Main Questions and Answers
Q1

Extent of the permeation of RORA within the organization as a KPI of profitability

A1

In formulating the Medium-term Business Plan and annual business plans, management
and head office sections hold meetings based on RAF and analyze earnings using RORA
to discuss in which fields to focus management resources, including capital and humanresources. In this way, we formulate plans for various matters, including balances of loan
assets and securities; and link these to business promotion efforts.
While many employees working at branches and other sales staff may be more aware ofROA (which is based on actual figures) than risk-asset-based RORA, we are building abusiness structure to focus on improving profitability by integrating the awareness of thosein the field with the perspectives of the head office staff and management who oversee
business activities.

Q2

In cost controls, do you focus more on the KPI of OHR or amounts?

A2

We consider both to be important, but if we had to put one above the other, it would beamounts. We consider OHR to be a target in controlling amounts.
During the period covered by the current Medium-term Business Plan, the number ofinvestment projects proposed by each section will increase, in part as a rebound fromrestraints on development work on other computer systems before the launch of the nextgeneration accounting system in 2021. We use an OHR of 55% as a guideline in controllingthese costs.
Our basic concept consists of additional investments conditional on verifying the resultsof investments, assuming steady future earnings growth.

Q3

A3

Am I correct in understanding the ROE target in the Medium-term Business Plan torefer to return on net assets based on TSE standards, not return on shareholders’equity? What are management’s thoughts on the fact that return on net assets isdeclining as share price rises?
We use return on net assets based on TSE standards as the ROE target in the Mediumterm Business Plan.
We feel we face a dilemma: return on net assets is constrained as it fails to keep up
with increasing gains on valuation of stocks due to the recent increases in the share pricedespite making progress on reducing cross-shareholdings.
We are currently revisiting and discussing the capital levels and shareholdings needed
to demonstrate stable financial intermediary functions and to be prepared for major
earthquakes and other risk events based on reviews of capital policies. In doing so, wesense a need to identify return on shareholders’ equity separately from return on netassets.
We intend to continue providing thorough explanations so that stakeholders can grasp
our focus on continually increasing ROE.

Main Questions and Answers
Q4

Thinking on improving the profitability of home mortgages and securitization ofloan claims
We believe home mortgages are difficult to price. We need to consider total profitability,including not just loan yields, but profits from future transactions spurred by homemortgages.

A4Q5

A5

We will also proceed with digital transformation (DX) efforts to improve the profitabilityof our businesses as a whole by promoting low-cost operations and reducing manual
work as much as possible, while pursuing claim securitization in a balanced mannerbased on consideration of resulting reduced loan balances and effects on earnings.

Do you feel you will exceed the profit target of 64.0 billion yen in consolidated net
income in the final year of the Medium-term Business Plan without incorporating
the effects of rising interest rates?
Deposit and loan balances are growing as economic conditions return to normal postCOVID. We expect to see steady future growth in light of various factors, including therecent state of lending-related costs. We are also laying the groundwork for the future bysteadily advancing into new fields, including making TJS a subsidiary and establishing
SFG Marketing and SFG Real Estate Investment Advisors. We will also consideradditional business initiatives and efforts to expand business domains.
As these efforts bear fruit, combined with the effects of rising interest rates, we expect
to achieve the profit target of 64.0 billion yen for the final fiscal year of the Medium-term
Business Plan ahead of schedule. In the final year of the Plan, we intend to achieve still
higher profits.

Q6

What business opportunities do you see as interest rates rise? How do yourcompetitive strengths differ from those of other companies?
Since few Bank employees have direct experience with rising interest rates, we arepreparing for future responses in various ways, including holding internal study meetings.
At such times, the differences in how we have served customers and the relationships
established with them will become apparent in the scope and scale of our of business
opportunities.

A6

That is, we see differences in our capacity to build relationships, which allows us tobroaden the services we can offer throughout the Group, will not just create the ability toadapt to rising interest rates, but lead to growth in business opportunities.
In a world of positive interest rates, the scale of deposit and loan balances will generatemassive differences in earnings. We are currently on track to have loans of more than 10
trillion and deposits of more than 11 trillion yen. We consider this to be a positive tailwind
for our businesses and a source of competitive strength.

Main Questions and Answers
Q7

Competition for deposits with online banks and future strategies for securing
deposits
It’s difficult to see any benefits in competing with the average online bank in the samearena. Most of the customers of our online branch live in Shizuoka Prefecture; many use
the online branch as a supplement to our brick-and-mortar branches. Our online banking
services have a different nature than general online bank accounts.
That is, unlike online banks that attract deposits based on the benefits of interest rates
and systems, we need a strategy of appealing to customers to deposit with us becauseof who we are as Shizuoka Bank. We will continue to take dynamic action, including
leveraging the strengths of our customer base and network in the region and carrying out
effective promotional campaigns for events like childbirth and school entry in the lives ofour customers.

A7
We believe our online branch also needs to clarify its strategies for achieving
differentiation from other banks with respect to aspects like the usability of convenience
store ATMs.
At the same time, it’s important to prevent outflows of deposits to other prefectures as
inheritances are passed down. In Shizuoka Prefecture, many heirs live in the greater
Tokyo area; accounts with the online branch play a role in preventing the loss of deposits.
Behind our accelerated opening of branches in Kanagawa Prefecture in recent years isthe recognition that many former Shizuoka Prefecture residents live there. We want touse our network of branches located outside Shizuoka Prefecture to prevent the loss ofdeposits to other prefectures.

Q8

A8

Have you set up an investment line subject to decisions at the sole discretion of thePresident as a way of approaching new investment?
From a governance perspective we have no plans to set up an investment line subject
to decisions at the sole discretion of the President. However, we’ve established theBusiness Development Department as an organization under the direct supervision ofthe President with the mission of launching new businesses. It studies new businesses
like SFG Marketing and SFG Real Estate Investment Advisors.
We believe it’s preferable to submit proposals based on high business potential to theBoard for deliberations, rather than setting up a line subject to personal decision.
In the Bank’s culture, we always consider KPIs on profit and try to avoid cannibalizationof existing businesses. For this reason, in some ways, it can be difficult to generate newbusinesses. Under the holding company structure, we have established an organization
outside of the Bank to study new businesses, giving it a degree of freedom under thePresident’s direct supervision.

Main Questions and Answers
Q9

What are the motives, advantages, and disadvantages of separating the posts ofPresident of the holding company and President of the Bank?
We believe that, ideally, the posts of President of the holding company and Presidentof the Bank subsidiary should be separate. This is because we want to ensure a structure
under which the holding company can make appropriate decisions in the event ofconflicts of interest within the Group. Such decisions might be more difficult if thePresident of the holding company also represents the Bank.
The potential disadvantages of separating top management, on the other hand, include
the difficulty for the holding company in ascertaining information and the slower pace ofmanagement in a multilayered structure. However, in migrating to a holding company
structure, we designed the organizations to incorporate various measures to avoid thesedisadvantages.

A9For example, in the area of control of information, the President of the holding companyserves concurrently as a Director of the Bank while Audit and Supervisory Committee
members of the holding company serve concurrently as Corporate Auditors of the Bank.
This structure of concurrent posts is designed to enable the holding company to efficiently
ascertain information on subsidiaries.
We have taken steps to realize rapid and flexible management, including raising theamount subject to decisions by the Bank subsidiary through the delegation of authority
and revising the scope subject to independent decision-making. Through these and othermeasures, we’re building an organization that will enable the effective functioning of thegovernance framework while separating oversight and execution.