Medium-term Management Plan

Go forwardwith Our Region（FY2022～FY2024）

Table of Contents
1. Outline of the Medium-term Management Plan
1-1
External environment
1-2
Long-term vision and strategy
1-3
Outline of the Plan
1-4
Key indicators
1-5
Roadmap for financial target
2. Strategic priorities
2-1
Improvement of comprehensive consulting ability
2-2Initiatives in the environmental field
2-3
Promotion of Digital Transformation
2-4
Well-being work style
2-5
Strengthening group comprehensive capabilities
2-6
Strengthening governance21. Outline of the Mediumterm Management Plan

1-1 External environment
Assumed future
SocietyEconomy◼ The problem of population decline◼ The rise of digital natives◼ Changes in lifestyle◼ Diversity◼ Transition to a decarbonized society◼ Regional economy shrinking◼ Widening regional disparities◼ Labor shortage◼ Changes in industrial structure◼ Continuation of low interest rates

Technology◼ Digital transition◼ Cashless progress◼ Expansion of AI utilization◼ Entry from different industries

Request to our company
CustomerCommunity◼
◼
◼

Contributing to development of regional
economy and industry
Support for efforts to achieve SDGs
Leading industry-academia-government
collaboration◼
◼
◼
◼

Shareholders

Employee◼
◼
◼
◼

Choosing the best work style
A rewarding work environment
Improvement of employment conditions
Support for skill improvement

Providing highly convenient services
Customer-oriented proposals
Contribution to sustainable business growth
Smooth business succession support◼
◼
◼
◼

Medium- to long-term improvement ofcorporate value
Enriching shareholder returns
Highly transparent information disclosure
Practice of sustainability management4

1-2 Long-term vision and strategy
Long-term vision

Sustainable growth together with local communities andcustomers through problem solving

To be attractive✓ Development of regional
economy and industry✓ Comfortable andprosperous life
✓ Sustainable society

To be attractive

Localcommunities andcustomers

Hokuhoku FG✓ Selected and loved company✓ Active and diverse humanresources✓ Improving shareholder value
and corporate value

Long-term strategy
Solving more challenges by
expanding business domain
Solving morechallenges
Strengthening sales force⚫ Providing the best consulting services in theregion⚫ Improving services utilizing digital technologies⚫ Diversification of services by expanding businessdomain

Strengthening profitability
Developing a corporate
culture through the active
Building a management
Long-term
participation of employeesbase that supports
visionDeveloping a⚫ Create a workplace where diverse
Building a sustainable growth
human resources can play an activeof efficient group
corporatebusiness base ⚫ Realizationrole
management structure
culture⚫ Increase work satisfaction and pride
in work⚫ Creation of highly specialized
personnel

Investing in human resources⚫ Building a sales system with aneye on the future⚫ Improve productivity throughbusiness reforms5

1-3 Outline of the PlanPractice of management philosophy
Long-term vision

Sustainable growth together with local communities andcustomers through problem solving
Medium-term Management Plan（FY2022～FY2024）

Go forward with Our Region

Title
Positioning

A period to challenge priority strategies toward the realization of a long-term
visionImprovement of comprehensive consulting ability
・Sophistication and expansion of solution menu
・Improvement of transaction profitability bysegment strategy
・Strengthening support for COVID-19
・Strengthening proposal capability
Strengthening governance・Enhancement of equity capitaland shareholder returns・Sophistication anddiversification of operations
・Advanced risk management
system

6 crucial strategies
Consulting

Governance

Strengthening group comprehensive capabilities
・Expansion of resource sharing between thetwo banks
・Providing comprehensive financial services
in collaboration

Environmental
field

Contribution to thelocal communityGroup
comprehensive
capabilities

Initiatives in the environmental field・Response to TCFD recommendations
・Reduce our company's CO2 emissions
・Strengthen solutions to business partners
・Strengthen cooperation with local
governments and various entities

DigitalTransformation

Well-being

Promotion of DigitalTransformation・Strengthen digital banking
function
・Business reform utilizing
digital technologies

Well-being work style・Improvement of working environment
・Realization of diverse work styles
・Improving the skills of executives andemployees

