Policy for Disposal of Nonperforming Loans and Balance of Nonperforming Loans as of March 31, 2011

Hyakugo Bank makes appropriate write-offs and provisions to reserves according to the possibility of recovery or the risk of impairment of loan assets, as determined by the Bank’s self-assessment of asset quality. In addition, the Bank aggressively works to recover nonperforming loans, and is carrying out the final disposal of nonperforming loans through sales and other means. As a result, disposal of nonperforming loans on a consolidated basis in the fiscal year ended March 31, 2011 totaled ¥1,185 million.

Risk-Monitored Loans and Balance, Prior-Year Comparison and Loans Disclosed under the Financial Reconstruction Law

Risk-monitored loans on a consolidated basis totaled ¥80,895 million as of March 31, 2011, an increase of ¥2,123 million from a year earlier, and represented 3.28 percent of total loans outstanding, an increase of 6 basis points from a year earlier.

Loans disclosed under the Financial Reconstruction Law on a non-consolidated basis totaled ¥79,810 million as of March 31, 2011, an increase of ¥2,113 million from a year earlier. Nonperforming loans as a percentage of total credit outstanding remained at a low level, increasing 6 basis points from a year earlier to 3.20 percent. The coverage for nonperforming loans was 73.98 percent, and the Bank maintains appropriate reserves to cover future risks and improve asset quality.

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