About Nanto Bank

Progress under the Management Plan

Progress under the Management Plan
Management Plan overview
In December 2019, the Nanto Bank Group announced its management goals and mission for the period from April 2020 to March 2030
under the title “Nanto Mission and Goals for Achievement in 10 Years.”
The three tenets of the Nanto Mission are “pursuit of regional development,” “creation of vitality-creating human resources,” and“improvement of profitability.” All are aimed at contributing to achievement of Nanto Bank’s goals of increasing Nara prefecture’s GDP byapproximately 350 billion yen, cultivating 350 management personnel, and achieving non-consolidated ROA of 0.35% or above.
We followed this goal creation in December 2021 by formulating five new indicators as renewed interim targets for FY2024:
consolidated profit of 3 billion yen from customer transactions; OHR of less than 70%; ROE of at least 4.0%; non-consolidated ROA of atleast 0.25%; and cultivation of 1,000 qualified vitality creation personnel.

Earliest possible return to profitability of core businesses and progress toward interim targets
Interim targets (to March 2024) and status of achievement
FY2021results
Profit from customer
1.8 billion yen
transactions (consolidated)

FY2022
results

FY2023planInterim target(FY2024)

5.8 billion yen

5.6 billion yen

30 billion yen

OHR (consolidated)

68.1%

72.5%

73.1%

Below 70%

ROE (consolidated)

4.09%

1.72%

4.18%

Above 4.0%

ROA (non-consolidated)

0.25%

0.20%

0.21%

0.25% orabove

Number of employeeswith qualifications related
to vitality creation

559

601

750

1,000

In FY2021, we succeeded three years ahead of schedule in surpassing
our initial interim target for non-consolidated profit from customertransactions, also referred to herein as “profit from core businesses
operations,” set for achievement by FY2024. Subsequent efforts to further
reinforce the Group’s ability to achieve its revised interim target led toconsolidated profit on customer transactions of 5.8 billion yen in FY2022,
exceeding the new interim target by 4.0 billion yen year on year. The same
period saw our OHR worsen and our ROE and ROA decline due to a
falloff in profit resulting from a disposal of losses in the market sector.
In FY2023, we plan to enhance our ROE and ROA indicators
through improved market sector earnings.

Fiscal 2022 results and outlook for fiscal 2023
Profit from customer transactions
In the “income” column in our FY2022 results, interest on loans and bills discounted
increased by 2.1 billion yen from the previous fiscal year to 34.2 billion yen due to improved
loan yields stemming primarily from an increase in the balance of loans and bills discounted
5.8
5.6
as a result of comprehensive funding support for responses to the coronavirus pandemic.
Net profit on services and other transactions also grew by 0.6 billion yen from the previous
1.8Planned
0.3
fiscal year to 7.0 billion yen due to an increase in home loan-related fees and income fromcorporate solutions.
-3.2
The “expenses” column, meanwhile, showed year-on-year downturns in both
2019
2020
2021
2022
2023 (Fiscal year)
personnel expenses and property and equipment expenses of 0.1 billion yen and 0.5 billion
yen, respectively, owing mainly to a decrease in deposit insurance premiums.
Consolidated net profit from customer services increased as a result, rising by 4.0 billion yen from the previous fiscal year to 5.8 billion yen due to an
improvement in the Bank’s non-consolidated net profit from customer services.
We expect to achieve higher income in FY2023 by raising interest on loans by 0.9 billion yen from the previous fiscal year to 35.1 billion yen through anincrease in the average balance of loans, and by raising net fees and commissions by 0.1 billion yen from the previous fiscal year to 7.1 billion yen throughan increase in fees and commissions. We expect to record higher revenues in the corporate solutions business as well.
As concerns expenses, meanwhile, although we will continue to implement our planned personnel reductions, our personnel expenses are expected
to remain almost unchanged due to such factors as higher basic salaries, while property expenses are expected to rise by 1.1 billion yen from the previous
fiscal year to 14.9 billion yen due to strategic investments in such IT instruments as smartphone banking applications.
In consideration of the above factors, we expect to record consolidated net profit from customer transactions of 5.6 billion yen in FY2023, a year-onyear decline of 0.2 billion yen.
Trends in profit from customer transactions (consolidated)(Billions of yen)

Credit-related expenses
Credit-related expenses slipped by 0.5 billion yen from the previous fiscal year to
1.4 billion yen in FY2022, as the occurrence of nonperforming loans fell in response
to our efforts to shore up our core businesses to cope with the effects of thepandemic.
The nonperforming loan balance rose by 5.5 billion yen from the end of theprevious fiscal year to 58.9 billion yen, leading to a nonperforming loan ratio of 1.46%.
While new accruals are expected to increase year on year in FY2023 due tosuch factors as higher prices and the start of full repayment of pandemic-relatedloans, we foresee a downturn in credit expenses of ¥0.4 billion year on year to ¥1.0
billion in response to an expected reversal of allowances for loan losses resulting
from improved business performance by customers of our business improvement
services.

