Annual Report
2021
Year ended March 31, 2021

Hokuhoku Financial Group, Inc.

Company outline (as of March 31, 2021)
Company name: Hokuhoku Financial Group, Inc.
Date of establishment: September 26, 2003
Location of head office: 1-2-26 Tsutsumicho-dori, Toyama City
Purpose of business: Management and control of subsidiaries and affiliates and ancillary and related business
Capital: ¥70,895 million
Shares issued and outstanding:Common stock ………………………

132,163,014

Preferred stock (Type 5) ……………

85,955,000

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

CONTENTS

Profile ……………………………………………………………………… 1
Message from the Management ………………………………………… 2
Our Strengths ………………………………………………………………3
Characteristics of Our Main Business Area …………………………… 4
Performance Highlights ………………………………………………… 6
President’s Message ……………………………………………………… 10
Process for value creation ……………………………………………… 14
Hokuhoku Financial Group SDGs Declaration and Key CSR Activity Themes …… 16
Initiatives to address issues related to climate change ………………… 18
Deputy President’s Message …………………………………………… 20
Medium-Term Management Plan ……………………………………… 22
Medium-Term Management Plan “ALL for the Region” ……………… 23
Stakeholder Communication …………………………………………… 25
Building a sound and resilient management foundation ……………… 26
CORPORATE GOVERNANCE ……………………………………… 26
MEASURES FOR RISK MANAGEMENT …………………………… 31
MEASURES FOR COMPLIANCE …………………………………… 34
Consolidated Financial Statements
Consolidated Balance Sheet ………………………………………… 37
Consolidated Statement of Income ………………………………… 38
Consolidated Statement of Comprehensive Income ……………… 38
Consolidated Statement of Changes in Equity ……………………… 39
Consolidated Statement of Cash Flows …………………………… 41
Notes to Consolidated Financial Statements ……………………… 42
Independent Auditor’s Report …………………………………………… 72
Non-consolidated Financial Statements
The Hokuriku Bank, Ltd.
Non-consolidated Balance Sheet (Unaudited) …………………… 77
Non-consolidated Statement of Income (Unaudited) …………… 78
The Hokkaido Bank, Ltd.
Non-consolidated Balance Sheet (Unaudited) …………………… 79
Non-consolidated Statement of Income (Unaudited) …………… 80
Corporate Information …………………………………………………… 81
Outline of Subsidiaries — Hokuriku Bank ……………………………… 82
Outline of Subsidiaries — Hokkaido Bank ……………………………… 83
Directors …………………………………………………………………… 84
简单的本集团中文简要…………………………………………………… 85

Profile
Since its establishment in 1877, Hokuriku Bank has

The operations of the Hokuhoku Financial Groupextend beyond the limits of a single district.

developed an extensive network of branches throughout

Our extensive network is outlined below.

the Hokuriku district. On account of trade through the

Hokuriku district …………………………… 151 branches
Toyama prefecture …………………………… 93 branches
Ishikawa prefecture ………………………… 36 branches
Fukui prefecture ……………………………… 22 branches

Kitamae-bune or “Northbound Ships,” branches extended
to the major cities of Hokkaido, enabling the bank tomeet customers’ needs. The Hokkaido Bank, which wasestablished in 1951, has developed a network of branches

Hokkaido …………………………………… 161 branches

throughout Hokkaido, and built a firm business structure

Three major metropolitan areas ………… 16 branches
Tokyo and Yokohama ………………………
9 branches
Nagoya ………………………………………
3 branches
Osaka and Kyoto ……………………………
4 branches

centered on individuals and small and medium-sizedenterprises.
The Hokuriku Bank, Ltd. and The Hokkaido Bank, Ltd.
underwent management integration in September 2004 toform the Hokuhoku Financial Group Inc., which today oper-

Others (Sendai, Niigata, Nagano, Takayama) …

ates a super-regional financial network that encompasses

Overseas ……………………………………
8 offices
New York Representative Office (Hokuriku Bank)
Yuzhno-Sakhalinsk Representative Office (Hokkaido Bank)
Vladivostok Representative Office (Hokkaido Bank)
Singapore Representative Office (Hokuriku Bank)
Bangkok Representative Office (Hokuriku Bank)
Dalian Representative Office (Hokuriku Bank)
Shanghai Representative Office (Hokuriku Bank)
Shenyang Representative Office (Hokkaido Bank)
Ho Chi Minh Representative Office (Hokuriku Bank)(Scheduled to be established in 2021)

the Hokuriku region, Hokkaido, and Japan’s three major
metropolitan areas (Tokyo, Osaka, and Nagoya areas).

May 2002

Comprehensive business alliance
between
Hokuriku Bank and Hokkaido BankMay 2003

Agreement on full integration ofmanagement of Hokuriku Bank andHokkaido Bank

4 branches(As of June 30, 2021)
Vladivostok

September
2003

YuzhnoSakhalinsk

Shenyang
DalianHokugin Financial Group, Inc.
established

Shanghai

Hokuriku Bank Group comes undermanagement of Hokugin Financial
Group

Bangkok
Ho Chi Minh

Singapore

Management integration effected
through equity swap
September
2004

New York

Hokkaido

Hokuhoku Financial Group, Inc. wasborn.

Hokuriku district
Ishikawa

Toyama

Fukui

Tokyo
Osaka

NagoyaThree major metropolitan areas
Hokuhoku Financial Group, Inc. Annual Report 2021

1

MESSAGE FROM THE MANAGEMENT

Left: Eishin Ihori

Right: Yuji Kanema

President(concurrently serving as president of
The Hokuriku Bank, Ltd.)

Deputy President(concurrently serving as president of
The Hokkaido Bank, Ltd.)We would like to express our sincere gratitude for your continued patronage of
Hokuhoku Financial Group and its subsidiaries.
While the rapid economic slowdown caused by the outbreak of the COVID-19
has been eased, the future outlook of business environment surrounding regional
financial institutions is still uncertain due to the re-spread of the viruses and to thenegative impact on the local economy, especially in some business sectors such as
tourism.
In such an environment, we will continue to make efforts to offer optimal solutions which will meet the various needs of our customers suffering from the COVID-19 and to support the sustainable growth of the local communities by pursing ourbasic three policies, “Contribution to community development”, “Evolution andchange to the future” and “Exercise of the group’s comprehensive strength”, all ofwhich are held in our medium-term management plan "ALL for the Region".
We would like to ask for your continued support and patronage.
July 2021

Eishin Ihori
President

2

Hokuhoku Financial Group, Inc. Annual Report 2021

Yuji Kanema
Deputy PresidentOur Strengths

We contribute to the regions with our strengths and strive to grow sustainably.

Our solid customer base built over our long history■ Hokuriku Bank and Hokkaido Bank were established in 1877 and 1951, respectively.
■ It has been 16 years since the Group was formed in 2004.
■ Our solid customer base in Hokuriku and Hokkaido has been built over our long history.
Market Share in Hokuriku (Toyama, Ishikawa, Fukui)Market Share in Hokkaido#1 in deposit and lending#2 in deposit and lending

29.9%

20.5%

28.0%

17.0%

DepositLending

Deposit

31.6%

30.1%

23.4%

19.5%

■ Hokuhoku Financial Group■ Regional competitors■ Other banks

22.7%

30.9%

Lending

9.9%

10.3%

27.4%

23.5%

36.0%

39.2%

■ Community banks*Market shares are as of September 2020. They were calculated by the Group based on statistical data from Bank of Japan, think tanks and others. They exclude Japan Post Bank.
*The market shares of regional competitors and other banks are our estimates.

Our competent people■ Our people have diligence and pioneering spirits, each of which represents key characteristics of Hokuriku and Hokkaido, respectively.
■ We believe diversity makes us stronger, and we are dedicated to building a diverse workforce.
■ Our people have industry-leading expertise in such areas as business succession, agriculture, and cross-border businesses.
Women in management roles

CFP and 1st level FP holders

169

235

160

(March 2020)

216(March 2021)(March 2020)(March 2021)

Extensive branch network across multiple regions■ Our branch network spreads extensively across multiple regions, including Hokuriku, Hokkaido, Tokyo, Osaka and Aichi. We also haveglobal offices in foreign countries.
■ Our extensive branch network gives us a unique advantage in the industry in promoting business matching for our customers.
■ We are constantly optimizing our branches in terms of number, size, functions and operating hours.
Number of branches (June 2021)

Business matching deals across Hokuriku and Hokkaido (FY2020)

332 branches in Japan

171

branches in Honshu(Hokuriku, Tokyo, Osaka, Aichi and others)

161

127

branches in Hokkaido

41

Leads

closed deals

8 global offices outside of Japan
1. New York 2. Bangkok 3. Singapore 4. Shanghai 5. Dalian
6. Shenyang 7. Vladivostok 8. Yuzhno-Sakhalinsk 9. Ho Chi Minh City**We plan to open a new office in Ho Chi Minh City in 2021.

Strategic partnerships with key players■ We help our clients find technology partners from universities in our operating areas.
■ We help our clients expand their businesses in foreign countries.
Number of partnerships with municipalities and universities(March 2021)

47

Municipalities

22

Universities

Number of partnerships with government-sponsored banks and otherinternational banks outside of Japan (March 2021)

63

partnerships

Hokuhoku Financial Group, Inc. Annual Report 2021

3

CHARACTERISTICS OF OUR MAIN BUSINESS AREA
Population and Square Measure*1

Number of businesses*1

ToyamaPrefecture aIshikawa
Prefecture b

Fukui
Prefecture c

Total
a+b+c

1.04Mn(37th)

1.13Mn(33th)

0.76Mn(43rd)

2.95Mn4,248(33rd)

4,186(35th)

4,191(34th)

Population(Ranking)
Square Measure(Ranking) km2

Hokkaido—

5.25Mn(8th)
83,424(1st)Gross Prefectural Product*1,2

Hokkaido

259

Hokuriku

167

Toyama56

Ishikawa

65

Fukui

45

(JPY Bn)

ToyamaaIshikawa
b

Fukui
c

Total
a+b+c

4,824.7(0.85%)(28st)

4,768.7(0.84%)(29th)

3,459.5(0.61%)(42nd)

13,052.9(2.30%)

GPP(Proportion)(Ranking)(Thousand)

Hokkaido
19,652.8(3.47%)(9th)

Industrial Structure*2
Primary
0.9%

Primary
4.3%
Secondary
34.9%

Primary
1.1%
Secondary
17.3%

Secondary
27.8%

Hokuriku

Hokkaido

All Japan

Tertiary
64.2%

Tertiary
78.4%

Tertiary
71.1%

Data source : *1 Ministry of Internal Affairs and Communications,*2 Cabinet Office

Hokkaido• With vast expanses of land and ample fishing areas in the ocean surrounded on all sides, Hokkaido has thriving primary industries such as
agriculture and fisheries compared to the rest of Japan. As a result, Hokkaido is called the largest food supply base of Japan.
• It is also popular as a tourist destination, and receives many visitors both from Japan and overseas.

Abundant Natural Resources
Hokkaido
26%

Hokkaido
14%

Hokkaido
23%

Agricultural
land

Agricultural
products

Fishery
products

74%

86%

77%

Wheat / Potato / Onion /Milk etc.

Atka mackerel / Tangle /Salmon / Cod / Scallops etc.

Data source : Ministry of Agriculture, Forestry and Fisheries / Ministry of Land, Infrastructure, Transport and Tourism Hokkaido Regional Development Bureau /Department of Agriculture, Hokkaido Government

4

Hokuhoku Financial Group, Inc. Annual Report 2021

Increasing Numbers of Tourists Visiting Hokkaido

Renewable Energy
Hydroelectric power / Geothermal energy / Wind power / Solar power

Data source : Bureau of Tourism, Department of Economic Affairs,
Hokkaido Government
Inbound tourists

Total tourists

(Mn)
9.1

8.8

8.3

8.2

2.3

2016

2.7

2017

3.1
2.4

2018

2019

Hokuriku• The Hokuriku region is bordered by the Sea of Japan to its front, and flanked by steep mountains, such as the Tateyama mountain range,
to its back. This creates a topography in which massive amounts of meltwater from snow flow into rivers, and this water is used for hydroelectric power generation, and also plays a role in attracting manufacturing companies to the region. ( The Hokuriku region has a higher
ratio of secondary industries compared to Japan as a whole.)• The 3 prefectures of Hokuriku have each developed industries that match their distinctive characteristics.

Toyama Prefecture’s Pharmaceutical Product Production
Data source: Ministry of Health, Labour and Welfare, Statistics of Production by Pharmaceutical Industry(¥ billion)

621.8

654.0

693.7
624.6

No. 4
in Japan

Fukui Prefecture’s Eyeglasses Production
Fukui Prefecture (Sabae City in particular) has more than a 100-year
history as a manufacturing base for eyeglasses, and boasts the top
share in the eyeglasses manufacturing industry (including frames) inJapan. The prefecture is a global hub for frame manufacturing inparticular, on par with Italy and China. Leveraging its excellent
technological capabilities, the prefecture is working to increasevalue-added, including enhancing its brand power, with an eye
towards capturing demand in the growing Asian market.

Many Global Niche Top Companies in Ishikawa Prefecture

2016

2017

2018

2019

Toyama Prefecture, which forms the medicine capital known as
Medicine city Toyama, is home to a diverse range of pharmaceutical companies, from the allocated drug sales industry of the past,
to new drug developers, generic drug manufacturers, and over-thecounter drug manufacturers. In addition, peripheral industries, suchas plastic container packaging and printing, are well developed in
the prefecture. Toyama Prefecture is home to highly-distinctive
pharmaceuticals companies, such as a pioneer company in thefield of transdermal absorption-type medications, and the firstcompany in the world to develop intraoral film-type medications.

Ishikawa Prefecture has a developed industrial sector, centered on
the textile and machinery industries. In 2020, the Ministry of Economy, Trade and Industry’s Manufacturing Industries Bureau selected
2 machinery and processing-related companies, and 1 electricaland electonic-related companies from Ishikawa Prefecture to be
included in the “Global Niche Top Companies.” Companies wereselected based on a determination that they were strong in suchareas as: [i] Compatibly achieving both global share and profits; [ii]Having unique and independent characteristics; [iii] Addressing
approaches to risk of losing out to competitors; and [iv] Maintaining
sustainability of their global share.

Hokuhoku Financial Group, Inc. Annual Report 2021

5

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

FY2020FY2019Y-o-Y Change
(6.4)
0.5

Ordinary income
Ordinary profits
Net income attributable toowners of the parent

175.9
32.2

182.4
31.6

21.3

1.0

20.2

Capital adequacy ratio

9.45%

0.51%

8.94%

With regard to the Company’s operating performance in thefiscal year ended March 31, 2021, consolidated ordinary
income fell by ¥6.4 billion year-on-year to ¥175.9 billion.
Consolidated ordinary profits increased by ¥0.5 billion to¥32.2 billion.
Net income attributable to owners of the parent increased by ¥1.0 billion to ¥21.3 billion.
The capital adequacy ratio was 9.45% on a consolidated basis at the end of the fiscal year.
With regard to the payment of dividends for the fiscal
year ended March 31, 2021, dividends for common stock
were ¥35.00 per share, paid once as the year-end dividends, and dividends for preferred stock (Type 5) were thedesignated ¥7.50 per share (¥15 annually) paid respectively
as the interim and year-end dividends.

Summary of Operations (Hokuriku Bank and Hokkaido Bank) <Total of both banks>
Total of both banks(¥ billion)

FY2020Ordinary income
Core gross business profits
Expenses (excluding temporarily processed portion)
Core net business profits
Excluding gains (losses) on
cancellation of investment trusts
Credit costs
Ordinary profits
Net income

157.9
120.7

FY2019Y-o-Y Change
(5.5)
(2.4)

163.5
123.2

82.3

(3.0)

85.3

38.4

0.5

37.8

37.6

3.0

34.5

13.0
32.0
22.4

1.0
0.5
1.6

12.0
31.4
20.8

Total ordinary income for both banks was ¥157.9 billion,
down ¥5.5 billion year-on-year, while net income increasedby ¥1.6 billion to ¥22.4 billion.
At Hokuriku Bank, ordinary income decreased by ¥2.1
billion to ¥86.4 billion and net income increased by ¥3.0
billion year-on-year to ¥14.2 billion.
At Hokkaido Bank, ordinary income decreased by ¥3.4
billion to ¥71.5 billion and net income decreased by ¥1.3
billion year-on-year to ¥8.1 billion.

(¥ billion)(¥ billion)

Hokuriku BankFY2020Ordinary income
Core gross business profits
Expenses (excluding temporarily processed portion)
Core net business profits
Excluding gains (losses) on
cancellation of investment trusts
Credit costs
Ordinary profits
Net income

86.4
66.7

Capital adequacy ratio

Hokkaido Bank
FY2019Y-o-Y Change
(2.1)
(0.1)

FY2020FY2019

88.5
66.8

71.5
54.0

Y-o-Y Change
(3.4)
(2.3)

74.9
56.3

43.9

(1.8)

45.7

38.4

(1.1)

39.6

22.8

1.6

21.1

15.6

(1.1)

16.7

21.5

1.5

19.9

16.1

1.4

14.6

8.4
20.5
14.2

(0.8)
2.7
3.0

9.2
17.7
11.2

4.6
11.5
8.1

1.8
(2.1)
(1.3)

2.7
13.7
9.5

9.14%

0.55%

8.59%

8.88%

0.12%

8.76%

Core Gross Business Profits <Total of both banks>
Net interest income

Net fees and commissions

Other income

125.7
1.0
16.5

123.2
1.2
16.5

Total 120.7
1.0
15.9

108.1

105.4

103.7

FY2018FY2019FY2020(¥ billion)

6

Hokuhoku Financial Group, Inc. Annual Report 2021

Net interest income……¥103.7 billion
Due to a fall in interest and dividends on securities, net
interest income declined by ¥1.7 billion year on year.
Net fees and commissions……¥15.9 billion
Due to a fall in commissions on sales of insurance, net
fees and commissions declined by ¥0.5 billion year on
year.
Other income……¥1.0 billion
Due to a fall in gain on foreign exchange transactions,other income declined by ¥0.1 billion year on year.
Core gross business profits……¥120.7 billion
As a result of the above, core gross business profits
decreased by ¥2.4 billion year on year.

Expenses <Total of both banks>
Hokuriku Bank

Hokkaido Bank

OHR

68.85%

69.27%

68.19%

86.5

85.3

46.4

45.7

43.9

40.1

39.6

38.4

FY2018FY2019FY2020

Total

Expenses……¥82.3 billion
Through efforts to improve operational efficiency, expenses fell by ¥3.0 billion year on year.

82.3(¥ billion)

Core Net Business Profits <Total of both banks>
Hokuriku Bank

Hokkaido Bank

ROA

0.30%

0.28%

0.25%

39.1

37.8

22.6

21.1

22.8

16.4

16.7

15.6

FY2018FY2019FY2020Total

Core net business profits……¥38.4 billion
Due to a fall in expenses, core net business profits increased by ¥0.5 billion year on year.

38.4(¥ billion)

Net Income <Total of both banks>
Hokuriku BankNet Income……¥22.4 billion
Although credit costs increased, net income increased by¥1.6 billion year on year due to an increase in core net
business profits.

Hokkaido Bank

26.6
Total

22.4

20.8
15.5
11.2

14.2

11.0

9.5

8.1

FY2018FY2019FY2020(¥ billion)

Hokuhoku Financial Group, Inc. Annual Report 2021

7

PERFORMANCE HIGHLIGHTS

Loans and Bills Discounted <Total of both banks>
Hokuriku Bank

8,360.8

Loans and bills discounted……¥9,065.1 billion
Due to the increase in loans to enterprises, individuals
and publics, there was an increase of ¥392.0 billion
compared with the end of the previous fiscal year.

Hokkaido Bank

8,673.1

Total

9,065.1

5,033.3

4,740.3

4,910.3

3,620.5

3,762.7

4,031.7

2019

2020

2021

(¥ billion)
End of March

Loans to Small- and Medium-sized Enterprises (SMEs) <Total of both banks>
Hokuriku Bank

Loans to SMEs……¥5,766.6 billion
As a result of efforts to support financing for customers
affected by COVID-19, loans to SMEs increased by¥369.2 billion compared with the end of the previous
fiscal year.

Hokkaido Bank

Total

5,766.6

5,275.8

5,397.4

3,094.8

3,191.4

2,180.9

2,206.0

2,425.6

2019

2020

2021

3,341.0(¥ billion)
End of March

Deposits (Including negotiable certificates of deposit) <Total of both banks>
Hokuriku Bank

Deposits (including negotiable certificates ofdeposit)……¥12,815.6 billion
Due to increases in individual deposits and corporate
deposits, deposits increased by ¥1,152.9 billion compared with the end of the previous fiscal year.

Hokkaido Bank

Total 12,815.6
11,439.7

11,662.6

6,636.8

6,735.4

4,802.8

4,927.2

5,465.1

2019

2020

2021

7,350.5(¥ billion)
End of March

8

Hokuhoku Financial Group, Inc. Annual Report 2021

Capital Adequacy Ratio <On a consolidated basis>
CapitalCapital adequacy ratio……9.45%
Although 10% of the ¥53.7 billion in preferred stock (Type5) was the subject of a partial redemption on October 1,
2020, capital adequacy on a consolidated basis stayed
securely in the 9% level at 9.45%, 0.51 points upper thanthe end of the previous fiscal year, owing to the accumulation of retained earnings.

Capital adequacy ratio

9.45%

9.09%

8.94%

521.0

529.8

549.9

2019

2020

2021

(¥ billion)
End of March

Disclosed Claims under the Financial Reconstruction Law <Total of both banks>
Disclosed claims under the Financial Reconstruction
Law……¥180.1 billion
Disclosed claims under the Financial Reconstruction Lawrose by ¥26.7 billion compared with the end of the previous fiscal year.
NPL ratio……1.93%
The NPL ratio rose by 0.22 percentage points comparedwith the end of the previous fiscal year.
Substandard claims
Bankrupt and substantially bankrupt claims

1.79%

Doubtful claims
NPL Ratio

153.4
21.1

120.3

119.5

16.1

Substandard
claimsDoubtful claims

1.93%

154.6
18.2

2019

● Claims subject to disclosure: loans, customers’ liabilities for acceptance and guarantees, foreign exchanges, accrued interest, suspense
payments, securities loaned, private bonds with the Bank’s own
guarantees (regarding claims on obligors requiring caution, loans andprivate bonds with the Bank’s own guarantees only).

1.71%
Total

End of March● Disclosed Claims under the Financial Reconstruction Law: The bankclassifies both loans and other assets in line with the stipulations of the
Financial Reconstruction Law.

12.8

2020

180.1
25.6

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

143.1

11.5

This category is defined as claims on borrowers
requiring caution under asset self-assessment.
This category comprises past due loans (threemonths or more) and restructured loans underthe Banking Law.
This category is defined as claims on potentiallybankrupt borrowers under asset self-assessment.
The execution of contracts on repayment of theprincipal and payments of interest is highly
doubtful.
This category is defined as the sum of claims onbankrupt borrowers and effectively bankrupt
borrowers.

(¥ billion)

2021

Ratings
Rating and Investment
Information, Inc.

R&I

A

“Ratings” are determined by ratings agencies, third-party institutions with no vested
interest in the companies they rate, and indicate a company’s creditworthiness and ability
to fulfill obligations in concise signs.
Hokuhoku Financial Group Inc., Hokuriku Bank and Hokkaido Bank have obtained“A” ratings from Rating and Investment Information, Inc. (R&I), and are considered as
being highly creditworthy. Hokuriku Bank also has obtained “A-” rating from Standard &Poor’s Ratings Japan K. K.

Hokuhoku Financial Group, Inc. Annual Report 2021

9

PRESIDENT’S MESSAGE

Contributing to the sustainablegrowth of Hokuriku andHokkaido regions
The Hokuhoku Financial Group aims to contribute to thesustainable growth of Hokuriku and Hokkaido regions by providing
solutions to the local economies facing a lot of challenges and bycreating new added values in the regions.

Eishin Ihori, Pr e sident(Pr e sident o f the Hokuriku Bank,L t d.)

Our strengths
First of all, I would like to explain our strengths and thepotential of our prime areas, Hokuriku and Hokkaido.
Our strengths are the strong customer base built over
our history, the network of branches operating in wider
areas than other regional banks, our people withdiligence and pioneering spirits, each of which
represents a value in Hokuriku and Hokkaido
respectively, and the partnerships with manymunicipalities and universities aiming to solve issues inlocal economies.
Next, I would like to refer to the characteristics of
Hokuriku and Hokkaido regions, which are the businessfoundation of the Group. Hokuriku region is located in
the center of three major metropolitan areas. It has ahigh-quality educational environment and forms the bestindustrial area facing the Sea of Japan. It also hasabundant water resources with good quality. Hokkaido
region has strong branding strategy. It is the largest foodproduction area in Japan and is one of the leading
suppliers of new types of energy. It has the world’sleading tourism resources as well. Such characteristics
are priceless strengths for the regions, which should beprotected and succeeded in the future.

Looking back on 2020 -Issues in Hokuriku and HokkaidoLooking back on 2020, I would like to talk about thebusiness environment and issues surrounding the Group.
In 2020, the spread of Covid-19 had negative impact on
our business activities. Despite the steady progress of
vaccination, the spread of new mutant viruses has
prevented convergence of the infection and theJapanese economy has been stagnant. In addition, the10

Hokuhoku Financial Group, Inc. Annual Report 2021

local economies have been facing difficult issues such as
the decline of working population due to the lowbirthrate combined with aging and as abnormal weather
caused by climate change. Hokuriku and Hokkaido, ourprime areas, have been subject to government
emergency declaration and various economic activities
have been constrained. Due to the outflow of theyounger population to metropolitan areas, themanufacturing sector in Hokuriku and the primary sectorin Hokkaido have been facing difficulties in retaining anddeveloping human resources that will succeed theirbusinesses in the future. Furthermore, natural disasters
and climate change pose a constant threat to these
sectors, which could have negative impact on the local
economies.

