HIROGIN INTEGRATED REPORTHIROGIN REPORT 2019
INTEGRATED REPORT

Management Policy

Management Vision | The Hiroshima Bank Group’s “Aspiration”

Building a reliable Hiroshima Bank Group united throughtrusting relations with the regional community
Code of Conduct
Our basic approach and commitment to stakeholders when implementing specific initiatives
tied to our “management vision”

The Hiroshima Bank Group shall rigorously implement soundmanagement based on the following code of conduct:

Work in step with regional communities to actively contribute to their development
Strive to enhance customer satisfaction and peace of mind
Continuously enhance the Bank’s corporate value
Create a cheerful, rewarding workplace
Exercise a high level of complianceContents

1<About Hiroshima Bank>
P. 1 Management Policy / Management Vision /Code of Conduct
P. 3 History
P. 5 Mid-Term Management Plan 2017
(FY2017 – FY2021)
P. 7 Summary of Business Performance (FY2018)
P. 9 Value Creation Process
P.11 Message from the President

HIROSHIMA BANK INTEGRATED REPORT 2019

<Strategies for Individual Businesses>
P.19 Banking BusinessP.27 Asset Management Business (Collaboration
between Banking and Securities Businesses)
P.29 Asset Management Business(Inheritance-Related Businesses)<Special Feature>
P.31 Initiatives Aimed at Digital Transformation

Notes on the Publicationof the “HIROGIN REPORT 2019”
The Hiroshima Bank, Ltd. (the “Bank”) has prepared this HIROGINREPORT 2019 (INTEGRATED REPORT) to facilitate understanding among
stakeholders, particularly investors, of the Bank’s initiatives aimed atsustainable value creation.
In editing this report, we referred to the International Integrated
Reporting Framework advocated by the International Integrated
Reporting Council (IIRC), the Guidance for Integrated Corporate
Disclosure and Company-Investor Dialogues for Collaborative Value
Creation advocated by the Ministry of Economy, Trade and Industry,and other guidelines, in order to present the Bank’s business model andprovide integrated explanations of mechanisms to sustainably create
value. Furthermore, please refer to HIROGIN REPORT 2019 (DISCLOSUREREPORT) for detailed financial data, etc.

<Management Base>
P.35 Corporate Governance
P.39 Board of Directors, Executive Officers and Audit &Supervisory Board Members
P.41 Initiatives Aimed at Practicing Customer-Oriented
Business Operations
P.45 Management of Customer Protection, etc.
P.46 ComplianceP.48 Risk Management

P.52 Internal Audits
P.53 Human Resource Strategy
P.62 Communication with Shareholders and Investors<Providing Value to the Community>
P.63 The Group’s Approach to Corporate Social
Responsibility (CSR)

HIROSHIMA BANK INTEGRATED REPORT 20192

About Hiroshima Bank

History
At 10:00 a.m. on August 8, 1945, just two days after the atomic bomb was dropped, the Bank restarted its operations byborrowing a floor space of 20 tsubo (approx. 66 square meters) from the Bank of Japan’s business room along with desks,
chairs, and other furnishings. Even though most of its customers did not have their personal seals or passbooks, the Bank
relied on employees’ memories and took crisis measures in a flexible manner such as responding to requests for refund forconvenience purposes. Despite these measures, the Bank managed to maintain its credibility without any particular disputeat a later date. The Bank’s DNA of “customer-oriented business operations” remains unchanged to this day.

1878
The 66th National Bank,
the Bank’s predecessor, wasestablished in November in
Onomichi as the first bankin the prefecture, before
opening for business in April
1879.

1988
(April)Enacted the CI and establishedthe current corporate badge(July)

Characters used in Japanesename changed (no change tothe English name)19451965 (February)(May)

Completion of new Head Office building

New Geibi Bank was established bymerging five banks consisting of Geibi Bank,
Kure Bank, Binan Bank, Miyoshi Bank, andHiroshima Godo Chochiku Bank.

(August 6)

Suffered losses as a result of the atomic
bomb (11 branches out of 16 in Hiroshima
City together with 144 officers andemployees of the Bank were lost)

Head Office of the Bank immediately after
the atomic bomb (photograph taken on
August 8)

1960

1980
1970
1971 (February)
Listed stocks on the firstsections of Tokyo Stock
Exchange and Osaka
Securities Exchange

1978 (November)100th anniversaryof the founding
Opened Hiroshima Museum of Art
and established Hirogin no Mori

1950 (August 6)
Name changed to Hiroshima
Bank five years after theatomic bomb, in connection to“Hiroshima, the City of Peace”

Hiroshima Museum of Art

Social trends

3

1940

1960

1945 A tomic bomb
dropped1964 Tokyo Olympics

HIROSHIMA BANK INTEGRATED REPORT 2019

1970

1980

1973 The first oil shock1985 The Plaza Accord

1979 The second oil shock

1989 C onsumption tax was
introduced

History

2018 (from January)
Moved to temporary branch

1990

2013 (July)(February)(November)Opened Singapore Representative Office

The “Genesis Building,”
a new computing
center, completed“Hiroshima High
Building 21”
completed2009 (April)
Opened Bangkok
Representative Office

2004 (October)
Established <Hirogin> Money
Consulting Plaza

2010
2017 (June)

2000

EstablishedHirogin Securities

2016
(May)

Completed the construction of <Hirogin>
Chuo Building

1990
1996 (February)
Opened Shanghai
Representative Office(December)Opened <Hirogin> Insurance Plaza

Corporate Data (As of March 31, 2019, non-consolidated)
Head Office

1-1-7, Nishikaniya, Minami-ku, Hiroshima City,
Hiroshima 732-0804, Japan (temporary Head Office)Phone+81-82-247-5151

Established

November 1878

Branches andOffices

151 domestic branches including 1 branch
dedicated for bank transfers and 1 Internet
branch13 offices
Shanghai Representative Office
Bangkok Representative Office
Singapore Representative Office

Websitehttps://www.hirogin.co.jp/

Common Stock ¥54,573 million
Deposits + NCD ¥7,262.9 billion
Loans¥6,014.6 billion

Employees

3,405

Hiroshima Bank Search

1990

2000

2010

1991 Economic bubble collapsed

2005 Deposit insurance fully deregulated

2012 The second Abe cabinet formed

1995 T he Great Hanshin-Awaji
Earthquake

2006 B ank of Japan ended zero interest
rate policy
2007 S ubprime mortgage crisis occurred in
the U.S.
2008 Global financial crisis occurred“Abenomics” started
 ank of Japan introduced “quantitative2013 Band qualitative monetary easing”
2017 Trump administration formedin the U.S.

HIROSHIMA BANK INTEGRATED REPORT 20194

About Hiroshima Bank

Mid-Term Management Plan 2017 (FY2017 – FY2021)“Aiming to be acomprehensive financial services groupthat continues to grow with local customers”— A “True First Call Bank Group” —The business environment surrounding regional financial institutions remains more difficult than wehave ever experienced, including prolonged ultra-low interest rates and entry to the banking
industry of competitors from other industries, in addition to declines in population and the numberof business establishments. In addition, customer behavior is changing rapidly in line with thedevelopment of ICT, and the traditional business model centered on deposits and lending is reachinga major turning point.
Even under these circumstances, we formulated our Mid-Term Management Plan 2017, incorporating
our intent to establish new growth drivers and grow together with our customers, as we mobilize
the strength of the entire Hiroshima Bank Group and practice customer-oriented operations.
All employees of the Hiroshima Bank Group will come together as one to become a true first-callbank group.

 asic policies (three pillars of the
B
Mid-Term Management Plan)
Reform the earnings structure based on

Further development of measures

implementing value-added sales

toward high value-added banking

focused on customer needs

business

Nurturing a corporate culture that

Promotion of measures for asset

promotes workstyle reform and a desire

management business that meet theto take on challenges

asset formation needs of customers

Active commitment to regional
revitalization

5

Key initiatives

HIROSHIMA BANK INTEGRATED REPORT 2019

Enhancement of the profit baseMid-Term Management Plan 2017 (FY2017 – FY2021)

Building a reliable

Hiroshima Bank Group
united through trusting relations withthe regional community
Management targets (FY2021)
Profit attributable to owners of the parent¥

30

Non-interest income ratio

40billion or more% or more

Consolidated capital adequacy ratio

Total custody assets (average)

10¥% or more

10

trillion or more

Consolidated ROE

Around6%

Adjusted overhead ratio

50% levelMajor strategies

Marketingstrategy

Securities
strategy

Enhance newservicedevelopment

WorkstylereformHuman
resource strategy

HIROSHIMA BANK INTEGRATED REPORT 20196

About Hiroshima Bank

Summary of Business Performance (FY2018)

Core banking profit¥

Net income

32.6 billion¥

Profit attributable to owners of the parent

25.3 billion(+¥0.3 billion)¥(¥(1.7) billion)(¥ billion)(¥(0.3) billion)(¥ billion)(¥ billion)

31.2

29.9
34.4

FY201632.3

32.6

FY2017FY2018

Loan balance

¥

27.0

FY2016¥FY2018

Corporate loans, etc.

5,852.3

FY2016¥

6,014.6

2,426.3

46.2
39.8

7

4,366.3

4,466.7
390.4

1,417.5

1,485.9

1,547.9

2017

2018

2019

HIROSHIMA BANK INTEGRATED REPORT 20192017

FY2018Limited-purpose loans, etc.
Apartment loans(¥ billion)

2,516.9
1,417.5

4,187.6

FY2017(+¥62.0 billion)(¥ billion)

2,293.5

25.5

1,547.9 billion(+¥90.6 billion)

Individual loans

25.8

Individual loans

2,516.9 billion(+¥162.3 billion)

5,605.1

FY201725.3

Loans to SMEs

6,014.6 billion(¥ billion)

25.5 billion

2018

2019

1,485.9
61.0
41.1

417.3

Card loans
Housing loans

1,547.9
75.9
39.9

440.4

941.1

966.3

991.5

2017

2018

2019

Summary of Business Performance (FY2018)

Deposits and NCD

Total custody assets (including Hirogin Securities)

Non-interest income ratio(including income from Hirogin Securities)¥

7,479.0 billion¥

9,075.3 billion

35.2%(+¥4.7 billion)((0.4) points)(+¥19.7 billion)(%)(¥ billion)

Corporate deposits
Individual deposits
Public and finance institution deposits

7,308.5

7,459.3

7,479.0

2,242.0

2,291.1

2,284.5

Non-deposit products (including Hirogin Securities)
Deposits and NCD(¥ billion)

8,802.9
1,494.3

9,070.6

9,075.3

1,611.3

1,596.2

4,721.6

4,831.3

421.1

446.5

363.0

2017

2018

2019

7,308.5

7,459.3

35.2

FY2017FY201833.2

FY2016

4,645.2

35.6

7,479.0

Consolidated ROE* Deposits and NCD include negotiable certificates ofdeposit.

2017

2018

2019

5.3%

* The balance of Hirogin Securities’ non-deposit products
is stated at fair value.

((0.2) points)
(%)

6.9

Consolidated capital adequacy ratio

Non-performing loan ratio

11.01%

1.15 %((0.06) points)((0.05) points)(%)(¥ billion)

Substandard loans
Doubtful loans
Loans to bankrupt borrowers, etc. Non-performing loan ratio

1.28%

11.10

11.07

FY2016

1.20%

1.15%

71.4

70.1

16.8

18.5

11.01
72.6
14.7

4.00

2017

2018

2019

52.6

48.3

5.3

FY2017FY2018Adjusted overhead ratio

61.7%((0.8) points)
(%)

61.4
Domestic standard (Regulatory floor)

5.5

62.5

61.7

45.7

5.3

6.3

5.9

2017

2018

2019

FY2016FY2017FY2018* Amounts of loans reported under the Financial
Reconstruction Act have been rounded to the nearest
whole unit.
HIROSHIMA BANK INTEGRATED REPORT 20198

About Hiroshima Bank

Value Creation Process
CapitalCapitalto be toutilized
be utilized

Business
Businessmodelmodel

Financial
Financial
capitalcapital“Aiming“Aiming
to betoa comprehensive
be a comprehensive
financialfinancialsecontinues
to growwith withlocal local
customers”
continues
to grow
customers”

SloganSlogan
of Mid-Termof Mid-Term
Management
Management
Plan Plan
2017 2017High earning
High earning
power power
Sound lending
Sound lending
assets assets
Strong capital
Strong capital— A “True— A First“TrueCall
First
Bank
CallGroup”
Bank Group”——

Advanced
Advancedrisk management
risk management

Human
Human
capitalcapital
Diverse human
Diverse resources
human resources
FP skills andFP skills
otherand
advancedother advanced

Building
Building
relationships
relationships
throughthrough“dialogue”“dialogue”
with customers
with customers

expertiseexpertise
Organizational
Organizational
culture focused
culture focusedon employees’
on employees’
motivationmotivation
to work to work

IntellectualIntellectual
capitalcapital

ReformReformthe earnings
the earnings

FeasibilityFeasibility
studies accumulated
studies accumulated

structure
structure
based
based
on thoroughon thoroughbased onbased
expertiseon expertise
thus far thus far
FunctionsFunctions
for providing
for providing
advancedadvanced
and diverse
andsolutionsdiverse solutions
FunctionsFunctions
for developingfor developing
newnewservices utilizing
services state-of-the-art
utilizing state-of-the-art
digital technology
digital technology
Comprehensive
Comprehensive
financial services
financial services

implementation
implementationof a of aProviding
Providingsolutionssolutionsthat thatconcentrateconcentrate
the collective
the collective
capabilities
capabilitiesof the of theHiroshima
Hiroshima
Bank GroupBank Group(= practicing(= practicing
value-added
value-added
sales) sales)

Identifying
Identifying
and andsharingsharing
customers’
customers’“issues”“issues”(needs)(needs)“market-in”“market-in”
approachapproachoffered byofferedthe Groupby theas Groupa wholeas a whole

SocialSocial
capitalcapital
High-qualityHigh-quality
and steady andcustomersteadybase
customer base
Corporate culture
Corporate
thatculture
thoroughlythat thoroughly
implementsimplements
customer-oriented
customer-oriented
business business
operations,operations,inherited frominherited
the time
fromofthe time of

Nurturing
Nurturinga corporatea corporate
cultureculturethat promotesthat promotes
workstyleworkstyleP.53
reformreform
and a anddesirea desire
to taketoon
take
challenges
on challenges
commitment
to regional
revitalization
ActiveActive
commitment
to regional
revitalization

our founding
ourandfounding
the atomic
and thebomb
atomic bomb

P.21

P.53
P.21

Store networkStore
closely
network
attached
closely
to theattachedregionto the region

NaturalNaturalcapitalcapitalRich in tourism
Richresources,
in tourismincluding
resources,
World
including World

StrongStrongmanagement
management
basebaseto support
to support
the businessthe business
model
model

Heritage SitesHeritage
such as Sites
the Hiroshimasuch as thePeace
Hiroshima Peace (Corporate(Corporate
governancegovernanceand risk
andgovernance)risk governance)
Memorial andMemorial
Itsukushima
and Shinto
Itsukushima
ShrineShinto Shrine
A temperateAarea
temperatewith anarea
abundant
with annaturalabundant naturalenvironment,environment,
surrounded bysurrounded
the Seto Inlandby the Seto Inland
Sea and the Chugoku
Sea and theMountains
Chugoku Mountains

Mid- toMidlong-term
to long-termchangeschangesin economic
in economic
and social
environments
and social
environments
9

HIROSHIMA BANK INTEGRATED REPORT 2019

Management
Management
PolicyPolicy(Management(Management
VisionVision+ Code+ of
CodeConduct)of Conduct)

Declining
Declining
population
population Falling birthrate
Falling birthrate
and agingandsocietyaging society
Stimulation
Stimulationof regionalof regional
DemandDemand
for workstyle
for workstylereform reform
DemandDemand
for moreforsophisticatedmore sophisticatedeconomyeconomyrisk management
risk management

Value Creation Process

Products
Products
and services
and services
offeredoffered

ValueValue
offeredofferedCore businesses
Core businesses

Customers
Customers

ervicesl services
groupgroupthat that”—

VariousVarious
types oftypes
optimalof optimal
solutionsolution

Creation of shared value(exerting(exertingconsulting
consulting
functions)functions)Management
Management
and succession
and succession
supportsupport
for customers’
for customers’“assets”“assets”
as a whole
as a whole

Eco-friendly
Eco-friendly
products
products
and services,and services,
etc.
etc.
FurtherFurther
development
developmentofofmeasuresmeasurestoward toward
high highvalue-added
value-added
bankingbanking
businessbusiness
P.35

P.35

P.19

P.19

Promotion
Promotionof measuresof measuresforfor
asset management
asset managementbusinessbusinessthat meetthatthemeet
asset
theformation
asset formationneeds ofneeds
customersof customers
P.27

P.27

New businessNew businessareas areas

Equity Equity
financingfinancing
to contributeto contributetoto(Enhancement(Enhancementof new serviceof new service
development,
development,
etc.)
etc.)

P.31

SupportSupportfor regional
for regional
development
development
regional
regional
revitalization
revitalization
New products
New products
and services
and services
ininthe-artthe-art
digital digitaltechnology
technology
ServicesServices
in non-financial
in non-financial
areas, etc.
areas, etc.

Integrated
GroupGroupmanagement
Integrated
management

Comprehensive
Comprehensive
solutionssolutionsto address
to address

P.35 P.35

Sustainable increase inshareholder value
Highly transparent information
disclosureConstructive dialogue

rehabilitation
rehabilitation

new businesses
new businesses
that utilizethat state-ofutilize state-ofP.31

Shareholders
Shareholders

businessbusiness
growthgrowthand businessand businessand tourism
and tourism
promotion
promotion
to leadto
tolead to
Enhancement
Enhancementof the profitof thebase
profit baseCreation of shared value

based onbased
“feasibility
on “feasibility
studies”
studies”

 ustomer growth (increase inC
corporate value)Stable asset formation and succession
for customers
Customer
satisfaction andpeace of mind

all typesalloftypes
needs,of beyondneeds, beyond
the bounds
the boundsof bankingof banking
operations
operations

Employees
Employees
A bright working environmentthat motivates employees
Promotion of a diverse range ofworkstyles and achievement ofwork-life balancePromotion of diversity

Regional
Regional
communitycommunity
Contribution to development ofregional community
Stimulation of the regional
economy through development ofindustry and job creation
Contribution to creation of asustainable regional community
through our main businesses

Global warming
and climate
and change
climate changeAccelerated
Accelerated
progression
progressionof digitalizationof digitalization
SustainedSustained
low-interest-rate
low-interest-rateenvironment
environmentGlobal warming

HIROSHIMA BANK INTEGRATED REPORT 201910

About Hiroshima Bank

Message from the President“Hiroshima Bank never develops without thedevelopment of regional communities.
We will remain committed to our customeroriented stance as we respond to the changesof the times.”

 iroshima Bank’s raison d’être inH
the region
The Bank finally established its Head Office inHiroshima in the course of a series of mergers, etc.,
following the founding of its predecessor, The 66th
National Bank, in Onomichi in 1878. While the Bank’slong and eventful history extends over 140 years,
there are two major symbolic events.
First, after the atomic bombing of Hiroshima in
1945, which led to the death of 144 persons out of
the Bank’s approximately 450 employees and the total
destruction by fire of its eight offices, including its
Head Office, we restarted our operations two days
later by borrowing a floor space inside the Bank ofJapan. I believe this event shows the spirit of Hiroshima
Bank or “Hirogin” that persists to this day, whereby
we stand alongside the local community and are firmly
committed to fulfilling the roles required of us. The
second symbolic event came in 1997 when the priceof the Bank’s shares plummeted owing to the spreadof so-called rumors, and we were supported by thegenerous assistance of many of our local customers.
These two historical events represent “Hirogin” asa bank that remains rooted in our local communities,

11

HIROSHIMA BANK INTEGRATED REPORT 2019

which has moved forward and developed alongside
our customers in our four local prefectures of
Okayama, Yamaguchi, Ehime, and, in particular,
Hiroshima, and these events also symbolize that themission of a regional bank is to contribute to thedevelopment of local communities.
I believe that the Bank’s raison d’être lies in exerting
every effort to contribute to invigorating the region
through “strengthening our initiatives aimed atregional revitalization,” which is also one of the threepillars of basic policies for the mid-term plan currently
underway.

E xternal environment, risks, andopportunities surrounding Hiroshima Bank
The declining population and aging society are thegreatest risks facing all regions across Japan. Under
these conditions, how we invigorate regions and stem
the flow of people out of these areas have become
major challenges, and the areas where we operate are
no exception in that regard.
In addition, the four prefectures where the Bank isbased are home to a significant number of companies
engaged in the manufacturing industry, so it can

Message from the President

Toshio Heya

President

HIROSHIMA BANK INTEGRATED REPORT 201912

About Hiroshima Bankbe said that the region is very susceptible to theimpact of foreign exchange rates. Looking at the
global economy in recent years, while movements inforeign exchange rates have been difficult to predictowing to a multitude of uncertain factors, including
trade friction between the U.S. and China andissues surrounding Brexit, it is assumed that there isa high risk of yen appreciation, which will be likely
to cause a negative impact on the industries in our
region. Furthermore, when looking at the current
macroeconomic environment, we would have to saythat the global business sentiment has passed its peak
and the outlook for both the global economy and theJapanese economy is uncertain, so we are aware that
it is very difficult to be optimistic.
In the financial industry where the Bank operates,
I recognize that we will face increasingly fierce
competition, including with companies in otherindustries as well as among companies traditionallyoperating within the financial industry, as entrants fromother industries are expected to increase along withthe development of trends toward cashless payment.
In addition, during the period of rapid economic
growth from the 1950s to the 1960s, banks could
sufficiently operate their businesses by financing
companies that needed it, as there was a very highdemand for financing, mainly from corporations.
However, as the Japanese economy matured, we havecome to a situation where we must admit that the roleand presence of indirect financing has diminished. At
present, while there are many companies that maintainthe so-called debt-free management, unfortunately
regional banks have entered an age where theycannot sufficiently operate their businesses by relying
solely on the traditional indirect financing operations.
13

HIROSHIMA BANK INTEGRATED REPORT 2019

Amid these conditions, we must ask whether we
can expand the scope of our operations to businesses
other than the lending business. Or to put it in adifferent way, we must identify “where the needs ofour customers lie.” Certainly, many customers, both
corporate and retail, require funds, but if we adopt
a broader perspective, there is also a large pool ofdemand other than financing. For example, corporate
managers have issues and needs related to theirbusinesses, such as “What should be our approachgoing forward?” and “What should we do to resolve
issues?” In these circumstances, I think that in order
to coexist and co-prosper with local customers, itwill be important for us to exert our comprehensive
capabilities as a group and enhance the range ofservices we can offer, based on a market-in approach.
We are in a period of major change, so people
and companies must also adapt to survive. Facing
unavoidable changes will inevitably bring an
opportunity for transformation. I firmly believe thattaking a positive stance toward risk and looking atthese changes as opportunities for taking on new
challenges will lead to positive results.

Mid- to long-term vision
When we formulated our “Mid-Term Management
Plan 2017,” which is currently underway and ends infiscal 2021, we presented our future vision for the
Bank as a “comprehensive financial services group”
that continues to grow with local customers.
This vision incorporates our desire to serve ourcustomers and continue growing alongside them into
the future, through establishing businesses that will
become new growth drivers, and becoming a true
first-call bank group, as we practice customer-oriented
business operations.
In this mid-term plan, we have established thefollowing three pillars of its basic policies: (1) Reformthe earnings structure based on implementing valueadded sales focused on customer needs; (2) Nurturinga corporate culture that promotes workstyle reform
and a desire to take on challenges; and (3) Active
commitment to regional revitalization.
In accordance with these pillars, we have set forth
the following key initiatives: “further developmentof measures toward high value-added banking
business,” by enhancing consulting sales and providing
comprehensive solutions; “promotion of measures
for asset management business that meet the asset
formation needs of customers,” based on longterm and continuous transactions including the next
generation; and the “enhancement of the profit base,”Message from the President

through efforts for regional development, tourism
promotion, measures for community healthcare, etc.

 verview of strategies aimed atOachieving our vision
As we look to achieve our vision, we are focusing on
developing our businesses by exploring the banking
business and expanding the asset managementbusiness.
Banking business
When exploring the banking business, it will be very
important as we look to create new added value that
we have a deep understanding of our customers,
including not only the details of their businesses but
also their strengths and weaknesses, issues they face,and other factors. To achieve this, the Bank was quickto actively take on feasibility studies.
When gaining an understanding of customers’
actual circumstances through feasibility studies, it willbe essential that we build stronger relationships withcustomers while sharing with them how to enhancetheir strengths or improve their weaknesses, and link
this to consulting proposals.
Hiroshima Prefecture is an area with a strong
manufacturing presence even on a national level, with
auto, shipbuilding, and shipping as its main industries.
Many companies are involved in each industry, andnaturally, we cannot build relationships of trustwith our customers unless we ourselves possess anunderstanding and deep insight of these industries. In
order to build strong relationships with customers, weestablished the Automobile-related Measures Office in
2001, as well as other specialized departments tailoredto specific industries, including the Shipping Finance
Division to support customers in the shipbuilding andshipping industries. We are focusing our efforts onbuilding relationships of trust by nurturing professional
human resources with deep understanding andadvanced expertise concerning these industries, who
are capable of engaging in dialogue on an equal
footing with our customers.
In addition, surveys have shown that Hiroshima
Prefecture is the fifth-highest prefecture in the
country in terms of the percentage of businesses withno successor, so it could be said that there is a highdemand for services related to business succession in
the area. I believe that in order to maintain the vitalityof the region it is extremely important that businesses
are properly passed on to the next generation insteadof being shuttered. In order to address this need,
we launched a recruitment consultancy business in
April 2019 so as to strengthen our initiatives aimed
at providing support related to nurturing businesssuccessors and the area of M&A, and to address theneed for recruitment consultancy services related to
executives in management positions.
Our fundamental approach to the banking businesslies in how we can support companies’ sustainable
development and contribute to regional development.
Asset management businessIn the asset management business, there is a tendency
to focus on the management of “funds,” while
operations may tend to be dominated by discussionsof investment trusts, insurance, and other products,
but we prioritize the management of our customers“assets” as a whole. In other words, we believe thattrue asset management lies in firmly protecting ourcustomers’ household assets and finding solutions to
support their asset formation.
Of course, our collaboration with Hirogin Securities
will enable us to enhance our asset management
product lineups, but we will also make proposals

Aiming to be a comprehensive financial services groupthat continues to grow with local customers

HIROSHIMA BANK INTEGRATED REPORT 201914

About Hiroshima Bank

related to the management and effective utilizationof customers’ wide variety of assets, including realestate, insurance, and marketable securities. For retailcustomers in particular, the transfer of these assets tothe next generation is an extremely important issue,
and we are enhancing our ability to address theseneeds by strengthening initiatives focused on our trustand inheritance operations.

Our path to achieving our visionFiscal 2018 summary and key areas of focus for fiscal 2019
Results in fiscal 2018 were slightly below our targets,
but I recognize that our business performance may beviewed favorably to a certain degree, including yearon-year increases in core banking profit and net
business profit, which are indicators of our earning
power in our core businesses as a financial institution.
Additionally, I think we have sowed many seeds thatwill support the development of new customeroriented services and the establishment of businesses
that will become new growth drivers, as we aim tobecome a true first-call bank group.
In fiscal 2019, the third year of our mid-term plan, inorder to ensure that the management objectives we set
forth in our five-year mid-term plan are achievable, weshall nurture the seeds we have sown and make thembear fruit and we must also sow new seeds to expand
the scope of our business operations. As we proceedwith these initiatives, it will be of prime importancethat we strengthen our relationships with customers. It
will be important that we establish a corporate culture
where we identify our customers’ true needs andsupport them, including exploring feasibility studies,while also raising our customers’ expectations as muchas we can. This year, we intend to take on the challengeof making as many customers as possible feel that
Hirogin provides them with good proposals.

Pursuing the enduring spirit of “Hirogin” evenin the midst of a period of major change

We intend to expand the scope of our business
operations, but we have no intention to expand
the scope of the regions where we operate, basedon our approach of prioritizing our home region.
Furthermore, there shall be absolutely no change to
our corporate philosophy of earning the trust of ourcustomers in the region and continuing to be the firstbank customers consult when they face issues.
I believe the greatest asset for any bank is its
people. I think that in order for us to know what ourcustomers want and how we can make appropriate
proposals through “dialogue,” it is crucially importantthat each employee is constantly aware of our true
raison d’être when engaging with customers. Businessissues related to succession and M&A for corporate
customers, and asset succession for retail customers,
are not the type of issues that can be easily discussed.
In order for customers to consult us on these types ofissues, it is vital that we build relationships that enable
customers to trust us, through mutual understanding
from dialogue on a “person-to-person” level, forboth corporate and retail customers. Accordingly,
it will be important that our approach to business
operations shall not be “bank-oriented,” but instead
we shall continue to engage with customers andprovide the optimal solutions for customers’ needs,
i.e., it will be important that all employees have a true
understanding of a market-in approach and stance.
I think it will take some time for this stance to takeroot as our corporate and organizational culture, but
we shall ensure it is spread properly by repeatedly
conveying our message.
As a precondition for the above, I consider it myrole to create an environment where employees
feel motivated, and can engage in their work with

Pursuing the enduring spirit of “Hirogin” even in
the midst of a period of major change

15

HIROSHIMA BANK INTEGRATED REPORT 2019

Message from the President

a constructive, positive attitude, and take on new
challenges at any time. Of course, measures such as
reducing overtime hours will be important in terms ofworkstyle reform. However, in addition to initiatives
on this level, I think that a pivotal part of workstylereform lies in a firm sense of awareness among
employees that a variety of workstyles do exist.
At present, the users of the shortened working hoursystem are mostly female employees who have alreadytaken maternity and childrearing leave. The traditional
way of thinking has been that shortened working
hours are an irregular way of working. However,the number of employees facing the pressing issueof care for elderly relatives is likely to increase in the
future, for both men and women. In addition, if wethink about how we can enable people to work past
retirement age and rehire employees, it appears likelythat a variety of workstyles, such as working threedays a week, will emerge.
In other words, this will mean that the mainstream
thinking itself will cease to exist, instead of the way of
thinking that the traditional and stereotypical way ofworking is “regular working” and there is “irregular
working.” Each employee will be able to work in his or
her own style, and I believe that unless all employees
are aware of this, workstyle reform, in its true sense,shall not progress.
I want to expand the rules of our organization
to enable employees to sufficiently exert theirindividuality and capabilities and deepen mutual
understanding through dialogue, while also fosteringa corporate culture that enables all employees to takeon new challenges in a proactive manner.

Our approach to future points ofcontact with customers
It used to be sufficient for banks to have counters andATMs, but as the world undergoes major changes, it is
becoming difficult for banks to maintain contact withcustomers with only counters and ATMs. Even now,bank counters are only open from 9 a.m. to 3 p.m.,
excluding certain branches, and many customers cannot
come to our branches during these hours. In addition,
the number of customers visiting counters is falling eachyear as those who previously visited our branches haveless and less opportunities to do so. Looking ahead, I
question whether we should maintain the full range offunctions currently available at counters.
Furthermore, the number of ATMs will likely decline
in the future, as we move toward cashless payments.
On the other hand, there is also the view that weshould move toward unmanned stores and increase
efficiency by adding functions currently available atcounters to ATMs. However, I think that as the needsof our customers become increasingly diverse, we willenter a new age where the way we address thosevaried needs while maintaining convenience for ourcustomers, without focusing entirely on one method,
will become increasingly important.
While promoting digitalization utilizing the IoT andAI, the Bank will firmly proceed with efficient business
operations while also maintaining and expanding
points of contact with customers by creating newservices that can meet the expectations of customers.

SDGs and ESG-based perspective aimed
at sustainable regional development
In terms of addressing environmental issues (E), we areaware that supporting customers’ initiatives should be
our roles to be fulfilled through our main businesses,
such as providing eco-friendly financing products,
not to mention our own ongoing initiatives aimed atenvironmental and forest conservation activities aswell as construction of a new eco-friendly Head Officebuilding and other measures.
Addressing social issues (S) will contribute directly
to regional revitalization, and the Bank is focusing
not just on increasing our initiatives aimed at regional
development, but also actively participating in
local projects, etc. Many redevelopment projects
are currently underway in Hiroshima, but I believethat development of the region as a whole, i.e.,development as an entire “area,” will be verysignificant for the region, as opposed to merely
rebuilding aged buildings, i.e., development as
an individual “point.” I believe that our role lies inbringing the region together as a steadfast entity tomaterialize these projects, by participating in such
HIROSHIMA BANK INTEGRATED REPORT 201916

About Hiroshima Bank

projects from the beginning and creating a network ofpeople with similar passion, including those in public
administration.
In terms of our approach to governance (G),which supports “E” and “S” initiatives, I think wehave entered an age where it is extremely important
not just to focus on strengthening governance, butalso to communicate those efforts to stakeholders
and facilitate their understanding of them. In orderto enhance our ability to provide information andproperly communicate it to stakeholders, I think it
will be necessary to streamline the content of ourbusinesses once again and confirm the direction ofdifferent initiatives based on management policy while
making revisions as required. In April 2019, the Bank
appointed personnel to focus on SDGs and ESG ona full-time basis, and we are collecting information
on environmental, social, and governance initiatives
already implemented internally, while actively
endeavoring to disclose related information bothinternally and externally.
Dialogue and mutual understanding are also
important from the perspective of SDGs and ESG. I
believe that how we can promote dialogue to advancemutual understanding with our stakeholders will
become a very important key element.

