Corporate Logo and Corporate Color
DAISHI HOKUETSU INTEGRATED REPORT 2022of the Daishi Hokuetsu FG
C or por ate Log o

Based on the motif of geography in Niigata
Prefecture, the corporate logo uses a goldencolor representing bountiful harvests of rice
to express the expansive land, and uses thecorporate color azure to express the rivers
which moisten that land and the vast Sea ofJapan connecting with the rest of the world.
The elliptical shape in the center of the logo
was designed in the image of islands and rice inNiigata Prefecture.
The two lines rising upwards depict how
Daishi Bank and Hokuetsu Bank form a single
massive surge, boldly challenging changes
for the future and continuing to contribute toregional society.

Integrated Report 2022

C or por ate C olor
Azure

DAISHI HOKUETSU INTEGRATED REPORTBlue colors create positive images such astrust, sincerity, and future orientation. Among
blue colors, azure is a particularly rich andbeautiful shade.
In our logo, the color azure represents the vast
Sea of Japan which borders Niigata Prefecture;
the Shinano River, Agano River, and other rivers
which flow into the Sea of Japan after moistening
the fertile land; and the clear expanse of blue
skies. This color represents how our new financialgroup will continuously grow in the future while
earning the trust of regional society.

DAISHI HOKUETSU Financial Group, Inc.
Location of principal head office functions: 1071-1 Higashiborimae-dori 7-bancho, Chuo-ku,
TEL

URL

Niigata-shi, Niigata Prefecture025-224-7111 (representative)
https://www.dhfg.co.jp/

Edited and issued by the Business Planning Division of Daishi Hokuetsu Financial Group
Issued in July 2022

This Disclosure Magazine isprinted withvegetable oil ink.

The disclosure uses easy-to-read
universal design font.

Daishi Hokuetsu FG and the
TSUBASA Alliance have set
SDGs Declarations.

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

Contents
Message from Management

03

Message from Management‥ ‥‥‥‥‥‥ P.03

Overview of the Daishi Hokuetsu FG

09Business Area‥ ‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥ P.09
Financial / Non-Financial Highlights‥‥‥ P.11

Communication with Stakeholders

58

Communication with Stakeholders‥ ‥‥‥ P.58

Corporate Data

60

List of Executives‥ ‥‥‥‥‥‥‥‥‥‥‥‥‥ P.60
List of Group Companies‥ ‥‥‥‥‥‥‥‥ P.62

History of the Daishi Hokuetsu Bank‥ ‥ P.13

Value Creation Story

15

Overview of Value Creation Story‥‥‥‥ P.15
Increasing Diversification and Complexityof the Needs of Regional Society andChanges in the Business Environment

Surrounding the FG‥‥‥‥‥‥‥‥‥‥‥‥‥ P.17

This section introduces the Daishi Hokuetsu
FG’s system for creating new value throughour business activities.

The 2nd Medium-Term Management Plan‥‥‥ P.18
Sustainability Initiatives‥ ‥‥‥‥‥‥‥‥‥ P.19
New Value Creation‥ ‥‥‥‥‥‥‥‥‥‥‥ P.28
Business Base to Support New Value

Creation‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥‥ P.38

[Editorial Policy]
Daishi Hokuetsu Financial Group has prepared this“DAISHI HOKUETSU INTEGRATEDREPORT 2022”in order to help readers gain a better understanding of the company’sinitiatives aimed at sustainable value creation. When compiling this report, we havereferred to the "International <IR> Framework," the Ministry of Economy, Trade andIndustry's "Guidance for Integrated Corporate Disclosure and Company-Investor Dialogues
for Collaborative Value Creation (Guidance for Collaborative Value Creation)," and otherresources.
Regarding our Disclosure Magazine prepared in accordance with
Articles 21 and 52-29 of the Banking Act and Article 7 of the Act
on Emergency Measures for the Revitalization of the Financial
Functions, please refer to "Disclosure Magazine 2022 (https://www.
dhfg.co.jp/financial/ir/disclo/)”on the website of the company.
This report contains forward-looking statements, but these are notguarantees of future performance and may differ materially from
actual results owing to changes in the business environment andother factors.

This section introduces the new value being
created by the Daishi Hokuetsu FG.

This section introduces our five strengths andbusiness base for supporting new value creation,
including governance and risk management
systems.

[Presentation of figures]
On January 1, 2021, the company’s wholly owned
subsidiaries, Daishi Bank and Hokuetsu Bank, merged, with
Daishi Bank as the surviving company and Hokuetsu Bank as
the dissolving company, with the company name changing to
Daishi Hokuetsu Bank.
The figures for Daishi Hokuetsu Bank in this document are calculated
in accordance with the following rules from the perspective of
making appropriate period comparisons for each item.

March 31, 2021, the fiscal year ended March 31, 2022,● 

and March 31, 2022
Figures for Daishi Hokuetsu Bank

The fiscal year ended March 31, 2021
Simple sum of the figures for Daishi Bank and Hokuetsu● Bank for April – December 2020 and the figures for
Daishi Hokuetsu Bank from January 2021 onwards
Figures for the fiscal year ended March 31, 2020 and
for March 31, 2020

● 

Simple sum of the figures for Daishi Bank and Hokuetsu Bank

*As a general rule, the figures in this document have been rounded down to the nearest unit.
*The“Daishi Hokuetsu Financial Group”may be referred to below as“Daishi Hokuetsu FG,”
“FG”or“the company”in this document.
“* QR Code,”which is referenced in this document, is a registered trademark of DENSO WAVE INCORPORATED.

Inquiries

1

Business Planning Division, Daishi Hokuetsu Financial Group TEL: 025-224-7111 (representative)

DAISHI HOKUETSU REPORT 2022

Thank you very much for your continued support.
The Daishi Hokuetsu Financial Group (the“Group”) focuses on constructive dialogue (engagement) withall stakeholders, with a view to achieving the sustainable growth and medium- to long-term enhancementof corporate value expected under the Corporate Governance Code, as a company on the Prime Market,
where have a higher level of governance is required.
As part of these efforts, we have decided to overhaul our existing“Integrated Report and Disclosure
Magazine”and publish it as our“Integrated Report.”
In the“Integrated Report,”in addition to the existing disclosure of financial information, we will also
take steps to enhance the disclosure of non-financial information and sustainability initiatives in line with
the Group's medium- to long-term value creation story. Accordingly, we intend to use the“Integrated
Report”as an engagement tool to promote constructive dialogue with stakeholders, and we hope you
will enjoy reading it.
Going forward, we will continue to contribute to the development of regional society by providing newvalue based on our Management Philosophy, while placing importance on the“trust”of our stakeholders.
We look forward to your continued support and favor.

As a trusted financial group,
Philosophy

Management
Philosophy

Action Principles

we will continue to provide
services that live up to the
expectations of customers andcontribute to the development ofregional society.

MissionWe will boldly take on challenge
to create new value.

Vision and Approach

DAISHI HOKUETSU REPORT 2022

2

Message from Management

Message from Management

Building on the trust from the local community that we have built up overthe past 140 years, we will achieve sustainable growth in the region.
Arrival of an Era of Great Change
The business environment surrounding theand materials, and rapid fluctuations in foreignchanging from multiple perspectives, including thetime, the importance of sustainability, includingGroup is becoming increasingly uncertain anddeclining and aging population with a decreasing
number of children, the normalization of ultra-low
interest rates, and intensifying competition fromother industries, as well as new risk factors suchexchange markets and interest rates. At the same

digital transformation (DX) and climate change, isgrowing at an accelerating pace as digital technology advances.

As these changes overlap, we are currently inas the prolonged impact of COVID-19 in recent

an era of great change, in which social and indus-

which have caused spikes in the prices of energyuals, are undergoing significant change.

times and the emergence of geopolitical risks,

trial structures, as well as the lifestyles of individ-

President and Representative Director

Michiro Ueguri

Our Management Philosophy is Our Story of Sustainable Value Creation
Eiichi Shibusawa, who established Japan's firstbank (The First National Bank) in 1873, stated, "In

all things, I think that those who use trust as thebasis of things and do things in accordance withwhat is right will surely prosper, and those whotake actions that violate what is right will surely
3

DAISHI HOKUETSU REPORT 2022

perish." This concept forms the basis of“sustain-

ability management,”which has recently been
attracting attention around the world.

Daishi Hokuetsu Bank, the core company in theGroup, has built a deep relationship of trust withthe local community by continuing to contributeMessage from Management

Overview of the Daishi Hokuetsu FG

Value Creation Story

Communication with Stakeholders

Corporate Data

to regional society for more than 140 years since

great change”and engaging in related study. In this“trust”as a core competence of the Group, andcreasingly diverse and complex issues and needs

its establishment in 1873. Today, we position

earning“trust”is part of the "Action Principles”inour Management Philosophy.

The“Mission”of the Group, which expresses・・・

our raison d'être, is also to“continue to contribute to the development of regional society.”In

other words, building on the foundation of trust,
we will repeatedly enter into deep dialogue(engagement) with our customers, and adopt a

stance of boldly taking on challenge in this“era ofway, we will develop an understanding of the in-of our customers, and create and provide newvalue that exceeds expectations. As a result, theGroup pursues cyclical and sustainable growththrough the development of our customers andregional society, as well as the enhancement ofour corporate value and the trust of stakeholders.

In this way, the Group's Management Philos-

ophy clearly expresses our story of sustainablevalue creation.

Unity of Purpose: Our Slogan for Achieving our Management Philosophy
In April 2021, when I assumed the position of

President, I adopted the phrase "unity of purpose"“isshi-danketsu”(
in Japanese) as a slogan to enableby our integration and merger. We have expressed
these ideas as the slogan, "unity of purpose."

In June of this year, approximately 90% of

all officers and employees to work together to achieve

respondents to an employee survey answered that

"Shi," the Japanese for“purpose”in this slogan,survey, I believe that this slogan has now moved from

our Management Philosophy.

refers to our Management Philosophy. "Shi”is astrong feeling that one "wants to achieve something
or become something," and I think that organizations
in which each and every officer and employee has

diverse values and mutually accepts one another tend
to be resistant to environmental change and are likely
to produce unexpected results, in a positive sense.

Accordingly, I believe that we should all have our own"harmony is progressing." Based on the results of this"unity of purpose" in related to harmony between

the employees of the two merged banks, to thenext stage, namely "unity of purpose" in relation toemployees with diverse attributes, such as officers andemployees, different genders, branch managers andnew employees, and new graduates and mid-career
employees.

In addition, in order to further solidify our "unity

individual "shi (purpose)." As we work in the Group,of purpose," I have taken the initiative in directly

the "Management Philosophy" as a set of sharedand ideas in my own words. In addition, I am creating

however, I hope that all officers and employees havevalues.

The Group was established in October 2018

through the management integration of Daishi Bankand Hokuetsu Bank, which were both based in Niigata

Prefecture. The two banks subsequently merged in
January 2021. Based on the long history of the twobanks sharpening their skills through healthy rivalry

contacting employees to communicate my thoughts
opportunities to listen to the opinions of employees

on an ongoing basis, and officers other than myself

are also actively visiting sales offices, etc., and creating

opportunities for direct dialogue with employees.
In such ways, senior management and employees
engage in regular and repeated dialogue.

since the late nineteenth century, "ichi" in our slogan(meaning“one”in Japanese) also refers to a groupof people with the same purpose “shi”() belonging

to a single organization. In addition, the meaning of“danketsu”("unity" in Japanese) is that all of us arekeenly aware of our“shi,”i.e., our common purpose,and by working as one to achieve this purpose, wewill enhance our collective strength as an organizationand make significant use of the synergies generated

DAISHI HOKUETSU REPORT 2022

4

Message from Management

Message from Management
Five Strengths that Enhance Our Ability to Create Value
In order for the Group to put our Management

Philosophy into practice and achieve it as a sustainableorganization, I believe it will be essential that we makethe best possible use of our existing problem-solving

functions (development) and expand our businessdomains (exploration) by taking advantage of thestrengths we have accumulated to date.
1

ability to create value by leveraging our five corecompetencies:“ 1 trust from the local community,”“ 2 achieving three synergies (merger synergy,
group synergy, and TSUBASA Alliance synergy),”“3

human resource capabilities,”“ 4 collective strength
as an organization,”and“ 5 sound finance.”

Trust from the Local Community
Daishi Hokuetsu Bank, the core company in theGroup, has built relationships of trust with the local

more than 140 years.

The Group's greatest strength lies in our“relationshipcommunity and grown together with regional societyof trust with the local community,”which is of theeras by contributing to the development of the local

this is the foundation for our provision of financial andthrough the Meiji, Taisho, Showa, Heisei, and Reiwa
economy while also responding to the ever-changing
environment over the course of our long history of2

utmost importance for regional banks. We believe

information services and for achieving sustainablegrowth together with the local community.

Achievement of Three Synergies (Merger Synergy, Group Synergy, and TSUBASA Alliance Synergy)
In our 2nd Medium-Term Management Plan,

launched in April 2021, we have set forth“achieving"TSUBASA Alliance synergy."

With regard to “merger synergy,” by sharing

synergistic effects”as the most important theme forexpertise, coordinating overlapping functions, andour management integration and merger. Accordingly,

top line and reducing costs, thus strengthening ourour new stage of further consolidating the results of
we are working to achieve synergistic effects in thethree areas of "merger synergy," "group synergy," and5

For our strengths, we will first strengthen our

DAISHI HOKUETSU REPORT 2022

reallocating business resources, we will enhance our
profit structure.

Specifically, we are simultaneously integrating

Message from Management

Overview of the Daishi Hokuetsu FG

Value Creation Story

branches, streamlining head office, and reforming oursales office operations. As a result, in the last fiscal

year, we made approximately 540 employees
available, of which we strategically reassigned

approximately 280 employees, excluding those who
reached the mandatory retirement age, etc., to sales
divisions, Group companies, and other operations.

With regard to the reallocation of business resources,

our progress in the first year was already approximately

60% of our three-year target in the medium-term plan.

Additionally, in order to maximize“merger synergy,”

we have established the Structural Reform Promotion

Committee, which is chaired by me, as an organization

to promote "new structural reforms," based on thethree pillars of sales reform, sales office operations
reform, and head office operations reform, and we aretackling these issues in a cross-organizational manner.
For“group synergy,”we are enhancing the solutions

we offer in the non-financial sector through“Bridge

Niigata,” a regional trading company establishedfollowing our management integration, and“Daishi
Hokuetsu Career Bridge,”a recruitment agency. We

are also restructuring our Group companies toimprove efficiency and strengthen their functions. In
addition, in order to achieve further group synergy,

we are implementing the PDCA cycle in a cross-organizational and multi-layered governance structure,such as holding monthly "Group Company Senior

Management Meetings," in which the Presidents ofGroup companies participate, and these efforts are

steadily generating results. We believe that there is
still significant room for growth through the use of3

Communication with Stakeholders

Corporate Data

networks based on our “ 1 trust from the local

community,”and we will further strengthen efforts by
the Group as a whole.
"TSUBASA

Alliancesynergy"referstotheachievement of synergies from the TSUBASA Alliance,

which is a partnership of 10 major regional banks
around the country, including the Daishi Hokuetsu
Bank. The total assets of the banks participating in the
Alliance is 96 trillion yen, making it one of the largest
among regional banks, and we have expanded ourpartnership in all fields, including systems andadministration, to build a very strong relationship. The

synergies generated by the Daishi Hokuetsu Bank todate have reached a total of 8.4 billion yen, and we
intend to further strengthen our partnership in
response to issues such as climate change, an area

where the importance of our initiatives will continue
to increase in the future.

In December last year, we entered into the“Gunma-

Daishi Hokuetsu Alliance” with Gunma Bank in aneighboring prefecture, and working groups in five
fieldsareconsidering

specific

promotionutilizingmeasuresforpartnership, such as “regional revitalization andtourism

geographicalcharacteristics.”The synergy effects of this alliancethrough fiscal 2026 are expected to be 8 billion yen
for the cumulative total of five years for both banks.

Going forward, we will further strengthen ourpartnerships in the TSUBASA Alliance and the Gunma-

Daishi Hokuetsu Alliance, and expand the "TSUBASA
Alliance Synergy."

Human Resource Capabilities
At present, people are increasingly accepting the

growth of regional society while also accumulating

way that we call them“personnel expenses,”but(1) supporting growth through on-the-job training

idea that spending on employees is not a cost in therather an investment in human capital to become asustainable organization. In the Group, however, wehave long been using the term "human resources"

based on our belief that "employees are an important

asset," and we have been increasing our investment

in human resources accordingly. Recognizing thathuman resources as a source of competitiveness are

our most important asset (capital), we are working
from multiple perspectives to develop humanresources capable of contributing to the sustainable

the trust of our customers, through such measures as:

and various training programs, recurrent education,etc.; (2) developing systems that enable a variety ofwork-styles, such as part-time jobs and secondary
jobs; (3) promoting health management; and (4)creating an environment where a diverse range ofhuman resources, including women, seniors, andmid-career hires, can play an active role. We intend
to continue to invest in human capital to strengthen
our human resources and actively disclose information
related to human capital.

DAISHI HOKUETSU REPORT 2022

6

Message from Management

Message from Management
4

Collective Strength as an Organization
In the merger between Daishi Bank and Hokuetsu

Bank, which was a nationwide first as a merger ofdifficult project with a "unity of purpose," sharing theirlargest market shares in the same prefecture, we

this way, I feel that our harmony as an organization

two regional banks with the largest and second
successfully executed the merger using the complete
integration method, which is considered to be moredifficult because the merger and integration ofsystems and operations are conducted at the sametime, in order to achieve the benefits of the merger as
quickly as possible and return the fruits of the merger
to the local community.

In 2020, the final year of this project, theunprecedented disaster of the COVID-19 pandemic
struck, and we faced the adversity of having ouractions severely limited, but as a result of the strong

commitment of all officers and employees to do
whatever they could to ensure the execution of the

project, we were able to complete both the merger
and the integration of systems and operations at thesame time.
5

Sound Financial Position
In order to earn the trust of the local community,

steadymanagementisessential

forfinancialbusinesses such as the Group. Over our history of

more than 140 years, we have steadily strengthened
our management foundations.
The

company's

capitaladequacy

ratio(consolidated) of 10.51% significantly exceeds the

4% level required by financial institutions underdomestic standards, meaning that we maintain asufficiently sound position. In addition, the Group's

consolidated total assets amount to 10.6 trillion yen,while the loan balance at the Daishi Hokuetsu Bankis 5.1 trillion yen, and the deposit balance is 8.4

trillion yen, making us the largest financial institution
in Niigata Prefecture in terms of both market shareand the amount of these balances. Furthermore, we

are among the leading financial institutions in Japanin terms of the size of our local market share. In thisway, our solid business foundations and soundfinancial position enable us to achieve stableshareholder returns based on our policy for return toshareholders, in which we aim for a shareholder
return rate of approximately 40%.

7

All officers and employees worked on this extremely

DAISHI HOKUETSU REPORT 2022

pleasure and pain, and generating results together. In

and the unity of our mindset have advanced, and that

we have been able to improve our“ability to executeplans.”In addition, we have steadily improved our
project management capabilities to manage andappropriately respond to complex projects such as
mergersandtheintegrationofsystems

andoperations, and our accumulated expertise is now
being utilized in various projects, such as“structuralreform”and“initiatives for sustainable management”
within the Group. We consider these capabilities tobe part of our collective strength as an organizationthat implements the PDCA cycle, and a great strength
for the Company. Going forward, we will continue torespond appropriately to the rapidly changing
external environment, while also enhancing ourcollective strength as an organization.

Message from Management

Overview of the Daishi Hokuetsu FG

Value Creation Story

Communication with Stakeholders

Corporate Data

Practicing Sustainability Management
In the past, many companies saw investment inannounced the“Daishi Hokuetsu Financial Group’s

the pursuit of profits, and viewed it as a cost to

have added "practicing sustainability management"

the environment and society as a“trade-off”withfulfill their social responsibilities. Now, however,with the growing importance of sustainability
initiatives, such as responses to climate change,
the idea of "trade-on" has been spreading rapidly.

Under this approach, companies aim to balancethemaintenanceandimprovement

of

the

environment and society with economic growth

and the sustainability of corporate activities. In May
2021, the Group established the “Sustainability

Promotion Committee,”chaired by myself, with a
view

to

appropriately

fulfillingour

Basic Sustainability Policy.”From this fiscal year, we
as

a

basic

strategyof

ourMedium-Terminvestment

andfinancing

Management Plan, and have also established andannounced

polices,targets, and CO2 emissions reduction targets. As
stated at the beginning of this report, however,there is no change to our basic Management Policy
because the Management Philosophy and ourapproach to sustainability are connected at afundamental level.

In the future, the Group will continue to take thesocialinitiative in sustainability management and lead

we seek to achieve. This committee has been

disclosure regarding the Group's initiatives andresponsibilities and creating the sustainable society
engaged in discussions on sustainability initiatives,
including responses to climate change issues, suchas disclosure based on the TCFD recommendations.

In December 2021, we also formulated andlocal communities. We will enhance information
offer the expertise we have accumulated back to

local communities. In this way, we will improve

environmental and social value, as well as theGroup's corporate value.

Continue to Boldly Take on the Challenges of Changing Times
Since my appointment as President, I have

The Group will celebrate five years since ourvisited more than 200 business partners and met

establishment in October 2023, and the Daishi

while giving due consideration to the status ofof its founding in November of the same year.

directly with the Presidents of each company,

infections amid restrictions imposed owing to the

COVID-19 pandemic. On these occasions, I
received many comments, such as, "We havereceived proposals that are more useful than

before the management integration." This is atestament to the steady growth of our officers andHokuetsu Bank will celebrate the 150th anniversary
Please follow the progress of the Group as we

continue to boldly take on the challenges ofchanging times, based on the trust that we havebuilt up over many years.


Ideal Formemployees, who carry out their daily activities

with the mindset of "taking on the challenges ofchanging

times

and

creating

addedvalue."

Accordingly, I am grateful to both our customers

and our officers and employees. Encouraged bythis, we will continue working to achieve our“ideal form”of being an organization that has a"unity of purpose," which achieves significant
collective strength far beyond the sum of its

individual parts, through officers and executives

We establish ourselves as a financial andinformation services group that receives
overwhelming support by creating new value

through our financial intermediary function
andinformationintermediaryfunction,increasing the efficiency of management, andcontinuing to contribute to the growth ofregional society.

sharing their trajectories toward even higher
heights.

July 2022
DAISHI HOKUETSU REPORT 20228

Overview of the Daishi Hokuetsu FG

Business Area

Overview of the Daishi Hokuetsu FG

Niigata Prefecture is the main market of the Daishi Hokuetsu Financial
Group. Located on the Sea of Japan side of Japan’s main island of Honshu,
thanks to its geography and climate the prefecture has long been recognized
for its booming agriculture industry and for production of foods such as riceconfectionery and processed seafood products made from its abundant rice,
agricultural and fishery resources. The nominal gross product of Niigata
Prefecture, which is equivalent to its GDP, ranks 16th in Japan (fiscal 2018),
and it is 15th in Japan in terms of population (fiscal 2020). The region has
substantial potential, including the area in the middle of the prefecture around
Sanjo and Tsubame cities, where there is substantial transportation
infrastructure and a concentration of companies with technologies that arepraised around the world as hardware towns, as well as the Sado area, wherea World Heritage site is expected to be registered, and tourism resources
such as fireworks displays and hot spring resorts.
On the other hand, the rate of population decline has been faster than thenational average, and the total population has been declining for 24
consecutive years since peaking in 1997. In addition, the startup rate remains
low, with the prefecture 45th in Japan (in fiscal 2019), and the tourism
industry faces many challenges, such as the prolonged impact of COVID-19.
Based on these characteristics of Niigata Prefecture and the issues it faces,
the Company will create new value in order to continue contributing to thedevelopment of regional society based on our Management Philosophy.

BANK

BANK

BANK

*Figures are quoted from the websites of the
Ministry of Internal Affairs and Communications
website, the Cabinet Office, and Niigata Prefecture.

Characteristics of Niigata Prefecture■

Substantial Transportation Infrastructure

Niigata Prefecture's substantial high-speed transportation infrastructure, etc., enables quick and efficient access from
Kanto, Kansai, Tohoku, and other areas.
Advantages of transportation network

Nihonkai Tohoku Expressway

Highways stretching out in five different
directions(Kan-etsu, Hokuriku, Joshin-etsu, Ban-etsu,

Niigata Airport

and Nihonkai Tohoku)
Joetsu ShinkansenkuNiigata Port

Hokuriku Shinkansenku

Conventional railroad lines such as the

Naoetsu PortLine

Hokuriku
Expressway

Shin-Etsu Line, Hokuriku Line, and Uetsu

ku

Niigata Airport

Domestic routes:kuo

9 (New Chitose, Narita, Chubu Centrair

International, Komaki, Itami, Kansai Interna-otional, Kobe, Fukuoka, Naha)
International routes:o

Hokuriku
Shinkansen

Ban-etsu
Expressway

JoetsuShinkansen
Kan-etsu
Expressway
Toward Tohoku

Joshin-etsu Expressway

6 (Seoul, Shanghai, Harbin, Khabarovsk,

Vladivostok, Taipei)o*International flights are suspended owing to theku

Niigata Port

impact of COVID-19

Comprehensive ports, function-specificports:

Toward Hokuriku
Toward Tokai

Toward Kanto

International container shipping sector

Designated as LNG (liquefied natural gas)ku

sectoroFunction-specific ports:

Naoetsu Port

Designated as LNG (liquefied natural gas)

sectorAs of June 30, 2022o
9

DAISHI HOKUETSU REPORT 2022

Message from Management■

Overview of the Daishi Hokuetsu FG

Value Creation Story

Communication with Stakeholders

Corporate Data

Thriving Agricultural Industry Thanks to the Abundant Natural Environment

Niigata Prefecture is surrounded by many rivers and mountains, including
the Shinano River, the longest river in Japan, and has long been a region
with thriving agriculture thanks partly to its relatively good weather fromspring to summer.
The amount of rice produced in Niigata Prefecture amounts to 150.3
billion yen, the highest in Japan, and the amount of sake consumed (peradult) is 8.6 liters, also the highest in Japan. (Fiscal 2020)■

Characteristic Industries Backed by Advanced Metalworking Technology

The Tsubame-Sanjo area is one of the leading centers of metalworking inJapan.
This area’s domestic share of the Western metal tableware market, such as
spoons and forks, exceeds 90%. In addition, its high quality has earned it a good
reputation around the world, including cutlery from the area being used at theNobel Prize banquet, and products from Tsubame being used as souvenirs forthe leaders of other countries at APEC (Asia-Pacific Economic Cooperation).
In recent years, there have been an increase in the number of facilities wherevisitors can enjoy factory tours and experience the skills that craftsmen havecultivated over many years, as well as the ideas that have been passed down tothem, in actual hands-on experiences, and there has increasing anticipation
surrounding these facilities as a tourism resource.
■

Abundant Tourism Resources

In this section, we introduce some of Niigata Prefecture's abundant tourism resources.

Sado
Sado is Japan's largest remote island, attracting
approximately 500,000 tourists every year. The gold and silver
mines that flourished mainly during the Edo period (17thcentury to late 19th century) are expected to be registered asa World Cultural Heritage site. In addition, in April 2022, theMinistry of the Environment designated Sado City as a
“Decarbonization Leading Area," and the city is actively
working to achieve carbon neutrality by 2050.

Fireworks Displays
Fireworks displays areheld in various parts ofNiigata Prefecture. In
particular, the fireworks
displays held in Nagaoka,
Katakai, and Kashiwazaki
are known as the "threegreat fireworks displays of
Echigo." Of these, theNagaoka fireworks display
is held in memory of those
who have died, and inprayer for restoration and peace, and it attracts more one
million or more visitors over the two days it is held.

Hot Spring Resorts, Ski and Snowboard Resorts
There are 144 hotspring resorts withaccommodation facilities
in Niigata Prefecture,
meaning the prefectureranks third in Japan on
this metric. It also boasts
the third highest numberof ski and snowboard
resorts in Japan.

Issues Facing Niigata Prefecture
Although Niigata Prefecture has a sizable economy, its total population peaked at 2.49 million in 1997, and has been
decreasing for 24 consecutive years. As of October 2021, the total population was 2.17 million. On the other hand, thepercentage of elderly people (65 years or older) has been increasing year by year, and now stands at 33.4%.
In addition, the startup rate in Niigata Prefecture (fiscal 2019) was 2.7%, lower than the national average of 4.3%, andranked 45th in Japan.
DAISHI HOKUETSU REPORT 2022

10

Overview of the Daishi Hokuetsu FG

Financial Highlights
Daishi Hokuetsu FG (Consolidated)151

Net income reverting toparent company shareholders

millionCapital adequacy ratio

151

128

9.65

10.51

10.35

10.51

Fiscal year ended
March 31, 2021

Fiscal year ended
March 31, 2022

%

107

(%)

(100 million yen)
Fiscal year ended
March 31, 2020

Fiscal year ended
March 31, 2021

OHR (expense ratio)
84.7

79.0

Fiscal year ended
March 31, 2022

71.2

Fiscal year ended
March 31, 2020

%

71.2

3.5

ROE

%

3.5

3.2
2.6

(%)
Fiscal year ended
March 31, 2020

Fiscal year ended
March 31, 2021

Fiscal year ended
March 31, 2022(%)
Fiscal year ended
March 31, 2020

Fiscal year ended
March 31, 2021

Fiscal year ended
March 31, 2022

Daishi Hokuetsu Bank (Non-Consolidated)Core business net profit

236

million

236

222

121

Net Income
153

152

101

121

(100 million yen)
Fiscal year ended
March 31, 2020

Fiscal year ended
March 31, 2021

Fiscal year ended
March 31, 2022

84,785

Deposit balance

million82,23484,785

Fiscal year ended
March 31, 2021

Fiscal year ended
March 31, 2022

76,580(100 million yen)
Fiscal year ended
March 31, 2020

Loan balance

Fiscal year ended
March 31, 2021

11

DAISHI HOKUETSU REPORT 2022

Fiscal year ended
March 31, 2022

51,305

million

51,094

49,59651,305

Fiscal year ended
March 31, 2020

Fiscal year ended
March 31, 2021

Fiscal year ended
March 31, 2022

(100 million yen)
Fiscal year ended
March 31, 2020

million(100 million yen)Message from Management

Overview of the Daishi Hokuetsu FG

Value Creation Story

Communication with Stakeholders

Corporate Data

Non-Financial Highlights

Business startups or
re-startups(FY2021)

Customers(FY2021)

1,628

43

Number of cases ofHR support

Number of casesof support forsales channel
development

Number of casesof productivity
improvement
support(FY2019 to FY2021)(FY2019 to FY2021)(*Actual result at Bridge Niigata)(*Actual result at Bridge Niigata)

1,104(*Actual result at Daishi Hokuetsu Career Bridge)

Donations throughdonation-typeprivate placement
bonds(FY2013 to FY2021)

497

Number of students
being issued
scholarships fromthe Daishi Hokuetsu
Scholarship
Association

99

Number of participantsin financial education
activities(FY2013 to FY2021)¥170 1,218 12,146
million(FY1962 to FY2021)

External evaluation of
Health and Productivity
Management

5 years of

Employees(FY2021)

Number ofcompanies
supported in
M&A

1,704
(FY2019 to FY2021)

Regional
Society

Number of companies
supported in businesssuccession

External assessmentof support for childrearing

External assessmentof active participationof women

continuous
certification“Eruboshi Level III Certification”

DAISHI HOKUETSU REPORT 2022

12

Overview of the Daishi Hokuetsu FG

History of the Daishi Hokuetsu Financial Group
Since our founding in 1873, we have quickly and accurately identified the issues facing our customers and society as

they have changed with the times, and we have continued to provide financial and information services aimed at solving

1873

1917

History of the company

The Fourth National Bank of Japan
foundedFounded in current-day Niigata
City as Japan’s third national bank.

Corporate name changed to The Daishi
Bank, Ltd.
Although the name had been changed to
Niigata Bank in 1896, customers
continued to use the nickname“Daishi”
when referring to the bank. Therefore, thename was changed to The Daishi Bank.

1878

The Sixty-Ninth National Bank ofJapan founded
After the end of the Boshin War,founded in current-day Nagaoka
City in order to promoteeconomic growth.

1942

The Nagaoka SixtyNinth Bank established1896

Established via a merger
by The Sixty-Ninth Bankand The Nagaoka Bank.

The Nagaoka Bank foundedFounded in current-day Nagaoka City inconjunction with economic growth suchas a boom in the petroleum industry andestablishment of railway companies.

(million people)

2.5

1888

Niigata Prefecture had
the largest populationin Japan(1.66 million)2

1 trillion

Loans: ¥Deposits:

1 trillion

¥

1.5

1

1874

1880

Period of enriching the country, strengthening thearmed forces, and building new industries
Modernization of Japan

Developments in
Niigata Prefecture13

1868: Opening of Niigata Port (one offive ports opened)
1871: Creation of Niigata Prefecture aspart of the abolishment of feudal
domains and establishment ofprefectures
1876: B uilding of Chosei Bridge(Nagaoka City)DAISHI HOKUETSU REPORT 2022

1890

1950

The Great Depression
and two world wars

1960

Period of
economic recovery

1880: G reat fire of Niigata
1886: Building of Bandai Bridge(Niigata City)
1945: B ombing of Nagaoka City

1970

Period of rapid
economic growth

1964: N ational Sports

Festival in Niigata
1964: N iigata earthquake

Period of stableeconomic growth

1973: N iigata Airport became
an international airport

Message from Management

Overview of the Daishi Hokuetsu FG

Value Creation Story

Communication with Stakeholders

Corporate Data

these issues. This has enabled us to earn the trust of stakeholders while achieving sustainable growth and increasing ourcorporate value.

2018

2021

Hokuetsu Financial Group

Hokuetsu Bank

Birth of the Daishi

Birth of the Daishi

Corporate namechanged to The
Hokuetsu Bank

(trillion)
9

1997

Peak population in Niigata Prefecture(2.49 million)

5 trillion

8Loans: ¥7

6

5

Deposits:¥5 trillion

43

Daishi Hokuetsu Bank savings and deposits
Daishi Hokuetsu Bank loans

2

Niigata Prefecture population
1*Figures for 2020 and before are the total of
Daishi Bank and Hokuetsu Bank.
1980

1990

Bubble period

1982: O pening of

JoetsuShinkansen

2000

Prolonged economic
stagnation

1988: Opening of theentire Hokuriku
Expressway
was opened

Boom years of theearly and mid 2000s

2010

Global financial crisis

Continue to contribute to the development of regional society

1948

0

2021 (years)

COVID-19 pandemic
Increased geopolitical risk

1997: T he entire

2004: 7
 /13 flood damage and2011: Great East Japan Earthquake
Hokuhoku Line
Chuetsu earthquake
2018: T he temperature exceeded 40
on the Ban-etsu 2007: Chuetsu offshoredegrees Celsius for the first time in
Expressway wasearthquake and Niigata City
the prefecture's history
openedbecame a city designated2020: Nationwide declaration of a state ofby government ordinanceemergency in relation to the2009: N ational Sports Festival in
COVID-19 pandemic
NiigataIsland Gold Mine”nominated2021:“Sado
as a UNESCO World Heritage Site

DAISHI HOKUETSU REPORT 2022

14

Value Creation Story

Overview of Value Creation Story

Value Creation Story

As the external environment changes, the needs of regional society are becoming more diverse andcomplex, and the business environment surrounding the company is undergoing significant changes.

