Quick View
| Metric | Current Period | Same Period of Previous Year | YoY |
|---|---|---|---|
| Revenue | ¥452.5B | ¥387.1B | +16.9% |
| Operating Income | - | - | - |
| Ordinary Income | ¥57.5B | ¥49.8B | +15.5% |
| Net Income | ¥41.0B | ¥34.3B | +19.4% |
| ROE | 2.7% | 2.5% | - |
Executive Summary
Cumulative results for Q3 increased in both revenue and profit, mainly due to the expansion of interest income. Ordinary revenue was ¥452.5B (¥387.1B in the same period of the previous year, YoY +16.9%), ordinary income was ¥57.5B (¥49.8B in the previous year, YoY +15.5%), and net income attributable to owners of the parent was ¥41.0B (¥34.3B in the previous year, YoY +19.4%). Although the increase in interest on loans exceeded the increase in funding costs, securing higher profit, the ordinary income margin declined slightly from 12.9% to 12.7%.
Factors Affecting Performance
【Revenue】Ordinary revenue was ¥452.5B, up +16.9% year on year. Ordinary revenue from external customers in the Banking Business was ¥390.1B (up +17.9%), driving the overall result and accounting for 86.2% of total ordinary revenue. While the balance of loans increased only 1.8% year on year, interest on loans rose significantly to ¥189.3B (up +26.3%), indicating that revenue growth was driven by improved yields rather than loan volume. The Leasing Business also contributed to revenue growth, with ordinary revenue of ¥50.2B (up +14.6%), while the Credit Guarantee Business (¥1.6B, down -1.2%) and Other Businesses (¥10.5B, down -1.1%) recorded revenue declines.
【Profit and Loss】Ordinary income was ¥57.5B, up +15.5% year on year. Profit from the Banking Business was ¥55.8B (up +20.1%), exceeding the growth in ordinary revenue and leading the increase in profit. In contrast, the Credit Guarantee Business recorded profit of ¥4.0B (down -16.0%), and Other Businesses recorded profit of ¥1.4B (down -28.5%), indicating that profit growth was concentrated in the Banking Business. General and administrative expenses were ¥161.4B, increasing only +4.1% year on year and remaining below the growth rate of ordinary revenue. Meanwhile, other ordinary expenses increased to ¥136.3B, up +22.6% year on year, putting pressure on the ordinary income margin. Net income was ¥41.0B (up +19.4%), while extraordinary loss of ¥0.1B was immaterial, indicating limited dependence on one-time factors. Overall, the Company achieved increases in both revenue and profit.
Segment Analysis
The Banking Business generated ordinary revenue of ¥390.1B (up +17.9%) and segment profit of ¥55.8B (up +20.1%), making it the core business and accounting for the majority of total profit. The Leasing Business generated ordinary revenue of ¥50.2B (up +14.6%) and profit of ¥1.6B (up +18.4%); although small in scale, it achieved increases in both revenue and profit. The Credit Guarantee Business generated ordinary revenue of ¥1.6B (down -1.2%) and profit of ¥4.0B (down -16.0%); its profit margin was high at 252.5%, but profit declined. Other Businesses generated ordinary revenue of ¥10.5B (down -1.1%) and profit of ¥1.4B (down -28.5%), resulting in lower profit. The earnings diversification benefit from non-banking businesses declined during the current period.
Key Financial Indicators
【Profitability】The net income margin was 9.1%, improving from 8.8% in the same period of the previous year, while the ordinary income margin declined slightly to 12.7% from 12.9% in the previous year. NIM was 1.08%, indicating a thin spread earned on interest-earning assets.【Cash Quality】The difference between ordinary income and income before taxes consisted solely of extraordinary loss of ¥0.1B, indicating limited dependence on one-time factors. Comprehensive income was ¥189.1B, equal to the amount attributable to owners of the parent, with the portion attributable to non-controlling interests being negligible.【Investment Efficiency】ROE was 2.7% and ROIC was approximately 3.6%, indicating that capital efficiency remained low.【Financial Soundness】The equity ratio was 4.7%, improving 40bp from 4.3% in the previous year, but remaining below the 8% benchmark for financial soundness. The deposit-to-loan ratio was 72.8%, within the benchmark range, and deposits accounted for approximately 92.0% of liabilities, indicating a stable funding structure.
