#1TOCH GIN NTOCHIGI BANK First for You あなたとともに Financial Results Presentation for the Fiscal Year Ended March 31, 2023 (June 6, 2023)#2Contents Overview of Financial Results TOCH GN TOCHIGI BANK Key Measures in the 11th Medium-term Management Plan Overview of Financial Results Net Interest Income Core Net Business Profit Deposits and CDs Loans and Bills Discounted Deposit Assets P. 3 Basic strategy 1: Strengthen earning power P. 4 1-1 Business Strategy P. 24 P. 5 1-2 Corporate Customer Strategy P. 25 P. 6 1-3 Individual Customer Strategy P. 26 P. 7 1-4 DX Strategy P. 27 P.8 Basic strategy 2: Strengthen systems Securities P. 9 2-1 Branch Strategy P. 28 Expenses P. 10 2-2 New Business Strategy P. 29 Loans Based on P. 11 2-3 Sophistication of Risk Management P. 30 the Banking Act and Financial Reconstruction Act 2-4 Group Strategy P. 31 Shareholder Returns Policy P. 12 Capital Adequacy Ratio and Consolidated ROE P. 13 2-5 Capital Strategy and Shareholder Returns Policy Basic strategy 3: Strengthen human capital investment P. 32 Financial Results Forecast P. 14 3-1 Human Resource Strategy (1) 3-2 Human Resource Strategy (2) P. 33 P. 34 Purpose & Sustainability Management Establishment of Purpose P. 16 Establishment of Long-term Vision P. 17 Realization of Sustainability Management P. 18 Overview of the 11th Medium-term Management Plan Review of the Previous (10th) Medium-term P. 20 Management Plan Overall Image of the 11th Medium-term P. 21 Management Plan The 11th Medium-term Management Plan P. 22 Numerical Targets 1#3Overview of Financial Results 2#4Overview of Financial Results Non-consolidated 2022/3 2023/3 (Billion yen) Change % Change Gross operating profit 26.9 27.0 +0.1 Net interest income 25.4 29.0 +3.6 +0.5% +14.2% Fees and commissions income 4.2 4.4 +0.2 +3.3% Other operating income (2.8) (6.4) (3.6) (127.8%) Expenses 22.1 21.3 (0.8) (3.6%) Substantial net business profit (Note) 4.7 5.6 +0.9 +20.2% Core net business profit 7.5 12.0 +4.5 +59.3% Core net business profit (excluding gains (losses) from 7.4 7.9 +0.5 +6.7% cancellation of investment trusts) Provision of general allowance for 0.6 (0.7) loan losses (1) Net business profit 4.1 6.4 Losses on sale of bonds (2.8) (6.3) (3.5) (1.3) (225.0%) +2.3 +56.4% (123.6%) Unusual profits and losses 0.3 (2.0) (2.3) (760.4%) Non-performing loan disposal (2) 1.4 3.4 +2.0 +137.5% Ordinary profit 4.4 4.3 (0.1) (1.1%) Profit 3.0 2.2 (0.8) (28.2%) Costs for loans written-off (1) + (2) 2.0 2.7 +0.7 +31.1% Consolidated 2022/3 2023/3 Change % Change Ordinary profit 5.5 5.0 (0.5) Profit attributable to owners of parent 3.6 2.6 (1.0) (9.2%) (26.9%) TOCH GN TOCHIGI BANK Main Points on Non-consolidated Financial Results ●Net interest income increased by 3.6 billion yen year on year. This was due to gains from the cancellation of investment trusts, such as bear funds, which more than offset losses from the sale of securities. Other operating income decreased by 3.6 billion yen year on year. This was due to realized losses from the sale of securities held, which suffered increased valuation losses as a result of rising interest rates in Japan and overseas. Profit decreased by 800 million yen year on year. This was due to an increase in non-performing loan disposal expenses (costs for loans written off) of 700 million yen, mainly resulting from the bankruptcy of a major borrower, as well as an increase in income taxes payable compared to the previous fiscal year. Profits related to our main business, which are core net business profit (excluding gains (losses) from cancellation of investment trusts) and substantial net business profit, increased year on year due to an increase in fees and commissions income and the effect of cost reductions. (Note) Substantial net business profit = Net business profit (before provision to general allowance for loan losses) Main Point on Consolidated Financial Results O Consolidated ordinary profit and profit attributable to owners of parent for the fiscal year ended March 31, 2023 decreased year on year, primarily due to the same reasons as in the non-consolidated financial results. 3#5Net Interest Income (Billion yen) 2022/3 2023/3 Change Net interest income 25.4 29.0 +3.6 % Change +14.2% Interest on loans and 20.4 20.3 discounts (0.1) Interest and dividends on 4.3 7.8 +3.5 (0.3%) +81.8% securities Interest on deposits with banks 0.8 0.8 +0.0 Interest on deposits (-) 0.2 0.1 +1.3% (0.0) (44.8%) Reasons for Increases (Decreases) in Net Interest Income 25.4 2022/3 Average loan balance Yield on loans/discounts Average securities balance +2.8 +0.5 (0.6) +0.6 Yield on securities (Billion yen) TOCH GN TOCHIGI BANK Interest on loans and discounts decreased by 100 million yen year on year. This was due to lower yields, despite the increase in the average balance of loans and bills discounted, particularly for SME and personal loans. Interest and dividends on securities increased by 3.5 billion yen year on year. This was due to the inclusion of gains from the cancellation of investment trusts, such as bear funds, to cover losses from the sale of securities. Interest on deposits with banks and interest on deposits remained flat year on year. Overall net interest income increased by 3.6 billion yen year on year. Trend in Yields on Loans and Discounts and on Securities Loans/Discounts Securities 29.0 1.16 1.11 1.07 1.06 1.04 1.06 1.01 0.79 0.90 0.73 2023/3 2019/3 2020/3 2021/3 2022/3 2023/3 4 (%)#6Core Net Business Profit (Billion yen) 2022/3 2023/3 Change % Change Substantial net business profit (Note 1) 4.7 5.6 +0.9 +20.2% Core net business profit (Note 2) 7.5 12.0 +4.5 +59.3% Core net business profit (excluding gains (losses) from cancellation of investment trusts) 7.4 7.9 +0.5 +6.7% Trend in Core Net Business Profit ■ Core net business profit 12 10 8 6 ■ Core net business profit (excluding gains (losses) from cancellation of investment trusts) 4.8 4 3.8 2 5.9 5.1 7.1 5.8 (Billion yen) 12.0 7.9 7.5 7.4 2019/3 2020/3 2021/3 2022/3 2023/3 TOCH GN TOCHIGI BANK (Note 1) Substantial net business profit = Net business profit (before provision to general allowance for loan losses) (Note 2) Core net business profit = Substantial net business profit - Gains (losses) on bonds Core net business profit for the fiscal year