Interim Report 2025（3,624KB）

Interim Report

Six-Month Period Ended September 30, 2025

Editorial Policy

This document is an Interim Report (document explaining the Bank’s business operations and financial condition) created in compliance with Article 21 of the Banking Act.

Forward-Looking Statement

This document contains forward-looking statements regarding the Bank’s financial condition and results of operations. These forward-looking statements, which include the Bank’s views and assumptions with respect to future events, involve certain risks and uncertainties. Actual results may differ from forecasts due to changes in economic conditions and other factors.

Corporate Data

Corporate History 2

Business Activities 3

Organization Chart 4

Directors, Audit & Supervisory Board Members and

Executive Officers 5

Staff Profile 5

Office Directory 6

Business Network 7

Subsidiaries and Affiliated Companies 8

Management Support and Efforts for Regional

Economic Revitalization 9

Financial Data

Consolidated Information

CONSOLIDATED BUSINESS RESULTS 10

Consolidated Financial Highlights 10

CONSOLIDATED FINANCIAL REVIEW 11

Consolidated and Equity-Method Companies 11

Analysis of Business Results 11

Analysis of Financial Condition 13

CONSOLIDATED SEMIANNUAL FINANCIAL STATEMENTS 15

Consolidated Semiannual Balance Sheet (Unaudited) 15

Consolidated Semiannual Statement of Income

(Unaudited) 16

Consolidated Semiannual Statement of Comprehensive

Income (Unaudited) 17

Consolidated Semiannual Statement of Changes in Equity (Unaudited) 18

Consolidated Semiannual Statement of Cash Flows (Unaudited) 19

Notes to Consolidated Semiannual Financial Statements (Unaudited) 20

INCOME ANALYSIS (Consolidated) 54

Interest-Earning Assets and Interest-Bearing Liabilities 54

Fees and Commissions 54

Gains on trading account transactions 54

Other Ordinary Income 55

Non-Consolidated Information

NON-CONSOLIDATED BUSINESS RESULTS 56

Non-Consolidated Financial Highlights 56

NON-CONSOLIDATED SEMIANNUAL FINANCIAL

STATEMENTS 57

Non-Consolidated Semiannual Balance Sheet (Unaudited) 57

Non-Consolidated Semiannual Statement of Income (Unaudited) 58

Non-Consolidated Semiannual Statement of Changes in

Equity (Unaudited) 59

INCOME ANALYSIS (Non-Consolidated) 60

Net Revenue, Business Profit 60

Ratios 61

Yield on Interest-Earning Assets, Interest Rate on

Interest-Bearing Liabilities, Net Yield/Interest Rate 61

Average Balance of Interest-Earning Assets and

Interest-Bearing Liabilities 62

Analysis of Interest Income and Interest Expenses 63

Fees and Commissions 64

Gains on trading account transactions 64

Other Ordinary Income 65

General and Administrative Expenses 65

ELECTRONIC PAYMENT INSTRUMENTS (Non-Consolidated) 65

CRYPTO ASSETS (Non-Consolidated) 65

DEPOSIT OPERATIONS (Non-Consolidated) 66

Balance of Deposits 66

Balance of Time Deposits by Residual Period 66

Balance of Deposits by Depositor 67

Deposits per Office 67

Deposits per Employee 67

LOAN OPERATIONS (Non-Consolidated) 68

Balance of Loans and Bills Discounted 68

Balance of Loans and Bills Discounted by Residual Period 68

Ratio of Loans and Bills Discounted to Deposits 68

Loans and Bills Discounted per Office 68

Loans and Bills Discounted per Employee 69

Loans and Bills Discounted to Small and Medium-Sized Enterprises (SMEs) 69

Consumer Loans Outstanding 69

Breakdown of Loans and Bills Discounted by Industry 69

Balance of Loans and Bills Discounted,

Classified by Purpose 70

Breakdown of Loans and Bills Discounted by Collateral 70

Breakdown of Collateral for Customers’ Liabilities

for Acceptances and Guarantees 70

Write-Off of Loans 70

Allowance for Loan Losses 70

Loans to restructuring countries 71

NPLs based on the Banking Act and the FRA 72

Allowance Ratios for Each Category of Borrower,

Based on Asset-Assessments 72

Asset-Assessment, NPLs based on the FRA, Write-Offs

and Allowance 73

SECURITIES (Non-Consolidated) 74

Balance of Securities Held 74

Balance of Securities by Residual Period 75

Ratio of Securities to Deposits 75

SECURITIES BUSINESS (Non-Consolidated) 76

Underwriting of Public Bonds 76

Over-the-Counter Sales of Public Bonds and

Securities Investment Trusts 76

INTERNATIONAL OPERATIONS (Non-Consolidated) 77

Foreign Exchange Transactions 77

Balance of Assets in International Operations 77

TRUST BUSINESS OPERATIONS (Non-Consolidated) 78

Statement of Trust Assets and Liabilities 78

Balance of Money Trusts under Management 78

Balance of Securities Related to Money Trusts 79

Balance of Principal of Money Trusts by Trust Period 79

Operational Status of Money Trusts by Type 79

CAPITALIZATION (Non-Consolidated) 80

History of Capitalization 80

Major Shareholders 80

Ownership and Distribution of Shares 80

Disclosure Based on Basel III Capital

Accord Pillar III—Market Discipline81

Share Procedure Information123

Business Activities (As of January 1, 2026)

1. Deposits

   ・Deposits

   Checking accounts, savings accounts, time deposits, deposits-at-notice, non-residents’ deposits in yen and deposits in foreign currencies

   ・Negotiable certificates of deposit

2. Lending

   ・Loans

   Loans on deeds, loans on notes and overdraft

   ・Discount on promissory notes

   Bankers’ acceptances and discounts on commercial bills

3. Securities investment business

   Corporate Data

Public bonds, local bonds, corporate bonds, equity and other securities for cash reserves for payment of the deposit and fund management

1. Domestic exchange

   Such services as money orders between branches of the Bank and those of other banks, collection of payments, etc.

2. Foreign exchange

   Remittance to foreign countries and other foreign currency-related businesses

3. Consignment of bonds

   Consignment business for soliciting or managing public bonds and issue agent or payment agent

4. Trust operations

   Management of various trust assets including cash, securities, monetary claims and real estate

5. Other services

・Guarantee of liabilities (acceptances and guarantees)

・Lending of securities

・Underwriting of public bonds

・Over-the-counter sales of securities investment trusts

・Trust business for secured corporate bonds

・Agency business

① Revenue agency for Bank of Japan

② Handling of funds for regional public entities, including those in Tokyo

・Custody services

・Interest rate, currency and other derivative transactions

・Over-the-counter sales of insurance products

・Financial instruments intermediary business

・Business matching services

General Meeting of Shareholders

Board of Directors

Audit & Supervisory Board Members Audit & Supervisory Board

Office of Audit & Supervisory Board

Management Committee

Chief Executive Officer (CEO)

Internal Audit Div. Asset Assessment Div.

Compliance & Governance Unit

Compliance Management Div. (Financial Crime Management Office) (Aozora Hotline Desk) Legal Div.

Human Resources Unit Human Resources Div.

