Mebuki Financial Group, Inc.

Financial Results
For FY2016(IR Presentation Material)(This page is intentionally left blank)
1

Contents
1. Highlights

3

3. Forecast for FY2017◇ Forecast for FY2017 (1)(2)

2. Financial Results for FY2016◇ Main Points of FY2016 Financial Results 4◇ Core Gross Business Profit

5◇ Net Interest Income / Loans and Deposits 6(Average Balance / Average Yield)◇ Loans (1)-(5)◇ Deposits

23

4. Integration Synergies◇ Synergy Effects
on Statement of Income

7-11◇ Sales Promotion Measures

12◇ Sales Promotion Measures

24-25
26

(Loans / Strategic Personnel Allocation )27

13(Corporate Services / Financial Assets under Custody)

14-15◇ System Integration / Cost reduction 28◇ Financial Assets under Custody◇ Securities (1)(2)◇ Capital Adequacy Ratio /Shareholder Return

21-22◇ Strategic Shareholdings

16◇ Day 180 Plan (2H FY2016)

29-34◇ Expenses / OHR

17◇ Step-up 180 Plan (1H FY2017)35-36◇ Credit Related Costs /Non-performing Loans

18[APPENDIX] Data Book

◇ Status of Group Companies

19◇[Reference] Gain on Negative Goodwill

20
2Highlights
Financial Results for FY2016 (Results for 1H of Joyo Bank + 2H of Mebuki)◎ Consolidated net income* of Mebuki surpassed the forecast mainly because gain on negative

goodwill of ¥119.2 bn associated with the business integration exceeded the initial estimate.
<Mebuki> Consolidated net income ¥158.4 bn / Forecast ¥155.0 bn ＊ attributable to owners of the parent◎ The business integration synergy for the second half of FY2016 was ¥0.9 bn.

Earnings Forecast for FY2017 (Changes : year-on-year basis)◎ Consolidated ordinary profit and consolidated net income* are forecasted to increase by ¥ 6.2
bn to ¥58.5 bn and decrease by ¥118.4 bn to ¥40.0 bn respectively. ＊ attributable to owners of the parent
Non-consolidated net income <Joyo> ¥23. 0bn （-¥1.4 bn） <Ashikaga> ¥21.0 bn （-¥5.4 bn）◎ Synergy effect of the business integration of ¥2.7 bn is expected for FY2017.

Dividend◎ Year-end dividend for FY2016 is ¥6.50 per share, including commemorative dividend (¥1.00) forthe business integration of the Joyo Bank and Ashikaga Holdings.
◎ For FY2017, in line with an earnings distribution policy*, annual dividend projection is ¥11.00,
interim dividend and year-end dividend of which are ¥5.50 each.
＊ Aim to continue the stable dividend returns while taking into account both the maintenance of solid capital levels for the future growth andthe appropriate distribution of profits to our shareholders.
3Main Points of FY2016 Financial Results◇ Consolidated net income* of Mebuki surpassed the forecast mainly because gain on negative
goodwill associated with the business integration, which is ¥119.2 bn, exceeded the initial estimate.
＊ attributable to owners of the parent● Mebuki FG (JPY Bn)<Reference> Results of Joyo and Ashikaga(JPY Bn)

Consolidated
FY2016

Progress[Progress against forecast]

Forecast

FY2016
J+A

Joyo

Ashikaga
Joyo

Ashikaga
101.6%

Non-personnel expenses

60.4
47.0

-8.3 105.2 -6.2 82.3 -2.0 96.1% 92.3%-4.4 85.1 -4.6 68.2 +0.1 102.3% 101.4%-2.7 14.3 -1.1 13.2 -1.6 84.3% 79.7%-1.0 5.6 -0.4 0.7 -0.5 51.6% 47.4%-2.8 5.8 -1.7 -0.2 -1.0 62.2% 64.8%-0.2 68.5 +0.2 46.4 -0.5 98.7% 100.7%+0.0 34.7 -0.2 25.7 +0.3
-1.3 29.5 -0.0 17.5 -1.3

FY2016 include those of Joyo Bank for the

Net business income(before general allowance for loan

72.5

-8.0 36.7

110.1%

first half and those of Mebuki for the second

Core net business income

-5.1
+0.2
-8.2
-5.3
+4.8
+2.5
-13.6
-1.0
-7.7

Credit related costs (a)+(b)9.5 +5.0

Ordinary profit

52.2

98.5%

53.0

Net income attributableto owners of the parent

158.4

102.2%

155.0

ResultGross business profit

187.5

Net interest income

153.4

27.6
6.3
(o/w gains/losses on bond transactions) 5.6
Net fees and commissions(exc. gain on negative
goodwill)

39.2

98.0%

40.0

Net other business income and Net trading income

Expenses

・ Mebuki FG’s consolidated financial results forhalf.
・ Gain on negative goodwill due to thebusiness integration of ¥119.2bn wasrecorded as extraordinary income (refer to p.20).
・Business integration synergy for FY2016 is¥0.9 bn. Synergy effect of the businessintegration of ¥2.7 bn is expected for FY2017.

Personnel expenses

115.0

66.9
Net transfer to general allowance for loan losses (a) -0.4
Net business income
73.0
Net non-recurrent gains/losses-4.0
o/w Disposal of non-performing loans (b) 10.0
o/w Gains/losses related to stocks, etc
9.7
Ordinary profit
68.9
Extraordinary income/losses-2.1
Net Income
50.8

YoY
YoY
YoY
ResultResultChangeChangeChange-6.5 35.8

-1.5

J+A

92.4% 79.8%

103.4%
89.8%
177.5%
95.8%-

30.8 -4.7 36.0 -0.4 96.3% 83.4% 110.8%-0.6 +0.0 0.1 +0.1
37.3 -6.5 35.6 -1.7 92.9% 81.2% 109.5%-1.7 -0.4 -2.3 -4.8
5.4 -0.0 4.5 +4.8 133.5% 108.6% 183.4%
7.5 +2.8 2.1 -0.3 244.2% 189.7%
35.6 -7.0 33.2 -6.5 97.0% 88.0% 109.0%-0.8 -0.1 -1.3 -0.9
24.4 -3.3 26.4 -4.4 103.8% 87.3% 125.7%
4.7

-0.0

4.7 +5.0 127.3% 95.3%

191.4%

4

＊ Figures in parentheses are changes on a year-on-year basis

Core Gross Business Profit (Gross Business Profit excluding Gains/Losses on Bond Transaction)◇ Core gross business profit decreased by ¥5.4 bn, net interest income and net fees andcommissions of which decreased by ¥4.4 bn and ¥2.7 bn from the previous year respectively.
◇ The drop in the profit is mainly attributable to a decline in loan yields and a decrease in fees
related to financial assets under custody.
● Joyo + Ashikaga(JPY Bn)● Key Change Factors(JPY Bn)
+2.5
+1.4

16.2%
+2.5

187.3

(-5.4)

1.3

27.5

29.0

30.4

Net Fees andcommissions
-2.7

-7.9

181.9
0.7

(+1.8)

27.6(-2.7)

Other

153.4
(-4.4)FY2014FY2015FY2016

OthersLoan Yields

Security
Interests

Deposits
Interests

FY2015-3.5● Gains on Cancellation of Private Offering Investment Trusts
among Interests and Dividends on Securities(JPY Bn)

Joyo
Ashikaga-1.0

FY2013

Net fees andcommissions/ Core grossbusiness
profitLoan Volume

Net interest
income

157.9

181.9

+0.7
Net fees andcommissions

156.1

+1.8

-3.0
Net interest income -4.4

154.4

-5.4

Other net
Business Income

1.9

187.3

Other Net Fees
andCommissions

183.9

186.5

FY201615.2%

Investment Trust/Insurance

15.5%
15.0%

Annual(o/w 2H)
Annual(o/w 2H)

FY2014FY2015FY20160.3
0.8
1.7(-0.0)
(0.4)
(1.6)
1.1
3.7
3.6
(0.4)

5

(Domestic + International)
Net Interest Income / Loans and Deposit (Average Balance / Average Yield)＊ Unless otherwise mentioned, figures shown are sum of domestic and international figures.