ended March 31, 2023 increased by 4.5 billion yen year on year due to gains from the cancellation of bear funds held for hedging purposes to cover losses on the sale of securities. O Core net business profit (excluding gains (losses) from cancellation of investment trusts) increased by 500 million yen year on year mainly due to cost reductions. * Core net business profit represents the Bank's main business profitability, which consists of interest income (i.e., interest on loans and discounts and interest and dividends on securities) and fees and commissions income. LO 5#7Deposits and CDs (Billion yen) 2022/3 2023/3 Change % Change Deposits and CDs 3,018.3 3,059.4 +41.1 +1.3% Personal 2,441.0 2,475.4 +34.4 +1.4% Corporate 540.6 553.1 +12.5 +2.3% 2,704.5 2,208.1 Trends in Deposit/CD Balance ■All deposits ■ Personal 2,937.7 ■Corporate 3,018.3 3,059.4 TOCH GN TOCHIGI BANK Tochigi Bank deposits show an increase mainly in personal deposits from the locally rooted business base. Deposits as of March 31, 2023 increased by 41.1 billion yen from the end of the previous fiscal year. Deposit Balance by Prefecture (2023/3) (Billion yen) (Billion yen) Gunma Ibaraki Tokyo 33.3 24.7 24.2 1.1% 0.8% 0.8% 0000 2,738.7 2,383.1 2,441.0 2,475.4 2,246.1 Increase mainly in personal deposits 518.4 540.6 553.1 435.4 443.5 2019/3 2020/3 2021/3 2022/3 2023/3 Saitama 501.6 16.4% Tochigi 2,475.4 80.9% 6 CO#8Loans and Bills Discounted (Billion yen) 2022/3 2023/3 Change Loans and bills discounted 1,955.1 2,031.7 +76.6 % Change +3.9% SMEs 842.0 862.2 +20.2 Personal 642.5 654.9 +12.4 +2.4% +1.9% Home loans 586.7 598.5 +11.8 +2.0% Trend in Balance of Loans and Bills Discounted ■ All loans/bills discounted ■SMEs/Personal 1,925.8 1,948.7 1,962.9 1,955.1 TOCH GN TOCHIGI BANK Loans and bills discounted as of March 31, 2023 increased by 76.6 billion yen from the end of the previous fiscal year mainly due to an increase in SME and home loans. Tochigi Bank loans and bills discounted consist mainly of SME and personal loans. The Bank provides a range of solution services for business operators facing many business challenges, such as labor shortages after the COVID-19 pandemic and an increase in material prices caused by a weakening yen, and also firmly meets their funding needs. Balance of Loans and Bills Discounted by Prefecture (2023/3) Ibaraki 24.9 1.2% 0000 (Billion yen) (Billion yen) Home loans 2,031.7 Gunma 1,438.8 1,460.6 1,507.7 1,484.6 1,517.1 42.1 2.1% Tokyo 341.9 16.8% 554.9 Mainly SME loans and personal loans 570.7 584.0 586.7 598.5 2019/3 2020/3 2021/3 2022/3 2023/3 Saitama 307.3 15.1% Tochigi 1,315.3 64.8% 7#9Deposit Assets (Billion yen) 2022/3 2023/3 Change Deposit assets 398.3 414.4 +16.1 Public bonds 23.5 25.6 +2.1 % Change +4.0% +9.0% Investment trusts 137.5 146.1 +8.6 +6.2% Individual pensions, etc. 237.2 242.5 +5.3 +2.2% Trend in Balance of Deposit Assets TOCH GN TOCHIGI BANK The balance of deposit assets as of March 31, 2023 increased by 16.1 billion yen from the end of the previous fiscal year, as we have provided customer-oriented financial services, such as proposals for investment through long-term, diversified accumulation, leading to customers' asset formation. Automatic savings agreements are increasing, both in terms of amount and the number of customers with agreements. Trend in Investment Trust Deposit Balance and Number of Customers ■ Public bonds ■Investment trusts ■Individual pensions, etc. (Billion yen) (Billion yen) Deposit balance Customers (Persons) 200 50,000 38,715 150 29,906 31,693 33,112 36,314 40,000 414.4 385.7 398.3 369.3 374.7 30,000 100 137.5 146.1 20,000 50 98.2 111.6 89.0 10,000 0 0 2019/3 2020/3 2021/3 2022/3 2023/3 242.5 237.2 248.1 237.5 251.6 Automatic Savings Agreements (Million yen) Agreements Customers w/ agreements (Persons) 21,460 19,001 1,000 16,880 20,000 98.2 137.5 146.1 13,938 750 15,000 89.0 111.6 9,692 500 1,058 10,000 514 861 757 39.3 28.6 25.6 2019/3 2020/3 2021/3 23.5 2022/3 25.6 250 5,000 189 2023/3 0 0 2019/3 2020/3 2021/3 2022/3 2023/3 8#10Securities (Billion yen) 2022/3 2023/3 Change % Change Total securities 606.9 620.6 +13.7 +2.2% Public bonds (Government bonds and 225.8 263.6 +37.8 +16.7% Local government bonds) Corporate bonds 116.0 118.1 +2.1 Stocks 13.2 14.4 +1.2 Other 251.8 224.4 (27.4) +1.7% +9.1% (10.8%) Trend in Securities Balance at the Fiscal Year-end TOCH GN TOCHIGI BANK Valuation losses on other securities expanded due to continued high volatility stemming from forecast fiscal policies in Europe and the U.S. and the unstable political climate. The expansion in valuation losses occurred despite reducing positions in foreign bond investment trusts (other securities) due to rising interest rates overseas. While the Bank's portfolio does not pose excessive credit risk from stocks, corporate bonds, and other securities, the Bank continues to restructure the portfolio by reducing positions with valuation losses, such as foreign bond investment trusts. Valuation Gains (Losses) on Other Securities ■Stocks ■Bonds ■ Other (Billion yen) ■Government bonds ■ Corporate bonds ■Local government bonds ■Stocks (Billion yen) ■ Other 606.9 581.2 530.8 530.2 620.6 3.8 Valuation (10.4) (3.0) (15.4) (26.3) gain 1.6 1.2 1.5 ↑ 224.4 251.8 281.5 263.8 307.9 14.4 13.2 118.1 14.4 116.0 10.3 15.5 115.8 71.4 108.1 58.4 55.9 64.5 70.7 54.3 192.2 167.3 80.6 93.5 104.8 2019/3 2019/3 2020/3 2021/3 2022/3 2023/3 (0.7) (1.8) (2.8) (5.5) Valuation loss (9.9) (11.0) (11.1) (16.8) 2020/3 2021/3 2022/3 2023/3 Note: The numbers in bold show the net valuation gains (losses). 