DAISHI HOKUETSU REPORT 2019
Disclosure for the Year Ended March 31, 2019

A part of the community.

Niigata, Our Target Market

Advantage of transportation networks

In Niigata Prefecture, basic technology indispensable for
manufacturing is accumulating at an accelerated rate. This
includes mold-making, high-precision machining, casting, forging,and metal pressing. Niigata Prefecture is the number one
manufacturer in Japan of products such as metal tableware andoil stoves.
With a prosperous agricultural industry centering on rice
growing, it is a leading producer of rice and the number one
manufacturer of rice confectionery in Japan.

12,584 km2

Population

2,246 thousands (15 th of 47 pref.)GDP¥8,884 billion(14 th of 47 pref.)Gross agricultural output¥  248 billion(12 th of 47 pref.)Industrial shipment per capital¥4,835 billion(23 th of 47 pref.)Annual sales¥7,015 billion(16 th of 47 pref.)N
Nihonkai-Tohoku
Expressway
Nihonkai-Tohoku
Expressway P

NiigataPort

Niigata
Niigata

Niigata Airport

Niigata Prefecture, our target market
Area

Port
BanetsuPort
Expressway

Niigata
AirportNiigata
AirportNaoetsuPort

Hokuriku
Expressway( 5 th of 47 pref.)Nihonkai-Tohoku Expressway

Niigata
Hokuriku
Port
ShinkansenHokuriku
Line
Hokuriku

Expressway
Expressway

Hokuriku
Expressway(As of March 31, 2019)

Port

Niigata Airport

Ka
JoetsuJoetsuJoshinetsu
Shinkansen
Line
Shinkansen
Line

Joshinetsu Banetsu
Expressway
Hokuriku
Hokuriku Expressway
Shinkansen
Line
Shinkansen
Line
Kanetsu
Expressway
Kanetsu
Expressway
Naoetsu▪‌Expressways that
extend in five directions
Nihonkai-Tohoku
Expressway
Port
Joshinetsu
Expressway‌(Kanetsu, Hokuriku, Joshinetsu, Banetsu
and NihonkaiJoshinetsu
Expressway
Hokuriku
Tohoku)Expressway
JoetsuNiigataPort
Hokuriku▪‌
Joetsu Shinkansen
Line
Shinkansen Line
Kanetsu
Expressway▪‌Hokuriku ShinkansenLine Expressway
Nihonkai-Tohoku
Niigata Airport
Banetsu▪‌ConventionalJoshinetsu
railway line
such
Expresswayas the Shinetsu Line
Expressway
Hokuriku Line, Niigata
and Uetsu Line
NaoetsuPort

FoundedDeposits¥7,177 billion

Loans¥5,065 billion

Total assets¥8,950 billion

Credit rating

A+ (JCR)

Principal Head
Office Functions

Hokuriku▪‌Niigata
ShinkansenLine Port

Shinkansen Line

Kanetsu Expressway

General port and functional port:
Joshinetsu
Expressway
International
marinecontainers division
Certified LNG (liquefied natural gas) division▪‌Naoetsu Port‌Functional port: Certified LNG (liquefied natural gas)
divisionContents
Message from Management
02

Message from Management

About the Daishi Hokuetsu FG
05
07

History of the Two BanksManagement Philosophy / Ideal Form

Medium-Term Management Plan
09
10
11

1st Medium-Term Management Plan
Management Indexes (KPI) / Evaluation Indexes forContributing to the Community
Basic Strategy

Financial Highlights / Non-Financial Highlights
13
16

Overview of Financial Highlights
for Year Ended March 31, 2019
Non-Financial Highlights

To Our Shareholders
17
18

Return to Shareholders / Shareholders Benefits
Information Disclosure

TSUBASA Alliance
19

1

TSUBASA Alliance

DAISHI HOKUETSU REPORT 2019

Naoetsu
Banetsu
BanetsuPort
Expressway
Expressway

Shinkansen Line

Kanetsu Expressway▪‌Niigata Airport
Port
Domestic
routes: 8 routes
Hokuriku
2-14 Ote-dori 2-chome, Nagaoka-shi, Niigata
Niigata Airport
Banetsu
Expressway ‌(Sapporo, Narita, Chubu
Joetsu International,
Komaki, Itami,
ShinkansenExpresswayLine1071-1 Higashiborimae-dori 7-bancho, Hokuriku Kansai International, Fukuoka, and Okinawa)
Shinkansen Line
Naoetsu
KanetsuInternationalroutes:Expressway
6 routes
Chuo-ku, Niigata, Niigata-shi
Port
Shanghai,
Harbin, Khabarovsk, Vladivostok,
Hokuriku ‌(Seoul,Joshinetsu Expressway
ExpresswayTaiwan)
JoetsuOctober 2018

Head OfficeNiigata Airport

JoetsuNaoetsu
Naoetsu
Shinkansen
Line
Hokuriku
Port

Shinkansen Line

Profile (Consolidated)

Niho

Nihonkai-Tohoku Expressway

ESG Initiatives and Contributions to SDGs
21
22
30
31
33
34
35

Initiative Policy for ESG / SDGs Declarations
SDGs Declaration 1 Regional Economy / Society
SDGs Declaration 2 Aging Society
SDGs Declaration 3 Financial Services
SDGs Declaration 4 Diversity
SDGs Declaration 5 Environmental Protection
Corporate Governance

Company Information
41
43

List of Executives / Group Companies
Organization Chart / Major stockholders

Financial Data
44
45
47
47
48
50
51
73
74
75
76

Financial Data Contents
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Shareholders' Equity
Consolidated Statements of Cash Flows
The Status of Financial Results (Consolidated)
Non-Consolidated Balance Sheets(Daishi Bank)
Non-Consolidated Statements of Income(Daishi Bank)
Non-Consolidated Balance Sheets(Hokuetsu Bank)
Non-Consolidated Statements of Income(Hokuetsu Bank)

Message from Management

Message from Management

Chairman and Representative Director

Katsuya Sato

President and Representative Director

Fujio Namiki

Thank you very much for your continued support.
The Daishi Bank and The Hokuetsu Bank underwent management integration on October 1, 2018 toestablish the Daishi Hokuetsu Financial Group, Inc. as a wholly-owning parent company of the two banks.
We would like to express our most sincere gratitude for the extraordinary understanding and support
from all stakeholders towards establishment of the Company.
Through the management integration, the Group has implemented the following management
philosophy:“We will continue to provide services that live up to the expectations of customers andcontribute to the development of regional society as a trusted financial group, and boldly take onchallenge to create new value.”We are committed to eternally fulfilling the financial intermediary function
and the information intermediary function which are the mission and roles of a regional financial
institution.

Implementation of the 1st Medium-Term Management Plan (October 2018 to March 2021) 
The management environment surrounding the Group is an unprecedented period of great change due
to factors such as a shrinking Japanese economy caused by population decline associated with theacceleration of a declining birthrate and aging population, the lengthening of monetary-easing policy, thegrowth of digitalization such as expanding cashless services, and the increased competition caused by
new entry into the banking industry by corporations from other industries.
We formulated the 1st Medium-Term Management Plan in order to respond to these changes in the
management environment, thus maintaining and improving the sustainability of the Group. In order toachieve the priority management themes of revitalizing the regional economy, strengthening profitability,
and increasing management efficiency, the plan defines the three basic strategies of improving thefinancial intermediary function and the information intermediary function, increasing management
efficiency, and increasing the sophistication of the Group management system. We are putting the total
power of the entire Group into implementing these strategies.

DAISHI HOKUETSU REPORT 20192

Message from Management

Message from Management
Establishment of a Regional Trading Company 
As a priority measure for contributing to the community as stated in the 1st Medium-Term Management
Plan, we established and began operations of the regional trading company Bridge Niigata, Ltd. on April 1of this year.
Furthermore, by organically integrating the vast amount of
information held by the two banks, we are also working to expand
corporate sales channels and engage in business matching, as wellas to disseminate information on Niigata Prefecture’s wealth ofresources in area such as agriculture, forestry, marine products,
and tourism throughout Japan and overseas, and to support
increased productivity through measures such as utilizing IT
Corporate logo of Bridge Niigata, Ltd.
technology of corporations in Niigata Prefecture.

Establishment of an Employment Agency 
On May 24, we established Daishi Hokuetsu Career Bridge, Ltd. to support the resolution of humanresources issues faced by corporations in Niigata Prefecture. We plan to start business activities at the
new company from October of this year, pending approval from related government agencies.
Our new employment agency seeks to provide one-stop solutions as a comprehensive consulting
company for human resources. For example, it responds to shortages of managers and expert personnel,
cultivation of employees, acceptance of foreign laborers, and other human resources issues and needs of
local corporations.
Through a partnership between Bridge Niigata, Ltd. and Daishi Hokuetsu Career Bridge, Ltd., we will
expand the business fields of the Group and will boldly challenge fields outside of the traditional bankframework. By doing so, we are committed to fulfilling the expectations of our stakeholders.

Held the Niigata Food and Comprehensive Business Talks Conference (Shoku Biz!) This May, the two banks cooperated to hold the Niigata Food and Comprehensive Business Talks
Conference (Shoku Biz!), the largest such business conference in Niigata Prefecture. Based on the themeof regional revitalization, exhibiting corporations from all industries were given the opportunity toadvertise their own products, services, and technologies, as well as to engage in business discussions.. We
also advertised the appeal of Niigata Prefecture and provided information which will lead to regional
revitalization.
The actual Shoku Biz! conference received high acclaim from everyone involved. The numbers ofattendees, exhibiting companies, and business talks were all record highs compared to prior years.

Scene from the Niigata Food and Comprehensive Business Talks Conference (Shoku Biz!)

3

DAISHI HOKUETSU REPORT 2019

Initiatives in the TSUBASA Alliance 
The TSUBASA Alliance is a framework for wide-reaching partnerships among regional banks. Since its
founding in October 2015, the TSUBASA Alliance has conducted partnerships in a breadth of fields
including collaboration in fintech, systems, and administrative tasks.
The range of cooperate was further widened through initiatives in the 2018 fiscal year. Examples include
joint development of TSUBASA Smile, a new counter reception tablet which enables various procedures
to be performed paperless and without the need to affix a personalseal, and holding of the Singapore Business Exchange Meeting, which
supports the overseas business expansions of our customers.
This year, the two banks joined the alliance, bringing the current
membership to a total of nine banks. Moving forward, we will further
accelerate this strategic alliance in order to contribute to thesustainable growth of regional society through the provision of highLogo mark of TSUBASA Allianceadded-value financial and information services.

Initiatives for ESG and SDGs 
In order to fulfill our corporate social responsibility for achieving a sustainable society, the Group has
defined initiatives for ESG (Environment, Society, and Governance) and SDGs (Sustainable Development
Goals) as main measures in our 1st Medium-Term Management Plan. We are actively conducting activities
which are related to these initiatives. In May of this year, we established the Daishi Hokuetsu Financial
Group SDGs Declaration, and also officially announced the TSUBASA SDGs Declaration as part of the
TSUBASA Alliance.
During the period from November 2018
to March 2019, we handled Private
Placement Bonds to Support Childrearing,
Education, and Personal Development as a
joint plan between the two banks forcontributing to the achievement of SDGs. A
total of 178 client corporations showed
their support for the issuance.
In the bond plan, a portion of theproceeds from the joint issuance of private
placement bonds by issuance corporations
and the two banks was used to support
business activities related to childrearing,education, and personal development bymunicipalities in Niigata Prefecture. We
made a series of donations totaling 14.35
Private Placement Bonds to Support Childrearing, Education, and Personal
million yen.
Development
Moving forward, we are committed
actively to resolving environmental problems, addressing social issues, supporting the cultivation of thenext generation, and fulfilling other social needs by providing financial products and services such as theaforementioned bonds. By doing so, we will implement ESG management and contribute to theachievement of SDGs.
Additionally, in order to establish unshakeable trust in the Group from society, we will continue to put
our full effort into strengthening the compliance system which forms the core of management, as well as
establishing an even higher ethical viewpoint. We will work to construct high-quality governance based on
our corporate governance code, and will strive to improve corporate value from the viewpoint of our
stakeholders.
We encourage society to expect the best for future activities of the Daishi Hokuetsu Financial Group.
We sincerely look forward to your further support.
July 2019

DAISHI HOKUETSU REPORT 20194

About the Daishi Hokuetsu FG

History of the Two Banks

Profile of The Daishi Bank
(as of March 31, 2019)
Location of Head Office1071-1 Higashiborimae-dori, 7-bancho,
Chuo-ku, Niigata-shi

１８７３Founded as The Fourth
National Bank of Japan

１９１７

１９28

Corporate name changed to
The Daishi Bank, Ltd.

Finished construction of its
third head office

FoundedNovember 2, 1873
Total Assets¥5,976,100 million
Capital¥32,700 million
Number of Employees
2,180(2,238 when including employees
stationed from other organizations)
Number of Branches
122 branches; 1 representative office(Shanghai)
113 branches in Niigata Prefecture(including 5 field offices and 3 virtual
offices)
9 branches outside of Niigata Prefecture

THE HOKUETSU BANK
Profile of The Hokuetsu Bank
(as of March 31, 2019)

Founded in current-day
Niigata City as Japan’s thirdnational bank.

１８７８Founded as The Sixty-NinthNational Bank of JapanThe head office featured
stone construction usingarchitectural styles fromancient Greece.

Although the name had beenchanged to Niigata Bank in
1896, customers continued
to use the nickname“Daishi”
when referring to the bank.
Therefore, the name waschanged to The Daishi Bank.

１８９６

Founded as The Nagaoka
Bank

１９４２

Established as The Nagaoka
Sixty-Ninth Bank

Location of Head Office2-14 Ote-dori 2-chome, Nagaoka-shi
FoundedDecember 20, 1878

Established via
a merger by
The Sixty-NinthBank and The
Nagaoka Bank.

Total Assets¥2,941,400 million
Capital¥24,500 million
Number of Employees
1,370(1,415 when including employees
stationed from other organizations)

After the end of the Boshin
War, founded in current-day
Nagaoka City in order topromote economic growth.

Number of Branches
84 branches
79 branches in Niigata Prefecture
5 branches outside of Niigata
Prefecture

Founded in current-day
Nagaoka City in conjunction
with economic growth suchas a boom in the petroleum
industry and establishment ofrailway companies.

１９４８
Corporate namechanged to The
Hokuetsu Bank

Corporate Logo and Corporate Color of the Daishi Hokuetsu FG
Corporate Logo

Corporate Color

Azure
Daishi Hokuetsu Financial Group
Based on the motif of geography in Niigata Prefecture, thecorporate logo uses a golden color representing bountiful harvests ofrice to express the expansive land, and uses the corporate color
azure to express the rivers which moisten that land and the vast Sea
of Japan connecting with the rest of the world.
The elliptical shape in the center of the logo was designed in theimage of islands and rice in Niigata Prefecture.
The two lines rising upwards depict how the two banks form asingle massive surge, boldly challenging changes for the future andcontinuing to contribute to regional society.

5

DAISHI HOKUETSU REPORT 2019Blue colors create positive images such as trust,sincerity, and future orientation. Among blue colors,
azure is a particularly rich and beautiful shade.
In our logo, the color azure represents the vast Sea ofJapan which borders Niigata Prefecture; the ShinanoRiver, Agano River, and other rivers which flow into the
Sea of Japan after moistening the fertile land; and theclear expanse of blue skies. This color represents how
our new financial group will continuously grow in the
future while earning the trust of regional society.

１９７３

１９９２

Listed on the Second Sectionof the Tokyo Stock Exchange

Completed the current head
office１９７５

Listing changed to the First
Section of the Tokyo Stock
Exchange

Completed construction of
the current head office (thefifth head office built) byexpanding and remodeling forenhancement anddevelopment of functions andfacilities.

October
2018

Establishment of the Daishi
Hokuetsu Financial Group

Profile of the Daishi Hokuetsu
Financial Group(as of March 31, 2019)

１９６５

Completed the current head
office１９７３

Listed on the First Section of
the Tokyo Stock Exchange

Location of Head Office2-14 Ote-dori 2-chome, Nagaoka-shi

January
2021

Merger of the twobanks to form The
Daishi Hokuetsu Bank
(scheduled)

Location of Principal Head Office Functions
1071-1 Higashiborimae-dori 7-bancho,
Chuo-ku, Niigata-shi
Established
October 1, 2018
Capital¥30,000 million
Listed Securities ExchangeTokyo Stock Exchange (Securities
Code: 7327)

In contrast to the red bricksof the former head office, the
new head office was built inwhite marble.

Corporate Name of the Merged Bank and Other Related Items
Assuming that permission is received from applicable government agencies and other requirements are fulfilled, The Daishi Bank and
The Hokuetsu Bank plan to merge in January of 2021.
The corporate name of the merged banks will be The Daishi Hokuetsu Bank, Ltd. Similar to the Daishi Hokuetsu FG, inheriting thecorporate names of The Daishi Bank and The Hokuetsu Bank will allow us to utilize the brand power of the two banks’corporate names
in Niigata Prefecture. The corporate logo and corporate color will become the same as the Daishi Hokuetsu FG.

January 2021

THE HOKUETSU BANKThe corporate name of the group company Daishi Securities will also change in October 2019.
By changing the corporate name to Daishi Hokuetsu Securities Co., Ltd., we will unify the corporate brand with the Daishi Hokuetsu FG,
strengthen the sense of group unity, and strengthen the consulting function in the securities field. Additionally, we will maximize synergy infields linking banking and securities.

October 2019

THE DAISHI SECURITIESDAISHI HOKUETSU SECURITIESDAISHI HOKUETSU REPORT 20196

About the Daishi Hokuetsu FG

Management Philosophy / Ideal FormManagement Philosophy / Ideal Form

Main External Environment

Decliningbirthrate, aging
society, andshrinkingpopulation

Management Philosophy
As a trusted financial group,

ActionPrinciples

we will continue to provide services
that live up to the expectations ofcustomers and contribute to thedevelopment of regional society.

MissionWe will boldly take on challenge tocreate new value.

Vision andApproach

Lengthening ofmonetary-easing
policyGrowth ofdigitalization

Ideal Form
We establish ourselves as a financial andinformation services group that receives

Spread of
economic
globalization

overwhelming support by creating new value
through our financial intermediary function andinformation intermediary function, increasing theefficiency of management, and continuing tocontribute to the growth of regional society.

7

DAISHI HOKUETSU REPORT 2019

Increased
participation inbanking businessby corporations
from otherindustries

Strategy

For Achievement of a Sustainable Society

1st Medium-Term Management Plan

Five Declarations for Implementing
ESG Management and Achieving SDGs

Basic Strategy I
Improve our financial intermediary function
and information intermediary function
Create topline synergy*1 andreform our portfolio*2

Basic Strategy II

In order to fulfill our corporate social
responsibility for achieving a sustainable society,
the Daishi Hokuetsu FG actively works to resolve
social issues related to ESG (Environment,
Society, and Governance) and contributes to theachievement of SDGs (Sustainable Development
Goals) set by the United Nations. By doing so, we
seek to grow continually with regional society.

Increase management
efficiency
Create cost synergy*3

Basic Strategy III
Increased sophistication of theGroup management systemstrengthening ofmanagement infrastructure▲

For details, see pp. 9 to 12*1. Synergy‌which increases profits through management
integration and merger*2. Activities‌
for reforming the composition of owned
assets, heightening the composition ratio of interest on
loans and non-interest income in the gross profit of corebusinesses, and strengthening profitability*3. Synergy‌which decreases expenses throughmanagement integration and merger

Five Declarations
Declaration 1

Declaration 2

Regional Economy / Society

Aging Society

Contribute to revitalization of the
Support a safe and secure
regional economy and community.
lifestyle for the elderly.
Declaration 3

Financial Services

Provide financial services forleading an even better lifestyle.
Declaration 4
Declaration 5

Diversity

Environmental Protection

Promote diversity andwork-style reform.

Contribute to sustainable
environmental protection.

〈 TSUBASA Alliance* 〉*Framework for wide-ranging cooperation among regionalbanks with the aim of proposing and implementing
measures to contribute in areas such as sustainableregional growth, increased sophistication of financial
systems, and increased corporate value of corporategroups participating in the alliance.

▲▲

For details, see pp. 19 to 20

For details, see pp. 21 to 40

DAISHI HOKUETSU REPORT 20198

Medium-Term Management Plan

1st Medium-Term Management Plan
The Daishi Hokuetsu FG plans to merge the two banks and perform system integration in January 2021.
The Medium-Term Management Plan consists of two phases: the 1st Medium-Term Management Planfor until the 2020 fiscal year in which the two banks will merge, and the 2nd Medium-Term Management
Plan which seeks to maximize the synergistic effect of the merger.
FG established in
October 20182017 fiscal year2018 fiscal year

January 2021*
Merger of the two banks and system integration

2019 fiscal year

2020 fiscal year

2021 fiscal year and beyond

Extent of creatingsynergistic effect

FG Medium-Term
Schedule

Startup 180(October 2018
to March 2019)

1st Medium-Term
Management Plan

(October 2018 to March 2021)

From management integration until merger● Early creation of synergistic effect

Theme ofPlan Period● ‌Execution and achievement of current

2nd Medium-Term
Management Plan

(April 2021 to March 2024)

After merger● Maximization of synergistic effectmanagement plans for the two banks● ‌Creation of a foundation for creating amerger synergistic effect(April 2018 to March 2021)

Management Plan
Schedule at
Each Bank

Medium-Term
Step-Up New Stage — Transformation andManagement Plan Leap Forward —THE HOKUETSU BANK

19th Long-termManagement Plan

(April 2017 to March 2020)—Working tirelessly for the communityand for tomorrow (the future)—(extend 1 year)

New Management Plan

*The schedule for merger of the two banks and system integration is the plan as of March 2019. This schedule may be subject to change.

Basic Strategy
The three priority management themes of the Daishi Hokuetsu FG are revitalizing the regional economy, strengthening
profitability, and increasing management efficiency. In order to achieve these themes, we are working to implement thefollowing three basic strategies: I) improving the financial intermediary function and the information intermediaryfunction, II) increasing management efficiency, and III) increasing the sophistication of the Group management system.
1st Medium-Term Management Plan Plan Period: October 2018 to March 2021
Basic Strategy I

Basic Strategy II

Basic Strategy III

Improving the financial
intermediary function and theinformation intermediary function

Increasing management
efficiency

Increasing thesophistication of the Groupmanagement system

Create topline synergy andreform our portfolio

Create cost synergy

strengthening themanagement infrastructure

Priority Tactics

Priority Tactics

Priority Tactics

Strengthen the consulting function
Enhance products/services
Expand new business fields
Increase efficiency andimprove convenience through digitalization

9

DAISHI HOKUETSU REPORT 2019

Decrease costs through management
integrationand partnerships with other banks

Strengthen human resources capability
and organization capability
Increase the sophistication of
governanceThree-structure reform ofadministrative duties, branches,and channels

Increase the sophistication ofrisk management

Management Indexes (KPI) / Evaluation Indexes for Contributing to the Community

Management Indexes (KPI)
The average small and mid-sized corporate loan balance, the average consumer loan balance, and the amount of non-interest income
all increased steadily year-on-year. There are also steady results from efforts for the five indexes for portfolio reform, such as the ratio ofsmall and mid-sized corporate loans to total loans.
*Items not listed as consolidated are calculated on a total basis for the two banks.
FY2017
Results

Management Index (KPI)

Profitability

Growthpotential

Efficacy

Financialhealth(100
Consolidated income for million
yen)
the period*1―

Average small and mid-sizedcorporate loan balance*2(100
millionyen)

17,629Average consumer loanbalance(100
millionyen)

11,612

Non-interest income*3(100
millionyen)

165

Core business grossprofit OHR

(%)

73.4

Consolidated ROE(shareholder capital
base*4)(%)

Consolidated capital
equity ratio(%)

FY2018Results

568

＋977

＋681

FY2017
Results

Five Indexes for Portfolio Reform

Ratio of small and midsized corporate loans
to total loans

(%)

37.1

Ratio of consumer
loans to total loans

(%)

24.4

Ratio of unsecuredloans to consumer
loans

(%)

8.0

Ratio of profit from assets
on deposit to corebusiness gross profit

(%)

7.6

Ratio of financial
solutions income to corebusiness gross profit

(%)

6.7

FY2018Results

＋0.1

37.2

18,606
12,293

＋11

＋1.4

―

―

176
74.8
15.5
（17.8）
9.5

＋0.2

24.6

8.0

＋1.8

＋0.8

9.4

7.5

*1. Net income attributable to parent company shareholders*2. Annual average balance before partial direct depreciation*3. ‌Total amount of other business profits excluding fees/commissions and gains (losses)
related to bonds (government bonds, etc.)*4. The‌ denominator is calculated by subtracting valuation difference on available-for-sale securities, etc., from net assets

Evaluation Indexes for Contributing to the Community
From among the 37 items for benchmarks of the financial intermediary function, the Daishi Hokuetsu FG has selected eight items for
initiatives as indexes to evaluate the status of contribution to the community. For all eight of these items, results have exceeded thecorresponding targets, and initiatives are going smoothly at the two banks.
Evaluation Indexes for Contributing to the Community

Top-priority index formeasuring extent ofcontribution to community
Maintenance/increase ofleaders for the regional
economyTargetResults

Comparison with target

Number of corporations doing business with
the Daishi Hokuetsu FG as their main bank

13,950

14,237＋287

Number of projects involving startup/restart ofa business

1,050

1,136

＋86

Corporations supported in finding a businesssuccessor

1,400

1,433

＋33

900
210,000
million yen

2,355
452,800
million yen＋1,455＋242,800
million yen

Number of corporations utilizing Guidelines for
Personal Guarantee Provided by Business
Owners

3,460

3,836

＋376

Number of business partners who reformed
their management indexes, etc.

8,750

9,078

＋328

Number of projects for supporting main
businesses

3,450

3,729

＋279

520

660

＋140

Number of borrowers/balance based on
evaluation of business feasibility

Support for increasing
added value ofcorporations*Calculation base forthe two banks

FY2018

Number of corporations being supported forformulation of management reform plans

DAISHI HOKUETSU REPORT 201910

Medium-Term Management Plan

Basic Strategy

Basic Strategy I: Improving the financial intermediary function and the information intermediary function
We will create even higher added value by working to expand new business fields, and to increase efficiency and improve convenience through digitalization.

Establishment of the Regional Trading Firm Bridge Niigata, Ltd. As a priority measure for contributing
to regional society, we established theregional trading firm Bridge Niigata, Ltd.
in April 2019.
Based on the overwhelming amountof information held by The Daishi Bankand The Hokuetsu Bank, Bridge Niigata
will conduct business by performing thethree functions of connecting,expanding, and creating.
As a“Niigata sales company,”Bridge
Niigata contributes to the growth of theregional economy by functioning as abridge between the Niigata Prefecture
economy and markets outside of theregion. For example, the company
develops new sales channels for highquality agricultural products, forestry
products, marine products, industrial
products, crafts, and other products ofNiigata Prefecture. The company also
engages in effective marketing throughpartnerships with major corporations
possessing strengths in each field,
promotes tourism by communicating
information throughout Japan andoverseas, and utilizes ICT to support theincreased productivity of small andmedium-sized corporations.

Service providers (business/government)

Producers (business)
Agricultural,
forestry,or marine products

Industrial
products

Traditional
craftsIn
Niigata
Prefecture Tourism/

Other

restaurants

MedicineandwelfareGoods

Tourism-related

Government

Services

TSUBASA banks

Retail/wholesale

Finance

IT

Nomura Securities
Group

Connect

CreateExpandTransportation/
shipping

Information-related/
media

Daishi Hokuetsu FG

Daishi Hokuetsu
Career Bridge, Ltd.,
Goods+added value
Services+added value

Other

etc.

Service vendors

Municipalities in
Niigata Prefecture

Sales/proposals

ProﬁtMarket information

New sales destinations/sales channels outside of Niigata Prefecture and overseas provided by Bridge Niigata

Establishment of the Employment Agency Daishi Hokuetsu Career Bridge, Ltd. 
In May 2019, we established
Daishi Hokuetsu Career Bridge,
Ltd. to support the resolution ofhuman resources issues faced byclient corporations. For example,
the company responds toshortages of managers and expert
personnel, cultivation of
employees, and acceptance of
foreign laborers.
As a comprehensive consulting
company for human resources,
Daishi Hokuetsu Career Bridge
supports the resolution of regional
human resources issues throughthe three functions of connecting,expanding, and creating.
*‌Daishi Hokuetsu Career Bridge isscheduled to start business operationsin October 2019 assuming thefulfillment of certain requirements,
including certification as a private
employment service by the Ministry of
Health, Labour, and Welfare based on
the Employment Security Act.

11

DAISHI HOKUETSU REPORT 2019

Corporations
inNiigata Prefecture
Resolution ofhuman resources
issuesShortages ofmanagers
andexpert personnel

High turnoverrate among
young generation

Bridge Niigata, Ltd.

●

Executives/managers●

Expert personnel/technicians●

Salespeople, etc.

ExpandInformation on
Tokyo metropolitan area

TSUBASA banks

External employment
agencies

Human resources matching

Connect

Daishi Hokuetsu
Career Bridge, Ltd.

Partnerships

Solutions for human resource cultivation●

Training and seminars

CreateJob seekers in
Niigata Prefectureetc.

Daishi Management Consulting
Information sharing/
partnerships

Hokugin Economic Research InstituteResearch Center of Niigata
etc.

Cultivation of
employees
Niigata Prefecture

Universities

Corporations
inNiigata Prefecture

Regional banksetc.

Basic Strategy II: Increasing management efficiency
In addition to implementing three-structure reform for administrative duties, branches, and channels, we are increasing

management efficiency through management integration and partnerships with other banks via the TSUBASA Alliance.

Initiatives for Three-Structure Reform 
Based on the principle of placing the customer first, we are actively implementing three-structure reform based on the three pillars of reforming administrative duties, reforming branches, and reforming channels.
Three-Structure Reform
Reform of Administrative Duties*The number of reductions in administrative personnel is scheduled in
The Daishi Bank Medium-Term Management Plan (April 2018 to March 2021).

