2 02 2

HOKKOKU FINANCIAL HOLDINGSFINANCIAL REPORT

2022

CONSOLIDATED BALANCE SHEETS
Hokkoku Financial Holdings, Inc. and Consolidated Subsidiaries

As of March 31,

Assets:Cash and due from banks (Note 15)
Call loans and bills bought
Monetary claims bought
Money held in trusts (Note 12)
Securities (Notes 9, 10, 11 and 17)
Loans and bills discounted (Notes 9 and 10)
Foreign exchanges (Note 9)
Lease receivables and investment in leased assets (Note 22)
Other assets (Notes 9 and 17)
Tangible fixed assets (Notes 14 and 16)
Intangible fixed assets
Deferred tax assets (Note 26)
Customers’ liabilities for acceptances and guarantees (Note 9)
Reserve for possible loan losses
Total assets
Liabilities:
Deposits (Notes 10 and 17)
Negotiable certificates of deposit (Note 10)
Call money and bills sold (Note 17)
Guarantee deposit received under securities lending transactions (Note 17)
Borrowed money (Notes 10, 17 and 18)
Foreign exchanges
Bonds payable (Note 19)
Borrowed money from trust account (Note 20)
Other liabilities (Note 27)
Reserve for bonuses
Net defined benefit liability (Note 27)
Reserve for management board benefit trust
Reserve for reimbursement of deposits
Reserve for loss on refund of interest
Deferred tax liabilities (Note 26)
Deferred tax liability arising from revaluation of land (Note 14)
Acceptances and guarantees
Total liabilities
Net assets:
Common stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity (Note 21)
Valuation differences on available-for-sale securities
Net deferred gains on hedging instruments
Land revaluation surplus (Note 14)
Remeasurements of defined benefit plans (Note 27)
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets

See accompanying notes to consolidated financial statements.
1

2022

2022

Millions of yen

Thousands of U.S. dollars(Note 2)¥¥

1,607,871
65,0003,052
13,5281,356,079
2,585,262
11,13835,19537,364
31,3889,949
265
17,986(61,849)
5,712,233¥

4,257,200
1,000
618,824
313,497
155,9851
20,000154
53,752
747
2,398
496
127
19
4,368
1,412
17,986
5,447,975¥

10,00029,727
182,357(3,124)
218,960
36,652115
2,296(1,467)37,597
7,701
264,258
5,712,233$$

13,137,279
531,089
24,937
110,539
11,079,989
21,123,148
91,006
287,565
305,288
256,465
81,296
2,168
146,956(505,345)
46,672,387$

34,783,892
8,170
5,056,172
2,561,459
1,274,499
14
163,4121,266
439,188
6,110
19,596
4,057
1,041
162
35,694
11,540146,956
44,513,237$

81,706
242,891
1,489,971(25,531)
1,789,037
299,472
945
18,762(11,990)
307,190
62,922
2,159,150
46,672,387

CONSOLIDATED STATEMENT OF INCOME
Hokkoku Financial Holdings, Inc. and Consolidated Subsidiaries

Year ended March 31,

IncomeInterest income on:
Interest on loans and discounts
Interest and dividends on securities
Other interest income
Total interest income
Trust fees
Fees and commissions
Other operating income
Other income (Note 23)
Total income

2022

2022

Millions of yen

Thousands of U.S. dollars(Note 2)¥

24,12011,378588
36,0870
9,487
17,55921,59584,730$197,078
92,968
4,812
294,859
077,514143,475
176,450
692,300

Expenses
Interest expenses on:
Deposits
Borrowings and rediscounts
Interest on bonds
Other
Total interest expenses
Fees and commissions
Other operating expenses
General and administrative expenses (Note 23)
Other expenses (Note 23)
Total expenses

110
35
180
167
494
3,578
13,79931,03816,651
65,563

904
297
1,476
1,364
4,042
29,238112,753
253,604
136,051535,690

Special gains and losses (Note 24)(3,220)(26,316)

Profit before income taxes
Income taxes (Note 26):
Current
Deferred

15,946130,293

5,723
596
6,319
9,626
238
9,387

46,762
4,875
51,63778,655
1,951
76,704

ProfitProfit attributable to non-controlling interests
Profit attributable to owners of parent

Amounts per share (Note 28)
Net assets
Profit

¥

$

2022

2022

Yen

U.S. dollars(Note 2)¥

9,576.53
340.64

$

78.24
2.78

See accompanying notes to consolidated financial statements.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Hokkoku Financial Holdings, Inc. and Consolidated Subsidiaries

Year ended March 31,

Profit2022

2022

Millions of yen

Thousands of U.S. dollars(Note 2)

¥

9,626

$

78,655

Other comprehensive income (Note 25)
Valuation differences on available-for-sale securities
Net deferred gains on hedging instruments
Remeasurements of defined benefit plans (Note 27)
Total other comprehensive income(27,030)
119976(25,934)(220,859)
978
7,977(211,904)

Comprehensive income(16,308)(133,248)

Total comprehensive income attributable to:
Owners of parent
Non-controlling interests¥(16,424)
116$(134,199)
950

See accompanying notes to consolidated financial statements.
2

CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS
Hokkoku Financial Holdings, Inc. and Consolidated Subsidiaries
Millions of yen
Shareholders’ equity
Retainedearnings

Common stock Capital surplus
Balance as of March 31, 2021
Changes by share transfer¥26,673¥13,053

Treasury stock¥176,013

Total¥(663) ¥215,077(16,673)

16,673———

Cash dividends——(2,521)—(2,521)

Profit attributable to owners of parent

—

—

9,387

—

9,387

Transfer from retained earnings to capital surplus

—

497

(497)

—

—

Repurchase of treasury stock

—

—

—

(3,041)(3,041)

Disposal of treasury stock

—

—

—

82

82

Cancellation of treasury stock

—

(497)

—

497

—

Reversal of land revaluation surplus

—

—

(23)

—

(23)

Net changes in items other than shareholders’equity

—

—

—

—

—

(2,461)

3,882

Total changes during the year
Balance as of March 31, 2022

(16,673)

16,6736,344¥10,000¥29,727¥182,357¥(3,124) ¥218,960

Millions of yen
Accumulated other comprehensive income
Valuation
Net deferreddifferences on gains (losses) on
available-forhedging
sale securities
instruments
Balance as of March 31, 2021

¥63,560

Land
revaluation
surplus¥(3) ¥2,272

Total
accumulated
othercomprehensive income¥(2,443) ¥63,385

Non-controllinginterests
Total net assets
¥

7,806

¥

286,269

Changes by share transfer

—

—

—

—

—

—

—

Cash dividends

—

—

—

—

—

—

(2,521)

Profit attributable to owners of parent

—

—

—

—

—

—

9,387

Transfer from retained earnings to capital surplus

—

—

—

—

—

—

—

Repurchase of treasury stock

—

—

—

—

—

—

(3,041)

Disposal of treasury stock

—

—

—

—

—

—

82

Cancellation of treasury stock

—

—

—

—

—

—

—

Reversal of land revaluation surplus

—

—

—

—

—

—

(23)

(26,908)

119

23

976

(25,788)(105)(25,894)976(25,788)(105)(22,011)¥(1,467) ¥37,597¥7,701¥264,258

Net changes in items other than shareholders’equityTotal changes during the year
Balance as of March 31, 2022

(26,908)119

23¥36,652¥115¥2,296

See accompanying notes to consolidated financial statements.
3

Remeasurements ofdefinedbenefit plansThousands of U.S. dollars (Note 2)
Shareholders’ equity
Retainedearnings

Treasury stockTotal$1,438,135$(5,420)$1,757,312

Common stock Capital surplus
Balance as of March 31, 2021
Changes by share transfers$217,942$106,655(136,236)

136,236———

Cash dividends——(20,604)—(20,604)

Profit attributable to owners of parent——

76,704—76,704

Transfer from retained earnings to capital surplus

—

4,067

(4,067)——

Repurchase of treasury stock

—

—

—

(24,853)(24,853)

Disposal of treasury stock

—

—

—

674

674

Cancellation of treasury stock—(4,067)

—

4,067

—

Reversal of land revaluation surplus

—

—

(195)

—

(195)

Net changes in items other than shareholders’equity

—

—

—

—

—

Total changes during the year
Balance as of March 31, 2022

(136,236)

136,236

51,836(20,111)31,725$81,706$242,891$1,489,971$(25,531)$1,789,037

Thousands of U.S. dollars (Note 2)
Accumulated other comprehensive income
Valuation
Net deferreddifferences on gains (losses) on
available-forhedging
sale securities
instruments
Balance as of March 31, 2021

Land
revaluation
surplusRemeasurements ofdefinedbenefit plans

Total
accumulated
othercomprehensive income

Non-controllinginterests
Total net assets$$519,330$(32)$18,566$(19,967)$517,897

Changes by share transfers

—

—

—

—

—

—

—

Cash dividends

—

—

—

—

—

—

(20,604)

Profit attributable to owners of parent

—

—

—

—

—

—

76,704

Transfer from retained earnings to capital surplus

—

—

—

—

—

—

—

Repurchase of treasury stock

—

—

—

—

—

—

(24,853)

Disposal of treasury stock

—

—

—

—

—

—

674

Cancellation of treasury stock

—

—

—

—

—

—

—

Reversal of land revaluation surplus

—

—

—

—

—

—

(195)

(219,858)

978

195

7,977

(210,707)(862)(211,570)

Net changes in items other than shareholders’equityTotal changes during the year
Balance as of March 31, 2022

(219,858)

978

195

7,977

(210,707)$299,472$945$18,762$(11,990)$307,190$

63,784$ 2,338,994(862)(179,844)

62,922$ 2,159,150

See accompanying notes to consolidated financial statements.
4

CONSOLIDATED STATEMENT OF CASH FLOWS
Hokkoku Financial Holdings, Inc. and Consolidated Subsidiaries

Year ended March 31,

Cash flows from operating activities:
Profit before income taxes
Adjustments to reconcile profit before income taxes to net cash provided byoperating activities:
Depreciation and amortization
Loss on impairment
Increase (decrease) in reserve for possible loan losses
Increase (decrease) in reserve for bonuses
Increase (decrease) in net defined benefit liability
Increase (decrease) in directors’ retirement benefits
Increase (decrease) in reserve for management board benefit trust
Increase (decrease) in reserve for reimbursement of deposits
Increase (decrease) in reserve for losses on refund of interest
Increase (decrease) in reserve for customer service points
Accrued interest and dividend income
Accrued interest expenses
Losses (gains) on securities, net
Losses (gains) on money trusts
Foreign exchange losses (gains), net
Losses (gains) on disposal of tangible fixed assets
Losses (gains) on revision of retirement benefit plan
Net decrease (increase) in loans and bills discounted
Net increase (decrease) in deposits
Net increase (decrease) in borrowed money (excluding subordinated borrowings)
Net decrease (increase) in due from banks (exclusive of Due from the Bank ofJapan)Net decrease (increase) in call loans and others
Net increase (decrease) in call money and others
Net increase (decrease) in guarantee deposit received under securities lendingtransactions
Net decrease (increase) in trading account assets
Net decrease (increase) in foreign exchange assets
Net increase (decrease) in foreign exchange liabilities
Net decrease (increase) in lease receivables and investment in leased assets
Net decrease (increase) in cash collateral paid for financial instruments
Net increase (decrease) in borrowed money from trust accountInterest and dividends received
Interest paid
Other, net
Subtotal
Income taxes paid, net of refund
Net cash provided by (used in) operating activities
Cash flows from investing activities:
Purchase of securities
Proceeds from sale of securities
Proceeds from redemption of securities
Interests and dividends received on investments
Purchase of tangible fixed assets
Purchase of intangible fixed assets
Proceeds from sale of tangible fixed assets
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Cash dividends paid
Cash dividends paid to non-controlling interests
Repurchases of treasury stock
Proceeds from sale of treasury stock
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year (Note 15)

See accompanying notes to consolidated financial statements.
5

2022

2022

Millions of yen

Thousands of U.S. dollars(Note 2)¥

15,946$130,293

4,331
601
7,700
(26)
(10,642)
(31)
35
(45)
(13)
(324)
(36,087)494(16,619)(15)(17,807)
2,048
(726)
29,603
219,488
19,63935,390
4,915
62,919(212)(86,955)
(253)
293
(370)
(112)
(2,652)(294,859)
4,042(135,792)(122)(145,494)
16,735(5,934)
241,877
1,793,350
160,463

14,85453,044(99,869)

121,366
433,406(815,993)

83,130
105
(359)
(0)
384
(1,487)
924,747(427)
10,692
302,374(8,257)294,117679,230859(2,939)(4)
3,141(12,149)76
202,199(3,493)87,3662,470,585(67,469)
2,403,116(800,593)
555,992
86,488
13,694(2,243)(2,971)
496(149,137)(6,541,334)
4,542,793
706,659
111,891(18,331)(24,278)
4,059(1,218,540)(2,519)(221)(3,041)82(5,700)22
139,302
1,465,419¥ 1,604,721(20,588)(1,812)(24,853)674(46,579)
186
1,138,183
11,973,355$ 13,111,538

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Hokkoku Financial Holdings, Inc. and Consolidated Subsidiaries
For the year ended March 31, 2022

