Because it is a machine translation, it
is not always an accurate translation.

Management Strategy of
HOKKOKU FINANCIAL HOLDINGS, Inc.
And Summary of second quarter
financial results of FY2022.
October 29, 2021

Explanation（Contents）
1.Summary of Financial Results

Bank・Outline of the 2Q of the fiscal year ended March 31, 2022
2.Business Model and Medium-to Long-Term
Management Strategy

Holdingcompany

・Hokkoku Financial Holdings' Value Creation Process
・ESG Initiative Policies and Materiality
・3 Pillars for Realizing Business Models
1-[Digital]
2-[People]
3-[Facility ①][Facility ②]・Longer-Term Management Strategy 2021
・Medium-to Long-Term Targets
・Medium-to Long-Term Target Levels (Details and Consolidation)
・Major Strategic Framework
・Forecasts for the fiscal year ended March 2022
・Policy on Distributing Profits to Shareholders
・Shareholders' Equity Ratio and ROE

3.Management Strategy ~Details of Strategy~

4

6
7
8
9
10
11
12
13
14
15
16
17
18
19

Holdingcompany

21
・Purpose of Transition to a Holding Company Structure
22
・Governance Structure of the Holding Company
23
・Group Synergy and Growth Strategy
・Renovation of the Sales Structure-Breaking Out of the Head Office and 24
Sales Branch Structure25
・Evolution from CRM to Integrated Business Platform
・Consulting ① ~ Direction of consulting for FHD in Northern Country ~ 26
27
・Consulting ②～From an investor and consulting perspective rather
than a creditor perspective
28
・Consulting ③-Established QR Investment, a specialized investmentcompany
29
・Consulting ④ ~ Overseas Business Support ~30
・Leasing business・Efforts to Create a DX Cashless Society ①-Strategy Overview31
・Efforts to Create a DX Cashless Society ②-Regional Revitalization through 32
Flow of Funds・Efforts to Create a DX-Cashless Society ③-HOKKOKU LIFE +33
・System Strategy ①-Target Direction34
・System Strategy ②-Shift to Strategic Investment35
・System Strategy ③ ~ Future Development ~36
・System Strategy ④ ? World View by the FHD of North Korea?
37
・System Strategy ④ ~ Strategy Story of Digital Banks ~38・Securities Investment Strategy ①-Transition of Investment Strategy39
・Securities Investment Strategy ② ~ Investment Policy ~40
・Securities Investment Strategy ③-Future Investment Strategy41
・Life planning support
42
・Investment Advisory Company: Establishment of FD Advisory
43
Outline of the 2Q of the fiscal year ended March 31, 4.2022
・Loans Outstanding and Yields by Segment ~・Loans and bills discounted ~ Yield by segment ~・Operation of negotiable securities
・3 Business Revenues ~Card Leasing Consulting~・Card Business・Sales of risky financial products
・Trends and Forecasts of Credit Costs

5.Reference Materials
・Efforts to Reform Operations and Improve Productivity
・ESG Initiatives (E)・ESG Initiatives (S)・ESG Initiatives (G)・Major Figures ①
・Major Figures ②

Bank
45
46
47
48
49
50
51
Holdingcompany
53
54
55
56
57
58

HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

Bank

1. Summary of Financial Results

HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

Outline of the 2Q of the fiscal year ended March 31, 2022
[Non-Consolidated Overview]<Operating profits from core business: JPY6.344 billion, YoY +JPY622 million><Ordinary income JPY15.255 billion +JPY6.976 billion YoY>
<Interim net income JPY9.618 billion +JPY4.973 billion YoY>

Bank

Interest and dividends on securities and gains (losses) on securities transactions increased YoY.
The cost of disposing of non-performing loans also declined YoY, resulting in higher sales and profits.

(1) Outline of profit and loss
【Non-consolidated】
End of Sep.2020 End of Sep.2021

Ordinary income
Ordinary profit
Profit37,143
8,279
4,645
5,722

Net business profit

39,486
15,255
9,618
6,344【Consolidated】
End of Sep.2020 End of Sep.2021

Ordinary income
Ordinary profit
Profit42,451
9,049
5,054

44,736
15,817
9,875（Millions of yen)
Change Change(%)

2,343
6,976
4,973
622

6.3%
84.2%
107.0%
10.8%（Millions of yen)
Change Change(%)

2,285
6,768
4,821

5.3%
74.7%
95.3%

(Billions of

Non-consolidated profit and loss

yen)

152

63

83
50
Sep.2019

46

63

Sep.2020

Sep.2021

Ordinary profit

13.04%

profit13.31%

Capital adequancy ratio(2) Capital adequacy ratio
End of Mar.2019 End of Mar.2020 End of Sep.2021
Consolidated capital adequacy ratio

57

Net business profit

12.17%* 親会社株主に帰属する中間純利益
Profit attributable to owners of parent

9682

12.17%

13.04%

13.31%

Change0.27%

Sep．2019

Mar.2021

Sep.2021

HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

4Holding
company

2. Business Model and Medium-to
Long-Term Management Strategy

HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

Hokkoku Financial Holdings’ Business Model
Holdingcompany

Corporate Philosophy, Brand, and ESG Initiative Policies
Awareness of the

In line with materiality～Hokkoku Financial Holdings’ s Vision-

external environment

Corporate Activities“Next-Generation Regional of
integrated regional companies"

・Climate Change・Market shrinkage due
to population decline
・Population outflow to
the Tokyo metropolitan
area・Aging population①Response to
climate change andenvironmental
conservation

Consulting firm

②Contribution toregional economic
revitalization

・Succession issue
・Need to respond to
globalization
・Diversification ofvalues・Lengthening Response
to COVID-19

Banking operations③Developing humanresources that
contribute to Improving
the quality of region④Enhancing managementtransparency throughdialogue withshareholders

Specialized
investmentcompany

Investment
advisory firm

EC site company

Bank cardcompany

BPO company

Leasing company

Systemcompany

Servicingcompany

Staffing
agencies

Value creation for the region
Localcommunities

Customers

Contribute to theimprovement ofquality of the region

Shareholders
and Investors

Increaseshareholder value

Providing various
added values

Employees
In a variety of ways
Be motivatedWorking Styles

Contributing to the Achievement of
SDGs

Moving to a holding company
structure, accelerate themovement toward realization!

Foundation to support value creation, Strengthening of corporate governance and the risk & 6
HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.
compliance system

6

ESG Initiative Policies and Materiality[ESG Initiative Policy]
・Hokkoku Financial Holdings aims to work together with all stakeholders, including local communities, to realize a sustainable society
by actively working to resolve ESG (Environmental, Social, and Governance) issues through its business activities.
・We believe that the resolution of ESG issues through our business activities and the virtuous cycle of sustained improvement inearnings brought about by them will lead to the realization of our corporate philosophy "To be a prosperous future, expand the circleof mutual trust, and build a prosperous future together with the community."

Holdingcompany

7

HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

3 Pillars for Realizing Business Models
Creating Value and Achieving Sustainable Growth in Local Communities-Realizing a
Sustainable Society[Digital]
Penetration of digital banks ⇒ Convenience and high productivity for all customers[Employees] Consulting, Advice, Study Meetings ⇒ What People Can Do[Branches] Saturday, business, and residence-oriented design ⇒ To consulting, advising, collaborating, and educational venues inface to face

Holdingcompany

All customers

Employees

・

Promotion of local
environmental conservationand energy conservation

Environmentally Responsive
and Residential Communities
Toward a Common Awarenessamong Communities

・Cloud-first technology
・In-house development + collaboration
・Shift of employees to the digital field(20-30% of employees will be in thedigital field)

・

Implementation of Climate

Change Measures andof

DigitalEnvironmental Measures

・Proposal of advanced

capableexamples of environmental

responses

・

Develop and produce humanresources

contributing to the evolution

into a quality region

・Collaboration with companies,

Advicelocal governments, and・AI Consulting &universities

business processes

To raise the level of dialogue

・Business process of・ ・Recurrent education and risk

killing・Further Enhancing Skills andOrganizational Capabilities"face-to-face" and "net"(non-pair)
Fusion of facets)・

Facility (Branches)・・Digitization of the region
・Collaboration with companies, local
governments, universities, and IT
HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.
companies

8

3 pillars to 1-[Digital] for realizing business model
Holdingcompany

Common "digital bank"

Our idea of "digital bank" Realizing speedy development by narrowing down target
customers and functions

Digital bank(Internet Branch)

Hokkoku Cloud Banking (Individuals)
Hokkoku Digital Banking (Corporate)

Traditional banks(Products andServices)・Targeted only for highly digital
literate individuals and companies
・Have limited functions

・Complex but necessary operations as social
infrastructure(Account transfer, etc.)
・Digital vulnerable (elderly people, microenterprises, etc.)