Reduce administrative personnel in sales oﬃces by half

Reduce ﬁnancial administrative personnel in sales oﬃces(reduction of approx. 260 people by March 31, 2021)(reduction of approx. 150 people by March 31, 2021)●Eliminate back-oﬃce administrative duties
Elimination in ●Eliminate veriﬁcation
Five Categories ●Eliminate cash management●Eliminate use of paper●Eliminate use of personal seals●Standardization of administrative rules●Reconstruction of systems
Reform of
Financing Duties ●Expansion of administrative concentration●Review of decision-making authority●Utilization of tablets

Reform of Branches
Change sales oﬃces
into consulting spaces

Increase customer convenience throughnon-face-to-face channels

Speciﬁc Examples ̶̶̶̶̶̶̶̶̶̶

Speciﬁc Examples ̶̶̶̶̶̶̶̶̶̶

November 2018

November 2018

Implementation of TSUBASA Smile (p. 47)
November 2018

Installation of remote consultation service

Speciﬁc Examples ̶̶̶̶̶̶̶̶̶̶̶̶̶̶̶̶̶̶̶̶̶̶̶̶̶̶̶̶̶̶̶̶̶̶
January 2018
May 2018
November 2017
Implementation of RPA (p. 19) Paperless application for investment trusts and insurance
Establishment of Middle Oﬃce

Reallocation to core business (sales and planning divisions)

Reform of Channels

200 people

Implementation of Web Completion Scheme
for personal loans (p. 47)
April 2019

Implementation of Bank Passbook App(p. 47)*Plan for The Daishi Bank by March 31, 2021

Branch Integration after Merger of the Two Banks (Branch network)
Branches of The Daishi Bankand The Hokuetsu Bank

(adjacent branches)(Adjacent Branches) Integration of 50 Branches (Daishi: 20; Hokuetsu: 30) starting from April 2021
Branch-in-Branch Format
Integrate adjacent branches via a branch-in-branch format* while considering factors
such as the useful life of the building area, location, and market/branch characteristics
Branch A

Branch B

Branch Empty SpaceAs a general rule, empty space issold. However, we are also
reviewing utilization methods inaccordance with needs of thecommunity.

Reallocation of personnel
Enhancement of sales personnel

After integration

Branch A
Branch B

Branch B is relocated to the adjacent Branch A*Method in which the locations of multiple sales oﬃces are merged into the same location and coexist in the same building(regional single branches)

Finished recording branch impairment costs (total of 6,400 million yen for the two banks)
associated with branch integration in ﬁnancial results for the 2018 ﬁscal year

(Regional Single Branches) For the time being, plan to maintain even after merger of the two banks
For the time being, we plan to maintain branches in regions where a branch for only one of the two banks islocated (regional single branch), in former municipality units prior to municipal mergers in the Heisei Period

Basic Strategy III: Increasing the sophistication of the Group management system
By strengthening human resources capability and organizational capability, and by increasing the sophistication of governance, wewill seek further sophistication of the management system for the entire Group and will strengthen the management infrastructure.

Initiatives for Organizational Harmony Start of Personnel Interaction
Since the management integration in October 2018, we have encouraged thesharing of know-how and strengthening of functions through interaction of thetwo banks’personnel for specialized divisions such as securities divisions andconsulting divisions.
In April 2019, we started personnel interaction for branch managers andassistant branch managers of the two banks.
Furthermore, we hold joint seminars on days off and in evenings for bankpersonnel of the two banks, and have started mutual availability for training
centers of the two banks.

Number of employees
participating in seminars held ondays off and in evenings during theyear ended March 31, 2019

3,375employees(tabulated from October 2018)

Joint training for
new bank personnelof the two banks
DAISHI HOKUETSU REPORT 201912

Financial Highlights / Non-Financial Highlights

Financial Highlights Overview of Financial Highlights for the Year Ended March 31, 2019
Consolidated Results for the Daishi Hokuetsu Financial Group

Profit and Loss

(Unit: 100 million yen)

Item

Year Ended March 31, 2019

Ordinary income

1,180

Ordinary profit

167

Profit attributable to owners of parent

568

Consolidated capital equity ratio

9.54 %*‌Consolidated results for the first year of establishment (year ended March 31, 2019) were calculated by adding the consolidated
profit/loss of The Hokuetsu Bank after the management integration to the full-year consolidated profit/loss of The Daishi Bank.
*‌Net income attributable to shareholders of the parent company includes 47,200 million yen in gain on bargain purchase due to the corporate integration.

Ratings
Daishi Hokuetsu Financial GroupWe received an A+ (long-term senior debt rating)from the Japan Credit Rating Agency (JCR).

Japan Credit Rating Agency (JCR)

AAA
AA

A＋

A

A

BBB

Aー

◦Rating
The certainty of fulfillment for bonds (corporate bonds, etc.)
issued by a corporation is evaluated by a ratings organization
which is a fair third party. The evaluation results are displayed as
an easy-to-understand symbol that objectively assesses thecreditworthiness and safety of the corporation. This rating is an
important index.

BB
B
CCC
CC
C
D

The Daishi Bank

13

The Hokuetsu BankJapan Credit Rating Agency (JCR)

Moody’s

Japan Credit Rating Agency (JCR)

A+

A2

A+

DAISHI HOKUETSU REPORT 2019

The following numbers are a simple summation of the full-year non-financial results of the two banks. These numbers do not match
Totals of the Two Banks consolidated
the consolidated financial results of the Daishi Hokuetsu Financial Group.

Profit and Loss
Gross profit
Core business net profit¥83,400¥21,100

Gross proﬁt

millionOrdinary profit

millionCurrent net incomeCore business net proﬁt

Ordinary proﬁt(100 million yen)(100 million yen)

1,000

300

851

800

834

¥23,500¥14,300

284
235

206

200
150

400

143

100

231

200

millionCurrent net income

250

600

million

211

50

0

0

Year ended March 31, 2018Year ended March 31, 2019Year ended March 31, 2018

Despite an increase in profit from fees and commissions consistingof interest on loans and non-interest income, gross profit decreased
to 83,400 million yen (down 1,600 million yen year-on-year) mainly
due to a decrease in interest and dividends on securities. Corebusiness net profit decreased to 21,100 million yen (down 2,000
million yen year-on-year) mainly due to a decrease in gross profit.
◦Gross profit◦Core business net profit

Total profit calculated by adding
capital income consisting of interest
income such as deposits, loans, andsecurities; fees and commissions which
are income from fees; and otherbusiness interest which is income fromother business activities.

Profit obtained from main businessactivities of the bank. Calculated bydeducting gains (losses) related tobonds (government bonds, etc.) fromgross profit and then subtracting
expenses such as personnel expenses
and property costs.

Year ended March 31, 2019

Ordinary profit decreased to 23,500 million yen (down 4,900 million
yen year-on-year) mainly due to an increase in net credit costs.
Current net income decreased to 14,300 million yen (down 6,300
million yen year-on-year) due to a decrease in ordinary profit, as well as
to 6,400 million yen in extraordinary losses for branch integration
expenses in conjunction with the management integration.
◦Ordinary profit
Profit obtained from normal
operating activities. Calculated
by subtracting ordinary
expenses from ordinary profit.

◦Current net income
Final income calculated bysubtracting extraordinary
losses, taxes, etc., fromordinary profit.

Deposits and Assets on Deposit
Deposits
(100 million yen)

¥7,488,000
All branches

Branches in Niigata Prefecture

76,00074,12374,00072,00070,00071,884

million72,46874,88073,167

Assets on deposit
Total(100 million yen)

Investment trust

millionInsurance

10,0008,000
6,000

70,177¥879,800

8,617

8,798

8,609

5,262

5,199

5,528

4,000
2,000

68,00066,000

1,926

2,101

2,114

Year Ended March 31, 2017

Year Ended March 31, 2018Year Ended March 31, 20190Year Ended March 31, 2017

Year Ended March 31, 2018Year Ended March 31, 2019

The deposit balance (including negotiable deposits)
increased to 7,488,000 million yen, with the main increase
being deposits from customers in Niigata Prefecture.

Assets on deposit increased to 879,800 million
yen as a result of proposals matching the assets
management needs of our customers.

DAISHI HOKUETSU REPORT 201914

Financial Highlights / Non-Financial Highlights

Financial Highlights Overview of Financial Highlights for the Year Ended March 31, 2019
The following numbers are a simple summation of the full-year non-financial results of the two banks. These numbers do not match
Totals of the Two Banks consolidated
the consolidated financial results of the Daishi Hokuetsu Financial Group.

Loans and Securities¥5,091,500

Loans
(100 million yen)

All branches

Branches in Niigata Prefecture

60,00050,00040,00030,00025,00020,00015,00020,00010,00010,000

5,000

0

0

Year Ended March 31, 2017

Year Ended March 31, 2018

¥2,494,200

Total

37,86436,51435,38930,000

Securities

Domestic bonds(100 million yen)

50,91549,44347,011

millionYear Ended March 31, 2019

The loan balance increased to 5,091,500 million yen as theresult of actively responding to the lending needs of customers.

27,578Foreign government bonds

25,903

17,877

Year Ended March 31, 2017

14,971

3,566

1,666

Stocks24,942

15,900

4,553

million

4,181

1,786

Year Ended March 31, 2018

1,471

Year Ended March 31, 2019

The securities balance decreased to 2,494,200 million
yen as the result of decreases in domestic bonds, etc.

Bad Debt¥67,500

Bad debt
Substandard claims(100 million yen)

1,200
900
600
300
0

Doubtful claims

Bankrupt/substantially bankrupt claims

818

659

93

(%)

1.2

675

70

million yen, which was 1.28% of non-performing loan.
The head offices and sales offices are working together to support

Non-performing loan ratio

1.28

717

65

million

1.6

1.40

1.69

Non-performing loan balance based on the Financial Revitalization Act(loans reported based on the Financial Revitalization Act) was 67,500

50

0.8

564

543

0.4

82

81

0

Year Ended March 31, 2017 Year Ended March 31, 2018 Year Ended March 31, 2019

management reform at our customers.

◦Substandard claims
Delinquent loans of 3 months or longer and restructured loans to substandard
debtors, excluding doubtful claims and bankrupt/substantially bankrupt claims.

◦Doubtful claims
Loans for which the debtor has not entered business bankruptcy, but is
experiencing worsened financial status and economic performance, and there isa high possibility that it may not be possible to recover capital or receive
interest on the loan according to the contract.

◦Bankrupt/substantially bankrupt claims
Loans of debtors with bankrupt business due to reasons such as the start ofbankruptcy procedures, the start of reorganization procedures, or declaration forthe start of reorganization procedures, or loans to which these conditions apply.

The Daishi Bank / The Hokuetsu Bank Consolidated / Non-Consolidated

Status of equity ratio

*A level of at least 4% is required for banks operating only in Japan.

The Daishi Bank
Non-consolidated equity ratio

10.16%

10.79%

9.65%

The Hokuetsu Bank

Consolidated equity ratio

10.25%

9.25%

9.63%

4％
Domestic
standard

8.45%

8.99%

8.58%

Consolidated equity ratio

9.06%

8.47%

8.87%

4％
Domestic
standard

Year Ended March 31, 2017 Year Ended March 31, 2018 Year Ended March 31, 201915

Non-consolidated equity ratio

DAISHI HOKUETSU REPORT 2019Year Ended March 31, 2017 Year Ended March 31, 2018 Year Ended March 31, 2019

Non-Financial Highlights

Support for Startups

Support for Business Succession/M&A

Business startups or re-startups inwhich the two banks were involved(FY2018)

1,136
Handling of Private Placement Bonds
Handling of private placement
bonds for donations

Number of companies supported in(FY2018)
business succession

856

Number of companies supported in M&A(FY2018)

577
Promotion of Diversity
Female manager ratio*(as of March 31, 2019)(total since the start of handling)

1,025¥96,700
millionSupport for Growth of Next Generation

Number of participants in financial
education activities

22.8

％

*‌Ratio of female employees holding the rank of acting branch manager,
assistant director, or higher from among all bank employees holding therank of acting branch manager, assis-tant director, or higher.

Environmental Protection
Number of participants in afforestation
activities (total since the start of activities)

3,063(total since the year ended March 31, 2014)

9,927

Amount/ratio of decrease in CO2(compared to the year ended March 31, 2010)

3,840 25.4
tons

Support for Cultural Activities％

Support for the Elderly

Number of events* held by the twobanks(total since the year ended March 31, 1993)

150

Number of employees certified as(FY2018)
Service Care-Fitters

225

Number of employees attending
lectures to train Dementia Supporters(total since the year ended March 31, 2017)

4,889*‌Mainly consisting of classical music concerts and rakugo (Japanese comedy)
performances with the aim of providing local residents with low-priced
events that contribute to the promotion of local culture and art.

DAISHI HOKUETSU REPORT 201916

To Our Shareholders

Return to Shareholders / Shareholders Benefits

Policy for Return to Shareholders
While considering the public nature of the banking business, in order to reward each one of our shareholders
moving forward, our basic policy is to continue stable returns to shareholders while also ensuring an increase ininternal reserves in order to strengthen our revenue base.
Specifically, we aim for a shareholder return rate of approximately 40%
Dividends per sharewhen combining dividends and acquisition of treasury stock.
Year-end dividends for the
Furthermore, our policy is to work to increase ROE based on strengthening
60yenyear ended March 31, 2019of current net income. Our mid- to long-term goal is at least 5%.

Shareholder Benefits System
We have implemented a shareholder benefits system in order to thank shareholders for their continued support,
to increase the appeal of investing in our company’s stock, and to encourage more people to engage in long-termownership of our company’s stock.

Applicable Shareholders 
The first benefits package is offered to shareholders who are listed in our company’s shareholder register as ofMarch 31, 2019 and who own at least 50 shares. Afterwards, benefits packages will be offered to shareholders
who continuously owned at least 100 shares (1 share unit) for period of at least one year, using March 31 of eachyear as the reference date (the same shareholder number is listed continuously at least three times in theshareholder register as of March 31 and September 30 of each year). Shareholders who own at least 50 shares but
less than 100 shares as of March 31, 2019 will continue to be eligible for the shareholder benefits system bypurchasing additional shares to reach ownership of at least 100 shares by March 31, 2020.
●

First Benefit (March 31, 2019)●

Shareholders owning the following number of shares as of March 31, 2019

Second and Subsequent Benefits (from March 31, 2020)
Shareholders continuously owning the following number of shares for at least 1 year

Number of Shares Owned

Amount of Gift

Number of Shares Owned

Amount of Gift

50 shares to less than 1,000 shares

Equivalent to 2,500 yen

100 shares to less than 1,000 shares

Equivalent to 2,500 yen

1,000 shares or more

Equivalent to 6,000 yen

1,000 shares or more

Equivalent to 6,000 yen

Contents of the Shareholder Benefits System 
Depending on the number of shares owned, the shareholder can select their desired gift from either of thefollowing two catalogs.
(1) Catalog listing special local goods from Niigata Prefecture or donations to the Hokugin Scholarship Fund
(2) Catalog listing special local goods from other prefectures as TSUBASA Alliance Joint Plan**Catalog listing special local goods from four regional banks participating in the TSUBASA Alliance (The Chiba Bank: Chiba Prefecture, The
Chugoku Bank: Okayama Prefecture, The Iyo Bank: Ehime Prefecture, The Toho Bank: Fukushima Prefecture).

Notes ‌ his benefits system can only be used by the shareholder.
T
Benefits cannot be transferred, loaned, or otherwise assigned
to a third party, including family members.
● ‌For details on how to apply for the benefits services and how
to use the services, please refer to the catalogs sent to eligible
shareholders.
● ‌Contents, conditions, and other details of benefits are subject
to change depending on factors such as changes in the financeenvironment. Advance notifications of such changes will beannounced on the Company website or through othermediums.
●

17

DAISHI HOKUETSU REPORT 2019

Information Disclosure

Disclosure Activities
With the goal of achieving transparency and health of management, we
actively hold disclosure activities for disclosure of management status andother information. Through these activities, we seek to create understanding
towards our management status from stakeholders including customers,
regional residents, and shareholders.
In addition to disclosing our disclosure journal and other PR materials on our
website, we hold company information sessions in Tokyo for institutional
investors. Through these sessions, we seek to increase corporate value. We
also hold company information sessions for individual investors in Niigata
Prefecture, which is the main business infrastructure of our company.

Information session for investors

Disclosure Policy
At the time of our establishment in October 2018, we announced the Daishi Hokuetsu Financial Group
Disclosure Policy which defines topics such as our company’s basic posture towards disclosure of information.

１．Basic Posture 
Accurately conveying our company’s activities and management status to stakeholders is fundamental andessential for obtaining trust towards our company. We recognize that timely and appropriate disclosure ofcompany information will help increase the health and transparency of our management.
In particular, we recognize that timely and appropriate disclosure of important company information which willaffect the investment decisions of investors is an extremely important responsibility of a listed company. In the
future, we will continue to engage in sincere and timely disclosure.

２．Information Disclosure Method 
Our company discloses important information in compliance with the Companies Act, the Banking Act, the Financial
Instruments and Exchange Act, other related laws, and rules defined by the Tokyo Stock Exchange.
We use a Timely Disclosure Network (TDnet) system for timely disclosure of applicable items. Furthermore, we
immediately list said items on our company’s website in order to ensure broad transmission of applicable information.
Moreover, even in the case of information that is not subject to disclosure regulations, we consider fairness andappropriateness in order to actively disclose information which we believe will have a significant effect on investment
decisions and information which we consider as pertinent for increasing understanding towards our company.

３．Fair Disclosure Initiatives 
We strive to engage in fair disclosure of information through measures to avoid selective disclosure to certain
individuals when conveying undisclosed important information that will affect investment decisions.
Immediately after company information sessions held for institutional investors, we disclosure materials used at
the session on our website.

４．Development of Internal Systems We will continually develop and enhance internal systems for implementing our disclosure policy.
Moreover, we are working to further enhance the contents of timely disclosed information, etc., and to further enhance thecontents, issuance form, etc., of publications such as our disclosure journal. Additionally, through active utilization of tools such as
our website, we are working to enable fast and easy access by stakeholders to a variety of management and financial information.

５．Items Related to Future Forecasts Disclosed information includes future forecasts related to the financial condition and results of companies in the
Daishi Hokuetsu Financial Group. We make no guarantee that future results will be achieved in accordance withthese future forecasts. Future forecasts contain a certain element of risk and uncertainty. Actual results may differ
due to factors such as future changes in the environment surrounding management.

DAISHI HOKUETSU REPORT 201918

TSUBASA Alliance

TSUBASA Alliance
The TSUBASA Alliance is a framework for wide-range
regional partnerships aimed at proposing andimplementing measures for contributing to sustainableregional growth, sophistication of financial systems,
increased corporation value of member bank groups,
and other initiatives.
The Musashino Bank joined the alliance in March
2019, followed by The Shiga Bank in May 2019. A totalof nine banks now participate in the alliance.

TSUBASA Alliance logo

Banks Participating in the TSUBASA Alliance Location of Head Office and Branches

North Pacific BankThe Daishi Bank
The Hokuetsu BankThe Toho BankThe Shiga BankThe Chiba BankThe Chugoku Bank

The Musashino BankThe Iyo Bank
本店所在地
Head Office
店舗所在地
BranchHistory of the TSUBASA Alliance
Since its founding in October 2015, the alliance has worked to form partnerships involving the group companiesof participating banks in a wide range of fields such as sharing of fintech and systems, sharing of administrative
duties, inheritance-related business, and international business.

Collaboration for core systems
Migration of new systems

Establishment of the T&I Innovation Center

Jan. 2016 Chiba Jan. 2017 Daishi
May 2017 Chugoku

July 2016 Daishi, Chiba, Chugoku,
Iyo, Toho, North Pacific, IBM (Japan)

Partnership in inheritance-related
business with The Chiba Bank
Oct. 2016 Daishi, Chugoku June 2017 Toho

Partnership in asset management business
June 2017 Toho Aug. 2017 North PacificJan. 2018 Daishi

2017

2016

Start of TSUBASA AllianceOct. 2015 Daishi, Chiba, Chugoku

19

DAISHI HOKUETSU REPORT 2019

Increase in participating banks
Mar. 2016 Iyo, Toho, North PacificStreamlining of indirect
division
Partnerships indifferent industries

Creation of new businessTowards further cost
reduction and improvementof service standards

TSUBASA SDGs Declaration
On May 22, 2019, The Daishi Bank, The
Regional Economy / Society Declaration 1 Contribute to revitalization of the local economy and community.
Hokuetsu Bank, The Chiba Bank, The Chugoku
Bank, The Iyo Bank, The Toho Bank, North PacificDeclaration 2 Support a safe and secure lifestyle for the elderly.
Aging Society
Bank, The Musashino Bank, and The Shiga Bank
enacted the TSUBASA SDGs Declaration as a joint
Financial Services Declaration 3 Provide financial services for leading an even better lifestyle.
measure of the TSUBASA Alliance. The declaration
Declaration 4 Promote diversity and work-style reform.
Diversity
is a joint initiative for achieving SDGs set by theUnited Nations.
Environmental Protection Declaration 5 Contribute to sustainable environmental protection.
One of the joint goals of the TSUBASA Alliance issustainable regional growth. Based on mutual
understanding that member banks share the same regional social and environmental issues, the joint declaration was madeto further strengthen response to these issues.

Comparison of Other Banks Financial Results (Consolidated) for the Year Ended March 31, 2019—In Order of Total Assets
Total Assets

Deposits

Loans

Mitsubishi UFJ Financial Group¥311.1 trillion¥180.1 trillion¥107.4 trillion

Sumitomo Mitsui Financial Group¥203.6 trillion¥122.3 trillion¥77.9 trillion

Mizuho Financial Group¥200.7 trillion¥124.3 trillion¥78.4 trillion

TSUBASA

¥65.7 trillion¥54.1 trillion¥41.8 trillion

Resona Holdings*2¥59.1 trillion¥51.1 trillion¥36.1 trillion*1

Sumitomo Mitsui Trust Holdings¥57.0 trillion¥31.9 trillion¥29.0 trillion

TSUBASA

¥55.0 trillion¥45.1 trillion¥34.5 trillion

Fukuoka Financial Group¥20.8 trillion¥14.0 trillion¥12.9 trillion

Concordia Financial Group

¥18.9 trillion¥15.9 trillion¥12.6 trillion

Mebuki Financial Group

¥17.3 trillion¥14.3 trillion¥11.1 trillion*3*1. ‌The Musashino Bank joined in March 2019.
The Shiga Bank joined in May 2019.
*2. ‌The Kansai Mirai Financial Group (Kansai
Urban Banking Corporation, The Minato Bank)
was included in consolidation from April 2018.
*3. ‌Japan Trustee Services Bank and two othercompanies are not included in consolidationfrom October 2018.

The scale of total net assets
comes after mega banks

Moving forward, we will further accelerate strategic alliances by concentrating the know-how and knowledge of each bank. By doing so,
we will contribute to sustainable growth of regional society through the provision of high added-value financial services, etc.

Agreement for collaboration among
administrative departments

Activation of the TSUBASA
FinTech shared platform
Apr. 2018

Implementation of TSUBASA Smile

Nov. 2018 Daishi Apr. 2019 Chiba
May 2019 Chugoku

Feb. 2018 Daishi, Chiba

Implementation of bank passbook app
Feb. 2019 Chiba, North Pacific
Apr. 2019 Daishi May 2019 Chugoku

2019
2018

Increase in participating banks
Mar. 2019 Musashino May 2019 Shiga

Increase in participating banks
Apr. 2018 Hokuetsu

Aggregate shared functions andNew

Alliance
Platform Concept

The Daishi Bank /The Hokuetsu Bank

Corporate
Sales Merchandising Compliance
Planning

Banks participating in
the allianceCorporate
Sales Merchandising Compliance
Planning

Risk

Administration

indirect divisions; improve

Systems Auditing(Aggregation)

Risk

Administration

Systems Auditing

productivity and increase
sophistication of services by sharing
know-how and human resources

Merchandising

Compliance

Risk

Administration

Systems

Auditing

DAISHI HOKUETSU REPORT 201920

ESG Initiatives and Contributions to SDGs

Initiative Policy for ESG
In order to fulfill its social responsibility for achieving a sustainable society, the Daishi Hokuetsu FG actively works
to resolve social issues related to ESG (Environment, Society, and Governance). Furthermore, the Group
contributes to achievement of SDGs (Sustainable Development Goals) set by the United Nations. Through these
activities, we seek to realize sustainable growth together with the region.

E nvironment

In order to protect the rich and beautiful natural environment of our home in Niigata Prefecture, andto contribute to the achievement of a sustainable society, the Group supports customers who
engage in environmental protection. Furthermore, as a corporate citizen, we actively holdenvironmental protection activities for the region and work to solve global environmental issues.

S ociety

In addition to supporting the real-life regional economy by providing a wide range offinancial services that respond to needs of the region and society, the Group conducts
activities based on regional and social needs for contributing to growth of regionalsociety by utilizing management resources such as diverse human resources.

G overnanceIn order to obtain high recognition and establish unshakeable trusts from stakeholders including customers, local residents,and shareholders, the Group will work to improve financial health and profitability. We recognize that strengthening andenhancing corporate governance is an important management issue, and we strive to augment auditing and supervisory
functions for corporate management, as well as to increase the transparency of management activities.

SDGs Declarations
In May 2019, we set the Daishi Hokuetsu FG SDGs Declaration in accordance with the TSUBASA SDGs Declaration which were set

together with banks in the TSUBASA Alliance. Detailed initiatives for each declaration are introduced starting from the following page.

Declaration 1

Declaration 2

Declaration 3

Regional Economy / Society

Aging Society

Financial Services

Contribute to revitalization of thelocal economy and community.

Support a safe and secure
lifestyle for the elderly.

Provide financial services forleading an even better lifestyle.

Declaration 4

Diversity
▼△

〇●
●〇

DAISHI HOKUETSU REPORT 2019

Environmental Protection■□□

Promote diversity andwork-style reform.

21

Declaration 5

Contribute to sustainable
environmental protection.

SDGs Declaration 1 Regional Economy / Society Initiatives for achieving regional revitalization
In order to achieve perpetual contribution to regional society which is the prime purpose of the management integration, the entire Daishi
Hokuetsu FG is actively working to implement measures which will create a positive cycle for communities, people, and work.

Community

PeopleProblem-solving based onregional characteristics

Work

Create a flow of newpeople to rural areas

Create stable employment
in rural areas

Held the Niigata Food and Comprehensive Business Talks Conference (Shoku Biz!)
The two banks hold a variety of business meetings aimed atdeveloping sales channels and expanding suppliers for our customers.
In May 2019, we held the Niigata Food and Comprehensive
Business Talks Conference (Shoku Biz!).
Shoku Biz! is the largest such business conference in Niigata
Prefecture and was based on the theme of regional revitalization.
Exhibiting corporations from all industries were given the opportunity
to advertise their own products, services, and technologies, as well as
to engage in business discussions. The Group advertised the appealof Niigata Prefecture and provided information which will lead toregional revitalization.

Number of
Visitors

2,775

Number ofBusiness Talks

613(new records)

Exhibitor booth at Shoku Biz!

Held the Niigata Startup Awards 2018

The Daishi Bank
The Hokuetsu Bank

The Niigata Startup Awards recruit and award outstanding ideas andinitiatives for business startups. Award-winners receive cash prizes.
Furthermore, as a supplementary prize, the two banks provide support for
growth after startup. For
example, the banks support the
expansion of sales channels andinteraction with regional
corporations.
Following selection by thescreening committee, a single
Grand Prize and three ExcellencePrizes were awarded in January
2019.
Awards ceremonyAward-winning Business Plans
Business Plan
Grand Prize

Development of an ultra-lightweight system forobservation/recording of nystagmus for diagnosing vertigo

Excellence Prize
Advanced Technology Utilization Model

Production/sale of fertilized eggs for beef cows and dairy
cows in order to increase efficiency of calf production

Excellence Prize
Surface Regional Revitalization Model

Compact beer brewery for revitalization of thebrewery town Nuttari

Excellence Prize
Regional Value Creation Model

Next-generation monpe (women’s work pants) made by
local women using Niigata kamedajima fabricHeld the 3rd Niigata Business Idea Contest
The 3rd Niigata Business Idea Contest was
jointly held by Niigata Mitsukoshi Isetan Ltd.,the Niigata Branch of the East Japan Railway
Company, and the two banks (hereinafter,“the Four Companies”).
In addition to awarding the outstanding
business ideas of businesses and students, thecontest provides support from the FourCompanies for commercialization activities
such as marketing and business matching.
The Student Category is for university
students in Niigata Prefecture. Applications
were received from a total of 42 teams. In
November 2018, six finalist teams gave
presentations for the final screening, after
which a Grand Prize and Runner-Up Prizes
were selected.
The Business Category received applications
from 50 teams. In March 2019, six teams gave
final presentations, after which a Grand Prizeand Runner-Up Prizes were selected.

The Daishi Bank
The Hokuetsu Bank

During the presentation

The Daishi Bank
The Hokuetsu BankAwards ceremony (Student Category)Awards ceremony (Business Category)Award-Winning Business Ideas
Business Idea
Grand Prize
Student
Category

Business
Category· ‌Establishment of sixth-sector industrial business aimed at advertisingproducts brewed in Settaya through regional cooperation· ‌Sumbrella: A folding parasol with a traditional Niigata pattern
Runner-Up Prize · ‌First in Niigata! A café-style diner specializing in kurumafu (baked
pieces of wheat gluten cut into rings)
Grand Prize· Vacuum-packed‌knit hat for cancer patients featuring sterilized processing

Runner-Up Prizeideal sound—Manufacturing a spherical speaker made from Echigo cedar!!
· Seeking‌· Land‌cultivation business for silver salmon from Niigata Prefecture

DAISHI HOKUETSU REPORT 201922

ESG Initiatives and Contributions to SDGs

SDGs Declaration 1: Regional Economy / Society —Initiatives for achieving regional revitalization—

Held JBMC-NIIGATA 2018

The Daishi Bank
The Hokuetsu BankIn November 2018, we cooperated with ICLOVE (Minamiuonuma City
Local Industry Support Liaison Council) to hold JBMC (Japan Business
Model Competition)-NIIGATA 2018 for contributing to new regional
business and regional revitalization.
Awards ceremony

The competition was made possible through close cooperation by
Minamiuonuma City, local industries, universities, and banks. At theAwards Resultscompetition, eleven teams presented their business model aiming for

Business Model

regional revitalization and activation of the regional economy.
After careful consideration, two teams were selected for awards andqualified for the national competition (JBMC Finals) to be held in Tokyo.