10 Nanto Report 2023, the integrated report of Nanto Bank

Trends in credit-related expenses (non-consolidated)(Billions of yen)

6.9
2.9

2.0

1.4

1.0
Planned

2019

2020

2021

2022

2023 (Fiscal year)

Trends in non-performing loans outstanding and the NPL ratio(Billions of yen)

1.47%

1.35%

1.35%

1.46%

51.8

52.0

53.3

58.9

2019

2020

2021

2022 (Fiscal year)

About Nanto Bank

Developing Human
Value Creation by theGovernance Supporting Our Consolidated Financial
Resources for Value Creation Group’s Human Resources Proactive Human ResourcesStatements

Our Shared Vision

GovernanceBusinessmodelStrategies
and resources
allocationPerformanceOutlook

Market sector revenue
Market sector revenue trends (non-consolidated)(Billions of yen)

18.2

17.5

17.3

14.2
Planned

1.0
2019

2020

2021

2022

2023 (Fiscal year)

Income in the market sector fell sharply by 16.2 billion yen from the previous year
to 1.0 billion yen in FY2022 in response to the sale of all fixed-rate foreign bonds
whose positions had reversed in order to secure stable income from FY2023
forward. This result reflected ordinary income of 10.7 billion yen and capitalincome of -9.7 billion yen.
We are planning to increase our market sector earnings by 13.2 billion yenfrom the previous fiscal year to 14.2 billion yen in FY2023 through improvements
in both capital income and earned income.

Net IncomeTrends in net income (consolidated)(Billions of yen)

11.8

10.8

3.1
2019

2020

2021

11.0

4.7

Planned2022

2023 (Fiscal year)

Consolidated net income for FY2022 fell to 4.7 billion yen, a decrease of 7.1
billion yen from the previous year attributed to a significant downturn in market
sector income, while income from customer transactions increased and creditrelated expenses decreased. Our main business segment earnings excluding themarket segment remained steady owing to a restructuring of our portfolio.
We anticipate consolidated net income of 11.0 billion yen in FY2023, a yearon-year increase of 6.2 billion yen due to improved market sector earnings,
although profit from customer transactions will likely remain mostly unchanged.

Capital policy
Basic policy
While implementing comprehensive measures to ensure the Group’s financial soundness, we are also working to raise its medium- to longterm corporate value by realizing returns commensurate with the cost of shareholders’ equity through strategic investments for sustainablegrowth and stable, flexible returns to shareholders.

Capital adequacy ratio
Trends in the capital adequacy ratio (consolidated and non-consolidated)
(%)

9.75
9.40

2018

9.39

9.47

9.60

9.06

9.15

9.29

2019

2020

Consolidated

2021

9.25
8.95

The Group’s consolidated capital adequacy ratio decreased by 0.35 percentage
point to 9.25% and its non-consolidated capital adequacy ratio by 0.34
percentage point to 8.95% from the previous year in FY2022 due to an increase inrisk-weighted assets and a decrease in net income for the period.
The future will see us continue our efforts to maintain an appropriate capital
adequacy ratio and to manage capital efficiently.

2022 (Fiscal year)

Non-consolidated

Policy on returns to shareholders rends in dividends and the consolidated dividendTpayout ratio
(Yen)
81.7%
76.4%
%
30.1%
30.2
24.0%
80

110

80

113

104
Forecast

2019
2020
Dividend per share

2021
2022
2023 (Fiscal year)
Consolidated dividend payout ratio

Although our FY2022 financial results recorded a significant decrease in net income,we paid the year-end dividend of 73 yen per share as announced in Septemberof last year. This action reflected the fact that our business performance, including
our profit from customer transactions and excluding the impact of the disposalof losses in the market sector, was generally in line with our plan. As a result, theannual dividend for the year, including an interim dividend of 40 yen, was 113
yen per share. The annual dividend planned for FY2023 is 104 yen per share inaccordance with the policy on returns to shareholders shown below.
Policy on returns to shareholders (announced February 2022)
Maintain a stable dividend of ¥80 per share, while aiming for a dividend payout ratioof 30% of net income payable to shareholders of the parent company.

Cross-shareholdingT rends in the market value of cross-shareholdings and theratio of cross-shareholdings to net assets
26.5%

26.1%

28.6%

77.9

74.7

75.2

(Billions of yen)
Approx. 20

Target2020
2021
Balance ofcross-shareholdings (market value)2022
2024 (Fiscal year)
Percentage in net assets(consolidated)

Nanto Bank engages in cross-shareholding when it contributes to ensuring theGroup’s sustainable growth and maintenance or enhancement of its corporate
value, and when it is considered necessary to the Group’s business strategy.
The ratio of the balance of cross-shareholdings to consolidated net assets ona market value basis declined from 38.3% at March 31, 2015 to 28.6% at March
31, 2023. We have set a target of reducing this ratio to about 20% by end March2025 as part of efforts to maintain an awareness of capital efficiency in the Bank’smanagement.

Nanto Report 2023, the integrated report of Nanto Bank11