The Year in Review

Kiyo Holdings, Inc.

Deposits
During the period under review, we worked to maintain the stable balance of deposits. Especially in deposits from individuals, we have promoted a campaign featuring the 110th anniversary time deposits of our subsidiary Kiyo Bank. The term-end balance of deposits came to ¥2,947.4 billion on a consolidated basis.

Loans and Bills Discounted
The balance of loans and bills discounted was ¥2,041.3 billion at the end of the fiscal year on a consolidated basis. In addition to continued strength in housing loans, business loans, which had been at low levels for the past several years, has shown a significant improvement, particularly in Osaka Prefecture.

Segment Information
The following is the earnings performance of each segment. The banks, the core of the Kiyo Financial Group, registered ordinary income of ¥70.7 billion, ordinary expenses of ¥70.1 billion, and ordinary profit of ¥0.5 billion.
    The leasing business reported ordinary income of ¥3.6 billion, ordinary expenses of ¥3.5 billion and ordinary profit of ¥0.1 billion.
    The credit card business achieved ordinary income of ¥1.8 billion, ordinary expenses of ¥1.7 billion, and ordinary profit of ¥0.1 billion.
    The clerical work business and other operations posted ordinary income of ¥2.2 billion, ordinary expenses of ¥2.1 billion, and ordinary profit of ¥0.1 billion.

Securities
The balance of securities holdings came to ¥803.3 billion on a consolidated basis.

Cash Flows
The period-end balance of cash and cash equivalents increased ¥81.6 billion to ¥133.1 billion, which is partly attributable the share transfer in the amount of ¥12.8 billion.
    Net cash provided by operating activities amounted to ¥46.5 billion, chiefly reflecting a decline in pledged money for securities borrowing transactions.
    Net cash provided by investing activities came to ¥4.7 billion, due chiefly to proceeds from sales of securities.
    Net cash provided by financing activities amounted to ¥17.5 billion, due mainly to the issuance of shares.

Capital Ratio
The Kiyo Holdings’ capital ratio (on a consolidated basis; standards applied to banks operating solely in Japan) improved to 9.52%. In March 2006, Kiyo Holdings undertook an issuance of ¥25.2 billion in preferred stock to procure capital. Utilizing this capital procurement, Kiyo Holdings invested ¥8.0 billion in Kiyo Bank, and ¥9.0 billion in Wakayama Bank. In this way, both banks were able to achieve sound financial positions. We are working to build a financial structure that will enable us to further increase lending to local small and medium-sized enterprises, and support corporate rehabilitation programs. The capital ratio (domestic standards) for Kiyo Bank declined 0.42 percentage point year-on-year to 8.59% on a non-consolidated basis, and fell 0.51 percentage point to 8.60% on a consolidated basis. The capital ratio (domestic standards) for Wakayama Bank increased 2.02 percentage points to 8.90% on a non-consolidated basis, and rose 2.03 percentage points to 9.01% on a consolidated basis.

Earnings
As a result of the active marketing of housing loans to individuals and strong sales of investment trusts and individual pension insurance products, net interest income came to ¥46.0 billion, net fees and commissions totaled ¥7.6 billion, and net other income came to ¥0.7 billion. With the aim of enhancing the soundness of our asset portfolio, we posted a credit cost of ¥26.7 billion. This figure included a provision for possible loan losses and the non-performing loans. However, thanks to the favorable performance of the stock market, gains on equity-related transactions totaled ¥7.5 billion. As a result, ordinary profit came to ¥0.9 billion for the reporting term, and net income totaled ¥3.2 billion, due mainly to the posting of an extraordinary gain on trust fund operation for employees’ retirement benefits in the amount of ¥9.0 billion, which more than offset deferred income taxes of ¥7.4 billion, resulting from a reversal of deferred tax assets.