Financial Data
2023
Year ended March 31, 2023

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED BALANCE SHEET……………………………………… 1
CONSOLIDATED STATEMENT OF INCOME…………………………… 2
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME……… 2
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY……………… 3
CONSOLIDATED STATEMENT OF CASH FLOWS……………………… 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS……………… 6
INDEPENDENT AUDITOR’S REPORT……………………………………… 43

Hokuhoku Financial Group, Inc.

2023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）

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

2023

2022

Thousands of
U.S. dollars (Note 1)2023¥ 4,357,148
52,344
15,5192,220
18,2481,854,257
9,533,464
17,975201,393
100,013
8,299
7,696
7,598
63,881(67,361)¥ 5,471,090
26,731
21,2173,454
18,4742,206,987
9,193,283
25,628201,789
99,135
10,323
10,8393,275
60,310(72,470)$ 32,630,483
392,003116,223
16,626
136,665
13,886,449
71,395,673
134,619
1,508,226
748,996
62,153
57,63856,908478,409(504,464)¥ 16,172,700¥17,280,071$ 121,116,607¥ 13,513,726
162,020
10,430313,271266
1,352,450
735
5,230
119,823
3,407
83
1,063
1,385
10
7,759
4,941
63,881¥ 13,202,604
318,920
21,123288,815651
2,608,500
647
4,514
125,967
3,703
123
943
1,495
10
13,9094,984
60,310$ 101,203,670
1,213,365
78,116
2,346,073
1,995
10,128,437
5,509
39,169897,351
25,516624
7,963
10,376
81
58,11337,010478,40915,560,488

16,657,226

116,531,777

70,895
119,778416
374,971(675)

70,895125,128500
359,045(852)

530,929
897,0133,119
2,808,145(5,058)37,152(195)
7,694(1,419)56,225
325
7,791
338

278,232(1,465)57,622(10,628)

608,6173,594
612,212¥ 16,172,700

619,396
3,449
622,845¥17,280,071

4,557,909
26,921
4,584,830$ 121,116,607

Millions of yen
March 31

AssetsCash and due from banks (Note 5)
Call loans and bills bought
Monetary claims bought (Notes 8 and 31)
Trading assets (Notes 6, 8, 31 and 32 )Money held in trust (Note 7)
Securities (Notes 8, 14, and 31)
Loans and bills discounted (Notes 9, 14, 15, and 31)
Foreign exchanges (Note 10)
Other assets (Notes 14 and 32)
Tangible fixed assets (Note 11)
Intangible assets (Note 12)
Assets for retirement benefits (Note 18)
Deferred tax assets (Note 28)
Customers’ liabilities for acceptances and guarantees (Note 13)
Allowance for loan losses (Note 3)
Total assets
Liabilities and equity
Liabilities
Deposits (Notes 14, 16, and 31)
Call money and bills sold (Note 14)
Payables under repurchase agreements
Payables under securities lending transactions (Note 14)
Trading liabilities (Notes 6 and 32 )Borrowed money (Notes 14, 17, and 31)
Foreign exchanges (Note 10)
Borrowed money from trust account
Other liabilities (Note 32)
Liability for retirement benefits (Note 18)
Reserve for directors’ and audit & supervisory board members’ retirement benefits
Reserve for contingent losses
Reserve for reimbursement of deposits
Reserve under the special laws
Deferred tax liabilities (Note 28)
Deferred tax liabilities for revaluation (Note 28)
Acceptances and guarantees (Note 13)
Total liabilities
Equity (Notes 19, 20, and 22)
Capital stock
Capital surplus
Stock acquisition rights (Notes 21 and 22)
Retained earnings
Treasury stock
Accumulated other comprehensive income
Valuation difference on available-for-sale securities (Note 8)
Deferred gains (losses) on hedges
Revaluation reserve for land (Note 11)
Defined retirement benefit plans (Note 18)
Total
Non-controlling interests
Total equity
Total liabilities and equity
See notes to consolidated financial statements.

Hokuhoku Financial Group, Inc. Financial Data 2023

CONSOLIDATED BALANCE SHEET

1

2023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）

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

Millions of yen

Thousands of
U.S. dollars (Note 1)
2023

Year ended March 31

2023

2022

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
Trust fees
Fees and commissions (Note 33)
Trading income
Other ordinary income (Note 24)
Other income (Note 26)
Total income¥83,035
20,763
(9)
43
4,795
485
30
40,235860
18,872
18,817
187,929¥82,578
16,353
―
―
5,504
362
36
39,571
1,627
20,067
15,683
181,785$621,850
155,499(73)
324
35,9103,635
227
301,323
6,443
141,336
140,920
1,407,394

Expenses
Interest expense:
Interest on deposits
Interest on payables under repurchase agreements
Interest on payables under securities lending transactions
Interest on borrowings and rediscounts
Other interest expense
Fees and commissions
Other ordinary expenses (Note 25)
General and administrative expenses
Provision of allowance for loan losses
Other expenses (Note 27)
Total expenses

875
390
5,444
1,325
1,589
14,50835,892
83,683830
17,656
162,197

435
9
390
7
642
15,455
19,66087,273
12,874
11,801
148,552

6,560
2,922
40,773
9,926
11,906108,656
268,799
626,701
6,219
132,229
1,214,691

25,731

33,233

192,703

3,056
1,117
21,557
121¥21,435

11,656890
20,685
158¥20,526

22,892
8,370
161,441
912$160,529

Income before income taxes
Income taxes (Note 28):
Current
Deferred
Net income
Net income attributable to non-controlling interests
Net income attributable to owners of the parent

Yen

Per share of common stock (Notes 2-t and 23)
Basic net income
Diluted net income
Cash dividends applicable to the year

¥159.18
158.63
37.00

U.S. dollars¥147.47146.95
35.00

$1.19
1.19
0.28

See notes to consolidated financial statements.

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

2023

2022

Thousands of
U.S. dollars (Note 1)
2023¥ 21,557(21,327)(19,118)(521)(1,757)¥20,685(21,974)(24,707)386
2,324$ 161,441(159,719)(143,177)(3,902)(13,163)

69
¥229
83
146

21
¥(1,288)(1,474)185

523$1,722628
1,094

Millions of yen
Year ended March 31

Net income
Other comprehensive income (loss) (Note 29)
Valuation difference on available-for-sale securities
Deferred gains (losses) on hedges
Defined retirement benefit plans
Share of other comprehensive income (loss) of associates accounted forusing equity method
Total comprehensive income (loss)
Comprehensive income (loss) attributable to owners of the parent
Comprehensive income (loss) attributable to non-controlling interests
See notes to consolidated financial statements.

2

Hokuhoku Financial Group, Inc. Financial Data 2023

CONSOLIDATED STATEMENT OF INCOME、CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

2023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Hokuhoku Financial Group, Inc. and Consolidated Subsidiaries
Thousands
IssuedIssuednumber of
number ofshares ofshares ofcommon stock preferred stock
BALANCE, APRIL 1, 2021

132,163

85,955

Millions of yen

Capitalstock

Capitalsurplus¥70,895¥133,905

StockacquisitionrightsRetainedearnings¥538¥344,103

Cash dividends(5,882)

Net income attributable to owners of the parent

20,526

Purchases of treasury stock(3,392)(10,743)0155(8,778)

8,778

Reversal of revaluation reserve for land297

Net changes in the year
BALANCE, MARCH 31, 2022

(38)
128,770

75,212¥70,895¥125,128¥500¥359,045

Cash dividends(5,606)

Net income attributable to owners of the parent

21,435Purchases of treasury stock¥(852)(5,375)

Disposals of treasury stock
Retirement of treasury stock(10,743)21

181(5,371)

5,371

Reversal of revaluation reserve for land97

Net changes in the year
BALANCE, MARCH 31, 2023¥(1,180)(8,606)

Disposals of treasury stock
Retirement of treasury stock

Treasury
stock

(83)
128,770

64,469¥70,895¥119,778¥416¥374,971¥(675)

Millions of yen
Accumulated other comprehensive income
Valuation
Deferreddifference on
available-for-sale gains (losses)on hedges
securities
BALANCE, APRIL 1, 2021

¥80,937¥(61)

Revaluation
reserve forland

Definedretirement
benefit plans¥8,088¥(1,986)

Noncontrollinginterests

Total¥635,241¥3,263Total
equity¥638,504

Cash dividends(5,882)(5,882)

Net income attributable to owners of the parent

20,526

20,526

Purchases of treasury stock(8,606)(8,606)

Disposals of treasury stock

156

156

Retirement of treasury stock──

Reversal of revaluation reserve for land

297

297

Net changes in the year

(24,712)

386

(297)

2,324

(22,336)

185(22,151)

BALANCE, MARCH 31, 2022

¥56,225¥325¥7,791¥338¥619,396¥3,449¥622,845

Cash dividends(5,606)(5,606)

Net income attributable to owners of the parent

21,43521,435Purchases of treasury stock(5,375)(5,375)

Disposals of treasury stock

202

202

Retirement of treasury stock──

Reversal of revaluation reserve for land97

97

Net changes in the year

(19,072)

(521)

(97)

(1,757)(21,532)

145(21,386)

BALANCE, MARCH 31, 2023

¥37,152¥(195)¥7,694¥(1,419)¥608,617¥3,594¥612,212

Hokuhoku Financial Group, Inc. Financial Data 2023

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

3

2023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）

BALANCE, MARCH 31, 2022

Capitalstock

Thousands of U.S. dollars (Note 1)
Stock
CapitalRetainedacquisition
surplusearnings
rights$530,929$937,078$3,747$2,688,874

Cash dividends(41,986)

Net income attributable to owners of the parent

160,529

Purchases of treasury stock

Treasurystock$(6,387)(40,256)

Disposals of treasury stock

162

1,358

Retirement of treasury stock(40,227)

40,227

Reversal of revaluation reserve for land728

Net changes in the year
BALANCE, MARCH 31, 2023

(628)
$530,929$897,013$3,119$2,808,145$(5,058)

Thousands of U.S. dollars (Note 1)
Accumulated other comprehensive income
Valuation
Deferreddifference on
available-for-sale gains (losses)on hedges
securities
BALANCE, MARCH 31, 2022

$2,437

Definedretirement
benefit plans$58,350$2,535

Total

Noncontrollinginterests

Total
equity$4,638,631$25,830$4,664,461

Cash dividends(41,986)(41,986)

Net income attributable to owners of the parent

160,529

160,529

Purchases of treasury stock(40,256)(40,256)

Disposals of treasury stock

1,520

1,520

Retirement of treasury stock──

Reversal of revaluation reserve for land

728

728

Net changes in the year

(142,836)(3,902)(728)(13,163)(161,257)

1,091(160,166)

BALANCE, MARCH 31, 2023

$278,232$(1,465)$57,622$(10,628)$4,557,909$26,921$4,584,830

See notes to consolidated financial statements.

4$421,068

Revaluation
reserve forland

Hokuhoku Financial Group, Inc. Financial Data 2023

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

2023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）

CONSOLIDATED STATEMENT OF CASH FLOWS
Hokuhoku Financial Group, Inc. and Consolidated Subsidiaries
Thousands of
U.S. dollars (Note 1)
2023

Millions of yen
Year ended March 31
1. Cash flows from operating activities:
Income before income taxes
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 losses
Decrease (increase) in asset for retirement benefits
Increase (decrease) in liability for retirement benefits
Increase (decrease) in reserve for directors’ andaudit & supervisory board members’ retirement benefits
Increase (decrease) in reserve for reimbursement of deposits
Interest income
Interest expense
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 paper,and other debt purchased
Net increase (decrease) in call money and bills soldNet increase (decrease) in payables under securities lending transactions
Net decrease (increase) in foreign exchanges (assets)
Net increase (decrease) in foreign exchanges (liabilities)
Net increase (decrease) in borrowed money from trust accountInterest 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
Purchases of money held in trust
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 assets
Net cash provided by (used in) investing activities
3. Cash flows from financing activities:
Dividends paid
Dividends paid to non-controlling shareholders
Purchases of treasury stock
Proceeds from disposals 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 5)

2023

2022

¥ 25,731
5,984
286
2,102
(17)
(5,109)
119
3,143
(296)

¥ 33,233
6,682
414
2,102
(24)
9,738
188
(7,755)137$ 192,703
44,815
2,147
15,744(133)(38,264)
895
23,538(2,221)

(40)

(68)

(301)

(109)
(109,113)
9,625
8,678
(20)
(18,500)
363
1,234
(385)
(340,180)
316,695(5,573)(1,256,050)
4,131

(134)
(104,798)
1,485
743
(18)
(13,380)
522
(46)
302
(142,837)
413,849(158)
222,530(9,291)(822)(817,145)
72,08664,993(151)(138,549)
2,719
9,247
(2,887)(2,547,596)
2,371,717(41,741)(9,406,503)
30,941(19,914)(19,962)(149,142)(167,592)
24,4557,652
88
716
88,889(9,258)(24,038)(1,456,304)(10,278)(1,466,582)

34,855(18,972)(3,242)200
1,571
87,995(1,615)(22,891)
471,354(8,941)
462,413(1,255,091)
183,148
57,310659
5,362
665,689(69,339)(180,023)(10,906,195)(76,972)(10,983,167)(437,538)
622,709
169,082(20,632)
20,49820,783(5,184)77(2,074)
367,722(963,265)
680,813
192,934(20,543)
20,462
16,371(8,170)372(1,629)(82,653)(3,276,704)
4,663,443
1,266,253(154,516)
153,510
155,650(38,824)580(15,534)
2,753,858(5,606)(0)(5,375)0(10,981)30(1,109,810)
5,451,451¥ 4,341,640(5,882)(0)(8,606)0(14,488)36
365,3085,086,143¥5,451,451(41,986)(4)(40,256)2(82,244)230(8,311,323)
40,825,671$ 32,514,348

See notes to consolidated financial statements.

Hokuhoku Financial Group, Inc. Financial Data 2023

CONSOLIDATED STATEMENT OF CASH FLOWS

5

2023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）

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

1. Basis of Presentation
The accompanying consolidated financial statements have been
prepared in accordance with the provisions set forth in theJapanese Financial Instruments and Exchange Act and its
related accounting regulations, the Enforcement Regulation for
the Banking Act, and in conformity with accounting principles
generally accepted in Japan (“Japanese GAAP”), which are
different in certain respects as to the application and disclosure
requirements of International Financial Reporting Standards.
In preparing these consolidated financial statements, certain
reclassifications and rearrangements have been made to theconsolidated financial statements issued domestically in order topresent them in a form which is more familiar to readers outsideof Japan. In addition, certain reclassifications have been made in
the 2022 consolidated financial statements to conform to theclassifications used in 2023.
All Japanese yen figures in the consolidated financial
statements have been rounded down to the nearest million yen.
Accordingly, the total of each account may not be equal to the
combined total of the individual items. The U.S. dollar amounts
are then rounded to thousand dollars.
The consolidated financial statements are stated in Japaneseyen, the currency of the country in which Hokuhoku Financial
Group, Inc. (the “Company”) is incorporated and operates. The
translations of Japanese yen amounts into U.S. dollar amounts
are included solely for the convenience of readers outside Japanand have been made at the rate of ¥133.53 to U.S. $1, the rateof exchange at March 31, 2023. Such translations should not be
construed as representations that the Japanese yen amounts
could be converted into U.S. dollars at that or any other rate.

2. Summary of Significant Accounting Policies
a. Consolidation
The consolidated financial statements as of March 31, 2023
include the accounts of the Company and its 12 subsidiaries(together, the “Group”).
Under the control and influence concepts, those companies
in which the Company, directly or indirectly, is able to exercise
control over operations are fully consolidated, and thosecompanies over which the Group has the ability to exercise
significant influence are accounted for by the equity method.
All significant intercompany balances and transactions havebeen eliminated in consolidation. All material unrealized profit
included in assets resulting from transactions within the Group isalso eliminated.
An investment in one associated company is accounted forby the equity method.
Five companies were not treated as subsidiaries even though
the Group owns over 50% of its voting rights because theobjective for the Group to own the voting rights is merely toinvest business succession and the investment meets therequirement according to Paragraph 16 of the AccountingStandards Board of Japan (the ”ASBJ”) Guidance No. 22“Implementation Guidance on Determining a Subsidiary and an
Affiliate.”
Five companies were not treated as affiliates even though theGroup owns 20% to 50% of its voting rights because theobjective for the Group to own the voting rights is merely toinvest business succession and the investment meets therequirement according to Paragraph 24 of the ASBJ Guidance
No. 22 “Implementation Guidance on Determining a Subsidiary
and an Affiliate.”

