An image of a target portion is captured while first light beams are applied thereto. Thereby, a first image signal is obtained. The first light beams are in a wavelength range in which an absorption coefficient varies in accordance with a change in oxygen saturation of hemoglobin in blood. An image of the target portion is captured while second light beams in a broadband wavelength range are applied thereto. Thereby, second and third image signals are obtained. Oxygen saturation is calculated from the first to third image signals. Reliability of the oxygen saturation is calculated from one of the first to third image signals. Color difference signals each corresponding to the oxygen saturation is obtained from a color table. Each of the color difference signals is corrected in accordance with the reliability. An oxygen saturation image is generated based on corrected color difference signals and displayed.