Annual Report
2006
Year ended March 31, 2006

Hokuhoku Financial Group, Inc.

CONTENTS

To Our Shareholders.............................................................................
Corporate Social Responsibility ...........................................................
Performance Highlights........................................................................
Plan For Sound Management ..............................................................
Corporate Governance .........................................................................
Compliance System..............................................................................
Risk Management System ...................................................................
Topics ....................................................................................................
Consolidated Financial Statements
Consolidated Balance Sheets ..........................................................
Consolidated Statements of Operations..........................................
Consolidated Statements of Stockholders’ Equity ..........................
Consolidated Statements of Cash Flows.........................................
Notes to Consolidated Financial Statements...................................
Independent Auditors’ Report..............................................................
Nonconsolidated Financial Statements
The Hokuriku Bank, Ltd.
Nonconsolidated Balance Sheets (Unaudited) ............................
Nonconsolidated Statements of Operations (Unaudited) ...........
The Hokkaido Bank, Ltd.
Nonconsolidated Balance Sheets (Unaudited) ............................
Nonconsolidated Statements of Operations (Unaudited) ...........
Corporate Information ..........................................................................
Outline of Subsidiaries — Hokuriku Bank ............................................
Outline of Subsidiaries — Hokkaido Bank ...........................................
Board of Directors and Corporate Auditors .........................................

1
2
4
9
11
12
13
14
18
19
20
21
23
38

39
40
41
42
43
44
45
46

TO OUR SHAREHOLDERS(From left)

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

Yoshihiro Sekihachi
Deputy President(concurrently serving as president of the Hokkaido Bank, Ltd.)We would take this opportunity to thank our stakeholders sincerely for theirsupport. We are pleased to deliver the Hokuhoku Financial Group’s annual
report for the fiscal year ended March 31, 2006.
We are building closer relationships with our customers based on our management principle of shared prosperity with the community and by providing highquality financial services. We do this by leveraging the synergy we achievethrough the consolidation of management and increasing the enterprise valueof the Group.
All executives and other staff members are united in their commitment tomaking a sustained effort to meet the expectations of our customers. We lookforward to your continued support.
September 2006

Shigeo Takagi

Yoshihiro Sekihachi

President

Deputy President

Hokuhoku Financial Group, Inc. Annual Report 2006

1

CORPORATE SOCIAL RESPONSIBILITY

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

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

Our Business Matching Initiatives
1. Medical/Pharmaceutical/Biotech Convention (Kanazawa)May 2005: 90 booths, 72 companies
Top-level research institutions: 10 booths
Government institutes: 3 booths
Companies: 57 booths
Health food research group: 1 booth
Dalian biotechnology
medical industry park, China: 3,200 visitors
2. Hokkaido food Special Business Conference (Sapporo)May 2005: 32 companies
12 buyers from all over Japan
September 2005: 27 companies
117 buyers and supermarket managers
July, October 2005: Follow-up meetings
3. China business-matchmaking confab (Shanghai)(First business matchmaking conference held by Japaneseregional banks)
Hokuriku Bank, Hokkaido Bank, Shizuoka Bank, Chiba Bank,
Hachijuni Bank

2

Hokuhoku Financial Group, Inc. Annual Report 2006

December 2005: 81 companies exhibited, and 1,500
companies attended; 3,000 discussions in
one day
4. Eight regional banks meet to talk business in Shanghai
Hokuriku Bank, Hokkaido Bank, Yokohama Bank,
The 77 Bank, Joyo Bank, Ogaki Kyoritsu Bank,
Bank of Kyoto, Chugoku Bank
July 2006: 86 companies exhibited
5. Establishment of Hokuhoku ASEAN Kai
February 2006: Founding members, 40 companies
6. Signing of an economic exchange memorandumwith Shanghai city
April 2006: Signing of memorandum with Shanghai
Municipal Government Foreign Economic
Relations & Trade Commission
Helping Japanese companies as they set up overseas
operations, with organization and information support

Our Responsibility as a Good Corporate Citizen
Investor Relations
Twice each year, the Hokuhoku Financial Group, Inc. hosts

Environment-Friendly Financial Products
The Group’s two banks are offering loans with preferential

meetings for securities and financial analysts, to which overinterest rates to would - be purchasers of homes with

100 persons are invited, following the full-term and interim

advanced environment-friendly features.

closings of the Company’s books. On June 14, 2006 ourAt Hokuriku Bank, we are providing low-interest loans

meeting was attended by a record number of 131 analysts.

for the removal of asbestos, as well as various loans for the

At around the same period, we also held a number of

repair of damage caused by natural phenomena such asindividual meetings and small-group meetings. We received

earthquakes, flooding, and high winds. Also, by underwrit-a number of direct requests for interviews from equity

ing the issuance of private bonds, the bank makes use ofinvestors, to which we responded positively in line with our

the system operated by the Development Bank of Japan

proactive disclosure policy. Since 2005, we have also beenfor supporting companies engaged in the manufacture offollowing a policy of strengthening our ties with overseas

products or the provision of services that contribute toward

investors by holding frequent explanatory meetings andenvironmental preservation.

personal interviews, and otherwise demonstrating thetransparency of the Company’s management.
We will continue to adopt a proactive stance toward communication with our shareholders and other investors.

Hokkaido Bank, meanwhile, handles the Environment
Preservation Fund, a loan-making scheme operated by themunicipality of Sapporo to finance anti-pollution programs,
methods of reducing the environmental load imposed bybusinesses, and the purchase of low-pollution vehicles. The

Employment & Education
As a contribution to the education of the younger generationbank also acts as an agent for the Sapporo City government

in the job -related skills they will need after graduation,

Building” system for supporting the construction (or retrofit-

the staff of Hokuriku Bank and Hokkaido Bank both taketing) of public facilities to be barrier-free with respect to bothan enthusiastic approach to breaking down the barriers

persons with disabilities and elderly citizens.

by disbursing loans under the municipality’s “Welfare City-

between the bank and society at large by organizing toursof bank branches and lectures on the banking business forstudents from elementary to high school.
For six months from April 2005 Hokuriku Bank sponsoreda series of lectures at Toyama University, and from Novem-

Contributions to the Regional Community
Both banks actively contribute to regional cultural events
such as Sapporo’s Yosakoi Soran Festival and Toyama’s
Owara Odori Machinagashi Festival.

ber of the same year the bank also sponsored a series of

The head offices of both banks utilize their show windows

lectures at Kanazawa University. Bank staff were dispatched

to display local works of art, such as Hokuriku Bank’s Art

to serve as lecturers in both these cases.

Promenade and Hokkaido Bank’s Lilac Gallery. By offering

As for Hokkaido Bank, from October 2005 the bank spon-these spaces to local people for the exhibition of theirsored a series of five lectures at Hokkai Gakuen University

creations, the banks forge closer bonds with the community

jointly with Nomura Securities, at which bank staff acted as

as a whole.

lecturers. These lectures were open to both students at theuniversity and members of the public.

In addition to the foregoing, as a good corporate citizen,
the Company undertakes a wide range of other activities
with the goal of injecting further vitality into the regions inwhich our banks operate.

Hokuhoku Financial Group, Inc. Annual Report 2006

3

PERFORMANCE HIGHLIGHTS
Summary of operations (Hokuhoku Financial Group, Inc.)
In the fiscal year ending March 31, 2006 the Hokuhoku Financial Group, Inc. recorded ¥13.5 billion in operating revenue, ¥12.7
billion in ordinary income, and ¥12.7 billion in net income.
On a consolidated basis, the Group posted ordinary revenue of ¥240.9 billion, ordinary income of ¥48.2 billion, and net incomeof ¥26.8 billion. The Group’s capital ratio stood at 9.00% as of the term-end.
Business Indicators for the Hokuhoku Financial Group (consolidated)(¥ million)

Ordinary revenue
Ordinary income
Net income
Stockholders’ equity
Total assets
Net assets per share
Basic earnings per share
Diluted earnings per share
Capital ratio (standard for banks with domestic operations only)
ROE

FY2005

FY2004

FY2003240,986
48,285
26,837
406,0149,535,627¥179.37¥18.31¥14.32
9.00%
10.72%

203,200
27,226
11,248
380,750
9,398,673¥159.75
¥6.86
¥5.67
8.33%
4.88%

179,445
7,074
5,031
193,692
5,675,209¥119.86
¥3.94
¥3.55
8.20%
3.53%

Summary of Operations (Hokuriku Bank and Hokkaido Bank)
The business performance of the Hokuhoku Financial Group on aconsolidated basis for FY2005 comprises the figures for Hokkaido
Bank from September 1, 2005 to March 31, 2006 and for Hokuriku
Bank from April 1, 2005 to March 31, 2006. In addition, part of theloan assets of Hokuriku Bank were transferred to a subsidiary thatwas set up by the bank to support corporate rehabilitation programs for borrowers. For year-on-year comparison on a pro forma
basis, the total sum of the two subsidiary banks plus the spun-off
company is employed in the following description.
Deposits and Loans
Deposits made by retail banking customers (individuals) registeredan increase over the previous term, but corporate customer deposits
declined. As a result, the term-end balance of deposits was downby ¥109.6 billion from the previous term-end, at ¥8,216.4 billion.
On the loans side, while business loans registered a year-on-year
decline, loans to individuals, centered on mortgage loans and otherhousing-related loans, grew steadily as per our expectations. As aresult, total loans posted a year-on-year increase of ¥167.2 billion(see Note below) to ¥6,706.2 billion.
Note: Up to fiscal 2004, Residential Mortgage-Backed Securities (RMBS)
had been classified under “Loans,” but with effect from the reporting
period (fiscal 2005), they are classified under “Financial Claims
Purchased.” In order to enable comparison of the above-noted
increase of ¥167.2 billion in loans with figures for prior years, prior-year
figures have been adjusted by the deduction of the figures for RMBS.

Profits and Losses
The core business profit, which is generated by conventionalbanking operations, increased by ¥6.4 billion over the previous
term, to a record high of ¥92.2 billion. This achievement was inspite of a decline in interest income on loans and securities, and is
attributable to an increase in income from fees and commissions
attendant on growth in sales of investment trust and pension
products, as well as financial derivatives, in addition to successful
measures to reduce expenses.

4

Hokuhoku Financial Group, Inc. Annual Report 2006

Thanks to the improving trend in corporate business performances, there were fewer cases of large-scale bankruptcies
among the two banks’ customers during the reporting period, andthe amount of newly-emergent nonperforming loans also registered a decrease. Moreover, considerable success was achievedin turning around the business performances of financially troubled
customers through management advisory services. As a result, thetotal credit cost for the reporting term was down by ¥11.7 billion
year-on-year at ¥47.7 billion. Regarding securities transactions(including unrealized gains) we posted a gain of ¥7.0 billion, a yearon-year rise of ¥5.5 billion.
As a result of the foregoing, ordinary income rose ¥16.4 billion
year-on-year, to ¥50.5 billion, while net income was up ¥13.8 billion
at ¥29.0 billion.
Dividend Policy
In consideration of the public nature of the businesses engaged
in by the Group companies under the control of the Hokuhoku
Financial Group, in particular the two banking subsidiaries, theCompany follows a basic policy of paying a stable dividend to its
shareholders while at the same time ensuring that the Company
always has sufficient retained earnings to maintain a healthyfinancial position over the long term.
In line with this policy, the Company paid an annual dividend forfiscal 2005 of ¥1.50 per ordinary share of common stock, ¥3.85
per share of 1st-issue Class 1 shares of preferred stock, ¥3.31 pershare of 1st-issue Class 4 shares of preferred stock, and ¥7.50 per
share of 1st-issue Class 5 shares of preferred stock.
From here onward, in deciding the dividend payments for eachterm, the management will take into account the Company’sbusiness performance for that term, and the need to retain andaccumulate a sufficient amount of earnings to contribute to theimprovement of the Company’s business structure and assist in
the repayment of the public funds that the Company has borrowed.
While balancing these various concerns, the management will
make every effort to maintain per-share dividends at a stable level.

Business Indicators for Hokuriku Bank and Hokkaido Bank (total for the two banks and Hokugin Corporate combined)(¥ billion)

Years ended March 31

Core gross business profit
Core business profit
Ordinary income
Net income (loss)

2006

2005

2004

2003

2002

180.8
92.2
50.5
29.0

175.0
85.8
34.1
15.2

176.5
87.8
17.3
15.7

170.5
78.5
(46.7)(52.3)

170.5
74.2(143.4)(131.1)* Core gross business profit = Gross business profit – gains/losses on bonds* Core business profit = Core gross business profit – expenses

Core business profit(Billion ¥)100

Expenses
1.00

1.02

0.98

(%)
1.0

0.89
0.80

80
74.2

87.8

(Billion ¥)
56.49
120

92.2

85.8

100

0.8

78.5

60

0.6

40

0.4

20

0.2

53.91

96.3

91.9

80

50.25

50.95

88.7

89.2

(%)
60
48.99
88.6

40

60

0
Years ended 2002
2003
March 31Core business profit

2004

2005

0.0

2006

ROA (core business profit basis)

40
20
0Years ended 2002
March 31
Expenses

ROA (core business profit basis) = Core business profit / (Average balance of total assets –Average balance of customers’ liabilities for acceptances and guarantees)

600

676.2

400

9.51

74.2
78.5
668.8
87.8
85.8
92.2

0.8
8.01
0.89
1
569.4
0.98
1.02

6.83

(%)
10
8

7.5
5.76

6

474.9

End of March 2003

2005

2006

0

OHR (core gross business profit basis)

End of March 2004

Balance of problem assets basedon the Financial Reconstruction Law

End of March 2005

96.3
September 2004 91.9
Consolidation of Management
September 2003
Establishment

5.0

399.9

4
2.5

End of March 2002

2004

Capital ratio (FG consolidated)
(%)
10.0

200

0

2003

OHR (core gross business profit basis) = Expenses / Core gross business profit

Current Status of Problem Assets(Billion ¥)
9.44
800

20

End of March 2006

88.7
89.1
88.6

56.49
53.91
50.25
50.95
48.99

8.00

8.33

9.00

2

0.0

0

End of September 2004 End of March 2005 End of March 2006
Capital ratio

Ratio of problem assets based on the
Financial Reconstruction Law

676.2
9.44
668.8
9.51
The Group has worked to streamline operations and raise efficiency by developing strategic partnerships, outsourcing work, and
569.4
8.01
8
effectively allocating management resources by reviewing the operation of branches, personnel, and organizations.
474.9
6.83
8.33
399.9
5.76
9
(¥ billion)

Progress in rationalization (total for the four companies: holding company, Hokuriku Bank, Hokkaido Bank, Hokugin Corporate)

Domestic branches (Note 1)
Employees (Note 2)
Personnel costs (Note 3)
Operating expenses
Personnel costs and operating expenses

End of FY 2005
(March 2006)

End of FY 2004
(March 2005)

End of FY 2003
(March 2004)

End of FY 2002
(March 2003)

End of FY 2001
(March 2002)

247
4,294
40.3
42.8
83.2

249
4,506
40.2
43.3
83.5

255
4,832
40.5
43.4
84.0

262
5,347
43.4
43.2
86.7

271
5,655
46.6
44.1
90.8

(Notes)(1) Excluding sub-branches, international operations center, loan direct centers, payment branches, and shared ATM branches.
(2) Includes branch staff, general affairs staff, and staff on loan. Excludes contract, part-time, and temporary staff.
(3) Includes expenses for staff dispatched to the holding company that the holding company pays to its subsidiaries.
Hokuhoku Financial Group, Inc. Annual Report 2006

5

Hokuriku Bank (including Hokugin Corporate):Core business profit rose ¥3.2 billion year-on-year to a record ¥55.2 billion. Interest income declined, mainly as a result of slack
demand for loans to corporate customers, but sales of investment trust, insurance, and financial derivatives products to individuals registered a year-on-year gain, pushing up income from fees and commissions.
As a result of changes in the borrower classification of some debtors, in addition to the enforcement of stricter collateral evaluation standards, there was a decline in the number of newly-emergent nonperforming loans, and borrowers as a whole weremoved upward in ranking. Thanks to these factors, total credit cost fell ¥7.8 billion from the previous term, to ¥34.7 billion.
Ordinary income posted a ¥9.9 billion increase to reach ¥26.7 billion, while net income rose ¥11.4 billion year-on-year, to ¥15.6
billion.

