2 02 3

HOKKOKU FINANCIAL HOLDINGSFINANCIAL REPORT

2023

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

As of March 31,
2023
Assets:Cash and due from banks (Note 14)
Call loans and bills bought
Monetary claims bought
Money held in trusts (Note 11)
Securities (Notes 8, 9, 10 and 16)
Loans and bills discounted (Notes 8 and 9)
Foreign exchanges (Note 8)
Lease receivables and investment in leased assets (Note 21)
Other assets (Notes 8 and 16)
Tangible fixed assets (Notes 13 and 15)
Intangible fixed assets
Deferred tax assets (Note 25)
Customers’ liabilities for acceptances and guarantees (Note 8)
Reserve for possible loan losses
Total assets
Liabilities:
Deposits (Notes 9 and 16)
Negotiable certificates of deposit (Note 9)
Call money and bills sold (Note 16)
Guarantee deposit received under securities lending transactions (Note 16)
Borrowed money (Notes 9, 16 and 17)
Foreign exchanges
Bonds payable (Note 18)
Borrowed money from trust account (Note 19)
Other liabilities (Note 26)
Reserve for bonuses
Net defined benefit liability (Note 26)
Reserve for management board benefit trust
Reserve for reimbursement of deposits
Reserve for loss on refund of interest
Deferred tax liabilities (Note 25)
Deferred tax liability arising from revaluation of land (Note 13)
Acceptances and guarantees
Total liabilities
Net assets:
Common stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity (Note 20)
Valuation differences on available-for-sale securities
Net deferred gains on hedging instruments
Land revaluation surplus (Note 13)
Remeasurements of defined benefit plans (Note 26)
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets

See accompanying notes to consolidated financial statements.
1

¥

¥

2023

2022
Millions of yen

1,354,859
141,000
3,266
13,535
1,468,300
2,523,613
11,68436,445
51,111
32,102
8,539
4,617
17,282(62,631)5,603,724¥¥

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

4,360,798—¥

532,156
360,955
26,553
3
20,000164
42,925
712
1,376
410
96
2
1,185
1,411
17,282
5,366,036¥

10,00027,139188,428(8,216)217,351
11,332(2)
2,296(1,333)
12,292
8,044
237,688
5,603,724

Thousands of U.S. dollars(Note 2)$$

10,146,480
1,055,942
24,461
101,368
10,996,032
18,899,225
87,502272,935
382,768
240,41363,94834,576
129,428(469,047)
41,966,037
32,657,821—$

3,985,294
2,703,181
198,860
25
149,779
1,229
321,466
5,337
10,308
3,073
724
19
8,879
10,569129,428
40,185,999$

74,889203,246
1,411,131(61,534)
1,627,732
84,871(19)
17,195(9,986)
92,06060,244
1,780,037
41,966,037

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

Years ended March 31,
2023

2023

2022
Millions of yen

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 22)
Total income¥¥

24,105
13,701
511
38,3190
9,628
15,897
20,89784,743Thousands of U.S. dollars(Note 2)

24,12011,378588
36,0870
9,487
17,55921,59584,730$180,528
102,610
3,832
286,9713
72,106
119,058
156,498
634,637

Expenses
Interest expenses on:
Deposits
Borrowings and rediscounts
Interest on bonds
Cash collateral received for securities lent
Other
Total interest expenses
Fees and commissions
Other operating expenses
General and administrative expenses (Note 22)
Other expenses (Note 22)
Total expenses

103
1,689
179
2,169
7
4,149
3,517
21,84730,992
8,187
68,696

110
35
180
149
17
494
3,578
13,79931,03816,651
65,563

777
12,6491,342
16,24758
31,076
26,345
163,618
232,103
61,319514,463

Special gains and losses (Note 23)(1,484)(3,220)(11,113)

Profit before income taxes
Income taxes (Note 25):
Current
Deferred

14,562

15,946109,060

2,305
3,216
5,522
9,040
299
8,741

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

17,26824,08841,35767,7032,241
65,462

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

¥

¥

2023

$

2023

2022
Yen

Amounts per share (Note 27)
Net assets
ProfitProfit - diluted¥

9,149.42
336.06
336.05

U.S. dollars(Note 2)¥

9,576.53
340.64

$

—

68.51
2.51
2.51

See accompanying notes to consolidated financial statements.

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

Years ended March 31,
2023

2023

2022
Millions of yen

Profit

¥

9,040

¥

Thousands of U.S. dollars(Note 2)

9,626$

67,703

Other comprehensive income (Note 24)
Valuation differences on available-for-sale securities
Net deferred gains on hedging instruments
Remeasurements of defined benefit plans (Note 26)
Total other comprehensive income(25,269)(118)
133(25,254)(27,030)
119976(25,934)(189,245)
(886)
1,003
(189,128)

Comprehensive income(16,213)(16,308)(121,424)

Total comprehensive income attributable to:
Owners of parent
Non-controlling interests¥(16,562)348¥(16,424)
116$(124,037)
2,612

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

¥26,673¥13,053

Changes by share transfer

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

(16,673)

16,6736,344¥10,000¥29,727¥182,357

Cash dividends——(2,670)—

Profit attributable to owners of parent

—

—

8,741

—

8,741

Repurchase of treasury stock

—

—

—

(8,081)(8,081)

Disposal of treasury stock

—

(25)

—

427

401

Cancellation of treasury stock—(2,562)

—

2,562

—

Reversal of land revaluation surplus

—

—

0

—

0

Net changes in items other than shareholders’equity

—

—

—

—

—

Balance as of March 31, 2022

Total changes during the year
Balance as of March 31, 2023—
¥

10,000(2,588)¥

27,139¥(3,124) ¥218,960

6,070
¥

188,428(2,670)(5,091)¥(1,609)(8,216) ¥

217,351

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

¥63,560¥Land
revaluation
surplus(3) ¥

¥

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)

Net changes in items other than shareholders’equity(26,908)

119

23

976

(25,788)(105)(25,894)

Total changes during the year

(26,908)

119

23

976

(25,788)(105)(1,467) ¥37,597

Balance as of March 31, 2022

¥36,652

¥

115

¥

2,296

¥

¥

7,701

(22,011)¥

264,258

Cash dividends

—

—

—

—

—

—

Profit attributable to owners of parent

—

—

—

—

—

—

8,741

Repurchase of treasury stock

—

—

—

—

—

—

(8,081)

Disposal of treasury stock

—

—

—

—

—

—

401

Cancellation of treasury stock

—

—

—

—

—

—

—

Reversal of land revaluation surplus

—

—

—

—

—

—

0

(25,319)

(118)

(0)

133

(25,304)

343(24,960)

133(25,304)(1,333) ¥

12,292

Net changes in items other than shareholders’equityTotal changes during the year
Balance as of March 31, 2023

(25,319)¥

11,332(118)¥(2) ¥

See accompanying notes to consolidated financial statements.
3

2,272

Remeasurements ofdefinedbenefit plans

(0)
2,296

¥

(2,670)

343
¥

8,044

(26,569)¥

237,688

Thousands of U.S. dollars (Note 2)
Shareholders’ equity
Common stock Capital surplus

Retainedearnings

Treasury stock

Total$74,889$222,627$1,365,667$(23,401)$1,639,783

Cash dividends——(20,001)—(20,001)

Profit attributable to owners of parent——

65,462—

65,462

Repurchase of treasury stock

—

—

—

(60,523)(60,523)

Disposal of treasury stock

—

(192)

—

3,201

3,008

Cancellation of treasury stock—(19,189)—

19,189—

Reversal of land revaluation surplus

—

—

2

—

2

Net changes in items other than shareholders’equity

—

—

—

—

—

Balance as of March 31, 2022

Total changes during the year
Balance as of March 31, 2023—

(19,381)

45,463(38,132)(12,051)$74,889$203,246$1,411,131$(61,534)$1,627,732

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, 2022Land
revaluation
surplusRemeasurementsof defined
benefit plans

Total
accumulated
othercomprehensive income

Non-controllinginterests
Total net assets$274,487$866$17,197$(10,989)$281,562$57,672$1,979,018

Cash dividends

—

—

—

—

—

—

(20,001)

Profit attributable to owners of parent

—

—

—

—

—

—

65,462

Repurchase of treasury stock

—

—

—

—

—

—

(60,523)

Disposal of treasury stock

—

—

—

—

—

—

3,008

Cancellation of treasury stock

—

—

—

—

—

—

—

Reversal of land revaluation surplus

—

—

—

—

—

—

2

Net changes in items other than shareholders’equity(189,616)

(886)

(2)

1,003

(189,501)

2,571(186,929)

Total changes during the year

(189,616)

(886)

(2)

1,003

(189,501)

2,571(198,980)$84,871$(19)$17,195$(9,986)$92,060$60,244$1,780,037

Balance as of March 31, 2023

See accompanying notes to consolidated financial statements.
4

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

Years ended March 31,
2023
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 (excluding 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 refund
Income taxes paid, net of refund
Net cash provided by (used in) operating activities