6

Hokuhoku Financial Group, Inc. Financial Data 2023

Basis of Presentation

Assets and liabilities of newly consolidated subsidiaries arevalued at fair value at the respective dates of acquisition, andgoodwill is amortized using the straight-line method over 20
years.
b. Cash and Cash Equivalents
For the purpose of reporting cash flows, “Cash and cash
equivalents” consists of “Cash” and “Due from the Bank ofJapan.”
c. Trading Purpose Transactions“Transactions for trading purposes” (for purposes of seeking tocapture gains arising from short-term changes in interest rates,
currency exchange rates, or market prices of securities and othermarket-related indices or from gaps among markets) are
included in “Trading assets” and “Trading liabilities” on a tradedate basis.
Trading securities and monetary claims bought for trading
purposes are stated at fair value at the balance sheet date.
Trading-related financial derivatives, such as swaps, futures, andoptions are stated at amounts that would be received or paid forsettlement if such transactions were terminated at the balance
sheet date. Income and losses on trading purpose transactions
are recognized on a trade-date basis and recorded as “Trading
income” or “Trading losses.”
Trading income and losses include interest received and paid
during the fiscal year and unrealized gains and losses resulting
from the change in the fair value of securities, monetary claimsbought, and derivatives between the balance sheet dates.
d. Securities
Securities are classified and accounted for, based principally on
the Group’s intent, as follows: (a) held-to-maturity debt
securities, which are expected to be held to maturity with thepositive intent and ability to hold to maturity, are stated atamortized cost computed by the straight-line method and (b)available-for-sale securities, which are not classified as trading
purpose securities or held-to-maturity securities, are stated at fairvalue with unrealized gains and losses, net of applicable taxes,
reported in a separate component of equity. Nonmarketableavailable-for-sale equity securities are stated at cost determinedby the moving-average method.
For other-than-temporary declines in fair value, securities are
reduced to net realizable value by a charge to income.
Securities included in money held in trust are recorded in thesame manner as securities mentioned above.
e. Tangible Fixed Assets (excluding Lease Assets)
Tangible fixed assets are stated at cost less accumulated
depreciation. The Company and its consolidated banking
subsidiaries (the subsidiaries hereafter referred to as the“Banks”) depreciate their equipment based on the decliningbalance method and their premises principally based on thestraight-line method. The estimated useful lives of major assets
are as follows: (1) buildings: 6 to 50 years and (2) equipment: 3
to 20 years.
Consolidated non-banking subsidiaries depreciate theirequipment and premises principally based on the decliningbalance method over their expected useful lives.
f. Intangible Assets (excluding Lease Assets and Goodwill)
Intangible assets are amortized based on the straight-line2023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）

method. Capitalized software for internal use owned byconsolidated subsidiaries is amortized using the straight-line
method over its estimated useful life (mainly five years).
g. Lease Assets
Lease assets under non-transfer ownership finance lease
contracts (in which the ownership of leased assets is nottransferred to the lessee; included in tangible fixed assets andintangible assets) are depreciated on a straight-line basis overthe lease period with a residual value of zero, excepting whencontracted amounts for residual value are specified.
h. Long-Lived Assets
The Group reviews its long-lived assets for impairment whenever
events or changes in circumstances indicate the carrying amountof an asset or asset group may not be recoverable. An
impairment loss would be recognized if the carrying amount ofan asset or asset group exceeds the sum of the undiscounted
future cash flows expected to result from the continued use andeventual disposition of the asset or asset group. The impairment
loss would be measured as the amount by which the carrying
amount of the asset 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.
i. Allowance for Loan Losses
The Banks provide an allowance for loan losses which isdetermined based on management’s judgment and anassessment of future losses based on their self-assessment
systems. These systems reflect past experience of credit losses,
possible credit losses, business and economic conditions, thecharacter, quality, and performance of the portfolio, the value ofcollateral or guarantees, and other pertinent indicators.
The Banks have implemented a self-assessment system todetermine the quality of their assets. The quality of all loans is
assessed by branches and the credit supervisory division with asubsequent audit by the asset review and inspection division inaccordance with the Banks’ policy and guidelines for the selfassessment of asset quality.
The Banks have established a credit rating system underwhich borrowers are classified into five categories based on theirfinancial condition, cash flows, earnings ability and otherconsiderations. The credit rating system is used in the selfassessment of asset quality. All loans are classified into fivecategories for self-assessment purposes: “Normal,” “In need ofcaution (“Substandard” borrowers with substandard loans orother borrowers in need of caution),” “Possible bankruptcy,”“Virtual bankruptcy,” and “Legal bankruptcy.”
The definitions of these categories are as follows:
Normal:A “Normal” borrower has strong results and no particular
problems with its financial position.
In need of caution:
An “In need of caution” borrower has problems with lending
conditions, has problems with fulfillment, has poor results
or is unstable, has problems with its financial position, orotherwise requires special attention in future management.
Substandard:
A “Substandard” borrower has substandard loans.
“Substandard” loans are loans to “In need of caution”
borrowers that are “three months or more in arrears” orhave restructured loans.
Possible bankruptcy:
A “Possible bankruptcy” borrower is not bankrupt now but
is facing business difficulties and has failed to makeadequate progress on its business improvement plan, etc.,
such that there is a strong possibility of it going into
bankruptcy in the future.
Virtual bankruptcy:
A “Virtual bankruptcy” borrower is not yet legally andformally bankrupt, but is in serious business difficulties
from which it is considered impossible to rebuild. In otherwords, the borrower is practically bankrupt.
Legal bankruptcy:
A “Legal bankruptcy” borrower is legally and formallybankrupt. This would include bankruptcy, liquidation,
corporate reorganization, civil-rehabilitation, composition,and deposition by suspension of business in the clearing
house.
For loans to borrowers classified as "Legal bankruptcy" or"Virtual bankruptcy," the Banks fully provide the net amount ofloans and estimated collectible amounts by collateral or
guarantees.
For borrowers classified as "Possible bankruptcy" with which
the unsecured portion of claims exceeds a certain amount, or alarge lot borrowers holding substandard loans, if cash flows fromcollection of principal and interest can be reasonably estimated,the Banks provide the difference between the present values ofthese cash flows discounted at the initial contractual interest rate
and the book values of the loans (the “DCF” method).
For borrowers classified as "Possible bankruptcy" or holding
substandard loans without using the “DCF” method, a specificreserve or a general allowance is provided based on three-year
expected loan losses. Expected loan losses are measured basedon three-year historical loan loss ratio and forward-looking
information.
For borrowers classified as “Normal” or “In need of caution”
loans, the Banks segregate the loans into two categories”Business loan” or “Consumer loan.” General allowance for thesecategories is provided based on one-year expected loan losses,
respectively. Expected loan losses are measured by eachcategories based on one-year historical loan loss ratios andforward-looking information.
The Company and its consolidated non-banking subsidiaries
determine the allowance for loan losses by a similar selfassessment system as that of the Banks.
For collateralized or guaranteed claims to borrowers who arein “Virtual bankruptcy” or “Legal bankruptcy,” the amountexceeding the estimated value of collateral or guarantees has
been deducted as deemed uncollectible directly from thoseclaims. The deducted amounts were ¥31,275 million ($234,218
thousand) and ¥33,911 million at March 31, 2023 and 2022,
respectively.
j. Accounting Method for Retirement Benefits
In calculating retirement benefit obligations, the benefit formulabasis is used as a method of attributing expected retirement
benefits to the period up to the end of this fiscal year.
The past service cost is amortized using the straight-line
method over nine years within the employees’ averageremaining service period. It’s commenced from the fiscal year of
incurrence.
The unrecognized actuarial (gains) losses are amortizedusing the straight-line method over eight or nine years within the
Hokuhoku Financial Group, Inc. Financial Data 2023

Basis of Presentation

7

2023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）

employees’ average remaining service period, commencing fromthe next fiscal year of incurrence.
k. Reserve for Directors’ and Audit & Supervisory Board
Members’ Retirement Benefits
A reserve for directors’ and audit & supervisory board members’
retirement benefits is provided for payment of retirement benefits
to directors and audit & supervisory board members in theamount deemed accrued at the fiscal year end, based on theestimated amount of benefits.
The Company and the Banks abolished their directors’ andaudit & supervisory board members’ retirement benefits systemat the Board of Directors’ meeting on May 11, 2012, andresolved to provide a lump-sum payment of retirement benefitsof directors and audit & supervisory board members at thegeneral meeting of shareholders on June 26, 2012. According tothese resolutions, the lump-sum payment of retirement benefitsof directors and audit & supervisory board members shall beeffectuated upon the retirement of each individual director andaudit & supervisory board member. Reserve for directors’ andaudit & supervisory board members’ retirement benefits wasended in June 2012, and the entire remaining amount is included
in “reserve for directors’ and audit & supervisory board members’
retirement benefits.”
l. Reserve for Contingent Losses
A reserve for contingent losses is provided for possible losses inaccordance with the Joint Responsibility System of Credit
Guarantee Corporations and possible losses from contingencies
not covered by other specific reserves.
m. Reserve for Reimbursement of Deposits
A reserve for reimbursement of deposits which were notpreviously recognized as liabilities under certain conditions isprovided for possible losses on the future claims of withdrawal
based on historical reimbursement experience.
n. Reserve under the Special Laws
A reserve under the special laws is a reserve for contingent
liabilities and provided for compensation for losses fromsecurities related transactions or derivative transactions inaccordance with Article 46-5 of the Japanese Financial
Instruments and Exchange Act.
o. Stock Options
The companies are required to recognize compensation expensefor employee stock options based on the fair value of the stock
options at the date of grant and over the vesting period as
consideration for receiving goods or services. The companies arealso required to account for stock options granted to nonemployees based on the fair value of either the stock option or
the goods or services received. In the consolidated balance
sheet, the stock options are presented as stock acquisition rights
as a separate component of equity until exercised.
p. Income Taxes
The provision for income taxes is computed based on the pretax
income included in the consolidated statement 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
bases of assets and liabilities. Deferred taxes are measured byapplying currently enacted income tax rates to the temporary

8

Hokuhoku Financial Group, Inc. Financial Data 2023

Basis of Presentationdifferences.
q. Translation of Foreign Currencies
Assets and liabilities denominated in foreign currencies aretranslated into Japanese yen mainly at the exchange rate
prevailing as of the balance sheet date.
r. Derivatives and Hedging Activities
Derivatives are stated at fair value. Derivative transactions thatmeet hedge accounting criteria are primarily accounted for under
the deferral method whereby unrealized gains and losses aredeferred until maturity as deferred gains (losses) on hedge
accounting in a separate component of equity.
The Banks hedge interest rate risks arising from theirfinancial assets and liabilities by employing the technique known
as “individual hedging” that establishes a specific position to
directly hedge a particular item. Such hedges, limited to certain
assets and liabilities, are accounted for by the deferred methodor, where appropriate interest rate swaps are involved, by the
special rule method.
The effectiveness of hedges is assessed as follows: theBanks specify the hedged items according to their risk
management regulations, with the aim of centralizing hedging
instruments, and verify the extent to which the exposure ofinterest rate risks on hedged items is mitigated.
The Banks hedge currency exchange fluctuation risks arisingfrom their foreign currency denominated financial assets andliabilities. 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” (The Japanese Instituteof Certified Public Accountants (“JICPA”) Industry Committee
Practical Guidelines No. 25).
The effectiveness of these hedges is assessed as follows:
where currency swap transactions and exchange swap
transactions are used as hedging instruments to offset exchange
fluctuation risks arising from foreign currency denominatedfinancial assets and liabilities, hedge effectiveness is assessedby verifying the agreement of the amounts of the designatedhedging instruments corresponding to the hedged foreign
currency financial assets and liabilities.
The Company and consolidated non-banking subsidiaries are
not engaged in hedging operations using derivative transactions.
s. Finance Lease
Sales and cost of sales are accounted for when lease payments
are paid.
t. Per Share Information
Basic net income per share is computed by dividing net income
attributable to common shareholders by the weighted-average
number of shares of common stock outstanding for the period.
Diluted net income per share reflects the potential dilutionthat could occur if the outstanding stock options were exercised.
Diluted net income per share assumes full exercise of theoutstanding stock options at the beginning of the year (or at thetime of grant).
Cash dividends per share presented in the accompanying
consolidated statement of income are dividends applicable to therespective fiscal years, including dividends to be paid after theend of the fiscal year.

2023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）

u. New Accounting Pronouncements- “Accounting standard for Current Income Taxes” (ASBJ
Statement No. 27, October 28, 2022, Accounting Board ofJapan)- “Accounting Standard for Presentation of Comprehensive
Income” (ASBJ Statement No. 25, October 28, 2022, Accounting
Board of Japan)- “Implementation Guidance on Tax Effect Accounting” (ASBJ
Guidance No. 28, October 28, 2022, Accounting Board of Japan)
In February 2018, the ASBJ has issued ASBJ Statement No. 28,"Partial Amendments to Accounting Standard for Tax EffectAccounting", etc. (“ASBJ Statement No. 28”).
In the course of deliberations on the transfer of the practicalguidelines on tax effect accounting by the Japanese Institute ofCertified Public Accountants to the Accounting Standards Boardof Japan, the results of the deliberations on the following two
issues that were decided to be reviewed after the publication of“ASBJ Statement No. 28”.
- Classification of current income taxes (Taxation forcomprehensive income)- Tax effect on the sale of shares of subsidiaries and affiliatesthat applied Group Taxation Regime.
The New Accounting Standards are effective for annual
periods beginning on or after April 1, 2024.
The Company is in the process of measuring the effects ofapplying the New Accounting Standards in future applicable
periods.

(c) The risk that might affect carrying amount to theconsolidated financial statements in next financial year
If the assumption for the evaluation of the achievability ofthe borrowers’ “Business Improvement Plans” changes,
it is possible that the situation will have a significant
impact on allowance for loan losses.

4. Accounting Change(Application of “Implementation Guidance on AccountingStandard for Fair Value Measurement”)
Effective April 1, 2022, the Company adopted ASBJ Guidance
No. 31, “Implementation Guidance on Accounting Standard for
Fair Value Measurement,” issued on June 17, 2021 ("ASBJ
Guidance No. 31"). The Company applies the New AccountingStandard prospectively, in accordance with transitional treatment
provided in paragraph 27-2 of “ASBJ Guidance No. 31”.
Under the "New Accounting Standard, the Company
discloses the consolidated balance sheet amounts, the fair value
and the difference between the consolidated balance sheet
amounts and the fair value for investment trust applied
paragraph 24-9 of “ASBJ Guidance No. 31”, which consider the
net asset value(NAV) as fair value, in Note 31 “fair value offinancial instrument” without comparative information in priorfiscal year in accordance with transitional treatment provided inparagraph 27-3 of “ASBJ Guidance No. 31”.

3. Significant Accounting Estimate
The significant accounting estimate that can significantly affectthe consolidated financial statements for the next fiscal year is asfollows:
Allowance for loan losses(1) Carrying amount on the consolidated financial statements offiscal year ended March 31, 2023 and 2022 were as follows.
2023

2022

Thousands of
U.S. dollars
2023¥67,361¥72,470$504,464

Millions of yen

Allowance for loan losses

Recording allowance for loan losses has a significant impact on
operating results and financial status because of relatively highpercentage of loans and bills discounted on the consolidatedbalance sheet as March 31, 2023. Therefore, we determined that
it was significant accounting estimate.
(2) Information on the significant accounting estimate(a) Methodology for estimate
The Banks estimate the allowance for loan losses
according to the methodology described in Note 2,"Summary of Significant Accounting Policies, i. Allowancefor Loan Losses” to the consolidated financial statements.
(b) Principal assumption
Principal assumption is the prospects for recovery ofborrowers’ business performance in the future periods
and the achievability of the borrowers’ medium-tern tolong-term business improvement plans (“Business
Improvement Plans”).
In case of borrowers whose business results orfinancial position is currently unfavorable or unstable, theBanks frequently determine the borrowers classifications
based on the latest borrowers’ business conditions andthe borrowers’ “Business Improvement Plans” in addition
to the borrowers’ historical business performance.
About the above, there are no significant changes fromprevious consolidated fiscal year.

Hokuhoku Financial Group, Inc. Financial Data 2023

Basis of Presentation

92023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）5. Cash and Cash Equivalents
The reconciliation of “Cash and cash equivalents” in the consolidated statement of cash flows and “Cash and due from banks” in the
consolidated balance sheet as of March 31, 2023 and 2022 consisted of the following:
Millions of yen
2023
2022

Cash and due from banks
Due from banks except for deposits with the Bank of Japan
Cash and cash equivalents¥4,357,148(15,507)¥4,341,640¥5,471,090(19,639)¥5,451,451

Thousands of
U.S. dollars
2023$32,630,483(116,135)$32,514,348

6. Trading Assets and Liabilities
Trading assets and liabilities as of March 31, 2023 and 2022 consisted of the following:

Trading Assets

Millions of yen
2023
2022

Trading securities
Trading-related financial derivatives
Total¥1,897322¥2,220

Trading Liabilities

Millions of yen
2023
2022

Trading-related financial derivatives
Total

¥266
¥266

¥2,710744¥3,454¥651¥651

Thousands of
U.S. dollars
2023$14,2102,416$16,626
Thousands of
U.S. dollars
2023$1,995$1,995

7. Money Held in Trust
Money held in trust for trading purposes as of March 31, 2023 and 2022 consisted of the following:Amounts recorded in the consolidated balance sheet
Valuation gain (loss) included in consolidated statement of income

Millions of yen
2023
2022

Thousands of
U.S. dollars
2023¥14,248(9)$106,709(74)¥14,124(0)

Money held in trust for other purposes as of March 31, 2023 and 2022 consisted of the following:
Millions of yen
2023
2022

Amounts recorded in the consolidated balance sheet
Valuation gain (loss) included in consolidated statement of income¥4,000―¥4,350―Thousands of
U.S. dollars
2023$29,956―

8. Securities(1) Securities as of March 31, 2023 and 2022 consisted of the following:
Millions of yen
2023
2022

Japanese national government bonds
Japanese local government bonds
Japanese corporate bonds
Japanese corporate stocks
Other securities
Total¥234,380
605,791
277,593
214,164
522,327¥1,854,257¥428,800
614,707
276,518
224,545
662,416¥2,206,987

Thousands of
U.S. dollars
2023$1,755,268
4,536,746
2,078,883
1,603,865
3,911,687$13,886,449

As of March 31, 2023 and 2022, securities included equity investments in non-consolidated subsidiaries that amounted to ¥2,557 million($19,155 thousand) and ¥1,944 million, respectively.
In the following description, in addition to “Securities,” also presented are trading account securities which are classified as “Trading
assets” in the consolidated balance sheet and beneficiary claims on loan trusts which are classified as “Monetary claims bought” in the
consolidated balance sheet.