Daishi Hokuetsu
FG Award

Water tank that utilizes an improved water circulation
system to eliminate the need to change water

ICLOVE Award

Using smartphones to manage study schedules, holdclasses, and give advice

Support for Business Succession / M&As

The Daishi Bank
The Hokuetsu Bank

The two banks are engaged in a Business Succession Support
Program offering comprehensive one-stop support for topics
including succession among family members, succession to
executives or employees, and M&As. Support is offered whenmanagers are still unsure of whether they will find a successor
for their business or close the business.

Information about
the BusinessSuccession Support
ProgramAlso, at the 7th Bank of the Year Awards Ceremony held by
Nihon M&A Center Inc. in June 2019, The Hokuetsu Bank won
Awards ceremony

the Special Award for its efforts towards M&As.

Support for Overseas Business Expansion

The Daishi Bank
The Hokuetsu Bank

The two banks support overseas business expansion by customers in areas such as trade and settlement with overseas companies,
establishment of overseas branches, expansion of overseas sales, overseas fund raising, and overseas equipment leasing.

Distributing information through seminars 
In April 2019, the two banks held a joint Chinese Business Exchange Meeting in Shanghai, China. Moreover, The Hokuetsu Bank cooperated
with its business partner the Bank for Investment and Development of Vietnam (BIDV) and fifteen Japanese financial institutions who work
together with the BIDV to hold the BIDV Business Seminar and Exchange Meeting in Hanoi, Vietnam.

Support by local staff overseas Japanese employees of The
Daishi Bank are stationed full-time at the Daishi Bank
Shanghai Representative Officein order to support businessexpansion in China. The
employees also provide
information on local economic
development and opportunities
for business matching with
Chinese companies.
Furthermore, the two banks
dispatch employees to multiple
overseas financial institutions
who are our business partners
so that they can offer a wide
range of support for overseas
expansion by our customers.

23

DAISHI HOKUETSU REPORT 2019

Daishi Hokuetsu FG Overseas Network

Vietnam

Vietcombank
HD Bank
Bank for Investment andDevelopment of Vietnam

People’s Republic of China
Industrial and Commercial
Bank of China Limited
Bank of Communications
LimitedBank of China

Shanghai
Representative Oﬃce
MexicoIndia

Banco Nacional de
Mexico Sun

State Bank of India

ThailandKasikorn Bank

Indonesia

Bank Negara Indonesia

Philippines
Metrobank

United States (State of Hawaii)
Central Paciﬁc Bank

Support for Grant Applications

The Daishi Bank
The Hokuetsu Bank

We are working to support problem-solving utilizing grants in response to various management issues at our customers; for example,
implementation of new projects and facilities investment for improving productivity.

Distributing information through seminars 
There are many different types of grants which can be

Number of people
attending the seminar

applied to diverse corporate management issues such as theneed to install equipment for saving manpower in order toalleviate a labor shortage, or the desire to develop products

5,540 participants(total since 2013)

for growing a new business. There are numerous different

conditions for application of these grants.
The two banks hold seminars on grants to ensure timely
dissemination of the latest information on grants offered bynational and local governments.

Seminar on utilizing grants from the
Ministry of Economy, Trade, and Industry

Individual grant consultations for advice on creating application materials 
The two banks provide attentive support by holding
individual grant consultations for easy-to-understand advice
to customers who are considering applying for grants suchas Monozukuri Grants, which support facilities investment forincreasing productivity, and Energy Conservation Grants,
which support facilities upgrades for saving energy. Our
advice focuses on topics such as understanding grantsystems and methods for creating application materials.
During past applications for Monozukuri Grants, numerous
customers supported by the two banks were selected toreceive grants. As a result, these customers were able toimprove productivity by installing the latest facilities.

Individual grant consultations

Holding Seminars for Healthcare and Nursing Care Providers

The Daishi Bank
The Hokuetsu Bank

In order to support healthcare providers and nursing care providers, the two banks hold avariety of joint seminars aimed at providing information.
In July 2019, the two banks held a joint seminar entitled“Nursing Care Management
Seminar: Work-Style Reform and Implementation of IoT/AI at Nursing Care Facilities.”Theseminar explained caution points and latest trends related to implementation of the Act on
the Arrangement of Related Acts to Promote Work Style Reform. It also explained utilizationof IoT and AI while introducing actual examples.
Other activities by the two banks include consulting by teams specializing in healthcare andInformation on
Nursing CareManagement
Seminars

nursing care. For example, we provide support for opening medical clinics based on analysisof the catchment area where opening is planned, as well as support for management,
personnel, and labor management.

Initiatives for Utilization of Vacant Homes

The Daishi Bank
The Hokuetsu Bank

Cooperating with municipalities in Niigata Prefecture to implement measures for utilization of vacant homes We have formed partnership agreements with 19 municipalities in Niigata Prefecture in order to encourage people
from the Tokyo metropolitan area to move and settle in our prefecture, as well as to promote efficient utilization ofvacant homes. Additionally, we have partnered with the Japan Trans-Housing Institute (JTI) to provide the Sumai no
Kakehashi (Home Bridge) Loan for reform of vacant homes, as well as reverse mortgage loans utilizing vacant homes.

Number of partner
municipalities utilizing
vacant homes

19 cities(as of March 31, 2019)

List of partner local governments (in order of municipality code)
Niigata City, Nagaoka City, Sanjo City, Kashiwazaki City, Shibata City, Ojiya City, Tokamachi City, Mitsuke City,
Murakami City, Tsubame City, Itoigawa City, Myoko City, Gosen City, Joetsu City, Agano City, Sado City,
Uonuma City, Minamiuonuma City, Tainai CityDAISHI HOKUETSU REPORT 201924

ESG Initiatives and Contributions to SDGs

SDGs Declaration 1: Regional Economy / Society —Initiatives for achieving regional revitalization—

Initiatives for PPP and PFIThe Daishi Bank
The Hokuetsu Bank

Supporting the construction, operation, etc., of public facilities through cooperation among municipalities, private businesses, and financial institutions 
We actively engage in PFI (Private Finance Initiatives) which
utilize private funds, management capability, andtechnological capability in order to support the construction,
maintenance, operation, etc., of public facilities and otherorganizations. Furthermore, we are active in PPP (PublicPrivate Partnerships) in which government and the private
sector cooperate in order to improve various government
services, promote efficient use of financial capital, contribute

Loan
Service purchase fees
(facility development fees)

Local government bodies(entity placing order)
Directagreement

Service purchase fees
(maintenance, management,
and operation fees)

Financial
institution

to efficient government administration, etc., by utilizing theRepayment
Loan

diverse know-how and technology of the private sector.

development and operation of the Niigata Prefectural
Budokan, which is a PFI project implemented by Niigata
Prefecture.

SPC*(special purpose
company)

Insurance
contract
Dividends

SponsorInvestment

Various outsourcing
contracts

In September 2018, The Hokuetsu Bank constructed
uniquely arranged syndication-type project financing for

Business
contract

Insurancecompany

Construction
company

Design ﬁrm

Maintenancecompany

Operationcompany*SPC (Special Purpose Company): A company established in order to execute a certain business.

By developing the Budokan as a core prefectural sports
facility, this project seeks to improve the competitive abilityof prefectural martial arts, to cultivate healthy young people
through the martial arts, and to contribute to improved healthof local residents. This large-scale project of Niigata
Prefecture makes significant contributions to the public goodand regional well-being.

Image of completed Niigata Prefectural Budokan

Initiatives Utilizing the Regional Industry Evaluation System of Daishi (RIED*)The Daishi Bank

Supporting industrial policy of local government based on industry analysis for each municipality 
The Daishi Bank uses big data to analyze industrial characteristics and regional commercial
flow for each municipality and broad region. Based on analysis results, we support theexecution of regional comprehensive strategy by holding discussions with local governments topropose methods for cultivating core corporations and measures for industry. Furthermore, we
cooperate with the Development Bank of Japan and the Value Management Institute to holdstudy sessions on regional analysis.
We held discussions with 21 local governments in fiscal 2018.
*Regional Industry Evaluation System of Daishi

Regional analysis study session with local governments

Initiatives for Supporting Increased Productivity

The Daishi Bank
The Hokuetsu Bank

We are implementing various initiatives aimed at increasing productivity in Niigata
Prefecture. Examples include providing information on measures for utilizing AI and

IoT, and promotion of IoT through public-private partnerships.
In May 2019, the two banks cooperated with Bridge Niigata, Ltd. and NCS
Corporation to hold the Frontline Seminar on IoT & Work-Style Reform. The seminar
aimed to support increased productivity at our customers. Our explanation on thetheme of work-style reform included the latest examples on topics such as advanced
solutions which utilize AI and IoT to encourage corporate reform and growth, andbusiness outsourcing through RPA.
Additionally, the two banks agree with the purpose of Local IoT Acceleration Labs.
As a participating member organization of the Niigata IoT Acceleration Lab andNagaoka City IoT Acceleration Lab, we actively work to raise awareness for IoT andspread the technology throughout Niigata Prefecture.

25

DAISHI HOKUETSU REPORT 2019

Frontline Seminar on IoT & Work-Style Reform

The Hokuetsu Bank Award

The Hokuetsu Bank

The Hokuetsu Bank Award is presented to support theactivities of groups and individuals who have madeoutstanding contributions to social welfare in Niigata
Prefecture. We started the award in 1977 in order to

Number of winners of
The Hokuetsu Bank Award

444 groups and individuals(total as of March 31, 2019)

commemorate the 100th anniversary of The Hokuetsu
Bank’s founding. In fiscal 2018, the award was presented
to twelve new groups and individuals at the 42nd awards ceremony. A total of 444
groups and individuals have been recognized with the award.
We received the following comments from award-winners:“The award has inspired
me to do even more.”“I never expected to win such an award. I am truly honored.”Awards ceremony for the Hokuetsu Bank Award

Initiatives for Promoting Sports
The two banks actively work to promote regional sports. The

The Daishi Bank
The Hokuetsu Bank

The Hokuetsu Bank has sponsored the“Healthy Hokuetsu Bank

Daishi Bank supports the Niigata City Marathon that is held every

Cup—Volleyball Tournament for Niigata Prefecture Elementary

October. Bank employees compete as runners and help with

School Students”since 1989. Through this tournament, the bankvolunteer activities. Through these efforts, we enliven the Niigata

contributes to the healthy physical and emotion growth of young

City Marathon together with the local community. The bank also

boys and girls, helps form friendships through sports, andactively promotes local sports by sponsoring events such as youth

promotes local sports.

baseball tournaments.

Niigata City Marathon

Healthy Hokuetsu Bank Cup: Volleyball Tournament for
Niigata Prefecture Elementary School Students

Holding the Life-Up Concert

The Daishi Bank
The Hokuetsu Bank

In order to promote regional music and artistic culture, The
Daishi Bank has continued to hold the Daishi Life-Up Concert toprovide high-quality music, traditional performing arts, and otherevents at a low price. For fiscal 2018, we held a classical concert
by Noé Inui who has performed in various parts of the world as amaster of reinterpreting European violin music. Also, as a joint
event with The Hokuetsu Bank, we held a rakugo (Japanese
comedy) performance by Kikunojo Kokontei, a rakugo performer
who specializes in classic rakugo and has won numerous awards
for classic performing arts.
For fiscal 2019, we held the Daishi Hokuetsu Life-Up Concert inJuly. It was a classical concert by the Kuroda, Campagnari, andDillon Trio Orchestra composed of Aki Kuroda, Aldo Campagnari,and Francesco Dillon. Furthermore, we plan to hold a rakugo
performance by Kenko Sanyutei in March 2020.

Kuroda, Campagnari, and Dillon
Trio Orchestra

Kenko SanyuteiⒸMasako Yamada

DAISHI HOKUETSU REPORT 201926

ESG Initiatives and Contributions to SDGs

SDGs Declaration 1: Regional Economy / Society —Initiatives to support next generation growth—

Holding the Daishi Hokuetsu Academy
In order to support the physical and emotional development of

The Daishi Bank
The Hokuetsu Bank

SDGs in academy classes in order tochildren, The Daishi Bank has held the Daishi Academy since fiscal

cultivate and enlighten human resources

2013.

who will contribute to the sustainable

The Daishi Academy provides local children with thegrowth of the region. In the new class on

Number of participantsat the Daishi Academy

9,553 participants(total as of March 31, 2019)

opportunity to interact with professionals in various fields onliving organisms, we offered students ansocial themes to develop their sensitivities outside of school andopportunity to develop interest in ahome, and to make them more familiar with finance.

sustainable recycling-oriented society by studying nature from theSince the Daishi Academy was first held in fiscal 2013, over
1,000 children have participated every year, and the total number

nearby Sea of Japan and nearby areas. The theme of the newclass was“Let’s Learn About Our Future from the Sea!”of participants as of March 31, 2019 was 9,553.

In fiscal 2019, we will cooperate with The Hokuetsu Bank to

Additionally, in fiscal 2018, we incorporated the perspective of

Living organisms

Cookinghold the Daishi Hokuetsu Academy.

BasketballArt

Held the Niigata Regional Championships of the 13th All-Japan High School Economics Quiz Tournament
In December 2018, we held the Niigata
Regional Championships of the 13th All-Japan
High School Economics Quiz Tournament. It was
the sixth time that the championships had been
held in Niigata Prefecture. A total of 29 teams
participated in the 2018 championships. Afterintense competition consisting of a written
preliminary round and a lightning round using
buzzers, the team from Niigata High School won
the tournament and earned the right tocompete in the national tournament.

Niigata Regional Championships of the Economics Quiz Tournament

Held a Bus Tour for Families during Spring Vacation:“Niigata Family Adventure—Behind the Scenes at a Newspaper Company, Bank, and Power Station!”
In March 2019, the two banks cooperated with Niigata Nippo Co., Ltd.
and the Niigata Branch of Tohoku Electric Power Co., Inc. to hold a family
bus tour named“Niigata Family Adventure—Behind the Scenes at a
Newspaper Company, Bank, and Power Station!”
Through collaboration with a newspaper company, bank and electric
power company, the bus tour gave participants a behind-the-scenes lookat each company. Participants toured newspaper printing equipment,

Touring the Omoshiro Shinbunkan(newspaper museum)

27

DAISHI HOKUETSU REPORT 2019

The Daishi Bank
The Hokuetsu BankThe Daishi Bank
The Hokuetsu Bank

bank vaults containing 100 million yen, the turbine buildings of a thermal
power station, and other facilities which normally cannot be seen. The
tours helped broaden the perspective of children who will lead the future
generation.
On the day of the tour, a total of 43 family members participated in 20
groups. Participants asked many questions during the tours. It was a very
meaningful experience for everyone involved.

Touring the Head Office of
The Daishi Bank, Ltd.

Touring the Higashi-Niigata Thermal Power
Station of Tohoku Electric Power Co., Inc.

Started Handling of the Niigata Future Japan Stock Fund

The Daishi
Securities

From May 2019, Daishi Securities started the sale of the Niigata Future
Japan Stock Fund (nicknamed Niigata no Kakehashi (Bridge to Niigata)), a
donation-type investment trust for supporting the future of Niigata
Prefecture.
By investing a portion of its capital into“Niigata-related stocks”of listed
corporations with head offices located in Niigata Prefecture, thisinvestment trust supports corporations which contribute to theprefectural economy.
Moreover, a portion of administrative expenses (custodian expenses)
paid by customers is donated to support a better future for Niigata
Prefecture. Our entire Group including related companies will work
together to support the asset formation of our customers and tocontribute to regional growth for a sustainable society.

Information on the Niigata Future Japan Stock Fund

Handling of Donation-Type Private Placement Bonds
The two banks handle donation-type private placement bonds aimed atachieving regional revitalization through our main banking business.
From November 2018 to March 2019, we offered Private Placement

The Daishi Bank
The Hokuetsu Bank

bonds, The Daishi Bank uses a portion of issuance fees to offer Future
Support Private Placement Bonds which donate books, sports equipment,
and other school supplies to local schools.

Bonds to Support Childrearing, Education, and Personal Development as a
joint project by the two banks. We received support from a total of 178
corporations.
In this project, issuing corporations and the two banks cooperate inorder to use a portion of private placement bond issuance fees tosupport local government initiatives for child-raising, education, andhuman resources development in Niigata
Donation-Type Private
Placement Bonds

1,025 cases
96.7 billion yen(total as of March 31, 2019)

Prefecture. Since July 2019, we have madetotal donations of 14.35 million yen.
Additionally, in cooperation with thecorporations issuing private placement

Information on Private Placement Bonds to Support Childrearing,
Education, and Personal Development

Provision of an HR Cultivation Support Program

Information on Future Support
Private Placement Bonds

The Daishi Bank
The Hokuetsu Bank

Through cooperation with Daishi Management Consulting andFrom fiscal 2019, we have enhanced our lineup of seminars to

the Hokugin Economic Research Institute, the two banks provide

better meet the needs of our customers. For example, in addition

an HR Cultivation Support Program for resolving issues faced byto the previously available level-based seminars, we now offer six

business in terms of cultivating human resources.

types of objective-based seminars.

Six types of objective-based seminars(1) ‌How to perform SWOT for management
ability (beginner/intermediate)(2) ‌Improving manners for serving customers
and providing business entertainment(3) Career design for working women(4) nvigoration of internal communication(5) Mental health management(6) ‌Crucial points of cash flow management
and bank reviews

Level-based seminars

Information on the HR
Cultivation Support Program

DAISHI HOKUETSU REPORT 201928

ESG Initiatives and Contributions to SDGs

SDGs Declaration 1: Regional Economy / Society —Initiatives to support next generation growth—

Scholarships from the Hokugin Scholarship Association

The Hokuetsu Bank

The Hokugin Scholarship Association provides assistance in the form ofobligation-free scholarships to young people who graduated withoutstanding academic records from high schools in Niigata Prefecture, but
are unable to attend university due to economic reasons. The Hokugin
Scholarship Association is a public interest incorporated foundation whichseeks to cultivate human resources who will contribute to society. The
secretariat office of the association is located in The Hokuetsu Bank.
The association started issuing scholarships from 1962. A total of 1,167
students have received scholarships as of April 2019.
Furthermore, starting from applications in fiscal
Number of students being
issued scholarships

1,167 students(total as of April 30, 2019)2018, we expanded eligible students by adding
special-needs schools to eligible organizations.
We will continue to contribute to regional society
by providing more scholarship opportunities foryoung people.

Presented Banners Featuring a Traffic Safety Slogan

The Daishi Bank
The Hokuetsu Bank

Cooperating with Niigata University to Hold a Curriculum for Students

The Daishi Bank
The Hokuetsu Bank

In order to promote traffic safety campaigns and raise awareness for

The two banks have partnered with Niigata University to cooperate intraffic ethics, we presented banners featuring a traffic safety slogan to all

curriculums for students at the school and to encourage understanding

elementary schools and junior high schools in Niigata Prefecture.

among students towards corporation in Niigata Prefecture.

The Hokuetsu Bank has continued this project every year since 1969.

As part of our projects led by Niigata University to promote regional

The two banks started jointly operating the project from the 51st

revitalization, The Daishi Bank participated in a curriculum held based onpresentation in fiscal 2019.

the theme of“exploring the appeal of Niigata corporations.”Through the

In April 2019, a presentation ceremony was held at Niigata Prefectural

curriculum, we are cooperating in activities for cultivating human

Office for the list of traffic safety slogans. In May, a traffic safety helicopter

resources who are interested in local Niigata industry, and who will

landed on the grounds of Uonuma City Ukaji Elementary School toactively contribute to regional invigoration and growth of industry.

present the banner to children and to encourage greater awarenesstowards traffic safety.
Presentation
Destination

Additionally, in January 2019, The Hokuetsu Bank participated in acurriculum entitled“Corporate Principles and Management Strategy in
Niigata”for students at Niigata University. By introducing the appeal of

Banners Featuring a Traffic Safety Slogan
Traffic Safety Slogan

Number of Banners
Presented

Elementary
schools“Don’
t run into the street! Stop andlook both ways!”

485
banners

Junior highschools“Always be cautious even on familiar
roads to and from school!”269
banners

Ceremony to present banners

29

At the Party for Hokugin Scholarship Recipients

DAISHI HOKUETSU REPORT 2019the regional economy and industry in Niigata Prefecture the curriculum
seeks to increase recognition among students for corporations in theprefecture, to increase rate of employment at corporations in theprefecture, to prevent young people from living outside the prefecture,and to encourage young people to settle down in the prefecture.

At a lecture for students

SDGs Declaration 2: Aging Society

Universal Design at Branches

Stationing of Service Care-Fitters and Dementia Supporters

The Daishi Bank
The Hokuetsu Bank

The two banks are working to create branches which can be

The Daishi Bank
The Hokuetsu Bank

The two banks station staff with expert knowledge at all of ourused with peace of mind by all customers, from elderly

sales offices to support procedures at counters. This enables

customers to customers with disabilities.

smooth visits by elderly customers and customers with

Universal design measures such as removing all unevendisabilities.

surfaces at main entrances have been implemented at 189 of the

The Daishi Bank stations at least one employee certified as a

two banks’total of 201 branches. Through such measures, weService Care-Fitter*1 and one employee certified as a Dementia

are creating branches which can be used with peace of mind by

Supporter*2 at each sales office. The Hokuetsu Bank stations at

people who have difficulty walking or who use wheelchairs.

least one employee certified as a Dementia Supporter at eachsales office.
*1 Service Care-Fitters
Certified by the Nippon Care-Fit Education Institute (Public Interest
Incorporated Foundation)*2 Dementia Supporters
Certified by the Community-Care Policy Network (NPO)

Tulip Donation Activities
The Daishi Bank donates tulips (the official flower of thebank) to social welfare facilities, etc. in Niigata Prefecture.
We have conducted this activity since 1970, making it thelongest-running social contribution activity at The Daishi
Bank. We deliver potted plants every spring and bulbs every

The Daishi Bank

Number of facilities
receiving deliveries ofpotted plants and bulbs
More than

130 facilities

fall to a total of over 130 facilities.

Donation of tulips

Prevention of Special Scams

The Daishi Bank
The Hokuetsu Bank

The two banks have formulated a variety of measures in order to protect important deposits
from damage caused by malicious special scams targeting mainly elderly customers.
Bank employees visit welfare facilities and other facilities in each region in order to raiseawareness on current special scams. By explaining the status of scams, the methods used, andother related information, the visiting employees raise awareness for preventing damage inadvance.

Please be careful of special scams which claimchanges to the branch name, changes to thebranch number, or integration of branches at
The Daishi Bank or The Hokuetsu Bank.
In Niigata Prefecture, there have been multiple instances of suspicious telephone calls
or visits from individuals claiming to be employees of The Daishi Bank or The Hokuetsu
Bank. These individuals state that changes to the branch name, changes to the branchnumber, or integration of branches have made it necessary to collect the bank passbooks
or cash cards of customers, or to confirm the PIN numbers of customers.
Bank employees will never collect cash cards or personal seals from customers, and will
never ask for the PIN number of a customer’s cash card. In some cases, bank employees
may collect bank passbooks when necessary to fulfill a request from a customer; forexample, printing information in the passbook or carrying over information to a new
passbook. However, bank employees will never collect bank passbooks without being
requested to do so by a customer.
Please be very careful regarding these points.
Also, please be sure to contact the police or a bank branch if you receive a suspicious
telephone call or visit.

Pamphlet:“Increasing Caution towards
Special Scams”

DAISHI HOKUETSU REPORT 201930

ESG Initiatives and Contributions to SDGs

SDGs Declaration 3: Financial Services

Initiatives for Private Placement Bonds Conveying Niigata Appeal (SDGs Private Placement Bonds)
In June 2019, the two banks started the joint project of Private

The Daishi Bank
The Hokuetsu Bank

Niigata Prefecture, and to contribute to the promotion of regional

Placement Bonds Conveying Niigata Appeal (SDGs Private Placement

revitalization and achievement of SDGs. In addition to providing capital

Bonds).

support to corporations that support these initiatives, the corporations

Through an industry-government-finance partnership, this projectissuing the bonds, The Daishi Bank, and The Hokuetsu Bank donate a

supports initiatives

portion of fees to the Niigata Prefectural Tourist Association (a public

for conveying theinterest incorporated association).

appealing tourist
resources of(Flow from issuance of private placement bonds until donations)

Niigata Prefecture

Corporation
issuing bonds

to tourists fromJapan and❶ Issuance of private placement bonds

overseas. By doing
so, we seek toattract theInformation on Private Placement Bonds Conveying
Niigata Appeal (SDGs Private Placement Bonds)

increasing inbounddemand, etc., toDonation of
portion of fees

Press release

Newspaper
medium❸The Hokuetsu BankThe Daishi Bank❷

Niigata Prefectural
Tourist Association

Enhancement of Smartphone Applications
From April 2019, The Daishi Bank started providing the Daishi Bank
Passbook App for smartphones.

The Daishi Bank

Bank Passbook App

The Daishi Bank Passbook App is a service that enables real-time referenceof balances and deposit/withdrawal details for registered accounts via
smartphone 24 hours a day. The app is used by many customers.
The Passbook App is part of an environmentally-friendly account known as a

See here for
iPhone“Green Account.”Customers can apply for this type of account at a bankcounter. Bank passbooks are not issued for Green Accounts, so there is noneed to print information in passbooks or carry over information to new
passbooks. This reduces paper consumption andCO2 emissions. Green Accounts also eliminate theGreen Accounts

5,048 accounts(as of March 31, 2019)

See here forAndroid

worry of losing your passbook or having it stolen.
Many new customers are applying for Green
Accounts and existing customers are changing
from existing accounts.

Construction of Web Completion Scheme for Personal Loan Products, and Start of
Accepting Applications via the“TSUBASA Smile”Counter Reception System
From November 2018, we started offering a Web Completion
Scheme for personal loan products, and started using the TSUBASA
Smile counter reception system.
Web Completion Scheme is a personal loan service in which all

simplifies customer application procedures and increases the speedof response for screening results.
Furthermore, from April 2019, we have started using TSUBASA
Smile for handling administrative tasks related to deposits. Examples

procedures from application to borrowing can be performed on the

include the opening of new accounts for checking accounts andinternet (smartphones, computers, etc.). This service is available for all

applications for the Daishi Willink credit card. Moving forward, we will

personal loans except for home loans. Starting use of this service hascontinue to successively expand the handled procedures in order toeliminated the need for customers to visit branches or to fill out

increase convenience for our customers.

written contracts. This has made it easier to use personal loan
products for customers who have difficulty coming to a bank counter.
The TSUBASA Smile counter reception system features a dedicatedterminal at the counter. The system enables customers to complete
application procedures by selecting a product and then following
instruction on the screen to enter required items. The procedures are
paperless, do not require a personal seal, and are performed in aconversation format with the customer. The system significantly

31

The Daishi BankDAISHI HOKUETSU REPORT 2019

Counter reception system: TSUBASA SmileHandling of Loans with Special Provisions for Exemption of Principal at Earthquake Disaster
In April 2018, we established Loans with Special
Provisions for Exemption of Principal at
Earthquake Disaster in order to support business
continuity and recovery measures at regional
corporations in the event of a major earthquake.

The Daishi Bank

Scale of loans as of
May 31, 201975 corporations,12.4 billion yen(total from April 2018)

Numerous corporations use the loans.

Newspaper advertisement for Loans with Special Provisions for
Exemption of Principal at Earthquake Disaster

Held the Asset Management Seminar Commemorating the Founding of Daishi Hokuetsu Financial GroupThe Daishi Bank
The Hokuetsu Bank

In October and November of 2018, the two banks held theAsset Management Seminar Commemorating the Founding ofDaishi Hokuetsu Financial Group. A total of 584 customers
attended the seminars at all venues.
The seminar featured lectures by instructors from Pictet AssetManagement (Japan) Ltd. and Rheos Capital Works Inc. The
respective lectures were based on the themes of“Which ofPictet’s asset conservation techniques are utilized by theworld’s wealthy class?”and“Increase while protecting! Assetcreation through long-term investment.”The speakers

Scene from the Asset Management
SeminarInformation on the AssetManagement Seminar

explained the necessity and results of long-term diversified
investment.

Handling of World Bank Sustainable Development Bonds and Green Bonds:
Cooperation Measures of TSUBASA Alliance
In September 2018, as a joint measure together with groupsecurities subsidiaries of other banks participating in the TSUBASA
Alliance, Daishi Securities sold Sustainable Development Bonds(Indian Rupee denominated) issued by the World Bank.
Sustainable Development Bonds are issued by the World Bankon the international capital market in order to support projects in

The Daishi
Securities

securities subsidiaries have sold Green Bonds which are issued by
the World Bank.
Our Group will continue to promote impact investment whichseeks to balance social results with financial return, and tocontribute to the achievement of Sustainable Development Goals(SDGs).

a wide range of fields including education, health, infrastructure,
government, agriculture, and the environment. The goal of theseprojects is to reduce poverty and support development indeveloping countries. The World Bank uses the capital received
from investors in financing projects aimed at achieving sustainablegrowth in developing nations.
The group securities subsidiaries of the TSUBASA Alliance have
served as a bridge between investors who want to contribute tosociety through investment and a variety of projects implemented
by the World Bank in developing nations. For example, theInvestments in Social Bonds (JICA Bonds)
The two banks have invested in the JICA Bond as a social bond* issued
by the Japan International Cooperation Agency (an independentadministrative corporation; hereinafter,“JICA”) in June 2019. As an ESG
investment aimed at the realization of a sustainable society, this bondaims to achieve economic and social development in developing areas, as

TSUBASA Alliance logo

Information on the World Bank
Sustainable Development Bonds

The Daishi Bank
The Hokuetsu Bank*‌Social bond: A social contribution-based bond that takes into
consideration ESG and allocates the funds procured to projects that
contribute to the resolution of social issues such as basic infrastructuredevelopment (water supply and sewerage systems, sanitation,transportation, etc.) and improving access to social services (health,education, employment, financial services, etc.).

well as to contribute to environmental considerations and the resolutionof social issues from a long-term perspective.