Our role for our stakeholders
I believe the most important role to fulfill is to bea bank that continues to inspire the dreams of our

Message from the President

stakeholders.
For our customers, this means becoming a banking
group that “provides high-quality solutions with asense of speed,” i.e. precisely the banking group thatthey “want to call first.”
For the local community, this means being a reliable
entity that people would think “will provide theoptimal solutions when there is a project, or a change
to be made.”
For employees, this means providing them witha place where they can work with the sense that“working at Hiroshima Bank is enjoyable, and we cangrow as a person.”In addition, for shareholders, this means continuing
to be a company that shareholders would feel “willgrow as a company as a result of its business activities
and will bring about a high level of shareholder
returns.”
I believe these are the important roles that the Bank
should fulfill.
Amid major changes of the times, we intend to
take steps to enhance corporate value in a sustainable
manner while continuing to steadily return profits toshareholders, by expanding the scope of our business
operations that constitute our growth strategies going
forward.
Going forward, we continue to endeavor to enhance
corporate value, aiming to become the Hiroshima
Bank Group that is reliable and connected with local
customers by strong relationships of trust. We lookforward to the continued support of our stakeholders
as companions with whom we continue to envision
our dreams together.

Toshio Heya
President

17

HIROSHIMA BANK INTEGRATED REPORT 2019

About Hiroshima Bank

Business Strategies

Business Strategies
Major strategies
Marketing strategy
Enhance value-added sales focused on customer needs
1. Enhance consulting sales (such as feasibility studies) and provide comprehensive solutions
2. Expand asset management business based on long-term and continuous transactions including the next generation
3. Enhance efforts for regional development, tourism promotion, and measures for community healthcare

Strategies for individual businesses
Banking business P.19
Asset management business P.27

Securities strategy
Ensure stable income with proper risk-taking based on market conditions

Workstyle reform
Promote a thorough reduction of labor burden
Improve labor productivity effectively utilizing Tomorrow Navi (integrated sales support system)

Workstyle reform P.58

Human resource strategy
Foster human resources able to quickly respond to changes and create value for local communities
Conduct human resource development measures that fit the banking and asset management business framework and establish career paths
Promote diversity
1. Employ professional people with various values and skills
2. Implement measures to help advance the careers of women

Human resource strategy P. 53

Enhance new service development
Focus on ICT*, especially FinTech
Enhance new service development through collaboration with other non-financial businesses*ICT means Information and Communication Technology.
Digital strategy P. 31

Utilizing an SDGs-based
perspective in
key strategies

Achieving sustainability

Contributing to theresolution of social issues
through financial
products and services

As we aim to coexist and co-prosper with “regional society” and the “environment and society,”
we shall provide value in various forms, while incorporating an SDGs-based perspective. (P63)

HIROSHIMA BANK INTEGRATED REPORT 201918

Strategies for Individual Businesses

Banking BusinessWe strive to grow together with the regional economy, through support forthe core businesses of local companies based around “feasibility studies”
We are striving to practice “high-value-added banking business,” based around“feasibility studies,” which are the advantages of Hiroshima Bank.
Automakers, shipbuilders, and companies in other distinctive industries
are clustered in this region, and the Bank has long focused proactively onunderstanding industry trends and business details and supporting theresolution of issues, while also taking steps to systematize the “connoisseur”
capabilities, which tend to be dependent on individual expertise, andutilize them in systematic ways. As we previously realized the importance ofqualitative information linked to future business prospects, we have positioned
the Bank’s “feasibility studies” at the core of sales based on customer needs, inorder to practice “high-value-added banking business.”

Hiroshima Bank’s “feasibility studies”
Hiroshima Bank’s “feasibility studies” evaluate the details of customers’ businesses, their growth potential, and other factors in an
appropriate manner, and exert consulting functions, including proposing solutions to issues and providing implementation support. Basedon these studies, we strive to revitalize regional industries through financing and support for customers’ core businesses.
Background to this initiative
In the 1990s, a decade plagued by the issue of bad debt disposal, the Bank provided
financing to suppliers in the automobile industry (components manufacturers) bylooking at their financials. However, the suppliers that possess technical expertise
irreplaceable in the automobile industry must be supported by taking a step into
management restructuring even if they are in a financially difficult position. It
became necessary to place more importance on qualitative information from theperspective of whether or not they were necessary for their industry cluster, insteadof looking solely at their financial position.
In January 2001, in order to accurately respond to the diversification andsophistication of business partners in the automobile-related industries, the Bank
newly established the “Automobile-related Measures Office” by hiring personnel transferred from the auto industry. Experts
visited suppliers’ plants and gained an understanding of the technical side of their businesses. To this, we added financial
analysis as a bank, enabling us to understand customers’ businesses in terms of both “technical” and “financial” aspects. Evenin the midst of rapid external changes such as the Lehman shock, we were able to deal with these changes while remaining
committed to this approach. This led to the development of the Bank’s feasibility studies.
Hiroshima Bank’s “feasibility studies”

Appropriate assessment of corporate customers
Appropriate assessment of details of businesses andgrowth potential of customers at various life stages

Identification and analysisof regional economy
and industries
Companies
Companies driving
the regional economy, engaging in businesswith roots
major borrowers,
in the region, etc.
etc.

Connoisseur (capabilities)
Qualitative analysis ...Branch offices
Mid-term plan formulation support ...Head Office

Utilization of external
professionalorganizations, etc.
19

HIROSHIMA BANKRESEARCH INSTITUTE
Industry and company researchpersonnel (Head Office)Not unnecessarily reliant
on financial data,collateral/guarantees,
repayment histories, etc.

Exerting consulting functions (offering solutions and implementation support)
Sustainable companies
Founding and growth

Collaboration between industry, academia, government, andfinancial institutions, government financial institutions, funds, etc.
Supply of funds Company split

Financial support

Change of terms
DES

Addressing
issuesCore business support

DDS

Debt forgiveness

DES : Debt Equity Swap. Debt conversion to equity
DDS : Debt Debt Swap. Debt conversion to subordinated debt

Productivity improvement Business succession
Revenue increase

Companies facing difficulty in continuing to operate
Adjustment of guarantee obligations

Proactive utilization of Guidelines on
Management Guarantees

Regional Economy Vitalization Corporation of Japan (REVIC), Small and Medium-sizedEnterprise Revitalization Support Councils, credit guarantee corporations, private consultants, etc.

HIROSHIMA BANK INTEGRATED REPORT 2019

Banking BusinessCorporate banking strategy centered on “feasibility studies” (key measures)
We shall further strengthen our offering of comprehensive consulting services (core business support, businesssuccession, etc.) to local companies, and focus on establishing a business model that can achieve a balance
between regional economic development and expansion of earnings opportunities for the Bank at a higher level.
Corporate banking strategy concept
Corporate banking strategy centered on feasibility studies
Central strategies
Hiroshima Bank
By life stage

By industry

Strengthening initiatives targeting the startup phasethrough enhanced collaboration between “industry,
academia, government, and financial institutions”
Strengthening initiatives aimed at business succession
during the “decline phase” etc.

Sustaining and enhancing earning power
Establishing competitive advantage
Further commitment to the local area

Rolling out different strategies for each industry,
such as appropriate financial support for companies
in the automobile industry (Mazda-related suppliers)
and the construction industry (business operators
focused on disaster recovery, etc.)

Balance at a higher level

Offering solutions tailored to corporate customers’ unique characteristics
By region

Corporate customers, the local area

Supporting tourism business operators
through SETOUCHI BRAND CORPORATION
Regional development utilizing private REITs

Enhanced effectiveness by utilizing financial digital technology, etc.

Enhanced management capabilities
Revitalization of the regional
economyAI, electronic contracts, web channels, etc.

Hiroshima Bank’s connoisseur capabilities
T here is a cluster of many suppliers in Hiroshima Prefecture, centering around Mazda Motor Corporation, andthe Bank appointed automobile-related screening personnel in the Credit Supervising Division and automobilerelated personnel in the Investment Banking Division, as it sees this entire “Mazda cluster” as customers.
The Bank identifies and analyzes the current status and trend of Mazda Motor Corporation and the automobile
industry, and it has been proactively providing management improvement support, overseas expansion support,
etc. to customers that are suppliers with a significant impact on the regional economy (Tier 1, Tier 2, Tier 3…).
Hiroshima Bank’s connoisseur capabilities Initiatives targeting the automobile industry (overview of the Bank’s support)

Strengthen costcompetitiveness
Main issues for suppliers

Tier 1 suppliers

Tier1

Tier1

Overseas development
Streamlining

Tier 2 suppliers

Tier2

Tier2

Tier2

Business plan formulation(growth strategies, reconstruction plan)
Overseas expansion support(finance, FS formulation)
Support for improvements at worksites
Business matching(individual and business meetings, etc.)...etc.

Tier2

Area
solutionsTechnical development
Tier 3, Tier 4…

Tier3

Tier3

“Mazda cluster”

Tier3

Tier3

Tier3

Development of other manufacturers
Diversifying development

Sustaining and enhancing
competitiveness of
the Mazda cluster

Mazda Motor
Corporation

Shift to overseas production andincrease in overseas procurement

Issue sharing

Qualitative analysis
HIROSHIMA BANK INTEGRATED REPORT 201920

Strategies for Individual Businesses

Status of initiatives for improving SME
management and regional revitalization
At the Bank, we consider exerting smooth financial intermediary functions for customers to the fullest as the most importantmission and role of regional financial institutions, and we will strengthen our efforts to provide management support for ourcustomers and propose optimal solutions for achieving management targets and resolving management issues.

Start-up and new business development support
Initiatives for venture company support
In order to enhance the vitality of the local economy, there has been a strong demand for “revitalization of startups” and “new business creation” by venture companies.
The Bank contributes to the revitalization of the regional economy and practices financing activities that arerooted in the local community by utilizing its network to support business start-ups and business growth, while
conducting proper and active financing.
Corporate growth

Growth phase

Stable phase

Hiroshima Venture Grant

Hirogin Venture Fund

Hirogin Venture Company Support Loans

A publicly solicited grant for the purposeof discovering and nurturing promisingventure entrepreneurs who are
enthusiastic about the prospect ofstarting new businesses and furtheringcommercialization

Investment targeting venture companies
that are close to the start-up stage, with anemphasis on growth potential and businessfeasibility (using regional funds provided by
the Bank)

Start of business

Loans that utilize external technicalevaluation organizations, etc.

<Hirogin> Start-up Support Loans
In addition to providing loans of the funds necessary to start a business (loans prior to opening also available), we provide
comprehensive support for those who are aiming to establish a business or who have just started up recently, including
providing services to help resolve various issues such as providing support for drafting a start-up business plan, improving
administrative efficiency, and expanding sales channels.

Support process
Start-up Support Loans

Potential business founders(prior to opening)

Business funding support with loans (loans prior to opening also available)
Start-up founders (after opening)

Support for drafting business plan based on our“Guidelines for Drafting Start-up Business Plans”
Free dispatch of professional consultants

Business expansion / business stability

Business support through <Hirogin> Start-up Support Services
Support after opening with free dispatch of professional consultants
Free website creation support
Provision of card loans that can be used at convenience store ATMs
Discounts on service fees for on-the-spot counseling service “VisasQ”
Free provision of internet banking services
Management consultation by a TKC certified tax accountant
Above services are all available upon request

Results of FY2018 (cumulative)
Start-up Support Loans (including Individual Business Owner Safety Plan)

93 loans / ¥211 million (509 loans / ¥1,055 million)

Support during growth stages
As support for the growth stages of our customers,
we offer a wide range of financing schemes, including
support for expanding into new sales channels
by facilitating business matching and technology
development, information provision and advising for
21

HIROSHIMA BANK INTEGRATED REPORT 2019new business development such as overseas expansion,utilization of loans secured by way of assignment of
movables and claims and loans secured by intellectual
property.

Banking Business

Financial support (financing)
The Bank provides consulting-type loans to address our customers’ diverse needs.
Provision of consulting-type loans<Hirogin> Health Management Evaluation-based Loan System<Hirogin> Disaster Prevention / BCP Support Loans

System features

System features

 irogin evaluates initiatives for “health management.”
H
Based on a program jointly developed with theHiroshima Branch of Japan Health Insurance
Association, health management is evaluated in four
grades of S, A, B, and C, and if the business achieves
a grade higher than a B, they are provided with a“certificate” after their loan is granted.
Companies that receive outstanding evaluation results
will be announced in news releases by Hirogin. We
also give advice on improving “health management”
based on the results of this evaluation.

 e will conduct a free diagnosis of the status ofW
formulation of disaster prevention measures and BCPs
and the financial impact on business performance inthe event of a disaster in collaboration with a non-life
insurance company.
If our customer wishes to formulate/review their<Hirogin> Cybersecurity Countermeasures Support Loans<Hirogin> Loans with Business Continuity Cost Insurance

System features

System features

 e will conduct a free diagnosis of cybersecurityWsystems and the potential financial impact of a cyberattack in collaboration with a non-life insurancecompany, and provide feedback on the results of thediagnosis after the loan is granted.
Based on the diagnosis results, and at the customer’s
request, individual support for the introduction andimprovement of relevant countermeasures will be
provided in collaboration with a non-life insurancecompany and cybersecurity countermeasure specialists.
Cyber risk insurance is set up to compensate forlosses incurred from legal liability for damages due
to information leaks resulting from cybersecurity
incidents during the loan period. (The insurance
premium is covered by the Bank)

BCP, they can use either a free or paid plan for BCP
formulation support.
Commitment lines can also be set if certain conditions
are met.

T hese financial products offer loans with insurance tocover the cost of business continuity.
The insurance covers any additional expenses
incurred to continue business operations, such as“borrowing costs for temporary branches” and“premium expenses for rush construction project,”in the event of distress resulting from a fire or natural
disaster (excluding earthquakes, volcanic eruptions,and tsunamis) during the borrowing period. (Theinsurance premium is covered by the Bank)The insurance amount (payment limit) is determinedbased on the amount of the loan at the time ofborrowing.

<Hirogin> Business Succession Support Loan
System featuresF or business succession, we will support every
step from the plan formulation phase to the funds
ultimately required.
To ensure that the successor of a company canoperate businesses smoothly after businesssuccession, the loan period is set to a maximum of
15 years, and a grace period (up to 5 years) can beallowed based on the business succession plan.

Results from consulting-type loans (total)
Results of FY2018

94 loans / ¥3,081 million

HIROSHIMA BANK INTEGRATED REPORT 201922

Strategies for Individual Businesses

Core business support
By strengthening our relationships with our customers, we share information on the issues and problems they face,and provide support for formulating management improvement plans and follow up on progress being made.
Furthermore, we are actively deepening collaborative efforts with external professional organizations to provide
support for business improvement, business rehabilitation, and changes in business activities, while nurturing
human resources that are highly skilled in business rehabilitation.
Selection and utilization of optimal management improvement support
In addition to the financial situation of our customers, we actively support their management improvement by
utilizing the knowledge and expertise of external professional organizations and other sources, as necessary, toresolve various management issues, such as increasing sales and facilitating business succession.
Results of FY2018
SME Business Rehabilitation Support Co-operative(number of consultations)

10 consultations

Management Improvement Plan Formulation Support Business28 consultations

Yorozu Support Center*

540 consultations* Includes consultations through video conferencing systems

Nurture human resources to enhance business rehabilitation skills<Number of participants in corporate skill-up training programs>(Person)The Bank continuously nurtures human resources thathave skills in business rehabilitation.

50
45

40
30

31

20
10

0

FY2017FY2018Business succession support through M&A
The Bank is focusing on M&A operations to support companies that have issues with business succession withno successor. Hiroshima Bank started the operations in 1997, being first among regional banks to take on suchinitiatives, and the team of 11 people has been currently taking on the operation. In FY2018, we achieved arecord-high number of 457 projects accepted and 14 contracts executed.
(Number of contracts)(Number of projects)

500

25
23

Contracts executed (left scale)

457

Projects accepted (right scale)

20

400

382

383

18

350

18
306

15

13
236

10

9
6

5

9
154

6

14

14

14

130

10
176

12

231

11
11

204

198
205

8

204

190

183

9

8

275

13

12

249

217

184

23

54

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

HIROSHIMA BANK INTEGRATED REPORT 2019

250
200
150

60

0

300

6

4
9

450

100
50
0

Banking BusinessInitiatives for “expansion of business fields”
Through the expansion of business fields, the Bank will strive to acquire new opportunities to generate earnings
and seek to become a comprehensive financial services group that is not bound by conventional frameworks asinitiatives with an eye toward deregulation in the future (reviews of investment regulations, etc.) are being taken.
Equity business
The Bank seeks to enhance the corporate value of unlisted customers by investing in funds (equity business) inaccordance with a variety of corporate life stages, such as the start-up and re-growth phases in addition to thegrowth and stable phases.
Start-up phase(From startup and secondary
startup to year five)

Growth phase

Growth resumption phase

Stable phase

Slow growth, decline phase

Solutions

Needs

Net sales

ListingRehabilitation

Securing human resources,
Management improvement,
expanding sales channels Increasing productivity, rationalizing / standardizing operations business conversion / discontinuation
Fund raising

Start-up support(Start-up Support Loans, etc.)

Venture support

IPO

Business succession, M&A

Business rehabilitation (DES, DDS, etc.)
Support for management improvements
IPO support
Business succession

Consulting-type loans
Business matching
Support for expansions abroad

Equity business

Services to support formulating mid-term plans
Venture capital

Buyout / business succession

Corporate rehabilitation

By industry, purpose / by project

The Bank provides equity funds that contribute to our customer’s business growth and business succession
measures.
In addition, we support business rehabilitation through purchases of credits and DES / DDS, etc. for companies
planning business rehabilitation by utilizing professional consulting services of our subsidiary Shimanami Servicer
Co., Ltd. (servicer).

HIROSHIMA BANK INTEGRATED REPORT 201924

Strategies for Individual Businesses

Regional development
Regarding urban development support, the Bank actively participates in activities based on the concept
of area management in collaboration with local governments, placing emphasis on intangible or “soft”
initiatives that contribute to enhancing the area’s value, including efforts to generate prosperity, going
beyond the idea of “buildings = construction and renovation of tangible or “hard” structure.
Initiatives for urban development span over a long period of time. We will establish a dedicatedteam, aiming to increase the entire value of the city by undertaking integrated efforts from a long-term
perspective without making a distinction between hard and soft initiatives.
As one specific initiative, we have been entrusted with the designated management of the Rest Houseof Hiroshima Peace Memorial Park, jointly with other local companies. In addition to the designatedmanagement of a single facility like this, we plan to expand activities positioned as important bases forarea management, as a hub for connecting the Peace Park, a site recognized around the world, with themetropolitan area of Hiroshima City and nearby tourist attractions.
The Head Office of the Bank, currently undergoing reconstruction, is based on the concept of creating a“solution terminal” that realizes “development” and “innovation” in the regional economy together withour customers, under the “HEIWA Project” (Hiroshima’s Evolution & Innovation With All) . A cafe andevent space will be set up on the first floor, and this facility will be used as a base for area management
activities with the goal of contributing to the prosperity of the city center.
Create a flow of people from the Rest House to the city center
新白島駅

広島市平和記念公園
レストハウス

二葉山
広島駅周辺地区

中央公園

広島

駅

広島バスセンター
広島銀行（新本店ビルを建設中）

平和記念公園

市民球場

平和

大通

り

紙屋町・八丁堀地区

国道2号
広島大学本部跡地

2021年1月に完成予定

25

HIROSHIMA BANK INTEGRATED REPORT 2019

比治山公園

Banking Business

Tourism promotion
As the role of regional financial institutions becomes important in the “regional revitalization,” which is one of
the growth strategies set forth by the government, seven regional banks in the Setouchi region including the Bank
participate in initiatives facilitated by Setouchi DMO and provide support for local tourism-related companies. The
Bank seeks to collaborate with Setouchi DMO and provides financial support to tourism-related operators using the
Setouchi Tourism Revitalization Fund and provides direct business support through the Setouchi DMO Members.
* Setouchi DMO…A cooperative system, under the collaboration of The Inland Sea, SETOUCHI Tourism Authority and SETOUCHI BRAND CORPORATION,
to take on initiatives to attract tourists, etc., by managing tourism promotion in the Setouchi region from a management perspective.

Organization chart of Setouchi DMO

7 financial institutions including

Hiroshima BankThe Inland Sea,
SETOUCHI Tourism Authority(staff secondment /Providing services

Promotion
Setouchi DMO

Tourism, buying
products

Tourists

SETOUCHI
BRAND CORPORATION
Setouchi Tourism
Revitalization Fund

Setouchi DMO Members
Product development support

Collaboration
policy-based finance)

Management support,
Investment andProduct development support
financing

Tourism-related business operators

SETOUCHI BRAND CORPORATION attracts global brand hotels to redevelopment sites
in the center of Hiroshima City
The Bank provides financing and dispatches personnel to SETOUCHI BRAND CORPORATION

Regional DMO establishment support
Each local government refers to regional revitalization through tourism promotion in the “Comprehensive Strategy for
Overcoming Population Decline and Vitalizing Local Economy.” Tourism promotion through the establishment of DMO
is attracting attention nationwide (123 DMOs registered and 114 candidates for registration as DMOs as of March
29, 2019), and as requests for consultation from local governments both within and outside of Hiroshima Prefecture
related to the establishment of DMO are rapidly increasing, the Bank collaborates with its branch offices to provide
consulting services for local governments in regard to the establishment of DMO and post-establishment support.

FY2015

Onomichi / Shimanami DMO Promotion Support Business

FY2016

Akiota Regional Trading Company Establishment Planning BusinessMiyoshi DMO Establishment Support Business

FY2017Tokushima Eastern Region DMO Establishment Preparation Advisory BusinessTsuyama Extended-Stay Tourism Development Project Promotional DMO Establishment
Plan Support Business

FY2018

Fukuyama Tourism Promotion System Establishment Support Business
Shobara Tourism Promotion Planning Business

HIROSHIMA BANK INTEGRATED REPORT 201926

Strategies for Individual Businesses

Asset Management Business (Collaboration
between Banking and Securities Businesses)
In June 2017, Hiroshima Bank converted Hirogin
Securities (former Hirogin Utsumiya Securities Co.,
Ltd.) into a wholly-owned subsidiary and establisheda system that can address the diversifying andsophisticated needs of our customers.
We will endeavor to provide and propose highvalue-added products and services by integrating
Hiroshima Bank’s customer base with Hirogin
Securities’ expertise (collaboration between banking
and securities businesses).

Initiatives for asset management business through collaboration
between banking and securities businesses
Propose active management productsC lassifying the product lineup of the Hirogin GroupHigh

Hiroshima Bank

Hirogin Securities

An assortment

Introduction of needs
for securities trading

Risk / return

Strengthen initiatives forfinancial instrument
intermediary services

Strengthen initiatives
for inheritance-related
businessesof internet-only

management

investment trusts

products

and savings-only

Stocks, foreign bonds,
structured bonds,
theme-type investment
trusts, etc.

investment trusts

Yen deposits, publicbonds, foreign currency

StableIntroduction of needs
for inheritance andinsurance
Expand asset management base byproposing stable management products

Activemanagement
products

An assortment

deposits, savings-typeof low-risk

investment trusts, low-

investment trusts,

risk investment trusts,

etc.

insurance, etc.

Low

F inancial instrument intermediary services
Hiroshima Bank offers “financial instrument intermediary services,” in which the Bank handles procedures to open securities accounts
for customers, based on entrustment by Hirogin Securities. Customers can open a securities account, a doorway to securities management,over the counter at Hiroshima Bank, which has an extensive branch network. In addition, the counter at Hiroshima Bank handles someproducts offered by Hirogin Securities (public structured bonds*, etc.), and the entire Hirogin Group works together to address ourcustomers’ securities management needs.
(*Structured bonds: bonds that allow a relative degree of freedom in defining terms such as maturity and interest rates by pairing a standard bond with a derivative instrument, etc.)

1
Customers(Individuals and corporations)

HIROSHIMA BANK INTEGRATED REPORT 2019

Intermediation to
Hirogin Securities<Hiroshima Bank>

3
27

2

Open a “securities account”
at Hiroshima Bank

Proposals, trading[Primary products] Stocks, investment trusts, bonds, etc.

<Hirogin Securities>

Asset Management BusinessIncreasing the number of joint branches between Hiroshima Bank and Hirogin Securities
We are increasing the number of joint branches in order to provide one-stop services as the Hirogin Group thatcover services including consultations on highly specialized inheritance measures as well as asset management.
(Hirogin Securities branches are established inside the following Hiroshima Bank branches)
Joint branches established (As of March 31, 2019)
Hirogin Securities

Date ofestablishment

Hiroshima Bank

Hirogin Securities

Youme Town Hiroshima Office Youme Town Hiroshima Branch OfficeFebruary 2008

Kabe Branch

Kabe Branch

May 2018

Hatsukaichi Branch

Hatsukaichi Branch

November 2008

Kure Branch

Kure Branch

May 2018

Okayama Branch

Okayama Branch Office

May 2014

Fuchu Branch

Fuchu Branch

July 2018

Mihara Branch

Mihara Branch Office

January 2018

Imabari Branch

Imabari Branch Office

August 2018

Hiroshima-Nishi BranchSatellite Booth Hiroshima-Nishi

March 2018

Tokaichi Branch

Miyoshi Branch

October 2018

Furuichi BranchSatellite Booth Furuichi

March 2018

Iwakuni Branch

Iwakuni Branch

November 2018

Kaita BranchSatellite Booth Kaita

March 2018

Fukuyama Sales Division Fukuyama Branch

January 2019

Ube Branch

Ube Branch

March 2018

Tokyo Branch

March 2019

Hiroshima BankTokyo Branch

Date ofestablishment

L aunched simple account-to-account transfer services
In order to sophisticate settlement functions within the Group, we launched a convenient service for transferring funds
free of charge simply by submitting a request over the phone or at the Hirogin Securities counter when transferring
funds from Hiroshima Bank to Hirogin Securities.
<Hirogin Securities>

1<Hiroshima Bank>

Simple account-to-account transfer service
Request account-to2 account transfer

Requestaccount-to-accounttransfer

Depositaccount

Securities
account

Hirogin
Securities’ customers

3 Account-toaccount transfer

L aunched “trust agreement agency business” and “banking agency business”
Customers of Hirogin Securities will also be introduced to Hiroshima Bank’s trust products, and the entire Hirogin Groupwill address local customers’ needs for inheritance measures.

1. Proposals related to inheritance,

Hirogin
Securities

explanations of trust products
and ordinary deposit accounts

3. Send documents(Agency)

Hiroshima
Bank

2. Apply
4. Sign agreement
5. Send detailed statement of trust agreement, passbook, etc.

(Affiliated trust
companies,
affiliated banks)

Hirogin Securities’ customers

Summary of Business Performance
Trends in the number of Hirogin Securities intermediary accounts and balance(¥ billion)

250.0

T rends in earnings from <Hirogin Securities> intermediary services(Number of accounts)

Intermediary balance
Intermediary accounts

200.0

10,698
9,008

14,777

16,0001,500(¥ million)

1,440

12,715
190.2

200.7

12,000

1,184

1,143

1,000

8,000

150.0
141.9
100.0

113.7

4,000
500

0

506

0

50.0

End of September End of March End of September End of March
2017
2018
2018
2019

0

First half/
2017

Second half/
2017

First half/
2018

Second half/
2018

HIROSHIMA BANK INTEGRATED REPORT 201928

Strategies for Individual Businesses

Asset Management Business(Inheritance-Related Businesses)
As we are approaching the “era of the 100-year
life,” we will provide support for the growing elderly
market in ensuring smooth succession of assets tothe next generation and effective use of assets, andalso provide schemes that allow them to manage
properties in preparation for cases where it becomesdifficult to make judgment due to conditions such as
dementia. Through these services, we aim to achievesmooth inheritance and succession of assets based on
customers’ needs.

Proposing solutions in accordance with each life event
The Bank seeks to propose optimal solutions that address the life events of our customers and the needs of each generation. For those in the
period of asset formation, we will contribute to their stable asset formation by long-term and diversified investments. For the elderly generation,in addition to strengthening efforts for inheritance-related business and helping with smooth inheritance and succession of assets, we willproceed with relationship building with the next generation through efforts such as proposing secondary inheritance measures.

Teens

20s

Needs

Life event

Findinga job

HavingMarriage children

30s

40s

Buyinga homeChildren’s
education

Children’smarriage

Retirement

Financing tobuy a carFinancing for
marriage

Financing tobuy a home

Financing for Financing for
education
renovations

Solutions

Savings and asset formation
Cashless payment services,card loans, automobile loans, etc.

Junior NISA

60s

70s

Nursingcare

Dementia, inheritance

Both the testator and beneficiary
are made fully aware of thehousehold’s portfolio, including
relevant real estate, and proposals
are provided that contribute toasset formation, as well as
inheritance measures.

IncomeOpeninga bankaccount

50s

Housing loans

Educationalloans

Era of the 100-year life

Nursing care, dementia,
inheritance measures
Preparing for a comfortable second life

Renovation
loans

Savings-type investment trusts, regular savings NISA,
iDeCo, level premium insurance plan, etc.

Investment trusts (NISA),
annuity insurance,
whole life insurance, etc.
Testamentary trust and inheritanceproperty liquidation services,money trust with special provisions, etc.

Key measures
1. Expand contact points between seniors and the next generation by proposing measures for dementia and inheritance
2. Expand systems to accept requests for consultations by establishing the “Inheritance Consultation Plaza”
3. Improve consultation abilities for the inheritance and trust businesses by establishing a section specializing in trusts
4. Propose long-term asset management to the elderly in collaboration with Hirogin Securities

29

HIROSHIMA BANK INTEGRATED REPORT 2019

Asset Management Business

Example of our initiatives
A case of dementia and inheritance measures
Trustee (Hiroshima Bank)
Trust agreement
SpouseEntruster (64, female)Transfer of rights
after inheritance
Eldest daughter (31, female)

Sister (62, female)ProxyrequestBrother

Proxy

Niece (42, female)

Proxy request

Proxy[Needs]Property management after the onset of dementia
Property management for the eldest daughter (who has a disability) after inheritanceAnxiety because of the eldest daughter not being able to handle the inheritance procedures herself
Want to determine how the inheritance will be divided in advance[Measures] Execute an agreement for “money trust with special provisions (asset trust)”
Signed an agreement for money trust with special provisions designating her younger sister as proxy in orderto manage properties after the onset of dementia
After inheritance, beneficiary right will be transferred to the eldest daughter, and her younger sister (niece)
continues to manage her properties
Preparing a will through a “testamentary trust”
As the eldest daughter has difficulty with inheritance procedures, the entruster prepares a will and specifies
how the inheritance will be dividedH er anxieties are eliminated as the Bank will handle all procedures after inheritance such as name change, etc.
 oney Trust with Special Provisions
M(joint management-type) that Connects Family

 oney Trust with Special Provisions
M(joint management-type) that Passes on Thoughts

This product allows prompt succession of properties

This product provides support for handlingin the event of an emergency.

complicated procedures of gift before death.

Managed by highly secure deposits

Assistance with procedures for annual gifting

Collective asset management

Records of annual gift transactions are retained

Annual notifications on earnings and contract details

Entruster can designate recipients after deathLong-term property management of up to 30 years

Long-term operation and management of up to 30 years

Subject to principal guarantee & deposit insurance

Subject to principal guarantee & deposit insurance

Summary of Business PerformanceT rends in the balance and number of contracts of inheritance-related
trust products(¥ million)

30,000(Number of contracts)

4,197

Total balance of three products*
Total number of contracts of three products 3,644

25,000
2,201

5,000
4,000

2,919

T rends in the number of accounts and earnings of the testamentary
trust and inheritance property liquidation services(¥ thousand)(Number of accounts)

35,00030,000

102
83

78

90

83

70

3,000
2,000

20,00025,000Earnings, the Bank

50

Earnings, agencies
1,000

15,00020,000

Number of accounts, total

22,723

18,222

20,65822,868024,2354,800

10,00014,597

5,000

0

30
10

0
15,00010,000110

5,000

End of September End of March End of September End of March
2017
2018
2018
2019

0

9,381

First half/
2017

Second half/
2017

9,103

8,758

First half/
2018

Second half/
2018*Asset trust, Trust that Connects Family, Trust that Passes on Thoughts

HIROSHIMA BANK INTEGRATED REPORT 201930

Special Feature

Initiatives Aimed at Digital Transformation

Amid the trend of rapidly advancing digitalization, the Bank believes that the initiative
aimed at digital transformation (transformation of business structure through digitaltechnologies) is one of its important management strategies. Based on the major premisethat we take root in our relationships with the local society as a regional bank, the Bank
will continue taking on the challenge of revitalizing the regional economy and improving
convenience for corporate and retail customers centered around the local communities byutilizing state-of-the-art digital technologies.

Understanding the background and environment
We are facing issues specific to the financial industry,
such as negative interest rate policies, and regulatory
easing of financial services and entry of competitorsfrom other industries, in addition to the trend of market
contraction across the industries and regional areas, asseen in the declining birth rate and aging population andthe concentration of people in the major cities. Amidthese conditions, we cannot be optimistic about theenvironment surrounding the Bank. On the other hand,
we are also aware that these threats may become major
opportunities if we deftly ride the current of digitalization
by utilizing our strengths, namely, “relationship with
regional customers,” “vast wealth of data centered on
the region,” and “credibility within the region.”

