Investor Relations Meeting...Investor Relations Meeting Presentation Material November 2018 Table of Contents I. Summary of Financial Report for the Six Months Ended September 30,

Investor Relations Meeting

Presentation Material

November 2018

Table of Contents

I. Summary of Financial Report for the Six

Months Ended September 30, 2018

II. Management Strategies

1. Summary of Earnings for the Six Months Ended

September 30, 2018

2. Interest Income

3. Average Loan Rate for New Loans to Corporate

Borrowers by Region

4. Deposits and Loans

5. Securities

6. Redemptions of Yen-denominated Bonds/ Interest Rate Risk

7. Net Fees and Commissions

8. Credit Costs and NPLs

9. Earnings Forecasts for FY2018

10. Income from Services for Customers

1. Long-term Targets

2. Basic Strategies

3. Enhancing the Competitiveness of Regional Industries—

Improving the Corporate Value of Our Clients

4. Implementing Relationship Banking (Case Study)

5. Enhancing the Competitiveness of Regional Industries—

Support by Industry and Business Category

6. Enhancing Measures for Medium-risk Borrowers (in Shimane

and Tottori)

7. Strategies by Region (Sanyo, Hyogo, Osaka)

8. Upgrading Consulting Services for Individual Customers

9. Enhancing Individual Loan Business

10. Loans for Investment Property

11. Credit Card Business

12. Gogin’s Structural Reform Project

13. Personnel Strategy to Keep Each Employee Highly Motivated

14. Orchestrating the Comprehensive Power of the Group

15. Capital Policy and Shareholder Return

16. ESG (Environment)

17. ESG (Society)

18. ESG (Governance)

I. Summary of the Financial Report

for the Six Months Ended

September 30, 2018

3

1. Summary of Earnings for the Six Months Ended September 30, 2018

Summary of Earnings (Non-consolidated) Summary of Earnings (Consolidated)

Net interest income

Decreased by 300 million yen year on year due to a fall in interest and

dividends received on securities, although interest on loans increased for the

first time in 10 years reflecting an increase in the balance of loans.

Credit costs

Gains (losses) on securities

Net fees and commissions

Increased by 1.3 billion yen year on year due to an addition of 1.8 billion yen in

accordance with a partial revision of the criteria for provision in the future.

The net loss related to bond transactions increased by 2.5 billion yen year on

year due to a rise in loss on sales, as we systematically sold U.S. treasury

securities with low yields.

Gains on stocks expanded by 2.8 billion yen year on year due to sales of ETF,

etc.

Remained almost flat as in the same period last year, which is attributable

to an increase in commissions relating to business support, despite a slight

decrease in commissions relating to assets under management.

Financial Highlights for Six Months Ended September 30,

2018 (Non-consolidated)

(Billion yen)

Six months

ended

September

30, 2017

Six months

ended

September

30, 2018 YoY change

Gross banking profit 28.3 (3.0) 25.2

Net interest income 26.7 (0.3) 26.3

Net fees and commissions 2.9 (0) 2.9

Net loss related to bond

transactions (1.5) (2.5) (4.0)

Gross core banking profit 29.8 (0.5) 29.3

Expenses 18.6 0 18.7

Personnel expenses 9.0 0.1 9.2

Non-personnel expenses 8.2 (0) 8.1

Transfer to the general loan

loss reserve (1) － 0.8 0.8

Net banking profit 9.6 (3.9) 5.6

Adjusted net banking profit 9.6 (3.1) 6.4

Net core banking profit 11.1 (0.6) 10.5

Nonrecurring gains 0.5 2.9 3.5

Bad debt disposals (2) 0 0.4 0.5

Gains on reversals from

loan loss reserve (3) 0 (0) －

Gains on stocks 1.1 2.8 4.0

Ordinary profit 10.2 (1.0) 9.1

Extraordinary profit (loss) (0) (0) (0)

Net income (loss) 7.1 (0.9) 6.2

Credit costs (1)+(2)-(3) 0 1.3 1.3

(Billion yen)

Six months

ended

September

30, 2017

Six months

ended

September

30, 2018 YoY change

Ordinary income 47.7 2.4 50.1

Ordinary profit 10.5 (0.8) 9.6

Profit attributable to owners of parent 7.3 (0.6) 6.6

A

B

C

D

E

A

B

E

C D

4

16.8 16.3 16.2 16.3

12.3 13.2 13.5 11.7

1.9 1.7 1.6 3.0

(2.4) (2.4) (2.3) (2.8) (0.8) (1.5) (1.0)

27.2 27.2 26.7 26.3

(5.0)

5.0

15.0

25.0

35.0

1H/FY2015 1H/FY2016 1H/FY2017 1H/FY2018

0.86% 0.81%

0.70% 0.67% 0.67%

0.4%

0.6%

0.8%

1.0%

FY2014 FY2015 FY2016 FY2017 1H/FY2018

2. Interest Income

(Billion yen) Net interest income

* Weighted average of loans

performed during the period

Net interest income Factors affecting net interest income

Yields on yen-denominated loans and securities Average loan rate for loans to new corporate customers

(yen denominated)

Remains almost

unchanged

(Million yen, %) Year-on-year

change

<Reference>

Balance

factors Yield factors Spread

Interest income (208) 702 (910) (0.03)

Of which, interest on

loans 131 960 (829) (0.05)

Of which, interest and

dividends on securities (1,745) (466) (1,278) (0.14)

Fund-raising expense 167 117 48 0.00

Of which, interest on

deposits 522 13 508 0.02

Of which, interest paid on

bond lending transactions (469) 159 (628) (0.21)

1.37%

1.22% 1.12% 1.07% 1.06%

1.25%

1.25% 1.23% 1.16% 1.14%

0.0%

0.5%

1.0%

1.5%

2.0%

FY2015 FY2016 FY2017 1H/FY2018 FY2018

Yen-denominated loansYen-denominated securities

Increased for the first

time in a decade

Drop rate has

been shrinking.

Interest on loans

Interest and dividends on

securities

Other interest income

Interest on deposits

Bond lending transactions

Other interest expenses

Foreign currency

deposits increased.

