ 119,208Loans on bills ................................................ 109,992 107,946 980,408Loans on deeds ........................................... 3,000,637 2,800,311 26,746,029Overdrafts ....................................................... 337,902 335,118 3,011,872

Total ............................................................. ¥ 3,461,905 ¥ 3,257,723 $ 30,857,518

Loans in legal bankruptcy totaled ¥372 million ($3,315 thousand) and ¥636 million as of March 31, 2017 and 2016, respectively. Nonaccrual loans totaled ¥44,760 million ($398,966 thousand) and ¥49,594 million as of March 31, 2017 and 2016, respectively. Loans in legal bankruptcy are loans in which the interest accrual is discontinued (excluding the portion recognized as bad debts) based on management’s judgment as to the collectibility of principal or interest resulting from the delay in payments of interest or principal for a considerable period of time and other factors. Nonaccrual loans are loans in which the interest accrual is discontinued, other than loans in legal bank-ruptcy and loans granting deferral of interest payment to the debtors in financial difficulties to assist them in their recovery.

Past due loans (three months or more) as to principal or interest pay-ments totaled ¥242 million ($2,157 thousand) and ¥338 million as of March 31, 2017 and 2016, respectively. Loans classified as loans in legal bankruptcy and nonaccrual loans are excluded. Restructured loans totaled ¥12,323 million ($109,840 thousand) and ¥15,418 million as of March 31, 2017 and 2016, respectively. Such restruc-tured loans are loans on which creditors grant concessions (e.g., reduction of the stated interest rate, deferral of interest payments, extension of maturity dates, waiver of the face amount, or other concessive measures) to the debtors to assist them in recovering from financial difficulties and eventually being able to pay creditors. Loans classified as loans in legal bankruptcy, nonaccrual loans and past due three months or more are excluded.

8. Foreign exchangesForeign exchange assets and liabilities at March 31, 2017 and 2016, consisted of the following:


U.S. dollars

2017 2016 2017

Assets:Due from foreign correspondents .................................. ¥ 3,950 ¥ 7,282 $ 35,208Foreign bills of exchange purchased .............................................. 0 3 0Foreign bills of exchange receivable ............................................... 1,304 1,492 11,623

Total ....................................................... ¥ 5,254 ¥ 8,778 $ 46,831

Liabilities:Foreign bills of exchange sold ..... ¥ 46 ¥ 41 $ 410Accrued foreign bills of exchange................................................ 14 13 124

Total ....................................................... ¥ 61 ¥ 54 $ 543

9. Other assetsOther assets at March 31, 2017 and 2016, consisted of the following:


U.S. dollars

2017 2016 2017

Prepaid expenses ....................................... ¥ 90 ¥ 124 $ 802Accrued income ......................................... 4,121 4,146 36,732Derivatives ..................................................... 2,526 3,127 22,515Other (Note 12) ........................................... 52,009 62,983 463,579

Total ............................................................. ¥ 58,747 ¥ 70,381 $ 523,638

10. Tangible fixed assetsTangible fixed assets at March 31, 2017 and 2016, consisted of the following:


U.S. dollars

2017 2016 2017

Buildings.......................................................... ¥ 14,444 ¥ 15,221 $ 128,745Land ................................................................... 38,431 38,611 342,552Construction in progress ...................... 2,082 1,310 18,557Other ................................................................. 2,965 3,482 26,428

Total ............................................................. ¥ 57,924 ¥ 58,626 $ 516,302

Accumulated depreciation on tangible fixed assets at March 31, 2017 and 2016 amounted to ¥47,448 million ($422,925 thousand) and ¥46,664 million, respectively.


11. Long-lived assetsThe Group recognized impairment losses for the years ended March 31, 2017 and 2016, as follows:

The Bank groups assets by branch, which is the minimum unit for management accounting. Subsidiaries group their assets by unit, which periodically manages profit and loss. The Bank wrote down the carrying amounts to the recoverable amounts and recognized impairment losses of ¥430 million ($3,832 thousand) and ¥210 million for the years ended March 31, 2017 and 2016, respectively, since the carrying amounts of the assets held by the above branches and other exceeded the sum of the undiscounted future cash flows. The recoverable amounts of these assets were measured at their net realizable selling prices, which were determined by quotations from real estate appraisal information, less estimated costs to dispose.

Impairment losses


U.S. dollars

Location Description Classification 2017 2016 2017

Shiga Prefecture Branch offices and other Equipment ............................................................... ¥ 6 ¥ — $ 53Shiga Prefecture Idle asset Land ............................................................................. 423 — 3,770Other Branch offices and other Land, buildings and equipment................. — 109 —Other Idle asset Land, buildings and equipment................. — 101 —

Total .................................................................................................................................................................................................... ¥ 430 ¥ 210 $ 3,832

Impairment losses are included in other expenses (Note 25).

12. Assets pledgedAssets pledged as collateral and related liabilities at March 31, 2017 and 2016, were as follows:


U.S. dollars

2017 2016 2017

Investment securities .............................. ¥405,118 ¥164,939 $3,610,999Other assets (investments in leases) (Note 9) ......................................... 1,157 1,135 10,312


U.S. dollars

Related liabilities 2017 2016 2017

Deposits........................................................... ¥ 26,087 ¥19,993 $ 232,525Payables under securities lending transactions ................................................ 137,947 26,937 1,229,583Borrowed money ....................................... 176,917 20,402 1,576,940

In addition, other assets (deposits to central counterparty) of ¥12,169 million ($108,467 thousand) at March 31, 2017 and investment securities totaling ¥46,777 million ($416,944 thousand) and ¥59,389 million at March 31, 2017 and 2016, respectively, were pledged as collateral for settlement of exchange and as securities for futures transactions and others. Other assets (Note 9) include guarantee deposits of ¥456 million ($4,064 thousand) and ¥780 million at March 31, 2017 and 2016, respectively.

13. Overdrafts and commitment linesOverdraft agreements and commitment line agreements are agreements that oblige the Group to lend funds up to a certain limit agreed in advance. The Group makes the loans upon the request of an obligor to draw down funds under such loan agreements as long as there is no breach of the various terms and conditions stipulated in the relevant loan agreements. The unused commitment balance relating to these loan agreements at March 31, 2017 and 2016 amounted to ¥908,532 million ($8,098,154 thousand) and ¥888,294 million, respectively, and the amounts of unused commitments whose original contract terms are within one year or unconditionally cancelable at any time were ¥875,449 million ($7,803,271 thousand) and ¥862,523 million at March 31, 2017 and 2016, respectively. In many cases, the term of the agreement expires without the loan ever being drawn down.

Therefore, the unused loan commitment will not necessarily affect future cash flows. Conditions are included in certain loan agreements that allow the Group to decline the request for a loan draw down or to reduce the agreed limit amount where there is due cause to do so, such as when there is a change in financial conditions or when it is necessary to do so in order to protect the Group’s credit. The Group takes various measures to protect its credit. Such measures include having the obligor pledge collateral to the Group in the form of real estate, securities, etc. on signing the loan agree-ments or, in accordance with the Group’s established internal procedures, confirming the obligor’s financial condition, etc. at regular intervals.

14. Land revaluationUnder the “Act of Land Revaluation,” promulgated on March 31, 1998 (final revision on May 30, 2003), the Bank elected a one-time revaluation of its own-use land to a value based on real estate appraisal information as of March 31, 2002. The resulting land revaluation surplus represented unreal-ized appreciation of land and was stated, net of income taxes, as a compo-nent of equity. There was no effect on the consolidated statement of income. Continuous readjustment is not permitted unless the land value subsequently declines significantly such that the amount of the decline in value should be removed from the land revaluation surplus account and related deferred tax liabilities. At March 31, 2017 and 2016, the carrying amount of the land after the above one-time revaluation exceeded the fair value by ¥12,785 million ($113,958 thousand) and ¥13,200 million, respec-tively.

Method of revaluationThe fair values were determined by applying appropriate adjustments for land shape and analysis on the appraisal specified in Article 2-3 of the Enforcement Ordinance of the Act of Land Revaluation effective March 31, 1998.


Description of bonds ........................................ Unsecured convertible bonds with stock acquisition rights, payable in Euro/U.S. dollars, due June 23, 2020

Class of shares to be issued ........................... Ordinary shares of common stock

Issue price for stock acquisition rights ... —

Exercise price of shares .................................... $5.925

Total amount of debt securities issued ...... $200,000 thousandTotal amount of shares issued by exercising stock acquisition rights ......... —Percentage of shares with stock acquisition rights ............................................... 100%Exercise period of stock acquisition rights ......................................................................... From April 7, 2015 to June 9, 2020Matters concerning substitute payment ................................................................. At the time of exercise of respective

stock acquisition rights, the bonds pertaining to the said stock acquisi-tion rights shall be contributed, and the price of such bonds shall be the same amount as their face value.

18. Other liabilitiesOther liabilities at March 31, 2017 and 2016, consisted of the following:


U.S. dollars

2017 2016 2017

Accrued income taxes ............................ ¥ 851 ¥ 4,202 $ 7,585Accrued expenses ..................................... 3,846 4,076 34,281Unearned income ..................................... 8,583 8,132 76,504Derivatives ..................................................... 3,851 4,602 34,325Other ................................................................. 11,777 16,129 104,973

Total ............................................................. ¥28,909 ¥37,143 $257,678

19. Acceptances and guaranteesAll contingent liabilities arising from acceptances and guarantees are reflected in “Acceptances and guarantees.” As a contra account, “Customers’ liabilities for acceptances and guarantees,” is shown as an asset representing the Bank’s right of indemnity from the applicants. The amounts of “Acceptances and guarantees” and “Customers’ liabilities for acceptances and guarantees” amounting to ¥19,961 million ($177,921 thousand) and ¥13,699 million as of March 31, 2017 and 2016, respectively, were set off because those which were relevant to corporate bonds and the guaranteed bonds were held by the Bank itself.

