YMFG Medium-Term Management Plan 2013

Our Goal

To be a financial group that nurtures andgrows with our region
Road to “YMFG Zone”
Zone of Over-regional Network Economy(Going beyond individual regions to forge links among the regions, creating a growing economic zone)

Core Objective

Achieve mutual prosperity with the region by transforming into “One YMFG”
As a financial group comprising three banks—Yamaguchi Bank, Momiji Bank and Kitakyushu Bank—we will build relationships deeply rooted in these regions. At the same time, we will forge connections
between the regions, nurture them, and deliver collective Group strength through our transformation into“One YMFG.” Through these efforts, we aim to invigorate the regions and ensure YMFG’s growth.

Priority Measures for Achieving the Core Objective

Transforming into “One YMFG”
Q

Becoming one, going to the “regions” — From “company” to “regions”
We will work to bring together companies and employees, strengthen points of contact between regions
and customers, and leverage the strengths of each bank’s brand to build deep relationships with the regions.

QAs one “YMFG” —From “company” to “YMFG”
We will enhance Group controls and connections, cultivating a sense of togetherness as the Group, andaugmenting the collective power of the Group as one “YMFG.”

Achieving Mutual Prosperity between the Region and YMFG
Q

Generating regional vigor —As the leading company in the region
By leveraging the network of our Group, including its bases in Asia, we will strive to strengthen points ofcontact between individual regions, between regions and customers, and among customers, thereby
invigorating the region.

Q

Increasing the number of YMFG fans —As the best company in the region
As the best company in the region, we will take advantage of our strengths as a comprehensive financial groupto provide consulting-based sales and unique products and services, increasing the number of YMFG fans.

Reinforcing the Management Foundation to Support “One YMFG”
To transform ourselves into “One YMFG,” we will build a robust management foundation that can adapt toall manner of changes in the environment.

YMFG6Targets (to be achieved by fiscal year ending March 31, 2016)

YMFG

Yamaguchi BankMomiji Bank

Kitakyushu BankBusiness Profits fromCore Operations¥125 billion or more

¥65 billion or more

¥40 billion or more

¥13 billion or more

Ordinary Profits¥40 billion or more

¥30 billion or more

¥11 billion or more

¥3 billion or more

Net Income¥25 billion or more

¥20 billion or more

¥7 billion or more

¥2 billion or more

Adjusted OHR

Less than 67%

Less than 60%

Less than 74%

Less than 75%

Progress of Measures under the YMFG Medium-Term Management Plan 2013
 Through success on each core objective, steadily make progress toward creating the “YMFG Zone.”
 In the interest of “reinforcing relationships to develop YMFG fans,” boldly take on the challenge of expanding the base ofcustomers who will grow in tandem with YMFG.

Fiscal 2014 (Fiscal Year Ending March 31, 2015)

Transforming into “One YMFG”

Current situationt Reinforce networks deeply rooted
in regions

We are making progress on each core objective, includingt Promote Group unification

toward information-intensive marketing and specifict Make effective use of information
within the Groupinitiatives to reinvigorate the regional economy. In the fiscal

restructuring the branch network, transforming awarenessyear ending March 31, 2015, the second year of themedium-term management plan, we will put every effort intoAchieving Mutual Prosperity
between the Region and YMFGtInvigorate the regional economy
through collaborationt Take part in initiatives to support
business revitalizationt Participate in Asian growth

expanding the customer base to achieve “mutual prosperity
between the region and YMFG.

Priority issue:“Reinforcing relationships to develop YMFG fans”
Basic policy: “Challenge to Change”
1. Change to interact broadly with customers
t Expand our customer base, enter potential markets

Strengthen the Management
Foundation to Support“One YMFG”
t Consolidate back-office operations inmarket and international departmentst Take steps to consolidate Group humanresouces functions

2. Change to interact deeply with customers
t Ensure information-intensive sales, strengthen
consulting-based sales

Increase number of YMFG fans Ù Resolve regional andcustomer issues

Fiscal 2015
(Final Year for theMedium-Term Plan)

To be a financial group that nurtures and grows with our region
Road to “YMFG Zone”

Fiscal 2013

Annual Report20147Mutual Prosperity between the Region and YMFG: Community Reinvigoration throughCooperation
Leverage a broad financial network to enhance effective use of information within the Group, strive to invigorate a Group
trading sphere. Assist company startups, and aggressively support growth fields, such as environmental, medical andagricultural.

