About Nanto Bank

President’s Message

The Nanto Bank Group’s“unconventional” humanresources provide
support for issues facedby customers and theregion.

President (Representative Director)

Takashi Hashimoto

4 Nanto Report 2023, the integrated report of Nanto Bank

About Nanto Bank

Our Shared Vision

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

Organizational
overview and external
environment

GovernanceBusinessmodelRisks andopportunities

Strategiesand resources
allocation

Performance

OutlookIntroduction
The Japanese economy is currently showing signs of recovery, as economic
activity returns to normal following the downgrading of the new coronavirus
strands to category 5. Consumer spending is recovering steadily, boosted
by rising wages and a positive appetite for investment, including capital
investment in the corporate sector.
Downside risks to the economy are increasing at the same time, however,
due to proliferating geopolitical risks and rising prices of resources and raw
materials. In the financial markets, the environment surrounding financial
institutions remains uncertain due to financial system instability and prolonged
monetary tightening in the United States and Europe.
In Nara prefecture, which forms the primary business base of theNanto Bank Group, consumer spending and corporate activity are gradually
recovering, and demand for tourism, driven largely by foreign visitors toJapan, is picking up. On the other hand, structural social issues, such as
contraction of the regional economy due to a declining birthrate and aging
population and a shortage of successors to take over private companies,
are increasing in severity. As a regional financial institution, we consider it
our role and responsibility to continue contributing to regional development
by confronting these issues head-on. We are working together with ourcustomers and local communities to resolve them, attaining sustainablegrowth of the Group as a result.

Nanto Report 2023, the integrated report of Nanto Bank5

About Nanto Bank

President’s Message

Progress of the Management PlanSince April 2020, the Group has been working to implement the Nanto Mission: “Pursuit of regional
development, fostering of vitality-creating human resources, and enhancement of profitability,” in accordancewith our Management Plan, “Nanto Mission and the Group’s Goals for Achievement in 10 Years.”
In FY2021, we achieved the preliminary interim target stated in our Management Plan for nonconsolidated profit from transactions with customers by FY2024, three years ahead of schedule. We
then moved in December 2021 to establish a new interim target of 3 billion yen in non-consolidated
profit from transactions with customers aimed at achieving a higher level of profitability as a Group.
In the fiscal year ended March 31, 2023, consolidated
net profit from transactions with customers exceeded therevised interim target due to increased interest on loans andfees, profits on service transactions, and reduced expenses,
results underpinning a steady increase in net businessprofit. We credit the stable profitability of our customertransactions for facilitating construction of a “muscular”
management structure capable of supporting strategic
investment in IT fields such as smartphone banking from a
medium- to long-term perspective.
At the same time, however, our net income decreased
due to lower earnings in the market sector. This reflected
the sale of instruments such as fixed-rate foreign bonds, allof which saw their earnings reversed due to rising interest
rates in Europe and the United States. Going forward, we will stabilize our market sector earnings by
restructuring our portfolio to emphasize yen bonds.
The Nanto Bank Group will celebrate its 90th anniversary in June 2024. We are proud to attributeour long-term market presence to growth together with the regional community we serve, achieved
through a commitment to regional development based on the invisible assets of confidence and trust
granted us by our stakeholders. In this fiscal year, it will be important for us to finalize achievement ofour interim goals for FY2024. All the Group’s officers and employees share a commitment to working
together to realize the Nanto Mission with the aim of ensuring our ability to remain a bank that grows
together with the community.