Net Interest Income

Average Balance of Loans and Deposits (J + A)

● JoyoInterest on
loans andbills
discounted

FactorChange(YoY)

Average
Balance+1.6bn +1.5bn (+140.5bn)(Domestic)(International)+0.1bn (+10.0bn)-4.3bn -4.9bn (-8BP)+0.5bn (+52BP)-0.5bn -1.3bn+0.8bnAverage
Balance-0.4bn -0.5bn (-51.4bn)+0.0bn (+0.5bn)

Yield-0.0bn -1.0bn (-5BP)+1.0bn (+22BP)

Yield

Interest on
deposits (-)
Interest anddividends on
securities-

12,218.1
J 7,450.1
A 4,768.0

12,542.3
J 7,599.3
A 4,943.0

9,107.1

J 5,274.9
A 3,832.2

Interest anddividends on
securities

J 7,834.1
A 5,043.0

9,623.0

J 5,577.5
A 4,045.5

FY2014

J 8,063.8
A 5,179.1[Deposits]
YoY +365.8 bn（+2.8％)

9,981.2

10,204.5[Loans]YoY +223.3 bn（+2.2％)

J 5,808.2
A 4,173.0

J 5,958.9
A 4,245.6

Deposits

FY2015FY2016(JPY Bn)

Average Yield of Loans and Deposits

FactorChange(YoY)

Average
Balance+0.8bn +0.8bn (+72.4bn)+0.0bn (+0.0bn)

Yield-3.5bn -3.5bn (-8ＢＰ)+0.0bn (+40ＢＰ)(Domestic)(International)● Joyo1.32%● Ashikaga
1.21%

1.14%

1.29%
Interest on
deposits (-)

13,242.9

12,877.1

Loans

FY2013● Ashikaga

Interest on
loans andbills
discounted(JPY Bn)(JPY Bn)-

Average
Balanace

Yield-1.1bn -1.1bn+0.0bn+2.5bn +1.9bn (+136.0bn)+0.6bn (+29.5bn)+0.6bn -0.3bn (-3ＢＰ)+0.9bn (+54BP)

1.18%

1.11%

1.45%
1.06%
1.04%

Loan
Yields
(1)

1.40%

1.35%
1.31%

1.28%
1.24%

1.20%
1.18%

Yield
Spread(1)-(2)

0.03%

0.03%

0.03%

0.02%

FY2013

FY2014FY2015FY2016

Deposits
Yields
(2)

0.05%

0.04%

0.04%

0.02%

FY2013

FY2014FY2015FY2016

6

＊Figures in parentheses are changes on a year-on-year basis

Loans (1) by Borrower Type◇ Loans to individual customers increased by ¥247.2 bn (+6.1%) and housing related loans increasedby ¥241.8 bn from the previous year.
◇ Loans to corporate customers decreased by ¥3.5 bn and those to local SMEs increased ¥61.7 bn
year-on-year .
● Joyo + Ashikaga
9,406.6
1,282.7

4,692.7

9,845.8
1,327.3

4,772.2(JPY Bn)(+1.2％)

10,187.1

10,315.4

1,348.3

4,813.1

1,232.9

4,809.6● Joyo5,399.3(-8.5％)(-0.0％)

3,431.1

3,746.2

4,025.6

Mar-14Mar-15Mar-16

Mar-17

91.9
45.6
40.4
5.1
Mar-14104.5

5,967.0

807.3

843.4

758.3

(-10.0％)792.3

Corporate
customers

2,776.6

2,828.6

2,821.3(-0.2％)

2,720.8

1,886.1

2,072.4

2,240.5

2,387.4(+6.5％)

Mar-14Mar-15Mar-16

Mar-17

PublicsectorCorporate

Individual
customers● Ashikaga(+1.7％)＊ “Individual Customers” include sole proprietors and “Corporate customers”
includes financial institutions.

(Reference) Foreign Currency Denominated Loans

5,912.7

5,656.4

PublicsectorIndividual
customers

4,272.8 (+6.1％)(+0.9％)

4,189.4

4,274.4

4,348.4

490.3

519.9

504.8

474.6

1,971.9

1,995.6

1,984.5

1,988.2(+0.1％)

1,544.9

1,673.7

1,785.0

1,885.4(+5.6％)

Mar-14Mar-15Mar-16

Mar-17

4,007.3(JPY Bn)

128.3(-5.9％)
PublicsectorCorporate

Joyo

116.0

86.3
5.5

98.8
5.7

12.2

Mar-15Mar-16

Mar-17

Ashikaga

Individual
customers7

＊Figures in parentheses are changes on a year-on-year basis

Loans (2) Loans to Corporate Customers●Joyo + Ashikaga (JPY Bn)
Balance by Area

●Ashikaga
Tokyo

Tokyo

4,759.8 4,798.7 4,794.2

2,776.6 2,828.6 2,821.3
Neighboring
Prefectures
1,868.1 1,839.7 1,773.5 (-66.2)
Tochigi

902.4

943.2

998.5

867.4

866.6

875.7

1,121.5 1,148.8 1,146.1

120.5
220.3
103.0

131.2
226.1
110.6

Local

Local

3,020.3

1,493.5

1,020.0 1,037.6 1,025.3(+11.8)(+61.7)

4,759.8 4,798.7 4,794.2
1,696.2 1,610.4 1,559.5 (-50.9)
237.4

Chiba/
Saitama
Fukushima/
Miyagi
Tochigi
Ibaraki

112.4
216.8
95.3

206.9 (-1.1)

Large
Mid-sized●Joyo

1,166.0

1,133.9 (-32.0)

Saitama
Ibaraki

1,983.1 1,970.1 1,972.9

Gunma

536.2
31.4
296.6
101.5
245.1

492.7
27.0
325.2
111.2
250.1

445.7 (-47.0)

772.1

763.6

765.1

28.0
355.6
120.8
257.5

Tochigi

Local

1,527.0(+49.9)

Large

Large

Mid-sized

Mid-sized

SMEs

SMEs

114.3

Fukushima●Ashikaga

2,776.6 2,828.6 2,821.3

1,199.2

Tokyo＊The balance of Ashikaga
doesn’t include loans tofinancial institutions, which is¥15.3 bn as of March 31, 2017.

Mar-15 Mar-16 Mar-17

Mar-15 Mar-16 Mar-17●Joyo + Ashikaga (JPY Bn)

208.0

1,331.9 1,347.0 1,327.8 (-19.1)

IbarakiMar-15 Mar-16 Mar-17

Balance by Company Size

●Joyo

103.3

99.1

(-4.2)

2,825.8 2,980.1 3,027.4 (+47.3)

1,462.9 1,559.2 1,588.1 (+28.9)

Mar-15 Mar-16 Mar-17

Mar-15 Mar-16 Mar-17

1,983.1 1,970.1 1,972.9
497.0
123.1

444.4
104.7

425.6
107.8

SMEs
(-18.7)(+3.1)

1,362.9 1,420.9 1,439.3 (+18.4)

Mar-15 Mar-16 Mar-17

8

＊Figures in parentheses are changes on a year-on-year basis

Loans (3) Housing Related Loans
Housing Related Loans (Term-end Balance)● Joyo + Ashikaga
3,139.2
631.2

3,443.9730.1

3,709.5
813.9● Joyo(JPY Bn)

900.3(+7.3%)(+10.6%)

1,714.1
496.9

2,507.9

2,713.6

2,895.4● Ashikaga

3,951.3 (+6.5%)

1,897.0580.6

2,062.0

2,213.7651.0

724.0 (+11.2%)

3,050.9 (+5.3%)
Apartment loans(+5.4%)

1,425.1
134.3

1,546.9
149.5

1,647.5
162.9

1,737.6
176.3 (+8.1%)

1,217.1

1,316.3

1,410.9

1,489.6 (+5.5%)

1,290.8

1,397.4

1,484.5

1,561.3 (+5.1%)

Mar-14Mar-15Mar-16

Mar-17Mar-14Mar-15Mar-16

Mar-17

Housing loans

Mar-14Mar-15Mar-16

Mar-17＊”Apartment loans” include those to corporate customers

Loans Made
● Joyo + Ashikaga● Joyo(JPY Bn)● Ashikaga

Apartment loans

535.5

544.7

125.4

142.4

410.0

FY2013402.3

FY2014

510.7
131.7

378.9

FY2015(-4.5%)

Housing loans

498.9
137.1

361.7

(+4.1%)(-5.6%)

302.6

315.1

300.9

97.7

114.1

105.7

109.8 (+3.8%)

232.9
27.7

229.6
28.2

209.8
26.0

204.9

200.9

195.1

184.1 (-2.3%)

205.1

201.4

183.8

177.6 (-2.3%)

FY2013

FY2014FY2015FY2016FY2013

FY2014FY2015FY2016293.9(-3.4%)

204.9
27.3 (+5.0%)(-2.3%)FY2016＊”Apartment loans” don’t include those to corporate customers

9Loans (4) Average Yields
By Borrower type (Domestic) Joyo

Loans to Corporate Customers (By Area)