15. DepositsDeposits at March 31, 2017 and 2016, consisted of the following:


U.S. dollars

2017 2016 2017

Current deposits ......................................... ¥ 164,122 ¥ 148,288 $ 1,462,893Ordinary deposits ...................................... 2,066,624 1,961,105 18,420,750Deposits at notice ..................................... 73,286 47,661 653,231Time deposits............................................... 2,111,325 2,067,717 18,819,190Other deposits ............................................. 101,289 106,377 902,834

Total ............................................................. ¥4,516,648 ¥ 4,331,151 $ 40,258,917

16. Borrowed moneyAt March 31, 2017 and 2016, the weighted-average interest rates applicable to borrowed money were 0.42% and 1.17%, respectively. Borrowed money at March 31, 2017 and 2016, consisted of the following:


U.S. dollars

2017 2016 2017

Subordinated loans .................................. ¥ 20,000 ¥20,000 $ 178,269Borrowing from banks and other .... 186,830 30,509 1,665,299

Total ............................................................. ¥206,830 ¥50,509 $1,843,568

Annual maturities of borrowed money at March 31, 2017 were as follows:

Year ending March 31 Millions of yenThousands of

U.S. dollars

2018 .................................................................................................. ¥181,215 $1,615,2502019 .................................................................................................. 2,400 21,3922020 .................................................................................................. 1,710 15,2422021 .................................................................................................. 1,053 9,3852022 .................................................................................................. 407 3,6272023 and thereafter................................................................. 20,042 178,643

Total ............................................................................................ ¥206,830 $1,843,568

17. BondsBonds at March 31, 2017 and 2016, consisted of the following:

Millions of yenThousands

of U.S. dollars

2017 2016 2017 Interest rate Due

Convertible bonds with stock acquisition rights (*) .............................. ¥22,438 ¥22,536 $200,000 — June 23, 2020(*) The above convertible bonds with stock acquisition rights are subordinated bonds

with non-viability write-off clause. The description of the said bonds was as follows:


20. Equity(1) Capital stock and capital surplusThere were no changes in the number of common stock for the years ended March 31, 2017 and 2016.

(2) Companies ActJapanese companies are subject to the Companies Act of Japan (the “Companies Act”). The significant provisions in the Companies Act that affect financial and accounting matters are summarized below:

(a) DividendsUnder the Companies Act, companies can pay dividends at any time during the fiscal year in addition to the year-end dividend upon resolution at the shareholders’ meeting. For companies that meet certain criteria such as: (1) having a Board of Directors, (2) having independent auditors, (3) having an Audit & Supervisory Board, and (4) the term of service of the directors is prescribed as one year rather than two years of normal term by its articles of incorporation, the Board of Directors may declare dividends (except for dividends-in-kind) at any time during the fiscal year if the company has prescribed so in its articles of incorporation. However, the Bank cannot do so because it does not meet all the above criteria. The Companies Act permits companies to distribute dividends-in-kind (non-cash assets) to shareholders subject to a certain limitation and addi-tional requirements. Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if the articles of incorporation of the company so stipulate. The Companies Act provides certain limitations on the amounts available for dividends or the purchase of treasury stock. The limitation is defined as the amount available for distribution to the share-holders, but the amount of net assets after dividends must be maintained at no less than ¥3 million.

(b) Increases/decreases and transfer of common stock, reserve and surplusThe Companies Act requires that an amount equal to 10% (20% for banks pursuant to the Banking Act) of dividends must be appropriated as a legal reserve (a component of retained earnings) or as additional paid-in capital (a component of capital surplus), depending on the equity account charged upon the payment of such dividends, until the total of the aggregate amount of legal reserve and additional paid-in capital equals 25% (100% for banks pursuant to the Banking Act) of common stock. Under the Companies Act, the total amount of additional paid-in capital and legal reserve may be reversed without limitation. The Companies Act also provides that common stock, legal reserve, additional paid-in capital, other capital surplus and retained earnings can be transferred among the accounts under certain conditions upon resolution of the shareholders.

(c) Treasury stock and treasury stock acquisition rightsThe Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock by resolution of the Board of Directors. The amount of treasury stock purchased cannot exceed the amount available for distribution to the shareholders that is determined by a specific formula. Under the Companies Act, stock acquisition rights are presented as a separate component of equity. The Companies Act also provides that com-panies can purchase both treasury stock acquisition rights and treasury stock. Such treasury stock acquisition rights are presented as a separate component of equity or deducted directly from stock acquisition rights.

(3) Appropriations of retained earningsThe following appropriation of retained earnings at March 31, 2017 will be proposed at the Bank’s ordinary general shareholders’ meeting held on June 27, 2017.


U.S. dollars

Cash dividends (dividend amount per share: ¥4.5 or $0.040) ¥1,171 $10,437

21. Stock optionsThe stock options outstanding as of March 31, 2017, are as follows:

DescriptionPersonsgranted

Number of options granted

Date ofgrant

Exerciseprice

Exercise period

2013 Stock Option

9 directors 47,000 shares August 20, 2013

¥ 1 ($ 0.01)

From August 21, 2013 to August 20,

2043

2014 Stock Option


¥ 1 ($ 0.01)


2044

2015 Stock Option


¥ 1 ($ 0.01)


2045

2016 Stock Option


¥ 1 ($ 0.01)


2046

The stock option activity is as follows:

2013 StockOption

2014 StockOption

2015 StockOption

2016 StockOption

Year Ended March 31, 2017

Non-vested

April 1, 2016—Outstanding — — 15,350 —

Granted — — — 78,200

Canceled — — (1,100) —

Vested — — (14,250) (58,650)

March 31, 2017—Outstanding — — — 19,550

Vested

April 1, 2016—Outstanding 61,300 62,400 46,050 —

Vested — — 14,250 58,650

Exercised (14,300) (12,300) (11,300) —

Canceled — — — —

March 31, 2017—Outstanding 47,000 50,100 49,000 58,650

2013 StockOption

2014 StockOption

2015 StockOption

2016 StockOption

Exercise price ¥ 1 ¥ 1 ¥ 1 ¥ 1($0.01) ($0.01) ($0.01) ($0.01)

Average stock price at exercise ¥ 442 ¥ 442 ¥ 441 —

($3.94) ($3.94) ($3.93) ($ —)

Fair value price at grant date ¥ 528 ¥ 589 ¥ 634 ¥ 473

($4.71) ($5.25) ($5.65) ($4.22)

The Assumptions Used to Measure the Fair Value of the 2016 Stock Option

Estimate method: Black-Scholes option-pricing model

Volatility of stock price: 29.031%

Estimated remaining outstanding period: 2 years and 0 month

Estimated dividend: ¥8 per share

Risk free interest rate: 0.210% negative


22. Other operating incomeOther operating income for the years ended March 31, 2017 and 2016, consisted of the following:


U.S. dollars

2017 2016 2017

Gains on foreign exchange transactions-net ....................................... ¥ 406 ¥ 593 $ 3,618Gains on sales of bonds ......................... 4,483 8,902 39,958Other ................................................................. 13,672 14,461 121,864

Total ............................................................. ¥18,562 ¥23,957 $165,451

23. Other incomeOther income for the years ended March 31, 2017 and 2016, consisted of the following:


U.S. dollars

2017 2016 2017

Reversal of allowance for possible loan losses ................................................... ¥ 840 ¥ — $ 7,487Recovery of claims previously charged-off ................................................. 1,120 434 9,983Gains on sales of stocks and other securities ....................................................... 1,707 2,936 15,215Other ................................................................. 2,048 1,688 18,254

Total ............................................................. ¥5,716 ¥5,059 $50,949

24. Other operating expensesOther operating expenses for the years ended March 31, 2017 and 2016, consisted of the following:


U.S. dollars

2017 2016 2017

Losses on sales of government bonds ............................................................. ¥ 2,582 ¥ 277 $ 23,014Losses on redemption of bonds ...... — 669 —Expenses on derivatives other than for hedging .................................................

— 4,184 —

Other ................................................................. 12,267 13,051 109,341Total ............................................................. ¥14,850 ¥18,182 $132,364

25. Other expensesOther expenses for the years ended March 31, 2017 and 2016, consisted of the following:


U.S. dollars

2017 2016 2017

Provision of allowance for possible loan losses ................................................... ¥ — ¥2,365 $ —Charge-off of loans and bills discounted .................................................. 1,535 562 13,682Losses on impairment of long-lived assets (Note 11) ................ 430 210 3,832Losses on sales of investment in stocks .............................................................. — 76 —Other ................................................................. 379 704 3,378

Total ............................................................. ¥2,344 ¥3,919 $20,893

26. Gains (losses) related to bondsGains (losses) related to bonds for the years ended March 31, 2017 and 2016, consisted of the following:


U.S. dollars

2017 2016 2017Gains (losses) related to bonds including Japanese government bonds (five components of accounts):

Gains on sales of bonds ................... ¥ 4,483 ¥ 8,902 $ 39,958Losses on sales of bonds ................ (2,582) (277) (23,014)Losses on redemption of bonds ....................................................... — (669) —

Total ....................................................... ¥ 1,900 ¥ 7,955 $ 16,935Gains (losses) on derivatives: ¥ 55 ¥(4,184) $ 490Gains (losses) related to bonds ...... ¥ 1,956 ¥ 3,771 $ 17,434

27. Gains (losses) related to stocks and other securities

Gains (losses) related to stocks and other securities for the years ended March 31, 2017 and 2016, consisted of the following:


U.S. dollars

2017 2016 2017Gains (losses) related to stocks and other securities (three components of accounts):

Gains on sales of stocks and other securities ................................... ¥1,707 ¥2,936 $15,215Losses on sales of stocks and other securities ................................... — (76) —Losses on retirement of stocks and other securities ......................... — (3) —

Gains (losses) related to stocks and other securities ............................. ¥1,707 ¥2,856 $15,215

28. LeasesLessorOne subsidiary leases certain equipment and other assets. As stated in Note 2 (r) ii, finance lease transactions other than those in which ownership is fully transferred to the lessee are accounted for in a similar manner to ordinary sales and transactions, effective from the year ended March 31, 2009.

