Annual Report
2009Year ended March 31, 2009

Hokuhoku Financial Group, Inc.

Company outline (as of March 31, 2009)
Company name: Hokuhoku Financial Group, Inc.
Date of establishment: September 26, 2003
Location of head office: 1-2-26 Tsutsumicho-dori, Toyama City
President: Shigeo Takagi (President, Hokuriku Bank)
Deputy President: Yoshihiro Sekihachi (President, Hokkaido Bank)
Purpose of business: Management and control of subsidiaries and affiliates and ancillary and related business
Capital: ¥70,895 million
Shares issued and outstanding:Common stock...................................... 1,391,630,146
Preferred stock (Type 1) ...................
50,000,000*
Preferred stock (Type 4) ...................
61,400,000*
Preferred stock (Type 5) ................... 107,432,000* Preferred Stock Type 1 and Type 4 were acquired and retired by 50,000,000 shares and 26,400,000 shares respectively on July 7, 2009. After retirement,
there are no issued shares of Type 1 and 35,000,000 outstanding shares of Type 4.

Exchange listings: Tokyo Stock Exchange (First Section)
Sapporo Securities ExchangeThis document contains forward-looking statements. Statements of this kind do not constitute guarantees of future performance, as factors such as changes in
the operating environment may cause actual performance to differ.
The figures stated in this document are, in principle, rounded down to the nearest whole unit.

CONTENTS

Profile .................................................................................................. 1
Message from the Management .......................................................... 2
Plan for Sound Management ............................................................... 4
Performance Highlights ....................................................................... 6
Corporate Governance ........................................................................ 10
Approach to Compliance ..................................................................... 13
Risk Management System ................................................................... 15
Corporate Social Responsibility ........................................................... 19
Topics ................................................................................................. 22
Financial Section ................................................................................. 25
Consolidated Financial Statements
Consolidated Balance Sheets ...................................................... 26
Consolidated Statements of Income ............................................ 27
Consolidated Statements of Changes in Net Assets .................... 28
Consolidated Statements of Cash Flows ..................................... 30
Notes to Consolidated Financial Statements ................................ 31
Independent Auditors’ Report .......................................................... 45
Nonconsolidated Financial Statements
The Hokuriku Bank, Ltd.
Nonconsolidated Balance Sheets (Unaudited) ......................... 46
Nonconsolidated Statements of Income (Unaudited)................ 47
The Hokkaido Bank, Ltd.
Nonconsolidated Balance Sheets (Unaudited) ......................... 48
Nonconsolidated Statements of Income (Unaudited)................ 49
Corporate Information.......................................................................... 50
Outline of Subsidiaries — Hokuriku Bank ............................................. 51
Outline of Subsidiaries — Hokkaido Bank ............................................ 52
Board of Directors and Corporate Auditors .......................................... 53........................................................................ 54

Profile
Since its establishment in 1877, Hokuriku Bank has developed an extensive network of branches throughout the Hokuriku
district. On account of trade through the Kitamae-bune or “Northbound Ships,” branches extended to the major cities of
Hokkaido, enabling the bank to meet customers’ needs. The Hokkaido Bank, which was established in 1951, has developed
a network of branches throughout Hokkaido, and built a firm business structure centered on individuals and small andmedium-sized enterprises.
The Hokuriku Bank, Ltd. and The Hokkaido Bank, Ltd. underwent management integration in September 2004 to form
the Hokuhoku Financial Group Inc., which today operates a super-regional financial network that encompasses the Hokuriku
region, Hokkaido, and Japan’s three major metropolitan areas (Tokyo, Osaka, and Nagoya areas).

May 2002

Comprehensive business alliance between
Hokuriku Bank and Hokkaido BankMay 2003

Agreement on full integration of management of
Hokuriku Bank and Hokkaido Bank

September 2003

Hokugin Financial Group, Inc. established
Hokuriku Bank Group comes under management of
Hokugin Financial GroupManagement integration effected through equity swap

September 2004

Hokuhoku Financial Group, Inc. is born.

The operations of the Hokuhoku Financial Groupextend beyond the limits of a single district.
Our extensive network is outlined below.

Hokkaido

Hokuriku district ............................................ 147 branches
Toyama prefecture .......................................... 90 branches
Ishikawa prefecture ......................................... 35 branches
Fukui prefecture............................................... 22 branches
Hokkaido ........................................................ 155 branches
Three major metropolitan areas of Japan ....
Tokyo and Kanagawa ......................................
Kinki (Osaka) and Nagoya ................................

17 branches
10 branches
7 branches

Other ..............................................................

4 branches

Overseas ........................................................
5 offices
Hokuriku district
Shanghai Representative Office (Hokuriku Bank)
Shenyang Representative Office (Hokkaido Bank)
Ishikawa
ToyamaSingapore Representative Office (Hokuriku Bank)Fukui
New York Representative Office (Hokuriku Bank)
Yuzhno-Sakhalinsk Representive Office (Hokkaido Bank)Tokyo(As of June 30, 2009)

Osaka

NagoyaThree major metropolitan areas

Hokuhoku Financial Group, Inc. Annual Report 2009

1

MESSAGE FROM THE MANAGEMENT(from left)

Shigeo Takagi
President(concurrently serving as president of
the Hokuriku Bank, Ltd.)

Yoshihiro Sekihachi
Deputy President(concurrently serving as president of
the Hokkaido Bank, Ltd.)First, we would like to thank all our stakeholders for their support the Hokuhoku Financial Group hasreceived over the years.
We hereby deliver our Annual Report 2009, in which we introduce our Management Policy, CSR
Initiatives, and financial results. We hope you will read this report and deepen your understanding of ouroperations and performance.
Our company was formed in September 2004 as a bank holding company through the management
integration of The Hokuriku Bank Ltd. and The Hokkaido Bank Ltd. We will see our fifth anniversary comearound this September, thanks to the warm relationship with our stakeholders.
We will make continuous effort to implement various measures in order to grow in tandem with ourcustomers, in the spirit of our corporate philosophy, which emphasizes mutual prosperity for our group andits operating regions.

We pursue further development of our business model
Pioneer of the “super-regional financial group”
formatOur Company was the first among regional banks to createa super-regional financial network extending beyond theboundary of a bank’s original home area. Since then, ourGroup has been aggressively pursuing the objectives of thebusiness integration — the strengthening marketing capabilities, increasing management efficiency, and cementing
customer loyalty. We have renewed our commitment torelationship banking, making it our top priority to meetcustomer needs while ensuring customer convenience during the entire management integration process. We intend
to leverage the brand power of our core banks — Hokuriku
Bank and Hokkaido Bank — to achieve greater harmonization of operations, with the aim of raising customer
satisfaction and convenience. Our unique business modelthrough management integration is expected to gain broad
acceptance in the near future among regional banks.
We have maximized utilization of our network as awide-area regional financial group. One of the areas inwhich we have been realizing results and differentiating
ourselves from others is business matching. The Hokkaido

2

Hokuhoku Financial Group, Inc. Annual Report 2009

Business Forum, sponsored by Hokkaido Bank since 1999,
was certified by the Hokkaido Bureau of Economy, Tradeand Industry as an enterprise that promotes cooperation
between local SMEs. We believe this official certification
constitutes public recognition of the various initiatives that
Hokkaido Bank has undertaken through the years.
The Hokuhoku Financial Group maintains one of thelargest overseas network among regional banks in East andSoutheast Asia. We have signed economic cooperationagreements with many overseas local governments, and byentering into business partnerships with overseas financial
institutions we are able to provide customized financial
services to the clients. In this way, we have been working toincrease our service menu.
In March 2009, we become the only Japanese bank to
open a representative office in the city of Yuzhno-Sakhalinsk
in the Russian province of Sakhalin. We also plan to open a
representative office in London by the end of the current term.
Leveraging our various networks, we aggressively provide local information to meet customer needs and support
their expansion into overseas markets, continually extending
the unique and sophisticated services as a regional bank.

Best among regional banks for making
relationship with customers the top priority
In the spirit of our corporate philosophy, which emphasizes
mutual prosperity for our Group and its operating regions,
we have built up close ties with customers and provide
quality banking service to win their confidence and support.
In response to the rapid deterioration in economic conditions, we are aggressively providing loans to SMEs under an
emergency guarantee program created by the government.
We also offer consultations for management on weekends
and holidays, and have set up an advisory service toprevent a chain of bankruptcies, while simultaneously
bolstering backup support for corporate revival throughour specialized departments within our headquarters. We
are also actively involved in various industry-governmentacademic collaborative projects targeting the developmentof new businesses and the promotion of local industries.
On the other hand, we are endeavoring to respond todiverse needs of our individual customers. We are in theprocess of expanding the number of “Personal Branches,”
which offer retail services solely for individual customers.
These offices contain quiet spaces where customers canconsult with our staff on asset management and mortgage
loans. We have also expanded our lineup of loan products
and our network of ATMs located in convenience stores.

Strategic allocation of human resources andbranches
To increase operational efficiency at our headquarters weare transferring staff to our retail branches, and are also
expanding the back-office functions shared by the twobanks. With regard to the number of branches, we haveundertaken a review of the role of each branch. At the timeof the management integration in 2004, there were a total of
255 branches. By March 31, 2007, the number of branches
had dropped to 246. We made utmost efforts to minimize
customer inconvenience by taking over the operations
performed by the Hokuriku and Hokkaido Banks. The twobanks also relocated branches to raise efficiency. We met
our goal of raising branch efficiency by March 2007, andreopened the branches deemed necessary for strengthening our retail capabilities.
Regarding bank staff, we have succeeded in maintaining
our marketing capabilities while simultaneously reducing thenumber of employees by curbing recruitment and making
greater use of part-time staffs. Our work force declined froma total of 4,506 employees in March 2007 to 4,289 at theend of March 2009, resulting in a more efficient marketing
structure. Since then, we have increased the number of
employees to enhance our competitiveness, and haveundertaken the direct hiring of agency part-time staffs.

Adoption of joint IT system
System costs are showing a strong upward trend, due tothe increase in the costs of ensuring uninterrupted service
while meeting user needs amid expansion in the productlineup, and the costs for the upgrading of risk management.
Thus, our Group agreed to develop “three-bank joint IT
system” with the Bank of Yokohama, and is preparing for its
launch in May 2011. Following the introduction of the new
system, we expect not only to cap rising system costs, butalso to accelerate the launch of new products and services.
We also expect to enhance customer convenience by
upgrading system functions. We additionally pursue further
efficiency through joint use of computer systems, including
subsystems of each bank.

Strengthening financial foundation
As the result of strictly applying risk management controls,
intensively implementing corporate revival measures, andfocusing on rehabilitation support for our customers, we
succeeded in lowering our non-performing loan (NPL) ratio
under the Financial Reconstruction Law from 7.85% on
September 30, 2004 to 3.07% on March 31, 2009.
We worked steadily to retain earnings and implemented
recapitalization measures, including the issue of subordinated bonds and a capital increase through public offerings.
As a result, our capital ratio rose from 8.00% in September
2004 to 10.81% in March 2009.
In May 2008, Rating & Investment Information, Inc. (R&I)
gave Hokuhoku Financial Group, the Hokuriku Bank and the
Hokkaido Bank, a credit rating of “A” (single A flat). We takethis as recognition of the effectiveness of the measures wehave implemented to date.
We have continually raised our dividend payments
over the past few years, and decided to raise the annual
dividend payment term by 0.50 yen to 3 yen for the fiscal
2008, although we have not yet reached a satisfactory level.
The current difficult operating conditions are expected topersist. Nonetheless, we promise to make concerted efforts
to further raise the Group’s corporate value, by maintaining
the high degree of trust from our customers through ourstaunch commitment to relationship banking.
July 2009

Shigeo Takagi
President

Yoshihiro Sekihachi
Deputy President

Hokuhoku Financial Group, Inc. Annual Report 20093

PLAN FOR SOUND MANAGEMENT
Working to achieve stable earnings, with the goal of repaying public funds
Based on the Law on Emergency Measures to Revitalize the Functions of the Financial System, the Company issued a totalof ¥120.03 billion in preferred stock, which was placed to the specified partner bank. After strengthening our marketing
capabilities, increasing management efficiency, and cementing customer loyalty under our Plan for Sound Management, webought back a portion of this preferred stock in the amount of ¥35 billion in August 2007 and in the amount of ¥25 billion inJune 2008, leaving a balance of public funds for repayment in the approximate amount of ¥59.9 billion.
The combined balance of retained earnings for Hokuhoku Financial Group, Inc. on a non-consolidated basis, Hokuriku
Bank and Hokkaido Bank, from which repayments will be made, totaled ¥138.2 billion, a sufficiently high level for thispurpose. In July 2009, we additionally bought back a portion of this preferred stock in the amount of ¥40 billion, making aremaining balance of public funds the approximately ¥19.9 billion. We aim for full repayment as quickly as possible, considering making every effort to support local business partners under unprecedented economic crisis.
Summary of the Preferred Stock issued by the Company (as of July, 2009)
Type
Total amount issued
Issue price
Balance
Dividend (payout ratio)
Acquisition priceDate for mandatory
acquisition

Preferred stock (Type 4)
35 million shares¥570 per share¥19.95 billion¥6.62 (1.16%)¥223.40 (on and after August 1, 2009; subject to change according to the market price* of ordinary shares ofcommon stock of the Company)
August 1, 2009

Note: The term “market price” here refers to the average closing price of the Company’s common stock on the Tokyo Stock Exchange over a 30-trading-day
period beginning with the trading day 45 trading days prior to date for mandatory acquisition.

Balance of public funding to be repaid
10.44%

10.39%

7.74%

7.48%

10.81%(%)
Balance of retained earnings(Hokuhoku Financial Group Inc. + Hokuriku Bank + Hokkaido Bank)

9.00%
8.00%

6.01%

140.0

8.33%

6.47%
5.95%

Tier I capital ratio(Hokuhoku Financial Group Inc., on a consolidated basis)

140.0
120.0

40.3

Capital ratio(Hokuhoku Financial Group Inc., on a consolidated basis)

7.58%

46.3

68.1

133.9
120.0
102.4 85.0

In July 2009, the Group made a repayment of publicfunds in the amount of ¥40 billion, causing the remainingbalance to decline to approximately ¥19.9 billion.

138.2
59.9

End of Sep. End of Mar. End of Mar. End of Mar. End of Mar. End of Mar.
2004
2005
2006
2007
2008
2009

(¥ billion)* Calculated in accordance with the current BIS standards (Basel II).
Up to and including the term ended March 2006, however,the previous BIS standards were employed to calculate the Group’s
capital ratios.

In our Plan for Sound Management, we are reorganizing our operations to further improvement of profitability, efficiency andsoundness. We have set numerical targets and policies for every year until the year ending March 2012.
In the year ended March 31, 2009, ordinary profits and net income both fell short of targets due to an increase in credit
costs as corporate results wilted amid economic slowdown in Japan and overseas under the impact of ongoing turbulencein world financial markets, and to increased impairment losses on marketable securities caused by the stock market slump.
Against this backdrop, we have set aside retained earnings in the amount of ¥138.2 billion as a source for repaymentof public funding. Our financial position is now secure enough for this purpose. Looking ahead, we will continue to takemeasures to bolster our earnings base through greater efficiency. Assuming that the public loans are all repaid, we will betaking active steps to improve our customer services and strengthen our marketing capabilities with the aim of consolidating
the trust of our customers and the financial markets.

4

Hokuhoku Financial Group, Inc. Annual Report 2009

Profitability, Efficiency and Soundness under Plan for Sound Management
Remaining a leader in earnings capability among regional banks(Earnings forecasts for the year ending March 31, 2010)
Core net business profit: ¥74.5 billion, Net income: ¥28.5 billion* As macro-economic changes have been more severe than we had assumed when preparing our initial targets, we have lowered targets for the year ending
March 31, 2010 to the above levels.

We have already secured the means of repayment for public funding
Retained earnings as of March 31, 2009: ¥138.2 billion

Increase investment in a strategic joint computer project with our subsidiary banks and the
Bank of Yokohama (launch planned for May 2011).
Remain one of the leaders among regional banks in OHR

Establishing a stable financial position(Target after repayment of public funding)
Capital ratio on a consolidated basis: 9%
Tier I ratio on a consolidated basis: 6%

Income (Hokuriku Bank + Hokkaido Bank)

Gross business profit
Expensesof which costs of computerization totaled(OHR)
Net business profit
Core net business profit
Total credit costs
Ordinary income
Net income

March 2009
(Projected)
173.0
93.0
14.4
(53.76%)
79.9
81.5
28.0
44.0
49.0

(¥ billion)

March 2009
165.7
91.5
13.6
(55.21%)
76.7
76.8
35.5
21.3
37.9

March 2010
(Projected)
177.8
95.0
16.5
(53.45%)
82.7
82.7
22.0
58.7
34.7

March 2011
(Projected)
180.3
95.6
16.9
(53.02%)
84.7
84.7
22.0
60.1
35.3

Balance of retained earnings (Hokuhoku Financial Group, Inc. + Hokuriku Bank + Hokkaido Bank)

Balance of retained earnings

March 2009
(Projected)
149.3

March 2009
138.2

March 2012
(Projected)
182.9
95.2
16.5
(52.03%)
87.7
87.7
22.0
63.4
37.3

(¥ billion)

March 2010
(Projected)
175.6

March 2011
(Projected)
202.7

March 2012
(Projected)
230.9

March 2010
(Projected)
10.74%
7.85%

March 2011
(Projected)
10.92%
8.27%

March 2012
(Projected)
11.05%
8.70%

Capital ratio (Hokuhoku Financial Group, Consolidated)

Consolidated capital ratio
Tier I capital ratio

March 2009
(Projected)
10.47%
7.45%

March 200910.81%
7.58%

OHR = Expenses/Gross business profit
Core business profit = Net business profit + Provision for general allowance for loan losses – Gains (losses) related to bonds
Credit costs includes transfer to allowance for loan losses
Balance of retained earnings = Retained earnings – Legal reserve

Hokuhoku Financial Group, Inc. Annual Report 2009

5

PERFORMANCE HIGHLIGHTS
Summary of Operations (Hokuhoku Financial Group, Inc.; on a consolidated basis)(¥ billion)

FY2008FY2007

Ordinary income
Ordinary profits
Net income

239.6
21.3
37.0

Change(21.6)(44.9)
(1.6)

261.2
66.3
38.6

Capital ratio

10.81%+0.42%

10.39%In the fiscal year ended March 31, 2009, Hokuhoku
Financial Group recorded ordinary income of ¥239.6 billion,a decrease of ¥21.6 billion year-on-year on a consolidated
basis. Ordinary profits declined ¥44.9 billion year-on-year to¥21.3 billion, and net income fell ¥1.6 billion to ¥37.0 billion.
Our capital ratio stood at 10.81% at the term-end on aconsolidated basis, an increase of 0.42 percentage pointfrom the previous term-end.

Summary of Operations (Hokuriku Bank and Hokkaido Bank)(¥ billion)

Hokuriku Bank (including Hokugin Corporate)and Hokkaido Bank
FY2008FY2007
ChangeOrdinary income
218.8(18.8)
237.6
Core gross business profit
168.6(10.3)
178.9
Expenses
91.5
1.6
89.9
Core net business profit
77.0(11.9)
88.9
Credit costs
33.9
9.1
24.7
Loss on marketable securities(17.7)(17.0)(0.6)
Ordinary profits
23.1(43.1)
66.2
Net income
39.7
(0.4)
40.2

Owing to a decline in income from sales of investment trusts
amid a slump in this market, and a slowdown in foreignexchange transactions, as well as an increase in expenses
due to investment in a new computer system, the banking
subsidiaries recorded a year-on-year decline of ¥11.9 billion
in core net business profit to ¥77.0 billion.
Ordinary profits declined ¥43.1 billion to ¥23.1 billion
due to increases in credit costs and realized and unrealized
losses on marketable securities, caused by the turbulencein financial markets and a dramatic worsening in the real
economy. Net income came in at ¥39.7 billion, a slight
year-on-year decline, due partly to the decrease in deferredincome taxes.

(¥ billion)(¥ billion)

6

Ordinary income
Core gross business profit
Expenses
Core net business profit
Credit costs
Ordinary profits
Net income

Hokuriku Bank
(including Hokugin Corporate)
FY2008FY2007
Change124.5(17.0)
141.5
95.0(10.6)
105.6
51.3
0.2
51.1
43.6
(10.8)
54.5
19.8
0.2
19.6
10.6
(26.1)
36.7
28.2
5.8
22.3

Capital ratio

10.23%

Hokuhoku Financial Group, Inc. Annual Report 2009

+0.13%

10.10%

Hokkaido Bank
FY2008FY2007

94.3
73.5
40.2
33.3
14.0
12.5
11.4

Change
(1.7)
0.3
1.3
(1.0)
8.9
(16.9)
(6.3)

96.0
73.2
38.8
34.4
5.1
29.4
17.8

10.45%+0.32%

10.13%

Core gross business profit (Hokuriku Bank (including Hokugin Corporate) and Hokkaido Bank)
Net interest income
Net fees and commissions
Non-interest income ratio

175.0
7.6

180.8
13.2

181.8
12.6

178.9
11.6

26.3

29.2

31.8

30.5

Others

(%)
168.6
11.0

● Core gross business profit = net interest income + net fees andcommissions + other net operating income; Equivalent to gross profit
margin in the case of companies other than banks.

23.8
23.46%

24.50%

23.54%

141.0● Net interest income = income from interest on loans, deposits, receivable bonds and dividends on equity shares, after deduction of interest
on deposits

20.69%

19.40%

138.4

137.3

136.8

Core gross business profit declined ¥10.3 billion year-onyear to ¥168.6 billion, owing to declines in interest income
and net fees and commissions.

● Net fees and commissions = fees and commissions received relating
to remittance, investment trust and insurance sales agency businesses
after deduction of corresponding expenses

133.7● Other net operating income = income from foreign exchange transactions and derivatives transactions(¥ billion)
Years ended
March 31

2005

2006

2007

2008

2009

● Non-interest income ratio = Non-interest income as a percentage ofcore gross business profit

Expenses (Hokuriku Bank (including Hokugin Corporate) and Hokkaido Bank)
Hokuriku Bank

Hokkaido Bank

OHR

91.5

Expenses increased by ¥1.6 billion to ¥91.5 billion for thereporting term, as a result of increased personnel expenses
to build up sales capability and investments in new computer systems.

51.3● Expenses = Personnel expenses + non-personnel expenses + taxes
Equivalent to selling, general and administrative expenses in the caseof companies other than banks

54.31%
50.95%

89.2

51.6

48.99%

48.39%

88.6

88.0

50.9

50.5

(%)

50.29%

89.9

51.1● OHR = Expenses divided by core gross business profit
This index shows a bank’s efficiency at realizing profits with a small
outlay (expenses); the lower the figure the better.
37.5

37.7

37.4

38.8

40.2

2005

2006

2007

2008

2009

(¥ billion)
Years ended
March 31Core net business profit (Hokuriku Bank (including Hokugin Corporate) and Hokkaido Bank)
Hokuriku Bank

0.98%

Hokkaido Bank
1.02%

ROA

1.03%

(%)
0.96%

92.2

93.8

85.8

88.9

0.80%
77.0

51.9

55.2

56.5

54.5

● Core net business profit = core gross business profit minus expenses
Equivalent to operating income in the case of companies other thanbanks, this indicates a bank’s achievements in its core banking field.