10

Hokuhoku Financial Group, Inc. Financial Data 2023

Cash and Cash Equivalents、Trading Assets and Liabilities、Money Held in Trust、Securities2023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）(2) Valuation gain or loss on trading account securities included in income before income taxes was ¥(19) million ($(149) thousand) and¥(26) million as of March 31, 2023 and 2022, respectively.
(3) The amounts on the consolidated balance sheet, aggregate fair value, and unrealized gains (losses) on held-to-maturity debt
securities as of March 31, 2023 and 2022 were as follows:
Millions of yen
March 31, 2023

Fair value exceeding amount on consolidated balance sheet:
Held-to-maturity debt securities:
Japanese government bonds
Japanese local government bonds
Total
Fair value below amount on consolidated balance sheet:
Held-to-maturity debt securities:
Japanese government bonds
Japanese local government bonds
Total
Grand total

Amount on
consolidatedbalance sheet

Estimated
fair value

¥500
2,500
¥3,000¥502
2,507¥3,009

¥2
7
¥9

¥―
―
―
¥3,000¥―――¥3,009¥―――¥9

Net unrealized
gains (losses)

Millions of yen
March 31, 2022

Fair value exceeding amount on consolidated balance sheet:
Held-to-maturity debt securities:
Japanese government bonds
Japanese local government bonds
Total
Fair value below amount on consolidated balance sheet:
Held-to-maturity debt securities:
Japanese government bonds
Japanese local government bonds
Total
Grand total

March 31, 2023

Fair value exceeding amount on consolidated balance sheet:
Held-to-maturity debt securities:
Japanese government bonds
Japanese local government bonds
Total
Fair value below amount on consolidated balance sheet:
Held-to-maturity debt securities:
Japanese government bonds
Japanese local government bonds
Total
Grand total

Amount on
consolidatedbalance sheet

Estimated
fair value¥1,5001,500¥3,000¥1,5071,511¥3,018

¥7
11
¥18

¥―
1,000
1,000
¥4,000¥―999
999¥4,018

¥―
(0)
(0)
¥17

Net unrealized
gains (losses)

Thousands of U.S. dollars
Amount on
Estimated
Net unrealized
consolidated
fair value
gains (losses)balance sheet$3,746
18,722$22,468$3,764
18,776$22,540

$18
54
$72

¥―
―
―
$22,468¥―――$22,540

¥―
―
―
$72

Hokuhoku Financial Group, Inc. Financial Data 2023

Cash and Cash Equivalents、Trading Assets and Liabilities、Money Held in Trust、Securities11

2023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）(4) The amounts on the consolidated balance sheet, acquisition or amortized cost, and unrealized gains (losses) on available-for-salesecurities as of March 31, 2023 and 2022 were as follows:

March 31, 2023

Amount on consolidated balance sheet exceeding acquisition or amortized cost:
Japanese corporate stocks
Bonds:
Japanese government bonds
Japanese local government bonds
Japanese corporate bonds
Total bonds
Other securities:
Foreign securities
Other
Total other securities
Total
Amount on consolidated balance sheet below acquisition or amortized cost:
Japanese corporate stocks
Bonds:
Japanese government bonds
Japanese local government bonds
Japanese corporate bonds
Total bonds
Other securities:
Foreign securities
Other
Total other securities
Total
Grand total

March 31, 2022

Millions of yen
Amount on
Acquisition/
Net unrealized
consolidatedbalance sheet amortized cost gains (losses)

Amount on consolidated balance sheet exceeding acquisition or amortized cost:
Japanese corporate stocks
Bonds:
Japanese government bonds
Japanese local government bonds
Japanese corporate bonds
Total bonds
Other securities:
Foreign securities
Other
Total other securities
Total
Amount on consolidated balance sheet below acquisition or amortized cost:
Japanese corporate stocks
Bonds:
Japanese government bonds
Japanese local government bonds
Japanese corporate bonds
Total bonds
Other securities:
Foreign securities
Other
Total other securities
Total
Grand total

12

Millions of yen
Amount on
Acquisition/
Net unrealized
consolidatedbalance sheet amortized cost gains (losses)

Hokuhoku Financial Group, Inc. Financial Data 2023

Cash and Cash Equivalents、Trading Assets and Liabilities、Money Held in Trust、Securities¥161,912¥58,171¥103,740

99,668114,858
143,256
357,783

96,545
114,561
142,107353,214

3,122
296
1,149
4,568

19,11065,19384,303¥603,998

13,46061,48774,947¥486,334

5,649
3,706
9,355
¥117,664¥26,397¥30,084¥(3,687)

134,212488,432
134,337
756,982

138,258
494,443
136,370769,072(4,045)(6,010)(2,033)(12,089)

270,066
160,739
430,805
1,214,185¥1,818,183

305,523
180,064
485,587
1,284,744¥1,771,078(35,456)(19,324)(54,781)(70,558)¥47,105¥161,697¥57,223¥104,474

168,768
119,163
180,700
468,632

160,072
118,714179,081457,868

8,695
449
1,619
10,76357,472
112,125
169,597¥799,928

51,964
104,610
156,575¥671,666

5,507
7,515
13,022¥128,261¥36,761¥46,386¥(9,625)

258,531493,043
95,817
847,393

262,106
496,252
96,694855,054(3,574)(3,209)(876)(7,660)354,584
140,123494,707
1,378,862¥2,178,790

379,336
149,376
528,7131,430,154¥2,101,821(24,752)(9,252)(34,005)(51,291)¥76,9692023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）

Thousands of U.S. dollars
Amount on
Acquisition/
Net unrealized
consolidatedbalance sheet amortized cost gains (losses)

March 31, 2023

Amount on consolidated balance sheet exceeding acquisition or amortized cost:
Japanese corporate stocks
Bonds:
Japanese government bonds
Japanese local government bonds
Japanese corporate bonds
Total bonds
Other securities:
Foreign securities
Other
Total other securities
Total
Amount on consolidated balance sheet below acquisition or amortized cost:
Japanese corporate stocks
Bonds:
Japanese government bonds
Japanese local government bonds
Japanese corporate bonds
Total bonds
Other securities:
Foreign securities
Other
Total other securities
Total
Grand total$1,212,553$435,647$776,906

746,410860,172
1,072,839
2,679,421

723,023
857,949
1,064,233
2,645,205

23,3872,223
8,606
34,216

143,114488,228
631,342$4,523,316

100,807460,474
561,281$3,642,133

42,30727,75470,061$881,183$197,687$225,299$(27,612)

1,005,112
3,657,851
1,006,044
5,669,007

1,035,411
3,702,863
1,021,275
5,759,549(30,299)(45,012)(15,231)(90,542)2,022,516
2,288,051
1,203,769
1,348,492
3,226,285
3,636,543
9,092,979
9,621,391$13,616,295 $13,263,524(265,535)(144,723)(410,258)(528,412)$352,771(5) Information on held-to-maturity debt securities, which were sold during the years ended March 31, 2023 and 2022 is as follows:
Millions of yen
Year ended March 31

Proceeds

2023
Realized
gains

Realized
lossesProceeds

2022
Realized
gains

Realized
lossesThousands of U.S. dollars
2023
Realized
Realized
Proceeds
gains
losses$―$―Japanese government bonds¥―¥―¥― ¥4,051¥4,602¥551
A consolidated subsidiary sold a portion of held-to-maturity debt securities curbing the expansion of future interest rate risk.

$―

Hokuhoku Financial Group, Inc. Financial Data 2023

Cash and Cash Equivalents、Trading Assets and Liabilities、Money Held in Trust、Securities13

2023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）(6) Information on available-for-sale securities, which were sold during the years ended March 31, 2023 and 2022 is as follows:
March 31, 2023

Japanese corporate stocks
Bonds:
Japanese government bonds
Japanese local government bonds
Japanese corporate bonds
Total bonds
Other securities:
Foreign securities
Other
Total other securities
Total

March 31, 2022

Proceeds

Millions of yen
Realized gains Realized losses¥42,826¥16,967¥876

218,61028,027110
246,749

5,008
―
0
5,009

3,321
1,356
―
4,677

220,707
63,567284,274¥573,849

170
2,312
2,483
¥24,459

20,578403
20,981¥26,535

Millions of yen
Realized gains Realized losses

Japanese corporate stocks
Bonds:
Japanese government bonds
Japanese local government bonds
Japanese corporate bonds
Total bonds
Other securities:
Foreign securities
Other
Total other securities
Total

March 31, 2023

Thousands of U.S. dollars
Proceeds
Realized gains Realized losses

Japanese corporate stocks
Bonds:
Japanese government bonds
Japanese local government bonds
Japanese corporate bonds
Total bonds
Other securities:
Foreign securities
Other
Total other securities
Total

14

Proceeds

Hokuhoku Financial Group, Inc. Financial Data 2023

Cash and Cash Equivalents、Trading Assets and Liabilities、Money Held in Trust、Securities¥49,826¥8,178¥1,340184,375
10,496
7,323
202,195

1,469
96
82
1,648

477
―
―
477

234,771
108,054342,826¥594,848

1,682
3,938
5,620
¥15,447

8,089
1,955
10,045¥11,863$320,723$127,066$6,564

1,637,167
209,895
830
1,847,892

37,506―
6
37,512

24,872
10,158―35,0301,652,865
476,054
2,128,919$4,297,534

1,279
17,31818,597$183,175

154,1113,020
157,131$198,725

2023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）(7) A consolidated subsidiary of the Group sold a portion of held-to-maturity debt securities and changed classification from held tomaturity debt securities to available-for-sale securities. As a result, available-for-sale securities and valuation difference on availablefor-sale securities increased by ¥189,803 million, ¥5,157 million, respectively, and deferred tax assets decreased by ¥2,253 million on
consolidated balance sheet amount as of March 31, 2022. Not applicable during the years ended March 31, 2023.
(8) Impairment losses on available-for-sale securities amounted to ¥3,950 million ($29,585 thousand) and ¥1,677 million as of March 31,
2023 and 2022, respectively.
An impairment of securities is recognized if the decline in fair value is substantial and the decline is determined to be other-thantemporary. The assessment of whether or not a decline in fair value is other-than-temporary by classification of the security issuer
which is used in the self-assessment of asset quality is as follows:(i) For issuers who are classified as borrowers under “In need of caution,” “Possible bankruptcy,” “Virtual bankruptcy,” “Legal bankruptcy.”
Stocks: where the fair value is lower than the acquisition cost.
Bonds: where the fair value declines by over 30% compared to the amortized cost or acquisition cost.
(ii) For issuers who are classified as borrowers under “Normal.”
Stocks and bonds: where the fair value declines by 50% or more compared to the amortized cost or acquisition cost, or the fairvalue declines by over 30% but less than 50% compared to the amortized cost or acquisition cost and market prices remaining
below a certain level.
* In determination of impairment losses, stocks’ fair value are determined based on the average quoted market prices in the lastmonth of the consolidated fiscal year.
(9) Reconciliation of valuation difference on available-for-sale securities to the amounts included in “valuation difference on available-forsale securities,” presented as a separate component of net assets as of March 31, 2023 and 2022, in the consolidated balance sheet,
was as follows:
Millions of yen
2023
2022

Valuation difference before taxes on available-for-sale securities
Deferred tax liabilities
Valuation difference on available-for-sale securities (before adjustment)
Amounts attributable to non-controlling interests
The Company’s portion of valuation difference on available-for-sale securities of equity method investees
Amounts recorded in the consolidated balance sheet¥48,137(11,002)37,134(269)
287¥37,152¥77,978(21,725)
56,253(245)
217¥56,225

Thousands of
U.S. dollars
2023$360,497(82,398)
278,099(2,021)
2,154$278,232

Hokuhoku Financial Group, Inc. Financial Data 2023

Cash and Cash Equivalents、Trading Assets and Liabilities、Money Held in Trust、Securities15

2023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）9. Loans and Bills Discounted
Loans and bills discounted as of March 31, 2023 and 2022
consisted of the following:

Bills discounted
Loans on bills
Loans on deeds
Overdrafts
Total

Millions of yen
2023
2022

Thousands of
U.S. dollars
2023¥25,053¥27,344
153,115
161,850
8,286,655 7,976,173
1,068,639 1,027,914¥9,533,464 ¥9,193,283$187,621
1,146,678
62,058,381
8,002,993$71,395,673

Claims under The Banking Act and the Financial
Reconstruction Law include Japanese corporate bonds insecurities, which are guaranteed for all or part of the redemptionof the principal and the payment of interest, and the issuance of
these are limited to a private placement of securities (pursuant to
Article 2, Clause 3 of the Japanese Financial Instruments andExchange Act), loans and bills discounted, foreign exchanges,
accrued interest and suspense payments in other assets andcustomers’ liabilities for acceptances and guarantees. The
amounts of these claims were as follows:
Thousands of
U.S. dollars
2023

Millions of yen
2023
2022

Bankrupt andsubstantially bankrupt
Doubtful
Substandard
Loans past due
for 3 months or more
Restructured loans
Non Performing Loans
NormalTotal¥15,099¥15,743$113,082

168,757

165,173

1,263,817

37,45034,087

280,463

717

51

5,371

36,73334,035275,092¥221,307¥215,004 $1,657,362
9,556,444 9,231,734 71,567,770¥9,777,751 ¥9,446,739 $73,225,132

Bankrupt and substantially bankrupt represent claims to
obligors under bankruptcy and similar claims, as provided forunder the Bankruptcy Law, the Corporate Reorganization Law,
the Civil Rehabilitation Law and similar laws.
Doubtful represent claims to obligors that are not yet inbankruptcy but have experienced deterioration in their financial
condition and operating performance and for which there is ahigh probability of contractual defaults on principal and interest
payments.
Loans past due for three months or more represent loans
which the principal and/or interest is three months or more pastdue, but exclude bankrupt and substantially bankrupt anddoubtful.
Restructured loans are loans where the Group relaxes
lending conditions by reducing the original interest rate or byforbearing interest payments or principal repayments to support
the borrower’s reorganization. Restructured loans exclude
bankrupt and substantially bankrupt, doubtful, loans past due forthree months or more.
Normal represent claims to obligors that are experiencing no
particular problems with their financial condition or operating
performance, other than claims in any of the three categories
above.
These amounts represent the gross amounts before
deduction of the allowance for loan losses.

16

Hokuhoku Financial Group, Inc. Financial Data 2023

Loans and Bills Discounted

Bills discounted are accounted for as financial transactions inaccordance with “Accounting and Auditing treatment of
Accounting Standards for Financial Instruments in Banking
Industry” (JICPA Industry Committee Practical Guidelines No.
24). The Banks have the right to sell or repledge as collateralsuch discounted bills at their discretion. The total face value ofbank acceptance bills, commercial bills, documentary bills andforeign currency bills bought, which were obtained at a discount,
were ¥27,564 million ($206,427 thousand) and ¥29,762 million
as of March 31, 2023 and 2022, respectively.

10. Foreign Exchanges
Foreign exchanges as of March 31, 2023 and 2022 consisted of
the following:
Millions of yen
2023
2022

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
2023¥13,457
2,511
2,007¥17,975¥20,9212,417
2,289¥25,628$100,783
18,80515,031$134,619

¥303
4
427
¥735

¥178
88
380
¥647

$2,27632
3,201$5,509

11. Tangible Fixed Assets
Tangible fixed assets as of March 31, 2023 and 2022 were as
follows:
Millions of yen
2023
2022

Buildings
Land
Lease assets
Construction in progress
Other tangible fixed assets
Total¥32,50957,930
494
4,215
4,865
¥100,013¥31,91257,771
669
3,580
5,201
¥99,135

Thousands of
U.S. dollars
2023$243,459
433,836
3,700
31,56736,434$748,996

Accumulated depreciation amounted to ¥108,082 million($809,426 thousand) and ¥106,906 million as of March 31, 2023
and 2022, respectively.
The book value of tangible fixed assets adjusted for gains onsales of replaced assets amounted to ¥5,809 million ($43,510
thousand) and ¥5,821 million as of March 31, 2023 and 2022,
respectively.
Under the “Act Concerning Land Revaluation,” Hokuriku
Bank, Ltd. revalued its own land for business operations as ofMarch 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 valueby ¥15,620 million ($116,985 thousand) and ¥16,024 million asof March 31, 2023 and 2022, respectively.

2023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）12. Intangible Assets

15. Loan Commitments

Intangible assets as of March 31, 2023 and 2022 were as

Overdraft facility and loan commitment contracts with customers

follows:

to lend up to the prescribed limits in response to customers’Millions of yen
2023
2022

Software
Goodwill
Lease assets
Other intangible assets
Total¥3,912
2,978
232
1,176
¥8,299¥4,180
5,080
197
865
¥10,323

Thousands of
U.S. dollars
2023$29,299
22,304
1,739
8,811$62,153

applications for a loan, as long as there is no violation of any
condition within the contracts. The unused amount of suchcontracts totaled 2,411,801 million ($18,061,867 thousand) and¥2,491,442 million as of March 31, 2023 and 2022, respectively,of which amounts with original agreement terms of less than one
year are ¥2,267,955 million ($16,984,611 thousand) and¥2,336,350 million as of March 31, 2023 and 2022, respectively.
Since the majority of the commitments expire without being

13. Customers’ Liabilities for Acceptances and Guarantees

drawn upon, the unused amount does not necessarily represent

All contingent liabilities arising from acceptances and guarantees

a future cash requirement. Most of these contracts haveconditions allowing the Group to refuse customers’ applications

are reflected in acceptances and guarantees in liabilities on the
consolidated balance sheet. As a contra account, customers’
liabilities for acceptances and guarantees are also shown in
assets, which represent the Banks’ right of indemnity from theapplicants.
Guarantee obligations on securities issued by private
placement (pursuant to Article 2, Clause 3 of the Japanese
Financial Instruments and Exchange Act) amounted to ¥158,589
million ($1,187,672 thousand) and ¥163,443 million as of March
31, 2023 and 2022, respectively.

for a loan or decrease the contract limits with proper reasons(e.g., changes in financial situation, deterioration in customers’
creditworthiness). At the inception of the contracts, the Groupobtains collateral including real estate, securities, etc., if
considered necessary. Subsequently, the Group performs aperiodic review of the customers’ business results based oninternal rules and takes necessary measures to reconsider
conditions in contracts and require additional collateral andguarantees.

