IR Presentation...IR Presentation December 1, 2015 Results for First Half of Fiscal Year Ending...

IR Presentation

December 1, 2015

Results for First Half of Fiscal Year Ending March 31, 2016

Materials were prepared for the Bank’s presentation of its results for the first half of fiscal year ending March 31, 2016 held on December 1, 2015.

Current state of Miyagi Pref. 8

Outline of the Medium-term Management Plan 9

Strengthen earthquake recovery support 10

Reinforce the earnings base 12

Enhance the value of the region 14

Smooth migration to and utilization of MEJAR 17

1. Financial Summary 2. Key Management Measures

Contents

3. Projected Performance

First Half of Fiscal Year Ending First Half of Fiscal Year Ending March 31, 2016March 31, 2016

Results for first half of FY2016 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

Projected performance for FY2016 18

Numerical targets 19

Summary of profits and losses(Non-consolidated)

First half FY2015

First half FY2016

YoY changeIncrease/decrease

Rate of change %

Gross operating income 40.6 39.6 (1.0) (2.4)[Core gross operating income] [ 40.6 ] [ 40.5 ] [ (0.1) ] [ (0.1) ]

Interest income 35.4 35.8 0.4 1.1Fees and commissions 5.2 5.0 (0.2) (4.0)

Other operating income 0.0 (1.2) (1.2)

Gains (losses) on bonds 0.0 (0.9) (0.9)

Expenses 29.0 27.2 (1.8) (6.0)Operating income before provision of general reserve for possible loan losses 11.6 12.4 0.8 6.4

[Core operating income] [ 11.6 ] [ 13.3 ] [ 1.7 ] [ 14.7 ]

Provision of general reserve for possible loan losses — — —

Operating income 11.6 12.4 0.8 6.4

Special income and losses 4.6 4.9 0.3

Bad debt disposals (-) 0.2 0.2 0.0

Gains on reversal of reserve for possible loan loss 2.6 4.2 1.6

Gains (losses) on stocks 0.3 0.1 (0.2)

Gains (losses) on investments in money held in trust 1.7 0.3 (1.4)

Ordinary income 16.2 17.3 1.1 6.9

Extraordinary income — — —

Extraordinary loss 0.1 0.4 0.3

Income taxes (incl. deferred taxes) 6.2 6.1 (0.1)

Net income 9.9 10.8 0.9 9.1

Credit-related expenses (2.4) (4.0) (1.6)

Results for first half ofResults for first half of FY2016FY2016

<Ordinary income/Net income>

Increased due to an increase in interest income mainly on interest and dividends on securities and decrease in expenses mainly in deposit insurance premiums.

Both increased due to a decrease in credit-related expenses mainly from gains on reversal of reserve for possible loan loss.

<Core operating income>


1

1. Financial Summary(JPY bn, %)

+1.3

(2.0)

(0.5)

+1.9

(0.0) (0.1) (0.2)

Interest rates/ Interest margin

First half FY2015

First half FY2016 YoY change

Loans and bills discounted interest rate

1.13 1.04 (0.09)

Securities interest rate 0.77 0.88 0.11Interest rate on deposits 0.03 0.03 0.00

Interest rate spread 0.89 0.88 (0.01)Net interest margin 0.14 0.19 0.05

Major accounts (average balances)

First half FY2015

First half FY2016 YoY change

Loans and bills discounted 3,991.7 4,232.5 240.8

Securities 3,640.3 3,521.9 (118.4)Deposits and certificates of deposits

7,561.0 7,675.9 114.9

First half FY2015

First half FY2016

FY2016(Plan)YoY change YoY change

Interest income 35.4 35.8 0.4 70.2 0.0Investment income 37.1 37.9 0.8(Interest on loans and bills discounted) 22.8 22.1 (0.7)

(Interest and dividends on securities) 14.2 15.6 1.4

Fund procurement costs 1.7 2.1 0.4

(Interest on deposits) 1.4 1.5 0.1

2

<Change factors in interest income>

First half of FY2015

Interest income35.4

Factors in loans (0.7)

Other


Interest income35.8

(JPY bn)

Average balance

Yield

Factors in securities +1.4

Yield

Average balance

Average balance Yield

<Reference> Trends of market interest rates

<First half of FY2016 summary>

Interest income

Factors in deposits (0.1)

Interest income increased ¥400 million YoY due to an increase in interest and dividends on securities despite a decrease in interest on loans and bills discounted.

* Figures in change (increase/decrease) show percentage points.

(JPY bn)

(JPY bn)


First half of FY2016 YoY change

JPY TIBOR (3 months) 0.21 0.17 (0.04)5-year JGBs 0.17 0.09 (0.08)10-year JGBs 0.56 0.40 (0.16)

(%)

(%)

First Half of Fiscal Year Ending First Half of Fiscal Year Ending March 31, 2016March 31, 20161. Financial Summary

City

ba

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Reg

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Sec

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Shi

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Oth

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Loans and bills discounted (average balances)

First half FY2015

First half FY2016


Loans and bills discounted 3,991.7 4,232.5 6.0 4,235.2 4.4

Corporate loans 2,445.8 2,601.0 6.3

[Excl. spread loans] 1,251.9 1,312.0 4.8

[Spread loans] 1,193.9 1,289.0 7.9

Retail loans 820.3 875.7 6.7

[Housing loans] 780.9 837.6 7.2

Loans for local governments 725.6 755.8 4.1

2,070.8 2,442.5 2,483.3 2,580.1 2,683.0

759.4

810.9 837.0 865.8 893.4 675.6

754.4 740.6 781.8 738.6

0.0

1,000.0

2,000.0

3,000.0

4,000.0

Mar. 2011 Mar. 2014 Sep. 2014 Mar. 2015 Sep. 2015

Corporate Retail Public, etc.

