Governance Supporting Our Proactive Human Resources

Corporate GovernanceCorporate GovernanceWe believe that the basis for governance is a constant pursuit of the best possible way to maximize
the value we offer all our stakeholders in order to achieve the Nanto Mission’s goals and to play an
indispensable role in regional development.

Corporate Governance Structure
The Bank’s Board of Directors comprises 12 members, seven corporate directors (of which, one Audit and Supervisory Board
member) who are familiar with the Group’s operations and five outside directors (of which, two Audit and Supervisory Board
members) who have extensive experience and knowledge outside the Bank. This structure was adopted to separate supervisionfrom execution and to ensure that the Board comprises members with diverse knowledge, experience, and capabilities.
In addition, the supervisory function of the Board of Directors has been strengthened by establishing the Nomination andCompensation Advisory Committee. The Committee comprising the President, Vice President and five outside directors is chairedby an outside director, and includes knowledgeable outside experts as observers to enhance the independence, objectivity, andtransparency of its decision-making.

Transition to a bank with an Audit and Supervisory Committee
By transitioning to a bank with an Audit and Supervisory Committee, we have strengthened our auditing and supervisory functions andaccelerated our decision-making, while seeking to achieve sustainable growth and enhance our corporate value over the medium to long term.
Structure

General Meeting of Shareholders

Audit andSupervisory Committee

Board of Directors

Nomination andCompensation Committee

Directors other than Audit andSupervisory Board members

5 outside directors
including the Chairperson(As of end June 2023)

Directors who are Audit andSupervisory Board members

Opinion-exchange session

Management Meeting

Internal Audit Division

Divisions/Departments

History of Corporate Governance

2023
2022

Transition to a bank with an Audit andSupervisory Committee structure

Ratio of outside directors 40%
Appointment of female outside directors promoted

2021
Director Skills Matrix formulated and disclosed
Sustainability Policy established
Target for strategic shareholding reduction announced
Plan using stock options as stock-based compensation discontinued
Performance-linked stock compensation plan introduced

2020
Nomination and Compensation Advisory Committee established2016
Executive Officer System introduced
Evaluations of Board of Directors’ effectiveness initiated48 Nanto Report 2023, the integrated report of Nanto Bank

About Nanto Bank

Our Shared Vision

Governance Supporting Our
Developing Human
Value Creation by the
Resources for Value Creation Group’s Human Resources Proactive Human Resources

Consolidated Financial
Statements

Governance

PerformanceDirector Skills Matrix

Director and Managing Executive Officer

Kouji Honda

Director and Managing Executive Officer

Takao Handa

Director and Audit and Supervisory Board Member

Experience inother industries

Ryuichiro Funaki

Human resources
development

Takeshi Sugiura

Director and Senior Managing
Executive Officer
Director and Managing Executive Officer, General
Manager, Sales Promotion Headquarters

Human resources
planning

Kazuya Yokotani

Sales promotion

Vice President (Representative Director)

Sales planning

Satoshi IshidaMarket operations

President (Representative Director)

IT & digital

Takashi Hashimoto

Examination

Current position in the Bank

Finance &accounting

Name

Risk management

Management
strategy[Full-time directors][Outside directors]
Name

Current position in the Bank

Hidetaka Matsuzaka

Outside Director

Kozue Nakayama

Outside Director

Takashi Nishimura

Outside Director

Shuhei Aoki

Outside Director
Audit and Supervisory Committee Member
Outside Director
Audit and Supervisory Committee Member

Yoshihiko Kasuya

Regional economy

Economic andfinancial environment

Organization &governance

Finance & AccountingSelection of outside directors
Reasons for appointment and expected contributions