Cash Flow Analysis
As cash flow statement data were not provided, funding trends are analyzed based on changes in the balance sheet. Cash and due from banks decreased 27.5% year on year to ¥1,498.3B, while securities increased 10.4% year on year to ¥898.2B, indicating a shift in fund allocation toward loans and securities investments. While deposits were largely flat at ¥2,839.0B, negotiable certificates of deposit increased to ¥612.5B (up +80.2%), and call money increased to ¥466.9B (up +276.2%), indicating an increase in market-based funding and greater dependence on funding sources other than deposits. The combined balance of cash and due from banks and securities was ¥1,480.0B, equivalent to approximately 36.9% of deposits, indicating that a certain level of liquidity asset buffers was maintained.
Earnings Quality
The increase in current-period profit was primarily supported by recurring earnings growth from higher interest on loans (up +26.3%), while extraordinary loss was only ¥0.1B, indicating limited dependence on one-time factors. On the other hand, funding costs increased sharply by +76.1% year on year, and interest on deposits rose +102.4%, putting pressure on the ordinary income margin. Comprehensive income was ¥189.1B, substantially exceeding net income of ¥41.0B, primarily due to market valuation factors, including valuation difference on securities of ¥125.0B and deferred hedge gains or losses of ¥28.6B. This divergence indicates that, separate from the earning power of the core business, valuation gains arising from fluctuations in interest rates and stock prices are boosting net assets; net assets could come under pressure if market conditions move in the opposite direction.
Earnings Forecast and Guidance
The full-year forecast is ordinary revenue of ¥618.0B, ordinary income of ¥85.0B (up +30.7% year on year), and net income of approximately ¥60.0B based on the disclosed figures. The Q3 cumulative progress rates were 73.2% for ordinary revenue, 67.6% for ordinary income, and 68.3% for net income. Although all were below the standard 75% level, the shortfall was within 10 percentage points and did not represent a significant deviation. Achieving the ordinary income forecast will require an increase of approximately ¥27.5B in Q4. It should also be noted that the earnings forecast and dividend forecast were revised during the current quarter.
Shareholder Returns
The Q2 dividend was ¥28.00 per share, resulting in an estimated payout ratio of 22.0% based on cumulative Q3 net income of ¥41.0B. The full-year forecast dividend is ¥78.00, resulting in an estimated forecast payout ratio of 40.9% against forecast full-year net income of ¥60.0B, within the benchmark of less than 60%. The dividend allocation for the second half is relatively generous, at effectively approximately ¥50. Treasury stock increased to ¥1.07B (up +38.7% year on year), but as details such as the acquisition amount were not disclosed, the payout ratio is stated based solely on dividends, and the total return ratio is not assessed.
Risk Factors
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Interest rate spread risk: NIM was low at 1.08%. While interest on loans increased +26.3% year on year, interest on deposits rose sharply by +102.4%. If deposit rates continue to rise, the interest margin may come under further pressure.
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Business concentration risk: The Banking Business accounts for 86.2% of ordinary revenue and the majority of segment profit, making it the primary business. Regional economic conditions and trends in funding demand from local companies therefore have a significant impact on consolidated performance.
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Capital adequacy risk: The equity ratio improved from the previous year to 4.7% but remains below the general financial soundness benchmark of 8%. Fluctuations in valuation difference on securities have a significant impact on net assets, necessitating close monitoring of capital headroom amid changes in market conditions.