61-4 Key indicators
Key indicators

FY2021

FY2024Long-term
goals（Result）（3 years later）¥20.5 Bn

Over ¥25 Bn

Over ¥35 Bn

Consolidated
Capital adequacy
ratio

9.54％

In thehigher 9％range

Over 12％OHR*

63.15%In the lower
60％ range

50％ level

Consolidated Netincome（10 years later）

Non Interest
Revenue ratio*(Non InterestRevenue)

15.14％(¥18.9 Bn)

16％ level

Over 18％(Over ¥20 Bn)(Over ¥25 Bn)

Environment
related investment
and loan*¥37.1 Bn

¥210 Bn¥700 Bn*Total of two banks

7

1-5 Roadmap for financial target
Improvement of comprehensive
consulting ability
Initiatives in the environmental
field

Human resources investment
Increased labor costs

Well-being work style

Improving profitability＋＋＋

Other

Business loan interest
Fee revenue
Securities interest

Net income

Investment indigitalization
Increased capital
investment¥20.5Productivity
improvement
Business innovation

Net income¥25BnPromotion of Digital Transformation

Bn

Strengthening group
comprehensive capabilities
FY2021

Strengthening governance
FY20248２. Strategic priorities

2-1 Improvement of comprehensive consulting ability◆ Strengthening problem-solving capabilities by expanding and enhancing solution menus◆ Expanding customer base and improving transaction profitability by building sales strategies according tocustomer segments◆ Strengthening management improvement support customers impacted by COVID-19
Expansion and sophistication of solution menu
UpgradingStrengthening
problem-solving
capabilities

Proposing optimal solutions including nonfinancial fields

DX・IT introduction support

Regional trading
company

Temporary staffingbusiness

M＆A / Businesssuccession support

Managementconsulting

Overseas expansion/ Trade support

Corporate portal
Finance function＜Affiliatedcompany＞
Securities
Lease
Card
CapitalGuarantee

Financialsector

Nonfinancial
sectorConsidering newservices
Advertising business
Data analysis
Services for the elderly
Real estate services

Sustainable finance

Existing solution area

Expanding customer base and improving transaction profitability

Trading depth
Area

Sales strategy
according tocustomer segment（JPY Bn）

+1.0

5.6

4.6FY2021

FY2024

Number of M＆A / Businesssuccession support＋95355450

Environment-related
consulting

Equity businessBusiness matching

Annual sales

Corporate solution revenue

Expandingcustomer base
Improvingtransaction
profitability

Expansion

FY2021

FY2024

Strengthening support for COVID-19
Strengthening monitoring function
Deepening business evaluation

Management
improvement ofbusiness partners

Improving the effectiveness ofbusiness revitalization support

Controlling credit
costs

10

2-1 Improvement of comprehensive consulting ability◆ Deliver optimal proposals according to customer needs and life stages◆ Contribute to customer asset formation and portfolio construction by strengthening consulting functions

Life stage

Active generation
Needs to build up assets
PrepareRetirement generation

Senior / Wealthy class

Needs to manage assets

Needs to inherit assets

Protect

Use
Leave

Suggestion

Borrow◼ Asset formation support
based on life planning◼ Establishing a consultation
system tailored to lifestyle
Number of funded productcontracts*＋42,505

161,800

119,295

FY2021DivideGive

Increase◼ Asset management support
based on retirement planning◼ Practice of portfolio proposals
according to risk tolerance◼ Responding to diverse needs bycooperating with affiliatedcompany
Balance of assets undercustody（JPY Bn）
532
305

FY2024*Dollar-cost averaging mutual fund holders, andlevel premium insurance contracts＋117◼ Fostering professional humanresources◼ Consulting utilizing trusts andreverse mortgages◼ Expansion of non-financial
consulting menu
Number of Trusts / One-time
payment insurance

650

350

227300

FY2021

FY2024

Investment trust balance
Assets under custody by affiliated company＋3,99910,3006,301

FY2021

FY2024112-2 Initiatives in the environmental field◆ In anticipation of a carbon-free society, implement in-house efforts in advance◆ Contribute to the decarbonization of the region by improving the corporate value of ourbusiness partners◆ Collaborate with stakeholders and lead regional initiatives

