THE MICHINOKU BANK, LTD. ANNUAL REPORT 2017

Transcription

1 THE MICHINOKU BANK, LTD. ANNUAL REPORT 2017 Fiscal year from April 1, 2016, to March 31, 2017

2 Financial Review (Financial and Economic Climate) Regarding an overview of the global financial and economic climate, there was a mild recovery in the overall economy mainly as a result of the rise in interest rates, which was carried out against the backdrop of the improvement in consumer sentiment following an improved employment environment in the U.S., a continuing trend of moderate recovery in the euro-zone economy, and a solid trend of economic growth in China. The Japanese economy continued its moderate recovery trend supported by a firm employment environment, stable consumer spending and a trend toward improved corporate earnings. The local economies of Aomori Prefecture and the Hakodate region, where the Bank s principal operations are based, have also continued to recover at a moderate pace backed by the continuous improvement in businesses mainly led by the non-manufacturing sector and firm consumer spending. (Business Results) Net profit from core business decreased by 2,454 million year on year to 5,401 million due to the increase in expenses, in addition to the decreases in net interest income, and fees and commissions. While net profit from core business decreased, ordinary profit also decreased by 1,685 million year on year to 4,964 million due to the increase in net losses related to stocks. While ordinary profit decreased, profit also decreased by 932 million year on year to 3,578 million due to recording a gain on return of retirement benefit trust. Furthermore, in regard to consolidated financial results, consolidated ordinary profit decreased by 1,583 million year on year to 5,521 million, and profit attributable to owners of parent decreased by 1,105 million year on year to 3,827 million. ( Deposits and Deposit Assets) balance of total deposits and deposit assets increased by 41.6 billion year on year to 2,190.3 billion. Of this, the total balance of deposits and deposit assets for individual customers increased by 12.4 billion year on year to 1,681.1 billion due to the increase in insurance balance. The balance of total deposits for Aomori Prefecture and the Hakodate region, where the Bank s principal operations are based, increased by 33.0 billion year on year to 1,839.1 billion, which is 93.5% of the balance of total deposits. (Loans and Bills Discounted) The balance of loans and bills discounted increased by 80.8 billion year on year to 1,484.3 billion due to the increase in demand for personal loans, mainly in corporate loans and mortgage loans. The balance of loans and bills discounted for Aomori Prefecture and the Hakodate region is 1,152.0 billion, which is 77.6% of the Bank s loans and bills discounted. As such, the Bank continues to receive a great deal of patronage in the region. (Cash Flow) In terms of the status of cash flows, net cash used in operating activities primarily involving deposits and loans amounted to 55.2 billion, while net cash provided by investing activities mainly involving the trading of securities amounted to 12.0 billion. Additionally, net cash provided by financing activities amounted to 4.2 billion, mainly due to issuance of common. As a result, cash and cash equivalents as of March 31, 2017 amounted to billion, a decrease of 39.0 billion from March 31, ( Adequacy Ratio) The Bank secured an adequate level of capital adequacy ratio (domestic standard), which is an indicator of the soundness of operations, at 8.50% on a consolidated basis. 1

3 Consolidated Financial Statements Consolidated Balance Sheet The consolidated financial statements of the Bank were audited by Ernst & Young ShinNihon LLC pursuant to Article 193-2, Paragraph 1 of the Financial Instruments and Exchange Act. In addition, an audit pursuant to Article 396, Paragraph 1 of the Companies Act was conducted by Ernst & Young ShinNihon LLC. Thousands of Millions of yen U.S. Dollars As of March 31, 2017 and Assets Cash and due from banks 131, ,500 1,170,059 Monetary claims bought 2,569 2,599 22,898 Money held in trust 17,926 19, ,791 Securities 412, ,599 3,679,546 Loans and bills discounted 1,468,859 1,389,453 13,092,608 Foreign exchanges 1,775 1,283 15,821 Lease receivables and investment assets 14,087 13, ,568 Other assets 69,390 13, ,504 Property, plant and equipment 16,898 17, ,620 Intangible assets 2,751 3,360 24,521 Net defined benefit asset 1,384 9,776 12,341 Deferred tax assets 3,789 4,750 33,776 Customers liabilities for acceptances and guarantees 9,568 8,048 85,290 Allowance for loan losses (13,650) (13,670) (121,670) assets 2,139,427 2,061,147 19,069,678 Liabilities Deposits 1,913,946 1,896,902 17,059,870 Negotiable certificates of deposit 42,501 31, ,835 Borrowed money 2,025 12,325 18,049 Foreign exchanges ,089 Bonds with subscription rights to 6,996 6,999 62,358 Other liabilities 64,008 13, ,533 Provision for bonuses 1,053 1,026 9,393 Net defined benefit liability 5,134 5,327 45,762 Provision for stock benefit for officers 474 4,230 Provision for reimbursement of deposits ,956 Provision for contingent loss ,831 Provision for loss on interest repayment Deferred tax liabilities for land revaluation ,977 Acceptances and guarantees 9,568 8,048 85,290 liabilities 2,047,500 1,976,827 18,250,292 Net assets stock 36,986 34, ,675 surplus 31,589 29, ,573 Retained earnings 21,819 18, ,484 Treasury (1,462) (2,565) (13,034) shareholders equity 88,932 80, ,699 Valuation difference on available-for-sale securities 1,886 1,633 16,815 Revaluation reserve for land Remeasurements of defined benefit plans 481 1,667 4,290 accumulated other comprehensive income 2,478 3,426 22,093 Subscription rights to 334 Non-controlling interests ,592 net assets 91,926 84, ,385 liabilities and net assets 2,139,427 2,061,147 19,069,678 2