43.6

33.8

37.0

37.2

34.4

33.3

2005

2006

2007

2008

2009

Core net business profit declined ¥11.9 billion year-on-yearto ¥77.0 billion, due to a lower level of core gross business profit and higher expenses. Return on assets (ROA)
remained at one of the highest levels among Japan’s
regional banks.

● ROA = Core net business profit divided by total assets (average for the term)This figure indicates the effectiveness of employment of assets in thegeneration of profits; the higher the figure the better.
(¥ billion)

Years ended
March 31

Hokuhoku Financial Group, Inc. Annual Report 20097

PERFORMANCE HIGHLIGHTSNet income (Hokuriku Bank (including Hokugin Corporate) and Hokkaido Bank)
Hokuriku Bank

Hokkaido Bank

39.7

29.0

18.9

Net income was flat year-on-year at ¥39.7 billion, due partly
to a decline in deferred income taxes.

40.2

39.7

22.3
28.2

15.6
15.2
4.1
20.7
11.1

13.4

2005

2006

17.8
11.4
(¥ billion)

Years ended
March 31

2007

2008

2009

Loans and bills discounted (Hokuriku Bank
(including Hokugin Corporate) and Hokkaido Bank)

Deposits (Hokuriku Bank and Hokkaido Bank)
Hokuriku Bank

8,326.0

4,942.7

Hokuriku Bank

Hokkaido Bank

8,216.4

4,836.6

8,434.6

4,917.4

8,407.4

4,909.1

Hokkaido Bank

8,671.5
7,156.7

6,538.9

6,706.2

6,839.7

6,897.6

3,999.4

4,110.4

4,146.7

4,210.7

4,293.3

2,539.4

2,595.7

2,692.92,686.8

2,863.4

2005

2006

2007

2008

2009

5,040.0

3,383.3

3,379.7

3,517.2

3,498.3

3,631.4

2005

2006

2007

2008

2009

(¥ billion)(¥ billion)
End of March

End of March

Formerly, Hokuriku Bank included RMBS (residential mortgage-backed securities) in the general category ofloans and bills discounted, but with effect from fiscal 2005 these have been included in “call loans and bills
bought.” To enable comparisons, figures for prior years are shown after deduction of RMBS.

Capital ratio (Hokuriku Bank)
Capital ratio

Capital ratio (Hokkaido Bank)

Tier I capital ratio

Capital ratio

Tier I capital ratio(%)
10.10%
8.42%

8.86%

9.91%

10.13%

10.45%

9.16%
8.50%
6.94%

5.96%

(%)

10.23%

7.37%

7.28%

7.14%

7.74%

7.27%

6.59%

6.39%

5.96%

5.38%

End of March

2005

2006

2007

2008

2009

End of March

2005

2006

2007

2008

2009

● Capital ratio
This ratio indicates the proportion of the bank’s regulatory capital (capital stock, capital surplus, retained earnings and supplementary elements) to its
risk-weighted assets. The higher the ratio, the healthier its financial position.
● Tier I capital ratio
This ratio indicates the proportion of a bank’s Tier I capital (the basic element of regulatory capital; basically capital stock, capital surplus, and retained
earnings) to its risk-weighted assets (principally loans). The higher the ratio, the healthier its core banking operations.

8

Hokuhoku Financial Group, Inc. Annual Report 2009

Credit costs (Hokuriku Bank (including Hokugin Corporate) and Hokkaido Bank)
Hokuriku Bank

Hokkaido Bank

Credit cost ratio

Total credit costs increased ¥9.1 billion year-on-year to¥33.9 billion, reflecting an increase in bankruptcies due tothe rapid deterioration in the Japanese economy.

(%)

0.90%

0.73%

● Credit costs = amount of bad debt disposal + provisions to allowancefor possible loan losses

59.4

0.38%

0.36%

25.6

24.7

22.0

19.6

42.6

33.9
34.7

Years ended
March 31

● Credit cost ratio = total credit cost divided by average loan balanceThis index compares credit costs with the balance of outstandingloans.

0.48%

47.7

16.8

12.9

2005

2006

3.6

5.1

2007

2008

19.8

14.0

(¥ billion)

2009

Bad debt subject to mandatory disclosure under the Financial Reconstruction Law(Hokuriku Bank (including Hokugin Corporate) and Hokkaido Bank)
Bad debt (officially “claims”) subject to mandatory disclosure
under the Financial Reconstruction Law came to ¥227.5 billion, a decrease of ¥33.2 billion from the previous term-end.
The NPL ratio under the Law stood at 3.07%, down 0.57
percentage points from the previous term-end.
Bankrupt and quasi-bankrupt assets
Substandard loans

Doubtful assets
NPL ratio

6.83%
(%)

● Assets (claims) subject to mandatory disclosure under the Financial
Reconstruction Law: The bank classifies both loans and other assets inline with the stipulations of the Financial Reconstruction Law.
● Assets subject to disclosure: loans, customers’ liabilities for acceptances and guarantees, foreign exchanges, accrued interest, suspense
payments, securities loaned, private bonds with the Bank’s own
guarantees (regarding claims on obligors requiring caution, loans andprivate bonds with the Bank’s own guarantees only)
Bankrupt andquasi-bankrupt
assetsThis category is defined as the sum of claims
on bankrupt borrowers and effectively bankrupt
borrowers

Doubtful assets

This category is defined as claims on potentiallybankrupt borrowers under asset self-assessment.
The execution of contracts on repayment of
the principal and payments of interest is highly
doubtful.

Substandard
loans

This category is defined as claims on borrowers
requiring caution under asset self-assessment.
This category comprises past due loans (threemonths or more) and restructured loans underthe Banking Law.

5.76%
474.9
85.7

399.9

4.43%

61.6
315.0
58.5

256.5

3.64%
260.7

3.07%

63.6

253.4

227.5
70.0

● NPL ratio: Indicates NPLs (under the Financial Reconstruction Law) asa percentage of total credit. The lower the ratio, the sounder the credit
portfolio.

194.4
149.3
140.3
132.7
End of March

2005

84.9

62.0

47.8

17.1

2006

2007

2008

2009

(¥ billion)

Bad debt coverage
Unclassified
Claims: ¥7,171.1 bn
Total credit atMarch 31, 2009:¥7,398.6 bn

Assets subject
to disclosure:¥227.5 bn

Assets subject to disclosure

Method of coverage

Coverage ratio

Bankrupt andquasi-bankrupt assets¥70.0 bn

Allowance: ¥13.9 bn
Collateral & guarantees:¥56.1 bn100%

Doubtful assets¥140.3 bn

Allowance: ¥37.9 bn

86.90%
Collateral & guarantees:¥83.9 bn

Of the total of ¥227.5 billion in assets subject to mandatory disclosure
under the Financial Reconstruction Law, ¥145.8 billion were coveredby collateral or guarantees, and ¥55.5 billion were covered byallowance for possible loan losses.The overall coverage ratio as ofMarch 31, 2009 was thus 88.51%, indicating a sufficiently soundfinancial position has been maintained.

Substandard loans¥17.1 bn

Allowance: ¥3.6 bn
Collateral & guarantees:¥5.7 bn

Overallcoverage ratio:
88.51%

54.72%

Hokuhoku Financial Group, Inc. Annual Report 20099

CORPORATE GOVERNANCE
We will strengthen our system of corporate governance and increase
management transparency.
Basic approach
The holding company and all its member companies regard strengthening and upgrading corporate governance as a management priority. We have drawn up a basic policy — our management philosophy — covering all our activities from management
strategy-setting and decision-making down. We share basic values and philosophies through the Hokuhoku Financial Group
Code of Conduct, for the increased corporate value and the further economic development of Hokuriku and Hokkaido.

Corporate governance
We have established a decision-making system with
the Shareholders’ Meeting and Board of Directors at
the top, enabling quick decision-making, as day-to-day
operational authority has been delegated. Bodies such as
the Management Committee are able to respond quickly to
specific and detailed matters based on basic policies set
by the Board of Directors. Furthermore, in addition to theManagement Committee, a Market Strategy Committee,
which works to disseminate information on the operation

policy throughout the Company, and a Management
Advisory Committee, which is composed of independent
specialists and is responsible for checks and follow-up of
the Plan for Sound Management, have been established.
In this way we have built a system for effective decisionmaking, implementation, evaluation, and improvements.
In addition, the Board of Directors decides basic policies
on internal controls, and is taking the steps needed tocreate an effective internal control system.

Hokuhoku Financial Group, Inc.
Shareholders’ Meeting

Management Advisory Committee

3 external auditors

Members: 4 external experts, 2 group auditors
Aim: Check and follow the execution of plan for soundmanagement, advise to management

Internal Audit
Execution

Market Promotion Committee
Members: Group directors + subsidiary presidents
Aim: Implementation of management policy, understand businessenvironment and give indication

Planning Groupof

1 external director

Board of Directors

PDCA

Management Committee

Administration Group

Risk Management Group

Hokuriku BankManagement Advisory
Committee
Advises to theManagement

Board of Auditors

Audit Group

Hokkaido Bank
Other
Subsidiaries

Shareholders’ Meeting
Board of Auditors

Shareholders’ Meeting
Board of Auditors

Board of Directors

Management Advisory
Committee
Advises to theManagement

Board of Directors

Management Committee

Management Committee
Each bank sends
executives to serveon the other’s Board.

1. Board of Directors
Responsible for decisions related to important management
policies involving the Group as a whole; and for overseeing
the general management, and risk management and auditing
conducted by the holding company and its subsidiaries.
2. Board of Auditors
Determines auditing policies and assigns specific duties toparticular statutory auditors, and monitors the performance of
their duties by the directors.
3. Management Committee
Composed of standing directors of the Company, this bodymakes decisions — based on the basic policies laid down by
the Board of Directors — on matters relating to operational

10

Hokuhoku Financial Group, Inc. Annual Report 2009

policies involving the entire Group and on the implementation ofimportant tasks by specific divisions.
4. Management Advisory Committee
Responsible for improving the transparency of Group management and increasing the precise implementation of the Planfor Sound Management by reflecting proposals made from a
specialist’s point of view in management.
5. Market Promotion Committee
Composed of the executive directors and presidents of subsidiaries; is responsible for disseminating important management
policies and similar items throughout the Group and for
ensuring that business policy implementation reflects executive
decisions by verifying each member’s management situation.

Basic policy on internal controls
1. Ensuring that Directors perform their duties in conformity
with the law and with our articles of incorporation
In addition to settling matters involving the law or the articles
of incorporation, the Board of Directors decides on basic
management policy and major issues affecting conduct ofoperations, sets up organizations and systems, and supervises
performance of duties by directors. It also recommends
external directors for appointment at Shareholders’ Meetings,
and ensures more rigorous checks and balances.
Corporate Auditors attend important meetings including
those of the Board of Directors, investigate the Company’s
operations and financial position, and audit the performance of
duties by directors from an independent standpoint.
2. Storage and management of information relating toperformance of duties by directors
Based on its own regulations and document management
rules, the Board of Directors creates systems for storage andmanagement of information regarding performance of duty bydirectors.
3. Other systems: Rules regarding management of risk oflossesThe Board of Directors decides on basic risk management
policy and regulations, and establishes management systems,
based on an assessment of the degree of risk to which theCompany and Group companies are exposed, and of thesignificance of risk-control measures. We have compiled on acontingency plan and established a crisis management system
for unexpected events and risk such as natural disasters.
Each company in the Group conducts due risk management in close partnership with risk management departmentsof other Group members, based on the Group’s basic policy.
4. Ensuring efficient performance of duties by directors
The Board of Directors sets overall organizational standards forbasic tasks and assignment of duties to operational entities,
and the Company and all Group members have systems
enabling well-organized and efficient conduct of business
operations.
The Management Committee coordinates business operations in a prompt and effective way, based on delegation of
authority and assignment of duties by the Board of Directors.
To this end, it makes active use of teleconferencing andother telecommunications-based systems.
5. Ensuring that employees conform the law and the articles
of incorporation in the performance of duties
We regard compliance as one of our most important management tasks and recognize that an incomplete compliancesystem could weaken our business foundation. In view of this,we have established a set of rules to serve as a basic policy
and compliance charter.
Based on the above charter, the Company and Group
members carry out their business in partnership, in a fair andhonest way.

The Company has no connections with criminal elementsthat threaten public order or security, and avoids all businessdealings with such groups.
If any cases of unlawful or wrongful behavior are uncoveredby managerial staff members or other employees, they should
be reported using our whistleblower/consultation hotline.
6. Ensuring the appropriateness of operations within theGroup
The Board of Directors is responsible for overall Groupmanagement, compiling the Group management regulations,preparing frameworks for agenda-setting and reporting foreach Group company with regard to important matters, andreceiving reports from internal auditing departments on thefindings of audits into the status of legal observance and risk
management and the propriety and effectiveness of business
operations.
We also have in place mechanisms to ensure the propriety
of financial reporting, enabling accurate and clear statements ofour financial position and business results.
7. Deployment of employees as assistants to Corporate
Auditors
When receiving a request from a Corporate Auditor for help
in the conduct of auditing duties, the Board of Directors
shall respect the auditor’s views and provide the necessary
personnel based on expertise required. In addition, to ensure
the independence of these employees vis a vis the Board of
Directors, prior agreement of the Board of Auditors is requiredfor personnel transfers and disciplinary measures.
8. Reporting by the Board of Directors and employee
assistants to the Corporate Auditors, and other reportingto the Corporate Auditors
Directors shall submit reports to the Corporate Auditors as
follows.
(1) Directors shall report to the Board of Auditors whenevermatters that could cause significant losses to the Company
are discovered.
(2) An effective and flexible reporting system shall be established for reporting to the Board of Auditors by directors andemployees, on the matters designated in advance by the
Corporate Auditors and directors.
(3) The Corporate Auditors may request reports from the directors or employees as needed.
9. Ensuring effective auditing by Corporate Auditors
The Board of Directors shall give due acknowledgement to
the importance and usefulness of auditing by the Corporate
Auditors, and if the Corporate Auditors request creation of asystem for smoother and more effective performance of auditing duties, they shall give this due consideration. The Board
of Auditors shall conduct regular meetings with representative
directors and accounting auditors.

Hokuhoku Financial Group, Inc. Annual Report 200911

CORPORATE GOVERNANCE

To ensure sound management of the Group,
we are strengthening our internal auditing
Basic philosophy
The Group believes that establishment of internal auditing mechanisms that effectively meet requirements regarding scaleand nature of operations, regulations applied to the Group’s businesses and categories of risk, are indispensable for due
legal observance by the Group, protection of customers’ interest and risk management. Based on this conviction, the Groupand its main banks (The Hokuriku Bank, Ltd. and The Hokkaido Bank, Ltd.) have established an internal auditing department.
The internal auditing department of each Group member is guaranteed to work independently from other departments,
with its mechanism of checks and balances.

Groupwide Measures
The Company has established an Audit Group to verify
the appropriateness and effectiveness of the internal
auditing of each Group member and to coordinate theirinternal audit activities. In line with basic policy and rules
on internal audits compiled by the Board of Directors, theAudit Group carries out internal audits on the Company andits (non-banking) subsidiaries and affiliates, and receives
reports from Hokuriku Bank and Hokkaido Bank on resultsof internal audits and matters requiring improvement
measures. Furthermore, when necessary, it carries out
integrated assessment and management of the status ofinternal auditing for the whole Group through on-site bankinvestigations, guidance and reports.
Results of internal audits at Group companies are

12

Hokuhoku Financial Group, Inc. Annual Report 2009

periodically reported to the Board of Directors promptly whenneeded. In particular, mechanisms are in place for prompt
reporting to the Board of Directors of events that could havesignificant impact on the management of the Group.
Based on the basic policy and rules for internal auditingat each bank, audits are also carried out at Hokuriku Bankand Hokkaido Bank into the operations and assets of theirhead offices, branches and subsidiaries. In conducting
audits, internal audit plans are made (in terms of frequency
and depth) after assessments of legal observance, protection of customer interest and risk management at eachdepartment audited.
When necessary, the audit departments of both banks
and the Audit Group of the Company conduct joint audits,in order to strengthen and streamline overall Group auditing.

APPROACH TO COMPLIANCE
Ensuring more rigorous observance of laws and social norms
Basic policy
The Company regards compliance as one of our most important management priorities and recognizes that an incomplete
compliance system could weaken our business foundation. Therefore, we are implementing a basic compliance policy as
described below, to ensure our business activities are fair and honest.

SystemTo establish a compliance system, the Group has put inplace organizational structures and arranged joint measuresby the Group and each member company.
The Risk Management Group has been designatedas the Compliance General Department responsible foroverseeing compliance within the Group, and the head of
the Risk Management Group leads the Compliance General
Department.
Compliance officers are deployed to each branch ofsubsidiary banks and each Group member company,
to implement training and awareness-raising policies
regarding compliance in the workplace. Subsidiary banks
have established Compliance General Departments andcompliance committees, whose brief is to assess progressin compliance measures and make improvements.

Basic policy on compliance
1. Recognition of the Group’s basic mission and social
responsibilities
As a regional financial institution, the Group recognizes
its public duties and social responsibilities and strives togain greater trust through the conduct of sound business
operations.

2. Providing quality financial services
By providing high-quality, integrated financial services,
the Group will contribute to the stable economic andsocial development of the operating regions and to abetter life for its customers.
3. Strict observance of laws and regulations
The Group strictly observes all relevant laws and regulations, and conducts business in a trustworthy and honest
way that conforms to its own standards of corporate
ethics and to social norms.
4. Elimination of ties with criminal elements
The Group contributes to a healthy society by resolutely
refusing to associate or work with persons known to beconnected with organized crime.
5. Ensuring management transparency
The Group aims for a highly transparent management
and organizational culture, and aims for accurate disclosure and swift decision-making.

Hokuhoku Financial Group, Inc.
Board of Directors
Corporate Auditors, Board of Auditors
Management Committee
Compliance General Department

Hokuriku Bank

Risk Management Group

Other subsidiaries

Board of Directors

Management Committee

Hokkaido Bank

Board of Directors

Corporate Auditor
Board of Auditors

Audit Group

Corporate
Auditor (s)President

Compliance Committee

Board of Directors
Corporate Auditors
Board of Auditors
Management Committee
Compliance Committee

Compliance OfficeCompliance General Department

Compliance Department

Compliance officers, etc.

Compliance officers, etc.

Compliance manager

Hokuhoku Financial Group, Inc. Annual Report 200913

APPROACH TO COMPLIANCE

Compliance manual and compliance program
To ensure rigorous compliance, we have compiled a compliance manual laying down basic standards. We also plan
our Compliance Program every year as an actual action
plan, thus we have made our compliance system work
effectively and have improved understanding of complianceissues among executives and regular staff alike.

Customer protection and measures toincrease customer convenience
To protect customers’ assets, information and otherinterests, the Group has a clear policy, and has compiled a
protocol, based on the following five considerations.
The Compliance General Department of every Group
member is the office responsible for overall managementof customer protection. Compliance officials at each Group

Basic rules of management ofcustomer protection

14

member work in partnership for ongoing review of management systems, problem resolution and data analysis,through which various improvement policies may be drawn
up and implemented.

Measures for protection of personal information
We are committed to protecting personal informationin the custody of the Banks, by abiding by the Personal
Information Protection Act, ensuring that such information
is protected in an appropriate way, and taking measures toprevent data leakage.
The Group has also compiled a declaration and policy
on protection of personal information, which is disclosed
on our website. We aim to maximize customer trust as afinancial institution that can contribute to regional society.

Policies for management of customer protection

Explaining to the customer

In line with the law and regulations, we will provide adequate explanation of financial products
and sufficient information to enable our customers to fully understand the nature of our products.

Customer service support

We will listen carefully to customer complaints and give advice in an appropriate way.

Protection of customer data

Information concerning customers shall be acquired in a lawful way and securely managed.

Outsourcing

In outsourcing operations relating to transactions with customers, we will duly supervise
suppliers to protect customer information and interests.

Conflict of interest

We will take measures to avoid prejudicing customer interests in transactions with us, and takedue measures where the risk of interest conflict arises.

Measures to deal with criminal elements

Measures to deal with financial crime

To continue to justify the trust of the public, and offer
appropriate and sound financial services, the Group has
established a basic policy on dealing with criminal elements, and have deployed officers to address the issue oforganized crime syndicates. We are determined to avoid allcontact with such groups.

In recent years, bank card theft and “furikomi” (phishing)fraud cases have increased. To nip this problem in the bud,the Group has strengthened security measures and, basedon legislation mandating relief for victims of bank-cardfraud, reimburses victims of such scams.

Hokuhoku Financial Group, Inc. Annual Report 2009

RISK MANAGEMENT SYSTEMThe Group is striving to build a risk management system appropriate
for risks to which it is exposed.
Hokuhoku Financial Group’s general risk management system
Financial services are becoming more diversified and complex, and financial institutions are exposed to a wide range of risk.
We at Hokuhoku Financial Group recognize that risk management — protecting customer deposits and justifying the trust ofshareholders and creditors — is one of our most important management tasks for ensuring sound operations and earnings
growth, and have in place a risk management system.
Each Group company has created a risk management department with its own set of rules, and the Group as a whole isworking toward integrated risk management through close cooperation between these departments.
We have established asset liability management committees and general risk management committees at our subsidiarybanks, which have the highest risk exposure within the Group. At the subsidiary banks, we have categorized risk for management purposes as follows: credit risk, market risk, liquidity risk and operational risk, with operational risk further divided
into administrative and system risk, and micro-managed primarily by dedicated operating risk panels.
As the risk management general department for the entire Group, the Risk Management Group at the parent company,
bases its activities on the scale and type of risk faced by each Group member. After receiving risk management status
reports, the department duly issues instructions to each Group member, and delivers reports outlining response policies
regarding risk status and issues faced by the Group to the Board of Directors and other senior management. In this way,soundness of operations is assured.
Hokuhoku Financial Group, Inc.

Board of Directors
Corporate Auditors, Board of Auditors
Management Committee
Risk Management Group

Audit Group
Other Subsidiaries

Hokuriku Bank
Hokkaido Bank

Board of Directors
Corporate Auditor, Board of Auditors
Management Committee

ALM Committee

General Risk Management Committee
Operational Risk Subcommittee

Market risk

Liquidity risk

Allocation of risk capital
To ensure that risk exposure does not become excessive
compared with our capital position, the Group applies a unified set of benchmarks to each category of risk to appraise
and manage exposure.
Risk at the subsidiary banks is divided into credit risk,
market risk and operational risk. By numerically quantifying
risk, estimates are made of maximum potential losses. To
ensure effective use of limited capital resources, risk capital
allocations are undertaken using Tier I portions of thebanks’ regulatory capital as the source of funding. Risk isthen controlled and managed within a range permissible inbanking operations.
We also take account of risk that could arise at otherCredit risk

Operational risk

subsidiaries than banks, ensuring that risk never becomes
excessive compared with total regulatory capital on agroupwide basis.
Tier II

Exclusion items: expected losses – reserves
Excess: Provisions for other risk at subsidiaries
other than banks

Exclusion
items
ExcessMarket risk

Tier I
Risk capital
allocation
at subsidiarybanks

Regulatory
capital

Source offunding

Market risk
Credit risk
Credit risk
Operational risk

Operational risk

Risk capital
allocation at
subsidiary banks

Risk level at
subsidiary banks

Hokuhoku Financial Group, Inc. Annual Report 200915

RISK MANAGEMENT SYSTEM

Credit risk management
Basic policy
Credit risk is the risk that, as a result of such factors as the deterioration of a customer’s business situation, it will become
impossible to recover principal or receive interest as initially contracted. For banks, whose role is to act as financial intermediaries, this is an unavoidable risk, but in Hokuhoku Financial Group, we endeavor to maintain and enhance asset soundness
through the development and strengthening of a management structure for credit risk.

