FFG ANNUAL REPORT 2023

FUKUOKA FINANCIAL GROUP
FFG ANNUAL REPORT 2023

To be your bank of choiceFUKUOKAFINANCIAL
GROUP

Financial Data

Consolidated ROE
Consolidated ROE =Our Principles

13.6%

Consolidated capital adequacy ratio

Net income attributableto owners of the parent(Net assets at the beginning of the period+ Net assets at the end of the period) ÷2

10.7%

10.7%

10.7%

11.6% About 10%

10.2%
9.6%
<Based on compliancewith the final Basel III>

About 6%

5.7%
FFG aims to become a financial groupthat creates values for all stakeholders by:Group Management Principles

6.6%

Enhancing perception and taking
actions without fear of failure, Pursuing high
4.9%
3.4%

quality for future progress, and Bolstering people’s optimum choice.
FY18

Brand Slogan Core Value

FY19

FY20

FY21

FY22

FY18

FY24
(Plan)To be yourBankof choiceCorebusiness
profit (3 banks total)(Billions of yen)

100.0
80.0

105.9

97.5

FY22

FY24
(Plan)

110.6(Billions of yen)

80.0

FFG creates a virtuous cycle of “contribution to regional economic
60.0 development”
51.6

Sustainability Policy

FY21

100.0

104.0

79.7

78.9

77.2

FY20

Consolidated net income

Your closest bank Your reliable bank Your sophisticated bank
120.0

FY19

60.0

and “improvement of FFG corporate value” through business activities
based on
40.0

65.0
54.1
44.6
31.2

40.0

the Group Management Principles in order to help develop a sustainable
society.
20.0
20.0
0.0

Long-term Vision 2030

FY18

FY19

FY20

FY21

FY22

0.0

FY24
(Plan)

FY18

FY19

FY20

FY21

FY22

*Figure in FY22 includes impact of securities portfolio restructuring

FY24(Plan)The Best Regional Bank that contributes to the growth of all stakeholders
Balanceandof deposits
and loans at the end of thethrough financeconsulting
period (consolidated)

Consolidated core OHR =(Trillions of yen)

Deposits and CDs
Loans

25

15 13.014.3

20.5

17.5

19.5
17.1

16.7

March 31,2020

March 31,2021

March 31,
2022

20
16.1

Consolidated OHR
Consolidated expenses
Consolidated gross business profit

20.9
68.9%

17.6

68.4%

60.6%

64.6%

60.8% About 60%

10
50March 31,
2019

FY18

March 31,2023

Allowance for loan losses and allowance ratio trends(Billions of yen)

250.0

Allowance for loan losses
Allowance ratio
1.3

200.0

1.0

150.0

129.2

182.5

1.4

1.4

202.6

199.3

(%)

1.3

(Billions of yen)

4,000.0
1.0

FY21

FY22

FY24
(Plan)

StocksJapanese Government Bonds
Corporate bonds
Foreign bonds, etc.
3,540.6

3,727.3

3,760.0

March 31,2020

March 31,2021

Municipal bonds

4,023.6

3,850.9

3,000.0
2,000.0

0.5
1,000.0

50.0

1

FY20

Balance of securities

1.5

187.8

100.0

0.0

FY19

*Figure in FY22 excludes loss-cutting in foreign bonds

March 31,2019

March 31,2020

March 31,2021

March 31,2022

March 31,
2023

0.0

0.0

March 31,2019

March 31,2022

March 31,2023

FFG ANNUAL REPORT 2023

76

FFG aims to become a financial group that creates values for all stakeholders by:Enhancing perception and taking actions without fear of failure, Pursuing highquality for future progress, and Bolstering people’s optimum choice.

To be your Bank of choiceYour closest bank Your reliable bank Your sophisticated bank

FFG creates a virtuous cycle of “contribution to regional economic development”
and “improvement of FFG corporate value” through business activities based on
the Group Management Principles in order to help develop a sustainable society.

The Best Regional Bank that contributes to the growth of all stakeholders
through finance and consulting

FFG ANNUAL REPORT 2023

2

FFG Overview

The Future We Aim to Realize
The future we aim to realize is a society of local communities that are economically, materially, and spiritually richer.
FFG believes that in the midst of various environmental changes, the social issues the Company must address (materiality
issues) in order to realize such a society are the shrinking of the regional economy, the changing industry structure, an
era of 100-year human lifespans, and climate change.
Through “transformation of our existing business model,” “taking on the challenge of new business,” and othermeasures set out in the 7th Mid-Term Management Plan, we will contribute to solving these social issues and aim toachieve our Long-term Vision 2030 while getting closer to achieving the sustainable society we aim to create.
“The Best Regional Bank” envisioned in our Long-term Vision 2030 is a financial group that contributes to the growth of
all stakeholders through finance and consulting.

Transformationof existing
business model

ClimatechangeChanging
industry
structure

Shrinkingof theregional
economyGovernance/
Risk Management/
Compliance

An era of
100-yearhuman
lifespans

Our mission
and promise
3

The 7th Mid-Term
Management Plan
Human resource
strategies

Materiality

Challenging
new businesses

Group Management Principles (mission)
Brand Slogan (promise)

The sustainable society
we aim to create

Providingsocialvalue

Long-term
Vision 2030

A society of local
communities that areeconomically, materially,and spiritually richer

Improving
economicvalue

The Best Regional Bank that contributes
to the growth of all stakeholders throughfinance and consulting

To bring about “the future we aim to realize,” all officers and employees execute their daily
duties guided by the shared values in the “Group Management Principles” that have remained
unchanged since the founding of FFG, and in our promise to all stakeholders that captures thisphilosophy in a single phrase, “to be your Bank of choice.”
By creating a virtuous cycle of solving social issues, or “providing social value,” and “improving
FFG’s value in economic terms” as a result of society’s support, FFG aims to realize aprosperous society together with all stakeholders.

A financial group that bolsters people’s optimum choice
To be your Bank of choice

FFG ANNUAL REPORT 2023

4

FFG Overview

The Story of Fukuoka Financial Group
Fukuoka Financial Group, Inc. (FFG), was established
as a financial holding company through the joint
share transfer of the Bank of Fukuoka and the
Kumamoto Bank on April 2, 2007. The Shinwa Bank
joined into the Group in the same year and theEighteenth Bank also integrated in 2019. Since those
two banks merged on October 1, 2020, The JuhachiShinwa Bank was newly established. On October 1,
2023, FFG was integrated with the Fukuoka Chuo
Bank, Ltd.

Within Kyushu
Other

460
9

Fukuoka Prefecture
Within Kyushu
Other

152
12
6

With its headquarters in Fukuoka, the largest
city in Kyushu, FFG’s network extends across the
Kyushu region through bases in the three prefecturesof Fukuoka, Kumamoto and Nagasaki.
All of ficers and employees of the Fukuoka
Financial Group are united in their efforts to fulfill thepromise to stakeholders to make FFG “your Bank ofchoice.” We look forward to your continued support
in our drive to upgrade our services as a broad areabased regional financial group that spans local andglobal levels.

Fukuoka Pref.
Saga Pref.
Oita Pref.
Nagasaki Pref.

Nagasaki Prefecture
Within Kyushu
Other

Kumamoto Pref.

164
21
3

Miyazaki Pref.

Kumamoto Prefecture 63
Within Kyushu
7

Fukuoka Prefecture

Kagoshima Pref.

Kyushu41(As of September 30, 2023)

2009

History of Fukuoka Financial Group2010

Foundation of the Fukuoka Chuo Bank, Ltd.
Foundation of
the Shinwa Bank, Ltd.

1877

1879

Foundation of
the Bank ofFukuoka, Ltd.

5Foundation of
the EighteenthBank, Ltd.

1929

1951

Foundation of
the Kumamoto
Bank, Ltd.

2007

April
Establishment of FFG(The Bank of Fukuoka, Ltd. and
the Kumamoto Bank, Ltd.)
OctoberManagement integration of the
Shinwa Bank, Ltd.

January
IT system integration of
the Shinwa Bank, Ltd.
January
IT system integrationof the Kumamoto
Bank, Ltd.

FFG’s Overseas Network

DalianChina

Shanghai

Kyushu has strong relationships

Taipeiwith Asian countries and is aHong Kong

market with enormous potential.
We are supporting our customers
by broadly strengthening our

Bangkok(Thailand)

contact points throughout Japanand overseas.

Ho Chi Minh
(Vietnam)

U.S.A.
New York

Japan

Singapore

2023

Tokyo
Osaka Aichi

2021
2020

(as of March 31)

2016

May
Launch of commercial operations ofMinna Bank, Ltd.

2015
2012

March
Opening of representative office in
Bangkok
April
Maeda Securities Co., Ltd. becomes awholly owned subsidiary, and begins
operations as Fukuoka Securities Co.,
Ltd. (now FFG securities Co., Ltd.)—Group-wide balance of deposits
exceeds ¥11 trillion.

—Loans: ¥17.8 trillion—Deposits: ¥21.0 trillion

2019

April
Business Integration
with the EighteenthBank, Ltd.

DecemberOpening of representative
office in Taipei

OctoberBusiness Integration
with the Fukuoka
Chuo Bank, Ltd.

October
Merger of the Shinwa Bank, Ltd.
and the Eighteenth Bank, Ltd.
(The Juhachi-Shinwa Bank, Ltd.
was established.)

April
Launch of iBank Business
July
Opening of representative officein Ho Chi Minh City

The Bank of Fukuoka, Ltd.
The Kumamoto Bank, Ltd.
Fukuoka Financial Group, Inc.

The Juhachi-Shinwa Bank, Ltd.
The Fukuoka Chuo Bank, Ltd.
Minna Bank, Ltd.

FFG Head Office (Fukuoka City)
FFG ANNUAL REPORT 2023

6

FFG Overview

7

Message from the President

To be the Best Regional Bank
that creates a virtuous cycle ofproviding social value andimproving economic value

Hisashi Goto
Director & President
Fukuoka Financial Group, Inc.

On October 1, FFG completed a business integration with the Fukuoka Chuo Bank. Since its
founding, the Fukuoka Chuo Bank has been focusing on sound management as a “financial
institution specializing in SMEs” and building close relationships with regional customers. As aresult of this integration, we are well-equipped with systems to support customers with a wide
range of backgrounds, from large corporations to SMEs including individual business owners.
Going forward, our aim is to achieve “the growth of FFG” while contributing to the “creationof prosperous local communities,” leveraging the strengths of the Fukuoka Chuo Bank as well
as FFG’s sophisticated menu of solutions and expansive network.

FFG ANNUAL REPORT 2023

8

FFG Overview

Introduction —FFG’s business base, Kyushu
I will first talk about Kyushu, our business base.
As you might know, Kyushu continues to be a leading
growth region in Japan. The Fukuoka region is busy withthe sounds of construction of new buildings and bustles
with visitors from Japan and other parts of the world tilllate at night. Hearing the potpourri of foreign languages
being spoken, one might momentarily forget that this isFukuoka. Nagasaki prefecture has seen stabilization in
employment and the recovery of the tourism industry,
which was badly hit by the COVID-19 pandemic, inaddition to a change in the flow of people to and from theregion with the operational launch of the Nishi Kyushu
Shinkansen. In Kumamoto prefecture, the entry of TSMC
into the region has spurred strong demand for capital

investment across a wide range of related industries,
accompanied by a rapid acceleration in the developmentof infrastructure in the surrounding area.
The main reason why I chose to work for the Bank ofFukuoka is the region’s potential for growth. At the time,
Fukuoka already seemed like a huge city to me, havinggrown up in the small city of Isa in Kagoshima prefecture.
The Fukuoka of today has grown dramatically compared
to what it was back then. Although I cannot claim to havepredicted the Bank of Fukuoka’s growth in tandem withthe region, I intuitively felt that it would happen. Today, thisintuition spreads to the Kyushu area, continuing into the
future.
See P11: TOPICS FFG × Kyushu’s Past, Present, and Future

The Last Year in Retrospect
It has been one and a half years since I assumed theposition of President in April last year. At the time, I
announced that I would focus on three efforts: “being
thoroughly customer-focused,” “bringing out the vitality ofpeople and the organization,” and “continuing to increase
profits.” We assess the status of each of these threeefforts every year. I will explain this past year’s
assessment with reference to the progress of the 7th
MTMP and upcoming developments.

<Being thoroughly customer-focused>
Our business is built upon the continuous support of ourcustomers. Accordingly, the attitude behind our work is
being “customer-focused.” The highest priority is toalways have “the customer” at the forefront of our minds
as we carry out our work, for not only our sales
representatives but all employees including those inplanning and administration as well as clerical divisions.
To this end, our brand slogan, “To be your Bank of

9choice,” is a philosophy we share with our employees
every day.
Led by this philosophy, we have set forth a “goal-based
sales” initiative in the sales policy of the 7th MTMP.
We share customers’ goals (targets and dreams) andprovide solutions geared at problem-solving to achievethese goals. This sales style has been disseminatedacross the company through initiatives over the past year.
Currently, measures to achieve “digitalization,” “business reforms,” and “sales reforms” are being steadily
implemented and with the resulting synergies, we willsolve the problems faced by our customers and theregion (society) and differentiate FFG from competitors(Willing To Pay).
See P27-28: CDO’s Message — Customer-focused Self-transformation
See P29-30: Message from GM, Sales Administration Division
Strengthening our ability to provide solutions using “Humans × Digital Technology”

<Bringing out the vitality of people andthe organization>
Being “customer-focused” is the responsibility of eachand every employee. Specifically, it involves employees
striving to improve their capabilities while bearing “thecustomer” in mind in the course of their daily duties. It isa way to challenge themselves and achieve self-actualization through their work.
It is imperative that we raise the know-how and skills ofsales representatives and increase the number of humanresources capable of delivering sophisticated solutions inorder to carry out the goal-based sales policy laid out inthe mid-term plan. Further, specialist human resources
are also needed in planning and administration as well as
in the clerical, digital and markets divisions. In order tosecure such human capital, we have moved ahead withvarious initiatives through the employee hiring, development, placement, and treatment processes.
Face-to-face communications were severely restricted
during the three years of the COVID-19 pandemic. In thewake of the lifting of these restrictions, subsidies weremade available to all employees for the purpose of stimulating communication between workplace colleagues
outside of work. Each workplace had their own uniqueinitiatives, and the positive impacts on business operations can be felt.

Personally, while on business trips to see customers I
sought out opportunities to visit nearby branches,
continuously seeking to exchange opinions with branch
employees. We have begun to implement regular
employee engagement surveys to measure the effects ofthese policies.
See P37-38: Building a Human Resource Portfolio to Achieve FFG’s Business Strategy
See P39-40: Improving Employee Engagement<Continuing to increase profits>
In FY2022, apart from a recording a significant loss onsale of bonds due to the restructuring of our foreign bondportfolio affected by rising U.S. interest rates, performance is in line with initial plans. As a result, we havesucceeded in paving the way to achieving the 65.0 billion
yen profit target set for the final year of the mid-term plan,
including growth investments and human capital investments.
See P17-20: Message from Officer in Charge of Corporate Planning and FinanceIn our assessment, it has been a year where we
successfully initiated the virtuous cycle for sustainablegrowth depicted in the Corporate Sustainability diagram
below, with solid initiatives in the three efforts as
described above.

Corporate Sustainability (the Virtuous Cycle)
Corporate goals: Providing social value
Improving corporate value—Continuing to generate profits while solving stakeholder issues—

The company
Sustainable profit growth(virtuous cycle of business)

Customer satisfaction
Support(customers/society)

Customer contact points

Solving customers’ issues(providing value to society)

Bringing out
organizational vitality

Employees

Solving social issues
Contributing to (local)
communities
Tax payment (community)
Stock price, dividend,
etc. (investors)

Business process

Growthinvestment

People/Organization

Treatment of
employees• Personnel
system• Human resource
development• Organizational
cultureEmployee goals: Self-actualization—Growing while contributing to others (customers/related parties)—

Wages, welfare
programs, etc.

Role as a professional(sense of purpose)

Personal growth(self-actualization)

Satisfaction of others

Social contact points

Personal
investment

Thoughts(will)
Contributing to others(customers/related parties)
Various roles(sense of purpose in work and life)

FamilyLocal
community

Other

Employee engagement

FFG ANNUAL REPORT 2023

10

FFG Overview

TOPICS

FFG × Kyushu’s Past, Present, and Future —Kyushu’s “Innovativeness,” a Legacy for the Future—

Present

Past“Innovativeness” is a key word that cannot be omitted when talking about FFG’s corporate DNA. These roots canbe traced back to Kyushu’s enterprising history.
It is this history of Kyushu that FFG has continuously grown with. With Kyushu as our home ground, we willcontinue to contribute to creating a prosperous society by solving customers’ and community’s issues drawing on
our fundamental strengths of “financial functions (settlement, intermediation, and credit creation)” and the region’s“trust and reliance” in us.

It all began in Dejima, Nagasaki

Nagasaki’s Dejima. During the Edo period, Nagasaki, where the Juhachi-Shinwa
Bank is headquartered, was Japan’s only connection to the rest of the world, andas such was early to receive Western science and technology, medicine, andculture.
It was from Dejima where Japan exported its gold, silver, copper and othermaterials, and also where it imported raw silk, sugar, medicines, and the like. Sugarand other exotic foreign imported goods of all kinds would pass through Nagasaki
and make their way all over Japan via Nagasaki Kaido trade route, also known as
Sugar Road.
Today, “Dejima,” which is currently undergoing restoration, is right next to theheadquarters of the Juhachi-Shinwa Bank. One might say that Kyushu’s eminently
international industrial history began at Nagasaki.

The Juhachi-Shinwa Bank
head office and Dejima

Yawata Steel Works—“Silicon Island” Kyushu —Expansion of TSMC into Kumamoto
TSMC’s Kumamoto facility is currently a hot point of interest in Japan. The head
office of the Kumamoto Bank is a 30- to 40-minute car ride away.
The history of Kyushu’s industrial clusters is undoubtedly a background factor in
TSMC’s expansion. The Imperial Yawata Steel Works first began operations in1901. The production of steel using coal from the Chikuho coal field and iron ore
imported from China transformed Kitakyushu from a fishing village into a large
industrial zone that contributed to the modernization of Japan’s industry.
The 1960s saw a string of semiconductor and related companies make theirway into Kyushu, including those that manufactured materials and production
equipment for semiconductor parts. Kyushu’s large semiconductor industrial
cluster led to it being known as “Silicon Island Kyushu.”Today, Kyushu’s share of domestic production value is approximately 40% forintegrated circuit (IC) production and 20% for semiconductor production
equipment.
After TSMC announced the construction of its new facility in Kumamoto
prefecture’s Kikuyo-cho in October 2021, major semiconductor-related companies
have been building new plants and upgrading facilities in the Kyushu region.
Following TSMC’s entry, the Kumamoto Bank’s business base of Kumamoto
prefecture is experiencing a rapid rise in demand, spanning across various aspects
including infrastructure and other public works and employment-related UIJ turns.

The Imperial Yawata Steel Works%
50

Share in Japan

40
30
20

Billionsof yen
1,000

Value of production

800
600
400
200
0

10

15

20

22 (Year)

Kyushu’s IC production value andnational share

Source: Adapted from Kyushu Bureau of Economy,
Trade and Industry, “Kyushu Keizai no Genjo”(“The Current Status of the Kyushu Economy”),
2022 Edition.

FutureFukuoka, Brimming With Future Potential

11

The city of Fukuoka where the head offices of FFG and the Bank of Fukuoka arelocated is a comfortable city to live in with a rich variety of commercial facilities andexcellent airport connections to attract customers, making it an attractive hub andgateway to Asia. A city that young people find attractive, Fukuoka has been ranked
first in residential city rankings for four consecutive years and is the leading city inJapan in terms of population growth rate and proportion of young generation.
Since Fukuoka Mayor Soichiro Takashima announced the “Startup City” projectin 2012, numerous start-ups have sprung up from Fukuoka. Today, venture capital
investment value is on the rise, with over 40 emerging, unlisted companies with a
total corporate value of over 1.0 billion yen. The city ranked first in “business startrate” for the fourth year running, and is also number one in Japan for proportion ofprospective entrepreneurs.
Further, the city is in the midst of ongoing redevelopment projects such as“Tenjin Big Bang” and “Hakata Connected.” The “Tenjin Big Bang” development is
projected to exceed 70 stories by 2026, and together with “Hakata Connect,” isexpected to contribute 1.3 trillion yen to the economy annually. Fukuoka brims with
future potential and is becoming more attractive than ever.

Fukuoka City ranked first in Japan

Most desirable city to live in(by local government)*1
Population growth rate
(among government-designated cities)*2
Proportion of young generation(among government-designated cities)*3
Business start rate
(among 21 major cities)*4
Proportion of prospective entrepreneurs(among government-designated cities)*5

Sources:*1: Daito Trust Construction Co., Ltd.’s “Ii Heya Net Sumitai Machi
Ranking 2023” (“Good Housing Desirable City Ranking 2023”)*2: The Statistics Bureau of Japan’s “2020 Population Census”*3, 4, 5: Fukuoka City’s “Fukuoka Facts” website

FFG’s Materiality
Aspiring toward a “society of local communities that areeconomically, materially, and spiritually richer” was one ofthe decisions laid out by FFG in our 7th Mid-Term
Management Plan. That is to say, a “society where
everyone can do what they really want to do, withoutanxiety regarding the future,” and a “society where
everyone’s individuality works together and everyone
feels like a member of society.”
However, there are obvious barriers to the “prosperous
society” we hope for, such as more frequent natural
disasters, heightening geopolitical risk, shrinking regional
populations and an aging population coupled with adeclining birth rate.
Furthermore, this “prosperous society” is not something FFG can create on our own. It is something that will
be achieved by our business together with our customers
and other stakeholders.
What social issues must be resolved to achieve this?
We have identified four materiality issues—social
issues that we must address—considering the various
changes in the external environment and their importance.
(1) The “shrinking of the regional economy” due to theshrinking population is an important issue that
requires urgent action as it is a shared problem that
affects all who reside and do business in the region.
(2) The use of digital technology is essential to realizing
a “society where everyone can do what they reallywant to do.” Further, we have identified the “changing

industry structure (as a result of digitalization)” as animportant challenge. This is because even as theinnovative services made possible by advances indigital technology pose a competitive threat tobusinesses, the use of digital technology isaccompanied by a wealth of opportunities.
(3) Lifespans are becoming longer as a result ofadvancements in medical technology. This brings
with it additional financial and other anxieties about
the future. Supporting “customers’ rich lives” with ourfinancial functions and consulting service is an
important challenge in “an era of 100-year human
lifespans.”(4) Natural disasters are an annual affair in Kyushu, withdrastic consequences on the region. Responding to“climate change” so as to achieve a carbon neutral
society, among other things, is also an important
issue, as business activities are built upon coexistence with society and the environment, from asustainability perspective.
These four materiality issues are challenges that point
us toward a prosperous society, and the measures in the
7th MTMP aim to realize the society we wish to achieve
by addressing these issues, which will also serve toaccelerate FFG’s growth. Having defined the fourmateriality issues as the social issues that we must
address, “FFG’s story of value creation” become visible.

FFG’s Purposes
In the current era where importance is attached to acompany’s social role and sustainability as encapsulated
by SDGs and ESG, a company’s purposes are “providing
value to society” and “improving its own economic value.”“Providing value to society” means using the company’s strengths to provide products and services that
respond to society’s challenges and needs, and “improving its own economic value” means raising the company’scompetitive power and profitability to secure growthcapabilities so that the business becomes more able tosustain itself.
From this perspective, FFG’s purposes are therefore toutilize its strengths, that is to say, our “financial functions(settlement, intermediation, and credit creation)” and the“trust and reliance built up over 150 years,” to squarely

address the challenges faced by our customers and thecommunity (society), contributing to solving them andimproving our corporate value as a result of these
activities.
However, the way we address and solve problems issomewhat different from that of a non-financial company.
While a non-financial company solves problems with thegoods and services it supplies, a bank provides products
and services to customers, whose actions and businessactivities then contribute to solving the problems. In otherwords, we indirectly engage with challenges across thecommunity (society) through our customers’ businesses
and other activities.
As an example, raising productivity is essential torevitalize the regional economy in the midst of a shrinking

FFG ANNUAL REPORT 2023

12

FFG Overview

population and manpower scarcity. The management
integrations we have implemented to date serve to boost
banking productivity and contribute to sustaining andrevitalizing regional employment. In addition, therevitalization of local businesses and improvements toregional productivity resulting from M&As and businesssuccession may also be considered a contribution tocounteracting the shrinking population.
The “GROWTH I” (“Growth One”) facility supporting
start-ups launched in August and the “regional projects”
carried out in coordination with the local government areamong collective initiatives undertaken by industry,
academia, and the government for solving social issues
such as creating industry and revitalizing the region.
We can contribute to the achievement of region-wide(social) targets of Kyushu’s “GRP* improvement” and“achieving carbon neutrality” by solving the problems ofour 6.6 million private customers and 300,000 businesscustomers.