14,562¥Thousands of U.S. dollars(Note 2)

15,946$109,060

4,190
93
782
(35)
(1,021)
–
(86)
(30)
(17)
–
(38,319)
4,149(11,325)(6)(19,204)640–
61,648102,598(129,432)

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
19,63931,380
701
5,860
(263)
(7,652)
–
(645)
(230)
(129)
–
(286,971)
31,076(84,813)(50)(143,819)
4,799–
461,683
768,354(969,311)(3,700)(76,214)(86,668)

14,85453,044(99,869)(27,710)(570,765)(649,057)

47,458–(545)
1(1,672)3,387
924,471(3,955)(12,827)(121,068)
1,315(9,196)(128,949)

83,130
105
(359)
(0)
384
(1,487)
924,747(427)
10,692
302,374–(8,257)294,117355,416–(4,087)
11(12,525)
25,36568
183,266(29,621)(96,066)(906,675)
9,853(68,875)(965,697)

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(489,726)
298,61360,66917,125(2,477)(2,569)1,000(117,364)(800,593)
555,992
86,488
13,694(2,243)(2,971)
496(149,137)(3,667,542)
2,236,304
454,351
128,255(18,555)(19,242)7,491(878,935)

Cash flows from financing activities:
Cash dividends paid
Cash dividends paid to non-controlling interests
Repurchase 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 14)(2,673)(5)(8,081)
340(10,420)
21(256,712)
1,604,721
1,348,008(2,519)(221)(3,041)82(5,700)22
139,302
1,465,419
1,604,721(20,025)(40)(60,523)
2,552(78,036)
163(1,922,506)
12,017,683
10,095,176

See accompanying notes to consolidated financial statements.
5

¥

2023

2022
Millions of yen

¥

¥

$

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Hokkoku Financial Holdings, Inc. and Consolidated Subsidiaries
For the years ended March 31, 2023 and 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.
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 ¥133.53 = U.S. $1.00, the rate ofexchange in effect on March 31, 2023 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
As of and for the year ended March 31, 2023, the accompanying
consolidated financial statements include the accounts of the Company
and its 11 subsidiaries: the Bank, the Hokkoku General Leasing Co.,
Ltd., the Hokkoku Credit Service Co., Ltd., the Hokkoku Credit
Guarantee Co., Ltd., the COREZO, Ltd. (formerly, the Hokkoku
Management, Ltd.), the Hokkoku Servicer, Ltd., Digital Value Co, Ltd.,the FD Advisory, Ltd., the CC Innovation, Ltd., the BPO Management,
Ltd. and the QR Investment, Ltd.
On April 1, 2022, the BPO Management, Ltd. was newly establishedby the former Hokkoku Management, Ltd. through an incorporationtype company split, and included in the scope of consolidation fromthe year ended March 31, 2023. All significant inter-company
receivables and payables and transactions have been eliminated inconsolidation.
The following six subsidiaries are not consolidated, nor accounted
for by the equity method, as the assets, contribution of their income
and retained earnings are considered immaterial and do not havea material impact on the consolidated financial statements if
excluded from the scope of consolidation, and their nonconsolidation will not prevent reasonable judgments regarding theGroup’s financial position and 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 Fund Investment Limited
Partnership, Thai CC Innovation Co., Ltd., CC Innovation Vietnam
Co., Ltd. and CC Innovation Singapore Pte. Ltd.
Similarly, there are three associates that are not accounted for by
the equity 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 claims, which it
is possible to reasonably estimate cash flows from collection ofprincipal 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 (estimated cash flow method).
For other claims, the Bank classifies debtors into groups based onrelationship with debtors, understanding of debtors’ business (businessfeasibility), as well as debtors’ financial information. For each group,
the Bank estimates the probability of default using the Bank’s pastdefault experience over one year or three years. In addition, in orderto take into account economic fluctuation factors, the expected rate ofloan losses calculated with reference to the long-term average rate ofdefault is also used for the calculation of the probability of default.
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 of6the 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 ¥23,327 million ($174,700 thousand) and¥23,472 million for the years ended March 31, 2023 and 2022.
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 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.

7

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
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. Amounts recognized in the consolidated financial statements as ofMarch 31, 2023 and 2022
2023
2022
2023
Millions of yen

Reserve for possible loan losses

Thousands of
U.S. dollars¥62,631 ¥61,849 $469,047

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 subsidiary of the Company, determines
the amount of reser ve for possible loan losses based on thedetermination of judgments of debtor classification in accordance withthe self-assessment of asset quality guidelines, and as stated in “3.
Summary of Significant Accounting Policies, g. Reserve for possible
loan losses.”(2)Key assumptions
Key assumptions include “outlook for future performance of debtors indetermining debtor classification.”
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 including the impacts of the COVID-19 situation and soaring
resource prices, the outcome of the debtor’s business strategy and theBank’s supporting policy to the debtor.
(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 from the assumptions originally used in the estimates, due tothe change in future performance of debtors or other factors.
5. Changes in Accounting Policies(Application of Implementation Guidance on Accounting Standard for
Fair Value Measurement)
Effective from the beginning of the year ended March 31, 2023, theGroup has applied the “Implementation Guidance on AccountingStandard for Fair Value Measurement” (ASBJ Guidance No. 31, June 17,
2021, hereinafter “Implementation Guidance”). In accordance with thetransitional treatment prescribed in Paragraph 27-2 of the
Implementation Guidance, the Group has applied this new accounting
policy prospectively. There is no impact on the consolidated financial
statements from the changes.
Further, in accordance with Paragraph 27-3 of the Implementation
Guidance, the footnote of investment trusts for the year ended March 31,
2022 is not disclosed in Note “9. Financial Instruments and Related
Disclosures, Fair value hierarchy of financial instruments.”
6. Changes in Accounting Estimates
The Bank being a consolidated subsidiary of the Company previously
provided the general reserve for possible loan losses for debtors(excluding those with restructured claims and for which estimated cash
flow method is applied) based on the expected loan loss amount over the
next one year or three years. The expected loan loss amount is estimatedby using 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.
On the other hand, the Group has adopted the policy to conduct businessbased on an understanding of a client’s business feasibility focusing on
future and growth potential, with the strong relationship with thecustomer, and has worked to solve the customer’s business agendas,
while better-managing credit.
In light of this background, the Bank has examined a more appropriate
method for providing the reserve for possible loan losses by making
debtor classification more granular to accurately identify change in loan
portfolio profile of the Bank and taking into account future economic
fluctuations by reflecting past long-term cyclical changes. For the year
ended March 31, 2023 the Bank has changed the method of accounting
estimates after completing the data analysis and its procedures as well as
related internal control procedures.
In particular, the method to calculate expected loan loss has beenchanged as follows: (i) to break down the debtor classification into
groups based on relationship with debtors, understanding of debtors’
business (business feasibility), in addition to debtors’ financial information
which the Bank has focused on, (ii) for each group, to obtain theprobability of default based on the Bank’s past default experience over
one year or three years, and finally (iii) to estimate expected rate of loan
loss with reference to the long-term average rate of default in order totake into account economic fluctuations.
As a result of this change in accounting estimates, the reserve for possible
loan losses decreased by ¥2,443 million ($18,295 thousand) and profit
before income taxes increased by ¥2,443 million ($18,295 thousand) for
the year ended March 31, 2023.
7. 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.
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 the respective Officers corresponding to the number ofpoints granted to the respective Officers 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 ¥500 million ($3,745 thousand) and 105
thousand shares for the year ended March 31, 2023 and ¥561
million and 117 thousand shares for the year ended March 31,
2022, respectively.