Leverage Broad Financial Network

Provide Support via Funds

Joint business matching fairs

Yamaguchi Dream Creation Industry Support Fund

• The theme for the eighth fair, in February 2014, was• A fund established in cooperation with Yamaguchi“agriculture, food and health.”

Prefecture to reinforce overall industry, centering oncommerce and industry including agriculture, forestry andPromote collaboration with local government bodies,
universities and other public-sector institutions• Participate proactively in local government bodies’ regional

fisheries, in our region.
• Total fund amount: ¥1.0 billion (of which, ¥0.67 billion
provided by YMFG)• Duration: 10 years

invigoration projects.

• Investment history: 6 projects/¥258.5 million (as of April 2014)

The Yamagin Regional Enterprise Support Foundation• Encourages business start-ups and entry to new business

Hiroshima Innovation Network, Inc.
• Investment fund established with financial institutions,fields among small and medium-sized companies andcentered on Hiroshima Prefecture. Momiji Bank is also anuniversities in the three-prefecture region.
• Fiscal 2013 projects: 19 projects/¥19 million (14 small/investor.
• In May 2013, invested in Momiji Bank customer (1medium company, 5 university R&D projects)

project/¥540 million).

• Since establishment: 416 projects/¥416 million

Results of fiscal 2013 initiatives

Initiatives in Growth Fields

Business Matching(SuccessfulProjects)

Industry –Government– AcademiaCollaboration(Projects)

Business Startup
Support (Numberof Applications
for Aid to SupportCompanyStartups)

Yamaguchi Bank

40

2017Momiji Bank

182

2235

collaborate on the initiatives with sales offices, including YM

Kitakyushu Bank

70

156Consulting.

Initiatives targeting environmental, medical andagricultural sectors• Assign personnel who specialize in growth fields to• YM Growth Support Fund and other entities develop
specialized financial products in response to funding needs
in growth fields.

YMFG8Mutual Prosperity between the Region and YMFG: Business Turnaround Support Initiatives
 After the conclusion of the Financing Facilitation Act, continue to take part in initiatives to support business revitalization.
 Make use of revitalization support funds to review current state of business and support transformation to new, profitablebusinesses.

Revitalization network withspecialized outside institutions
QAuditors, tax accountants, support

Collaborate among sales branches,
headquarters, affiliated companies
Qassociations, etc.

Specialized departments in three Group

Utilize business revitalization fundQ

Establish Yamaguchi Business
Restoration Fundbanks’ headquartersCustomers likely to improve management
More than 1,000 prospects(Three-bank total)Yamaguchi Business Restoration Fund(Yamaguchi Bank, Kitakyushu Bank)Seto Mirai Fund for revitalization of smalland medium-sized companies (Momiji Bank)Q

Established: September 30, 2013

Q

Q

Total fund amount: ¥3.0 billion

Q

Q

Duration: 8 years (may be extended)Q

Established: December 1, 2012
Total fund amount: ¥3.2 billion(of which, ¥0.5 billion provided by Momiji Bank)
Duration: 5 years (may be extended)Reinforcing Relationships to Develop YMFG Fans

We will further accelerate our initiatives of the fiscal year ended March 31, 2014. At the same time, through five core
objectives we will reinforce relationships to increase the number of YMFG fans even more. We will promote initiatives aimed
at a “YMFG Zone” of prosperity with the region.

PresentReinforcing Relationships to Develop YMFG Fans

Mutual Prosperity
with the Region

Core Objectives in the Year Ending March 31, 2015
(1) Change to interact broadly
1. Provide new business loans to sole
proprietors and small businesses2. Use IT channels to strengthen pointsof contact with customers(2) Change to interact deeply
3. Enhance consulting expertise
4. Create time and cultivate manpower bypromoting efficiency
5. Enhance effective use of information
within the GroupYMFG fans

Ongoing Initiatives

t Reinforce networks deeply rooted in regions
t Promote Group unificationt Take part in initiatives to invigorate the community

YMFG ZONE

Growth, prosperity

YMFG
Enhanced earnings platform
Grow by responding tocustomer needs Build a
new growth model

Increase in YMFG fansNote: “YMFG fan” is a customer segment that transacts more than a certain amount of business with us.

Broader

Expandtransaction
content

Increasetransaction
partners

DeeperAnnual Report20149
To Be the Largest and Most Respected Financial Group in the Chugoku and Shikoku Regions

Strategic operations centered aroundYamaguchi Bank, the Group’s core bank,attacking both flanks with Momiji Bank
to the east and Kitakyushu Bank to the west.