External environment

Changes inpolitical andeconomic trends
overseas
Advancement ofDX
Increased risk ofclimate change
Spread ofinfection(pandemic)
Increased
geopolitical risk

BANK

Intensification ofcompetition withother banks
Transformation offinancial policies
Expansion ofcollaboration acrossbusiness lines
Increased participationin the banking businessby companies fromother industries

15

DAISHI HOKUETSU REPORT 2022

Business Activities

Intellectual capital bility to respond to changeAand strengths as an organization
gained through the management
integration and merger● 
Sharing expertise in bothfinancial and non-financial fields byleveraging the Group's collective
strength● 
Accumulating expertise throughthe TSUBASA Alliance●Engagement(Dialogue)

Social capital relationship of trust with theAlocal community that has been
built over more than 140 years● 
A strong business foundation● 
Share of savings deposits andsavings in Niigata Prefecture:
41.2%
● 
Share of loans in Niigata
Prefecture: 53.0%(As of March 31, 2021, source:
The Journal of Finance)● 
Main Bank Trend Survey
Number of main banks
No. 9 in Japan(No. 5 among regional banks)
As of October 31, 2021, source:
TEIKOKU DATABANK)●

Financial capital otal assets (consolidated forT
the Group): 10,670.3 billion yen● 
Deposits (non-consolidated):
8,478.5 billion yen● 
Capital adequacy ratio(consolidated for the Group):
10.51%● 
Rating :A+ (JCR) ( Daishi Hokuetsu FG
and Daishi HokuetsuBank)
A3 (Moody’s) (Daishi Hokuetsu
Bank)●

Trust from theAchieving Three Synergies

Prolonged ultralow interest rateenvironment

 umber of employeesN(consolidated for the Group):
3,591
● 
Large number of employees withfinancial qualifications(Daishi Hokuetsu Bank andDaishi Hokuetsu Securities)● Financial planner level 1: 193● Financial planner level 2: 2,459● Securities analysts: 55● SME Management Consultants:
46●

Five Strengths

finance

Changes in the business environment surrounding the Group

Environment surrounding

Human capital

Value Creation Process

Increased overseas
expansion bycompanies in theprefecture

Increasing Diversification and Complexity of the Needs of Regional Society

Declining birthrate
and aging society
Population decline

Management
Philosophy

Inputs (capital to utilize)

MergerGroup
TSUBASA
Alliance
SynergyBusiness Base to Support

Message from Management

Overview of the Daishi Hokuetsu FG

Value Creation Story

Communication with Stakeholders

Corporate Data

Based on our Management Philosophy, the company is boldly taking on the challenge of change,
and creating new value through business activities that leverage our strengths.

As a trusted financial group, we will continue to provide services that live up to the
expectations of customers and contribute to the development of regional society.
We will boldly take on challenge to create new value.

Provide value tostakeholders(Outcome)

Aimed at Creating New Value

Continue to contributeto the development oflocal communities

Consulting
Customers

Continue boldly taking
on the challenge tocreate new value●

Offering solutions
Financial sector●

Non-financial sector

Provide services that live●

up to the expectations ofcustomers

Local Community

38

P.

Details

Details

Human
Resource
Capabilities

42

P.

38

Stable returns toshareholders

47

Collective P.
Strength as an
Organization

Enhancing corporate
value through timely andappropriate information
disclosure andconstructive dialogue●

Details

Employees

48

P.

Sound
Financial Position●●

New Value Creation

Creating a sustainableregional society throughsolutions to environmental
and social issues●

Details

SynergyIncreasing conveniencethrough DX

Shareholders

P.

SynergyAchieving an affluent
lifestyle through asset
building

Regional Society●

Details

Business development byimproving profitability
and productivity

Trusted financial group eveloping a workplaceD
environment where
employees can feel job
satisfaction and work withpeace of mind
Workplace where each
employee can grow

DAISHI HOKUETSU REPORT 2022

16

Value Creation Story

Increasing Diversification and Complexity of the
Needs of Regional Society and Changes in theBusiness Environment Surrounding the FG
As the external environment changes, the needs of regional society are becoming more diverse andcomplex, and the environment surrounding the company is undergoing significant changes.

External environment
Declining birthrate, aging
society, and falling population

Increasing Diversification and Complexity of
the Needs of Regional Society
Financial sector

Changes in political andeconomic trends overseas

 ant to raise business fundsW● 
Want to start investing in stocks● 
Want to introduce environmentallyfriendly equipment● 
Want to proceed with business succession● 
Want to proceed with the move tocashless payment in stores, etc.

Advancement of DX●

Increased overseas
expansion by companies in
the prefecture

Increased risk of climatechangeSpread of infection(pandemic)●

Non-financial sector

 ant to hire senior managers andW
specialist human resources● 
Want to expand sales channels● 
Want to enhance operational efficiency
through DX● 
Want to introduce a business process
management system● W ant to conduct market and industry
research, etc.

Increased geopolitical risk

Environment surrounding finance
Prolonged ultra-low interest
rate environment
BANK

Intensification ofcompetition with otherbanks
Transformation of financial
policies
Expansion of collaboration
across business lines
Increased participation in thebanking business by companies
from other industries

17

DAISHI HOKUETSU REPORT 2022

Changes in the business environment
surrounding the GroupRisks

 ontinuation of low levels of loan incomeC● 
Decline in profitability due to intensifiedcompetition● 
Increase in credit costs due todeterioration in business performance ofbusiness partners●

Opportunities ifferentiation through consultingD
capabilities● 
Expansion of new profit opportunities
through cross-industry collaboration● 
Expansion of business scope based on
deregulation●

Message from Management

Overview of the Daishi Hokuetsu FG

Value Creation Story

Communication with Stakeholders

Corporate Data

The 2nd Medium-Term Management Plan
(Plan period: April 2021 – March 2024)

Since April 2021, the company has been focused on the 2nd Medium-Term Management Plan,
based on the overriding theme of "three synergies," as we aim to create new value that meets theincreasingly diverse and complex needs of regional society.
Furthermore, in April 2022, in line with the growing importance of addressing sustainability issues,
we added“practicing sustainability management”as the new fifth basic strategy of the 2nd MediumTerm Management Plan.

Priority businesschallenges

Basic strategies

Most Important Theme

Details

38

P.

Basic strategy I

Strengthen
profitability

Achieve synergistic
effects

AchievingThree Synergies

Makemanagement
more efficient

Maximize merger
synergy

Basic strategy II

Dramatic improvements
in productivity●●●

Basic strategy III

Maintain andDeveloping andenhancing humanresourcesC oordinate
overlapping functionsR eallocate businessresources

Maximize groupsynergy

improvesoundnessS hare expertise

Maximize the use ofGroup company functions
Basic strategy IV

Improving risk
management
Maximize TSUBASA
alliance synergy
Initiatives
essential forovercoming thepriority businesschallenges

Basic strategy V

New!
(Added in April 2022)

Practicing sustainability
management

Take advantage of thescale of being one of thelargest regional banks

DAISHI HOKUETSU REPORT 2022

18

Value Creation Story

Sustainability Initiatives
Sustainability Initiatives
With developments related to sustainability, including measures to tackle climate change, gaining momentum
both in Japan and overseas, the Group formulated the“Daishi Hokuetsu Financial Group’s Basic Sustainability
Policy”(the“Basic Sustainability Policy”) in December 2021 in order to clarify our stance and initiatives, and theGroup is working as a whole to promote sustainability initiatives aimed at solving environmental and social issues
facing the region.

Daishi Hokuetsu Financial Group Management Philosophy“Daishi Hokuetsu Financial Group’s Basic Sustainability Policy”(formulated in December 2021)
Based on our Management Philosophy, the Daishi Hokuetsu Financial Group contributes to thecreation of a sustainable local community by proactively and independently addressing environmental
and social issues surrounding the region from a medium- to long-term perspective.

Initiatives Targeting
Regional Issues

In order to solve environmental and other issues facing regional society, theGroup will use our collective strength to maximize our financial intermediaryfunctions and information intermediary functions in both risk management andopportunity creation, and pursue sustainable regional growth while also
increasing the corporate value of the Daishi Hokuetsu Financial Group.

Initiatives Targeting
Environmental Problems

Aiming to contribute to mitigating environmental risks such as climate change,
we will actively support customers who are tackling environmental issues,
such as the creation of a decarbonized society and the conservation of
biodiversity. We will also work to reduce the environmental impact of thecorporate activities of the Daishi Hokuetsu Financial Group.

Establishing
relationships of trustwith society

We will respect human rights in all corporate activities.
We will comply with laws, regulations, and social norms, conduct fair andappropriate transactions with our customers in good faith, and establish solid
relationships of trust with our stakeholders through appropriate information
disclosure and dialogue.
We will prioritize a stance of being close to and maintaining dialogue with
regional society, and we will contribute to raising awareness of sustainability
within the region.

Human resource
development andimprovement of theworkplace environment

As a member of the regional society, we will engage in human resource
development and awareness-raising activities to ensure that our officers andemployees can act with initiative and a sense of ownership in relation tovarious issues related to sustainability.
We will respect the values of each and every employee and create a healthy
working environment in which a diverse range of human resources can remain
healthy and actively participate, based on fair and appropriate treatment.

Daishi Hokuetsu Financial Group ESG
Initiatives Policy

19

DAISHI HOKUETSU REPORT 2022

Daishi Hokuetsu Financial Group SDGs
Declarations

Message from Management

Overview of the Daishi Hokuetsu FG

Value Creation Story

Communication with Stakeholders

Corporate Data

Provision of Consulting Solutions to Promote Sustainability and SDG Initiatives
In order to promptly respond to the increasingly diversified needs of our customers in relation to sustainability
and the SDGs, we have appointed persons in charge of sustainability promotion at all branches, and we are
actively providing solutions from both financial and non-financial perspectives in cooperation with our head officeand external organizations.
< Main initiatives and results >Consulting services

Financing
Sustainability Linked Finance (loans and bonds)

Products in which the customer sets targets (SPTs) related to the SDGs and ESG,
and the applicable interest rate changes according to the level of achievement of
those targets

Daishi Hokuetsu SDGs
Consulting Service

Sustainability Finance (loans and bonds)

Providing advanced examplesof SDGs, training for clients,and support for the formulationof an“SDGs Declaration”

Products that customers can use to raise funds for initiatives related to the SDGs
and ESGSDGs Support Loan

Track record

Products that support corporate SDGs from both a financial and consulting
perspective by utilizing Group companies and external alliances to provide
consulting services to clients when they raise funds, aimed at solving issues
related to SDGs that should be addressed, after they have been clarified using thefree "SDGs Diagnosis Service"

58 companies(As of June 30, 2022)■ Began Offering Daishi Hokuetsu SDGs Consulting Service

The Daishi Hokuetsu Bank began offering the“Daishi Hokuetsu SDGs Consulting Service”in September 2021, inorder to support efforts to achieve the SDGs in the region. In this service, we diagnose corporate clients' efforts toachieve the SDGs and provide consulting based on the results. We also support clients creating their own SDGs
declarations. As of the end of June 2022, we had provided support to a total of 58 companies creating their own
SDGs declarations since the launch of the service.
■ Launch of Sustainable Finance Products

In August 2021, Daishi Hokuetsu Bank began offering“Sustainability Linked Finance,”in which customers set
targets (SPTs) related to the SDGs and ESG, and the applicable interest rate and other terms of the loans or private
placement bonds fluctuate according to the level of achievement of those targets. This product is designed suchthat an external organization will evaluate (third-party evaluation) the appropriateness of clients' SPTs, etc., and byobtaining an objective evaluation, companies can effectively publicize their efforts to stakeholders.
In March 2022, we also began offering“SDGs Support Loans”for SMEs working to achieve the SDGs. With thisproduct, customers raising funds specify initiatives that they will implement in order to achieve the SDGs, and wewill provide support for customers to achieve the initiatives that they have specified, including various services
through collaboration with Group companies, and the introduction of external experts.
< Diagram of sustainability linked finance scheme >Conclusion of loan agreement
and setting of SPTs

Corporate
customers
External organization(third-party evaluation)

Report on the status of efforts

Daishi Hokuetsu
Bank

Second opinion and verification

DAISHI HOKUETSU REPORT 2022

20

Value Creation Story

Sustainability Initiatives
Responding to Climate Change (Initiatives Targeting Climate Change Based on the TCFD
Recommendations)
In recent years, damage from extreme weather events and large-scale natural disasters around the world has

increased in scale. In Japan, heavy rain, typhoons, and other events have caused significant damage, contributing
to the growing impact of climate change on corporate business activities.

In April 2021, we announced our support for the recommendations of the TCFD* (Task Force on Climate-related

Financial Disclosures), which calls for appropriate disclosure of information on the financial impact of climatechange on companies. Accordingly, we are accelerating our efforts to create a decarbonized society and working
to enhance information disclosure on climate change in line with these recommendations.

*TCFD (Task Force on Climate-related Financial Disclosure): A private-sector-led task force that encourages the corporate disclose of climate-related information,
established by the Financial Stability Board (FSB) in December 2015.

Process

1

Governance

Recommended Disclosure in
the TCFD Recommendations

The Organization’s Governance Around Climate-related Risk
and Opportunities

In May 2021, we established the“Sustainability Promotion Committee,”which is chaired by the President, andconsists of an officer responsible for operations, the Presidents of Group companies, managers of the Daishi

Hokuetsu Bank, and others. The committee met four times in fiscal 2021. Furthermore, Internal Audit andSupervisory Committee Members from the company and Daishi Hokuetsu Bank participate as observers.

The Sustainability Promotion Office, the secretariat of the committee, compiles reports on sustainability fromGroup companies and Daishi Hokuetsu Bank and reports the results to the Sustainability Promotion Committee.
The committee participates in decision-making and supervision by the Board of Directors related to our response
to climate change, including the establishment of a system for the committee to deliberate matters such as

initiatives related to sustainability, analysis of risks and opportunities, and strategies based on the results of thisanalysis, before these details are deliberated at meetings of the Board of Directors.

■ Governance Organization

General Meeting of Shareholders

Established

Board of Directors

May 2021

Audit and Supervisory
Committee
Sustainability
Promotion Committee
Executive Committee

Corporate Planning
Division

Human Resources
Planning Division

Regional Revitalization
DivisionGroup Strategy
Promotion Division

Sustainability
Promotion OfficeSubsidiary banks and Group companies

21

DAISHI HOKUETSU REPORT 2022

Auditing Division

Risk Management
Department

General Affairs
Division

Message from Management

Overview of the Daishi Hokuetsu FG

Value Creation Story

Communication with Stakeholders

Corporate Data

■ Role of Each Committee, etc.
Committee, etc.

Role related to climate change

Receiving regular reports on initiatives
related to sustainability (including

Board of Directors

initiatives in response to the TCFD
recommendations), and independently
participating in decision-making andsupervision

Main Reports and Deliberations at
Meetings of the Board of Directors
May 2021

Establishment of the“Sustainability Promotion
Committee”●

December 2021●

Formulation of the Basic
Sustainability Policy

January 2022

Report on the status of our
response to the TCFD
recommendations● 
Report on the status of activities
to promote sustainability●

Deliberation of policies, plans,

indicators, and target-setting related tosustainability

Periodic reports to the Board of

Executive
Committee

Directors on the Group’s efforts toaddress climate change (initiatives in
response to the TCFD

recommendations) based on the Basic
Sustainability Policy

March 2022

Report on the“Ministry of theEnvironment TCFD Scenario
Analysis Pilot Program”(See"Topics" below)● 
Addition of Basic Strategy V“practicing sustainability
management”to the 2nd
Medium-Term Management Plan(see“Topics”below)●

April 2022●

Sustainability
Promotion
Committee

Deliberation of sustainability,
formulation of strategies, etc.

F ormulation of“Investment &Financing Policies that consider
environment and society”andsetting of“Sustainable FinanceTargets”and“CO2 emissions
reduction targets”

June 2022O utline of information disclosure
based on the TCFD
recommendations in fiscal 2021
● 
Fiscal 2021 performance reportand policies for fiscal 2022, in
relation to sustainability
initiatives●

Head office of the Group, subsidiary banks,and Group companies

Process2

Strategy

Recommended Disclosure in
the TCFD Recommendations

Actual and Potential Impacts of Climate-related Risks andOpportunities on Our Businesses, Strategy, and Financial Planning

The Group recognizes physical risks, transition risks, and opportunities related to climate change risks on short-term (5 years), medium-term (10 years), and long-term (30 years) time horizons, and we analyze their impact on
the Group in both qualitative and quantitative terms. Based on the results of these analyses, the Group works tostrengthen our risk management systems and enhance our provision of information, consulting services, andsolutions for customers.

DAISHI HOKUETSU REPORT 2022

22

Value Creation Story

Sustainability Initiatives
Our Understanding of the Risks and Opportunities Associated with Climate Change(1) Our Understanding of the Risks Associated with Climate Change
The Group has established the following examples for each major risk category with respect to physical risks
and transition risks arising from climate change, based on our formation of expectations in advance concerningchanges in the business environment accompanying the surfacing of issues related to climate change.
Short term (5 years): around 2025

Medium term (10 years): around 2030

Long term (30 years): around 2050

Examples of physical risks

Credit risk

Damage to customers' assets owing to floods, etc.

Market risk

Market turmoil owing to the effects of extreme weather events and resulting fluctuations in the value offinancial instruments, etc.

Liquidity risk

Withdrawal of deposits and other actions by customers affected by floods, etc.

Operational risk

Suspension of business operations owing to damage from floods, etc.

Examples of transition risks

Credit risk

Negative impact on customers’businesses and financial positions
from their inability to respond to regulations and social changes

Market risk

Fluctuations in the value of financial instruments affected by thetransition to a decarbonized society, etc.

Liquidity risk

Lowering of external ratings owing to delays to our transition to a
decarbonized society and limited methods of raising funds

Operational risk

Reputational risk from our delayed transition to a decarbonizedsociety■ Scenario Analysis Related to Climate Change

Physical risks
We have analyzed the impact of

Scenario*One of the scenarios set by the Intergovernmental Panel on Climate Change (IPCC)

damage to collateral value, as wellas the deterioration in businessperformance due to the stagnationof the business activities of ourcustomers, in the event of a largescale flood caused by climate change
throughout Niigata PrefectureFor

transition

Real estate collateral categorized asrisks,

wehavepower and food sectors, which aresectors highly affected by climatechange risk in the loan portfolio of
Daishi Hokuetsu Bank.

DAISHI HOKUETSU REPORT 2022

accepted throughout all of Niigata Prefecture
Credit costs are expected to increase byaround 500 million yen

Credit costs are expected to increase byaround 8.5 billion yen

Credit costs are expected to increase by around 9.0 billion yen in total

The International Energy Agency (IEA)'s“Sustainable Development Scenario (SDS)”
and“Net Zero Emissions Scenario (NZE)”●

Method ofanalysis(2)
Estimate the amount of sales lost owing to
the stagnation of borrowers’businessactivities as a result of floods, and estimate
credit costs based on the results
Borrowers of Daishi Hokuetsu Bank locatedthroughout Niigata Prefecture (excluding
large corporations and public funds)

Scope of“buildings”that Daishi Hokuetsu Bank has
analysis

Scenario

selected and analyzed the electric23(1)
Estimate the amount of collateral damage
Method of due to flood damage to buildings andestimate credit costs based on the results
analysis

Results ofanalysis

Transition risks

Based on the 4°
C scenario,* we have estimated flood damage based on theassumption that large-scale flooding caused by climate change occurs once every
100 years throughout Niigata Prefecture●Under these scenarios, forecast the balance sheets and profit and loss statementsof sample companies in a particular sector (2021 to 2050), and assess business
continuity for all companies in the sector
Estimate the increase in credit costs with simulations for different categories ofborrower in a particular sector based on the costs associated with transition

Scope ofanalysisElectric power and food sectors

Results ofanalysis

Credit costs are expected to increase by around 1.9 billion yen in total

Message from Management

Overview of the Daishi Hokuetsu FG

Value Creation Story

Communication with Stakeholders

Corporate Data

■ Topics
Participation in "Pilot Program Support Project for Scenario Analysis of Climate Risks andOpportunities in Line with TCFD Recommendations"
●

●

●

●

In fiscal 2021, Daishi Hokuetsu Bank was selected for the "Pilot Program Support Project for Scenario Analysisof Climate Risks and Opportunities in Line with TCFD Recommendations," which was implemented by the
Ministry of the Environment.
With the support of experts, in this support project, we analyzed the following factors based on the exposureof Daishi Hokuetsu Bank to each industry, regional characteristics, etc.: (1) assessment of the importance ofrisks, (2) definition of scenario groupings, (3) assessment of business impact, (4) quantitative assessment ofphysical risks, and (5) quantitative assessment of transition risks. We also shared knowledge related to climatechange risks and opportunities within the Group.
In the future, we plan to continue accumulating expertise on climate change risks and opportunities, including
analytical know-how acquired through this support project,
Examples of implementation of scenario analysis
expand the target sectors of our analysis, and make our scenario
https://www.env.go.jp/
analysis more sophisticated.
Details concerning examples of the company's implementation of
scenario analysis are provided on the website of the Ministry of theEnvironment.

content/900518880.pdf(2) Our Understanding of the Opportunities Associated with Climate Change
We recognize that the primary role of financial institutions in responding to climate change is to provide various
solutions, including financing for measures to combat climate change, to help customers transition to a decarbonizedsociety.
Because the transition to a decarbonized society requires maintaining and improving the environment and society,while also enhancing corporate value, the Group will accumulate expertise related to sustainability, including climatechange, and contribute to raising awareness of sustainability in the region by actively sharing related information, while
supporting customers' efforts against climate change based on our engagement with them.

Engagement

Consulting

We identify and analyze
the risks andopportunities faced byour customers as a resultof climate change andother sustainabilityrelated changes fromvarious perspectives, andshare our understandingof the businessenvironment surrounding
our customers.

Based on this sharedunderstanding, we
will discuss with ourcustomers initiatives
to solve their issues
and improvesustainability.

Offering
solutions
Based on the resultsof these discussions
with our customers,
we will provide
appropriate solutions
in both financial andnon-financial areas,
while making
maximum use of thecompany’s Groupsynergy.

Accumulation of expertise related to sustainability, including
climate change
Contribution to raising awareness of sustainability in the region
through actively sharing information

Sustainable corporate
growthEconomic
activitySociety

Globalenvironment

DAISHI HOKUETSU REPORT 2022

24

Value Creation Story

Sustainability Initiatives■ Topics
Addition of“Practicing Sustainability Management”as a Basic Strategy in the 2nd
Medium-Term Management Plan
The company positions sustainability as one of our most important management issues. Accordingly, in
December 2021, we formulated the "Basic Sustainability Policy," and we also added "practicing sustainability
management" as the fifth basic strategy in the 2nd Mid-Term Management Plan (April 2021 to March 2024)of the Daishi Hokuetsu Financial Group. In this way, we are actively working to maintain and improve theenvironment and society, while also enhancing corporate value.

The 2nd Medium-Term Management Plan

Basic strategy I

Achieve synergistic effects

Basic strategy II

Dramatic improvements in productivity

Basic strategy III

Developing and enhancing
human resources

Basic strategy IV

Improving risk management

Basic strategy V

Practicing sustainability management

Clarify as a management strategy and further accelerate ofGroup-wide initiatives

Process3

Added in
April
2022

Risk management

Recommended Disclosure in
the TCFD Recommendations

Methods of Identifying, Assessing, and Managing Climate Change
Risks

In order to clarify our commitment to contributing to the creation of a sustainable regional society through investment
and financing, we established the“Investment & Financing Policies that consider environment and society”in May 2022.
While actively supporting customers who are working to solve environmental and social issues in local communities, we
also identify businesses, etc., expected to have a negative impact on the environment and society, recognize them asrisks to local communities and the Group, and make prudent investment and loan decisions accordingly.
In our risk management framework, we recognize that climate change risk has a significant impact on the global
environment and the regional economy. We analyze important risks (risks that can materialize within a short period oftime) and emerging risks (risks that are not currently recognized but could have a material impact on business strategy
if they surface), and are building a risk management system that takes into account the results of these analyses in the
management of credit risk, market risk, liquidity risk, and operational risk.
25

DAISHI HOKUETSU REPORT 2022

Message from Management

Overview of the Daishi Hokuetsu FG

Value Creation Story

Communication with Stakeholders

Corporate Data

“Daishi Hokuetsu Financial Group Investment & Financial Policies that consider
environment and society”
Through investments and loans, Daishi Hokuetsu Financial Group will actively support a range of activities
that contribute to solving various environmental and social problems affecting local communities.
In addition, with regard to investments and loans in the following specified businesses, etc., expected to
impact the sustainability of society, the Company will endeavor to mitigate or avoid the impact of suchbusinesses, etc., according to the stated policy.

As a general rule, we will not invest in or finance the construction of new coal-fired
power plants. When considering exceptional measures, however, in light of conditions

Coal-fired thermal
power plants

related to electric power, resources, and other factors in countries and regions thathave no choice but to rely on coal-fired thermal power, we will carefully consider
what measures to take, comprehensively taking into consideration internationalguidelines such as the OECD Arrangement on Officially Supported Export Credits,
power generation efficiency, impact on the environment and local communities, andother factors.

Deforestation

When considering investments and loans for deforestation projects, we will makedecisions based on careful consideration of the status of acquisition of any internationallyprojects

recognized certifications (FSC*1 and PEFC*2), consideration for the environment, thePalm oil plantation

With a view to protecting the environment and human rights, when consideringdevelopment
projects

Arms manufacturingbusinesses

occurrence of any issues with local communities, and other factors.

investments and loans for palm oil plantation development projects, we will makedecisions based on careful consideration of the status of acquisition of any international
certifications (RSPO* 3), consideration for the environment, human rights violations, theoccurrence of any issues with local communities, and other factors.

We will not invest in or provide loans to companies that manufacture inhumane
weapons, such as cluster munitions.

*1 Forest Stewardship Council
An international organization that endorses "appropriate forest stewardship"*2 Programme for the Endorsement of Forest Certification“Forest stewardship endorsement,”in which a third party certifies that forestry is conducted in accordance with international standards (intergovernmental process
standards) established for sustainable forest stewardship*3 Roundtable on Sustainable Palm Oil
A nonprofit organization operating in seven sectors related to palm oil (palm oil production, oil extraction and trade, consumer product manufacturing, retail, banking
and investment companies, environmental NGOs, and social and development NGOs)■ Ratio of Carbon-related Assets* to Total Credit Outstanding

As of the end of March 2022, carbon-related assets accounted for 1.1% of loans, etc., at Daishi Hokuetsu Bank.
*Total loans, acceptances and guarantees, foreign exchange, private placement bonds, etc., for the electric power and energy sectors (however, this excludes those forwater supply and renewable energy power generation businesses)

DAISHI HOKUETSU REPORT 2022

26

Value Creation Story

Sustainability Initiatives
Process

4

Indicators and Targets

Recommended Disclosure in
the TCFD Recommendations

Indicators and Targets Used to Assess and Manage Climate-related
Risks and Opportunities

Sustainable Finance Target
The Group aims to execute sustainable finance totaling 1.5 trillion yen (including 1 trillion yen in the environmental
sector) by fiscal 2030.
Details of target

Fiscal 2030 target
Fiscal 2021 onward

Cumulative
amount executed¥1.5 trillion¥1.5 trillion
Target amount(including ¥1 trillion in
to be
the environmental
executed
sector)Definition¥90.1 billion
Fiscal 2021

Fiscal 2030

Target period

Loans, investments(including equity
investments), and leasetransactions that
contribute to theresolution ofenvironmental andsocial issues

Actual results in fiscal
2021 (million yen)Loan

85,720Investments

4,295

Leases180

Total

90,195

Fiscal 2021 to fiscal
2030

CO2 Emissions Reduction Target
In terms of the Group's CO2 emissions reduction targets, we have set a target of reducing Scope 1 and Scope 2
emissions by 65% compared with fiscal 2013 by fiscal 2030. Furthermore, we will consider setting new targets forthe reduction of CO2 emissions, including Scope 3 emissions, in the future.
Fiscal 2030 target
Vs. fiscal 2013

30% reduction

65% reduction(Scope 1 and 2)

Details of target
Reduce the Group’s Scope 1 and Scope 2 CO2 emissions
by 65% from fiscal 2013 levels by fiscal 2030
Actual results in fiscal 2021
CO2 emissions reduction rate (vs. fiscal 2013)

Fiscal 2013

Fiscal 2021

- 30.0%Fiscal 2030

< Trends in CO2 Emissions by Scope >Fiscal 2013

Fiscal 2019

Fiscal 2020

Fiscal 2021

Vs. fiscal 2013

Scope14,512t

3,797t

4,066t

3,677t-18.5%

Scope2

11,743t

9,136t

9,569t

7,706t-34.4%

Total

16,255t

12,933t

13,635t

11,383t-30.0%*CO2 emissions by Scope are measured based on the amount of each type of energy used (electricity, gas, etc.) and CO2 emissions factors (for each fiscal year andcompany) at each Group company.
Scope 2 CO2 emissions are affected by the CO2 conversion factor of electric power (which varies annually depending on the amount of CO2 emitted by electric powercompanies during power generation). Therefore, even if the amount of electricity used is the same, the amount of CO2 emissions by users varies for each electric powercompany and fiscal year.

27

DAISHI HOKUETSU REPORT 2022

Message from Management

Overview of the Daishi Hokuetsu FG

Value Creation Story

Communication with Stakeholders

Corporate Data

New Value Creation
The company is committed to creating new value that contributes to the development of regional society
through a process of value creation based on engagement (dialogue).

Group Functions Aimed at Creating New Value
We are creating new value by linking the Group functions of the company to provide“timely”and“optimal”
services in a“one-stop”manner, with the aim of solving various issues facing customers and regional society.

Non-ﬁnancial sector

Financial sector

Banking
Want to raise business
funds
Want to build assets forthe future
Want to discuss issues
other than finance.

Recruitment
consultancy
Want to hire senior
managers and specialist
human resources

Securities
Want to start investingin stocks

BANK

Regional trading
company

LeasesWant to expand sales channels
Want to enhance operational
efficiency through DX

Contributing to thedevelopment of regionalsociety by creating newvalue

Want to make a business plan
Want to conduct market andindustry researchConsulting andresearch

Want to introduce abusiness process
management system

Want to proceed withthe move to cashless
payment in stores

The Daishi

The Daishi JCB Card

Computer Service

The Daishi DC CardNCS

The Hokuetsu Card

Systems

Want to introduce environmentallyfriendly equipment while
controlling upfront expenses

The Hokuetsu Leasing

Want to proceed withbusiness succession
Want to start a new
business

Fund management

Card*In addition,“The Daishi Guaranty”and“The Hokuetsu Credit Guarantee,”which provide guarantee services for housing loans, etc., are both Group companies.

DAISHI HOKUETSU REPORT 2022

28

Value Creation Story

New Value Creation
Initiatives to Improve the Corporate Value of Local Companies■ Initiatives For Financing Closely Linked to Local Communities

Daishi Hokuetsu Bank provides financial and information intermediation to facilitate the smoothprovision of funds to SMEs, which play an important role in supporting regional society and theDisclosure Magazine
2022

local economy. In addition, we also actively provide management support tailored to companies’
life stages.

In March 2022, we established“Consultation Desks Related to COVID-19, the Situation in

Ukraine, Rising Raw Materials Prices, etc.”in all sales offices, in order to respond to the various
concerns of our customers arising from factors such as the situation in Ukraine and rising raw

material prices, in addition to the prolonged impact of COVID-19. At these consultation desks, we
provide consulting to meet the needs of our clients, such as consultations related to financing andtrade, as well as business plan reviews.

For details of our initiatives for financing closely linked to local communities, please refer to thehttps://www.
dhfg.co.jp/
financial/ir/
disclo/"Disclosure Magazine" posted on the company’s website.

■ Support for Customers Considering Business Startups and Re-startups

At Daishi Hokuetsu Bank, the Group acts as a whole toprovide one-stop support to prospective founders,business operators in the early years of their business,and business operators considering a second founding,Business startups or
re-startups (FY2021)

1,704

cases

covering areas from business ideas to the formulation of
specific earnings plans and fundraising. In the fiscal year

ended March 2022, Daishi Hokuetsu Bank was involved
in 1,704 startups and second startups.

In addition to appointing staff to provide startup support

at all sales offices, at the“Niigata Startup Salon”held incooperation with Daishi Hokuetsu Research & Consulting,we provide a wide range of consultation services, frombusiness ideas to specific earnings plans and action plans,
to business operators who are considering a startup or

second startups, those who have just founded businesses,
and those who are considering measures to respond to

Information About Niigata Startup Salon

the new normal.

■ Support for Customers who Want to Proceed with Business Succession

The company is making concerted efforts to maintainandcreateemployment

opportunities

insupport for business succession to 1,628 clients, in which

without successors is said to be more than 50%.

lack of successors to offer tailor-made responses tocommunities. In Niigata Prefecture, the rate of businesses
Accordingly,

in

order

to

maintain

employment

opportunities in the local community and achievesustainable economic growth, it is essential for us as alocal financial institution that we support businesssuccession through M&A and other means, in addition to

we worked closely with senior managers faced with avarious challenges faced by clients, and collaborated withGroup companies to ensure the smooth succession ofmanagement and assets. In addition, in terms of M&A, thetotal number of employees of companies that signed
contracts where the need for a transfer was due to a

curbing business closures.

“lack of successor”was approximately 1,000 in the fiscal

for customers in the areas of business succession andto the maintenance of local employment opportunities.