Organization and policy for addressing these issues
Based on the above understanding of the environment,in August 2016, we established the “New Business
Development Promotion Office” within the Management
Planning Division as a department that conducts
evaluations over a mid- to long-term perspective tocreate drastically new businesses, including non-financial
businesses. In February 2018, we reorganized the office as
the “Digital Innovation Office,” by integrating smartphone

31

HIROSHIMA BANK INTEGRATED REPORT 2019app functions, positioning the office as a department thatplays a central role in the “digitalization of finance.” In April
2019, the office was promoted to the “Digital Strategy
Division” by integrating cashless payment functions.
Under the initiative of top management, we have beenstrengthening our organization to “strengthen initiatives
toward digital transformation,” which are speedier andmore challenging.

Digital Strategy

Environmental analysis

Strategy / Policy for responding

Threats
Declining population andaging society
Concentration of people
in major cities
Negative interest rate policy
Regulatory easing andentry from other industries
Opportunities (Chances)

Promote drastic digitaltransformation while taking
root in our relationships
with the local society as aregional bankCreate new businesses andopen innovation with an eye
toward alliance with avariety of players, including
those in other industries
Full-fledged efforts to utilize
data

Specific initiatives

Creation of new businessand open innovation
Hiroshima Sandbox
Creation of new businesses
through Ideathon, collaboration
with other companies, etc.
Publication of API

Utilization of data

Commodification of financial
services and increasing competition

Developing a datacollaboration platform

Rapid changes in channels
and devices

AI-based financial screening

Development ofopen innovation
Development of technology thatutilizes data (IoT, AI, and API)
Creation of legal framework
for utilizing data

August 2016
Formed the New Business
Development Promotion
OfficeFebruary 2018
Reorganized into the Digital
Innovation Office
April 2019
Promoted to the Digital
Strategy DivisionInternal business efficiency improvements
RPA

Digitalization of existing businesses
Promoting cashless payments

Strengths

Advancement of Hirogin App

Relationship with
regional customers

Wallet+ service

Vast database of customer
information, etc.

YEN HIROSHIMA PROJECT©
・YEN HIROSHIMA PROJECT is the brand name of an innovation hub for collaboration across theregion and different industries, which was newly launched by Hiroshima Bank based on the concept
of “contributing to revitalizing the regional economy as a circular platform in the Hiroshima region.”・The word “YEN” incorporates the three ideas of: (1) “yen (en ),” the currency; (2) “en ” (the Japaneseword for “circle”), the circular platform within the region; and (3) “en ” (the Japanese word for“connection”), the connection with people and corporations.
・The symbol of this brand is designed in the motif of a five-yen coin, which simply symbolizes these three
concepts. It also represents the Bank’s strong co-creating relationship with the region, by expressing
itself in blue, which is the Bank’s corporate color, along with the shape of the Seto Inland Sea.
・The “YEN HIROSHIMA” project will continue to implement various initiatives that contribute torevitalizing the economy of the Hiroshima region on an ongoing basis.

HIROSHIMA BANK INTEGRATED REPORT 201932

Special Feature“Hirogin” will realize the optimal solution for “regional bank×digital technology×local communities”
The Digital Strategy Division of Hiroshima Bank willrealize a drastic innovation, aiming to make a greater
contribution to the local community based on thefollowing three key strategies:(1) Drastic overhaul of existing services and channels(Utilization of new technologies and responding tochanges in customer behavior)(2) Identify an ideal model while utilizing its strengths“as a regional financial institution,” and create new
businesses and open innovation, including alliancewith other businesses(3) Promotion of data utilization.

Koichi Seo

General Manager, Digital Strategy Division

Digital strategy will be the most fundamental strategy for the Bank over the next ten years
As a financial institution that plays a role in the social
infrastructure, we are aware that digitalization is a priority
issue that must be addressed as soon as possible. Basedon this understanding, we are committed to taking on avariety of initiatives aimed at the “fundamental overhaulof existing services and channels,” including the “releaseand enhancement of our banking app,” “introduction
and a gradual launching of product lineups for cashless
payment services,” and the “introduction of RPA.”
On the other hand, as a bank that should growtogether with the local community, the Bank must build abusiness model that will contribute to the improvement of
convenience for regional customers and the revitalizationof the regional economy over the medium- and long-term span, while always foreseeing the trend of thetimes. For this purpose, by focusing on the “utilization ofdata,” we will constantly take on new challenges, aiming
to create new businesses based on open innovation,
through means such as “alliance with various entities inindustry, academia, and the government centered on thelocal region.”
What will be necessary for regional corporate andretail customers in five or ten years? What should we do
as a regional financial institution? These issues are directly
related to how the management of the Bank should be.
We will make efforts based on the understanding that
digital strategy will be the most fundamental strategy for
the Bank over the next ten years.

Hirogin is focusing on these types of digital innovation (introduction of an example)
Publication of API
The Bank makes available to external companies a part of its banking services, such as balance inquiry andtransaction history inquiry as an open API (users are required to go through certain screening processes). As we look
to continue increasing our API lineups going forward, we will seek to collaborate and cooperate with a diverse rangeof companies, while ensuring the protection of the users. These efforts will be made based on the perspective of
diversifying our channels that contribute to enhanced convenience for our customers and promoting open innovationsuch as creating new value for customers through mutual creation of new services with other businesses.
FinTech company

33

HIROSHIMA BANK INTEGRATED REPORT 2019

API open infrastructure(OpenCanvas)
API callResponse

Open API

Response

Apps

Inquiry andtransaction
requests

API infrastructureInternet
API callInternet

Bank

For corporations

Core systems

Corporate IB(AnserBizSol)
Internal API
ESB infrastructure

For individuals

Internal API

Accounting-type andinformation-type

Customer

Digital Strategy

Hiroshima Regional Data Collaboration Platform Creation Demonstration ProjectAs part of measures to promote the utilization
Solutions for
Solutions for more Solutions for more Solutions for utilization
purchasing activities efficient movement efficient logistics
of data, the Bank participates in the “Regionalof idle assets
Data Collaboration Platform Creation
Data collaboration platform (temporary name)
Demonstration Project,” which was adopted by“Hiroshima Sandbox,” a project outsourced by
Other consortium
Infrastructure
FinancePurchase Population
Open(power)analysis-related movementthe Hiroshima prefectural government, jointly
relatedData collected from thedatademonstration project
information related information information related datawith SoftBank, The Chugoku Electric Power
Consortium data
Open data Other consortium data
Company, and Izumi. We have been conducting
demonstration tests since October 2018, aiming to build services that will contribute to the promotion of data
distribution between companies in Hiroshima and enhanced convenience for residents of the prefecture.

Utilization of AI for business feasibility finance screening
In February 2017, the Bank launched a
Model
Learning data
Correlation
Correlation Correlation(program specifications)demonstration test aimed at utilizing AI (artificial
Solution data
Input data
strengthfactorsAA
intelligence) for business feasibility financeDeposit and withdrawal Financial data,
DefaultB×C
history data
etc.
informationC
screening for small businesses. The considerationof utilizing AI for business feasibility finance,
People (the Bank)
AI (artificial intelligence)
which is one of the main businesses of a bank,
Use AI to comprehensively analyze the trend and pattern (correlation) From the correlations identified, causal relationship isinferred from analogy by humans and requiredof deposit and withdrawal statements, etc., common to the entities
is a pioneering effort in the industry, and we willthat defaulted in the past, and identify factors with strong correlation factors are selected to create a model (programming)
continue considering the implementation of thistechnology, aiming to achieve speedy and low-cost financing.

Promotion of workstyle reforms with utilization of RPA
As part of measures to reform work styles, we are
Business operation cost reduction Quality enhancements Productivity enhancements
also proactively focusing on “RPA (Robotics Process
24 hours a day, 365 days a year, shifting
Zero mistakes
Personnel expenses reduction
Automation),” aiming to improve the efficiency
to high value-added operationsof internal operations. After demonstration
Robot creation (first time only)
Robot execution (as needed)
tests, we began the full-fledged application of(1) Operate(2) Teach(3) Execute
RPA learns the details of
Operate RPA tools to
Execute the robot
RPA to all business operations at Head Office intheoperations
andacomplete required tasks in(manual, by timer, etc.)
robot is createdaccordance with instructions
October 2018. While seeking to make a drastic
Automate routine operations without programming
improvement of cost structure, we will take steps
to review the allocation of resources, aiming to provide high value-added services by utilizing the time saved.

Holding the Ideathon and taking on challenges such as the Hiroshima Sandbox
In order to create new businesses and services, theBank is taking on new challenges in a variety of areas.
In April 2017, we held the “First Finance Ideathon: YEN
HIROSHIMA,” a participatory idea generation eventfor the general public. Many participants acceptedand supported this initiative, which projects an image
different from the traditional image of a bank, andregarding the prize-winning ideas, we will continue toconsider the feasibility of implementing them as ourservices.

In addition, we arealso looking for all
types of possibilities
for collaboration
between industry,
academia, and thegovernment, including
actively participatingin the “Hiroshima
Sandbox” organized by Hiroshima Prefecture.

Banking apps and response to transition to cashless payment
We are also continuing to implement advanced
initiatives aimed at digitalizing existing businesses.
In 2016, we launched support for “HIROCA,” a local
e-money card, the first of its kind issued by a bank.
This card is used as a personal identification card
doubling as a method of local payment by companies
and universities.
In addition, we were quick to address the transition
towards cashless payments across the country, as
we introduced J-Coin Pay in March 2019, and wewill also continue to take steps to create a diverse

lineup of payment
methods. We arealso focusing on
smartphone apps,
and in November
2016 we released“Hirogin App” as apublic portal app.
Furthermore, as we introduced balance inquiry
functions in February 2019, we will continue to takemore steps to enhance our services.

Hiroshima Bank will continue proactively taking on new challenges aimed at “digital innovation”!
HIROSHIMA BANK INTEGRATED REPORT 201934

Management BaseCorporate Governance

Basic approach
While fulfilling our social responsibility and public mission, the Bank will receive high evaluation from and build unshakable bondsof trust with our stakeholders, including both customers and shareholders by raising management soundness, efficiency, andtransparency. In this way, the Bank works to promote sustainable medium- to long-term growth and increase corporate value.
To attain this goal, we respect the intent and spirit of the Corporate Governance Code of the Tokyo Stock Exchange, Inc., andset out the following five basic principles in an effort to realize effective corporate governance.
(1) We respect shareholders’ rights, secure equality and develop an appropriate environment for the exercise of the rights.
(2) We strengthen measures in corporate social responsibility (CSR) and work in effective collaboration with all stakeholders,
including the regional community, customers and employees, thereby fostering a corporate culture and climate in respect for
their rights and standpoints.
(3) We maintain transparent management by providing fuller disclosure in a timely and appropriate manner.
(4) Our Board of Directors supervises the Bank’s business execution effectively and makes decisions swiftly, based on its fiduciary
responsibility and accountability to shareholders.
(5) We promote constructive dialogues with shareholders and respond appropriately.

Efforts to enhance governance

June 2015

December 2015

June 2016

June 2017

One external director(woman) was appointed
Reduced the number of directors
and the term to one year
Review performance-linked
compensation for directors
Review the executive officer
systemThe Compensation
Committee and theNomination Advisory
Committee were
establishedOne external director was
added

Introduced the stockcompensation scheme(BIP trust) for directors
and executive officers

Trends in external officers
External directors(Persons)

External Audit & Supervisory Board members

Ratio of external officers

40.0%

40.0%

40.0%

3

3

3

33.3%
18.8%

3

20.0%

25.0%

25.0%

3

3

3

3

3

3

3

2
1
0

2011

2012

1
2013

2014

2015

2016

2017

2018

Corporate Governance Overview
The Bank’s Board of Directors consists of 10 members, including threeexternal directors. The board convenes once a month, in principle,
and is responsible for making management decisions and overseeing
business execution. The Bank has established the Management Board
as a body for discussing and determining important matters relating
35

HIROSHIMA BANK INTEGRATED REPORT 2019to overall management based on the basic policy determined by the
Board of Directors. The members of the committee are the Chairman,
President, and directors in charge of the respective divisions, andthe committee convenes once a week, in principle. In addition, theBank has established the Directors’ Loan Evaluation Board as a bodyCorporate Governanceto discuss and determine important loan projects based on the basic
policy formulated by the Board of Directors. The members of thecommittee are the Chairman, President, Senior Managing Directors,
and directors in charge of the respective divisions, and the committee
convenes once a week, in principle. The Articles of Incorporation of
the Bank prescribe that the number of directors of the Bank does
not exceed 15 and that terms of office are for one year, to clarify
management responsibility and build a management framework to
respond rapidly to changes in the management environment.
The external directors receive reports on the results of internal audits,
Audit & Supervisory Board members’ audits, and accounting audits
as well as reports on the state of internal control from the division in
charge of internal control during meetings of the Board of Directors
as part of their roles of providing management supervisory functions
from an external perspective. In particular, the external directors receive
detailed explanations of the agendas for the meetings of the Boardof Directors and reporting materials in advance from the divisions incharge of internal audit and internal control, respectively, and provide
appropriate suggestions and advice during such advanced explanation
or meetings of the Board of Directors, thereby endeavoring to raise theeffectiveness of their management supervisory functions.

The Audit & Supervisory Board consists of five members, including
three external Audit & Supervisory Board members. It convenes oncea month and as required. The Audit & Supervisory Board members
participate in meetings of the Board of Directors and provide
appropriate suggestions and advice on management decision-making.
The Audit & Supervisory Board members, including external
Audit & Supervisory Board members, are striving to implement
efficient audits by maintaining close coordination with the divisionin charge of internal audits and accounting auditors through theactive exchange of opinions and information and by attending
audits of branches by the division in charge of internal audits andon-site audits by accounting auditors. In addition, the Audit &Supervisory Board members receive reports on the progress of thetasks of developing sub-systems in the internal control system andimportant matters that affect the effectiveness of the sub-systems
from the division in charge of internal control, including the statusof the response to such matters, periodically or as required. The
Audit & Supervisory Board members are endeavoring to develop
and strengthen the internal control system from their standpoint as
Audit & Supervisory Board members by requesting explanations andproviding suggestions and advice as required on such occasions.

(Mechanism for overseeing business execution and management)

Election/Dismissal

General Meeting of Shareholders

Audit & Supervisory Board
5 Audit & Supervisory Board members(Among these, 3 are external Audit &Supervisory Board members)

Election/Dismissal

Board of Directors
10 directors(Among these, 3 are external directors)

Accounting auditor
KPMG AZSA LLC

Management Board

Directors’ Loan Evaluation Board* In addition to the above, 14 executive officers who do not concurrently serve as directors (as of June 27, 2019) are appointed by the Board of Directors to execute their duties.

Reasons for selecting the current corporate governance structure
The Bank has adopted an Audit & Supervisory Board system as part of its efforts to strengthen corporate governance for the following reasons and purposes:F or responding promptly and accurately to changes in the management environment and ensuring theappropriateness of the Bank’s business operations, it is important to have a system in which internal Bank directors,
who have a wealth of expert knowledge and experience in the banking business and bank management and a deep
understanding of the operation and execution of the Bank’s business, oversee as members of the Board of Directors
the management’s decision-making and the execution of duties by the other directors;H aving the Audit & Supervisory Board whose members, including external Audit & Supervisory Board members, audit
the execution of duties by the directors is effective and serves as a management monitoring function; andT he highly independent external directors and external Audit & Supervisory Board members provide their supervisingand auditing functions in a fair and objective manner from a neutral perspective and give appropriate suggestions
and advice on the execution of the duties by the directors and on the status of the operation of internal controls,
thereby ensuring an adequate management supervisory system.

Composition and functions, etc., of the Board of Directors
In addition to deciding on important management issues including
formulation of mid-term management plans, the Board of Directors
values its overall balance between knowledge, experience andability as well as diversity to exert highly effective management
supervisory functions. To this end, the Board of Directors iscomprised of internal directors who are familiar with the Bank’s

operations and external directors who have great experience anddeep insight in their areas of expertise. Additionally, based onrequirements for external directors stipulated by the Companies
Act and independence standards for external officers set forth
by the Tokyo Stock Exchange, Inc., the Bank appoints external
directors who are independent officers.
HIROSHIMA BANK INTEGRATED REPORT 201936

Management Base

Analysis and evaluation of effectiveness of the Board of Directors
Regarding the status of development and operation of internal
control systems, the Board of Directors receives a report at
every fiscal year-end and confirms that there are no issues witheffectiveness.
Furthermore, we work to raise the Board of Directors’
effectiveness by taking the measures below.
 election of external officers and implementation ofSadvance explanations to external officers regarding Boardof Directors meeting materials
Advance deliberations and summarizing of key points via
the management committee and various other committees
Revisions as needed on matters resolved and reported by
the Board of Directors, etc.
Additionally, the Bank analyzes and evaluates the effectivenessof the Board of Directors at every fiscal year-end based on selfevaluation by directors and Audit & Supervisory Board members,

Former General Manager ofHiroshima Branch, Bank of Japan
Professor of Hiroshima City University

 ne female director was appointed in June 2015O
External directors account for 30% of the Board of Directors

Former Chairman of the Board of NIPPON TELEGRAPH AND TELEPHONE CORPORATION

External

Internal

External

Internal

on documents for external officers, in addition to building
a support system such as by developing an environment toview internal regulations, notices and other internal bankinformation.
Alongside the above, the Bank works to strengthen ties withexternal directors and Audit & Supervisory Board members
through measures such as holding liaison conferences (external
officer liaison conferences), aiming to secure information
sharing and common understanding.
Directors

Effective use of external officers
The highly independent external directors and external Audit &Supervisory Board members are providing their supervising andauditing functions in a fair and objective manner from a neutral
perspective and giving appropriate suggestions and advice on
the execution of the duties by the directors and on the status of
the operation of internal controls, thereby ensuring an adequate
management monitoring system.
In such an environment, the Bank has established theCompensation Committee and the Nomination Advisory
Committee, which include external directors among their members,
to secure transparency and objectivity for processes of determining
compensation and nomination of directors. Resolutions are madein view of deliberations of the committees.
We have introduced a system for external officers to view andconfirm in advance the agenda for a meeting of the Board of
Directors and its reporting materials from outside the Bank, andwe provide devices for this purpose. Furthermore, the secretariat
and various departments responsible for administrative work for
Board of Directors meetings hold advance explanatory meetings

Additionally, the Bank encourages and supports self-improvement
efforts by directors and Audit & Supervisory Board members toacquire knowledge and information necessary for effectively
fulfilling their roles and responsibilities, and it holds and provides
various training sessions and seminars in cooperation with external
institutions and organizations.

Audit & Supervisory
Board members

Under such circumstances, every fiscal year the Board of Directors
receives a report on the status of development and operation
concerning systems for ensuring appropriate business operation andconfirms that they are appropriately developed and implemented.
The board also conducts a “Board of Directors Self-evaluation
Questionnaire” to analyze and evaluate the effectiveness of theBoard of Directors based on its results.

LawyerCertified public accountant

T hree among five Audit & Supervisory Board members
are external Audit & Supervisory Board members
One of external Audit & Supervisory Board members isa womanFormer President of ANDERSEN Co., Ltd.

and an analysis and evaluation for FY2018 took place at the Boardof Directors meeting in April 2019.
As a result, in comprehensive view of overall balance between
knowledge, experience and ability, and status of operation, it was
confirmed that the Board of Directors of the Bank demonstrated
highly effective management supervisory functions. Also
confirmed was that directors and Audit & Supervisory Board
members appropriately fulfilled their duties and responsibilities
and that adequate support systems for external officers were inplace.
In addition, in consideration of the future management
environment, the Board of Directors shared the recognition
that further efforts are required for response to diversity andpromotion of more active discussion by the Board of Directors.
The Bank’s Board of Directors will continue to conduct
adequate discussions in light of the above analysis and evaluationand improve response to issues, while moving forward withinitiatives to strengthen governance.

Operational and other revisions in the Board of Directors implemented in FY2018 in light of evaluation results for FY2017

Issues recognized in FY2017

1

Revised procedures on deliberations
at the Board of Directors meetings
regarding formulation of“management plans”

Revisions were made such that agenda items (reports) were submitted to theBoard of Directors from the planning stage, with final resolution made by the
Board of Directors (previously, only the final resolution was made by the Boardof Directors)

A significant portion of the time

Reducing time used for explanations
to secure time for deliberation at theBoard of Directors meetings

Operated such that, in principle, time for explanations was within 1/4 of thetotal time overall
Provided adequate explanations for external officers at advance explanatory
meetings

to Board of Directors meetings
2 dedicatedis used to explain agenda items

37

Measures implemented during FY2018

In deliberations concerning importantmanagement issues, there are noframeworks to take in the opinions ofexternal officers from the planning stage

HIROSHIMA BANK INTEGRATED REPORT 2019

Corporate Governance

Officer compensation system
Policies and procedures for determining officer compensation
Based on the following policies and procedures, the Board of
Directors of the Bank determines compensation that provides healthy
incentives for sustainable growth while giving consideration to theviewpoints of transparency, objectivity, and fairness.
Officer compensation comprehensively reflects such factors as thestatus of officer compensation at other banks similar in scale to theBank, historical payment results, and salary standards of the Bank’s
employees. Compensation for directors is determined by a resolutionof the Board of Directors, while compensation for Audit & Supervisory
Board members by their discussion. However, the total compensation
for directors and Audit & Supervisory Board members comes within
the range as resolved by a General Meeting of Shareholders.
(a) Compensation for directors (excluding external directors) is
composed of fixed-amount compensation based on job titles,
performance-linked compensation, and stock-based compensation.
They are appropriately balanced in consideration of the Bank’sbusiness results and linkage with shareholder return.

The stock-based compensation system utilizes a framework known
as an officer compensation board incentive plan (BIP; hereinafter thesame) trust. Utilizing compensation amounts for eligible officers as
funds, the trust acquires shares of the Bank, and provides the sharesand cash equivalent to disposal of the Bank’s shares upon directors’
retirement.
(b) Compensation for executive officers is composed of fixedamount compensation, bonuses, and stock-based compensation(officer compensation BIP trust). They are appropriately balanced
in consideration of the Bank’s business results and linkage withshareholder return.
(c) For the sake of neutrality, compensation for external directors
and Audit & Supervisory Board members is only composed of fixedamount compensation without factors related to business results
and stock prices.

Deliberations by the Compensation Committee and the Nomination Advisory Committee
To secure transparency and objectivity for the process of determining
majority of independent external directors as its members have been
compensation for directors and executive officers, the Compensation
established, and matters on compensation are determined in light ofCommittee and Nomination Advisory Committee comprised of adeliberations by these committees.

Development of successors to management
The Bank has put in place a rank-based training system and clarifies
the standards and abilities required for each job position and rank
in order to develop human resources systematically. The training
system includes the “Hirogin Management School” aimed atdeveloping management personnel from a medium- to long-term

perspective. The Hirogin Management School provides a programin which selective employees who are expected to undertake future
management of the Bank learn to demonstrate the “ability ofthinking befitting of a corporate manager (management strategy,
business reform, etc.).” (See page 55 for details)

Cross-shareholdings
As shown below, the Bank defines (1) Policies regarding crossshareholdings of listed shares and (2) Standards for exercise of voting

rights for cross-shareholdings, and appropriately addresses crossshareholdings.

(1) Policies regarding cross-shareholdings of listed shares
The Bank has a basic policy of not engaging in cross-shareholding, except where it is deemed that the holding has a rationale suchas development of the regional economy or improvement of corporate value. As for shares held, the Board of Directors periodicallyevaluates the following aspects to determine the rationale for the shareholding: (a) whether the benefits and risks of each shareholding
are commensurate with capital costs associated with the holding; and (b) the company’s (i) level of contribution to the regional
economy, (ii) growth potential and future prospects and (iii) medium- to long-term profitability in banking transactions. Evaluations on
cross-shareholdings carried out at the Board of Directors meeting in March 2019 showed that approximately 80% of the companies inwhich the Bank holds shares satisfy these conditions. For shares in companies that fail to satisfy these conditions, the Bank is currently
holding discussions to improve profitability in transactions or reduce shareholdings.
(2) Standards for exercise of voting rights for cross-shareholdings
In exercising voting rights, the Bank examines the management principles and status of maintenance of corporate governance at thecompany in question, and then comprehensively determines voting for or against proposals in view of factors such as (a) if the company
is conducting appropriate decision-making that will lead to medium- to long-term increases in corporate value and improvement ofshareholder value and (b) if the company is free from the possibility that it inflicts damage to the Bank as a shareholder. Items to be
examined to find potential impacts on corporate value and shareholder value in particular are as follows: (a) proposals for appropriationof surplus that potentially have a significantly detrimental effect on financial soundness, (b) proposals for election of directors and Audit& Supervisory Board members and provision of retirement benefits at companies that have recorded losses or paid no dividends for acertain period of time, and (c) proposals for anti-takeover measures, among other items.

HIROSHIMA BANK INTEGRATED REPORT 201938

Management Base

Board of Directors, Executive Officers andAudit & Supervisory Board Members(As of June 26, 2019)

Directors

Koji Ikeda

Toshio Heya

Tohru Hirota

ChairmanPresident

Director & Senior Managing Executive Officer

Joined the Bank in April 1977. After serving
as General Manager of Management
Planning Division, Managing Executive Officer
and General Manager of Fukuyama Sales
Division, and other posts, assumed office asManaging Director and General Manager ofManagement Planning Division in June 2009,
and President in June 2012. Working in thecurrent position since June 2018.

Joined the Bank in April 1983. After serving
as General Manager of Management
Planning Division, Managing Executive Officer
and General Manager of Head Office Business
Department, and other posts, assumed officeas Director & Managing Executive Officer inJune 2016. Working in the current position
since June 2018.
In charge of Secretariat Department, Tokyo
Liaison Office, and Digital Strategy Division

Joined the Bank in April 1981. After serving
as General Manager of Otemachi Branch,
Managing Executive Officer and General
Manager of Imabari Branch, and otherposts, assumed office as Managing Director
and General Manager of Eastern Area
Headquarters in June 2013. Working in thecurrent position since June 2015.
In charge of Banking Business Planning
Division, Corporate Planning Division, andPublic Services Business Division

Yasushi Kojiri

Katsuhiko Nakama

Akira Maeda

Director & Managing Executive Officer

Director & Managing Executive Officer

Director & Managing Executive Officer

Joined the Bank in April 1984. After serving
as General Manager of Personnel & General
Affairs Division, Managing Executive Officer
and General Manager of Tokyo Branch, andother posts, assumed the current position inJune 2018.
In charge of Personnel & General Affairs
Division and Risk Management Division

Joined the Bank in April 1985. After serving
as General Manager of Credit Supervising
Division, Executive Officer and General
Manager of Onomichi Branch, and otherposts, assumed the current position in June2018.
In charge of Credit Supervising Division andShipping Finance Division

Joined the Bank in April 1985. After serving
as General Manager of Retail Division,
General Manager of Management Planning
Division, and other posts, assumed office as
Executive Officer in April 2016. Working in
the current position since June 2018.
In charge of Asset Management Division,
Retail Loan Division, and Treasury &Investment Division

Executive Officers

Akira Ogi
Director & Managing Executive Officer
Joined the Bank in April 1986. After serving as General
Manager of Personnel & General Affairs Division, General
Manager of Management Planning Division, and other posts,
assumed office as Managing Executive Officer in October
2018. Working in the current position since June 2019.
In charge of Management Planning Division, Banking
Operation Management Division, and Information
Technology Planning & Administration Division; Deputy
General Manager in charge of Digital Strategy Division

39

HIROSHIMA BANK INTEGRATED REPORT 2019

Senior Managing Executive
Officer (Area Officer)

Hiroshi Honkawa

Executive Officer (General
Manager of Tokyo Branch)

Fumitsugu Kariyada

Senior Managing Executive
Officer (Area Officer andGeneral Manager of Eastern
Area Headquarters)

Ikuo Kojiri

Executive Officer (General
Manager of Tokuyama
Branch)Hideki Toi

Managing Executive Officer(General Manager of Head
Office Business Department)

Masahiro Koike

Executive Officer (General
Manager of Imabari Branch)

Koji Hakoda

Kimio Okano

Executive Officer (General
Manager of Onomichi
Branch)Shinichi Fukamachi

Managing Executive Officer(Area Officer)
Executive Officer (General
Manager of Okayama
Branch)Atsuhiro Kunimura

Executive Officer (General
Manager of Audit Division)

Yoshitaka Yamashita
Koji Sakai

Executive Officer (General
Manager of Treasury &Investment Division)

Hiroyuki Higashiyama

Executive Officer (Investment
Banking Division andInternational Business
Division)
Executive Officer (General
Manager of Fukuyama Sales
Division)

Hironori Sato

Executive Officer (General
Kazuo Kiyomune
Manager of Kure Branch andGeneral Manager of Kure
City Municipal Office Branch)Board of Directors, Executive Officers and Audit & Supervisory Board Members

Masahiro Sumikawa

Kaori Maeda

Director

Director

External

Assumed office as General Manager ofHiroshima Branch, Bank of Japan in May
2000. After serving as Representative Senior
Managing Director of The Tokyo Tomin Bank,
Limited and Senior Advisor of American
Family Life Assurance Company of Columbus,
and other posts, assumed office as Director of
the Bank in June 2013 (current position).

Satoshi Miura
External

Director

External

Assumed office as Assistant of School of Engineering,
Hiroshima University in April 1982. After serving as
Assistant of Department of Computer and Network
Engineering, Faculty of Information Sciences, Hiroshima
City University, Assistant Professor of Information
Processing Center, Hiroshima City University, and otherposts, assumed office as Professor of Graduate Schoolof Information Sciences, Hiroshima City University sinceApril 2007 (current position). Working as Director of
the Bank since June 2015 (current position).

Assumed office as Senior Vice President andHead of Personnel of NIPPON TELEGRAPH
AND TELEPHONE CORPORATION in June
1996. After serving as President andRepresentative Director of Nippon Telegraphand Telephone East Corporation, President &CEO of NIPPON TELEGRAPH AND TELEPHONECORPORATION, and other posts, assumed
office as Director of the Bank in June 2016(current position).

Hitoshi Katayama

Yuji EkiYasutoshi Takei

Audit & Supervisory Board Member

Audit & Supervisory Board Member

Audit & Supervisory Board Member External

Joined the Bank in April 1985. After serving
as General Manager of Fukuoka Branch,
General Manager of Hiroshima-Nishi
Branch, and other posts, assumed officeas Senior General Manager of ComplianceManagement Division in April 2017. Working
in the current position since June 2017.

Joined the Bank in April 1986. After
serving as General Manager of Secretariat
Department, General Manager of HiroshimaHigashi Branch, and other posts, assumed
office as Senior General Manager of Risk
Management Division in April 2019. Working
in the current position since June 2019.

Registered as attorney-at-law in April 1979
(current position). Assumed office as Audit& Supervisory Board Member of the Bank in
June 2011 (current position).

Audit & Supervisory Board Members

Yoshinori Takahashi

Masako Yoshida

Audit & Supervisory Board Member External

Audit & Supervisory Board Member External

Registered as certified public accountant
in March 1980. After serving as General
Manager of Hiroshima Branch, KPMG
AZSA LLC and other posts, assumed officeas Representative of Takahashi CPA & Tax
Accountant Office in July 2011 (current
position). Working as Audit & Supervisory
Board Member of the Bank since June 2015
(current position).

Assumed office as President of ANDERSEN
Co., Ltd. in April 2006. After serving as
President of ANDERSEN Institute of Bread& Life Co., Ltd., Corporate Advisor of
ANDERSEN Institute of Bread & Life Co., Ltd.,and other posts, assumed office as Audit &Supervisory Board Member of the Bank in
June 2015 (current position).

(*) Directors, Masahiro Sumikawa, Kaori Maeda, andSatoshi Miura, are External Directors as stipulated in
Article 2, Paragraph 15 of the Companies Act. In
addition, Masahiro Sumikawa, Kaori Maeda, and Satoshi
Miura are independent officers as stipulated by Tokyo
Stock Exchange, Inc.
Director Kaori Maeda’s name in the family register is
Kaori Aibara.
(*) Audit & Supervisory Board Members, Yasutoshi Takei,
Yoshinori Takahashi, and Masako Yoshida, are External
Audit & Supervisory Board Members as stipulated in
Article 2, Paragraph 16 of the Companies Act. In
addition, Yasutoshi Takei and Yoshinori Takahashi are
independent officers as stipulated by Tokyo Stock
Exchange, Inc.
HIROSHIMA BANK INTEGRATED REPORT 201940

Management Base

Initiatives Aimed at Practicing Customer-Oriented Business Operations
Basic approach
The Bank holds the management vision of “building a
reliable Hiroshima Bank Group united through trusting
relations with the regional community.” To realize thevision, we have stipulated in the Hiroshima Bank’s
Corporate Behavior Charter that we will “strive toenhance customer satisfaction and peace of mind andcontribute to the regional economy by taking ownershipof our role as a financial institution to support theregional economy and providing the highest quality
financial services with full consideration for protectionof customers’ interests.” This notion is shared andimplemented by all of our officers and employees.

In particular, in sales of financial instruments, we holdcustomers’ interests to the maximum priority basedon customer-oriented business operations (fiduciaryduty). In line with this attitude, we maintain a highlevel of expertise and offer high-value-added products
and services from a customer perspective, which we
believe would result in improved corporate value ofthe Bank over the medium and long term. Based onsuch recognition, we have established, published, andpracticed the policy for Hirogin’s customer-oriented
business operations.