Investments in leases included in other assets on the balance sheets as of March 31, 2017 and 2016 consisted of the following:


U.S. dollars

2017 2016 2017

Gross lease receivables .......................... ¥17,633 ¥18,043 $157,170Unguaranteed residual values ........... 566 601 5,045Unearned interest income ................... (1,650) (1,729) (14,707)Investments in leases .............................. ¥16,549 ¥16,915 $147,508


Maturities of lease receivables for finance leases that are deemed to transfer ownership of the leased property to the lessee are as of March 31, 2017 are as follows:


U.S. dollars

2018 .................................................................................................. ¥28 $2492019 .................................................................................................. 16 1422020 .................................................................................................. 15 1332021 .................................................................................................. 14 1242022 .................................................................................................. 14 1242023 and thereafter................................................................. 23 205

Maturities of gross lease receivables related to investments in leases as of March 31, 2017 are as follows:


U.S. dollars

2018 .................................................................................................. ¥5,667 $50,5122019 .................................................................................................. 4,564 40,6802020 .................................................................................................. 3,419 30,4752021 .................................................................................................. 2,343 20,8842022 .................................................................................................. 1,134 10,1072023 and thereafter................................................................. 504 4,492

With regard to finance lease transactions entered into prior to April 1, 2008, that are not deemed to transfer ownership of the property to the lessee, leased investment assets are recognized at the book value of leased assets as of March 31, 2008. As a result, income before income taxes for the year ended March 31, 2016, increased by ¥0 million more than it would have been if the revised accounting standard was applied retroactively to all the finance lease transactions. The minimum rental commitments under noncancelable operating leases as of March 31, 2017 and 2016, were as follows:


U.S. dollars

2017 2016 2017

Due within one year ................................ ¥12 ¥18 $106Due after one year .................................... 11 17 98

Total ............................................................. ¥24 ¥36 $213

29. Retirement benefit plansThe Bank and consolidated subsidiaries have either funded or unfunded defined benefit plans. The Bank’s funded defined benefit corporate pension plan (contract type) provides lump-sum or annuity payments, the amounts of which are determined based on the length of service and certain other factors. The Bank’s lump-sum severance payment plan, which became a funded plan as a result of setting a retirement benefits trust, provides lump-sum payments determined based on the length of service, position, and certain other factors. The consolidated subsidiaries’ unfunded lump-sum severance payment plans are based on a simplified method in the calcula-tion of their liability for retirement benefits and retirement benefit costs.

1. Defined benefit plan (except for the plan adopting the simpli-fied method)

(1) The changes in defined benefit obligation for the years ended March 31, 2017 and 2016, were as follows:


U.S. dollars

2017 2016 2017

Balance at beginning of year ............. ¥51,272 ¥44,340 $457,010Current service cost ........................... 2,002 1,650 17,844Interest cost ............................................ 220 665 1,960Actuarial losses ...................................... 1,022 7,419 9,109Benefits paid ........................................... (3,100) (2,802) (27,631)Prior service cost .................................. — — —

Balance at end of year ............................ ¥51,418 ¥51,272 $458,311

(2) The changes in plan assets for the years ended March 31, 2017 and 2016, were as follows:


U.S. dollars

2017 2016 2017

Balance at beginning of year ............. ¥37,951 ¥38,568 $338,274Expected return on plan assets ........................................................ 442 591 3,939Actuarial gains (losses) ..................... 3,340 (2,296) 29,770Contribution from the employer ....................................... 2,203 2,253 19,636Benefits paid ........................................... (1,230) (1,165) (10,963)

Balance at end of year ............................ ¥42,706 ¥37,951 $380,657

(3) Reconciliation between the liability recorded in the consolidated balance sheet and the balances of defined benefit obligation and plan assets:


U.S. dollars

2017 2016 2017Funded defined benefit obligation ................................... ¥51,418 ¥51,272 $458,311Plan assets ...................................................... (42,706) (37,951) (380,657)Net liability arising from the balance sheet ................................... ¥ 8,711 ¥13,321 $ 77,645


U.S. dollars

2017 2016 2017

Liability for retirement benefits ........ ¥8,711 ¥13,321 $77,645Asset for retirement benefits .............. — — —Net liability arising from the balance sheet ................................... ¥8,711 ¥13,321 $77,645

(4) The components of net periodic benefit costs for the years ended March 31, 2017 and 2016, were as follows:


U.S. dollars

2017 2016 2017

Service cost ................................................... ¥2,002 ¥1,650 $17,844Interest cost................................................... 220 665 1,960Expected return on plan assets ........ (442) (591) (3,939)Recognized actuarial (gains) losses .. 617 (651) 5,499Amortization of prior service cost ... — — —Net periodic benefit costs .................... ¥2,398 ¥1,073 $21,374


(5) Amounts recognized in other comprehensive income (before income tax effect) in respect of defined retirement benefit plans for the years ended March 31, 2017 and 2016, were as follows:


U.S. dollars

2017 2016 2017

Prior service cost ........................................ ¥ — ¥ — $ —Actuarial (gains) losses ........................... (2,935) 10,366 (26,160)Total .................................................................... ¥(2,935) ¥10,366 $(26,160)

(6) Amounts recognized in accumulated other comprehensive income (before income tax effect) in respect of defined retirement benefit plans as of March 31, 2017 and 2016, were as follows:


U.S. dollars

2017 2016 2017

Unrecognized prior service cost ...... ¥ — ¥ — $ —Unrecognized actuarial (gains) losses............................................................... (1,754) 1,180 (15,634)Total .................................................................... ¥(1,754) ¥1,180 $(15,634)

(7) Plan assets:a. Components of plan assets

2017 2016

Bonds ............................................................................................... 19% 22%Stocks ............................................................................................... 55 52

Cash and cash equivalents ................................................. 7 7

General accounts ...................................................................... 19 19

Total ................................................................................................... 100% 100%

(Note) Total plan assets included retirement benefits trust of 44% and 42%, for the years

ended March 31, 2017 and 2016, respectively, mainly consisting of 5 stocks, which were

set for a corporate pension plan and a lump-sum payment plan.

b. Method of determining the expected rate of return on plan assetsThe expected rate of return on plan assets is determined considering allocation of plan assets and the long-term rates of return which are expected currently and in the future from the various components of the plan assets.

(8) Assumptions used for the years ended March 31, 2017 and 2016, were set forth as follows:

2017 2016

Discount rate ............................................................................... 0.43% 0.43%Expected rate of return on plan assets

Plan assets (except for retirement benefits trust) ......................................................................................... 2.01% 2.80%Plan assets (retirement benefits trust) ................... 0.00% 0.00%

Estimated rate of salary increase ..................................... 3.50% 3.50%

2. Defined benefit plan adopting the simplified method(1) The changes in defined benefit obligation adopting the simplified

method for the years ended March 31, 2017 and 2016, were as follows:


U.S. dollars

2017 2016 2017

Balance at beginning of year ............. ¥ 95 ¥91 $ 846Net periodic benefit costs .............. 33 12 294Benefits paid ........................................... (8) (8) (71)Contribution to the plan ................. — — —

Balance at end of year ............................ ¥120 ¥95 $1,069

(2) Reconciliation between the liability recorded in the consolidated balance sheet and the balances of defined benefit obligation and plan assets:


U.S. dollars

2017 2016 2017

Unfunded defined benefit obligation..................................................... ¥120 ¥95 $1,069Net liability arising from the balance sheet ................................... ¥120 ¥95 $1,069


U.S. dollars

2017 2016 2017

Liability for retirement benefits ........ ¥120 ¥95 $1,069Net liability arising from the balance sheet ................................... ¥120 ¥95 $1,069

(3) Net periodic benefit costs recognized in the simplified method for the years ended March 31, 2017 and 2016, were ¥34 million ($303 thou-sand) and ¥12 million, respectively.

3. Defined contribution planNot applicable.

30. Income taxesThe tax effects of significant temporary differences that resulted in deferred tax assets and liabilities at March 31, 2017 and 2016, were as follows:


U.S. dollars

2017 2016 2017

Deferred tax assets:Allowance for possible loan losses ........................................................ ¥ 11,228 ¥ 12,822 $ 100,080Devaluation of stocks and other securities................................................. 5,466 5,462 48,720Liability for employees’ retirement benefits .......................... 5,285 5,734 47,107Depreciation ........................................... 1,487 1,610 13,254Accrued enterprise tax ..................... 115 318 1,025Defined retirement benefit plans .......................................................... — 359 —Other ........................................................... 2,366 2,710 21,089Less valuation allowance ................ (13,859) (14,615) (123,531)

Total ....................................................... ¥ 12,091 ¥ 14,403 $ 107,772Deferred tax liabilities:

Reserve for advance depreciation of fixed assets ........ (175) (175) (1,559)Reserve for special account of advanced depreciation of fixed assets ............................................ — (96) —Net unrealized gains on available-for-sale securities ......... (45,748) (39,974) (407,772)Defined retirement benefit plans .......................................................... (534) — (4,759)

Total ....................................................... (46,457) (40,246) (414,092)Net deferred tax assets .................. ¥ (34,366) ¥ 25,842 $ (306,319)


A reconciliation between the normal effective statutory tax rate and the actual effective tax rate reflected in the accompanying consolidated statements of income for the years ended March 31, 2017 and 2016, is as follows:

2017 2016

Normal effective statutory tax rate ................................................................... 30.6% 32.8%Permanent differences – mainly dividends received ................................. (1.0) (0.9)Increase in valuation allowance for deferred tax assets .......................... (3.7) (6.2)Decrease in deferred tax assets due to changes in statutory tax rate ................................................................... — 2.7

Other ................................................................. 0.9 0.5

Actual effective tax rate ...................... 26.8% 28.9%

31. Financial instruments and related disclosures

1. Overall situation concerning financial instruments(1) Basic policy for financial instrumentsAs a regional financial institution with its main business base in Shiga Prefecture, the Group provides financial services centered on banking operations. The Group’s main operations are to extend loans to customers in its business area, and make investments in securities by mainly using funds that are received as deposits from customers and those that are obtained through the financial market. To carry out these operations, the Group has financial assets and financial liabilities that are largely subject to interest rate volatility. To prevent adverse effects from such interest rate volatility, the Group conducts Asset Liability Management (ALM), the comprehensive management of assets and liabilities.