14. Assets Pledged

16. Deposits

Assets pledged as collateral and their relevant liabilities as ofMarch 31, 2023 and 2022 were as follows:

Deposits as of March 31, 2023 and 2022 consisted of theMillions of yen
2023
2022

Assets pledged as collateral:
Securities¥907,086 ¥1,208,022
Loans and bills discounted 1,072,486 2,452,157
Relevant liabilities to the above assets:
Deposits
23,89527,857
Call money and bills sold
20,000―
Payables under securities
313,271
288,815lending transactions
Borrowed money
1,347,191 2,602,410$6,793,128
8,031,799
178,953―
2,346,073
10,089,053

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 of March 31, 2023 and 2022:
Millions of yen
2023
2022

Securities
Other assets¥998
105,209¥2,097105,219

Thousands of
U.S. dollars
2023$7,478787,908

In addition to the above, initial margins for futurestransactions, cash collateral paid for financial instruments, andguarantee deposits that are included in “Other assets” in the
consolidated balance sheet as of March 31, 2023 and 2022 wereas follows:
Millions of yen
2023
2022

Cash collateral paid forfinancial instruments
Guarantee deposits

following:Thousands of
U.S. dollars
2023

Thousands of
U.S. dollars
2023¥6,806¥11,005$50,976

4,340

4,355

32,503

Millions of yen
2023
2022

Thousands of
U.S. dollars
2023

Current deposits, ordinary
deposits, saving deposits ¥10,073,216 ¥9,636,970 $75,437,854
and deposits at noticeTime deposits and3,272,639 3,382,658
24,508,643
installment savings
Negotiable certificates
58,50664,079438,151of deposit
Other deposits
109,364
118,895
819,022
Total¥13,513,726 ¥13,202,604 $101,203,670

17. Borrowed Money
As of March 31, 2023 and 2022, the weighted-average annualinterest rates applicable to borrowed money were 0.06% and0.02%, respectively.
Annual maturities of borrowed money as of March 31, 2023
were as follows:Year ending March 31

2023
2024
2025
2026
2027
2028 and thereafter
Total

Millions of yen

Thousands of
U.S. dollars¥537,420
303,294
294,816
216,532256
129¥1,352,450$4,024,720
2,271,358
2,207,867
1,621,602
1,921
969$10,128,437

Hokuhoku Financial Group, Inc. Financial Data 2023

Loans and Bills Discounted

172023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）18. Retirement Benefits(3)

Overview of the Group’s retirement benefit plans
The Hokuriku Bank, Ltd. and The Hokkaido Bank, Ltd. provided
two defined benefit retirement programs, corporate pensions andretirement bonuses, in addition to the defined contribution
pension plan. At the time of retirement, employees may be
issued a premium retirement grant that is not subject to inclusionin the actuarial computation of projected benefit obligations inconformity with the standards for accounting for retirement
benefits. The Banks have established retirement benefit trusts.
The consolidated domestic subsidiaries, other than the two
noted above, provide retirement lump-sum grants.
(a) Defined benefit plan
(1) The changes in defined benefit obligations for the years
ended March 31, 2023 and 2022 were as follows:

Balance at beginning of year
Service cost
Interest cost
Actuarial (gains) losses
Benefits paid
Past service cost
Decrease resulting fromtransfer to defined
contribution pension plans
OthersBalance at end of year

Millions of yen
2023
2022

Thousands of
U.S. dollars
2023¥83,343
1,703
511
1,254
(5,082)―$624,155
12,756
3,831
9,395(38,060)―¥94,864
2,133
578
481
(5,458)(1,742)―(7,593)―

2¥81,733

80¥83,34318$612,095(2) The changes in plan assets for the years ended March 31,
2023 and 2022 were as follows:

Balance at beginning of year
Expected return on plan assets
Actuarial (gains) losses
Contributions from the employer
Benefits paid
Decrease resulting fromtransfer to defined
contribution pension plans
OthersBalance at end of year

Millions of yen
2023
2022

Thousands of
U.S. dollars
2023¥90,479
2,279(2,126)
153(4,764)$677,594
17,069(15,929)
1,149(35,683)¥94,382
2,568
1,822
513
(4,956)―(3,931)―

2¥86,02280¥90,47918$644,218

Reconciliation

betweentheliability

recordedintheconsolidated balance sheet and the balances of defined
benefit obligation and plan assets was as follows:

Funded defined benefit obligation
Plan assets
Unfunded defined benefit obligation
Plan assets
Net liability (asset) arising fromdefined benefit obligation

Millions of yen
2023
2022

Thousands of
U.S. dollars
2023¥68,363(76,002)(7,639)13,370(10,019)
3,350¥69,714(80,554)(10,839)
13,628(9,924)
3,703$511,968(569,181)(57,213)100,128(75,037)
25,091¥(4,289)¥(7,135)$(32,122)

Millions of yen
2023
2022

Liability for retirement benefits
Asset for retirement benefits
Net liability (asset) arising fromdefined benefit obligation

Thousands of
U.S. dollars
2023¥3,407(7,696)¥3,703(10,839)$25,516(57,638)¥(4,289)¥(7,135)$(32,122)(4) The components of net periodic benefit costs for the years
ended March 31, 2023 and 2022 were as follows:
Millions of yen
2023
2022

Service cost
Interest cost
Expected return on plan assets
Recognized actuarial (gains) losses
Recognized past service cost
OthersNet periodic benefit costs¥1,703511(2,279)
1,049
(193)
33
¥824

¥2,133578(2,568)
501
(16)
114
¥744

Thousands of
U.S. dollars
2023$12,756
3,831(17,069)
7,860(1,450)248$6,176(5) Amounts recognized in other comprehensive income (before
income tax effect) in respect of defined retirement benefit
plans for the years ended March 31, 2023 and 2022 were as
follows:

Past service cost
Actuarial gains (losses)
Total

Millions of yen
2023
2022

Thousands of
U.S. dollars
2023¥(193)(2,331)¥(2,525)$(1,450)(17,463)$(18,913)¥1,726
1,613¥3,340(6) Amounts recognized in accumulated other comprehensive
income (before income tax effect) in respect of defined
retirement benefit plans as of March 31, 2023 and 2022 wereas follows:
Millions of yen
2023
2022

Unrecognized past service cost
Unrecognized actuarial (gains) losses
Total

18

Hokuhoku Financial Group, Inc. Financial Data 2023

Retirement Benefits¥(1,532)
3,574¥2,041¥(1,726)1,242¥(484)

Thousands of
U.S. dollars
2023$(11,480)
26,767$15,2872023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）(7)Plan assets• Components of plan assets
Plan assets as of March 31, 2023 and 2022 consisted of thefollowing:
Bonds
StocksCash and deposits
General accounts
Other
Total

2023

2022

29.18%
46.54
1.25
7.18
15.85
100.00%29.69%
44.98
2.06
7.14
16.13
100.00%Note: Plan assets include retirement benefit trusts of 20.57% and 20.25%
as of March 31, 2023 and 2022, respectively.

• Method of determining the expected rate of return on plan assets
The expected rate of return on plan assets is determinedconsidering the long-term rates of return, which are expectedcurrently and in the future, from the various components of theplan assets.
(8) Assumptions used for the years ended March 31, 2023 and2022 were set forth as follows:
2023

Discount rate
Expected rate of return on plan assets

2022

0.61%-0.63% 0.61%-0.63%
2.2%-3.5% 2.6%-3.0%(b) Defined contribution pension plan
Millions of yen
2023
2022

Contribution

¥497

¥350

Thousands of
U.S. dollars
2023$3,72819. Equity
Japanese banks are subject to the Banking Act and theCompanies Act of Japan (the “Companies Act”). The significant
provisions in the Companies Act and the Banking Act that affectfinancial 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. Additionally, forcompanies that meet certain criteria including (1) having a
Board of Directors, (2) having independent auditors, (3) having
an Audit & Supervisory Board, and (4) the term of service of thedirectors being prescribed as one year rather than the normal
two-year 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 prescribedso in its articles of incorporation. With respect to the third
condition above, the Board of Directors of companies with anaudit and supervisory committee (as implemented under theCompanies Act effective May 1, 2015) may also declare
dividends at any time because such companies, by nature,
meet the criteria under the Companies Act. The Company isorganized as a company with an audit and supervisorycommittee, effective June 27, 2017. The Company meets all
the above criteria, and accordingly, the Board of Directors may
declare dividends (except for dividends-in-kind) at any time
during the fiscal year.
Semiannual interim dividends may also be paid once a

year upon resolution by the Board of Directors if the articles
of incorporation of the company so stipulate. The Companies
Act provides certain limitations on the amounts available fordividends or the purchase of treasury stock. The limitation isdefined as the amount available for distribution to theshareholders, 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,reserve, and surplus
The Banking Act requires that an amount equal to 20% of
dividends must be appropriated as a legal reserve (acomponent of retained earnings) or as additional paid-in
capital (a component of capital surplus), depending on theequity account charged upon the payment of such dividends,
until the aggregate amount of the legal reserve and additional
paid-in capital equals 100% of common stock. Under theCompanies Act, the total amount of additional paid-in capitaland 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
within equity under certain conditions upon resolution of theshareholders.
(c) Treasury stock and treasury stock acquisition rights
The Companies Act also provides for companies to purchasetreasury stock and dispose of such treasury stock byresolution of the Board of Directors. The amount of treasury
stock purchased cannot exceed the amount available for
distribution to the shareholders, which is determined by aspecific formula.
Under the Companies Act, stock acquisition rights arepresented as a separate component of equity.
The Companies Act also provides that companies canpurchase both treasury stock acquisition rights and treasury
stock. Such treasury stock acquisition rights are presented asa separate component of equity or deducted directly fromstock acquisition rights.
On October 1, 2016, the Company implemented a common
stock consolidation at a ratio of ten stocks to one stock based on
the resolution of the General Shareholders’ meeting held on
June 24, 2016.
(d) Appropriations of retained earnings
The following appropriations of retained earnings at March 31,
2023 was approved at the Company’s general shareholders’meeting held on June 27, 2023:
Cashdividends,¥37.00($0.28) per share of common
stock
Cash dividends, ¥7.50 ($0.06)
per share of preferred stock(Type 5)

Millions of yen

Thousands of
U.S. dollars¥4,740$35,504

483

3,620

Hokuhoku Financial Group, Inc. Financial Data 2023

Retirement Benefits192023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）20. Capital Stock

21. Stock Acquisition Rights

Information with respect to capital stock of the Company as of

Stock acquisition rights as of March 31, 2023 and 2022

March 31, 2023 and 2022 is as follows:

consisted of stock options.

2023

Number of shares:
Authorized:
CommonPreferred (Type 5)
Issued and outstanding:CommonPreferred (Type 5)
Treasury stock:
CommonPreferred (Type 5)

2022

22. Stock Options
The stock option plans grant options to the Company’s directors
280,000,000
110,000,000

280,000,000
110,000,000

128,770,814
64,469,000

128,770,814
75,212,000

655,341
11,096

831,643
11,112Preferred stock (Type 5)
Preferred stock (Type 5) is noncumulative and nonparticipating.
Shareholders of the preferred stock (Type 5) are not entitled tovote at the general meeting of shareholders, except when the
proposal to pay the prescribed dividends to shareholders is not
submitted to the general meeting of shareholders or is rejected
at the general meeting of shareholders.
Annual dividends per share of preferred stock (Type 5) are
paid to shareholders at ¥15.00.
The changes in the number of treasury stock for the fiscal
years ended March 31, 2023 and 2022 were as follows:
As of April Changes during the fiscal year As of March
1, 2022
2023
Increase*1 Decrease*2 31, 2023
Common831,643
4,305
180,607655,341
Preferred (Type 5)
11,112 10,742,984 10,743,000
11,096
As of April Changes during the fiscal year As of March
1, 20212022
Increase*1 Decrease*2 31, 2022
Common953,838 3,397,257 3,519,452
831,643
Preferred (Type 5)
11,128 10,742,984 10,743,000
11,112*1 The increase of common represents the acquisition of treasury stockand odd-lot shares.
The increase of preferred (Type5) represents the acquisition of treasury
stock.
*2 The decrease of common represents the retirement of treasury stockand the exercise of stock options.
The decrease of preferred (Type5) represents the retirement oftreasury stock.

20

Hokuhoku Financial Group, Inc. Financial Data 2023

Retirement Benefits

and the Banks’ directors and executive officers to purchasecertain shares of the Company’s common stock in the respective
exercise periods. The exercise prices are subject to adjustments
for stock issuances below fair value and stock splits.
Stock option expenses in the amount of ¥120 million ($900
thousand) and ¥117 million were recorded under general andadministrative expenses for the years ended March 31, 2023 and2022, respectively.
The stock options outstanding as of March 31, 2023 were as
follows:

Stock options

Persons
granted19 directors
2012 Stock 23 executive
Optionofficers
19 directors
2013 Stock 22 executive
Optionofficers
19 directors
2014 Stock 21 executive
Optionofficers
18 directors
2015 Stock 24 executive
Optionofficers
19 directors
2016 Stock 25 executive
Optionofficers
20 directors
2017 Stock 25 executive
Optionofficers
19 directors
2018 Stock 24 executive
Optionofficers
19 directors
2019 Stock 24 executive
Optionofficers
19 directors
2020 Stock 23 executive
Optionofficers
19 directors
2021 Stock 24 executive
Optionofficers
18 directors
2022 Stock 24 executive
Optionofficers

Numberof options
granted(Shares)

Date of
grant

Exercise
price Exercise period

105,850

November28, 2012¥1

62,950August 13,
2013

¥1

55,400July 11,2014¥1

41,730July 14,2015¥1

106,200

August 12,
2016

¥1

75,960July 14,2017¥187,420July 11,2018¥1

114,610

July 10,2019¥1

138,000

July 10,
2020¥1July 14,2021¥1

July 11,2022¥1154,930
156,200

From November
29, 2012 toNovember 28,
2042
From August 14,
2013 to August
13, 2043
From July 12,2014 to July 11,
2044
From July 15,
2015 to July 14,
2045
From August 13,
2016 to August
12, 2046
From July 15,2017 to July 14,
2047
From July 12,2018 to July 11,
2048
From July 11,
2019 to July 10,
2049
From July 11,2020 to July 10,
2050
From July 15,2021 to July 14,
2051
From July 12,2022 to July 11,2052

2023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）The stock option activity was as follows:Year ended
March 31, 2023

Non-vested:
March 31, 2022
–outstanding
GrantedCanceled
VestedMarch 31, 2023
–outstanding
Vested:March 31, 2022
–outstanding
VestedExercised
Canceled
March 31, 2023
–outstanding
Exercise price
Average stock
price at exercise
Fair value priceat grant dateYear ended
March 31, 2023

Non-vested:
March 31, 2022
–outstanding
GrantedCanceled
VestedMarch 31, 2023
–outstanding
Vested:March 31, 2022
–outstanding
VestedExercised
Canceled
March 31, 2023
–outstanding
Exercise price
Average stock
price at exercise
Fair value priceat grant date2012 stock option 2013 stock option 2014 stock option 2015 stock option(Shares)(Shares)(Shares)(Shares)

―
―
―
―

―
―
―
―

―
―
―
―

―
―
―
―

―

―

―

―

11,510―6,600―

12,220―7,350―

10,710
―
6,480
―

9,260
―
4,810
―

4,910
¥1
$0.01

4,870
¥1
$0.01

4,230
¥1
$0.01

4,450
¥1
$0.01

¥829
$6.21

¥829
$6.21

¥829
$6.21

¥829
$6.21

¥1,080$8.09¥1,820$13.63¥2,010$15.05¥2,650$19.85

Year ended
March 31, 2023

Non-vested:
March 31, 2022
–outstanding
GrantedCanceled
VestedMarch 31, 2023
–outstanding
Vested:March 31, 2022
–outstanding
VestedExercised
Canceled
March 31, 2023
–outstanding
Exercise price
Average stock
price at exercise
Fair value priceat grant date2020 stock option 2021 stock option 2022 stock option(Shares)(Shares)(Shares)

―
―
―
―

―
―
―
―

―
156,200―――

103,330―
37,950―154,930―
43,600――156,200
840
1,670

65,380¥1$0.01

111,330¥1$0.01

153,690
¥1
$0.01

¥831
$6.22

¥830
$6.22

¥864
$6.47

¥802
$6.01

¥759
$5.68

¥769
$5.76

―
156,2002016 stock option 2017 stock option 2018 stock option 2019 stock option(Shares)(Shares)(Shares)(Shares)

Shares and per share figures have been restated, as appropriate,
―
―
―
―

―
―
―
―

―
―
―
―

―
―
―
―

―

―

―

―

31,770―13,550―27,120―10,890―43,750―19,660―70,620―28,850―18,220¥1$0.01

16,230¥1$0.01

24,090¥1$0.01

41,770
¥1
$0.01

¥829
$6.21

¥829
$6.21

¥829
$6.21

¥829
$6.21

¥1,170$8.76¥1,717$12.86¥1,353$10.13¥1,080$8.09

to reflect a one-for-ten stock consolidation effective October 1,
2016.
The Assumptions Used to Measure the Fair Value of the 2022
Stock Options
Estimate method
Black-Scholes option-pricing model
Volatility of stock price32.577%
Estimated remaining outstanding period 2 years and 5 months
Estimate dividend¥35.00 per share
Risk-free interest rate
(0.076)%
In estimating the vested number of stock options, theCompany basically reflects only the actual forfeited number since
it is difficult to make a reasonable estimate on the future forfeited
number.