FFG’s capital through the initiatives in the 7th MTMP, wewill invest the financial resources in future growth andhuman capital, once again providing even greater social
value and improving economic value, and so on. This is
FFG’s “story of value creation” that will achieve the“society of local communities that are economically,materially, and spiritually richer” we aspire toward.
See P25-26: Value Creation Process*GRP: Gross regional product

While creating a virtuous cycle of “providing social
value” and “improving economic value” and enhancing

The opening of the GROWTH I facility (August 31, 2023)

Human Capital Management
It is “each and every one of our employees” whose
actions bring FFG closer to its goals. We link ourmanagement strategy with our human resource strategy
in accordance with our philosophy that investing proactively in human capital is the “source of improvement ofcorporate value.”
The pillars of our human resource strategy are “building
a strategic human resource portfolio” and “improving
employee engagement,” the foundation of which are“DE&I” and “organizational culture.”<Building a strategic human resource
portfolio>
In order to build a human resource portfolio that can
execute our business strategies, our planning, operational, and human resources divisions coordinate with eachother to achieve the optimal placement of humanresources by considering: “When and how many personnel will be needed, and what kinds of skills are required ofthem? How do we develop them?”
Given our current business strategies, it is particularly
important that we have a strong team of “digital humanresources” and “solution-focused human resources.”
At present, we have around 450 digital humanresources, but this is far from enough in view of the speedof technological innovation in this field and the expanding

13

scope of business. We will continue to hire mid-career
workers and develop our human resources. However,apart from in-house resources, we also see those joining
us from system vendors and partner companies, among
others, as valuable strategic forces. Investing in humanresources from partner companies in this way is aninvestment in bringing service development in-house.
In order to achieve “transformation of our existing
business model,” it is necessary to increase the numberof “solution-focused human resources” who can provide
high-quality consulting. Currently, our corporate businessemploys specialist human resources in structured
finance, M&A, business succession, and the retailbanking business has specialist asset managers known
as TACs (top asset coordinators) at the headquarters. Inline with the restructuring of our sales system, these
specialist human resources will be integrated with staff incharge of sales branches in each area. Then, throughdaily OJT, we will develop the staff in charge of sales
branches into “solution-focused human resources” withspecialist expertise.
We seek to maximize organizational performance by
optimizing our desired human resource portfolio to alignwith our external environment and business strategy.
See P37-38: Building a Human Resource Portfolio to Achieve FFG’s Business Strategy

<Improving employee engagement>
The elements of improving employee engagement are“affinity with FFG,” “treatment and content of work” and“work style.”
Firstly, the management team, including myself,
actively communicate with employees to work towardachieving “unity in thinking,” in order that employees feellike participants in our “story of value creation.”
As for “treatment and content of work” and “workstyle,” we will enhance the personnel system and its
operation, such as by ensuring fair assessment andtreatment, providing promotion opportunities for young
workers and female employees, and introducing the“career challenge program” and the “internal concurrent
role system” designed for self-directed career development, the “specialist course” for pursuing specialization in
defined fields, and the “paid hours-off system” and“flexible leave system” that support a flexible work style.

TOPICSIn addition, we will enhance leadership and management training by increasing the opportunities for seniorlevel employees who are in charge of vitalizing the organization to directly engage in discussions with the management team.
See P39-40: Improving Employee Engagement

Brand Book

To instill in employees our philosophy of our brandslogan declared on the day FFG was established, “To
be your Bank of choice,” we developed anddistributed the “Brand Book” booklet.
Despite the passing of 15 years, the booklet’s
message to employees remains unchanged. It isalways on my desk for me to re-read.
I would like to share what I read out to the attendees at the recent Fukuoka Chuo Bank integrationcommemoration ceremony.
“May we work with pride and motivation every day.
May we provide services that satisfy our customers.
The management team steers the direction ofmanagement so that employees and their families canwork with peace of mind; division and store managers
give guidance on the way forward and encourage
employees; bosses and colleagues strive to mutually
understand each other and support each other intheir duties.
Each of us in our individual roles, cherishing thepersons closest to us—our FFG Group colleagues—
as we consider what we must do and take action day
by day, is nourishment for the FFG group’s massive
growth.
Each of us, as employees of FFG, communicatingheart-to-heart to achieve mutual understanding.
Thinking of what we ourselves can do, and taking
action right now on the things we must do.

It is not a difficult thing. But it is not something thatcan be done by one person. Let each of us officers
and employees come together and open the way to
FFG’s future with our collective strength.
To achieve our aspiration, ‘To be your Bank ofchoice.’”Brand Book

The commemoration ceremony of the Fukuoka Chuo Bank
integration (October 1, 2023)

FFG ANNUAL REPORT 2023

14

FFG Overview<DE&I (Diversity, Equity & Inclusion) and organizational culture>
It is said that “an organization where diverse humanresources work will be full of lively discussion and is more
likely to generate new ideas than a homogeneousorganization.” Fostering diverse human resources (DE&I)
and an organizational culture that is transparent and open
is essential to a company’s growth.
DE&I promotion can be approached from many angles.
I would like to talk about current efforts in “mid-career
recruitment” and “active participation of women.”
As regards “mid-career recruitment,” we are accelerating such efforts in iBank marketing, Minna Bank, the DX
Promotion Headquarters and other areas involving digitaltechnology. Digital technology related departments arediverse groups, with around half of employees being
mid-career hires, as well as having staff from partnercompanies coming to work together. We plan to extend
this form of organizational management to other non-digital related departments as well.
As for “active participation of women,” we haveachieved our current target ratio of 15% women in

management positions through proactive efforts madeuntil now. We will continue with initiatives to provide
promotion opportunities and increase their capabilities,
so as to raise this ratio to 25%. We expect many womenleaders to emerge as a result of these initiatives.
In order for diverse individuals to let their capabilities
fully flourish, it is necessary to cultivate an organizational
culture that provides “psychological safety,” in that
employees are comfortable to speak their minds without
feeling at risk or afraid. In my day-to-day duties, I am
committed to active communication, and in a third-party
assessment performed by a law office this fiscal year, we
received an assessment that our “organizational culture
generally provides psychological safety.”
We will continue with these and other initiatives to build
an organization where diverse individuals work withautonomy and self-motivation.
See P41-42: DE&I/Organizational Culture

Initiatives to Address Climate Change
Every year, Japan experiences “once-a-decade” heavy
rains and other natural disasters. The heavy rains that hit
northern Kyushu in July affected many of our customers
badly and severely impacted the regional economy. The
Bank of Fukuoka’s branch stores were also damaged andhad to suspend operations for some time.
Amidst such climate shifts, we have prioritized“sustainability” initiatives as a major management issue,
and are working on group-wide initiatives to bring us
closer to a decarbonized society. In particular, in addition
to in-house decarbonization initiatives, we are leveraging
our scoring service Sustainable Scale Index thatquantifies the status of ESG and SDG initiatives, toengage in dialogue with customers. We are also adding
to our track record of action by undertaking positive
impact finance that contributes to solving environmental
and social issues, and other activities.
In addition, we are strengthening our coordination withlocal industries. The Bank of Fukuoka, together with nineretailers in the Kyushu area including AEON KYUSHUCo., Ltd., established the “Kyushu Ryutsu Sustainability
Salon” (“Kyushu Distribution Sustainability Salon”). Their
activities include empirical experiments aimed at achieving decarbonization in the distribution industry. As a bank,

we are in a unique position to create value by contributing
to these kinds of industry-wide “sustainability” efforts.
In this edition of the Integrated Report, we aredisclosing CO2 emissions attributable to our portfolio ofinvestments and loans (Scope 3) for the first time. Goingforward, we will create an action plan for engaging withcustomers to reduce the amount of emissions anddevelop a roadmap for achieving decarbonization.
See P47-52: Achieving Sustainability Transformation (SX) at FFG

Launch of the Kyushu Ryutsu Sustainability Salon (May 29, 2023)

15

Sustainably Improving Corporate Value
As a result of the hike in interest rates due to the revisionof the Bank of Japan’s policy and the expected rise inactivity in the Kyushu economy due to TSMC’s
expansion, FFG’s stock price has risen by about 60%
since I assumed the position of President in April 2022.
However, the price book-value ratio (PBR) remains below
1 and we take this very seriously.
We acknowledge that return on equity (ROE) and priceearnings ratio (PER) must improve in order to enhance
corporate value (improve PBR). As regards ROE, we willachieve concrete results for the various current measures
under way and are aiming to increase each businessportfolio’s profitability, return on risk-weighted assets(RORA), to a level that exceeds cost of shareholders’equity in the medium- to long-term.

As for PER, we regard your shared understanding of
FFG’s business direction and growth direction—that is tosay your affinity with FFG’s story of value creation toward
generating a virtuous cycle of “providing social value” and“improving economic value”—as something we cannot
do without. To achieve this, we will work to proactively
engage in dialogue with all our investors and otherstakeholders, as well as making disclosures that include
specific non-financial targets.
In addition, as the Chairperson of the Regional Banks
Association of Japan, I am working to improve the brandstrength of regional banks as a whole by contributing to
the region through the promotion of joint businesses andcoordination among member banks.
See P17-20: Message from Officer in Charge of Corporate Planning and Finance

Toward the Next Mid-Term Management Plan
This summer, we held an “officers’ training retreat” at a
hotel in the city involving key officers. During the retreat,
we exchanged our personal ideas on fundamental
management questions such as: “What is FFG’s
purpose?” “What kind of value can only FFG create?”“What future does FFG wish to achieve?” This was anactivity I was determined to make happen since I
assumed the position of President, and it served as aspace for participants to understand each other betterand share their thoughts.
Moving forward, we plan to include a wider range ofparticipants in these discussions and bring new clarity to
our “purpose” and “long term vision.” We will communicate these in a clear and understandable way and set
specific financial and non-financial KPIs, so as to achieve
shared understanding with our customers, the community, employees, shareholders, and other stakeholders.
I would like these sentiments to be reflected in the next
mid-term plan as “FFG’s story of value creation” that

employees can actively participate in with a sense
purpose.
In closing...
“In order to refine your mind, treat the present momentwith utmost seriousness.” This is a teaching of Kazuo
Inamori, the founder of Kyocera and a person whom I
admire deeply. In a speech to commemorate theircompany’s 100th anniversary, a customer recently said, “I
will work earnestly every day in preparation for the next
100 years.” Both sayings resonate strongly with a will toapply the Zen teaching of “nikon” (living fully in the present
moment). Feeling like every day is a battle for existence issomething that people in management are accustomed
to.
I will keep these words close to heart in my daily duties.
I will steer FFG with the utmost perseverance.
I humbly ask for your continued support as FFG strives
to meet your expectations as the “closest, most reliable,
and most sophisticated” bank.

Director & President
Fukuoka Financial Group, Inc.

FFG ANNUAL REPORT 2023

16

FFG Overview

Message from Officer in Charge ofCorporate Planning and Finance

Toward Improving
Corporate Value

Teppei Mizoe

Aiming to improve ROE by repeatedly
making investments based on growthstrategies and realizing investment effects

Executive Officer, FFG andGeneral Manager of Corporate
Planning Division, FFG

Reviewing Business Performance for FY2022
In FY2022, despite significant changes in the market
environment in Japan and overseas, the core businessprofit for the three banks of FFG reached a record highlargely because of the strong performance of loans andbills discounted to small- and medium-size enterprises.
On the other hand, in order to eliminate concerns overa decline in future earnings due to a sharp rise in overseasinterest rates, we restructured our securities portfolio(recording a loss on sales), with a focus on foreign bonds,
and strengthened our resistance to future interest rate
hikes.
In addition, Minna Bank began handling consumer
loans in July; however, we revised our future outlook since
results were significantly lower than planned. Although
this is a new business and therefore involves someuncertainties, making Minna Bank profitable is regarded
as an issue.
As a result, consolidated net income decreased fromthe previous fiscal year to 31.2 billion yen. However,excluding the impact from the restructuring of the

securities portfolio, the situation generally progressed inline with the initial plan, and I am confident that this willlead to sustainable growth in the future.
FY2021(Billions of yen)

Gross business profit

FY2022

Actual results Actual results YoY comparison
204.9
177.0
(28.0)Net interest income

184.8

186.4

+1.6

Non-interest income

20.1

(9.5)

(29.6)(8.0)(38.2)(30.2)

Expenses(115.4)(109.3)+6.1

Core business profit(3 banks total)

97.5

105.9

+8.3

Consolidated adjustments(14.7)(19.5)

(4.9)

(5.9)

(11.2)(5.3)

Parent company shareholder
net income

54.1

31.2

(23.0)

Excluding impact from
portfolio restructuring

−

57.3

+3.1

including bond-related
incomeMinna Bank, Ltd.

Progress of the Mid-Term Management Plan
The 7th Mid-term Management Plan, which started in
FY2022, is positioned as “the 3-year period during which
we aim to quickly realize new growth investments(transformation of the existing business model startingwith DX, and taking on the challenge of new businesses)
based on profit growth in existing businesses by realizing
the investment effects of the main measures (operational
reforms, integration with the Eighteenth Bank, etc.) in the17previous mid-term management plan.” As management
indicators under the plan for FY2024, we are targeting
consolidated net income of 65.0 billion yen (an increase of
10.9 billion yen compared with FY2021) and an ROE ofabout 6% (an increase of about 0.5%).
(First year initiatives)
Until now, iBank marketing and Minna Bank have been
driving DX as a form of open innovation, but in order toadvance the DX of existing businesses, which has been an
issue, in FY2022, we developed new digital tools as astarting point (“banking apps for individual customers,”“portal site for corporate customers,” and “SFA (sales force
automation)”). In line with this, we are working on initiatives
such as considering new branch formats based on theconcept of self-service and cashless operations, andintroducing high-performance ATMs aimed at improving
customer convenience and operational efficiency.
In addition, as well as instilling an awareness throughout
the company of a “goal-based sales approach” as amarketing style common to the Group, we worked on
expanding our solution functions to resolve issues facedby customers and local communities, including by
expanding the sales area of FFG Lease Co., Ltd. andestablishing a subsidiary specializing in M&A advisory.
(Initiatives from FY2023 onward)
In FY2023, we will gradually roll out the digital tools wehave been developing. Using digital tools as a starting
point, we will move forward with a channel shift (thedigitization of banking transactions) and the introductionof a new branch format (streamlined branches), with theaim of securing adequate sales staff. At the same time, weplan to refine our human skills by reviewing our sales
structure (integration of sales staff) and utilizing SFA, andwill significantly raise our solution capabilities bystrengthening the functions of our strategic subsidiaries.
By linking and connecting each measure in this way, we
will move forward with a sense of speed with the“transformation of the existing business model,” in otherwords, strengthening our competitiveness and profitability.
In addition, we conducted a business integration with
the Fukuoka Chuo Bank, Ltd. in October 2023. Byleveraging the management resources and strengths ofboth banks, we will support the problem-solving andgrowth of all customers in Fukuoka prefecture.
(Initiatives by Minna Bank)
Minna Bank continues to be an important challenge fromthe perspective of addressing our top risks, including the“rapid progress of the digital society” and the “depopulation,
shrinking birthrate, and aging of communities.”
Many companies have expressed interest in our BaaS
business, which is a focus of early monetization, and wehave so far started providing services through API
collaboration with three companies. By continuing toincrease our partner companies and approach thecustomer bases of those companies, we will deliver thebanking services of Minna Bank to an even greaternumber of users, thereby generating revenue.
In addition, the know-how acquired by Minna Bank,
including the advanced UX favored by young people, thecloud banking system built from scratch, andorganizational management provided by diverse humanresources, is an advantage that FFG has over otherfinancial institutions. By leveraging this know-how, we aim
to maximize synergies across the entire Group.
(Response to environmental changes)
Domestic interest rates have been rising recently on theback of the Bank of Japan’s monetary policy revisions. In
addition to more appropriate interest rate management
than in the past, the sales division will thoroughly
implement a goal-based sales approach by understanding
customer needs and issues when interest rates rise. In
market operations, we will take appropriate interest raterisks while paying attention to bond valuation losses.
Changes associated with interest rate hikes are a major
opportunity, and we will respond resolutely.
We are also seeing significant changes in our businessareas, including the expansion of TSMC into Kumamoto,the Hakata Connected and Tenjin Big Bang redevelopment
projects in Fukuoka, and the Nishi Kyushu Shinkansen andstation redevelopment projects in Nagasaki. We will fulfill
our role as a local financial institution, revitalize theeconomy, and increase our corporate value.
Moreover, the environment is constantly changing, as
evidenced by global trends such as rapid technologicaladvances, including generative AI, and rising awareness ofSDGs, as well as an increase in corporate bankruptcies
due to the weak yen, high prices, and labor shortages (=signs of credit risk). We believe that to achieve sustainablegrowth, it is essential to adequately understand thesechanges, identify risks and opportunities, and respond
appropriately.
(Future outlook)
In FY2023, we are planning net income of 61.5 billion yen(an increase of 30.3 billion yen from the previous fiscal
year). We aim to achieve targets by steadily implementing
each measure in the Mid-Term Management Plan, while
responding to issues and environmental changes aimed
at making Minna Bank profitable.
As we approach the final year of the Mid-Term Management
Plan, we are making steady progress in improving productivity
and strengthening solution capabilities through transformationof the existing business model, and are also restructuring our
securities portfolio and taking advantage of the rising yen
interest rate. We believe that the probability of achieving theplan is increasing.
7th Mid-Term Management Plan
target management indicators

FY23 plan

FY24 targets

Net income

61.5 billion yen

65.0 billion yen

ROE

About 6%

About 6%

Soundness

Capitaladequacy ratio

About 10%

About 10%

Efficiency

Consolidated
OHR

About 60%

About 60%

Profitability

FFG ANNUAL REPORT 2023

18

FFG Overview

Message from Officer in Charge of Corporate Planning and FinanceCapital Strategy and Shareholder Returns
Our basic policy for our capital strategy is “capitalmanagement that achieves a balance between growthinvestment and shareholder returns based on the premiseof maintaining soundness of the company.” We consider
the target range for the capital adequacy ratio, which isthe premise for soundness, to be around 10% to 11%.
FFG’s basic policy for shareholder returns is to pay out
stable dividends (either maintained or increased) throughprofit growth. Since our establishment in 2007, we have
either maintained or increased dividend payouts throughsteady profit growth. We conducted the first acquisition of
our own shares in FY2022. Going forward, we will continue to flexibly consider acquisition of our own shares,

taking into account performance trends, our capitalsituation, growth investment opportunities, the market
environment, and so on.
Trends in dividends per share (yen)[Establishment]
40
35

60

65

65

FY07

13

15

16

10

75

17

85

85

85

18

19

20

95

21

105

22

*Restated to reflect the one-for-five reverse stock split of our common stock
conducted in October 2018

115

23
Plan

Toward Improving Corporate Value

19(Dialogue with shareholders and other stakeholders)
We focus on information dissemination, including non-financial information, and IR activities in order to help investors and other stakeholders understand our approach tobusiness strategies, human resource strategies, andcapital strategies, aimed at improving ROE.
In addition, we will utilize opinions obtained throughconstructive dialogue with our stakeholders as areference for business management and capital policy,
among other things.
Through these initiatives, we aim to “reduce the cost ofshareholders’ equity” and thereby improve corporate
value by reducing information asymmetry with our stakeholders and helping them understand the Company’svalue creation story, which creates a virtuous cycle of“providing social value” and “improving economic value.”
We sincerely appreciate the continued understanding
and support of all our stakeholders.

Profit growthProfit increase projection

Growthinvestment

Investors’ evaluations of corporate value are expressed interms of stock price and market capitalization. FFG’sstock price in terms of PBR has remained below 1 since
our establishment in 2007, partly because of the collapseof Lehman Brothers and the introduction of negativeinterest rates, and is currently at the low level of around
0.7 (as of August 2023).
We recognize that the cost of shareholders’ equity
based on CAPM calculations is around 7% to 8%, and webelieve that the main reason for the low PBR is the factthat ROE is below this level. The Company recognizes
that this is a harsh market evaluation, and will work to
improve it.
In order to improve the PBR, we will work on “improving
ROE,” “raising the growth rate,” and “reducing the cost ofshareholders’ equity.” Of these, we regard “improving
ROE” as a priority theme, and while maintaining the profit
base of our existing core businesses, we will improve
efficiency with DX as the starting point and improve ourcurrent profitability based on RORA, i.e., working on thetransformation of FFG’s existing business model.
Additionally, by creating a cycle of earning profits throughinvestments based on growth strategies and the achievement of investment effects, we will further improve ROE
while increasing our growth rate.
Our ROE target for FY2024, which is the final year of
the 7th Mid-Term Management Plan, is approximately
6%, but this will still remain below the cost of shareholders’ equity, even if we achieve it. Firstly, we will work on
current measures to ensure that we achieve the goals of
the 7th Mid-Term Management Plan. However, in the next
Mid-Term Management Plan, we aim to achieve an ROE
of 8%, which would satisfy the cost of shareholders’equity, and in the future we would like to aim for an ROEof 10%.

FY 18

Consolidated net income
Investment and effect of the
6th mid-term management plan
Investment and effect of the
7th mid-term management plan
Investment and effect of the
8th mid-term management planand thereafter

Profit growth byrealizing the effectof investment
for growth
Improvementof corporate
value

Profit level
without investment
for growth

6th MTMP

7th MTMP

8th MTMP and thereafter

19

22 23

25

20

21

24

26

27

28

29 30

*Consolidated net income (FY19, FY22) excludes the effects of negative goodwill,
FL provision, portfolio restructuring, etc.

—Initiatives to improve corporate value—
We consider the cost of shareholders’ equity to be approximately 7% to 8% on the basis of CAPM calculations. As part of our initiatives
to improve corporate value, we will further strengthen efforts to improve ROE, reduce the cost of shareholders’ equity, and raise growth
rates. Specifically, the initial goal is to achieve an ROE of 6% by 2024, the final year of the 7th Mid-Term Management Plan, throughinitiatives covered in the Plan, with the next goal being to achieve an ROE of 8%, which would fulfill the cost of shareholders’ equity during
the period of the next Mid-Term Management Plan, followed by an ROE of 10% as our future goal.

(Trends in PBR)

Cost of shareholders’ equity and target ROE

1.0

1

Collapse of Lehman Brothers

Introduction of negative interest rates

3 Growth

rate

Market ALM Division: Optimize risk-free assets and risk assets• Optimize allocation to domestic and overseas risk assets andcontrol interest rate risk by diversifying revenue sources

Improve future profit expectations by taking on new business challenges• Returns that exceed the cost of shareholders’ equity in new
business• Acquire new revenue and expand customer base through Minna
Bank and others• Sustainable growth by “providing social value” and “improving
economic value”• Revitalization of communities that only FFG can realize• Human resource strategy integrated with growth strategy
Enhance information disclosure, including non-financial information• Improve understanding of business strategy, growth strategy, andhuman resource strategy

Reducerisk factors(from an investor’s
perspective)• Raise awareness of FFG and eliminate information asymmetry(Trends in ROE)

2 / 3

FY15

FY14

EquityFY13

Risk assets

FY22

FY21

FY20

FY19

FY18

0.0%

FY12

Risk assets

6.0%

5.0%

FY11

Profit

8.0%

FY10

ROE

Equity

10.0%

10.0%

FY09

Capital adequacy ratio

ProfitCost of shareholders’ equity
7-8%
Target levels

FY08

RORA

P.105

15.0%

FY07

With regard to the optimization of risk returns, we need toincrease profitability while maintaining awareness of capital
adequacy requirements specific to the banking industry. We will
work to improve ROE based on RORA.

P.31
-33

•Constructive dialogue withshareholders at company
information sessions, small
meetings, etc.

