Download pdf - 77bank IR Presentation › ... › pdf › 2018_06_ir_presentation.pdfIR Presentation Results for Fiscal Year Ended March 31, 2018 June 5, 2018 Fiscal Year Ended March 31, 2018 I

Materials were prepared for the Bank’s presentation of its results for the fiscal year ended March 31, 2018 held on June 5, 2018.

IR Presentation Results for Fiscal Year Ended March 31, 2018

June 5, 2018

Fiscal Year Ended March 31, 2018

I. Financial Summary II. Overview of Medium-term Management Plan

III. Projected Performance

Contents

Summary of profits and losses 1

Interest income 2

Loans and bills discounted 3

Deposits and certificates of deposits 4

Securities 5

Assets in custody 6

Credit-related expenses/capital adequacy ratio/credits disclosed under the Financial Reconstruction Law 7

Results of previous Medium-term Management Plan

“VALUE UP: Challenge Value Creation” 8

Bank Image Sought by The 77 Bank and Action Guidelines 10

Basic Policies 11

Targets / KPIs 12

Key Strategies 13

Key Strategy 1: Growth strategy —Strengthening of profitability— 14

Key Strategy 2: Regional economy vitalization strategy —Enhancement of value of the region— 21

Key Strategy 3: Productivity enhancement strategy —Effective and efficient allocation of resources— 23

Key Strategy 4: Governance strategy —Strengthening of governance for sustainable growth— 25

<Reference> Quantitative plan 27

Projected performance for FY2019 29

Both ordinary income and net income increased because securities-related income and gains on reversal of reserve for possible loan loss increased.

Core operating income increased because of an increase in interest income due to increases in interest on loans and dividends on securities and a decrease in expenses mainly due to decrease in labor cost through working style reform.

(JPY bn, %)

Summary of profits and losses(Non-consolidated) FY2017 FY2018

YoY changeIncrease/decrease

Rate of change %

Gross operating income 69.2 67.7 (1.5) (2.1)[Core gross operating income] [ 73.7 ] [ 75.9 ] [ 2.2 ] [ 3.0 ]Interest income 67.6 69.6 2.0 2.9Fees and commissions 9.4 9.3 (0.1) (1.4)Other operating income (7.8) (11.2) (3.4)

Gains (losses) on bonds (4.5) (8.2) (3.7)Gains (losses) on forex transactions (2.6) (3.6) (1.0)

Expenses 53.2 52.8 (0.4) (0.7)Operating income before provision of general reserve for possible loan losses 16.0 14.9 (1.1) (6.7)

[Core operating income] [ 20.5 ] [ 23.1 ] [ 2.6 ] [ 12.8 ]Provision of general reserve for possible loan losses －－－

Operating income 16.0 14.9 (1.1) (6.7)

Special income and losses 5.6 8.4 2.8Bad debt disposals (-) 0.4 0.5 0.1Gains on reversal of reserve for possible loan loss 2.0 2.8 0.8

Gains (losses) on stocks 1.9 2.7 0.8Gains (losses) on investments in money held in trust 2.5 4.0 1.5

Ordinary income 21.6 23.3 1.7 7.9

Extraordinary income －－－

Extraordinary loss 0.5 0.7 0.2Income taxes (incl. deferred taxes) 4.5 5.9 1.4Net income 16.6 16.7 0.1 0.7

Credit-related expenses (1.6) (2.3) (0.7)

<Core operating income>

<Ordinary income/Net income>

FY2017 FY2018

Consolidated ordinary income 23.8 25.7

Net income attributable to owners of the

parent16.1 18.3

Summary of profits and lossesI. Financial Summary

1

(JPY bn)

+1.3

(1.1) (1.3)

+3.3

(0.0) (0.0)(0.2)

2

<Change factors in interest income>

FY2017Interest income67.6

Factors in loans +0.2

Other

FY2018Interest income69.6

(JPY bn)

Average balances

Yield

Factors in securities +2.0

Yield

Average balances

Average balances

<Reference> Trends of market interest rates

<FY2018 summary>

Interest income

Factors in deposits (0.0)

(JPY bn)

FY2017 FY2018 FY2019 (Plan)YoY change YoY change

Interest income 67.6 69.6 2.0 64.0 (5.6)

Investment income 70.4 72.7 2.3(Interest on loans and bills discounted) 41.2 41.4 0.2(Interest and dividends on securities) 29.0 31.0 2.0

Fund procurement costs 2.8 3.1 0.3

(Interest on deposits) 1.5 1.5 0.0

(JPY bn)

Major accounts (average balances) FY2017 FY2018 YoY change

Loans and bills discounted 4,355.1 4,494.0 138.9

Securities 3,214.2 3,078.1 (136.1 )Deposits and certificates of deposits 7,727.7 7,761.0 33.3

(%)

Interest rates/ Interest margin FY2017 FY2018 YoY change

Loans and bills discounted interest rate 0.94 0.92 (0.02 )

Securities interest rate 0.90 1.00 0.10

Interest rate on deposits 0.01 0.01 0.00

Interest rate spread 0.84 0.86 0.02

Net interest margin 0.16 0.19 0.03* Figures in YoY change (increase/decrease) show percentage points.

(%)FY2017 FY2018 YoY change

JPY TIBOR (3 months) 0.06 0.06 0.00

5-year JGBs (0.18 ) (0.10 ) 0.08

10-year JGBs (0.05 ) 0.05 0.10

I. Financial Summary

Yield

Interest income increased JPY 2.0 billion year- on-year due to increased interest on loans and bills discounted as a result of rebalancing of loan assets and increased dividends on securities.

Loans and bills discounted

(JPY bn)

<FY2018 summary>

3,505.8

Loans and bills discounted balances

Loans and bills discounted balances by region(JPY bn)

4,227.7 4,357.9

Share in the loans in Miyagi Pref. (end of Mar. 2018)

77 BANK

* Excludes agricultural and fishery cooperatives

43.0%

Average balances increased 3.1% year-on-year on average due to an increase chiefly in corporate loans centered in SMEs, and in retail loans centered in loans, and the term-end balance increased 3.9%

+2.3%

YoY growth+3.9%

+8.5%

+2.6%

Tohoku region

Miyagi Pref. Sendai City

2011/3 2015/3 2016/3

+6.1%

YoY growth+6.2%

+7.6%

2017/3

3,089.6 3,224.4

4,450.3

3,368.6

(JPY bn, %)

Loans and bills discounted (average balances)


Loans and bills discounted 4,355.1 4,494.0 3.1 4,601.0 2.3

Corporate loans 2,691.3 2,789.7 3.6[Excl. spread loans] 1,509.5 1,656.5 9.7[Spread loans] 1,181.8 1,133.2 (4.1)Retail loans 962.8 1,056.3 9.7[Housing loans] 922.2 1,006.9 9.1Loans for local governments 701.0 648.0 (7.5)

4,627.1

2018/32015/3 2016/3 2017/3 2018/3


3,578.1

3

0(Immediately afterthe earthquake)

