HIROGIN REPORT 2020
INTEGRATED REPORT

Management Policy (Management Vision + Code of Conduct)
Management Vision | The Hiroshima Bank Group’s “Aspiration”

Building a reliable Hiroshima Bank Group united
through trusting 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 sound management
based on the following code of conduct:

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

Notes on the Publication of the“HIROGIN REPORT 2020 (INTEGRATED REPORT)”The Hiroshima Bank, Ltd. (the “Bank”) has prepared this HIROGIN REPORT 2020 (INTEGRATED REPORT) to facilitate understanding among stakeholders, particularly investors, of the Bank’s initiatives aimed at sustainable 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, and divisions of the Bank worked
closely together. The Report details the Bank’s business model and explains the mechanisms tosustainably create value. We will continue to take advantage of the Report as a tool for dialogue
with all stakeholders with the aim of improving corporate value.
Furthermore, please refer to HIROGIN REPORT 2020 (DISCLOSURE REPORT) for detailed financial data, etc.
Toshio Heya, President
1

HIROSHIMA BANK INTEGRATED REPORT 2020

Contents
About Hiroshima BankManagement Policy / Management Vision / Code of Conduct
History
Transition to a Holding Company Structure
Message from the President
Value Creation Process
Message from Financial Officer
Summary of Business Performance (FY2019)
Nonfinancial Highlights and Characteristics of Hiroshima Bank’s
Business Area
Mid-Term Management Plan 2017
Strategies for Individual Businesses
Banking Business
Asset Management BusinessInitiatives Aimed at Digital Transformation
Initiatives for Sustainability
Our Approach to Corporate Social Responsibility (CSR) and SDGs
Initiatives
Response to Climate Change and Global Warming

1
3
5
7
13
15
17
19
21
23
27
31

35
37

Initiatives to Revitalize Local Communities and Economy
Human Resource Strategies
Provision of Value to the Community
Corporate GovernanceRisk GovernanceInterview with an External Director
Board of Directors, Executive Officers and Audit & Supervisory
Board Members
Power to Support Sustainability

41
43
53
57
61
62

Communication with Shareholders, Investors and Customers
Initiatives Aimed at Practicing Customer-Oriented Business Operations
Customer Protection Management
Compliance
Risk Management
Internal Audits
Corporate Information
Branch Network
Overview and Disclosure

65
67
70
71
73
77

63

78
79

HIROSHIMA BANK INTEGRATED REPORT 20202

About Hiroshima Bank

History
On August 8, 1945, just two days after the atomic bomb was dropped,
the Bank restarted its operations by borrowing a floor space fromthe Bank of Japan’s business room along with desks, chairs, and otherfurnishings. Even though most of its customers did not have theirpersonal seals or passbooks, the Bank relied on employees’ memories
and took crisis measures in a flexible manner such as responding torequests for refund for convenience purposes. Despite these measures,the Bank managed to maintain its credibility without any particular
dispute at a later date.
After the period of reconstruction from the devastation of atomic
bombing, we steadily expanded operations as the local economy grew.
In November 1997, however, after the economic bubble collapsed inJapan, we faced the second major crisis involving a sharp drop in shareprices in reputational damage and a surge in withdrawals.
But we were able to recover the market’s confidence by actively
disclosing our earnings and asset details, having many employees visit
customers to explain the situation, and carrying out bold structuralreforms.
Although we experienced two grave crises, we were able toovercome the difficulties and have continued to grow to this day,thanks to warm support from our customers and our employees’
sincere and honest effort. The Bank’s DNA of “customer-oriented
business operations” remains unchanged to this day.

1878
1988

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

(April)Enacted the CI andestablished the current
corporate badge(July)

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

Completion of new Head
Office building

New Geibi Bank was establishedthrough a five-way merger of Geibi Bank,
Kure Bank, Binan Bank, Miyoshi Bank, andHiroshima Godo Chochiku Bank.

1974 (November)
Online system covering all
branches completed(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.)

1980
1978 (November)

1970
Head Office of the Bank immediately
after the atomic bomb (photographtaken on August 8)

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

1960

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

3

100th anniversaryof the founding
Opened Hiroshima Museum of Art
and established Hirogin no Mori

Hiroshima Museum of Art

1940

1960

1970

1980

1990

1945 A tomic bomb
dropped1964 Tokyo Olympics

1973 The first oil shock1985 The Plaza Accord

1979 The second oil shock

1989 C onsumption tax
was introduced

 conomic bubble
1991 E
collapsed

HIROSHIMA BANK INTEGRATED REPORT 2020 he Great Hanshin-Awaji
1995 T
Earthquake

History

2019(April)Digital Strategy Division established
Inheritance Consultation Plaza opened(September)2016 (May)1990 (February)

Announced a plan to shift to a holding
company structure (scheduled in
October 2020)
Opened Hanoi Representative OfficeCompleted the construction of <Hirogin> Chuo Building

The “Genesis
Building,” a newcomputing center,completed2013 (July)
Opened Singapore Representative Office2009 (April)
Opened Bangkok Representative Office

2003 (January)
Joint system operation with the Bankof Fukuoka introduced

2010

2000
2018 (from January)

1990

Moved Head Office totemporary branch

2017(March)Formulated Mid-Term Management
Plan 2017
Adopted a slogan: “Aiming to be
a comprehensive financial services
group that continues to grow withlocal customers— A True First Call
Bank Group —”1996 (February)
Opened Shanghai
Representative Office

1997 (November)(June)

Share prices plunged in
reputational damage

Made Hirogin Securities a wholly
owned subsidiary

2020(April)1998

Hirogin Capital Partners established(October)(February)
“Promise of the 120th year” forstructural reforms announced
Consolidated overseas branches
and urban branches as part of aplan to return to a “Bank of theRegion”(October)

Launched “Reliance 21”, a new
Long-Term Management Plan

Hirogin Holdings
established

2000

2010

2005 D eposit insurance fully deregulated

2011 T he Great East Japan Earthquake
occurred2016 B ank of Japan introduced
negative interest rate policy he second Abe cabinet formed;
2012 T“Abenomics” started

 evastating floods occurred2018 Din July2013 B ank of Japan introduced “quantitative and qualitative monetary easing”

 ew Imperial era name,2019 N
Reiwa, announced

2006 B ank of Japan ended zerointerest rate policy
 ubprime mortgage crisis oc2007 S
curred in the U.S.
2008 Global financial crisis occurred2020
2020 N ew coronavirus
pandemic

HIROSHIMA BANK INTEGRATED REPORT 20204

About Hiroshima BankTransition to a Holding Company Structure[Maximizing group synergy under a holding company structure]
Starting on October 1, we will take steps to strengthen our unified group operation and collaboration within
the group under a new group business structure and maximize the group synergy by taking advantage ofcharacteristics and strengths of group companies.
July July
Hirogin Hirogin
BusinessBusiness
Service absorbed
Service absorbed
and merged
and mergedwith Hiroginwith Hirogin
BusinessBusinessSupportSupport

20192019

AugustAugust
EstablishedEstablishedHirogin Hirogin
REIT Management
REIT Management

Efforts for unified group operation in the past

20182018
April April
Hiroshima
Hiroshima
Bank absorbed
Bank absorbed
andandmerged mergedwith Hiroginwith Hirogin
Wealth WealthManagement
Management

JanuaryJanuary
Hirogin Hirogin
Guarantee
Guaranteeand Hiroginand Hirogin
Card Card
Service became
Service became
wholly owned
wholly owned
subsidiaries
subsidiaries

HiroshimaHiroshima
Bank
Bank
Hirogin Business
Hirogin Service
Business Service
Current structure

Current structure

Process of transition to a holding-company structure

June June
Hirogin Hirogin
Securities
Securities
20152015
becamebecame
a whollya wholly
owned subsidiaryowned subsidiary

Process of transition to a holding-company structure

Shareholders
Shareholders

Hirogin Securities
Hirogin Securities
Shimanami
Shimanami
Servicer Servicer

Hirogin
REIT Management
Hirogin REITManagement
HiroginPartners
Capital Partners
Hirogin Capital
Hirogin
Card Service
Hirogin Card
Service
Hirogin Guarantee
Hirogin Guarantee
Hirogin Lease*
Hirogin Lease*Non-consolidated
Non-consolidated
subsidiaries (threesubsidiaries
companies)(three companies)* An affiliated company* An affiliatedaccounted
company
for byaccounted
the equity formethodby the equity method

Structure after the establishment of a holding company

2 0172017

Structure after the establishment of a holding company

April April
Hirogin Hirogin
Lease absorbed
Lease absorbed
andandmerge with
merge
Hiroginwith Hirogin
Auto Lease
Auto Lease

Shareholders
Shareholders
Hirogin Holdings
Hirogin Holdings
Bank
HiroshimaHiroshima
Bank
Hirogin Service
Business Service
Hirogin Business
Hirogin
REIT Management
Hirogin REITManagement
Hirogin
Card Service
Hirogin Card
Service
Hirogin Guarantee
Hirogin Guarantee
Non-consolidated
Non-consolidated
subsidiaries (threesubsidiaries
companies)(three companies)
Hirogin Securities
Hirogin Securities
Shimanami
Shimanami
Servicer Servicer
HiroginPartners
Capital Partners
Hirogin Capital
Hirogin Lease*
Hirogin Lease** An affiliated *company
An affiliatedaccounted
company
for byaccounted
the equity
formethodby the equity method

Business model of the holding company
We are deepening and expanding the scope of our business operations and our customer base in the markets of our four local prefectures of
Okayama, Yamaguchi, Ehime, and, in particular, Hiroshima, which has enormous potential in terms of the size of economy and growth opportunities. At the same time, we aim to realize our management policy and achieve sustainable growth of the group by thoroughly working to resolve
every issue that faces the local community and customers and actively committing ourselves to development of the region.

Management Policy (Management Vision)
Closely offering thorough andtrusted support to customers

As a comprehensive
regional services group

Relations with regional

Provisioncommunity and customers
Deepening/expanding
customer baseof solutions

Deepening/expanding
operations
Further expansion ofoperations throughtransition to a holding
company structure

Differentiation from rivals (source of competitive edge)
5

HIROSHIMA BANK INTEGRATED REPORT 2020

Contributing to the creation of a prosperous
future for the regional community

Development of region/
customer growth
Contribution toachievement of SDGs

Further risk-taking
in region

Evaluation by regional
community and customers

Sustainable growthof the Group
Higher profitability
Stable Management BaseestablishedIncreased corporate value(Enhanced shareholder returns)

Evaluation by market (investors
and shareholders)Holding-Company Structure

April April
Hirogin Hirogin
Capital Partners
established
Capital Partners
establishedHirogin Holdings,Inc.
What we mean by the trade nameBy adding “Hirogin,” a brand that our group companies have built up over
the years, to the trade name of the holding company, we made it clearthat the new company is the holding company of the group and hopedthat the company would strengthen the sense of unity among groupmembers and boost our popularity in the market.

2020
2020

Management Policy (Management Vision+ Code of Conduct)
Management Vision
October 2020

Transition to aholding-company
structure

Contribute to the creation of a prosperous future for the regional community as a trusted Regional
Comprehensive Services Group by closely offering thorough support to customers.

Code of Conduct
Hirogin Holdings will endeavor to create the shared values with the regional community
and realize a sustainable society, based on five items of the Code of Conduct.

2

Work in step with regional communities to actively contribute to their development
Think and act from the customers’ points of view to contributeto their prosperous life and business development

3

Continuously enhance the Bank’s corporate value

4

Create a cheerful, rewarding corporate group where everyone works healthfully

5

Exercise a high level of compliance1
We aim to become a Comprehensive
Regional Services Group that makes
thorough effort to solve every issue
including in nonfinancial areas, torespond to more diversified, complex andsophisticated customer needs.

Active commitment to development of the region

Outline of future profit expansion
In addition to our efforts in existing financial areas that focus on
deposit and lending businesses, we are strengthening inheritanceservices, business succession supports, the equity business, and other services that are expected to enjoy further growing demand. We
aim to take advantage of every available function within the group
and alliances with companies, including those in other industries, toprovide solutions in financial and non-financial areas.

Outline of revenue makeup of overall group
Nonbanking

Group company revenue, etc.
Revenue related to consulting service, etc.
for corporate and retail customers

Bank

Profit structure reforms with aim to establish stable management base
Deepening/expanding customer base and operations

Relations
Corporate
customers

Feasibility studies

Retailcustomers

Household asset management(including asset formation/
management)

Growth driver for profit expansion
Active use of Group company functions
 ctive use of alliance with otherA
companies/business formats

Identifying
needs

Solutions
Put all functions and alliance within the Group to effective use
to provide solutions, including in nonfinancial areas

 upport of inheritance and businessSsuccession measuresEquity business rban redevelopment support andUtourism promotion

Revenue related to conventional
financial services(Interest on loans and discounts, etc.)

Provide every available solution to solve issues forcustomers

Contribution to regional development
and customer growth

Sustainable growth of Group

Realization of Management Policy

HIROSHIMA BANK INTEGRATED REPORT 20206

About Hiroshima Bank

Message from the President
We will continue to contribute tocreating a prosperous future for theregional community as a trusted
Regional Comprehensive Services
Group by closely offering thoroughsupport to customers.
Toshio Heya
President

7

Hiroshima Bank Group continues togrow with customers

Transition to a holding company
structure, aiming to evolve further

The 66th National Bank, the predecessor of Hiroshima
Bank or “Hirogin,” was established in Onomichi in
1878. Hirogin eventually established its Head Officein Hiroshima and grew with customers in local
prefectures of Hiroshima, Okayama, Yamaguchi andEhime, the area of our operation.
In recent years, we have gone beyond theboundaries of banking business and operated under
the slogan of a true first-call bank group or a groupthat can be approached by customers for consultation
on any issue troubling them through our assistance forsolving respective issues faced by the local community,
companies and individuals as a comprehensive
financial service group.

The business environment surrounding financial
institutions, especially regional banks, is undergoinga dramatic change as customers’ needs become
increasingly diversified, complex and sophisticateddriven by declining population, intensifying
competition fueled by entry by non-financial
companies, and change in economic and social climate
and lifestyles and values, and as digital transformation
rapidly progresses. The traditional framework ofbanking service has been becoming inadequate foraddressing these changes flexibly and appropriately.
We believe that what the Bank should do underthese circumstances is to find out specific needs andissues for the local community and customers, aiming

HIROSHIMA BANK INTEGRATED REPORT 2020

Message from the President

to deepen relations (deepening/expanding customerbase), and thoroughly work to address needs andsolve issues and provide reliable solutions (deepening/
expanding the scope of our business operations). We
thus decided to take the Bank forward and adopt a
new group business structure—a holding company
structure—in order to realize our wish to contribute tocreating an abundant future for the local community
as a Comprehensive Local Service Group sympathetic
to customers and trusted by them.
On the strength of the Hirogin brand that we havegrown over the 140 years of our history, we will strive
to increase corporate value in a sustainable mannerby continuing to grow with local customers as acomprehensive regional service group, an organizationthat can maximize group synergy and respond to every
needs of customers in both financial and nonfinancial
areas.

Changing world and change inrequired financial functions— from lending to investment —Amid a dramatically changing world, we think it isdifficult for a regional bank operating only in Japan
to continue to contribute to the development of
its region only by financial services, especially thebanking service centered on lending. If the Japanese
economy were still on a steady growth track, we
believe “lending” would have a significant role toplay in fund mediation, or the process of accepting
surplus funds in deposits and lend them to businesses
in need of funds. However, we cannot expect thepace of economic growth seen during the period ofhigh economic growth from 1965 to 1974. Under thecircumstances, we think the role played by lending islikely to become limited and smaller. In this situation,

Group structure after establishment of the holding company (plan)

Hiroshima Bank

Shimanami Servicer
Creditmanagement

Hirogin
Capital Partners
Equityinvestment

Hirogin
Card Service

Comprehensive Regional
Services Group
that can respond to every
need of customers

Payment

Hirogin Guarantee

Bank

Creditguarantee

Efficiency
improvement

Regional
development

Securities

Hirogin
Securities

Lease

Hirogin Lease

Hirogin REIT Management

Hirogin Business Service

what is playing an increasingly important role, in placeof lending, is equity, that is, the function of investing.
In Hiroshima and our three other local prefectures,
there are numerous manufacturers. We believe wemust maintain this precious industrial structure andhelp the manufacturing industry continue to develop.
We also think that helping new industries develop
and expand the scope of industries is a good way to
improve the growth potential of this region.
To make that happen, it is especially importantto support startups to be launched going forward
and venture businesses with growth potential. For
such companies, investment can meet the needs ofcustomer companies more precisely than loans, in
our view. From that viewpoint, we think the role ofinvestment plays in our region is going to become
extremely important.

To respond to issues and needs
that are expected to grow morediversified in the future
If we do not broaden our perspective or address
customer needs in areas other than funding and issues
that should be overcome, customers will not recognize
us as a “first-call bank group.”
As their needs diversify, customers would not besatisfied if we continue to make the same kind of
proposals that we made in the past and we would
not be able to get to the essence of true solutions forcustomers. As there are companies in many different
stages, their issues and needs differ, naturally. This
holds true for individual customers. For example, somecompanies expand their fields of activity globally,
while others diligently seek to remain in existence,
maintaining a viable size, and other companies neverstop trying to expand into new areas.
It will be, therefore, extremely important for us
to build solid relations with customers so that both
corporate and individual customers can open up andfrankly talk about what they have in mind.
Furthermore, we need to have necessary expertiseand be ready to offer high-quality, broad and deep
services when proposing solutions to address a wideranging issues and needs of customers.
I am convinced that building solid relations andproviding high value-added solutions is what we needto increase the Hiroshima Bank Group’s value. We aim
to step up efforts to achieve these goals under six key
themes. Namely: (i) contribution to sustainable
development of the regional economy, (ii)creation of new industries/businesses andgrowth of customer companies, (iii) enhancing
business targeting the elderly, (iv) supporting

HIROSHIMA BANK INTEGRATED REPORT 20208

About Hiroshima Bank

family businesses and business owners, (v)fundamental reform of channels addressing
customer needs, and (vi) stepping up digitaltransformation efforts.

Deepening and expanding relations
and solutions(i) Contribution to sustainable development of
the regional economy(ii) Creation of new industries/businesses andgrowth of customer companies
We think the biggest risk is declining population,
which seems to be true for any region in the country.
It may be difficult to stop a natural drop in
population, but it is very important to have theviewpoint of seeking to increase it socially. In
other words, a regional economy needs to develop
sustainably and for that, the viewpoint of creating
new businesses in areas such as tourism, in addition tocreate new industries, is essential.
To that end, there are two roles a bank can play.
One is to support business startup or growth efforts
by providing solutions including in nonfinancial areas
and taking advantage of every available function,
network, and alliance with other companies and inother business formats, in addition to appropriate
and active fund provision as a bank. The other is tocreate a platform on which government agencies andspecialized entities work closely together and close
coordination between efforts by industry, the public

9

HIROSHIMA BANK INTEGRATED REPORT 2020sector, the academia and the financial sector will
create innovation on a sustained basis. We believethese two roles are major missions the Hiroshima Bank
Group should undertake in our region.
As part of our efforts to accomplish these missions,
we are working to build an innovation ecosystem(structure in which a whole industry provides
value) that can continuously create new industries
and business operators. Hiroshima Prefecture,
Hiroshima University, Hiroshima Industrial Promotion
Organization, Hiroshima Venture Development Fund,and Hiroshima Bank are working closely together andintegrating and combining their human resources,
funds, information, etc. to revitalize the regional
industry.
In addition, we have worked with the Hiroshima
prefectural government, Creww Inc. and Hiroshima
Venture Capital Co., Ltd. to hold Hiroshima Open
Accelerator 2019, an initiative that aims for new
business creation by local companies through open
innovation that connects management resourcesof businesses based in Hiroshima Prefecture andstartups across Japan. This was the first-ever endeavorof its kind for a regional bank in Japan, not just the
Chugoku, Shikoku and Kyushu regions. In the firstevent, eight tie-up ideas were adopted.
In addition, we invested in the first fund recognized
by Hiroshima University that supports startups basedon research seeds held by universities in Hiroshima
Prefecture, including Hiroshima University. We aim
to actively engage in activities to help new industries
and businesses grow and joint projects with regional
industries and businesses to create shared value,
including financial support.
Of course, it is also important to think of how we
can support sustainable growth of existing industries
and customers. While further progress of work-stylereform can be seen in the coronavirus crisis, we feelthe need to bolster efforts to support introduction of
IT to strengthen competitiveness, raise productivity
and improve efficiency of work processes atcompanies going forward, in addition to active efforts
to address funding and business succession needs. For
this, we recently began discussing the launch of a joint
venture with Mighty Net Co., a business partner withwhom we have built a relationship of trust throughcollaborations in a project to develop and operate
our systems and joint sales activities. Going forward,
we plan to bring together our IT strength and ourstrength in offering solutions based on feasibility
studies to contribute to solving management issues
and introducing IT at local companies.
In addition to the initiatives described above, wewill work to build a structure that will enable us tocontinue to support customers on efforts to solve

Message from the President

their issues, from every angle, for many years to come,including measures to address the type of needs thatremain under the surface at present but are likely toemerge in the future.
(iii) Enhancing business targeting the elderly
Aging society is an issue that needs to be addressed
urgently for Japan, especially rural regions, ashouseholds with the elderly have increased
significantly. We introduced the Hirogin Life Partner
service in 2017, believing that it is important to provide
a comprehensive support that includes life-related
support, in addition to making efforts to enhancefinance-related support, by offering additional support
for handover of property to the next generation, notjust investing or managing the funds entrusted to us.
It has gained recognition as a comprehensive service
that includes services in the non-financial area, andthe number of users increased, including home- andlife-related support for issues within households, suchas housekeeping and cleaning, caring for the garden,
disposal of articles that are no longer needed, moving,monitoring and security, as well as support related touse, sale or passing down of real estate properties.
Going forward, we will strive to create a structure inwhich issues that need to be solved can be conveyed
to heirs at the early stage, while enhancing our
support service lineup and increasing contact points
with families.
(iv) Supporting family businesses andbusiness owners
As problems such as shortage of talents to succeed
current leaders at small- and medium-sized companies
are surfacing, smooth handover of assets and businessto the next generation is a major issue for thedevelopment of the regional economy. In response
to increased needs related to business succession

Relations with regional community and customers

Deepening/expanding customer base
Corporate customers: Feasibility studies
Retail customers: Household asset management (including
asset formation/management)

Deepening/expanding operations
Solutions
Put all functions and alliance within the Group to effective use toprovide solutions, including in nonfinancial areasand M&As, we combined Investment Banking
Division and a business succession function of theAsset Management Division in April 2020 to create abusiness succession and M&A team in the Investment
Banking Division’s financial service office.
In addition, we set up a “business owner relations
office” in the Banking Business Planning Division forthe purpose of supporting family-run small-to-medium
businesses and business owners for a medium to longterm. We aim to deepen relations with owners offamily-operated businesses with a focus on consulting
services that capitalize on feasibility studies, while
taking advantage of nonbanking service functions
operated by group companies, and continue toenhance unified support for both corporate and retailcustomers. By doing so, we hope to increase thepresence as the reliable Hiroshima Bank Group.
(v) Fundamental reform of channels addressing
customer needs(vi) Stepping up digital transformation efforts
As we are and will be required to adopt a new life
style amid and after the coronavirus pandemic, it isnecessary to establish new ways to make contact withcustomers other than branches where face-to-facecontact is the basic style. In other words, we think it
is an urgent task to drastically reform our businesschannels in a way that will make them better suited tothe change in life styles and behaviors of customers.
Some of the services that have traditionally beenhandled at physical branches are already available atnoncustomer-facing channels using digital technology,
including the internet branch and the Hirogin App.
Going forward, we aim to further expand options
to allow customers to avail themselves to services
without visiting a branch.
Meanwhile, we will continue to step up efforts totransform our branches in a way that makes customers
would say, “It’s hard to live without Hiroshima Bank,”
and make them “a place of relaxed consultation where
frank conversation takes place” and highly specialized
advice is offered. Furthermore, we will make ourbranches a place where more familiar and reliable
services are offered, by establishing infrastructure
for online interviews, etc. that maintain such added
values.
In addition to business channel reforms, we believethat we also need to step up efforts to realize digitaltransformation (DX). There are two ways of promoting
DX in our plans. One is digitalization of existing
businesses, aimed at reinforcing contact points
with customers and achieving higher efficiency ofoperations. The other is development of new digitalbusinesses to establish new revenue sources.
Development of new digital businesses is a kindof investment for creating new businesses. The

HIROSHIMA BANK INTEGRATED REPORT 202010

About Hiroshima Bank

development team led by young members are working
passionately on this project and trying new things
aggressively and boldly. Currently, a project related toa business targeting the elderly and another project
for employee benefits of companies are taking shape.
Going forward, we will seek to create services that
can help deepen and expand customer relations andsolutions.

Structural reforms that will realize
efficient business operation
Reinforcing management basethrough more sophisticatedrisk governance and increased
fulfillment in work
In order to contribute to solving issues for the local
community and customers, we need to constructa solid management base that can play a role of afinancial infrastructure and enable aggressive risktaking. The most important premise for this is “areview of work and decision-making processes,”
which will improve efficiency of existing business
operation. We have been working on drastic structuralreforms to improve productivity.
And as we seek to expand our service offerings
through the transition to a holding company structure,
we face the need to go back to the basics of ourbusiness, namely, “receiving the value generated bytaking risks in the form of returns,” and rethink it
and convert it to, “how we should take risk within apermissible scope in order to generate returns.” Forexample, there is no need to explain whether lending
or investing carries a higher risk than the other. In
order to aggressively take risks in a high-risk business,
we need to assess the risk in more advanced way. We
will clarify where credit and compliance risks lie andmanage them, and enhance our risk governance.
On the other hand, accepting a degree of risk meansthat we will face more opportunities of experiencing
failures. If the company only regards any failure as
negative, it will make it difficult for employees totake on new challenges. We need to eliminate sucha mindset if it exists in the company. We thus aim tocreate a corporate culture in which employees think “atendency to maintain status quo will likely lead to thecompany’s decline and doing nothing when there arethings one can do is the most negative thing.”
I have been thinking that people hate to do workthat they are forced to do and they do a good job andachieve high productivity when they are motivated to
do the work. I believe the most important thing for
improving fulfillment in work is to create a company
where each employee can concentrate on the work

11

HIROSHIMA BANK INTEGRATED REPORT 2020

that makes them think for themselves and want to doit.
When times are changing very fast and needs are
becoming more diversified, each employee needs
to be a human resource with their own strength
continuing to evolve. If they fail to do so, we cannot
be trusted by customers. We have drastically changed
our personnel system in the hope that employees
can become more conscious about the importance of
creating a positive cycle in which employees putting
their skills to maximum use in their fields of expertise
will lead to more satisfied customers. I am convincedthat if we achieve a true reform of employee
consciousness and behavior, we will be able to achieve
the goal of introducing a holding company structureand stay alive in our region as a Hiroshima Bank Group
that continues to contribute to the development of theregion.