6#11Expenses (Billion yen) 2022/3 2023/3 Change % Change Total expenses 22.1 21.3 (0.8) Personnel expenses 12.5 12.1 (0.4) (3.6%) (3.4%) Non-personnel expenses 8.2 7.8 (0.4) (4.0%) Taxes 1.4 1.3 (0.1) (2.7%) Trend in Expenses and Overhead Ratio (OHR) GN TOCHIGI BANK TOCH Expenses are declining due to reduction, streamlining, and concentration of business operations in branch offices, and office network restructuring. Expenses in the fiscal year ended March 31, 2023 fell to 21.3 billion yen, and OHR (based on gross operating profit) decreased by 2.0 percentage points year on year. The number of branch locations as of March 31, 2023 was 75, under the Branch-in-Branch (BinB) method. Number of Employees and Branch Offices Taxes Personnel expenses (Billion yen) 40.0 86.2 82.0 79.5 74.8 72.8 Non-personnel expenses Employees Branch offices -Branch locations ⚫OHR (%) 100 (Persons) 3,000 (Locations) 100 91 88 86 86 86 189 30.0 24.2 23.7 22.6 22.1 21.3 75 2,400 75 85 60 80 81 75 75 1,800 1,601 60 1,565 1,540 60 50 1,478 1,402 50 20.0 13.7 13.3 12.8 12.5 12.1 10.0 8.9 8.8 8.3 8.2 7.8 1.5 0.0 1.5 1.4 1.4 1.3 2019/3 2020/3 2021/3 2022/3 2023/3 1,200 25 600 40 40 20 20 0 0 2019/3 2020/3 2021/3 2022/3 2023/3 Note: OHR (%) = Expenses ÷ Gross operating profit (excluding gains (losses) on the sale of bonds and from cancellation of investment trusts) 10 10#12Loans Based on the Banking Act and Financial Reconstruction Act (Billion yen) 2022/3 2023/3 Change % Change Total loans based on the Banking Act and Financial 44.4 43.3 (1.1) (2.5%) Reconstruction Act Bankrupt and quasi- bankrupt loans 1.1 1.9 +0.8 +73.4% Doubtful loans 42.0 40.6 (1.4) (3.1%) Special attention loans 1.3 0.7 (0.6) (46.9%) TOCH GN TOCHIGI BANK Loans based on the Banking Act and Financial Reconstruction Act was 43.3 billion yen, down 1.1 billion yen year on year, mainly due to a decrease in doubtful loans. ●Non-performing loan ratio as of March 31, 2023 was 2.10%, down 0.14 percentage points year on year. The cost of credit for the fiscal year ended March 31, 2023 was 2.4 billion yen, up 700 million yen year on year. The credit cost ratio was 0.12%, up 0.03 percentage points year on year. Loans Based on the Banking Act and Financial Reconstruction Act: Balance at the Fiscal Year-end Cost of Credit Bankrupt and quasi-bankrupt loans Special attention loans Doubtful loans Real cost of credit Credit cost ratio Non-performing loan ratio (Billion yen) (%) 60.0 2.28 2.32 2.50 (Billion yen) 5 (%) 0.20 0.18 2.23 2.24 2.10 0.15 46.0 4 0.16 48.0 44.8 2.00 43.1 44.4 0.14 43.3 1.9 1.6 2.2 1.9 3 36.0 1.50 0.12 0.12 0.09 2 1.00 24.0 39.7 42.4 43.3 42.0 40.6 12.0 0.08 3.6 3.0 2.8 2.4 1 0.04 0.50 1.7 0.0 1.1 2019/3 0.7 2020/3 0.8 2021/3 1.3 2022/3 0 0.7 2023/3 0.00 2019/3 2020/3 2021/3 2022/3 0.00 2023/3 Note 1: Real cost of credit = Costs for loans written-off - Recoveries of written off receivables Note 2: Credit cost ratio = Real cost of credit ÷ Average loan balance 11#13Shareholder Returns Policy TOCH GN TOCHIGI BANK Shareholder Returns Policy (formulated in May 2022) The Bank's basic policy is to continue to pay shareholders consistent dividends while working to maintain sound management and enhance internal reserves to earn the trust of our customers and everyone in the local community, based on the Bank's public nature. We have explicitly stated our view on shareholder returns while maintaining this basic policy. We target a total return ratio of 30% to 35%. This ratio indicates total returns, consisting of dividends and purchase of treasury shares, as a percentage of profit attributable to owners of parent. Dividend Per Share and Total Consolidated Return Ratio (Yen) 15.0 Dividend per share Total consolidated return ratio (%) 40.0 34.1 12.5 28.6 Target of 30 to 35% 25.1 10.0 7.5 15.8 30.0 20.0 We have decided to pay a year-end dividend of 3.00 yen per share for the fiscal year ended March 31, 2023, in line with the dividend forecast announced last May (this will be proposed at the annual general shareholders' meeting in June 2023). Combined with the interim dividend of 3.00 yen per share, this brings the annual dividend to 6.00 yen per share. For the fiscal year ended March 31, 2023, we repurchased 1,069,400 treasury shares (at an acquisition cost of 274 million yen) to enhance the return to shareholders through the improvement of capital efficiency. The total return ratio was 34.1%, which was within the target range of 30% to 35% set in our shareholder returns policy. We plan to pay an annual dividend of 6.00 yen per share for the fiscal year ending March 31, 2024. 5.0 6.0 6.0 5.5 5.0 5.0 2.5 10.0 0.0 00 0.0 2020/3 2021/3 2022/3 2023/3 2024/3 (Plan) 12#14Capital Adequacy Ratio and Consolidated ROE (Billion yen, %) 2022/3 2023/3 Change Consolidated capital adequacy 12.06 11.85 ratio Equity capital 175.1 174.9 (0.21) (0.2) Risk assets Consolidated ROE 1,451.9 1,474.9 +23.0 2.21 1.68 (0.53) Consolidated Capital Adequacy Ratio Equity capital Capital adequacy ratio (Billion yen) (%) 11.90 12.06 11.85 250.0 11.37 11.17 12.5 200.0 TOCH GN TOCHIGI BANK Consolidated capital adequacy ratio for the fiscal year ended March 31, 2023 was 11.85%, down 0.21 percentage points year on year, due to an increase in risk assets including loans and bills discounted. We are targeting a consolidated ROE (based on shareholders' equity) of 3.0% or higher in the final fiscal year of the 11th Medium-term Management Plan. ●We will strive to improve ROE by improving operating efficiency and strengthening the Group strategy while focusing on utilizing equity capital to take risks, mainly in providing loans to SMEs and personal loans. We will manage the Bank with an awareness of ROE, based on our shareholder returns policy. Consolidated ROE Consolidated ROE (net asset-based) - Consolidated ROE (shareholder's equity-based) 3.0 10.0 150.0 167.0 167.2 172.7 175.1 174.9 7.5 2.0 100.0 50.0 900 (%) 2.21 2.13 1.68 1.29 1.14 5.0 1.53 1.0 1.25 1.12 2.5 - + 3.00 T 0.0 2020/3 2021/3 2022/3 2023/3 0.0 0.0 2019/3 2020/3 2021/3 2022/3 2023/3 Final year of MTMP 13#15Financial Results Forecast TOCH GN TOCHIGI BANK (Billion yen) Non-consolidated 2023/3 2024/3 Change % Change Gross operating profit 27.0 27.9 +0.9 Net interest income 29.0 24.8 (4.2) Fees and commissions income 4.4 4.3 (0.1) Other operating income (6.4) (1.1) +5.3 Expenses 21.3 21.9 +0.6 Substantial net business profit 5.6 6.0 +0.4 +3.4% (14.5%) (2.3%) +82.8% +2.8% +7.1% Main Points of Non-consolidated Forecast We forecast an increase in interest on loans and discounts, which is an income from our main business. We expect an increase in expenses due to investments for growth planned in the 11th Medium-term Management Plan. Core net business profit 12.0 7.2 (4.8) (40.0%) Core net business profit We will restructure the portfolio by selling securities with valuation losses in order of priority, which involves recording losses from the sale of those securities. ●Given the strong uncertainty in the domestic economy, such as soaring energy and raw material prices, we forecast profit of about 1.8 billion yen, based on a conservative estimate of non-performing loan disposal expenses. (excluding gains (losses) from 7.9 7.2 (0.7) (8.8%) cancellation of investment trusts) Net business profit 6.4 6.0 (0.4) (6.3%) Gains (losses) on bonds (6.3) (1.2) +5.1 +80.9% Ordinary profit 4.3 3.2 (1.1) (25.6%) Profit 2.2 1.8 (0.4) (18.2%) Costs for loans written-off 2.7 3.4 +0.7 +25.9% (Billion yen) Consolidated 2023/3 2024/3 Change % Change Ordinary profit 5.0 3.7 (1.3) Profit attributable to owners of parent 2.6 2.0 (0.6) (26.0%) (23.1%) Main Point of Consolidated Forecast O Consolidated financial results reflect the financial results forecast at the non-consolidated level. We forecast around 2.0 billion yen in profit attributable to owners of parent at the consolidated level. 