Industry Benchmark (Reference—Company Analysis)
Industry Benchmark (bank)
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Net Income Margin | 9.1% | – | – |
| The Company's net income margin of 9.1% is provided for reference as an absolute level because comparative data within the industry are insufficient. |
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (Year on Year) | 16.9% | – | – |
| Similarly, the Company's ordinary revenue growth rate of 16.9% is based on a standalone performance figure, as industry comparison data are limited. |
※Source: Compiled by the Company
Key Takeaways from the Financial Results
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The Company achieved increases in both revenue and profit, with ordinary revenue up 16.9%, ordinary income up 15.5%, and net income up 19.4%. However, the loan balance increased only 1.8%, and profit growth was primarily attributable to improved loan yields.
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The equity ratio of 4.7%, ROE of 2.7%, and NIM of 1.08% were all at low levels. A structural characteristic observed is that room remains to improve capital efficiency and underlying earnings power despite the ongoing trend of profit growth.
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The net income progress rate against the full-year plan was 68.3%. Trends in the interest rate spread and credit costs in Q4 will be key to achieving the plan.
This report is an earnings analysis document automatically generated by AI based on XBRL earnings flash report 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 responsibility, and, where necessary, after consulting with a professional advisor.
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AI Financial Analysis
Executive Summary
Yamagata Bank delivered a solid FY2026 Q3 cumulative earnings performance, led by higher interest income and a stronger banking-segment contribution. Consolidated ordinary revenue increased 16.9% year on year to ¥45.25bn. Ordinary income rose 15.5% to ¥5.75bn, while net income attributable to owners increased 19.7% to ¥4.10bn. Net income growth exceeded ordinary-income growth, reflecting a modestly lower effective tax rate of 28.7% versus approximately 30.8% in the prior-year period. The reported net profit margin was 9.1%, within the stated 5-10% good range but still below the 10% excellent threshold. The implied ordinary-income margin was broadly stable at 12.7%, with revenue growth being substantially matched by the growth in ordinary expenses. Net interest income increased 19.1% to ¥22.37bn, as interest income grew 28.4% to ¥28.75bn despite a 76.1% increase in interest expense to ¥6.39bn. This demonstrates that asset-yield improvement more than offset the rising cost of deposits and other funding. The banking business remained the core profit engine, generating ¥5.58bn of segment profit, up 20.1% year on year. Lease operations also improved, with segment profit rising 18.4% to ¥0.16bn. In contrast, credit guarantee segment profit declined 16.0% to ¥0.40bn and other businesses declined 28.5% to ¥0.14bn. Comprehensive income was particularly strong at ¥18.91bn, supported by a ¥12.50bn positive year-to-date movement in the valuation difference on securities within OCI. This OCI recovery lifted total equity 12.4% year on year to ¥152.84bn, although it does not have the same recurring character as ordinary earnings. The reported, annualized ROE of 3.6% remains below the 8% general-equity benchmark and highlights limited capital efficiency despite the earnings improvement. Management's full-year forecast implies FY2026 ordinary income of ¥8.50bn and net income attributable to owners of ¥6.00bn; Q3 progress is 67.6% and 68.3%, respectively. Accordingly, the final quarter requires a meaningful earnings contribution, particularly relative to the 75% seasonal reference point. The earnings trajectory is constructive, but the investment case remains dependent on sustaining interest spreads, controlling funding-cost pressure, and improving capital productivity.