 Digitization of products and services to all
customers
 Promote the digitization of the entire region

・Digitize all users
・Digitize all functions
Digital Benefits for All Customers in the Region!

Change inBusiness Model

Northern
DX
Cashless
Fund

Opened a 24-hour web
account
 No hang No passbook
 No need for brick-andmortar stores～Change in the raison d'etreof stores ~Cloud banking
classes at all
storesWeb access(corporate IB)classes fromscratchFor no basic
fees for both
corporations
andindividuals

HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

9

3 pillars to 2-[People] for realizing business model
Holdingcompany

Human Resources Strategy Framework of the FHD

Producing humanresources Develop professional human resources who can support career autonomy and contributeto value creation
 Improving the level of dialogue and enhancing collaboration

Value in the Region with the
Knowledge Acquired at Hokkoku FHD

With a high degree of satisfaction
Career Review and Wage Structure
・Performance Evaluation + Personnel Evaluation → Career
Review
Supporting Career Autonomous and Human Resource
Development
・Wage system that emphasizes skills, roles, and contributions
・Bonus: Stable payment + Performance-linked stock grants

Organization that can leverage
human resources

Respect for Diverse Values
Support career autonomy
・Treatment and staffing with respect tocareer plans
・Lifting of the ban on side business・To create an environment in which people
with disabilities can work together

・Contributing to the Creation of

Recruitment

Realizing
corporate ideals

Flexible hiring

Creating Value for
Local Communities
・Improving Quality

Shared values - a ・Strengthen year-round hiring and midcareer hiring
common・Implementation of advance payment of
retirement allowancephilosophy

・Increase wage base for young mid-level
employees, including starting salaries

Sophistication of the humanresource development system

Ideal working
environment

・Effectively Utilizing Advanced External
Knowledge
・Support for MBA acquisition
・Visualization of skills through in-housedeveloped HRM system (flexible
arrangement possible)
HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

Framework for
improving skills

10

3 pillars to 3-[Facility ①] to realize business model
Holdingcompany"Real" Stores in the "Digital" Thinking of Northern FHD
Improvingfinancial
literacy

Do not sell "goods"

For each individual of ourcustomers
Place to provide services

Digital bank+Branches

Saturdaybusiness

DigitalOMO

Place to maximize
CX/UX

In
comfort※CX: Customer Experience
UX: User ExperienceGood
quality

Improved
literacy※OMO: Online Merges with Offline (a globally integrated on-line and offline)

Providing value (useful) information through digital= Providing
value
HOKKOKU
FINANCIAL HOLDINGS,
INC. All rights reserved.

11

3 pillars to 3-[Facility ②] to realize business model
Initiatives for carbon neutrality▶

Introducing the "ZEB" concept to store design-Taking the lead in
implementing ESG management in the region-

Holdingcompany

Full Banking Branches• Basic policy: Nearly ZEB(Reduce primary energy consumption by 75% or more)• Installation facilities
Photovoltaic power generation, high-efficiency air
conditioning and ventilation, natural light
Enhancement of external performance, sunlightshielding, and use of groundwater

Retail Branches• Basic policy: ZEB Ready(Reduce primary energy consumption by 50% or more)• Conservation of local environments• Promotion of energy saving

Realization of a sustainable society
HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

12

Longer-Term Management Strategy 2021※2021.4.28 announced
Medium-to Long-Term Management Strategy-Update Plans-※An update is planned at the time of
the announcement of the financial
results for the FY2022.3

Holdingcompany■-Formulated a medium-term management plan that specifies a period of about 3 years■-Updated every fiscal year the level, strategy, and policy for initiatives that should be targeted in
the medium-to long-term[Background of formulation]
・Need to have a medium-to long-term awareness of major direction
・Necessity of responding to rapid changes in social and business conditions～Progress of measures in project format and agile working styles ~Taking account of the rapidly changing social and environmental situations, formulate plans more flexibly and inline with actual conditions.
The need to decide and implement strategies more rapidly is increasing, and medium-to long-term strategies will
be announced in line with the agile-type strategic policies of the project team.

Basic formulation policy①Image of Our Vision for the Next 5-and 10-Years as Medium-to Long-Term Targets②Present policies and strategies for achieving the vision③Keep abreast of changes in society and the market environment and constantly update※It will be updated every fiscal year after showing the changes in the environment that form theassumption.
HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

13

Medium-to Long-Term Targets～Level of image over the medium to long term based on future environmental
expectations and action policiesItem

FYE March.
2021
ActualFYE March.
2026
5 years fromnow

FY3/2031
About 10 years
later

Consolidated Operating Income

JPY12.8 billion

JPY16 billion

JPY21 billion

Consolidated Net Income

JPY6.7 billion

JPY10 billion

JPY13 billion

New Business Revenues (Consolidated)(New business revenue including card
leasing and consulting)

JPY3.9 billion

JPY7.5 billion

JPY11 billion

OHR (consolidated)*1

70.7%

65.0%

Latter half of50%

ROE (Consolidated)*2

2.5%

3.5%

4.5%

Holdingcompany*1 1 OHR is the ratio of general and administrative expenses to gross operating profit, defined as gross operating profit
minus 5 fixed income accounts.
*2 2 ROE is calculated as: (Total net assets at the beginning of the period + Total net assets at the end of the period)/Net
income attributable to owners of the parent to 2
14

HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

Medium-to Long-Term Target Levels(Details and Consolidated)FYE March. 2021
ActualFYE March. 2026
5 years from now

FY3/2031
About 10 years later

Net interest income, etc. *1

JPY34.6 billion

JPY33.5 billion

JPY33 billion

Fees and commissions

JPY8.1 billion

JPY12 billion

JPY15.5 billion

Card Business

JPY1.5 billion

JPY3.4 billion

JPY4 billion

Leasing business

JPY1.8 billion

JPY1.9 billion

JPY2.5 billion

Consulting business

JPY600 million

JPY2 billion

JPY4 billion

JPY0

JPY200 million

JPY500 million

Personnel expenses

JPY14.5 billion

JPY13.5 billion

JPY13 billion

Property costs

JPY13.4 billion

JPY14 billion

JPY13 billion

JPY5.8 billion

JPY6.3 billion

JPY4.8 billion

JPY6.7 billion

JPY10 billion

JPY13 billion

Item

Other New Businesses*2

System-related expenses

Net income※1 Investment income of QR Investment Co., Ltd. is recorded in net interest income, etc.
※2 Recorded business revenues from FD Advisory Co., Ltd., EC mall business, etc.

Holdingcompany

15

HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

Key Strategy Framework
Holdingcompany

Expansion of business axis
■Expansion of business axes (business domains) by the new company■Expand customer base by deepening existing operations

Sophistication of credit risk management and support systems■Awareness of issues and appropriate risk management through understanding of business potential andstrengthening of relationships■Management improvement support by strengthening consulting functions

Maximize group synergy■Improving the quality of services provided to local communities (speeding up decision-making and efficient business
operations)■Improve management efficiency by maximizing group synergies (governance, effective use of management resources)

Developing Human Resources That Contribute to Improving the Quality of Local Communities■Mobilization of human resources within the Group and the development of next-generation managers(Development of high-value-added, highly productive human resources capable of responding toincreasingly diverse and sophisticated needs)
16
HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

Forecasts for the fiscal year ended March 2022
・The company revised its performance forecast for the fiscal year ended March 31, 2022 upward in response to a substantial
increase in gains and losses related to marketable stocks in the fiscal year ended September 2021, which was higher thanoriginally expected. However, the full-year results are expected to be on a par with the previous fiscal year, assuming that the
impact of the new Corona viral infectious disease on the overall economy will continue to some extent.
・The dividend forecast is JPY80, an increase of JPY10 per share, in line with the upward revision to the earnings forecast.

○Forecast of Results for the Fiscal Year Ending March 2022
【The Hokkoku Bank - Non-consolidated】（Full year）（Interim period）
FY2020result（Millions of yen）

FY2020interim result

FY2021interim result

8,279
4,645
5,722

15,2559,618
6,344【Hokkoku Financial Holdings - Consolidated】（Full year） （Interim period）
FY2020
FY2021
FY2020resultforecast
interim result

FY2021interim result

Ordinay profit
ProfitNet business profit

Ordinay profit
Profit*1

11,283
5,954
11,77812,8906,752

FY2021
forecast

12,000
6,500
12,00013,0007,000

Ordinay profit
Interim net Profit
Net business profit

Ordinay profit*1

Interim net profit

9,049
5,054

* 1:Profit attributable to owners of parent○Dividend per share

FY2017*2

Annual dividends
Interim dividends
Year-end dividends

4.00 yen
50.00 yen

FY2018FY201980.00 yen
40.00 yen
40.00 yen

70.00 yen
35.00 yen
35.00 yen

FY2020interim result

80.00 yen
30.00 yen
50.00 yen

15,817
9,875（Forecast）
FY2021interim result*3

80.00 yen
40.00 yen
40.00 yen

* 2：On October 1.2017, the Bank conducted consolidation of shares at the ratio of ten shares of its common stock into one share.
The impact of this stock consolodation is taken into consideration in the amount presented for FY2017, and the amount for the annual
dividend per share for the same fiscal year is shown as a dash.
* 3 : For the fiscal year ending March 2022, the interim dividend forecast by The Hokkoku Bank and the year-end dividend forecast by
Hokkoku Financial Holdings are shown.

