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• Led mainly by junior board members consisting of 20 young employeeswith an average age of 30, we are carrying out activities to reform ourcorporate philosophy from the "bottom-up."• As a result of carefully considering ʻour company's vision when achievinga customer-oriented business modelʼ and ʻwhat we must pursue toachieve it,ʼ we arrived at our new corporate philosophy which expresses
our aim to "be a bank that makes people think 'I'm glad you'rehere…I'm glad we met'".
• In realizing our new corporate philosophy, it is also vital for staff to feelthat their work is meaningful and put their own ideas into action.
Therefore, our ambition to retrain and rebuild each and every person is
also expressed in "Our Ambition."2• In order for us to achieve the target vision set in our corporate
philosophy, we established a Compliance Charter that provides thestandard guiding employees' actions and judgments.
• By ensuring that all employees act with an awareness of, andcompliance to, the Compliance Charter, we aim to achieve a healthyorganizational and corporate culture while also ensuring thoroughcompliance.

3• We submitted a business improvement plan to the Financial Services Agency inaccordance with a Business Improvement Order dated October 5, 2018
• Through steady implementation of this business improvement plan, we are working
to ensure thorough compliance, realize customer-oriented business operations, andbuild a healthy organizational and corporate culture.
• We are drastically reforming all aspects of our business while promoting the active
introduction and utilization of external resources to incorporate an 'external
perspective'.
• The following six items represent the major improvement goals, while the status ofthese, currently at November 14, are as shown above.
(1) Clarification of responsibilities based on the recent disposition(2) Mindset reform and governance reform (business management measures) for
rebuilding the company(3) Establishment of a management system for excluding anti-social forces and amanagement system to prevent money laundering and terrorist financing(4) Establishment of internal audit systems and credit risk management, including
loan screening management(5) Elimination of transactions with companies controlled to a some degree by afounding family member(6) Establishment of measures to appropriately respond to each customer individuallyconcerning share house and other investment real estate loans.

4• With regard to share house and other investment real estate loans, asmeasures to support customers having difficulty with loan repayment, wehave not only applied existing measures such reducing rates and modifying
conditions, but also taken it a step further by starting to cut some of theprincipal.
• We will continue striving to attentively and thoroughly listen to eachcustomer's situation, and provide optimal solutions that, as best possible,
win their consent and understanding without being unreasonably fixated on
rigid procedural, one-size-fits-all solutions.

5• Under the new business framework, we aim to optimize risk versus
return based on two central components: our Mid-Term Business Plan
and Risk Appetite Framework.
• To strengthen compliance measures, we have formulated acompliance program with 4 basic policies set as its specific action
plan.
• We have also formulated the structure for robust governancemeasures; transitioned to being a company with an Audit andSupervisory Committee; and established a voluntary Nomination andRemuneration Committee. Our goals are to strengthen the
supervisory capacity of the Board of Directors, as well as achieve
corporate governance that ensures objectivity and transparency.

67• Our vision is to create a "new Suruga Bank" that can provide value toshareholders, employees, and society, which we will achieve througha commitment to carrying out customer-oriented business andachieving true customer satisfaction by providing unique value
through our specialty area of retail banking.
• We will establish measures for thorough compliance and controlling
appropriate risk/return, and develop a "new sustainable businessmodel" as a public financial institution that benefits the public.
• The business strategy for realizing this vision consists of two pillars:① Building a revenue base that balances risk and return bypromoting marketable activities aimed at rebuilding our corebusiness of retail banking, as well as diversifying risk andstabilizing earnings② Promoting existing business while pursuing new business, byapplying risk capital control in a manner that considers risk versus
return, and also bolstering equity capital to prepare for risks that
tend to surface in high-stress environments.

8• In our Mid-Term Business Plan up to FY2025, we plan to reestablish asustainable business model over the next three years as Phase 1 ofthe plan.
• In the current business environment, it is necessary to respond tocontinued negative interest rates, regulation revisions, and fintech
trends. Meanwhile, in today's social environment, banks are expected
to respond to the growing awareness of inheritance & asset building
as well as ever-diversifying customer needs.
• Amid a difficult environment, we must continue to make retailbanking our core business and aim to develop businesses that are
different from those in the past while leveraging our knowledge andexpertise.
• We will focus on retargeting investment real estate loans andreforming the “quality” of assets. We will also shift away from acredit-risk centric portfolio, and promote securities with varying risk
profiles. We need to pursue the challenge of creating new businesses
unique to our company by drawing on the strengths of alliances and
API collaboration platform.
• We aim to establish a new position by striving to optimize theallocation of management resources who support our basic strategy
and completing priority issues quickly.