8. Claims to be disclosed under the Financial Revitalization
Act and the Banking Act
Claims to be disclosed under the Act on Emergency Measures for the
Revitalization of the Financial Functions (the “Financial RevitalizationAct”) and the Banking Act are included in the following accounts in the
consolidated balance sheets:• 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:
2023

2022

Millions of yen

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

2023
Thousands of
U. S. dollars¥ 29,654 ¥ 17,094 $222,079
41,09949,797

307,792

1,381

857

10,3492,187
9,079
16,383¥ 74,323 ¥ 76,829 $556,605

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 are
granted to debtor, including reduction or waivers of interest, deferredpayment of principal or interest and debt forgiveness. The amounts ofclaims are before deducting reserve for possible loan losses.
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 ¥9,701 million ($72,657
thousand) and ¥9,151 million as of March 31, 2023 and 2022,
respectively.
Overdraft agreements and loan commitments are agreements underwhich the Group is 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, 2023 and 2022 totaled ¥378,685
million ($2,835,955 thousand) and ¥394,436 million, respectively;¥366,897 million ($2,747,679 thousand) of which, as of March 31,
2023 (2022: ¥381,637 million), 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 make 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,

8monitoring a customer’s business on a regular basis in accordance withestablished internal procedures, and modifying the loan commitment
agreements when necessary.
9. Financial Instruments and Related Disclosures
Status of Financial Instrumentsa. 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 Groupfor 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 and9loans. 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 have been
established to define the authority and hedging policies, and thecredit lines by counterparty have been determined. Front officesthat enter into the contracts, back offices that conduct reconciliation
procedures and control the credit lines and the divisions that assess
the effectiveness of hedges are separated so that 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 ¥45,660 million ($341,947 thousand)and ¥48,702 million as of March 31, 2023 and 2022,
respectively. The deposit internal models are applied to measureinterest 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, 2023 and 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, foreignexchanges (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 sheets.
March 31, 2023
Millions of yen

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

Fair value

Difference¥1,448,587 ¥1,448,587 ¥
2,523,613—(60,945)2,462,668
2,469,876
Assets, total
3,911,255
3,918,463
Deposits
4,360,798
4,360,802
Borrowed money
26,55326,554
Liabilities, total
4,387,352
4,387,356
Derivative transactions (*2)
To which hedge accounting
105
105
is not applied
To which hedge accounting(4)(4)
is applied
Derivative transactions, total ¥101 ¥101 ¥

7,208
7,208
3
0
3
—

—

Thousands of U. S. dollars

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

Fair value

Difference$10,848,402 $10,848,402 $
18,899,225—(456,417)
18,442,808
29,291,210
32,657,821
198,860
32,856,682

18,496,792
Assets, total
29,345,194
Deposits
32,657,848
Borrowed money
198,862
Liabilities, total
32,856,710
Derivative transactions (*2)
To which hedge accounting
792
792
is not applied
To which hedge accounting
(33)
(33)
is applied
Derivative transactions, total $759 $759 $

53,98453,984
26
1
28
—
—
—

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)

2,526,862
2,540,105
Assets, total
3,878,617
3,891,860
Deposits
4,257,200
4,257,212
Negotiable certificates of deposit
1,000
1,000
Borrowed money
155,985
155,986
Liabilities, total
4,414,186
4,414,199
Derivative transactions (*2)
To which hedge accounting(3,312)(3,312)
is not applied
To which hedge accounting
159
159
is applied
Derivative transactions, total ¥(3,152) ¥(3,152) ¥

13,243
13,243
11
—
0
12

2022

Millions of yen

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

2023
Thousands of
U. S. dollars

Carrying value¥ 3,765 ¥ 3,476 $ 28,197
15,947849
119,432¥19,712 ¥ 4,325 $147,629(*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) The Group recognized loss on impairment of ¥308 million ($2,310
thousand) on unlisted equity securities for the year ended March 31, 2023.
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 24-16 of the “Implementation Guidance on AccountingStandard for Fair Value Measurement (ASBJ Guidance No. 31, June 17,2021).

(Note 2) M aturity of financial assets and securities with contractual
maturities as of March 31, 2023
March 31, 2023
Millions of yen—

March 31, 2023
Carrying value2023

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¥87,513 ¥170,839 ¥189,861 ¥119,176 ¥362,476 ¥81,963
securities with
contractual maturities:
Japanese government————
159,800
67,000bonds
Municipal bonds
36,98967,73560,342
83,507
132,450
15
Corporate bonds
39,57855,57591,093
1,016
2,116
3,900
Other
10,94547,52938,42634,653
68,11011,048Loans (*)
607,672
396,417272,183
239,930
274,701
690,379
Total¥695,186 ¥567,257 ¥462,045 ¥359,106 ¥637,178 ¥772,342
March 31, 2023
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$655,382 $1,279,412 $1,421,865 $892,504 $2,714,571 $613,817
securities with
contractual maturities:
Japanese government———— 1,196,734
501,759
bonds
Municipal bonds
277,014507,265
451,899625,380
991,913112
Corporate bonds
296,400
416,203
682,195
7,608
15,846
29,206
Other
81,968355,942
287,771259,515510,076
82,738Loans (*)
4,550,834 2,968,753 2,038,369 1,796,826 2,057,228 5,170,219
Total$5,206,217 $4,248,165 $3,460,235 $2,689,330 $4,771,799 $5,784,037(*) Loans to “legally bankrupt,” “substantially bankrupt” and “likely to becomebankrupt” borrowers which are not expected to be repaid amounting to¥29,790 million ($223,101 thousand) are not included.
Loans with no contractual maturities amounting to ¥12,537 million ($93,892
thousand) are not included.

———(*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.

10

(Note 3) Maturity of bonds and interest-bearing liabilities as of March
31, 2023

March 31, 2023
Thousands of U. S. dollars

March 31, 2023
Level 1Millions of yen

Deposits (*)
Borrowed money
Total

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¥3,490,436 ¥ 198,281 ¥ 43,553 ¥
— ¥
— ¥
—
26,46786————¥3,516,904 ¥198,368 ¥43,553 ¥
— ¥
— ¥
—
March 31, 2023
Thousands of U.S. dollars

Deposits (*)
Borrowed money
Total

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$26,139,718 $1,484,921 $326,167 $
— $
— $
—
198,213647————$26,337,931 $1,485,568 $326,167 $
— $
— $
—

(*) 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 sheets
March 31, 2023
Millions of yen

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

Fair value
Level 2 Level 3¥245,129 ¥— ¥— 372,490
—
399
—
6,027
— 125,187—
57,730136,175—
2,617—
65,598132,928
54,148
246,788503,670
941,552
—
—
¥

105
(4)

— ¥101 ¥

Total— ¥245,129— 372,490
—
399
—
6,027
— 125,187
3,364
61,095— 136,175—
2,617— 198,527— 300,937
3,364 1,448,587
—
—

105
(4)

— ¥101

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

Total$1,835,762 $
— $
— $1,835,762— 2,789,560— 2,789,560
—
2,994
—
2,994
—
45,137—45,137— 937,524— 937,524— 432,343
25,197457,541
1,019,812—— 1,019,812
19,604——
19,604491,266
995,493— 1,486,760
405,517 1,848,186— 2,253,704
3,771,963 7,051,240
25,197 10,848,402
—
—
$

792
(33)

—
—

— $759 $

792
(33)

— $759

March 31, 2022
Millions of yen

Level 1
Securities:
Available-for-sale securities (*2):
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 (*1):
Currency relatedInterest rate related
Included in Derivativetransactions, total

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
—
—
¥

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) ¥——(3,312)159— ¥(3,152)(*1) 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) The table as of March 31, 2022 does not include investment trusts for which
the transitional treatment prescribed in Article 5, Paragraph 6 of the
supplementary provision of the “Cabinet Office Order to Partially Amend
the Regulation on Terminology, Forms, and Preparation Methods ofFinancial Statements” (Cabinet Office Order No. 9, March 6, 2020) areapplied. Carrying value of such investment trusts in the consolidatedbalance sheet as of March 31, 2022 is ¥219,996 million.

(2)‌Financial instruments other than those measured at fair value in the
consolidated balance sheets
March 31, 2023
Millions of yen

Loans
Included in Assets, total
Deposits
Borrowed money
Included in Liabilities, total

11

Fair value
Level 2 Level 3

Fair value
Level 1 Level 2 Level 3
Total
¥
— ¥
— ¥2,469,876 ¥2,469,876—— 2,469,876
2,469,876— 4,360,802— 4,360,802—
26,554—26,554¥— ¥4,387,356 ¥— ¥4,387,356

March 31, 2023
Thousands of U. S. dollars

Loans
Included in Assets, total
Deposits
Borrowed money
Included in Liabilities, total

Fair value
Level 1 Level 2 Level 3
Total
$
— $
— $18,496,792 $18,496,792—— 18,496,792 18,496,792— 32,657,848— 32,657,848—
198,862—
198,862$— $32,856,710 $
— $32,856,710
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(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 sheets(1)Quantitative information on significant unobservable inputs
Fiscal year ended March 31, 2023
Significant
WeightedValuation unobservable Range of average oftechniques
inputsinputsinputsSecurities:
Available-for-sale securities
Industrial bonds

Present value

Probability of
0.30 – 1.53%
default

1.07%

Fiscal year ended March 31, 2022
Significant
WeightedValuation unobservable Range of average oftechniques
inputsinputsinputsSecurities:
Available-for-sale securities
Industrial bonds

Present value

Probability of
0.14 – 2.11%
default

0.80%(2)Reconciliation from beginning balance to ending balance andvaluation gains or losses recognized for the years ended March 31,
2023 and 2022
March 31, 2023
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
Industrial bonds ¥3,415 ¥— ¥6 ¥(58) ¥Assets, total ¥3,415 ¥— ¥6 ¥(58) ¥

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

Valuation
gains(losses)(*2)— ¥ 3,364 ¥— ¥3,364 ¥

——March 31, 2023
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
Industrial bonds $25,581 $— $50 $(434) $
Assets, total $25,581 $— $50 $(434) $

