Summary of the 1 st Quarter Financial Statements for the First Three Months of FY2016 [JGAAP] (Consolidated) August 1, 2016 Listed Exchange TSE Company Name Aozora Bank, Ltd. URL http://www.aozorabank.co.jp/ TSE Code 804 Representative Shinsuke Baba, Representative Director and President Contact Person Ichiro Mizuno, Joint General Manager of Financial Control Division Scheduled Filing Date of Security Report Aug. 10, 2016 Dividend payable date Sep. 15, 2016 Reference Material Yes Trading Accounts Yes Investor Meeting Yes TEL (0)26-1111 (Unit: JPY millions, rounded down) 1. Business highlights for the first three months of FY2016 (1) Consolidated business results (Note: Percentages show year-on-year rates of change) Ordinary income Ordinary profit Profit attributable to owners of parent Three months ended Million Yen % Million Yen % Million Yen % Jun. 0, 2016 2,289.2 11,870 (25.5) 1,82 11.8 Jun. 0, 2015 1,299 (14.1) 15,928 (26.4) 12,75 0.5 (Note) Comprehensive income JPY 16,195 million ( - %) (Three months ended June 0, 2016) JPY 1,18 million ( - 94.6%) (Three months ended June 0, 2015) Net income per common share (basic) Net income per common share (diluted) Three months ended Yen Yen Jun. 0, 2016 11.85 11.85 Jun. 0, 2015 10.61 7.91 (2) Consolidated financial condition Total assets Total net assets Net assets to total assets ratio (Note) Net assets per common share Million Yen Million Yen % Yen Jun. 0, 2016 4,618,294 416,16 9.0 55.09 Mar. 1, 2016 4,592,921 405,498 8.8 46.8 (Ref.) Total net assets (less Subscription rights to shares and Non-controlling interests) JPY 414,178 million (June 0, 2016) JPY 404,54 million (March 1, 2016) (Note) Net assets to total assets ratio = (Total net assets - Subscription rights to shares - Non-controlling interests) / Total assets 2. Dividend 1Q end 2Q end Annual dividend Q end Year-end Annual Yen Yen Yen Yen Yen FY2015(common share) 4.00 4.00 5.00 5.60 18.60 FY2016(common share) 4.00 FY2016(common share) (Forecast) - - - 18.40 (Note) Revision of dividends forecast to the latest announcement (Note) The common share dividend forecast for FY2016 is 18.40 yen per common share. Dividends will be paid quarterly and amount of the payment for the 2 nd quarter and thereafter will be separately announced upon determination. The dividend payment forecast for FY2016 was calculated by dividing the total dividend amount, which is set at 50% of Profit attributable to owners of parent for forecast FY2016, by the total number of common shares issued, excluding treasury shares, as of June 0, 2016.. Consolidated earnings forecast for the year ending March 1, 2017 (FY 2016) (Note: Percentages show year-on-year rates of change) Profit attributable Net income Ordinary profit to owners of parent per share Million Yen % Million Yen % Yen 1H of FY2016 26,500 (10.7) 21,500 (11.5) 18.4 FY2016 (Full Year) 5,000 (4.9) 4,000 (1.1) 6.86 (Note) Revision of consolidated earnings forecast to the latest announcement
* Notes (1) Changes in material subsidiaries during the first quarter (changes in specified subsidiaries which affect the scope of consolidation) (2) Accounting treatments particularly used for the quarterly financial statements () Changes in accounting policy, accounting estimates, or retrospective restatements (a) Changes with revisions of accounting standards Yes (b) Changes other than (a) above (c) Changes in accounting estimates (d) Retrospective restatements (Note) For more information, please refer to () Changes in accounting policy, accounting estimates, or retrospective restatements of 2. Information about items stated in * Notes of Summary on page of the attachment. (4) The number of common shares issued (a) The number of common shares issued ( including treasury shares ) Jun. 0, 2016 Mar. 1, 2016 1,182,894,181 1,182,894,181 (b) The number of treasury shares 16,501,700 16,501,000 (c) The average number of common shares outstanding ( months ) Three months ended Jun. 0, 2016 Three months ended Jun. 0, 2015 1,166,92,65 1,166,94,181 Implementation process of quarterly review This quarterly summary is out of scope of quarterly review stipulated by Financial Instruments and Exchange Act. The quarterly review on the quarterly financial statements is in process at the disclosure of this quarterly summary. Notes and remarks for the proper use of earnings projection The above earnings forecast involves certain risks and uncertainties since the calculations are based on management s assumptions and beliefs in light of information currently available. This should not be interpreted as a promise or guarantee that the forecast will be achieved. Please be aware that actual results may be materially different from the forecast presented herein due to various factors.