Holdingcompany

17

HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

Policy on Distributing Profits to Shareholders
・Shareholder Return Policy: Clarify the policy of returning profits to shareholders from the dividend
payout ratio to the total return ratio (Revised 2021.1)
・Continue to repurchase and amortize treasury stock

Holdingcompany

Share buybacks
BeforereviewAfter
review

Stable dividend JPY60+
Performance-linked
dividend
Dividend payout ratio
25-30%

Stable dividend JPY70(Including performance-linked
dividends)

Net income

Dividend payout
ratio

90 yen27.8%

May201340%
2020.3

JPY8.023 billion

2021.3

JPY6.676 billion

Feb2015
Feb-May2016

2022.3 (planned)

JPY5.954 billion

80 yen28.8%

70 yen29.9%

80 yen37.5%

Acquisition oftreasury stock

850,000 shares-

991,000 shares-

Retirement ofTreasury Stock-

880,000 shares-

995,000 shares

71.1%

28.8%

77.9%

37.5%

Total return ratio(upper limit)2,800

Jan-Feb2013

JPY6.5 billion

Aug2017
Oct2019-Feb2020
Mar2021-Jul(Plan)Nov2021～Mar2022

Annual dividends(upper limit)1,000

May-Jul2011
May-Jul2012

2019.3

JPY9.479 billion

2,268
1,548
1,392
1,492
1,488
1,700
1,218
3,780
1,511
4,122
3,200
477

Jan-Feb2012➡Total return ratio※The Company implemented a 1-for-10 reverse stock split of its common shares on October 1, 2017.

JPY80(forecast)-

Total value(in million
yen)

4,185
5,000
5,000
5,000
5,000
4,785
2,800
10,000
5,000
8,500
991
200

Nov2007
Feb-Mar2011

Share buybacks

Shareholder benefit program
2018.3(※)

Number ofshares(inthousand)Cancellations
Number ofshares(inthousand)

Total value(in million
yen)

2011
9,000
3,707
2012
10,0002,980
Undecided
2013
10,000
3,236
2014
2,800
1,161
Undecided
2016
14,700
5,202
2019
880
4,222
2020
995
3,225
2021 HOLDINGS,
206
HOKKOKU FINANCIAL
INC. All rights497
reserved.

18

Shareholders' Equity Ratio and ROE・Aiming to increase the total return ratio and ROE while emphasizing a balance with theequity ratio (maintained at the 11% level)<Consolidated> Equity
Ratio<Consolidated>
EquityRatio<Non-consolidated> Return on Equity (ROE)
13.04%

12.98%

12.60%
12.32%

11.78%
10.30%

11.62%

11.79%

5.00%

11.41%
378

11.76%

4.50%

11.24%

118

123

4.33%
4.17%

9.65%

4.00%
155

3.81%

148

241

3.50%
2,503

2,256

3.00%

2,216

2,080

3.12%

2,652

2,521

2.75%

Return on Equity (ROE)・・・On a net income basis.

2.39%

2.50%
End of 2016.3

End of 2017.3

End of 2018.3

End of 2019.3

End of 2020.3

End of 2021.3

2.00%
End of 2016.3
Tier1

Tier2

Equity Ratio

End of 2017.3

End of 2018.3

End of 2019.3

End of 2020.3

End of 2021.3

Tier1 Ratio

ROE

19

HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

Holding
company

3. Management Strategy~Details of Strategy~

HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

Purpose of Transition to a Holding Company Structure
・Aim to provide value to customers and improve management efficiency by further advancing group
governance and maximizing group synergies.

Holdingcompany

・Continue to provide even higher-quality services by expanding the scope of operations.
[Purpose] Transition to a holding company structure ⇒Further accelerating the realization of the nextgeneration of integrated regional companies

Objective ①: Maximize group synergy
Holding company
Consolidation of Group management
functions in HD(Strategy, Governance, Risk Management,
Management Resource Allocation, etc.)

Group ofsubsidiaries

Subsidiaries specialize in business promotion
To improve the management efficiency of
the Group as a wholeMobility of personnel within the group
Cultivating next generation of management

Objective ②: Expansion of business axis
Expansion of the business axis of the current subsidiary<The Digital Value, Ltd.> (system company)
・Expand customer base to other financial institutions and general businesscompanies<The Hokkoku Servicer, Ltd> (servicer)
・Strengthening the purchase of receivables from other financial institutions
that do not have a servicing function as a subsidiary

Expansion of business scale through the establishment of
a new company<The CC Innovation, Ltd. _ Established in June 2021>（consulting company）
・Development of The Hokkoku Bank consulting department into a corporate organization
・Develop consulting services for industries and regions, etc.
<The QR Investment, Ltd. _ Established in June 2021>（specialized investment company）
・Wide range of business partners, including business revitalization companies, businesssuccession companies, and regional revitalization companies provided capital support<The FD advisory, Ltd _ Established in May 2021>（ investment advisory company）
・Developing investment advisory businesses for individuals and corporations<Thai CC Innovation Co., Ltd>（ Overseas Subsidiaries (Thailand)）<CC Innovation(Vietnam)Co., Ltd>（ Overseas Subsidiaries (Vietnam)）・Strengthening local consulting for business partners’ local subsidiaries

21
HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

Governance Structure of the Holding Company
・ Made the holding company a company with an Audit and Supervisory Committee and strengthened Holding
company
governance by separating group management from business execution
・ Aiming to maximize Group synergies by accelerating decision-making and building an efficient business
management system

Customers
The Hokkoku Credit Guarantee Co., Ltd
The Hokkoku Management, Ltd
The CC Innovation, Ltd※The Hokkoku General Leasing Co., Ltd.
The Hokkoku Servicer, Ltd
The QR Investment, Ltd※

Reporting and consultation

The Hokkoku Credit Service Co., Ltd

The Digital Value, Ltd
The FD Advisory, Ltd※

Instructions and management

The Hokkoku Financial Holdings Co. Ltd.
General Meeting of Shareholders
Audit and Supervisory
Committee

Board ofDirectors

Audit
Department

Group
Strategic
Committee

General Planning Dept.

Nomination andCompensation
Committee

Management Administration
Department
22 22
HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

Group Synergy and Growth Strategy
・As an account manager, bankers effectively utilize the functions of Hokkoku Financial Holdings to provide customers with high-quality services
・The functions of consulting, investment advisory, regional investment banking, management advisory, card and cashless, and systemdevelopment and operation from Hokuriku to Japan and the world

Holdingcompany

・Contribute to the creation of an open ecosystem for new regional financial institutions by expanding and sharing with other financial institutions
with different values

Bank staff = Account manager
Card(Hokkoku
Bank)(Hokkoku
CreditService)

Investment
and fund(QR
Investment)

Consulting(CC
Innovation)
Servicer(Hokkoku
Servicer)
Investme
nt advice(FD
Advisory)

Loans anddeposits
・Settlement(Hokkoku
Bank)

Systems(Digital
Value)

Lease(Hokkoku
Bank)(Hokkoku
GeneralLeasing)

EC site(COREZO)

Customers

Main functions of thenorthern FHD
Banks (Hokkoku Bank)
Leasing (Hokkoku Bank andHokkoku General Leasing)

Business Domain■Mainly in the 3
prefectures of
Hokuriku

Consulting (CC Innovation)
BPO(Hokkoku
Management)Regional Investment Banks (QR
Investment)
Investment Advisory (FDAdvisory)
System Development andOperation (Digital Value)■From the 3
prefectures of
Hokuriku
Expansion to
Japan and theworld■Other Financial
Institutions

Card cashless
HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

23

Renovation of the Sales Structure -Breaking Out of the
Head Office and Sales Branch Structure-

Holdingcompany・Specialize in the corporate and individual divisions to improve the skills of each division and accelerate measures.
・Toward an organization that is aware of customer journey design and customer segments through collaboration
by a flat, streamlined, and highly productive organization and next-generation CRM.

Previous sales structure

Corporate group
Next-generation CRM

Branch Manager
Vice office manager

Branch Manager

FA

Understanding ofbusiness potential andsolution of problems
Corporate assessment
and credit
Comprehensive
transaction

Personal Dept.

Corporate Dept.