(¥ billion)

Years ended March 31

Core gross business profit
Core business profit
Ordinary income
Net income (loss)

2006

2005

2004

2003

2002

106.1
55.2
26.7
15.6

103.6
51.9
16.8
4.1

107.0
55.0
6.5
4.9

101.3
48.0
9.5
2.7

101.7
44.7
(155.9)(135.6)* Core gross business profit = Gross business profit – gains/losses on bonds* Core business profit = Core gross business profit – expenses

Core business profit

Expenses
1.02(Billion ¥)
60

0.90
0.79

45

1.03

0.98

55.0
48.0

(%)
1.00

(%)
60

52.56

55.2

51.9

57.0

48.61

49.85

52.0

51.6

47.97

0.75

60

30

0.50

40

30

15

0.25

20

15

44.7

0
Years ended 2002
2003
March 31Core business profit

2004

2005

2006

0.00

ROA (core business profit basis)

ROA (core business profit basis) = Core business profit / (Average balance of total assets –Average balance of customers’ liabilities for acceptances and guarantees)(Billion ¥)
9.15
600

420.9
400

44.7
8.15
48
55
363.6
51.9
55.2

0.79
7.87 0.9
1.02
354.2
0.98
1.03

7.46
6.03

7.5

326.5

End of March 2003

End of March 2004

Balance of problem assets basedon the Financial Reconstruction Law

420.9
9.15
363.6
8.15
354.2
7.87
326.5
7.46
Hokuhoku Financial Group, Inc. Annual Report 2006
260.2
6.03

(%)
10

2003

2004

2005

2006

OHR (core gross business profit basis)

8

57
7.07

6
260.2

5.0
4
2.5

End of March 2002

0Years ended 2002
March 31
Expenses

50.9

Capital ratio
(%)
10.0

200

0

53.2

OHR (core gross business profit basis) = Expenses / Core gross business profit

Current Status of Problem Assets

6(Billion ¥)
56.01
80

End of March 2005

End of March 2006

Ratio of problem assets based on the
Financial Reconstruction Law

0.0

52
51.6
50.9

56.01
52.56
48.61
49.85
47.97

End of March 2003

End of March 2004

7.5053.2

8.04

8.42

8.86

2
0

End of March 2002

Capital ratio (non-consolidated)

420.9
363.6
354.2
326.5
260.2

End of March 2005

End of March 2006

45

0

Hokkaido BankCore business profit rose ¥3.1 billion over the previous term, to an all-time high of ¥37.0 billion. Interest income increased thanks
to an expansion in securities investment, while growth in sales of investment trust, insurance, and financial derivatives products
pushed up fees and commissions. Income from other banking operations also increased.
Total credit cost was down ¥3.8 billion from the previous term at ¥12.9 billion, as a result of a decline in the number of corporate customer bankruptcies and success in turning around the businesses of financially troubled companies.
Ordinary income rose ¥6.5 billion to ¥23.8 billion, while net income increased ¥2.3 billion to ¥13.4 billion.

(¥ billion)

Years ended March 31

Core gross business profit
Core business profit
Ordinary income
Net income

2006

2005

2004

2003

2002

74.7
37.0
23.8
13.4

71.3
33.8
17.3
11.1

69.4
32.8
10.7
10.8

69.1
30.5
(56.3)(55.0)

68.7
29.4
12.4
4.5

* Core gross business profit = Gross business profit – gains/losses on bonds* Core business profit = Core gross business profit – expenses

Core business profit(Billion ¥)
40

0.97
0.82

30

Expenses

29.4

1.00

0.98

0.88

(%)
1.00

(Billion ¥)
57.19
50

55.89

52.78

52.56

50.44

36.6

37.5

37.7

37.0
32.8

30.5

33.8

0.75

40

39.3

38.6

(%)
60

45

30
20

0.50

30
20

10

0.25

0
Years ended 2002
2003
March 31Core business profit

2004

2005

2006

0.00

ROA (core business profit basis)

ROA (core business profit basis) = Core business profit / (Average balance of total assets –Average balance of customers’ liabilities for acceptances and guarantees)

300
255.3
200

29.4
30.5
305.232.8
33.8
37

0.82
0.88
8.26
0.97
0.98
215.2 1

9
5.76

148.3

End of March 2002

End of March 2003

End of March 2004

Balance of problem assets basedon the Financial Reconstruction Law

255.3
305.2
215.2
148.3
139.7

End of March 2005

5.31

2004

2005

2006

0

OHR (core gross business profit basis)

39.3
38.6
6.0736.6
37.5
37.7

57.19
55.89
6.4752.78
52.56
50.44

End of March 2003

End of March 2004

8
6

6
4

139.7

End of March 2006

Ratio of problem assets based on the
Financial Reconstruction Law

9.95
11.59
8.26
5.76
5.31

(%)
10
8.18

100

0

2003

Capital ratio
(%)
12

11.89
9.95

0
Years ended 2002
March 31
ExpensesOHR (core gross business profit basis) = Expenses / Core gross business profit

Current Status of Problem Assets(Billion ¥)
400

15

10

3

0

8.50
7.28

2
0

End of March 2002

End of March 2005

End of March 2006

Capital ratio

8.18
6.07
6.47
7.28
8.5

Hokuhoku Financial Group, Inc. Annual Report 20067

Regional deposits and loans for the Hokuhoku Financial GroupAs a broad-based regional financial group with the three prefectures of the Hokuriku region and Hokkaido as its major operatingareas, the Hokuhoku Financial Group contributes to the prosperity of its customers by leveraging IT networks and comprehensive
financial service capabilities that also embrace the three major urban areas of Japan, Kanto, Kansai and the Nagoya area. Customer
deposits are used to provide financing for customers in our service regions, and contribute to their economic development.
Breakdown of deposits by region

Breakdown of loans by region(Billions of yen)

4,836.6

2006

3,379.7

4,191.6(Billions of yen)
Total deposits (Hokuriku Bank)
Total deposits (Hokkaido Bank)

3,361.3

4,222.5

2006

3,031.7

2,595.7

Deposits in the region (Hokuriku Bank)
4,942.7

2005

3,383.3

4,300.3
5,100.3

2004

4,126.6

2005

3,191.6

4,386.2

Loans in the region (Hokuriku Bank)

Deposits in the region (Hokkaido Bank)

3,357.7

Loans to SMEs

2,539.4

3,020.6

Loans in the region (Hokkaido Bank)

2,412.8
4,325.2

2004

3,165.8

Total loans (Hokuriku Bank)
Total loans (Hokkaido Bank)

2,460.1

3,130.4

2,562.1
2,463.0

Number of loans to SMEs
(Billions of yen)
2,193.9

2006

1,088.6

Loans to SMEs (Hokkaido Bank)

1,583.74836.64191.6

1,047.4
3379.73361.32,286.3
4942.73383.3
1,662.4
1,071.7
4300.33357.72005

5100.34386.2
1,791.6

2004(Numbers)
Loans to SMEs (Hokuriku Bank)

3191.62,447.3
3165.81,125.4

Loans to SMEs in the region(Hokkaido Bank)

1,157.7

Number of loans to SMEs (Hokuriku Bank)
Number of loans to SMEs (Hokkaido Bank)

26,4774222.53031.7Loans to SMEs in the region(Hokuriku Bank)
1,106.6

10,185

10,0912595.72460.131,09010,6494181.7 26,562 2539.4
10,5433075.62412.830,9772006

2005

4325.23130.4

2004

Number of loans to SMEs in the region(Hokuriku Bank)
Number of loans to SMEs in the region(Hokkaido Bank)

2562.1
31,223
11,5152463
11,39526,564As of March 31

Lending in the region by industry (as of March 31, 2006)
2193.9Hokuriku Bank 1583.7
1.1 2286.3
1662.42447.31791.628.8

Total¥ 3,031.7
billion1088.61047.4(%)
15.2

1157.71125.4

8.0

12.9
11.6

7.3

0.4

1106.6
1071.74.4

10.7

3097.71018.51009.1

Hokkaido Bank 2647.7• Manufacturing• Construction• Transportation andcommunication, etc.
and retail• Wholesale• Finance, insurance, andreal estateservices• Miscellaneous• Municipalities• Individuals• Others(¥ billion)
460.3
241.0
134.4
392.0
222.8
351.0
323.3
871.6
34.8

3109
7.2
2656.2(%)
5.5

3122.32656.4

36.6

Total¥ 2,460.1
billion

12.7

11.2

1064.91054.3• Manufacturing1139.5 • Construction• Transportation andcommunication, etc.
14.4
and retail• Wholesale• Finance, insurance, andreal estateservices• Miscellaneous
8.8• Municipalities• Individuals• Others

3.3 1151.5(¥ billion)
176.2
134.5
81.2
353.8
215.6
275.6
311.8
900.6
10.5

Notes 1. Loans of Hokuriku Bank include loans of Hokugin Corporate
2. Hokuriku Bank formerly included residential mortgage-backed securities in Loans and bills discounted. However, from fiscal 2005, these instruments have been included in monetary claims purchased. For the purposes of comparison with the previous fiscal year, we have provided figuresthat exclude residential mortgage-backed securities. In addition, we have included securitized mortgage loans in the loan balance.
15.2
8
4.4
12.9
7.3
11.6
10.7
28.8
1.1

8

Hokuhoku Financial Group, Inc. Annual Report 2006

7.2
5.5
3.3
14.4
8.8
11.2
12.7
36.6
0.4

PLAN FOR SOUND MANAGEMENT

We will strive for stable earnings with the goal of repaying public funds.
Based on the Law on Emergency Measures to Revitalize the Functions of the Financial System (referred to below as
the Emergency Revitalization Law), the company issued a total of ¥120.03 billion in preferred stock (First-issue class 1
preferred shares ¥75 billion, First-issue class 4 preferred shares ¥45.03 billion), which was placed to specified banks.
Accompanying the management consolidation of the two banks in September 2004, a plan covering the period toMarch 31, 2008 was adopted based on the Financial Reconstruction Commission’s Basic Finding on the Rehabilitation
Plans issued on September 30, 1999, and the provisions of Article 1-2 of the Emergency Revitalization Law.
According to the plan, the Group will strive to ensure stable profitability with the goal of repaying public funds, byutilizing its unique extensive regional network to realize the goals of integration, which include “strengthening sales
promotion,” “increasing management efficiency,” and “stabilizing the business foundation.”

Goals and Strategy of the Management Integration
1. Strengthening Sales Promotion
The Group will substantially improve its operations, particularly in Hokkaido, by linking the Hokuriku Bank’s extensive
network encompassing both the Hokuriku district and the three major metropolitan areas of Japan, with the Hokkaido
Bank’s customized financial service in Hokkaido.
• Strengthening efforts to match businesses using its extensive regional network• Engaging in transactions with corporations’ trading partners and employees, using the customer bases of the two banks• Strengthening its solution and proposal ability by sharing the know-how of the two banks

2. Increasing Management Efficiency
The Group will strive to create a highly profitable and efficient operation system that more efficiently utilizes management resources by integrating and reorganizing redundant infrastructure in Hokkaido, while stressing the maintenanceand strengthening of excellent relationships with customers of both banks.
• Rebuilding an efficient and effective network of branches• Combining back-office operations and mail delivery services of the two banks within Hokkaido• Concentrating management activity for the entire group, including planning and risk management under the holding company

3. Stabilizing the Business Foundation
The Group is working to create a stable asset portfolio by utilizing an operating base that extends over two geographical areas with different economic environments to become a regional financial group supported by customers andhighly trusted by the market.
• Building an asset portfolio diversified across a wide area and a wide range of industries by utilizing extensive regional operations• Implementing stable capital and dividend policies by having the holding company absorb fluctuations in the profits of its subsidiary banks
and companies• Strengthening its capabilities in corporate rehabilitation and M&A by sharing know-how and engaging in broad regional banking activity

Hokuhoku Financial Group, Inc. Annual Report 2006

9

We set the following five items as targets in the plan for restoring management soundness to further improve profitability, efficiency, and soundness. The plan will be implemented through March 2008.
In fiscal year 2005, the second year under the revised plan, core business profits reached ¥91.7 billion due to the steady
implementation of restructuring measures and measures to strengthen earnings included in the plan.
In addition, ordinary income and net income were greater than expected, although the cost of disposing of nonperforming loans was greater than expected due to stricter collateral valuations and an additional provision toreserves for loan losses.
We will continue to work to win the trust of customers and the market by ensuring stable earnings.

Further strengthening our top-level profitability among regional banks
Target by March 2008
Net business profit (excluding provision for general reserve for possible loan losses): ¥100.5 billion
Net income: ¥42.1 billion

Securing sufficient retained earnings to repay public funds
Target by March 2010
Balance of retained earnings of ¥192.8 billion(Repayment due date of July/August 2010 for public funds in the form of ¥120.0 billion in preferred stock)Pursuing greater efficiency and reducing expenses
Target by March 2008
OHR 46.48%

Establishing a financial foundation trusted by the market
Target by March 2008
Capital ratio of 9.18%(Reduce the percentage of deferred tax assets as Tier I capital to 20%)

Accelerating disposal of non-performing loans and support for corporate rehabilitation
Target by March 2008
Reducing the percentage of non-performing loans up to 5.99%

Income (Hokuriku Bank + Hokkaido Bank)(¥ billion)

Gross business profit
Expenses(OHR [Expenses/Gross business profit])
Net business profit (excluding provision for general reserve for possible loan losses)
Core business profit
Total credit cost
Ordinary income
Net income

March 2005

March 2006
(Target)March 2006

Difference

March 2007
(Target)March 2008
March 2008
(Target) and March 2006

180.2
89.1
(49.49%)

176.7
88.7
(50.19%)

180.0
88.5
(49.16%)

+3.3
(0.2)
(-1.03%)

181.5
87.9
(48.46%)

187.9
87.3
(46.48%)

+7.9
(1.2)
(-2.68%)

91.0
85.8
59.5
34.0
15.2

88.0
87.2
39.0
47.6
25.9

91.5
91.7
46.6
50.6
29.1

+3.5
+4.5
+7.6
+3.0
+3.2

93.5
92.7
31.0
60.7
36.1

100.5
98.9
31.0
67.3
42.1

+9.0
+7.2
(15.6)+16.7+13.0

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

Balance of retained earnings

March 2005

March 2006
(Target)March 2006

Difference

March 2007
(Target)

46.3

64.7

68.1

+3.4

94.0

March 2005

March 2006
(Target)March 2006

Difference

March 2007
(Target)

8.33%
5.95%

8.12%
6.34%

9.00%
6.47%

+0.88%+0.13%

8.58%
6.89%

March 2008
March 2008
(Target) and March 2006

129.9

+61.8

Consolidated capital ratio (Hokuhoku Financial Group)

Consolidated capital ratio
Tier I capital ratioCore business profit = Net business profit (excluding provision for general reserve for possible loan losses) – Gains (losses) on bonds
Credit cost includes transfer to general reserve for possible loan losses
Balance of retained earnings = Retained earnings – Legal reserve

10

Hokuhoku Financial Group, Inc. Annual Report 2006

March 2008
March 2008
(Target) and March 2006

9.18%
7.57%

+0.18%+1.10%

CORPORATE GOVERNANCE

We will strengthen our system of corporate governance and increase
management transparency.
Basic Approach
The holding company and all its member companies regard strengthening and upgrading corporate governance as a management priority. We have drawn up a basic policy—our management philosophy—covering all our activities from management
strategy-setting and decision-making down, and through the Hokuhoku Financial Group Code of Conduct, we are creating asounder management paradigm to ensure that basic values and philosophies are shared across the Group, enterprise value isincreased, and the further development of the Hokkaido and Hokuriku regions is enabled.

Corporate Governance
We have established a decision-making system with the Shareholders’ Meeting and Board of Directors at the top, enabling quick
decision-making since day-to-day operational authority has been delegated. Bodies such as the Management Committee areable to respond quickly to specific and detailed matters based on basic policies set by the Board of Directors. Furthermore, in
addition to the Management Committee, a Market Strategy Committee, which works to disseminate information on the operation
policy throughout the company, and a Management Advisory Committee, which is composed of independent specialists and is
responsible for checks and follow-up of the “plan for sound management,” have been established. In this way we have built asystem for decision-making, implementation, evaluation, and improvements. In addition, the Board of Directors decides on basic
policy for internal controls, and is taking the steps needed to create an effective internal control system.
The following are the main bodies in this system:(1) Board of Directors: responsible for decisions related to business implementation, critical policies, and important management matters, and monitoring implementation.
(2) Board of Auditors: audits the legal appropriateness of business implementation by the Board of Directors by attending
Board of Director meetings and providing detailed reports.
(3) Management Committee: makes decisions on important business matters based on basic policies set by the Board of
Directors.
(4) Management Advisory Committee (in general, meets four times a year): responsible for improving the transparency ofGroup management and increasing the precision implementation of the “plan for sound management” by reflecting proposals
made from a specialist’s point of view in management(5) Market Strategy Committee (in general, meets four times a year): composed of the executive directors and presidents
of subsidiaries; is responsible for disseminating important management policies and similar items throughout the Group and for
ensuring that business policy implementation reflects executive decisions by verifying the each member’s management situation.
Hokuhoku Financial GroupManagement Advisory Committee

Shareholders’ Meeting

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

Market Strategy Committee(Coordication: some members takemore than one position at a time)Members: Group directors + subsidiary presidents
Aim: Implementation of management policy, understandbusiness environment and give indication

Planning Group

of
PDCA

8 external members
Advises to theManagement

1 external director

Board of Directors

Management Committee

Administration Group

Audit Group

Risk Management Group

Hokuriku BankManagement Advisory
Committee

Board of Auditors

Internal audit
Execution

Hokkaido Bank

Shareholders’ Meeting

Other
subsidiaries

Internal audit

Shareholders’ Meeting
Internal audit

Board of Directors

Board of Directors

Management Committee

Management Committee

Management Advisory
Committee
4 external members
2 advisers
Advises to theManagement

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

Hokuhoku Financial Group, Inc. Annual Report 2006

11

COMPLIANCE SYSTEMThe Group rigorously adheres to all laws and corporate regulations.
Philosophy on Compliance (adherence to laws and regulations)
We position compliance as our most important management task and recognize that an incomplete compliance system canweaken our business foundation. Therefore, we are implementing a basic compliance policy as described below, and are striving
to conduct fair and honest corporate activity.
To establish a compliance system for the entire Group, we have worked in cooperation with each member company to establish various compliance regulations and organizational systems to ensure that each member company has a compliance policy inplace.
We have created the positions of General Compliance Manager, as the executive in charge of implementing all compliancemeasures within the Group, and a General Manager for Eliminating the Influence of Organized Crime, as the person responsible
for the Group’s resolute response to all organized crime issues and for ensuring that the Group has no connections with criminal
elements.
In addition, we have established a Compliance Program, a concrete plan to realize our compliance goals, and are systematicallyworking to create a compliance system and to raise management and employees’ awareness of compliance issues.
We have also created a compliance office at each Hokuriku Bank and Hokkaido Bank branch, and at each Group company, toaggressively work to implement measures to educate employees about and develop awareness of the need for compliance.