2 , 647 . 12 , 766 . 3 2 , 790 . 6

2 , 917 . 7 2 , 925 . 5

1 , 826 . 01 , 918 . 0 1 , 929 . 4

2 , 031 . 2 2 , 023 . 9

1,000.0

2,000.0

3,000.0

Sep. 2013 Mar. 2014 Sep. 2014 Mar. 2015 Sep. 2015

The term-end balance of loanas in Miyagi Pref.

The term-end balance of loanas in Sendai City

Loans and bills discountedLoans and bills discounted

3

(JPY bn)


3,505.8

Loans and bills discounted balances

Changes in the term-end balance of loans in Miyagi Pref. and Sendai City

(JPY bn)

4,007.8 4,060.94,227.7 4,315.0

0

Share in the loans in Miyagi Pref. (end of Sep. 2015)

77 BANK

* Excludes agricultural and fishery cooperatives

41.5%

Average balance increased 6.0% and term-end balance increased 6.2% YoY due to an increase in corporate loans and retail loans centering on housing loans.

(0.2)%

YoY growth+6.2%

+6.7%

+8.0%

(Immediately after the earthquake)

(JPY bn, %)


3,778.0 4,454.0 4,492.4 4,555.9 4,596.1

1,378.7

1,602.9 1,533.9 1,587.3 1,638.7 479.7

1,819.6 1,465.0 1,711.7 1,407.5

0.0

2,000.0

4,000.0

6,000.0

8,000.0

Mar. 2011 Mar. 2014 Sep. 2014 Mar. 2015 Sep. 2015

Retail Corporate Public, etc.

City

ban

ks

Trus

t ban

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Reg

iona

l ban

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Seco

nd-ti

er

regi

onal

ba

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Shin

kin

bank

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Oth

er

Deposits and certificates of deposits

(average balances)

First half FY2015

First half FY2016


Deposits and certificates of deposits 7,561.0 7,675.9 1.5 7,538.6 0.0

Retail deposits 4,493.7 4,598.2 2.3

Corporate deposits 1,611.3 1,661.2 3.0

Public deposits 1,432.3 1,389.2 (3.0)

Deposits and certificates of depositsDeposits and certificates of deposits

4


(JPY bn)

5,636.4

Deposits and certificates of deposits balances

7,876.57,491.3

7,854.9 7,642.3

七十七

55.6％

Share in deposits in Miyagi Pref. (end of Sep. 2015)

* Excludes Japan Post Bank and agricultural and fishery cooperatives

77 BANK 55.6%

* Source: Economic Census 2012

*Source: Basic resident register population handbook 2015

<Number of salary deposit users in Miyagi Pref.>

<Number of pension deposit users in Miyagi Pref.>

Average balance increased 1.5% and term-end balance increased 2.0% YoY due to an increase in retail deposits and corporate deposits despite decrease in public deposits.

(3.9)%

YoY growth+2.0%

+6.8%

+2.3%

(Immediately after the earthquake)

77 Bank users Number of workers in Pref.(*) Share

685,000 956,000 72%

77 Bank users Number of 65 and older population in Pref.(*) Share

283,000 571,000 50%

(JPY bn, %)


3.47 3.27 3.132.70

3.06

0.80 0.58 0.53 0.47 0.44 0.0

1.0

2.0

3.0

0.0

1.0

2.0

3.0

4.0

Mar. 2012 Mar. 2013 Mar. 2014 Mar. 2015 Sep. 2015

Modified duration Yields (%)

Mar. 2012

Mar. 2013

Mar. 2014

Mar. 2015

Sep. 2015

Mar. 2016 Plan

National gov. bonds

55.4% 59.5% 59.1% 56.6% 51.6% 47.6%

Local gov. bonds 2.8% 2.6% 2.1% 2.1% 4.3% 5.9%

Corporate bonds 30.3% 25.5% 25.5% 26.7% 27.0% 28.4%

Others 9.1% 10.5% 11.6% 12.8% 15.3% 16.2%

Investment trusts, etc.

5.2% 5.4% 5.2% 6.0% 7.6% 7.8%

Foreign bonds 3.9% 5.1% 6.4% 6.8% 7.7% 8.4%

Stocks 2.4% 1.9% 1.7% 1.8% 1.8% 1.9%

End-Mar. 2014 End-Mar. 2015 End-Sep.2015

Investment balance Approx. JPY 940.0 billion Approx. JPY 810.0 billion Approx. JPY 660.0 billion

Yield 0.30% 0.31% 0.31%

Modified duration 2.48 2.35 2.31

SecuritiesSecurities

5

Aiming to increase interest income by rebalancing marketable securities portfolio<Additional investment accompanying the significant increase in

deposits following the earthquake>

Composition ratio by type (on an amortized cost base)

Balance of securities (based on market value)