Plan

5

1.37% 1.27%

1.10% 1.01% 1.04%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

FY2014 FY2015 FY2016 FY2017 1H/FY2018

3. Average Loan Rate for New Loans to Corporate Borrowers by Region

* Weighted average of loans performed during the period

Shimane and Tottori Sanyo Region

Hyogo and Osaka Tokyo

0.67% 0.62%

0.53% 0.52% 0.53%

0.0%

0.2%

0.4%

0.6%

0.8%

FY2014 FY2015 FY2016 FY2017 1H/FY2018

0.66% 0.64%

0.56% 0.56% 0.55%

0.0%

0.2%

0.4%

0.6%

0.8%

FY2014 FY2015 FY2016 FY2017 1H/FY2018

0.40% 0.38% 0.39% 0.41% 0.45%

0.0%

0.2%

0.4%

0.6%

0.8%

FY2014 FY2015 FY2016 FY2017 1H/FY2018

Remains almost

unchanged

Drop rate has

been shrinking.

Remains almost unchanged

Upward trend

Bottomed out

Remains almost unchanged

6

2,354.3 2,379.8 2,417.9 2,451.7 2,457.6

982.1 1,032.5 1,083.8 1,109.1 1,103.5

420.9 427.1 412.9 417.7 413.2 3,757.5 3,839.6 3,914.7 3,978.6 3,974.3

0.0

1,000.0

2,000.0

3,000.0

4,000.0

FY2015 FY2016 FY2017 1H/FY2018 FY2018

Individuals Corporates Local public organizationsand financial institutions

544.4 596.0 656.7 700.4 712.8

1,404.2 1,542.1

1,658.2 1,734.9 1,752.8

515.5 534.9

563.6 566.0 552.1 2,464.2

2,673.1 2,878.6

3,001.4 3,017.8

0.0

1,000.0

2,000.0

3,000.0

FY2015 FY2016 FY2017 1H/FY2018 FY2018

Individuals Corporates Local public organizationsand financial institutions

(Billion yen)

4. Deposits and Loans

Full-year plan

(Billion yen)

Full-year plan

Deposits and NCDs (average balance) Total Loans (average balance)

Source: The Japan Financial News “Nikkin,” and the website of Japan Post Bank

* Excluding Japan Agricultural Cooperatives and the National Association of Labour Banks

Our Share of Total Deposits in Shimane and Tottori Our Share of Total Loans in Shimane and Tottori

46.5% 46.5% 46.8% 47.6%

23.0% 22.6% 22.3% 21.6%

11.4% 11.3% 11.4% 11.7%

0%

10%

20%

30%

40%

50%

15/3末 16/3末 17/3末 18/3末

当行

ゆうちょ銀

信金・信組

54.0% 54.6% 55.7% 56.2%

20.6% 20.8% 20.7% 20.8%

16.0% 15.6% 15.2% 15.5%

0%

10%

20%

30%

40%

50%

60%

15/3末 16/3末 17/3末 18/3末

当行

地銀

（除く当行）

信金・信組

65.5% 69.6% 73.5% 75.4% 75.9% * Including NCD

San-in Godo Bank

Japan Post Bank

Shinkin Banks and

credit associations

March 31,

2015

March 31,

2016

March 31,

2017

March 31,

2018

Loan deposit

ratio

San-in Godo

Bank

Regional

banks (excl.

San-in Godo

Bank).

March 31,

2015

March 31,

2016

March 31,

2017

March 31,

2018 Source: The Japan Financial News “Nikkin”

* Excluding Japan Agricultural Cooperatives and the National Association of Labour Banks

Shinkin Banks

and credit

associations

7

(2%)

0%

2%

4%

16/3期 17/3期 18/3期 18/9期

903.9 858.5 761.6 595.4

219.9 211.5 206.7

189.4

192.6 198.2 196.9

173.1

301.2 402.3 377.6

374.3

95.9 133.9

191.9

258.6

0.0

500.0

1,000.0

1,500.0

2,000.0

March 31,2016

March 31,2017

March 31,2018

September30, 2018

Government bonds Municipal bonds Corporate bonds

Foreign securities Stocks Investment trusts

11.7 11.1 9.4

4.4

2.1 1.8 1.5

0.6

1.5 1.3

1.2

0.5

6.4 8.6 9.6

3.8

1.5 1.4

1.7

0.7

1.4 2.4 2.8

1.6

24.9 26.9 26.5

23.9

0.0

10.0

20.0

30.0

FY2015 FY2016 FY2017 FY2018

Government bonds Municipal bonds Corporate bonds

Foreign securities Stocks Investment trusts

(2%)

0%

2%

4%

FY2015 7/3期 18/3期 1H/FY2018

(Billion yen)

5. Securities

FY2015 FY2016 FY2017 1H/FY2018

Government

bonds1.26% 1.27% 1.22% 1.22%

Municipal

bonds0.96% 0.85% 0.76% 0.63%

Corporate

bonds0.77% 0.72% 0.62% 0.55%

Foreign

securities2.36% 2.32% 2.28% 2.14%

Stocks 3.82% 3.49% 4.60% 4.07%

Investment

trusts, etc.1.96% 2.00% 1.95% 1.49%

Total

securities1.43% 1.47% 1.48% 1.37%

3.0

U.S. treasury bond 1.3

European bonds 0.6

0.6

Foreign currency

denominated

foreign securities

Other

1628.9 1753.9

1843.3 1774.0

(Billion yen)

295.4

U.S. treasury bond 60.6

European bonds 169.7

78.8

Foreign currency

denominated

foreign securities

Other

Balance of Securities (Acquisition cost-based) Breakdown of Interest and Dividends on Securities

Yields on Securities Investment and Funding Environment for U.S. Treasury Bond

and European Bonds

Plan for

the 2H

Yield in bond investment

Yield on fund procurement in

the market

USD

FY2015 17/3期 18/3期 1H/FY2018

Yield in bond investment

Yield on fund procurement in

the market

EUR

Fund procurement

yield rose.

A spread exceeding the

coupon yield was secured

due to fund procurement at

negative interest rates.