— $
— $

ReclassificationfromLevel 3

Balance at
end ofyear

Valuation
gains(losses)(*2)— $ 25,197 $
— $25,197 $

—
—

12

March 31, 2022

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
Industrial bonds ¥3,106 ¥— ¥3 ¥305 ¥Assets, total ¥3,106 ¥— ¥3 ¥305 ¥

— ¥
— ¥

Millions of yen

ReclassificationfromLevel 3

Balance at
end ofyear

Valuation
gains(losses)(*2)— ¥ 3,415 ¥— ¥3,415 ¥——(*1) The amount is included in “Valuation differences on available-for-salesecurities” of “Other comprehensive income” of the consolidated statementsof 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 of
Industrial bonds is a probability of default. Significant increase(decrease) in this input alone results in significant decrease (increase)in the fair value.
10. Securities
a. Trading account securities
Valuation differences on trading account securities included inearnings for the years ended March 31, 2023 and 2022 were niland ¥(0) million, respectively.
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, 2023 and 2022.
c. Available-for-sale securities which have a readily determinable fairvalue
The acquisition cost and carrying value of available-for-sale securities
which have a readily determinable fair value and the related
unrealized gains or losses as of March 31, 2023 and 2022 aresummarized as follows:
March 31, 2023
Millions of yen

Stock
Debt securities
Others
Total

Carrying Acquisition
value
cost
Difference
Gains
Losses¥136,175 ¥66,359 ¥69,815 ¥70,885 ¥1,069
810,329
827,370(17,040)150
17,190502,082
537,200(35,118)
3,663
38,781¥1,448,587 ¥1,430,930 ¥17,657 ¥74,698 ¥57,041
March 31, 2023
Thousands of U.S. dollars

Stock
Debt securities
OthersTotal

13

Carrying Acquisition
value
cost
Difference
Gains
Losses$1,019,812$496,964 $522,847 $530,854 $8,007
6,068,520
6,196,135(127,614)
1,125
128,740
3,760,069
4,023,068(262,999)
27,432
290,432$10,848,402 $10,716,169 $132,233 $559,413 $427,180

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

Japanese government bonds, equities and others loaned under the
securities lending agreement in the amount of ¥32,936 million ($246,659
thousand) and ¥72,998 million is included in the above as of March 31,
2023 and 2022, respectively.
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 was not recognized for the year ended
March 31, 2023. The related loss on impairment amounted to ¥3,803
million (of which, ¥3,803 million for stock) for the year ended March 31,
2022. The criteria for determining if such decline 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,
2023 and 2022 are as follows:
2023

2022

Millions of yen

Unrealized gains on available-forsale securities
Deferred tax liabilities

2023
Thousands of
U. S. dollars¥17,657 ¥ 53,734 $ 132,233(4,928)(15,736)(36,910)¥12,728 ¥ 37,998 $ 95,322
Attributable to non-controlling interest(1,395)(1,345)(10,450)
Net unrealized gains on available¥11,332 ¥ 36,652 $ 84,871
for-sale securities
Note:
Unrealized gains on investments in partnerships without market prices, inthe amount of ¥53 million, are included in unrealized gains on availablefor-sale securities as of March 31, 2022.
Available-for-sale securities sold during the years ended March 31, 2023
and 2022 are summarized as follows:
2023

2022

Millions of yen

Proceeds from sale
Gain on sale
Loss on sale¥305,974
20,98910,315¥550,686
24,5303,828

2023
Thousands of
U. S. dollars$ 2,291,429
157,187
77,252

11. Money Held in Trusts
Money held in trusts for investment purposes
2023

2022

Millions of yen

2023
Thousands of
U. S. dollars

Amount recorded in the consolidated¥13,535 ¥13,528 $101,368
balance sheets
Valuation differences included in
35
28
267
profit and loss for the fiscal year
12. 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, theGroup 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,
2023 and 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, 2023 and2022.
(2) Currency related derivatives
March 31, 2023
Millions of yen

Contract amount
Total

Over one year Fair value

OTC transactions:
— ¥
— ¥
Currency swaps¥Forward contracts on foreign Sold
69,067—exchange
Bought37,474
—
Sold
6,255
5,732
Currency options
Bought
6,255
5,732
Total
¥
— ¥
— ¥

Valuation
gains(losses)

— ¥
(596)
699
(419)
422
105 ¥

—
(596)
699
473
(461)
115

March 31, 2023
Thousands of U. S. dollars

Contract amount
Total

Over one year Fair value

Valuation
gains(losses)

OTC transactions:
— $
— $
— $
—
Currency swaps$Forward contracts on foreign Sold
517,246—(4,464)(4,464)exchange
Bought 280,647
—
5,239
5,239
Sold
46,84942,930(3,143)
3,545
Currency options
Bought46,84942,9303,161(3,458)
Total
$
— $
— $ 792 $ 861
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
2,148
(266)
(68)
Currency options
Bought
3,488
2,148
266
76
Total
¥
— ¥
— ¥ (3,312) ¥ (3,304)
Note:
The above transactions are stated at fair value and valuation gains orlosses is recorded in the consolidated statements 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, 2023 and 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, 2023
Millions of yen
Contract
amountContract
Fair valuedueamountafter oneyear

Interest
Deferral rate swaps:
Securities ¥16,676 ¥16,676 ¥(4)Receivehedge
accounting floating
Pay fixedTotal—— ¥(4)

Hedge
Transaction
accounting
type
methodMajor
hedgeditem

March 31, 2023
Thousands of U. S. dollars
Contract
amountContract
Fair valuedueamountafter oneyear

Interest
Deferral rate swaps:
Securities $124,889 $124,889 $(33)Receivehedge
accounting floating
Pay fixed
Total—— $(33)

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
Note:
Gains or losses on above contacts is deferred until maturity of the hedged
items in accordance with JICPA Industry Audit Committee Report No. 24.
(2) Currency related derivatives
There are no currency related derivatives as of March 31, 2023 and2022.
13. 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 ¥5,819
million ($43,580 thousand) and ¥6,047 million as of March 31, 2023
and 2022, respectively.
14. Cash Flows
A reconciliation between cash and due from banks in the consolidatedbalance sheets as of March 31, 2023 and 2022 and cash and cash
equivalents in the consolidated statements of cash flows for the year thenended is as follows:

14

2023

2022

Millions of yen

2023

Cash and due from banks¥1,354,859 ¥ 1,607,831 $ 10,146,480
Due from banks other than the Bank
(6,850)(3,110)(51,303)of JapanCash and cash equivalents¥1,348,008 ¥ 1,604,721 $ 10,095,176
15. ‌Accumulated Depreciation and Deferred Gains on
Tangible Fixed Assets
Accumulated depreciation totaled ¥34,225 million ($256,311 thousand)and ¥34,133 million as of March 31, 2023 and 2022, respectively.
Deferred gains on tangible fixed assets deducted for tax purposes as ofMarch 31, 2023 and 2022 were ¥2,775 million ($20,785 thousand)and ¥2,847 million, respectively.
16. Assets Pledged
Assets pledged as collateral as of March 31, 2023 and 2022 were as
follows:
2023

2022

Millions of yen

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

¥

¥

720,455 ¥
743
721,198

2023
Thousands of
U. S. dollars

662,707 $ 5,395,455
4,130
5,566
666,8375,401,021

42,154
26,40022,00042,761
155,700
22,000315,696
197,708
164,756

360,955

313,497

2,703,181

451,510 ¥

533,958 $ 3,381,343

Margin deposits with the clearing house of ¥20,000 million ($149,779
thousand) and ¥20,000 million as of March 31, 2023 and 2022 andguarantee deposits of ¥68 million ($510 thousand) and ¥85 million were
included in other assets as of March 31, 2023 and 2022, respectively.
17. Borrowed Money
The details of borrowed money as of March 31, 2023 and 2022 are as
follows:
2023

2022

Millions of yen

Borrowed money
Due from May 2023 throughFebruary 2026
Average interest rate: 0.00% p.a.