(2) Nature and extent of risks arising from financial instrumentsThe financial assets held by the Group are primarily loans to customers within its business area and are subject to credit risk caused by the contrac-tual default of its customers. The Group’s domestic loan portfolio attempts to distribute risk by industry sector to eliminate its exposure to credit risk caused by changes in the business environment in certain industries. The Group holds investment securities, primarily comprised of bonds, corporate stocks and investment trusts, for the following purposes: to sell them to customers, for purely investment purposes, and for strategic investment. These are subject to interest rate volatility risk, market price volatility risk, and the credit risk of the issuers. Foreign currency-denominated loans and bonds are subject to foreign exchange risk. They are managed to reduce foreign exchange risk by procuring foreign currency funds through currency swaps, repurchase transactions, or call transactions. Financial liabilities are primarily deposits from customers as well as borrowed money and bonds with stock acquisition rights. Borrowed money and bonds with stock acquisition rights are — under certain conditions, such as when the Group is unable to access the market — subject to risks that losses are incurred due to an inability to secure required funds or being forced to raise funds at significantly higher than normal interest rates. Moreover, some of the Group’s borrowings are made at variable interest rates and are subject to risks of losses from increasing fund procurement costs associated with rising interest rates. To respond to customer needs and hedge market risks for assets and liabilities, the Group uses derivative transactions, including interest rate swaps, currency swaps, currency options, and forward exchange contracts. For some of these transactions, the Group applies hedge accounting based on internal regulations that comply with the “Practical Guidelines for Financial Instruments” of the Japanese Institute of Certified Public Accoun-tants and the Group’s own hedging policies.

To obtain short-swing profits, the Group transacts bond futures contracts, bond options, and stock price index futures trading after setting position limit and loss limits amounts. These derivative transactions include the market risk of incurring potential losses from market fluctuations, such as fluctuations in interest rates and exchange rates, as well as the credit risk of incurring potential losses when the counterparty to the transaction defaults on a contract.

(3) Risk management for financial instruments(i) Credit risk managementRecognizing credit risk as the most important risk to business management from the standpoint of its size and scope, the Group has established regulations and standards pertaining to such risk. It has also developed a borrower rating system based on a Foundation Internal Ratings-based approach and has built a credit risk management system appropriate to its needs. Notably, the Group has developed a rating system that involves asset self-assessments. Under this system, for example, the Business Management department reports the results of its own asset ratings at meetings such as the Meeting of Managing Directors. With respect to individual credit management, the Group has instituted its “Basic Rules of Loan Business,” in which it has clearly defined the way of thinking and a code of conduct to which all employees involved in the loan business should adhere. It has also established basic procedures to follow when making credit decisions or managing credit, along with putting in place a system that enables executives and employees to make credit decisions in accordance with the principles of public benefit, security, profitability, liquidity, and growth potential. More specifically, the Group has developed and is operating a credit management system that handles credit assessment, credit limits, credit information management, and internal ratings; sets guarantees and collateral; and deals with problem debts of companies (or corporate groups) or individual projects. This credit manage-ment system is being implemented in every bank branch and the Credit Supervision department. With respect to extending credit to overseas borrowers, the Group manages it by setting a credit limit for each country at the Meeting of Managing Directors each fiscal year, after taking into account the foreign currency conditions and the political and economic situation of the country in which the borrower resides. With respect to conducting market transactions for securities or other instruments, a limit is set semiannually at the Meeting of Managing Directors for bond issuer credit risk and counterparty risk for derivative and financial transactions, and the credit status and the market prices are managed on a daily basis. The Group has established a system in which reports about those risks are routinely given to the Meeting of Managing Directors.

(ii) Market risk managementThe Group has compiled a set of Market Risk Management Rules with the goal of upgrading market risk management, strengthening internal controls, and ensuring sound management. To achieve stable profits, the Group institutes a financial plan and risk management policy semiannually and is working to build an appropriate risk management system.1) Interest rate risk managementAs interest rate risk inevitably arises in banking business operations, the Group manages all assets and liabilities (including off-balance transactions), such as deposits, loans, and securities, in a comprehensive manner through ALM. Along with the aforementioned Market Risk Management Rules, the Group has established standards for risk management methods and reporting procedures. The Group conducts monitoring through such models as Value at Risk (VaR) and the maturity ladder approach, and reports to the ALM Committee on a regular basis.2) Exchange rate risk managementFor exchange rate volatility risk, the Group sets position limits at the Meeting of Managing Directors to manage positions that are subject to exchange rate risk. The Group controls positions by using derivative transactions, including foreign currency transactions and currency swaps. The Group establishes an acceptable level of risk using VaR and manages the level of risk on a daily basis so that it stays within an acceptable range.


3) Price volatility risk managementTo rigorously manage price volatility risk for transactions, including securities, the Group has divided the organization into a market transaction sector, business management sector, and risk management sector. For market transactions including securities, the Group takes into account overall Group risk and return, based on a financial plan and a risk management policy, and formulates a business management plan in the market sector. When making investments, the Group calculates position amounts, gains, and losses as well as VaR and Basis Point Value (BPV) based on the abovementioned policy and plan. The extent to which the Group complies with the established acceptable risk limit and other risk limits is monitored on a daily basis and is reported to management.4) Derivative transaction managementWith respect to derivative transactions, the divisions concerned with the execution of transactions, the evaluation of hedge effectiveness, and business management have been separated, and an internal checking system has been established. Because a majority of the Group’s derivative transactions are performed for the purposes of hedging and cover transac-tions to customer transactions, the Group manages them so that asset and liability risks and market risks are offset with each other.5) Quantitative information regarding market risksRegarding market risks, the Group measures the quantitative risk of interest rate risks and stock price volatility risks through VaR, a statistical method. Principally by reporting these risks to the ALM Committee and other organizations on a regular basis, the Group ensures appropriate monitoring and management. In calculating the risk amounts, the Group adopts a historical simulation method (a holding period of one year, a confidence interval of 99%, and an observing period of two years).

Interest rate risksThe Group measures interest rate risks of all its assets and liabilities, including loans, securities and deposits, and derivative transactions.

The Group’s interest rate risk amounts stood at ¥14,967 million ($133,407 thousand) as of March 31, 2017 and ¥3,853 million as of March 31, 2016.

Regarding liquid deposits, such as ordinary deposits, the Group handles some as deposits that remain with the Group for an extended period and manages them by allocating them to each period category based on an internal model.

Stock price volatility risksThe Group holds certain shares for strategic investment and purely investment purposes. The volatility risk amounts of the prices of such shares stood at ¥66,474 million ($592,512 thousand) as of March 31, 2017, and ¥51,614 million as of March 31, 2016.

BacktestingTo verify the appropriateness of the risk amounts that are measured through VaR, the Group carries out backtesting in which VaR is compared with gains and losses. In this way, the Group analyzes the effectiveness of the risk measurement method. However, because VaR statistically measures the amounts based on the historical market volatility, results may vary due to assumptions, measuring methods, and other factors. In addition, risks may not be able to be appropriately captured when the market environment changes drastically.

Interest rate risks and stock price volatility risks that are held by the Bank’s consolidated subsidiaries are excluded from the calculation of the market risk amount as the impact from such risks on the Group is limited.

(iii) Liquidity risk management related to financingThe Group has compiled a set of Liquidity Risk Management Rules under a basic policy of clearly understanding its cash position and ensuring stable financing. In this way, it strives to establish an appropriate risk management system. With respect to daily financing, the Group monitors and manages the financial environment, the balance of realizable current assets, the expected amount of cash outflows, and other such factors. The Group reports the financing situation and other related matters to the ALM Committee on a regular basis.

2. Fair value of financial instrumentsFair value and the consolidated balance sheet amount of as of March 31, 2017 and 2016, are shown below. Immaterial accounts on the consolidated balance sheet are not included in the table below. Some instruments, such as unlisted stocks, whose fair value cannot be reliably determined, are not included in the table below (see Note 2).

Millions of yen

2017


amount Fair value Difference

Cash and due from banks ........................ ¥ 470,106 ¥ 470,106 ¥ —Investment securities

Trading securities..................................... 4,908 4,908 —Available-for-sale securities ............... 1,456,487 1,456,487 —

Loans and bills discounted ...................... 3,461,905 — —Allowance for possible loan losses (*1) ................................................... (28,744) — —

3,433,161 3,454,611 21,449Assets total ......................................................... 5,364,663 5,386,113 21,449Deposits............................................................... 4,516,648 4,517,070 422Negotiable certificates of deposit ....... 86,478 86,481 3Call money and bills sold .......................... 90,276 90,276 —Payables under securities lending transactions .................................................... 137,947 137,947 —Borrowed money ........................................... 206,830 207,947 1,116Liabilities total .................................................. 5,038,181 5,039,723 1,542Derivative transactions (*2)

Deferred hedge accounting is not applied ............................................... 407 407 —Deferred hedge accounting is applied ......................................................... (1,733) (1,733) —

Derivative transactions total ................... ¥ (1,325) ¥ (1,325) ¥ —


Millions of yen

2016



Cash and due from banks ........................ ¥ 187,959 ¥ 187,959 ¥ —Investment securities

Trading securities..................................... 5,383 5,383 —

Available-for-sale securities ............... 1,418,384 1,418,384 —


3,226,121 3,263,050 36,928

Assets total ......................................................... 4,837,848 4,874,777 36,928Deposits............................................................... 4,331,151 4,331,708 557

Negotiable certificates of deposit ....... 84,722 84,725 3

Call money and bills sold .......................... 51,284 51,284 —Payables under securities lending transactions .................................................... 26,937 26,937 —Borrowed money ........................................... 50,509 52,052 1,543

Liabilities total .................................................. 4,544,605 4,546,709 2,104Derivative transactions (*2)

Deferred hedge accounting is not applied ............................................... 913 913 —Deferred hedge accounting is applied ......................................................... (2,388) (2,388) —

Derivative transactions total ................... ¥ (1,474) ¥ (1,474) ¥ —


2017



Cash and due from banks ........................ $ 4,190,266 $ 4,190,266 $ —Investment securities

Trading securities..................................... 43,747 43,747 —Available-for-sale securities ............... 12,982,324 12,982,324 —


30,601,310 30,792,503 191,184Assets total ......................................................... 47,817,657 48,008,851 191,184Deposits............................................................... 40,258,917 40,262,679 3,761Negotiable certificates of deposit ....... 770,817 770,844 26Call money and bills sold .......................... 804,670 804,670 —Payables under securities lending transactions .................................................... 1,229,583 1,229,583 —Borrowed money ........................................... 1,843,568 1,853,525 9,947Liabilities total .................................................. 44,907,576 44,921,320 13,744Derivative transactions (*2) .....................