Hokuhoku Financial Group

Board of Directors
Auditors and Board of Auditors, independent audits of importantmatters related to compliance throughout the GroupManagement Committee
Risk Management Group (Compliance General Department)
Integration and Planning related to compliance issues throughout the Group

Hokuriku Bank

Hokkaido Bank

Subsidiaries, etc.

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 strives to gain
greater trust through the conduct of sound business operations.
2. Providing quality financial services
By providing quality integrated financial services, the Group will contribute to the stable economic and social development of the region and to a better life for its customers.
3. Strict adherence to laws and rules
The Group strictly adheres to laws and regulations, and conducts business in a trustworthy and honest fashion that
conforms to corporate ethics and social norms.
4. Elimination of ties with criminal elements
The Group contributes to a healthy society by resolutely refusing to associate or work with persons known to be connected with organized crime.
5. Ensuring management transparency
The Group aims for a highly transparent management and organizational culture, and strives for accurate disclosure andswift decision-making.

12

Hokuhoku Financial Group, Inc. Annual Report 2006

RISK MANAGEMENT SYSTEMThe Group is striving to build a risk management system appropriate for thetypes and scale of risks to which the Group is exposed.
The Hokuhoku Financial Group Risk Management System
Amid financial liberalization and globalization, finance services are becoming more diversified and complex, and financial institutions are exposed to various risks, including credit risk, market risk, liquidity risk, and operational risk.
We recognize that risk management is one of our most important management tasks, and work to improve profitability, ensure
sound management, and to strengthen our risk management system in order to win the trust of shareholders and creditors andto protect customers’ deposits.
In particular, while each Group company has created a risk management department, the Group as a whole is working toward
integrated risk management through close cooperation between these departments. Serving as an overall risk management unit,
the Risk Management Group has drawn up the “Risk Management Rules” and a “Basic Risk Management Policy.” In addition,
based on this basic policy, each member company has established a risk management system corresponding to the scope andtype of risk that it is exposed to, and works to manage risk in an appropriate manner.
We have strengthened corporate governance, and ensure sound management by having each group company submit reports
on risk management, by giving appropriate instructions on risk management issues, and by reporting on risk management matters and problems for discussion to the Board of Directors and other management units.

Hokuhoku Financial Group• Report on risks,
problems, andresponses toproblems• Set basic policies• Offers guidanceon matters related
to establishing thesystemBoard of Directors
Management Committee

Risk Management Group

Creditrisk

Marketrisk

Liquidity
risk• Report on the state ofrisk management

Operationalrisk• Determine basic policy andinstructing on items such assystem creation

Group members
Hokuriku Bank

Hokkaido Bank

Subsidiaries, etc.

Subsidiary Bank
Board of Directors
Management Committee
Risk management department

Hokuhoku Financial Group, Inc. Annual Report 2006

13

TOPICS

Hokuhoku Financial Group
1. Restructuring the branch network in Hokkaido

4. Alliance with the Bank of Yokohama

Along with the transfer of the Kosei Offi ce of Hokkaido
Bank on April 11, 2005, Naebo Branch of Hokuriku Bank was
relocated to the vacant site of Kosei Office on May 23, 2005,
and Sosei Branch of Hokkaido Bank moved to the vacant siteof Naebo Branch on December 12, 2005.
In Hokkaido, we aim to increase transactions with customers by making maximum use of the two core brands, namely
Hokuriku Bank and Hokkaido Bank. Based on this policy, we
will continue to promote an effective and efficient allocation of
branches.

On March 24, 2006, Hokuriku Bank and Hokkaido Bank arrived
at an agreement with the Bank of Yokohama on such operations as free use of the automated teller machines (ATMs) of
the other banks when withdrawing money, and an alliance inthe provision of sales information in Japan and in support forcustomers who are moving into Asian countries.
We will also provide the customers of each bank withsupport for their business needs for the development of newclients and suppliers, the development of new products, andthe advancement into different business areas, as well as theirneeds when moving into China and South-East Asia.

5. Participation in the Yosakoi Soran Festival

2. Issue of subordinated bonds
Following the first issue in March 2005, a ¥20.0 billion issueof the second uncollateralized subordinated bond with an early
redemption clause was conducted on September 28, 2005.
The fund was used for subordinated loans to Hokuriku Bankand Hokkaido Bank.

3. Encouraging the shared use of systems
The swift provision of quality services based on the strategic
use of information technology is an important task for financial
institutions.
The Hokuhoku Financial Group has been examining system
integration. We seek to maximize the effect of management
integration through improved business effi ciency and to
reinforce the Group’s marketing capabilities and business
management structure.
To this end, Hokuriku Bank, Hokkaido Bank and the Bank of
Yokohama reached a basic agreement to conduct a study forthe joint use of systems on November 24, 2005, and enteredinto a basic contract on joint system use on March 24, 2006.
The three banks will establish the System Council to specifi cally examine the joint development and joint use of systems,
and plan to phase in the new system from January 2010. We
believe that this will deliver system integration for the Groupand enable us to further strengthen and increase the sophistication of our system functions.

14

Hokuhoku Financial Group, Inc. Annual Report 2006

Following our first participation in 2005, we took part for thesecond time in Sapporo’s Yosakoi Soran Festival (held for the
15th time this year), from the 7th to the 11th of June. As lastyear, we again joined forces with the Hokkai Ahondara group,
one of the oldest groups (having taken part in the festival ten
times) to form a Hokkai Ahondara Group & Hokuhoku FG
team, which put on an elegant dance with 140 members. The
group was one of the largest of the 350 participating teams.
The festival was thoroughly enjoyed by all the participantsfrom throughout Japan as well as the spectators, producing a
sense of shared community and achievement.

Hokuriku Bank
1. Bolstering the support system for overseas
advancement
On Februar y 13, 20 0 6, the Hokuhoku Financial Groupestablished a club, the “Hokuhoku ASEAN Kai” in Singapore
to support corporate customers of Hokuriku Bank andHokkaido Bank in their efforts to expand. Based on an alliancewith Kasikorn Bank in Thailand, we will develop a speedy
and effective support system for companies advancing into
ASEAN nations by such measures as constructing networks
among members and with investment facilitation bodies of
the governments of each of the ASEAN member states.
The Hokuhoku Financial Group also concluded an economic
exchange memorandum with the municipal governmentof Shanghai when the Group hosted Tang Qingfu, deputy
director of the Shanghai Foreign Economic Relations andTrade Commission of Shanghai Municipality. More Hokuriku
Bank customers have moved into Shanghai than into any othercity in China, and the Shanghai Foreign Economic Relations
and Trade Commission is a high-level government body thathas the power to approve investment by foreign companies
in Shanghai. The memorandum will further bolster support
for the operations of the Bank’s customers in China. The
conclusion of the memorandum with this commission, which
is an upper division of Shanghai Municipality, is a first for a
Japanese regional bank.

2. Mutual free use of automatic machines(CDs, ATMs) with Takayama Shinkin Bank

3. Opening of the Hokugin Dream Center Musashi
On June 5, 2006, we opened Hokugin Dream Center Musashi,a specialty office with the combined functions of asset management and loan services, in Kanazawa, a first for Hokuriku
Bank. In addition to its function as a loan center, the Center
will serve as a new type of specialty office able to meet thediversified asset management needs of our customers.
It presents the customers with a space where they are able
to receive our consultation services in a relaxed manner, witha booth-type counter and reception area. A convenient Kids’
Corner is also available.

4. A string of launches of new housing loans
In October 2005, we launched a ground-breaking housing loan
with special terms for borrowers who suffer cancer, stroke orheart attack. In this product, the loan balance will become nil(100% security) by means of an insurance benefit paid when
the loan holder is diagnosed to be suffering from an acute
myocardial infarction or a cerebral stroke (brain hemorrhage,
cerebral infarction, subarachnoid hemorrhage), or cancer(already covered by the insurance). Also in January 2006, we
introduced the Yume Home (Block Point), a housing loan that
limits debt repayment risk associated with rising interest rates.
In April 2006, we began handling the Yume Home (Venus),
a housing loan designed specifically to assist working women.
This loan comes with strong support services such as
unemployment credit cost insurance in the case of the lossof employment and an exemption from fees at the time of
prepayment (500,000 yen or more per prepayment).

Since February 1, 2006, we have been operating underan agreement allowing free use of each bank’s automatic
machines (CDs, ATMs) with Takayama Shinkin Bank. The
head office of Takayama Shinkin Bank is located in Takayama,Gifu Prefecture, which has had close cultural and economic
relationships and strong human exchange with the Hokuriku
region since the Edo Period (1603 - 1867).
The mutual free use of automatic machines will strengthen
the ties between the two regions and enlarge the area thatcan receive our services.

Hokuhoku Financial Group, Inc. Annual Report 2006

15

5. Refurbishment of Iwase Branch in Meiji Period
merchant house style
The Iwase Area of Toyama was made prosperous when
Kita m a e b u n e ( s h i p s p l y i n g t h ewestern coastal route round Honshu
from Osaka to Hokkaido during the
Edo and Meiji periods) stopped at theport. Traditional houses in the district
are currently being rebuilt as a city
project. In this area, we refurbished
Iwase Branch, which began operatingin March 1900 as the head offi ceof Iwase Bank, like an old merchantfamily house during the Meiji Period (1868 - 1912). It has beenrenovated as a branch with a flavor suitable for a port town
using Sumushiko, a traditional lattice in Iwase, and contributes
to the reconstruction of a cityscape with the air of a trading
district for coastal merchant ships.

6. Opening of the Hokugin Art Gallery
On February 2, 2006, we opened the Hokugin Art Gallery on
the glazed façade facing the Hokugin Square of the head officeof Hokuriku Bank. This is part of our activities to revitalize thelocal shopping area on the central street and to support artists
in Toyama Prefecture.

Hokkaido Bank
1. New construction, transfer andintegration of branches
On December 12, 2005, Sosei Branch was moved to improvethe effi ciency of the branch network of the Hokuhoku
Financial Group. This branch was transferred to a new buildingon the vacant site of the former Naebo Branch of Hokuriku
Bank (which had already been moved to the vacant site of theformer Kosei Office of Hokkaido Bank). As the main branch in
the Sosei and Naebo areas, it aims to continue to increase thevolume of transactions with customers.
On December 19, 2005, Midorimachi Branch was relocatedto a new of fi ce in Shinkaicho 4 - chome and renamed
Tomakomai Higashi Branch. The new office is located inside acommercial complex that lies in front of the AEON Tomakomai
Shopping Center, and will provide better access to thosecustomers who live on
the eastern side of thecity. We will endeavor toearn higher support from
customers by providing
more community-oriented
services than ever before.
Tomakomai Higashi Branch

16

Hokuhoku Financial Group, Inc. Annual Report 2006

2. Hokkaido Food Special Business Conference
To help food and beverage manufacturers in Hokkaido expand
their sales channels, we held the second Hokkaido FoodSpecial Business Conference on September 12, 2005, following the first meeting on May 11, 2005. Inviting a large numberof supermarket managers and buyers from every region of
the country, we set up meetings for opinion exchange andbusiness talks with 27 participants. In addition to the businessmeetings, we supported the participating companies by holding a follow-up meeting for them so that they could receive
orders.

Hokkaido Food Special Business Conference3. Interaction with Shenyang

5. Dosanko Bank 55 (Go! Go!) Campaign

On May 16, 2006, we held the “Shenyang Day in Sapporo”
jointly with Sapporo City and Shenyang Municipality in
L i ao ning P rov inc e, a c entr al c it y in the N o r th E ast
Development Policy of China. In this event, business negotiations were actively held between Japanese companies in
Hokkaido and 24 Chinese counterparts in Shenyang for trade
and technical cooperation, in addition to an investment presentation meeting and an informal meeting for opinion exchangewith the Shenyang government.
On the same day, we concluded a cooperation agreementon the opening of a representative office of Shenyang Municipality in Hokkaido and the establishment of a Japan industrial
park in the Shenyang Industrial Complex.
We will enhance thebusiness support systems forour customers through thecollection and provision of
local information.

To mark the 55th anniversary of our foundation, we have beenrunning the “Dosanko Bank 55 (Go! Go!) Campaign” since
March 5, 2006. On April 22, all employees of the Bank in the
Asahikawa area participated in clearing the Asahiyama Zoo,
while sixty employees cleaned the Odori Park in Sapporo on
May 18. We will continue to make every possible effort toactively participate in social contribution activities to extend
our gratitude to those who support Hokkaido Bank in various
ways.

4. Initiatives in new financing methods
On June 10, 2005, we entered into a loan agreement with
the Hokkaido Development Agency for the development
project of the Tomakomai general judicial government building
implemented by the Hokkaido Development Agency. This
uses a project finance method based on a fund arrangement
by Hokkaido Bank alone.
This is one of a few fund arrangements using a PFI* methodby a regional bank on its own and the first regional PFI projectin Hokkaido in which the client is the Hokkaido Development
Agency, the fund arranger is Hokkaido Bank and the representative company is a company in Hokkaido. This project
received the Regional PFI Award, a special award of the firstJapan PFI Grand Prize.
We remain committed to developing new financing methods and will further strive to facilitate local financing.
* PFI is an abbreviation for “private finance initiative.” This is a methodof providing efficient public services by applying funds, technicalcapabilities, and management capabilities in the private sector to theconstruction, maintenance, management and operation of infrastructure.

6. Expansion of branches handling securities
brokerage business
In April 2005, we launched a securities brokerage business ateight branches in Hokkaido, and our customers are now able
to open a securities account and purchase foreign bonds. Asof the end of March 2006, the number of branches handlingthe securities brokerage business increased to 63, one of thelargest among Japan’s regional banks. We made a primaryoffering of the World Bank bond three times in fiscal 2005.
For secondary bonds, we are providing foreign bonds withhigh credit ratings, centered on the government bonds ofdeveloped nations. We also began handling structured bonds
using derivatives. We will continue to meet the diversified
investment needs of our customers.

7. Commencement of testamentary processing andtestamentary trust services
In November 20 05, we began providing testamentar yprocessing services, in which the Bank takes on inheritanceprocedures on behalf of heirs when an issue of succession
arises. We also started offering testamentary trust services,in which the Bank consults customers on the preparation ofwills, keeps wills in custody, and acts as executor to guarantee
accurate distribution of assets, as an agent for a trust bank.
These services are a first for a financial institution in Hokkaido.
Adding these services to the business succession consulting
services we already provide, we will meet the needs of ourcustomers for consultations related to business succession
and inheritance.

Hokuhoku Financial Group, Inc. Annual Report 2006

17

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED BALANCE SHEETS
Hokuhoku Financial Group, Inc. and Subsidiaries
Thousands of
U.S. dollars (Note 1)

Millions of yen

2006

2005

2006

AssetsCash and due from banks (Note 23) .....................................................................
Call loans and bills bought ....................................................................................
Commercial paper and other debt purchased .......................................................
Trading assets (Note 4) ........................................................................................
Money held in trust (Note 28) ................................................................................
Securities (Notes 5, 10 and 28) ............................................................................
Loans and bills discounted (Notes 6 and 10) ........................................................
Foreign exchanges (Note 7) .................................................................................
Other assets (Note 10) ..........................................................................................
Premises and equipment (Notes 8, 10, 14 and 21) ..............................................
Deferred tax assets (Note 22) ...............................................................................
Goodwill ................................................................................................................
Customers’ liabilities for acceptances and guarantees (Note 9) ...........................
Reserve for possible loan losses ..........................................................................
Total assets ..........................................................................................................