Outside Director

Hidetaka Matsuzaka

Outside Director

Kozue Nakayama

Outside Director

Takashi Nishimura

Outside Director
Audit and Supervisory
Board Member

Shuhei Aoki
Outside Director
Audit and Supervisory
Board Member

Yoshihiko Kasuya

Mr. Matsuzaka was appointed to the position of outside director because of his extensive experience and broad
knowledge of corporate management and organizational operations as well as for his large fund of knowledge thatenables him to supervise management accurately and fairly, and to express his opinions on management froma broad perspective. We expect him to draw on his diverse management experience in corporate operations tosupervise the Bank’s management from an independent perspective, free from the conventional boundaries of afinancial institution.
In addition to her extensive experience as a corporate executive, Ms. Nakayama currently serves as outside director
and outside corporate auditor for three listed companies. She was appointed to the position of independent
outside director owning to her wealth of knowledge and deep insight. She is expected to apply her diverse range
of knowledge and experience to contribute to regional development and to provide advice on the Bank’s efforts topromote diversity, as well as to supervise the Bank's management from an independent, objective standpoint.
Mr. Nishimura was appointed to the position of outside director based on his extensive corporate management
experience in the railroad, real estate, and hotel industries, as well as on his broad knowledge and profound insight
into the issues of corporate organizational management and governance. The Bank expects him to utilize his extensive
management experience in and expansive knowledge of non-financial business entities to provide advice that contributes
to regional development and to supervise the Bank’s management from an independent, objective standpoint.
Mr. Aoki has a wealth of knowledge and experience in every aspect of the financial industry, which has prepared him
to supervise management accurately and fairly in such ways as by sharing his opinions with management from a
broad perspective. We expect him to fulfill his duties as an outside director by drawing on his extensive knowledge
and experience in the financial field to provide accurate advice, and to supervise the Bank’s management from an
independent, objective standpoint.
Mr. Kasuya’s appointment to the positions of outside director and Audit and Supervisory Board member was made dueto the wide-ranging knowledge and superior insight he has acquired through his experience in both financial institutions
and non-financial business enterprises. He is expected to use his diverse experience and knowledge to supervise theBank’s management from an independent, objective standpoint as a member of the Audit and Supervisory Board.

Nanto Report 2023, the integrated report of Nanto Bank

49

Governance Supporting Our Proactive Human Resources

Corporate GovernanceCorporate GovernanceOperational status of the Board of Directors
The Board of Directors is responsible for making important decisions promptly in a highly uncertain management environment aswell as for supervising management. To enhance the effectiveness of these functions, the Board seeks to improve its deliberations
by explaining the matters to be deliberated, particularly to outside directors, in advance of meetings of the Board of Directors.
In addition, the Board of Directors holds opinion exchange meetings to discuss important management issues and mediumto long-term themes after resolutions are made and reports compiled. The directors engage in lively discussions at these meetings,
especially the outside directors, who offer their opinions from various perspectives.

Number of Board of Directors meetings and main subjects of discussion (April 2022 - March 2023)
Board of Directors Meeting Chairman President

Times convened 13

Main items for deliberation• Transition to a bank with an Audit and Supervisory Committee• Review of strategic shareholdings• Action plan for the current fiscal year based on the Management Plan
• Progress in construction of the new main building
and monitoring of progress• Other matters required by laws and regulations (closing of accounts, convening of the Ordinary
General Meeting of Shareholders, selection of representative directors and directors with special titles)• Initiatives to address sustainability issues (e.g., addressing climate change)

Opinion-exchange session

Chairman President

Times convened 5

Main issues discussed• Action Plan for FY2023• Initiatives to revitalize local industry in Nara Prefecture• Bank’s issues from the perspective of industry trends andits policies with respect to the future

Number of Nomination and Compensation Advisory Committee meetings and main advisory matters (April 2022 - March 2023)
Nomination and Compensation Committee

Times convened 7

Main consultation contents• Consideration of the Bank’s governance structure• Placing selection of candidates for the
Board of Directors on the agenda• Consideration of the qualities and capabilities required of directors and updating of the skills matrix table• Setting of targets for executive compensation and performance-linked stock compensation for the current fiscal year

Outside directors’ support system•	We provide outside directors with various types of information they need to perform their duties and contribute to discussions at Board meetings. The Bank also arranges timely training andseminars to share relevant knowledge.
•	The full-time Audit and Supervisory Board members provide the outside Audit and Supervisory Board members with information concerning the status of the Bank, including reports fromthe Internal Audit Department and Risk Management Department, to facilitate communication and cooperation with members of the Audit and Supervisory Board.

Compensation for directors
The Bank has established the following policy for determining the content of compensation, etc., for each individual director(“determination policy” hereinafter).

Basic policy he compensation system is designed to encourage directors (excluding directors who are members of the Audit and Supervisory
T
Board. Same hereafter) to conduct management from a medium- to long-term perspective, and to enhance their awareness of
their duty to contribute to improving the Bank’s performance and increasing its corporate value over the medium to long term. As
a basic policy, compensation for each director shall be set at an appropriate level determined by the Board of Directors once a
year following deliberation and reporting by the Nomination and Compensation Advisory Committee.
More specifically directors’ compensation comprises fixed monthly compensation and performance-linked, stock-based
compensation, while compensation for outside directors, whose responsibility is limited to a supervisory function, comprises only
monthly compensation determined in consideration of their duties.