Hokuhoku Financial Group, Inc. Financial Data 2023

Retirement Benefits212023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）23. Per Share Information

24. Other Ordinary Income(1) Net income per share of common stock

Other ordinary income for the years ended March 31, 2023 andReconciliation of the difference between basic and diluted net

2022 is as follows:income per share (“EPS”) for the years ended March 31, 2023
and 2022 was as follows:Year ended
March 31, 2023

Basic EPS – Net
income available tocommon shareholders
Effect of dilutive securities
Diluted EPS – Net
income for computation

Year ended
March 31, 2022

Basic EPS – Net
income available tocommon shareholders
Effect of dilutive securities
Diluted EPS – Net
income for computation

Thousands ofMillions of yen
shares
Net income
Weightedattributable toowners of parent average shares¥20,388

Yen

U.S. dollars

EPS

128,074 ¥159.18

$1.19

449
¥20,388

128,524 ¥158.63

Thousands ofMillions of yen
shares
Net income
Weightedattributable toowners of parent average shares¥19,318

$1.19

Yen

130,994 ¥147.47

131,455 ¥146.95

Net assets per share of common stock as of March 31, 2023 and2022 were as follows:

Net assets per shareof common stock

2022¥4,491.95 ¥4,539.12

U.S. dollars
2023$33.64

Net assets per share of common stock as of March 31, 2023 and2022 were calculated based on the following:
Millions of yen
2023
2022

Total equity¥612,212 ¥622,845
Deductions from total equity:
Stock acquisition rights
416
500
Non-controlling interests
3,594
3,449
Preferred stock
32,22837,600Preferred dividends
483
564
Net assets attributable tocommon stock at the endof the fiscal year
575,488 580,731
Number of shares of common
stock at the end of the fiscal
year used for the calculation of
net assets per share of common
128,115 127,939
stock (shares in thousands)

22

Hokuhoku Financial Group, Inc. Financial Data 2023

Retirement Benefits¥1,184$─

6,460
10,936
1,475¥18,872

6,284
11,1401,457¥20,067

48,38481,904
11,048$141,336

25. Other Ordinary Expenses

EPS

Yen

¥─

Millions of yen
2023
2022

(2) Net assets per share of common stock

2023

Gain on foreign exchangetransactions – net
Gains on sales and redemptionof bonds and other securities
Lease receipts
Other
Total

Thousands of
U.S. dollars
2023

Other ordinary expenses for the years ended March 31, 2023
and 2022 are as follows:

461¥19,318

Millions of yen
2023
2022

Thousands of
U.S. dollars
2023$4,584,830
3,119
26,921
241,361
3,620

4,309,809

Losses on foreign exchangetransactions – net
Losses on sales, redemption
and devaluation of bonds
and other securities
Losses on derivatives
Lease costs
Other
Total

Thousands of
U.S. dollars
2023

¥52

¥─

$391

25,43517
10,114273¥35,892

9,076
910,258316¥19,660

190,486129
75,7462,047$268,799

2023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）26. Other Income
Other income for the years ended March 31, 2023 and 2022 are

A reconciliation between the normal effective statutory tax rate

as follows:

and the actual effective tax rate reflected in the accompanying
consolidated statement of income for the year ended March 31,

Gains on sales of stocks
Gains on sales of tangible
fixed assets
Other
Total

Millions of yen
2023
2022

Thousands of
U.S. dollars
2023¥18,022$134,970

45
748¥18,817¥9,78099
5,803¥15,683342
5,608$140,920

27. Other Expenses
Other expenses for the years ended March 31, 2023 and 2022

2023 and 2022 are as follows:
2023

Normal effective statutory tax rate
Change in valuation allowance
Permanently non-taxable income
Per capita portion of inhabitants’ taxes
Permanently non-deductible expenses
Other
Actual effective tax rate2022

30.45% 30.45%(17.00)5.58(1.41)(1.04)
0.57
0.46
0.36
0.17
3.25
2.13
16.22% 37.75%

are as follows:
Millions of yen
2023
2022

Losses on write-offs of loans¥325
and bills discounted
Losses on sales of stocks
1,100
Losses on impairments of
6,626
stocks and other securities
Losses on sales of loans
119
Losses on waiver of loans
6,541
Losses on impairments and695
disposals of fixed assets
Other
2,249
Total
¥17,656

Thousands of
U.S. dollars
2023

¥500
2,889

$2,435
8,239

4,842
135
―

49,622895
48,986

1,037
2,396¥11,801

5,208
16,844$132,229

28. Income Taxes
The Company and its domestic subsidiaries are subject toJapanese national and local income taxes which, in theaggregate, resulted in the normal effective statutory tax rate of
approximately 30.45% for the years ended March 31, 2023 and2022.
The tax effects of significant temporary differences and tax
loss carryforwards which resulted in deferred tax assets andliabilities at March 31, 2023 and 2022 are as follows:

Deferred tax assets:
Allowance for loan losses
Depreciation
Liability for retirement benefits
Loss on valuation of securities
Valuation difference on
available-for-sale securities
Other
Operating loss carryforwards
Subtotal
Less: Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Valuation difference on
available-for-sale securities
Land transfer through merger
Other
Total deferred tax liabilities
Net deferred tax assets

Millions of yen
2023
2022

Thousands of
U.S. dollars
2023¥27,377
481
5,446
9,057

¥29,430
625
4,852
11,885$205,031
3,607
40,791
67,834

2,957
4,938
55
50,31524,38725,927―
5,302
52
52,14930,375
21,774

22,14736,985415
376,810
182,637
194,173

26,78020,628
2,765
2,765
2,694
2,861
26,08832,408¥(160) ¥(10,634)

29. Other Comprehensive Income (Loss)
The components of other comprehensive income (loss) for theyears ended March 31, 2023 and 2022 are as follows:
Millions of yen
2023
2022

Valuation difference on
available-for-sale securities:
Amount incurred¥(35,064) ¥(32,495)
during the fiscal year
Reclassification adjustment
5,215(1,153)
Prior to deducting tax effect (29,848) (33,648)
Tax effect
10,730
8,941
Total(19,118) (24,707)

Thousands of
U.S. dollars
2023$(262,595)
39,060(223,535)
80,358(143,177)

Deferred gains (losses) on hedges:
Amount incurred during
the fiscal year
Reclassification adjustment
Prior to deducting tax effectTax effect
Total

(895)
231
(663)
142
(521)

(860)
1,414
553
(167)
386

(6,704)
1,737(4,967)
1,065(3,902)

Defined retirement benefit plans:
Amount incurred during
the fiscal year
Reclassification adjustment
Prior to deducting tax effectTax effectTotal(3,381)855(2,525)767(1,757)

2,854
485
3,340
(1,015)2,324(25,324)
6,411(18,913)5,750(13,163)

Share of other comprehensive
income (loss) of associates
accounted for using the equity
method:Amount incurred during
48
113
the fiscal year
Reclassification adjustment
(13)
(15)
Prior to deducting tax effect100
32
Tax effect
(30)
(10)
Total
69
21
Total othercomprehensive income¥(21,327) ¥(21,974)(loss)

853
(101)
752
(229)
523
$(159,719)

154,489
20,713
20,176
195,378$(1,205)
Hokuhoku Financial Group, Inc. Financial Data 2023

Other Income232023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）30. Leases(1) Finance lease transactions(Lessee)
The Group leases ATMs, computer equipment, software, andother assets.
(2) Operating lease transactions(Lessee)
The minimum rental commitments under noncancelable
operating leases as of March 31, 2023 and 2022 are as follows:
Thousands of
U.S. dollars
2023

Millions of yen
2023
2022

Within one year
Over one year
Total

¥3
2
¥5

¥3
5
¥9

$27
17
$44

31. Financial Instruments and Related Disclosures(1) Group policy on financial instruments
The Group provides a wide variety of financial services, centeredon banking services such as deposit-taking and lending.
The Group's lending activities are aimed at achieving coprosperity with the regional economy and the Group endeavors tomanage the Group's lending in a sound and appropriate manner,
while simultaneously working to strengthen credit risk
management.
Investments in securities are strictly managed based on theGroup’s risk management policies and regulations. Regarding
deposit-taking operations, the Group aims to ensure stable
fundraising by the expansion and upgrading of financial services
for all customers in the region. Borrowed money and corporate
bonds are used mainly for medium- to long-term fundraising.
Given the different term structures of the Group’s financial
assets such as loans and financial liabilities such as deposits, theGroup is exposed to interest-rate fluctuation risk in the financial
markets. For this reason, the Group conducts comprehensive
asset liability management (“ALM”) to appropriately control suchmarket risk and ensure stable earnings.
(2) Nature and extent of risks arising from financial instruments
The financial assets held by the Group consist primarily of
securities and loans to domestic customers. Loans are subject tocredit risks that could cause financial loss to the Group, such as
declines or losses in asset value resulting from a possible
deterioration in the financial condition of borrowers. With regard
to securities, the Group is exposed to the credit risk of issuers,interest-rate risk, and market price volatility risk. However, theGroup takes adequate steps to mitigate these risks.
Financial liabilities, including deposits and borrowed money, areexposed to liquidity risk arising from the possibility that the Groupmay be obliged to procure funds at interest rates significantly higher
than normal owing to a sudden change in the market environment ora deterioration in the Group’s financial position.
The Banks make use of currency-related derivatives such as
currency swaps, forward exchange contracts, and currency
options, as well as interest-related derivatives such as interestrate swaps, interest-rate futures, and interest-rate caps, to meet
the ALM needs of the Banks as well as the various needs of the24

Hokuhoku Financial Group, Inc. Financial Data 2023

Other Income

Banks’ customers. These derivatives are exposed to thefollowing risks among others: interest-rate risk, the risk of
exchange rate fluctuations, price volatility risk, and credit risk.
However, none of the Group’s financial assets and liabilities
are attended by notably high risk levels, nor do they include any
particular derivatives with high market price volatility.
The Banks apply hedge accounting to hedge the value ofsome of its assets and liabilities against interest-rate fluctuations.
When applying hedge accounting, the Banks adopt integrated
management in both hedging instruments and hedged items aslong as hedging is managed and evaluates the effectiveness ofthe hedges.
(3) Risk management for financial instruments
The Group have established risk management departments andhave stipulated basic regulations for risk management and otherregulations pertaining to risk. In addition, the Group haveestablished an ALM Committee and a Comprehensive Risk
Management Committee, where qualified risks and administration
matters are discussed regularly to ensure that all categories ofrisk are managed effectively. Changes in regulations andorganizational structures of the Banks are revised or supervisedby the Company to ensure conformance to the Group’s policies
and the results of the above committees are reported to theCompany.
(a) Credit Risk Management
The Group’s fundamental policy is to strive for improved
earnings and ensure sound business operations through theappropriate management of credit risk. In line with this policy, theCompany and the Banks collaborated in establishing various
regulations, including Credit Risk Management Regulations, andensuring the effective operation of internal checking functions byseparating business promotion departments from credit risk
management departments. Rigorous screening is also
conducted and credit ratings are granted based on Credit Policy.
Additionally, the setting of credit limits is managed on an
individual customer basis to avoid the risk of an
overconcentration of loans in particular sectors. Finally, theBanks carry out self-assessment and credit risk quantification
procedures and the risk situation is regularly reported to the
Banks’ board of directors.
As for the loan screening process of the Banks, the branches
concerned carefully analyze each loan application and screen
each customer involved. In the event that the decision exceeds thelimits of authority of the branch manager, the appropriate loan
screening departments at the headquarters of the Banks carry out
their own analysis and screening. Specialized staff members inplace within the screening departments are responsible forparticular industries and geographical areas. These specialists
provide the appropriate advice and guidance to the branches
based on the particular features of the customer.
Concerning the creditworthiness of security issuers andcounterparty risk in derivative transactions, credit informationand the state of transactions are regularly monitored andmanaged by the risk management departments of the Banks.
(b) Market Risk Management
Having stipulated regulations such as Market Risk Management
Regulations and an arranged organizational structure including

2023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）

ALM and other committees, the Banks appropriately control
market risk associated with lending and deposit-taking in order toensure stable earnings.
Interest Rate Risk Management
The risk management departments of the Banks regularly andcomprehensively monitor the interest rates and time-frames
involved in the Banks’ financial assets and liabilities and monitor
interest rate risk levels through methods such as gap analysis
and sensitivity analysis of interest rates, based on the Banks’
Interest Rate Risk Management Regulations and other related
regulations where the methods and procedures to be employed
for risk management are described in detail.
The Banks set ceiling amounts for each type of interest raterisk to control such risk appropriately. Derivatives such as
interest-rate swaps and interest-rate caps are employed from an
ALM perspective so that the Banks reduce interest rate risk byhedging against interest rate fluctuations.
Foreign Exchange Risk Management
Using measures such as currency swaps to reduce foreignexchange risk, the Banks manage exchange risk arising fromfluctuations in foreign exchange rates that affect the values ofassets and liabilities denominated in foreign currencies.
Price Volatility Risk Management
Regarding investments in instruments such as securities, theBanks carry out prior screening and set investment ceilings, andthen constantly monitor the investment status to minimize pricevolatility risk. Every process above has to be strictly managed
under the supervision of the Banks’ Board of Directors and to bein line with policies laid down by Management Committees. A highpercentage of the stocks held by the Banks are acquired and held
for long-term strategic purposes. The Banks monitor the market
conditions and financial positions of the securities issuers. Valueat Risk (“VaR”) and other methods are used to determine theamount of market risk for each security held. The staff members of
the responsible departments provide regular reports to the Banks’
Board of Directors and Management Committees to confirm thatprice risk is controllable and all rules pertaining to market risk
management are being followed correctly.
Derivatives
The Banks arrange their organizational structures securing theseparation and internal check-and-balance mechanisms among
front sections (specializing in market transactions), middle
sections (engaging in risk management), and back sections(responsible for book entries and settlements). Management
sections confirm the validity of transactions, value the Banks’daily derivative positions, and measure gains and losses as wellas risk levels. Derivative transactions are carefully managed insuch a way that losses never exceed a predetermined maximum.
Quantitative Information Related to Market Risk
Hokuriku Bank and Hokkaido Bank measure quantitative
information related to market risk.
• Financial instruments in the trading accountIn calculating VaR for trading securities and a portion ofcurrency-related and interest-related derivative transactions
held in the trading account, Hokuriku Bank adopts the historicalsimulation method (a holding period of 1 business day, aconfidence interval of 99%, and a main observation period of
1,250 business days).

The market risk amounts (VaR) of the trading business of
Hokuriku Bank were ¥571 million ($4,276 thousand) and ¥297
million as of March 31, 2023 and 2022, respectively.
Hokkaido Bank has no financial instruments in the trading
accounts.
• Financial instruments in the banking accountIn the Banks, the main financial instruments affected by interest
rate risk are monetary claims bought, loans and bills
discounted, bonds, deposits, borrowed money, andtransactions of interest rate swaps, interest swaptions, andinterest rate caps held in derivative transactions. The main
financial instruments affected by market value are listed stocks
and investment trust. The Banks use VaR for integrated
management of these financial instruments.
For calculating VaR, the Banks adopted the historicalsimulation method (a holding period of 120 business days, aconfidence interval of 99% and main observation period of 1,250
business days) and consider the correlations between interestand the fluctuation of prices of the listed stocks. In addition,
Hokkaido Bank has set a holding period of 10 business days for
trading account securities (including public bonds traded over thecounter) and for specified fund trust as investment securities.
Hokkaido Bank also considers the correlation between interest
rates and the fluctuation of prices of the listed stocks incalculating VaR of specified fund trust as investment securities.
Hokuriku Bank’s VaR of the financial instruments in thebanking account was ¥32,258 million ($241,579 thousand) and¥28,903 million as of March 31, 2023 and 2022, respectively.
Hokkaido Bank’s VaR of the financial instruments in thebanking account was ¥11,723 million ($87,793 thousand) and¥21,868 million as of March 31, 2023 and 2022, respectively.
Hokkaido Bank’s trading account securities totaled ¥4 million($30 thousand) and ¥8 million as of March 31, 2023 and 2022,
respectively. Hokkaido Bank’s specified fund trust totaled ¥0
million ($3 thousand) and ¥0 million as of March 31, 2023 and2022, respectively.
The Banks perform back testing of the VaR measurement
model at fixed intervals. VaR measures the amount of market
risk by certain occurrence probabilities that are statisticallycalculated based on past market movements. Therefore, there
are cases in which VaR cannot capture risk under sudden anddramatic changes in markets beyond normal circumstances.
VaR shows the maximum loss during the holding period of
the financial instruments under a confidence interval (99%) thatis statistically calculated based on past market movements. In
particular, the Banks calculate 100BPV (100 Basis Point Value)as supplements of the assets and liabilities and change in theirpresent value on the assumption that index interest rate rises
by 1.00%.
Hokuriku Bank’s 100BPV was a ¥69,444 million increase($520,063 thousand increase) and a ¥61,557 million increase
as of March 31, 2023 and 2022, respectively. Hokkaido Bank’s
100BPV was a ¥26,749 million increase ($200,322 thousand
increase) and a ¥768 million decrease as of March 31, 2023
and 2022, respectively.

Hokuhoku Financial Group, Inc. Financial Data 2023

Other Income252023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）For calculating 100BPV, the correlations between interest
rates and the other parameters are not considered because the
100BPV is measured on the assumption that risk parameters
other than interest rate remain unchanged. Actual risk canexceed the calculated 100BPV in the case of a drastic change
in interest rates beyond reasonable prior expectations.
(c) Liquidity Risk Management
In accordance with the Banks’ rules for management of liquidity
risk, the Banks form an accurate appraisal of fund operations
and procurement, and take measures to ensure smooth cash
flows. Specifically, the Banks set benchmarks in various different
categories to check liquidity risk on a daily basis, and maintainadequate levels of high-liquidity assets that are readily
convertible into cash, such as government bonds.
The Banks have in place mechanisms for periodicallyassessing and managing liquidity risk through ALM committees,
to prepare for every possible scenario.
(4) Supplementary explanation relating to fair values offinancial instruments
The fair values of financial instruments include certain
assumptions that are used in the measurement of such amounts.
Accordingly, the results of such measurement may vary if
different assumptions are used.

Millions of yen
March 31, 2022

Monetary claims bought *1
Securities
Bonds classified as
held-to-maturity
Available-for-sale securities
Loans and bills discounted
Allowance for loan losses *1

Millions of yen
Fair value

Unrealized
gain (loss)¥15,519¥15,519

¥─

3,000

3,009

9
─

Total assets

1,797,664 1,797,664
9,533,464(65,478)
9,467,985 9,496,103¥11,284,170 ¥11,312,297

28,117¥28,126

Deposits
Borrowed money
Total liabilities¥13,455,219 ¥13,455,256
1,352,450 1,348,028¥14,807,670 ¥14,803,284¥36(4,421)¥(4,385)

March 31, 2023

Monetary claims bought *1
Securities
Bonds classified as
held-to-maturity
Available-for-sale securities
Loans and bills discounted
Allowance for loan losses *1

Derivative transactions *2
Derivative transactions not
qualifying for hedge accounting
Derivative transactions
qualifying for hedge accounting*3
Total derivative transactions

26

Carrying
amount¥(492)¥(492)

¥─

(959)

(959)

*4─

¥(1,451)¥(1,451)¥─

Hokuhoku Financial Group, Inc. Financial Data 2023

Other Income

Fair value

Unrealized
gain (loss)¥21,217¥21,217

¥─

4,000

4,018

17
─

Total assets

2,157,573
2,157,573
9,193,283(70,487)
9,122,796
9,196,126¥11,305,587 ¥11,378,936

73,330¥73,348

Deposits
Borrowed money
Total liabilities¥13,138,524 ¥13,138,604
2,608,500
2,606,603¥15,747,024 ¥15,745,208¥79(1,896)¥(1,816)

Derivative transactions *2
Derivative transactions not
qualifying for hedge accounting
Derivative transactions
qualifying for hedge accounting *3
Total derivative transactions

March 31, 2023

(5) Fair value of financial instruments
The fair values of the main financial instruments at March 31,
2023 and 2022 are as follows.
These amounts do not include stocks without a quoted
market price and investments in partnerships (see Note 1) . In
addition, Cash and due from banks, Call loans and bills bought,
negotiable certificate of deposit, Call money and bills sold,Payables under securities lending transactions are omitted sincethese instruments are mainly settled in the short term (within 1year) and the book values approximate the fair values.
Fair value of financial instruments

Carrying
amountMonetary claims bought *1
Securities
Bonds classified as
held-to-maturity
Available-for-sale securities
Loans and bills discounted
Allowance for loan losses *1¥(4,182)¥(4,182)¥─

(1,587)(1,587)*4─

¥(5,769)¥(5,769)¥─

Thousands of U.S. dollars
Carrying
Unrealized
Fair value gain (loss)
amount$116,223$116,223$─

22,46822,54173
─Total assets

13,462,628 13,462,628
71,395,673(490,364)
70,905,309 71,115,878$84,506,628 $84,717,270

210,569$210,642

Deposits
Borrowed money
Total liabilities$100,765,519 $100,765,792
10,128,437 10,095,323$110,893,956 $110,861,115$273(33,114)$(32,841)

Derivative transactions *2
Derivative transactions not
qualifying for hedge accounting
Derivative transactions
qualifying for hedge accounting *3
Total derivative transactions$(3,685)$(3,685)$─

(7,184)(7,184)*4─

$(10,869)$(10,869)$─*1. Allowance for loan losses shown in this table represents the generalallowance and specific allowance for loan losses. Figures forallowance for loan losses on monetary claims bought are directlydeducted from the balance of monetary claims bought as the amountconcerned is insignificant.
*2. Derivative transactions included in trading assets and liabilities andother assets and liabilities are shown together. Assets and liabilities
arising from derivative transactions are shown within parentheses withrespect to net liabilities.
*3. Transactions to which hedge accounting is applied include interest rate
swap transactions designated as hedging instrument for the purpose ofbalancing interest rate fluctuations in loans, securities, etc. Deferredhedge accounting is applied to these transactions. Of these hedge
relationships to which “Practical Solution on the Treatment of Hedge
Accounting for Financial Instruments that Reference LIBOR” (ASBJ
PITF No. 40, March 17, 2022) applies are accounted for under the
standard.
*4. As interest-rate swaps subject to exceptional treatment are accounted
for together with the loans being hedged by the swaps, their fair value
is included in the loans in question on the consolidated balance sheet.
*5. Available-for-sale securities include investment trust which consider
NAV as fair value applied paragraph 24-9 of “ASBJ Guidance No. 31”,
as of March 31, 2023.