Management system
To maintain and enhance soundness of each asset
portfolio, we apply unified system of internal ratings andasset self-assessment at both subsidiaries. We promptly
and accurately appraise credit risk through the systems,
and, when necessary, carry out write-offs and provisions toreserves for possible loan losses.
Subsidiary banks each have their own credit risk
management systems, while Hokuhoku Financial Groupmanages such risk on a Groupwide basis.
Subsidiary banks ensure strict separation of the officers
and units responsible for business promotion and for credit
screening, and conduct rigorous screening, provision andmanagement of credit in a way that is independent frombusiness promotion.
When making individual judgments on credit provision,
rigorous screening is carried out in accordance with standards and principles in our credit policy. For this purpose,screening systems are enhanced by improved computerized support and training and other policies are adopted for
improving credit-screening capabilities.
To explain more concretely, detailed analysis andscreening of individual loan applications is appropriately
undertaken at each bank branch, and if a manager
lacks the authority to give approval, further analysis andscreening is conducted by the head office credit screening
department. Officers specializing in particular industries andregions are deployed in the credit screening department,
ensuring a system of consultation and guidance tailoredto the needs of individual branches, based on borrower
characteristics.

Internal ratings system
To enable objective appraisal of credit risk in lending
operations, the subsidiary banks have introduced aninternal ratings system. Using 14 credit ratings based on
financial data and qualitative information regarding borrower
creditworthiness, the system enables ongoing monitoring ofchanges in rating.

16

Hokuhoku Financial Group, Inc. Annual Report 2009

Based on the ratings generated by the internal ratingssystem at the subsidiary banks, we compute credit risk andforecast loss rates for each individual borrower category,
and then ensure that interest rates duly match risk. Basedon our groupwide management rules for credit limits, weseek to enhance credit risk management by such means
as curbing the risk of credit concentration (the aggregate ofon-balance-sheet and off-balance-sheet credits).
Internal
rating
S
A
B
C
D
E
F
N
G
H
I
X
Y
Z

Borrower categorization by asset self-assessment

Normal borrowers

Borrowers requiring caution
Substandard borrowers
Borrowers threatened with bankruptcy
Effectively bankrupt borrowers
Bankrupt borrowers

Asset self-assessment, write-offs andprovisions to reserves for possible loan losses
Based on preset standards, subsidiary banks conduct selfassessments of asset portfolios (primarily loans).
Self-assessment aims at more precise evaluation ofassets and enhancing asset soundness. Self-assessment
is a prerequisite for appropriate write-offs and provisions toreserves for possible loan losses, as required by businessaccounting principles in Japan.
The Group has unified standards for write-offs andprovisions to reserves for possible loan losses. For loans
other than those specified below (including loans to borrowers requiring caution), provision is made to the reserves
for possible loan losses based on the historical loan-loss
ratio over a particular past period. For loans to borrowers
threatened with bankruptcy, a provision is made to specificreserves, in the amount deemed necessary, after exclusionof amounts that may be recoverable through collateral andguarantees. For loans to bankrupt and effectively bankrupt
borrowers, provision is made in the full amount at issue
to the specific reserve, excluding amounts that may berecoverable through collateral and guarantees.

Corporate rehabilitation
After making a loan to a corporate customer, we endeavor
to prevent defaults leading to bad debt through follow-up
reviews of the borrower’s business performance and plans,
and to ensure asset soundness through dedicated baddebt management and strengthened support for corporate
rehabilitation.

Market risk management
Basic policy
Market risk is the risk of incurred losses in securities resulting from fluctuations in market rates such as interest rates, stockand bond prices, and foreign-exchange rates. This is a significant and unavoidable risk in lending and deposit-taking as wellas in the investment activities.
Having established asset-liability management committees in the subsidiary banks, where market risk is critical in their transactions including lending and deposit-taking, Hokuhoku Financial Group controls such risk in order to ensure stable earnings.

Asset-liability management committees
Given the different time structures of assets such as loans
and of liabilities such as deposits, banks are constantly
exposed to interest-rate fluctuation risk in financial markets.
The asset-liability management committees assess
risk level using value-at-risk (VaR), basis-point-value (BPV)
and other methods. They run a wide range of earnings
simulations under differing interest-rate fluctuation scenarios
to understand asset-liability structures, and work together
to ensure a suitable balance between risk and earnings
performance.

Risk capital allocation and transaction ceilings
To ensure that subsidiary banks are not exposed to excessive market risk, we set investment ceilings for bonds andequity shares and other securities based on the risk capital
allocation based on VaR, and manage both the balance andrisk level of marketable securities. We have also set rules forwhen losses (unrealized and realized) grow, and adopted
more rigorous rules for retention of individual stocks held by
each bank.
The units in charge of transacting market-related
business conduct operations with strict observance ofmanagement policy for market risk and ceiling amounts forthat particular fiscal year. At the same time, the risk management departments, which are separate from the units incharge of transacting market-related business, continuously
monitor risk levels under normal conditions and set “trigger
points” when ceiling amounts are approached, to enable

early defusing of risk issues. They report if necessary,to management through the general risk management
committees.
When market prices significantly fluctuate and it is
impossible to accurately assess risk levels and to raise theprospect of unforeseen risk, risk levels are assessed using
comparisons between VaR and actual losses through backtesting, and regular calculations of the possible extent of
actual losses under conditions of market fluctuation throughstress-testing.

Liquidity risk management
Liquidity risk refers to the risk of having to procure fundingat exceptionally high interest rates due to credit crunch
problems following dramatic changes in the market environment or deterioration in the financial position of financial
institutions. Based on our rules for management of liquidity
risk, we form an accurate appraisal of fund operations andprocurement at subsidiary banks, and take measures toensure smooth cash flows.
The subsidiary banks maintain adequate levels ofhigh-liquidity assets that are readily convertible into cash,
such as government bonds, and conduct daily checks withregard to liquidity risk based on benchmarks for various
different categories. To prepare for sudden liquidity risk, wehave in place mechanisms for periodically assessing andmanaging liquidity risk through the asset-liability management committees, at each stage of the event.

Hokuhoku Financial Group, Inc. Annual Report 200917

RISK MANAGEMENT SYSTEM

Operational risk management
Basic policy
Operational risk refers to the risk of losses arising due to accidents, wrongful conduct and legal violations during day-to-day
banking operations, computer system stoppage or misuse, or external and internal events such as earthquakes and fires.
Operational risk at the Group has been categorized as follows. We take ongoing measures to correctly recognize,
appraise and manage each type of risk, and avoid or reduce losses significantly affecting business activities.
Administrative risk

Risk of losses due to administrative errors and accidents, or wrongful transactions in which
employees have exceeded their authority

System risk

Risk of losses due to stoppage of computer systems, system failures due to operating errors, andmisuse of computers

Legal risk

Risk of losses due to failure to confirm legality of transactions

Customer-related risk

Risk of causing losses to customers through failure to adequately explain products, leading to legal
and other action prejudicial to the Group’s interests

Reputational risk

Risk of losses due to unjustified rumors and defamation within markets and among customers

Other risk

Risk of sustaining damage through occurrence of natural disasters and related negligence, and otherrisk not covered by the above list

Organizational structure
We have compiled rules for management of operational risk.
In addition to categorization of risks, we have laid down
basic processes for risk management.
At our subsidiary banks, operating risk panels meeteach month, to analyze the cause of and discuss thesolution of various operational risks collected from actuallyoccurred or prevented incidents, such as administrative
errors and failings leading to customer complaints,
computer system failures, phishing fraud and data leakage.
Potential risks are then evaluated and risk reduction policies
taking account of all eventualities are discussed.
Status reports and results of discussions concerning
operational risk are reported to management of the subsidiary banks and to the Group. By comparing actual losses
arising from operational risk and risk capital allocation, weare able to monitor whether risk has grown to the point
where it systemically endangers operations.

Risk management systems by major category• Administrative risk management
The group has closely analyzed the causes of administrative incidents and problems, and discussed measures
to prevent recurrence. Based on the above process, weare raising the standard of administrative operations andimproving administrative processing systems, dispensing
guidance from head office, centralizing clerical work at
branches and automating procedures, so as to enableprevention of the occurrence of accidents and problems in
administrative operations and full and prompt continuationof administrative processes.

18

Hokuhoku Financial Group, Inc. Annual Report 2009

To avoid administrative and other kinds of risk, we
conduct internal audits and have established a system ofmutual checks and balances and rigorous administrative
processing systems.
• System risk
With the increasing sophistication of financial business andthe growth in transaction volumes, it is becoming increasingly important to ensure that computer systems cannot failand that they always operate stably.
The Group has formulated basic rules for systemrisk management (System Risk Standards) and otherregulations, and has established a rigorous management
and operating structure with a variety of backup and othersecurity management measures in place.

Contingency plan
The Group has compiled a contingency plan to ensure
that, in the unlikely event of a disaster or other emergency,
its impact is minimized and business operations can becontinued. In the event of earthquakes or events such as
the recent outbreak of new flu, we have drawn up plans forbusiness continuation and crisis response, enabling us tocontinue to perform our settlement function as a financial
institution.

CORPORATE SOCIAL RESPONSIBILITY
Fundamental approach to group CSR
1. Basic stance
The Hokuhoku Financial Group has positioned the fulfillment of the Group’s corporate social responsibility as one of its highest
management priorities. Guided by our overall corporate philosophy, we aim always to comply with the law and observe
generally accepted principles of ethical behavior. The principal purpose of existence of the Group is to serve as a linchpin of
the communities in which it operates by fulfilling its role as a financial services group doing business across a wide area of thecountry. In addition, we take seriously our obligation to contribute to the realization of a thriving economy and a sustainable
society by means of active involvement in environmental preservation, as well as other activities that benefit society as a whole.

2. Definitions
1) CSR
The Hokuhoku Financial Group views its corporate social responsibilities not simply as the duty to pursue economic gains
for the good of the regional economy and to contribute to the development of a sustainable society. We see our social
responsibilities as also encompassing efforts to address the wide range of environmental and social issues affecting our
stakeholders.
2) Our Stakeholders
We define our stakeholders as being all persons and institutions whose interests are closely linked to those of the Group,
including our customers, shareholders, and employees, as well as the wider community of which we are all members.

Putting links with local customers first
While fostering close links between the Group and the regions we serve, we will listen to customer opinions
and take measures to make our branches more appealing and to offer better services.
Increasing customer satisfaction• Ongoing “Smile” campaigns• Customer satisfaction survey• Visits by employees of Hokuriku Bank and Hokkaido Bank to theother partner bank’s lobbies to compare customer treatment andexchange views• Organizational changes to promote corporate social responsibility
activities

Asset management seminar for individual customers
Enhanced customer convenience• More convenience store ATM partnerships• Expansion of lineups of loan and insurance products• Increased range of foreign currencies handled in forex operations(New Taiwan Dollar, Russian Rouble)• Launch of online investment trust services

Enhancing branch appeal

Measures for prevention of financial crime• Creation of relaxed environment for customer consultations
2 branches opened in 2008 targeting individuals (Hokkaido Bank):
Tonden and Ainosato (Sapporo)• Participation in community-building project
Refurbishment of Yatsuo branch (Toyama) in traditional wooden
machiya town-house style (Hokuriku Bank)• Barrier-free access• Installation of Automated External Defibrillators (AEDs)• Strengthening of measures to prevent phishing fraud
Ensuring Bank staff offer maximum customer assistance atATMs, banning use of mobile phones in ATM booths, providing
warnings and information via automated voice recordings, andraising awareness of financial crime through posters and stickers
Informal seminars by visiting experts on phishing (Hokuriku Bank)• Strengthening anti-crime measures
Anti-crime training and lectures to employees
Improving security primarily through “smart” bank cards with an
IC chip and upgraded magnetic strip reading for bank-accountbooks (Hokkaido Bank)

Hokuhoku Financial Group, Inc. Annual Report 200919

CORPORATE SOCIAL RESPONSIBILITY

Support regional economic development through wide area networks
across Japan and some overseas locations
The Hokuhoku Financial Group aims to help spur regional economic growth by further strengthening widearea networks spanning the Hokuriku, Hokkaido and three major metropolitan areas of Japan, as well as
overseas networks.
Agreements with overseas municipal and othergovernment organizations

Business-matching events (fiscal 2008-2009)
June 2008: Business Summit in Nagoya
July: Joint business conference of Japanese regional banks, held in
Shanghai, PRC
July: Hokuhoku Financial Group business conference, held in
Dalian, PRC
August: Hokkaido Food Special Business conference in Tokachi,
for agricultural producers
September: Hokkaido Food Special Business conference
October: Business-matching meeting in Shenyang, PRC
October: “New technology conference” in Tokyo
November: Regional banks’ “Food Selection 2008”
March 2009: Hokkaido Business Forum 2009
March: “Food and Tourism summit” special business conferencein Fukui
May: Business conference in Changzhou, PRC
June: Hokkaido Food Special Business conference in Hakodate
July: Manufacturing business conference in Shanghai

October 2004
November 2005
April 2006
September 2006
November 2006
March 2007
June 2007
February 2008
June 2008
February 2009

DalianShenyang
Shanghai
Liaoning
Vietnam govt.
ChangchunSuzhouGuangdong
HarbinNingboHokuriku Bank
Hokkaido Bank
Hokuhoku Financial Group
Hokuhoku Financial Group
Hokuriku Bank
Hokkaido Bank
Hokuriku Bank
Hokuhoku Financial Group
Hokkaido Bank
Hokuhoku Financial Group

Alliances with overseas banks and other partners
December 2005
July 2006
September 2007
September 2008
December 2008
April 2009KASIKORNBANK (Thailand)Standard Chartered Bank
State Bank of India
Mizuho Corporate Bank
Bank of Communications, PRC
Financial Information Service
Co., Taiwan

Hokuriku Bank
Hokuriku Bank
Hokuriku Bank
Hokuriku Bank
Hokuriku Bank
Hokkaido Bank

Bank customer organizations
Hokuriku Chojokai
Hokkaido Chojokai
Shanghai Chojokai
Hokuhoku ASEAN kai

Number of companies
1,023
261
160
150

More dialog and better disclosure
We continuously communicate with investors and analysts for better disclosure.

20

IR for investors and analysts

IR for individual investors

November 2008: Investors’ meeting for the fiscal 2008 interim results;
122 participants (Tokyo)
May 2009: Investors’ meeting for the fiscal 2008 results;
132 participants (Tokyo)

February – March 2009: Meetings organized in partnership withlocal companies in the hosting area;
240 participants in total (Toyama,Kanazawa and Fukui)

IR overseas

General meeting of shareholders

July 2008: North America (New York, Boston, Toronto, Chicago)
September 2008: Europe (London, Edinburgh, Milan, Zurich)June 2009: Ordinary general meeting of shareholders (Sapporo,with live broadcast to Toyama)

Hokuhoku Financial Group, Inc. Annual Report 2009

Creating an attractive workplace for every employee
Education and training

Leisure time-off• Rebuilding training center (Hokkaido Bank)• Training classes (by grade and job category), on-the-job training• Promoting self-developments, various training courses(dispatch of trainees), external and overseas training• All kinds of time-off arrangements (full one-week holiday, “refreshment” holidays, anniversary/birthday leave, etc) half-day paid leave

Career development service• Career-track change, regular employment for contracted bank
employees, in-house recruitment

Broadening recruitment• Revision of pay scale for new graduates• Conversion of agency part-time workers to direct bank employees• Recruitment seminar for women (Hokuriku Bank)Child-rearing/care support policies• Maternity, care and nursing leave, shortened working hours

Advancing with regional communities
We take part in social contribution activities.
Personal finance classes

Support for cultural events• All-Japan high-school quiz in finance and economy (“Economics
Koshien,” with meets in Hokkaido, Toyama and Fukui prefectures)• Participation as Mini Hokkaido Bank in the “Kodomo no Machi(kids’ town) Mini Sapporo 2008” for children, hosted by Sapporo
city• Talks given at high schools and universities by visiting lecturers• Internships• Sponsorship of the “Lilac” concert• Making available the Hokuhoku Space Teru-Teru Tei theater• Support for advertising for World Cultural Heritage registration for
the “Modern-Age Cultural Heritage Sites of Takaoka”

Welfare initiatives• Sponsorship of nursing courses for carers of people with dementia• Donation of used stamps to the Social Welfare Association of
Toyama City (money is used to dispatch medical professionals
overseas and for vaccinations)

Helping conserve the regional environment
Measures undertaken as a financial institution• Support financing for environment-friendly homebuilding,intermediary role in carbon-rights trading, lending based on“environmental ratings”• Intermediary services for applications to loans under the Sapporo
City environment protection fund (Hokkaido Bank)

Helping reduce greenhouse gases• Compilation of environmental action guidelines, setting of numerical targets for reduction of CO2 emissions (Hokkaido Bank)• Arrangement of environment-protection lectures for employees(Hokuriku Bank)• Adoption of casual dress code for summer• Introduction of solar power generation and water-heating facilities• Reduction of paper usage volumes through shift to paperlessaccount record and document management

Further environmental protection activities• Voluntary cleaning activities by employees• Tree-planting• Participation in “voluntary council of regional banks for protecting
forests in Japan”• Support for the Toyako G8 Summit in Hokkaido• Sponsor TV program on companies manufacturing eco-friendly
products (April 2008 to March 2009)• Support “Kids’ ISO14001 program” (Hokkaido)

Hokuhoku Financial Group, Inc. Annual Report 200921

TOPICS

Hokuriku Bank
1. Solar-power generation system introduced
We have installed a solar-power generation system at our
Shimizumachi Branch, in Toyama city, taking advantage ofrenovations to the building’s exterior. Photovoltaic panels
have been used in parts of the exterior wall covering. The
power generated is expected to provide approximately halfof the electricity used for lighting the offices at the branch.
In November 2008 the Toyama Minami Chuo Branch
became our third branch to install a solar-power generation
system, which was placed on the rooftop. The Hokuhoku
Bank is a participant in “Team Minus 6%,” the Japanese
government’s energy-saving campaign which encourages
businesses to economically utilize and conserve energy
so as to reduce CO2 emissions and thereby help combat
global warming.

3. Ad campaign fetes Takaoka’s 400-year history, urges
World Heritage Site recognition
We put up promotional posters on the walls of our
Takaoka Branch to show our support for Takaoka’s bid
to have its historical cultural heritage registered as a world
heritage site to mark the 400th anniversary of the town’sbirth. Posters featured the slogan “World Heritage Site
Recognition for Takaoka — A Heart-Felt Commitment to Our
400-Year History,” while the design highlights the town ofKanayamachi’s reputation as the birthplace of bronze castingin Japan. As the regional financial institution, we believe it isimportant to provide the backing for Takaoka’s commemorative campaign to further its future economic development,
while also working together with everyone in the region to
support local efforts to win World Heritage Site recognition.

2. Sponsorship of nationwide economics quiz for highschool students
To encourage high school students to acquire knowledgeof economics and finance, the Hokuriku Bank and the
Association for the Promotion of Financial Literacy (anNPO), jointly sponsored teams from Toyama and Fukui
for the third “Economics Koshien” (the 3rd All-Japan HighSchool Economics Quiz Tournament). Toyama representatives Moriyama and Asa gave an impressive performance,
placing sixth overall at the event, held in Tokyo’s Roppongi
Hills on January 25, 2009. We will continue to sponsor
events that ensure the sound development of our youth andprovide the opportunity for financial education regarding
indispensable knowledge in modern social life.

22

Hokuhoku Financial Group, Inc. Annual Report 2009

4. Hokuriku Bank Book Collection donated toKanazawa University
In December 2008, we donated the “Hokuriku Bank Book
Collection,” consisting of 161 volumes, to Kanazawa
University. We hope these books will aid students
in their career preparations and job hunting activities. This
donation — the first of its kind by a private company tothe university — came about following the signing of anagreement for comprehensive collaboration between thetwo parties in June 2008. The donated materials are available for viewing in Kanazawa University’s Central Library
Reading Hall. These books are open for public viewing, and
it is our hope that many students will take advantage of thisopportunity.

5. “MBA Citizens’ Course” offered at University of
Toyama’s graduate school
In March 2005, the Hokuriku Bank signed an agreement
for comprehensive collaboration with the University of
Toyama, and agreed to sponsor two courses on “The
Theory of Financial Institutions” and “The Theory of Financial
Analysis” on an ongoing basis as part of this collaboration.
During fiscal 2009, in the first semester further advanceswere made with regard to collaboration. In the university’s
Graduate School of Economics, we have newly establisheda course entitled, “MBA Citizens’ Course — Management
Case Studies on Enterprise Value Creation and Corporate
Revival.” The course, to be offered as an open class, combines corporate financial theory at the graduate level andlectures by managers working at the frontline. By making

the course an open class, we will give local residents theopportunity to attend lectures at the graduate level and hear
about the keys to success from managers, based on theirown experiences. We expect this to be a useful course forcommunity members.

Hokkaido Bank
1. The Hokkaido Food Special Business Conference

2. Online investment trust service launched

On September 3, 2008, we co-hosted the Hokkaido
Food Special Business Conference with the Hokkaido
Government. This is the fifth time we have staged thisevent, which has been held since 2005 with the aim ofhelping Hokkaido-based food and beverage manufacturers
to expand their sales channels. This time, the conference
featured unknown specialties and superior items with adistinctive flavor. A total of 44 food and drink manufacturers
exhibited at the event, including a number of Hokuriku Bank
clients, giving them the chance to promote their products.
The event also provided the venue for a total of 320 business meetings through parallel individual sessions, in which
34 buyers from 30 supermarkets, department stores andother nationwide retailers participated, showing the highdegree of interest in Hokkaido’s food culture.

The Hokkaido Bank launched a new online investment trust
services on December 1, 2008. These are the first online
investment trust services to be offered in Hokkaido. The
new service makes it possible for individual customers to
buy and sell investment trusts on their personal computersat home, any time of the day or night. It is also currently
possible to confirm the investment status of the funds inone’s portfolio.

3. “Personal Branch” opened in Ainosato (Sapporo)
To respond to the diversifying needs of our individual
customers, we have opened our second “Personal Branch”
dedicated to transactions for individuals, the Ainosato
Personal Branch. The new branch was opened in Sapporo
City’s North Ward on December 1, 2008. The “Personal
Branch,” exclusively for individual customers, is a place
they can go for financial advice. The branch interior is quiet,
and consultation booths have been installed to allow fora degree of privacy. Here, customers can receive advice
regarding such topics as asset management and mortgage
loans. These branches are open on weekends and holidays,
allowing customers to arrange for consultations. We aim to

Hokuhoku Financial Group, Inc. Annual Report 200923

make our branches more appealing by enhancing customer
convenience.

4. New representative office opened in Sakhalin
The Hokkaido Bank opened a representative office in thecity of Yuzhno-Sakhalinsk in Sakhalin on March 24, 2009,
becoming the only Japanese bank to currently operate
offices in the Russian Far East. Sakhalin is experiencing
remarkable economic growth as a result of large-scale
oil and natural gas projects underway there through joint
ventures with foreign companies. Economic exchange
is becoming increasingly active between Sakhalin andHokkaido, which is in close geographical proximity to theprovince. Opening an office in Sakhalin will enable us toprovide support to clients for business operations in the
Russian Far East, mainly through the provision of up-todate information not only on the province but also the restof Russia’s Far East. Prior to the opening of the new representative office, Hokkaido Bank signed a memorandumwith VTB Bank, Russia’s second largest commercial bankconcerning an administrative tie-up with VTB’s Khabarovsk
and Vladivostok branches. Through the tie-up, Hokkaido
Bank will gain access to VTB Bank’s various networks andfunctions, enabling us to provide our customers with support for Russian business expansion.