Corporate Strategy Unit

Business Strategy Div. (Crisis Management Office)

Corporate Administration & Service Div. GMO Aozora Net Bank, Ltd. Aozora Securities Co., Ltd. Aozora Investment Management Co., Ltd.

Office of Corporate Secretary

Finance Group Financial Control Div. Financial Management Div.

Corporate Communication Div. (Sustainability Management Office)

Credit Risk Management Group Credit Div. Workout Div. Appraisal Div. Credit Planning Div.

Integrated Risk Management Group Risk Management Div.

IT Control Div. Application Management Div.

IT Control Div. (Cyber Security Office)

Systems & Operations Unit

Technology Group

Infrastructure Management Div.

Data Strategy Div. Process Innovation Div.

Strategic Investments Unit Market & International Business Unit

Institutional Banking Management Div. (Facilitation of Financing Promotion Office) (Sustainable Business Office) Syndication & Trust Div. Equity Investment Div. ALM Solutions Div.(Portfolio Management Innovation Office) Aozora Regional Consulting Co., Ltd.

Customer Relations Unit

Financial Institutions Div.I Financial Institutions Div.II Financial Institutions Div.III*

Allied Banking Group

Financial Institutions Div.IV Financial Institutions Div.V Financial Institutions Div.VI Public Institutions Div.

Retail Banking Management Div. (Solution Management Office) BANK Planning Div. Retail Banking Div. Consulting Business Div.

*Branches Kansai Br.(Kansai Business Div.I, Kansai Business Div.II, Financial Institutions Div.III, Kansai Operations Management Div.), Nagoya Br., Fukuoka Br., Sendai Br., Hiroshima Br., Sapporo Br., Takamatsu Br., Kanazawa Br., Shinjuku Br., Nihonbashi Br., Shibuya Br., Ueno Br., Ikebukuro Br., Yokohama Br., Chiba Br., Osaka Br., Umeda Br., Kyoto Br., BANK Br., BANK Blue Br., BANK Sky Br., BANK Marine Br., BANK Cobalt Br.

Directors and Audit & Supervisory Board Members Executive Officers

Director and Chairman Koji Yamakoshi* Senior Managing Executive Officers Masaki Onuma

Toru Takahashi

Representative Director Hideto Oomi* Jun Shinozaki

and President

Representative Director Masayoshi Ohara* Managing Executive Officers Kazuhiro Yasuda

and Deputy President Tetsuji Okuda

Director and Takashi Kato* Hiroki Nakazato

Senior Managing Executive Officer Naoko Tanaka

Directors Sakie Tachibana Fukushima Executive Officers Hiroshi Suzuki Hideyuki Takahashi Shu Takahashi

Hideaki Saito Yukiko Morita

Koichi Tadano Takashi Hagio

Hiromasa Kawashima Jun Nakashima

Hiroshi Kaneko

Standing Audit & Supervisory Board Satoshi Hashiguchi Mitsuhiro Segawa

Member Mayumi Takada

Audit & Supervisory Board Members Toraki Inoue Kouji Igarashi

Junichi Maeda Kosuke Takai

Chiharu Hirota

*Serving as Executive Officer concurrently Kimiaki Satou

Taro Kitai

Yoshitsugu Kusuda

Toshiya Furutaku

Staff Profile (As of September 30, 2025)

Notes: 1. The number of employees includes executive officers and locally hired staff overseas, but excludes temporary employees.

2. The figure in parentheses is the average number of temporary employees for the year.

Office Directory (As of January 1, 2026)

Overseas Network

• Representative Offices

  New York Representative Office Shanghai Representative Office Representative Office Registered in

  Singapore

  Address Address Address

  680 Fifth Avenue, Suite #503, New York, NY 10019, U.S.A.

  Domestic Network

• Head Office

  6-1-1, Kojimachi,

  Chiyoda-ku, Tokyo 102-8660 Japan

  SWIFT: NCBTJPJT

• Branch Offices

Sapporo

4-1-4, Kita Sanjo-nishi,

Chuo-ku, Sapporo 060-0003

Sendai

3-2-1, Chuo, Aoba-ku,

Sendai 980-0021

Shinjuku*

6-1-1, Kojimachi,

Chiyoda-ku, Tokyo 102-8660

Nihonbashi

2-2-1, Nihonbashi-muromachi,

Chuo-ku, Tokyo 103-0022

Shibuya

1-7-7, Shibuya, Shibuya-ku,

Tokyo 150-0002

Ueno

2-2-1, Nihonbashi-muromachi,

Chuo-ku, Tokyo 103-0022

27F, Hang Seng Bank Tower, 1000 Lujiazui Ring Road, Pudong New Area,

Shanghai 200120, People’s Republic of China

Ikebukuro

2-28-13, Minami-Ikebukuro,

Toshima-ku, Tokyo 171-0022

Chiba

2-15-11, Fujimi, Chuo-ku,

Chiba 260-0015

Yokohama

1-1-1, Minamisaiwai, Nishi-ku,

Yokohama 220-0005

Kanazawa

2-37, Kamitsutsumicho,

Kanazawa 920-0869

Nagoya

3-28-12, Meieki, Nakamura-ku,

Nagoya 450-6404

Kyoto

79, Kankobokocho,

Muromachi-Higashiiru, Shijo-dori, Shimogyo-ku, Kyoto 600-8009

Kansai

1-12-12, Umeda, Kita-ku,

Osaka 530-0001

(Kansai Branch deals solely with corporate clients.)

50 Raffles Place,

#16-05A Singapore Land Tower, Singapore 048623

Osaka

1-12-12, Umeda, Kita-ku,

Osaka 530-0001

Umeda

1-12-12, Umeda, Kita-ku,

Osaka 530-0001

Hiroshima

13-13, Motomachi, Naka-ku,

Hiroshima 730-0011

Takamatsu

9-6, Konyamachi,

Takamatsu 760-0027

Fukuoka

2-8-36, Tenjin, Chuo-ku,

Fukuoka 810-0001

BANK Branch BANK Blue Branch BANK Sky Branch

BANK Marine Branch BANK Cobalt Branch

6-1-1, Kojimachi,

Chiyoda-ku, Tokyo 102-8660 https://www.aozorabank.co.jp/bank/

* Shinjuku Branch relocated to the first floor of the Bank’s Head Office on March 31, 2025. Following the relocation, the Shinjuku Branch and the Retail Banking Division conduct business operations concurrently at the same location using the “branch-in-branch method.”

Business Network (As of September 30, 2025)

: Consolidated subsidiaries

: Affiliated companies accounted for using the equity method

Main affiliates

(

Banking business

Trust services

)

GMO Aozora Net Bank, Ltd. Banking business

Aozora Regional Consulting Co., Ltd. Business consulting services

Aozora Asia Pacific Limited Financial services

Aozora Europe Limited Financial services

Aozora North America, Inc. Financial services AZB Funding 12 Limited and other 12 companies Investment vehicle Orient Commercial Joint Stock Bank Banking business

Aozora Loan Services Co., Ltd. Distressed loan servicing

Aozora Securities Co., Ltd. Financial instruments business Aozora Investment Management Co., Ltd. Investment management services Aozora Real Estate Investment Advisors Co., Ltd. Investment advisory services ABN Advisors Co., Ltd. M&A advisory services

Aozora Corporate Investment Co., Ltd. Venture capital investment

(Note) Aozora Investment Management Co., Ltd. and Aozora Securities Co., Ltd. entered into the absorption-type merger agreement on September 30, 2025.