1. Basis of Presentation
Hokkoku Financial Holdings, Inc. (the “Company”) is a holding company
established on October 1, 2021, by transforming the Hokkoku Bank, Ltd.
(the “Bank”) and its consolidated subsidiaries into a holding company
structure.
Upon the establishment of the Company, the Bank became a wholly
owned subsidiary of the Company, and at the same time, the Bank
provided all shares of the following nine subsidiaries of the Bank to theCompany by dividend in kind for the transformation to a holding
company: the Hokkoku General Leasing Co., Ltd., the Hokkoku Credit
Service Co., Ltd., the Hokkoku Credit Guarantee Co., Ltd., the Hokkoku
Management, Ltd., the Hokkoku Servicer, Ltd., Digital Value Co, Ltd., the
FD Advisory, Ltd., the CC Innovation, Ltd. and the QR Investment, Ltd.
The accompanying consolidated financial statements of the Company
and its consolidated subsidiaries (collectively the “Group”) are preparedon the basis of accounting principles generally accepted in Japan, which
are different in certain respects as to the application and disclosure
requirements of International Financial Reporting Standards, and arecompiled from the consolidated financial statements prepared by theCompany as required by the Financial Instruments and Exchange Act ofJapan. In addition, the notes to the consolidated financial statements
include information which is not required under accounting principles
generally accepted in Japan, but is presented herein as additional
information. As permitted by the Financial Instruments and Exchange Act,
amounts of less than one million yen have been rounded down. As aresult, the totals shown in the accompanying consolidated financial
statements (both in yen and U.S. dollars) do not necessarily agree withthe sums of the individual amounts.
2. U.S. Dollar Amounts
The Company maintains its records and prepares its financial statements
in yen. Amounts in U.S. dollars are presented solely for the convenienceof readers outside Japan. The rate of ¥122.39 = U.S. $1.00, the rate ofexchange in effect on March 31, 2022 has been used in conversion. The
conversion should not be construed as a meaning that yen could be
converted into U.S. dollars at the above or any other rate.
3. Summary of Significant Accounting Policies
a. Principles of consolidation
The accompanying consolidated financial statements include theaccounts of the Company and its 10 subsidiaries as of March 31,
2022. All significant inter-company receivables and payables andtransactions have been eliminated in consolidation.
The following subsidiaries are not consolidated, nor accounted for by
the equity method, as the assets, contribution of their income andretained earnings are considered immaterial and do not have amaterial impact on the consolidated financial statements if excluded
from the scope of consolidation, and their non-consolidation will notprevent reasonable judgments regarding the Group’s financial positionand operating results: Ishikawa Small Business Revitalization No. 2
Fund Investment Limited Liability Partnership, Ishikawa Small Business
Revitalization No. 3 Fund Investment Limited Liability Partnership, QR
Investment No. 1 Business Succession Fund Investment Limited
Partnership, Thai CC Innovation Co., Ltd. and CC Innovation Vietnam
Co., Ltd.
Similarly, there are two associates that are not accounted for by theequity method due to insignificancy.
b. Trading account securities
Trading account securities are stated at fair value at end of year, andthe related cost of sale is determined using the moving averagemethod.
c. Securities
Held-to-maturity securities are stated at amortized cost (straight-line
method) using the moving average method. Stocks of unconsolidated
subsidiaries which are not accounted for by the equity method arestated at cost using the moving average method. Available-for-salesecurities are stated at fair value based on market prices at thebalance sheet date (related cost of sale is determined using the moving
average method). However, equity securities without market prices arestated at cost using the moving average method.
The valuation differences on available-for-sale securities are included

directly in net assets.
For translation differences of available-for-sale securities (bonds)
denominated in foreign currencies, the translation differences related
to changes in fair value are recognized as valuation differences andother differences are recognized as foreign exchange gains or losses.
Securities managed as assets held in trust in money trust, whose
primary purpose is to invest in securities, are stated at fair value.
d. Derivative financial instruments
Derivatives are stated at fair value.
e. Tangible fixed assets
Tangible fixed assets are carried at cost less accumulated depreciation.
Depreciation of tangible fixed assets of the Bank being a consolidated
subsidiary of the Company, is computed by the declining-balancemethod. The useful lives of buildings and equipment are summarized
as follows.
		
Buildings
10 to 50 years
		
Others	  3 to 20 years
Depreciation of tangible fixed assets of other consolidated subsidiaries
other than the Bank is computed primarily by the declining-balancemethod over the estimated useful lives of the respective assets.
f. Intangible fixed assets
Amortization of intangible fixed assets is computed by the straight-line
method. Acquisition costs of internal use software are capitalized andamortized by the straight-line method primarily over a useful life,
determined by consolidated subsidiaries, of 5 to 10 years.
g. Reserve for possible loan losses
The reserve for possible loan losses of the Bank being a consolidated
subsidiar y of the Company, is provided as detailed below inaccordance with the internal rules for providing reserves for possible
loan losses:
For claims to debtors who are legally bankrupt (as a result ofbankruptcy special liquidation, etc.) or who are substantially bankrupt,
a reserve is provided based on the amount of the claims, net of theamount expected to be collected by the realization of collateral, or asa result of the execution of a guarantee.
For claims to debtors who are not currently bankrupt, but are likely to
become bankrupt (“debtors at a risk of bankruptcy”), a reserve isprovided according to the amount considered necessary for the claims,
net of the amount expected to be collected by the realization ofcollateral, or as a result of the execution of guarantee, based on an
overall debt servicing capacity assessment of the debtor. In addition,
for claims to debtors with large exposure exceeding certain amount or
debtors at a risk of bankruptcy, including restructured loans, which it ispossible to reasonably estimate cash flows from collection of principal
and receipt of interest, a reserve is provided according to thedifference between the amount of related cash flows discounted by theoriginal contract interest rate before restructuring the loans and theircarrying value.
For other claims, a reserve is provided based on the expected loan
loss amount over the next one year or three years. The Bank estimates
the rate of loan losses with reference to the average rate of loan losses
over a certain period of time based on the Bank’s past loan-loss
experience over one year or three years.
All claims are assessed by the Bank’s Business Section (at the branches
and the related head office divisions) based on the Bank’s internal
rules for the self-assessment of asset quality. The Corporate Audit
Depar tment, which is independent of the Business Section,subsequently conducts audits of such assessments.
At consolidated subsidiaries other than the Bank, reserves for generalclaims are provided at an amount estimated based on the actual
historical rate of loan losses and reserves for specific claims (frompotentially bankrupt customers, etc.) are provided at an amountdeemed to be uncollectible based on the respective assessments.
For collateralized or guaranteed claims to debtors who are legally or
substantially bankrupt, the amount exceeding the estimated value ofthe collateral or guarantees is deemed to be uncollectible and written
off against the total outstanding amount of the claims. The total
amount of write-off was ¥23,472 million ($191,785 thousand) for theyear ended March 31, 2022.

6

h. Bonuses to employees
The reserve for bonuses to employees is provided at the estimatedamount to be attributed to the current fiscal year.
i. Reserve for management board benefit trust
The reserve for management board benefit trust is recorded at an
estimated amount of obligation to be required for delivery of its sharesthrough the trust to directors and executive officers of the Bank being a
consolidated subsidiary of the Company, based on its internal rules.
j. Reserve for reimbursement of deposits
The reserve for reimbursement of deposits is recorded at an estimatedamount to be required to reimburse the customers’ claims on thederecognized inactive deposit accounts.
k. Reserve for loss on refund of interest
The reserve for loss on refund of interest is recorded by a certain
consolidated subsidiary to provide for the customers’ claims to refund
the interest exceeding the maximum limit of interest rate stipulated by
the Interest Rate Restriction Act based on the past experience ofrefund.
l. Retirement benefit plans
In calculating retirement benefit obligations, the benefit formula basis
is used as a method of attributing expected retirement benefits to theperiod up to the end of this fiscal year. Treatments of prior service costand actuarial gains or losses are as follows:
Prior service cost is amortized by the straight-line method over acertain period (10 years) which falls within the average remaining
years of service of the employees when incurred.
Actuarial gains or losses are amortized in the following years after
incurred by the straight-line method over a certain period (10 years)
that falls within the average remaining years of service of theemployees.
m. Foreign currency translations
Assets and liabilities denominated in foreign currencies and accountsof overseas branch are translated into Japanese yen equivalents
primarily using the exchange rate prevailing at the balance sheet date.
n. Revenue recognition(1)Revenue recognition for finance leases
Sale and cost of sale are recognized at the time of the receipt of lease
payments.
(2)Recognition of dividends on stocks included in interest and dividends
on securities
Dividends on stocks resulting from appropriation of other retained
earnings (limited to cash to be distributed as dividends), which areapproved by resolutions of meetings of shareholders, the Board of
Directors or other decision-making bodies of issuing companies, arerecognized in the fiscal year to which the effective date of therespective dividend belongs.
However, dividends are recognized in the fiscal year in which thepayments are received, when the payments are made within the
period normally required after the effective date.
(3)Recognition of revenue from contracts with customers
Revenue from contracts with customers is recognized at a point in time
when a promised good or service is transferred to a customer, at theamount assumed to be received in exchange for the good or service.
As to the third-party’s point program participated by certain
consolidated subsidiaries, the amount assumed to be used isrecognized as the amount to be collected on behalf of third-party, anddeducted from fees and commissions.
p. Hedge accounting
Hedging interest rate risk
The Group applied the deferral method to account for financial
instruments that hedge the interest rate risk on financial assets andliabilities, as provided in the “Treatment for Accounting and Auditingof Application of Accounting Standard for Financial Instruments in
Banking Industr y” (The Japanese Institute of Certified Public
Accountants (JICPA) Industry Committee Practical Guideline No. 24,
March 17, 2022). The hedge effectiveness is assessed by grouping
and specifying hedged items including deposits and loans andhedging instruments including interest rate swaps by a certain period.
Hedging foreign exchange risk
The Group applies the deferral method to account for derivative
instruments that hedge the foreign exchange risk on various foreigncurrency financial assets and liabilities, as provided in the “Treatment

7

for Accounting and Auditing with Regard to Accounting for Foreign
Currency Transactions in Banking Industry” (The Japanese Institute ofCertified Public Accountants (JICPA) Industry Committee Practical
Guideline No. 25, October 8, 2020). The hedge effectiveness of thesecurrency-swap transactions, FX swap transactions and similar
instruments to hedge the foreign exchange risks of foreign-currency
financial assets or liabilities is assessed by comparing the foreign
currency position of the hedged assets or liabilities with that of thehedging instruments.
q. Consumption taxes
Nondeductible consumption taxes levied on the purchase of premises
and equipment are charged to income when incurred.
r. Cash and cash equivalents
For the purpose of reporting cash flows, cash and cash equivalents
consist of cash and due from the Bank of Japan.
s. Accounting treatments and procedures adopted in cases where
relevant accounting standards are unclear
Gains or losses on cancellation of investment trusts are aggregated byindividual issue, then the gains are recognized as interest anddividends on securities under interest income and the losses arerecognized as other operating expenses.
4. Significant Accounting Estimates
Reserve for possible loan losses is the item identified and recognized in
the current fiscal year’s consolidated financial statements based on theaccounting estimates and may give significant impact on the consolidated
financial statements of the following fiscal year.
(a) Amount recognized in the consolidated financial statements as ofMarch 31, 2022
2022
2022
Millions of yen

Reserve for possible loan losses

Thousands of
U.S. dollars¥61,849 $505,345(b) Information that contributes to an understanding of the nature ofsignificant accounting estimates for the identified items(1) Estimation method
The Bank being a consolidated subsidiar y of the Company,
determines the amount of reserve for possible loan losses based on
the determination of judgments of debtor classification in accordancewith the self-assessment of asset quality guidelines, and as stated in“3. Summary of Significant Accounting Policies, g. Reserve forpossible loan losses.”(2) Key assumptions
Key assumptions include “outlook for future performance of debtors indetermining debtor classification” and “impact of the COVID-19
pandemic.”
Outlook for future performance of debtors in determining debtor
classification
In determining debtor classification, the Bank evaluates debtors on an
individual basis based on the repayment status, financial position,business performance, future outlook and others. In particular, whenassessing the appropriate classification of a debtor with repayment
status, financial position, or business performance being deteriorating,such factors as the reasonableness and feasibility of the business
improvement plan which embodies the assumption of the outlook for
future business performance, serve as significant factors in making therelevant judgment.
The reasonableness and feasibility of the business improvement plan may
be affected by changes in the business environment surrounding the
debtor, the outcome of the debtor’s business strategy and the Bank’s
supporting policy to the debtor.
Impact of the COVID-19 pandemic
As of March 31, 2022, the Group assumes that the COVID-19 pandemic
would be settled down during the year ending March 31, 2023 andeconomic activities would fully recover during the year ending March 31,
2024, which may have a certain impact on the credit risk of loans heldby the Bank.
In the local economy, some industries are beginning to show a worsening
trend while there are signs of recovery from the previous year’s decline,
particularly in the manufacturing sector. Tourists and guests at major hot
spring resorts and restaurants in Ishikawa prefecture have been

recovering since the lifting of the pre-emergency measures. Although theeconomic activity is resuming subject to infection control measures, theimpact of the COVID-19 pandemic on the economy is still uncertain, and
the Group assumes economic activities would fully recover during theyear ending March 31, 2024.
Based on the aforementioned assumptions, the Group determines the
debtor classification using the most current information available, andmakes estimates of the amount of reserve for possible loan losses. The
Group has updated these assumptions from this fiscal year end,
considering the most current status of the COVID-19 pandemic.