DAISHI HOKUETSU REPORT 201932

ESG Initiatives and Contributions to SDGs

SDGs Declaration 4: Diversity

Career Improvement Exchange Training with Corporations in Other Industries

The Daishi Bank
The Hokuetsu Bank

The two banks participated in career improvement training led by the Niigata Prefecture

Women’s Foundation. The training seeks to create desire for career improvement amongfemale bank employees and to form an interpersonal network with employees in otherindustries.
At the training, female employees from our Group participated together with female

employees from insurance companies and securities companies. The training featured group
discussion held on the theme of“advice for continuous growth.”Participants engaged in a

lively exchange of opinions on topics such as special techniques for achieving work-life balance
and useful tips gained from examples at other companies. The training was an outstanding
opportunity for female bank employees to discover their vision for a fulfilling career.

Career improvement exchange training
with corporations in other industries

Domestic Corporation Observation Training for Female Bank Employees

The Hokuetsu Bank

In October 2018, 17 female employees of The Hokuetsu Bank visited Fukui Prefecture fortraining by observing corporations.
The training aimed to increase the motivation of female employees at The Hokuetsu Bank byinteracting with female executives in order to study the fulfillment of corporate management
and organizational management. Participants listened to discussion on topics such as
leadership and management from a female executive who had founded a company
manufacturing parts for eyeglasses, and from a female director of a Japanese inn.

Domestic corporation observation
training for female bank employees

Established the Health Management Promotion Office

The Daishi Bank

A priority tactic in the 1st Medium-Term Management Plan of the Daishi Hokuetsu FG is“strengthening human resources capability andorganization capability.”As part of achieving this goal, we established Health Management Promotion Offices in clinics at The Daishi Bank.
By doing so, we have constructed a system for even more active promotion of health management at our Group. Specific activities include
enhancing the medical checkup system for employees and implementing activities for promoting health.

Evaluation from External Institutions

The Daishi Bank
The Hokuetsu Bank

The two banks are working to create an environment where employees canwork with peace of mind and perform to their true potential.
In July 2018, The Daishi Bank received the special Platinum Kurumin certificationfrom the Minister of Health, Labour and Welfare as a corporation that supports
child-raising in compliance with the Act on Advancement of Measures to Support
Raising Next-Generation Children*1. Additionally, the bank received the Eruboshi

Accreditation III (highest level) certification as a company taking excellent action incompliance with the Act on Promotion of Women’s Participation andAdvancement in the Workplace*2.

The Daishi Bank was the first corporation in Niigata Prefecture to have obtained
double certification for both Platinum Kurumin and Eruboshi Accreditation III(highest level).
In June 2019, The Hokuetsu Bank became the second corporation in Niigata
Prefecture to have obtained double certification for both Platinum Kurumin andEruboshi Accreditation III (highest level).
In February 2019, The Daishi Bank was certified as an Excellent Enterprise of
Health and Productivity Management 2019 (White 500) under the Certified Health& Productivity Management Outstanding Organizations Recognition Program jointly
conducted by the Ministry of Economy, Trade and Industry and the Nippon Kenko
Kaigi. It was the second consecutive year that the bank received this certification.
The Daishi Bank believes that the maintenance and improvement of the health of
employees is the foundation of human resources that contribute to the region, andaccordingly, we have worked to expand opportunities for disease prevention andimprove mental health care. We are working to achieve health management
throughout our entire organization; for example, we established the HealthManagement Declaration in November 2018.

33

DAISHI HOKUETSU REPORT 2019

Platinum Kurumin
certification logo

Eruboshi Accreditation III(highest level) certification logo

Certificate of Excellent Enterprise of
Health and Productivity
Management 2019 (White 500)

Logo of Excellent Enterprise of
Health and Productivity
Management 2019 (White 500)

*1 The Act on Advancement of Measures to Support Raising Next-Generation Children
is a law intended to promote initiatives for supporting child-raising and work at
corporations, etc., with the goal of developing an environment for the healthy birthand growth of children who will lead society in the next generation.
*2 The Act on Promotion of Women’s Participation and Advancement in the
Workplace is a law that defines the responsibility of entities (nation government,
local governments, private business owners (general business owners)) in
promoting women’s participation and advancement in order to achieve a society
where women can fully exhibit their individuality and capabilities.

SDGs Declaration 5: Environmental Protection

Afforestation Activities

The Daishi Bank
The Hokuetsu BankThe Daishi Bank participates in forest preservation activities in order to maintain green and abundant forests in the region in the future.
Since fiscal 2009, the bank has operated the Daishi-no-Mori (Daishi Forest) project in the Agamachi district of Higashikanbara County,
Niigata Prefecture. Furthermore, in fiscal 2017, we started afforestation activities at Araihama Forest Park in Tainai-shi, Niigata Prefecture.
In October 2018, a total of 602 executives, employees, and their family members (including executives and employees from The HokuetsuBank) participated in activities to plant 500 broadleaf trees.

Afforestation activities

Protecting the Crested Ibis

The Daishi Bank
The Hokuetsu Bank

In 1967, The Hokuetsu Bank designated the crested ibis as our official bank bird.
Native to Niigata Prefecture, the crested ibis is an internationally protected bird
species. From 1968, we started the Crested Ibis Protection Fund as one activity toprotect and raise crested ibis. During the 51 years since then, we have sent
donations from The Hokuetsu Bank and its employees to Niigata Prefecture.
In May 2019, we made a donation together with The Daishi Bank. Total donations
as of May 31, 2019 have reached 36,479,000 yen.

Donations to Niigata Prefecture

Volunteer Activities by the Hokugin Magokoro Association

The Daishi Bank
The Hokuetsu Bank

The Hokugin Magokoro Association is an organization operated through voluntary
participation and donations from executives and employees. Through the association,
The Hokuetsu Bank participates in volunteer activities and donates to projects forenvironmental protection, social welfare, etc.
In fiscal 2018, we participated in volunteer activities to protect endangered species
in Niigata Prefecture, including the crested ibis and the mountain lily. In fiscal 2019,
executives and employees of The Daishi Bank joined us to participate in volunteer
activities throughout Niigata Prefecture.
Environmental protection volunteer activities

Green ATMs (Using Carbon Offset Function to Contribute to the Environment)

The Daishi Bank

Since August 2014, The Daishi Bank has installed green ATMs as
part of providing environmentally-friendly products and services.
Green ATMs have a carbon offset*1 function under the Niigata
Credit*2 program based on the concept ofATMs that contribute to the environment
Carbon offset results
as of March 31, 2019

222 tons(total since August 2014)

more the more they are used. Specifically,
we offset 20g of CO2 every time theseATMs are used. As of March 31, 2019, 43of these ATMs have been installed at 19
locations in Niigata Prefecture.

Green ATMsymbol*1 Carbon offsetting is an approach in which greenhouse gases such as
CO2 emitted in daily life or economic activities are offset throughcredits recognized in other areas.
*2 Niigata Credit is a program in which Niigata Prefecture approvescredits (amount of reduction/absorption of greenhouse gases) for
increased CO2 absorption amounts achieved by maintaining forests in
Niigata Prefecture. These credits can be offset against the CO2 emitted
by a corporation or can be utilized in environmental activities.

DAISHI HOKUETSU REPORT 201934

ESG Initiatives and Contributions to SDGs

Corporate Governance

Basic Philosophy of Corporate GovernanceWe recognize the strengthening and enhancement of corporate governance as important management issue for
improving financial soundness and profitability in order to establish a strong reputation and unshakable credibility
from stakeholders including customers, the local community, and shareholders, and it works to enhance thefunctions of audits and oversight on corporate management and improve the transparency of management activities.

Corporate Governance Guidelines andCorporate Governance Reports of the Daishi
Hokuetsu FG are available on our website.

URL：

https://www.dhfg.co.jp/esg/governance/

Governance Structure
The Group has established governance organizations such as the Board of Directors, which attends to basic management
matters, makes important decisions regarding business management, and monitors the status of business execution by eachdirector, the Audit and Supervisory Committee, which has a supervisory function similar to the Board of Directors and also
audits the business execution of directors, and the Executive Committee, which decides on business management items on
the basis of policies decided at board meetings and manages the progress of Group management plans and strategies. Other
governance organizations include the ALM (Asset Liability Management) & Risk Management Committee, the Compliance
Committee, and the Merger Promotion Committee.
Furthermore, we have established a Nomination and Compensation Committee which ensures opportunities for obtaining
appropriate involvement and advice from outside directors when reviewing important matters related to the appointment,
dismissal and remuneration of directors, thus strengthening fairness, transparency, and objectivity.
Additionally, full-time members of the Audit and Supervisory Committee attend meetings of the Executive Committee andvarious other committee meetings in order to provide appropriate advice and recommendations.

◦Board of Directors 
In principle, board meetings are held once per month. In addition to attending to basic management matters and making
important decisions regarding business management, the Board of Directors monitors the status of business execution byeach director.

◦Audit and Supervisory Committee 
In principle, committee meetings are held once per month. The Committee complies with regulations such as laws, theArticles of Incorporation, and Rules of the Audit and Supervisory Committee. The Committee has a supervisory function
similar to the Board of Directors and also audits the business execution of directors.

◦Nomination and Compensation Committee As an advisory body to the Board of Directors, the Committee ensures opportunities for obtaining appropriate
involvement and advice from outside directors when reviewing important matters related to the appointment, dismissal
and remuneration of directors, thus strengthening fairness, transparency, and objectivity. In principle, the Committee meetsin March and April each year, and also holds special meetings as necessary.

◦Executive Committee 
The Executive Committee is established as management meeting under the Board of Directors. In principle, theCommittee meets twice per month. The Committee decides on business management items on the basis of policies
decided at board meetings, manages the progress of Group management plans and strategies, and decides on anddeliberates matters delegated from the Board of Directors.

◦Other Committees 
The ALM (Asset Liability Management) & Risk Management Committee, the Compliance Committee, and the Merger
Promotion Committee have been established as advisory bodies to the Executive Committee.

35

DAISHI HOKUETSU REPORT 2019

Corporate Governance Organization Chart General Meeting of Shareholders

Appointment and dismissal

Appointment anddismissal

Audit and supervision

Board ofDirectors

Consultation and report

Audit and Supervisory Committee

Committees
Instructions
and orders

Executive Committee

Compliance Committee
Merger Promotion Committee

ReportCooperation andcoordination

Audit

Secretariat of Audit andSupervisory Committee

ALM & Risk Management Committee

Auditing Dept.

Accounting Auditors

Nomination andCompensation Committee

Audit

Corporate Planning Dept.

Human Resources
Planning Dept.

Guidance, management and supervision

Sales Planning Dept.

Report and deliberation

Systems & Administration
Management Dept.

Merger Promotion Dept.

Guidance, management and supervision

Risk Management Dept.

Report and deliberation

Report and deliberation

Guidance, management and supervision

Subsidiaries, etc.

Report and deliberation

Audit

Audit

THE HOKUETSU BANK

Audit

Guidance, management and supervision

Subsidiaries, etc.

Governance Initiatives

The Daishi Bank
The Hokuetsu Bank

Formulation of Basic Policy on Anti-Money Laundering and Counter-Terrorism Financing Measures 
The Daishi Hokuetsu FG and the two banks have formulated the Basic Policy on Anti-Money Laundering and CounterTerrorism Financing Measures in order to prevent money laundering and financing of terrorists.
During transactions with customers, financial institutions are required to formulate risk-appropriate measures for preventing
money laundering as based on related laws and regulations*. By formulating this Basic Policy, the Group clarifies ouroperational policy, management posture, etc., in relation to money laundering and financing of terrorists. The entire Grouptakes organizational action to implement appropriate measures.
*Act on Prevention of Transfer of Criminal Proceeds; Guidelines for Anti-Money Laundering and Combating the Financing of Terrorism(formulated by the Japan Financial Services Agency); etc.

Niigata Prefecture Financial Institutions Cybersecurity Information Committee 
The two banks participate in the Niigata Prefecture Financial Institutions Cybersecurity Information Committee forstrengthening cybersecurity. The Daishi Bank Systems Department serves as the secretariat office for the Committee.
Members of the Committee include 29 financial institutions with head offices in Niigata Prefecture, as well as the Niigata
Bankers Association, the Niigata Shinkin Bank Association, the Niigata Prefecture Credit Union Cooperative, and the Niigata
Securities Union. The Niigata Prefecture Police Department also participates as an observer.
The second meeting of the Committee was held in February 2019. The
meeting featured lectures and cybersecurity demonstrations on topics
such as the latest examples of fraudulent remittance techniques and thelatest cyber information. Furthermore, an information exchange session
was held by financial institutions which fulfill a leading role in the financial
infrastructure of Niigata Prefecture.
Moving forward, the Group will continue to cooperate with financial
institutions in Niigata Prefecture and to strengthen cybersecurity. We will
Scene from a lecture
Institutions exchanging information
also strive to provide our customers with secure and safe services.

DAISHI HOKUETSU REPORT 201936

ESG Initiatives and Contributions to SDGs

Corporate GovernanceInternal Controls Basic Policy◦System for Ensuring that Business Execution by Our

Directors and Employees is in Compliance with Laws,
Regulations, and the Articles of Incorporation

The Group has established Compliance Rules to ensure the directors
and employees of the Group and Group companies comply with laws,
regulations, the Articles of Incorporation, and social norms, and operatebusiness in an appropriate and healthy manner.
The Group has established a Compliance Committee anddepartments for the supervision of compliance. In addition tocomprehensively ascertaining and managing the status of complianceat the Group and Group companies, these organizations develop
systems related to compliance.
The Group has established an Auditing Department that is
independent from departments being audited. The Auditing
Department periodically implements audits on operations at the Groupand Group companies, and then reports the audit results to the Boardof Directors.
The Group has established Rules for Operation of the Whistleblowing
System. In addition to defining appropriate methods for whistleblowing
and consultation in regards to legal violations, etc., by directors andemployees of the Group and Group companies, the Group has
developed systems for the protection of whistleblowers, etc.
The Group has established the Management Policy for Protection ofCustomers, Etc., and has established the Rules for Managing Conflicts ofInterest. Furthermore, the Group has developed systems for protecting
and increasing convenience for customers of the Group and Group
companies, and developed systems for managing conflicts of interest to
prevent unfair damage to customer profit.
The Group has established the Basic Policy Against Anti-Social
Forces, and has established the Rules for Responding to Anti-Social
Forces. The Group develops systems for the Group and Group
companies to block relations with antisocial forces which harm theorder and safety of civil society. Furthermore, the Group implements
organizational response to unreasonable requests, etc., from antisocial
forces.
Based on Guidelines for Preventing Insider Trading, Etc., the Groupdevelops systems for appropriate management of undisclosed
important facts which are related to business partners of the Group orGroup companies, and which were obtained during business activities.

◦System for Saving and Managing Information on
Execution of Business by Directors

The Group has constructed a system for saving and managing
information on execution of business by directors for the applicable
period. Furthermore, based on the Document Management Rules, theGroup creates and saves minutes for the General Meeting of
Shareholders, meetings of the Board of Directors, and other important
meetings involving directors.

◦Regulations and Other Systems for Managing the Risk of Loss

The Group has established the Group Risk Management Basic
Regulations for establishing healthy management at the Group andGroup companies, and to secure appropriate income which iscommensurate with various risks.
The Group has established the Group Comprehensive Risk
Management Regulations in order to ensure appropriate and healthybusiness at the Group and Group companies. Furthermore, the Group
performs appropriate risk management in response to the types andscope of risk.
The Group has established the ALM & Risk Management Committee
and the Risk Management Administration Division in order to manage
risk at the Group and Group companies. Moreover, the Group develops
systems for managing the risk of loss.
The Group has constructed a system in which the Auditing
Department verifies the appropriateness and efficacy of risk
management systems at the Risk Management Administration Division,
and works to enhance/strengthen the risk management systems.
The Group has established Basic Rules for Business Continuity inorder to quickly recover business in the event of a crisis, andappropriately develops systems for crisis management.

◦System for Ensuring Efficient Execution of Business by Directors

In addition to defining management targets, the Group formulates
management plans and uses appropriate methods to manage business
operations.
The Group has established Rules for the Board of Directors andoperates the Board of Directors appropriately. Furthermore, the Grouphas established an Executive Committee which is delegated the
responsibility of deciding on certain matters from the Board of
Directors. In addition to deciding on the delegated issues, the Executive
Committee conducts preliminary review of items being deliberated by
the Board of Directors in order to contribute to decision-making by the
Board of Directors. In order to ensure the business is executed
efficiently by directors, officers, and employees, the Group has
established Organization Regulations, etc., which define rules forbusiness duties, authority, and decision-making.

37

DAISHI HOKUETSU REPORT 2019

◦Systems for Ensuring Appropriate Business at the Groupand at Corporate Bodies Composed of Group Companies
Based on our Management Philosophy, the Group and Group
companies share business strategy as a corporate body and conduct
management by utilizing the capabilities of the entire Group. The GroupManagement Regulations define basic rules related to deliberation,
reporting, etc., of important matters such as management plans ofsubsidiaries, etc., as pertains to management of Group companies by
the Group. The Group develops systems for ensuring healthy,
appropriate, and efficient management of the Group.
Based on the Group Internal Control Regulations for Financial
Reporting, the Group and Group companies develop an internal control
system to ensure the appropriateness and reliability of financial reportat the Group and Group companies.
In addition to ensuring appropriate response in compliance withlaws, regulations, etc., for transactions, etc., within the Group, theGroup and Group companies perform appropriate management with afocus on ensuring healthy business of the Group, as based on our Basic
Policy for Transactions Within the Group and our Basic Policy for
Business Partnerships in the Group.
Based on the Basic Policy for Internal Controls, the Auditing
Department conducts audits to ensure appropriate operation ofbusiness, and provides necessary recommendations for contributing to
the appropriateness of those operations.
The Group develops systems for immediate reporting to directors of
the Group if a director or employee of the Group or a Group company
discovers a significant legal violation or other important compliancerelated matter at a Group company. The Group has also clarified
standards for reporting from subsidiaries to the Group, and develops
reporting systems for matter required for Group operation.
The Group develops systems to ensure that directors and employees
engaging in reporting as described above are not subject to unfair
treatment as the result of reporting.

◦Matters Concerning the Dispatching of Employees toAssist in Duties of the Audit and Supervisory Committee
In order to increase the efficiency and efficacy of its duties, the Audit
and Supervisory Committee dispatches employees to supplement
duties of the Committee (hereinafter,“Assistants”).

◦Matters Concerning the Independence of Assistants from Directors (Excluding
Directors who are Members of the Audit and Supervisory Committee)

Appointment, transfer, personnel evaluation, and disciplinary action
for Assistants is decided upon after deliberation with the Audit andSupervisory Committee.
The Group develops systems to prevent Assistants from being
concurrently involved in executive positions which are related to their
execution of business duties. Furthermore, (excluding directors who aremembers of the Audit and Supervisory Committee) directors must show
consideration to ensure that Assistants are not subject to any unfair
restrictions on the execution of their business duties.

◦Systems for Reporting to the Audit and Supervisory

Committee by Directors and Employees, and Systems Related
to Other Reports to the Audit and Supervisory Committee
Based on internal regulations such as the Rules of the Audit andSupervisory Committee, if a director or employee of the Group or aGroup company discovers a matter which has the potential of causing
serious harm to the Group or a Group company, the director or
employee shall report said matter to the Audit and Supervisory
Committee. Furthermore, in addition to matter defined by laws,
regulations, and rules, the Audit and Supervisory Committee shall beable to request reports as necessary from directors, employees of theInternal Controls Department, and other persons. No individual who
has reported to the Audit and Supervisory Committee shall be subject
to unfair treatment as the result of reporting.
The Group develops systems for reporting the results of internal
audits at the Group and Group companies to the Audit and Supervisory
Committee from the Internal Controls Department.

◦Systems for Ensuring Efficient Auditing by the Audit
and Supervisory Committee

The Group develops systems for effective audits by facilitating
cooperation such as the exchange of opinions between the Audit andSupervisory Committee and accounting auditors, officers, the Risk
Management Department, the Auditing Department, and other internal
departments that possess internal controls functions.
If the Audit and Supervisory Committee requests that the Group payin advance, provide reimbursement, engage in debt processing, etc., forexpenses occurring due to execution of the Committee’s duties, theGroup shall immediately process those expenses. Moreover, the Groupshall pay the expenses for obtaining recommendations, etc., fromoutside experts when deemed it necessary by the Audit andSupervisory Committee.

Risk Management System
The Group’s basic policy of risk management is to stably secure profits
corresponding to risk and plan the appropriate distribution ofmanagement resources, as well as to construct a system of mutual checks
and balances for the various risks faced by the Group. This is possible byaccurately recognizing and ascertaining various risks, engaging inappropriate management and supervision of risks, and auditing theseprocesses related to risks.
Based on this policy, the Group has established a Risk Management
Department as a supervisory organization that understands and manages
risk comprehensively, cutting across organizational boundaries.
Furthermore, the Group has established the ALM & Risk Management
Committee to comprehensively ascertain and manage the status of ALM
and risks throughout the Group, and to contribute to maintaining a healthyGroup and increasing profitability by reviewing appropriate response
measures, etc. Meetings of the ALM & Risk Management Committee areheld as necessary and are also attended by members of the Audit andSupervisory Committee. Minutes from meetings of the ALM & Risk
Management Committee are reported to the Board of Directors and otherentities as appropriate in an effort to resolve and reform problems related

to risk. Additionally, the Auditing Department (Internal Controls
Department) is under direct supervision of the Board of Directors and isensured independence from the department being audited. The Auditing
Department conducts strict audits for overall business, and verifies theappropriateness and effectiveness of internal controls systems. Under thisrisk management system, the Group implements risk capital allocation atits subsidiary banks in order to maintain healthy business and achieve
efficient utilization of capital. Additionally, the Group anticipates theinterruption of business due to unexpected emergencies such as
earthquakes and other large-scale disasters, and defines priority business
operations, etc., for continuity at subsidiary banks. The Group has
established the Basic Rules for Business Continuity to define timely andaccurate management and instructions for subsidiary banks, and hasconstructed a risk management system.

Diagram of FG Risk Management System 

Audit andSupervisory Committee

Board of Directors

Auditing Department (Internal Controls Department)
The Group’s Auditing Department conducts
audits of the Group and Group companies

Executive Committee
ALM & Risk Management Committee【Types of risks】

Credit risk

Risk Management Department (Risk Management Administration Division)

Market risk

Liquidity risk

Operational risk

Cybersecurity risk

Instructions (development of risk management systems, etc.)

Reporting & deliberation (risk status, response guidelines)

Board of Directors

Audit andSupervisory Committee

Risk Management Division (Risk Management Administration Division)

Market risk

Risk Management andCompliance Committee
ALM Committee

Management Meeting

Credit risk

Reporting & deliberation (risk status, response guidelines)

Liquidity risk

Cybersecurity
Management Committee

Operational risk

Cybersecurity risk

Board of Directors

Corporate Auditors/
Board of Corporate
Auditors

ALM Meeting

Management Meeting

Committee for Deliberating
the Prevention of Accidents

Risk Management Division (Risk Management Administration Division)Committee for Deliberating
Loan Management

Credit risk

Market risk

Liquidity risk

Operational risk

Cybersecurity risk

Departments with jurisdiction by risk category

Departments with jurisdiction by risk category

Sales oﬃces, Head Oﬃce, Group companies

Sales oﬃces, Head Oﬃce, Group companies

DAISHI HOKUETSU REPORT 201938

ESG Initiatives and Contributions to SDGs

Corporate Governance
Credit Risk Management Systems Credit risk is the risk that the value of principal or interestof a loan will decrease or disappear due to bankruptcy,
deterioration of credit, etc., at a business partner to whom abank has lent money, thus resulting in a loss incurred by thebank.
The Group appropriately operates and manages credit risk
based on our regulations for credit risk management.
In the Group’s system, the Risk Management Department
serves as an organization for managing credit risk. The
Department develops regulations for credit risk
management, and plans and operates activities for analyzing,assessing, and improving risk.
At The Daishi Bank and The Hokuetsu Bank, screening
departments which are completely separated from sales
departments perform strict loan screening and appropriate
management of problem loans. Also, the two banks strive tomaintain healthy assets through bank-wide initiatives such asactivities to support management reform at business
partners. Strict credit examinations and autonomous
assessments of loans, etc., are carried out through a twolevel examination system at local sales offices andd e p ar tm e n ts at th e h e ad o f f i c e . T h e n , th e A u d it in g
Department conducts a final review to ensure the accuracy
and appropriateness of the credit examinations andautonomous assessments. For our credit portfolio, we
appropriately manage credit concentration to particularregions, industries, corporations, groups, etc. Moreover, thetwo banks take measures such as quantifying credit risk* andsetting credit risk limits in accordance with equity capital.
*Q uantification of credit risk is the process of using statisticalmethods to quantify in numerical form and estimate the amountof credit risk contained in a credit portfolio.

Market Risk Management Systems Market risk is the risk that assets and obligations may
fluctuate in value due to changes in market factors, thus
resulting in a loss incurred by the Group. Such market factors
include domestic and foreign interest rates, valuations on
securities, and foreign exchange rates.
The Group has established an ALM Operation Policy inorder to adjust market risk to the appropriate amount andsecure stable income. Based on this policy, we set limits forrisk-taking, loss, etc., for securities management.
In addition, the ALM & Risk Management Committee
discusses important issues in market risk management. If a
serious incident has occurred in management of securities,
this system ensures that details are reported to management
immediately.

Liquidity Risk Management Systems Liquidity risk is the risk of the Group incurring a loss due todifficulty of securing required funds during financing or being
forced to procure funds at an interest rate which is muchhigher than normal (financing risk). It is also the risk of
incurring a loss due to being forced to engage in market
transactions at significantly disadvantageous conditions or
prices (market liquidity risk).
The Group has established the Liquidity Risk Management

Regulations at The Daishi Bank and The Hokuetsu Bank.
Management departments involved in financing ascertain
and analyze the financing status, and engage in appropriate
market procurement as necessary. Furthermore, in
preparation for unexpected events, the Group has
established response measures and reporting/contact
systems to enable fast response in a variety of situations inaccordance with the degree of scarcity in financing.

Operational Risk Management Systems Operational risk is the risk that the Group’s internal
administrative procedures, actions of directors or employees,
or systems operations may be inappropriate or may fail tofunction, or that other external factors will occur resulting ina loss incurred by the bank. Based on risk factors, the Group
categorizes and manages the following types of risk: 1)
administrative risk, 2) systems risk, 3) information-security
risk, 4) compliance risk, 5) human-error risk, 6) tangible-asset
risk, 7) outsourcing risk, and 8) reputation risk.

In the Group, in order to manage operational risk
appropriately, the Risk Management Department (amanagement supervisory organization) conducts activities
such as making proposals on important matters related tooperational risk management, accepting reports on
operational risks from subsidiary banks and monitoring thoserisks, and verifying/improving the efficacy of management
systems for operational risks.

Cybersecurity Risk Management Systems Cybersecurity risk is the risk that the Group will incur aloss as the result of threats on the Group’s cybersecurity
from cyberattacks (the act of maliciously using an
information communications network or information system
for unauthorized entry via a cyberspace, for stealing,
modifying, or destroying information, for stopping theoperation of information systems or causing incorrect
operation, for executing unauthorized programs, for
conducting DDoS attacks, etc.).
In order to strengthen our response to cybersecurity, theGroup has established a Cybersecurity Management
Committee, a Basic Policy for Cybersecurity Management,

39

DAISHI HOKUETSU REPORT 2019and response manuals for different types of cyberattacks.
Furthermore, the Group reviews advance prevention andpredictive management of cybersecurity incidents. In theevent that a cybersecurity incident occurs, the Group
reviews countermeasures for fast recovery, measures toprevent damage from spreading, measures to prevent
reoccurrence, etc.
Additionally, based on instructions from the Executive
Committee and other management organizations, werecognize cybersecurity risks as risk that must be managed
throughout the entire Group, and we work to strengthen ourmanagement of cybersecurity.

Business Continuity System 
The Group has defined rules such as Basic Rules for
Business Continuity. Even in the event of a disaster or other
unforeseen occurrence, the Group has developed a business
continuity system that will minimize the impact on ourcustomers and will enable us to maintain financial functions

by limiting the impact on the Group management.
In the event of a large-scale natural disaster or system
malfunction, we will immediately establish a Disaster
Response Headquarters and work for the recovery/continuityof business.

Compliance System
Compliance is one of the top management priorities at the Group. In accordance with the following Basic Policy, alldirectors and employees work to ensure management based on our Management Philosophy.

Basic Policy

１．All directors and employees in the Group always act in accordance with our Management Philosophy, andrecognize the social responsibility and public mission that must be fulfilled by our Group. Furthermore, all directors
and employees understand and follow the code of conduct regulated by the Japanese Bankers Association.
２．The Group works to develop and establish a compliance system for maintaining trust in the Group, and for ensuring thehealth and appropriateness of our business.

Compliance System 
The Group has established the Risk Management Department
as a department for overseeing compliance. The Department
engages in activities such as formulating compliance-related
measures and monitoring the status of compliance in the Group.
In addition, the Group holds meetings of a Compliance
Committee which is connected directly with management. The
Committee investigates matters such as the status of compliancemanagement in the Group, and works to develop and establish
compliance systems in the Group.
Additionally, we formulate a Compliance Program every year as
a detailed execution plan for thorough compliance, and work toestablish compliance systems in accordance with ourManagement Philosophy.

Board of Directors
Executive Committee

Compliance Committee(deliberation on important matters and status of initiatives)(Secretariat Oﬃce: Risk Management Department)

THE HOKUETSU BANK

Group

Group

DAISHI HOKUETSU REPORT 201940

Company Information

List of Executives / Group Companies

Daishi Hokuetsu Financial Group Board Members

(as of June 25, 2019)

Chairman and
Representative Director

President andRepresentative Director

Katsuya Sato

Fujio Namiki

Director

Director

Satoshi Hasegawa

Kazuyoshi Hirokawa

Director

Director

Takuya Watanabe

Kiyofumi Obara

Director

Director

Makoto Takahashi

Michiro Ueguri

Director(Audit and Supervisory
Committee Member)

Outside Director(Audit and Supervisory
Committee Member)

Shinjiro Kawai

Koichi Masuda

Outside Director(Audit and Supervisory
Committee Member)

Outside Director(Audit and Supervisory
Committee Member)

Hiroshi Fukuhara

Toshizo Oda

Outside Director(Audit and Supervisory
Committee Member)

Kazuaki Matsumoto* ‌Each of the Outside Directors Koichi Masuda, Hiroshi Fukuhara, Toshizo Oda and Kazuaki Matsumoto are outside directors as defined
under Article 2, item (xv) of the Companies Act.