24

Hokuhoku Financial Group, Inc. Annual Report 2009

5. Decision made to commence ATM services for
Taiwan’s FISC Smart Card
Approximately 300,000 Taiwanese tourists travel to
Hokkaido each year, accounting for about 40% of all foreign
visitors to Japan’s northernmost island. The Hokkaido
Bank has decided to install a network of dedicated ATMs
to handle transactions with the Taiwanese FISC smart
card. This will be the first time that a Japanese company
has installed ATMs for a foreign card. In April 28, 2009, the
Hokkaido Bank finalized a prospectus with the Central Bankof the Republic of China, Taiwan FISC (Financial Service
Information Co., Ltd.), and NTT Data Corporation for the
new service. Assuming that we will be granted approval by
the Taiwanese financial authorities, we have begun preparations and plan to commence the new service in January
2010.

FINANCIAL SECTION

Consolidated Balance Sheets ............................................. 26
Consolidated Statements of Income ................................... 27
Consolidated Statements of Changes in Net Assets ........... 28
Consolidated Statements of Cash Flows ............................ 30
Notes to Consolidated Financial Statements ....................... 31
Independent Auditors’ Report ............................................. 45

The Hokuriku Bank, Ltd.
Nonconsolidated Balance Sheets (Unaudited)................ 46
Nonconsolidated Statements of Income (Unaudited) ...... 47

The Hokkaido Bank, Ltd.
Nonconsolidated Balance Sheets (Unaudited)................ 48
Nonconsolidated Statements of Income (Unaudited) ...... 49

Hokuhoku Financial Group, Inc. Annual Report 200925

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED BALANCE SHEETS
Hokuhoku Financial Group, Inc. and Consolidated Subsidiaries

Millions of yen
March 31

2009

2008

AssetsCash and due from banks (Note 22) ..................................................................
Call loans and bills bought .................................................................................
Monetary claims bought ....................................................................................
Trading assets (Note 4) ......................................................................................
Money held in trust (Note 27) .............................................................................
Securities (Notes 5, 10 and 27) ..........................................................................
Loans and bills discounted (Notes 6 and 10) .....................................................
Foreign exchanges (Note 7) ...............................................................................
Other assets (Note 10) .......................................................................................
Tangible fixed assets (Notes 8 and 14) ..............................................................
Intangible fixed assets .......................................................................................
Deferred tax assets (Note 21) ...........................................................................
Customers’ liabilities for acceptances and guarantees (Note 9) ..........................
Allowance for loan losses ..................................................................................
Total assets .....................................................................................................

¥ 412,377
60,726
154,830
8,719
4,751
1,673,591
7,133,148
13,381
182,963
111,642
39,90293,391135,055(95,397)¥9,929,086¥ 282,827
81,521
185,898
7,952
7,277
1,661,169
6,871,383
14,029159,454
133,480
42,02564,657
159,456(103,169)¥9,567,964

4,198,083
618,208
1,576,206
88,76948,367
17,037,475
72,616,808
136,225
1,862,606
1,136,543
406,214950,747
1,374,887(971,160)$101,079,978

Liabilities and net assets
Liabilities
Deposits (Notes 10 and 11) ...............................................................................
Call money and bills sold (Note 10) ....................................................................
Payables under securities lending transactions (Note 10) ...................................
Trading liabilities (Note 4) ...................................................................................
Borrowed money (Notes 10 and 12) ..................................................................
Foreign exchanges (Note 7) ...............................................................................
Bonds payable (Note 13) ...................................................................................
Other liabilities ...................................................................................................
Provision for employee retirement benefits (Note 26)..........................................
Reserve for contingent loss................................................................................
Reserve for reimbursement of deposits..............................................................
Deferred tax liabilities for land revaluation ...........................................................
Acceptances and guarantees (Note 9) ...............................................................
Total liabilities ..................................................................................................

¥8,661,538
10,000—2,263
395,55955
64,500196,678
8,960
1,558
2,196
9,054
135,055
9,487,421¥8,435,625
40,0006,492
1,563
225,762270
66,500154,373
11,052
599
2,777
9,061
159,456
9,113,535$ 88,176,107
101,802—
23,043
4,026,869
567
656,6222,002,227
91,216
15,86922,364
92,173
1,374,887
96,583,746

Net assets
Capital stock (Note 15) ......................................................................................
Capital surplus...................................................................................................
Retained earnings (Note 16) ..............................................................................
Treasury stock ...................................................................................................
Total shareholders’ equity ..............................................................................
Valuation difference on available-for-sale securities (Note 27).............................
Deferred gains or losses on hedges ...................................................................
Revaluation reserve for land (Note 14)................................................................
Total valuation and translation adjustments ..................................................
Minority interests ...............................................................................................
Total net assets ...............................................................................................
Total liabilities and net assets ........................................................................

70,895223,098
156,942(470)
450,466(18,341)(45)
8,908(9,478)676
441,664¥9,929,086

70,895
253,234
125,950(421)
449,658(4,722)
(16)
8,918
4,179
590
454,428¥9,567,964

721,725
2,271,189
1,597,703(4,786)
4,585,831(186,716)(459)
90,687(96,488)6,889
4,496,232$101,079,978

See notes to consolidated financial statements.

26

Thousands of
U.S. dollars (Note 1)
2009

Hokuhoku Financial Group, Inc. Annual Report 2009$

CONSOLIDATED STATEMENTS OF INCOME
Hokuhoku Financial Group, Inc. and Consolidated Subsidiaries

2009

2008

Thousands of
U.S. dollars (Note 1)
2009

IncomeInterest income:Interest on loans and discounts ....................................................................
Interest and dividends on securities ..............................................................
Interest on receivables under resale agreements ..........................................
Interest on receivables under securities borrowing transactions ....................
Interest on deposits with other banks ...........................................................
Other interest income ...................................................................................
Fees and commissions (Note 18) .......................................................................
Trading income (Note 19) ..................................................................................
Other ordinary income .......................................................................................
Other income.....................................................................................................
Total income......................................................................................................

¥141,213
19,280
76
49
1,295
2,380
41,017
1,633
29,345
5,874
242,165¥141,966
19,164
210
6
917
3,626
47,275
1,289
34,491
12,617
261,565$1,437,576
196,281779
504
13,18524,231
417,563
16,627
298,740
59,8062,465,292

Expenses
Interest expense:
Interest on deposits ......................................................................................
Interest on payables under securities lending transactions ............................
Interest on borrowings and rediscounts ........................................................
Interest on bonds payable ............................................................................
Other interest expense .................................................................................
Fees and commissions (Note 18) .......................................................................
Other ordinary expenses ....................................................................................
General and administrative expenses.................................................................
Provision of allowance for loan losses ................................................................
Other expenses (Note 20) ..................................................................................
Total expenses ..................................................................................................

25,746
60
2,345
1,885
498
11,547
18,837
100,62233,90924,389219,842

23,852
523
1,954
1,972
1,175
11,20917,352
96,74324,44819,331
198,563

262,099620
23,87419,194
5,079
117,553
191,769
1,024,360
345,202248,287
2,238,037

22,32363,002

227,255

8,516(23,315)87¥ 37,034

1,338
22,96162¥ 38,640

86,701(237,357)
891$ 377,020

Millions of yen
Years ended March 31

Income before income taxes and minority interests............................................
Income taxes (Note 21):
Current .........................................................................................................
Deferred .......................................................................................................
Minority interests in net income..........................................................................
Net income.......................................................................................................
See notes to consolidated financial statements.

Hokuhoku Financial Group, Inc. Annual Report 200927

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
Hokuhoku Financial Group, Inc. and Consolidated Subsidiaries
Thousands
IssuedIssuednumber of
number ofshares ofshares ofcommon stock preferred stock
Balance as of March 31, 2008 ................................ 1,391,630
266,432
Changes during the period
Cash dividends ....................................................
——Net income ..........................................................
——
Purchase of treasury stock ..................................
——
Disposal of treasury stock ....................................
——
Retirement of treasury stock ................................
—(47,600)
Reversal of revaluation reserve for land ................
——Net changes of items
other than shareholders’ equity ..........................
——
Total changes during the period...........................
—(47,600)
Balance as of March 31, 2009 ................................ 1,391,630
218,832

Millions of yen

Capitalstock¥70,895

Capitalsurplus¥253,234

Retainedearnings¥125,950

Treasurystock¥ (421)

Total
shareholders’equity¥449,658

—
—
—
—
—
—

—
—
—
(25)
(30,110)—(6,053)37,034
—
—
—
10

—
—
(30,232)72
30,110—(6,053)37,034(30,232)
47
—
10

—
—
¥70,895—(30,135)¥223,098—
30,992¥156,942

—
(48)
(470)

—
807
¥450,466

Minority
interests
¥590

Total
net assets¥454,428

—
—
—
—
—
—
86
86
¥676

(6,053)37,034(30,232)47—
10(13,571)(12,763)¥441,664¥

Millions of yen
Valuation
Total valuationdifference on
Deferredavailable-for-sale gains or losses Revaluation and translation
securities
on hedges reserve for land adjustments
Balance as of March 31, 2008 .........................................................
¥ (4,722)¥(16)¥8,918¥ 4,179
Changes during the period
Cash dividends .............................................................................
————Net income ...................................................................................
————
Purchase of treasury stock ...........................................................
————
Disposal of treasury stock .............................................................
————
Retirement of treasury stock .........................................................
————
Reversal of revaluation reserve for land .........................................
————Net changes of items other than shareholders’ equity ...................
(13,618)(28)(10)(13,657)
Total changes during the period....................................................
(13,618)(28)(10)(13,657)
Balance as of March 31, 2009 .........................................................
¥(18,341)¥(45)¥8,908¥ (9,478)

Thousands
IssuedIssuednumber of
number ofshares ofshares ofcommon stock preferred stock
Balance as of March 31, 2007 ................................ 1,391,630
336,432
Changes during the period
Cash dividends ....................................................
——Net income ..........................................................
——
Purchase of treasury stock ..................................
——
Disposal of treasury stock ....................................
——
Retirement of treasury stock ................................
—(70,000)
Reversal of revaluation reserve for land ................
——
Increase due to the change ofthe interest of an associated company ...............
——Net changes of items
other than shareholders’ equity ..........................
——
Total changes during the period...........................
—(70,000)
Balance as of March 31, 2008 ................................ 1,391,630
266,432

28

Hokuhoku Financial Group, Inc. Annual Report 2009

Millions of yen

Capitalstock¥70,895

Capitalsurplus¥293,268

Retainedearnings¥ 93,072

Treasurystock¥ (447)

Total
shareholders’equity¥456,788

—
—
—
—
—
—

—
—
—
(18)
(40,015)—(5,801)38,640
—
—
—
38

—
—
(40,168)180
40,015—(5,801)38,640(40,168)
162
—
38

—

—

—

(1)

(1)

—
—
¥70,895—(40,033)¥253,234—
32,878¥125,950

—
26
(421)

—
(7,129)¥449,658¥

Millions of yen
Valuationdifference on
Deferred
Total valuation
available-for-sale gains or losses Revaluation and translation
securities
on hedges reserve for land adjustments
Balance as of March 31, 2007 .........................................................
¥26,078¥(20)¥8,957¥35,016
Changes during the period
Cash dividends .............................................................................
————Net income ...................................................................................
————
Purchase of treasury stock ...........................................................
————
Disposal of treasury stock .............................................................
————
Retirement of treasury stock .........................................................
————
Reversal of revaluation reserve for land .........................................
————
Increase due to the change ofthe interest of an associated company ........................................
————Net changes of items other than shareholders’ equity ...................
(30,801)3(38)(30,836)
Total changes during the period....................................................
(30,801)3(38)(30,836)
Balance as of March 31, 2008 .........................................................
¥ (4,722)¥(16)¥8,918¥ 4,179

Minority
interests
¥543

Total
net assets¥492,348

—
—
—
—
—
—

(5,801)38,640(40,168)
162
—
38

—
46
46
¥590

(1)
(30,790)(37,919)¥454,428

Thousands of U.S. dollars (Note 1)

Balance as of March 31, 2008 .........................................................
Changes during the period
Cash dividends .............................................................................
Net income ...................................................................................
Purchase of treasury stock ...........................................................
Disposal of treasury stock .............................................................
Retirement of treasury stock .........................................................
Reversal of revaluation reserve for land .........................................
Net changes of items other than shareholders’ equity ...................
Total changes during the period....................................................
Balance as of March 31, 2009 .........................................................

Capitalstock$721,725

Capitalsurplus$2,577,977

Retainedearnings$1,282,196

Treasurystock$ (4,290)

Total
shareholders’equity$4,577,608

—
—
—
—
—
—
—
—
$721,725

—
—
—
(256)
(306,532)——(306,788)$2,271,189(61,622)
377,020———
109—
315,507$1,597,703——(307,769)
741
306,532——(496)$ (4,786)(61,622)
377,020(307,769)
485
—
109
—
8,223
$4,585,831

Thousands of U.S. dollars (Note 1)
Valuation
Total valuationdifference on
Deferred
Minority
available-for-sale gains or losses Revaluation and translationinterests
securities
on hedges reserve for land adjustments
Balance as of March 31, 2008 ......................................................... $ (48,080)$(169)$90,796$ 42,547$6,012
Changes during the period
Cash dividends .............................................................................
—
—
—
—
—
Net income ...................................................................................
—
—
—
—
—
Purchase of treasury stock ...........................................................
—
—
—
—
—
Disposal of treasury stock .............................................................
—
—
—
—
—
Retirement of treasury stock .........................................................
—
—
—
—
—
Reversal of revaluation reserve for land .........................................
—
—
—
—
—
Net changes of items other than shareholders’ equity ...................
(138,636)
(290)
(109)
(139,035)
877
Total changes during the period....................................................
(138,636)
(290)
(109)
(135,035)
877
Balance as of March 31, 2009 ......................................................... $(186,716)$(459)$90,687$ (96,488)$6,889Total
net assets$4,626,167(61,622)
377,020(307,769)
485—
109(138,158)(129,935)$4,496,232

See notes to consolidated financial statements.

Hokuhoku Financial Group, Inc. Annual Report 200929

CONSOLIDATED STATEMENTS OF CASH FLOWS
Hokuhoku Financial Group, Inc. and Consolidated Subsidiaries

Millions of yen
Years ended March 31
1. Cash flows from operating activities:
Income before income taxes and minority interests ...................................................
Depreciation .............................................................................................................
Impairment losses .....................................................................................................
Amortization of goodwill ............................................................................................
Equity in losses (gains) of affiliates .............................................................................
Increase (decrease) in allowance for loan losses .......................................................
Increase (decrease) in reserve for contingent loss .....................................................
Increase (decrease) in reserve for employee bonuses................................................
Increase (decrease) in provision for employee retirement benefits..............................
Increase (decrease) in reserve for reimbursement of deposits ...................................
Interest income .........................................................................................................
Interest expenses......................................................................................................
Losses (gains) on securities ......................................................................................
Losses (gains) on money held in trust .......................................................................
Losses (gains) on foreign exchange ..........................................................................
Losses (gains) on sales of fixed assets ......................................................................
Net decrease (increase) in trading assets ..................................................................
Net increase (decrease) in trading liabilities ...............................................................
Net decrease (increase) in loans and bills discounted ................................................
Net increase (decrease) in deposits...........................................................................
Net increase (decrease) in negotiable certificates of deposit ......................................
Net increase (decrease) in borrowed money (excluding subordinated borrowed money) ...
Net decrease (increase) in due from banks (excluding deposits with the Bank of Japan) ...
Net decrease (increase) in call loans, bills bought, commercial paperand other debt purchased ......................................................................................
Net decrease (increase) in receivables under securities borrowing transactions.........
Net increase (decrease) in call money and bills sold ..................................................
Net increase (decrease) in payables under securities lending transactions.................
Net decrease (increase) in foreign exchanges (assets) ...............................................
Net increase (decrease) in foreign exchanges (liabilities) ............................................
Issuance and redemption of bonds payable (excluding subordinated bonds payable) ...
Interest income-cash basis .......................................................................................
Interest expense-cash basis .....................................................................................
Other, net .................................................................................................................
Subtotal.........................................................................................................................
Income taxes paid ....................................................................................................
Net cash provided by (used in) operating activities ...................................................
2. Cash flows from investing activities:
Purchases of securities .............................................................................................
Proceeds from sales of securities..............................................................................
Proceeds from redemption of securities ....................................................................
Proceeds from sales of money held in trust...............................................................
Proceeds from fund management .............................................................................
Purchases of tangible fixed assets ............................................................................
Proceeds from sales of tangible fixed assets .............................................................
Purchases of intangible fixed assets..........................................................................
Net cash provided by (used in) investing activities ....................................................
3. Cash flows from financing activities:
Proceeds from issuance of subordinated borrowed money.......................................
Repayment of subordinated borrowed money ..........................................................
Repayment of subordinated bonds ...........................................................................
Expenditures for fund procurement ...........................................................................
Dividends paid ..........................................................................................................
Dividends paid to minority shareholders ....................................................................
Purchases of treasury stock ......................................................................................
Proceeds from sales of treasury stock ......................................................................
Net cash provided by (used in) financing activities ....................................................
4. Effect of exchange rate changes on cash and cash equivalents ..............................
5. Net increase (decrease) in cash and cash equivalents ..............................................
6. Cash and cash equivalents at beginning of the period ..............................................
7. Cash and cash equivalents at end of the period (Note 22) .........................................
See notes to consolidated financial statements.

30

Hokuhoku Financial Group, Inc. Annual Report 2009

Thousands of
U.S. dollars (Note 1)
2009

2009

2008

22,323
7,135
14
2,420
(3)
(7,772)959—(2,091)(580)(164,295)
30,536
18,210
124
41
1,570
(767)
699
(261,765)
249,742(23,828)
149,796(46,560)¥ 63,002
15,988244
2,265
0(16,375)
599
(30)
(271)
2,777
(165,891)
29,477
(787)
172
1,355
496
1,338
845
(57,903)(34,492)
11,848(5,182)(97,270)

51,862—(30,000)(6,492)647(214)—
144,010(22,680)
37,048150,091(794)
149,296

162,518
21,7858,427(36,284)
1,628
(140)
(810)
148,454(20,550)(8)37,227(2,620)34,607

527,973—(305,406)(66,096)
6,594(2,187)—
1,466,051(230,895)
377,156
1,527,962(8,090)1,519,872(1,013,105)
669,250
288,450
2,600
19,302(12,128)
2,951(2,267)(44,945)(683,863)
490,793
128,516
7,432
19,209(16,279)819(1,861)(55,233)(10,313,608)
6,813,102
2,936,480
26,468
196,505(123,469)
30,043(23,080)(457,559)

20,000—(2,000)(3,081)(6,053)(0)(30,232)47(21,319)(41)
82,989165,335¥ 248,324

12,500(5,000)(3,900)(2,893)(5,801)(0)(40,168)
162(45,101)(95)(65,822)
231,158¥165,335

203,604—(20,360)(31,370)(61,622)(5)(307,769)
485(217,037)(427)
844,849
1,683,142$ 2,527,991¥$

227,255
72,645150
24,645(34)(79,124)
9,768—(21,295)(5,912)(1,672,556)
310,867
185,387
1,270
423
15,993(7,817)
7,122(2,664,822)
2,542,421(242,575)
1,524,956(473,995)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Hokuhoku Financial Group, Inc. and Subsidiaries

1. Basis of Presentation
The accompanying consolidated financial statements have been
prepared in accordance with the provisions set forth in the Japanese
Financial Instruments and Exchange Act and its related accounting
regulations, and in conformity with accounting principles generally
accepted in Japan, which are different in certain respects as toapplication and disclosure requirements of International Financial
Reporting Standards.
The accompanying consolidated financial statements havebeen restructured and translated into English (with some expanded
descriptions) from the consolidated financial statements of
Hokuhoku Financial Group, Inc. (the “Company”) prepared under
the Japanese Financial Instruments and Exchange Act and its
related accounting regulations.
Some supplementary information included in the statutory
Japanese language consolidated financial statements, but notrequired for fair presentation, is not presented in the accompanying
consolidated financial statements.
Amounts less than one million yen have been omitted. As
a result, the totals in Japanese yen shown in the consolidated
financial statements do not necessarily agree with the sum of theindividual amounts. The translation of the Japanese yen amounts
into U.S. dollars is included solely for the convenience of readers
outside Japan, using the prevailing exchange rate at March 31,
2009, which was ¥98.23 to US$1. The U.S. dollar amounts are thenrounded to thousands. The convenience translations should not be
construed as representations that the Japanese yen amounts havebeen, could have been, or could in the future be, converted into
U.S. dollars at that rate.

eliminated in consolidation. All material unrealized profit included in
assets resulting from transactions within the Group is eliminated.
Consolidated subsidiaries
Hokuriku Bank, Ltd.
Hokkaido Bank, Ltd.
Hokugin Lease Co., Ltd.
Hokuriku Card Co., Ltd.
Hokuriku Hosho Services Co., Ltd.
Hokugin Software Co., Ltd.
Nihonkai Services Co., Ltd.
Hokugin Business Services Co., Ltd.
Hokugin Office Services Co., Ltd.
Hokugin Real Estate Services Co., Ltd.
Hokugin Shisankanri Co., Ltd.
Hokuriku International Cayman Ltd.
Hokugin Corporate Co., Ltd.
Dogin Business Service, Ltd.
Dogin Card Co., Ltd.

Capital (¥mil)
140,40993,524
100
36
50
30
500
30
20
100
100
US$1,000
100
50
120

Ownership (%)
100.00100.0070.25
87.39
100.00100.00100.00(100.00)(100.00)(100.00)(100.00)(100.00)(100.00)(100.00)(100.00)

Notes: 1. Ownership figures in parentheses are inclusive of cross-shareholdings.
2. The two subsidiaries whose balance sheet date differs from the date of theCompany are consolidated using their financial statements based on their tentative
settlement of accounts at the consolidated balance sheet date.
3. On March 31, 2009 liquidation procedures for Hokugin Shisankanri Co., Ltd. werecompleted. Hokugin Office Services Co., Ltd. and Hokugin Corporate Co., Ltd.
are currently under liquidation procedures based on a resolution of the Board of
Directors made on March 31, 2009.

Associated company
Hokuhoku Capital Co., Ltd.

Capital (¥mil)
250

Ownership (%)(38.75)

Notes: 1. Ownership figure in parentheses is inclusive of cross-shareholdings.
2. Hokuriku Capital Co., Ltd. was renamed Hokuhoku Capital Co., Ltd.

Assets and liabilities of consolidated subsidiaries are valued atfair value at the respective dates of acquisition, and goodwill andnegative goodwill is amortized using the straight-line method over
20 years and 5 years, respectively.