Toward 2030-Pursuit of Management PhilosophyEvery time we start senior management meetings, werecite our Management Philosophy,“Prospering
Together with the Region”,“Fair & Steady Management”
and“Progressive & Innovative Services”. Our
Management Philosophy are the guiding principles in theGroup. Based on these principles, we aim to contributeto customers and local communities by providing No.1
financial services and solutions and to achieve growthand development together with them. To move forward
to that aim, we have established our corporate vision for2030 that we strive to contribute to the sustainablegrowth of Hokuriku and Hokkaido regions in the future.
In order to achieve this, we have been practicing the
medium-term management plan“ALL for the Region”aswell as providing“ESG financial services”in the region,by which we help the industries solve their ESG issues
and achieve their sustainable growth.
I believe that we can achieve our corporate vision for2030 and our Management Philosophy.

Management
Philosophy"Prospering Together with the Region""Fair & Steady Management""Progressive & Innovative Services"

Aim
Contributing to customers and local
communities by providing No.1 financial
services and solutions and achieving growthand development together with them

Corporate vision for 2030
Striving to contribute to the sustainable growth of
Hokuriku and Hokkaido regions in the future

Strategies· Medium-term management plan "ALL for the Region"· ESG Regional Finance

Hokuhoku Financial Group, Inc. Annual Report 2021

11

PRESIDENT’S MESSAGE

Strive to realize sustainablegrowth of Hokuriku andHokkaido regions
I would like to explain our strategies and initiatives toachieve our corporate vision 2030, in which we aim tocontribute to the sustainable growth of Hokuriku andHokkaido regions in the future.

Medium-term management plan“ALL for the Region”
The Group has been practicing the medium-term
management plan“ALL for the Region”from FY2019 toFY2021. In the plan, we aim to contribute to customers
and local communities by providing No.1 financial
services and solutions, and to achieve growth anddevelopment together with them. In order to achievethis, all executive officers and employees of the Groupare making efforts to provide our customers with“Faceto Face and attractive financial services”and with
“Digital financial services”.
For corporate customers, we focused on financial
support for customers who were affected by Covid-19.
In February 2020, when Covid-19 began to spread inJapan, we launched help desks at all branches offeringloan and started to support our customers’working
capital needed to ease the impact of Covid-19.
In addition, in order to support our customers’
businesses, we promoted business-matching that
introduces new buyers or suppliers to them andprovided consulting services to find optimal solutions totheir business issues. While we experienced difficulties
in business meetings with our customers due to the
spread of Covid-19, we utilized tools such as web
meeting to understand the various needs of ourcustomers.
For individual customers, as the need for non-face-toface transactions increased after the spread of Covid-19,
the number of online transactions increased significantly.
We established a structure to meet a wide range of ourcustomers’needs according to their life stage. For
instance, we expanded the lineup of investment trusts
that can be purchased online, strengthened cooperation
between banks and the securities subsidiary for wealth12

Hokuhoku Financial Group, Inc. Annual Report 2021

management consulting, and expanded inheritancerelated consulting services. In addition, we worked
further to improve customer satisfaction in retail loans,renewing mortgage products, starting corporate credit
life insurance with cancer insurance for private car loans,and introducing electronic contracts.
We also worked to improve our cost structure. We
reduced expenses by making branch operation more
efficient, by digitalizing some operations of branches andby consolidating them back into headquarters. As for
Covid-19, we thoroughly implemented measures toprevent the spread of infection and to continue ourbusiness smoothly, including encouraging remote workand reviewing business hours. We also actively engaged
in health and productivity management with the aim of
improving the vitality and productivity of employees. In
FY 2020, both Hokuriku Bank and Hokkaido Bank werecertified as one of the White 500 enterprises for the
fourth consecutive year.
As for the Group governance system, the Corporate
Governance Committee and the Board of Directors
actively incorporated the objective opinions of outside
directors to enhance discussion on medium and longterm strategies. In addition, we strived to disclose
information in a highly transparent manner under ourdisclosure policy. As part of this effort, the Group issued
the Integrated Report 2020 for the first time last year.
In order to improve shareholder value, we aim to
maintain a stable dividend with a total return ratio of
more than 50%, including redemption of preferredshares, taking our capital adequacy ratio into account.
We are also working to keep our capital enough to
supply funds to our customers in the local economies.

Practice of ESG Regional FinanceIn recent years, various environmental and social issues
such as climate change and human rights violations in
supply chains have arisen on a global scale, and the role
expected to financial institutions, which play animportant role in global business, is becoming extremely
large. In February 2021, the Group established theEnvironment Policy and endorsed the TCFD
recommendations. In addition, in order to reduce ourown emissions, we set a target of 46% to reduce CO2
emissions by FY2030. At the same time, we establishedan“Investment and Loan Policy for Specified
Businesses”, clearly stating that we will promotesustainability through finance as a regional financial
institution. In addition, both Hokuriku Bank andHokkaido Bank were chosen as partner of the“ESG
Regional Finance Promotion Program”conducted by the
Ministry of the Environment, and researched andanalyzed physical and transition risks related to climatechange. In FY2020, we recognized the importance ofaddressing climate-related issues through this program.
In particular, through interviews with business partners,
it became clear that most companies recognized theimportance to solve the issues, but they did not know

Exercise of
the Group's
comprehensive
strength

Establishment of theEnvironment Policy

Endorsement of the
TCFD recommendations

Improvement ofsustainability of majorindustries in the region
Enhancementof the valueof customers

Contributing to the sustainable growth of
Hokuriku and Hokkaido regions in the future

Evolution andchange to the
futureAnnouncement of the
Hokuhoku Financial
Group SDGs Declaration

Continuous use ofregional resources

Contributing to achieve the SDGs

Contribution tocommunity
development

ESG Regional FinanceContributing to creation of a
Circulating and Ecological Economy「ALL for the Region」

I believe that if we steadily implement these strategies I
explained, we will surely be able to open up a bright
future for Hokuriku and Hokkaido together with local
communities and customers. I myself will take the leadin making every effort with all executive officers andemployees of the Group.
We look forward to your continued support andpatronage.

Local Communities and Customers

The Hokuhoku Financial Group

Medium-term
management plan

how to tackle them. In order to solve the problems ofclimate change for our business partners, we need to
first be aware of the current issues. Secondly, we needto provide solutions and financial support based on
business evaluation incorporating the external
environment. With regard to such solutions, we believethat it is important to work together with companies,
local governments, and other banks with technicalcapabilities and know-how, rather than to try to provide
solutions by the Group alone. Currently, we are working
to build a system that supports the resolution of climatechange issues faced by local companies. Through these
initiatives, we would like to realize our vision by building
and materializing our optimal“ESG Regional Finance”.

Hokuhoku Financial Group, Inc. Annual Report 2021

13

PROCESS FOR VALUE CREATION

Create common values by providing service that respond to customer andIssues ofsustainablity of
the region
■

■

■

■

■

Change in the global
environment caused byclimate change
Destruction anddeterioration of theinfrastructure caused bynatural disaster
Bad influence on theindustries in the region
caused by change inecosystem
Shortage of humanresources that would leadregional economy
Economic stagnation
caused by the spread of
Covid-19

Customer issues■■

Asset formation
Assets succession to thenext generation

Prospering together
with the region

Growth strategy■ Business succession
problem■■Management
Fair & Steady

Correspondence to AI/IoT

Capital to utilize

Community issues■

Declining birthrate andaging population

Population decrease■ Concentration in urban
areas
■

■

Issues of ESG and SDGs

Financial capital
The 5th asset size among
regional banks

Human capital
Diligent and strong talentIntellectual capital
Top-class know-how among
regional banks and external
collaboration

Financial issues■

Long term low interest rate■

Entry from different industries■

Expanding business of
public financial institutions

Society capitalHigh regional share and wide
area network

Natural capitalRich nature of Hokkaido and
Hokuriku

Practice of management
philosophy
14

Hokuhoku Financial Group, Inc. Annual Report 2021＝

community issues

Value provided to each stakeholder

philosophy
Management

Progressive &Innovative Services

Shareholder

・Enrichment of shareholder returns
・Creating shareholder value over the
medium to long term
・High transparency information disclosure

Community

・Regional activation
・Promote responsible investment and loan
・Improvement of financial literacy
・Reduction of environmental burden
・Realization of recycling-based society

Customer・Activate financial assets
・Successful business and asset succession
・Business growth support
・Regional core industry support
・Provision of highly convenient and fulfilling
services

Employee・Fulfilling workplace
・Promotion of diversity
・Promotion of work-life balance

Medium-termManagement Plan
Exercise thegroup’scomprehensive
strength

Contribution tocommunity
development

Evolution andchange to the
futurePractice of ESG
Regional Finance・‌‌Hokuhoku Financial Group SDGs
Declaration
・‌‌The Environment Policy
・‌‌E n d o r s e m e n t o f t h e T C F D
recommendations

Return to community/Sharing issues through dialogue with stakeholders

Solving customer and community
issuesHokuhoku Financial Group, Inc. Annual Report 2021

15

HOKUHOKU FINANCIAL GROUP SDGs DECLARATION AND KEY CSR ACTIVITY THEMESThe Hokuhoku Financial Group discusses the issues and initiatives regarding CSR including
SDGs/ESG at the Management Committee and the Board of Directors regularly.

Management philosophy

Key themes

Realization of sustainable community

E

S

G

Contribute to responsible investment and financing as a regional
financial institution by promoting constructive dialogue based on
issues including SDGs and ESG, stable job creation by actively
supporting startup companies and growth companies in the region,and the realization of sustainable local communities by promoting
collaboration with local governments and customers

Prospering
Together with theRegionStrive to reduce environmental burden, including promoting the useof renewable energy and reducing greenhouse gas emissions

Improving financial literacy in the region

S

Work to improve the financial literacy of customers and children
through financial and economic education and financial consulting,and support asset formation and smooth business and asset
succession for the future

G

Building a sound and resilient management foundation
Fair & SteadyManagement

Enhance transparency by promoting dialogue with stakeholders,build a stronger management base by enhancing governance,
thoroughly managing various risks, and further strengthening
compliance

Improving convenience for all customers

S

Strive to further improve convenience by providing advanced
financial products and services that all customers can easily accessand use with peace of mind

Progressive &Innovative
Services

Ensuring good work environment leading to better productivity
Work to create rewarding and fulfilling workplaces by promoting
the active participation of diverse personnel, promoting work stylereform including a balance between work and childcare/nursing
care, and developing personnel who will lead the Group in the
future16

Hokuhoku Financial Group, Inc. Annual Report 2021

S

Hokuhoku Financial Group SDGs Declaration
Based on our management philosophy of “Prospering Together with the Region”, “Fair& Steady Management”, and “Progressive & Innovative Services”, Hokuhoku Financial
Group aims to improve the sustainability of the regional economy and regional
communities by proactively engaging in CSR initiatives based on the SDGs advocatedby the United Nations.

Programs:

We commit to improve the sustainability of
the regional economy and regional
communities.
■ Corporate loans designed to promote ESG/SDGs(ESG/SDGs corporate loans)■ Sophisticated consulting services■ Conferences for entrepreneurs and corporate
leaders■ Corporate loans designed to support companies
with middle-risk profiles■ Business matching through our extensive network■ Partnerships with key players in the regions■ Adoption of environmentally-friendly products orservices that use less energy

Targets in FY2021
0

for students■ Engagement with investment beginners with

auto-investment of mutual funds, NISA and iDeCo■ Intensive training programs for financial advisors■ Seminars for corporate executives

50

100

150

200 (％)

ESG/SDGs corporate loans: 500 loans(FY2021)383

Corporate borrowers that received ourbusiness assessments: 9,800
borrowers (cumulative from FY2019)

8,848

Contracts of corporate solution services:2,400 contracts (FY2021)

4,406

We enhance financial literacy in the regions.
■ Education programs about economy and financeOur performance in FY2020

0

50

100

150

200 (％)

Participants in financial literacy seminars:
8,000 people (FY2021)

4,605

Contracts of retail trust banking
services: 450 contracts (FY2021)

548

We build and maintain strong governance.
■ Governance through Audit and Supervisory

Committee and Corporate GovernanceCommittee■ Continuous updates and implementation ofcompliance programs■ Transparent disclosure by annual reports

We innovate customer experiences.
■ Hokuhoku Pay (smartphone payment)■ Expansion of online product offerings■ UX/UI improvement in our smartphone apps
■ Branch functions optimized for customer needs

professional certificates■ Training programs designed by position andcareer type
■ Supports for women to take managerial positions■ Installment and promotion of health benefits andchild-bearing benefits

3 out of
11

0

50

100

150

200 (％)App users: 375,000 users(cumulative from FY2019)299,866

Web account holders: 75,000 holders(cumulative from FY2019)37,234We seek to make our work place better toincrease our productivity.
■ Training programs to encourage our staff to earn

27.2%

Ratio of independent board members outof all board members: ≧1/3
(after a general meeting of shareholders inJune 2022)

0

50

100

150

200 (％)

Use ratio of child-bearing holidays by men:
100.0% (FY2021)

91.8%

Women in management roles:
150 women (FY2021)

169

Hokuhoku Financial Group, Inc. Annual Report 2021

17

INITIATIVES TO ADDRESS ISSUES RELATED TO CLIMATE CHANGE

We support the recommendations of TCFDIn April 2019, we publicly announced “Hokuhoku Financial Group SDGs Declaration” followed by theestablishment of “Hokuhoku FG Environment Policy” as well as our expression of support for therecommendations of the Task Force Climate-related Financial Disclosure (TCFD) in February 2021. As
one of the leading companies in Hokuriku and Hokkaido, we aspire to lead regional communities intransition to a carbon-free society, especially taking initiatives to address issues related to climatechange.

GovernanceWe discuss our issues and initiatives regarding SDGs/ESG at the Management Committee and theBoard of Directors regularly as well as periodically. With our primary focus on addressing issues
related to climate change, we are considering to incorporate our in-depth analysis of risks andopportunities related to climate change in our reports at those meetings.

Strategy
As stated in our “CSR Initiatives” announced with the SDGs declaration, we place our primary focus
on addressing issues related to climate change. We are deepening our analysis of risks andopportunities related to climate change. For your reference, our carbon-related business loan assets
account for 1.31%* of the total business loan assets.
*Carbon-related business loan assets refer to the remaining balance of business loans to the energy
and utility sector, excluding the following businesses: water and sewerage, renewable energy andpower generation. The loan balance is a sum of Hokuriku Bank and Hokkaido Bank.

Transition risks▪ Our credit costs may increase due to new regulations or technology innovations that affect our
portfolio companies.

Physical risks▪ Our credit costs may increase due to natural disasters, including typhoons, torrential rain andflooding, that could drop the values of our collateral.

Opportunities▪ Demands for business loans may grow if companies increase investments to reduce carbon
emissions.
▪ Demands for new types of products or services to address climate change may increase.
▪ Our operational costs may decrease if we adopt new materials or innovative technologies.

Risk Management
We recognize that transition risks and physical risks related to climate change may affect ouroperation, strategy and financial performance. We are considering to implement in-depth analysis ofthese risks to take appropriate measures and mitigate their potential negative impacts on the Group.

18

Hokuhoku Financial Group, Inc. Annual Report 2021

Investment and Loan Policy for Specified Businesses
We strive to support businesses that could make a positive impact on the environment orcommunities while we maintain our credit policy regarding some types of businesses that could harmthem.
1. Fossil fuel power generation
In principle, we do not finance investments for new fossil fuel power plants. If we consider suchfinance in some exceptional cases, we carefully assess its environmental impact based on various
factors such as energy efficiency in respect of international guidelines.
2. Arms Manufacturing
We will not finance any type of business involved with arms manufacturing, including nuclear
weapons, chemical weapons, biological weapons, landmines and cluster bombs.
3. Oil Palm Plantation Development
When we consider financing businesses involved with oil palm plantation development, we carefully
assess their environmental and societal impact based on various factors such as internationallyrecognized certificates given to the manufacturing process that takes care of the environment andbiological diversity.
4. Deforestation
When we consider financing businesses involved with deforestation, we carefully assess their impact
on the environment and society based on various factors such as internationally-recognizedcertificates, their considerations for the environment and local communities.
5. Human Rights Violations and Forced Labor
We will not finance any type of business involved with activities that violate human rights such as
human trafficking, child labor and forced labor.

Targets and Metrics
We aim to improve the sustainability of the regional economy and communities through our productand service offerings as well as our own efficient use of resources, energies and recycling to address
climate change.

Targets
1. ESG/SDGs Corporate Loans: 500 loans (FY2021)
2. CO2 Emission Reduction Rate of Hokuriku Bank and Hokkaido Bank: 46% in FY2030 vs in FY2013

Metrics and Our performance
1. ESG/SDGs/CSR Private Offering Bonds, Environment Assessment Loans: 383 loans (FY2020)
2. CO2 Emission Reduction Rate* (Scope1, Scope2) of Hokuriku Bank and Hokkaido Bank: 33%(FY2020 vs FY2013)

Hokuhoku Financial Group, Inc. Annual Report 2021

19

DEPUTY PRESIDENT’S MESSAGE

Heading for a new stage
I assumed the role of Vice President of Hokuhoku Financial
Group and President of Hokkaido Bank in June this year. I
believe that my mission is to“realize the evolution of the Groupto a new stage”and to“provide new value to our stakeholders”.
I will explain our initiatives in“adaptation to the new normal”,“enhancement of group synergies”,“digitalization”,and“humanresource management”,which I believe are particularly
important in order to realize that evolution.

Yuji K anema, Deput y Pr e sident(Pr e sident, The Hokk aido Bank, L t d.)

Adaptation to the new normal
The impact of the spread of Covid-19 changed ourtools. Under the medium-term management plan“ALLway we work and interact with people, and we wereof the Group are making efforts to provide our

behavior and values. This had a major impact on thealso required to make significant changes in ouroperations relying on face-to-face business practice.
In FY2020, we strengthened our efforts to adapt to

the new normal, working together with governmentaffiliated financial institutions to help clientcompanies improve management and enhancing

for the Region”, all executive officers and employees

customers with“Face to Face and attractive financial
services”and with“Digital financial services”, I

believe that such efforts are the best solutions to

respond to the new normal, and we will continue
such endeavors.

non-face-to-face services utilizing digital or online

Group Synergies
Under the medium-term management plan“ALL for

Department, Risk Management Department, andgroup collaboration more than ever as a priority.

in June 2021. Under the name“Hokuhoku

the Region”, the Group focused on strengthening
In June 2019, the Headquarters launched a new

initiative in which our staff at the Corporate PlanningGroups of both Hokuriku Bank and Hokkaido Bank
got together and worked at the same office in thesame location. In addition, we assigned our staff topromote marketing collaboration between the twobanks. Various progress have been made in this two
years. In order to further speed up our progress, we
restructured our organization and established

Corporate Planning Department, Business Planning20

Hokuhoku Financial Group, Inc. Annual Report 2021

Audit Department at the Hokuhoku Financial Group
Collaboration”, we are promoting solutions such as
cofinancing and business matching that utilize thewide-area network of both banks. We will continue
to provide new added values to our customers bystrengthening our unique collaboration. We are also

accelerating collaboration with subsidiary companies
such as the securities company, the credit cardcompany, and the leasing company. We will continue
to strengthen our capabilities as the group that offers
comprehensive financial services.

Digitalization
Operating in wide areas throughout Japan, thedelivery of property between our customer and our

infrastructure for business operations earlier thansystem operated by five partnering banks, we havesales staff on the tablet PCs. As the MEJAR project, a

Hokuhoku Financial Group developed IT

other financial institutions, such as PCs integrated

with web conference system and online work flows
in which documents for approval are acceptedwithout any seal. For our customers, we provided avariety of online services such as smartphone apps
and online banking. In FY2020, we improved

begun to develop a next-generation customer

relations management system and loan approvalsystem, which are scheduled to start to operate in

2024, aiming to centrally manage the data of eachsystem that is now separate and to improve thequantity and quality of our business proposals forcustomers. We will continue to promote digitalization

customer experience as well as our operational
efficiency by introducing the electronic

communication channel that enables us to exchange
information and documents with companies and thethat balances face-to-face financial services anddigital financial services.

property management system that manages the

Human Resource Management
In order to advance these initiatives, it is essential topersonnel system to ensure that diverse talents canall employees, including young people and women,

improvements and aim to be a highly sustainableoptimize human resource management in a way thatcan work with satisfaction. The Group has worked topromote health and diversity in the working

environment, to change work style, and to review our

work flexibly. We will continue to makeorganization by utilizing digital tools and changing
our ways of thinking.

Heading for a new stage
This fiscal year is the final year of the current

medium-term management plan“ALL for the Region”.
I would like to make it a year to lay the groundwork
for a new stage. In the new stage, we will provide

new value to all stakeholders, including customers
and local communities through the No.1 financial
services in the region under our management

philosophy of“Prospering Together with the Region”,“Fair & Steady Management”, and“Progressive &Innovative Services”. I will lead this effort as Deputy

President of Hokuhoku Financial Group and Presidentof Hokkaido Bank.

Adoption to the
new normal

Group Synergies

Digitalization

Human Resource
Management

Heading for a
new stage

Hokuhoku Financial Group, Inc. Annual Report 2021

21

MEDIUM-TERM MANAGEMENT PLAN
The Medium-Term Management plan “ALL for the Region” positions the three years from FY2019 to FY2021 as a “Period
during which all employees of the Group evolve in terms of both ‘services that empathize with Face to Face customers’ and‘digital financial services pursuing convenience’ and in which we will continue to contribute to the local community.”
All of the Group’s executives and employees will work as one to become a comprehensive financial services group that
contributes to customers and local communities by providing No. 1 financial services and solutions, creates shared value,
and achieves growth and development together with them.

Outline of the Plan
Title

ALL for the Region

Positioning

Period during which all employees of the Group evolve in terms of ˝services closely attracting
customers at Face to Face˝ and ˝digital financial services pursuing convenience˝ and will continue tocontribute to the local community

Basic policies

Contribution tocommunity development• Face problems together and work to provide solutions
that contribute to the development of the region andcustomers

Evolution and change tothe future• Provide financial services that capture technologicalinnovation and changes in needs to meet customer
expectations

Exercise the group´scomprehensive strength• Strengthen group collaboration and establish optimum
business promotion and management system

Creating
commonvaluesThe Medium-term Management Plan’s priority indicator (Total of 2 banks, consolidated)
FY2019 Result

FY2020 Result

Main business profit*¥16.9 billion¥19.6 billion

Over ¥22 billion

Consolidated net income¥20.2 billion¥21.3 billion

Over ¥22 billion

Capital Adequacy Ratio

8.94%

9.45%

Maintain 8% level

OHR

69.27%

68.19%

Maintain under 70% level* We calculate main business profit in line with our own standard

22

FY2021 Target

Hokuhoku Financial Group, Inc. Annual Report 2021

MEDIUM-TERM MANAGEMENT PLAN "ALL FOR THE REGION"
Key initiatives in each strategic area and progress report
Overview
In the short term, we are taking measures to compensate for the decrease in profits due to the decline in interest on loans
and to the mass redemption of yen bonds.
In the long term, we are working to strengthen the Group’s business foundation so that we can contribute to the sustainablegrowth of the local communities and create shared value between them and the Group.

Strategy for corporate customers■ Exercise financial intermediation function◦Bolster strategies and promotion system according to thecharacteristics of sales areas and the business stages ofcustomers, and develop a lending strategy based on assessing
business possibilities.
■ Strengthen corporate consulting◦Expand the lineup of solution services, and offer consulting
services according to the business stage of each customer

FY18
Balance of loans in
5,159.7
primary areas (JPY Bn)(※)
Number of corporate
customers financed
based on businessevaluation

6,219

FY19

FY20

5,254.1

5,709.8

7,372

8,848

※:Total of business loans and housing loans in Hokuriku andHokkaido

FY18

FY19

FY20

Fees for solution
services for corporate
customers (JPY Bn)(※)

3.0

3.6

3.2

Net trading income(JPY Bn)

1.6

1.7

1.4

※:Business matching, private placement bond, syndicatedloan, M&A support, succession support

Strategy for individual customers■ Strengthen consulting to individual customers andexpand individual customer base◦Expand products for various life stages and the face-to-face as well

Balance of housing
loans (JPY Bn)

FY18

FY19

FY20

2,082.4

2,210.5

2,391.3

FY18

FY19

FY20

83,01993,008 117,275

FY18

FY19

as non-face-to-face channels, support asset formation, enhanceservices for wealthy customers, better address various financing
needs, and grow the business base

Digitalization & Fintech strategy■ Enhance digital banking functions◦Enhance digital banking channels by expanding functions for

non-face-to-face channels, such as smartphone apps
◦Improve customer convenience by phasing out the use of personalseals, paper documents, and cash cards.
■ Contribute to development of cashlesss society◦Build an infrastructure to promote a cashless environment in theregionNumber of internet
banking contracts

Community revitalization strategy■ Contribute to regional revitalization and respond to issues of ESG
and SDGs◦Revitalize the regional economy in cooperation with local
governments, local companies and educational institutions◦Aim for sustainable development of the local economy and local
communities though CSR activities based on ESG and SDGs

Number of ESG/
SDGs-related investments and loans

406

446

FY20
383

Hokuhoku Financial Group, Inc. Annual Report 2021

23

MEDIUM-TERM MANAGEMENT PLAN "ALL FOR THE REGION"

Strategy for security investment■ Increase and stabilize investment return◦Increase returns through diversified investments in diverse investment asset classes, as well as strategic and flexible
investments◦Enhance risk control system by emphasizing comprehensive profit/loss and enhancing the ability to respond to sudden
and rapid market movements

Risk management■ Strengthen governance using Risk Appetite Framework (RAF) and respond to diversifying risks◦Formulate management strategy and improve risk control system utilizing RAF◦Foster a risk culture for appropriate risk-taking and eliminating legal violations, etc. through employee training◦Enhance the risk control system by improving simulations and stress tests to respond immediately to changes in themarket environment

Business reform, optimization of branch store network and strategy for utilization of human resources■ Improve management efficiency,productivity and work environment◦Streamline operations by slimming down operations, centralizing
headquarters operations, and promoting outsourcing◦Promote business rationalization by utilizing ICT (digitalization,
RPA, elimination of paper)◦In order to maintain regional financial infrastructure, improve thebranch network by clarifying the roles and functions of each branch
and reviewing ATM operations◦Develop human resources with a goal of improving customer
service, expertise and management ability◦Create and maintain a work environment in which diverse humanresources can play an active role

FY18

FY19

FY20

G&A expenses (JPY
Bn)

86.5

85.3

Non-Personnel

38.4

38.5

36.7

Personnel

41.9

40.5

39.2

82.3

Hokuhoku FG Group strategy■ Strengthen and expand collaboration in Hokkaido area
◦Strengthen sales promotion capabilities through joint use of
consulting and financial service functions◦Advance the joint use of branches that both banks will renovate
going forward in Hokkaido◦Expand joint use of offices in Hokkaido, including headquarters andback office functions■ Centralization of headquarters operations◦Pursue additional synergies by consolidating functions into holding
company Hokuhoku FG■ Strengthen cooperation with banks and affiliates◦Provide financial services through cooperation between subsidiarybanks and affiliates, and exercise integrated capabilities■ Efforts to improve shareholder value◦Maintain stable dividends while accumulating profits to bolster
capital24

Hokuhoku Financial Group, Inc. Annual Report 2021

Balance of loans in
Hokkaido (JPY Bn)(※)

FY18

FY19

FY20

2,958.2

2,993.8

3,258.6※:Total of business loans and housing loans

FY18
Ordinary profits ofaffiliated companies(JPY Bn)

1.9

FY19
3.2

FY20
3.5

STAKEHOLDER COMMUNICATION
Relationship with stakeholders<Shareholders and Investors>
Hokuhoku Financial Group values dialogue with shareholders and investors.
In FY 2020, we hosted a conference call for institutional investors in May and online meetings for individual investors in June. In November, we hosted an investor meeting at Tokyo. We explained the Group’s
profile, highlights of business performance and strategies in the conference and meetings.