Policy on determination of individual monthly remuneration (monetary) he monthly remuneration for the Bank’s directors shall be a fixed monthly amount, which shall be determined comprehensively inTaccordance with the “Remuneration Regulations for Directors and Corporate Auditors,” taking into consideration their position, thelevel of other companies’ compensation, the Bank’s performance, and the level of employees’ salaries.
The total remuneration shall be no more than 400 million yen per year (including the amount of not more than 80 million yen foroutside directors), subject to approval by the General Meeting of Shareholders.

50 Nanto Report 2023, the integrated report of Nanto Bank

About Nanto Bank

Our Shared Vision

Governance Supporting Our
Developing Human
Value Creation by the
Resources for Value Creation Group’s Human Resources Proactive Human Resources

Consolidated Financial
Statements

Governance

Performance ompensation for directors who are also Audit and Supervisory Board members shall be “monthly compensation” paid as fixedC
remuneration according to their duties from the perspectives of increasing their independence and further strengthening corporate
governance. The monthly remuneration shall be determined through discussions by the Audit and Supervisory Committee inaccordance with the “Remuneration Regulations for Directors.” The total amount shall be no more than 100 million yen per year,
subject to approval by the General Meeting of Shareholders.

Policy on determination of the details and methods of calculating the amount and number of
performance-linked stock compensation (non-monetary compensation)
 he purpose of performance-linked, stock-based compensation is to clarify the linkage between directors’ compensation and the Bank’sTbusiness performance and stock value, and to increase the directors’ awareness of the need to contribute to improving the Bank’sbusiness performance and increasing its corporate value over the medium to long term.
The Bank will adopt a structure known as a “Board Incentive Plan (BIP) Trust” (“BIP Trust” hereinafter) as performance-linked, stock-based
compensation for the three terms from the fiscal year ended March 31, 2022 to the fiscal year ended March 31, 2024.
The BIP Trust is an incentive plan for directors under which shares of the Bank and an amount equivalent to the cash proceeds from theconversion of the Bank's shares are delivered or paid to directors in accordance with their position and the degree to which indicatorssuch as performance targets have been achieved.
In accordance with the “Officer Compensation Regulations” and the “Share Delivery Regulations Concerning the Officer Compensation
BIP Trust” established by the Board of Directors, “fixed points” corresponding to the directors’ positions and “performance-linked points”
ranging from 0% to 200%, depending on the achievement of the Bank’s performance targets for each fiscal year, are assigned at a set
time each year.
Points are accumulated annually, and one point is allocated as one share of the Bank’s stock in proportion to the accumulated points atthe time of retirement (including cases in which a director who is not a member of the Audit and Supervisory Board retires and is later
appointed as a director who is a member of the Audit and Supervisory Board).
“Performance-linked points” for each fiscal year are based on a target value for profit from customer services (consolidated basis) for theyear in question as a means of motivating the recipients to achieve the Bank’s goals of “securing stable, positive profit from customer
services” and “maximizing the Group’s earnings” as stipulated in the Management Plan.
The maximum amount contributed by the Bank is a total of 100 million yen (the total number of the Bank’s shares issued is 84,000
shares) for three fiscal years.
< Formula for calculation of allotted points>
Fixed points = Base amount of stock-based compensation by position (*1) × 2/3 ÷ Assumed stock price (*2)
Performance-linked points = Base amount of stock-based compensation by position × 1/3 ÷ Assumed stock price x Performance-linked coefficient*1 Total amount of compensation for each position to be paid under the scheme when the performance achievement rate is 100%.
*2 Average acquisition unit price of the Bank's shares initially acquired by the BIP Trust (rounded down to the nearest whole number)Standard amount of stock compensation by rank
Position (*3)
President (Representative Director)
Vice President (Representative Director)
Director and Senior Executive Officer
Director and Managing Executive Officer(Unit: thousand yen)Standard amount of stock-based
compensation by position (*1)
6,156
5,472
4,275
3,762

Breakdown
Fixed portion
4,104
3,648
2,850
2,508

Performance-linked portion
2,052
1,824
1,425
1,254

*3 The position at the beginning of the period subject to payment (from the day following the Annual General Meeting of Shareholders of the previous year to the date of the Annual General
Meeting of Shareholders of the current year) is applied.