Hirogin’s SDGs Declaration andstrengthened support for local
companies’ SDGs efforts
Going forward, we will need to run the Bank company
keeping in mind with the sustainable development
goals (SDGs) adopted by the United Nations inoperating business. Otherwise, we cannot fulfill our
corporate social responsibility.
The Hiroshima Bank Group adopted a declaration inwhich we promise to start from where and what we
can do, one by one, as an organization, under the four
themes of “region,” “aging society,” “human rights”
and “environment.” In the meantime, we endorsed
the recommendations of the Task Force on Climaterelated Financial Disclosures (TCFD) and decided towork to step up measures against climate change andenhance disclosure of information on climate-related
risk opportunities.
We also launched the Hirogin SDGs support services
in which we handle bank-guaranteed privately placedbonds (SDGs type), check how efforts on SDGs are
made by customer companies, and give feedback
Hiroshima Bank Group SDGs Declaration
RegionEfforts to revitalize regional
community and economy

Agingsociety

Provision of ﬁnancial service
suited to aging society

HumanrightsHIROGIN GROUP SDGs

Environment

Response to climate change
and global warming

Diversity and inclusion
Building a community where
local customers can live in peaceMessage from the President

on the results compiled by sorting out necessary
measures, as part of a project to support SDGs
efforts by local companies. The service has alreadybeen used in more than 60 instances since January
2020, providing companies to work out their SDGs
declarations.
Going forward, we hope to play a role in helping
local people deepen their understanding of SDGs
through provision of various structures and products
so that activities based on SDGs will progress further
in all areas of the region.

Fiscal 2019 summary and key areasof focus for fiscal 2020
In fiscal 2019, profit attributable to owners of theparent dropped from a year earlier and failed to reachthe announced target. We recognize that this is amajor issue.
On the other hand, in the areas that we focusedon, our efforts are starting to bear fruit. Specifically,feasibility studies, which are our strength, andcollaboration with Hirogin Securities have produced
certain results, and the banking-securities
collaboration strategy is taking root. Furthermore,trust-related services, which we focused on as part ofefforts to bolster the business targeting the elderly,

have produced results exceeding the initial targets.
Overall, we have concluded that it was a fruitful year
in which we have steadily made achievements.
In fiscal 2020, which started with measures toaddress the spread of new coronavirus infection,
we will carry out business to maximize our financial
intermediary function as our top priority, in order toensure circulation of “money” or the blood for the
economy, for supporting financing at companies.
We are also feeling the importance of thinking
about how the economy can be brought back tonormal once the coronavirus pandemic is over. For that
purpose, we believe the key is finding ways to support
customers in areas other than lending, including
support for improving efficiency of operation andproductivity, in anticipation of a new era.
We were unable to have contact especially withretail customers in April and May due mainly to theimpact of the state of emergency. We will, therefore,
seek to establish new ways of having contact withcustomers suited to the new era in an early stage, inorder to promote consulting services which we are
currently focused on.

To our stakeholders: We aim for afurther leap as new Hiroshima
Bank Group
Hiroshima Bank Group has come to a point where wemust change drastically.
The biggest goal of the evolution to a new
business structure, the holding company structure,
is to expand the scope of our business operations tobecome a company that can appropriately address
local customers’ needs and solution of issues. In
other words, we want to transcend the establishednotion of “bring money matters to the bank” andgrow into a company that can say, “bring yourproblems to Hirogin.” And we will pursue sustainablegrowth and improved corporate value by actively
contributing to the development of our region, which
has a great potential in terms of both economic scaleand growth opportunities, under our Management
Vision, “Contribute to creating a prosperous future
for the regional community as a trusted regional
comprehensive services group by closely offering
thorough support to customers.”
I hope our stakeholders, as colleagues who paintdreams with us for the coming new era, will have highhopes for the future of the reborn Hiroshima Bank
Group and continue to support us.

Toshio Heya
President

HIROSHIMA BANK INTEGRATED REPORT 202012

About Hiroshima Bank

Value Creation Process
Mid- to long-term changes in economic and social environments
Aggravation of social issues

Environmental change◎Declining population◎Falling birthrate and aging society◎Sustained low-interest-rate environment◎Accelerated progression of digitalization◎Shrinking regional economy◎Global warming and climate change◎Demand for productivity improvement◎Demand for more sophisticated risk management

Management Policy

Building the reliable Hiroshima Bank Group(Management Vision)

Relationswith regional communityand customers

Nurturing a
corporate culturethat promotes workstylereform and a desire to
take on challenges

Intangible
assets that
supportstrategyFoundationthat supports
sustainable growth

13

HIROSHIMA BANK INTEGRATED REPORT 2020

Feasibility study
Household asset
management including
asset formation/management

Put all functions and alliancewithin the Group to effective
use to provide solutions,
including in nonfinancial
areas

Active commitment
to regional
revitalization

Financial capital

Human capital◎ High earning power◎ Sound lending assets◎ Strong capital◎ Advanced risk management◎ Diverse human resources◎ FP skills and other advanced expertise◎ Organizational culture focused on employees’
motivation to work

Social capital

Natural capital◎ High-quality and steady customer base
◎ Corporate culture that thoroughly implements customer-oriented business
operations, inherited from the time of our founding and the atomic bomb
◎ Store network closely attached to the region◎ Rich in tourism resources, including World Heritage Sites such as theHiroshima Peace Memorial and Itsukushima Shinto Shrine◎ A temperate area with an abundant natural environment,
surrounded by the Seto Inland Sea and the Chugoku Mountains

Corporate GovernanceRisk Governance(Compliance risk management)Value Creation Process

Hiroshima Bank Group SDGs Declaration

Key SDGs issues (materiality)

RegionAgingsocietyHumanrightsEnvironment

united through trusting relations with the regional community

Provision of value to all
Hiroshima Bank Group
stakeholders

Creation ofshared valueIntellectual capital◎ Feasibility studies accumulated based on expertise thus far◎ Functions for providing advanced and diverse solutions◎ Functions for developing new services utilizing
state-of-the-art digital technology

Customers

Regional community◎ Customer’s growth(increase in corporate value)◎ Stable asset formation andsuccession for customers◎ Customer satisfaction and peace of mind

◎ Contribution to development of regional community◎ Stimulation of the regional economy
through development of industry and job creation◎ Contribution to creation of a sustainableregional community through our main businesses

Employees

Shareholders◎ A bright working environment that
motivates employees◎ Promotion of a diverse range of workstyles
and achievement of work-life balance◎ Promotion of diversity and inclusion◎ Sustainable increase in shareholder value◎ Highly transparent information disclosure◎ Constructive dialogue

HIROSHIMA BANK INTEGRATED REPORT 202014

About Hiroshima Bank

Message from Financial Officer
We will work to improve the Group’s
corporate value and contribute tosustainable growth of the region by
maintaining and improving the capital
adequacy ratio through ample retained
earnings, appropriate risk taking andstrategic investment.
Akira Ogi,
Director & Senior
Managing Executive Officer

Business performance
The economy in this region during fiscal 2019 saw capital
expenditure remain resilient and public investment related todisaster recovery and reconstruction stay at high levels.
On the other hand, economic activities were weak as export
and production activities slumped especially in the manufacturingindustry, the main industry of the region, due to a global economic
slowdown associated with the emergence of geopolitical risk,
including a U.S.-China trade frictions, and consumer spending
decreased, affected by a consumption tax hike.
In addition, corporate and consumption activities slowed
significantly since the beginning of the year affected by the spreadof new coronavirus infections, making the impression that an
economic downturn has deepened.
Under such economic circumstances, the Bank’s core grossbanking profit decreased ¥1.6 billion year on year to ¥83.7 billion
as net interest income increased due to a rise in interest on loans
and discounts but fees and commissions dropped due mainly to a
decline in operating income from asset management business.

Expenses stayed flat from a year ago at ¥52.7 billion as nonpersonnel expenses and taxes increased due to an increasein depreciation of premises, equipment and others and a
consumption tax hike but personnel expenses decreased due
mainly to a drop in retirement benefit expenses. As a result, corebanking profit fell ¥1.6 billion from a year ago to ¥31.0 billion.
Although impairment loss on shareholdings was booked amid
a falling stock market affected by the spread of new coronavirus
infection, ordinary profit increased ¥1.5 billion to ¥37.4 billion due
mainly to a year-on-year increase in securities-related gains after
sale of cross-shareholdings and other factors.
Credit expenses increased ¥1.1 billion year on year, due mainly
to booking of proactive allowance to take account of the expected
operational environment in the future.
Net income decreased ¥1.2 billion year on year to ¥24.1 billion
as a result of booking impairment losses on tangible fixed assets
planned to be disposed of.
Profit attributable to owners of the parent decreased ¥1.3 billion
year on year to ¥24.2 billion.

Financial results forecasts for fiscal 2020

FY2020<Reference>
FY2019¥22.5 billion¥24.2 billion

Consolidated ROE

4.5%

5.0%

Adjusted overhead
ratio

64.1%

62.9%

Profit attributable toowners of the parent

15

HIROSHIMA BANK INTEGRATED REPORT 2020

The financial results forecasts have been
prepared on the assumption that theinterest rates, exchange rates and shareprices would remain in the same range ofthe current market. Impact of the spreadof new coronavirus infections is estimatedusing the information available to the

Bank as of May 12, 2020. If economic
activities remain stagnant, actual figures
may diverge significantly from theforecasts.
If we decide that the financial results
forecasts need to be revised, we willpromptly disclose the revised figures.

Message from Financial Officer

Capital policy
The consolidated capital adequacy ratio of the Bank was 10.89% at the11.07％
Risk asset amount (¥ billion)
11.01％
10.89％
Consolidated capital adequacy ratio
end of March 2020. The figure would be well above 4% or the regulatory
floor* even under a stress test reflecting changes in the market, etc. at the
10% or more
3,664.6
3,533.5
3,464.2
time of the Lehman shock.
To hold steady
The Bank sets a risk appetite framework to operate business in a waythat soundness is maintained and the capital efficiency is improved. We
position active credit risk-taking in the region and strategic investment
To increase
aimed at gaining new revenue opportunities as one of the pillars of
our management strategy. We aim to maintain a consolidated capital0adequacy ratio of at least 10% for a medium to long term by attaching
End of March End of March End of March
Future
2018
2019
2020
special importance to achieving appropriate levels of profitability in<Reference> External credit rating
relation to the amount of risk assets and striking the right balance against 40000
capital adequacy ratio.
35000
Japan Credit Rating Agency Rating and Investment Information* The criteria specified in the “Criteria for a bank to judge if adequacy of its equity capital is appropriate inrelation to assets, etc. it holds, based on provisions in Article 14-2 of the Banking Act” (Financial Services
Agency Notice No. 19 of 2006).

30000

(JCR)

(R&I)

25000

AA-

A+

Moody’s
A2

20000
15000

Shareholder returns

10000
5000
0

The Bank takes care to enhancing shareholder returns and retained
Dividend criteria table (revised February 2020)
earnings in order to execute its financial intermediary function andCash dividends per share
Profit attributable
Consolidated
to owners of thecontribute to the region’s sustainable growth as a regional leading bank,payout ratio(i) Stable dividends (ii) Performance-linked(i) + (ii)parentdividends
and pays “performance-linked dividends,” which reflect profit attributable¥18¥36
Below 34.1%
Over ¥33.0 billion
to owners of the parent, in addition to “stable dividends.”
Over ¥30.0 billion ¥15¥3331.2% - below 34.4%
up to ¥33.0 billion
In February 2020, we revised the dividend criteria table and changed
Over ¥27.0 billion ¥12¥30
31.2% - below 34.7%
up to ¥30.0 billion
the consolidated payout ratio target to a range between 31% and 36%
Over ¥24.0 billion ¥9
¥27
31.2%
- below 35.1%¥18
up to ¥27.0 billion
from a range between 20% and 24%, after comprehensively reviewing
Over ¥21.0 billion ¥6¥24
31.2% - below 35.7%
the balance between the level of the medium- to long-term capital
up to ¥24.0 billion
Over ¥18.0 billion adequacy ratio target and shareholder returns.
¥3¥21
31.2% - below 36.4%
up to ¥21.0 billion
In fiscal 2019, we paid out an annual ordinary dividend of ¥22.5 per
Up to ¥18.0 billion¥0¥1831.2% or moreshare after the above revision, and the consolidated payout ratio came to28.8%. For fiscal 2020, we plan to pay an annual dividend of ¥24 per share, based on the dividend criteria table.
We will continue to enhance shareholder returns, while considering increasing retained earnings.
Cash dividends per share and payout ratio

14

12
2

4

Commemorative dividend marking
130th anniversary of establishment

20.1％

18.1％

10

10

FY2006

FY2007

22.4％

22.3％

14
4

10

10

10

10

10

10

10

FY2008FY2009FY2010FY2011

21.3％
Stable dividends increase

27.9％

21.7％

21.1％

Performance-linked dividends

Stable dividends

21.8％

24.3％

22
16
12

18
6

4

21.9％

21.7％

22
18

10

10

6

Commemorative dividend marking
140th anniversary of establishment

Commemorative dividends

60.5％

12

12

12

12

12

12

FY2012FY2013

FY2014FY2015FY2016FY2017

Payout ratio

28.8％

33.2％
24

22.5
20
2

6

7.5

6
18
15
12

FY2018FY2019Note: The Bank
conducted a shareconsolidation of commonshares at the ratio of 1
share for 2 shares on
October 1, 2017. Cashdividends per share
figures in fiscal 2017or earlier are amounts
accounting for the shareconsolidation. As werevised the dividend
criteria table in fiscal
2019, proportionate
figures for the period
before and after therevision are shown.

FY2020(forecast)

Policy on cross-shareholdings

15

10
5
0

配当目安テーブル導入

20

The Bank has a basic policy of not engaging in cross-shareholding, except
25
where it is deemed that the holding has a rationale such as development ofthe
20regional economy or improvement of corporate value.”
As for shares held, the Bank confirms the rationale for the shareholding. If
the15Bank cannot find sufficient rationale, it will decide whether to continue
to hold them after having dialogue with the investee company.
10
In fiscal 2019, we reduced our cross-shareholdings by ¥4.1 billion as aresult of dialogue with issuers.

50

See page 60 for details of our policy regarding cross-shareholdings, etc.

Listed shares

0

増配

Unlisted shares, etc.

(¥ billion)

73.4

73.0

71.9

19.2

19.7

19.8

54.2

53.3

52.1

47.7

End of March2017

End of March2018

End of March2019

End of March
2020

67.8
20.1

HIROSHIMA BANK INTEGRATED REPORT 2020

6
0

25

16

About Hiroshima Bank

Summary of Business Performance (FY2019)

Core banking profit (excluding gains/losses on investment trust cancellations)

Net income

31.0 billion

Profit attributable to owners of the parent

24.1 billion¥(¥(1.6) billion)(¥(1.2) billion)(¥(1.3) billion)(¥ billion)

32.3

24.2 billion

¥

¥

32.6

(¥ billion)(¥ billion)

31.0
27.0
25.8

25.3

25.5

24.1

FY2017FY2018FY2019FY2017

Loan balance¥

FY2018FY2019FY20182,644.7 billion

1,619.2 billion¥(+¥127.8 billion)(¥ billion)(+¥71.3 billion)(¥ billion)■ Corporate loans, etc. ■ Individual loans

6,479.7(¥ billion)■ Limited-purpose loans, etc. ■ Card loans■ Apartment loans■ Housing loans

2,426.3

2,516.9

2,644.7
1,485.9
61.0
41.1

4,366.3

174,466.7

1,547.9

1,619.2

2018

2019

2020

HIROSHIMA BANK INTEGRATED REPORT 2020

1,547.9
75.9
39.9

1,619.2
84.7
38.9

465.7

4,860.4

1,485.9

FY2019Individual loans¥(+¥465.1 billion)

6,014.6

FY2017Loans to SMEs

6,479.7 billion

5,852.3

24.2

417.3

2018

2019

2020

440.4

966.3

991.5

1,029.7

2018

2019

2020

Summary of Business Performance (FY2019)

Deposits and NCD

7,709.0 billion¥

Total custody assets (including Hirogin Securities)

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

9,215.1 billion

34.9%(+¥139.8 billion)((0.3) points)¥(+¥230.0 billion)(¥ billion)■ Individual deposits ■ Corporate deposits■ Public and finance institution deposits

7,459.3

7,479.0

7,709.0(¥ billion)■ Non-deposit products (including Hirogin Securities)■ Deposits and NCD

9,070.6

80000
9,075.3

1,611.3

70000
1,596.2

4,831.3

35.6

35.2

34.9

FY2017FY2018FY20199,215.1
1,506.0

60000
4,721.6(%)

4,999.8

50000
40000
7,459.3

2,291.1

2,284.5

2,358.0

446.5

363.0

351.1

2018

2019

2020

7,479.0

7,709.0

30000

Consolidated ROE

20000

5.0%

10000

* Deposits and NCD include negotiable certificatesof deposit.

2018

2019

0

2020

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

(%)

Consolidated capital adequacy ratio

Non-performing loan ratio

10.89%

1.06%((0.12) points)((0.09) points)

(%)

5.5

FY20175.3

5.0

FY2018FY2019(¥ billion)■ Substandard loans ■ Doubtful loans■ Loans to bankrupt borrowers, etc. ● Non-performing loan ratio

Adjusted overhead ratio

11.07

11.01

10.89

1.20%

1.15%

1.06%

71.4

70.1

69.8

16.8

18.5

17.6

62.9%
(+1.2 points)(%)

Regulatory minimum required for4.00

banks using domestic standards

2018

2019

2020

48.3

45.7

46.1

6.3

5.9

6.1

2018

2019

2020

62.5

FY201761.7

FY201862.9

FY2019* Amounts of loans reported under the Financial
Reconstruction Act have been rounded to thenearest whole unit.

HIROSHIMA BANK INTEGRATED REPORT 202018

About Hiroshima Bank

Nonfinancial Highlights
Corporate customers

Number of qualified financial planners

CSPFP 1st grade:

356 persons

Approx.

31,000CSPFP 2nd grade:

1,556 persons

companies(as of the end of March 2020)(as of the end of March 2020)
Note: 1st and 2nd grades include CFP and AFP holders, respectively.

 umber of borrowers to whom loans are granted basedN
on feasibility studies and balance of outstanding loans

3,539 customers¥711.2 billion

280 cases¥923 million(as of the end of March 2020)(FY2019)

 umber of cases of consultation offered by businessNsuccession advisory service

M&A support

249 cases

27 cases(FY2019)(FY2019)

 eduction in greenhouseRgas emission

 mployment ofEdisabled persons

Between FY2017 and FY2018

10.6%
reduction

2.2%(82 persons)(June 1, 2020)19

 umber of cases of loans granted to support businessNstart-up or new business and granted amounts

HIROSHIMA BANK INTEGRATED REPORT 2020P romotion of active participationof women	(ratio of women in managerialand supervisory positions)12.5%(172 persons)(April 1, 2020)

Health management

Nonfinancial Highlights and Regional Features

Characteristics of Hiroshima Bank’s Business Area
Combined population and GDP of four prefectures in the Bank’s area

OkayamaPrefecture
Hiroshima
Prefecture
Yamaguchi
Prefecture
Ehime
Prefecture

Population
Approx.

7.51 million

A size rivaling
Aichi Prefecture
Source: “Population Based on Basic Resident Registration” by
the Ministry of Internal Affairs and Communications
	(January 2019) umber of companies for which Hiroshima Bank isNthe main bank
Chugoku region (ranked No. 1 for 10
consecutive years)

15,536 companies
16.02%

Hiroshima Prefecture (ranked No. 1 for10 consecutive years)

14,515 companies
37.21%

GDP

31 trillion

Approx. ¥A size rivaling
Kanagawa Prefecture
Source: Cabinet Office (fiscal 2016)

Number of tourists visiting Hiroshima Prefecture

Number of foreign tourists

2.75 million
Total number of tourists

65.04 million(2018)(as of the end of October 2019)

Source: Teikoku Databank

Source: Japan Tourism Agency, Hiroshima Prefecture

HIROSHIMA BANK INTEGRATED REPORT 202020

About Hiroshima Bank

Mid-Term Management Plan 2017
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 the development of ICT, and the
traditional business model centered on deposits and lending is reaching a major turning point.
Even under these circumstances, we formulated our Mid-Term Management Plan 2017 in March 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.

 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

21

Key initiatives

HIROSHIMA BANK INTEGRATED REPORT 2020

Enhancement of the profit baseMid-Term Management Plan 2017

Building a reliable

Hiroshima Bank Group
united through trusting relations with theregional community
Major strategies

Marketingstrategy

Enhance new service
development

Securities
strategyWorkstylereformHuman
resource
strategy

Ahead of the transition to a holding company structure scheduled for
October 1, 2020, we are reviewing the current Mid-Term Management Plan
2017 and developing a new mid-term management plan for the period from
October 2020 to fiscal 2023.
The holding company structure will allow us to maximize the group synergy.
We will strive to contribute to the development of the region through efforts
to resolve issues for the regional community and customers.

HIROSHIMA BANK INTEGRATED REPORT 202022

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 ofHiroshima Bank.
Automakers, shipbuilders, and companies in other distinctive
industries are clustered in this region, and the Bank has long focusedproactively on understanding industry trends and business details
and supporting the resolution of issues, while also taking steps
to systematize the “connoisseur” capabilities, which tend to be
dependent on individual expertise, and utilize them in systematicways.
As we previously realized the importance of qualitative 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.”[Views on environment and issues]
Prolonged period of negative interest rates, decreasing population and business offices,diversifying needs of businesses[Issues that need to be addressed]
Support to companies’ growth and new business creation, contribution to efforts torevitalize regional communities and sustainable economic development in the region[Goals]Practice high-value-added banking business based around “feasibility studies,” which are
the advantages of Hiroshima Bank
Our “feasibility studies,” which we have developed through many years providing support suited tocharacteristics of local industries, is one of our advantages.
Our goal as a financial institution that will remain in the region is to understand the region and its
industry and provide loans and core business support that can lead to customers’ growth.

Consulting process
Our consulting
process

Dialogue withcustomers

Mutualunderstanding
with customers

Identifying
management
issues

Proposingsolutions
to issues

Resolving issues

Consulting based on feasibility studies[Building relations][Provision of solutions]

Understanding and sharing of issues

Maximizing consultingQualitative analysis

Consulting-type loans

Mid-term plan formulation support, etc.

M&A / business succession
Business matching

Industry RM
Autos, ships/shipping, medical/nursing
care, tourism, etc.

HIROSHIMA BANK RESEARCH INSTITUTE

23

HIROSHIMA BANK INTEGRATED REPORT 2020

Derivatives (foreign exchange, risk hedge)
Support for expansions abroad
Recruitment consultancy business quity businessEothersBanking Business

Hiroshima Bank’s “feasibility studies”
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)
by looking at their financials. However, the suppliers
that possess technical expertise irreplaceable in theautomobile industry must be supported by taking a
step into management restructuring even if they are ina financially difficult position. It became necessary toplace more importance on qualitative information fromthe perspective of whether or not they were necessary
for their industry cluster, instead of looking solely at theirfinancial position.
In January 2001, in order to accurately respond to thediversification and sophistication of business partners in the automobile-related industries, the Bank newly establishedthe “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. Even in the midst of rapid external changes such as the Lehman shock, we were able to deal with thesechanges 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 driving
Companies
the regional economy, engaging in businessmajor borrowers,
with rootsetc.
in the region, etc.

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

Utilization of external
professionalorganizations, etc.

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.

TopicsThe Bank reorganizes the structure of its Head Office in April 2020
Combined the business succession functions of the Investment Banking Division and the Asset Management Division andcreated the Business Succession and M&A Team in Investment Banking Division’s Financial Service Office in response toincreasing needs for services related to business succession and M&As.
Created the Business Owner Relations Office in the Banking Business Planning Division to support family-run small-tomedium businesses and business owners for a medium to long term.
HIROSHIMA BANK INTEGRATED REPORT 202024

Strategies for Individual Businesses

Corporate Banking Strategy Centered on“Feasibility Studies” (Key Measures)
Hiroshima Bank’s connoisseur capabilities
T here is a cluster of many suppliers in Hiroshima
Prefecture, centering around Mazda Motor
Corporation, and the Bank appointed automobilerelated screening personnel in the Credit Supervising
Division and automobile- related personnel in theInvestment Banking Division, as it sees this entire“Mazda cluster” as customers.

 he Bank identifies and analyzes the current status
T
and trend of Mazda Motor Corporation and theautomobile industry, and it has been proactively
providing management improvement support,
overseas expansion support, etc. to customers thatare 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)
Shift to overseas production andincrease in overseas procurement
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.

AreasolutionsTier2
Technical development

Tier 3, Tier 4…

Tier3

Tier3

Tier3

Tier3

Tier3

Development of other manufacturers
Diversifying development“Mazda cluster”

Sustaining and enhancing
competitiveness of
the Mazda cluster

Mazda Motor
Corporation

Issue sharing

Qualitative analysis

Efforts in the recruitment consultancy businessWe want to reform businessprocesses but we don’t haveanyone with know-how inthe company.
We don’t have in-house
talent to succeed thepresident.

by taking advantage of our experience in sharing
management issues with customers through feasibility
studies, as part of our support to resolve issues.

Matching
Executives

Job seekers

Corporate customers

We launched a recruitment consultancy business in
April 2019 to help corporate customers address issuesof labor shortage. In particular, we have been focusing
on providing referrals of executive-level personnel

Experts
Practical-level
workers

I want to help in improving
business processes or start
new businesses.
I want to make use of myexperience and work in aposition close to
management.

Statistics for April 2019 - March 2020 *Ratios represent percentage shares
Number of recruitment applications accepted (268 cases)
46 cases
17.2%

43 cases
16.0%
45 cases
16.8%[Cases handled by
the Bank]
Executives
17 cases
9 cases
29.8%
3.4%

125 cases
46.6%[BM] Executives

Successful job offers (57 cases)

11 cases
19.3%

Middle-level

11 cases
19.3%[Cases handled by
the Bank]
Executives
6 cases
10.5%

12 cases
21.1%

Practical-level workers

Experts

・The Bank itself introduces executive candidates to customers for whom our Investment Banking Division conductedfeasibility studies.
・Middle, practical and expert level candidates are introduced by employment agencies in a tie-up with the Bank.
25

HIROSHIMA BANK INTEGRATED REPORT 2020

Banking Business

Efforts in business succession
As business succession has become a serious issue inthe regional economy amid aging business owners andshortage of successors, the Bank supports businesssuccession through the M&A advisory service. The
number of customers seeking our support has been
increasing in recent years.
Number of successful M&A contracts and consultation offered

In April 2020, we combined divisions supporting
family members’ business succession to create astructure to provide one-stop support to address avariety of needs.

Major flow of business succession(Number of projects)

650

450
400

Number of projects accepted (right scale)
18

350

18

15

13

12

300

14

14

14
13

250

12

11

10

9

9

10

200

11
9

8
6

Succession
by third party
(M&A)

6

100

4

1997

Successor
not foundin family

2000

2005

Businesshanded
over

150

8

2010

2015

2019

Sale of assets(Discontinuation)

No businesssuccession

50
0Succession by
family member(succession
within family)

Business succession

23

5

Successor
foundin family

500

Number of contracts executed (left scale)

6

How?

550

27

Tripled over a decade25

20

To whom?

600

Owner retires

30(Number of contracts)

0

Initiatives for equity business
The Bank invests in three funds formed by Hirogin
Capital Partners Co., Ltd., which are the Business
Rehabilitation Fund, the Business Succession Fund andthe Venture Fund.
Taking advantage of these funds, the Bank will
provide a kind of support in the forms of “businessparticipation,” which goes beyond the escort-runnerstyle support,” by leveraging “equity investment,”

which targets customers contributing to solving
regional issues and those working to grow theirbusiness, and “consulting functions,” which we havedeveloped over the years. Through these efforts, we
aim to deepen and expand the Group’s customer andbusiness axes, improve corporate value of investee
companies and help revitalize the regional economy.