The application of this implementation guidance has no impact on the
consolidated financial statements.
7. Changes in Presentation
With the “Cabinet Office Order to Partially Amend the Regulation for
Enforcement of the Banking Act” (Cabinet Office Order No. 3, January
24, 2020) coming into effect on March 31, 2022, the Group haschanged the asset categories to be disclosed as “risk monitored loans”
under the Banking Act to those to be disclosed as “claims under the Act
on Emergency Measures for the Revitalization of the Financial Functions(the “Financial Revitalization Act”).”(3) Impact on the consolidated financial statements in the following fiscal
year
Since the aforementioned “(ii) Key assumptions” involves uncertainty,
it may give a significant impact on the amount of reserve for possible
loan losses in the consolidated financial statements of the following
year when the assumption for improvements in outlook of future
performance used in determining debtor classification may bechanged and/or the status of the COVID-19 pandemic and theimpact on the economy may be changed from the aforementioned
assumption in the future.

8. Additional Information(Management board benefit trust)
The Bank, a consolidated subsidiary of the Company, has adopted ashare-based payment plan, “management board benefit trust,”(hereinafter the “Plan”) to directors and executive officers (hereinafter“Officers”) of the Bank.

5. Changes in Accounting Policies(Application of Accounting Standard for Revenue Recognition)
Applying the “Accounting Standard for Revenue Recognition” (ASBJ
Statement No. 29, March 31, 2020, hereinafter the “AccountingStandards for Revenue Recognition”) effective from the beginning of theyear ended March 31, 2022, the Group recognizes revenue at theamount assumed to be received in exchange for a promised good orservice at the point in time when the control of the said good or service istransferred to a customer.
In accordance with the transitional treatment prescribed in the proviso toParagraph 84 of the Accounting Standard for Revenue Recognition, theGroup adjusted the beginning balance of retained earnings for the
cumulative effect of retroactive application of this new accounting policy
prior to the beginning of the year ended March 31, 2022, and then has
applied this new accounting policy.
However, applying a method prescribed in Paragraph 86 of the
Accounting Standard for Revenue Recognition, the Group does not
retroactively apply this new accounting policy to the contracts from whichalmost all the revenue had been recognized before the beginning of theyear ended March 31, 2022 in accordance with previous accounting
treatment. There is no significant impact on the consolidated financial
statements from the changes.
(Application of Accounting Standard for Fair Value Measurement)
Effective from the beginning of the year ended March 31, 2022, theGroup has applied the “Accounting Standard for Fair Value
Measurement” (ASBJ Statement No. 30, July 4, 2019, hereinafter, the“Accounting Standard for FVM”). In accordance with the transitional
treatment prescribed in Paragraph 19 of the Accounting Standard for
FVM and Paragraph 44-2 of the “Accounting Standard for Financial
Instruments” (ASBJ Statement No. 10, July 4, 2019), the Group has
applied this new accounting policy prospectively. There is no impact on
the consolidated financial statements from the changes.
6. Accounting Standards and Guidance Issued but Not Yet
Effective“Implementation Guidance on Accounting Standard for Fair Value
Measurement” (ASBJ Guidance No. 31, June 17, 2021)(a) Outline
When the “Implementation Guidance on Accounting Standard for
Fair Value Measurement” (ASBJ Guidance No. 31) was originallyissued on July 4, 2019, it was considered necessary to spend certain
period of time to complete discussions among parties concerned withregard to the “fair value measurement of investment trusts.” It wasalso considered necessary to discuss how fair value of the “investmentsin partnerships which are presented in a balance sheet at the net
amount equivalent to the holding equity interest” should be disclosed.
Those discussions had been carried out approximately over one year
after the issuance of the “Accounting Standard for Fair Value
Measurement,” and finally the relevant amendment was issued onJune 17, 2021.
(b) Scheduled date of application
The Group is scheduled to apply this implementation guidance fromthe beginning of the year ending March 31, 2023.
(c) Impact of the application of this implementation guidance(a) Outline
The Plan is a share-based payment plan under which the Bank
contributes capital to establish a trust (hereinafter the “Trust”) and theTrust acquires the Company’s shares. The Company’s shares areprovided to each Officer corresponding to the number of points
granted to each Officer through the Trust. In principle, Officers will
receive delivery of the Company’s shares at the time of their retirement
as Officers.
(b) The Company’s shares remaining in the Trust
The Company’s shares remaining in the Trust are recognized astreasury stock under shareholders’ equity. The carrying value and thenumber of the shares are ¥561 million ($4,584 thousand) and 117
thousand shares for the year ended March 31, 2022.
9. Claims to be disclosed under the Financial Revitalization
Act and the Banking Act
Claims to be disclosed under the Financial Revitalization Act and the
Banking Act are included in the following accounts in the consolidatedbalance sheet:• corporate bonds (limited to those whose principal and interest are
fully or partially secured and issued under private placements aspermitted in Article 2, Paragraph 3 of the Financial Instruments andExchange Act) under “Securities,”• “Loans and bills discounted,”• “Foreign exchanges,”• Accrued interest and suspense payments under “Other assets,”• “Customers’ liabilities for acceptances and guarantees” and• securities when such securities are lending (limited to those under loan
for use contracts or lease contracts).
The following table summarizes claims to be disclosed under the Financial
Revitalization Act and the Baking Act:

Claims against bankrupt or quasibankrupt debtors
Doubtful claims
Claims past due for three months or
more
Restructured claims
Total

2022

2022

Millions of yen

Thousands of U. S.
dollars¥¥

17,094 $

139,671

49,797

406,878

857

7,007

9,079
76,829 $

74,188627,746

Claims against bankrupt or quasi-bankrupt debtors present loans toborrowers in bankruptcy procedures, including commencement ofbankruptcy proceedings, reorganization proceedings and rehabilitation
proceedings, and other similar claims.
Doubtful claims present loans, other than claims against bankrupt orquasi-bankrupt debtors, for which the borrowers have not yet enteredinto bankruptcy, but their financial conditions and business performance
have deteriorated, and therefore, it is highly probable that the principal
and interest cannot be collected in accordance with the contracts.
Claims past due for three months or more present loans whose principal
or interest payments are three months or more past due, but are notclassified as claims against bankrupt or quasi-bankrupt debtors anddoubtful claims.
Restructured claims present loans on which certain concessions favorable
to debtor, including reduction or waivers of interest, deferred payment ofprincipal or interest and debt forgiveness, are granted.
The amounts of claims are before deducting reserve for possible loan
losses.

8

Bills discounted are accounted for as financial transactions in accordancewith JICPA Industry Audit Committee Report No. 24. The Bank being a
consolidated subsidiary of the Company, has the right to sell or re-pledge
the banker’s acceptance bills, commercial bills discounted, documentarybills and foreign exchange bought without restrictions. The face value ofbanker’s acceptance bills, commercial bills, documentary bills andforeign exchange bought at a discount was ¥9,151 million ($74,773
thousand) as of March 31, 2022.
Overdraft agreements and loan commitments are agreements underwhich the Group are obliged to extend loans up to a prearranged limit
unless the customer is in breach of contract. The loan commitments not
yet drawn down as of March 31, 2022 totaled ¥394,436 million($3,222,784 thousand); ¥381,637 million ($3,118,208 thousand) of
which, as of March 31, 2022, was related to agreements whose
contractual terms were for one year or less or which were unconditionallycancelable at any time.
As the majority of these agreements expire without the right to extend theloans being exercised, the undrawn commitment balance does notnecessarily affect the future cash flows of the Company or of its
consolidated subsidiaries. These agreements usually include clauses
which stipulate that the Company and its consolidated subsidiaries havethe right either to refuse the execution of the loans or to reduce thecontractual commitments in cases where changes in the borrower’s
financial position are identified, protection them through credit
enhancement is required or other unforeseen circumstances arise.
The Company and its consolidated subsidiaries take various measures toprotect their credit. Such measures include obtaining real estate or
securities as collateral at the time of entering into the agreements,
monitoring a customer’s business on a regular basis in accordance withestablished internal procedures, and modifying the loan commitment
agreements when necessary.
10. Financial Instruments and Related Disclosures
Status of Financial Instruments(a) Policy on financial instruments
The Group provides financial services such as banking business andleasing business. Major banking business includes lending services,
bills discounting and fund management through dealing andunderwriting Japanese government bonds, municipal bonds andavailable-for-sale securities. On the other hand, funds are raised
mainly by taking deposits and negotiable certificates of deposit andalso by issuance of bonds, call money and others as needed.
The Group conducts asset and liability management (ALM) andmanages the risks identifying various types of risk exposuresassociated with the banking business, since the Group holds financial
assets and liabilities exposed to the market risk of fluctuation ofinterest rates. As part of risk management, the Group also utilizes
derivative transactions.
(b) Contents and risk of financial instruments
Financial assets held by the Group mainly consist of loans tocorporate and individual customers which are exposed to credit risk
arising from nonperformance of the customers. In addition, the loanbalances are concentrated to Ishikawa prefecture where the head
office of the Bank, a consolidated subsidiary of the Company, islocated and accordingly, the changes in the economic circumstancesof the region may have a great impact on the credit risk. Securities
mainly consist of Japanese government bonds, municipal bonds,
corporate bonds and equity securities that are classified as availablefor-sale securities. These securities are exposed to credit risk of issuers
and market risks of fluctuation in interest rates, market prices andforeign exchange rates for bonds denominated in foreign currencies.
On the other hand, financial liabilities consist of mainly deposits andnegotiable certificates of deposit, call money and others. With respect
to call money, the Company and the Bank may be forced to raise fundunder unfavorable conditions and accordingly, significantly increase
funding costs in case that fund raising capacity of the Company andthe Bank significantly declined under certain circumstances such as
significant deterioration of financial positions of the Company and theBank, serious systemic risk of the financial system and downgrades of
the credit rating of the Company and the Bank by external rating
agencies.
Derivative transactions consist of hedging activities performed as partof ALM against market risks (interest rate risk and foreign exchangerisk) associated with assets and liabilities held by the Group andtransactions to respond to customers’ diversified needs for hedging
against the risks of customers. The Group applies hedge accounting
for interest rate swaps and currency swaps employed by the Group9for hedging purposes and periodically verifies the effectiveness ofhedging activities to assess if the relationships between hedging
instruments and hedged items including assets and liabilities areappropriate, and also if the market risks of interest rates and foreignexchange rates are offset by hedging instruments.
(c) Risk management system for financial instruments
Credit risk management:
The Group has established and operates a credit control system
including credit review by individual loan transaction, internal credit
rating, self-assessment of asset quality, large exposure control,
measurement of risk exposure and management of problem loans inaccordance with credit risk management policies, credit policies,
lending operation rules and credit risk control rules. These credit
controls are performed by the credit review sections of theconsolidated subsidiaries as well as each operating office and are
periodically deliberated by and reported to the decision-making
bodies including Board of Directors, where appropriate. In addition,
the Audit Department audits the status of credit risk controls.
Credit risk associated with the issuers of securities and counterparty
risk associated with treasury transactions and derivative transactions
are controlled by periodically identifying credit information and themark-to-market values by the Market Finance Division of the Bank
being a consolidated subsidiary of the Company.
Market risk management:(1)Interest rate risk management
The Group funds loans and securities mainly with deposits taken,
but holds long-term and short-term interest rate gaps arising fromthe timing difference in the maturities repricing of deposits andloans. Accordingly, the Management Administration Division of theGroup monitors the risk exposures by establishing risk limits basedon the integrated risk control policy and integrated risk control ruleand reports to the Group Strategic Committee and the Board of
Directors. In addition, the General Planning Department andManagement Administration Division monitor the interest rate risk
based on the interest rate sensitivity analysis, gap analysis, ladderanalysis as well as Interest Rate Risk in the Banking Book (IRRBB)
approach and report to the Group Strategic Committee on aregular basis.
The Group also enters into interest rate swap contracts to hedge
the interest rate fluctuation risk.
(2) Foreign exchange risk management
The Group holds, in part, foreign currency denominated assets
and liabilities. These foreign currency denominated assets andliabilities are appropriately hedged using currency swaps andother methods, whereby their exposures to the foreign exchange
risk are controlled.
(3) Price fluctuation risk management
The Group controls the price fluctuation risk associated with equity
securities and investment trusts in accordance with the integrated
risk management policies and procedures to control the exposures
within the Group’s risk tolerance while securing appropriate
earnings. Among these, the Group established limits fortransactions which require risk controls.
Moreover, the middle office of the Market Finance Division of the
Bank being a consolidated subsidiar y of the Company, incooperation with the Management Administration Division
responsible for risk management, monitors the risk exposures andverifies compliance with the limit. In addition, the Management
Administration Division identifies, measures and analyzes thoserisks and conducts stress tests. Such information is reported to theGroup Strategic Committee and the Board of Directors on aregular basis and where appropriate.
(4) Derivative transactions
With respect to derivative transactions, The internal rules havebeen established to define the authority and hedging policies, andthe credit lines by counterparty have been determined. Front
offices that enter into the contracts, back offices that conduct
reconciliation procedures and control the credit lines and thedivisions that assess the effectiveness of hedges are separated sothat the internal control functions effectively.
(5) Quantitative information related to market risk
The financial instruments exposed to interest rate risk and pricefluctuation risk such as stock price fluctuation risk include, among
other things, “Loans and bills discounted,” “Securities,” “Deposits,”and “Derivatives” recorded in the banking book. The Group uses
the VaR model to measure market risk exposure of interest rate,
stock and investment trust related instruments. Adopting thevariance-covariance method (holding period: half a year,confidence level: 99.9%, observation period: 720 business days)in computing the VaR, the Group examines the correlation between
interest rate risk and price fluctuation risk. Total market risk
exposure of the Group was ¥48,702 million ($397,930 thousand)as of March 31, 2022. The deposit internal models are applied tomeasure interest rate risk of liquid deposits held by the Bank being
a consolidated subsidiary.
The back-testing is implemented to compare the model-based VaRwith actual profit and loss for the securities held by the Group and
it is confirmed that the measurement model in use captures themarket risk with sufficient precision. However, the risk undercertain abnormal market fluctuations may not be captured, since
the VaR is measured based on the probability of occurrence in anormal distribution of historical market fluctuations. In addition,
VaR is a statistical value computed based on assumptions and it is
not intended to estimate maximum amount of losses.
(d) Supplementary explanation on the fair value of financial instruments
Certain assumptions are adopted to determine the fair value offinancial instruments. The said fair value may differ when different
assumptions are adopted.
Fair value of financial instruments
The following table summarizes the carrying value, fair value anddifference of financial instruments as of March 31, 2022.
Note that unlisted equity securities without market prices andinvestments in partnerships are not included in the table (see Note 1
below).
For cash and due from banks, call loans and bills bought, foreignexchanges (assets/ liabilities) call money and bills sold and guarantee
deposit received under securities lending transactions, the disclosure
is omitted since their fair value approximates their carrying value due
to short maturity. The disclosure is also omitted for insignificant itemsin the consolidate balance sheet.
March 31, 2022
Millions of yen

