Okashin_H1-H4.indd H1 2018/08/09 20:41 The Okazaki Shinkin Bank was established in 1924 in Okazaki City, Aichi JAPAN Prefecture to serve small and medium-sized companies and their employees. Under its corporate mission of sincerely striving for the prosperity of society and the development of regional industry, the Bank continues to maintain sound operations, and is steadily widening its business scope. The Bank AICHI currently enjoys an overwhelming share of deposits and loans in Okazaki City, and is one of the top-ranked shinkin banks in Japan. NAGOYA Amid the present dramatic changes in the financial sector, the Bank OKAZAKI reaffirms its customer-focused business stance. We are continuing to improve our services and lineup of financial products, streamline our corporate organization, raise operational efficiency, and further reinforce our risk management capability and earning power. $V0DUFK7KH%DQN·VQHWZRUN²FRYHULQJWKHZKROHRI$LFKL 3UHIHFWXUH²FRPSULVHGEUDFKHV7KHQHWZRUNZDVVWDIIHGE\ employees serving 131,658 members. The total balance of deposits stood at ¥3,043,268 million (US$28,645 million), and loans and bills discounted totaled ¥1,584,243 million (US$14,911 million). (exchanging ¥106.24, end of March 2018) Profile of The Okazaki Shinkin Bank About the Representative System (As of March 31, 2018) Shinkin banks are the Japanese equivalent of a credit union, and are a form of financial • Established: July 1924 institution with a cooperative structure based on the fundamental principles of "mutual trust" • Head Office: 41 Motosuga, Sugo-cho, Okazaki and "reciprocity" between members, and that maximizes the value of the opinions of each • Members: 131,658 and every member. Each member of a shinkin bank therefore has a single voting right regardless of the number of asset accounts, and participates in the operation of the bank • Capital: 3,167.7 million yen through the general meetings. However, because of the large number of members of the • Deposits: 3,043.2 billion yen Okazaki Shinkin Bank, it is not possible in practice to actually hold general meetings. In • Loans: 1,584.2 billion yen order to maintain member consensus while ensuring the completeness of deliberations, a • Full-time employees: 2,010 representative system is therefore used instead of general meetings. • Location: 99 locations The representatives committee is the highest-level decision-making body for deciding Number of Offices by Area important issues such as approval of accounts or change to statutes of the bank, and Okazaki Area 29 appointment of the board of directors and auditors. The representatives committee Nagoya Area 19 therefore conducts business through representatives that are selected by some appropriate procedure from among the members, and the opinions of each and every member are Owari Area 5 therefore reflected in the running of the bank in the same way as a general meeting. West-Mikawa Area 30 Furthermore, communication with representatives and members that occurs not only in East-Mikawa Area 16 the representative meetings, but also in everyday operations is treated as important, and is incorporated into various improvements in the running of the bank. １ Okashin_AR_01-10_2018.indd 01 2018/08/09 20:42 Message from the Management Ichiro Obayashi Makoto Okawara Chairman of the Board President Aiming to Be the Most Trusted, Number-One Community Bank Thank you for using the Okazaki Shinkin Bank. We are publishing "The State of Okashin 2018," our annual disclosure report, in order to foster an even deeper understanding of our bank, and we would invite everyone to read it. Local economic conditions continued along the path of a gentle recovery in 2017, including a transition to stronger production activities due to increases in exports and equipment investment. However, the sense of uncertainty about the future also increased due to a greater sense of labor shortages among companies as well as concerns over increasing tension surrounding North Korea and trade friction caused by the United States. On the financial side of the economy during this time, interest rate levels have continued to be extremely low, with the Bank of Japan maintaining a policy of negative interest rates. Amidst these financial and economic conditions, we have striven to improve the quality of our financial services with a focus on fields in which our clients have growing needs, such as business match-making, business succession and inheritance, real estate utilization, health care and welfare, and overseas business support, based on an approach that seeks mutual advantage and puts fairness before profits, in accordance with the medium-term business plan we launched in 2015, our "Three-Year Plan for Transitioning from Quantity to Quality." With regard to bank locations, we moved our Nagoya Branch to the