Profitability Analysis
The reported annualized DuPont ROE is 3.6%, comprising a 9.1% net profit margin, 0.019x asset turnover, and 21.19x financial leverage. For a bank, the high leverage factor principally reflects deposit-funded intermediation and therefore should not be interpreted in the same manner as leverage at an industrial company. The limiting factor in the DuPont structure is asset turnover/capital productivity rather than profit margin: banks inherently operate with very large balance sheets relative to equity, and the resulting ROE remains modest despite a healthy 9.1% net margin. The reported annualized ROE of 3.6% is also consistent with the capital-efficiency alert and remains below the 5% ROIC warning threshold cited in the supplied benchmarks. The five-factor analysis shows a tax burden of 0.713, indicating that 71.3% of pre-tax profit was retained after tax; this is normal under the stated benchmark. The interest burden of 0.999 indicates that profit before tax was almost identical to the operating/ordinary profit proxy used in the calculation, consistent with bank accounting where interest is part of core operations. EBIT margin was 12.7%, supporting the conclusion that recurring profitability remained resilient. Interest income increased by ¥6.35bn to ¥28.75bn, driven by a ¥3.95bn increase in interest on loans and a ¥1.99bn increase in interest and dividends on securities. Interest expense increased by ¥2.76bn, including a ¥2.48bn increase in interest on deposits, but net interest income still expanded by ¥3.59bn. Net fee and commission income declined 1.0% to ¥4.27bn because fee income increased only 1.6% while fee expense rose 7.4%. General and administrative expenses increased 4.1% to ¥16.14bn, materially slower than revenue growth, indicating positive operating leverage in the core cost base. However, other ordinary expenses rose 22.6% to ¥13.63bn, faster than revenue, limiting margin expansion at the consolidated level. The core banking segment's profit margin improved by approximately 27 basis points to 14.3%, with segment profit increasing 20.1% against a 17.9% rise in external revenue. Leasing recorded a lower but improving margin of 3.2%, up roughly 11 basis points. Credit guarantee profitability remained high relative to its revenue base but weakened year on year, as segment profit fell faster than revenue. The 1.08% NIM quality alert is material: it is below the 1.5% warning threshold and shows that, notwithstanding current net-interest-income growth, the bank operates with a structurally thin intermediation margin. The immediate earnings uplift appears supported by higher loan and securities yields, but sustainability depends on whether repricing of earning assets continues to exceed repricing of deposits and wholesale funding.
Growth Assessment
Revenue growth was broad-based but concentrated in the core banking business. Banking-segment external ordinary revenue increased 17.9% to ¥39.02bn and accounted for 86.2% of consolidated external ordinary revenue. The lease segment grew revenue 14.6% to ¥5.02bn, contributing a further source of diversification, although its absolute profit contribution remained limited. Credit guarantee revenue was broadly flat at ¥0.16bn, while other businesses declined 1.1% to ¥1.05bn. The main growth driver was the 28.4% increase in interest income, led by loans and securities income. Loans and bills discounted increased 1.8% year on year to ¥2,067.28bn, supporting the increase in loan interest income. Securities increased 10.4% to ¥898.18bn, also supporting the rise in interest and dividend income from securities. Deposits were nearly stable, declining 0.3% to ¥2,838.98bn, implying that balance-sheet growth was driven more by asset mix and market valuation than deposit expansion. Full-year revenue forecast progress is 73.2% at Q3, close to the 75% seasonal reference point. Ordinary-income progress is 67.6%, 7.4 percentage points below the 75% reference, while net-income progress is 68.3%, 6.7 percentage points below. These progress rates do not exceed the supplied 10 percentage-point deviation threshold, but they indicate that a stronger fourth quarter is needed to achieve the full-year targets. The full-year forecast calls for 30.7% year-on-year ordinary-income growth, implying that management expects the earnings acceleration to continue through year-end. The forecast dividend of ¥78 per share implies a payout ratio of approximately 40.8% against forecast EPS of ¥191.17. The announced revision of both earnings guidance and dividends is consistent with improved profitability expectations. Revenue sustainability is most sensitive to the trajectory of market rates, deposit repricing, loan demand in the regional economy, and returns generated on the enlarged securities portfolio.