<Environment>
Hokuriku Bank and Hokkaido Bank were chosen as partner of the“ESG Regional Finance Promotion Program”conducted by the Ministry of the Environment. The report of the work was introduced as part ofthe“Guidance for ESG Regional Finance”published and announced by the Ministry of the Environment.
In April 2020, the work of Hokuriku Bank was introduced at the“4th ESG Finance High Level Panel”hosted
by the Ministry of the Environment. The executive officer of the bank explained the roll regional financial
institution should play in supporting the regions to work on their ESG issues.

<Community>
Hokkaido Bank actively contributes to the promotion of various sports in Hokkaido. In FY 2020,
the Hokkaido Bank Fortius, a women’s curling team the bank supported as the main sponser,
won the 38th Zen-Noh Women’s Curling Japan Tournament for the second time in six years.

<Municipalities, Educational Institutions and Industry Associations>
Hokuriku Bank and Hokkaido Bank proactively cooperate with municipalities, educational institutions,and other various organizations to promote academia-industry collaboration and to improve financial and
SDGs literacy in the region. By the end of FY 2020, the banks concluded cooperation agreement with 47
municipalities and 22 universities.

<Customers>
Hokuriku Bank and Hokkaido Bank conduct surveys of customers engaged in asset managementtransactions to listen sincerely to the opinions of customers, which are useful for proposing better services and products.
The survey utilizes the NPS®(Net Promoter Score®), which provides a score for“How likely is itthat you would recommend our company/product/service to a friend or colleague?,”measuring
the level of interest that a customer has in a corporate brand, product and person in charge.
In FY 2020, as in FY2019, both banks received ratings that exceeded the average of the 50 regional banks that participated in the survey.

<Employees>
Hokuriku Bank and Hokkaido Bank have been holding the“Hokuhoku
Young Forum”since 2014 to strengthen links and to promote dialogue
between young employees and executive officers.
While we have postponed the Young Forum in FY 2020 to prevent the
spread of Covid-19, we are planning to promote such dialogue, utilizing
video conference if needed, to help young employees deepen their understanding about the Group.

Hokuhoku Financial Group, Inc. Annual Report 2021

25

BUILDING A SOUND AND RESILIENT MANAGEMENT FOUNDATIONCORPORATE GOVERNANCE
Basic approach
The Company and all group companies regard strengthening and enhancing corporate governance as one of the mostimportant management priorities. We have drawn up a basic policy — our management philosophy — covering all our
activities including the formulation of management strategies and making management decisions. We share basic values anda sense of ethics through the Hokuhoku Financial Group Code of Conduct, and endeavor to increase corporate value andrealize solid management aimed at contributing to the development of the Hokuriku and Hokkaido regions.

Corporate governance

We use a company with Audit and Supervisory Committee
system and also appoint external Director. Additionally, inorder to bolster our group governance framework and, as aholding company, to ensure that operations are managed
appropriately, people from each of our principal subsidiaries,
Hokuriku Bank and Hokkaido Bank, are appointed as
Directors at the other bank to promote mutual understanding and mutual checks and balances.
In this way, in addition to having established this framework to cyclically enable effective decision-making, implementation, evaluation, and improvements, the Board of
Directors decides the basic policy on internal controls, tocreate an effective internal control system.

We have established a framework that enables quick decision-making, with the Shareholders’ Meeting and Board of
Directors at the top of the framework, and day-to-day
operational authority delegated in accordance with internal
rules. Bodies such as the Management Committee are able
to respond quickly to specific and expert matters based on
basic policies established by the Board of Directors. Furthermore, separate from the Management Committee, wehave established a Business Promotion Committee which
ensures that business policies are correctly carried out
among group companies.

Overview of key bodies (times of meetings held during FY2020)
1. Board of Directors (11 times)
Responsible for decisions related to important policies for
management of the Group as a whole, and for overseeing thebusiness management, risk management and auditing carriedout by the holding company and its subsidiaries. Three Directors
are appointed and oversight is strengthened by incorporating
perspectives that are independent from management.
2. Audit and Supervisory Committee (10 times)
Determines matters related to auditing policies, plans andmethods, and matters related to the execution of duties of theappointed Director serving as Audit and Supervisory
Committee Member. Also, monitors the performance of duties
by Directors, and carries out determinations of opinions related
to the nomination, compensation, etc., of Directors who are
not serving as Audit and Supervisory Committee Members.
3. Corporate Governance Committee (5 times)
The Committee, which is composed of three external Directors
and one full-time Director serving as Audit and Supervisory

Committee Member, aims to secure sustainable growth andboost long-term corporate value of the Group through exchanging information and sharing perceptions among external Directors and by offering advice on the Company’s important issues.
4. Management Committee (41 times)
Comprising full-time Directors of the Company, this bodymakes decisions — in accordance with the basic policies laid
down by the Board of Directors — on matters relating tobusiness execution policies for the entire Group and mattersrelated to the implementation of particularly important tasks by
specific divisions.
5. Business Promotion Committee (4 times)
Comprising full-time Directors of the Company and presidents
of subsidiaries, this body is responsible for making sure thatimportant issues and management policies for the entire Groupare widely known and understood, as well as for keeping trackof business results at each company to ensure that business iscarried out appropriately.

Hokuhoku Financial Group, Inc.
Shareholders’ Meeting
Business Promotion Committee
Members: Full-time Hokuhoku FG Directors
and subsidiary presidents
Purpose: To ensure sound management
policy implementation, ascertain
the status of business and provide
instructions

Corporate Planning Dept.

Board of Directors
Executionof
PDCA

Audit and Supervisory
Committee

Appointment of 3 external Directors

Corporate Governance Committee
Management Committee

Business Planning Dept.

Risk Management Dept.

Hokuriku Bank

Hokkaido Bank

Shareholders’ Meeting
Audit & Supervisory Board
Board of Directors

Shareholders’ Meeting
Other
Subsidiaries

Management Committee

Hokuhoku Financial Group, Inc. Annual Report 2021

Audit & Supervisory Board
Board of Directors
Management Committee

Each bank appoints a person from the other bank as its Director

26

Audit Dept.

Reason for appointment as external Director
In the selection of candidates for external Directors, in addition to the knowledge, experience and capabilities to perform therole, the Company places great importance on ensuring independence to meet the requirements for external directors provided by the Companies Act and to exercise the management supervisory function.
Name

Reason for appointment

Attendance at Board of Directors
meetings and Audit and Supervisory
Committee meetings for FY2020

Masaaki Manabe

He is well versed in management and local economies as a business manager
and he is expected to strengthen the supervisory function of the Company’s
overall management, so he has been appointed an external Director.
In addition, he does not breach the criteria for independence prescribed in
Securities Listing Regulations, etc., meets the “criteria for judging
independence” prescribed by the Company, does not present any concern
about conflicts of interest with general shareholders, is judged to haveadequate neutrality, and has been designated an independent director.

Board of Directors
meetings
11/11
Audit and Supervisory
Committee meetings
10/10

Nobuya Suzuki

He has extensive experience in the management of financial institutions (lifeinsurance) and he is expected to strengthen the supervisory function of theCompany’s overall management, so he has been appointed an external
Director.
In addition, he does not breach the criteria for independence prescribed in
Securities Listing Regulations, etc., meets the “criteria for judging
independence” prescribed by the Company, does not present any concern
about conflicts of interest with general shareholders, is judged to haveadequate neutrality, and has been designated an independent director.

Board of Directors
meetings
11/11
Audit and Supervisory
Committee meetings
10/10

Kaoru Funamoto

Due to his extensive experience and broad insight at National Police
Agency and The Resolution and Collection Corporation, he is expected
to strengthen the supervisory function of the Company’s overallmanagement, so he has been appointed an external Director.
In addition, he does not breach the criteria for independence prescribedin Securities Listing Regulations, etc., meets the “criteria for judging
independence” prescribed by the Company, does not present any
concern about conflicts of interest with general shareholders, is judged tohave adequate neutrality, and has been designated an independent
director.

New appointment

Expertise of external Directors
Corporate management
Masaaki Manabe●

Nobuya Suzuki●

Kaoru Funamoto

Finance

Law

Public administration

●

●

●
●

Assessment of the effectiveness of the Board of Directors
The Company’s Board of Directors conducts analysis and assessment of the overall corporate governance system including
the overall effectiveness of the Board of Directors each year in light of the purpose of our Corporate Governance Guidelines,
discloses an overview of the results and aims to make the necessary improvements.
Overview of the analysis and assessment results concerning the effectiveness of the FY2019 Board of Directors
The assessment is that the composition and management of the Board of Directors and the Corporate Governance Committee, which isestablished with external Directors as key members under the Board of Directors, are appropriate and the effectiveness of the Board of
Directors has been secured.
Note that in the discussion about the assessment, opinions were shared about the need to further improve meeting materials and toprovide more information to external Directors to enable ehnahced discussion to increase corporate value and we plan to take the necessary actions in the future.
Initiatives in FY2020
We improved the meeting materials, and also reported variety of topics including important management issues and changes in the external environment of our business to enhance discussion at the meetings.

Hokuhoku Financial Group, Inc. Annual Report 2021

27

BUILDING A SOUND AND RESILIENT MANAGEMENT FOUNDATION

Overview of the analysis and assessment process concerning the effectiveness of the FY2020 Board of Directors
Assessment concerning the effectiveness was conducted at the Board of Directors meeting in May after registered self-assessment
survey was conducted for all directors and suggestions were put forward from the Corporate Governance Committee based on thesurvey results.
[Items in the self-assessment survey (headings)]
1) Composition of the Board of Directors2) Operation of the Board of Directors3) Operation of the Corporate Governance Committee
4) Role and responsibilities of Directors, support system of external Director, etc.
5) Relationship with shareholders and investors
6) Corporate governance system and overall effectiveness of the Board of Directors
7) Status of improvements since the previous fiscal year
Overview of the analysis and assessment results concerning the effectiveness of the FY2020 Board of Directors
The assessment is that the composition and management of the Board of Directors and the Corporate Governance Committee, which isestablished with external Directors as key members under the Board of Directors, is appropriate and the effectiveness of the Board of
Directors has been secured.
Note that in the discussion about the assessment, opinions were shared about the need to fulfill information and to improve meeting
materials to provide the members of the Board of Directors further, as well as to enhance discussion about business strategies of theGroup and we plan to take the necessary action in the future.

Director training
In order for Directors to appropriately perform the roles and responsibilities expected of persons in charge of important governance bodies, the Company’s Board of Directors encourages and supervises efforts of Directors to study for the acquisition of
the necessary knowledge and appropriate updates to deepen their understanding of such roles and responsibilities.
(Key initiatives in FY2020)
Shared information relating to the Financial Services Agency’s Financial Services Policy with external Directors at the meetingof Corporate Governance Committee

Directors’ remuneration
The Company has established the Corporate Governance Guidelines at the Board of Directors and the Company prescribes
the policy concerning the determination of amounts such as Directors’ remuneration, etc. and its calculation method, and themethod and procedures for determining such policy in the Guidelines as follows.
ⅰ The Company determines the level and composition of Directors’ remuneration to function as an incentive for the Group’s
sustained growth and the medium to long-term improvement in corporate value.
ⅱ The remuneration, etc. of Directors excluding Directors serving as Audit and Supervisory Committee Members shall comprise the following basic remuneration and share remuneration, with the respective amounts within the upper limits of theannual remuneration approved at the General Meeting of Shareholders, and be determined by the Board of Directors in an
objective and transparent manner upon the recommendation from the Corporate Governance Committee concerning theappropriateness and validation of the amounts calculated in accordance with separately prescribed Directors’ remuneration
provisions and share remuneration-type stock option provisions.
(a) Basic remuneration
Basic remuneration shall be a fixed amount of remuneration prescribed for each position.
(b) Share remuneration
Share remuneration shall be share remuneration-type stock options equivalent to amounts prescribed for each position.
ⅲ The remuneration, etc. of Directors serving as Audit and Supervisory Committee Members shall comprise only basic remuneration in light of the role to direct and audit the execution of business from a neutral and independent perspective, and be
determined by discussion of Directors serving as Audit and Supervisory Committee Members in accordance with the separately prescribed Directors’ remuneration provisions, within the upper limits of the annual remuneration approved at theGeneral Meeting of Shareholders.
The details of resolutions concerning Directors’ remunerations, etc. at the General Meeting of Shareholders are as follows.
ⅰ Resolution was made at the Ordinary General Meeting of Shareholders held on June 27, 2017.

ⅱ The amount of remuneration including bonuses for Directors (excluding Directors serving as Audit and Supervisory Committee Members) shall be an amount not exceeding 250 million yen per year (not including the salaries of employees serving
concurrently as Directors).
ⅲ The amount of remuneration for Directors serving as Audit and Supervisory Committee Members shall be an amount notexceeding 80 million yen per year.
ⅳ In addition to the upper limit of the amount of remuneration for Directors (excluding Directors serving as Audit and Supervisory Committee Members) there shall be a separate allocation of stock acquisition rights as share remuneration-type stock
options for Directors (excluding Directors serving as Audit and Supervisory Committee Members and external Directors) for
an amount not exceeding 45 million yen per year (not including the salaries of employees serving concurrently as Directors).

28

Hokuhoku Financial Group, Inc. Annual Report 2021

Total amounts of remuneration (FY2020)
Total amountsof remuneration(millions of yen)

Category of executives
Directors (excluding Directors
serving as Audit & Supervisory
Committee Members)(excluding Outside Directors)
Directors serving as Audit &Supervisory Committee Members(excluding Outside Directors)
Outside Directors

Total amounts by category of remuneration (millions of yen)
Share
Fixed
remuneration-type
remuneration
Variablestock-options(Basicremuneration(Share remuneration)
remuneration)

Number of
eligible
executives

139

118

–

20

7

25

25

–

–

1

22

22

–

–

4

Response to cross-shareholdings
The Company and its core subsidiaries (Hokuriku Bank and Hokkaido Bank) have prescribed the policy concerning crossshareholdings of listed companies and standards for exercising voting rights as follows. With regard to issues that are notdeemed appropriate to hold, we will proceed with the sale after adequate dialogue with the business partners. In addition, we
may sell cross-held shares even if it is deemed appropriate to hold them, taking into consideration market environments, management and financial strategies, etc.

Policy on cross-shareholdings(1) Cross-shareholdings are held on a limited basis in cases where it is judged that such cross-shareholdings will contributeto the enhancement of the corporate value of the subject company and the Group by maintaining and strengthening along-term and stable relationship with the subject company and enjoying advantages in terms of business strategy.
(2) For cross-shareholdings, the risk/return associated with holding is measured for each individual issue based on an index that takes into account the cost of capital. In addition, the Company shall conduct a comprehensive review of the
purpose of holding such shares at the Board of Directors, etc. each year, to determine whether or not to hold them inlight of their economic rationality based on future prospects, business strategies such as business relationships andbusiness alliances, and relevance to the regional economy.

Standards on exercising voting rights
When exercising voting rights for cross-shareholdings, the following points shall be confirmed for each agenda item, and if
necessary, a comprehensive decision for approval or disapproval shall be made through dialogue with the business partner.
(1) Will it contribute to increasing the medium to long-term corporate value and sustainable growth of the partner company?
(2) Will it contribute to increasing the medium to long-term economic benefits of the Group?

Changes in cross-shareholdings (the number of listed issues) (From Sep. 30, 2018, shares contributed to theretirement benefit trusts are included.The number represents the total of the two banks.)
230

225

220

211

201

As of Sept. 30, 2016

As of Sept. 30, 2017

As of Sept. 30, 2018

As of Sept. 30, 2019

As of Sept. 30, 2020

Basic policy on internal controls
1. System to ensure that executives and employees of theCompany and group companies perform their duties inconformity with laws and regulations, as well as in conformity with our articles of incorporation
In addition to setting matters pertaining to laws and regulations, or the articles of incorporation, the Board of Directors
decides on basic management policies and important issues
related to the execution of operations, establishes organizations and systems, and supervises performance of duties byDirectors.
The Board of Directors selects multiple external Directors inpositions independent from the Group in the selection ofcandidates for the Board of Directors, working to boost themutual checks and balances function.
The Board of Directors establishes the Corporate GovernanceCommittee, creating a system to provide the appropriate
advice and involvement in important items to the Company
through coordination with the external Directors.

The Board of Directors, positioning compliance as one of themost important management issues, draws up both basic
compliance policy and the compliance charter.
It furthermore establishes control departments to maintain andenhance the compliance system of the Company and groupcompanies.
The Board of Directors draws up a Compliance Program as
each fiscal year’s action plan, thoroughly implementing honest
and fair corporate activities, rejecting all relationships with
antisocial forces, and preventing money laundering, etc.
The Board of Directors establishes a whistleblower system
whereby an executive or an employee who discovers illegal orinappropriate actions can report to a whistleblower contact
point established in advance.
Every fiscal year the Board of Directors draws up an Audit
Policy and has the internal audit department, in accordancewith this, conduct audits of the state of compliance to laws
and regulations, etc. of the Company and group companies,
and report these results to the Board of Directors and the
Hokuhoku Financial Group, Inc. Annual Report 2021

29

BUILDING A SOUND AND RESILIENT MANAGEMENT FOUNDATION

Audit and Supervisory Committee, etc.
2. System related to the storage and management of information related to the performance of duties by Directors
Based on the Board of Directors rules as well as document
management rules and other regulations, the Board of Directors creates systems for the storage and management of information related to performance of duties by Directors.
Directors can access the documents at any time.
3. Rules and other systems related to the management of riskof losses of the Company and group companies
Recognizing the existence of various risks surrounding theCompany and group companies, and fully aware of theimportance of controlling such risks, the Board of Directors
formulates the basic risk management policies and risk management rules.
It furthermore establishes control departments, establishing asystem to accurately recognize and gauge individual risk
associated with Group company management, and to ensure
the soundness of Group management through appropriate
management and operations.
The Board of Directors have formulated contingency plans,
etc. and established a crisis management system to prepare
for unexpected events and risks such as natural disasters.
Each group company carries out appropriate risk management in close partnership with each group company’s risk
management department, following the Group’s basic policy.
Every fiscal year the Board of Directors draws up an Audit
Policy and has the internal audit department, in accordancewith this, conduct audits of the state of risk management of
the Company and group companies, and report these results
to the Board of Directors and the Audit and Supervisory
Committee, etc.
4. System to ensure that Directors, etc. of the Company andgroup companies perform duties efficiently
The Board of Directors draws up a management plan to clarify
the Group’s desired vision and its performance goals.
The Board of Directors sets overall organizational standards
for basic tasks, operational entities, and assignment of duties,
and establishes a system in which the Company and all groupcompanies perform well-organized and efficient business
operations.
The Management Committee executes business operations
promptly and efficiently, based on the delegation of authority
by the Board of Directors with regard to the execution ofbusiness operations, and on the predetermined assignment of
duties.
5. System to ensure the appropriateness of financial reporting
The Board of Directors draws up a basic policy related to theinternal control evaluation of financial reporting, establishing asystem to ensure the suitability of financial reporting and toprovide true and clear reporting on both financial conditions
and management results.
6. System to ensure the appropriateness of operations within
the corporate group which consists of the Company andgroup companies
The Board of Directors is responsible for overall group management. It establishes the group management rules, prepares frameworks for agenda-setting and reporting to theCompany for each group company with regard to importantmatters, and receives reports from internal audit departmentson the findings of audits into the state of compliance to laws
and regulations, etc., risk management, and the appropriateness and effectiveness of business operations.
30

Hokuhoku Financial Group, Inc. Annual Report 2021

The Board of Directors draws up Regulations for Intra-Group
Transactions with the aims of clarifying the control system for
intra-group transactions, etc. and of carefully maintaining thesoundness of management practices for the Group as awhole. The Board of Directors performs its duties of management and administration based on these regulations.
7. Matters related to employees required to assist with dutiesof the Audit and Supervisory Committee
In order to assist the Audit and Supervisory Committee in the
conduct of their duties, the Board of Directors shall place
employees who carry out this work only and to whom Audit
and Supervisory Committee Members may directly give
directions and orders based on their independence andeffectiveness etc.
The Board of Directors requires prior consent from the Audit
and Supervisory Committee for personnel transfers anddisciplinary measures regarding such employees.
8. System for the Company and group company executives
and employees to report to the Audit and Supervisory
Committee and other systems related to reporting to the
Audit and Supervisory Committee
If executives and employees of the Company or group companies discover matters that could cause significant losses to theCompany or group companies, they shall directly or indirectly
report such matters to the Audit and Supervisory Committee.
The Board of Directors establishes a system to report to theappointed Directors serving as Audit and Supervisory Committee Members for reports carried out in accordance with rules,
including such reports within the Company and such reports
from group companies to the Company.
Either the Audit and Supervisory Committee or appointed
Director serving as Audit and Supervisory Committee Member
may request reports from executives and employees of theCompany or group companies as needed.
The Board of Directors shall establish a system to ensure that
executives and employees of the Company or group companies are not mistreated as a result of having reported to,
consulted or investigated with the Audit and Supervisory
Committee.
9. Other systems to ensure effective auditing by the Audit andSupervisory Committee
The Board of Directors shall give due acknowledgement to theimportance and usefulness of auditing by the Audit and Supervisory Committee, and shall discuss and take responsive
action appropriately if the Audit and Supervisory Committee
requests creation of a system for smoother and more effective
performance of auditing duties.
The appointed Director serving as Audit and Supervisory
Committee Member may attend important meetings such as
the Management Committee.
Furthermore, either the Audit and Supervisory Committee or
appointed Director serving as Audit and Supervisory Committee Member shall regularly meet with the representative
Directors and outside accounting auditors, in addition to which
it shall maintain close collaboration and cooperative relations
with internal audit departments and other departments withinternal control functions, receiving reports both on a regularbasis and as required, and requesting explanations as andwhen necessary.
Directors serving as Audit and Supervisory Committee Members may invoice the Company for any expenses deemednecessary in order to perform duties of the Audit and Supervisory Committee.

Internal auditing mechanisms
Basic approach
The Group believes that establishment of internal auditing mechanisms that effectively meet requirements according to thescale and nature of operations, laws and regulations applied to the Group’s businesses and categories of risk, is
indispensable for enabling due legal and regulatory compliance by the Group, customer protection and risk management.
Based on this conviction, the Company and its subsidiary banks, Hokuriku Bank and Hokkaido Bank have establishedinternal auditing departments.
The internal auditing departments of each Group company develop mechanisms of checks and balances, which thereby
ensure that those departments function independently of other departments.

Group-wide measures
The Company has established the Audit Dept., which is
expected to verify the appropriateness and effectiveness ofinternal management mechanisms of the subsidiaries andto oversee the internal audit function of those companies. Inline with basic policy and rules on internal audits compiledby the Board of Directors, the Audit Dept. carries out internal audits on the Company and its non-banking subsidiaries
and affiliates, and also receives reports from Hokuriku Bankand Hokkaido Bank that include results of internal audits
and progress made on matters requiring improvement.
Furthermore, when necessary, the Audit Dept. centrally
assesses and manages the implementation of internal
audits within Group companies through on-site bank investigations, guidance and reports.
Results of internal audits at Group companies are
periodically reported to the Board of Directors promptly

when needed. In particular, mechanisms have been put inplace for prompt reporting to the Board of Directors withrespect to events that could significantly impact management of the Group.
Also at Hokuriku Bank and Hokkaido Bank, operational
and asset audits are performed involving head offices,branches and subsidiaries of each bank, based on thepolicy and rules for internal audits of the respective banks.
Conducting these audits involves assessing legal andregulatory compliance, customer protection, and risk
management at each entity subject to audit, and thenmaking efficient and effective internal audit plans taking into
account factors such as the frequency and extent of suchaudits.
When necessary, the audit departments of both banks
and the Audit Dept. of the Company conduct joint audits inorder to strengthen and streamline overall Group auditing.

MEASURES FOR RISK MANAGEMENT
General risk management systems
The Group has created basic risk management policies that address various risks and is working to upgrade general risk
management systems to ensure proper resource allocation and risk taking in balance with earnings targets while keeping
overall levels of risk within the Group’s managerial capacity to address such risk and in order to protect customer deposits
and earn the trust of our shareholders and creditors.
In addition, the Group has established a general risk management department to integrate and manage the various risks
while also conducting internal audits by an independent audit department with a structure to verify the appropriateness andeffectiveness of the risk management system.
Hokuhoku Financial Group, Inc.

Board of Directors
Audit and Supervisory
Committee

Management Committee

Hokuriku Bank

Hokkaido Bank

Risk Management Dept.

Audit Dept.