Carrying value
Securities:
Available-for-sale securities
Loans
Reserve for possible loan
losses (*1)

Fair value

Difference¥ 1,351,754 ¥ 1,351,754 ¥
2,585,262—(58,399)

Assets, total
Deposits
Negotiable certificates of deposit
Borrowed money
Liabilities, total
Derivative transactions (*2)
To which hedge accounting
is not applied
To which hedge accounting
is applied
Derivative transactions, total ¥

2,526,862
3,878,617
4,257,200
1,000
155,985
4,414,186

2,540,105
3,891,860
4,257,212
1,000
155,986
4,414,199

13,243
13,24311—
0
12[3,312][3,312]

—

159

159

—

[3,152] ¥[3,152] ¥—March 31, 2022
Thousands of U.S. dollars

Carrying value
Securities:
Available-for-sale securities
Loans
Reserve for possible loan
losses (*1)

Fair value

Difference$11,044,648 $11,044,648 $
21,123,148—(477,158)
20,645,989
31,690,637
34,783,892
8,170
1,274,499
36,066,562

20,754,195
31,798,843
34,783,990
8,170
1,274,504
36,066,664

Assets, total
Deposits
Negotiable certificates of deposit
Borrowed money
Liabilities, total
Derivative transactions (*2)
To which hedge accounting[27,066][27,066]
is not applied
To which hedge accounting
1,307
1,307
is applied
Derivative transactions, total $[25,759] $[25,759] $

108,205
108,20597—4102(*1) A general reserve for possible loan losses and a specific reserve for possible
loan losses on loans are deducted.
(*2) Derivative transactions recorded under other assets and other liabilities arepresented on a net basis. Net liabilities are shown in square parentheses.

(Note 1) The following table summarizes equity securities without market
prices and investments in partnerships. Note that these
instruments are not included in available-for-sale securities inthe table above.

Unlisted equity securities (*1) (*2)
Investments in partnerships (*3)
Total

2022

2022

Millions of yen

Thousands of U. S.
dollars

Carrying value
3,476 $
28,401
849
6,938¥4,325 $
35,340¥(*1) The fair value of unlisted equity securities is not disclosed pursuant toParagraph 5 of the “Implementation Guidance on Disclosures about Fair
Value of Financial Instruments (ASBJ Guidance No. 19, March 31, 2020).
(*2) No unlisted equity securities were impaired for the year ended March 31,2022.
(*3) The fair value of investments in partnerships is not disclosed pursuant toParagraph 27 of the “Implementation Guidance on Accounting Standard
for Fair Value Measurement (ASBJ Guidance No. 31, July 4, 2019).

(Note 2) M aturity of financial assets and securities with contractual
maturities as of March 31, 2022
March 31, 2022
Millions of yen

Due in one
year or lessDue after one Due after three Due after five Due after sevenyear through years through years through years through Due after ten
three years
five years
seven years
ten years
years

Securities:
Available-for-sale¥48,633 ¥165,540 ¥218,573 ¥96,509 ¥339,979 ¥103,831
securities with
contractual maturities:
Japanese government————
141,000
94,800bonds
Municipal bonds
32,27961,52063,60980,654125,34330
Corporate bonds
7,182
66,075111,195
1,616
774
4,900
Other
9,172
37,944
43,768
14,23872,862
4,101
Loans (*)
624,232
430,468
296,717233,524
272,741
696,049
Total¥672,865 ¥596,009 ¥515,291 ¥330,033 ¥612,720 ¥799,880
March 31, 2022
Thousands of U.S. dollars

Due in one
year or lessDue after one Due after three Due after five Due after sevenyear through years through years through years through Due after ten
three years
five years
seven years
ten years
years

Securities:
Available-for-sale$397,367 $1,352,567 $1,785,876 $788,539 $2,777,837 $848,361
securities with
contractual maturities:
Japanese government———— 1,152,054
774,573bonds
Municipal bonds
263,739502,660
519,723
658,999 1,024,128245
Corporate bonds
58,682539,874
908,535
13,203
6,324
40,035
Other
74,945
310,033
357,617
116,336595,330
33,507Loans (*)
5,100,351 3,517,186 2,424,361 1,908,033 2,228,459 5,687,147
Total$5,497,719 $4,869,753 $4,210,238 $2,696,573 $5,006,297 $6,535,509(*) Loans to “legally bankrupt,” “substantially bankrupt” and “likely to becomebankrupt” borrowers which are not expected to be repaid amounting to¥18,282 million ($149,380 thousand) are not included.
Loans with no contractual maturities amounting to ¥13,245 million ($108,226
thousand) are not included.

—
—
—

10

(Note 3) Maturity of bonds and interest-bearing liabilities as of March
31, 2022

March 31, 2022
Thousands of U. S. dollars

March 31, 2022

Level 1Millions of yen

Due after one Due after three Due after five Due after sevenDue in one year through years through years through years through Due after ten
year or less three years
five years
seven years
ten years
years¥3,362,592 ¥ 220,479 ¥ 26,301 ¥
— ¥
— ¥
—

Deposits (*)
Negotiable certificates of
1,000
—
—
deposits
Borrowed money
155,831
132
22
Total
¥3,519,424 ¥220,611 ¥26,323 ¥

—

—

—

—
— ¥

—
— ¥

—
—

March 31, 2022
Thousands of U. S. dollars

Due after one Due after three Due after five Due after sevenDue in one year through years through years through years through Due after ten
year or less three years
five years
seven years
ten years
years$27,474,408 $1,801,451 $214,897 $
— $
— $
—

Deposits (*)
Negotiable certificates
8,170
—
—
of deposits
Borrowed money
1,273,239
1,079
180
Total
$28,755,817 $1,802,530 $215,077 $

—

—

—

—
— $

—
— $

—
—

(*) On-demand deposits are included under “Due in one year or less.”

Fair value hierarchy of financial instruments
The fair value of financial instruments is classified into three categories
depending on whether inputs for a fair value measurement are
observable or significant.
Level 1 fair value:‌Fair value measured by using quoted prices in
active markets as observable inputs for assets or
liabilities subject to a fair value measurement
Level 2 fair value:‌Fair value measured by using observable inputs
other than those used for Level 1 fair value
Level 3 fair value:Fair value measured by using unobservable inputs
The fair value is classified into a category to which the lowest priority is
assigned for a fair value measurement.
(1)‌Financial instruments measured at fair value in the consolidatedbalance sheet
March 31, 2022
Millions of yen

Level 1
Securities:
Available-for-sale securities (*1):
Japanese government bonds
Municipal bonds
Government-guaranteed bonds
Public corporation bonds
Bank debentures
Industrial bonds
Equity securities
Foreign equity securities
Foreign bonds
Included in Assets, total
Derivative transactions (*2):
Currency relatedInterest rate related
Included in Derivativetransactions, total

11

Fair value
Level 2 Level 3¥ 259,262 ¥— ¥— 362,602
—
3,013
—
8,284
— 130,315—
46,517
139,466—
2,360—
39,504137,016
440,593687,748——¥

[3,312]159— ¥[3,152] ¥Total— ¥ 259,262— 362,602
—
3,013
—
8,284
— 130,315
3,415
49,932— 139,466—
2,360— 176,520
3,415 1,131,758——[3,312]159— ¥[3,152]

Securities:
Available-for-sale securities (*1):
Japanese government bonds
Municipal bonds
Government-guaranteed bonds
Public corporation bonds
Bank debenture bonds
Industrial bonds
Equity securities
Foreign equity securities
Foreign bonds
Included in Assets, total
Derivative transactions (*2):
Currency relatedInterest rate related
Included in Derivativetransactions, total

Fair value
Level 2 Level 3

Total$2,118,329 $
— $
— $2,118,329— 2,962,678— 2,962,678—
24,625—
24,625—67,686—
67,686— 1,064,754— 1,064,754— 380,072
27,909407,982
1,139,523—— 1,139,523
19,283——
19,283322,777 1,119,504— 1,442,281
3,599,913 5,619,322
27,909 9,247,145——$

[27,066]1,307— $[25,759] $

——[27,066]1,307— $[25,759](*1) The table does not include investment trusts for which the transitional
treatment prescribed in Article 5, Paragraph 6 of the supplementaryprovision of the “Cabinet Office Order to Partially Amend the Regulation on
Terminology, Forms, and Preparation Methods of Financial Statements”(Cabinet Office Order No. 9, March 6, 2020) are applied. Carrying valueof such investment trusts in the consolidated balance sheet is ¥219,996
million ($1,797,502 thousand) as of March 31, 2022.
(*2) Derivative transactions accounted for as other assets or liabilities are shown
collectively. Assets and liabilities generated from derivative transactions arestated in net, and net liabilities are shown in square parentheses.

(2)‌Financial instruments other than those measured at fair value in the
consolidated balance sheet
March 31, 2022
Millions of yen

Loans
Included in Assets, total
Deposits
Negotiable certificates of deposits
Borrowed money
Included in Liabilities, total

Fair value
Level 1 Level 2 Level 3
Total
¥
— ¥
— ¥ 2,540,105 ¥ 2,540,105—— 2,540,105
2,540,105— 4,257,212— 4,257,212
—
1,000
—
1,000
—
155,986—
155,986¥— ¥ 4,414,199 ¥— ¥ 4,414,199
March 31, 2022
Thousands of U. S. dollars

Loans
Included in Assets, total
Deposits
Negotiable certificates of deposits
Borrowed money
Included in Liabilities, total

Fair value
Level 1 Level 2 Level 3
Total
$
— $
— $20,754,195 $20,754,195—— 20,754,195 20,754,195— 34,783,990— 34,783,990
—
8,170
—
8,170
— 1,274,504— 1,274,504$— $36,066,664 $
— $36,066,664(Note 1) Explanation of valuation techniques and inputs used for fairvalue measurement
AssetsSecurities:
Securities for which unadjusted quoted prices in active markets areavailable are classified into Level 1 fair value. Such securities mainly
include listed equity securities and government bonds issued by majorcountries.
Even if available quoted prices are used, securities are classified into
Level 2 fair value when the relevant markets are not active. Suchsecurities mainly include municipal bonds, corporate bonds as well as
government bonds issued by countries other than major countries.
When quoted prices are not available, the fair value is measured byusing valuation techniques such as the present value technique
discounting future cash flows. Observable inputs are used in the valuation

to the maximum extent possible. Inputs include risk-free interest rates,
credit spreads, probability of default. When unobservable inputs are notused for the measurement or those impact is insignificant, the fair value isclassified into Level 2. When significant unobservable inputs are used,
the fair value is classified into Level 3.
Loans:
The fair value of loans is measured by discounting the aggregate value ofprincipal and interest at the market interest rate reflecting credit risks, etc.
for each category based on type of loans, internal ratings and maturities.
Loans with floating interest rates reflect the market interest rates in the
short-term; thus, the carrying value is used as the fair value of those loans
as the fair value approximates the carrying value, where the credit
situation of the borrowers does not vary significantly after executing theloans. For loans with a shorter remaining period (i.e., less than oneyear), the carrying value is used as the fair value as the fair value
approximates the carrying value.
With respect to claims to “legally bankrupt” borrowers, “substantiallybankrupt” borrowers and “likely to become bankrupt” borrowers, the fairvalue is measured at the discounted present value of estimated future
cash flows or the discounted present value of estimated collectible
amounts through collateral and guarantee. The said fair value isclassified into Level 3 since the impact from unobservable inputs issignificant.
Liabilities
Deposits and negotiable certificates of deposits:
With respect to on-demand deposits, the fair value is measured at theamount that is required to paid at the balance sheet date. The fair valueof time deposits is measured at the discounted present value of future
cash flows based on each category of certain period of time. Market
rates are used to discount future cash flows. For deposits with a shorter
remaining period (i.e., less than one year), the carrying value ispresented as the fair value as the fair value approximates the carrying
value. The said fair value is classified into Level 2.
Borrowed money:
The fair value of borrowed money is measured at the present value
calculated by discounting the aggregate amount of principal and interestat the interest rate reflecting the remaining period of each borrowing andcredit risk. Of which, the borrowed money with floating interest rates
reflects the market interest rates in the short-term, and the credit status of
the Group has not significantly been changed after the execution ofborrowings; thus, the carrying value is presented as the fair value since it
is deemed that the fair value approximates the carrying value. The said
fair value is classified into Level 2.
Derivative transactions
Derivative transactions comprise interest rate related transactions (e.g.,interest rate swaps) and currency related transactions (e.g., currency
options, currency swaps) and the fair value of derivatives is measured atthe value determined by the discounted present value or option pricing
models.
The fair value measured by using unadjusted quoted prices in active
markets is classified into Level 1, which includes those of bond futuresand interest rate futures. When unobservable inputs are not used for themeasurement or those impact is insignificant, the fair value is classified
into Level 2. When significant unobservable inputs are used, the fairvalue is classified into Level 3.
(Note 2) ‌Information on Level 3 fair value, of financial instruments
measured at fair value in the consolidated balance sheet