2.15%
1.90%

1.80%
1.71%

1.66%

1.65%

1.40%

1.24%

1.58%

1.60%
Individual
1.53%

0.65%

1.43%

1.40%
1.20%

1.20%

1.47%

1.15%

1.13%

1.07%

1.05%

1.02%

0.98%

0.86%

0.83%

1.00%
0.80%

0.73%

0.64%

0.95%

0.92%

0.75%

0.74%

1H20152H2015

Ashikaga Local

1.32%

1.25%

1.33%

1.28%

1.22%

0.64%

0.58%

0.59%

0.38%

0.37%

1H20162H2016

0.60%

0.86%

0.84%

0.67%

0.66%

1H20162H2016

0.40%

0.51%

Public

0.49%

0.46%

0.44%

2H2014

1H20152H20150.20%

2H2014

1H2014

By Borrower type (Domestic) Ashikaga

Joyo Local

Ashikaga Tokyo

Joyo Tokyo

Housing Loans

2.15%

1.74%

1.58%
1.70%

1.66%

1.62%

1.65%

1.38%
1.40%

1.32%

1.34%
1.27%

0.75%

0.72%

1.29%
1.23%

1.27%
1.19%

0.69%

0.68%

1H20152H20150.40%

1H20142H2014

1.52%
1.58%

1.55%

Individual

1.46%

Ashikaga Total

1.42%

1.48%

0.90%
0.65%

0.69%

1.37%

1.39%

0.00%
1H2014

1.15%

1.41%

1.45%

Corporate

0.40%

1.90%

1.50%

Total

1.15%
0.90%

1.46%

1.56%

1.21%

1.12%

1.18%
1.09%

1.40%

Total

Corporate

1.35%

0.61%

1H20162H2016

1.31%
Joyo Total

1.30%

1.24%

1.21%

0.94%

0.90%

0.94%

0.95%

0.91%

0.91%

0.90%

0.90%

0.88%

0.86%

0.86%

0.85%

1H20142H2014

1H20152H2015

1H20162H2016

Public

0.62%

1.36%

Joyo newly
madeAshikaga
newly made10

＊Figures in parentheses are changes on a year-on-year basis

Loans (5) Unsecured Loans
Unsecured Loans (Term-end balance)●Joyo + Ashikaga●Joyo(JPY Bn)

136.6●Ashikaga(+15.2％)

118.5
103.7

(+11.0％)Card loans

62.4

90.4

(+16.8％)

53.4
47.1

41.6

5.5

3.9
26.9

2.4
23.9

29.8

67.8

62.4
Free purpose
loans

6.8
32.6

22.4

25.8

29.8

34.8

Mar-14Mar-15Mar-16

Mar-17

Educational
loans(+9.3％)

0.8
24.1

Car loans(+16.7％)

28.0

28.2

26.3

19.2

21.8

25.0

14-Mar15-Mar

16-Mar17-MarExternal guarantee
companies

Guarantee companies
within Mebuki FG

7%

More than 0.5 mil
but less than 1 mil

62%

23.4

1 mil or more
but less than 2 mil
2 mil or more

4.8
3.5
8.0

3.1
2.8
6.6

1.4
2.3
5.3

6.1
4.4
9.8

14-Mar 15-Mar 16-Mar 17-Mar

Employee-specific Website (Joyo) Ashikaga will start to make use of theemployee-specific website from Oct. 2017
(Thousandpeople)(As of Mar. 31, 2017)

700
600
500

24%

58.5%
External guarantee
companies(applicarions are closed)

0.5 mil or less

34.3

28.3

18.9

17.1

7%

7.2%

35.9

0.7

0.7

(JPY)

34.3%

44.6

28.1

25.1

＊The following is distribution situation of credit limit perborrower guaranteed by external guarantee companies
who accept guarantee applications now, which isapproximately 35% of total amount of card loans .

(based on amount)

54.6

Distribution Situation ofCredit Limit per Borrower

Percentage of Guarantee Companies
Guaranteeing Card Loans●Joyo + Ashikaga

23.7

22.7
1.0
21.6

(+22.4％)

82.0

73.9

400
300

Users of web-based
service for client
employeeof which, Payroll
account holder

697 thousand people

Client companies

8,404

281 thousand people

200
100
0
Oct-12Mar-13Mar-14Mar-15Mar-16

Mar-1711

＊Figures in parentheses are changes on a year-on-year basis

Deposits Balance by Depositor Type◇ Deposits of individual and corporate customers have been on the increase (Individual customers :YoY +2.7%, Corporate customers : YoY +1.3%).
● Joyo + Ashikaga
12,448.8724.6
2,627.1

12,814.1
727.8
2,741.9(JPY Bn)

13,327.9804.4
3,020.8● Joyo(+1.8%)

13,572.9748.0

3,062.8(+1.6%)(-7.0%)
Publicsector
(+1.3%)

7,728.7372.0
1,471.0

390.8
1,542.1

8,103.3

8,240.3

458.1
1,738.2

424.0
1,747.4

9,344.2

9,502.6

9,762.1(+2.7%)

Mar-15Mar-16

5,647.8

5,795.7

5,906.8

6,068.9

Mar-14Mar-15Mar-16

Mar-17

5,085.3

5,224.5

5,332.5

337.0
1,199.8

346.2
1,282.5323.9
1,315.4(Reference) Foreign Currency Deposits
127.7
71.1

58.3
18.4
Mar-14

54.6
16.4
Mar-15

111.4
16.3
Mar-16352.5
1,156.0(JPY Bn)

165.6
76.7

4,957.8

Mar-17140.7(+0.5%)

24.8
Mar-17(+2.7%)

Individual
customers(+2.0%)(-6.4%)(+2.5%)

Public sector

Corporate
customers

Joyo
Ashikaga

Public sector

Corporate
customers● Ashikaga
Mar-14(-7.4%)

Corporate
customers
Individual
customers

9,097.0

7,490.9

3,449.2

3,548.5

Mar-14Mar-15

3,595.7

3,693.1(+2.7%)
Individual
customers※1 “Corporate customers” include financial institutions.
※2 Foreign currency deposits include foreign currency deposits hedged by forward exchange contracts, offshore deposits, and so forth.

Mar-16

Mar-1712

Financial Assets under Custody Balance / Sales Commission

Sales Commission

Financial Assets under Custody(Balance)◇ Sales commissions, mainly those of investment trusts and insurance products, decreased due tothe concern over the unstable financial market.
◇ Both banks have been focusing on broadening their customer bases.
● Joyo + Ashikaga
340,552

340,848● Joyo(JPY Bn)

353,723● Ashikaga

JGB etc.

191,616 190,950 197,224
1,815.9478.7

1,869.2

1,784.9

1,789.7

366.7

273.8

225.8

70.1

94.8

76.7

667.9

718.4

757.5

156.0

781.3

592.3

713.8

658.6

626.3

Mar-14Mar-15Mar-16

Mar-17

Foreigncurrency
deposits
Insurance

298.1
Investment
trustsNumber ofcustomers● Joyo + Ashikaga (JPY Bn)
13.1
0.2
0.6

15.2
0.3
0.6
4.2

3.9

14.8
0.4
0.7
5.2

FY20139.7

FY20148.2

FY2015

58.3

388.7

239.2

186.2

155.3

53.7

78.5

131.2

423.3

445.5

454.1

771.9

780.2

180.6

127.5

18.4

16.4

749.2

753.7

87.6

70.5

16.3

24.8

279.2

295.1

312.0

327.2

298.8

372.7

325.4

295.2

293.5

341.1

333.2

331.1

Mar-14Mar-15Mar-16

Mar-17Mar-14Mar-15Mar-16

Mar-17● Joyo● Ashikaga

Financial instrumentsintermediary service

11.7
0.5
0.9
3.4

8.1

148,936 149,898 156,499

1,044.0 1,089.0 1,035.7 1,036.0

6.6

FY2016

JGB etc.
Foreign currency
deposits
Insurance

6.4
0.2
0.4

8.0
0.3
0.5
2.2

1.9

Investment trusts

3.6
FY20134.7

FY2014

7.5
0.3
0.6

6.6
0.0

5.4
2.6

0.3
1.4

3.8

3.2

FY2015FY2016

0.2

1.9

7.2
0.0

7.2
0.1

2.0

2.5

6.2
0.3
1.9

4.4

4.9

4.4

FY2013

FY2014FY2015

3.4
FY2016

13

Securities (1) Balance / Unrealized Valuation Gains / Losses

4,065.1

4,210.6

401.3

567.2

753.8

365.6

326.5

346.5

551.4

614.8

679.6

2,556.5

Investment
trusts etc.
StocksForeignbonds

2,430.6
Domestic
bonds

Mar-15Mar-16

Joyo

3,972.2

2,653.7

Gains

LossesDomestic

8.0

-1.8

6.1 JGB, J-REIT, etc.

International

3.0

-3.4

-0.3

－

9.5

-1.9

7.5 Strategic shareholdings, ETF(JPY Bn)
Gains / losses
on bondtransactions
Gains / losses
related tostocks, etc.

Ashikaga● Joyo + Ashikaga

Gains on
Sales of Securities

Term-end Balance(Balance Sheet Amount)◇ Considering the interest rate of Japanese yen, suspended reinvestment of redemption payments of
JGBs, which results in a decrease of the amount of domestic bonds held.
◇ Continue to rebalance our portfolio through purchasing investment trusts and foreign bonds, while
paying attention to risk management.

Mar-17

Gains / losses
on bondtransactions
Gains / losses
related tostocks, etc.

Net

Foreign government bond,Ginnie Mae, etc.

○Sold bonds with lower interest rate, longer duration, etc.

Gains

LossesNet

Domestic

0.7

-1.0

International

-

-

-

－

3.1

-0.9

2.1

-0.2 JGB, Local government bond, eｔｃ.