¥ 346,805—
215,361
9,467
25,422
1,749,069
6,678,269
14,816
126,901
116,291
101,880
39,968271,390(160,015)¥9,535,627¥ 498,350
80,02022,367
9,611
23,964
1,559,963
6,682,643
19,835
101,490
120,221
124,444
40,413
277,471(162,123)¥9,398,673$ 2,952,289—
1,833,330
80,592
216,412
14,889,500
56,850,851
126,133
1,080,285
989,966
867,294
340,242
2,310,296(1,362,184)$81,175,006

Liabilities, minority interests and stockholders’ equity
Liabilities
Deposits (Notes 10 and 11) ..................................................................................
Call money and bills sold (Note 10) ......................................................................
Payables under securities lending transactions (Note 10) ....................................
Trading liabilities (Note 4) .....................................................................................
Borrowed money (Note 12) ...................................................................................
Foreign exchanges (Note 7) .................................................................................
Bonds (Note 13) ....................................................................................................
Other liabilities ......................................................................................................
Reserve for employee bonuses ............................................................................
Reserve for employee retirement benefits (Note 27) ............................................
Deferred tax liabilities for land revaluation ............................................................
Acceptances and guarantees (Note 9) .................................................................
Total liabilities .....................................................................................................

¥8,203,885
317,500
107,877755
34,754345
71,220100,418
24
11,831
9,159
271,390
9,129,162¥8,311,812
124,900
109,148
1,010
52,647228
52,73068,67323
11,241
7,596
277,471
9,017,483$69,838,133
2,702,818
918,3376,434
295,859
2,940
606,282
854,848204
100,719
77,9712,310,296
77,714,841

Minority interests ................................................................................................

451

439

3,842

Stockholders’ equity
Capital stock (Note 15) .........................................................................................
Capital surplus ......................................................................................................
Retained earnings (Note 16) .................................................................................
Land revaluation excess (Note 14) .......................................................................
Net unrealized gain on available-for-sale securities (Note 28) .............................
Treasury stock ......................................................................................................
Total stockholders’ equity .................................................................................
Total liabilities, minority interests and stockholders’ equity .........................

50,000272,576
57,542
9,063
17,136(303)
406,014¥9,535,627

50,000272,41235,586
11,192
11,825(264)
380,750¥9,398,673

425,641
2,320,393
489,846
77,153
145,877(2,587)3,456,323$81,175,006

March 31

See notes to consolidated financial statements.

18

Hokuhoku Financial Group, Inc. Annual Report 2006

CONSOLIDATED STATEMENTS OF OPERATIONS
Hokuhoku Financial Group, Inc. and Subsidiaries
Thousands of
U.S. dollars (Note 1)

Millions of yen

2006

2005

2006

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

¥126,161
18,6717
208
5,812
43,085
1,159
33,136
13,366
241,611¥111,470
12,1092
305
1,093
33,2503,215
30,165
11,741
203,354$1,073,990
158,947
62
1,777
49,483366,778
9,875
282,088
113,7902,056,790

Expenses
Interest expenses:
Interest on deposits ..........................................................................................
Interest on payables under securities lending transactions .............................
Interest on borrowings and rediscounts ...........................................................
Interest on bonds .............................................................................................
Other interest expenses ...................................................................................
Fees and commissions (Note 18) .........................................................................
Other operating expenses .....................................................................................
General and administrative expenses ...................................................................
Provision for reserve for possible loan losses .......................................................
Other expenses (Note 20 and 21) .........................................................................
Total expenses ......................................................................................................

7,952
637
1,096
1,523
2,407
10,99916,60994,08343,477
16,252
195,040

5,716
439
1,349
829
1,578
8,511
17,17578,69748,192
16,177
178,667

67,6995,424
9,332
12,973
20,496
93,639141,392
800,913370,116
138,356
1,660,340

46,571

24,687396,450695
18,98949¥ 26,837

923
12,42689¥ 11,248

5,919
161,652417$ 228,462

Year ended March 31

Income before income taxes and minority interests ..............................................
Income taxes (Note 22):
Current .............................................................................................................
Deferred ...........................................................................................................
Minority interests in net income ............................................................................
Net income ...........................................................................................................
See notes to consolidated financial statements.

Hokuhoku Financial Group, Inc. Annual Report 2006

19

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Hokuhoku Financial Group, Inc. and Subsidiaries
Thousands

Millions of yen

Issuednumber ofshares ofcommon stock

Issuednumber ofshares ofpreferred stock

Capitalstock

CapitalsurplusRetainedearnings

Balance at March 31, 2004 ............... 987,146
Net income ...................................
Cash dividends ............................
Treasury stock transactions .........
Transfer from land
revaluation excess .....................
Stock exchange ........................... 299,483
Changes during the year..............
Increase in the number ofaffiliates accounted for by
the equity method.......................
Balance at March 31, 2005 ............... 1,286,630
Net income ...................................
Cash dividends ............................
Treasury stock transactions .........
Transfer from land
revaluation excess .....................
Changes during the year..............
Balance at March 31, 2006 ............... 1,286,630

150,000¥50,000¥105,408¥27,228
11,248(3,786)

Net unrealized
gain onLand revaluation available-for-sale
excesssecurities¥12,088

¥

370

190

186,432

Treasurystock¥(1,402)

1,138
896
2

166,813(896)
11,454

336,432

50,000(2)
35,586
26,837(5,218)272,412

11,192

11,825

164

(39)
336

336,432¥50,000(264)¥272,576¥57,542(336)(1,791)¥ 9,0635,310¥17,136¥ (303)Thousands of U.S. dollars (Note 1)

Capitalstock

Capitalsurplus

Balance at March 31, 2005 ......................................................... $425,641 $2,318,994
Net income .............................................................................
Cash dividends.......................................................................
Treasury stock transactions ...................................................
1,399
Transfer from land revaluation excess ...................................
Changes during the year........................................................
Balance at March 31, 2006 ......................................................... $425,641 $2,320,393
See notes to consolidated financial statements.

20

Hokuhoku Financial Group, Inc. Annual Report 2006

Retainedearnings

Net unrealized
gain onLand revaluation available-for-sale
excesssecurities$302,938
228,462(44,422)$95,276

2,868(2,868)(15,255)$77,153$100,666

Treasurystock$(2,252)(335)$489,846

45,211$145,877$(2,587)

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

Millions of yen
Year ended March 31

1.Cash flows from operating activities:
Income before income taxes and minority interests ...................................
Depreciation ................................................................................................
Losses on impairment of fixed assets .........................................................
Amortization of goodwill ..............................................................................
Equity in earnings of affiliates .....................................................................
Decrease in reserve for possible loan losses .............................................
Increase in reserve for employee bonuses .................................................
Increase in reserve for employee retirement benefits .................................
Interest income ...........................................................................................
Interest expenses .......................................................................................
Losses (gains) on securities .......................................................................
Losses (gains) on money held in trust ........................................................
Losses (gains) on foreign exchange ...........................................................
Losses (gains) on sales of premises and equipment ..................................
Decrease (increase) in trading assets ........................................................
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 sold ..................................
Net increase (decrease) in payables
under securities lending transactions ........................................................
Net decrease (increase) in foreign exchanges (assets) .............................
Net increase (decrease) in foreign exchanges (liabilities) ..........................
Issuance and redemption of bonds (excluding subordinated bonds) .........
Interest received .........................................................................................
Interest paid ................................................................................................
Other, net ....................................................................................................
Subtotal .....................................................................................................
Income taxes paid .......................................................................................
Net cash provided by operating activities ...................................................

2006

2005

2006

¥ 46,571
15,197
1,020
1,961
133
(10,222)0553(150,862)
13,617(7,591)(232)(1,485)
316
144
(254)
10,964(113,791)
18,687¥ 24,687
15,352—1,085(0)(31,241)0
181(124,981)
9,914(3,489)
(129)
191
2,674
809
63
16,205(39,646)
5,730$ 396,450
129,370
8,689
16,702
1,138(87,024)
1
4,712(1,284,260)
115,925(64,626)(1,982)(12,642)
2,691
1,227
(2,165)93,335(968,682)
159,079(4,893)(75)(41,655)

507

7,299

4,320

(112,973)
192,600

122,006
111,100(961,722)
1,639,568(1,271)
5,018
116
(10)
132,992(15,658)(17,215)
3,940
(704)
3,236

62,666(5,149)24(20)
119,725(9,214)
11,423
297,193(1,020)296,172(10,820)
42,720991(85)
1,132,138(133,294)(146,552)
33,547(5,994)27,553

Hokuhoku Financial Group, Inc. Annual Report 2006

21

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

Millions of yen

2006

2005

2006

2.Cash flows from investing activities:
Purchases of securities ...............................................................................
Proceeds from sales of securities ...............................................................
Proceeds from maturity of securities ..........................................................
Purchases of money held in trust ...............................................................
Proceeds from sales of money held in trust ................................................
Proceeds from fund management ..............................................................
Purchases of premises and equipment ......................................................
Proceeds from sales of premises and equipment .......................................
Purchases of stocks of subsidiaries ............................................................
Net cash used in investing activities ...........................................................

¥(616,429)
302,422
149,320(1,608)—18,947(3,309)1,095(2,384)(151,946)¥(524,663)
257,822
126,765(1,420)2,000
8,170(2,081)
1,149—(132,256)$(5,247,545)
2,574,465
1,271,135(13,693)—
161,296(28,175)
9,322(20,298)(1,293,493)

3.Cash flows from financing activities:
Proceeds from issuance of subordinated borrowed money ........................
Repayment of subordinated borrowed money ............................................
Proceeds from issuance of subordinated bonds .........................................
Repayment of subordinated bonds .............................................................
Expenditures for fund procurement ............................................................
Dividends paid ............................................................................................
Dividends paid to minority stockholders .....................................................
Purchases of treasury stock .......................................................................
Proceeds from sales of treasury stock ........................................................
Net cash provided by (used in) financing activities ...................................

9,000(22,000)
20,000(1,500)(2,687)(5,218)
(57)
(248)
300
(2,412)—(4,000)20,000—(1,984)(3,786)
(53)
(176)
1,571
11,57076,615(187,282)
170,256(12,769)(22,881)(44,422)(490)(2,119)2,555(20,537)

4.Effect of exchange rate changes on cash and cash equivalents ..............

62

(1)

536

Year ended March 31

5.Net increase in cash and cash equivalents .................................................

(151,059)

175,485(1,285,941)

6.Cash and cash equivalents at beginning of year ........................................

489,969

184,308

4,171,015

7.Increase in cash and cash equivalents due toincrease in consolidated subsidiaries .......................................................

—

130,175—

8.Cash and cash equivalents at end of year (Note 23) ..................................

¥ 338,909¥ 489,969$ 2,885,074

See notes to consolidated financial statements.

22

Hokuhoku Financial Group, Inc. Annual Report 2006

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

1. Basis of Presentation
The accompanying consolidated financial statements havebeen prepared in accordance with the provisions set forth in
the Japanese Securities and Exchange Law and its related
accounting regulations, and in conformity with accounting
principles generally accepted in Japan, which are different incertain respects as to application and disclosure requirements of International Financial Reporting Standards.
The accompanying consolidated financial statements havebeen restructured and translated into English (with some
expanded descriptions and the inclusion of consolidated
statements of stockholders’ equity) from the consolidated
financial statements of Hokuhoku Financial Group, Inc.
(the “Company”).
Some supplementary information included in the statutory
Japanese language consolidated financial statements, but notrequired for fair presentation, is not presented in the accompanying consolidated financial statements.
Amounts less than one million yen have been omitted. As aresult, the totals in Japanese yen shown in the consolidated
financial statements do not necessarily agree with the sum of
the individual amounts. The translation of the Japanese yenamounts into U.S. dollars is included solely for the convenienceof readers outside Japan, using the prevailing exchange rate at
March 31, 2006, which was ¥117.47 to US$1. The U.S. dollar
amounts are then rounded to thousands. The conveniencetranslations should not be construed as representations that
the Japanese yen amounts have been, could have been, or
could in the future be, converted into U.S. dollars at that rate.
2. Scope of Consolidation
On September 26, 2003, the Company was formed as a holding company for the Hokuriku Bank Ltd. by way of stocktransfers (“kabushiki-iten”), and on September 29, Hokugin
Lease Co., Ltd., Hokuriku Card Co., Ltd., Hokuriku Hosho
Services Co., Ltd. and Hokugin Software Co., Ltd. cameunder the control of the Company. Nihonkai Services Co.,
Ltd. was formed as a wholly-owned subsidiary of the Company
on December 25, 2003.
On September 1, 2004, Hokkaido Bank, Ltd. and Dogin
Business Service, Ltd., its consolidated subsidiary, became
the Company’s consolidated subsidiaries by a way of stockto-stock exchange (“kabushiki-kokan”).
On March 1, 2006, Dogin Card Co., Ltd., formerly an equitymethod affiliate of the Hokuhoku Financial Group, wasincluded in the scope of consolidation after our subsidiary,
Hokkaido Bank, acquired additional shares of Dogin Card.
The performance of Dogin Card for the reporting term wasaccounted for using the equity method.
The consolidated financial statements as of March 31, 2006
include the account of the Company and its 15 (14 in 2005)
subsidiaries (together, the “Group”). The consolidated subsidiaries are listed below.
Under the control or influence concept, those companies inwhich the Company, directly or indirectly, is able to exercise
control over operations are fully consolidated, and those companies over which the Group has the ability to exercise significant influence are accounted for by the equity method.

Investments in one (two in 2005) associated company isaccounted for by the equity method. The associated companies are also listed below.
All significant intercompany balances and transactions havebeen eliminated in consolidation. All material unrealized profit
included in assets resulting from transactions within theGroup is eliminated.
Consolidated subsidiaries
Capital (¥mil) Ownership (%)
Hokuriku Bank, Ltd.
140,409100.00
Hokkaido Bank, Ltd.
93,524100.00
Hokugin Lease Co., Ltd.
100
70.25
Hokuriku Card Co., Ltd.
36
87.39
Hokuriku Hosho Services Co., Ltd.
50
100.00
Hokugin Software Co., Ltd.
30
100.00Nihonkai Services Co., Ltd.
500
100.00
Hokugin Business Services Co., Ltd.
30
(100.00)
Hokugin Office Services Co., Ltd.
20
(100.00)
Hokugin Real Estate Services Co., Ltd.
100
(100.00)
Hokugin Shisankanri Co., Ltd.
100
(100.00)
Hokuriku International Cayman Ltd.
US$1,000(100.00)
Hokugin Corporate Co., Ltd.
100
(100.00)
Dogin Business Service, Ltd.
50
(100.00)
Dogin Card Co., Ltd.
1,226
(100.00)
Notes: 1. Ownership figures in parentheses are inclusive of cross-shareholdings.
2. The two subsidiaries whose balance sheet differs from the date of
the consolidated settlement of accounts are consolidated using theirfinancial statements based on their tentative settlement of accounts
at the consolidated settlement date.
Associated company
Capital (¥mil) Ownership (%)
Hokuriku Capital Co., Ltd.
250
(42.50)Note: Ownership figures in parentheses are inclusive of cross-shareholdings.