Active communication with investors

1 Improve ROE

FY17

Raise awareness of FFG

FY27

2

P.19
P.51
-60
P.67

•Stable profit growth byrealizing investment effects•Human resource strategies

FY24

Improve PER

Reduce cost ofshareholders’equity7th Mid-Term Management Plan andsustainability management

Realize FFG’s sustainability management

FY22

Growth strategy
Human resource
strategy

P.45-48•Make Minna Bank profitable

FY21

Improve
growth rate

P.19

Challenging new businesses

FY20

3

(future earnings
expectations)

Capital policy•Balanced management of growthinvestment and shareholder
returns based on the premise ofmaintaining soundness

Capital management that balances growth investment andshareholder returns• Implement flexible buybacks of own shares, targeting a capital
adequacy ratio at around 10%

Financialleverage control

P.37
-44

Sophistication of securities portfolio
management

FY19

New
expectations

Expectations
realized(current profitability)(PBR improvement)•Sales reforms and second
business reforms with DX as
the starting point

FY18(risk return
optimization)

Improve ROE

Improve
corporate value

Transformation of existing business
model

Sales Division: Improve ROE through transformation of theexisting business model• Effectively utilize capital and expand fee income• Strengthen solution business and consulting business throughgoal-based sales approach

Improve RORA

FY16

Initiatives in the
7th Mid-Term Management Plan

Outline of initiatives to improve corporate value

1

FY15

About 10%FY17

Future target ROE

0.0

FY14

About 8%FY16About 6%
FY13

Target ROE in the 7th Mid-Term Management Plan
Target ROE in the next Mid-Term Management Plan
(level fulfilling cost of shareholders’ equity)

FY12

About 7-8%

FY11

0.5

Cost of shareholders’ equity based on CAPM

FY10

Cost of2 shareholders’equity

FY09

ROE

FY08

1

FY07

PBR

Reduce cost of shareholders’ equity and improve growth rate (= improve PER)

By reducing information asymmetry with the market through information disclosure, including non-financial information, and engaging in
IR activities, as well as helping investors identify with FFG’s value creation story, we aim to reduce the cost of shareholders’ equity andimprove the growth rate with the aim of improving PER.
FFG ANNUAL REPORT 2023

20

FFG Overview

Kyushu Figures
10% of Japan’s Economy

10.2 %

Population

Scale of
Production

10.2% of total population of Japan lives in
Kyushu.

4 th

The Kyushu region represents the fourth-largest
economy in Japan, following Tokyo (Kanto), Osaka (Kinki) and Nagoya (Chubu) regions.

Kyushu is referred to as “the 10% of Japan’s Economy”
because it accounts for approximately 10% of Japan’s total
population, GDP, number of businesses, etc.
In terms of GDP, Kyushu is the fourth largest economy
following the three major metropolitan areas of Kanto, Kinki,
and Chubu, and is an important domestic production basefor key industries including the cars, IC-related, agricultural,and food product industries.
In addition, as high-speed transport networks with
Fukuoka Prefecture at its center have been developed,
Kyushu not only offers convenience, but as a gateway to
Asia has high potential for expanded transactions with the
Asian region.

5

Time toAirportminutes

Fukuoka Airport is only 5–10 minutes by
subway from central Fukuoka.

Kyushu’s Place in the WorldInternational comparison of regional GDP(Billions of U.S. dollars)

475

Nigeria
Argentina

450

Austria445

KYUSHU

443

United ArabEmirates

421

Source: Profile of Kyushu 2023, Kyushu Bureau of Economy, Trade and Industry

Data Analysis for Kyushu
Gross Prefectural Production*1 (FY2019)

Number of Businesses*1 (2021)

Loans*2 (March 31, 2023)

Kyushu Total 48.3 trillion yen

Kyushu Total 539,921

Kyushu Total 41.0 trillion yen

41.2%

13.2% 9.9%

35.7%

38.1% 13.3% 10.7%

37.9%

53.9%

11.9% 7.2% 27.0%

Population* (2022)

Commercial Sales* (2014)

Deposits* (March 31, 2023)

Kyushu Total 12.8 million

Kyushu Total 34.4 trillion yen

Kyushu Total 59.8 trillion yen

1

39.9%

3

13.6% 10.3% 36.2%

Fukuoka
Nagasaki

53.0%

Kumamoto
Other prefectures of Kyushu

2

10.7% 8.1% 28.2%

Sources

48.0%

12.7% 9.6% 29.7%*1 Summary of Kyushu economy 2022, Kyushu Bureau of Economy, Trade and Industry*2 Deposits, Vault Cash, and Loans and Bills Discounted by Prefecture, Bank of Japan*3 Census of Commerce in 2014 (confirmed report), Ministry of Economy, Trade and Industry

Well-Balanced Industry Grouping
Kyushu is an important base of production in Japan for thecars, integrated circuits (IC), agriculture and food industries.

Northern Kyushu, a center of “Car Island”
is an important car-producing region with accumulated factory base ofdomestic manufacturers such as Toyota, Nissan and Daihatsu.

Middle Kyushu, contributes to “Silicon Island”
is home to a flourishing semiconductor industry, facilitated by its high-quality water sources, abundant workforce and well-developed infrastructureof roads and ports.

Fukuoka Pref.
Saga Pref.
Oita Pref.
Nagasaki Pref.

Southern Kyushu, a center of “Food Island”
produces foods with brand power such as Miyazaki beef and Kagoshima
black pork.

Share in Japan

Kumamoto Pref.
Number of Passenger
Cars Produced in Kyushu

14.6%

Kagoshima Pref.

Amount of IC Production

Amount ofAgricultural Production

44.6%

20.2%

2022

2022

2021

1.14 million

930.1 billion yen

1.79 trillion

Miyazaki Pref.

Sources: Summary of Kyushu 2022, Kyushu Bureau of Economy, Trade and Industry

21

What is Kyushu?
Kyushu is located in the south westernmost area of Japan. It is bordered by
the East China Sea to the west and the Pacific Ocean to the east. The
climate is slightly warmer and more tropical than Honshu, mainland ofJapan. The region has rich nature, multiple World Heritage sites, and arobust tourism industry. In Fukuoka Prefecture, where the headquarters of
FFG is located, new seeds for growth are sprouting, characterized by largescale redevelopment that takes advantage of the National Strategic Special
Zone and active start-up support through public-private collaboration.

Fukuoka

Kumamoto

Nagasaki

Convenient Transport Hub
Since various means of transportation of land, sea, and air are concentrated in central Fukuoka, it has taken the role of a hub
which connects the flow of people, goods, money and information with each prefecture in Kyushu.

Fukuoka Airport

Port

Shinkansen (high-speed railway)

The flight time to most of Asian countries is more thanan hour shorter than that from Tokyo.

In the number of foreign cruise ship nationwide,
Hakata (2nd), Nagasaki (4th), Kagoshima (8th), andSasebo (10th) are ranked with in the 10th.

Its network connects mainland to the city ofKagoshima in the South of Kyushu. In 2022, the routeto Nagasaki was newly opened for service.

A New Wave in the Regional Economy

Fukuoka City Ranked

Fukuoka, a Global Start up City
Fukuoka City offers substantial support, including preferential tax
treatment and subsidies, to start-up companies. At Fukuoka Growth
Next, a next-generation start-up support facility, Fukuoka City and local
companies work together to offer development programs, collaborate
with global accelerators, and create financing opportunities.
As part of the Startup Hub City Project, Fukuoka City has been selected
as a Global Startup City and Kitakyushu City as a Startup City, whichindicates an accelerating trend to support start-ups in various areas.

TSMC, the world’s largest commissioned production, built a newfactory in Kikuyo-cho, Kumamoto prefecture. Demand for funds has
increased across a wide range of industries, including real estate,semiconductors, logistics, and commercial facilities.

(%)

7

40.0

6.3

5.7

5.5

5

5.2

Business start rate
(among 21 major cities)*3

Kyushu University Ranked

3rd in Japan

Source:*1 	Statistics Bureau of Japan, “2020 Population Census”*2 	Fukuoka City, “Vision for Global Start-up City Fukuoka”*3 	Fukuoka City, “Fukuoka Facts”*4 	INITIAL, Inc., “2021 1H Japan Startup Finance”

35.7

35.0

5.1

5.1

30.0
25.0

4

26.5

29.3

27.3
20.3

20.0

3

15.0

2

10.0

1

5.0

0

Proportion of young generation(among designated cities)*2

The rate of increase of foreign residents in Fukuoka city is at the top level for major cities.
Growth rate of foreign residents (2015-2020)(%)

6

Population growth rate
(among designated cities)*1

Amount of funds raisedby university-based start-ups*4

Impact on expansion of TSMC in Kumamoto

Business Start Rate among 21 major cities of Japan (FY2021)

1st in Japan

Fukuoka Saitama

NagoyaChiba Yokohama Osaka
Source: Fukuoka City

0.0

Metropolitan Yokohama
Tokyo
City

Nagoya
City

Osaka
City

Fukuoka
City

Source: Created by the Kyushu Bureau of Economy, Ministry of Justice, “Statistics on Foreign Residents”

FFG ANNUAL REPORT 2023

22

Stories of Value Creation

Strengths of FFG
Corporate culture without fear of failure
FFG’s strengths are its creative and challenging
corporate culture and its ability to make decisions thatallows such culture. FFG has been one of the firstbanks to take action in several areas, such as partingwith non-performing loans after the bursting of theasset bubble, management integration utilizing suchknow-how, and initiatives in new fields with an eye on
the future. By actively taking on the challenge of
unprecedented strategic options, we have developed
a sound awareness of risk, enhanced perception, andthe ability to take action without fear of failure.

Disposal of non-performing loans
March 2001 The Bank of Fukuoka recorded anallowance for loan losses of 175.0 billion
yen (a loss of 76.8 billion yen); V-shaped
recovery from the following year
Business integration
April 2007
The Kumamoto Family Bank (now theKumamoto Bank)
October 2007 The Shinwa Bank
2020.10 Merger (The
April 2019
The Eighteenth Bank Juhachi-Shinwa Bank)
October 2023 The Fukuoka Chuo Bank
New initiatives
April 2016
iBank business (participated in by 12regional banks across Japan)
May 2021
Launch of commercial operations of Minna
Bank}

Sophisticated and diverse human resources
We have developed human resources with high levels of
expertise and diverse skills through the execution of various
strategic options. Above all, the source of FFG’s competitiveness is its assessment and problem-solving abilities forthe industry cultivated through business revitalization.
Through human resource exchanges beyond boundaries
of banks and fields, we have worked to integrate culturesand sophisticate skills. We are also actively investing in thedevelopment of specialist human resources in order tomeet the changing needs of our customers. We haveestablished a system and an environment in which diverse
human resources can play active roles regardless of genderor age.

Development and recruitment of specialist personnel
Financial Planners who is equivalent to 1st grade Certified
Skilled: 446 (As of March 31, 2023)
Number of mid-career recruitment: 221 (FY2020-FY2022)
Number of digital human resources: 448 (as of March 31,
2023)
Development of autonomous human resources
Number of Career Challenge applicants: 294 (FY2022)
Next-generation leader development program
Promotion of DE & I
Ratio of women in management positions (as of March 31,2023)
Bank of Fukuoka: 15.6%, Kumamoto Bank: 25.4%,
Juhachi-Shinwa Bank: 15.8%

Solid business base and a close-knit network
FFG is a regional financial group with a wide area of presence that seamlessly covers the entire Kyushu region which
it sees as a single economic zone, centered around its mother markets of Fukuoka, Kumamoto, and Nagasaki.
Building on the trust each bank has built up, we have earned strong support from both corporate and retailcustomers, with a sales base that is top class among regional bank groups.
Domestic network

Retail banking customers: Approximately 6.62
million (approx. 50% of Kyushu’s population)
Corporate banking customers: Approximately 280,000(approx. 50% of business offices in Kyushu)
Companies using FFG as main bank: 40,000(the largest number of all regional banks)

FukuokaHead office and branches: 205
Sub-branches: 6

Oita
Saga

Branches: 3

Branches: 10

Outside Kyushu
Kumamoto
NagasakiHead office and branches: 157
Sub-branches: 9

Head offices andbranches: 453
Sub-branches: 16

Kagoshima
Branches: 4

Overseas network

23(10,000 companies)

Branches: 9

Head office and branches: 64
Sub-branch: 1

Total
Miyazaki
Branch: 1

Overseas offices: 8*As of March 31, 2023

4.0
2.9

*Branches in Fukuoka includes
a b ra n c h fo r b a n k tra n s fe r
service only, and an internet
branch.
*Branches in Nagasaki includes
2 branches for bank transfer
service only, and an internet
branch.
As of June 30, 2023

FFG

2.5

2.4

2.2

2.1

Mebuki Hokuhoku North Kyushu Chiba
FG
FG
Pacific
FG
Bank
Bank
*Source: Data provided by TEIKOKU DATABANK, LTD.

Single Platform/Multiple Brands
We maintain the brands of each bank that havebeen well-loved and trusted by local communities throughout their long history, and at thesame time, we have established a “Single
Platform/Multiple Brands” that standardizes thebusiness administration and IT systems as wellas products and services. Our unique management style is optimally suited to business integration between regional banks to facilitate thepursuit of economies of scale and efficiency.
Minna Bank, the first digital bank in Japan,
provides unique services nationwide under thegovernance and risk management of FFG.

Customers and local communities
The
Bank of
FukuokaThe
Kumamoto
Bank

The
Juhachi-Shinwa
Bank

The
Fukuoka Chuo
Bank

Minna Bank

Securities companies, card companies, consulting companies

Sharing product and service line-up

Providinguniqueservices

Product and service planning

Products
and services
Office systems Office systems

Office systems

Governance, Risk management, Internal control system

FFG’s two-way approach (ambidextrous management)
FFG has adopted a two-way approach of “challenge to Minna Bank (exploration)” and “the transformation ofexisting business models (exploitation),” which generate sustainable synergies while complementing each other,creating an advantage unique to FFG that differentiates it from other sectors and banks as it pursues the two at thesame time.
Minna Bank

Market creation

Establish a digital bankRenew the banking
business model itself
from the ground up(=Minna Bank)

Exploration

Transform existing
business models

Renew
business model

Differentiate
ourselves with
“Human x Digital”
power

Existing business(digital)
Existing business(analog)

Exploitation

Group total power
FFG is a comprehensive financial service groupwith 23 affiliated companies in total. We arecapable of addressing all the needs of our customers, from securities, insurance, and consulting,to marketing, lease and venture support. Few
financial groups are capable of performing
this many functions, and our ability to provide
advanced solutions that make the most of thepower of our organization is one of FFG’s uniquestrengths. Strengthening subsidiaries is a pillar of
our strategy, and we have established several
new companies in the past few years. We arebuilding a Group-wide operating system that
includes banks and affiliated companies.

Creditcard

Lease
Rehabilitation
supportTrading

VenturesupportHuman resource
matching

MarketingConsulting

Securities

Insurance

FFG ANNUAL REPORT 2023

24

Stories of Value Creation

Value Creation Process
External
environment

Shrinkingpopulation

Aging populationand declining
birth rate

Digitalization

Naturaldisasters

Materiality(Response to issues material to FFG and four changes)

Diversity

Price• Shrinking regional • An era of 100-yearincrease
economyhuman lifespans• Changing industry • Climate change Entry fromstructureother sectors
Geopolitical
risks

INPUT

ACTIVITY(Source of value)(The 7th Mid-Term Management Plan)

Human capital• Number of employees: 7,546
Including 221 mid-career
recruitment
Including 448 digital humanresources• Engagement score: 59 A

Intellectual capital• Management integration/PMI
know-how• Service/System development
capabilities
Minna Bank, DX Promotion
Headquarters• Group total power
Twenty three affiliated companies
with a variety of functions• Sustainable Scale Index(ESG/SDGs Scoring Model Service)Sales
reforms

Improve sales
productivity
Sharing informationand know-how

Strategic
subsidiaries

Shifting ourhuman resources
to areas of growthBusinessreforms

Digitalization

Improving business efficiency

Taking on the challengeof new business• Total deposits: 20.9 trillion yen• Total loans: 17.6 trillion yen• Capital adequacy ratio: 9.6%
• Allowance for loan losses: 187.8
billion yen

The Fukuoka
Chuo Bank• High brand loyalty in the community• Corporate banking customers:
Approximately 280,000• Retail banking customers:
Approximately 6.62 million• Wallet+ affiliated banks: 12 banks• Minna Bank accounts: 820,000• BaaS partners: 3

Strengthening our ability
to provide solutions

See pages 27-32 for details

Financial capitalSocial/related capital

25

Transforming existing
business models withDX as the starting point• Minna Bank
• FFG Industries(trading company)

See pages 33-36 for details

Human resource
strategies
Strategic humanresource portfolio

See pages
37-42 fordetails

Employeeengagement

Governance, Risk Management, Compliance
See pages 53-70 for details

IMPACT(The sustainable society we aim to create)[Referential indicators]
General Incorporated Associations
Kyushu Economic Federation’s
Kyushu Future Vision 2030
(Vision shared with FFG)
Economic vision: Per-capita GRP*1 of 5 million yen
Material vision: Achieving carbon neutrality
Spiritual vision: Improving happy community indicator*2

Economically, materially,and spiritually enriched society
A society where everyone can do what they reallywant to do, without anxiety regarding the future
A society where everyone’s individuality works
together and everyone feels like a member of society*1 Gross Regional Product*2 An indicator comprising two indicators (Kou and Fuku)
Kou: happiness given by chance, fortune brought from someexternal force
Fuku: happiness resulting from one’s act, blessing earned on
one’s own

OUTPUTOUTCOME(to be gained from business activities)(Providing social value andimproving economic value)

For customers

Optimum solutions provided
through goal-based marketing

Yardsticks for measuring outputs

Corporatebankingbusiness• Growth in the number of customers
using FFG as a main bank
• Increase in the balance of loans to
SMEs, etc.
• Increase in the number of customers
with improved management indicators• Increase in the number of users of the
BIZSHIP web portal for corporate
customers• Sustainable finance: 2 trillion yen

Retailbankingbusiness• Increase in customer assets undermanagement• Increase in the number of NISAs• Increase in the number of digitalchannel users

Community
and industrygovernmentacademia
collaboration
See pages
43-46 for details

For employees• Creation of open innovation• Increase in the number of community
projects (community development
support)• Financial and economic education
participants: 100,000
An environment that helps every
employee maximize their potentials

Social value• Productivity improvement inlocal SMEs
• Maintaining and creating
industries and employment• Stress-free access to financial
services• Resolving financial concerns• Higher financial literacy• Transition to a decarbonizedsociety (Net zero in-house
CO2 emissions)

Virtuous
cycle

Economic value• Increase in net income• Improvement of ROE• Reduction of consolidated OHR• Maintaining soundness• Enhancing shareholder returns

Yardsticks for measuring outputs

Human resource • Increase in digital human resources• Increase in solution-focused humanportfolio
resources• Ratio of personnel in management
DE & I
positions with diverse backgrounds: 35%• Percentage of childcare leave
Organizationaltaken by men: 100%
culture• Assurance of psychological safety

Corporate value

See page
18 for details• Improvement of PBR• Improvement of employee
engagement• Improvement of the brand image

FFG ANNUAL REPORT 2023

26

Growth Strategy

Transformation of
Existing Business Model
Customer-focused Self
Transformation
Building a “regional platform” forcirculating people, goods, money,
and information

Masahiro Fuji
Executive Officer,
CDO, FFG andGeneral Manager
of DX Promotion
Headquarters, FFG

Developing services from a customer perspective
To remain a bank of choice in the midst of advancements

financial data and proposes suitable integrated solutions,in digital technology that bring about major changes insupporting customers in growing their businesses using

customer behavior and social structures, we must

digital technology.

develop services from the customer’s perspective andIn developing these services, we interviewed custom-transform our business processes more quickly than ever.

ers while they interacted with the portal and continuously

FFG’sbeyondrefined the features until they received a positive response

digitalization and efficiency improvements. We understand“digitaltransformation

(DX)”

goes

from our customers. The process is a true application of

DX to be “customer-focused self-transformation” wheredeveloping services from a customer perspective. We will

we challenge ourselves with various initiatives to explore

continue to quickly improve service features and develop

the future of banking.

new features based on customers’ views, with theSpecific current initiatives are the revamp of the banking apps for individual customers and ongoing develop-

unwavering aspiration of “providing the best for ourcustomers” as our guiding principles.

ment of the portal site for corporate customers. The
banking apps for individual customers were initiallyreleased as an intuitive, safe, and secure application thatanyone could easily start using, with basic banking
functions such as balance inquiry and funds transfer.
While non-face-to-face transaction needs are on the rise,
there are customers who are uneasy or uncomfortablewith a digital environment. Therefore, FFG provides bank-

Digital human resources active in FFG(as of March 31, 2023)
Designers

20
Data scientists

46

ing apps that address customers’ unfamiliarity andconcerns about money and digital technology based on

Business169

the concept of “a banking app that is by your side.” As for

Mid-career hires
47%

the portal site for corporate customers, a new website
has been established to provide a new digital channel asa banking contact point for customers who we regularly
meet and speak with in person. The portal includes afeature that analyzes management challenges based on

27

Engineers & IT

213

Regular employees
53%

Revitalization of communities through the creation of regional economic zones
In the digital world, our services must compete not only

FFG is a regional financial group with a wide area ofwith traditional banks but also with digital platform opera-

presence that seamlessly covers the entire Kyushu

tors and other industries. In addition to providing uniqueregion, and has a dense physical channel network inand convenient services that anyone can easily use,

Kyushu. Further, each of our banks has deep, trusting

nationwide platform operators are also incorporating

relationships with regional businesses built up over ourbanking, securities, and other financial feature andlong history. In addition, we have been progressively

accumulating a formidable number of customers as they“enhancing our service development system” in the digitalbuild a digital economic zone.

domain since the Digital Strategy Division was estab-

Meanwhile, the challenges faced by regional business-lished in 2017.

es and residents cannot be overcome solely with these

The future vision that FFG aims to achieve through DX

nationwide services. The need for services tailored to theis the revitalization of the regional economy while leverag-realities of the various regions we have been active in will

ing these strengths that we have cultivated till now, while

continue to exist. I believe that the path to developing

applying our experience and knowledge acquired throughFFG and regional economies lies in the question of how

new businesses such as iBank marketing and Minna

we can continue to provide high-quality services focusingBank.

on regional communities.

Building a localized regional platform
In addition to continuing to provide customers with

DX at FFG is a self-transformation initiative in which ourconvenient, valuable financial services via our existing

people, the key agents of our transformation, stay evensales office network and digital channels, FFG will provide

closer to our customers than before as they help solvea wide range of non-financial services through in-person

their problems, and continually take on challenges toand digital channels by engaging in digital and otherachieve this while focusing completely on the customer. It

collaborations with regional businesses with whom FFG

is a challenge to embody our brand slogan by being thehas built trusting relationships over many years. This way,“closest,” “reliable,” and “sophisticated” bank of choice.

we will resolve regional business challenges and local
residents’ concerns within the region, and facilitate the

Revitalization ofcommunities

circulation of people, goods, money, and information
within the region.
Building a localized regional platform by cooperatingwith local businesses and providing a broad range ofservices beyond financial services will not only maintain

Infrastructure
Local
Commerce
government(daily necessities) Government

and expand FFG’s customer base; it will also create aregional economic zone where a wide variety of people
will gather. This will lead to revitalization of the regional
economy, further strengthening FFG’s customer base.
FFG will continue to make use of digital technology toachieve the “realization of a prosperous society” througha virtuous cycle of “providing social value” and “improving
economic value.”

Industry

Businesses

FFG
×

DigitalPeopletechnology

Customer Schools,base medical care,nursing careAcademia

Local
residents

Research
institutions

Economiczone

Agriculture,
forestryand fisheries
FFG ANNUAL REPORT 2023

28

Growth Strategy

Transformation of Existing
Business Model

Strengthening our ability toprovide solutions using“Humans × Digital Technology”

Tomomasa Yamamoto
General Manager,
Sales Administration Division

As a regional financial organization that grows together
with the region, the social issues we are facing include thedecline of the regional economy due to depopulation,
shrinking birthrate, and aging population, and thequestion of how to counteract the shrinking of the regional economy. Further, what society expects of a regional
financial organization is certainly changing, due to theevolution of technology like ChatGPT, rapid transformation of how people work as a result of the COVID-19
pandemic, and the diversification of individuals’ values.
In the midst of this, FFG must continue to be chosen bycustomers in order to provide value to, and grow together
with, the regional community in the future. The 7th
Mid-Term Management Plan seeks to achieve thisthrough “transformation of our existing business model.”The diagram to the right presents an overview of thetransformation of our existing business model.
(1) A fusion of humans and digital technology
The newly released banking apps for individual
customers and portal site for corporate customers
allow for easy access to banking transactions via
smart phones and computers, giving customers moreconvenience. At the same time, the introduction of the
SFA (sales force automation) system enables
seamless coordination of all types of information andknow-how, thereby “improving sales productivity.”(See P31-32 for details)(2) Business reforms
We have introduced ATMs with advanced features, aninternet-based service corner and other services that
increase the level of convenience for customers, while29

having also started to shift to a new store operations
model that reduces in-store operations. By improving
the efficiency of our operations through suchinitiatives, we are “shifting our human resources toareas of growth” and are building a system that allows
us to focus through consulting. (See P32 for details)(3) Sales reforms
In addition to the effect of “improving sales productivity” and “shifting our human resources to areas ofgrowth” through digitalization and business reforms,
we will provide high-level, standardized consulting by
reorganizing our sales offices, starting with gathering
sales personnel and nurturing solution-focused humanresources, and expanding and making active use of
our strategic subsidiaries.