Target value
Profit from customer transactions (consolidated): 5.6 billion yen

Performance-linked coefficient(Unit: thousand yen)-0.2 billion yen to -0.1 billion yen

Performancelinked coefficient80%+0.9 billion yen to +1 billion yen

190%+0.3 billion yen to +0.4 billion yen

130%-0.3 billion yen to -0.2 billion yen

70%+0.8 billion yen to +0.9 billion yen

180%+0.2 billion yen to +0.3 billion yen

120%-0.4 billion yen to -0.3 billion yen

60%+0.7 billion yen to +0.8 billion yen

170%+0.1 billion yen to +0.2 billion yen

110%- 0.5 billion yen to -0.4 billion yen

50%+0.6 billion yen to +0.7 billion yen

160%

0.0 billion yen to +0.1 billion yen

100%

0.5 billion yen or less0%+0.5 billion yen to +0.6 billion yen

150%- 0.1 billion yen to -0.0 billion yen

90%

Deviation from target+1 billion yen

Performancelinked coefficient200%

PerformanceDeviation from target
linked coefficient+0.4 billion yen to +0.5 billion yen
140%

Deviation from target

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51

Governance Supporting Our Proactive Human Resources

Corporate GovernanceCorporate Governance
Policy on monthly remuneration and performance-linked stock compensation as a percentageof remuneration, etc., for individual directors
 he Bank shall determine the ratio of remuneration according to each individual director’s classification to ensure that the level ofT
remuneration encourages directors to conduct management from a medium- to long-term perspective and with heightened awarenessof the need to contribute to improving the Bank’s performance and to increasing its corporate value for the foreseeable future.
Specifically, monthly remuneration shall be fixed remuneration, and the ratio of performance-linked stock compensation shall be 10% to
20% of the annual total monthly remuneration, depending on the degree to which target values are achieved.

Matters concerning determination of individual directors’ remuneration, etc.
In its efforts to ensure objectivity and transparency in the procedures employed to determine remuneration and enhance corporate value,
the Bank has established the Nomination and Remuneration Advisory Committee, of which the Chair and a majority of the members areoutside directors.
Individual directors’ compensation is determined by the Board of Directors in accordance with the “Regulations on Directors’Compensation,” based on deliberations and reports of the Nomination and Compensation Advisory Committee.

 otal compensation by executive officer category, total compensation by type ofTcompensation, and number of executive officers eligible for compensation, etc.
Current fiscal year (April 1, 2022 to March 31, 2023)

Executive officer classifications

Number of
executive
officers

Total remuneration, etc.
(million yen)

Directors (excluding outside directors)

6

216

181

35

Corporate auditors (excluding outside
corporate auditors)

2

38

38

—

Outside directors and outside auditors

6

39

39

—

Performance-linked compensation(non-monetary compensation)

Fixed remuneration(Notes) 1. The Bank has introduced performance-linked stock compensation for directors. Performance-linked remuneration in this table is theamount recorded as expenses for the fiscal year under review.
2. The Bank’s consolidated business profit from customer transactions, which is the basis for calculating performance-linked remuneration,
was 5.89 billion yen (an increase of 3.19 billion yen compared to the target) for the fiscal year under review, compared to the target of 2.7
billion yen.
3. No employee salaries were paid to directors who also serve as employees.
4. There is no director whose total amount of remuneration, etc., on a consolidated basis is 100 million yen or more.
5. The above compensation is for the fiscal year under review, and the Bank has transitioned to a bank with an Audit and Supervisory
Committee system following the resolution to amend the Bank’s Articles of Incorporation at the Annual General Meeting of Shareholders
held on June 29, 2023.

52 Nanto Report 2023, the integrated report of Nanto Bank

About Nanto Bank

Our Shared Vision

Governance Supporting Our
Developing Human
Value Creation by the
Resources for Value Creation Group’s Human Resources Proactive Human Resources

