THE FUKUSHIMA BANK, LTD.

Business Details

The bank conducts deposit, lending, and exchange operations, along with related businesses, at its head office and branches/sub-branches. Banking Business segment ordinary income for the full fiscal year FY2026 (ending March 2026) was ¥12,799 million (up ¥1,836 million year on year), accounting for approximately 84% of the group's total ordinary income of ¥15,175 million, making it the core segment. The bank provides a wide range of financial services to individuals, corporations, and local governments in its home base of Fukushima Prefecture. Fukugin Regional Revitalization Investment Co., Ltd. (established August 2025) was newly added as a consolidated subsidiary, strengthening the regional revitalization investment function.

Recent Overview

Achieved a return to profit for the first time in two periods, driven by a surge in fund investment income and the drop-off of one-time expenses.

Banking Business segment profit for the full fiscal year FY2026 (ending March 2026) was ¥617 million, a substantial improvement and swing to profit from ¥(1,245) million in the prior period. Fund investment income (non-consolidated) surged to ¥9,737 million (up ¥1,688 million year on year), with both interest on loans (¥8,155 million) and interest and dividends on securities (¥1,334 million) increasing substantially. Meanwhile, operating expenses were sharply reduced to ¥7,952 million (down ¥1,005 million year on year) due to the drop-off of one-time expenses recorded in the prior period related to the next-generation banking system replacement. However, funding costs surged to ¥1,877 million (up ¥1,343 million year on year) amid rising interest rates, and the overall interest margin remained in negative territory at △0.04%. In August 2025, Fukugin Regional Revitalization Investment Co., Ltd. was newly established and added as a consolidated subsidiary.

Key Products

Growth Drivers

• Increase in interest on loans: Non-consolidated interest on loans was ¥8,155 million (up ¥1,077 million year on year), driven by growth in loan balances to local governments (up ¥8,882 million year on year) and housing loans (up ¥5,678 million year on year), together with a rise in the loan yield (1.41%, up 0.19 percentage points year on year)
• Increase in interest and dividends on securities: Non-consolidated figure was ¥1,334 million (up ¥533 million year on year), driven by additions to the government bond balance (up ¥3,641 million year on year) and a higher yield (0.76%, up 0.28 percentage points year on year)
• Reduction in operating expenses: Non-consolidated operating expenses were ¥7,952 million (down ¥1,005 million year on year), mainly due to the drop-off of one-time expenses associated with the next-generation banking system replacement recorded in the prior period
• Expansion of assets in custody balance: The balance as of the end of March 2026 was ¥122,092 million (up ¥11,639 million year on year), with notable growth in investment trusts (up ¥8,540 million) and insurance (up ¥2,628 million)
• Increase in fee and commission income: Non-consolidated figure was ¥2,849 million (up ¥249 million year on year), with fee income expanding steadily
• Expansion of the scope of consolidation: The regional revitalization investment function was strengthened through the new consolidation of Fukugin Regional Revitalization Investment Co., Ltd. (established August 2025)

Risks

• Sharp increase in funding costs due to rising interest rates: Funding costs (non-consolidated) surged to ¥1,877 million (up ¥1,343 million year on year), mainly due to interest on deposits of ¥1,805 million (up ¥1,283 million year on year); the overall interest margin remains in negative territory at △0.04%, and continued rate increases risk further margin compression
• Large unrealized losses on securities: Net unrealized valuation gains (losses) on other securities worsened to ¥(8,917) million (from ¥(8,199) million in the prior period), and unrealized losses on held-to-maturity bonds worsened substantially to ¥(6,803) million (from ¥(2,920) million in the prior period), with unrealized losses on an expanding trend
• Non-performing loan risk: The non-consolidated disclosed claims ratio was 1.92% (roughly flat versus 1.93% in the prior period). Claims against bankrupt and reorganized debtors increased to ¥4,971 million (up ¥557 million year on year). Credit-related costs also increased to ¥638 million (from ¥482 million in the prior period)
• Sluggish regional economy: Personal consumption in Fukushima Prefecture, the bank's main operating base, remains weak. A persistent tendency toward frugality amid rising prices, combined with a nationwide increase in small and medium-sized enterprise bankruptcies, leaves a residual risk of spillover to the regional economy
• Decline in the ratio of loans to small and medium-sized enterprises: The balance of loans to small and medium-sized enterprises, etc. was ¥462,575 million (up ¥2,078 million year on year), but the ratio fell to 78.46% (down 1.48 percentage points from 79.94% in the prior period) due to a relative increase in loans to local governments
• Risk of failing to achieve the next-period earnings forecast: The consolidated ordinary profit forecast for FY2027 (ending March 2027) assumes high growth of ¥1,100 million (up 59.9% year on year), which may be difficult to achieve depending on the interest rate environment and credit cost trends