Coordination of Measures
Solve customer/
community
issuesStrengthening our ability to provide solutions(high-level, standardized consulting)

(3)
Sales
reforms
Improving
conveniencefor customers
Improving sales
productivity(1)
Digitalデジタル
technology

Strategic
subsidiaries

Shifting
our human
resources toareas of growth

Sharing of
information
andknow-how
Improving businessefficiency(2)

Businessreforms

Growth investment/
Human resource investment

FFG’s sales strategy

Differentiate
FFG fromcompetitors

Sustainableprofit growth

Shareholder
returns

Goal-based sales
consulting with a particular focus on encouraging the shift
from savings to investment.
In an era of 100-year human lifespans, in order tosupport our customers in doubling asset-based income
under plans such as NISA and iDeCo, the Group’s
securities subsidiaries and banks will work in unison toprovide high-quality consulting on classifying sources ofmoney, optimal asset allocation, and after-sales follow up
service.
In both the corporate and retail banking businesses, wewill leverage the power of technology while sharing
information and know-how across the organization. It is
important for the Group to apply its collective capabilities
and fully leverage the solutions provided by strategic
subsidiaries, be it through M&A, business succession, or
support for SDGs. We aim to establish a competitive
advantage in the region by solving customers’ challenges
with seamless coordination between sales offices,
specialists at the headquarters and staff of strategic
subsidiaries.
FFG will continue to contribute to the realization of bothcustomers’ and organizational “goals” by listening with acaring ear to customers, having conversations with them,and walking by their side.

Corporate businesses

Become a “business partner” to customers who solves
their business problems together with them and supports
their core business

Solving their problems

HumansRetail banking business

Become a “lifelong companion” to customers who
provides total consulting to enable them to achieve
a prosperous future

The future wewish to achieve(our goal)

The 7th Mid-Term Management Plan sets out a “goal-based
sales” approach as FFG’s sales style, in which we focus
on thoroughly knowing and understanding customers sothey will share their mid- to long-term goals and needs aswell as challenges and concerns, and providing thesolutions required to resolve or achieve them.
Efforts over the past year have been focused on
spreading understanding and awareness of goal-based
sales throughout the company. Going forward, we will
embark on improving skills specific to providing solutions
and consulting services, achieving standardization, andcommencing the provision of such services to customers.
In the corporate businesses, while we will firmly
continue to provide for customers’ financial needs (loans),
we will focus efforts on providing solutions centeredaround “raising corporate value” for our customers.
Further, as a regional financial organization with deep
ties to the region, as a group, we will provide possible
support and work to create new, related businesses in
Kyushu, “Silicon Island,” where needs continue to growwith the entry of Taiwanese semiconductor contract
manufacturer, TSMC, into Kumamoto prefecture. (SeeP45-46 for details)
In the retail banking business, we will focus on being alifelong companion to customers by providing total life

Achievementof SDGs

Accompanying

them on their journey
Customers

Sharing of goals throughDigitaltechnology

Current situation

Minna Bank
Wallet+(iBank marketing)conversation

Building solid,
trusting customer
relationships

Banking apps forindividual customers
Portal site for corporate customers(BIZSHIP)SFA (sales force automation)

Growing thenumber of key
customers

Buildinga sustainablebusiness model

A localized regional“digital platform”

FFG ANNUAL REPORT 2023

30

Growth Strategy

Transformation of existing business model

Leveraging digital technology —Improving convenience for customers—
Banking apps for individual customers
While the need for non-in person services has risen inrecent years due to lifestyles being affected by the
COVID-19 pandemic and advances in digitalization, theBank of Fukuoka released a new banking app in July
2023 based on the concept of “by your side” that can beused by customers who are uncomfortable or uneasy
with the digital environment.
Various banking features were enhanced, giving
customers even more convenience. In addition to full
implementation of the basic banking functions of balance
inquiry and funds transfer, improvements included theability to record notes for deposits and withdrawals and a
one-time password autofill feature at the point of making
a money transfer. Newly added functions include
pre-withdrawal notifications and visualization of investment trust and card loan status using graphs.
In October 2023, we added the ability to set up periodic
money transfers and a feature for paying invoices andpayment notices via smart phone. The Kumamoto Bankand the Juhachi-Shinwa Bank also released the app.

We will continue to provide greater convenience tocustomers by staying by their side to address their “questions” and “hesitations” about money and digital technology and continuously adding and improving app features,
while also working to achieve a shift of bank employees todigital channels and improve sales productivity.

Portal site for corporate customers
In October 2023, we launched the “BIZSHIP” portal site
for corporate customers, a new digital channel targetedat corporates and individual business owners.
Going beyond digitalization of basic banking transactions, this portal site has a collection of features toaddress the challenges our customers face on a daily
basis, and also serves as an enhanced point of contact
for customers.
First, basic features that form the core of the service are
implemented, such as bulk management for multiple
bank accounts, deposit and withdrawal notifications,submitting and receiving documents online, and management diagnosis from a financial perspective. Then, we

Digital passbook

31

conduct customer verification by repeatedly collecting
customer use cases and feedback, and speedily executefeature upgrades and develop new functions to serve
diverse customer needs.
We aspire to create a new customer experience andbusiness model fusing digital technology and humancapability and befitting a regional financial organization,
combining FFG’s trusting relationships with regional
businesses—a strength built up over years—and thisservice.

Online banking proceduresManagement diagnostic tools

Leveraging digital technology —Improving sales productivity—
SFA (sales force automation)
We are in the process of rebuilding a sales support system focusing on introducing SFA in order to achieve differentiationof FFG’s sales from that of other banks.
We are centralizing customer and project information, visualizing information and sharing it to shift mindsets to be morecustomer-focused and improve the sophistication and uniformity of our services.
Understanding
the customer

Customer-first view

Identificationof needs

We will add depth to the Group’s understanding of customers by aggregating
information about customers’ businesses and life events, needs and projects,
and relationships with our bank and other banks in the form of long-term
trends.
Identified customer needs and proposed solutions are displayed in a unified
interface, resulting in a system that sales representatives find intuitive to use.

Leadcreation

Detectionof needs

NEXT Best Action

The system recommends specific actions to sales representatives based onsales scenarios generated by analyzing high performers and identifying
apparent and latent customer needs on a per-product basis.
Further, together with this information, the system suggests pamphlets ofrecommended products, positive case studies, explanatory videos, and othersales content.
The more our sales representatives use both the corporate portal andpersonal apps, the more data and information are captured, improving theaccuracy of the system’s recommendations, which will raise sales productivity.

Recommended
actionBusiness reforms —New branch format—
In September 2023, the Bank of Fukuoka introduced a
new store format to two branches (Keyakidori branch andChidori branch) in Fukuoka prefecture, designed aroundthe concept of self-service and cashless store operations.
FFG is expanding its range of non-in person services
including via banking apps for individual customers andweb-based account opening services. In combination
with this expansion of digital channels, initiatives areunder way to roll out the new branch format to equipbranch stores with facilities such as advanced ATMs that
can handle an expanded range of transactions, remotecustomer service terminals, and web services corners.
At new branch stores, cash transactions, withdrawals
and deposits, and other ordinary transactions will be
primarily carried out using ATMs.
Other facilities installed at branches include remotecustomer service terminals that connect customers withspecialists at headquarters to provide services such asaccount opening and changing of address, and self-service web services corners where customers may
complete procedures on their own.

This digitalization and adoption of a self-service format
shifts store employees to a consultation-based operational role and transforms our branches into “consulting
spaces.”Branch interior

Web services corner

Advanced ATMs

Remote customer service terminal

FFG ANNUAL REPORT 2023

32

Growth Strategy

Minna Bank

Kenichi Nagayoshi
President, Minna Bank
Established iBank marketing in 2016
Assumed the position of President,
Minna Bank in April 2022

Creating a new customer base for FFG
Minna Bank celebrated its second anniversary this year,
having launched its services on May 28, 2021. Currently(as of the three months ended March 31, 2023), ourapplication has been downloaded 2.09 million times and
720,000 bank accounts have been opened, increasing
the size of our customer base. Initially, we were often
introduced as “the first regional online bank,” but today
we are being recognized as a “digital bank,” the first inJapan, and one of the few worldwide.
Compared to the customer base of existing banks, ofwhich around 70% is aged 40 and up, Minna Bank’s
customer base is focused on customers aged 30 andyounger. Our strategy of providing smartphone-based,user-friendly services to capture digital natives has paidoff, as our reach expands beyond the region and acrossall 47 prefectures of Japan. This has created a newcustomer base for FFG and is thus also a significant
contribution to the group’s strategy.

Looking ten years into the future to create theideal bank
This project began in 2014 with the mission given by
Takashige Shibato (current Chairman of FFG), “to discover a non-linear growth strategy that departs from precedent by looking ahead to envision the ideal bank of afuture ten years from now.”
Minna Bank is the result of a determination to pushbeyond persistent innovation to achieve rapid, groundbreaking innovation, spurred by an existential awareness33of the speed at which the world was changing and theincreased competition from non-financial businesses.
At present, we have had to delay our forecasted
profitability date due to not being able to obtain loans as
anticipated, but we continue with all kinds of initiatives toachieve growth that will position us to become a strong
pillar of profits for FFG in future.

B2C business and the road to BaaS business
Our initial business was “B2C,” providing financial
services to individuals focusing on the kind of financial
experience digital natives desired. We have designatedthe year ahead as the first year of BaaS and will start our“BaaS business (B2B2X business)” in earnest. We will
make Minna Bank’s financial functions available to partnercompanies through an API, creating new value.

Past achievements
Users & attributes

820,000
accounts

Demographic reach

73% of users are

Japan-wide

digitalnativesin 2.5 years

Note: Data is for the six months ended September 30, 2023

Services launched

July 2022

Minna Bank Loan
Debut!

New service

Launch of

February 2023

April 2023

Links

Personal funds transfers with no remittance fees

Launch of COTRA Remittance!

Minna Bank loans
now repayable byAugust 2023 Second level loan feature development

Fixed-rate
repayments

FFG ANNUAL REPORT 2023

34

Growth Strategy

Minna Bank

“Banking as a Service,” a new form of finance
Human resource staffing agency
EntertainmentPERSOL TEMPSTAFF CO., LTD.
pixiv Inc.

RetailLife insurance

United Super Markets Holdings Inc.

Mitsui Sumitomo PrimaryLife Insurance Company, Limited

Non-life insurance

FinanceE.design Insurance Co., Ltd.

REVOLUT TECHNOLOGIES JAPAN, Inc.

Creating new value by combining financial ×
non-financial business
Minna Bank, with one of its service concepts being“integrating into everyone’s ‘living’,” will provide newservices that seamlessly link consumption and purchasing activities integral to daily life to financial functions,creating new value by combining financial × non-financial
business.
Our BaaS business will allow business partners(businesses) to provide the financial functions andservices of the “Minna Bank app” to their own customers
via their smartphone applications and website. Business
partners can select the required functions and services
they wish to utilize individually. BaaS is a new structure inwhich our business customers’ users (their customers)
can use Minna Bank services through the provision of
Minna Bank services to our business customers by wayof an API.

Commencing external provision of read andwrite APIsIn FY2022, development was completed of a read API
that allows individual users to perform identity verification

35

at the point of transaction, balance inquiry, and deposit
and withdrawal details display as well as a write API thatallows them to make payments by bank transfer, among
others. These actions can be performed by the user
through the application or website provided by ourbusiness customers. In FY2023, we began providing
these APIs to other external parties as well.

A new customer experience through“+Finance”
Providing frictionless, new experiential value to ourcustomer base of digital natives with diverse values andlifestyles for whom finance is integrated in every area oflife will also create new valuable experiences for ourbusiness partners.
Minna Bank will continue to enhance the APIs available
and promote the expansion of business alliances so as todevelop the BaaS businesses even further.
Settlement
CreditEtc..

Human resource strategies
Minna Bank aspires to a mission of making “connections that are valuable to everyone”
Believing that in order to achieve and realize our Mission
and Vision, “dynamic growth as an organization in thebusiness of financial innovation” also applies to the organizational and human resource aspects of the business,

Align individual and organizational growth
vectors and work to realize them together

Minna Bank is putting in place various measures. Part ofthis strategy is having a human resource management
structure that was uniquely designed.
Minna Bank’s design concept for its personnel system
is a “system for the company (business) and individual(employee) to grow together.” This system was construct-

Individualcareer design
Committing tobusiness growthover the midto long termiMZ business
Opportunities for
growth andsupport for
activities

ed from the ground up based on the idea that it should
enable Minna Bank’s professional human resources withamong others, are very different from what you might finddiverse backgrounds and strengths to “become a teamin traditional banks.

that trusts each other and takes on every challenge,

Minna Bank’s personnel system was fully rolled out thismaximizing their strengths for Minna Bank’s growth andfiscal year. Operationalization is of the utmost priority, infinancial innovation,” while also “having Minna Bank serve

order to see the full effects of the system as one thatas a space for them to autonomously mold their own

supports organizational and human resource activities.

careers and achieve growth.” The assessment, job

We will work together with our employees to operational-

grades (promotions) and wage aspects of the system,ize it as “a system for everyone, by everyone.”FFG ANNUAL REPORT 2023

36

Human Capital Management

Building a Human Resource Portfolio to Achieve
FFG’s Business Strategy
Human Resource Strategy and Human Resource Development Policy
FFG is committed to maximizing the strength of its human resources as a management strategy to realize its
long-term vision, and hopes to build a vibrant organization in which diverse individuals can maximize theirpotentials as autonomous and self-driven members to achieve sustainable growth of the organization.
Our 7th Mid-Term Management Plan sets “building a strategic human resource portfolio by acquiring anddeveloping human resources who can realize our business strategy” as the pillar of our human capital strategy,
and we are working on various measures.
To achieve our business strategy speedily, we need to recruit diverse human resources who can respond to
rapid changes in the business environment and develop such skills in our people. Accordingly, we will build astrategic portfolio while diversifying our recruitment, enhancing training and self-development menus, building afoundation for autonomous career development, and developing specialized human resources in addition toconventional recruitment and human resource development activities.

Current Situation and Issues Recognized37

We believe that our current challenges are to speedily

To link our management strategies and human resource

carry out the optimal and flexible allocation of humanpolicies more solidly, we need to further clarify the “essen-resources to achieve our business strategy, taking into

tial qualities of desired human resources” for realizing our

account of experience, skills, evaluation, and aptitudes ofbusiness strategies.

individuals, to meet the changes in sales style and

The key for future human resource strategies will be toinformation management driven by DX, as well as creat-

continue dialogues with employees to ensure that every

ing a system that allows employees to design various

individual can maximize their performance, toward

career plans for autonomous career development regard-

building a strategic portfolio and improving labor produc-less of age.

tivity.

input(1) Recruitment of diverse human resources• Recruitment of new graduates for specific departments• Strengthening mid-career recruitment

We are hiring people who will grow as professionals in specialized
sections of the Bank’s headquarters (investment banking department /digital IT department).

We focus on acquiring ready-to-work human resources skilled inbanking operations as well as those with a high level of expertise in thedigital and IT fields.

(2) Development of human resources to achieve our strategies• Secondment of younger employees (for training)• Self-development incentive program

We regularly send about 40 to 50 young employees on secondment tocompanies in various sectors such as healthcare, real estate, and IT for
gaining knowledge in specialized fields.

Financial assistance for self-development
activities is offered to encourage employees
to work autonomously for personal growthand career fulfillment.

• Employees with IT Passport certification

55

million yen(FY2022)• Employees with 1st grade financial planner certification

902

446

(As of March 31, 2023)(As of March 31, 2023)(3) Optimal and flexible allocation of human resources• Strengthening solution-focused human resources• Recruitment and development of digital human resources

To review our sales organization, we will group together specialized
human resources from the headquarters and branch staff by area toprovide high-quality on-the-job training. We will strengthen the skills of
branch staff and develop solution-focused human resources throughboth “real” on-the-job training and “digital” sharing of information andknow-how using our systems.

With the rapid pace of technologicalinnovation and the expansion of ourbusiness areas, we are strengthening ourrecruitment and training of digital humanresources. We also regard people fromour partner companies as valuable
human resources to help in-housedevelopment.

448
299

2021

2022

(FY)

outputSurvey of most popular companies
among job seekers in Kyushu and Okinawa

Customer-oriented investment trust sales(Source: Career tasu)

Ranked the

1st for five consecutive years

Increase in mid-career recruitment

46(FY2021)

100

Bank of Fukuoka
Highest rating “S+”Selected as a DX Stockfor two consecutive years(FY2022)FFG ANNUAL REPORT 2023

38

Human Capital Management

Improving Employee Engagement

Maximizing Employee Performance
Increasing employee engagement is essential for each(3) Diversity of work styles

FFG employee to act voluntarily and maximize his or her

We respect the diverse backgrounds of each of ourperformance to achieve our business strategy.

employees and strive to enhance their wellbeing by

We believe that the main factors that increase employ-

helping them balance their work and private lives.

ee engagement are: (1) affinity with FFG, (2) satisfaction
with compensation and job, and (3) diversity of work

By introducing various human resource measures andstyles.

operating them appropriately, we aim to increase the(1) Affinity with FFG

feeling of consent and satisfaction, which will lead to

To help employees recognize what their work means

higher engagement.

to society and increase their motivation, we are

In the first engagement survey conducted in February

working to promote the understanding of FFG’s

2023, FFG earned a score of 59.0 and a rating of A,

management philosophy and deepen their affinity withwhich are reasonably high results as a whole.

its vision.
(2) Satisfaction with treatment and job

On the other hand, the results vary by attribute, such asage, job, and position. Based on the issues and causes

We will enhance the career path options we offer to

identified from these analyses, we will plan and takeenable every employee’s self-fulfillment, and review

actions to address the issues in repeated cycles totreatment including wages and promotions, to create

maintain and increase employee engagement.

an environment that allows our employees to workwith a high level of satisfaction.

Policy for the Improvement of the Internal Environment
By increasing flexible work style options to suit thecircumstances of individuals with various backgrounds
and creating an environment that allows for fulfillment inboth work and private lives, we will work to create
systems that are not only employee-friendly, but also
increase productivity and satisfaction, leading to higher
engagement.

Employees

FFG

Autonomous thinking,action and growth

Respect and support for× diverse
human resources
Performance

Diverse human resources

Active and voluntary action
Diverse values

Diversity

Inclusion

Diverse ideas
EquityAppropriate support for individuals
Fair management for individuals

39

Team effort
job satisfaction

input(1) Affinity with FFG• Distributing Brand Books• Branch forum / Head office forum

To realize our brand slogan, “To be your bank of choice,” all employees
are given a copy of our Brand Book which describes the values to serveas the code of conduct for employees, what we promise to ourstakeholders, and what expectations we are to meet. Reviewing thesefrom time to time helps us reconfirm the direction we should aim for.

To promote the understanding of management policies, we organize asession for the management to communicate FFG’s vision andinitiatives to focus on directly to employees for each location and region
at the beginning of every fiscal year.
Many employees who attended the event said that it improved theirmotivation.

• Projects by young employees
Young employees of each bank communicate with colleagues acrossorganizational boundaries to plan and manage various events. This is
aimed to create an organization where everyone can work comfortably
and wants to continue to work with pride.

(The Bank of Fukuoka) Furatto(The Kumamoto Bank) O.K.com• (The Juhachi-Shinwa Bank) “Young Member Subcommittee,” Job
Satisfaction Improvement Project••(2) Satisfaction with treatment and job• One-on-one meetings• Career Challenge system

These meetings are intended as opportunities for supervisors to support
the growth of their subordinates and to encourage autonomy andindependent growth of individual employees. By listening attentively tosubordinates to understand what they feel inside, supervisors canensure the psychological safety of their subordinates, which helps
day-to-day operations to be carried out smoothly.

This system enables employees tochoose their own jobs to encourage
self-driven career development.

Number of Career
Challenge applicants
282

294

2021

2022 (FY)Diverse career paths•

Specialist course•

Under this system, employees who are experienced in front-line
sales to corporate and retail customers, IT, markets, risk
management, and other specialized operations can choose
their own career paths. It is intended to foster specialized
human resources and to offer more diverse career paths.

12

Customer Service course
Employees on this career path will accumulate
skills as specialists in back office operations andplay active roles as the faces of FFG, responding
to the diversifying needs of its customers.

employees(As of March 31, 2023)(3) Diversification of work styles
Realizing diverse work styles•

Flexible leave system•

Paid hours off system•

Partner co-location system•

Reinstatement system

A multipurpose leave system that allows employees to focus on their career development or personal
circumstances, to help them build a better career after returning to work.
A flexible leave system that allows employees to take hours off to suit their lifestyles or individual
circumstances
An employee whose spouse is to be transferred to a different location can be transferred to an area
where the couple can live together.
A system that provides reemployment opportunities for employees who resigned due to marriage,
childbirth, childcare, nursing care, or the transfer of a spouse.

59

A

Engagement survey

Score:

The
engagement
surveymeasuresemployeeengagement in terms of “expectations” and “satisfaction”
with the company, job, workplace, and superiors, andvisualize the effects of various human resource measures.

*The average of the scores of about 10,000 companies
using this survey is 50*The third highest rating on a scale from AAA to DD

Rating:[Reference] Engagement score and ratings
Score

33

39

Rating

DD

DDD

42
C

45
CC

48
CCC

52
B

55
BB

58
BBB

61
A

67
AA

AAA

*Scores are represented as deviations from the national average of B50.

FFG ANNUAL REPORT 2023

40

Human Capital Management

DE&I/Organizational Culture
Working to enrich employees’
individual lives

Asumi Noda joined a megabank after graduating from a Tokyo
university. She joined the Bank of Fukuoka, Ltd. in 2010 as
mid-career hire when her spouse changed career. Thereafter,
she worked on structured finance and overseas financeprojects and in FY2022, she joined the Human Resources
Department. Since April 2023, she has served concurrently as
FFG’s DE&I Promotion Group Lead and General Manager ofthe Bank of Fukuoka’s DE&I Promotion Group. As a mother of
two, she has utilized the maternity leave, childcare leave,
special leave* and similar systems.

Asumi Noda
DE&I Promotion Group Lead,
FFG; General Manager,
DE&I Promotion Group,
The Bank of Fukuoka, Ltd.

*The “flexible leave system” (which was known as the spouse transfer
leave system at the time her spouse was transferred overseas)

FFG’s policy aims

Steps to achieve policy aims

FFG’s initiative policy for DE&I is “to respect and integrate

FFG has implemented a range of initiatives to achieve

the diversity of knowledge and experience of our humanDE&I. From an early stage, steps have been taken toresources with various experiences and backgrounds,

establish an environment where employees can takeand to connect this to the growth of the organization.”

active roles regardless of gender. As a result, theAs a regional financial organization, we will continue toprovide an environment where every individual in FFG can

as has the fields in which they are active.

let their capabilities shine to the fullest with DE&I as theOn the other hand, diversity issues are yet to befoundation of our management strategies, in order toresolved for decision-makers, and we wish to develop

provide for our customers’ diverse and sophisticatedmore diverse role models to heighten employees’ sense

needs and grow sustainably alongside the regionalof purpose. We must push on with the work of creating ancommunity.

environment

where

appropriate

management

andNeedless to say, people are of different nationality,

support are given to each individual, in addition togender, and age, and each of us also has different career

working on the company’s systems. On gender as a DE&I

histories, values, and reasons to work. In addition, eachissue, around half of our employees are women. To

of us is facing our own unique set of circumstances.

achieve DE&I in FFG, it is essential that these employees

This is precisely why FFG aims to build an organizationthat can adapt to the rapidly changing environment toare given an environment where they can apply theirabilities to the fullest possible extent.

achieve continued growth, by initiatives that involve

That said, the environment is gradually becoming more

everyone so as to create a workplace in which eachdiverse as many veteran specialists enter the digital andindividual’s differences are respected and supported andfinancial industries as mid-career hires. Achieving DE&I

where anyone can grow while cherishing their personal as

will increasingly come within reach if we can integrate

well as professional lives.

these experienced hires with diverse backgrounds and

FFG’s goal is the creation of a virtuous cycle in which

41

proportion of women in management has risen steadily,know-how, needless to say operational skills.

employees achieve self-actualization and growth and

FFG has over 10,000 employees. Each one of themdeliver high-value added products and services to

has their individual lives and personal priorities. We will

customers in their work, leading to the growth of FFG

keep promoting initiatives that will enrich each of thesealong with the regional community.

individual lives.

