Message from the Management

Performance
Faced with these difficult economic conditions, the Bank strove to raise operating efficiency and thus reinforce earnings. On March 31, 2002, the balance of deposits at fiscal year-end was ¥1,867.6 billion (US$14,016 million), up ¥112.8 million from a year earlier thanks to a solid increase in deposits by individual customers. The balance of loans and bills discounted grew ¥10.0 million, to ¥1,487.0 billion (US$11,160 million), owing to the Bank’s assertive efforts to provide financing to small and medium-sized companies and meet the loan needs of consumers. The fiscal year-end balance of securities was ¥478.1 billion (US$3,588 million), up ¥39.1 million.
   Demand for funds remained sluggish and the yield on investment funds continued its decline. Amid these circumstances, we worked to expand the Bank’s business base, further raise operational efficiency, and improve investment profitability. As a result, net income came to ¥722 million (US$5 million).
   Measures to dispose of bad debt were taken in line with strict loan asset assessment standards.

Future Challenges
Conditions surrounding Japan’s financial institutions continue to change dramatically. Factors include large-scale consolidation within the industry, the entry of new players from other sectors, and the partial removal of unlimited deposit guarantees in April 2002. Moreover, such guarantees are scheduled to be withdrawn for all deposits in April 2003. These changes are expected to prompt customers to become increasingly selective when choosing financial institutions. Indeed, a new era is emerging, marked by a major transformation in the way institutions are managed.
   In response to these challenges, in April 2002 the Bank embarked on a new medium-term management plan, entitled “21st Century Marketing Strategy.” The aim of the plan is to help the Bank strengthen its position as a leading bank in Nagasaki Prefecture in both qualitative and quantitative terms, without reliance on public funds and without the need to merge with other banks.
   Guided by the plan, the Bank will pursue drastic reforms to its cost structure, with the aim of reducing costs by reassessing its personnel and branch frameworks and centralizing systems and core administrative processes. In these ways, we will seek to further raise operating efficiency. Meanwhile, we will strive to further improve the soundness of our asset portfolio.
   By implementing its new medium-term management plan, the Bank intends to create a profit-oriented operating foundation and become a bank that customers can patronize with peace of mind, even after the complete elimination of unlimited deposit guarantees.

Kazuhito Fujiwara, President

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