14#16Purpose & Sustainability Management 15#17Establishment of Purpose Purpose of the Tochigi Bank Group TOCH GN TOCHIGI BANK We continue to bring smiles and happiness to our customers' faces by resolving their problems to earn their gratitude in return. • Aspirations of the Group's Officers and Employees In the midst of drastic changes in the environment surrounding the regional community and economy, we have clearly stated our Purpose by having all officers and employees working together to reconsider the significance of the Tochigi Bank Group's existence in the regional community. The business and roles of the Tochigi Bank Group will change as the world changes, but all officers and employees of the Group will share the Purpose, which is the “unwavering significance of the Bank's existence," and all organizations and all officers and employees will move forward with their efforts in the same direction. Background of the Establishment of Purpose • The Group was founded as a mutual loan company, a type of common people's finance for mutual aid, to extend money to micro, small and medium-sized commercial and industrial enterprises (providing a credit creating function). ⚫ This aspiration has remained unchanged to this day. We have contributed to the development of the regional economy by fulfilling our financial intermediary function for the region and regional customers under our management philosophy of "We will contribute to the creation of a prosperous regional community and aim to be a reliable bank." • In a changing external environment, such as shrinking markets and advancing digitalization and IT, the Group is committed to close ties with its "regional customers." By establishing "face-to-face relationships" with the customers and "resolving their issues and problems," we aim to contribute to the development and growth of regional communities. . As time has gone by, the issues and problems of our customers have diversified. We have responded to the expectations of society by connecting information, people, and goods, rather than just providing financial support at the time of our founding. With advancing IT and DX technologies, it is expected that the number of points of contact between people will decrease. However, the Group's significance of existence lies in its commitment to close ties with the regional community by continuing to provide solutions to the problems of its customers. • We have decided our Purpose as such aspiration, which expresses the nature of the "Tochigin Group," including the "friendliness" that is one of the Bank's strengths and the "solutions to issues and problems" that the Bank has been working on. *The Purpose o the Tochigi Bank Group has been formulated based on "1,053" opinions submitted by officers and employees. 16#18Establishment of Long-term Vision TOCH GN TOCHIGI BANK Long-term Vision A corporate group that co-creates the future of regional communities through “relationships" and "solutions" The Tochigi Bank Group has established its long-term vision with the following aspirations: "To be the closest to our customers," "To resolve not only individual issues of the regional residents but also those of the community at large," and "To enhance the sustainability of the regional community and work with the entire community to co-create the future." In order to further develop solutions to issues, from the perspective of human capital, we should develop the human resources who will work on those solutions. To this end, we will also make efforts to create an environment in which all employees can demonstrate their abilities and play an active role with enthusiasm. Changing Bank Role Simply providing existing banking functions is not enough for sustainable growth of the region and the Bank. The Bank itself must also change through the sophistication of solutions, the creation of new businesses, etc. Changing Market Environment Declining and aging population Long-lasting low interest rate environment Growing entry of different industries into the banking industry Decreasing business locations Expanding cashless payment Advancing digitalization Increasing sustainability initiatives for environmental issues, etc. 17#19Realization of Sustainability Management -Creation of demand by resolving regional issues― Sustainability Policy TOCH GN TOCHIGI BANK The Tochigi Bank Group considers environmental and social issues and pursues a virtuous cycle for regional economies through our business activities, based on our management philosophy. We will contribute to the sustained development of regional communities and all stakeholders and achieve sustained enhancement of the corporate value of the Group. Action Policy based on the Tochigi Bank Declaration on SDGs Creation of Demand by Resolving Regional Issues Achieving Local SDGs 1. Sustainable growth of QUTY IND 11 TU CEL T TOCH KONT 16 TRACE UNTER Local economy Tochigi Bank TOCHIGI regional economies Demonstrate financial intermediary functions in response to customer needs 2. Contribution to regional communities 4 BUCATION Contribute to the development and revitalization of regional communities 3. Regional environmental conservation 7 CLEARENCY 11 13 15 Reduce environmental load through environmentally friendly business activities 4. Active participation by diverse human resources 4 BUCATION REDUCES R 10 Improve work environments in order that