[ Attachment ] 1. Qualitative information (1) Operating results (2) Financial condition () Consolidated earnings forecast 2. Information about items stated in * Notes of Summary (1) Changes in material subsidiaries during the first quarter (2) Accounting treatments particularly used for the quarterly financial statements () Changes in accounting policy, accounting estimates, or retrospective restatements (Reference) Summary of consolidated revenue and expenses. Quarterly consolidated financial statements (1) Quarterly consolidated balance sheet (2) Quarterly consolidated statement of income and quarterly consolidated statement of comprehensive income Quarterly consolidated statement of income For the first three months ended Jun. 0 Quarterly consolidated statement of comprehensive income For the first three months ended Jun. 0 () Notes to quarterly consolidated financial statements (Information on going concern assumption) (Changes in shareholders' equity) 2 2 4 5 5 6 6 7 8 8 8 1
1. Qualitative information (1) Operating results Aozora reported consolidated net revenue of 22.0 billion yen, a decrease of 1.5 billion yen, or 6.5% year on year. Business profit was 10.7 billion yen, a decrease of 2.9 billion yen, or 21.5% year on year. Profit attributable to owners of parent was 1.8 billion yen, an increase of 1.5 billion yen, or 11.8% year on year, representing progress of 2.1% towards the full-year forecast of 4.0 billion yen. Net interest income was 10.2 billion yen, a decrease of 2.8 billion yen, or 21.7% year on year, due to factors including increased U.S. dollar funding costs, while the yields on loans and securities increased as the Bank continued its disciplined approach to balance sheet management. Non-interest income increased 1. billion yen, or 12.5% year on year, to 11.8 billion yen. Net fees and commissions were 2.2 billion yen, a decrease of 0.5 billion yen, or 18.2% year on year, and net trading revenues were 4.5 billion yen, an increase of 0.7 billion yen, or 19.%, mainly reflecting strong earnings from the sale of derivative-related products. Gains/losses on bond transactions were a gain of 2. billion yen, compared with a gain of 2.2 billion yen in the first three months of FY2015. Net other ordinary income, excluding gains/losses on bond transactions, was 2.8 billion yen, an increase of 1.0 billion yen, or 54.4% year on year, reflecting strong gains from limited partnerships. General and administrative expenses were 11. billion yen, an increase of 1.4 billion yen, or 14.4% year on year, representing 25.0% of the 45.0 billion yen budgeted for the full year. The increase mainly reflected amortization expenses incurred in relation to our new core banking system. As a result of the above factors, consolidated business profit was 10.7 billion yen, a decrease of 2.9 billion yen, or 21.5%. Credit-related expenses were a net reversal of 0.6 billion yen, mainly due to recoveries of written-off claims. Ordinary profit and profit before income taxes were both 11.9 billion yen, a decrease of 4.1 billion yen, or 25.5%. Taxes (corporation tax, resident tax, business tax and deferred income taxes) were a net credit of 2.0 billion yen in the first three months of FY2016. As a result of the aforementioned factors, profit attributable to owners of parent for the first three months of FY2016 was 1.8 billion yen, an increase of 1.5 billion yen, or 11.8% year on year representing progress of 2.1% towards the full-year forecast of 4.0 billion yen. Net income per common share (basic) was 11.85 yen, as compared to 10.61 yen per share (basic) for the first three months of FY2015. 2