Under that agreement, the absorption-type merger will take place on April 1, 2026, with Aozora Investment Management Co., Ltd. as the surviving company.

Consolidated Subsidiaries

(%)

Affiliated Companies Accounted for Using the Equity Method

(%)

Other Associated Companies

(%)

Aozora has been making various efforts to fully leverage the Group’s competencies and effectively uses a high degree of expertise and abundant know-how in order to solve management issues faced by its customers, including medium-sized companies and SMEs, and to revitalize local communities.

Specifically, Aozora actively works on the following initiatives ① through ④ in cooperation with regional financial institutions in order to meet various needs at start-up and growth stages as well as in business succession and business recovery of customers:

① Support for nurturing start-up companies To support the growth of our promising start-up

customers, not only Aozora Bank but also Group Companies cooperate each other to establish Aozora Start-up Ecosystem Support Framework that provides support according to each growth stage of companies and offers one-stop support services. Group Companies include Aozora Corporate Investment Co., Ltd. that provides investments and loans for start-ups with a focus on venture debt, B Spark that offers solutions for customers facing DX challenges in any region in cooperation with start-ups having advanced knowledge, GMO Aozora Net Bank, which aims to be the No. 1 bank for small businesses and start-ups, providing a variety of services tailored to customers in the early stages of business, etc.

② Solutions for business succession issues

For business succession issues, Aozora established Solution Management Office aimed to provide our customers, who are medium-sized companies’ or SME owners, with professional consulting services and meet various needs.

We continue to fully leverage Aozora Group’s competencies represented by ABN Advisors, Co., Ltd. registered as an M&A support institution of Small and Medium Enterprise Agency and AJ Capital Co., Ltd. running business succession funds in order to provide various solutions to customers and address business succession issues faced by the medium-sized companies and SMEs and revitalization of local economies also in cooperation with regional financial institutions and local companies across Japan.

③ Promotion of business recovery support

We promote support for management improvement and business recovery according to customers’ reality through our specialty in tailor-made sales activities.

Specific examples include financing such as DIP finance for medium-sized company and SME customers aiming at business recovery, assistance for M&A toward the business succession and support for management improvement effectively using a network of outside experts.

Additionally, Aozora provides support for the business recovery of medium-sized company and SME customers and the regional economic revitalization through establishing and operating business recovery funds in collaboration with regional financial institutions.

④ Solutions for issues of regional financial institutions Aozora assists regional financial institutions and their clients in solving diversified issues faced by them by leveraging the various financial service functions of Aozora Group.

In addition, Aozora has formed alliances with many regional financial institutions to provide solutions to their clients and has built a cooperative relationship toward business solutions for regional core businesses, medium-sized companies and SMEs.

We recognize that one of the most important roles of a financial institution is to provide customers with a smooth supply of funds. Based on our Basic Policy for Facilitation of Finance, we are prepared to respond appropriately to consultations from customers who are affected by recent increased prices, overseas situations, labor shortages, and other factors.

For the six-month periods ended September 30, 2025, 2024 and 2023, and the years ended March 31, 2025 and 2024

(Millions of yen)

Notes: 1. Deposits include negotiable certificates of deposit (NCDs).

1. Diluted net income per share for the year ended March 31, 2024 is not described in the above table, because of net loss per share although there are diluted shares.

2. ‘Trust assets’ is assets in trust pertaining to trust business under the Act on Engagement in Trust Business by a Financial Institution (the Concurrent Business Act). The company operating the trust business among the Bank and its subsidiaries is the Bank.

1. Consolidated and Equity-Method Companies

   (Number of Companies)

   	September 30, 2025	March 31, 2025	Change
   Consolidated subsidiaries	24	24	0
   Subsidiaries and affiliated companies accounted for using the equity method	1	1	0

   The consolidated financial statements include the accounts of the Bank, its significant subsidiaries and affiliated companies. The number of consolidated subsidiaries was 24 as of September 30 and March 31, 2025, respectively.

   The number of subsidiaries and affiliated companies accounted for using the equity method was 1 as of September 30 and March 31, 2025, respectively.

   There was no change in consolidated and equity-method companies from March 31, 2025.

2. Analysis of Business Results

   1. Income

      Consolidated Financial Review

(Millions of yen)

・Total income was ¥117.1 billion, a decrease of ¥1.3 billion year on year

・Interest income was ¥78.8 billion, a decrease of ¥2.9 billion year on year

• Domestic net interest income significantly increased due to higher yen interest rates and an increase in domestic loan outstandings, while overseas net interest income declined due to a decrease in loans and tighter spreads

  ・Fees and commissions income were ¥19.4 billion, an increase of ¥5.8 billion year on year

• Net fees and commissions increased due to growth in loan-related fee income, mainly associated with LBO finance, as well as GMO Aozora Net Bank’s increased profitability.

  ・Gains on trading account transactions were ¥1.9 billion

  ・Other ordinary income was ¥13.9 billion, an increase of ¥0.8 billion year on year

• Gains from limited partnerships increased due to growth in gains from exit transactions associated with Non-performing loans and buyouts.

1. Expenses

   (Millions of yen)

   	September 30, 2025 (6 months)	September 30, 2024 (6 months)	Change
   Total expenses	¥101,770	¥105,393	¥(3,622)
   Interest expenses	54,484	56,995	(2,510)
   Interest on deposits	14,147	6,346	7,800
   Interest on bonds payable	2,954	3,067	(112)
   Interest on borrowings and rediscounts	2,542	1,135	1,406
   Interest expenses on interest rate swaps	13,204	19,432	(6,228)
   Other interest expenses	21,637	27,013	(5,376)
   Fees and commissions expenses	3,656	3,177	478
   Losses on trading account transactions	341	581	(240)
   Other ordinary expenses	3,491	8,242	(4,751)
   Amortization of bond issuance costs	78	101	(22)
   Losses on foreign exchange transactions	70	4,668	(4,598)
   Losses on sales of bonds and other securities	1,137	192	944
   Losses on redemption of bonds and other securities	121	36	85
   Losses on derivatives	—	—	—
   Other	2,077	3,243	(1,165)
   General and administrative expenses	31,653	30,117	1,536
   Other expenses	8,142	6,278	1,864
   Losses on sales of stocks and other securities	32	—	32
   Losses on devaluation of stocks and other securities	60	—	60
   Losses on investments in money held in trust	—	—	—
   Write-off of loans	5,537	78	5,459
   Provision of allowance for loan losses	—	4,255	(4,255)
   Provision of allowance for credit losses on off-balance-sheet instruments	36	—	36
   Losses on disposition of loans	1,067	183	884
   Losses on disposal of fixed assets	6	—	6
   Losses on impairment of fixed assets	—	260	(260)
   Other	1,401	1,501	(100)

   Consolidated Financial Review

・Total expenses were ¥101.7 billion, a decrease of ¥3.6 billion year on year

・Interest expenses were ¥54.4 billion, a decrease of ¥2.5 billion year on year

・General and administrative expenses were ¥31.6 billion, an increase of ¥1.5 billion year on year

• General and administrative expenses were managed within the budget while the Bank remained focused on investments in human capital.