March 31, 2022
Millions of yen

Profit or othercomprehensive Purchase,income (“OCI”) sale,recognized for issuance
Balance at the current
andbeginning of fiscal year settlement,
Profit OCI (*1)
year
net

Reclassification to
Level 3

Securities:
Available-forsale securities
Corporate bonds ¥3,106 ¥— ¥ 3 ¥305 ¥Assets, total ¥3,106 ¥— ¥ 3 ¥305 ¥

ReclassificationfromLevel 3— ¥— ¥Balance at
end ofyear

Valuation
gains(losses)(*2)— ¥ 3,415— ¥3,415——

March 31, 2022
Thousands of U. S. dollars

Profit or othercomprehensive Purchase,income (“OCI”) sale,recognized for issuance
Balance at the current
andbeginning of fiscal year settlement,
Profit OCI (*1)
year
net

Reclassification to
Level 3

Securities:
Available-forsale securities
Corporate bonds $25,386 $— $31 $2,492 $
Assets, total $25,386 $— $31 $2,492 $

ReclassificationfromLevel 3— $— $Balance at
end ofyear

Valuation
gains(losses)(*2)— $27,909 $
— $27,909 $

——(*1) The amount is included in “Valuation difference on available-for-salesecurities” of “Other comprehensive income” of the consolidated statementof comprehensive income.
(*2) It presents valuation gains or losses of financial assets or liabilities held at
the balance sheet date, out of profit recognized for the current fiscal year.

(3)‌Fair value valuation procedures
The Market Trading Division performs a fair value measurement inaccordance with the policies and procedures prepared by the Risk
Management Division. The measured fair value is verified by the
independent valuation division for the reasonableness of inputs andvaluation techniques used for the measurement and appropriatenessof the classified level of the fair value. The verification result isreported to the Risk Management Division periodically, and thus, theappropriateness of the policies and procedures of the fair value
measurement is ensured.
The fair value is measured using a valuation model that mostappropriately reflects the nature, characteristics and risk of each
asset. In case where quoted prices obtained from third parties areused, the reasonableness of the prices is verified by confirming thevaluation techniques and inputs used and by applying appropriate
methods including comparison with the market prices of similar
financial instruments.
(4) The impact on the fair value in case where any changes are made tosignificant unobservable inputs
The significant unobservable input used in measuring the fair value ofcorporate bonds is a probability of default. Significant increase(decrease) in this input alone results in significant decrease (increase)in the fair value.

(1)Quantitative information on significant unobservable inputs
Fiscal year ended March 31, 2022
Significant
WeightedValuation unobservable Range of average oftechniques
inputsinputsinputsSecurities:
Available-for-sale securities
Probability ofCorporate bonds
Present value
0.14 – 2.11% 0.80%
default

11. Securities(a) Trading account securities
Valuation differences of trading account securities included inearnings for the year ended March 31, 2022 were ¥(0) million ($(6)
thousand).

(2)Reconciliation from beginning balance to ending balance andvaluation gains or losses recognized for the year ended March 31,
2022(c) Available-for-sale securities which have a readily determinable fairvalue
The acquisition cost and carrying value of available-for-sale securities(b) Held-to-maturity securities which have a readily determinable fair
value
There were no held-to-maturity securities to be reported as of March
31, 2022.

12

which have a readily determinable fair value and the related
unrealized gains or losses as of March 31, 2022 are summarized asfollows:

12. Money Held in Trusts
Money held in trusts for investment purposes

March 31, 2022
Millions of yen

Stock
Debt securities
Others
Total

Carrying Acquisition
value
cost
Difference
Gains
Losses¥139,466 ¥67,255 ¥72,210 ¥73,372 ¥1,161
813,410
818,936(5,525)422
5,948
398,877
411,881(13,004)
5,362
18,366¥1,351,754 ¥1,298,073 ¥53,680 ¥79,156 ¥ 25,476
March 31, 2022
Thousands of U.S. dollars

Stock
Debt securities
Others
Total

Carrying Acquisition
value
cost
Difference
Gains
Losses$1,139,523 $549,518 $590,005 $599,496 $9,490
6,646,056
6,691,206(45,149)
3,450
48,6003,259,067
3,365,318(106,251)
43,812150,063$11,044,648 $10,606,043 $438,604 $646,759 $208,154

Japanese government bonds, equities and others loaned under the
securities lending agreement in the amount of ¥72,998 million ($596,440
thousand) is included in the above as of March 31, 2022.
Securities (excluding equity securities without market prices andinvestments in partnerships) other than trade account securities, whose
fair value is available, are written down to the fair value if the fair value
has significantly declined compared with the acquisition cost and suchdecline is not considered to be recoverable. The difference between theacquisition cost and the fair value is recognized as a loss on impairment.
The related loss on impairment amounted to ¥3,803 million ($31,072
thousand) (of which, ¥3,803 million ($31,072 thousand) for stock) for
the year ended March 31, 2022. The criteria for determining if suchdecline is significant are as follows:
Securities whose fair value is 50% or less than the acquisition cost arenecessarily written down and securities whose fair value is between 50%
and 70% of the acquisition cost are written down when the market priceis considered to be non-recoverable within one year, taking into
consideration the trend of the market price and operating performancesof the issuing entities. The components of net unrealized gains onavailable-for-sale securities recorded under net assets as of March 31,
2022 are as follows:

Unrealized gains on available-forsale securities
Deferred tax liabilities

2022

2022

Millions of yen

Thousands of U. S.
dollars¥53,734 $

439,042(15,736)
37,998 $
(1,345)(128,572)
310,469(10,997)¥

Attributable to non-controlling interest
Net unrealized gains on available¥36,652 $
for-sale securities

299,472

Note:Unrealized gains on investments in partnerships without market prices, inthe amount of ¥53 million ($433 thousand), are included in unrealized
gains on available-for-sale securities.
Available-for-sale securities sold during the year ended March 31, 2022
are summarized as follows:

Proceeds from sale
Gain on sale
Loss on sale

13

2022

2022

Millions of yen

Thousands of U. S.
dollars¥550,686 $ 4,499,440
24,530200,428
3,828
31,2782022

2022

Millions of yen

Thousands of U. S.
dollars

Amount recorded in the consolidated¥13,528
balance sheet
Valuation difference included in
28
profit and loss for the fiscal year

$110,539
236

13. Derivatives
The Group enters into interest rate swaps to hedge interest rate risk
associated with deposits, loans and holding debt securities and currency
swaps and foreign exchange forward contracts to hedge foreignexchange risk associated with certain assets and liabilities denominatedin foreign currencies. In addition, to respond to the customers’ hedging
needs related to their interest rate risk and foreign exchange risk, theGroup enters into derivative contracts including interest rate swaps,
currency swaps, foreign exchange forward contracts and currency
options. These transactions are covered by the reversing trades to avoid
market risk. The effectiveness of these hedging activities is assessed andverified on a regular basis.
Derivative contracts to which hedge accounting is notapplied:With respect to derivatives to which hedge accounting is not applied,contract amount or notional principal amount defined in the contract, fairvalue and valuation gains or losses by transaction type as of March 31,
2022 are as follows:
Note that contract amount does not represent the market risk exposure of
the derivative transactions.
(1) Interest rate related derivatives
There are no interest rate related derivatives as of March 31, 2022.
(2) Currency related derivatives
March 31, 2022
Millions of yen

Contract amount

Valuation
gains(losses)

Total
Over one year Fair value
OTC transactions:
— ¥
— ¥
— ¥
—
Currency swaps¥Forward contracts on foreign Sold
82,922—(3,836)(3,836)exchange
Bought27,568
—
524
524
Sold
3,488
—
(266)
(68)
Currency options
Bought
3,488
—
266
76
Total
¥
— ¥
— ¥ (3,312) ¥ (3,304)
March 31, 2022
Thousands of U. S. dollars

Contract amount

Valuation
gains(losses)

Total
Over one year Fair value
OTC transactions:
— $
— $
— $
—
Currency swaps$—Forward contracts on foreign Sold
677,523(31,350) (31,350)
exchange
Bought 225,250
4,283
4,283
—
—
Sold
28,503(2,178)(560)
Currency options
Bought28,503
2,178
627
—
Total
$
— $
— $(27,066) $(26,999)
Note:
The above transactions are stated at fair value and valuation gains orlosses is recorded in the consolidated statement of income.
Derivative contracts to which hedge accounting is applied:With respect to derivatives to which hedge accounting is applied,contract amount or notional principal amount defined in the contract andfair value by transaction type and by hedge accounting method as ofMarch 31, 2022 are as follows:
Note that contract amount does not represent the market risk exposure of
the derivative transactions.

(1)Interest rate related derivatives

Hedge
Transaction
accounting
type
methodMajor
hedgeditem

March 31, 2022
Millions of yen
Contract
amountContract
Fair valuedueamountafter oneyear

Interest
Deferral rate swaps:
Securities ¥20,000 ¥20,000 ¥159
Receivehedge
accounting floating
Pay fixed
Total—— ¥159

Hedge
Transaction
accounting
type
methodMajor
hedgeditem

March 31, 2022
Thousands of U. S. dollars
Contract
amountContract
Fair valuedueamountafter oneyear

Interest
Deferral rate swaps:
Securities $163,412 $163,412 $1,307
Receivehedge
accounting floating
Pay fixed
Total—— $1,307
Note:
Gains or losses on above contacts is deferred until maturity of the hedged
items in accordance with JICPA Industry Audit Committee Report No. 25.
(2)Currency related derivatives
There are no currency related derivatives as of March 31, 2022.
14. Revaluation of Land
Pursuant to the “Act on Revaluation of Land” (the “Act”), land used forthe business operations of the Bank being a consolidated subsidiary of
the Company, was revalued on March 31, 1999. The excess of therevalued aggregate market value over the total book value (carrying
value) before revaluation was included in net assets as land revaluation
surplus at the net amount of the related tax effect as of March 31, 1999.
The corresponding income taxes were included in liabilities as of March
31, 1999 as deferred tax liability arising from revaluation of land. The
revaluation of the land was determined based on the official prices
published by the Commissioner of the National Tax Authority inaccordance with Article 2, Paragraph 4 of the Enforcement OrdinanceConcerning Land Revaluation, with certain necessary adjustments.
The difference between the total fair value of land for business operation
purposes, which was revalued in accordance with Article 10 of the Act,and the total book value of the land after the revaluation was ¥6,047
million ($49,408 thousand) as of March 31, 2022.
15. Cash Flows
A reconciliation between cash and due from banks in the consolidatedbalance sheet as of March 31, 2022 and cash and cash equivalents inthe consolidated statements of cash flows for the year then ended is asfollows:
2022

2022

Millions of yen

Thousands of U. S.
dollars

Cash and due from banks¥1,607,871 $ 13,137,279
Due from banks other than the Bank
(3,150)(25,740)of JapanCash and cash equivalents¥1,604,721 $ 13,111,538

16. ‌Accumulated Depreciation and Deferred Gains on
Tangible Fixed Assets
Accumulated depreciation totaled ¥34,133 million ($278,894 thousand)as of March 31, 2022.
Deferred gains on tangible fixed assets deducted for tax purposes as ofMarch 31, 2022 were ¥2,847 million ($23,268 thousand).

17. Assets Pledged
Assets pledged as collateral as of March 31, 2022 were as follows:

Pledged assets:
Securities
Other assets
Total
Liabilities secured by the above
assets:
Deposits
Borrowed money
Call money and bills sold
Guarantee deposit received under
securities lending transactions
Total

2022

2022

Millions of yen

Thousands of U. S.
dollars¥¥

662,707 $ 5,414,715
4,130
33,746
666,837
5,448,462
42,761
155,700
22,000349,387
1,272,162
179,753

313,497

2,561,459

533,958 $ 4,362,763

Margin deposits with the clearing house of ¥20,000 million ($163,412
thousand) as of March 31, 2022 and guarantee deposits of ¥85 million($695 thousand) were included in other assets as of March 31, 2022.
18. Borrowed Money
The details of borrowed money as of March 31, 2022 were as follows:

Borrowed money
Due from April 2022 throughFebruary 2026
Average interest rate: 0.00% p.a.