Overview of funds
HiCAP

H i ro g i n C a p i t a l P a r t n e r s C o . , L t d .

Businessrehabilitation

Business
succession

VentureHiCAP-1¥2.0 billion

HiCAP-2¥2.0 billion

HiCAP-3¥1.0 billion

HiCAP-1
Investment limited partnership

HiCAP-2
Investment limited partnership

HiCAP-3
Investment limited partnership

Business rehabilitation*

Business succession

VentureFund size¥2.0 billion¥2.0 billion¥1.0 billion

Partners

Limited partner (LP): The Hiroshima Bank, Ltd.
General partner (GP): Hirogin Capital Partners Co., Ltd.

Name
Scope of investment targets

Date of establishment

July 3, 2020

* The business rehabilitation fund also aims to actively support customers affected directly or indirectly by the coronavirus pandemic.

HIROSHIMA BANK INTEGRATED REPORT 202026

Strategies for Individual Businesses

Asset Management Business
Pursue growth with customers through consulting andproposals suited to specific lifecycle phases
Hiroshima Bank works to propose solutions optimized for needs specificto the customer’s life cycle phase or generation.
As we are approaching the “era of the 100-year life,” we will provide
support for the growing elderly market to ensure smooth succession ofassets to the next generation and effective use of assets, and optimum
solutions using consulting-style trusts and others, which allow them tomanage properties in preparation for cases where it becomes difficult
for them to make judgment due to conditions such as dementia.
Furthermore, we will support customers’ asset management andformation through coordinated efforts of the entire Hiroshima Bank
Group, taking advantage of sophisticated, expert investment proposals
by Hirogin Securities.

[Views on environment and issues]
Prolonged period of negative interest rates, falling population, aging society,diversified/sophisticated/complex customer needs[Issues that need to be addressed]
Customers’ household asset management, wide-ranging asset formation support,smooth asset transfer/succession support[Goals]Realization of serviced that last over a long period (life-long services)
We will offer proposals on management and use of “overall assets” that vary widely,
including real estate properties, through not just management or proposals for financial
assets but consultation on inheritance, gift, etc., by bringing together capabilities of theentire Hiroshima Bank Group.
The Bank’s goal is to continue to provide a comprehensive support for “precious assets offamilies” for many years to come, by recommending ways to transfer assets smoothly toheirs, etc. and supporting subsequent investment and management.

How we proceed

Segment

Initiatives

Wealthy class(Business owners)

Inheritance / business succession consulting
Enhance proposals for asset management by utilizing Hirogin Securities

Asset management

Integrated operation of Banking and Securities through expansion of joint branches

class

Expand/enhance products for business owners (including companies)
Utilize the Bank’s customer base to promote long-term, savings, diversified (small-lot) investment

Asset formation class
Expand field further by utilizing alliance that includes companies in other industries

27

HIROSHIMA BANK INTEGRATED REPORT 2020

Asset Management Business

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 eachgeneration. For those in the period of asset formation, we will contribute to their stable asset formation by longterm and diversified investments. For the elderly generation, in addition to strengthening efforts for inheritancerelated business and helping with smooth inheritance and succession of assets, we will proceed with relationshipbuilding with the next generation through efforts such as proposing secondary inheritance measures.

Teens

20s

30s

Finding Marriage Having Buying
a job
children a home

Life cycle

Financing
to buy a car

Children’s
education

50s

Children’smarriage

Retirement

Both the testator and beneficiary are
made fully aware of the household’s
portfolio, including relevant realestate, and proposals are provided
that contribute to asset formation, as
well as inheritance measures.

IncomeOpening abankaccount

40s

Financing to
Financingbuy
for marriage
a homeFinancingforeducation

Junior NISA

Financingforrenovations

Educationalloans

Renovation
loans

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

Dementia,
inheritanceNursing care, dementia,
inheritance measures

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

Preparing for a comfortable second life
[Nursing care, dementia, inheritancemeasures][Savings and asset formation]

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

Nursingcare

Preparing for a comfortable second life

Preparing for marriage, home purchase,
education, etc.

IssuesRecommended products, services, etc.

Housing loans

70s

Era of the 100-year life

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

60s

Investment trusts (NISA), annuity insurance, whole
life insurance, testamentary trust, inheritanceproperty liquidation services, money trusts, etc.

Advice by branch consulting advisors, as well as expert staff of Insurance Plazas, Inheritance Consultation
Plazas and Hirogin Securities
Use the Hirogin App and online brokers in a tie-up to execute transactions at any time, freely
Consultation on home and living, including home renovation and cleaning, addressed through use of
specialized service providers in a tie-up

TopicsHirogin Inheritance Consultation Plazas opened to respond to customers’ inheritance consulting needs even on holidays
1. April 2019 -: Inside Hiroshima Station North Branch (Saturdays and Sundays only: 9 a.m. - 3 p.m.)
2. August 2019 -: Inside Head Office Business Department (Weekdays only: 9 a.m. - 3 p.m.)
3. October 2019 -: Inside Fukuyama Sales Division (Sundays only: 9 a.m. - 3 p.m.)A “Reliable Watch Service” introduced for customers who apply for trust products to help them maintain a stress-free life
without worries in their elderly life.
1. “Watch Service” by security companies to ensure safe and secure life
2. “Warranty Service” by insurance companies to prepare for contingencies

HIROSHIMA BANK INTEGRATED REPORT 202028

Strategies for Individual Businesses

Enhancing Proposal Capabilities on AssetManagement and Formation
Expansion of joint branches with Hirogin Securities
The Bank has 22 branches jointly operated with Hirogin securities. They can address a wide range of consultationneeds and requests related to asset management and inheritance under a one-stop service platform. (Inside theHiroshima Bank branches below, Hirogin Securities branch has its own branches.)
Joint branches established (as of April 30, 2020)
Propose active management products

Hiroshima Bank

Hirogin
Securities

Youme Town
Youme Town Hiroshima
Hiroshima Office
Branch OfficeStrengthen initiatives forinheritance-related
businesses

Hiroshima Bank

Hirogin
Securities

Date ofestablishment

February 2008

IwakuniBranchIwakuniBranchNovember
2018

Fukuyama
BranchJanuary 2019
March 2019

Hatsukaichi
BranchHatsukaichi
BranchNovember
2008

Fukuyama
Sales Division

Okayama
BranchOkayama
Branch Office

May 2014

Tokyo BranchTokyo Branch

Mihara Branch

Mihara Branch
OfficeJanuary 2018

Saijo Branch

Higashihiroshima
BranchJuly 2019

FuruichiBranchSatellite Booth
FuruichiMarch 2018

OnomichiBranchOnomichiBranchAugust 2019

Ube Branch

Ube Branch

March 2018

HiroshimaNishi Branch

HiroshimaNishi Branch

September2019

Matsuyama
Branch OfficeNovember
2019
December
2019

Introduction of needs
for securities trading

Strengthen initiatives forfinancial instrument
intermediary services

Date ofestablishment

Kabe Branch

Kabe Branch

May 2018

Matsuyama
BranchKure Branch

Kure Branch

May 2018

Innoshima
BranchInnoshima
BranchTakehara
BranchJanuary 2020

Kaita Branch
OfficeJanuary 2020

Tokuyama
BranchTokuyama
BranchFebruary 2020

Minamimachi
BranchMinamimachi
Branch Office*April 2020

Fuchu Branch

Fuchu Branch

July 2018

Takehara
BranchImabari Branch

Imabari Branch
OfficeAugust 2018

Kaita Branch

TokaichiBranchMiyoshi
BranchOctober 2018

Introduction of needs
for inheritance andinsurance* Youme Town Hiroshima Branch Office was closed.

Expand asset management baseby proposing stable management products

Financial instrument intermediary services
At Hiroshima Bank, customers can open a securities account with Hirogin Securities and the Bank handles some ofthe products offered by Hirogin Securities’ products.

1

2Open a “securities account”
at Hiroshima Bank

Customers(Individuals and corporations)<Hiroshima Bank>3(¥ billion)(Number of accounts)

Intermediary balance
Intermediary accounts

250.0<Hirogin Securities>

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

 rends in the number of <Hirogin Securities>Tintermediary accounts and balance
300.0Intermediation to
Hirogin Securities

18,58420,00016,00014,777

 rends in earnings from <Hirogin Securities>Tintermediary services(¥ million)

3,000

2,962
2,583

2,500

232.6

200.0

200.7

10,6982,000

12,000
1,500

150.0
141.9

8,000

100.0

1,000

4,000

50.0

0

29

1,691

End of March End of March End of March
2018
2019
2020

HIROSHIMA BANK INTEGRATED REPORT 2020

0

500

0

FY2017FY2018FY2019Asset Management Business

Providing Optimum Solutions
for Inheritance Needs
Inheritance Consultation Plazas
We have Inheritance Consultation Plazas where staff specialized in inheritance give easy-to-understand explanations
and provide support for free at dedicated consultation booths, for which customers are asked to make reservation.
Basic knowledge about inheritance
I want to researchinheritance property
and confirm legal heirs.

I want to learn about
necessary procedures
and actions to takefor eventualities.

I want to learn about
how to prepare a will.

What happens toinheritance for a couple
without children?

Open only on Saturdays and Sundays

Inside Hiroshima Station North Branch (11-2, Wakakusacho, Higashi-ku, Hiroshima City)

Open only on weekdays

Inside Head Office Business Department (1-1-7, Nishikaniya, Minami-ku, Hiroshima City)

Open only on Sundays

Inside Fukuyama Sales Division (1-1-1, Kasumicho, Fukuyama City)

Key solutions
We offer optimum solutions for customers to address issues including from inheritance measures taken before thedevisor’s death to support for procedures after his or her death.

Devisor

Smooth inheritanceWill preparation

Heir

Consultation topics

Smooth procedures
Secondary inheritancemeasures

Solutions
Inheritance measureproposals
Testamentary trusts
Yearly gift trusts
Inheritance property
liquidation services
Will execution
Insurance
Others umber of contracts of inheritance-relatedN
trust products and balance(Number of contracts)(¥ billion)

60.0

Total balance*
Number of contracts

 umber of accounts opened and earnings of testamentaryNtrust and inheritance property liquidation services(¥ thousand)

6,000

250,000

5,000

200,000

5,196

50.0

(Number of accounts)

Earnings, the Bank
Earnings, agencies
Total number of accounts

30.0

4,000

161

24.2
20.7

10.0

200

150,000

150

3,000

192,302

100,000

1,000

End of March2018

End of March End of March
2019
2020

0

100
50

2,000

0
50,00023,978

0

185

2,919
29.1

20.0

300
250

4,197
40.0

350
305

0

FY2017

27,523
17,861

18,490FY2018FY2019*Asset trust, Trust that Connects Family, Trust that Passes on Thoughts,
Trust that Connects Family (savings-type investment trust type)

HIROSHIMA BANK INTEGRATED REPORT 202030

Strategies for Individual Businesses

Initiatives Aimed at Digital Transformation
Amid the trend of rapidly advancing digitalization,
the Bank believes that the initiative aimed at digitaltransformation (transformation of business structure
through digital technologies) is one of its importantmanagement strategies.
Based on the major premise that we take root in
our relationships with the local society as a regionalbank, the Bank will continue taking on the challengeof revitalizing the regional economy and improving
convenience for corporate and retail customers
centered around the local communities by utilizing
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 populationand the concentration of people in the major cities.
Amid these conditions, we cannot be optimistic

about the environment surrounding the Bank. On
the other hand, we are also aware that these threats
may become major opportunities if we deftly ridethe current of digitalization by utilizing our strengths,
namely, “relationship with regional customers,” “vastwealth 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 theManagement Planning Division as a departmentthat conducts evaluations over a mid- to long-term
perspective to create drastically new businesses,
including non-financial businesses. In February 2018,
we reorganized the office as the “Digital Innovation
Office,” by integrating smartphone app functions,
31

HIROSHIMA BANK INTEGRATED REPORT 2020

positioning the office as a department that plays acentral 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 havebeen strengthening our organization to “strengthen
initiatives toward digital transformation,” which are
speedier and more challenging.

Digital Strategy“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 alliance withother businesses
3. Promotion of data utilization.

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 thesocial infrastructure, we are aware that digitalization
is a priority issue that must be addressed as soon
as possible. Based on this understanding, we arecommitted to taking on a variety of initiatives aimed
at the “fundamental overhaul of existing services andchannels,” including the “release and enhancementof our banking app,” “introduction and a graduallaunching 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 mustbuild a business model that will contribute to theimprovement of convenience for regional customers
and the revitalization of the regional economy over theEnvironmental analysis

medium- and long-term span, while always foreseeing
the trend of the times. For this purpose, by focusing
on the “utilization of data,” we will constantly take on
new challenges, aiming to create new businesses basedon open innovation, through means such as “alliancewith various entities in industry, academia, and thegovernment centered on the local 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 theunderstanding that digital strategy will be the mostfundamental strategy for the Bank over the next ten
years.

Strategy / Policy for responding

Threats
Falling birthrate and aging society
Concentration of people in major cities
Negative interest rate policy
Regulatory easing and entry from other industries

Opportunities (Chances)

Promote drastic digitaltransformation while taking rootin our relationships with the local
society as a regional bankCreate new businesses and open
innovation with an eye toward
alliance with a variety of players,
including those in other industries
Full-fledged efforts to utilize data

Commodification of financial services and increasing competition
Rapid changes in channels and devices
Development of open innovation
Development of technology that utilizes data (IoT, AI, and API)
Creation of legal framework for utilizing data

Strengths

Relationship with regional customers

August 2016
Formed the New Business
Development Promotion OfficeFebruary 2018
Reorganized into the Digital
Innovation Office
April 2019
Promoted to the Digital
Strategy Division

Specific initiatives
Creation of new business andopen innovation
Hiroshima Sandbox
Publication of API

Utilization of data
Developing a data collaboration platform

Internal business efficiency improvements
RPA

Digitalization of existing businesses
Advancement of Hirogin App
Promoting cashless payments
Wallet+ service

Vast database of customer information, etc.

HIROSHIMA BANK INTEGRATED REPORT 202032

Strategies for Individual Businesses

Hirogin’s Digital Transformation (DX) Efforts
Advancement of Hirogin App
Hirogin App is positioned as a new customer contact point to emerge after branchcounters and ATMs, which is closer to customers and can be very convenient. We
have enhanced its functionality since the February 2019 update. Its slogan is “Hirogin,always in your hand.”Aiming to make it a portal app serving as an entrance and a starting point forcarrying out daily transactions, from balance inquiry to banking transactions,in simple operation, we will continue to add new functions and enhance its
convenience.
[Functions added in the past]November 2016: Hirogin App released; function of open account request (Hirogin
Carp Branch); FAQ function using automated response (AI support)April 2017: Security check function added
February 2019: Balance inquiry function added
August 2019: Biometric identification for internet banking logins introduced
December 2019: Function to request opening of investment trust accounts added
April 2020: Linkage with online brokers (SBI Securities and Rakuten Securities)

Promoting cashless payment
We help customers issue “multifunctional IC employee
identification cards,” which hold several brands ofelectronic money and can serve as their employee
ID cards. Customers have put these IC cards toeffective use for reducing administrative workload
and improving efficiency of internal management
processes for security (entry to and exit from the office)management with their personal identification function
and workstyle reforms by digitalizing attendance
management, besides their cashless payment function.
We have stepped up amobile payment service,whose use has recently
increased rapidly. We
have worked to expand
handling of charges fromthe Bank’s accounts toservices, and in June 2020, we introduced COi Pay,
our proprietary mobile payment service. It is a very
convenient service, accepted at shops bearing “Ginko

Pay” mark across Japan.
Users do not need tocharge COi Pay because
payment is immediately
debited from the users’bank accounts, thepayment is made to themember shops on thenext business day at theearliest.
Going forward, we willcontinue to actively work
toward contributing topromotion of cashless
payment in the local
market.

Promotion of workstyle reforms with utilization of RPA
As part of measures to reform work styles, we areproactively focusing on “RPA (Robotics Process
Automation),” aiming to improve the efficiency ofinternal business operations.
After demonstration tests, we began the full-fledged
application of RPA to all business operations at Head
Office in October 2018. While seeking to make a drastic
improvement of cost structure, we will take steps to33

HIROSHIMA BANK INTEGRATED REPORT 2020

review the allocationof resources, aiming
to provide higher
value-added services
by taking maximum
advantage of thesaving time.

Digital Strategy

Regional Data Collaboration Platform Creation Demonstration Project
The Bank participates in the “Regional Data
information provided by diverse companies in different
Collaboration Platform Creation Demonstration
business formats, and integrating such information
Project,” which was adopted by “Hiroshima
into a single platform so that possibilities of creating
Sandbox,” a project outsourced by the Hiroshima
new services are explored, which was not possible byprefectural government, jointly with SoftBank, The
individual companies.
Chugoku Electric Power
Company, and Izumi. The
Solutionsdemonstration projectis being carried out withan aim to contribute to
Purchasing activities
Efficient movement
Efficient logistics
Utilization of idle assets
establishing services bypromoting data distribution
Data collaboration platform (temporary name)among companies in
Hiroshima and improving
Other consortium
Purchase analysis Population
Finance-related Infrastructure (power)Open
convenience for the-related
movement-related information
information
data
Data
collected
from the demonstration project
information-related data
prefecture’s residents, byConsortium data
Open data
Other consortium dataprocessing and analyzing

For fulfilling 11,000 days of post-retirement life! Connected Seniors Consortium
We are part of the Connected Seniors Consortium(The Japan Research Institute, Limited, etc.) for the
purpose of realizing and commercializing of the subME
service which provides functions to utilize accumulated
data for helping senior citizens enjoy active life fora long period. As the era of 100-year lifespan isapproaching, the consortium is conducting a projectto test a subME digital
Users (elderly people) recreate
twin, which recreates
their information in cyberspace
the information of the
Input of information
user in cyberspace, isin day-to-day lives
used to help the elderly
make their long later life
Advice provision
subME
according torealME (myself)(avatar, other self)
the situationfrom the age 70, whenmany people retire fromwork, fulfilling through their own efforts. What kindof contribution can Hiroshima Bank make as a regional
financial institution?
We are now thinking about this question seriously,
in anticipation of the service’s commercial introduction
in 2022 or later.

(1) A s a partner to talk withdaily, subME supports
users along withaccumulating knowledge
and information.

(3) At the end-of-life phase,(2) subME creates new communication
opportunities by using accumulated
subME plays a role as proxy to
information when users are healthy
communicate to the users’ family
and active. When the physical strength
members and assistance providersof users declines, subME provides
with accumulated information.
advice and encouragement to help theusers maintain their health.

YEN HIROSHIMA© PROJECT・YEN HIROSHIMA© PROJECT is the brand name of an innovation hub for collaboration across the region
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 Japanese word
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 2020

34

Initiatives for Sustainability

Our Approach to Corporate Social Responsibility (CSR) and SDGs Initiatives
Hiroshima Bank Group’s approach to corporate social responsibility (CSR)
The Hiroshima Bank Group has accumulated its history
while receiving support from many customers as aregional leading bank group.
For being a bank group indispensable for the region
until and from now, we aim to gain trust from all
stakeholders and further enhance its existence valueby actively promoting all CSR aspects such as social
contribution and environmental protection, in addition
to contributing to the sustainable growth of theregional economy through its businesses.

Creating a good cycle in the entire region

Enhancing the sustainability of the Hiroshima Bank Group

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.

Protecting the
local environment(Environment)

Nurturing local
culture and people(Society)
1. Contribution to the community

2. Diversity

1. Reduction of environmental impact(1) Promotion of local culture(1) Promotion of work-life(1) Environmental protection activities(2) Support for local sports(3) Support for financial education(4) Social welfare activities(2) Offering environmentally aware productsbalance(2) Support for activities ofdiverse human resources(3) Forest protection activities(4) Social awareness-raising(5) Promotion of paperless operations(5) Participation in community activities

Supporting the local
economy and industries(Economy)
1. Business activities(1) Compliance(2) Corporate governance(3) IR activities(4) Dividends and tax payments

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

Promoting CSR management

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HIROSHIMA BANK INTEGRATED REPORT 2020

CSR Basic Policy, SDGs Declaration

Hiroshima Bank Group’s SDGs

Hiroshima Bank Group SDGs Declaration

In September 2019, the Hiroshima Bank Groupdeveloped the Hiroshima Bank Group SDGs
Declaration, in which the Bank’s policy for SDGs
efforts is summarized, to help achieve the “sustainable
development goals (SDGs)” adopted by the United

Nations, aiming to contribute to solving social andenvironmental issues of the region and achieving
sustainable growth through provision of high valueadded financial services and by coordinating efforts bygroup members.

1. Region
Efforts to revitalize local communities and economy• We will contribute to revitalizing the regional economy by supporting sustainable growth of local industries and companies.
• We will contribute to building a livable town in the region through efforts for regional revitalization.

2. Aging society
Provision of financial service suited to aging society• We will practice customer-first business operation, and support stable asset formation for the future and smooth inheritanceand business succession by promoting financial and economic education and making optimum consulting, proposals, etc.
• We will contribute to improving customers’ lives and living by offering advanced and highly convenient networks and financial
services from which customers can choose according to their stage of life.

3. Human rights
Diversity and inclusion• We respect human rights of all people, and diversity of society and individuals, and will contribute to creating a society where
every person can have a fulfilling job and lead a satisfying life.

Building a community where local customers can live in peace• We will never associate with any antisocial organization that threatens the order and security of the citizenry, and will strive toenhance measures to counter financial crimes, including money laundering and financing of terrorism, and contribute to creating a society where customers can live in safe.

4. Environment
Response to Climate Change and Global Warming• We will contribute to the realization of a sustainable society while working to reduce climate change risks by working to reduce
the environmental impact on local communities and engaging in environmental protection activities of our home area including
the Seto Inland Sea as well as by supporting customers’ businesses and initiatives to conserve the environment.

Efforts to raise awareness for SDGs
Hiroshima Bank Group SDGs Handbook
We have issued an SDGs Handbook which
explains SDGs and plainly outlines theHiroshima Bank Group’s efforts underthemes of “region,” “aging,” “humanrights” and “environment.”“Hirogin free college” SDGs seminars
We held a workshop-style seminar where
the 2030 SDGs Card Game was used todeepen understanding of the nature of
SDGs.
Employee training by job grades
We raise awareness of employees by holding
employee training by job grades, to deepen
understanding of the nature of SDGs andour Bank’s effort policy for them.
HIROSHIMA BANK INTEGRATED REPORT 2020

36

Initiatives for Sustainability

Response to Climate Change andGlobal Warming

Hiroshima Bank has established Environmental Protection Activities in its Corporate Behavior Charter, and has positioned environmental protection as the foundation of bank management. In addition, the Bank has announced that it will actively pursue
environmental protection activities in the Environmental Declaration and the Hiroshima Bank Group SDGs Declaration.
We will continue to contribute to the realization of a sustainable society while working to reduce climate change risks by working to reduce the environmental impact on local communities and engaging in environmental protection activities of our homearea including the Seto Inland Sea as well as by supporting customers’ businesses and initiatives to conserve the environment.

Response to the Task Force on Climate-related Financial Disclosures (TCFD)In March 2020, the Bank agreed to the Task Force on
Climate-related Financial Disclosures (TCFD)*1, amid aninternational emphasis on responding to social changes caused by climate change.
We will continue to strengthen our response to
climate change, and will enhance our disclosures on

climate-related risks and opportunities based on TCFD
recommendations.

*1 R ecommendations of the Task Force on Climate-related Financial Disclosures (TCFD)
In December 2015, the Financial Stability Board (FSB) established the Task Force on Climate-related Financial Disclosures (TCFD) in response to the intentions of the G20
Finance Ministers and Central Bank Governors. In June 2017, TCFD published the final report outlining recommendations for encouraging voluntary disclosure by companies. The recommendations are not only for the financial sector alone, but for all firms.

37

Governance

When the Board of Directors and the Management Board formulate the Hiroshima Bank Group
SDGs Declaration, the status of responses to TCFD are reviewed and future measures are considered.
In formulating management plans, we use “climate change risks” as a possible risk scenario
for formulation of bank management, and assess the degree of impact and likelihood from bothquantitative and qualitative perspectives.

Strategy

The Hiroshima Bank Group SDGs Declaration stipulates “the environment (measures to deal with
global warming and climate change)” as a priority (materiality) of our SDGs, and is working to
reduce climate change risks through the provision of high-value-added financial services, including
eco-friendly financing products.

RiskManagement

The Bank recognizes that the risk of climate change-related transition and physical risks affect its
business and financial condition. In the future, we will identify and analyze the impact of theserisks and consider the establishment of a management system within the comprehensive risk management framework.

Indicators andTargets

Calculating our greenhouse gas emissions, we are working to reduce them. (See page40.)

HIROSHIMA BANK INTEGRATED REPORT 2020

Initiatives for Environment

Efforts to combat climate change by exerting financial intermediary functions
Promotion of eco-friendly finance
The Bank actively provides financial support to companies and projects that contribute to measures for climate change through its eco-friendly financing system,
aiming to realize a low-carbon society and to transition
Hirogin Solar Power Loan
System features vailable for users of the Feed-in Tariff
A
Scheme for Renewable Energy
Applicable up to 15 years of loan period

to a decarbonized society, including the utilization ofrenewable energy.

Track records of eco-friendly finance(¥ billion)

39.4
32.2

40.0
35.0
30.0
25.0

Global environmental support system Eco Harmony
System features
Available for companies that have obtained ISO
14001 certification or Eco-Action 21 certification,
aiming to reduce the environmental loadAvailable for purchases of low-emission vehicles,
installation of clean energy equipment, andacquisition of emission credits

22.3
15.3

20.0
15.0

14.6
6.1

15.3
7.2

8.5

8.1

10.0
5.0
0

6.9

7.2

End of March End of March End of March End of March
2017
2018
2019
2020
Hirogin Solar Power Loan
Global environmental support system Eco Harmony

Adoption as the Ministry of the Environment’s ESG Financing Promotion Project
In September 2019, the Bank became the only financial
institution in the Chugoku region that was designated by theInterest Subsidy Program for Regional ESG Loan Promotion

Projects implemented by the Ministry of the Environment andthe only financial institution decided to be supported by the
FY2019 Regional ESG Financing Promotion Project.

Project name

Description

Regional ESG Loan
Interest Subsidy
Project

In order to promote ESG financing by regional financial institutions and promote ESG
management by borrowers, interest subsidies are provided for renewable energy and energysaving capital investment, which are highly effective in reducing CO2, for a maximum of 1%
per annum for a period of three years.
(Applications are being made to be a designated financial institution in FY2020 with a targetof 10 billion yen for the implementation of ESG loans that involve environmental factors.)

ESG financing
promotion projects
in the region

In order to promote ESG financing by regional financial institutions, support will be provided forregional market surveys of promising green projects, etc., uncovering potential and profitability,
evaluating business feasibility by considering ESG elements in the target areas, and establishing
their processes.

Investment in Green Bonds
Through investments in Green Bonds, the Bank supports companies and individual customers who actively

engage in social contribution activities and we also
actively promote social contribution activities.