  ・Other expenses were ¥8.1 billion, an increase of ¥1.8 billion year on year

• Credit-related expenses were a net expense of ¥6.0 billion. Of these, ¥4.2 billion were related to U.S. office loans, and ¥1.7 billion were related to other than U.S. office loans.

• Loan work-outs for Non-performing loans are entering their final stage, with a focus on processing speed. Additional costs were incurred due to the sale of Non-performing loans as well as valuation reassessments.

1. Net income

(Millions of yen)

・Income before income taxes was ¥15.3 billion, an increase of ¥2.2 billion year on year

・Consolidated net income attributable to owners of the parent was ¥13.6 billion, an increase of ¥1.6 billion year on year

・Net income per share was ¥98.37

1. Analysis of Financial Condition

1. Loans and bills discounted

   (Millions of yen)

   	September 30, 2025	March 31, 2025	Change
   Total loans	¥4,163,123	¥4,206,564	¥(43,440)
   Domestic loans Overseas loans	2,925,464 1,237,659	2,904,274 1,302,290	21,190 (64,630)
   Ratio of overseas loans	29.7％	31.0％	(1.3)％

   Breakdown of Loans and Bills Discounted by Industry (Consolidated)

   (Millions of yen)

   	September 30, 2025	March 31, 2025
   Domestic offices (excluding Japan offshore market accounts)	¥3,252,878	¥3,298,786
   Manufacturing Agriculture, forestry and fisheries Mining, quarry and gravel extraction Construction Electricity, gas, heat supply and water Information and communications Transport and postal service Wholesale and retail trade Finance and insurance Real estate Leasing Various services Local government Others	403,142 845 — 26,152 132,618 114,306 68,551 132,218 442,128 783,326 213,672 229,372 1,890 704,650	369,666 883 — 25,765 140,184 117,077 58,669 75,646 411,033 748,573 208,079 168,009 4,931 970,263
   Overseas offices (including Japan offshore market accounts)	910,245	907,777
   Government Financial institutions Others	— — 910,245	— — 907,777
   Total	¥4,163,123	¥4,206,564

   Consolidated Financial Review

Note: 1. 'Domestic offices' includes the Bank (except foreign branches) and consolidated subsidiaries in Japan.

2. 'Overseas offices' includes foreign branches of the Bank and consolidated subsidiaries based overseas.

(Millions of yen)

・Total Loans were ¥4,163.1 billion, a decrease of ¥43.4 billion compared to March 31, 2025

・Domestic loans were ¥2,925.4 billion, an increase of ¥21.1 billion compared to March 31, 2025

• Corporate loans grew as the Bank expanded its domestic customer base, with the alliance with Daiwa Securities Group playing a significant role.

  ・Overseas loans were ¥1,237.6 billion, a decrease of ¥64.6 billion

• Overseas real estate non-recourse loan outstandings continued to decrease as the work-out of U.S. office loans progressed.

・NPL ratio (consolidated) was 1.6%, a decrease of 0.5% from March 31, 2025

1. Securities

   (Millions of yen)

   	September 30, 2025	March 31, 2025	Change
   Japanese debt securities	¥285,712	¥265,438	¥20,273
   Japanese national government bonds	141,732	128,590	13,142
   Japanese local government bonds	34,998	33,700	1,298
   Japanese short-term corporate bonds	—	—	—
   Japanese corporate bonds	108,981	103,147	5,833
   Japanese stocks	34,388	29,957	4,431
   Other securities	1,081,734	1,060,062	21,671
   Foreign securities	904,506	892,797	11,708
   Others	177,227	167,265	9,962
   Total	¥1,401,835	¥1,355,458	¥46,376

   ・Securities were ¥1,401.8 billion, an increase of ¥46.3 billion compared to March 31, 2025

2. Deposits and bonds payable

   Consolidated Financial Review

(Millions of yen)

Note: Total of deposits and time deposits include negotiable certificates of deposit (NCDs).

・Total core funding (deposits and bonds payable) was ¥6,022.9 billion, an increase of ¥225.4 billion compared to March 31, 2025

1. Equity

・Equity was ¥473.3 billion, an increase of ¥13.6 billion from March 31, 2025.

・Net assets per common share were ¥3,355.19

Aozora Bank, Ltd. and Consolidated Subsidiaries September 30, 2025

See the accompanying notes to consolidated semiannual financial statements.

Aozora Bank, Ltd. and Consolidated Subsidiaries For the six-month period ended September 30, 2025

See the accompanying notes to consolidated semiannual financial statements.

Aozora Bank, Ltd. and Consolidated Subsidiaries For the six-month period ended September 30, 2025

See the accompanying notes to consolidated semiannual financial statements.

Aozora Bank, Ltd. and Consolidated Subsidiaries For the six-month period ended September 30, 2025

See the accompanying notes to consolidated semiannual financial statements.

Aozora Bank, Ltd. and Consolidated Subsidiaries For the six-month period ended September 30, 2025

See the accompanying notes to consolidated semiannual financial statements.

Aozora Bank, Ltd. and Consolidated Subsidiaries For the six-month period ended September 30, 2025

1. Basis of Presentation of Consolidated Semiannual Financial Statements

   The accompanying consolidated semiannual financial statements of Aozora Bank, Ltd. (the ‘Bank’) and consolidated subsidiaries (together, the ‘Group’) have been prepared in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange Act, the Banking Act of Japan and other related accounting regulations, and in accordance with accounting principles generally accepted in Japan (‘Japanese GAAP’), which are different in certain respects as to the application and disclosure requirements of IFRS Accounting Standards.

   Consolidated Semiannual Financial Statements

In preparing these consolidated semiannual financial statements, certain reclassifications and rearrangements have been made to the consolidated semiannual financial statements issued domestically in order to present them in a form which is more familiar to readers outside Japan.

The consolidated semiannual financial statements are stated in Japanese yen, the currency of the country in which the Bank is incorporated and operates. Japanese yen figures of less than one million yen are truncated, except for per share data. As a result, the totals do not necessarily equal the sum of the individual amounts. The translation of Japanese yen amounts into U.S. dollar amounts is included solely for the convenience of readers outside Japan and has been made at the rate of ¥148.88 to $1.00, the rate of exchange at September 30, 2025. Such translations should not be construed as representations that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.

1. Summary of Significant Accounting Policies

   1. Use of Estimates

      The preparation of consolidated semiannual financial statements in accordance with Japanese GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the consolidated semiannual financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

      Material estimates that are particularly susceptible to significant change in the near term include, but are not limited to, those that are related to the determination of the allowance for loan losses, deferred tax assets, and the valuation of financial instruments.

   2. Consolidation

      The consolidated semiannual financial statements include the accounts of the Bank, its significant subsidiaries and affiliated companies. The number of consolidated subsidiaries was 24 as of September 30, 2025. The number of subsidiaries and affiliated companies accounted for using the equity method was 1 as of September 30, 2025.