all employees can play an active role with enthusiasm and job satisfaction Shop Positive impact Environmental protection Company Company City Hall Local community Respect for human rights Sustainability Targets ■Amount of sustainability finance ⇒ 85.0 billion yen or more by March 31, 2026 ■Number of regional issues resolved ⇒ 12 issues by March 31, 2026 ■CO2 emissions reduction ⇒ -70% by fiscal 2030 ■ Percentage of female workers in managerial positions ⇒ 16% or higher as of March 31, 2026 Percentage of male bank employees who take childcare leave ⇒ 80% or higher as of March 31, 2024 Sustained development of stakeholders Sustained enhancement of the corporate value of the Group 18#20Overview of the 11th Medium-term Management Plan 19#21TOCH GN TOCHIGI BANK Review of the Previous (10th) Medium-term Management Plan Key Numerical Targets and Results 10th Medium-term Management Plan Item 2020/3 Target in Final Fiscal Year 2021/3 2022/3 2023/3 Profit (Consolidated) ¥1.8 billion ¥2.5 billion or more ¥2.0 billion ¥3.6 billion ¥2.6 billion Core net business profit (excluding gains (losses) on cancellation of ¥5.1 billion ¥6.0 billion or more ¥5.8 billion ¥7.4 billion ¥7.9 billion investment trusts) Capital adequacy ratio 11.17% 10% level 11.90% 12.06% 11.85% (Consolidated) Key Themes and Results Theme 1: Enhancement of value offered to customers by making the most of our consulting function Theme 2: Development of customer-oriented human resources 2020/3 2023/3 Initiatives aimed at promoting the advancement of women Target 2026/3 Result 2023/3 Business matching (Annual) 498 agreements (Annual) 666 agreements agreements concluded Investment trust balance ¥89.0 billion ¥146.1 billion Percentage of female workers in managerial positions (deputy investigator) or higher 16% or higher 11.7% Theme 3: Establishment of a sustainable management base that supports customers Improving Efficiency of Branch Office Operations ATM outsourcing ■Concentration of administrative work at the Head Office, etc. Improving Efficiency of Branch Network => Number of Branch Locations: 85 branches (2020/3) ⇒ 75 branches (2023/3) Number holding specialized qualifications (2023/3) Reduction of administrative work SME Management Consultants 11 people 200,000 hours/year Management Consultants 37 people 1st-grade Certified Skilled Professional 47 people of Financial Planning (CSPFP) 20#22Overall Image of the 11th Medium-term Management Plan Sustainability Policy Management Philosophy Purpose TOCH GN TOCHIGI BANK ■We will contribute to the creation of a prosperous regional community and aim to be a reliable bank. ■We will develop as a financially sound bank that can flexibly cope with a new era. ■We will create workplace that can provide job satisfaction. We continue to bring smiles and happiness to our customers' faces by resolving their problems to earn their gratitude in return. Long-term vision: A corporate group that co-creates the future of regional communities through "relationships" and "solutions" 11th Medium-term Management Plan "Implement new value offerings" 12th Medium-term Management Plan "Evolve new value offerings" 13th Medium-term Management Plan The 11th Medium-term Management Plan (For the fiscal year ending March 31, 2024 to the fiscal year ending March 31, 2026) Theme "Implement New Value Offerings" Key Measures Basic strategy 1: Strengthen earning power -Evolution (deepening) of regional financial business and reinforcement of earnings structure― Delivery of "highly specialized solutions" face to face directly and indirectly ■Deeper risk-taking and consulting capabilities starting with business feasibility assessments ■Total support for life design Promotion of DX ■Creation of demand by resolving regional issues Key Measures Basic strategy 2: Strengthen systems -Promotion of structural reforms and reinforcement of management base for the future- ■Revamp of the sales system/branch system depending on area characteristics ■Enhancement of sustainability promotion system -Creation of new businesses and services- Sophistication of risk management ■Reinforcement of the Group governance ■Enhancement of capital strategy and shareholder returns policy Basic strategy 3: Strengthen human capital investment -Foundation of sustainable management- ■Cultivation of the "Tochigin mindset" ■Improvement of internal environment Enhancement of human resource development ■Cultivation of a new organizational culture/climate 21#23The 11th Medium-term Management Plan Numerical Targets Long-term target for ROE is 5% or higher. Profitability indicators Item Profit (Profit attributable to owners of parent) Core net business profit (excluding gains (losses) on cancellation of investment trusts) TOCH GN TOCHIGI BANK Target in Final Fiscal Year (ending March 31, 2026) Fiscal Year Ended March 31, 2023 Results Fiscal Year Ended March 31, 2020 Results ¥5.5 billion ¥2.6 billion ¥1.8 billion or more ¥8.5 billion ¥7.9 billion ¥5.1 billion or more ROE (Consolidated, based on shareholders' 3.0% or higher equity) Efficiency OHR indicators 1.53% 1.12% (Based on gross operating profit (excluding gains (losses) on the sale of bonds and from cancellation of investment 72% level 72.86% 82.06% trusts)) Capital adequacy ratio (Consolidated) 11% level 11.85% 11.17% Soundness indicator Definition of indicators Profit (Consolidated): Profit attributable to owners of parent ■Core net business profit (excluding gains (losses) on cancellation of investment trusts): Net business profit + Provision to general allowance for loan losses - Gains (Losses) on sale of bonds - Gains (Losses) on cancellation of investment trusts ■ROE: Profit (Consolidated) ÷ Equity capital × 100 ■OHR: Expenses ÷ Gross operating profit (excluding gains (losses) on the sale of bonds and from cancellation of investment trusts) × 100 ■Capital adequacy ratio (Consolidated): Equity capital (Consolidated) / Risk assets (Consolidated) 22 22#24Key Measures in the 11th Medium-term Management Plan -Key measures based on three basic strategies- 23#25Basic strategy 1: Strengthen earning power -Evolution (deepening) of regional financial business and reinforcement of earnings structure- 1-1 Business Strategy TOCH GN TOCHIGI BANK -Delivery of "highly specialized solutions" face to face