Deferred hedge accounting is not applied ............................................... 3,627 3,627 —Deferred hedge accounting is applied ......................................................... (15,447) (15,447) —

Derivative transactions total ................... $ (11,810) $ (11,810) $ —

(*1) General allowance for loan losses and specific allowance for loan losses provided to

“Loans and bills discounted” are separately presented in the above table.

(*2) Derivative transactions recorded in “Other assets” and “Other liabilities” are aggre-

gated and shown herein. Assets and liabilities attributable to the derivative

transactions are totally offset and the net liability position as a consequence of

offsetting would be represented with brackets.

(Note 1) Valuation method of financial instrumentsAssets(1) Cash and due from banksAs fair values of cash and due from banks without maturity approximate book values, the Group deems the book values to be the fair values. Since contractual terms of cash and due from banks with maturities are short (i.e., one year or less) and fair values of these instruments approximate book values, the Group deems the book values to be the fair values.

(2) SecuritiesFair values of securities that have market prices are based on their market prices. With respect to those without market prices, the Group uses the present value that is calculated by discounting the future cash flows of the principal based on contracts, using an interest rate obtained by adjusting interest rates available in the interbank market in accordance with categories of internal ratings and terms, taking into account the credit risk premium and the liquidity risk premium. Fair value information for securities by classification is included in Note 4 “Securities.”

(3) Loans and bills discountedAs fair values of loans and bills discounted with short contractual terms (i.e., less than one year) approximate book values, the Group deems the book values to be the fair values. Regarding loans with long contract terms (i.e., 1 year or longer), those with floating interest rates reflect the market rate in the short term. Conse-quently, unless the credit conditions of borrowers have not significantly changed after the execution of the loans, the book value of the loans is presented as the fair value, as the fair value approximates the book value. With respect to fair values of loans with long contract terms with fixed interest rates, the Group uses the present value that is calculated by dis-counting the future cash flows of the principal based on contracts, using an interest rate obtained by adjusting interest rates available in the interbank market in accordance with categories of internal ratings and terms, taking into account the credit risk premium and the liquidity risk premium. Mean-while, the fair value of certain loans (including consumer loans) is calculated by discounting the future cash flows of the principal based on contracts, using an interest rate considered to be applicable in cases when similar loans are executed. With respect to claims against legally bankrupt debtors, virtually bank-rupt debtors and debtors who are likely to go bankrupt (potentially bankrupt debtors), since credit losses are calculated based on the present value of the expected future cash flows or the estimated amounts that the Group would be able to collect from collateral and guarantees, fair values approximate the consolidated balance sheet amount net of the currently expected credit loss amount, and the Group thus deems such amounts to be fair value. Regarding loans, for those without a fixed maturity due to loan charac-teristics such as limiting loans to within the value of collaterals, the Group deems the book value to be the fair value, since the fair value is expected to approximate the book value based on the estimated repayment period, interest rate, and other conditions.


Liabilities(1) Deposits and (2) Negotiable certificates of depositFor demand deposits, the Group deems the payment amounts required on the consolidated balance sheet date (i.e., book values) to be the fair value. The fair value of time deposits and negotiable certificates of deposit with short deposit terms (i.e., less than one year) approximate the book value, and the Group deems the book value to be the fair value. With respect to deposits with long deposit terms (i.e., one year or longer), the Group uses the present value calculated by discounting future cash flows of the principal based on contracts, using the interest rate that would apply to newly accepted deposits in accordance with the categories of deposit terms.

(3) Call money and bills sold and (4) Payables under securities lending transactions

Since contractual terms of these instruments are short (i.e., less than one year) and fair values of these instruments approximate book values, the Group deems the book values to be the fair values.

(5) Borrowed moneyAs the fair value of borrowed money with short contractual terms (i.e., less than one year) approximates the book value, the Group deems the book value to be the fair value.

Regarding borrowed money with long contractual terms (i.e., one year or longer), for floating rate borrowings, the book value is presented as the fair value, because the fair value approximates book value. This is because the floating rate borrowings reflect the market interest rate in a short period and there has been no significant change in our credit conditions or in the credit conditions of our consolidated subsidiaries before or after the borrowings were made. With respect to fixed rate borrowings, the Group uses the present value calculated by discounting the future cash flows of the principal based on contracts, using an interest rate obtained by adjusting interest rates available in the interbank market in accordance with categories of terms, taking into account the Bank’s credit risk premium. Meanwhile, fair values of borrowings of consolidated subsidiaries are calculated by discounting the future cash flows of the principal based on contracts, using interest rates considered to be applicable in cases when the similar borrowings are made.

DerivativesFair value information for derivatives is included in Note 32 “Fair value information on derivative transactions.”

(Note 2) Financial instruments whose fair value cannot be reliably determinedThe following instruments are not included in “Available-for-sales securities” in the above table showing the fair value of financial instruments.

Consolidated balance sheet amount

Millions of yen Thousands of U.S. dollars

2017 2016 2017

Unlisted stocks (*1) (*2) ..................................................................... ¥4,006 ¥3,396 $35,707Investment in capital of partnership and others (*3) ..... 2,189 1,753 19,511

Total ........................................................................................................ ¥6,196 ¥5,149 $55,227(*1) Fair value of unlisted stocks is exempt from disclosure because they do not have a market price and their fair value cannot be reliably determined.

(*2) For the year ended March 31, 2017, no impairment losses for unlisted stocks were recorded. For the year ended March 31, 2016, impairment losses for unlisted stocks amounted to

¥3 million.

(*3) Fair value of investment in capital of partnership and others is exempt from disclosure because partnership assets are composed of unlisted stock and others and their fair value

cannot be reliably determined.

(Note 3) Maturity analysis for financial assets and securities with contractual maturities

Millions of yen

2017

1 year or less 1 to 3 years 3 to 5 years 5 to 7 years 7 to 10 years Over 10 years

Due from banks ..................................................................................... ¥ 433,617 ¥ — ¥ — ¥ — ¥ — ¥ —Available-for-sale securities ......................................................... 243,454 364,558 191,679 60,850 159,350 190,525

Japanese government bonds................................................. 113,600 103,000 34,000 24,000 55,500 63,000Japanese local government bonds ..................................... 48,244 105,789 51,098 16,462 8,014 5,372Japanese corporate bonds ....................................................... 71,478 113,411 37,438 9,527 15,460 120,865Others .................................................................................................... 10,132 42,357 69,143 10,859 80,376 1,288

Loans and bills discounted (*) ...................................................... 818,210 644,590 510,172 344,618 399,037 671,853Total ........................................................................................................ ¥ 1,495,282 ¥ 1,009,148 ¥ 701,851 ¥ 405,468 ¥ 558,388 ¥ 862,379

Millions of yen

2016


Due from banks ..................................................................................... ¥ 151,445 ¥ — ¥ — ¥ — ¥ — ¥ —Available-for-sale securities ......................................................... 144,344 410,740 338,009 51,279 153,999 110,863

Japanese government bonds................................................. 50,500 168,600 77,000 5,000 81,000 23,000

Japanese local government bonds ..................................... 23,201 81,854 113,070 19,702 11,180 —

Japanese corporate bonds ....................................................... 60,333 123,774 89,515 10,112 18,253 80,998

Others .................................................................................................... 10,310 36,512 58,423 16,464 43,566 6,864

Loans and bills discounted (*) ...................................................... 837,412 597,289 465,557 301,597 359,752 618,861

Total ........................................................................................................ ¥ 1,133,202 ¥ 1,008,030 ¥ 803,566 ¥ 352,876 ¥ 513,752 ¥ 729,725



2017


Due from banks ..................................................................................... $ 3,865,023 $ — $ — $ — $ — $ —Available-for-sale securities ......................................................... 2,170,015 3,249,469 1,708,521 542,383 1,420,358 1,698,235

Japanese government bonds................................................. 1,012,567 918,085 303,057 213,922 494,696 561,547Japanese local government bonds ..................................... 430,020 942,945 455,459 146,733 71,432 47,883Japanese corporate bonds ....................................................... 637,115 1,010,883 333,701 84,918 137,801 1,077,324Others .................................................................................................... 90,311 377,547 616,302 96,791 716,427 11,480

Loans and bills discounted (*) ...................................................... 7,293,074 5,745,520 4,547,392 3,071,735 3,556,796 5,988,528Total ........................................................................................................ $13,328,121 $8,994,990 $6,255,914 $3,614,118 $4,977,163 $7,686,772

(*) Loans in legal bankruptcy, virtual bankruptcy, and potential bankruptcy amounting to ¥45,132 million ($402,281 thousand) and ¥50,230 million loans and bills discounted without

contractual maturities amounting to ¥28,289 million ($252,152 thousand) and ¥27,021 million are excluded from the table above as of March 31, 2017 and 2016.