Excluding impact of increase in securities after the earthquake

3.30

0.56

Shift from a JGB-centered portfolio• Rebalancing by investing redemption proceeds of JGB in

investment trusts and other assets

Securing profits and expanding the source of profits• Agile management taking advantage of unrealized gains and

increased investment utilizing investment trusts and other assets

Maintaining a portfolio management focused on safety and liquidity• Maintaining management of yen bond portfolio centering

on short-to-medium-term notes

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

End-Mar. 2014

End-Mar. 2015

End-Sep. 2015

Gains (losses)from

revaluation end-Sep. 2015

Change from end-Mar. 2015YoY change

Securities 3,716.5 3,683.6 3,541.8 (141.8) 155.8 (27.8)Bonds 3,603.7 3,541.1 3,407.0 (134.1) 82.7 (20.6)

National gov. bonds 2,152.4 2,003.3 1,769.3 (234.0) 22.0 (0.5)

Local gov. bonds 76.5 75.6 147.2 71.6 1.3 0.4

Corporate bonds 933.9 950.7 928.6 (22.1) 16.2 0.5Others 440.9 511.5 561.9 50.4 43.2 (21.0)

Investment trusts, etc. 214.6 274.7 299.7 25.0 43.2 (20.6) Foreign bonds 226.3 236.8 262.2 25.4 0.0 (0.4)

Stocks 112.8 142.5 134.8 (7.7) 73.1 (7.2)

(JPY bn)


0.0

200.0

400.0

600.0

800.0

Sep. 2013 Mar. 2014 Sep. 2014 Mar. 2015 Sep. 2015

1 ,020978

1 ,054 1 ,0811 ,015

0

200

400

600

800

1,000

1,200

1H FY2014 2H FY2014 1H FY2015 2H FY2015 1H FY2016

Sales of assets in custody First half FY2015

First half FY2016


Investment trusts and insurance 42.6 51.9 21.8 95.0 3.5

Investment trusts 17.4 29.8 71.2

Insurance 25.2 22.1 (12.3)

Public bonds 60.8 7.3 (87.9)

Total 103.4 59.2 (42.7)

6

Assets in custodyAssets in custody

(JPY bn)

Balance of assets in custody

717.8

(JPY mn)

Sales commissions of assets in custody

701.0 721.0686.4

645.01,020 978

1,054 1,0811,015

300.4 316.0 337.2 356.1 370.9

918839

911989 985


Sale of public bonds decreased due to decline in yield

93.8 91.7 95.7 100.2 101.1

255.9 269.8224.3 241.5

206.6 518469

516625 651

364 333

370394400

+9.9%

YoY(10.5)%

+11.7%

+5.6%

Sales of investment trusts were brisk and there was an increase in both balance and commissions

Total assets in custody

InsuranceInvestment trusts Total assets

in custodyInsuranceInvestment

trusts

(JPY bn, %)


)( Investment trusts and insurance

1. Financial Summary

Investment trusts and insurance

)(

8.8

(1.4) (0.7)

(3.8) (4.0)

0.24

(0.03) (0.01)(0.08) (0.14)

(0.2)

0.0

0.2

0.4

(5.0)

0.0

5.0

10.0

39.9 38.9 32.5 31.8 33.2

96.7 77.1

73.4 74.7 77.3

37.6

28.1 28.8

18.3 14.7

4.71 3.77 3.31 2.91 2.86

-22.0

-20.0

-18.0

-16.0

-14.0

-12.0

-10.0

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

0.0

40.0

80.0

120.0

160.0

200.0

240.0

280.0

Mar. 2012 Mar. 2013 Mar. 2014 Mar. 2015 Sep. 2015

End-Mar. 2015 End-Sep. 2015

Capital adequacy ratio (non-consolidated/ domestic standards) (a/c) 12.19 11.35

Capital (a) 373.8 360.2

(Core capital: instruments and reserves) 373.8 360.2

(Subordinated loans) * (b) 20.0 —

(Core capital: regulatory adjustments) 0.0 0.0

Risk assets (c) 3,065.9 3,172.7

(Ref.) Capital adequacy ratio [excluding subordinated loans] (a – b) / c

11.53 11.35

Credit-related expenses

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

7

Credits disclosed under the Financial Reconstruction Law

Loans to bankrupt and quasi-bankruptDoubtful loansSubstandard

loans

(%)

(JPY bn)

(%)

Capital adequacy ratio

Ratio of credits disclosed under the Financial Reconstruction Law

FY2012 FY2013 FY2014 FY2015 1H FY2016

* We returned all of the 20 billion yen in subordinated loans (public funds) in June 2015.

●

Credits disclosed under the Financial Reconstruction Law●

Credit-related expenses and credit-related expense rate trends

credit-related expense rateCredit-related expenses

174.2

144.0134.7

124.8 125.2

(JPY bn)

(JPY bn, %)


Enhancement of infrastructure development

Revitalization of disaster-affected businesses and agricultural / fishery industries

Support recovery and development of sales channels

Housing reconstruction supports

Earthquake reconstruction

Progress of the Regional Development Project Economic activities of high levels

Miyagi Pref.Centering around the

Sendai economic zone, making expansive use of

the flow of commerce, goods, people and

information in the Tohoku region leveraging the Bank’s information

network

8

Current state of Miyagi Pref.