Financial Health
Total assets increased 2.3% year on year to ¥3,237.94bn, while total equity increased 12.4% to ¥152.84bn. The increase in equity was strongly supported by comprehensive income of ¥18.91bn, including improvement in the valuation difference on securities. Total liabilities rose 1.9% to ¥3,085.10bn and represented 95.3% of total assets, a normal balance-sheet structure for a deposit-taking bank but one that makes regulatory capital and asset quality central risk variables. The reported D/E ratio of 20.19x triggers the high-leverage alert and is far above the 2.0x general corporate warning threshold. Its root cause is the bank's deposit-funded model: deposits of ¥2,838.98bn are recognized as liabilities while common equity is ¥152.66bn. This level is structurally typical for banks and is not directly comparable with industrial-company debt leverage, but it still means that modest changes in asset values, credit costs, or funding conditions can have an amplified effect on equity returns and capital ratios. The capital adequacy ratio reported in the supplied data is 4.7%, up from 4.3% a year earlier but below the stated 8% minimum and 12% strong benchmarks. On the supplied definition, this is a material capital-management concern and makes retention of earnings and monitoring of risk-weighted-asset growth important. Deposits exceeded loans by ¥771.70bn, and the implied loan-to-deposit ratio is approximately 72.8%, within the 70-90% target range. This funding structure suggests that loans are principally funded by customer deposits rather than excessive wholesale borrowing. Cash and due from banks of ¥149.83bn, securities of ¥898.18bn, and monetary claims bought of ¥5.31bn provide a substantial liquidity-asset base alongside the loan portfolio. Borrowed money declined 4.1% to ¥102.20bn, while negotiable certificates of deposit increased 80.3% to ¥61.25bn and call money rose to ¥46.69bn from ¥12.41bn. The rise in market-based short-term funding should be monitored alongside the sharp increase in funding costs. Treasury stock increased in absolute value by ¥2.99bn to negative ¥10.72bn, a 38.7% year-on-year change, consistent with greater use of share repurchases or treasury-share accumulation. There were acceptances and guarantees of ¥12.34bn, representing an off-balance-sheet credit exposure that requires normal credit-risk management. Intangible assets were only 0.1% of total assets and no goodwill was reported, limiting M&A-related balance-sheet and impairment risk.
Notable B/S Changes
Securities: +¥84.81bn (+10.4%) to ¥898.18bn - a significant expansion in the investment portfolio supports securities income but increases interest-rate and valuation sensitivity. Cash and due from banks: -¥56.77bn (-27.5%) to ¥149.83bn - liquidity was partly redeployed or reallocated while the securities portfolio expanded. Loans and bills discounted: +¥35.69bn (+1.8%) to ¥2,067.28bn - moderate loan growth supported the ¥3.95bn increase in interest on loans. Total equity: +¥16.84bn (+12.4%) to ¥152.84bn - primarily supported by ¥18.91bn of comprehensive income and improved securities valuation reserves. Valuation difference on securities: improved by ¥12.50bn to negative ¥8.45bn - a substantial OCI recovery strengthened capital but remains exposed to market-price movements. Treasury stock: -¥2.99bn (-38.7%) to negative ¥10.72bn - increased treasury-share holdings reduce equity modestly and should be considered alongside dividend and capital-management policy. Negotiable certificates of deposit: +¥27.27bn (+80.3%) to ¥61.25bn - greater use of market-based deposits may contribute to funding-cost pressure.
Cash Flow Quality
Dividend Sustainability
The Q2 dividend was ¥28 per share, equivalent to a calculated payout ratio of 22.0% against FY2026 Q3 cumulative net income. The full-year dividend forecast is ¥78 per share, compared with forecast EPS of ¥191.17, implying a dividend-only payout ratio of approximately 40.8%. This prospective payout ratio is below the 60% sustainability benchmark and leaves room for retained earnings to support regulatory capital and future balance-sheet growth. Retained earnings increased to ¥134.55bn from ¥132.23bn a year earlier, notwithstanding the higher treasury-stock balance, indicating that internal capital generation remains positive. The announced dividend revision aligns shareholder distributions with improved earnings expectations. Given the reported capital adequacy ratio of 4.7% under the supplied metric, the capacity to sustain further dividend increases should be assessed primarily against capital requirements and risk-weighted-asset management rather than earnings alone. The available earnings-based payout profile appears manageable, while the prudence of capital distribution remains linked to capital-ratio improvement.