Board of Directors

Audit & Supervisory Board Members,
Audit & Supervisory Board

Other
Subsidiaries

Management Committee
ALM Risk Management Committee

Market risk

Liquidity risk

Credit risk

Operational risk

Hokuhoku Financial Group, Inc. Annual Report 2021

31

BUILDING A SOUND AND RESILIENT MANAGEMENT FOUNDATION

Allocation of risk capitalthrough initiatives that include checking risk allocation plans

The Group’s risk management practices involve taking aunified approach to the extent possible in terms of quantifying
the various risks that emerge with respect to its operations,and then taking steps to ensure that overall levels of risk are
kept within the Group’s capacity to take on such risk.
The subsidiary banks control and manage risk with theaim of ensuring that levels of risk remain within a range
permissible for banking operations. To that end, they
estimate maximum potential loss through a process thatinvolves quantifying credit risk, market risk and operationalrisk. They then allocate risk capital by using core capital as
allocation source, with the aim of making effective use ofcapital resources.

of subsidiary banks, verifying that amounts in excess of risk

Meanwhile, the Company ensures that excessively large

capital allocations are sufficient to cover risk conceivably
affecting subsidiaries other than the subsidiary banks aswell as risk not included in the risk assumptions, and monitoring actual levels of risk.
In addition, we perform stress tests to calculate theextent of potential losses that would be anticipated in thecase of normally inconceivable deterioration of businessconditions, excessive market fluctuations and other such
scenarios. In this way, we periodically examine the substantiality of our capital position against risk that cannot beeasily perceived.

risks are not taken relative to capital on a Group-wide basis,

Credit risk management
Basic approach
Credit risk involves, for instance, the threat that deterioration of a customer’s financial health might make it impossible torecover principal or receive interest of loans and bills discounted, etc. as initially contracted. Although this is an unavoidable
risk when it comes to banks whose role is to act as financial intermediaries, the Group endeavors to maintain and enhance
asset soundness by developing and strengthening its credit risk management systems.

Credit risk management systems
To maintain and enhance asset integrity, the Group applies
its internal ratings system and asset self-assessment,
promptly and accurately appraises credit risk, and performs
write-offs and provisions to reserves for possible loan losses
as appropriate.
When making individual judgements on granting credit,
rigorous screening is carried out in accordance with standards and principles stated in our credit policy.

32

of large borrowers based on the Group-wide management
rules for credit limits and manage so that no excessive credit
concentration risk materializes.

Asset self-assessment standards
Self-assessments are strictly performed by the asset assessment departments in the subsidiary banks according to theasset self-assessment standards and the appropriateness isverified by the risk management department and independentinternal management department.

Internal ratings systems

Corporate rehabilitation

To enable objective appraisal of credit risk of loans and bills
discounted, etc., our subsidiary banks have introduced
internal ratings systems. Using 15 credit ratings based on
financial data and qualitative information regarding borrower
creditworthiness, the system enables ongoing monitoring ofchanges in ratings.
In addition, we monitor the credit concentration status

After making a loan to a corporate customer, we endeavor toprevent such loans from becoming designated as bad debt byassessing business conditions faced by our borrowers andperforming follow-up reviews of the borrower’s business plans.
Meanwhile, we strive to ensure asset integrity through creationof a framework for dedicated management of bad debt andenhanced support for corporate rehabilitation.

Hokuhoku Financial Group, Inc. Annual Report 2021

Market risk management
Basic approach
Market risk involves the threat of incurring losses due to fluctuations in the value of assets and liabilities held by the Group, orin the earnings generated by the Group, such that may be caused by fluctuations in various market risk factors, such as
interest rates, stock prices, and foreign exchange rates.
The Group endeavors to properly control market risk and manage operations in a manner that ensures stable earnings.
To that end, at the subsidiary banks that mainly handle transactions involving market risk, we have created regulations formarket risk management and comprehensively manage assets and liabilities by employing asset-liability management (ALM)
practices.

Liquidity risk management
Liquidity risk refers to fund procurement risk involving the threat of losses that may be incurred due to a fall in creditworthiness or the like diminishing an entity’s financing availability and forcing it to procure funds at significantly higher interest rates
than normal. Liquidity risk also refers to market liquidity risk involving the threat of losses that may be incurred due to market
disruptions or the like preventing an entity from engaging in transactions and forcing it to engage in transactions on considerably less favorable terms than normal.
The subsidiary banks, which account for a majority of the Group’s liquidity risk, stipulate regulations on liquidity risk
management and maintain adequate levels of government bonds and other payment reserve assets that are readily convertible into cash. They also set various control indices pertaining to liquidity risk and monitor those on a daily basis. Developments regarding liquidity risk are regularly reported in meetings of the ALM Risk Management Committees and other suchbodies, and discussions are held in that regard, to ensure that we will be able to take action to address any crisis, should
one emerge, appropriate to the stage of the particular situation.
By precisely assessing management and procurement levels at subsidiary banks, we ensure that fund procurement canproceed smoothly.

Operational risk management
Basic approach
Operational risk refers to the threat of losses arising from inappropriate operational processes, improper conduct of executive
officers and employees, unsuitable computer systems, or adverse external events.
The Group categorizes operational risk into seven categories as prescribed in the “Rules for management of operationalrisk”: 1) Administrative risk, 2) System risk, 3) Legal risk, 4) Personnel risk, 5) Tangible asset risk, 6) Reputational risk, and 7)
Other risks. The status of these risks is monitored at the Operational Risk Specialist Committee, which convenes monthly at
the subsidiary banks, and we strive to establish Plan, Do, Check and Act (PDCA) cycle frameworks by grasping potential
risks through risk assessments, etc. and the evaluation of preventative measures.

Hokuhoku Financial Group, Inc. Annual Report 2021

33

BUILDING A SOUND AND RESILIENT MANAGEMENT FOUNDATION

Risk management systems by major category

Crisis management• Administrative risk management
Through the analysis of the causes of administrative errors
and other incidents, the Group discusses measures toprevent reoccurrence, while advancing improved efficiencies
and centralization of headquarter administrative operations
from the perspective of consolidation and mutual checks
and endeavoring to implement initiatives that will reduce
administrative risk.
• System risk management
The Group has formulated “rules for system risk management” as well as “a basic policy on ensuring the safety of
information assets (security policy)”, has established arobust management and operating structure, and implements a variety of security management measures, including backup systems. In addition, the Group is working tostrengthen its security management system in order topromptly address cyberattacks which have been on the risein recent years.

To minimize the impact of any large-scale disaster or otheremergency, should one occur, the Group has compiled acrisis management manual with contingency plans andother such content, and has also established a contingency
framework that includes mechanisms for information-gathering as well as centralized crisis instruction and command.
In particular, at our subsidiary banks, we have drawn up
a Business Continuity Plan (BCP), which enables us tocontinue to perform our settlement functions and otheroperations required of financial institutions in the event of anearthquake, outbreak of a new strain of influenza or othersuch crisis, and have otherwise established a frameworkthat enables a full-scale response to crisis situations.

MEASURES FOR COMPLIANCE
Basic policy
At Hokuhoku Financial Group, we regard compliance as one of our most important management priorities, thereby fullyrecognizing that shortfalls with respect to compliance could weaken our business foundations. Therefore, the Board of
Directors has established basic compliance policies which underpin our efforts to engage in business activities in a fair andhonest manner.

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

2. Providing quality financial services
By providing high-quality, integrated financial services, theGroup will contribute to enabling stable economic and social
development of its operating regions, while facilitating better
lives for its customers.

3. Strict observance of laws, regulations and rules
The Group strictly observes all relevant laws, regulations andrules, and conducts business in a fair and prudent manner, in
adherence with its own standards of corporate ethics andsocial norms.

4. Rejection of all ties with anti-social elements
The Group contributes to a healthy society by resolutely
refusing to associate or work with anti-social elements thatthreaten social peace and security.

34

Hokuhoku Financial Group, Inc. Annual Report 2021

5. Ensuring management transparency
The Group aims to achieve a highly transparent management
and organizational culture through accurate and swift
disclosure and decision making.

Systems
To establish compliance systems, the Group has established acompliance charter, put in place organizational structures andarranged joint measures by involving the Company and eachGroup company.
The Risk Management Dept. acts as the Compliance General
Department responsible for overseeing compliance within theGroup, and the head of the Risk Management Dept. acts as theofficer in charge of compliance.
Compliance officers and other such managers are deployed
to each branch of subsidiary banks and each Group company inorder to aggressively implement training and awareness-raising
initiatives regarding compliance in the workplace. Subsidiarybanks have established Compliance General Departments andCompliance Committees, which work to assess progress incompliance measures and make improvements.

Hokuhoku Financial Group, Inc.

Board of Directors
Audit and Supervisory
Committee

Management Committee

Risk Management Dept.

Compliance General Department

Subsidiaries, etc.

Board of Directors

Audit Dept.

Audit & Supervisory Board Members,
Audit & Supervisory Board

President

Management Committee

Management Committee
Compliance Committee

Compliance Committee
Compliance Department

Compliance General Department

Compliance Department

Compliance officers, etc.

Compliance officers, etc.

Compliance manager

Hokuriku Bank

Other Subsidiaries, etc.

Hokkaido Bank

Compliance manual and compliance programs
To ensure rigorous compliance, we have formulated acompliance manual (code of conduct) compiling all fundamental
considerations which executive officers and employees need toobserve. The manual is distributed to all executive officers andemployees, and in-house seminars and training sessions are
conducted to ensure thorough familiarity with its content.

Measures for better customer protection andgreater customer convenience
To protect customer assets, information and other interests, theGroup has established policies for management of customer
protection within its basic rules for management of customer
protection.
Furthermore, we have formulated protocols and appropriate
response structures based on five separate considerations, inorder to provide pertinent explanations to our customers inaccordance with the Japanese Financial Instruments andExchange Act and other laws, and to properly handle customer
grievances and inquiries through a customer consultation office
set up to serve as a point of customer contact.
Moreover, the Compliance General Departments of respective Group companies act as offices responsible for overallcustomer protection management, and in partnership with eachdepartment in charge, they operate through a framework that

Basic rules for management ofcustomer protection

In addition, every year the Board of Directors decides on the
Compliance Program which acts as a detailed action plan
implemented to maintain the compliance structure. The Board
also receives regular reports on the state of the Program’s
execution, and ensures that compliance procedures are put into
practice.

enables them to draft and implement various improvement
measures through efforts that involve ongoing review geared
toward ensuring proper functioning of management systems,
problem resolution and data analysis.

Measures for protection of personal information
In the financial industry, ensuring the safety of information assets
is of utmost importance in terms of gaining customer trust. As
such, we are committed to rigorously protecting and using any
and all customer information in our custody and preventing its
leakage.
Especially in the area of personal information, the Group has
formulated a personal information protection declaration, which
is disclosed on our website, in order to comply with the
Personal Information Protection Act and other laws, and to gain
the full trust of our customers in acting as a financial institutionthat contributes to local communities.

Policies for management of customer protection

Explaining to the customer

In line with laws and regulations, we will adequately and sufficiently explain financial products
and provide information when carrying out transactions with our customers.

Customer service support

We will listen carefully to customer grievances and give advice in an appropriate manner.

Protection of customer data

We will lawfully acquire and securely manage all information concerning our customers.

Outsourcing
Conflict of interest

When outsourcing operations relating to transactions with customers, we will duly supervise
service providers to protect customer information and interests.
We will appropriately manage transactions involving customers where conflict of interest could
be an issue so as to prevent customer interests from becoming unduly impaired.

Hokuhoku Financial Group, Inc. Annual Report 2021

35

BUILDING A SOUND AND RESILIENT MANAGEMENT FOUNDATION

Measures for dealing with anti-social elements
The Group has established basic policies for dealing with
anti-social elements, with the aim of earning the public’s trust
and maintaining appropriate and sound financial services.
Our initiatives in this regard also involve deploying officers to
respective Group companies in order to address issues
regarding organized crime syndicates, coordinating with law
enforcement, implementing firm measures for dealing with
anti-social elements, and severing all relations with anti-social
elements that threaten the peace and security of social order.

Internal notification system
The Group has set up a whistleblower and consultation hot line
and developed a framework for strengthening the compliancesystem by incorporating checks and balances in order topromptly detect and counteract any unlawful and wrongful
behavior.

Anti-money laundering and measures to deal
with financial crime
In recent years, bank card theft, exploitation and “Furikome”
fraud (bank transfer scams) have been on the rise. As such, oursubsidiary banks have bolstered security measures to prevent
such occurrences, while taking proper action with respect tovictims of such scams, such that includes reimbursing them inaccordance with Japan’s Furikome Fraud Relief Act.

36

Hokuhoku Financial Group, Inc. Annual Report 2021

The Group regards its pursuit of measures for preventing
money laundering and other financial crimes as an importantmanagement challenge. Accordingly, we have been working toclarify divisions of internal roles on the basis of our anti-money
laundering policy, while building a control system that enables us
to implement effective measures at the right time with regard toverifying transactions, reporting suspicious transactions andmanaging correspondent relationships. Moreover, we have been
educating our executive officers and employees through training, and striving to improve relevant mechanisms throughinitiatives that include performing audits to evaluate complianceof our anti-money laundering policies.

Measures for financial alternative dispute
resolution (ADR) system
In order to promptly and properly respond to customer feedback
and grievances, our subsidiary banks have concluded agreements with the Japanese Bankers Association, which is a
designated dispute resolution organization that works to resolve
disputes from a fair and impartial position.
Banking
Name of designated dispute resolution organization:
Japanese Bankers Association
Inquiries:
Japanese Bankers Association Customer Relations Center
Financial instruments business
Name of designated dispute resolution organization:
Financial Instruments Mediation Assistance Center2021/10/13 9:49:45 / 21759016_株式会社ほくほくフィナンシャルグループ_総会その他（Ｃ）

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

2021

2020

Thousands of
U.S. dollars (Note 1)
2021¥ 5,096,491―
27,985
3,407
18,545
2,107,290
9,050,446
22,385
202,694
95,784
13,5683,084
3,596
52,921(62,731)¥ 2,725,025
59,79532,684
3,790
16,054
1,815,484
8,656,450
19,014
194,483
96,905
17,320―6,456
56,099(54,703)$ 46,034,609―
252,783
30,782
167,517
19,034,332
81,749,134
202,198
1,830,857
865,181
122,559
27,85932,488478,017(566,630)¥16,635,471¥13,644,861$150,261,686¥ 12,788,914
280,517
24,670307,787349
2,385,969
447
2,942
120,203
3,566
192
755
1,629
7
20,966
5,123
52,921¥ 11,638,618
68,264
11,877
294,641497
827,574
113
534
119,799
12,199
190
1,025
1,978
5
10,9195,20156,099$115,517,244
2,533,804
222,8422,780,124
3,156
21,551,531
4,042
26,5801,085,755
32,215
1,735
6,824
14,723
70
189,383
46,277
478,017

15,996,966

13,049,541

144,494,322

70,895
133,905
538
344,103(1,180)70,895
139,269497
329,343(1,237)640,367
1,209,515
4,866
3,108,150(10,662)

80,937(61)
8,088(1,986)55,525(1,076)
8,211(9,049)731,078(553)
73,062(17,940)

635,241
3,263
638,504¥16,635,471

592,378
2,941
595,319¥13,644,861

5,737,883
29,481
5,767,364$150,261,686

Millions of yen
March 31

AssetsCash and due from banks (Notes 5 and 31)
Call loans and bills bought (Note 31)
Monetary claims bought (Notes 8 and 31)
Trading assets (Notes 6, 8, 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 (Notes 14 and 31)
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
Acceptances and guarantees (Note 13)
Total liabilities
Equity (Notes 19, 20, and 22)
Capital stock
Capital surplus
Stock acquisition rights (Note 21)
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. Annual Report 2021

CONSOLIDATED BALANCE SHEET

37

2021/10/13 9:49:45 / 21759016_株式会社ほくほくフィナンシャルグループ_総会その他（Ｃ）

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

Millions of yen

Thousands of
U.S. dollars (Note 1)
2021

Year ended March 31

2021

2020

IncomeInterest income:Interest on loans and discounts
Interest and dividends on securities
Interest on receivables under resale agreements
Interest on deposits with other banks
Other interest income
Trust fees
Fees and commissions
Trading income
Other ordinary income (Note 24)
Other income (Note 26)
Total income¥84,053
18,554
(1)
1,432
463
42
37,817
1,625
20,04911,994
176,032¥85,027
22,817
(4)
878
518
6
38,8201,270
24,303
9,127
182,765$759,223
167,596(18)
12,942
4,190
385
341,591
14,684
181,098
108,340
1,590,031

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

623
27
216
37
858
15,356
14,97091,511
12,8158,436
144,854

1,047
37
1,162
340
1,807
15,416
12,544
94,962
11,463
13,390152,172

5,629
245
1,958
341
7,757
138,713135,225
826,586
115,755
76,207
1,308,416

31,17730,593

281,615

10,646(1,066)
21,598263¥21,334

9,226
972
20,393
141¥20,252

96,164(9,637)
195,088
2,380$192,708

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-u and 23)
Basic net income
Diluted net income
Cash dividends applicable to the year

¥152.17151.6835.00

U.S. dollars¥142.74
142.37
40.00

$1.37
1.37
0.31

See notes to consolidated financial statements.

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

Year ended March 31

2021

2020

Thousands of
U.S. dollars (Note 1)
2021

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¥21,598
33,54925,343
1,014
7,063¥20,393(40,440)(36,012)(165)(4,183)$195,088
303,043
228,919
9,168
63,800127¥55,148
54,825322(78)¥(20,046)(20,180)
133

1,156$498,131
495,214
2,917

Millions of yen

See notes to consolidated financial statements.

38

Hokuhoku Financial Group, Inc. Annual Report 2021

CONSOLIDATED STATEMENT OF INCOME、CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

2021/10/13 9:49:45 / 21759016_株式会社ほくほくフィナンシャルグループ_総会その他（Ｃ）

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, 2019

132,163

107,432

Millions of yen

Capitalstock

Capitalsurplus¥70,895¥144,622

StockacquisitionrightsRetainedearnings¥443¥316,329

Cash dividends(7,381)

Net income attributable to owners of the parent

20,252

Purchases of treasury stock
Retirement of treasury stock(10,734)

13

56(5,367)

5,367

Reversal of revaluation reserve for land

142
53

Net changes in the year
132,163

96,698¥70,895¥139,269¥497¥329,343

Cash dividends(6,697)

Net income attributable to owners of the parent

21,334Purchases of treasury stock¥(1,237)(5,375)

Disposals of treasury stock
Retirement of treasury stock(10,743)7

61(5,371)

5,371

Reversal of revaluation reserve for land

122
41

Net changes in the year
BALANCE, MARCH 31, 2021¥(1,281)(5,380)

Disposals of treasury stock

BALANCE, MARCH 31, 2020

Treasurystock

132,163

85,955¥70,895¥133,905¥538¥344,103¥(1,180)

Noncontrollinginterests

Total
equityMillions of yen
Accumulated other comprehensive income
Valuationdifference on
Deferredavailable-for-sale gains (losses)
securities
on hedges
BALANCE, APRIL 1, 2019

¥91,608¥(910)

Revaluation
reserve forland

Definedretirement
benefit plans¥8,354¥(4,865)

Total¥625,196¥2,807¥628,004

Cash dividends(7,381)(7,381)

Net income attributable to owners of the parent

20,252

20,252

Purchases of treasury stock(5,380)(5,380)

Disposals of treasury stock

70

70

Retirement of treasury stock――Reversal of revaluation reserve for land

142

142

Net changes in the year

(36,083)

(165)

(142)

(4,183)(40,522)133(40,389)

BALANCE, MARCH 31, 2020

¥55,525¥(1,076)¥8,211¥(9,049)¥592,378¥2,941¥595,319

Cash dividends(6,697)(6,697)

Net income attributable to owners of the parent

21,334

21,334Purchases of treasury stock(5,375)(5,375)

Disposals of treasury stock

68

68

Retirement of treasury stock――Reversal of revaluation reserve for land

122

122

Net changes in the year

25,412

1,014

(122)

7,063

33,409322

33,731BALANCE, MARCH 31, 2021

¥80,937¥(61)¥8,088¥(1,986)¥635,241¥3,263¥638,504

Hokuhoku Financial Group, Inc. Annual Report 2021

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

39

2021/10/13 9:49:45 / 21759016_株式会社ほくほくフィナンシャルグループ_総会その他（Ｃ）

Capitalstock
BALANCE, MARCH 31, 2020

$640,367

Thousands of U.S. dollars (Note 1)
Stock
Capitalacquisition
Retained
surplusrightsearnings$1,257,965$4,490$2,974,827

Cash dividends(60,495)

Net income attributable to owners of the parent

192,708

Purchases of treasury stock

Treasurystock$(11,177)(48,555)

Disposals of treasury stock

68

552

Retirement of treasury stock(48,518)

48,518

Reversal of revaluation reserve for land

1,110
376

Net changes in the year
BALANCE, MARCH 31, 2021

$640,367$1,209,515$4,866$3,108,150$(10,662)

Thousands of U.S. dollars (Note 1)
Accumulated other comprehensive income
Valuationdifference on
Deferredavailable-for-sale gains (losses)
securities
on hedges
BALANCE, MARCH 31, 2020

$501,539$(9,720)

Revaluation
reserve forland

Definedretirement
benefit plans$74,172$(81,740)

Total
equity$5,350,723$26,568$5,377,291

Cash dividends(60,495)(60,495)

Net income attributable to owners of the parent

192,708

192,708

Purchases of treasury stock(48,555)(48,555)

Disposals of treasury stock

620

620

Retirement of treasury stock

―

―

1,110

1,110

Reversal of revaluation reserve for land
Net changes in the year

229,539

9,167(1,110)63,800301,772

2,913

304,685

BALANCE, MARCH 31, 2021

$731,078$(553)$73,062$(17,940)$5,737,883$29,481$5,767,364

See notes to consolidated financial statements.

40

Total

Noncontrollinginterests

Hokuhoku Financial Group, Inc. Annual Report 2021

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

2021/10/13 9:49:45 / 21759016_株式会社ほくほくフィナンシャルグループ_総会その他（Ｃ）

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

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)

Thousands of
U.S. dollars (Note 1)
2021

2021

2020

¥ 31,177
6,743
685
2,102
(12)
8,028
(269)
(3,084)(8,633)¥ 30,593
7,159
915
2,102
1
1,799
(64)
398
5,205

$ 281,615
60,914
6,190
18,989(113)
72,516(2,435)(27,859)(77,981)1(348)(104,502)
1,763(7,089)7(6,357)
402
382
(147)
(393,996)
1,166,557(16,261)
1,558,395(6,676)6(265)(109,237)
4,395(6,213)
68
2,053
174
281
(47)
(312,312)
261,483(33,193)
214,909(488)

17(3,150)(943,933)
15,930(64,041)64(57,422)
3,637
3,454
(1,336)(3,558,815)
10,537,054(146,883)
14,076,375(60,303)64,493225,045
13,146(3,370)333
2,408
84,791(2,016)2,498
2,616,197(7,977)2,608,220

24,761
52,928(58,009)(3,307)(681)
534
87,943(4,468)54,043
223,469(9,727)
213,741

582,547
2,032,748
118,746(30,447)
3,016
21,752765,890(18,215)
22,56523,631,086(72,056)
23,559,030(945,725)
449,479
250,893(20,013)
20,156
18,554(3,549)138(1,309)(231,376)(1,036,495)
621,687
368,078(25,463)
20,295
22,817(3,343)965(1,379)(32,838)(8,542,370)
4,059,973
2,266,226(180,775)
182,065
167,596(32,065)
1,248(11,830)(2,089,932)(6,697)(0)(5,375)0(12,073)192,364,789
2,721,353¥5,086,143(7,381)(0)(5,380)0(12,761)(23)
168,118
2,553,235¥2,721,353(60,495)(4)(48,555)
0(109,054)
175
21,360,219
24,580,922$45,941,141

See notes to consolidated financial statements.

Hokuhoku Financial Group, Inc. Annual Report 2021

CONSOLIDATED STATEMENT OF CASH FLOWS

41

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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 orderto present them in a form which is more familiar to readers
outside of Japan. In addition, certain reclassifications have been
made in the 2020 consolidated financial statements to conformto the classifications used in 2021.
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 ¥110.71 to U.S. $1, the rateof exchange at March 31, 2021. 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, 2021
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 Groupis also eliminated.
An investment in one associated company is accounted forby the equity method.
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 andother market-related indices or from gaps among markets) are42

Hokuhoku Financial Group, Inc. Annual Report 2021

Basis of Presentation

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,and options are stated at amounts that would be received or
paid for settlement if such transactions were terminated at thebalance sheet date. Income and losses on trading purposetransactions are recognized on a trade-date basis and recorded
as “Trading income” or “Trading losses.”
Trading income and losses include interest received andpaid during the fiscal year and unrealized gains and losses
resulting from the change in the value of securities, monetaryclaims bought, 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 atfair value with unrealized gains and losses, net of applicabletaxes, reported in a separate component of equity. The fairvalues of equity securities with quoted market prices are
determined based on the average quoted market prices in thelast month of the fiscal year. Available-for-sale securities forwhich fair value is not reliably determined are stated at cost
determined by 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)
Intangible assets are amortized based on the straight-line
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.

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h. Long-Lived Assets
The Group reviews its long-lived assets for impairment
whenever events or changes in circumstances indicate thecarrying amount of an asset or asset group may not berecoverable. An impairment loss would be recognized if thecarrying amount of an asset or asset group exceeds the sum of
the undiscounted future cash flows expected to result from thecontinued use and eventual disposition of the asset or asset
group. The impairment loss would be measured as the amountby 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 theasset 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 customers are classified into five categories based on
their financial 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 withlending conditions, has problems with fulfillment, has poor
results or is unstable, has problems with its financial
position, or otherwise 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
from collection of principal and interest can be reasonably
estimated, the Banks provide the difference between thepresent values of these 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
based on three-year historical loan loss ratio and forwardlooking 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.” Generalallowance for these categories is provided based on one-year
expected loan losses, respectively. Expected loan losses aremeasured by each categories based on one-year historical loan
loss ratios and forward-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 ¥37,109 million ($335,193
thousand) and ¥38,565 million at March 31, 2021 and 2020,
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 unrecognized actuarial (gains) losses are amortizedusing the straight-line method over eight or nine years within theemployees’ average remaining service period, commencing
from the next fiscal year of incurrence.

Hokuhoku Financial Group, Inc. Annual Report 2021

Basis of Presentation

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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
the amount deemed accrued at the fiscal year end, based on
the estimated 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
to these resolutions, the lump-sum payment of retirement
benefits of directors and audit & supervisory board members
shall be effectuated upon the retirement of each individual
director and audit & supervisory board member. Reserve fordirectors’ and audit & supervisory board members’ retirement
benefits was ended 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
expense for employee stock options based on the fair value ofthe stock options at the date of grant and over the vesting period
as consideration for receiving goods or services. The companies
are also 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 consequencesof temporary differences between the carrying amounts and thetax bases of assets and liabilities. Deferred taxes are measured
by applying currently enacted income tax rates to the temporary
differences.