1.45%

0.89%

Average in the 1H of FY2018

167.9

27.4

27.5

35.6

REIT

Foreign bond funds

Stock funds

Other

Results for the 1H

11.7

0.6

0.3

0.5

0.1

REIT

Foreign bond funds

Stock funds

Other

Spread

Average in the 1H of FY2018

Plan

8

6 . Redemptions of Yen-denominated Bonds / Interest Rate Risk

5.14 4.60 4.36

4.88

6.24 6.18 5.82 6.40

0.0

2.0

4.0

6.0

8.0

March 31, 2016 March 31, 2017 March 31, 2018 September 30, 2018

Duration (domestic bonds)

Duration (foreign bonds)(Year)

Duration

Composition of Redemptions of Yen-denominated Bonds (As of March 31, 2018)

Interest Rate Risk

69.1 58.8 51.3 47.5

23.2 31.4 31.1

36.4

0.0

20.0

40.0

60.0

80.0

March 31, 2016 March 31, 2017 March 31, 2018 September 30, 2018

100 BPV (domestic bonds including funds)

100 BPV (foreign bonds including funds)(Billion yen)

206.9

39.0

183.7 164.8 167.0

47.9

24.4

24.1

15.4

15.1

79.5

47.9

36.2

40.9

17.8

26.1

41.7

302.9

99.6

248.9

33.2

206.1

288.3

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 andthereafter

Government bonds Municipal bonds Others

(Billion yen) 1.29%

0.42%

1.10%

Yield

0.59%

0.71%

0.92%

(234.6 billion yen was redeemed during the 1H of FY2018.)

9

2,887

1,621 1,827

957

252

523

1,285

432

3,139

2,144

3,112

2,725

0

1,000

2,000

3,000

4,000

FY2015 FY2016 FY2017 FY2018

Bank

Gogin Securities

664

1,013 1,144

663

188

332 326

214 5

42

377

2 857

1,388

1,848 1,900

0

500

1,000

1,500

2,000

FY2015 FY2016 FY2017 FY2018

Coupon swaps

計画

合計

(Million yen)

Results for

the 1H

879

Results for

the 1H

1,389

Year-on-

year change:

–319

Year-on-year

change:

+193

1.6

0.8 0.9 0.9

0.3

0.3

0.5 0.6

0.4

0.5

0.5 0.5

1.0

0.9

0.9 0.8

3.5

2.6

2.9 2.9

0.0

1.0

2.0

3.0

4.0

1H/FY2015 1H/FY2016 1H/FY2017 1H/FY2018

Assets under management

Business support

Credit card

Others

(Billion yen)

* Credit card and other fees and commissions are net of expenses.

7. Net fees and commissions

* Expected profits for the entire periods for private placement bond

guarantee fees and coupon swaps are included.

Fees and Commissions Business Support Fees and Commissions

(Million yen)

Group’s Assets under Management Commissions

1H/FY

2018

Brokerage

commissions

(including introduction

commissions)

105

Investment trust sales

commission

(including trust fees)

305

Insurance product

sales commissions

(including renewal

fees)

547

Plan

for the

2H

1H/FY

2018

Business

matching64

Syndicate loan 246

M&A 45

Private placement

bond

commissions

218

Consulting 18

Other 69

Plan

for the

2H

Plan

Plan

10

3.4

(0.2)

0.6 1.3

(1.2) (0.5)

0.13%

(0.01)% 0.02%

0.04%

-0.1%

0.0%

0.1%

0.2%

(1.5)

0.5

2.5

4.5

6.5

FY2015 FY2016 FY2017 1H/FY2018

(Billion yen) Credit cost ratio

[Credit cost / Term-end balance of loans and bills discounted]

73.75% 79.14%

73.13% 74.67%

52.48% 51.95% 47.11% 44.45%

33.48% 24.68%

16.40% 18.57%

0%

30%

60%

90%

March 31, 2016 March 31, 2017 March 31, 2018 September 30,2018

Ratio of reserve Estimated loss rate Actual loan loss ratio

16.5 12.1 11.0 13.1

33.4 31.6 30.9 27.2

16.6 14.5 11.6 13.7

66.5 58.4

53.6 54.1

2.49%

2.02% 1.73% 1.73%

0%

1%

2%

3%

0.0

30.0

60.0

90.0

120.0

March 31, 2016 March 31, 2017 March 31, 2018 September 30,2018

Substandard loans Doubtful loansBankrupt or de facto bankrupt NPL balance ratio

(Billion yen)

8. Credit Costs and NPLs

Loans Based on the Financial Reconstruction Act

Ratio of reserve for debtors at risk of bankruptcy (Doubtful Loans) Credit Costs

Revision to Criteria of Reserve

Criteria of reserve were

revised.

1.8 billion yen was added.

Criteria of reserve

were revised.

4.5 billion yen was added.

Sufficient

reserve

Ratio of reserve for debtors at risk of bankruptcy (doubtful loans)

64.76% (before revision)

74.67% (after revision)

① Estimated loss rate at substandard debtors and debtors at risk of bankruptcy

② Expansion of application of DCF standards to borrowers at risk of

bankruptcy

Calculation period: from three periods to seven periods (Parts subject to the SME Finance Facilitation Act)

Shortage of guarantee: from 100 million yen or more to

50 million yen or more

11

9. Earnings Forecasts for FY2018

(Consolidated)

YoY changeChange from the

initial forecast for

FY2018

95.8 50.1 (0.7) 95.0 5.0 90.0

19.8 9.6 (0.5) 19.3 0.4 18.9

13.6 6.6 (0.4) 13.2 0.1 13.1

16.93% 15.62% (1.01)% 15.92% (1.43)% 17.35%

4.51% 4.27% (0.28)% 4.23% 0.04% 4.19%

YoY changeChange from the

initial forecast for

FY2018

59.6 29.3 (0.0) 59.5 1.9 57.6

Net interest income 53.1 26.3 0.0 53.2 2.0 51.2

Net fees and commissions 5.9 2.9 0.2 6.1 0.0 6.1

36.8 18.7 0.2 37.0 0.6 36.4

Personnel expenses 17.9 9.2 0.7 18.7 0.5 18.2

Non-personnel expenses 16.7 8.1 (0.5) 16.2 0.1 16.1

22.8 10.5 (0.3) 22.4 1.3 21.1

(1.6) (0.0) 1.1 (0.5) 0.2 (0.7)