Strategic shareholdings,
Investment trust

Unrealized Valuation
Gains / Losses
on Available for Sale Securities＊Refer to p.5, for information regarding gains on cancellation of private offering investment trusts, Joyo
and Ashikaga’s results for FY2016 of which are +1.7bn and +3.6bn respectively.

● Joyo + Ashikaga
300.1
58.1

180.9

264.1
33.9
143.8

9.2
51.7

11.0
75.3

Mar-15Mar-16(JPY Bn)● Joyo237.3

Investment
trusts etc. 232.6

23.5

Stocks

170.8

45.6
-2.6
Mar-17

Foreignbonds
Domestic
bonds

44.2
144.7

[As of Apr.30]● Ashikaga[As of Apr.30]

Total

192.5

186.0

25.1

22.9

114.4

7.0
36.6

8.5
44.3

Mar-15Mar-16

138.8

26.0
-1.8
Mar-17+174.0Investment trusts+19.6
Stocks+127.4Foreign bonds+0.4
Domestic bonds
+26.4

Total

67.5

71.6

13.9

8.7

36.2

29.4

2.1
15.1

2.4
30.9

Mar-15Mar-16

51.3
0.5
31.9

19.5
-0.7
Mar-17+52.5
Investment trusts+0.3
Stocks+31.4
Foreign bonds+0.5
Domestic bonds
+20.1

14

Securities (2) Interest Rate Risk / Foreign Bonds◇ Foreign bonds, most of which are government bonds and government-guaranteed bonds, haveunrealized gains as of April 30, 2017.

8● Ashikaga(Years)Yen denominated bondDuration

Foreign currency denominated bond

7

5.7

6
5
4
3

3.8

4.2
3.5

3.8

4.4

3.5

3.4

3.4

Mar-15Mar-16

4.8
4.1

3.8

4.9
4.6

5.1

3.4

Interest Rate Risk (10 BPV)

● Joyo● Joyo● Ashikaga(JPY Bn)

Foreign currency denominated bondYen denominated bond

9.5
1.1

8.4

8.5

8.6

8.8

1.3

1.4

1.9

7.2

7.1

5.0

5.0

5.1

5.1

0.1

0.3

0.5

1.0

4.9

4.6

4.5

4.0

6.9

2
Mar-14Mar-17Mar-14Mar-15Mar-16

Mar-14Mar-17Mar-15Mar-16

Foreign Bonds / Funds(Book Value)● Joyo + Ashikaga (As of Mar. 31, 2017)

Foreign
Bonds

Funds

o/w Government Bondo/w Corporate Bondo/w Ginnie Maeotherso/w ETF
o/w REIT
othersMar-17Mar-14Mar-15 Mar-16

Mar-17(JPY Bn)

J+A
682.2
313.6
285.9
28.7
53.9
727.0
155.7
58.1

Joyo
458.4
261.0
114.7
28.7
53.9
316.0
155.7
42.2

513.2

118.0

Ashikaga
Details
223.8 52.5 Invest mainly in U.S. Treasury and partially in European bonds
171.2 Bonds rated A or above account for 90% of total
0.0 Sold bonds w hose duration w as likely to be longer in FY2016
0.0 Securitized products centering on CLO (only highest tranches)
411.0 0.0 Control risks using bear funds
15.8 Invest in diversified REIT considering yield and liquidity
Improve risk-return profile of entire portfolio considering correlation

395.2 w ith other assets

15Strategic Shareholdings◇ Sum of strategic shareholdings of the two banking subsidiaries are ¥146.6 bn (YoY -¥6.9 bn)◇ The amount of Joyo is ¥127.9 bn (YoY -¥6.5 bn), which is equivalent to 29.7%* of CET1
＊ The rate is calculated assuming stocks which its issuers agreed for us to sell were sold.

● JoyoBalance● Joyo + Ashikaga

200.0(JPY Bn)

180.0
160.0

157.9
19.7

140.0

155.6

Mar-14Mar-15Mar-16

Mar-17

ChangeBalance

138.2

135.9

134.4

127.9

-6.5

CET1 ratio

34.6%

34.1%

32.6%

30.4%
(29.7%)-2.2%（-2.9%）

Mar-14Mar-15Mar-16

Mar-17

Change

19.7

19.7

19.1

18.7

-0.4

● Ashikaga

153.5
146.6

19.7

(JPY Bn)

19.1
18.7

Ashikaga

Balance

Joyo

120.0

Excerpts from Basic Corporate Governance Policy

100.0（Basic Policy on Strategic Shareholdings）

80.0
138.2

135.9

134.4

127.9

Mar-14Mar-15Mar-16

Mar-17

60.0
40.0
20.0
0.0

＊ Concerning some of the stocks which its issuers agreed for
us to sell, their risks are hedged through forward contract.

・ The objective and rationale behind strategic
shareholdings are sustainable growth andimprovement of mid- to long-term corporate value of
Mebuki FG and its customers, and to maintain astable relationship with customers.
・ Concerning major strategic shareholdings, examine
the permissibility of the shareholdings at the board of
directors every year, based on mid- to long-term
economic rationality reflecting the risk and returns,
and the objective and rationale behind theshareholdings.

16

＊Figures in parentheses are changes on a year-on-year basis

Expenses / OHR◇ Despite the fact that taxes such as size-based business tax increased, expenses decreased (by¥0.2 billion on Joyo-Ashikaga simple-sum basis) compared with the previous fiscal year, mainly
due to decreases in non-personnel expenses centering on depreciation expenses. We willcontinue to focus on cost reduction.
● Joyo + Ashikaga(JPY Bn)● Joyo
66.7%

65.1%

64.0%
61.2%

64.3%

62.1%
58.8%

119.6
5.2

117.9

61.3%
Taxes

69.8

68.2

68.5

3.0

3.4

3.7

4.2

32.3

31.8

29.5

29.5

35.1

34.5

34.9

34.7

FY2013

FY2014FY2015FY2016(-0.2)

115.3

115.0

6.5

7.4

5.8

(+0.9)(-1.3)

52.4

70.6

51.5

48.4

47.0

Nonpersonnel
expenses● Ashikaga
61.2%

Personnel
expenses(+0.0)

61.8

FY201360.5

FY201460.3

FY2015＊OHR ＝ Expenses / Gross business profit

60.4

FY2016

59.6%

55.7%

56.4%

48.9

48.0

47.0

46.4

2.1

2.3

2.8

3.2

20.1

19.6

18.8

17.5

26.6

26.0

25.3

25.7

FY2013

FY2014FY2015FY2016＊The depreciation method
has been changed from thedeclining-balance method tothe straight-line method,which decreased
depreciation expenses by¥0.7 bn.

OHR

17

Credit Related Costs / Non-performing Loans◇ In the second half of FY2016, despite of the fact that credit related costs increased mainly due
to an extraordinary factor, number of bankruptcies of local businesses remains low level.
<Reference (1)> Credit Related Cost Ratio

Credit Related Costs(JPY Bn)

FY2013

FY2014FY2015FY2016

6.5
Ashikaga

Joyo

3.2
3.2

2.3

2.1

1.4

1

14

Approx. ¥3 bn

1.1

1.2

0.9

3.0

1.2

2.6

1.5

2.1

14

1

15

2

15

3.3

1.4

0.9

2

Extraordinary factor related
to some large-lot borrower

1

16

2

1.79%

1.74%

0.082%

0.079%

Ashikaga

0.193%

0.066%-0.006%

0.112%

2H14

1H15(Cases/JPY Bn)

2H15

1H16

2H16

IbarakiPrefecture

number

71

83

53

65

62

64

amount

17.1

32.0

18.3

12.6

10.4

9.0

Tochigi
Prefeture

number

62

86

71

59

66

78

amount

11.0

19.7

6.2

10.3

12.3

13.3

16

＊ Numbers of bankruptcies of enterprises with 10 million yen or more in net debt

● Ashikaga(JPY Bn)

1.91%

0.032%

1H14(sum of the two banking
subsidiaries)

Non-performing Loans
2.01%

0.120%<Reference (2)> Business Failures-1.4● JoyoJoyo

Bankrupt and substantiallybankrupt claims

2.31%(JPY Bn)

2.22%

1.61%

2.10%

2.04%

2.08%

Doubtful claims

115.0

111.6

7.0

5.6

81.1

77.2

107.0
6.0
74.8

104.5

98.2

7.0

7.0

71.3

69.7

Claims requiring monitoring

Non-performing loan ratio

98.4

94.9

91.4

88.7

92.4

6.8

5.3

72.5

72.0

4.9
66.1

6.0
65.4

7.5
69.1

26.8

28.7

26.1

26.0

21.3

19.0

17.5

20.3

17.1

15.7

Mar-15

Sep-15Mar-16

Sep-16

Mar-17Mar-15

Sep-15Mar-16

Sep-16

Mar-1718

Status of Group Companies

Business operation

JOYO

Sales

Company nameMain business activities

Ordinary Profit

YoY

YoY

The Joyo Lease

Leasing of machinery and equipment, claim acquisition

22,092 +1,993

The Joyo Securities

Dealing of securities, mediation,commission and substitution of trading of securities

