Kazuhito Fujiwara, President

Since our founding as Japan’s 18th bank in 1877, we have grown in tandem with regional society, driven by a commitment to maintaining sound business operations. Throughout our history, we have overcome numerous challenges to establish a firm foundation as the central bank in our region, and we extend our thanks to everyone for their warm and long-lasting support.
   Japan’s socioeconomic structure has undergone rapid change in recent years, further raising the severity of conditions in the financial services sector and prompting customers to be more selective about the institutions they choose. There are strong and growing pressures to improve the stability and credibility of the financial system as a means of restoring the domestic economy to a path of steady progress. In addition to ensuring sound operations, regional financial institutions are expected to contribute to the economies of the regions in which they operate.
   To meet such expectations, in April 2002 the Eighteenth Bank embarked on Stage 1 of its medium-term management plan, entitled “21st Century Marketing Strategy.” Under the plan, the Bank is striving to functionally upgrade its comprehensive service lineup in a way that meets the needs of the times, by maintaining operational soundness and enhancing its earnings power without relying on public funds. The Bank will work harder than ever to foster the development of the regional economy while responding swiftly and accurately to the diversifying needs of customers.

Progress Report on Medium-Term Management Plan
The core of the Bank’s medium-term plan is to bolster earnings power in two ways – by raising the volume of retail loans, principally mortgage loans – and by increasing revenue from fees and commissions on the operation of assets in customers’ accounts. At the same time, we are also taking steps to right-size our branch network as a means of achieving higher management efficiency, while reorganizing our marketing structure.
   Radical changes are being made to effect major reductions in general and administrative expenses, and our workforce is being downsized with the goal of 1,650 employees by March 2004.
   Thanks to these measures, the Bank’s gross profit on core banking operations for the reporting period posted an increase of ¥313 million over the previous term, to ¥43,238 million (US$359.7 million). Expenses, meanwhile, decreased by ¥786 million year-on-year, to ¥28,173 (US$234.3 million). Thanks to the successful implementation of our initiatives to raise earnings and reduce costs under the current medium-term plan, net operating profit for fiscal 2002 amounted to ¥15,064 million (US$125.3 million), an increase of ¥1,099 million over the previous business term.

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