Annual Report 2014 Year Ended March 31, 2014
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Annual Report 2014 Year ended March 31, 2014 Hokuhoku Financial Group, Inc. Company outline (as of March 31, 2014) Company name: Hokuhoku Financial Group, Inc. Date of establishment: September 26, 2003 Location of head office: 1-2-26 Tsutsumicho-dori, Toyama City Purpose of business: Management and control of subsidiaries and affiliates and ancillary and related business Capital: ¥70,895 million Shares issued and outstanding: Common stock .................................. 1,351,630,146 Preferred stock (Type 5) .................... 107,432,000 Exchange listings: Tokyo Stock Exchange (First Section) Sapporo Securities Exchange This document contains forward-looking statements. Statements of this kind do not constitute guarantees of future performance, as factors such as changes in the operating environment may cause actual performance to differ. The figures stated in this document are, in principle, rounded down to the nearest whole unit. CONTENTS Profile .................................................................................................. 1 Message from the Management .......................................................... 2 Medium-term Management Plan.......................................................... 4 Performance Highlights ....................................................................... 6 Corporate Governance ........................................................................ 10 Approach to Compliance ..................................................................... 13 Risk Management System ................................................................... 15 Corporate Social Responsibility ........................................................... 20 Topics ................................................................................................. 23 Consolidated Financial Statements Consolidated Balance Sheet ............................................................ 26 Consolidated Statement of Income .................................................. 27 Consolidated Statement of Comprehensive Income ........................ 27 Consolidated Statement of Changes in Equity ................................. 28 Consolidated Statement of Cash Flows ........................................... 30 Notes to Consolidated Financial Statements .................................... 31 Independent Auditor’s Report .............................................................. 57 Non-consolidated Financial Statements The Hokuriku Bank, Ltd. Non-consolidated Balance Sheet (Unaudited) .............................. 58 Non-consolidated Statement of Income (Unaudited) .................... 59 The Hokkaido Bank, Ltd. Non-consolidated Balance Sheet (Unaudited) .............................. 60 Non-consolidated Statement of Income (Unaudited) .................... 61 Corporate Information .......................................................................... 62 Outline of Subsidiaries — Hokuriku Bank ............................................. 63 Outline of Subsidiaries — Hokkaido Bank ............................................ 64 Board of Directors and Audit & Supervisory Board Members ............... 65 ........................................................................ 66 Profile The operations of the Hokuhoku Financial Group Since its establishment in 1877, Hokuriku Bank has extend beyond the limits of a single district. developed an extensive network of branches throughout Our extensive network is outlined below. the Hokuriku district. On account of trade through the Hokuriku district ........................................ 149 branches Kitamae-bune or “Northbound Ships,” branches extended Toyama prefecture ...................................... 91 branches to the major cities of Hokkaido, enabling the bank to Ishikawa prefecture ..................................... 36 branches meet customers’ needs. The Hokkaido Bank, which was Fukui prefecture ........................................... 22 branches established in 1951, has developed a network of branches Hokkaido .................................................... 159 branches throughout Hokkaido, and built a firm business structure centered on individuals and small and medium-sized Three major metropolitan areas ............... 16 branches enterprises. Tokyo and Yokohama .................................. 9 branches The Hokuriku Bank, Ltd. and The Hokkaido Bank, Ltd. Nagoya ........................................................ 3 branches underwent management integration in September 2004 to Osaka and Kyoto ......................................... 4 branches form the Hokuhoku Financial Group Inc., which today oper- Others (Sendai, Niigata, Nagano, Takayama) ... 