0.6 1.3 2.2 2.8 0.9 1.9

13.3 6.2 (0.0) 13.2 0.4 12.8

OHR 61.75% 64.00% 0.49% 62.24% (1.07)% 63.31%

FY2018

Forecast

FY2018

Forecast

Initial

forecast for

FY2018

Initial

forecast for

FY2018

Ordinary income

1H of

FY2018(Billion yen)FY2017

Non-interest income ratio

(Billion yen)FY2017

1H of

FY2018

Profit attributable to owners of parent

Net income

ROE (Shareholders’ equity basis)

(Non-consolidated)

Ordinary profit

Gross core banking profit

Expenses

Net core banking profit

Losses on securities

Credit costs

12

(0.1)

0.6

0.0

(1.9) (1.7)

(0.8)

0.4

(0.9)

(2.0)

(1.0)

0.0

1.0

FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2020

10. Income from Services for Customers

Drastic revisions to services for customers will be implemented to move into the black

in the final fiscal year of the Medium-term Management Plan.

(Billion yen)

Income from services for customers = Average balance of loans (Yield on loans –

Yields on deposits, etc.)

+ Net fees and commissions

- Operating expenses (including retirement benefit

expenses in extraordinary profit and loss)

Present issues

Improvement of loan income

Diversification of profit

sources

Measures to be taken

Increase in loan balance Loans for corporate

customers

Loans for individual

customers

Limit the decrease in yields on loans. Enhance measures for medium-risk borrowers.

Increase net fees and commissions.

Business support fees and

commission-related income

Assets in custody Credit card

Reform of cost structure Drastic review of expenses Structural reform project

Promotion of digitalization

* Yields on deposits, etc.: Actual yields corrected from foreign currency

deposits with forex contracts

0.14% (before correction) ⇒ 0.05% (after correction)

Plan

Results

for the 1H

1H of

FY2018

II. Management Strategies

14

1. Long-term Targets

Regional Issues

and Risks

San-in Godo Bank

Initiatives

Target Vision

Core business initiatives Regional contribution activities

Resilient management structure

Fundamental support

Governance Risk management Information disclosure

Boost added value for the region and customers Boost added value for San-in Godo Bank

Establish a sustainable business model to assist in making a sustainable region.

Business

opportunities

Create the future with the region and customers

Regional economic revitalization Region development and improvement

Regional environmental preservation

Population decline and aging

Regional revitalization

Labor shortages Fewer business establishments

Forest regeneration

Regional resource depletion

Productivity enhancement

Today

Issues Startup support/ Business succession

Medium-term Management Plan

Realize sustainable growth for both the region and the Bank itself by resolving issues that our region and our

customers face.

Fees, commissions

and interest

Provide sophisticated financial services

Educational and cultural initiatives

15

2. Basic Strategies

Establish business models to develop together with customers by improving customer-oriented added

value.

Jointly creating customer-oriented added value

Corporate

customer

Realize the growth of both our customers and San-in Godo Bank through our relationship banking

activities aimed at deepening our long-term business partnerships.

Provide unified services of business support and finance to improve the value added of our customers.

Pursue inter-region synergies by expanding the range of our customer base.

Individual

customer

Strive to become the main bank by enhancing convenience and expertise while considering diversifying

financial needs as business opportunities.

Enhance transactions through various channels by utilizing IT.

Establish long-term trust relationships by providing advanced consulting services.

Structural

reform

Reconstruct service infrastructure aiming to radically improve efficiency in the operational process and

enhance productivity in line with the changes in IT and customer behavior.

Cultivate specialized personnel capable of satisfying diversified and advanced customer needs.

Improve organizational operations to maximize employees’ capabilities. Human

resources

16

One-person-one-company

program

Added value improvement

activity

Enhance consulting

service

3,327 4,720

6,219 7,313

6,146

9,796

14,571

16,571

2,608

4,378

6,954

8,912

0

6,000

12,000

18,000

FY2015 FY2016 FY2017 1H/FY2018

Total number of clients whosemanagement challenges are known to us

Total number of clients’ needs which are known to us Total number of business matchingnegotiations

3. Enhancing the Competitiveness of Regional Industries

—Improvement of the Corporate Value of Our Clients Endeavor to realize both improvement of the added value of our clients and increased transactions with

San-in Godo Bank by practicing relationship banking activities.

FY2015 to FY2017

FY2018 and

thereafter

Reinforce the trust relationships with our clients.

Approximately half

of all corporate

clients

Added value improvement activity One-person-one-company program

Business consulting

・Contingency fee-type

consulting

・Support for business

plans

・Support for business

succession

・Business matching

・M&A

Financial consulting

・Financing based on

business

evaluations

・Syndicate loans

・Private placement

bonds

Number of clients we

declared to support

business: 1,218

(as of Sep. 30, 2018)

430 companies

17

A contingency fee-type consulting service agreement

was concluded based on a trust relationship

established by supporting business establishment.

4. Implementing Relationship Banking (Case Study)

Consulting by our employee stationed at the client’s office Contingency fee-type consulting service

Support for the development of the existing business domain and entry

into new businesses

Support for the establishment of solid organization systems by

improving internal organizations and developing human resources, etc.

Honda Shoten LLC

(a manufacturer of Izumo soba noodles)

Continuously implementing

business support activities such as

making proposals and follow-ups

for the solution of challenges.

1st year of foundation

Import and sale of olive oil from overseas

Plans to manufacture and process olive oil in the future

Improvement of internal organization

Food manufacturer

[Management challenges and needs]

Expansion of sales channels by

expanding the scope of business

and enhancing the brand power.

Improving the internal

organizations

Honda Shoten San-in Godo Bank

Our initiatives were highly evaluated by the client,

which requested our consulting service by a

dispatched bank employee.

A bank employee has been stationed at the

client’s office to provide paid consulting services.

Since April

2018

Since October

2018

Ryutsu Co., Ltd. (Transportation and postal service)

The

2nd

case

3rd

case

We offer support for improving sales and operating income, etc. and

receive commissions for results that were predetermined according to

the results.

The amount of commission is determined according to the degree of

difficulty of the case, and the profit of the relevant company, etc.

