Aichi Bank : Annual Report 2022

2022

ANNUAL REPORT

The Aichi Bank, Ltd.

PROFILE

Aichi Bank is a regional bank whose business base is Aichi Prefecture, the central prefecture of the Tokai region, one of the country's three main industrial areas. Since its establishment in 1910, the Bank has worked to meet the diverse needs of customers in the region, based on its corporate mission of contributing to the prosperity of the community via a thorough commitment to sound management and business growth.

Aichi Bank has a domestic service network comprising 106 branches, and also engages in international operations. The Bank's head office is located in Nagoya, Aichi Prefecture, Japan's fourth- largest prefecture by population, and an area that combines a beautiful natural environment with a rich historical and cultural heritage.

As of March 31, 2022, the Bank had total assets of ¥4,320,749 million (US$35,303 million) on a consolidated basis, and deposits amounting to ¥3,389,658 million (US$27,695 million). Its capital ratio, calculated according to standards for banks operating only in Japan, stood at 9.95%.

FINANCIAL HIGHLIGHTS Years ended March 31, 2022 and 2021

		Millions of Yen			Thousands of U.S. Dollars
Consolidated		2022			2021			2022			2021
For the year:
Total income	¥	56,200	¥	53,296	$	459,187	$	435,460
Total expenses		40,825			47,329			333,564			386,706
Profit before income taxes		15,374			5,966			125,614			48,745
Profit attributable to owners of parent		10,945			4,266			89,427			34,855
At year-end:
Deposits	¥	3,389,658	¥	3,221,635	$	27,695,547	$	26,322,697
Loans and bills discounted		2,759,402			2,528,640			22,545,975			20,660,511
Securities		993,000			953,370			8,113,407			7,789,606
Total assets		4,320,749			3,788,132			35,303,121			30,951,319
Total net assets		239,512			246,391			1,956,957			2,013,162

Note: The U.S. dollar amounts represent translation of Japanese yen at the rate of ¥122.39 to U.S. $1.00 on March 31, 2022.

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Yukinori Ito, President

MESSAGE FROM THE MANAGEMENT

Business and Financial Conditions

Looking back at Japan's economy during the year ended March 31, 2022, although economic activity, such as face-to-face services, continued to stagnate amid challenging conditions in which the COVID-19 pandemic has been prolonged in addition to the impact of supply restrictions remaining, the economy has continued to recover as exports and manufacturing have continued to increase, which has led to improvements in corporate earnings.

On the other hand, as for the local economy of our business base, which is centered in Aichi Prefecture, exports and manufacturing have come to a standstill as manufacturing in the automobile industry, one of the major local industries, has not yet recovered due to disruptions in the component supply chain because of the long-lasting semiconductor shortage and the spread of COVID-19. Furthermore, with regard to personal consumption, the recovery of the economy is in a lull, which differs from Japan overall, as there is strong downward pressure on restaurants, accommodation services, etc.

Looking forward, in regard to the economic outlook, we are expecting recovery due to the effects of the economic measures, improvement in overseas economies, etc. amid the normalization of

socioeconomic activity, despite increasing uncertainties, such as the spread of COVID-19 and the steady rise of energy prices, etc. caused by the situation in Ukraine.

In the financial sector, the Bank of Japan works to support the cash flows of corporations, etc. and stably maintain financial markets through special programs that support monetary easing in response to COVID-19 under "quantitative and qualitative monetary easing with yield curve control," and will not hesitate to take additional monetary easing measures if necessary.

Looking at the business environment surrounding the Bank, challenges have further increased due to factors such as competition between banks, including financial institutions in other prefectures, steadily intensifying because of the advancement of the development of fintech and parties entering into the banking industry from other industries as well as both long- and short-term interest continuing to remain low in the continuation of monetary easing measures amid a situation in which the end of COVID-19 is still unable to be foreseen.

The Bank set four basic policies of "reinforce sales capabilities & profitability," "increase productivity," "reinforce human resources" and "reinforce governance," in the "Eleventh Medium-Term Management Plan," which spanned from April 2019 until March 2022, and carried out various initiatives with the aim of being a "bank that contributes to the local community as our customers' partner."

Earnings

Our business results on a consolidated basis for the year ended March 31, 2022 are as follows.