4 Consolidated Statement of Income Thousands of Millions of yen U.S. Dollars For the Years Ended March 31, 2017 and Income Interest on loans and discounts 20,638 21, ,962 Interest and dividends on securities 5,831 7,210 51,975 Other ,096 Fees and commissions 6,572 7,105 58,586 Other income 15,794 15, ,781 income 48,959 50, ,401 Expenses Interest on deposits 893 1,349 7,964 Interest on borrowings and rediscounts Other Fees and commissions payments 3,209 3,055 28,610 Other ordinary expenses 5,888 7,530 52,483 General and administrative expenses 22,785 22, ,094 Other expenses: Provision of allowance for loan losses ,152 Other 9,448 8,199 84,220 expenses 43,073 43, ,935 Profit before income taxes 5,886 7,240 52,465 Income taxes - current ,798 Income taxes - deferred 1,470 1,781 13,108 Profit 3,877 4,969 34,558 Profit attributable to non-controlling interests Profit attributable to owners of parent 3,827 4,932 34,112 Consolidated Statement of Comprehensive Income Thousands of Millions of yen U.S. Dollars For the Years Ended March 31, 2017 and Profit 3,877 4,969 34,558 Other comprehensive income (933) (3,943) (8,318) Valuation difference on available-for-sale securities 253 (2,776) 2,257 Revaluation reserve for land 23 Remeasurements of defined benefit plans, net of tax (1,186) (1,190) (10,576) Comprehensive income 2,943 1,026 26,240 Comprehensive income attributable to Comprehensive income attributable to owners of parent 2, ,793 Comprehensive income attributable to non-controlling interests

5 Consolidated Statement of Changes in Equity Millions of yen Shareholders equity Fiscal year from April 2016, to March 31, 2017 stock surplus Retained earnings Treasury shareholders equity Balance at beginning of current period 34,168 29,689 18,790 (2,565) 80,082 Issuance of new 2,817 2,817 5,635 Dividends of surplus (812) (812) Profit attributable to owners of parent 3,827 3,827 Purchase of treasury (1,036) (1,036) Disposal of treasury (917) 2,139 1,221 Reversal of revaluation reserve for land Net changes of items other than shareholders equity changes of items during period 2,817 1,900 3,029 1,102 8,850 Balance at end of current period 36,986 31,589 21,819 (1,462) 88,932 Accumulated other comprehensive income Valuation accumulated difference on Remeasurements other available-for-sale Revaluation of defined comprehensive securities reserve for land benefit plans income Subscription rights to Noncontrolling interests net Fiscal year from April 2016, to March 31, 2017 assets Balance at beginning of current period 1, ,667 3, ,320 Issuance of new 5,635 Dividends of surplus (812) Profit attributable to owners of parent 3,827 Purchase of treasury (1,036) Disposal of treasury 1,221 Reversal of revaluation reserve for land (14) (14) Net changes of items other than shareholders equity 253 (1,186) (933) (334) 39 (1,228) changes of items during period 253 (14) (1,186) (948) (334) 39 7,606 Balance at end of current period 1, , ,926 4