Head Office

RM

Future sales structure

Cross-selling
Individual consulting

Workplace

RM

Branch managers andsales section
managers
CR・FA
Store management

Understanding of business potential andsolution of problems

Life plan proposal

Corporate assessment and credit

WealthyComprehensive
transaction
Workplace

Hierarchical organization in which branch managers ofcorporate carriers oversee corporate and individual sales

Customer
Data

CR Group FA Group

Individual consulting

Collaboration

Workplace

Achieve optimal information provision by strengthening
proposal capabilities and optimal timing

24

HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

Evolution from CRM to Integrated Business Platform
・Breaking out of CRM and developing an integrated business platform based on a new concept thattranscends CRM

Thinking of Hokkoku Financial Holdings"Unified Business Platform"

Common "CRM" System for managing customers on
a bank basis
Customer Relationship Management
Functional
1. Customer information
management
2. Sales activity management
3. Opportunity management
4. Identification of prospective
customers
5. Data Analysis

Holdingcompany

Scheduled to start
operation in FY2022

 Complete all customer-oriented businessprocesses
 Linked to back-office functions, accounting
systems, Internet banking Datalake, etc.
Function
1. Customer information
management
2. Sales activity
management
3. Opportunity
management
4. Identification ofprospective customers
5. Data Analysis

6.
7.
8.

Loan support
Automatic audit
Electronic contract

9.

Financial productsale
10. Collateralmanagement
11. Individualized
connection
12. Call center
13. Contract
Management
14. Concentration ofadministrative work
15. IB data linkage

HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

25

Consulting ①~ Direction of consulting for Hokkoku Financial Holdings~
Holding・Conventional banking business has become a [corporation RM=consultant] system due to the progress of digitization. company
・Provide consulting services to industries, regions, and municipalities in line with previous consulting services focused on loanbusiness partners and SMEs
・Development of a subsec-type consulting menu for micro businesses
Image Targeted by the FHD and CC Innovation in North Korea Supporting the Solutions of Issues Necessary to Corporate Growth

Listedcompanies
Large
enterprises

Net depositors
Non-mainborrowers
Small andMediumEnterprises

Small-scale
Business
operator

Field of consulting aimed at
by FHD and CC Innovation
In the past
Domain of
consulting

Management Strategy

Industries andregions
Local
governments

Further reduce costs
Construction oforganization control
Improving administrative
efficiency and ICT utilization

New
menu

Marketing
Personnel system andhuman resources
development

Business succession andM&A
By providing consulting in a wide range of areas and menus,
Contributing to Regional Revitalization and Sustainable Growth
HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

26

Consulting ② -From the perspective of investors andconsulting, rather than from the perspective of creditorsForm of new "corporate support" to be addressed by regional financial
institutions

Holdingcompany

Expectations for support for business partners to increase corporate value as a sustainable business model even under low
interest rates and future population decline

Multifaceted Supply of Growth Funds
Loan support and investment support, each business has a phase in which it takes the lead/Loans and investments arecomplementaryManagement support that leads to theenhancement of corporate value

Building a model that organically links management advice and support menu can be effective

Corporate Stage and Consulting Overview
Banking, CCI, QRI
・the servicer
Works

2. Period of growthand stability• ICT・BPR・M&A• Business Succession and
Personnel Systems• Overseas expansion andrecruitment

1. Founding period••••

Startup support loans
Business planning
Subsidy consulting
Opening a settlement
account

Management support
system that integrates
finance and consulting

4. Regrowth and exit
Loans
Business
succession
Fund• Business succession andexit M&A
Regrowth• Asset sales support
fund• Bulk sale
• Debt Collection

3. Stagnation and recovery
Loans
VentureFund

Revitalization• Business due diligencefund• Support for formulation andimplementation of
improvement plans
Servicer27• Rescheduling
HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.
• DDS and credit cut

Consulting ③ -Establishment of QR Investment, a
specialized investment company・Established 2021.6 to meet diversifying funding needs related to business growth, such as business succession

and business model transformation
・Organize funds from time to time that are unique to regional investment companies that support various stages of
the company

Holdingcompany

Characteristics of QR Investment (Fund)・Establish a fund according to the stage from startup to revitalization, with the investment stance of
supporting the region as a leader in the region, rather than having no earnings returns.
・External specialist funds focus on large-scale projects, while this fund focuses on regional development
and supports business partners regardless of the scale of investment
Acquisition of status as general partner of the “Ishikawa SME Revitalization Fund” (June 15, 2021)

・Acquired the status of general partner of the Corporate Recovery Fund, which was operated by Hokkoku
Management Co., Ltd., The Hokkoku Bank Group (Total: JPY4 billion)

Establishment of QRI Business Succession Fund No. 1 (July 1, 2021)
・Established a business succession fund (JPY2 billion) with the aim of increasing the value of investee companies incollaboration with the CC Innovation, The Hokkoku Bank

Establishment of “Noto SDGs Fund” with July 26, 2021
・Part of efforts in a collaboration agreement with an enterprise that has relocated its head office from Tokyo to the
Okunoto region
・Invests in unlisted companies and start-up companies that conduct businesses that contribute to the achievement ofSDGs of the Noto region
・Subsequently, the Kyoei Shinkin Bank with the local Shinkin Bank will also invest.

28

HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

Consulting ④ ~ Overseas Business Support ~On its own
Overseas Network

Established a local subsidiary (consulting company) in Thailand and Vietnam in FY2021
Beyond the framework of representative offices, enabling sales activities and consulting
services

Holdingcompany

CC Innovation Co.,LTD.

・Shanghai
Hokkoku Bank Shanghai
representative office・HanoiTransferred from the Hokkoku Bank to
the Vietnamese Investment andDevelopment Bank

Established in
October 2021

Bangkok, Thailand
Thai CC Innovation Co., Ltd

Scheduled to be established in
November 2021

Ho Chi Minh City, Vietnam
CC Innovation Vietnam Co., Ltd

Capital: 8 million baht
(Approx. JPY28
million)Capital $250 thousand(Approx. JPY27
million)

1 Japanese employee
4 Thai people
Business Activities
Consulting services

・Silicon Valley(Stanford
University)
Dispatch of bank
employees from the
Hokkoku Bank

2 Japanese employees
1 Vietnamese・Singapore
Hokkoku Bank
Singapore BranchBusiness Activities
Consulting services
29

HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

Leasing business・A system that enables account managers to propose loans and leases on a 1-stop basis
Holdingcompany・In order to strengthen the system, the leasing business section was newly established to supervise
the leasing business of 2020.4 groups. Organizational revision to 2021.3 lease departments
Initiatives in the Leasing Business

Customers
On a 1-stopbasis
Procedurable

HokkokuBank• Loans• Non-Transfer ofOwnership
Finance leases

Hokkoku
General Leasing(Affiliates)• Ownership transfer
Finance leases• Residual value
setting lease• Maintenance lease(1,000,000 yen)

(1,000,000
yen)

2,000
360

300
332

200

1,500

275

1,632
1,385

1,672

1,802

1,464

1,000
883

203

100

500

173

88

0

0
2017.32018.32019.32020.32021.32017.32021.92018.32019.32020.32021.32021.9Lease Investment Assets (Consolidated)(Billionsof yen)400
300
212
200

We canRealize the best mix proposal

Trends in Leasing Operating
Income (Consolidated)

Trends in Leasing Operating
Income (Non-Consolidated)

238

265

261

259

100

97

93

208

100
0

43
2017.384

95

2018.32019.32020.32021.32021.930
HokkokuBank
Hokkoku
GeneralHOKKOKU
FINANCIALHOLDINGS,
INC.Leasing
All rights reserved.

Efforts to Create a DX Cashless Society ①-Strategy Overview・Regional Quality Improvement Needs a Significant Improvement in the Productivity of Both Customers andus
Holdingcompany・Internet banking is an essential infrastructure for the digitization of the region. * The fee strategy is to invest
in
the region!
・Toward a more selective commission structure to accelerate DX and cashless operations
What can Hokkoku FHD do to create a DX and cashless society◆Supporting the shift to DX in local communities using paperless andcashless solutions◆Utilizing the Hokkoku DX Cashless Fund (*) to support operational
efficiency and improvement of the cashless environment※Examples of Utilization of the Hokkoku DX Cashless Fund•Introduction of ticket vending machines (with cashless settlement functions) at
restaurants•Introduction of automatic dispensers (with cashless settlement function) at hospitals•Introduction of various cloud services, etc.