2023
Thousands of
U. S. dollars¥26,553 ¥155,985 $198,860

Scheduled repayments of borrowed money by each year:
Year ending March 31,
2024
2025
2026
2027
2028 and thereafter
Total

Millions of yen

Thousands of U. S.
dollars¥26,467 $
198,213
62
467
24
180
—
—
—
—
¥26,553 $198,860

18. 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, 2023
and 2022 are as follows:

15

2023

Thousands of
U. S. dollars

Issueddate

Redemption Interest
date
rate

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

2022

2023
Thousandsof U. S.
dollars

Millions ofyen

0.94% ¥

10,000 ¥

10,000 $

74,8890.86%

10,00010,00074,88920,000 ¥

20,000 $ 149,779¥Scheduled redemptions of bonds payable by each year:
Year ending March 31,
2024
2025
2026
2027
2028 and thereafter
Total

Millions of yen

Thousands of U. S.
dollars

¥

— $
—
—
—
20,000¥20,000 $

————
149,779
149,779

19. Borrowed Money from Trust Account
The principal amount of trust account with contracts indemnifying theprincipal is as follows:
2023

2022

Millions of yen

Money trust

¥164

¥

2023
Thousands of
U. S. dollars

154 $ 1,229

20. 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 cancel 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, 2023 and 2022 are as follows:a. Number of outstanding shares and treasury stock
For the year ended March 31, 2023

Type of shares
Issued stock:
Common stock
Treasury stock:
Common stockThousand shares
Balance at Increase Decrease Balance at
beginning during
duringendof yearthe year the yearof year27,908—1,000

26,908

1,118

1,784

1,093

1,809

Notes:
1. The decrease in issued stock of 1,000 thousand shares is due to thecancellation of treasury stock.
2. The increase in treasury stock of 1,784 thousand shares consists of
the repurchase of treasury stock of 1,783 thousand shares andrequests for the buyback of shares less than one unit of 1 thousand
shares.
3. The decrease in treasury stock of 1,093 thousand shares consists ofthe cancellation of treasury stock of 1,000 thousand shares, grantof restricted shares of 80 thousand shares and shares provided
from the Bank’s management board benefit trust of 12 thousand
shares.
4. The number of treasury stock (common stock) as of March 31,
2023 includes 105 thousand shares held by the Bank’s
management board benefit trust at Custody Bank of Japan, Ltd.
(Trust account).
For the year ended March 31, 2022

Type of shares
Issued stock:
Common stock
Treasury stock:
Common stockThousand shares
Balance at Increase Decrease Balance at
beginning during
duringendof yearthe year the yearof year28,115—

206

27,908

141

1,201

223

1,118

Notes:
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).
b. Stock acquisition rights
There are no stock acquisition rights as of March 31, 2023 and 2022.
c. Dividends paid to the shareholders during the year
For the year ended March 31, 2023
Date ofresolution

Resolution
byType ofsharesTotal
dividends

Dividends
per share

Dateof record

Effective
date

June
14, 2022

Ordinary
generalmeeting ofshareholders

CommonStock¥1,345
million($10,075
thousand)(Note 1)¥50.0($0.37)

March 31,2022

June 15,
2022

Board ofDirectors

CommonStock¥1,325
million($9,925
thousand)(Note 2)¥50.0($0.37)

October
28, 2022

September December 5,
30,
2022
2022

2. The total amount of dividends paid includes ¥5 million ($39
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 is shown in
the table below.
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 it’s 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(Note 1)¥50.0

March 31,2021

June 21,2021

October29, 2021

Board ofDirectors

CommonStock ofthe Bank¥1,116
million(Note 2)¥40.0

September December 3,
30,
2021
2021

Notes:
1. The total amount of dividends paid includes ¥6 million of dividends
for shares held by the Bank’s management board benefit trust.
2. The total amount of dividends paid includes ¥4 million of dividends
for shares held by the Bank’s management board benefit trust.
Dividends applicable to the year ended March 31, 2023, 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

Dateof record

Effective
date

June
9, 2023

Ordinary
generalmeeting ofshareholders

Commonstock¥1,260
million($9,437
thousand)(Note)¥50.0($0.37)

March
31,
2023

June 12,
2023(Above cash dividends are distributed from retained earnings.)
Note:
The total amount of dividends paid includes ¥5 million ($39 thousand) ofdividends for shares held by the Bank’s management board benefit trust.
21. Leases
As lessee:a. Finance leases
The Group has 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,
2023 and 2022:
2023

2022

Millions of yen

Due within one year
Due after one year
Total

¥154
232
¥386

¥
¥

160
246
407

2023
Thousands of
U. S. dollars$ 1,158
1,737$ 2,896

Notes:
1. The total amount of dividends paid includes ¥5 million ($44thousand) of dividends for shares held by the Bank’s management
board benefit trust.

16

As lessor:

23. Special gains and losses

a. Finance leases
Investment in leased assets consists of the following:Special gains and losses for the years ended March 31, 2023 and 2022
consist of the following:

2023

2022

Millions of yen

Lease receivables
Residual value
Unearned interest income
Total¥34,663 ¥
647(2,288)¥33,022 ¥

2023

34,452 $ 259,595
632
4,848
(2,496)(17,141)
32,589 $ 247,302

Maturities of lease receivables and investment in leased assets as ofMarch 31, 2023 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¥916 ¥10,051 $
6,862 $ 75,273
2024
2025
744
7,809
5,578
58,488
2026
643
5,889
4,816
44,109
2027
549
4,489
4,114
33,622
2028
216
3,374
1,620
25,2732029 and thereafter
352
3,048
2,639
22,828Total¥3,422 ¥34,663 $ 25,632 $ 259,595
b. Operating leases
The following table presents the schedule of future minimum lease
payments under non-cancellable operating leases as of March 31,
2023 and 2022:
2023

2022

Millions of yen

Due within one year
Due after one year
Total

¥184
242
¥426

Special gains (losses):— ¥Gain on revision of retirement benefit plan ¥Gain on disposal of tangible fixed assets
70
Loss on disposal of tangible fixed assets(1,460)Loss on impairment(93)
Business restructuring expenses—
Total¥(1,484) ¥Location
Ishikawa Pref.

2023
Thousands of
U. S. dollars

Outside Ishikawa Pref.

Major income included in other income for the years ended March 31,
2023 and 2022 are as follows:

Total

Millions of yen

Recoveries of written off receivables
Gain on sale of equity securities

2023
Thousands of
U. S. dollars¥263 ¥360 $ 1,970¥19,847 ¥20,098 $ 148,637

Major expenses included in other expenses for the years ended March
31, 2023 and 2022 are as follows:
2023

2022

Millions of yen

Major expenses included in general and administrative expenses for theyears ended March 31, 2023 and 2022 are as follows:
2023

2022

Millions of yen

Salaries and allowances
Retirement benefit expenses
Depreciation

Location
Ishikawa Pref.

Thousands of
U. S. dollars

Loss on disposable of tangible fixed assets includes loss on unusable
software of ¥1,367 million ($10,240 thousand) and ¥2,475 million forthe years ended March 31, 2023 and 2022, respectively.

2023
Thousands of
U. S. dollars¥12,512 ¥11,478 $ 93,705
77
1,310
579
¥3,948 ¥4,145 $ 29,567

726 $
—5526(2,492)(10,938)
(601)
(701)
(858)
—
(3,220) $(11,113)

Year ended March 31, 2023
Millions of Thousands ofMain use
Asset typeyen
U.S. dollars
9 operating
Land ¥
14 $
106
branches
4 operating
Buildings
16
119branches
1 commonLand
03
use asset
1 commonBuildings
54
410
use asset
3 idle assets
Land
0
6
1 operating
Building
650
branch1 idle asset
Land
0
5
¥
93 $
701

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.

2023

Provision of reserve for possible loan losses ¥3,269 ¥ 11,357 $ 24,488
Loss on sale of equity securities
1,620
911
12,137
Loss on devaluation of equity securities
502
3,862
3,764
Loss on sale of receivables¥162 ¥
291 $ 1,220

2023
Thousands of
U. S. dollars

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 statements of income, by reducing the carrying value to therespective recoverable amount.

¥190 $ 1,383
286
1,812
¥477 $ 3,196

2022

2022

Millions of yen

22. ‌Other Income, Other Expenses and General and
Administrative Expenses

2023

17

2023

Thousands of
U. S. dollars

Outside Ishikawa Pref.

Total

Year ended March 31, 2022
Millions ofMain use
Asset typeyen
11 operating
Land ¥226
branches
8 operating
Buildings
146
branches
8 idle assets
Land
57
1 idle asset
Buildings
21
1 operatingLand
36
branch2 operating
Buildings
16
branches
2 idle assets
Land
49
1 idle asset
Buildings
46
¥
601

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.

24. Other Comprehensive Income

26. Retirement Benefit Plans

The components of other comprehensive income for the years ended
March 31, 2023 and 2022 are as follows:

The Group has the defined contribution pension plans (corporate type)(“defined contribution plan”), and certain 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 planand transferred the defined contribution plan to the Company on thesame date.