Contingency fee-type consulting service

Establishment of a trust

relationship

• Assisted eight negotiations as a support service for business establishment

• Our service was highly evaluated by the client, resulting in a loan made by us as the sole lender.

Cultivating needs

• Shortage of personnel for sales activities and know-how

⇒A wide range of business support including the development of new sales channels was required.

Structuring a contract

• A contingency fee was fixed by multiplying a certain ratio by the portion we contributed to net sales.

Launched in

August 2018

1st case

18

Support for higher profitability and promoting the improvement of

corporate value

5. Enhancing Competitiveness of Regional Industries

— Support by Industry and Business Category

The business establishment support program has developed steadily. We implemented revitalization measures for major

regional industries and groups of companies.

Small-scale business conventions were held.

Accommodation and tourism Food manufacturing

SAN-IN Innovation Program

Background: In the San-in region, a low rate of establishment and a high rate of exit were notable. Revitalization to energize the local economy was necessary.

Highly motivated human

resources for start-ups and

business establishments

in the region

San-in Godo Bank Outside

consultants

Labor shortage

Needs for cost reduction

Support for

・ improvement of

operation

・ introduction of IT

Case

examples

Create the seeds of business

that are “Unique to San-in”

and “Made in San-in.”

Innovative entrepreneurs

across the nation

San-in Godo Bank and

Nomura Research Institute, Ltd. Supports

Stimuli

“Gogin’s Business Convention for Food Ingredients”

in Hiroshima

Business creation session Generating business projects to develop

and deepen them into “crazy ideas.”

Commercialization support session Establishing partnerships toward the

realization of business projects

Regional support organizations including San-in Godo Bank, industry,

government, academia and media agencies support commercialization.

16 teams were

organized as of

October 18.

Ryokan and hotels

Focusing on

improvement of service

Each relevant branch office held a business convention

that met its clients’ needs. Ryokan and hotels

42 sellers from Shimane,

Tottori and Hyogo

43 buyers from

Hiroshima

Support for expansion

of sales channels

11 deals

were

concluded

Status of

progress

Final

presentations on

December 18

19

123.9 139.6 149.0

93.5 97.3 99.1

217.5 237.0 248.1

0.0

50.0

100.0

150.0

200.0

250.0

September 30,2017

March 31,2018

September 30,2018

１．リレーションシップバンキング

Business activities will be reinforced by improving our risk-taking system and for higher yields.

6. Enhancing Measures for Medium-risk Borrowers (in Shimane and Tottori)

Select target borrowers.

Fully understand the prospects and challenges of

clients through dialogues (business evaluation).

Growth and

improvement of

earnings of clients

Increase in loans

and yields

(1) Proposal for offering support for core operations

to improve added value

⇒ Supply of funds necessary for their realization

(2) Proposal for restructuring of funding structure

⇒ Designed to provide companies with an

environment where they can focus on core

operations, by eliminating concerns over

shortage of cash flow

Balance of loans to target borrowers

(Billion yen)

* Business evaluation-based loans for borrowers requiring

attention and lower-risk borrowers

Risk-adjusted gross business income (1H/FY2018)

Utilization of

proprietary loans

Setting flexible repayment

conditions

(including long-term lump-

sum repayment)

Average

interest rate

2.15% Average interest rate

Balance of loans to 2,082 target borrowers

(786)

(1,296)

Normal debtors

1.75 %

Borrowers

requiring

attention and

higher-risk

borrowers

Target borrowers: 0.62%

(Compared to average of Gogin*: +0.26%)

(September 30, 2018)

Balance

Risk-adjusted gross

business income

13.8

billion yen

1.09%

1.17%

20

Expand our customer base.

Encourage our clients to do business with Gogin as their main

bank through relationship banking activities.

Play the role of a bridge to Shimane and Tottori through business

matching, etc.

605.9 630.4 653.2 664.8

232.2 265.6 303.6 330.6 349.3

413.5 471.3 518.2 216.6

232.4 230.1

221.1

0

5,000

10,000

15,000

20,000

16/3期 17/3期 18/3期 18/9期

両県内山陽兵庫大阪東京

１．リレーションシップバンキング 7. Strategies by Region (Sanyo, Hyogo, Osaka)

Average Balance of Loans for Corporate Borrowers by Region

1,404.2 1,542.1

1,734.9

353 460 570 581

1,583 1,820

1,938 1,972

1,936 2,280

2,508 2,553

0

1,000

2,000

3,000

FY2015 FY2016 FY2017 1H/FY2018

Number of corporate clients in Hyogo and Osaka

Gogin as themain bank

(Clients)

Kobe West Branch was newly opened.

The 10th branch in Hyogo

Sanyo Region

Hyogo and Osaka

(Billion yen)

We will strive to become the main bank of small- and medium-sized

enterprises based in local communities, and to pursue relationship

banking activities.

0.5 0.6 0.5 0.5 0.9

13.2 21.6

27.4

1.2

1.9

4.4

7.5

2.7

15.7

26.7

35.6

0.0

10.0

20.0

30.0

40.0

June 30,2017

September 30,2017

March 31,2018

September 30,2018

Balance of ship finance

Shimane and Tottori

Sanyo Region

Hyogo and Osaka

(Billion yen)

Develop new clients and further cultivate transactions with

existing clients.

Initiatives for loans to local industries

2,000.0

1,500.0

1,000.0

500.0

FY2015 FY2016 FY2017 1H/FY2018

Shimane

and

Tottori

Sanyo

Region Hyogo

and

Osaka

Tokyo

0.0

1,658.2

21

16.2%

19.0%

28.5%

31.9%

0%

10%

20%

30%

40%

FY2015

FY2016

FY2017

1H/FY2018

930 1,369 1,556

1,000

2,321

0

500

1,000

1,500

2,000

2,500

FY2015 FY2016 FY2017 FY2018

2プライベートバンキング部門の立上げ 8. Upgrading Consulting Services for Individual Customers

Enhance customer-oriented consulting services, and shift to a stock-based profit model.

(actual accumulation balance)

(Million yen)

Enhance Consulting Services

Enhance contacts with asset-forming customers

(on an amount basis)

Approach to a high-income class

Plan

for the

2H

Collect customer’s attribute information

using an inquiry sheet.