Customer-oriented lineup of products
Hiroshima Bank and Hirogin Securities work as one
to offer a wide range of financial products that meeta variety of asset formation needs depending on thecustomer’s purpose for asset management, knowledge
and experience, asset and liability composition, and risk
tolerance.
When adopting new financial products, we review
matters to be considered in product selection below
at the Product Selection Meeting comprised of branch
offices (consulting advisers), Risk Management Division,
Banking Business Planning Division, Corporate Planning
Division, Asset Management Division, and Treasury& Investment Division, to select customer-oriented
products.
Matters to be considered in product selection
The product meets prospective customers’ needs

The product is easy to understand for prospective
customers (easily explained by service representatives)
The product is in line with prospective customers’ risk
tolerance and expected returns
The product’s commission level is appropriate interms of the management of conflicts of interest
The product’s merchantability produces customers’interests compared to similar products
The product’s past performances complies withinvestment policies
In addition, we periodically verify at the ProductSelection Meeting whether the current lineup of our
products complies with the items above.
When adopting products, we check matters on credit
quality and support systems of asset managementcompanies based on a set of check items.

Proposals for portfolios that contribute to customer asset formation (promotion of long-term, deposit, or diversified investment)
For inexperienced or beginner investors, we utilize
the Life Plan Guide, an asset management handbook,to help them understand the necessity of asset
investment in line with life events, risk and return
relationships, and investment procedures.
In addition, we precisely identify customers’
investment purposes, risk tolerance, needs, knowledge
and experience, and financial assets utilizing a
consulting sheet and a questionnaire on insurance
products.
When proposing products based on customers’
purposes, risk tolerance, needs and other information
identified, we provide an easy-to-understandexplanation of products, including commissions

41

HIROSHIMA BANK INTEGRATED REPORT 2019that customers bear, using materials and tools suchas an investment trusts lineup, a product brochure,
and a portfolio proposal tool in accordance with thecustomer’s level of understanding.
Furthermore, in order to reduce customer paperwork
for product applications, we are improving operational
efficiency by digitalizing the procedures.
To meet a variety of customer needs for asset
management, we strive to research on and actively use
FinTech, including the introduction of a robo-advisor,
as well as hold seminars to help customers improvefinancial literacy in areas such as understanding market
environments and gaining knowledge on finance andinvestment.

Customer-oriented

Customer-oriented follow-up services
For elderly customers, we confirm the content of
products, explain the management status of the
products at least once a year, and verify any changes
in the initially identified investment purpose, risk
tolerance and needs in order to propose reviews of theportfolio. As such, we provide information according
to the customer’s understanding.
In addition, for customers owning complicatedproducts such as structured bonds, we reconfirm thecontent of the products based on the initially identified
investment purpose, risk tolerance and needs morethan three months after sales, providing informationaccording to the customer’s understanding.
In the case of a sudden change in market value,change of merchantability, or downgrade of an issuer’s
rating, we provide customers with information in atimely and appropriate manner in accordance with thecustomer’s risk tolerance to eliminate any anxiety.
Additionally, we hold periodical seminars to provide
customers with information including related market
trends and management status necessary for making
investment decisions on products that customers hold.

Frameworks to give appropriate incentives to employees for the pursuit ofcustomer-oriented business operations
We have established a performance evaluation
system that contributes to customer-oriented business
operations.
In addition, we appoint salespersons qualified by ourcertification system to maintain a high level of expertisethat is responsive to diversifying and more sophisticatedcustomer needs for asset management. At the sametime, we enhance the quality of education for operatorsand improve performance evaluation management byencouraging employees to acquire the financial plannercertification and providing lectures (e-learning) toimprove asset management skills.
Also, we study the status of customer-oriented
consultation and information provision conductedby sales representatives through monitoring by
headquarters and utilize it for the education of sales
representatives.

Report on initiatives for customer-oriented business operations
We verify the compliance status of the “policy for Hirogin’s customer-oriented business operations” on a semiannual
basis and publish a report every year.

Status of “initiatives for customer-oriented business operations”
Ensuring customer-oriented business operations
Both the number of holders of financial instruments and balances increased successfully due to the practice ofcustomer-oriented business operations.
Number of holders of financial instruments and balances(¥ billion)

132,461(Customers)

132

1,049.9

1,000.0

968.5
879.3

800.0

147,566

144,388

135,468

28.8

408.7

876.6

36.2

34.4

32.1

427.8

410.6

Number of holders offinancial instruments

410.4

Jointly operated
designated money trusts

600.0
172.4
400.0

200.0

0

111.6

109.7

84.4

96.3

245.8

End of March 2016

224.0

End of March 2017

149.0

202.1

End of March 2018

195.9

213.7

Insurance
Public bondFinancial instrument
intermediary services

180.4

Investment trust

End of March 2019
HIROSHIMA BANK INTEGRATED REPORT 201942

Management Base

Number of customers of savings-type investment trusts and amount of transfers
16,844(Customers)

12,74910,793(¥ billion)

4.9

5.0

3.6
4.1
4.0

2.2
5,102

3.0

Number of customers ofsavings-type investment trusts

2.0
1.9

1.0

0.7

1.0

0

0.7

0.8

FY2015FY20160.2

Term-specific savings-type
investment trusts

1.3

General savings-type
investment trusts (indefinite)
FY2017FY2018Initiatives for development of human resources with expertise and training on investment
The number of qualified financial planners is steadily increasing, and we are enhancing initiatives for advanced expertise.
We seek to provide a wide range of information by actively holding seminars for customers in asset investment,
iDeCo, and inheritance.
Number of qualified financial planners

Number of seminars for customers held

(Persons)

2,000

CSPFP 2nd-grade
CSPFP 1st-grade

1,500

1,531
1,402

1,718

1,844
1,507

(Times)

300

323
52

33
250

1,254

21
85

200
1,000

150

97

0

277

300

337

End of March End of March End of March End of March
2016
2017
2018
2019

(Note) Financial planning certifications (CSPFP 1st-grade and CSPFP 2nd-grade, CFP and AFP)

43

HIROSHIMA BANK INTEGRATED REPORT 2019

221

9
46

18
15
42

61

38

139

Inheritance

285
21

5

47
114

68

100

500

iDeCo
Other

288

1,418

1,155

247

Asset management
Trust

108

98

50
0

First half/
2017

Second half/
2017

First half/
2018

Second half/
2018

Customer-oriented

System to gather customers’ voice
Customer opinion cards
We place customer opinion cards on counters or desks so that they can easily catch the eyes of customers, togather a wide range of customers’ voice. Opinions received are utilized to improve our services.

Customer satisfaction survey

Call centerWe periodically conduct customer satisfaction surveys for

The customer relations office and call center listen

individual and corporate customers. Based on the results,

to customers’ opinions and inquiries via telephone.

the Bank identifies areas for improvement in customer

Utilizing the opinions and wishes of our customers, we

satisfaction, and then branch offices and headquarters

are working toward improving customer satisfaction.

team up to improve and enhance our services.

In fiscal 2018, we received about 480,000 inquiries
and references via telephone.

System to translate customer’ voice into better customer satisfaction
In addition to customers’ voice sent to branch offices

ProvideCustomers

and the call center, we receive numerous opinions andwishes via customer opinion card placed at each branch
office. To convert customers’ voice into customer
satisfaction, we analyze customers’ opinions and wishes
and identify areas for improvement in products and“Visualization” of customers’ wishes
Customers’
voice

Customer
opinion card

Questionnaire
surveyCollect

UnderstandBranch offices

Headquarters

services, and then branch offices and headquarters
work together to research and analyze the causes aswell as to identify problems. Based on the results, weconsider steps to offer better products and services.

Improve

Development of better products and services

HIROSHIMA BANK INTEGRATED REPORT 201944

Customer-oriented

Management Base

Customer Protection Management
Solicitation policy
In the solicitation of financial products, the Bank
complies with the rules below.
1. The Bank endeavors to solicit customers forsuitable products in consideration of the customer’s
knowledge of the product, experience, asset
composition, and investment purpose.
2. The Bank endeavors to provide the customer withadequate information on important matters suchas the content of the product and details of risks
to enable the customer to carry out transactions attheir own discretion.

3. The Bank does not solicit customers by providing
misleading statements, such as arbitrary decisions or
false information.
4. The Bank does not solicit customers in a time or aplace causing inconvenience to them.
5. The Bank continues to develop knowledge of
products to make sound and appropriate solicitations
that satisfy customers.

Structure of customer protection management
The Bank has established Customer Protection
Management Regulations at the Board of Directors as a
guideline to secure a structure aimed at protecting andenhancing convenience for customers.
In the Customer Protection Management Regulations,
we formulate policies and management mattersregarding explanation to customers, customer support(consultation and complaints), customer information,
outsourcing, and conflict of interests, making theseknown to all operators.

In addition, we have designated the Risk Management
Division as the controlling department and established acompliance program at the Board of Directors meetingon a semiannual basis as basic procedures to be
performed to ensure customer protection, and status ofprogress in the plan is reported to the Board of Directors
on a regular basis.

Information management
Based on our published Privacy Policy, the Bank acquires
or provides personal information prudently and strives tocontinuously improve safety control measures including
strengthening system protections against cyber attacks.
In order to manage customers’ valuable information
assets in an appropriate and prudent manner, allemployees regularly receive training for information
security to ensure a high level of awareness whenhandling information.

45

HIROSHIMA BANK INTEGRATED REPORT 2019

We conduct thorough internal audits on handlingpersonal information to improve the effectiveness of
information management.
If disclosure, correction, or suspension of personal
information is requested by a customer, the Bank
responds to the request after verifying the customer’s
identification.

Management BaseCompliance

Compliance
Basic approach
As the environment surrounding financial institutions
changes drastically, the Bank believes it is important
to meet various needs as a leading bank in the region,build a stronger management base and executecompliance-oriented business for earning great trustfrom our shareholders, investors, and customers.

In this regard, the Bank makes compliance a toppriority of management and has made utmost efforts
for establishing a compliance system and encouraging
each and every employee to understand the system sothat corporate ethics will take root as a culture.

Establishment of the system
The Bank has established a Compliance Committee
to follow laws and regulations thoroughly and build
corporate ethics, and the committee deliberates andconsiders matters relating to compliance. In this andother ways, we ensure that we never commit violationsof compliance.
In addition, compliance managers have been placedin all divisions in the Head Office and all branches
to exchange legal information and monitor daily

compliance status. The Bank is also continuously
striving to strengthen a central management system
relating to compliance and management functions
through the Risk Management Division.
Furthermore, a compliance supervisor has beenplaced in the Audit Division for independent
monitoring so that the internal check and balancesystem will be reinforced.

Operation
Compliance structure
Audit & Supervisory
Board Office
Reporting

Audit & Supervisory Board members(Audit & Supervisory Board)
Duty execution audits

Reporting

ReportingCompliance Committee(Secretariat: Risk Management Division)

Reporting

Risk Management Division
Reporting,informing,
consulting

Instructing

Instructing

Reporting, informing,
consulting

Head Office(compliance manager)

Supporting, instructing

Audit Division(compliance supervisor)

Internal audits

Board of Directors

Reporting, informing,
consulting

Branches(compliance manager)

The Board of Directors resolves on a complianceprogram every half fiscal year as a practical plan
for realization of desired compliance. Based on thecompliance program, we carry out relevant measures
steadily.
Specifically, the Bank has disclosed the compliancemanual on the Bank intranet and strived to ensure that
all employees are familiar with this manual, throughvarious activities such as rank-based training sessions
and training sessions for compliance managers. Also,
the Bank has been promoting initiatives including thedevelopment of a check system by involving executive
members actively in compliance and strengthening acentral compliance management system.
Progress and achievements of the complianceprogram are reviewed every quarter. While striving to
identify and solve problems, the Bank has been making
persistent efforts for realizing greater compliance.

The Hiroshima Bank Group

Money laundering and other fraud prevention system[Money laundering prevention system]
A growing number of organizations are taking action
against money laundering and terrorism funding(hereinafter, “Money Laundering, Etc.”) as laws andregulations controlling Money Laundering, Etc. aredeveloped in Japan and overseas. In response tothis trend as well as requests from FATF and otherinternational institutions, the Bank and its Group
companies regard the prevention of Money Laundering,
Etc. as a critical management issue and establishedan effective control system for the entire Group withinvolvement of executive members.
Specifically, the Bank has strengthened measures
such as verification at the time of initial transaction,
HIROSHIMA BANK INTEGRATED REPORT 201946

Management BaseComplianceprevention of transactions with persons subject toasset-freezing sanctions and other economic sanctions,and detection of suspicious transactions, in order toprevent various transactions, products and services of
the Bank and its Group companies from being used forthe purpose of Money Laundering, Etc. that seriously
affects healthy economic activities.
In light of a business environment surrounding
the Bank and its management strategies, the Bank
conducts risk identification and assessment of Money
Laundering, Etc. by using a risk-based approachand then risk reduction measures considering theidentified risk to promote efforts for preventing Money
Laundering, Etc.

[Bribery prevention system]
The Bank and the Group companies have stipulated
compliance rules regarding bribery and corruption
prevention in the internal regulations and regard themas an important compliance matter to promote Groupwide efforts for the prevention with the involvementof the executive members.
The Bank has been strengthening the internalmanagement system and making constant efforts
for preventing bribery and corruption. Such efforts
include establishing a prior approval system for businessentertainment and gifts and a hotline system, conducting
monitoring by internal audits and other means, and giving
regular training and tests to directors and employees.

Actions against anti-social elements
Based on the “Guideline for How Companies Prevent
Damage from Anti-Social Forces” set forth by the Japanese
government in June 2007, the Bank completely severs any
and all relations with anti-social elements which threaten
the order and safety of civil society, including provisionof financial services through an alliance with any othercompany (credit sales companies, etc.).
We positioned the Risk Management Division as acontrolling division for eliminating any relationships with
anti-social elements and established various regulations.

In addition, we provide regular training to our employees
for the purpose of eliminating such relationships.
Furthermore, we have built a system for eliminating
those transaction relationships by, for example,
maintaining close relationships with the police, theNational Center for Removal of Criminal Organizations,lawyers and other external professional organizations. The
Bank will take determined steps to counter any unjustified
demands through all legal measures in cooperation withthe police and other external professional organizations.

Designated dispute resolution organization
The Bank has concluded a basic contract for the
implementation of dispute resolution procedures withdesignated dispute resolution organizations below. These

47

organizations accept complaints and dispute resolution
petitions from customers.

Bank operations

Trust operations

Japanese Bankers Association

Trust Companies Association of Japan, TrustContacts: Japanese Bankers Association

Consultation Center

Consultation Office(http://www.shintaku-kyokai.or.jp/profile/(http://www.zenginkyo.or.jp/adr/)

profile04.html)

Consultation contact (telephone):

Consultation contact (telephone):

0570-017109 or 03-5252-3772

0120-817335 (toll-free) or 03-6206-3988[Internal whistleblowing system (hotline)]
The Bank has established an internal whistleblowing
system (hotline) in 2006 for the prevention and early
detection of misconducts. To ensure effectiveness ofinternal whistleblowing, the Bank has taken measures
to protect whistleblowers from any disadvantages
and established external contacts and multiple
whistleblowing channels.
The Bank believes that an effective internal
whistleblowing system (hotline) will enhance theBank’s ability of self-correction and contributes tocompliance-oriented management, leading to anincrease in corporate value. Therefore, the Bank holds
Meetings of All Branch Managers and All BranchCompliance Day Study Sessions through which all
employees can learn about contents and importanceof the internal whistleblowing system.

HIROSHIMA BANK INTEGRATED REPORT 2019

Contact points of the hotline and whistleblowing methods
Contact
point

Risk Management Division

Extension line,
Whistleblowing
dedicated phone number,
methods
mobile phone, e-mailBank lawyer
Dedicatedphone
numberManagement Base

Risk Management

Risk Management
Basic approach
In order to fully justify the trust of customers andshareholders, the Bank must be able to ensure
appropriate levels of earnings and stable operations,by dealing appropriately with various kinds of risk its
operations are subject to, while remaining a soundly
managed institution.

Based on our Comprehensive Risk Management
Regulations laid down by the Board of Directors, theBank decides on a detailed risk management policy foreach fiscal year, and manages all categories of risk on
an integrated basis.

Risk management framework
For management of major categories of risk—credit,
market, liquidity and operational risk—we havededicated offices. The Risk Management Division
manages risk centrally and comprehensively. To
position us to deal appropriately with the increasing
diversification and complexity of risk, we haveestablished a Comprehensive Risk Management

Committee and carry out regular audits throughthe Audit Division into the appropriateness andeffectiveness of our risk management systems.
Under this risk management regime, we aim toensure sound, profitable banking operations, while
striking an ideal balance between capital adequacy,risk management and earnings imperatives.

Board of Directors

Management Board

Directors’ Loan Evaluation Board

Comprehensive Risk Management Committee

Compliance Committee

Credit risk
(Risk Management
Division)

Market risk
(Risk Management
Division)

Liquidity risk
(Risk Management
Division)

Operational risk (Risk Management Division)

Administrative System risk
Tangible(Information Human risk asset risk Reputational Legal risk
risk
risk
(Risk
Technology (Personnel(Banking
Planning & & General (Personnel & (Management Management
Operation
Management Administrative Affairs Div.) General Planning Div.)Div.)
Affairs Div.)
Div.)
Div.)

Audit Division

Risk Management Division (Overall risk management)

Risk regarding money launderingand terrorism funding(Risk Management Div.)

Audit & Supervisory Board members (Audit & Supervisory Board)

Audit & Supervisory Board Office

Risk management framework (as of April 1, 2019)

Head Office, branches and the Hiroshima Bank GroupHIROSHIMA BANK INTEGRATED REPORT 201948

Management BaseComprehensive Risk Management
Comprehensive risk management is undertaken bymeasuring the various risks faced by the Bank using
uniform benchmarks such as value at risk (VaR) andthen measuring such risk against the Bank’s corporate
strength.
We set ceilings (risk capital allocations) for riskmonitored assets in the categories of credit risk,
market risk, and operational risk, with dedicatedoffices controlling risk-monitored assets. Centralized
appraisal of risk-monitored assets as a proportion of

Bank capital is undertaken by the Risk Management
Division. We have also created a system for risk
management reports to be submitted regularly to theBoard of Directors, with implementation of appropriate
countermeasures.
In addition, we evaluate and review the adequacyof our capital ratio through periodic stress tests, whichclarify the possible impact on capital and earnings oflosses arising from risk that could not be evaluatedusing statistical methods.

Credit risk
Credit risk is the risk of sustaining losses due toreduction or loss in value of assets due to deteriorating
credit circumstances at a borrower.
Credit screening structure
For all major loans made by our branches, the Bank
has in place a system of rigorous credit-screening
carried out by a credit-screening department, which is
independent of the marketing department. In addition
to establishing teams for each sector, the creditscreening department has established dedicated teams
to ensure sounder borrower finances and effective
corporate rehabilitation, and also offers support tomanagement trying to improve operations.
In approving a loan, the Bank not only follows thebasic principles and rules for credit extension laid
down by the Board of Directors, turning down any
application that runs counter to the law or public
morals, but also takes careful account of profitability
and public benefit, in addition to fund use, repayment
source, and guarantee and collateral arrangements.
In cases where customers apply for a review ofborrowing terms, the Bank will give a considered
response accounting for actual circumstances faced by thecustomer, in line with the Board of Directors’ basic policy
for management of funding facilitation. Appropriate andprompt credit screening is carried out after joint appraisalof a customer’s needs and concerns—and is not justbased on a mechanical, uniform judgment informed only
by financial statements and other superficial statistics andindustry-specific guidelines.
To strengthen and expand the credit
screening system, the Bank seeks to appraise thecreditworthiness of a given company through caseby-case credit management and takes continuous
measures to improve the credit-screening skills of
employees such as various kinds of training programs.

49

HIROSHIMA BANK INTEGRATED REPORT 2019

Risk-management using the borrower
category system
We have introduced the borrower category system toclearly identify objective credit risk on loans we extend.
Based on financial and other data indicating the levelof creditworthiness of the borrower, we have divided
borrowers into 12 grades, and continuously monitorchanges in credit risk. We then carry out credit risk
quantification based on these grades to assess credit
risk on loan assets and manage risk capital allocations.
We also accumulate and organize the data necessaryfor quantification of credit risks, such as the default
rate within each grade and progress in asset recovery
from customers in default, combined with our highlysophisticated quantification technologies, to obtain astill more detailed picture of risk-monitored assets.
Bank’s own assessment
In parallel with the borrower category system, we
conduct strict checks into the soundness of loan
assets through annual assessment carried out by
ourselves. Screening is carried out by particular Bank
branches in light of the financial situation faced by
the borrower, and the results are checked by thecredit-screening department of the Head Office. In
addition, the Risk Management Division extracts
important information and conducts a rigorous review
of screening due process and accuracy, and the Audit
Division carries out the process audit. Based on this inhouse assessment, in cases where there is no realistic
prospect of asset recovery, provisions are made to
the reserve for possible loan losses to cover the entire
value of the sum at risk. This provision is then recorded
as a loss for the fiscal year under review. In this way,
we ensure asset soundness.

Risk Management

Market risk
Market risk is the risk of incurring losses due tofluctuation in interest rates, stock and bond prices
and foreign exchange rates, leading to changes in themarket value of assets we hold.
The Bank seeks to stabilize earnings by controllinginterest rate and other market risk by expanding andstrengthening asset-liability management (ALM),
including not only securities holdings but also deposits
and loans. Findings of ALM analysis and simulations
are incorporated into annual management policy as asignificant element in management planning judgments.
In addition, we have created frameworks to ensurestable earnings through rigorous management of market
risk, enabling us to respond swiftly and appropriately
to market movements. We set limits on risk-monitored
assets and lay down hedging policy and reporting andconsulting rules for when asset value falls. We monitor

accounting principles, that enables us to reflectchanging market prices appropriately and accurately infinancial data.

compliance with ceilings and other limits through major
measures such as total value of positions, amount ofrisk-monitored assets and earnings performance, as wellas management on a daily basis.
In addition, accounting is rigorously based on a
holding-purpose category, using mark-to-market

with strict rules in terms of position limits and losscutting measures. For positions and transactions onbehalf of customers, we follow a policy of squarepositions by fully covering them through the interbank
market.

Trading account risk
With regard to our trading accounts (for securities
and off-balance-sheet transactions that involve shortterm gains on sales or purchases and trading at thebehest of customers), we have special management
mechanisms in place, since these transactions differ
qualitatively from banking account transactions(involving deposits and loans, investment securities,
and related transactions). The Bank has set up
designated trading accounts, and is strengthening their
management using transparent accounting procedures
based on mark-to-market principles. For proprietary
position dealing, we limit our position by complying

Liquidity risk
Liquidity risk is the risk of losses arising fromunforeseen fund outflows leading to a drying up of
cash flow, and the necessity of raising funds at higher
rates than normal.
The Bank prepares for capital outflow under shortterm stress conditions by holding highly liquid assets
such as government bonds. Furthermore, to alleviate
long-term fund procurement risk, the Bank manages

the stability gap between loans with low liquidity andstable funding such as deposits and long-term market
funding.
Furthermore, we monitor liquidity risk, cash flow,
and matters that could affect cash flow, and havein place measures to ensure a swift and appropriate
response to unexpected events.

Operational risk
Operational risk is the risk of losses arising due tofailures in work processes and employee activities,
computer system irregularities and the impact ofexternal events.
To comprehensively and accurately manage
operational risk, the Bank has divided such risk into
a number of subcategories: administrative risk,
system risk, human risk, legal risk, tangible asset
risk, and reputational risk. Such risk is managed
comprehensively.

Administrative risk
Administrative risk is the possibility of losses arisingfrom negligent processing by employees, accidents, orunauthorized activities.
Through various training programs, the Bank ensuresrigorous performance of administrative duties to highstandards of accuracy, speed, propriety and courtesy.
It has also compiled a procedure for administrative
duties based on the five principles of making a recordof everything, keeping a hard copy, self-responsibility,
checking and confirming.

HIROSHIMA BANK INTEGRATED REPORT 201950

Management Base

Risk Management

The Bank has a reporting system for relaying
complaints and opinions from customers and detailsof major clerical errors and incidents. To better
meet in-house regulations and ensure deeper staff
commitment, we analyze factors and trends in mattersraised in this feedback, and, where necessary, takeeffective countermeasures. In addition to proactively
using underlying data to prevent recurrence ofclerical errors, incidents and the like, we also identify
and analyze potential administrative risk and takepreventative measures.
System risk
System risk is the possibility of a loss arising from thefailure, malfunction, or unauthorized use of computer
systems.
The Bank has established a basic security policy
for due protection of information assets and specificoperating rules. Their management is geared to thedegree of importance of information systems and ofdata.
Depending on their importance, IT systems use
duplicated computers, communication lines, power
supplies and other items. For core systems, wehave backup centers located in both Hiroshima andFukuoka, operated jointly with the Fukuoka Financial
Group. We have taken measures to ensure that we canstay in business even in cases of major disasters.
For critical customer information (data), we use
strict security controls, such as encryption and othermeasures, to prevent unauthorized external access andinformation leaks.
Moreover, in response to increasingly sophisticatedand serious cyber attacks, the Bank has made theissue a management priority and conducts constantinformation collection and analysis regarding attack
trends. The Bank has also established Hiroshima BankCSIRT* as an organization to respond rapidly in theevent of a cyber attack, thereby strengthening its
security management stance.
Furthermore, to prepare for unexpected situations,cybersecurity incidents, and other events that canjeopardize the stable operation of computer systems,
the Bank has formulated contingency plans andconducts regular drills.
* Computer Security Incident Response Team

Human risk
Human risk is the risk of losses arising from a fall in
employee productivity or employee resignations, andemployee acts leading to a loss of public confidence in
the Bank.

51

HIROSHIMA BANK INTEGRATED REPORT 2019

We seek to optimize personnel management
through employee education, training and work
guidance, by ensuring appropriate personnel
management based on job description and personnel
policy. We also have in place preparations for dealing
with pandemic influenza and other major disasters that
could interrupt operations, with measures in place foreach stage in the development of a possible pandemic.
By increasing key staff at our Head Office, we aim tocreate a framework for continuing operations.
Legal risk
Legal risk is the risk of sustaining losses due topenalties or legal liabilities arising from legal violations
or a breach of contract.
In addition to daily awareness-raising and training
in compliance, we ensure appropriate management
through steady implementation of legal checks andestablishment of a legal consultation framework.
Tangible asset risk
Tangible asset risk is the risk of losses arising due todamage to tangible assets caused by disasters, illegal
acts or inappropriate asset management.
We keep full records on locations and status of
movable assets and real estate that we own, borrow orlend out, and have in place management mechanisms
for anticipated damage caused by disasters, illegal
behavior, etc.
Reputational risk
Reputational risk is the risk of losses arising due
to a loss of confidence in the Bank on the part ofcustomers and markets, as a result of the spreading offalse information.
In addition to ensuring the highest standardsof transparency in disclosure, we seek to prevent
reputational risk from arising by monitoring the Bank’s
reputation.
Risk regarding money laundering andterrorism funding
Based on the “Act on Prevention of Transfer of
Criminal Proceeds” and the Enforcement Order andEnforcement Regulation of the same act, we ensure
appropriate management through efforts as describedon pages 46 and 47, by establishing a management
framework regarding money laundering and terrorism
funding.

Management Base

Risk Management/Internal Audits

Crisis management system
In addition to the above risk management measures,
we have compiled a business continuity plan (BCP), aplan to continue major operations on a priority basis
in our Emergency Management Regulations to deal

properly with risk in cases where earthquakes andother large-scale natural disasters disrupt our services.
In this way, we have established our crisis management
framework appropriately.

Internal Audits
Basic approach
For the purpose of contributing to sound andappropriate business operations, the internal
audit department evaluates appropriateness andeffectiveness of the internal control system of theaudited departments in observance of disciplines

and represents objective opinions from a fairand independent standpoint, while requesting
improvement of problems or recommending correction
as well as providing advice.

Implementation structureWith respect to internal auditing of the Bank, theBoard of Directors is engaged in building an effective
internal audit framework according to types anddegree of each risk in order to realize compliance.
Based on internal audit regulations—which were
formulated with the aim of contributing to sound andappropriate operations of the business—the internal
audit department, which is independent from theaudited departments, conducts internal audits on
items related to compliance, risk management andinternal control associated with financial reporting,among other areas, for each department andbranch, subsidiary, and affiliated company, as well as
outsourced contractors.

Specifically, these audits are conducted by
conforming to the basic internal audit plan establishedby the Board of Directors every half fiscal year. The
results of the audits are reported every month to theBoard of Directors.
Also, the internal audit department notifies theaudited departments of the internal audit resultsin writing, requests improvement or recommends
correction regarding items necessary to be improvedor corrected, and reports the status of these actions
on a regular basis to the Board of Directors.

HIROSHIMA BANK INTEGRATED REPORT 201952

Management Base

Human Resource Strategies
Basic policy
The Bank encourages each and every employee toproactively contribute to the regional community
through bank operations with pride, grow on theirown, and work actively in and outside the Bank until
65 years old. In light of this, the Bank has developed
human resource strategies to enhance quality (skills
and abilities) and awareness (motivation and job

satisfaction) of the Bank’s employees and to contributeto improving its organizational strength.
Specifically, the Bank is working to increase job
satisfaction of employees, centering on initiatives to“Foster human resources able to quickly respond tochanges and create value for local communities” and“Promote diversity,” in accordance with the humanresource strategy of Mid-Term Management Plan 2017.

Foster human resources able to quickly respondto changes and create value for local communities
Develop professionalism in all employees

Promote “workstyle reform”
Create job satisfaction

Realize a pleasant workplace

Promote an environment where diverse human resources can actively
work by fully utilizing their personality (promote diversity)
Exhibit strengths of all employees

Strengthening of human resource development
1. Helping younger employees grow to become professional early on
We are conducting various growth support measures
mainly for younger employees to realize moresophisticated consulting business with customer needs
as a starting point.

(1) Establishing systems and plans for developing
younger employees
The three year period after joining the Bank isimportant for developing new employees as corepersonnel.
We set out a job rotation rule where new employees
initially experience multiple operations in a systematic
way for an understanding of a basic flow of the bankbusiness and grow steadily over two to three years to
become a core player.

Also, we present career path models for each
operation area to help each and every employee
envisage their own career path and become a highly
specialized talent.
Furthermore, based on the concept that new
employees should be educated organizationally, we
have established an instructor system to strengthen
their mind and integrity as a person, in addition to theiroperating abilities.

(2) Strengthen off-JT
We have development programs and training systems
for each operation area through which entry-level
employees can step up to mid- or high-level in a steadymanner.
We are improving training effects by proactively
adopting practical training programs such as group
work and active learning, in addition to knowledge
acquisition through lectures.

53

HIROSHIMA BANK INTEGRATED REPORT 2019

Specific example of active learning
Theater learning: a training program throughtheatrical experience for the improvementof communication skills and training of teambuilding
Blind soccer: a training program for
improving mutual understanding andcommunication skills and generating a
sense of unity through soccer playing with ablindfoldHuman Resource Strategies

Development system for three years after joining the Bank (job rotation rule)
First year (new employee)

Second year

Becoming a member of the organization (a professional)by acquiring basic business and bank practices

Sales
assistants(until June)

Third year
Using ingenuity and achieving stretchedgoals set for themselves

Acquiring an ability to produce resultson their own

Banking operations
In charge of area retail, loans, and consulting advisors

To be placed in both operations when possible

Asset management operations
Consulting advisors (and in charge of area retail)Training system for personnel in charge of each operation (FY2018)
First year

Banking

Corporate loans

Forth year and after

Corporate business upskilling

Loan trainees

Contact persons forforex consultation

Persons in chargeof forex operations

Corporate business trainees

Goals (fifth year)

Feasibility study(required for Meister)

Corporate
loan Meister

International operations advisors(required for Meister)International
operation Meister

Individual loans upper level(required for Meister)

Individual loan
Meister

Individual loans
Individual loan center training(Asset management)
Entry-level employees
development program

Follow-up of AR

New AR

Follow-up training

New employee introduction training

CommonAsset management
Sales administration

Second to third years(Banking)
Entry-level employees
development program

Practical FP(required for Meister)

FP Meister

Outside training
for CA

Advanced asset
management(required for Meister)

Asset management
MeisterManagers’ assistantcertification

Sales group leaders(required for Meister)

Sales administration
Meister

FP intermediate level

FP upper level

Basic business insurance

Advanced business insurance

Asset management I

Asset management II

Approval stamp
assistant certification

Higher level of approval stamp assistant

DM Centertraining
B Course training (I to VI)(Upskilling of sales administration)Counselor banking

Administration management

Number of trainees in FY2018
Entry-level employees development program
Operations

Training required for Meister

Number of certified Meister

Number of trainees

Operations

Number of trainees

FY2018

Total (accumulated)

Banking (Corporate loans) 98 persons

Corporate loans

47 persons

10 persons

25 persons

Individual loans

74 persons

International operations

19 persons

4 persons

12 persons

93 persons

Individual loans

10 persons

1 person

6 persons

265 persons

FP

14 persons

6 persons

22 persons

Asset management

27 persons

15 persons

36 persons

Sales administration

12 persons

12 persons

23 persons

Total

129 persons

48 persons

124 persons

Asset management
Total

HIROSHIMA BANK INTEGRATED REPORT 201954

Management Base

(3) Creating learning opportunities

learning support system @Home-Web” which enables

We have created a learning environment by holding

online learning using their household computer and“free college” seminars on Saturday at whichsmartphone. In this way, we encourage employees toattendance is voluntary and adopting the “homedevelop themselves.

