Information Meeting
The First Half Ended September 2016

THE NANTO BANK, LTD.

Table of Contents
I. About the Nanto Bank, Ltd.

2. Priority Strategies

1. Profile of the Nanto Bank. . . . . 2

2. Operating Areas of the Bank. . . . . 3

3. Characteristics of Nara Prefecture. . . . . 4

4. Market Characteristics. . . . . 5

II. Financial Results for the First Half of FY2016

1. Summary of Profit and Loss

. . . . . 7

2. Summary of Deposits and Loans. . . . . 8

3. Summary of Non-Performing Loans. . . . . 9

4. Business Forecast for FY2016. . . . . 10

5. Capital Adequacy Ratio and Shareholder Returns. . . . 11

III. Management Strategy

1. Outline of the Next Management Plan
(1) Progress of the Current Medium-Term Management
Plan and Forecast Results. . . . . 13
(2) Challenges for Our Existing Business Model. . . . . 14(3) Management Environment and Challenges. . . . . 15

(4) Business Model Reform. . . . . 16

(5) Our Management Vision and Significance of the
Next Management Plan
. . . . . 17
(6) Basic Philosophy. . . . . 18

(7) Priority Strategies. . . . . 19

(8) Transforming Our Earnings Structureand Loans Portfolio. . . . . 20

(9) Target Metrics. . . . . 21

(10) Profit and Loss Plan

. . . . . 22

(11) Staffing Plan

. . . . . 23

(1) Regional Revitalization(i) Creation of Regional Vitality. . . . . 24(ii) Aid Projects for Tourism Promotionand Local Industry. . . . . 25
(2) Pursuit of the Four Reforms(i) Awareness Reform (a) Human Resource andOrganizational Strategy. . . . . 26(ii) Sales Reform(a) Platform and Market Strategy. . . . . 27(b) Retail Business Strategy
Personal Solutions Business. . . . . 28
Asset Investment Services. . . . . 29
Personal Loans. . . . . 30(c) Corporate Business Strategy
Corporate Solutions Business. . . . . 31
Numerical Targets. . . . . 32(d) Osaka Strategy
Branch Deployment and Staffing Plan
. . . . . 33
Numerical Targets. . . . . 34(e) Market Investment Strategy. . . . . 35(f) Group Strategy. . . . . 36(iii) Clerical Operations Reform (a) Clerical Operations
Strategy
Rebuilding of Our Clerical Operations Structure . . . . 37
New Branch Structure. . . . . 38(iv) Expenses Reform (a) Expenses Strategy. . . . . 39
(3) Upgrading of Management and Controls. . . . . 40
<Appendix>. . . Appendix 1–8

表紙Ⅰ

I. About the Nanto Bank, Ltd.

1

1. Profile of the Nanto Bank
Profile of the Nanto Bank (as of September 30, 2016)

1. Founded

June 1, 1934

2. Location of head office

16 Hashimoto-cho,Nara City

3. Capital¥29,249 million

4. Number of employees

2,719

5. Number of offices

138 (Japan), 2 (representative offices in Hong Kong and Shanghai)

6. Total assets¥5,826.5 billion

7. Deposits outstanding¥4,762.3 billion

8. Outstanding loans¥3,240.9 billion

9. Capital adequacy ratio

Non-consolidated:
9.12%
Consolidated:
9.35%

10. Market share in Nara Prefecture Loans

Corporate Philosophy(i) Pursue sound and efficient management(ii) Provide superior comprehensive financial
services(iii) Contribute to regional prosperity(iv) Strive to become a highly reliable, friendly andattractive bank

49.0%

Deposits: 49.0%
11. External credit rating"A" (Stable) from JCR"A-" (Stable) from R&I(Head Office)22. Operating Areas of the Bank
Operating Areas of the Bank

Our network of branches

Map of Japan

Kyoto Pref.
Hyogo Pref.
Osaka Pref.

Mie Pref.
Nara Pref.
Wakayama Pref.

Number of branches
Headquarters
and branches

Nara Pref.
Wakayama
Pref.

Kyoto Pref.
Mie Pref.
Osaka Pref.
Hyogo Pref.
Tokyo
Total

71
6
12
1
18
1
1
110

(as of October 31, 2016)
Subbranches

19
2
3
2
26

Agencies

3
3

Total

93
8
15
3
18
1
1
139
3

3. Characteristics of Nara Prefecture
Characteristics of Nara Prefecture History Nara Prefecture was home to the nation's capital for most of the Asuka Period (from 592 to 710) andthe Nara Period (from 710 to 794), during which time a significant number of important present-day cultural
heritages, such as Buddhist buildings, were created.
* During one part of the Nara Period (from 784 to 794), Japan's capital was located in the southwest area of Kyoto
Prefecture.
 Abundant tourism resources Three World Heritage sites  Ranked top in Japan for the number of suchsites
* Buddhist Monuments in the Horyu-ji Area, Historic Monuments of Ancient
Nara and Sacred Sites and Pilgrimage Routes in the Kii Mountain Range A total of 1,320 National Treasure and Important Cultural Property
certifications (as of January 1, 2016)* Nara Prefecture, accounting for 10.1% of the nation's total, is ranked 3rd in(Nara Park)
Japan, trailing only Tokyo and Kyoto Prefecture in this respect.
 In 2015, the annual number of foreign tourists visiting Nara Prefecture exceeded the 1 million mark.
 Neighbors Osaka Prefecture Nara Prefecture has excellent traffic access to the neighboring Osaka Prefecture, the second biggest economy
among the nation's prefectures.
* The distance between Nara Prefecture and Osaka Prefecture is about 30 km  30 to 40 minutes via expressway
or rail.
 These two prefectures are quite close to each other in terms of human and local connections.
It is common for Nara residents to work in Osaka Prefecture.
* Nara Prefecture is ranked top among the nation's prefectures for the ratio of local residents being employedoutside the prefecture.
44. Market Characteristics
Market characteristics
 Nara Prefecture: A substantial retail business market
 Osaka Prefecture: Second largest economy among all the country's prefectures, substantial retail and corporate
business markets<Key indicators>
Item* Ranking is among the 47 prefectures of Japan(Unit)

Nara
Pref.

Rank

Osaka
Pref.

Rank

SourceMinistry of Internal Affairs andCommunications, Preliminary Counts ofPopulation Census of Japan
Ministry of Internal Affairs andCommunications, 2014 Economic
Census for Business Frame

SurveyperiodOctober
2015

Total population(Thousandof people)

1,365 30th

8,838 3rd

Number of private
enterprises (offices)(Thousandof entities)

49 38th440 2ndNominal prefectural GDP (¥ trillion)

3 39th37 2ndCabinet Office, Annual Report on
Prefectural Accounts

FY2013

Housing starts(Thousandof units)

6 36th69 3rdMinistry of Land, Infrastructure,
Transport and Tourism

2016

Deposits balance(¥ trillion)

11 24th

90 2ndKinyu Journal,
Regional Financial Map 2016

March 2016

Loan balance(¥ trillion)

3 31st45 2ndKinyu Journal,
Regional Financial Map 2016

March 2016

Personal savings(per household)(¥ thousand)November
2014

Personal depositsbalance (per capita)(¥ thousand)March 2015

1st

14,801 18th

Ministry of Internal Affairs andCommunications, National Survey of
Family Income and Expenditure

3,836 4th

4,258 2nd

Bank of Japan

17,816

July 2014

5

表紙Ⅰ

II. Financial Results
for the First Half of FY2016

6

1. Summary of Profit and Loss(¥ billion)

1H
FY20151H
FY2016

Y/Ychange21 Net income

28.1
25.4
3.2
(0.5)
0.6
21.7
12.9
7.8
6.3
0.1
(0.9)
7.5
0.1
0.7
1.4
0.3
7.6
(0.0)
7.6
2.3
5.2