Daishi Hokuetsu Bank has further strengthened support

M&A, by utilizing our business base and external networks,

which have been expanded as a result of the merger, toshare expertise and business activities covering the area
as a whole among neighboring branches.
29

In the fiscal year ended March 2022, we provided

local

DAISHI HOKUETSU REPORT 2022

year ended March 2022, and these efforts therefore led

Contributing to themaintenance of approximately

1,000 jobs

Message from Management

Overview of the Daishi Hokuetsu FG

Value Creation Story

Communication with Stakeholders

Corporate Data

■ Topics
Support for Business Succession, Startups, and Re-startups Through the Fund BusinessIn December 2021, Daishi Hokuetsu Capital Partners,
a specialist investment subsidiary of the company, established the“No. 1 Daishi Hokuetsu Regional Initiatives
Investment Limited Partnership”(the“Fund”) in partnership with Daishi Hokuetsu Bank, with the objective of
supporting business succession, startups, and new busi-

ness development, which are pressing issues for local
companies. Through the Fund, we will provide capitalfunds and management support with hands-on participation in management. In doing so, we will contributeto the sustainable growth of the regional economy andenhance the corporate value of investee companies.
Investment target(Limited liability partner)

No. 1 Daishi Hokuetsu

Investment

Regional Initiatives

Investment●

proceed with businesssuccession

Investment Limited●

Partnership (Fund)(Unlimited liability partner)

Investment
management

Management
supportCompanies that want toStartups (re-startups) andcompanies aiming to expand
into new business fields

Coordination

Total fund amountExternal partners¥1.0 billion

Group companies/external
experts

Management
support■ Support for Resolving Human Resources Issues Faced by Regional Companies

Daishi Hokuetsu Career Bridge, a subsidiary that commenced

matching services for part-time and secondary jobs tooperations in October 2019, is contributing to the maintenanceintroduce employees with highly specialized skills, mainly inand creation of regional employment opportunities by

the Tokyo metropolitan area, to companies in the prefecture.

supporting the resolution of human resource issues faced by

It suggests the use of personnel with dual or side occupations

companies in the prefecture through two businesses:

in order to solve the problems faced by companies in the

personnel-matching business and the personnel development

prefecture and to actively support their growth by incorporating

solution business.

the expertise and skills of these personnel.

In the personnel-matching business, we support theIn the personnel development solutions business, we holdmatching of human resources suited to the needs of regional

training and seminars for the development of human resources

companies, centering on senior management and managers

at companies in the prefecture, and we also provide support

who are necessary for the business continuity of regionalin areas such as the promotion of employment for students

companies and specialist human resources who can support

within and outside Niigata who are either coming or returningbusiness expansion, etc. In addition, we also provide personnel

to the prefecture.
Personnel-matching business

Recruitment consultancy
Daishi Hokuetsu Financial Group

Number of consultations on

Information
coordination
Entry

Introduction ofcompanies

Human Resources
needs

staffing

Human
Resources
needs

Employment contract

Number of
consultations

Introduction ofhuman resources
Job seekers(Fiscal 2019 to fiscal 2021)

Company

Of which, thosethat led tohiring or job
offers

1,104
187

DAISHI HOKUETSU REPORT 2022

30

Value Creation Story

New Value Creation■ Support for Customers Aiming to Improve Operational Efficiency through DX“Bridge Niigata,”a regional trading company in the Group,

Reform Support Operations," which were implemented by

prefecture through three businesses: the sales channel

latest trends in technology was provided to companies andis working to increase the corporate value of companies in thedevelopment business (see page 32 for details), the productivity
enhancement business, and the tourism promotion business.

In Niigata Prefecture, a labor shortage due to a declining

population and changes in the business environment, such as

work-style reforms, have made the improvement of productivity

a major issue for companies, meaning that companies must

Niigata Prefecture. In these operations, information about theopportunities to utilize digital technology were offered, throughtraining to improve IT literacy for the employees of financial
institutions and commercial and industrial organizations, andcross-industry exchange events, etc., between IT-relatedcompanies and companies in Niigata Prefecture.

Furthermore, we were recently selected for the“Fiscal 2022

promote DX. A survey conducted by Niigata Prefecture in fiscal

Subsidy Program for Promoting the Creation of New Regional

for Industry in Niigata Prefecture" revealed "delays in IT investment

Project)”(the“Project”) conducted by the Ministry of Economy,

2020 as part of the "Project for Establishing a Digitization Initiativeby companies in the prefecture and a lack of awareness of DX,"
as well as a "shortage of digital human resources."

In response to these regional issues, Bridge Niigata is working

with partner companies such as the Daishi Hokuetsu FG toprovide consulting on how to improve the efficiency of businessprocesses, such as the visualization of business processes,
paperless systems, and the introduction of RPA systems. Bridge
Niigata also proposes measures for improvement suited toeach company, thereby supporting the enhancement of

productivity. In addition, in order to promote DX awarenessreform among companies in Niigata Prefecture, we werecommissioned to provide "Fiscal 2021 DX Promotion Awareness

Growth Industries (Regional DX Promotion Activity Support
Trade and Industry. The purpose of the Project is to contribute to

the improvement of productivity by strongly promoting DX
initiatives among regional companies, through the provision of
support and matching support to regional companies based oncooperation between industry, academia, and government. As anorganization representing the Project, Bridge Niigata will contributeto the improvement of added value and the competitiveness ofregional companies by supporting the transformation of businessprocesses, business models, etc., of regional companies utilizing
digital technology, in cooperation with Daishi Hokuetsu FG, aswell as industry, academia, and government.

Consulting to Improve Business Process Efficiency

Number of cases of productivity
improvement support

Support for introduction of Robotic Process Automation (RPA)● Payment with consumption tax system● Support for going paperless● Support for the introduction of attendance management systems,

etc.
●

Fiscal 2019 to fiscal 2021

99

cases

Vision of the“Fiscal 2022 Subsidy Program for Promoting the Creation of New Regional Growth
Industries (Regional DX Promotion Activity Support Project)”●< Three pillars of DX support >In the “Fiscal 2022 Subsidy Program for
Promoting the Creation of New Regional
Growth Industries (Regional DX Promotion
Activity Support Project),” companies andorganizations with strengths in various fields inCreating regional successstoriesindustry, academia, government, and financeAchieve a concrete vision

will collaborate to support reforms to businessthrough support and create
regional leaders throughprocesses, business models, etc., that utilize

success stories

digital technology, based on the three pillars
of "creating regional success cases," "building

Regional
companies

systems for connecting," and "human resource
development," thereby enhancing the added
value

and

competitivenessofregional

companies.
●

In cooperation with Niigata Prefecture, we aim
to provide comprehensive support, while alsoestablishing the Project as a platform forongoing DX promotion.

31

DAISHI HOKUETSU REPORT 2022

Building systems forconnecting

Human resource
development

Creating of effective matching

Development of digital humanmechanisms

resources by companies

Message from Management

Overview of the Daishi Hokuetsu FG

Value Creation Story

Communication with Stakeholders

Corporate Data

■ Support for Customers Aiming to Expand Sales Channels

Although Niigata Prefecture has strengths related to regional
resources, such as abundant nature and distinctive regional
industries, as well as being a major transportation hub on the Sea ofJapan side of Japan, these strengths have not been fully leveraged.
In addition, an increasing number of regional companies are

attractiveness of local products, the technological capabilities ofcompanies in Niigata, and other information. The shop also returns
market information, such as people’s views of products from Niigata
in the Tokyo metropolitan area and related needs, to companies in
the prefecture, thereby contributing to increasing the added value ofdue to a declining and aging population. Taking advantage of therich range of information and extensive network of the Daishi
Hokuetsu Financial Group, “Bridge Niigata,” a regional trading
company, is working to expand sales channels for regional
companies in the sales channel development business.
At the“Bridge Niigata”permanent antenna shop that opened in
October 2019 in Nihonbashi, Chuo-ku, Tokyo, Bridge Niigata

buyers in the Tokyo metropolitan area for businesses in Niigata who
had fewer opportunities to hold business meetings owing to thenegative impact of COVID-19 on travel in and out of the prefecture,and has been thus supporting the expansion of sales channels forbusinesses in the prefecture even amid the COVID-19 pandemic.
Furthermore, Bridge Niigata’s activities to support the expansion ofsales channels amid the COVID-19 pandemic have been wellinterested in expanding their sales channels outside the prefecture
and overseas, in anticipation of a shrinking market in the prefecture

manages all operations related to the sale of products from Niigata
Prefecture, from planning and procurement to in-store sales. The
range of goods offered has expanded to approximately 700
products, with approximately 200 products available on its own
e-commerce website. In addition, the shop also has staff dedicatedto developing sales channels for corporations in the Tokyo
metropolitan area, and is actively sharing information on the
Bridge Niigata antenna shop

prefectural products.
In addition, Bridge Niigata held online business meetings withreceived, resulting in it being selected by the Cabinet Secretariat’sMain Office for Revitalization of Communities, People and Jobs as oneof 2020’s 39“Distinctive Efforts by Financial Institutions and Other
Organizations Contributing to the Revitalization of Local Communities”
in March 2021, and receiving an award from the Minister of State for
Regional Revitalization. Please refer to the following URL or QR code
for a video providing more details about this initiative.

Supporting the expansion of sales channels
for Niigata Prefecture products

Examples of Distinctive Efforts

Establishment of Bridge Niigata antenna shop on thefirst floor of the Tokyo Branch of Daishi Hokuetsu Bank
Expansion in the number of products offered
to approximately

700

Full-scale operation of the Bridge Niigata
e-commerce website (from fiscal 2021)
Expansion in the number of products available
on the e-commerce website to approximately

200

Exterior of the antenna shop

Video introducing "Examples ofDistinctive Efforts"“Bridge Niigata”online store

https://www.
bridge-niigata.com/shop/

https://www.youtube.
com/watch?v=
eWYUrZTPsvs

Products■ Support for Customers Working to Improve Management

Daishi Hokuetsu Research & Consulting provides management
consulting services, such as management consulting, support for
the formulation of management strategies and business plans,
support for applications for various subsidies, and support for
the restructuring of personnel systems. In addition, Daishi

loans as a result of the impact of COVID-19, etc., and are unable
to formulate their own management improvement plans, etc.,
thereby supporting management improvement, business
revitalization, and a renewed sense of taking on new challenges
at SMEs, etc. As part of the Small and Medium Enterprisethat have financial problems, such as the burden of repaying

Prefecture.

Hokuetsu Research & Consulting engages in economic surveys
and research on industry trends and other factors, provides
human resource development services, such as holding seminars
in conjunction with Daishi Hokuetsu Career Bridge, and offers
membership services, such as issuing journals for members.
In the management consulting business, Daishi Hokuetsu
Research & Consulting provides support for support for theformulation of management improvement plans to businesses

Agency's "Support for the Formulation of Management
Improvement Plans (commonly referred to as "Project 405"),
Daishi Hokuetsu Research & Consulting supported theformulation of 51 plans (in fiscal 2021, up 28 from the same
period of the previous year), as a certified support institution. In
addition, Niigata Prefecture ranked first nationwide for thenumber of plans supported under Project 405, and Daishi
Hokuetsu Research & Consulting ranked first in Niigata

DAISHI HOKUETSU REPORT 2022

32

Value Creation Story

New Value Creation■ Increasing Customer Convenience by Enhancing Non-Face-to-Face Services

Enhancements to Online Application Systems
Daishi Hokuetsu Bank has introduced an online application

our partner companies. As a result, the bank account transfer

trusts, and housing loans to increase convenience for ourcustomers to use their personal seals. Customers who wish toscheme for unsecured loans such as car loans, investment
customers. In the fiscal year ended March 2022, we beganoffering life insurance policies for which customers can complete
the entire process from estimation to concluding a contract

through our website, and we also began accepting online

applications for the opening of“investment trust accounts,”“NISA accounts,”and“Tsumitate NISA accounts.”This way,procedures are now paperless and there is no need formake a bank account transfer can complete the procedures

via the Internet, which also contributes to enhancing theefficiency of administrative procedures at partner companies.
< Proportion of non-face-to-face applications > (FY2021)■ Non-face-to-face ■ Face-to-faceeven customers who have difficulty coming to the bank during

Unsecured loans(individuals)

Investment trusts

Housing loans

92.0%

63.9%

50.0%

the day can apply 24 hours a day on Daishi Hokuetsu Bank’swebsite. We have also launched an“Online Account Transfer

Application Service,”that enables customers to complete theaccount transfer application process by entering the necessary

information from the websites of Daishi Hokuetsu Bank andProvision of smartphone apps
To increase customer convenience, Daishi Hokuetsu

Bank offers smartphone apps such as the“Daishi Hokuetsu

and withdrawals for up to 10 years.

In the last three years, the number of free shared "Daishi

Little Bank”app, which has functions such as checking the

Hokuetsu IDs," which enable users to access these apps

deposits and withdrawals, and providing information on

spending apps, has increased by about 150,000. In orderbalance of a representative account, checking the details offinancial products tailored to customer life events, and the“Daishi Hokuetsu Passbook App,”a digital passbook appthat enables customers to check the details of deposits

and the services of partner companies such as householdto further increase convenience for customers, we plan torenew the“Daishi Hokuetsu Little Bank”app in the future.

(IDs)< Number of Daishi Hokuetsu IDs (individuals) (approximate) >Further
expansion incustomer basethrough bankmergers

150,000 IDs in three years

Smartphone app+

Daishi Hokuetsu
Little Bank

launched

160,000(January 2021)

Plan to renew the“Daishi Hokuetsu Little
Bank app to further

increase convenience

4,100
March 2019

March 2020

January 2021
Bank merger

March 2022

■ Enhancement of Products and Services that Respond to Changes in Customers' Lifestyles

Revisions to Housing Loan Products
In February 2022, Daishi Hokuetsu Bank revised its housing

loan products and enhanced the lineup of group credit life
insurance products, order to address a wide range of needs

Key points of product revisions●

Extension of the available
borrowing period for housing
loans (from 30 to 40 years)●

Addition of "funds for thepurchase of a home for living in
two regions" to the use of funds●

"Marital Couple Life Plan" added
to group credit life insurance,  etc.

arising from changes in the lifestyles of its clients, including thefact that employees can live in two areas as a result of the
expansion of remote work, namely urban and rural areas, longer

working lives as a result of the extension of the retirement age,and the increase in the number of dual-income households.
33

DAISHI HOKUETSU REPORT 2022

Message from Management

Overview of the Daishi Hokuetsu FG

Value Creation Story

Communication with Stakeholders

Corporate Data

Revisions to Living Trust Products< Number of trust service customers >In December 2021, Daishi Hokuetsu Bank made changes to living trust

products, which have been available since October 2019, in order to actively

Will trusts, legacy services, living trusts, etc.

respond to the increasingly diversified needs of customers in line with theCompared with theprevious year

aging society. Under the revised plans, in order to meet the asset
management needs of elderly clients, we have developed a system where

Approximately

2.5x

family members support asset management for the individual in the event ofcognitive impairment, etc. Accordingly, even if the individual suffers fromdementia or requires nursing care, a family member (agent) designated inadvance will be able to withdraw necessary funds such as medical andnursing care expenses from the individual's account on behalf of the200

individual.

118

The number of customers for trust services provided by the bank has been(cases)increasing year by year, and we will continue endeavoring to provide

Fiscal year ended
March 31, 2020

products and services based on the needs of our customers.

Customer needs

I am worried that
if I suffer fromdementia, I won't
be able to manage
my money

My family will facedifficulties if theycannot withdraw
money to pay for
hospital andnursing careexpenses

Fiscal year ended
March 31, 2021

Fiscal year ended
March 31, 2022

Daishi Hokuetsu Bank "Living Trust”

I want to decide
who to give moneythat can be used
immediately ifsomethinghappens to me

Tsunagu Plan

Upon inheritance, the trust money shall be
immediately transferred to the beneficiary
By designating the beneficiary inadvance, the beneficiary canreceive the funds immediately if
inheritance occurs without going
through complicated inheritance

Customers themselves

How can I manage
money when myparents suffer fromdementia or
require nursingcare?

I wish family
members could
withdraw money
for my parents on
their behalf

535

335
+167%
+

procedures.

If I'm going tomanage myparents' money, I
want the rest of myfamily to know

Mimamoru Plan

Support for dementia and nursing care added to the“Tsunagu Plan”

By designating a relative as agent inFamily members

Is it true that you
won't be able towithdraw deposits
right away if you
inherit it
unexpectedly?

advance, even if the customer cannot go to
the bank themselves, the agent can
withdraw funds to be used for thecustomer, such as medical and nursing careexpenses, on their behalf.

■ Creating Communication Spaces Utilizing Vacant Branches< Daishi Hokuetsu Icotto Prefectural Office >Daishi Hokuetsu Bank opened a new communication space, the“Daishi

Hokuetsu Icotto Prefectural Office” (the “Facility”) within the Niigata

Prefectural Office in November 2021, utilizing a branch that became vacant
as a result of the consolidation of branches that began in April 2021.

The Facility has free Wi-Fi, and is equipped with a co-working space anda free space that anyone can use freely. In addition, we set up a digital

experience space where users can experience new financial services, aninterview space where users discuss loans, asset management, and otherfinancial services, and a remote consultation booth. Amid the expansion of

remote working, the Facility has been used by many people, with thenumber of visitors exceeding 5,000 (as of the end of March 2022).

Free Wi-Fi
available

Free to use

No membershipregistration
required

DAISHI HOKUETSU REPORT 2022

34

Value Creation Story

New Value Creation
Providing Products and Services that Contribute to Local Communities■ Returning Profits to Local Communities through Donation-type Private Placement Bonds

In November 2020, Daishi Hokuetsu Bank began

In September 2013, Daishi Hokuetsu Bank became theaccepting applications for the “Niigata‘Food Kizuna’

first bank in Japan to begin handling donation-based

Support Private Place Bonds,”which aim to provide safe

private placement bonds, and as of the end of Marchand nutritious meals and food to people affected by2022, donations had been made to 881 organizations,

COVID-19. In July 2021, the bank began offering thebringing the total amount of donations to 170 million yen.

“Niigata ‘Food

and

Job

Kizuna’ Support

PrivatePlacement Bonds,”which add support for“jobs.”A totalof 116 clients that issued the Private Placement Bonds insupport of this initiative, and Daishi Hokuetsu Bank, jointly
donated a total of 10.81 million yen through the Niigata
Prefecture Social Welfare Council to organizations operating
children's cafeterias and food banks in Niigata Prefecture.

Examples of support provided through donation-based private
placement bonds●

Private placement bonds for the Nagaoka Fireworks●

Private placement bonds for the“startup support project”inMinamiuonuma●

Private placement bonds for neighborhood safety
monitoring activities●

Private placement of bonds to support future creation in
Agano, etc.

Donation ceremony■ Returning Profits to Local Communities Through the“Niigata Future

Japan Stock Fund,”a Donation-type Investment Trust

Starting in May 2019, Daishi Hokuetsu Securities has
been conducting sales for the Niigata Future Japan StockFund (nicknamed Niigata no Kakehashi (Bridge to
Niigata)), a donation-type investment trust for supporting
the future of Niigata Prefecture. This investment trust
supports companies that contribute to the economy of
Niigata Prefecture by investing a portion of its funds in“Niigata-related stocks,” which are listed companies
headquartered in Niigata Prefecture. In addition, a
portion of the investment management fees (trust fees)
receivedfromcustomersisdonatedtowelfareorganizations in the prefecture, alongside a donationfrom the establishing company, to support the future
development of Niigata Prefecture. As of the end of
March 2022, a cumulative total of approximately 21
million yen had been donated.
35

DAISHI HOKUETSU REPORT 2022

Information about the Niigata Future Japan Stock Fund

Message from Management

Overview of the Daishi Hokuetsu FG

Value Creation Story

Communication with Stakeholders

Corporate Data

Supporting Customers and Local Communities in Maintaining and Improving Environmental Value■ Initiatives Targeting Financing for Renewable Energy

Daishi Hokuetsu Bank actively focuses on financing for renewable energy. In

Total amount of project
financing originatedAugust 2021, Daishi Hokuetsu Bank and Sumitomo Mitsui Trust Bank jointly
established project finance for a biomass power generation project in Niigata Port.

¥59.2 billion

In April 2022, we also participated in a financing for a biomass power generation
project in Tomakomai City, Hokkaido. Both projects are very socially significant asthey will contribute to the spread and expansion of renewable energy in Japan, andthanks to the utilization of the TSUBASA Alliance, multiple banks from the Alliancewere able to participate as lenders.
■ Active Efforts in a Project of the Ministry of the Environment

Selected by the Ministry of the Environment as an Institution Receiving Support in the“FY2022
Project for Promotion of ESG Regional Finance”
Daishi Hokuetsu Bank was selected by the Ministryof the Environment as an institution receiving support
in the“FY2022 Project for Promotion of ESG Regional< Outline of selected project >“Support for Decarbonization through Productivity
Name

Improvements Across the Entire Supply Chain in the
Tsubame-Sanjo Area of Niigata Prefecture”

Finance.”This is the second year in a row that we●have been selected for this project.
With the support of the Ministry of the Environment

created for the promotion of decarbonization across theentire region, with support for a system to maintain theand experts, Daishi Hokuetsu Bank is working on"division of labor" that is a characteristic of the region.

“Support for Decarbonization through Productivity
Improvements Across the Entire Supply Chain in the
Tsubame-Sanjo Area of Niigata Prefecture” in this

Details of●

initiatives to support decarbonization in Niigata
Prefecture and thus contribute to the achievement of

We

will

identify

various

ESG

issues

other

than

decarbonization, such as productivity improvements, andinitiatives

conduct evaluations of business feasibility that take ESG
factors into consideration.

project. In addition, we will utilize the know-how andexpertise accumulated through this project to promote

In the Tsubame-Sanjo district, one of Japan's leadingindustrial clusters for metalworking, a model case will be●We will support the establishment of a foundation for
decarbonization

throughout

thesupplychain

bysolidifying the structure of the "division of labor" throughsupport for productivity improvement.

Niigata Prefecture's“zero carbon by 2050”target.

Selected by the Ministry of the Environment as a designated financial institution in the“FY2022
Interest Subsidy Project for the Promotion of Regional Decarbonization Financing”
Daishi Hokuetsu Bank was the first institution in Niigata Prefecture to be selected by the Ministry of theEnvironment as a designated financial institution in the“FY2022 Interest Subsidy Project for the Promotion ofRegional Decarbonization Financing.”This project aims to promote decarbonization efforts by reducing customers’
actual interest burden with interest subsidies from the Ministry of the Environment, for loans for capital investmentthat contributes to CO2 reduction, such as the introduction of various facilities, including solar power generation,
biomass power generation, and hydroelectric power generation, and the replacement of equipment with highly
energy-efficient equipment.

Selected for the“FY2022 ESG Lease Promotion Project for Building a CarbonFree Society”by the Ministry of the Environment
The Daishi Hokuetsu Lease was selected as a designated leasing company for the“FY2022 ESG Lease Promotion
Project for Building a Carbon-Free Society”conducted by the Ministry of the Environment. This is the second year
in a row that we have been selected for this project.
This project promotes ESG leasing initiatives and supports decarbonization through subsidies for a certain
percentage of total lease payments from the Ministry of the Environment when companies introduce decarbonizedequipment through leasing.
DAISHI HOKUETSU REPORT 2022

36

Value Creation Story

New Value Creation
The Company’s Initiatives to Maintain and Improve Environmental Value■ Opening of Environmentally Friendly Branches “( Sekiya Branch”and“Sekiya-Chuo Branch”)

The“Sekiya Branch”and the“Sekiya-Chuo Branch”of Daishi Hokuetsu Bank, which
are scheduled to be newly built in September 2022, are designed to be barrier-free,meaning they can be used safely by elderly and disabled customers. In addition, energysaving and solar power generation facilities will be installed to reduce environmental
impact. Furthermore, these branches are expected to receive“ZEB* (Net Zero Energy
Building)”certification, which aims to reduce energy consumption in buildings to zero.
“* ZEB (Net Zero Energy Building)”
An abbreviation for Net Zero Energy Building, which refers to buildings that aim to achieve a
comfortable indoor environment, while reduce energy consumption to zero by installing energysaving equipment and renewable energy.

Planned new branch■ Investments in Regional Power Producers and Suppliers Through Public-Private Financial

Partnerships to Reduce Carbon in Local Communities

In July 2019, Daishi Hokuetsu Bank invested in“Niigata
Swan Energy Corporation,”a regional power producer andRegional power
producer and suppliersupplier in Niigata City, as part of efforts to utilize low-carbon
energy such as renewable energy in the region. Niigata Swan
Energy Corporation operates a business selling electric powerthat utilizes the heat generated at cleaning centers and otherfacilities, with the electric power being used at public facilities,
etc., in Niigata City.
In March 2022, we also invested in“Kashiwazaki IR Energy

Generateelectricity

Use electricity
Regional public
facilities, etc.

Cleaning center,etc.

Corporation,” in Kashiwazaki City. Kashiwazaki IR Energy
Corporation plans to launch an electric power retail businessby the end of fiscal 2022, and intends to create an environment

Investment

Government, private,
and financial

Electricity
Moneywhere citizens and businesses can utilize low-carbon energy.

■ Topics: ~Initiatives to Protect Biodiversity~
Protecting the Crested Ibis

Daishi Hokuetsu Bank designated the internationally protected crested ibis, the Niigata Prefectural bird, as its officialbank bird in 1967. Since 1968, Daishi Hokuetsu Bank has operated the Crested Ibis Protection Fund as an activity toprotect and raise crested ibises. In the many years since, funds raised from bank employees have been combined withdonations from the bank and presented to Niigata Prefecture.
Aﬀorestation Activities

In order to pass on the lush green forests of the region to the
future, Daishi Hokuetsu Bank is engaged in forest conservation
activities. In addition to the Daishi-Hokuetsu-no-Mori (Daishi
Hokuetsu Forest) activities in Agamachi, Higashikanbara-gun, Niigata
Prefecture, which we have been involved with since fiscal 2009, we
have been working on afforestation activities at Araihama Forest
Park in Tainai, Niigata Prefecture since fiscal 2017.
Through these activities, forests lost owing to damage frompests have been restored, contributing to the maintenance of
ecosystems through forest conservation, and also providing local
communities with wind and sand protection.

37

DAISHI HOKUETSU REPORT 2022

Afforestation Activities

Message from Management

Overview of the Daishi Hokuetsu FG

Value Creation Story

Communication with Stakeholders

Corporate Data

Business Base to Support New Value Creation
Five Strengths
In this section, we introduce the "Five Strengths" that support the creation of new value as a management foundation forthe continuous creation and provision of new value for regional society.

1 Trust from the Local Community
Daishi Hokuetsu Bank, a core company of the Daishi

We believe that new value can be created through the

Hokuetsu Financial Group, has been building a relationship ofvalue creation process based on engagement (dialogue) only

trust with the local community for more than 140 years, fromwhen there is a relationship of trust as the foundation, and thethe late 19th century to today, by fulfilling our role and mission

Group's relationship of trust with local communities that we

as a regional bank while supporting the local community as ahave developed over many years is a valuable asset andregional bank headquartered in Niigata Prefecture.

strength.

■ Share of Business

Daishi Hokuetsu Bank has a high share of both savings

Japan after megabanks and fifth among regional banks. The

deposits and loans in Niigata Prefecture, at 41.2% andbusiness foundation that Daishi Hokuetsu Bank has built up

53.0%, respectively. In addition, according to the "Nationwide

over many years serves as a platform for the business

Main Bank Trend Survey of Companies (2021)" (source:

development of the Daishi Hokuetsu Financial Group,

TEIKOKU DATABANK), we were the main bank forenabling us to provide services that meet the expectations

approximately 18,000 companies, which placed us ninth inof local residents.

< Share of savings and deposits >Other(second-tierregional banks,
credit unions,
etc.)

55.2%

Nationwide Main Bank Trend Survey ofCompanies (2021)< Share of loans >9Rankedth in Japanbehind megabanks, etc.

Other

Daishi
HokuetsuBank(second-tierregional banks,
credit unions,
etc.)

41.2%

40.9%

Daishi
Hokuetsu
Bank

53.0%

Source: Financial
Major banks

3.6%

JournalMajor banks

6.1%(end of March

Ranked5th among regional banks

Source: TEIKOKU DATABANK (end of October 2021)

2021)

2 Achieving Three Synergies
In our 2nd Medium-Term Management Plan, launched in April 2021, we
are working to achieve synergistic effects in the three areas of "merger
synergy," "group synergy," and "TSUBASA Alliance synergy," which are thecompany’s strengths.

Company Briefing Materials
https://www.dhfg.co.jp/
financial/ir/session/

Please refer to the "Company Briefing Materials" posted on thecompany’s website for information about the current status of initiatives
to achieve the three synergies.

■ Three Synergies and their Details
Maximize merger
synergy
Share expertiseCoordinate
overlapping functions● 
Reallocate businessresources●●

Maximize groupsynergy
Maximize the useof Group company
functions

Maximize TSUBASA
alliance synergy
Take advantage of the scale ofbeing one of the largest
regional banks

DAISHI HOKUETSU REPORT 2022

38

Value Creation Story

Business Base to Support New Value Creation
Five Strengths■ Merger Synergy

Efforts to Deepen Financial Intermediary Functions and Information Intermediary Functions by
Reallocating Management Resources and Sharing Expertise
Under our 2nd Medium-Term Management Plan, theto the head office by 40, from 30 to 70, and expanded thecompany is actively redistributing management resources

number of“consulting plazas,”which provide consultations

through measures such as the consolidation of branches,for personal loans, etc., from 9 to 11.

streamlining of head office, and operations reform at sales

At the same time, by sharing our expertise, we are taking

offices, with the aim of enhancing our financial intermediary

steps to enhance our consulting functions in various fields,

functions and information intermediary functions. In fiscal

including business succession, M&A, and asset management.

2021, the company made approximately 540 employees

management

employees, mainly within the Group. At the Daishi Hokuetsu

functions to appropriately meet the increasingly diverse

Bank, we increased the number of consulting staff assigned

and complex needs of our customers.

Consulting staff from the head office stationed
at sales offices
Beforethe bank
merger30

After thebankmerger70< Production of personnel >60% of our target formaking personnel available
in the first year

Cumulative total
Approximately

Cumulative total
Approximately

900

800

Approximately

Approximately

enhance

Beforethe bank
merger9

After thebankmergerlocations

ourconsulting

11

locations

Number of redeployed personnel after taking into account natural attrition,such as mandatory retirement age, voluntary retirement, and reduction in hiring
Achieved approximately

60% of our target forreassigning personnel inthe first year

Cumulative total
Approximately

450

Approximately

210

130

Cumulative total
Approximately

500
Approximately

100

Approximately

Approximately

Approximately

280

70

Approximately

35

Approximately

50

Approximately

200

Approximately

330

Approximately

420

Approximately

195

Approximately

210

Fiscal 2021

Fiscal 2022
(planned)
Streamliningof head oﬃce

Fiscal 2023
(planned)

Fiscal 2021

Sales oﬃce
operations reform

Banking
Division

Branch Consolidation Initiatives
Daishi Hokuetsu Bank announced the consolidation of 50
branches in February 2019, based on our basic policy ofminimizing any reduction in convenience for customers. We
have made steady progress toward this target, including
moving the initial three-year plan forward to one year andeight months. In addition, as one of the synergies resulting
from the consolidation of branches, we are returning gains
from the synergies to local communities with measures toimprove convenience, such as building new branches.**New branches scheduled to be built...
“Sekiya Branch and Sekiya-Chuo Branch,”“Shirone Branch and Shirone-Chuo Branch,” and “Kamo Branch, Kamo-Chuo
Branch, and Nishikamo Branch”

DAISHI HOKUETSU REPORT 2022

andConsultation centers for personal loans, etc.:
Increase in consulting plazas

270

540

Consolidationof branches

resources< Number of reassigned personnel >Achieved approximately

39

Going forward, we will continue to strategically reallocate

available, of which we reassigned approximately 280

Fiscal 2022
(planned)
Group Company
DivisionsFiscal 2023
(planned)
Personnel matching withbusiness partners, etc.

< Branches >Down

Plan to consolidate 50 branches▶ We will achieve our target, which was
initially for approximately three years, in
one year and eight months

201

Reducedby 30
branches

March 31, 2021

171

approximately

25% overtwo years

Plan toreduce by
20 branches

March 31, 2022

151

Target for
March 31, 2023

*Number of brick-and-mortar branches (excluding branches in branches,Internet branches, etc.)

Message from Management

Overview of the Daishi Hokuetsu FG

Value Creation Story

Communication with Stakeholders

Corporate Data

Cross-organizational Efforts by the“Structural Reform Promotion Committee”
In order to maximize merger synergy, Daishi Hokuetsu Bank established the“Structural

Main items deliberated

Reform Promotion Committee,”which is chaired by the President, in April 2021, and is
promoting structural reforms in a cross-organizational manner, based on the three pillars of“sales reform,”“sales office operations reform,”and“head office operations reform.”In
addition, the committee further strengthen cost controls by deliberating investments from acompany-wide perspective.

●

Reallocate businessresources●

DX Strategy●

Sales reform●●

Operations reform
Investment decisions foreach project,
etc.

■ Group Synergy

Restructuring and Strengthening Group Governance in Order to Exercise the Group’s Collective
Strength
In October 2021, the company reorganized the leasing,are implementing the PDCA cycle in a cross-organizational

consulting and research, and fund management businesses

and multi-layered governance structure, such as holding

into three companies, “The Daishi Hokuetsu Lease Co.,

monthly "Group Company Senior Management Meetings,"

Ltd.,”“Daishi Hokuetsu Research & Consulting, Ltd.,”and

in which the Presidents of Group companies participate,“Daishi Hokuetsu Capital Partners Co., Ltd.,”respectively,

and the number of business transactions on which Groupand made them 100% subsidiaries, in order to maximize

companies collaborate, such as Daishi Hokuetsu Bank,

the Group's collective strength and further strengthen

Daishi Hokuetsu Securities, and The Daishi Hokuetsu

collaboration within the Group.

Lease,”has been steadily increasing.

In addition, in order to achieve further group synergy, weGroup Structure~ to September 2021
Daishi Hokuetsu Financial Group

From October 2021~
Daishi Hokuetsu Financial Group

Daishi Hokuetsu Bank

DaishiLease

Daishi Hokuetsu Bank

The Hokuetsu Leasing

Daishi Hokuetsu
Securities

The Hokuetsu Leasing

Daishi Hokuetsu
Securities

The Daishi JCB Card

Daishi Hokuetsu Career
BridgeThe Hokugin Economic
Research Institute

Daishi Hokuetsu Career
BridgeThe Daishi DC Card

Daishi Management
Consulting

New!

The Daishi JCB Card

Company name change +100% subsidiary

The Daishi DC CardNew!

The Hokuetsu Card

The Daishi Guaranty
The Hokuetsu Credit
Guarantee
The Daishi Computer
Service

LeasesThe Daishi Hokuetsu
Lease

Consulting and research

Daishi Hokuetsu
Research & Consulting
Restructuring + 100%
subsidiaryNew!