An organizational culture that assures psychological safety
It is necessary for the company’s sustained growth tofoster an organizational culture in which “psychologicalsafety” is assured and people of diverse backgrounds may
engage in the open-minded expression of their views.
Accordingly, FFG is working diligently to spread awareness of the concept of psychological safety throughcontinuous training and a specially-created guidebook.

Third-party
assessments

If employees can engage daily in fruitful communicationsand voice their views frankly regardless of their job titles,
this enhances our risk management and may prevent or
quickly identify inappropriate incidents. Not only would thisincrease our “reliability,” but it may also bring about positiveeffects such as the creation of new businesses and astronger sense of purpose.

As a form of organizational culture “peacetime health check,” FFG has implemented “third-party assessments”
twice, once in FY2011 and once in FY2017, in which an independent evaluation and review was conducted by
an external law office (Nagashima Ohno and Tsunematsu).
In FY2022, we implemented a third-party assessment for the third time, with the objectives of surfacingorganizational issues across FFG and assessing the extent to which an “organizational culture without fear of
failure” has been established in FFG, with psychological safety as one of the key words. We are in the process ofstudying and implementing measures to address the issues uncovered from the feedback received.

Input
Initiatives for demonstrating diversity
Enhancing understanding of DE&I

Various forms of support for achieving balance(childcare/caregiving x work)

Management training
Coaching; DE&I promotion training, etc.
• Training sessions and seminars targeted at employees
Caregiving/LGBTQ/unconscious bias, etc.
• Initiatives achieved through “flexibility”
Furthering DE&I promotion by acting as a bridge
between our workplaces and headquarters•

Pre- and post-natal leave/childcare leave, caregiving leave• Support program for returning to work
• Mandatory childcare leave for men• Handbook on achieving balance(childcare x work, caregiving x work)• Maintaining a daycare center inside the company• Subsidy scheme for childcare service fees
• Shortened working hours scheme, etc.
•

Loan workshops
for women

Supporting women in shaping their careers••

The petit petit
daycare center
within thecompany

Training workshops and study groups for female employees
Mentor system

Initiatives for fostering organizational culture
Measures to revitalize communication

KaTaRi-Ba (inside FFG headquarters building)In-house company SNS
Subsidy for workplace communication-related events• Family day• The “Say thank you more” movement(an initiative for expressing day-to-day gratitude using cards)••

The eighth floor of FFG’s headquarters was renovated with theawareness that an environment that could bring a wide variety of people
together to create new ideas was more necessary than ever. As we say
in Fukuoka, “kataru”—to become one of the group. We hope this will bea space for all to come and “talk about and be part of various projects,”
regardless of one’s position and job.

OutputRatio of personnel with titled positions
having diverse backgrounds
Results for FY2022

23.8%

Target for FY2030

35% or more

Proportion of women in management*
Results for FY2022

17.6%

Target for FY2028

25.0%

Male employees who took childcare leave (FY2022)
The Bank of Fukuoka

97%

The Kumamoto Bank

100%

The Juhachi-Shinwa Bank

108%

Foreigners in employment (as of March 31, 2023)

13*Equivalent in meaning to the definition of managerial positions in the regulations of the“Act on Promotion of Women’s Active Engagement in Professional Life” (Act No. 64 of
2015).

FFG ANNUAL REPORT 2023

42

Contribution to Sustainable Local Communities

Regional Revitalization
Contribution to Regional Growth That
Only FFG Can Achieve
Regional revitalization as considered by FFG
At FFG, we are working on regional revitalization by
providing the Group’s “diverse solutions” based on the“trust and reliance from customers” that bank of Fukuoka,
Kumamoto Bank, and Juhachi-Shinwa Bank have built
up throughout our long history.
FFG’s concept of regional revitalization is to work
proactively to resolve regional issues in collaboration withlocal governments and business partners, and to further
enhance the attractiveness of local communities. By
connecting people and land through the networks that
we have as a bank that is deeply rooted in the region, we
aim to contribute to regional growth in a way that only
FFG can do.
The Bank of Fukuoka is a designated financial institution in approximately three-quarters of the 61 municipalities in Fukuoka prefecture. We have deep business
relationships with local governments, and in addition toproviding consulting services in the areas of finance,accounting, tax revenue matters, and financing, etc., inrecent years, we have also seen an increase in consulting in the areas of agriculture and regional promotion. In
addition, at sales sites, we have started to hear fromlocal business partners that they “want to preserve thelocal communities where they were born and raised,
and where they conduct business as sustainable local
communities.”
Under these circumstances, in 2019, we established
the Regional Co-creation Division at the Bank of Fukuoka
based on the concept of “creating together with local
communities.” At present, we are proceeding with two
initiatives: the Public Finance Corporation Department,
which is a front office department that works mainly withthe public sector and helps local governments with
monetary matters and administrative DX, and the Regional Revitalization Promotion Department, which proposes

Regional revitalization platform
Collaboration among industry,
government, academia, and finance

FFG Group’s competitivenessLocal
governments

Local
companies

Universities

Corporate
alliances

Realization of open innovation
Business proposals

Budget certification

Commercialization

Self-propulsion

Local issues
Tourism
promotion

Aging populationand declining
birth rate

Healthcare

Smart cities

Resolution of issues

43

Community
development

Shift to ICT

Job creation

Creation of Disaster prevention,
public facility
pest control,
complexes
etc.

Business creation

Tokuichi Yamauchi
General Manager of Sales Administration Division,
FFG and General Manager of Regional Co-creation Division,
the Bank of Fukuoka, Ltd.

commercialization related to regional revitalization, collaborates with industry, government, academia, and finance,and collects information and conducts sourcing on
private sector utilization projects, etc.
In addition, the Sales Promotion Division and Solution
Sales Division at Kumamoto Bank, and the Regional
Promotion Division at Juhachi-Shinwa Bank play similarroles, and by working closely together, the three banks
are working on regional revitalization while creating Groupsynergies.

Creation of sustainable business
FFG’s specific efforts in regional revitalization are basedon two concepts: “regional projects” and “expanding
sales channels for local products.”“Regional projects” is an initiative to form a consortiumwith local governments, local companies, universities,
and others to create business opportunities while solving
issues using national and local subsidies and corporate
funds. In FY2022, we implemented 32 projects. (P. 68:
Mt. Hiko Temple Lodging Revitalization Project)“Expansion of sales channels for local products”
involves supporting the expansion of sales channels
by rebranding local products and crafts, etc., andusing digital channels such as EC and crowdfunding
as well as real-time events at commercial facilities andother complexes in conjunction with iBank marketing.
In FY2022, we implemented 34 such initiatives. (P. 68:
Supporting the expansion of sales channels for specialty
products from Minamishimabara, Nagasaki prefecture,etc.)
All these initiatives are based on FFG’s goal-based
sales approach, in which we empathize with the goals of
the region and our business partners and the stories thatlead to them, and they are also aware of profitability inorder to become sustainable businesses for FFG, ourbusiness partners, and the region.

Creating the future together with local communities
As awareness of regional revitalization grows across a wide range of generations, we believe that our raison d’être,which is to “contribute to regional growth,” is once again being questioned.
As the region continues to grow in the future, FFG must of course provide support using digital technology, but
we believe that “building connections and relationships between people,” in other words, communication is evenmore important.
We are focusing on disseminating information and spreading awareness within the company in order toproceed with regional revitalization on a company-wide basis, while sharing issues with branch staff who areclosely connected to local communities and have front-office contact with customers.
As an entity that creates the future together with local communities, we will continue to take the approach of
considering what only FFG can do, and continue to evolve as a Group.

Regional project —Mt. Hiko Temple Lodging Restoration Project in Soeda, Tagawa District, Fukuoka Prefecture—
The town of Soeda, which was severely impacted by the torrential rains in northern Kyushu, including experiencing thesuspension of public transportation, the destruction of natural forests, and damage to shrines, aims to increase theimmigrant and exchange population by promoting tourism leveraging the appeal of Mt. Hiko, which is one of Japan’s threesacred mountains and the symbol of the town. As part of these efforts, we utilized the Japan Tourism Agency’s businessproject to conduct Shugendo (Japanese mountain asceticism) experience
tours (creation of tourism contents andhuman resource development) andconduct surveys of temple lodgings.
Our aim is to renovate the lodgings andopen a high-value-added hotel that willserve as a tourist exchange base along
the entranceway to the shrine, with aview to future commercialization.

Expansion of sales channels for local products —Supporting sales channel expansion using digital technology—
Supporting increased consumption of wild gamefrom Fukuoka prefecture
In Fukuoka prefecture, where the damage to agricultural,
forestry and fisheries products by wild birds and animals
is an issue, wild game is viewed as a local resource, andefforts are being made to use it effectively. As part ofthese efforts, we developed sales channels and provided
promotional support for “Fukuoka Wild Game,” with theaim of expanding consumption and disseminating
information about wild game. In addition to holding
gourmet events under the name of “Fukuoka Wild Game
Fair,” we supported these initiatives through a hybrid ofreal-time and online methods, including by selling
discount meal tickets to certified wild game restaurants
through FFG’s CF website, “Ennichi Funding.” This was asustainable initiative that created a virtuous cycle of pest
control and contributing to sales to restaurants byincreasing awareness of wild game from Fukuoka prefecture.

Supporting the expansion of sales channels for
specialty products from Minamishimabara,
Nagasaki prefecture
As part of the “Minamishimabara City Promotion Project”
aimed at disseminating the appeal of Minamishimabara’s
food, nature, history, and tourism, etc., we held a special
feature on the specialty products of Minamishimabara
through FFG’s EC website, “Ennichi,” in collaboration
with Nagasaki Culture Telecasting Corporation, with thetheme of “Delicious Minamishimabara.”
We used the special feature to disseminate information about Minamishimabara’s specialty products, andworked on planning so that people could order theseproducts despite the difficulties of visiting the area due tothe COVID-19 pandemic.
Taking advantage of this project, we will continue tosupport each business operator’s initiatives to disseminate information through SNS and expand sales channels
through EC websites.

FFG ANNUAL REPORT 2023

44

Contribution to Sustainable Local Communities

Regional Revitalization

The Potential of Kyushu—Silicon Island Kyushu—
TSMC expands into Kumamoto
In November 2021, TSMC (Taiwan Semiconductor Manufacturing Company Limited), a leading semiconductor
manufacturer in Taiwan, announced that it planned to build
a new plant in Kikuyo, Kumamoto prefecture.
Since then, major semiconductor-related companies
have been steadily expanding their facilities in the Kyushu
area. In addition, local governments in the area and FFG’s
business partners have been increasingly active in taking
measures to accommodate new plants and support thesemiconductor industry.

Since the 1960s, Kyushu has been known as “Silicon
Island” due to the concentration of semiconductor-relatedindustries, partly as a result of its abundance of waterrequired for semiconductor production and the relatively
low-priced and stable supply of electricity. Kyushu’s
national market share of semiconductor devices hit arecord high in 2019 of 44.5%. Now, with TSMC’s expansion into Kyushu, the area’s semiconductor-related industry is ramping up even more.

Interviews with FFG’s business partners
Kyushu is home to many plants and offices that not only
manufacture semiconductors but also produce semiconductor manufacturing equipment and materials. There areapproximately 1,000 such businesses, ranging frommajor companies to small- and medium-sized enterprises, and approximately 70% of them are located in FFG’s
business bases of Fukuoka, Kumamoto, and Nagasaki.
In July 2023, we conducted interviews with approximately 250 FFG business partners associated with thesemiconductor industry. As a result, approximately 60%
of our business partners responded that the expansion
by semiconductor-related companies such as TSMC
would have a “positive impact.”
Meanwhile, the interviews revealed issues faced bybusiness partners, including “dealing with a shortage ofhuman resources,” “how to increase sales (expand sales
channels),” and “dealing with aging equipment.”

Additionally, there are many urbanization control areasin the vicinity of Kikuyo, making the securing of businesssites a major issue, and some companies have given up
on expanding into Kikuyo. For this reason, the construction of industrial parks in Kumamoto prefecture isproceeding at a rapid pace.

Management issues faced by related business partners
Human resource
shortages

163

Increasing sales

122

Aging equipment

57

Sales dispersion
Business succession
and M&A

44
32

N=253
Number of responses: 528

Strengthening FFG’s related business
The Kumamoto Bank is strengthening its support systemthrough personnel exchanges, collaboration agreements,
and the formation of project teams with local governments, and universities, etc. In addition to demand forcapital investment due to public works such as infrastructure development and the construction and expansion ofplants in related supply chains, employment-related
needs associated with UIJ turns and real estate demandassociated with securing housing are expected toincrease, and we are providing active support from theperspectives of financing, business matching, andcommunity development.
In addition, in December 2022, FFG entered into abusiness alliance with CTBC Financial Holding Co., Ltd.,a leading Taiwanese financial company. Approximately
1,400 people participated in the seminar held in Kuma-

45

moto prefecture in March 2023 with the themes of“Taiwan” and “Semiconductors,” both at the venue andonline. Going forward, we will continue to strengthen
collaboration in areas such as providing financial services
and business matching, with a view to the revitalization ofindustries, including the semiconductor industry, in both
Kyushu and Taiwan.

Interview

Interviews with the Kumamoto Bank
“New Regional Development
Promotion Team”

Kumamoto Bank

New Regional Development Promotion Team

About the system
The “New Regional Development Promotion Team” wasestablished in April 2022 as a specialized unit for projects related
to TSMC’s expansion. Currently, twelve people are working on
the team, four of whom are permanently stationed at four sales
offices (reinforced offices) located around TSMC plants.

Changes we are now seeing, and business opportunities
for FFG
The topics for which we often receive inquiries from business
partners including real estate, human resources, and company
introductions. The need for housing is increasing significantly,
and large-scale subdivisions that have never been seen before
are being created in surrounding areas. Meanwhile, land prices
are soaring, and since there are many individual customers who
have sold their land, we are also holding seminars on taxes incollaboration with external instructors.

In addition, many local governments with which we have collaborative agreements introduce us to companies from outside theprefecture, thereby creating new business opportunities.

Future outlook
Going forward, we would like to collaborate with eachdepartment of FFG and strengthen our approach to large
companies. We would also like to actively promote business withcompanies expanding outside of Taiwan.
The strength of the “New Regional Development Promotion
Team” is the speed of its response to customer needs. We would
like to continue to stimulate Kyushu and Kumamoto together
with our customers.

<Case studies of the New Regional Development Promotion Team>

Case 1: Introducing office relocation sites to companies within the prefecture
Background

Providing solutions

We were consulted by a business partner
engaged in the sale and maintenanceof semiconductor equipment that wasconsidering the relocation of the offices of
its affiliated companies due to the expected increase in demand as a result of the
expansion by TSMC.

We worked with real estate agents on the same day, and on the next day we provided
real estate information not yet available to the public. The property had been used bya semiconductor-related business, and matched the needs of the business partner,
thereby leading to business matching. The same company is also raising the numberof its employees in order to increase orders in the future. Since the business of ourbusiness partners is in a growth phase, we would like to continue supporting them insolving issues by providing a variety of solutions that meet their needs.

Case 2: Contributing to attracting leading temporary staffing companies from outside the prefecture
Background

Providing solutions

A major manufacturing-related outsourcing
company headquartered in the Tokyo
metropolitan area consulted us through a
local government with which we have acollaborative agreement, regarding a site
for the construction of a business officeand training facility.

We provided property information received from a local real estate company, which
led to the conclusion of a rental contract for the property as a training facility.
Additionally, since special electrical work was required, we introduced a business
operator who was a business partner of the Kumamoto Bank and could undertake
the work. As many of our business partners face the issue of dealing with humanresource shortages, we believe that our contribution to attracting a leading
temporary staffing company will lead to the future growth of local companies.

Case 3: Starting business with Taiwanese companies expanding into the prefecture
Background

Providing solutions

A Taiwanese company that does
business with TSMC established a local
subsidiary in the prefecture. When wevisited the company for new sales
purposes, we were asked to introduce
a company that can design and build
clean rooms, which are essential for
semiconductor manufacturing.

When we requested information at a team meeting, we found a company among ourbusiness partners that has a proven track record in building clean rooms. When webrought the two companies together, their needs matched and led to businessmatching. In September, we visited the company’s headquarters in Taiwan and wereintroduced to related business partners.
Although we are seeing many Taiwanese companies with business dealings with
TSMC expanding into Kumamoto, it would appear that finding new business
partners in Kumamoto is a major challenge for them. By collaborating with FFG’srepresentative office in Taiwan, we hope to connect companies in Taiwan and
Kumamoto and contribute to both their development.
FFG ANNUAL REPORT 2023

46

Contribution to Sustainable Local Communities

Achieving Sustainability Transformation (SX) at FFG
Initiatives to address climate change

Climate change: Initiatives addressing TCFD* recommendations
FFG has positioned efforts for addressing climate change as an important element of its business strategy. Aiming
to share easy-to-understand and useful information with its stakeholders, the Group declared in August 2020 that itsupports the recommendations of the TCFD*.
We will continue to expand the content of disclosure in line with the recommendations.
*Task Force on Climate-related Financial Disclosures

GovernanceUnder the direction and advice of the Board of Directors, the FFG head office has built an organizational structure topromote sustainability measures across the entire Group with the Corporate Planning Division as an administration
division.

Board of Directors
Reporting

Supervision

Overall administration/
Formulation of strategies

Subsidiary banks

Sustainability Promotion Structure

Corporate Planning Division
Sustainability Administration GroupIn principle, the Sustainability Promotion Conferenceis held semiannually with a framework of the GroupManagement Conference.
Its contents are reported to the Board of Directors.

Sustainability Promotion Council
In principle, the council is held with general managers
once a month.

Each division(managers and responsible
personnel assigned)

Group companies

Group Management Conference(Sustainability Promotion Conference)In order to clarify FFG’s roles and responsibilities regarding the risks and opportunities of climate change, our Risk
Management Policy stipulates that the Board of Directors is responsible for developing and establishing various risk
management systems based on the characteristics of the climate-related risk, and action plans and other related
matters are discussed by the Board of Directors or the Group Risk Management Committee, depending on the natureof the climate-related risk.
W ith regard to investments and loans, our Environment and Society-Conscious Loan Policy, which takes into
consideration the demands of the international community for the prevention of global warming and our expectations
for the realization of sustainable local communities, is clearly stated in the Credit Policies, and decisions are made by
Board of Directors.

47

Strategies<Climate-related risks and opportunities>
The Group has recognized the following climate-related risks and opportunities based on the Group’s asset structure,business model, and possible future changes in the external environment.

Risks
Type

Physicalrisk

Details

Risk typeTime axis(*1)

Increased damage to customers due to an increase in heavy
rains, typhoons, and other natural disasters in the Kyushu
region, FFG’s business baseCredit risk

Short tolong term

Increased damage to own branches and data centers due to anincrease in heavy rains, typhoons, and other natural disasters in
the Kyushu region, FFG’s business baseTangible
asset risk

Short tolong term

Manifestation of negative impacts that comes with transitioning
to a decarbonized society on finances and business continuityof mainly SME customers with limited resources to respond to
the transition

Risks

Transition
risk

Decrease in value of loans for businesses such as coal-fired
thermal power plants due to strengthened restrictions on
businesses that could negatively impact the environment andsociety
Decline in corporate value due to gap between FFG’s climatechange initiatives and stakeholders’ expectations

Medium tolong term
Credit risk
Medium tolong term
Reputationrisk

Short tolong term

Opportunities
Type

Opportunities

Products
andservices

Details

Time axis(*1)

In preparation for an increase in storms, floods, and other disasters, providing
customers with risk reduction schemes that utilize insurance, and services
such as BCP formulation and diagnosis support

Short tolong term

Increased sustainable financing that supports the business of customers tosolve environmental issues

Long term

Increased consulting services such as GHG emission measurement andreduction plan execution support

Short tolong term

Realization of a sustainable business that supports the sustainability
management of customers through dialogue based on the SS Index(*2)

Short tolong term(*1) Short term (0 to 3 years), medium term (3 to 10 years), long term (more than 10 years)(*2) Sustainable Scale Index: A unique ESG/SDGs scoring model service developed jointly by FFG subsidiary Sustainable Scale and Kyushu University.

<Scenario analysis>
FFG utilizes scenario analysis to identify the impact of climate-related risks on the Group and establish strategic
resilience.
Based on the results of the scenario analysis, we will create business opportunities and mitigate risks for corporate
customers by enhancing engagement with them to ensure they can adapt to climate change and transition to a
decarbonized society.
Scenario analysis methods have not yet been established in many areas, and are still in the process of development.
Accordingly, FFG continues to work to refine and enhance the analysis.

FFG ANNUAL REPORT 2023

48

Contribution to Sustainable Local Communities

Achieving Sustainability Transformation (SX) at FFG<Scenario analysis>
Selection of sectors subject to analysis
With an eye toward the transition to a decarbonized society, we conduct risk assessment to inform the selection of
sectors subject to scenario analysis of transition risks. The risk assessment is carried out based on how large theimpact of policy and legal, technology,
market, and reputation changes would

Large
Metal/mining⇒The steel sector was added to the FY2023 scenario analysis

FFG’s portfolio.
B a s e d o n t h e r i s k a s s e s s m e n t b y
sector, we added the steel sector tothe conventional utility, energy andautomotive sectors for the FY2023
analysis.
W e will enhance risk recognition by

Impact of transition risk

be on each sector, as well as the size ofOil/gasElectricity
Airtransportation
Automotive

Agriculture
Chemistry

Construction materials/
capital goods

Large

FFG’s portfolio

results of each sector, in accordancetechnology, and market environments.

Real estate management/
development

Land transportation

Beverages/
processed foods/
meat

Paper/
forest products

constantly reviewing the assessmentwith changes in climate-related policy,

Marine transportation

EnergyTransportation

Materials/buildings

Agriculture/food/forest products*Boldfaced sectors have been analyzed in the past

Analysis results

*Changes from the last time are underlined

Physical risk

Transition risk

Risk
analyzed• Damage to collateral properties from storms andﬂoods• Deterioration of financial conditions due to thesuspension of obligors’ businesses• Deterioration of financial conditions of obligors
from decreased net sales and increased costs
that come with transitioning to a decarbonizedsociety

Applicableportfolio• Borrowers with business feasibility in Japan• Utility and energy sector(*1)• Automotive sector• Steel sector

Scenario• RCP 8.5 (4˚C scenario) or RCP 2.6 (2˚C scenario)
in the IPCC(*2) Assessment Report• Net Zero 2050 (1.5˚C scenario) and Current
Policies (3˚C scenario) by NGFS(*3)

Analysis
method• Use a storm and ﬂood model to estimate the levelof impact on locations and structures such as
obligors’ collateral properties and business offices• Forecast changes in future performance in thetarget sector based on the transition scenario, andestimate the impact on ratings and credit costs• Additional credit costs that could be incurred by 2050:• Additional credit costs that could be incurred by 2050:

Up to 5.0 billion yen *Total 12.9–28.6 billion yen(*4)

Analysis
results( 4)(*1) Excludes water suppliers and renewable energy generators(*2) IPCC: UN Intergovernmental Panel on Climate Change(*3) NGFS: Network of Central Banks and Supervisors for Greening the Financial System(*4) Total of Bank of Fukuoka, Kumamoto Bank, and Juhachi-Shinwa Bank

<Carbon-related assets>
The percentage of carbon-related assets is 30.47%.
EnergyTransportation

Materials

Agriculture/food/forest
products

Total carbon-related
assets(*5)

1.92%

4.82%

22.24%

1.49%

30.47%(*5) Aggregated based on the Bank of Japan industry classification. Includes loans and acceptances and guarantees, but does not include unexecutedbalance of commitment lines. Total of Bank of Fukuoka, Kumamoto Bank, and Juhachi-Shinwa Bank

49

Risk Management
The Group positions risks that are particularly important for management as top risks, and has selected “risks related
to climate change” as one of them. See page 64 of this report for details.
Should Climate-related risks manifest, there would be ripple effects across every risk category including credit, market,
liquidity, and operational risks. Our Board of Directors is actively involved in the development and establishment ofproper risk management systems based on such characteristics of the climate-related risk.
Climate-related risks that are deemed important are managed and addressed within a comprehensive risk management
framework by risk category depending on how a risk is likely to manifest itself.
For example, we assess the physical risk of damage to FFG branches from storms and ﬂoods within the operationalrisk management framework, and appropriately address the risk by taking necessary measures such as reevaluating
insurance policies.
For more information on FFG’s comprehensive risk management, see page 25 of FFG Disclosure 2023 “Financial Data”(Japanese only) on our website.

