The Yamagata Bank (8344) FY2026 FY Earnings Report

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Executive Summary

For the fiscal year ended March 2026, revenue and earnings increased due to the expansion of interest income and disciplined expense management, resulting in a high-quality financial performance in which the earnings growth rate significantly exceeded the revenue growth rate. Ordinary income was ¥63.33B (+19.8% year on year), ordinary income was ¥9.05B (+39.1%), and net income attributable to owners of the parent was ¥6.53B (+48.0%). The primary driver of earnings growth was a 29.1% increase in funds investment income resulting from higher interest income on loans and securities. Top-line growth, which substantially exceeded the 4.2% increase in expenses, drove margin improvement.

Factors Affecting Financial Performance

【Revenue】Ordinary income of ¥63.33B represented a substantial 19.8% year-on-year increase. The Banking Business accounted for 87.1% (¥55.17B) of ordinary income from external customers and was the main contributor to revenue growth. Funds investment income increased to ¥40.08B (+29.1%), while net fees and commissions decreased to ¥5.97B (-1.6%), indicating a greater reliance on net interest income as a revenue source.

【Earnings】Ordinary income increased to ¥9.05B (+39.1%), while net income increased to ¥6.53B (+48.0%), with the earnings growth rate exceeding the revenue growth rate. Funding costs rose to ¥8.98B (+75.3%), increasing at a faster pace than funds investment income; if this gap narrows, it could affect the sustainability of future margin improvement. Expenses were contained at ¥21.53B (+4.2%), and the moderate pace of expense growth relative to revenue expansion contributed to earnings growth. Extraordinary losses were minimal at ¥0.02B, including impairment losses of ¥0.01B, indicating that the earnings increase was not dependent on temporary factors. Accordingly, the current period can be concluded to have produced both revenue and earnings growth.

Segment Analysis

The Banking Business generated ordinary income of ¥55.17B and segment profit of ¥8.41B, representing a profit margin of 15.2%, and constituted the core of consolidated revenue. The Leasing Business generated ordinary income of ¥6.49B and profit of ¥0.24B, corresponding to a profit margin of 3.7%. The Credit Guarantee Business is small in scale, with ordinary income of ¥0.21B, but highly profitable, generating profit of ¥0.63B and a profit margin of 296.7%, reflecting the low cost of guarantee performance relative to guarantee fees. Other businesses, including data processing and credit cards, generated ordinary income of ¥1.47B and profit of ¥0.26B, representing a profit margin of 17.9%. The Banking Business makes an overwhelmingly large contribution to consolidated profit, illustrating the business concentration structure characteristic of regional financial institutions.

Key Financial Indicators

【Profitability】The net profit margin was 10.3%, improving by approximately 2.0pt from 8.3% in the previous year, while the ordinary income margin also improved to 14.3% from 12.3%. However, NIM, which represents the difference between the yield on funds investment and funding costs, was 1.47%, a level warranting close monitoring when assessing the sustainability of profitability improvements.【Cash Quality】Operating Cash Flow (OCF) was ¥26.45B, equivalent to 4.05 times net income of ¥6.53B, and cash backing remained sound even after deducting ¥0.87B in income taxes paid.【Investment Efficiency】ROE was 4.3% (3.2% in the previous year), while ROIC was also approximately 4.3%. Although profitability was improving, returns on invested capital remained low.【Financial Soundness】The Equity Ratio was 4.6%. Deposits of ¥289.51B compared with loans of ¥211.00B resulted in a loan-to-deposit ratio of 72.9%, within an appropriate range. Most liabilities consisted of deposits, reflecting the balance-sheet structure unique to banks and distinct from that of general operating companies.

Cash Flow Analysis

OCF was ¥26.45B, a substantial improvement from -¥42.76B in the previous year, demonstrating cash-generation capacity equivalent to 4.05 times net income of ¥6.53B. Investing Cash Flow was an outflow of ¥37.83B, primarily comprising funds investment related to securities and loans, including ¥7.02B in capital expenditures. Financing Cash Flow was an outflow of ¥3.48B, including ¥1.70B in share repurchases and ¥2.65B in dividend payments. Broadly defined free cash flow, calculated by deducting Investing Cash Flow from OCF, was -¥11.38B. However, because the acquisition and sale of securities and similar transactions are included in Investing Cash Flow for banks, the same interpretation as for general operating companies is not appropriate. OCF after capital expenditures of ¥19.43B more than sufficiently covered the combined ¥4.35B in dividends and share repurchases, indicating a sound position in terms of funding for shareholder returns. Cash and cash equivalents stood at ¥186.29B at period-end, a decrease of ¥14.86B from the previous year.