      Under the control and influence concepts, those entities in which the Bank, directly or indirectly, is able to exercise control over finance and operations are fully consolidated, and those entities over which the Group has the ability to exercise significant influence should be accounted for by the equity method.

      Practical Issues Task Force (‘PITF’) No. 20, ‘Practical Solution on Application of Control Criteria and Influence Criteria to Investment Associations,’ issued by the Accounting Standards Board of Japan (‘ASBJ’), provides additional guidance on how the control and influence concepts should be practically applied to investment vehicles, such as limited partnerships, Tokumei Kumiai arrangements (a silent partnership under the Commercial Code of Japan), and other

      entities with similar characteristics in order to prevent these investment vehicles from being inappropriately excluded from consolidation.

      The consolidated semiannual financial statements do not include the accounts of certain subsidiaries such as Aozora Chiiki Saisei Co., Ltd., because the combined total assets, total income, net income (loss) and retained earnings, etc. of such subsidiaries would not have a material effect on the accompanying consolidated semiannual financial statements.

      Investments in unconsolidated subsidiaries and affiliated companies, such as AJ Capital Co., Ltd. and AZ-Star Co., Ltd. are generally stated at cost. These companies are not accounted for using the equity method of accounting because the effect on the accompanying consolidated semiannual financial statements would not be material even if the equity method of accounting had been applied to the investments in these companies.

      Goodwill is amortized over an appropriate period not to exceed 20 years under the straight-line method. Immaterial goodwill is expensed as incurred. A bargain purchase gain is charged to operations on the acquisition date after reassessing the procedures to allocate the acquisition price and ensure that an acquirer has correctly identified all of the assets acquired and all of the liabilities assumed with a review of such procedures used.

      All significant intercompany balances and transactions are eliminated in consolidation. All material unrealized profits resulting from transactions within the Group are also eliminated.

      The Group applies the ASBJ Implementation Guidance No. 22, ‘Implementation Guidance on Determining a Subsidiary and an Affiliate for Consolidated Financial Statements’, which clarifies the conditions where a company does not regard an entity as a subsidiary and an affiliated company even if the company holds the controlling interest of the entity or exercises significant influence on the entity.

      CRE HOLDINGS SUB 1 LLC and City Center Hotel JV LLC

      are not treated as an affiliated company even though the Group owns 20% to 50% of the voting rights, because the Group obtains the voting rights primarily to benefit from the appreciation of the investment resulting from growth or restructuring the investee's businesses and the investment meets the conditions of the Paragraph 24 of the ASBJ Implementation Guidance No. 22.

      In accordance with PITF No. 18, ‘Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements,’ foreign subsidiaries’ financial statements prepared in accordance with either IFRS Accounting Standards or generally accepted accounting principles in the United States are used for the consolidation process with certain limitations.

   3. Cash and Cash Equivalents

      Cash and cash equivalents consist of cash on hand and due from the Bank of Japan.

   4. Trading Account Assets/Liabilities

      Consolidated Semiannual Financial Statements

Transactions for trading purposes (for the purpose of seeking to capture gains arising from short-term changes in interest rates, currency exchange rates or market prices of securities and other market-related indices or arbitrage opportunities) are included in ‘Trading account assets’ or ‘Trading account liabilities,’ as appropriate, on a trade-date basis. Trading account assets and liabilities are stated at fair value.

Profits and losses (interest received and paid, dividend, gains and losses on sales, and valuation gains and losses) on transactions for trading purposes are shown as ‘Gains on trading account transactions’ and ‘Losses on trading account transactions,’ as appropriate.

1. Securities

   All securities are classified and accounted for, depending on management’s intent, as follows:

   1. Trading securities which are held for the purpose of earning capital gains in the near term (other than securities booked in trading accounts) are reported at fair value, and the related unrealized gains and losses are recognized in the consolidated semiannual statement of income.

   2. Held-to-maturity debt securities which are expected to be held to maturity with the positive intent and ability to hold them to maturity are reported at amortized cost.

   3. Stocks in unconsolidated subsidiaries and affiliated companies which are not accounted for by the equity method are reported at acquisition cost (using the moving-average method).

   4. Available-for-sale securities are reported at fair value, with unrealized gains and losses, net of applicable taxes, reported within accumulated other comprehensive income as a separate component of equity. The cost of sale of these securities is determined mainly by the moving-average method.

   Non-marketable equity securities are measured at cost. The cost of non-marketable equity securities stated at cost is determined by the moving-average method.

   For other-than-temporary declines in fair value, the cost of securities is reduced to fair value and the impairment losses are recognized by a charge to operations.

   The Group records its interests in investment limited partnerships, associations under the Civil Code of Japan, and Tokumei Kumiai arrangements, based on its proportionate share of the net assets in such entities, and recognizes its share of profits or losses in a manner similar to the equity method of accounting. The Group records such interests in ‘Securities.’

   Securities included in money held in trust on behalf of the Group are accounted for in the same manner as the securities mentioned above.

2. Derivatives and Hedging Activities

   Derivative financial instruments (other than derivatives booked in trading accounts) are classified and accounted for as follows:

   1. All derivatives other than those used for hedging purposes are recognized as either assets or liabilities and measured at fair value, with gains or losses recognized currently in the consolidated semiannual statement of income.

   2. Derivatives used for hedging purposes, if they meet certain hedging criteria, including high correlation of fair value movement and effectiveness between the hedging instruments and the hedged items and the assessment of its effectiveness, are recognized as either assets or liabilities and measured at fair value. Valuation gains or losses on derivatives used for hedging purposes are primarily deferred over the terms of the hedged items within accumulated other comprehensive income as a component of equity and are charged to operations when the gains and losses on the hedged items are recognized.

      1. Hedges of Interest Rate Risk

         The Bank applies deferral hedge accounting to hedges of interest rate risk associated with financial assets and liabilities, principally by portfolio hedging, in accordance with ‘Accounting and Auditing Treatments on the Application of Accounting Standards for Financial Instruments in the Banking Industry’ (the Japanese Institute of Certified Public Accountants (‘JICPA’) Industry Committee Practical Guideline No. 24, March 17, 2022), or by individual hedging.

         Under the JICPA Industry Committee Practical Guideline No. 24, portfolio hedges to offset changes in fair value of fixed-rate instruments (such as loans or deposits) (‘fair value hedges’) are applied by grouping hedging instruments and hedged items by their maturities. The assessment of hedge effectiveness is generally based on the consideration of interest rate indices affecting the respective fair values of the group of hedging instruments and hedged items.

         With regard to portfolio hedges to fix cash flows, the effectiveness is assessed by verifying the correlation between factors that cause fluctuations in interest rates of hedged items and those of hedging instruments in accordance with the JICPA Industry Committee Practical Guideline No. 24.

         With regard to an individual hedge to offset changes in fair value of fixed-rate instruments, since principal conditions underlying in available-for-sale securities (debt securities, etc.) and bonds payable as hedged items and interest rate swaps as hedging instruments are substantially on the same terms, the hedge is deemed highly effective.