<Environment and Society-Conscious Loan Policy>In order to make consideration for the environment and society in our loan services, the Bank of Fukuoka, theKumamoto Bank, the Juhachi-Shinwa Bank, and the Fukuoka Chuo Bank have stipulated prohibited loans and loan
activities that require special attention in our “Environment and Society-Conscious Loan Policy*.”The balance of loans in project finance for construction of coal-fired thermal power plants in the Group was 2.3 billion
yen as of March 31, 2023, which is scheduled to become zero by FY2035.
*Please refer to our Group website for details.

Indicators and Targets<Sustainable finance>
In October 2021, the Group positioned finance which contributes to the resolution of environmental and social issues ofour customers and the realization of a decarbonized society as “sustainable finance.” We have set the total execution
amount target as “2 trillion yen from FY2020 to FY2030 (including 1 trillion yen for the environment).” Going forward, we
aim to achieve targets by helping our customers resolve their issues.
As of the end of March 2023, the total amount executed by the Bank of Fukuoka, the Kumamoto Bank, and theJuhachi-Shinwa Bank is 449.2 billion yen, of which 162.9 billion yen is for environmental finance.
Achievement

Sustainable Finance Targets
FY2020–FY2030

Total execution amount2 trillion yen(including 1 trillion yen for the environment)(FY2020–FY2022)

Sustainable Finance
Of which,environment related

449.2 billion yen
162.9 billion yen

Eligible financeFinance that contributes to solving environmental and social issues such as climate changeFinance that supports and promotes customers’ ESG and SDGs

FFG ANNUAL REPORT 2023

50

Contribution to Sustainable Local Communities

Achieving Sustainability Transformation (SX) at FFG<Efforts to achieve in-house carbon neutrality>
In May 2022, we set the Group’s CO2 emissions (Scope 1,2) reduction target as “net zero by FY2030” in order toaccelerate our local decarbonization efforts.
In order to achieve our target, we will implement energy-saving measures such as shifting to eco-friendly stores whenrebuilding stores, switching to highly efficient air conditioning, and adopting LED lighting. In addition, we will consider
switching the power we are currently using to power sources derived from renewable energy.
In-house CO2 emissions reduction target

FY2022 emissions results

Net zero by FY2030

24,596 tons (Down 41% from FY2013)*Applies to Scope 1 and Scope 2 of the GHG Protocol.

Environmentally friendly branchesWe will actively consider shifting to ZEB* design branches when considering future branch rebuilding. ZEB-designed
buildings can significantly reduce electricity consumption, leading to a reduction in CO2 emissions.
In February 2023, Kumamoto Bank Koshi Loan Center opened. In addition, Juhachi-Shinwa Bank Hasami Branch andBank of Fukuoka Minamikokura Branch opened in June and September of the same year, respectively.
* Net Zero Energy Building: A building that aims to realize a comfortable indoor environment while achieving zero annual balance of primary energy
consumption in the building.

Kumamoto Bank Koshi Loan Center

Juhachi-Shinwa Bank Hasami BranchBank of Fukuoka Minamikokura Branch

CO2 emissions
Measurement items

FY2013

FY2021

FY2022

Scope 1 (direct emissions associated with the use of gas and gasoline)

4,447

2,862

2,834

Scope 2 (indirect emissions associated with the use of electricity, heat, andsteam supplied by other companies)

37,48421,986

21,762

41,931

24,84824,596

Scope 1, 2

51

(Unit: t-CO2)

About Scope 3(Unit: t-CO2)

S cope 3 in the GHG Protocol refers toemissions other than those covered by

Measurement items

FY2022Category 1:

Purchased products and services

41,974greenhouse gases (CO2, etc.) emitted by theCategory 2:

Capital goods

29,887

reporting company itself, Scope 3 covers

Category 3:

Fuel and energy-related activities notincluded in Scope 1 and 2

2,600

to the reporting company’s business activities.

Category 4:

Transport, delivery (upstream)

1,428

F rom FY2022, the Group has calculated

Category 5:

Waste generated from operations

40

Scope 3, including category 15.

Category 6:

Business trips

981

Category 7

Employee commutes

3,402

Category 15:

Investments and loans

20,077,259

Scope 1 and 2. While scope 1 and 2 covers

other companies’ greenhouse gases related* The figures represent the total of Bank of Fukuoka, Kumamoto Bank, and Juhachi-Shinwa Bank as of March 31, 2023
* Scope 3 calculation methods, emissions figures, etc. are based on the “Basic Guidelines on Accounting for Greenhouse Gas Emissions Throughout theSupply Chain Ver. 2.5 (Ministry of the Environment and Ministry of Economy, Trade and Industry, Government of Japan, March 2023)” and “Emissions Unit
Value Database for Accounting of Greenhouse Gas Emissions, etc., by Organizations Throughout the Supply Chain Ver. 3.3 (Ministry of the Environment
and Ministry of Economy, Trade and Industry, Government of Japan, March 2023)” (categories 8 to 14 have calculated values of zero).

About category 15 (investments and loans)
The emissions were calculated for borrowers of the Bank of Fukuoka, the Kumamoto Bank, and the Juhachi-Shinwa
Bank with business feasibility (corporations and sole proprietors), taking into account the measurement method of thePCAF(*1) Standard.
We used both the bottom-up approach, where emissions are calculated from GHG emissions data disclosed bycompanies, and the top-down approach, where emissions are estimated based on carbon intensity of each industry.
We will contribute to the realization of a decarbonized society by expanding and refining the scope of calculation, as
well as utilizing the calculation results to engage with business partners and in turn reducing emissions.
(Unit: t-CO2)

Oil/gasCarbonintensity(*2)
2.26

Power

26.93

2,687,555

Automotive

4.94

212,079

Land transportation

3.20

800,492

Marine transportation

6.55

758,583

Air transportation

12.14

53,356

Metal/mining

10.87

1,742,040

Chemistry

7.67

473,6894.70

4,440,226

1.17

573,734

Agriculture

8.08

269,413

Beverages/processed foods/meat

5.17

1,060,460

Paper/forest products

3.67

158,928

1.87

6,491,572

Industry
EnergyTransportation

Materials/
buildings

Agriculture/
beverages/
forestproducts
Other
Total(*4)

Construction materials/capital
goods
Real estate management/
development

Emissions(*3)
355,133(*1) P artnership for Carbon Accounting
Financials: An international initiative fordeveloping methods to measure anddisclose greenhouse gas emissions infinancial institutions’ investment andloan portfolios(*2) Carbon intensity = (Carbon intensityof each borrower)/Number of borrowers(*3) C a l c u l a t e d e m i s s i o n s ( t o p - d o w n
approach)= (Carbon intensity of each borrower
× Borrower net sales) × Attribution
coefficient (Financial institution’s
investments and loans outstanding/
Total shareholders’ equity and liabilities)(*4) Excluding business partners that havenot closed their fiscal year or do nothave the data necessary for calculationfor other reasons (87% of investments
and loans outstanding are covered)
The calculation results may change
significantly in the future due toexpanded disclosure of customers’
GHG emissions or changes incalculation standards and methods andindustry classifications.

20,077,259

FFG ANNUAL REPORT 2023

52

Strengths to Support Value Creation

Corporate Governance

Basic Views on Corporate Governance
The Group’s management principles state the Group’s goal to become a financial group that creates value for all
stakeholders, including shareholders, customers, local communities and our employees, and the Group’s basic
management policy is based on the same view.
Under these Group management principles, the Company, as a holding company to govern the Group, mainly consists of thecore subsidiary banks, is working toward the realization of highly effective corporate governance for the purpose of optimizing
the management resources of the Group and administering the Group as a whole in a sound and appropriate manner.
In addition, we have formulated the Fukuoka Financial Group Corporate Governance Guidelines* 1 as our basic
approach to corporate governance and its operational guidelines.
*1 Please refer to our Group website for details.

Corporate Governance System
Overview and Reasons for Adoption of Current Corporate Governance System
The Company has appointed four highly independent External Directors to fully perform supervisory functions within
the Board of Directors, while the Audit & Supervisory Committee, composed of three Audit & Supervisory Committee
Members, audits the status of the Directors’ job performance appropriately. In this way, a sufficiently effective governancesystem has been established, and therefore the current organizational design of a company with an audit & supervisorycommittee has been adopted.
(As of October 2, 2023)

General Meeting of
Shareholders
Group Nominating Advisory Committee
Group Compensation Advisory Committee

Board of Directors

Representative
Directors

Group IT Special Committee
Corporate
Planning
Division

Human Resources
Quality
Administration Administration
Division
Division

Corporate Strategy,
Sustainability
Administration,
Corporate Planning,
Corporate
Management,
Financial
Management,
Public Relations

Human
Resources
Planning,
Human
Resources
Development

Compliance,
CounterFinancial
Crime,
Improvement ofService Quality

Office of Audit &Supervisory Committee

Group Management
ConferenceGroup Risk Management Committee
ALM Committee
Compliance Committee
Counter-Financial Crime Committee
Operational Risk Management Committee

Executive
Secretariat

Audit & Supervisory
Committee

DX Promotion Headquarters

Solution Business Headquarters

GeneralAffairs
Division
Corporate
Stock Affairs,
Property
Administration/
General Affairs

Sales
Operations
Treasury andInvestment Administration Administration
Division
Division
DivisionIT
Administration
Division

Risk
CreditAdministration Supervision
Division
DivisionInternal
Audit
Division

Treasury
Planning,
Treasury
Management

IT Planning

Risk
Management

Internal Audit

Sales Strategy,
Sales
Promotion
SupportOperations
Planning

Asset
Assessment

Subsidiaries of FFG

Subsidiaries

Board of Directors (held 11 meetings in FY2022)
The Board of Directors consists of 11 Directors(including 4 External Directors), and shall discuss andmake decision on basic guidelines related to Groupmanagement, as well as matters stipulated by laws,
ordinances and the Articles of Incorporation. The
Board shall also make decisions on important mattersconcerning business management of subsidiary banks,business and affairs of the Group, while overseeing thejob performance of Directors and Executive Officers.

53

Audit & Supervisory Committee (held 12 meetings in FY2022)
The Audit & Supervisory Committee consists of three
Audit & Supervisory Committee Members (including two
External Directors), and based on the basic policies andaudit plan for the Group-wide audit, shall audit Directors’
job performance and examine the status, etc., ofbusiness conditions and assets of the Group as a whole.
Office of Audit & Supervisory Committee
To fully perform the audit functions of the Audit &Supervisory Committee, staff (multiple members)
are exclusively designated to support the Audit &Supervisory Committee.

Group Nominating Advisory Committee, Group Compensation Advisory Committee
To enhance transparency and fairness of our group management, the Group Nominating Advisory Committee and Group
Compensation Advisory Committee, an advisory body to the Board of Directors, shall discuss matters related to theelection/dismissal and the compensation of Directors.
Group Nominating Advisory Committee
Group Compensation Advisory Committee
Chairperson: Takashige Shibato (Director & Chairman)
Chairperson: Masahiko Fukasawa (External Director)
Members: Hisashi Goto (Director & President)
Members: Takashige Shibato (Director & Chairman)
		 Masahiko Fukasawa (External Director)
		Hisashi Goto (Director & President)		 Toshiya Kosugi (External Director)
		Toshiya Kosugi (External Director)
		 Hideo Yamada (External Director)
		Hideo Yamada (External Director)
		 Nobuko Ishibashi (External Director)
		Nobuko Ishibashi (External Director)
Group Management Conference
The Group Management Conference consists of 6
Executive Directors (chaired by the President) (alsoattended by full-time Audit & Supervisory Committee
Members), and based on basic guidelines stipulated
and matters entrusted by the Board of Directors, shalldiscuss important matters related to business andaffairs of the Group, including group management andoperational planning.

Group Risk Management Committee
The Group Risk Management Committee consistsof 6 Executive Directors and general managers of
departments/offices in charge (chaired by the President)(also attended by full-time Audit & Supervisory
Committee Members), and shall discuss and reporton matters related to asset portfolio management,compliance, and counter-financial crime management, in
addition to carrying out discussions concerning each of
the risk management systems of the Group as a whole.

Group IT Special Committee
The Group IT Special Committee consists of 6 Executive
Directors and general managers of departments/offices
in charge (chaired by the President) (also attended byfull-time Audit & Supervisory Committee Members), andto strengthen the IT governance system of the groupas a whole, shall discuss matters related to IT strategy,system risk management, and investment in IT systems.

Executive Officers
For quick decision-making of the Board of Directors
and strengthening business execution functions, 21
Executive Officers (including 6 serving concurrently as
Director) are elected and delegated the execution ofbusiness by a resolution of the Board of Directors.

History of Strengthening Corporate Governance
Establishment of the Company

2007
Organization
designBoard ofDirectors(Number of
persons)
External
officers

2008

2009

2010

2011

2012

2013

2014

2015

2016

Company with an audit & supervisory board

13

12

13

2017

2018

2019

2020

2021

2022

2023

Transition to a company with an audit & supervisory committee

14

13

12
(Abolition of the Audit &Supervisory Board)

Audit & Supervisory Board: Three Audit & Supervisory Board Members (including two External Audit & Supervisory Board Members)
Two External Directors (as well as two External Audit & Supervisory Board Members)

11

Four External Directors

Group Risk Management Committee(Introduced Counter-Financial Crime Committee)(ALM/operational risk management/compliance)
Group IT Special Committee

Major
committees

Group Compensation & Nominating Advisory Committee

Group Compensation Advisory Committee
Group Nominating Advisory Committee

Executive
remuneration

Fixed compensation (performance-linked compensation introduced only for the Bank of Fukuoka)

Introduction of performance-linked stock compensation(The Company and its subsidiary banks)

Introduced an executive officer system

Other major
initiatives

Establishment of the Corporate Governance Guidelines
Evaluations of the effectiveness of the Board of Directors

FFG ANNUAL REPORT 2023

54

Strengths to Support Value Creation

Corporate Governance

Board of Directors
Directors

Takashige Shibato

Hisashi Goto

Hiroshi Miyoshi

Director & Chairman(Representative Director)

Director & President(Representative Director)

The Bank of Fukuoka, Ltd.;
Director & Chairman(Representative Director)

The Bank of Fukuoka, Ltd.;
Director & President(Representative Director)

Director &Deputy President(Representative Director)

Hiroyasu Hayashi

Toshimi Nomura

Nobuhiko Yamakawa

Director &Executive Officer

Director & Executive
Officer

Director & Executive
Officer

The Bank of Fukuoka, Ltd.;
Director & Managing
Executive Officer

The Kumamoto Bank, Ltd.;
Director & President(Representative Director)

The Juhachi-Shinwa Bank, Ltd.;
Director & President(Representative Director)

The Bank of Fukuoka, Ltd.;
Director & Deputy President(Representative Director)

Skills Matrix of the Board of Directors

Audit & Supervisory
Committee

Board of Directors

Organization

The Company’s basic stance is to compose its Board of Directors so that their overall knowledge, experience,capabilities, and other qualities are well-balanced in order to realize sustainable growth and medium- to long-term
improvement in corporate value of the Company.
Based on the long-term vision of being “the best regional bank contributing to growth for all stakeholders throughfinance and consulting,” the following matrix indicates the knowledge, experience, capabilities, and other qualities that
the Company believes its Board of Directors should possess, and the knowledge, experience, capabilities, and otherqualities possessed by the Directors:

*1

55

and

Member of eachCommittee*1
Name

GenderPositionTakashige
ShibatoMale

Chairman

Hisashi
Goto

Male

President

HiroshiMiyoshiMale

Deputy President

Hiroyasu
HayashiMale

Director

ToshimiNomuraMale

Director

Nobuhiko
Yamakawa

Male

Director

Masahiko
Fukasawa

Male

Director (External)

Toshiya
KosugiMale

Director (External)

TetsuyaMarutaMale

Audit & Supervisory
Committee Member

Hideo
YamadaMale

Audit & Supervisory
Committee Member (External)

NobukoIshibashi

FemaleAudit & Supervisory
Committee Member (External)

Skills which the Company believes its Board of Directors should possess

Group
Group
MarketHuman
Financial
Legal/
Risk
Consulting/
Nominating Compensation Corporate
operation or capital/
Advisory
Advisory management accounting Compliance management Marketing
management Diversity
Committee Committee

denote the chairperson of each committee and its members, respectively.

IT/DigitalMasahiko Fukasawa

Toshiya Kosugi

Tetsuya Maruta

External Director

External Director

AlixPartners Asia LLC;
Senior Advisor

Truth, Human Science andManagement Organization
Laboratory LLC;
Representative

Director(Audit & Supervisory
Committee Member,full-time)

Hideo Yamada

Nobuko Ishibashi

External Director(Audit & Supervisory
Committee Member)

External Director(Audit & Supervisory
Committee Member)

Graduate School of Businessand Finance, Waseda
University; Professor

Kobe City Law Office;Representative partner lawyer

Ratio of External Directors
Board of Directors

36%

Outside 4 persons
Inside 7 persons

Audit & Supervisory
Committee

67%

Outside 2 persons
Inside 1 person

Group Nominating
Advisory Committee

67%

Outside 4 persons
Inside 2 persons

Group Compensation
Advisory Committee

67%

Outside 4 persons
Inside 2 persons

Reasons for Electing External Directors
Reason for election, expected roles

Attendance in
FY2022Masahiko
Fukasawa

Mr. Masahiko Fukasawa has held positions as the Japan Representative (concurrently served as Chairman of Korea Office) and the Chairman of China
Office of A. T. Kearney. He has served as the Joint Representative of Asian Region and the Joint Representative of Japan from February 2014, Managing
Director from January 2021, and Senior Advisor of AlixPartners Asia, LLC from June 2023. As such, he possesses extensive practical experience andspecialized knowledge in consulting on management strategy and business revitalization of a wide variety of companies. He has been elected as External
Director in the expectation that he will supervise Directors and management of the Company from an independent and objective standpoint while utilizing
his extensive practical experience and insight accumulated so far to provide opinions, guidance, and advice to our top management in a timely andappropriate manner, thereby contributing to the medium- to long-term improvement of the corporate value of the Group.

Board of Directors
11/11 meetings

Toshiya
KosugiMr. Toshiya Kosugi has held managerial positions of personnel and general affairs divisions at Uniden Corp. and Apple Inc. and other major domestic and foreigncompanies. He currently serves as Representative Partner of Truth, Human Science & Management Organization Laboratory LLC. He also serves as professor ata graduate school. As such, he possesses extensive practical experience and specialized knowledge in organizational reform, development, and managementof human resources. He has been elected as External Director in the expectation that he will supervise Directors and management of the Company from an
independent and objective standpoint while utilizing his extensive practical experience and insight accumulated so far to provide opinions, guidance, and advice
to our top management in a timely and appropriate manner, thereby contributing to the medium- to long-term improvement of the corporate value of the Group.

Board of Directors
11/11 meetings

Hideo
YamadaAlthough Mr. Hideo Yamada has never been directly involved in the management of a corporation, he possesses extensive practical experience andadvanced capabilities and insight in the corporate management strategies, finance and accounting fields gained through his extensive career including
Professor of Graduate School of Business and Finance of Waseda University.
He has been elected as External Director serving as an Audit & Supervisory Committee Member in the expectation that he is able to provide valuableadvice to the Board of Directors and conduct objective and neutral audits of the Company to ensure legal compliance and appropriateness of businessexecutions of the Company by utilizing his extensive practical experience and professional insight, thereby contributing to the establishment of a quality
corporate governance structure that responds to social trust.

Board of Directors
11/11 meetings
Audit & Supervisory
Committee
12/12 meetings

NobukoIshibashi

Although Ms. Nobuko Ishibashi has never been directly involved in the management of a corporation, she possesses extensive practical experience andadvanced capabilities and insight in legal affairs in general as an attorney.
She has been elected as External Director serving as an Audit & Supervisory Committee Member in the expectation that she is able to provide valuableadvice to the Board of Directors and conduct objective and neutral audits of the Company to ensure legal compliance and appropriateness of businessexecutions of the Company by utilizing her extensive practical experience and professional insight, thereby contributing to the establishment of a quality
corporate governance structure that responds to social trust.

Board of Directors
11/11 meetings
Audit & Supervisory
Committee
12/12 meetings

Name

Independent
Director

FFG ANNUAL REPORT 2023

56

Strengths to Support Value Creation

Corporate GovernanceDirector Remuneration
The Company has introduced a performance-linked compensation plan for its Directors (excluding Directors serving as
Audit & Supervisory Committee Members, External Directors, and Directors who are non-residents in Japan). The planseeks to clarify the link between Directors’ remuneration and the Group’s performance and shareholder value, raise themotivation of Directors to contribute to the medium- to long-term improvement of business performance and the growthof corporate value, and have Directors share with all shareholders the risks and returns of share price ﬂuctuations.

Policy on Determining Remuneration Amounts and Calculation Methods(resolution at the Board of Directors Meeting held on June, 2022)[Basic policies]
Compensation for Directors (excluding Directors serving as Audit & Supervisory Committee Members) of
the Company shall be determined based on the “Policies on Determining Compensation for Directors,etc.” set forth in Article 10 of the Corporate Governance Guidelines within the scope of the total annualcompensation for all Directors resolved at the Annual Shareholders Meeting.
—Policies on Determining Compensation for Directors, etc.—(1) A system of Compensation for Directors shall be set appropriately so that it serves as a healthy
incentive for Directors and Executive Officers, which would eventually lead to the sustainable growth of
the Group.
(2) Compensation for Directors shall be determined in overall consideration of the roles and responsibilitiesof each Director and Executive Officer, in addition to considering the Company’s mid to long-termbusiness performance and economic and social conditions.
(3) The Group Compensation Advisory Committee shall, in response to the consultation from the Board of
Directors, deliberate on Compensation for Directors based on the policies set forth in this Article, andthe Board of Directors shall make final decisions with full respect for the Committee’s deliberation.
[Specific policies based on basic policies](1) P olicy on determining amounts of individual compensation, etc. (excluding performance-linked
compensation, etc. and non-monetary compensation, etc.), and calculation methods (including policy
on determining the timing or conditions for granting compensation)· Individual base compensation shall be paid monthly with a fixed amount.
· The Group Compensation Advisory Committee shall, in response to the consultation from theBoard of Directors, deliberate on the base compensation, based on the “Policies on Determining
Compensation for Directors, etc.” The Board of Directors shall respect the Committee’s deliberationand determine the officer compensation system based on the Policies on Determining Compensation
for Directors, etc., and the base compensation is paid pursuant to the system.
(2) Policy on determining the details of performance-linked compensation, etc. and non-monetarycompensation, etc. and calculation methods of their amounts and number of units (including policy on
determining the timing or conditions for granting compensation)· From the standpoint of clarifying management responsibility and providing an incentive to improve
corporate value, the Company has decided to pay its Directors (excluding External Directors) stockcompensation, which is a performance-linked compensation, in addition to base compensation.
At a certain time each year, eligible Directors shall be granted points whose amounts are linked to
the level of net income attributable to owners of parent posted by the Company. The Directors shallbe delivered Company shares, etc. upon retiring from the positions of both the Company’s Director(including Director serving as an Audit & Supervisory Committee Member) and Executive Officer, andthe number of shares to be delivered shall be determined based on the cumulative number of points
granted during their terms in office.*1· The Group Compensation Advisory Committee shall, in response to the consultation from the Boardof Directors, deliberate on the non-monetary compensation, which is the subject performancelinked compensation, based on the “Policies on Determining Compensation for Directors, etc.” The
Board of Directors shall pay the compensation in accordance with the officer compensation system
decided with full respect for the Committee’s deliberation.
(3) Policy on determining the ratio of amounts of fixed compensation, performance-linked compensation,etc., and non-monetary compensation, etc. to amounts of individual compensation, etc.
· Individual compensation paid to the Directors shall be the sum of base compensation and stockcompensation, which is a performance-linked compensation. The compensation system including
provision on the ratio of base compensation to stock compensation, a performance-linked
compensation, in individual compensation, etc. shall be set appropriately based on the “Policies on
Determining Compensation for Directors, etc.” so that the system functions as a healthy incentive
toward sustainable growth.