Quality of Earnings

Net income of ¥6.53B was only minimally affected by extraordinary losses of ¥0.02B, including impairment losses of ¥0.01B, and represented genuine earnings growth driven by the expansion of recurring net interest income. OCF of ¥26.45B reached 4.05 times net income, indicating limited accruals, or divergence between accrual and cash accounting, and strong cash backing for earnings. Meanwhile, comprehensive income of ¥17.88B significantly exceeded net income of ¥6.53B, primarily due to a ¥10.60B improvement in valuation difference on securities. Because these valuation gains may reverse as a result of changes in interest rates and market prices, they entail a certain degree of volatility as a driver of net asset growth and warrant attention. The fact that funding costs increased sharply by 75.3%, compared with a 29.1% increase in funds investment income, is also a factor that will influence the quality of future earnings.

Earnings Forecast and Guidance

For the following fiscal year, ending March 2027, the company forecasts ordinary income of ¥65.10B (+2.8% compared with the current period), ordinary income of ¥12.10B (+33.7%), and net income of ¥7.10B (+13.2%). While the revenue growth rate is expected to decelerate significantly from 19.8% in the current period, the ordinary income margin is projected to improve from 14.3% in the current period to approximately 18.6%. Achieving the plan will require the continued expansion of net interest income and maintenance of expense discipline, as well as management of funding costs to prevent a decline in NIM.

Shareholder Returns

The annual dividend for the current period was ¥84 per share, consisting of an interim dividend of ¥28 and a year-end dividend of ¥56. The year-end dividend was revised upward from ¥50 to ¥56 as of the announcement date. The Payout Ratio was 40.4%, within a range generally considered sustainable when dividends alone are used as the basis of assessment. Including ¥1.70B in share repurchases, the Total Return Ratio was approximately 66.7%, indicating an active shareholder-return stance when evaluated separately from the Payout Ratio. OCF after capital expenditures of ¥19.43B exceeded the combined ¥4.35B in dividends and share repurchases, indicating that returns were funded by cash generated during the current period. The dividend forecast for the following period is ¥98 (+16.7% year on year), representing a planned dividend increase.

Risk Factors

1. Revenue concentration risk: The Banking Business accounts for 87.1% of ordinary income from external customers, creating a structure in which fluctuations in the regional economy and funding demand from local companies directly affect consolidated performance.

2. Net interest margin compression risk: NIM was 1.47%, while the growth rate of funding costs (+75.3%) exceeded the growth rate of funds investment income (+29.1%). If rising deposit interest rates outpace improvements in investment yields, future net interest income could come under pressure.

3. Changes in capital levels and funding structure: The Equity Ratio was 4.6%. Market-based funding other than deposits has also increased, including borrowings (+22.7%), negotiable certificates of deposit (+20.5%), and call money (+141.6%), increasing sensitivity to funding costs and market liquidity.

Industry Benchmarks (For Reference; Compiled by the Company)

Profitability and Returns

The net profit margin is slightly below the industry median.

Growth and Capital Efficiency

The revenue growth rate significantly exceeds the industry median, representing a high pace of revenue growth within the industry.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. Ordinary income increased by +39.1% year on year and net income by +48.0%, expanding at rates exceeding the +19.8% revenue growth rate. The containment of expense growth at 4.2% supported margin improvement, with the ordinary income margin and net profit margin each improving by approximately 2.0pt.

2. OCF reached 4.05 times net income, indicating strong cash backing for earnings. Meanwhile, NIM of 1.47%, an Equity Ratio of 4.6%, and a construction-in-progress ratio of 34.5% of tangible fixed assets remain areas requiring continued monitoring from the perspectives of profitability, capital, and investment efficiency.

3. For the following period, the company plans to increase the dividend (from ¥84 to ¥98) and achieve a further improvement in the ordinary income margin. Balancing the sustainable expansion of net interest income with funding cost management will be key to achieving the plan.

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly available earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting with a professional as necessary.