Deposits and certificates of deposits

<FY2018 summary>

(JPY bn)

5,636.4

Deposits and certificates of deposits balances

7,854.9 7,971.2

Share in deposits in Miyagi Pref. (end of Mar. 2018)

* Excludes Japan Post Bank and agricultural and fishery cooperatives

77 BANK 55.5%

▲4.1%

YoY growth+1.8%

+3.4%

+2.8%

Services to expand the customer base (from Jan. 2018)

7,821.4

Average balance increased 0.4% year-on-year, due to increases in retail and corporate deposits, despite a decline in public deposits. The term-end balance increased 1.8%

(JPY bn, %)Deposits and certificates of

deposits(average balances)


Deposits and certificates of deposits 7,727.7 7,761.0 0.4 7,739.5 (0.2)

Retail deposits 4,700.0 4,845.4 3.0

Corporate deposits 1,755.1 1,797.2 2.3

Public deposits 1,243.8 1,070.3 (13.9)

2011/3 2015/3 2016/3 2017/3 2018/3

•Handling of “electronic delivery service” (Launched in Mar. 2018)

•Viewing of documents on deposits, investment trust, etc. (investment trust account statement, etc.) is made available via online banking service, instead of delivery by postal mail

•Opening of a coupon site “77 Coupon” (Launched in Apr. 2018)

•Handling of “Online Bankbook” (Launched in Apr. 2018)

•Environmental consideration and promotion of paperless•Prevention of losing bankbooks and illegal use due to theft

•Websites offering coupons by category (restaurants, leisure, etc.) are available on the Bank’s website and in the 77 Bank app.


7,964.3

4

(Immediately afterthe earthquake)

Yields and modified duration of yen-denominated bonds*Yen-dominated bonds other than investment trusts

Securities

Composition ratio by type (on an amortized cost base)Balance of securities (based on market value)

<FY2018 summary>

End-Mar.2016

End-Mar.2017

End-Mar. 2018

End-Mar. 2019(Plan)

National gov. bonds 46.2% 39.2% 33.0% 25.1%

Local gov. bonds 6.7% 7.9% 12.7% 18.4%

Corporate bonds 29.4% 31.4% 32.1% 33.1%

Others 15.8% 19.2% 19.9% 21.1%

Investment trusts, etc. 8.6% 12.0% 13.9% 14.9%

Foreign bonds 7.2% 7.2% 6.0% 6.2%

Stocks 1.9% 2.3% 2.3% 2.3%

(JPY bn)

End-Mar.2016

End-Mar.2017

End-Mar.

2018

Gains (losses)from evaluation end-Mar. 2018

Change from end-Mar. 2017

YoY change

Securities 3,478.9 3,242.6 3,126.0 (116.6) 162.8 6.6

Bonds 3,353.7 3,091.6 2,966.5 (125.1) 73.0 (4.6)National gov. bonds 1,560.9 1,225.5 988.5 (237.0) 10.9 (6.2)Local gov. bonds 229.0 246.9 381.9 135.0 4.5 0Corporate bonds 997.2 983.2 960.2 (23.0) 9.9 (4.0)

Others 566.6 636.0 635.9 (0.1) 47.7 5.6Investment trusts, etc. 327.8 414.7 461.9 47.2 49.4 5.7

Foreign bonds 238.8 221.3 174.0 (47.3) (1.7) (0.1)

Stocks 125.2 151.0 159.5 8.5 89.8 11.2


5

○ Balance of marketable securities decreased owing to suppressed reinvestment of national gov. bonds and foreign bond redemptions

○ Implementation of replacement transactions of foreign bonds and stocks, etc.

○ Secured revenue opportunities by flexible trading

○ Continuation of portfolio rebalancing to cope with negative rate environment•Reinvest in yen-bond management guided by interest-rate risk•Continue yen bonds into the rebalance of investment trusts, etc.

Sales of assets in custody

FY2017 FY2018FY2019(Plan)YoY change YoY change

Investment trusts and insurance 74.9 64.1 (14.4) 89.0 38.8

Investment trusts 44.8 30.9 (31.0)

Insurance 30.1 33.2 10.2

Public bonds 3.9 5.4 38.4

Total 78.8 69.5 (11.8)(Reference)

Financial product brokerage (structured bonds, etc.) 37.9 21.9 (42.2)

<FY2018 summary>• Investment trust sales and balance

decreased as the net asset values remained high reflecting the bullish market trend.

• Despite persisting scheduled rate reduction, insurance sales and balance increased centering on foreign-currency denominated insurance products.

• Income increased including the commissions, etc. from 77 Securities. This contributed to the expansion of group earnings.

Assets in custodyI. Financial Summary

393.5356.1

316.0

(JPY bn)

Balance of assets in custody

(JPY mn)

Sales commissions of assets in custody

408.7

2,359

Structured bonds, etc. Operating revenue of 77 Securities

Public bondsInsuranceInvestment trusts

406.9

6

2,002 2,152 2,0761,898

Sales in 77 Securities (After deduction of sales from bank

brokerage) FY2018

Shares 6.2

Investment trusts 5.0Structured bonds,

overseas bonds, etc. 34.8

Total 46.0

(Reference)

(JPY bn, %)

(JPY bn)


Investment trusts and insurance

Foreign currency deposits (excluding deposits by financial institutions and offshore accounts)

Structured bonds, etc. (brokerage) 77 Securities

606.2616.6652.1701.5718.4

16.71.7

13.4 6.714.8 17.4

15.8 14.2

18.1

33.2

0.7

FY2018FY2017FY2016FY2015FY2014

2433

56234242

8.8 (1.4) (0.7)

(3.8)(6.2)

(1.6) (2.3)

0.24

-0.03 -0.01

-0.08-0.14

-0.03 -0.05

▲ 0.3

0.0

0.3

-10

-5

0

5

10

Credit-related expenses/capital adequacy ratio/credits disclosed under the Financial Reconstruction Law

(%)

(JPY bn)

(%)(JPY bn)

Credits disclosed under the Financial Reconstruction LawCredit-related expenses and credit-related expense rate trends

Credit-related expense rateCredit-related expenses

174.2

144.0134.7

124.8116.3

(0.3)

FY2018

Credit-related expenses Credits disclosed under the Financial Reconstruction Law

Capital adequacy ratio

105.7(JPY bn, %)End-Mar.

2017End-Mar.

2018Capital adequacy ratio (non- consolidated/ domestic standards) (a/b)

10.48 10.18

Capital (a) 373.4 383.6

(Core capital: instruments and reserves) 373.5 383.7

(Core capital: regulatory adjustments) 0.1 0.1

Risk assets (b) 3,561.6 3,767.7


7

FY2017FY2016FY2015FY2014FY2013FY2012

99.5

2018/32017/32016/32015/32014/32013/32012/3

Ratio of credits disclosed under the Financial Reconstruction Law

Loans to bankrupt and quasi-bankrupt

Doubtful loans

Substandard loans(5)

(10)

(0.03) (0.01) (0.08)

(0.14)

(0.03) (0.05)

• Of the basic targets (6 items in all), 2 items about the increase of market share were achieved.• 4 items about enhancement of profitability and pursuit of efficiency were not achieved partly due to the adverse impact of low interest rates because of the negative interest rate policy.