27.3
25.0
2.8
(0.5)
0.6
19.6
10.9
7.5
7.6
3.4
2.1
8.9
(0.1)
0.0
0.1
1.0
8.7
(0.0)
8.6
1.7
6.9

-0.8
-0.4
-0.3
-0.0
+0.0
-2.1
-1.9
-0.3
+1.2
+3.2
+3.1
+1.4
-0.3
-0.7
-1.3
+0.7
+1.1
-0.0
+1.0
-0.5
+1.6

22 Credit cost (*2)

0.2

1.9

+1.6

1

Core gross business profit

2

Interest income

3

Fees and commissions

4

Other operating income (*1)

5

Cost of derivative financial
products

6

Expenses7

Personnel expenses

8

Non-personnel expenses

9Core net business profit

10 Gains/Losses on bonds (JGBs, etc.)
Net transfer to general provision for

11 possible loan losses

12 Net business profit
13 Non-recurrent gains/losses
14

Gains/Losses on stocks

15

Disposal of non-performing loans

16

Retirement benefit expenses

17 Ordinary income
18

Extraordinary gains/losses

19 Income before taxes
20 Income taxes* 1 Excludes gains/losses on bonds (JGBs, etc.)* 2 (Net transfer to general provision for possible loan losses + Disposal of non-performing loans) – (Bad debt recovered)

Analysis of Change Factors
in Core Net Business Profit(¥ billion)

Core net business profit for 1H FY2015

6.35

1) Average balance of loans(Y/Y change +¥147.5 billion)+0.842) Interest rate on loans(1.01%, Y/Y change -0.12pp)-2.04

3) Average balance of deposits(Y/Y change -¥58.5 billion)+0.014) Interest rate on deposits(0.02%, Y/Y change -0.02pp)+0.56

Lending/deposit sector total-0.625) Average balance of securities(Y/Y change +¥101.0 billion)+0.576) Yield on securities(1.15%, Y/Y change +0.01pp)+0.167) Interest on fund management-0.07

8) Interest on fund procurement(including cost of derivative financial products)-0.51

Market sector total
9) Fees and commissions(investment trust revenues: Y/Y change -¥0.31 billion
life insurance revenues: Y/Y change -¥0.12 billion)

+0.14
-0.38

10) Others+0.0411) Expenses+2.10

Core net business profit for 1H FY2016

7.64

7

2. Summary of Deposits and Loans
Balance of deposits

Balance of loans<By sector><By sector>
4,770.2

4,815.2

4,781.7<Change from4,762.3March 31, 2016>

230.1
871.0

247.3
897.6

218.7
886.0

(+26.6)(-11.6)

217.4
888.4

* Number in bracket denotes change from previous period

5,000.0(¥ billion)(+21.9)3,601.2

3,607.2

3,625.4(+69.8)(+6.0)(+18.1)

3,120.5

3,198.1

3,240.9 March 31, 2016>
+42.7

494.4

505.8

543.6

574.8

Corporate(+2.4)

730.7

742.6

743.7

714.8

Wholesaleloans(-28.8)Personal(+1.2)

888.1

885.6

912.0

938.4

(+10.2)(-2.5)

Retailbusinessloans(+26.3)

975.3

986.4

998.7

1,012.7(+14.6)(+11.0)(+12.3)

Personal
loans(+14.0)March 31,2015

September
30, 2015

March
31, 2016-19.3

3,626.7

Government/Banks(-1.2)

3,300.0 3,088.7(¥ billion)

NegotiableCD(-21.8)

0

67.7

62.9

51.5

29.7

March 31,2015

September
30, 2015

March
31, 2016

September
30, 2016

0<By prefecture>

5,000.0

September
30, 2016

275.6
343.4
289.0

272.9
363.9
314.5

256.9
356.1
296.4

(-3.4)(+25.4)(-18.0)

257.5
350.1
308.4

* Number in bracket denotes change from previous period
Others(+0.6)

3,300.0(¥ billion)

Kyoto Pref.
(-5.9)
Osaka Pref.,etc.
(+12.0)3,794.2

3,800.8

3,820.6(+79.2)(+6.5)(+19.7)

3,816.4

67.7

62.9

51.5

29.7

March 31,2015

September
30, 2015

March
31, 2016

September
30, 2016

825.4

843.1

855.2

745.8

747.6

759.2

(+33.1)(+1.7)(+11.6)

1,517.4

1,529.8

1,583.7(+52.4)(+12.3)(+53.8)March 31,2015

September
30, 2015

March
31, 2016

837.9

773.0

Nara Pref.
(-4.2)
NegotiableCD(-21.8)0(+26.3)Loans for local
governments(+31.1)<By prefecture>* Number in bracket denotes change from previous period(¥ billion)<Change from

* Number in bracket denotes change from previous period

01,629.8

Others(-17.2)

Osaka Pref.,etc.
(+13.8)Nara Pref.
(+46.1)

September
30, 20168

3. Summary of Non-Performing Loans
Breakdown of Credit Cost

Credit Cost(¥ billion)

(%)
0.30

8.0

Disposal of
non-performing
loans

6.0
(¥ billion)

Credit cost ratio

5.0
0.05

0.05

0.03

1.1
-0.0

-0.01
1.9

1.4

1.7
0.3
-0.5

-1.4

1.0

Bad debt
recovered

-5.0

-0.3

-0.2

Net transfer togeneral provision
for possible loan
lossesCredit cost

-2.0

-0.30

FY2013-3.7

FY2014FY2015

1H FY2016

Total
credit cost

* Credit cost ratio = Credit cost / Average balance of loans

Disposal of Non-Performing Loans by Region

FY2013

FY2014FY2015

1H FY2016

-0.3

1.4

1.0

1.9

Loans Based on the Financial Reconstruction Law /Non-Performing Loans Ratio
150.0

5.0
(¥ billion)

Nara Pref.

0.9

2.77
14.5

Osaka Pref., etc.

0.3
-0.0
-0.0

0.3

0.3
0.0

0.3
Others

FY201463.0
0FY2015

2.57

2.30

2.08

15.5

10.0

9.5

59.3

58.0

50.9

4.00
(％)

Specialattention

Doubtful

-0.3

-2.0

FY2013

Nonperforming
loans ratio(¥ billion)

4.4

-0.4
-0.4

2.1
0.1
-0.4

1H FY2016

Total

5.8

5.1

5.8

March 31,2014

March 31,2015

March 31,
2016

83.3

80.0

73.9

7.4

0.00

Septemberor de30, 2016 Bankrupt
facto bankrupt

67.99

4. Business Forecast for FY2016
Business Forecasts for FY2016(¥ billion)

Interest on Deposit and Loan, Interest Margin
FY2015 FY2016
forecast
Y/Ychange1 Core net business profit
2

Interest income

3Interest on loans

4Interest on securities

11.2

13.5

+2.2

1.33

1.22

1.27

1.17

0.97

0.95

-0.3

34.7

32.1

-2.6

17.9

19.8

+1.9

FY2013

Yield on Securities

6.1

5.9

-0.1

6

Expenses

43.2

40.4

-2.8

25.5

22.3

-3.1

8 Net business profit

15.8

15.1

-0.6

9 Ordinary income

13.1

15.3

+2.2

10 Net income

11.7

11.5

-0.1

1.11
1.07
0.88
Total interest
margin49.2

Fees and commissions

Personnel expenses

Interest on loans

49.6

5

7

1.50
(%)

0.00

1.50
(%)

0.13
0.06

0.10
0.05

0.10
0.04

FY2014FY2015Interest margin
between deposits
and loans

0.99
0.97
0.83
Expense ratio
Interest on
deposits

0.17
0.02
FY2016
forecast

Foreign

1.33
1.20

1.42

0.92

1.00

1.06

0.87

0.91

0.94

1.45
1.14
1.03
Yield onsecurities
Domestic

0.00

11 Credit cost (*)

1.0

3.0

+1.9

FY2013

FY2014FY2015FY2016
forecast* (Net transfer to general provision for possible loan losses + Disposal of non-performing loans)– (Bad debt recovered)105. Capital Adequacy Ratio and Shareholder Returns
Capital Adequacy Ratio
400.0

