THE FIRST BANK OF TOYAMA (7184) FY2026 Q3 Earnings Report

Quick View

Executive Summary

For the cumulative Q3 period of the fiscal year ending March 2026, a sharp increase in deposit funding costs offset the increase in investment income, resulting in declines in both revenue and earnings. Revenue (ordinary income) was ¥378.6B (前年比-8.3%), ordinary income was ¥147.4B (同-23.8%), and net income was ¥105.4B (同-22.7%). The primary factor was a substantial decrease in both ordinary revenue and profit in the Banking Business segment. While investment income increased by +14.6% YoY, funding costs rose 3.6-fold, compressing the deposit-loan spread.

Factors Affecting Performance

【Revenue】Ordinary revenue was ¥378.6B, down -8.3% YoY. The Banking Business, which declined to ¥319.9B (-12.3%) and accounted for 84.5% of total revenue, led the overall decline. Meanwhile, the Leasing Business increased to ¥44.9B (+7.5%), and Other Businesses increased to ¥13.8B (+112.3%). The decline in Banking Business revenue was attributable to a decrease in other ordinary revenue (¥67.2B, -30.6% YoY).

【Profit and Loss】Ordinary income was ¥147.4B (-23.8%), and net income was ¥105.4B (-22.7%). Segment profit in the Banking Business declined substantially by -26.8% YoY to ¥141.9B, while the Leasing Business also saw profitability deteriorate, with profit falling 93.6% from ¥6.4B to ¥0.4B. In contrast, Other Businesses increased profit to ¥9.9B (+54.4%). The ordinary income margin declined by approximately 789bp to 38.9% from 46.8% in the same period of the previous year. Expenses (¥98.8B, +2.3%) increased despite the decline in revenue, worsening operating leverage. Extraordinary gains and losses were negligible, and the gap between ordinary income and net income was within the normal range, attributable to income taxes and other taxes (¥42.0B, effective tax rate 28.5%). In conclusion, both revenue and earnings declined.

Segment Analysis

The Banking Business remains the core contributor to both revenue and profit; however, ordinary revenue declined to ¥319.9B (-12.3%) and segment profit declined to ¥141.9B (-26.8%). The deterioration in profitability of this core business, which accounts for 93.2% of consolidated profit, weighed on overall performance. The key factor was compression of the deposit-loan spread due to a sharp increase in funding costs (3.6 times the previous year). The Leasing Business increased ordinary revenue to ¥44.9B (+7.5%), but segment profit plunged to ¥0.4B (-93.6%), indicating that revenue growth has not translated into profit. Other Businesses, including credit card operations, contributed to diversification of revenue sources, with ordinary revenue of ¥13.8B (+112.3%) and profit of ¥9.9B (+54.4%), demonstrating high profitability with a consolidated profit margin of 72.0%.

Key Financial Indicators

【Profitability】The ordinary income margin was 38.9%, down approximately 789bp from 46.8% in the same period of the previous year, while the net profit margin was 27.8%, down approximately 520bp from 33.0%. The primary reason for the decline was that the sharp increase in interest on deposits (¥24.7B, +271.9% YoY) exceeded the increase in interest on loans (¥90.3B, +19.2%). 【Cash Flow Quality】While extraordinary gains and losses were nearly zero and net income was generated primarily from core operations, comprehensive income of ¥446.9B substantially exceeded net income of ¥105.4B, primarily due to valuation differences on other securities (+¥340.4B). Accordingly, earnings quality has a high degree of dependence on market-driven factors. 【Investment Efficiency】Annualized ROE was 7.3%, decomposed into a net profit margin of 27.8% × total asset turnover of 0.030 times × financial leverage of 8.62 times. 【Financial Soundness】The equity ratio was 11.6%, improving by +200bp from 9.6% in the same period of the previous year, but remained slightly below the 12% level generally regarded as an indicator of financial soundness. The loan-to-deposit ratio was 73.1% (loans ¥1027.7B ÷ deposits ¥1406.8B), within an appropriate range.

Cash Flow Analysis

Although detailed disclosure of the cash flow statement is unavailable, an examination of funding trends based on balance sheet movements shows that deposits expanded steadily to ¥1,406.82B (+2.2% YoY), while loans also increased to ¥1,276.9B (+2.6%), indicating a moderate upward trend in both deposits and loans. Securities increased to ¥525.14B (+7.8%), and cash and deposits also accumulated to ¥86.86B (+7.6%), strengthening the liquidity asset base. Borrowings declined substantially by -52.0% YoY to ¥7.10B, reducing dependence on external borrowing. Net assets expanded significantly to ¥193.27B (+26.7%), but this was primarily attributable to improvement in valuation differences on securities and differs in nature from the accumulation of internally generated funds through operating activities; this distinction should be noted.