Total income increased ¥2,904 million year on year to ¥56,200 million (US$459 million) mainly due to increases in interest on loans and bills discounted and purchased, interest on and dividends from securities and fees and commissions. Total expenses decreased ¥6,504 million year on year to ¥40,825 million (US$333 million) mainly due to a decrease in provision of allowance for possible loan losses. As a result, profit attributable to owners of parent increased ¥6,679 million year on year to ¥10,945 million (US$89 million).

By segment, ordinary income of the banking segment increased ¥2,939 million year on year to ¥47,463 million (US$387 million) and its segment profit increased ¥9,635 million to ¥15,212 million (US$124 million). Ordinary income of the leasing segment decreased ¥83 million year on year to ¥8,082 million (US$66 million), and its segment profit decreased ¥191 million to ¥144 million (US$1 million).

Cash Flows

Net cash provided by operating activities increased ¥279,864 million year on year to ¥314,587 million (US$2,570 million). This was mainly attributable to increases in borrowings and call money and bills sold. Net cash used in investing activities decreased ¥110,378 million to ¥54,626 million (US$446 million). This was mainly attributable to purchases of securities. Net cash used in financing activities amounted to ¥1,746 million (US$14 million), an increase in cash used of ¥646 million. This was mainly due to dividends paid.

As a result, cash and cash equivalents at the end of the year amounted to ¥482,440 million (US$3,941 million), an increase of ¥258,215 million from the previous year-end.

Medium-term Strategy

In the "Twelfth Medium-Term Management Plan," we have set the three basic strategies of "strengthen ability and channels for solving issues (business strategy)," "increase efficiency of and optimize management (foundational strategy)" and "reform corporate culture and develop human resources (human resources strategy)," aiming to "provide trustworthy and ideal financial services to communities, and become the leading bank in generating value that continues to grow together with the community."

The specific details of each basic strategy are as follows:

1. "Strengthen ability and channels for solving issues (business strategy)"
   We will support the transition to a carbon-free society and establish a business model that grows together with the community by demonstrating our consulting function and strengthening channels that utilize digital technologies.
2. 1. Strengthen consulting function by enhancing solutions menu
   2. Enhance services for individuals
   3. Strengthen non-face-to-face channels
   4. Establish sales structure appropriate for the market environment
3. "Increase efficiency of and optimize management (foundational strategy)"
   We will establish sustainability for management by increasing productivity and optimizing management resources, and aim for sustainable growth together with the community.
4. 1. Strategic relocation of personnel
   2. Promotion of IT and the shift to digital, and increase operational efficiency (BPR)
   3. Display the Group's comprehensive strengths
   4. Enhance managerial control
5. "Reform corporate culture and develop human resources (human resources strategy)"
   We will establish a corporate culture that places importance on speed and taking on challenges, and establish a rewarding, vibrant organization where all employees play an active role.
6. 1. Establish a corporate culture that places importance on speed and taking on challenges
   2. Develop professional human resources
   3. Strengthen initiatives for diversity & inclusion
   4. Strengthen initiatives for ES management and health and productivity management

- 2 -	Yukinori Ito
President

BOARD OF DIRECTORS AND CORPORATE AUDITORS

President	Directors
Yukinori Ito	Audit and Supervisory Committee Members
	Masahiro Kato*1
Senior Managing Director	Yasutoshi Emoto*2
Nobuhiko Kuratomi	Yasuo Hasegawa*2
	Yoshihiko Nakao*2
Managing Directors	Tsunehiro Matsuno*2
Hiroyasu Matsuno	Chieko Murata*2
Hiroaki Yoshikawa
Directors
Kenichi Taguchi
Norimasa Suzuki	*1Standing Audit and Supervisory Committee Member
Kenji Ito	*2Outside Audit and Supervisory Committee Member

CORPORATE DIRECTORY

Service Network

Head Office

(Securities & Foreign Business Department)

14-12, Sakae 3-chome,Naka-ku, Nagoya 460-8678

Telephone: [phone]

SWIFT: AICHJPJN

Facsimile: 81-52-262-5793

Domestic Branches

Gifu (3)

Tokyo (1)

Head Office

Shizuoka (1)

Aichi (98)

Mie (2)

Osaka (1)

Total 106 Domestic Branches

Consolidated Companies

Aigin Business Service Co., Ltd.

Aigin DC Card Co., Ltd.

Aigin Lease Co., Ltd.

Aigin Computer Service Co., Ltd.

Aichi Capital Co., Ltd.

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The Aichi Bank, Ltd.

Consolidated Financial Statements

March 31, 2022 and 2021

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