Nanto Mission
Pursuit of regional
development
Fostering ofvitality-creating
human resources
Profitability
enhancement

FY20206 Nanto Report 2023, the integrated report of Nanto Bank

Early achievement of the Group’s
preliminary interim targets

Management Plan, The Nanto Mission and Goals for Achievement in 10 YearsFY2021

New interim targets (FY2024)
Profit / loss on customer transactions(Consolidated)
OHR (Consolidated)Reset

ROE (Consolidated)
ROA (Non-consolidated)
Employees with certification in fields
related to vitality creation

FY2022+3 billion yen
Under 70%

4.0% or higher
0.25% or higher
1,000Current
fiscal year

90th Anniversary

FY2023

FY2024

Goals for achievemen (FY2029)
Nara prefecture GDP
Up approx. 350 billion yen
Management
personnel cultivation

350

ROA (Non-consolidated)
0.35% or above(June 2024)

FY2029About Nanto Bank

Our Shared Vision

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

Organizational
overview and external
environment

GovernanceBusinessmodel

Risks andopportunities

Strategies
and resources
allocation

Performance

Outlook

Fostering human resources to realize sustainablegrowth for customers and the community
Do customers feel a strong desire to work on their issues with us?
Over the nine decades since its establishment, the Group has steadily built relationships of trust with its
customers by providing products and services that ensure their ability to conduct transactions with us
safely and securely. With changes in our operating environment, such as a contraction of the workingage population and rapid progress in digitalization, however, the challenges confronting customers are
becoming increasingly diverse and complex. Our ability to continue contributing to their sustainablegrowth under these circumstances will require seeking solutions to their various challenges from thecustomers’ perspective, rather than simply providing products and services generated in our traditional
deposit and loan business.
The first step toward achieving this ability will be to realize ourselves as a Group with whichcustomers feel a genuine desire to work closely. We are responding by fostering “unconventional”
human resources who meet this standard. When customers want to take on new challenges or solve
difficult problems, the Group will be the first institution they turn to for advice, and we will have earned
the right to claim that we have established true relationships of trust that enable us to grow together.
Not only in our relationships with customers but also within the Group itself, the presence ofmany human resources with whom customers express a desire to work and who are recognized by
the community as their “go-to experts” to consult with about issues will undoubtedly contribute toincreasing the Group’s corporate value.
At a time when the concept of human capital management is becoming increasingly prevalent,
the Group is investing actively in personnel recruitment based on a recognition that “human resources
are our most valuable management capital.”

An organization that pursues diversity and cultivates unconventional human resources
Inspiring customers and colleagues with a genuine desire to work in collaboration with us requires
our personnel to acquire specialized skills and accumulate a diverse range of experiences. We areresponding by providing growth opportunities such as secondment to outside organizations, dispatchof trainees, personnel exchanges among Group companies, and support for acquisition of qualifications
that contribute to problem-solving. We are also working to diversify our human resources by expanding
our career recruitment program and introducing a system to encourage participation in side jobs.
If every Group employee combines advanced expertise, varying values, and diverse experiencewith a clear awareness of their personal goals for accomplishment in the Group, the growth direction
they wish to follow, and the ways in which they want to give back to the community, and if they
consistently draw on these attributes to find the best possible solutions from their own perspective,
new financial services and solutions will naturally emerge.
I consider it my most important mission to foster an organizational culture in which every single
employee’s ideas are respected, and in which each can continue to do what they want to and should
do with conviction.

Nanto Report 2023, the integrated report of Nanto Bank

7

About Nanto Bank

President’s Message

Value created by the Group’s human resources
We will deploy our human resources to achieve sustainable management that enables collaborative
development of the Group with its local communities by addressing and resolving issues faced by eachindividual customer, the regional communities and society as a whole.

Resolving customer issues
Since the introduction of the Management Plan, we have been devoting ourselves to maximizing efforts
to “know our customers.” Among these efforts, we not only propose financial products or services
but also endeavor to further deepen mutual understanding with our customers by tackling the real,
underlying problem causing the issues they face together..
Problems uncovered in these “know our customer” efforts involve various matters beyond theneed for cash flow support, such as management improvement, securing human resources, andbusiness succession. We not only work together as a Group to resolve such issues, but we also makethe utmost use of our external expert network to provide a variety of solutions that go beyond financial
activities in furtherance of our customers’ sustainable growth.
We continue to help individual customers achieve affluent lives with peace of mind bycooperating closely in their life planning and providing superior services and information in a timely
manner to meet their various needs and challenges, especially those emerging in today’s “era of 100year lifetimes.”