Major Initiatives◆Free supply of card merchant terminals from 2016 onward◆Launch of HOKKOKU LIFE + for Individual Customers◆<For corporate customers> Free corporate Internet banking fees

Super Cashless Region◆Collaborative project with Visa Worldwide◆Hokuriku region into Japan's "cashless digital advanced region"

Commission strategy■Commission to be reduced(Implementation date:
October 2021)

0
➡ yen

Corporate Internet Banking
Basic commission JPY3.3
thousand/month
Hokkoku Bank
Remittance fees JPY110/case■Fees raised (newly established)(Implementation date: October 2022)

Bank counter and cash-related
To other financial institutions
Remittance fees JPY660/caseCommission for deposit of large
coins (newly established)➡

JPY1.1
thousand/case
0 to JPY770➡ per caseMoney exchange fees 0 to JPY660/case

HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

31

Efforts to Create a DX Cashless Society ②-Regional Revitalization through Flow of FundsHolding• Creating a new base in order to move toward a cashless society in the Hokuriku region and contributing tocompany
revitalize the region by facilitating the flow of funds• Making fast business development possible by providing both terminals to member shops and debit cards
・Established the Hokkoku DX Cashless Fund (JPY1 billion) to further cashless operations and revitalize local
communities.

With the DX cashless fundTo the creation of a moreconvenient society
Toward realization

Building an environment where cards
can be used to pay anywhereApp
Vending machines
Ticketmachines

PointsCard
Membershops

Cloud-based
accounting software

Visa Debit(Contactless Payment)

Productivity enhancement(streamlining)
Revitalize the region by
Facilitating the flow of funds※Visa debit and point availability even in
32
non-face-to-face
HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved. 32

Efforts to Create a DX-Cashless Society③-HOKKOKU LIFE +Holding
company<Product description>
Internet banking and Visa debit in passbook-less and seal-lessaccounts Digital account with a card
<Concept>

New Lifestyle Base Accounts for Customers to Realize Better Lives
・Improve convenience for customers' money by digitizing and cashless bank accounts
・Easy to use by anyone without being limited to store locations (free to transfer to another bank or
use ATMs at convenience stores)
Digital Contact Acquisition
Cashless payments and digitaltransactions completed
Acquisition of consumption, sales data,and income and expenditure data

Timely and appropriate proposals andsupport for individual employees

HOKKOKU LIFE+
All of which are thestarting points
Expanding services
as needed

FY2024
Subscribers:
280,000
Selection rate:
70%2021.9 (starting 8 month)
Subscribers: 29,000
HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

System Strategy ① -Target Direction▶

● Population decline, negative interest rate policy, and the cashless policy● Recession associated with the expansion of COVID-19● Decline in customer visits and completion of transactions▶

Holdingcompany

Japan's financial environment

Deterioration of profit environment
Changing in profit structure
IT’s accelerated evolution

Direction of Hokkoku Financial Holdings• Implementation of management strategies triggered by thesystemDirection • IT investment in systems for customers as well as in-house

As the basis of ourtransformation"Operations" and "IT"I spent 15 years building
this!

• Construction of an ecosystem for data linkage involving regions
Ultimate • Creating new services that are highly convenient through the provision of
BaaS(Banking as a Service)goal

To regional development by posting solid profits in a challenging businessenvironment Aiming for Further Evolution to Continuously Contribute
34

HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

System Strategy ② -Shift to Strategic Investment-

Holdingcompany

・Accelerate strategic investment to build a system foundation capable of responding quickly to rapidchanges in the market.

IT Investment-Related Costs (Cash Out Basis by Fiscal Year)
Strategic investments
Accounting cloud computing
3%
Corporate cloud banking
New CRM, etc.
S
32%
e
c
In-houseu Commissioned
development,
44%
developmentr
etc.
i
For Digital Valuet
Utilization, etc.
y 55%

For development andoperation
Promote in-houseproduction

Maintenance, operation, etc.

2011.3 fiscal year
(actual)97%
68%
Development
and operation
outsourcing

FY2021.3(Actual)

HW purchaseandmaintenance2026.3 fiscal year
(forecast)(forecast)2
billionCurrently, the company is building a next-generation
foundation, including account-based cloud computing,corporate cloud banking, and the next-generation CRM
system.
Costs also rose due to the renewal of ATM equipment andother factors.

45%
36%
2
billion▶

Communicati
on costRenewal of IT infrastructure
ATM upgrades, etc.

2016.3 fiscal year
(actual)2031.3 fiscal year

64%

4billion

Almost accountbased
OS Expenses

Li
c
e
n
s
e

SW
maintenance4
billion56%
Through in-housedevelopment andoperation
Operations andmaintenance costs
reducedOn the other hand,due to an increase
in cloud usage
Increase in licensing
costs

In-house development and operation
for the future,
Strengthening Strategic Investment in Security
and Other Areas

35
HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

System Strategy ③ ~ Future Development ~Holdingcompany

・ Transition of strategic systems to cloud services - Enhancing sales and reducing costs using
information technology 2019
Cloud
Banking
Account
systemCloud
computing

SubSystems

2020

2021

Release for
Individual
customers

2022
Release for
Corporate
customers

Strengthening Digital with Cloud Banking

IaaS
Aggregate data to cloud

2023

2024

2025

Systematically enhancement
Dramatically improved productivity,
both customer and intra-bank

PaaS
Transforming the Quality of Sales into a ProfessionalField through Data Utilization

In-house
Rapid in-house development of business applications based on new
production
CRM

In-house production of su-systems

Reduced maintenance / renewal investment costs

36

HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

System Strategy ④ World View by the Hokkoku FHD
Holding

Collaboration among regional financial institutions that share values and strategies
company

1 Aiming to become a world of "cloud-first in-housedevelopment and operation"[Question]
 First, it will take time to reform the organization and structure...

2 If you can't start immediately, start by setting the target date[Question] There is a shortage of personnel and skills capable of in-housedevelopment and operation in the cloud...

3

System subsidiary The Digital Value, Ltd supports as an IT partner to the goal

Hokkoku FHD aims for "open digital regionalism"
Creating an Open Ecosystem for New Regional Financial
37
Institutions!
37
HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

System Strategy ⑤ ~ Strategy Story of Digital Banks ~Transformation intoa FinTech

Modernize thesystem•• Personal Cloud Banking• Transition to core cloud→ Digitalization•

Supply value-added
products•

FHD transforms itself
into a FinTech company
Collaboration withFinTech companies thatshare common values•

Holdingcompany

Differentiation through highvalue-added comprehensive
services
Realize the philosophy of returning
high-quality services to local
communities

General financial institutions

To expand existing systems
Cooperation with FinTech
Extension of existing
system functions→ Digitization••

FinTech data linkages,
which are not strategic,
FinTech companies holdportal data. Banks aretransformed into "soilpipe."

Commoditization
Difficult to differentiate
services due tocommoditization of
38
HOKKOKU
FINANCIALHOLDINGS,
INC.
Allrightsreserved.
systems•

Securities Investment Strategy ①-Transition of Investment
StrategyReflecting changes in the market environment, wehave reformed our investment style since 2014.
2019

・Strengthen procurement at the

Change in the financial
Singapore branchenvironment
Zero interest rate
Corporate Governance Code2014

Balance of securities(Unit: 100 million yen)

2017

2018

2020
・Strengthen

corporate bond
・J-REIT from privately investment
2015・Reduction of・Rebalancing of net placed investment
strategic
investment equity
trusts・Breaking away from BUY & HOLD of yen・Switched to domestic stockholdings
denominated bonds
and overseas ETFs

2016

・Switch loans to large corporations to net
investment

2021

・Super-long-term JGB
investment
・Multi-asset investment

Periodicrevenue(Millions of yen)

[Balance of Securities by Asset and Periodic Earnings]

14,000Holdingcompany

25,00012,00020,00010,0008,000

15,000

6,000

10,000

4,000

5,000

2,000
0

0
2014/3

2015/3Yen-denominated bonds

2016/32017/3Foreign bonds

2018/3
Stocks2019/32020/32021/339
Investment
trustsPeriodicrevenue
HOKKOKU
FINANCIAL HOLDINGS,
INC.
All rights reserved. 39Securities Investment Strategy ② ~ Investment Policy ~Current issues

Super-long-term JGB investment + carry roll-down strategyHolding

company[Investment Policy by Investment Asset]

Investmen
t assets

Yendenominated bonds

Investment policy

Taking Interest Rate Risk with Super-Long-Term
JGBs

StocksRisk optimization

Foreignbonds

Reinforcement of profits through long-term andshort-term spreads

Investment
trustsAiming for Stable Earnings through Multi-Asset
Strategy

Carry roll-down strategy

200,000
150,000

Buy-and-hold strategy

100,000
50,000

21年

20年

19年

18年

17年

16年

15年

14年

13年

12年

11年

10年

9年

8年

7年

6年

5年

4年

0

3年

Investment of super-long-term JGBs
Amid expectations of a prolonged low interest rate environmentand stable interest rates,
Aim to increase net interest income through interest rate risk
Reinforcement of investment through investment trusts
Stable management with restrained risk through the adoption ofmultiasset funds

250,000

2年

Operational Policies for FY2021

In addition to investing in super-long-term JGBs in the 2020-year zone, theCompany sells bonds in the 11-2013-year zone after holding them for a certain
period of time to lock in a profit from the decline in yields (carry-down strategy).