The Hokuetsu Card

The Daishi Guaranty
The Hokuetsu Credit
Guarantee
The Daishi Computer
ServiceFund management

Daishi Hokuetsu
Capital Partners Co.,
Ltd.
Restructuring + 100%
subsidiary

DAISHI HOKUETSU REPORT 2022

40

Value Creation Story

Business Base to Support New Value Creation
Five Strengths■ TSUBASA Alliance Synergy“TSUBASA Alliance*”Initiative
Since its establishment in October 2015, the“TSUBASA Alliance,”a framework for wide-range regional partnerships
among 10 regional banks including Daishi Hokuetsu Bank, has deepened collaboration not only in the systems field but also
in a wide range of fields, including sales promotion and risk management.
In January 2022, ONAD Co., Ltd. was established as a joint venture that provides consulting services related to online
asset management, etc., from a neutral standpoint. ONAD Co., Ltd. began operating in April, as part of the TSUBASA
Alliance’s efforts to work together to explore new business models.
Going forward, we will continue to position this alliance, which is among the largest among regional banks, as the "mainengine for accelerating innovation" within the Daishi Hokuetsu Financial Group, as we look to provide financial and information
services with higher added value.
* TSUBASA Alliance
In October 2015, the TSUBASA Alliance was launched as the“TSUBASA Financial System Advancement Alliance,”aframework for wide-range regional partnerships by three banks, Daishi Hokuetsu Bank, The Chiba Bank, Ltd., and The
Chugoku Bank, Ltd. The Iyo Bank, Ltd., The Toho Bank, Ltd., and North Pacific Bank, Ltd., joined in March 2016, The
Musashino Bank, Ltd. in March 2019, The Shiga Bank, Ltd. in May 2019, Bank of The Ryukyus, Limited in April 2020,and The Gunma Bank, Ltd. in December 2020. As a result, 10 banks are participating at present.

Number ofparticipating
banks

Synergies fromcollaborative measures at
Daishi Hokuetsu Bank

Cumulative
amount of

10¥8.4 billion

banks

October 2015 to March 2022

(As of March 31, 2022)

Total assets ofparticipating
banks

¥96

■ Head office location■ Branch location

trillion(On a consolidated basis
for the fiscal year ended
March 31, 2022)

Launch of the“Gunma-Daishi Hokuetsu Alliance”
In December 2021, Daishi Hokuetsu Bank concluded
the “Gunma-Daishi

Hokuetsu

Alliance,” analliance

Cumulative
total in fiveyears

partnership aimed at contributing further to the local
community and continuously improving corporate value,+¥8.0

with The Gunma Bank, Ltd., one of the banks participating

billionin the TSUBASA Alliance whose business area is adjacentto that of Daishi Hokuetsu Bank. As of the end of MarchApproximately

2022, synergies from this alliance had already generated

Approximately¥9.5 billion¥1.5 billion

approximately 1.5 billion yen in the joint origination ofsyndicated loans, etc. We expect synergies from thecollaboration over the next 5 years (from April 2022 toMarch 2027) (cumulative) to be approximately 8.0 billion
yen, as a result of various measures utilizing the expertiseand geographical characteristics of the two banks.
41

DAISHI HOKUETSU REPORT 2022

Announcement of the launch of the
Alliance

Cumulative results from
December 2020 toMarch 31, 2022

Cumulative forecast
through to March
31, 2027

Message from Management

Overview of the Daishi Hokuetsu FG

Value Creation Story

Communication with Stakeholders

Corporate Data

3 Human Resource Capabilities
The company regards human resources as the most important capital, or "human capital," which forms the foundation forthe sustainable development of the company. Accordingly, we are focusing on“developing and enhancing human resources”
as a basic strategy in our Medium-Term Management Plan.
■ Start of a New Personnel System

Daishi Hokuetsu Bank has launched a completely new

are required to achieve both improved productivity andpersonnel system that is different from the previous system, in

employee satisfaction. In addition, we introduced an expert

order to promote the enhancement of each employee's skills(professional position) system for diverse career development.

and support their growth, with consulting capabilities as the

Since the merger, these systems have contributed significantly

main focus. The new personnel system incorporates four

to promotion of a shared awareness among employees throughelements

fair and equitable management, and has played an important("professional

human

resource

development,""management reform," "work-style reform," and "diversity") that
Perspectives for improving consulting
capabilities
Ability togatherinformation
Ability to
managerisks
Ability tomake andrealizedecisionsrole in promoting employee growth.

Concept of the new personnel system
at Daishi Hokuetsu Bank

Introduction of expert (professional position)systemBasic policy of the system

Individual sales, corporate
Started appointment
sales, strategy andin October 2021
management, etc.

(2) Clarify evaluation criteria
and support for growth

Scope of specialized areas(1) Fair evaluation
Ability toidentify
issues(3) Build a diverse humanresource base(4) Promote organizational
harmony

Proposal/planning
ability(5) O ptimize personnel expenses

Four factors required to achieveboth productivity improvement andemployee satisfaction

Professional humanresource development■ Improving Consulting Capabilities

Individual sales

Wealthy segment consulting

Corporate sales

Financial Solutions & FinanceBusiness succession & M&A,
business revitalization

Strategy &management

Market operations, IT & systems
data analysis, marketing and risk
management

Management reform

Work-style ReformDiversity

Four Policies for Improving Consulting Capabilities

In order for the company to meet the expectations of thelocal community and continue to grow together with it, wemust continue to support our customers in resolving theirissues. To this end, it is important to improve the consulting
capabilities of our employees, and we are making various
efforts and investments based on the four policies shown on
the right.

I Development of Human Resources with a Focus on Practical

SkillsII Development of a System for Realizing the Human Resources

Development Cycle

III Cultivation and securing of experts to promote DX and explore

new business areas

IV Enhancement of consulting capabilities through appropriate

assignment of personnel capable of active participation in awide range of fields

Development of Human Resources with a Focus on Practical Skills

I

In order to support the achievement of the Management Philosophy and the 2nd Medium-Term Management Plan from a humanresource perspective, we have established a mechanism to enhance our practical consulting capabilities as professionals throughon-the-job training at head office and sales offices, as well as training and secondment to corporate clients and Group companies,
as part of efforts to strengthen our foundations for human resources with multifaceted consulting capabilities.

II

Development of a System for Realizing the Human Resources Development Cycle

In order to improve the consulting capabilities of employees, it is important for each
employee to have a high level of awareness toward their own autonomous career

Human resources development cycle

development and for the company to support career development in order to realize

Provision of opportunities for
growthCareer Challenge System, 
Improvement Contribution torecurrent of practical the organization
education, skills(success stories)etc.

a growth cycle for each employee.
In order to increase career awareness among young and mid-career employees,
Daishi Hokuetsu Bank provides training
programs for employees to create theirown career plans, and has also enhanced
measures to support employees in the

Learning andchallenges

pursuit of their career plans, including
recurrent

educationtopromoteself-development, such as thematic learning

Human resources development cycle:
A cycle in which improvements in practical skills lead tosuccess stories, which in turn lead to a virtuous cycle offurther independent learning and taking on new challenges

and the acquisition of certifications suited
to those career plans, in order to achieve a
growth cycle for each employee.

Training

DAISHI HOKUETSU REPORT 2022

42

Value Creation Story

Business Base to Support New Value Creation
Five Strengths■ Topics
Career Challenge System

Daishi Hokuetsu Bank has implemented the Career Challenge System, in which employees with high motivation and ability are

selected and assigned to departments, branches, and positions of their choice, in order to create opportunities to take on thechallenge of new duties and careers and revitalize the organization by supporting growth and enhancing motivation. This systemenables employees themselves to take the initiative in facing new challenges, and it is a new type of career path that goes beyond
the traditional framework for employees who aim to actively participate in new fields.

Cultivation and securing of experts to promote DX and explore new business areas

I II

With the surrounding environment undergoing major change,

issues, we have established an expert system under the new

decarbonization, the development and securing of expert humansystem, we will develop highly specialized human resources

including the rapid advancement of DX and the response toresources with deep expertise in specialized fields and specificnew business areas has become a major issue. To address these

personnel system at Daishi Hokuetsu Bank. Through the expert
within the bank and offer appropriate treatment and benefits for
mid-career employees.

■ Topics
Implementation of the New Structural Reform 2030 Project

Young employees who participated

Assuming that the business environment will continue to change significantly(November 2021 to March 2022)

30 in total

in the future as a result of factors such as sustainability aspirations andadvances in digital technology, Daishi Hokuetsu Bank has formulated

hypotheses about the issues and needs of local communities and customers,

etc., and based on our Management Philosophy, we have implemented the“New Structural Reform 2030 Project,”which examines new business models

that go beyond conventional ideas, including financial intermediary services
and information intermediary services, in order to achieve a sustainableregional community by working to resolve environmental and social issues
surrounding local communities.

The President was in charge of the project, and young employees in their 30s from head office, sales offices, and Group

companies played a central role in implementing this project, as an opportunity to develop human resources and capabilities
through activities such as discussions and planning aimed at the creation of new business ideas.

 nhancement of consulting capabilities through appropriate assignment of personnelE
capable of active participation in a wide range of fields

IV
In

order

to

offer

customers

multifaceted

consulting

recruitment agency and regional trading company. We are alsoenables us to provide services in a one-stop manner, includingorganization of Group companies in order to enhance thecapabilities, the company is working to establish a system thatboth our financial businesses such as banking, securities, leases,
and cards, as well as our non-financial businesses, such as ourreassigning Group human resources and reinvigorating theconsulting capabilities of the Group as a whole.

■ Practicing Human Resource Management to Enable All Group Officers and Employees to

Actively Participate

The company implements a variety of human resource management initiatives to ensure that a diverse range of officers and employees,
including those of Group companies, are able to work and actively participate in a healthy, energetic, and rewarding manner.

Establishing Highly Flexible and Productive Work-Styles Compatible with the New Normal
As a result of the COVID-19 pandemic, there has been a majororganization, we are taking steps to reform the awareness ofchange in the awareness of society as a whole concerning work-

managers by providing them with ongoing training on themes

styles, including the expansion of remote work. In order tosuch as "revitalizing organizational communication (improving

respond to these changes in the environment related to work-‘psychologicalstyles and create a comfortable working environment, theengagement." At the same time, we are also working to improvecompany is promoting flexible and highly productive work-styles

the motivation of young employees through the “Careerthat enable employees to choose the time and place where they

Challenge System” and the “New Structural Reform 2030

work according to the nature of their work, including actively

Project.”Through these efforts, we are building an organization

promoting leave take-up and teleworking.

with a high level of engagement.

In addition, in order to improve our productivity as an

43

DAISHI HOKUETSU REPORT 2022

safety,’ etc.)"and"improving

employee

Message from Management

Overview of the Daishi Hokuetsu FG

Value Creation Story

Communication with Stakeholders

Corporate Data

Supporting the Active Participation of Diverse Human Resources through Diversity Management
and Practicing Sustainability Management
A base of diverse human resources is essential for sustainable

Program for Women,” with the aim of promoting female

implementing various initiatives to support the active participation

positions. Currently, 13 female employees are participating in

corporate development. Accordingly, the company is also

employees to senior management and other managerialof a diverse range of human resources, including women andthe program. As a result of these efforts, Daishi Hokuetsu Bank

senior citizens.

appointed its first female executive officer in June 2022.

Daishi Hokuetsu Bank has been working to create an

In order to further promote diversity initiatives, the company isenvironment where it is easy for women to balance work andworking to create an environment in which a diverse range ofof women. As an example of our proactive initiatives in this area,

ideas and values. At the same time, the company has formulatedchild rearing, as part of our aim to promote the active participation

human resources can actively participate while utilizing their

Daishi Hokuetsu Bank has received both "Eruboshi Level III”
certification and "Platinum Kurumin" certification from the
Minister of Health, Labour and Welfare. In the fiscal year ended
March 2022, Daishi Hokuetsu Bank launched the“Empowerment

a training program to enable employees to independently act on

issues related to sustainability with a sense of ownership, and isthus working to foster awareness and understanding ofsustainability and the SDGs.

< Diversity Initiatives (Daishi Hokuetsu Bank) >Improvement in the take-up rate of childcare leave
March 2021

March 2022
FemaleOverall

47.2%

Annual paid leave take-up rate

86%
Male

11%

March 2022
FemaleOverall

73.3%

98%

62.5%

Male

57.3%

48%

Increase in the ratio of female managers(deputy level and above)

Average take-up rate forannual paid leave by financeand insurance companies
Ministry of Health, Labour andWelfare2021 Comprehensive Surveyof Working Conditions

Ratio of mid-career hires in managerial/supervisory positions(deputy level and above)

March 2021

March 2022

March 2020

March 2021

March 2022

24.4%

25.2%

50.0%

54.3%

54.2%

Number of
mid-career hires

Certified as a“Health & Productivity Management
Outstanding Organization for 2022”(White 500)

40

Number of
mid-career hires

46

Number of
mid-career hires

48

Acquired both“Platinum Kurumin”and“Eruboshi Level III”
certification

Doubleacquisition

Five years ofcontinuous
certification

Daishi Hokuetsu
Bank is the only company toachieve this in Niigata Prefecture*Total from before the merger

Daishi Hokuetsu
Bank is the only company toachieve this in Niigata Prefecture

Social Contribution Activities by Employees
As a member of regional society, employees of the company actively participate in regional social contribution activities. Whenemployees participate, they consider social contribution activities that they themselves should participate in, and through actualinteractions with people in need of support, these activities raise awareness of solving social issues in the local community, while also
improving engagement by strengthening communication among employees. For information about our main initiatives, please refer to“Communication with Stakeholders”on P.58.

DAISHI HOKUETSU REPORT 2022

44

Value Creation Story

Business Base to Support New Value Creation
Five Strengths

Message from the Officer in Charge of Human Resources

Senior Managing andRepresentative Director

Kazuyoshi Hirokawa

For the company, “human resources” are a source of competitiveness. Recognizing human resources as themost important capital for the sustainable development of the company, we support the growth of Group humanresources in order to contribute to the sustainable growth of regional society while also accumulating the trustof our customers. We also support a diverse range of work-styles for our employees and actively engage in healthmanagement.
The company is a financial and information services group that is

positioned as a specific prescription for achieving this purpose, thetrusted by local communities. It was established in 2018 through thecompany has set "developing and enhancing human resources" as amanagement integration of two regional banks headquartered inbasic strategy related to human resources, and we are working toward

Niigata Prefecture. Our shared purpose is to continue to contribute to

the "promotion of organizational harmony and shared awareness,"the development of local communities by responding flexibly to"improvement of consulting capabilities," and "practicing humansociety, which is continuously changing in a multifaceted way withresource management to enable all Group officers and employees toaccelerating pace, meeting all customer needs, and providing newactively participate," as measures to achieve this strategy.

value.
In the 2nd Medium-Term Management Plan, which we have

45

DAISHI HOKUETSU REPORT 2022

The purpose of "promotion of organizational harmony and shared

Message from Management

Overview of the Daishi Hokuetsu FG

Value Creation Story

Communication with Stakeholders

Corporate Data

awareness" is to quickly promote the "development of a shared

has received “White 500” certification under the Certified Health &awareness among employees," which is an important process after

Productivity Management Outstanding Organizations Recognition

management integration. Accordingly, we have promoted theProgram for five consecutive years.

development of a shared awareness and the sharing of our

In terms of promoting the active participation of women, in June ofManagement Philosophy, while also working to improve engagement,

this year, Daishi Hokuetsu Bank appointed its first female executive

through the continuous holding of briefings for managers by theofficer. In order to further promote the development of female humanPresident and meetings for dialogue between management andresources who can be promoted to higher positions, such as directors

employees, and free and frank discussions between employees theand senior managers, Daishi Hokuetsu Bank revised the "Empowerment

management.

Program for Women" last fiscal year. At present, 13 employees are

The "improvement of consulting capabilities" is an initiative aimed atparticipating in the program and working to mutually improve theirimproving the multifaceted consulting capabilities of the company's

knowledge and skills. In this way, we are promoting the development

human resources in order to respond to all customer needs. It focusesof human resources who can play a role as next-generation leaders.

on measures such as developing systems to support the active

Furthermore, in order to further strengthen our D&I (Diversity &participation of a diverse range of human resources while respecting

Inclusion) initiatives, we have jointly established the “TSUBASA

diverse viewpoints and values with different experiences, skills, andDiversity & Inclusion Declaration” together with the banks participating

attributes. As a result of these efforts, our human resources arein the TSUBASA Alliance. Going forward, we intend to actively

becoming increasingly aware of the need to autonomously develop

implement collaborative measures based on this declaration, including

their own careers, and we are also steadily developing humanvarious joint training programs for officers and employees by the

resources with deep knowledge in specialized fields and specific newparticipating banks of TSUBASA.

business areas.
The initiatives related to human resources of the company that I"Practicing human resource management to enable all Group officers

have introduced here represent only a part of our total initiatives, but

and employees to actively participate" is an effort to create an

through these initiatives, the company will continue to contribute toenvironment in which employees can exercise their full potential by

the development of the region as a trusted financial and information

utilizing the capabilities of human resources with diverse values to theservices group, by enhancing our human resources capabilities andmaximum possible extent and supporting employees taking on newincreasing the value of our human capital to enable us to exercise thechallenges. We are also promoting IT and DX to support flexible work-

Group’s collective strength.

styles,developing

anenvironment

for

remoteworking,

andimplementing measures to support continued employment and healthmanagement, and we believe that further improvements to theworking environment will be essential.
Daishi Hokuetsu Bank took the advantage of the merger in January
2021 to introduce a personnel system that promotes the enhancementof each employee’s skills and supports their growth.
Under this system, in order to make a diverse range of work-styles
possible in accordance with changes in individuals’ lifestyles, we haveintroduced a "region limitation system" that allows employees to limit
the regions in which they work, and we are also working to establish
teleworking and staggered working hours. In order to enable diverse
career development, we are working to create an environment that
supports the growth of sustainable organizations and individuals whileeliminating constraints on location and time as much as possible, andthat enables employees with childcare and nursing care responsibilities
to actively participate. In addition, we have introduced an expert(professional position) system for human resources focused specificallyon specialized fields such as consulting, business succession, M&A,
and IT, with the aim of revitalizing the organization by supporting
employee growth and increasing motivation.
In order to leverage the capabilities of diverse human resources tothe maximum possible extent, it is important that we create anenvironment in which employees can maintain a positive mental andphysical condition and remain healthy as they work. The company
actively engages in “health management,” and Daishi Hokuetsu BankDAISHI HOKUETSU REPORT 2022

46

Value Creation Story

Business Base to Support New Value Creation
Five Strengths
4 Collective Strength as an Organization■ Ability to Respond to Change and Strengths as an Organization Gained Through the Management

Integration and Merger

The company was established in October 2018 as a wholly owning parent
company through the management integration of The Daishi Bank and The
Hokuetsu Bank (the“two banks”), which ranked first and second in the prefectureand each had a history of more than 140 years. In January 2021, these two
subsidiary banks merged to form Daishi Hokuetsu Bank. In recent times, amid theunprecedented disaster of COVID-19, all officers and employees worked as one

Established October 2018

to successfully execute the extremely difficult project of simultaneously merging
the subsidiary banks and integrating their systems and operations (the merger
and systems & operations integration project).
The Group has cultivated an ability to respond to changes and organizational

Integration of systems andoperations

capabilities through various initiatives aimed at the successful completion of the
management integration and merger. We recognize that this ability to respond tochanges and our organizational capabilities are significant strengths that will

Merged January 2021

enable the company to achieve sustainable growth in a business environmentthat is changing in a multifaceted way with accelerating pace.
At present, we utilize the project management capabilities developed throughthe merger and systems & operations integration project in various projects,
including the“Structural Reform Promotion Committee”headed by the President.
■ Promotion of Organizational Harmony and Shared AwarenessIn January 2021, subsidiaries The Daishi Bank and The

views. In addition, we have eliminated mindsets based on the

Hokuetsu Bank merged and started afresh as Daishi Hokuetsu

former banks through active personnel changes and in-house

Bank. Based on this background, Daishi Hokuetsu Bank has been

training, without focusing on the former banks, and have ensured

promoting organizational harmony and a shared awarenesssufficient opportunities for communication even amid theamong employees as important themes related to human

COVID-19 pandemic through such measures as expanding

resources.

opportunities

for

employeenetworking

in-houseseminars, etc. Between January 2021, the time of the bankharmony and promoting a shared awareness will enhance themerger, and June 2022, we transferred approximately 2,200

Group's collective strength. Accordingly, we have taken steps to

employees. These measures have borne fruit, and we believe

ensure the dissemination and understanding of our Managementthat we have eliminated mindsets based on the former banks.

Philosophy and Medium-Term Management Plant, throughAccordingly, all officers and employees of the Group are working

continuous briefings for managers by the President and meetings

toward the development of the regional economy with "unity offor officers and employees to engage in dialogue and exchange

purpose,”with the“purpose”being our Management Philosophy.

< Briefings and networking meetings to develop a shared awareness >Dialogue between senior(January 2021 to May 2022)
management and employees
Briefings to disseminate the
Number of participants
Management Philosophy andMedium-Term Management Plan Approximately

4,700

President's briefing for managers
Meeting to
exchange dialogue
Number of venues
and participants

47

through

The company believes that quickly achieving organizational

DAISHI HOKUETSU REPORT 2022

Number of participants

Approximately

Total ofapproximately

300 venues

300

Approximately

7,000

participantsMeeting to exchange dialogue

Message from Management

Overview of the Daishi Hokuetsu FG

Value Creation Story

Communication with Stakeholders

Corporate Data

5 Sound Financial Position■ Substantial Equity Capital

The Daishi Hokuetsu Financial Group’s consolidated
capital adequacy ratio for the fiscal year ended March< Capital adequacy ratio (consolidated) >2022 increased by 0.16 percentage points from the

0.16ptsame period of the previous fiscal year to 10.51%. This+

figure exceeds both the domestic standard of 4% and
the international standard of 8% based on the Basel

10.35%

10.51%

Fiscal year ended
March 31, 2021

Fiscal year ended
March 31, 2022

Accord, thus ensuring a sufficient level from the viewpointof soundness. Furthermore, the external rating of the

9.65%

Daishi Hokuetsu Financial Group is "A+" from the Japan
Credit Rating Agency (JCR), and Daishi Hokuetsu Bank
has received ratings of "A+" from the Japan Credit Rating
Agency and "A3" from Moody's.

Fiscal year ended
March 31, 2020

< Ratings >Japan Credit Rating Agency (JCR)

Moody’
s

A+

–

A+

A3
(As of March 2022)■ Policy for Return to Shareholders

While considering our public nature as a financial group,in order to reward each one of our shareholders moving< Actual shareholder returns >Dividends per
share (annual)

Shareholder returnrate

Fiscal year ended
March 31, 2020

120 yen

42.5%

and

Fiscal year ended
March 31, 2021

120 yen

50.7%

Furthermore, consolidated ROE for the fiscal year ended

Fiscal year ended
March 31, 2022

120 yen36.1%

forward, our basic policy is to continue stable returns toshareholders while also ensuring an increase in internal
reserves in order to strengthen our revenue base.
Specifically, we aim to maintain a shareholder return rate of
approximately

40%,

when

combining

dividends

acquisition of treasury stock.
March 2022 was 3.5%, an improvement of 0.9 percentage
points from the previous year. At present, our target for the
fiscal year ending March 2024, which is the final fiscal yearof the 2nd Medium-Term Management Plan, is 4.5%, but
over the medium to long term, we aim to maintain aconsolidated ROE of 5% or more, based on increasing
profitability.

DAISHI HOKUETSU REPORT 2022

48

Value Creation Story

Business Base to Support New Value Creation
Corporate Governance and Risk Management Systems

Corporate Governance
Basic Approach to Corporate GovernanceIn order to obtain high recognition and establish unshakeable

management, as well as to increase the transparency ofand shareholders, the basic approach of the Group is to work

strengthening and enhancing corporate governance is antrusts from stakeholders including customers, local residents,

management

to improve financial health and profitability, while also striving

activities,

based

on

our

recognition

that

important management issue.

to augment auditing and supervisory functions for corporate

Overview of Corporate Governance Structure
The Board of Directors of the company is responsible for

the Sustainability Promotion Committee, ALM & Risk Management

achieving the Group's sustainable growth and medium- to long-

Committee, Compliance Committee, and Regional Revitalization

term enhancement of corporate value, in order to obtain highPromotion Committee.

recognition and establish unshakeable trust from stakeholders

In addition, the Nomination and Compensation Committee has

including customers, local residents, and shareholders. In orderbeen established as an advisory body to the Board of Directors,

on basic management matters and important business execution

considering important matters related to the appointment andto fulfill this responsibility, the Board of Directors makes decisions

in order to enhance fairness, transparency, and objectivity when

for the Group as a whole, and supervises the status of eachdismissal of directors, compensation, and succession planning, byDirector's execution of their operations.

securing opportunities for outside directors to appropriately

In addition, the company has established the Audit andparticipate and provide advice. The important matters described

Supervisory Committee, which has a supervisory function, like theabove are determined by the Board of Directors after deliberation

Board of Directors, and also audits the execution of operations

and the receipt of a report from the Nomination and Compensation

by directors, and the Executive Committee, which determines

Committee. In the event that the Nomination and Compensation

matters related to the execution of operations based on theCommittee does not reach a unanimous agreement in a resolution

policies of the Board of Directors, manages the execution statuson the content of this report, it shall include all arguments in theof Group management plans and strategies, and resolves andreport to the Board of Directors.

discusses matters delegated by the Board of Directors, as well as< Corporate governance organization chart >Appointment and dismissal

General Meeting of Shareholders

Appointment and dismissal

Nomination andCompensation Committee

Consultation and report

Board of Directors

Audit and supervision

Audit and Supervisory Committee

Executive Committee

ALM & Risk Management Committee
Compliance Committee
Regional Revitalization Promotion Committee

Corporate Planning
Division

Human Resources
Planning Division

Instructions andordersCooperation and coordination
Audit

Auditing Division

ReportRisk Management
Department

Secretariat of Audit andSupervisory Committee

Audit

Regional Revitalization
Promotion Division
Regional Revitalization
Division

Guidance, management, and supervision

Group Strategy Promotion
Division

Report and deliberation

Guidance, management,
and supervision

Accounting Auditors

Committees

Sustainability Promotion Committee

General Affairs
Division

Audit

Report anddeliberation

Subsidiaries, etc.
Audit

As of June 24, 2022

49

DAISHI HOKUETSU REPORT 2022

Message from Management

Overview of the Daishi Hokuetsu FG

Value Creation Story

Communication with Stakeholders

Corporate Data

< Board of Directors >Chair

President
Proportion of outside directors: 35.7%(5 out of 14)

Composition
Number of meetings
held in FY2021

12 (once a month, in principle)
Director< Proportion of outside directors >From June 2021

October 2018 (at founding of the company)
Total
number of
directors

Director

Outside directors

13

9

4

Proportion of outside
directors

30.7%(4/13)< Audit and Supervisory Committee >Total
number of
directors

Director

Outsidedirectors

14

9

5

Chair
Composition

Proportion of outside directors: 83.3% (5out of 6)

Chair

35.7%
(5/14)

President

Composition
Number of meetings
held in FY2021

12 (once a month, in principle)

President

Composition

Directors (excluding members of the Audit
and Supervisory Committee)

Frequency of
meetings

Twice a month, in principle

Proportion of outside directors: 62.5% (5out of 8)4(1) A ppointment and dismissal of directors(2) S election and dismissal of representative
directors(3) S election and dismissal of directors withspecial duties(4) C ompensation, etc., for directors (excluding
members of the Audit and Supervisory Committee)(maximum amount of compensation and individualcompensation amounts)(5) Compensation, etc., for directors (membersof the Audit and Supervisory Committee)(excluding matters related to allocation ofindividual compensation amounts)(6) S uccession planning< Executive Committee >Chair

Proportion of outside
directors< Nomination and Compensation Committee >Full-time Audit and Supervisory Committee
MemberNumber of meetings
held in FY2021

Outside directors

Main items
deliberated

The Board of Directors of the company ensures that the Board of Directors as a whole has the necessary skills to implement ourManagement Philosophy and achieve the Medium-Term Management Plan, as shown below.
< Areas where Directors have experience >Title
Chairman and Representative
Director

Name

Management strategy
and sustainability

Risk management●

Fujio Namiki●

President and Representative
Director

Michiro Ueguri●

Senior Managing andRepresentative Director

Kazuyoshi Hirokawa●

Director

Makoto Takahashi●

Director

Ken Shibata●

Director

Takayoshi Tanaka

Director

Toshiyuki Maki

Director

Masami Watanabe

Director (Auditand Supervisory
Committee Member)Yutaka Kimura

Human resourcesmanagement

●
●

Sales

Company screening●●

Market operations●

Systems andoperations

●

●

●
●

●

●

●

●
●
●
●

●

●

< Areas of special expectations for outside directors >
Title

Name

Director (outside) Audit andSupervisory Committee Member

Toshizo Oda

Director (outside) Audit andSupervisory Committee Member

Kazuaki Matsumoto

Director (outside) Audit andSupervisory Committee Member

Kunio Mori

Director (outside) Audit andSupervisory Committee Member

Tadashi Shirai

Director (outside) Audit andSupervisory Committee Member

Hiroyuki Kikuchi

Corporate
management

Management theory

Financialaccounting

Law

IT and systems

Regional
administration

●
●
●
●

●
●
DAISHI HOKUETSU REPORT 2022

50

Value Creation Story

Business Base to Support New Value Creation
Corporate Governance and Risk Management Systems

Evaluation of the Effectiveness of the Board of Directors in Fiscal 2021
The Board of Directors of the company< Results of analysis and evaluation in fiscal 2021 >analyzes and evaluates the effectiveness of
the

Board

of

Directors,

includingthecomposition and operation of the Board of

Directors and the status of the activities of
Directors,

and

works

to

improve

Details●●theeffectiveness of the Board of Directors by●using the PDCA cycle to implement measures
to address issues that have been identified.

In fiscal 2021, the Board of Directors

analyzed and evaluated the effectiveness of
the Board of Directors as a whole after

considering the results of self-evaluations

conducted through surveys of all directors. In
the assessment of the Board of Directors, the● ased on their own expertise, outside directors consistently and actively make statements and provide
Bappropriate advice and supervision at meetings of the Board of Directors
 ince the merger of the subsidiary banks in January 2021, under the supervision of the Board of Directors,
S
synergies have been steadily achieved through initiatives such as organizational harmony, branch
consolidation, the reorganization and strengthening of Group companies, and thorough cost management
 he “Daishi Hokuetsu Financial Group’s Basic Sustainability Policy” was established in DecemberT2021, based on the recognition that sustainability initiatives are a fundamental management policy ofthe same level as the Management Philosophy
In April 2022, the Company also added "practicing sustainability management" to the basic strategy ofthe 2nd Medium-Term Management Plan. In addition, the Board of Directors has taken the initiative in
addressing climate change and other sustainability issues, including establishing "Investment &Financing Policies that consider environment and society" and setting "sustainability targets" and "CO2emissions reduction targets."In fiscal 2021, measures were taken to address issues identified based the results of the evaluation ofeffectiveness in fiscal 2020, such as "creating opportunities for passing on the expertise of representative
directors, etc., for the development of successors" and "continuing to actively develop human resources
with a view to the appointment of female directors," and steady improvements have been madeeffectiveness of the Board of Directors as a

< Policies for responding in fiscal 2022 >those provided in the table on the right under

Ensuring thediversity of theBoard ofDirectors

whole has been ensured, for reasons such as< Results of analysis and evaluation in fiscal
2021 >.

In fiscal 2022, we will consider andimplement measures based on the evaluationof effectiveness in fiscal 2021, as part ofefforts to further improve the effectiveness of
the Board of Directors. Furthermore, thespecific policies for responding are describedin the table on the right (bottom table), under< Policies for responding in fiscal 2022 >.

MatterContinued
development of
successors
Further exerciseof the functionsof outside
directors

Details●●●●

Response toissuessurrounding
sustainability●●H uman resources development with a view to the appointment of female directors, inorder to ensure the diversity of the Board of Directors (development programs werealready in place for female employees, and in June 2022, the company appointed theGroup's first female executive officer at Daishi Hokuetsu Bank, the company’s subsidiary)Successor development through feedback from representative directors to directors
concerning assessments of the development of successors and training sessions, etc., topass on expertise, based on“successor development plans”
Further revitalization of the Board of Directors and the Nomination and Compensation
Committee through continuous exchange of opinions between outside directors andthe Presidents of Group companies, etc.
F
 urther enhancement of discussions on sustainability (including ESG and the SDGs) at
meetings of the Board of Directors with measures such as the accumulation of expertisethrough independent self-study by directors aimed at practicing sustainable management
Promotion of awareness of sustainability in the Group and local communities led by the
Board of Directors
 nhancement of disclosure related to sustainability, including disclosure based on theEframework of the TCFD recommendations

Officer Compensation■ Outline of Policy for Determining Compensation, etc., for Directors

The amount of officer compensation for each director of thedirectors who are not Audit and Supervisory Committee

following policy, by resolution of the Board of Directors following

Supervisory Committee Members for the amount of individualcompany shall be determined each fiscal year based on the
deliberations and a report by the Nomination and Remuneration
Committee for the amount of individual compensation for●Compensation shall be fair and highly reasonable, to ensure

Members, and by discussion among directors who are Audit andcompensation for directors who are Audit and Supervisory
Committee Members.
●

accountability to shareholders and other stakeholders.
●L evels of compensation, etc., shall take into consideration levels

compensationaccording

to

their

roles

and

roles and responsibilities of the Group's officers in aiming todirectors, bonuses linked to the degree of achievement of

economy and society by achieving sustainable and stable growthstock compensation to increase incentives to increaseat other companies, etc., and shall be appropriate to reward the

become a financial group that contributes to the regional

performance indicators for a single fiscal year, and trust-type

Compensation for directors who are not Audit andcorporate value over the medium to long term.
●Compensation for directors who are Audit and SupervisoryofCommittee Members shall be limited to basic compensation

are retained for the Group's senior management, and thatfunctions and independence of directors who are Audit andSupervisory

Committee

Members

shallconsistcompensation able to ensure that excellent human resourcesin consideration of the independence audit and supervisory

also increases incentives to performance in each fiscal year

Supervisory Committee Members.

and increase corporate value over the medium to long term.

51

paid

responsibilities, and for directors who are not outside

through the sincere execution of business operations, etc.
●

Specifically, compensation for directors who are not Audit

and Supervisory Committee Members shall consist of basic

DAISHI HOKUETSU REPORT 2022

Message from Management

Overview of the Daishi Hokuetsu FG

Value Creation Story

Communication with Stakeholders

Corporate Data

■ Officer Compensation System

Basic Compensation
Classification

Details

Directors who are not Audit It shall consist of fixed monthly compensation. The amount of basic compensation determined for each position shalland Supervisory Committee be determined by the Board of Directors after deliberation and a report by the Nomination and Compensation
Members
Committee.
Directors who are Audit
and Supervisory Committee
Members

It shall consist of fixed monthly compensation. The amount of basic remuneration shall be determined according towhether the director is a full-time or part-time member of the Audit and Supervisory Committee, and shall be
determined by discussion among the directors who are Audit and Supervisory Committee Members.

Performance-linked Compensation
Bonuses are performance-linked compensation based on business performance in each fiscal year. Payment tables in accordancewith target levels of profit and the degree of achievement of those targets are determined each fiscal year by the Board of
Directors after deliberation and a report by the Nomination and Compensation Committee.
Details

Performance Indicators andPerformance indicators consist of consolidated net income attributable to shareholders of the parent company, which

Reasons for Selecting theis the basis for calculating the shareholder return rate, and core business net profit, which indicates the level of profits

Performance Indicatorsfrom the main businesses of the subsidiary banks, which are our major subsidiaries.