      2. Hedges of Foreign Currency Risk

         The Bank applies deferral hedge accounting to hedges of foreign currency risk associated with foreign currency-denominated financial assets and liabilities in accordance with ‘Accounting and Auditing Treatments for Foreign Currency Transactions in the Banking Industry’ (the JICPA Industry Committee Practical Guideline No. 25, October 8, 2020).

         Consolidated Semiannual Financial Statements

In accordance with the JICPA Industry Committee Practical Guideline No. 25, the Bank designates certain currency swaps and foreign exchange swaps for the purpose of funding foreign currencies as hedges for the exposure to changes in foreign exchange rates associated with foreign currency-denominated assets or liabilities when the foreign currency positions on the hedged assets or liabilities are expected to exceed the corresponding foreign currency positions on the hedging instruments. Hedge effectiveness is reviewed by comparing the total currency position of the hedged items with that of the hedging instruments by currency.

For hedging the foreign currency exposure of foreign currency-denominated available-for-sale securities (other than debt securities), which were designated in advance, fair value hedge accounting is adopted on a portfolio basis when the cost of the hedged securities is covered with offsetting liabilities denominated in the same foreign currency as the hedged securities.

1. Hedges of Securities Price Fluctuation Risk

   The Bank designates available-for-sale securities (stocks, etc.) for price fluctuation risk of stocks and available-for-sale securities (debt securities, etc.) for price fluctuation risk of listed investment trusts as hedged items and total return swaps as hedging instruments, and applies individual deferral hedge accounting.

   The assessment of hedge effectiveness is generally based on the comparison of changes in fair value of the hedged item and hedging instruments.

2. Intercompany and Intracompany Derivative Transactions

For intercompany and intracompany derivative transactions for hedging purposes (‘Internal derivatives’), including currency and interest rate swaps, the Bank currently charges gains and losses on internal derivatives to operations or defers them within accumulated other comprehensive income as a component of equity without elimination in accordance with the JICPA Industry Committee Practical Guidelines No. 24 and No. 25. These reports permit a bank to retain the gains and losses on internal derivatives in its consolidated semiannual financial statements without elimination if the bank establishes and follows strict hedging criteria by entering into mirror-image offsetting transactions with external third parties after the designation of internal derivatives as hedging instruments.

1. Tangible Fixed Assets and Intangible Fixed Assets Tangible fixed assets and intangible fixed assets are stated at cost.

   Depreciation of tangible fixed assets of the Group is computed primarily by the declining-balance method at rates based on the estimated useful lives of the assets, while the straight-line method is applied to buildings, including structures and equipment attached to buildings, of the Bank. The ranges of useful lives are principally from 15 years to 50 years for buildings and from 5 years to 15 years for other tangible fixed assets.

   Amortization of intangible fixed assets of the Group is computed by the straight-line method over the estimated useful lives of the assets. Costs of software developed or obtained for internal use are amortized over the estimated useful lives of the software (principally from 5 years to 13 years).

   Lease assets under finance lease transactions, in which substantial ownership is not deemed to be transferred, are depreciated by the straight-line method over the lease term. The salvage value is zero or the guaranteed amounts if specified in the lease contracts.

2. Long-Lived Assets

   The Group reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. An impairment loss would be recognized if the carrying amount of an asset or asset group exceeds the sum of the undiscounted future cash flows expected to result from the continued use and eventual disposition of the asset or asset group. The impairment loss would be measured as the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of the discounted cash flows from the continued use and eventual disposition of the asset or asset group or the net selling price at disposition.

3. Deferred Charges

   Corporate bond issuance expenses are deferred and amortized by the straight-line method over the terms of the corporate bonds. Share issuance expenses are deferred and amortized by the straight-line method over the three years.

4. Write-Off of Loans and Allowance for Loan Losses Loans to borrowers who are assessed as ‘Bankrupt’ (in the process of legal proceedings for bankruptcy, special liquidation, etc.) or ‘De facto bankrupt’ (in serious financial difficulties and are not deemed to be capable of restructuring) under the Bank’s self-assessment guidelines are written off to the amounts expected to be collected through the disposal of collateral or execution of guarantees, etc. The amounts deemed to be uncollectible and written off were ¥34,848 million ($234,073 thousand) and ¥24,356 million at September 30 and March 31, 2025, respectively.

   For loans to borrowers who are assessed as ‘In danger of

   bankruptcy’ (not yet bankrupt but are in financial difficulty and are highly likely to go bankrupt in the foreseeable future), a specific allowance is provided for the loan losses at an amount considered to be necessary based on an overall solvency assessment of the borrowers and expected collectible amounts through the disposal of collateral or execution of guarantees, etc. For loans whose future cash flows of principal and interest are reasonably estimated, the difference between the discounted cash flows and the carrying amount is accounted for as an allowance for loan losses (the ‘DCF method’).

   Consolidated Semiannual Financial Statements

For other loans, the Bank provides the expected loan loss for the average remaining period of loans (almost three to four years respectively), after classifying the loans into four groups of corporate loans in North America/Europe, Asia, overseas real estate non-recourse loans and other loans, based on the characteristics of risk. The expected loan loss is determined based on the average rates of loan loss experience or bankruptcy over a certain period of time in the past, responding to the average remaining period with certain adjustments such as future prospects by considering the latest trend of loan loss experience. However, for borrowers with a large credit exposure that are categorized as ‘Need attention,’ under the internal credit rating system, the loan loss amount estimated by the DCF method is reflected as an addition to the allowance for loan losses determined based on the estimated loan loss ratio, if necessary. For certain borrowers other than those mentioned above that have a large credit exposure over a certain amount, an allowance is provided in addition to an amount determined based on an expected loan loss rate, according to the above method.

The allowance for loans to restructuring countries is provided for the amount of expected losses based on an assessment of political and economic conditions in their respective countries.

All loans are monitored in accordance with the internal self-assessment standard and other guidance on an ongoing basis. The operating divisions or branches review the internal credit ratings of borrowers which also determines the borrower categories. The internal credit ratings are then approved by the divisions in charge of credit.

The division in charge of asset assessment, which is independent of the operating divisions or branches and the divisions in charge of credit, reviews the appropriateness of the internal credit ratings on a sample basis.

Based on the borrower categories as of year-end determined by the aforementioned process, the operating divisions or branches initially determine write-offs and the allowance for loan losses, and the division in charge of asset assessment verifies and determines the final amounts.

With regard to the allowance for loan losses of consolidated subsidiaries, a general allowance is determined for the amount of estimated loan losses using historical loan loss data over a defined period in the past. For loans to ‘In danger of bankruptcy’ borrowers and ‘De facto bankrupt’ and ‘Bankrupt’ borrowers, a specific allowance is provided or the uncollectible amount is written off based on an assessment of

collectability of individual loans.

The independent internal audit divisions periodically audit the appropriateness of the write-offs and allowances based on the self-assessment on a regular basis.

(Additional Information)

For overseas real estate non-recourse loans, the Bank assumes a decrease in market liquidity mainly due to the deteriorating environment of the U.S. real estate market, and particularly U.S office market are expected to stabilize during the FY2025, considering the market trends.

