THE TOHOKU BANK,LTD.

Business Details

Through the head office and branches/sub-branches, the bank conducts deposit-taking, lending, securities investment, domestic and foreign exchange, corporate bond trustee services, guarantee of obligations, over-the-counter sales of government bonds and other public bonds, and securities investment trusts. Its main customers are small and medium-sized enterprises, individuals, and local governments within Iwate Prefecture, and it plays a role in providing stable funding to the regional economy. This is the core segment, accounting for over approximately 90% of consolidated ordinary income, forming the earnings base for the entire group.

Recent Overview

Ordinary income and profit both increased substantially due to higher loan interest and fee income, while the non-performing loan ratio also improved.

In FY2026 (ending March 2026, FY2025), interest on loans increased to ¥10,196 million (from ¥8,513 million in the prior fiscal year), expanding fund management income to ¥12,419 million. Fee and commission income also increased to ¥3,063 million. On the other hand, due to the policy rate hike, fund procurement expenses surged to ¥2,093 million (from ¥619 million in the prior fiscal year). The non-consolidated non-performing loan amount decreased substantially to ¥15,552 million (from ¥19,901 million in the prior fiscal year), and the non-performing loan ratio improved to 2.15% (from 2.83% in the prior fiscal year). The loan balance renewed its record high at ¥716,064 million. Valuation gains/losses on other securities deteriorated to negative ¥14,883 million.

Key Products

Growth Drivers

• Increase in interest on loans: Interest on loans increased to ¥10,196 million (from ¥8,513 million in the prior fiscal year) due to expansion of the average loan balance (¥706,705 million) and improved yield (1.44%)
• Expansion of fee and commission income: Consolidated fee and commission income expanded to ¥2,290 million (from ¥2,125 million in the prior fiscal year) due to increased sales commissions from assets in custody such as investment trusts and insurance, as well as exchange fees
• Improvement in the interest rate environment: Against the backdrop of the Bank of Japan's policy rate hike (approximately 0.75%), the yield on fund management rose to 1.23% (from 1.05% in the prior fiscal year), improving the overall interest margin to 0.12%
• Substantial improvement in non-performing loans: The non-consolidated non-performing loan ratio declined to 2.15% (from 2.83% in the prior fiscal year), and credit-related expenses decreased to ¥1,353 million (from ¥1,499 million in the prior fiscal year), boosting profit
• Active expansion of loans to small and medium-sized enterprises and individuals: Under the priority strategy of "support for regional revitalization" in the second medium-term management plan, housing loan balance reached ¥107,424 million and loans to individuals reached ¥127,324 million, both renewing record highs
• Expansion of assets in custody balance: The assets in custody balance increased to ¥102,897 million (from ¥88,473 million in the prior fiscal year) through the three pillars of investment trusts, insurance, and public bonds, contributing to stable growth in fee income

Risks

• Rising funding costs due to a sharp increase in interest on deposits: Interest on deposits surged to ¥1,770 million (from ¥540 million in the prior fiscal year) due to the policy rate hike, and the risk of margin compression continues
• Expansion of securities valuation losses: Valuation gains/losses on other securities have deteriorated to negative ¥14,883 million (from negative ¥10,144 million in the prior fiscal year), an worsening trend, increasing the risk of bond valuation losses amid rising interest rates
• Decline in capital adequacy ratio: Due to the expansion of risk assets accompanying the increase in loans to individuals, etc., the non-consolidated capital adequacy ratio declined to 8.56% (from 8.99% in the prior fiscal year), narrowing the margin above the medium-term management plan target of 8.5%
• Risk of fluctuation in credit-related expenses: Uncertainty in credit costs remains, including the recording of ¥1,336 million in provision for individual allowance for doubtful accounts. Non-performing loans to various service industries remain at a high level of ¥7,175 million
• Population decline and shrinking regional economy: Since the bank's main base is Iwate Prefecture, there is a long-term risk of shrinking deposit and loan demand due to population decline. The individual deposit balance continues to trend downward at ¥589,307 million
• Decline in deposit balance: Deposits, etc. balance declined to ¥917,212 million (from ¥921,754 million in the prior fiscal year) due to a decrease in individual deposits, among other factors, posing a challenge toward achieving the medium-term management plan target of ¥1 trillion in total deposits