HIROGIN REPORT 2020 INTEGRATED REPORT 005_0719987912009.indd 2 2020/09/26 11:51:30 Management Policy (Management Vision + Code of Conduct) Management Vision | The Hiroshima Bank Group’s “Aspiration” Building a reliable Hiroshima Bank Group united through trusting relations with the regional community Code of Conduct Our basic approach and commitment to stakeholders when implementing specific initiatives tied to our “management vision” The Hiroshima Bank Group shall rigorously implement sound management based on the following code of conduct: 1. Work in step with regional communities to actively contribute to their development 2. Strive to enhance customer satisfaction and peace of mind 3. Continuously enhance the Bank’s corporate value 4. Create a cheerful, rewarding workplace 5. Exercise a high level of compliance Notes on the Publication of the “HIROGIN REPORT 2020 (INTEGRATED REPORT)” The Hiroshima Bank, Ltd. (the “Bank”) has prepared this HIROGIN REPORT 2020 (INTEGRATED RE- PORT) to facilitate understanding among stakeholders, particularly investors, of the Bank’s initia- tives aimed at sustainable value creation. In editing this report, we referred to the International Integrated Reporting Framework advo- cated by the International Integrated Reporting Council (IIRC), the Guidance for Integrated Corpo- rate Disclosure and Company-Investor Dialogues for Collaborative Value Creation advocated by the Ministry of Economy, Trade and Industry, and other guidelines, and divisions of the Bank worked closely together. The Report details the Bank’s business model and explains the mechanisms to sustainably create value. We will continue to take advantage of the Report as a tool for dialogue with all stakeholders with the aim of improving corporate value. Furthermore, please refer to HIROGIN REPORT 2020 (DISCLOSURE REPORT) for detailed finan- cial data, etc. Toshio Heya, President 1 HIROSHIMA BANK INTEGRATED REPORT 2020 005_0719987912009.indd093_0719987912009.indd 31 2020/09/262020/09/17 11:51:3010:04:23 Contents About Hiroshima Bank Initiatives to Revitalize Local Communities and Economy 41 Management Policy / Management Vision / Code of Conduct 1 Human Resource Strategies 43 History 3 Provision of Value to the Community 53 Transition to a Holding Company Structure 5 Corporate Governance 57 Message from the President 7 Risk Governance 61 Value Creation Process 13 Interview with an External Director 62 Message from Financial Officer 15 Board of Directors, Executive Officers and Audit & Supervisory Summary of Business Performance (FY2019) 17 Board Members 63 Nonfinancial Highlights and Characteristics of Hiroshima Bank’s Power to Support Sustainability Business Area 19 Communication with Shareholders, Investors and Customers 65 Mid-Term Management Plan 2017 21 Initiatives Aimed at Practicing Customer-Oriented Business Operations 67 Strategies for Individual Businesses Customer Protection Management 70 Banking Business 23 Compliance 71 Asset Management Business 27 Risk Management 73 Initiatives Aimed at Digital Transformation 31 Internal Audits 77 Initiatives for Sustainability Corporate Information Our Approach to Corporate Social Responsibility (CSR) and SDGs Branch Network 78 Initiatives 35 Overview and Disclosure 79 Response to Climate Change and Global Warming 37 HIROSHIMA BANK INTEGRATED REPORT 2020 2 093_0719987912009.indd010_0719987912009.indd 2 2020/09/17 10:04:2415:27:28 About Hiroshima Bank History On August 8, 1945, just two days after the atomic bomb was dropped, Japan, we faced the second major crisis involving a sharp drop in share the Bank restarted its operations by borrowing a floor space from prices in reputational damage and a surge in withdrawals. the Bank of Japan’s business room along with desks, chairs, and other But we were able to recover the market’s confidence by actively furnishings. Even though most of its customers did not have their disclosing our earnings and asset details, having many employees visit personal seals or passbooks, the Bank relied on employees’ memories customers to explain the situation, and carrying out bold structural and took crisis measures in a flexible manner such as responding to reforms. requests for refund for convenience purposes. Despite these measures, Although we experienced two grave crises, we were able to the Bank managed to maintain its credibility without any particular overcome the difficulties and have continued to grow to this day, dispute at a later date. thanks to warm support from our customers and our employees’ After the period of reconstruction from the devastation of atomic sincere and honest effort. The Bank’s DNA of “customer-oriented bombing, we steadily expanded operations as the local economy grew. business operations” remains unchanged to