The Group applies business combination procedures basedon JICPA Accounting System Committee Research Report No.
6, “Capital Consolidation Procedure for Establishment of Entire
Parent and Subsidiary Relationship using Stock-to-Stock
Exchange and Stock-Transfer Methods”. The business combination by a way of stock transfers on September 26, 2003
mentioned above was accounted for by the pooling-of-interests
method and the business combination by a way of stock-tostock exchange on September 1, 2004 mentioned above was
accounted for by the purchase method.
Assets and liabilities of consolidated subsidiaries are valued
at fair value at the respective dates of acquisition, and goodwill and negative goodwill is amortized using the straight-line
method over 20 years and 5 years, respectively.
Consolidated Statement of Stockholders’ Equity is preparedbased on the profit appropriation effected during the consolidated fiscal year.
3. Significant Accounting Policies(1) Trading assets/liabilities and trading profits/losses
Transactions for trading purposes (seeking gains arising fromshort-term changes in interest rates, currency exchange rates,or market prices of securities and other market related indicesor from variation among markets) are included in “Trading
assets” or “Trading liabilities” on the consolidated balance
sheet on a trade date basis. Profits and losses on trading purpose transactions are recognized on a trade date basis, andrecorded as “Trading profits” and “Trading losses”.
Securities and monetary claims purchased for trading purposes are stated at the fiscal year-end market value, andHokuhoku Financial Group, Inc. Annual Report 2006

23

financial derivatives such as swaps, futures and options arestated at amounts that would be settled if the transactions
were terminated at the consolidated balance sheet date.
“Trading profits” and “Trading losses” include interest
received or paid during the fiscal year, the year-on-year valuation differences of securities and monetary claims and theyear-on-year valuation difference of the derivatives assumingthat the settlement will be made in cash.
Hokuhoku Financial Group accounts for foreign currencytranslation differences arising from currency swaps for trading
purposes as “Trading assets” or “Trading liabilities” on agross basis, pursuant to the “Treatment of Accounting and
Auditing Concerning Accounting for Foreign Currency
Transactions in Banking Industry” (JICPA Industry Audit
Committee Report No. 25).
(2) Securities
As for securities other than trading purposes, debt securities
that consolidated subsidiaries have the positive intent andability to hold to maturity are classified as held-to-maturity
securities and are carried at amortized cost (straight-line
method) using the moving-average method.
Securities other than trading purpose securities and heldto-maturity securities are classified as available-for-salesecurities. Stocks in available-for-sale securities that havemarket prices are carried at their average market prices during the final month of the fiscal year, and bonds and others
that have market prices are carried at their fiscal year-end
market prices (cost of securities sold is calculated using primarily the moving-average method). Available-for-sale securities with no available market prices are carried at cost or
amortized cost using the moving-average method. Net unrealized gains (losses) on available-for-sale securities, net ofincome taxes, are included in “Stockholders’ equity”.
Securities included in money held in trust are carried in thesame method as for securities mentioned above.
(3) Derivative transactions
Derivative transactions, excluding those classified as trading
derivatives, are carried at fair value.
(4) Depreciation method
a. Premises and equipment
The Company and the consolidated banking subsidiaries
depreciate their equipment on the declining-balance method
and their premises principally on the straight-line method.
The estimated useful lives of major items are as follows:
Buildings: 6 to 50 years
Equipment: 3 to 20 years
Consolidated non-banking subsidiaries depreciate theirequipment and premises principally on the declining-balancemethod over their expected useful life.
b. Lease assets
Lease assets are depreciated on the straight-line method overthe number of years until their lease expires, and their estimated disposal value at that time serves as their residual value.
An additional depreciation is expended in order to provide

24

Hokuhoku Financial Group, Inc. Annual Report 2006

for any possible contingency involving customers, and such
expense in the year ended March 31, 2006 is ¥— million andcomes to ¥116 million on an accumulated basis.
c. Software costs
Capitalized software for internal use owned by consolidated
subsidiaries is depreciated using the straight-line method
over its estimated useful life (mainly six years).
(5) Long-lived assets
In August 2002, the Business Accounting Council (BAC)
issued a Statement of Opinion, Accounting for Impairment of
Fixed Assets, and in October 2003 the Accounting Standards
Board of Japan (ASBJ) issued ASBJ Guidance No.6,
Guidance for Accounting Standard for Impairment of Fixed
Assets. These new pronouncements were effective for fiscal
years beginning on or after April 1, 2005 with early adoption
permitted for fiscal years ending on or after March 31, 2004.
The Group adopted the new accounting standard for impairment of fixed assets as of April 1, 2005.
The Group reviews its long-lived assets for impairment
whenever events or changes in circumstance indicate thecarrying amount of an asset or asset group may not be recoverable. An impairment loss would be recognized if the carrying amount of an asset or asset group exceeds the sum of
the undiscounted future cash flows expected to result fromthe continued use and eventual disposition of the asset or
asset group. The impairment loss would be measured as theamount by which the carrying amount of the asset exceeds its
recoverable amount, which is the higher of the discounted
cash flows from the continued use and eventual disposition of
the asset or the net selling price at disposition.
The effect of adoption of the new accounting standard for
impairment of fixed assets was to decrease income before
income taxes and minority interests for the year ended March
31, 2006 by ¥1,020 million ($8,688 thousand).
(6) Reserve for possible loan losses
Reserve for possible loan losses of consolidated banking
subsidiaries is provided as detailed below in accordance with
the internal standards for write-offs and provisions.
For claims on borrowers that have entered into bankruptcy,
special liquidation proceedings or similar legal proceedings(“bankrupt borrowers”) or borrowers that are not legally or formally insolvent but are regarded as substantially in the same
situation (“effectively bankrupt borrowers”), a reserve is provided based on the amount of claims, after the write-off statedbelow, net of the expected amount of recoveries from collateraland guarantees.
For claims on borrowers that are not currently bankrupt but
are perceived to have a high risk of falling into bankruptcy, areserve is provided in the amount deemed necessary basedon an overall solvency assessment of the claims, net of the
expected amount of recoveries from collateral and guarantees.
For other claims, after classification, a reserve is provided
based on the historical loan-loss ratio.
Sales departments assess all claims in accordance with theinternal rules for self-assessment of assets, and the credit

review department, independent from these operating sections, audits their assessment. The reserves are provided
based on the results of these assessments.
The Company and its non-banking consolidated sub sidiaries also carry out asset self-assessment utilizing thesimilar methods to those employed by the consolidated subsidiaries engaging in banking operations to make provisions
for doubtful accounts in the amount deemed necessary.
For collateralized or guaranteed claims on bankrupt borrowers and effectively bankrupt borrowers, the amount exceeding
the estimated value of collateral and guarantees is deemed to
be uncollectible and written off against the total outstanding
amount of the claims. The amount of write-off was ¥178,907
million at March 31, 2006.
(7) Reserve for employee bonuses
Reserve for employee bonuses is provided for payment ofbonuses to employees, in the amount of estimated bonuses,
which are attributable to the respective fiscal year.
(8) Reserve for employee retirement benefits
Reserve for employee retirement benefits is provided for payment of retirement benefits to employees, in the amountdeemed accrued at the fiscal-year end, based on the projected retirement benefit obligation and the fair value of plan
assets at the fiscal year-end.
Unrecognized prior service cost is amortized using thestraight-line method, over eight or nine years within theemployees’ average remaining service period at incurrence.
Unrecognized net actuarial gain (loss) is amortized using
the straight-line method, over eight or nine years within theemployees’ average remaining service period, commencing
from the next fiscal year of incurrence.
Unrecognized net transitional obligation from the initial
application of the new accounting standard for employee
retirement benefits (¥28,464 million) is amortized primarily
using straight-line method over 15 years.
(9) Translation of foreign currency assets and liabilities
Assets and liabilities denominated in foreign currencies aretranslated into Japanese yen mainly at the exchange rate
prevailing at the consolidated balance sheet date.
(10) Lease transactions
Financing leases excluding those in which the ownership of
the property is transferred to the lessee, are accounted for in
the same method as operating leases.
(11) Accounting for significant hedges
a. Interest risk hedges
The consolidated banking subsidiaries hedge interest raterisks arising from their financial assets and liabilities by
employing the technique known as “individual hedging” that
establishes a specific position to directly hedge a particular
item. Such hedges, limited to certain assets and liabilities, areaccounted for by the deferred method or, where appropriate
interest rate swaps are involved, by the special rule method.
“Macro hedges” employed for holistic management of interest

rate risks arising from varied portfolios of financial assets andliabilities, including loans and deposits, through derivatives
arrangements, ceased to benefit from the hedge accounting
standards in April 2002. The appraisal difference or unrealized gain/loss on the hedging positions (a net loss of ¥5,088
million) whose recognition had been deferred under the standards until the discontinuation of hedge accounting is scheduled to be prorated and credited/charged to income over theremaining life (4.5 years) of the hedging instruments. This
step is taken in accordance with the “Accounting and Auditing
Treatments in Application to Banking Business of Standards
for Accounting for Financial Instruments” (JICPA Industry
Audit Committee Report No. 24).
b. Foreign currency hedges
The consolidated banking subsidiaries hedge their foreign
currency denominated financial assets and liabilities against
currency exchange fluctuation risks. Such hedges areaccounted for by the deferred method specified in the“Accounting and Auditing Treatments in Banking Business inAccounting for Foreign Currency Denominated Transactions
and Others” (JICPA Industry Audit Committee Report No. 25).
The effectiveness of hedges is assessed as follows: where
currency swap transactions and exchange swap transactions
are used as hedges to offset exchange fluctuation risks arising from foreign currency denominated financial assets andliabilities, by verifying the agreement of the amounts of thehedging foreign currency positions outstanding and thehedged foreign currency financial assets and liabilities.
Consolidated non-banking subsidiaries are not engaged in
hedging operations using derivative transactions.
(12) Per share information
Basic earnings per share is computed by dividing net income
available to common stockholders by the weighted-average
number of common shares outstanding for the period.
Diluted earnings per share reflects the potential dilution that
could occur if preferred stocks were exercised into common
stock.
(13) Accounting for consumption tax
National and local consumption taxes are accounted for by
the tax exclusion method.
However, a range of consumption taxes on equipment andpremises that cease qualifying for exclusion is included in
expenses in the accounting year it is incurred.
(14) Accounting for income taxes
The provision for income taxes is computed based on thepretax income included in the consolidated statements ofoperations. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future
tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities.
Deferred taxes are measured by applying currently enacted
tax laws to the temporary differences.

Hokuhoku Financial Group, Inc. Annual Report 200625

(15) Accounting for surplus appropriations
The Consolidated Statements of Stockholders’ Equity is
prepared on the basis of surplus appropriations finalized during the fiscal year it covers.
(16) Range of cash and cash equivalents in consolidated statements ofcash flows
Cash and cash equivalents consist of cash on hand anddemand deposits with the Bank of Japan.
4. Trading Accounts
Trading accounts as of March 31, 2006 and 2005 are as
follows:
Millions of yen

Thousands of
U.S. dollars

Assets

2006

2005

2006

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

¥6,422¥6,201$54,676

The amounts of these loans are as follows:
Millions of yen

Loans to borrowers underbankruptcy proceedings..............
Overdue loans...............................
Loans overdue for atleast three months......................
Restructured loans........................
Total .............................................

3,410¥9,611Millions of yen

25,916$80,592
Thousands of
U.S. dollars

Liabilities

2006

2005

2006

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

¥755
¥755

¥1,010¥1,010$6,434$6,434

5. Securities
Securities as of March 31, 2006 and 2005 are as follows:
Millions of yen
2006

2005

Japanese government bonds ........ ¥ 749,340 ¥ 570,389
Japanese local
government bonds ......................
149,857 148,153
Japanese corporate bonds ............
423,202 451,018
Japanese stocks ...........................
228,375 186,541
Other securities ............................
198,292 203,859
Total ............................................. ¥1,749,069 ¥1,559,963

Thousands of
U.S. dollars
2006$ 6,378,993
1,275,712
3,602,646
1,944,122
1,688,027$14,889,500

6. Loans and Bills Discounted
Loans and bills discounted as of March 31, 2006 and 2005
are as follows:
Millions of yen
2006

2005

Bills discounted ............................ ¥ 137,825 ¥ 148,515
Loans on bills................................
847,288965,869
Loans on deeds ............................ 4,697,558 4,546,398
Overdrafts.....................................
995,596 1,021,860
Total ............................................. ¥6,678,269 ¥6,682,643

Thousands of
U.S. dollars
2006$ 1,173,283
7,212,808
39,989,432
8,475,328$56,850,851

Loans and Bills Discounted include loans to borrowers underbankruptcy proceedings, overdue loans, loans overdue for atleast three months and restructured loans.

2005

2006

¥ 28,706
285,988¥ 41,832
295,960$ 244,369
2,434,568

92
84,809¥399,597

632
132,142¥470,567

790
721,968$3,401,695

These amounts represent the amount before deduction of thereserve for possible loan losses.
7. Foreign Exchanges
Foreign exchanges as of March 31, 2006 and 2005 are as
follows:

AssetsDue from foreign banks ................
Foreign exchange bills bought.......
Foreign exchange bills receivable ....
Total .............................................

Hokuhoku Financial Group, Inc. Annual Report 2006

Thousands of
U.S. dollars

2006

2005

2006

¥ 6,3322,298
6,185¥14,816¥10,163
2,728
6,943¥19,835$ 53,910
19,56652,657$126,133

Millions of yen

Thousands of
U.S. dollars

Liabilities

2006

2005

2006

Due to foreign banks.....................
Foreign exchange bills sold...........
Foreign exchange bills payable .....
Total .............................................

¥200
90
54
¥345

¥100
94
33
¥228

$1,706771
463$2,9408. Premises and Equipment
The accumulated depreciation as of March 31, 2006 and 2005
amounted to ¥101,638 million ($865,228 thousand) and¥100,174 million, respectively.
The book value of premises and equipment adjusted forgains on sales of replaced assets as of March 31, 2006
amounted to ¥3,908 million ($33,275 thousand).
9. Customers’ Liabilities for Acceptances and Guarantees
All contingent liabilities arising from acceptances and guarantees are reflected in acceptances and guarantees. As a contra
account, customers’ liabilities for acceptances and guarantees
is also shown on the assets side, which represents the Bank’s
right of indemnity from the applicants.
10. Pledged Assets
Assets that are pledged as collateral as of March 31, 2006 and2005 are as follows:
Millions of yen

Assets that arepledged as collateral:
Securities................................
Loans and bills discounted......
Obligations corresponding tocollateral assets:
Deposits .................................
Payables under securities
lending transactions..............
Call money and bills sold.........

26

2006

Millions of yen

3,044¥9,467

Thousands of
U.S. dollars

Thousands of
U.S. dollars

2006

2005

2006

¥365,791
223,749¥289,847
151,803$3,113,915
1,904,733¥ 63,007¥ 61,889$ 536,375

107,877
287,500

109,148
124,900

918,337
2,447,433

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, 2006 and 2005.
Millions of yen

Securities .....................................
Other assets .................................

Thousands of
U.S. dollars

2006

2005

2006

¥170,789
43¥181,65719$1,453,902
370

Premises and equipment included guarantee deposits of¥5,961 million ($50,751 thousand) and ¥5,845 million as ofMarch 31, 2006 and 2005, respectively.
11. Deposits
Deposits as of March 31, 2006 and 2005 are as follows:
Millions of yen
2006

2005

Current deposits, ordinary deposits,
saving deposits and deposits at notice .... ¥4,101,016 ¥3,968,624
Time deposits and installment savings...... 3,861,185 3,979,665
Other deposits ..............................
201,206
341,731
Subtotal ........................................ ¥8,163,408 ¥8,290,022
NCDs ............................................
40,477
21,790Total ............................................. ¥8,203,885 ¥8,311,812

Thousands of
U.S. dollars
2006$34,911,182
32,869,543
1,712,835$69,493,560
344,573$69,838,133

12. Borrowed Money
Borrowed money includes ¥28,000 million ($238,359 thousand) and ¥41,000 million in subordinated borrowed money
as of March 31, 2006 and 2005, respectively.
13. Bonds
Bonds include ¥70,400 million ($599,302 thousand) and¥51,900 million of subordinated bonds as of March 31, 2006
and 2005, respectively.
14. Land Revaluation Excess
Under the “Law Concerning Land Revaluation”, Hokuriku
Bank, Ltd. revaluated its own land for business operation as ofMarch 31, 1998. The revaluation gain is included in stockholders’ equity as “Land revaluation excess”, net of taxes. The carrying amount of the land after the above one-time revaluation
exceeded the market value by ¥21,905 million ($186,475
thousand) and ¥20,395 million as of March 31, 2006 and2005, respectively.

15. Capital Stock
Information with respect to capital stock of the Company as ofMarch 31, 2006 and 2005 are as follows:
Number of shares:
Authorized:
Common ..................................
Preferred (Type 1).....................
Preferred (Type 2).....................
Preferred (Type 3).....................
Preferred (Type 4).....................
Preferred (Type 5).....................
Issued and outstanding:Common ..................................
Preferred (Type 1).....................
Preferred (Type 4).....................
Preferred (Type 5).....................

2006

2005

2,800,000,000
400,000,000
200,000,000
200,000,000
90,000,000
110,000,000

2,800,000,000
400,000,000
200,000,000
200,000,000
90,000,000
110,000,000

1,286,630,146
150,000,000
79,000,000
107,432,000

1,286,630,146
150,000,000
79,000,000
107,432,000

1. Preferred Stock (Type 1 and Type 4)
Preferred stocks (Type 1 and Type 4) are noncumulative and nonparticipating
for dividend payments, and stockholders of the preferred stock are not entitledto vote at a general meeting of stockholders except when the proposal to pay
the prescribed dividends to stockholders is not submitted to the general meeting of stockholders or is rejected at the general meeting of stockholders.
Annual dividends per share of preferred stock (Type 1 and Type 4) are paid
to stockholders by ¥7.70 and ¥6.62, respectively.
In cases of liquidation distribution, stockholders of preferred stock (Type 1
and Type 4) will receive ¥500 and ¥570 per share, respectively, and will nothave the right to participate in any further liquidation distribution.
The Company may, at any time, purchase and retire preferred stocks out of
earnings available for distribution to the stockholders.
Stockholders of preferred stock (Type 1 and Type 4) may request the Company
to convert their preferred stocks into common stocks. The period during which
the conversion may be requested (the “conversion period”) and the terms andconditions of conversion with respect to preferred stock (Type 1 and Type 4) were
determined by the resolution made in accordance with the provisions of Article
365 of the Commercial Code, of a stockholders meeting of the Company. The
conditions of conversion of preferred stock (Type 1 and Type 4) were determinedby the resolution of the board of directors relating to the issuance of the relevant
preferred stocks. The conversion period and conversion price* of each type ofpreferred stock are as follows:
Preferred stock (Type 1): September 1, 2004 to July 29, 2010
¥337.40
Preferred stock (Type 4): September 1, 2004 to July 31, 2010
¥337.40* Conversion prices are reset and adjusted pursuant to the appointed rules
governing conversion of the preferred stocks.
Any preferred stock (Type 1 and Type 4) with respect to which conversion
has not been requested during the conversion period shall be mandatorily
converted, as of the date immediately following the last day of the conversion
period (the “mandatory conversion date”), into such number of common
stocks as is obtained by dividing the corresponding amount set forth below by
the average of the daily closing prices per share of common stock in regulartransactions at the Tokyo Stock Exchange on each of the 30 consecutive trading days (excluding any day on which the closing price is not available) commencing on the 45th trading day preceding the mandatory conversion date. Ifsuch average price is less than ¥150 and ¥137.50, in the case of preferredstock (Type 1 and Type 4), respectively, then the preferred stock shall be converted into such number of common stocks as is obtained by dividing the corresponding amount set forth below by the relevant amount described above:
Preferred stock (Type 1): ¥500 per share
Preferred stock (Type 4): ¥570 per share
2. Preferred stock (Type 5)
Preferred stock (Type 5) is noncumulative and nonparticipating for dividend
payments, and stockholders of the preferred stock (Type 5) are not entitled tovote at a general meeting of stockholders except when the proposal to pay theprescribed dividends to stockholders is not submitted to the general meetingof stockholders or is rejected at the general meeting of stockholders.
Annual dividends per share of preferred stock (Type 5) are paid to stockholders by ¥15.00.