Shareholder Returns<Capital adequacy ratio> Consolidated

12.00

Non-consolidated(¥ billion)

FY2016

(%)

9.72

9.75

9.36

9.35

9.29

9.32

9.11

9.12

<Capital> Consolidated

Approx.
9% as of
March 31,2017

FY2014September
30, 2015

March 31,2016

Consolidated

¥

9.8

12.1

6.7

(11.6)

Dividend per
share

Yen

7

7

3.5

(70)

3) Total dividends billion

1.8

1.8

0.9

(1.8)

Payout ratio(3) / 1))

%

19.0%

15.4%

14.0% (16.1%)¥
billion

0.01

0.00

0.00

―

%

19.1%

15.5%

14.0%

―

¥

0.00

September
30, 2016

4)

Amount of(¥ billion)<Non-consolidated>

5) treasury stock

March 31,2015

September
30, 2015

March 31,2016

September
30, 2016

acquired1) Capital adequacy ratio

9.29%

9.32%

9.11%

9.12%

2) Capital

193.4

196.7

198.9

207.1

Total ratio ofreturn((3) + 5)) / 1))

-

-

-

-

2,080.8

2,111.3

2,181.1

2,271.1

March 31,2015

September
30, 2015

March 31,2016(¥ billion)
September
30, 2016

1) Capital adequacy ratio

9.72%

9.75%

9.36%

9.35%

2) Capital

204.3

207.8

206.9

215.1

-

-

-

-

2,101.7

2,130.7

2,209.7

2,299.5

Subordinatedloans3) Risk assets<Consolidated>

Subordinatedloans3) Risk assets

Full fiscal
year(forecast)Non-consolidated

215.1
207.8
206.9
204.3
207.1
198.9
196.7
193.4

March 31,2015

1H1) (1H) net income billion

2)0

FY2015

6)

Share consolidation(10 shares  1 share)11III. Management Strategy

12

1. Outline of the Next Management Plan (1) Progress of the Current Medium-Term Management Plan and Forecast Results
Outline of the Current Medium-Term Management
Plan "Vitality Creation Plan"(from April 2014 to March 2017)<Numerical targets: Actual and forecasted results><(i) Net income>

15.0
10.0

Basic philosophy
 Aim to enhance top-line profit through practicing
customer-centricity and effective investment of funds
 Strive to realize management efficiency through optimum
deployment of corporate resources

Actual results
MediumTerm
Management
Plan

11.7

9.7

11.5
8.0

5.9

5.4

FY2014FY20155.00(¥ billion)

FY2016(forecast) Build-up an organization enabling self-fulfillment throughhuman resource development and revitalization<(ii) Balance of loans>

3,400.0

Key strategies

3,200.0

I. Vitalizing the community
II. Establishing a revenue baseIII. Strengthening human resources and the organization

Medium-Term
Management
Plan

3,000.0(¥ billion)

3,198.1
3,126.8

Actualresults

3,088.7
3,033.2
FY2014FY2015

IV. Improving productivity<(iii) Balance of deposits>

V. Strengthening the internal management system

5,000.0
Numerical targets

4,702.4
4,690.7

4,838.7
4,730.2

3,283.0
3,250.0

FY2016(forecast)

5,000.0
4,746.0<FY2016>(i)

Net income:¥8 billion or above

4,500.0(ii)

Balance of loans:¥3.25 trillion or above

Medium-Term
ManagementPlan(iii) Balance of deposits: ¥5 trillion or above

4,000.0(¥ billion)

Actualresults

FY2014FY2015FY2016(forecast)13

1. Outline of the Next Management Plan (2) Challenges for Our Existing Business Model<Expenses><Interest on loans>
45.0

50.0

(¥ billion)(¥ billion)

38.5

36.5

45.1

44.9

43.2

34.7

40.4

32.1

20.0
FY2013

FY2014FY2015FY201630.0
FY2013

FY2014FY2015(forecast)<OHR><Fees and commissions>

10.0

85.0

(¥ billion)

(%)

5.7

6.2

6.1

FY2016(forecast)Nanto Bank

79.3

79.2

5.9

77.7
74.8
Regional bank average

71.3

70.9

70.7

FY2013

FY2014FY201570.0

0FY2013

FY2014FY2015FY2016(forecast)

FY2016(forecast)* Core gross business profit basis

141. Outline of the Next Management Plan (3) Management Environment and Challenges

Management Challenges

Policy aspects

Management metrics◆ Continued quantitative and qualitative
monetary easing Decreasing interest income due to falling interest
on loans◆ Negative interest rate policy Improvement in management metrics◆ Corporate governance code

(OHR and ROE, among others), etc.

◆ Changes in financial regulations

Organization and system
Social and economic aspects◆ Declining population and shrinking
economies in rural regions

 Build a more productive organizational system Upgrade our management and controls framework◆ Falling birth rate and an aging society

 Enhance human resource development◆ Empowerment of women Promote diversity, etc.

Technology aspects
Sales◆ Rise of FinTech

 Vitalize the Nara Prefecture economy

Competitive environment◆ Raising of maximum amount of deposits withJapan Post Bank
◆ Intensifying competition with rival banks andnon-bank competitors◆ Accelerating realignment of regional financial

 Maintain our deposits and loans market sharesin Nara Prefecture Build a sales platform suitable for the markets
 Consider new sales channels and services
 Improve our solution skills, etc.

It is essential to reform our business model.

Management Environment

institutions

15

1. Outline of the Next Management Plan (4) Business Model Reform
Business Model Reform<Human resources and organizational aspects>
 Ensure the permeation of improvement
culture and ethos that are unique to the
Nanto Bank

<Sales aspects>

・ Personal solutions business・ Corporate solutions business・ Osaka strategy

Improve salesquality Bolster our market investment skills
 Strengthen our group strategy<Clerical operations aspects>
 Promote clerical operations BPR
 Build an organizational operation that enables thestaff to focus on sales activities<Expenses aspects>
 Shift in expense structure

Improve clericaloperations quality

Raise ROA and ROE

 Strengthen our retail strategy

Improve OHR

Regional Revitalization

 Build a new business model

Build a robust structure Foster a spirit of taking on challenges
among bankers

Raise our capital adequacy ratio

Improve humanresources quality

 Revise expenses as a whole Make strategic investment for human resource
development and IT

16

1. Outline of the Next Management Plan (5) Our Management Vision and Significance of the Next Management Plan
Management Vision"A Vitality Creating Bank"(from 2014 to 2024)
 We aim to become a bank that creates vitality for itself and for its local communities through i) delivering high-quality
financial and consultation functions as a regional financial institution and ii) cultivating a corporate culture full of dreams
and pride.

Significance of the Next Management Plan

"Vitality Creation Plan II—Changing and Taking on Challenges"(from April 2017 to March 2020)
 We have set the three years as a period in which to strive to change to a robust
structure in consideration of the changing financial climate. For the plan's final
year coinciding with our 85th anniversary, we will make sure to achieve goodresults in terms of earnings and the financial position.