1年①Decrease in net interest income on bonds due to the longterm low interest rate environment②Decline in fund efficiency due to increase in surplus funds③Corporate Governance and Response to Stricter Basel
Regulations

Investments in multiasset strategic funds
Using total return swaps, achieve performance similar to that of cash
investments while controlling risk assets.
[Overview of Multi-Asset Funds]
Amount Invested
Up to JPY50 billion

Investment target

NikkeiJapanese, U.S., European, andBritish stocks
Bond futures and U.S. MBS

Expected returns

1.65% per annum (before
costs)

Risk (standard
deviation)

2.73% per annum

Worst drawdown[Portfolio of the fund]
Average

Stocks20…

S&P500EuropeaGinnie…
Frenchn stocks
govern JGB futures
ment
Treasur TSY…
bonds
y noteDebt…

6.8%
HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

40

Securities Investment Strategy ③-Future Investment Strategy••

Optimize risk by reducing stock balance. Unrealized gains are allocated to system and otherHoldingcompany
structural reform expenses.
Private placement funds created within the Group. Secure stable earnings by investing in fundswith low risk and cost.

In-house production of private funds

Equity risk optimization••

Reduce stock balances and optimize equity risk
Strengthen profitability through regular
maintenance based on multi-faceted analysis••(Millions of yen)[Book Value Balance, Valuation Gains/Losses, Realized

Formed a private placement fund advised by FD
Advisory.
Reduce costs and improve operational know-how byincreasing in-house production within the Group.
[Image of fund formation by FD Advisory]

Gains/Losses]
100,000[Fund image]

90,000

Securities
market80,000U.S equities
10%

70,00060,000Japanese
equity10%

50,000U.S.
government
bond…

40,00030,000Japanesegovernment
bond…

Investme
nt

Providers ofCapitalOperating Application
fee
Results

Entrustedcompany

Application
fee

Investment
instructions

20,00010,000Consignment0
2014/3

2015/3

Stock balance

2016/32017/3

2018/3

Appraisal profit/loss

2019/32020/32021/3(planned)

2022/3

Realized gains and losses

Sales
companies

Distributions

Investme
company41
nt advice
HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

Life planning support

IncomeAsset utilization andasset preservation

Age 60 Age 70 Age 80

Basic cost of living
Housing purchase expenses and Own medical costs
housing loans
・Long-term care expenses
Parent's nursing
Educational expenses
care costs
for childrenLife plan consultations and holding of seminars tailored to each generation

Smart lifestyles (LIFE+・Visa debit, cloud banking, various types of loans)Asset building (iDeCo, investment trusts, Omakase Navi)

Succession to the Next Generation (Life Insurance, Will Trust, and Heritage
Resolution)

Investment trusts andinsurance

Pension income
Pension receipts

Retirement

Age 40 Age 50

Dear children,
Wedding

College advancement

High school entrance

Spending

Entering junior high schoolAge 20 Age 30

Entry into elementary school

Home purchase

Birth of children

Wedding

Employment

Event

SalaryRetirement benefits

Holding◆To the life events and needs of each customer ◆Strengthening Relationships with Next
Generations to Encourage People to company
Have
Providing optimal advice and services
a Long-Term, Reliable LifeIntermediation of financial
instruments

Sharing life plans

Understanding ofoverall assets

Follow-up for the
Next Generation

Smooth asset transfer
support

Heritage consolidation/Will
proxy trust

Asset succession support and living
gift
Stock Countermeasures and Will
Trust

Strengthening contact
with inheritors
Consultation on life-accompanied
driving
HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

42

Investment Advisory Company: Establishment of FD
Advisory
Holdingcompany

Description of Businesses

•
•
•
•

Asset Management
Asset succession andbusiness succession
Insurance and real estateWill trust, family trust, etc.

•••

Providing Operational Solutions
Support for establishment ofoperational systems
Support for review of businessprocesses

Investment strategy proposal

Investment advisory policy

Aim to contribute to customer asset formation by enjoying the fruitsof medium-to long-term economic growth.
Contribute to the development of a sustainable society andsustainable growth of the market as a whole through investment.

Fund structuring image
through investment
adviceInvestment

Securities
marketProviders ofCapitalOperatingResults

ApplicationDistributions
fee
Application
fee
Sales

Entrustedcompany
Investment
instructions

FD Advisory
Investment advice③Fund structuring
Advice②Consulting for Financial
Institutions and Other SpecificInvestors①For IndividualsLife planning

Consignment
company

Distributions

companies••

Advising on fundmanagement strategies
Advice on fund investment
decisions

Consulting services
Basic consulting policyReturn to regional financial institutions theknowledge gained through operational reforms
and organizational reforms practiced by the
Hokkoku Bank Market FinanceDepartment.

2021.10 Formation of new
fund to realize FD (FiduciaryDuty)
FDA advises on
management andinvestment decisions

HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

43

Bank

4. Outline of the 2Q of the fiscal
year ended March 31, 2022

HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

Loans Outstanding and Yields by Segment ~・Loans to individuals increased. Commercial loans declined slightly, but the ratio of loans to SMEs was at a highBanklevel of 76.1%.
・Yields declined further due to the execution of the countermeasure fund for corona (low-interest system loan).

Yield of loans and loan balanceBillion yen

1.02%

0.96%

0.95%

Breakdown by area
(billions of yen)

0.92%

3,425

3,354

3,152

3,324

3,026

2,943

3,175

2,915

19,728

20,11320,012End of
End of
End ofSep.2020 Mar. 2021 Sep 2021

19,926

End Mar. 2020 End of Sep. 2020 End of Mar. 2021 End of Sep. 2021
Local goverments and public corporations
Medium-and large sized companies
Small and medium-sized enterprises,etc
Interest on loans

Total of 3prefectures in
Hokuriku area

24,12324,08923,931△ 192△ 0.8%

Ishikawa

18,22818,16718,066△ 162△ 0.9%

Toyama

4,702

4,718

4,674

△ 28

△ 0.6%

Fukui

1,192

1,202

1,191

△1

△ 0.1%

Others

2,289

2,250

2,234

△ 55

△ 2.4%Breakdown by company size

Breakdown by type(billions of yen)(Billions of yen)

End of
September.
2020

End of March.
2021

End of
September.
2021

Change from Change from
Sep.2020
Sep.2020

Compared toCompared to
September
September
2020
2020
Increase/Decr
Rate of changeease

End ofSep.2020

End ofMar.2021

End ofSep.2021

Change from Change from
Sep.2020
Sep.2020

Meter Loan

26,41026,33926,165

△245

99.0%

Business loans

13,09913,18012,768

△ 331

97.5%

Of which, SMEs, etc.

20,11320,012

19,926

△187

99.0%

Consumer loans

9,957

10,006

10,072115

101.2%(Ratio of SMEs, etc.)

76.1%

75.9%

76.1%

―

―

Housing loans

9,578

9,642

9,728

150

101.6%

2,943

3,175

2,915

△28

99.0%

Othe loans

379

363

344

△ 35

90.8%

3,354

3,152

3,324

△30

99.1%

lical goverments andpublic corporations

Of which, medium-andlarge-sized companies, etc.
Of which, local
governments and public
corporations

3,354

45

HOKKOKU
All rights reserved.
99.1%
3,152 FINANCIAL
3,324 HOLDINGS,△ 30 INC.

Loans and bills discounted ~ Yield by segment ~Yield by Segment

Average Contract Interest Rate(％)

FY2019Businessloans
Consumerloans→

FY2020→

FY2021

Bank

→

(％)

Sep.2021

FY2019FY2020

FY2021

Sep. 2021

1.276-0.0391.237-0.0691.168-0.025

1.143

0.912

-0.0580.854-0.0140.840-0.014

0.826

Business loans

1.157

1.127

0.899

0.831

Secured

0.768-0.044

0.724

0.005

0.729

-0.0040.725

Consumer loans

0.646

0.694

0.575

0.548

Unsecured

3.359-0.0543.305-0.0783.227-0.050

3.177

Local
goverments

0.581-0.0620.519-0.1400.379-0.063

0.316

Business loans

Yield by region (business loans)
FY2019→FY2020→

FY2021→

Yield by Segment
Consumer loans

(%)

(％)

1.4

Sep.2021

1.3

1.323

1.276

1.237
1.168

1.143

0.854

0.84

0.826

2020.32021.32021.9

1.2

Total of3prefectures

1.428-0.0631.365-0.0801.285-0.076

1.209

Ishikawa

1.41-0.0591.351-0.0771.274-0.0781.196

1.0

Toyama1.506-0.0761.430-0.0971.333-0.077

1.256

0.9

Fukui

1.375

-0.0881.287-0.0661.221-0.036

1.185

Others0.553-0.001

0.552-0.0180.534-0.007

0.527

1.1
1.076

0.912

2018.32019.30.8
0.7
46
HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

Securities Investment
・Diversify investments from a medium-to long-term perspective and secure earnings through flexible trading
・Seek to secure stable realized profits by capturing profit opportunities in response to changes in theinvestment environment