In line with this, for all borrowers of overseas real estate non-recourse loans that require careful monitoring in the future, the loan loss amount mainly estimated by the DCF method is reflected as an addition to the allowance for loan losses determined based on the estimated loan loss ratio.

In addition, for non-recourse loans backed by underperforming office properties in the U.S. due to the changes in working styles in the post-COVID-19 period, in order to prepare for the disposal of these properties, for cases where there is a possibility of debt recovery in the future, the Bank evaluates the property considering the risk of price decline during the FY2025 and determines individual borrower category considering the possibility of the debt recovery through the disposal of properties. The allowance for loan losses is made based on the estimated disposal price assuming the price decline risk.

The above assumptions, which are the basis for the estimates, have a high degree of uncertainty, and depending on the situation, future profits and losses may fluctuate.

1. Allowance for Investment Losses

   Allowance for investment losses is provided for estimated losses on certain investments based on an assessment of the issuers’ financial condition and uncertainty about future recoverability of the decline in realizable values of the investments.

2. Asset Retirement Obligations

   Asset retirement obligation is defined as a legal obligation imposed either by law or contract that results from the acquisition, construction, development and the normal operation of a tangible fixed asset and is associated with the retirement of such a tangible fixed asset. The asset retirement obligation is recognized as the sum of the discounted cash flows required for the future asset retirement and is recorded in the period in which the obligation is incurred if a reasonable estimate can be made. If a reasonable estimate of the asset retirement obligation cannot be made in the period the asset retirement obligation is incurred, the liability should be recognized when a reasonable estimate of asset retirement obligation can be made. Upon initial recognition of a liability for an asset retirement obligation, an asset retirement cost is capitalized by increasing the carrying amount of the related fixed asset by the amount of the liability. The asset retirement cost is subsequently allocated to expense through depreciation over the remaining useful life of the asset. Over time, the liability

   is accreted to its present value each period. Any subsequent revisions to the timing or the amount of the original estimate of undiscounted cash flows are reflected as an increase or a decrease in the carrying amount of the liability and the capitalized amount of the related asset retirement cost.

3. Provision for Credit Losses on Off-Balance-Sheet Instruments

   Provision for credit losses on off-balance-sheet instruments is provided for credit losses on commitments to extend loans and other off-balance-sheet financial instruments based on an estimated loss ratio or individually estimated loss amount determined by the same methodology used in determining the amount of allowance for loan losses.

4. Reserves under Special Laws

   Consolidated Semiannual Financial Statements

Reserves under special laws are reserves for financial products’ transaction liabilities which are provided for compensation for losses from securities brokering in consolidated domestic subsidiaries in accordance with the Financial Instruments and Exchange Act, Article 46-5 and the Cabinet Office Ordinance on Financial Instruments Business, Article 175.

1. Retirement and Pension Plans

   The Group accounts for retirement benefit liabilities (assets) based on the defined retirement benefit obligations and plan assets at the consolidated semiannual balance sheet date. The defined retirement benefit obligations are calculated based on the benefit formula attribution of the expected benefit over the service period of employees. Prior-service cost is amortized using the straight-line method over a period within the employees’ average remaining service period at incurrence. Net actuarial gain and loss are amortized using the straight-line method over a period (five years) within the employees’ average remaining service period commencing from the next fiscal year after incurrence.

   Some consolidated subsidiaries adopt a simplified method based on the defined retirement benefit obligations for each retirement plan that would be required if all employees retired voluntarily at the consolidated semiannual balance sheet date.

2. Lease Transactions

   All finance lease transactions are capitalized to recognize lease assets and lease obligations on the consolidated semiannual balance sheet.

   All other leases are accounted for as operating leases.

3. Income Taxes

   Deferred income taxes are recorded to reflect expected future consequences of temporary differences between assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes. These deferred taxes are measured by applying currently enacted tax rates to the temporary differences. The Bank assesses the realizability of deferred tax assets based on consideration of the available

   evidence, including future taxable income, future reversals of existing temporary differences, and tax-planning strategies. The Bank reduces the carrying amount of a deferred tax asset to the extent that it is not probable that sufficient taxable income will be available to allow the benefit of part or all of that deferred tax asset to be realized. Such reduction may be reversed to the extent that it becomes probable that sufficient taxable income will be available and warrant the realization of tax benefits.

   The Bank and some of its domestic consolidated subsidiaries have applied the group relief system.

4. Foreign Currency Items

   Assets and liabilities denominated in foreign currencies held by the Bank are translated into Japanese yen at the exchange rates prevailing at the consolidated semiannual balance sheet date except for investments in equity securities of unconsolidated subsidiaries or affiliated companies, which are translated at historical rates.

   Assets and liabilities denominated in foreign currencies which are held by consolidated subsidiaries are translated into Japanese yen at the exchange rates as of their respective semiannual balance sheet dates, while equity accounts are translated at historical rates. Differences arising from such translations are shown as ‘Foreign currency translation adjustment’ within accumulated other comprehensive income as a separate component of equity.

   Revenue and expense accounts of consolidated foreign subsidiaries are translated into Japanese yen at the average exchange rate. Differences arising from such translation are included in ‘Non-controlling interests’ or ‘Foreign currency translation adjustment’ as a separate component of equity in the consolidated semiannual balance sheet.

5. Per Share Information

Basic net income (loss) per share is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period, retroactively adjusted for stock splits or reverse stock splits.

Diluted net income per share reflects the potential dilution that would occur if dilutive options and warrants were exercised or the securities were converted into common stock, also retroactively adjusted for stock splits or reverse stock splits. Diluted net income per share of common stock assumes full conversion of the preferred stock at the beginning of the year (or at the time of issuance) with an applicable adjustment for related dividends to preferred stock, unless the preferred stock has an antidilutive effect.

Net assets per share of common stock are computed by dividing net assets attributable to common stockholders by the number of shares of common stock outstanding at the end of the period.

Cash dividends per share presented in the accompanying consolidated semiannual statement of income are dividends applicable to the respective periods including dividends to be paid after the end of the period.

1. Cash and Cash Equivalents

   Cash and cash equivalents as of September 30, 2025 and 2024, consisted of the following:

   	Millions of yen		Thousands of U.S. dollars
   	September 30, 2025	September 30, 2024	September 30, 2025
   Cash on hand Due from the Bank of Japan	¥3,022 1,639,050	¥3,871 1,697,302	$20,302 11,009,207
   Total	¥1,642,073	¥1,701,173	$11,029,509

2. Trading Account Assets and Liabilities

   Trading account assets and liabilities as of September 30 and March 31, 2025, consisted of the following:

   	Millions of yen		Thousands of U.S. dollars
   	September 30, 2025	March 31, 2025	September 30, 2025
   Trading account assets:
   Trading account securities derivatives for hedging	¥1,967	¥1,323	$13,218
   Trading account financial derivatives	293,957	261,480	1,974,459
   Total	¥295,925	¥262,803	$1,987,677
   Trading account liabilities:
   Trading account securities derivatives for hedging	¥222	¥250	$1,491
   Trading account financial derivatives	272,617	208,904	1,831,126
   Total	¥272,839	¥209,155	$1,832,617

   Consolidated Semiannual Financial Statements

1. Securities

   Certain amounts shown in the following tables include negotiable certificates of deposit in ‘Due from banks’, and certain beneficiary interests in trust classified as ‘Monetary claims bought’ in addition to ‘Securities’ stated in the consolidated (semiannual) balance sheet.