6 Thousands of U.S. Dollars Shareholders equity Fiscal year from April 2016, to March 31, 2017 stock surplus Retained earnings Treasury shareholders equity Balance at beginning of current period 304, , ,485 (22,865) 713,815 Issuance of new 25,116 25,116 50,232 Dividends of surplus (7,245) (7,245) Profit attributable to owners of parent 34,112 34,112 Purchase of treasury (9,238) (9,238) Disposal of treasury (8,179) 19,070 10,890 Reversal of revaluation reserve for land Net changes of items other than shareholders equity changes of items during period 25,116 16,937 26,999 9,831 78,884 Balance at end of current period 329, , ,484 (13,034) 792,699 Accumulated other comprehensive income Valuation accumulated difference on Remeasurements other available-for-sale Revaluation of defined comprehensive securities reserve for land benefit plans income Subscription rights to Noncontrolling interests net Fiscal year from April 2016, to March 31, 2017 assets Balance at beginning of current period 14,557 1,120 14,866 30,544 2,985 4, ,586 Issuance of new 50,232 Dividends of surplus (7,245) Profit attributable to owners of parent 34,112 Purchase of treasury (9,238) Disposal of treasury 10,890 Reversal of revaluation reserve for land (132) (132) Net changes of items other than shareholders equity 2,257 (10,576) (8,318) (2,985) 352 (10,951) changes of items during period 2,257 (132) (10,576) (8,451) (2,985) ,799 Balance at end of current period 16, ,290 22,093 4, ,385 5

7 Millions of yen Shareholders equity Fiscal year from April 2015, to March 31, 2016 stock surplus Retained earnings Treasury shareholders equity Balance at beginning of current period 34,168 29,735 15,015 (2,653) 76,266 Issuance of new Dividends of surplus (1,234) (1,234) Profit attributable to owners of parent 4,932 4,932 Purchase of treasury (7) (7) Disposal of treasury (46) Reversal of revaluation reserve for land Net changes of items other than shareholders equity changes of items during period (46) 3, ,816 Balance at end of current period 34,168 29,689 18,790 (2,565) 80,082 Accumulated other comprehensive income Valuation accumulated difference on Remeasurements other available-for-sale Revaluation of defined comprehensive securities reserve for land benefit plans income Subscription rights to Noncontrolling interests net Fiscal year from April 2015, to March 31, 2016 assets Balance at beginning of current period 4, ,858 7, ,027 Issuance of new Dividends of surplus (1,234) Profit attributable to owners of parent 4,932 Purchase of treasury (7) Disposal of treasury 48 Reversal of revaluation reserve for land (53) (53) 23 Net changes of items other than shareholders equity (2,776) (1,190) (3,966) (3,469) changes of items during period (2,776) (53) (1,190) (4,020) Balance at end of current period 1, ,667 3, ,320 6