Balance of securities (book value)(Billions of yen)

11,442
1,215

11,075975

653
10,377
931

9,734
930
933

2,352

1,683

819
10,075
927

784
9,549

1,848

1,221

2,251

6,481

6,626

7,012

End of

End of

End of

End of

End of

End ofMar.2017

Mar.2018

Mar.2019

Mar.2020

Mar.2021

Sep.2021

645

StocksInvestment trusts

Changes in Realized Gains/Losses by Asset
25,000 (1,000,000 yen)
Yen-denominated bonds

Foreign bonds
StocksInvestment trusts

20,00015,00012,884
10,804

840

7,576

6,187

Foreign bonds(Billions of yen)

1,874

6,440

Yen-denominated bonds

Valuation gains on securities

778

837

918

18,736

20,172

18,935Mar.2017

Mar.2018

844

Mar.2019

Mar.2020

Mar.2021

Sep.2021

Loans to large enterprises (syndicated loans)→ listed shares

200,000
150,000

11,480100,000
50,00000
End of
19.3

882
335

5,000

End of18.3

784(1,000,000 yen)

10,000End of
17.3

Bank

End of20.3

End of21.3

End of21.9

Syndicated loans

5.00%Long-term investment stocks
Stock dividend yields

3.00%
1.00%
-1.00%47

HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

3 Business Revenues~Bank cards business, Leasing business, Consulting~Bank

Income from 3 business revenues(Millions of yen)

2,000

611

661

309

0

360

410

1,000

245
88
275

203

FY2017FY2018

332

345

275
762

537

371

470

FY2019Card business

175

941

FY2020

FY2021

Leasing businessSep. 2021

Consulting(Millions of yen)
FY2017FY2018FY2019FY2020

FY2021

Sep. 2021

Consulting

245

309

410

661

611

345

Leasing business

88

203

275

332

360

175

Card Business

275

371

537

762

941

470

Total

608

884

1,224

1,756

1,912
990
48
HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

Card BusinessBank・ Small businesses have also benefited from the cost advantages of conducting their own card
merchant operations, and the cashless environment in the region is steadily expanding.
Number of debit cards issued (aggregate)

Number of card merchants (aggregate)(Stores)(Thousands of sheets)

7,500

300

260
239

250

6,114

6,386

6,501

2021.32021.9

6,000

206
200

4,078

4,500

154

150
109

2,751

3,000

100

1,753

58

1,500

50

0

0
2017.32018.32019.32020.32021.32021.9

941

1,000

470

371

0
2017.32018.32019.32020.32020.3

300

537
275

2019.3

Changes in the number of store

762

500

2018.3

E-commerce malls (COREZO)

Operating Profit from Card
(Millions of yen)2017.32021.32021.9

206

239

200
※2019.5.20 OpenOperated bysubsidiary Hokkoku
Management Co.,
Ltd.

100

24

32

2019.52020.302021.32021.949

HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

Sales of risky financial products
Average holding period of Mutual fundcontracts

10年

8.38

7.52

8年

40,000

6.98

6年※ Data for major banks andregional banks is cited from
"January 14, 2020: CustomerOriented Business Operations ofFinancial Businesses"

3.6

3.5

20,0005,203

10,00016,828

Hokkokubank
9major banks
End of Mar.2019 End of Mar.2020 End of Mar.2021

27regional banks

60.0%
45.0%

46.8%

46.2%

40.0%
30.0%

35.0%

20.0%
21.0%

10,674

11,824

12,14520,94322,487

21,941

20,791FY2019.3

FY2020.3

FY2021.3

FY2021.9

37.0%
25.0%

10.0%

※ Data for major banks andregional banks is cited from
"January
14, 2020:※Data
for major
banks Customerand regional
Operations
banksOriented
is cited Businessfrom "January
14, ofBusinesses"Business
2020:Financial
Customer-Oriented
Operations of Financial Businesses"

End of Mar.2019

End of Mar.2020

Hokkokubank

5major banks

Savings-type investment trustiDeCo

Hokkoku Omakase Navi※Started handling 2019.10 Omakase Navi in
Hokkoku※For savings-type investment trusts, the average number of investment trusts per year is recorded
because the end of the month is a holiday, etc. and it is difficult to make an accurate comparison.

Ratio of customers who conduct savings-type investment trusts

50.0%

5,031

0
FY2018.3

0年

3,964

8,335

4.1

2年

1,654

30,000

5.3

4年(Numb Number of savings-type financial product
er)

Bank

End of Mar.2021

19regional banks

・Continue providing services and advice for customers' stable lifestyles,
enriched lifestyles, and happy lives.
・The sales of risk financial products are predicated on contributing to the asset
formation of customers over the medium to long term.

・Continue to sell risk financial products based on the above concept.
・This has led to an average holding period for investment trusts, an increase in
the percentage of customers who conduct savings-type investment trusts, and anincrease in the number of contracts for savings-type financial products.
HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

50

Trends and Forecasts of Credit Costs
Bank・Credit costs for the first half of FY2021 were JPY5 billion, approximately JPY1 billion higher than the initial forecast
・The forecast for the fiscal year ending March 2022 has also been revised to around JPY9 billion, which is JPY1 billion
higher than the initial forecast
・The Company's policy is to maintain a high coverage ratio and reduce the risk of future impact on profits and losses
through the implementation of adequate provisions in the future.

<Credit costs>

Total credit costs (Billions of yen)

General reserve for possible loan
losses (Billions of yen)

End of
End of
End of
End of 2022.3
Mar.2019 Mar.2020 Mar.2021 Sep.2021 Forecast

33

2

98

27

113

30

50

14

90

15

<Preservation
Status>
Receivables disclosed under
the Financial Reconstruction
Act (billion yen)

564

553

561

608

645

Amount of preservation(Billions of yen)

534

524

534

587

619

94.7%

94.7%

95.1%

96.5%

95.8%

Coverage ratio
Disposal of non-performing loans(Billions of yen)

<Breakdown of Credit Costs>

31

71

83

36

75

End of
End of
End of
End of 2022.3
Mar.2019 Mar.2020 Mar.2021 Sep.2021 Forecast

Commercial loans (Billions of yen)

20

83

104

46

80

Consumer loans (Billions of yen)

12

14

9

4

10

End of
End of
End of
End of
End ofMar.2018 Mar.2019 Mar.2020 Mar.2021 Sep.2021

・In the first half of FY2021, results exceeded initialexpectations due to the downgrading of somemajor customers.
・It is expected to exceed the initial forecast for thefull FY2021, but it is expected to fall below theprevious year's level.
HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

51

Holding
company

5. Reference Materials

HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

Efforts to Reform Operations and Improve Productivity
Within DX to 2015

2015～ Customer DX
cloud banking release2021～  Corporate
PaaS of the accounting system

2013

2009

Holdingcompany Introduction of IT infrastructure restructuring and Surface(Microsoft  Accelerating the in-house production ofdivisions into planning divisions
 Consolidation of HR divisions into planning divisions
subsystems(to strategically reduce non-personnel(Integration of Corporate Planning and Human Resources Strategy)
expenses) Examination Department abolished Consolidation of financing and business operations into the General
Administration Department
 Introduction of the loan limit system(Strategic Credit Efforts,
Responding with a sense of speed) Reduction of loan administration and Relocation of new head officeconcentration of headquarters
 Branch back-office operation
Simplification and centralization of
headquarters
 Established the Systems
 With Surface to everyone
Department
 By tablet
Smartphone distribution(Strategic system investment)
Commencement of sales of financial
products
 HOKKOKU LIFE + Started
 BPR and systematization in the loan
 BankVision on Azure operation
division In-house production of subsystems
 Elimination of loan clerks at branch Development of new ATMs
offices Full renewal of IT infrastructure Introduced area sales system
 Established Hokkoku Financial HD
 Introduction of Microsoft Teams Commencement of store Acquired DX certification (first(FAT of business terminals)
consolidation
regional bank) Establishment of a callcenter Announcement of account cloud conversion project Introduction of
corporate mass
 Established Digital Value Co., Ltd.
strategy Northern Cloud Banking (Personal Version) Release Renovation of Accounting system
53
HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.
groupwaremigration

 Consolidation of general affairs

2010

2014

2007

2016

2012

2021

2000～

2020

2017

2011

2015

2019

ESG Initiatives (E)Holding・"Climate Change Response and Environmental Conservation" set as materiality
company・We plan to reflect this in the menu of ESG-compliant consulting for customers and regions, andwe plan to work toward contributing to the fostering of ESG momentum in the region.