HIROSHIMA BANK INTEGRATED REPORT 2020

38

Initiatives for Sustainability

Efforts for reducing environmental load
New environment-conscious Head Office building under construction
The new Head Office building, scheduled for completion in February 2021, aims to be an environmentally friendly
office building that uses the latest technology to conserve electricity and water resources.
West side

East side

Rooftop greening

Outdoor unit yard
Machine room

Compact gas
cogeneration systems❶ Wind tower (gravity ventilation)❷ Pneumatic radiant air conditioning❸ Solar radiation shading with eaves
Task &
ambient lighting

Adoption of water-saving equipment

Low-E glasses

LED lighting(rest rooms, etc.)
Adoption of various
control systems

Use of timber produced
in Hiroshima Prefecture
BEMS❺
Parking lot
Parking lot

Terrace❼ Greening of lower part and terraces❽ Mist spraying for lower part

Parking lot
Parking lot
Entrance

Parking lot
Roadway

Rijyo Street

Use of rainwater❻❹ Geothermalheat pumpEast-west cross-sectional view of parking lots

[Environment-conscious plans for the new Head
Office building]Heat
1. Wind tower (Ecovoid/gravity ventilation):
Securing gravity ventilation routes for the office at thefour corner of the building, creating a wind flow toincrease natural ventilation effect
2. Pneumatic radiant air conditioning: Controlling
the temperature of the ceiling surface to provide a
comfortable air-conditioning environment and mitigating the indoor temperature
3. Solar radiation shading with eaves: Installingeaves that are finely spaced on the exterior to shield
the sunlight while securing a view
4. Geothermal heat pump: Burying undergroundheat utilization piping to use for air-conditioning theentrance of the Head Office
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HIROSHIMA BANK INTEGRATED REPORT 2020

5. BEMS (Building Energy Management System):
Visualization of energy consumption

Water
6. Use of rainwater: Reuse of rainwater for miscellaneous purposes such as plant watering and toilet
flushing

Heat island mitigation
7. Terrace greenery: Greening the lower part and thesecond-floor terrace to create comfort and mitigate
heat island effect
8. Mist spraying: Spraying dry mist from the piloti areafacing the Rijyo Street to create cool spots and mitigate
heat island effectInitiatives for Environment

Environment-conscious office activities[Reduction of the amount of electric power, gas
and copy 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.

their awareness so that they will set temperature for air
conditioners in a conservative manner.

[Room temperature control in summer and winter]
We are working to reduce electricity and gas consumption (reduce CO2 emissions) through controllingroom temperatures in summer and winter. Employees
are allowed to be dressed comfortably based on their
judgment in accordance with the TPO, and heightens[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.

[Use of environment-conscious business vehicles]
For reducing environmental load, we use low-emission
cars for business to eliminate greenhouse gas emission.

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

21,113

19,881

20,371

20,55918,795

Amount of CO2 emission (t-CO2)

15,682

14,40014,631

14,665

13,096

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,
employees and their families planted a total of 1,500
saplings such as Japanese chestnut, Japanese oaks,
beeches and wild cherry trees in Hirogin no Satoyama(village forest) (Akiota-cho, Yamagata-gun, Hiroshima
Prefecture; 3.0 ha) over five years from 2010. Furthermore, we have maintained the village forest by, forexample, removing undergrowth since 2015 to growthe trees planted in the forest.
Activities for maintaining

Hirogin no Satoyama

As part of environmental protection activities, our new employees
planted saplings of Japanese cherrytrees at the Bank’s Hirogin no Moriseminar-training center over theten years from 2010 to 2019. A
total of 60 Japanese 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,” wewill continue our efforts for protecting rich nature.
HIROSHIMA BANK INTEGRATED REPORT 2020

40

Initiatives for Sustainability

Initiatives to Revitalize Local Communities and Economy
The Bank supports SDGs efforts of its business partners
in order to make the region a better place and to leadto sustainable growth. As a regional financial institution, we actively promote and support SDGs efforts oflocal companies, because SDGs initiatives, which arebecoming a social requirement for companies, lead tobusiness expansion, innovation, and other opportunities, and are also effective in securing human resources. We will realize sustainable growth for both theregion and the Bank by resolving ESG issues throughour business activities.

Supporting SDGs Initiatives by Local Companies
Handling of privately placed bonds (SDGs Type): Community Development
Contribution Type and Corporate SDGs PR TypeThrough the issuance of these privately placed bonds, we will make donations within 0.2% of the issue amount of privately placed bonds with the aim of contributing to local communities, and publicize SDGs efforts of the issuing companies.

Donation ceremony for Community
Development Contribution Typeprivately placed bonds

Example of corporate SDGs PR advertisement

MYKITT Co., Ltd., a beauty salon
company, has donated a graduation trip to a local child care facility,
Hiroshima Shudoin, for children
graduating from elementary school.
We received comments of joy saying,“It has become a support that is truly
needed.”Handling started in November 2019 -- 45 cases worth ¥5.37 billion handled as of the end of June 2020

Handling of Hirogin SDGs support services
This is a service that checks the status of SDGs efforts of business partners using the Bank’s
original check sheet, feeds back the results, and supports the formulation of the SDGs Declaration as external PR. SDGs Formulated declarations will be provided in the form of datathat can be posted on the website.

Handling started in January 2020 -- 68 cases handled as of the end of June 2020

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HIROSHIMA BANK INTEGRATED REPORT 2020

Initiatives to Revitalize Local Communities and Economy

Creation of shared values with regional industries
Hiroshima Open Accelerator 2019
We are working to create new businesses through open innovation that links the management resources of companies in
Hiroshima Prefecture with the services of startup companies
nationwide. In fiscal 2019, eight cooperative proposals wereadopted.
In 2020, the event was held for the second time, and webegan recruiting participating companies in July.
Local companies

Startups nationwide
Providing management
resources such as customer
base and funds

Providing collaborativeideas and distinctive services

Creating new
businesses

Providinga platform

Operation
Hiroshima Prefecture: Program implementation
Hiroshima Bank: Program implementation
Creww Inc.: Platform provision, program implementation
Hiroshima Venture Capital Co., Ltd.: Advice and investment in startups

More than 4,000 companies
registeredon Creww platforms

Investment in Hiroshima University’s first certified fundWe invest in research seeds owned by Hiroshima University and other universities and research institutions in Hiroshima Prefecture, as well as venture companies initiated by researchers, students, and other concerned parties, andcontribute to regional revitalization through sustainable development of regional economies and job creation.
LP

GP
Partnership agreement
LP investment

GP investment

Designated universities

Expected expansion ofdesignated universities

Cooperative VC
Hiroshima University and Investment
Limited Partnership for Supporting Venturesfrom Universities in Hiroshima Prefecture
Designation

Investment execution

SupportVenture company started byuniversities in Hiroshima Prefecture
Listing, M&As, etc.

Investment execution
by operating funds

To grow into a company that contributes
to regional economic development

In order to enhance support for investees, we will seek the cooperation of Kyoto University Innovation Capital Co.,
Ltd., which has a wealth of experience in investing in research seeds and supporting commercialization. In this way,
we will seek to discover investment destinations with innovative technologies at an early stage and accelerate theimprovement of corporate value and work to foster a momentum for commercialization at universities in Hiroshima
Prefecture.
We will donate part of the investment income from this fund to Hiroshima University to expand the circle of thestartup ecosystem, which will lead to the creation of next-generation research seeds.
HIROSHIMA BANK INTEGRATED REPORT 2020

42

Initiatives for Sustainability

Human Resource Strategies
Basic policy
The Bank encourages each and every employee to prohuman resources able to quickly respond to changes
actively contribute to the regional community throughand create value for local communities” and “Promotebank operations with pride, grow on their own, anddiversity,” in accordance with the human resource
work actively in and outside the Bank until 65 years
strategy of Mid-Term Management Plan 2017.
old. In light of this, the Bank has developed human resource strategies to enhancequality (skills and abilities)
Foster human resources able to quickly respond to changes and create value for local communities
and awareness (motivation
Develop professionalism in all employees
and job satisfaction) of theBank’s employees and to
Promote “workstyle reform”
contribute to improving its
Create job satisfaction
Realize a pleasant workplaceorganizational strength.
Specifically, the Bank is
Promote an environment where diverse human resources canworking to increase job satisactively work by fully utilizing their personality (promotion of diversity)
faction of employees, centerExhibit strengths of all employees
ing on initiatives to “Foster

Strengthening of human resource development
In the human resources strategy of the Mid-Term Management Plan 2017, we have put a priority on “Foster
human resources able to quickly respond to changes
and create value for local communities.”

We believe that strengthening human resource
development is indispensable in order to realize ourmanagement vision of “building a reliable Hiroshima
Bank Group united through trusting relations with theregional community.” Based on this idea, we are implementing the following measures.

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 is important for developing new employees as core personnel.
We set out a job rotation rule where new employees
experience multiple operations in a systematic way intheir first year for an understanding of a basic flow of
the bank business 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(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.

43

HIROSHIMA BANK INTEGRATED REPORT 2020

their own career path and become a highly specialized
talent.
Furthermore, based on the concept that new employees should be educated organizationally, we haveestablished an instructor system to strengthen theirmind and integrity as a person, in addition to theiroperating abilities.

Specific example of active learning
Theater learning: a training program throughtheatrical experience for the improvement ofcommunication skills and training of teambuilding
Blind soccer: a training program for improving mutual understanding and communication skills and generating a sense of unity
through soccer playing with a blindfold

Human Resource Strategies

Development system for three years after joining the Bank for the new employees in FY2019 (job rotation rule)
First year (new employee)

Second year

Third year

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

Acquiring an ability to
produce results on their own

Using ingenuity and achieving
stretched goals set for themselves

Banking operations
Sales
In charge of area retail and loans (consulting advisors)administration(until June)
Asset management operations
Consulting advisors (and in charge of area retail)To be placed in both operations when possible

Training system for personnel in charge of each operation (FY2019)
Second to fourth years

Entry-level employees
development program
Banking
Basics of loans
Feasibility study
Individual loans
Basics of individual loans
Individual loan
center training
DM Center training
Entry-level employees
development program
Asset management
Basics of financial
instruments
Inheritance measures

Fifth year and after

Loan trainees for beginners (short-term)
Persons in charge of forex operations
Follow-up training (review/mind strengthening)

New employee introduction training (overview of bank operations/basics for new workers/manner/basics of various operations)

Sales administration

Asset management

CommonBankingFirst year (new employee)Contact persons for forex consultation
New AR

Follow-up of AR

Training for international
operations advisors

Investment Banking
Division trainees Training requiredfor Meister

Corporate business upskilling
Case study
Counselor banking

Asset management operations (inheritance consulting/real estate utilization)
Asset management operations (asset management)
Asset management operations (insurance consulting)Asset management operations (basics of inheritance)
Basic business insurance

Approval stamp
assistant certification

Higher level of approvalstamp assistantGoals

FP upper level
Learning for
CSPFP 1st grade
AM operations
for corporations

International
operations advisors

Meister

Feasibility study(FP/Legal affairs/
Finance 2nd grade)

Banking
operations
Meister

Practical FP(CSPFP 1st grade/Legalaffairs/Finance 2nd grade)

Consulting
Meister

Advanced asset
management(CSPFP 2nd grade)Assetmanagement
operations Meister

Persons in chargeof testamentary trust
Inheritance consultation

Managers’ assistantcertification

Managers’
assistant- advanced

Number of trainees in FY2019
Entry-level employees development program

Training required for Meister

Number of certified Meister

Operations

Number oftrainees

Classification of Meister

Number oftrainees

Number of certified
persons for FY2019
23 persons

Banking

110 persons

Banking operations

48 persons

Individual loans

66 persons

Consulting

9 persons

5 persons

Asset management

116 persons

Asset management operations

42 persons

22 persons

Total

292 persons

Total

99 persons

50 persons

HIROSHIMA BANK INTEGRATED REPORT 2020

44

Initiatives for Sustainability(3) Creating learning opportunities
learning using their household computer and smartphone. In this way, we encourage employees to develop themselves.

We have created a learning environment by holding“free college” seminars on Saturday at which attendance is voluntary and adopting the “home learning
support system @Home-Web” which enables online

2. Strengthening expertise
As an environment surrounding the financial industry is increasingly sophisticated, we are required tostrengthen the expertise of each and every employee
to respond to customer needs reliably. Based on thisconcept, we are taking various measures including

establishing the Meister System as a final goal of operational skills for employees and proactively sending
employees to business schools in and outside Japan.

3. Development of future executives (for strengthening governance into the future)
The Bank holds the Hirogin Management School fordeveloping future executive candidates with support
from the Keio University Graduate School and GLOBISCORPORATION to strengthen the “ability of thinking
befitting of a corporate manager” in considering management strategies and business reform.

Under the program, participants learn the leadershipand management theory and business frameworks
with specific cases as examples and ultimately makesuggestions on management.

Training system for the management position (managers and supervisors) (FY2019)
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
entryNewmanagers

New branchmanagers

Follow-up of new
branch managers

Responsible
person for
financial
product sales

Strengthening of
consulting forbranch managers

Management
for supervisors

Sales

Public relations

Loans

Overall (by position)
Overall (by operation)
45

Supervisors

New responsible
person for loans

Strengthening of
consulting skills(Banking)· Necessary
operational knowledge

New responsible
personfor public
relations· Necessary
operational
knowledge

New responsible
person for sales· Necessary operational
knowledge

HIROSHIMA BANK INTEGRATED REPORT 2020

· Feasibility study· Consulting sales

Banking for
responsible
persons· Promotion of loans

Advancedbusiness
insurance
Responsible person for sales· Strengthening of administration
process system andstricter administration

Strengtheningof consulting skills(Asset management)· Strengthening ofasset management
ability

Asset management
for corporations· Customer
protection
management· Compliancestructure· Strengthening ofasset management
ability

Management for generaland branch managers

Human Resource Strategies

Hirogin Management School for selective employees conducted in FY2019
Level

Main contents

Intermediate

Leadership application
Human resource development
and question skills
Facilitation for independence

Upper

Business strategies
Technovate strategies

Practical

 mbition as a leader andA
integrity as a person
Organizational reformAcquisition of competitive
advantage through business
innovation

Lecturer

Number of trainees

Program

19 persons

Training for
new managers

GLOBIS CORPORATION
24 persons

Business school attachedto the Keio University
18 persons
Graduate School

Total

Rank-based training programs for managers conducted in FY2019

61 persons

TargetFrequency Number of trainees

Persons promoted to
managers

Twice a year

41 persons

Training for new
New branch managers
branch managers

Twice a year

15 persons

Follow-up
Three months after assigned
training for new
as new branch managers
branch managers

Once a year

20 persons

Management
training for
All general and branch
general andmanagers
branch managers

Once a year 178 persons(Note 1)

* All programs include lectures for strengthening management skills, human resource management,
thorough compliance and elimination of harassment.
(Note 1) We have held twice a year every year, but it was not held in the second half of 2019 due tothe small number of new branch managers.

4. Fair evaluation and treatment
To attain an objective of the human resource system,or to enhance the quality and motivation of employees, it is necessary to offer fair treatment based on fairevaluation and develop them by providing feedback ofevaluation results.

For this purpose, the Bank has clarified our “missions”
and “evaluation criteria.” Furthermore, we evaluate
both results and actions based on target management
for well-balanced evaluation between results and skills,
which is reflected in the treatment of our employees.

Diversity and inclusion
Companies’ perpetual growth essentially requires theability to innovate continuously according to changesof the times. Such innovation will be realized whenemployees with diverse viewpoints and values exhibit
their abilities based on their intention and awareness.
And this necessitates an environment and corporate
culture where diverse human resources can continue
to work lively.

The Bank regards the initiative to “promote diversity” as one of the major human resource strategies in
the Mid-Term Management Plan 2017 and conducts: 1.
recruitment of specialists with diverse values and skills;and 2. support of career development of women.

1. Recruitment of specialists with diverse values and skills
We recruit about ten specialists such as IT specialists
and lawyers every year as mid-career employment.
For creating an environment where they can exhibit
their abilities without quitting the Bank, we hold agathering with mid-career entrants every year to gather their opinions and support the creation of networks
among them.

Recruitment of skilled persons for the past three years
Category

FY2017FY2018FY2019Specialists at the
Head Office

7 persons

8 persons

8 personsWork-ready humanresources at branches

3 persons

2 persons

2 persons

2. Support of career development of women
Currently, the male-female ratio is almost 50:50 among hires of new graduates at the Bank.
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 2020

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Initiatives for Sustainability[Work-life balance support system]“I want to live with my family because I got married,” “Iwant to avoid my child from changing schools,” “I wantto live near my parents because they need care” — ouremployees have different needs arising from changes intheir lifestyles. Catering to such needs, the Bank offers acareer course where employees do not transfer to otherwork 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
and then opt for the work-location-restricted course
when it is necessary to live with their family.
Regarding the balance between childcare, nursing careand work, our systems offer more than legally required.
For example, we require employees to take six-weekmaternity leave before birth (14 weeks if multiple births)
so that they can rest without hesitation. In addition,

employees can choose from 6 hours, 7 hours, and 8hours for short working hours. Furthermore, in cooperation with Hiroshima Prefecture, we have an authorizedchildcare facility in the office for employees returning towork. For nursing care, we have established systems suchas caregiver leave and time off for caregivers as well as ashorter 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 a shorter
working hour system to promote communication amongcolleagues having similar problems and help them learn
together. As a result of these efforts, there are almost no
employees who leave the Bank due to childbirth and 65
employees newly took a childcare leave in FY2019.

Work-life balance support system of Hiroshima Bank
Six weeks
Eight weeks
Entrance into
beforeafter
elementary
Marriage Pregnancy childbirth Childbirth childbirth 1 year-old 2 years-old 3 years-old school 6th grade

Caregiver leave(365 days in total per person)

Maternity leave before Childcare leave
and after childbirthTime 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))
Care-cure leave (seven days a year)* Half-day time-off possible

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
from late-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 authorizedchildcare facility in the officehas begun to be used together
with Hiroshima Prefecture.

Change of course,change of base area

* Gray rectangles indicate the same content as legally required.
* This selection of 6 hours or 7 hours for the purpose of childcare is available up to 5 years and a half (2010 days) in total for each eligible child

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.

47

HIROSHIMA BANK INTEGRATED REPORT 2020

In not a few cases, female employees lose confidence
and give up on their career development while raisinga child after giving birth as they find it difficult to workin the same way as before. To avoid such cases, theBank offers opportunities for younger employees toHuman Resource Strategies

contemplate a mid- to long-term career plan before
they experience the life events. At the next stage, theBank provides opportunities for potential managers andsupervisors to improve their skills and mindsets and for
managers and supervisors to interact with other employees of the same gender that they can share theirworries with.

Through these initiatives, the number of female
managers and supervisors of the Bank has currently increased to 172 (12.5% of all managers and supervisors),
1.9 times compared to five years ago.
In the future, the Bank will further take measures toeliminate the stereotype of gender-based division oflabor and consider new positions for proactive female
assignment. Also, we are considering measures for gender diversity such as the promotion of understanding ofLGBT.

Third year after
joining the Bank

Before childbirth

During childcare period

Mid-career employees

Managers and supervisors

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

Upskilling seminars
Meetings forcross-industrial
exchange

Communication eventsfor female managers
and supervisors

Number of employees (by gender)
As of April 1, 2010

As of April 1, 2020
Men

Women

Men

Women

Managers

544 persons

12 persons

Managers

535 persons

19 persons

Supervisors786 persons

50 persons

Supervisors

670 persons

153 persons

General1,074 persons

1,298 persons

General1,039 persons

1,227 persons

3. Employment of disabled persons
The Bank actively employs disabled persons based on
its social mission: “Support independent living of disabled persons.” To create a workplace that gives thema sense of satisfaction with their lives and jobs insteadof just a place for social engagement, the Bank offers

jobs and work environments suitable for different
types of their disabilities and aptitudes. In addition, we
have follow-up system to prevent turnover. As of June
1, 2020, disabled persons account for 2.2% of ouremployees, which is above the legal employment rate.

Work placement

Duty

Work details

Remarks

Work Support
Center

Generalaffairs

Printing bills and business cards, sealing andsending letters, sorting and sending documents, and printing operations, etc.

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

General Affairs
Department

Cleaning
Generalaffairs

Cleaning the Head Office

People with hearing impairments and otherdisabilities work as a team

BranchGeneralaffairs

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

They are employed at their local branch so thatthey can commute from home.

Administration
Center

Generalaffairs

Data entry (tax, currency transfer, etc.)

Enhancing the teaching system so that even
beginners can perform data entry operation* Beyond the above, the Bank is developing jobs suitable for characteristics of disabled persons in divisions of the Head Office.

HIROSHIMA BANK INTEGRATED REPORT 2020

48

Initiatives for Sustainability

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 in theworkstyle reform, we launched the Workstyle Reform
Promotion Headquarters led by the President in October 2017.
The Bank regards the reform of culture, reform ofoperations and reform of systems as the core of ourworkstyle reform, and has been promoting well-balanced reform. We realize the reform of culture bychanging mindsets and behaviors of employees

through the reform of operations and reform of systems, and push forward with the reform of operations
and reform of systems through the reform of culture.
Through this interplay of the reforms, the Bank is creating an employee-friendly work environment.
As a result of these efforts, overtime hours havedeclined by 32% during five years from fiscal 2015.
In addition, the number of days of paid leave taken
increased to an average of 12.7 from 10 over the five
years.
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

Reform of systems

 Efforts for enhancing labor productivity” was added to the items of the “result evaluation” and “action“
evaluation” of employees.
 doption of an electronic approval workflow - Paperless meetingAUse of tablets at branch counters - Trial of remote workL owered upper limit of hours regarding application of special clause under the agreement based on 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

Average number of paid leave taken per person(hours)
20(Days)
15

15.12
15

13.88

Targets for FY2020:
Within 10 hours
12.28

11.13

12.1
10

10.33

10.1

10.0

12.7

10.1

10

Targets for FY2020:
13 days or more

5

5

0

49

2015

HIROSHIMA BANK INTEGRATED REPORT 2020

2016

2017

2018

2019

2020

0

2015

2016

2017

2018

2019

2020

Human Resource Strategies

Health of employees
Based on the recognition that keeping and enhancing
the mental and physical health of employees and theirfamilies are indispensable for sustainable growth ofcorporations, the Bank formulated the “Hiroshima Bank
Health Management Declaration” in August 2018.
Based on the guideline that sets the direction of theefforts, the Personnel & General Affairs Division andrelated organizations and groups inside and outside
the company cooperate with each other under thesupervision and order of the president and director
in charge of the personnel and human resources tooperate and promote the system.

We are working for realizing health management,with “efforts for keeping and enhancing health,”“creating a pleasant workplace with job satisfaction”
and “promoting close relationship with and contribution to the regional community” as priority items to beaddressed.
As a result of these activities, in March 2020, wewere recognized under the 2020 Certified Health &Productivity Management Outstanding Organizations
Recognition Program.

Initiatives 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, andactively recommends that employees take a comprehensive health screening and a cancer examination.
We have substantial support systems for the medical
checkups: Employees can take a special leave to take acomprehensive health screening; and when 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.

As a measure to comply with the revised Health
Promotion Act, with smoking at the site prohibitedfrom April 2020, the Hiroshima Bank Health Insurance
Association established a new subsidy system startingin October 1, 2019 for compensating for the cost to
stop smoking in order to help smokers to quit smoking.
We have signed a health-related agreement with
Hiroshima International University to promote efforts
to maintain and improve health.

Creating a pleasant workplace with job satisfaction
We value the work-life balance approach and are proactively promoting the workstyle reform.
We have introduced a work interval system to reduce long working hours.
As a general rule, we have set a rule to take 11
hours of rest between the end of work and the start ofwork.
As such, we are creating a culture of finishing work
early while employees are increasingly concentrating
on truly necessary jobs.

Meanwhile, the Bank is creating a workplace withjob satisfaction by taking measures for improving boththe productivity and workplace such as recommending internal recreational activities by creating a costsubvention system to facilitate communication in theworkplace 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
enhance their health by forming a business alliancewith the Hiroshima Branch of Japan Health Insurance
Association in May 2015, for the purpose of enhancing
and contributing to the health of employees in thelocal offices.

We launched a Hirogin Health Management Evaluation Loan System as part of initiatives toward
expansion of health investment through the Bank’sbusinesses.
We offer these services actively to regional smalland medium-sized companies so that the services
will be widely introduced and expanded to facilitate
activities for enhancing working people’s health.

HIROSHIMA BANK INTEGRATED REPORT 2020

50

Initiatives for Sustainability

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 theircareer path on their own and realize their ideal working style, while striving to create a corporate culture
which gives job satisfaction.
In addition, we revised the personnel system inJuly 2020 with the aim of “building a system thatcan enhance and utilize specialized expertise” and“demonstrate the ability and skill in the right place.”
The Bank has adopted a personnel system based on
specific course categories that enables employees toselect either the BK business field or the AM businessfield according to their own aptitude and to increase
their expertise within the business field, and to pursue
higher expertise in specific fields such as the IT field
and the market field.
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 be realized
without an understanding by people around them including division and branch managers. We are steadily
promoting awareness-raising through rank-based
training programs and branch manager meetings, andfocusing 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, to create a vibrant workplace andorganizational culture, we conduct coaching andharassment training for managers and supervisors. To
introduce measures that incorporate diverse opinions,
we focus on dialogues with the employees union. The
dialogues were held 30 times in fiscal 2019. In thisconnection, 58% of employees of Hiroshima Bank
are members of the employees union as of the end of
March 2020.

Dream Challenge Ticket Granting Ceremony

51

HIROSHIMA BANK INTEGRATED REPORT 2020

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

1. Development of Ethics Regulations
The Bank formulated Ethics Regulations for the purpose of clarifying the code of conduct expected ofHiroshima Bank and all employees, establishing corporate 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 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 human rights.
Therefore, we added a new provision to the regulations that “Hiroshima Bank respects the human rights
of all people.”

2. Periodic awareness-raising activities
The Bank has actively conducted awareness-raising
activities by, for example, giving a lecture on the anti-discrimination and human rights issue during training programs on timing of milestones such as entering
the Bank and promotion to a higher position or rank aswell as training programs provided to staff and mid-career hires 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 anti- discrimination issue andexecuting corporate social responsibility, the Bank established the Anti- discrimination 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 and otherharassment behaviors as they must be strictly forbidden.
To prevent harassment behaviors in advance, theBank conducts awareness-raising at the Meetings of
All Branch Managers held at the beginning of every
six months ending September and March and conducts

a periodic anonymous questionnaire 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.

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

Number of hires
Total

Men

Women

FY2018175 persons

88 persons

87 persons

FY2019166 persons

84 persons

82 persons

FY2020114 persons

61 persons

53 persons

HIROSHIMA BANK INTEGRATED REPORT 2020

52

Initiatives for Sustainability

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 “RoseParade”

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

Inori-no-izumi (fountain of prayer) in the
Hiroshima Peace Memorial Park53

HIROSHIMA BANK INTEGRATED REPORT 2020

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 fountain ofprayer was completely renovated as part of our 140th anniversary business in 2018.
Also in 1968, the Bank
constructed a memorial
monument for people killedby the atomic bombing
to honor atomic bomb
victims and predecessors
who built the foundationof the Bank’s development.
The Bank’s directors,
as well as former andcurrent employees, visit
the monument every year
on August 6, the day the
Memorial monument for people killed by theatomic bomb was dropped.
atomic bombing

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, infant homes, and foster parent organizationsorganized as a social welfare corporation from 2007, to create anenvironment where children who will lead the next generation can growhealthily by equally receiving education and participating in communities.