44

Hokuhoku Financial Group, Inc. Annual Report 2021

Basis of Presentation

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 forunder the deferral method whereby unrealized gains and losses
are deferred 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 techniqueknown as “individual hedging” that establishes a specificposition to directly hedge a particular item. Such hedges, limited
to certain assets and liabilities, are accounted for by thedeferred method or, 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
arising from their foreign currency denominated financial assets
and liabilities. Such hedges are accounted for by the deferred
method specified in the “Accounting and Auditing Treatments in
Banking Business in Accounting for Foreign Currency
Denominated Transactions and Others” (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
denominated financial assets and liabilities, hedge effectivenessis assessed by verifying the agreement of the amounts of thedesignated hedging 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. Consumption Taxes
The Company and its domestic consolidated subsidiaries
account for consumption tax and local consumption tax by thetax exclusion method, whereby receipts and payments ofconsumption taxes are not included in the transaction amounts
and, accordingly, consumption tax amounts do not affect themeasurement of profit or loss transactions. However,consumption taxes on tangible fixed assets that are not taxdeductible are expensed in the fiscal year under review.
t. Finance Lease
Sales and cost of sales are accounted for when lease payments
are paid.

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u. 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
the respective fiscal years, including dividends to be paid after
the end of the fiscal year.
v. New Accounting Pronouncements
Accounting standards for Revenue Recognition
The ASBJ issued ASBJ Statement No. 29, "AccountingStandard for Revenue Recognition" on March 31, 2020 and
ASBJ Guidance No. 30, "Implementation Guidance on
Accounting Standard for Revenue Recognition" on March 26,
2021. The core principle of the standard and guidance is that anentity should recognize revenue to depict the transfer ofpromised goods or services to customers in an amount thatreflects the consideration to which the entity expects to beentitled in exchange for those goods or services. An entity
should recognize revenue in accordance with that core principle
by applying the following 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 performanceobligations in the contract
Step 5: Recognize r e v e n u e w h e n ( o r a s ) t h e e n t i t ysatisfies a performance obligation
The accounting standard and guidance are effective forannual periods beginning on or after April 1, 2021.
The Company expects to apply the accounting standard andguidance for annual periods beginning on or after April 1, 2021,
and is in the process of measuring the effects of applying theaccounting standard and guidance in future applicable periods.
Accounting standards for Fair Value Measurement
On July 4, 2019, the ASBJ issued ASBJ Statement No. 30,"Accounting Standard for Fair Value Measurement" and ASBJ
Guidance No. 31, "Implementation Guidance on AccountingStandard for Fair Value Measurement," and revised related
ASBJ Statements and ASBJ Guidance (the "New AccountingStandards"). Under the New Accounting Standards,
nonmarketable available-for-sale equity securities are stated atcost, while under the current accounting standards,
nonmarketable available-for-sale securities are stated at cost.
The New Accounting Standards are effective for annual
periods beginning on or after April 1, 2021.
The Company expects to apply the New AccountingStandards for annual periods beginning on or after April 1,
2021, and is in the process of measuring the effects of applying
the New Accounting Standards in future applicable periods.

3. Significant Accounting Estimate
The significant accounting estimate that can significantly affectthe consolidated financial statements for the next fiscal year is
as follows:
Allowance for loan losses(1) Carrying amount on the consolidated financial statements offiscal year ended March 31, 2021
Allowance for loan losses ¥62,731 million ($566,630
thousand)(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.
Allowance for Loan Losses” to the consolidated financial
statements.
(b) Principal assumption
The Banks’ development of the prospects for recovery ofborrowers’ business performance in the future periods
and the achievability of the borrowers' medium-term tolong-term business improvement plans largely
contributes to the assumption for the allowance . The
Banks frequently determine the borrower classifications
based on the prospects for recovery of the borrowers'
business performance in the future periods and theachievability of the borrowers' medium-term to long-termbusiness improvement plans, in addition to theborrowers' historical business performance. Furthermore,
the Banks assess whether to change the borrowerclassifications, as necessary, reflecting the changes inthe borrowers’ business conditions, including the impactof the novel coronavirus disease (“COVID-19”).
In addition, the Group’s current expectation is that the
majority of the impact of COVID-19 on our society will
manifest in the next 1 to 2 years, and that during thisperiod, there will be a distinct impact on the financial
health of borrowers. At the end of current fiscal year,
allowance for loan losses is provided assessing whether
to change the borrower classifications, as necessary,reflecting the changes in the borrowers’ businessconditions, based on the expectation including the impact
of COVID-19.
(c) The risk that might affect carrying amount to theconsolidated financial statements in next financial year
If borrowers’ business performance changes or
COVID-19 lasts for longer than the Group’s current
assumption, it is possible that the situation will have asignificant impact on allowance for loan losses

4. Change in presentation(Application of “Accounting Standard for Disclosure of
Accounting Estimates”)
The Group has initially applied “Accounting Standard forDisclosure of Accounting Estimates” (ASBJ Guidance No. 31 on
March 31, 2020) to the consolidated financial statements as ofthe end of and for the current fiscal year and included noteregarding significant accounting estimate in the consolidated
financial statements.
However, in accordance with transitional treatment provided
in Section 11 of "Accounting Standard for Disclosure of
Accounting Estimates," the note related to the fiscal year ended
March 31, 2020 has not been included.
Hokuhoku Financial Group, Inc. Annual Report 2021

Basis of Presentation45

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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, 2021 and 2020 consisted of the following:
Millions of yen
2021
2020

Cash and due from banks
Due from banks except for deposits with the Bank of Japan
Cash and cash equivalents¥5,096,491(10,347)¥5,086,143¥2,725,025(3,671)¥2,721,353

Thousands of
U.S. dollars
2021$46,034,609(93,468)$45,941,141

6. Trading Assets and Liabilities
Trading assets and liabilities as of March 31, 2021 and 2020 consisted of the following:

Trading Assets

Millions of yen
2021
2020

Trading securities
Trading-related financial derivatives
Total¥2,926481¥3,407

Trading Liabilities

Millions of yen
2021
2020

¥349
¥349

Trading-related financial derivatives
Total¥3,139650¥3,790¥497¥497

Thousands of
U.S. dollars
2021$26,433
4,349$30,782
Thousands of
U.S. dollars
2021$3,156$3,156

7. Money Held in Trust
Money held in trust for trading purposes as of March 31, 2021 and 2020 consisted of the following:Amounts recorded in the consolidated balance sheet
Valuation gain (loss) included in consolidated statement of income

Millions of yen
2021
2020

Thousands of
U.S. dollars
2021¥14,045
12$126,870
111¥14,204(53)

Money held in trust for other purposes as of March 31, 2021 and 2020 consisted of the following:
Millions of yen
2021
2020

Amounts recorded in the consolidated balance sheet
Valuation gain (loss) included in consolidated statement of income¥4,500―¥1,850―Thousands of
U.S. dollars
2021$40,647―

8. Securities
Securities as of March 31, 2021 and 2020 consisted of the following:
Millions of yen
2021
2020

Japanese national government bonds
Japanese local government bonds
Japanese corporate bonds
Japanese corporate stocks
Other securities
Total

46

Hokuhoku Financial Group, Inc. Annual Report 2021

Cash and Cash Equivalents、Trading Assets and Liabilities、Money Held in Trust、Securities¥ 448,020
551,450
288,519
238,941
580,358¥2,107,290¥ 452,102
476,500
303,771
197,884
385,225¥1,815,484

Thousands of
U.S. dollars
2021$ 4,046,797
4,981,037
2,606,084
2,158,267
5,242,147$19,034,332

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As of March 31, 2021 and 2020, securities included equity investments in non-consolidated subsidiaries that amounted to ¥1,334 million($12,058 thousand) and ¥1,194 million, respectively.
In the following description, in addition to “Securities,” also presented are trading account securities which are classified as “Trading
assets” in the consolidated balance sheet and beneficiary claims on loan trusts which are classified as “Monetary claims bought” in the
consolidated balance sheet.
Valuation gain or loss on trading account securities included in income before income taxes was ¥(29) million ($(268) thousand) and¥(27) million as of March 31, 2021 and 2020, respectively.
The amounts on the consolidated balance sheet, aggregate fair value, and unrealized gains (losses) on held-to-maturity debt
securities as of March 31, 2021 and 2020 were as follows:
Millions of yen
March 31, 2021

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

Amount on
consolidatedbalance sheet

Estimated
fair value

Net unrealized
gains (losses)¥61,496
2,500
107,714¥171,710¥70,316
2,518
108,364¥181,199¥8,81918
650¥9,488

¥

¥

¥

―
―
27,171
27,171¥198,881――
27,066
27,066¥208,265

―
―
(104)
(104)
¥9,383

Millions of yen
March 31, 2020

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

March 31, 2021

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

Amount on
consolidatedbalance sheet

Estimated
fair value

Net unrealized
gains (losses)¥64,026
1,500
118,983¥184,510¥73,740
1,519
119,803¥195,063¥9,713
19
819¥10,553

¥

¥

¥

―
1,000
20,784
21,784¥206,294―
999
20,68921,688¥216,751

―
(0)
(95)
(96)
¥10,456

Thousands of U.S. dollars
Amount on
Estimated
Net unrealized
consolidated
fair value
gains (losses)balance sheet$ 555,473
22,581
972,942$1,550,996$ 635,141
22,748
978,816$1,636,705$79,668
167
5,874$85,709

$

$

$

―
―
245,426
245,426$1,796,422――
244,478
244,478$1,881,183

―
―
(948)
(948)
$84,761

Hokuhoku Financial Group, Inc. Annual Report 2021

Securities47

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The amounts on the consolidated balance sheet, acquisition or amortized cost, and unrealized gains (losses) on available-for-salesecurities as of March 31, 2021 and 2020 were as follows:

March 31, 2021

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, 2020

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

48

Hokuhoku Financial Group, Inc. Annual Report 2021

Securities

Millions of yen
Amount on
Acquisition/
Net unrealized
consolidatedbalance sheet amortized cost gains (losses)¥ 186,287¥ 68,158¥ 118,129

177,332
323,798
122,143
623,275

176,297
322,674
120,440
619,411

1,035
1,124
1,703
3,863

132,027
114,931
246,958¥1,056,521

122,450
104,440
226,890¥914,460

9,576
10,491
20,067¥142,060¥ 23,191¥ 29,177¥ (5,986)

209,191
225,151
31,490465,833

210,399
225,761
31,629467,790(1,207)(609)(139)(1,956)217,934
143,446
361,380
850,405¥1,906,926

230,169
153,694
383,863
880,831¥1,795,292(12,234)(10,248)(22,482)(30,425)¥111,634

Millions of yen
Amount on
consolidated
Acquisition/
Net unrealizedbalance sheet amortized cost gains (losses)¥ 131,254¥ 51,407¥79,846

344,350
271,621116,305732,277

340,467
269,956
114,096
724,521

3,883
1,664
2,208
7,756

154,875
102,271
257,146¥1,120,678

143,077
96,204
239,282¥1,015,210

11,797
6,066
17,863¥105,467¥37,111¥46,171¥(9,059)

43,725
202,379
47,697
293,80243,957
202,918
48,111
294,987

(231)
(539)
(414)
(1,185)

15,352
145,405
160,758
491,672¥1,612,350

15,507
164,756
180,264
521,423¥1,536,634(155)(19,350)(19,506)(29,751)¥75,715

2021/10/13 9:49:45 / 21759016_株式会社ほくほくフィナンシャルグループ_総会その他（Ｃ）

March 31, 2021

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

Thousands of U.S. dollars
Amount on
consolidated
Acquisition/
Net unrealizedbalance sheet amortized cost gains (losses)$1,682,662$615,648$1,067,014

1,601,776
2,924,748
1,103,279
5,629,803

1,592,422
2,914,591
1,087,888
5,594,901

9,354
10,157
15,391
34,902

1,192,549
1,038,130
2,230,679$9,543,144

1,106,050
943,3672,049,417$8,259,966

86,49994,763
181,262$1,283,178$209,475$263,548$(54,073)

1,889,548
2,033,707
284,438
4,207,693

1,900,453
2,039,213
285,700
4,225,366(10,905)(5,506)(1,262)(17,673)

1,968,519
2,079,031
1,295,692
1,388,259
3,264,211
3,467,290
7,681,379
7,956,204$17,224,523 $16,216,170(110,512)(92,567)(203,079)(274,825)$1,008,353

Information on available-for-sale securities, which were sold during the years ended March 31, 2021 and 2020 is as follows:
March 31, 2021

Proceeds

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, 2020

Proceeds

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

Millions of yen
Realized gains Realized losses¥47,367¥8,053¥1,05949,097
42,10370
91,271

81
241
0
323

96
207
―
303

149,578
90,638240,217¥378,856

4,111
2,745
6,856
¥15,233

1,012
5,921
6,934
¥8,297

Millions of yen
Realized gains Realized losses¥49,437¥4,176¥3,991

25,21434,602
1,754
61,570

124
237
9
371

44
22
―
66

220,473
124,414344,888¥455,897

5,531
4,976
10,508¥15,056

249
1,266
1,516
¥5,575

Hokuhoku Financial Group, Inc. Annual Report 2021

Securities49

2021/10/13 9:49:45 / 21759016_株式会社ほくほくフィナンシャルグループ_総会その他（Ｃ）

March 31, 2021

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

Thousands of U.S. dollars
Proceeds
Realized gains Realized losses$427,851$72,741$9,571

443,478
380,305
638
824,421

732
2,181
6
2,919

870
1,872
―
2,742

1,351,088
818,701
2,169,789$3,422,061

37,13924,796
61,935$137,595

9,144
53,49062,634$74,947

Impairment losses on available-for-sale securities amounted to ¥116 million ($1,054 thousand) and ¥3,389 million as of March 31,
2021 and 2020, 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:(1) For issuers who are classified as borrowers under “In need of caution,” “Possible bankruptcy,” “Virtual bankruptcy,” “Legalbankruptcy.”
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.
(2) 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.
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, 2021 and 2020, in the consolidated balance sheet,
was as follows:

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

50

Hokuhoku Financial Group, Inc. Annual Report 2021

Securities

Millions of yen
2021
2020

Thousands of
U.S. dollars
2021¥111,634(30,674)
80,960(218)
195¥ 80,937$1,008,353(277,068)
731,285(1,977)1,770$ 731,078¥75,715(20,098)
55,616(159)
67¥55,525

2021/10/13 9:49:45 / 21759016_株式会社ほくほくフィナンシャルグループ_総会その他（Ｃ）

9. Loans and Bills Discounted

10. Foreign Exchanges

Loans and bills discounted as of March 31, 2021 and 2020
consisted of the following:

Foreign exchanges as of March 31, 2021 and 2020 consisted ofMillions of yen
2021
2020

¥19,701¥29,563$177,955
Bills discounted
Loans on bills
172,132
225,441
1,554,810
Loans on deeds
7,797,266 7,282,401
70,429,648
1,061,345 1,119,043
9,586,721
Overdrafts¥9,050,446 ¥8,656,450 $81,749,134
Total
Loans and bills discounted include loans to borrowers inbankruptcy, past due loans, past due loans (three months ormore), and restructured loans. The amounts of these loans
were as follows:
Millions of yen
2021
2020

the following:Thousands of
U.S. dollars
2021

Thousands of
U.S. dollars
2021

Loans to borrowers in bankruptcy¥3,124¥3,196$28,219
Past due loans
153,218 131,319
1,383,959
Past due loans
428
3,871
(three months or more)
367
25,123
20,767226,931
Restructured loans¥181,894 ¥155,651 $1,642,980
Total
Loans to borrowers in bankruptcy represent nonaccrualloans to debtors who are legally bankrupt, as defined in theOrder for Enforcement of the Corporation Tax Act.
Past due loans are nonaccrual loans which include loansclassified as “Possible bankruptcy” and “Virtual bankruptcy.”
Nonaccrual loans are defined as loans (after the partial writeoff of claims deemed uncollectible) on which the Banks havestopped accruing interest income due to substantial doubt
existing about the ultimate collection of principal and/or interest.
Such loans are classified either as “Possible bankruptcy” or“Virtual bankruptcy” under the Banks’ self-assessment
guidelines.
In addition to past due loans as defined above, certain otherloans classified as “In need of caution” under the Banks’ selfassessment guidelines include past due loans (three months ormore) which consist of loans for which the principal and/orinterest is three months or more past due, but exclude loans toborrowers in bankruptcy and past due loans.
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 loans
to borrowers in bankruptcy, past due loans or past due loans(three months or more).
These amounts represent the gross amounts before
deduction of the allowance for loan losses.
Bills discounted are accounted for as financial transactionsin accordance 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 ¥21,346 million ($192,811 thousand) and ¥33,036 million
as of March 31, 2021 and 2020, respectively.

Millions of yen
2021
2020

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
2021¥19,040
1,644
1,700¥22,385¥13,9123,473
1,628¥19,014$171,987
14,856
15,355$202,198

¥227
0
220
¥447

¥21
22
69
¥113

$2,0513
1,988$4,042

11. Tangible Fixed Assets
Tangible fixed assets as of March 31, 2021 and 2020 were as
follows:
Millions of yen
2021
2020

Thousands of
U.S. dollars
2021

Buildings¥32,612 ¥32,963$294,579
Land
56,59756,927511,219
Lease assets
847
846
7,651
Construction in progress
221
260
2,003
5,505
5,907
49,729Other tangible fixed assets¥95,784 ¥96,905$865,181
Total
Accumulated depreciation amounted to ¥105,989 million($957,362 thousand) and ¥103,037 million as of March 31, 2021
and 2020, respectively.
The book value of tangible fixed assets adjusted for gains onsales of replaced assets amounted to ¥5,824 million ($52,612
thousand) and ¥5,738 million as of March 31, 2021 and 2020,
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 theland after the above one-time revaluation exceeded the market
value by ¥16,422 million ($148,342 thousand) and ¥16,982
million as of March 31, 2021 and 2020, respectively.

Hokuhoku Financial Group, Inc. Annual Report 2021

Loans and Bills Discounted

51

2021/10/13 9:49:45 / 21759016_株式会社ほくほくフィナンシャルグループ_総会その他（Ｃ）

12. Intangible Assets

15. Loan Commitments

Intangible assets as of March 31, 2021 and 2020 were as
follows:

Overdraft facility and loan commitment contracts with customers
to lend up to the prescribed limits in response to customers’applications for a loan, as long as there is no violation of any
condition within the contracts. The unused amount of suchcontracts totaled ¥2,492,147 million ($22,510,594 thousand)and ¥2,447,305 million as of March 31, 2021 and 2020,
respectively, of which amounts with original agreement terms ofless than one year are ¥2,337,027 million ($21,109,452
thousand) and ¥2,320,671 million as of March 31, 2021 and2020, respectively.
Since the majority of the commitments expire without being

Millions of yen
2021
2020

Software
Goodwill
Lease assets
Other intangible assets
Total¥5,404
7,182
259
720
¥13,568¥7,038
9,285
325
671
¥17,320

Thousands of
U.S. dollars
2021$48,82064,8792,348
6,512$122,559

13. Customers’ Liabilities for Acceptances and Guarantees
All contingent liabilities arising from acceptances andguarantees are reflected in acceptances and guarantees inliabilities 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 ofindemnity from the applicants.
Guarantee obligations on securities issued by private
placement (pursuant to Article 2, Clause 3 of the Japanese
Financial Instruments and Exchange Act) amounted to¥168,245 million ($1,519,699 thousand) and ¥170,406 million
as of March 31, 2021 and 2020, respectively.

drawn upon, the unused amount does not necessarily represent
a future cash requirement. Most of these contracts haveconditions allowing the Group to refuse customers’ applications
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
Assets pledged as collateral and their relevant liabilities as ofMarch 31, 2021 and 2020 were as follows:
Millions of yen
2021
2020

Thousands of
U.S. dollars
2021

Assets pledged as collateral:
Securities¥1,141,336 ¥749,462 $10,309,241
Loans and bills discounted 2,331,618
653,398
21,060,595
Relevant liabilities to the above assets:
Deposits
29,281¥28,280
264,484
Call money and bills sold
78,00045,000704,543
Payables under securities
307,787294,641
2,780,124lending transactions
2,380,313
822,015
21,500,442
Borrowed money
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, 2021 and 2020:
Millions of yen
2021
2020

Thousands of
U.S. dollars
2021

Securities¥ 2,056 ¥ 2,006$ 18,576
105,219 105,219
950,406
Other assets
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, 2021 and 2020
were as follows:
Millions of yen
2021
2020

Cash collateral paid forfinancial instruments
Guarantee deposits

52¥7,203¥6,151$65,065

4,057

4,348

36,651

Hokuhoku Financial Group, Inc. Annual Report 2021

Loans and Bills Discounted

Thousands of
U.S. dollars
2021

16. Deposits
Deposits as of March 31, 2021 and 2020 consisted of thefollowing:
Millions of yen
2021
2020

Thousands of
U.S. dollars
2021

Current deposits, ordinary
deposits, saving deposits ¥9,144,928 ¥7,953,259 $82,602,555
and deposits at noticeTime deposits and3,443,341 3,479,486
31,102,355
installment savings
Negotiable certificates of deposit
64,23880,500580,244
136,404
125,371
1,232,090
Other deposits¥12,788,914¥11,638,618 $115,517,244
Total

17. Borrowed Money
As of March 31, 2021 and 2020, the weighted-average annualinterest rates applicable to borrowed money were 0.02% and0.03%, respectively.
Annual maturities of borrowed money as of March 31, 2021
were as follows:Year ending March 31

2022
2023
2024
2025
2026
2027 and thereafter
Total

Millions of yen

Thousands of
U.S. dollars¥1,650,985
68,842
362,103
303,059471
506¥2,385,969$14,912,707
621,832
3,270,741
2,737,417
4,259
4,575
$21,551,531

2021/10/13 9:49:45 / 21759016_株式会社ほくほくフィナンシャルグループ_総会その他（Ｃ）

18. Retirement Benefits
Overview of the Group’s retirement benefit plans
The Hokuriku Bank, Ltd. which previously provided threedefined benefit retirement programs, corporate pensions, andtax qualified pension and retirement bonuses, terminated thetax qualified pension and migrated a portion of the retirement
bonus to a defined contribution pension in March 2011. At thetime of retirement, employees may be issued a premium
retirement grant that is not subject to inclusion in the actuarial
computation of projected benefit obligations in conformity withthe standards for accounting for retirement benefits. The
Minister of Health, Labour and Welfare approved on February
17, 2003 that Hokuriku Bank Ltd. would be relieved of theobligation to administer the future payment service of thegovernment mandated portion of its employee pension fund.
The Hokuriku Bank, Ltd. was further approved on March 1,
2005 to switch from an employee pension fund to a corporate
pension fund.
The Hokkaido Bank, Ltd. provides defined benefit
arrangements that combine a retirement lump sum grant and an
employee pension fund plan, and also provides a defined
contribution pension since fiscal year 2016. The Hokkaido Bank,
Ltd. was approved by the Minister of Health, Labour andWelfare on March 26, 2004 to be relieved of the obligation toadminister the future payment service of the government
mandated portion of the employee pension fund. The HokkaidoBank, Ltd. was further approved on March 31, 2006 to switchfrom an employee pension fund to a corporate pension fund.
The consolidated domestic subsidiaries, other than the two
noted above, provide retirement lump-sum grants.
The Company’s employees are all on loan from its
subsidiaries and are covered by the retirement benefit programof the subsidiaries from which they each come.
The Banks have established retirement benefit trusts.