2. Scope of Consolidation
On September 26, 2003, the Company was formed as a holding
company for The Hokuriku Bank Ltd. by way of stock transfers(“kabushiki-iten”), and on September 29, 2003, Hokugin Lease
Co., Ltd., Hokuriku Card Co., Ltd., Hokuriku Hosho Services Co.,
Ltd. and Hokugin Software Co., Ltd. came under the control of theCompany. Nihonkai Services Co., Ltd. was formed as a whollyowned subsidiary of the Company on December 25, 2003.
On September 1, 2004, Hokkaido Bank, Ltd. and Dogin
Business Services, Ltd., its consolidated subsidiary, became theCompany’s consolidated subsidiaries by a way of stock-to-stock
exchange (“kabushiki-kokan”).
On March 1, 2006, Dogin Card Co., Ltd., formerly an equitymethod affiliate of the Company, was included in the scope of
consolidation after the Company’s subsidiary, Hokkaido Bank,acquired additional shares of Dogin Card.
The consolidated financial statements as of March 31, 2009
include the accounts of the Company and its 15 subsidiaries (together,
the “Group”). The consolidated subsidiaries are listed below.
Under the control or influence concept, those companies inwhich the Company, directly or indirectly, is able to exercise control
over operations are fully consolidated, and those companies overwhich the Group has the ability to exercise significant influence areaccounted for by the equity method.
Investment in one associated company is accounted for by theequity method. The associated company is also listed below.
All significant intercompany balances and transactions have been

3. Significant Accounting Policies(1) Trading assets/liabilities and trading income/losses
Transactions for trading purposes (seeking gains arising fromshort-term changes in interest rates, currency exchange rates,or market prices of securities and other market related indices orfrom variation among markets) are included in “Trading assets” or“Trading liabilities” on the consolidated balance sheet on a tradedate basis. Income and losses on trading purpose transactions
are recognized on a trade date basis, and recorded as “Trading
income” and “Trading losses.”
Securities and monetary claims purchased for trading purposes
are stated at the fiscal year-end market value, and financial derivatives such as swaps, futures and options are stated at amounts
that would be settled if the transactions were terminated at theconsolidated balance sheet date.
“Trading income” and “Trading losses” include interest received
or paid during the fiscal year, the year-on-year valuation differencesof securities and monetary claims and the year-on-year valuationdifference of the derivatives assuming that the settlement will bemade in cash.
The Group presents foreign currency translation differences arising from currency swaps for trading purposes as “Trading assets”
or “Trading liabilities” on a gross basis, pursuant to the “Treatmentof Accounting and Auditing Concerning Accounting for Foreign
Currency Transactions in Banking Industry” (JICPA Industry Audit
Committee Report No. 25).

Hokuhoku Financial Group, Inc. Annual Report 200931

(2) Securities
As for securities other than trading purposes, debt securities that
consolidated subsidiaries have the positive intent and ability tohold to maturity are classified as held-to-maturity securities and are
carried at amortized cost (straight-line method) using the movingaverage method.
Securities other than trading purpose securities and held-tomaturity securities are classified as available-for-sale securities.
Shares in available-for-sale securities that have market prices
are carried at their average market prices during the final monthof the fiscal year, and bonds and others that have market prices
are carried at their fiscal year-end market prices (cost of securities
sold is calculated using primarily the moving-average method).
Available-for-sale securities with no available market prices are carried at cost or amortized cost using the moving-average method.
Valuation difference on available-for-sale securities, net of income
taxes, is included in “Net assets.”
Securities included in money held in trust are carried in the same
method as for securities mentioned above.
(3) Derivative transactions
Derivative transactions, excluding those classified as trading derivatives, are carried at fair value.
(4) Depreciation method
a. Tangible fixed assets (exclude Lease assets)
The Company and the consolidated banking subsidiaries depreciate their equipment on the declining-balance method and theirpremises principally on the straight-line method.
The estimated useful lives of major items are as follows:
Buildings: 6 to 50 years
Equipment: 3 to 20 years
Consolidated non-banking subsidiaries depreciate their equipment and premises principally on the declining-balance method
over their expected useful life.
b. Intangible fixed assets (exclude Lease assets)
Intangible fixed assets are depreciated on the straight-line method,and capitalized software for internal use owned by consolidated
subsidiaries is depreciated using the straight-line method over its
estimated useful life (mainly six years).
c. Lease assets
Lease assets under non-transfer ownership finance lease contracts(in which the ownership of leased assets is not transferred to thelessee; included in tangible fixed assets and intangible fixed assets)are depreciated on a straight-line basis, with the conditions of thelease period being employed for the useful life and a residual valueof zero, excepting when contracted amounts for residual value are
specified.
(5) Long-lived assets
The Group reviews its long-lived assets for impairment whenever
events or changes in circumstance indicate the carrying amountof an asset or asset group may not be recoverable. An impairment
loss would be recognized if the carrying amount of an asset or
asset group exceeds the sum of the undiscounted future cash
flows expected to result from the continued use and eventual
disposition of the asset or asset group. The impairment loss would

32

Hokuhoku Financial Group, Inc. Annual Report 2009

be measured as the amount by which the carrying amount of theasset exceeds its recoverable amount, which is the higher of the
discounted cash flows from the continued use and eventual disposition of the asset or the net selling price at disposition.
(6) Allowance for loan losses
Allowance for loan losses of consolidated banking subsidiaries isprovided as detailed below in accordance with the internal standards for write-offs and provisions.
For claims on borrowers that have entered into bankruptcy, special liquidation proceedings or similar legal proceedings (“bankrupt
borrowers”) or borrowers that are not legally or formally insolvent
but are regarded as substantially in the same situation (“effectively
bankrupt borrowers”), a reserve is provided based on the amountof claims, after the write-off stated below, net of the expectedamount of recoveries from collateral and guarantees.
For claims on borrowers that are not currently bankrupt but areperceived to have a high risk of falling into bankruptcy, a reserve
is provided in the amount deemed necessary based on an overall
solvency assessment of the claims, net of the expected amount ofrecoveries from collateral and guarantees.
For other claims, after classification, the allowance is provided
based on the historical loan-loss ratio.
Branches and credit supervisory departments assess all claimsin accordance with the internal rules for self-assessment of assets,
and the credit review department, independent from these operating sections, audits their assessment. The allowance is provided
based on the results of these assessments.
The Company and its non-banking consolidated subsidiaries
also carry out asset self-assessment utilizing the similar methods
to those employed by the consolidated subsidiaries engaging inbanking operations to make provisions for doubtful accounts in theamount deemed necessary.
For collateralized or guaranteed claims on bankrupt borrowers and effectively bankrupt borrowers, the amount exceeding
the estimated value of collateral and guarantees is deemed to beuncollectible and written off against the total outstanding amountof the claims. The amount of write-off was ¥125,706 million($1,279,718 thousand) and ¥135,533 million at March 31, 2009
and 2008, respectively.
(7) Provision for employee retirement benefits
Provision for employee retirement benefits is provided for paymentof retirement benefits to employees, in the amount deemed accruedat the fiscal-year end, based on the projected retirement benefit
obligation and the fair value of plan assets at the fiscal year-end.
Unrecognized prior service costs are amortized using thestraight-line method, over eight or nine years within the employees’
average remaining service period at incurrence.
Unrecognized net actuarial gain (loss) is amortized using thestraight-line method, over eight or nine years within the employees’
average remaining service period, commencing from the next fiscal
year of incurrence.
Unrecognized net transitional obligation from the initial application of the new accounting standard for employee retirement
benefits (¥28,423 million) is amortized primarily using straight-line
method over 15 years.

(8) Reserve for contingent loss
Reserve for contingent loss is provided for possible losses in accordance with the Joint Responsibility System of Credit Guarantee
Corporations.
(9) Reserve for reimbursement of deposits
Reserve for reimbursement of deposits which were not previously
recognized as liabilities under certain conditions is provided forpossible losses on the future claims of withdrawal based on thehistorical reimbursement experience.
(10) Translation of foreign currency assets and liabilities
Assets and liabilities denominated in foreign currencies are translated into Japanese yen mainly at the exchange rate prevailing at
the consolidated balance sheet date.
(11) Lease transactions
In March 2007, the ASBJ issued ASBJ Statement No. 13,“Accounting Standard for Lease Transactions,” which revised theprevious accounting standard for lease transactions issued in June
1993. The revised accounting standard for lease transactions iseffective for fiscal years beginning on or after April 1, 2008 withearly adoption permitted for fiscal years beginning on or after April
1, 2007.
(Lessee)
Under the previous accounting standard, finance lease that deemto transfer ownership of the leased property to the lessee were to
be capitalized. However, other finance leases were permitted to beaccounted for as operating lease transactions if certain “as if capitalized” information is disclosed in the note to the lessee’s financial
statements. The revised accounting standard requires that all
finance lease transactions should be capitalized to recognize leaseassets and lease obligations in the balance sheet. In addition, theaccounting standard permits leases which existed at the transition
date and do not transfer ownership of the leased property to thelessee to be accounted for as operating lease transactions.
The Company applied the revised accounting standard effective
April 1, 2008. In addition, the Company accounted for lease which
existed at the transition data and do not transfer ownership of theleased property to the lessee as operating lease transactions. The
effect of this change was not material.
(Lessor)Under the previous accounting standard, finance leases that deemto transfer ownership of the leased property to the lessee were to
be treated as sales. However, other finance leases were permitted to be accounted for as operating lease transactions if certain“as if sold” information is disclosed in the note to the lessor’s
financial statements. The revised accounting standard requiresthat all finance leases that deem to transfer ownership of the leaseproperty to the lessee should be recognized as lease receivables,
and all finance leases that deem not to transfer ownership of theleased property to the lessee should be recognized as investments
in lease.
The Company applied the revised accounting standard effective
April 1, 2008. The effect of this change was to decrease operating
income and income before income taxes and minority interests by¥1,232 million ($12,543 thousand).

(12) Accounting for significant hedges
a. Interest risk hedges
The consolidated banking subsidiaries hedge interest rate risks
arising from their financial assets and liabilities by employing thetechnique known as “individual hedging” that establishes a specificposition to directly hedge a particular item. Such hedges, limited
to certain assets and liabilities, are accounted for by the deferred
method or, where appropriate interest rate swaps are involved, by
the special rule method.
The effectiveness of hedges is assessed as follows: the subsidiaries specify hedge items according to their risk management
regulations, with the aim of centralized management of hedge
instruments, and hedge items and verify the extent to which exposure of interest rate risks on hedged items is mitigated.
b. Foreign currency risk hedges
The consolidated banking subsidiaries hedge currency exchange
fluctuation risks arising from their foreign currency denominatedfinancial assets and liabilities. Such hedges are accounted for by
the deferred method specified in the “Accounting and Auditing
Treatments in Banking Business in Accounting for Foreign Currency
Denominated Transactions and Others” (JICPA Industry Audit
Committee Report No. 25).
The effectiveness of hedges is assessed as follows: where currency swap transactions and exchange swap transactions are usedas hedging instruments to offset exchange fluctuation risks arisingfrom foreign currency denominated financial assets and liabilities,
it is assessed by verifying the agreement of the amounts of thedesignated hedging instruments corresponding hedged foreign
currency financial assets and liabilities.
c. Consolidated non-banking subsidiaries are not engaged in hedging operations using derivative transactions.
(13) Per share information
Basic earnings per share is computed by dividing net income available to common stockholders by the weighted-average number ofshares of common stock outstanding for the period.
Diluted earnings per share reflects the potential dilution that
could occur if preferred stock was converted into common stock.
(14) Accounting for consumption tax
National and local consumption taxes are accounted for by the tax
exclusion method.
However, a range of consumption taxes on equipment andpremises that cease qualifying for exclusion is expensed as
incurred.
(15) Accounting for income taxes
The provision for income taxes is computed based on the pretax
income included in the consolidated statements of income. The
asset and liability approach is used to recognize deferred tax assets
and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax basesof assets and liabilities. Deferred taxes are measured by applying
currently enacted tax laws to the temporary differences.

Hokuhoku Financial Group, Inc. Annual Report 200933

(16) Cash and cash equivalents in consolidated statements ofcash flows
Cash and cash equivalents consist of cash on hand and demand
deposits with the Bank of Japan.
(17) Additional information
Partial changes was made to the calculation method for fair valueof other securities
The Company had been applying market price to establish
book value for floating-rate Japanese Government Bonds for fiscal
year 2007. Based on our determination that current market prices
may not reflect fair value due to the extremely limited volume ofactual transactions, the Company has applied theoretically calculated bond prices as book value for fiscal 2008. Compared withthe amounts using market prices for the calculation of fair-value
amounts, amounts posted under “Securities” and “Valuation difference on available-for-sale securities” have increased by ¥12,686
million and ¥7,562 million, respectively while deferred tax assets
have decreased by ¥5,124 million.
The reasonably estimated fair-value amounts of the said government bonds are equivalent to the discounted present value of thebonds, which is calculated by discounting future cash flows of thebonds by discount rates determined primarily using bond yields.
The primary variables in the calculation formula of the present valueof the said government bonds are bond yields and yield volatilities.

4. Trading Accounts
Trading accounts as of March 31, 2009 and 2008 are as follows:

AssetsMillions of yen
2009
2008

Thousands of
U.S. dollars
2009

Trading securities .........................
Trading-related financial derivatives ...
Total ............................................

¥3,783
4,936¥8,719¥4,125
3,826¥7,952$38,51750,252$88,769

Liabilities

Millions of yen
2009
2008

Thousands of
U.S. dollars
2009

Trading-related financial derivatives ...
Total ............................................

¥2,263¥2,263$23,043$23,043¥1,563¥1,563

5. Securities

6. Loans and Bills Discounted
Loans and bills discounted as of March 31, 2009 and 2008 are as
follows:
Millions of yen
2009
2008

Bills discounted............................. ¥ 97,138 ¥ 124,166
Loans on bills ...............................
509,018
586,733
Loans on deeds ............................ 5,472,617 5,111,434
Overdrafts .................................... 1,054,374 1,049,048
Total ............................................ ¥7,133,148 ¥6,871,383

Thousands of
U.S. dollars
2009$

988,892
5,181,900
55,712,285
10,733,731$72,616,808

Loans and bills discounted include loans to borrowers underbankruptcy proceedings, overdue loans, loans overdue for at least
three months and restructured loans.
The amounts of these loans are as follows:
Millions of yen
2009
2008

Loans to borrowers
under bankruptcy proceedings ..... ¥ 31,134
Overdue loans .............................. 182,427
Loans overdue
for at least three months .............
707
Restructured loans ........................
16,412
Total ............................................ ¥230,682

Thousands of
U.S. dollars
2009¥ 22,756
193,383$ 316,957
1,857,145

172
47,643¥263,955

7,205
167,084$2,348,391

These amounts represent the amount before deduction of theallowance for loan losses.

7. Foreign Exchanges
Foreign exchanges as of March 31, 2009 and 2008 are as follows:
Millions of yen
2009
2008

AssetsDue from foreign banks .................
Foreign exchange bills bought........
Foreign exchange bills receivable ...
Total ............................................
Liabilities
Due to foreign banks .....................
Foreign exchange bills sold ............
Foreign exchange bills payable ......
Total ............................................

Thousands of
U.S. dollars
2009¥ 9,007920
3,452¥13,381¥ 7,751
2,039
4,238¥14,029$ 91,700
9,374
35,151$136,225

¥

¥

$

¥

—
51
4
55

¥

82
184
4
270

$

—
524
43
567

Securities as of March 31, 2009 and 2008 are as follows:
Millions of yen
2009
2008

Japanese government bonds ......... ¥ 715,949 ¥ 701,755
Japanese local government bonds ...
260,844
216,978
Japanese corporate bonds.............
452,952
445,971
Japanese stocks ...........................
133,992
167,742
Other securities ............................
109,852
128,722
Total ............................................ ¥1,673,591 ¥1,661,169

Thousands of
U.S. dollars
2009$ 7,288,500
2,655,444
4,611,141
1,364,072
1,118,318$17,037,475

8. Tangible Fixed Assets
The accumulated depreciation amounted to ¥96,000 million($977,307 thousand) and ¥162,428 million as of March 31, 2009
and 2008, respectively.
The book value of tangible fixed assets adjusted for gains
on sales of replaced assets amounted to ¥3,898 million($39,691 thousand) and ¥3,898 million as of March 31, 2009 and2008, respectively.

9. Customers’ Liabilities for Acceptances and Guarantees
All contingent liabilities arising from acceptances and guarantees
are reflected in acceptances and guarantees. As a contra account,customers’ liabilities for acceptances and guarantees is also shownon the assets side, which represents the Bank’s right of indemnityfrom the applicants.

34

Hokuhoku Financial Group, Inc. Annual Report 2009

Guarantees obligations on securities issued by private placement (pursuant to Article 2, Clause 3 of the Japanese Financial
Instruments and Exchange Act) amounted to ¥114,419 million($1,164,808 thousand) and ¥112,895 million as of March 31, 2009
and 2008, respectively.

10. Pledged Assets
Assets that are pledged as collateral as of March 31, 2009 and2008 are as follows:
Millions of yen
2009
2008

Assets that are pledged as collateral:
Securities ................................. ¥279,322
Loans and bills discounted ........ 346,216
Other assets.............................
500
Obligations corresponding
to collateral assets:
Deposits .................................. ¥ 52,962
Payables under securities
lending transactions................
—
Call money and bills sold...........
10,000Borrowed money ...................... 323,754¥175,406
370,693—

Thousands of
U.S. dollars
2009$2,843,553
3,524,544
5,092¥ 61,268$ 539,170

6,492
30,000172,300—
101,8023,295,877

In addition to the assets presented above, the following assets
were pledged as collateral relating to transactions on exchange
settlements or as substitutes for futures transaction margins as ofMarch 31, 2009 and 2008:
Millions of yen
2009
2008

Securities ..................................... ¥247,370
Other assets .................................
210¥204,844
58

Thousands of
U.S. dollars
2009$2,518,283
2,139

Other assets include guarantee deposits of ¥4,368 million($44,475 thousand) and ¥4,449 million as of March 31, 2009 and2008, respectively.

11. Deposits
Deposits as of March 31, 2009 and 2008 are as follows:
Millions of yen
2009
2008

Current deposits, ordinary deposits,
saving deposits
and deposits at notice ................. ¥4,091,573 ¥4,009,612
Time deposits
and installment savings.................. 4,343,065 4,157,401
Other deposits ...................................
155,934
173,817
Subtotal .............................................. ¥8,590,573 ¥8,340,831
70,965
94,793
NCDs ...................................................
Total .................................................... ¥8,661,538 ¥8,435,625

Thousands of
U.S. dollars
2009$41,652,993
44,213,233
1,587,442$87,453,668
722,439$88,176,107

12. Borrowed Money
Borrowed money includes ¥70,500 million ($717,703 thousand)and ¥50,500 million of subordinated borrowed money as of March
31, 2009 and 2008, respectively.

13. Bonds Payable
Bonds payable includes ¥64,500 million ($656,622 thousand) and¥66,500 million of subordinated bonds as of March 31, 2009 and2008, respectively.

14. Revaluation Reserve for Land
Under the “Act Concerning Land Revaluation,” Hokuriku Bank,
Ltd. revaluated its own land for business operation as of March 31,
1998. The revaluation gain is included in net assets as “Revaluation
reserve for land.” The carrying amount of the land after the above
one-time revaluation exceeded the market value by ¥22,758 million($231,686 thousand) and ¥22,068 million as of March 31, 2009
and 2008, respectively.

15. Capital Stock
Information with respect to capital stock of the Company as ofMarch 31, 2009 and 2008 are as follows:2009

Number of shares:
Authorized:
Common ..................................... 2,800,000,000
Preferred (Type 1) ........................
400,000,000
Preferred (Type 2) ........................
200,000,000
Preferred (Type 3) ........................
200,000,000
Preferred (Type 4) ........................
90,000,000
Preferred (Type 5) ........................
110,000,000
Issued and outstanding:Common ..................................... 1,391,630,146
Preferred (Type 1) ........................
50,000,000
Preferred (Type 4) ........................
61,400,000
Preferred (Type 5) ........................
107,432,000

2008

2,800,000,000
400,000,000
200,000,000
200,000,000
90,000,000
110,000,000
1,391,630,146
80,000,000
79,000,000
107,432,000(1) Preferred stock (Type 1 and Type 4)
Preferred stock (Type 1 and Type 4) are noncumulative and nonparticipating for
dividend payments, and stockholders of the preferred stock are not entitled tovote at a general meeting of stockholders except when the proposal to pay theprescribed dividends to stockholders is not submitted to the general meeting ofstockholders or is rejected at the general meeting of stockholders.
Annual dividends per share of preferred stock (Type 1 and Type 4) are paid tostockholders by ¥7.70 and ¥6.62, respectively.
In cases of liquidation distribution, stockholders of preferred stock (Type 1 andType 4) will receive ¥500 and ¥570 per share, respectively, and will not have theright to participate in any further liquidation distribution.
The Company may, at any time, purchase and retire preferred stock out of
earnings available for distribution to the stockholders.
Stockholders of preferred stock (Type 1 and Type 4) may request theCompany to convert their preferred stock into common stock. The period during
which the conversion may be requested (the “conversion period”) and the terms
and conditions of conversion with respect to preferred stock (Type 1 and Type4) were determined by the resolution made in accordance with the provisions of
the Companies Act of Japan (the “Companies Act”), of a stockholders meeting of
the Company. The conditions of conversion of preferred stock (Type 1 and Type4) were determined by the resolution of the board of directors relating to theissuance of the relevant preferred stock. The conversion period and conversion
price* of each type of preferred stock are as follows:
Preferred stock (Type 1): September 1, 2004 to July 29, 2010 ¥314.40
Preferred stock (Type 4): September 1, 2004 to July 31, 2010 ¥313.90* Conversion prices are reset and adjusted pursuant to the appointed rules governing
conversion of the preferred stocks.

Any preferred stock (Type 1 and Type 4) with respect to which conversion has
not been requested during the conversion period shall be mandatorily converted,
as of the date immediately following the last day of the conversion period (the“mandatory conversion date”), into such number of common stock as is obtainedby dividing the corresponding amount set forth below by the average of thedaily closing prices per share of common stock in regular transactions at theTokyo Stock Exchange on each of the 30 consecutive trading days (excluding
any day on which the closing price is not available) commencing on the 45th
trading day preceding the mandatory conversion date. If such average price is

Hokuhoku Financial Group, Inc. Annual Report 200935

less than ¥146.70 and ¥136.20, in the case of preferred stock (Type 1 and Type4), respectively, then the preferred stock shall be converted into such numberof common stock as is obtained by dividing the corresponding amount set forth
below by the relevant amount described above:
Preferred stock (Type 1): ¥500 per share
Preferred stock (Type 4): ¥570 per share(2) Preferred stock (Type 5)
Preferred stock (Type 5) is noncumulative and nonparticipating for dividend
payments, and stockholders of the preferred stock (Type 5) are not entitled tovote at a general meeting of stockholders except when the proposal to pay theprescribed dividends to stockholders is not submitted to the general meeting ofstockholders or is rejected at the general meeting of stockholders.
Annual dividends per share of preferred stock (Type 5) are paid to stockholders by ¥15.00.