FormulaPerformance-linked
coefficient

Bonus = Standard amount of bonus for each position × Performance-linked coefficient
Performance-linked coefficient = Applicability ratio of consolidated net income attributable to shareholders of the parent
company for the company × 0.5 + Applicability ratio of the core business net profit for the subsidiary banks × 0.5
The application rate fluctuates within a range of 70% to 130%, in accordance with the level of achievement of targets
for consolidated net income attributable to shareholders of the parent company for the company and core business net
profit for the subsidiary banks.
If consolidated net income attributable to shareholders of the parent company for the company or core business net

Application rate

profit of the subsidiary banks falls below 50% of the target, or the dividend is reduced, the application ratio will bedeliberated by the Nomination and Compensation Committee.
In addition, the Nomination and Remuneration Committee may deliberate the applicable ratio if it is deemed appropriate
to evaluate performance, etc., after eliminating the impact of any factors that occur that should be considered as
temporary special factors that could not be expected when the payment table was set, etc.

Non-monetary Compensation
Non-monetary compensation consists of trust-type stock

equivalent to the conversion value of the company’s sharesdetermined for each position by the Board of Directors after

the trust when both directors (including directors who are Audit

compensation, and the standard amount of compensation isdeliberation and a report by the Nomination and Compensation
Committee. Points corresponding to the amount of compensation

are granted once a year, and shares of the company and money

equivalent to the accumulated points is delivered or paid throughand Supervisory Committee Members) and executive officers of
the company and our subsidiary banks retire.

Composition Ratios of Compensation
Compensation for directors who are not Audit and Supervisory

composition ratios of compensation, a benchmark of 50:25:25 isand trust-type stock compensation, which is non-monetarytrust-type stock compensation when the performance-linked

Committee Members consists of basic compensation, bonuses,

compensation, and standard amounts for each position havebeen set for each type of compensation. In terms of thegenerally used for the ratio of basic compensation to bonuses tocoefficient for bonuses is 100%.

Succession Planning
In order to achieve sustainable growth and increase

and a "successor development plan," which sets forth

has formulated a“succession plan”to ensure that the optimalfor evaluating the status of the development of each candidate,

corporate value over the medium to long term, the company
person succeeds to the position of President of the company,
who plays a central role in these efforts, at the optimal time.

This plan consists of a "successor selection plan," which sets
forth a method for selecting the optimal person by ensuring
fairness,transparency,

andobjectivity

whenselectingcandidates for the President and directors of the company,

development policies, methods of development, and methods
in order to ensure that candidates for the President anddirectors of the company possess the qualifications andabilities required of them.

The status of the development of candidates for President

based on this plan, etc., is reported to the Nomination andRemuneration Committee on a regular basis.

DAISHI HOKUETSU REPORT 2022

52

Value Creation Story

Business Base to Support New Value Creation
Corporate Governance and Risk Management Systems

Initiatives Related to Cross-shareholdings
The company has established the "Policy on Cross-Number of cross-shareholdings

shareholdings" based on the Corporate Governance Code, as
follows.

300

As of the end of December 2021, the company has verified

Listed companies

Non-listed companies (including shares of aﬃliates)

273

267

253

108

108

96

165

159

157

Fiscal year ended
March 31, 2020

Fiscal year ended
March 31, 2021

Fiscal year ended
March 31, 2022

250

the appropriateness of holding all of its cross-shareholdings,

200

and a report has been submitted to the Board of Directors to

the effect that negotiations will continue toward the reduction

150

of cross-shareholdings for which the significance of holding

100

cannot be recognized, after sufficient dialogue with business

50

partners.

0

The number of stocks held in the fiscal year ended March2022 decreased by 14 from the previous fiscal year.

Policy on Cross-shareholdings●

The company and Daishi Hokuetsu Bank will hold a●For individual cross-shareholdings, the Company has

limited number of cross-shareholdings, when it isestablished the "Cross-Shareholding Basic Policy," and theto the maintenance and improvement of the corporate

comprehensive assessment of the appropriateness of suchjudged that such cross-shareholdings will contributevalue of our business partners and the Group over the
mediumtolongpartners,

from

term,

and

will

reducecross-

viewpointof

reducingrisks

shareholdings after sufficient dialogue with businesstheassociated with shareholdings, capital efficiency, etc.

Board

of

Directors

regularly

verifies

and

makes

a

cross-shareholdings, from the perspective of medium- tolong-term economic rationality, taking into account returns

and risks, the growth potential, future potential, or

revitalization, etc., of business partners, the relationshipbetween business partners and the regional economy, andbusiness strategies, such as business alliances.

Risk Management System
Basic Policy on Risk Management
The Group’s basic policy of risk management is to stably secure profits corresponding to risk and plan the appropriate distributionof management resources, as well as to construct a system of mutual checks and balances for the various risks faced by the Group.

This is possible by accurately recognizing and ascertaining various risks, engaging in appropriate management and supervision ofrisks, and auditing these processes related to risks.

Outline of Risk Management System
Based on the above basic policy, the Group has establishedDirectors and is ensured independence from the departmentthat understands and manages risk comprehensively, cutting

for overall business, and verifies the appropriateness anda Risk Management Department as a supervisory organization

across organizational boundaries. Furthermore, the Group has
established the ALM & Risk Management Committee tocomprehensively ascertain and manage the status of ALM andrisks throughout the Group, and to contribute to maintaininga healthy Group and increasing profitability by reviewing

effectiveness of internal controls systems.

Under this risk management system, the Group implements

risk capital allocation at subsidiary banks in order to maintainhealthy business and achieve efficient utilization of capital.

Additionally, the Group anticipates the interruption of

appropriate response measures, etc. Meetings of the ALM &business due to unexpected emergencies such as earthquakes

from meetings of the ALM & Risk Management Committee areoperations, etc., for continuity at Daishi Hokuetsu Bank. The

Risk Management Committee are held as necessary. Minutes

reported to the Board of Directors and other entities asappropriate in an effort to resolve and reform problems
related to risk.

Additionally, the Auditing Department (Internal Audit

Department) is under direct supervision of the Board of53

being audited. The Auditing Department conducts strict audits

DAISHI HOKUETSU REPORT 2022

and other large-scale disasters, and defines priority businessGroup has established the Basic Rules for Business Continuity

to define timely and accurate management and instructions

for the bank, and through such measures, has constructed arisk management system.

Message from Management

Overview of the Daishi Hokuetsu FG

Value Creation Story

Communication with Stakeholders

Corporate Data

< Diagram of risk management system >Audit and supervision

Board of Directors
ReportCredit risk

Instructions
and orders

Executive
Committee

ALM & Risk Management
Committee[Types of risks]

Audit and Supervisory Committee

Risk Management
Department(Risk Management
Administration Division)

Auditing Division

Liquidity risk

Operational risk

Market risk

Instructions (development of risk management systems, etc.)

Cooperation and coordination

Audit

Audit
Cybersecurity risk

Reporting & deliberation (risk status, response guidelines)

Market risk

Liquidity risk

Operational risk

Cybersecurity risk

Departments with jurisdiction by risk category
Sales offices, Head Office, Group companies

Daishi Hokuetsu Capital Partners Co., Ltd.

[Types of risks]Credit risk

Daishi Hokuetsu Research & Consulting, Ltd.

Risk Management Division(Risk Management Administration Division)

ALM & Risk Management
Committee
Compliance Committee
IT Risk Management
Committee

The Daishi Hokuetsu Lease Co., Ltd.

Management Meeting

Daishi Hokuetsu Career Bridge, Co., Ltd.

Audit and Supervisory
Committee

Daishi Hokuetsu Securities Co., Ltd.

Board of Directors

As of June 24, 2022

Definition of Each Type of Risk and Related Management Systems
Credit risk
Credit risk is the risk that the value of principal or interest of amanagement of assets through management improvementof credit, etc., at a business partner to whom a bank has lent

fully across both banks. Credit rating and self-assessment of loans,loan will decrease or disappear due to bankruptcy, deterioration
money, thus resulting in a loss incurred by the bank.

The 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

support activities to customers, etc., the approach being promoted
etc., is strictly enforced through a two-stage assessment system,
one by the sales office and the other by the head office division. In

addition, the appropriateness and validity of credit rating and self-

assessment is verified in the audit conducted by the Audit division.
Regarding the credit portfolio, credit concentration management

concerning credit risk management, as well as for the planningfor specific areas, industries, companies, groups, etc., are

At Daishi Hokuetsu Bank, credit divisions, completely detachedquantification* is being conducted and credit risk limits in line withand operation of analysis, evaluation, and improvement activities.

from sales promoting divisions, conduct strict screening andmanage problematic loans appropriately. It also aims for soundconducted in an appropriate manner. Furthermore, credit risk
total equity are being set.

*Credit risk quantification is to digitize and estimate the a mount of credit risk
involved in the credit portfolio, using statistical methods.

Market risk
Market risk is the risk that assets and obligations may fluctuate invalue due to changes in market factors, thus resulting in a loss incurredby the Group. Such market factors include domestic and foreign

income, and determines the risk limits and loss limits in securities
operation in line with the policy.

Furthermore, important matters concerning risk management

interest rates, valuations on securities, and foreign exchange rates.

are reviewed in the ALM & Risk Management Committee, and it ismarket risks to an appropriate magnitude and to secure stableoccur in securities operations to the management.

The Group has established an operation policy for ALM to adjust

prepared to promptly report any important situation that may

DAISHI HOKUETSU REPORT 2022

54

Value Creation Story

Business Base to Support New Value Creation
Corporate Governance and Risk Management Systems

Liquidity risk
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 much higher

than normal (financing risk). It is also the risk of incurring a loss due

established at Daishi Hokuetsu Bank to grasp and analyze thestatus of financing by the administration division responsible forfinancing to raise funds from the market as necessary.
Inaddition,

response

measuresandareportingandto being forced to engage in market transactions at significantly

communicating structure have been established in order toIn the Group, “Liquidity risk management rules” have been

degree to which funds are required in unforeseen circumstances.

disadvantageous conditions or prices (market liquidity risk).

respond promptly under various situations, in accordance with the

Operational risk
Operational risk is the risk that the Group’s internal

administrative procedures, actions of directors or employees, or8) reputation risk.

In the Group, in order to manage operational risk appropriately,systems operations may be inappropriate or may fail to function,

the Risk Management Department (a management supervisoryby the bank. Based on risk factors, the Group categorizes andimportant matters related to operational risk management,or that other external factors will occur resulting in a loss incurredmanages 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, andorganization) conducts activities such as making proposals on
accepting reports on operational risks from subsidiary banks andmonitoring those risks, and verifying/improving the efficacy ofmanagement systems for operational risks.

Cybersecurity risk
Cybersecurity risk is the risk that the Group will incur a loss as thethe Internet and cloud services, in fiscal 2022, we set forth a basic

order to strengthen our response to cybersecurity, the Group hason the use of cloud services, as well as the management of risks

result of threats on the Group’s cybersecurity from cyberattacks. In
established a Basic Policy for Cybersecurity Management, andresponse manuals for different types of cyberattacks, and we also
take measures such as the advance prevention and predictive
management of cybersecurity incidents.

As it is necessary to enhance the management of risks associatedwith the promotion of DX (digital transformation), such as the use ofpolicy of strengthening systems for managing external risks based

associated with the internal network environment. Accordingly, theGroup is working on measures such as strengthening the expertiseof controlling departments in relation to IT risks, strengthening ourability to act based on early warning information, and strengthening
our ability to respond through training. The status of these efforts isregularly reported to the Executive Committee.

Business Continuity
In the event of a crisis, such as a disaster (natural disaster,

epidemic, etc.) or an accident (power failure, system failure, etc.),

management resources of customers and the Group.

In addition, we have established standards of conduct,

the company's basic policy, based on our role as a regionalorganizational systems, etc., for officers and employees of thecustomers, officers and employees of the Group, their families,of these measures, we conduct regular drills during peacetime

financial institution group, is to prioritize ensuring the safety ofand others above all else. At the same time, by continuing ourbusiness operations, we will endeavor to avoid any impact on
the settlement system, and to protect the assets andGroup in the event of a crisis. In order to ensure the effectivenessand report the results to the Board of Directors, thereby verifying
any issues and points for improvement in the business continuity
system.

Compliance■ Basic Policy on Compliance

The basic policy of the company is that we work to develop andrecognize the social responsibility and public mission that must be

and for ensuring the health and appropriateness of our business.

understand and follow the code of conduct regulated by theestablish a compliance system for maintaining trust in the Group,
At the same time, all directors and employees in the Group always

act in accordance with our Management Philosophy, and■ 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

Japanese Bankers Association.

works to develop and establish compliance systems for theGroup as a whole.

Furthermore, as a plan for practicing business operations thatmeasures and monitoring the status of compliance in the Group.

place the utmost priority on compliance, based on the company’sCommittee, which is connected directly with management, once

for each fiscal year, by resolution of the Board of Directors, andIn addition, the Group holds meetings of a Compliancea month, in principle. The Committee deliberates matters suchas the status of compliance management in the Group, and55

fulfilled by our Group. Furthermore, all directors and employees

DAISHI HOKUETSU REPORT 2022

Management Philosophy, we formulate a“Compliance Program”
the Board of Directors regularly manages and evaluates the
progress of the program.

Message from Management

Overview of the Daishi Hokuetsu FG

Value Creation Story

Communication with Stakeholders

Corporate Data

■ Initiatives to Instill and Establish Compliance AwarenessWithin the Group, the President and other officers utilize
various opportunities to provide explanations of theManagement Philosophy and business operations that place
the utmost priority on compliance, including meetings to
exchange dialogue with employees. In addition, we also
implement initiatives aimed at instilling and establishing anawareness of compliance through various group training
programs, e-learning, compliance seminars held at eachdepartment and branch, and other measures.
In addition, we are taking steps to identify the status of theinstillation of compliance at each Group company andenhance initiatives aimed at strengthening the early discovery
and control of issues, while also endeavoring to ensure theeffectiveness of compliance systems through monitoring by
the company’s Risk Management Department and verificationby the Auditing Division.

■ Internal Reporting System (Opinion Box)

The company has established an internal reporting system(Opinion Box) that enables officers and employees of theGroup to receive opinions, proposals, and requests that
contribute to management, as well as reports of violations oflaws and regulations, etc. The contact points for reports are
the Risk Management Department and the Audit andSupervisory Committee of the company. In order to protect

whistleblowers, information is thoroughly managed, and asystem has been developed to ensure that whistleblowers
are not treated disadvantageously for the reason of having
submitted a report.
Matters such as the content of reports submitted via thissystem and the results of responses are reported to the Boardof Directors on a regular basis.

■ Cutting Relations with Organized Crime

The Group has established the“Basic Policy on Organized
Crime”to block any relationship with organized crime, i.e.,groups and individuals who pursue economic interests
using violence, force, and fraud.
We will work in closer cooperation with externalorganizations with professional expertise, such as thepolice and lawyers, and will not engage in backroom deals
with these elements nor provide them with inappropriate

favors or funds.
Furthermore, we have established a system throughwhich the organization as a whole will deal with elementsthat pose a threat to social order and safety. This involves
taking a decisive stance of cutting off all relations and using
both civil and criminal legal measures to deal appropriately
with any unreasonable demands.

■ System for Preventing Money Laundering, etc.

The Group recognizes that the prevention of money
laundering and terrorist financing is one of the most important
responsibilities for a financial institution to perform.
Accordingly, we position it as an important issue in terms ofbusiness strategy, and we are working to implement systematic
measures in line with the "Basic Policy on Countermeasuresagainst Money Laundering and Terrorist Financing.”
In our company, the officer in charge of the Risk Management
Department is the person responsible for overseeing
measures to combat money laundering, and the Risk
Management Department is the department overseeing
these efforts. The Group has a system in place to centrally●

Identification and assessment of risks associated withthe use of goods, services, etc., for money launderingand terrorist financing, and the implementation of riskmitigation measures in accordance with the nature ofthese risks●Introduction of various IT systems to properly manage
risks associated with money laundering and terrorist
financing

In addition, TSUBASA Alliance, Co., Ltd., which was jointly
established by Daishi Hokuetsu Bank with the participation of
TSUBASA Alliance member banks, has established an AntiMoney Laundering Center (AML Center) within the company,

manage measures against money laundering and terrorist
financing throughout the Group as a whole, and the status of
the management of these measures is regularly reported to
the Compliance Committee, the Board of Directors, etc.
In addition, at Group companies, including Daishi Hokuetsu
Bank, we have appointed persons responsible for these
efforts from among their respective officers, and have alsoestablished departments to oversee these efforts. In order toprevent money laundering and terrorist financing, as well as
to protect customers' assets from various financial crimes,
such as specialized fraud, the Group is mainly implementing
the following measures.
●

Regular confirmation and updating of customer
information in accordance with the“Guidelines for AntiMoney Laundering and Combating the Financing ofTerrorism”formulated by the Financial Services Agency●

Proactive appeals to customers to protect their assets
from financial crimes, such as specialized fraud●

Ongoing education and training for all Group officers
and employees

and work is underway to upgrade risk management systems
to prevent money laundering, terrorist financing, etc., incollaboration with other participating banks.

DAISHI HOKUETSU REPORT 2022

56

Value Creation Story / Communication with Stakeholders

Business Base to Support New Value Creation
Corporate Governance and Risk Management Systems■ Customer-oriented Business Operations (Fiduciary Duty)

Daishi Hokuetsu Bank and Daishi Hokuetsu Securities
have been conducting customer-oriented initiatives in theasset management advice business in accordance with our“Basic Policy on Customer-oriented Business Operations,”
which the company announced in June 2019.
All our officers and employees will continue to work forthe best interests of our customers, contributing to theirstable asset building by proposing appropriate products
and services that meet their investment objectives and life
cycles, and by providing easy-to-understand information.

The

Basic

Policyon

Customer-oriented

Business

Operations and the Status of Initiatives and Key
Performance Indicators (KPIs) under the Basic Policy for
the Fiscal Year Ended March 2022 are posted on thecompany’s website.

Status of Initiatives and Key Performance Indicators(KPIs) under the Basic Policy
https://www.dhfg.co.jp/other/fiduciary/■ Matters Related to the Internal Control System

The company has established the "Basic Policy on Internal
Controls" by resolution of the Board of Directors and weare working to enhance its effectiveness, in order todevelop a "systems to ensure the properness of operations"at the company and Group companies. Going forward, inFor details of the company's basic approach to internal
control systems and the status of their development,

please refer to the "Corporate Governance Report"
posted on the company’s website.

Corporate Governance Reportorder to respond appropriately to changes in the businessenvironment, we will continue to strengthen and enhance
our internal control systems by continuously reviewing

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

■ Response to the Financial ADR System (Alternative Dispute Resolution)
The financial ADR system is a system for the simple and prompt
settlement of issues arising between customers and financial institutions
outside of court, based on facilitation, mediation, and arbitration of by aneutral and fair third-party dispute resolution institution. Daishi Hokuetsu
Bank has entered into a contract concerning dispute resolution procedureswith the Japan Bankers Association, which is a designated dispute resolution
organization.

57

DAISHI HOKUETSU REPORT 2022

Designated dispute resolution organization with which
Daishi Hokuetsu Bank has concluded a contract

JBA Customer Relations Center☎0570-017109☎03-5252-3772
Reception hours: 9:00am to 5:00pm on weekdays(excluding bank holidays and national holidays)

Message from Management

Overview of the Daishi Hokuetsu FG

Value Creation Story

Communication with Stakeholders

Corporate Data

Communication with Stakeholders
The company builds relationships of trust through frequent communication with many stakeholders, including customers,
local communities, shareholders, and employees. In addition, in order to ensure the soundness and transparency of ourmanagement, we actively engage in disclosure activities to create an understanding of the status of the company’smanagement, sustainability initiatives, and other matters.

Communication with Customers
Daishi Hokuetsu Bank works to improve business
operations by sharing opinions and requests received from
customers through dialogue at counters, etc., in the head

Customers

Opinions and requests
Sales offices

office and branches,“Customer Opinion Cards”placed on
counters at sales offices, the website, call centers, etc.

Products
Services

Customer Opinion Cards

Branches

WebsiteATM

Communication with Regional Society■ Financial Education Activities

In

order

to

supportthephysicalandemotional

development of children in local communities, Daishi
Hokuetsu Bank has held the“Daishi Hokuetsu Academy”
since the fiscal year ended March 2014, as an activity toprovide financial education. A total of 12,146 students

school visit

participated during the period from when the academy
opened until the fiscal year ended March 2022.
■ Scholarships from the Daishi Hokuetsu Scholarship Association

Since 1962, Daishi Hokuetsu Bank has granted non-repayable scholarships
to young people with outstanding academic records who are unable toattend university for financial reasons.

Number of students
granted scholarships(FY1962 to FY2021)

1,218■ Initiatives to Promote Sports and Culture

Daishi Hokuetsu Bank is actively involved in the promotionof local sports, and has sponsored the “Healthy Daishi
Hokuetsu Bank Cup Volleyball Tournament for Niigata
Prefecture Elementary School Students”since 1989, andthe “Daishi Hokuetsu Bank Battle of the Flags YouthBaseball Tournament” since 1999, while also providing
support for local sports clubs.
In order to promote regional music and artistic culture,
Daishi Hokuetsu Bank also holds the Daishi Life-Up Concert
to provide high-quality music, traditional performing arts,and other events.

Elementary school
volleyball tournament

Daishi Hokuetsu Hall

■ Volunteer activities by the Daishi Hokuetsu Magokoro Association

Daishi Hokuetsu Bank engages in volunteer environmental
protection

activities

anddonatestoenvironmental

protection and social welfare groups in Niigata Prefecture
through the Daishi Hokuetsu Magokoro Association, an
organization operated through voluntary participation anddonations from executives and employees.
Donation of Vehicle to the Sado Japanese Crested Ibis Conservation Center

DAISHI HOKUETSU REPORT 2022

58

Communication with Stakeholders / Corporate Data

Communication with Stakeholders
Communication with Shareholders■ Disclosure Activities

The company actively engages in disclosure activities to create anunderstanding of the status of management, sustainability initiatives,and other matters among shareholders.
In the fiscal year ended March 2022, we held company information
sessions for institutional investors (full-year and interim earnings
results), and we also distributed explanatory materials and videos
for individual investors on our website.

Company Briefing

https://www.dhfg.co.jp/
financial/ir/session/Materials

Video of company briefing■ Shareholder Beneﬁts System

The company has implemented a shareholder benefits system inorder 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-term ownership of the company’sstock.
Shareholders who have continuously owned atleast 100 shares (1 unit) for at least one year
Applicable

Shareholders(the same shareholder number is listed

continuously at least 3 times in the shareholder
registry as of March 31 and September 30 ofeach year), with March 31 as the date ofrecord shall be applicable.

(1) Catalog listing special local goods from
Details

Niigata Prefecture and various types of

Number of Shares Owned

Amount of Gift(2) Catalog listing special local goods from100 shares to less than
1,000 shares

Equivalent to 2,500 yen

1,000 shares or more

Equivalent to 6,000 yen

donationsother prefectures as a TSUBASA Alliance
Joint Plan

Communication with Employees
In order to achieve our Management Philosophy and ensure that all
officers and employees can focus on their day-to-day operations witha“unity of purpose,”the company holds“Officer Dialogue Exchange
Meetings,” in which the President and other officers directly
communicate their views and the importance of compliance toemployees.
In addition, we regularly conduct employee“engagement surveys”
and“harmony questionnaires”aimed at post-merger organizational
harmony, and report the results to the Board of Directors. In this way,
we are implementing initiatives to enhance engagement through, forexample, reflecting the views of employees in management.
59

DAISHI HOKUETSU REPORT 2022

Officer Dialogue Exchange Meeting

Message from Management

Overview of the Daishi Hokuetsu FG

Value Creation Story

Communication with Stakeholders

Corporate Data

List of Executives

Corporate Data

Director(As of June 24, 2022)
Chairman and Representative
Director

President and Representative
Director

Number of years served
as director
Attendance at meetingsof the Board of Directors
Attendance at meetingsof the Nomination andCompensation
Committee
Number of theCompany's shares held

Number of years served
as director
Attendance at meetingsof the Board of Directors
Attendance at meetingsof the Nomination andCompensation
Committee
Number of theCompany's shares held

Fujio Namiki

3 years 9
months
12 / 12
4/4
8,600

Senior Managing and Representative
Director

Kazuyoshi Hirokawa
Number of years served
as director
Attendance at meetingsof the Board of Directors
Attendance at meetingsof the Nomination andCompensation
Committee
Number of theCompany's shares held

12 / 12
4/4
3,500

Director

Makoto Takahashi

12 / 124/4
5,700

Number of years served
as director
Attendance at meetingsof the Board of Directors
Number of theCompany's shares held

3 years 9
months
12 / 12
4,150

Director

Ken Shibata

Takayoshi Tanaka

2 years
12 / 122,500

Director

Toshiyuki Maki

Number of years served
as director
Attendance at meetingsof the Board of Directors
Number of theCompany's shares held

3 years 9
months3 years 9
monthsDirector

Number of years served
as director
Attendance at meetingsof the Board of Directors
Number of theCompany's shares held

Michiro Ueguri

1 year12 / 12900

Number of years served
as director
Attendance at meetingsof the Board of Directors
Number of theCompany's shares held

1 year12 / 12
4,826

Director

Masami Watanabe

Number of years served
as director
Attendance at meetingsof the Board of Directors
Number of theCompany's shares held

1 year12 / 121,212

DAISHI HOKUETSU REPORT 2022

60

Corporate Data

List of Executives
Director(As of June 24, 2022)

Director (Auditand Supervisory
Committee Member)Yutaka Kimura
Number of years served
as director
Attendance at meetingsof the Board of Directors
Attendance at meetingsof the Audit andSupervisory Committee
Number of theCompany's shares held

2 years
12 / 1212 / 121,300

Outside directors(As of June 24, 2022)

Director (outside) Audit andSupervisory Committee Member

Director (outside) Audit andSupervisory Committee Member

Number of years served
as director
Attendance at meetingsof the Board of Directors
Attendance at meetingsof the Audit andSupervisory Committee
Attendance at meetingsof the Nomination andCompensation Committee
Number of theCompany's shares held

Number of years served
as director
Attendance at meetingsof the Board of Directors
Attendance at meetingsof the Audit andSupervisory Committee
Attendance at meetingsof the Nomination andCompensation Committee
Number of theCompany's shares held

Toshizo Oda

3 years 9
months
11 / 12
11 / 12
4/4
3,100

Director (outside) Audit andSupervisory Committee Member

Kunio Mori

Number of years served
as director
Attendance at meetingsof the Board of Directors
Attendance at meetingsof the Audit andSupervisory Committee
Attendance at meetingsof the Nomination andCompensation Committee
Number of theCompany's shares held

1 yearKazuaki Matsumoto
3 years 9
months
12 / 1212 / 12
4/4
100

Director (outside) Audit andSupervisory Committee Member

Tadashi Shirai
Newly appointed

12 / 1212 / 124/40Number of theCompany's shares held

0

Director (outside) Audit andSupervisory Committee Member

Hiroyuki Kikuchi
Newly appointed

Number of theCompany's shares held0*Attendance at meetings of the Board of Directors, the Audit and Supervisory Committee, and the Nomination and Compensation
Committee is from the conclusion of the 3rd ordinary general meeting of shareholders of the company in June 2021 until the 4th
ordinary general meeting of shareholders of the company in June 2022.
61

DAISHI HOKUETSU REPORT 2022

Message from Management

Overview of the Daishi Hokuetsu FG

Value Creation Story

Communication with Stakeholders

Corporate Data

List of Group Companies
Status of Each Group Company(as of March 31, 2022)

Company names:

Main business activities

Date of establishment

Capital stock

BankingNovember 2, 1873

¥32,776 million

Securities

August 8, 1952

¥600 million

HR recruitment services andconsulting services related tocorporate HR

May 24, 2019

¥30 million

LeasingNovember 11, 1974

¥100 million

Consulting services and survey,
research, and information
provision services related to theeconomy and society

July 1, 1997

¥30 million

Daishi Hokuetsu Capital Partners Co., Ltd.

Venture capital services

June 8, 1984

¥20 million

The Daishi Guaranty Co., Ltd.

Credit guarantees

October 27, 1978

¥50 million

The Hokuetsu Credit Guarantee Co., Ltd.

Credit guarantees

August 20, 1986

¥210 million

The Hokuetsu Leasing Co., Ltd.

LeasingNovember 1, 1982

¥100 million

Computer-related business

May 10, 1976

¥15 million

Credit cards and credit
guarantees

November 12, 1982

¥30 million

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

Credit cards

March 1, 1990

¥30 million

The Hokuetsu Card Co., Ltd.

Credit cards and credit
guarantees

June 1, 1983

¥20 million

The Daishi Hokuetsu Bank, Ltd.

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

Daishi Hokuetsu Securities Co., Ltd.
8-26 Jonaicho3-chome, Nagaoka-shi

Daishi Hokuetsu Career Bridge, Co., Ltd.

Hokuetsu Daiichi Bldg., 2nd Floor 2-25 Higashi-odori1-chome, Chuo-ku,
Niigata-shi

The Daishi Hokuetsu Lease Co., Ltd.
2-10 Akashi2-chome, Chuo-ku, Niigata-shi

Daishi Hokuetsu Research & Consulting, Ltd.

Daishi Kaijo Bldg., 1-18 Higashiodori2-chome, Chuo-ku, Niigata-shi

Daishi Kaijo Bldg., 1-18 Higashiodori2-chome, Chuo-ku, Niigata-shi
Fuyu-Sha Bldg., 3rd Floor 224-1 Honcho-dori 5-bancho, Chuo-ku, Niigata-shi
Choryo-Sha Bldg., 1st Floor 13-23 Miyabara2-chome, Nagaoka-shi
Hokuetsu Higashi Bldg., 5th Floor 9-20 Kesajiro1-chome, Nagaoka-shi

The Daishi Computer Service Co., Ltd.

1-17 Abumi1-chome, Chuo-ku, Niigata-shi (inside the Daishi Hokuetsu 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.

Hokuetsu Higashi Bldg., 4th Floor 9-20 Kesajiro1-chome, Nagaoka-shi■ Information About The Daishi Hokuetsu Bank’s Branch Network (as of July 31, 2022)
Number of branches: 203

189 branches within Niigata Prefecture(including 5 field offices)

14 branches outside of Niigata Prefecture
Number of sites: 161

Sado Area(5 branches, 5 sites)*The number of sites shows the number of sales sites after
the integration of branches using the branch-in-branchmethod.
*The number of branches does not include three virtual
branches.

Shimoetsu Area
(102 branches, 77 sites)

Chuetsu Area
Click here for our website

Joetsu Area

(63 branches, 50 sites)(19 branches, 16 sites)

Please refer to the Daishi Hokuetsu Bank website for specific store locations,business hours, etc.

Outside Niigata(14 branches, 13 sites)

DAISHI HOKUETSU REPORT 2022

62

Financial Data
CONTENTS 
Consolidated Balance Sheets

64

Consolidated Statements of Income

66

Consolidated Statements of Comprehensive Income

66

Consolidated Statements of Shareholders' Equity

67

Consolidated Statements of Cash Flows70

The Status of Financial Results (Consolidated)

71

Non-Consolidated Balance Sheets (Daishi Hokuetsu Bank)83

Non-Consolidated Statements of Income (Daishi Hokuetsu Bank) 84

63

DAISHI HOKUETSU REPORT 2022

Consolidated Balance Sheet
Years ended March 31, 2022
Note: The translations of the Japanese yen amounts into US dollars are using the prevailing exchange rate at March 31,
2022, which was ¥122.39 to US $1.