Yamaguchi Bank
(Head office: Shimonoseki City)

Head office and branches
Sub-branch offices

10825

Momiji Bank
(Head office: Hiroshima City)

Head office and branches
Sub-branch offices

95
20Kitakyushu Bank
(Head Office: Kitakyushu City)

Head office and branches
Sub-branch office

31
1

The Group ranks No. 6 among 64 regional banks in Japan in terms of total assets.
The total population and nominal gross prefectural product of the region in which the Group operates (Yamaguchi Prefecture,Hiroshima Prefecture, Kitakyushu City) are approximately 5 million and ¥20 trillion, respectively, both of which account for
approximately 4% of the national total.
Total Assets(T Yen)

Head Office LocationArea

9.6 (6th)

Yamaguchi Pref.

Chugoku

5.2 (4.1%)

20.0 (4.0%)

Yamaguchi Bank

5.6 (—)

Yamaguchi Pref.

Chugoku

1.4 (1.1%)

5.6 (1.1%)

Momiji Bank

3.1 (—)

Hiroshima Pref.

Chugoku

2.8 (2.2%)

11.0 (2.2%)

Kitakyushu Bank

0.9 (—)

Kitakyushu City

Kyushu0.9 (0.7%)

3.3 (0.7%)

Bank

YMFGPopulation(M people)

Gross Prefectural Product(T Yen)

* Total assets data are taken from kessan tanshin reports of each bank for the fiscal year ended March 2014. Numbers in parentheses ( ) indicate the ranking among 64
regional banks in Japan* The population data are estimates as of October 1, 2013. Numbers in parentheses ( ) indicate the percentage in the total population in Japan.
* Gross prefectural product (nominal) data are taken from the 2011 statistics. Numbers in parentheses ( ) indicate the percentage in the GDP in Japan.

YMFG

10

Economies and Industries of Yamaguchi and Hiroshima Prefecture, and Kitakyushu City(Reference)
Yamaguchi Prefecture

Excellent industrial concentration

Gateway to exchanges with Asia

Rich industrial human resources• Many plants of major corporations locatedowing to the excellent transportationnetwork• Excellent harbor conditions with 2• Excellent historical background that has

international harbors and 4 major harbors
in the prefecture

traditionally nurtured the social climate
encouraging study and education• Concentration of primary material industries • The largest export and import center insuch as cement and chemicals owing to the the Chugoku region such as auto partsrich mineral resources
and chemicals• Increasing entries of processing andassembly industries such as transportation
machinery and more recently thepharmaceutical industry• Serves as the production center in westernJapan for many global enterprises• Excellent support system under the industryacademic coordination such as joint research
between a university and a private-sector
company, R&D to develop next generationindustries, etc.

Hiroshima Prefecture
The largest industrial prefecture in the Manufacturing industry centered

Home of many No. 1 enterprises

Chugoku and Shikoku regions

around Mazda Motor Corporation• Many local enterprises in a variety of• Growth of heavy industries, particularly• The formation of a group of broad-basedtransportation machinery such as
automobiles and shipbuilding, leveraging
the technological strength developed
through military manufacturingautomobile-related companies with Mazda
Motor Corporation on top of the hierarchy

industries with nationwide reputation anda large domestic market share throughleveraging excellent technologies (Refer tothe right section)• Ranks No.11 in Japan in terms of nominal
gross prefectural product with a shareof 2.2% in Japan and 40% in theChugoku region• The shipbuilding industry encompassing
middle-ranking and small and mediumsized shipbuilding companies and related
manufacturers such as pumps and turbines,
which holds the No. 1 share in Japan• Additional concentration of traditional
industries such as the fiber industry andthe manufacturing of furniture for
newlywed couples

Kitakyushu City
Concentration of a variety of industries City of manufacturing

Environmental and energy industries• Kitakyushu City was born in 1963 through• Steel accounts for approximately 40% of• A forerunner of the eco-town businessa merger of 5 cities.

the total manufacturing industry• Mainly heavy and chemical industries• Concentration of auto assembly plants

leveraging the concentration of industrial
technology with broad manufacturing bases(steel in the main)

including Nissan Motor Kyushu Co., Ltd.,
Toyota Motor Kyushu, Inc., and Daihatsu
Motor Kyushu Co., Ltd.

• New concentration of increasingly diverse
industries such as auto-related industries
due to the proximity to Asia and the highly
developed logistics infrastructure• Recent concentration of semiconductor
design companies owing to the developmentof Kitakyushu Science and Research Park

• Research and development is conducted on
new energy sources such as the technology
to reduce the oxygen content under thepromotion system developed through theindustry-academic-public coordination

Annual Report201411