The 90th anniversary(2024)The 85th
anniversary(June 2019)
The 80th anniversary(FY2014)

Vitality Creation Plan(from April 2014
to March 2017)

Vitality Creation Plan II—
Changing and Taking on
Challenges17

1. Outline of the Next Management Plan (6) Basic Philosophy
Basic Philosophy
Create regional economic vitality
 Make utmost efforts to revitalize our salestarget areas in pursuit of co-creation withlocal communities

Deliver customer-centric services

Improve productivity and profitability
through reviewing operations

 Deliver optimum and sophisticated services bypromptly meeting the increasingly diverse
needs of customers

 Improve productivity and profitability through enhancing thequality of sales, clerical operations, and human resources,
based on the Four Reforms (to awareness, sales, clericaloperations and expenses)

Upgrade the management andcontrols framework
 Bolster risk control and earnings management, thusbuilding a management and controls framework
capable of responding to the changing environment
in a flexible manner18

1. Outline of the Next Management Plan (7) Priority Strategies
Priority Strategies(Initiatives policy)■ Create regional vitality by playing a leading role in local community, people and job
areas(1) Regional Revitalization
Awareness
reform(2) Pursuit of theFour Reforms

Sales
reformHuman resource andorganizational strategy■ Vitalize our human resources and organization by i) fostering the spirit of taking onchallenges among the bankers, ii) bolstering the human resource development system
and iii) realizing a work-life balance

Platform and market
strategy■ Revise the framework of our branches and sales, bolster points-of-contact withcustomers, and deliver high-quality services

Retail businessstrategy■ Serve as the closest possible consultant for customers of all generations by paying
proper attention to their life stages

Corporate businessstrategy■ Aim to become the true main bank for the customer through exercising theconsultation function and delivering solutions according to the company's growthstage

Osaka strategy■ Raise the Bank's presence by actively allocating or reallocating our corporate
resources, based on branch continuity

Municipality strategy■ Seek to develop relationships with individual municipalities by delivering financing
and consulting functions to themMarket investment
strategy■ Expand profits by diversifying our investment methods while taking risks
appropriately

Group strategy■ Grow consolidated profits through delivering comprehensive financial services bytapping into our Group's capabilities

Clericaloperations
reformClerical operations
strategy■ Fundamentally overhaul the clerical operations of branches and the headquarters,
thus transforming the organization into a more efficient one

ExpensesreformExpenses strategy■ Revise expenses as a whole to transform our expenses structure(3) Upgrading of Management
and Controls■ Upgrade our management and controls to firmly support the business model and toobtain even greater trust from customers

191. Outline of the Next Management Plan (8) Transforming Our Earnings Structure and Loans Portfolio
Earnings Structure(core gross business profit basis)

Bolster fee
business

Loans Portfolio
(%)

100%

100%
Noninterest
incomeMarketsectorincomeLending/
depositsectorincome(%)

Expand retail
loans

10.2

28.6

11.6

20

31.1
30

61.1

57.2

14.8

17.1

23.8

21.9

Retailbusiness
loans

29.3

61% 29.6

Personal
loans

31.9

31.2

33

FY2013
25年度

FY2016
28年度(forecast)(予想)

FY201931年度(plan)(計画)

Loans forlocal
governments

Wholesale
loans

15
19

33

66%

50

0%

0%
FY2013
25年度

FY2016
28年度(forecast)(予想)

FY201931年度(plan)(計画)* Non-interest income = Fees and commissions + Other operating income(excluding gains/losses on bonds (JGBs, etc.))

20

1. Outline of the Next Management Plan (9) Target Metrics

Target Metrics

FY2015Result

FY2019targetOHR

79.32%

Less than 70%

Non-interest income
ratio

11.73%

20 to 29%

Capital adequacy
ratio

9.11%

Approx. 10%

ROA

0.20%

At least 0.3%

ROE

4.76%

At least 5%* Calculation formulae for the metrics• OHR:
Expenses/Core gross business profit• Non-interest income ratio:(Fees and commissions + Other operating income (excluding
gains/losses on bonds (JGBs, etc.))/Core gross business profit• Capital adequacy ratio:
Core capital/Risk assets• ROA:
Core net business profit/Total assets• ROE:Net income/Net assets21

1. Outline of the Next Management Plan (10) Profit and Loss Plan
Profit and Loss Plan
<Core gross business profit>

60.0(¥ billion)<Core net business profit>

20.0

57.8

(¥ billion)

53.9

12.8

50.0

40.0

13.5

10.0

FY2013

FY2016(forecast)

FY2019(plan)

0
FY2013<Expenses>

FY2016(forecast)

FY2019(plan)<Net income>

50.0

20.0

(¥ billion)(¥ billion)

44.9
11.5

40.4
10.0

40.0

30.0

0
FY2013

FY2016(forecast)

FY2019(plan)

8.8

FY2013

FY2016(forecast)

FY2019(plan)

22

1. Outline of the Next Management Plan (11) Staffing Plan

Staffing Plan

Aiming to build a 2,300-strong platform<March 31, 2016>* Figures in brackets are the percentage shares

Total no. ofstaff

Branch Sales staff

 Clerical operations
staff

Headquarters

2,669(100%)

1,942
(72%)

<March 31, 2020>
At the end of thenext management plan

Build a 2,300-strong platform(down by 369 staff)◆ Increase the number of sales staff◆ Reduce the number of clericaloperations staff by about 30%◆ Close branches and revise the formats

553
(28%)
349
(17%)

620
(23%)

◆ Reduce the number of non-sales side
staff by about 20%◆ Employ part-timer for about 30% of the
Operation–focused Division staff<March 31, 2022>

2,460

2,300

(100%)(100%)

1,780

1,670

(72%)

(72%)

610
(34%)
230
(12%)

610
(36%)
230
(13%)

580

540

(23%)

(23%)

Part-timer,
etc.

886

 Ratio of parttimer to full-time
staff

24%

31%

(Total no. of employees)(3,555)(3,370)

Increase part-timer ratio (up 184 persons)

1,070

23

2. Priority Strategies(1) Regional Revitalization (i) Creation of Regional Vitality

 Create regional vitality by playing a leading role in local community, people and job areas
Regional Revitalization Initiative
Build a platform to collaborate and cooperate with municipalities Conclude a collaboration agreement* Results: conclusion with the Nara Prefecture and 10 local municipalities in the prefecture Bolster relationships with municipalities
Municipality strategy: Seek to develop relationships with individual municipalities by delivering financing and consulting
functions to them

Get involved in the Japanese government's Regional
Comprehensive Strategy in an aggressive and proactive manner
Community
building Participate in community-building projects
 Bolster PPP/PFI initiatives, etc.

Creation of regional vitality
Generate flows ofpeople Tourism promotion, etc.

Create jobs
 Strive to attract companies Strengthen assistance for start-ups and new
business deployment
 Revitalize the forest product business Provide assistance on herbal medicine andagricultural vitalization, etc.

24

2. Priority Strategies(1) Regional Revitalization (ii) Aid Projects for Tourism Promotion and Local Industry

Tourism Promotion
Utilized tourism revitalization fund

★ Inbound tourists
to Nara Prefecture
38.11 million (2014)⇒ 42.00 million (2019 target)

Revitalization of Forestry Business
Collaborated with forestry business associations

Stimulated tours and excursions

 Entered into a comprehensive collaboration agreement with
Yoshino Kawakami Shachu (February 2016)⇒ Collaboration and cooperation for product creation,
information dissemination, matching with non-forestry
businesses, and development of market

 Ran tours in collaboration with a major travel agency(November and December 2016)

Encouraged and publicized the use of
Nara-made forest products

Encouraged use of Nanto Cotoca,a credit card doubling as an IC cash card

 Engaged in public relations activities at business matching
fair events
 Organized seminars and learning courses with thecooperation of Narano-ki Marketing Council

 Developed the accommodation and tour environment,
tapping into local resources Attracted tourists to partner stores and facilities<Privilege of Nanto Cotoca>
Discount service for partner stores and facilities

Sent out information via applications

Assistance in Pharmaceutical and
Herbal Medicine Sectors
Collaborated with the Nara Prefecture
and unions

Attracted visitors↓
Expanded consumption in
local areas (Use Cotoca)