Hokuhoku Financial Group, Inc. Annual Report 200627

16. Retained Earnings
Through May 1, 2006, Japanese banks are subject to theJapanese Commercial Code (the “Code”) and the Banking
Law.
The Code requires that all shares of common stock arerecorded with no par value and at least 50% of the issue priceof new shares is required to be recorded as common stock andthe remaining net proceeds as additional paid-in capital, whichis included in capital surplus. The Code permits Japanesecompanies, upon approval of the Board of Directors, to issue
shares to existing stockholders without consideration as astock split. Such issuance of shares generally does not giverise to changes within the stockholders’ accounts.
The Banking Law also provides that an amount at least
equal to 20% of the aggregate amount of cash dividends andcertain other appropriations of retained earnings associatedwith cash outlays applicable to each period shall be appropriated as a legal reserve (a component of retained earnings)
until such reserve and additional paid-in capital equals 100%of stated capital. The amount of total additional paid-in capitaland legal reserve that exceeds 100% of the stated capital may
be available for dividends by resolution of the stockholders. In
addition, the Code permits the transfer of a portion of additional paid-in capital and legal reserve to the stated capital byresolution of the Board of Directors.
The Code allows Japanese companies to repurchase treasury stock and dispose of such treasury stock by resolution of
the Board of Directors. The repurchased amount of treasury
stock cannot exceed the amount available for future dividendplus amount of stated capital, additional paid-in capital or
legal reserve to be reduced in the case where such reduction
was resolved at the stockholders meeting.
In addition to the provision that requires an appropriation fora legal reserve in connection with the cash payment, the Codeimposes certain limitations on the amount of capital surplus
and retained earnings available for dividends. The amount of
capital surplus and retained earnings available for dividends
under the Code was ¥135,430 million ($1,152,894 thousand)as of March 31, 2006, based on the amount recorded in the
Company’s general books of account.
Dividends are approved by the stockholders at a meeting
held subsequent to the fiscal year to which the dividends areapplicable. Semiannual interim dividends may also be paid
upon resolution of the Board of Directors, subject to certain
limitations imposed by the Code.
On May 1, 2006, a new corporate law (the “Corporate Law”)
became effective, which reformed and replaced the Codewith various revisions that would, for the most part, be applicable to events or transactions which occur on or after May 1,
2006 and for the fiscal years ending on or after May 1, 2006.
The significant changes in the Corporate Law that affectfinancial and accounting matters are summarized below;
a. Dividends
Under the Corporate Law, companies can pay dividends at any
time during the fiscal year in addition to the year-end dividend
upon resolution at the stockholders meeting. For companies
that meet certain criteria such as; (1) having the Board of28

Hokuhoku Financial Group, Inc. Annual Report 2006

Directors, (2) having independent auditors, (3) having theBoard of Corporate Auditors, and (4) the term of service of thedirectors is prescribed as one year rather than two years ofnormal term by its articles of incorporation, the Board of
Directors may declare dividends (except for dividends in kind) if
the company has prescribed so in its articles of incorporation.
The Corporate Law permits companies to distributedividends-in-kind (non-cash assets) to stockholders subject toa certain limitation and additional requirements.
Semiannual interim dividends may also be paid once a year
upon resolution by the Board of Directors if the articles ofincorporation of the company so stipulate. Under the Code,certain limitations were imposed on the amount of capital surplus and retained earnings available for dividends. The
Corporate Law also provides certain limitations on theamounts available for dividends or the purchase of treasury
stock. The limitation is defined as the amount available for
distribution to the stockholders, 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 Law requires that an amount equal to 20% of
dividends must be appropriated as a legal reserve (a component of retained earnings) or as additional paid-in capital (acomponent of capital surplus) depending on the equity
account charged upon the payment of such dividends until
the total of aggregate amount of legal reserve and additional
paid-in capital equals 100% of stated capital. Under theCode, the aggregate amount of additional paid-in capital andlegal reserve that exceeds 100% of stated capital may bemade available for dividends by resolution of the stockholders. Under the Corporate Law, the total amount of additional
paid-in capital and legal reserve may be reversed without limitation of such threshold. The Corporate Law also provides
that stated capital, legal reserve, additional paid-in capital,
other capital surplus and retained earnings can be transferredamong the accounts under certain conditions upon resolutionof the stockholders.
c. Treasury stock and treasury stock acquisition rights
The Corporate Law also provides for companies to purchasetreasury stock and dispose of such treasury stock by resolution of the Board of Directors. The amount of treasury stock
purchased cannot exceed the amount available for distribution
to the stockholders which is determined by specific formula.
Under the Corporate Law, stock acquisition rights, whichwere previously presented as a liability, are now presented asa separate component of stockholders’ equity.
The Corporate Law also provides that companies can purchase both treasury stock acquisition rights and treasury
stock. Such treasury stock acquisition rights are presented asa separate component of stockholders’ equity or deducted
directly from stock acquisition rights.
On December 9, 2005, the Accounting Standards Board ofJapan (ASBJ) published a new accounting standard forpresentation of stockholders’ equity. Under this accounting
standard, certain items which were previously presented asliabilities are now presented as components of stockholders’equity. Such items include stock acquisition rights, minority
interest, and any deferred gain or loss on derivatives
accounted for under hedge accounting. This standard iseffective for fiscal years ending on or after May 1, 2006.
17. Per Share Information
Net assets per share ............................
Basic earnings per share......................
Diluted earnings per share ...................

2006

2005

¥179.37¥ 18.31¥ 14.32¥159.75¥ 6.86¥ 5.67

Millions ofyen

Thousands ofshares

Net income

Earnings per
average shares
share

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

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

2006

2005

2006

¥ 7,584
13,973
2,623
18,903¥43,085¥ 6,131
11,5801,835
13,703¥33,250$ 64,569
118,951
22,336160,922$366,778¥18.31

475,859
1,761,239¥7,958

1,159,915

1,677

538,499¥9,635

1,698,414

Thousands of
U.S. dollars

2006

2005

2006

¥ 2,292
8,707¥10,999¥1,942
6,568¥8,511$19,517
74,122$93,639

19. Trading Income and Losses
Millions of yen

1,285,380

Thousands of
U.S. dollars

Yen

Weighted

For the year ended March 31, 2005:
Basic earnings per share
Net income available tocommon stockholders...........
Effect of dilutive securities
Preferred stocks......................
Diluted earnings per share
Net income for computation ....

Millions of yen

Millions of yen

Reconciliation of the differences between basic and diluted
earnings per share for the years ended March 31, 2006 and2005 is as follows:

For the year ended March 31, 2006:
Basic earnings per share
Net income available tocommon stockholders...........
¥23,547
Effect of dilutive securities
Preferred stocks......................
1,677
Diluted earnings per share
Net income for computation ....
¥25,225

18. Fees and Commissions
Fees and commissions for the years ended March 31, 2006
and 2005 are as follows:¥14.32

¥6.86

¥5.67

Thousands of
U.S. dollars(a) Trading income

2006

2005

2006

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

¥ 185
974
¥1,159¥ 936
2,279¥3,215$1,5798,296$9,875

Millions of yen

Thousands of
U.S. dollars(b) Trading losses

2006

2005

2006

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

—
—

—
—

—
—

20. Other Expenses
Included in other expenses for the fiscal years ended March
31, 2006 and 2005 were write off of loans and bills discountedof ¥837 million ($7,131 thousand) and ¥2,813 million, valuation losses on sales of stocks and other securities of ¥572 million ($4,874 thousand) and ¥2,541 million, respectively.

21. Losses on Impairment of Fixed Assets
The differences between the recoverable amount and the book value of the following assets were recognized as losses on
impairment of fixed assets during the current fiscal year:
Area

Principal purpose of use

Hokkaido area

Branch premises to be closed
Idle assets

1 branch
12 items

Type

Impairment loss

Land and premises¥379 million$3,234 thousand

Hokuriku area

Idle assets

13 items

Land and premises¥517 million$4,403 thousand

Other

Idle assets

7 items

Land and premises¥123 million$1,052 thousand

Regarding consolidated subsidiaries that undertake banking operations, every retail branch is, in principle, designated by thebanking subsidiaries as the smallest unit for recognition and measurement of impairment loss, taking into consideration cash
flows in the region in question. The head office, computer centers, dormitories, employee housing, and welfare facilities do not
generate their own cash flow and therefore are classified as the subsidiaries’ common property. Each leasing property held by
the consolidated subsidiary involved in the real estate leasing business is designated as the smallest unit for recognition andmeasurement of impairment loss. All other subsidiaries are designated as units for recognition. In the case of assets scheduled
for disposal and idle assets, assets are grouped by company, and individual assets are assessed as measurement units. In therecording of an impairment loss, the book value of each asset is reduced to the recoverable amount. Regarding the banks’branches scheduled for closure due to the transference of business operations, as well as idle assets such as land on which theinvestments cannot be recouped due to declining appraisal values, the recoverable amounts used for the measurement of such
impairment loss are net sales prices. In principle, the net sales price is calculated in accordance with the Real Estate Appraisal
Standards (Ministry of Land, Infrastructure and Transport, revised on July 3, 2002).

Hokuhoku Financial Group, Inc. Annual Report 200629

22. Income Taxes
The Company and its domestic subsidiaries are subject toJapanese national and local income taxes which, in theaggregate, resulted in normal effective statutory tax rates ofapproximately 40.43% for the years ended March 31, 2006
and 2005.
On March 31, 2003, a tax reform law concerning enterprise
tax was enacted in Japan which changed the normal effective
statutory tax rate from 41.74% to 40.43%, effective for years
beginning on or after April 1, 2004. The deferred tax assets
and liabilities which will realize on or after April 1, 2004 aremeasured at the effective tax rate of 40.43% as of March 31,
2004.
The tax effects of significant temporary differences and tax
loss carryforwards which resulted in deferred tax assets andliabilities at March 31, 2006 and 2005 are as follows:
Millions of yen
2006

2005

Deferred tax assets
Reserve for possible loan losses.................
Depreciation...............................................
Reserve for employee retirement benefit ....
Loss on valuation of securities ...................
Other..........................................................
Operating loss carryforwards......................
Subtotal ...............................................
Less: Valuation allowance ..........................
Total deferred tax assets..................................

¥108,448
2,191
14,837
11,163
4,873
52,839194,353
74,413
119,939¥121,370
2,387
14,364
12,5082,800
57,916211,348
72,122
139,226

Deferred tax liabilities:
Net unrealized gains onavailable-for-sale securities .....................
Other..........................................................
Total deferred tax liabilities ..............................
Net of deferred tax assets ................................

¥ 17,352
706
18,058¥101,880¥ 14,076
705
14,782¥124,444

Thousands of
U.S. dollars
2006

Deferred tax assets
Reserve for possible loan losses................. $ 923,198
Depreciation...............................................
18,655Reserve for employee retirement benefit .... 126,306
Loss on valuation of securities ...................
95,031Other..........................................................
41,487
Operating loss carryforwards...................... 449,814
Subtotal ............................................... 1,654,491
Less: Valuation allowance .......................... 633,466
Total deferred tax assets.................................. 1,021,025
Deferred tax liabilities:
Net unrealized gains onavailable-for-sale securities ..................... $ 147,721
Other..........................................................
6,010
Total deferred tax liabilities .............................. 153,731
Net of deferred tax assets ................................ $ 867,294

30

Hokuhoku Financial Group, Inc. Annual Report 2006

23. Cash and Cash Equivalents
The reconciliations of “Cash and cash equivalents” in the consolidated statements of cash flows and “Cash and due frombanks” in consolidated balance sheets as of March 31, 2006
and 2005, are as follows:
Millions of yen

Cash and due from banks inbalance sheet .............................
Due from banks except for
deposits with the Bank of Japan....
Cash and cash equivalents inthe statements of cash flows ......

Thousands of
U.S. dollars

2006

2005

2006

¥346,805¥498,350$2,952,289(7,895)(8,381)(67,215)¥338,909¥489,969$2,885,074

24. Commitment Lines
Loan agreements and commitment line agreements relating toloans are agreements, which oblige the Group to lend funds up
to a certain limit agreed in advance. The Group makes theloans upon the request of an obligor to draw down funds undersuch loan agreements, as long as there is no breach of thevarious terms and conditions stipulated in the relevant loan
agreement. The unused commitment balance relating to theseloan agreements amounted to ¥2,217,529 million ($18,877,414
thousand) and ¥2,146,119 million as of March 31, 2006 and2005, respectively. Of this amount, ¥2,202,243 million($18,747,285 thousand) and ¥2,143,273 million as of March 31,
2006 and 2005, respectively, relates to loans where the term of
the agreement is one year or less, or unconditional cancellationof the agreement is allowed at any time.
In many cases the term of the agreement runs its course
without the loan ever being drawn down. Therefore, theunused loan commitment will not necessarily affect future
cash flows. Conditions are included in certain loan
agreements which allow the Group either to decline therequest for a loan draw down or to reduce the agreed limit
amount where there is due cause to do so, such as when
there is a change in financial condition, or when it is necessary
to do so in order to protect the Group’s credit. The Grouptakes various measures to protect its credit. Such measures
include having the obligor pledge collateral to the Bank and its
consolidated subsidiaries in the form of real estate, securities
etc. on signing the loan agreement, or in accordance with theGroup’s established internal procedures confirming theobligor’s financial condition etc. at regular intervals.

25. Segment Information(a) Segment information by business
For the fiscal years ended March 31, 2006 and 2005 on consolidated results are as follows:
Millions of yen
2006

Banking

Lease

Other
business

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

¥ 216,866
1,856
218,723
169,749¥ 48,974¥16,874
1,362
18,236
17,207¥ 1,029¥ 7,245
5,053
12,29914,131¥ (1,831)¥ 240,986
8,273
249,259
201,087¥ 48,171¥—(8,273)(8,273)(8,387)¥113¥ 240,986—
240,986
192,700¥ 48,285

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

¥9,489,732
4,094
816
3,084

¥44,988
10,777—
12,818¥192,126
325
204
219

¥9,726,847
15,197
1,020
16,122¥(191,219)———¥9,535,627
15,197
1,020
16,122Eliminationor corporate

Consolidated

Total

Eliminationor corporate

Consolidated

Millions of yen
2005

Banking

Lease

Other
business

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

¥ 178,680
2,679
181,359
154,309¥ 27,050¥18,253
1,030
19,283
18,129¥ 1,154¥ 6,267
5,289
11,557
11,324¥232¥ 203,200
8,999
212,200
183,763¥ 28,436¥—(8,999)(8,999)(7,788)¥ (1,210)¥ 203,200—
203,200
175,974¥ 27,226

II Identifiable assets...........................................................
Depreciation expenses....................................................
Capital expenditures .......................................................

¥9,333,369
3,685
1,914

¥49,879
11,324
15,390¥193,400
342
165¥9,576,650
15,352
17,470¥(177,976)——¥9,398,673
15,352
17,470Eliminationor corporate

Consolidated

Total

Thousands of U.S. dollars
2006

Other
business

Total

Banking

Lease

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

$ 1,846,145
15,807
1,861,952
1,445,042$ 416,910$143,648
11,598155,246
146,485$ 8,761

61,67943,024
104,703120,297$ (15,594)$ 2,051,472
70,4292,121,901
1,711,824$ 410,077$—(70,429)(70,429)(71,398)969$ 2,051,472—
2,051,472
1,640,426$ 411,046

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

$80,784,308
34,852
6,949
26,261$382,975
91,750—109,118$1,635,541
2,768
1,740
1,871

$82,802,824
129,370
8,689
137,250$(1,627,818)———$81,175,006
129,370
8,689
137,250$$(b) Segment information by location
As operations in Japan, in terms of all segments and total assets for all segments, accounted for more than 90% of total ordinary
income, information by location has been omitted.
(c) Segment information about the ordinary income from international operations
As ordinary income from international operations accounted for less than 10% of total ordinary income, information about theordinary income from international operations has been omitted.