Aiming to become an environmentally advanced financial group
Actively promote research and disclosure in line with TCFD recommendations

Feb. 2021 Supported TCFD
recommendations

July 2021

Raised our target of CO2 emissions

Nov. 2021

The “Sustainability Promotioncommittee” was newly establishedStrengthen cooperation with local governments
and various entitiesContribute to the realization ofsustainable local communities incollaboration with stakeholders
Number of participants in financial economy/ SDGs related education＋12,616

Reduce our company's CO2 emissions

Cooperation
with theregion

20,000In-house
efforts

Support forbusiness
partners

7,384
FY2021

Sophistication of governance
Strengthening strategy and risk
management by conducting
scenario analysis

FY2024

Aiming for early realization of the 2030
reduction target
CO2 emissions＊（t-CO2）- 46%

FY2013

FY2030*Scope 1 and 2 at domestic offices of Hokuriku Bank and Hokkaido Bank

Strengthen solutions to business partners
Amount of environmental finance and investment
provided＋490＋172
37
FY2021（JPY Bn）

700

210
FY2024

Number of SDGs / environment-related
services used800＋552
248

FY2030

FY2021

FY202412

2-3 Promotion of Digital Transformation◆ Expanding and evolving digital banking functions with the aim of providing more convenient and familiar services for customers◆ Improve efficiency through digital business reforms and realize sophisticated customer services

Providing new value and experience to all stakeholders by utilizing digital technology anddrastically transforming operations and services

Our goal

Change the behavior of customers and employees
Safe and convenient procedure foranyone, anytime, anywhere

Transform business
communication and become acloser partner

・Simpler and easier to use
・Services offered at our branches
are also available on our app

・Aim for the entrance to allservices, including non-financial
services

Number of IB / App subscribers＋392,867
950,000

Evolution ofpersonal appbanking

Expansion ofcorporate
portalTransform the roles of employees byminimizing simple office work andimprove services
・From clerical professionals toconsulting professionals
Reduction effectequivalent to 150
employees

Reform ofstore
reception

Office work reductions time

-310,000hours

557,133
Deepeningdata science
FY2021

FY2024

Strategic
renewal of coresystemRenewal of

次期CRMの構
customer
築management
systemCapture customer's thoughts andneeds with data

Taking on the challenge of further
cost reduction while ensuringstability and reliability

・Personalized proposals
・Automation and sophistication ofvarious monitoring

・Promotion of investment instrategic areas

FY2021

FY2024

Centralized and comprehensive
management and utilization ofinformation
・Promptly respond to customers’
needs and realize useful proposals

132-4 Well-being work style◆ Build a work environment where employees can experience well-being in order to create astrong organization that realizes sustainable growth
Improvement of working
environment◼ Rebuilding personnel system◼ Promotion of utilization of leave system◼ Environment where seniors can play anactive role
◼ Eradication of harassment◼ Investing in employee healthRealization of diverse work
stylesFemale manager ratio 20% or more(FY2024)

Well-being
work style

Improved easeof work◼ Supporting women's career development
and flexible working styles◼ Active recruitment of professional humanresources◼ Promote employment of people withdisabilities◼ Working environment anywhere

Strong organization that realizes
sustainable growth

Improvingwork
satisfaction

Service / productivity
improvement

Skill
improvement

Investing inhuman resources

Performance
improvement
Number of qualification holders

Improving the skills of executives
and employees◼ Expansion of in-house certification
system, training, teaching
490
materials, etc.
282
◼ Improvement of consulting ability
175
and IT literacy◼ Introduction of training system inFY2021
FY2024other departments■1st grade Certified Skilled Professional of Financial◼ Development of highly-skilled
Planning / CERTIFIED FINANCIAL PLANNER
human resources by secondment■Information Technology Passport Examination

3,300

14

2-4 Well-being work style◆ We will build new headquarters buildings, which will be our symbol, in Sapporo and Toyama tocreate a comfortable office environment.
◆ Further improve productivity by responding to the diverse work styles of staff. In addition, wewill achieve both business continuity and environmental friendliness.