HIROSHIMA BANK INTEGRATED REPORT 2020

54

Initiatives for Sustainability

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 hope that the museum would bring peace ofmind to the people of Hiroshima, the city once reduced

to ruins by the atomic bomb on August 6, 1945, themuseum came into being as a magnificent edifice ofart on the theme of love and peace of mind.
It was also built to pray for the repose of souls of thevictims that laid the foundation 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 Ecole de Paris school, including paintings by Degas, Monet, Renoir, Van Gogh, and Picasso, and Japanesemodern art works since the Meiji Period, including traditional-style nihonga works.

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

In FY2019, from a viewpoint of developing the next
generation, we started to hold a Hirogin Dream Future
Concert to provide an opportunity at which highschool students can perform with Hiroshima SymphonyOrchestra.

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.

55

HIROSHIMA BANK INTEGRATED REPORT 2020

Provision of Value to the Community

Response to New Coronavirus Infection
Amid the nationwide outbreak of new coronavirus
infection, the Bank, as a public institution essential
for maintaining social functions, is responsible forsupporting business partners’ financial positions andeconomic activities so that our basic policy has been tocontinue our operation in tackling the issue. We place
top priority on “protecting the health and lives of ourcustomers and employees,” and constantly consider
what we can do as a regional financial institution andtake action accordingly.

Support for customers- Establishment of loan consultation desks (including
holidays)- Establishment of a Holiday Loan Consultation Desk
during the Golden Week holiday- Handling of Special Loan to Cope with New Corona
Virus (up to ¥1 billion, 5-year grace period)- Holding sales promotion events to support sales ofgoods of business partners- Handling of the scheme of substantially interest-freeloans- Waiving part of loan-related fees (loan modification
fees, etc.)- Introduction of business partners (desired suppliers)- Fee incentives for new users of Hirogin Business Online
Service

Ensuring the Safety and Security of Customers and Employees- Acrylic boards and vinyl sheets installed at all stores- Periodic disinfection of equipment in branch offices- Shortening of business days and business hours andimplementation of extraordinary closure- Implementation of business operations with minimum
personnel (introduction of closure for lunch)- Promotion of time difference and remote work
- Split operations (decentralized work) implemented at
the headquarters
Donation- We donated 10 million yen to Hiroshima Prefecture tohelp strengthen the medical care system and provide
corporate support- Face masks, raincoats, and protective clothing donatedto Hiroshima Prefecture

Other- Implementation of remote training for new employees- Use of video conference system with visitors to the head office (announcement of financial results, IR, etc., also
held at video conferences)- Implementation of “Friday Ovation” to express appreciation to healthcare and welfare workers

While placing top priority on protecting the health and lives of our customers and employees, we willcontinue to support local economic activities by providing financial infrastructure essential to maintaining
social functions, such as prevention of splash infection and remote work, keeping “new lifestyles” in mind.

HIROSHIMA BANK INTEGRATED REPORT 2020

56

Initiatives for Sustainability

Corporate Governance

Basic approach
While fulfilling our social responsibility and public mission, the Bank will receive high evaluation from and build unshakable bonds of trustwith our stakeholders, including both customers and shareholders by raising management soundness, efficiency, and transparency. In thisway, 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., and set 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) W e 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) O ur 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%

40.0%

42.8%

3

3

3

3

3

33.3%
18.8%

3

20.0%

25.0%

25.0%

3

3

3

3

3

3

3

3

3

2

2011

2012

1

1

2013

2014

2015

2016

2017

2018

2019

2020

Corporate Governance Overview

The Bank’s Board of Directors consists of 9 members, including threeexternal directors. The board convenes once a month, in principle, and is
responsible for making management decisions and overseeing businessexecution. The Bank has established the Management Board as a bodyfor discussing and determining important matters relating to overall

57

HIROSHIMA BANK INTEGRATED REPORT 2020

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, and the committee
convenes once a week, in principle. In addition, the Bank has establishedthe Directors’ Loan Evaluation Board as a body to discuss and determineCorporate Governanceimportant loan projects based on the basic policy formulated by the
Board of Directors. The members of the committee are the Chairman,
President, and directors in charge of the credit-screening divisions,and the committee convenes once a week, in principle. The Articles ofIncorporation 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, toclarify 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 aswell as reports on the state of internal control from the division in chargeof internal control during meetings of the Board of Directors as partof their roles of providing management supervisory functions from anexternal perspective. In particular, the external directors receive detailed
explanations of the agendas for the meetings of the Board of Directors
and reporting materials in advance from the divisions in charge ofinternal audit and internal control, respectively, and provide appropriate
suggestions and advice during such advanced explanation or meetings ofthe Board of Directors, thereby endeavoring to raise the effectiveness of
their management supervisory functions.

The Audit & Supervisory Board consists of five members, including threeexternal Audit & Supervisory Board members. It convenes once a monthand as required. The Audit & Supervisory Board members participate inmeetings 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 division in charge of internal
audits and accounting auditors through the active exchange of opinions
and information and by attending audits of branches by the division in
charge of internal audits and on-site audits by accounting auditors. In
addition, the Audit & Supervisory Board members receive reports on the
progress of the tasks of developing sub-systems in the internal control
system and important matters that affect the effectiveness of the subsystems 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 and providing suggestions andadvice as required on such occasions.

(Mechanism for overseeing business execution and management)(As of June 25, 2020)

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
9 Directors(Among these, 3 are external directors)

Accounting auditor
KPMG AZSA LLC

Management Board

Directors’ Loan Evaluation Board* In addition to the above, 16 executive officers who do not concurrently serve as directors (as of June 25, 2020) 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:- For responding promptly and accurately to changes in the management environment and ensuring the appropriateness 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 inthe 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;- Having 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; and- The highly independent external directors and external Audit & Supervisory Board members provide their supervising and 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.

Following the transition to a holding company structure (scheduled for October 1, 2020), the holding company will adopt
a company with an audit and supervisory committee structure to strengthen corporate governance in light of the intent of
establishing the holding company to strengthen group governance.
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 and ability as well as diversity to exerthighly effective management supervisory functions. To this end,
the Board of Directors is comprised of internal directors who
are familiar with the Bank’s operations and external directors

who have great experience and deep insight in their areas ofexpertise. Additionally, based on requirements 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 2020

58

Initiatives for Sustainability

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.
- S election of external officers and implementation of advance
explanations to external officers regarding Board of Directors
meeting materials- A ppropriate reflection of the opinions given in advance
explanation at the Board of Directors- A dvance deliberations and summarizing of key points via the
management committee and various other committees- R evisions as needed on matters resolved and reported by the
Board of Directors, etc.

Additionally, the Bank analyzes and evaluates theeffectiveness of the Board of Directors at every fiscal year-end

Internal

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.

Professor of
Hiroshima City University

External

Directors

One female director was appointed
in June 2015
External directors account for onethirds of the Board of Directors

Former Chairman of the Board of
NIPPON TELEGRAPH AND TELEPHONE CORPORATIONInternal

Former Branch Manager of the Bank of Japan,
Director of The Securities Analysts Association of Japan

External

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 theirmembers, to secure transparency and objectivity for processesof determining compensation and nomination of directors.
Resolutions are made in 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 meetingson 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.

Additionally, the Bank encourages and supports selfimprovement efforts by directors and Audit & Supervisory Board
members to acquire knowledge and information necessaryfor effectively fulfilling their roles and responsibilities, and it
holds and provides various training sessions and seminars incooperation 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 andoperation concerning systems for ensuring appropriate business
operation and confirms that they are appropriately developedand implemented. The board also conducts a “Board of
Directors Self-evaluation Questionnaire” to analyze and evaluate
the effectiveness of the Board of Directors based on its results.

Certified public
accountant
Former President of
ANDERSEN Co., Ltd.

Three among five Audit &Supervisory Board members are
external Audit & Supervisory Board
members
One of external Audit & Supervisory
Board members is a woman

Lawyerbased on self-evaluation by directors and Audit & Supervisory
Board members, and an analysis and evaluation for FY2019
took place at the Board of Directors meeting in April 2020.
As a result, in comprehensive view of overall balance
between knowledge, experience and ability, and status ofoperation, 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 forexternal officers were in place.
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 andbusiness expansion under the holding company structure.
The Bank’s Board of Directors will continue to conduct
adequate discussions in light of the above analysis andevaluation and improve response to issues, while moving
forward with initiatives to strengthen governance.

Officer compensation system
Policies and procedures for determining officer compensation
The Board of Directors of the Bank determines compensation thatprovides healthy incentives for sustainable growth while giving
consideration to the following policies and procedures from theviewpoints of transparency, objectivity and fairness.

59

HIROSHIMA BANK INTEGRATED REPORT 2020

Officer compensation comprehensively reflects such factors as
the status of officer compensation at other banks similar in scale
to the Bank, historical payment results, and salary standards of
the Bank’s employees. Compensation for directors and executive
officers is determined by a resolution of the Board of Directors,

Corporate Governanceand compensation for Audit & Supervisory Board members isdetermined by the members’ discussion. However, the totalcompensation for directors and Audit & Supervisory Board
members comes within the range as resolved by a General Meetingof 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.

(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.

Officer compensation system
Directors

Executive Officers

External Directors and Audit &Supervisory Board members

Fixed amount compensation
Stock-based compensation*
Performance-linked compensation
Bonuses to officers* A system that utilizes a framework known as an officer compensation board incentive plan (BIP) trust. Utilizing compensation amounts for eligible officers as funds, the trust acquires shares of the Bank,and provides the shares and cash equivalent to disposal of the Bank’s shares upon officers’ retirement.

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

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

Hirogin Management School provides a program in which
selective employees who are expected to undertake future
management of the Bank learn to demonstrate the “abilityof thinking befitting of a corporate manager (management
strategy, business reform, etc.).” (See page 45 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 cross-shareholdings.

(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 eachshareholding are commensurate with capital costs associated with the holding; and (b) the company’s (i) level of contribution to theregional 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 December 2019 showed that approximately 80%of the companies in which 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 governanceat the company 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 of shareholder value and (b) if the company is free from the possibility that it inflicts damage to the Bank as ashareholder. Items to be examined to find potential impacts on corporate value and shareholder value in particular are as follows: (a)proposals for appropriation of surplus that potentially have a significantly detrimental effect on financial soundness, (b) proposals forelection of directors and Audit & Supervisory Board members and provision of retirement benefits at companies that have recorded
losses or paid no dividends for a certain period of time, and (c) proposals for anti-takeover measures, among other items.

HIROSHIMA BANK INTEGRATED REPORT 2020

60

Initiatives for Sustainability

Risk GovernanceRisk GovernanceRisk governanceIn order to establish robust risk governance, the Bank

In addition, to ensure that the risk appetite

has introduced a risk appetite framework, preparedframework functions effectively, we are working toa risk appetite statement describing the risk appetite

foster a sound risk culture that encourages everyone

framework and risk appetite to make them wellin the Bank to behave in accordance with the Bank’s

understood within the Bank.

values regarding risk taking and risk appetite.

Risk culture
In order to realize the sustainable development of local

decision-making related to risk recognition, risk-

communities and the sustainable enhancement of thetaking, risk management, etc., and that it is the basis

corporate value of Hiroshima Bank, it is essential forfor building strong risk governance. Based on thateach employee to make decisions and act not only

recognition, the Bank has established the Hiroshima

in compliance with laws and regulations but also in

Bank’s Risk Culture, while ensuring consistency with its

accordance with the expectations and requests of all

Code of Conduct.

stakeholders, including customers, and the Bank’s

In addition, in order to foster and disseminate themanagement policy.

risk culture within the bank, we share and disseminate

The Bank recognizes that risk culture is theit through such means as sending messages fromfundamental concept for organizational and individual

management and conducting training.

Risk appetite framework
The risk appetite framework is positioned as a

The introduction of the risk appetite framework

framework that supports the management of theclarifies the risk appetite (the type and level of risk

Bank as a whole to “promote risk taking and control

that the Bank is prepared to accept) for achieving therisk,” based on the appropriate recognition of the

management plan and enables the Bank to pursue

environment and risks.

more profit opportunities and promote appropriate
risk-taking.

Risk culture

Strategies & measures

Resource allocation

Revenue plan

Diverse andsufficient discussion

Risk appetite
Management Policy (Management Vision+ Code of Conduct)

61

HIROSHIMA BANK INTEGRATED REPORT 2020

Stress test

Environment and risk recognition

Management planInterview with an External Director

Expecting new value creation at the next stage,
which will proceed with advanced and challenging
decisions conscious of changes in the times
Kaori Maeda, External director

Q

What kind of roles do you think regional
communities expect the Hiroshima Bank
Group to play?

I strongly feel that the management stance of Hiroshima Bank
demonstrates the strong sense of responsibility toward the region
as a regional bank. I feel the management’s strong determinationthat it has to work harder because this is a tough time. In addition toproviding financial support to local companies, I believe that Hiroshima
Bank will play an increasingly important role in efforts to revitalize local
communities and create new businesses through mutual collaboration
among industry, government, academia, and financial institutions.
We played an active role in inviting a hotel operator with high global
recognition to open a hotel in Hiroshima (scheduled to open in 2022),
which will contribute to the tourism business from the perspectives ofincreasing the number of inbound visitors and inviting international
conferences. In this region, where manufacturing industries areconcentrated, we participate in IT Integration Forum and Hiroshima
Open Accelerator 2019 in order to create innovation by integrating
cutting-edge IT technologies, diverse data utilization, and various
real-world industries. Expectations are rising for the role of promptly
and smoothly encouraging the creation of new businesses, including
support in terms of financing and know-how.

Q

What are your strengths when you serve as
external director? What should Hiroshima
Bank do to increase corporate value in the
future?

The Internet, which has become essential infrastructure, is playing
an even greater role as a foundation for the creation of new value,
including IoT, data collection, and digital transformation.
In the past, the banking system was independent from the world
outside the bank, but now there are increasing opportunities forend users to use banking functions via the Internet (e.g. balance
inquiries and transaction history checks) through smartphone
apps. In the future, it will become extremely important to ensure
quick, smooth, and secure access to services provided through thebanking system and the Internet.
Over the five years since I became an external director, theway cash is used has changed dramatically. In the future,
information and data may have value in place of the monetary
value that current money has. The spread of new coronavirus
infection has made it impossible to move things including cash,
and I think this is a trigger to change what people expect frombanks. We have begun to hear the phrase “information bank.”
Now it is all the more important to have the perspective of how
to utilize information and data. I believe that there will be more
opportunities to utilize the experience and knowledge that wehave cultivated over the years in this field.

Q

How do you evaluate the corporate
governance of Hiroshima Bank?

I feel that the Bank is making extremely forward-looking judgments
fully aware of changes in the times, including the appointmentof three independent external directors, which account for onethird of the Board of Directors, hiring people like me in the IT field.
In addition, from the perspective of effectiveness, I think that theexternal directors have knowledge and expertise in a variety offields, and that they are well-balanced. Under these circumstances,
I believe that the functions of execution and supervision are
exercised effectively, not only by speaking out with an awarenessof risk governance from each perspective, but also by constructively
deepening discussions on unexpected inquiries and severe opinionsfrom external experts, presenting concepts and concrete actions,and ensuring directions in the case of what cannot be implemented
immediately. For example, the Bank is proactively making its APIs
accessible from outside. It is a meaningful judgment from theperspective of increasing corporate value and sustainable growth,and I believe that it is one example of the successful functioning of
the current organization.

Q

Please tell us about the shift change inperspectives that will be needed in the future.

That is the way the Bank contacts customers. This is also a prerequisite
for the decision to shift to a holding company.
Traditionally, the management body of a bank focused on faceto-face channels and measured the value of the bank by the numberof customers visiting its branch offices. In recent years, the Financial
Services Agency has been encouraging open innovation between
banks and Fintech providers by making APIs accessible to outsiders.
In the future, banks will need to create a variety of contact points andprovide more services that can be offered through non-face-to-facecontacts. Until now, it may have been difficult to use local banks for along period of time if customers move their main residence to different
places. However, in light of the increasing spread of banking services
over networks in the coming era, it is necessary to change the way
banks interact with each other, for example, by providing services thatcan be used continuously even if they move to other cities or overseas.
Under such a shift change, I believe that the transition to a holding
company will lead to further enhancement of corporate value by
accelerating efforts to advance into fields and other areas that could
not be moved by the framework of a bank alone, and to create newservices that utilize new technologies and the environment, based on thecredibility, trust, and sense of security of our bank.

profileBorn in Hiroshima Prefecture. After working as an assistant at School of Engineering,
Hiroshima University, joined the Radiation Effects Research Foundation, a Cooperative
Japan-US Research Organization, in 1990. Worked on establishing an Internet
connection point*, which was rare at that time in Japan, and then went on to the fieldof information communication and computer network research. Joined Hiroshima City
University in June 1994, then assumed office as professor of the Graduate School ofInformation Sciences of the same university in April 2007. Assumed office as External
Director of the Bank in June 2015.
* A point to connect with the Internet, offered by companies and internet service
providers

HIROSHIMA BANK INTEGRATED REPORT 2020

62

Initiatives for Sustainability

Board of Directors, Executive Officers andAudit & Supervisory Board Members(As of June 25, 2020)

Directors

Koji Ikeda

63

Toshio Heya

Akira Ogi

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 otherposts, assumed office as Managing Director and General Manager
of Management Planning Division in June 2009. After servingas President for six years since June 2012, assumed the current
position in June 2018. With experience mainly in business divisions
and planning divisions, he has a wealth of experience as well as
thorough knowledge about overall operations. Served as President
for six years and Chairman of the Board of Directors for two years.
With abundant management experience, he has strengthened theeffectiveness of the decision-making and supervisory functions of
the Board of Directors by leveraging his experience and knowledge
therein.

Joined the Bank in April 1983. After serving as General Manager
of Management Planning Division, Managing Executive Officer andGeneral Manager of Head Office Business Department, and otherposts, assumed office as Director & Managing Executive Officer
in June 2016. Working in the current position since June 2018. In
charge of Secretariat Department, Tokyo Liaison Office, and Digital
Strategy Division. With experience mainly in business divisions
and planning divisions, he has a wealth of experience as well as
thorough knowledge about overall operations. Having served as
President for two years, he has strengthened the effectiveness ofthe decision-making and supervisory functions of the Board of
Directors by leveraging his experience and knowledge therein.

Joined the Bank in April 1986. After serving as General Manager
of Personnel & General Affairs Division, General Manager ofManagement Planning Division, and other posts, assumed officeas Managing Executive Officer in October 2018 and as Director &Managing Executive Officer in June 2019. Working in the current
position since April 2020.
In charge of Management Planning Division, Information
Technology Planning & Administration Division, Banking Operation
Management Division, and Deputy General Manager in charge of
Digital Strategy Division.
With experience mainly in the planning divisions and businessdivisions, he has a wealth of experience as well as thoroughknowledge about overall operations.

Katsuhiko Nakama

Kazuo Kiyomune

Shinichi Fukamachi

Director & Managing Executive Officer

Director & Managing Executive Officer

Director & Managing Executive Officer

Joined the Bank in April 1985. After serving as General Manager ofCredit Supervising Division, Executive Officer and General Manager
of Onomichi Branch, and other posts, assumed the current positionin June 2018.
In charge of Credit Supervising Division and Shipping Finance
Division.
With experience mainly in compliance divisions and loan divisions,
he has a wealth of experience as well as thorough knowledge
about overall operations.

Joined the Bank in April 1986. After serving as General Manager
of Otemachi Branch, Executive Officer and General Manager ofKure Branch, and other posts, assumed the current position in June
2020.
In charge of Banking Business Planning Division, Corporate
Planning Division, and Public Services Business Division.
With experience mainly in business divisions and planning divisions,
he has a wealth of experience as well as thorough knowledge
about overall operations.

Joined the Bank in April 1987. After serving as General Manager
of Retail Banking Division, General Manager of Personnel &General Affairs Division, Executive Officer and General Manager of
Onomichi Branch, and other posts, assumed the current position inJune 2020.
In charge of Personnel & General Affairs Division and Risk
Management Division.
With experience mainly in the business divisions and personnel
divisions, he has a wealth of experience as well as thoroughknowledge about overall operations.

Kaori Maeda

Satoshi Miura

Yoshinori Shinmen

Director External

Director External

Director External

Assumed office as Assistant of School of Engineering, Hiroshima
University in April 1982. After serving as Assistant of Departmentof Computer and Network Engineering, Faculty of Information
Sciences, Hiroshima City University, Assistant Professor ofInformation Processing Center, Hiroshima City University, andother posts, assumed office as Professor of Graduate School ofInformation Sciences, Hiroshima City University since April 2007
(current position). Assumed office as Director of the Facultyof Information Sciences and Dean of the Graduate School ofInformation Sciences, Hiroshima City University in April 2020
(current position). Working as Director of the Bank since June 2015
(current position).
With experiences as a scholar in the IT field, as well as a wide range
of knowledge and high level of insight, she has been contributing
to strengthening the effectiveness of the decision-making andsupervisory functions of the Board of Directors from a perspective
independent from that of the management by leveraging her
extensive experience and broad insight as an IT expert.

Assumed office as Senior Vice President and Head of Personnel
of NIPPON TELEGRAPH AND TELEPHONE CORPORATION in June
1996. After serving as President and Representative Director of
Nippon Telegraph and Telephone East Corporation, President &CEO of NIPPON TELEGRAPH AND TELEPHONE CORPORATION,
and other posts, assumed office as Special Advisor of NIPPONTELEGRAPH AND TELEPHONE CORPORATION in June 2018 (current
position). Outside Director of Nippon Life Insurance Company(current position). Working as Director of the Bank since June 2016(current position).
Engaged in management as President & CEO and Chairman of theBoard of NIPPON TELEGRAPH AND TELEPHONE CORPORATION,
and has experience in supervising business execution as a manager.
Contributing to strengthening the effectiveness of the decisionmaking and supervisory functions of the Board of Directors froma perspective independent from that of the management byleveraging his extensive experience and broad insight.

Assumed office as Internal Auditor of the Bank of Japan in July
2009. After serving as Secretary General, and Representative
Director of the Securities Analysts Association of Japan, assumed
office as Director of the Securities Analysts Association of Japan inAugust 2017 (current position).
Working as Director of the Bank since June 2020 (current position).
Has experience in supervising business execution after having
experienced management and administration as Branch Managerof the Bank of Japan and as the Representative Director of
the Securities Analysts Association of Japan. Contributing tostrengthening the effectiveness of the decision-making andsupervisory functions of the Board of Directors from a perspective
independent from that of the management by leveraging his
extensive experience and broad insight as a manager.

HIROSHIMA BANK INTEGRATED REPORT 2020

Board of Directors, Executive Officers and Audit & Supervisory Board Members

Audit & Supervisory Board Members

Hitoshi Katayama

Yuji Eki

Audit & Supervisory Board Member

Audit & Supervisory Board Member

Yoshinori Takahashi
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 office as Senior General Manager ofCompliance Management Division in April 2017. Working in thecurrent 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 certified public accountant in March 1980. After
serving as General Manager of Hiroshima Branch, KPMG AZSA LLC
and other posts, assumed office as Representative of Takahashi
CPA & Tax Accountant Office in July 2011 (current position).
Assumed office as Audit & Supervisory Board Member of the Bankin June 2015 (current position).

(*) Directors Kaori Maeda, Satoshi Miura, and Yoshinori Shinmen
are External Directors as stipulated in Article 2, Paragraph 15 of
the Companies Act, and in addition, they 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, Yoshinori Takahashi,
Masako Yoshida, and Tadashi Osako are External Audit &Supervisory Board Members as stipulated in Article 2, Paragraph
16 of the Companies Act. In addition, Yoshinori Takahashi andTadashi Osako are independent officers as stipulated by Tokyo
Stock Exchange, Inc.

Masako Yoshida

Tadashi Osako

Audit & Supervisory Board Member External

Audit & Supervisory Board Member External

Assumed office as Representative Director of ANDERSEN Co.,
Ltd. in April 2006. Assumed offices as President of ANDERSEN
Institute of Bread & Life Co., Ltd., Corporate Advisor of
ANDERSEN Institute of Bread & Life Co., Ltd. Assumed office as
Outside Director of Sompo Japan Insurance Inc. in June 2018
(current position). Assumed office as Audit & Supervisory Board
Member of the Bank in June 2015 (current position).

Registered as attorney-at-law in April 1982. Joined Hiroshima AllIn Law and Accounting Office in July 2011, and assumed office as
General Manager of Hiroshima All-In Law and Accounting Officein January 2019 (current position). Director (Audit & Supervisory
Committee Member) of Nishikawa Rubber Co., Ltd. (current
position). Assumed office as Audit & Supervisory Board Member ofthe Bank in June 2020 (current position).

Executive Officers
Senior Managing Executive Officer(Area Officer)

Hiroshi Honkawa

Koji Sakai

Kimio Okano

Executive Officer (Investment Banking
Division, International Business
Division, Asset Management Division,
Retail Loan Division)

Managing Executive Officer (Area
Officer)Managing Executive Officer (In chargeof Treasury & Investment Division)

Hiroyuki Higashiyama

Executive Officer (General Manager
of Fukuyama Sales Division)

Hironori SatoManaging Executive Officer (Presidentof Hirogin Securities Co., Ltd.)

Fumitsugu Kariyada

Executive Officer (General Manager
of Tokuyama Branch)

Mitsutoshi Tokunaga

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

Hideki Toi

Executive Officer (General Manager
of Tokyo Branch)

Tsuyoshi Yanagida

Managing Executive Officer (General
Manager of Imabari Branch)

Koji Hakoda

Executive Officer (General Manager
of Onomichi Branch)

Hiromi Iwate

Executive Officer (General Manager of
Okayama Branch)

Atsuhiro Kunimura

Executive Officer (General Manager
of Head Office Business Department)

Minoru Fujihiro

Executive Officer (General Manager ofAudit Division)

Yoshitaka Yamashita

Executive Officer (General Manager
of Kure Branch and General Manager
of Kure City Municipal Office Branch)

Yuji Hiroe

Executive Officer (General Manager
of Management Planning Division)

Shinichi Yokomi

HIROSHIMA BANK INTEGRATED REPORT 2020

64

Power to Support Sustainability

Communication with Shareholders,
Investors and Customers
IR-related activities
Activities for individual investors
The Bank holds briefings for all individual investors andposts IR information on the website to actively provide
information actively. In addition, the Bank holds a
briefing at Hirogin Securities Co., Ltd., which is ouraffiliated company, and Hiroshima Museum of Art
every year for informing a broader range ofshareholders of the attractiveness of the Bank.

Activities for institutional investors
The Bank holds a briefing of financial results foranalysts and institutional investors twice a year on theoccasion of full-year and interim results. In addition, we
explain management strategies and financial positionsat individual meetings with domestic and overseas
institutional investors.

Activities in FY2019
Activities for individual investors

Number of events

Number of participants

8 times

491 persons

Briefing sessions for individual investors
Activities for institutional investors

Number of events Number of participants/companies

Briefing sessions for analysts and institutional investors

2 times

260 persons

Small meetings for analysts and institutional investorsOnce

7 companies

Interviews with overseas institutional investors

9 times-Interviews with Japanese institutional investors

16 times-

New initiatives related to IR
As a new effort related to IR, we held a small meetingin January 2020 to exchange views with analysts andinstitutional investors on growth strategies and capital
policies after the transition to a holding company
structure.
In addition, to prevent the spread of new coronavirus
infection, we held an online briefing session for analysts
and institutional investors, using a video conferencing
system, instead of holding a meeting in Tokyo as in ausual year.
On the days of the meetings, a large number ofpeople participated in the meeting, where the president
explained financial results and responded to questions
from participants.