2,181

Sale of softw are and contracting of calculating business

The JoyoComputer Service
The Joyo Industrial
Research InstituteConsulting, investigation and research(JPY Mil)Net Income*
YoY

1,024

+139

645

+13

+39

740

-37

509

-48

1,437

+59

89

+27

60

+20

606

-20

19

-31

12

-21

The Joyo Credit Guarantee

Credit guarantee of housing loans

3,766

+212

1,582

-454

1,033

-326

The Joyo Credit

Credit card services

1,198

+11

235

+1

206

+55

The JoyoBusiness Service

Agent in charge of administrative w ork for the Bank

786

+1

0

-1

0

-0

The Joyo Cash Service

Maintenance and management of the Bank’s ATMs and CDs

1,101

+4

1

-0

0

+0

The Joyo Equipment
Management

Maintenance and management ofoperational properties and equipment of the Bank

973

-5

283

+55

184

+96

34,144 +2,295

3,977

-301

2,654

-211

3,481

+298

1,575

-409

995

-277

648

+23

39

+28

37

+27

1,220

-213

2,969 +5,781

2,264+4,319

5,350

+109

4,583 +5,400

3,297+4,068

Total

Ashikaga

Ordinary Income

Ashikaga Credit Guarantee

Credit guarantee of housing loans

Ashigin Research InstituteConsulting, investigation and research

Ashigin Card

Credit card services
Total＊attributable to owners of the parent

Change of trade
names （Apr. 3, 2017）

Mebuki Lease
Mebuki Securities• Strengthen and deepen
the cooperation within
the newly establishedgroup in order toprovide one-stop
services with greater
added value[ Mebuki Lease ][ Mebuki Securities ] Changed its trade name from Joyo Lease to “Mebuki Lease” onApril 3,2017.
 Became a wholly owned subsidiary of Mebuki FG.
 Integrated the leasing business of Ashikaga Credit Guarantee into
Mebuki Lease. Ashikaga started to handle finance lease andinstallment sales provided by Mebuki Lease, as agency.

 Changed its trade name from Joyo Securities to “Mebuki Securities”
on April 3,2017.
 Number of branches of Ashikaga Bank which handle financial
products provided by Mebuki Securities as intermediaries increased
from 13 to 128.
 Meet diversifying investment needs through one-stop service.

19

Gain on Negative Goodwill (Reference)【Legal Form of the Business Combination】【Accounting for Business Combinations(Reverse Acquisition / Purchase Method)】

Share Exchange on October 1,2016

Gain on negative goodwill of ¥119.2bn is recorded in
extraordinary income

Ashikaga HD ： Parent company
Joyo Bank ： Wholly owned subsidiary

Joyo Bank ： Acquiring company
Ashikaga HD ： Acquired company【Image (As of October 1, 2016)】

Mebuki FG

Joyo Bank

Total Net Assets (consolidated) : ¥824.7bn
Joyo Bank’s
Total Net Assets(Consolidated Basis)

Total Net Assets(Consolidated Basis)¥582.0bn＋

Ashikaga HD
Fair Value of Net Assets(Consolidated Basis) （※１)¥242.7bn＝¥582.0bn
Capital Surplus¥123.5bn
Retained Earnings¥119.2bn(※2) Acquisition Cost of Ashikaga HD(※3) Gain on negative Goodwill

The difference between the acquisition cost and the fair value of net assets of Ashikaga HD is gain on negative goodwill.
Fair Value of Net Assets(※1)
This figure is equivalent to the fair valueof assets and liabilities of Ashikaga HD(after deduction of Ashikaga HD’s positive
goodwill on the balance sheet).

Acquisition Cost of Ashikaga HD (※2)
The acquisition cost in the purchase method, which isequivalent to the market capitalization of Ashikaga HD, isrecorded in capital surplus.
◇Ashikaga HD’s number of shares after adjustment / Exchange Ratio(1.17) ×Closing price of Joyo’s stock at the final trading date.

Gain on Negative Goodwill (※3)
Gain on the negative goodwill is recorded
in extraordinary income on the
consolidated income statement and inretained earnings on the consolidated
20
balance sheet.

Forecast for FY2017 (1)◇ For FY2017, projection of consolidated ordinary profit and that of consolidated net income* are¥58.5 bn (YoY +6.2 bn) and ¥40.0 bn (YoY -¥118.4 bn) respectively.

◇ Synergy effect of the business integration of ¥2.7 bn is expected for FY2017 (The businessintegration synergy for the second half of FY2016 was ¥0.9 bn).
＊Attributable to owners of the parent●Joyo + Ashikaga●Mebuki FG（JPY Bn)+ Non-banking Subsidiaries[Consolidated]
Items
InterimOrdinary Profit

Annual32.0

Net income
attributable toowners of the parent

58.5

22.0

40.0

Interim

Net income

Annual27.5

48.0

Consolidation Adjustments -¥8.0 bn●Joyo (non-consolidated)●Joyo + Ashikaga
Items

Items

[non-consolidated]
YoY
Interim
AnnualchangeBreakdown ofConsolidation Adjustments of -¥8.0 bn○Adjustments related to securities-6.4 bn○Interest expenses of subordinated loans, expenses, etc.
-1.6 bn●Ashikaga (non-consolidated)[non-consolidated]

Items

Interim

Annual[non-consolidated]

YoY
Change

Items

Interim

AnnualYoY
ChangeCore net businss
income

33.5

63.0

-3.9

Core net businss
income

17.0

32.5

+1.6

Core net businss
income

16.5

30.5

-5.5

Ordinary profit

37.0

64.0

-4.9

Ordinary profit

19.5

33.5

-2.1

Ordinary profit

17.5

30.5

-2.7

Net income

25.5

44.0

-6.8

Net income

13.5

23.0

-1.4

Net income

12.0

21.0

-5.4

21

Forecast for FY2017 (2) Sum of the two Banking Subsidiaries (Reference)
FY2016 Results

J+A

Joyo

(JPY Bn)
Gross business profit

FY2017 Forecast
Ashikaga

J+A

Joyo

YoY

Ashikaga

J+A
Change

ratio

Joyo

Ashikaga

ChangeChange

187.5

105.2

82.3

183.0

103.5

79.5

-4.5

-2.4%

-1.7

-2.8

Net interest income

153.4

85.1

68.2

146.5

82.0

64.5

-6.9

-4.5%

-3.1

-3.7

Net fees and commissions

27.6

14.3

13.2

31.5

17.5

14.0

+3.8

+13.9%+3.1+0.7

Net trading income andNet other business income

6.4

5.6

0.7

5.0

4.0

1.0

-1.4

-21.8%-1.6+0.2(Of w hich, gains/losses
on bond transactions)

5.6

5.8

-0.2

3.0

3.0

0.0

-2.6

-46.4%-2.8+0.2

Expenses

115.0

68.5

46.4

117.0

68.0

49.0

+1.9

+1.7%

-0.5

+2.5

Net business income(before general allow ance for loan losses)

72.5

36.7

35.8

66.0

35.5

30.5

-6.5

-9.0%

-1.2

-5.3

Core net business income

66.9

30.8

36.0

63.0

32.5

30.5

-3.9

-5.8%

+1.6

-5.5

Net transfer to general allow ance
for loan losses (a)

-0.4

-0.6

0.1

- 0.5

- 0.5

0.0

+0.0

-

+0.1

-0.1

Net business income

73.0

37.3

35.6

66.5

36.0

30.5

-6.5

-8.9%

-1.3

-5.1

Net non-recurrent gains/losses

-4.0

-1.7

-2.3

-2.5

-2.5

0.0

+1.5

-

-0.7

+2.3

Disposal of non-performing loans (b)

10.0

5.4

4.5

6.5

4.0

2.5

-3.5

-35.1%-1.4-2.0

Gains/losses related to stocks, etc

9.7

7.5

2.1

6.5

4.0

2.5

-3.2

-33.4%-3.5+0.3

Ordinary profit

68.9

35.6

33.2

64.0

33.5

30.5

-4.9

-7.1%

-2.1

-2.7

Extraordinary income/losses

-2.1

-0.8

-1.3

-0.7

-0.5

-0.2

+1.4

-

+0.3

+1.1

Net Income

50.8

24.4

26.4

44.0

23.0

21.0

-6.8

-13.4%-1.4-5.4

Credit related costs (a)+(b)

9.5

4.7

4.7

6.0

3.5

2.5

-3.5

-37.1%

-1.2

-2.2

57.7

27.4

30.3

47.5

26.0

21.5

-10.2

-17.8%-1.4-8.8[ Break Down ]-6.9〇Net Interest Income
Interest on loans and discounts-2.6Interest and dividend on securities+2.2
Interest on deposits (-)
+0.3
+3.5
Market borrowing, etc. (-)
Gains on cancellation of private
offering investment trusts-2.7〇Net fees and commissions
Assets under custody
Corporate services, etc.