41

DAISHI HOKUETSU REPORT 2019

Directors at The Daishi Bank (as of June 25, 2019)

Directors at The Hokuetsu Bank (as of June 25, 2019)

President and CEO (Officer)

Fujio Namiki

President and CEO (Officer)

Katsuya Sato

Deputy President(Officer)

Satoshi Hasegawa

Senior Managing Director (Officer)

Kazuyoshi Hirokawa

Senior Managing Director (Officer)

Takuya Watanabe

Senior Managing Director (Officer)

Hiroyuki Kaizu

Managing Director

Kiyofumi ObaraManaging Director

Ichiro Muromoto

Managing Director

Jumatsu Eizuka

Managing Director

Makoto Takahashi

Managing Director

Michiro Ueguri

Managing Director

Masami Watanabe

Director of Head Office Sales Dept.,
Director of Niigata Airport Branch

Hiroshi ShindoManaging Director

Director and Executive Officer Planning Dept.

Director of Comprehensive

Ken Shibata

Director

Director and Executive Officer Resources Dept.

Director of Human

Takayoshi Tanaka

Director

Director of Sales
Director and Executive Officer Headquarters

Toshiyuki Maki

Director (outside)

Kiroku Takeuchi

Director

Nobuaki Miyamoto

Standing Corporate Auditor

Shuichi Nomizu

Eiichi TsuruiStanding Corporate Auditor

Matsuichi Nanba
Toshio Kitamura

Managing Director

Director (outside)(Audit and Supervisory
Committee Member)(Audit and Supervisory
Committee Member)Manager of Niigata
BranchDirector (outside)(Audit and Supervisory
Committee Member)

Katsuaki Fujikura

Corporate Auditor (outside)

Executive Officer

Director of Market
Operations Dept.

Masahito Toda

Corporate Auditor (outside)

Executive Officer

Manager of Tokyo Branch

Naruhito Hosaka

Executive Officer

Manager of Nagaoka
Sales Dept.
Manager of MinamiNiigata Branch
Director of Business
Administration Dept.
Manager of Takada Sales Dept.,
Manager of Honcho Branch

Executive Officer
Executive Officer
Executive Officer

Executive Officer

Takehiko Hori

Hiroki Hoshi
Director of Head Office
Sales Dept.

Executive Officer

Ryuji Takahashi
Motoi Yamada

Shiro Watanabe
Director of Market
Sales Dept.
Director of Sales
Supervision Dept.

Tadanori Miyakoshi
Takashi Ishizaka

Katsutoshi Sakai
Toshiyuki Kobayashi
Nobuaki Takahashi

Overview of Group CorporationsCompany

The Daishi Bank, Ltd.

1071-1 Higashiborimae-dori 7-bancho, Chuo-ku, Niigata-shi

The Hokuetsu Bank, Ltd.

2-14 Ote-dori 2-chome, Nagaoka-shi

Daishi Hokuetsu Career Bridge, Ltd.

Hokuetsu Daiichi Bldg., 2nd Floor 1-2-25 Higashi-odori, Chuo-ku, Niigata-shi

Daishi Securities Co., Ltd.
3-8-26 Jonaicho, Nagaoka-shi

The Daishi Guaranty Co., Ltd.

Fuyu-Sha Bldg., 3rd Floor 224-1 Honcho-dori 5-bancho, Chuo-ku, Niigata-shi

The Hokuetsu Credit Guarantee Co., Ltd.

Choryo-Sha Bldg., 1st Floor 2-13-23 Miyabara, Nagaoka-shi

The Daishi Management Consulting Co., Ltd.

Fuyu-Sha Bldg., 2nd Floor 224-1 Honcho-dori 5-bancho, Chuo-ku, Niigata-shi

The Hokugin Economic Research Institute, Ltd.

Omotemachi Bldg., 1st Floor 3-2-1 Omotemachi, Nagaoka-shi

The Daishi Lease Co., Ltd.

2-2-10 Akashi, Chuo-ku, Niigata-shi

The Hokuetsu Leasing Co., Ltd.

Hokuetsu Higashi Bldg., 5th Floor 1-9-20 Kesajiro, Nagaoka-shi

The Daishi Computer Service Co., Ltd.

1-1-17 Abumi, Chuo-ku, Niigata-shi (inside the Daishi Bank Business Center)

The Daishi JCB Card Co., Ltd.

Daishi Kami-Okawa-mae Bldg., 3rd Floor 1245 Kamiokawamae-dori 8-bancho, Chuo-ku, Niigata-shi

The Daishi DC Card Co., Ltd.

Daishi Kami-Okawa-mae Bldg., 1st Floor 1245 Kamiokawamae-dori 8-bancho, Chuo-ku, Niigata-shi

The Hokuetsu Card Co., Ltd.

Hokuetsu Higashi Bldg., 4th Floor 1-9-20 Kesajiro, Nagaoka-shi(as of July 1, 2019)
Ratio of the Group’s voting
rights in the subsidiary,
including indirect ownership

Main business activities

Date ofestablishment

BankingNovember 2,
1873¥32,700 million

100.0%

Banking

December 20,
1878¥24,500 million

100.0%

Comprehensive HR consulting

May 24,2019¥30 million

100.0%

Securities

August 8,1952¥600 million

100.0%

Credit guarantees

October 27,
1978¥50 million

100.0%

Credit guarantees

August 20,
1986¥210 million

100.0%

Consulting and venture capital

June 8,1984¥20 million

100.0%

Survey research and information provision
related to the economy and society

July 1,
1997¥30 million

50.0%

Comprehensive leasing services

November 11,
1974¥100 million

26.0%

Comprehensive leasing services

November 1,
1982¥100 million

100.0%

Computer-related business

May 10,1976¥15 million

30.0%

Credit cards and credit
guarantees

November 12,
1982¥30 million

66.6%

Credit cards

March 1,
1990

¥30 million

70.0%

Credit cards and credit
guarantees

June 1,
1983¥20.45 million

100.0%

CapitalDAISHI HOKUETSU REPORT 201942

Company Information

Organization Chart / Major stockholders

Organization Chart of the Daishi Hokuetsu Financial Group(as of July 1, 2019)

The Daishi BankTheTHE
Hokuetsu
Bank
HOKUETSUBANK

The Hokuetsu Bank

Major stockholders (10 largest)
株主名

43(As of March31,2019)
Number of Share

Percent

1

Japan Trustee Services Bank, Ltd. (Trust Account)

2,978 (Thousand)6.52 ％

2

Meiji Yasuda Life Insurance Company

1,624

3.55

3

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

1,434

3.14

4

Nippon Life Insurance Company

1,156

2.53

5

Sompo Japan Nipponkoa Insurance Inc.

888

1.94

6

DFA INTL SMALL CAP VALUE PORTFOLIO（Standing proxy: Citibank N.A.,Tokyo Branch）

886

1.94

7

Tohoku Electric Power Co., Inc.

852

1.86

8

Daishi Bank Employee’s stockholdings

804

1.76

9

Daido Life Insurance Company

705

1.54

10

JP MORGAN CHASE BANK 385151（Standing proxy: Mizuho bank Settlement & Clearing Services Department）

673

1.47

DAISHI HOKUETSU REPORT 2019

Financial Data
CONTENTS 
Consolidated Balance Sheets

45

Consolidated Statements of Income

47

Consolidated Statements of Comprehensive Income

47

Consolidated Statements of Shareholders' Equity

48

Consolidated Statements of Cash Flows50

The Status of Financial Results (Consolidated)

51

Non-Consolidated Balance Sheets(Daishi Bank)73

Non-Consolidated Statements of Income(Daishi Bank)

74

Non-Consolidated Balance Sheets(Hokuetsu Bank)

75

Non-Consolidated Statements of Income(Hokuetsu Bank)76

DAISHI HOKUETSU REPORT 2019

44





Consolidated Balance Sheet
Years ended March 31,2019
Note:The translations of the Japanese yen amounts into US dollars are using the prevailing exchange rate at March 31, 2019,which was\110.99 to US $1.

■Assets（Millions of Yen）

Cash and due from banks

2019

2019

¥1,108,007$9,982,946

Call loans and bills bought

3,773

34,000

Monetary claims bought

17,414

156,902

Trading account securities

3,911

35,246

Securities

2,496,047

22,488,943

Loans and bills discounted

5,065,891

45,642,776

Foreign exchanges

19,661

177,150

Other assets

160,157

1,442,990

Tangible fixed assets

54,167

488,042

Intangible fixed assets

14,220128,125

Asset for retirement benefits

3,387

30,518Deferred tax assets

5,012

45,159Customers’ liabilities for acceptances and guarantees

19,108172,162(20,538)(185,049)¥8,950,224$80,639,915

Allowance for loan losses
Total Assets■ Liabilities（Millions of Yen）

Deposits
Negotiable certificates of deposit
Call money and bills sold(Thousands of U.S. Dollars）

2019

2019

¥7,177,466$64,667,685

279,430

2,517,621

4,994

45,000

Payables under repurchase agreements

110,272

993,531

Payables under securities lending transactions

403,529

3,635,724

Borrowed money

433,879

3,909,175

Foreign exchanges

755

6,806

Other liabilities

66,079595,367

Provision for bonuses

2,290

20,638Provision for directors’ bonuses

116

1,050

Provision for retirement benefits

7,852

70,750

Provision for directors’ retirement benefits

41

373

Provision for reimbursement of deposits

2,989

26,938Provision for system cancellation losses

457

4,122

1,131

10,190

Provision for contingent loss
Reserves under the special laws

11

105

Deferred tax liabilities

5,504

49,590

Deferred tax liabilities for land revaluation

5,239

47,204

Acceptances and guarantees
Total Liabilities

45(Thousands of U.S. Dollars）

DAISHI HOKUETSU REPORT 2019



19,108172,162¥8,521,150$76,774,040

■ Net Assets（Millions of Yen）
2019

2019

Capital stock¥30,000

Capital surplus

87,667

789,871Retained earnings

258,756

2,331,348

Treasury stock(1,336)(12,037)

Shareholders' equity

375,0883,379,477

Valuation difference on available-for-sale securities

41,032369,693

Deferred gains or losses on hedges(5,657)(50,973)

Revaluation reserve for land

$270,2946,424

57,880Remeasurements of defined benefit plans(5,505)(49,606)

Accumulated other comprehensive income

36,292326,993

637

5,746

Subscription rights to shares
Non-controlling interests
Total Net assets
Total Liabilities and Net assets(Thousands of U.S. Dollars）

17,054

153,658

429,073

3,865,874¥8,950,224$80,639,915



DAISHI HOKUETSU REPORT 2019

46





Consolidated Statements of Income
Years ended March 31,2019（Millions of Yen）

(Thousands of U.S. Dollars）

2019

2019

Ordinary Income¥118,007$1,063,227

Interest income

58,956531,183

Interest on loans and discounts

38,713

348,797

Interest and dividends on securities

19,669177,219

Interest on call loans and bills bought

436Interest on receivables under resale agreements

(6)

(60)

Interest on deposits with banks

226

2,043

Other interest income

349

3,147

Fees and commissions

24,535221,064

Other ordinary income

25,385

228,715

Other income

9,130

82,263

Ordinary Expenses

101,301

912,705

Interest expenses

6,454

58,150Interest on deposits

946

8,528

Interest on negotiable certificates of deposit

35

315

Interest on call money and bills sold

38

342

Interest on bills sold

686

6,183

2,617

23,579Interest on payables under securities lending transactions
Interest on borrowings and rediscounts
Other interest expenses

151

1,367

1,979

17,832Fees and commissions payments

6,752

60,836

Other ordinary expenses

21,214

191,137

General and administrative expenses

57,301

516,280

Other expenses

9,578

86,301

Ordinary profit

16,706

150,521Extraordinary income

47,208425,335

Gain on disposal of noncurrent assets
Gain on bargain purchase
Extraordinary loss
Loss on disposal of noncurrent assets
Impairment loss

07

47,207425,328

2,472

22,276

131

1,185

2,248

20,254

Transfer to reserve for system cancellation losses
Income before income taxes

92

837

61,441

553,580

Income taxes-current

6,988

62,965

Income taxes-deferred(3,121)(28,120)

Net income

57,574

518,735

729

6,576

¥56,844$512,159

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

Consolidated Statements of Comprehensive Income
Years ended March 31,2019（Millions of Yen）

(Thousands of U.S. Dollars）

2019

2019

Net Income¥57,574$518,735

Other Comprehensive Income(20,221)(182,187)

Valuation difference on available-for-sale securities(10,104)(91,042)

Deferred gains or losses on hedges(5,276)(47,543)

Remeasurements of defined benefit plans, net of tax(4,839)(43,601)

Comprehensive income

37,353

336,547

36,634330,069

719

6,478

(Comprehensive income attributable to)Comprehensive income attributable to equities of parent
47

Comprehensive income attributable to non-controlling interests

DAISHI HOKUETSU REPORT 2019







Consolidated Statements of Shareholders' Equity
Years ended March 31 , 2019

（Millions of Yen）
Shareholders' equity
Capital stock Capital surplus

Balance at March 31,2018\32,776\25,179(2,776)62,488Retained earnings

Treasury stock

Total equity\208,533\ (4,240)\262,249(49)

59,661

Changes of items during the period
Increase by share transfers
Dividends from surplus(3,772)(3,772)

Profit attributable to owners of parent

56,84456,844Purchase of treasury stock
Disposal of treasury stock
Retirement of treasury stockReversal of revaluation reserve for land

(1,016)(1,016)

(84)

643

559

(3,326)

3,326

―

560

560

Net changes of items other thanshareholders' equity
Total changes of items during period(2,776)62,48850,222

2,904

112,838

Balance at March 31,2019\30,000\87,667\258,756\ (1,336)\375,088

Accumulated other comprehensive income
Valuationdifference on
available-forsale securities
Balance at March 31,2018\51,126

Deferred gains Revaluation

Remeasurements

or losses onreserve forof defined benefit

hedges

land

plans

\6,984\(666)\(380)

Total accumulated Subscription
rights toothercomprehensive

shares

Noncontrolling

Total net assetsinterests

income\57,064\554\16,258\336,126

Changes of items during the period
Increase by share transfers

59,661Dividends from surplus(3,772)

Profit attributable to owners of parent

56,844Purchase of treasury stock(1,016)

Disposal of treasury stock

559

Retirement of treasury stock―Reversal of revaluation reserve for land
Net changes of items other than560
(10,093)(5,276)(560)(4,839)(20,771)83

796(19,891)

Total changes of items during period(10,093)(5,276)(560)(4,839)(20,771)83

796

92,947

Balance at March 31,2019\41,032\(5,657)\6,424\(5,505)\36,292\637\17,054\429,073

shareholders' equity

DAISHI HOKUETSU REPORT 2019

48





(Thousands of U.S. Dollars）
Shareholders' equity
Capital stock Capital surplus
Balance at March 31,2018$295,314$226,863(25,020)563,008

Retained earnings

Treasury stock

Total equity$1,878,852$(38,207)$2,362,822(449)

537,539

Changes of items during the period
Increase by share transfers
Dividends from surplus(33,986)(33,986)

Profit attributable to owners of parent

512,159

512,159

Purchase of treasury stock
Disposal of treasury stock
Retirement of treasury stockReversal of revaluation reserve for land

(9,154)(9,154)

(757)

5,801

5,043

(29,971)

29,971

―

5,052

5,052

Net changes of items other thanshareholders' equity
Total changes of items during period(25,020)563,008

452,496

26,1691,016,654

Balance at March 31,2019$270,294$789,871$2,331,348$(12,037)$3,379,477

Accumulated other comprehensive income
Valuationdifference on
available-forsale securities
Balance at March 31,2018$460,637

Deferred gains Revaluation

Remeasurements

or losses onreserve forof defined benefit

hedges

land

plans

$(3,429)$62,933$(6,004)

Total accumulated Subscription
rights toothercomprehensive

shares

Noncontrolling

Total net assetsinterests

income$514,136$4,995$146,482$3,028,437

Changes of items during the period
Increase by share transfers

537,539

Dividends from surplus(33,986)

Profit attributable to owners of parent

512,159

Purchase of treasury stock(9,154)

Disposal of treasury stock

5,043

Retirement of treasury stock―Reversal of revaluation reserve for land
Net changes of items other than(90,944)(47,543)(5,052)(43,601)(187,143)

750

7,175

(179,216)

Total changes of items during period(90,944)(47,543)(5,052)(43,601)(187,143)

750

7,175

837,437

Balance at March 31,2019$369,693$(50,973)$57,880$(49,606)$326,993$5,746$153,658$3,865,874

shareholders' equity



49

5,052

DAISHI HOKUETSU REPORT 2019







Consolidated Statement of Cash Flows
Years ended March 31 , 2019

（Millions of Yen）

(Thousands of U.S. Dollars）

2019

2019

Net cash provided by (used in) operating activities:
Income before income taxes\61,441$553,580

Depreciation and amortization

4,270

38,474

Impairment loss

2,248

20,254(47,207)(425,328)

Gain on bargain purchase
Increase (decrease) in allowance for loan losses

2,353

21,203

Increase (decrease) in provision for contingent loss

(204)

(1,844)

Increase (decrease) in provision for bonuses

115

1,037

Increase (decrease) in provision for directors' bonuses

15

142

Increase (decrease) in provision for retirement benefits

94

848

Increase (decrease) in provision for retirement liability

335

3,020

Increase (decrease) in provision for directors' retirement benefits

(2)

(18)

Increase (decrease) in provision for reimbursement of deposits

312

2,814

Increase (decrease) in provision for system cancellation losses
Financing income
Financing expenses
Loss (gain) related to securities

92

837

(58,956)(531,183)

6,454

58,150(2,224)(20,038)

Loss (gain) on investments in money held in trust

18

169

Foreign exchange losses (gains)

(5)

(53)

Loss (gain) on disposal of noncurrent assets

130

1,177

Net decrease (increase) in trading account securities(574)(5,180)Net decrease (increase) in loans and bills discounted(122,750)(1,105,960)

Net increase (decrease) in deposit

49,680447,614

Net increase (decrease) in negotiable certificates of deposit(16,867)(151,972)

Net increase (decrease) in borrowed money (excluding subordinated borrowings)

76,723

691,266

Net decrease (increase) in deposit (excluding deposit paid to Bank of Japan)

1,551

13,980(5,875)(52,936)

Net decrease (increase) in call loans

7,890

71,096

Net increase (decrease) in payables under securities lending transactions

Net increase (decrease) in call money(11,989)(108,021)

Net decrease (increase) in foreign exchanges-assets(5,470)(49,292)

Net increase (decrease) in foreign exchanges-liabilities

285

2,576

Revenue for finance

59,883

539,535

Payments for finance(6,069)(54,684)

Other, net(5,278)(47,555)

sub-total(9,577)(86,288)

Income taxes paid

(7,454)(67,166)\(17,032)$(153,455)

Net cash provided by (used in) operating activities
Net cash provided by (used in) investment activities:
Purchase of securities(631,225)(5,687,230)

Proceeds from sales of securities

525,926

4,738,503

Proceeds from redemption of securities

258,549

2,329,487

Proceeds from decrease in money trust

1,984

17,883Purchase of property, plant and equipment(1,484)(13,378)

Purchase of intangible assets(3,138)(28,273)

Proceeds from sales of property, plant and equipment

96

867

Net cash provided by (used in) investment activities:\150,708$1,357,859(3,772)(33,987)

Net cash provided by (used in) financing activities:
Cash dividends paid
Dividends paid to non-controlling interests
Purchase of treasury stock
Proceeds from sales of treasury stock
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents

(10)

(93)

(1,016)(9,154)

248

2,243

\(4,549)$(40,991)

5

53

Net increase (decrease) in cash and cash equivalents

129,133

1,163,466

Cash and cash equivalents at beginning of the year

773,856

6,972,303

Increase in cash and cash equivalents due to share transfer

202,862

1,827,752\1,105,851$9,963,522

Cash and cash equivalents at the end of the year
DAISHI HOKUETSU REPORT 201950

The Status of Financial Results (Consolidated)
Notes (From April 1, 2018 to March 31, 2019)(Basic items that form the foundation for preparationof consolidated financial results)
1. Matters regarding the scope of consolidation(1) Consolidated subsidiaries: 13 companies
Company names:
The Daishi Bank, Ltd., The Hokuetsu Bank, Ltd., The Daishi
Lease Co., Ltd., The Daishi Computer Service Co., Ltd., The Daishi
Guaranty Co., Ltd., The Daishi JCB Card Co., Ltd., The Daishi DC
Card Co., Ltd., The Daishi Management Consulting Co., Ltd.,
Daishi Securities Co., Ltd., Hokuetsu Leasing Co., Ltd., The
Hokuetsu Credit Guarantee Co., Ltd., The Hokuetsu Card Co., Ltd.,The Hokugin Economic Research Institute.
Both Daishi Bank, Ltd. and Hokuetsu Bank, Ltd. have become full
subsidiaries of the Company accompanying its establishment.
Both banks and their consolidated subsidiaries have now been
included in the scope of consolidation from this fiscal term.
(2) Non-consolidated subsidiaries: 4 companies
Daishi Food Industry Activation Fund Investment Limited
Partnership, Daishi Food and Agriculture Assist Fund Investment
Limited Partnership, Daishi Start-up Support Fund Investment
Limited Partnership, Hokuetsu Sixth Industry Support Fund
Investment Limited Partnership.
Non-consolidated companies have been excluded from the scopeof consolidation since their assets, current account balance, net
profit or loss for the current term (amount corresponding toequity), retained earnings (amount corresponding to equity), andother accumulated comprehensive income (amount corresponding toequity), etc., have little relevance and will not prevent rational
judgment to be made regarding the financial status andmanagement performance of the corporate group.

2. Matters related to the application of equity method(1) Non-consolidated subsidiaries subject to application of equity
method:None(2) Affiliated companies subject to application of equity method:None(3) Non-consolidated subsidiaries not subject to application of equity
method: 4 companies
Daishi Food Industry Activation Fund Investment Limited
Partnership, Daishi Food and Agriculture Assist Fund Investment
Limited Partnership, Daishi Start-up Support Fund Investment
Limited Partnership, Hokuetsu Sixth Industry Support Fund
Investment Limited Partnership.
Non-consolidated subsidiaries not subject to application of equity
method have been excluded from the scope of application ofequity method since their net profit or loss for the current term(amount corresponding to equity), retained earnings (amountcorresponding to equity), and other accumulated comprehensive
income (amount corresponding to equity), etc., do not haveimportant impact on the consolidated financial statement.
(4) Affiliated companies not subject to application of equity method:None.

3. Matters related to the fiscal year, etc., of
consolidated subsidiaries

The closing date for consolidated subsidiaries is as follows:
Last day of March: 13 companies

4. Matters related to accounting policies(1) Valuation criterion and valuation method for trading accountsecurities:
Valuation of trading account securities is made using the market
value method (cost of securities sold is calculated mainly by themoving average method).
(2) Valuation criterion and valuation method for valuable securities(i) The amortized cost method (straight-line method) using themoving average method is used for securities held forownership until maturity. For other trading accountsecurities, the market value method based on the market
price on the consolidated closing date (cost of sale to be
calculated using the moving average method) is used, as arule. However, the prime cost principle using the moving
average method is used for those for which market value isextremely difficult to ascertain.
The valuation difference for other trading account securities
is processed by the all net asset direct entry method.

51

DAISHI HOKUETSU REPORT 2019

(ii)

The market value method is used for valuation of securities
managed as estates in an individually operated monetarytrust held as trust assets with security operations as its main
purpose.

(3) Valuation criterion and valuation method for derivativetransaction
Valuation of derivative transactions is conducted using themarket value method.
(4) Depreciation method for fixed assets(i) Tangible fixed assets (excluding leased assets)
The straight-line method is mainly used for tangible fixed
assets.
Major service life is as follows:
Buildings: 10 to 50 years
Others:2 to 20 years(ii) Intangible fixed assets (excluding leased assets)
The straight-line method is used for intangible fixed assets.
Software used by the Company is depreciated based on theusage period (5 to 9 years) determined by the Company andits consolidated subsidiaries.
(iii) Leased assets“Tangible fixed assets” and “Intangible fixed assets”
included in leased assets related to finance leases exempt
from passage of title are depreciated by the straight-line
method with the lease period set to the statutory service life.
As for residual value, the guaranteed residual value shall be
used in cases in which residual value clause is included in
the lease agreement and zero for all other leases.
(5) Criteria for recording allowances for loan losses
Allowances for loan losses of consolidated subsidiaries in banking
business are recorded as per the depreciation and allowance
criteria set in advance, as follows:
Claims related to debtors who are legally insolvent, such as thosefacing bankruptcy or special liquidation (“Bankrupt debtors”) or
debtors under equivalent situations (“Effectively bankrupt
debtors”) are recorded as follows: The recorded amount is theremaining balance after deduction from the book value after
direct reduction as stated in the proviso, from the possible
marketable collateral amount and recoverable amount fromguarantees. For claims against debtors not currently insolvent
but with high risk of future insolvency (“Potentially bankrupt
debtors”), an amount judged to be necessary after
comprehensively considering the solvency of the debtor from theamount of balance, after deduction of the possible marketable
collateral amount and recoverable amount from guarantees fromthe claim amount, is recorded.
Claims other than the above are recorded based on loan loss rate,etc., calculated from past performance over a certain period.
Sales related divisions and HQ related divisions have conductedasset audits on all claims based on asset self-assessment criteria
and the assessment results have been audited by the asset
auditing division independent of the division being audited.
Provided however, that for collateral and claims with guarantees
against Bankrupt debtors and Effectively bankrupt debtors, thebalance after deduction of the validated amount of collateral andthe amount expected to be recoverable from the guarantee arededucted directly from the amount of the claim as the estimateduncollectable amount, and stands at \9,695 million.
An amount acknowledged to be necessary, in consideration of thepast loan loss rate for general claims and estimated uncollectableamount in consideration of individual recovery possibilities for
specific claims, such as those with default possibilities, arerecorded as allowances for loan losses of other consolidated
subsidiaries.
(6) Criteria for recording provision for bonuses
In preparation for expected bonus payment to employees, theamount of the expected bonus payment pertaining to therelevant consolidated fiscal year has been recorded as a provision
for bonuses.
(7) Criteria for recording provision for directors’s bonuses
In preparation for expected bonus payments to directors, theamount of the expected bonus payment pertaining to therelevant consolidated fiscal year has been recorded as provision
for director’s bonuses.

The Status of Financial Results (Consolidated)(8) Criteria for recording provision for directors’s retirement benefits
In preparation for payment of retirement benefits to directors ofconsolidated subsidiaries, the amount of expected retirement
benefits for directors acknowledged to have occurred before theclosing of the current fiscal year has been recorded as provisions
for director’s retirement benefits.
(9) Criteria for recording provision for reimbursement of deposits
In preparation for reimbursement of deposits from depositors fordeposits in which recording as a liability has been suspended, loss
occurring from future reimbursement claims have been
estimated, and the amount deemed necessary has beenrecorded as a provision for reimbursement of deposits.
(10)Criteria for recording provision for systems cancellation loss
Provisions for systems cancellation loss are recorded for the
expected loss to be borne by Daishi Bank and Hokuetsu Bank,
related to cancellation before maturity of the systems currently inuse, accompanying the transition to the system to be adopted by
the bank after the merger.
(11)Criteria for recording provision for contingent loss
Provisions for contingent loss are recorded by estimating the loss
and recording the amount judged to be necessary, for possible
loss occurring in the future for contingent events other thanevents provided under other provisions.
(12)Criteria for recording reserves under the special laws
Reserves under special laws are reserves for financial producttransaction liabilities for consolidated subsidiaries conducting
securities business. The amount calculated under the provisionsof Article 46-5 of the Financial Instruments and Exchange Act is
set aside to compensate for loss in incidents occurring related tosecurities future transactions, etc.
(13)Accounting method related to retirement benefits
In the calculation of retirement benefit liabilities, the benefit
formula standard is adopted as the method of attributing the
expected amount of retirement benefits within the current
consolidated fiscal year. Furthermore, the methods of processing
profit and loss for prior service costs and actuarial gain or loss are
as follows:
Prior service cost: Profit and loss processing using thestraight-line method for a certain numberof years (10 years) within the average
employee residual term of service at thetime of occurrence.
Actuarial gain or loss: Profit and loss processing of theamount pro-rated by the straight-line
method for a certain number of years (10to 12 years) within the average employee
residual term of service at the time ofoccurrence, from the following fiscal year.
It must be noted that some consolidated subsidiaries have adopted asimplified method in the calculation of retirement benefit, in whichamount to be paid for voluntary retirement at the end of the current
term is taken as the retirement benefit liability in the calculation ofretirement benefit liability and retirement benefit cost.
(14) Criteria for conversion of foreign currency denominated assets
and liabilities into Japanese yen
Foreign currency denominated assets and liabilities areconverted into Japanese yen using the rate of exchange on the
consolidated closing date.
(15)Criteria for recording of profits and expenses related to financelease transactions
Criteria for recording profits and expenses related to financelease transactions are conducted by recording sales and cost of
sales, when lease fees are received.
(16)Important risk hedging methods(a) Interest risk hedge
As a method of hedge accounting of interest risk occurringfrom financial assets and liabilities of consolidated
subsidiaries in the banking industry, “Individual hedge” that
directly establish correspondence between the target of thehedge with the hedging method is partially adopted on
assets and liabilities to conduct accounting processing bydeferred hedges. This allows the target of the hedging

method and the target of the hedge to be integrally
managed. The effectiveness of the hedge is evaluated byverification of whether the interest risk subject to hedging
has been diminished by the hedging method. In addition,
exceptional processing for interest swaps are made, andjudgment regarding the requirements for exception
processing is used in lieu of the judgment of hedge
effectiveness.
(b) Exchange fluctuation risk hedging
Deferred hedge, as provided in “Handling in accounting andaudit of foreign currency denominated transactions, etc., in
the processing of accounts in the banking industry” (Special
Audit Committee Report No. 25 by The Japanese Instituteof Certified Public Accountants (JICPA) dated July 29, 2002.
Hereinafter “Industry-wise Audit Committee Report No.
25”) is adopted. The effectiveness of the hedge is evaluatedwith currency swap transactions and exchange swap
transactions, etc., conducted with the aim of diminishingexchange fluctuation risks of foreign currency denominateddebts and credits and the effectiveness of the hedge isevaluated by confirming the existence of a foreign currency
position equivalent amount that matches the foreign
currency denominated debts and credits, which are thetargets of the hedge.
(17) Scope of funds in consolidated cashflow statements
The scope of funds in consolidated cashflow statements are cash
and deposit with the Bank of Japan listed in “Cash and deposits”
in the consolidated balance sheet.
(18) Account processing of consumption tax, etc.
The excluding tax method is mainly adopted for accountprocessing of consumption tax and local consumption tax(“Consumption tax, etc.”) by the Company and consolidated
subsidiaries. However, non-deductible consumption tax related
to tangible fixed assets is recorded as expenses in the
consolidated accounting for the current fiscal year.