Increase the number of inbound tourists
Grow tourism-based consumption

 Organized an opinion exchange meeting with the Nara
Prefecture Pharmaceutical Association (August 2016)
 Participated in a Nara Prefecture Herbal Medicine Mecca
Promotion Council event
 Engaged in public relations activities at a business matching
fair event

Expand the market for local industries252. Priority Strategies(2) Pursuit of the Four Reforms(i) Awareness Reform (a) Human Resource and Organizational Strategy

 Vitalize our human resources and organization by i) fostering the spirit of taking on challenges
among the bankers, ii) bolstering the human resource development system and iii) realizing a worklife balance

Foster the spirit of taking on challenges among the bankers
Bolster Organizational Skills
Develop the framework forawareness reform Set up the Nanto Improvement
Committee
 Chair: President
 Introduce consulting from a major
manufacturer-affiliated entity

Optimize staff numbers
 Improve productivity throughclerical operations BPR and sales
BPR and branch consolidation andclosures

Enhance Human
Resource Capabilities

Improve CS and ES

Enhance and enrich the humanresource development system

Deliver products and services
from a customer perspective

Foster specialists in different
sectors

Enrich work-life balance Foster specialists through defining
the roles of retail and corporate
sales staff

Promote efforts for diversity
 Set up the Work Style Reform
Office (October 2016)

 Amend the systems into ones that are more impartial and convincing

Revise personnel affairs systems⇒ Improve employees' motivation and productivity and empower female andsenior-age employees, etc.

◆ Improve human resource quality◆ Improve organization productivity
26

2. Priority Strategies(2) Pursuit of the Four Reforms (ii) Sales Reform (a) Platform and Market Strategy

 Revise the framework of our branches and sales, bolster points-of-contact with customers, anddeliver high-quality services
Rebuild Our Existing Branch Network

Bolster Our Sales Structure

Consolidate and close branches

Expand our sales staff

 Branch closures and format change: around 30 branches(staff reduction effect: about 90 staff)* Includes the number based on implementation in FY2016

 Build a 600-strong sales teamEnhance our unit-based sales structure Improve specialisms while remaining friendly Deliver high-quality service through challenge-solution
sales activities

Unit mother branch

BranchA
BranchB

Retail sales

Bolster non-face-to-face channels
 Consider introducing a new settlement service application

FA OfficeCorporate Business
OfficeConsider New Sales Channels and Services

Customer

FinTech initiative Set up the FinTech Promotion Office (July 2016)
 Considered delivering new financial services that leverage
artificial intelligence (AI), block chains, and biometrics

Loan sales
Retail sales
Loan sales

Customer
FA OfficeCorporate Business Office* Currently in place at 5 units comprising 20
branches in Nara Prefecture⇒ Set up a FinTech Joint Research Group (November 2016)
 Name: Chance FinTech Lab
 Participants are Chance partner regional banks, Bank ofTokyo-Mitsubishi UFJ and IBM Japan.

Revise our over-the-counter sales structure◆ Operate branches according to the market ◆ Improve customer convenience◆ Acquire new customer segments27

2. Priority Strategies(2) Pursuit of the Four Reforms(ii) Sales Reform (b) Retail Business Strategy—Personal Solutions Business Serve as the closest possible consultant for customers of all generations by paying proper
attention to their life stages<Products and services> Shift to one-stop solutions

Youngcustomers

Life stage

Elderlycustomers

Asset-building
customer◆ Investment trust ◆ Life insurance ◆ Credit cards etc.
Products& services◆ Card loan ◆ Personal car loan ◆ Housing mortgage loan
◆ Education loan ◆ Salary remittance◆ Defined contribution pension ◆ Deposit product etc.

◆ Pension remittance◆ Apartment loan
◆ Inheritance-related service etc.

◆ Face-to-face channels (branch, consultation contact point and group company)
Channel◆ Non-face-to-face channels (smartphone application, ATM, online banking, direct service center and website)Sales
system◆ Increase the number of sales staff<Sales system> Improve specialisms◆ Improve specialisms<Channel> Shift to an omnichannel format
28

2. Priority Strategies(2) Pursuit of the Four Reforms(ii) Sales Reform (b) Retail Business Strategy—Asset Investment Services

Nara Prefecture Market
Abundant personal assets

Our current situation

 Balance of savings per household: Ranked top in Japan Securities ratio:
Ranked 6th in Japan Share in deposits in Nara Prefecture⇒ Approx. 50% (excl. Japan Post Bank and JA)
 Share in securities in Nara Prefecture⇒ Approx. 10% (estimate)* Statistics Bureau, Ministry of Internal Affairs and Communications, National
Survey of Family Income and Expenditure (as of November 2014)* Securities ratio = Securities / Balance of savings

Bolster Securities Business and Inheritance Business<Retail sales staff plan>(People)200(¥ billion)

200
150

<Sales plan>

Financial
product
mediation

200.0

96.3
100.0

109

100
FY2015FY2016FY2017FY20180.0

Bolster efforts on inheritance-related service
 Number of mediation transactions: 14 in FY2015 ⇒ 36 in the 1H
FY2016Life
insurance

5.1
32.8
65.2

FY2015 FY2016(forecast)* Includes FA Offices
November 2015: Used tablet devices
April 2016:
Launched the investment trust doubling project(IDP)
October 2016:
Established the Private Banking Office- Arranged for the help desk to support branches- Pursued activities to assist branches inmarketing
November 2016: Arranged for 62 low counter tellers to specialize
in asset investment consultation services
December 2016: Widened the scope of financial productmediation services to cover all of our branches

2.9
35.6
57.6

103.2

Investment
trust

FY2019(plan)<Earnings plan>
8.0(¥ billion)

4.0

0.0

Other

3.71

3.72

1.88

1.93

0.04
1.78

Life
insurance

0.06
1.73

FY2015 FY2016(forecast)Investment
trust

FY2019(plan)* Others: Financial product mediation and trust services, etc.

29

2. Priority Strategies(2) Pursuit of the Four Reforms(ii) Sales Reform (b) Retail Business Strategy—Personal Loans

Bolster Consumer Loans

Bolster Housing Mortgage Loans

Revise card loan product Raise maximum loan amounts and add guarantee service
companies, etc.

Step up promotion via L Plaza 12 outposts staffed by 70 staff (September 30, 2016)

Continue to utilize direct channels
 Expand the scope of direct service center operations(loan service concentration)
 Step up online advertising and promotion-call services

Advance purpose-specific loan products

 Enhancement of our holiday sales system Pursuit of activities targeting mainly leading housingbusiness operators and major local players
 Pursuit of collaborations with branches in the form of
housing sales projects, etc.

 Launched the Female-Only Loan service (August 2016)
 Carried out an Education Loan campaign (November 2016)<Consumer loans balance plan (average balance)><Housing mortgage loans balance plan
(average balance)>
1,000.0(¥ billion)(¥ billion)

30.0

897.8

900.0
20.0

20.2

21.8

822.4
800.0

10.0

700.0
FY2013

FY2016FY2019(forecast)(plan)* Excludes real estate utilization loans

FY2013

FY2016FY2019(forecast)(plan)

30

2. Priority Strategies(2) Pursuit of the Four Reforms(ii) Sales Reform (c) Corporate Business Strategy—Corporate Solutions Business Aim to become the true main bank for the customer through exercising the consultation function
and delivering solutions according to the company's growth stage
Deliver Solutions according to the Growth Stage
Founding
periodGrowthperiodMaturity
periodTransformation period◆ Assistance for start-ups andnew business deployment◆ Business matching service◆ Syndicate loan

◆ Merger and acquisition
support◆ Crowd funding, etc.

◆ Assistance for theacquisition of certificationfor various subsidies◆ Support for overseas
expansion◆ Private placement bonds◆ Insurance product◆ Support for businesssuccession, etc.

Growthperiod◆ Assistance for the formulationof operational improvement
plans◆ Merger and acquisition support,
etc.