Results of previous MTMP “VALUE UP Challenge Value Creation” (1)II. Overview of MTMP

8

○Results about basic targets and evaluation

(Reference) Change in the market environment (％, JPY)

Change of interest rates, etc. (average) FY2015 FY2016 FY2017 FY2018 Unsecured call rate O/N 0.07 0.06 (0.05) (0.05)

JPY TIBOR (3 months) 0.20 0.16 0.06 0.06

USD LIBOR (3 months) 0.24 0.41 0.87 1.5010-year Japanese government bonds 0.47 0.29 (0.05) 0.0510-year US treasury bonds 2.34 2.10 1.97 2.43Exchange rate (JPY/USD) 110 120 108 110Nikkei Average (at term-end) 19,207 16,759 18,909 21,454Bank’s stock price (at term-end) 680 398 482 (Note) 2,505

Note. 5-to-1 consolidation of shares executed on October 1, 2017

BOJ introduced negative interest rate policy (Feb. 2016)

Targets FY2015 FY2016 FY2017 FY2018

Compared with target

Enhancement of

profitability

Net income JPY 20.0 bn

or more16.9 bn 15.7 bn 16.6 bn 16.7 bn (3.3 bn)

Increase of interest on loans and discounted [Compared with FY2015]

JPY 1.5 bn or more

[45.4 bn][43.9bn](1.5 bn)

[41.2 bn](4.2 bn)

[41.4 bn](4.0 bn)

(5.5 bn)

Fees and commissions JPY 10.5 bn or more

10.3 bn 10.0 bn 9.4 bn 9.3 bn (1.2 bn)

Pursuit of

efficiency

Core OHR (core gross operating income expense ratio)

Less than 65%

71.07％ 76.48％ 72.17％ 69.52% 4.52%

Increase of market share

Increase of loans and bills discounted in Miyagi Prefecture (balance as of March 31, 2018) [compared with the balance as of March 31, 2015]

JPY 250.0 bn or more

[2,917.7 bn][3,027.2 bn]

109.5 bn [3,154.4 bn]

236.7 bn [3,348.9 bn]

431.2 bn 181.2 bn

Increase of loans and bills discounted in Sendai (balance as of March 31, 2018) [compared with the balance as of March 31, 2015]

JPY 150.0 bn or more

[2,031,2 bn][2,097.4 bn]

66.2 bn [2,174.7 bn]

143.5 bn [2,340.4 bn]

309.2 bn 159.2 bn

Earnings pow

er Proposal capabilities

Strengthen earthquake recovery support

Reinforce the earnings base

Enhance the value of the region

Smooth migration to and utilization of MEJAR

○Vigorously supply risk money

○Strengthen support for corporate rehabilitation and business reform

○Contribute to recovery and development of the region

○Increase interest income and fees and commissions

○Diversify sources of earnings by expanding the scope of business

○Further pursue productivity improvement

○ Display the overwhelming presence in the Tohoku region

○ Bolster the 77 brand

○Effective utilization of MEJAR

Continuous support in light of the transition of the phase of earthquake recovery support

Strengthening of sales capabilities and enhancement of productivity to abandon the high-cost, low earnings model

Enhancement of the value of the region through regional revitalization initiatives

Further enhancement of operational efficiency through strengthening of partnerships with other MEJAR-participating banks

Priorities Issues to be addressed

•Response to earthquake disaster-related loans•Utilization of diverse means of funding

•Vigorous response to the double loan problem

•Support of utilization of subsidies and other support systems

•Promotion of rebalance of loan assets

•Rebalance of securities portfolio

•Establishment of a new Group company

•Conversion into a 100% subsidiary

•Greater support of M&A and business succession

•Introduction of RPA

•Implementation of business reform

•Strengthening of sales efforts in the Tohoku region

•Regional revitalization initiatives

•Strengthening of corporate governance

•Promotion of working style reform

•Enhancement of efficiency of administrative tasks by utilization of MEJAR functions

•Expansion of direct channel functions

[No. of cases of earthquake disaster-related loans/amount]

[No. of borrowers utilizing credit purchaseinstitutions]

[Rebalance of loan assets]Ratio of loans other than those for borrowers in Tokyo/Nagoya/Osaka and for regional public bodies

Balance of unsecured loans

[Strengthening of the Group’s comprehensive capabilities]

[Opening of a new site]Singapore Representative Office opened (May 2016)

[Utilization of MEJAR]

Corporate 8,173 cases/ JPY403.8 bn

Retail 17,050 cases / JPY279.0 bn

Industry Reconstruction Corporation

Corporation for Revitalizing Earthquake affected Business

75 borrowers

187 borrowers

[Partnership with regional public bodies]Signed agreements with 16 entities in Miyagi Prefecture and Fukushima Prefecture

77 Securities started operation (April 2017)Establishment of 77 Capital (July 2016)

57.1％ (FY2015) ⇒65.1％ (FY2018)

JPY 28.5 bn (Mar-End 2015) ⇒JPY 46.5 bn (Mar-End 2018)

9

○Results of priority measures and issues to be addressed

Expansion of revenue opportunities through ATM

Major achievements and results

Results of previous MTMP “VALUE UP Challenge Value Creation” (2)

[Enhancement of operational efficiency by utilizing RPA]

Introduction of a loan service support system

[Strengthening of corporate governance]Transition to a company with an Audit & Supervisory Committee (June 2017)

Scope: 40 business processes, Max. 3,200 hours will be secured.

II. Overview of MTMP

Bank Image Sought by The 77 Bank and Action Guidelines

1. We always put customers first. ••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• [ Customer ]2. We vitalize communication inside and outside the Bank. •••••••••••••••••••••••••••••••••••••••••••••••• [ Communication ]3. We share needs and issues of customers by deepening relationships with customers. ••••••••••• [ Connection ]4. We enhance consulting capabilities and offer the optimum solutions. •••••••••••••••••••••••••••••••• [ Consulting ]5. We comply with laws and the code of corporate ethics and maintain fair and honest practices.•• [ Compliance ]6. We take cost into consideration and further enhance productivity. •••••••••••••••••••••••••••••••••••••[ Cost performance ]7. We take up challenges without fear of change. ••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••[ Challenge ]

Positioning of the bank image and Action Guidelines

Medium-term Management Plan

Specific measures to be implemented to realize the bank image sought by The 77 Bank

10

Action Guidelines: 7C Guidelines

Become a bank that is truly supported by customers through differentiation from other banks and new contenders (other business formats) entering the financial field and establish a robust business foundation for the future by abandoning the low-earnings model

Bank image sought by The 77 Bank“Best Consulting Bank” that responds to customers’

needs by offering the optimum solutions


Bank Creed

(Management philosophy)

Action GuidelinesAction to be taken by the Bank’s officers

and employees to achieve the bank image sought by The 77 Bank

Bank image sought by The 77 Bank

Bank image sought by The 77 Bank over the medium-to long term based on the

management philosophy

1. Name

2. Period

3. Basic policies (Medium-term business model)

“For The Customer & For The Future”—Best Consulting Bank Project—

3 years [from April 1, 2018 to March 31, 2021]

Further enhance the degree of customer satisfaction and confidence in the Bank through “consulting” offering the optimum solutions by identifying customers’ needs and issues. Moreover, enhance profitability and employee satisfaction through these initiatives.