2. Strengthening expertise
As an environment surrounding the financial industry

establishing the Meister System as a final goal ofis increasingly sophisticated, we are required tooperational skills for employees and proactively

strengthen the expertise of each and every employee

sending employees to business schools in and outside

to respond to customer needs reliably. Based on thisJapan.

concept, we are taking various measures including

3. Development of future executives (for strengthening governance into the future)
The Bank holds the Hirogin Management School for

Under the program, participants learn the leadershipdeveloping future executive candidates with supportand management theory and business frameworks

from the Keio University Graduate School and GLOBIS

with specific cases as examples and ultimately make

CORPORATION to strengthen the “ability of thinking

suggestions on management.

befitting of a corporate manager” in considering
management strategies and business reform.
Training system for the management position (managers and supervisors) (FY2018)
Job
position

General employees

Qualification

C6 and 7

C6 and 7

C5Managers
C3 and 4C3 and 4

C1 and 2

Hirogin Management School – accumulating experience through integrated trainings and career-based placement

Selection

Supervisors
entry

New supervisors

Improvement ofmanagement skills

Intermediate

Upper

Practical

Selection

Selection

Selection

Managers
entry

New managers

New branchmanagers

Follow-up of new
branch managers

Responsible person
for financial productsales

Strengthening of
consulting forbranch managers· Customer protection
management· Compliance structure· Strengthening ofasset management
ability

LoansManagement
for supervisors

Sales

Public relations

Overall (by position)
Overall (by operation)
55

Supervisors

Strengthening of
consulting skills(banking)

New responsible
person for loans·Necessary
operational
knowledge

New responsible
person for public
relations·Necessary
operational
knowledge

New responsible
person for sales·Necessary operational
knowledge

HIROSHIMA BANK INTEGRATED REPORT 2019

Banking for
responsible
persons· Promotion ofloans

Upper businessinsurance
Responsible person for sales· Strengthening of administration
process system and stricter
administration· Feasibility study· Consulting sales

Strengthening of
consulting skills(asset management)· Strengthening of asset
management ability

Upper businessinsurance

Management
for general andbranch managers

Human Resource Strategies

Hirogin Management School for selective employees conducted in FY2018
Level

Main contents

IntermediateL eadership application
Human resource development
and question skills
Facilitation for independenceUpper usiness strategies
BTechnovate strategies

Practical

 mbition as a leader andA
integrity as a person
Organizational reformAcquisition of competitive
advantage through digitalization
Creation of organization for
innovation

Lecturer

Rank-based training programs for managers conducted in FY2018

Number of trainees

Program

20 persons

Training for
new managers

Persons promoted to
managers

Twice a year 45 persons

New branch managers

Twice a year 32 persons

36 persons

Training for
new branchmanagers
Follow-up
training for
new branchmanagers

Three months after assigned
Twice a year 37 persons
as new branch managers

GLOBIS CORPORATIONBusiness school attachedto the Keio University
10 persons
Graduate School

Total

66 persons

TargetFrequency Number of trainees

Management
All general and branchtraining for
managers
general andbranch managers

Once a year 180 persons* All programs include lectures for strengthening management skills, human resource management,
thorough compliance and elimination of harassment.

4. Fair evaluation and treatment
To attain an objective of the human resource system, or

For this purpose, the Bank has clarified our missions

to enhance the quality and motivation of employees,

and evaluation criteria. Furthermore, we evaluate both

it is necessary to offer fair treatment based on fair

results and actions based on target management forevaluation and develop them by providing feedback ofwell-balanced evaluation between results and skills,

evaluation results.

which is reflected in the treatment of our employees.

Diversity and inclusion
Companies’ perpetual growth essentially requires the

The Bank regards the initiative to “promoteability to innovate continuously according to changes

diversity” as one of the major human resourceof the times. Such innovation will be realized whenstrategies in the Mid-Term Management Plan 2017

employees with diverse viewpoints and values exhibit theirand conducts: 1. recruitment of specialists with diverse

abilities based on their intention and awareness. And thisvalues and skills; and 2. support of career development

necessitates an environment and corporate culture whereof women.

diverse human resources can continue to work lively.

1. Recruitment of specialists with diverse values and skills
We recruit about ten specialists such as IT
specialists and lawyers every year. For creating an

Recruitment of skilled persons for the past three years
Category

FY2016FY2017FY2018

without quitting the Bank, we hold a gathering

Specialists at the
Head Office

7 persons

7 persons

8 personswith mid-career entrants every year to gather theirWork-ready persons 5 persons
at branches

3 persons

2 personsenvironment where they can exhibit their abilities

opinions and support the creation of networks
among them.

2. Support of career development of women
The Bank has established systems and offered more learning opportunities such that female workers, who accountfor approximately half of persons joining the Bank, can continue to work actively while balancing work and various
life events such as marriage, childbirth, childcare, and nursing care.

HIROSHIMA BANK INTEGRATED REPORT 201956

Management Base

Work-life balance support system“I want to live with my family because I got married,”“I want to avoid my child from changing schools,”“I want to live near my parents because they needcare” — our employees have different needs arising fromchanges in their lifestyles. Catering to such needs, the Bank
offers a career course where employees do not transfer toother work locations. Employees can change courses after
joining the Bank, and this option allows them to work ina flexible manner: for example, they accumulate a wide
range of experience without restricting work locations andthen opt for the work-location-restricted course when it isnecessary to live with their family.
Regarding the balance between childcare, nursing
care and work, our systems offer more than legallyrequired. For example, we require employees to take sixweek maternity leave before birth (14 weeks if multiple
births). Also, employees working for shorter hours canselect the number of working days (17 days or every

business day) and working hours (five, six or eight
hours). Furthermore, in cooperation with Hiroshima
Prefecture, we have an authorized childcare facility inthe office for employees returning to work. For nursing
care, we have established systems such as caregiver
leave and time off for caregivers as well as a shorter
working hour system.
To explain the purposes of these systems clearly andfacilitating optimal utilization, we conduct lectures
about the systems for employees before their maternity
leave. In addition, we hold work-life balance support
seminars for employees taking a childcare leave or ashorter working hour system to promote communication
among colleagues having similar problems and help
them learn together. As a result of these efforts, there
are almost no employees that left the Bank due tochildbirth and 56 female employees took a childcare
leave in fiscal 2018 (return to work ratio: 100%).

Work-life balance support system of Hiroshima Bank
Entrance into
Eight weeks
Six weeks
elementary
after
beforeMarriage Pregnancy childbirth Childbirth childbirth 1 year-old 2 years-old 3 years-old school 4th grade

Caregiver leave(365 days in total per person)

Maternity leave before
and after childbirth Childcare leave

Time off or leave
Reduction of work hours
Benefits, etc.

Nursing careTime off for caregivers (5 times/year) (can be used for family care (including childbirth of spouse))
Time off for sick/injured childcare(5 days a year per child * Half-day time-off possible)

Time off for caregivers(5 days a year per person)* Half-day time-off possible

Shorter working hours Shorter working hours

Shorter working hours

Easier commute and medical carein a hospital during working hours

Shorter working hours
Later work start time andearlier work ending time

Relief from overtime work
Restriction of overtime work
(24 hours a month, 150 hours a year)
Relief from late-night work

Restriction of
overtime work
Relief fromlate-night work

Support for using childcare services(5,000 yen to 30,000 yen per person)
Money gift
for wedding

Money giftfor childbirth

Change of course,change of base area

Change of course,change of base area

In March 2016,
an authorized childcare facility
in the office has begun to be used together
with Hiroshima Prefecture.

Change of course,change of base area

* Gray rectangles indicate the same content as legally required.
* Eight hours / every day is the only option offered to employees who have a child and work for shorter hours, during the period from October of the child’s first-grade year until the beginning of the fourth-grade year.

Learning and communication opportunities for career development
The Bank offers opportunities for awareness andlearning as well as communication for each career andlife stage to help female employees develop their own
career paths after experiencing various life events.
In not a few cases, female employees lose
confidence and give up on their career development
57

HIROSHIMA BANK INTEGRATED REPORT 2019

while raising a child after giving birth as they find it
difficult to work in the same way as before. To avoid
such cases, the Bank offers opportunities for younger
employees to contemplate a mid- to long-term careerplan before they experience the life events. At the nextstage, the Bank provides opportunities for potential

Human Resource Strategies

managers and supervisors to improve their skills andmindsets and for managers and supervisors to interact
with other employees of the same gender that they
can share their worries with.
Through these initiatives, the number of female
managers and supervisors of the Bank has increased
to 160 (11.5% of all managers and supervisors), up
1.8 times compared to five years ago. In addition, asa result of these initiatives, the Bank was selected asa stock in the MSCI Japan Empowering Women Index(WIN), which selects companies that can address future
workforce shortage with excellent gender diversity.
In the future, the Bank will further take measures
to eliminate the stereotype of gender-based divisionof labor and consider new positions for proactive
female assignment. Also, we are considering measures
for gender diversity such as the promotion ofunderstanding of LGBT.

Third year after
joining the Bank

Before childbirth

During childcare period

Seminar forconsidering a midto long-term
career plan

Lectures about systems
available before andafter childbirth andtheir usage methods

Communication eventsfor employees using
shorter working hoursystem and other systems

Mid-career employees
Upskilling seminars
Meetings forcross-industrial
exchange

Managers and supervisors
Communication eventsfor female managers
and supervisors

Number of employees by rank (by gender)
As of April 1, 2009

As of April 1, 2019
Men

Women

Men

Women

Managers

534 persons

10 persons

Managers

550 persons

17 persons

Supervisors786 persons

49 persons

Supervisors

681 persons

143 persons

General

1,094 persons

1,311 persons

General1,074 persons

1,236 persons

Senior employees––

Senior employees

77 persons

35 persons

Staff

188 persons

1,383 persons

Staff

67 persons

1,234 persons

3. Employment of disabled persons
The Bank actively employs disabled persons basedon its social mission: “Support independent living of
disabled persons.” To create a workplace that gives
them a sense of satisfaction with their life and job

instead of just a place for social engagement, theBank offers jobs and work environments suitable fordifferent types of their disabilities and aptitudes.

Work placement

Duty

Work details

Remarks

Work Support
Center

Generalaffairs

Printing bills and business cards, sealing
and sending letters, sorting and sending
documents, jobs at printing center, etc.

We established a better environment where
persons with various disabilities can work
comfortably, such as barrier-free facilities
and a rest area.

General Affairs
Department

Cleaning

Cleaning the Head Office

Persons with hearing deficiency conduct
jobs as a team.

BranchGeneralaffairs

Guiding at the lobby, cleaning in andoutside the branch, guiding at a parking
lot, etc.

They are employed at their local branch sothat they can commute from home.

* Beyond the above, the Bank are developing jobs suitable for characteristics of disabled persons in divisions of the Head Office.

Workstyle reformDiverse human resources work actively with higher
job satisfaction, which will result in the provision ofhigh value-added services to customers. Based on such
belief, the Bank puts the workstyle reform as one of
the three pillars of the Mid-Term Management Plan
2017, and is endeavoring to nurture a corporate culture
accordingly.
In an effort to make meaningful progress inthe workstyle reform, we launched the Workstyle
Reform Promotion Headquarters led by the Presidentin October 2017. The Bank regards the reform ofculture, reform of operations and reform of systems
as the core of our workstyle reform, and has beenpromoting well-balanced reform. We realize thereform of culture by changing mindsets and behaviors
of employees through the reform of operations
and reform of systems, and push forward with thereform of operations and reform of systems throughthe reform of culture. Through this interplay of thereforms, the Bank is creating an employee-friendly
work environment.
As a result of these efforts, overtime hours have
HIROSHIMA BANK INTEGRATED REPORT 201958

Management Basedeclined by 26% during four years from fiscal 2015.
In addition, the number of days of paid leave taken
increased to an average of 12 from 10 in fiscal 2017.
In recognition of these efforts, the Bank was
accredited as one of the First Hiroshima Prefecture

Workstyle Reform Good Practice Companies in
September 2017.
We will continue to strive to offer high value-added
services while enhancing job satisfaction of employees
by promoting the workstyle reform.

Reform of culture

Reform ofoperations

Reform ofsystems

Specific efforts
Reform of culture
Reform ofoperations“Efforts for enhancing labor productivity” were added to the items of the result evaluation and action
evaluation of employees.
· Adoption of an electronic approval workflow · Paperless meeting· Use of tablets at branch counters · Trial of remote work

· Auto log off for limiting hours of PC use· Lowered upper limit of hours regarding application of special clause under the agreement based on
Reform of systems Article 36 of the Labor Standards Act· Adoption of the work interval system (11 hours)· Abolition of the core time in the flex time system (from April 2019)

Average monthly overtime per person
20(hours)
15.12

15

13.88

12.28

Average number of paid leave taken per person

Targets for
FY2019:Within 10 hours

12
10(Days)

12.1

10.1

10.0

10.1

2015

2016

2017

8

11.13

Targets for
FY2019:12 days or more

6

10

4
5
2
0

2015

2016

2017

2018

2019

0

2018

2019

Health of employees

59

Based on the recognition that keeping and enhancing
the mental and physical health of employees andtheir families are indispensable for sustainablegrowth of corporations, the Bank formulated the“Hiroshima Bank Health Management Declaration”
in August 2018. We are working for realizing healthmanagement, with “efforts for keeping and enhancing
health,” “creating a pleasant workplace with job

satisfaction” and “promoting close relationship withand contribution to the regional community” aspriority items to be addressed.
As a result of these activities, in February 2019,
we were selected as a brand of the 2019 Health &Productivity Stock Selection and recognized under the2019 Certified Health & Productivity Management
Outstanding Organizations Recognition Program.

Efforts for keeping and enhancing health
The Bank focuses on establishing health management
and consulting systems in cooperation with industrial
physicians and the health insurance association,

and actively recommends that employees takea comprehensive health screening and a cancer
examination. We have substantial support systems for

HIROSHIMA BANK INTEGRATED REPORT 2019

Human Resource Strategies

the medical checkups: Employees can take a special
leave to take a comprehensive health screening; andwhen employees of a certain age or older insured by
the health insurance association take a comprehensive
health screening or a breast and uterus cancer

screening, the Bank subsidizes all of the expenses
incurred. These efforts have been highly evaluated andthe Bank received the “Hiroshima Prefectural GovernorAward” as a registered company under the “Team forFighting Cancer in Hiroshima” in October 2018.

Creating a pleasant workplace with job satisfaction
We value the work-life balance approach and areproactively promoting the workstyle reform. To
eliminate long working hours, we adopted a work
interval system in divisions of the Head Office to makesure that our employees are given at least 11 hoursof uninterrupted rest between leaving and starting
work in principle. In addition, a system where personal
computers are automatically shut down at a certain
time was introduced in all branches. As such, weare creating a culture of returning home early while
employees are increasingly concentrating on truly
necessary jobs. Meanwhile, the Bank is creating aworkplace with job satisfaction by taking measures
for improving both the productivity and workplacesuch as recommending internal recreational activities
by creating a cost subvention system to facilitatecommunication in the workplace and holding sports
events for all employees every year.

Promoting close relationship with and contribution to the regional community
The Bank is fully working for helping employees
Health Management Support Loan as part of initiatives
enhance their health by forming a business alliancetoward expansion of health investment through thewith the Hiroshima Branch of Japan Health InsuranceBank’s businesses. We offer these services actively to
Association in May 2015, for the purpose of enhancing
regional small- and medium-sized companies so thatand contributing to the health of employees inthe services will be widely introduced and expanded
the local offices. We launched a Hirogin Healthto facilitate activities for enhancing working people’sManagement Evaluation Loan System and Hirogin
health.

Nurturing a corporate culture
Respecting diversifying values and changing lifestyles,
Hiroshima Bank has prepared plans and training
systems for each and every employee to develop
their career path on their own and realize their ideal
working style, while striving to create a corporate
culture which gives job satisfaction.
For employees to fully exhibit their abilities with highmotivation, it is necessary to consider their respective
situations and willingness carefully. Hiroshima Bank has
established the work-location-restricted course withlimited duties and the shorter working hour system,and therefore employees can select their workstyledepending on their physical and economic conditions.
Also, we have developed systems to draw out theircan-do spirits such as the Post Challenging System
where employees can apply for a desired post towardrealizing their career path and the Dream Challenging
System where employees can apply for a transfer toanother division through their efforts.
Employees’ diverse working styles cannot berealized without an understanding by people aroundthem including division and branch managers. We
are steadily promoting awareness-raising throughrank-based training programs and branch manager
meetings, and focusing on creation of a culture that
supports each employee trying something new.
Recognizing that “giving praise” means finding
and communicating the value of individuals, things orevents, the Bank aims to establish a culture allowing
employees to actively try something new and also a“praising culture.”
In addition, for the purpose of creating a lively
workplace and organizational culture, we have heldcoaching training programs targeting all division andbranch managers. They all obtained the “Third-Grade
Praising Master Certificate.”
To introduce measures that incorporate diverse
opinions, we focus on dialogues with the employees
union. The dialogues were held 23 times in fiscal 2018.
In this connection, 57% of employees of Hiroshima
Bank are members of the employees union as of theend of March 2019.

HIROSHIMA BANK INTEGRATED REPORT 201960

Management Base

Human Resource Strategies

Human rights
The Bank has deep relationships with customers
through daily transactions.
With such relationships, words and behaviors of
our employees may significantly influence customers
and society. Therefore, the Bank considers executionof management and operations in respect for human
1. Development of Ethics Regulations
The Bank formulated Ethics Regulations for the
purpose of clarifying the code of conduct expectedof Hiroshima Bank and all employees, establishingcorporate ethics that are the base of trust, and fulfillingsocial responsibility and public missions of the Bank.
For promoting response to the recently increasing
attention to SDGs and ESG, we revised the Ethics

2. Periodic awareness-raising activities
The Bank has actively conducted awareness-raising
activities by, for example, giving a lecture on theanti-discrimination and human rights issue during
training programs on timing of milestones such asentering of new graduate recruits into the Bank andpromotion to a higher position or rank as well as

Regulations (Hiroshima Bank’s Corporate Behavior
Charter) in December 2018.
Companies are required to take steps to eliminate
violations of human rights from a wider viewpoint
and we are also required to respect broader humanrights. Therefore, we added a new provision to theregulations, clearly describing that “Hiroshima Bank
respects the human rights of all people.”training programs provided to staff and mid-careerhires just after they are employed.
Also, in addition to these activities in training
programs, the Bank conducts education to all employees
as the anti-discrimination issue workplace study every
year, using an e-learning system within the Bank.

3. Anti-discrimination measures
The Bank regards anti-discrimination measures as aparticularly important theme among awareness-raising
activities for human rights.
For the purpose of deepening a proper
understanding and recognition of the antidiscrimination issue and executing corporate social

responsibility, the Bank established the Antidiscrimination Issue Awareness Raising Promotion
Committee chaired by the director in charge of the
Personnel & General Affairs Division in 1977 and hassince worked to eradicate prejudice and discrimination.

4. Prevention of sexual, power and other harassment
The Bank is striving to prevent sexual, power andother harassment behaviors as they must be strictly
forbidden.
To prevent harassment behaviors in advance, theBank conducts awareness-raising at the Meetingsof All Branch Managers held at the beginning of
every fiscal year and conducts a periodic anonymousquestionnaire survey for all employees to detect such
behaviors at their early stage.
In addition, we set up hotlines in the Head Office
and an external lawyer firm for consultation andcomplaints about harassment and any perpetrators arestrictly punished.

5. Fair screening for employment
The Bank recruits employees based on their personality
rather than their gender and educational backgrounds.
As our motto, we meet all candidates to check theiraptitude and aspiration through interviews, without
screening by job application forms.

61

rights as one of the corporate social responsibilities(CSR).
Furthermore, the Bank positions the antidiscrimination and human rights issue as an important
issue when considering relationship between
corporations and human rights.

HIROSHIMA BANK INTEGRATED REPORT 2019

Number of hires by gender for the past three years
Joined in:

Number of hires
Total

Men

Women

FY2017191 persons

104 persons

87 persons

FY2018175 persons

88 persons

87 persons

FY2019166 persons

84 persons

82 persons

Management BaseCommunication with Shareholders and Investors

Communication with Shareholders and Investors
1. Briefing for investors
Activities for individual investors

Activities for institutional investors

The Bank holds and livestreams a briefing for all

The Bank holds a briefing of financial results forindividual investors to provide information actively. In

analysts and institutional investors twice a year on the

addition, we hold a briefing at Hirogin Securities Co.,occasion of full-year and interim results. In addition,Ltd., which is our affiliated company, and Hiroshima

we explain management strategies and financial

Museum of Art every year for informing a broader

positions at individual meetings in domestic andrange of shareholders of the attractiveness of theoverseas IR events.

Bank.

IR-related activities

Briefing session
Regular briefings for individual investors
We locally hold briefings for individual investors topromote constructive dialogues with our shareholders.

Regular briefings for analysts and institutional
investors
We hold briefings for domestic institutional investors
every half fiscal year to promote constructive dialogues
with our shareholders.

For individual shareholders

Regular briefings for overseas investors
We continuously conduct IR activities overseas including
the U.S. and Europe to diversify the Bank’s shareholders.

Posting of IR materials on the website
We post materials of company explanatory meetings fordomestic institutional investors and local and individual
investors on the Bank’s website.
Placement of IR-related section (person in charge)
Section in charge of IR: Management Planning Division
Person in charge of managing IR: Officer in charge ofthe Management Planning Division
Person in charge of IR administrative liaison: General
Manager of the Management Planning Division
For analysts and institutional investors

2. General Meeting of Shareholders
With respect to the Ordinary General Meeting of Shareholders held in June every year, the Bank is improving theenvironment for exercising voting rights for shareholders and its convenience. Also, we post a resolution notice on
the Bank’s website promptly after the meeting.
(1) Early sending of a convocation notice*(2) Voting rights exercisable via the Internet or mobile phone (including a smartphone)(3) Participation in a voting rights exercise platform* It is posted on the securities exchange and the Bank’s website about a week before sending (in Japanese and English).

HIROSHIMA BANK INTEGRATED REPORT 201962

Provision of Value to the Community

The Bank Group’s Approach to Corporate
Social Responsibility
The Hiroshima Bank Group has accumulated its history

stakeholders and further enhance its existence value

while receiving support from many customers as aby actively promoting all CSR aspects such as social

regional leading bank group.

contribution and environmental protection, in addition

For being a bank group indispensable for the region
until and from now, we aim to gain trust from all

to contributing to the sustainable growth of theregional economy through its businesses.

Promoting CSR management

Supporting
the local economy
and industries

Nurturing local culture
and people

Protecting
the local environment(Economy)(Society)(Environment)

1. Business activities

1. Contribution to the community

1. Reduction of environmental impact(1) Compliance(1) Promotion of local culture(1) Environmental protection(2) Corporate governance(2) Support for local sports(3) IR activities(3) Support for financial education(4) Dividends and tax payments(4) Social welfare activities(5) Participation in community

2. Banking operations(1) Provide high value-added
financial products,
services, and solutions(2) Facilitate funding

activities
2. Diversity(1) Promotion of work-life balance

activities(2) Offering environmentallyaware products(3) Forest protection activities(4) Social awareness-raising(5) Promotion of paperless
operations(2) Support for activities ofdiverse human resources

Contributing to the growth of the regional community and customers, enhancing corporate value
We seek to secure the sincere trust of all our stakeholders, including the regional community,
customers, shareholders, the market and our employees.

Enhancing the sustainability of the Hiroshima Bank Group
Creating a good cycle in the entire regiona

63

HIROSHIMA BANK INTEGRATED REPORT 2019

Provision of Value to the Community

Efforts for reducing environmental load
New environment-conscious Head Office building under construction
We plan to introduce the state-of-the-art
environmental technologies for new Head
Office building to be completed in January
2021. We aim for creating an environmentallyfriendly office building by applying a naturalventilation system where a building itself takes
in wind by using natural energy, terrestrial
heat that keeps the building cool in summer
and warm in winter, power-saving LED lights,
and rainwater harvesting that saves water
resources.

Special features of the building
Installation of greenery areas aroundthe building and in the terrace on thesecond floor
Creation of pilotis space in the building
entrance area
Installation of a memorial monument
for people killed by the atomic bombing
Building with base isolation andsecuring of fuel for emergency power
generation

Environment-conscious office activities
Reduction of the amount of electric power, gas andcopy paper used
We are making efforts to reduce the amount of electric
power, gas and copy paper used by encouraging use ofstairs, duplex printing, and N-up printing.
Promotion of “Cool Biz” and “Warm Biz” campaigns
We conduct “Cool Biz” (light clothing) in summer and“Warm Biz” (heavy clothing) in winter every year.
Also, for strengthening energy-saving measures, theHead Office conducts the Casual Cool Biz campaign
and the Warm Biz campaign by lowering the preset
temperature of air conditioners.

Use of environment-conscious business vehicles
For reducing environmental load, we use low-emission
cars for business to eliminate greenhouse gas emission.
Collection of eco-caps (plastic bottle caps)
We started to collect eco-caps in February 2010 for the
purpose of recycling them and providing vaccines tochildren in developing countries.

Amount of electricity used and CO2 emission
FY2014FY2015FY2016FY2017FY2018Amount of electricity
used (thousand kwh)

21,113

19,881

20,371

20,55918,795

Amount of CO
emission(t-CO2)

15,682

14,40014,631

14,665

13,096

2

HIROSHIMA BANK INTEGRATED REPORT 201964

Provision of Value to the Community

Communication with the region
Participation in events
As a regional financial institution, the Bank aims to place a high value on communication with the regional
community and participates in various local events.

Hiroshima Flower Festival“Flower Parade (orizuru mikoshi(paper crane floats))”

Hiroshima Flower Festival“Kinsai YOSAKOI Dance Parade”

Fukuyama Rose Festival“Rose Parade”

Mihara Yassa Festival

Cleaning activity
The Bank’s employees and their families participate in

Project.” In addition, we actively work for cleaning

local cleaning activities such as “Zero Litter & Clean

activities around the branches for showing our

Walk Campaign” and “Ota-gawa River Cleaning

gratitude to local residents.

Zero Litter & Clean Walk Campaign

Cleaning activity by new employees

Contribution to the peace city
We constructed “Inori-no-izumi (fountain of prayer)” in the Hiroshima Peace
Memorial Park in November 1964 and presented it to Hiroshima City in order toconsole the souls of the victims, who passed away while feeling thirsty for waterin a town burnt by the atomic bomb, and wish everlasting peace. The fountainof prayer was completely renovated as part of our 140th anniversary business in2018 and was cleaned up by our new employees in the spring of 2019.
Also in 1968, the Bank
constructed a memorial
monument for people killedby the atomic bombing tohonor atomic bomb victims
and predecessors who built
the foundation of the Bank’s
development. The Bank’s
directors, as well as former
and current employees, visit
the monument every year on
August 6, the day the atomic
bomb was dropped.
Inori-no-izumi (fountain of prayer)in the Hiroshima Peace Memorial Park65

HIROSHIMA BANK INTEGRATED REPORT 2019

Memorial monument for people killed by the atomic bombing

Provision of Value to the Community

Environmental protection activities
Activities for protecting forests
In order to preserve the rich nature of our home areaand pass it on to future generations, our directors andemployees as well as their families planted a total of
1,500 saplings such as Japanese chestnut, Japaneseoaks, beeches and wild cherry trees in Hirogin no

Satoyama (village forest) (Akiota-cho, Yamagata-gun,
Hiroshima Prefecture; 3.0 ha) over five years from2010. Furthermore, we have maintained the village
forest by, for example, removing undergrowth since2015 to grow the trees planted in the forest.

Activities for maintaining Hirogin no Satoyama

As part of environmental protection activities, our new employees have planted saplings of Japanese cherry trees at
the Bank’s Hirogin no Mori seminar-training center since April 2010. A total of 60 cherry trees are growing steadily.

The Bank has been a member of “Save The Forest In
Japan” since its foundation. It consists of 64 member
regional banks. In accordance with the organization’s
philosophy of “passing on beautiful and healthy forests
to the next generation,” we will continue our efforts
for protecting rich nature.

HIROSHIMA BANK INTEGRATED REPORT 201966

Provision of Value to the Community

Support for financial education
Financial education activities
The Bank provides a variety of financial education
programs to get younger generations that will bear the
future of the region familiar with finance indispensablefor people’s life.
The Kids Money School for elementary school
students provides tours at the Bank and lectures
about the importance and proper use of money; theWork Experience Programs for junior and senior highschool students provide lectures about the financial
system, economic conditions, and other matters togive opportunities for the participants to acquire better
financial literacy.
In addition, the Bank’s directors and employees incharge of various operations visit local universities toprovide lectures about such matters as the financial
system, financial products, and services of banks andmanagement strategies of the Bank to students who
are about to enter the world of work.

Welfare and volunteer activities
Response to damage from the Heavy Rain Event of July 2018
Toward reconstruction from significant damage caused by the Heavy Rain Event of July 2018, we, as a regional
financial institution, carried out measures as below:
Donation: donations from Hiroshima Bank and the Group companies as well as
their directors and employees
Accepting donations from customers
Establishing a response promotion teamProviding assistance to disaster victims in the region(1) Measures for convenience, (2) establishment of “special loan for recovery
from the disaster,” (3) establishment of “consultation service for damage causedby the torrential rain,” (4) special treatment for areas covered by the Disaster
Relief Act under insurance policies, (5) exemption of fees when disaster victims
use a safe-deposit box, (6) measures in line with the “guidelines for out-ofcourt settlements for a natural disaster relating to debt adjustment for affectedvictims,” (7) visits and provision of relief material to disaster victims, etc.
Volunteers: dispatch of a total of about 300 employees to affected areas
Establishing the West Japan Torrential Rain Reconstruction FundThis fund covers the entire affected areas through cooperation among major
financial institutions located in the affected areas to support continuation,
restarting and reconstruction of business operations of the affected companies.
Welfare activities
The Bank gives Christmas presents to children’s homes in Hiroshima
Prefecture every year from 1994.
Furthermore, we, together with MetLife, Inc., donate money tochildren’s homes and infant homes organized as a social welfare
corporation from 2007, to create an environment where children
who will lead the next generation can grow healthily by equally
receiving education and participating in communities.

67

HIROSHIMA BANK INTEGRATED REPORT 2019

Provision of Value to the Community

Promotion of culture and sports
Hiroshima Museum of Art
The Hiroshima Museum of Art was established in
November 1978 by Hiroshima Bank in commemorationof the 100th anniversary of its foundation as we movethrough history together with the region. In the hopethat the museum would bring peace of mind to thepeople of Hiroshima, the city once reduced to ruins

by the atomic bomb on August 6, 1945, the museum
came into being as a magnificent edifice of art on thetheme of love and peace of mind. It was also built topray for the repose of souls of the victims that laid thefoundation of today’s Hiroshima and to express wishes
for peace.

Collection
The art gallery exhibits some 80 works throughout the year among about 300 works we own, comprising European
modern art works centered on the French Impressionists from the Romantics in the mid-19th century to the Ecolede Paris school, including paintings by Degas, Monet, Renoir, Van Gogh, and Picasso, and Japanese modern art
works since the Meiji Period, including traditional-style nihonga works.

Support for three Hiroshima-based professional bodies
The Bank supports three professional sports and culturalorganizations in Hiroshima, the Hiroshima Toyo Carp
baseball team, the Sanfrecce Hiroshima (FC) football team,and the Hiroshima Symphony Orchestra. We join handswith local companies to cheer the teams, hold games
sponsored by us, and hold Hirogin Tomorrow Concert
performed by the Hiroshima Symphony Orchestra.

In July 2019, from a viewpoint of developing thenext generation, we held a new concert to provide an
opportunity at which high school students can performwith professionals.

Other than the above, we support a local women’s soccer team ANGE VIOLET HIROSHIMA and a professional
basketball team HIROSHIMA DRAGONFLIES to contribute to local revitalization through sports.

HIROSHIMA BANK INTEGRATED REPORT 201968

Financial Section

Consolidated Balance Sheets

For more details about the financial information contained inthis annual report, please refer to the financial informationthat has been made public on the Hiroshima Bank website.

https://www.hirogin.co.jp/eng/index.html

THE HIROSHIMA BANK, LTD. AND CONSOLIDATED SUBSIDIARIESAs of March 31, 2018 and 2019
Millions of
U.S. dollars (Note 1)

Millions of yen

2018

2019

2019

ASSETSCash and due from banks (Notes 4, 13 and 21)
Call loans and bills purchased (Note 21)
Financial receivables purchased (Notes 4 and 21)
Trading assets (Notes 4 and 21)
Money held in trust (Notes 5 and 21)
Securities (Notes 4, 7, 11 and 21)
Loans and bills discounted (Notes 6,7, 8 and 21)
Foreign exchanges
Other assets (Note 7)
Tangible fixed assets (Note 10)
Intangible fixed assets
Net defined benefit assets (Note 17)
Deferred tax assets (Note 18)
Customers’ liabilities for acceptances and guarantees (Note 11)
Reserve for possible loan losses (Note 21)
Total assets¥1,511,177
18,521
7,424
5,847
8,256
1,382,716
5,861,796
7,741
88,94991,982
9,585
54,607735
38,237(35,429)¥9,052,152¥1,432,022
19,953
7,813
5,839
10,312
1,175,920
6,020,840
7,536
91,384
95,392
9,530
65,106734
43,479(33,194)¥8,952,671$12,902
180
70
53
93
10,59554,247
68
823
859
86
587
7
392
(299)
$80,662

LIABILITIES AND NET ASSETS
Liabilities:
Deposits (Notes 7 and 21)
Call money and bills sold (Note 21)
Payables under repurchase agreements (Notes 7 and 21)
Deposits received for bonds lending/borrowing transactions (Notes 7 and 21)
Trading liabilities
Borrowed money (Notes 7, 9 and 21)
Foreign exchanges
Due to trust account
Other liabilities
Net defined benefit liabilities (Note 17)
Reserve for retirement benefits of directors and corporate auditors
Reserve for reimbursement of deposits
Reserve for point loyalty programs
Reserve for stock payments
Reserve for loss related to Head Office rebuilding
Reserve under Special Laws
Deferred tax liabilities (Note 18)
Deferred tax liabilities for land revaluation reserve (Note 10)
Acceptances and guarantees (Note 11)
Total liabilities¥7,441,054
50,000111,329
262,859
4,023
585,551224
42
49,741
42
26
4,447
129
176
1,987
41
10,876
13,61338,237¥8,574,404¥7,464,155—
88,521
260,108
3,856
516,331339
2360,935
39
23
3,558
120
341
846
39
8,947
13,61043,479¥8,465,280$67,251
—
798
2,344
35
4,652
3
0
549
0
0
32
1
3
8
0
81
123
392
$76,271

54,57354,57330,746
309,747(1,260)393,807
48,399(547)
27,763
8,016
83,632308
477,748¥9,052,152

30,740329,367(1,040)413,641
35,676(2,016)
27,792
12,12173,574
176
487,391¥8,952,671

Net Assets (Note 12):
Common stock:
Authorized – 1,000,000,000 shares
Issued – 312,633,171 shares
Capital surplus
Retained earnings
Common stock in treasury
Total stockholders’ equity
Net unrealized holding gains on securities available for sale (Note 4)
Net deferred gains (losses) on hedging instruments, net of tax
Land revaluation and translation adjustments, net of tax (Note 10)
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Stock acquisition rights (Note 22)
Total net assets
Total liabilities and net assets
See notes to consolidated financial statements.