Provide solutions as a true main bank
Bolster relationships by utilizing business practicality assessments and local benchmarks◆ Improve the specialisms of sales
staff
・Enhance the unit-based sales
structure◆ Set up the Business
Revitalization Support Office・Established in July 2016
・Bolster the functions of theCredit Analysis Division◆ Strengthen activities toward top
100 companies in Nara Prefecture
・Collaboration between theheadquarters and branches31

2. Priority Strategies(2) Pursuit of the Four Reforms(ii) Sales Reform (c) Corporate Business Strategy—Numerical Targets

Corporate Numerical Targets<Target for the number of new retailbusiness customers>(cumulative number from FY2016)
12,000(Entities)(先）<Target for the number of business practicality
assessment-based borrower>(cumulative number from FY2016)<Target for corporate solutionrelated earnings>(¥ million)(先）(Entities)

1,500

8,000

* A combined total amount offoreign exchange-related
income, syndicate loans,private placement bonds,
business mediation service,merger and acquisition deals,
business succession
support service andcorporate insurance service

10,000

6,000

8,000

1,000

6,000
4,000

3,000

4,000

500

366

2,000

2,000

414

2,000

0

0
2FY2016
8 年度(forecast)(予想)

3FY2019
1 年度(plan)(計画)

0
2FY2016
8 年度(forecast)(予想)

3FY2019
1 年度(plan)(計画)

27年度
FY2015 28年度
FY2016(予想)(forecast)

31年度
FY2019(plan)(計画)32

2. Priority Strategies(2) Pursuit of the Four Reforms(ii) Sales Reform (d) Osaka Strategy—Branch Deployment and Staffing Plan

 Raise the Bank's presence by actively allocating or reallocating our corporate resources, based onbranch continuity
Osaka Staffing Plan

Build a 20-strong Branch Network in Osaka

Reallocate corporate resources appropriately
Shin-Osaka
BranchAmagasaki
BranchOsaka Chuo OfficeOsaka Pref.

National
ranking

Total population

8,836,000 persons

3rd

Number of private
enterprises

440,000 entities

2nd

Balance of deposits¥90.4 trillion

2nd

Balance of loans¥45.1 trillion

2nd

Metric Expand and reallocate staff according to the market

Daito
BranchOsaka Kita
BranchOsaka Higashi
BranchEiwa
BranchOsaka
BranchIshikiri
Branch Hirano Branch
Opened: January 31, 2017
New construction: 1H FY2017(planned)
Izumi
Branch155

Kawachinagano
Branch161

141

Wakaeiwata
Branch

Habikino
BranchSakai
BranchHatsushiba
Branch(People)(人)* Includes L Plaza<Staffing plan of sales staff>

YoshidaBranchYao
BranchTezukayama
Branch

190

140
31, 2
March
31,
2March6/3末
7 / 3 31,
末 2March
8/3末
2014

2015

2016

31,
3March2/3末2020 (plan)(計画)

Bolster the Osaka Regional Headquarters’ Functions
Share information by consolidating corporate
information
Raise decision-making speed and improveplanning skills
 Allocated a dedicated Managing Executive Officer(April 2016)

Bolster and develop the sales business capacity

Izumisano
BranchUpgrade and expand our corporate
22
and retail transaction platform
33

2. Priority Strategies(2) Pursuit of the Four Reforms(ii) Sales Reform (d) Osaka Strategy—Numerical Targets

Numerical Targets in Osaka Area
<Target for the number of new retail business customers>(cumulative number from FY2016)<Target for retail business loan balance>(average balance)

400.0(Entities)(¥ billion)

3,000

350.0

316.8
2,000

300.0

1,000

284.7

250.0

700

200.0

0
FY2016FY2019(forecast)(plan)FY2015FY2016FY2019(forecast)(plan)

34

2. Priority Strategies(2) Pursuit of the Four Reforms (ii) Sales Reform (e) Market Investment Strategy

 Expand profits by diversifying our investment methods while taking risks appropriately
Investment Policy<Target for market-sector core gross business profit> Diversify our investment methods through taking risks
appropriately
 Secure profits steadily through making diversified investments
 Secure profits by flexibly engaging in investment and financing<Target for securities balance>

18.0(¥ billion)

15.0
14.0

2,000.0(¥ billion)

1,719.9 1,753.4
1,500.0

123.0
64.4
107.0

10.0
FY2015

235.1
69.6
125.8

Investment
trusts322.8

Equities

332.6
1,000.0500.0

1,102.5

Eurodenominatedbonds

FY2019(plan)(plan)<Target for bond duration>(Years)Foreign bonds

6

5.3
4.5
4.2

US dollardenominated
bonds

990.3

FY2016

5.7
4.7
4.2

Yen bonds

Yen bonds

Total

0
March 31,2016

0March 31, March 31,
20162017 (plan)

March 31,2020 (plan)* Expansion of market-sector staff by about 10 is planned from
FY2016 onward

March 31,2017 (plan)

March 31,2020 (plan)<Sell policy investment-based shareholdings>
Reduce the balance continually each fiscal year35

2. Priority Strategies(2) Pursuit of the Four Reforms (ii) Sales Reform (f) Group Strategy

 Grow consolidated profits through delivering comprehensive financial services by tapping into ourGroup's capabilities
Bolster Our Group's Capabilities

Banking
operations

Creditguarantee
operations

Lease
operations
 Improve our staff's ability toform lease transactions

Deliver comprehensive
financial services⇒ Grow consolidated profits

Software operations

Credit card operations

Other
operations

 Raise usage ratio and hikemembership fees for member
merchants
 Increase no. of corporate credit card
plan members

 Consider meeting customers' real estate-relatedneeds Consider working on new business domains

36

2. Priority Strategies(2) Pursuit of the Four Reforms (iii) Clerical Operations Reform(a) Clerical Operations Strategy—Rebuilding of Our Clerical Operations Structure Fundamentally overhaul the clerical operations of branches and the headquarters, thustransforming the organization into a more efficient one
Rebuilding of Our Clerical Operations Structure
Clerical operations: Abolition, simplification, machine usage, labor saving and concentration

Branches
Reduce clerical workload by 30%
 Simplify operations and use machines more Consolidate back office clerical operations
into the headquarters
 Rebuild the document management framework
 Revise and/or abolish products and services

Reduce clerical operations
staff by 30%

Use IT to streamline operations
 Utilize tablet devices

Revise our over-the-counter sales structure

Headquarters
 Aggressively eliminate waste Turn the organization into one that can be run bya small number of staff members
 Merged the Operations Control Division and the
Operations Division (October 2016)⇒ Allocated staff to strategic divisions

Reduce the number of existing staff by 20%
Reduce the number of Operations Division
staff by 30%

Installed the Operations Support Team
(June 2016)
 Concentrated branches' back office clericaloperations
・ Established in the Operations Control Division (June2016)
・ Intended to engage in branches' back office clericaloperations in a self-contained manner

Become a more efficient organization⇒ Improve productivity

37

2. Priority Strategies(2) Pursuit of the Four Reforms (iii) Clerical Operations Reform(a) Clerical Operations Strategy—New Branch Structure

New Branch Structure
・ Assign part-time employees tohigh-counter teller service
・ Arrange for low-counter tellers to solely
provide asset investment services

Low counter
Loan counter

Staff

Staff

Staff

Part-timer

Part-timer

Simplify the clerical procedures for different types of
notifications and concentrate inheritance procedures, etc.