(2) Financial condition Total assets were 4,618. billion yen as of June 0, 2016, an increase of 25.4 billion yen, or 0.6%, compared to March 1, 2016. Loans were 2,479.7 billion yen, a decrease of 2.0 billion yen, or 1.%, from March 1, 2016. Domestic loans increased 6.7 billion yen. In U.S. dollar terms, overseas loans increased 2.0 million dollars (due to the strengthening yen, a decrease of 68.6 billion on a yen basis). Securities decreased by 7.6 billion yen, or 4.1%, from March 1, 2016, to 885.9 billion yen. Total liabilities were 4,202.0 billion yen, an increase of 14.6 billion yen, or 0.%, compared to March 1, 2016. The Bank continued its efforts to flexibly manage its funding volume in line with its assets. As a result, total core funding (deposits, negotiable certificates of deposit, debentures and bonds) decreased 59.8 billion yen, or 1.9%, from March 1, 2016 to,11.8 billion yen. Net assets were 416. billion yen, representing an increase of 10.8 billion yen, or 2.7%, in comparison with March 1, 2016. Net assets per common share were 55.09 yen, as compared to 46.8 yen per common share as of March 1, 2016. () Consolidated earnings forecast No change has been made to the full-year consolidated earnings forecast of FY2016 announced on May 16, 2016 (net revenue of 92.0 billion yen, business profit of 47.0 billion yen, ordinary profit of 5.0 billion yen and profit attributable to owners of parent of 4.0 billion yen). (Note) Figures stated in 0.1 billion yen units are rounded to the nearest 0.1 billion yen. 2. Information about items stated in * Notes of Summary (1) Changes in material subsidiaries during the first quarter (2) Accounting treatments particularly used for the quarterly financial statements () Changes in accounting policy, accounting estimates, or retrospective restatements Changes in accounting policy (Application of Practical Solution on a change in depreciation method due to Tax Reform 2016) Starting in the first three months of FY2016, some consolidated subsidiaries applied the Practical Solution on a change in depreciation method due to Tax Reform 2016 (ASBJ PITF No.2, June 17, 2016) and changed their depreciation method for structures and equipment attached to buildings from declining-balance method to straight-line method. This application has little effect on the quarterly consolidated financial statements.
(Reference) Summary of consolidated revenue and expenses (JPY 100 million) FY2015 FY2016 Change months Apr.-Jun. months Apr.-Jun. Net revenue 1 25 220 (15) Net interest income 10 102 (28) Net fees and commissions 27 22 (5) Net trading income 8 45 7 Gains/losses on bond transactions 22 2 1 Net other ordinary income excluding gains/losses on bond transactions 18 28 10 General and administrative expenses (98) (11) (14) Business profit 2 16 107 (29) Credit-related expenses 16 6 (10) Gains/losses on stock transactions 1 4 Other 6 2 (4) Ordinary profit 159 119 (41) Extraordinary profit - - - Profit before income taxes 159 119 (41) Total income taxes (6) 20 55 Profit 124 19 15 Profit/loss attributable to non-controlling interests 0 (0) (0) Profit attributable to owners of parent 124 18 15 1 Net revenue = (Interest income-interest expenses)+(fees and commissions income -Fees and commissions expenses)+(trading income-trading expenses) +(Other ordinary income-other ordinary expenses) 2 Business profit = Net revenue-general and administrative expenses Regardless of nature of accounts, income or profits are shown as positive and expenses or losses are shown as negative amount on the table above. 4