directly and indirectly— With investment for growth and strategic assignment of personnel, we will provide highly specialized solutions by deploying our human resources to "operations that only people can perform (through direct and indirect face-to-face channels)," which is one of our strengths. [What we want to achieve] Deliver "highly specialized solutions" face to face directly and indirectly Investment for Growth Invest ¥8.0 billion or more in total DX and systems Enhancement of non-face-to-face channels (alternative to branch (for 3 years) offices), customer contact points, and convenience ■Drastic reduction of administrative work (BPR) New Businesses and Group companies ■Investment in new business fields leading to solutions to regional environmental and social issues and a circular regional economy (PPA business, etc.) ■Equity investments in regional businesses Branch offices ■Diversification of branch office formats (streamlined branch office, etc.) ■Investment in elimination and consolidation of branch offices and area head office system Human resources Investment in human resource development (reskilling, etc.) ■Development of specialists (consulting, DX, FP, etc.) Utilization and hiring of external specialists Strategic Personnel Assignment Reassign 150 personnel in total (for 3 years) Increase of personnel by 20 employees in Corporate Business Division Reassignment of 30 employees from external relations with individuals to external relations in general Reassignment of 30 employees to area head offices Reassignment of 40 employees to Customers Center ■DX/IT section Group companies ■New business fields Utilizing/Leveraging Data Propose products and services timely and appropriately through each channel by utilizing and leveraging data. Non- face-to-face Direct face-to-face Indirect face- to-face Data Utilization Data Centralization DATA LAKE (online) Improve administrative efficiency and customer convenience Deepen transactions 24#26Basic strategy 1: Strengthen earning power -Evolution (deepening) of regional financial business and reinforcement of earnings structure― 1-2 Corporate Customer Strategy -Deeper risk-taking and consulting capabilities starting with business feasibility assessments― TOCH GN TOCHIGI BANK We will meet the diverse needs and expectations of our customers by deepening our sales activities with a focus on solutions to issues, starting with business feasibility assessments based on the relationship skills and in- depth dialogue we have cultivated over the years. More core customers and larger share of business Starting with business feasibility assessments Supporting development of key industries Relationship skills Area analysis Industry analysis In-depth dialogue Deeper risk-taking Deeper consulting (Manufacturing, Healthcare, Agriculture, Environment, etc.) Item (KPI) 2026/3 Business lending Growth Establishment of Risk-taking System Continuous financing support based on in-depth business feasibility assessment through dialogue Solutions Selection and Concentration of Key Issues Support for strengthening business sustainability through consulting from a new perspective and expansion of business contents Number of cases of consulting Lending amount originated resulting from the above consulting services Increase in the number of core customers 7,850 cases (for 3 years) ¥160.0 billion (for 3 years) 750 customers (for 3 years) Core customers: Customers with a certain credit and investment balance, continuous transactions and services on multiple transaction items, etc. 25 ــيمـ#27Basic strategy 1: Strengthen earning power -Evolution (deepening) of regional financial business and reinforcement of earnings structure- 1-3 Individual Customer Strategy -Total support for life design― TOCH GN TOCHIGI BANK In addition to the medium and long-term asset formation support, we will offer consulting services that are firmly attuned to the life plans of each generation and provide life-long support for a wide range of customers' financial plans. Young Asset builders Middle-aged Seniors Life-long support utilizing direct face-to-face (external relations), indirect face-to-face (Direct Center, Customer Service Center), and non-face-to-face (online) channels. Asset Management Establish a business model based on stock-based revenue [Direct face-to-face] Deepen consulting sales Deliver tailor-made proposals targeting high-net-worth individuals/business owners [Indirect face-to-face] Utilize Customer Service Center Contribute to resolving issues for many customers by establishing a web-based interview system [Non-face-to-face] Promote Toshin Direct Expand the customer base by targeting young people and asset builders Personal Loan Establish a consultation system via a variety of channels [Direct face-to-face] Promote hybrid-type sales Establish sales structure combining direct and indirect face-to-face approaches [Indirect face-to-face] Utilize Direct Center Support many customers' financial needs via phone/web [Non-face-to-face] Enhance products online Expand products transacted completely on the web (e.g., loan contracts) Personal Loan KPI: Number of contracts (for 3 years) Asset management KPI 2023/3 2026/3 Balance of investment trusts ¥146.1 billion ¥230.0 billion With collateral Number of investment trust holders 66,815 holders Number of NISA accounts 28,919 accounts 70,900 holders 47,600 accounts Without collateral 5,400 contracts 16,500 contracts 26#28Basic strategy 1: Strengthen earning power 1-4 DX Strategy -Promotion of DX- Key measures -Evolution (deepening) of regional financial business and reinforcement of earnings structure― TOCH GN IN TOCHIGI BANK Specific initiatives Face-to-face channel Enhance services for customers Non-face-to-face Develop human resources (level- specific) Utilize/leverage Al and data channel Promoting DX for business customers: Business Direct, Mikatano Service, Business matching, ICT consulting, etc. Enhancing apps and online services for individual customers: Expansion of app and web service functions to build customer contact points and improve convenience Developing online services for business customers: Construction of customer contact points through corporate portals Specialized personnel: Personnel with specialized