ManagerManager

Sales
Staff

Part-timer

Staff

・ Increase the numberof sales staff

Staff

Part-timer

Part-timer

Continue to shift to a paperless format basedon the document management system
Concentrate back office clerical operations in the Center
toward completing the operations in a self-containedmannerCustomer service teamAccount executive teamUtilize tablet for asset
investment
consultation service

Staff

Staff

Tablet

Staff

Staff

High counter・ Reduce the number of clericaloperations staff by 30%

38

2. Priority Strategies(2) Pursuit of the Four Reforms (iv) Expenses Reform (a) Expenses Strategy

 Revise expenses as a whole to transform our expenses structure
Transform Our Expenses Structure
Allocate personnel expenses effectively<Personnel expenses plan>(¥ billion)

26.3
 Revise our personnel affairs and pension systems

25.0

22.3
20.0
Invest strategically in IT and FinTech
 Make investments to deliver higher customer
convenience and improve the Bank's productivity

15.0
FY2013

Invest on human resource development
 Make investments toward fostering specialists andimproving skills

Reduce non-personnel expenses

FY2016FY2019(forecast)(plan)<Non-personnel expenses plan>(¥ billion)

18.0

17.7

15.6

16.0

 Continue to rigorously lower non-personnel expenses

14.0
FY2013

FY2016FY2019(forecast)(plan)

39

2. Priority Strategies(3) Upgrading of Management and Controls

 Upgrade our management and controls to firmly support the business model and to obtain evengreater trust from customers
Upgrading of Management and Controls
Rigorously ensure customer protection
Bolster our risk control

 Strengthen our control framework for customer protection

 Bolster our comprehensive risk management
 Bolster our market risk control Detect risks for increasingly diverse investment
assets in a more rigorous manner Measure interest risk amounts precisely andperform interest controls
 Upgrade our credit risk controls
 Strengthen measures to address serious system
failure and cyber security matters Put fiduciary duty into practice Disclosure of insurance agency commission(October 2016)

Strengthen earnings management
and governance platforms
 Perform earnings management toward improving
profitability
 Bolster our corporate governance Introduced the Executive Officer System (April 2016)
 Increased the number of outside Directors (June 2016)
 Changed director term of office(from two years to one year) (June 2016)

Build a more solid management and control frameworkthat supports our business model40

Appendix
1. Share in Nara Prefecture

Appendix-1

2. Business Conditions for Local Companies(Sentiment on Local Economy)

Appendix-2

3. Business Bankruptcy and Employment Conditions

Appendix-3

4. Population and Number of Private Enterprises

Appendix-4

5. State of Loans by Industry

Appendix-5

6. Shift in Classification of Debtors

Appendix-6

7. Total Risk Management

Appendix-7

8. Pursuit of CSR Activities

Appendix-8

1. Share in Nara Prefecture
Share in Loans

Share in Deposits

Trust banks

Trust banks

0.1%

3.6%

Shinkin banks

Shinkin banks

18.1%
Regional banks

17.8%
Nanto Bank

8.4%

Regional banks

4.0%

49.0%

Nanto Bank

49.0%

Mega banks

Mega banks

24.3%

25.5%

* Commercial banks, trust banks and shinkin banks in Nara
Prefecture. (excluding agricultural cooperatives, Japan Post
Bank) (as of September 30, 2016)

Share indeposits

(%)
50.0

49.3

49.0

49.1

48.8

48.5

48.5

48.7

49.2

49.1

49.2

48.1

47.8

47.8

48.7
Share in
loans

45.0

40.0

49.0
49.0

March
2013

September
2013

March
2014

September
2014

March
2015

September
2015

March
2016

September
2016

Appendix-1

2. Business Conditions for Local Companies (Sentiment on Local Economy)
Business Sentiment among Nara Prefecture-based
Companies (Quarter on quarter DI)

20
(DI)

DI = (Percentage share of "positive" companies)– (Percentage share of "negative" companies)

120

-2.1

0

Industrial Production Index

奈良
近畿
全国

110

Kinki region 107.0

-5.7
-8.9

-10.9

-12.7

104.0
101.5

-13.3

-14.3

-15.4

-20

-15.8

98.4

99.7

-20.5

-22.5

National
average

100

92.2

90

-40

Nara Pref.

-60

80
Apr. toJun.

Jul. to
Sep.

Oct. toDec.

FY2014Jan. toMar.

Apr. toJun.

Jul. to
Sep.

Oct. toDec.

FY2015Jan. toMar.

Apr. toJun.

Jul. to
Sep.

Oct. toDec.
(forecast)

FY2016(Source: Nanto Economic Research Institute)

March

3月

September

9月

FY2014
26年度

March

3月

September

9月

FY2015
27年度

March September

3月

9月

FY201628年度(Source: Ministry of Economy, Trade and Industry, Kinki Bureau of
Economy, Trade and Industry, Nara Prefecture)

Appendix-2

3. Business Bankruptcy and Employment Conditions
Number of Bankruptcies in Nara Pref.
(Cases)(¥ billion)

30.0

Effective Ratio of Job Offers to Applicants

Total debts

164

200

(Times)（倍）Osaka Pref.

1.40

Number of bankruptcies

1.40
1.38

116

97

29.2

National
average 1.29

16.0

28

10.6

Kinki region

2.2

0
FY2013

FY2014FY20150

1.13

FY2016(Apr. to Sep.)
1.08<Number of bankruptcies by industry>

Nara Pref.

8

Construction

7

Retailing

6

Wholesaling

1.09

3

Manufacturing2

Services
Transportation andcommunication

1

Others

1
0

0.80
April
26/4
2014

(Cases) 10

April
July October
26/7
26/10 January
27/1 27/4
2014

2014

2015

2015

July October
27/7
27/10 January
28/1 April
28/4
2015

2015

2016

2016

July
28/7
2016

[Source: Ministry of Health, Labour and Welfare][Source: Teikoku Databank]Appendix-3

4. Population and Number of Private Enterprises
Population and Number of Households (Nara Prefecture)
Number ofhouseholds(Thousand of people)

1,500
573
555

560

577

580

Number of Private Enterprises(Thousand ofhouseholds)

Feb. 29,
2012

Jul. 31,2014

National
average

5,886,193

5,453,635

5,442,764-443,429

-7.5

Osaka
Pref.

443,848408,713403,852-39,996

-9.0

Nara
Pref.

50,42446,711

46,774-3,650-7.2

Change from Jul. 31, 2009

Population

1,392 1,384 1,376

1,300

(%)

Number of entities

583

564

1,411 1,406 1,401 1,394

Jul. 31,
2009

600[Source: Statistics Bureau, Ministry of Internal Affairs and Communications, Economic Census]

500
Mar. 31, Mar. 31, Mar. 31, Mar. 31, Jan. 31, Jan. 31, Jan. 31,
2010
2011
2012
2013
2014
2015
2016

[Source: Nara Prefecture]

Future Population Estimates (by prefecture)

Number of Private Enterprises by Industry (Nara Prefecture)(2010 = 100)

Jul. 31,2009

Feb. 29,
2012

Jul. 31,2014

Change from Jul. 31, 2009
Change (number)

All industries
Agriculture, fishery and forestry

100.0

Mining, stone and gravel quarrying
Construction
Manufacturing

90.0

National
averageMie Pref.
Shiga Pref.
Kyoto Pref.

80.0

Osaka Pref.
Hyogo Pref.
Nara Pref.
Wakayama
Pref.

92.8 Shiga Pref.

Electric, gas, heat supply and water supply
Information communication
Transportation and postal services

84.4 Kyoto Pref.
84.1 Osaka Pref.
83.8 National
average83.6 Hyogo Pref.
81.3 Mie Pref.
78.3 Nara Pref.

Wholesaling and retailing
Finance and insurance
Real estate and leasing
Academic research and specialized and technology services

Accommodation and food services
Living and entertainment services

71.8

Wakayama
Pref.