Responding to local issues
As concerns fostering the growth of the regional economy, there are challenges facing the region
that cannot be addressed merely by solving the issues of individual customers. For example, Nara’s
agricultural output is among the lowest in Japan, and its farming industry’s sustainability is becoming acommon concern due to the aging of farmers and increase in the number of abandoned farms.
As concerns tourism, despite Nara’s being one of the nation’s richest prefectures in terms of
tourism resources that include numerous World Heritage
sites and national treasures, the majority of tourists are
daytime visitors, and spending on tourism is relatively low
compared to that in neighboring prefectures.
The Group is responding directly to these various regionalissues, not only by meeting customers’ needs, but also bytaking the initiative proactively in establishing local businesses.
Specific examples of these efforts include our founding ofNara Mirai Design Co., Ltd., a regional revitalization company
organized to establish a profitable and sustainable agriculturalmodel by using the so-called “smart agriculture” technology,
as well as information and communication technologies (ICT).
Among its various efforts to promote excursions and longer-

8 Nanto Report 2023, the integrated report of Nanto BankAbout Nanto Bank

Our Shared Vision

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

Organizational
overview and external
environment

GovernanceBusinessmodelRisks andopportunities

Strategies
and resources
allocation

Performance

Outlook

stay tourism, Nara Mirai Design has acquired an old private house in the town of Yoshino, which it plansto renovate as an attractive lodging and tourism facility over the next several years.
Another issue involves Nara prefecture’s forests, which account for approximately 77% of theprefectural land area and are recognized as one of Japan’s leading sources of high-quality timber. We
are seriously considering engagement in a platform project to improve productivity in the forestry andlumber industries.
In October 2022, our specialized investment subsidiary Nanto Capital Partners established asocial impact fund, the first of its kind among regional banks, to invest in startup companies that seek
solutions to such regional issues as the declining population and aging society of Nara prefecture andthe surrounding region.

Confronting issues facing society at large
Attaining sustainable growth of our regional community will also require society to tackle the challenges
facing it. These include the falling birthrate and aging and contraction of the population as well as
the exacerbation of natural disasters and reduction of biodiversity accompanying climate changethat have illuminated the urgency of dealing with environmental issues. In accordance with the TCFD
recommendations we endorsed in 2021, the Group has pursued decarbonization efforts aimed atreducing its CO2 emissions by at least 50% from their fiscal 2013 level by fiscal 2030, while alsoendeavoring to reduce consumption of paper in its operations.
The Group supports customers’ efforts to address climate change and other issues related to theSDGs through funding, including environment-related loans, sustainable finance, and other financial
instruments, to help them in organizing their sustainability initiatives. We also offer the Nanto SDGs
Introduction Consulting Service to facilitate our customers’ commitment to the SDGs.

In conclusion
Operating in this challenging environment surrounding Japan’s regional financial institutions today, wewill continue our efforts to enhance the corporate value of the Group by sharing our vision for the futurewith our stakeholders and by deepening our mutual understanding through close communication anddialogue at every opportunity.
Companies with price-to-book (P/B) ratios under 1.0 are recently exhibiting accelerating
momentum toward improvement. We realize that Nanto Bank’s weak P/B ratio results from both
structural problems faced by regional banks and the fact that our return on equity (ROE) is lower thanthe cost of capital anticipated by investors.
Banks, especially regional banks, bear an important responsibility as the backbone of the localeconomy. While mindful of our P/B ratio, we are committed to supporting our customers in a mannerthat aligns with the unique characteristics of our region, and to doing so from a long-term perspective.
We are committed to making further efforts to achieve sustainable growth of the Group and thedevelopment of the local community. Your continued support would be much appreciated by every
member of our staff, each of whom is willing to respond to innovative ideas and challenging tasks.

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