Make proposals to meet each customer’s

needs.

A fund wrap was introduced. (April 2018).

Make proposals on the most appropriate asset

management course based on customer needs.

Long-term management and diversified investments

⇒ Stable asset formation

Professional asset managers adjust the asset

allocation according to the environment. ⇒ Feel secure

Balance of assets under management by the Group

(Billion yen)

94.6 87.3 78.9 77.2

13.8 14.5 28.6 31.6 8.7

37.1 57.7 67.3

117.1

138.9

165.2 176.1

0.0

40.0

80.0

120.0

160.0

200.0

March 31,2016

March 31,2017

March 31,2018

September 30,2018

Brokerage of financial instruments

Gogin Securities

Balance of fund wrap

(as of September 30,

2018)

Pri

va

te A

dvis

ory

Dep

art

me

nt

Customer Total consulting from the viewpoint of

preservation of assets and asset succession

Custom-made products and services

Long-term trust relationship

Established at

the Head

Office in

November

2018 Optimal asset

allocation

Secure asset

succession

3.5 billion yen

(Total of Gogin and

Gogin Securities)

Advice provided by outside professional

partners

Cooperation with personnel in charge of

business succession of the Head Office

Plan

Contacts to busy working age groups

Accumulation-type

investment trusts

Ratio of application for

investment trusts

online

22

• Increase advertisements.

• Improve dedicated websites for

employees of partner companies

• Increase the lineup for online

application

• Trust relationships with partner

companies

⇒ Explain the products and

services by visiting the

workplaces.

55.2 61.6 66.2 68.1

11.7 13.2

14.7 15.0 15.5 15.6

16.8 17.1 82.6 90.5

97.9 100.2

0.0

20.0

40.0

60.0

80.0

100.0

March 31,2016

March 31,2017

March 31,2018

September 30,2018

Card loan (excl. education loans) Card loan (education loans)

Consumer loan

423.3 457.0 499.5 513.8

80.2 91.4

109.1 116.9 503.6 548.5

608.6 630.7

0.0

100.0

200.0

300.0

400.0

500.0

600.0

700.0

March 31,2016

March 31,2017

March 31,2018

September 30,2018

Shimane and Tottori Other regions

9. Enhancing Individual Loan Business

Balance of housing loans (by region) Loans to individuals

(Billion yen)

(Billion yen)

Enhance loans for employees of partner companies.

Enhance contacts with employees of partner companies

493 531 608

118,923 123,876 133,740

0

70,000

140,000

0

700

FY2016 FY2017 1H/FY2018

Number of partner companiesNumber of employees of partner companies

(Persons)

Non-face-to-face basis

(online) Face-to-face basis

Numbers of both partner companies and employees have

increased steadily.

Secure individual customers after loan transactions.

(Companies)

23

110.6 121.9 135.8 139.9 0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

March 31,2016

March 31,2017

March 31,2018

September30, 2018

10. Loans for Investment Property

Balance of loans for investment property Credit assessment and management system

Credit is assessed based on business evaluation considering

stress tolerance.

Verify the earning plan of the property by

applying stresses such as a decline of rent

income or a rise in the interest rate.

2,605.7

2,822.4

3,016.5 3,036.3

Loans for

investment

property

Loans for property to be purchased by an individual

for investment purposes or for residence.

4.2% 4.3% 4.5% 4.6%

We select loan properties based on careful credit assessments. The percentage of loans for investment

property to total loan amount remains low.

Location and

profitability

Check the income and financial assets, etc. of

the borrower that can cover the risk of

fluctuations in income from the property.

Background

assets

Conservatively assess the collateral value.

The upper limit of loans is not elevated

irrespective of the collateral price.

Preservation

Appropriate management by periodic monitoring

Enhance the management system and fiduciary duty (FY2018).

Establishment of a guideline for examination (by clarifying the key

points for examination)

Implement internal audits concerning Gogin’s internal systems.

Ensure to confirm the customer’s understanding of the business

risks.

3,500.0

3,000.0

2,500.0

2,000.0

1,500.0

1,000.0

500.0

Total loan

amount

Percentage of total loan amount

(Billion yen)

Amount of loans

for investment

property

24

964 1,051 1,064

485

0

200

400

600

800

1,000

1,200

FY2015 FY2016 FY2017 FY2018

11. Credit Card Business

Large card share in the region

⇒ Expand the infrastructure for the use of credit cards and promote their use.

Shopping amount by credit card

51.9 57.2 62.4

31.4

0.0

20.0

40.0

60.0

80.0

FY2015 FY2016 FY2017 FY2018

Corporate credit card

Income from credit cards

(Million yen) (Billion yen)

Plan for

the 2H

67.2

Affiliate stores (The Gogin Credit Co., Ltd.)

5.5 6.0 6.6

3.4

9,869 9,886 9,990 10,046

0.0

2.0

4.0

6.0

8.0

FY2015 FY2016 FY2017 FY2018

Shopping amount Number of card members

Increase shopping amounts by promoting the use of corporate credit cards. Increase the number of affiliated stores by unifying Group-wide efforts.

32.7 34.9 38.2

20.3

10,426 10,412 10,637 10,742

0.0

10.0

20.0

30.0

40.0

50.0

FY2015 FY2016 FY2017 FY2018

Net sales of affiliated stores Number of affiliated stores

(Billion yen)

Plan for

the 2H

1,196

Plan

Plan

Plan

Plan

(Billion yen)

25

12. Gogin’s Structural Reform Project

Enhancing cost management

Efforts for digitalization

17.1 16.8 16.7

8.1

16.2

0.0

6.0

12.0

18.0

FY2015 FY2016 FY2017 FY2018

(Billion yen)

Non-personnel expenses

Plan

for

the

2H

Establishment of the Digitalization Department

Alliances with FinX DIGITAL Co., Ltd. and Japan Digital Design, Inc.

Measures for

digitalization

Increase

interaction with

customers.

• The introduction of RPA enabled the reduction

of 4,100 hours of paperwork (equivalent to the

working hours of 2 employees).

• Promote BPR

• The structural reform project will reduce

paperwork by 100,000 hours (equivalent to the

working hours of 50 employees).