(April 1, 2009-March 31, 2012)

“SSS Improvement Plan”

1. Enhance sales capabilities 2. Improve productivity

3. Contribute to stakeholders

“POWER for the Future”

1. Support earthquake recovery and revitalize the regional economy

2. Strengthen loan and consulting capabilities

3. Further improve productivity

“VALUE UP”

1. Strengthen earthquake recovery support

2. Reinforce the earnings base3. Enhance the value of the region4. Smooth migration to and

utilization of MEJAR(April 1, 2018-March 31, 2021)

“For The Customer &

For The Future”

—Best Consulting Bank Project—

Great East Japan Earthquake

(March 2011)Transition to MEJAR

(January 2016)Bank’s 140th

anniversary(December 2018)

Bank’s 150th

anniversary(December 2028)

Basic Policies

11


(April 1, 2012-March 31, 2015) (April 1, 2015-March 31, 2018)

○Targets Targets for the final year of MTMP (FY2021)

○Key Performance Indicators (KPIs) for strengthening consulting capabilities

Targets / KPIs

12


Item FY2018 results FY2021 targetsEnhancement of profitability

• Net income (consolidated) JPY18.3 bn JPY19.0 bn or more • Interest on loans and bills discounted JPY41.4 bn JPY45.0 bn or more • Fees and commissions JPY9.3 bn JPY11.5 bn or more

Pursuit of efficiency • Core OHR (core gross operating income expense ratio)

69.5% Less than 70%

• ROE (consolidated) 3.8% 3.7% or more Pursuit of soundness • Capital adequacy ratio (consolidated) 10.4% 10% or more Strengthening of corporate sales capabilities

• Balance of corporate loans (term-end) JPY2,796.0 bn JPY3,000.0 bn or more Of which Miyagi Prefecture JPY1,698.9 bn JPY1,900.0 bn or more Of which Sendai City JPY1,223.3 bn JPY1,370.0 bn or more

Strengthening of retail sales capabilities

• Balance of assets in custody, Group (term-end) (Note) JPY606.2 bn JPY740.0 bn or more

• Balance of consumer loans (term-end) JPY1,101.4 bn JPY1,200.0 bn or more

Note: Sum of assets in custody of The 77 Bank and those of 77 Securities (Foreign currency deposits exclude deposits by financial institutions and offshore accounts.)

Item FY2018 results FY2021 targetsEnhancement of consulting capabilities

• No. of employees with qualifications (1st grade Certified Financial Planner, CFP, and Small and Medium enterprise Management Consultant) (final year)

111 persons 700 persons or more

Strengthening of consulting for corporate clients

• No. of corporate loan borrowers (final year) 12,290 borrowers 13,000 borrowers or more • No. of clients who signed contracts for customized solutions based on business evaluation (cumulative total for 3 years) (Note 2)

(1,114 clients) 2,000 clients or more

• Fees and commissions from corporate clients (final year) (Note 1) JPY0.6 bn JPY1.8 bn or more Strengthening of consulting for retail customers

• No. of business succession, inheritance, and asset succession support recipients (cumulative total for 3 years) (Note 2)

(677 recipients) 3,300 recipients or more

• No. of increases in contracts for installment-type assets in custody [compared with FY2018 term-end] (Note 2)

(10,856 contracts) 40,000 contracts or more

• No. of seminars for customers (cumulative total for 3 years) (Note 2) (80 times) 1,100 times or more

Note 1: Fees and commissions for syndicated loans, commitment lines, business matching, M&A, privately placed corporate bonds, manager insurance products, etc. Note 2: Results indicated for FY2018 are results for the single year.

Based on the recognition that the “high-cost, low-profit model” is the largest issue, promote consulting-based sales throughout the Group to enhance customer satisfaction with the Bank and the Bank’s profit.

Also, strengthen the channel strategy to expand customer contact points.

Key Strategies

13

(1)Establish systems and structures for strengthening onsultingcapabilities

• Revise the HQ’s organizational structure to strengthen support systems for corporate offices

• Establishment of a region support team consisting of HQ liaison personnel•HR development to enhance consulting capabilities

(2) Strengthen consulting-based sales capabilities throughout the Group• Strengthen corporate sales capabilities

• Continuous efforts to rebalance loan assets• Strengthening of corporate sales through initiatives for business

evaluation• Efforts to increase non-interest income, centering on fees and

commissions from corporate clients• Strengthening of overseas business support• Cultivation of opportunities by utilizing information

•Strengthen retail sales capabilities• Greater promotion of consumer loans• Strengthening of capabilities to sell assets in custody• Increase of assets in custody and consumer loans by corralling mass

customers, younger customers, and the asset formation clientele(3) Strengthen the channel strategy utilizing IT and FinTech

• Strengthening of collaboration with MEJAR participating banks(4) Promote sophisticated management of securities

(1) Continue earthquake recovery support (2) Contribute to regional revitalization(3) Strengthen relations with regional public bodies(4) Strengthen support for corporate rehabilitation and business

reform

(1) Make effective investment in light of sales measures(2) Continue business reform(3) Promote working style reform(4) Optimize allocation of human resources and promote

strategic utilization

Growth strategy —Strengthening of profitability—Key Strategy 1

Regional economy vitalization strategy —Enhancement of value of the region—Key Strategy 2

Governance strategy —Strengthening of governance for sustainable growth—

(1) Enhance and strengthen governance

• Vigorously address ESG-related issues

(2) Establish brand strategy

(3) Enhance shareholder value

Key Strategy 4

Key Strategy 3Productivity enhancement strategy —Effective and efficient allocation of resources—


Establish systems and structures for strengthening consulting capabilities

Corporate Finance Dept.

•Support for corporate rehabilitation•Support for business reform

Credit Supervision Div.

•Promotion of foreign exchange transactions

•Overseas business support

Treasury Administration & International Div.

•Efficient sales promotion structure•Analysis of quality of office

operations (segment)

Business Promotion Div.

Personal Banking & Direct Promotion Div.

(Business Evaluation Desk)

Regional Development Promotion Div.(Regional Vitalization Promotion Desk)

Consulting Promotion Div.