First privatization of a government-administered airport

Privatization to be complete by Jun. 2016

Reinvigoration of tourism and other regional industries

Privatization of Sendai Airport

To open on Dec. 6, 2015

Length 13.9 km, 13 stops Estimated usage 80,000 passengers per day

Promotes new flow of people and development of town centers

Sendai Subway Tozai line

April 2016 Tohoku Pharmaceutical Univ. to evolve into Tohoku Medical and Pharmaceutical Univ.

The first medical department to be set up in 37 years

Expansion of the foundation of regional medical and nursing care

Establishment of Medical Dept.

Society as a whole continues to grow due to an increase in workers and students

Increase of 30,000 (from before the Earthquake)

Population (Oct. 1) 2010：1,040,0002015：1,070,000(Sendai City)

Maintaining a high level as reconstruction demand has led to increase in job openings in construction, healthcare and welfare fields

Nationwide ranking 11thNationwide average 1.24

1.38(Sep. 2015)

Effective ratio of job offers to applicants

Demand brisk due to reconstruction from the Earthquake and construction of public housing

FY 2010: approx. 12,600FY 2014: approx. 24,500

Two-fold(from before the

Earthquake)Housing starts

Benchmark land price has risen three years in a row both in commercial and residential areas due to reconstruction demand and progress of re-development

Commercial area +2.1%Residential area +0.6%

Up three years in a row

Land price

Fukushima Branch

Koriyama Branch

Soma BranchHaramachi

BranchTaira Branch

Onahama Branch

Yamagata Branch

Akita Branch

Morioka Branch

Kitakami Branch

Aomori Corporate Office

Concentration of automotive industry and IED industry

Development of growth fields and new businesses

Local revitalization measure under cooperation among the industry, academics, and the government

Industrial transformation


2. Key Management Measures

“Value-creating bank that grows together with and is the most trusted by the region”““ValueValue--creating bank that grows together with and is the most trusted bcreating bank that grows together with and is the most trusted by the regiony the region””

<Basic Policies>

Outline of the Medium-term Management Plan

I. Strengthen earthquake recovery support

I.I. Strengthen earthquake recovery Strengthen earthquake recovery supportsupport

II. Reinforce the earnings baseII.II. Reinforce the earnings baseReinforce the earnings base

III. Enhance the value of the regionIII.III. Enhance the value of the regionEnhance the value of the region

<Basic objectives>

IV. Smooth migration to and utilization of MEJAR

IV.IV. Smooth migration to and Smooth migration to and utilization of MEJARutilization of MEJAR

Net income (*) JPY 20.0 billion or more

Increase of interest on loans and discounted [compared with FY2015] JPY 1.5 billion or more

Fees and commissions JPY 10.5 billion or more

Core OHR (core gross operating income expense ratio) Less than 65%

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

JPY 250.0 billion or moreIncrease 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 billion or more

9

Targets for the final year of the Plan (FY2018)

<The Bank’s Configuration in 10 Years (Long-term vision)>

Medium-term Management Plan “VALUE UP: Challenge Value Creation”from April 1, 2015 to March 31, 2018

Medium-term Management Plan “VALUE UP: Challenge Value Creation”from April 1, 2015 to March 31, 2018

<Bank Image Sought by The 77 Bank>

“Leading bank in the Tohoku region with scale and earnings power ranked within the top 10 regional banks based on the established earnings base capable of coping with any change in the business environment through creation of new value in the region”

1. Total of deposits, loans and assets in custody: around JPY 15 trillion —Achieve deposits of JPY 8 trillion and loans of JPY 5 trillion—

2. ROE (net income basis): around 7%

(as of March 31, 2015: JPY 12.8 trillion)

(FY2015: 4.0%)

* When net income of JPY20.0 billion or more is achieved, ROE (net income basis) is expected to be around 5%.



Unsecured Housing Total

Cases 3,945 10,092 14,037

Amount 6.8 206.4 213.2

Operating Capital expenditure Total

Cases 5,320 1,958 7,278

Amount 211.0 111.8 322.8

Active provision of risk money

Corporate

Pin-point response to fund needs according to reconstruction stage

Earthquake disaster-related loan performanceCumulative total of earthquake disaster-related loans(after the earthquake to end-Sep. 2015)

21,315 cases / JPY 536.0 billion

Retail

Recovery development assistance projects for SME group facilitiesBridging finance performance(after the earthquake to end-Sep. 2015)

657 cases / JPY 46.2 billion

Portion of own funds performance (after the earthquake to end-Sep. 2015)


The first to the fourteenth offeringsTotal amount of grants determined

220 groups (3,824 companies) / Approx. JPY 238.3 billion

10

Investment case study

ABL

ABL performance (after the earthquake to end-Sep. 2015)


17 personal property appraisal advisors (as of end-Sep. 2015)

Of which, 1H FY2016 performance 17 cases / JPY 2.0 billion

Examples of collateral

77 Bank

Regional Economy Vitalization Corporation of Japan

(REVIC)

Development Bank of Japan(DBJ)

Established in Dec. 2014

Fund size JPY 5.0 billion

Subscription Subscription Subscription

I. Strengthen earthquake recovery support (1)

Helping to rebuild the regional economy by continuing with initiatives to strengthen earthquake recovery support

Support for mid-term management plan of an Akiu onsen ryokan

Investment of JPY 500 million

In Akiu onsen, a famous hot spring resort in Miyagi, we provided financial support for a mid-term management plan of an inn to help contribute to the promotion of local attraction.