16. Shareholders’ Equity
Since May 1, 2006, Japanese banks have been subject to the
Banking Act and the Companies Act. The significant provisions in
the Companies Act that affect financial and accounting matters are
summarized below:
a. Dividends
Under the Companies Act, companies can pay dividends at any
time during the fiscal year in addition to the year-end dividend upon
resolution at the shareholders meeting. For companies that meetcertain criteria such as; (1) having the Board of Directors, (2) having
independent auditors, (3) having the Board of Corporate Auditors,and (4) the term of service of the directors is prescribed as one year
rather than two years of normal term by its articles of incorporation,
the Board of Directors may declare dividends (except for dividends
in kind) at any time during the fiscal year if the company has prescribed so in its articles of incorporation. However, the Company
cannot do so because it does not meet all the above criteria.
Semiannual interim dividends may also be paid once a year upon
resolution by the Board of Directors if the articles of incorporationof the company so stipulate. The Companies Act provides certain
limitations on the amounts available for dividends or the purchaseof treasury stock. The limitation is defined as the amount available
for distribution to the shareholders, but the amount of net assets
after dividends must be maintained at no less than ¥3 million.
b. Increases/decreases and transfer of common stock, reserveand surplus
The Banking Act requires that an amount equal to 20% of
dividends must be appropriated as a legal reserve (a componentof retained earnings) or as additional paid-in capital (a componentof capital surplus) depending on the equity account charged upon
the payment of such dividends until the total of aggregate amountof legal reserve and additional paid-in capital equals 100% of thecommon stock. Under the Companies Act, the total amount ofadditional paid-in capital and legal reserve may be reversed without
limitation. The Companies Act also provides that common stock,legal reserve, additional paid-in capital, other capital surplus andretained earnings can be transferred among the accounts undercertain conditions upon resolution of the shareholders.
c. Treasury stock and treasury stock acquisition rights
The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock by resolution of theBoard of Directors. The amount of treasury stock purchased cannot exceed the amount available for distribution to the shareholders

36

Hokuhoku Financial Group, Inc. Annual Report 2009

which is determined by specific formula.
Under the Companies Act, stock acquisition rights, which werepreviously presented as a liability, are now presented as a separate
component of equity.
The Companies Act also provides that companies can purchase both treasury stock acquisition rights and treasury stock.
Such treasury stock acquisition rights are presented as a separate
component of equity or deducted directly from stock acquisitionrights.

17. Per Share Information
Yen

Net assets per share .............................
Basic earnings per share .......................
Diluted earnings per share .....................

2009

2008

¥234.56¥ 24.91¥ 22.79¥225.62¥ 25.81¥ 23.48

Reconciliation of the differences between basic and diluted
earnings per share for the years ended March 31, 2009 and 2008
are as follows:
Millions ofyen

For the year ended March 31, 2009:
Basic earnings per share
Net income available
to common stockholders ..........
Effect of dilutive securities
Preferred stock..........................
Diluted earnings per share
Net income for computation .......
For the year ended March 31, 2008:
Basic earnings per share
Net income available
to common stockholders ..........
Effect of dilutive securities
Preferred stock..........................
Diluted earnings per share
Net income for computation .......

Net income

Thousands ofshares
Weighted
average shares

Yen
Earnings
per share¥34,631

1,390,260¥24.91

791

163,879¥35,423

1,554,139¥22.79¥35,889

1,390,354¥25.81

1,138

186,203¥37,028

1,576,557¥23.48

18. Fees and Commissions
Fees and commissions for the years ended March 31, 2009 and2008 are as follows:
Millions of yen
2009
2008

Fees and commissions (income)
Deposits and loans ...................
Remittances and transfers ........
Securities-related business .......
Others .....................................
Total ............................................

¥10,982
12,671
4,967
12,396¥41,017¥11,121
13,2059,470
13,478¥47,275

Millions of yen
2009
2008

Fees and commissions (expenses)
Remittances and transfers ........
Others .....................................
Total ............................................

¥ 2,112
9,434¥11,547¥ 2,156
9,052¥11,209

Thousands of
U.S. dollars
2009$111,801
128,996
50,567
126,199$417,563
Thousands of
U.S. dollars
2009$ 21,504
96,049$117,553

19. Trading Income and Losses

22. Cash and Cash Equivalents(a) Trading income

Millions of yen
2009
2008

Thousands of
U.S. dollars
2009

Income from trading securities .......
Income from trading derivatives .....
Total ............................................

¥ 196
1,436
¥1,633¥ 250
1,038¥1,289$ 2,002
14,625$16,627(b) Trading losses

Millions of yen
2009
2008

Thousands of
U.S. dollars
2009

Losses on trading securities ..........
Total ............................................

—
—

—
—

—
—

The reconciliations of “Cash and cash equivalents” in the consolidated statements of cash flows and “Cash and due from banks” inconsolidated balance sheets as of March 31, 2009 and 2008, areas follows:
Millions of yen
2009
2008

Cash and due from banks
in balance sheet ......................... ¥412,377
Due from banks except for
deposits with the Bank of Japan... (164,053)
Cash and cash equivalentsin the statements of cash flows.... ¥248,324

Thousands of
U.S. dollars
2009¥282,827$4,198,083(117,492)(1,670,092)¥165,335$2,527,991

20. Other Expenses
Included in other expenses for the fiscal year ended March 31,
2009 and 2008 were write-offs of loans and bills discounted of¥1,193 million ($12,153 thousand) and ¥1,282 million, impairment losses on stocks and other securities of ¥15,779 million($160,634 thousand) and ¥8,482 million, losses on sales of loans of¥1,955 million ($19,905 thousand) and ¥1,719 million, respectively.

21. Income Taxes
The Company and its domestic subsidiaries are subject to Japanesenational and local income taxes which, in the aggregate, resulted ina normal effective statutory tax rate of approximately 40.43% for
the years ended March 31, 2009 and 2008, respectively.
The tax effects of significant temporary differences and tax loss
carryforwards which generated in deferred tax assets and liabilities
at March 31, 2009 and 2008 are as follows:
Millions of yen
2009
2008

Deferred tax assets:
Allowance for loan losses .......... ¥ 69,534
Depreciation .............................
1,971
Reserve for employee
retirement benefits .................
15,901
Loss on valuation of securities ...
14,567
Valuation difference
on available-for-sale securities ...
9,615
Other .......................................
4,828
Operating loss carryforwards .....
33,433
Subtotal............................... 149,852
Less: Valuation allowance .........
49,974
Total deferred tax assets ...............
99,878Deferred tax liabilities:
Book-value correction
for securities .......................... ¥ 4,730
Other .......................................
1,756
Total deferred tax liabilities ............
6,486
Net deferred tax assets ................. ¥ 93,391

Thousands of
U.S. dollars
2009¥ 75,921
2,083$ 707,873
20,072

15,60812,827

161,885
148,295

4,208
4,896
29,777
145,323
73,681
71,641

97,88949,152
340,361
1,525,527
508,747
1,016,780¥ 6,073
910
6,984¥ 64,657$

23. Commitment Lines
Loan agreements and commitment line agreements relating toloans are agreements, which oblige the Group to lend funds up toa certain limit agreed in advance. The Group makes the loans upon
the request of an obligor to draw down funds under such loan
agreements, as long as there is no breach of the various terms andconditions stipulated in the relevant loan agreement. The unused
commitment balance relating to these loan agreements amounted
to ¥2,218,922 million ($22,589,049 thousand) and ¥2,247,264
million as of March 31, 2009 and 2008, respectively, out of which,¥2,177,913 million ($22,171,576 thousand) and ¥2,206,850 million
related to loans where the term of the agreement is one year or
less, or unconditional cancellation of the agreement is allowed at
any time, as of March 31, 2009 and 2008, respectively.
In many cases the term of the agreement runs its course without
the loan ever being drawn down. Therefore, the unused loan commitment will not necessarily affect future cash flows. Conditions areincluded in certain loan agreements which allow the Group either todecline the request for a loan draw down or to reduce the agreed
limit amount where there is due cause to do so, such as when
there is a change in financial condition, or when it is necessary
to do so in order to protect the Group’s credit. The Group takes
various measures to protect its credit. Such measures include having the obligor pledge collateral to the Bank and its consolidated
subsidiaries in the form of real estate, securities etc. on signing theloan agreement, or in accordance with the Group’s establishedinternal procedures confirming the obligor’s financial condition etc.
at regular intervals.

48,154
17,87966,033$ 950,747

Hokuhoku Financial Group, Inc. Annual Report 200937

24. Segment Information(a) Segment information by business
For the fiscal years ended March 31, 2009 and 2008 on consolidated results by business segment are as follows:
Millions of yen
2009
Banking

Lease

Other business

Total

I. Ordinary income(1) Ordinary income from outside customers ......................
(2) Ordinary income from intersegment transactions ...........
Total ................................................................................
Ordinary expenses............................................................
Ordinary profits (loss)........................................................

¥ 217,075
1,461
218,536
200,515¥ 18,020¥14,224
1,228
15,453
14,945¥ 507¥ 8,348
6,515
14,864
12,886¥ 1,977¥

II. Identifiable assets.............................................................
Depreciation expenses......................................................
Losses on impairment of fixed assets ................................
Capital expenditures .........................................................

¥9,937,253
6,641
9
13,939¥39,946167—
0¥139,521
327
5
455¥10,116,721
7,135
14
14,395¥

239,648
9,206
248,854
228,348
20,505

Elimination or
corporate

Consolidated¥—(9,206)(9,206)(10,099)¥893¥ 239,648—
239,648
218,249¥ 21,399¥(187,635)———¥9,929,086
7,135
14
14,395

Elimination or
corporate

Consolidated

Millions of yen
2008
Banking

Lease

Other business

Total

I. Ordinary income(1) Ordinary income from outside customers ......................
(2) Ordinary income from intersegment transactions ...........
Total ................................................................................
Ordinary expenses............................................................
Ordinary profits (loss)........................................................

¥ 235,686
1,915
237,602173,650¥ 63,952¥16,417
1,385
17,803
17,448¥ 354¥ 9,153
6,804
15,95813,417¥ 2,540¥ 261,257
10,106271,363
204,516¥ 66,846¥—(10,106)(10,106)(9,576)¥(529)¥ 261,257—
261,257
194,940¥ 66,317

II. Identifiable assets.............................................................
Depreciation expenses......................................................
Losses on impairment of fixed assets ................................
Capital expenditures .........................................................

¥9,546,268
5,958
244
7,585

¥45,428
9,639—
10,190¥157,976
390—
365¥9,749,674
15,988244
18,141¥(181,709)———¥9,567,964
15,988244
18,141Elimination or
corporate

Consolidated

Thousands of U.S. dollars
2009
Banking

Lease

Other business

Total

I. Ordinary income(1) Ordinary income from outside customers ...................... $ 2,209,865(2) Ordinary income from intersegment transactions ...........
14,879Total ................................................................................
2,224,744
Ordinary expenses............................................................
2,041,290
Ordinary profits (loss)........................................................ $183,454$144,805
12,511
157,316
152,152$ 5,164$

84,993
66,330151,323
131,192$ 20,131$ 2,439,663
93,7202,533,383
2,324,634$
208,749$—(93,720)(93,720)(102,817)$
9,097$ 2,439,663—
2,439,663
2,221,817$
217,846

II. Identifiable assets............................................................. $101,163,122
Depreciation expenses......................................................
67,610Losses on impairment of fixed assets ................................
95
Capital expenditures .........................................................
141,902$406,658
1,700—
5$1,420,359
3,335
55
4,642

$102,990,139
72,645150
146,549$(1,910,161)———$101,079,978
72,645150
146,549(b) Segment information by location
As operations in Japan, in terms of all segments and total assets for all segments, accounted for more than 90% of total ordinary profits,
information by location has been omitted.
(c) Segment information about the ordinary income from international operations
As ordinary profits from international operations accounted for less than 10% of total ordinary profits, information about the ordinary profits
from international operations has been omitted.

38

Hokuhoku Financial Group, Inc. Annual Report 2009

25. Lease Transactions(Lessee)
The Company leases ATMs, computer equipment, software andother assets.
As discussed in Note 3 (11), the Company accounts for leases
which existed at the transition date and do not transfer ownershipof the leased property to the lessee as operating lease transactions. Pro forma information for the year ended March 31, 2009 as
described below is for such leases existing at the transition date.
Pro forma information with respect to the leased property, suchas acquisition cost, accumulated depreciation and net book value
at March 31, 2009 and 2008 are as follows:

Acquisition cost ............................
Accumulated depreciation .............
Net book value ..............................

Millions of yen
2009
2008

Thousands of
U.S. dollars
2009¥4,1882,435¥1,753$42,644
24,791$17,853¥4,2071,763¥2,444

Pro forma amounts of obligations under finance lease at March
31, 2009 and 2008 are as follows:

Within one year.............................
Over one year ...............................
Total ............................................

Millions of yen
2008

Acquisition cost ..........................................................................
Accumulated depreciation ...........................................................
Balance at year-end ....................................................................

¥46,459
21,735¥24,723

The pro forma amounts of lease receivable under finance leaseat March 31, 2008 is as follows:
Millions of yen
2008

Within one year...........................................................................
Over one year .............................................................................
Total ..........................................................................................

¥ 8,953
17,615¥26,569

Millions of yen
2009
2008

Thousands of
U.S. dollars
2009

Lease payments received and depreciation expenses for theyears ended March 31, 2008 is as follows:

¥ 652
1,101
¥1,753$ 6,638
11,215$17,853

Millions of yen
2008

¥ 690
1,753
¥2,444

Pro forma information concerning lease payments and depreciation expenses for the years ended March 31, 2009 and 2008
are as follows:
Millions of yen
2009
2008

Lease payments............................
Depreciation expenses ..................

The method of calculating the pro forma amounts of depreciation expense for the years ended March 31, 2009 and 2008 are as
follows:
Depreciation is computed based on the straight-line method
over the period of lease, with no residual value.
(Lessor)
Acquisition cost, accumulated depreciation and balance at March
31, 2008 is as follows:

¥690
690

¥659
659

Lease payments received ............................................................
Depreciation expenses ................................................................

¥10,717
9,636

Thousands of
U.S. dollars
2009$7,031
7,031

26. Retirement Benefits(a) Overview of the Group’s retirement benefit plans
The Hokuriku Bank, Ltd., provides the defined benefit programs that are a corporate pension plan, a qualified retirement pension plan and aretirement lump sum grant. At the time of retirement, employees may be issued a premium retirement grant that is not subject to inclusion in
the actuarial computation of projected benefit obligations in conformity to the standards for accounting for retirement benefits. The Hokuriku
Bank, Ltd., was approved by the Minister of Health, Labor and Welfare on February 17, 2003, to be relieved of the obligation to administer the
future payment service of the government mandated portion of its employees pension fund. The Hokuriku Bank, Ltd. was further approved on
March 1, 2005, to switch from the employees pension fund to a corporate pension fund.
The Hokkaido Bank, Ltd., provides defined benefit arrangements that combine a retirement lump sum grant and an employees pension
fund plan. The Hokkaido Bank, Ltd., was approved by the Minister of Health, Labor and Welfare on March 26, 2004, to be relieved of theobligation to administer the future payment service of the government mandated portion of the employees pension fund.
The consolidated domestic subsidiaries other than the two noted above provide retirement lump sum grants.
The Company’s employees are all on loan from its subsidiaries, and are covered by the retirement benefit program of the subsidiaries fromwhich they each come.
The Hokuriku Bank, Ltd., and The Hokkaido Bank, Ltd. has established benefit trust arrangements as a part of its plan assets.

Hokuhoku Financial Group, Inc. Annual Report 200939

(b) Retirement benefit
Millions of yen
2009
2008

Projected benefit obligations (A) ................................................................................................................................
Plan assets at fair value (B).......................................................................................................................................
Projected benefit obligations in excess of plan assets (C) = (A) + (B) ...........................................................................
Unrecognized transitional obligation (D) .....................................................................................................................
Unrecognized actuarial differences (E) .......................................................................................................................
Unrecognized prior service costs (F) ..........................................................................................................................
Net projected benefit obligations recognized on the consolidated balance sheets (G) = (C) + (D) + (E) + (F) ...................
Prepaid pension costs (H) .........................................................................................................................................
Reserve for employee retirement benefits (G) – (H) .....................................................................................................

¥(93,095)
48,736(44,359)
11,36928,695(2,504)(6,799)2,161¥ (8,960)¥(93,264)
61,510(31,753)
13,27014,081(4,502)(8,904)
2,147¥(11,052)

Thousands of
U.S. dollars
2009$(947,732)
496,142(451,590)
115,742
292,129(25,497)(69,216)
22,000$ (91,216)(c) Retirement benefit expenses

Service costs ...........................................................................................................................................................
Interest cost on projected benefit obligations .............................................................................................................
Expected return on plan assets .................................................................................................................................
Amortization of unrecognized prior service costs ........................................................................................................
Amortization of unrecognized actuarial differences .....................................................................................................
Amortization of transitional obligation ........................................................................................................................
Other (additional payments, including premium retirement benefits) ............................................................................
Net periodic retirement benefit expenses ...................................................................................................................

Millions of yen
2009
2008

Thousands of
U.S. dollars
2009¥1,9302,103(2,072)(1,997)
2,569
1,900
202
¥4,635$19,654
21,410(21,103)(20,340)
26,161
19,351
2,061$47,194¥2,042
2,098(2,252)(1,997)
(91)
1,895
287
¥1,981(d) Assumptions for calculation of projected benefit obligations(1) Discount rate .........................................................................................................................................
(2) Expected rate of return on pension assets................................................................................................
(3) Method of benefit attribution ...................................................................................................................
(4) Period of amortization of unrecognized prior service costs ........................................................................
(5) Period of amortization of unrecognized actuarial differences .....................................................................
(6) Period of amortization of transitional obligation.........................................................................................

2009

2008

2.0% – 2.5%
3.5% – 4.0%
Straight-line method
8 or 9 years
8 or 9 years
15 years

2.0% – 2.5%
3.5% – 4.0%
Straight-line method
8 or 9 years
8 or 9 years
15 years

27. Market Value of Securities and Money Held in Trust(1) Securities
The market value of securities at March 31, 2009 and 2008 were as follows:
1. The amounts shown in the following tables include trading securities classified as “Trading assets,” negotiable certificates of deposit
bought classified as “Cash and due from banks,” and commercial paper and beneficiary claims on loan trusts classified as “Commercial
paper and other debt purchased,” in addition to “Securities” stated in the consolidated balance sheets.
2. Investments in subsidiaries and affiliates have no market quotations.
(a) Securities classified as trading purposes

March 31
Consolidated balance sheet amount ..........................................................................................................................
Valuation gains included in the earnings for the fiscal year .........................................................................................

Millions of yen
2009
2008

Thousands of
U.S. dollars
2009¥3,783
28$38,517291¥4,12539(b) Bonds classified as held-to-maturity with market value
Millions of yen

40

March 31, 2009

Consolidatedbalance sheet
amountMarketvalue

Net unrealized
gains (losses)

Unrealized
gains

Japanese government bonds ............................................................
Japanese local government bonds ....................................................
Japanese corporate bonds................................................................
Other ..............................................................................................
Total ...............................................................................................

¥16,396
4,464
30,183
11,601¥62,646¥16,839
4,471
28,967
11,288¥61,566¥ 442
6(1,216)(312)¥(1,079)

¥443
6
18
—
¥468

Hokuhoku Financial Group, Inc. Annual Report 2009

Unrealized
losses

¥

0
—
1,235
312
¥1,548

Millions of yen

March 31, 2008

Japanese government bonds ............................................................
Japanese local government bonds ....................................................
Japanese corporate bonds................................................................
Other ..............................................................................................
Total ...............................................................................................

Consolidatedbalance sheet
amountMarketvalue

Net unrealized
gains (losses)

Unrealized
gains

Unrealized
losses¥13,854
10,87853,45917,135¥95,327¥14,278
10,90153,26916,938¥95,387

¥423
22
(189)
(196)
¥ 59

¥423
22
41
19
¥507

¥ —
0
230
216
¥447

Thousands of U.S. dollars

March 31, 2009

Consolidatedbalance sheet
amountMarketvalue

Net unrealized
gains (losses)

Unrealized
gains

Unrealized
lossesJapanese government bonds ............................................................
Japanese local government bonds ....................................................
Japanese corporate bonds................................................................
Other ..............................................................................................
Total ...............................................................................................

$166,923
45,447307,278
118,107$637,755$171,431
45,516294,895
114,922$626,764$ 4,50869(12,383)(3,185)$(10,991)$4,51069
192—$4,771$

2—
12,575
3,185$15,762

Note: Market value is calculated by using market prices at the fiscal year-end.

(c) Available-for-sale securities with market value
Millions of yen

March 31, 2009

Acquisition
cost

Consolidatedbalance sheet
amountStocks .............................................................................................
Bonds .............................................................................................
Japanese government bonds........................................................
Japanese local government bonds ................................................
Japanese corporate bonds ...........................................................
Other ..............................................................................................
Total ...............................................................................................

¥ 114,477
1,264,669
702,737
256,002305,929
113,964¥1,493,112¥ 104,451
1,260,759
699,552
256,379
304,826
99,967¥1,465,177

March 31, 2008

Acquisition
cost

Consolidatedbalance sheet
amountNet unrealized
gains (losses)

Unrealized
gains

Unrealized
lossesStocks .............................................................................................
Bonds .............................................................................................
Japanese government bonds........................................................
Japanese local government bonds ................................................
Japanese corporate bonds ...........................................................
Other ..............................................................................................
Total ...............................................................................................

¥ 123,196
1,185,426
705,534
204,864
275,027
121,064¥1,429,687¥ 136,411
1,169,342
687,900
206,099
275,342
114,862¥1,420,616¥13,215(16,083)(17,634)
1,235
315(6,202)¥ (9,070)¥22,579
4,949
2,072
1,772
1,104
792
¥28,321¥ 9,364
21,032
19,707
536
789
6,994
¥37,391

Acquisition
cost

Consolidatedbalance sheet
amountNet unrealized
gains (losses)

Unrealized
gains

Unrealized
losses$ 1,165,403
12,874,576
7,153,998
2,606,158
3,114,420
1,160,184$15,200,163$ 1,063,332
12,834,767
7,121,577
2,609,996
3,103,194
1,017,685$14,915,784$(102,071)(39,809)(32,421)
3,838(11,226)(142,499)$(284,379)$ 89,917
44,77824,725
11,5198,534
761$135,456$191,988
84,587
57,146
7,681
19,760143,260$419,835

Net unrealized
gains (losses)

Unrealized
gains

Unrealized
losses¥(10,026)(3,910)(3,184)376(1,102)(13,997)¥(27,934)¥ 8,832
4,398
2,428
1,131
838
74
¥13,305¥18,858
8,309
5,613
754
1,941
14,072¥41,240

Millions of yen

Thousands of U.S. dollars

March 31, 2009

Stocks .............................................................................................
Bonds .............................................................................................
Japanese government bonds........................................................
Japanese local government bonds ................................................
Japanese corporate bonds ...........................................................
Other ..............................................................................................
Total ...............................................................................................

Note: Consolidated balance sheet amount is determined as follows:
StocksAverage market price during one month before the fiscal year-end
Bonds and other Market price at the fiscal year-end

Hokuhoku Financial Group, Inc. Annual Report 200941

(d) Available-for-sale securities sold during the years ended March 31, 2009 and 2008
Millions of yen
2009
2008

Year ended March 31
Proceeds from sales................................................................................................................................................. ¥660,522
Gains on sales .........................................................................................................................................................
3,580
Losses on sales .......................................................................................................................................................
2,279¥474,673
10,160891

Thousands of
U.S. dollars
2009$6,724,245
36,451
23,203(e) Securities with no available market value
Thousands of U.S.
Millions of yen
dollars
Consolidated balance sheet amount
2009
2008
2009

March 31

Bonds classified as held-to-maturity.......................................................................................................................... ¥ 37,925
Privately placed bonds .........................................................................................................................................
37,925
Available-for-sale securities ...................................................................................................................................... 234,673
Unlisted stocks ....................................................................................................................................................
29,459Unlisted foreign securities ....................................................................................................................................
0
Other .................................................................................................................................................................. 205,213¥ 36,627
36,627
264,689
31,087
1
233,601$ 386,084
386,084
2,389,017
299,9018
2,089,108

After 10 years¥135,387
134,617—769
17,283¥152,670(f) Change in classification of securities
Not applicable.
(g) Redemption schedule of available-for-sale securities with maturities and held-to-maturity bonds

March 31, 2009

Within 1 year

Millions of yen
After 1 year
After 5 years
through 5 years
through 10 years

Bonds ..........................................................................................................................
Japanese government bonds.....................................................................................
Japanese local government bonds .............................................................................
Japanese corporate bonds ........................................................................................
Other ...........................................................................................................................
Total ............................................................................................................................