◆The Hokkoku Bank announced its endorsement to TCFD's recommendations to
2021.5.
◆In FY2020, CO2 emissions were reduced by approximately 37% compared to
FY2013 due to reduced electricity consumption, mainly due to the relocation of
the head office building in 2014.
◆Targets for reducing CO2 emissions in FY2030 set at a △ of 60% compared to
FY2013 through initiatives such as store consolidations and closures and efforts toconvert rebuilt stores to ZEBs
Compared to
FY2013
Approx. 37%
reduction

10,000
8,000
6,000
4,000
2,000
0
FY2013

FY2014FY2015FY2016FY2017FY2018FY2019FY2020■CO2 emissions (absolute) (tons/ CO2)54
HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

ESG Initiatives (S)・Contribute to solving ESG issues through business activities aimed at becoming a next-generation regional comprehensive
Holdingcompany.
company
・Establish an organizational structure that can respond flexibly to changes in the times, foster a corporate culture, and respondto a variety of work styles.
[Yamanaka lacquer productivity improvement project [Efforts for the IKAWA PPP/PFI Regional Platform]

Efforts to create an environment in which
women can thrive

Main Initiatives

utilizing ICT]・ Shortened working hours for childcare (up to the third yearof elementary school)
・ Extension of childcare leave (2 years allowed)
・ Recommendation of staggered hours system
・ Training for returning to work
・ Enhancement of home learning tools

60
50
Solving issues such as improving regional productivity through the creation of acashless environment[Creation of cashless environment based on cardbusiness][Platform for regional revitalization (EC mall)]Diversity management

40
30

64.9%

61.7%
51.6%

37.0%

38.4%

0

39.6%

41.5%

45.8%
42.5%

49

20
10

49.1%

67.6%

43.1%

51

41
32

25
16
5.2%

7.3%

9.2%

11.7%

13.9%

14.6%

16.4
17.4
18.4
19.4
20.4
21.4
Number of female managers
Ratio of female managers
Ratio of female employees
Ratio of women among pool of newly requited graduates 55

HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

55

ESG Initiatives (G)・The Bank has improved the transparency of the business decision-making process as a result of the participation in management by outside directors.
The ratio of Independent Outside Directors is 45.5%.
・Selected a system that further clarifies the link between the share value of the Bank and the remuneration for Directors

Corporate Governance Structure
Delegation of part of businessexecution decision to directors

Ratio of independentThe ➡ Board of Directors discusses management
strategies in a constructive manner.

Directors(2016)

Board ofDirectors

Audit and
(Executive) Audit and Supervisory
Directors Supervision Committee
6 directors※

6 representative
directors

FiscalYear
Ratio of independent Outside Directors 2006
(2021)

Outside3 Independent
OutsideDirectors

3 Independent Outside
Directors

Stock compensation-type stock
option plan introduced

2015

Transitioned to a company with anaudit and supervisory committee
Outside directors are elected.
Appointed 1 female director(outside)(5 outside directors)
Discuss
Discuss
remuneration election of
Directors

InstructionAnd
diretion

Optional
Nomination and
Audit Department
Compensation※Figures for 2021 will be formally decided byCommittee the 2021.6.18 General Meeting of Shareholders

System of compensating directors

2016

2017

2018

2019

2020

2021
(※)

Directors (persons)

16

17

17

17

15

11

Outside Directors(persons)

4

4

4

5

5

5

Independent Outside
Directors (persons)

3

3

3

5

5

5

18.7

17.6

17.6

29.4

33.3

45.4

Ratio of Independent
Outside Directors (%)

Introduced a system of executive
officers

200911
Directors

16
Directors

Main Initiatives

Base salary + Performance-linked payment + Stock distribution Trust
Directors and Executive Officers※Current Composition Ratio of Executive Compensation 6 : 2 : 2 (FY2020 Results)
who are not Audit andSupervisory Committee Members
Executive Officers
Only base salary
Directors who are Audit andSupervisory Committee Members

Set up nominating andcompensation committees
2016

Introduction of a system forevaluating the effectiveness of theBoard of Directors

2017

Introduced a stock grant trust

2019

Appointed 2 female directors(outside)
Increased from 3 independent
outside directors to 5

※Figures for 2021 will be formally decided by
the 2021.6.18 General Meeting of Shareholders

2020

33% of independent outside
directors

Independent Outside Directors Ratio
2021 HOLDINGS, INC. All rights reserved. 56
HOKKOKU FINANCIAL
to 45%(*)

Changes in Key Figures①
FY2017FY2018FY2019FY202044,004(43,949)

43,911(45,041)

42,882(41,509)47,538(41,584)

Net interest income

38,45739,19735,55634,87634,259△ 617

Fees & commissions
Other business profit

5,071
475

5,332
△ 618

5,604
1,722

5,938
6,723

5,737
△ 1,269△ 201△ 7,992

Gain/loss on bonds
Expenses

55
28,806△ 1,129
28,346

1,372
28,256

5,953
29,422△ 2,226
29,175△ 8,179△ 247

Personnel cost

14,284

14,441

14,372

14,261

13,958△ 303

Non-personnel costTaxes

12,702
1,819

11,9581,946

12,004
1,879

13,062
2,098

12,975
2,241

△ 87
143

Net business profit

15,142

16,694

13,253

12,162

11,778△ 384

Provision of reserve for possible loan losses① （△）

Net business profit(after reserve)

1,037
14,160△ 469
16,034203
14,422

2,674
15,441

3,060
6,491

386
△ 8,950

Expenses related to portfolio problems△ 140△ 1,293△ 1,642△ 3,464

4,792

8,256

378
754

1,636
2,095

1,309
3,062

3,975
7,103

13,239
8,335

9,264
1,232

Ordinary profit692
14,02063
14,74169
12,78017
11,97772
11,28355△ 694

Extraordinary gain/loss

△ 333

△ 629

△ 710

△ 1,154

△ 897

257

Profit before income taxes
Profit13,687
10,107

14,112
9,479

12,0708,023

10,823
6,676

10,385
5,954

△ 438
△ 722

Changes in gain/loss(Non-consolidated)

Gross profit(Excluding gain/loss on bonds（△）

Gain/loss on equity
Amount of credit costs②
Recoveries of written off claims③（△）

FY2021YOY Change
38,727△ 8,811(40,954)
△ 630

Bank

57

HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

Changes in Key Figures②(Billions of yen, %)Averagebalance, yield,
etc.

FY2017
Average balance

FY2018Yield

Average balance

FY2019Yield

Average balance

FY2020Yield

Average balance

FY2021

Yield

Average balance

Yield

Loans

22,867

1.23

23,456

1.13

24,655

1.06

25,577

1.02

26,2150.95

Securities

9,899

1.19

9,803

1.52

10,080

1.31

9,389

1.09

9,857

0.93

Call loans, etc.

5,441

Total interest-earning assets

38,2081.06

41,012

1.03

45,412

0.88

46,0250.80

47,7390.73

31,1350.01

32,5070.01

33,8330.01

35,0770.00

38,2520.00

Negotiable certificates of deposit

1,031

0.02

1,036

0.02

919

0.01

1,164

0.00

976

0.00

Call money, etc.

5,161

Total interest-bearing liabilities

37,327

Deposits

7,752

10,676

7,528
0.05

11,05810,704

41,0710.07

45,458

11,666

9,883
0.10

46,126

Bank

9,062
0.04

48,2900.01(%)

FY2017FY2018FY2019FY2020

FY2021YOY Changes

Interest margin for total fundinterest rate

0.24

0.27

0.16

0.12

0.11

△ 0.01

Gap on yields of deposits and loans

1.22

1.12

1.05

1.01

0.95

△ 0.06

Expense ratio

0.89

0.84

0.81

0.81

0.74

△ 0.07

65.54

62.93

68.07

70.75

71.24

0.49

ROA (based on net business profit)

0.24

0.20

0.16

0.13

0.11

△ 0.02

ROE (based on profit)

4.33

3.81

3.12

2.75

2.39

△ 0.36OHR

HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.

58

We are prohibited from copying or duplicating this material or distributing it to third parties
without obtaining prior approval from Hokkoku Financial Holdings, Inc. This document has
been prepared solely for the purpose of providing information and is not intended to solicit
the purchase or sale of any particular security. All or part of the information contained inthis document is subject to revision or change without prior notice. These materials
contain forward-looking statements. Please note that these statements are not guarantees
of future performance and may differ from the targets due to changes in the businessenvironment and other factors.

Please address inquiries on this document to

Hokkoku Financial Holdings, INC.
General Planning Dept. PR & IR Section
E-mail: cyosa@hokkokubank.co.jp
HOKKOKU FINANCIAL HOLDINGS, INC. All rights reserved.