Hokuhoku Financial Group, Inc. Annual Report 200631

26. Lease Transactions
Finance lease transactions that do not transfer ownership ofthe leased property to the lessee for the year ended March
31, 2006 and 2005 are as follows:(Lessee)
Pro forma information with respect to the leased property,
such as acquisition cost, accumulated depreciation and net
book value at March 31, 2006 and 2005 are as follows:
Millions of yen

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

2006

2005

¥2,504761¥1,742¥1,530360¥1,169Within one year.............................
Over one year ...............................
Total .............................................

2006

2005

¥ 358
1,384
¥1,742¥ 259
909¥1,169Lease payments............................
Depreciation expenses..................

Millions of yen

2006$21,319
6,482$14,837

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

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

2005

2006

¥299
299

¥152
152

$2,550
2,550

2005

2006

¥55,288
27,040¥28,247$442,018
218,342$223,676

Thousands of
U.S. dollars

2006

2005

2006

¥12,896
15,014¥27,911¥11,157
19,989¥31,147$109,785
127,820$237,605

Lease payment received and depreciation expenses for theyears ended March 31, 2006 and 2005 are as follows:
Millions of yen

Thousands of
U.S. dollars

2006

2006

¥51,923
25,648¥26,275

Millions of yen

2006$ 3,049
11,788$14,837

Thousands of
U.S. dollars

The pro forma amounts of lease receivable under financelease at March 31, 2006 and 2005 are as follows:

Thousands of
U.S. dollars

Pro forma information concerning lease payment and depreciation expenses for the years ended March 31, 2006 and2005 are as follows:
Millions of yen(Lessor)
Acquisition cost, accumulated depreciation and balance at
March 31, 2006 and 2005 are as follows:

Thousands of
U.S. dollars

Pro forma amounts of obligations under finance lease at
March 31, 2006 and 2005 are as follows:
Millions of yen

The method of calculating the pro forma amounts of depreciation expenses for the years ended March 31, 2006 and 2005
are as follows:
Depreciation is computed based on the straight-line method
over the period of lease, with no residual value.

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

Thousands of
U.S. dollars

2006

2005

2006

¥12,434
10,775¥13,061
11,323$105,857
91,732

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

32

Hokuhoku Financial Group, Inc. Annual Report 2006

(b) Retirement benefit
Thousands of
U.S. dollars

Millions of yen

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

2006

2005

2006

¥(92,655)
87,886(4,768)17,061(15,625)(8,498)(11,831)—¥(11,831)¥(88,240)
61,503(26,737)
18,957
7,034(10,496)(11,241)—¥(11,241)$(788,757)
748,161(40,596)
145,243(133,021)(72,345)(100,719)—$(100,719)(c) Retirement benefit expenses
Thousands of
U.S. dollars

Millions of yen

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

2006

2005

2006

¥1,8882,195(1,352)(1,997)
1,588
1,895
1,260
¥5,477¥1,7891,903(1,008)(1,023)
969
1,577
858
¥5,066$16,075
18,686(11,516)(17,008)
13,526
16,138
10,727$46,628(d) Basis for calculation of projected benefit obligations(1) Discount rate .........................................................................................................
(2) Expected rate of return on pension assets ..............................................................
(3) Method of benefit attribution ..................................................................................
(4) Period of amortization of unrecognized prior service costs .....................................
(5) Period of amortization of unrecognized actuarial differences ..................................
(6) Period of amortization of transitional obligation ......................................................

2006

2005

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

2.5%
2.5% – 4.0%
Straight-line method
9 years
9 years
15 years

28. Market Value of Securities and Money Held in Trust(1) Securities
The market value of securities at March 31, 2006 and 2005 was as follows:
1. The amounts shown in the following tables include trading securities classified as “Trading assets”, negotiable certificates ofdeposit bought classified as “Cash and due from banks”, and commercial papers and beneficiary claims on loan trusts classified as “Commercial paper and other debt purchased”, in addition to “Securities” stated in the consolidated balance sheets.
2. Investments in subsidiaries and affiliates have no market quotations.
(a) Securities classified as trading purposes
Thousands of
U.S. dollars

Millions of yen
March 31

2006

2005

2006

Consolidated balance sheet amount...........................................................................................
Valuation gains (losses) included in the earnings for the fiscal year ............................................

¥6,422(66)¥6,201
14$54,676(569)

Hokuhoku Financial Group, Inc. Annual Report 200633

(b) Bonds classified as held-to-maturity with market value
Millions of yen

March 31, 2006

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

Consolidatedbalance sheet
amountMarket value

Net unrealized
gains (losses)

Unrealized
gains

Unrealized
losses¥11,822
6,429
28,965¥47,217¥11,874
6,266
28,404¥46,545

¥ 51
(162)
(561)
¥(672)

¥ 54
0
178
¥233

¥ 3
162
739
¥905

Millions of yen

March 31, 2005

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

Consolidatedbalance sheet
amountMarket value

Net unrealized
gains (losses)

Unrealized
gains

Unrealized
losses¥ 4,901
2,021
29,425¥36,348¥ 5,162
2,007
29,741¥36,910

¥260
(13)
315
¥561

¥260
1
407
¥669

¥ —
15
92
¥107

Unrealized
lossesThousands of U.S. dollars

March 31, 2006

Consolidatedbalance sheet
amountMarket value

Net unrealized
gains (losses)

Unrealized
gains

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

$100,643
54,736
246,578$401,957$101,082
53,350241,801$396,233$ 439(1,386)(4,777)$(5,724)

$ 468
0
1,519
$1,987

March 31, 2006

Acquisition
cost

Consolidatedbalance sheet
amountNet unrealized
gains (losses)

Unrealized
gains

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

¥ 125,718
1,235,281
766,765
153,169
315,346
176,859¥1,537,860¥ 192,879
1,196,553
737,517
149,857
309,177
176,518¥1,565,951¥67,161(38,728)(29,247)(3,312)(6,168)(341)¥28,091¥67,702
645
36
349
259
2,827
¥71,175¥

March 31, 2005

Acquisition
cost

Consolidatedbalance sheet
amountNet unrealized
gains (losses)

Unrealized
gains

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

¥ 131,526
1,069,403
564,993
147,391
357,017
185,506¥1,386,436¥ 153,023
1,071,373
565,487
148,153
357,732
181,495¥1,405,893¥21,497
1,970
493
761
714
(4,010)¥19,457¥25,471
6,598
2,548
1,922
2,127
940
¥33,010¥ 3,973
4,628
2,055
1,160
1,412
4,950
¥13,552

Acquisition
cost

Consolidatedbalance sheet
amountNet unrealized
gains (losses)

Unrealized
gains

Unrealized
losses$ 1,070,219
10,515,720
6,527,331
1,303,907
2,684,482
1,505,576$13,091,515$ 1,641,948
10,186,036
6,278,350
1,275,712
2,631,974
1,502,666$13,330,650$571,729(329,684)(248,981)(28,195)(52,508)(2,910)$239,135$576,339
5,494
313
2,971
2,210
24,071$605,904$ 4,610335,178
249,294
31,16654,71826,981$366,769

$

29
1,386
6,296
$7,711

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

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

541
39,37329,284
3,661
6,427
3,169
¥43,084

Millions of yen

Thousands of U.S. dollars

March 31, 2006

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

Note: Consolidated balance sheet amount is calculated as follows:
StocksAverage market prices during one month before the fiscal year-end
Bonds and otherMarket prices at the fiscal year-end

34

Hokuhoku Financial Group, Inc. Annual Report 2006

(d) Available-for-sale securities sold during the years ended March 31, 2006 and 2005
Thousands of
U.S. dollars

Millions of yen
Year ended March 31

Sales amount .....................................................................................................................
Gains on sales ....................................................................................................................
Losses on sales ..................................................................................................................

2006

2005

2006

¥276,149
9,089
954¥259,492
6,322
339$2,350,810
77,3778,123(e) Securities with no available market value
Thousands of
U.S. dollars

Millions of yen
Consolidated balance sheet amountMarch 31

Bonds classified as held-to-maturity...................................................................................
Privately placed bonds..................................................................................................
Available-for-sale securities ...............................................................................................
Unlisted stocks (excluding OTC stocks) .........................................................................
Unlisted foreign securities.............................................................................................
Other ............................................................................................................................

2006

2005

2006

¥ 30,922
30,922282,859
34,947
1
247,910¥ 26,532
26,532
102,395
33,161
1
69,232$ 263,237
263,237
2,407,927
297,499
92,110,419(f) Change of classification of securities
Not applicable.
(g) Redemption schedule of available-for-sale securities with maturities and held-to-maturity bonds
Millions of yen
Within 1 year

After 1 year
through 5 years

After 5 years
through 10 years

After 10 years¥ 97,585
22,327
12,55562,702
48,400¥145,985¥495,263
197,225
57,488240,549
42,155¥537,419¥442,800
245,52179,814
117,464
57,970¥500,770¥286,751
284,266—
2,485
22,988¥309,740

Within 1 year

After 1 year
through 5 years

After 5 years
through 10 years

After 10 years¥114,673
22,602
5,071
87,00017,462¥132,136¥489,396
172,460
65,217
251,718
74,580¥563,977¥324,481
136,845
77,864
109,771
55,894¥380,376¥241,009
238,481—
2,528
26,637¥267,646

March 31, 2006

Within 1 year

After 1 year
through 5 years

After 5 years
through 10 years

After 10 years

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

$ 830,725
190,068
106,880
533,777
412,020$1,242,745$4,216,089
1,678,945
489,389
2,047,755
358,858$4,574,947$3,769,474
2,090,077
679,444
999,953
493,493$4,262,967$2,441,065
2,419,904—
21,161
195,694$2,636,759

March 31, 2006

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

Millions of yen
March 31, 2005

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

Thousands of U.S. dollars(2) Money Held in Trust(a) Money held in trust classified as trading purposes
Thousands of
U.S. dollars

Millions of yen
March 31

2006

2005

2006

Consolidated balance sheet amount ...................................................................................
Valuation gains included in profit/loss during the year.........................................................

¥7,425
109¥7,46025$63,215935

Hokuhoku Financial Group, Inc. Annual Report 200635

(b) Money held in trust classified as held-to-maturity
Not applicable(c) Other money held in trustThousands of
U.S. dollars

Millions of yen
March 31

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

2006

2005

2006

¥18,000
17,996(3)
29
33¥16,400
16,503103106
3$153,230
153,198
(32)
254
286

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

(3) Net Unrealized Gains on Available-for-Sale Securities and Other Money Held in Trust
Thousands of
U.S. dollars

Millions of yen
March 31

Net unrealized gains...........................................................................................................
Available-for-sale securities .........................................................................................
Other money held in trust .............................................................................................
Net deferred tax liabilities ...................................................................................................
Net unrealized gains (before following adjustment) .............................................................
(–) Minority interests..................................................................................................................
(+) Hokuhoku’s interest in net unrealized gains on
valuation of available-for-sale securities
held by affiliates accounted for by the equity method ..................................................
Net unrealized gains...........................................................................................................

2006

2005

2006

¥28,087
28,091(3)(11,364)
16,722¥19,560
19,457103(7,917)
11,643$239,103
239,135(32)(96,743)
142,36037450¥17,13616

197¥11,825316

3,833$145,877

29. Derivatives
The Hokuriku Bank, Ltd. and the Hokkaido Bank, Ltd. (together, the “Banks”) use swaps, futures, forward and option contracts,
and other similar types of contracts based on either interest rates, foreign exchange rates or securities prices.
The purpose for using derivative finance products are 1) to respond to the hedging needs of customers, 2) to reduce market
risks related to the assets and liabilities and 3) for trading purposes under the strict risk management structure.
Derivative transactions are accompanied by losses arising from credit risk and losses resulting from market risk.
Derivatives transactions entered into by the Banks have been made in accordance with its risk management policies and procedures, and positions, gain- and-loss amounts, risk amounts and other information regarding the status of trading transactions
are reported to the management board.
· Interest Rate-Related Transactions
Millions of yen
2006

March 31

Contract
Value

MarketValue

RecognizedGain (Loss)

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

¥384,504
373,973
214,810
207,798
89,01455,043/¥(11,214)
13,687
(319)
319
(470)
627
¥ 2,629¥(11,214)
13,687
6,469
303
2,619
(95)
¥ 11,770

Millions of yen
2005

36

March 31

Contract
Value

MarketValue

RecognizedGain (Loss)

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

¥157,811
164,174
18,17018,170102,517
67,208/¥2,970
(544)
(65)
65
(162)
265
¥2,529¥3,346
(544)
116
(15)
3,008
(569)
¥5,341

Hokuhoku Financial Group, Inc. Annual Report 2006

Thousands of U.S. dollars
2006

March 31Over-the-counter transactions
Swaps
Receive/fixed and pay/floating.....................................................................................................
Receive/floating and pay/fixed.....................................................................................................
Options/sell .......................................................................................................................................
Options/buy.......................................................................................................................................
Others/sell.........................................................................................................................................
Others/buy ........................................................................................................................................
Total .......................................................................................................................................................

Contract
Value

MarketValue

RecognizedGain (Loss)$3,273,211
3,183,563
1,828,643
1,768,951
757,762
468,579/$ (95,467)
116,518(2,721)
2,719(4,008)5,342$ 22,383$ (95,467)
116,518
55,077
2,585
22,299(810)$100,202· Foreign Exchange-Related Transactions
Millions of yen
2006

March 31

Contract
Value

MarketValue

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

¥ 78,218
41,302
24,931
376,810
376,740
/

¥

225
(578)
110
(15,381)
15,381¥ (242)

RecognizedGain (Loss)

¥ 225
(578)
110
7,848
(2,830)¥4,775

Millions of yen
2005

March 31

Contract
Value

MarketValue

RecognizedGain (Loss)

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

¥100,821
25,16017,017
226,892
226,851
/

¥ 138
(600)
280
(8,618)8,617¥ (181)

¥ 138
(600)
280
3,159
(481)
¥2,497

Thousands of U.S. dollars
2006

March 31Over-the-counter transactions
Swaps...............................................................................................................................................
Forward contracts/sell.......................................................................................................................
Forward contracts/buy ......................................................................................................................
Options/sell .......................................................................................................................................
Options/buy.......................................................................................................................................
Total .......................................................................................................................................................

Contract
Value

MarketValue

RecognizedGain (Loss)$ 665,860
351,601
212,238
3,207,717
3,207,120/$ 1,922(4,926)941(130,941)
130,940$ (2,064)$ 1,922(4,926)941
66,816(24,097)$40,656

At March 31, 2006 and 2005, the Group had no outstanding contracts in stock related transactions, bond related transactions,commodity related transactions and credit derivative transactions.
30. Subsequent Events
Appropriations of Retained Earnings
The following appropriations of retained earnings at March 31, 2006 were approved at the Company’s general stockholders
meeting held on June 27, 2006:

Cash dividends, ¥1.50 per share on common stock.....................................................
¥3.85 per share on preferred stock (Type1) .......................................
¥3.31 per share on preferred stock (Type4) .......................................
¥7.50 per share on preferred stock (Type5) .......................................

Millions of yen

Thousands of
U.S. dollars¥1,928577
261
805$16,419
4,916
2,226
6,859

Hokuhoku Financial Group, Inc. Annual Report 2006

37

INDEPENDENT AUDITORS’ REPORTThe Board of Directors
Hokuhoku Financial Group, Inc.
We have audited the accompanying consolidated balance sheets of Hokuhoku Financial Group, Inc. (the “Company”)
and consolidated subsidiaries as of March 31, 2006 and 2005, and the related consolidated statements of operations,stockholders’ equity, and cash flows for the years then ended, all expressed in yen. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosuresin the financial statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Hokuhoku Financial Group, Inc. and consolidated subsidiaries as of March 31, 2006 and2005, and the consolidated results of their operations and their cash flows for the years then ended in conformity withaccounting principles generally accepted in Japan.
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March
31, 2006 are presented solely for convenience. Our audit also included the translation of yen amounts into U.S. dollar
amounts and, in our opinion, such translation has been made on the basis described in Note 1.

Toyama, Japan

38

June 27, 2006

June 27, 2006

A MEMBER OF ERNST & YOUNG GROBALMember of Deloitte Touche Tohmatsu

Hokuhoku Financial Group, Inc. Annual Report 2006

NONCONSOLIDATED FINANCIAL STATEMENTSNONCONSOLIDATED BALANCE SHEETS (UNAUDITED)The Hokuriku Bank, Ltd.
Thousands of
U.S. dollars

Millions of yen

2006

2005

2006

AssetsCash and due from banks......................................................................................
Call loans and bills bought .....................................................................................
Commercial paper and other debt purchased........................................................
Trading assets .......................................................................................................
Money held in trust.................................................................................................
Securities ...............................................................................................................
Loans and bills discounted.....................................................................................
Foreign exchanges ................................................................................................
Other assets...........................................................................................................
Premises and equipment .......................................................................................
Deferred tax assets................................................................................................
Customers’ liabilities for acceptances and guarantees..........................................
Reserve for possible loan losses ...........................................................................
Reserve for possible investment losses.................................................................
Total assets ..........................................................................................................