Reconstruction and revitalization of Miyagi tourism

Miyagi Reconstruction and Regional Revitalization Support Fund

(cases, JPY bn)

(cases, JPY bn)


Goods inventory: Rice, foodstuff such as frozen marine products, molds

Accounts receivable:

Electronically recorded monetary claims, medical fee receivables

Other movables: Solar panels, boats, large cranes, power shovels


64

47

Active support for housing reconstruction needs

Progress of housing reconstruction projects

20 40 60 80 1000

125 areas/195 areas

Performance of the handling of The 77 Bank Earthquake Reconstruction Support Housing Loans (for mass relocation/leased land)

(JPY bn) (case)

Support for business clients to resolve issues

11

(As of Sep. 2015)

29 areas/34 areas

Business operations improvementBusiness operations improvement support (1H FY2016)

2,435 customers

Number of business turnaround plan developed

149 customers

Of which, upgraded to higher borrower category

Assessment by resident credit officer (presence of locally-based credit officer)

Swift credit response in earthquake-affected areas

Business rehabilitationUse of credit purchase corporations(The Great East Japan Earthquake SME Reconstruction Support Fund, Organization for Industry Promotion)(after the earthquake to end-Sep. 2015) Support (to be) provided:

235 cases

Use of guidelines for Individual Debtor Out- of-Court Workouts(after the earthquake to end-Sep. 2015) Agreements :209 cases

No cases of disagreement

Cooperation with external organizationsExternal specialists in the Credit Supervision Division (end-Sep. 2015: six experts)

Specialized support in coordination with the Enterprise Assistance Dept (12 members)

Visiting customers together with external specialists

Cooperation with the Regional Economy Vitalization Corporation of Japan (REVIC)

Dispatching specified experts (on contracts dated Aug. 2014)

Learning expertise through personnel exchanges (from Mar. 2015, one employee dispatched to REVIC)

Learning from the expertise and know-how of outside experts, brushing up skills to assess business viability

64%

85%

32%

45%

23%

17%

Over the past year (%)

3,369/10,420 houses

(Land reallocation)(Disaster prevention mass relocation)

Two employees stationed in Ishinomaki area starting Apr. 2015

I. Strengthen earthquake recovery support (2)

Progress (%)

(Completed)

(Started)

Disaster prevention mass relocation

(Completed)

Provision of land for housing

Land reallocation

7,427/15,916 houses36% 47%(Completed)

Public housing for victim



0.6 1.3 1.0

4.2 28

62 49

193

0

50

100

150

200

0.0

2.5

5.0

2H FY2014 1H FY2015 2H FY2015 1H FY2016

Amount of housing loan grantedNumber of housing loan

770.8797.9

827.4855.6

29.0 28.7 28.5 29.1

300.0

500.0

700.0

900.0

Mar.2014 Sep.2014 Mar.2015 Sep.2015 Mar.201625.0

30.0

35.0Housing loans Unsecured loans

1.00

1.05

1.10

1.15

761.5 788.3 820.3 846.2 875.7

1,274.3 1,322.7 1,345.5 1,393.3 1,441.7

1,047.1 1,101.2 1,100.3 1,131.6 1,159.3

667.5 708.5 725.6 746.6 755.8

0.0

1,000.0

2,000.0

3,000.0

4,000.0


Individuals For SMEs For mid- and large-sized companies For local governments and other

Decline in loan rates slowing down

Rebalancing of loan assets

Retail loans

New products and services according to clients’ life stage

(JPY bn)

Interest rate on loans (Monthly average)

12

(JPY bn)

(JPY bn)

Loan outstanding balance by type of borrowers (Average balance for the first half)

Paperless application with the use of a tablet PCFor home

buyers

Introduced Oct. 2015

For senior citizens

Reverse mortgage loans Introduced Oct. 2015

For students and their parents

Introduced Sep. 2015

Max. 30 million yen

3,750.43,920.7 3,991.7

4,117.7 4,232.5

(%)

For the general public

Credit card loans Introduced Jun. 2015

Mailed application

First among regional banks

First among regional banks in Tohoku

+5.3%

YoY+6.0%

+7.1%

+6.7%

+4.1%

Outstanding balance of housing and unsecured loans

II. Reinforce the earnings base (1)

Nov. 2014 Oct. 2015May 2015 Aug. 2015Feb. 2015

To respond to home related financing needs of the older generation

Faster credit evaluation with the use of the tablet PC of the real estate agent

Contracts concluded on a non-face- to-face basis


Education loan (for medical students)

Expanded the amount and term to respond to the needs of students of medical, dental and pharmaceutical departments


28.8 28.2

23.9 25.8

0

0

2.6 3.1

0

0

0.0

20.0

40.0

60.0

FY2014 FY2015 FY2016(Plan)

FY2017(Forecast)

FY2018(Forecast)

Personal expenses Non-personal expenses Tax

0.4 1.5 1.9

0.0

1.0

2.0

3.0

4.0

5.0

FY2014 FY2015 FY2016

Sales of assets in custody

End-Sep. 2014 End-Mar. 2015 End-Sep. 2015NISA accounts Approx. 13,000 Approx. 17,000 Approx. 20,000Percent of accounts with NISA contract 29.7% 39.1% 44.9%