Risk Assessment
Business risks include NIM was 1.08%, below the 1.5% warning threshold. The root cause is a structurally narrow spread between asset yields and deposit/funding costs. While current interest-income growth is strong, further deposit-rate repricing could compress earnings if loan and securities yields do not rise at least as quickly., The regional-bank business model is exposed to regional economic activity and borrower conditions in Yamagata and surrounding areas. Slower local corporate investment, demographic decline, or stress in small and medium-sized enterprises could weaken loan growth and increase credit costs., The securities portfolio increased ¥84.81bn year on year to ¥898.18bn. This supports income generation but raises exposure to interest-rate movements and market-price volatility., Credit guarantee segment profit declined 16.0% and other-business segment profit declined 28.5%, reducing the contribution from non-bank diversification..
Financial risks include The reported D/E ratio of 20.19x is above the 2.0x quality-alert threshold. For a bank this is primarily a consequence of deposit funding, but the high balance-sheet leverage increases sensitivity of equity and capital ratios to credit losses and valuation changes., The supplied capital adequacy ratio was 4.7%, below the stated 8% minimum benchmark. Although it improved from 4.3%, the reported level implies limited tolerance for material risk-weighted-asset growth or losses under the supplied definition., Interest expense increased 76.1% year on year, materially faster than interest income. Continued funding-cost inflation is a key risk to future net interest income., Negotiable certificates of deposit increased to ¥61.25bn and call money increased to ¥46.69bn, indicating a greater role for market-based funding alongside the stable deposit base..
Key concerns include Capital efficiency remains low: reported annualized ROE and the cited ROIC were both 3.6%, below the 5% capital-efficiency warning threshold and well below the 8% general ROE benchmark., Comprehensive income of ¥18.91bn materially exceeded net income of ¥4.10bn because of securities valuation gains. This strengthened equity but is market-sensitive and should not be treated as recurring operating profit., Q3 ordinary-income progress toward full-year guidance was 67.6%, below the 75% seasonal reference, requiring a comparatively stronger Q4 to reach the ¥8.50bn full-year forecast., Treasury stock increased by ¥2.99bn, or 38.7%, which supports shareholder-return flexibility but also reduces common equity available as a capital buffer..
Investment Implications
Key takeaways include Core earnings improved, with ordinary income up 15.5% and net income attributable to owners up 19.7% year on year., The banking segment is the core business, accounting for 97.1% of pre-elimination segment profit and delivering 20.1% profit growth., Net interest income rose 19.1%, but the 1.08% NIM indicates a thin structural margin and continuing funding-cost sensitivity., The implied 72.8% loan-to-deposit ratio reflects a balanced, deposit-funded lending structure., OCI-related securities valuation improvement materially strengthened equity, but this benefit is market dependent., The full-year forecast is achievable only with continued earnings delivery in Q4, especially at the ordinary-income level..
Metrics to watch include NIM and the spread between loan yields and deposit rates, Interest income growth relative to interest-expense growth, Capital adequacy ratio and risk-weighted-asset trajectory, Loan growth, deposit growth, and the loan-to-deposit ratio, Credit costs, non-performing-loan trends, and loan-loss allowance utilization, Securities valuation movements and OCI volatility, Q4 ordinary-income delivery against the ¥8.50bn full-year forecast, Dividend payout ratio and treasury-stock movements.
Regarding relative positioning, Yamagata Bank shows improving near-term earnings momentum and a conservatively funded loan-to-deposit profile, but its reported annualized ROE of 3.6%, 1.08% NIM, and supplied 4.7% capital adequacy ratio point to weaker capital efficiency and a more constrained risk profile than institutions achieving stronger spreads and double-digit capital ratios.