■ Assets(Millions of Yen)

(Millions of Yen)

(Thousands of U.S.Dollars)

2021

2022

2022

Cash and due from banks¥2,055,703¥2,758,985$22,542,574

Monetary claims bought

13,080

14,115

115,334

Trading account securities

3,234

3,018

24,663

Securities

2,451,146

2,501,271

20,436,894

Loans and bills discounted

41,785,295

4,937,462

5,114,102

Foreign exchanges

16,802

16,304133,216

Other assets

147,069

175,270

1,432,067

Tangible fixed assets

57,86456,855464,546

Intangible fixed assets

17,246

13,919113,727

Assets related to retirement benefits

11,584

14,352

117,265

Deferred tax assets

1,167

10,29584,166

Customersʼ liabilities for acceptances and guarantees

18,61418,966

154,965

Allowance for loan losses
Total Assets■ Liabilities

Deposits
Negotiable certificates of deposit
Receivables under resale agreements
Payables under securities lending transaction
Borrowed money
Foreign exchanges
Borrowed money from trust account
Other Liabilities
Provision for bonuses
Provision for directorsʼ bonuses
Provision for share-based payment
Retirement benefit related liabilities
Provision for directorsʼ retirement benefits
Provision for reimbursement of deposits
Provision for system cancellation losses
Provision for contingent loss
Reserves under the special laws
Deferred tax liabilities
Deferred tax liabilities for land revaluation
Acceptances and guarantees
Total Liabilities(24,443)(27,153)(221,857)¥9,706,533¥10,670,304$87,182,811(Millions of Yen)

(Millions of Yen)

(Thousands of U.S.Dollars)

2021

2022

2022

¥8,113,424¥8,207,503$67,060,248

76,876111,132

233,401
37,006

1,907,033
302,367

188,425
663,603

298,397
1,358,761

2,438,088
11,101,903

186
202

209
2,886

1,710
23,58162,5992,682

65,1002,350

531,912
19,203

127
-

120
541

985
4,423

694
41

653
36

5,342
294

1,831
12

1,454
-

11,887
-

1,401
15

1,615
16

13,198
138

5,646
5,169

2,610
5,163

21,332
42,19018,61418,966

154,965¥9,252,687¥10,236,798$83,640,809

DAISHI HOKUETSU REPORT 2022

64

■ Net Assets(Millions of Yen)

(Thousands of U.S.Dollars)

2021

2022

2022

¥30,000
87,665¥30,000
98,865$245,118
807,790

Treasury stocks

271,627(808)

281,174(1,566)

2,297,365(12,798)

Shareholdersʼ eguity

388,485

408,473

3,337,475

Valuation difference on available-for-sale securities

39,9488,030

65,611

Deffered gains or losses on hedges(4,452)

464

3,793

Revaluation reserve for land

6,266

6,251

51,082

Capital stock
Capital surplus
Retained earnings

Remeasurements of defined benefit plans

4,426

5,240

42,819Total accumulated other comprehensive income

46,18819,987

163,307

Subscription rights to shares
Non-controlling interests
Total net assets
Total Liabilities and Net assets

65(Millions of Yen)

DAISHI HOKUETSU REPORT 2022

692

-

-

18,4795,044

41,218453,845433,505

3,542,002¥9,706,533¥10,670,304$87,182,811

Consolidated Statements of Income
Years ended March 31, 2022
Ordinary income
Financing income
Interest on loans and discounts
Interest and dividends on securities
Interest on call loans and bills boughtInterest on receivables under securities borrowing
transactions
Interest on deposits with banks
Other interest income
Trust fees
Fees and commissions
Other ordinary income
Other income
Ordinary expenses
Financing expenses
Interest on deposits
Interest on negotiable certificates of deposit
Interest on call money and bills soldInterest on bills soldInterest on payables under securities lendingtransactions
Interest on borrowings and rediscounts
Other interest expenses
Fees and commissions payments
Other ordinary expenses
General and administrative expenses
Other expenses
Ordinary profit
Extraordinary income
Gain on disposal of noncurrent assets
Gain on reversal of subscription rights to shares
Gain on revision of retirement benefit plan
Extraordinary loss
Loss on disposal of noncurrent assets
Impairment loss
Transfer to reserve for financial products transaction
liabilities
Provision for share‐based payment
Income before income taxes
Income taxes‐current
Income taxes‐deferred
Net Income
Profit attributable to non‐controlling interests
Net income reverting to parent company shareholders

Consolidated Statements of Comprehensive
IncomeYears ended March 31, 2022
Net Income
Other Comprehensive Income
Valuation difference on available‐for‐sale securities
Deffered gains or losses on hedges
Retirement benefit adjustment amountComprehensive income（Millions of Yen）

（Millions of Yen）

(Thousands of U.S.Dollars)

2021

2022

2022

¥143,132
63,636
46,061
16,956(118)¥135,711
62,68445,612
16,008(69)$1,108,844
512,171372,679
130,800
(568)

0

1

13

383
353
1
27,96833,81917,706125,631
3,120
738
17
11
115

762
369
53
28,71534,066
10,190112,166
2,287
458
10
0
112

6,226
3,019
437
234,625
278,347
83,262916,466
18,692
3,745
86
0
920

378

174

1,424

60
1,798
8,055
29,332
71,96013,163
17,500
1,039
0
1,038
818
293
521

33
1,497
7,703
24,17965,07012,92423,545
418
0
418
622
119
74

277
12,23862,944
197,562531,669
105,598
192,378
3,423
1
3,421
‐
5,082
979
604

4

1

8

17,721
5,951
327
11,441646¥10,795

427
23,3428,281(469)
15,530385¥15,1443,488
190,718
67,663(3,838)
126,893
3,150$123,743（Millions of Yen）

（Millions of Yen）

(Thousands of U.S.Dollars)

2021

2022

2022

¥11,441
41,306
19,625
10,404
11,27752,748¥15,530(27,869)(33,600)
4,916
814(12,338)$126,893(227,708)(274,532)
40,171
6,652(100,815)

51,827(11,042)(90,221)921(1,296)(10,593)(Comprehensive income attributable to)Comprehensive income attributable to equities of parent
Comprehensive income attributable to non‐controllinginterests

DAISHI HOKUETSU REPORT 2022

66

Consolidated Statements of Shareholders' Equity
Years Ended March 31, 2021

(Millions of Yen)

Shareholders' equity

Balance at March 31,2020

Capital stock

Capital surplus¥30,000¥87,670

Retainedearnings¥266,161

Treasury stocks

Shareholdersʼ
equity¥(1,023)¥382,809

Changes of items during theperiodDividends from surplus(5,480)(5,480)Net income reverting toparent company
shareholders

10,795

10,795Purchase of treasury stock
Disposal of treasury stock(5)

Reversal of revaluation
reserve for land

(5)

(5)

220

214

151

151

Net changes of items otherthan shareholders' equity
Total changes of items during
periodBalance at March 31,2021

‐

(5)

5,466

214

5,675

¥30,000¥87,665¥271,627¥(808)¥388,485

Accumulated other comprehensive income
Valuationdifference on
available‐for‐sale securities
Balance at March 31,2020¥20,596

Total
Subscription Non‐controlling
Total net assets
Deffered gains Revaluation Remeasurements accumulated rights to sharesinterests
or losses onreserve for of defined benefit
otherhedgeslandplanscomprehensive
income¥(14,856)¥6,417¥(6,850)¥5,307¥767¥17,569¥406,453

Changes of items during theperiod67

Dividends from surplus(5,480)Net income reverting toparent company
shareholders

10,795Purchase of treasury stock(5)

Disposal of treasury stock214

Reversal of revaluation
reserve for land151

Net changes of items otherthan shareholders' equity

19,351

10,404(151)

11,27740,881(75)

910

41,716

Total changes of items during
period19,351

10,404(151)

11,27740,881(75)

910

47,391

Balance at March 31,2021¥39,948¥(4,452)¥6,266¥4,426¥46,188¥692¥18,479¥453,845

DAISHI HOKUETSU REPORT 2022

Consolidated Statements of Shareholders' Equity
Years Ended March 31, 2022

(Millions of Yen)

Shareholders' equity

Balance at March 31,2021

Capital stock

Capital surplus¥30,000¥87,665

Cumulative effect of changes
in accounting policies
Restated balance

Retainedearnings¥271,627

Treasury stocks

Shareholdersʼ
equity¥(808)¥388,485(121)
30,00087,665271,506

(121)
(808)

388,363

Changes of items during theperiodDividends from surplus(5,490)(5,490)Net income reverting toparent company
shareholders

15,144

15,144Purchase of treasury stock
Disposal of treasury stock(57)

Reversal of revaluation
reserve for land
Change in ownership interestof parent due to transactions
with non‐controlling interests(1,088)(1,088)

330

273

14

14

11,257

11,257

Net changes of items otherthan shareholders' equity
Total changes of items during
periodBalance at March 31,2022‐

11,199

9,668

(758)

20,110¥30,000¥98,865¥281,174¥(1,566)¥408,473

Accumulated other comprehensive income
Valuationdifference on
available‐for‐sale securities
Balance at March 31,2021¥39,948

Total
Subscription Non‐controlling
Deffered gains Revaluation Remeasurements accumulated
Total net assets
rights to sharesinterests
or losses onreserve for of defined benefit
otherhedgeslandplanscomprehensive
income¥(4,452)¥6,266¥4,426¥46,188¥692¥18,479

Cumulative effect of changes
in accounting policies
Restated balance¥453,845(121)

39,948(4,452)

6,266

4,426

46,188692

18,479453,723

Changes of items during theperiodDividends from surplus(5,490)Net income reverting toparent company
shareholders

15,144Purchase of treasury stock(1,088)

Disposal of treasury stock273

Reversal of revaluation
reserve for land
Change in ownership interestof parent due to transactions
with non‐controlling interests

14
11,257

Net changes of items otherthan shareholders' equity(31,917)

4,916

(14)

814

(26,201)(692)(13,434)(40,328)

Total changes of items during
period(31,917)

4,916

(14)

814

(26,201)(692)(13,434)(20,218)

Balance at March 31,2022¥8,030¥464¥6,251¥5,240¥19,987‐¥5,044¥433,505

DAISHI HOKUETSU REPORT 2022

68Consolidated Statements of Shareholders' Equity(Thousands of U.S.Dollars)

Years Ended March 31, 2022
Shareholders' equity

Balance at March 31,2021

Capital stock

Capital surplus$245,118$716,280

Cumulative effect of changes
in accounting policies
Restated balance

Retainedearnings$2,219,363

Treasury stocks

Shareholdersʼ
equity$(6,605)$3,174,156(994)
245,118

716,280

2,218,368(994)(6,605)

3,173,161

Changes of items during theperiodDividends from surplus(44,861)(44,861)

Net income reverting toparent company
shareholders

123,743

123,743

Purchase of treasury stock
Disposal of treasury stock(467)

Reversal of revaluation
reserve for land
Change in ownership interestof parent due to transactions
with non‐controlling interests(8,896)(8,896)

2,702

2,235

115

115

91,977

91,977

Net changes of items otherthan shareholders' equity
Total changes of items during
periodBalance at March 31,2022‐

91,51078,997(6,193)

164,313$245,118$807,790$2,297,365$(12,798)$3,337,475

Accumulated other comprehensive income
Valuationdifference on
available‐for‐sale securities
Balance at March 31,2021$326,400

Total
Subscription Non‐controlling
Total net assets
Deffered gains Revaluation Remeasurements accumulated rights to sharesinterests
or losses onreserve for of defined benefit
otherhedgeslandplanscomprehensive
income$(36,377)$51,197$36,167$377,387$5,656$150,990

Cumulative effect of changes
in accounting policies
Restated balance$3,708,191(994)

326,400(36,377)

51,19736,167377,387

5,656

150,990

3,707,196

Changes of items during theperiodDividends from surplus(44,861)

Net income reverting toparent company
shareholders

123,743

Purchase of treasury stock(8,896)

Disposal of treasury stock2,235

Reversal of revaluation
reserve for land
Change in ownership interestof parent due to transactions
with non‐controlling interests

69

115
91,977

Net changes of items otherthan shareholders' equity(260,788)

40,171

(115)

6,652

(214,080)(5,656)(109,771)(329,507)

Total changes of items during
period(260,788)

40,171

(115)

6,652

(214,080)(5,656)(109,771)(165,194)

Balance at March 31,2022$65,611$3,793$51,082$42,819$163,307‐$41,218$3,542,002

DAISHI HOKUETSU REPORT 2022

The Status of Financial Results (Consolidated)
Consolidated Statement of Cash Flows
Years ended March 31, 2022

（Millions of Yen）

（Millions of Yen）

(Thousands of U.S.Dollars)

2021

2022

2022

¥17,721
6,241
521
1,338
135
351
(2)
(8,886)(8,251)¥23,342
6,959
74
2,709
214
(332)
(6)
541
(2,767)(40)$190,718
56,860604
22,1381,751(2,718)(56)
4,423(22,612)
(328)

1

(4)

(40)

(586)

(376)

(3,076)

Net cash provided by (used in) operating activities
Income before income taxes
Depreciation costs
Impairment loss
Increase (decrease) in allowance for loan losses
Increase (decrease) in provision for contingent loss
Increase (decrease) in provision for bonuses
Increase (decrease) in provision for directors’ bonuses
Increase (decrease) in provision for share‐based payment
Increase (decrease) in provision for retirement benefits
Increase (decrease) in provision for retirement liability
Increase (decrease) in provision for directors’ retirement
benefits
Increase (decrease) in provision for reimbursement ofdeposits
Increase (decrease) in provision for system cancellation
lossesFinancing income
Financing expenses
Loss (gain) related to securities
Foreign exchange losses (gains)
Loss (gain) on disposal of noncurrent assets
Net decrease (increase) in trading account securities
Net decrease (increase) in loans and bills discounted
Net increase (decrease) in deposit
Net increase (decrease) in negotiable certificates of deposit
Net increase (decrease) in borrowed money (excluding
subordinated borrowings)
Net decrease (increase) in deposit (excluding deposit paid
to Bank of Japan)
Net decrease (increase) in call loans
Net increase (decrease) in call money
Net increase (decrease) in payables under securities
lending transactions
Net decrease (increase) in foreign exchange‐assets
Net increase (decrease) in foreign exchange‐liabilities
Net increase (decrease) in borrowed money from trust
account
Revenue for finance
Payments for finance
Other
Subtotal
Income taxes paid
Net cash provided by (used in) operating activities

(400)

(12)

(99)

(63,636)
3,120(5,103)
(2)
292
(52)
145,857
740,249(175,332)(62,684)
2,287(1,133)(0)
119
215(176,640)
94,079156,525(512,171)
18,692(9,259)
(1)
978
1,764
(1,443,255)
768,688
1,278,909

264,371695,158

5,679,863

174

(48)

(395)

4,996
36,517(1,035)(74,125)(8,459)(605,649)(137,705)

109,972

898,538

3,669
(102)

497
22

4,067
182

76

2,683

21,92766,516(3,470)20,075
908,696(5,098)903,597

65,441(2,508)(35,267)
803,860(6,174)
797,685534,693(20,495)(288,157)
6,568,024(50,451)
6,517,572(1,116,196)
796,067
249,931(4,752)76(3,647)(78,519)(1,099,541)
783,306
233,472(1,906)80(921)(85,510)(8,983,918)
6,400,086
1,907,614(15,576)
657(7,531)(698,668)(5,480)(10)(5)
1(5,490)(10)(1,088)0(44,861)(87)(8,896)1-(2,352)(19,219)(5,495)
2
819,585
1,234,458¥2,054,043(8,942)0703,233
2,054,043¥2,757,277(73,062)1
5,745,842
16,782,772$22,528,615

Net cash provided by (used in) investment activities
Purchase of securities
Proceeds from sales of securities
Proceeds from redemption of securities
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Net cash provided by (used in) investment activities
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
Purchase of shares of subsidiaries not resulting in change
in scope of consolidation
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at the end of the year

DAISHI HOKUETSU REPORT 2022

70

The Status of Financial Results (Consolidated)

Notes (From April 1, 2021 to March 31, 2022)(Basic items that form the foundation for preparation of consolidated
financial results)
1. Matters regarding the scope of consolidation
(1)

(2)

2.

Matters related to the application of equity method

(1)
(2)
(3)

(4)

3.
4.

Nonconsolidated subsidiaries subject to application of equity method
There are no applicable items
Affiliated companies subject to application of equity method
There are no applicable items
Nonconsolidated subsidiaries not subject to application of equity method: 4 companies
Daishi Food and Agriculture Assist Fund Investment Limited Partnership, Daishi
Startup Support Fund Investment Limited Partnership, Hokuetsu Sixth Industry
Support Fund Investment Limited Partnership, No. 1 Daishi Hokuetsu Regional
Creation Investment Limited Partnership.
Nonconsolidated subsidiaries not subject to application of equity method havebeen excluded from the scope of application of equity method since their net profit
or loss for the current term (amount corresponding to equity), retained earnings(amount corresponding to equity), and other accumulated comprehensive income(amount corresponding to equity), etc., do not have an important impact on the
consolidated financial statements.
Affiliated companies not subject to application of equity method
There are no applicable items

(6)

(7)

(8)

(9)

Matters related to the fiscal year, etc., of consolidated subsidiaries(10)

Matters related to accounting policies

(11)

(2)

(12)

The closing date for consolidated subsidiaries is as follows:
Last day of March: 13 companies
(1)

(3)
(4)

(5)

71

Consolidated subsidiaries: 13 companies
Company names:
The Daishi Hokuetsu Bank, Ltd., Daishi Hokuetsu Securities Co., Ltd., The Daishi
Hokuetsu Career Bridge Co., Ltd., The Daishi Hokuetsu Lease Co., Ltd., Daishi
Hokuetsu Research & Consulting. Ltd., Daishi Hokuetsu Capital Partners Co., Ltd.,
Daishi Credit Guarantee Co., Ltd., The Hokuetsu Credit Guarantee Co., Ltd.,
Hokuetsu Leasing Co., Ltd., The Daishi Computer Service Co., Ltd., The Daishi JCB
Card Co., Ltd., The Daishi DC Card Co., Ltd., The Hokuetsu Card Co., Ltd.
(Note) The Daishi Hokuetsu Lease Co., Ltd., Daishi Hokuetsu Capital Partners Co.,
Ltd., and Daishi Hokuetsu Research & Consulting Ltd. changed their name from The
Daishi Lease Co., Ltd., The Daishi Management Consulting Co., Ltd., and The
Hokugin Economic Research Institute, Ltd., respectively, on October 1, 2021.
Nonconsolidated subsidiaries: 4 companies
Daishi Food and Agriculture Assist Fund Investment Limited Partnership, Daishi
Startup Support Fund Investment Limited Partnership, Hokuetsu Sixth Industry
Support Fund Investment Limited Partnership, No. 1 Daishi Hokuetsu Regional
Creation Investment Limited Partnership.
Nonconsolidated companies have been excluded from the scope of consolidation since
their assets, current account balance, net profit or loss for the current term (amountcorresponding to equity), retained earnings (amount corresponding to equity), andother accumulated comprehensive income (amount corresponding to equity), etc.,
have little relevance and will not prevent rational judgment from being made regarding
the financial status and management performance of the corporate group.

Valuation criterion and valuation method for trading account securities:
Valuation of trading account securities is made using the market value method (costof securities sold is calculated mainly by the moving average method).
Valuation criterion and valuation method for valuable securities
The amortized cost method (straight-line method) using the moving averagemethod is used for securities held for ownership until maturity. For other trading
account securities, the market value method (cost of sale to be calculated using themoving average method) is used. However, the prime cost principle using themoving average method is used for shares without market value.
The valuation difference for other trading account securities is processed by the all
net asset direct entry method.
Valuation criterion and valuation method for derivative transaction
Valuation of derivative transactions is conducted using the market value method.
Depreciation method for fixed assets(i) Tangible fixed assets (excluding leased assets)
The straightline method is mainly used for tangible fixed assets.
Major service life is as follows:
Buildings
10 to 50 years
Other
2 to 20 years(ii) Intangible fixed assets (excluding leased assets)
The straightline method is used for intangible fixed assets. Software used by theCompany is amortized based on the usage period (5 to 9 years) determined by
the Company and its 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 straightline
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 isincluded in the lease agreement and zero for all other leases.
Criteria for recording allowances for loan losses
Allowances for loan losses of consolidated subsidiaries in banking business arerecorded as per the depreciation and allowance criteria set in advance, as follows:
Claims related to debtors who are legally insolvent, such as those facing bankruptcy
or special liquidation (“Bankrupt debtors”) or debtors under equivalent situations(“Effectively bankrupt debtors”) are recorded as follows: The recorded amount is
the remaining balance after deduction from the book value after direct reduction as
stated in the proviso, from the possible marketable collateral amount andrecoverable amount from guarantees. For claims against debtors not currently
insolvent but with a high risk of future insolvency (“Potentially bankrupt debtors”),
anticipated losses over the next three years on the amount of balance, after
deduction of the possible marketable collateral amount and recoverable amountfrom guarantees from the claim amount, are recorded. Amounts of anticipatedlosses were calculated by the loss rate based on average values of bad debt ratio
over a set period of time in the past (three calculation periods),

DAISHI HOKUETSU REPORT 2022

(13)

(14)

(15)
(16)

(17)

according to actual bad debt over the past three years. If the loss rate based on averagevalues over a longer period of time taking the past business cycle into account was
higher, then the difference was added to this calculation as the necessary corrections
for future predictions and other factors. For debtors from whom losses are anticipated
to exceed the loss ratio, the amount deemed necessary is recorded after
comprehensive judgment of the possible recoverable amount.
For claims against debtors other than the above (one classification of normal
debtors and three classifications of debtors requiring attention*), amounts ofanticipated losses over the next one or three years are mainly recorded. Amounts ofanticipated losses were calculated by the loss rate based on average values of bad
debt ratio over a set period of time in the past (three calculation periods), according
to actual bad debt over the past one or three years. If the loss rate based on
average values over a longer period of time taking the past business cycle into
account was higher, then the difference was added to this calculation as thenecessary corrections for future predictions and other factors.
Sales-related divisions have conducted asset 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.
*The three classifications of debtors requiring attention are classified according towhether or not there is a business improvement plan and whether or not there areloans with relieved loan conditions.
Provided, however, that for collateral and claims with guarantees against Bankrupt
debtors and Effectively bankrupt debtors, the balance after deduction of thevalidated amount of collateral and the amount expected to be recoverable from theguarantee are deducted directly from the amount of the claim as the estimateduncollectable amount, and stands at 9,738 million yen.
An amount acknowledged to be necessary, in consideration of the past loan loss rate
for general claims and estimated uncollectable amount 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.
Criteria for recording provision for bonuses
In preparation for expected bonus payment to employees, the amount of the
expected bonus payment pertaining to the relevant consolidated fiscal year has
been recorded as a provision for bonuses.
Criteria for recording provision for directors’s bonuses
In preparation for expected bonus payments to directors, the amount of the
expected bonus payment pertaining to the relevant consolidated fiscal year has
been recorded as provision for director’s bonuses.
Criteria for recording provision for share-based payment
In preparation for payment of compensation to directors of the Company and someconsolidated subsidiaries under the share-based payment plan, the amount of
anticipated compensation to directors acknowledged to have occurred before theclosing of the current consolidated fiscal year has been recorded as provisions forshare-based payment.
Criteria for recording provision for directors’s retirement benefits
In preparation for payment of retirement benefits to directors of consolidated
subsidiaries, the amount of expected retirement benefits for directors
acknowledged to have occurred before the closing of the current fiscal year has
been recorded as provisions for director’s retirement benefits.
Criteria for recording provision for reimbursement of deposits
In preparation for reimbursement of deposits from depositors for deposits in which
recording as a liability has been suspended, a loss occurring from future
reimbursement claims has been estimated, and the amount deemed necessary has
been recorded as a provision for reimbursement of deposits.
Provision for systems cancellation loss is made for the estimatedLoss on the cancellation before maturity of systems used by the banks (The Daishi Bank,
Ltd. and The Hokuetsu Bank, Ltd.) prior to the merger, accompanying the transition to
the systems to be adopted by Daishi Hokuetsu Bank, Ltd. after the merger.
Criteria for recording provision for contingent loss
Provisions for contingent loss are recorded by estimating the loss and recording theamount judged to be necessary, for possible loss occurring in the future forcontingent events other than events provided under other provisions
Criteria for recording reserves under the special laws
Reserves under special laws are reserves for financial product transaction liabilities
for consolidated subsidiaries conducting the securities business. The amountcalculated under the provisions of Article 46-5 of the Financial Instruments andExchange Act is set aside to compensate for loss in incidents occurring related tosecurities future transactions, etc.
Accounting method related to retirement benefits
In the calculation of retirement benefit liabilities, the benefit formula standard isadopted 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
Profit and loss processing using the straight-line method for a
cost
certain number of years (10 years) within the average employee
residual term of service at the time of occurrence.
Actuarial gain Profit and loss processing of the amount pro-rated by theor loss
straight-line method for a certain number of years (10 to 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 a simplified
method in the calculation of retirement benefit, in which the amount to be paid forvoluntary retirement at the end of the term is taken as the retirement benefit
liability in the calculation of retirement benefit liability and retirement benefit cost.
Criteria for recording of important profits and expenses
Criteria for recording profits and expenses related to finance lease transactions are
conducted by recording sales and cost of sales, when lease fees are received.
Criteria for conversion of foreign currency denominated assets and liabilities into
Japanese yen
Foreign currency denominated assets and liabilities are converted into Japanese yen
using the rate of exchange on the consolidated closing date.
Important risk hedging methods(i) Interest risk hedge
As a method of hedge accounting of interest risk occurring from financial assets
and liabilities of consolidated subsidiaries in the banking industry, “Individual
hedge” that directly establish correspondence between the target of the hedge
with the hedging method is partially adopted on assets and liabilities to conduct
accounting processing by deferred hedges. This allows the target of the hedging
method and the target of the hedge to be integrally managed. The effectivenessof the hedge is evaluated by verification of whether the interest risk subject tohedging has been diminished by the hedging method.
In addition, exceptional processing for interest swaps are made, and judgment
regarding the requirements for exception processing is used in lieu of thejudgment of hedge effectiveness.

The Status of Financial Results (Consolidated)(18)(ii) Exchange fluctuation risk hedging
Deferred hedge, as provided in “Handling in accounting and audit of foreign
currency denominated transactions, etc., in the processing of accounts in thebanking industry” (Special Audit Committee Report No. 25 by The JapaneseInstitute of Certified Public Accountants (JICPA) dated October 8, 2020,
hereinafter referred to as "Special Audit Committee Report No. 25"). The
effectiveness of the hedge is evaluated with currency swap transactions andexchange swap transactions, etc., conducted with the aim of diminishingexchange fluctuation risks of foreign currency denominated debts and credits andthe effectiveness of the hedge is evaluated by confirming the existence of aforeign currency position equivalent amount that matches the foreign currency
denominated debts and credits, which are the targets of the hedge.
Of the above hedging relationships, the exceptional treatment prescribed in the
PITF in question is applied to all hedging relationships included in the scope of
application of “Treatment of Hedge Accounting for Financial Instruments that
Reference LIBOR" (PITF No. 40, March 17, 2022). The details of the hedging
relationships to which this PITF is applied are as follows.
Hedge accounting methods...Deferral hedge accounting and exceptional
accounting for interest rate swaps.
Hedging instruments...Currency swaps and interest rate swaps
Hedged items...Securities and loans
Types of hedging transactions ...Cash flow hedges and hedges against market
fluctuations
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.

(Significant accounting estimates)

Items whose amount was recorded in the consolidated financial statements for the current
fiscal year based on accounting estimates, and which may have a significant impact on the
consolidated financial statements for the following fiscal year, are given below.
(Allowance for loan losses)
The Company has judged that the allowance for loan losses is important in accounting
estimates because the ratio of loans, etc. of consolidated subsidiaries engaged in thebanking business to the consolidated balance sheet of the Company group is relatively
high and the recording of the allowance for loan losses significantly affects the
management performance and financial status.
1. Amount recorded in the consolidated financial statements for the current consolidated
fiscal year
Allowance for loan losses¥27,153 million
Of this amount, the allowance for loan losses of consolidated subsidiaries engaged in thebanking business was 23,119 million yen, and corporate customers made up the majorityof the allowance for loan losses.
2. Information that contributes to understanding the nature of the significant accounting
estimates for the identified items(1)
Method of calculation
Estimated allowances for loan losses for consolidated subsidiaries engaged in
the banking business are calculated by conducting asset assessments under theasset self-assessment criteria to determine “debtor classifications” (normal
debtors, debtors requiring attention, debtors requiring special attention,
debtors in danger of bankruptcy, effectively bankrupt debtors, and bankrupt
debtors). Depreciations and allowances are then made in accordance with thedetermined debtor classifications under the depreciation and allowance criteria.
These estimates include judgments and assumptions, the key details of which
are as given below. Moreover, the method of calculation, including assumptions
for depreciation and allowances, is described in “4. Matters related toaccounting policies (5) Criteria for recording allowances for loan losses.”In order to assess the estimated recorded amount of the allowance for loan
losses, consolidated subsidiaries engaged in the banking business perform
verification by considering various factors to determine whether theassumptions used in estimating the allowance for loan losses are reasonable
and whether the balance of the allowance for loan losses is sufficient to coverpotential future losses.
(2)
Key assumptions
A key assumption is the “outlook on the borrower’s future performance when
determining debtor classifications.” This key assumption is the same as that
determined by the Company at the end of the previous consolidated fiscal year,
and has been determined as important again by the Company since any
material difference between the assumption and the actual results may have amaterial impact on the Company’s business results. The “outlook on the
borrower’s future performance when determining debtor classifications” is set
based on individual assessments of each borrower’s ability to earn income.
Each time a borrower discloses financial results or events that affect their
creditworthiness occur, we evaluate their financial position, cash flow, ability to
repay based on profitability, loan terms and conditions and their fulfillment,characteristics of their industry, etc., business continuity and profitability
outlook, and ability to repay debts based on cash flow, determining the debtor
classification by synthesizing these factors. Furthermore, in determining the
debtor classification, we consider both qualitative and quantitative information
about a borrower. Qualitative information includes assumptions about theborrower’s technical capabilities, growth potential, and future performanceoutlook. In addition, in cases where the borrower has drawn up a radical
business restructuring plan that is highly feasible or a business improvement
plan that is reasonable and feasible, the debtor classification will be determinedby taking into consideration the future business outlook in light of said plan.
Necessary corrections have been made to the depreciation and allowance inaccordance with “4. Matters related to accounting policies (5) Criteria forrecording allowances for loan losses.” All of these measures are designed toprepare for future loan losses and include assumptions about the outlook forthe economic environment and the collectability of receivables.
The COVID-19 pandemic is a phenomenon with prolonged broad repercussions
on the economy and corporate business activities, and we expect these impacts
to continue for a certain amount of time into the future.
In the current consolidated fiscal year, more customers were affected by adeterioration in business performance and cash flow compared with theprevious year, partly due to the impact of COVID-19 being reflected in the
full-year business performance of the customers, and loan losses or other losses
have occurred in some cases. We assume, however, that there will be no major
impact on the debtor classification, etc., because the Company group willcontinue making every effort on activities to support business improvement andbusiness revitalization of the customers, and various economic measures andother measures are expected to have an effect in suppressing credit
deterioration. We have also not changed the method of estimating allowances
for loan losses as of the end of the current consolidated fiscal year. This isbecause we have taken a position of taking the current deteriorating businessperformance into account as soon as possible when determining debtor
classification. The assumptions regarding the impact of COVID-19 describedabove remain the same as those determined by the Company at the end of theprevious consolidated fiscal year, and no significant changes have been madesince the previous consolidated fiscal year.

(3)

Effect on the consolidated financial statements for the following fiscal year
If the assumptions used for the initial estimate change, such as a significant
change in the economic environment including the effects of COVID-19, thedebtor classification and the estimated amount of collateral available for
disposal may change. This may have a significant impact on the allowance forloan losses in the consolidated financial statements for the following fiscal year.

(Changes in the accounting policies)(Application of the accounting standard for revenue recognition, etc.)
From the beginning of the current consolidated fiscal year, the Company has applied the“Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 31, 2020,
hereinafter referred to as the “Accounting Standard for Revenue Recognition”), etc. As aresult, the Company will recognize revenue in the amount expected to be received in
exchange for the promised goods or services when control over those goods or services istransferred to the customer. This has no impact on the consolidated financial statements.
(Application of the accounting standard for fair value measurement, etc.)
From the beginning of the current consolidated fiscal year, the Company has applied the“Accounting Standard for Fair Value Measurement” (ASBJ Statement No. 30, July 4, 2019,
hereinafter referred to as the “Accounting Standard for Fair Value Measurement”), etc. As aresult, the Company revised its method for market value adjustment in the calculation of themarket value of derivative transactions to one that makes maximum use of observable
inputs estimated from derivatives traded on the market, in accordance with paragraph 8 of
the Accounting Standard for Fair Value Measurement. This revision was made due to theadoption of the Accounting Standard for Fair Value Measurement, etc. In accordance withthe transitional measures set forth in the proviso of paragraph 20 of the AccountingStandard for Fair Value Measurement, the Company reflected the cumulative effect ofapplication of the new accounting policy in retained earnings at the beginning of the current
consolidated fiscal year as if the new accounting policies were retrospectively applied prior
to the beginning of the current consolidated fiscal year.
As a result, retained earnings at the beginning of the current consolidated fiscal year
decreased by 121 million yen, other assets grew 32 million yen, other liabilities were up 207
million yen, deferred tax assets increased by 53 million yen, and net assets per share fell
2.66 yen.
In accordance with the transitional handling set forth in paragraph 19 of the AccountingStandard for Fair Value Measurement and paragraph 44-2 of the Accounting Standard for
Financial Instruments (ASBJ Statement No. 10, July 4, 2019), the Company has decided toapply the new accounting policies set forth in the Accounting Standard for Fair Value
Measurement continuously in the future. As a result, earthquake derivatives, which had
previously been recorded by recognizing their acquisition price as the consolidated balance
sheet amount since they are financial instruments whose market value is extremely difficult
to grasp, are now recorded by recognizing their market value calculated using the cost
approach as the consolidated balance sheet amount, starting from the end of the current
consolidated fiscal year.

(Yet-to-be-applied accounting standards, etc.)

・ Implementation Guidance on Accounting Standard for Fair Value Measurement (ASBJ
Guidance No. 31, June 17, 2021)(1)
Overview
The handling of the calculation of market value of investment trusts and its notes,
and the handling of notes on market value of investment in capital of partnerships
for which the amount equivalent to equity interests is recorded on the balance
sheet in the net value have been stipulated.
(2)
Scheduled date of application
Scheduled to apply starting at the beginning of the fiscal year ending March 2023.
(3)
Impact of the application of the accounting standard, etc.
The impact of the application of these accounting standards, etc. is currently being
evaluated.

(Additional information)(Introduction of the share-based payment plan using trusts)
1. Overview of transactions
The Company introduced a trust-type share-based payment plan (hereinafter referred toas the "Plan") that delivers shares of the Company to directors of the Company who are
not Audit and Supervisory Committee members (excluding outside directors and those
who are not residents in Japan) and directors who are not Audit and Supervisory
Committee members (excluding outside directors and those who are not residents inJapan) and executive officers (excluding those who are not residents in Japan) of The
Daishi Hokuetsu Bank, Ltd., which is a consolidated subsidiary of the Company (directorsof the Company who are not Audit and Supervisory Committee members, directors of
The Daishi Hokuetsu Bank, Ltd. who are not Audit and Supervisory Committee members,
and executive officers of The Daishi Hokuetsu Bank, Ltd. are hereinafter collectively
referred to as "Eligible Directors, etc.").
Based on the Corporate Governance Code revised in June 2021 and the amended
Companies Act enacted in March 2021, the purpose of the introduction of the Plan is tofurther clarify the link between the compensation of Eligible Directors, etc. and the valueof the Company’s shares that functions as a sound incentive for sustainable growththrough the implementation of the Company group’s Management Philosophy and therealization of the Medium-Term Management Plan.
The Plan establishes a trust by combining the amount of money within the range
approved by the resolution of the general meeting of shareholders of the Company andthe amount of money contributed by The Daishi Hokuetsu Bank, Ltd. after the approvalof the general meeting of shareholders of the Bank with the Eligible Directors, etc. whomeet certain requirements as beneficiaries. The trust acquires the Company’s sharesfrom the share market using the money in the trust as financial funds.
During the trust period, in accordance with the predetermined provisions for the deliveryof shares, beneficiaries shall receive, after receiving a certain number of points, thenumber of the Company’s shares equivalent to 50% of the number of points at the timeof retirement (shares less than one unit shall be rounded up), and shall receive money
equivalent to the amount converted into cash within the trust for the remaining shares.
2. The Company’s shares held by the trust
The book value and number of shares of the Company held by the trust were 1,083
million yen and 398 thousand shares at the end of the current consolidated fiscal year,
and they are recorded as treasury stock in the Net Assets section.