69

HIROSHIMA BANK INTEGRATED REPORT 2019

$

492

277
2,968
(9)
3,727
321
(18)
250
109
663
2
4,391
$80,662

Consolidated Statements of Income
THE HIROSHIMA BANK, LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2018 and 2019
Millions of
U.S. dollars (Note 1)

Millions of yen

Income:Interest income:Interest on loans and discounts
Interest and dividends on securities
Other interest income
Fees and commissions
Other operating income
Other income (Note 14)
Total income
Expenses:
Interest expenses:
Interest on deposits
Interest on borrowings and rediscounts
Other interest expenses
Fees and commissions
Other operating expenses
General and administrative expenses (Note 22)
Other expenses (Note 14)
Total expenses
Income before income taxes and others
Income taxes (Note 18):
Provision for income taxes and others
Deferred income taxes
Net income
Profit attributable to owners of the parent

2018

2019

2019

¥ 61,786
13,945
1,340
31,732
4,525
15,774
129,105¥ 62,534
11,186
1,806
29,677
7,552
8,483
121,242

$ 563
101
16
267
68
76
1,092

2,865
3,779
2,890
9,518
4,691
61,1297,975
92,85036,255

2,218
3,465
2,846
9,443
3,417
58,044
5,073
84,50936,733

20
31
26
85
31
523
46
761
331

10,696(250)
25,809¥ 25,809

8,559
2,591
25,581¥ 25,581

77
23
230
$ 230

Yen

Amounts per share of common stock (Note 12):
Net assets
Net income
Diluted net income
Cash dividends applicable to the year

¥1,534.40
82.81
82.71
13.50

U.S. dollars (Note 1)¥1,564.51
82.16
82.09
20.00

$14.10
0.74
0.74
0.18

See notes to consolidated financial statements.

Consolidated Statements of Comprehensive Income
THE HIROSHIMA BANK, LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2018 and 2019
Millions of
U.S. dollars (Note 1)

Millions of yen

2018
Net income¥25,809
Other comprehensive income (loss) (Note 23):
Net unrealized holding gains (losses) on securities available for sale		8,900
Net deferred gains (losses) on hedging instruments, net of tax
		 (34)Remeasurements of defined benefit plans
		3,004
Share of other comprehensive income (loss) of affiliated companies accounted for		 6by equity method
Comprehensive income¥37,686
Attributable to:Comprehensive income attributable to owners of the parent¥37,6862019¥ 25,581

2019
$ 230

		(12,719)
		(1,469)
		4,105		(115)
		(13)
		37

		

(3)

		(0)

¥ 15,494

		140¥ 15,494$ 140

See notes to consolidated financial statements.

HIROSHIMA BANK INTEGRATED REPORT 201970

Consolidated Statements of Changes in Net Assets
THE HIROSHIMA BANK, LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2018 and 2019
Millions of yen

2018
Stockholders’ equity
Item

Common stock

Capital surplus

Retained earnings

Common stock
in treasury

Total
stockholders’ equity¥54,573¥30,743¥290,180¥(437)¥375,060

Balance at the beginning ofcurrent period
Changes of items during theperiodDividends from surplus
Profit attributable to ownersof the parent
Purchase of common stock intreasury
Disposal of common stock intreasury
Net changes of items otherthan stockholders’ equity
Total changes of items during
the period
Balance at the end of current
period(6,242)(6,242)25,80925,809

2

(855)

(855)

32

35

—

2

19,566(822)

18,746¥54,573¥30,746¥309,747¥(1,260)¥393,807

Millions of yen

2018
Accumulated other comprehensive income

Item

Balance at the beginning ofcurrent period
Changes of items during theperiodDividends from surplus
Profit attributable to ownersof the parent
Purchase of common stock intreasury
Disposal of common stock intreasury
Net changes of items otherthan stockholders’ equity
Total changes of items during
the period
Balance at the end ofcurrent period71

Net unrealized Net deferred gains Land revaluation
holding gains(losses) on hedging and translation(losses) on securities instruments,
adjustments,
available for sale
net of tax
net of tax¥39,492¥(512)¥27,763

Remeasurementsof defined benefit
plans¥5,011

Total accumulated
other
Stock acquisition
comprehensive
rightsincome¥71,755¥322

Total net
assets¥447,138(6,242)25,809
(855)
35
8,906

(34)

—

3,004

11,877(14)

11,862

8,906

(34)

—

3,004

11,877(14)

30,609¥48,399¥(547)¥27,763¥8,016¥83,632¥308¥477,748

HIROSHIMA BANK INTEGRATED REPORT 2019

Millions of yen

2019
Stockholders’ equity
Item

Balance at the beginning ofcurrent period
Changes of items during theperiodDividends from surplus
Profit attributable to ownersof the parent
Purchase ofcommon stock in treasury
Disposal ofcommon stock in treasury
Reversal of land revaluation
reserve
Net changes of items otherthan stockholders’ equity
Total changes of items during
the period
Balance at the end of current
periodCommon stock

Capital surplus

Retained earnings

Common stock
in treasury

Total
stockholders’ equity¥54,573¥30,746¥309,747¥(1,260)¥393,807(5,932)(5,932)25,581

25,581

(6)

(0)

(0)

220

214

(28)

(28)

—

(6)

19,620220

19,833¥54,573¥30,740¥329,367¥(1,040)¥413,641

Millions of yen

2019
Accumulated other comprehensive income

Item

Balance at the beginning ofcurrent period
Changes of items during theperiodDividends from surplus
Profit attributable to ownersof the parent
Purchase ofcommon stock in treasury
Disposal ofcommon stock in treasury
Reversal ofland revaluation reserve
Net changes of items otherthan stockholders’ equity
Total changes of items during
the period
Balance at the end of current
periodNet unrealized Net deferred gains Land revaluation
holding gains(losses) on hedging and translation(losses) on securities instruments,
adjustments,
available for sale
net of tax
net of tax¥48,399¥(547)¥27,763

Remeasurementsof defined benefit
plans¥8,016

Total accumulated
other
Stock acquisition
comprehensive
rightsincome¥83,632¥308

Total net
assets¥477,748(5,932)25,581(0)
214(28)(12,722)(1,469)28

4,105(10,058)(131)(10,190)(12,722)(1,469)28

4,105(10,058)

(131)

9,643

¥35,676¥(2,016)¥27,792¥12,121¥73,574¥176¥487,391

HIROSHIMA BANK INTEGRATED REPORT 201972

Millions of U.S. dollars

2019
Stockholders’ equity
Item

Common stock

Capital surplus

$492

$277

Balance at the beginning ofcurrent period
Changes of items during theperiodDividends from surplus
Profit attributable to ownersof the parent
Purchase ofcommon stock in treasury
Disposal ofcommon stock in treasury
Reversal ofland revaluation reserve
Net changes of items otherthan stockholders’ equity
Total changes of items during
the period
Balance at the end of current
periodRetained earnings

Common stock
in treasury

Total
stockholders’ equity$2,791$ (11)$3,548

(53)

(53)

230

230

(0)

		(0)

(0)

		2

2

(0)

$492

(0)

(0)

177

		2

179

$277

$2,968$ (9)$3,727

Millions of U.S. dollars

2019
Accumulated other comprehensive income

Item

Net unrealized Net deferred gains Land revaluation
holding gains(losses) on hedging and translation(losses) on securities instruments,
adjustments,
available for sale
net of tax
net of tax

Balance at the beginning ofcurrent period
Changes of items during theperiodDividends from surplus
Profit attributable to ownersof the parent
Purchase of common stock intreasury
Disposal of common stock intreasury
Reversal of land revaluation
reserve
Net changes of items otherthan stockholders’ equity
Total changes of items during
the period
Balance at the end of current
period73

HIROSHIMA BANK INTEGRATED REPORT 2019

$436

$ (5)

$250

Remeasurementsof defined benefit
plans

$72

Total accumulated
other
Stock acquisition
comprehensive
rightsincome$754$3

Total net
assets$4,304

(53)
230
(0)
2
(0)
(115)

		(13)

0

37

(91)

(1)

(92)

(115)

		(13)

0

37

(91)

(1)

87

$321

$(18)

$250

$109

$663

$2

$4,391

Consolidated Statements of Cash FlowsTHE HIROSHIMA BANK, LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2018 and 2019
Millions of
U.S. dollars (Note 1)

Millions of yen

2019

2018
Cash flows from operating activities:
Income before income taxes and others
Depreciation of premises, equipment and others
Impairment losses of fixed assets
Gains on negative goodwill
Equity in earnings of affiliates
Loss on step acquisitions
Net change in reserve for possible loan losses
Decrease (increase) in net defined benefit assets
Increase (decrease) in net defined benefit liabilities
Net change in reserve for retirement benefits of directors and corporate auditors
Net change in reserve for reimbursement of deposits
Net change in reserve for point loyalty programs
Net change in reserve for stock payments
Net change in reserve under special laws
Net change in reserve for loss related to Head Office rebuilding
Interest income
Interest expense
Net losses on securities transactions
Net losses on dispositions of fixed assets
Net change in trading assets
Net change in trading liabilities
Net change in loans
Net change in deposits
Net change in negotiable certificates of deposit
Net change in borrowed money excluding subordinated loans
Net change in due from banks other than from the Bank of Japan
Net change in call loans and bills purchased
Net change in call money and bills soldNet change in deposits received for bonds lending/borrowing transactions
Net change in foreign exchanges (assets)
Net change in foreign exchanges (liabilities)
Interest received
Interest paid
Net change due to issuance and redemption of straight bonds
Other – net
Subtotal
Income taxes paid
Total adjustments
Net cash provided by (used in) operating activities¥

36,2556,610
31(4,196)(149)
2,123(2,504)(8,529)
4
(1)
2,985
3
176
(2)
892
(77,073)
9,534(3,981)130
3,369(3,159)(244,990)
185,386(40,444)
128,681285(1,458)
20,775(138,782)
148
60
83,171(9,776)(20,000)(27,331)(138,010)(14,415)(152,426)(116,170)¥

36,733
4,678
130
—
(148)
—
(2,235)(10,498)
(3)
(3)
(888)
(9)
165
(1)
(1,140)(75,528)8,530(6,041)158
7(166)(159,043)
82,903(59,802)(69,219)894(1,819)(72,807)(2,750)205
115
78,156(9,131)—
3,254(292,037)(8,873)(300,910)(264,177)

2019
$

331
42
1
—
(1)
—
(20)
(95)
(0)
(0)
(8)
(0)
1
(0)
(10)
(680)
77
(54)
1
0
(1)
(1,433)
747
(539)
(624)
8
(16)
(656)
(25)
2
1
704
(82)
—
29
(2,631)(80)(2,711)(2,380)Cash flows from investing activities:
Purchases of securities
Proceeds from sales of securities
Proceeds from maturity of securities
Increase in money held in trust
Decrease in money held in trust
Purchases of tangible fixed assets
Purchases of intangible fixed assets
Proceeds from sales of tangible fixed assets
Payments for retirement of tangible fixes assets
Net cash provided by (used in) investing activities(284,859)
249,618
420,335(0)
1,300(3,545)(2,037)0(9)
380,803(430,007)
306,396
326,020(2,079)23(5,539)(2,763)2(33)
192,018(3,874)
2,761
2,937
(19)
0
(50)
(25)
0
(0)
1,730

Cash flows from financing activities:
Dividends paid
Purchases of treasury stock
Proceeds from sales of treasury stock
Payments of lease liabilities
Net cash provided by (used in) financing activities(6,242)
(855)
0
(70)
(7,167)(5,934)(0)
0(72)(6,008)

(53)
(0)
0
(1)
(54)

2
257,466
1,245,160
53¥1,502,680(94)(78,260)
1,502,680—¥1,424,420

(1)
(705)
13,539—$12,834

Effect of foreign exchange rate changes on cash and cash equivalents
Net change in cash and cash equivalents
Cash and cash equivalents at the beginning of year
Increase in cash and cash equivalents from newly consolidated subsidiary
Cash and cash equivalents at the end of year (Note 13)
See notes to consolidated financial statements.

HIROSHIMA BANK INTEGRATED REPORT 201974

Notes to Consolidated Financial Statements
THE HIROSHIMA BANK, LTD. AND CONSOLIDATED SUBSIDIARIESMarch 31, 2018 and 20191 Basis of presenting consolidated financial
statements
The accompanying consolidated financial statements of
The Hiroshima Bank, Ltd. (the “Bank”) and its consolidated
subsidiaries have been prepared in accordance with theprovisions set forth in the Japanese Financial Instruments
and Exchange Law and its related accounting regulations,and in conformity with accounting principles generally
accepted in Japan (“Japanese GAAP”), which are different
in certain respects as to application and disclosure
requirements of International Financial Reporting Standards.
The accompanying consolidated financial statements
have been restructured and translated into English (withsome expanded descriptions) from the consolidated
financial statements of the Bank prepared in accordancewith Japanese GAAP and filed with the appropriate Local
Finance Bureau of the Ministry of Finance as requiredby the Financial Instruments and Exchange Law. Some
supplementary information included in the statutory
Japanese language consolidated financial statements, but
not required for fair presentation, is not presented in theaccompanying consolidated financial statements.
The Bank maintains its accounting records in Japaneseyen, the currency in which the Bank is incorporated andoperates. In preparing the accompanying consolidated
financial statements and notes thereto, Japanese yen
figures less than one million yen have been rounded down
to the nearest million yen, except for per share data, in
accordance with the Financial Instruments and Exchange
Law and Enforcement Regulation concerning Banking Law
of Japan. Therefore, total or subtotal amounts shown in theaccompanying consolidated financial statements and notes
thereto do not necessarily agree with the sums of individual
amounts. The translations of the Japanese yen amounts
into U.S. dollars are included solely for the convenience ofreaders, using the prevailing exchange rate at March 31,
2019, which was ¥110.99 to U.S. $1.00. The conveniencetranslations should not be construed as representations that
the Japanese yen amounts have been, could have been, or
could in the future be, converted into U.S. dollars at this or
any other rate of exchange.

75

HIROSHIMA BANK INTEGRATED REPORT 20192 Principles of consolidation
The consolidated financial statements include the accountsof the Bank and 7 subsidiaries for the year ended March 31,
2019. The Bank includes the accounts of several companies
which are less than 50% owned in the accompanying
consolidated financial statements in the case that the
Bank has control over these companies through crossshareholdings, transfer of management, and provision ofdebt guarantees and loans. All significant intercompany
balances and transactions have been eliminated.
Investment in 20% to 50% owned company is carried at costadjusted for equity in undistributed earnings or losses sinceacquisition (the equity method). The Bank also applies theequity method for investments in certain companies which
are less than 20% owned in the case that the Bank is able toexercise significant influence over these companies.
The consolidated financial statements do not include theaccounts of a subsidiary because the total assets, total
income, net income, retained earnings and total accumulated
other comprehensive income of the subsidiary would nothave had a material effect on the consolidated financial
statements.
Investments in the unconsolidated subsidiaries were statedat cost. If the equity method of accounting had been applied
to the investments in the subsidiaries, the effect on theaccompanying consolidated financial statements would not
be material.
Consequently, the consolidated financial statements include
the account of the Bank and its 7 subsidiaries and anaffiliated company for the year ended March 31, 2019.
As of March 31, 2019, the fiscal year ending dates are March
31 for 7 subsidiaries.

3 Significant accounting policies
Trading assets and trading liabilities
The Bank adopted mark-to-market accounting for trading
assets and trading liabilities including securities, financial
receivables and financial derivatives for trading purpose.
Trading assets and trading liabilities are recorded on a tradedate basis, and revenues and expenses related to trading
securities transactions are also recorded on a trade datebasis. Securities and financial receivables for trading purposes
are stated at market or fair value at the balance sheet date.
Financial derivatives such as futures and option transactions
are stated at a deemed settlement amount at the balance
sheet date. Unrealized gains or losses incurred by the markto-market method are charged to income.

Securities
All companies are required to examine the intent of holding
each security and classify those securities as (a) securities
held for trading purposes (hereafter, “trading securities”),(b) debt securities intended to be held to maturity (hereafter,“held-to-maturity debt securities”), (c) equity securities
issued by subsidiaries and an affiliated company, and (d) for
all other securities that are not classified in any of the above
categories (hereafter, “available-for-sale securities”).
Trading securities are stated at fair market value. Gains andlosses realized on disposal and unrealized gains and losses
from market value fluctuations are recognized as gains orlosses in the period of the change. Held-to-maturity debt
securities are stated at amortized cost. Equity securities
issued by subsidiaries and affiliated companies which are notconsolidated or accounted for using the equity method arestated at moving-average cost. Available-for-sale securities
with available fair market values are stated at fair market
value. Unrealized gains and unrealized losses on thesesecurities are reported, net of applicable income taxes, asa separate component of net assets. Realized gains andlosses on sale of such securities are computed using movingaverage cost.
Available-for-sale securities whose fair value cannot be
reliably determined are carried at cost determined by themoving-average method.
Debt securities with no available fair market value arestated at amortized cost, net of the amount considered notcollectible. Other securities with no available fair market
value are stated at moving-average cost.
If the market value of held-to-maturity debt securities, equity
securities issued by subsidiaries and affiliated companies
not consolidated or accounted for by the equity method,
and available-for-sale securities declines significantly, suchsecurities are stated at fair market value and the difference
between fair market value and the carrying amount isrecognized as loss in the period of the decline. If the fairmarket value of equity securities issued by unconsolidated
subsidiaries and affiliated companies not on the equity
method is not readily available, such securities should be
written down to net asset value with a corresponding charge
in the income statement in the event net asset value declines
significantly. In these cases, such fair market value or the net
asset value will be the carrying amount of the securities atthe beginning of the following year.

When market values of available-for-sale securities with fairmarket values decline by 50% or more of the acquisition
cost at the balance sheet date, the Bank writes down suchsecurities to the fair market values and records the related
write-downs as loss in its consolidated statements of income.
When market values of available-for-sale securities with fairmarket value decline by 30% or more but less than 50% of
the acquisition cost, write-downs to the fair market values
may be recognized for certain issuers based on evaluationof issuers’ debtor classification. The Bank devaluated the
securities other than securities held for trading purposes
and recognized a loss of ¥46 million (¥46 million for debt
securities) and ¥353 million ($3 million) (¥249 million ($2million) for equity securities and ¥104 million ($1 million)
for debt securities) for the years ended March 31, 2018 and2019, respectively.
Derivatives and hedge accounting
Companies are required to state derivative financial
instruments at fair value and to recognize changes in the fairvalue as gains or losses unless derivative financial instruments
are used for hedging purposes.
(1) Hedging against interest rate fluctuations
The Bank applies deferred hedge accounting pursuant to
the treatment regulated by “Treatment for Accounting and
Auditing of Application of Accounting Standard for Financial
Instruments in Banking Industry” (JICPA Industry Audit
Committee Report No. 24) to hedge transactions such as
interest rate swaps entered into to mitigate interest rate risk
arising from financial assets and liabilities. The Bank assessed
the hedge effectiveness by considering the adequacy ofoffsetting movement of the fair value by the changes ininterest rates through classifying the hedged items suchas loans and the hedging instruments such as interest rate
swaps by their maturity.
With respect to hedging transactions to fix the cash flows,
hedging instruments (e.g. interest rate swaps) are designatedto hedged items collectively by interest rate indices andtenors in accordance with JICPA Industry Audit Committee
Report No. 24. Since material terms related to hedged items
and hedging instruments are substantially identical, andsuch hedging transactions are deemed highly effective, theassessment of effectiveness is based on the similarity of theterms.
(2) Hedging against foreign currency fluctuations
The Bank applies deferred hedge accounting to hedgetransactions such as currency swaps and foreign exchange
swaps entered into to mitigate foreign exchange risk arisingfrom foreign-currency-denominated financial assets andliabilities.

HIROSHIMA BANK INTEGRATED REPORT 201976

The Bank applies the hedge accounting pursuant to“Treatment of Accounting and Auditing Concerning
Accounting for Foreign Currency Transactions in Banking
Industry” (JICPA Industry Audit Committee Report No.
25) to currency swap transactions and foreign exchange
swap transactions for the purpose of funds lending andborrowing in different currencies. The Bank assesses thehedge effectiveness by confirming that the positions ofhedge instruments (currency swap and foreign exchange
swap transactions) do not exceed the corresponding foreigncurrency-denominated monetary receivables and payables ashedged items.
(3) Exceptional treatment
For some assets and liabilities, the Bank defers recognitionof gains or losses resulting from changes in fair value ofderivative financial instruments until the related losses orgains on the hedged items are recognized. Also, if interest
rate swap contracts are used as a hedge and meet certain
hedging criteria, the net amount to be paid or received under
the interest rate swap contract is added to or deducted fromthe interest on the assets or liabilities for which the swap
contract was executed.
Tangible fixed assets (except for lease assets)
Tangible fixed assets except for land utilized for business
operations are stated at cost less accumulated depreciation.
Accumulated impairment losses are deducted fromacquisition costs.
The Bank and its consolidated subsidiaries depreciate their
tangible fixed assets under the straight-line method overtheir estimated useful lives. Estimated useful lives of major
items are as follows:
Buildings:
22–50 years
Others:3–20 years
Accumulated depreciation for tangible assets as of March 31,2018 and 2019 amounted to ¥50,922 million and ¥51,982
million ($468 million), respectively.
Deferred revenue deducted from the acquisition cost was¥12,779 million and ¥12,779 million ($115 million) as ofMarch 31, 2018 and 2019, respectively.
Intangible fixed assets (except for lease assets)
Intangible fixed assets are amortized using the straight-line
method. Software utilized by the Bank is amortized over theperiod in which it is expected to be utilized mainly for 5 or 10
years.

77

HIROSHIMA BANK INTEGRATED REPORT 2019

Lease assets
Lease assets of the finance leases included in “Tangible
fixed assets” other than those that transfer the ownershipof leased property to the lessees are depreciated using
the straight-line method over the lease term with zero
residual value unless residual value is guaranteed by thecorresponding lease contracts.
Reserve for possible loan losses
For loans to insolvent customers who are undergoingbankruptcy or other collection proceedings or in a similar
financial condition, the reserve for possible loan losses isprovided in the full amount of such loans, excluding the
portion that is estimated to be recoverable due to available
security interests or guarantees.
For the unsecured and unguaranteed portions of loans tocustomers not presently in the above circumstances, but
for which there is a high probability of so becoming, thereserve for possible loan losses is provided for estimatedunrecoverable amounts determined after evaluating thecustomer’s overall financial conditions.
For other loans, the reserve for possible loan losses isprovided based on the Bank’s actual rate of loan losses in thepast.
Consolidated subsidiaries provide the reserve for possible
loan losses mainly based on the actual rate of loan losses in
the past.
All branches and the credit supervision department evaluate
all loans in accordance with the self-assessment rule, andtheir evaluations are audited by the asset audit section, whichis independent from branches and the credit supervision
department, and the evaluations are revised as required
based on the audits.
Secured and guaranteed loans which are for insolvent
borrowers or in a similar financial condition are disclosed
based on the amount of loans net of amounts estimatednot to be collected through disposition of collateral or
through execution of guarantees. Such amounts directly
set off against those loans at March 31, 2018 and 2019were ¥15,536 million and ¥15,444 million ($139 million),
respectively.

Employees’ severance and retirement benefits
The liabilities and expenses for severance and retirement
benefits were determined based on the amounts actuariallycalculated using certain assumptions.

Reserve for loss related to Head Office rebuilding
Reserve for loss related to Head Office rebuilding is provided
to cover estimated losses arising from the rebuilding of the
Head Office of the Bank.

The Bank and its consolidated subsidiaries provided
allowance for employees’ severance and retirement benefits
at March 31, 2018 and 2019 based on the estimatedamounts of projected benefit obligation and the fair valueof the plan assets at those dates. Actuarial gains and losses
were recognized in expenses using the straight-line method
over 14 years, which was not longer than the average ofthe estimated remaining service lives, commencing with thefollowing period.

Reserve under Special Laws
Reserve under special laws is provided for contingent
liabilities and provided for compensation for losses fromsecurities-related transactions or derivative transactions,pursuant to Article 46-5-1 of the Financial Instruments andExchange Act and Article 175 of the related cabinet order.

In calculating the projected benefit obligation, the straightline method is used to attribute the expected benefit
attributable to the respective fiscal year. Prior service costs
were recognized in the consolidated statements of income as
incurred.
Certain consolidated subsidiaries adopt the simplified
method for the calculation of net defined benefit liability andexpenses for severance and retirement benefits.
Reserve for retirement benefits of directors andAudit & Supervisory Board members
Reserve for retirement benefits of directors and Audit &Supervisory Board members is provided for in payment of
retirement benefits to directors, corporate auditors and otherexecutive officers, in the amount deemed accrued at the
fiscal year-end based on our internal regulations.
Reserve for retirement of deposits
Reserve for retirement of deposits which were derecognized
as liabilities under certain conditions is provided for the
possible losses on the future claims of withdrawal.
Reserve for point loyalty programs
Reserve for point loyalty program is provided for theestimated expenses based on an estimate of the future
usage of points. Points are granted to credit card holders
through card usage under the point loyalty program which isdesigned to promote card usage.

Foreign currency translation
The consolidated financial statements of the Bank
are maintained in Japanese yen. Assets and liabilities
denominated in foreign currencies are translated into
Japanese yen at the exchange rates prevailing at the balance
sheet dates, etc.
Income taxes
Income taxes consist of corporation, enterprise andinhabitants taxes. The provision for income taxes is computed
based on the pretax income of the Bank and each of its
consolidated subsidiaries with certain adjustments requiredfor consolidation and tax purposes. The asset and liability
approach is used to recognize deferred tax assets andliabilities for loss carryforwards and the expected future tax
consequences of temporary differences between the carrying
amounts and the tax bases of assets and liabilities.
Valuation allowances are recorded to reduce deferred tax
assets based on the assessment of the recoverability of thetax benefits.
Consumption taxes
National and local consumption taxes of the Bank and its
consolidated domestic subsidiaries are accounted for using
the tax-excluded method.
Consolidated statements of cash flows and cash
equivalents
In preparing the consolidated statements of cash flows, cash
and due from the BANK OF JAPAN are considered to be cash
and cash equivalents.

Reserve for stock payments
Reserve for stock payments is provided for the Bank’s stock
payment to its directors and executive officers based on the
Director Share Payment Regulations at the estimated amountat the fiscal year-end.

HIROSHIMA BANK INTEGRATED REPORT 201978

Amounts per share
Net assets per share is calculated by dividing net assets by
the number of common stocks outstanding at the year-end(excluding “treasury stock”).
Net income per share is calculated by dividing profit
attributable to owners of the parent by the average numberof shares of common stock outstanding during the year
(excluding “treasury stock”).
Cash dividends per share represent the actual amounts
declared as applicable to the respective years.
Reclassifications
Certain amounts in the 2018 consolidated financial
statements have been reclassified to conform to the 2019presentation.
Additional information
Transactions vesting treasury stocks through trust
The Bank has introduced the Plan using a structure called a
BIP (Board Incentive Plan) Trust aiming at improvement of theBank’s mid and long-term performance as well as increase of
the awareness of contributions to increasing corporate value.
(1) Outline
The Plan grants specified points to directors, etc. dependingon the Director Share Payment Regulations. The Bank’s
shares and cash in the amount of converted value of such
Bank’s shares equivalent to the number of such points may
be granted and paid through trust at the time of retirement.
The Bank’s shares to be granted to directors are acquired
through the trusted cash by the Bank.
(2) The Bank's share remaining in the trust
1. The shares of the Bank remaining in the trust are recorded
as treasury stock under net assets through the carrying
value.
2. The carrying value of treasury stock remaining in the trustis ¥847 million and ¥764 million ($7 million) at March 31,2018 and 2019, respectively.
3. The number of the shares of the Bank remaining in thetrust is 968 thousand and 873 thousand at March 31,2018 and 2019, respectively.

79

HIROSHIMA BANK INTEGRATED REPORT 20194 Securities(1) Trading account securities included in “Trading assets,”
certificates of deposit with banks included in “Cash anddue from banks,” and trust beneficiary rights included in“Financial receivables purchased,” which are separately
reported from “Securities” in the consolidated balance
sheets, are included in this section.
(2) The following tables summarize acquisition costs, bookvalues and fair values of securities with available fairvalues as of March 31, 2018 and 2019:a) Trading securities:
Millions of yen

Millions of
U.S. dollars

2018

2019

2019

¥(2)

¥(0)

$(0)

Amount of net unrealized
gains (losses) includedin the consolidated
statements of incomeb) Available-for-sale securities:
At March 31, 2018
Millions of yen

Acquisition
Book value
cost
Fair value exceeding cost:
Equity securities¥ 119,558 ¥ 45,888
Bonds:
		 701,291 		 694,738
National government bonds 		 445,288 		 442,539
Local government bonds 		 96,230 		 94,889
Bonds
		 159,772 		 157,309
Others		 85,513 		 80,938
Subtotal
		 906,362 		 821,565

Grossunrealized
gain¥73,669
6,552
2,749
1,340
2,463
4,574
84,797

Fair value not exceeding cost:

Equity securities		 13,885 		 16,396
Bonds:
		 121,400 		 121,862
National government bonds 		 40,982 		 41,103
Local government bonds 		 25,193 		 25,259
Bonds
		 55,223 		 55,499
Others		 332,639 		 345,354
Subtotal
		 467,925 		 483,613
Total¥1,374,288 ¥1,305,179(2,511)
(462)
(121)
(65)
(275)
(12,714)(15,688)¥69,109

At March 31, 2019
Millions of yen

Acquisition
Book value
cost
Fair value exceeding cost:
Equity securities¥ 83,453 ¥ 33,423
Bonds:
		 633,156 		 623,083
National government bonds 		 317,344 		 311,704
Local government bonds 		 116,260 		 114,939
Bonds
		 199,552 		 196,439
Others		 144,989 		 140,438
Subtotal
		 861,599 		 796,945

Grossunrealized
gain¥50,030
10,072
5,639
1,321
3,112
4,551
64,654

Fair value not exceeding cost:

Equity securities		 22,430 		 26,073
Bonds:
		7,256 		7,281National government bonds 		— 		—
Local government bonds 		
1,950 		
1,950
Bonds
		
5,306 		5,331Others		 275,412 		 285,715
Subtotal
		 305,099 		 319,071
Total¥ 1,166,699 ¥ 1,116,016(3,642)
(25)
—
(0)
(25)
(10,303)(13,971)¥50,682

Millions of U.S. dollars

Acquisition
Book value
cost
Fair value exceeding cost:
Equity securities
$
752 $
301
Bonds:
		5,705 		5,614National government bonds 		
2,859 		2,808Local government bonds 		
1,047 		
1,036
Bonds
		
1,798 		1,770Others		
1,306 		1,265Subtotal
		
7,763 		
7,180

Gross
unrealized
gain
$451
91
51
12
28
41
583

Fair value not exceeding cost:

Equity securities
		
Bonds:		
National government bonds 		
Local government bonds 		
Bonds		Others		
Subtotal
		
Total
$

202 		
65 		
— 		
18 		
48 		
2,481 		2,749 		10,512 $

235
66
—
18
48
2,574
2,875
10,055

(33)
(0)
—
(0)
(0)
(93)
(126)
$457

(3) Total sales of available-for-sale securities sold at March 31,2018 and 2019 were as follows:
At March 31, 2018
Millions of yen

TypeProceeds
from sales

Total amount Total amountof gains onof losses on
sales
sales

Equity securities¥ 8,501 ¥ 2,019
		 31,122 		 227Bonds:
National government bonds 		 25,870 		 215Local government bonds 		 3,910 		
9
Bonds
		 1,342 		
2
		192,226 		 6,580
OthersTotal¥ 231,850 ¥ 8,827

¥ 154
		
10
		
—
		
8
		
1
		 4,632¥ 4,797

At March 31, 2019
Millions of yen

TypeProceeds
from sales

Total amount Total amountof gains onof losses on
sales
sales

Equity securities¥ 6,360¥ 2,446
Bonds:
		 93,591 		1,727
National government bonds 		 92,251 		1,674— 		 —
Local government bonds 				 1,340 		 53BondsOthers		199,815 		5,253
Total¥ 299,767¥9,427¥ 259
		 259		 258		 —
		 0
		3,009¥ 3,528

Millions of U.S. dollars

Type

Proceeds
from sales

Total amount Total amountof gains onof losses on
sales
sales

Equity securities$
57$22
Bonds:
		843 		16National government bonds 		831 		15Local government bonds 		 — 		—Bonds
		 12 		0
		1,800 		47OthersTotal$ 2,701
$85

$ 2
		2
		2
		—
		0
		27
$32

HIROSHIMA BANK INTEGRATED REPORT 201980

5 Money held in trust(1) Money held in trust classified as trading purpose
There was no money held in trust classified as trading purpose for the years ended March 31, 2018 and 2019.
(2) Money held in trust classified as held-to-maturity
There was no money held in trust classified as held-to-maturity for the years ended March 31, 2018 and 2019.
(3) Other money held in trust
Millions of yen

Year ended March 31, 2018
Carrying amount Acquisition cost

Other money held in trust¥8,256

Net unrealized
gain (loss)

Unrealized
gain

Unrealized
loss

¥—

¥—

¥—

Net unrealized
gain (loss)

Unrealized
gain

Unrealized
loss

¥—

¥—

¥—

Net unrealized
gain (loss)

Unrealized
gain

Unrealized
loss

$—

$—

$—

¥8,256

Millions of yen

Year ended March 31, 2019
Carrying amount Acquisition cost

Other money held in trust¥10,312¥10,312

Millions of U.S. dollars

Year ended March 31, 2019
Carrying amount Acquisition cost

Other money held in trust

$93

$93

Notes: 1. Consolidated balance sheet amount is calculated using market prices at the fiscal year-end.
2. “Unrealized gain” and “Unrealized loss” are breakdowns of “Net unrealized gain (loss).”