2023

2022

Millions of yen

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¥(24,537) ¥(11,539)(36,077)(21,653) $ (183,763)(17,034)(86,417)(38,687)(270,181)

(3)
(166)
(170)
(76)
317
240
(36,006)
10,752¥(25,254) ¥
2023

166
5
172

(27)
(1,246)(1,273)

(31)
(576)
1,573
2,378
1,541
1,802
(36,973)(269,652)
11,03980,523(25,934) $ (189,128)
2022

2023
Thousands of
U. S. dollars

Millions of yen

Tax effect on other comprehensive income:
Valuation differences on available-for-sale securities:
Amount before tax effectTax effectAmount after tax effect
Deferred gains (losses) on hedging instruments:
Amount before tax effectTax effectAmount after tax effectRemeasurements of defined benefit plans
Amount before tax effectTax effectAmount after tax effect2023
Thousands of
U. S. dollars

Defined benefit Plans
a. The reconciliation of in defined benefit obligation for the years ended
March 31, 2023 and 2022 are as follows:
2023

2022

Millions of yen

Balance at beginning of year¥19,302 ¥ 29,725 $ 144,558
Service cost—
459—
Interest cost
35
48
268
Actuarial gains or losses
(16)
126
(123)
Benefits paid
(1,013)(1,459)(7,586)
Decrease due to transfer to the defined—(9,598)—contribution plan
Balance at end of year¥18,309 ¥ 19,302 $ 137,116
b. The reconciliation of in plan assets for the years ended March 31,
2023 and 2022 are as follows:
2023

2022

Millions of yen¥(36,077) ¥(38,687) $ (270,181)
10,807
11,65680,935(25,269)(27,030)(189,245)
(170)
51
(118)

172
(52)
119

(1,273)
387
(886)

240
1,541
(106)
(565)
¥133 ¥976 $

1,802
(799)
1,003

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

c. The reconciliation between the net defined benefit liability recorded in
the consolidated balance sheets and the balances at end of year ofdefined benefit obligation and plan assets
2023

2022

Millions of yen

2023

2022

2023
Thousands of
U. S. dollars

Millions of yen

Deferred tax assets:¥18,180 ¥ 18,238 $ 136,156
Reserve for possible loan losses
Net defined benefit liability
399
651
2,990
Depreciation of real estate
1,002
992
7,505
Devaluation of equity securities
695
928
5,211
Other
2,649
4,451
19,840Subtotal
22,92725,262
171,704
Valuation allowance(14,287)(13,388)(106,996)
Total deferred tax assets
8,640
11,87364,707
Deferred tax liabilities:
Valuation differences on available-for-sale securities(4,928)(15,736)(36,910)
Other
(280)
(240)
(2,099)Total deferred tax liabilities(5,209)(15,976)(39,010)Net deferred tax assets (liabilities)¥3,431 ¥ (4,103) $ 25,697
A reconciliation of the statutory tax rate applicable to the Company andits consolidated subsidiaries to the effective tax rate for the years ended
March 31, 2023 and 2022 are 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

2023
30.4%

2022
30.3%

0.5

0.5

(19.0)
0.2
6.1
17.7
2.0
37.9%

(4.6)
0.2
8.4
3.9
0.9
39.6%

2023
Thousands of
U. S. dollars¥16,904 ¥16,684 $ 126,596
253
250
1,898
(70)
94
(530)
858
896
6,429
(1,013)(1,021)(7,586)¥16,932 ¥16,904 $ 126,807

25. Income Taxes
The major components of deferred tax assets and liabilities as of March
31, 2023 and 2022 are summarized as follows:

2023
Thousands of
U. S. dollars

Funded defined benefit obligation
Plan assets

2023
Thousands of
U. S. dollars¥18,309 ¥19,302 $ 137,116(16,932)(16,904)(126,807)
1,376
2,398
10,308———

Unfunded defined benefit obligation
Net liability recorded in the consolidated¥1,376
balance sheets2023¥2,398
2022

Millions of yen

Net defined benefit liability¥1,376
Net liability recorded in the consolidated¥1,376
balance sheets$ 10,308
2023
Thousands of
U. S. dollars¥2,398$ 10,308¥2,398$ 10,308

d. The components of retirement benefit expenses for the years ended
March 31, 2023 and 2022 are as follows:
2023

2022

Millions of yen

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

2023
Thousands of
U. S. dollars

¥

— ¥
459 $
—
35
48
268
(253)
(250)
(1,898)
430
919
3,226
(135)
(135)
(1,016)¥77 ¥ 1,041 $
579

Other than above, the Group recognized ¥726 million 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.

18

e. The components of remeasurements of defined benefit plans (before
deducting tax effect) on other comprehensive income as of March 31,
2023 and 2022 are as follows:
2023

2022

Millions of yen

Prior service cost
Net actuarial gains or losses
Total

2023
Thousands of
U. S. dollars¥(113) ¥(271) $ (847)
353
3,467
2,650
¥240 ¥3,195 $ 1,802

f. The components of remeasurements of defined benefit plans (before
deducting tax effect) on accumulated other comprehensive income asof March 31, 2023 and 2022 are as follows:
2023

2022

Millions of yen

Unrecognized prior service cost¥
Unrecognized net actuarial gains or losses
Total
¥

— ¥
(1,730)(1,730) ¥Thousands of
U. S. dollars

113 $
—(2,084)(12,956)(1,970) $ (12,956)(1) The components of plan assets are as follows:
2023
86%
9
4
1
100%

2022
85%
9
5
1
100%

Note:
Total plan assets include 0% and 0% of retirement benefit trust establishedon corporate pension plans as of March 31, 2023 and 2022,
respectively.
(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 years ended March 31, 2023 and 2022,
are set forth as follows:
2023
2022
0.0% to 0.6% 0.0% to 0.6%
Discount rateLong-term expected rate of return on plan assets
1.5
1.5
Defined Contribution Plan
No amount was required for contribution to the defined contribution planof the Company for the year ended March 31, 2023. The amount of therequired contribution to the defined contribution plan of the Company
was ¥269 million 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 were transferred tothe defined contribution plan effective February 28, 2022. Of which, theportion not transferred, in the amount of ¥6,090 million, was included in“Other liabilities” as of March 31, 2022. The transfer completed as ofMarch 31, 2023.
27. Per Share Information
Net assets per share as of March 31, 2023 and 2022 and profit per
share for the year then ended are as follows:
2023

2022
Yen

Net assets per share
Profit per share
Profit per share-diluted¥9,149.42¥336.06
336.052023
U. S. dollars¥ 9,576.53 $
¥ 340.64 $
—

68.52
2.52
2.52

Notes:
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 shares

19

Basic information in computing above per share data are as follows:
2023

2023

g. Plan assets

General accountEquity securities
Debt securities
Other
Total

are 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, 2023, the number of shares of treasury stock deductedin calculating outstanding number of shares at end of year is 105
thousand shares and average outstanding number of shares during
the year is 105 thousand shares. For the year ended March 31,
2022, the number of shares of treasur y stock deducted in
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.

2022

Net assets per share:¥237,688
Net assets per balance sheets
Amounts to be attributed to non8,044
controlling interests
Net assets attributed to common stock¥229,643
shareholders
Number of shares outstanding at end of
25,099year (unit: thousand shares)
Profit per share:¥8,741
Profit attributable to owners of parent
Profit attributable to common stock¥8,741
shareholders
Average number of shares outstanding
26,010during the year (unit: thousand shares)
Profit per share-diluted:
Adjustment to profit attributable to¥—owners of parent
Increase in common stock
0(unit: thousand shares)[Of which, restricted shares under the0
share-based payment plan](unit: thousand shares)
Outline of dilutive shares not included in—
the calculation of profit per share-diluted
due to the absence of dilutive effect

¥

2023
Thousands of
U. S. dollars

Millions of Yen

264,258 $ 1,780,037
7,701

¥

60,244

256,557 $ 1,719,793
26,790¥

9,387 $

65,462¥

9,387 $

65,462

27,559
¥

— $

—

—

0

—

0

—

—

28. 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 11 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, e-commerce website operation business, servicer
business, system development/management/administration services,
investment advisory business, consulting services, fund administration
services and back-office 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, 2023

Year ended March 31, 2022

Millions of yen

Reportable segments
Banking Leasing
Total

Millions of yen

Adjustments Consolidated

Total revenue:¥72,038 ¥12,704 ¥84,743 ¥External customers
Intersegments
189
6
196
72,22812,71084,939
Total
Segment profit
15,220837
16,058Segment assets
5,593,763
39,3195,633,082
Other information
3,927
262
4,190
Depreciation
Interest income
38,444—38,444
Interest expenses
4,149
118
4,267
Increase in tangible and¥4,938 ¥— ¥4,938 ¥
intangible fixed assets— ¥84,743
(196)
—
(196)
84,743(11)
16,046(29,357)
5,603,724
—
(125)
(118)

4,190
38,3194,149— ¥4,938

Loan
Income from externalcustomers¥

Securities
investment

Lease

Other

Total

23,989 ¥35,908 ¥11,917 ¥12,914 ¥84,730

Information about loss on impairment of long-lived assets by reportablesegment:
Year ended March 31, 2023
Millions of yen