(Changes to accounting policies that are difficult todistinguish from changes in estimates in accounting)
The fixed percentage method had been adopted as the depreciation
method for the tangible fixed assets of Daishi Bank (excluding
buildings and facilities and structures annexed to buildings acquiredon or after April 1, 2016). However this has been changed to thestraight-line method from this consolidated fiscal year.
In the medium-term management plan starting from fiscal 2018,
Daishi Bank has checked the actual state of use of operating
branches and office equipment, etc., and as a result, found thatthese have been used stably over a long period, and that the use
values are generally constant throughout their service-life. It has
been judged that changing to the straight-line method, which
allocates the costs evenly over the service life, more appropriatelyreflects the state of management.
In addition, accompanying the integration of management with
Hokuetsu Bank in October 2018, review was conducted on theoperating branches and the use of office equipment, etc., in the
consolidated subsidiaries in banking business, switching to thestraight-line method has been judged to more appropriately reflect
the state of management.
This change has resulted in an increase of \197 million in ordinary
income and net income before adjustments of taxes, etc., comparedto adoption of the conventional method.

(Additional information)(Transaction to grant shares of the Company to employees, etc.
through trust)(1) Summary of transaction
Daishi Bank Ltd., a subsidiary of the Company has been
conducting transaction to grant shares of the Company via a trust
through an employee stock ownership association from
November 13, 2015, as a part of its service and benefit programfor its employees. Accompanying the establishment of theholding company through a joint transfer of stock on October 1,
2018, its operating body has been transferred to the Company,
as well as the transfer of E-ship trust assets to the Company.
The scheme is an incentive plan targeted at all employees
participating in the “Daishi Bank Employee Stock Ownership
Association” (“Stock ownership association”). Under this scheme,
the Company has set up a “Special Trust for Daishi BankDAISHI HOKUETSU REPORT 201952

The Status of Financial Results (Consolidated)
Employee Stock Ownership Association” (“Employee stock trust”)
and the Employee stock trust will acquire the shares of theCompany in numbers expected to be acquired by the Stockownership association during the period of five (5) years after its
establishment in advance. Thereafter, the shares of the Company
will be sold continuously from the Employee stock trust to the
Stock ownership association, and in the event that an amountequivalent to profit from sales of stock has accrued within the
Employee stock trust as of the end of the trust, such amountequivalent to profit from sales of stock shall be distributed toindividuals qualifying as beneficiaries. As the Company will be
providing guarantee for debt of the Employee stock trust topurchase the Company stock, in the event there is an accrued
debt balance equivalent to loss from sales of stock occurring froma drop in the Company’s stock price, the Company shall settle theremaining debt based on the guarantee contract.
(2) Company shares owned by the trust
Company shares remaining in the trust are recorded at its bookvalue (excluding the amount of ancillary expenses) in the trust as
treasury stock in Net assets. Book value and the number ofshares of said treasury stock is \ 273 million and 47 thousand
shares.
(3) Book value of borrowing recorded by application of the grossamount method.
\525 million(Consolidated Balance Sheet related)

1. Total amount of shares or contribution in non-consolidated
subsidiaries and affiliated companies:
Contribution:\488 million
2. The amount of bankrupt debtor claims and overdue claims inloans are as follows:
Bankrupt debtor claims \2,044 million
Overdue claims\61,107 million“Bankrupt debtor claims” refers to loans which the events
indicated in a. through e. in Article 96, paragraph 1, item 3 orevents provided in item 4 of the Order for the Enforcement of the
Corporation Tax Act (Cabinet Order No. 97 of 1965) haveoccurred, for loans in which unreceived interest payment has notbeen recorded, being judged that collection of capital, interest
payment, or its settlement cannot be expected for continued
delay in the repayment of capital or payment of interest for areasonable period or for other causes (excluding portions forwhich bad debts have been written off) (“Uncollected interest
non-recorded loan”).
Furthermore, “Overdue claims” refers to uncollected interest
non-recorded loans, other than loans in which the payment ofinterest has been given a grace period for the purpose of
assisting the Bankrupt debtor claim or management
reorganization or support.

3. The amount of loans overdue for three (3) months or longer is asfollows:
Loans overdue for three (3) months or longer \514 million“Loans overdue for three (3) months or longer” refers to loans
where payment of interest or repayment of capital has been
delayed for three (3) months or longer, from the day following
the contract due dates, in which Bankruptcy debtor claims or
overdue claims do not apply.
4. Of the loans, those with relieved loan conditions are as follows:
Loans with relieved loan conditions: \4,840 million“Loans with relieved loan conditions” refers to loans for which a
reduction in interest, a grace period for interest payment, a grace
period for repayment of capital, debt forgiveness, or otheragreements favorable to the debtor have been made for the
purpose of assisting the debtor with management reorganizationor support, that do not fall under Bankrupt debtor claims,
overdue claims or loans overdue for three (3) months or longer.
5. The aggregate total of Bankrupt debtor claims, overdue claims,
loans overdue for three (3) months or longer, and loans withrelieved loan conditions are as follows:
Total amount:\68,506 million
Note that the amount of loans indicated in 2. through 5. above
are the amount prior to deduction of allowance for loan loss.

53

DAISHI HOKUETSU REPORT 20196. Discounting of bills is processed as financial transaction, based on“Handling in accounting and audit regarding the application offinancial instruments accounting standards in the banking
industry” (Special Audit Committee Report No. 24 by JICPA dated
February 13, 2002). The Bank retains the right to freely disposeof bank acceptance bills, commercial bills, documentary bills, andforeign bills bought, etc., and thus received in the form of sales or(re)mortgaging and their face value is as follows: \25,358 million
7. Assets provided as security are as follows:
Assets provided as security
Securities\1,031,998 million
Other assets\52 million
Total\1,032,050 million
Liabilities corresponding to security assets
Deposits\ 57,276 million
Payable under repurchase agreements\110,272 million
Payables under securities lending transactions \403,529 million
Borrowed money\424,577 million
In addition to the above, the following has been tendered as a
substitute for security for foreign currency settlement,
short-term financial transactions, or futures market transaction
deposits, etc.
Trading account securities\20 million
Securities\5,269 million
Furthermore, financial instruments security deposits, central
clearing organization security deposits, and guarantees areincluded in Other assets and their amount are as follows.
Financial instruments security deposits \14,536 million
Central clearing organization security deposits\50,000 million
Guarantees\1,446 million
8. Overdraft agreements and Commitment line agreements forloans are agreements to provide loans up to a prescribed limit,
when application for a loan has been made by customers, in theevent that there is no breach of the terms as provided for in theagreement. Unexecuted loan balances related to these
agreements are as follows:
Unexecuted loan balance\1,842,401 million
Of which the original term of loan is within 1 year
\1,752,435 million
or can be cancelled unconditionally at any time
Since many of these agreements terminate without the loan
being executed, the unexecuted loan balance itself does not
impact the future cashflow of the consolidated subsidiaries
engaged in the banking business or to some of the consolidated
subsidiaries. Many of these agreements contain a clause that theconsolidated subsidiaries engaged in the banking business or tosome of the consolidated subsidiaries may refuse the loan ordecrease the limit amount in the event that applications for loans
have been made, in the event that there have been changes infinancial situation, securing of loans, and other reasonablereasons. In addition, guarantees, such as real estate, valuable
securities, etc., are secured at the time of agreement as
necessary, and the state of the customers are checked regularly(semi-annually) even after the agreement in accordance with thein-house regulations, and review of the agreement and measures
to secure credit, etc., are conducted.
9. Based on the Act on Revaluation of Land (Act No. 34 dated March
31, 1998), revaluation of business-use land owned by Daishi
Bank was conducted. For the valuation difference, the amountequivalent to tax related to the subject valuation difference has
been recorded in Liabilities, as “Deferred tax liability related torevaluation” and the amount after deduction of this amount isrecorded in Net assets under “Land revaluation difference”.
Date of revaluation
March 31, 1998
Method of revaluation as provided in Article 3 paragraph 3 ofsaid Act.
Calculated based on the method provided and publishedby the Director General of National Tax Administration
Agency to calculate the value of land on which the taxable
value for the land tax, as provided in Article 16 of theLand-holding Tax Act (Act No. 69 of 1991) andestablished in the Order for Enforcement of Act on
Revaluation of Land (Order No. 119 dated March 31,
1998) Article 2 item 4, with reasonable adjustments (rateof value correction by depth, etc.) made.
The difference between the total amount of market
value of the business-use land revaluated as provided forin Article 10 of said Act as of the end of the term and theThe Status of Financial Results (Consolidated)total amount of book value after revaluation of saidbusiness-use land:\12,670 million
10. Aggregate amount of depreciation of tangible fixed assets
Aggregate amount of depreciation\83,708 million
11. Amount of compressed entry of tangible fixed assets
Amount of compressed entry\8,046 million(Amount of compressed entry in current consolidated
fiscal year)(\4 million)
12. Amount of guarantee obligation for privately-placed bonds(under Article 2 paragraph 3 of Financial Instrument andExchange Act) in bonds included in “Securities”.
\140,313 million(Consolidated Statements of Income Related)

1. The following is included in Other ordinary income.
Gain on sales of stocks and other securities\5,430 million
2. The following are included in General and administrative
expenses.
Salaries and allowances\26,879 million
Retirement benefit costs\1,738 million
3. The following are included in Other expenses.
Written-off of loans\1,820 million
Loss on sales of stocks and other securities\1,501 million
4. Impairment loss have been recorded for the following asset
groups.
Mainly inside Niigata Prefecture
Classification
Business use
Major usage
Branch office use
31 cases
Type
Land and buildings
Impairment loss
\2,214 million
Classification
Owned
Major usage
Unutilized capital, etc. 13 cases
Typeland and buildings
Impairment loss
\33 million
Accompanying the plans for integration (or relocation) of
branches after the merger of Daishi Bank and Hokuetsu Bank in
January 2021 (scheduled) and the fall in land prices, etc.,
recovery of investment can no longer be anticipated and theirbook value has been reduced down to the possible recoverable
value. The amount of said impairment loss of \2,248 million has
been recorded under Extraordinary loss.
The policy for grouping of assets of consolidated subsidiaries
conducting banking business is as follows:
As a rule, grouping is conducted in sales branch units, which is
the minimum division in management accounting. Assets
scheduled for disposal and unemployed capital, et.,. are grouped
by individual asset units. Head office, administration centers,
welfare facilities, etc., which are assets related throughout thebank are handled as common assets.
Net realizable value is used as the recoverable amount of theasset group for the current consolidated fiscal year and is
calculated based mainly on real estate appraisal evaluation
criterion, etc.

(Consolidated Statements of Comprehensive Income
Related)

1.

Recycling and amountcomprehensive income

of

tax

effects

related

to

Other(Unit: \ million)
Valuation difference on available-for-sale securities
Incurred cost for this term
(9,756)
Recycling(4,318)Before tax effect adjustment(14,075)
Tax effect amount
3,971
Valuation difference on available-for-sale securities(10,104)
Deferred gains or losses on hedges
Incurred cost for this term
(10,056)
Recycling
2,474
Before tax effect adjustment(7,581)
Tax effect amount
2,305
Deferred gains or losses on hedges(5,276)
Remeasurements of defined benefit plans(net of tax)
Incurred cost for this term
(7,506)
Recycling544
Before tax effect adjustment(6,961)
Tax effect amount2,122
Remeasurements of defined benefit plans(net of tax) (4,839)
Total Other comprehensive income(20,221)(Consolidated Statements of Shareholders Equity
related)1. Matters related to the type and total number of issued
shares, and type and number of Treasury stocks(Unit: 1,000 shares)
Number ofshares atthebeginning of
the current
consolidated

Number ofincreasedsharesduring thecurrent
consolidated

Number of
decreasedsharesduring thecurrent
consolidated

fiscal term

fiscal term

fiscal term

34,62512,002684

45,942

34,62512,002684

45,942

852

309

805

356

852

309

805

356

Number ofshares at
the end of
the current
consolidated
fiscal term

Remarks

Number ofissuedsharesOrdinaryshares
Total(Note)
1, 2

TreasurystocksOrdinaryshares
Total(Note)
3, 4, 5(Note) 1. Increase in issued ordinary shares are increase from share transfers.
2. Decrease in issued ordinary shares are decrease from cancellation ofTreasury stocks.
3. Ordinary shares of Treasury stocks at the beginning of the current
consolidated term includes 110 thousand Daishi Bank shares owned by theSpecial Trust for Daishi Bank Employee Stock Ownership Association(“Employee stock trust”).
4. Ordinary shares of Treasury stocks at the end of the current
consolidated term includes 47 thousand Daishi Bank shares owned by the
Employee stock trust.
5. The breakdown of increase in the number of ordinary shares ofTreasury stocks is as follows.
Increase by purchase request of fractional unit shares
3 thousand shares
Increase from share transfers
10 thousand shares
Acquisition of Treasury stocks based on
board meeting resolution
295 thousand shares
Breakdown of decrease in the number of ordinary shares of Treasury stocks is asfollows.
Transfer by exercise of stock option rights
58 thousand shares
Decrease by sales of Diashi Bank and Company sharesby Employee stock trust
62 thousand shares
Decrease by purchase request of fractional unit shares
0 thousand shares
Decrease by cancellation of Treasury stocks based on
board meeting resolution
684 thousand shares

DAISHI HOKUETSU REPORT 201954

The Status of Financial Results (Consolidated)

2. Matters related to right to subscribe to new shares and right tosubscribe to new treasury stocks

Breakdown ofClassifica
tion

Type

Number of shares to be target of the right toofsubscribe to new shares (shares)

sharesCurrent

to beconsolidated fiscal

Beginnintargetright tog ofof thesubscri

subscrsharesyear

consolidtonewe as ofcurrent

right

be to

ibe to

ated

Incre

Decre

fiscal

ase

ase

year

new

Balancthe
End ofend ofcurrenttheRema

consolid

currentrks

atedfiscalfiscalyear

year(\ milli(Lease transaction related)on)sharesAs
Company

Stock

-

637

-

637

optionTotal

3. Matters related to dividends(1) Amount of dividends paid out during the current consolidated
fiscal year
As the Company is a joint holding company established by joint
transfer of stock on October 1, 2018, the amount of dividend paid
is the amounts resolved in the Board of Directors Meeting of thefollowing fully owned subsidiaries:
Total
Type

(Resolution)ofsharesamount ofDividend

dividends

per(\ million)

share (\)

Reference

Effective

date

date

of

Ordinary

directors,

shares ofMay

Daishi

11,

2018
Board

45.00

1,527

45.00

720

30.00

March

31,

June

1,

2018

2018

September

December30, 2018

3, 2018

September

December30, 2018

3, 2018

Bankof

Ordinary

Directors,

shares ofNovember

Daishi8, 2018

Bank

Board

1,524

of

Ordinary

Directors,

shares ofNovember

Hokuetsu

8, 2018

Bank(Note) The total amount of dividends of Daishi Bank includes
dividends for Employee stock trust (\4 million from the Board of
Directors Meeting on May 11, 2018. \3 million from the Board of
Directors Meeting on November 8, 2018).
(2) Dividends for which the reference date falls within the current
consolidated fiscal year with the effective date occurring after thelast day of the current consolidated fiscal year.
Total(Resolution

Type of)sharesamount ofdividends(\ million

DividenSourced per

Referenc

Effectivof fundshare

e datee dateMarch

June 3,31, 2019

2019

(\)

) (Note)Ordinaryshares ofBoard of

Daishi

Directors,

Hokuets

May 10,u

2019

Finance

Retaine
2,738

d

60.00

earnings

Group,
Inc.

(Note) The total amount of dividends include dividend of \2 million
for Employee stock trust.

(Consolidated cashflow statement related)

1. Relationship between the end of term cash and cash equivalents
and the amount indicated in the account titles in the consolidatedbalance sheet
Cash and deposit account\1,108,007 million
Deposits (excluding Bank of Japan deposit) (\2,155 million)
Cash and cash equivalents\1,105,851 million(Note: Figures indicated in parenthesis are negative values)

55

DAISHI HOKUETSU REPORT 2019

Operating lease transactions<Borrower side>
Unearned lease fees concerning irrevocable operating leasetransactions(Unit: \ million)
One (1) year or less72
Exceeding one (1) year
175
Total
248
<Lender side>
Unearned lease fees concerning irrevocable operating leasetransactions(Unit: \ million)
One (1) year or less
182
Exceeding one (1) year
363
Total
546

(Financial instruments related)(Note)Board

2. Major breakdown of assets and liabilities of companies that havenow become consolidated subsidiaries through the transfer ofsharesAccompanying the consolidation of Hokuetsu Bank through thetransfer of shares major breakdown of assets and liabilities, as ofthe start of consolidation, is as follows:
Total assets\2,900,457 million
Of which, loans and bills discounted \1,707,285 million
Of which, securities\908,396 million
Of which, allowance for loan losses (\ 5,551 million)
Total liabilities\2,793,366 million
Of which, deposits\2,501,042 million

Accounting titles with little relevance have been omitted from theamounts recorded in the consolidated balance sheet.
1. Matters concerning the status of financial instruments(1)Policy regarding approach towards financial instruments
The Company group is engaged, with focus on banking business
together with financial services covering lease operations,securities operations, credit guarantee operations, credit card
operations, and others. Funds raised by deposits and negotiablecertificate of deposits are mainly managed through loans andvaluable securities.
As the Company has financial assets and liabilities that areaccompanied by interest rate fluctuations, risks on assets andliabilities for the entire group is comprehensively grasped andcontrolled to avoid disadvantageous impact from interest rate
fluctuations. A comprehensive Asset and Liability Management(ALM) is implemented to improve profits as well as stability.
Derivative transactions are conducted as a part of the activities.
(2)Contents of financial instruments and their risks
Financial assets held by the Company group are mainly loans
made to domestic companies and individuals, and are exposed tocredit risk in which recovery of capital and interest on loans could
be made difficult by bankruptcy of the customers or deteriorationof financial status.
Valuable securities are mainly stocks, bonds, investment trusts,
and investment in capital of partnerships. In addition to securities
held for ownership until maturity, purely financial, and forbusiness promotion purposes, trading account securities arebonds and are held for trading. These are exposed to market
risks from fluctuation of market factors, in which the asset value
held by the Company group may be reduced, incurring loss
though credit risks of the issuing entity, domestic and overseasinterest rates, the price of valuable securities, etc., and foreignexchange rates.
Of the financial liabilities of the Company group, deposits, etc.,
and marketable fund raising are exposed to liquidity risk. In
addition to the possibility of outflow of deposits or not being able
to raise necessary funds by the deterioration of the Company
group’s credibility, there is also a possibility of incurring loss by
being forced to conclude transactions under unfavorable
conditions.
Derivative transactions conducted by the Company group
includes interest rate swaps, forward exchange contracts,
currency options, etc., to respond to needs to hedge risks related
to interest rates and foreign currency of the customers.
Furthermore, as a part of ALM, interest rate swap transactions,currency swap transactions, etc., are being conducted for

The Status of Financial Results (Consolidated)interest rate risk control in banking operations, as well as foradjustment of fund surplus or deficit in banking operations andfor stabilizing fund liquidity.
In addition, in the subsidiary banks and some of the consolidated
subsidiaries, credit futures transaction, etc., aimed at pursuing
trading profits are conducted within the extent of earning powerand corporate strength. Risks generated from these derivativetransactions include credit risks in which the counterpart of thetransaction has defaulted, and market risks in which loss can begenerated by fluctuation of interest rates and currency exchange.
“Hedge accounting” is adopted for derivative transactions aimed
a hedging risks. Evaluation of the effectiveness of hedging is
made by checking that the amount of derivative transaction risk,
as a hedge method, is within the range of allowable risk amount,as provided in the operating criteria concerning hedgetransaction management, and quarterly verification of whether
the risk subject to the hedge has been diminished is conducted.
(3) Risk management structure related to financial instruments(i)Credit risk management
The Company group operates and manages credit risk in an
appropriate matter based on various rules concerning credit
risk management.
In terms of structure, the Risk Management Department is
responsible for controlling credit risks, and maintains
various rules concerning credit risk management, as well as
for the planning and operation of analysis, evaluation, andimprovement activities.
In both Daishi Bank and Hokuetsu Bank, credit divisions,completely detached from sales promoting divisions,conduct strict screening and manages problematic loans
appropriately. It also aims for sound management of assets
through management improvement support activities tocustomers, etc., the approach being promoted fully acrossboth banks. Credit rating and self -assessment of loans, etc.,
is strictly enforced through a two-stage assessment system,
one by the sales office and the other by the head officedivision. In addition, appropriateness and validity of credit
rating and self-assessment is verified in the audit conductedby the Audit division.
Regarding the credit portfolio, credit concentration
management for specific areas, industries, companies,
groups, etc., are conducted in an appropriate manner.
Furthermore, credit risk quantification (Note) is being
conducted and credit risk limits in line with total equity arebeing set.
(Note) Credit risk quantification is to digitize and estimate
the amount of credit risk involved in the credit portfolio,using statistical methods.
(ii)Market risk management
The Company group has established an operation policy for
ALM to adjust market risks to an appropriate magnitude andto secure stable income, and determines the risk limits andloss limits in valuable securities operation in line with thepolicy.
Furthermore,
importantmatters
concerningrisk
management are reviewed in the ALM & Risk Management
Committee, and is prepared to promptly report any
important situation that may occur in valuable securities
operations to the management.
As a rule, the Company group conducts quantitative analysis
concerning market risks for all financial instruments, mainly
using Value at Risk (VaR), and is calculated and managed by
Daishi Bank and Hokuetsu Bank respectively. Quantitative
analysis is not conduced on some of the financial
instruments that have little impact for its amount, etc., andsome of the financial instruments of some group companies.
Daishi Bank mainly adopts VaR by historical method(holding period: 120 days, confidence interval: 99%,
observation period: 1,250 days) (note that thevariance-covariance method is adopted on some of theinvestment trusts). The amount of market risk as of the endof the current consolidated fiscal year (excluding market
risks of financial instruments whose market value isextremely difficult to assess, such as non-listed stock) is\38,656 million.
Hokuetsu bank adopts the VaR by the variance/covariancemethod (holding period: 6 months, confidence interval:
99%, observation period: 5 years). The amount of market
risk as of the end of the current consolidated fiscal year

(excluding market risks of financial instruments whosemarket value is extremely difficult to assess, such as
non-listed stock) is \28,598 million.
A back test which compares the computed VaR and thetheoretical profit and loss (profit and loss assumed to havegenerated when the portfolio is fixed as of the timing of risk
amount measuring) is conducted to verify the validity of themeasurement model.
However, VaR only indicates the amount of risk under a fixedcertainty statistically computed from past market
fluctuations, and may not be able to capture risks when themarket environment should change inconceivably. This
being the case, it is supplemented by separate stress tests,
etc.
(iii)Liquidity risk management
In the Company group, “Liquidity risk management rules”
have been established in each subsidiary bank to grasp andanalyze the status of financing by the administration division
responsible for financing to raise funds from the market as
necessary.
In addition, response measures and reporting andcommunicating structure has been established in order to
conduct prompt response under various situation, in theunlikely event to match the urgency of fund needs.
(4) Supplementary explanation regarding matters concerning themarket value of financial instruments, etc.
In addition to the prices based on market price, the market valueof financial instruments includes reasonably calculated prices inthe event that there are no market prices. In this calculation,certain presumptions are adopted and said price may differ if
calculated based on different presumptions.
2. Matters concerning the market value of financial instruments, etc.
The amount recorded in the consolidated balance sheet, theirmarket value and the differences are as follow. Market value fornon-listed shares that is extremely difficult to grasp has not been
included in the table to follow (refer to (Note 2))(Unit: \ million)
Amount recorded inconsolidated balance

DifferenceMarket value

(*1)

sheet
(1) Cash and due from banks

1,108,007

1,108,007

―

0

0

―

66,99968,601

1,601

2,420,308

2,420,308―(2) Securities
Trading account securities
Held for ownership
until maturity
Other securities(3) Loans and bills
discounted
Allowances for loan
losses (*2)

5,065,891(19,622)5,046,269

5,080,072

33,802

Total Assets

8,641,585

8,676,989

35,404(1) Deposits

7,177,466

7,177,652(185)

279,430

279,431(0)

110,272

110,272―

403,529

403,529―(2) Negotiable certificatesof deposit(3) Payables under
repurchase agreements(4) Payables under securities
lending transactions(5) Borrowed money
Total Liabilities

433,879

433,886(6)8,404,577

8,404,770(192)

Derivative transactions (*3)
Hedge accounting not applied

1,170

1,170

―

Hedge accounting applied(8,635)(8,761)(125)

Total derivative transactions(7,464)(7,590)(125)(*1) Appraisal profit or loss is indicated in the Difference column.
(*2) General and individual allowances for loan losses corresponding
to loans and bills discounted have been deducted.
(*3)Derivative transactions recorded in other assets and liabilities,
and transactions in which special processing of interest rate
swap is adopted are indicated together as a batch.
Net debts and credits generated from derivative transactions areindicated in net amount and items in which its total will be net
debt are indicated in (parenthesis).
Provisions for contingent loss corresponding to derivatives havebeen directly reduced in the consolidated balance sheet amounts
as they have little relevance.

DAISHI HOKUETSU REPORT 2019

56

The Status of Financial Results (Consolidated)(Note 1) Calculation method for the market value of financial instruments
Assets(1) Cash and due from banks
As the market price of due from banks without maturity is approximately the same as their book value, the book value is taken to be themarket value. For due from banks with maturity, as their agreed period is short (within one (1) year), and its market value is approximately
the same as their book value, the book value is taken to be the market value.
(2) Securities
Price at the exchange for stocks, reference bond trading statistics published by the Japan Securities Dealers Association or the price, etc.,
indicated by the correspondent financial institution is used for bonds. Price at the exchange, published reference price or price indicated by
the correspondent financial institution is used for investment trusts. Privately-placed bonds guaranteed by the issuing bank with floatinginterest rate are short term and will reflect the market interest rate and are approximately the same as their book value, unless the credit
status of the issuing body has differed significantly after its execution, and therefore said book value is taken to be the market value. Market
value of privately-placed bonds with fixed interest rate is calculated by adding guarantee fees to the amount discounted by the interest rate
added with a credit spread on appropriate indices, such as swap interest rate, on the total sum of capital and interest, for each classification
based on type, internal rating, and period.
Notes regarding securities by holding purposes are indicated in [(Valuable securities related)].
(3) Loans and bills discounted
Loans and bills discounted with floating interest rates are short term and reflects the market interest rates and are approximately the sameas their book value (before deduction of general allowance for loan losses) unless the credit status of the issuing body has differedsignificantly after its execution. Therefore said book value is taken to be the market value. Those with fixed interest rates are calculated byadding guarantee fees to the amount discounted by the interest rate added with a credit spread on appropriate indices, such as swap interest
rate, on the total sum of capital and interest, for each classification based on type, internal rating, and period. The market value for thosewith short agreed period (within one (1) year) is approximately the same as their book value (before deduction of general allowance for loan
losses) and the book value is taken to be the market value.
Since the estimated loan loss is calculated on claims, etc., for Bankrupt debtors, Effectively bankrupt debtors, and Potentially bankrupt
debtors based on the present value of estimated future cashflow or the expected recovery value from mortgages and guarantees, its market
value is approximately close to the amount of recorded amount of claims in the consolidated balance sheet after deduction of the recorded
amount of allowance for loan losses, this amount is taken as the market value.
For loans and bills discounted with no due date for repayment set, for special characteristics, such as restricting said loan within the extent
of security assets, its market value, from the estimated repayment period and interest rate conditions, etc., is assumed to be approximately
the book value (before deduction of general allowance for loan losses), and this is taken as the market value.
Liabilities(1) Deposits and (2) Negotiable certificates of deposit
For call deposits, the payment amount (book value) when payment request is made on the consolidated closing date is deemed to be themarket value. Furthermore, the market value of time and savings deposits and negotiable certificates of deposit is segmented by a fixed
period and their present value is calculated by discounting the future cash flow. The discount rate used is the interest rate used when
accepting new deposits. Since the market value and book value is approximately the same for those with short term deposit period (withinone (1) year), said book value is taken as the market value.
(3) Payables under repurchase agreements
Since the agreed period of payables under repurchase agreements is short (within one (1) year), its market value is approximately the bookvalue, and this is taken as the market value.
(4) Payables under securities lending transactions
Since the market value of those with short agreed period short (within one (1) year, its market value is approximately the book value, andthis is taken as the market value.
(5) Borrowed money
Of borrowed money, those with floating interest rates are short term, reflecting market interest rates. Furthermore, since the credit statusof the Company and its consolidated subsidiaries have not differed much after their execution, the market value is considered to beapproximate to the book value, and the book value is taken as the market value. For those with fixed interest rates, the present value iscalculated by segmenting the total amount of capital and interest of the borrowed money into a fixed period, and discounting it with aninterest rate expected to be applied in a similar borrowing.
Since the market value of those with short agreed period (within one (1) year) is approximately the book value, this is taken as the market
value.
Derivative transactions
Derivative transactions are listed in “(Derivative transactions)”.
(Note 2) The Amount of financial instruments recorded in the consolidated balance sheet of which the market value has been acknowledged to
be extremely difficult to grasp is as follows. These are not included in “Assets (2) Other securities.”(Unit: \ million)
Segment
March 31, 2019(i) Non-listed stock (*1) (*2)4,475(ii) Investment in capital of partnerships, etc. (*3)
4,355
Total
8,831
(*1)There are no market values for non-listed stocks and it is extremely difficult to grasp their market values and they have not been
made subject to market value disclosure.
(*2)In the current consolidated fiscal year, no impairment (\0 million) has been made for non-listed stocks.
(*3)Of investment in capital of partnerships, etc., those for which the market value is extremely difficult to grasp, such as cases in which
the partnership estate is in non-listed stocks, have not been made subject to market value disclosure. Parts of “Other assets” areincluded in investment in capital of partnership, etc.