+3.8
+2.4
+1.4

〇Expenses
Personnel
Non-personnel

+1.9
+0.8
+1.2

【Consolidated】
Net income attributable to ow ners of the parent[ ROE ]FY2017
Projection

FY2016[ OHR ]FY2016FY2017
Projection

Mebuki FG (consolidated)

-

4.6%

Joyo + Ashikaga

61.3%

63.8%

Joyo (non-consolidated)

4.1%

3.8%

Joyo (non-consolidated)

65.1%

65.8%

Ashikaga (non-consolidated)

8.3%

6.5%

Ashikaga (non-consolidated)

56.4%

61.5%

22

Capital Adequacy Ratio / Shareholder Return※Calculation method of risk weighted assets
Mebuki FG ： The fundamental internal rating based approach
Joyo ： The fundamental internal rating based approach
Ashikaga ： The standardized approach

Capital Adequacy Ratio● JoyoCapital adequacy ratio

1,500.0

12.60%

12.40%

12.00%

11.86%(consolidated)● Ashikaga
Capital adequacy ratio

9.01%

8.96%

9.01%

9.17%

250.2

261.0

274.7

299.0

440.0

435.8

451.5

457.5

Mar-14Mar-15Mar-16

Mar-17

10.62%

10%or higher●

1,000.0(consolidated)■ Ashikaga
Capital (consolidated)

500.0(JPY Bn)■ JoyoCapital (consolidated)(JPY Bn)

789.0● Mebuki FG
Capital adequacy ratio(consolidated)■ Mebuki FG
Capital (consolidated)

0.0
Mar-17Mar-18(JPY Bn)<Reference> Capital Adequacy Ratio without Temporary Measure (consolidated)

Mebuki FG
Joyo
Ashikaga

Mar-14 Mar-15 Mar-16 Mar-17
9.49%
11.35% 11.51% 11.17% 11.52%
8.67%
8.64%
8.77%
9.00%

Dividend Policy
Aim to continue stable dividend returns while taking into account ofboth the maintenance of solid capital levels for the future growth and theappropriate distribution of profits to our shareholders○ For FY2016, year-end dividend is ¥6.50 per share, including acommemorative dividend of ¥1.00 for the business integration.
○ For FY2017, annual dividend projection is ¥11.00 per share in line withthe earnings dividend policy (Dividend payout ratio estimate : 32.3%).

[ Status of Subordinated Loans ]・Mebuki FG: Subordinated loans¥40 bn (Call date: FY2018)¥30 bn (Call date: FY2020)

FY2016¥6.50(Incl. commemorative
dividend of \1.00)

AnnualDividend

FY2017
Interim
Dividend

Year-end
Dividend¥11.00

¥5.50

¥5.50

(Reference) Dividend payout ratio (FY2016) : 7.6%
Dividend payout ratio excluding an extraordinary factor * : 26.9%＊The later ratio is calculated as shown below:
Dividend (Interim dividend of Joyo and Ashikaga HD + Year-end dividend of Mebuki)
Consolidated net income (1st half of Joyo and Ashikaga HD+ 2nd half of Mebuki FG [ exc. gain on negative goodwill ])23

Synergy Effects on Statement of Income (1)◇ Synergy effect for the 2H of FY2016 (¥0.9 bn) surpassed the projection in the First Medium-Term
Group Business Plan and its forecast for FY2017 (¥2.7 bn) is in line with the plan.
◇ Integration measures are progressing steadily to achieve synergy effect target for after FY2018.
● Initial Plan

Synergy Effects
on the Statement of Income(JPY Bn)

Initial Plan
Approx. ¥15.0 bn

20

Amount*2H2016 Result15+ ¥0.9 bn

FY2017 Forecast+ ¥2.7 bn

progressed
accordingto the plan

10
Result0.9●

50＊ Before income tax

2H2016

Initialplan
2.7●

FY2017

Reversesynergy

Initial plan
Approx. 5.0 bn

Costreduction
Top line

FY2018FY2019(5)<First Medium-Term Group Business Plan>

Results for FY2016

FY2020

FY2021＜(Reference) Term of the next plan＞(JPY Bn)

Items

Results

Initial Plan

1. Loans
Corporate services

+0.39

+0.25

・ Increase co-financing, syndicate loans, mutual customer referral
・ Strengthen product line-up through joint development
・ Enhance solutions for corporate customers (Derivatives, etc.) ・Increase lease transactions

2. Financial assets under custody

+0.34

+0.40

・ Conduct campaigns ･ Share sales promotion know-how ・Utilization of Mebuki Securities
・ Commemorating the business integration, establish and sell an investment trust named “Two Dreams”

3. Securities

+0.05

+0.17

・ Joint investment

4. Others

+0.10

+0.03

・ Start dual currency deposit service (Ashikaga) ・Foreign currency deposit campaign
・ Promote cross boarder loans

5. Cost reductions

＋0.10

+0.02

・ Reduction of system related expenses
・ Reduction of other non-personnel expenses

6. Cost Increases / Reverse synergy

-0.08

-0.12

・ Lower transfer fee between both banks to the inter-branch rate, etc.

+0.91

+0.75

Total

Details―24

Synergy Effects on Statement of Income (2)Projection for FY2017（JPY Bn)

Items

Projection

Details

1. Loans (refer to p.26)
Corporate Services (refer to p.27)+1.5・ Enhance sales promotion utilizing wide-area network→ Co-financing, syndicate loans, mutual customer referral, growth Industries (medical and nursing, etc.)
・ Utilization of Mebuki Lease ・ Strategic personnel allocation to important areas
・ Joint development of online application housing loans ・ Joint promotion of female specific housing loans
・ Share know-how for non-face-to-face sales promotion (Unsecured loans)

2. Financial assets under custody(refer to p.27)+0.8

・Share financial product sales promotion know-how ・Utilization of Mebuki Securities
・Conduct campaigns

3. Securities+0.7

・ Invest in new categories combining investment experience of both banks ・ Joint investment
・Sophisticate management and investment measures through sharing analytical methods for monitoring and performance evaluations

4. Others+0.4

・Promote cross boarder loans
・Start dual currency deposit service (Ashikaga) ・Foreign currency deposit campaign

5. Cost reductions (refer to p.28)+0.3･ Share cost reduction know-how ・Improve price bargaining power through group-wide information sharing
・ Share know-how to improve branch operation efficiency ･ Integrate business operations center of both banks in Tokyo・ Joint issuance of notes and checks, and cash cards

6. Cost Increases / Reverse synergy-1.0

・ Lower transfer fee between both banks to the inter-branch rate・ Increase in depreciation expenses and running costs

Total

+2.7

―
＊ Figures in the following table are changes of the number of personnel

Personnel Relocation* (Regular Employee and Part-time Workers)
1. Reduction of administrative staff(Operational efficiency improvement)

Deallocate
Deallocate

2. Increase of sales promotion staff(Allocate resources to growth areas)

Allocate
Net (1+2)（people）

Resultfor 2H 2016

FY2017
Projection

Total

-42

-63

-105

・Improvement of operational efficiency ・Integrate business operations center of both banks in Tokyo
・Business Process Reengineering (BPR)

-

-38

-38

・Improvement of branch operation efficiency (Share know-how)
・Reconstruction of branch network in overlapping areas

＋17

＋64

＋81

・Increase personnel in new / important areas (refer to p.26 for information about FY2017)
・Enhance solutions for corporate customers

-25

-37

-62

・Increase personnel in important areas while controlling total number of employees

25

Sales Promotion Measures Loans / Strategic Personnel Allocation to important areas
Loans to Corporate Customers<Common Strategy>

Individual Customer Strategy(Synergy Effect Projection for FY2017 : +¥0.6 bn)(Synergy Effect Projection for FY2017 : +¥0.3 bn)◎ Strategic personnel allocation to new /important areas
Approx.+50 people<Corporate Customer Strategy>◎ Enhance Cooperative Sales
Promotion between the Two Banks
・ Enhance sales promotion basedon wide-area information through“Regional Collaboration Meeting”
set in ten areas.

◎ Wide-area Regional Revitalization
・ Promote migration to Ibaraki and Tochigi
・ Inter-Prefectural tourism promotion
・ Attraction of enterprises in corporation
with local governments
・ Wide-area business matching◎ Promote Unsecured Loans・ Share sales promotion know-how
・ Share know-how for non-face-toface sales promotion
・ Enhance cross-selling to housing
loan customers⇒ Increase unsecured loans

Miyagi⇒ Increase co-financing, syndicate
loans, mutual customer referrals◎ Cultivate Growth Industries(Medical and Nursing, etc.)