• Proposal list of investment trusts by AI

• Improve proposals by using tablet terminals.

• Utilization of various proposal lists created by

AI

• Increase the variety of applications online and

through apps.

• Increase dedicated websites for employees of

partner companies.

Face-to-face

channel

Non-face-to-face

channels

Actual achievements Future efforts

Trust

Convenient • Application for loans online

• Apps for opening a bank account

In-house development in the Group companies

Integration of San-in Economics & Management Institute Co., Ltd.

⇒ Establishment of the Industry Research Group

Partial in-house development of San-in Office Services

⇒ Establishment of the General Administrative Group

Integration of Gogin’s agencies ⇒ Establishment of local offices.

Cost reduction activities

Scrutiny and selection of proposed investments

Drastic revision of operations

Plan

Improve the efficiency

of paperwork.

Visualization of sales

activities

Visualization of customers

Diversification of

channels

26

Promote efficiency and cooperation.

13. Personnel Strategy to Keep Each Employee Highly Motivated

Strategic fields

Number of staff

increased (in the 1H

of FY2018)

Loan and corporate sales (Hyogo and Osaka) 8

Business support 5

Industry research 13

Private advisory 2

Transfer of system, promotion of digitalization, etc. 26

Strategic personnel relocation

Utilize expert personnel

Attended by a total of 140 interested and motivated limited-area

employees

Corporate sales training for limited-area employees

Participation by women

Held for

the first-

time

Diversified career paths

Relocated 10 employees to the finance and corporate sales

divisions (in Shimane and Tottori)

Appointment as managers

Accelerate appointment as managers

The first female general manager was appointed.

54 employees were relocated based

on strategic personnel management.

Receive

dispatched

workers.

Headquarters Group

companies

Sa

n-i

n G

od

o B

an

k

・Buyout fund

・Trust bank

・IT company

・External trade

supporting

organization

・Maritime investment

fund

Local major IT

companies

・Consulting firm

・Certified public

accountants

・Securities companies

・IT companies, etc.

Mid-career

employ-

ment

Branch offices

Sending to

trainings

Getting

know-how

17.7% 19.6% 21.3% 22.0%

25.0%

0%

10%

20%

30%

March 31,2016

March 31,2017

March 31,2018

September30, 2018

March 31,2021

Target

Percentage of female managers

27

1H of

FY2017

1H of

FY2018

YoY

change

The San-in General Lease

Co., Ltd. 232 286 54

Gogin Securities Co., Ltd. 220 (29) (249)

The Gogin Capital Co., Ltd. (5) 52 57

The Gogin Credit Co., Ltd. 9 145 136

Group

companies

14. Orchestrating the Comprehensive Power of the Group C

usto

mer

The San-in General

Lease Co., Ltd.

Gogin Securities Co., Ltd.

The Gogin Capital Co.,

Ltd.

The Gogin Credit Co.,

Ltd.

Provision of comprehensive financial services

Provide comprehensive financial services with the aim of meeting diversified customer needs by reinforcing

our cooperation among the Group companies.

Earnings of the major Group companies

Provide highly professional and one-stop services to meet customer needs.

Maximization of Group synergy

(Million yen) <Net income for the six-month period>

In-house development in the Group companies

Group company Subject

business

Purposes of

reorganization

San-in Economics &

Management Institute

Investigations

and research

To provide highly

value-added services

San-in Office Services Central

paperwork Rationalization of

operations and

promotion of efficiency Gogin’s agencies

Banking

agent

Transfer the Group companies’ businesses into Gogin in order to

improve the service content and efficiency of operations.

* The figures of the above companies were adjusted for consolidated

accounting purposes (before the offsetting).

Lease brokerage

Brokerage of

financial instruments

Introduction of funds

Introduction of

affiliated stores

Ban

k

Personnel

exchange

(to increase

expertise)

28

Profit attributable to owners of parent (shareholders’ equity basis)

Average balance of shareholders’ equity

(Average of balance at beginning and end of the term) x 100

4.64% 4.61% 4.51% 4.27% 4.23%

0.0%

2.0%

4.0%

6.0%

8.0%

FY2015 FY2016 FY2017 1H/FY2018 FY2018

15. Capital Policy and Shareholder Return

Levels of profit

(consolidated basis) (Billion yen)

1 Annual

dividend Payout ratio

Stable dividend Performance-linked

dividend

Over15.0 14 yen 16 yen 30 yen 31.2% or less

More than 14.0 to 15.0 14 yen 14 yen 28 yen 29.2% to 31.2%







Less than 8.0 14 yen 0 yen 14 yen 27.3% or more

ROE (Consolidated and shareholders’ equity basis)

Dividend table

Trend of shareholder return

FY2015 FY2016 FY2017 FY2018

(Estimate)

Annual dividend per

year 15 yen 15 yen 26 yen 26 yen

Payout ratio 18.00% 17.50% 30.48% About 30%

Number of shares

repurchased 1,300,000 2,250,000 － Flexibly

implemented

in response

to situations

Number of shares

of treasury stock

retired

1,300,000 2,250,000 －

Shareholder return

ratio 28.80% 30.60% 30.48%

Slightly over

30%

Plan

ROE =

29

Save the Forest! San-in Network Conference:

The “Friendship Store” system has been launched.

Assuming the role of secretariat, San-in Godo Bank takes the initiative in

expanding forest conservation activities in Shimane and Tottori by holding

events, etc.

Number of members: 52 groups (as of August 2018) (29 groups in Tottori; 23

groups in Shimane)

The 64 regional banks nationwide cooperate with each

other in exchanging information and sharing know-how

of forest conservation in their hometowns.

Established with volunteer groups and non-profit

organizations based in Shimane and Tottori as its

members

Forest conservation activities are conducted by

directors, employees and their family members in six

forests located in Shimane and Tottori.

16. ESG (Environment)

Aggressively promote proposals for carbon offsetting

• In 2009, Tottori Prefecture consulted with us about the outline of the

Offset Credit (J-VER) scheme, the acquisition of J-VER certification, and

sales promotion. We made a proposal for the scheme using our paid

business matching service.