Earnings Quality

Extraordinary gains and losses were nearly zero relative to net income of ¥105.4B (extraordinary gains of ¥0.01B and extraordinary losses of ¥0B), which is favorable in that profit was generated from recurring business activities. However, in terms of profit composition, funding costs expanded 3.6-fold, compared with a +14.6% increase in investment income, indicating that changes in the interest-rate environment are putting pressure on core operating margins. Meanwhile, comprehensive income reached ¥446.9B, more than four times net income, with the difference attributable to a ¥340.4B increase in valuation differences on other securities. Because these valuation differences may reverse in response to fluctuations in market interest rates and stock prices, the significant gap between net income and comprehensive income indicates that the increase in capital during the period was heavily dependent on market factors rather than accruals from core operations.

Earnings Forecast and Guidance

Progress toward the full-year ordinary income forecast of ¥203.0B was 72.6%, 2.4pt below the standard progress rate of 75%, although the variance was small. Achievement of the forecast will require ordinary income of ¥55.6B in Q4. Progress toward the full-year net income forecast of ¥140.0B was 75.3%, approximately in line with the standard level. The fact that the earnings and dividend forecasts were revised during the current quarter should be noted as a factor for assessing the accuracy of the full-year outlook.

Shareholder Returns

The Q2 dividend was ¥28 per share (ordinary dividend), resulting in a payout ratio of 17.1% against cumulative Q3 net income of ¥105.4B. The full-year dividend forecast is ¥78, implying a year-end dividend of ¥50. Based on forecast full-year net income of ¥140.0B and average shares outstanding during the period of 63.08 million shares, the forecast payout ratio is approximately 35.1%, which does not represent an excessive burden relative to earnings. Treasury shares had a carrying value of ¥10.9B, increasing from ¥1.1B in the same period of the previous year. Trends in share repurchases should also be monitored when assessing total shareholder returns.

Risk Factors

1. Compression of the deposit-loan spread: Interest on deposits increased +271.9% YoY, substantially exceeding the +19.2% increase in interest on loans. During the rising-rate phase, revisions to funding costs have preceded improvements in investment yields, creating the possibility of further spread compression.

2. Declining profitability in the Banking Business segment: Profit in the core Banking Business segment declined -26.8% YoY. If the recovery of this core business, which accounts for 93.2% of consolidated profit, is delayed, achieving the full-year ordinary income forecast will become more difficult.

3. Dependence of capital on valuation differences on securities: The primary factor behind the ¥407.5B increase in net assets was the +¥340.4B increase in valuation differences on other securities, which constitutes the majority of comprehensive income of ¥446.9B. If market interest rates or stock prices reverse, net assets may fluctuate through a contraction in valuation differences.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (bank)

Profitability and Returns

The Company’s net profit margin of 27.8% has limited comparative data available, but its absolute level is reasonably strong.

Growth and Capital Efficiency

The Company’s revenue growth rate was negative YoY. As sufficient comparative data within the industry is unavailable, its detailed positioning remains limited.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. The ordinary income margin declined approximately 789bp YoY, as the increase in funding costs caused by the sharp rise in interest on deposits (+271.9%) put pressure on the earnings structure. The key focus going forward is whether this change is sustainable in line with the interest-rate environment or temporary.

2. Progress toward the full-year ordinary income forecast was 72.6%, while progress toward the net income forecast was 75.3%. On a net income basis, results are broadly in line with the plan. Securing ordinary income of ¥55.6B in Q4 is a prerequisite for achieving the forecast.

3. The equity ratio improved to 11.6% from 9.6% in the same period of the previous year, but the primary driver was an increase in valuation differences on other securities. A structural characteristic is that sensitivity to changes in market conditions has also increased.

---

This report is an earnings analysis document automatically generated by AI through analysis of XBRL earnings release data. It does not recommend investment in any specific security. Industry benchmarks are reference information compiled by the Company based on publicly available earnings data. Investment decisions should be made at your own responsibility, and you should consult a professional as necessary.

---End of Report---