4 branches ates a super-regional financial network that encompasses Overseas .................................................... 9 offices the Hokuriku region, Hokkaido, and Japan’s three major New York Representative Office (Hokuriku Bank) metropolitan areas (Tokyo, Osaka, and Nagoya areas). Yuzhno-Sakhalinsk Representative Office (Hokkaido Bank) Vladivostok Representative Office (Hokkaido Bank) London Representative Office (Hokuriku Bank) Singapore Representative Office (Hokuriku Bank) Comprehensive business alliance Bangkok Representative Office (Hokuriku Bank) May 2002 between Dalian Representative Office (Hokuriku Bank) Hokuriku Bank and Hokkaido Bank Shanghai Representative Office (Hokuriku Bank) Shenyang Representative Office (Hokkaido Bank) Agreement on full integration of (As of June 30, 2014) May 2003 management of Hokuriku Bank and Hokkaido Bank London Vladivostok Yuzhno Shenyang September Sakhalinsk New York Hokugin Financial Group, Inc. Dalian 2003 established Shanghai Hokuriku Bank Group comes under Bangkok management of Hokugin Financial Singapore Group Management integration effected through equity swap Hokkaido September Hokuhoku Financial Group, Inc. is 2004 born. Hokuriku district Ishikawa Toyama Fukui Tokyo Osaka Nagoya Three major metropolitan areas Hokuhoku Financial Group, Inc. Annual Report 2014 1 MESSAGE FROM THE MANAGEMENT (from left) Yoshihiro Sekihachi Eishin Ihori Chairman President (concurrently serving as president of (concurrently serving as president of The Hokkaido Bank, Ltd.) The Hokuriku Bank, Ltd.) 2 Hokuhoku Financial Group, Inc. Annual Report 2014 We would like to express our sincere appreciation to all our customers for their continued patronage to the Hokuhoku Financial Group. The Hokuhoku Financial Group was formed on September 1, 2004, as the first wide-area financial group comprising regional banks. Based on its networks in the Hokuriku area (Toyama, Ishikawa and Fukui prefectures), Hokkaido and Japan’s three metropolitan areas, the Group has contributed to the economic development of the areas in which it operates and has supported the prosperity of local people in their daily lives. Over the last 10 years, the Group has completed repay- ment of public fund, a concern for management, and achieved shared use of core IT systems, enabling it to provide high- quality efficient services. Having achieved our target of ¥10 trillion in deposits, we have made significant progress toward our goal of stabilizing our business foundation. Turning to the current business environment in Hokuriku and Hokkaido, we see prospects of improved earnings at local enterprises, as government growth strategies including financial easing by the Bank of Japan gradually take effect across the region and the regional economy gears itself for launch of the Hokuriku Shinkansen (Bullet Train) line next spring. However, interest rates are expected to stay at low levels, and the earnings environment for financial institutions is set to remain severe. Against this backdrop, the Group is taking measures to strengthen marketing capabilities and improve management efficiency under the “GO for IT!” medium-term management plan. In fiscal 2013, the first year of the plan, consolidated net income was ¥27.3 billion, ahead of the target. In light of this achievement, we increased the term-end dividend by ¥0.25 to ¥4.00 per common share. Aiming to become a close and reliable financial group for local customers, we are committed to providing high-quality financial services. Through these activities, we are working to bolster enterprise value by strengthening our profitability and financial position. We ask for your continued support and encouragement in our future business endeavors. July 2014 Yoshihiro Sekihachi Eishin Ihori Chairman President Hokuhoku Financial Group, Inc. Annual Report 2014 3 MEDIUM-TERM MANAGEMENT PLAN In April 2014, the Group launched the “GO for IT!” medium-term management plan, and designated the three-year period of the plan as a term for establishing an optimized business strategy for sustainable growth. We remain committed to the existing management policies of “Strengthening Marketing Capabilities” and “Improving Management Efficiency” along with “Cementing Management Foundation.” In addition, we will raise our corporate value by obtaining the trust of local customers and contributing to the revitalization of the regional economy. Overview of the Medium-Term Management Plan Title GO for IT! Period 3 Years (April 2013–March 2016) Position A term for establishing an optimized business strategy for sustainable growth Target Corporate Profile Close and Reliable Financial Group for Local Customers Basic Policies 1. Establish solid management foundation for sustainable growth under changing business in Management Plan circumstances