57

(4) Methods for determining the details of individual compensation, etc., for Directors (when delegating
Directors all or part of the determination of the details of individual compensation, etc., their names,
positions, responsibilities, and the details of the authority to be delegated shall be included)· The Group Compensation Advisory Committee shall, in response to the consultation from the Boardof Directors, deliberate on the details of individual compensation, etc. for Directors, based on the“Policies on Determining Compensation for Directors, etc.” The Board of Directors shall respect
the Committee’s deliberation and determine the officer compensation system, and the details of
individual compensation, etc. for Directors based on the system.
· Of the individual compensation, etc. for Directors, the base compensation for External Directors
shall also be deliberated by the Group Compensation Advisory Committee in response to theconsultation from the Board of Directors, and based on the “Policies on Determining Compensation
for Directors, etc.” However, the Board of Directors shall delegate to the Chairman the responsibility
to make final decisions on the specific details of the individual compensation, etc. with full respect for
the Committee’s deliberation, and the Chairman who has received such delegation shall make final
decisions.
*1 In the event that certain conditions (such as misconduct) stipulated by the Company are met, or in similar cases, the Company will not deliver shares, etc.
of the Company, or will require the return of the amount equivalent to the delivery of shares, etc. already delivered (malus clause and clawback clause).

In terms of compensation for the Company’s Directors (excluding Directors serving as Audit & Supervisory Committee
Members), the maximum amount of total annual remuneration for all Directors is set based on resolution by ashareholders meeting. At the 15th Annual Shareholders Meeting held on June 29, 2022, it was resolved that (1) the
total annual remuneration be within 220 million yen in monetary compensation (including up to 24 million yen annuallyfor External Directors), and (2) the amount of money to be contributed to the stock compensation program be within 80
million yen per fiscal year.
In terms of compensation for the Company’s Directors serving as Audit & Supervisory Committee Members, themaximum amount of total monthly remuneration for all such Directors is set based on resolution by a shareholders
meeting. At the 13th Annual Shareholders Meeting held on June 26, 2020, it was resolved that the total monthly
remuneration be within 6 million yen (within 72 million yen annualized).
The Group Compensation Advisory Committee, in response to the consultation from the Board of Directors,
deliberates on individual compensation for Directors (excluding Directors serving as Audit & Supervisory Committee
Members) based on the “Policies on Determining Compensation for Directors, etc.”, and the Board of Directors makes
the final decision with full respect for the Committee’s deliberation. The individual compensation for Directors serving as
Audit & Supervisory Committee Members is determined based on discussions by the Audit & Supervisory Committee.

Evaluation of Effectiveness of the Board of Directors in FY2022 (Summary)
The Board of Directors of the Company analyzes and evaluates the effectiveness of the Board as a whole on an annual
basis, and regularly discloses the summary of the evaluation.
The method and results of evaluation of the effectiveness of the Board of Directors as a whole for FY2022 are as follows.
[Evaluation method]
The evaluation of the Board of Directors was implemented by following the method (procedures) described below.
i)	Conducted a questionnaire to evaluate the effectiveness of the Board of Directors with Directors and Executive
Officers;ii)	In addition to i), conducted interviews with External Directors to collect a wider range of opinions; andiii)	Based on the results of i) and ii), analyzed and evaluated the effectiveness of the Board of Directors as a whole, andimplemented sharing of awareness on issues, discussions on improvement measures, etc.
The evaluation method in general and the details of the questionnaire were decided based on a review from theobjective perspective of external experts.

FFG ANNUAL REPORT 2023

58

Strengths to Support Value Creation

Corporate Governance[Evaluation results (summary)]
1. Overall evaluation· We verified that the Board of Directors was properly operated pursuant to the Corporate Governance Guidelines and that theeffectiveness of the Board of Directors as a whole is ensured.
2. Results of previous year’s evaluation and subsequent actions· Through the previous year’s evaluation, participants shared their perspectives regarding efforts targeting further improvements indiscussion quality, and the development of an approach toward non-traditional business initiatives.
· In accordance with the above, the Company has introduced a number of measures, including the explanations of important matters
not subject to the agenda of the Board of Directors to External Directors and efforts targeting the enhancement of status reports
regarding new businesses undertaken by subsidiary banks.
3. Awareness of issues shared through the evaluation and the trajectory of future response· Through this evaluation, the Company confirmed that as a result of its implementation of the initiatives described in 2 above,
discussion quality has improved while also ensuring the application of External Directors’ expertise. The evaluation also revealed thatthrough these initiatives, the Board of Directors is now in a position to appropriately assess new business opportunities.
· Participants also shared awareness of the need to facilitate further improvement of corporate governance by providing moredetailed information to External Directors. Specifically, the Company confirmed that the details of internal discussions held prior tomeetings of the Board of Directors should be shared with External Directors and verified that External Directors should have greater
opportunities to visit business sites and exchange opinions with employees and officers outside the Board of Directors meetings.
· The Company also confirmed the need to enhance the Group’s internal discussions and reporting on new businesses, including
those conducted by non-bank subsidiaries. Moving forward, the Company will enhance the Group’s medium- and long-term
corporate value by strengthening its ability to proactively tackle new areas of business while appropriately identifying risks.

FY2021 evaluation
results

FY2022
initiatives(Awareness of issues)∙ Further improvement in
the quality of discussions∙ Development of an
approach towardbusinesses that are notextensions of theexisting ones

FY2022 evaluation results(Evaluation)∙ Improving explanations
to External Directors(on important matters
not subject to theagenda of the Board of
Directors)∙ Enhancement of status
reports regarding new
business undertaken
by subsidiary banks∙ Discussion quality has
improved while also
ensuring the application ofExternal Directors’
expertise∙ The Board of Directors is
better equipped toappropriately assess new
business opportunities(Awareness of issues)(Direction of initiatives)∙ Provision of more detailed
information to External
Directors• For External Directors
1) Sharing the status of
discussions up to thesubmission of agendas
2) Provision of greater opportunities to visit business sites
and exchange opinions with
employees and officers
outside the Board of
Directors meetings∙ Enhancement of theGroup’s internal discussions and reporting on
new businesses (including
those conducted by
non-banking subsidiaries)• Strengthening of the structure
to take on the challenge of new
businesses while appropriately
identifying risks

59Specific Issues Considered by the Board of Directors (FY2022)
Matters related to the Board of Directors, etc.

Matters related to the Group’s financial results· Selection of Representative Directors and Managing Directors· Finalization of financial results, payment of dividends· Selection of Executive Officers and selection of Managing
Executive Officers· Election of members of the Group Compensation Advisory
Committee and the Group Nominating Advisory Committee· Introduction of performance-linked compensation plan
including stock compensation· Evaluations of the effectiveness of the Board of Directors

 atters related to the Group’s management strateM
gies and business execution· Formulation of the 7th Mid-Term Management Plan
· Formulation of business plans· Progress of business plans

Matters related to the Group’s internal audit· Formulation of audit plans· Status of implementation of audits

Matters related to the Group’s risk management· Formulation of risk management programs· Selection of top risks· Status of risk management· Status of self-assessments, results of amortization/allowance for loan losses, and nonperforming loans disclosed
under the Financial Reconstruction Law· Matters related to acquisition of own shares· Matters related to business integration with the Fukuoka
Chuo Bank, Ltd.
· Status of business at Minna Bank

Matters related to the Group’s compliance· Formulation of Compliance Program· Status of initiatives of digital transformation (DX) strategy· Progress of Compliance Program· Progress of initiatives to revitalize the economy of Nagasaki
prefecture· Responses to money laundering, etc.

· Regular reviewing of retention of shares for cross-shareholding investments· Strengthening of management system for the whistleblowing system

For more information on the Group’s corporate governance, please refer to the Corporate
Governance Report available on the Company’s website.
https://www.fukuoka-fg.com/en/company/governance.html

FFG ANNUAL REPORT 2023

60

Strengths to Support Value Creation

Risk Management

Basic Views
While business opportunities expanded for banks due to changes in society such as evolution of technology and growing
awareness of SDGs, they have caused the risks that banks face to become more diverse and complex. In this environment, risk management, which identifies risks, understands and analyses them, and implements appropriate control
measures, has become increasingly important.
FFG, in so far as is possible, applies a uniform yardstick to quantify the diverse risks that arise in the pursuit of its business and, based on comprehensive understanding, aims for management that strikes a balance between maintaining
soundness and raising profitability. This is implemented groupwide through the FFG’s risk management measures.

The Risk Management System for FFG and the Group’s Banks
FFG has established the Group Risk Management Committee, comprising the holding company and Group banks, tomonitor the various risks that the Group faces and to deliberate on risk management measures and policies attuned tochanges in the internal and external environments.
In addition, Group banks have founded similar risk management systems that carry out comprehensive risk management for the Group in close cooperation with FFG.
Subsidiary Bank’s Risk Management Framework (e.g. The Bank of Fukuoka)

Customer Protection, etc.
Counter-Financial Crime

Quality Administration Division
Administration of Counter-Financial Crime

Inappropriate Incidents

CounterFinancial Crime
Committee

Quality Administration Division
Administration of
Inappropriate Incidents, etc.

Crime and Disaster Prevention, etc.

ALM
Committee

Corporate Planning Division
Administration of Crisis
Management and Response

Operational Risk
Management
Committee

Risk Administration
DivisionManagement
Conferences, etc.
Reporting andConsultation from
Each Department

Administration of
Capital Strategy

Legal Compliance

Instructions on
Management
Policy, etc.

Credit Risk

Internal Audits
FFG Audit DivisionMarket Risk
Liquidity Risk
System Risk

Main Departments

Corporate Planning
Division

Capital Management

Operational Risk Management

Administration of Risks

Asset Assessment

Administrationof Group-Level
Risk
Management

Administrative
Risk
Tangible
Asset Risk
Labor Risk

Reporting on Risk
Management
Information
Consulting on
Matters Related
to RiskManagement

Legal Risk
Reputation
Risk

Compliance
Committee[Management Area]

Quality Administration Division
Administration of Legal Compliance

Legal Compliance

Quality Administration Division

Customer Protection, etc.

Administration of Customer Protection, etc.

Counter-Financial Crime

Quality Administration Division

Inappropriate Incidents

Administration of Counter-Financial Crime
CounterFinancial Crime
Committee

Crime and Disaster Prevention, etc.

Quality Administration Division

Asset Assessment

Administration of Inappropriate Incidents, etc.
Corporate Planning Division

ALM
Committee

Administration of Crisis
Management and Response

Operational Risk
Management
Committee

Loan Administration Division
Administration of Self-Assessment
and Allowance for Depreciation
Risk Management Division
Administration of Risks
Corporate Planning Division

Management
Conferences, etc.
Reporting andConsultation from
Each Department
Subsidiary Bank’s Reporting
Audit Division

Administration of Capital Strategy

Internal Audits
FFG Audit Division

Capital Management
Credit Risk
Market Risk
Liquidity Risk
System Risk

Main Departments

Quality Administration Division
Administration of Customer Protection, etc.

Subsidiary
Bank’s[Committees][Supervising Division]Operational Risk Management

Legal Compliance[Reporting to and Consultingwith Management]

Legal Compliance

Quality Administration Division
Administration of Legal ComplianceComprehensive Risk Management

Board of Directors

Compliance
Committee[Management Area]

Board of Directors

Group Risk
Management
Committee[Supervising Division]Comprehensive Risk Management

FFG’s Risk Management Framework[Reporting to and Consultingwith Management]

Administrative
Risk
Tangible
Asset Risk
Labor Risk
Legal Risk
Reputation
Risk

Amid a rapidly changing social environment and increasing complexity ofrisks, we need to not only engage in preventive risk management but also
strengthen resilience to respond flexibly to unexpected risks. Through61

Yuki Umezu

appropriate risk management, we, the Risk Administration Division hopes to

FFG Risk
Administration
Divisionfurther growth of FFG.

support each department and branch in taking on challenges and facilitate

Risk Appetite Framework
Financial institutions receive profits in exchange forGroup Management
Principles

taking on various risks that arise from businesses,

1etc., including credit risk on loans and market risk on

2 Sustainability Policy

securities investment.

3 Long-term Vision 2030

FFG defines the types and amount of risk taken on

Risk appetite management

voluntarily with the aim of achieving management goals
as “Risk appetite.” With this risk appetite as the starting

5

9

point, we introduced the “Risk Appetite Framework” toconduct business management and risk management.
Through establishing the Risk Appetite Framework,
our stance towards risk-taking is clarified, which enables
FFG to pursue more opportunities for profit, and toConnect
organicallyManagementplans

6 Risk Appetite Policy
7 Policy on allowance

for loan losses
Reflection

Strategy risk
assessment

Mid-Term
Assessment Risk capital allocation
Management Plan Assessment
Reflection
8
10
Risk limits
Business plan
Stress tests
Verification
Verification
Verification

11 Risk indicator management

Monitoring of actual results
Utilization

conduct more appropriate risk control.

4 Risk culture

Securing soundness

Balance

Raising profitability

Risk Appetite Policy
FFG specifies strategies regarding risk-taking in the risk

There are seven risk categories in the risk appetite

appetite policy and defines “risks to take and risks topolicy comprising “Compliance risk” and “ESG risk”

avoid.”

added to the five* comprehensive risk management

The risk appetite policy consists of “Fundamental
principle,” which specifies the fundamental principle
for risk-taking in each risk category, and “Risk Appetite(qualitative and quantitative),” which specifies specificrisk-taking methods and the quantitative levels thereof.

categories.
*R efers to: 1) Comprehensive risk, 2) Market risk, 3) Credit risk,
4) Liquidity risk, 5) Operational risk
For more information on the comprehensive risk management
framework and each risk category, please refer to “Risk Management”
section of this report.

Policy on Allowance for Loan Losses
FFG takes out allowances in a forward-looking manner

economic fluctuations, and leads to stable and appropriate(“forward-looking allowances”) by quantifying future risks

financial intermediary functions including cash management

using wide range of information on the current and future

support.

circumstances and reflecting this on our allowance for

FFG specifically estimates “forward-looking allow-

loan losses while taking our loan policies and portfolio

ances” by considering the need to group allowances

into account.

based on criteria such as industry types and company

A “forward-looking allowance” strengthens our

size while taking the analysis of our credit portfolio into

preparedness for future uncertainty by calculating

consideration. Next, FFG analyzes the possibility of risk

allowances based on economic predictions, which allows

events that might aggravate the domestic or interna-

FFG to operate loans without being too impacted bytional economic environment, and considers the future

FFG ANNUAL REPORT 2023

62

Strengths to Support Value Creation

Risk Management

economic scenario. Under the “Policy on Allowance forhas established a structure to maintain the soundness

Loan Losses,” FFG reviews the necessity for groupingof capital and allowance together to cover latent credit

and the economic scenario every half year, in principle.

risks that may actualize in the event of future economic

The “Policy on Allowance for Loan Losses” has been

deterioration.

formulated within the Risk Appetite Framework, and FFG
Stress Tests
Amid drastic changes in the external environment

reflect deteriorating risks including credit risk andsurrounding financial institutions, FFG positions

market risk that may arise in the future, FFG verifies

stress tests as an effective method of evaluating thethe appropriateness of its management plans and risksustainability of its business model.

appetite. Through scenarios that refer to extremely large

FFG conducts multiple types of stress tests, striving

market fluctuations, etc. in the past, FFG verifies theto strengthen its responsiveness to each type of risk.

adequacy of regulatory capital and economic capitalSpecifically, through multiple stress scenarios that

under stress situations.

Strategy Risk Assessment
In the business environment surrounding financial

changes affecting financial and business stability,”

institutions changing acceleratingly due to the declining

and assesses strategy risks under the Risk Appetite

birthrate and aging population, and new entrants fromFramework. Specifically, strategy risks are classified andother sectors fueled by digitalization, FFG is expanding

assessed taking a certain method, and in particular,

new initiatives such as digital transformation (DX) as well,those that are quantifiable are reflected in the capital

therefore strategy risks are rising in importance.

adequacy assessment.

FFG defines strategy risk as a “risk of businessmisjudgments and lack of adaptability to environmental
Risk Indicator Management
Among potentially significant risks identified, FFG

The aims of risk indicator management are: “to swiftly

conducts risk indicator management on risks for which

recognize a heightened level of a potentially significant

quantitative analysis is possible and that have a material

risk for FFG” and “to discuss and implement specificimpact on FFG. Specifically, utilizing risk heat maps,

countermeasures at an early stage for risks where theetc. which comprise various quantitative indicators

possibility of actualization is high and the impact is large,such as production and employment-related indicesso as to keep the impact on FFG to a minimum.”and expected inflation rate, FFG conducts initiatives tocapture indicators of risk actualization in the future.

63

Top Risks
The Group defines risks that are particularly important for management as “top risks,” which are selected by the Board of
Directors. We share awareness regarding top risks within the Group, and take measures to reduce their probability andimpact. By doing so, we are working to strengthen risk governance.

Top Risks

Examples of risk events

Deterioration of our credit
portfolio• Credit cost increase that exceeds forecasts, due to the deterioration of businessperformance of customers caused by prolonged resource price rises anddepreciation of yen, labor shortages, and the start of full-fledged repayment ofeffectively no-interest loans

Rapid development of digitalsociety• Damage to our existing earnings base due to the advancement of technology
or the emergence of innovative financial services run by platformers and otherindustries

System failure and cybersecurity• Loss of credibility due to large-scale system failures which disadvantage business
partners• Loss of credibility due to customer information being leaked or continuity ofoperations being hindered because of a cyberattack

Risks associated with growthstrategies• Difficulty in securing the quality and quantity of human resources required to carryout growth strategies and advanced/specialized operations• Increase in losses due to errors assessing the success or failure of business
investment in new strategies and the decision to continue investment

Destabilization of Japaneseand international financial
markets• Decline of net interest income due to the continued low interest policy in Japan• Increased valuation losses due to extreme market fluctuations, and contraction of
portfolio size and future earnings associated with the treatment of losses

Risks related to climatechange• Decrease in corporate value of the Company and customers due to the delay inclimate change-related disclosure and decarbonization support for customers• Damage to the Company, officers and employees, and business partners due tonatural disasters such as heavy rains.

Acceleration of depopulation,
shrinking birthrate, and aging
of society in provincial areas• Decreased business scale due to the decline of the regional economy and theincrease in closure of customers’ businesses as population decline and aging
progress at a faster pace than expected in business areas of the Group

Compliance risks• Loss of credibility due to acts that violate laws and regulations or deviate fromsocial norms• Loss of credibility resulting from the Group’s products being misused for financial
crimes due to an inadequate management system for money laundering, etc.

External risks that can change
assumptions regarding thesocial environment• Significant impact on management strategy resulting from significant changes
in the social environment and business assumptions due to the division of theinternational community associated with the emergence of geopolitical risks

Liquidity risk in Japan andoverseas• Tight yen-based cash flows due to an outflow of deposits larger and happening inshorter period of time than expected• Tight foreign-currency-based cash flows due to a decline of net interest income
and a decrease in procurement resulting from elevated overseas interest rates
and increased procurement premiums

FFG ANNUAL REPORT 2023

64

Strengths to Support Value Creation

Risk Management

Business Continuity Structure
Amid increases in natural disasters, large-scale

policies, and other matters to minimize the impact ofcyberattacks, and other incidents that are difficult todisasters and accidents and enable recovery from a

predict and have a significant impact on the businessstate of crisis. In case of an emergency, the Generalcontinuity of financial institutions, FFG has been working

Response Headquarters, headed by the officer in charge

to strengthen and enhance its business continuityof Corporate Planning Division, will be set up to takestructure as a company charged with the mission ofnecessary measures. Based on the Crisis Management

providing stable financial services.

Regulations, emergency drills are conducted regularly, at

FFG has established the Crisis Management

least once a year.

Regulations, which set forth the structure, response

Cyber Security Initiatives
Cyber Security Management Structure
In light of the rising materiality of cyber security as digitalon trends in cyberattack methods, vulnerability, andtransformation (DX) overhauls business models andother security-related matters from security vendors

remote work and other workstyle reforms progress,and external institutions, and appropriately manages

FFG has selected cyber security as one of the top risks

how countermeasures are taken. We also operate

and has been working to strengthen its cyber security

the cross-divisional FFG Computer Security Incident

management system.

R e s p o n s e Te a m ( F F G - C S I R T ) , w i t h t h e C y b e r

With regard to system risk management, which is

Security Group serving as the secretariat. This leads

the foundation for cyber security management, we are

to seamless cooperation between divisions when aadministering and controlling the risk appropriately bycyberattack occurs, and in turn enables an appropriate

building an adequate risk management structure within

initial response and recovery efforts from the user’s

the framework of operational risk management. For more

perspective. At normal times, we share security

information, see pages 28 to 30 of FFG Disclosure 2023

information and regularly conduct emergency drills.

“Financial Data” (in Japanese) on our website.

Activities that enhance the effectiveness of security

To address cyberattack risks that are intensifying

measures are escalated to the Group IT Special

in recent years, we have set up the Cyber Security

Committee, where reports are made to the management

Group, which specializes in cyber security, in the ITteam each year.

Administration Division. The Group collects information
Response to Incidents
Through self-analysis and third-party assessment

security measures against cyberattacks that infiltrate us,

based on the cyber security framework, we discussand continuing to conduct practical incident response

security measures necessary for minimizing damage anddrills (TLPT).

improve resilience (the ability to recover quickly), thereby*Zero trust

strengthening the capability to respond to incidents fromvarious angles.
Our plans for FY2023 include rolling out zero trust*security infrastructure at all branches, strengthening65

A system where communications are never trusted implicitly and all ofthem are authenticated and authorized each time

Education and Training
To enhance the overall cyber security literacy of officers and employees, FFG engages in education and training activities
constantly, targeting all officers, employees, and staff including those of affiliated companies. Such activities include
information security training sessions at workplace, distribution of security handbooks, suspicious email drills, and sharing of
the latest security incidents.
In addition, we, especially FFG-CSIRT members, actively participate in various other activities, such as drills andexercises organized by the National center of Incident readiness and Strategy for Cybersecurity and the Financial
Services Agency.

Cyber Security Management System(Organizational Mission)

CIO
ReportingInstructions

Management TeamFFG Board of Directors/Group Management Conference/Group IT Special Committee

Seamless cooperation between divisions

IT Administration Division
Cyber Security Group[Roles]Discuss Group IT strategy, systemrisk management, and investment
in IT systems to strengthen the IT
governance system

FFG-CSIRTFFG Computer Security Incident Response Team (FFG-CSIRT)

Corporate Planning
Division
Quality Administration
Division
Sales Administration
DivisionGroup IT Special Committee

Operations
Administration Division
DX Promotion
Headquarters
Risk Administration
Division

Concentration and centralized management of security-related information

Subsidiary banks

Security vendors

Financials ISAC Japan

Affiliated companies

CCoE*1

SOC*2

Established in February 2015
[Head of Task Force]
General Manager of FFG IT
Administration Division[Roles]
Initial response to cyberattacks
Information sharing and emergency
drills at normal times

Cyber Security Group, IT
Administration Division
Established in April 2017
[Roles]Planning, promotion, andmanagement of security measures
Secretariat of FFG-CSIRT*1 CCoE（Cloud Center of Excellence）
An organization that has knowledge on cloud systems and supports safe cloud use*2 SOC（Security Operation Center）
An organization that monitors information systems, detects and analyzes cyberattacks, and advises on countermeasures

FFG ANNUAL REPORT 2023

66

Strengths to Support Value Creation

Compliance Measures

Basic Views
The Group believes that “compliance” is one of the most important management issues for financial institutions, for whichtrust is the greatest asset. We are working to establish corporate ethics and enhance and strengthen our compliancesystem.
The Group and all officers and employees shall comply with the letter and the spirit of our Compliance Charter*, whichshows the compliance-related basic values, spirit, and code of conduct in common among Group companies, and conduct daily business with high ethical standards.
*Our Compliance Charter is posted on our company website.
https://www.fukuoka-fg.com/en/company/compliance.html

Compliance Framework
We have established the position of Chief Complianceother members, who discuss and report on important

Officer (CCO) as the officer in charge of building and op-

matters related to compliance, and periodically evaluate

erating compliance systems for the entire Group, as welland check the progress of the Compliance Program.
Each company in the Group has also established aas the Quality Administration Division Compliance Group

compliance administration division, and they are working

as the department that oversees compliance.
Furthermore, we have established the Compliance
Committee, comprised of the President, Directors, andtogether with the Company to enhance and strengthen
the compliance system throughout the Group.