(Note 4) Maturity analysis for bonds, borrowed money, and other interest-bearing liabilities

Millions of yen

2017


Deposits (*) ............................................................................................... ¥ 4,111,515 ¥ 391,030 ¥ 14,102 ¥ — ¥ — ¥ —Negotiable certificates of deposit .............................................. 86,478 — — — — —Call money and bills sold ................................................................. 90,276 — — — — —Payables under securities lending transactions ................ 137,947 — — — — —Borrowed money .................................................................................. 181,215 4,111 1,461 42 20,000 —

Total ........................................................................................................ ¥ 4,607,432 ¥ 395,142 ¥ 15,563 ¥42 ¥ 20,000 ¥ —

Millions of yen

2016


Deposits (*) ............................................................................................... ¥ 3,868,353 ¥ 442,425 ¥20,371 ¥ — ¥ — ¥—Negotiable certificates of deposit .............................................. 82,908 1,813 — — — —

Call money and bills sold ................................................................. 51,284 — — — — —

Payables under securities lending transactions ................ 26,937 — — — — —

Borrowed money .................................................................................. 23,692 4,584 2,053 178 20,000 —

Total ........................................................................................................ ¥ 4,053,178 ¥ 448,823 ¥22,424 ¥178 ¥ 20,000 ¥—


2017


Deposits (*) ............................................................................................... $36,647,785 $3,485,426 $ 125,697 $ — $ — $—Negotiable certificates of deposit .............................................. 770,817 — — — — —Call money and bills sold ................................................................. 804,670 — — — — —Payables under securities lending transactions ................ 1,229,583 — — — — —Borrowed money .................................................................................. 1,615,250 36,643 13,022 374 178,269 —

Total ........................................................................................................ $41,068,116 $3,522,078 $ 138,720 $374 $178,269 $—

(*) Demand deposits are included in “1 year or less.”


32. Fair value information on derivative transactions

Derivative transactions to which hedge accounting is not applied

The following is the fair value information for derivative transactions to which hedge accounting is not applied at March 31, 2017 and 2016. The contractual value of swap agreements and the contract amounts of forward exchange contracts, option agreements and other derivatives do not necessarily measure the Bank’s exposure to market risk.

(1) Interest-rate-related transactions

Millions of yen

2017

Contractualvalue

Contractualvalue dueafter one

year Fair value

Netunrealized

gains (losses)

Over-the-counter:Interest rate swap

Receivable fixed rate/pay

floating rate ...................................... ¥283 ¥283 ¥(0) ¥(0)Total ............................................. ¥ — ¥ — ¥(0) ¥(0)

Millions of yen

2016

Contractualvalue


year Fair value

Netunrealized

gains (losses)



floating rate ...................................... ¥172 ¥172 ¥2 ¥2

Total ............................................. ¥ — ¥ — ¥2 ¥2


2017

Contractualvalue


year Fair value

Netunrealized

gains (losses)



floating rate ...................................... $ 2,522 $ 2,522 $(0) $(0)Total ............................................. $ — $ — $(0) $(0)

Notes: 1. The above transactions were revalued at the end of each of the years and the

related gains and losses are reflected in the accompanying consolidated

statements of income.

2. The fair values of the above derivatives are principally based on quoted

market prices, such as those of Tokyo Financial Exchange Inc., or discounted

values of future cash flows.

(2) Currency-related transactions

Millions of yen

2017

Contractualvalue


year Fair value

Netunrealized

gains (losses)

Over-the-counter:Currency swap:.................................. ¥ 33,326 ¥ 17,114 ¥ 228 ¥228Forward exchange contracts:

Sold .................................................... 35,524 — 134 134Bought ............................................. 3,369 — 43 43

Currency options:

Sold .................................................... 52,467 31,538 (1,871) 325Bought ............................................. 52,467 31,538 1,871 79

Total ............................................. ¥ — ¥ — ¥ 407 ¥813

Millions of yen

2016

Contractualvalue


year Fair value

Netunrealized

gains (losses)

Over-the-counter:Currency swap:.................................. ¥ 26,802 ¥ 20,709 ¥ 20 ¥ 20

Forward exchange contracts:

Sold .................................................... 36,732 — 1,148 1,148

Bought ............................................. 7,059 — (257) (257)

Currency options:

Sold .................................................... 53,659 33,399 (1,774) (57)

Bought ............................................. 53,659 33,399 1,774 404

Total ............................................. ¥ — ¥ — ¥ 910 ¥ 1,257


2017

Contractualvalue


year Fair value

Netunrealized

gains (losses)

Over-the-counter:Currency swap:.................................. $ 297,049 $ 152,544 $ 2,032 $2,032Forward exchange contracts:

Sold .................................................... 316,641 — 1,194 1,194Bought ............................................. 30,029 — 383 383

Currency options:

Sold .................................................... 467,662 281,112 (16,677) 2,896Bought ............................................. 467,662 281,112 16,677 704

Total ............................................. $ — $ — $ 3,627 $7,246

Notes: 1. The above transactions were revalued at the end of each of the years and the

related gains and losses are reflected in the accompanying consolidated

statements of income.

2. Fair value is calculated using discounted cash flows.

(3) Stock-related transactions are not performed.(4) Bond-related transactions are not performed.(5) Financial product-related transactions are not performed.(6) Credit derivative transactions are not performed.


Derivative transactions to which hedge accounting is applied

The following is the fair value information for derivative transactions to which hedge accounting is applied at March 31, 2017 and 2016. The contract amounts do not necessarily measure the Bank’s exposure to market risk:

(1) Interest-rate-related transactions

Millions of yen

2017

Hedged items

Contractualvalue


year Fair value

Principle treatmentInterest rate swap:

Receivable floating rate/ pay fixed rate .......................

Available-for-sale

securities (bonds) ¥20,000 ¥20,000 ¥(1,733)

Millions of yen

2016

Hedged items

Contractualvalue


year Fair value



Available-for-sale

securities (bonds) ¥20,000 ¥20,000 ¥(2,387)


2017

Hedged items

Contractualvalue


year Fair value



Available-for-sale

securities (bonds) $178,269 $178,269 $(15,447)

Notes: 1. Deferred hedge accounting is mainly applied in accordance with the JICPA

Industry Audit Committee Report No. 24.

2. The fair values of the above derivatives are principally based on quoted

market prices, such as those of Tokyo Financial Exchange Inc., or discounted

values of future cash flows.

(2) Currency-related transactions

Millions of yen

2017

Hedged items

Contractualvalue


year Fair value

Forward exchange contracts .............................................

Loansdenominated

in foreign currencies

¥449 ¥— ¥0

Millions of yen

2016

Hedged items

Contractualvalue


year Fair value


Loansdenominated


¥842 ¥— ¥(0)


2017

Hedged items

Contractualvalue


year Fair value


Loansdenominated


$4,002 $— $0

Notes: 1. Deferred hedge accounting is mainly applied in accordance with the JICPA

Industry Audit Committee Report No. 25.

2. Fair value is calculated using discounted cash flows.

(3) Stock-related transactions are not performed.(4) Bond-related transactions are not performed.

33. Comprehensive incomeThe components of other comprehensive income for the years ended March 31, 2017 and 2016, were as follows:

Millions of yen


2017 2016 2017Unrealized (losses) gains on available-for-sale securities:

The amount arising during the period .............................................. ¥23,237 ¥ (5,170) $ 207,121Reclassification adjustments to profit or loss .......................................... (3,643) (11,575) (32,471)Before adjustments to tax effect ......................................................... 19,593 (16,745) 174,641The amount of tax effect ................ (5,773) 7,051 (51,457)

Total ....................................................... ¥ 13,819 ¥ (9,694) $ 123,174

Deferred losses on derivatives under hedge accounting:

The amount arising during the period .............................................. ¥ 635 ¥ (1,360) $ 5,660Reclassification adjustments to profit or loss .......................................... 17 11 151Before adjustments to tax effect ......................................................... 653 (1,349) 5,820The amount of tax effect ................ (198) 394 (1,764)

Total ....................................................... ¥ 454 ¥ (955) $ 4,046

Land revaluation surplus:Reclassification adjustments to profit or loss .......................................... ¥ — ¥ — $ —Before adjustments to tax effect ......................................................... — — —The amount of tax effect ................ — 387 —

Total ....................................................... ¥ — ¥ 387 $ —

Defined retirement benefit plans:The amount arising during the period .............................................. ¥ 2,317 ¥ (9,715) $ 20,652Reclassification adjustments to profit or loss .......................................... 617 (651) 5,499Before adjustments to tax effect ......................................................... 2,935 (10,366) 26,160The amount of tax effect ................ (893) 3,304 (7,959)

Total ....................................................... ¥ 2,041 ¥ (7,062) $ 18,192Total other comprehensive income .............................................. ¥ 16,315 ¥ (17,323) $ 145,422


34. Business combinationsYear Ended March 31, 2017(Transaction under common control)Additional acquisition of subsidiaries’ shares

1. Outline of the business combination(1) Name of acquired company and its business outline

Name Business outline

The Shiga DC Card Co., Ltd. Credit card business, credit guarantee businessThe Shigagin JCB Co., Ltd. Credit card business

Shigagin Lease & Capital Co., Ltd. Leasing and investment business

(2) Date of the business combinationFebruary 2, 2017

(3) Legal form of the business combinationAcquisition of shares from noncontrolling interests

(4) Name of the company after the combinationUnchanged

(5) Other mattersIn order to expedite decision-making and strengthen governance of the Group as well as to provide comprehensive financial services as an integrated Group through cooperation throughout the Group.

2. Outline of accounting policy appliedThe transaction was accounted for as a transaction with noncontrolling interests within a transaction under common control based on “Accounting Standard for Business Combinations” (ASBJ Statement No. 21 issued in September 2013) and “Guidance on Accounting Standard for Business Combinations and Business Divestitures” (ASBJ Guidance No. 10 issued in September 2013).