Reportablesegments
Banking LeasingTotal¥
93 ¥ — ¥
93

Loss on impairment

Year ended March 31, 2023
Thousands of U. S. dollars

Year ended March 31, 2023

Reportablesegments
Banking Leasing
Total$701 $ — $701

Thousands of U. S. dollars

Reportable segments
Adjustments Consolidated
Banking Leasing Banking
Total revenue:$539,493 $95,144 $634,637 $
External customers
Intersegments
1,421
47
1,469
540,915
95,191
636,107
Total
Segment profit
113,985
6,273
120,258
Segment assets
41,891,433
294,461 42,185,894
Other information
29,413
1,966
31,380Depreciation
Interest income
287,910—
287,910
Interest expenses
31,074888
31,962
Increase in tangible and$36,985 $
—$36,985 $
intangible fixed assets

—
(938)
(886)

31,380286,971
31,076—$36,985

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
37,2735,737,755
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

Notes:
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, 2023
Millions of yen

Loan
Income from externalcustomers

Securities
investment

Lease

Loss on impairment— $634,637(1,469)—(1,469)634,637(84)
120,174(219,857) 41,966,037

Other

Year ended March 31, 2022
Millions of yen

Reportablesegments
Banking LeasingTotal¥
601 ¥ — ¥
601

Loss on impairment
29. Revenue Recognition

The following table summarizes the information on disaggregation ofrevenue from contracts with customers for the years ended March 31,
2023 and 2022:
2023

2023

Millions of yen

Thousands of U. S. dollars

Banking Leasing
Total Banking Leasing
Total
Fees and commissions:
Deposits and loans¥1,665 ¥— ¥1,665 $ 12,472 $
— $ 12,472
business
Foreign exchange
2,099
—
2,099
15,726—
15,726business
Trust-related business
65
—
65
493
—
493
Securities-related
699
—
699
5,234
—
5,234
business
Agency business
237
—
237
1,780
—
1,780
Card business
2,233
—
2,233
16,725—
16,725
Consulting business
1,086
—
1,086
8,135
—
8,135
Other business
1,190
34
1,225
8,913
261
9,175
Fees and commissions,
9,277
34
9,312
69,482261
69,744
total
Other operating income
481
950
1,432
3,605
7,120
10,726
Income other than
96
5
101
719
37
756
operating oncome
Income from contracts
9,855
990
10,84673,807
7,419
81,226
with customers
Income other than above
62,183
11,71373,896 465,685
87,725 553,410
Total income from external¥72,038 ¥12,704 ¥84,743 $539,493 $ 95,144 $634,637
customers

Total¥24,061 ¥35,868 ¥12,704 ¥12,108 ¥84,743
Year ended March 31, 2023
Thousands of U. S. dollars

Loan
Income from externalcustomers

Securities
investment

Lease

Other

Total

$ 180,196 $268,619 $95,144 $90,677 $634,637

20

2022
Millions of yen

Banking Leasing
Total
Fees and commissions:
Deposits and loans¥1,605 ¥— ¥1,605
business
Foreign exchange
2,397
—
2,397
business
Trust-related business
63—
63
Securities-related
734
—
734
business
Agency business
269
—
269
Card business
2,053
—
2,053
Consulting business
751
—
751
Other business
1,242
27
1,270
Fees and commissions,
9,118
27
9,146
total
Other operating income
198
563
762
Income other than
421
2
423
operating oncome
Income from contracts
9,738
593
10,332
with customers
Income other than above
63,073
11,32474,398
Total income from external¥72,812 ¥11,917 ¥84,730
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, 2023, the year ending March 31,
2024 and thereafter is omitted due to insignificancy.

advisory service for individuals, corporations and financial institutions
for the first time in Japan. FDAlco will enhance its expertise to further
fulfill customers’ needs through developing a program to cultivate
professional human resources responsible for investment advisory
service. By providing consulting service taking advantages of theGroup’s various functions, FDAlco will not only offer investment
advisory services as the core business but also provide a wide rangeof solutions for management issues and other related matters toregional financial institutions nationwide, expanding beyond“geographical limitations” and “existing business areas.” After themerger, FDAlco aims to establish a new business model for investment
advisory services that prioritizes customers’ best interests with an
exceptional sense of speed.
(3) Date of the business combination
May 31, 2023
(4) Legal form of the business combination
Share acquisition(5) Name of the company after the business combination
FDAlco Co., Ltd.
Effective June 1, 2023, FD Advisory has changed its business name to
FDAlco Co., Ltd.
(6) Voting rights acquired73%
The voting rights after the business combination is 80%.
(7) Grounds for determining acquiring company
The Company acquired 73% of ALCOLAB’s voting rights throughshare acquisition in exchange for cash.
b. Breakdown of acquisition cost of acquired company and type of
consideration

30. Related Party Transactions
There was no applicable transaction to be reported for the years ended
March 31, 2023 and 2022, respectively.
31. Subsequent Events
Business combination
At the Board of Directors’ meeting held on March 31, 2023, theCompany resolved to (i) make ALCOLAB, Ltd. (hereinafter “ALCOLAB”)
its subsidiary by acquiring ALCOLAB’s shares, and (ii) merge ALCOLAB
with the FD Advisor y, Ltd. (hereinafter “FD Advisor y”), being a
consolidated subsidiary of the Company, for the purpose of businessintegration with ALCOLAB and FD Advisory. Accordingly, the Company
made ALCOLAB its subsidiary by acquiring ALCOLAB’s shares on May
31, 2023. In addition, the merger of FD Advisory and ALCOLAB wascompleted on June 1, 2023.
a. Overview of the business combination(1) Name of the acquired company and description of the business
Name of the acquired company ALCOLAB, Ltd.
Description of the business Investment advisory service(2) Reason for the business combination
In 2021, the Company established FD Advisory, a subsidiaryengaged in investment advisory service, in order to meet customers’
diversifying needs. Using its advanced expertise, FD Advisory has
committed to realizing customers’ financial well-being andcompanies’ growth by providing comprehensive and customeroriented neutral advisory services that go beyond product or service
information.
Since its establishment, ALCOLAB had provided business support andservices including (i) support for customers in enhancing theiroperational structures to establish securities investment as their corebusiness, (ii) investment advisory services on global asset allocationand (iii) support for installing a risk appetite framework. Through all
those efforts, ALCOLAB has been highly regarded by regional
financial institutions.
The Company has cooperated with ALCOLAB since 2020, in various
projects including strategic capital allocation, enhanced effectivenessof market operations and establishment of specialized investmentcompanies and investment advisory companies.
With this merger as a starting point, FDAlco Co., Ltd. (hereinafter“FDAlco,” formerly, FD Advisory) will integrate ALCOLAB’s knowledge
into the Group’s business base and will launch full-fledged investment

21

Millions of Thousands ofyen
U. S. dollars

Consideration for acquisition
Acquisition costCash¥ 1,096 $ 8,208
1,096
8,208

c. Description of major acquisition related cost and the amounts
Not determined yet.
d. Goodwill arising from the business combination, reason for giving
rise to recognizing the goodwill and method and period ofamortization
Not determined yet.
e. Breakdown of assets acquired and liabilities assumed on the closing
date of the business combination
Not determined yet.
Cancellation of treasury stock
At the Board of Directors’ meeting held on April 28, 2023, the Company
resolved to cancel its treasury stock on May 9, 2023, in accordance withthe 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
1,700,000 shares
May 9, 2023

Repurchase of own shares
At the Board of Directors’ meeting held on April 28, 2023, 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 repurchased(2) Number of shares to be repurchased(3) Total cost of shares to be repurchased(4) Repurchase period

The Company’s common stock
2,500,000 shares (upper limit)¥9,000 million ($67,400 thousand) (upper limit)
From May 10, 2023 to March 29, 2024

Balance Sheets
The Hokkoku Bank, Ltd.

As of March 31,
2023
Assets:Cash and due from banks
Call loans
Monetary claims bought
Money held in trusts
Securities
Loans and bills discounted
Foreign exchanges
Investment in leased assets
Other assets
Tangible fixed assets
Intangible fixed assets
Deferred tax 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
Deferred tax liabilities
Deferred tax liability arising from revaluation of land
Acceptances and guarantees
Total liabilities
Net assets:
Common stock
Capital surplus
Retained earnings
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

¥

2023

2022
Millions of yen¥

1,354,783
141,000
1,336
13,535
1,463,068
2,545,638
11,684
6,778
41,77230,8199,051
3,924
17,282(61,353)
5,579,323¥

4,384,122—
532,156
360,955
26,5183
20,000164
36,053
553
—
410
96
—
1,411
17,282
5,379,729¥

26,673
11,289149,388
187,352
9,948
(2)
2,296
12,241
199,593
5,579,323¥

Thousands of U.S. dollars(Note 2)¥

1,607,831
65,0001,286
13,528
1,351,149
2,603,927
11,1388,546
33,46030,275
10,199—17,986(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$$

10,145,913
1,055,942
10,011
101,368
10,956,855
19,064,170
87,50250,765
312,829
230,804
67,78329,392
129,428(459,469)
41,783,296$

32,832,492—
3,985,294
2,703,181
198,59825
149,779
1,229
270,004
4,146
—
3,073
724
—
10,569129,428
40,288,546$

199,760
84,546
1,118,767
1,403,073
74,500(19)
17,19591,676
1,494,749
41,783,296

22

Statements of Income
The Hokkoku Bank, Ltd.