“Hokuhoku Sapporo Building”
Hokkaido Bank Headquarters Building /Hokuriku Bank Sapporo Branch
Location : Sapporo
Scheduled to be completed in 2024

NToyamaStationS“Hokuhoku FG headquartersbuilding”
Hokuriku Bank headquarters building
Location : Toyama
Scheduled to be completed in 202615

2-5 Strengthening group comprehensive capabilities◆ Contribute to solving the problems of our business partners by utilizing our sales base over awide area
Support for both banks’ business partners

HokurikuBankCo-financing

Business matching

HokkaidoBankIn Hokkaido, Expanding
FG market share
Hokkaido area loan balance＋168.4
Further sharing of resources between the two banks
Consulting（Management / IT）

3,441.2

3,272.8

International business（overseas expansion, derivatives, etc.）
FY2021

Ｍ＆A / Business succession
support（JPY Bn）

Finance function
Joint use of funds

FY2024

Problem-solving ofbusiness partners
Number of achievements*
900＋345555

Expansion of resource sharing
between the two banks

FY2021

FY2024*Co-financing within the group, wide area businessmatching, etc.

162-5 Strengthening group comprehensive capabilities◆ Expansion of group profits by utilizing resources of related subsidiaries◆ Providing comprehensive financial services in collaboration with intimate friendship companies
Hokuriku Bank
FG / Banking
subsidiary

Hokkaido Bank
Bank intimacy / friendship company

Hokuhoku Tokai
Tokyo Securities

Lease

Real estate
Insurance

DigitalTransformation

Regional
trading
Agriculture

Hokugin Lease
Hokuhoku Capital

Dogin Regional
Research Institute

Providingcomprehensive
financial services

Hokuriku Card
Dogin Card

Profit of related subsidiaries*（JPY Bn）

Hokuhoku Services

3.6
2.7

Hokugin Software

Hokuriku HoshoServices
FY2021Respond to a wide range of needs

FY2024* Total of related subsidiaries Net income (excludingcredit costs), and Hokuhoku Tokai Tokyo Securities
Referral Fee17

2-6 Strengthening governance◆ Enhancement of equity capital and shareholder returns by improving profitability◆ Sophistication and diversification of operations by utilizing “RAF”◆ Response to diversifying risks via sophistication of risk management system
Enhancement of equity capital and shareholder returns◼Steady accumulation of retained earnings◼Redemption of preferred stock◼Reduction of strategically held shares through dialogue
Improvingprofitabilityandproductivity

Investment for growth
Enhancement of equity capital
Enhancement of shareholder returns(aiming for a total return ratio of 50% *)* Includes redemption and dividends of preferred stock

Sophistication and diversification of operations◼ Utilization of “RAF”
Portfolio construction based on risk appetite policy◼ Diversification of investment and expansion of new
investment destinations
Equity fund / Structured finance
Sustainable and environment-related investment◼ Pursuit of group synergies
Examination of business collaboration between the twobanks' market divisions
Investment policy, market analysis, sharing of new investment fields
Early development of professional human resources

Advanced risk management system
FY2022-FY2024
New Medium-termManagement Plan

FY2019-FY2021
Previous Medium-termManagement Plan

・Establishment of FG Risk
Management Department
・Maintenance andunification of various
rules and systems
・Strengthening AML /CFT management system
・Thorough measures toprevent recurrence ofmisconducts◼ Strengthening the risk

management system centered on
the holding company◼ Further strengthening the AML /CFT management system◼ Fostering a sound risk culture◼ Reinforcement of compliance◼ Strengthen resilience

Responding to various risks◼ Look ahead and properly grasp the risk
Utilization of various simulations and stress tests◼ Strengthening risk visualization and root cause analysis
Understanding and monitoring essential problems andpotential risks◼ Response to new risks
System renewal , cyber security response, climate change risk

18Inquiries related to this material should be addressed to
Hokuhoku Financial Group, Inc.
Managing Planning Division
TEL(+81)76-423-7331
FAX(+81)76-423-9545
E-MAIL:info@hokuhoku-fg.co.jp
https://www.hokuhoku-fg.co.jp/
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document has been prepared for information purpose only and does
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Information contained herein may be changed or revised without
prior notice. This document may contain forecasting statements as
to future results of operations. No forecast statement can beguaranteed and actual results of operations may differ from thoseprojected.