¥ 147,834—
215,3536,129
2,425
892,726
4,085,728
11,12043,98570,12563,078186,234(86,309)(687)¥5,637,748¥ 198,403
80,00022,3646,336
2,469
815,650
4,139,458
13,16632,791
72,69380,732
174,654(87,368)—¥5,551,353$ 1,258,487—
1,833,268
52,182
20,651
7,599,609
34,781,042
94,668374,441596,969
536,973
1,585,382(734,735)(5,848)$47,993,089

Liabilities and stockholders’ equity
Liabilities
Deposits .................................................................................................................
Call money and bills sold .......................................................................................
Payables under securities lending transactions.....................................................
Trading liabilities ....................................................................................................
Borrowed money....................................................................................................
Foreign exchanges ................................................................................................
Other liabilities .......................................................................................................
Reserve for employee retirement benefits .............................................................
Deferred tax liabilities for land revaluation .............................................................
Acceptances and guarantees ................................................................................
Total liabilities ......................................................................................................

¥4,864,851
222,300
23,816755
72,453282
40,674273
9,159
186,234
5,420,802¥4,964,016
88,2005,848
1,010
78,974197
36,005512
7,596
174,654
5,357,015$41,413,567
1,892,398
202,7476,434
616,784
2,403
346,253
2,332
77,971
1,585,382
46,146,271

Stockholders’ equity
Capital stock ..........................................................................................................
Capital surplus .......................................................................................................
Retained earnings..................................................................................................
Land revaluation excess ........................................................................................
Net unrealized gain on available-for-sale securities ..............................................
Total stockholders’ equity ..................................................................................
Total liabilities and stockholders’ equity...........................................................

140,409
14,99835,667
9,063
16,806
216,945¥5,637,748

140,409
14,99821,588
11,192
6,149
194,338¥5,551,353

1,195,280
127,683
303,632
77,153143,070
1,846,818$47,993,089

March 31

Hokuhoku Financial Group, Inc. Annual Report 2006

39

NONCONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)The Hokuriku Bank, Ltd.
Thousands of
U.S. dollars

Millions of yen

2006

2005

2006

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

¥ 73,686
10,008207
3,840
22,991
1,129
9,821
10,703132,391¥ 80,599
9,435
305
847
21,006
3,169
8,002
10,253
133,620$ 627,281
85,201
1,770
32,697
195,723
9,618
83,612
91,1201,127,022

Expenses
Interest expenses:
Interest on deposits...........................................................................................
Interest on payables under securities lending transactions ..............................
Interest on borrowings and rediscounts ............................................................
Other interest expenses....................................................................................
Fees and commissions ..........................................................................................
Other operating expenses......................................................................................
General and administrative expenses....................................................................
Provision for reserve for possible loan losses........................................................
Other expenses......................................................................................................
Total expenses.......................................................................................................

4,809
626
2,015
2,402
6,016
8
52,941
28,5209,077
106,418

4,710
437
2,084
1,575
5,873
313
53,73840,814
9,486
119,034

40,9405,331
17,15920,456
51,21374
450,684
242,790
77,277905,924

25,972

14,586

221,098

92
10,193¥ 15,687

92
10,402¥ 4,092783
86,772$ 133,543

Year ended March 31

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

40

Hokuhoku Financial Group, Inc. Annual Report 2006

NONCONSOLIDATED BALANCE SHEETS (UNAUDITED)The Hokkaido Bank, Ltd.
Thousands of
U.S. dollars

Millions of yen

2006

2005

2006

AssetsCash and due from banks......................................................................................
Call loans and bills bought .....................................................................................
Commercial paper and other debt purchased........................................................
Trading account securities .....................................................................................
Money held in trust.................................................................................................
Securities ...............................................................................................................
Loans and bills discounted.....................................................................................
Foreign exchanges ................................................................................................
Other assets...........................................................................................................
Premises and equipment .......................................................................................
Deferred tax assets................................................................................................
Customers’ liabilities for acceptances and guarantees..........................................
Reserve for possible loan losses ...........................................................................
Total assets ..........................................................................................................

¥ 198,384—
2
3,329
22,996910,066
2,595,733
3,696
33,771
28,737
39,631
29,663(55,502)¥3,810,512¥ 299,322
20
2
3,274
21,494
790,8902,539,494
6,668
22,93929,28345,15832,318(51,919)¥3,738,950$ 1,688,813—
24
28,342
195,762
7,747,224
22,096,990
31,465
287,491
244,640
337,379
252,522(472,479)$32,438,173

Liabilities and stockholders’ equity
Liabilities
Deposits .................................................................................................................
Call money and bills sold .......................................................................................
Payables under securities lending transactions.....................................................
Borrowed money....................................................................................................
Foreign exchanges ................................................................................................
Other liabilities .......................................................................................................
Reserve for employee retirement benefits .............................................................
Acceptances and guarantees ................................................................................
Total liabilities ......................................................................................................

¥3,397,340
95,20084,06026,00063
29,293
11,28429,6633,672,906¥3,383,826
36,700103,299
14,00031
17,373
10,53032,3183,598,079$28,920,923
810,420715,590
221,333
537
249,374
96,060252,522
31,266,759

Stockholders’ equity
Capital stock ..........................................................................................................
Capital surplus .......................................................................................................
Retained earnings..................................................................................................
Net unrealized gain on available-for-sale securities ..............................................
Total stockholders’ equity ..................................................................................
Total liabilities and stockholders’ equity...........................................................

93,524
16,79522,225
5,061
137,606¥3,810,512

93,524
16,795
19,46911,082140,871¥3,738,950

796,152
142,973
189,201
43,0881,171,414$32,438,173

March 31

Hokuhoku Financial Group, Inc. Annual Report 2006

41

NONCONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)The Hokkaido Bank, Ltd.
Thousands of
U.S. dollars

Millions of yen
Year ended March 31

2006

2005

2006

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

¥51,874
9,642
7
0
1,971
17,814
4,131
3,053
88,495¥53,246
6,780
5
0
358
16,446
2,425
2,822
82,085$441,594
82,08262
0
16,787
151,652
35,17325,994753,344

Expenses
Interest expenses:
Interest on deposits...........................................................................................
Interest on payables under securities lending transactions ..............................
Interest on borrowings and rediscounts ............................................................
Other interest expenses....................................................................................
Fees and commissions ..........................................................................................
Other operating expenses......................................................................................
General and administrative expenses....................................................................
Provision for reserve for possible loan losses........................................................
Other expenses......................................................................................................
Total expenses.......................................................................................................

3,145
10
435
4
5,562
2,031
38,345
12,9852,860
65,382

1,682
3
25
2
5,236
494
38,124
13,8395,460
64,871

26,77893
3,704
40
47,352
17,295
326,427
110,545
24,352556,586

23,113

17,213

196,758

62
9,606¥13,44464
6,022¥11,126532
81,777$114,449

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

42

Hokuhoku Financial Group, Inc. Annual Report 2006

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

Hokuhoku Financial Group, Inc
The Hokuriku Bank, Ltd.

Hokugin Lease Co., Ltd.
(Leasing)

The Hokkaido Bank, Ltd.

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

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

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

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

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

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

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

Hokugin Software Co., Ltd.
(Software development)

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

Nihonkai Services Co., Ltd.
(Servicer)

Hokuriku International Cayman Limited(Finance)

Hokuriku Capital Co., Ltd.*(Venture capital, IPO consulting)* Affiliated company

Hokugin Corporate Co., Ltd.
(Corporate rehabilitation)

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

Address

Main business activities

Established

Capital

FG’s share of
voting rights

Dividend

The Hokuriku Bank, Ltd.

1-2-26 Tsutsumicho-dori, Toyama City

Banking

July 31, 1943

140,409100.001,944

The Hokkaido Bank, Ltd.

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

Banking

March 5, 1951

93,524100.0010,688

Hokugin Lease Co., Ltd.

2-21 Aramachi, Toyama City

Leasing

July 21, 1983

100

70.25

134

Hokuriku Card Co., Ltd.

1-2-1 Shintomi-cho, Toyama City

Credit card operations,loan guarantees

March 2, 1983

36

87.39

3

Hokuriku Hosho Services Co., Ltd.

1-2-26 Tsutsumicho-dori, Toyama City

Credit guarantees

December 12, 1978

50

100.00–

Hokugin Software Co., Ltd.

1-5-25 Higashidenjigata, Toyama City

Software development

May 1, 198630

100.00–Nihonkai Services Co., Ltd.

2-1-14 Chuo-dori, Toyama City

Servicer

December 5, 2003

500

100.00–

Hokugin Business Services Co., Ltd.

1883 Hiyodorijima, Toyama City

Document management,
cash management, ATM/CD
maintenance/operation,
concentrated businessprocessing

March 25, 195330

(100.00)–

Hokugin Office Services Co., Ltd.

1-2-26 Tsutsumicho-dori, Toyama City

Human resource solutions

March 3, 1986

20

(100.00)–

Hokugin Real Estate Services Co., Ltd.

1-2-26 Tsutsumicho-dori, Toyama City

Property Management

September 26, 1988

100

(100.00)–

Hokugin Shisankanri Co., Ltd.

1-2-26 Tsutsumicho-dori, Toyama City

Auctioning pledged properties

March 7, 2000

100

(100.00)–

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

Finance

April 27, 1993

US$1,000(100.00)–

Hokugin Corporate Co., Ltd.

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

Corporate rehabilitation

December 1, 2004

100

(100.00)–

Dogin Business Service, Ltd.

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

Document management,
cash management, ATM/CD
maintenance/operation,
concentrated businessprocessing

June 8, 1979

50

(100.00)–

Dogin Card Co., Ltd.

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

Credit card operations,loan guarantees

June 13, 1977

1,226

(100.00)–

Hokuriku Capital Co., Ltd.*

1-8-10 Marunouchi, Toyama City

Venture Capital

January 11, 1985

250

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

Hokuhoku Financial Group, Inc. Annual Report 2006

43

OUTLINE OF SUBSIDIARIES - HOKURIKU BANKThe Hokuriku Bank, Ltd..
Web site: www.hokugin.co.jp
Establishment

History

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

August 1877

Kanazawa 12th National Bank founded

February 1879

Toyama 123th National Bank founded

January 1884

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

July 1897

Toyama 12th National Bank changed name to 12th Bank

July 1943

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

January 1950

Launched foreign exchange operations (first regionalbank to do so)

Company outline (as of March 31, 2006)
The Hokuriku Bank, Ltd.
Business:
Banking
Incorporation:
July 31, 1943 (founded in 1877)
Location of headquarters: 1-2-26 Tsutsumicho-dori,
Toyama City Toyama
President:
Shigeo Takagi
Total assets:¥5,637.7 billion
Deposits (including NCDs): ¥4,864.8 billion
Loans:¥4,085.7 billion
Issued shares:
Common stock
987,147,185
Class 1 preferred shares 150,000,000
Capital ratio(non-consolidated):
8.86%
Employees:
2,570
Branches (as of June 30, 2006)
Domestic:
186 (131 branches, 55 sub-branches)
Overseas:
3 representative offices
Non-branch ATMs
202

September 1961

Listed on the Tokyo Stock Exchange

November 1961

New head office built

January 1971

Received blanket approval to engage in correspondentbanking services

November 1973

Completed first integrated online system linking all
officesMarch 1974

Received blanket approval to engage in foreign exchange
business

July 1978

Received blanket approval to handle yen-denominatedand foreign-denominated syndicated loans

October 1979

Launched second online system

November 1981

Launched online foreign exchange system

January 1984

Launched firm banking service

May 1987

Introduced VI (visual identification)

August 1990

Completed third online system

November 1993

Launched investment trust agent operations

December 1998

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

Launched Internet and mobile banking services

July 2000

Completed new computer center (Alps building)January 2001

Launched new computer system

April 2001

Launched over-the-counter sales of casualty insurance

February 2002

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

February 2002

Launched convenience store ATM service (E-net)

October 2002

Launched over-the-counter sales of life insurance

March 2003

Took over part of the Ishikawa Bank’s operations

September 2003

Established Hokugin Financial Group through stock swap,
then became subsidiary of the Hokugin Financial Group

September 2004

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

December 2004

Launched securities agency operations
Established corporate rehabilitation company Hokugin
Corporate

March 2006

44

Hokuhoku Financial Group, Inc. Annual Report 2006

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

OUTLINE OF SUBSIDIARIES - HOKKAIDO BANKThe Hokkaido Bank, Ltd..
Web site: www.hokkaidobank.co.jp
Establishment

History

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

March 1951

Hokkaido Bank established

April 1961

Launched foreign exchange operations

Company outline (as of March 31, 2006)
The Hokkaido Bank. Ltd.
Business:
Banking
Incorporation:
March 5, 1951
Location of headquarters: 4-1 Odori Nishi, Chuo-ku,
Sapporo City
President:
Yoshihiro Sekihachi
Total assets:¥3,810.5 billion
Deposits (including NCDs): ¥3,397.3 billion
Loans:¥2,595.7 billion
Issued shares:
Common shares:
374,356,952
Class 1 preferred shares: 79,000,000
Class 2 preferred shares: 107,432,000
Capital ratio(non-consolidated):
8.50%
Employees:
1,724
Branches (as of June 30, 2006)
Domestic:
134 (125 branches, 9 sub-branches)
Non-branch ATMs
317

May 1962

Listed on the Sapporo Stock Exchange

August 1964

Present head office built

June 1971

Online system (first) launched

July 1976

Online system (second) launched

December 1980

Received blanket approval to engage in correspondentbanking services

April 1981

Hokkaido Small and Medium Corporation Human
Resource Development Fund established

June 1986

Launched online foreign exchange system

September 1987

Debuted on the first section of the Tokyo Stock Exchange

October 1990

Constructed the Higashi Sapporo Dogin Building

March 1991

Established Dogin Cultural Foundation

October 1991

Launched a new foreign exchange online system

November 1991

Constructed Dogin Building Annex

January 1993

Online system (third) launched

April 1994

Launched investment trust agent operations

December 1998

Started sales of investment trust accounts

July 1999

Issued No. 1 class 2 preferred shares (issuance amountwas ¥53.716 billion)

November 1999

Launched telephone banking service

June 2000

Launched Internet mobile banking

April 2001

Started sales of casualty insurance accounts

October 2002

Started sales of life insurance accounts

December 2003

Opened Business Loan Plaza

April 2004

Launched convenience store ATM service

September 2004

Came under management of Hokugin Financial Group,parent of Hokuriku Bank; Hokuhoku Financial Grouplaunched

April 2005

Launched securities agency operations

March 2006

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

Hokuhoku Financial Group, Inc. Annual Report 200645

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

Deputy President:
Yoshihiro Sekihachi

Directors:
Satoshi Kawai
Mitsuhiro Tokuno

Masamichi Kondo
Akihiko Soma

Hideaki Haoka
Yuji Oshima

Yoshihiro Minami

Yasuhiro Ishiguro

Corporate Auditors:
Toshitsugu Kawakami
Norikiyo Hayashi

The Hokuriku Bank
President:
Shigeo Takagi

Deputy President:
Satoshi Kawai

Senior Managing Directors:
Hideaki Haoka

Mitsuhiro Tokuno

Managing Directors:
Taminori Iwasaki

Masato Matsumoto

Kumakichi Yagi

Akihiko Furuta

Kenichi Nakamura

Director:
Akihiko Soma
Corporate Auditors:
Tatsuo Asai

The Hokkaido Bank
President:
Yoshihiro Sekihachi
Directors:
Masamichi Kondo

Masahiro Sasahara

Hiroshi Sagayama

Satoshi Kawai

Corporate Auditors:
Hisae Goto

Tatsuhiro Ishikawa

Yutaka Hayakawa

Akira Ibayashi

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

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

46

Hokuhoku Financial Group, Inc. Annual Report 2006

Treasury and Securities Department
2-10, Nihonbashi-muromachi 3-chome,
Chuo-ku
Tokyo 103-0022, Japan
Telephone: +81-3-3231-7360
Facsimile: +81-3-3246-1255
E-mail: shikintky@hokugin.co.jp

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

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: nyrep@hokugin.com

Market and International Administration Center
4-1, Odori Nishi, Chuo-ku,
Sapporo 060-8676, Japan
Telephone: +81-11-233-1104
Facsimile: +81-11-231-9248
SWIFT Address: HKDBJPJTShanghai Representative Office
Shanghai International Trade Center, 602,
Yan’an west Toad 2201,
Changning, Shanghai 200336
Telephone: +86-21-6270-8108
Facsimile: +86-21-6270-8338
E-mail: hokugin@online.sh.cn
Singapore Representative Office
6 Battery Road # 17-04 Shigapore 049909
Telephone: +65-6534-0010
Facsimile: +65-6534-0070
E-mail: hokuriku@singnet.com.sg

Treasury and Securities Department
2-10, Nihonbashi- muromachi 3-chome,
Chuo-ku,
Tokyo 103-0022, Japan
Telephone: +81-3-3241-3457
Facsimile: +81-3-3245-1779

Hokuhoku Financial Group, Inc.

Printed in Japan
Printed on recycled paper