2023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）(Note 1) The following are the consolidated balance sheet
amounts of stocks without a quoted market price, andinvestments in partnerships. These amounts are not included in“Available-for-sale securities” in fair value of financial
instruments.
Consolidated balance sheet amounts

March 31

Millions of yen
2023
2022

Thousands of
U.S. dollars
2023

Unlisted stocks *1, 2
Investments in partnerships *3
Unlisted foreign securities *1
Total¥25,857
27,734
0¥53,592$193,646
207,7043$401,353¥26,089
19,323
0¥45,413*1. In accordance with paragraph 5 of “Implementation Guidance on
Disclosures about Fair Value of Financial Instruments” (ASBJ
Guidance No.19, March 31, 2020), these items are not subject todisclosure of the fair value.
*2. Unlisted stocks were written down by ¥2,675 million ($20,037
thousand) and ¥3,263 million as of March 31, 2023 and 2022,
respectively.
*3. In accordance with paragraph 24-16 of “Implementation Guidance on
Accounting Standard for Fair Value Measurement” (ASBJ Guidance
No.31, June 17, 2021), investments in partnerships are not subject todisclosure of the fair value.

Hokuhoku Financial Group, Inc. Financial Data 2023

Other Income272023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）(Note 2) Maturity analysis for financial assets and securities with contractual maturities
Millions of yen
Due in 1 year
or less

Due after 1 year
through 3 years¥1,085
108,385¥―
267,008¥―
326,021¥―354,395¥14,474
515,885

Bonds classified as held-to-maturity

1,000

500

1,500

―

―

Japanese government bonds

500

―

―

―

―

Japanese local government bonds

500

500

1,500

―

―

Available-for-sale securities with maturities
Japanese government bonds
Japanese local government bonds
Japanese corporate bonds
Other
Loans and bills discounted
Total

107,385―
45,46344,767
17,153
3,188,700¥3,298,170

266,508
23,00095,28685,15363,0681,420,074¥1,687,082

324,521
19,000122,423
76,888106,209
1,118,637¥1,444,658

354,395
43,500
162,540
11,693
136,660
743,621¥1,098,016

515,885
148,000
182,769
60,078125,0362,860,716¥3,391,076

March 31, 2022

Due in 1 year
or less

Due after 1 year
through 3 years

Monetary claims bought
Securities
Bonds classified as held-to-maturity
Japanese government bonds
Japanese local government bonds
Available-for-sale securities with maturities
Japanese government bonds
Japanese local government bonds
Japanese corporate bonds
Other
Loans and bills discounted
Total

¥883
155,988
1,000
1,000
―
154,988
52,00035,01749,30918,6612,856,264¥3,013,136¥―
260,989
1,500
500
1,000
259,489―
91,33285,29682,8601,468,056¥1,729,046

March 31, 2023

Monetary claims bought
Securities

28

Hokuhoku Financial Group, Inc. Financial Data 2023

Maturity analysis for financial assets and liabilities with contractual maturities

Due after 3 years Due after 5 years
through 5 years through 7 years

Millions of yen
Due after 3 years Due after 5 years
through 5 years through 7 years¥―
293,740
1,500
―
1,500
292,240
16,000104,868
65,978105,394
1,086,697¥1,380,438¥―
328,254―――328,254
45,50083,103
13,580186,070
737,138¥1,065,392

Due after
7 years

Due after
7 years¥20,268
831,044―――831,044
308,000
299,958
61,731
161,354
2,845,084¥3,696,397

2023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）

March 31, 2023

Due in 1 year
or less

Thousands of U.S. dollars
Due after 1 year Due after 3 years Due after 5 years
through 3 years
through 5 years through 7 years

Monetary claims bought
Securities
Bonds classified as held-to-maturity
Japanese government bonds
Japanese local government bonds
Available-for-sale securities with maturities
Japanese government bonds
Japanese local government bonds
Japanese corporate bonds
Other
Loans and bills discounted
Total$8,129811,692
7,488
3,744
3,744
804,204―
340,477
335,265
128,462
23,880,029$24,699,850$―
1,999,611
3,744
―
3,744
1,995,867
172,246
713,595
637,710472,316
10,634,873$12,634,484$―
2,441,560
11,234―
11,2342,430,326
142,290
916,821575,817795,398
8,377,423$10,818,983$―
2,654,048―――
2,654,048
325,770
1,217,258
87,574
1,023,446
5,568,950$8,222,998

Due after
7 years$108,399
3,863,440―――
3,863,440
1,108,365
1,368,754
449,925
936,396
21,423,774$25,395,613

Loans and bills discounted
Claims on "Legal bankruptcy" borrowers, "Virtual bankruptcy" borrowers, and "Possible bankruptcy" borrowers amounted to ¥182,140
million ($1,364,044 thousand) and ¥179,726 million as of March 31, 2023 and 2022, respectively, and loans with no contractual
maturities amounted to ¥19,572 million ($146,581 thousand) and ¥20,315 million as of March 31, 2023 and 2022, respectively. They are
not included in the table above.
(Note 3) Maturity analysis for financial liabilities with contractual maturities

March 31, 2023

Due in 1 year
or less

Due after 1 year
through 3 years

Deposits
Borrowed money
Total¥12,603,517
537,420¥13,140,938¥678,050
598,110¥1,276,161

March 31, 2022

Due in 1 year
or less

Due after 1 year
through 3 years

Deposits
Borrowed money
Total¥12,210,561
1,647,615¥13,858,176¥724,888
665,481¥1,390,370

March 31, 2023

Due in 1 year
or less

Deposits
Borrowed money
Total$94,387,163
4,024,720$98,411,883

Millions of yen
Due after 3 years Due after 5 years
through 5 years through 7 years¥169,019
216,788¥385,808¥2,104129¥2,233

Millions of yen
Due after 3 years Due after 5 years
through 5 years through 7 years¥196,648
295,093¥491,741¥3,415310¥3,725

Thousands of U.S. dollars
Due after 1 year Due after 3 years Due after 5 years
through 3 years
through 5 years through 7 years$5,077,890
4,479,225$9,557,115$1,265,778
1,623,522$2,889,300$15,758970$16,728

Due after
7 years¥2,527―¥2,527
Due after
7 years¥3,011
─¥3,011
Due after
7 years$18,930―$18,930

Deposits
Demand deposits are included in “Due in 1 year or less.”

Hokuhoku Financial Group, Inc. Financial Data 2023

Maturity analysis for financial assets and liabilities with contractual maturities29

2023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）(6) Financial Instruments Categorized by Fair Value Hierarchy
The fair value of financial instruments is categorized into the following three levels, depending on the observability and significance of the
inputs used in fair value measurements:
Level 1: Fair values measured by using quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Fair values measured by using inputs other than quoted prices included within Level 1 that are observable for the assets or
liabilities, either directly or indirectly.
Level 3: Fair values measured by using unobservable inputs for the assets or liabilities.
If multiple inputs are used that have a significant impact on the measurement of fair value, fair value is classified at the lowest level in thefair value measurement among the levels to which each of these inputs belongs.
(a) The financial assets and liabilities measured at the fair values in the consolidated balance sheet
Millions of yen
March 31, 2023

Monetary claims bought
Securities
Available-for-sale securities
Japanese government bonds and Japanese local government bonds
Japanese corporate bonds
Japanese stocks
Other
Total assets
Derivative transactions *1 *2
Interest rate - related transactions
Foreign exchange - related transactions
Commodity - related transactions
Credit derivative transactions
Total derivative transactions

Level 1¥―
600,191
600,191
194,981―
168,389
236,819¥600,191

Level 2¥―
1,017,250
1,017,250
642,190
107,146
19,919247,993¥1,017,250

Level 3
¥15,519
170,446
170,446―
170,446――¥185,965

Total¥15,519
1,787,888
1,787,888
837,172
277,593
188,309484,813¥1,803,407

¥―
―
―
―
¥―

¥0
(1,443)19―¥(1,423)

¥―
―
―
(27)
¥(27)

¥0
(1,443)19(27)¥(1,451)

Level 1
¥─
836,054
836,054389,535
─
182,996
263,522¥836,054

Level 2
¥─
914,193914,193649,971
100,224
20,444
143,552¥914,193

Level 3
¥21,217
176,294
176,294─
176,294──¥197,511

Total¥21,217
1,926,541
1,926,541
1,039,507
276,518
203,440
407,074¥1,947,758

¥─
─
─
─
¥─

¥553
(6,357)43
─
¥(5,760)

¥─
─
─
(9)
¥(9)

¥553
(6,357)43(9)¥(5,769)

Millions of yen
March 31, 2022

Monetary claims bought
Securities
Available-for-sale securities
Japanese government bonds and Japanese local government bonds
Japanese corporate bonds
Japanese stocks
Other
Total assets
Derivative transactions *1 *2
Interest rate - related transactions
Foreign exchange - related transactions
Commodity - related transactions
Credit derivative transactions
Total derivative transactions

30

Hokuhoku Financial Group, Inc. Financial Data 2023

Maturity analysis for financial assets and liabilities with contractual maturities2023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）

Thousands of U.S. dollars
March 31, 2023

Monetary claims bought
Securities
Available-for-sale securities
Japanese government bonds and Japanese local government bonds
Japanese corporate bonds
Japanese stocks
Other
Total assets
Derivative transactions *1 *2
Interest rate - related transactions
Foreign exchange - related transactions
Commodity - related transactions
Credit derivative transactions
Total derivative transactions

Level 1$―
4,494,804
4,494,804
1,460,208―
1,261,062
1,773,534$4,494,804

Level 2$―
7,618,140
7,618,140
4,809,338
802,415
149,177
1,857,210$7,618,140

Level 3$116,223
1,276,468
1,276,468―
1,276,468――$1,392,691

Total$116,223
13,389,412
13,389,412
6,269,546
2,078,883
1,410,239
3,630,744$13,505,635

$―
―
―
―
$―

$3
(10,812)
148―$(10,661)

$―
―
―
(208)
$(208)$3(10,812)148(208)$(10,869)*1. Derivative transactions included in trading assets and liabilities and other assets and liabilities are shown together. Assets andliabilities arising from derivative transactions are shown within parentheses with respect to net liabilities.
*2. As interest-rate swaps subject to exceptional treatment are included in the loans in question on the consolidated balance sheet.
*3. At March, 31 2022, investment trust was excluded in the above. It amounted to ¥231,032 million. At March 31, 2023, investment trust
which consider NAV as fair value was excluded in the above. It amounted to ¥9,776 million ($73,216 thousand).
(b) The financial assets and liabilities not measured at the fair values in the consolidated balance sheet
Millions of yen
March 31, 2023

Securities
Bonds classified as held-to-maturity
Japanese government bonds and Japanese local government bonds

Level 1
¥502
502

Level 2
¥2,507
2,507

502

2,507

─

3,009

─

─

9,496,103

9,496,103

Loans and bills discounted

Level 3¥──Total
¥3,0093,009

Total assets¥502¥2,507¥9,496,103¥9,499,113

Deposits
Borrowed money
Total liabilities──¥─

13,455,256
1,343,278¥14,798,534

─
4,750¥4,75013,455,256
1,348,028¥14,803,284

Level 1
¥1,507
1,507

Level 2
¥2,5102,510

Level 3¥──Total
¥4,018
4,018

1,507

2,510

─

4,018

─

─

9,196,126

9,196,126¥1,507¥2,510¥9,196,126¥9,200,145

──¥─

13,138,604
2,603,262¥15,741,867

─
3,340¥3,34013,138,604
2,606,603¥15,745,208

Level 1
$3,764
3,764

Level 2
$18,777
18,777

3,764

18,777

─22,541

──

71,115,878

71,115,878$3,764$18,777$71,115,878$71,138,419

──$─

100,765,792
10,059,750$110,825,542

─35,573$35,573

100,765,792
10,095,323$110,861,115

Millions of yen
March 31, 2022

Securities
Bonds classified as held-to-maturity
Japanese government bonds and Japanese local government bonds
Loans and bills discounted
Total assets
Deposits
Borrowed money
Total liabilities

Thousands of U.S. dollars
March 31, 2023

Securities
Bonds classified as held-to-maturity
Japanese government bonds and Japanese local government bonds
Loans and bills discounted
Total assets
Deposits
Borrowed money
Total liabilities

Level 3
$──

Total
$22,541
22,541

Hokuhoku Financial Group, Inc. Financial Data 2023

Maturity analysis for financial assets and liabilities with contractual maturities312023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）(Note 1) The following is a description of valuation methodologies and inputs used for measurement of the fair value of assets andliabilities
Monetary claims bought
Trust beneficiary rights for mortgage and loans are stated at the level 3 fair value based on the price provided by the financial institutions.
Trust beneficiary rights for account receivables are stated at the level 3 based on the present value as discounting cash flows by market
interest rates in consideration of credit risk.
Securities
When quoted prices are available in an active market, the Group adopts the quoted prices to measure the fair value are classified as
Level 1 of the fair value hierarchy that include stocks and investment trusts listed on the Prime Market of the Tokyo Stock Exchange andJapanese Government Bonds.
The fair value of an input that can be directly or indirectly observed other than Level 1 input is classified as Level 2 of the fair value
hierarchy.
When a quoted price is not observable, an entity measures fair value using valuation technique such as discount present value
method of future cash flows and that maximises the use of relevant observable inputs which include interest market rates and theprobability of default. When an unobservable input is significant to the entire measurement, the fair value is classified as Level 3 of thefair value hierarchy that include privately-placed bonds.
Loans and bills discounted
For loans, the fair value is measured using the total future cash flows from principal and interest discounted by current market interest
rates, taking into account the credit risk involved. This measurement is performed separately for each different category of loans,classified by type of loan, internal credit ratings, and maturity length. As loans with variable interest rates reflect short-term market
interest rates, the book value will approximate the fair value unless the creditworthiness of the borrower changes subsequent to thegrading of the loan. Because of this, the book value is employed as the fair value.
Regarding the fair value of claims on "Legal bankruptcy" borrowers, "Virtual bankruptcy" borrowers, and "Possible bankruptcy" borrowers,
credit losses are estimated based on the present value of estimated future cash flows or the estimated value recoverable from collateraland guarantees. Since the book value stated on the consolidated balance sheet as of the consolidated balance sheet date, minus thepresent value of estimated bad debt, approximates the fair value, this figure is treated as the fair value. These fair values are classified as
Level 3 of the fair value hierarchy. Also, fair value of loans are accounted hedged by the swaps for together with the loans are reflected
the fair value of such interest-rate swaps.
Deposits
For demand deposits, the amount payable on demand as of the consolidated balance sheet date (i.e., the carrying amount) is considered
to be the fair value and is classified as Level 2 of the fair value hierarchy. In addition, the fair value of time deposits is calculated bydiscounting the estimated future cash flows for each of the specified periods and is classified as Level 2 of the fair value hierarchy. Thismeasurement is performed separately as per the remaining maturity of time deposits. The discount rate employed is the interest rate isavailable in the market.
Borrowed money
Borrowed money with floating interest rates reflects market interest rates and because the credit standing of the Company and its
consolidated subsidiaries has changed little since taking out such loans, the book value is deemed to approximate the fair value and istherefore treated as such. For money borrowed through loans carrying fixed rates, the current value of such loans is determined bydiscounting the total of their principal plus interest (separately for each specific period) at the rate currently applied to other loans of thesame duration and terms. These fair values are mainly classified as Level 2 of the fair value hierarchy.
Derivative transactions
Derivative transactions for which unadjusted quoted prices in active markets are available are classified as Level 1 of the fair value
hierarchy. However, since most derivative transactions are over-the-counter transactions and there are no published quoted prices, fairvalues are measured using valuation techniques such as the discounted present value method and the Black-Scholes model dependingon the type of transaction and the period to maturity. The main inputs used in these valuation techniques are interest rates, exchange
rates, volatility, etc. When an unobservable input is not entire or is not significant for the fair value measurement, the fair values areclassified as Level 2 of the fair value hierarchy that include plain vanilla swap, currency option, and so on.
The fair value used significant unobservable inputs are classified as Level 3 fair value of the fair value hierarchy.
(Note 2) The information of level 3 fair value with the financial assets and liabilities measured at the fair values in the consolidatedbalance sheet(a) The quantitative information of fair values measured by using unobservable inputs for the assets or liabilities
March 31, 2023

valuation method

32

Monetary claims bought

Discounted cash flow method

Privately-Placed bonds

Discounted cash flow method

Unobservable inputs for the assets
Bankruptcy probability by ratings
Expected loss ratio
Expense ratio
Bankruptcy probability by ratings
Expected loss ratio
Expense ratio