Cooperation

Cooperation

Customers (retail, corporate, local governments)

Corporate officesExternal expert

institutions

Information/ Needs

II. Overview of MTMP Key Strategy 1: Growth strategy—Strengthening of profitability—(1)

External Sales Dept.(Corporate Sales Promotion Desk)

14

Headquarters

Solutions

Group companies

Reorganization in April 2018, increase headcount to about 80

•Consulting by specialists•Vigorous support for structuring deals•Effective utilization of external experts•HR development by having junior

employees accompany senior employees when visiting customers etc.

Demonstrate HQ liaison functions

77 Research & Consulting (to be established in July 2018)

Growth Strategy

•Support for business succession•M&A advisory•Inheritance countermeasures•Promotion of assets in custody

Consulting Promotion Dept.•Structuring of syndicated loans•Promotion of structured finance•Promotion of private placement of

corporate bonds•Utilization of funds

•“Region Support Team” to offer high-value-added solutions and support corporate offices

•Support of growth fields (healthcare and nursing, environment & energy, agri business)

•Promotion of settlement business for corporate clients (FB, Densai)

•Support for starting a new company or business

•Support and development of regional core companies

•Promotion of urban development (PPP/PFI)

•Support for promotion of tourism•Utilization of information•Business matching•Support of public business

•Strengthening of non-face-to-face channels

•Expansion of sales to mass customersAomori Hachinohe Sales Office

Growth Strategy

Strengthen corporate sales capabilities — Continuous efforts to rebalance loan assets

Outstanding balance of corporate loans (at term-end)


15

○Rebalancing of loan customers ○Rebalancing in terms of regions

(JPY bn)

[Corporate loans]Over 1.5 times increase

in about 10 years

(April 1, 2009-March 31, 2012)

“SSS Improvement Plan” “POWER for the Future” “VALUE UP”

(April 1, 2018-March 31, 2021)

“For The Customer & For The Future”

(April 1, 2012-March 31, 2015) (April 1, 2015-March 31, 2018)

• Strengthening loans to SME with higher-margin

• Proactive risk-taking through encouragement of business evaluation and exercise of good judgment

• Setting of interest rates, taking profit margin into consideration

• Shifting from Tokyo, Nagoya and Osaka to the local market (throughout Tohoku area)

• Promotion of lending throughout Tohoku area, using a wide-area sales networks and information

• Identify funding demand throughout Tohoku area

Growth StrategyStrengthen corporate sales capabilities

— Strengthening of initiatives for business evaluation○Initiatives for business evaluation


Cooperation

Advice based on expert knowledge

Cultivate and capture diverse customer needs by business

evaluation

Offer solutions by demonstrating consulting functions

• Funding• Support of starting a company, business matching• Advice on business succession and M&A• Proposal to utilize funds and derivatives• Proposal of industry-academia-government

collaboration and utilization of subsidies• Support for broader marketing channels (holding of

business meetings)• Overseas business support• Support for corporate rehabilitation and business

reform• Referral of customers and business partners, etc.

Headquarters

Corporate offices

External expert institutions

Clients

Group companiesCooperation

Cooperation

Bank’s system

Issues for enhancement of corporate value

Funding Business matching

Securing of HR Business succession

Broader marketing channels

Utilization of subsidies

Overseas business development

M&A

Systematization of business evaluation

Cooperation

Enhance listening capabilities

Assist documentation, etc.

• Demonstrate the HQ functions for highly specialized cases

• Promotion of consulting-based sales in cooperation with external experts

16

Strengthen information collection capabilities

Strengthen awareness-raising activities about business evaluation

(From Jan. 2018 onward) Strengthening of awareness-raising in the Bank though “workshops” and “business evaluation coaching”

Set targets

(cumulative for 3 years covered by MTMP)

Strengthen approaches to core companies Strengthen follow-ups“Fishery and fishery processing industry,” “manufacturers,” companies with net sales of JPY1 billion or more

HQ and corporate offices to share the progress and shifting of the emphasis from “proposals” to “concluding contracts and implementation”

Deepen business

evaluation

Standardize business

evaluation

No. of clients who signed contracts for customized solutions: 2,000 clients

(77’ Research & Consulting

Growth Strategy

Strengthen corporate sales capabilities — Efforts to increase income other than interest income


Fees and commissions from corporate clients

642

400

1,850

Syndicated loans and commitment lines• Strengthening of systems for promoting arrangement and agent services

M&A advisory• Full process support by full-time staff for contract formation• Provision of highly specialized advisory services in partnership with external

experts

• Proposal for use of insurance products corresponding to business succession needs, such as preparation of retirement benefits, needs for financial closing, etc.

Manager insurance

Privately placed corporate bonds• Expansion of eligible clients by revising the minimum issue price and the bond criteria• Realization of social contribution by donation-type privately placed corporate bonds

Fee-based business matching• Diversification of the service lineup by expanding partners• Provision of appropriate solutions to resolve clients’ issues

17

(JPY mn)

99 partners(End-Apr.

2018)

HQ liaison

HQ and corporate offices cooperate to identify customer needs and conduct proposal-driven sales with high added value

Clients (corporations, etc.)

Corporate offices

○Bank staff deployed overseas: 13(Representative offices: 4, Financial institutions: 6, Other: 3)○Employment of foreigners: 2○Overseas partner financial institutions: 11(Bangkok Bank, Vietcom Bank, Cooperative Bank, etc.)○Other partner institutions in Japan and overseas: 17(Miyagi Prefecture, Tohoku Economic Federation, Nippon Export and Investment Insurance, etc.)


Changes in the number of business sites set up by local companies

Asia Business Support Dept. (established March 2011)

○Overseas network

○Solutions for issues by overseas business support

Diversifying client needs

Utilization of HR and network

Offering of solutions

Seize earnings opportunities

151

300

450(Sites)

18

Number of overseas business support cases

FY2019 FY2020 FY2021

1,300 1,400 1,500Cumulative total for 3 years 4,200 cases

March 2005 March 2011 March 2018

Strengthen corporate sales capabilities — Overseas business supportGrowth Strategy

ShanghaiRepresentative Office(opened July 2005)

China/Hong Kong ASEAN region

Fund procurement

Marketing channel expansion

Materials procurement

Provision of localinformation

Support for overseas units

Trading

SingaporeRepresentative Office(opened May 2016)

Strengthen retail sales capabilities —Strengthening consumer loans

○Housing loans

6,376 6,619 6,943 7,080 7,028 7,141 7,7088,274

8,9139,688

10,48911,220

401 379 361 343 307 293 290 285 302387

465

760

0

5,000

10,000

200

400

600

800

住宅ローン #REF! 無担保ローン [Housing loans]Over 1.5 times increase

in about 10 years

[Unsecured loans]Turned upward from the

post-earthquake downward trend

(億円) (億円)

02008/3 2009/3 2010/3 2011/3 2012/3 2013/3 2014/3 2015/3 2016/3 2017/3 2021/32018/3