3. Additional acquisition of subsidiaries’ sharesAcquisition cost of the acquired company and related details of each class of consideration


Consideration for acquisition Cash and due from banks ¥1,878 $16,739Acquisition cost ¥1,878 $16,739

4. Change in equity interest of the Bank due to transaction with noncontrolling interests(1) Major reason for change in capital surplusAdditional acquisition of subsidiaries’ shares

(2) Amount of capital surplus increased due to transaction with noncontrolling interests¥ 615 million ($5,481 thousand)

35. Net income per shareReconciliation of the differences between basic and diluted net income per share (“EPS”) for the years ended March 31, 2017 and 2016, is as follows:

Millions of yen Thousands of shares Yen U.S. dollars

Net income Attributable to Owners of the parent

Weighted-Average Shares EPS

For the year ended March 31, 2017Basic EPS:

Net income attributable to common shareholders ..................................... ¥14,895 260,329 ¥57.21 $0.510Effect of dilutive securities:

Warrants ................................................................................................................................... 33,953Diluted EPS:

Net income for computation ...................................................................................... ¥14,895 294,283 ¥50.61 $0.451For the year ended March 31, 2016

Basic EPS:

Net income attributable to common shareholders ..................................... ¥15,508 260,321 ¥59.57

Effect of dilutive securities:

Warrants ................................................................................................................................... 33,775

Diluted EPS:

Net income for computation ...................................................................................... ¥15,508 294,097 ¥52.73


36. Subsequent eventAppropriation of retained earningsThe following appropriation of retained earnings will be authorized at the ordinary general shareholders’ meeting to be held on June 27, 2017:


Cash dividends,¥4.5 ($0.04) per share ......................................................................... ¥1,171 $10,437

Total ........................................................................................................ ¥1,171 $10,437

37. Segment informationFor the years ended March 31, 2017 and 2016Because the Group has only one segment, banking, the description is not presented.

Related Information(1) Information about services

Millions of yen

2017

Lending services Securities investment Fees and commissions Other Total

Operating income from external customers....................... ¥39,171 ¥19,840 ¥13,923 ¥17,215 ¥90,151Millions of yen

2016


Operating income from external customers....................... ¥40,245 ¥24,642 ¥13,992 ¥16,963 ¥95,844Thousands of U.S. dollars

2017


Operating income from external customers....................... $349,148 $176,842 $124,101 $153,445 $803,556

(2) Information about geographical areas(a) Operating incomeOperating income from external domestic customers exceeded 90% of total operating income on the consolidated statements of income for the years ended March 31, 2017 and 2016; therefore geographical operating income information is not presented.(b) Tangible fixed assetsThe balance of domestic tangible fixed assets exceeded 90% of the total balance of tangible fixed assets on the consolidated balance sheets as of March 31, 2017 and 2016; therefore, geographical tangible fixed assets information is not presented.

(3) Information about major customersOperating income to a specific customer did not reach 10% of total operating income on the consolidated statements of income for the years ended March 31, 2017 and 2016; therefore, major customer information is not presented.


38. Related party transactionsTransactions of the Bank with related parties for the year ended March 31, 2017, were as follows:

Transaction amount Year-end balance

Related party Category Description of transactionsMillions of yen

Thousands of U.S. dollars Accounts name

Millions of yen


Lending operation loan, net of collection ............................................... ¥ 17 $ 151 Loans ...................... ¥ 28 $ 249

Taiyo & Co.

Company in which director or relative has the majority of the voting rights

Interest receipts .................................... 0 0Other liabilities ............. 0 0

Commission receipts, etc. .............. 0 0

Lending operation loan, net of collection ............................................... (8) (71) Loans ...................... 141 1,256

Guarantee of payment ..................... (16) (142)

Customers’ liabilities for acceptances and guarantees ....... 148 1,319

Interest receipts .................................... 1 8

Acceptances and guarantees ....... 148 1,319

KUSANEN CO., LTD.


Guarantee commission receipts .................................................... 0 0

Other liabilities ............. 0 0

Commission receipts, etc. .............. 0 0

Transactions of the Bank with related parties for the year ended March 31, 2016, were as follows:

Transaction amount

Year-end balance

Related party Category Description of transactions Millions of yen Accounts name Millions of yen

Taiyo & Co.


Lending operation loan, net of collection ............................................... ¥ (1) Loans ...................... ¥ 11

Interest receipts .................................... 0Other liabilities ............. 0

Lending operation loan, net of collection ............................................... 21 Loans ...................... 149

Guarantee of payment ..................... (16)

Customers’ liabilities for acceptances and guarantees ....... 164

KUSANEN CO., LTD.


Interest receipts .................................... 1

Acceptances and guarantees ....... 164

Guarantee commission receipts .................................................... 1

Other liabilities ............. 0


INDEPENDENT AUDITOR’S REPORT

To the Board of Directors of The Shiga Bank, Ltd.:

We have audited the accompanying consolidated balance sheet of The Shiga Bank, Ltd. and its consolidated subsidiaries as of March 31, 2017, and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information, all expressed in Japanese yen.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in Japan, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of The Shiga Bank, Ltd. and its consolidated subsidiaries as of March 31, 2017, and the consolidated results of their operations and their cash flows for the year then ended in accordance with accounting principles generally accepted in Japan.

Convenience Translation

Our audit also comprehended the translation of Japanese yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made in accordance with the basis stated in Note 1 to the consolidated financial statements. Such U.S. dollar amounts are presented solely for the convenience of readers outside Japan.

June 2, 2017

Member ofDeloitte Touche Tohmatsu

Deloitte Deloitte Touche Tohmatsu LLCYodoyabashi Mitsui Building4-1-1, Imabashi, Chuo-kuOsaka 541-0042JapanTel: +81 (6) 4560 6000Fax: +81 (6) 4560 6001www.deloitte.com/jp


Composition of Capital Disclosure (Capital ratio of the fiscal year ended March 31, 2017, Basel III)

Millions of yen, %

Year ended March 31, 2017 Year ended March 31, 2016

Basel IIITemplate

No..

Amounts excluded

under transitional

arrangements

Amounts excluded

under transitional

arrangementsItemsCommon Equity Tier 1 capital: instruments and reserves1a+2-1c-26 Directly issued qualifying common share capital plus related capital surplus and retained earnings 238,193 224,531

1a of which: capital and capital surplus 57,654 57,0432 of which: retained earnings 185,201 172,152

1c of which: treasury stock (-) 3,490 3,49026 of which: national specific regulatory adjustments (earnings to be distributed) (-) 1,172 1,173

of which: other than above — —1b Subscription rights to common shares 113 983 Accumulated other comprehensive income and other disclosed reserves 105,343 26,335 69,336 46,2245 Common share capital issued by subsidiaries and held by non-controlling interests (amount allowed in group Common Equity Tier 1) — —

Total of items included in Common Equity Tier 1 capital: instruments and reserves subject to transitional arrangements 277 951of which: common share capital issued by subsidiaries and held by non-controlling interests (amount allowed in group Common Equity Tier 1)

277 951

6 Common Equity Tier 1 capital: instruments and reserves (A) 343,927 294,917Common Equity Tier 1 capital: regulatory adjustments

8+9 Total intangible fixed assets (excluding those relating to mortgage servicing rights) 2,041 510 1,448 9658 of which: goodwill (including those equivalent) — — — —9 of which: other intangibles other than goodwill and mortgage servicing rights 2,041 510 1,448 965

10 Deferred tax assets that rely on future profitability excluding those arising from temporary differences — — — —11 Deferred gains or losses on derivatives under hedge accounting (0) (0) 0 012 Shortfall of eligible provisions to expected losses 4,541 1,135 2,869 1,91213 Securitization gain on sale — — — —14 Gains and losses due to changes in own credit risk on fair valued liabilities — — — —15 Asset for retirement benefits — — — —16 Investments in own shares (excluding those reported in the Net assets section) 2 0 0 017 Reciprocal cross-holdings in common equity — — — —18 Investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation — — — —

19+20+21 Amount exceeding the 10% threshold on specified items — — — —19 of which: significant investments in the common stock of financials — — — —20 of which: intangible fixed assets relating to mortgage servicing rights — — — —21 of which: deferred tax assets arising from temporary differences — — — —22 Amount exceeding the 15% threshold on specified items — — — —23 of which: significant investments in the common stock of financials — — — —24 of which: intangible fixed assets relating to mortgage servicing rights — — — —25 of which: deferred tax assets arising from temporary differences — — — —27 Regulatory adjustments applied to Common Equity Tier 1 due to insufficient Additional Tier 1 and Tier 2 to cover deductions — —28 Common Equity Tier 1 capital: regulatory adjustments (B) 6,585 4,319

Common Equity Tier 1 capital (CET1)29 Common Equity Tier 1 capital (CET1) ((A)-(B)) (C) 337,341 290,598

Additional Tier 1 capital: instruments

30

31aDirectly issued qualifying Additional Tier 1 instruments plus related capital surplus of which: classified as equity under applicable accounting standards — —

31b Subscription rights to Additional Tier 1 instruments — —

32Directly issued qualifying Additional Tier 1 instruments plus related capital surplus of which: classified as liabilities under applicable accounting standards — —Qualifying Additional Tier 1 instruments plus related capital surplus issued by special purpose vehicles and other equivalent entities

— —

34-35 Additional Tier 1 instruments issued by subsidiaries and held by non-controlling interests (amount allowed in group Additional Tier 1) 1,247 2,14033+35 Eligible Tier 1 capital instruments subject to transitional arrangements included in Additional Tier 1 capital: instruments — —

33 of which: instruments issued by bank and its special purpose vehicles — —35 of which: instruments issued by subsidiaries — —

Total of items included in Additional Tier 1 capital: instruments subject to transitional arrangements — —of which: transitional arrangements related to accumulated other comprehensive income — —

36 Additional Tier 1 capital: instruments (D) 1,247 2,140Additional Tier 1 capital: regulatory adjustments

37 Investments in own Additional Tier 1 instrument — — — —38 Reciprocal cross-holdings in Additional Tier 1 instruments — — — —39 Investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation — — — —

40Significant investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation — — — —

Capital ratio (consolidated)(Appended Form 2 of Supplementary Provision of the Notification of Japanese Financial Services Agency No. 7, 2014)


Millions of yen, %

Year ended March 31, 2017 Year ended March 31, 2016

Basel IIITemplate

No..