Hokuhoku Financial Group, Inc. Financial Data 2023

Maturity analysis for financial assets and liabilities with contractual maturities

Range of valuation input
0.002%
10.667%0.310%
0.000%-2.994%
10.667%-25.191%
0.297%-0.310%

2023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）

March 31, 2022

valuation method
Monetary claims bought

Discounted cash flow method

Privately-Placed bonds

Discounted cash flow method

Unobservable inputs for the assets
Bankruptcy probability by ratings
Expected loss ratio
Expense ratio
Bankruptcy probability by ratings
Expected loss ratio
Expense ratio

Range of valuation input
0.002%
11.517%0.426%
0.000%－5.380%
11.517%－19.244%
0.036%－0.426%(b) Adjustment sheet from beginning balance to ending balance as of period and unrealized gains (losses) recognized as gains (losses)
for the period
Millions of yen
March 31, 2023

Balance at the beginning of the period
Profit and loss or other comprehensive income at thecurrent period
Included in profit and loss*1
Included in other comprehensive income*2
Purchase, Issue
Sales, Redemption, Settlement
Balance at the end of current period
Unrealized gains (losses) on financial assets andliabilities held as of the consolidated balance sheet
date among the amount recorded to gains (losses)or the period

Monetary claims bought¥21,217

Privately-Placed bonds¥176,294

Total¥197,511

(79)

(488)

(568)

2
(81)
3,621
(9,239)15,51921(510)
46,340(51,698)
170,44623(591)
49,961(60,938)
185,965

¥─

¥─

¥─

Monetary claims bought¥27,985

Privately-Placed bonds¥45,060¥73,046

(95)

(48)

(143)

1
(96)
3,248
(9,922)──
21,217(48)
022,830(19,032)
127,484─
176,294(46)(96)
26,078(28,954)
127,484
─
197,511

¥─

¥─

¥─

Millions of yen
March 31, 2022

Balance at the beginning of the period
Profit and loss or other comprehensive income at thecurrent period
Included in profit and loss*1
Included in other comprehensive income*2
Purchase, Issue
Sales, Redemption, Settlement
Transfer to fair value level 3 *3Transfer from fair value level 3
Balance at the end of current period
Unrealized gains (losses) on financial assets andliabilities held as of the consolidated balance sheet
date among the amount recorded to gains (losses)
for the period

Total

Thousands of U.S. dollars
March 31, 2023

Monetary claims bought

Corporate bonds soldthrough private placement$1,320,259

Total

Balance at the beginning of the period$158,893$1,479,152
Profit and loss or other comprehensive income at the(597)(3,660)(4,257)current period
Included in profit and loss*1
15
160
175
Included in other comprehensive income*2(612)(3,820)(4,432)
Purchase, Issue
27,123
347,038
374,161
Sales, Redemption, Settlement(69,196)(387,170)(456,366)
Balance at the end of current period
116,223
1,276,467
1,392,690
Unrealized gains (losses) on financial assets andliabilities held as of the consolidated balance sheet$─$─$─date among the amount recorded to gains (losses)
for the period*1. Those amounts are included in interest income, other ordinary income and other ordinary expenses in the consolidated statement ofincome as of March 31, 2022. Those amounts are included in interest income and other ordinary income in the consolidated statement ofincome as of March 31, 2023.
*2. Those amounts are included in valuation difference on available for sale securities of other comprehensive income in the consolidated
statement of comprehensive income.
*3. Due to changed classification from held maturity debt securities to available-for-sale securities.

Hokuhoku Financial Group, Inc. Financial Data 2023

Maturity analysis for financial assets and liabilities with contractual maturities33

2023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）(c) Description of the valuation processes used by the entity
In accordance with the policies and procedures established by the Corporate Planning Department regarding the fair values, the Banks
verifies the appropriateness of the valuation techniques and inputs used in the measurement of fair values by the back offices of the
Banks. The report of these verifies is submitted to middle offices, therefore, the appropriateness of fair value hierarchy and policy orprocess of fair value measurement are securely established.
In measurement of the fair value, the Banks use an evaluation model that is most adequate that reflects the nature, characteristics
and risks of each asset. In addition, when using quoted prices provided by the third parties, the appropriateness of prices is verified byappropriate methods such as confirmation of the valuation techniques and inputs used and comparison with the market prices of similar
financial instruments.
(d) Description of the sensitivity of the fair value measurement to changes in unobservable inputs
Significant unobservable inputs used in measurement of the fair value of purchased monetary claims and privately-placed bonds are theprobability of default by rating, the expected credit loss ratio and the expense ratio. A significant increase (decrease) in these inputs
affect mitigate or magnify of the fair value.
(7) Investment trust consider NAV as fair value
Adjustment sheet from beginning balance to ending balance as of period and unrealized gains (losses) recognized as gains (losses) forthe period
March 31, 2023

Millions of yen

Thousands of
U.S. dollars

Balance at the beginning of the period¥8,902$66,669
Profit and loss or other comprehensive income at the
332
2,489
current period
Included in profit and loss*1
4
35
Included in other comprehensive income*2
327
2,454
Purchase, Issue
853
6,394
Sales, Redemption, Settlement(311)(2,335)
Balance at the end of current period¥9,776$73,217*1. Those amounts are included in interest income in the consolidated statement of income.
*2. Those amounts are included in valuation difference on available for sale securities of other comprehensive income in the consolidated
statement of comprehensive income.

34

Hokuhoku Financial Group, Inc. Financial Data 2023

Maturity analysis for financial assets and liabilities with contractual maturities2023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）32. Derivatives(1) Derivative transactions to which hedge accounting is not appliedWith respect to derivatives to which hedge accounting is not applied, notional principal or contract amount, fair value at the balance sheet
date by transaction type, and related unrealized gain or loss. Note that contract amounts do not represent the market risk exposure ofderivative transactions.
• Interest Rate-Related Transactions

March 31, 2023

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

March 31, 2022

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

March 31, 2023

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

Millions of yen
Notional principal or contract amount
Fair value
Total
Due after 1 year

¥33,859
33,869448
448/¥28,798
28,808
448
448
/

¥75
131
(0)
0
¥207

Millions of yen
Notional principal or contract amount
Fair value
Total
Due after 1 year

¥46,968
46,937479
479/¥38,004
37,989
479
479
/

¥575
(274)
(0)
0
¥300

Thousands of U.S. dollars
Notional principal or contract amount
Fair value
Total
Due after 1 year

$253,570
253,645
3,360
3,360
/

$215,669
215,745
3,360
3,360
/

$564
987
(7)
7
$1,551

Unrealized gain (loss)

¥75
131
10
(3)
¥213

Unrealized gain (loss)

¥575
(274)
10
(3)
¥306

Unrealized gain (loss)

$564
987
75
(29)
$1,597

Note: The above transactions are stated at fair value and unrealized gain or loss is charged to income or expenses in the consolidated statement of income.

• Foreign Exchange-Related Transactions

March 31, 2023

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

March 31, 2022

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

March 31, 2023

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

Millions of yen
Notional principal or contract amount
Fair value
Total
Due after 1 year

¥9,863
115,355
40,11393,42093,420/¥8,914
5,528
5,528
65,686
65,686
/

¥5
(905)
208
(3,340)3,340¥(691)

Millions of yen
Notional principal or contract amount
Fair value
Total
Due after 1 year

¥5,051
136,733
57,89827,52327,523/¥2,327
1,336
1,321
15,404
15,404/¥3(5,429)
909
(675)
675
¥(4,516)

Thousands of U.S. dollars
Notional principal or contract amount
Fair value
Total
Due after 1 year

$73,869
863,893
300,408
699,624
699,624/$66,761
41,40041,400491,922491,922/$42(6,780)1,561(25,017)
25,017$(5,177)

Unrealized gain (loss)

¥5
(905)
208
(241)
769
¥(163)

Unrealized gain (loss)¥3(5,429)909
34
122¥(4,360)

Unrealized gain (loss)$42(6,780)1,562(1,809)5,761$(1,224)

Note: The above transactions are stated at fair value and unrealized gain or loss is charged to income or expenses in the consolidated statement of income.

Hokuhoku Financial Group, Inc. Financial Data 2023

Derivative transactions to which hedge accounting is not applied、Derivative transactions to which hedge accounting is applied35

2023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）• Commodity-Related Transactions

March 31, 2023

Over-the-counter transactions
Swaps
Receive/fixed and pay/floating
Receive/floating and pay/fixed
Total

March 31, 2022

Over-the-counter transactions
Swaps
Receive/fixed and pay/floating
Receive/floating and pay/fixed
Total

March 31, 2023

Over-the-counter transactions
Swaps
Receive/fixed and pay/floating
Receive/floating and pay/fixed
Total

Millions of yen
Notional principal or contract amount
Fair value
Total
Due after 1 year

¥348
348
/

¥306
306
/

¥(123)
143¥19

Millions of yen
Notional principal or contract amount
Fair value
Total
Due after 1 year

¥1,0601,060/¥1,0491,049/¥(415)
458¥43

Thousands of U.S. dollars
Notional principal or contract amount
Fair value
Total
Due after 1 year

$2,611
2,611/$2,2952,295/$(927)
1,075$148

Unrealized gain (loss)¥(123)
143¥19

Unrealized gain (loss)¥(415)
458¥43

Unrealized gain (loss)$(927)
1,075$148

Notes: 1. The above transactions are stated at fair value and unrealized gain or loss is charged to income or expenses in the consolidated statement of income.
2. The above derivative transactions consist of those for oil, copper, aluminum, etc.

• Credit Derivative Transactions

March 31, 2023

Over-the-counter transactions
Credit default options
Sell
Buy
Total

March 31, 2022

Over-the-counter transactions
Credit default options
Sell
Buy
Total

March 31, 2023

Over-the-counter transactions
Credit default options
Sell
Buy
Total

Millions of yen
Notional principal or contract amount
Fair value
Total
Due after 1 year

¥─
1,379
/

¥─
1,365
/

¥─
(27)
¥(27)

Millions of yen
Notional principal or contract amount
Fair value
Total
Due after 1 year

¥─
488
/

¥─
471
/

¥─
(9)
¥(9)

Thousands of U.S. dollars
Notional principal or contract amount
Fair value
Total
Due after 1 year$─
10,330/$─
10,228/$─(208)$(208)

Unrealized gain (loss)

¥─
(25)
¥(25)

Unrealized gain (loss)

¥─
(8)
¥(8)

Unrealized gain (loss)

$─
(191)
$(191)

Notes: 1. The above transactions are stated at fair value and unrealized gain or loss is charged to income or expenses in the consolidated statement of income.
2. “Sell” and “Buy” indicate assumption and cession of credit risk, respectively

36

Hokuhoku Financial Group, Inc. Financial Data 2023

Derivative transactions to which hedge accounting is not applied、Derivative transactions to which hedge accounting is applied

2023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）• Others
Millions of yen
Notional principal or contract amount
Fair value
Total
Due after 1 year

March 31, 2023

Over-the-counter transactions
Earthquake derivatives
Sell
Buy
Total

¥8,965
8,965
/

¥─
─
/

¥(57)
57
¥─

Millions of yen
Notional principal or contract amount
Fair value
Total
Due after 1 year

March 31, 2022

Over-the-counter transactions
Earthquake derivatives
Sell
Buy
Total

¥8,965
8,965
/

¥─
─
/

¥(57)
57
¥─

Thousands of U.S. dollars
Notional principal or contract amount
Fair value
Total
Due after 1 year

March 31, 2023

Over-the-counter transactions
Earthquake derivatives
Sell
Buy
Total

$67,138
67,138/$──/$(433)
433$─

Unrealized gain (loss)

¥─
─
¥─

Unrealized gain (loss)

¥─
─
¥─

Unrealized gain (loss)

$─
─
$─

Note: The above transactions are stated at fair value and unrealized gain or loss is charged to income or expenses in the consolidated statement of income.

(2) Derivative transactions to which hedge accounting is appliedWith respect to derivatives to which hedge accounting is applied, notional principal or contract amount and fair value at the balance sheet
date by transaction type and hedge accounting method. Note that contract amounts do not represent the market risk exposure ofderivative transactions.
• Interest Rate-Related Transactions
March 31, 2023
Hedge accounting method

Type

Hedged item

Accounting method
employed in principle

Swaps
Receive/floating and pay/fixed
Swaps
Receive/floating and pay/fixed

Yen-based bondExceptional treatment forinterest swaps
Total

Hedge accounting method

Type

Hedged item

Accounting method
employed in principle

Swaps
Receive/floating and pay/fixed
Swaps
Receive/floating and pay/fixed

Yen-based bond

¥20,000¥20,000¥(206)

34,576/

34,576/*2¥(206)

Millions of yen
Notional principal or contract amountTotal
Due after 1 year

Fair value¥70,000¥20,000¥253

36,718/36,672/*2¥253

Loans and bills discounted

March 31, 2023
Hedge accounting method

Type

Hedged item

Accounting method
employed in principle

Swaps
Receive/floating and pay/fixed
Swaps
Receive/floating and pay/fixed

Yen-based bondExceptional treatment forinterest swaps
Total

Fair value

Loans and bills discounted

March 31, 2022

Exceptional treatment forinterest swaps
Total

Millions of yen
Notional principal or contract amountTotal
Due after 1 year

Thousands of U.S. dollars
Notional principal or contract amount
Fair value
Total
Due after 1 year

$149,779$149,779$(1,548)

258,943/

258,943/*2$(1,548)

Loans and bills discounted

Notes: 1. Deferred hedge accounting is mainly applied in accordance with JICPA Industry Committee Practical Guidelines No. 24.
2. Amounts resulting from interest swaps with exceptional treatment are accounted for together with the financial instruments hedged. As a result, thefair value is included in the fair value of the loans stated in Note 31, "Financial Instruments and Related Disclosures.”Hokuhoku Financial Group, Inc. Financial Data 2023

Derivative transactions to which hedge accounting is not applied、Derivative transactions to which hedge accounting is applied37

2023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）• Foreign Exchange-Related Transactions
March 31, 2023
Hedge accounting method

Accounting method
employed in principle

Type

Swaps
Forward contracts

Hedged item

Foreign loans and foreign
securities
Call loans and due frombanks (foreign currencies)

Total
March 31, 2022
Hedge accounting method

Accounting method
employed in principle

Type

Swaps
Forward contracts

Hedged item

Foreign loans and foreign
securities
Call loans and due frombanks (foreign currencies)

Total
March 31, 2023
Hedge accounting method

Accounting method
employed in principle

Type

Swaps
Forward contracts

Total

Hedged item

Foreign loans and foreign
securities
Call loans and due frombanks (foreign currencies)

Millions of yen
Notional principal or contract amountTotal
Due after 1 year

Fair value¥20,146¥116¥(874)

10,781

─

121

/

/

¥(752)

Millions of yen
Notional principal or contract amountTotal
Due after 1 year

Fair value¥18,654¥249¥(1,281)

19,650
/

─
/

(559)
¥(1,840)

Thousands of U.S. dollars
Notional principal or contract amount
Fair value
Total
Due after 1 year

$150,873$873$(6,549)

80,742

─

913

/

/

$(5,636)

Note: Deferred hedge accounting is mainly applied in accordance with JICPA Industry Committee Practical Guidelines No. 25.

38

Hokuhoku Financial Group, Inc. Financial Data 2023

Derivative transactions to which hedge accounting is not applied、Derivative transactions to which hedge accounting is applied

2023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）33. Revenue Recognition(1) Disaggregation of Revenue from contracts with customers
Revenues from contracts with customers on a disaggregated basis for the year ended March 31, 2023 and 2022 are as follows:
Millions of yen
2023
Reportable segment
Hokuriku Bank Hokkaido Bank
Total

Trust fees
Fees and commissions
Deposits and loan operations
Domestic and foreign exchange operations
Investment operations
Agency operations
Safe keeping and safe operations
Other
Other ordinary incomes
Other incomes
Ordinary income from contracts with customers
Ordinary income except the above
Ordinary income from external customers¥30
15,030
4,299
5,189
1,037
595
142
3,767
―
―
15,06081,110¥96,171¥―
14,458
5,736
3,909
1,525
634
76
2,576
―
―
14,45861,183¥75,641¥30
29,48810,035
9,098
2,562
1,229
219
6,343
―
―
29,518142,294¥171,812

Millions of yen
2022
Reportable segment
Hokuriku Bank Hokkaido Bank
Total

Trust fees
Fees and commissions
Deposits and loan operations
Domestic and foreign exchange operations
Investment operations
Agency operations
Safe keeping and safe operations
Other
Other ordinary incomes
Other incomes
Ordinary income from contracts with customers
Ordinary income except the above
Ordinary income from external customers¥36
15,057
4,257
5,413
1,595
574
149
3,068
―
―
15,09372,773¥87,867¥―
14,279
5,601
4,236
1,596
639
77
2,128
―
―
14,27957,358¥71,637¥36
29,336
9,858
9,650
3,191
1,213
226
5,196
―
―
29,373130,132¥159,505

Other *

Total

¥―
5,116
―
―
1,353
446
―
3,316
1,460
35
6,612
9,458
¥16,070¥30
34,604
10,035
9,098
3,915
1,675
219
9,660
1,460
35
36,131
151,752¥187,883

Other *

Total

¥―
4,576
―
―
1,207
441
―
2,927
1,445
33
6,054
12,233¥18,288¥36
33,912
9,858
9,650
4,399
1,654
226
8,123
1,445
33
35,427
142,366¥177,793

Thousands of U.S.dollars
2023
Reportable segment
Other *
Hokuriku Bank Hokkaido Bank
Total

Total

$227
$―
$227
$―
$227
Trust fees
112,562108,276
220,838
38,317259,155
Fees and commissions
32,19842,95775,15575,155―
Deposits and loan operations
38,861
29,276
68,137
68,137―
Domestic and foreign exchange operations
7,770
11,421
19,191
10,13529,326
Investment operations
4,456
4,749
9,205
3,341
12,546
Agency operations
1,066
576
1,642
1,642
―
Safe keeping and safe operations
28,211
19,29747,50824,841
72,349Other
10,941
10,941―――Other ordinary incomes
263
263
―
―
―
Other incomes
112,789
108,276
221,065
49,521
270,586
Ordinary income from contracts with customers
607,435
458,199 1,065,634
70,832
1,136,466
Ordinary income except the above$720,224 $566,475 $1,286,699 $120,353 $1,407,052
Ordinary income from external customers* “Other” was included financial instruments business, leasing, credit card operations and others without banking.