○Unsecured loans

• Expand comprehensive earnings through cross- selling with housing loans

• Promote loans guaranteed by Group companies

• Promote loan contracts via non-face-to-face means

Outstanding balance of housing and unsecured loans (term-end balances)

• Improve weekend consulting services, using Loan Centers and Counselling Plazas

• Identify potential deals by strengthening ties with home builders

(No. of houses)

<Housing starts in Miyagi Prefecture>

Great East Japan

Earthquake

Great E

ast Japan E

arthquake

Peaked but still at a high level

Support loans for households with children

19

• Propose loans utilizing big data analysis• Expand the product lineup to meet diversifying needs

Strengthen promotion utilizing social media

Strengthen capturing loan deals through segmentation of guarantee rates by introducing a central credit screening system

ATM card loans

Growth Strategy

Housing loans Unsecured loans(JPY100 mn) (JPY100 mn)(JPY bn)

1,000.0

500.0

637.6 661.9 694.3

708.0702.8 714.1 770.8

827.4891.3

968.81,048.9

1,122.0(JPY bn)

80.0

60.0

40.0

20.0

40.1 37.936.1

34.3 30.7 29.3 29.0 28.5 30.2

38.7

46.5

76.0

Strengthen retail sales capabilities — Strengthening of non-interest income


Balance of assets in custody of the Group

606.2616.6

740.0

77 Bank

20

(JPY bn)

Accommodate the needs of rich clientele

1.0 bn

0.2 bn

1.2 bn

1.1 bn

Fees and commissions(FY2021 targets)

Strengthen sales of assets in custody across the Group through bank-brokerage partnership

Expand business with asset formation clientele

77 Securities

JPY3.5 bnInvestment trusts, NISA, etc. Stocks, investment trusts,

structured bonds, etc.

Partnership

77 Securities

Structured bonds / foreign bonds (Brokerage)

Insurance

Investment trusts• Promote contracts for installment-type assets in custody (savings

investment trusts, installment-type NISA)• Stimulate needs by holding workplace seminars and seminars for

customers• Promote employee installment NISA• Introduce 140th anniversary commemorative fund

・Offers a wider lineup of financial products than at the Bank’s counters and highly specialized services delivered by full time staff

Partners: 2,556 customers (End-Mar. 2018)

• Promote referral to the section dedicated to insurance that is open on weekends

• Propose optimum products according to life plans and life events of customers

No. of securities accounts opened in the 1st year since the start of operation Referral: 2,665, Brokerage: 2,017

• Expand customer base for sales of assets in custody by approaching the asset formation clientele

Growth Strategy

(excl. financial institutions andoffshore accounts)


Foreign currency depositsStructured bonds,etc.（brokerage）77 Securities

Regional economy vitalization strategy

Corporate Support Office

Resident credit screening

Off-site credit screening

Continue earthquake recovery support


Rehabilitation period (4 years) Development period (3 years)Recovery period (3 years)Recovery of Miyagi Pref.

Miyagi Prefecture Earthquake Recovery Plan

March 2011 2014 2018

Present

Continue earthquake recovery support in light of the transition of the phase from rehabilitation to development

• Reinforcement of credit screening structure

○Support for broader marketing channels

○Support for corporate rehabilitation and business reform

○Earthquake disaster-related loan performance

• Business-matching deals in Japan

• No. of cases of support for overseas business

Credit Screening Department personnel visits a corporate office and conduct credit screening

Credit Screening Department personnel resides in Ishinomaki area and conducts credit screening

• Utilization of external experts and external entities

Resident 3 external experts provide support in cooperation.

21

25,223 cases / JPY682.8 billion

<Corporate>

<Retail>

○Support for diversified funding

• ABL (Asset-based lending) 173 cases / JPY30.4 billionExercise of good judgment by 20 real estate appraisal advisors

• Privately placed corporate bonds 102 cases / JPY9.9 billionDonation-type bonds to support social contribution activities of clients

• Recovery support fund 19 cases / JPY5.2 billionUse of recovery support fund according to the recovery phase

Cloud funding Factoring Liquidation of receivables

6,603 cases

(after the earthquake to end-Mar. 2018, total)

(FY2018: 1,410 cases)

4,327 cases(FY2018: 1,290 cases)

Support detailsPerformance since the earthquake

FY2018

Support for overseas units 436 48

Support for trading, etc. 358 24Support for marketing channel expansion and procurement

1,112 371

Provision of information 2,421 847

Total 4,327 1,290

Speedy response to deals requiring highly specialized knowledge

Provision of support for corporate rehabilitation and business reform by utilizing specialized knowledge

External entities Alliance with 39 entities including REVIC

Food Kingdom Miyagi Business Meeting

Operating Capital expenditure

Total

Cases 5,781 2,392 8,173

Amount (JPY bn) 252.5 151.3 403.8

Unsecured Housing Total

Cases 4,237 12,813 17,050

Amount (JPY bn) 7.3 271.7 279.0

(after the earthquake to end-Mar. 2018, total)

Key Strategy 2: Regional economy vitalization strategy—Enhancement of value of the region—(1)

Regional economy vitalization strategy

Use of “FINE+ Tohoku”

Contribute to regional revitalization

II. Overview of MTMPKey Strategy 2: Regional economy vitalization strategy—Enhancement of value of the region—(2)

Promotion of tourism, job creation

Support for starting a new company or business

Support and develop regional core companies

Resolve issues of the region

Strengthen relations with regional public bodies

Strengthen consulting capabilitiesCooperate with external partners

• Support for initial and secondary business launch• Support for growth of regional companies by utilizing the 3-party

partnership scheme involving Tokyo Stock Exchange and Tohoku University

• Utilization of the fund in cooperation with 77 Capital

Partnership agreements with 16 entities Utilize the information network and

the Bank’s group capabilitiesTokyo Stock Exchange, Tohoku University, etc.

Fund No. 1: “77 New Business Fund”

• Greater encouragement for public-private projects (PPP/PFI)

• Greater efforts to promote tourism

Promotion of urban development

Total value of fund: JPY 1.0 billion (launched Aug. 2016)

Investments made: 12 deals/JPY306 million (as of end-Mar. 2018)

• Solutions to issues that utilize business evaluation

FY2017 FY2018

No. of clients evaluated 1,776 3,255

Balance of funds for clients evaluated JPY401.1 bn JPY543.6 bn

• Grasp information on projects through the government-private collaboration platform

• Coordinate projects in cooperation with Group companies• Promote urban development projects based on the partnership agreement with the Development Bank of Japan Inc.

• Participation in regional development projects

• Tohoku University campus relocation• Tohoku synchrotron radiation facility invitation project

22

• Identify and grasp needs through relations with clients• Support enhancement of corporate value and regional value in

cooperation between HQ and corporate offices• Provide training to enhance the Bank employees’ capabilities to make

good judgements

• Support for DMO establishment and operation, financial support, and strengthen cooperation

• Create tourist areas to vitalize the region

• Support for starting a new company or business in cooperation with external partners

Synchrotron radiation facility (image)

Aim to become a resort facility attractive throughout the year not only for tourism during the snow season but also for trekking in the summer, viewing autumn leaves, etc.