this day. In November 1997, however, after the economic bubble collapsed in 1878 The 66th National Bank, 1988 the Bank’s predecessor, was (April) established in November in Enacted the CI and Onomichi as the first bank in established the current the prefecture, before opening corporate badge for business in April 1879. (July) Characters used in Japanese name changed (no change 1945 1965 (February) to the English name) (May) Completion of new Head New Geibi Bank was established Office building through a five-way merger of Geibi Bank, 1974 (November) Kure Bank, Binan Bank, Miyoshi Bank, and Hiroshima Godo Chochiku Bank. Online system covering all branches completed (August 6) Suffered losses as a result of the atomic bomb (11 branches out of 16 in Hiroshima City together with 144 officers and employees of the Bank were lost.) 1980 1978 (November) 1970 100th anniversary Head Office of the Bank immediately of the founding after the atomic bomb (photograph taken on August 8) 1971 (February) Opened Hiroshima Museum of Art and established Hirogin no Mori Listed stocks on the first sections of Tokyo Stock 1960 Exchange and Osaka Securities Exchange 1950 (August 6) Name changed to Hiroshima Bank five years after the atomic bomb, in connection to “Hiroshima, the City of Peace” Hiroshima Museum of Art 1940 1960 1970 1980 1990 1945 Atomic bomb 1964 Tokyo Olympics 1973 The first oil shock 1985 The Plaza Accord 1991 Economic bubble dropped 1979 The second oil shock 1989 Consumption tax collapsed was introduced 1995 The Great Hanshin-Awaji Earthquake 3 HIROSHIMA BANK INTEGRATED REPORT 2020 HIROSHIMA BANK INTEGRATED REPORT 2020 4 010_0719987912009.indd 3 2020/09/17 15:27:29 091_0719987891907.indd091_0719987891907.indd 1-2 1-2 2019/07/232019/07/23 14:28:15 14:28:15 History 2019 (April) Digital Strategy Division established Inheritance Consultation Plaza opened (September) 2016 (May) Announced a plan to shift to a holding company structure (scheduled in (February) 1990 Completed the construction of <Hirogin> Chuo Building October 2020) The “Genesis Opened Hanoi Representative Office Building,” a new 2013 (July) computing center, completed Opened Singapore Representative Office 2009 (April) Opened Bangkok Representative Office 2003 (January) Joint system operation with the Bank of Fukuoka introduced 2010 2000 2018 (from January) Moved Head Office to 2017 temporary branch 1990 (March) Formulated Mid-Term Management 1996 (February) Plan 2017 Adopted a slogan: “Aiming to be Opened Shanghai a comprehensive financial services Representative Office group that continues to grow with local customers— A True First Call 1997 (November) Bank Group —” (June) Share prices plunged in Made Hirogin Securities a wholly reputational damage owned subsidiary 2020 (April) 1998 Hirogin Capital Partners established (February) (October) “Promise of the 120th year” for structural reforms announced Consolidated overseas branches and urban branches as part of a plan to return to a “Bank of the Region” (October) Hirogin Holdings Launched “Reliance 21”, a new Long-Term Management Plan established 2000 2010 2020 2005 Deposit insurance fully deregulated 2011 The Great East Japan Earthquake 2016 Bank of Japan introduced 2020 New coronavirus 2006 Bank of Japan ended zero occurred negative interest rate policy pandemic interest rate policy 2012 The second Abe cabinet formed; 2018 Devastating floods occurred 2007 Subprime mortgage crisis oc- “Abenomics” started in July curred in the U.S. 2013 Bank of Japan introduced “quantita- 2019 New Imperial era name, 2008 Global financial crisis occurred tive and qualitative monetary easing” Reiwa, announced 3 HIROSHIMA BANK INTEGRATED REPORT 2020 HIROSHIMA BANK INTEGRATED REPORT 2020 4 010_0719987912009.indd 4 2020/09/17 15:27:29 091_0719987891907.indd091_0719987891907.indd 1-2 1-2 2019/07/232019/07/23 14:28:15 14:28:15 About Hiroshima Bank Transition to a Holding Company Structure [Maximizing group synergy under a holding company structure] April April Starting on October 1, we will take steps to strengthen our unified group operation and collaboration within Hirogin HiroginCapital PartnersCapital Partners established established the group under a new group business structure and maximize the group synergy by taking advantage of characteristics and strengths of group companies. July July Hirogin HiroginBusiness Business Service absorbedService absorbed and mergedand mergedwith Hirogin with Hirogin BusinessBusiness Support Support 20192019 AugustAugust Efforts for unified group operation in the past EstablishedEstablished Hirogin HiroginREIT Management REIT Management 20202020 20182018 April April JanuaryJanuary HiroshimaHiroshima Bank absorbed Bank absorbed and and Hirogin HiroginGuarantee Guarantee and Hirogin and HiroginCard