Hokuhoku Financial Group, Inc. Financial Data 2023

Revenue Recognition、Segment Information、Related Party Transactions、Subsequent Events39

2023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）(2) Basic information to understand the revenue from contracts with customers
The Group recognizes revenue in accordance with that core principle by applying the following 5 steps:
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation
Accounting Standard for Revenue Recognition is applied to contracts with customers are mainly Fees and commission in the Banks. The
Banks provides exchange settlements services such as transfer of fund and deposit services such as account transfers and sales agency
services for investment trusts and life insurance contracts. If the performance obligations are satisfied at a point in time such as
settlement and conclusion of sales contracts, the fees received in connection with the services are recognized as revenue when theperformance obligations satisfied.
In addition, if performance obligations are satisfied for a certain period of time, revenue is recognized as the performance obligations
satisfied over time.
The Company and its consolidated non-banking subsidiaries recognize the revenues by a similar method as that of the Banks.

34. Segment Information
An entity is required to report financial and descriptive information about its reportable segments. Reportable segments are operating
segments or aggregations of operating segments that meet specified criteria. Operating segments are components of an entity about
which separate financial information is available and such information is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance. Generally, segment information is required to be reported on the same
basis as is used internally for evaluating operating segment performance and deciding how to allocate resources to operating segments.
(1) Description of reportable segments
The Group's reportable segments are those for which separate financial information is available and regular evaluation by the Board of
Directors and Management Committees is being performed in order to decide how resources are allocated among the Group and assess
performance.
The Group comprehensively conducts banking business as its core business and other financial services under the control of theCompany.
The Company recognized each of its consolidated subsidiaries as an operating segment. Therefore, Hokuriku Bank and Hokkaido
Bank are reportable segments.
(2) Methods of measurement for the amounts of ordinary income, profit (loss), assets, liabilities and other items for eachreportable segment
The accounting policies of each reportable segment are consistent with those disclosed in Note 2, "Summary of Significant Accounting
Policies." Profits of reportable segments are the same as net income. Ordinary income from intersegment transactions is based ontransaction prices determined in the same manner as ordinary income from external customers.

40

Hokuhoku Financial Group, Inc. Financial Data 2023

Revenue Recognition、Segment Information、Related Party Transactions、Subsequent Events

2023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）(3) Information about ordinary income, profit (loss), assets, liabilities, and other items
Segment results for the years ended March 31, 2023 and 2022 are as follows:
Millions of yen
2023
Reportable segment
Hokuriku Bank Hokkaido Bank
Total

Ordinary income
Ordinary income from external customers
Ordinary income from intersegment transactions
Total
Segment profit
Segment assets
Segment liabilities
OthersDepreciation
Amortization of goodwill
Unamortized balance of goodwill
Increase in tangible fixed assets and intangible
assets

Other

Total

Reconciliations Consolidated¥96,171
1,045
97,217
14,3149,477,305
9,107,387¥75,641
1,309
76,9508,711
6,655,698
6,442,887¥171,812
2,354
174,167
23,026
16,133,004
15,550,275¥19,605
3,750
23,355
1,813
96,12864,757¥191,418
6,105
197,523
24,83916,229,133
15,615,032¥(3,534)¥187,883(6,105)
─(9,639)187,883(3,404)
21,435(56,432) 16,172,700(54,544) 15,560,488

3,379
─
─

2,375
─
─

5,754
─
─

233
─
─

5,988
─
─

(4)
2,102
2,978

5,984
2,102
2,978

¥3,647¥3,501¥7,149¥258¥7,407¥(11)¥7,395

Millions of yen
2022
Reportable segment
Hokuriku Bank Hokkaido Bank
Total

Ordinary income
Ordinary income from external customers
Ordinary income from intersegment transactions
Total
Segment profit
Segment assets
Segment liabilities
OthersDepreciation
Amortization of goodwill
Unamortized balance of goodwill
Increase in tangible fixed assets and intangible
assets¥87,867
1,131
88,998
13,102
10,178,190¥9,808,584¥71,637¥159,505
1,345
2,476
72,983
161,982
8,770
21,873
7,065,244 17,243,435¥6,842,923 ¥16,651,508

Other

Total

¥20,145¥179,650
4,308
6,785
24,453
186,435
2,302
24,176
94,854 17,338,290¥64,994 ¥16,716,502

Reconciliations Consolidated¥(1,856)¥177,793(6,785)
─(8,641)
177,793(3,649)20,526(58,218) 17,280,071¥(59,276) ¥16,657,226¥3,787──

¥2,650──

¥6,438
─
─

¥243
─
─

¥6,682
─
─

¥0
2,102
5,080

¥6,682
2,102
5,080¥7,015¥2,712¥9,727¥102¥9,830¥(11)¥9,818

Thousands of U.S. dollars
2023
Reportable segment
Hokuriku Bank Hokkaido Bank
Total

Ordinary income
Ordinary income from external customers
Ordinary income from intersegment transactions
Total
Segment profit
Segment assets
Segment liabilities
OthersDepreciation
Amortization of goodwill
Unamortized balance of goodwill
Increase in tangible fixed assets and intangible
assets

Other

Total

Reconciliations Consolidated$720,224
7,831
728,055
107,204
70,975,103
68,204,808$566,475
9,805
576,280
65,237
49,844,220
48,250,484$1,286,699
17,636
1,304,335
172,441
120,819,323
116,455,292$146,822
28,087
174,909
13,582
719,905
484,962$1,433,521
45,723
1,479,244
186,023
121,539,228
116,940,254$(26,469) $1,407,052(45,723)
─
(72,192)
1,407,052(25,494)
160,529(422,621) 121,116,607(408,477) 116,531,777

25,306
──

17,790──43,096
─
─

1,752
─
─

44,848──

(33)
15,74422,30444,815
15,74422,304$27,316$26,226$53,542$1,934$55,476$(89)$55,387

Hokuhoku Financial Group, Inc. Financial Data 2023

Revenue Recognition、Segment Information、Related Party Transactions、Subsequent Events

41

2023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）(4) Information about services
Millions of yen
Investment
Other
operations

Deposit andloan operations

Year ended March 31, 2023

Ordinary income from external customers¥96,000¥50,664

Year ended March 31, 2022

¥95,708¥39,040

Ordinary income from external customers

Total¥43,044¥177,793

Thousands of U.S. dollars
Investment
Other
operations

Deposit andloan operations

Year ended March 31, 2023

¥187,883

Millions of yen
Investment
Other
operations

Deposit andloan operations

Ordinary income from external customers

Total¥41,219$718,942$379,421

Total$308,689$1,407,052(5) Information about geographical areas
There is no geographical segment outside Japan accounting for 10% or more of ordinary income and tangible fixed assets.
(6) Information about major customers
There are no major customers individually accounting for 10% or more of ordinary income.

35. Related Party Transactions
Related party transactions as of March 31, 2023 and 2022 were as follows:• Officers and principal individual shareholders of the company submitting consolidated financial statements
March 31, 2023
Transaction amount *6
Related party

Account Classification

Balance at end of year

Millions of yen

Thousands of
U.S. dollars

Millions of yen

Thousands of
U.S. dollars

¥17
¥500
¥260

$127
$3,744$1,947

¥15
¥500
¥152

$112
$3,744$1,138

Minamidani Kanamono Co., Ltd. *2
Loans and bills discounted
NAKAMURA-TOME HOLDING CO., LTD. *3,4 Loans and bills discounted
Yagikuma Co., Ltd *5
Loans and bills discounted
March 31, 2022
Related party

Account Classification

Minamidani Kanamono Co., Ltd. *2
Nakamura-Tome Precision Industry Co., Ltd. *3
NAKAMURA-TOME HOLDING CO., LTD. *3
Yagikuma Co., Ltd *5

Loans and bills discounted
Loans and bills discounted
Loans and bills discounted
Loans and bills discounted

Transaction amount *6

Balance at end of year

Millions of yen

Millions of yen

¥21
¥947
¥500
¥344

¥19
¥─
¥500
¥314

Notes: 1. Terms and conditions of the transactions are similar to those with unrelated parties.
2. Close relatives of a member of the Hokuriku Bank’s director own the majority of the voting rights.
3. A member of the Hokuriku Bank’s audit & supervisory board and his close relatives own the majority of the voting rights, and he is the president ofthese companies.
4. The transaction amount is the average balance during the period in which the Group had a related party relationship with the company. Balance atthe end of the year is the balance outstanding on the date when the related party relationship ceased to exit.
5. A member of the Hokuriku Bank’s audit & supervisory board and his close relatives own the majority of the voting rights.
6. Transaction amount was reported at the average balance for the period.

36. Subsequent Events
Acquisition of common stock
The Company resolved to acquire the following common stock based on Article 156 of the Companies Act as applied by replacing terms
pursuant in accordance with to provisions of Article 165-3 of the Act at the meeting of the Board of Directors held on May 10, 2023:
Type of shares to be acquired

Common Stock

Total number of shares to be acquired

5,000,000 (maximum)

Total acquisition cost

¥4,000 million ($29,956 thousand) (maximum)

Acquisition method

Market purchase on the Tokyo Stock Exchange

Acquisition period

From May 12, 2023 to August 10, 2023

The company completed to acquire its own shares by July 7, 2023 as follows:42

Total number of shares acquired

3,578,700

Total acquisition cost

¥3,999 million ($29,955 thousand)

Hokuhoku Financial Group, Inc. Financial Data 2023

Revenue Recognition、Segment Information、Related Party Transactions、Subsequent Events

2023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）

INDEPENDENT AUDITOR’S REPORTTo the Board of Directors of
Hokuhoku Financial Group, Inc.:
OpinionWe have audited the consolidated financial statements of Hokuhoku Financial Group, Inc. and its consolidated subsidiaries (the "Group"),which comprise the consolidated balance sheet as of March 31, 2023, and the consolidated statement of income, consolidated statementof comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year thenended, and notes to the consolidated financial statements, including a summary of significant accounting policies, all expressed inJapanese yen.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial
position of the Group as of March 31, 2023, and its consolidated financial performance and its consolidated cash flows for the year thenended in accordance with accounting principles generally accepted in Japan.
Convenience Translation
Our audit also comprehended the translation of Japanese yen amounts into U.S. dollar amounts and, in our opinion, such translation has
been made in accordance with the basis stated in Note 1 to the consolidated financial statements. Such U.S. dollar amounts arepresented solely for the convenience of readers outside Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibilities under those standards
are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are
independent of the Group in accordance with the provisions of the Code of Professional Ethics in Japan, and we have fulfilled our otherethical responsibilities as auditors. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.

Hokuhoku Financial Group, Inc. Financial Data 2023

INDEPENDENT AUDITOR’S REPORT43

2023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）

Key Audit Matter
A key audit matter is a matter that, in our professional judgment, was of most significance in our audit of the consolidated financial
statements of the current period. The matter was addressed in the context of our audit of the consolidated financial statements as awhole, and in forming our opinion thereon, and we do not provide a separate opinion on the matter.
Determination of Borrower Classifications in the Estimation of Allowance for Loan Losses
Key Audit Matter Description

How the Key Audit Matter Was
Addressed in the Audit

As of March 31, 2023, the Group recorded loans and bills Our audit procedures to address the key audit matterdiscounted of ¥9,533,464 million ($71,395,673 thousand), included the following, among others:
representing 58% of total assets, and allowance for loan losses of¥67,361 million ($504,464 thousand) on the consolidated balance (1)Tests of the effectiveness of controls

sheet.
In accordance with the Banks' policies and guidelines
The subsidiaries of the Group providing banking services (thefor internal controls, borrower classifications are initially"Banks") classify borrowers into categories, namely "Normal," "In
need of caution" ("Substandard" borrowers with substandard loans

determined by the branches. The branches regularly
determine borrower classifications based on theor other borrowers in need of caution), "Possible bankruptcy,"

borrowers' financial statements, and assess whether to"Virtual bankruptcy," and "Legal bankruptcy," according to theborrowers' repayment ability based on their financial conditions,change the borrower classifications, as necessary. The
asset review and inspection division, which is

cash flows, earnings ability and other considerations, and estimate

independent

the allowance for loan losses for each category as described in
Note 2, "Summary of Significant Accounting Policies, i. Allowanceappropriateness of such determination.

for Loan Losses" to the consolidated financial statements.
In case of borrowers whose business results or financial position iscurrently unfavorable or unstable, the Banks frequently determine
the borrower classifications based on the borrowers' latest
business conditions, and the evaluation of the borrowers' future
prospects, such as the prospects for recovery of their business (2)performance in the future periods and the achievability of theborrowers' medium term to long term business improvement plans("Business Improvement Plans"), in addition to the borrowers'
historical business performance, as described in Note 3,"Significant Accounting Estimate" to the consolidated financial
statements.
Loans and bills discounted was the most significant line item on the
consolidated balance sheet as of March 31, 2023. The related
allowance for loan losses involves significant estimates that could
have a significant impact on the consolidated financial statements.
The determination of borrower classifications based on theevaluation of the borrowers' future prospects, including theborrowers' Business Improvement Plans, requires the Banks to

44

from

the

branches,evaluatestheWe tested the design and operating effectiveness ofthe controls over the branches' determination of theborrower classifications and the evaluation by theasset review and inspection division by inquiring of thepersons in charge and inspecting related documents.
Tests of the borrower classifications
We tested whether the Banks' management evaluationof the borrowers' future prospects, including theirBusiness Improvement Plans, was conducted basedon a reasonable basis by:—Comparing the borrowers' Business Improvement
Plans with historical results—Inspecting an analysis of external and internal
environments and a financial analysis—Inquiring of the persons in charge of the asset review
and inspection division and inspecting relevant

have a detailed understanding of the borrowers' external andinternal environments as well as advanced financial analyticalabilities. Additionally, the evaluation of the borrowers' future

supporting documents regarding the achievability ofthe borrowers' Business Improvement Plans,
including the borrowers' measures for increasing

prospects, including the borrowers' Business Improvement Plans,
involves judgment made by the Banks' management.

sales and reducing costs and changes in businessstructure

Hokuhoku Financial Group, Inc. Financial Data 2023

INDEPENDENT AUDITOR’S REPORT2023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）We identified the determination of borrower classifications based— Inquiring of the persons in charge of the asseton the evaluation of the borrowers' future prospects, including theirBusiness Improvement Plans, as a key audit matter.

review and inspection division and inspecting
relevant supporting documents regarding thefeasibilityoffinancialsupportfromfinancial

institutions or other third parties within the Business
Improvement Plans

Other Information
Other information comprises the information included in the Group's disclosure documents accompanying the audited consolidated
financial statements, but does not include the consolidated financial statements and our auditor's report thereon.
We determined that no such information existed and therefore, we did not perform any work thereon.
Responsibilities of Management and the Audit and Supervisory Committee for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance withaccounting principles generally accepted in Japan, and for such internal control as management determines is necessary to enable thepreparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group's ability to continue as a going
concern, disclosing, as applicable, matters related to going concern in accordance with accounting principles generally accepted in Japanand using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has
no realistic alternative but to do so.
The Audit and Supervisory Committee is responsible for overseeing the Directors' execution of duties relating to the design and operating
effectiveness of the controls over the Group's financial reporting process.
Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance, but is not a guarantee that an audit conducted in accordance with auditing standards generally accepted in Japan will
always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis ofthese consolidated financial statements.

Hokuhoku Financial Group, Inc. Financial Data 2023

INDEPENDENT AUDITOR’S REPORT45

2023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）As part of an audit in accordance with auditing standards generally accepted in Japan, we exercise professional judgment and maintainprofessional skepticism throughout the audit. We also:• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design
and perform audit procedures responsive to those risks. The procedures selected depend on the auditor's judgment. In addition, we
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentionalomissions, misrepresentations, or the override of internal control.
• Obtain, when performing risk assessment procedures, an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of theGroup's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures
made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability tocontinue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's reportto the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may
cause the Group to cease to continue as a going concern.
• Evaluate whether the overall presentation and disclosures of the consolidated financial statements are in accordance with accounting
principles generally accepted in Japan, as well as the overall presentation, structure and content of the consolidated financial
statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions andevents in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to
express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of thegroup audit. We remain solely responsible for our audit opinion.
We communicate with the Audit and Supervisory Committee regarding, among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the Audit and Supervisory Committee with a statement that we have complied with relevant ethical requirements
regarding independence, and communicate with it all relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with the Audit and Supervisory Committee, we determine those matters that were of most significance inthe audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe thesematters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing sowould reasonably be expected to outweigh the public interest benefits of such communication.

46

Hokuhoku Financial Group, Inc. Financial Data 2023

INDEPENDENT AUDITOR’S REPORT2023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）Interest Required to Be Disclosed by the Certified Public Accountants Act of Japan
Our firm and its designated engagement partners do not have any interest in the Group which is required to be disclosed pursuant to theprovisions of the Certified Public Accountants Act of Japan.

Deloitte Touche Tohmatsu LLC
July 19, 2023

Hokuhoku Financial Group, Inc. Financial Data 2023

INDEPENDENT AUDITOR’S REPORT47

2023/08/08 9:05:43 / 23998876_株式会社ほくほくフィナンシャルグループ_ディスクロージャー誌（通期）Interest Required to Be Disclosed by the Certified Public Accountants Act of Japan
Our firm and its designated engagement partners do not have any interest in the Group which is required to be disclosed pursuant to theprovisions of the Certified Public Accountants Act of Japan.

Megumi Yanaga
Designated Engagement Partner
Certified Public Accountant

Satoshi Komatsu
Designated Engagement Partner
Certified Public Accountant

Yasuhiko Igarashi
Designated Engagement Partner
Certified Public Accountant

Deloitte Touche Tohmatsu LLC
July 19, 2023

48

Hokuhoku Financial Group, Inc. Financial Data 2023

INDEPENDENT AUDITOR’S REPORT

Hokuhoku Financial Group, Inc.

Hokuhoku Financial Group, Inc.

Financial Data 2023

Printed in Japan