Key site for regional tourismMiyagi Zao Eboshi Ski Resort

Productivity enhancement

strategyContinue business reform / Promote working style reform

II. Overview of MTMP Key Strategy 3: Productivity enhancement strategy—Effective and efficient allocation of resources— (1)

23

Expenses

Allocate resources effectively and efficiently to secure manpower and time to concentrate on consulting services

52.053.2 52.8

Reduce non-personnel expenses

Reduce personnel expenses

(JPY bn)

Continue business reform and BPRThoroughly control expenses

Suppress overtime through realization of work-life balance

○Continue business reform

○Promote working style reform

○Utilize RPAPhase 1 Phase 2 Phase 3 Total

Period From Nov. 2017 to Mar. 2018

From Apr. 2018 to Sep. 2018

From Oct. 2018 onward ー

Business processes covered

Approx. 40 processes




Annual time saving 3,200 hours 2,115 hours 8,400 hours 13,700 hours

Enhance efficiency of business processes of corporate offices /

Promote HQ centralization

Business reform at corporate offices

Reform business processes, etc.

Business reform at HQReform meetings

For further secure manpower and time, accelerate business reform, including HQ centralization of business processes at corporate offices

Realize work-life balance

Develop promising human capital

Establish an environment where diverse HR can demonstrate their full

potential

Promote health and productivity management

Enhance productivity and

service

Personal and Corporate Value

enhancement Project

Enhance motivation of each employee and realize a highly productive organization

Target for time saving during the MTMP period: 10,515 hours

161 min./day per corporate office Surplus manpower: 80 persons(From Apr. 2015-End-Mar. 2017) (From Apr. 2017-End-Mar.2018)

No. of average monthly overtime hours per person

(FY2017⇒FY2018)Reduced by approx. 3 hours

Usage of annual paid leave

(FY2015)55.8％ ⇒ 73.2％

(FY2018)

100％ (FY2018: 79 persons)(from FY2015 to FY2018)

Male employees’ usage of childcare leave Ratio of female managers

(FY2015)11.1％ ⇒ 12.8％

(FY2018)

○Realize work-life balance• Strengthen initiatives for supporting employees to balance work

and childcare/nursing, etc.• Introduce systems such as teleworking

○Continue business reform• Continue business reform of corporate offices and HQ

• Effectively utilize surplus manpower and time saved by business reform

• Hold “MIRAI Talk” at more places

○Deepen relations with clients through business evaluation

○Revise the incentive programs for corporate offices to evaluate their medium- to long-term initiatives

• Expand evaluation of medium- to long-term sale activities

• Revise the composition to strengthen profitability• Set targets in light of the role of each corporate

office

○Establish systems and structures for strengthening consulting capabilities

• Establish a system for supporting corporate offices centering on Consulting Promotion Div. and strengthen cooperation

• Expand contact points for customers by utilizing IT and FinTech• Demonstrate consulting capabilities through cooperation among the 77

Group (greater bank-brokerage partnership, establishment of a consulting company)


24

Sales promotion reform

Working style reform

Business reform

Productivity enhancement

strategy

Key Strategy 3: Productivity enhancement strategy —Effective and efficient allocation of resources—(2)

○Create promising human capital• Utilize human resources development programs, internal qualification

systems, systems for “sharing” regarding funding and sales

○Deepen BPR• Enhance efficiency of sales activities through BPR• Promote further HQ centralization of business processes

of corporate offices

○Promote IT and the paperless office• Enhance business efficiency by utilizing RPA• Promote digitization of business processes by

utilizing tablets

○Establish systems and structures for cost management

• Strengthen systems for due diligence of investments

○Establish an environment where diverse human resources can demonstrate their full potential

• Reflect medium- to long-term initiatives and human resources development initiatives in personnel evaluation

○Promote health and productivity management• Enhance measures for employees’ health management• Fulfill “health and productivity management declaration”

• Shift emphasis to efforts to resolve issues• Strengthen follow-up through sharing of the progress

situations between HQ and corporate offices• Promote sophistication, standardization and efficiency improvement of the business evaluation method through systematization

Vigorously address ESG-related issues


Environment E SocialＳ○Promote financial education

○Promotion of female engagement

○Corresponding to an environmentally friendly society

• Initiatives for saving energy

• Renewables-related funding

• Loans related to social contribution

Environmental policy

(established in 2012)

Proactively and continuously implement efforts that aim at conserving the region’s natural environment and reducing environmental impacts

Power consumption decreased year on year for the 10th consecutive year(Total at Headquarters, Administration Center, and Izumi Center (systems departments))

8,663

17,032

10,000

20,000 (Thousand kwh)

Funding for activities related to environmental protection and childcare support

Funding for renewable energy businesses, such as solar power generation

Vigorously support financial education by utilizing the Bank’s practical knowledge and know-how in order to contribute to fostering of future leaders

Item Description No. of participants(FY2018)

Financial MuseumIntroduction of the history and the role of money and banks. Held at Head Office

1,642 participants (mainly elementary and junior high

school students)

Seminars held at Tohoku Gakuin University

The Bank’s employees lecture on the financial trend and roles of financial institutions

328 participants

Training sessions for new employees

Training for basic business manner (greeting, telephone manner, etc.)

112 cases / 646 participants

Activities in experience- based programStudent City

Having a booth at a facility operated by Sendai City for providing job experience

114 schools / 8,174 participants

Enhance women’s awareness about career development and establish a workplace environment where women can work energetically and bring their capabilities into full play.

Target 1: 30% or more increase in the number of female managers (compared with March 31, 2017)

Target 2: 600 or more women engaged in consulting.Target 3: 150 or more women with qualifications to enhance their consulting

capabilities during the term above (1st grade Certified Financial Planner, CFP, and Small and Medium Enterprise Management Consultant)

<Action Plan based on the Act of Promotion of Women’s Participation and Advancement in the Workplace(From April 1, 2018 to March 31, 2021)

25

Key Strategy 4: Governance strategy—Strengthening of governance for sustainable growth—(1)

243 cases / JPY76.2 billion

(Deal amount basis, after the earthquake to end-Mar. 2018)

(FY2018: 38 cases / JPY15.0 billion)

17cases / JPY528 million

(Executed amount basis, after the earthquake to end-Mar. 2018)

(FY2018: 5 cases / JPY172 million)

Governance strategy

• Investment in consideration of the environment and society (green bond, etc.)Promote social contribution activities through investment in businesses that will lead to environmental improvements such as reduction of CO2 emissions

3.5 4.0 4.5 4.5 4.5 4.5

3.5 4.04.5 4.5 4.5 4.5

3.5

22.5

2012/3 2013/3 2014/3 2015/3 2016/3 2017/3 2018/3

Enhance shareholder value


○Milestones for enhancement/strengthening of governance Dividends

Total sum paid out(JPY mn)