• We are positively involved in the creation of the “Tottori Prefecture J-

VER Local Coordinator Program” (currently referred to as the “J-credit

Local Coordinator Program”). We have been certified as a “J-credit

Local Coordinator” by Tottori Prefecture, Nichinan Town of Tottori

Prefecture, and Yabu City of Hyogo Prefecture.

• Through this scheme, we endeavor to realize sustainable local

communities by disseminating the importance of environmental

conservation and methods to reduce environmental burdens through the

J-credit system.

Activities to save and grow forests to pass them on to the next generation

Support for emissions trading Forest conservation activity Since 2010 Since 2006

Clients Conclusion of the J-credit Selling

and Purchase Agreement

Compensation (Offsetting)

Inte

rme

dia

ry

Sustainable

forestation Propose

effective use

of J-credit

Initiatives by Gogin as the J-credit local coordinator

Advantages of purchasing J-credit • Offsetting CO2 emissions from

corporate activities

• Differentiation of products and services

• Improvement of the company’s image

as one that positively addresses

environmental and social issues

Advantages of selling J-credit • Using the revenue from J-credit for forest

maintenance

• Establishment of a network with

companies with high environmental

awareness

• Publicity and dissemination of the creation

of sustainable and healthy forests

Certify the J-credit

local coordinator Introduce

companies

considering

using

J-credit

Municipal

governments, etc.

San-in Godo Bank

San-in Godo Bank’s forest conservation activities: Three pillars

(GOGIN GREEN PROJECT)

Gogin Forests of

Hope:

Save the Forest! San-

in Network

Conference:

A group of volunteer

regional banks for

saving forests:

The “Friendship Store” system was launched as a revitalization

measure for the activities of the members amid various challenges

including “aging members,” and “lack of contact with local

communities” after more than 10 years of establishment.

■Purpose:

A sales branch that is closest to the member will be the office in charge.

Through mutual cooperation and friendship, the purposes of the

Conference’s activities and the importance of the forest conservation

activities will be promoted to the residents of Shimane and Tottori, thereby

raising consciousness of environmental conservation including that of

forests, etc.

■San-in Godo Bank’s specific initiatives:

・ Cooperation with the member’s public relation

activities

・ Cooperation with participation in events, etc.

held by members

Total quantity offset by our intermediary: 2,555 t-CO2 As of November 21, 2018

30

17. ESG (Society)

Gogin Challenged

Matsue (Since September 2007)

Gogin Challenged

Tottori (Since September 2017)

• People with intellectual disabilities work in specific jobs.

• Supports the employment of people with disabilities in

communities based on “Yumeiku Work Support Services”

• Mainly mentally challenged people and people with

developmental disorders are hired.

• By engaging in clerical work at our bank, they can

expand the future scope of their work.

Number of employees: presently, 6. ⇒ To be

increased to approx. 20.

Cultivating human resources capable of making decisions from a broad

perspective with cogitative and visionary functions.

Supporting the independence of people with disabilities by positively

employing them.

• Operated by the Gogin Shimane Cultural Promotion Foundation

• Aiming at cultivating highly motivated human resources capable of

participating in future society.

• The third generation students entered the school in April 2018.

Supporting the independence and participation

in society of people with disabilities Operation of a private school “Shofukan” Since 2007 Since 2012

Company benefit-type private

placement bonds

Private placement bonds contributing to the local community together with our clients

Donations are given under the joint signature of the

issuer and Gogin to a group designated by the issuer. Donation-type private placement

bonds

Donation to educational

organizations-type

Books and sports gear, etc. are presented to educational

organizations.

Regional revitalization-

type

Activity funds are donated to non-profit organizations, etc. engaged in

solving local issues in Shimane and Tottori.

Sports promotion-type Activity funds are donated to local sports teams.

251

11

24

22.2 billion yen

0.8 billion yen

2.1 billion yen

Total number of

issues

Total amount of

issuance

15 1.2 billion yen The issuer of private placement bonds provides subsidies for the hotel expenses

of tourists who use the subject ryokan and hotels in Shimane and Tottori.

Since 2018

Since 2015

Since 2017

(as of October

2018)

Support the improvement of company benefits of our clients.

Increase the value added of the accommodation and tourism

businesses as the main industry of Shimane and Tottori.

31

18. ESG (Governance)

Enhancing our corporate governance system with the aim of responding to stakeholders’ expectations

and realizing the sustainable improvement of our corporate value

Establishment of nominating and compensation committees Governance system

For the purpose of improving the effectiveness of corporate

governance, voluntary “Nominating and Compensation

Committees” were established as consultative bodies to the

Board of Directors. (June 2018)

(1) Highly transparent and objective process of selecting

directors and officers

(2) Compensation system for directors and officers as an

incentive to improve corporate value

Purposes

Discussing matters

Selection of candidates for directors, corporate auditors and

executive officers, selection of directors with special titles,

and compensation of directors, etc.

Composition of the Committee

Chairperson No. of Outside

Directors

No. of Inside

Directors Total

Outside

Director 3 2 5

Board of Directors (Directors)

⇒ “Decision-making function concerning management”

and “supervisory function of execution of operations”

Executive Officer ⇒ Function of business execution

Separation of functions by introducing an executive officer system

Sufficient number of directors for holding full discussions

Structure of four executive officers contending with four

non-executive officers(*)

* Chairman of the Board (Chairperson) + three Outside

Directors

System for revitalizing the Board of Directors

Compensation of fixed amount (an incentive for stable

management)

Performance-based compensation (an incentive for higher

performance)

Stock-linked compensation (an incentive for improving

medium- to long-term shareholder value)

Highly transparent compensation system for directors

Forward-looking statements are including in this material. These statements do not

provide a guarantee of the San-in Godo’s future performance, and actual results are

subject to risks and uncertainties. Please note that future performance may differ

from the views presented herein owing to changes in the operating environment and

other factors.

For inquiries relating to this material,

please contact:

Planning Group

Management Planning Development

The San-in Godo Bank, Ltd.

Phone: +81-852-55-1020

Fax : +81-852-27-3398

Email: [email protected]

Investor Relations Meeting...Investor Relations Meeting Presentation Material November 2018 Table of Contents I. Summary of Financial Report for the Six Months Ended September 30,

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