knowledge, skills, and experience. Talent from outside, consultants, advisors, etc. Core personnel: Front-line personnel for DX and ICT service planning, execution, and management, as well as professional services Base personnel: Personnel with basic knowledge of DX and IT to provide basic banking services and recognize customers' issues and needs Strengthening data marketing; building an integrated database foundation; utilizing Al; distributing direct messages, emails, etc., and utilizing social media Utilize/leverage Al and data Through the construction of a customer database foundation, we will create "new value" in each field by aggregating and combining the data held by each system to utilize a wide variety of data. be strengthened Fields and items to New value creation through data collection (centralization) and utilization Product planning Business administration Financial instruments that reflect customer needs (loan products catering to industry characteristics and individual life cycles), etc. I Sales representatives, digital distribution (loans, asset management, new businesses, lending by industry, etc.), etc. Screening & Rating Risk Management Consulting ■Screening model (loans) Al-based monitoring Credit risk model Anti-money laundering, etc. ■Asset management and inheritance Solutions to issues such as sales channel matching, etc. resolving issues Foundation for DATA LAKE (Customer database foundation) Accounting CRM Apps Cashless External info 27#29Basic strategy 2: Strengthen systems -Promotion of structural reforms and reinforcement of management base for the future- 2-1 Branch Strategy -Revamp of the sales system/branch system depending on area characteristics― TOCH GN TOCHIGI BANK In order to respond to changes in the market, such as a declining population, and changes in customer needs, we will enhance our initiatives to achieve efficient branch operations and resolve issues of the regional community and customers by revamping branch capabilities and locations depending on regional characteristics, while maintaining ties with customers by expanding various channels and advancing DX. Branch Strategy Introduce area head office system Speedy response to customers ■Reinforcement of initiatives to resolve issues in the regional community Expand streamlined branch offices Expansion of personal bank branches and purpose-built branches corresponding to regional characteristics Efficient branch operations while retaining customer convenience Open online branch Reinforcement of non-face-to-face sales through an internet branch (Aiming to open during the period of the Medium-term Management Plan) Sales system tailored to regional characteristics —Strengthen consulting sales- Achieve efficient branch operations and resolve issues of the regional community and customers Number of branch locations 75 Satellite locations Personal bank branches 66 Satellite locations Personal bank branches Full banks Full banks Sales System Financial Service Division Personal Loan Division Customer Service Center FS leader Money plan supporter Corporate Business Division Loan Plaza Corporate promotion leader Solution supporter Highly specialized consulting sales External relations (with both corporates and individuals) Consulting sales Head office offices Area head offices Branch 2023.3 2026.3 28#30Basic strategy 2: Strengthen systems -Promotion of structural reforms and reinforcement of management base for the future- 2-2 New Business Strategy -Enhancement of sustainability promotion system (Creation of new businesses and services)― TOCH GN TOCHIGI BANK The deregulation of the Banking Act has made it possible to provide new businesses and services that go beyond the conventional business framework. New business initiatives play an important role in our growth strategy. We will work to create a variety of new services, such as through collaboration with highly specialized companies outside the Group as well as with companies within the Group. Business Model Sustainability Promotion WG Regional Analysis Section Dialogue Resolving Tochigi Bank Group companies Local government Dialogue specific issues External consulting firms Regional companies Tochigi Bank Regional Platforms Tochigi Bank Regional companies Local government Educational institutions Business ideas Regional issues and needs (Voices of local governments and businesses, economic indicators, local government policies) Materializing new businesses and services 29 29#31Basic strategy 2: Strengthen systems -Promotion of structural reforms and reinforcement of management base for the future- 2-3 Sophistication of Risk Management In the face of increasingly complex and diverse risks affecting management, we are strengthening our risk management system to anticipate and appropriately respond to various types of risks that may arise. Significant risks inherent in the implementation of the Medium-term Management Plan Item Securities investment strategies DX and system strategies Risk management Deeper risk-taking to the Credit risk management region Market risk management Cyber security, third party Sale of financial instruments in general Compliance/conduct risk management Others * Prevention of money laundering and terrorism financing, climate change risk, operational resilience Various risk management of the Group companies (strengthening of the Group governance) Enhancing three lines of defense system Risk owner, Risk and Compliance Management Divisions, Audit Division October 2022 Risk Management Office was reorganized into the Risk Management Division (from 4 to 8 persons). "Market Risk Management Office" (3 persons) was newly established as an office within the Risk Management Division. TOCH GN TOCHIGI BANK Restructuring of screening system • Objective data and qualitative information on area characteristics are collected/accumulated, and shared. • Risk-taking policy for areas and industries are clarified. Business feasibility assessment and policy on initiatives to improve the business value of customers are clarified. Securities investment strategies Even amid the current volatile market environment, we aim to improve profitability by combining risk hedging and flexible trading, while preventing the expansion of