2022

2022

Millions of yen

Thousands of U. S.
dollars¥

155,985 $ 1,274,499

Scheduled repayments of borrowed money by each year:
Year ending March 31,
2023
2024
2025
2026
2027 and thereafter
Total

Millions of yen

Thousands of U. S.
dollars¥155,831 $ 1,273,239
70
574
61
505
22
180
—
—
¥ 155,985 $ 1,274,499

19. Bonds Payable
In the fiscal year of 2021, the Bank has issued series of unsecured
callable subordinated bonds with special exemption clause in case of
actual bankruptcy. The details of bonds payable as of March 31, 2022
were as follows:
2022
Issued date

Redemptiondate

The Hokkoku Bank Ltd.:
1st Unsecured
July 22, 2020 July 22, 2030
Callable Bonds
2nd Unsecured
March 10,
March 10,Callable Bonds
2021
2031
Total

Interest
rate

2022

Thousands
Millions of of U. S.
yendollars

0.94% ¥ 10,000 $ 81,706
10,0000.86%

81,706¥ 20,000 $ 163,412

Scheduled redemptions of bonds payable by each year:
Year ending March 31,
2023
2024
2025
2026
2027 and thereafter
Total

Millions of yen¥Thousands of U. S.
dollars— $
———
20,000¥20,000 $

————
163,412
163,41214

20. Borrowed Money from Trust Account
The principal amount of trust account with contracts indemnifying theprincipal is as follows:

Money trust

2022

2022

Millions of yen

Thousands of U. S.
dollars

¥154

$

1,266

21. Shareholders’ Equity
Japanese banks are subject to the Banking Act and the Companies Act.
The Companies Act requires that all shares of common stock be issued
with no par value and at least 50% of the amount paid of new shares isrequired to be recorded as common stock and the remaining net
proceeds as additional paid-in capital, which is included in capitalsurplus. The Companies Act permits Japanese companies, upon approvalof the Board of Directors, to issue shares to existing shareholders without
consideration by way of a stock split. Such issuance generally does notgive rise to changes within the shareholders’ accounts.
The Banking Act provides that an amount at least 20% of the aggregate
amount of cash dividends and certain other appropriations of retained
earnings associated with cash outlays applicable to each period shall beappropriated as a legal reserve (a component of retained earnings) until
such reserve and additional paid-in capital equals 100% of common
stock. The amount of total additional paid-in capital and legal reservethat exceeds 100% of common stock may be available for dividends byresolution of the shareholders after transferring such excess inaccordance with the Companies Act. In addition, the Companies Act
permits the transfer of a portion of additional paid-in capital and legal
reserve to the common stock subject to resolution of the Board of
Directors.
The Companies Act allows Japanese companies to repurchase treasury
stock and dispose of such treasury stock upon resolution of the Board of
Directors. The aggregate repurchased amount of treasury stock cannot
exceed the amount available for future dividends plus the amount ofcommon stock, additional paid-in capital or legal reserve that could betransferred to retained earnings or other capital surplus other thanadditional paid-in capital upon approval of such transfer at the ordinary
general meeting of shareholders.
Dividends are approved by the shareholders at the meeting held
subsequent to the fiscal year to which the dividends are applicable.
Interim dividends may also be paid upon resolution of the Board of
Directors, subject to certain limitations imposed by the Companies Act.
The movements of outstanding shares and cash dividends during theyears ended March 31, 2022 are as follows:(a) Number of outstanding shares and treasury stock
For the year ended March 31, 2022
Thousand shares
Balance at Increase Decrease Balance at
beginning during
duringend
Type of sharesof yearthe year the yearof yearIssued stock:
28,115—
206
27,908
Common stock
Treasury stock:
141
1,201
223
1,118
Common stock
Note:
1. The decrease in issued stock of 206 thousand shares is due to thecancellation of treasury stock.
2. The increase in treasury stock of 1,201 thousand shares consists of
the repurchase of treasury stock of 1,200 thousand shares andrequests for the buyback of shares less than one unit of 1 thousand
shares.
3. The decrease in treasury stock of 223 thousand shares is due to thecancellation of treasury stock of 206 thousand shares and sharesprovided from the Bank’s management board benefit trust of 17
thousand shares.
4. The number of treasury stock (common stock) as of March 31,
2022 includes 117 thousand shares held by the Bank’s
management board benefit trust at Custody Bank of Japan, Ltd.
(Trust account).

15(b) Stock acquisition rights
There are no stock acquisition rights as of March 31, 2022.
(c) Dividends paid to the shareholders during the year
The Company is a holding company established through sole sharetransfer on October 1, 2021. Dividends paid to the shareholders are theamounts resolved at the Ordinary general meeting of shareholders andthe meeting of the Board of Directors of the Bank being its a wholly
owned subsidiary.
For the year ended March 31, 2022
Date ofresolution

Resolution
byType ofsharesTotal
dividends

Dividends
per share

Dateof record

Effective
date

June
18,2021

Ordinary
generalmeeting ofshareholders

CommonStock ofthe Bank¥1,405
million($11,483
thousand)(Note 1)¥50.0($0.40)March 31,2021

June 21,2021

October
29,2021

Board ofDirectors

CommonStock ofthe Bank¥1,116
million($9,121thousand)(Note 2)¥40.0($0.32)September December 3,
30,
2021
2021

Note:
1. The total amount of dividends paid includes ¥6 million ($55
thousand) of dividends for shares held by the Bank’s management
board benefit trust.
2. The total amount of dividends paid includes ¥4 million ($40
thousand) of dividends for shares held by the Bank’s management
board benefit trust.
Dividends applicable to the year ended March 31, 2022, but notrecorded in the accompanying consolidated financial statements, since
the effective date is subsequent to the current fiscal year end:
Date ofresolution

Resolution
byType ofsharesTotal
dividends

Dividends
per share

Date ofrecordEffective
date

June 14,2022

Ordinary
generalmeeting ofshareholders

Commonstock¥1,345
million($10,992
thousand)(Note)¥50.0($0.40)March 31,2022

June 15,
2022(Above cash dividends are distributed from retained earnings.)
Note:
The total amount of dividends paid includes ¥5 million ($48 thousand) ofdividends for shares held by the Bank’s management board benefit trust.
22. Leases
As lessee:(a) Finance leases
The Group have tangible fixed assets, mainly consisting of vehicles,
under finance lease arrangements which do not transfer ownership ofthe leased assets to the lessee. The leased assets are depreciated on astraight-line method over respective lease periods with the salvage
value determined in the agreements or otherwise nil.
(b) Operating leases
The following table presents the schedule of future minimum lease
payments under non-cancellable operating leases as of March 31,
2022:

Due within one year
Due after one year
Total

2022

2022

Millions of yen

Thousands of U. S.
dollars

¥
¥

160
246
407

$
$

1,313
2,016
3,330

As lessor:

24. Special gains and losses(a) Finance leases
Investment in leased assets consists of the following:Special gains and losses for the year ended March 31, 2022 consist of
the following:

2022

2022

Millions of yen

Thousands of U. S.
dollars¥

Lease receivables
Residual value
Unearned interest income
Total

34,452 $
632(2,496)32,589 $¥281,498
5,168(20,394)266,273

Maturities of lease receivables and investment in leased assets as ofMarch 31, 2022 are as follows:
Millions of yen

Thousands of U. S. dollars

Investment
Investment
Lease
in leased
Lease
in leased
Year ending March 31 receivables
assetsreceivables
assets¥712 ¥ 9,657 $ 5,823 $ 78,905
2023
2024
604
8,308
4,940
67,883
2025
425
6,060
3,478
49,518
2026
321
4,166
2,626
34,039
2027
224
2,874
1,836
23,4842028 and thereafter
316
3,386
2,586
27,666Total¥2,605 ¥ 34,452 $ 21,292 $281,498(b) Operating leases
The following table presents the schedule of future minimum lease
payments under non-cancellable operating leases as of March 31,
2022:
Millions of yen

Due within one year
Due after one year
Total

1,559
2,343
3,903

Recoveries of written off receivables
Gain on sale of equity securities

2022

2022

Millions of yen

Thousands of U. S.
dollars¥360 $¥20,098 $

2,945
164,217

Major expenses included in other expenses for the year ended March 31,
2022 are as follows:
2022

2022

Millions of yen

Thousands of U. S.
dollars

Provision of reserve for possible loan losses ¥11,357 $
Loss on sale of equity securities
911
Loss on devaluation of equity securities
3,862
Loss on sale of receivables¥
291 $

92,796
7,449
31,561
2,381

Loss on disposable of tangible fixed assets includes loss on unusable
software of ¥2,475 million ($20,226 thousand).
Major expenses included in general and administrative expenses for theyear ended March 31, 2022 are as follows:

Salaries and allowances
Retirement benefit expenses
Depreciation

2022

2022

Millions of yen

Thousands of U. S.
dollars¥11,478 $
1,310¥4,145 $

93,783
10,70933,867

Millions of yen

5,934
43
(20,361)(4,915)(7,017)(26,316)

Loss on Impairment
For identifying a loss on impairment, the Bank’s operating branches aregrouped by the areas under control of the area management (or bybranches if not under control of the area management) and the Bank’s
idle assets are grouped individually. Headquarters, office centers,
dormitories, welfare facilities, etc. are treated as common use assets
because they do not generate independent cash flows. In principle, Eachof the consolidated subsidiaries is treated as a group of units.
For the following operating branches and idle assets among above
tangible fixed assets, loss on impairment is recognized in the
consolidated statement of income, by reducing the carrying value to therespective recoverable amount.

Location
Ishikawa Pref.

Outside Ishikawa Pref.

23. Other Income, Other Expenses and General and
Administrative Expenses
Major income included in other income for the year ended March 31,
2022 are as follows:

2022
Thousands of U. S.
dollars

Special gains (losses):
726 $
Gain on revision of retirement benefit plan ¥Gain on disposal of tangible fixed assets
5
Loss on disposal of tangible fixed assets(2,492)
Loss on impairment(601)
Business restructuring expenses
(858)
Total
¥(3,220) $Thousands of U. S.
dollars¥190 $286
¥477 $

2022

Total

Year ended March 31, 2022
Millions of Thousands ofMain use
Asset typeyen
U.S. dollars
11 operating
Land ¥
226 $
1,852
branches
8 operating
Buildings
146
1,195
branches
8 idle assets
Land
57
471
1 idle asset
Buildings
21
173
1 operating
Land
36
301
branch2 operating
Buildings
16
133
branches
2 idle assets
Land
49
407
1 idle asset
Buildings
46379¥
601 $
4,915

In the assessment of loss on impairment, the recoverable amount iscomputed using the net realizable value, which is determined mainly
based on the real estate appraisal value.
25. Other Comprehensive Income
The components of other comprehensive income for the year ended
March 31, 2022 were as follows:

Reclassification adjustments
Valuation differences on available-for-sale securities:
Gains (losses) incurred during the year
Reclassification adjustment
Amount before tax effect
Deferred gains (losses) on hedging instruments:
Gains (losses) incurred during the year
Reclassification adjustment
Amount before tax effectRemeasurements of defined benefit plans
Gains (losses) incurred during the year
Reclassification adjustment
Amount before tax effectTotal amount before tax effectTax effectTotal other comprehensive income

2022

2022

Millions of yen

Thousands of U. S.
dollars¥¥(21,653) $(17,034)(38,687)(176,921)(139,181)(316,103)

166
5
172

1,359
46
1,406

(31)
1,573
1,541
(36,973)
11,039(25,934) $

(260)
12,857
12,597(302,099)
90,195(211,904)

16

2022

2022

2022

2022

Millions of yen

Thousands of U. S.
dollars

Millions of yen

Thousands of U. S.
dollars

Tax effect on other comprehensive income:
Valuation differences on available-for-sale securities:¥(38,687) $Amount before tax effectTax effect
11,656
Amount after tax effect(27,030)
Deferred gains (losses) on hedging instruments:
172
Amount before tax effectTax effect(52)
Amount after tax effect119
Remeasurements of defined benefit plans
1,541
Amount before tax effectTax effect(565)
Amount after tax effect¥976 $

(316,103)
95,243(220,859)
1,406
(428)
978
12,597(4,620)7,977

26. Income Taxes
The major components of deferred tax assets and liabilities as of March
31, 2022 are summarized as follows:
2022

2022

Millions of yen

Thousands of U. S.
dollars

Deferred tax assets:¥
18,238 $
Reserve for possible loan losses
Net defined benefit liability
651
Depreciation of real estate992
Devaluation of equity securities
928
Other
4,451
Subtotal
25,262
Valuation allowance(13,388)
Total deferred tax assets
11,873
Deferred tax liabilities:
Valuation differences on available-for-sale securities(15,736)
Other
(240)
Total deferred tax liabilities(15,976)
Net deferred tax assets (liabilities)¥(4,103) $

149,017
5,321
8,108
7,587
36,373
206,408(109,396)
97,012(128,572)(1,965)(130,538)(33,525)

A reconciliation of the statutory tax rate applicable to the Company andits consolidated subsidiaries to the effective tax rate for the year ended
March 31, 2022 is presented as follows:
Statutory tax rate
Reconciliation:
Nondeductible permanent differences, such as entertainment
expenses
Nontaxable permanent differences, such as dividend income
Per capita residents’ taxes
Valuation allowance
Offsetting dividends from subsidiaries
Other
Effective tax rate

2022
30.3%
0.5
(4.6)
0.2
8.4
3.9
0.9
39.6%

27. Retirement Benefit Plans
The Group has the defined contribution pension plans (corporate type)(“defined contribution plan”), and consolidated subsidiaries of theCompany have defined benefit corporate pension plans (“defined benefit
plans”). Effective February 28, 2022, certain consolidated subsidiaries
transferred all lump-sum payment plans to the defined contribution plan.
Applying “Implementation Guidance on Accounting for Transfer between
Retirement Benefit Plans” (ASBJ Guidance No.1, December 16, 2016)
and “Practical Solution on Accounting for Transfer between Retirement
Benefit Plans” (PITF No.2, February 7, 2007), the Company treated the
portion transferred to the benefit contribution plans as the termination of
the retirement benefit plans.
Defined benefit Plans(a) The reconciliation of in defined benefit obligation for the year ended
March 31, 2022 is as follows:

17

Balance at beginning of year¥
29,725 $
Service cost
459
Interest cost48
Actuarial gains or losses
126
Benefits paid
(1,459)Decrease due to transfer to the defined(9,598)contribution plan
Balance at end of year¥19,302 $

242,874
3,751
399
1,034
(11,920)(78,422)
157,715(b) The reconciliation of in plan assets for the year ended March 31,
2022 is as follows:

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

2022

2022

Millions of yen

Thousands of U. S.
dollars¥16,684
250
94896(1,021)¥16,904$136,322
2,044
774
7,327
(8,348)$138,119(c) The reconciliation between the net defined benefit liability recorded in
the consolidated balance sheet and the balances at end of year ofdefined benefit obligation and plan assets

Funded defined benefit obligation
Plan assets

2022

2022

Millions of yen

Thousands of U. S.
dollars¥19,302 $
(16,904)
2,398—

Unfunded defined benefit obligation
Net liability recorded in the consolidated¥2,398 $
balance sheet

157,715(138,119)
19,596—
19,5962022

2022

Millions of yen

Thousands of U. S.
dollars

Net defined benefit liability¥2,398 $
Net liability recorded in the consolidated¥2,398 $
balance sheet

19,596

19,596(d) The components of retirement benefit expenses for the year ended
March 31, 2022 are as follows:

Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial gains or losses
Amortization of prior service cost
Retirement benefit expenses

2022

2022

Millions of yen

Thousands of U. S.
dollars¥459 $
48
(250)
919
(135)
¥
1,041 $

3,751
399
(2,044)
7,509(1,109)
8,506

Other than above, the Group recognized ¥726 million ($5,934
thousand) of gain on revision of retirement benefit plan for the year
ended March 31, 2022 due to the transfer of all lump-sum payment
plans to the defined contribution plan.
(e) The components of remeasurements of defined benefit plans (before
deducting tax effect) on other comprehensive income as of March 31,
2022 are as follows:

Prior service cost
Net actuarial gains or losses
Total

2022

2022

Millions of yen

Thousands of U. S.
dollars¥(271) $
3,467¥3,195 $

(2,218)28,331
26,112

(f) The components of remeasurements of defined benefit plans (before
deducting tax effect) on accumulated other comprehensive income asof March 31, 2022 are as follows:

Unrecognized prior service cost
Unrecognized net actuarial gains orlosses
Total

2022

2022

Millions of yen

Thousands of U. S.
dollars¥113 $
(2,084)924(17,027)¥(1,970) $

(16,103)(g) Plan assets(1) The components of plan assets are as follows:
2022
85%
9
5
1
100%

General accountEquity securities
Debt securities
Other
Total

Note:
Total plan assets include 0% of retirement benefit trust established on
corporate pension plans as of March 31, 2022.
(2) Method of determining the long-term expected rate of return on plan
assetsThe long-term expected rate of return on plan assets is determinedconsidering the long-term rates of return which are expected currently
and in the future from the various components of the plan assets.
(h) Assumptions used for the year ended March 31, 2022, were set forth
as follows:
Discount rateLong-term expected rate of return on plan assets
Expected salary increase rate2022
0.0% to 0.6%
1.5—

Defined Contribution Plan
The amount of the required contribution to the defined contribution planof the Company was ¥269 million ($2,202 thousand) for the year ended
March 31, 2022.
Other matters
In connection with the transfer from lump-sum payment plans to thedefined contribution plan, the funds of ¥8,120 million ($66,346
thousand) are to be transferred to the defined contribution plan. Of
which, the portion not yet transferred, in the amount of ¥6,090 million($49,759 thousand), was included in “Other liabilities” as of March 31,
2022.
28. Per Share Information
Net assets per share as of March 31, 2022 and profit per share for theyear then ended are as follows:

Net assets per share
Profit per share

2022

2022

Millions of yen

Thousands of U. S.
dollars¥9,576.53 $
¥340.64 $

78.24
2.78

Note:
1. Custody Bank of Japan, Ltd. (Trust account) holds the shares of theCompany as trust assets relevant to the management board benefit
trust of the Bank, a consolidated subsidiary of the Company. In thecalculation of net assets per share and profit per share, the sharesare included in treasury stock, which are deducted in calculating
outstanding number of shares at end of year and average
outstanding number of shares during the year. For the year ended
March 31, 2022, the number of shares of treasury stock deductedin calculating outstanding number of shares at end of year is 117
thousand shares and average outstanding number of shares during
the year is 127 thousand shares.
2. Profit per share-diluted is not disclosed since there is no dilutive
share.

Basic information in computing above per share data is as follows:

Net assets per share:
Net assets per balance sheets
Amounts to be attributed to noncontrolling interests
Net assets attributed to common stock
shareholders
Number of shares_outstanding at end ofyear (unit: thousand shares)
Profit per share:
Profit attributable to owners of parent
Profit attributable to common stock
shareholders
Average number of shares_outstanding
during the year (unit: thousand shares)

2022

2022

Millions of yen

Thousands of U. S.
dollars¥

264,258 $ 2,159,150
7,701

¥

62,922

256,557 $ 2,096,227
26,790¥

9,387 $

76,704¥

9,387 $

76,70427,55929. Segment Information(a) Reportable segments
The reportable segments of the Group are the components of theGroup for which separate financial information is “available” and are
subject to periodic review by the Board of Directors which is the chief
operating decision maker to determine the allocation of management
resources and assess performance.
The Group consists of the Company and its 10 consolidated
subsidiaries. The Group designs comprehensive strategies to provide
financial services including banking and leasing businesses and isengaged in operating activities. Accordingly, the Group is composedof operating segments by financial services based on the groupcompanies and “Banking” and “Leasing” segments are identified as
the reportable segments.
The “Banking” segment provides customers with banking services,credit guarantee services related to consumer finance services, credit
card services, subsidiaries’ accounting services, e-commerce website
operation business, ser vicer business, system development/
management/administration services, investment advisory business,consulting services and fund administration services.
The “Leasing” segment provides customers with leasing services.
(b) Calculation method of gross Revenue and net operating income
Accounting policies adopted by the reportable segments are the sameas those described in “3. Summary of Significant Accounting
Policies,” except for the scope of consolidation. Segment profit of thereportable segments is measured based on revenue from ordinary
operations and intersegment income is based on the market
transaction price in the same manner as income from externalcustomers.
(c) Reportable segment information concerning income, profit or loss,
assets, liabilities and other items
Year ended March 31, 2022
Millions of yen

Reportable segments
Banking Leasing
Total

Adjustments Consolidated

Total revenue:¥72,812 ¥11,917 ¥84,730 ¥External customers
Intersegments
137
7
145
72,95011,92584,875
Total
Segment profit
18,450727
19,178Segment assets
5,700,481
37,273 5,737,755
Other information
4,121
209
4,331
Depreciation
Interest income
36,208—36,208Interest expenses
493
114
608
Increase in tangible and¥5,193 ¥— ¥5,193 ¥
intangible fixed assets— ¥84,730
(145)
—
(145)
84,730(11)
19,167(25,521) 5,712,233
—
(120)
(113)

4,331
36,087494— ¥5,193

18

Year ended March 31, 2022

2022

2022

Thousands of U. S. dollars

Millions of yen

Thousands of U. S. dollars

Reportable segments
Banking Leasing
Total

Adjustments Consolidated

Total revenue:$594,923 $97,376 $692,300 $
— $692,300
External customers
Intersegments
1,127
59
1,186
(1,186)—
596,050
97,436
693,487(1,186)692,300
Total
Segment profit
150,753
5,947
156,700(90)
156,609
Segment assets
46,576,367
304,546 46,880,914(208,527) 46,672,387
Other information
33,6781,712
35,390—35,390Depreciation
Interest income
295,844—295,844(984)
294,859
Interest expenses
4,033
936
4,970
(927)
4,042
Increase in tangible and$42,430 $
— $42,430 $
— $42,430
intangible fixed assets
Note:
1. “Total revenue” corresponds to “Net Sales” of non-banking
industries.
2. Adjustments refer to the elimination of intersegment transactions.
Other information:
Information by service line:
Year ended March 31, 2022
Millions of yen

Loan
Income from externalcustomers

Securities
investment

Lease

Other

Total

¥23,989 ¥35,908 ¥11,917 ¥12,914 ¥84,730
Year ended March 31, 2022
Thousands of U. S. dollars

Loan
Income from externalcustomers

Securities
investment

Lease

Other

Total

$ 196,008 $293,396 $97,376 $105,517 $692,300

Information about loss on impairment of long-lived assets by reportablesegment:
Year ended March 31, 2022
Millions of yen

Loss on impairment

Reportablesegments
Banking Leasing
Total¥ 601 ¥ — ¥ 601
Year ended March 31, 2022
Thousands of U. S. dollars

Loss on impairment

Reportablesegments
Banking Leasing
Total$4,915 $ — $4,915

30. Revenue Recognition
The following table summarizes the information on disaggregation ofrevenue from contracts with customers for the year ended March 31,
2022:

Banking Leasing
Total Banking Leasing
Total
Fees and commissions:
Deposits and loans¥ 1,605 ¥ — ¥ 1,605 $ 13,120 $ — $ 13,120
business
Foreign exchange
2,397—
2,397 19,593— 19,593
business
Trust-related business
63
—
63
516
—
516
Securities-related
734
—
734
5,999
—
5,999
business
Agency business
269
—
269
2,200
—
2,200
Card business
2,053—
2,053 16,779— 16,779
Consulting business
751
—
751
6,143
—
6,143
Other business
1,242
27
1,270 10,153
227 10,381
Fees and commissions,
9,118
27
9,146 74,507
227 74,734
total
Other operating income
198
563
762
1,623
4,605
6,228
Income other than
421
2
423
3,440
17
3,457
operating oncome
Income from contracts
9,738
593 10,332 79,570
4,849 84,420
with customers
Income other than above
63,073 11,324 74,398 515,352 92,527 607,879
Total income from external¥ 72,812 ¥ 11,917 ¥ 84,730 $594,923 $97,376 $692,300
customers
The information that provides a base for understanding revenue fromcontracts with customers is stated in “3. Summary of Significant
Accounting Policies, n. Revenue recognition.”
The information that contributes to an understanding of the amounts ofrevenue for the year ended March 31, 2022, the year ending March 31,
2023 and thereafter is omitted due to insignificancy.
31. Related Party Transactions
There was no applicable transaction to be reported for the year ended
March 31, 2022.
32. Business Combinations
Transaction under common control(a) Overview of the business combination(1) Name of the company and description of the business
Wholly owned subsidiary resulting from the share transfer: the
Hokkoku Bank, Ltd. (Banking business)(2) Date of business combination
October 1, 2021
(3) Legal form of the business combination
Establishment of a holding company through a sole share transfer(4) Company name after the business combination
Wholly owning parent company established in the share transfer:
Hokkoku Financial Holdings, Inc.
(5) Other matters
The Company has established to respond to changes in businessenvironment, including deregulation, and to meet expectations of andcontribute to its customers and local communities, without being
limited by the conventional framework of the banking industry.
Effective October 1, 2021, the Company acquired all shares of thefollowing nine subsidiaries of the Bank, the Company’s wholly owned
subsidiary, as dividend in kind: the Hokkoku General Leasing Co.,
Ltd., the Hokkoku Credit Service Co., Ltd., the Hokkoku Credit
Guarantee Co., Ltd., the Hokkoku Management, Ltd., the Hokkoku
Servicer, Ltd., Digital Value Co, Ltd., the FD Advisory, Ltd., the CC
Innovation, Ltd. and the QR Investment, Ltd. Thus, these ninecompanies became directly and wholly owned subsidiaries of theCompany.
(b) Overview of the accounting treatment
For accounting purposes, this transaction was treated as a transaction
under common control in accordance with the “Accounting Standard
for Business Combinations” (ASBJ Statement No. 21, January 16,2019) and the “Guidance on Accounting Standard for Business
Combinations and Accounting Standard for Business Divestitures”(ASBJ Guidance No. 10, January 16, 2019).

19

33. Subsequent Events
Cancellation of treasury stock
At the Board of Directors’ meeting held on April 28, 2022, the Company
resolved to cancel its treasury stock on May 13, 2022, in accordancewith the provision of Article 178 of the Companies Act. The cancellation
was conducted on the same date.
(1) Reason for cancellation(2) Type of shares to be cancelled(3) Number of shares to be cancelled(4) Cancellation dateTo enhance shareholder returns, improve capitalefficiency, and take flexible capital measures.
Common stock
1,000,000 shares
May 13, 2022

Repurchase of own shares
At the Board of Directors’ meeting held on April 28, 2022, the Company
resolved to repurchase its own shares in accordance with the provision of
Article 156 of the Companies Act as applied pursuant to the provision of
Article 165, Paragraph 3 of the same act in order to take flexible capital
policies responding to changes in the business environment and toenhance shareholder returns.
(1) Type of shares to be repurchase(2) Number of shares to be repurchase(3) Total cost of shares to be repurchase(4) Repurchase period

Common stock
2,500,000 shares (upper limit)¥9,000 million ($73,535 thousand) (upper limit)
From May 9, 2022 to April 28, 2023

20

Balance Sheets
The Hokkoku Bank, Ltd.