(a) Defined benefit plan
(1) The changes in defined benefit obligations for the years
ended March 31, 2021 and 2020 were as follows:

Balance at beginning of year
Service cost
Interest cost
Actuarial (gains) losses
Benefits paid
OthersBalance at end of year

Millions of yen
2021
2020

Thousands of
U.S. dollars
2021¥96,454
2,255
593
776
(5,298)83¥94,864$871,232
20,3695,362
7,014(47,858)754$856,873¥97,879
2,339
602
985
(5,440)87¥96,454(2) The changes in plan assets for the years ended March 31,
2021 and 2020 were as follows:

Balance at beginning of year
Expected return on plan assets
Actuarial (gains) losses
Contributions from the employer
Benefits paid
OthersBalance at end of year

Millions of yen
2021
2020

Thousands of
U.S. dollars
2021¥84,254
2,395
9,699
2,031
(4,082)
83¥94,382$761,035
21,641
87,612
18,347(36,872)754$852,517¥91,283
2,651(6,300)443(3,910)87¥84,254

Hokuhoku Financial Group, Inc. Annual Report 2021

Retirement Benefits532021/10/13 9:49:45 / 21759016_株式会社ほくほくフィナンシャルグループ_総会その他（Ｃ）(3) Reconciliation between the liability recorded in the
consolidated 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
2021
2020

Thousands of
U.S. dollars
2021¥80,622(83,706)(3,084)
14,242(10,675)
3,566¥81,729(74,845)6,884
14,724(9,408)5,315$728,231(756,090)(27,859)
128,642(96,427)
32,215¥ 482¥12,199

Millions of yen
2021
2020

Liability for retirement benefits
Asset for retirement benefits
Net liability (asset) arising fromdefined benefit obligation$ 4,356
Thousands of
U.S. dollars
2021¥3,566(3,084)¥12,199―$32,215(27,859)¥ 482¥12,199$ 4,356(4) The components of net periodic benefit costs for the years
ended March 31, 2021 and 2020 were as follows:
Millions of yen
2021
2020

Service cost
Interest cost
Expected return on plan assets
Recognized actuarial (gains) losses
OthersNet periodic benefit costs¥2,255593(2,395)1,229
118¥1,800¥2,339602(2,651)
1,272
56¥1,619Thousands of
U.S. dollars
2021$20,369
5,362(21,641)
11,106
1,069$16,265(5) Amounts recognized in other comprehensive income (before
income tax effect) in respect of defined retirement benefit
plans for the years ended March 31, 2021 and 2020 were as
follows:
Millions of yen
2021
2020

Actuarial gains (losses)
Total¥10,152¥10,152¥(6,014)¥(6,014)

Thousands of
U.S. dollars
2021$91,703$91,703(6) Amounts recognized in accumulated other comprehensive
income (before income tax effect) in respect of defined
retirement benefit plans as of March 31, 2021 and 2020
were as follows:
Millions of yen
2021
2020

Unrecognized actuarial (gains) losses
Total

54

¥2,856¥2,856

Hokuhoku Financial Group, Inc. Annual Report 2021

Retirement Benefits¥13,008¥13,008

Thousands of
U.S. dollars
2021$25,798$25,798(7) Plan assets• Components of plan assets

Plan assets as of March 31, 2021 and 2020 consisted of thefollowing:
Bonds
StocksCash and deposits
General accounts
Other
Total

2021

2020

29.13%
45.43
2.75
7.11
15.58
100.00%35.14%
34.11
11.86
7.88
11.01
100.00%Note: Plan assets include retirement benefit trusts of 19.28% and19.15%
as of March 31, 2021 and 2020, 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, 2021 and2020 were set forth as follows:
2021

Discount rate
Expected rate of return on plan assets

2020

0.61%–0.63% 0.61%–0.63%
2.7%–3.0% 3.0%–3.3%(b) Defined contribution pension plan
Millions of yen
2021
2020

Contribution

¥345

¥353

Thousands of
U.S. dollars
2021$3,123

2021/10/13 9:49:45 / 21759016_株式会社ほくほくフィナンシャルグループ_総会その他（Ｃ）

19. 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, for companies that meet certain criteria including(1) having a Board of Directors, (2) having independent
auditors, (3) having an Audit & Supervisory Board, and (4) theterm of service of the directors being prescribed as one year
rather than the normal two-year term by its articles ofincorporation, the Board of Directors may declare dividends(except for dividends-in-kind) at any time during the fiscal year
if the company has prescribed so in its articles ofincorporation. With respect to the third condition above, theBoard of Directors of companies with an audit and supervisorycommittee (as implemented under the Companies 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 is organized as a company
with an audit and supervisory committee, effective June 27,
2017. The Company meets all the above criteria, andaccordingly, 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 for dividends or the purchase of treasury stock.
The limitation is defined as the amount available for
distribution to the shareholders, but the amount of net assets
after dividends must be maintained at no less than ¥3 million.
(b) Increases / decreases and transfer of common stock,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 topurchase treasury stock and dispose of such treasury stockby resolution of the Board of Directors. The amount oftreasury stock purchased cannot exceed the amountavailable for distribution to the shareholders, which isdetermined by a specific 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
as a 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 basedon 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,
2021 will be approved at the Company’s general shareholders’meeting held on June 25, 2021:
Cash dividends, ¥35.00($0.32) per share of common
stock
Cash dividends, ¥7.50 ($0.07)
per share of preferred stock(Type 5)

Millions of yen

Thousands of
U.S. dollars¥4,592$41,485

644

5,822

Hokuhoku Financial Group, Inc. Annual Report 2021

Retirement Benefits552021/10/13 9:49:45 / 21759016_株式会社ほくほくフィナンシャルグループ_総会その他（Ｃ）

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, 2021 and 2020
consisted of stock options.

March 31, 2021 and 2020 is as follows:
Number of shares:
Authorized:
CommonPreferred (Type 5)
Issued and outstanding:CommonPreferred (Type 5)
Treasury stock:
CommonPreferred (Type 5)

2021

2020

280,000,000
110,000,000

280,000,000
110,000,000

132,163,014
85,955,000

132,163,014
96,698,000

953,838
11,128

999,658
11,144Preferred 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, 2021 and 2020 were as follows:
2021
CommonPreferred (Type 5)

As of April Changes during the fiscal year As of March
1, 2020
Increase*1 Decrease*2 31, 2021
999,658
4,120
49,940953,838
11,144 10,742,984 10,743,000
11,128*1 The increase of common represents primarily the acquisition of odd-lot
shares.
The increase of preferred (Type5) represents the acquisition oftreasury stock.
*2 The decrease of common represents primarily the exercise of stock
options.
The decrease of preferred (Type5) represents the retirement oftreasury stock.

As of April Changes during the fiscal year As of March
1, 2019
2020
Increase*1 Decrease*2 31, 2020
Common1,038,191
7,777
46,310999,658
Preferred (Type 5)2,160 10,742,984 10,734,000
11,144*1 The increase of common represents primarily the acquisition of odd-lot
shares.
The increase of preferred (Type5) represents the acquisition oftreasury stock.
*2 The decrease of common represents primarily the exercise of stock
options.
The decrease of preferred (Type5) represents the retirement oftreasury stock.

56

Hokuhoku Financial Group, Inc. Annual Report 2021

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22. Stock Options
The stock option plans grant options to the Company’s directors
and the Banks’ directors and executive officers to purchasecertain shares of the Company’s common stock in therespective exercise periods. The exercise prices are subject toadjustments for stock issuances below fair value and stock
splits.
Stock option expenses in the amount of ¥110 million ($1,000
thousand) and ¥123 million were recorded under general andadministrative expenses for the years ended March 31, 2021
and 2020, respectively.
The stock options outstanding as of March 31, 2021 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

Numberof options
granted(Shares)

Date of Exercise
grantprice Exercise period

105,850

November28, 2012¥1

62,950August 13,
2013

¥1

55,400July 11,2014¥1

41,730July 14,2015¥1

August 12,
106,200
2016¥1

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

114,610

July 10,2019¥1

138,000

July 10,2020¥1

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

The stock option activity was as follows:Year ended
March 31, 2021

Non-vested:
March 31, 2020
–outstanding
GrantedCanceled
VestedMarch 31, 2021
–outstanding
Vested:March 31, 2020
–outstanding
VestedExercised
Canceled
March 31, 2021
–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)

―
―
―
―

―
―
―
―

―
―
―
―

―
―
―
―

―

―

―

―

18,770―――16,700―――15,600―820―

16,960―2,560―

18,770¥1$0.01

16,700¥1$0.01

14,780¥1$0.01

14,400
¥1
$0.01

¥―
$―

¥―
$―

¥905
$8.17

¥905
$8.17

¥1,080$9.76¥1,820$16.44¥2,010$18.16¥2,650$23.94

Year ended
March 31, 2021

Non-vested:
March 31, 2020
–outstanding
GrantedCanceled
VestedMarch 31, 2021
–outstanding
Vested:March 31, 2020
–outstanding
VestedExercised
Canceled
March 31, 2021
–outstanding
Exercise price
Average stock
price at exercise
Fair value priceat grant dateYear ended
March 31, 2021

Non-vested:
March 31, 2020
–outstanding
GrantedCanceled
VestedMarch 31, 2021
–outstanding
Vested:March 31, 2020
–outstanding
VestedExercised
Canceled
March 31, 2021
–outstanding
Exercise price
Average stock
price at exercise
Fair value priceat grant date2016 stock option 2017 stock option 2018 stock option 2019 stock option(Shares)(Shares)(Shares)(Shares)

―
―
―
―

―
―
―
―

―
―
―
―

―
―
―
―

―

―

―

―

54,390―9,900―

46,130―8,960―

76,460―12,040―114,610―
15,660330

44,490¥1$0.01

37,170¥1$0.01

64,420¥1$0.01

98,620
¥1
$0.01

¥898
$8.11

¥900
$8.13

¥900
$8.13

¥900
$8.13

¥1,170$10.57¥1,717$15.51¥1,353$12.22¥1,080$9.76

2020 stock option(Shares)―
138,000―
138,000――
138,000――
138,000
¥1
$0.01
¥802
$7.24
¥―
$―

Hokuhoku Financial Group, Inc. Annual Report 2021

Retirement Benefits572021/10/13 9:49:45 / 21759016_株式会社ほくほくフィナンシャルグループ_総会その他（Ｃ）

Shares and per share figures have been restated, as appropriate,
to reflect a one-for-ten stock consolidation effective October 1,
2016.

Net assets per share of common stock as of March 31, 2021

The Assumptions Used to Measure the Fair Value of the 2020
Stock Options
Estimate method
Black-Scholes option-pricing model

Total equity¥638,504 ¥595,319
Deductions from total equity:
Stock acquisition rights
538
497
Non-controlling interests
3,263
2,941
Preferred stock
42,971
48,343644
725
Preferred dividends
Net assets attributable tocommon stock at the endof the fiscal year
591,085 542,812

Volatility of stock price32.931%
Estimated remaining outstanding period One years and four months
Estimate dividend¥40.00 per share
Risk-free interest rate
(0.175)%In estimating the vested number of stock options, the Company
basically reflects only the actual forfeited number, since it isdifficult to make a reasonable estimate on the future forfeited
number.

23. Per Share Information(1) Net income per share of common stock
Reconciliation of the difference between basic and diluted net
income per share (“EPS”) for the years ended March 31, 2021
and 2020 was as follows:Year ended
March 31, 2021

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

Year ended
March 31, 2020

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

Thousands ofsharesMillions of yen
Net income
attributable to
Weightedowners of parent average shares¥19,964

Yen

EPS

131,200 ¥152.17

131,620 ¥151.68

Thousands ofMillions of yen
shares
Net income
attributable to
Weightedowners of parent average shares¥18,721

$1.37

$1.37

Retirement Benefits

131,163

24. Other Ordinary Income
Other ordinary income for the years ended March 31, 2021 and2020 is as follows:
Millions of yen
2021
2020

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

131,153 ¥142.74

131,492 ¥142.37

2020¥4,504.91 ¥4,138.44

Hokuhoku Financial Group, Inc. Annual Report 2021

5,339,046

Thousands of
U.S. dollars
2021

¥ 980

¥1,100$8,852

5,955
75
11,606
1,431¥20,0499,387
48
12,257
1,510¥24,30353,794686
104,840
12,926$181,098

Other ordinary expenses for the years ended March 31, 2021
and 2020 are as follows:

Yen

58

4,866
29,481
388,149
5,822

EPS

and 2020 were as follows:

Net assets per shareof common stock

131,209$5,767,364

25. Other Ordinary Expenses(2) Net assets per share of common stock
Net assets per share of common stock as of March 31, 2021

2021

Number of shares of common
stock at the end of the fiscal
year used for the calculation of
net assets per share of common
stock (shares in thousands)

Thousands of
U.S. dollars
2021

Yen

338
¥18,721

Millions of yen
2021
2020

U.S. dollars

419¥19,964

and 2020 were calculated based on the following:

U.S. dollars
2021$40.69Losses on sales, redemption
and devaluation of bonds
and other securities
Lease costs
Other
Total

Millions of yen
2021
2020

Thousands of
U.S. dollars
2021¥3,951
10,689329¥14,970$35,690
96,5552,980$135,225¥907
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26. Other Income
Other income for the years ended March 31, 2021 and 2020 are
as follows:
Millions of yen
2021
2020

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

Thousands of
U.S. dollars
2021¥9,612¥5,797$86,823

25
2,356¥11,994362
2,967¥9,127231
21,286$108,340

27. Other Expenses

A reconciliation between the normal effective statutory tax rate
and the actual effective tax rate reflected in the accompanying
consolidated statement of income for the year ended March 31,
2021 and 2020 are as follows:
2021

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 rate

2020

30.45% 30.45%(1.65)
1.87(1.08)(1.05)
0.46
0.52
0.21
0.37
2.33
1.17
30.72% 33.33%

Other expenses for the years ended March 31, 2021 and 2020

29. Other Comprehensive Income (Loss)are as follows:
Millions of yen
2021
2020

Losses on write-offs of loans
and bills discounted
Losses on sales of stocks
Losses on impairments ofstocks and other securities
Losses on sales of loans
Losses on impairments anddisposals of fixed assets
Other
Total

Thousands of
U.S. dollars
2021

¥466
4,427

¥458
4,982

$4,21439,995

98
193

3,081
404

891
1,747

1,113
2,136
¥8,436

1,452
3,011¥13,390

10,05819,302$76,207

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, 2021 and2020.
The tax effects of significant temporary differences and tax
loss carryforwards which resulted in deferred tax assets andliabilities at March 31, 2021 and 2020 are as follows:
Millions of yen
2021
2020

Thousands of
U.S. dollars
2021¥27,639696
8,116
10,8055,193
47
52,49927,231
25,267¥25,366755
12,19911,4515,878
52
55,70228,28027,421$249,657
6,292
73,311
97,605
46,914427
474,206
245,974
228,232

Deferred tax liabilities:
Valuation difference on
available-for-sale securities
37,170Land transfer through merger
2,765
2,701
Other
Total deferred tax liabilities
42,637¥(17,369)
Net deferred tax assets

26,4432,765
2,675
31,884¥(4,462)

335,743
24,982
24,402
385,127$(156,895)

Deferred tax assets:
Allowance for loan losses
Depreciation
Liability for retirement benefits
Loss on valuation of securities
Other
Operating loss carryforwards
Subtotal
Less: Valuation allowance
Total deferred tax assets

The components of other comprehensive income (loss) for theyears ended March 31, 2021 and 2020 are as follows:

Valuation difference on
available-for-sale securities:
Amount incurred
during the fiscal year
Reclassification adjustment
Prior to deducting tax effectTax effectTotal

Millions of yen
2021
2020

Thousands of
U.S. dollars
2021¥42,800 ¥(39,879)(6,881)(9,355)35,919(49,234)(10,575)
13,222
25,343 (36,012)$386,601(62,156)
324,445(95,526)
228,919

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

401
843
1,245
(230)
1,014

(1,713)
1,689
(24)
(141)
(165)

3,629
7,621
11,250(2,082)
9,168

Defined retirement benefit plans:
Amount incurred during
the fiscal year
Reclassification adjustment
Prior to deducting tax effectTax effect
Total

8,922
1,229
10,152(3,089)7,063(7,286)1,272(6,014)
1,830(4,183)80,597
11,106
91,703(27,903)63,800

183
(0)
183
(55)
127

(120)
8
(112)
34
(78)

1,661
(1)
1,660
(504)
1,156

¥33,549 ¥(40,440)$303,043

Share of other comprehensive
income (loss) of associates
accounted for using the equity
method:Amount incurred during
the fiscal year
Reclassification adjustment
Prior to deducting tax effectTax effectTotal
Total othercomprehensive income(loss)

Hokuhoku Financial Group, Inc. Annual Report 2021

Other Income592021/10/13 9:49:45 / 21759016_株式会社ほくほくフィナンシャルグループ_総会その他（Ｃ）

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, 2021 and 2020 are as follows:
Millions of yen
2021
2020

Within one year
Over one year
Total

¥3
9
¥13

¥3
13
¥17

Thousands of
U.S. dollars
2021

$35
89
$124

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
to manage the Group's lending in a sound and appropriatemanner, 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
to credit risks that could cause financial loss to the Group, suchas 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 or a 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 the60

Hokuhoku Financial Group, Inc. Annual Report 2021

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-ratefluctuations. When applying hedge accounting, the Banks adopt
integrated management in both hedging instruments andhedged items as long as hedging is managed and evaluates theeffectiveness of the hedges.
(3) Risk management for financial instruments
The Banks have established risk management departments andhave stipulated basic regulations for risk management and otherregulations pertaining to risk. In addition, the Banks haveestablished an ALM Committee and a Comprehensive Risk
Management Committee, where qualified risks andadministration matters are discussed regularly to ensure that all
categories of risk are managed effectively. Changes inregulations and organizational structures of the Banks arerevised or supervised by the Company to ensure conformance to
the Group’s policies and the results of the above committees arereported to the Company.
(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,
the Company and the Banks collaborated in establishingvarious regulations, including Credit Risk Management
Regulations, and ensuring the effective operation of internal
checking functions by separating 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 therisk of an overconcentration of loans in particular sectors.
Finally, the Banks 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
the limits 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

2021/10/13 9:49:45 / 21759016_株式会社ほくほくフィナンシャルグループ_総会その他（Ｃ）

Regulations and an arranged organizational structure including
ALM and other committees, the Banks appropriately control
market risk associated with lending and deposit-taking in orderto ensure 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
high percentage of the stocks held by the Banks are acquiredand held for long-term strategic purposes. The Banks monitor themarket conditions and financial positions of the securities issuers.
Value at Risk (“VaR”) and other methods are used to determine
the amount 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 toconfirm that price risk is controllable and all rules pertaining tomarket 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 thehistorical simulation method (a holding period of 1 businessday, a confidence 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 ¥179 million ($1,617 thousand) and ¥119
million as of March 31, 2021 and 2020, respectively.
Hokkaido Bank has no financial instruments in the trading
accounts.
• Financial instruments in the banking accountIn the Banks, the main financial instruments affected byinterest 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 overthe counter) 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 ¥48,751 million ($440,349 thousand)and ¥57,954 million as of March 31, 2021 and 2020,
respectively. Hokkaido Bank’s VaR of the financial instrumentsin the banking account was ¥13,527 million ($122,184
thousand) and ¥15,622 million as of March 31, 2021 and2020, respectively. Hokkaido Bank’s trading account securities
totaled ¥13 million ($117 thousand) and ¥14 million as ofMarch 31, 2021 and 2020, respectively. Hokkaido Bank’s
specified fund trust totaled ¥2 million ($18 thousand) and ¥2
million as of March 31, 2021 and 2020, 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%)
that is statistically calculated based on past market
movements. In particular, the Banks calculate 100BPV (100Basis Point Value) as supplements of the assets and liabilities
and change in their present value on the assumption thatindex interest rate rises by 1.00%.
Hokuriku Bank’s 100BPV was a ¥70,800 million increase($639,509 thousand increase) and a ¥70,325 million increase
as of March 31, 2021 and 2020, respectively. Hokkaido Bank’s
100BPV was a ¥6,977 million increase ($63,021 thousand
increase) and a ¥18,061 million increase as of March 31, 2021
and 2020, respectively.
Hokuhoku Financial Group, Inc. Annual Report 2021

Other Income

612021/10/13 9:49:45 / 21759016_株式会社ほくほくフィナンシャルグループ_総会その他（Ｃ）

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, andmaintain adequate 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, in addition tovalues determined based on market prices, valuations
calculated on a reasonable basis if no market prices areavailable. Certain assumptions are used in the calculations ofsuch amounts. Accordingly, the results of such calculations mayvary if different assumptions are used.
(5) Fair value of financial instruments
The fair values of the main financial instruments at March 31,
2021 and 2020 are as follows. These amounts do not include
unlisted stocks whose fair values are extremely difficult todetermine (see (b) Financial instruments whose fair values are
deemed to be extremely difficult to determine).
(a) Fair value of financial instruments
Millions of yen
March 31, 2021

Carrying
amountFair value¥5,096,491 ¥5,096,491
Cash and due from banks
Call loans and bills bought――
Monetary claims bought *1
27,98527,985
Securities
Bonds classified as
198,881
208,265
held-to-maturity
Available-for-sale securities
1,878,941
1,878,941
Loans and bills discounted
9,050,446(61,071)
Allowance for loan losses *1
8,989,375
9,086,869
Total assets¥16,191,675 ¥16,298,553
Deposits
Call money and bills soldPayables under securities
lending transactions
Borrowed money
Total liabilities
Derivative transactions *2
Derivative transactions not
qualifying for hedge accounting
Derivative transactions
qualifying for hedge
accounting*3
Total derivative transactions
62¥12,788,914 ¥12,789,094
280,517
280,517
307,787

¥―
―
―
9,383
―

97,493¥106,877¥180―

307,787―

2,385,969
2,386,764¥15,763,189 ¥15,764,163

794
¥974

¥(626)¥(626)¥―(2,311)(2,311)*4 ―¥(2,937)¥(2,937)¥―

Hokuhoku Financial Group, Inc. Annual Report 2021

Other Income

Unrealized
gain (loss)

Millions of yen
March 31, 2020

Carrying
amountFair value

Cash and due from banks¥2,725,025 ¥2,725,025
Call loans and bills bought
59,79559,795
Monetary claims bought *1
32,68332,683
Securities
Bonds classified as
206,294
216,751
held-to-maturity
Available-for-sale securities
1,579,666
1,579,666
Loans and bills discounted
8,656,450(52,904)
Allowance for loan losses *1
8,603,545
8,708,651
Total assets¥13,207,011 ¥13,322,574
Deposits
Call money and bills soldPayables under securities
lending transactions
Borrowed money
Total liabilities
Derivative transactions *2
Derivative transactions not
qualifying for hedge accounting
Derivative transactions
qualifying for hedge accounting
Total derivative transactions

March 31, 2021

¥11,638,618 ¥11,638,722
68,264
68,264
294,641

Derivative transactions *2
Derivative transactions not
qualifying for hedge accounting
Derivative transactions
qualifying for hedge accounting*3
Total derivative transactions¥―――
10,456―105,105¥115,562¥104―

294,641―

827,574
828,429¥12,829,099 ¥12,830,058

855
¥959

¥176

¥176

¥―

(1,304)(1,304)*4 ―¥(1,127)¥(1,127)¥―

Thousands of U.S. dollars
Carrying
Unrealized
amountFair value gain (loss)

Cash and due from banks$46,034,609 $46,034,609
Call loans and bills bought――
Monetary claims bought *1
252,783
252,783
Securities
Bonds classified as
1,796,422
1,881,183
held-to-maturity
Available-for-sale securities
16,971,740 16,971,740
Loans and bills discounted
81,749,134(551,632)
Allowance for loan losses *1
81,197,502 82,078,125
Total assets$146,253,056 $147,218,440
Deposits
Call money and bills soldPayables under securities
lending transactions
Borrowed money
Total liabilities

Unrealized
gain (loss)$115,517,244 $115,518,876
2,533,804
2,533,804
2,780,124$―――
84,761―880,623$965,384$1,632―2,780,124―

21,551,531 21,558,703$142,382,703 $142,391,507

7,172$8,804$(5,658)$(5,658)$―(20,878)(20,878)*4 ―$(26,536)$(26,536)$―*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 parentheseswith respect to net liabilities.

2021/10/13 9:49:45 / 21759016_株式会社ほくほくフィナンシャルグループ_総会その他（Ｃ）*3. Transactions to which hedge accounting is applied include interest
rate swap transactions designated as hedging instrument for the
purpose of balancing interest rate fluctuations in loans, securities, etc.
Deferred hedge accounting is applied to these transactions. Of thesehedge relationships to which “Practical Solution on the Treatment ofHedge Accounting for Financial Instruments that Reference LIBOR”(ASBJ PITF No. 40, September 29, 2020) applies are accounted forunder 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.

Cash and due from banks
The fair values of due from banks with no maturity are
considered to be equal to the book value since the book valuesof these items approximate their fair values. The fair values ofdue from banks with maturity are calculated using the total cash
flows from principal and interest discounted by current market
interest rates, taking into account the credit risk involved. This
calculation is performed separately for each maturity length. In
the event that the terms of due from banks are one year or less,the book values are regarded as approximate to the fair values
and are therefore treated as such.
Call loans and bills bought
The fair values of call loans and bills bought are considered tobe equal to the book value since the contractual terms are one
year or less and book values of these items approximate theirfair values.
Monetary claims bought
The fair values of trust beneficiary rights relating to mortgage
loans purchased by the Banks and relating to loan claims are
determined based on the quoted prices obtained fromcounterparty financial institutions. The fair values of small-lot
monetary claims resulting from asset liquidations are
determined by discounting the cash flows at the market interest
rates, taking into account the credit risk involved.
Securities
The fair values of stocks are calculated on the basis of theaverage price of the stocks on the stock market for the onemonth period immediately preceding the last day of theaccounting term. The fair values of bonds are calculated using
the price indicated on the securities market or other officiallyannounced prices. In the event that neither of these fair values
are available, the price is based on a reasonable estimate. For
investment trusts, the fair value is calculated on the basis of apublicly available benchmark price.
For privately-placed bonds guaranteed by one of the Banks,
the present value is separately calculated using the present
value discounted by a market interest rate where the credit riskof each bond issuer and the remaining period of the bonds are
considered.
For more detailed information regarding the different types of
securities classified according to holding purpose, see “6.
Securities.”
Loans and bills discounted
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 the grading of the loan. Because of this, the bookvalue is employed as the fair value.

For loans with fixed interest rates, the fair value is calculatedusing the total future cash flows from principal and interest
discounted by current market interest rates, taking into accountthe credit risk involved. This calculation is performed separately
for each different category of loans, classified by type of loan,internal credit ratings, and maturity length. For loans whose
repayment period is one year or less, the book value is a close
approximation of the fair value and is therefore employed as
such.
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 theestimated value recoverable from collateral and guarantees.
Since the book value stated on the consolidated balance sheet

as of the consolidated balance sheet date, minus the present
value of estimated bad debt, approximates the fair value, thisfigure is treated as the fair value.
For the category of loans whose maturity is not fixed
because of the loan ceiling set within the estimated value
recoverable from the collateral, the book value is deemed toapproximate the fair value because of the expected period for
repayment and the interest rates applied. The book value istherefore employed as the fair value.
Deposits
For demand deposits, the amount payable on demand as of theconsolidated balance sheet date (i.e., the carrying amount) is
considered to be the fair value. In addition, the fair value of time
deposits is calculated by discounting the estimated future cash
flows for each of the specified periods. This calculation is
performed separately as per the remaining maturity of time
deposits. The discount rate employed is the interest rate thatwould be applied to newly accepted deposits. In the event thatthe deposit term is one year or less, the book value is deemed
to approximate the fair value and is therefore treated as such.
Call money and bills sold and Payables under securities
lending transactions
The fair values of Call money and bills sold and Payables under
securities lending transactions are considered to be equal to thebook value since the contractual terms are one year or less andfair values of these items approximate their book values.
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 thefair value and is therefore treated as such.
For money borrowed through loans carrying fixed rates, thecurrent value of such loans is determined by discounting thetotal of their principal plus interest (separately for each specificperiod) at the rate currently applied to other loans of the same
duration and terms. For loans whose repayment period is one
year or less, the book value is deemed to approximate the fairvalue and is therefore treated as such.

Hokuhoku Financial Group, Inc. Annual Report 2021

Other Income

632021/10/13 9:49:45 / 21759016_株式会社ほくほくフィナンシャルグループ_総会その他（Ｃ）

Derivative transactions
Derivative transactions include interest rate-related transactions(futures, options, swaps, and others), foreign exchange-relatedtransactions (futures, options, swaps, and others), andcommodity-related transactions and are based on the prices on
securities exchanges, discounted value of future cash flows,
option pricing models, and others.
(b) Financial instruments whose fair values are deemed
to be extremely difficult to determine
Financial instruments whose fair values are deemed to be
extremely difficult to determine are indicated below, and are notincluded in “Monetary claims bought” and “Available-for-salesecurities” in the fair value information of financial instruments.