Usage 2.4 billion yen 5.4 billion yen 6.7 billion yen

Previous mid-term 3 years

New mid-term 3 years First half

FY2016 Progress

Total 236.2 270.0 51.9 19.2%

Investment trusts 97.9 120.0 29.8 24.8%

Insurance 138.3 150.0 22.1 14.7%

Reinforcing efforts to market assets-in-custody services

Bolstering the line-up of investment trusts and insurance policies

Reinforcement of the securities business

All branches in Tohoku and Hokkaido now handle financial instruments intermediary service (public structured bonds)

Promoting securities as investment alternative for proceeds from public bond redemption

Diversifying revenue sources by expanding business areas

Reduction of expenses

13

NISA accounts opened

Addition of wrap funds and unit-type investment trusts

Addition of foreign currency single premium whole life insurance

Handling level premium whole life insurance in all branches in Tohoku and Hokkaido

Lowering of minimum payment in installment-type trust funds (¥10,000 ¥5,000)

Expenses

(JPY bn)

55.3 57.162.3

55.0 54.0

Cost related to the migration to MEJAR will peak in FY2016Expenses are expected to decrease from then on

Proposal-based marketing capitalizing on relationships and trust

Offering solutions for customer’s issues and various needs

Syndicated loans, loans to non- residents

Seeking latent needs and offering solutions through collaboration with Nihon M&A Center

50 customers402 proposals (First half FY2016)

Arranged five loans (First half FY2016)

72 proposals (First half FY2016)

(JPY bn) Volume of securities business Actual for 7 months

Boosting of M&A business

Bolstering business matching on commissions

Boosting of investment with emphasis on profitability

Dealing with business succession

and inheritance needs

Strengthening of consulting business aimed at genuine needs and problem solving through relationships and effective meetings

II. Reinforce the earnings base (2)

(Reference) From April to October

2015

(JPY bn)



349 319 327

424 456

61 61 63

91 97

0

50

100

250

350

450


Amount of loans grantedNumber of loans

III. Enhance the value of the region (1)

Promoting regional industries, helping resolve issues of local business owners

Start-up related loans(JPY mn) (case)

Cooperation

Support

Regional revitalization

Set-up to promote regional revitalization

Capitalizing on regional network and contributing to the growth and development of the local economy

Raising the regional value and the Bank’s value

Local Public Entities

Other entitieslike REVIC, etc.

Local industry- academia-government

network

77 BANKRegional Revitalization Promotion

Committee

<Headquarters>Regional Revitalization

Desk

<Branches>Regional Revitalization

OfficersCollaboration

Support

Support

Cooperation

14

Investment in a venture fund started by Tohoku Univ.

Turn promising University-initiated technology into business by establishing, investing in and developing a venture

<Effects>Creation of a new industrial baseRegional revitalization through innovationDispatched one bank employee

Partnership with Miyagi University

<Effects>Turning primary industry into a growth industryMarketing and sales channel expansion food industrySupport for starting businesses and regional core industry

Fund total 9.68 billion yen

Helping promote the sixth industrialization

77 Bank invests 700 million yen, largest as a private company

Case study Help for Akiu winery

As Miyagi’s only winery, aims to produce and sell wine and cider from locally-grown fruit. Runs a restaurant as well to cater to tourists visiting the winery.

Vineyard: 1.3 haProduction: wine 29,000 bottles

Cider 7,000 bottles

Support

Effects

Fun-raising Market cultivation

Promotion of agriculture

Creation of business plan

Job creation Promotion of tourism

Restoring and expanding sales channels

Helping companies expand business

Helping promote the sixth industrialization

Supporting and developing tourism promotion projects

Initiatives in concert with regional industry, academia and government (U/I/J turns)

Help in making up a new business plan

Providing capital through funds

Holding events for entrepreneurs

Use of PPP/PFI (privatization of Sendai Airport)

Taking part in urban development projects

Holding “Community- building college”

Support for start-ups and new businesses

Promotion of urban development

Support and develop regional core companies Tourism and creation of jobs (Annual)



Copyright (C ) T- worldatlas All Right Reserved

Number of employees sent on detachment to Asia 9 persons

77 Bank's offices

Major partners

Asia Business Support Dept.

Opened in Mar. 2011Miyagi Pref.'s Dalian Office (Feb. 2011)

[China] 5 persons

Tohoku Economic Federation Business Center China Office (Apr. 2012)

Shanghai Representative Office

Opened in Jul. 2005

[India]State Bank of India (Feb. 2013)

Hong Kong Trade Development Council (Nov. 2010)

[Hong Kong] 1 person

CTBC HD (Dec. 2014)

[Taiwan]

Bangkok Bank (Apr. 2011)

[Thailand] 1 person

Vietcombank (Jan. 2014)

[Vietnam]Metropolitan Bank (Jun. 2013)

[Philippines]

[Singapore] 2 persons

Singapore representative officeTo be opened in the first half of FY2017 United Overseas Bank Limited

(Jun. 2014)

Bank Negara Indonesia (Nov. 2012)

[Indonesia]]3.81.70.7 1.1 1.1

1624 27 22

41

0.0

2.0

4.0


Amount of loans grantedNumber of loans

75 200 151

388

0

100

200

300

400

Mar. 2005 Mar. 2015

Number of clients with an overseas precenceNumber of overseas business locations


Expanding the overseas network

Support customer businesses to expand overseas

ASEANTo open a representative office in Singapore (To be opened in the first half of 2017)

China/ Hong Kong Shanghai Representative office

The overseas network

15

Two overseas offices and 10 major partners

Loans related to overseas business support(JPY bn) (case)

The overseas expansion of our clients (Customers)

The number of clients with an overseas presence and corresponding bases has

increased 2.5-times in 10 years.