57

DAISHI HOKUETSU REPORT 2019

The Status of Financial Results (Consolidated)(Note 3) Expected amount of redemption of monetary claims and securities with maturity after consolidated closing dateWithin 1 year

Exceeding 1
year but within
3 years―
536,182

Exceeding 3
years butwithin 5 years―
309,960

Exceeding 5
years butwithin 7 years―
165,908

Exceeding 7
years butwithin 10 years―
606,063(Unit: \ million)
Exceeding 10
years

Deposits
1,048,435―
Securities
328,422250,112
Bonds to be held to
7,482
58,503179―
800―
maturity
Government bonds
7,000
58,000――――
Corporate bonds
482
503
179
―
800
―
Other securities with
320,940
477,679
309,781
165,908605,263
250,112maturity
Government bonds
161,253
168,408
113,554
52,87943,651
155,661
Local government
38,04632,77020,367
21,059263,206
14,009bonds
Corporate bonds
59,823100,040
113,791
17,58723,534
16,597Loans and bills discounted
705,405
919,844764,442
485,092
521,157
1,019,909(*)
Total
2,082,262
1,456,027
1,074,402
651,000
1,127,221
1,270,022(*)
Loans and bills discounted do not include \63,151 million in cases in which the scheduled amount of redemption cannot be foreseen nor\587,240 million without an agreed due date, against Bankrupt debtors, Substantial Bankrupt debtors, and Effective Bankrupt debtors,
etc.
(Note 4) The amount of scheduled repayment of borrowed money and other interest-bearing debts after the consolidated closing date
(Unit: \ million)
Exceeding 1
Exceeding 3
Exceeding 5
Exceeding 7
Exceeding 10
Within 1 year
year but within
years but
years but
years butyears
3 years
within 5 years
within 7 years
within 10 years
Deposits (*)
6,618,134
478,907
74,973
2,097
3,353
―
Negotiable certificates of279,180250――――
depositPayables under
110,272―――――
repurchase agreements
Payables under securities
403,529―――――
lending transaction
Borrowed money
125,041
168,257
140,435
110
27
6
Total
7,536,158
647,414215,408
2,208
3,381
6
(*) Demand deposits in Deposits are included in “Within 1 year.”(Securities related)

1.The trust beneficiary rights in “Trading account securities” and “Monetary claims bought” are also included in addition to “Securities” in the
consolidated balance sheet.
2. “Subsidiary company stocks and affiliated company stocks” are listed as notes in the financial statements.

1. Trading securities
Valuation difference included in profit and loss of the consolidated fiscal year
2. Bonds to be held to maturity
TypeMarket value exceeds amountrecorded in consolidated balance
sheetMarket value does not exceed
amount recorded in consolidatedbalance sheet
Total

Government bonds
Corporate bonds
Sub total
Government bonds
Corporate bonds
Sub total\20 million

Amount recorded inconsolidated balance
sheet (\ million)
65,037
1,912
66,949―50
50
66,999Market value(\ million)
66,622
1,928
68,551―49
49
68,601

Difference(\ million)
1,584
16
1,601
―
(0)
(0)
1,601

DAISHI HOKUETSU REPORT 201958

The Status of Financial Results (Consolidated)

3. Other securities
Type

Amount recorded in consolidatedbalance sheet exceeds cost of
acquisition

Amount recorded in consolidatedbalance sheet does not exceed costof acquisition

Total

Stocks
Bonds
Government bonds
Local government
bonds
Corporate bonds
Other
Foreign bonds
Sub total
Stocks
Bonds
Government bonds
Local government
bonds
Corporate bonds
Other
Foreign bonds
Sub total

Amount recorded inconsolidated balance
sheet (\ million)
105,000
1,342,398
691,443

Acquisition cost(\ million)

Difference(\ million)

53,244
1,319,039
674,837

51,75623,35816,605389,570

384,777

4,793

261,384
448,029
348,323
1,895,428
39,45787,735
11,053

259,424
422,183
334,934
1,794,468
46,57588,14011,055

1,959
25,845
13,389100,960(7,118)
(405)
(1)

3,955

3,956

(0)

72,725398,188
69,777525,380
2,420,809

73,129429,937
71,498564,6542,359,122(403)(31,749)(1,720)(39,273)
61,686

4. Bonds to be held till maturity sold during the current consolidated fiscal year
Type

Cost of sale (\ million)
Corporate bonds
74
Total
74
(Reason for sale) Retirement by purchase
5. Other valuable securities sold during the current consolidated fiscal year
Type
Stocks
Bonds
Government bonds
Local government bonds
Corporate bonds
Other
Foreign bonds
Total

Cost of sale (\ million)
19,515150,297
84,00649,807
16,482
266,247
232,405
436,059

Fiscal 2018
Amount of sale (\ million)
74
74

Sales profit and loss (\ million)
0
0

Fiscal 2018
Amount of sale (\ million)
4,237
1,106
854
179
72
2,091
690
7,435

Sales profit and loss (\ million)
1,059
17
10
―
7
3,470
3,004
4,547

6. Valuable securities with changes to the purpose of ownership
No applicable items
7. Valuable securities written-down
For valuable securities other than trading account securities (excluding those for which market value is extremely difficult to grasp) incases in which the market value has fallen significantly from the acquisition price and the market price is not expected to return to theacquisition price, said market price is recorded in the consolidated balance sheet and the valuation difference is processed as loss for thecurrent consolidated fiscal year (“Write-down”).
The amount of Write down in the current consolidated fiscal year in \694 million (of which, \439 million is in stock and \254 million is inbonds).
The criterion of judging the market value to have “fallen significantly” is provided in the Self-assessment criteria. For bonds, Write-down
is conducted in the event that market value has fallen by 30% or more from its acquisition price or in consideration of the financial
conditions, etc., of the issuing company. For stocks and investment trusts, Write-down for the full amount is made in the case of stocks forwhich the market price as of the end of the term has fallen by 50% or more from the acquisition price, and for stocks of which the market
price has fallen by 30% or more but not exceeding 50%, Write-down is judged by the possibility of recovery of the market price, taking
into account trends in market price for a fixed period prior to the reference date and the financial conditions, etc., of the issuing company.

(Monetary trust related)
No applicable items(Valuation difference on available-for-sale securities)

The breakdown of other securities valuation difference recorded in the consolidated balance sheet is as follows:
Amount (\ million)
Valuation difference
61,686
Other securities
61,686
Other monetary trust―
Deferred tax liabilities to be deducted(18,706)
Valuation difference on available-for-sale securities (before adjustment for equity)
42,980Non-controlling interest equivalent to be deducted(1,948)(+) Parent company equivalent of valuation difference related to other securities owned by―equity method affiliated companies
Valuation difference on available-for-sale securities
41,03259

DAISHI HOKUETSU REPORT 2019

The Status of Financial Results (Consolidated)(Derivative transaction related)1.

Derivative transactions where hedge accounting has not been applied
The contract amount on the consolidated closing date or the amount equivalent to capital in contract, their market value and valuation
profit and loss, and the method of calculation of their market price, for each transaction subject type for derivative transactions where
hedge accounting has not been applied is as follows. It must be noted that the amount of contract itself does not indicate the market risk
related to the derivative transaction.
(1)
Interest rate related transactions
Contract
Of which,
Valuation profit
Classifi
Market valueTypeamount, etc.
exceeding 1 year
and losscation(\ million)(\ million)(\ million)(\ million)
Interest swap
Fixed receipt, floating payment
91,18980,826
1,923
1,923
Floating receipt, fixed payment
91,18980,826
(595)
(595)
Store
Interest options
Short commitment
5,009
5,000
(7)
(7)
Long commitment
2,016
2,012
0
(35)
Total
―
―
1,320
1,285
(Note)
1. Market valuation is made for the abovementioned transactions and the valuation profit or loss is recorded in the consolidate
balance sheet.
2. Calculation of market priceCalculation is done using discounted present value and option price computing models, etc.
(2)Currency related transactions

Classifi
cationType

Contract
amount, etc.
(\ million)
15,477

Of which,exceeding 1 year(\ million)
8,862

Contract
amount, etc.
(\ million)

Of which,exceeding 1 year(\ million)

Market value(\ million)

Valuation profit
and loss(\ million)（14）

Currency swap
（14）
Forward exchange contract
Short commitment
59,420
219
（272）
（272）
Long commitment
8,334
―
139
139
Currency option
Short commitment
280,078
190,163（4,121）
49,253
Long commitment
280,899
190,8294,122（45,208）
Total
―
―
（144）
3,897
1. Market valuation is made for the abovementioned transactions and the valuation profit or loss is recorded in the consolidate
balance sheet.
2. Calculation of market priceCalculation is done using discounted present value, etc.

Store

(Note)(3)

Stock related transactions
No applicable items(4)

Bond related transactions
No applicable items(5)

Goods related transaction
No applicable items(6)

Credit and derivative transactions
No applicable items

(7)

Other

Classifi
cationType

Market value(\ million)

Valuation profit
and loss(\ million)

Earthquake derivative
Short commitment
10,810―(152)―
Long commitment
10,810
―
152
―
Total
―
―
―
―
(Note) The acquisition price is used as the market price, as determination of a fair valuation amount is extremely difficult for the abovetransactions.
Store

DAISHI HOKUETSU REPORT 201960

The Status of Financial Results (Consolidated)2.

Derivative transactions where hedge accounting has been applied
The contract amount as of the consolidated closing date or the amount equivalent to capital, market value provided under the contract,
and the method to calculate said market value, for each transaction subject type and hedge accounting method, for derivativetransactions where hedge accounting is applied are as follows: It must be noted that the amount of contract itself does not indicate themarket risk related to the derivative transaction.
(1) Interest rate related transactions
Contract
Of which,
Method of hedge
Market value
Type
Major hedge subjects
amount, etc.
exceeding 1
accounting(\ million)(\ million)
year (\ million)
Interest swap
Other securities,
Generally applied
Floating receipt,
loans and bills
114,093
108,845（7,512）
processing method
fixed payment
discounted
Interest swap
3,000
Fixed receipt,
3,000
（25）
Exceptional interest
Loans and bills
floating payment
swap processing
discounted
Floating receipt,
8,862
8,862
（100）
fixed payment
Total
―
―
―
（7,638）(Note) 1. A deferred hedge was adopted as the method of hedge accounting for interest risks occurring from financial assets andliabilities.
2. Calculation of market priceCalculation is done using discounted present value, etc.
(2) Currency-related transactions
Method of hedge
accounting

Type

Major hedge subjects

Contract
amount, etc.
(\ million)

Of which,exceeding 1 year(\ million)

Market value(\ million)

Foreign currency
denominated54,49632,988(1,122)securities, and loans
and bills discounted
Total
―
―
―
(1,122)(Note) 1. Conducted mainly by deferred hedge based on “Handling in accounting and audit of foreign currency denominated transactions,etc., in the processing of accounts in the banking industry” (Special Audit Committee Report No. 25 by The Japanese Institute ofCertified Public Accountants, dated July 29, 2002).
2.Calculation of market priceCalculation is done using discounted present value, etc.
Generally applied
processing
method(3)(4)

Currency swap

Stock related transactions
No applicable items
Bond related transactions
No applicable items(Retirement benefit-related)

61

1.

Summary of the adopted retirement benefits scheme
The consolidated subsidiaries engaged in banking business have established a defined contribution pension plan as a defined-benefit plan,in addition to the corporate pension fund scheme and retirement allowance scheme. Furthermore, extra retirement allowance may be
paid in case of retirement of employees.
A retirement benefit trust has been established on the defined contribution pension plan and retirement allowance scheme of consolidated
subsidiaries engaged in the banking business.
In other consolidated subsidiaries, in addition to retirement allowance schemes being established, some of the consolidated subsidiaries
have also established defined contribution pension plans.
Furthermore, liabilities related to retirement benefits and retirement benefit expenses of retirement allowance schemes held by some of
the consolidated subsidiaries are calculated using the simplified method.

2.

Defined contribution scheme(1)
Adjustment table of retirement benefit liabilities, as of the beginning and end of the term (excluding schemes adopting the simplified method)
Beginning of term retirement benefit liability balance\46,050 million
Increase by stock transfer\25,722 million
Service costs\1,379 million
Interest costs\483 million
Actuarial gain or loss amount generated\6,228 million
Amount of retirement benefits paid(\3,253 million)
Other\81 million
End of term retirement benefit liability balance\76,691 million(2)
Adjustment table of pension assets, as of the beginning and end of the term (excluding schemes adopting the simplified method)
Beginning of term pension assets balance\45,918 million
Increase by stock transfer\28,648 million
Anticipated operational earnings\1,108 million
Actuarial gain or loss amount generated(\1,277 million)
Contribution from employers\833 million
Amount of retirement benefits paid(\2,386 million)
Other\81 million
End of term pension assets balance\72,925 million

DAISHI HOKUETSU REPORT 2019

The Status of Financial Results (Consolidated)
(3)

(4)

Adjustment table for debts related to retirement benefit liabilities as of the beginning and end of the term for schemes adopting the simplified method
Beginning of term retirement benefits related debts\679 million
Increase by stock transfer\1 million
Retirement benefit costs\61 million
Amount of retirement benefits paid(\42 million)
End of term retirement benefits related debts\699 million
Adjustment table for end of term balance of retirement benefit liabilities and pension assets, and debts and assets related toretirement benefits recorded in the consolidated balance sheet
Retirement benefit liability of savings-type scheme\76,691 million
Pension assets(\72,925 million)\3,766 million
Retirement benefit liability of non-savings-type scheme\699 million
Net amount of liabilities and assets recorded in
the consolidated balance sheet\4,465 million(Note) Includes schemes where simplified method is adopted.
Liabilities related to retirement benefits
Assets related to retirement benefits
Net amount of liabilities and assets recorded in
the consolidated balance sheet\7,852 million(\3,387 million)
4,465 million(5)

Retirement benefit costs and its itemized breakdown
Service costs
Interest costs
Expected operational earnings
Actuarial gain or loss processing amountPrior service cost processing amount
Retirement benefit costs calculated by the simplified method
Other
Retirement benefit cost related to defined benefit plan

(6)

Retirement benefit adjustment amountThe breakdown of items recorded in the adjustment amount related to retirement benefits (before deduction of tax effects) is as follows:
Prior service cost(\62 million)
Actuarial gain or loss(\6,899 million)
Total(\6,961 million)(7)

Aggregate amount of adjustment related to retirement benefits
The breakdown of items recorded in the aggregate amount of adjustment related to retirement benefits (before deduction of tax
effects) is as follows:
Unrecognized prior service cost(\87 million)
Unrecognized actuarial gain or loss
\8,008 million
Total\7,902 million
Matters related to pension assets(i) Ratio for each major classification in total pension assets is as follows:
Bonds
33%
Stocks
34%
General life insurance account28%
Cash and deposits
0%
Other
3%
Total
100%
(Note)
Total pension assets include 9% from retirement benefit trust established on the corporate pension plan and 23% fromretirement benefit trust established on the retirement allowance respectively, for the current consolidated fiscal year.
(ii)
Method to set long-term expected rate-of-return (“ROR”)
To determine the expected long-term ROR for pension assets, consideration is given on the distribution of current andexpected pension assets, and the current and expected long-term ROR on diverse assets that comprise the pension assets.

(8)

(9)

Matters regarding the basis of actuarial calculation
Major actuarial calculation basis
Discount rateLong-term expected ROR
Corporate pension fundRetirement benefit trust
Expected salary increase rate

\1,379 million\483 million（\1,108 million）\606 million（\62 million）\61 million\81 million\1,441 million

0.2% to 0.3%
2.0%
0% to 2.5%
6.2% to 6.6%

3. Defined contribution scheme
Amount of required contribution to defined contribution schemes of consolidated subsidiaries for the current consolidated fiscal year is\297 million.

DAISHI HOKUETSU REPORT 201962

The Status of Financial Results (Consolidated)(Stock option related)

1. Amount and accounting titles of costs recorded for stock options)Fiscal 2018
General and administrative expenses\196 million
2. Contents, size and fluctuation of stock options(1) Contents of stock options
Daishi Hokuetsu
Financial Group 1st
Stock Option
May 11, 2018, Board of
Resolution dateDirectors, Daishi BankClassification and3 directors of Daishi
numbers of granted
Bank, Ltd.
persons
Number of stock
7,400 ordinary shares
options by type ofof the Company
stock (Note 2)
Grant date (Note 3)
July 27, 2010
Rights finalizing
Rights finalizing
conditions notconditions
determined
Applicable
Applicable appoint
appointment period
period not determined
Rights exercising
October 1, 2018 to July
period27, 2040

Resolution date
Classification andnumbers of granted
persons
Number of stock
options by type of stock(Note 2)Grant date (Note 3)
Rights finalizing
conditions
Applicable appointment
periodRights exercising period

Resolution date
Classification andnumbers of granted
persons
Number of stock
options by type of stock(Note 2)Grant date (Note 3)
Rights finalizing
conditions
Applicable appointment
periodRights exercising period

63

DAISHI HOKUETSU REPORT 2019

Daishi Hokuetsu
Financial Group 2nd
Stock Option
May 11, 2018, Board of
Directors, Daishi Bank

Daishi Hokuetsu
Financial Group 3rd
Stock Option
May 11, 2018, Board of
Directors, Daishi Bank

Daishi Hokuetsu
Financial Group 4th
Stock Option
May 11, 2018, Board of
Directors, Daishi Bank

3 directors of Daishi
Bank, Ltd.

4 directors of Daishi
Bank, Ltd.

5 directors of Daishi
Bank, Ltd.

11,400 ordinary sharesof the Company

16,610 ordinary sharesof the Company

13,450 ordinary sharesof the Company

July 28, 2011
Rights finalizing
conditions notdetermined
Applicable appoint
period not determined
October 1, 2018 to July28, 2041

July 30, 2012
Rights finalizing
conditions notdetermined
Applicable appoint
period not determined
October 1, 2018 to July30, 2042

July 30, 2013
Rights finalizing
conditions notdetermined
Applicable appoint
period not determined
October 1, 2018 to July30, 2043

Daishi Hokuetsu
Financial Group 5th
Stock Option
May 11, 2018, Board of
Directors, Daishi Bank

Daishi Hokuetsu
Financial Group 6th
Stock Option
May 11, 2018, Board of
Directors, Daishi Bank

6 directors of Daishi
Bank, Ltd.

6 directors of Daishi
Bank, Ltd.

Daishi Hokuetsu
Financial Group 7th
Stock Option
May 11, 2018, Board of
Directors, Daishi Bank
6 directors and 3
executive officers ofDaishi Bank, Ltd.

Daishi Hokuetsu
Financial Group 8th
Stock Option
May 11, 2018, Board of
Directors, Daishi Bank
6 directors and 5
executive officers ofDaishi Bank, Ltd.

13,540 ordinary sharesof the Company

10,220 ordinary sharesof the Company

21,420 ordinary sharesof the Company

18,050 ordinary sharesof the Company

July 30, 2014
Rights finalizing
conditions notdetermined
Applicable appoint
period not determined
October 1, 2018 to July30, 2044

July 30, 2015
Rights finalizing
conditions notdetermined
Applicable appoint
period not determined
October 1, 2018 to July30, 2045

July 29, 2016
Rights finalizing
conditions notdetermined
Applicable appoint
period not determined
October 1, 2018 to July29, 2046

July 28, 2017
Rights finalizing
conditions notdetermined
Applicable appoint
period not determined
October 1, 2018 to July28, 2047

Daishi Hokuetsu
Financial Group 10th
Stock Option
May 11, 2018, Board of
Directors, Hokuetsu
Bank

Daishi Hokuetsu
Financial Group 11th
Stock Option
May 11, 2018, Board of
Directors, Hokuetsu
Bank

Daishi Hokuetsu
Financial Group 12th
Stock Option
May 11, 2018, Board of
Directors, Hokuetsu
Bank

Daishi Hokuetsu
Financial Group 13th
Stock Option
May 11, 2018, Board of
Directors, Hokuetsu
Bank

1 director of Hokuetsu
Bank, Ltd.

2 directors of Hokuetsu
Bank, Ltd.

2 directors of Hokuetsu
Bank, Ltd.

6 directors of Hokuetsu
Bank, Ltd.

1,020 ordinary sharesof the Company

1,885 ordinary sharesof the Company

1,565 ordinary sharesof the Company

3,910 ordinary sharesof the Company

July 26, 2012
Rights finalizing
conditions notdetermined
Applicable appoint
period not determined
October 1, 2018 to July26, 2042

July 26, 2013
Rights finalizing
conditions notdetermined
Applicable appoint
period not determined
October 1, 2018 to July26, 2043

July 27, 2014
Rights finalizing
conditions notdetermined
Applicable appoint
period not determined
October 1, 2018 to July28, 2044

July 27, 2015
Rights finalizing
conditions notdetermined
Applicable appoint
period not determined
October 1, 2018 to July27, 2045

The Status of Financial Results (Consolidated)

Resolution date
Classification andnumbers of granted
persons
Number of stock
options by type of stock(Note 2)Grant date (Note 3)
Rights finalizing
conditions
Applicable appointment
periodRights exercising period

Resolution date
Classification andnumbers of granted
persons
Number of stock
options by type of stock(Note 2)Grant date (Note 3)
Rights finalizing
conditions
Applicable appointment
periodRights exercising period(Note)

Daishi Hokuetsu
Financial Group 14th
Stock Option
May 11, 2018, Board of
Directors, Hokuetsu
Bank

Daishi Hokuetsu
Financial Group 15th
Stock Option
May 11, 2018, Board of
Directors, Hokuetsu
Bank

6 directors of Hokuetsu
Bank, Ltd.

10 directors of
Hokuetsu Bank, Ltd.

5,250 ordinary sharesof the Company

6,875 ordinary sharesof the Company

July 27, 2016
Rights finalizing
conditions notdetermined
Applicable appoint
period not determined
October 1, 2018 to July27, 2046

July 26, 2017
Rights finalizing
conditions notdetermined
Applicable appoint
period not determined
October 1, 2018 to July26, 2047

Daishi Hokuetsu Financial Group 16th Stock Option
November 9, 2018, Board of Directors, Daishi
Hokuetsu Financial Group
8 directors of Daishi Hokuetsu Financial Group,
Inc.; 8 directors of Dasishi Bank, Ltd.; 8 executive
officers of Daishi Bank Ltd.; 11 directors of
Hokuetsu Bank, Ltd.
50,440 ordinary shares of the Company
December 7, 2018
Rights finalizing conditions not determined
Applicable appoint period not determined
December 8, 2018 to December 7, 2048

1. From the 1st to the 15th stock options, the right to subscribe to new shares issued by both Daishi Bank and Hokuetsu Bank heldby the rightsholders have been issued with the right to subscribe to new shares of the Company, accompanying the establishmentof the Company as the full parent company of both banks through the joint transfer of shares dated October 1, 2018.
2. The options have been converted to number of shares.
3. The grant dates are the initial grant dates at Daishi Bank and Hokuetsu Bank respectively(2)Size and fluctuation of stock options
Stock options existing in the current consolidated fiscal year have been converted to number of shares and listed.
(i) Number of stock options
Daishi Hokuetsu
Daishi Hokuetsu
Daishi Hokuetsu
Daishi Hokuetsu
Financial Group 1st
Financial Group 2nd
Financial Group 3rd
Financial Group 4th
Stock Option
Stock Option
Stock Option
Stock Option
Before rights
finalization (shares)
End of previous
consolidated financial
―
―
―
―
year
Granted
7,400
11,40016,61013,450Lapsed――――Rights finalized――――
Unfinalized balance
7,400
11,40016,61013,450After rights finalization(shares)
End of previous
consolidated financial
―
―
―
―
year
Rights finalized――――
Rights exercised――――
Lapsed――――Unexercised balance――――

DAISHI HOKUETSU REPORT 201964

The Status of Financial Results (Consolidated)

Before rights
finalization (shares)
End of previous
consolidated financial
year
Granted
LapsedRights finalized
Unfinalized balance
After rights finalization(shares)
End of previous
consolidated financial
year
Rights finalized
Rights exercised
LapsedUnexercised balance

Before rights finalization(shares)
End of previous
consolidated financial
year
Granted
LapsedRights finalized
Unfinalized balance
After rights finalization(shares)
End of previous
consolidated financial
year
Rights finalized
Rights exercised
LapsedUnexercised balance

Before rights finalization(shares)
End of previous
consolidated financial
year
Granted
LapsedRights finalized
Unfinalized balance
After rights finalization(shares)
End of previous
consolidated financial
year
Rights finalized
Rights exercised
LapsedUnexercised balance

65

DAISHI HOKUETSU REPORT 2019

Daishi Hokuetsu
Financial Group 5th
Stock Option

Daishi Hokuetsu
Financial Group 6th
Stock Option

Daishi Hokuetsu
Financial Group 7th
Stock Option

Daishi Hokuetsu
Financial Group 8th
Stock Option

―

―

―

―

13,540――13,540

10,220――
10,22021,420――21,42018,050――18,050

-

-

-

-

―

―

―

―

―
―
―
―

―
―
―
―

―
―
―
―

―
―
―
―

Daishi Hokuetsu
Financial Group 10th
Stock Option

Daishi Hokuetsu
Financial Group 11th
Stock Option

Daishi Hokuetsu
Financial Group 12th
Stock Option

Daishi Hokuetsu
Financial Group 13th
Stock Option

―

―

―

―

1,020
―
―
1,020

1,885
―
―
1,885

1,565
―
―
1,565

3,910
―
―
3,910

-

-

-

-

―

―

―

―

―
―
―
―

―
―
―
―

―
―
―
―

―
―
―
―

Daishi Hokuetsu
Financial Group 14th
Stock Option

Daishi Hokuetsu
Financial Group 15th
Stock Option

Daishi Hokuetsu
Financial Group 16th
Stock Option

―

―

―

5,250
―
―
5,250

6,875
―
―
6,875

50,440――50,440

―

―

―

―
―
―
―

―
―
―
―

―
―
―
―

The Status of Financial Results (Consolidated)(ii)

Unit price information

Rights exercise price(\)
Average share price attime of exercise (\)
Average share price attime of exercise (\)

Rights exercise price(\)
Average share price attime of exercise (\)
Average share price attime of exercise (\)

Rights exercise price(\)
Average share price attime of exercise (\)
Average share price attime of exercise (\)

Rights exercise price(\)
Average share price attime of exercise (\)
Average share price attime of exercise (\)

Daishi Hokuetsu
Financial Group 1st
Stock Option

Daishi Hokuetsu
Financial Group 2nd
Stock Option

Daishi Hokuetsu
Financial Group 3rd
Stock Option

Daishi Hokuetsu
Financial Group 4th
Stock Option

1

1

1

1

―

―

―

―

2,860

2,360

2,110

3,000

Daishi Hokuetsu
Financial Group 5th
Stock Option

Daishi Hokuetsu
Financial Group 6th
Stock Option

Daishi Hokuetsu
Financial Group 7th
Stock Option

Daishi Hokuetsu
Financial Group 8th
Stock Option

1

1

1

1

―

―

―

―

3,690

5,110

3,430

4,900

Daishi Hokuetsu
Financial Group 10th
Stock Option

Daishi Hokuetsu
Financial Group 11th
Stock Option

Daishi Hokuetsu
Financial Group 12th
Stock Option

Daishi Hokuetsu
Financial Group 13th
Stock Option

1

1

1

1

―

―

―

―

1,330

1,780

1,900

2,230

Daishi Hokuetsu
Financial Group 14th
Stock Option

Daishi Hokuetsu
Financial Group 15th
Stock Option

Daishi Hokuetsu
Financial Group 16th
Stock Option

1

1

1

―

―

―

1,830

2,394

3,276

(Note) The fair evaluated unit prices of Daishi Bank and Hokuetsu Bank shares, on the initial grant date, are listed from the 1st through15th stock options.
3.

Fair stock option evaluated unit price estimation method
The fair evaluated unit price estimation method for stock options granted in the current consolidated fiscal year is as follows.
(1) Evaluation technique used: Black-Scholes method(2) Major basic values and estimation method
Daishi Hokuetsu Financial
Daishi Hokuetsu Financial
Daishi Hokuetsu Financial
Group 1st Stock Option
Group 2nd Stock Option
Group 3rd Stock Option
Stock price variability (Note 1)
36.50%
25.26%
25.30%
Expected remaining period
2.0 years
1.5 years
2.5 years(Note 4)
Expected dividend (Note 7)\7/share\7/share\7/shareNo-risk interest rate (Note 10)0.137%
0.146%
0.103%

Stock price variability (Note 1)
Expected remaining period(Note 4)
Expected dividend (Note 7)
No-risk interest rate (Note 10)

Stock price variability (Note 1)
Expected remaining period(Note 4)
Expected dividend (Note 7)
No-risk interest rate (Note 10)

Daishi Hokuetsu Financial
Group 4th Stock Option
30.24%

Daishi Hokuetsu Financial
Group 5th Stock Option
31.23%

Daishi Hokuetsu Financial
Group 6th Stock Option
25.96%

2.0 years

2.0 years

2.0 years\7/share0.129%\8/share0.073%\8/share0.002%

Daishi Hokuetsu Financial
Group 7th Stock Option
30.58%

Daishi Hokuetsu Financial
Group 8th Stock Option
33.28%

2.0 years

2.0 years\9/share( 0.360%)\9/share(0.099%)DAISHI HOKUETSU REPORT 2019

66

The Status of Financial Results (Consolidated)

Stock price variability (Note 2)
Expected remaining period(Note 5)
Expected dividend (Note 8)
No-risk interest rate (Note 11)

Stock price variability (Note 2)
Expected remaining period(Note 5)
Expected dividend (Note 8)
No-risk interest rate (Note 11)

Stock price variability (Note 3)
Expected remaining period(Note 6)
Expected dividend (Note 9)
No-risk interest rate (Note 12)(Note) 1.