Consolidated Financial
Statements

Governance

Performance

Evaluation of the Board of Directors’ effectivenessSince fiscal 2016, the Bank has followed a policy of conducting an annual analysis and evaluation of the effectiveness of the Boardof Directors.
The table shows the progress made in addressing issues identified in the previous year, as well as the methods and results ofthe evaluation of the Board of Directors’ effectiveness in fiscal 2022.
Progress in addressing issues identified in the previous year’s evaluation of theeffectiveness of the Board of Directors(1)	Deeper discussions at Board of Directors meetings on strategies that willcontribute to medium- to long-term improvement of corporate value
Action plans, new businesses, etc., were discussed at several Board of
Directors meetings as well as at opinion-exchange meetings.
(2)	Further review of the operation of the Board of Directors meetings to deepen
discussion
Representatives of the divisions responsible are also present at the
preliminary explanatory meetings for outside directors to explain theexecutives’ views, which provide the basis for discussion at Board of
Directors meetings, and also the reasons for their proposals.
(3) Enhancement of executives’ training to revitalize the Board of Directors
In accordance with the Annual Plan, theme-based study sessions suchas “Diversity and Promotion of Women’s Activities” and “Trends in Cyber
Security” were extended to the general manager level.
Evaluation method
In fiscal 2022, the Bank conducted an evaluation of the effectiveness of the Bank’s
Board of Directors as discussed below based on the results of a questionnaire
compiled and analyzed by an external consultant.
(1)	In February 2023, a questionnaire was sent to all the directors (10) and all the
corporate auditors (4) regarding the composition, operation, and deliberationsof the Board of Directors (“FY2022 Questionnaire”).
(2)	At a Board of Directors Meeting on May 12, 2023, the results of thequestionnaire and the external consultant’s analysis were reported.
(3)	At a Board of Directors meeting on June 17, 2023, the Bank finalized its
evaluation of the effectiveness of the Board of Directors for fiscal 2022 upon
discussion of the Bank’s issues and further initiatives.
The main items included in the FY2022 Questionnaire are as follows. Each questionin the questionnaire is designed to be rated on a 5-point scale. Starting in thecurrent fiscal year, comments must be included for each main item.

I. Composition and operation of theBoard of Directors (5 questions)II. Management and sales strategies(10 questions)III. Corporate ethics and risk
management (3 questions)IV. Dialogue with shareholders (4questions)
V. Nomination and compensation ofmanagement (3 questions)VI. Improvement of previous year’s
issues (1 question)

Summary of FY2022 Questionnaire analysis and evaluation results
The Board of Directors shared and discussed the results of the external consultant's
analysis of the FY2022 Questionnaire, and confirmed that, on the whole, the Bank's
Board of Directors operates appropriately and ensures effectiveness, with examples
including mention of certain issues that had been addressed in the previous year.
We recognize, however, that there is room for further improvement, including
addressing the issues raised in the previous year.
<Issues identified in the Questionnaire results>
Formulation and monitoring of management strategies
Promotion of DX and the SDGs
Investment in human capital and development and execution of humanresources strategies based on the Management Plan
Atmosphere of Board meetings and multifaceted discussions
Director training

Future Initiatives
As a result of discussions held by the Board of Directors concerning issues identified
from the results of the FY2022 Questionnaire, the following initiatives will be
implemented in fiscal 2023 to enhance the effectiveness of the Board of Directors
further.
<Initiatives for fiscal 2023>
 iscussion at Board of Directors’ meetings about strategies and other mattersDsupporting sustainable management
Further improvement of Board of Directors’ operations to deepen discussions
Enhanced training for Board members to revitalize the Board of Directors

Message from the Audit and Supervisory Committee Chairman
With the transition to a bank with an Audit and Supervisory Committee, I will have voting rights at Boardof Directors meetings as an Audit and Supervisory Board Member as well as the right to comment on
the appropriateness of management in the area of auditing. This structure will strengthen the Bank’s
supervisory functions and enhance its corporate governance while also contributing to further soundnessof its management and corporate value.
Director and Audit and Supervisory
Board Member
Since audits by the Audit and Supervisory Committee are conducted systematically based on an
Takao Handa
internal control system, the Audit and Supervisory Committee will actively support the Audit Department toenhance its sophistication, and the Audit and Supervisory Committee will review and discuss from various angles the issues that haveemerged across the Bank and other issues identified through various monitoring activities. The Audit and Supervisory Committee also
recognizes that it is responsible for contributing to the operation of the Board of Directors by examining and discussing issues fromvarious perspectives and making recommendations to the Board of Directors to encourage discussion of the conclusions reached.
Considering today’s trend toward “aggressive” governance, we intend to pay particular attention to the progress of the Action
Plan in realizing the Management Plan. With regard to investment in human capital, which is a key factor in sustainable growth, weare deepening our discussions of human resources strategies, including the creation of “unconventional” human resources. We will
examine the manner in which this human resources strategy fits in and functions with the Bank’s overall corporate strategy, including
its Management Strategy, as well as the implementation status of various measures in the field required by the human resources
strategy and the appropriateness of monitoring the results. We will then make suitable recommendations concerning these measures.
We will do our utmost to ensure that our recommendations contribute to the steady progress of human resources development withrespect to all the Bank’s executives and employees, while producing unconventional human resources.

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53