8 Consolidated Statement of Cash Flows Thousands of Millions of yen U.S. Dollars For the Years Ended March 31, 2017 and Cash flows from operating activities Profit before income taxes 5,886 7,240 52,465 Depreciation 2,235 2,295 19,927 Impairment loss ,330 Amortization of goodwill Loss (gain) on cancellation of leases (162) Loss (gain) on step acquisitions (125) Gain on reversal of subscription rights to (354) (3,160) Increase (decrease) in allowance for loan losses (20) (225) (184) Increase (decrease) in provision for bonuses Decrease (increase) in net defined benefit asset 6,108 (1,761) 54,449 Increase (decrease) in net defined benefit liability (164) (41) (1,467) Increase (decrease) in provision for stock benefit for officers 474 4,230 Increase (decrease) in provision for reimbursement of deposits (8) (49) (77) Increase (decrease) in provision for contingent loss (2) 6 (23) Increase (decrease) in provision for loss on interest repayment (9) 0 (85) Interest income (26,592) (28,804) (237,033) Financing expenses 939 1,547 8,374 Loss (gain) related to securities 563 1,636 5,021 Loss (gain) on money held in trust Foreign exchange losses (gains) (21) (16) (191) Loss (gain) on disposal of non-current assets Net decrease (increase) in loans and bills discounted (79,406) (64,727) (707,786) Net increase (decrease) in deposit 17,043 4, ,919 Net increase (decrease) in negotiable certificates of deposit 10,854 (3,420) 96,752 Net increase (decrease) in borrowed money (excluding subordinated borrowings) (10,300) (8,005) (91,808) Net decrease (increase) in deposit (excluding deposit paid to Bank of Japan) (707) 2,993 (6,306) Net decrease (increase) in call loans Net decrease (increase) in foreign exchanges - assets (491) 215 (4,377) Net increase (decrease) in foreign exchanges - liabilities 455 (3) 4,062 Net decrease (increase) in lease receivables and investment assets (221) (523) (1,977) Proceeds from fund management 22,251 25, ,335 Payments for finance (1,338) (2,023) (11,930) Other, net (3,031) (511) (27,022) Subtotal (55,393) (64,160) (493,748) Income taxes refund ,749 Income taxes paid (578) (421) (5,154) Net cash provided by (used in) operating activities (55,214) (63,627) (492,153) Cash flows from investing activities Purchase of securities (994,419) (1,222,740) (8,863,709) Proceeds from sales of securities 982,386 1,294,391 8,756,456 Proceeds from redemption of securities 23,473 98, ,229 Increase in money held in trust (121) (257) (1,080) Decrease in money held in trust 2,067 18,424 Purchase of property, plant and equipment (940) (2,225) (8,385) Purchase of intangible assets (462) (784) (4,119) Proceeds from sales of property, plant and equipment Purchase of of subsidiaries resulting in change in scope of consolidation (1,889) Net cash provided by (used in) investing activities 12, , ,035 Cash flows from financing activities Proceeds from issuance of common 5,632 50,206 Redemption of subordinated bonds (15,000) Cash dividends paid (812) (1,234) (7,245) Dividends paid to non-controlling interests (10) (16) (94) Purchase of treasury (1,036) (7) (9,238) Proceeds from sales of treasury 1, ,890 Repayments of lease obligations (748) (712) (6,672) Net cash provided by (used in) financing activities 4,245 (16,922) 37,845 Effect of exchange rate change on cash and cash equivalents Net increase (decrease) in cash and cash equivalents (38,939) 84,606 (347,080) Cash and cash equivalents at beginning of period 168,937 84,331 1,505,815 Cash and cash equivalents at end of period 129, ,937 1,158,734 7

9 Organizations and Officers (As of July 1, 2017) Organization Chart (As of July 1, 2017) Officers Chairman Senior Executive Officer Executive Officer Yasuo Sugimoto Soichi Fukui General Manager, Local Revitalization Division President and Chief Executive Tsutomu Inaniwa Takanori Kudo Officer Senior Executive Officer Executive Officer Kunihiro Takada General Manager, Sales Headquarters General Manager, Systems Management Division Vice-president and Executive Officer Takayuki Fujisawa Hiroaki Furukawa Masahiro Kato Managing Executive Officer Executive Officer Director (outside; part-time) General Manager, Administration Headquarters General Manager, Hirosaki Business Division Seiichi Kumagai and Administration Management Division Kenichi Asari Yumiko Kamada Eiichi Okuzaki Executive Officer Director (Audit & Supervisory Committee Member) Managing Executive Officer General Manager, Hachinohe Business Division Kazuhiko Odanaka General Manager, Head Office Masato Ishibashi Director (Outside Audit & Kinichi Ogasawara Executive Officer Supervisory Committee Member) Managing Executive Officer General Manager, Hakodate Business Division Ikuo Sato General Manager, Tokyo Branch and Head Hiroyuki Hayano Director (Part-time Outside Audit & of Tokyo Office, Management Planning Division Executive Officer Supervisory Committee Member) Takanori Iwaoka General Manager, Aomori Branch Shigeto Umatani Executive Officer Katsuhiko Fukushi Toshihiro Nishiya General Manager, Management Planning Division Shinji Suto Note: Seiichi Kumagai, Yumiko Kamada, Ikuo Sato, Shigeto Umatani and Toshihiro Nishiya are outside directors as stipulated in Article 2, Item 15 of the Companies Act. 8

10 Overseas and Domestic Network Head Office Shanghai Representative Office 1-3-1, Katta, Aomori , Japan 28th Floor, Hang Seng Bank Tower, Phone: (81) Lujiazui Ring Road, Facsimile: (81) Pudong New Area, Shanghai, International Division P.R. China 1-3-1, Katta, Aomori , Japan Phone: (86) Phone: (81) Facsimile: (86) Facsimile: (81) S.W.I.F.T.: MCHI JP JT (As of July 1, 2017) Number of Branch Offices Head Office & Branch Offices Offices Representative Offices Aomori Prefecture 77 2 Outside Aomori Prefecture 17 Overseas