2,616 2,617 2,805 3,180 3,368 3,353 3,364

Net income(JPY bn)

10.6 12.1 14.7 16.9 15.7 16.6 16.7

Dividend ratio

24.6％ 21.5％ 19.0％ 18.8％ 21.5％ 20.2％ 19.9％

“Corporate Governance Policy” establishedNov. 2015

“Corporate Governance Committee” established

Jun. 2017

Apr. 2014 “Executive officer system” introduced

Transition to a “Company with an Audit & Supervisory Committee”“Compensation system for Directors” revised (Performance-linked compensation system introduced)

Revision of the executive officer system

Jun. 2018

Appointment of a woman as Director female

G Governance

26

(JPY)

(22.5)

Increased ratio of Outside Directors

Key Strategy 4: Governance strategy—Strengthening of governance for sustainable growth—(2)

Consolidation of shares on Oct. 1, 2017

(Plan)

<Reference> Acquisitions of treasury stock

Timing No. of shares acquired Total cost of acquisition

Oct. 2002-Jan. 2003 1,770,000 JPY777 mn

Aug. 2003 1,000,000 JPY490 mn

Feb.-Apr. 2011 5,563,000 JPY2,535 mn

Nov. 2016-Jan. 2017 5,346,000 JPY3,000 mn

Introduction of a new position, senior executive officer, for streamlining and vitalizing the Board of Directors

The Bank intends to appoint a woman as an Outside Director to enhance management transparency through diversification of directors

37.5%(6 Outside Directors/Total 16 Directors)

Faster decision-making, oversight and business execution, strengthening of functions

Interim dividendsTerm-end dividends

Governance strategy

II. Overview of MTMP Reference: Quantitative Plan (1) (Quantitative plan to be formulated and reviewed annually)

27

1. Major accounts (average balance)

FY2018 FY2019 FY2020 FY2021(Results) (Plan) (Forecast) (Forecast) vs FY2018 change %

Loans and bills discounted 4,494.0 4,601.0 4,724.0 4,840.0 346.0 7.7

2,789.7 2,858.0 2,951.0 3,048.0 258.3 9.3

1,056.3 1,115.0 1,158.0 1,189.0 132.7 12.6

1,006.9 1,056.0 1,089.0 1,110.0 103.1 10.2

43.0 53.0 63.0 73.0 30.0 69.8

Deposits and certif icates of deposits (Note 1) 7,761.0 7,739.5 7,653.5 7,568.5 (192.5) (2.5)

2. Term-end balance

FY2018 FY2019 FY2020 FY2021(Results) (Plan) (Forecast) (Forecast) vs FY2018 change %

Loans and bills discounted 4,627.1 4,618.0 4,760.0 4,888.0 260.9 5.6

Corporate loans 2,796.0 2,842.0 2,941.0 3,040.0 244.0 8.7

1,698.9 1,750.0 1,830.0 1,910.0 211.1 12.4

Sendai City 1,223.3 1,250.0 1,310.0 1,370.0 146.7 12.0

Retail loans 1,101.4 1,135.0 1,174.0 1,201.0 99.6 9.0

Housing loans 1,048.9 1,071.0 1,106.0 1,122.0 73.1 7.0

Unsecured loans 46.5 56.0 66.0 76.0 29.5 63.4

Deposits and certif icates of deposits (Note 1) 7,964.3 7,858.0 7,733.0 7,636.0 (328.3) (4.1)

Balance of assets in custody, Group (Note 2) 606.2 650.0 682.0 740.0 133.8 22.1

Note 1. "Deposits and certif icates of deposits" is expected to decrease mainly because of outf low of public deposits in line w ith the progress of recovery from the earthquake.

Note 2. "Balance of assets in custody, Group" is the sum of assets in custody of The 77 Bank and those of 77 Securities (Foreign currency deposits exclude deposits by f inancial institutions and offshore accounts.)

Corporate loans

Retail loans

Unsecured loans

Miyagi Prefecture

Housing loans

(JPY bn, %)

(JPY bn, %)

Increase/decrease

Increase/decrease

II. Overview of MTMP Reference: Quantitative Plan (2) (Quantitative plan to be formulated and reviewed annually)

28

(%)

Interest rates/Interest margin

FY2018(Results)

FY2019(Plan) YoY change

Loans and bills discounted interest rate 0.92 0.91 (0.01)

Securities interest rate 1.00 0.85 (0.15)

Interest rate on deposits 0.01 0.02 0.01

Interest rate spread 0.86 0.79 (0.07)

Net interest margin 0.19 0.09 (0.10)

FY2018 (Results) FY2019 (Forecast)

Unsecured call rate O/N (0.05)% (0.05)%

JPY TIBOR (3 months) 0.06% 0.07%

5-year JGBs (0.10)% (0.10)%

10-year JGBs 0.05% 0.05%

Exchange rate (JPY/USD) ¥110 ¥111

Nikkei Average (At term-end) ¥21,454 ¥23,500

III. Projected Performance Projected performance for FY2019

29

FY2018(Results)

FY2019(Plan)

Consolidated ordinary income

25.7 25.0

Net income attributable to owners

of the parent18.3 18.0

(JPY bn)

(JPY bn)

Projected performance (non-consolidated)

FY2018(Results)

FY2019(Plan) YoY change

Gross operating income 67.7 68.4 0.7

[Core gross operating income] [ 75.9 ] [ 69.8 ] [ (6.1)]

Interest income 69.6 64.0 (5.6)

Fees and commissions 9.3 9.7 0.4

Other operating income (11.2) (5.3) 5.9

Gains (losses) on bonds (8.2) (1.4) 6.8Gains (losses) on forex transactions (3.6) (2.7) 0.9

Expenses 52.8 54.0 1.2Operating income before provision of general reserve for possible loan losses 14.9 14.4 (0.5)

[Core operating income] [ 23.1 ] [ 15.8 ] [ (7.3)]Provision of general reserve for possible loan losses －－－

Operating income 14.9 14.4 (0.5)

Special income (losses) 8.4 8.6 0.2

Bad debt disposals (-) 0.5 0.3 (0.2)Gains on reversal of reserve for possible loan losses 2.8 0.3 (2.5)

Gains (losses) on stocks 2.7 5.8 3.1Gains (losses) on investments in money held in trust 4.0 4.4 0.4

Ordinary income 23.3 23.0 (0.3)

Extraordinary losses (0.7) (0.5) 0.2

Income taxes (incl. deferred taxes) 5.9 5.5 (0.4)

Net income 16.7 17.0 0.3

Credit-related expenses (2.3) 0.0 2.3

<Interest rates and other assumptions underlying the projection (average)>

(Note) YoY change is a point difference.

This is a Japanese-English translation of the presentation material for your convenience. In the case that there is any discrepancy between the Japanese and English versions, the Japanese version is assumed to be correct. Please note that the projections described in this document do not guarantee future performance. Future performance projections may differ from actual results due to uncertainty caused by factors such as changes in the business environment.