910• For RA gross operating profit, which represents our main businessprofit including actual credit costs, we forecast a decrease of around13 billion yen in FY2022 versus FY2019. However, OHR should remain
within 60% due to cost reductions; non-consolidated net income
should be 6 billion yen; and the capital adequacy ratio is planned to beover 10%.
• We plan to improve the gap between consolidated and nonconsolidated figures by boosting profitability and reviewing functions
across the entire group. Through this we plan to increase consolidated
current net profit by 7 billion yen.

11• By building up a new portfolio of loans that controls risk andpromoting marketable activities, although a decline in average yield is
expected, these efforts will shift our asset allocation towards a middlerisk–middle return profit structure.

12• Shifting our asset allocation to a middle risk–middle return profit
structure will have the effect of reducing net interest income.
• In Phase 1, RA gross operating profit will decline to 49.0 billion yen
due to a conservative estimate of actual credit costs. After that, they
are expected to maintain the same level due to actual credit costs
peaking.

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• 'Downgrading' is the transition down to a lower debtor category, while
the 'downgrade rate' is the rate of this transition.
• Actual credit costs are calculated by estimating, for each quarter, theremaining balance in each debtor category based on the downgrade
rate and multiplying this by the reserve ratio difference that
corresponds to the debtor category.
• Even when a delinquency occurs, we estimate conservatively by using
actual downgrade results that reflect the current situation of issuingminimal reminders to customers.

14• A single income property loan is a loan for the purpose of purchasing asingle building for investment purposes, such as a residential
condominium or apartment.
• The balance for single income property loans is around 1.2 trillion yen,
but around 70%, or 850 billion of these are loans requiring special
attention.
• As a result of the changes in self-assessment standards at the end of
September 2018, loans are categorized as requiring special attention if
a tax return documents are not received or the loan property has anegative cash flow even if not delinquent. Most are not overdue at thispoint in time.
• While most loans requiring special attention are not overdue at thistime, there are concerns over the cash flow of loan properties.
Therefore, when estimating actual credit costs, these estimates are
made based on a detailed analysis that takes into account theoccupancy rates of loaned properties.

15• The lower the occupancy rate, the higher the downgrade rate tends tobecome. Especially when the occupancy rate falls under 80%, thedowngrade rate can be as high as 4.4%.
• Over the long term, by taking into account the downgrade rate foreach rate of occupancy (the lower the occupancy rate, the higher thedowngrade rate), we can expect the downgrade rate to improve overtime since the proportion of loans on low-occupancy-rate properties
will decline as the proportion of loans on high-occupancy-rate
properties increases.

16• Because the debtor category downgrade is estimated conservatively,
we can assume that actual credit costs will remain high in Phase 1.
• From 2023 onwards, loans on properties with low occupancy rates
will decrease, causing actual credit costs to decrease.

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• By incorporating new perspectives into the unique infrastructure andknow-how we have built up and refined over decades, we will
establish middle risk–middle return retail banking which involves lessrisk than our previous activities.
• There are 3 key points:① Our past strengths of investment real estate, housing, andunsecured personal loans are the primary sources of earnings.
② We will improve our financial support capabilities for solving a wide
range of problems in our customers' lifetimes and businesses.
③ We will promote securities investment for the purposes of portfolio
diversification and income stabilization.
• In local areas of Shizuoka and Kanagawa, and a broad range of otherareas around Tokyo, we will expand business in three segments of"life," "assets," and "business" based on the unique characteristics ofeach area.

19• We have established Compliance Leaders with the powers of thesecond line rank in our Three-Line Defense at all sales offices andheadquarters to ensure full compliance and risk management.
• In coordination with Compliance Area Supporters assigned to theCompliance Division, we are ensuring a clear reporting line for fraudcases and implementing checks-and-balances.
• We have also reviewed the marketability of investment real estateloans, sales, and work processes, strengthening our management ofboth operational and credit risks.

20• Based on the current market environment and management
resources, we plan to issue 190 billion yen worth of new loans by
FY2022.
• As far as investment real estate loans, in addition to implementing
comprehensive compliance and risk management, we also intend to
shift to a middle risk–middle return business model. The company alsoplans to generate 130 billion yen by focusing efforts on asset financefor business operators.
• Housing loans are planned to reach 50 billion yen taking advantage ofthe strengths that our company has built up to date in developing
highly-individualized markets.
• Unsecured loans are planned to achieve 10 billion yen by boosting ourability to propose solutions through sophisticated marketing.

21• We recognize a stable demand for real estate investment based on a
growing need to handle inheritance and asset building for retirement.
• As we resume loaning activities for investment real estate loans, weare shifting to a middle risk–middle return business model by
providing loans to affluent segments, which carries less risk than ourprevious model.
• While drawing on the strengths of our company's capabilities andclearly assessing risks through quantitative indicators such as DSCR,
we are also introducing middle-return products and re-establishingsales channels according to our customer base in order to transition
to our new business model.
• We aim to continue improving value for customers by staying closely
in tune with each customer's needs and honing our overall appraisal
skills.