   ‘Securities’ stated in the consolidated (semiannual) balance sheet as of September 30 and March 31, 2025, consisted of the following:

   	Millions of yen		Thousands of U.S. dollars
   	September 30, 2025	March 31, 2025	September 30, 2025
   Japanese national government bonds	¥141,732	¥128,590	$951,992
   Japanese local government bonds	34,998	33,700	235,080
   Japanese corporate bonds	108,981	103,147	732,007
   Japanese stocks	34,388	29,957	230,983
   Foreign bonds	597,932	570,987	4,016,206
   Other	483,801	489,075	3,249,606
   Total	¥1,401,835	¥1,355,458	$9,415,874

   As of September 30 and March 31, 2025, securities included equity investments in unconsolidated subsidiaries and affiliated companies that amounted to ¥72,583 million ($487,530 thousand) and ¥68,731 million, respectively.

   No held-to-maturity bonds were held as of September 30 and March 31, 2025.

   Consolidated Semiannual Financial Statements

The costs and carrying amounts of available-for-sale securities with fair value as of September 30 and March 31, 2025, were as follows:

The Group has adopted its impairment criteria based on the severity of decline of securities by borrower category of the issuer of securities in the determination of significant declines. A significant decline is regarded as an other-than-temporary decline unless the significant decline is reasonably recoverable. Impairment losses are recognized for other-than-temporary declines.

For the six-month period ended September 30, 2025, the Group wrote off other foreign securities included in marketable available-for-sale securities in the amount of ¥5 million ($37 thousand).

For the year ended March 31, 2025, the Group wrote off a total of ¥277 million, which was comprised of ¥135 million for stocks and ¥142 million for corporate bonds.

If the fair value declines more than 50% from the acquisition cost or amortized cost, the Group generally deems the decline to be significant and other-than-temporary. However, based on the borrower category of the issuer of securities, the following impairment criteria determine whether or not the fair value decline is significant under the internal standards for write-offs and reserves.

‘In danger of bankruptcy,’ ‘De facto bankrupt’ and ‘Bankrupt’ … if the fair value declines from cost.

‘Need attention’ … if the fair value declines more than 30% from cost.

‘Normal’ … if the fair value declines more than 50% from cost.

For debt securities categorized as ‘Normal,’ the fair value decline is deemed significant if the fair value declines more than 30% from cost.

For securities, whose fair value remains below a certain level, the fair value decline is deemed significant even if it does not meet the above criteria.

‘Bankrupt’ borrower means an issuer of securities under legal proceedings, such as bankruptcy or liquidation. ‘De facto bankrupt’ borrower means an issuer of securities in a similar condition as ‘Bankrupt’ borrower. ‘In danger of bankruptcy’ borrower means an issuer of securities that is not currently bankrupt but is highly likely to become bankrupt. ‘Need attention’ borrower means an issuer of securities that needs to be monitored carefully. ‘Normal’ borrower means an issuer of securities categorized as other than ‘Bankrupt,’ ‘De facto bankrupt,’ ‘In danger of bankruptcy’ or ‘Need attention.’

As of September 30 and March 31, 2025, there were no securities loaned under unsecured lending agreements, loan for use agreements, or lease agreements.

As of September 30 and March 31, 2025, there were no securities received under unsecured lending agreements, lending agreements with cash collateral or resale agreements, etc., and those received as collateral for derivative transactions, which the Group has the right to be freely sold or repledged.

‘Valuation difference on available-for-sale securities’ stated in the consolidated balance sheet as of September 30 and March 31, 2025, consisted of the following:

1. Money Held in Trust

   The carrying amounts and related valuation gains recognized in earnings for money held in trust classified as for investment purposes as of September 30 and March 31, 2025, were as follows:

   	Millions of yen		Thousands of U.S. dollars
   	September 30, 2025	March 31, 2025	September 30, 2025
   Carrying amounts Unrealized gains recognized in earnings	¥8,844 —	¥12,728 —	$59,408 —

   None of the money held in trust was categorized as held-to-maturity or available-for-sale as of September 30 and March 31, 2025.

2. Loans and Bills Discounted

Loans and bills discounted as of September 30 and March 31, 2025, consisted of the following:

Non-performing loans based on the Banking Act and the Financial Reconstruction Act as of September 30 and March 31, 2025, were as follows:

The above amounts are stated after write-offs of uncollectible amounts but before the deduction of the allowance for loan losses.

Non-performing loans based on the Banking Act and the Financial Reconstruction Act are listed in the second table above. These include corporate bonds in securities (limited to those for which payment of principal and interest is guaranteed in whole or in part, and the issuance of such bonds is through private placement of securities (Article 2, Paragraph 3 of the Financial Instruments and Exchange Act)), loans and bills discounted, foreign exchanges, accrued interest and suspense payables in other assets, customers' liabilities for acceptances and guarantees and securities in the case of loaned securities in the notes to the consolidated balance sheet (limited to only those subject to usage and lending or lending agreement).

‘Bankrupt and similar credit’ refers to the credit of borrowers who have filed for bankruptcy, corporate reorganization, composition, etc., as well as those borrowers who are in an equivalent situation.

‘Doubtful credit’ refers to the credit with serious doubt concerning the recovery of principal and receiving of interest as contract provisions, because the borrower’s financial condition and business results have worsened, although they have not reached the point of management collapse, excluding loans to ‘Bankrupt and similar credit’.

‘Loans overdue for three months or more’ refers to those loans excluding loans to ‘Bankrupt and similar credit’ and ‘Doubtful credit’ for which principal or interest remains unpaid for at least three months.

‘Restructured loans’ refers to those loans excluding loans to ‘Bankrupt and similar credit’, ‘Doubtful credit’ and ‘Loans overdue for three months or more’ for which agreement was made to provide a reduction or a moratorium on interest payments, or concessions in the borrower’s favor on interest or principal payments or to waive claims in order to support the borrowers' recovery from financial difficulties.

‘Normal credit’ refers to credits to borrowers whose financial condition and business results have no particular problem and which are not categorized in any of the above categories. Overdraft contracts and contracts for loan commitments are those by which the Group is bound to extend loans up to a prearranged amount, upon the request of customers, unless the customer is in breach of contract conditions. The unutilized balance of these contracts amounted to ¥602,902 million ($4,049,588 thousand) and ¥549,101 million as of September 30 and March 31, 2025, respectively. ¥468,014 million ($3,143,567 thousand) and ¥446,025 million of these amounts relate to contracts with residual contractual terms of one year or less as of September 30 and March 31, 2025, respectively.

Bills discounted are accounted for as financing transactions in accordance with ‘Accounting and Auditing Treatments on the Application of Accounting Standards for Financial Instruments in the Banking Industry’ (the JICPA Industry Committee Practical Guideline No.24), although the Bank has the right to sell or repledge them without restriction. The face values of such bills discounted held as of September 30 and March 31, 2025, were ¥3,445 million ($23,141 thousand) and

¥3,353 million, respectively.