Years ended March 31,
2023
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

23

¥

2023

2022
Millions of yen

24,12013,595511
38,227
0
7,873
5,382
20,621
72,105¥

Thousands of U.S. dollars(Note 2)

24,123
11,290588
36,003
0
8,549
8,200
21,16473,918$

180,636
101,817
3,832
286,286
3
58,96840,306
154,432
539,996

Expenses
Interest expenses on:
Deposits
Borrowings and rediscounts
Interest on bonds
Cash collateral received for securities lent
Other
Total interest expenses
Fees and commissions
Other operating expenses
General and administrative expenses
Other expenses
Total expenses

104
1,688
179
2,169
7
4,149
3,570
12,787
27,6998,247
56,454

110
35
180
149
17
493
3,631
5,438
29,585
16,67755,827779
12,647
1,342
16,24758
31,075
26,73595,764
207,442
61,765
422,783

Special gains and losses(1,484)(3,203)(11,116)

Profit before income taxes
Income taxes:
Current
DeferredProfit14,167
1,863
3,249
5,112
9,054

14,887
5,229
614
5,843
9,043

106,096
13,952
24,33638,28967,806¥¥$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, 2023, 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, 2023, 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.

24Classification of debtors for the purpose of determining the reserve for possible loan losses for
debtors whose repayment status, financial position or business performance is deteriorating,and change in estimate related to the method for calculating the expected loan loss amount,which forms the basis for calculating the reserve for possible loan losses
Description of Key Audit Matter

Auditor’s Response

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 2,523,613 million yen
on its consolidated balance sheet as at March
31, 2023, representing a significant portion of
the Group’s total assets of 5,603,724 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.

We mainly performed the following audit
procedures to examine the determination of
debtor classification and the change inestimate related to the method for calculating
the expected loan loss amount:

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.

・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.

As such, the Group calculates the expectedloan loss amount and records this as a reservefor possible loan losses.
The amount of the reserve for possible loan
losses recorded in the consolidated balance
sheet as at March 31, 2023 was 62,631
million yen. The method used for recognizing
the reserve for possible loan losses is
described in detail in “g. Reserve for Possible
Loan Losses” under “3. Summary of
Significant Accounting Policies” in Notes toConsolidated Financial Statements. Details of
the estimation of the reserve for possible loan
losses are described in “Significant
Accounting Estimates” in Notes toConsolidated Financial Statements.

25(1) Determination of 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 wellas the process to ensure the reliability of
the underlying debtors’ information.

・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
support related to the COVID-19
pandemic, and potential increases in credit
risk estimated based on available external
public information, in addition to themonetary impact of changes in the debtor
classification on the amount of the reservefor possible loan losses.
・In order to obtain an understanding of therecent status of deterioration in therepayment status, financial position, or
business performance of the debtors, we
inspected a set of materials related to theself-assessment of asset quality performed

The reserve for possible loan losses iscalculated 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 status, financial
position, business performance and future
prospects thereof.
In particular, when determining theclassification of a debtor whose repayment
status, financial position, or businessperformance is deteriorating, factors such as
the reasonableness and feasibility of thebusiness improvement plan, which embodies
the assumption of the outlook for futurebusiness performance, serve as significant
factors in making the relevant judgment.

by the Group, such as explanatory
materials on the business conditions ofdebtors, materials on debts and repayment
status, investigation materials that provide
details of the actual financial position of
debtors, financial statements, and trial
balances, and compared them withinformation publicly disclosed, madeinquiries of the corporate department, andinspected the negotiation history as
necessary. For particularly significant
debtors affected by the Group’s supporting
policy and lending strategy and major
debtors with a significant effect on theGroup’s financial statements, we comparedmaterials related to the self-assessment ofasset quality performed by the Group withavailable external credit information.

・For debtors whose repayment status,
financial position or business performanceis deteriorating and who are preparing
The reasonableness and feasibility of businessbusiness improvement plans, in order toimprovement plans are affected by changes inconsider the reasonableness and feasibility
the business environment surroundingof such plans, we analyzed trends based on
debtors, which includes the impact ofpast results for the debtors’ plan items such
COVID-19 and increases in resource prices,
as sales, gross profit or loss, operating
the outcome of their business strategies, andprofit or loss, profit or loss from ordinary
the Group’s supporting policies and lending
activities, and net profit or loss, evaluatedstrategies for such debtors. Therefore, thethe accuracy of estimates based on thedetermination of debtor classification
degree of achievement of previous businessinvolves estimation uncertainty and requires
improvement plans, and made inquiries ofsignificant management judgement.
the corporate department and inspected theAccordingly, we have determined that thenegotiation history as necessary. In cases
classification of debtors for the purpose ofwhere COVID-19 and increases in resource
determining the reserve for possible loan
prices have had a significant impact on thelosses for debtors whose repayment status,
debtor’s repayment status, financial
financial position, or business performance isposition or business performance, we
deteriorating is a key audit matter.
assessed whether such impact was taken
into account in considering theIn addition, as described in “Change inreasonableness and feasibility of businessAccounting Estimates” in Notes toimprovement plans. For particularly
Consolidated Financial Statements, the Groupsignificant debtors affected by the Group’s
made a change in estimate related to the
supporting policy and lending strategy, we
reserve for possible loan losses.
made inquiries of management andThis change is the result of the Group
executives in the corporate department
determining that it can more appropriately
regarding the Group’s supporting policy
estimate the reserve for possible loan losses
and the current status and future prospects

26

by breaking down the debtor classification toaccurately identify characteristic fluctuationsof the loan portfolio of the Group and taking
into account future economic fluctuations byreflecting past long-term economic
fluctuations and, after relevant consideration,completing the data analysis and its
procedures as well as related internal control
procedures in the fiscal year ended March 31,
2023. This determination is based on the
background that the Group has adopted thepolicy to conduct business based onunderstanding of debtors' business feasibility
focusing on future and growth potential, withthe strong relationship with the debtors andhas worked to solve the debtors' businessagendas, while better-managing credit.

of such debtors, and compared theirbusiness improvement plans with available
external information.
(2) Change in estimate related to the method
for calculating the expected loan loss
amount・We made inquiries of management
regarding the completion of data analysis
and data preparation as well as
implementation of related internal controls,
which were the reasons for the change inestimate in the fiscal year ended March 31,
2023, and inspected the minutes ofimportant meetings regarding approval of
the change. In addition, we evaluated therelated internal controls.

・We made inquiries of management
In particular, the method to calculate
regarding the reasons for selecting the
expected loan loss has been changed asgroups that were subdivided from thefollows: (i) to break down the debtor
debtor classification and used to calculateclassification into groups based on
the expected loss rate, analyzed the data
relationship with debtors, understanding ofthat was used, and considered thedebtors’ business (business feasibility), in
consistency between the results of ouraddition to debtors’ financial information
analysis and the explanation provided bywhich the Bank has focused on, (ii) for eachmanagement. Further, using the samples
group, to obtain the probability of default
from (1), we assessed whether thebased on the Bank’s past default experience
relationship with the debtors and theover one year or three years, and finally (iii)
understanding of the debtors’ businesses
to estimate expected rate of loan loss with
(understanding of feasibility) were appliedreference to the long-term average rate ofto the selected groups in accordance withdefault in order to take into account economic
the Group’s internal rules.
fluctuations.
・We made inquiries of management
As a result of this change in estimate, theregarding the reasons for selecting thereserve for possible loan losses as at Marchcalculation period for the past average
31, 2023 decreased by 2,443 million yen anddefault probability forming the basis forordinary income and profit before income
calculating the expected loss rate, analyzed
taxes for the fiscal year ended March 31,
the data that was used, and considered the2023 increased by 2,443 million yen.
consistency between the results of our
The groups that management selected toanalysis and the explanation provided by
calculate the expected loss rate and the
management.
calculation period for the past average default
probability forming the basis for calculating
the expected loss rate utilized by management
in making this change in estimate, as well as
the timeliness of the change in estimate, rely
greatly on management's judgment.

27

Accordingly, we have determined that thechange in estimate related to the method for
calculating the expected loan loss amount is a
key audit matter.
Other Information
Other information comprises the information included in disclosure documents that contain
audited consolidated financial statements, but does not include the consolidated financial
statements and our auditor’s report thereon. We have concluded that other information does notexist. Accordingly, we have not performed any work related to 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.

28

・ Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.
・ 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.

29

Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect tothe year ended March 31, 2023 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
September 15, 2023

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

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

30

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

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