6 Loans and bills discounted

7 Assets pledged(1) Doubtful loans included in loans and bills discounted at
March 31, 2018 and 2019 were as follows:

At March 31, 2018 and 2019, the following assets were
pledged as collateral for certain liabilities of the Bank andsubsidiaries.

Millions of yen

2018
Non-accrual loans:
Loans to borrowers
under bankruptcy
proceedings
Other delinquent loans
Accrual loans past due
three months or more
Restructured loans,including loans to
supported companies
Total

2019

Millions of
U.S. dollars

2019¥ 1,538¥ 1,200
		50,895 		47,394

$ 11
		427

		 2,876 		 3,755

		34

Securities
Loans and bills discounted
Other assets
Total

2018
¥848,175—
1,600¥849,776

2019¥704,024
186,780
1,896¥892,701

Millions of
U.S. dollars

2019$6,3431,683
17$8,043The collateral was pledged to secure:		13,923 		14,728¥69,233¥67,078

		133
$604

The Bank does not accrue interest on loans to borrowers
under bankruptcy proceedings and other delinquent loans,which are classified based on the results of self-assessment.
(2) Bills discounted are accounted for as financial transactionsin accordance with “Treatment for Accounting and
Auditing of Application of Accounting Standard for
Financial Instruments in Banking Industry” (JICPA Industry
Audit Committee Report No. 24). The Bank and its
consolidated banking subsidiaries have rights to sell or
pledge commercial bills discounted and foreign bills of
exchange purchased without restrictions, and their total
face amounts were ¥27,359 million and ¥27,146 million($245 million) at March 31, 2018 and 2019, respectively.
81

Millions of yen

HIROSHIMA BANK INTEGRATED REPORT 2019

Millions of yen

Deposits
Payables under
repurchase agreements
Deposits received
for bonds lending/borrowing transactions
Borrowed money

Millions of
U.S. dollars

2019
1,653

2019
$ 15

		 111,329 		 88,521

		 798

		 262,859 		260,108
		 555,664 		479,236

		2,344
		4,318

¥

2018
1,488

¥

In addition, securities not included in the above schedules
were pledged as collateral for operating transactions, such as
exchange settlements. These securities amounted to ¥5,013
million and nil at March 31, 2018 and 2019, respectively, andothers amounted to ¥48,888 million and ¥50,000 million($450 million) at March 31, 2018 and 2019, respectively.

Security deposits, included in other assets, amounted to¥2,567 million and ¥2,460 million ($22 million) at March
31, 2018 and 2019, respectively, deposits for financial
instruments amounted to ¥8,703 million and ¥11,792 million($106 million) at March 31, 2018 and 2019, respectively, anddeposits for futures trading amounted to ¥1,115 and ¥226
million ($2 million) at March 31, 2018 and 2019, respectively.
Of the securities received as collateral under transactions
with repurchase agreement, those which the Bank holds
rights to dispose of by sale or provision of collateral at its
discretion amounted to ¥21,070 million and ¥16,326 million($147 million) at March 31, 2018 and 2019, respectively.
Bills rediscounted are accounted for as financial transactionsin accordance with “Treatment for Accounting and Auditingof Application of Accounting Standard for Financial
Instruments in Banking Industry” (JICPA Industry Audit
Committee Report No. 24), and the total face amount ofcommercial bills discounted and foreign exchanges purchasedthat have been pledged were nil and ¥1 million ($0 million) at
March 31, 2018 and 2019, respectively.

8 Commitment line
Commitment line contracts on overdrafts and loans are thecontracts, under which the Bank lends to customers up to
the prescribed limits in response to customers’ applicationof loan as long as there is no violation of any conditionin the contracts. The unused amount within the limits
totaled ¥1,735,338 million and ¥1,735,804 million ($15,639
million) relating to these contracts at March 31, 2018 and2019, respectively. Among them, the amounts of unused
commitment of which term of contracts is less than one
year or revocable at any time totaled ¥1,655,587 million and¥1,646,364 million ($14,833 million) as of March 31, 2018and 2019, respectively.
Since many of these commitments expire without being
drawn down, the unused amount does not necessarily
represent a future cash requirement. Most of thesecontracts have conditions that the Bank and its consolidated
subsidiaries can refuse customers’ applications for loans
or decrease the contract limits with proper reasons (e.g.,changes in financial situation, deterioration in customers’
creditworthiness). At the inception of contracts, the Bankand its consolidated subsidiaries obtain real estate, securities,
etc., as collateral if considered to be necessary. Subsequently,
the Bank and its consolidated subsidiaries perform periodic
review of the customers’ business results based on internal
rules, and take necessary measures to reconsider conditions
in contracts and require additional collateral and guarantees.

9 Borrowed money
Subordinated loans included in borrowed money were
¥15,000 million and ¥15,000 million ($135 million) at March
31, 2018 and 2019, respectively.

10 Privately placed bonds
The amount of guarantee obligations for privately placed
corporate bonds (stipulated by Article 2-3 of the Financial
Instruments and Exchange Law) included in “Securities” was¥39,647 million and ¥37,878 million ($341 million) at March
31, 2018 and 2019, respectively.

11 Net assets
Under the Company Law of Japan, the entire amount of
the issue price of shares is required to be accounted for as
capital, although a company may, by resolution of its Boardof Directors, account for an amount not exceeding one-halfof the issue price of the new shares as additional paid-in
capital, which is included in capital surplus.
The Banking Law of Japan provides that an amount equal toat least 20% of cash dividends and other cash appropriations
shall be appropriated and set aside as a legal earnings
reserve until the total amount of legal earnings reserve andadditional paid-in capital equals 100% of common stock.
The legal earnings reserve and additional paid-in capital may
be used to eliminate or reduce a deficit by resolution of thestockholders’ meeting or may be capitalized by resolution of
the Board of Directors. On condition that the total amount oflegal earnings reserve and additional paid-in capital remains
being equal to or exceeding 100% of common stock, they
are available for distributions or certain other purposes by
the resolution of the stockholders’ meeting. Legal earnings
reserve is included in retained earnings in the accompanying
financial statements.
The maximum amount that the Bank can distribute as
dividends is calculated based on the unconsolidated financial
statements of the Bank in accordance with the Company Law
of Japan.
In accordance with the customary practice in Japan, theappropriations are not accrued in the financial statements
for the period to which they relate, but are recorded in thesubsequent accounting period in which the stockholders’approval has been obtained. Retained earnings at March 31,
2019 include the amount representing the year-end cash
dividend of ¥3,123 million ($28 million), ¥10.00 ($0.09) per
share, which was approved at the stockholders’ meeting heldon June 26, 2019.

HIROSHIMA BANK INTEGRATED REPORT 201982

12 Cash and cash equivalents
The reconciliation of cash and due from banks in the
consolidated balance sheets and cash and cash equivalents inthe consolidated statements of cash flows at March 31, 2018and 2019, was as follows:

Cash and due from banks
Foreign currency deposits
with banks
Cash and cash equivalents

Millions of yen

Millions of
U.S. dollars

2018
2019
¥1,511,177 ¥1,432,022

2019$12,902(8,496)(7,601)(68)¥1,502,680 ¥1,424,420$12,834

Significant non-monetary transactions
Year ended March 31, 2018
Hirogin Securities CO., LTD. (formerly Hirogin Utsumiya
Securities Co., Ltd.) has been included in the scope of
consolidation as it became a wholly owned subsidiary. The
increased assets and liabilities due to consolidation were as
follows:

Year ended March 31, 2019
There was no significant non-monetary transaction to be
noted for the year ended March 31, 2019.

13 Lease transactions
Finance Leases
Tangible fixed assets in lease assets mainly consisted ofbranches. The depreciation method of lease assets is shownin “3. Significant accounting policies.”
Finance leases other than those that transfer the ownershipof the leased property to the lessees which commenced infiscal years beginning prior to April 1, 2008 are accounted forin a similar way to operating leases.
Operating leases
Future minimum lease payments on operating leases whichwere not cancelable at March 31, 2018 and 2019 were as
follows:

Millions of yen

Current assets
Non-current assets
Total assets

2018¥24,236611¥24,847

Current liabilities
Non-current liabilities
Total liabilities¥15,60743¥15,650

Millions of yen

2019
¥4
3
¥7

2018
¥ 4
7
¥12

Due within 1 year
Due after 1 year
Total

Millions of
U.S. dollars

2019
$0
0
$0

14 Derivative transactions
Derivative transactions to which hedge accounting is not applied
Contracted amount (including notional principal amount), fair value and unrealized gains or losses of financial derivatives at
March 31, 2018 and 2019 were as follows:
Interest related:Year ended March 31, 2018
Millions of yen

Contracted amountOver one year

Type

Items not traded on exchanges

83

Interest rate swaps:
Receive fixed, pay variable
Receive variable, pay fixed
Receive variable, pay variable
Interest rate options:
Sell
Buy
Other contracts:
Sell
Buy
Total

HIROSHIMA BANK INTEGRATED REPORT 2019

Fair
value

Unrealized gains(losses)¥100,356
		100,342
		—¥ 90,390
		90,390		
—¥ 2,738		(1,961)
		 —¥ 2,738		(1,961)		 —		 2,533
		 2,533

		 2,533
		 2,533

		 (2)
		 2

		 10
		 (8)

		
		
¥

		
		
¥

		 —
		 —
¥ 777

		 —
		 —
¥ 779

—
—
—

—
—
—

Year ended March 31, 2019
Millions of yen

Contracted amountType

Items not traded on exchanges

Interest rate swaps:
Receive fixed, pay variable
Receive variable, pay fixed
Receive variable, pay variable
Interest rate options:
Sell
Buy
Other contracts:
Sell
Buy
Total

Fair
value

Over one year

Unrealized gains(losses)¥105,526
		105,526
		—¥ 94,487
		94,487		 —¥ 3,002		(2,164)		 —¥ 3,002		(2,164)		 —

		 2,266
		 2,266

		2,266
		2,266		 (0)
		 0

		 8
		 (7)

		
		
¥

		
		
¥

		 —
		 —
¥ 837

		 —
		 —
¥ 838

—
—
—

—
—
—

Millions of U.S. dollars

Contracted amountType

Items not traded on exchanges

Interest rate swaps:
Receive fixed, pay variable
Receive variable, pay fixed
Receive variable, pay variable
Interest rate options:
Sell
Buy
Other contracts:
Sell
Buy
Total

Fair
value

Over one year

Unrealized gains(losses)

$951
		951
		—

$851
		851
		—

$ 27
		(19)
		—$ 27
		(19)
		—

		20
		20

		20
		20

		(0)
		0

		0
		(0)

		—
		—
$ —

		—
		—
$ —

		—
		—
$ 8

		—
		—
$ 8

Notes: 1. The unrealized gains or losses on interest rate swaps, interest rate options and other contracts are recognized in the consolidated statements of income.
2. Fair value of transactions listed on exchanges is calculated using the closing prices on the Tokyo Financial Exchange and others. Fair value of OTC transactions is
calculated using the discounted present value and option pricing models.

Currency related:Year ended March 31, 2018
Millions of yen

Contracted amountType

Items not traded on exchanges

Currency swaps
Forward foreign exchange contracts:
Sell
Buy
Currency options:
Sell
Buy
Total

Fair
value

Over one year

¥411,637¥257,397

		43,733
		43,723
		145,553
		145,553¥—¥

Unrealized gains(losses)

129

¥ 207

		 6,479
		 6,130

		1,278		(654)

		1,278		(654)

		65,823
		65,823¥—

		(4,305)
		4,305¥ 752

		1,292		(592)¥1,530Year ended March 31, 2019
Millions of yen
Contracted amountType

Items not traded on exchanges

Currency swaps
Forward foreign exchange contracts:
Sell
Buy
Currency options:
Sell
Buy
Total

Fair
value

Over one year

¥459,612¥321,641

		63,899
		63,551
		155,252
		155,252¥—¥

Unrealized gains(losses)

96

¥ 143

		24,287
		23,979

		768
		 72

		768
		72

		59,371
		59,371¥—

		(3,520)
		3,520¥ 937

		1,451		(1,016)¥1,419HIROSHIMA BANK INTEGRATED REPORT 201984

Millions of U.S. dollars

Contracted amountOver one year

Fair
value

Unrealized gains(losses)$4,141$2,898

$ 1

$ 1

		576
		573

		219
		216

		7
		1

		7
		1

		1,399
		1,399
$ —

		535
		535
$ 	 —

		(32)
		32
$ 8

		13
		(9)
$13

Type

Items not traded on exchanges

Currency swaps
Forward foreign exchange contracts:
Sell
Buy
Currency options:
Sell
Buy
Total

Notes: 1. The unrealized gains or losses on currency swaps, forward foreign exchange contracts and currency options are recognized in the consolidated statements of income.
2. Fair value is calculated using the discounted present value method and option pricing models.

Bond related:
There were no bond related transactions for the years ended March 31, 2017 and 2018.
Others:Year ended March 31, 2018
Millions of yen

Contracted amountType

Items not traded on exchanges

Over one year

Earthquake derivatives:
Sell
Buy
Total

¥4,575
		4,575
¥
—

¥—
		—
¥—

Fair
value

¥(55)
		55
¥—

Unrealized gains(losses)

¥—
		—
¥—

Year ended March 31, 2019
Millions of yen

Contracted amountType

Items not traded on exchanges

Over one year

Earthquake derivatives:
Sell
Buy
Total

¥5,175
		5,175
¥
—

¥—
		—
¥—

Fair
value

¥(64)
		64
¥—

Unrealized gains(losses)

¥—
		—
¥—

Millions of U.S. dollars

Contracted amountType

Items not traded on exchanges

Over one year

Earthquake derivatives:
Sell
Buy
Total

$47
		47
$—

$—
		—
$—

Fair
value

$ (1)
		1
$—

Unrealized gains(losses)

$—
		—
$—

* Transactions above whose fair values are not readily determinable are stated at cost.

Derivative transactions to which hedge accounting is applied
The notional principal amount and fair value of financial derivatives at March 31, 2018 and 2019 were as follows:
Interest related:Year ended March 31, 2018
Millions of yen

Contracted amount

Method of hedge accounting
Deferral method

Exceptional treatment
of interest rate swaps

85

Type

Main hedge items

Interest rate swaps:
Receive fixed, pay variable
Receive variable, pay fixedInterest rate swaps:
Receive variable, pay fixed
Other contracts:
Buy
Total

Loans and bills discounted,
securities

HIROSHIMA BANK INTEGRATED REPORT 2019

Over one year

Fair
value

¥ 70,000
		111,831¥ 20,000
		107,831¥0		(333)

		101,918

		75,580

		 Note 3

		 1,000¥—		 1,000¥—

		 Note 3¥ (333)Loans and bills discounted
Loans and bills discounted

Year ended March 31, 2019
Millions of yen

Contracted amount

Method of hedge accounting
Deferral method

Exceptional treatment
of interest rate swaps

Type

Main hedge items

Interest rate swaps:
Receive fixed, pay variable
Receive variable, pay fixedInterest rate swaps:
Receive variable, pay fixed
Other contracts:
Buy
Total

Loans and bills discounted,
securities

Fair
value

Over one year

¥ 40,000
		137,744¥ 40,000
		137,744¥ 289
		(2,869)

		72,336

		58,832

		 Note 3

		 1,000¥—		¥		 Note 3¥(2,580)

Loans and bills discounted
Loans and bills discounted——

Millions of U.S. dollars

Contracted amount

Method of hedge accounting
Deferral method

Exceptional treatment
of interest rate swaps

Type

Main hedge items

Interest rate swaps:
Receive fixed, pay variable
Receive variable, pay fixedInterest rate swaps:
Receive variable, pay fixed
Other contracts:
Buy
Total

Loans and bills discounted,
securities

Fair
value

Over one year$ 360
		1,241$ 360
		1,241$ 3
		(26)

		652

		530

Note 3

		 9
$
—

		 —
$
—

Note 3$(23)

Loans and bills discounted
Loans and bills discounted

Notes: 1. As for interest rate swaps shown above, deferred hedge accounting is applied in accordance with JICPA Industry Audit Committee Report No. 24.
2. Fair value of transactions listed on exchanges is calculated using the closing prices on the Tokyo Financial Exchange and others. Fair value of OTC transactions is
calculated using the discounted present value, option pricing models and prices obtained from the counterparty financial institutions.
3. Interest rate swaps which meet specific matching criteria are accounted for as a component of hedged loans and bills discounted. Therefore, the fair value of thoseinterest rate swaps is included in the fair value of loans and bills discounted in fair value information shown in “21. Financial instruments and related disclosures.”

Currency related:Year ended March 31, 2018
Millions of yen

Method of hedge
accounting
Deferral method

Contracted amountType

Main hedge items

Currency swaps
Forward foreignexchange contracts
Total

Loans and bills discounted andsecurities denominated inforeign currencies

Over one year

Fair value¥ 76,376¥ 65,752¥ 2,912

		73,165
¥
—

		 —
¥
—

		477
¥ 3,390

Year ended March 31, 2019
Millions of yen

Method of hedge
accounting
Deferral method

Contracted amountType

Main hedge items

Currency swaps
Forward foreignexchange contracts
Total

Loans and bills discounted andsecurities denominated inforeign currencies

Over one year

Fair value¥ 67,545¥ 45,330¥ (1,248)

		87,819
¥
—

		 —
¥
—

		(325)¥ (1,574)

Millions of U.S. dollars

Method of hedge
accounting
Deferral method

Contracted amountType

Main hedge items

Currency swaps
Forward foreignexchange contracts
Total

Loans and bills discounted andsecurities denominated inforeign currencies

Over one year

Fair value

$ 609

$ 408

$ (11)

		791
$ —

		—
$ —

		(3)
$ (14)

Notes: 1. The Bank has applied the deferred hedge accounting stipulated in “Accounting and Auditing Concerning Accounting for Foreign Currency Transactions in Banking
Industry” (JICPA Industry Audit Committee Report No. 25, July 29, 2002).
2. Fair value has been measured on the basis of the calculation of discounted or present value.

HIROSHIMA BANK INTEGRATED REPORT 201986

15 Employees’ severance and retirement benefits
For the years ended March 31, 2018 and 2019
Change in projected benefit obligation
Millions of yen

2019

2018

Projected benefit obligation¥45,916¥44,651
at beginning of the year
Service costs during the		 1,180 		 1,178
yearInterest cost on projected
		
21 		
19
benefit obligation
Actuarial differences
incurred		 230 		 334		 (2,807) 		 (2,577)
Benefits paid
Other		 111 		 111Projected benefit
obligation at end¥44,651¥43,718of the year

Severance and retirement benefit expenses
Millions of
U.S. dollars

Millions of yen
Millions of
U.S. dollars

2019
$402
		11
		0
		3
		(23)
		1
$394

2018
Service costs—benefits
earned during the year
¥ 1,180
Interest cost on projected		21
benefit obligation
Expected return on plan
assets		(3,678)
Amortization of actuarial
differences
		 (347)
Severance and retirement
benefit expenses calculated
by simplified method		
4Severance and retirement
benefit expenses¥(2,820)

2019

2019

¥ 1,178

$ 11

		

19

		 0

		(3,968)

		(36)

		 (467)

		(4)

		

4

		 0

¥(3,234)$ (29)

Remeasurements of accumulated defined benefit plans
Millions of yen

Change in plan assets
Millions of yen

Plan assets at beginning of
the year
Expected return on plan
assetsActuarial differences
incurredContribution by thebusiness owner
Benefits paid
Other
Plan assets at end of
the year

Millions of
U.S. dollars

2018

2019

2019

¥91,956¥ 99,217$894

		 3,678 		
		 4,933 		

3,968

2019
¥5,950

6,752

		61

¥99,217¥108,785$980

Millions of yen

2019Millions of
U.S. dollars

2019¥ 44,609 ¥ 43,678$ 394
		(99,217) 		 (108,785) 		(980)		(54,607) 		 (65,106) 		(587)

Unfunded projected benefit
obligation		
42 		
39 		 0Net on consolidated¥(54,565) ¥ (65,067)$ (586)balance sheets
Millions of yen

2018
2019
Net defined benefit liability
¥
42 ¥
39
Net defined benefit asset
		 (54,607) 		 (65,106)
Net on consolidatedbalance sheets¥ (54,565) ¥ (65,067)

HIROSHIMA BANK INTEGRATED REPORT 2019

Millions of
U.S. dollars

2019
$
0
		(587)$ (586)2019$54

Remeasurements of defined benefit plans

		36

		 737 		
738 		7
		 (2,194) 		 (1,998) 		(18)		 106 		
106 		1

2018

87

2018
¥4,354

Millions of yen

The adjustment of the ending balances of projected
benefit obligation and plan assets to net defined
benefit liability and net defined benefit assets

Funded projected benefit
obligation
Plan assets

Actuarial differences

Millions of
U.S. dollars

Unrecognized actuarial
differences

Millions of
U.S. dollars

2018

2019

2019

¥(11,617)¥(17,567)$(158)

2018
3.9%
70.7
0.1
25.3
100%

2019
2.3%
73.2
0.1
24.4
100%

Classification of plan assets
Debt securities
Equity securities
Cash and due from banks
Other
Plan assets at end of the year

(Note) Plan assets include the retirement benefit trust established for the corporate
pension plans (60.2% in 2019 and 54.5% in 2018) and the retirement
benefit trust established for lump-sum payment plans (13.9% in 2019 and
16.0% in 2018).

Assumptions
Discount rate
Rates of expected return on plan assets
Expected salary increase rate

2018
0.2%
4.0%
2.9%

2019
0.2%
4.0%
3.1%

Defined contribution pension plan
Tangible fixed assets in lease assets mainly consisted of The
amount required to be contributed by the Bank is ¥296
million and ¥296 million ($3 million) for the years ended
March 31, 2018 and 2019, respectively.

16 Income taxes
Income taxes in the consolidated statements of income
consist of corporation tax, inhabitant taxes and enterprisetax. The effective statutory tax rate was approximately 31%
and 31% as of March 31, 2018 and 2019, respectively.
Significant components of deferred tax assets as of March
31, 2018 and 2019 were as follows:
Millions of yen

2018
2019
Deferred tax assets:
Reserve for¥ 14,932 ¥ 14,030
possible loan losses
Write-down of securities 		
747 		
765
		 1,865 		 1,809
Depreciation
Other		 4,860 		 5,186
Subtotal deferred tax assets 		 22,406 		 21,791
Valuation allowance for
		
— 		
—
tax loss carryforwards
Valuation allowance fortotal temporary differences
deductible in future periods 		 (978) 		 (1,063)
Subtotal valuation allowance 		 (978) 		 (1,063)
		 21,428 		 20,728
Total deferred tax assets
Deferred tax liabilities:
Net defined benefit assets 		(10,156) 		(13,235)
Gain on contribution orcancellation of securities
to employee retirement		 (691) 		 (691)
benefit trust
Net unrealized holding
gains on securities
		(20,721) 		(15,013)
available for sale
Total deferred tax liabilities 		(31,569) 		(28,941)
Net deferred tax assets¥(10,140) ¥ (8,212)

Millions of
U.S. dollars

2019

$ 126
		 7
		 16
		 47
		196
		 —

		(10)
		(10)
		187

		(119)		 (6)
		(135)
		(261)$ (74)(Changes in presentation)
The Bank has applied the “Partial Amendments to
Accounting Standard for Tax Effect Accounting” (ASBJ
Statement No.28, February 16, 2018) (hereinafter “Partial
Amendments to Tax Effect Accounting Standard”) from thefiscal year under review, and changed Note 18 Income taxes.
The Bank added the information indicated in explanatory
note 8 (excluding the total amount of valuation allowance)and 9 of “Accounting Standard for Tax Effect Accounting”
prescribed in Paragraph 3 to 5 of the Partial Amendments toTax Effect Accounting Standard in Note 18 Income taxes.

A reconciliation of the actual effective tax rate with thenormal effective statutory tax rate for the fiscal year ended
March 31, 2018 was as follows:
Normal effective statutory tax rate
Reconciliation:
Change in valuation allowance
Permanently tax-exempt income
Gains on negative goodwill
Loss on step acquisitions
Dividend income offset of consolidated subsidiaries
Other
Actual effective tax rate

2018
31.0%
(0.0)
(1.5)
(3.5)
1.8
0.9
0.2
28.8%

A reconciliation of the actual effective tax rate with thenormal effective statutory tax rate for the fiscal year ended
March 31, 2019 has been omitted, since the difference
between the actual effective tax rate and the normal
effective statutory tax rate was less than 5% of the normal
effective statutory tax rate.

17 Segment information
Operations of the Bank and its consolidated subsidiaries
include appraisal of collateral premises and land, servicing
businesses and other businesses, in addition to banking
business. As such operations are immaterial, separate
segment information is not required to be disclosed for theyears ended March 31, 2018 and 2019.
Income by service

Lending
Investment in securities
Fees and commissions
Other
Total

Millions of yen

Millions of
U.S. dollars

2018
2019
¥ 61,427 ¥ 62,142
		 24,331 		 23,033
		 31,732 		 29,677
		 7,418 		 6,384¥124,908 ¥121,238

2019
$ 560
		 208
		 267
		 58$1,09218 Related party transactions
Information about related party transactions for the years
ended March 31, 2018 and 2019 is omitted since they are
immaterial.

HIROSHIMA BANK INTEGRATED REPORT 201988

19 Financial instruments and related disclosures(1) Policy for financial instruments
The Bank and its consolidated subsidiaries conduct financial
services such as financial instruments transactions, credit
guarantees, leasing and credit card services, with banking
as their core activity. Among these businesses, core banking
operations include fund procurement through deposittaking and fund management through loans and investment
security portfolios. The financial assets and liabilities of the
Bank are subject to Asset Liability Management (“ALM,”
comprehensive management of assets and liabilities) insuch a way as to prevent adverse impact from interest-rate,
foreign-exchange and market-value fluctuation.
(2) Nature and extent of risk arising from financial
instruments
Loans and bills discounted are primarily provided to domestic
institutional and individual customers, in which the Bank is
exposed to customers’ credit risk. Securities primarily consistof stocks, bonds and investment trusts held by the Bank forthe purposes of building and maintaining good relationships
with customers, sole investment objective and held-tomaturity investment objective.
They are exposed to risk of fluctuation in interest rates andprices in the bond/stock markets and in addition, credit
risk arising from downgrading of the issuer’s credit rating.
Borrowed money, bonds and commercial papers are exposed
to liquidity risk, the risk that the Bank is unable to meet its
obligations as they fall due.
The Bank enters into the following derivative transactions,such as currency swaps and forward foreign exchange
contracts to meet the financial needs of customers andinterest rate swaps for the purpose of optimizing ALM. As
part of optimizing ALM, the Bank uses hedge accounting,specifying derivatives such as interest rate swaps as hedging
instruments, and loans as hedged items.
(3) Risk management for financial instruments
Credit risk management
Credit risk is the risk of sustaining losses due to reduction
or loss of value of assets due to deteriorating credit
circumstances at a borrower.

89

HIROSHIMA BANK INTEGRATED REPORT 2019

(Credit screening system)
For all major loans made by branches, the Bank has in placea system of rigorous credit-screening carried out by a creditscreening department, which is independent of the sales
departments. In addition to establishing teams for eachsector, the credit-screening department has established a
dedicated team to ensure sounder borrower finances andeffective corporate rehabilitation, and also offers support tomanagement trying to improve operational management.
In evaluating a customer application for a loan, the Bank will
give a considered response, in line with “The Basic Principles
Prescribing Credit” set up by the Board of Directors, turning
down any application that runs counter to the law or public
morality and taking careful account of profitability and publicbenefit, in addition to fund use, repayment source, andguarantee and collateral arrangements.
In cases where customers apply for a review of borrowing
terms, the Bank will give a considered response taking
account of actual circumstances faced by the customer, inline with “The Basic Principles for Facilitation of Finance” set
up by the Board of Directors. Appropriate and prompt credit
screening is carried out after joint appraisal of a customer’s
needs and concerns—and not just based on a mechanical,
uniform judgment informed only by financial statements andother superficial statistics and industry-specific guidelines.
To strengthen and expand the credit-screening system, theBank seeks to duly appraise the creditworthiness of a given
company through case-by-case credit management and takes
continuous measures to improve the credit-screening skills of
employees by various kinds of training program.
(Risk management using the credit rating system)
The Bank has introduced the credit rating system to give an
objective overview of credit risk on loans. Based on financial
and other data indicating the level of creditworthiness of theborrower, the Bank has divided borrowers into 12 grades,
and continuously monitors changes in credit risk. The Bank
then carries out credit risk quantification based on thesegrades, to assess credit risk on loan assets and set baseline
interest rates on loans.
The Bank also accumulates and organizes the data necessaryfor quantification of credit risks, such as the default rate
within each grade and extent of asset recovery from
customers in default, and uses a highly sophisticatedquantification technique to obtain a still more detailed
picture of risk-monitored assets.

(Self-assessment of assets)
In parallel with the credit rating system, the Bank conducts
strict checks into the soundness of loans and other assets
through annual assessment. Screening is carried out by
particular Bank branches in light of the financial situation
faced by the borrower, and the results are checked by thecredit-screening department of the Head Office. In addition,
the Risk Management Division extracts important informationand conducts a rigorous review of screening due process andaccuracy, and the Audit Division carries out the process audit.
Based on this self-assessment of assets, in cases where there
is no realistic prospect of asset recovery, provisions are madeto reserve for possible loan losses to cover the entire valueof the sum at risk. This provision is then recorded as a loss
for the fiscal year under review. In this way the Bank ensuresasset soundness on a continuous basis.
Market risk management( i ) Market risk management system
Market risk which is associated with change in the valueof financial instruments from fluctuations in interest rates,
securities prices, foreign exchange rates, and other marketrelated indices, has an effect on our financial performance.
The Bank controls market risk to stabilize earnings byendeavoring to improve and strengthen ALM.
Management of trading account risk
With regard to the trading accounts (for securities and offbalance-sheet transactions that target short-term gains onsales or purchases, and trading at the behest of customers),
the Bank has special management mechanisms in place toguard against risk, since these transactions differ qualitatively
from banking account transactions (involving deposits
and loans, investment securities, and related transactions).
The Bank has set up designated trading accounts, andis strengthening their management using transparent
accounting procedures based on fair value.
For proprietary position dealing, the Bank limits the position
by complying with strict rules in terms of position limits
and loss-cutting measures. For positions and transactions
on behalf of customers, the Bank follows a policy of squarepositions by fully covering them through the interbank
market.
(ii) Quantitative information relating to market risk(a) Financial products for trading purposes
The Bank holds securities and derivative transactions
including interest-rate and currency swaps for trading
purpose.

To measure the amount of market risk, the Bank adopts
VaR (Value at Risk) using the variance-covariance method(observation period: one year; confidence interval: 99.9%;
holding period: one day).
As of March 31, 2018 and 2019, the entire VaR of the Bankwas ¥1 million and ¥1 million ($0 million), respectively.
(b) Financial products held for other than trading purpose
The Bank holds various products such as loans, securities,
deposits, corporate bonds, and derivatives for other than
trading purpose.
To measure the amount of market risk associated with theseproducts, the Bank uses the VaR method using the variancecovariance method (observation period: one year; confidence
interval: 99.9%; holding period: six months for strategic
equity investments, three months for securities other thanstrategic equity investments, and one year for others).
The total VaR as of March 31, 2018 and 2019 was ¥54,186
million and ¥65,243 million ($588 million), respectively.
Within liquid deposits, the Bank recognizes interest risks
related to deposits left in the Bank for long periods without
withdrawal, which are allocated each fiscal period as core
deposits.
(c) VaR adequacy
The relationship between the VaR calculated with the modeland actual gains and losses data is back-tested. The Bank
has confirmed that the calculating model used for thesemeasurements captures market risk with the necessary
degree of accuracy.
However, because VaR is a method of measuring the amountof market risk in terms of the probability of a certain event
happening based on past statistical variation, it cannot be
used for assessing risk in a market environment characterized
by abnormal change.
Management of liquidity risks related to fundprocurement
Liquidity risk is the risk of incurring losses due to a decline in
cash flow or being obliged to procure funds at interest rates
that are markedly higher than usual due to an unexpected
outflow of cash.
The Bank has secured highly liquid assets such as government
bonds to prepare for cash outflows in times of short-term
stress. Moreover, to mitigate long-term fund procurement
risks, the Bank manages the gap between low-liquidity loans
and stable procurement.