* The Bank has notheld any briefing
sessions on site
for the purposeof preventing
the spread of
new coronavirus
infection since
February 2020.

The briefing session was held online to prevent the spread of newcoronavirus infection

General Meeting of Shareholders
With respect to the Ordinary General Meeting of
Shareholders held in June every year, we strived toenhance the environment for exercising voting rights andconvenience for shareholders*1, and we implemented
measures to prevent the spread of new coronavirus
infection*2 this year. For shareholders who were unable
to attend, we webcast the meeting. (Viewers wereallowed to only view the meeting via live broadcast.)*1 Early mail-out of Convocation Notices and announcement (posted on the Stock
Exchange and the Bank’s website about a week before mail-out), participatingin the voting platform, voting rights exercisable via the Internet from a PC or
smartphone, and prompt posting of resolution notice on the Bank’s website
after the General Meeting of Shareholders, etc.
*2 We reduced the number of seats at the venue to secure social distance,
requested all participants to wear face masks with temperature inspection
required, while our staff were wearing face guards, set up acrylic boards at thechairperson’s seat and at the speaker seat for shareholders, and so on.

65

HIROSHIMA BANK INTEGRATED REPORT 2020

Measures were taken at the reception to prevent the spread of newcoronavirus infection

Communication with Shareholders, Investors and Customers

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
We periodically conduct customer satisfaction surveys
for individual and corporate customers.
Based on the results, the Bank identifies areas for
improvement in customer satisfaction, and then branch
offices and headquarters team up to improve andenhance our services.

Call center
The customer relations office and call center listen to
customers’ opinions and inquiries via telephone.
Utilizing the opinions and wishes of our customers, we
are working toward improving customer satisfaction.
In fiscal 2019, we received about 390,000 inquiries
and references via telephone.

System to translate customers’ voice into better customer satisfaction
In addition to customers’ voice sent to branch offices
and the call center, we receive numerous opinions andwishes via customer opinion card placed at each branch
office.
In addition, we carry out regular questionnaire
surveys aiming at “Visualization” of customers’ wishes.
In order to utilize customer feedback to improvesatisfaction, we try to identify points for improvementin products and services based on customers’ opinions
and requests, and make every effort to provide better
products and services with branch offices and theheadquarters working together to consider
countermeasures.

ProvideCustomers“Visualization” of customers’ wishes
Customers’
voice

Customer
opinion cards

Questionnaire
surveyCollect

UnderstandBranch offices

Head Office
Improve

Development of better products and services

HIROSHIMA BANK INTEGRATED REPORT 2020

66

Power to Support Sustainability

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
ownership of our role as a financial institution to
support the regional economy and providing thehighest quality financial services with full consideration
for protection of customers’ interests.” This notion isshared and implemented by all of our officers andemployees.

In particular, in sales of financial instruments, wehold customers’ interests to the maximum priority
based on customer-oriented business operations(fiduciary duty). In line with this attitude, we maintain ahigh level of expertise and offer high-value-added
products and services from a customer perspective,
which we believe would result in improved corporate
value of the Bank over the medium and long term.
Based on such recognition, we have established,published, and practiced the “policy for Hirogin’s
customer-oriented business operations.”

Customer-oriented lineup of products
Hiroshima Bank and Hirogin Securities work as one tooffer a wide range of financial products that meet avariety 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

 he product is easy to understand for prospectiveT
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 performance 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 theLife Plan Guide, an asset management handbook, tohelp 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 that

67

HIROSHIMA BANK INTEGRATED REPORT 2020

customers bear, using materials and tools such as aninvestment 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 the portfolio.
As such, we provide information according to thecustomer’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 systemthat 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
operators and improve performance evaluation

management by encouraging employees to acquire thefinancial planner certification and providing lectures(e-learning) to improve asset management skills.
Also, we study the status of customer-oriented
consultation and information provision conducted bysales 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 asemiannual basis and publish a report every year.

HIROSHIMA BANK INTEGRATED REPORT 2020

68

Power to Support Sustainability

Status of “Initiatives for
Customer-oriented Business Operations”■ Developing human resources with ahigh level of expertise■ Enhancement of information provision
to our customers

The number of qualified financial planners is steadily increasing,
and we are enhancing initiatives for advanced expertise.
▶︎ Number of qualified financial planners

We seek to provide a wide range of information by actively
holding seminars for customers in iDeCo, inheritance, asset
management, etc.
▶︎ Number of seminars for customers held
(Times)(Persons)

2,000

CSPFP 2nd grade
CSPFP 1st grade

1,912

1,844

700

1,718

1,531

1,500

iDeCo
Trust

544

1,215

1,556
1,254

1,418

1,507

Inheritance
2000
Other

1500

70

500

130
573

36

54
14

135

36

1000

400

237

169

205

1,155

300

1,018

200

500

93

500

127

267

100
0

737

Asset management

600

1,402

1,000

800

247

277

300

337

356

197

March
2015

March
2016

March
2017

March
2018

March
2019

March
2020

175

106

0
FY20170

FY2018FY2019(Note) Holders of financial planning certifications (CSPFP 1st grade/CFP or CSPFP 2nd grade/AFP)■ Proposals for portfolios that contributeto customer asset formation (promotionof long-term, deposit, or diversified
investment)
The number of contracts and the amount of transfer to generalsavings-type investment trust (indefinite) are steadily increasing
due to our strengthened efforts to offer savings-type investment
trust to the customer group wishing to build up assets.
▶︎ Number of customers of savings-type
investment trusts and amount of transfers
Annual amount of transfer in general savings-type
investment trusts (indefinite)
Annual amount of transfer in term-specificsavings-type investment trusts
Number of customers ofsavings-type investment trusts
10,793(¥ billion)

5.0

4,998

The balance of financial instruments stays flat mainly due todecreased balance of investment trust, but the number ofholders of financial instruments is increasing due to our efforts
to implement customer-oriented operation.

▶︎ Number of holders of financial instruments
and balances(Customers)

19,47016,844

Investment trust
Financial instrument intermediary services
Insurance (Insurance balance is for single-premium policy only)
Public bond(¥ billion)

4.8(Customers)

Jointly operated designated money trusts
Number of holders of financial instruments
144,388

12,7494.95,102■ Expansion of customer base

12,000132,461

147,566

4.0

10,000
2.6

3.0

3.6

8,000

111.6

2.2

6,000
2.0
1.0

968.5
879.3

28.8

876.6
109.7

34.4 195.9

36.2 172.4

410.6

427.8

0.7

0.0

0.7

0.7
0.7

0.0

1.3

1.9

2.2

2,000

0.8

0

0
FY2014 FY2015 FY2016 FY2017 FY2018 FY2019

1,048.0
32.1
30.0
5000
204.2

435.2

408.7

410.4

84.4

96.3

149.0

213.7

245.8

224.0

202.1

180.4

132.9

March
2016

March
2017

March
2018

March
2019

March
2020

Status of “initiatives for customer-oriented business operations” (FY2019)
Explanation of KPIs which are announced on our website and status of our initiatives
other than the above can be found.
50

69

10000

4,000
1.0
0.2

HIROSHIMA BANK INTEGRATED REPORT 2020

40

20000
15000

135,468
1,049.9

4.1

152,162245.7

0Customer-oriented

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 for suitableproducts 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 such as
the content of the product and details of risks toenable 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
matters regarding explanation to customers, customer
support (consultation and complaints), customer
information, outsourcing, and conflict of interests,
making these known to all operators.

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

Information management
Based on our published Privacy Policy, the Bankacquires or provides personal information prudently
and strives to continuously 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.

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.

HIROSHIMA BANK INTEGRATED REPORT 202070

Power to Support Sustainability

Compliance
Basic approach
As the environment surrounding financial institutions
changes drastically, the Bank believes it is important tomeet 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 tofollow laws and regulations as well as social norms
thoroughly and build corporate ethics, and thecommittee deliberates and considers matters relating
to compliance. In this and other ways, we ensure that
we never commit violations of compliance.
In addition, compliance managers have been placedin all divisions in the Head Office and all branches toexchange 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 balance system 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
Instructing
Instructing
Reporting, informing,
consulting

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 forrealization 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 to thistrend as well as requests from FATF and otherinternational institutions, the Bank and its Group71

HIROSHIMA BANK INTEGRATED REPORT 2020

companies regard the prevention of Money Laundering,
Etc. as a critical management issue and established aneffective control system for the entire Group withinvolvement of executive members.
Specifically, the Bank has strengthened measures suchas verification at the time of initial transaction,
prevention of transactions with persons subject toComplianceasset-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 approach and then risk
reduction measures considering the identified risk topromote 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 them as
an important compliance matter to promote Groupwide
efforts for the prevention with the involvement of theexecutive members.

The Bank has been strengthening the internalmanagement system and making constant efforts forpreventing 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 provision offinancial 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 forthe 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 signed a basic procedural agreement with thedesignated dispute resolution organization shown below.

The following organizations accept complaints anddispute claims from customers.

Bank operations

Trust operations

Japanese Bankers Association

Trust Companies Association of Japan, Trust Consultation

Contact: Japanese Bankers Association Consultation Office

Center(https://www.zenginkyo.or.jp/adr/)(https://www.shintaku-kyokai.or.jp/profile/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 of the internal whistleblowing
system, the Bank has taken measures to protect
whistleblowers and reporters of investigation from any
disadvantages and established multiple whistleblowing
channels. In addition, a female lawyer (non-advisor)
was added as an external contact in March 2020.
The Bank believes that an effective internal
whistleblowing system (hotline) will enhance the Bank’s
ability of self-correction and contributes to complianceoriented management, leading to an increase incorporate value. Therefore, the Bank holds Meetings of
All Branch Compliance Day Study Sessions throughwhich all employees can learn about contents andimportance of the internal whistleblowing system.
C ontact points of the hotline andwhistleblowing methods
Contact point

Risk Management
Division

Whistleblowing
methods

Extension line,
dedicated phone
number, mobile
phone, e-mailBank lawyer,
female lawyer(non-advisor)
Dedicated phone
number,e-mailHIROSHIMA BANK INTEGRATED REPORT 202072

Power to Support Sustainability

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

Directors’ Loan Evaluation Board

Management Board

Comprehensive Risk Management Committee

Compliance Committee

Risk Management Division (Overall risk management)

Credit risk
(Risk
Management
Division)

Market risk
(Risk
Management
Division)

Liquidity risk
(Risk
Management
Division)

Operational risk (Risk Management Division)

Administrative System risk
risk (Banking(Information
Operation
Technology PlanningManagement & Administrative
Div.)
Div.)

Human risk
(Personnel &GeneralAffairs Div.)

Tangible asset
risk (Personnel& General
Affairs Div.)

Head Office, branches and the Hiroshima Bank Group73

HIROSHIMA BANK INTEGRATED REPORT 2020

Reputationalrisk(Management
Planning Div.)

Compliancerisk (RiskManagement
Div.)

Audit Division

Audit & Supervisory Board members (Audit & Supervisory Board)

Audit & Supervisory Board OfficeRisk management framework (as of April 1, 2020)

Risk Management

Comprehensive 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 limit) for risk monitored assets
in the categories of credit risk, market risk, andoperational risk, with dedicated offices controllingrisk-monitored assets. Centralized appraisal of riskmonitored assets as a proportion of Bank capital isundertaken by the Risk Management Division. We havealso created a system for risk management reports tobe submitted regularly to the Board 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 facedby the customer, in line with the Board of Directors’basic policy for management of funding facilitation.
Appropriate and prompt credit screening is carriedout after joint appraisal of a customer’s needs andconcerns—and is not just based on a mechanical,
uniform judgment informed only by financial
statements and other superficial statistics and industryspecific 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.

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 be used, forexample, to assess credit risk on loan assets.
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.

HIROSHIMA BANK INTEGRATED REPORT 202074

Power to Support Sustainability

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 a significant element in management planningjudgments.
In addition, we have created frameworks to ensurestable earnings through rigorous management ofmarket risk, enabling us to respond swiftly andappropriately to market movements. We set limits on
risk-monitored assets and lay down hedging policy andreporting and consulting rules for when asset value
falls. We monitor compliance with ceilings and otherlimits through major measures such as total valueof positions, amount of risk-monitored assets andearnings performance, as well as management on adaily basis.

In addition, accounting is rigorously based on a
holding-purpose category, using mark-to-market
accounting principles, that enables us to reflectchanging market prices appropriately and accurately infinancial data.
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
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.

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, systemrisk, human risk, tangible asset risk, reputationalrisk, and compliance risk. Such risk is managed
comprehensively.

75

HIROSHIMA BANK INTEGRATED REPORT 2020

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.
The Bank has a reporting system for relaying
complaints and opinions from customers and details

Risk Managementof 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* (Note) as an organization to respond rapidly inthe event 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.
* CSIRT: 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.
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.
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.
Compliance risk
Compliance risk refers to the risk of incurring losses
due to penalties or legal responsibilities arising fromviolations of laws and regulations or nonperformanceof contracts, as well as the risk of seriously affecting
the fairness and transparency of customers and themarket and seriously impairing the trust of the Bankdue to behaviors that deviate from social norms.
In addition to daily awareness-raising and training
in compliance with laws and regulations as well associal norms, we ensure appropriate management
through steady implementation of legal checks andestablishment of a legal consultation framework.

HIROSHIMA BANK INTEGRATED REPORT 202076

Power to Support Sustainability

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 as well as epidemics
disrupt our services. In this way, we have establishedour 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.

77

HIROSHIMA BANK INTEGRATED REPORT 2020

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.

Corporate Information

Branch Network

Branch Network
Branch Network (July 1, 2020)

Domestic Head Office and151
branches
Including 1 branch dedicated1
for bank transfers
1Internet branch

Shimane Prefecture

Hyogo Prefecture

1 branch

2 branches
Okayama Prefecture

10 branches(Hirogin Carp Branch)

Offices

12
Hiroshima Prefecture

120 Head Office and branches
12 offices
Yamaguchi Prefecture

7 branches

Ehime Prefecture

6 branches

Fukuoka Prefecture

2 branches[Others in Japan]
1 branch in Tokyo/1 branch in Aichi
Prefecture/1 branch in Osaka Prefecture[Overseas Representative Offices]
Shanghai, Bangkok, Singapore, Hanoi

Shobara City(2 branches)

Miyoshi City(2 branches)
Kitahiroshima-cho(1 branch)

Jinsekikogen-cho(1 branch)

Akitakata City(2 branches, 1 office)Sera-cho(1 branch)

Akiota-cho(1 branch)

Fuchu City(2 branches)

Fukuyama City
(17 branches, 1 office)Hiroshima City
(52 branches, 3 offices)

Hatsukaichi City
(4 branches)

Otake City
(1 branch)

Higashihiroshima City
(7 branches, 1 office)Aki-gun(4 branches)

Mihara City
(3 branches, 2 offices)

Onomichi City
(8 branches)

Takehara City
(1 branch)

Kure City(6 branches, 4 offices)
Etajima City(2 branches)

Osakikamijima-cho(1 branch)

HIROSHIMA BANK INTEGRATED REPORT 202078

Corporate Information

Overview and Disclosure

CORPORATE DATA
Overview of the Bank (As of March 31, 2020)

Group Network (As of April 1, 2020)

Head OfficeSubsidiaries

 -1-7, Nishikaniya,
1Minami-ku, Hiroshima
City, Hiroshima 7320804, Japan (temporary
Head Office)Phone+81-82-247-5151

Established

November 1878

Common Stock¥54,573 million

Deposits + NCD¥7,541.5 billion

Loans¥6,479.7 billion

Employees

3,412

Hirogin Securities Co., Ltd.
Shimanami Servicer Co., Ltd.
Hirogin REIT Management Co., Ltd.
Hirogin Capital Partners Co., Ltd.
Hirogin Card Service Co., Ltd.
Hirogin Guarantee Co., Ltd.
Hirogin Business Service Co., Ltd.

HB Asset Funding Corporation
Blue Investment Limited Partnership

Affiliatedcompanies

Shimanami Value Creation Investment
Limited Partnership
Hirogin Lease Co., Ltd.

Financial instrument brokerage
operations
Administration and recoveryof receivable debts
Asset management business
Investment business
Credit card services
Credit guarantee services
Consolidated accounting,printing, binding services
Collateral real estate valuation
services
Contract due diligence
services
Factoring services
Investment and financing
business
Investment and financing
business
Leases, car leasing services

Refer to our website for our corporate profile and IR information.

79

Top page

About Hiroshima Bank(https://www.hirogin.co.jp/)(https://www.hirogin.co.jp/company/)

IR Library

Hiroshima Bank Group’s SDGs

(https://www.hirogin.co.jp/ir/ir_library/)(https://www.hirogin.co.jp/company/csr/sdgs/)

HIROSHIMA BANK INTEGRATED REPORT 2020

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, 2019 and 2020
Millions of
U.S. dollars (Note 1)

Millions of yen

2019

2020

2020

ASSETSCash and due from banks (Notes 4, 15 and 22)
Call loans and bills purchased (Note 22)
Monetary claims bought (Notes 4 and 22)
Trading assets (Notes 4 and 22)
Money held in trust (Notes 5 and 22)
Securities (Notes 4, 7, 10 and 22)
Loans and bills discounted (Notes 6, 7, 8 and 22)
Foreign exchanges
Other assets (Note 7)
Tangible fixed assets (Notes 14 and 16)
Intangible fixed assets
Net defined benefit assets (Note 18)
Deferred tax assets (Note 19)
Customers’ liabilities for acceptances and guarantees
Reserve for possible loan losses (Note 22)
Total assets¥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¥1,472,936
6,711
7,820
6,241
9,971
1,125,896
6,483,336
34,990113,677
93,446
9,244
70,853705
36,470(33,692)¥9,438,609$13,534
62
72
57
92
10,34559,573
322
1,045
859
85
651
6
335
(310)
$86,728

LIABILITIES AND NET ASSETS
Liabilities:
Deposits (Notes 7 and 22)
Call money and bills sold (Note 22)
Payables under repurchase agreements (Notes 7 and 22)
Deposits received for bonds lending/borrowing transactions (Notes 7 and 22)
Trading liabilities
Borrowed money (Notes 7, 9 and 22)
Foreign exchanges
Due to trust account
Other liabilities
Net defined benefit liabilities (Note 18)
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 for dismantling costs for fixed assets
Reserve under Special Laws
Deferred tax liabilities (Note 19)
Deferred tax liabilities for land revaluation reserve
Acceptances and guarantees
Total liabilities¥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¥7,691,285
100,000
79,420321,008
3,814
641,0353,502
32
61,004
43
29
2,530
142
547
—
1,177
38
861
13,60536,470¥8,956,552$70,672
919
730
2,950
35
5,890
32
0
561
0
0
23
1
5
—
11
0
8
125
335
$82,299

54,57354,57330,740329,367(1,040)413,641
35,676(2,016)
27,792
12,12173,574
176
487,391¥8,952,671

30,740347,714(998)
432,030
15,010(5,025)27,781
12,08449,850176
482,057¥9,438,609

Net Assets (Note 11):
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 (losses) on securities available for sale (Note 4)
Net deferred gains (losses) on hedging instruments
Land revaluation reserve
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Stock acquisition rights (Note 23)
Total net assets
Total liabilities and net assets

$

501

282
3,195
(9)
3,970
138
(46)
255
111
458
2
4,429
$86,728

See notes to consolidated financial statements.

HIROSHIMA BANK INTEGRATED REPORT 202080

Consolidated Statements of Income
THE HIROSHIMA BANK, LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2019 and 2020
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
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 12)
Other expenses (Notes 13 and 14)
Total expenses
Income before income taxes
Income taxes (Note 19):
Current income taxes
Deferred income taxes
Net income
Profit attributable to owners of the parent

2019

2020

2020

¥ 62,534
11,186
1,806
29,677
7,552
8,483
121,242¥ 62,539
11,5981,674
28,255
10,431
12,657
127,158

$ 575
107
15
260
96
116
1,168

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

1,934
3,040
3,422
10,057
4,933
57,345
11,00091,73235,425

18
28
31
92
45
527
101
843
326

8,559
2,591
25,581¥ 25,581

8,698
2,457
24,270¥ 24,270

80
23
223
$ 223

Yen

Amounts per share of common stock:
Net assets
Net income
Diluted net income
Cash dividends applicable to the year (Note 11)¥1,564.51
82.16
82.09
20.00

U.S. dollars (Note 1)¥1,547.15
77.92
77.87
22.50

$14.22
0.72
0.72
0.21

See notes to consolidated financial statements.

Consolidated Statements of Comprehensive Income
THE HIROSHIMA BANK, LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2019 and 2020
Millions of
U.S. dollars (Note 1)

Millions of yen

2019
Net income¥25,581
Other comprehensive income (loss) (Note 24):
Net unrealized holding gains (losses) on securities available for sale		(12,719)
Net deferred gains (losses) on hedging instruments
		(1,469)
Remeasurements of defined benefit plans		4,105
Share of other comprehensive income (loss) of an affiliated company accounted for		 (3)
by the equity method
Comprehensive income¥15,494
Attributable to:Comprehensive income attributable to owners of the parent¥15,494
See notes to consolidated financial statements.

81

HIROSHIMA BANK INTEGRATED REPORT 20202020
¥ 24,270

2020
$ 223

		(20,662)
		(3,008)
		 (37)

		(190)		(28)
		(0)

		

(3)

		(0)

¥

557

		5

¥

557

$

5

Consolidated Statements of Changes in Net Assets
THE HIROSHIMA BANK, LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2019 and 2020
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 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
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 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
periodNet unrealized
holding gains
Net deferred gains(losses) on securities (losses) on hedging Land revaluation
available for sale
instruments
reserve¥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 202082

Millions of yen

2020
Stockholders’ equity
Item

Common stock

Capital surplus

Retained earnings

Common stock
in treasury

Total
stockholders’ equity¥54,573¥30,740¥329,367¥(1,040)¥413,641

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
period(5,934)(5,934)24,27024,270

(0)

(0)

(0)

42

42

10

10

—

(0)

18,34641

18,388¥54,573¥30,740¥347,714¥(998)¥432,030

Millions of yen

2020
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
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
period83

Net unrealized
holding gains
Net deferred gains(losses) on securities (losses) on hedging Land revaluation
available for sale
instruments
reserve¥35,676¥(2,016)¥27,792

Remeasurementsof defined benefit
plans¥12,121

Total accumulated
other
Stock acquisition
comprehensive
rightsincome¥73,574¥176

Total net
assets¥487,391(5,934)24,270(0)42
10(20,666)(3,008)

(10)

(37)

(23,723)—(23,723)(20,666)(3,008)

(10)

(37)

(23,723)—(5,334)¥15,010¥(5,025)¥27,781¥12,084¥49,850¥176¥482,057

HIROSHIMA BANK INTEGRATED REPORT 2020

Millions of U.S. dollars

2020
Stockholders’ equity
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
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

$501

$282

Retained earnings

Common stock
in treasury

Total
stockholders’ equity$3,026$ (10)$3,801

(55)

(55)

223

223

(0)

		(0)

(0)

		0

0

0

0

—

(0)

169

		0

169

$501

$282

$3,195$ (9)$3,970Millions of U.S. dollars

2020
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
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
periodNet unrealized
holding gains
Net deferred gains(losses) on securities (losses) on hedging Land revaluation
available for sale
instruments
reserve$328$ (19)$255

Remeasurementsof defined benefit
plans

$111

Total accumulated
other
Stock acquisition
comprehensive
rightsincome$676$2Total net
assets$4,478

(55)
223
(0)
0
0
(190)

		(28)

(0)

(0)

(218)

—

(218)

(190)

		(28)

(0)

(0)

(218)

—

(49)

$138

$(46)

$255

$111

$458

$2

$4,429HIROSHIMA BANK INTEGRATED REPORT 202084

Consolidated Statements of Cash FlowsTHE HIROSHIMA BANK, LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2019 and 2020
Millions of
U.S. dollars (Note 1)

Millions of yen

2020

2019
Cash flows from operating activities:
Income before income taxes
Depreciation of fixed assets
Impairment losses on fixed assets
Share of loss (profit) of an affiliate accounted for using the equity method
Net change in reserve for possible loan losses
Net change in net defined benefit assets
Net change 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
Net change in reserve for dismantling costs for fixed assets
Interest income
Interest expense
Net losses (gains) on securities transactions
Net losses (gains) 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
Other – net
Subtotal
Income taxes paid
Total adjustments
Net cash provided by (used in) operating activities

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)¥

35,425
4,664
2,306
(150)
498
(5,747)4
6(1,027)
21
206
(1)
(846)
1,177
(75,813)8,396(9,317)
194
(401)
(42)
(462,496)
275,748(48,618)
124,704(1,932)
13,23490,89960,900(27,454)
3,162
80,810(8,685)(10,993)
13,408(7,587)
5,821
41,247

$

326
43
21
(1)
5
(53)
0
0
(9)
0
2
(0)
(8)
11
(697)
77
(86)
2
(4)
(0)
(4,250)
2,534
(447)
1,146
(18)
122
835
560
(252)
29
743
(80)
(101)
123
(70)
53
379

Cash flows from investing activities:
Purchases of securities
Proceeds from sales of securities
Proceeds from redemption 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(430,007)
306,396
326,020(2,079)23(5,539)(2,763)2(33)
192,018(570,180)
423,695
155,049(22)
364(2,369)(2,731)
5
(46)
3,762

(5,239)
3,893
1,425
(0)
3
(22)
(25)
0
(0)
35

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(5,934)(0)
0(72)(6,008)(5,938)(0)
0(74)(6,013)

(55)
(0)
0
(1)
(55)

(94)
(78,260)
1,502,680¥1,424,420(15)
38,981
1,424,420¥1,463,401(0)358
13,088$13,447

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
Cash and cash equivalents at the end of year (Note 15)
See notes to consolidated financial statements.

85

¥

2020

HIROSHIMA BANK INTEGRATED REPORT 2020

Notes to Consolidated Financial Statements
THE HIROSHIMA BANK, LTD. AND CONSOLIDATED SUBSIDIARIESMarch 31, 2019 and 2020

1 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 Act
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,
2020, which was ¥108.83 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.

2 Principles of consolidation
The consolidated financial statements include the accountsof the Bank and six subsidiaries (collectively the “Group”) for
the year ended March 31, 2020.
Under the control and influence concepts, the companies
over which the Bank is able to exercise control, directly
or indirectly, are fully consolidated, and those companies
over which the Group has the ability to exercise significant
influence are accounted for using the equity method.
All significant intercompany balances and transactions havebeen eliminated.
There are three subsidiaries which are not consolidated
because the total assets, total income, net income, retained
earnings and total other comprehensive income of thesecompanies would not have a material effect on the
consolidated financial statements.
Investment in an affiliated company is accounted for using
the equity method. There is no affiliated company which is
not accounted for using the equity method.
The three unconsolidated subsidiaries are not accounted forusing the equity method, but they are stated at cost, because
these companies would not have a material effect on the
consolidated financial statements even if they are excluded
from the equity method.
As of March 31, 2020, the fiscal year ending dates are March
31 for six consolidated 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, monetaryclaims and financial derivatives for trading purpose. Trading
assets and trading liabilities are recorded on a trade datebasis, and revenues and expenses related to trading
securities transactions are also recorded on a trade datebasis. Securities and monetary claims 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.