Fukushima◎ Promote Housing Loans
・ Joint development of online
application housing loans(for refinancing)・ Joint promotion of female specified
housing loans

・ Share know-how for supporting
medical institutions’ bond issuance・Co-financing on large-scalecrediting<Individual Customer Strategy>

Gunma

Tochigi⇒ Increase housing loans
Ibaraki

Saitama⇒ Actively finance for customers’
future growth

Tokyo

Chiba

Number of customers
whose main bank is Joyo / Ashikaga
Osaka(Make new loans of ¥ 390 bn in FY2017)◎ Utilize Employee-specific website
・ Ashikaga will start to make use of
the employee-specific website
from Oct. 2017

Over 29,000 companies(Source: TEIKOKU DATABANK)

26

Sales Promotion Measures (Corporate Services / Financial Asset under Custody)
Corporate Services(Synergy Effect Projection for FY2017 : +¥0.6 bn)

Financial Asset under Custody(Synergy Effect Projection for FY2017 : +¥0.8 bn)

Construct One-stop Sales Promotion System → Improve Comprehensive Financial Services
Expand Operations of Mebuki Lease

Expand Operations of Mebuki Securities

Ashikaga : Start to intermediate finance lease and introduce installment
sales service customers to Mebuki Lease (Apr. 2017)
Joyo : Start to intermediate finance lease (Jan. 2017)

Ashikaga : Expand intermediation to all 128 branches (from 13 branches)
Joyo : Intermediate private placement structured bonds[ Contract amount of lease transactions / Number of lease contractors ]【 Sales amount / Amount of financial asset under custody】

40.0
35.0
30.0
25.0
20.0

6,621

7,400

5,610
34.0
29.2

FY2015Result29.6

FY2016
Result150.0
8,000
Contract amount (JPY Bn) 130.0
110.0
6,000
90.0
4,000
Number of lease contractors 70.0
50.0
2,000

213.4

[ Fees and commissions ]
4,927

5,462

86.7

under custody (JPY Bn)

0.0
FY2016
Result

FY2017
Projection

Financial Asset under Custody・Conduct personnel exchange, and share sales promotion know-how(Ashikaga’s promotion system and training structure, etc.)
・Utilize ICT (Introduce robo-advisor named PORTSTAR)FY2017
Projection

Sales amount (JPY Bn)

Amount of fees andcommissions (JPY Mill)(Syndicate Loans,
Private Placement Bond,
M&A, Trade-related Services)

FY2016
Result100.0
Amount of financial asset

99.1[ Sales amount ]4,029

FY2015Result

200.0
116.0

Syndicate Loans, Private Placement Bond,
M&A, Trade-related Services
・Share sales promotion know-how
・Jointly hold seminars for customers and study meetings
・Mutual use of overseas representative offices

300.0

Sales amount (JPY Bn)

166.9

FY2015Result

FY2017
Projection

259.0

343.0

322.2

(Stock investment trust,
Insurance)

214.6
FY2015Result

FY2016
Result

FY2017
Projection

27

System Integration / Cost Reduction
System Integration[ Basic Policy ] Ashikaga will adopt a core system named “Chance” that has
been used by Joyo and some regional banks
 Aim to complete core system integration in Jan. 2020
≪System integration project was commenced in Apr. 2017≫

Cost Reduction(Synergy Effect Projection for FY2017 : +¥0.3 bn)
 Share know-how for cost reduction and cost effectivenessevaluation
 Share know-how to improve branch operation efficiency
 Integrate business operation center in Tokyo of both banks so
as to concentrate business operations further.
 Improve operating efficiency through ICT investment● System Integration Project● Cost Reduction Project Integrate core system, distributed systems, networks, etc.

 Reduction of recurrent expenses :⇒ Reduce development costs and running costs such as
maintenance costs⇒ Shift the costs to investment in new domains and systems
Improve customer services at low cost by utilizing ICT● Schedule of System Integration
 Core system integration is scheduled for Jan. 2020

 Synergy effect of ¥0.4 bn* that arises from system integration
is estimated for FY2021
 Depreciation of initial costs of the integration will becompleted and synergy effect will increase in FY2024＊Cost reduction synergy (¥1.8 bn) – depreciation of initial costs (¥1.4 bn)

Reduce purchase of operation system equipment, building andrepairs of branches, and utilize joint purchasing

Branches Reconstruct branch network in overlapping areas
Relocated three branches as branch–in-branch and integrated two
branches in the two banks(Apr.-Jun. 2017)

 Construct efficient branch network Share know-how to improve branch operation efficiency
 Utilize internet branch[ Distributed Systems ] Integrate170 or more out of around 280 distributed systems
between Joyo and Ashikaga

28

Progress of the Initiatives and Measures of the Integration－Results of the Day 180 Plan－Group
Companies
Individual
Customers
Framework

OthersCorporate
Customers

Campaign

Assetsunder
Custody

Action Plan

ChannelItems
Lowering transfer fee
between both banks
to the inter-branch rate
Shared use of ATMs
for deposits
Securities
Leasing

Joint fundDetails
Lower the fee for transfer between the two banks to theinter-branch rate for teller transactions, ATM transactions,and internet banking transactions.
Make it possible to deposit money using a cash card
issued by either bank at the other bank's ATMs.
Start to intermediate financial products carried by Joyo
Securities at 13 branches of Ashikaga Bank to which fulltime financial consultants belong.
Ashikaga Bank begins to offer Joyo Lease’s auto leaseproducts.
Commemorating the business combination, establish andsell an investment trust named "Two Dreams" whichinvests in companies related to Ibaraki and Tochigi
Prefectures.

Investment product campaign

All customers have a chance to win local specialty items
by lottery if they obtain investment products worth at least
200,000 yen or start to accumulate investment trusts.

Car loans andeducational loans campaign

Preferential Interest Rates

Internet banking campaign
for corpotrate customers

Exemption of activation fee and three months of monthly
fees for new subscribers.

Business seminar

Members of either bank’s reserch institute can takeseminars of the other reserch institute at preferential
rates.

Deploy "liaison officers" at both banks' headquarters andestablish "Regional Collaboration Meeting" at 10 areas
in order to enhance the collaboration between Joyo Bank
Regional collaboration meeting and Ashikaga Bank on introducing customers and cofinancing
Liaison officer

Results (Oct. 2016 - Mar. 2017)(Figures in parentheses are YoY changes)
Sales amount of the whole group
Sales amount\78.2bn (+41.6bn)
o/w Foreign bonds\62.3bn (+36.5bn)
Number of referrals to Joyo Lease
3,258(+1,401)
Results of the whole group
Sales amount\20.2bn(Attained 101.3% of our target of \20bn)
Number of sales
9,117
Sales amount (Campaign performance)
Investment trust\28.2bn(+3.6bn)
Foreign currency deposits \2.3bn(+1.4bn)
Accumulation service
4,206(-394)
Preliminary application
Car loans\20.3bn / 10,958 loans
Educational loans \11.4bn / 4,309 loans
Amount of loans madeCar loans\7.7bn / 4,515loans
Educational loans\5.5bn / 1,990loans
New contracts of the whole group
New subscribers
3,642(+781)
Optional services
1,417
Mutual participants 52 from 33 companies

Co-financing\2,349mil /13borrowers
Syndicate loans\4,405mil /25borrowers
Number of referrals \1,760mil /24borrowers
Total\8,514mil /62borrowers

29Day180 Plan / Other Initiatives and Measures【Regional Revitalization】
Food Exhibition
In Mito City

Food BusinessMeeting

MebukiMebuki Financial Group

Business Award

Manufacturing
Business Forum2017

in Utsunomiya City
• Product development• Sales channel cultivation• Test marketing• Sales channel development＜refer to p.31＞＜refer to p.31＞

Conducted on Oct. 12, 2016

Conducted on Nov. 22, 2016＜refer to p.32＞

Regional
Revitalization Fund＜refer to p.33＞• Support business meetings
through technical proposal
booklet and panel exhibition＜refer to p.34＞
Conducted on Feb. 22, 2017

【Regional Interaction】【Organizational Integration (Personnel Exchange)】
Joint-Training

Economic Lecture (held 8 times in the 2H FY2016)
Introduced Mebuki FG in the main cities for both banks at the time of
the lectures (Presidents of both banks took part in the lectures in theunderlined cities below).

•【Venue】 Tochigi Pref.: Utsunomiya, Ashikaga
Ibaraki Pref.: Mito, Tsukuba, Hitachi, Kashima, Shimodate
Fukushima Pref.: Koriyama•

Regional Collaboration Meeting

Held rank-based trainings inEstablished “Regional Collaboration

which 1,000 employees

Meeting” at 10 areas to enhance

participated.

collaboration between Joyo Bank andShared each other’s training

Ashikaga Bank on introducing

program.

customers and co-financing.

【Other Initiatives and Measures】○Integration of overlapping branches： Integrate four of Joyo’s branches into two in Ustunomiya city and Moka city (on Apr. 3, 2017)○Operational efficiency improvement: Shared card issuing process, which reduces cost by approx. ¥18 mil per year
○Business alliance with crowd funding service “Makuake”(Ashikaga) First deal completed (Joyo) Developed affiliated loan

30

Initiatives of Day 180 Plan －Local Products Support Project－ Held “Food Exhibition in Mito City” and “Food Business Meeting in Utsunomiya City” for food related business
operators.
 Dividing the value chain of local products from development to sales into four stages below, provided seamlesssupport through appropriate measures depending on the stage.
1.Product Development

2.Test Marketing(Improvement of Products)

3.Sales Channel Cultivation

Food Exhibition in Mito City

Food Business Meeting in Utsunomiya City

Date

October 12, 2016

Place

Mito Plaza Hotel (Mito, Ibaraki Pref.)Exhibitors

100 companies

Evaluators

505＜Contents＞• Food related business operators exhibited their products and international
students and housewives experienced the products and evaluated them.
• Evaluation based on taste, price, package and so forth.
• Support food related operators’ future product development and test marketing.