HIROSHIMA BANK INTEGRATED REPORT 201990

The Bank has a structure to conduct liquidity measurements
and to secure available reserves over the net cumulative
outflow forecasted in an emergency situation.
(4) Fair values of financial instruments
Fair values of financial instruments are based on quoted
price in active markets. If quoted price is not available, otherrational valuation techniques are used.
Since the calculations of the reasonably calculated prices are
implemented under certain conditions and assumptions, theresult of calculations would differ if such calculations are
made under different conditions and assumptions.
Fair values of financial instruments as of March 31, 2018 and2019 were as follows:
Millions of yen

Year ended March 31, 2018

Carrying
amountFair value

Difference(1) Cash and due from banks ¥1,511,177 ¥1,511,177 ¥—(2) Call loans andbills purchased		 18,521 		 18,521 		
—(3) Financial receivables
purchased		
7,424 		7,424 		
—(4) Trading assets*2
Securities held for
trading purposes		
917 		
917 		—
(5) Money held in trust		
8,256 		8,256 		
—(6) Securities:
Securities held to maturity 		
— 		
— 		
—
Securities available for sale 		1,371,648 		1,371,648 		
—(7) Loans and bills discounted 		5,861,796
Reserve for possible loan
losses*1
		 (32,737)Net
		5,829,059 		5,967,373 		138,314
Total assets¥8,747,005 ¥8,885,320 ¥ 138,314(1) Deposits(2) Negotiable certificates ofdeposit(3) Call money and bills sold(4) Payables under
repurchase agreements(5) Deposits received
for bonds lending/borrowing transactions(6) Borrowed money
Total liabilities¥7,170,925¥

475

		 270,129 		 270,131 		
		 50,000 		 50,000 		

1—

		 111,329 		 111,329 		

—		 262,859 		 262,859 		
—		 585,551 		 586,266 		
715¥8,450,793 ¥8,451,986 ¥ 1,192

Derivative instruments*1, 3:
Hedge accounting
is not applied¥
Hedge accounting is applied 		
Derivative instruments total¥

91¥7,171,400

1,519 ¥
3,056 		4,576 ¥HIROSHIMA BANK INTEGRATED REPORT 2019

1,519 ¥
3,056 		4,576 ¥———

Millions of yen

Year ended March 31, 2019

Carrying
amountFair value

Difference(1) Cash and due from banks ¥1,432,022 ¥1,432,022 ¥—(2) Call loans andbills purchased		 19,953 		 19,953 		
—(3) Financial receivables
purchased		
7,813 		7,813 		
—(4) Trading assets*2
Securities held for
trading purposes		
1,048 		1,048 		
—(5) Money held in trust		 10,312 		 10,312 		
—(6) Securities:
Securities held to maturity 		
— 		
— 		
—
Securities available for sale 		1,164,414 		1,164,414 		
—(7) Loans and bills discounted 		6,020,840
Reserve for possible loan
losses*1
		 (30,041)
Net
		5,990,799 		6,143,725 		152,925
Total assets¥8,626,364 ¥8,779,289 ¥ 152,925(1) Deposits(2) Negotiable certificates ofdeposit(3) Call money and bills sold(4) Payables under
repurchase agreements(5) Deposits received
for bonds lending/borrowing transactions(6) Borrowed money
Total liabilities¥7,253,828¥7,254,221¥

393

		 210,327 		 210,328 		
		
— 		
— 		

1
—

		

—

88,521 		

88,521 				 260,108 		 260,108 		—
		 516,331 		 517,939 		 1,608¥8,329,118 ¥8,331,120 ¥ 2,002

Derivative instruments*1, 3:
Hedge accounting
is not applied¥
Hedge accounting is applied 		
Derivative instruments total¥

1,770 ¥
(4,155) 		
(2,385) ¥1,770 ¥
(4,155) 		
(2,385) ¥———Millions of U.S. dollars

Year ended March 31, 2019

Carrying
amountFair value(1) Cash and due from banks$ 12,902$ 12,902(2) Call loans and bills
purchased		 180 		 180(3) Monetary clams bought
		
70 		
70
(4) Trading assets*2
Securities held for trading
purpose		9 		9(5) Money held in trust
		
93 		
93
(6) Securities:
Securities held to maturity 		— 		—Securities available for sale 		10,491 		10,491(7) Loans and bills discounted 		54,247
Reserve for possible loan
losses*1
		 (271)		53,976 		55,354
Net
Total assets$ 77,722$ 79,100(1) Deposits
		65,356(2) Negotiable certificates of		 1,895
deposit(3) Call money and bills sold 		
—(4) Payables under repurchase		 798agreements(5) Deposits received
for bonds lending/borrowing transactions 		 2,344(6) Borrowed money
		 4,652$ 75,044
Total liabilities
Derivative instruments*1, 3:
Hedge accounting
is not applied$
Hedge accounting is applied 		
Derivative instruments total$

Difference

$

—

		
		

—
—

		
		

—
—

		
		

—
—

		1,378$1,378

		65,359 		

4

		 1,895 		
		
— 		

0
—

		

798 		—

		 2,344 		
		 4,667 		$ 75,062
$

—
14
18

16
$
(37) 		
(21) $

16$(37) 		
(21) $———*1. The amounts only include the general reserve for possible loan losses
and the specific reserve for possible loan losses provided to “Loans andbills discounted.” Reserve for possible loan losses provided in “Derivative
instruments” is directly deducted from the carrying amounts due toimmateriality.
*2. Derivative instruments are not included in trading assets.
*3. Derivative instruments recorded in “Trading assets,” “Liabilities,” “Other
assets” and “Other liabilities” are aggregated and shown herein. Assets andliabilities attributable to the derivative contracts are totally offset and the net
liability position as a consequence of offsetting would be represented withbrackets.

(Note 1) Valuation methodology for financial instruments
Assets(1) Cash and due from banks
The carrying amounts of due from banks with no maturities
approximate fair values because they have no maturity.
For due from banks with maturities, the carrying amounts
approximate fair value because most of them have shortmaturities.
(2) Call loans and bills purchased
The carrying amounts of call loans and bills purchased
approximate fair values because most of these instruments
have short maturities.

(3) Financial receivables purchased
Financial receivables purchased which have been divided
by priority such as subordinated and preferred interest andwhich have multiple owners are measured at the quoted
price from a third party. The carrying amounts of otherfinancial receivables purchased approximate fair values
because most of these instruments have short maturities.
(4) Trading assets
The fair values of securities held for trading purposes aremeasured at observable market prices or quoted price from athird party.
(5) Money held in trust
The fair values of money held in trust, which have an
external rating, are determined using the discounted cash
flow method. The fair values of other money held in trust
approximate fair values because most consists of deposits
with no maturities.
(6) Securities
The fair values of marketable equity securities are measured
at market prices. The fair values of bonds are measured atmarket prices or quoted price from a third party.
The fair values of investment trusts are measured at the
published benchmark price or quoted price from a third
party.
The value reasonably estimated for such bonds wascalculated by discounting the estimated future cash flows at
the rate derived from yields of Japanese government bonds.
The yields of Japanese government bonds and volatility are
major variables in pricing.
(7) Loans and bills discounted
The fair values of loans and bills discounted are determinedby discounting expected cash flows at the rates that would
be applied for the new same contract for each type of loan
product, interest, period of time and internal ratings-basedclassification.
For loans to obligors “legally bankrupt,” “virtually bankrupt”
and “possibly bankrupt,” since the reserve is provided basedon amounts expected to be collected through the disposalof collateral or execution of guarantees, the net carrying
amount as of the consolidated balance sheet date is thereasonable estimate of the fair value of those loans.
Loans with no maturities approximate fair values because
most are without concern of collectability.

HIROSHIMA BANK INTEGRATED REPORT 201992

Liabilities(1) Deposits (2) Negotiable certificates of deposit
The fair values of demand deposits are recognized as thepayment at the date of the consolidated balance sheets. The
fair values of time deposits are determined by discounting
the contractual cash flows at the rates that would be applied
for the same, new contracts.
(3) Call money and bills sold, (4) Payables under
repurchase agreements, (5) Deposits received for bonds
lending/borrowing transactions
The carrying amounts of call money and bills sold, deposits
received for bonds lending/borrowing transactions
approximate fair values, because these instruments haveshort maturities.

(6) Borrowed money
The fair values of borrowed money are determined bydiscounting the contractual cash flows at the rate thatwould be applied for the same, new contracts. The
carrying amounts of borrowed money with short maturities
approximate fair values.
Derivative instruments
The fair values of derivative instruments are measured at themarket prices or determined using the discounted cash flow
method or option pricing models.

(Note 2) Financial instruments whose fair value cannot be reliably determined
Carrying amountMillions of yen

2018
2019
¥ 6,753¥ 7,062		 4,315 		 4,442¥11,068¥11,505

Equity securities without readily available market price*1, 2
Other
Total

Millions of
U.S. dollars

2019
$ 64
		40
$104

*1. Equity securities without readily available market prices are out of the scope of fair value disclosure because their fair value cannot be reliably determined.
*2. Impairment loss on equity securities without readily available market prices was ¥1 million and ¥0 million ($0 million) for the years ended March 31, 2018 and 2019,respectively.

(Note 3) Maturity analysis for financial assets with contractual maturities
As of March 31, 2018
Millions of yen

Due from banks
Call loans and bills purchased
Financial receivables purchased
Money held in trust
Securities
Held-to-maturity
Available-for-sale:
National government bonds
Local government bonds
Bonds
OthersLoans and bills discounted*
Total

93

HIROSHIMA BANK INTEGRATED REPORT 2019

Less than
1 year¥1,431,761
18,521
7,424
8,256
304,727—
304,727
245,000
18,47932,8838,365
679,833¥2,450,525

More thanMore thanMore thanMore than
1 year less than 3 years less than 5 years less than 7 years less than
3 years
5 years
7 years
10 years¥      —
¥      —
¥      —
¥      —
—
—
—
—
—
—
—
—
—
—
—
—
207,169
120,151
46,474
90,217————207,169
120,151
46,474
90,217
77,10045,00010,000—36,812
10,36018,35035,74527,947
17,648
7,293
5,641
65,30947,142
10,83048,830576,258
744,037
512,207689,815¥783,428¥864,188¥558,681¥780,032

More than
10 years¥       ———
—376,228—
376,228
94,300—118,770
163,158
1,924,751¥2,300,980

As of March 31, 2019
Millions of yen

Due from banks
Call loans and bills purchased
Financial receivables purchased
Money held in trust
Securities
Held-to-maturity
Available-for-sale:
National government bonds
Local government bonds
Bonds
OthersLoans and bills discounted*
Total

Less than
1 year¥1,351,129
19,953
7,813
10,312
134,895—
134,895
62,10032,912
12,59527,288
637,720¥2,161,824

More thanMore thanMore thanMore than
1 year less than 3 years less than 5 years less than 7 years less than
3 years
5 years
7 years
10 years¥      —
¥     —
¥      —
¥      —
—
—
—
—
—
—
—
—
—
—
—
—
127,174
98,081
61,102
121,423————
127,174
98,081
61,102
121,423
45,00025,000
5,000
—
9,490
9,360
30,62034,26528,063
20,977
6,195
7,044
44,62142,743
19,287
80,113592,946755,289
531,882
739,268¥720,121¥853,370¥592,985¥860,691

Less than
1 year$12,173
180
70
93
1,215
—
1,215
560
297
113
246
5,746
$19,478

More thanMore thanMore thanMore than
1 year less than 3 years less than 5 years less than 7 years less than
3 years
5 years
7 years
10 years
$ —
$ —
$ —
$ —
—
—
—
—
—
—
—
—
—
—
—
—
1,146
884
551
1,094
—
—
—
—
1,146
884
551
1,094
405
225
45
—
86
84
276
309
253
189
56
63
402
385
174
722
5,342
6,805
4,792
6,661
$6,488$7,689$5,343$7,755More than
10 years¥       ———
—411,947—
411,947
162,000—
124,623
125,323
1,996,967¥2,408,914

Millions of U.S. dollars

Due from banks
Call loans and bills purchased
Financial receivables purchased
Money held in trust
Securities
Held-to-maturity
Available-for-sale:
National government bonds
Local government bonds
Bonds
OthersLoans and bills discounted*
Total

More than
10 years
$
—
—
—
—
3,712
—
3,712
1,460
—
1,123
1,129
17,992$21,704* Of loans and bills discounted, the portion whose timing of collection is unforeseeable, such as loans to “legally bankrupt” borrowers, loans to “virtually bankrupt”
borrowers and loans to “possibly bankrupt” borrowers amounting to ¥52,433 million and ¥48,594 million ($438 million), is not included in the above table as of March 31,2018 and 2019, respectively. Loans that do not have contractual maturity, amounting to ¥682,459 million and ¥718,170 million ($6,471 million), are not included either.

(Note 4) Maturity analysis for interest-bearing liabilities as of March 31, 2018 and 2019
As of March 31, 2018
Millions of yen

Deposits*
Negotiable certificates of deposit
Call money and bills soldPayables under repurchase agreements
Payables under securities lendingtransactions
Borrowed money
Total

Less than
1 year¥6,959,597
269,176
50,000111,329

More thanMore thanMore thanMore than
1 year less than 3 years less than 5 years less than 7 years less thanMore than
3 years
5 years
7 years
10 years
10 years¥191,777¥ 17,201¥ 987¥ 1,362
¥
—
		—
953
—
—
—
		—
—
—
—
—
		—
—
—
—
—

262,859
75,857¥7,728,819—
309,046¥501,776—
181,779¥198,980—
1,551¥2,539—16,080¥17,442		—
		1,235¥ 1,235

HIROSHIMA BANK INTEGRATED REPORT 201994

As of March 31, 2019
Millions of yen

Deposits*
Negotiable certificates of deposit
Call money and bills soldPayables under repurchase agreements
Deposits received for bonds lending/borrowing transactions
Borrowed money
Total

Less than
1 year
¥7,045,287
207,712—88,521More thanMore thanMore thanMore than
1 year less than 3 years less than 5 years less than 7 years less than
3 years
5 years
7 years
10 years¥175,039¥ 31,011¥1,265¥ 1,224
2,615
		
—
—
—
—
		
—
—
—
		
—
—
—
—

More than
10 years¥————

260,108
11,912¥7,613,542—
260,527¥438,181—
7,501¥7,501		—
		216,156¥247,167—
1,771¥3,037—
18,462¥19,686

Millions of U.S. dollars

Deposits*
Negotiable certificates of deposit
Call money and bills soldPayables under repurchase agreements
Deposits received for bonds lending/borrowing transactions
Borrowed money
Total

Less than
1 year$63,477
1,871
—
798

More thanMore thanMore thanMore than
1 year less than 3 years less than 5 years less than 7 years less than
3 years
5 years
7 years
10 years
$ 279
$11
$ 11
$1,577
24
		—
—
		—
		—
—
		—
—
—
		—
—
		—

More than
10 years
$—
—
—
—

2,344

—

		—

—

		—

—

107
$68,597

2,347$3,948

		1,948$2,227

16
$27

		166
$177

68
$68

* Deposits on demand are included in “Less than 1 year.”

20 Stock optionsA) The Bank recorded stock option expenses in “General and administrative expenses” of ¥20 million and nil for the years
ended March 31, 2018 and 2019, respectivelyB) Outline of stock options, size and changes in the year ended March 31, 2019(1) Outline of stock options
Stock options 2010

Stock options 2011

Stock options 2012

Persons to whom stock options are granted
Type and number of shares*
Date of rights granted
Condition for vesting
Eligible service period
Period for exercise of stock options

Directors of the Bank: 12
Common stock: 191,600
July 28, 2010
Not applicableNot applicable
From July 29, 2010
to July 28, 2040

Directors of the Bank: 11
Common stock: 179,150
July 27, 2011
Not applicableNot applicable
From July 28, 2011
to July 27, 2041

Directors of the Bank: 10
Common stock: 225,050
July 27, 2012
Not applicableNot applicable
From July 28, 2012
to July 27, 2042

Stock options 2013

Stock options 2014

Stock options 2015

Persons to whom stock options are granted
Type and number of shares*
Date of rights granted
Condition for vesting
Eligible service period
Period for exercise of stock options

Directors of the Bank: 10
Common stock: 133,700
July 25, 2013
Not applicableNot applicable
From July 26, 2013
to July 25, 2043

Directors of the Bank: 10
Common stock: 154,700
July 30, 2014
Not applicableNot applicable
From July 31, 2014
to July 30, 2044

Directors of the Bank: 8
Common stock: 82,500
July 31, 2015
Not applicableNot applicable
From August 1, 2015
to July 31, 2045

Persons to whom stock options are granted
Type and number of shares*
Date of rights granted
Condition for vesting
Eligible service period
Period for exercise of stock options

Directors of the Bank: 7
Common stock: 125,350
July 29, 2016
Not applicableNot applicable
From July 30, 2016
to July 29, 2046

Stock options 201695

HIROSHIMA BANK INTEGRATED REPORT 2019

(2) Size and changes of stock options
a. Number of stock options for the year ended March 31, 2019
Stock option
2010

Non-vested:
Outstanding on April 1, 2018
GrantedForfeited
VestedOutstanding on March 31, 2019
Vested:Outstanding on April 1, 2018
VestedExercised
Forfeited
Outstanding on March 31, 2019

Stock option
2011

Stock option
2013

Stock option
2014

Stock option
2015

Stock option
2016

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

30,300—14,500—15,80032,100—15,350—16,75057,150—19,050—38,10046,350—11,350—35,00065,500—25,850—39,65054,750—26,600—28,150108,300—
54,150—54,150b. Price information for the year ended March 31, 2019
Yen

U.S. dollars

Stock option 2010

Exercise price
Average exercise price
Fair value at the granted date

Stock option
2012

¥
1
		 729		 652Yen$ 0.00		6.57
		5.87(3) Method of estimating number of stock options
vestedOnly the actual number of forfeited stock options is reflected
because it is difficult to reasonably estimate the number ofstock options that will be forfeited in the future.

U.S. dollars

Stock option 2011

Exercise price
Average exercise price
Fair value at the granted date¥1
		 729		 644Yen$ 0.00		6.57
		5.80U.S. dollars

Stock option 2012

Exercise price
Average exercise price
Fair value at the granted date¥1
		 729		 446Yen$ 0.00		6.57
		4.02
U.S. dollars

Stock option 2013

Exercise price
Average exercise price
Fair value at the granted date¥1
		 729
		 820Yen$ 0.00		6.57
		7.39U.S. dollars

Stock option 2014

Exercise price
Average exercise price
Fair value at the granted date¥1
		 729
		 914Yen$ 0.00		6.57
		8.23
U.S. dollars

Stock option 2015

Exercise price
Average exercise price
Fair value at the granted date¥1
		 729
		1,346
Yen$ 0.00		6.57
		12.13
U.S. dollars

Stock option 2016

Exercise price
Average exercise price
Fair value at the granted date¥1
		 729		 654$ 0.00		6.57
		5.89HIROSHIMA BANK INTEGRATED REPORT 201996

21 Other comprehensive income (loss)
Reclassification adjustments and the related tax effects concerning other comprehensive income (loss) for the years ended
March 31, 2018 and 2019 were as follows:
Millions of
U.S. dollars

Millions of yen

2018
Net unrealized holding gains (losses) on securities available for sale:
The amount arising during the period
Reclassification adjustments
Before adjustments for tax effect
The amount of tax effectNet unrealized holding gains (losses) on securities available for saleNet deferred gains (losses) on hedging instruments, net of tax:
The amount arising during the period
Reclassification adjustments
Before adjustments for tax effect
The amount of tax effect
Net deferred gains (losses) on hedging instruments, net of tax
Remeasurements of defined benefit plans:
The amount arising during the period
Reclassification adjustments
Before adjustments for tax effect
The amount of tax effectRemeasurements of defined benefit plans
Share of other comprehensive income (loss) of affiliated companies accounted
for by equity method:
The amount arising during the period
Reclassification adjustments
Share of other comprehensive income (loss) of affiliated companies accounted
for by equity method
Total other comprehensive income (loss)

22 Business combination
Merger between consolidated subsidiaries
The Bank resolved the merger between Hirogin Mortgage
Service Co., Ltd. and Hirogin Business Support Co., Ltd. at theboard of directors meeting held on April 27, 2018, and thesecompanies merged on July 1, 2018.
A) Outline of transaction(1) Name and business of combined companies
Name of acquiring company: Hirogin Mortgage Service Co.,Ltd.
Business of acquiring company: Investigation and evaluationof real estate collateral
Name of acquired company: Hirogin Business Support Co.,Ltd.
Business of acquired company: Consolidated accounting,printing and bookbinding business(2) Date of business combination
July 1, 2018

97

HIROSHIMA BANK INTEGRATED REPORT 2019

2019

2019

¥ 16,860		(3,959)
		12,900
		(3,999)
		8,900¥(12,353)
		(6,073)
		(18,426)
		5,707		(12,719)$(111)
		(55)
		(166)
		51
		(115)

		(1,708)
		1,658
		 (50)		 15		 (34)		(4,623)
		2,493		(2,130)		660
		(1,469)

		(42)
		22
		(19)
		6
		(13)

		4,702		(347)
		4,354		(1,349)
		3,004

		6,417
		(467)
		5,950		(1,844)
		4,105

		58
		(4)
		54
		(17)
		37

		 6
		 —

		 (3)
		 —

		(0)
		—

		 6
¥ 11,877

		 (3)¥(10,086)

		(0)$ (91)(3) Legal form of business combination
Absorption-type merger in which Hirogin Mortgage Service
Co., Ltd. is the surviving company and Hirogin BusinessSupport Co., Ltd. is the absorbed company(4) Name of the company after business combination
Hirogin Business Service Co., Ltd.
(5) Others
This merger aims at efficiency of operations and further
strengthening of the group management.
B) Outline of accounting treatment
The transaction is treated as a common control transaction
pursuant to the Accounting Standard for Business
Combinations (ASBJ Statement No.21, September 13,2013), as well as the Guidance on Accounting Standard forBusiness Combinations and Accounting Standard for Business
Divestitures (ASBJ Guidance No.10, September 13, 2013).

23 Significant subsequent events
Absorption-type merger of a consolidated subsidiary
The Bank resolved the absorption-type merger of Hirogin
Wealth Management Co., Ltd., which is a consolidated
subsidiary of the Bank at the board of directors’ meeting held
on November 7, 2018, and these companies merged on April
1, 2019.
A) Outline of transaction(1) Name of business of combined companies
Name of acquiring company: The Hiroshima Bank, Ltd.
Business of acquiring company: Banking business
Name of acquired company: Hirogin Wealth Management
Co., Ltd.
Business of acquired company: Insurance agency business(4) Name of the company after business combination
The Hiroshima Bank, Ltd.
(5) Others
This merger aims at further strengthening of the groupmanagement through streamlining operations andenhancement of services.
B) Outline of accounting treatment
The transaction is treated as a common control transaction
pursuant to the Accounting Standard for Business
Combinations (ASBJ Statement No.21, January 16, 2019), as
well as the Guidance on Accounting Standard for Business
Combinations and Accounting Standard for Business
Divestitures (ASBJ Guidance No.10, January 16, 2019).

(2) Date of business combination
April 1, 2019(3) Legal form of business combination
Absorption-type merger in which the Bank is the surviving
company and Hirogin Wealth Management Co., Ltd. is theabsorbed company

HIROSHIMA BANK INTEGRATED REPORT 201998

Non-Consolidated Balance Sheets
THE HIROSHIMA BANK, LTD.
As of March 31, 2018 and 2019
Millions of
U.S. dollars

Millions of yen

99

2018

2019

ASSETSCash and due from banks
Call loans and bills purchased
Financial receivables purchased
Trading assets
Money held in trust
Securities
Loans and bills discounted
Foreign exchanges
Other assets
Tangible fixed assets
Intangible fixed assets
Prepaid pension cost
Customers’ liabilities for acceptances and guarantees
Reserve for possible loan losses
Total assets¥ 1,509,905
		 18,521
		 5,904
		 5,842
		
156
		1,393,440
		5,852,316
		 7,741
		 82,094
		 91,473
		 9,420
		 42,989
		 36,506
		 (33,474)¥ 9,022,839¥ 1,430,685
		 19,953
		 6,253
		 5,830
		162
		1,186,499
		6,014,683
		 7,536
		 83,600
		 94,890
		 9,431
		 47,538
		 41,996
		 (31,101)¥ 8,917,961$12,890
		180
		 56
		 53
		 1
		10,690
		54,191
		 68
		753
		855
		 85
		428
		378
		(280)$80,349

LIABILITIES AND NET ASSETS
Liabilities:
Deposits
Call money and bills soldPayables under repurchase agreements
Deposits received for bonds lending/borrowing transactions
Trading liabilities
Borrowed money
Foreign exchanges
Due to trust account
Other liabilities
Reserve for reimbursement of deposits
Reserve for point loyalty programs
Reserve for stock payments
Reserve for loss related to Head Office rebuilding
Deferred tax liabilities
Deferred tax liabilities for land revaluation reserve
Acceptances and guarantees
Total liabilities¥ 7,459,316
		 50,000
		 111,329
		 262,859
		 4,023
		 581,122
		
224
		
42
		 28,892
		 4,447
		
89
		
176
		 1,987
		 7,274
		 13,613
		 36,506¥ 8,561,905¥ 7,479,040
		—		 88,521
		 260,108
		 3,856
		 514,289
		
339
		
23
		 41,563
		 3,558
		
79
		
341
		
846
		 3,501
		 13,610
		 41,996¥ 8,451,677$67,385
		 —
		798
		
2,344
		 35
		
4,634
		 3
		 0
		374
		 32
		 1
		 3
		 8
		 32
		123
		378
$76,148

Net Assets:
Common stock:
Authorized – 2,000,000,000 shares
Issued – 312,633,171 shares
Capital surplus
Retained earnings
Common stock in treasury
Total stockholders’ equity
Net unrealized holding gains on securities available for saleNet deferred losses on hedging instruments, net of tax
Land revaluation reserve, net of tax
Total valuation and translation adjustments
Stock acquisition rights
Total net assets
Total liabilities and net assets¥
54,573
		 30,745
		 300,948
		 (1,246)
		 385,022
		 48,387
		(547)
		 27,763
		 75,604		
308
		 460,934¥ 9,022,839¥
54,573
		 30,739
		 320,376
		 (1,026)
		 404,663
		 35,668
		 (2,016)
		 27,792
		 61,444
		176
		 466,283¥ 8,917,961

$ 492
		277
		2,887		 (9)
		3,646		321		(18)
		250
		554
		 2
		4,201$80,349

HIROSHIMA BANK INTEGRATED REPORT 20192019

Non-Consolidated Statements of Income
THE HIROSHIMA BANK, LTD.
Years ended March 31, 2018 and 2019
Millions of
U.S. dollars

Millions of yen

2019

2018
Income:Interest income:Interest on loans and discounts
Interest and dividends on securities
Other interest income
Fees and commissions
Other operating income
Other income
Total income
Expenses:
Interest expenses:
Interest on deposits
Interest on borrowings and rediscounts
Other interest expenses
Fees and commissions
Other operating expenses
General and administrative expenses
Other expenses
Total expenses
Income before income taxes and others
Income taxes:
Provision for income taxes and others
Deferred income taxes
Net income¥ 61,410
		15,056
		 1,300
		25,183
		 4,515
		14,971
122,438¥ 62,182
		12,682
		 1,779
		24,430
		 7,537
		 6,321
114,932

$ 560
		114
		16
		220
		68
		57
		 1,036

		 2,867
		 3,724
		 2,886
		 9,889
		 4,691
		55,740
		 5,505
85,304
		37,134

		 2,219
		 3,425
		 2,842
		 9,983
		 3,417
		52,625
		 4,704
79,218
		35,713

		20
		31
		26
		90
		31
		474
		42
		 714
		322

		 9,700
		 399¥ 27,034

		 7,735
		 2,590¥ 25,388

		70
		23
$ 229

Yen

Amounts per share of common stock:
Net assets
Net income
Diluted net income
Cash dividends applicable to the year2019

¥1,480.24
		 86.74
		 86.63
		 13.5¥1,496.60
		 81.53
		 81.46
		 20.0

U.S. dollars$13.48
		0.73
		0.73
		0.18HIROSHIMA BANK INTEGRATED REPORT 2019100

Organization(As of April 1, 2019)

Secretariat Department
Management Planning
Division
Personnel &General Affairs Division
Risk Management Division
Banking Operation
Management Division
Information Technology Planning& Administration Division
Audit Division
Banking Business Planning
Division
Audit &
Supervisory
Board members(Audit & Supervisory
Board)

Audit &
Supervisory
Board Office

Eastern Area Headquarters
Chief Division
Officers

Didital Strategy DivisionCorporate Planning Division

GeneralMeeting of
Shareholders

Credit Supervising Division
Board ofDirectors

Management
Board

Shipping Finance Division
Investment Banking DivisionInternational Business Division

Public Services Business Division
Asset Management Division
Retail Loan Division
Treasury & Investment DivisionTokyo Liaison Office

Chief Area
Officers

101

HIROSHIMA BANK INTEGRATED REPORT 2019

Branch areas / BranchesMajor Shareholders

Stock Information(As of March 31, 2019)(As of March 31, 2019)
Shareholders

Number of shares(Thousand)

Percentage ofshares issued(%)

18,352
12,125
9,504
7,500
7,463
6,042
6,038
6,004
5,698
5,500

5.87
3.88
3.04
2.40
2.38
1.93
1.93
1.92
1.82
1.76

Japan Trustee Services Bank, Ltd. (Trust Account)
The Master Trust Bank of Japan, Ltd. (Trust Account)
Meiji Yasuda Life Insurance Company
Sompo Japan Nipponkoa Insurance Inc.
CP Chemical Incorporated
Nippon Life Insurance Company
Sumitomo Life Insurance Company
The Chugoku Electric Power Co., Inc.
Japan Trustee Services Bank, Ltd. (Trust Account 5)
The Bank of Fukuoka, Ltd.

Number of Shares Authorized

1,000,000 thousand

Number of Shares Issued

312,633 thousand

Number of Shareholders

18,701

Shareholder Incentive Plan
We have established shareholder incentives for shareholders to improve their satisfaction.
Shareholders eligible for the Shareholder Incentive Plan
Eligible shareholders’ reference
dateMarch 31 every year (hereafter, “the reference date”)

Eligible shareholders

Shareholders who have more than 100 shares listed on the Bank’s register of shareholders on the reference date

Operational period

From the beginning of July of the year containing the reference date to the end of June of the following year

Content of the Shareholder Incentive Plan

Preferential tickets will be sent to the eligible shareholders.
One of the following four courses can be chosen for each preferential ticket.
Course name(1) Time deposit course

Course overview
For time deposits made for one year, the course applies an additional interest rate up to the first date of
maturity.

(2) Investment trust course(3) Inheritance-related service
course

The courses provide cashback of 20% of the accumulated fee (excluding tax, ¥20,000 maximum) on eachtransaction.

(4) Hirogin Securities-related
trading course* Information about the Shareholder Incentive Plan is provided in branches and on the Bank’s website. For details, please ask at the counter.
* Please study the explanatory notes for each course before choosing it.
* Please be aware that the Shareholder Incentive Plan may include revisions to the incentive plan itself, including terminating the use of the plan due to changes in the businessenvironment and other factors, or have its contents changed.

We present tickets to the Hiroshima Museum of Art, a nonprofit organization, to our shareholders who make use of the Hirogin time
deposits we have established as shareholder incentives.
Foundation Hiroshima Museum of Art

Overview
The Hiroshima Museum of Art was established in November
1978 by Hiroshima Bank in commemoration of the 100th
anniversary of its foundation, as we move through history
together with the region. We hope that the museum can offer
spiritual repose to the people of Hiroshima, the city reduced toruins by the atomic bomb on August 6, 1945. To this end, we
have created a sanctuary of fragrant beauty around the themesof love and healing. We pray that it will also bring repose to
the victims of the bomb that has led to today’s Hiroshima, andpeace to Hiroshima City.

The collection
The art gallery exhibits some 80 works throughout the year,
comprising European modern art works centered on the French
Impressionists from the Romantics in the mid-19th century to
the Ecole de Paris school, including paintings by Degas, Monet,
Renoir, Van Gogh and Picasso, and Japanese modern art works
since the Meiji Period, including traditional-style nihonga works.

Address:

3-2 Motomachi, Naka-ku,
Hiroshima City (in Central Park) 730-0011, Japan
Opening Hours: 9:00 a.m.–5:00 p.m. (Last entry 4:30 p.m.)* Open until 7:00 p.m. on fridays during special exhibitions
Closed:Mondays except during special exhibitions (or the following day if a public holiday
falls on Monday) and December 29–January 2
Note: The museum is sometimes closed temporarily to change exhibitions.

HIROSHIMA BANK INTEGRATED REPORT 2019102

THE HIROSHIMA BANK, LTD.

Hirogin Report 2019 Integrated Report

Securities code

8 3 7 9Issued: July 2019
Edited: Public Relations and Regional Contribution Office,Management Planning Division, THE HIROSHIMA BANK, LTD.
1-1-7, Nishikaniya, Minami-ku, Hiroshima City, Hiroshima732-0804, Japan (temporary Head Office)TEL +81-82-247-5151
URL: https://www.hirogin.co.jp/