First for a regional bank in Tohoku

10th anniversary(Jul. 2015)

Strengthening overseas network and providing related information and promoting and helping customer businesses to expand overseas

Trade


Business needs of

customers


3.5 3.0 3.5 3.5 4.0 4.5 4.5

3.5 3.0

3.5 3.5 3.5

4.0 4.5

期末配当⾦中間配当⾦

Ratio of female employees

End-Mar. 2005

End-Mar. 2010

End-Sep. 2015

Number of female employees increased

-

Managerial position 4% 8% 10% Approx. 90

Loan officers/ sales rep. 8% 12% 23% Approx. 180

Enlarging of customer base for the Bank and its Group and maximizing the profit

Enhance the 77 Bank Brand Initiative for diversity

Improving shareholder value

JPY 7.0

JPY 9.0

JPY 6.0JPY 7.0 JPY 7.0

JPY 7.5JPY 8.5

□

Creating a working environment more amenable to work-life balance(Encouraging leaving on time, coming to work early in the morning, encouraging male employees to take child-care leave [FY2015: 76 employees])

Promoting female employees

16

Realizing synergies through cross- introduction of deals

Reinforcing retail loans through closer cooperation with credit guarantee

companies

Providing solutions through the use of group functions

Promoting BPR through streamlining and the centralization of operations

77 Leasing

77Computer Services

77 Card

77 Business Services

77 Outsourcing

77 Credit

Guarantee

77 BANK

Provision of comprehensive financial services

Dividend payment and payout ratio

Established the Corporate Governance Committee

Looking to enhance corporate governanceCorporate governance


Drafted the “Basic policy on corporate governance”

We have established a basic policy and code of conduct on corporate governance with a view toward promoting the bank's continuous growth and improving its company value over a medium-to-long term

Chairman and vice chairman: To be selected from outside directors

Members: Outside directors and internal directors

Mar. 2010 Mar. 2011 Mar. 2012 Mar. 2013 Mar. 2014 Mar. 2015Mar. 2016(Forecast)

Dividend ratio 22.7% — 24.6% 21.5% 19.0% 18.8% 21.0%

Total sum paid out

(JPY mn)2,655 2,264 2,616 2,617 2,805 3,180 3,400

Net income(JPY bn) 11.6 (30.6) 10.6 12.1 14.7 16.9 16.0

Annual dividends

Interim dividends

Term-end dividends



The Bank of Yokohama

From Jan. 2010THE HOKURIKU

BANKFrom May 2011

The Hokkaido BankFrom May 2011

77 BANK77 BANKFrom Jan. 2016From Jan. 2016<Systems to be shared>

•Core systems (including deposits, exchange, loans, etc.)•ATM, online banking•Divisional system, others (ALM, market risk measurement, business support, others)

17

MEJAR Most Efficient Joint Advanced Regional banking system

One month to go

Migration on January 4, 2016

With the concerted efforts of the bank and the group, we are aiming to realize a smooth migration to and utilization of MEJAR

• Expanding ATM services Pay-easy installment scheme, lottery tickets, handling of coins, changing to new passbooks

• Bolstering online banking services (for corporates and individuals), foreign-currency deposits, auto- debiting of utility bills

Hokuhoku FG

Handling credit applications electronically by installing loan operation system

Centralizing more operational tasks

Enhancing customer convenience and reducing workload at the counter

Reducing and evening out system- related expenses through jointly developing and managing the MEJAR system

Enhanced non-face-to-face channels

Providing attractive new products and services in a speedy manner

Boosting of proposal-based, direct- channel marketing based on customer attributes

Swift response to regulation changes

IV. Smooth migration to and utilization of MEJAR

Response to diversified and high-level financial services Improved convenience Enhancing efficiency and

sophisticated handling of operationsReducing and evening out system-related expenses



FY2015(Results)

FY2016 (Forecast)

Unsecured call rate O/N 0.07% 0.07%

JPY TIBOR (3 months) 0.20% 0.17%

5-year JGBs 0.13% 0.11%

10-year JGBs 0.48% 0.45%

Exchange rate (JPY/USD) ¥110 ¥123

Nikkei Average (At the term-end) ¥19,206 ¥19,000

Interest rates/Interest margin

FY2015(Results)

FY2016(Plan) YoY change

Loans and bills discounted interest rate 1.11 1.04 (0.07)

Securities interest rate 0.78 0.86 0.08

Interest rate on deposits 0.03 0.03 0.00

Interest rate spread 0.88 0.88 0.00

Net interest margin 0.13 0.06 (0.07)

Major accounts(average balances)

FY2015(Results)


Loans and bills discounted 4,054.5 4,235.2 4.4

Securities 3,616.9 3,461.0 (4.3)

Deposits and certificates of deposits 7,544.6 7,538.6 0.0

Investment trusts and insurance (term-end balances) 356.1 390.0 9.5

Projected performance (non-consolidated)