¥168,626
73,682
24,81070,133
13,479¥182,106¥703,755
232,077
152,349
319,328
27,185¥730,941

March 31, 2008

Within 1 year

Millions of yen
After 1 year
After 5 years
through 5 years
through 10 years

After 10 years

Bonds ..........................................................................................................................
Japanese government bonds.....................................................................................
Japanese local government bonds .............................................................................
Japanese corporate bonds ........................................................................................
Other ...........................................................................................................................
Total ............................................................................................................................

¥222,776
120,085
21,002
81,68813,267¥236,043¥625,987
212,022
115,956
298,008
43,666¥669,654¥147,289
146,397—892
14,329¥161,619

March 31, 2009

Within 1 year

Thousands of U.S. dollars
After 1 year
After 5 years
through 5 years
through 10 years

After 10 years

Bonds ..........................................................................................................................
Japanese government bonds.....................................................................................
Japanese local government bonds .............................................................................
Japanese corporate bonds ........................................................................................
Other ...........................................................................................................................
Total ............................................................................................................................

$1,716,654
750,102
252,578
713,974
137,222$1,853,876$7,164,365
2,362,590
1,550,951
3,250,824
276,754$7,441,119$4,295,844
2,805,418
851,915
638,511
343,395$4,639,239$1,378,268
1,370,435—
7,833
175,950$1,554,218

Millions of yen
2009
2008

Thousands of
U.S. dollars
2009¥3,852
5$39,21558¥421,980
275,576
83,68362,72033,731¥455,712¥368,651
223,249
80,01965,38235,118¥403,770(2) Money held in trust(a) Money held in trust classified as trading purposes

March 31
Consolidated balance sheet amount ..........................................................................................................................
Valuation gains (losses) included in profit/loss during the year ....................................................................................
(b) Money held in trust classified as held-to-maturity
Not applicable

42

Hokuhoku Financial Group, Inc. Annual Report 2009

¥4,780(36)

(c) Other money held in trust

March 31
Acquisition cost .......................................................................................................................................................
Consolidated balance sheet amount ..........................................................................................................................
Net unrealized gains.................................................................................................................................................
Unrealized gains ..................................................................................................................................................
Unrealized losses.................................................................................................................................................

Millions of yen
2009
2008

¥900
899
(0)
—
0

¥2,500
2,496
(3)
0
3

Thousands of
U.S. dollars
2009$9,162
9,152
(10)
—
10

Note: Consolidated balance sheet amount is calculated by using market prices at the fiscal year-end.

(3) Net unrealized gains on available-for-sale securities and other money held in trust

March 31
Net unrealized gains.................................................................................................................................................
Available-for-sale securities .................................................................................................................................
Other money held in trust .....................................................................................................................................
Net deferred taxes (liabilities) ....................................................................................................................................
Net unrealized gains (before following adjustments) ...................................................................................................
(–) Minority interests ................................................................................................................................................
(+) The Group’s interest in net unrealized gains on available-for-sale securities
held by affiliates accounted for by the equity method ..........................................................................................
Net unrealized gains.................................................................................................................................................

Millions of yen
2009
2008

Thousands of
U.S. dollars
2009¥(27,935)(27,934)(0)
9,615(18,320)0¥(9,073)(9,070)(3)
4,208(4,864)0$(284,390)(284,380)(10)
97,889(186,501)1(21)¥(18,341)

142¥(4,722)(214)$(186,716)

28. Derivatives
The Hokuriku Bank, Ltd. and The Hokkaido Bank, Ltd. (together, the “Banks”) use swaps, futures, forward and option contracts, and othersimilar types of contracts based on either interest rates, foreign exchange rates or securities prices.
The purpose for using financial derivative products are 1) to meet the hedging needs of customers, 2) to reduce market risks related to theassets and liabilities and 3) for trading purposes under the strict risk management structure.
Derivative transactions are accompanied by losses arising from credit risk and losses resulting from market risk.
Derivatives transactions entered into by the Banks have been made in accordance with its risk management policies and procedures,and positions, gain-and-loss amounts, risk amounts and other information regarding the status of trading transactions are reported to the
management board.
· Interest Rate-Related Transactions

March 31, 2009

Contract
value

Millions of yen
Marketvalue

Recognizedgain (Loss)

Over-the-counter transactions
Swaps
Receive/fixed and pay/floating.............................................................................................................
Receive/floating and pay/fixed.............................................................................................................
Options/sell ............................................................................................................................................
Options/buy............................................................................................................................................
Others/sell .............................................................................................................................................
Others/buy .............................................................................................................................................
Total ..........................................................................................................................................................

¥786,279
820,915
405,080
398,324
29,225
18,881/¥10,466(6,031)(3,784)
3,793
(67)
56
¥ 4,433¥10,466(6,031)
2,314
3,793
1,239
(330)
¥11,451

March 31, 2008

Contract
value

Millions of yen
Marketvalue

Recognizedgain (Loss)

Over-the-counter transactions
Swaps
Receive/fixed and pay/floating.............................................................................................................
Receive/floating and pay/fixed.............................................................................................................
Options/sell ............................................................................................................................................
Options/buy............................................................................................................................................
Others/sell .............................................................................................................................................
Others/buy .............................................................................................................................................
Total ..........................................................................................................................................................

¥644,990
678,218
387,051
379,396
53,97432,438/¥5,031(2,130)(2,813)
2,815
(221)
184
¥2,867¥ 5,031(2,130)
5,525
2,815
2,183
(452)
¥12,973

Hokuhoku Financial Group, Inc. Annual Report 200943

Contract
value

Thousands of U.S. dollars
Marketvalue

Recognizedgain (Loss)$8,004,473
8,357,078
4,123,797
4,055,018
297,525
192,213/$106,549(61,403)(38,526)
38,615(683)
578$ 45,130$106,549(61,403)23,56338,615
12,615(3,361)$116,578

March 31, 2009

Contract
value

Millions of yen
Marketvalue

Recognizedgain (Loss)

Over-the-counter transactions
Swaps ...................................................................................................................................................
Forward contracts/sell ............................................................................................................................
Forward contracts/buy ............................................................................................................................
Options/sell ............................................................................................................................................
Options/buy............................................................................................................................................
Total ..........................................................................................................................................................

¥ 71,853
14,196
17,799816,580
816,580/

March 31, 2008

ContractvalueOver-the-counter transactions
Swaps ...................................................................................................................................................
Forward contracts/sell ............................................................................................................................
Forward contracts/buy ............................................................................................................................
Options/sell ............................................................................................................................................
Options/buy............................................................................................................................................
Total ..........................................................................................................................................................

¥ 68,042
15,81915,158
848,434
848,434/

March 31, 2009

Contract
value

Thousands of U.S. dollars
Marketvalue

Recognizedgain (Loss)$ 731,479
144,522
181,200
8,312,945
8,312,945/$ 3,055(1,083)
7,124(772,687)
772,693$ 9,102$ 3,055(1,083)
7,124(28,078)
197,700$178,718

March 31, 2009

Over-the-counter transactions
Swaps
Receive/fixed and pay/floating.............................................................................................................
Receive/floating and pay/fixed.............................................................................................................
Options/sell ............................................................................................................................................
Options/buy............................................................................................................................................
Others/sell .............................................................................................................................................
Others/buy .............................................................................................................................................
Total ..........................................................................................................................................................
· Foreign exchange-related transactions

Over-the-counter transactions
Swaps ...................................................................................................................................................
Forward contracts/sell ............................................................................................................................
Forward contracts/buy ............................................................................................................................
Options/sell ............................................................................................................................................
Options/buy............................................................................................................................................
Total ..........................................................................................................................................................

¥

300
(106)
699
(75,901)
75,901¥ 894

Millions of yen
Market
value

¥

298
344
(712)
(71,417)
71,417¥ (69)

¥

300
(106)
699
(2,758)19,420¥17,555

Recognizedgain (Loss)

¥

298
344
(712)
(2,253)
18,372¥16,049

At March 31, 2009 and 2008, the Group had no outstanding derivatives contracts in stock related transactions, bond related transactions,commodity related transactions and credit derivative transactions.

29. Subsequent Events
Appropriations of retained earnings
The following appropriations of retained earnings at March 31, 2009 were approved at the Company’s general stockholders meeting held on
June 25, 2009:

Cash dividends, ¥3.00 per share on common stock ...................................................................................................................
Cash dividends, ¥3.85 per share on preferred stock (Type 1)......................................................................................................
Cash dividends, ¥3.31 per share on preferred stock (Type 4)......................................................................................................
Cash dividends, ¥7.50 per share on preferred stock (Type 5)......................................................................................................

44

Hokuhoku Financial Group, Inc. Annual Report 2009

Millions of yen

Thousands of
U.S. dollars¥4,170192
203
805$42,460
1,960
2,069
8,203

INDEPENDENT AUDITORS’ REPORTTo the Board of Directors of
Hokuhoku Financial Group, Inc.:
We have audited the accompanying consolidated balance sheets of Hokuhoku Financial Group, Inc. (the “Company”) andconsolidated subsidiaries as of March 31, 2009, and the related consolidated statements of income, changes in net assets,
and cash flows for the year then ended, all expressed in Japanese yen. These consolidated financial statements are theresponsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial
statements based on our audit. The consolidated financial statements of the Company and consolidated subsidiaries for theyear ended March 31, 2008 were jointly audited by us and Ernst & Young ShinNihon whose report, dated June 25, 2008,
expressed an unqualified opinion on those statements and included supplemental information that described to resolve theacquisition and retirement of preferred stock at the meeting of the Board of Directors held on June 23,2008.
We conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audit provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated
financial position of the Company and consolidated subsidiaries as of March 31, 2009, and the consolidated results of theiroperations and their cash flows for the year then ended in conformity with accounting principles generally accepted in Japan.
Our audit also comprehended the translation of Japanese yen amounts into U.S. dollar amounts and, in our opinion, suchtranslation has been made in conformity with the basis stated in Note 1. Such U.S. dollar amounts are presented solely for theconvenience of readers outside Japan.

June 5, 2009
DELOITTE TOUCHE TOHMATSU

Hokuhoku Financial Group, Inc. Annual Report 200945

NONCONSOLIDATED FINANCIAL STATEMENTSNONCONSOLIDATED BALANCE SHEETS (UNAUDITED)The Hokuriku Bank, Ltd.

2009

2008

Thousands of
U.S. dollars
2009

AssetsCash and due from banks .................................................................................
Call loans and bills bought .................................................................................
Monetary claims bought ....................................................................................
Trading assets ...................................................................................................
Securities ..........................................................................................................
Loans and bills discounted ................................................................................
Foreign exchanges ............................................................................................
Other assets ......................................................................................................
Tangible fixed assets .........................................................................................
Intangible fixed assets .......................................................................................
Deferred tax assets............................................................................................
Customers’ liabilities for acceptances and guarantees .......................................
Allowance for loan losses ..................................................................................
Allowances for investment losses ......................................................................
Total assets .....................................................................................................

¥ 293,653
20,726
154,750
6,589
858,854
4,290,055
6,649
73,92068,573
3,175
66,12681,703(49,391)(1,035)¥5,874,352¥ 189,431
30,519185,805
5,463
820,950
4,197,098
8,385
81,84865,732
3,452
42,78089,640(51,084)(58)¥5,669,966$ 2,989,452
211,000
1,575,394
67,085
8,743,298
43,673,580
67,691
752,522
698,092
32,326673,178
831,757(502,814)(10,536)$59,802,025

Liabilities and net assets
Liabilities
Deposits ............................................................................................................
Call money and bills sold ...................................................................................
Payables under securities lending transactions ..................................................
Trading liabilities ................................................................................................
Borrowed money ...............................................................................................
Foreign exchanges ............................................................................................
Other liabilities ...................................................................................................
Provision for employee retirement benefits .........................................................
Reserve for contingent loss................................................................................
Reserve for reimbursement of deposits..............................................................
Deferred tax liabilities for land revaluation ...........................................................
Acceptances and guarantees ............................................................................
Total liabilities ..................................................................................................

¥5,092,556
10,000—2,263
360,040
35
83,200
584
977
1,643
9,054
81,7035,642,059¥4,955,752
40,0006,492
1,566
249,335
191
76,982
285
270
2,232
9,061
89,6405,431,811$51,843,185
101,802—
23,043
3,665,278
366
846,998
5,955
9,949
16,72992,173
831,757
57,437,235

Net assets
Capital stock .....................................................................................................
Capital surplus...................................................................................................
Retained earnings .............................................................................................
Total shareholders’ equity ..............................................................................
Valuation difference on available-for-sale securities ............................................
Deferred gains or losses on hedges ...................................................................
Revaluation reserve for land ...............................................................................
Total valuation and translation adjustments ..................................................
Total net assets ...............................................................................................
Total liabilities and net assets ........................................................................

140,409
14,99875,571
230,980(7,550)
(45)
8,908
1,312
232,293¥5,874,352

140,409
14,99871,645
227,054
2,198
(16)
8,918
11,100238,155¥5,669,966

1,429,396
152,691
769,337
2,351,424(76,862)(459)
90,687
13,3662,364,790$59,802,025

Millions of yen
March 3146

Hokuhoku Financial Group, Inc. Annual Report 2009

NONCONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)The Hokuriku Bank, Ltd.

2009

2008

Thousands of
U.S. dollars
2009

IncomeInterest income:Interest on loans and discounts ....................................................................
Interest and dividends on securities ..............................................................
Interest on deposits with other banks ...........................................................
Other interest income ...................................................................................
Fees and commissions ......................................................................................
Trading income..................................................................................................
Other ordinary income .......................................................................................
Other income.....................................................................................................
Total income......................................................................................................

¥ 81,231
9,664
1,291
2,040
20,892
1,534
5,351
2,306
124,314¥ 82,696
10,431
911
3,286
25,082
1,150
8,342
9,404
141,306$ 826,955
98,391
13,147
20,774
212,694
15,62254,48323,481
1,265,547

Expenses
Interest expense:
Interest on deposits ......................................................................................
Interest on payables under securities lending transactions ............................
Interest on borrowings and rediscounts ........................................................
Other interest expense .................................................................................
Fees and commissions ......................................................................................
Other ordinary expenses ....................................................................................
General and administrative expenses.................................................................
Provision of allowance for loan losses ................................................................
Other expenses .................................................................................................
Total expenses ..................................................................................................

15,810
60
3,100
493
6,571
2,316
53,11020,332
14,931
116,728

14,743
505
2,961
1,173
6,584
0
50,784
19,404
11,867108,024

160,950620
31,563
5,027
66,903
23,582
540,679
206,992
152,003
1,188,319

7,586

33,281

77,228745(19,595)¥ 26,436201
11,852¥ 21,227

7,585(199,483)$ 269,126

Millions of yen
Years ended March 31

Income before income taxes..............................................................................
Income taxes:
Current .........................................................................................................
Deferred .......................................................................................................
Net income.......................................................................................................

Hokuhoku Financial Group, Inc. Annual Report 200947

NONCONSOLIDATED BALANCE SHEETS (UNAUDITED)The Hokkaido Bank, Ltd.

2008

Thousands of
U.S. dollars
2009¥

92,22451,001
1
2,488
7,277
893,897
2,686,873
5,643
56,507
26,781
3,004
22,82828,171(35,834)¥3,840,867$ 1,196,877
407,208—
21,684
48,367
8,818,109
29,150,922
68,534
674,051
320,782
34,798285,440
258,669(299,621)$40,985,820¥3,649,919
98,30019
84,899
8,068
581
553
25,4093,867,751¥3,546,510
40,00079
47,566
10,415328
545
28,171
3,673,617$37,156,873
1,000,713
201
864,291
82,143
5,920
5,635
258,669
39,374,445

93,524
16,79552,467
162,786(4,500)(4,500)158,285¥4,026,037

93,524
16,79557,445
167,764(515)(515)
167,249¥3,840,867

952,092
170,977
534,127
1,657,196(45,821)(45,821)
1,611,375$40,985,820

Millions of yen
March 31

48

2009

AssetsCash and due from banks .................................................................................
Call loans and bills bought .................................................................................
Monetary claims bought ....................................................................................
Trading account securities .................................................................................
Money held in trust ............................................................................................
Securities ..........................................................................................................
Loans and bills discounted ................................................................................
Foreign exchanges ............................................................................................
Other assets ......................................................................................................
Tangible fixed assets .........................................................................................
Intangible fixed assets .......................................................................................
Deferred tax assets............................................................................................
Customers’ liabilities for acceptances and guarantees .......................................
Allowance for loan losses ..................................................................................
Total assets .....................................................................................................

¥ 117,569
40,000
—
2,130
4,751
866,2022,863,495
6,732
66,21231,5103,418
28,03825,409(29,431)¥4,026,037

Liabilities and net assets
Liabilities
Deposits ............................................................................................................
Borrowed money ...............................................................................................
Foreign exchanges ............................................................................................
Other liabilities ...................................................................................................
Provision for employee retirement benefits .........................................................
Reserve for contingent loss................................................................................
Reserve for reimbursement of deposits..............................................................
Acceptances and guarantees ............................................................................
Total liabilities ..................................................................................................
Net assets
Capital stock .....................................................................................................
Capital surplus...................................................................................................
Retained earnings ..............................................................................................
Total shareholders’ equity ..............................................................................
Valuation difference on available-for-sale securities ............................................
Total valuation and translation adjustments ..................................................
Total net assets ...............................................................................................
Total liabilities and net assets ........................................................................

Hokuhoku Financial Group, Inc. Annual Report 2009

NONCONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)The Hokkaido Bank, Ltd.

2009

2008

Thousands of
U.S. dollars
2009

IncomeInterest income:Interest on loans and discounts ....................................................................
Interest and dividends on securities ..............................................................
Interest on receivables under resale agreements ..........................................
Interest on deposits with other banks ...........................................................
Other interest income ...................................................................................
Fees and commissions ......................................................................................
Other ordinary income .......................................................................................
Other income.....................................................................................................
Total income......................................................................................................

¥59,529
9,847
76
0
389
16,057
7,411
3,608
96,921¥58,728
9,408
210
0
346
18,306
7,178
1,970
96,148$606,023
100,254779
7
3,967
163,469
75,44736,731
986,677

Expenses
Interest expense:
Interest on deposits ......................................................................................
Interest on payables under securities lending transactions ............................
Interest on borrowings and rediscounts ........................................................
Other interest expense .................................................................................
Fees and commissions ......................................................................................
Other ordinary expenses ....................................................................................
General and administrative expenses.................................................................
Provision of allowance for loan losses ................................................................
Other expenses .................................................................................................
Total expenses ..................................................................................................

10,080
—
1,092
2
6,573
3,441
41,12012,8096,952
82,073

9,257
17
964
1
6,297
1,787
39,3704,133
5,859
67,687

102,623—
11,11826
66,92335,038418,610130,40270,779835,519

14,84828,460151,158

6,879(3,496)¥11,464

61
10,582¥17,81570,037(35,592)$116,713

Millions of yen
Years ended March 31

Income before income taxes..............................................................................
Income taxes:
Current .........................................................................................................
Deferred .......................................................................................................
Net income.......................................................................................................

Hokuhoku Financial Group, Inc. Annual Report 200949

CORPORATE INFORMATION(as of March 31, 2009)

The Hokuhoku Financial Group is composed of the holding company and 15 consolidated subsidiaries and one affiliate. Our core businessis banking, and we also provide a wider range of services including leases, credit cards, financing, and venture capital. The following is adiagram of our business.

Business diagram
Hokuhoku Financial Group, Inc.
The Hokuriku Bank, Ltd.

The Hokkaido Bank, Ltd.

Hokugin Lease Co., Ltd.
(Leasing)

Hokugin Business Services Co., Ltd.
(document management,
concentrated business processing)

Hokuriku Card Co., Ltd.
(Credit card operations, loan guarantees)

Dogin Business Service, Ltd.
(Document management, cash management,
concentrated business processing)

Hokugin Office Services Co., Ltd.*1(Human resource solutions)

Hokuriku Hosho Services Co., Ltd.
(Credit guarantees)

Dogin Card Co., Ltd.
(Credit card operations, loan guarantees)

Hokugin Real Estate Services Co., Ltd.
(Property management)

Hokugin Software Co., Ltd.
(Software development)

Hokugin Shisankanri Co., Ltd.*2(Auctioning pledged properties)

Nihonkai Services Co., Ltd.
(Servicer)

Hokuriku International Cayman Limited(Finance)

Hokuhoku Capital Co., Ltd.*3(Venture capital, IPO consulting)*1. Hokugin Office Services Co., Ltd. and Hokugin
Corporate Co., Ltd. are currently underliquidation procedures based on a resolution of
the Board of Directors made on March 31,
2009.
*2. On March 31, 2009 liquidation procedures for
Hokugin Shisankanri Co., Ltd. were completed.
*3. Affiliated company. Hokuriku Capital Co., Ltd.
was renamed Hokuhoku Capital Co., Ltd.

Hokugin Corporate Co., Ltd.*1(Corporate rehabilitation)

Major subsidiaries(units: millions of yen, %)Company name

Address

Established

Capital

FG’s share of
voting rights

Dividend

The Hokuriku Bank, Ltd.

1-2-26 Tsutsumicho-dori, Toyama City

Banking

July 31, 1943

140,409100.004,471

The Hokkaido Bank, Ltd.

4-1 Odori Nishi, Chuo-ku, Sapporo City

Banking

March 5, 1951

93,524100.003,212

Hokugin Lease Co., Ltd.

2-21 Aramachi, Toyama City

Leasing

July 21, 1983

100

70.25

—

Hokuriku Card Co., Ltd.

1-2-1 Shintomi-cho, Toyama City

Credit card operations,loan guarantees

March 2, 1983

36

87.39

3

Hokuriku Hosho Services Co., Ltd.

1-2-26 Tsutsumicho-dori, Toyama City

Credit guarantees

December 12, 1978

50

100.00—

Hokugin Software Co., Ltd.

1-5-25 Higashidenjigata, Toyama City

Software development

May 1, 198630

100.00—Nihonkai Services Co., Ltd.

1-6-8 Chuo-dori, Toyama City

Servicer

December 5, 2003

500

100.00—

Hokugin Business Services Co., Ltd.

1883 Hiyodorijima, Toyama City

Document management,
March 25, 1953
concentrated business processing

30(100.00)—

Hokugin Office Services Co., Ltd.

1-2-26 Tsutsumicho-dori, Toyama City

Human resource solutions

March 3, 1986

20

(100.00)—

Hokugin Real Estate Services Co., Ltd.

1-2-26 Tsutsumicho-dori, Toyama City

Property Management

September 26, 1988

100

(100.00)—

Hokugin Shisankanri Co., Ltd.

1-2-26 Tsutsumicho-dori, Toyama City

Auctioning pledged properties

March 7, 2000

100

(100.00)—

Hokuriku International Cayman Limited P.O. Box 309, Grand Cayman,
Cayman Islands, British West Indies

Finance

April 27, 1993

US$1,000(100.00)—

Hokugin Corporate Co., Ltd.

3-2-10 Nihonbashi-Muromachi,
Chuo-ku, Tokyo

Corporate rehabilitation

December 1, 2004

100

(100.00)—

Dogin Business Service, Ltd.