70.0

Education and learning-aid services
Medical and welfare services
Integrated services

2005 2010 2015 2020 2025 2030 2035 2040
[Source: National Institute of Population and Social Security Research]

Others (*)

50,424
132
5
4,394
5,423
35
342
821
14,073
732
3,288
1,568
5,552
4,365
1,630
3,451
443
4,170

46,711
117
6
3,882
5,073
34
282
785
12,434
694
3,050
1,446
5,184
4,101
1,629
3,603
323
4,068

46,774
138
6
3,712
4,740
41
264
743
12,451
719
2,967
1,505
5,167
4,144
1,730
4,172
428
3,847

-3,650
+6
+1
-682
-683
+6
-78
-78
-1,622
-13
-321
-63
-385
-221
+100
+721
-15
-323

Change (%)

-7.2%
+4.5%
+20.0%-15.5%-12.6%+17.1%-22.8%-9.5%-11.5%
-1.8%
-9.8%
-4.0%
-6.9%
-5.1%
+6.1%
+20.9%-3.4%-7.7%(*) Others: Religion; car maintenance; political, economic and culture associations; and waste treatment services[Source: Statistics Bureau, Ministry of Internal Affairs and Communications, Economic Census]

Appendix-4

5. State of Loans by Industry
Loans Outstanding by Industry

Ratio of Loans by Industry(¥ billion)

Mar. 31, Mar. 31, Mar. 31, Sep. 30,
Change from
2014
2015
2016
2016 Mar.
31, 2016(%)

Mar. 31, Mar. 31, Mar. 31, Sep. 30,
Change from
2014
2015
2016
2016 Mar.
31, 2016

Total lending volume2,983.9 3,088.7 3,198.1 3,240.9

42.7

Total lending volume100.00 100.00 100.00 100.00―

Manufacturing

490.3

502.3

500.7

502.2

1.4

Manufacturing

16.43

16.26

15.66

15.50

-0.16

Agriculture and forestry

3.0

2.9

2.7

2.3

-0.4

Agriculture and forestry

0.10

0.10

0.09

0.07

-0.01

Fishery

4.1

4.3

3.7

3.6

-0.1

Fishery

0.14

0.14

0.12

0.11

-0.00

Mining, stone and gravel
quarrying

7.3

7.1

11.7

11.4

-0.2

Mining, stone and gravel
quarrying

0.25

0.23

0.37

0.35

-0.01

Construction

85.9

84.0

85.1

78.3

-6.8

Construction

2.88

2.72

2.66

2.42

-0.25

Electric, gas, heat supply andwater supply

23.6

27.6

27.8

24.3

-3.4

Electric, gas, heat supply andwater supply

0.79

0.89

0.87

0.75

-0.12

Information communication

34.7

36.3

39.7

46.0

6.3

Information communication

1.16

1.18

1.24

1.42

0.18

Transportation and postal
services

94.7

91.0

105.2

108.0

2.7

Transportation and postal
services

3.17

2.95

3.29

3.33

0.04

Wholesaling and retailing

290.9

300.9

292.2

296.5

4.3

Wholesaling and retailing

9.75

9.74

9.14

9.15

0.01

Finance and insurance

158.6

158.5

148.4

126.1

-22.2

Finance and insurance

5.32

5.13

4.64

3.89

-0.75

Real estate and leasing

327.7

344.8

359.8

372.2

12.3

Real estate and leasing

10.98

11.17

11.25

11.49

0.23

Services

164.6

166.4

177.5

177.9

0.3

Services

5.52

5.39

5.55

5.49

-0.06

Local public entity

436.4

483.9

541.6

574.1

32.4

Local public entity

14.63

15.67

16.94

17.71

0.78

Others

861.5

878.0

901.3

917.3

15.9

Others

28.87

28.43

28.18

28.30

0.12

Appendix-5

6. Shift in Classification of Debtors<As of September 30, 2016>
 Total credit (loans):
 Loans to normal debtors:
 Loans to debtors requiring caution andsubstandard debtors:
 Loans to potentially bankrupt debtors and lower:¥3,262.3 billion (increase of ¥46.5 billion from Mar. 31, 2016)¥3,079.6 billion (increase of ¥59.5 billion from Mar. 31, 2016)¥124.2 billion (decrease of ¥7.5 billion from Mar. 31, 2016)¥58.4 billion (decrease of ¥5.4 billion from Mar. 31, 2016)(¥ billion)(Subject: Credit
related claimableassets such asloans)

1
2
3
4
5
6
7

Normal debtors
Debtors requiring caution
Substandard debtors
Potentially bankrupt debtors
Bankrupt and effectively
bankrupt debtors

New debtors
Total

As of
March 31,2016a3,020.1
118.7
13.0
58.0
5.8
0.0
3,215.7

As of September 30, 2016
Normal assetsb2,974.6
14.9
1.3
0.0
0.0
88.6
3,079.6

Assetsrequiring
caution

c
12.0
95.9
0.3
2.9
0.0
0.5
111.9

Substandard
assetsdPotentiallybankrupt
assetsBankrupt and For collection
effectively
or write-offsbankrupt assets

e

1.4
0.3
9.7
0.7
0.0
0.0
12.2

1.2
2.2
0.4
46.9
0.1
0.0
50.9

f
0.5
0.2
0.0
4.0
2.6
0.0
7.4

g
30.1
5.0
1.0
3.3
3.0
0.0
42.6

Change over March 31, 2016
Normal assets

59.5

Assetsrequiring
caution-6.7

Substandard
assets-0.8

Potentiallybankrupt
assets-7.0

Bankrupt andeffectively
bankrupt assets

1.6

Total

46.5
Appendix-6

7. Total Risk Management
Total Risk Management
Distribution for
capital adequacy(as of Sep. 30, 2016)¥260.3 billion

Risk capital(2H FY2016)¥160.5 billion

Risk amount(as of Sep. 30, 2016)¥79.1 billion

250.0(¥ billion)

Non-distributed capital adequacy¥99.8 billion

8.5
21.0
45.0

260.3

Buffer ¥81.3 billion

7.8
18.8
20.4
32.0

86.0
0

←Operational risk
←Credit risk
←Stock risk
←Interest rate risk, etc.

・Distribution for capital adequacy = Core capital + Valuation difference on available-for-sale securities reported
on the balance sheet
・Interest-rate risk measurement includes use of an internal model that considers core deposits<Risk Measurement Method>
Measurement
Approach

Confidence
Level

VaR

99%

1 yearInterest rate, investment purposes

VaR

99%

120 business days

Strategic purposes

VaR

99%

240 business days

Short-term trade

VaR

99%

10 business days

Credit risk

Market risk

Operational risk

Holding Period

Gross profit distribution approach

Appendix-7

8. Pursuit of CSR Activities

Social contribution activities Nanto Bank hockey team “Shooting Stars”
 Nanto Nara cheer squad (volunteer guides) Nanto Scholarship Society
 Financial and economic education
 Small Kindnesses Society (cleanup activities, blood
donation activities, etc.)
Nanto Bank hockey team

Environmental preservation activities

Won their seventh title, their first in 11 years, at the
38th Amateur National Hockey Championship Yoshino Cherry Tree Preservation Group Community support utilizing forests and wood Promotion of environmentally-conscious financial
products
 Cool Biz (lighter employee attire) Establishment of recycling centers

Community support through forest preservation andsupporting forestry revitalization

Brochure stand madefrom Yoshino cedar

Participated in the Third Forests, Trees
and Houses of Nara Festa event as a host

Volunteer guides

Financial and economic education(All Japan High School Economics
Quiz Tournament)

Manyo charity walkYoshino Cherry Tree Preservation
Group (fund-raising campaign)

Appendix-8

In this material, we refer to the future performance of the bank.
However, please be aware that these contents do not guarantee our future
performance and it may change due to the unexpected risks and uncertainties in
the operating environment.

[Contact, if any:]
The NANTO BANK, LTD. Corporate Planning DivisionTEL:0742-27-1552

FAX:

0742-20-3614

E-mail: ir-souki@nantobank.co.jp
URL:

http://www.nantobank.co.jp/