HIROSHIMA BANK INTEGRATED REPORT 202086

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 value. Gains and losses
realized on disposal and unrealized gains and losses frommarket 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 values are stated at fair value. Unrealized
gains and unrealized losses on these securities are reported,
net of applicable income taxes, as a separate component of
net assets. Realized gains and losses on sale of such securities
are computed using moving-average 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 value are stated atamortized cost, net of the amount considered not collectible.
Other securities with no available fair value are stated atmoving-average cost.
If the fair 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 value and the difference between
the fair value and the carrying amount is recognized asloss in the period of the decline. If the fair value of equity
securities issued by unconsolidated subsidiaries and affiliatedcompanies 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 theevent net asset value declines significantly. In these cases,
such fair value or the net asset value will be the carrying
amount of the securities at the beginning of the following
year.
When fair values of available-for-sale securities decline
by 50% or more of the acquisition cost at the balance
sheet date, the Bank writes down such securities to thefair values and records the related write-downs as loss in
its consolidated statements of income. When fair values
87

HIROSHIMA BANK INTEGRATED REPORT 2020of available-for-sale securities decline by 30% or more
but less than 50% of the acquisition cost, write-downs
to the fair values may be recognized for certain issuers
based on evaluation of issuers’ debtor classification. The
Bank devaluated the securities other than securities held
for trading purposes and recognized a loss of ¥353 million(¥249 million for equity securities and ¥104 million for debt
securities) and ¥1,605 million ($15 million) (¥1,605 million ($15
million) for equity securities) for the years ended March 31,
2019 and 2020, 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.
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 andborrowing 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,
2019 and 2020 amounted to ¥51,982 million and ¥41,665
million ($383 million), respectively.
Deferred revenue deducted from the acquisition cost was¥12,779 million and ¥12,772 million ($117 million) as ofMarch 31, 2019 and 2020, 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.
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
The Bank records its reserve for possible loan losses inaccordance with a predetermined standard for write-off andprovisions as follows:
For loans to borrowers who are legally bankrupt due tospecial liquidation, etc. (“legally bankrupt” borrowers) orborrowers in a similar financial condition (“virtually bankrupt”
borrowers), the reserve for possible loan losses is provided
in the carrying amounts of such loans which are stated after
directly setting off the uncollectible amounts as mentioned
below, less the disposable value of collaterals and theestimated recoverable value from relevant guarantees.
For loans to borrowers who are not bankrupt at present,
but likely to become bankrupt in future (“possibly
bankrupt” borrowers), the reserve for possible loan losses
is provided in the amounts considered to be necessary after
comprehensively evaluating the borrower’s overall financial
conditions out of the amounts remaining after deducting thedisposable value of collaterals and the estimated recoverable
value from relevant guarantees from the carrying amounts of
the loans.
Among loans to major borrowers who are possibly bankrupt
and those with restructured loans, for loans to borrowers
whose cash flows from collection of principal and interest
can be reasonably estimated, the reserve for possible loan
losses is provided in the amount of differences between theamount obtained by discounting the said cash flows at thecontractual interest rate before restructuring and the carrying
amounts of the loans (cash flow estimation method).
For other loans, the reserve for possible loan losses isprovided based on the expected credit losses for the coming
year or the coming three years. Expected credit losses are
determined by adding necessary adjustments such as future
prospects, etc. to the loss rate obtained by the average rateof actual loan losses for certain past periods based on bad
debts for the past year or the past three years.
The sales-related department evaluates all the loansin accordance with the self-assessment rule, and theirevaluations are audited by the asset audit department, whichis independent from the sales-related department.
For collateralized or guaranteed loans to legally bankrupt
and virtually bankrupt borrowers, the estimated uncollectible
amounts, which are the amounts remaining after deducting
the appraisal value of collaterals and the recoverable value
from relevant guarantees, are directly set off against thecarrying amounts of the loans. Such amounts directly
set off against those loans at March 31, 2019 and 2020

HIROSHIMA BANK INTEGRATED REPORT 202088

were ¥15,444 million and ¥15,858 million ($146 million),
respectively.
Consolidated subsidiaries record the reserve for possible
loan losses at the necessary amounts considering the past
bad debt ratio for general loans, and at the estimateduncollectible amounts for specific loans to possibly bankrupt
borrowers.
(Additional information)
Supposing that the impacts of the spread of coronavirus
disease (COVID-19) would continue for a certain period in
the future, the Bank recorded the reserve for possible loan
losses based on the assumption that a significant amount ofloss on loans, etc. would not be incurred thanks to economic
measures by the government and municipalities and various
supports from financial institutions, although the impact on
certain businesses may temporarily intensify.
Since these assumptions involve uncertainty, the performance
results for the following fiscal year and onward may beaffected in the event of a prolonged spread of COVID-19 andchanges to its impact on the economy.
Employees’ severance and retirement benefits
The liabilities and expenses for severance and retirement
benefits were determined based on the amounts actuariallycalculated using certain assumptions.
The Bank and its consolidated subsidiaries provided
allowance for employees’ severance and retirement benefits
at March 31, 2019 and 2020 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.
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

89

HIROSHIMA BANK INTEGRATED REPORT 2020

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.
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.
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.
Reserve for dismantling costs for fixed assets
Reserve for dismantling costs for fixed assets is provided tocover disbursements for dismantling buildings, etc. at theamount estimated to be incurred in future.
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.
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 andliabilities 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.
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 2019 consolidated financial
statements have been reclassified to conform to the 2020
presentation.
Unapplied new accounting standards
Accounting Standards for Fair Value Measurement, etc.
Accounting Standard for Fair Value Measurement (ASBJ
Statement No. 30, July 4, 2019)
Implementation Guidance on Accounting Standard for Fair
Value Measurement (ASBJ Guidance No. 31, July 4, 2019)
Accounting Standard for Financial Instruments (ASBJ
Statement No. 10, July 4, 2019)
Implementation Guidance on Disclosures about Fair Valueof Financial Instruments (ASBJ Guidance No. 19, March 31,
2020)(1) Overview
In order to enhance comparability with provisions underinternational accounting standards, “Accounting Standard
for Fair Value Measurement” and “Implementation Guidanceon Accounting Standard for Fair Value Measurement”(hereinafter collectively “Fair Value Accounting Standards,
etc.”) have been developed and the guidance on fair value
measurement has been provided. Fair Value AccountingStandards, etc. will be applied to the fair value of financial
instruments defined in “Accounting Standard for Financial
Instruments.”
In addition, “Implementation Guidance on Disclosures about
Fair Value of Financial Instruments” was revised and notes
such as the breakdown of fair value of financial instruments
under the fair value hierarchy were provided.
(2) Date of adoption
Fair Value Accounting Standards, etc. are scheduled to be
applied from the beginning of the fiscal year ending March
31, 2022.
(3) The effect of adopting the accounting standards
The effect of adopting Fair Value Accounting Standards, etc.
is under evaluation.
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 ¥764 million and ¥721 million ($7 million) at March 31,
2019 and 2020, respectively.
3. The number of the shares of the Bank remaining in thetrust is 873 thousand shares and 824 thousand shares at
March 31, 2019 and 2020, respectively.

HIROSHIMA BANK INTEGRATED REPORT 202090

4 Securities

At March 31, 2020

(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“Monetary claims bought,” which are separately reported
from “Securities” in the consolidated balance sheets, areincluded in this section.
(2) The following tables summarize acquisition costs andcarrying amounts of securities with available fair values asof March 31, 2019 and 2020:a) Trading securities:
Millions of yen

Millions of
U.S. dollars

2019

2020

2020

¥(0)

¥(2)

$(0)

Amount of net unrealized
gains (losses) includedin the consolidated
statements of income

Millions of yen

GrossCarrying
Acquisition
unrealized
amountcost
gains (losses)
Equity securities¥ 50,756 ¥ 21,863¥28,892
Bonds:
		 442,070 		 435,793
6,277
National government bonds 		 205,326 		 202,138
3,188
Local government bonds 		 79,883 		 79,047
836
Bonds
		 156,860 		 154,607
2,252
Others		 172,608 		 168,987
3,620
Subtotal
		 665,434 		 626,644
38,790Carrying amountexceeding cost:

Carrying amountnot exceeding cost:

Equity securities
		 24,928 		 31,579
Bonds:
		 247,240 		 248,319
National government bonds 		 114,601 		 115,169
Local government bonds 		 53,031 		 53,182
Bonds
		 79,607 		 79,967
Others		 178,408 		 188,599
Subtotal
		 450,577 		 468,498
Total¥ 1,116,012 ¥ 1,095,143(6,650)(1,079)
(568)
(150)
(360)
(10,191)(17,921)¥20,868

Millions of U.S. dollarsb) Available-for-sale securities:
At March 31, 2019
Millions of yen

GrossCarrying
Acquisition
unrealized
amountcost
gains (losses)
Equity securities¥ 83,453 ¥ 33,423¥50,030
Bonds:
		 633,156 		 623,083
10,072National government bonds 		 317,344 		 311,704
5,639
Local government bonds 		 116,260 		 114,939
1,321
Bonds
		 199,552 		 196,439
3,112
Others		 144,989 		 140,438
4,551
Subtotal
		 861,599 		 796,945
64,654
Carrying amountexceeding cost:

Carrying amountnot 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

91

HIROSHIMA BANK INTEGRATED REPORT 2020

Gross
Carrying
Acquisition
unrealized
amountcost
gains (losses)
Equity securities
$
466 $
201
$265
Bonds:
		
4,062 		4,004
58National government bonds 		
1,887 		1,857
29Local government bonds 		
734 		
726
8
Bonds
		
1,441 		1,421
21Others		
1,586 		1,553
33Subtotal		
6,114 		5,758356Carrying amountexceeding cost:(3,642)
(25)
—
(0)
(25)
(10,303)(13,971)¥50,682

Carrying amountnot exceeding cost:

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

229 		
2,272 		1,053 		487 		
731 		
1,639 		4,140 		10,255 $

290
2,282
1,058
489
735
1,733
4,305
10,063

(61)
(10)
(5)
(1)
(3)
(94)
(165)
$192

Year ended March 31, 2020

(3) Total sales of available-for-sale securities sold during theyears ended March 31, 2019 and 2020 were as follows:Year ended March 31, 2019

Type

Proceeds
from sales

Millions of yen

Proceeds
from sales

Total amount Total amountof gains onof losses on
sales
sales

Millions of yen

TypeTotal amount Total amountof gains onof losses on
sales
sales

Equity securities¥ 5,424¥ 7,572
Bonds:
		 72,767 		1,741
National government bonds 		 72,425 		1,719
Local government bonds 		— 		 —
Bonds
		342 		 22Others		341,456 		7,746¥ 419,649¥17,059
Total

Equity securities¥ 6,360 ¥ 2,446
		 93,591 		 1,727
Bonds:
National government bonds 		 92,251 		 1,674
Local government bonds 		
— 		
—
Bonds
		 1,340 		
53
		199,815 		 5,253
OthersTotal¥ 299,767 ¥ 9,427¥ 259
		 259		 258		—		
0
		 3,009¥ 3,528¥ 733
		 889
		 889		 —		 —		4,377¥ 6,000

Millions of U.S. dollars

Proceeds
from sales

Type

Total amount Total amountof gains onof losses on
sales
sales

Equity securities
$
50
$ 70
Bonds:
		669 		16National government bonds 		665 		16Local government bonds 		 — 		—		 3 		0BondsOthers		3,138 		71Total$ 3,856
$157

$ 7
		8
		8
		—
		—
		40
$55

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 at March 31, 2019 and 2020.
(2) Money held in trust classified as held-to-maturity
There was no money held in trust classified as held-to-maturity at March 31, 2019 and 2020.
(3) Other money held in trust
Millions of yen

At March 31, 2019
Carrying amount Acquisition cost

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

Net unrealized
gain (loss)

Unrealized
gain

Unrealized
loss

¥—

¥—

¥—

Net unrealized
gain (loss)

Unrealized
gain

Unrealized
loss

¥—

¥—

¥—

Net unrealized
gain (loss)

Unrealized
gain

Unrealized
loss

$—

$—

$—

Millions of yen

At March 31, 2020
Carrying amount Acquisition cost

Other money held in trust¥9,971¥9,971Millions of U.S. dollars

At March 31, 2020
Carrying amount Acquisition cost

Other money held in trust

$92

$92

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).”

HIROSHIMA BANK INTEGRATED REPORT 202092

6 Loans and bills discounted(1) Doubtful loans included in loans and bills discounted at
March 31, 2019 and 2020 were as follows:
Millions of yen

2020

2019
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

Millions of
U.S. dollars

2020¥ 1,200¥ 1,304
		47,394 		49,038

$ 12
		451

		 3,755 		 2,429

		22

		14,728 		15,167¥67,078¥67,939

		139
$624

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 ¥27,146 million and ¥21,600 million($198 million) at March 31, 2019 and 2020, respectively.

Security deposits, included in other assets, amounted to¥2,460 million and ¥2,357 million ($22 million) at March
31, 2019 and 2020, respectively, deposits for financial
instruments amounted to ¥11,792 million and ¥26,885
million ($247 million) at March 31, 2019 and 2020,
respectively, and deposits for futures trading amounted to¥226 million and ¥1,469 million ($13 million) at March 31,
2019 and 2020, 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 ¥16,326 million and ¥15,675 million($144 million) at March 31, 2019 and 2020, 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 ¥1 million and nil at March 31,
2019 and 2020, respectively.

7 Assets pledged

8 Commitment line

At March 31, 2019 and 2020, the following assets were
pledged as collateral for certain liabilities of the Bank andsubsidiaries.

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 ¥1,735,804 million and ¥1,752,135 million ($16,100
million) relating to these contracts at March 31, 2019 and2020, respectively. Among them, the amounts of unused
commitment of which term of contracts is less than one
year or revocable at any time totaled ¥1,646,364 million and¥1,668,372 million ($15,330 million) at March 31, 2019 and2020, respectively.

Securities
Loans and bills discounted
Other assets
Total

Millions of yen

Millions of
U.S. dollars

2019
2020
¥704,024 ¥ 706,907
434,140
186,780
1,496
1,896¥892,701 ¥1,142,544

2020$ 6,496
3,989
14$10,498

The collateral was pledged to secure:Millions of yen

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

93

In addition, other assets not included in the above schedules
were pledged as collateral for operating transactions, suchas exchange settlements. Other assets amounted to ¥50,000
million and ¥50,000 million ($459 million) at March 31, 2019and 2020, respectively.

Millions of
U.S. dollars

2020
1,671

2020
$ 15

		 88,521 		 79,420

		 730		 260,108 		321,008
		 479,236 		590,332

		2,950
		5,424

¥

2019
1,653

HIROSHIMA BANK INTEGRATED REPORT 2020¥

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 Bank

9 Borrowed money

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,
2020 include the amount representing the year-end cash
dividend of ¥4,216 million ($39 million), ¥13.50 ($0.12) per
share, which was approved at the stockholders’ meeting heldon June 25, 2020.

Subordinated loans included in borrowed money were
¥15,000 million and ¥15,000 million ($138 million) at March
31, 2019 and 2020, respectively.

12 General and administrative expenses

and 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.

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¥37,878 million and ¥38,889 million ($357 million) at March
31, 2019 and 2020, respectively.

The general and administrative expenses include salaries andallowances in the amounts of ¥25,406 million and ¥25,156
million ($231 million) for the years ended March 31, 2019 and2020, respectively.

13 Other expenses
Other expenses for the years ended March 31, 2019 and2020 include the following:

11 Net assets
Under the Companies Act 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 Act 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 Companies
Act of Japan.

Millions of
U.S. dollars

Millions of yen

Write-off of equity
securities, etc.
Loss on sales of equity
securities, etc.
Write-off of loans
Loss on sales of loans, etc.
Loss on provision of reserve
for reimbursement ofdeposits
Reserve for possible loan
lossesLoss on disposal of fixed
assetsImpairment losses on fixed
assetsProvision of reserve fordismantling costs for fixed
assets

2019

2020

2020

¥ 250

¥1,741

$16

259

1,160

11

3,051
589

1,147
486

11
4

550

—

—

37

2,859

26

186

202

2

130

2,306

21

—

1,070

10

14 Impairment losses on fixed assets
The Group recognized impairment losses on fixed assets inthe amounts of ¥130 million and ¥2,306 million ($21 million)
under “Other expenses” for the years ended March 31, 2019and 2020, respectively (see Note 13). Main items for the year
ended March 31, 2020 were as follows:
Location

Use

Type

Hiroshima City,
Land, buildings
Training center
Hiroshima Pref.
and structures
Hiroshima City, Temporary
Buildings andHiroshima Pref.
Head Officestructures

Millions ofyenMillions of
U.S. dollars¥1,105

$10

1,072

10

HIROSHIMA BANK INTEGRATED REPORT 202094

16 Lease transactions(Reasons for recognizing impairment losses)
The carrying amount of the training center was reduced
to the recoverable amount as it was determined to betransferred.
The carrying amount of the temporary Head Office was
reduced to nil as it is scheduled to be dismantled.

Finance Leases
Tangible fixed assets in lease assets mainly consisted ofbranches. The depreciation method of lease assets is shownin “3. Significant accounting policies.”(Asset grouping method)
The Group groups assets into units based mainly on sales
branches within certain regions with interdependent cash
flows. Idle assets are respectively treated as an independentunit. Head Office, company housing, welfare facilities andothers are treated as common assets since they do not
generate independent cash flows.
The recoverable value is measured based on the net selling
value, and the amount is computed at the estimated transfer
value.

15 Cash and cash equivalents

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, 2019 and 2020 were as
follows:
Millions of yen

2020
¥3
—
¥3

2019
¥4
3
¥7

Due within 1 year
Due after 1 year
Total

Millions of
U.S. dollars

2020
$0
—
$0

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, 2019and 2020 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

2019
2020
¥1,432,022 ¥1,472,936

2020$13,534(7,601)(9,534)(88)¥1,424,420 ¥1,463,401$13,447

17 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, 2019 and 2020 were as follows:
Interest related:
At March 31, 2019
Millions of yen

Contracted amountOver one year

Type

OTC

95

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 2020

Fair
value

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

—
—
—

—
—
—

At March 31, 2020
Millions of yen

Contracted amount
Type

OTC

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)¥ 125,307
		125,307
		
—¥119,881
		119,881
		 —¥ 3,750		(2,553)
		 —¥ 3,750		(2,553)
		 —		 2,000		 2,000		2,000
		2,000		 (0)
		 0

		 5
		 (4)

		
		
¥

		
		
¥

		 —
		 —
¥ 1,196		 —		 —¥ 1,197

—
—
—

—
—
—

Millions of U.S. dollars

Contracted amount
Type

OTC

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)$1,151
		1,151
		—$1,102
		1,102		—$ 34
		(23)
		—$ 34
		(23)
		—

		18
		18

		18
		18

		(0)
		0

		0
		(0)

		—
		—
$ —

		—
		—
$ —

		—
		—
$ 11

		—
		—
$ 11

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:
At March 31, 2019
Millions of yen

Contracted amount
Type

OTC

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)¥1,419At March 31, 2020
Millions of yen
Contracted amount

Type

OTC

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

Fair
value

Over one year

¥485,220¥466,710

		117,278
		109,916
		138,001
		138,001¥—¥

Unrealized gains(losses)

88

¥ 184

		21,556
		20,732		(1,521)
		2,645		(1,521)
		2,645

		66,281
		66,281¥—

		(3,083)
		3,083¥ 1,212

		2,212		(1,563)¥1,957

HIROSHIMA BANK INTEGRATED REPORT 202096Millions of U.S. dollars

Contracted amountOver one year

Fair
value

Unrealized gains(losses)$4,459$4,288$ 1$ 2

		1,078
		1,010

		198
		190

		(14)
		24

		(14)
		24

		1,268		1,268
$ —

		609
		609
$ —

		(28)
		28
$ 11

		20
		(14)
$18

Type

OTC

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.

Others:At March 31, 2019
Millions of yen

Contracted amount
Type

OTC

Over one year

Earthquake derivatives:
Sell
Buy
Total

¥5,175
		5,175
¥
—

¥—
		—
¥—

Fair
value

Unrealized gains(losses)

¥(64)
		64
¥—

¥—
		—
¥—

At March 31, 2020
Millions of yen

Contracted amount
Type

OTC

Over one year

Earthquake derivatives:
Sell
Buy
Total

¥6,050
		6,050
¥
—

¥—
		—
¥—

Fair
value

Unrealized gains(losses)

¥(85)
		85
¥—

¥—
		—
¥—

Millions of U.S. dollars

Contracted amount
Type

OTC

Over one year

Earthquake derivative:
Sell
Buy
Total

$56
		56
$—

$—
		—
$—

Fair
value

Unrealized gains(losses)

$ (1)
		1
$—

$—
		—
$—

* 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, 2019 and 2020 were as follows:
Interest related:
At March 31, 2019
Millions of yen

Contracted amount

Method of hedge accounting
Deferral method

Exceptional treatment
of interest rate swaps

97

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 2020

Over one year

Fair
value

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

		72,336

		58,832

		 Note 3

		 1,000¥—

		
¥

Loans and bills discounted
Loans and bills discounted——¥(2,580)

At March 31, 2020
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
		207,654¥ 20,000
		197,654¥ 287
		(6,683)

		56,556

		46,931

		 Note 3

		
¥

		
¥

Loans and bills discounted
Loans and bills discounted
—
—

—
—

¥(6,396)

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

$ 368
		1,908$ 184
		1,816$ 3
		(61)

		520

		431

Note 3

		 —
$
—

		 —
$
—

$(59)

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:
At 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)

At March 31, 2020
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¥ 69,459¥ 69,459¥ (155)

		162,147
¥
—

		 —
¥
—

		(168)¥ (324)

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

$ 638

$ 638

$ (1)

		1,490
$ —

		—
$ —

		(2)
$ (3)

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 202098

18 Employees’ severance and retirement benefits
For the years ended March 31, 2019 and 2020
Change in projected benefit obligation
Millions of yen

2020

2019

Projected benefit obligation¥44,651¥43,718
at beginning of the year
Service costs during the		 1,178 		 1,150
yearInterest cost on projected
		
19 		
16
benefit obligation
Actuarial differences
incurred		 334 		 419		 (2,577) 		 (2,880)
Benefits paid
Other		 111 		 109Projected benefit
obligation at end¥43,718¥42,534of the year

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

Millions of yen
Millions of
U.S. dollars

2020
$402
		11
		0
		4
		(26)
		1
$391

2019
Service costs—benefits
earned during the year
¥ 1,178
Interest cost on projected		19
benefit obligation
Expected return on plan
assets		(3,968)
Amortization of actuarial
differences		 (467)
Severance and retirement
benefit expenses calculated
by simplified method		
4Severance and retirement
benefit expenses¥(3,234)

2020

2020

¥ 1,150

$ 11

		

16

		 0

		(4,351)

		(40)

		 (989)

		(9)

		

4

		 0

¥(4,168)$ (38)

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

2019

2020

2020

¥ 99,217¥108,785$1,000				3,968 		6,752 		

4,351

2020
¥(54)

1,354

		 12

¥108,785¥113,344$1,041Millions of yen

2020

Millions of
U.S. dollars

2020¥ 43,678 ¥ 42,490$ 390
		 (108,785) 		 (113,344) 		(1,041)
		 (65,106) 		 (70,853) 		(651)

Unfunded projected benefit
obligation		
39 		
43 		 0Net on consolidated¥ (65,067) ¥ (70,810)$ (651)balance sheets
Millions of yen

2019
2020
Net defined benefit liability
¥
39 ¥
43
Net defined benefit asset
		 (65,106) 		 (70,853)
Net on consolidatedbalance sheets¥ (65,067) ¥ (70,810)

HIROSHIMA BANK INTEGRATED REPORT 2020

Millions of
U.S. dollars

2020
$
0
		(651)$ (651)2020$(0)

Remeasurements of defined benefit plans

		 40

		
738 		
862 		 8		 (1,998) 		 (2,115) 		 (19)		106 		
105 		 1

2019

99

2019
¥5,950Millions 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

2019

2020

2020

¥(17,567)¥(17,513)$(161)

2019
2.3%
73.2
0.1
24.4
100%

2020
2.2%
72.5
0.1
25.2
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 64.1% in 2020) and the retirement
benefit trust established for lump-sum payment plans (13.9% in 2019 and12.5% in 2020).

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

2019
0.2%
4.0%
3.1%

2020
0.2%
4.0%
3.1%

Defined contribution pension plan
The Bank’s required contribution to the defined contribution
pension plan was ¥296 million and ¥296 million ($3 million)
for the years ended March 31, 2019 and 2020, respectively.

19 Income taxes

20 Segment information

Income taxes in the consolidated statements of income
consist of corporation tax, inhabitant taxes and enterprisetax. The effective statutory tax rate was approximately 31%
at March 31, 2019 and 2020.

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, 2019 and 2020.

Significant components of deferred tax assets at March 31,
2019 and 2020 were as follows:
Millions of yen

2019

2020

Deferred tax assets:
Reserve for¥ 14,030 ¥ 14,107
possible loan losses
Write-down of securities 		
765 		
720
		 1,809 		 1,491
Depreciation
Other		 5,186 		 6,358
Subtotal deferred tax assets 		 21,791 		 22,678
Valuation allowance for
		
— 		
—
tax loss carryforwards
Valuation allowance fortotal temporary differences
deductible in future periods 		 (1,063) 		 (1,085)
Subtotal valuation allowance 		 (1,063) 		 (1,085)
		 20,728 		 21,593
Total deferred tax assets
Deferred tax liabilities:
Net defined benefit assets 		(13,235) 		(14,797)
Gain on contribution orcancellation of securities
to employee retirement		 (691) 		 (691)
benefit trust
Net unrealized holding
gains on securities
		(15,013) 		 (5,863)
available for sale
Retained earnings of		— 		 (397)
an affiliate
Total deferred tax liabilities 		(28,941) 		(21,749)
Net deferred tax liabilities¥ (8,212) ¥ (155)

Millions of
U.S. dollars

Income by service

2020

$ 130
		 7
		 14
		 58
		208
		 —
		(10)
		(10)
		198

Lending
Investment in securities
Fees and commissions
Other
Total

Millions of yen

Millions of
U.S. dollars

2019
2020
¥ 62,142 ¥ 62,256
		 23,033 		 31,226
		 29,677 		 28,255
		 6,384 		 5,411¥121,238 ¥127,149

2020
$ 572
		 287
		 260		 50$1,16821 Related party transactions
Information about related party transactions for the years
ended March 31, 2019 and 2020 is omitted since they are
immaterial.

		(136)		 (6)
		(54)
		 (4)
		(200)$ (1)A reconciliation of the actual effective tax rate with thenormal effective statutory tax rate for the fiscal years ended
March 31, 2019 and 2020 has been omitted, since thedifference between the actual effective tax rate and thenormal effective statutory tax rate was less than 5% of thenormal effective statutory tax rate.

HIROSHIMA BANK INTEGRATED REPORT 2020100

22 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 Bankfor the purposes of holding to maturity, pure investment,
as well as for the development of regional society and theenhancement of corporate value over the medium to longterm.
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.