22• Housing loans, an area where we had always excelled, will relaunch
under an in-house platform.
• In the market catering to large company employees, who account for
only around 15% of the workforce, there is fierce competition among
several players due to the high uniformity and many ready-madeproducts available.
• In contrast, we have secured a business area unique to our company
by providing customized products in the highly individualized market
which accounts for the remaining roughly 85% of all employees.
• In today's highly diversified society, our core competencies lie incustom products tailored to each customer which are based on
subdividing segments according to changes in the environment, andloan screening expertise based on a database we have built up over
the years.

23• By leveraging our marketing advantages and boosting the quality of
our solution-proposing capabilities, we are realizing lifetime support
for individual customers as well as business support for our corporate
customers.
• We propose optimal solutions by coordinating CRM info―whichcontains quantitative information such as financial transactions andqualitative information such as conversation details―in each channel,
integrating both "digital" and "human" elements.
• In the corporate sector, we will also utilize our knowledge of external
companies to improve service quality, which includes our businesssuccession with Shinsei Bank as well as M&A business alliances.
• In the years to come, we will continue to contribute to local
communities through customer-oriented business activities that strive
to propose solutions for customers at the best timing and bestchannel for them.

24• With the advancement of IT, the digital channel has grown to become
an essential contact point with customers. Given this background, we
will build a digital marketing infrastructure in FY2020.
• Building this infrastructure will help us realize the sophisticatedmarketing shown above, allowing us to:① Provide optimal content that is personalized based on web
behavior, history, etc.
② Approach customers at the most appropriate timing by using
scenarios created based on the individual customer's journey③ Deliver communication that is continuous and consistent across allchannels.
• We are committed to continuing to improve financial services byenhancing our retail infrastructure through strategic IT investments.

25• Advances in technologies such as API and AI have opened up new
possibilities for delivering innovative financial services, as well as
provided an opportunity to expand both our customer base andrevenue.
• Based on our unique retail infrastructure, we can provide customized
financial services to customers in the alliance.
• Going forward, we plan to continue expanding customer contact
points by utilizing the API collaboration platform and coordinating withas many multivarious industries as possible.
• We will continue to pursue the challenge of "innovating new financial
services" by merging our company's management resources withthose of our alliance partners.

26• We promote securities investments with different risk profiles fromretail banking.
• While basing investment targets on products with dependable market
liquidity, such as government bonds in developed countries, we also
aim to diversify risks and stabilize profits by controlling portfolios,
including loans, according to the market and financial environment.

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• We plan to implement structural reforms from the perspective of
branches, human resources, and group functions; establish a businessfoundation that promotes new business strategies; and reduce
expenses by 15% versus FY2018.

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• With regard to branch operational reforms, we plan to boost
operational efficiency by implementing a "three -less" policy; namely,"safe-less," "paper-less," and "operation-less."• By restructuring branches and ATM networks, we plan to centralize
work, revise ATM operations, and boost efficiency.
• Also, by expanding digitalization, pursuing open innovation, andstrengthening digital channels, we intend to further enhance branchfunctions, boost work efficiency and provide new value to customers.

30• We are resolving the immediate management workload byoverhauling branch operations in order to boost efficiency and solve
priority issues quickly, and by doing this we are promoting the frontshifting of human resources.
• While reallocation of human resources will increase the ratio of
employees assigned to sales offices to 61% by FY2022, overall
personnel expenses are expected to be reduced by around 8% versus
FY2018.

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• Suruga Bank is dedicated to working towards the revitalization ofcommunities and helping to solve social issues through its main
business, which is firmly seated in SDGs.
• We have been a supporter of an initiative for concentrating advanced
medical and health industries at the base of Mount Fuji since its
inception in 2001 through the "Pharma Valley Project," an industryacademia-government-finance collaboration that Shizuoka Prefecture
is promoting mainly in the eastern part of the prefecture.
• We will continue to actively participate in this project that implements
manufacturing, human-development and community-building with thegoal of making the prefecture number one in the world in terms ofhealth and longevity.
• As bicycle tourism promotion has been gaining momentum in
Shizuoka Prefecture, we continue to contribute to regional
revitalization by promoting cycling activities including the sponsorshipof cycling events with partners with which we have enteredpartnership agreements.

33• When establishing or reopening branches, we install environmentallyfriendly equipment and actively promote eco-office practices. Many of
our new branches have obtained CASBEE Shizuoka A-Rank or CASBEE
Kanagawa A-Rank certification.
• In addition to the examples introduced, we will continue to develop avariety of activities aimed at creating a better future with a renewed
feeling with gratitude toward local communities.

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