As of March 31,
2022

2021
Millions of yen

Assets:Cash and due from banks
Call loans
Monetary claims bought
Trading account securities
Money held in trusts
Securities
Loans and bills discounted
Foreign exchanges
Investment in leased assets
Other assets
Tangible fixed assets
Intangible fixed assets
Customers’ liabilities for acceptances and guarantees
Reserve for possible loan losses
Total assets
Liabilities:
Deposits
Negotiable certificates of deposit
Call money
Guarantee deposit received under securities lending transactions
Borrowed money
Foreign exchanges
Bonds payable
Borrowed money from trust account
Other liabilities
Reserve for bonuses
Reserve for retirement benefits
Reserve for management board benefit trust
Reserve for reimbursement of deposits
Reserve for customer service points
Deferred tax liabilities
Deferred tax liability arising from revaluation of land
Acceptances and guarantees
Total liabilities
Net assets:
Common stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Valuation differences on available-for-sale securities
Net deferred gains (losses) on hedging instruments
Land revaluation surplus
Total valuation and translation adjustments
Total net assets
Total liabilities and net assets

21

¥

¥

1,607,831
65,0001,286—
13,528
1,351,149
2,603,927
11,1388,546
33,46030,275
10,19917,986(60,390)
5,693,941¥

4,271,285
1,450
618,824
313,497
155,8691
20,000154
46,308
560
427
496
127
—
3,775
1,412
17,986
5,452,179¥

26,673
11,289166,010—
203,973
35,376
115
2,296
37,788
241,7625,693,941

2022
Thousands of U.S. dollars(Note 2)¥

1,483,350
118,000
1,312
105
13,513
1,195,702
2,633,905
10,7789,762
36,731
30,34912,182
17,345(52,559)
5,510,480$ 13,136,954
531,089
10,514—
110,539
11,039,705
21,275,653
91,006
69,832
273,390
247,371
83,338146,956(493,424)$ 46,522,929¥

3,976,489
75,557
718,694
230,366
135,998
2
20,000145
38,931
757
9,452
460
172
276
14,584
1,473
17,3455,240,709

34,898,975
11,847
5,056,172
2,561,459
1,273,547
14
163,412
1,266
378,372
4,579
3,493
4,057
1,041
—
30,851
11,540146,956$ 44,547,588¥

26,673
11,289168,092(663)
205,392
62,110(3)
2,272
64,378
269,771
5,510,480

217,942
92,241
1,356,404—
1,666,588
289,044945
18,762308,753
1,975,341$ 46,522,929¥

Statements of Income
The Hokkoku Bank, Ltd.

Years ended March 31,
2022
IncomeInterest income on:
Interest on loans and discounts
Interest and dividends on securities
Other interest income
Total interest income
Trust fees
Fees and commissions
Other operating income
Other income
Total income¥

24,123
11,290588
36,003
0
8,549
8,200
21,16473,9182022

2021
Millions of yen¥

Thousands of U.S. dollars(Note 2)25,0969,204
497
34,799
0
9,341
6,593
17,68068,414$

197,106
92,2494,810
294,166
0
69,85667,006
172,929
603,959

Expenses
Interest expenses on:
Deposits
Borrowings and rediscounts
Interest on bonds
Other
Total interest income
Fees and commissions
Other operating expenses
General and administrative expenses
Other expenses
Total expenses

110
35
180
166
493
3,631
5,438
29,585
16,67755,827

223
27
69
219
540
3,604
7,862
30,11315,01057,131

905
288
1,476
1,364
4,034
29,66944,439241,733
136,265
456,141

Special gains and losses(3,203)(897)(26,178)

Profit before income taxes
Income taxes:
Current
DeferredProfit14,887
5,229
614
5,843
9,043

10,385
5,588(1,156)
4,431
5,954

121,638
42,7305,018
47,74873,890

¥

¥

$

22

REPORT OF INDEPENDENT AUDITORS

Independent Auditor’s Report

The Board of Directors
Hokkoku Financial Holdings, Inc.
OpinionWe have audited the accompanying consolidated financial statements of Hokkoku Financial
Holdings, Inc and its consolidated subsidiaries (the Group), which comprise the consolidatedbalance sheet as at March 31, 2022, and the consolidated statements of income, comprehensive
income, changes in net assets, and cash flows for the year then ended, and notes to theconsolidated financial statements.
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Group as at March 31, 2022, and its
consolidated financial performance and its consolidated cash flows for the year then ended inaccordance with accounting principles generally accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for
the Audit of the Consolidated Financial Statements section of our report. We are independent of
the Group in accordance with the ethical requirements that are relevant to our audit of theconsolidated financial statements in Japan, and we have fulfilled our other ethicalresponsibilities in accordance with these requirements. We believe that the audit evidence wehave obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significancein our audit of the consolidated financial statements of the current period. These matters wereaddressed in the context of the audit of the consolidated financial statements as a whole, and informing the auditor’s opinion thereon, and we do not provide a separate opinion on thesematters.
We identified the following key audit matter as part of the audit of the consolidated financial
statements for the current period.

23

Classification of debtors for the purpose of determining the reserve for possible loan losses for
debtors for which repayment status, financial position or business performance is deteriorating
Description of Key Audit Matter
The Group has consolidated subsidiaries that
operate in the banking business, and theGroup provides loans as one of its corebusiness activities. The Group recorded loans
and bills discounted of 2,585,262 million yen
on its consolidated balance sheet as of March
31, 2022, representing a significant portion of
the Group’s total assets of 5,712,233 million
yen. By region, loans and bills discounted in
the Hokuriku region, particularly Ishikawa
Prefecture, where the Group’s head office islocated, account for a large portion of totalloans and bills discounted.
The collectability of loans is subject touncertainties that are difficult to predict due
to economic trends in Japan and overseas,
particularly those in the Hokuriku region,
deterioration in the business conditions ofdebtors, and decreases in the value ofcollateral caused by declines in the prices ofreal estate and stocks. As a result, there is apossibility of default by debtors.

Auditor’s Response
We mainly performed the following audit
procedures to examine the debtor
classification:
・We evaluated the Group’s internal control
over the determination of debtor
classification and the relevant credit ratingused as basis of such determination as
well as the process to ensure the reliabilityof the underlying debtors’information.
・We inspected the minutes of important
meetings including those of the Board of
Directors to examine events that have asignificant impact on the debtor
classification, including debt waivers, saleof distressed debt and consent to therestructuring plan.

・We selected samples by taking into
account the type of business, repayment
status, financial position or degree ofdeterioration in business performance ofthe debtor, the business support provided
by the Group to the debtor, the liquidity
As such, the Group calculates the amount of
support related to the COVID-19
loans that are not expected to be collected andpandemic, and potential increases in credit
records this as a reserve for possible loanrisk estimated based on available external
losses.
public information, in addition to the
The amount of the reserve for possible loanmonetary impact of changes in the debtor
losses recorded in the consolidated balance
classification on the amount of the reserve
sheet as of March 31, 2022 was 61,849
for possible loan losses.
million yen. The method used for recognizing ・In order to obtain an understanding of thethe reserve for possible loan losses isrecent status of deterioration in thedescribed in detail in “g. Reserve for Possible
repayment status, financial position, orLoan Losses” under “3. Summary ofbusiness performance of the debtors,
Significant Accounting Policies” in Notes toincluding the impact of the COVID-19
Consolidated Financial Statements. Details of
pandemic, we inspected a set of materials
the estimation of the reserve for possible loan
related to the self-assessment of asset
losses are described in “Significant
quality performed by the Group, such as
Accounting Estimates” in Notes to
explanatory materials on the business
Consolidated Financial Statements.
conditions of debtors, materials on debts
The reserve for possible loan losses isand repayment status, investigation24

calculated in accordance with the Group’s
predetermined guidelines for self-assessmentof asset quality as well as for write-offs andprovisioning. The calculation processincludes the determination of the debtor
classification, which is determined byevaluating the debtor’s repayment ability
based on its repayment history, financial
position, business performance and future
prospects thereof.

materials that provide details of the actual
financial position of debtors, financial
statements, and trial balances, andcompared them with information publicly
disclosed by the Group, made inquiries of
the corporate department, and inspected thenegotiation history as necessary. For
particularly significant debtors affected by
the Group’s supporting policy and lending
strategy, we compared materials related tothe self-assessment of asset quality
performed by the Group with available
external credit information.

In particular, when determining theclassification of a debtor for which repayment
status, financial position, or business・For debtors for which repayment status,
performance is deteriorating, factors such as
financial position or business performancethe reasonableness and feasibility of theis deteriorating and who are preparing
business improvement plan, which embodies
business improvement plans, to consider
the assumption of the outlook for future
the reasonableness and feasibility of suchbusiness performance including the impact ofplans, we analyzed trends based on past
the COVID-19 pandemic, serve as significant
results for the debtors’ plan items such as
factors in making the relevant judgment.
sales, gross profit or loss, operating profit
The reasonableness and feasibility of businessor loss, profit or loss from ordinary
improvement plans are affected by changes in
activities, and net profit or loss, evaluatedthe business environment surrounding
the accuracy of estimates based on the
debtors, the outcome of their business
degree of achievement of previous businessstrategies, and the Group’s supporting
improvement
plans, and made inquiries ofpolicies and lending strategies for suchthe corporate department and inspected thedebtors. Therefore, the determination ofnegotiation history as necessary. In cases
debtor classification involves estimation
where COVID-19 has had a significant
uncertainty and requires significant
impact on the debtor’s repayment status,
management judgement. In addition, thefinancial position or business performance,
degree of estimation uncertainty and reliance
we confirmed that such impact was taken
on management judgment may be higher
into account in considering thewhen COVID-19 has a significant impact onreasonableness and feasibility of businessthe debtor’s repayment status, financial
improvement plans. For particularly
position or business performance.
significant debtors affected by the Group’s
Accordingly, we have determined that the
supporting policy and lending strategy, weclassification of debtors for the purpose ofmade inquiries of management anddetermining the reserve for possible loan
executives in the corporate department
losses for debtors for which repayment status,
regarding the Group’s supporting policy
financial position, or business performance isand the current status and future prospects
deteriorating is a key audit matter.
of such debtors, and compared theirbusiness improvement plans with available
external information.

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Other Information
The other information comprises the information included in the financial report that contains
audited consolidated financial statements but does not include the consolidated financial
statements and our auditor’s report thereon. We have concluded that the other information does
not exist. Accordingly, we have not performed any work related to the other information.
Responsibilities of Management, the Audit and Supervisory Committee for theConsolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated
financial statements in accordance with accounting principles generally accepted in Japan, andfor such internal control as management determines is necessary to enable the preparation of
consolidated financial statements that are free from material misstatement, whether due to fraud
or error.
In preparing the consolidated financial statements, management is responsible for assessing theGroup’s ability to continue as a going concern and disclosing, as required by accounting
principles generally accepted in Japan, matters related to going concern.
The Audit and Supervisory Committee is responsible for overseeing the Group’s financial
reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and toissue an auditor’s report that includes our opinion. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these consolidated
financial statements.
As part of an audit in accordance with auditing standards generally accepted in Japan, we
exercise professional judgment and maintain professional skepticism throughout the audit. We
also:
・ Identify and assess the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error, design and perform audit procedures responsive tothose risks, and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion.
・ Consider internal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances for our risk assessments, while the purpose of the audit of
the consolidated financial statements is not expressing an opinion on the effectiveness of theGroup’s internal control.
・ Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.

26

・ Conclude on the appropriateness of management’s use of the going concern basis ofaccounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Group’s ability tocontinue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the
consolidated financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor’s report. However, future events or conditions may cause the Group to cease tocontinue as a going concern.
・ Evaluate the overall presentation, structure and content of the consolidated financial
statements, including the disclosures, and whether the consolidated financial statements
represent the underlying transactions and events in a manner that achieves fair presentationin accordance with accounting principles generally accepted in Japan.
・ Obtain sufficient appropriate audit evidence regarding the financial information of theentities or business activities within the Group to express an opinion on the consolidated
financial statements. We are responsible for the direction, supervision and performance ofthe group audit. We remain solely responsible for our audit opinion.
We communicate with the Audit and Supervisory Committee regarding, among other matters,
the planned scope and timing of the audit and significant audit findings, including any
significant deficiencies in internal control that we identify during our audit.
We also provide the Audit and Supervisory Committee with a statement that we have compliedwith the ethical requirements regarding independence that are relevant to our audit of theconsolidated financial statements in Japan, and to communicate with them all relationships andother matters that may reasonably be thought to bear on our independence, and whereapplicable, related safeguards.
From the matters communicated with the Audit and Supervisory Committee, we determine thosematters that were of most significance in the audit of the consolidated financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in our auditor’sreport unless law or regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not be communicated in ourreport because the adverse consequences of doing so would reasonably be expected to outweighthe public interest benefits of such communication.
Interest Required to Be Disclosed by the Certified Public Accountants Act of Japan
Our firm and its designated engagement partners do not have any interest in the Group which is
required to be disclosed pursuant to the provisions of the Certified Public Accountants Act ofJapan.

27

Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect tothe year ended March 31, 2022 are presented solely for convenience. Our audit also included thetranslation of Japanese yen amounts into U.S. dollar amounts and, in our opinion, suchtranslation has been made on the basis described in Note 2 to the consolidated financial
statements.
Ernst & Young ShinNihon LLC
Tokyo, Japan
August 10, 2022

根 津 昌 史/s/Masashi Nezu
Designated Engagement Partner
Certified Public Accountant㊞

池 田 裕 之/s/Hiroyuki Ikeda
Designated Engagement Partner
Certified Public Accountant㊞

刀 禰 哲 朗/s/Tetsuro Tone
Designated Engagement Partner
Certified Public Accountant㊞

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2-12-6 Hirooka, Kanazawa, Ishikawa 920-8670 Japan
Tel: +81(76) 263-1111

https://www.hfhd.co.jp/