2.

3.
4
5.
6.
7.
8.
9.
10.
11.
12.
4.

67

Daishi Hokuetsu Financial
Group 10th Stock Option
22.40%

Daishi Hokuetsu Financial
Group 11th Stock Option
27.00%

Daishi Hokuetsu Financial
Group 12th Stock Option
26.20%

2.3 years

4.7 years

3.7 years\6/share0.100%\6/share0.270%\6/share0.090%

Daishi Hokuetsu Financial
Group 13th Stock Option
25.10%

Daishi Hokuetsu Financial
Group 14th Stock Option
28.90%

Daishi Hokuetsu Financial
Group 15th Stock Option
29.10%

4.1 years

3.1 years

4.7 years\6/share0.050%\6/share(0.340%)\60/share(0.080%)

Daishi Hokuetsu Financial
Group 16th Stock Option
13.95%
2.5 years\60/share(0.136%)

Calculation based on Daishi Bank recorded stock prices corresponding to the following expected remaining period:
1st right to subscribe to new shares: July 27, 2008 to July 26, 2010
2nd right to subscribe to new shares: January 28, 2010 to July 27, 2011
3rd right to subscribe to new shares: January 28, 2010 to July 27, 2012
4th right to subscribe to new shares: July 30, 2011 to July 29, 2013
5th right to subscribe to new shares: July 30, 2012 to July 29, 2014
6th right to subscribe to new shares: July 30, 2013 to July 29, 2015
7th right to subscribe to new shares: July 29, 2014 to July 28, 2016
8th right to subscribe to new shares: July 28, 2015 to July 27, 2017
Calculation based on Hokuetsu Bank recorded stock prices corresponding to the following expected remaining period:
10th right to subscribe to new shares: March 29, 2010 to July 16, 2012
11th right to subscribe to new shares: November 3, 2008 to July 22, 2013
12th right to subscribe to new shares: November 8, 2010 to July 21, 2014
13th right to subscribe to new shares: June 13, 2011 to July 20, 2015
14th right to subscribe to new shares: June 17, 2013 to July 18, 2016
15th right to subscribe to new shares: November 5, 2012 to July 17, 2017
Calculation based on recorded stock prices of the Company, Daishi Bank, and Hokuetsu Bank, corresponding to the following
expected remaining period.
16th right to subscribe to new shares: June 7, 2016 to December 6, 2018
The expected remaining period for Daishi Bank has been estimated using the average period in office for directors andexecutive officers that have retired in the past.
The expected remaining period for Hokuetsu Bank has been estimated using the average period in office for directors thathave retired in the past.
Estimated by using the average period in office of the directors of the Company, Daishi Bank and Hokuetsu Bank and theexecutive officers of Daishi Bank as the expected remaining period.
Based on the closest dividend record when the right to subscribe to new shares was granted at Daishi Bank.
Based on the closest dividend record when the right to subscribe to new shares was granted at Hokuetsu Bank.
Based on the expected amount of dividend for the year ended March 31, 2019.
The yield for government bonds corresponding to the expected remaining period when the right to subscribe to new shares
was granted at Daishi Bank.
The yield for government bonds corresponding to the expected remaining period when the right to subscribe to new shares
was granted at Hokuetsu Bank.
The yield for government bonds corresponding to the expected remaining period when the right to subscribe to new shares
was granted at the Company.

Method to estimate the stock option rights finalized numbers
Since it is difficult to rationally estimate future lapses, a method only to reflect recorded lapses has been adopted.

DAISHI HOKUETSU REPORT 2019

The Status of Financial Results (Consolidated)(Tax effect accounting related)1.

Breakdown of major causes generating deferred tax assets and deferred tax liabilities
Deferred tax assets
Allowance for loan losses\7,652 million
Retirement benefit related liabilities\7,129 million
Depreciation and amortization\2,050 million
Valuable securities amortization\1,212 million
Deffered gains or losses on hedges\2,372 million
Book value correction for fair market valuation\3,948 million
Other\6,727 million
Subtotal deferred tax assets\31,095 million
Valuation reserve related to future subtraction
temporary difference, etc., total(\4,926 million)
Subtotal valuation reserve(\4,926 million)
Total deferred tax assets\26,168 million
Deferred tax liabilities
Valuation difference on available-for-sale securities(\18,706 million)
Retirement benefit trust establishment benefit(\1,016 million)
Book value correction for fair market valuation(\5,226 million)
Other(\1,710 million)
Total deferred tax liabilities(\26,660 million)
Net amount of deferred tax assets (liabilities)(\ 491 million)

2.

Breakdown of major items causing material difference between the enacted tax rate of companies submitting consolidated financial
statements and the burden rate of corporate tax, etc., after application of tax effect accounting
Enacted tax rate
30.5%
(Adjustment)
Items permanently excluded from expenses, such as entertainment expenses, etc.
0.2%
Items permanently excluded from gross revenue, such as dividends received, etc. (0.4%)
Per capita levy of resident tax
0.1%
Increase/decrease in valuation reserves(1.2%)
Negative goodwill profit(23.4%)
Other
0.5%
Burden rate of corporate tax, etc., after application of tax effect accounting 6.3%

(Business merger related)

The Company was established in October 1, 2018 through a joint transfer of stocks of Daishi Bank, Ltd. and Hokuetsu Bank, Ltd. In theaccounting processing of stock transfer, purchase method as provided in the accounting standards was adopted for business merger with Daishi
Bank, Ltd. being the acquiring company and Hokuetsu Bank, Ltd., being the acquired company.
(1) Outline of business merger(i)Name and business of the acquired company
Hokuetsu Bank, Ltd., Banking business(ii)
Major reasons for business merger
With the lengthening of monetary relaxation in Japan and expected shrinkage in deposits and loans expected in the future from theeffects of decreased population, etc., further decrease in profit margin in loan operations and securities investments is expected tofurther progress. The management environment surrounding both banks is expected to become further severe and the establishmentof a firmer management foundation has become a management issue common to both banks.
In addition, with progress being made in fintech, such as integration of finance and IT, and and digitalization, swift response to new
customer needs, such as digitization of financial services and creation of further additional values has become one of the important tasks.
With an increase in local companies starting operations overseas and business transactions with overseas companies in Niigata
prefecture, enhancement of consulting functions with a global point of view is also being required.
In view of the management environment facing both banks, as well as the diversification of customer needs, the banks have judged thatthe merger of the two banks that have established mutual trust over the years will lead to perpetually fulfilling the role and mission ofeach as a regional bank by addressing common management issues using the strengths of each and will contribute most to theshareholders of each bank, our customers, and those in the community.
(iii) Business combination date
October 1, 2018(iv) Legal form of business merger
Establishment of a joint holding company through the transfer of stocks.
(v)
Name of company after business merger
Daishi Hokuetsu Financial Group, Inc. (“Daishi Hokuetsu Financial Group”)(vi) Acquired voting rights
100%(vii) Major basis in determining the acquiring company
Based on acquisition determining elements in accounting principle regarding business merger.
(2) Term of the acquired company performance included in the consolidated financial statement
From October 1, 2018 through Mach 31, 2019(3) Acquisition cost and breakdown by type of consideration
Market value of ordinary shares of Daishi Hokuetsu Financial Group granted on the day of business merger:\59,711 million
Market value of rights to subscribe to new shares of Daishi Hokuetsu Financial Group
granted on the day of business merger:\84 million
Acquisition cost
\59,796 million

DAISHI HOKUETSU REPORT 2019

68

The Status of Financial Results (Consolidated)(4) Transfer ratio by type of stock, their calculation method, and number of granted stocks(i) Transfer ratio by type of stock(a)
1 ordinary share of Daishi Hokuetsu Financial Group for 1 ordinary share of The Daishi Bank, Ltd.
(b)
0.5 ordinary share of Daishi Hokuetsu Financial Group for 1 ordinary share of The Hokuetsu Bank, Ltd.
(ii) Calculation method
Requests for the calculation of stock transfer ratios were made to Nomura Securities Co., Ltd. by Daishi Bank and to Mizuho Securities
Co., Ltd, by Hokuetsu Bank as a third-party calculating computing institution, and consultations were conducted based on the submitted
reports, to agree and determine the transfer ratio.
(iii) Number of granted stocks
45,942,978 ordinary shares(5) Details and amount of major acquisition related costs
Advisory fees, etc.
\500 million(6) Amount of accepted assets and received liabilities on the day of business merger and their major breakdown(i)Amount of assets
Total assets\2,900,457 million
Of which, loans and bills discounted\1,707,285 million
Of which, valuable securities\908,396 million
Of which, allowance for loan loss(\5,551 million)(ii)
Amount of liabilities
Total liabilities\2,793,366 million
Of which, deposits\2,501,042 million(7) Amount of negative goodwill generated profit and generating factor(i)Amount of negative goodwill generated profit\47,207 million(ii)
Generating factor
Since the acquisition cost was less than the net amount distributed over received assets and received liabilities, the difference has been
acknowledged as negative goodwill generated profit.
(8) Estimated amount of impact on consolidated financial statement related to the current consolidated fiscal year, in the event that this businessmerger is assumed to have started on the fist day of the current consolidated fiscal year, and the method of their calculation
Ordinary income\21,716 million
Ordinary profit\3,655 million
Profit attributable to owners of parent\2,521 million
The above estimated amount of impact has been calculated based on the consolidated profit and loss statement from April 1, 2018 throughSeptember 30, 2018 of the acquired company, Hokuetsu Bank, Ltd.
Please note that the above estimated amount has not been audited by KPMG AZSA LLC.

(Real estate related, such as lease, etc.)

Some consolidated subsidiary companies own real estate for lease. However, their total amount is minor and has been omitted.

69

DAISHI HOKUETSU REPORT 2019

The Status of Financial Results (Consolidated)(Segment information, etc.)[Segment information]
1. Outline of reporting segments
The Company group consists of the Company, which is the bank holding company, and 13 consolidated subsidiaries, including The Daishi
Bank, Ltd. and The Hokuetsu Bank, Ltd. It provides a wide range of financial instruments and services to the customers in the region,
focused on banking operations, as well as for leasing, securities, credit guarantees, credit card operations, etc., and financial information bycompanies in the group are reported regularly to the Company’s board of directors.
Therefore, even though the Company group consists of segments formed by the Company and each consolidated subsidiary, “Banking”
which account for approximately 80% of all segments, together with “Leasing” and “Securities” have been established as reporting segments,
in view of their importance.
“Banking” is focused mainly on deposit operations and loan operations, with investments in securities, domestic currency operations, foreign
currency operations, and as the contact point for the sales of public bonds, investment trusts, insurance policies, etc., and is positioned as
the core of the group.
Furthermore, “Leasing” conducts integrated leasing operations, while securities operations are conducted in “Securities”.
2. The method of calculation for ordinary income, profit or loss, assets, liabilities, etc., of each reporting segment
The accounting method adopted for each reporting segments is identical to the preparation policy for consolidated financial statements.
Internal ordinary income between the segments is based on the actual amount of transaction.
3. Information regarding the amount of ordinary income, profit or loss, assets, liabilities, and other items of each reporting segment
Fiscal 2018 (April 1, 2018 through March 31, 2019)(Unit: \ million)
Amountrecorded in
Adjustments
consolidated financial
statement

Reporting segment
Banking
Ordinary income
Ordinary income from outside
customers
Internal
ordinary
incomebetween segments
Total
Segment profits
Segment assets
Segment liabilities
Other items
Depreciation costs
Interest income
Interest expenses
Increase in tangible andintangible fixed asset amount

Leasing

Securities
Total

Banking

Other

Total

95,117

19,676

4,200

118,993

3,483

122,477（4,469）118,007

2,568

334

6

2,909

6,845

9,754

（9,754）―

97,68520,0104,206

121,903

10,328132,232（14,224）

118,007

19,849

1,034

1,497

22,381

5,262

27,644（10,938）

16,706

8,913,283

64,374

19,5498,997,207

358,727

9,355,934（405,710）

8,950,224

8,510,505

46,835

7,686

8,565,027

21,9428,586,969（65,818）

8,521,150

3,913
60,822
6,412
4,108

262
162
151
342

30
239
3
14

4,206
61,224
6,567
4,465

57
3,756
10
114

4,264
64,980
6,577
4,579

5
（6,024）
（123）
43

4,270
58,9566,454
4,622(Note) 1. Ordinary income is indicated instead of amount of sales used generally for corporations. “Adjustment difference” refers to thedifference between ordinary income and the recorded amount of ordinary income in the consolidated financial statement .
2.“Other” refers to are business segments not included in the reporting segments, and includes credit guarantee operations, credit card
operations, and others.
3. The amount of adjustments is as follows:(1)The adjustment amount of (\4,469 million) in ordinary income from outside customers includes ordinary income adjustment of(\3,799 million), accompanying the adoption of the purchase method.
(2) The adjustment of segment profit of (\10,938 million) is from profit adjustment accompanying purchase method of (\4,666
million) and elimination of transactions between segments, etc.
(3) The adjustment of segment assets of (\405,710 million) is from profit adjustment accompanying purchase method andelimination of transactions between segments, etc.
(4)The adjustment of segment liabilities of (\65,818 million) is from adjustment accompanying purchase method and elimination oftransactions between segments, etc.
(5) The adjustment of \5 million in depreciation costs is the amount of adjustment, etc. for deprecation related to lease items
acquired by contracts with the Leasing segment, in segments other than the Leasing segment.
(6) The adjustment of (\6,024 million) in interest income is for elimination of transactions between segments, etc.
(7) The adjustment of (\123 million) in interest expenses is for elimination of transactions between segments, etc.
(8) The adjustment of \43 million in increase in tangible and intangible fixed asset amount is mainly the acquisition cost of lease
items acquired by contracts with the Leasing segment, in segments other than the Leasing segment.
4. Segment profit has been adjusted with ordinary income of consolidated profit and loss statement.
5. The values for Hokuetsu Bank, Ltd. are a compilation of consolidated results of operations from October 1, 2018 through March 31, 2019.

DAISHI HOKUETSU REPORT 201970

The Status of Financial Results (Consolidated)[Related information]
Fiscal year 2018 (From April 1, 2018 through March 31, 2019)1.
Information by each service(Unit: \ million)

Securities
investment
operations

Loan operations

Lease operations

Other

Total

Ordinary income from43,022
27,766
19,41627,801
118,007
outside customers(Note) Ordinary income is indicated instead of amount of sales for corporations.
2.
Information for each region(1) Ordinary income
Listing has been omitted since the amount of ordinary income of the Company group, segmented into external customers in Japanaccounts for 90% or more of the ordinary income in the consolidated statements of income.
(2) Tangible fixed assets
Listing has been omitted since the amount of tangible fixed assets of the Company group existing inside Japan accounts for 90% or moreof the tangible fixed assets of the consolidated balance sheet.
3.
Information by each major customer
Listing has been omitted since there are no specific customers whose ordinary income account for 10% or more of the consolidated
statements of income.
[Information regarding impairment loss of fixed assets for each segment]
Fiscal year 2018 (From April 1, 2018 through March 31, 2019)

Banking
2,248

Impairment loss

(Unit: \ million)

Reporting segment
Leasing
Securities
―

Total
2,248

―

Other

Total

―

2,248

[Information concerning amortization of good will and unamortized balance by reporting segment]
No applicable items[Information concerning negative goodwill generation profit by each reporting segment]
In the segment for banking, etc., in the current consolidated fiscal year, a negative goodwill generation profit has been recorded owning to
the merger of Daishi Bank and Hokuetsu Bank on October 1, 2018. The amount of negative goodwill profit generated for said matter is\47,207 million.

(Related party information)

1. Transactions with related parties(1)Transactions between consolidated companies submitting consolidated financial statements and related parties.
No applicable items(2)Transactions between consolidated subsidiaries submitting consolidated financial statements and related parties.
(a) The parent company and major shareholders (limited only to companies, etc.) of companies submitting consolidated financial
statements
No applicable items(b)Non-consolidated subsidiaries and affiliated companies of companies submitting consolidated financial statements
No applicable items(c)Companies with the same parent company as the company submitting consolidated financial statements and other affiliatedcompanies of companies submitting consolidated financial statements, etc.
No applicable items(d)Directors and major shareholders, etc. (limited only to individuals) of companies submitting consolidated financial statements,
etc.

Type

Company
name orfull name

Address

Capital orcontribution(\ million)

Businessor
occupation

Ownershipof votingrights(OwnedRelationshipwith related
party

Details oftransaction

Transaction
amount(\ million)

Accounting
item

End oftermbalance(\ million)

Debt
guarantee(note 1)

Debt
guarantee(note 1)55 (note
2)――

ratio (%)
Director of an important
subsidiary of company
submitting consolidated

Shiro
Watanabefinancial statement――

Auditor,The
Hokuetsu
Bank, Ltd.

Owned,
Direct,0.01

Terms of transaction and policy to determine the terms of transaction, etc.
(Note) 1. The Hokuetsu Bank, Ltd., a consolidated subsidiary of the Company has received debt guarantee from Mr. Shiro Watanabe, the auditorof said bank, for a loan to a third party.
2. The transaction amount shown is the amount of guarantee balance as of March 31, 2019.
2. Notes concerning the parent company or important affiliated companies(1)
Parent company information
No applicable items(2)
Summarized financial information of important affiliated companies
No applicable information

71

DAISHI HOKUETSU REPORT 2019

The Status of Financial Results (Consolidated)(Per share information)

Net assets per share\9,024.23
Net income per share for the current term
\1,427.50
Net income per share for the current term after adjustment
for potential voting\1,422.06(Note 1) The basis for calculation of net asset per share is as follows:
Total amount of Net assets\429,073 million
Amount to be deducted from net assets\17,692 million(of which, rights to subscribe to new shares)\637 million(of which, non-controlling shareholder equity)\17,054 million
Net asset amount at end of term concerning ordinary shares\411,381 million
Number of ordinary shares at the end of term used to
calculate the amount of net assets per share
45,586 thousand shares(Note)In the calculation of the amount of net assets per share, Company shares remaining in trust recorded as treasury stock inshareholder’s equity are included in the treasury stock deducted from the number of shares at the end of the term. The number oftreasury stock deducted at the end of the term in the calculation of the amount of net assets per share is 47 thousand shares.
(Note 2)The basis for calculation of net income per share for the current term and net profit per share for the current term after adjustment
for potential voting are as follows.
Net income per share for the current term
Net income reverting to parent company shareholders\56,844 million
Amount not reverting to ordinary shareholders\ -. million
Net income reverting to parent company shareholders related
to ordinary shares\56,844 million
Average number of ordinary shares during the term
39,821 thousand shares
Net income per share for the current term after adjustment
for potential voting
Amount of adjustment of net income for the current term
reverting to parent company shareholders\ -. million
Increase in number of ordinary shares
152 thousand shares
Of which, rights to subscribe to new shares
152 thousand shares
Summary of potential voting shares not included for lack of diluting effects, in the calculation of net income per share for thecurrent term adjustment for potential voting.
(Note) 1.Company shares remaining in trust recorded as treasury stock in shareholder’s equity are included in the treasury stock
deducted from the number of shares at the end of the term in the calculation of the amount of net income per share for thecurrent term and in the calculation of net income per share for the current term after adjustment of potential voting. The
number of shares of treasury stock deducted at the end of the term in the calculation of the amount of net income per sharefor the current term and in the calculation of net income per share for the current term after adjustment of potential voting
is 81 thousand shares.
(Note)2. Due to the establishment of the Company on October 1, 2018 through joint transfer of stocks, the average number ofordinary shares during the period between April 1, 2018 through September 30, 2018 has been calculated using the value
obtained by multiplying the average number of Daishi Bank shares during the period by share transfer ratio, and theaverage number of shares of the Company during the period between October 1, 2018 through March 31, 2019.

(Important subsequent events)
There are no applicable items

DAISHI HOKUETSU REPORT 2019

72





Non-Consolidated Balance Sheet

Years ended March 31,2018 and 2019
Note:The translations of the Japanese yen amounts into US dollars are using the prevailing exchange rate at March 31, 2019,which was\110.99 to US $1.

■Assets（Millions of Yen）

（Millions of Yen）

2018

2019

2019

Cash and due from banks\774,756\915,086$8,244,763

Monetary claims bought

15,313

17,414

156,902

Trading account securities

1,662

1,971

17,762

Securities

1,758,610

1,536,394

13,842,638

Loans and bills discounted

3,246,170

3,386,727

30,513,803

Foreign exchanges

9,479

11,885

107,087

Other assets

52,62751,643465,294

Tangible fixed assets

41,526

39,076352,072

Intangible fixed assets

12,047

12,543113,013

Prepaid pension cost

1,853

1,783

16,067

Customers’ liabilities for acceptances and guarantees

12,33012,373

111,483(10,145)(10,705)(96,456)\5,916,232\5,976,193$53,844,431

Allowance for loan losses
Total Assets■ Liabilities

Deposits
Negotiable certificates of deposit（Millions of Yen）

（Millions of Yen）

(Thousands of U.S. Dollars）

2018

2019

2019

\4,641,357\4,684,756$42,208,812

198,838

188,780

1,700,880

Payables under repurchase agreements

36,73540,736

367,028

Payables under securities lending transactions

326,708

290,2892,615,455

Borrowed money

347,941

424,329

3,823,134

144

459

4,142

Other liabilities

22,562

20,522

184,907

Provision for bonuses

1,161

1,247

11,239Provision for directors’ bonuses

88

79

720

Provision for retirement benefits

1,026

729

6,568

770

779

7,022

-

297

2,679

Provision for reimbursement of deposits

2,088

2,367

21,328Deferred tax liabilities

11,0904,693

42,287

Deferred tax liabilities for land revaluation

5,520

5,239

47,204

Acceptances and guarantees

12,33012,373

111,483\5,608,364\5,677,681$51,154,896

Foreign exchanges

Provision for contingent loss
Provision for system cancellation losses

Total Liabilities■ Net Assets

Capital stock（Millions of Yen）

（Millions of Yen）

(Thousands of U.S. Dollars）

2018

2019

2019

\32,776\32,776$295,314

Capital surplus

18,635

18,635167,904

Retained earnings

204,817

206,505

1,860,575

Treasury stock(4,240)--Shareholders' equity

251,989

257,917

2,323,794

Valuation difference on available-for-sale securities

48,71934,635

312,064(4,204)

Deferred gains or losses on hedges

(380)

(466)

Revaluation reserve for land

6,984

6,424

57,880Total Valuation and translation adjustments

55,32440,593

365,740554--

307,867

298,5112,689,534\5,916,232\5,976,193$53,844,431

Subscription rights to shares
Total Net assets
Total Liabilities and Net assets73(Thousands of U.S. Dollars）

DAISHI HOKUETSU REPORT 2019

Non-Consolidated Statements of Income
Years ended March 31, 2018 and 2019

（Millions of Yen）

（Millions of Yen）

2018

2019

Ordinary Income\78,538\76,616$690,302

Interest income

49,51347,742

430,152

Interest on loans and discounts

28,73730,022

270,497

Interest and dividends on securities

20,263

17,194

154,923

0

-

-

209

208

1,878

Interest on call loans
Interest on deposits with banks
Other interest income

2019

303

316

2,852

Fees and commissions

15,327

16,687150,348

Other ordinary income

3,733

4,253

38,323

Other income

9,963

7,933

71,478

Ordinary Expenses

59,87960,570545,728

Interest expenses

4,735

5,241

47,226

Interest on deposits

780

746

6,724

Interest on negotiable certificates of deposit

26

27

245

Interest on call money

0

(9)

(85)

Interest on bills sold

614

869

7,837

2,014

1,827

16,466

105

112

1,009

Interest on rate swaps

1,192

1,667

15,020

Other interest expenses

0

0

8

5,166

5,507

49,624

Interest on payables under securities lending transactions
Interest on borrowings and rediscounts

Fees and commissions payments
Other ordinary expenses

3,098

3,264

29,411

General and administrative expenses

42,99842,077379,107

Other expenses

3,880

4,479

40,357

Ordinary profit

18,65816,046

144,574

-

388

3,498

Extraordinary income
Gain on disposal of noncurrent assets

-

0

6

Gain on reversal of subscription rights to shares

-

387

3,491
23,904Extraordinary loss

56

2,653

Loss on disposal of noncurrent assets

46

107

970

Impairment loss

10

2,248

20,254

Transfer to reserve for system cancellation losses

-

297

2,679

Income before income taxes

18,601

13,781

124,168

Income taxes-current

5,407

4,335

39,065

Income taxes-deferred

(295)

(893)

(8,050)\13,489\10,339$93,153

Net income(Thousands of U.S. Dollars）



DAISHI HOKUETSU REPORT 2019

74





Non-Consolidated Balance Sheet

Years ended March 31, 2018 and 2019
Note:The translations of the Japanese yen amounts into US dollars are using the prevailing exchange rate at March 31, 2019,which was\110.99 to US $1.

■Assets

Cash and due from banks（Millions of Yen）

（Millions of Yen）

2018

2019

2019

\182,643\192,439$1,733,846

Call loans

5,418

3,773

34,000

Trading account securities

1,596

1,847

16,646

831,761

957,897

8,630,488
15,359,905

Securities
Loans and bills discounted

1,698,179

1,704,795

Foreign exchanges

6,190

7,776

70,062Other assets

35,93938,094343,226

Tangible fixed assets

29,07924,389219,743

Intangible fixed assets

1,163

1,315

11,852

Prepaid pension cost

5,854

5,604

50,493

Deferred tax assets

-

2,829

25,497

Customers’ liabilities for acceptances and guarantees
Allowance for loan losses
Total Assets■ Liabilities

Deposits
Negotiable certificates of deposit

6,560

6,734

60,678(4,487)(6,020)(54,243)\2,799,898\2,941,479$26,502,198（Millions of Yen）

（Millions of Yen）

(Thousands of U.S. Dollars）

2018

2019

\2,463,349\2,510,204$22,616,494

108,780

104,340

940,084

Call money

2019

-

4,994

45,000

Payables under repurchase agreements

64,36569,535626,503

Payables under securities lending transactions

24,960113,2391,020,269

228

295

2,664

Foreign exchanges
Other liabilities

8,499

18,082

162,924

Provision for bonuses

804

752

6,779

Provision for directors’ bonuses

25

25

225

Provision for reimbursement of deposits

691

622

5,609

Provision for system cancellation losses

364

160

1,443

Provision for contingent loss

464

351

3,168

Deferred tax liabilities

2,084

-

-

Deferred tax liabilities for land revaluation

2,859

2,463

22,191

Acceptances and guarantees

6,560

6,734

60,678\2,684,038\2,831,802$25,514,037

Total Liabilities■ Net Assets（Millions of Yen）

（Millions of Yen）

(Thousands of U.S. Dollars）

2018

2019

2019

Capital stock\24,538\24,538$221,083

Capital surplus

16,964

16,964

152,846

Retained earnings

54,981

54,198488,316

Treasury stock(1,287)--

Shareholders' equity

95,196

95,700862,246

Valuation difference on available-for-sale securities

18,24815,282

137,691(280)(5,190)(46,769)

Deferred gains or losses on hedges
Revaluation reserve for land

2,577

3,883

34,993

Total Valuation and translation adjustments

20,545

13,975125,915

118--

Subscription rights to shares
Total Net assets
Total Liabilities and Net assets

75(Thousands of U.S. Dollars）

DAISHI HOKUETSU REPORT 2019

115,860

109,676

988,161\2,799,898\2,941,479$26,502,198



Non-Consolidated Statements of Income
Years ended March 31, 2018 and 2019

（Millions of Yen）

（Millions of Yen）

(Thousands of U.S. Dollars）

2018

2019

Ordinary Income\43,319\40,760$367,242

Interest income

27,27825,904

233,393

Interest on loans and discounts

17,494

17,049153,611

Interest and dividends on securities

9,721

8,786

79,168

0

(2)

(26)

Interest on receivables under resale agreements

(9)

(14)

(129)

Interest on deposits with banks

28

32

295

Other interest income

43

52

474

Consolidated Statements of Income

7,138

7,287

65,660

Other ordinary income

4,933

2,512

22,635

Other income

3,970

5,055

45,553

Ordinary Expenses

33,48333,235

299,450

Interest expenses

1,500

1,923

17,333

529

445

4,013

Interest on negotiable certificates of deposit

17

17

156

Interest on call money

(0)

61

554

Interest on bills sold

(161)

(350)

(3,158)

388

1,232

11,108Interest on call loans

Interest on deposits

Interest on payables under securities lending transactions
Interest on borrowings and rediscounts

2019

0

0

0

Interest on rate swaps

726

517

4,661

Other interest expenses

(0)

(0)

(2)

Fees and commissions payments

3,900

4,264

38,418Other ordinary expenses

4,418

701

6,324

General and administrative expenses

22,65822,517

202,882

Other expenses

1,006

3,828

34,490Ordinary profit

9,836

7,524

67,792Extraordinary income

-

289

2,608

Gain on system cancellation losses

-

204

1,842

Gain on reversal of subscription rights to shares

-

84

765

512

4,264

38,423Extraordinary loss
Loss on disposal of noncurrent assets

61

34

306

Impairment loss

85

4,230

38,117

Transfer to reserve for system cancellation losses

364

-

-

Income before income taxes

9,324

3,549

31,976

Income taxes-current

1,394

1,559

14,052

Income taxes-deferred768(2,020)(18,200)\7,161\4,009$36,124

Net income

DAISHI HOKUETSU REPORT 201976

THE HOKUETSU BANK, LTD.
Daishi Hokuetsu Financial Group, Inc.
Location of head office :2-14 Ote-dori 2-chome, Nagaoka-shi, Niigata Prefecture
Location of principal head office functions :1071-1 Higashiborimae-dori 7-bancho, Chuo-ku, Niigata-shi, Niigata Prefecture
TEL : 025-224-7111 (representative)
URL : https://www.dhfg.co.jp/
Edited and issued by the Business Planning Division of Daishi Hokuetsu Financial Group
Issued in July 2019

This disclose uses easy-to-read
universal design font.

The Daishi Bank has signed thePrinciples for Financial Action forthe 21st Century.

The Hokuetsu Bank has signed
the Principles for Financial Action
for the 21st Century.