Venue

Evaluators

4.Sales Channel Development

Awards
Ceremony

Date

November 22, 2016

Place

Marronnier Plaza (Utsunomiya, Tochigi Pref.)Exhibitors

327 companies (Tochigi: 142, Ibaraki: 94)

Visitors

Approx. 3,000

Meetings Held

451

＜Contents＞• Exhibition where selling enterprises promote their products• Business meetings which require reservation• Support food related business operators’ sales channel expansion• Number of buyer enterprises that participated: 148

Exhibition of Prize-winning Productsof the Food Exhibition

Venue

Business
Meeting31

Initiatives of Day 180 Plan －Mebuki Business Award－ In commemoration of the establishment of Mebuki Financial Group, each bank’s business award was integrated
together and the first “Mebuki Business Award” is being held.
 Ingenious business ideas latent in both banks’ vast business territory are gathered and the best entries will bepresented with awards.
 After the award, consistent support is provided, including financial support such as formulating business plans andlaunching new businesses through financing and so forth.
Preliminary Judging○Each bank collects and evaluates plans（Document Screening / External Evaluation）

Final Judging

Final Judging Ceremony (May 15, 2017)○Grand Prix, Excellence Award, and Special Award（Presentation / External Evaluation）
TargetBusiness
Categories

1.Manufacturing 2.Agriculrure / 6th Industrialization 3.Environment / Energy 4.Medical/ Nursing Care 5. Advanced Technologies 6.Overseas Expansion 7.Regional
Revitalization, etc. 8.New Business, etc.

Application
PeriodFrom December 1, 2016 to January 31, 2017

Judging
Process

Preliminary Judging： Document Screening
Final Judging: Presentation

AwardsGrand Prix：1 plan（¥3mil）, Excellence Award：Several（¥1mil）,
Special Award： Mebuki Award, Hitachi Award, Encouragement Award： Several

Sponsors

Sponsors： Mebuki Financial Group, Joyo Bank, Ashikaga Bank
Co-sponsors： Joyo Industrial Research, Ashigin Research Institute

Number ofApplicants

646*
Joyo 344
Ashikaga 302＊Record high32

Initiatives of Day 180 Plan －Mebuki Regional Revitalization Fund－【Invest】【Invest】

Mebuki Regional
Revitalization Fund
Sompo Japan Nipponkoa
Insurance

Fund Size: ¥2 bn【Invest / Manage】

Outline of the Fund
Establishment: November 14, 2016

Joyo Industrial
Research【Management Support】

Ashigin ResearchInstitute

Its investment limit
is planed to be increased
based on the possibilities of investment
in new businesses

Investment Period: 10 years
Methods: Capital Contribution, etc.
Structure: Investment Business Limited
Partnerships

Businesses operators
who contribute toindustrial developmentin
food, agriculture,and tourism sectors

Food

Agriculture

TourismAmount / Number of deals¥1.2 bn / 4 deals (as of May12, 2017)(Invested Deals)
1. World Farm (Tsukuba city)
Date: Jan. 31, 2017 / Amount： ¥100 million
2. HATAKE Company (Tsukuba city)
Date: May. 31, 2017 / Amount： ¥200 million
3. SS Food International (Ichikawa city)

Date: Apr. 25, 2017 / Amount: ¥200 million
4. Hayakawa Holdings (Ashikaga city)
Date: Apr. 28, 2017 / Amount: ¥700 million＜Investment Target＞
・Operators who contribute to industrial development in food, agriculture, and tourism sectors(including agricultural corporations)・Prize winners of Mebuki Business Award etc.
33

Initiatives of Day 180 Plan －Manufacturing Business Forum－ A record number of 314 companies, including Ashikaga Bank’s 72 customers, exhibited at this year’s forum （including 11 overseas
companies）
 Distributed English version of the technical proposal booklet for the first time and coordinated business meetings with overseas
companies.
 With the full cooperation of SUBARU CORPORATION

・ Exhibitors: 314 companies(Gunma Manufacturing Division), set up exhibition booth of・ Visitors: 850 companies / Approx. 2,000 people

seven Tier 1 manufacturers.

・ Business meetings based on technical proposal

Conducted demonstrations which can offer clues to manufacturing→ Sango Co., Ltd. and Sango Kanto Co., Ltd. exhibited laborsaving machines which are used in the companies’ factories.

booklet: 390 meetings
・ Business meetings between Joyo Bank’s customers
and Ashikaga Bank’s customers: 90 meetings→ A venture company spun off from The Industrial Technology
Research Institute of Taiwan demonstrated a walking support robot.
 Three prize-winners of Joyo Business Award conducted presentations.

＜Technical proposal booklet (English Ver.)＞＜SUBARU CORPORATION’s booth＞＜Labor Saving Machines＞
34

Step-up 180 Plan －For Individual Customers－
Support Customers’ Asset Building<For the First Investment> First Investment Campaign (Jun.-Dec. / under planning)
Reward customers who open a new account, andpurchase financial products (¥100,000 or more) or start anaccumulation service for investment trusts (¥10,000 per
month or more) with prizes.

Support Customers’ Housing Acquisition<Housing Loans> Housing Loan for Women (Apr.-) A maximum two-year grace period of principal payment
during maternity and child care leave period Exemption of prepayment fee
 Exemption of group credit life insurance premium Online Application Housing Loan (May-)<For Additional Investment>
 Mebuki Securities (Apr.-)Ashikaga Bank started to intermediate financial products
carried by Joyo Securities at its all branches.

 Foreign Bond Campaign (Apr.-Jun.)
Reward customers who purchase foreign bonds directlyfrom Mebuki Securities or from the securities company
through any of Mebuki’s banking subsidiaries with gift
certificate or local specialties.

<Others>
 Mebuki Securities Founding Commemoration
Seminar (Apr.-Jun.)
 Foreign Currency Deposit Campaign(Jun.- Sept. / under planning) Preferential interest rates
 Exemption of prepayment fee
 Exemption of group credit life insurance premium

Unsecured Loans Motivates students to go to universities
located in Ibaraki and Tochigi Prefecture
Prevent student drain and increase student migration fromother prefectures as measures against population decline One-year Anniversary of Mebuki FG(Sept. 2017-Apr. 2018 / under planning)

Preferential interest rates for housing/educational loans
35

Step-up 180 Plan －For Corporate Customers－<Support for Manufacturers>
 Manufacturer Training Workshop (Aug.-Sept.)
 Inform KAIZEN activities conducted by large companies
to our customers for productivity improvement.
 Achieve SMEs’ improvement of production managementand development of human resources through theworkshop.

 R&D Meet-up in Utsunomiya and Mito (May-Jun.)
 Provide opportunities for applicants to have discussions
with researchers of universities and research institute,concerning certain themes.
 Promote information exchange among the participants.

 Rebuild support structures for start-ups andsecond start-ups
 Construct a support structure for university-originatedventure businesses.
 Support Mebuki Business Award applicants to launch new
businesses. Investment limit of Mebuki Regional
Revitalization Fund is planed to be increased based on
the possibilities of investment in their businesses.
(Present Investment limit : ¥2.0 bn / Investment amount : ¥1.2 bn)<Support for Agricultural Producers> Collaboration on Agri-Food Matching (Sept.) Joyo conducted a business matching event in Tsukuba
city to match agricultural producers and food processing
operators on a trial basis (Feb.)
 Another matching event is being planned, broadening its
area, which newly includes Tochigi Prefecture, andextending its scope to producer associations andmunicipalities.

<Support for Overseas Expansion>
 Cooperation on export support services (Mar.-) Cooperation with Japan Halal Business Association(Apr.-) Overseas business convention, businessnetworking, seminar (Jun.-)<Matching Event for Experienced Retirees and Local Businesses>
・Under the cooperation of Kanto Bureau of Economy, Trade and Industry and regional financial institutions, conduct matching events tomatch companies experiencing various management issues, and retirees and those who are just before their retirement.
・Through matching companies experiencing management issues, such as development of new products, sales channel expansion, andexperienced retirees, help the companies resolve management challenges.

36Inquiries :Mebuki Financial Group, Inc. Corporate Planning Department
TEL+81-29-300-2869 or +81-29-300-2603

E-mailir@mebuki-fg.co.jp

URL

http://www.mebuki-fg.co.jp/

This document has been prepared for information purposes only and does not form part of a solicitation to sell or purchase any securities.
Information contained herein may be changed or revised without prior notice. This document may contain forward-looking statements as tofuture results of operations. No forward-looking statement can be guaranteed and actual results of operations may differ from those projected.

37