. Quarterly consolidated financial statements (1) Quarterly consolidated balance sheet (In millions of yen) As of Mar.1, 2016 As of Jun.0, 2016 Assets Cash and due from banks 546,258 568,952 Call loans and bills bought 56 - Receivables under securities borrowing transactions 67,895 - Monetary claims bought 4,856 6,425 Trading assets 7,7 411,28 Money held in trust 26,25 1,474 Securities 92,526 885,945 Loans and bills discounted 2,511,622 2,479,670 Foreign exchanges 24,221 27,089 Other assets 96,12 15,670 Tangible fixed assets 21,918 21,911 Intangible fixed assets 11,257 12,606 Deferred debenture discounts 118 102 Net defined benefit asset 951 1,072 Deferred tax assets 21,57 22,578 Customers' liabilities for acceptances and guarantees 0,514 25,726 Allowance for loan losses (61,84) (59,712) Allowance for investment loss (476) (504) Total assets 4,592,921 4,618,294 Liabilities Deposits 2,710,51 2,75,274 Negotiable certificates of deposit 221,600 145,220 Debentures 219,465 198,26 Call money and bills sold 90,268 70,028 Payables under securities lending transactions 26,521 214,72 Trading liabilities 269,869 296,128 Borrowed money 208,048 226,0 Bonds payable 40,000 5,000 Other liabilities 119,562 225,049 Provision for bonuses,188 874 Provision for directors' bonuses 76 2 Net defined benefit liability 8,961 9,058 Provision for directors' retirement benefits 2 0 Provision for credit losses on off-balance-sheet instruments 1,94 2,202 Provision for contingent loss 409 49 Reserves under special laws 7 7 Deferred tax liabilities - Acceptances and guarantees 0,514 25,726 Total liabilities 4,187,422 4,201,978 Net assets Capital stock 100,000 100,000 Capital surplus 87,1 87,1 Retained earnings 199,785 207,086 Treasury shares (,88) (,88) Total shareholders' equity 8,710 91,011 Valuation difference on available-for-sale securities 16,258 19,818 Deferred gains or losses on hedges 4,48 4,890 Foreign currency translation adjustment () (1,562) Remeasurements of defined benefit plans 19 20 Total accumulated other comprehensive income 20,8 2,167 Subscription rights to shares 182 182 Non-controlling interests 772 1,955 Total net assets 405,498 416,16 Total liabilities and net assets 4,592,921 4,618,294 5
(2) Quarterly consolidated statement of income and quarterly consolidated statement of comprehensive income (Quarterly consolidated statement of income) (For the first three months ended Jun.0) For the three months ended Jun.0, 2015 (In millions of yen) For the three months ended Jun.0, 2016 Ordinary income 1,299 2,289 Interest income 16,508 14,746 Interest on loans and discounts 10,815 10,101 Interest and dividends on securities 4,801 4,5 Fees and commissions 2,919 2,486 Trading income,764 4,974 Other ordinary income 5,407 7,589 Other income 2,699 2,492 Ordinary expenses 15,71 20,418 Interest expenses,508 4,572 Interest on deposits 2,01 1,761 Interest on debentures 15 1 Fees and commissions payments 222 278 Trading expenses - 482 Other ordinary expenses 1,92 2,50 General and administrative expenses 9,417 11,090 Other expenses 81 1,491 Ordinary profit 15,928 11,870 Profit before income taxes 15,928 11,870 Income taxes - current 1,55 92 Income taxes - deferred 2,018 (2,914) Total income taxes,55 (1,990) Profit 12,74 1,861 Profit (loss) attributable to non-controlling interests (1) 28 Profit attributable to owners of parent 12,75 1,82 6
(Quarterly consolidated statement of comprehensive income) (For the three months ended Jun.0) For the three months ended Jun.0, 2015 (In millions of yen) For the three months ended Jun.0, 2016 Profit 12,74 1,861 Other comprehensive income (11,25) 2, Valuation difference on available-for-sale securities (11,172),559 Deferred gains or losses on hedges (119) 452 Foreign currency translation adjustment 42 (1,559) Remeasurements of defined benefit plans, net of tax (286) (119) Comprehensive income 1,18 16,195 Comprehensive income attributable to Comprehensive income attributable to owners of parent 1,19 16,166 Comprehensive income attributable to non-controlling interests (1) 28 7
() Notes to quarterly consolidated financial statements (Information on going concern assumption) (Changes in shareholders' equity) 8