Nagoya Building newly constructed in the Misono district of Nagoya, and our Okazaki Ekinishi Branch, Ikeura Branch, Handa Branch, and Hina Branch also moved to new facilities. We have also worked to offer greater convenience for our customers by continuing to install new ATMs in shopping centers and other locations. With the new medium-term management plan that we are starting in 2018, our "Three-Year Plan for Reform and Creativity," we aim to become a financial institution that thrills customers and enriches employees by creating new added value without being limited by previous ways of thinking, via five strategies that concern sales, bank branches, business operations, personnel, and finances. Our personnel and executives are united in our efforts to pursue business operations that will earn an even higher level of trust from our customers, and we humbly ask for your continued support in these efforts. July 2018 2 Okashin_AR_01-10_2018.indd 02 2018/08/09 20:42 Review of Operations Savings and Deposits Thanks to you, our savings and deposit balance reached 3 trillion yen in 30,432 (unit: 100 million yen) 29,105 28,283 December 2017. We were able to grow our savings and deposit balance to 3 trillion yen in December 2017. We are now ranked third nationwide among all shinkin 22,886 21,956 22,435 banks in this area. Going forward, we aim to be a financial institution that continues to please and bee Reached chosen by customers, and we hope to continuee 3 trillion receiving the exceptional support you have shown us.. yen Personal savings (yen) 3 trillion Reached 2 trillion yen 2 trillion Reached 1 trillion yen 0 End of March 2016 End of March 2017 End of March 2018 1 trillion Personal deposits increased 45 billion yen, and corporate deposits increased 83.3 billion yen, resulting in a savings and deposits increase of 132.7 billion yen 0 compared to the end of the previous fiscal year. The period-end balance was 1986 1994 2017 3,043.2 billion yen. Loans Profit and Loss Conditions (unit: 100 million yen) (unit: million yen) 15,495 15,706 15,842 Operating Current operating profit 7,129 profit 6,779 5,670 5,204 4,338 6,393 3,258 5,869 6,237 Individual loans 0 0 End of March 2016 End of March 2017 End of March 2018 End of March 2016 End of March 2017 End of March 2018 Loans increased by 13.5 billion yen compared to the end of the previous fiscal Operating profit was 6.779 billion yen, and current operating profit was year, for a period-end balance of 1,584.2 billion yen. 5.204 billion yen. Capital ratio Non-performing Loan Conditions (unit: 100 million yen) (unit: million yen) Isolated capital ratio (%) 193,991 13.1113.11 12.8112.818 12.4712.47 3.833.83 Non-performing loan rate (%) 3.243.24 2.902.990 1,926 1,953 2,000 59,738 51,265 46,225 Capital Accumulated amount earnings Non-performing loans 0 0 End of March 2016 End of March 2017 End of March 2018 End of March 2016 End of March 2017 End of March 2018 Our isolated capital ratio was 12.47% (a 0.34 point decrease compared to the end The non-performing loan amount based on the Financial Revitalization Act of the previous fiscal year). This is over 3 times more than the domestic standard of declined 5.04 billion yen compared to the end of the previous fiscal year, for a 4%, and it demonstrates both the soundness and security of the Okazaki Shinkin Bank. total of 46.225 billion yen. To further alleviate risks, our total capital is 200 billion yen, putting our bank in a position of excellent operational strength that ranks among Japan’s top shinkin banks. 3 Okashin_AR_01-10_2018.indd 03 2018/08/09 20:42 Efforts towards Compliance (Adhering to Laws) Fundamental Compliance Policy The Okazaki Shinkin Bank has established a fundamental policy of prioritizing compliance as our most important management issue, and all of our executives and employees are active in efforts to comply with laws and regulations, etc. A set of "in-house rules for supervising compliance" have been established based on the compliance policy, and these rules determine the basic items related to preparations for complying with laws, etc. A strong management system has also been built with the board of directors at the top. In terms of actions, the "compliance program" that details specific implementation plans is decided every year. Through this program, all of our executives and employees strive to be active in each of the areas for improving employee awareness and building systems for complying with laws, etc. Compliance Management System The final decision-making body in relation to compliance is the Board of Directors Corporate auditors board of directors. In addition to deciding on our fundamental policies and compliance standards, the board of directors appropriately evaluates the range of compliance measures in addition to the state of compliance.