Consolidated balance sheet amounts

March 31

Millions of yen
2021
2020

Thousands of
U.S. dollars
2021

Unlisted stocks *1, 2
Unlisted foreign securities *1
Total¥29,467
0¥29,467$266,166
4$266,170¥29,5220¥29,523*1. These items are excluded from “fair value information of financial
instruments” on the basis that no market price is available and adetermination of the fair value would be extremely difficult.
*2. Unlisted stocks were written down by ¥21 million ($198 thousand) and¥6 million as of March 31, 2021 and 2020, respectively.

(6) Maturity analysis for financial assets and securities with contractual maturities

64

March 31, 2021

Due in 1 year
or less

Due after 1 year
through 3 years

Due from banks
Call loans and bills bought
Monetary claims bought
Securities
Bonds classified as held-to-maturity
Japanese government bonds
Japanese local government bonds
Japanese corporate bonds
Available-for-sale securities with maturities
Japanese government bonds
Japanese local government bonds
Japanese corporate bonds
Other
Loans and bills discounted
Total¥4,959,360―
1,003
180,391
37,362――37,362
143,028
94,00026,525
13,6528,850
2,825,811¥7,966,566¥―――
284,199
61,4501,500
500
59,450222,748
52,00085,122
24,84660,7801,449,373¥1,733,572

March 31, 2020

Due in 1 year
or less

Due after 1 year
through 3 years

Due from banks
Call loans and bills bought
Monetary claims bought
Securities
Bonds classified as held-to-maturity
Japanese government bonds
Japanese local government bonds
Japanese corporate bonds
Available-for-sale securities with maturities
Japanese government bonds
Japanese local government bonds
Japanese corporate bonds
Other
Loans and bills discounted
Total¥2,589,878
59,795
1,127
275,71239,0162,520―
36,496236,696
160,400
47,00015,175
14,1202,877,722¥5,804,237

¥―
―
5,000
331,628
65,3451,000―
64,345266,283
146,600
66,086
26,51427,081
1,370,996¥1,707,625

Millions of yen
Due after 3 years Due after 5 years
through 5 years through 7 years¥―――
240,394
42,361
10,000500
31,861
198,032―
95,40937,35965,263
1,137,331¥1,377,725¥―――
189,488
6,985
―
1,500
5,485
182,503
12,00058,964
13,743
97,795
793,060¥982,548

Millions of yen
Due after 3 years Due after 5 years
through 5 years through 7 years¥―――
236,445
35,630500
1,000
34,130200,815―
101,593
32,861
66,3591,101,553¥1,337,998

Hokuhoku Financial Group, Inc. Annual Report 2021

Other Income、Maturity analysis for financial assets and securities with contractual maturities¥―――
121,948
15,976
10,0001,500
4,476
105,971―
51,762
15,55738,652725,964¥847,912

Due after
7 years¥――
26,788859,460
50,72550,000―725
808,735
227,500
281,70362,540236,9902,667,890¥3,554,139

Due after
7 years¥――
26,310510,645
50,61550,000―615
460,030
76,500204,720
72,155
106,654
2,417,153¥2,954,109

2021/10/13 9:49:45 / 21759016_株式会社ほくほくフィナンシャルグループ_総会その他（Ｃ）

March 31, 2021

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

Due after
7 years

Due from banks
Call loans and bills bought
Monetary claims bought
Securities
Bonds classified as held-to-maturity
Japanese government bonds
Japanese local government bonds
Japanese corporate bonds
Available-for-sale securities with maturities
Japanese government bonds
Japanese local government bonds
Japanese corporate bonds
Other
Loans and bills discounted
Total$44,795,954―
9,063
1,629,405
337,483――
337,483
1,291,922
849,065
239,595
123,32179,941
25,524,449$71,958,871$―――
2,567,062
555,059
13,5494,516
536,994
2,012,003
469,696
768,880
224,424
549,003
13,091,622$15,658,684$――
241,973
7,763,167
458,179
451,630―
6,549
7,304,988
2,054,918
2,544,522
564,904
2,140,644
24,098,012
32,103,152$―――
2,171,385
382,636
90,326
4,516
287,794
1,788,749―
861,793
337,453
589,503
10,273,066$12,444,451$―――
1,711,576
63,097―
13,54949,548
1,648,479
108,391
532,600
124,138
883,350
7,163,402$8,874,978

Loans and bills discounted
Claims on "Legal bankruptcy" borrowers, "Virtual bankruptcy" borrowers, and "Possible bankruptcy" borrowers amounted to ¥156,342
million ($1,412,178 thousand) and ¥134,317 million as of March 31, 2021 and 2020, respectively, and loans with no contractual
maturities amounted to ¥20,636 million ($186,404 thousand) and ¥28,743 million as of March 31, 2021 and 2020, respectively. They are
not included in the table above.
(7) Maturity analysis for financial liabilities with contractual maturities

March 31, 2021

Due in 1 year
or less

Due after 1 year
through 3 years

Deposits
Call money and bills soldPayables under securities lending transactions
Borrowed money
Total¥11,904,909
280,517
307,787
1,650,985¥14,144,199¥724,147――
430,946¥1,155,093

March 31, 2020

Due in 1 year
or less

Due after 1 year
through 3 years

Deposits
Call money and bills soldPayables under securities lending transactions
Borrowed money
Total¥10,683,960
68,264
294,641
139,324¥11,117,925¥787,429――
325,347¥1,112,776

March 31, 2021

Due in 1 year
or less

Due after 1 year
through 3 years$107,532,374
2,533,804
2,780,124
14,912,708$127,759,010$6,540,936――
3,892,572$10,433,508

Millions of yen
Due after 3 years Due after 5 years
through 5 years through 7 years¥152,074――
303,530¥455,605¥4,689――428¥5,118Millions of yen
Due after 3 years Due after 5 years
through 5 years through 7 years¥157,866――
362,387¥520,253¥4,637――471¥5,108Due after
7 years¥3,094――77¥3,172
Due after
7 years¥4,725――45¥4,770Thousands of U.S. dollars

Deposits
Call money and bills soldPayables under securities lending transactions
Borrowed money
Total

Due after 3 years Due after 5 years
through 5 years through 7 years$1,373,627――
2,741,676$4,115,303$42,354――3,875$46,229

Due after
7 years$27,953――700$28,653

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

Hokuhoku Financial Group, Inc. Annual Report 2021

Maturity analysis for financial assets and securities with contractual maturities、Maturity analysis for financial liabilities with
contractual maturities65

2021/10/13 9:49:45 / 21759016_株式会社ほくほくフィナンシャルグループ_総会その他（Ｃ）

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 and computation method of fair value are as follows. Note that
contract amounts do not represent the market risk exposure of derivative transactions.
• Interest Rate-Related Transactions

March 31, 2021

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

March 31, 2020

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

March 31, 2021

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

¥67,51267,500510
510/¥55,140
55,092510
510/¥1,275
(820)
(0)
0
¥455

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

¥86,72286,700541
541/¥73,81773,809541
541/¥1,912(1,315)(1)
1¥597

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

$609,817
609,706
4,610
4,610
/

$498,061
497,626
4,610
4,610
/

$11,524(7,410)(6)
6$4,114

Unrealized gain (loss)¥1,275
(820)
10
(4)
¥461

Unrealized gain (loss)¥1,912(1,315)9(3)¥603

Unrealized gain (loss)$11,524(7,410)93(38)$4,169Notes: 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 fair value is determined using the discounted value of future cash flows, option pricing models, etc.

• Foreign Exchange-Related Transactions

March 31, 2021

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

March 31, 2020

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

March 31, 2021

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

¥2,10076,77462,72639,851
39,851/¥2,100509
553
18,716
18,716/¥1(2,223)
1,074
(656)
655
¥(1,148)

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

¥5,456
43,52544,75338,971
38,971/¥1,231523
450
16,208
16,208
/

¥4
(155)
(323)
(837)
835
¥(476)

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

$18,971
693,478
566,588359,967
359,967/$18,971
4,600
5,000
169,057
169,057/$12(20,088)
9,704(5,926)
5,923$(10,375)

Unrealized gain (loss)¥1(2,223)
1,074
833
(625)
¥(939)

Unrealized gain (loss)

¥4
(155)
(323)
1,478
(1,254)¥(250)

Unrealized gain (loss)$12(20,088)
9,704
7,533
(5,646)$(8,485)

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 fair value is determined using the discounted value of future cash flows.

66

Hokuhoku Financial Group, Inc. Annual Report 2021

Derivative transactions to which hedge accounting is not applied

2021/10/13 9:49:45 / 21759016_株式会社ほくほくフィナンシャルグループ_総会その他（Ｃ）• Commodity-Related Transactions

March 31, 2021

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

March 31, 2020

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

March 31, 2021

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

¥842
842
/

¥832
832
/

¥(79)
145
¥66

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

¥331
331
/

¥250
250
/

¥170
(113)
¥56

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

$7,608
7,608/$7,5177,517/$(714)
1,317$603

Unrealized gain (loss)

¥(79)
145
¥66

Unrealized gain (loss)

¥170
(113)
¥56

Unrealized gain (loss)$(714)
1,317$603

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 fair value is determined using the price of the underlying asset, terms of contract, and other factors which structure the contract.
3. The above derivative transactions consist of those for oil, copper, aluminum, etc.

• Others

March 31, 2021

Over-the-counter transactions
Earthquake derivatives
Sell
Buy
Total

March 31, 2020

Over-the-counter transactions
Earthquake derivatives
Sell
Buy
Total

March 31, 2021

Over-the-counter transactions
Earthquake derivatives
Sell
Buy
Total

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

¥9,015
9,015
/

¥―
―
/

¥(58)
58
¥―

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

¥8,615
8,615
/

¥―
―
/

¥(55)
55
―

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

$81,429
81,429/$――/$(526)
526$―

Unrealized gain (loss)

¥―
―
¥―

Unrealized gain (loss)¥―――

Unrealized gain (loss)

$―
―
$―

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 fair value is determined using the price of the underlying asset, terms of contract, and other factors which structure the contract.

Hokuhoku Financial Group, Inc. Annual Report 2021

Derivative transactions to which hedge accounting is not applied67

2021/10/13 9:49:45 / 21759016_株式会社ほくほくフィナンシャルグループ_総会その他（Ｃ）(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 and computation method of the fair value are as follows. Note that
contract amounts do not represent the market risk exposure of derivative transactions.
• Interest Rate-Related Transactions
March 31, 2021
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

March 31, 2020
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 bondMarch 31, 2021
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

Total

¥73,000¥68,000¥(199)

37,670/37,670/*3¥(199)

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

Fair value¥65,883¥65,883¥(1,449)

38,545/38,531/*3¥(1,449)

Loans and bills discounted

Total

Exceptional treatment forinterest swaps

Fair value

Loans and bills discounted

Total

Exceptional treatment forinterest swaps

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

$659,380$614,217$(1,804)

340,260/

340,260/*3$(1,804)

Loans and bills discounted

Notes: 1. Deferred hedge accounting is mainly applied in accordance with JICPA Industry Committee Practical Guidelines No. 24.
2. The fair value is determined using the discounted value of future cash flows, option pricing models, etc.
3. Amounts resulting from interest swaps with exceptional treatment are accounted for together with the financial instruments hedged. As a result,the fair value is included in the fair value of the loans stated in Note 31, "Financial Instruments and Related Disclosures.”68

Hokuhoku Financial Group, Inc. Annual Report 2021

Derivative transactions to which hedge accounting is applied

2021/10/13 9:49:45 / 21759016_株式会社ほくほくフィナンシャルグループ_総会その他（Ｃ）• Foreign Exchange-Related Transactions
March 31, 2021
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)

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

¥34,665¥239¥(2,111)

―
/

―
/

―
(2,111)

Total
March 31, 2020
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, 2021
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)

Fair value

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

Fair value¥34,135¥298¥39

27,287
/

―
/

105
¥145

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

$313,123$2,164$(19,074)

―
/

―
/

―
$(19,074)

Total

Notes: 1. Deferred hedge accounting is mainly applied in accordance with JICPA Industry Committee Practical Guidelines No. 25.
2. The fair value is determined using the discounted value of future cash flows.

33. 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 thesame 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 andassess 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.

Hokuhoku Financial Group, Inc. Annual Report 2021

Derivative transactions to which hedge accounting is applied、Segment Information692021/10/13 9:49:45 / 21759016_株式会社ほくほくフィナンシャルグループ_総会その他（Ｃ）(3) Information about ordinary income, profit (loss), assets, liabilities, and other items
Segment results for the years ended March 31, 2021 and 2020 are as follows:
Millions of yen
2021
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¥85,281
1,145
86,427
14,297
9,857,292¥9,473,122¥70,337¥155,619
1,234
2,380
71,572
157,999
8,192
22,4906,737,566 16,594,859¥6,514,085 ¥15,987,208

Other

Total

¥20,518¥176,137
4,671
7,052
25,190183,189
2,408
24,898
95,160 16,690,020¥66,948 ¥16,054,156

Reconciliations Consolidated¥(174)¥175,963(7,052)―(7,226)
175,963(3,563)
21,334(54,548) 16,635,471¥(57,190) ¥15,996,966¥3,957――¥2,515――¥6,473
―
―

¥268
―
―

¥6,741
―
―

¥1
2,102
7,182

¥6,7432,102
7,182¥2,817¥2,170¥4,988¥60¥5,048¥6¥5,055

Millions of yen
2020
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¥87,353
1,175
88,528
11,2388,108,929¥7,754,187¥74,206¥161,560
775
1,951
74,982
163,511
9,592
20,831
5,496,607 13,605,537¥5,278,836 ¥13,033,024

Other

Total

¥21,118¥182,678
4,767
6,718
25,885
189,397
2,455
23,286
93,104 13,698,642¥67,258 ¥13,100,282

Reconciliations Consolidated¥(275)¥182,402(6,718)―(6,994)
182,402(3,034)
20,252(53,780) 13,644,861¥(50,740) ¥13,049,541¥4,271――¥2,571――¥6,842
―
―

¥309
―
―

¥7,152
―
―

¥6
2,102
9,285

¥7,1592,102
9,285¥3,085¥1,849¥4,935¥150¥5,085¥3¥5,088

Thousands of U.S. dollars
2021

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
assets70

Hokuhoku Financial Group, Inc. Annual Report 2021

Segment Information

Reportable segment
Hokuriku Bank Hokkaido Bank
Total

Other

$770,317
10,347780,664
129,141
89,037,059$85,567,002$185,331 $1,590,979
42,20063,699227,5311,654,678
21,752
224,897859,551 150,754,404$604,721 $145,010,902$635,331 $1,405,648
11,152
21,499646,483
1,427,147
74,004203,145
60,857,794 149,894,853$58,839,179 $144,406,181

Total

Reconciliations Consolidated$(1,572) $1,589,407(63,699)―(65,271)
1,589,407(32,189)
192,708(492,718) 150,261,686$(516,580) $144,494,322$35,748――$22,722――$58,470――$2,428――$60,898――$16
18,98964,879$60,914
18,98964,879$25,452$19,606$45,058$545$45,603$60$45,6632021/10/13 9:49:45 / 21759016_株式会社ほくほくフィナンシャルグループ_総会その他（Ｃ）(4) Information about services
Millions of yen
Investment
operations
Other

Deposit andloan operations

Year ended March 31, 2021

Ordinary income from external customers¥96,141¥39,914

Year ended March 31, 2020

¥43,484¥96,631

Year ended March 31, 2021

Total

¥42,287¥182,402

Thousands of U.S. dollars
Investment
operations
Other

Deposit andloan operations

Ordinary income from external customers¥175,963

Millions of yen
Investment
operations
Other

Deposit andloan operations

Ordinary income from external customers

Total¥39,907$868,404$360,532

Total$360,471$1,589,407(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.

34. Related Party Transactions
Related party transactions as of March 31, 2021 and 2020 were as follows:• Officers and principal individual shareholders of the company submitting consolidated financial statements
March 31, 2021
Transaction amount *5
Related party

Account Classification

Nakamura-Tome Precision Industry Co., Ltd.
Loans and bills discounted*2
NAKAMURA-TOME HOLDING CO., LTD. *2 Loans and bills discounted

Balance at end of year

Millions of yen

Thousands of
U.S. dollars

Millions of yen

Thousands of
U.S. dollars¥950$8,581¥950$8,581¥500$4,516¥500$4,516

March 31, 2020
Related party

Account Classification

Nakamura-Tome Precision Industry Co., Ltd.
Loans and bills discounted*2
NAKAMURA-TOME HOLDING CO., LTD. *2 Loans and bills discounted
YUGEYA Inc.*3
Loans and bills discounted *6
Kimito Tsurui *4Loans and bills discounted *6

Transaction amount *5

Balance at end of year

Millions of yen

Millions of yen

¥950

¥950

¥1,013
¥320
¥11

¥500
¥311
¥10

Notes: 1. Terms and conditions of the transactions are similar to those with unrelated parties.
2. 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.
3. A close relative of an ex-member of the Group’s directors owns the majority of this company’s voting rights.
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 exist.
4. Mr. Tsurui is a close relative of a member of the Group’s directors.
5. Transaction amount was reported at the average balance for the period.
6. Land and buildings were pledged as collateral for the loans.

35. Subsequent Events
There are no applicable matters.

Hokuhoku Financial Group, Inc. Annual Report 2021

Segment Information、Related Party Transactions、Subsequent Events

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INDEPENDENT AUDITOR’S REPORT

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Hokuhoku Financial Group, Inc. Annual Report 2021

INDEPENDENT AUDITOR’S REPORT

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NON-CONSOLIDATED FINANCIAL STATEMENTS

NON-CONSOLIDATED BALANCE SHEET (UNAUDITED)The Hokuriku Bank, Ltd.

2020

Thousands of
U.S. dollars
2021$30,427,546

Millions of yen
March 312021

AssetsCash and due from banks¥3,368,633¥1,780,569

Call loans and bills bought―

59,795―27,98532,683

252,783

Monetary claims bought
Trading assets

793

1,067

7,167

4,947

4,939

44,689Securities

1,268,165

1,158,001

11,454,839

Loans and bills discounted

5,033,384

4,910,354

45,464,591

Foreign exchanges

13,597

9,840

122,822

Other assets

66,84066,187603,744

Tangible fixed assets

73,176

74,202660,972

Intangible assets

3,363

4,369

30,378

Money held in trust

Prepaid pension cost

3,786

3,900

34,205

Customers’ liabilities for acceptances and guarantees

25,95029,419234,401

Allowance for loan losses
Total assets(33,332)(26,400)(301,078)

9,857,292¥8,108,929

89,037,059¥7,350,562¥6,735,467$66,394,748

280,517

68,2642,533,804

Liabilities and equity
Liabilities
Deposits
Call money and bills soldPayables under repurchase agreements

24,67011,877

222,842

Payables under securities lending transactions

221,036

285,243

1,996,535

Trading liabilities

349

497

3,156

Borrowed money

1,485,575

547,987

13,418,618

Foreign exchanges

92

47

832

Borrowed money from trust account

2,942

534

26,580

Other liabilities

53,15854,044

480,164

368

443

3,327

Reserve for employee retirement benefits
Reserve for directors’ and audit & supervisory board members’ retirement benefits

43

43

392

Reserve for contingent losses

495

703

4,472

Reserve for reimbursement of deposits

1,138

1,473

10,285

Deferred tax liabilities

21,097

12,937

190,569

Deferred tax liabilities for land revaluation

5,123

5,201

46,277

Acceptances and guarantees

25,95029,419234,401

9,473,122

7,754,187

85,567,002

Capital stock

140,409140,409

1,268,264

Capital surplus

14,99814,998135,479

Retained earnings

151,491

144,299

1,368,362

69,26947,899625,680(87)(1,076)

(790)

8,088

8,211

73,062

384,170

354,7423,470,057¥9,857,292¥8,108,929

89,037,059

Total liabilities
EquityValuation and translation adjustments
Valuation difference on available-for-sale securities
Deferred gains (losses) on hedges
Revaluation reserve for land
Total equity
Total liabilities and equity

Hokuhoku Financial Group, Inc. Annual Report 2021

NON-CONSOLIDATED BALANCE SHEET (UNAUDITED)_Hokuriku

772021/10/13 9:49:45 / 21759016_株式会社ほくほくフィナンシャルグループ_総会その他（Ｃ）

NON-CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)The Hokuriku Bank, Ltd.
Thousands of
U.S. dollars
2021

Millions of yen
2021

2020

Interest on loans and discounts¥42,557¥43,722$384,406

Interest and dividends on securities

13,36914,257

120,758

Interest on deposits with other banks

1,003

606

9,065

318

356

2,877

42

6

385

17,523

17,961

158,286

IncomeInterest income:

Other interest income
Trust fees
Fees and commissions
Trading income
Other ordinary income

50

136

458

4,063

6,064

36,708Other income

7,522

5,778

67,950Total income

86,452

88,889780,893

Interest on deposits

436

740

3,946

Interest on payables under repurchase agreements

27

37

245

Interest on payables under securities lending transactions

155

791

1,400

Expenses
Interest expenses:

Interest on borrowings and rediscounts
Other interest expenses
Fees and commissions

6

274

54

850

1,800

7,681

7,397

7,397

66,821Other ordinary expenses

1,450

314

13,099General and administrative expenses

44,73846,609404,105

Provision of allowance for loan losses

8,330

9,004

75,245

Other expenses

3,403

5,097

30,741

Total expenses

66,79572,067603,337

Income before income taxes

19,657

16,821

177,556

6,453

5,185

58,293

Income taxes:
Current

78

Deferred(1,093)396(9,878)Net income¥14,297¥11,238$129,141

Hokuhoku Financial Group, Inc. Annual Report 2021

NON-CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)_Hokuriku

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NON-CONSOLIDATED FINANCIAL STATEMENTS

NON-CONSOLIDATED BALANCE SHEET (UNAUDITED)The Hokkaido Bank, Ltd.

2020

Thousands of
U.S. dollars
2021

Millions of yen
March 312021

AssetsCash and due from banks¥1,725,165¥942,323$15,582,745

Trading account securities

2,614

2,722

23,615

Money held in trust

9,098

9,265

82,182

Securities
Loans and bills discounted

832,023649,217

7,515,342

4,031,781

3,762,756

36,417,498

Foreign exchanges

8,787

9,174

79,376

Other assets

86,13876,957778,059

Tangible fixed assets

28,00928,038253,000

Intangible assets

2,809

3,378

25,375Prepaid pension cost

978

―

8,836

Deferred tax assets

5,626

6,830

50,822Customers’ liabilities for acceptances and guarantees

26,966

26,674

243,580

Allowance for loan losses(22,433)(20,732)(202,636)¥6,737,566¥5,496,607

60,857,794$49,364,178

Total assets
Liabilities and equity
Liabilities¥5,465,108¥4,927,225

Payables under securities lending transactions

Deposits

86,751

9,398

783,589

Borrowed money

895,500

274,600

8,088,700

Foreign exchanges

355

65

3,209

Other liabilities

36,98137,739334,041

Reserve for employee retirement benefits
Reserve for directors’ and audit & supervisory board members’ retirement
benefits
Reserve for contingent losses

1,589

2,213

14,360Reserve for reimbursement of deposits
Acceptances and guarantees
Total liabilities

93

93

841

248

321

2,243

491

504

4,438

26,966

26,674

243,580

6,514,085

5,278,836

58,839,179

EquityCapital stock

93,524

93,524

844,766

Capital surplus

16,795

16,795

151,703

Retained earnings

101,751

98,929919,077

11,384

8,522

102,832

26

―

237

Valuation and translation adjustments
Valuation difference on available-for-sale securities
Deferred gains (losses) on hedges
Total equity
Total liabilities and equity

223,480

217,771

2,018,615¥6,737,566¥5,496,607$60,857,794

Hokuhoku Financial Group, Inc. Annual Report 2021

NON-CONSOLIDATED BALANCE SHEET (UNAUDITED)_Hokkaido

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NON-CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)The Hokkaido Bank, Ltd.
Thousands of
U.S. dollars
2021

Millions of yen
2021

2020

¥41,568¥41,367$375,475

6,041

9,024

54,567

(1)

(4)

(18)

428

270

3,870

IncomeInterest income:Interest on loans and discounts
Interest and dividends on securities
Interest on receivables under resale agreements
Interest on deposits with other banks

143

161

1,298

Fees and commissions

Other interest income

15,70915,907

141,898

Other ordinary income

2,947

4,471

26,625

Other income

4,778

3,786

43,163

Total income

71,61574,984

646,878

Interest on deposits

187

308

1,690

Interest on payables under securities lending transactions

61

370

558

Interest on borrowings and rediscounts

(5)

(0)

(53)

Other interest expenses

8

6

73

Fees and commissions

9,895

9,907

89,386

Other ordinary expenses

2,514

614

22,712

General and administrative expenses

38,977

40,212352,073

Provision of allowance for loan losses

4,488

2,556

40,541Other expenses

4,082

7,436

36,875

Total expenses

60,21061,412543,855

Income before income taxes

11,405

13,572103,023

Expenses
Interest expenses:

Income taxes:

80

Current

3,115

3,242

28,138Deferred

97

736

881

Net income¥8,192¥9,592$74,004

Hokuhoku Financial Group, Inc. Annual Report 2021

NON-CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)_Hokkaido

CORPORATEINFORMATIONCORPORATE INFORMATION(as(asofofMarch
March31,
31,2018)
2021)

Business activities
The Hokuhoku Financial Group is composed of the holding company and 12 consolidated subsidiaries and one affiliate. Our corebusiness is banking, and we also provide a wider range of financial services including leases, credit cards, loan guarantees and venture
capital. The following is a diagram of our business.

Business diagram

Hokuhoku Financial Group, Inc.
The Hokuriku Bank, Ltd.
Hokugin Business Services Co., Ltd.
(Document management,
concentrated business processing)

Hokuhoku Tokai Tokyo Securities Co., Ltd.
(Financial instruments business)

The Hokkaido Bank, Ltd.