(Consolidated Balance Sheet related)

1. Total amount of shares or contribution in non-consolidated subsidiaries and affiliates
Contribution:¥418 million
2. Claims based on the Banking Act and the Act Concerning Emergency Measures for the
Revitalization of the Financial Functions are as follows. Claims are recorded in the accountsof corporate bonds in "Securities" on the consolidated balance sheets (only corporate bonds
for which all or part of the redemption of the principal and the payment of interest is
guaranteed, and which were issued through the private placement of securities (Article 2,paragraph 3 of the Financial Instruments and Exchange Act)), loans, foreign exchange,interest receivable and advances in "Other assets," and customers’ liabilities for acceptancesand guarantees.
Bankrupt/substantially bankrupt claims and similar claims¥6,431 million
Doubtful claims¥107,144 million
Loans overdue for three (3) months or longer¥1,321 million
Loans with relieved loan conditions¥2,638 million
Total amount¥117,536 million

DAISHI HOKUETSU REPORT 2022

72

The Status of Financial Results (Consolidated)"Bankrupt/substantially bankrupt claims and similar claims" refers to loans of debtors withbankrupt business due to reasons such as the start of bankruptcy procedures, the start ofreorganization procedures, or declaration for the start of reorganization procedures, or loans
to which these conditions apply.
"Doubtful claims" refers to loans for which the debtor has not entered business bankruptcy,
but is experiencing worsened financial status and economic performance, and there is a highpossibility that it may not be possible to recover capital or receive interest on the loan
according to the contract, and which do not fall under bankrupt/substantially bankrupt
claims and similar claims.
"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, and which do not fall under bankrupt/substantially bankrupt claims
and similar claims and doubtful claims.
"Loans with relieved loan conditions" refers to loans for which a reduction in interest, agrace period for interest payment, a grace period for repayment of capital, debt forgiveness,or other agreements favorable to the debtor have been made for the purpose of assisting
the debtor with management reorganization or support, and which do not fall underbankrupt/substantially bankrupt claims and similar claims, doubtful claims, and loans
overdue for three (3) months or longer.
Note that the amount of loans above is the amount prior to deduction of allowance for loan
loss.
(Change of presentation)
In line with the enforcement of the Cabinet Office Ordinance Partially Amending the
Enforcement Regulations of the Banking Act (Cabinet Office Ordinance No. 3 of January
24, 2020) on March 31, 2022, the classification of "risk-management loans" under the
Banking Act is presented in accordance with the classification of disclosed claims underthe Act Concerning Emergency Measures for the Revitalization of the Financial Functions.
3. Discounting of bills is processed as a financial transaction, based on "Handling in accounting
and audit regarding the application of financial instruments accounting standards in thebanking industry" (Special Audit Committee Report No. 24 by JICPA dated March 17, 2022).
The Bank retains the right to freely dispose of bank acceptance bills, commercial bills,
documentary bills, and foreign bills bought, etc., and thus received in the form of sales or(re)mortgaging and their face value is as follows¥11, 277 million
4. Assets provided as security are as follows:
Assets provided as security
Securities¥1,130,943 million
Loans and bills discounted¥910,659 million
Total¥2,041,603 million
Liabilities corresponding to security assets
Deposits¥85,305 million
Receivables under resale agreements¥37,006 million
Payables under securities lending¥298,397 million
transaction
Borrowed money¥1,346,081 million
In addition to the above, the following has been tendered as a substitute for security forforeign currency settlement, short-term financial transactions, or futures market transaction
deposits, etc.
Trading account securities¥22 million
Securities¥2,019 million
Furthermore, financial instruments security deposits, central clearing organization security
deposits, and guarantees are included in Other assets and their amount are as follows.
Financial instruments security deposits¥10,004 million
Central clearing organization security¥50,000 million
deposits
Guarantees¥1,699 million
5. Overdraft agreements and Commitment line agreements for loans are agreements toprovide loans up to a prescribed limit, when application for a loan has been made bycustomers, in the event 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¥1,806,286 million
Of which, those where the original term of loan
¥1,700,444 million
is within 1 year
(or those that can be cancelled unconditionally at any time)
Since many of these agreements terminate without the loan being executed, the unexecutedloan 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 the consolidated subsidiaries engaged in the banking
business or to some o f t he consolidated subsidiaries may refuse the loan or decrease thelimit amount in the event that applications for loans have been made, in the event that
there have been changes in financial situation, securing of loans, and other reasonablereasons. In addition, guarantees, such as real estate or valuable securities, are secured at thetime of agreement as necessary, and the state of the customers is checked regularly evenafter the agreement in accordance with the in-house regulations, and a review of theagreement and measures to secure credit, etc., are conducted.
6. Based on the Act on Revaluation of Land (Act No. 34 dated March 31, 1998), revaluation ofbusiness-use land owned by Daishi Bank was conducted. For the valuation difference, theamount equivalent to tax related to the subject valuation difference has been recorded in
Liabilities, as "Deferred tax liability related to revaluation" and the amount after deductionof this amount is recorded in Net assets under "Land revaluation difference."
Date of revaluation
March 31, 1998
Method of revaluation as provided in Article 3, paragraph 3 of said Act.
Calculated based on the method provided and published by the Director General of
the National Tax Administration Agency to calculate the value of land on which thetaxable value for the land tax, as provided in Article 16 of the Land-holding Tax Act(Act No. 69 of 1991) and established in the Order for Enforcement of Act on
Revaluation of Land (Order No. 119 dated March 31, 1998) Article 2, item 4, withreasonable adjustments (rate of value correction by depth, etc.) made.
The difference between the total amount of market value of the business-use land
revaluated as provided for in Article 10 of said Act as of the end of the term and thetotal amount of book value after revaluation of said business-use land:¥12,513 million
7. Aggregate amount of depreciation of tangible fixed assets
Aggregate amount of depreciation¥78,455 million
8. Amount of compressed entry of tangible fixed assets
Amount of compressed entry¥8,110 million(Amount of compressed entry in(¥― million)
current consolidated fiscal year)
9. Amount of guarantee obligation for privately placed bonds (under Article 2, paragraph 3 of
the Financial Instrument and Exchange Act) in bonds included in "Securities."¥130,712 million
10. Trust principal with principal compensation agreement
Money in trust¥2,886 million

73

DAISHI HOKUETSU REPORT 2022

(Consolidated Statements of Income Related)

1. The following is included in Other ordinary income.
Gain on sales of stocks and other¥8,566 million
securities
2. The following are included in General and administrative expenses.
Salaries and allowances¥30,396 million
Retirement benefit costs¥323 million
Depreciation costs¥6,759 million
3. The following are included in Other expenses.
Written-off of loans¥1,746 million
Loss on sales of stocks and other¥4,381 million
securities
Loss on devaluation of stocks and other¥517 million
securities
4. Impairment loss
This information is omitted because it lacks materiality.

(Consolidated Statements of Comprehensive Income Related)
1. Recycling and amount of tax effects related to Other comprehensive income(¥ million)

Valuation difference on available-for-salesecurities
Incurred cost for this term
Recycling
Before tax effect adjustment
Tax effect amount
Valuation difference on available-for-salesecurities
Deffered gains or losses on hedges
Incurred cost for this term
Recycling
Before tax effect adjustment
Tax effect amountDeffered gains or losses on hedges
Retirement benefit adjustment amount
Incurred cost for this term
Recycling
Before tax effect adjustment
Tax effect amount
Retirement benefit adjustment amount
Total Other comprehensive income(46,857)(1,353)(48,210)
14,610(33,600)
5,552
1,515
7,068
(2,152)
4,916
1,626
(454)
1,171
(357)
814
(27,869)(Consolidated Statements of Shareholders Equity related)

1. Matters related to the type and total number of issued shares, and type and number ofTreasury stocks

Number of issued
sharesOrdinary shares(1,000 shares)

Current
Current
Current
Current
consolidated fiscal
consolidated fiscal
consolidated fiscal consolidated fiscal
year
year
year
year
Number of shares
Number of shares
Increase in
Decrease inat the beginningat the end of thenumber of shares number of sharesof the term
term

Total

45,94245,942

-

-

236
236

400
400

96
96

Rema rks

45,94245,942

Treasury stocks
Ordinary shares
Total

539 (Note)
539(Note) The breakdown of increase in the number of ordinary shares of treasury stocks is asfollows.
Increase due to request to purchase fractional unit shares
2 thousand shares
398 thousand
Acquisition by the trust for the share-based payment plansharesBreakdown of decrease in the number of ordinary shares of Treasury stocks is as follows.
Transfer by exercise of stock option rights
96 thousand shares
Decrease due to request to purchase fractional unit shares
0 thousand shares
The number of ordinary shares of treasury stocks at the end of the current consolidated
fiscal year includes 398 thousand shares of the Company held by the trust for theshare-based payment plan.
2. Matters related to right to subscribe to new shares and right to subscribe to new treasury
stocksThere are no applicable items
3. Matters related to dividends(1) Amount of dividends paid out during the current consolidatedfiscal year
(Resolution)

Type ofsharesTotalamount ofdividends(¥ million)(Note)

Dividend pershare (¥)

Reference date

Effective date

Board of Directors,
May 14, 2021

Ordinaryshares

2,742

60.00

March 31, 2021

June 1 , 2021

Board of Directors,
November 12, 2021

Ordinaryshares60.00

September 30,
2021

December 1,
2021

2,748

(Note) The total amount of dividends includes dividends on the Company’s shares held by the trust for theshare-based payment plan (23 million yen, the Board of Directors, November 12, 2021).

(2)

Dividends for which the reference date falls within the current consolidated fiscal
year with the effective date occurring after the last day of the current consolidated
fiscal year.

(Resolution)
Board ofDirectors, May
13, 2022

Type ofsharesTotalamountofdividends(¥ million)(Note)

Source offund

Dividend
per share(¥)

Ordinaryshares2,748

Re ta i n ed
earnings

60.00

Reference date

Effective date

March 31, 2022 June 1, 2022

(Note) The total amount of dividends includes 23 million yen of dividends on the Company’s shares held by
the trust for the share-based payment plan.

The Status of Financial Results (Consolidated)(Consolidated Statement of Cash Flow related)(ii) Market risk management
The Company group has established an operation policy for ALM to adjust market
risks to an appropriate magnitude and to secure stable income, and determines
the risk limits and loss limits in managing valuable securities in line with thepolicy.
Furthermore, important matters concerning risk management are reviewed at
the ALM & Risk Management Committee, and the committee is prepared topromptly report any important situation that may occur in the management ofvaluable securities to members of 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 the risks
are calculated and managed by Daishi Hokuetsu Bank. Quantitative analysis is notconduced on some of the financial instruments that have little impact for its
amount, etc., and some of the financial instruments of some group companies.
Daishi Hokuetsu Bank mainly adopts VaR calculated by the historical method(holding period: 120 days, confidence interval: 99%, observation period: 1,250
days) (note that the variance-covariance method is adopted for some of theinvestment trusts). The amount of market risk as of the end of the current
consolidated fiscal year (excluding market risk of financial instruments withoutmarket prices such as non-listed stock) was 47,359 million yen. Interest risks
associated with deposits and loans are recognized by defining liquid deposits
remaining in banks for a long time as core deposits and allocating those deposits
to maturities of up to 10 years based on an internal model.
A back test which compares the computed VaR and the theoretical profit and loss
(profit and loss assumed to have been generated when the portfolio is fixed as of
the timing of risk amount measuring) is conducted to verify that themeasurement model captures market risks with sufficient accuracy.
However, VaR only indicates the amount of risk under a fixed certainty
statistically computed from past market fluctuations, and may not be able tocapture risks that could occur if the market environment should changeinconceivably. This being the case, it is supplemented by separate stress tests,
etc.

1. Relationship between the end of term cash and cash equivalents and the amount indicatedin the account titles in the consolidated balance sheet
Cash and deposit account¥2,758,985 million
Deposits (excluding Bank of Japan
(¥1,708 million)
deposit)Cash and cash equivalents¥2,757,277 million(Lease transaction related)

Operating lease transactions<Borrower side>
Unearned lease fees concerning irrevocable operating lease transactions(¥ million)

One (1) year or lessExceeding one (1) year
Total

54
94
149

<Lender side>
Unearned lease fees concerning irrevocable operating lease transactions(¥ million)

One (1) year or lessExceeding one (1) year
Total

158
205
364

(Financial instruments related)

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 withfinancial services covering lease operations, securities operations, credit guarantee
operations, credit card operations, and others. Funds raised by deposits andnegotiable certificate of deposits are mainly managed through loans and valuable
securities.
As the Company has financial assets and liabilities that are accompanied by interest
rate fluctuations, risks relating to assets and liabilities for the entire group arecomprehensively grasped and controlled to avoid any disadvantageous impact frominterest rate fluctuations. 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)

(3)

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 to credit risk in which recovery ofcapital and interest on loans could be made difficult by bankruptcy of thecustomers or deterioration of financial status.
Valuable securities are mainly stocks, bonds, investment trusts, and investment incapital of partnerships. In addition to securities held for ownership until maturity,
purely financial, and for business promotion purposes, trading account securities
are bonds and are held for trading. These are exposed to market risks fromfluctuation of market factors, in which the asset value held by the Company groupmay be reduced, incurring loss though credit risks of the issuing entity, domestic
and overseas interest 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 ofdeposits or not being able to raise necessary funds by the deterioration of theCompany 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 tohedge 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 to control interest rate risk in banking
operations, as well as to adjust a fund surplus or deficit in banking operations andto stabilize fund liquidity.
In addition, in the subsidiary banks and some of the consolidated subsidiaries,
credit futures transaction, etc., aimed at pursuing trading profits are conductedwithin the extent of earning power and corporate strength.
Risks generated from these derivative transactions include credit risks in which thecounterpart of the transaction 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 ofderivative transaction risk, as a hedge method, is within the range of allowable risk
amount, as provided in the operating criteria concerning hedge transaction
management, and quarterly verification of whether the risk subject to the hedge
has been diminished is conducted.
Risk management structure related to financial instruments(i) Credit risk management
The Company group operates and manages credit risk in an appropriate matterbased on various rules concerning credit risk management.
In terms of structure, the Risk Management Department is responsible forcontrolling credit risks, and maintains various rules concerning credit risk
management, as well as for the planning and operation of analysis, evaluation,and improvement activities.
At Daishi 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 to customers, etc., the approach being promoted
fully across both banks. Credit rating and self -assessment of loans, etc., is strictly
enforced through a two-stage assessment system, one by the sales office and theother by the head office division. In addition, appropriateness and validity ofcredit rating and self-assessment is verified in the audit conducted by the Audit
division.
Regarding the credit portfolio, credit concentration management for specificareas, industries, companies, groups, etc., are conducted in an appropriatemanner. Furthermore, credit risk quantification (Note) is being conducted andcredit risk limits in line with total equity are being set.
(Note) Credit risk quantification is to digitize and estimate the amount of credit
risk involved in the credit portfolio, using statistical methods.

(iii) Liquidity risk management
In the Company group, “Liquidity risk management rules” have been establishedin each subsidiary bank to grasp and analyze the status of financing by theadministration division responsible for financing to raise funds from the market
as necessary.
In addition, response measures and reporting and communicating structure has
been established in order to conduct prompt response under various situation, inthe unlikely event to match the urgency of fund needs.
(4)

Supplementary explanation regarding matters concerning the market value offinancial instruments, etc.
In calculating the market value of financial instruments, certain presumptions are
adopted and said price may differ if it is calculated based on different
presumptions.

2. Matters concerning the market value of financial instruments, etc.
The amount recorded in the consolidated balance sheet, their market value and thedifferences are as follow. Shares without market prices and investment in capital ofpartnerships, etc. are not included in the following table (see Note 1). The notes to cash anddue from banks, receivables under resale agreements, and payables under securities lendingtransaction are omitted because they are settled in a short period of time and their market
value approximates their book value. In addition, notes to accounting titles with little
relevance to the amounts recorded in the consolidated balance sheet have been omitted.
Consolidated
Balance Sheet March
Recorded amount(¥ million)

Market value

Difference(1) Securities
Trading securities
Bonds to be held to maturity
Other securities(2) Loans and bills discounted (*2)(*3)
Allowances for loan losses (*1)
Total Assets(1) Deposits(2) Negotiable certificates of deposit(3) Borrowed money
Total Liabilities

0
1,608
2,490,377
5,114,102(25,383)
5,088,718
7,580,704
8,207,503
233,401
1,358,761
9,799,667

0
1,597
2,490,377(10)-

5,134,665
7,626,641
8,207,565
233,401
1,358,762
9,799,730

45,94745,937
61
0
0
62

(398)
(5,406)(5,804)(398)(5,406)(5,804)-

Derivative transactions (*2)
Hedge accounting not applied
Hedge accounting applied (*3)
Total derivative transactions(*1) General and individual allowances for loan losses corresponding to loans and bills discounted have been
deducted.
(*2) Derivative transactions recorded in other assets and liabilities are indicated together as a batch.
Net debts and credits generated from derivative transactions are indicated in net amount and items inwhich the total will be a net debt are indicated in parentheses.
Provisions for contingent loss corresponding to derivatives have been directly reduced in the consolidatedbalance sheet amounts as they have little relevance.
Transactions subject to exceptional interest swap processing are included in the market value of loans to behedged.
(*3) These are interest rate swaps designated as hedging instruments to fix the cash flows of loans to be hedged. In
most cases, deferred hedge accounting is applied. For these hedge relationships, we have applied the"Treatment of Hedge Accounting for Financial Instruments that Reference LIBOR" (PITF No. 40, March 17,2022).

DAISHI HOKUETSU REPORT 2022

74

The Status of Financial Results (Consolidated)(Note 1) The amounts of shares without market prices and investment in capital of partnerships
recorded in the consolidated balance sheet are as follows. These are not included in"Other securities."(2)(¥ million)(¥ million)

Classification

5,448
4,039

Investment in capital of partnerships, etc. (*3)(*1) The market value of non-listed stocks is not disclosed in accordance with paragraph 5 of the "Implementation
Guidance on Disclosures about Fair Value of Financial Instruments" (ASBJ Guidance No. 19, March 31, 2020).
(*2) In the current consolidated fiscal year, no impairment (¥61 million) has been made for non-listed stocks.
(*3) The market value of investment in capital of partnerships, etc. is not disclosed in accordance with paragraph 27of the "Implementation Guidance on Accounting Standard for Fair Value Measurement" (ASBJ Guidance No.
31, July 4, 2019). Parts of “Other assets” are included in investment in capital of partnership, etc.

(Note 2) Expected amount of redemption of monetary claims and securities with maturity after
consolidated closing date
Exceeding 1 Exceeding 3 Exceeding 5 Exceeding 7
Within 1
year but
years but
years but
years butyear
within 3
within 5
within 7
within 10
years
years
years
years
2,693,798-

Deposits(¥ million)

Exceedingten (10)years-

Securities
Bonds to be held tomaturity
Government bonds

165,671

321,421455,227

437,931426,516

422,744

8

-

-

800

800

-

-

-

-

-

-

-

Corporate bonds

8

-

-

800

800

-

Other securities withmaturity

165,663

321,421455,227

437,131425,716

422,744305,000

Government bonds
Local government
bonds
Corporate bonds

64,00057,00024,0006,000

95,000

11,20559,500220,199

226,760

170,13135,51255,088110,845

62,402

22,745

4,133

13,711Loans and bills discounted*

558,957

972,197

751,806

565,492

486,256

1,182,711

Total

3,418,427

1,293,619

1,207,034

1,003,423

912,772

1,605,456(*) Loans and bills discounted do not include ¥111,606 million in cases in which the scheduled amount ofredemption cannot be foreseen nor ¥484,308 million without an agreed due date, against Bankrupt debtors,
Substantial Bankrupt debtors, and Effective Bankrupt debtors, etc.

(Note 3) The amount of scheduled repayment of borrowed money and other interest-bearing
debts after the consolidated closing date
Exceeding 1 Exceeding 3 Exceeding 5 Exceeding 7
year but
years but
years but
years butwithin 3
within 5
within 7
within 10
years
years
years
years
7,683,310
465,064
51,072
2,117
5,938

Within 1
year
Deposits*
Negotiable certificates ofdepositPayables under securities
lending transaction
Borrowed money
Total(¥ million)

Exceedingten (10)years-

233,401

-

-

-

-

-

298,397

-

-

-

-

-

971,190

211,513

175,338

293

426

-

9,186,300

676,577

226,411

2,410

6,365

-

*Demand deposits in Deposits are included in "Within 1 year."

3. Matters concerning the breakdown of the market values of financial instruments, etc. bylevel
The market values of financial instruments are classified into the following three levels
according to the observability and relevance of the inputs used to calculate the market
value.
Level 1 market: Market values calculated based on market prices of assets or liabilities ofvaluewhich the market value formed in an active market needs to be
calculated among observable inputs for the calculation of market value
Level 2 market: Market values calculated using inputs for calculation of market value
value
other than Level 1 inputs out of observable inputs for market value
Level 3 market: Market values calculated using unobservable inputs for calculation ofvalue
market value
If multiple inputs that have a significant impact on the calculation of market value are used,
the market value is classified as the level whose priority is the lowest in the calculation of
the market value among the levels to which those inputs belong.
(1)
Financial instruments recorded on the consolidated balance sheet at market value(¥ million)

Classification

Market value
Level 1

Level 2

Level 3

Total

Securities
Trading securities
Stocks0--0118,849
553,658
352,208-

16,242
724,799
129,307
50,10317

139,041
5,705-

135,091
553,658
724,799
268,348
408,016
17

1,024,717

6,775
3,099
930,345103
144,849

6,775
3,099
103
2,099,912-

4,271
11,404
15,675

103
103

4,271
11,404103
15,779Other securities
StocksGovernment bonds
Local government bonds
Corporate bonds
Foreign government bonds
Other
Derivative transactions
Interest rate related
Currency related
Other
Total Assets
Derivative transactions
Interest rate related
Currency related
Other
Total Liabilities*Investment trusts to which transitional measures are applied in accordance with paragraph 26 of the"Implementation Guidance on Accounting Standard for Fair Value Measurement" (ASBJ Guidance No. 31, July4, 2019) are not included in the table above. The amount of those investment trusts, etc. in the consolidatedbalance sheet is 400,444 million yen.

75

Classification

March 31, 2022

Non-listed stock (*1) (*2)

DAISHI HOKUETSU REPORT 2022

Financial instruments other than those recorded on the consolidated balance sheet
at market valueMarket value
Level 1

Level 2

Level 3

Total

1,589
1,589
8,207,565
233,401
1,358,762
9,799,730

8
5,134,665
5,134,673-

1,597
5,134,665
5,136,263
8,207,565
233,401
1,358,762
9,799,730

Securities
Bonds to be held to maturity
Corporate bonds
Loans and bills discounted
Total Assets
Deposits
Negotiable certificates of deposit
Borrowed money
Total Liabilities-(Note 1) Explanation of evaluation techniques used in the calculation of market value and inputs
for the calculation of market value
AssetsSecurities
Securities whose unadjusted market prices in active markets are available are classified as
Level 1 market value. They mainly include shares and government bonds. In the case ofusing published market prices, if the market is not active, they are classified as Level 2
market value. They mainly include local government bonds and corporate bonds.
Investment trusts are based on published reference prices, etc., and not classified intolevels, as transitional measures are applied in accordance with paragraph 26 of the
Implementation Guidance on Accounting Standard for Fair Value Measurement.
Privately placed bonds guaranteed by the issuing bank with a floating interest rate areshort term and will reflect the market interest rate and are approximately the same as theirbook 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. As a result, they
are classified as Level 3 market value. The market value of privately placed bonds with afixed interest rate is calculated by adding guarantee fees for the accrued portion (unearned
guarantee fees) to the total sum of capital and interest discounted by the interest rate thatcombines the swap interest rate or other appropriate indices and credit spreads, for eachclassification based on type, internal rating, and period. Since the credit spreads and theunearned guarantee fees are unobservable, they are classified as Level 3 market value.
For securitized products (including some bonds), prices obtained from external business
operators (e.g., brokers) are recognized as market value based on periodic status checks,
such as a price comparison between similar products, time-series price comparison of asingle product, and analysis of consistency with published market indicators, and classified
as Level 3.
Loans and bills discounted
Loans and bills discounted with fixed interest rates are calculated by adding guarantee feesto 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 eachclassification based on type, internal rating, and period. Those with a floating interest rate
are short term and will reflect the market interest rate and are approximately the same astheir book value, unless the credit status of the borrower has differed significantly after its
execution, and therefore said 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 deducting 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, and this is taken as the market value.
Since the market value of those with a short agreed period (within one (1) year) isapproximately the book value, this is taken as the market value.
These are classified as Level 3 market value.
Liabilities
Deposits and negotiable certificates of deposit
For call deposits, the payment amount (book value) when a payment request is made on
the consolidated closing date is deemed to be the market value. Furthermore, the market
value of time and savings deposits and negotiable certificates of deposit is segmented by afixed 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 a short-term deposit period(within one (1) year), said book value is taken as the market value These are classified as
Level 2 market value.
Borrowed money
Of borrowed money, those with floating interest rates are short term, reflecting market
interest rates. Furthermore, since the credit status of the Company and its consolidated
subsidiaries have not differed much after their execution, the market value is considered tobe approximate to the book value, and the book value is taken as the market value. For
those with fixed interest rates, the present value is calculated by segmenting the total
amount of capital and interest of the borrowed money into a fixed period, and discounting
it with an interest rate expected to be applied in a similar borrowing. Since the market
value of those with a short agreed period (within one (1) year) is approximately the bookvalue, this is taken as the market value. These are classified as Level 2 market value.
Derivative transactions
Derivative transactions whose unadjusted market prices in active markets are available areclassified as Level 1 market value. They mainly include bond futures and share futures thatare exchange transactions.
Since most derivative transactions are over-the-counter transactions without publishedmarket prices, however, the market value is calculated using evaluation techniques such as
the present value technique and the Black-Scholes model according to the type oftransaction and the period until maturity. Major inputs used in these evaluation techniques
include interest rates, exchange rates, and volatility. Price adjustment is also made basedon the credit risk of the counterparty and the credit risk of the consolidated subsidiaries
themselves. If unobservable inputs are not used or their effect is not significant, the market
value is classified as Level 2. This includes interest-related transactions (e.g., interest rate
swaps, interest rate options) and currency-related transactions (e.g., foreign exchange
contracts, currency options, currency swaps). If important unobservable inputs are used or
the market value is calculated based on the amount currently required to refinance theasset's service capacity, the market value is classified as Level 3. This includes earthquake
derivatives.

The Status of Financial Results (Consolidated)(Note 2) Information on the Level 3 market value of financial instruments recorded on the
consolidated balance sheet at market value(1) Quantitative information on important unobserved inputs
Classification

Evaluation technique

Importantunobservable input

Range of input

Weighted average of
inputsSecurities(Securities related)

1 "Trading account securities" are included in addition to "Securities" in the consolidatedbalance sheet.
2 "Subsidiary company stocks and affiliated company stocks" are listed as notes in thefinancial statements.

1. Trading securities

Other securities

Valuation difference included in profit and loss of theconsolidated fiscal year

Corporate bonds
Private-placed
bonds

Present value
technique

Credit spread
Unearned guarantee
fee

0.0%-5.0%

0.6%

0.0%-2.0%

0.2%

2. Bonds to be held to maturity

Quantitative information for earthquake derivatives is not provided, since the market value of earthquake
derivatives is calculated based on the amount currently required to refinance the asset’s service capacity without
any inputs.

(2)

Adjustment table of beginning to ending balances and valuation profit and loss
recognized in profit and loss for the current term
Profit and loss forthe current term orother comprehensive
incomeNetamountofTransferpurchase
Beginnin
Recorded s, sales, to Level 3
g balance Recorded in othermarketissuancevalue
in profit compreh
andor loss
ensivesettleme(*1)
incoments(*2)

Securities
Other
securities
Corporatebonds
Foreigngovernment bonds
Derivativetransactions
Other
Short
commitmentLongcommitmentTransferfromLevel 3marketvalue

Endingbalance(¥ million)
Valuation
profit and loss
on financial
assets andfinancialliabilities held
as of the dateof theconsolidatedbalance sheet
in the amountrecorded in
profit and loss
for the current
term (*1)

148,974

(270)

237

(9,901)--

139,041

-

5,865

(51)

28

(136)

-

-

5,705

-

(97)

222

-

(228)

-

-

(103)

125

97

(222)

-

228

-

-

103

(125)

(*1) Included in "Financing income", "Other ordinary income," and "Other ordinary expenses" in the Consolidated
Statements of Income.
(*2) Included in "Other securities valuation difference" of "Other comprehensive income" in the Consolidated
Statements of Comprehensive Income.

(3)

Explanation of the valuation process for market value
The Company group has established policies and procedures for the calculation ofmarket value and procedures for the use of market value valuation models in the
Middle and Back Office departments. For calculated market values and theclassification of their levels, the appropriateness of evaluation techniques andinputs used for the calculation of market value is verified.
The calculation of market value uses evaluation models that best reflect the nature,
characteristics, and risks of individual assets. Even when using market prices
obtained from third parties, the appropriateness of those prices is verified throughappropriate methods such as the confirmation of evaluation techniques and inputs
used and the comparison with market value of similar financial instruments.

Type

Market value exceeds amountrecorded in consolidated balance
sheetMarket value does not exceed
amount recorded in consolidatedbalance sheet

Explanation of the effect of changes in important unobserved inputs on market
value
Credit spread
Credit spreads are calculated based on the expected default rate by rating, theperiod spread by rating, and the exposure at default.
In general, a significant increase (decrease) in credit spreads results in a significant
decrease (increase) in market value.
Unearned guarantee fee
Guarantee fees are calculated based on credit ratings. Unearned guarantee fees,
which constitute market value, are the accrued portion of guarantee fees.
In general, unearned guarantee fees decrease over time, causing a decline in market
value.

Government
bonds
Corporate bonds
Subtotal
Government
bonds
Corporate bonds
Subtotal

Total

Amount recordedin consolidatedbalance sheet(¥― million)

Market value(¥― million)

Difference(¥― million)

-

-

-

808
808

808
808

0
0

-

-

-

800
800
1,608

788
788
1,597

(11)
(11)
(10)

Amount recordedin consolidated Acquisition costbalance sheet(¥― million)(¥― million)

Difference(¥― million)

3. Other securities
Type
StocksAmount recorded in consolidatedbalance sheet exceeds cost of
acquisition

Bonds
Government
bonds
Local
government
bonds
Corporate
bonds
Other
Foreigngovernment
bonds
Subtotal
StocksAmount recorded in consolidatedbalance sheet does not exceed costof acquisition

Total

Bonds
Government
bonds
Local
government
bonds
Corporate
bonds
Other
Foreigngovernment
bonds
Subtotal

108,539534,758

67,377532,081

41,161
2,676

233,005

231,591

1,413

167,756

167,092664

133,996

133,397598

241,285

231,447

9,838

66,67864,0392,638

884,583
26,552
1,012,048

830,90730,314
1,027,335

53,676(3,762)(15,287)

320,653

331,660(11,006)(3,240)557,042560,283

134,352

135,392(1,039)567,192

590,426(23,233)

341,338

356,139(14,801)

1,605,793
2,490,377

1,648,076
2,478,983(42,283)
11,393

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

(4)

(¥14 million)

Corporate bonds
Total(Reason for sale)
Retirement by purchase.

Cost of sale(¥― million)

150
150

Amount of sale(¥― million)

150
150

Gains or losses onsale(¥― million)-

5. Other valuable securities sold during the current consolidated fiscal year
Type
Stocks
Bonds
Government bonds
Local government bonds
Corporate bonds
Other
Foreign government bonds
Total

Amount of sale(¥― million)

21,814
231,950
224,791
3,537
3,621
343,034
135,739596,799

Total gain on sale Total loss on sale(¥― million)(¥― million)

4,383
446
397
42
6
6,345
1,516
11,175

990
614
614
0
4,991
959
6,595

6. Valuable securities with changes to the purpose of ownership
There are no applicable items
7. Valuable securities written-down
For valuable securities other than trading account securities (excluding shares withoutmarket prices and investment in capital of partnerships) in cases in which the market value
has fallen significantly from the acquisition price and the market price is not expected toreturn to the acquisition price, said market price is recorded in the consolidated balance
sheet and the valuation difference is processed as a loss for the applicable consolidated
fiscal year ("Write-down").
The amount of Write down in the current consolidated fiscal year is ¥770 million (of which,¥455 million is in shares, ¥314 million is in bonds).
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 the 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 thefull amount is made in the case of stocks for which the market price as of the end of the term
has fallen by 50% or more from the acquisition price, and for stocks whose market price has
fallen by 30% or more but not exceeding 50%, Write-down is judged by the possibility ofrecovery of the market price, taking into account trends in the market price for a fixed periodprior to the reference date and the financial conditions, etc., of the issuing company.
DAISHI HOKUETSU REPORT 2022

76

The Status of Financial Results (Consolidated)(Monetary trust related)(1)

There are no applicable items

Method of hedge
accounting(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)

11,393
11,393
2,968

Valuation difference
Other securities
Other monetary trust
Deferred tax liabilities to be deducted
Valuation difference on available-for-sale securities(before adjustment for equity)
Non-controlling interest equivalent to be deducted

8,425
395
8,030

Valuation difference on available-for-sale securities(Derivative transactions 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 incontract, and their market value and valuation profit and loss, for each transaction subject
type for derivative transactions where hedge accounting has not been applied are 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
Cla
ssifi
cati
on

Sto
re

Type

Contract amount,
Of which,etc.
exceeding 1 year(¥― million)(¥ million)

Interest swap
Fixed receipt, floating
payment
Floating receipt, fixed
payment
Interest options

Market value(¥― million)

Valuation profit
and loss(¥― million)

116,654

109,205

1,970

1,970

116,654

109,205

(229)

(229)

-

-

1,741

1,741

Short commitment
Long commitment
Total(Note) Market valuation is made for the above-mentioned transactions and the valuation profit or loss is recorded in
the consolidate balance sheet.

(2)
Cla
ssifi
cati
on

Currency-related transactions
Type

Contract amount,
Of which,etc.
exceeding 1 year(¥― million)(¥― million)

Currency swap

Market value(¥― million)

Valuation profit
and loss(¥― million)

9,781

6,644

(42)

(42)

81,78334,722

19,23318,656(4,732)
2,693(4,732)
2,693

351,263351,253-

288,562
288,562-59(114)(2,135)19,824(14,526)
3,217

Forward exchange contract
StoreShort commitment
Long commitment
Currency option
Short commitment
Long commitment
Total(Note) Market valuation is made for the above-mentioned transactions and the valuation profit or loss is recorded in
the consolidate balance sheet.

(3)

Stock related transactions
There are no applicable items(4)

Bond related transactions
There are no applicable items(5)

Goods related transaction
There are no applicable items(6)

Credit and derivative transactions
There are no applicable items

(7)

Sto
re

Contract amount,
Of which,etc.
exceeding 1 year(¥― million)(¥― million)

Market value(¥― million)

Valuation profit
and loss(¥― million)

(103)
103
-

125
(125)
-

Earthquake derivative
Short commitment
Long commitment
Total

16,21016,210-Generally applied
processing
methodExceptional
interest swap
processing

TypeInterest swap
Floating receipt, fixed
payment
Interest swap
Fixed receipt, floating
payment
Floating receipt, fixed
payment
Total

Contract
amount, etc.
(¥― million)

Of which,exceeding 1
year(¥― million)

Market value(¥― million)

130,701130,701

762

Loans and bills
discounted

3,000

3,000

(Note 2)

84

84

-

-

-

Major hedge
subjects
Othersecurities, loans
and bills
discounted

762(Notes) 1.
A deferred hedge was adopted as the method of hedge accounting for interest risks occurringfrom financial assets and liabilities.
2. Transactions subject to the exceptional interest swap processing are processed together with loans and bills
discounted to be hedged. Therefore, their market value is included in the market value of the applicableloans and bills discounted in "(Financial instruments related)."(2)

Currency-related transactions
Type

Major hedge
subjects

Contract
amount, etc.
(¥― million)

Market value(¥― million)

Currency swap

Foreigncurrency
denominatedsecurities, andloans and bills
discounted

Of which,exceeding 1
year(¥― million)

58,66940,813(6,168)--(6,168)

Method of hedge
accounting

Generally applied
processing
methodTotal-(Note) Conducted primarily by deferred hedge in accordance with Special Audit Committee Report No. 25.