(As of October 2, 2023)

Board of Directors
Group Risk Management Committee(Compliance Committee)(Counter-Financial Crime Committee)
Chief Compliance Officer (CCO)DX Promotion
Headquarters

Solution Business
Headquarters

Internal Audit Division

Credit Supervision
Division

Risk Administration
Division

IT Administration
Division

Operations
Administration Division

Sales Administration
Division

Treasury andInvestment Division

General Affairs Division

Quality Administration
Division

Human Resources
Administration DivisionCorporate Planning
Division

Executive Secretariat(Compliance administration divisions)
Quality Administration Division Compliance Group

Subsidiaries

Subsidiaries

67

We embrace changes in the social environment, looking for issues
FFG should address as an organization. What we notice are sharedwithin the Group to improve internal systems and take necessary
measures. For example, guidelines have been established for theuse of generative AI, in light of the spread of its use by businesses.

Kaho Hashimoto
Compliance GroupFFG Quality Administration
Division

Initiatives to Enhance and Strengthen Our Compliance System
The Group has established a Compliance Charter, as well as a Compliance Manual that compiles our ethical provisions,in-house regulations, and laws and other pertinent ordinances. We also establish a Compliance Program for each fiscal
year as a practical plan for priority issues and action plans related to compliance.
For the current fiscal year, we aim to further raise the level of our organizational culture that emphasizes compliance, as
well as to enhance the anti-money laundering management system and the customer protection management structure.
We are implementing various initiatives such as sending out messages from management and holding regular workplace
training sessions. In addition, we are committed to measures to facilitate communication and initiatives related to psychological safety, so that employees can express their frank opinions freely and openly.

Whistleblowing System and Other Initiatives for the Early Discovery and Correction of Misconduct
FFG has set up a whistleblowing system called the Whistleblowing Hotline for the early detection and correction of acts
such as violations of laws and ordinances, or violations of employment rules. Not only an internal contact point, but also
an external contact point in a law office has been established in order to ensure confidentiality.
In addition, we have established a variety of systems that allow employees to report and consult with the Human Resources department or supervisors about anything so that troubles, concerns, etc. can be gathered more broadly andaddressed early. In order to promote awareness of these systems, we have placed posters with a focus on the user’s
perspective throughout the company. Also, by making it possible for officers and employees to check contact informationfrom their smartphones, we convey the sense of security and the convenience of our reporting and consultation systems.

Anti-bribery and Anti-corruption Initiatives
With regard to our efforts to prevent bribery and corruption, we have clearly stated FFG’s approach and specific responses in the Compliance Manual, and we are thoroughly spreading this knowledge to all officers and employees.

FFG ANNUAL REPORT 2023

68

Strengths to Support Value Creation

Compliance Measures

Anti-Money Laundering and Countering the Financing of Terrorism
In recent years, a variety of financial crimes such as fraud, illegal cash withdrawal, money laundering and financing of terrorism have occurred, and their schemes and techniques have become more complex and sophisticated. FFG and its
Group companies have established the Policy on Anti-Money Laundering and Countering the Financing of Terrorism tofight such financial crimes, and are taking various measures to protect customers’ assets.

<Outline of FFG’s Measures for Anti-Money Laundering and Countering the Financing of Terrorism>
Global regulations

National regulations and systems

FFG’s countermeasures•Act on Prevention of Transfer of
Criminal Proceeds•National Risk Assessment of Money
Laundering and Terrorist Financing•FSA Guidelines for Anti-Money

Risk Assessment Report
Risk identification
Risk assessment
Risk mitigation measures

Worldwide
International institutions
FATF
Basel Committee on Banking
Supervision, etc.

••

Laundering and Combating the
Financing of Terrorism, etc.

•••

FFG’s Main Initiatives
Establishment of the Management System
Positioning the prevention of money laundering and other financial crimes as one of the most critical issues for business management, FFG has established the Counter-Financial Crime Group under the Quality Administration Division
as an administration department and works to ensure uncompromising verification and sophistication of the management system to maintain and improve public trust.
FFG regularly holds Counter-Financial Crime Committee meetings attended by the management and heads of eachdepartment in order to discuss and report measures and cases. Understanding that financial crimes such as money
laundering can pose a material risk to the business, the management and heads of each department proactively takethe initiative and require all employees to fully understand the countermeasures.
Revision of the Risk Assessment Report
FFG identifies and assesses the risks associated with products and services that FFG and its Group companies offer,and in order to reduce such risks, we have established a written Risk Assessment Report by a Specified Business Operator, etc. (Risk Assessment Report), which is revised at least once a year.
Employee Training
In order to build a system that prevents use by criminal organizations, we conduct training and comprehension tests. We arealso striving to improve the awareness and sensitivity of all employees to financial crimes, such as by regularly disseminating
methods and points to be aware of regarding financial crimes, which are becoming more sophisticated and complex.
The Group reviews the status of compliance with measures to prevent money laundering and other financial crimes,
and based on the results, continuously improves the system.

Efforts to Cut Off Relationships with Anti-Social Forces
In order to maintain public trust in financial institutions and fulfill our social responsibilities, the Group is mobilizing its entire organization to cut off all relationships with anti-social forces that threaten the order and safety of civil society.
Specifically, we are working to prevent transactions with anti-social forces by introducing criminal organization exclusion clauses into our contracts and transaction agreements. In addition, if the other party is found to be an anti-social
force after the start of a transaction, we will cooperate with external specialized agencies such as the police and lawyers
to take measures to eliminate transactions and cut off relationships.

69Internal Audit

Basic Views
To address risks surrounding the Group in a timely and appropriate manner and sustainably improve corporate value,
FFG works to enhance and strengthen the internal control system. To this end, the Internal Audit Division, which is independent of business execution departments, conducts effective internal audits in accordance with the scale and characteristics of the business, applicable laws and regulations, and risks.

Implementation Systems for Internal Audits
As part of its management and administration, FFG’s

For more effective internal audits, the Internal Audit Divi-Internal Audit Division standardizes audit criteria andsion also exchanges information regularly and cooperates

methods across the board, and audits FFG and its sub-closely with Representative Directors, Audit & Supervisorysidiaries, including Group banks.

Committee Members, the Accounting Auditor, and depart-As the Internal Audit Division consists of secondees
from Group banks, FFG has a system in place where it
exercises control as a holding company and conducts audits based on the situation and changes in each company.
The Internal Audit Division conducts audits basedments in charge of internal control and risk management.
Internal Audit Structure
General Meeting of
Shareholders

Board of Directors

Audit & Supervisory
Committee
Reporting/Resolution

on internal audit policies as well as audit plans for eachfiscal year which are approved by the Board of Directors. Important matters, such as key audit results, are

Headquarters of the Company

reported regularly to the Board of Directors and the Audit

Bank of Fukuoka, Kumamoto Bank, Juhachi-Shinwa Bank
Fukuoka Chuo Bank, Minna Bank

& Supervisory Committee of FFG and subsidiary banks,
as well as to the Group Management Conference.

ReportingGroup Management
Conference
Reporting/Consultation

Internal
audit

Internal Audit
Division

Subsidiaries

Streamlining and Improving Internal Audits
The Internal Audit Division conducts risk-based audits so audit resources may be allocated effectively and efficiently torisks associated with changes in the internal and external environments or the transformation of business models. In addition, we take advantage of external institutions for audits that involve issues that are cutting-edge or require high levelsof expertise.
To maintain and improve audit quality, regular internal assessment takes place each fiscal year, and external thirdparty assessment takes place every five years. We thus constantly work toward more advanced internal audits. To raise
personal capable of auditing, we work to enhance their skills and knowledge by offering internal training sessions and opportunities to attend external seminars, as well as encouraging them to acquire specialized qualifications.

Interviews about Organizational Culture
The Internal Audit Division interviews each sales office and department about organizational culture to verify whether asound organizational culture is developed.
The interviews about organizational culture are held not only to prevent misconducts and scandals but also to review
whether the culture encourages a future-oriented mindset and motivates employees to take on challenges. By feedingback the findings and best practices to management, the Division takes part in achieving the Group Management Principles as the internal audit wing of the Group.

FFG ANNUAL REPORT 2023

70

Strengths to Support Value Creation

Shareholder Communication
Dialogue with Shareholders and Investors
To improve corporate value, FFG actively engages in constructive dialogue with shareholders and investors.
Dialogists from FFG
The management team engaged in

Overview

dialogue with shareholders and inves-

Dialogist from FFG

Attendees(including online)

May 23, 2022

Briefing for institutional investors

Director & President

104

June 29, 2022

General Meeting of Shareholders

Director & President

178

team or employees in charge of IR

August 26, 2022

Small meeting for institutional investors Director & President

16

engaged in dialogue individually with

October 12, 2022

Japanese and overseas shareholders

November 22, 2022 Briefing for institutional investors

tors mainly on the occasions listed on
the right. In addition, the management

Briefing for individual investors

Officer in charge ofCorporate Planning Division402

Director & President

96

and investors whenever requested(a cumulative total of 135 companies).
Overview of Counterparties
We held dialogue mainly with fund managers, analysts, persons in charge of ESG, and sell-side analysts of Japanese andoverseas institutional investors (for both active and passive investment).
Main Focuses of Dialogue
Hot topics of our dialogue mainly involved overview and progress of the 7th Mid-Term Management Plan; views on capital
strategy; Minna Bank; and Sustainability.
Learning from the Feedback
Comments and other feedback raised in dialogue from shareholders and investors were reported to Directors and otherpersonnel as needed. In addition, we shared such feedback with the management team and relevant divisions to improve
management strategies.

Shareholder Returns
FFG’s basic policy for shareholder returns is to pay out

balance between maintenance of soundness and growthstable dividends (either maintained or increased) throughinvestment.

profit growth. Since our establishment in 2007, we have

In FY2022, we acquired our own shares for the firsteither maintained or increased dividend payouts throughtime. We will continue to ﬂexibly consider acquisition ofsteady profit growth.

our own shares while taking into account performance

In the 7th Mid-Term Management Plan started in
FY2022, we adopt a performance-based dividend table

nities, the market environment, and so on.

with a target payout ratio (consolidated) of about 35%

Target dividend table

and aim to pay stable dividends, in consideration of the
Dividends per share (yen)40

71

trends, our capital situation, growth investment opportu-

40

40

40

50

60

60

65

65

75

85

85

85

95

105

115

Consolidated net income level*

Full-year dividend per share

65 billion yen or more

125 yen

Up to 37%

62.5–65 billion yen

120 yen35 to 36%

60–62.5 billion yen

115 yen35 to 36%

57.5–60 billion yen

110 yen35 to 36%

55–57.5 billion yen

105 yen35 to 36%

52.5–55 billion yen

100 yen35 to 36%

95 yen34 to 36%

FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23
(Plan)

50–52.5 billion yen*A one-for-five reverse stock split of our common stock was conducted on October 1,
2018 as the effective date. The above figures are calculated by recalculating dividends
before September 2018 on a post reverse stock split basis.

Below 50 billion yen

Payout ratio

Dividends with a target dividend ratio of 35%*Indicates net income attributable to owners of the parent

Corporate Data

Company Outline (as of September 29, 2023)
Fukuoka Financial Group, Inc.
Head Office
Date of Establishment
Paid-in Capital
Security Code
Stock Listings
Number of Employees
Telephone Number
Website

1-8-3, Otemon, Chuo-ku, Fukuoka 810-8693, Japan
April 2, 2007
¥124.7 billion
8354
Tokyo Stock Exchange, Fukuoka Stock Exchange
7,765 (Consolidated)(as of September 29, 2023)+81-92-723-2500
https://www.fukuoka-fg.com/

The Bank of Fukuoka, Ltd.
Head Office
Date of Establishment
Paid-in Capital
Number of Employees
Telephone Number
Website2-13-1, Tenjin, Chuo-ku, Fukuoka 810-8727, Japan
March 31, 1945¥82.3 billion
3,572 (as of September 29, 2023)+81-92-723-2131
https://www.fukuokabank.co.jp/

The Bank of Fukuoka’s Overseas Network
Hong Kong Representative Office

Shanghai Representative Office

Dalian Representative Office

Room 404, 4/F, Far East Finance Centre,
16 Harcourt Road, Hong Kong+852-2524-2169

Room 2010, Shanghai International Trade
Centre, 2201 Yan An Xi Road, Shanghai,
China+86-21-6219-4570

Room 622, Furama Hotel, No. 60 Ren Min
Road, Dalian, China+86-411-8282-3643

Bangkok Representative Office

New York Representative Office

16th Floor Unit 1606A, Park Ventures Ecoplex,
57 Wireless Road, Lumpini, Pathumwan,
Bangkok 10330, Thailand+66-2-256-0695

One Rockefeller Plaza, Suite 1201,
New York, NY 10020-2003 U.S.A.
+1-212-247-2966

Representative Office Registeredin Singapore
65 Chulia Street #27-03 OCBC Centre
Singapore 049513+65-6438-4913

Taipei Representative Office

Ho Chi Minh City Representative Office

Fabulous International Commercial Building
6F-1, No.126, Songjiang Rd., Zhongshan Dist.,
Taipei City 10457, Taiwan+886-2-2523-8887

Suite 1108, Saigon Tower, 29 Le Duan Street,
District 1, Ho Chi Minh City, Vietnam+84-28-3822-2802

The Kumamoto Bank, Ltd.
Head Office
Date of Establishment
Paid-in Capital
Number of Employees
Telephone Number
Website6-29-20, Suizenji, Chuo-ku, Kumamoto 862-8601, Japan
January 19, 1929
¥10 billion
795 (as of September 29, 2023)+81-96-385-1111
https://www.kumamotobank.co.jp/

The Juhachi-Shinwa Bank, Ltd.
Head Office
Date of Establishment
Paid-in Capital
Number of Employees
Telephone Number
Website

1-11, Douzacho, Nagasaki 850-0841, Japan
September 1, 1939
¥36.8 billion
1,977 (as of September 29, 2023)+81-95-824-1818
https://www.18shinwabank.co.jp/

The Fukuoka Chuo Bank, Ltd. * B usiness integration on October 1, 2023
Head Office
Date of Establishment
Paid-in Capital
Number of Employees
Telephone Number
Website2-12-1, Daimyo, Chuo-ku, Fukuoka 810-0041, Japan
June 5, 1951
¥4.0 billion
441 (as of September 29, 2023)+81-92-751-4433
https://www.fukuokachuo-bank.co.jp/

Minna Bank, Ltd.
Head Office
Date of Establishment
Paid-in Capital
Number of Employees
Telephone Number
Website

6-27, Nishinakasu, Chuo-ku, Fukuoka 810-0002, Japan
August 15, 2019¥8.25 billion
123+81-92-791-9231
https://www.minna-no-ginko.com/

FFG ANNUAL REPORT 2023

72

Corporate Data

Organizational Chart (as of September 29, 2023)
General Meeting of Shareholders

Executive Secretariat

Corporate Strategy Group
Corporate Planning Group

Group Compensation &Nominating Advisory Committee
Group Nominating Advisory Committee
Group Compensation Advisory Committee

Audit & Supervisory Committee
Office of Audit&
Supervisory Committee

Corporate Management Group
Corporate Planning
Division

Financial Management Group
Public Relations Group
Sustainability Administration Group
Facility Strategy Group

Board of Directors

Personnel Planning Group
Group Risk Management
Committee
ALM Committee
Compliance Committee
Counter-Financial Crime
Committee
Operational Risk
Management Committee

Group Management
Conference

Human Resources
Administration Division

Diversity Promotion Group
Personnel Administration Group
Human Resources Development Department
Staff-Training Planning Group
Staff-Training Group
Quality Group

Quality Administration
DivisionGroup IT Special Committee

Financial Instruments Management Group
Compliance GroupCounter-Financial Crime Group

General Affairs
Division
Representative Directors

General Affairs Group
Facilities Administration Group
Treasury Planning GroupYen Funds & Foreign Exchange Group
Foreign Currency Funds GroupDX Planning Group
Systems Design GroupDX Promotion
Headquaters

Agile Development Group

Treasury andInvestment Division

Strategic Investment Group
Treasury Operations Management Group
Treasury and Securities Management Group

Data Utilization Group

Treasury Settlement Group

Digital HR Development GroupInternational Operations GroupOperations Administration Group

Sales Strategy Planning Group
Sustainability Promotion & Planning GroupOperations Supervision Group

Branch Support Administration GroupOperations Planning Group

Corporate Finance GroupIT Administration Group

Personal Finance Group
Sales Administration
DivisionOperations Administration
Division“Palette” Business Administration & Sophistication GroupIT Administration
Division

IT Planning Group
Systems Management Group

Sales Administration Group

Cyber Security Group

Marketing Group

Risk Administration Group

Economic Affairs Research Group

Risk Resilience GroupInternational Strategy Planning GroupRegional Revitalization Promotion Group

Risk Administration
Division

Treasury Risk Management Group
Credit Planning Group
Business Management Group
Asset Management Group
Asset Assessment Group

Credit Supervision
Division

Business Promotion Group
Industry-Specific Affairs Group
Headquarters Audit GroupInternal Audit Division

Branch Audit Group
Audit Planning Group
Systems Audit Group73

Group Company Chart (as of October 2, 2023)
Fukuoka Financial Group, Inc.

Banking businessIn addition to the head office, 165 branches and 4 sub-branches(including 1 branch dedicated to bank transfers and 1 to Internet banking)8 overseas representative offices(Hong Kong, Shanghai, Dalian, Singapore, Bangkok, New York, Taipei, Ho Chi Minh City)

The Bank of Fukuoka, Ltd.
Other businesses

11 consolidated subsidiaries
Fukugin Business Operation Service Co., Ltd.

Office work agent business

Fukugin Guarantee Co., Ltd.

Loan guarantee business

FFG Computer Service Co., Ltd.

System development & operation business

FFG Card Co., Ltd.

Credit card business

Fukugin Real Estate Assessment Service Co., Ltd. Collateral valuation businessFukuoka Servicing Co., Ltd.

Credit management and collection business

FFG Insurance Service Co.,Ltd.

Insurance sales business

R&D Business Factory Co., Ltd.

Research and development businessFukuoka Asset Management Holdings

Investments and loans businessMercury Asset Corporation

Factoring business

Jupiter Asset Corporation

Factoring business

The Kumamoto Bank, Ltd.

Banking businessIn addition to the head office, 68 branches and 1 sub-branch

The Juhachi-Shinwa Bank, Ltd.

Banking businessIn addition to the head office, 178 branches and 9 sub-branches(including 1 virtual branch and 2 branch dedicated to bank transfers)

The Fukuoka Chuo Bank, Ltd.

Banking businessIn addition to the head office, 38 branches and 2 sub-branches

Minna Bank, Ltd.

Banking business
FFG Venture Business Partners Co., Ltd.
iBank marketing Co., Ltd.

Other business

Investments and loans businessInformation processing andcommunication services business

Zerobank Design Factory Co., Ltd.

Research and development of banking
system construction and financial business

FFG Growth Investment Co., Ltd.

Investments business

Sustainable Scale Co., Ltd.

Promotion of SDGs business

FFG Lease Co., Ltd.

Movable property and lease of rights

FFG Succession Co., Ltd.

M&A advisary services

FFG Securities Co.,Ltd.

Securities business

FFG Business Consulting Co.,Ltd.

Consulting business

Nagasaki Economic Research Institute Co., Ltd. Various research activities
FFG Asset Management Co., Ltd.

Investment trust management business

FFG Industries Co., Ltd.

General trading company business

FFG ANNUAL REPORT 2023

74

Corporate Data

Share Information (as of March 31, 2023)
Investor Information
Common stock

Number of authorized shares

360,000,000

Number of shares issued

191,138,265

Major Shareholders(Thousands of shares, %)Shares held

Ratio of shares
held to issued
number of shares

The Master Trust Bank of Japan, Ltd. (Trust account)

30,381

16.16

Custody Bank of Japan, Ltd. (Trust account)

14,247

7.58

SSBTC CLIENT OMNIBUS ACCOUNT (Standing
proxy: Custody Services Division of the Hongkong &Shanghai Banking Corporation Limited, Tokyo Branch)

9,131

4.85

Nippon Life Insurance Company

4,271

2.27

Meiji Yasuda Life Insurance Company

4,103

2.18

Sumitomo Life Insurance Company

3,790

2.01

JP MORGAN CHASE BANK 385632 (Standing proxy: Settlement& Clearing Services Department of the Mizuho Bank Ltd.)

3,071

1.63

The Dai-Ichi Life Insurance Company, Limited

2,936

1.56

The Kagoshima Bank, Ltd.

2,297

1.22

STATE STREET BANK AND TRUST COMPANY 505103(Standing proxy: Settlement & Clearing Services
Department of the Mizuho Bank Ltd.)

2,214

1.17

Common Stock Distribution byType of Shareholder
Individuals and other

Financial institutions

13.24%

43.81%

Overseas
corporations, etc.

26.81%

Financial
instrument traders

Other corporations

12.83%

3.31%

Stock Price
(Yen)
4000

(Point)
2000

3000

1500

2000

1000

1000

Stock price (left) 500
TOPIX (right)0

Apr-20

Apr-21

FY2020

FY2021

FY2022High (Yen)

2,422

2,497

4,164

Low (Yen)

1,286

1,805

2,467

Closing priceas of March 31 (Yen)

2,070

2,392

2,549

*A
 one-for-five reverse stock split of our common stock was conducted on October 1, 2018 as the effective date.
The above stock prices are calculated by multiplying prices before October 2018 by five.

75

0Apr-22FUKUOKAFINANCIAL
GROUP

Financial Data

Consolidated ROE
Consolidated ROE =Our Principles

13.6%

Consolidated capital adequacy ratio

Net income attributableto owners of the parent(Net assets at the beginning of the period+ Net assets at the end of the period) ÷2

10.7%

10.7%

10.7%

11.6% About 10%

10.2%
9.6%
<Based on compliancewith the final Basel III>

About 6%

5.7%
FFG aims to become a financial groupthat creates values for all stakeholders by:Group Management Principles

6.6%

Enhancing perception and taking
actions without fear of failure, Pursuing high
4.9%
3.4%

quality for future progress, and Bolstering people’s optimum choice.
FY18

Brand Slogan Core Value

FY19

FY20

FY21

FY22

FY18

FY24
(Plan)To be yourBankof choiceCorebusiness
profit (3 banks total)(Billions of yen)

100.0
80.0

105.9

97.5

FY22

FY24
(Plan)

110.6(Billions of yen)

80.0

FFG creates a virtuous cycle of “contribution to regional economic
60.0 development”
51.6

Sustainability Policy

FY21

100.0

104.0

79.7

78.9

77.2

FY20

Consolidated net income

Your closest bank Your reliable bank Your sophisticated bank
120.0

FY19

60.0

and “improvement of FFG corporate value” through business activities
based on
40.0

65.0
54.1
44.6
31.2

40.0

the Group Management Principles in order to help develop a sustainable
society.
20.0
20.0
0.0

Long-term Vision 2030

FY18

FY19

FY20

FY21

FY22

0.0

FY24
(Plan)

FY18

FY19

FY20

FY21

FY22

*Figure in FY22 includes impact of securities portfolio restructuring

FY24(Plan)The Best Regional Bank that contributes to the growth of all stakeholders
Balanceandof deposits
and loans at the end of thethrough financeconsulting
period (consolidated)

Consolidated core OHR =(Trillions of yen)

Deposits and CDs
Loans

25

15 13.014.3

20.5

17.5

19.5
17.1

16.7

March 31,2020

March 31,2021

March 31,
2022

20
16.1

Consolidated OHR
Consolidated expenses
Consolidated gross business profit

20.9
68.9%

17.6

68.4%

60.6%

64.6%

60.8% About 60%

10
50March 31,
2019

FY18

March 31,2023

Allowance for loan losses and allowance ratio trends(Billions of yen)

250.0

Allowance for loan losses
Allowance ratio
1.3

200.0

1.0

150.0

129.2

182.5

1.4

1.4

202.6

199.3

(%)

1.3

(Billions of yen)

4,000.0
1.0

FY21

FY22

FY24
(Plan)

StocksJapanese Government Bonds
Corporate bonds
Foreign bonds, etc.
3,540.6

3,727.3

3,760.0

March 31,2020

March 31,2021

Municipal bonds

4,023.6

3,850.9

3,000.0
2,000.0

0.5
1,000.0

50.0

1

FY20

Balance of securities

1.5

187.8

100.0

0.0

FY19

*Figure in FY22 excludes loss-cutting in foreign bonds

March 31,2019

March 31,2020

March 31,2021

March 31,2022

March 31,
2023

0.0

0.0

March 31,2019

March 31,2022

March 31,2023

FFG ANNUAL REPORT 2023

76

FFG ANNUAL REPORT 2023

FUKUOKA FINANCIAL GROUP
FFG ANNUAL REPORT 2023

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