Amounts excluded

under transitional

arrangements

Amounts excluded

under transitional

arrangementsItemsTotal of items included in Additional Tier 1 capital: regulatory adjustments subject to transitional arrangements 567 956

of which: shortfall of eligible provisions to expected losses 567 95642 Regulatory adjustments applied to Additional Tier 1 due to insufficient Tier 2 to cover deduction — —43 Additional Tier 1 capital: regulatory adjustments (E) 567 956

Additional Tier 1 capital44 Additional Tier 1 capital ((D) – (E)) (F) 679 1,183

Tier 1 capital (T1 = CET1 + AT1)45 Tier 1 capital (T1 = CET1 + AT1) ((C)+(F)) (G) 338,021 291,782

Tier 2 capital: instruments and provisions

46

Directly issued qualifying Tier 2 instruments plus related capital surplus of which: classified as equity under applicable accounting standards — —Subscription rights to Tier 2 instruments — —Directly issued qualifying Tier 2 instruments plus related capital surplus of which: classified as liabilities under applicable accounting standards 14,491 19,057Qualifying Tier 2 instruments plus related capital surplus issued by special purpose vehicles and other equivalent entities — —

48-49 Tier 2 instruments issued by subsidiaries and held by non-controlling interests (amount allowed in group Tier 2) 293 50347+49 Eligible Tier 2 capital instruments subject to transitional arrangements included in Tier 2: instruments and provisions 20,000 20,000

47 of which: instruments issued by bank and its special purpose vehicles 20,000 20,00049 of which: instruments issued by subsidiaries — —50 Total of general allowance for credit losses and eligible provisions included in Tier 2 153 142

50a of which: provision for general allowance for credit losses 153 14250b of which: eligible provisions — —

Total of items included in Tier 2 capital: instruments and provisions subject to transitional arrangements 16,462 29,303of which: accumulated other comprehensive income 16,462 29,303

51 Tier 2 capital: instruments and provisions (H) 51,401 69,007Tier 2 capital: regulatory adjustments

52 Investments in own Tier 2 instruments — — — —53 Reciprocal cross-holdings in Tier 2 instruments — — — —54 Investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation — — — —55 Significant investments in the capital banking, financial and insurance entities that are outside the scope of regulatory consolidation — — — —

Total of items included in Tier 2 capital: regulatory adjustments subject to transitional arrangements 567 956of which: shortfall of eligible provisions to expected losses 567 956

57 Tier 2 capital: regulatory adjustments (I) 567 956Tier 2 capital (T2)

58 Tier 2 capital (T2) ((H)-(I)) (J) 50,833 68,050Total capital (TC = T1 + T2)

59 Total capital (TC = T1 + T2) ((G)+(J)) (K) 388,854 359,832Risk weighted assets

Total of items included in risk weighted assets subject to transitional arrangements 512 967of which: intangibles other than mortgage servicing rights 510 965of which: deferred tax assets that rely on future profitability excluding those arising from temporary differences — —of which: investments in own shares 1 1

60 Risk weighted assets (L) 2,331,485 2,186,794Capital ratio (consolidated)

61 Common Equity Tier 1 capital ratio (consolidated) ((C)/(L)) 14.46 13.2862 Tier 1 capital ratio (consolidated) ((G)/(L)) 14.49 13.3463 Total capital ratio (consolidated) ((K)/(L)) 16.67 16.45

Regulatory adjustments72 Non-significant investments in the capital of other financials that are below the thresholds for deduction (before risk weighting) 22,077 10,42273 Significant investments in the common stock of other financials that are below the thresholds for deduction (before risk weighting) 779 83874 Intangible fixed assets relating to mortgage servicing rights that are below the thresholds for deduction (before risk weighting) — —75 Deferred tax assets arising from temporary differences that are below the thresholds for deduction (before risk weighting) — —

Provisions included in Tier 2 capital: instruments and provisions 76 Provisions (general allowance for credit losses) 153 14277 Cap on inclusion of provisions (general allowance for credit losses) 476 475

78Provisions eligible for inclusion in Tier 2 in respect of exposures subject to internal ratings-based approach (prior to application of cap) (if the amount is negative, report as “nil”) — —

79 Cap for inclusion of provisions in Tier 2 under internal ratings-based approach 12,822 12,207Capital instruments subject to transitional arrangements

82 Current cap on AT1 instruments subject to phase out arrangements — —

83Amount excluded from AT1 due to cap (excess over cap after redemptions and maturities) (if the amount is negative, report as “nil”) — —

84 Current cap on T2 instruments subject to transitional arrangements 30,000 36,000

85Amount excluded from T2 due to cap (excess over cap after redemptions and maturities) (if the amount is negative, report as “nil”) — —

Note: “Basel III Template No.” indicates the numbers in the table in Annex 1 of the document entitled Composition of capital disclosure requirements released by the Basel Committee on Banking Supervision on June 26, 2012.


Matters concerning the disclosure of consolidated leverage ratio

Millions of yen

Corresponding Line # on

International Template (Table 2)

Corresponding Line # on

International Template (Table 1)

FY2016 FY2015

Item

On-balance sheet exposures1 On-balance sheet exposures before deducting adjustment items 5,513,028 4,996,435

1a 1 Total assets reported in the consolidated balance sheet 5,539,561 5,025,4261b 2 Amount of assets of subsidiaries that are not included in the scope of the leverage ratio on a consolidated basis (-) — —

1c 7Amount of assets of subsidiaries that are included in the scope of the leverage ratio on a consolidated basis (except those included in the total assets reported in the consolidated balance sheet)

— —

1d 3 Amount of assets that are deducted from the total assets reported in the consolidated balance sheet (-) 26,533 28,9902 7 Amount of adjustment items pertaining to Tier 1 capital (-) 6,585 4,3193 Total on-balance sheet exposures (A) 5,506,442 4,992,116

Derivative transaction exposures4 Replacement cost associated with derivative transactions, etc. 2,528 3,127

5Add-on amount associated with derivative transactions, etc.Amount of receivables arising from providing cash margin in relation to derivative transactions, etc.

3,726 3,76676 —

6Amount of receivables arising from providing cash margin, provided where deducted from the consolidated balance sheet pursuant to the operative accounting framework

— —

7 Amount of deductions of receivables (out of those arising from providing cash variation margin) (-) — —

8Amount of client-cleared trade exposures for which a bank or bank holding company acting as clearing member is not obliged to make any indemnification (-)

9 Amount of adjusted effective notional amount of written credit derivatives — —10 Amount of deductions from effective notional amount of written credit derivatives (-) — —11 4 Total exposures related to derivative transactions (B) 6,330 6,894

Repo transaction exposures12 Amount of assets related to repo transactions, etc. — —13 Amount of deductions from repo transactions, etc. (-) — —14 Amount of counterparty risk exposure for repo transactions, etc. 616 240

15 Amount of agent transaction exposures

16 5 Total exposures related to repo transactions, etc. (C) 616 240Other off-balance sheet exposures

17 Notional amount of off-balance sheet transactions 900,202 882,00618 Amount of adjustments for conversation to in relation to off-balance sheet transactions 769,671 752,16219 6 Total exposures related to off-balance sheet transactions (D) 130,531 129,843

Consolidated leverage ratio20 The amount of capital (Tier 1 capital) (E) 338,021 291,78221 8 Total exposures ((A) + (B) + (C) + (D)) (F) 5,643,922 5,129,09422 Consolidated leverage ratio ((E) / (F)) 5.98% 5.68%

Corresponding Line # on International Template, Table 1 refers to that in Table 1 and Table 2 in the rule text of “Basel III leverage ratio framework and disclosure requirements” published by the Basel Committee on Banking Supervision on January 12, 2014.

1. Matters concerning the composition of consolidated leverage ratio (Appended Form 6 of Supplementary Provision of the Notification of the Financial Services Agency, The Japanese Government No. 7, 2014)

2. Reasons for any significant disparities in consolidated leverage ratio compared to the previous fiscal year (if any)Not applicable.


Number of shares held by type of shareholder (Thousand shares)

Government (incl. Local governments)

Other corporations

Financial institutions

Securities houses

Foreigners

Individuals and others

Note: Figures in parentheses represent voting rights as a percentage of the total voting rights held by each shareholder segment.

63 (0.0%)

92,118 (34.7%)

59,842 (22.5%)

3,886 (1.4%)

45,883 (17.2%)

63,655 (23.9%)

Stock InformationAs of March 31, 2017

Major shareholdersNumber of shares held

(Thousand shares)As a percentage of

total number of issued shares (%)

Japan Trustee Services Bank, Ltd. (Trust account) 15,237 5.74

Sompo Japan Nipponkoa Insurance Inc. 9,518 3.58

NORTHERN TRUST CO. (AVFC) RE SILCHESTER INTERNATIONAL INVESTORS INTERNATIONAL VALUE EQUITY TRUST (Managing agent, The Hongkong and Shanghai Banking Corporation Limited Tokyo Branch)

9,349 3.52

Nippon Life Insurance Company 8,054 3.03

Meiji Yasuda Life Insurance Company 7,999 3.01

Employee Stock Ownership of Shiga Bank 6,509 2.45

NORTHERN TRUST CO. (AVFC) RE U.S. TAX EXEMPTED PENSION FUNDS (Managing agent, The Hongkong and Shanghai Banking Corporation Limited Tokyo Branch)

6,117 2.30

Japan Trustee Services Bank, Ltd. (Trust account 9) 6,033 2.27

The Master Trust Bank of Japan, Ltd. (Trust account) 4,804 1.80

Mizuho Bank, Ltd. 3,920 1.47

Total 77,541 29.21



電話 077(521)2202


表紙［本誌］




電話 077(521)2202


表紙［本誌］



Documents

Year ended March 31, 2017 - 個人のお客さま : 滋賀銀行œMay 1951 Commenced foreign exchange business ˜October 1977 Listed stocks on the Osaka Securities Exchange (the Second