101

HIROSHIMA BANK INTEGRATED REPORT 2020

(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, 2019 and 2020, the entire VaR of the Bankwas ¥1 million and ¥5 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, 2019 and 2020 was ¥65,243
million and ¥76,320 million ($701 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 2020

102

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 at March 31, 2019 and2020 were as follows:
Millions of yen

At 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) Monetary claims bought 		
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¥

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¥

103¥7,254,221

1,770 ¥
(4,155) 		
(2,385) ¥HIROSHIMA BANK INTEGRATED REPORT 2020

1,770 ¥
(4,155) 		
(2,385) ¥———Millions of yen

At March 31, 2020

Carrying
amountFair value

Difference(1) Cash and due from banks ¥1,472,936 ¥1,472,936 ¥—(2) Call loans andbills purchased		
6,711 		6,711 		
—(3) Monetary claims bought 		
7,820 		7,820 		
—(4) Trading assets*2
Securities held for
trading purposes		
1,141 		1,141 		
—(5) Money held in trust		
9,971 		9,971 		
—(6) Securities:
Securities held to maturity 		
— 		
— 		
—
Securities available for sale 		1,114,090 		1,114,090 		
—(7) Loans and bills discounted 		6,483,336
Reserve for possible loan
losses*1
		 (31,180)
Net
		6,452,155 		6,612,298 		160,142
Total assets¥9,064,827 ¥9,224,970 ¥ 160,142(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¥7,529,577¥7,529,950¥373

		 161,708 		 161,709 				 100,000 		 100,000 		

0
—

		

—

79,420 		

79,420 				 321,008 		 321,008 		—
		 641,035 		 643,554 		 2,518¥8,832,751 ¥8,835,643 ¥ 2,892

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

2,403 ¥
(6,720) 		
(4,317) ¥2,403 ¥
(6,720) 		
(4,317) ¥———Millions of U.S. dollars

At March 31, 2020

Carrying
amountFair value(1) Cash and due from banks$ 13,534$ 13,534(2) Call loans and bills
purchased
		
62 		
62
(3) Monetary clams bought
		
72 		
72
(4) Trading assets*2
Securities held for trading
purpose		10 		10(5) Money held in trust
		
92 		
92
(6) Securities:
Securities held to maturity 		— 		—Securities available for sale 		10,237 		10,237(7) Loans and bills discounted 		59,573
Reserve for possible loan
losses*1
		 (287)Net
		59,287 		60,758
Total assets$ 83,293$ 84,765(1) Deposits
		69,187(2) Negotiable certificates ofdeposit		 1,486(3) Call money and bills sold 		 919
(4) Payables under repurchaseagreements
		 730(5) Deposits received
for bonds lending/borrowing transactions 		 2,950(6) Borrowed money
		 5,890$ 81,161
Total liabilities
Derivative instruments*1, 3:
Hedge accounting
is not applied$
Hedge accounting is applied 		
Derivative instruments total$

Difference

$

—

		
		

—
—

		
		

—
—

		
		

—
—

		1,471$1,471

		69,190 		

3

		 1,486 		
		 919 		0—		

730 		—

		 2,950 		
		 5,913 		
$ 81,188
$

—
23
27

22
$
(62) 		
(40) $

22$(62) 		
(40) $———*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) Monetary claims bought
Out of monetary claims bought, trust beneficiary rights,
that are divided by quality such as subordinated or preferredand owned by multiple holders, are measured at thequoted price from the counterpart financial institutions. For
other monetary claims bought, the carrying amounts are
considered as the fair value, as most of these instruments
have short maturities and the fair values approximate thecarrying amounts.
(4) Trading assets
The fair values of securities held for trading purposes aremeasured at observable market prices or quoted price fromcounterpart financial institutions.
(5) Money held in trust
The fair values of money held in trust, which have an externalrating, are determined using the discounted cash flow
method. For other money held in trust, the carrying amounts
are considered as the fair value, as the components of trust
assets consist of deposits with no maturities and the fairvalues approximate the carrying amounts.
(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 counterpart financial
institutions.
The fair values of investment trusts are measured at the
published benchmark price or quoted price from counterpart
financial institutions.
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.

HIROSHIMA BANK INTEGRATED REPORT 2020104For loans without any repayment due dates, the carrying
amounts are considered as the fair values, as the fair values
approximate the carrying amounts from the viewpoints of
estimated payment terms and interest rate conditions, etc.
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 thecontractual cash flows at the rates that would be applied forthe same, new contracts.

(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. For borrowed
money with short contract terms, the carrying amounts are
considered as the fair values, as the fair values approximate
the carrying amounts.
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.

(3) Call money and bills sold, (4) Payables under
repurchase agreements, (5) Deposits received for bonds
lending/borrowing transactions
The fair values of these items are considered as the carrying
amounts, as the contract terms are short and the fair values
approximate the carrying amounts.

(Note 2) Financial instruments whose fair value cannot be reliably determined at March 31, 2019 and 2020
Carrying amountMillions of yen

2019
2020
¥ 7,062¥ 7,319
		 4,442 		 4,486¥11,505¥11,805

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

Millions of
U.S. dollars

2020
$ 67
		41
$108

*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 ¥0 million and ¥135 million ($1 million) for the years ended March 31, 2019 and 2020,
respectively.

(Note 3) Maturity analysis for financial assets with contractual maturities
At March 31, 2019
Millions of yen

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

105

HIROSHIMA BANK INTEGRATED REPORT 2020

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 than 1
year less than
3 years¥      ———
—127,174—
127,174
45,0009,490
28,06344,621
592,946¥720,121

More thanMore thanMore than
3 years less than 5 years less than 7 years less than
5 years
7 years
10 years¥      —
¥      —
¥      —
—
—
—
—
—
—
—
—
—
98,081
61,102
121,423———
98,081
61,102
121,423
25,000
5,000
—
9,360
30,62034,265
20,977
6,195
7,044
42,743
19,287
80,113755,289
531,882
739,268¥853,370¥592,985¥860,691

More than
10 years¥       ———
—411,947—
411,947
162,000—
124,623
125,323
1,996,967¥2,408,914

At March 31, 2020
Millions of yen

Due from banks
Call loans and bills purchased
Monetary claims bought
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¥1,395,214
6,711
7,820
9,971
32,676—32,67615,0003,900
12,626
1,149
838,887¥2,291,281

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¥      —
¥     —
¥      —
¥      —
—
—
—
—
—
—
—
—
—
—
—
—
116,521
100,639
78,285202,586————
116,521
100,639
78,285202,586
45,00010,0005,000
57,00010,36028,36032,84950,06029,47036,787
8,669
13,687
31,69025,491
31,767
81,839587,928
778,888553,370
771,518¥704,450¥879,528¥631,656¥974,105

Less than
1 year$12,820
62
72
92
300
—
300
138
36
116
11
7,708
$21,054

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
$ —
$ —
$ —
$ —
—
—
—
—
—
—
—
—
—
—
—
—
1,071
925
719
1,861
—
—
—
—
1,071
925
719
1,861
413
92
46
524
95
261
302
460
271
338
80
126
291
234
292
752
5,402
7,157
5,085
7,089
$6,473$8,082$5,804$8,951More than
10 years¥       ———
—415,734—
415,734
173,000
6,302
131,370
105,060
2,140,758¥2,556,492

Millions of U.S. dollars

Due from banks
Call loans and bills purchased
Monetary claims bought
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
$
—
—
—
—
3,820
—
3,820
1,590
58
1,207
965
19,671$23,491* 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 ¥48,594 million and ¥50,343 million ($463 million), is not included in the above table as of March 31,
2019 and 2020, respectively. Loans that do not have contractual maturity, amounting to ¥718,170 million and ¥761,640 million ($6,998 million), are not included either.

(Note 4) Maturity analysis for interest-bearing liabilities at March 31, 2019 and 2020
At March 31, 2019
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
¥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 thanMore than
3 years
5 years
7 years
10 years
10 years¥175,039¥ 31,011¥1,265¥ 1,224
¥
—
		—
2,615
—
—
—
		—
—
—
—
—
		—
—
—
—
—

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

HIROSHIMA BANK INTEGRATED REPORT 2020

106

At March 31, 2020
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¥7,323,254
161,003
100,000
79,420321,008
39,413¥8,024,100

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¥166,045¥ 38,032¥ 1,079¥1,165
705
		
—
—
—
—
		
—
—
—
		
—
—
—
—

More than
10 years
¥
—
—
—
—

—
179,421¥346,171—
17,238¥17,238		—		382,677¥420,710—
18,260¥19,339—
4,024¥5,190Millions of U.S. dollars

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

Less than
1 year$67,291
1,479
919
730

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
$ 349
$10
$ 11
$1,526
6
		—
—
		—
		—
—
		—
—
—
		—
—
		—

More than
10 years
$ —
—
—
—

2,950

—

		—

—

		—

—

362
$73,731

1,649$3,181

		3,516$3,866

168
$178

		37
$ 48

158
$158

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

23 Stock optionsA) No stock option expense was recorded for the years ended March 31, 2019 and 2020.
B) Outline of stock options, size and changes in the year ended March 31, 2020
(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

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

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

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

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

Stock options 2016

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

107

HIROSHIMA BANK INTEGRATED REPORT 2020

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

(2) Size and changes of stock options
a. Number of stock options for the year ended March 31, 2020
Stock option
2010

Non-vested:
Outstanding on April 1, 2019
GrantedForfeited
VestedOutstanding on March 31, 2020
Vested:Outstanding on April 1, 2019
VestedExercised
Forfeited
Outstanding on March 31, 2020

Stock option
2011

Stock option
2013

Stock option
2014

Stock option
2015

Stock option
2016

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

15,800———15,80016,750———16,75038,100———38,10035,000———35,00039,650———39,65028,150———28,15054,150———54,150b. Price information for the year ended March 31, 2020
Yen

U.S. dollars

Stock option 2010

Exercise price
Average exercise price
Fair value at the granted date

Stock option
2012

¥
1
		 —
		 652Yen$ 0.00		 —
		5.99(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
		 —
		 644Yen$ 0.00		 —
		5.92
U.S. dollars

Stock option 2012

Exercise price
Average exercise price
Fair value at the granted date

¥
1
		 —
		 446Yen$ 0.00		 —
		4.10U.S. dollars

Stock option 2013

Exercise price
Average exercise price
Fair value at the granted date

¥
1
		 —
		 820
Yen

$
0
		 —
		7.53
U.S. dollars

Stock option 2014

Exercise price
Average exercise price
Fair value at the granted date

¥
1
		 —
		 914Yen$ 0.00		 —
		8.40U.S. dollars

Stock option 2015

Exercise price
Average exercise price
Fair value at the granted date

¥
1
		 —
		1,346
Yen$ 0.00		 —		12.37
U.S. dollars

Stock option 2016

Exercise price
Average exercise price
Fair value at the granted date

¥
1
		 —
		 654$ 0.00		 —		6.01

HIROSHIMA BANK INTEGRATED REPORT 2020

108

24 Other comprehensive income (loss)
Reclassification adjustments and the related tax effects concerning other comprehensive income (loss) for the years ended
March 31, 2019 and 2020 were as follows:
Millions of
U.S. dollars

Millions of yen

2019
Net unrealized holding gains (losses) on securities available for sale:
The amount arising during the period¥(12,353)
Reclassification adjustments
		(6,073)
Before adjustments for tax effect		(18,426)
The amount of tax effect		5,707		(12,719)
Net unrealized holding gains (losses) on securities available for saleNet deferred gains (losses) on hedging instruments, net of tax:
The amount arising during the period		(4,623)
		2,493
Reclassification adjustments
Before adjustments for tax effect		(2,130)
The amount of tax effect		660
		(1,469)
Net deferred gains (losses) on hedging instruments, net of tax
Remeasurements of defined benefit plans:
The amount arising during the period
		6,417
Reclassification adjustments		(467)
		5,950
Before adjustments for tax effect
The amount of tax effect		(1,844)
Remeasurements of defined benefit plans		4,105
Share of other comprehensive income (loss) of an affiliated company accounted
for using the equity method:
The amount arising during the period
		 (3)
Reclassification adjustments		 —
Share of other comprehensive income (loss) of an affiliated company accounted
for using the equity method
		 (3)
Total other comprehensive income (loss)¥(10,086)

25 Business combination
Merger between consolidated subsidiaries
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 and business of combined companies
Name of acquiring company: The Hiroshima Bank, Ltd.
Business of acquiring company: Banking
Name of acquired company: Hirogin Wealth Management
Co., Ltd.
Business of acquired company: Insurance agency(2) Date of business combination
April 1, 2019109

HIROSHIMA BANK INTEGRATED REPORT 2020

2020

2020

¥(21,431)
		(8,382)
		(29,813)
		9,150
		(20,662)$(197)
		(77)
		(274)
		84
		(190)		(6,677)
		2,316		(4,360)		1,351		(3,008)

		(61)
		21
		(40)
		12
		(28)

		934
		(989)		 (54)
		 16
		 (37)

		9
		(9)
		(0)
		0
		(0)

		 (3)
		 —

		(0)
		—

		 (3)¥(23,712)

		(0)$(218)(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(4) Name of the company after business combination
The Hiroshima Bank, Ltd.
(5) Others
This merger aims at further strengthening of groupmanagement and further improvement of services throughimproving efficiency of operations.
B) Outline of accounting treatment
The transaction is treated as a transaction under common
control in accordance with the Accounting Standard forBusiness Combinations (ASBJ Statement No. 21, January 16,2019), as well as the Guidance on Accounting Standard forBusiness Combinations and Accounting Standard for Business
Divestitures (ASBJ Guidance No. 10, January 16, 2019).

26 Significant subsequent events
Transformation to a holding company structure
through a sole-share transfer
The Bank resolved to transform to a holding company
structure by incorporating “Hirogin Holdings, Inc.,” a holding
company (the wholly owning parent company) (the “Holding
Company”) at the board of directors meeting held on May
12, 2020 through sole-share transfer (the “Share Transfer”)
dated October 1, 2020 (scheduled), on the assumption thatapproval at the annual stockholders’ meeting and necessary
approvals of the relevant authorities will be obtained.
The Share Transfer plan was approved at the annual
stockholders’ meeting held on June 25, 2020.
1. Purpose of the Share Transfer
The Bank’s management vision is to “build a reliable
Hiroshima Bank Group, united through trusting relations
with the regional community.” Based on this vision, formany years, from the perspective of implementing thegroup-integrated operation, the Bank has made an effort tostrengthen in-group cooperation, and has built a position
as a leading bank group in the region by demonstrating
its comprehensive strength, and has also proceeded withhealthy management on a stable operating base.
However, it is expected that the management environment
encompassing current financial institutions, particularly
regional financial institutions, will become harsher due toissues such as population decrease and entry from otherindustries. Moreover, due to changes in the economy andthe social situation, such as the rapid progress of digitaltransformation, as well as changes in customers’ lifestyle andattitude, customers’ needs are becoming more diversified,complex, and sophisticated. Therefore, it is consideredthat it will become more difficult for the current bankcentered structure to respond flexibly to the changes in
the management environment including the easing of
regulations, etc. or to accurately respond to customers’
needs.
In this situation, in order to aim to become a regional
comprehensive services group that meets all the needsof its customers, with a focus on finance, and to aim toconstantly improve the popularity within the regional market
and corporate value of the group, it is necessary to further
strengthen group governance as well as to further expand
the operation axis and enhance group synergy. To do so,
the Bank has determined that it is necessary to evolve intoa holding company structure, which will be the new groupmanagement structure.

Under a holding company structure, the management
vision will be to “contribute to the creation of a prosperous
future for the regional community, as a trusted regional
comprehensive services group by closely offering thoroughsupport to customers.” The Bank will realize “further
contribution to the regional community and customers”
and “the group’s sustainable growth and improvement ofcorporate value.”
Considering the purpose of its incorporation, i.e.,
strengthening group governance, the Bank will incorporate
the Holding Company as a company with an audit andsupervisory committee, and will further strengthen andenhance the corporate governance structure throughmeasures such as further strengthening the board of
directors’ supervisory function and the audit and supervisorycommittee’s audit function.
The Bank will be a wholly owned subsidiary of the Holding
Company due to the Share Transfer, and thus the shares of
the Bank will be delisted. The shares of the Holding Company
to be delivered to the stockholders as the consideration forthe shares of the Bank are scheduled to be registered to belisted on the First Section of the Tokyo Stock Exchange, Inc.
(the “TSE”). The listing date is scheduled to be on October 1,
2020, which will be the effective date of the registration ofincorporation of the Holding Company (the effective date of
the Share Transfer).
2. Summary of the Share Transfer(1) Schedule of the Share Transfer
Record date of the annual stockholders’ meetingTuesday, March 31, 2020
Board of directors meeting to approve the share transfer plan
Tuesday, May 12, 2020
Annual stockholders’ meeting to approve the share transfer
Thursday, June 25, 2020
planDate on which our shares will be delisted
Tuesday, September 29, 2020 (scheduled)
Date on which the incorporation of the Holding Company
will be registered (the effective date)
Thursday, October 1, 2020 (scheduled)
Date on which the shares of the Holding Company will be
Thursday, October 1, 2020 (scheduled)listedThe schedule is subject to change due to necessity in thecourse of the procedures of the Share Transfer or otherreasons.

HIROSHIMA BANK INTEGRATED REPORT 2020110

(2) Method of the Share Transfer
A sole-share transfer under which we will be the wholly
owned subsidiary company resulting from a share transfer
and the Holding Company will be the wholly owning parent
company incorporated in a share transfer.
(3) Details of the allocation pertaining to the Share Transfer(the share exchange ratio)
Hirogin Holdings, Inc. The Hiroshima Bank,(Wholly owning
Ltd. (Wholly owned
Company nameparent company
subsidiary company
incorporated inresulting froma share transfer)a share transfer)
Share exchange ratio
11(i) Share transfer ratio
The stockholders holding the Bank’s common shares enteredin the latest stockholder register as of the day immediately
preceding the effective date of the Share Transfer will bedelivered and allocated one common share of the Holding
Company to be incorporated per each of the common sharesof the Bank held by the stockholders.
(ii) Share units
The Holding Company will adopt a share unit system underwhich the number of shares constituting one unit will be
100.
(iii) Calculation basis of the share transfer ratio
The Share Transfer will be conducted to incorporate one
holding company that will be the wholly owning parent
company through the sole-share transfer of the Bank. Thus,
the stockholder structure of the Holding Company will notchange upon the Share Transfer. Accordingly, by putting thefirst priority on not causing disadvantages to stockholders,the Bank has decided to allocate and deliver the stockholders
one common share of the Holding Company per each of thecommon shares of the Bank held by the stockholders.
(iv) Results, methods, and the basis of calculation by a third
party organization
For the reasons described in (iii) above, no third party
organization has calculated the share transfer ratio.
(v) Number of new shares to be delivered through the Share
Transfer (scheduled)
312,315,203 common shares (scheduled)
If the total number of the issued shares of the Bank changes
prior to the Share Transfer takes effect, the above numberof new shares to be delivered by the Holding Company willfluctuate. Since the Bank plans to cancel its treasury shares tothe extent that they can practically be cancelled by the time111

HIROSHIMA BANK INTEGRATED REPORT 2020

immediately prior to the time when the Holding Company
acquires all of the Bank’s issued shares (the “Record Time”),
the number of the Bank’s treasury shares as of March 31,
2020 (317,968 shares) has been excluded from the sharessubject to the new share delivery in the above calculation.
In cases where the number of the Bank’s treasury shares asof March 31, 2020 fluctuates by the Record Time, includingin the case where the Bank’s stockholders exercise theirappraisal rights, the number of new shares to be delivered by
the Holding Company may fluctuate.
(4) Matters regarding stock acquisition rights and bonds withstock acquisition rights upon the Share Transfer
With regard to stock acquisition rights issued by the Bank,
equivalent stock acquisition rights of the Holding Company
will be delivered and allocated to holders of the Bank’s stockacquisition rights in place of the Bank’s stock acquisitionrights held by them. The Bank has issued no bonds withstock acquisition rights.
(5) Handling of new listing of the Holding Company
The Bank will apply for new listing (technical listing) of
shares of the Holding Company to be newly incorporated
to the First Section of the TSE. The listing date is scheduled
to be October 1, 2020. Since the Bank will become a wholly
owned subsidiary of the Holding Company through the Share
Transfer, the Bank will be delisted from the First Section of
the TSE on September 29, 2020 prior to the listing of theHolding Company.

3. Outline of the Holding Company to be newly incorporated through the Share Transfer(the wholly owning parent company incorporated in a share transfer) (scheduled)
Name

Hirogin Holdings, Inc.

Address

1-1-7, Nishikaniya, Minami-ku, Hiroshima-shi

Representatives and Chairman
directors to assume (Representative Director)
officePresident(Representative Director)

Koji Ikeda(Current Chairman of The Hiroshima Bank)

Toshio Heya(Current President of The Hiroshima Bank)

Director

Akira Ogi

(Current Director & Senior Managing Executive
Officer of The Hiroshima Bank)

Director

Kazuo Kiyomune(Current Director & Managing Executive Officer of
The Hiroshima Bank)

Director

Fumitsugu Kariyada(Current Managing Executive Officer of The
Hiroshima Bank)

Director (Audit and supervisory Hitoshi Katayama
committee member)(Current Audit & Supervisory Board Member of The
Hiroshima Bank)

Director (Audit and supervisory Kaori Maeda
committee member)(Current External Director of The Hiroshima Bank)

Director (Audit and supervisory Yoshinori Takahashi
committee member)(Current External Audit & Supervisory Board
Member of The Hiroshima Bank)

Director (Audit and supervisory Satoshi Miuracommittee member)(Current External Director of The Hiroshima Bank)(Note1) Among the Directors (Audit and supervisory committee members), Kaori Maeda, Yoshinori
Takahashi, and Satoshi Miura are external directors as provided in Article 2, item (xv) of theCompanies Act.
(Note2) Kaori Maeda’s name on her family register is Kaori Aibara.
Business description • Business management of banks and other companies that a bank holding company may have as its
subsidiaries pursuant to the Banking Act and any other business activities incidental or related thereto.
• In addition to those described in the above item, business activities that a bank holding company may
engage in pursuant to the Banking Act.
Stated capital¥60,000 million ($551 million)

Fiscal year end

March 31

4. Outline of the accounting upon the Share Transfer
Since the Share Transfer will fall under a “transaction under common control” under corporate accounting, it will not affectprofit or loss.

HIROSHIMA BANK INTEGRATED REPORT 2020112

Incorporation of a subsidiary
The Bank resolved to incorporate a subsidiary wholly ownedby the Bank at the board of directors meeting held on
December 20, 2019 and it was incorporated on April 1, 2020.
1. Purpose of incorporation
The Bank has been committed to the development of theregion including the support for tourism promotion as wellas identifying the true management issues faced by regionalcustomers through feasibility studies and appropriate
financing according to the various usage of funds.
With a view to the future under such conditions, an increaseis expected in funding needs relating to sophisticated anddiversified management issues of customers and regional
revitalization.
The incorporation of a subsidiary with investment expertisewould enable us to actively commit to regional revitalization
through strengthening financial intermediary functions
including fund management and an active supply of equity
financing as well as responding to customer needs.

113

HIROSHIMA BANK INTEGRATED REPORT 2020

The Group will contribute to the development of the region
and build a strong group management base as well as
expand the operation axis through the company and commit
to the solution of the management issues of the customers
by cultivating and supporting venture businesses and holding
equity interests.
2. Outline of the subsidiary(1) Name
Hirogin Capital Partners Co., Ltd.
(2) Business description
Investment(3) Date of incorporation
April 1, 2020
(4) Stated capital¥100 million ($1 million)(5) Stockholder	The Hiroshima Bank, Ltd. (wholly
owned subsidiary)Non-Consolidated Balance Sheets
THE HIROSHIMA BANK, LTD.
As of March 31, 2019 and 2020
Millions of
U.S. dollars

Millions of yen

2019

2020

ASSETSCash and due from banks
Call loans and bills purchased
Monetary claims bought
Trading assets
Money held in trust
Securities
Loans and bills discounted
Foreign exchanges
Other assets
Tangible fixed assets
Intangible fixed assets
Prepaid pension cost
Deferred tax assets
Customers’ liabilities for acceptances and guarantees
Reserve for possible loan losses
Total assets

2020¥ 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¥ 1,471,326
		 6,711
		 6,313
		 6,235
		
171
		
1,136,265
		
6,479,709
		 34,990
		 106,427
		 92,974
		 9,119
		 53,340
		 4,965
		 35,232
		 (31,848)¥ 9,411,933$13,519
		 62
		 58
		 57
		 2
		
10,441
		
59,540
		322
		978
		854
		 84
		490
		 46
		324
		
(293)
$86,483

LIABILITIES AND NET ASSETS
Liabilities:
Deposits
Call money
Payables 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
Reserve for dismantling costs for fixed assets
Deferred tax liabilities
Deferred tax liabilities for land revaluation reserve
Acceptances and guarantees
Total liabilities¥ 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¥ 7,709,050
		 100,000
		 79,420
		 321,008
		 3,814
		 639,493
		 3,502
		
32
		 41,541
		 2,530
		
94
		
547
		
—
		 1,177		—		 13,605
		 35,232¥ 8,951,052$70,836
		919
		730
		2,950
		 35
		5,876
		 32
		 0
		382
		 23
		 1
		 5
		 —
		 11
		 —
		125
		324
$82,248

Net Assets:
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 saleNet deferred losses on hedging instruments
Land revaluation reserve
Total valuation and translation adjustments
Stock acquisition rights
Total net assets
Total liabilities and net assets¥
54,573
		 30,739
		 320,376
		 (1,026)
		 404,663
		 35,668
		 (2,016)
		 27,792
		 61,444
		176
		 466,283¥ 8,917,961¥
54,573
		 30,739
		 338,614
		(984)
		 422,943
		 15,005
		 (5,025)
		 27,781
		 37,762
		
176
		 460,881¥ 9,411,933

$ 501
		282
		3,111		 (9)
		3,886
		138
		(46)
		255
		347
		 2
		4,235$86,483

HIROSHIMA BANK INTEGRATED REPORT 2020114

Non-Consolidated Statements of Income
THE HIROSHIMA BANK, LTD.
Years ended March 31, 2019 and 2020
Millions of
U.S. dollars

Millions of yen

2020

2019
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
Income taxes:
Current income taxes
Deferred income taxes
Net income¥ 62,182
		12,682
		 1,779
		24,430
		 7,537
		 6,321
114,932¥ 62,266
		12,765
		 1,630
		23,760
		10,413
		10,284
121,120

$ 572
		117
		15
		218
		96
		94
		 1,113

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

		 1,935
		 3,004
		 3,418
		10,855
		 4,933
		52,138
		10,706
86,992
		34,127

		18
		28
		31
		100
		45
		479
		98
		 799		314

		 7,735
		 2,590¥ 25,388

		 7,934
		 2,031¥ 24,161

		73
		19
$ 222

Yen

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

115

HIROSHIMA BANK INTEGRATED REPORT 2020

2020

¥1,496.60
		 81.53
		 81.46
		 20.00¥1,479.03
		 77.57
		 77.51
		 22.50

U.S. dollars$13.59
		0.71
		0.71
		0.21

Organization(As of April 1, 2020)

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

Branch areas / Branches

HIROSHIMA BANK INTEGRATED REPORT 2020

116

Major Shareholders

Stock Information(As of March 31, 2020)(As of March 31, 2020)
Shareholders

Number of shares(Thousand)

Percentage ofshares issued(%)

18,134
16,194
9,504
7,500
7,463
6,042
6,038
6,004
5,920
5,500

5.80
5.18
3.04
2.40
2.38
1.93
1.93
1.92
1.89
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•••

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.
Address:

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.

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.

117

HIROSHIMA BANK INTEGRATED REPORT 2020

THE HIROSHIMA BANK, LTD.

Hirogin Report 2020 Integrated Report

Securities code

8 3 7 9Issued: July 2020
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/