Hokugin Lease Co., Ltd.
(Leasing)

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

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

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

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

Dogin Regional Research Institute Co., Ltd.
(Research on regional economy,
survey research services, consulting)

Hokugin Software Co., Ltd.
(Software development)
Hokuhoku Services Co., Ltd.
(Servicer)* Equity method-affiliated company

Hokuhoku Capital Co., Ltd.*(Venture capital)

Major subsidiaries
Company name

Address

Main business activities

Established

Capital(units: millions of yen, %)FG’s share of Dividend
voting rights

The Hokuriku Bank, Ltd.

1-2-26 Tsutsumicho-dori, Toyama City Banking

July 31, 1943

140,409100.007,228

The Hokkaido Bank, Ltd.

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

March 5, 1951

93,524100.00—

Hokuhoku Tokai Tokyo
Securities Co., Ltd.

1-8-10 Marunouchi, Toyama City Financial instruments business April 21, 2016

1,250

60.00

—

July 21, 1983

100

70.25

—

March 2, 1983

36

87.39

3

December 12, 1978

50

100.00—

Hokugin Lease Co., Ltd.

2-21 Aramachi, Toyama City

Hokuriku Card Co., Ltd.

1-2-1 Shintomi-cho, Toyama City Credit card operations

Leasing

Hokuriku Hosho Services Co., Ltd. 1-2-26 Tsutsumicho-dori, Toyama City Loan guarantees
Hokugin Software Co., Ltd.

1-5-25 Higashidenjigata, Toyama City

Software development

May 1, 198630

100.00—

Hokuhoku Services Co., Ltd.

1-6-8 Chuo-dori, Toyama City

Servicer

December 5, 2003

500

100.00—Document management,
concentrated business processing
Document management, cash
management, concentrated
business processing
Credit card operations, loan
guarantees
Research on regional economy,
survey research services,
consulting
Venture capital

March 25, 195330

(100.00)—

June 8, 1979

50

(100.00)—

June 13, 1977

120

(100.00)—

August 8, 2002

100

(100.00)—

January 11, 1985

250

5.00
(38.75)—

Hokugin Business Services Co., Ltd. 1883 Hiyodorijima, Toyama City
Dogin Business Service, Ltd.
Dogin Card Co., Ltd.

Higashisapporo Dogin Building,Higashisapporo 3-1-2-33,
Shiroishi-ku, Sapporo City
2-2-14 Chuo-ku Minami, Sapporo City

Dogin Regional Research Institute Dogin Annex Building, 4-1
Co., Ltd.
Odori Nishi, Chuo-ku, Sapporo City
Hokuhoku Capital Co., Ltd.

1-6-8 Chuo-dori, Toyama City( ) Indicates voting rights involving shares held by subsidiaries

64

Hokuhoku Financial Group, Inc. Annual Report 2018

Hokuhoku Financial Group, Inc. Annual Report 2021

81

OUTLINE
HOKURIKU BANK,BANK, LTD.
LTD.
OUTLINE OF
OF SUBSIDIARIESSUBSIDIARIES - THE HOKURIKUThe Hokuriku Bank, Ltd.
https://www.hokugin.co.jp/

Establishment

History

The Hokuriku Bank has its origins as the Kanazawa 12th
National Bank, which was established on August 26, 1877, with
the House of Kaga-Maeda providing 70% of the capital. The
bank was the creation of the family established by Maeda
Toshiie, the founder of the Kaga clan.
Since its founding, the bank has worked hand-in-hand withcustomers in the region, and grown into a bank with a wide
branch network covering Hokuriku, Hokkaido, as well asJapan’s three major metropolitan areas. Based on the bank’s
management philosophy of “Prospering Together with theRegion,” “Fair & Steady Management”, and “Progressive &Innovative Services,” Hokuriku Bank draws fully on its
management resources to provide high-quality comprehensive
financial services, aiming to become the bank preferred andrelied on by local communities.

August 1877
February 1879
January 1884
July 1897
July 1943
January 1950
September 1961
November 1961
January 1971
November 1973
March 1974
July 1978

Company outline (as of March 31, 2021)
Company name:
The Hokuriku Bank, Ltd.
Business:
Banking
Incorporation:
July 31, 1943 (founded in 1877)
Location of headquarters:
1-2-26 Tsutsumicho-dori, Toyama City, Toyama
Total assets:¥9,857.2 billion
Deposits (including NCDs): ¥7,350.5 billion
Loans and bills discounted: ¥5,033.3 billion
Issued shares:
Common stock:
1,047,542,335
Capital adequacy ratio(non-consolidated):
9.14%
Employees:
2,365
Branches (as of June 30, 2021)
188 (145 branches, 43 sub-branches)
Domestic:
Overseas:
5 representative offices

October 1979
November 1981
January 1984
May 1987
August 1990
November 1993
December 1998
June 2000
July 2000
January 2001
April 2001
February 2002
February 2002
October 2002
March 2003
September 2003
September 2004
December 2004
March 2006
May 2011
December 2013
October 2015
April 2019
July 201982

Hokuhoku Financial Group, Inc. Annual Report 2021

Kanazawa 12th National Bank foundedToyama 123rd National Bank founded
Kanazawa 12th National Bank and Toyama 123rd
National Bank merged to form Toyama 12th
National Bank with headquarters in Toyama City
Toyama 12th National Bank changed nameto 12th Bank
Four banks, 12th, Takaoka, Chuetsu, andToyama Bank, merged to form Hokuriku Bank
Launched foreign exchange operations (firstregional bank to do so)
Listed on the Tokyo Stock Exchange
Completed present head office
Received blanket approval to engage incorrespondent banking services
Launched first online system
Received blanket approval to engage in
foreign exchange business
Received blanket approval to handle yendenominated and foreign-denominatedsyndicated loans
Launched second online system
Launched online foreign exchange system
Launched firm banking service
Introduced VI (visual identity)
Launched third online system
Launched investment trust agent operations
Launched over-the-counter sales of
securities investment trusts
Launched Internet and mobile banking services
Completed new computer center (Alps building)Launched new computer system
Launched over-the-counter sales of casualty
insurance
Third-party allocation worth ¥39.1 billion,
brought new capital to ¥140.4 billion
Launched convenience store ATM service
Launched over-the-counter sales of life insurance
Took over part of the Ishikawa Bank’s operations
Established Hokugin Financial Group, Inc.
through share transfer, then became a subsidiaryof the Hokugin Financial Group, Inc.
Integrated management with HokkaidoBank, name of parent company changed to
Hokuhoku Financial Group, Inc.
Launched securities agency operations
Entered into a contract on joint system use with
Hokkaido Bank and the Bank of Yokohama
Commenced use of joint IT system with
Hokkaido Bank and the Bank of Yokohama
The head office building was registered as aTangible Cultural Property (structures)
Opened an individual consulting base“Hokugin Plaza”
Launched Trust Business Service
Launched Recruitment Service
Hokuhoku Financial Group, Inc. Annual Report 2018

65

OUTLINE OF
OF SUBSIDIARIESSUBSIDIARIES - THE HOKKAIDOHOKKAIDO BANK,OUTLINE
BANK,LTD.
LTD.
The Hokkaido Bank, Ltd.
https://www.hokkaidobank.co.jp/

Establishment

History

Hokkaido Bank was established on March 5, 1951, in responseto the strong demand for financing from small and mediumsized corporations in Hokkaido accompanying the sudden
increase in population and development of new industries in
Hokkaido during the post-war recovery period.
Based on this background, and as a bank deeply rooted in
Hokkaido, Hokkaido Bank considers it its mission to contributeto regional economic growth by smoothly providing financing
and quality financial services to its customers in Hokkaido.
Going forward, Hokkaido Bank will never abandon the spirit withwhich it was created, and will continue to move forward together
with its customers in Hokkaido.

March 1951
April 1961
May 1962
August 1964
June 1971
July 1976
December 1980

Company outline (as of March 31, 2021)
Company name:
The Hokkaido Bank, Ltd.
Business:
Banking
Incorporation:
March 5, 1951
Location of headquarters:
4-1 Odori Nishi, Chuo-ku, Sapporo City
Total assets:¥6,737.5 billion
Deposits (including NCDs): ¥5,465.1 billion
Loans and bills discounted: ¥4,031.7 billion
Issued shares:
Common stock:486,634,512
Preferred stock (Type 2): 85,945,600
Capital adequacy ratio(non-consolidated):
8.88%
Employees:
2,137
Branches (as of June 30, 2021)
Domestic:
144 (136 branches, 8 sub-branches)
Overseas:
3 representative offices

April 1981
June 1986
September 1987
October 1990
March 1991
October 1991
November 1991
January 1993
April 1994
December 1998
July 1999
November 1999
June 2000
April 2001
October 2002
December 2003
April 2004
September 2004
April 2005
March 2006
August 2006
March 2009
January 2010
May 2011
March 2014
March 2019
April 201966

Hokuhoku Financial Group, Inc. Annual Report 2018

Hokkaido Bank establishedLaunched foreign exchange operations
Listed on the Sapporo Stock Exchange
Completed present head office
Launched first online system
Launched second online system
Received blanket approval to engage incorrespondent banking services
Hokkaido Small and Medium Corporation Human
Resource Development Fund establishedLaunched online foreign exchange system
Listed on the first section of the Tokyo Stock
Exchange
Completed the Higashi Sapporo Dogin Building
Established Dogin Cultural Foundation
Launched a new foreign exchange online system
Completed Dogin Building Annex
Launched third online system
Launched investment trust agent operations
Launched over-the-counter sales of
securities investment trusts
Issued preferred stock (Type 2) (issuanceamount was ¥53.716 billion)
Launched telephone banking service
Launched Internet mobile banking
Launched over-the-counter sales of casualty
insurance
Launched over-the-counter sales of life insurance
Opened Business Loan Plaza
Launched convenience store ATM service
Came under management of Hokugin Financial
Group, Inc., parent of Hokuriku Bank; Hokuhoku
Financial Group, Inc. launched
Launched securities agency operations
Entered into a contract on joint system use
with Hokuriku Bank and the Bank of
Yokohama
Opened representative office in Shenyang, China
Opened representative office in YuzhnoSakhalinsk, Russia
Taiwan ATM/SmartPay Debit Service started
Commenced use of joint IT system with
Hokuriku Bank and the Bank of Yokohama
Opened representative office in Vladivostok,
RussiaOpened Account Opening Plaza“Odori Subway Station Sub-Branch”
Opened the NISEKO Sub-Branch

Hokuhoku Financial Group, Inc. Annual Report 2021

83

DIRECTORSDIRECTORS

Hokuhoku Financial Group, Inc.

Addresses

President:
Eishin Ihori

Hokuhoku Financial Group, Inc.

The Hokkaido Bank, Ltd.

1-2-26, Tsutsumicho-dori Toyama
City, Toyama 930-8637, Japan
Telephone: +81-76-423-7331
https://www.hokuhoku-fg.co.jp/
E-mail: info@hokuhoku-fg.co.jp

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

Deputy President:
Yuji Kanema

Directors:
Hidenori Mugino
Yoshimasa Takada
Hiroshi Nakazawa
Masahiko Kobayashi
Akira Sakai
Directors serving as
Audit and Supervisory
Committee Members:
Hirokuni Kitagawa
Masaaki Manabe
Nobuya Suzuki
Kaoru Funamoto

The Hokuriku Bank, Ltd.
Chairman:
Hidenori Mugino
President:
Eishin Ihori
Managing Directors:
Hiroshi Nakazawa
Hiroyuki Jogan
Masahiko Kobayashi

Directors:
Yoshikazu Sakamoto
Akira Sakai
Audit & Supervisory
Board Members:
Masahiro Numada
Kenichi Nakamura
Isao Nagahara
Katsusuke Watanuki
Seiichiro Yagi

The Hokkaido Bank, Ltd.
Chairman:
Masahiro Sasahara
President:
Yuji Kanema
Deputy President:
Takashi Ohki
Managing Directors:
Yoshimasa Takada
Tsuyoshi Sasaki

Directors:
Tetsuya Yamazaki
Naoki Minami
Audit & Supervisory
Board Members:
Takashi Ogura
Ken Ebina
Shuji Iwamura
Satoshi Chiba

The Hokuriku Bank, Ltd.
International Department
1-2-26, Tsutsumicho-dori Toyama
City, Toyama 930-8637, Japan
Telephone: +81-76-423-7815
Facsimile: +81-76-423-7561
E-mail: kokusaibu@hokugin.co.jp
International Operations Center
Kanda Higashinippon bldg
5F 2, Kandatomiyamacho
Chiyoda-ku, Tokyo 101-0043, Japan
Telephone: +81-3-3252-8350
Facsimile: +81-3-3252-8360
E-mail: b.office@hokugin.co.jp
SWIFT Address: RIKBJPJTTreasury and Securities Department
14F, Nihonbashi Muromachi
Mitsui Tower, 2-1, 3-chome,
Nihonbashi Muromachi,
Chuo-ku, Tokyo 103-0022, Japan
Telephone: +81-3-3231-7360
Facsimile: +81-3-3246-1255
E-mail: shikintky@hokugin.co.jp
Overseas Offices (Hokuriku Bank)• New York Representative Office
780 Third Avenue, 28th Floor,
New York, NY 10017, U.S.A.
Telephone: +1-212-355-3883
Facsimile: +1-212-355-3204
E-mail: newyork@hokugin.com• Shanghai Representative Office
Shanghai International Trade
Center, 602, Yan’an West Road
2201,
Changning, Shanghai 200336,
P.R. of China
Telephone: +86-21-6270-8108
Facsimile: +86-21-6270-8338
E-mail: shanghai@hokugin.net• Dalian Representative Office
7F Shenmao Building 147 Zhongshan
Road, Xigang District, Dalian,
Liaoning, 116011 P.R. of China
Telephone: +86-411-3960-8018
Facsimile: +86-411-3960-8019
E-mail: dalian@hokugin-zg.com

Markets and International
Administration Center
2-33, Higashisapporo 3-jo
1-chome, Shiroishi-ku,
Sapporo City, Hokkaido 003-0003,
Japan
Telephone: +81-11-815-1315
Facsimile: +81-11-815-2237
SWIFT Address: HKDBJPJTTreasury and Securities Department
14F, Nihonbashi Muromachi
Mitsui Tower, 2-1, 3-chome,
Nihonbashi Muromachi,
Chuo-ku, Tokyo 103-0022, Japan
Telephone: +81-3-3241-3457
Facsimile: +81-3-3242-3588
Overseas Offices (Hokkaido Bank)• Shenyang Representative Office
Room 1118, Office Tower 1,
Forum 66, No. 1-1 Qingnian
Da jie, Shenhe District,
Shenyang 110063, China
Telephone: +86-24-3185-7008
Facsimile: +86-24-3185-7018
E-mail: dogin_shenyang@yahoo.co.jp• Yuzhno-Sakhalinsk
Representative Office
Office 44,18 Kommunisticheskiy Av.,
Yuzhno-Sakhalinsk
693000, Russia
Telephone: +7-4242-45-7523
Facsimile: +7-4242-45-7524
E-mail: tateyama@hbkys.ru• Vladivostok Representative Office
Room 613,Fresh Plaza,17Okeanskiy Pr., Vladivostok
690091, Russia
Telephone: +7-4232-65-8851
Facsimile: +7-4232-65-8852
E-mail: nakagawa@hbvl.ru• Representative Office
Registered in Singapore
6 Battery Road # 15-02 Singapore
049909
Telephone: +65-6534-0010
Facsimile: +65-6534-0070
E-mail: hokuriku@singnet.com.sg• Bangkok Representative Office
23rd Floor Unit 2314, Bhiraj Tower
at EmQuartier, 689 Sukhumvit
Road, North Klongton, Wattana
Bangkok 10110, Thailand
Telephone: +66-2-261-8495
Facsimile: +66-2-261-8497
E-mail: bangkok@hokugin.asia

84

Hokuhoku Financial Group, Inc. Annual Report 2021

Hokuhoku Financial Group, Inc. Annual Report 201867

北北金融控股集团简要设立日期∶2003年9月26日

北北金融集团的经营活动范围不是限于一个地域，而是在广泛的地域内展开着。

总行地址∶富山县富山市堤町通1丁目2番26号

我们广泛的营业网点分布在下列地区范围里 ：经营目的∶集团伞下的子公司的经营管理，以及连带的相关业务

北陆地区.................................................... 151分行（或支行）资本金∶708亿9,500万日元

富山县 ....................................................... 93分行（或支行）企业名称∶北北金融控股集团股份有限公司发行股份∶ 普通股 ...........................

132,163,014股

石川县 ....................................................... 36分行（或支行）第一次第5种优先股 ..........

85,955,000股福井县 ....................................................... 22分行（或支行）

上市交易所∶ 东京证券交易所（第一部）札幌证券交易所简介自从1877年北陆银行成立以来已经在北陆地区设立了广域性的经营网点。

三大都市圈 ................................................ 16分行（或支行）东京、横滨 ................................................

9分行（或支行）

名古屋 .......................................................

3分行（或支行）

大阪、京都 ................................................

4分行（或支行）其他地区（仙台、新泻、长野、高山）..........

4分行（或支行）

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

8代表处

纽约代表处 （北陆银行）从“北前船”或者说“北航船（北上的经济圈）”的交易关
系和客户的需要出发还在北海道各个主要城市内设立了自己的经营网点。
北海道银行成立于1951年，以支援中小企业和个人业务为中心在北海道道内的各个地区都设有营业网点。
北陆银行和北海道银行于2004年9月进行了经营统合，成立了（控股公司）北北金融控股集团股份有限公司。现在，北北金融控股集团已经形成了覆盖日本北陆地区北海道以及日本三大都市圈（东京，名古屋，大阪）的巨大的地方金融网络。

2002年5月

北海道地区 ................................................ 161分行（或支行）北陆银行和北海道银行缔结了全面业务协助协议（北海道银行）南萨哈林斯克代表处符拉迪沃斯托克代表处 （北海道银行）新加坡代表处（北陆银行）
曼谷代表处 （北陆银行）大连代表处 （北陆银行）
上海代表处 （北陆银行）沈阳代表处 （北海道银行）
胡志明代表处（北陆银行）（预定2021年开设）（2021年6月30日）

符拉迪沃斯托克南萨哈林斯克沈阳大连

2003年5月

北陆银行和北海道银行对经营统合取得一致意见

上海
曼谷
胡志明

新加坡

2003年9月

纽约设立北银金融控股集团股份有限公司
北陆银行成为北银金融控股集团伞下的银行
北海道

通过股份交换实现经营统合

2004年9月

北北金融控股集团股份有限公司诞生

注：北银金融控股集团股份有限公司改名为北北金融控股集团
股份有限公司。
北陆地区
石川

富山

福井

东京
大阪

名古屋

三大都市圈

Hokuhoku Financial Group, Inc. Annual Report 2021

85

北北金融控股集团 董事致辞

（相片左边）董事长

庵

荣伸（北陆银行 总行长）

（右边）
董事副社长

兼间 祐二（北海道银行 总行长）大家好！承蒙各位平时对北北金融控股集团以及本集团公司的厚爱，在此表示深深的感谢。
我们地方金融机构所处的经营环境非常严峻。新冠病毒导致的经济急速倒退即使可以看到一些重塑经济的行动，但是各地方新冠病毒的反复感染和扩大，使得观光业（旅游业）为代表的一
部分行业受到严重冲击，前景不透明的状态将继续。
在如此严峻的环境下，本集团公司于2019年4月开始的中期经营计划【ALL for the Region】
中提出的3个基本方针，在“为地方（地域）社会做贡献”“面向未来的进化 · 改革”“发挥集团的综合能力”的基础上，以地方（地域）金融集团为立足点，直面新冠病毒的祸害，通过为客户解决课题，行员上下团结一致为地方（地域）经济的继续成长作贡献。
请大家继续关注并惠顾，拜托了！

董事长

庵

荣伸

2021年7月

86

Hokuhoku Financial Group, Inc. Annual Report 2021

中期经营计划
新中期经营计划“ALL for the Region”是指，从2019年4月开始的3年时间, 同时把这3年定位为“本公司集团全体职员将推进‘Face to Face的贴近客户的服务’和‘追求便利性的数字金融服务’等两方面的服务，为持续致力于为地域做贡献
的体制构筑期间”。
本公司集团的全体职员团结一致，通过提供地域第一的金融服务，为客户和地域社会做贡献，创造共同价值，我们将
致力于成为与地域共同成长、发展的综合金融集团。

■ 计划的概要
名称

ALL for the Region

定位

本公司集团的全体职员推进“Face to Face的贴近客户的服务”和“追求便利性的数字金融服务”等两方面
的服务，持续地致力于为地域做贡献的体制构筑期间。

基本方针“对地域社会发展做贡献”·共同面对课题, 努力提供有助
于地域和客户发展的解决方案。

“对未来的进化变革”·提供反映技术革新和需求变化的金融服务, 不辜负客户的期望。

“集团综合实力的发挥”·在加强集团合作的同时，构筑
集团最佳的推进、管理体制。

创造
共同价值

■ 新中期经营计划的重点指标（2家银行合算、联结）
2021年度（最终）

2019年度业绩

2020年度业绩主要业务利润（2家银行合算）169亿日元196亿日元220亿日元以上

本期净利润（联结）202亿日元213亿日元220亿日元以上

资本充足率（联结）

8.94%

9.45%

维持高于8%OHR（2家银行合算）69.27%

68.19%

维持高于60%

Hokuhoku Financial Group, Inc. Annual Report 2021

87

根据基本方针而定的各战略区分的重点措施
重点措施

88

法人市场战略◆金融中介功能的发挥・完善与营业区域的特性以及顾客的商业舞台等对应的战略、推进体制，根据事业性评价，
展开融资战略。
◆加强法人咨询
・扩充解决方案菜单，推进与顾客的商业舞台对应的咨询建议。

个人市场战略◆加强个人咨询，扩大个人交易基础・扩充与生活舞台以及面对面、非面对面渠道对应的商品，支援资产形成，应对富裕阶层，加强应对各种资金需求，实现扩大交易基础。

数字化、Fintech战略◆增强数字银行功能
・强化智能手机应用程序等非面对面渠道的功能，推进数字银行化・提高顾客的便利性（无印章、无纸化、无现金卡）◆推进地域的无现金化・致力于推进地域无现金化的基础设施建设

地域社会活性化战略◆对地方再生的贡献和ESG、SDGs课题的对应・通过与地方公共团体、地域企业、教育机关的合作，实现地域经济的活性化・通过基于ESG、SDGs的CSR活动，以地域经济、地域社会的持续发展为目标市场、有价证券运用战略◆运用收益的增强和稳定化・通过运用对象的多样化形成的分散投资以及战略性的、机动灵活的运用，来实现收益的增强。
・通过建立重视综合损益的管理体制，强化行情突变时的对应力，来完善风险控制体制。

加强风险管理、合规守法◆强化对活用RAF（风险偏好框架）的治理以及应对多样化风险
・活用RAF来实现制定经营战略，强化风险管理体制・通过职员教育，构建切实杜绝风险行为和违法行为的风险文化・通过充实各种模拟和压力测试，强化适应环境变化的风险管理体制

业务改革、店铺优化、人财活用战略◆兼顾经营效率化、生产性向上以及工作价值
・通过业务简化、总部集中化、促进外部资源，推进业务合理化。
・通过活用ICT（数字化、RPA、无纸化），推动业务的效率化。
・为了维持地域的金融基础设施，通过明确职责和功能，来实现改善店铺体制和ATM运营。
・为提高顾客对应能力、专业性、管理能力，进行人财育成。
・打造一个能够有多种人才活跃的职场环境。

北北金融控股集团 集团战略◆加强和扩大在北海道地区的合作
・通过共同活用咨询和金融服务功能，强化营业推进力・两行今后将在北海道内共同推进店铺的重建・扩大包括总部功能以及后勤管理部门在内的北海道内据点的共同化◆通过对控股公司北北金融控股集团的功能集中，来追求更大的协同效果◆子银行、关联公司合作并发挥综合实力，提供金融服务◆致力于提高股东价值・在维持稳定的分红的同时，通过利益积累来充实资本。

Hokuhoku Financial Group, Inc. Annual Report 2021业绩精粹营业概况（北北金融控股集团联结）（单位：亿日元）

2020年度

2019年度
变动

经常收益

1,759

－64

1,824

经常利润

322

－5

316

归属于母公司股东的净利润

213

10

202

9.45％

0.51％

8.94％

资本充足率

本公司 2021 年 3 月期的业绩，联合结算的经常收益与上一期相比减少64亿日元为1，759亿日
元 ；联合结算的利益比上一期增加5亿日元为322
亿日元。归母公司的本期纯利益增加10亿日元为
213亿日元。
联合结算的自有资本比例为9.45%
2021年3月期的分红 ：普通股票期末1股为35
日元 ；第一回5种优先股的中期 · 末期为1股7.5日
元（一年为15日元）。

营业概况（北陆银行，北海道银行）（单位：亿日元）

2家银行合算2020年度

2019年度
变动

经常收益

1,579

－55

1,635

主营业务毛利润

1,207

－24

1,232

经费（临时处理部分除外）

823

－30

853

主营业务净利润

384

5

378

扣除投资信托解约损益后

376

30

345

信贷相关成本

130

10

120

经常利润

320

5

314

本期净利润

224

16

208

北陆银行 · 北海道银行（2行合算）
2行合算 ：经常收益比上一期减少55亿日元为
1，579亿日元。本期纯利益比上一期增加16亿日元为224亿日元。
北陆银行 ：经常收益比上一期减少21亿日元
为864亿日元，本期纯收益比上一期增加 30亿日
元为142亿日元。
北海道银行 ：经常收益比上一期减少34亿日
元为715亿日元，本期纯利益比上一期减少 13亿
日元为81亿日元。

（单位：亿日元）（单位：亿日元）

北陆银行

2020年度北海道银行

2019年度

2020年度

变动
经常收益

864

主营业务毛利润经费（临时处理部分除外）

2019年度
变动

－21

885

715

－34

749

667

－1

668

540

－23

563

439

－18

457

384

－11

396

主营业务净利润

228

16

211

156

－11

167

扣除投资信托解约损益后

215

15

199

161

14

146

信贷相关成本

84

－8

92

46

18

27

经常利润

205

27

177

115

－21

137

本期净利润

142

30

112

81

－13

95

资本充足率

9.14％

0.55％

8.59％

8.88％

0.12％

8.76％

Hokuhoku Financial Group, Inc. Annual Report 202089

Hokuhoku Financial Group, Inc.

Printed in Japan