FY2015(Results)


Gross operating income 80.1 78.0 (2.1)

[Core gross operating income] [ 80.3 ] [ 79.4 ] [ (0.9) ]

Interest income 70.2 70.2 0.0

Fees and commissions 10.3 9.9 (0.4)

Other operating income (0.4) (2.1) (1.7)

Gains (losses) on bonds (0.2) (1.4) (1.2)

Expenses 57.1 62.3 5.2

Operating income before provision of general reserve for

possible loan losses23.0 15.7 (7.3)

[Core operating income] [ 23.2 ] [ 17.1 ] [ (6.1) ]

Provision of general reserve for possible loan losses — — —

Operating income 23.0 15.7 (7.3)

Special income (losses) 7.5 8.8 1.3

Bad debt disposals (-) 0.8 0.8 0

Gains on reversal of reserve for possible loan losses 4.6 6.8 2.2

Gains (losses) on stocks 1.0 1.3 0.3

Gains (losses) on investments in money held in trust 2.9 1.6 (1.3)

Ordinary income 30.5 24.5 (6.0)

Extraordinary losses (0.2) (0.4) (0.2)

Income taxes (incl. deferred taxes) 13.4 8.1 (5.3)

Net income 16.9 16.0 (0.9)

Credit-related expenses (3.8) (6.0) (2.2)

<Interest rates and other assumptions underlying the projection>

Projected performance for FY2016Projected performance for FY2016

18

Note: Figures in YoY change shows percentage points

3. Projected Performance

(JPY bn) (JPY bn, %)

Ref.

(%)


FY2015 results FY2016 plan FY2017 forecast

FY2018Forecast1H FY2016

resultsChange vs. FY2015

Change

Loans and bills discounted 4,227.7 4,315.0 4,288.0 4,375.0 4,551.0 323.3 7.6

Balance of loans in Miyagi Pref. 2,917.7 2,925.5 2,972.0 3,030.0 3,170.0 252.3 8.6Deposits and certificates of deposits (notes) 7,851.0 7,638.3 7,449.0 7,259.0 7,195.0 (656.0) (8.3)

Sales of investment trusts and insurance 91.7 51.9 95.0 96.0 100.0 8.3 9.0Balance of investment trusts and insurance 356.1 370.9 390.0 430.5 485.0 128.9 36.1

Numerical targets (1)Numerical targets (1) (The targets are formulated and reviewed every year)(The targets are formulated and reviewed every year)

19

FY2015 results FY2016 plan FY2017 forecast

FY2018 forecast1H FY2016

resultsChange vs. FY2015

Change

Loans and bills discounted 4,054.5 4,232.5 4,235.2 4,250.5 4,397.0 342.5 8.4

Corporate loans 2,485.2 2,601.0 2,608.9 2,626.0 2,710.0 224.8 9.0

Retail loans 833.2 875.7 886.5 891.5 927.0 93.8 11.2Deposits and certificates of deposits (notes) 7,538.9 7,669.8 7,533.0 7,220.0 7,159.0 (379.9) (5.0)

Retail deposits 4,507.5 4,589.6 4,605.3 4,645.0 4,708.0 200.5 4.4

(JPY bn, %)

(JPY bn, %)2. Term-end balances

1. Average balances of major accounts

Note: We are expecting a decrease in the amount of deposits, mainly due to the outflow of public deposits in conjunction with the progress of the earthquake reconstruction.

3. Projected Performance First Half of Fiscal Year Ending First Half of Fiscal Year Ending March 31, 2016March 31, 2016

FY2015 (results) 1H FY2016 results FY2016 FY2017 FY2018

Unsecured call rate O/N 0.07 0.07 0.07 0.07 0.07

JPY TIBOR (3 months) 0.20 0.17 0.17 0.18 0.18

5-year JGBs 0.13 0.09 0.11 0.18 0.28

10-year JGBs 0.48 0.40 0.45 0.65 0.85

Exchange rate (JPY/USD) 110 122 123 127 131

Nikkei Average (At the term-end) 19,206 17,388 19,000 18,500 19,000

FY2015 results FY2016 plan FY2017 forecast FY2018 forecast1H FY2016 results Change vs. FY2015

Core gross operating income 80.3 40.5 79.4 80.1 83.1 2.8

Interest income 70.2 35.8 70.2 71.1 74.5 4.3

Interest on loans and bills discounted 45.4 22.1 44.0 45.0 47.1 1.7

Fees and commissions 10.3 5.0 9.9 10.2 10.6 0.3

Expenses 57.1 27.2 62.3 55.0 54.0 (3.1)

Core operating income 23.2 13.3 17.1 25.1 29.1 5.9

Net income 16.9 10.8 16.0 Target for the final year of the medium-term plan: JPY 20 billion or more

Core OHR 71.0 67.1 78.4 68.6 64.9 (6.1)

Capital adequacy ratio (domestic standard) 12.2 11.4 11.4 12.2 12.3 0.1

20

Numerical targets (2)Numerical targets (2) (The targets are formulated and reviewed every year)(The targets are formulated and reviewed every year)

(JPY bn, %)3. Incomes and losses

(Forecasts for main interest rates) (%, JPY)

3. Projected Performance First Half of Fiscal Year Ending First Half of Fiscal Year Ending March 31, 2016March 31, 2016

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.

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