(3)

Stock related transactions
There are no applicable items(4)

Bond related transactions
There are no applicable items(Retirement benefit-related)

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 fundscheme and retirement allowance scheme. On January 1, 2021, a portion of the retirement
benefit corporate pension scheme was transferred to a defined contribution pension scheme.
A retirement benefit trust has been established on the defined contribution pension plan andretirement 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 ofretirement allowance schemes held by some of the consolidated subsidiaries are calculatedusing the simplified method.
In addition, consolidated subsidiaries engaged in the banking business have set up a
retirement benefits trust.
2 Defined contribution scheme(1)
Adjustment table of retirement benefit liabilities, as of the beginning and end of theterm (excluding schemes adopting the simplified method)
Beginning of term retirement benefit liability balance¥66,968 million
Service costs¥1,418 million
Interest costs¥266 million
Actuarial gain or loss amount generated(¥196 million)
Amount of retirement benefits paid(¥3,637 million)
Other¥6 million
End of term retirement benefit liability balance¥64,825 million
(2)

Other
Classification

Interest rate related transactions-(Note) Market valuation is made for the above-mentioned transactions and the valuation profit or loss is recorded in
the consolidate balance sheet.

2 Derivative transactions where hedge accounting has been applied
The contract amount on the consolidated closing date or the amount equivalent to capital incontract, and their market value, for each transaction subject type and for each hedge
accounting method for derivative transactions where hedge accounting has been applied are
as follows. It must be noted that the amount of contract itself does not indicate the market
risk related to the derivative transaction.

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¥78,552 million
Expected operational earnings¥1,486 million
Actuarial gain or loss amount generated¥1,429 million
Contribution from employers¥403 million
Amount of retirement benefits paid(¥2,700 million)
Other¥6 million
End of term pension assets balance¥79,177 million(3)

Adjustment table for debts related to retirement benefit liabilities as of the beginningand end of the term for schemes adopting the simplified method
Beginning of term retirement benefits related debts¥694 million
Retirement benefit costs¥70 million
Amount of retirement benefits paid(¥110 million)
End of term retirement benefits related debts¥653 million(4)

Adjustment table for end of term balance of retirement benefit liabilities and pension
assets, and debts and assets related to retirement benefits recorded in the
consolidated balance sheet
Retirement benefit liability of savings-type scheme¥64,825 million
Pension assets (¥78,552 million)(¥79,177 million)(¥14,352 million)
Retirement benefit liability of non-savings-type scheme¥653 million
Net amount of liabilities and assets recorded in the consolidated balance
sheet(¥13,698 million)(Note) Includes schemes where the simplified method is adopted.
Retirement benefit related liabilities
Assets related to retirement benefits
Net amount of liabilities and assets recorded in the consolidated balance
sheet

77

DAISHI HOKUETSU REPORT 2022

¥653 million(¥14,352 million)(¥13,698 million)

The Status of Financial Results (Consolidated)(5)

Retirement benefit costs and its itemized breakdown¥1,418 million¥266 million(¥1,486 million)(¥243 million)(¥211 million)¥70 million¥81 million(¥103 million)

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(¥211 million)
Actuarial gain or loss
¥1,382 million
Total¥1,171 million
Aggregate amount of adjustment related to retirement benefits
The breakdown of items recorded in the aggregate amount of adjustment related toretirement benefits (before deduction of tax effects) is as follows:
Unrecognized prior service cost(¥1,793 million)
Unrecognized actuarial gain or loss(¥5,746 million)
Total(¥7,540 million)

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

Date of resolution

May 11, 2018
Board of Directors,
Daishi Bank

May 11, 2018
Board of Directors,
Daishi Bank

May 11, 2018
Board of Directors,
Daishi Bank

May 11, 2018
Board of Directors,
Daishi BankClassification
andnumbers of granted
persons

Daishi Bank, Ltd.
6 directors

Daishi Bank, Ltd.
6 directors

Daishi Bank, Ltd.
6 directors and 3
executive officers

Daishi Bank, Ltd.
6 directors and 5
executive officers

Number of stock
options by type ofstock (Note 2)

Ordinary shares of
the Company
13,540 shares

Ordinary shares of
the Company
10,220 shares

Ordinary shares of
the Company
21,420 shares

Ordinary shares of
the Company
18,050 shares

Grant date (Note 3)

July 30, 2014
Rightsfinalizing
conditions
notdetermined
Applicable appoint
periodnotdetermined

July 30, 2015
Rightsfinalizing
conditions
notdetermined
Applicable appoint
periodnotdetermined

July 29, 2016
Rightsfinalizing
conditions
notdetermined
Applicable appoint
periodnotdetermined

July 28, 2017
Rightsfinalizing
conditions
notdetermined
Applicable appoint
periodnotdetermined

October 1, 2018 –July 30, 2044

October 1, 2018 –July 30, 2045

October 1, 2018 –July 29, 2046

October 1, 2018 –July 28, 2047

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

May 11, 2018
Board of Directors,
Hokuetsu Bank

May 11, 2018
Board of Directors,
Hokuetsu Bank

May 11, 2018
Board of Directors,
Hokuetsu Bank

May 11, 2018
Board of Directors,
Hokuetsu Bank

Hokuetsu Bank, Ltd.
1 director

Hokuetsu Bank, Ltd.
2 directors

Hokuetsu Bank, Ltd.
2 directors

Hokuetsu Bank, Ltd.
6 directors

Number of stock
options by type ofstock (Note 2)

Ordinary shares of
the Company
1,020 shares

Ordinary shares of
the Company
1,885 shares

Ordinary shares of
the Company
1,565 shares

Ordinary shares of
the Company
3,910 shares

Grant date (Note 3)

July 26, 2012
Rightsfinalizing
conditions
notdetermined
Applicable appoint
periodnotdetermined

July 26, 2013
Rightsfinalizing
conditions
notdetermined
Applicable appoint
periodnotdetermined

July 28, 2014
Rightsfinalizing
conditions
notdetermined
Applicable appoint
periodnotdetermined

July 27, 2015
Rightsfinalizing
conditions
notdetermined
Applicable appoint
periodnotdetermined

October 1, 2018 –July 26, 2042

October 1, 2018 –July 26, 2043

October 1, 2018 –July 28, 2044

October 1, 2018 –July 27, 2045

Daishi Hokuetsu
Financial Group 14th
Stock Option

Daishi Hokuetsu
Financial Group 15th
Stock Option

May 11, 2018
Board of Directors,
Hokuetsu Bank

May 11, 2018
Board of Directors,
Hokuetsu Bank

Rightsconditions

finalizing

Applicableappointment period
Rightsperiodexercising

(7)

(8)

Matters related to pension assets(i) Ratio for each major classification in total pension assets is as follows:
30%
44%
21%
0%
3%
100%

Bonds
StocksGeneral life insurance accountCash and deposits
Other
Total

(Note) Total pension assets include 14% from retirement benefit trust established on the corporate pension
plan and 24% from retirement benefit trust established on the retirement allowance respectively, forthe current consolidated fiscal year.

Date of resolution
Classification
andnumbers of granted
persons

Rightsconditions

finalizing

Applicableappointment period
Rightsperiodexercising(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 and expected pension assets, and the current
and expected long-term ROR on diverse assets that comprise the pension assets.
(9)

Date of resolution

Matters regarding the basis of actuarial calculation
Major actuarial calculation basis
0.6%

Discount rateLong-term expected ROR

2.0%
1.9% to 2.0%
1.1%

Corporate pension fundRetirement benefit trust
Expected salary increase rate

*The expected salary increase rate for this consolidated fiscal year is expressed as a weighted average.

3 Defined contribution scheme
Amount of required contribution to defined contribution schemes of consolidated
subsidiaries for the current consolidated fiscal year is ¥427 million.

Classification
andnumbers of granted
persons

Hokuetsu Bank, Ltd.
6 directors

Hokuetsu Bank, Ltd.
10 directors

Number of stock
options by type ofstock (Note 2)

Ordinary shares of
the Company
5,250 shares

Ordinary shares of
the Company
6,875 shares

Grant date (Note 3)

July 27, 2016
Rightsfinalizing
conditions
notdetermined
Applicable appoint
periodnotdetermined

July 26, 2017
Rightsfinalizing
conditions
notdetermined
Applicable appoint
periodnotdetermined

October 1, 2018 –July 27, 2046

October 1, 2018 –July 26, 2047

Rightsconditions

finalizing

Applicableappointment period
Rightsperiodexercising(Stock option related)

Daishi Hokuetsu Financial Group 16th Stock
OptionDaishi Hokuetsu Financial Group 17th Stock
OptionDate of resolution

Meeting of the Board of Directors on
November 9, 2018

Classification
andnumbers of granted
persons

8 directors of Daishi Hokuetsu Financial Group,
Inc.; 8 directors of Daishi Bank, Ltd.; 8 executive
officers of Daishi Bank Ltd.; 11 directors of
Hokuetsu Bank, Ltd.

Meeting of the Board of Directors on June 25,
2019
8 directors of Daishi Hokuetsu Financial Group,
Inc.; 10 directors of Daishi Bank, Ltd.; 6executive officers of Daishi Bank Ltd.; 9
directors of Hokuetsu Bank, Ltd.; 2 executive
officers of Hokuetsu Bank, Ltd.

Number of stock
options by type ofstock (Note 2)

Ordinary shares of the Company
50,440 shares

Ordinary shares of the Company
65,900 shares

December 7, 2018

July 29, 2019

Rights finalizing conditions not determined

Rights finalizing conditions not determined

Applicable appoint period not determined

Applicable appoint period not determined

December 8, 2018 – December 7, 2048

July 30, 2019 – July 29, 2049

1 Amount and accounting titles of costs recorded for stock options)Fiscal 2021

¥ -. million

General and administrative expenses

2 Amount recorded as profits on lapse due to non-exercise of rights
Fiscal 2021

¥418 million

Gain on reversal of subscription rights to shares

3 Contents, size and fluctuation of stock options(1)
Contents of stock options
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

May 11, 2018
Board of Directors,
Daishi Bank

May 11, 2018
Board of Directors,
Daishi Bank

May 11, 2018
Board of Directors,
Daishi Bank

May 11, 2018
Board of Directors,
Daishi Bank

Daishi Bank, Ltd.
3 directors

Daishi Bank, Ltd.
3 directors

Daishi Bank, Ltd.
4 directors

Daishi Bank, Ltd.
5 directors

Number of stock
options by type ofstock (Note 2)

Ordinary shares of
the Company
7,400 shares

Ordinary shares of
the Company
11,400 shares

Ordinary shares of
the Company
16,610 shares

Ordinary shares of
the Company
13,450 shares

Grant date (Note 3)

July 27, 2010
Rightsfinalizing
conditions
notdetermined
Applicable appoint
periodnotdetermined

July 28, 2011
Rightsfinalizing
conditions
notdetermined
Applicable appoint
periodnotdetermined

July 30, 2012
Rightsfinalizing
conditions
notdetermined
Applicable appoint
periodnotdetermined

July 30, 2013
Rightsfinalizing
conditions
notdetermined
Applicable appoint
periodnotdetermined

October 1, 2018
to July 27, 2040

October 1, 2018
to July 28, 2041

October 1, 2018
to July 30, 2042

October 1, 2018
to July 30, 2043

Date of resolution
Classification
andnumbers of granted
persons

Rightsconditions

finalizing

Applicableappointment period
Rightsperiodexercising

Grant date
Rightsfinalizing
conditions
Applicableappointment period
Rightsexercising
periodDaishi Hokuetsu Financial Group 18th Stock
OptionDate of resolution
Classification
andnumbers of granted
persons
Number of stock
options by type ofstock (Note 2)
Grant date
Rightsfinalizing
conditions
Applicableappointment period
Rightsexercising
periodMeeting of the Board of Directors on June 24,
2020
8 directors of Daishi Hokuetsu Financial Group,
Inc.; 8 directors of Daishi Bank, Ltd.; 7 executive
officers of Daishi Bank Ltd.; 9 directors of
Hokuetsu Bank, Ltd.; 2 executive officers of
Hokuetsu Bank, Ltd.
Ordinary shares of the Company
80,980 shares
July 31, 2020
Rights finalizing conditions not determined
Applicable appoint period not determined
August 1, 2020 – July 31, 2050

(Notes) 1.
From the 1st to the 15th stock options, the right to subscribe to new shares issued by both
Daishi Bank and Hokuetsu Bank held by the rights holders have been issued with the right to subscribe to
new shares of the Company, accompanying the establishment of the Company as the full parent company ofboth 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 is the initial grant date for The Daishi Bank, Ltd. and The Hokuetsu Bank, Ltd.

DAISHI HOKUETSU REPORT 2022

78

The Status of Financial Results (Consolidated)(2)

Size and fluctuation of stock options
Stock options existing in the current consolidated fiscal year (year ended March
2022) have been converted to number of shares and listed.
(i) Number of stock options

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

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

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

7,400

11,400

14,110

9,930

7,400
-

11,400-

14,110
-

9,930
-

-

-

-

-

7,400
4,020
3,380
-

11,400
6,330
5,070
-

14,110
7,090
7,020
-

9,930
4,990
4,940
-

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

9,250

7,130

12,16010,870

9,250
-

7,130
-

12,160-10,870
-

-

-

-

-

9,250
5,240
4,010
-

7,130
4,230
2,900
-

12,160
6,300
5,860
-

10,870
4,410
6,460
-

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
-

79

1,055
-

875
875
-

1,500
1,500
-

-

-

-

-

1,020
1,020
-

1,055
1,055
-

875
875
-

1,500
1,500
-

Daishi Hokuetsu
Financial Group 14th
Stock Option

Daishi Hokuetsu
Financial Group 15th
Stock Option

Daishi Hokuetsu
Financial Group 16th
Stock Option

Daishi Hokuetsu
Financial Group 17th
Stock Option

2,010

3,085

32,73047,510

2,010
-

3,085
-

32,730-47,510
-

-

1,070

1,580

2,290

2,010
2,010
-

3,085
1,070
3,085
-

32,73013,36020,950-47,51017,67032,130-

Daishi Hokuetsu
Financial Group 18th
Stock Option
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

1,055

74,23074,2302,220
74,23021,90054,550-DAISHI HOKUETSU REPORT 2022

(Note) The "Lapsed" under "After rights finalization" refers to the waiver of subscription rights to shares that had
been granted but not yet been exercised, on condition of granting the appropriate number of points based on
the trust-type share-based payment plan, due to the abolition of the share-based payment-type stock option
plan and the introduction of the trust-type share-based payment plan.

(ii)

Unit price information
Daishi Hokuetsu
Financial Group 1st
Stock Option

Rights exercise price(¥)
Average share price attime of exercise (¥)
Fair evaluated unit
price on the grant date(¥)

Rights exercise price(¥)
Average share price attime of exercise (¥)
Fair evaluated unit
price on the grant date(¥)

Rights exercise price(¥)
Average share price attime of exercise (¥)
Fair evaluated unit
price on the grant date(¥)

Rights exercise price(¥)
Average share price attime of exercise (¥)
Fair evaluated unit
price on the grant date(¥)

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

2,432

2,432

2,432

2,432

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

2,432

2,432

2,432

2,432

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

Daishi Hokuetsu
Financial Group 17th
Stock Option

1

1

1

1

-

2,555

2,445

2,445

1,830

2,394

3,276

2,571

Daishi Hokuetsu
Financial Group 18th
Stock Option
Rights exercise price(¥)
Average share price attime of exercise (¥)
Fair evaluated unit
price on the grant date
(¥)

1
2,445
1,765

(Note) The fair evaluated unit prices of Daishi Bank and Hokuetsu Bank shares, on the initial grant date, are listedfrom the 1st through 15th stock options.

(Tax effect accounting related)

1 Breakdown of major causes generating deferred tax assets and deferred tax liabilities
Deferred tax assets
Allowance for loan losses¥10,214 million
Retirement benefit related liabilities¥2,572 million
Depreciation costs¥2,136 million
Valuable securities amortization¥1,905 million
Book value correction for fair market¥2,900 million
valuation
Other¥4,714 million
Subtotal deferred tax assets¥24,444 million
Valuation reserve related to future
subtraction(¥5,491 million)
temporary difference, etc., total
Subtotal valuation reserve(¥5,491 million)
Total deferred tax assets¥18,952 million
Deferred tax liabilities
Valuation difference on available-for(¥2,968 million)
sale securities
Retirement benefit trust establishment(¥1,761 million)
benefitDeffered gains or losses on hedges(¥298 million)
Book value correction for fair market(¥5,451 million)
valuation
Other(¥788 million)
Total deferred tax liabilities(¥11, 268 million)
Net deferred tax assets¥7,684 million

The Status of Financial Results (Consolidated)

2 Breakdown of major items that caused significant difference between the statutory effective
tax rate and the effective tax rate after the application of tax effect accounting of the company
submitting consolidated financial statements
Statutory effective tax rate
30.5%
(Adjusted)
Expenses
includingentertainment
expenses not qualifying for deduction
0.5%
permanently
Non-taxable dividends income(1.6%)

Inhabitant tax on per capita basis
Increase/decrease in valuation allowance
Other
Bankʼs effective tax rate

0.4%
2.6%
1.0%
33.4%

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

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

(Relating to business combination, etc.)

On October 1, 2021, the Company acquired shares of The Daishi Lease Co., Ltd. and The Hokugin
Economic Research Institute, Ltd., which are consolidated subsidiaries of the Company, from The
Daishi Hokuetsu Bank, Ltd., which is a wholly-owned subsidiary of the Company, throughdividends in kind, and from non-controlling interests. As a result, the Company increased its stakein those companies to 100% within the Company group, and those companies became whollyowned subsidiaries of the Company.
As of the same date, the Company acquired shares of Daishi Management Consulting Co., Ltd.,
which is a consolidated subsidiary of the Company, from The Daishi Hokuetsu Bank, Ltd. and The
Daishi Lease Co., Ltd., which are wholly-owned subsidiaries of the Company, through dividends inkind. As a result, that company became a wholly-owned subsidiary of the Company.
An overview of the share acquisition is as follows.
1 Acquisition of shares of subsidiaries by dividends in kind(1) Overview of transactions(i) Name and business activities of the combined company
Name of the combined company
The Daishi Lease Co., Ltd.
The Hokugin Economic Research Institute, Ltd.
Daishi Management Consulting Co., Ltd.

Business activities
Leasing
Survey research and information provision related tothe economy and society
Venture capital and consulting(ii) Date of business combination
October 1, 2021(iii) Legal form of business combination
Dividends in kind from consolidated subsidiaries(iv) Name of the combined company
Name of the company before combination

Name of the combined company

The Daishi Lease Co., Ltd.

The Daishi Hokuetsu Lease Co., Ltd.

The Hokugin Economic Research Institute, Ltd.

Daishi Hokuetsu Research & Consulting, Ltd.

Daishi Management Consulting Co., Ltd.

The Daishi Hokuetsu Capital Partners, Ltd.

(v) Other matters concerning the overview of transactions
The purpose is to further contribute to the local economy and maximize theCompany’s consolidated profit by deepening business through reorganization ofgroup companies and exploring new business areas in light of deregulation, as well
as by making the most use of group company functions and strengthening intragroup partnerships.
(2) Overview of accounting procedures performed
In accordance with the "Accounting Standard for Business Combinations" (ASBJ
Statement No. 21, January 16, 2019) and the "Guidance on Accounting Standards for
Business Combinations and Accounting Standards for Business Divestitures" (ASBJ
Corporate Accounting Standards Implementation Guidance No. 10, January 16,2019), the transaction was treated as a transaction under common control.
2 Acquisition of subsidiary shares by the Company(1) Overview of transactions(i) Name and business activities of the combined company
Name of the combined company
The Daishi Lease Co., Ltd.
The Hokugin Economic Research Institute, Ltd.

Business activities
Leasing
Survey research and information provision related tothe economy and society(ii) Date of business combination
October 1, 2021(iii) Legal form of business combination
Acquisition of shares from non-controlling interests(iv) Name of the combined company
Name of the company before combination

Name of the combined company

The Daishi Lease Co., Ltd.

The Daishi Hokuetsu Lease Co., Ltd.

The Hokugin Economic Research Institute, Ltd.

Daishi Hokuetsu Research & Consulting, Ltd.

(v) Other matters concerning the overview of transactions
The purpose of the share acquisition is as described in 1. (1) (v) "Other mattersconcerning the overview of transactions" above.
(2) Overview of accounting procedures performed
In accordance with the "Accounting Standard for Business Combinations" (ASBJ
Statement No. 21, January 16, 2019) and the "Guidance on Accounting Standards for
Business Combinations and Accounting Standards for Business Divestitures" (ASBJ
Corporate Accounting Standards Implementation Guidance No. 10, January 16,2019), the transaction was treated as a transaction with non-controlling interests
under common control.
(3) Matters concerning additional acquisition of subsidiary shares(i) The Daishi Lease Co., Ltd.
Cash and due
Acquisition price¥2,309 million
from banks
Acquisition cost
¥2,309 million(ii) The Hokugin Economic Research Institute, Ltd.
Cash and due
Acquisition price¥42 million
from banks
Acquisition cost
¥42 million(4) Matters concerning change in ownership interest of the Company due to transactions
with non-controlling interests(i) Major factors for changes in capital surplus
Additional acquisition of subsidiary shares(ii) Increase in capital surplus due to transactions with non-controlling interests¥11, 257 million
DAISHI HOKUETSU REPORT 2022

80

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 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 is reported regularly to the Companyʼs board of directors.
Therefore, even though the Company group consists of segments formed by the Company and each consolidated subsidiary, we have established "Banking," which accounts for the majority of all
segments, "Leasing," and "Securities" as reporting segments in view of their importance.
"Banking" is focused on deposit operations and loan operations, carries out investments in securities, domestic currency operations, foreign currency operations, and serves as the contact point forthe 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 basedon 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 2021 (April 1, 2020 through March 31, 2021)
Reporting segment
Banking
Ordinary income
Ordinary income from outside customers
Internal ordinary income between segments
Total
Segment profits
Segment assets
Segment liabilities
Other items
Depreciation costs
Financing income
Financing expenses
Increase in tangible and intangible fixed asset amount

Leasing

Securities

Total

Other

Total

Adjustments(¥ million)
Amount recorded inconsolidate dfinancial statement

114,207
3,163
117,371
14,791
9,648,950
9,238,216

21,327348
21,675913
62,76544,236

5,733
24
5,757
1,871
27,424
13,982

141,267
3,535
144,803
17,576
9,739,141
9,296,435

4,234
10,727
14,9628,120
361,145
22,322

145,502
14,263
159,766
25,697
10,100,286
9,318,757(2,370)(14,263)(16,633)(8,196)(393,753)(66,069)

143,132
143,132
17,5009,706,533
9,252,687

5,914
65,396
3,084
7,985

254
202
148
261

21
137
2
9

6,190
65,736
3,236
8,256

83
5,752
13
30

6,273
71,488
3,249
8,286

(32)
(7,851)
(129)
112

6,241
63,6363,120
8,399(Notes) 1.
Ordinary income is indicated instead of amount of sales used generally for corporations. “Adjustment difference” refers to the difference between ordinary income and the recorded amount of ordinary income in the
consolidated financial statement .
2. "Other" refers to the 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 (¥2,370 million) in ordinary income from outside customers includes ordinary income adjustment of (¥2,347 million), accompanying the adoption of the purchase method.
(2) The adjustment of segment profit of (¥8,196 million) is from elimination of transactions between segments, etc.
(3) The adjustment of segment assets of (¥393,753 million) is from elimination of transactions between segments, etc.
(4) The adjustment of segment liabilities of (¥66,069 million) is from elimination of transactions between segments, etc.
(5) The adjustment of (¥32 million) in depreciation costs is the amount of adjustment accompanying purchase method, 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 (¥7,851 million) in interest income is for elimination of transactions between segments, etc.
(7) The adjustment of (¥129 million) in interest expenses is for elimination of transactions between segments, etc.
(8) The adjustment of ¥112 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.

Fiscal 2022 (April 1, 2021 through March 31, 2022)
Reporting segment
Banking
Ordinary income
Ordinary income from outside customers
Internal ordinary income between segments
Total
Segment profits
Segment assets
Segment liabilities

106,101
1,484
107,585
18,267
10,612,770
10,225,200

Leasing

20,654335
20,989759
63,253
44,662

Securities

5,600
64
5,665
2,811
25,228
10,294

Total

132,356
1,884
134,240
21,83810,701,252
10,280,157

Other

5,123
11,225
16,34811,306366,250
25,002

Total

137,479
13,109150,589
33,145
11,067,503
10,305,160

Adjustments(1,768)(13,109)(14,878)(9,599)(397,199)(68,361)(¥ million)
Amount recorded inconsolidate dfinancial statement

135,711
135,71123,545
10,670,304
10,236,798

Other items
Depreciation costs
6,677
237
21
6,935
66
7,002
(43)
6,959
Financing income
63,864228
16464,257
8,390
72,647(9,963)62,684
Financing expenses
2,252
141
2
2,396
8
2,405
(117)
2,287
Increase in tangible and intangible fixed asset amount
2,460
218
28
2,707
25
2,733
94
2,828
(Notes) 1. Ordinary income is indicated instead of amount of sales used generally for corporations. “Adjustment difference” refers to the difference between ordinary income and the recorded amount of ordinary income in the
consolidated financial statement .
2. "Other" refers to the 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 (¥1,768 million) in ordinary income from outside customers includes ordinary income adjustment of (¥1, 230 million), accompanying the adoption of the purchase method.
(2) The adjustment of segment profit of (¥9,599 million) is from elimination of transactions between segments, etc.
(3) The adjustment of segment assets of (¥397,199 million) is from elimination of transactions between segments, etc.
(4) The adjustment of segment liabilities of (¥68,361 million) is from elimination of transactions between segments, etc.
(5) The adjustment of (¥43 million) in depreciation costs is the amount of adjustment accompanying purchase method, 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 (¥9,963 million) in interest income is for elimination of transactions between segments, etc.
(7) The adjustment of (¥117 million) in interest expenses is for elimination of transactions between segments, etc.
(8) The adjustment of ¥94 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.

81

DAISHI HOKUETSU REPORT 2022

The Status of Financial Results (Consolidated)[Related information]
Fiscal 2021 (April 1, 2020 through March 31, 2021)
1. Information by each service(¥ million)
Loan operations

Securities investment operations

50,754

Ordinary income from outside customers

Lease operations

38,510Other

21,120Total

32,746

143,132(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 Japan, accounts for 90% or more of the ordinary income inthe 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 more of the tangible fixed assets of the consolidatedbalance sheet.
3. Information by each major customer
Listing has been omitted since there are no specific customers from which ordinary income accounts for 10% or more of the ordinary income in the consolidated statements of income.
Fiscal 2022 (April 1, 2021 through March 31, 2022)
1. Information by each service(¥ million)
Loan operations

Securities investment operations

50,832

Ordinary income from outside customers

Lease operations

28,220Other

20,427

Total

36,231

135,711(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 Japan, accounts for 90% or more of the ordinary income inthe 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 more of the tangible fixed assets of the consolidatedbalance sheet.
3. Information by each major customer
Listing has been omitted since there are no specific customers from which ordinary income accounts for 10% or more of the ordinary income in the consolidated statements of income.
[Information regarding impairment loss of fixed assets for each segment]
Fiscal 2021 (April 1, 2020 through March 31, 2021)(¥ million)
Reporting segment

Banking
Impairment loss

Leasing

518

Securities

2

Other

Total

-

521

Total

-

521

Fiscal 2022 (April 1, 2021 through March 31, 2022)
This information is omitted because it lacks materiality.
[Information concerning amortization of good will and unamortized balance by reporting segment]
There are no applicable items[Information concerning negative goodwill generation profit by each reporting segment]
There are no applicable items(Related party information)

There are no material matters to be stated regarding transactions with related parties.

(Important subsequent events)
There are no applicable items(Per share information)

Net assets per share¥9,436.72
Net income per share for the current term
¥332.40
Net income per share for the current term after adjustment for¥331.58
potential voting(Note 1) The basis for calculation of net asset per share is as follows:
Total amount of Net assets¥433,505 million
Amount to be deducted from net assets¥5,044 million(of which, rights to subscribe to new shares)¥ -. million(of which, non-controlling shareholder equity)¥5,044 million
Net asset amount at end of term concerning ordinary shares¥428,460 million
Number of ordinary shares at the end of term used to45,403 thousand
calculate the amount of net assets per share
shares(Note) The Company’s shares remaining in the trust that are recorded as treasury
stocks in shareholders’ equity are included in the number of treasury stocks to
be deducted in the calculation of the number of shares at the end of the termin calculating the amount of net assets per share.
Number of treasury stocks at the end of the term deducted for calculating net
assets per share
Current consolidated fiscal year
398 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¥15,144 million
Amount not reverting to ordinary shareholders¥ -. million
Net income reverting to parent company shareholders related¥15,144 million
to ordinary shares
45,561 thousand
Average number of ordinary shares during the termshares
Net income per share for the current term after adjustment
for potential voting
Amount of adjustment of net income for the current term
¥ -. million
reverting to parent company shareholders
Increase in number of ordinary shares
113 thousand shares
Of which, rights to subscribe to new shares
113 thousand shares
Summary of potential voting shares not included for lack ofdiluting effects,
in the calculation of net income per share for the current term
adjustment for potential voting.
(Note) The Company’s shares remaining in the trust that are recorded as treasury
stocks in shareholders’ equity are included in the number of treasury stocks to
be deducted in the calculation of the average number of shares during theterm in calculating the net income per share for the current term and the net
income per share for the current term after adjustment for potential voting.
Average number of treasury stocks during the term deducted for calculation of
net income per share for the current term and net income per share for thecurrent term after adjustment for potential voting
Current consolidated fiscal year
219 thousand shares

DAISHI HOKUETSU REPORT 2022

82

Non – Consolidated Balance Sheet
Years ended March 31, 2021 and 2022
Note: The translations of the Japanese yen amounts into US dollars are using the prevailing exchange rate at March 31,
2022, which was ¥122.39 to US $1.

■ Assets（Millions of Yen）

Item

(Thousands of U.S.Dollars)

2021

2022

2022

Cash and due from banks¥2,055,227¥2,758,710$22,540,325

Monetary claims bought

13,080

14,115

115,334

Trading account securities

3,161

2,956

24,159Securities

2,441,677

2,493,036

20,369,611

Loans and bills discounted

4,959,621

5,130,559

41,919,756

Foreign exchanges

16,802

16,304133,216

Other assets

70,550102,503

837,515

Tangible fixed assets

66,84565,790537,544

Intangible fixed assets

16,957

13,684

111,814

Prepaid pension cost

6,452

7,853

64,166

Deferred tax assets-

11,40893,216

18,61418,966

154,965

Customersʼ liabilities for acceptances and guarantees
Allowance for loan losses
Total Assets■ Liabilities(20,040)(23,119)(188,902)

9,648,950

10,612,770$86,712,725（Millions of Yen）

（Millions of Yen）

2021

2022

(Thousands of U.S.Dollars)

2022

8,132,832

8,229,330$67,238,586

Negotiable certificates of deposit

90,666249,241

2,036,456

Receivables under resale agreements

111,132

37,006302,367

Payables under securities lending transaction

188,425

298,3972,438,088

Borrowed money

654,996

1,346,000

10,997,630

Foreign exchanges

186

209

1,710

Borrowed money from trust account

202

2,886

23,581Other Liabilities

27,24029,978244,942

Provision for bonuses

2,246

2,020

16,508Provision for directorsʼ bonuses

95

85

697

Provision for share-based payment

-

380

3,107

Provision for reimbursement of deposits

1,831

1,454

11,887

Provision for system cancellation losses

12

-

-

1,401

1,615

13,198Deposits

Provision for contingent loss
Deferred tax liabilities
Deferred tax liabilities for land revaluation
Acceptances and guarantees
Total Liabilities■ Net Assets

696

-

-

7,636

7,627

62,31918,61418,966

154,965

9,238,216

10,225,200$83,546,048（Millions of Yen）

（Millions of Yen）

Capital stock

32,77632,776

Capital surplus

60,13860,138491,365

Retained earnings

267,985

271,683

2,219,815

Shareholdersʼ eguity

360,900

364,598

2,978,988

Valuation difference on available-for-sale securities
Deffered gains or losses on hedges

44,153(4,452)

12,396464

101,283
3,793

Revaluation reserve for land

10,132

10,11082,610Total valuation and translation adjustments

49,833

22,971

187,687

Total net assets
Total Liabilities and Net assets

83（Millions of Yen）

DAISHI HOKUETSU REPORT 2022

(Thousands of U.S.Dollars)$267,807

410,734

387,569

3,166,676

9,648,950

10,612,770$86,712,725

Non-Consolidated Statement of Income
Ordinary income
Financing income
Interest on loans and discounts
Interest and dividends on securities
Interest on call loans
Interest on receivables under securities borrowing
transactions
Interest on deposits with banks
Interest on interest swaps
Other interest income
Trust fees
Fees and commissions
Other ordinary income
Other income
Ordinary expenses
Financing expenses
Interest on deposits
Interest on negotiable certificates of deposit
Interest on call money
Interest on bills soldInterest on payables under securities lending transactions
Interest on borrowings and rediscounts
Interest on interest swaps
Other interest expenses
Fees and commissions payments
Other ordinary expenses
General and administrative expenses
Other expenses
Ordinary profit
Extraordinary income
Gain on disposal of noncurrent assets
Gain on revision of retirement benefit plan
Other extraordinary income
Extraordinary loss
Loss on disposal of noncurrent assets
Impairment loss
Provision for share-based payment
Income before income taxes
Income taxes-current
Income taxes-deferred
Net Income（Millions of Yen）

（Millions of Yen）

(Thousands of U.S.Dollars)

2021

2022

2022

¥89,085
47,93834,104
13,243(75)¥107,585
63,86445,406
17,398(69)$879,036
521,810
370,998
142,158
(568)

0

1

13

329
3
332
1
17,6407,309
16,19678,833
1,916
558
12
(5)
197
255
25
869
2
5,961
8,827
50,626
11,501
10,251
1,039
0
1,038
707
206
501
10,583
3,204
488¥6,890

760
12
354
53
22,841
10,695
10,13089,317
2,252
458
10
0
112
174
0
1,485
10
8,553
5,902
59,988
12,62018,267
237
0
237
460
117
62
280
18,044
6,219(317)¥12,143

6,214
100
2,893
437
186,628
87,38582,773
729,776
18,403
3,746
88
0
920
1,424
3
12,137
82
69,88848,225490,142
103,116
149,259
1,940
1
1,939
3,764
960
508
2,294
147,436
50,815(2,598)$99,218DAISHI HOKUETSU REPORT 2022

84