4-1 Odori Nishi, Chuo-ku, Sapporo City

June 8, 1979
Document management,
cash management,
concentrated business processing

50(100.00)—

Dogin Card Co., Ltd.

2-2-14 Chuo-ku Minami, Sapporo City

Credit card operations,
June 13, 1977
loan guarantees, Credit guarantees

1,226(100.00)—

Hokuhoku Capital Co., Ltd.*

1-6-8 Chuo-dori, Toyama City

Venture Capital

250

5.00
(38.75)—* Equity method-affiliated company( ) Indicates voting rights involving shares held by subsidiaries

50

Main business activities

Hokuhoku Financial Group, Inc. Annual Report 2009

January 11, 1985

OUTLINE OF SUBSIDIARIES - HOKURIKU BANKThe Hokuriku Bank, Ltd..
http://www.hokugin.co.jp/

Establishment

History

The origin of the Hokuriku Bank is the Kanazawa 12th National
Bank, which was established on August 26, 1877 with the Houseof Kaga-Maeda providing 70% of the financing. The Bank was thecreation of the family established by Maeda Toshiie, the founder ofthe Kaga clan.
A unique, extensive regional bank, Hokuriku Bank worked withleading industries, and was a leader in areas such as international
operations, securities, and electronic banking. The Bank provides
high-quality integrated financial services that precisely and quickly
meet the needs of local customers. It will continue to contribute toregional development.

August 1877

Kanazawa 12th National Bank founded

February 1879

Toyama 123rd National Bank founded

January 1884

Kanazawa 12th National Bank and Toyama 123rd National
Bank merged to form Toyama 12th National Bank with
headquarters in Toyama City

July 1897

Toyama 12th National Bank changed name to 12th Bank

July 1943

Four banks, 12th, Takaoka, Chuetsu, and Toyama Bank,
merged to form Hokuriku Bank

January 1950

Launched foreign exchange operations (first regional bank to
do so)

Company outline (as of March 31, 2009)
Business:
Incorporation:
Location of headquarters:
President:
Total assets:
Deposits (including NCDs):
Loans:
Issued shares:

The Hokuriku Bank, Ltd.
Banking
July 31, 1943 (founded in 1877)
1-2-26 Tsutsumicho-dori, Toyama City, Toyama
Shigeo Takagi¥5,874.3 billion¥5,092.5 billion¥4,290.0 billion
Common stock
Preferred stock (Type 1)

987,147,185
113,900,000

Capital ratio(non-consolidated):
10.23%
Employees:
2,568
Branches (as of June 30, 2009)
Domestic:
186 (130 branches, 56 sub-branches)
Overseas:
3 representative offices

September 1961

Listed on the Tokyo Stock Exchange

November 1961

Present head office built

January 1971

Received blanket approval to engage in correspondentbanking services

November 1973

Completed first integrated online system linking all offices

March 1974

Received blanket approval to engage in foreign exchange
business

July 1978

Received blanket approval to handle yen-denominated andforeign-denominated syndicated loans

October 1979

Launched second online system

November 1981

Launched online foreign exchange system

January 1984

Launched firm banking service

May 1987

Introduced VI (visual identification)

August 1990

Completed third online system

November 1993

Launched investment trust agent operations

December 1998

Launched over-the-counter sale of securities investment
trustsJune 2000

Launched Internet and mobile banking services

July 2000

Completed new computer center (Alps building)January 2001

Launched new computer system

April 2001

Launched over-the-counter sales of casualty insurance

February 2002

Third-party allocation worth ¥39.1 billion, brought newcapital to ¥140.4 billion

February 2002

Launched convenience store ATM service (E-net)

October 2002

Launched over-the-counter sales of life insurance

March 2003

Took over part of the Ishikawa Bank’s operations

September 2003

Established Hokugin Financial Group, Inc. through sharetransfer, then became subsidiary of the Hokugin Financial
Group, Inc.

September 2004

Integrated management with Hokkaido Bank, name of parent
company changed to Hokuhoku Financial Group, Inc.

December 2004

Launched securities agency operations
Established corporate rehabilitation company Hokugin
Corporate Co., Ltd.

March 2006

Entered into a contract on joint system use with Hokkaido
Bank and the Bank of Yokohama

Hokuhoku Financial Group, Inc. Annual Report 200951

OUTLINE OF SUBSIDIARIES - HOKKAIDO BANKThe Hokkaido Bank, Ltd..
http://www.hokkaidobank.co.jp/

Establishment

History

On March 5, 1951, Hokkaido Bank was established based on
the strong demand from small and medium-sized corporations in
Hokkaido for funds accompanying the sudden increase in population and development of new industries in Hokkaido during thepost-war recovery period.
Based on this background and as a Bank deeply rooted in
Hokkaido, Hokkaido Bank considers its mission to be contributing
to regional economic growth by smoothly providing funds and full
financial services to its customers in Hokkaido. Hokkaido Bank
has not forgotten the spirit in which it was created and is moving
forward with its customers in Hokkaido.

March 1951

Hokkaido Bank established

April 1961

Launched foreign exchange operations

May 1962

Listed on the Sapporo Stock Exchange

August 1964

Present head office built

June 1971

Online system (first) launched

July 1976

Online system (second) launched

December 1980

Received blanket approval to engage in correspondentbanking services

April 1981

Hokkaido Small and Medium Corporation Human Resource
Development Fund established

June 1986

Launched online foreign exchange system

September 1987

Debuted on the first section of the Tokyo Stock Exchange

October 1990

Constructed the Higashi Sapporo Dogin Building

March 1991

Established Dogin Cultural Foundation

October 1991

Launched a new foreign exchange online system

November 1991

Constructed Dogin Building Annex

Company outline (as of March 31, 2009)
Business:
Incorporation:
Location of headquarters:
President:
Total assets:
Deposits (including NCDs):
Loans:
Issued shares:

The Hokkaido Bank. Ltd.
Banking
March 5, 1951
4-1 Odori Nishi, Chuo-ku, Sapporo City
Yoshihiro Sekihachi¥4,026.0 billion¥3,649.9 billion¥2,863.4 billion
Common stock:
Preferred stock (Type 1):
Preferred stock (Type 2):

374,356,952
65,500,000
107,432,000

Capital ratio(non-consolidated):
10.45%
Employees:
1,790
Branches (as of June 30, 2009)
Domestic:
137 (128 branches, 9 sub-branches)
Overseas:
2 representative offices

52

Hokuhoku Financial Group, Inc. Annual Report 2009

January 1993

Online system (third) launched

April 1994

Launched investment trust agent operations

December 1998

Started sales of investment trust accounts

July 1999

Issued preferred stock (Type 2) (issuance amount was¥53.716 billion)

November 1999

Launched telephone banking service

June 2000

Launched Internet mobile banking

April 2001

Started sales of casualty insurance accounts

October 2002

Started sales of life insurance accounts

December 2003

Opened Business Loan Plaza

April 2004

Launched convenience store ATM service

September 2004

Came under management of Hokugin Financial Group, Inc.
parent of Hokuriku Bank; Hokuhoku Financial Group, Inc.
launched

April 2005

Launched securities agency operations

March 2006

Entered into a contract on joint system use with Hokuriku
Bank and the Bank of Yokohama

August 2006

Opened representative office in Shenyang, China

March 2009

Opened representative office in Yuzhno-Sakhalinsk, Russia

BOARD OF DIRECTORS AND CORPORATE AUDITORS
Hokuhoku Financial Group, Inc.
President:
Shigeo Takagi

Directors:
Satoshi Kawai
Masamichi Kondo
Taminori Iwasaki
Akihiko Soma
Eishin Ihori
Yuji Oshima

Corporate Auditors:
Masato Matsumoto
Yoshihiro Minami
Yasuhiro Ishiguro
Norikiyo Hayashi

President:
Shigeo TakagiManaging Director:
Tatsuya Kaseda

Deputy President:
Satoshi Kawai

Directors:
Hidenori Mugino
Eishin Ihori
Akihiko Soma

Corporate Auditors:
Takashi Hirase
Kenichi Nakamura
Isao Nagahara
Tatsuo Kawada
Mitsuhiro Tokuno

Deputy President:
Yoshihiro Sekihachi

The Hokuriku Bank, Ltd.

Senior Managing Director:
Taminori Iwasaki

The Hokkaido Bank, Ltd.
President:
Yoshihiro Sekihachi
Deputy President:
Masamichi Kondo

Directors:
Masahiro Sasahara
Hiroshi Sagayama
Satoshi Kawai

Addresses
Hokuhoku Financial Group, Inc.
1-2-26, Tsutsumicho-dori Toyama City,
Toyama 930-8637, Japan
Telephone: +81-76-423-7331
http://www.hokuhoku-fg.co.jp/
E-mail: honsha2@hokuhoku-fg.co.jp

The Hokuriku Bank, Ltd.
International Department
1-2-26, Tsutsumicho-dori Toyama City,
Toyama 930-8637, Japan
Telephone: +81-76-423-7815
Facsimile: +81-76-423-7561
E-mail: kokusaibu@hokugin.co.jp
International Operations Center
2-10, Nihonbashi-muromachi 3-chome,
Chuo-ku, Tokyo 103-0022, Japan
Telephone: +81-3-3231-7329
Facsimile: +81-3-3270-5028
E-mail: b.office@hokugin.co.jp
SWIFT Address: RIKBJPJTTreasury and Securities Department
2-10, Nihonbashi-muromachi 3-chome,
Chuo-ku Tokyo 103-0022, Japan
Telephone: +81-3-3231-7360
Facsimile: +81-3-3246-1255
E-mail: shikintky@hokugin.co.jp

Corporate Auditors:
Keiji Okuda
Tatsuhiro Ishikawa
Michio Hatamoto
Masao Hoshi

Overseas Offices (Hokuriku Bank)New York Representative Office
780 Third Avenue, 28th Floor,
New York, NY 10017, U.S.A
Telephone: +1-212-355-3883
Facsimile: +1-212-355-3204
E-mail: newyork@hokugin.com
Shanghai Representative Office
Shanghai International Trade Center,
602, Yan’an West Road 2201,
Changning, Shanghai 200336, P.R.
CHINA
Telephone: +86-21-6270-8108
Facsimile: +86-21-6270-8338
E-mail: shanghai@hokugin.net
Singapore Representative Office
6 Battery Road # 17-04 Shigapore
049909
Telephone: +65-6534-0010
Facsimile: +65-6534-0070
E-mail: hokuriku@singnet.com.sg

The Hokkaido Bank, Ltd.
International Department
4-1, Odori Nishi, Chuo-ku,
Sapporo 060-8676, Japan
Telephone: +81-11-233-1093
Facsimile: +81-11-231-3133
E-mail: sckikaku@cello.ocn.ne.jp

Market and International Administration Center
2-33, Higashi Sapporo, 3-jyo 1-chome,
Shiroishi-ku, Sapporo 003-0003, Japan
Telephone: +81-11-815-1315
Facsimile: +81-11-815-2237
SWIFT Address: HKDBJPJTTreasury and Securities Department
2-10, Nihonbashi-muromachi 3-chome,
Chuo-ku, Tokyo 103-0022, Japan
Telephone: +81-3-3241-3457
Facsimile: +81-3-3245-1779
Overseas Offices (Hokkaido Bank)
Shenyang Representative Office
Fangyuan Mansion, No. 1106
Yuebin Street No. 1, Shenhe District,
Shenyang City 110013, P.R. CHINA
Telephone: +86-24-2250-5350
Facsimile: +86-24-2250-5351
E-mail: dogin_shenyang@yahoo.co.jp
Yuzhno-Sakhalinsk Representative Office
Diplomat Office No.404 Chekhova street
1A, Yuzhno-Sakhalinsk 693020, Russia
Telephone: 7-4242-46-1774
Facsimile: 7-4242-46-1775
E-mail: tsushima@hbkys.ru

Hokuhoku Financial Group, Inc. Annual Report 200953

北北金融控股集团简要（截至 2009 年 3 月 31 日）

企业名称∶北北金融控股集团股份有限公司
设立日期∶ 2003 年 9 月 26 日
总行地址∶富山县富山市堤町通 1 丁目 2 番 26 号
集团董事长∶高木繁雄（北陆银行 总行长）副董事长∶堰八义博（北海道银行 总行长）经营目的∶集团伞下的子公司的经营管理，以及连带的相关业务资本金∶ 708 亿 9,500 万日元发行股份∶ 普通股....................................... 1,391,630,146 股
第一次第 1 种优先股.................

50,000,000 股

第一次第 4 种优先股.................

61,400,000 股

第一次第 5 种优先股.................

107,432,000 股注∶第 1 种优先股和第 4 种优先股于 2009 年 7 月 7 日各回收了 50,000,000 股和 26,400,000 股。现在，第 1 种优先股已经全部回收完，第 4 种优先股的发
行量为 35,000,000 股。

上市交易所∶ 东京证券交易所（第一部）札幌证券交易所简历2002 年 5 月 北陆银行和北海道银行缔结了全面业务协助协议自从 1877 年北陆银行成立以来已经在北陆地区设立了广
域性的经营网点。

2003 年 5 月 北陆银行和北海道银行对经营统合取得一致意见

从“北前船”或者说“北航船（北上的经济圈）”的交易关
系和客户的需要出发还在北海道各个主要城市内设立了自己的2003 年 9 月

经营网点。

设立北银金融控股集团股份有限公司
北陆银行成为北银金融控股集团伞下的银行

北海道银行成立于 1951 年，以支援中小企业和个人业务为中心在北海道道内的各个地区都设有营业网点。
北陆银行和北海道银行于 2004 年 9 月进行了经营统合，通过股份交换实现经营统合成立了（控股公司）北北金融控股集团股份有限公司。现在，2004 年 9 月

北北金融控股集团已经形成了覆盖日本北陆地区北海道以及日

注：北银金融控股集团股份有限公司改名为北北金融控股集团

本三大都市圈（东京，名古屋，大阪）的巨大的地方金融网络。

北北金融控股集团股份有限公司诞生

股份有限公司。

北北金融集团的经营活动范围不是限于一个地域，而
是在广泛的地域内展开着。
我们广泛的营业网点分布在下面所写的地区范围里：ҽ߽‫ل‬北陆地区...................................................... 147 分行（或支行）富山县.......................................................... 90 分行（或支行）石川县.......................................................... 35 分行（或支行）福井县.......................................................... 22 分行（或支行）北海道地区................................................... 155 分行（或支行）三大都市圈................................................... 17 分行（或支行）其他地区......................................................

4 分行（或支行）

海外.............................................................

5 代表处

上海代表处

（北陆银行）

沈阳代表处

（北海道银行）新加坡代表处 （北陆银行）
纽约代表处

෩‫׎‬

‫ݙ‬඙

݁ঀ

‫ॻڍ‬
‫ؙ‬᐀

ண߁ྏ

（北陆银行）

南萨哈林斯克代表处 （北海道银行）（2009 年 6 月 30 日）
54

ҽଇٜഘ

Hokuhoku Financial Group, Inc. Annual Report 2009ൻ‫ڞؙ‬ชത

〈迎接经营统合 5 周年〉北北金融控股集团 董事致辞

（相片左边）集团董事长

高木繁雄（北陆银行 总行长）
（右边）

副董事长

堰八义博（北海道银行 总行长）感谢广大客户和股东对本集团的支持和惠顾。
此次，本集团发表《2008 年度企业经营情况》报告，具体介绍本集团公司 2008年度业绩状况、本集团公司的经营方针和 CSR（企业的社会责任）等情况，使客户可
以更好了解本公司的现状。
今年 9 月份本集团将迎来北陆银行和北海道银行经营统合 5 周年。5 年来，承蒙广大客户对本集团的热心惠顾和厚爱，使得本集团的业务得以稳步发展。衷心感谢广
大客户的厚爱！
今后本集团将更加努力经营，本着「与地区共创繁荣」的经营理念，实现与客户
共同发展的目标。

跨地域金融集团的先锋
本集团具有其他地方银行不可比拟的优越性即跨地域优越性。作为跨地域金融集
团，今年 9 月将迎来经营统合后的 5 周年。经营统合以来我们把重点放在「强化营业力」，「经营效率化」，「经营基础的稳定化」等 3 个主要方面。经营统合后，我们尤其重视「站在顾客立场上」考虑问题，也就是和客户换位思考，不给客户添麻烦，使客户安心地
利用本集团的各项业务。另外有效地发挥北陆银行和北海道银行两个品牌银行的效应，我们的最终目的是要提高银行的方便性和客户满意度。近年来这样的经营统合商业模式，在地方银行中得到了推广。
本集团最大限度地利用跨地域金融集团的网点优势，积极推进商贸洽谈活动并取
得了显著的成效。自从 1999 年起每年举办的「北海道商贸论坛」，这次得到北海道经
济产业局认可，被选为“凝结地区力定点项目”，我们的努力得到了肯定。
另外，本集团在地方银行中，是唯一拥有环日本海和东南亚地区海外网点的集团。
与多个境外政府机关签订了经济交流备忘录，还与多家境外银行签订了业务合作协议，加强和完善了当地金融服务机能。
2009 年 3 月，本集团在俄罗斯的南萨哈林斯克市开设了日本第一家银行代表处，计划在本年度内还将开设英国伦敦代表处。
集团将充分有效地利用这些海外网络向客户提供当地商贸信息，并以地区银行细
致而周到的服务积极促进客户的海外投资业务。

作为本地区 No.1 的客户关系良好银行发扬集团经营理念之一「与地区共创繁荣」的精神，以努力做到「从地区和客户这里取得毫无动摇的信赖和支持的最佳银行」为目标，同地区客户建立了长期的亲密
良好和根深蒂固的关系。为了应对经济环境急剧恶化，我们实施了全国紧急保证制度
Hokuhoku Financial Group, Inc. Annual Report 200955

积极周转资金，举办休息日经营商谈会，新设预防连锁倒闭的咨询窗口，加强支援各个中小企业。除此之外，总部还专设了“经营改善支援室和企业支援室”加强企业重组后援职能的职能部门。另外，作为地区金融机构加强了产业、学府、官府的携手合作，
积极展开“开拓新事业”和“振兴地方产业”等活动。
对于个人客户，新设了「个人业务支行」，在安心的氛围下，接受客户对资产运用
方法和住房贷款等咨询，扩充信贷商品，扩大便利店自动取款机的分布，以便满足客户的多种需求。

战略性配置人材和店铺谋求实现总部业务效率化，强化集中分行的人员配置，以后方支援办公室为核心，实现业务处理共同化。另外，在分行店铺数方面，对每个分行的作用作了重新调整，从经营统合初的 255 个分行（店铺数），到 2007 年 3 月末减至 246 个分行（店铺数）。
除此之外，2007 年 3 月，在不给客户增加麻烦的前提下，对北陆银行和北海道银行之间的营业网点的分布作了精心的调整，业务的交接也准备就绪了。为强化集团零售营业力部分地区计划增设新支行。
对于人员配置，集团灵活运用“企业钟点工”员工，抑制雇用新员工，在维持现有营业力的基础上逐步减少从业人员。从业人员数从 2005 年 3 月末的 4,506 名、至2007 年 3 月末减少到 4,289 名，建立了有效营业体制。其后为了提高竞争力，又采取
了人员增加，企业钟点工的直接雇用等措施。

逐步运行同一系统 (MEJAR)
为保证系统安全运营，应对客户的多样化需求，随着服务商品的增多，伴随着风险管理的高新化，集团的系统投入成本也在直线增加。本集团和横滨银行在「3 行系统统一化」利用上达成一致，现在正在为 2011 年 5 月正式开通该系统作前期准备。
该系统正常运行后将起到抑制经费增加的作用，同时迅速导入新商品和新服务，除了
在机能高效化为客户带来方便之外，包括现在运用的各行子系统在内也将逐步实现共同化，以进一步实现高效率化的目标。

经营基础稳健化彻底的风险管理，集中促进企业的再生，以及尽力支持客户重建等措施的实施结果，
使本集团的（公开）不良债权比率，从 2004 年 9 月期的 7.85% 下降到 2009 年 3 月
3.07%，情况大有改善。
在实现企业利润的实际积累的同时，采取发行次级债和实施公募增资等资本政策，
两行联结自有资本比率从 2004 年 9 月期为 8.00% 上升到 2009 年 3 月的 10.81%。
2008 年 5 月，信用等级投资信息中心 ( R & I ) 对“北北金融控股集团股份有限公司”、“北陆银行”、“北海道银行”信用评级为“A”，证明了本集团的经营努力得到广
了同行业界的认可。
关于企业分红，虽然远远未能达到客户满足的水平，但我们阶段性地实施了红利的增长，2008 年度的红利为每股分红 3 日元、比前一年增加了 50 钱。

最后目前，经济环境仍然很严峻。我们将一如既往地做到值得客户信赖和选择的「客户关系良好银行」，实现「为地区客户的繁荣做出贡献，持续共同发展」的目标，集团
的董事和职员上下齐心协力进一步提高企业价值。最后，愿广大客户能更加支持本集团。
董事长

高木繁雄
2009 年 7 月
56

Hokuhoku Financial Group, Inc. Annual Report 2009业绩精粹营业概况（北北金融控股集团联结）（货币单位：亿日元）

2008 年度

2007 年度

亿日元为 2,396 亿日元，联结经常利润比前年减少了
449 亿日元为 213 亿日元，联结净利润比前年减少了 16

前年比
经常收益

2,396

－ 216

2,612

经常利润

213

－ 449

663

本期净利润

370

－ 16

386

10.81%＋ 0.42%

10.39%

自有资本比率本集团 2008 年度联结经常收益比前年减少了 216亿日元为 370 亿日元。
联结自有资本比率比前年上升 0.42%，为 10.81%。

营业概况（北陆银行、北海道银行）（货币单位：亿日元）

由于信托商品销售不振和外汇交易的拖延收益有所

2 行合算＋子公司（注：其他子公司指北银 Corporate）

减少，再加上创建新系统等经费的增加，银行原来主要2008 年度

770 亿日元。

2007 年度
前年比

经常收益

2,188

－ 188

2,376

业务毛利润

1,686

－ 103

1,789

经费

915

＋ 16

899

业务净利润

770

－ 119

889

信贷相关成本

339

＋ 91

247

－ 177

－ 170

－6

经常利润

231

－ 431

662

本期净利润

397

－4

402

有价证券等相关盈亏业务收益力即业务净利润，比前期减少 119 亿日元为
另外，受金融市场混乱和实体经济的快速恶化的影响，以及信贷相关成本的增加和有价证券损失的增加，导致经常利润减少 431 亿日元，为 231 亿日元。本期净
利润由于法人税调整额的减少，为 397 亿日元。

（货币单位：亿日元）（货币单位：亿日元）

北陆银行＋其他子公司（注：其他子公司指北银 Corporate）
2008 年度

北海道银行

2007 年度

2008 年度
前年比

前年比

－ 17

960

735

＋3

732

402

＋ 13

388

545

333

－ 10

344

196

140

＋ 89

51

367

125

－ 169

294

－ 63

178

＋ 0.32%

10.13%

经常收益

1,245

－ 170

1,415

943

业务毛利润

950

－ 106

1,056

经费

513

＋2

511

业务净利润

436

－ 108

信贷相关成本

198

＋2

经常利润

106

－ 261

本期净利润
自有资本比率2007 年度

282

＋ 58

223

114

10.23%＋ 0.13%10.10%

10.45%

Hokuhoku Financial Group, Inc. Annual Report 200957

Hokuhoku Financial Group, Inc.

Printed in Japan