risk. [Investment sophistication] Profitability improvement, risk control, human resource development Cyber security We have established a business continuity structure with a dedicated cyber security team taking necessary measures mainly to prevent unauthorized system intrusions and information leaks, as well as preventing the spread of damage and promptly restoring operations in the event of a cyber attack. Strengthening of customer-oriented business operations In building a sustainable deposit asset business, we will develop an appropriate conduit risk management system to ensure long- term returns commensurate with customer risk and sales commissions and other costs. Prevention of money laundering, etc. Under the Action Policy on the Prevention of Money Laundering and Terrorism Financing, we are developing a system to properly assess risks and take more effective countermeasures based on the "Guidelines for Anti-Money Laundering and Combating the Financing of Terrorism” published by the Financial Services Agency. 30 50#32Basic strategy 2: Strengthen systems -Promotion of structural reforms and reinforcement of management base for the future- 2-4 Group Strategy -Reinforcement of the Group governance— TOCH GN TOCHIGI BANK By fully leveraging the solution capabilities of each Group company to resolve customer issues, we will contribute to the sustainable growth of the region and thus enhance the Group's corporate value. Sustainable growth of the region Resolve issues for regional businesses and customers Improvement of the Group's corporate value The Tochigin Capital & Consulting, Ltd. Fully leverage solution capabilities Clean Energy Solutions, Ltd. Sophistication of consulting and equity fields TOCH The Tochigin Card Service, Ltd. Contribution to the realization of a cashless society The Tochigin Leasing Co., Ltd. GNTOCHIGI BANK Strengthen the Group governance Realization of a circular regional economy Tochigin Tokai Tokyo Securities Co., Ltd. The Tochigin Business Service, Ltd. Reinforcement of SDGs/ESG and relevant supports Promotion of thorough customer-oriented business operations and bank-securities company cooperation * The "∞" circle expresses infinite possibilities that the Group will co-create with the regional residents, including the circulation and sustainability of the people and region. The Tochigin Shuchu Jimu Center, Ltd. Improvement of efficiency through concentration of peripheral operations 31#33Basic strategy 2: Strengthen systems -Promotion of structural reforms and reinforcement of management base for the future- 2-5 Capital Strategy and Shareholder Returns Policy TOCH GN TOCHIGI BANK We will allocate capital in a manner that balances “return to shareholders" and "investment for growth," while ensuring "financial soundness" necessary to continue to support our customers' financing needs even in a rapidly changing economic environment. 1. Financial Soundness Capital Adequacy Ratio (Consolidated) 11.85% 11% level 2. Shareholder Returns Policy We target a total return ratio of 30% to 35%. This ratio indicates total returns, consisting of dividends and purchase of treasury shares, as a percentage of profit attributable to owners of parent. Total Return Ratio 2023/3 2026/3 3. Capital Efficiency (ROE Improvement) ROE (Consolidated) Aim for 5% or higher in the long term 1.53% 3.0% or higher 2023/3 2026/3 34.1% 2023/3 Target of 30 to 35% 2026/3 4. Investment for Growth We will make new investments totaling 8.0 billion yen or more during the 11th Medium-term Management Plan, including investments in DX and systems, human resources, new businesses, branch office reorganization, as well as equity investments through subsidiaries. 32 32#34Basic strategy 3: Strengthen human capital investment -Foundation of sustainable management- 3-1 Human Resource Strategy (1) -Enhancement of human resource development- Expected type of personnel Personnel who can understand and put into practice important policies (who are strongly committed to contributing to customers and the community) Personnel who strive actively for their own growth Investment in Human Resources Total investment increase over 3 years: Annual training cost per employee: TOCH GN TOCHIGI BANK ¥370 million ¥40,000 (current) ⇒ ¥82,000 (after 3 years) Scheme for Human Resource Development Human Resource Development ■Development/implementation of reskilling measures ■Expansion of training and self-improvement contents ■Strategic secondment and assignment ■Support for specialized qualification acquisition External work experience as trainee ■Utilization of skills registration database, etc. Stronger support for improving knowledge and skills We encourage personnel to improve their skills through on- the-job training and the job rotation system and to take on next-level challenges by visualizing their skill levels. • We support the improvement of knowledge and skills by enriching e-learning contents and enhancing opportunities for self-improvement. Acquisition of Specialized Knowledge -Specialists for each strategy— Corporate Customer Strategy ■Industry specific consultants Structured finance specialists Business succession, M&A consultants DX/IT Strategy Data scientists, IT strategists IDX project managers, ICT consultants Individual Customer Strategy Financial planners Personnel who can share the concerns of our customers and support them in resolving issues for their maximum benefit New Business Strategy Self-directed personnel Personnel who have the courage to tackle new things and changes, and who can identify and solve problems Assignment Assignment to divisions that allow for leveraging the acquired knowledge Assignment of the right person to the right job ■Promotion of the advancement of women ■Strategic personnel assignment (reassignment) Overall picture Specialized personnel 2 to 5 people Core personnel 50 people Base personnel 500 people • Personnel with specialized knowledge, skills, and experience (data scientists, IT strategists, etc.) ⚫ Front-line personnel for DX/ICT service planning, execution, etc. (DX project managers, ICT consultants, etc.) • Personnel with basic knowledge of DX/IT 33#35Basic strategy 3: Strengthen human capital investment -Foundation of sustainable management- 3-2 Human Resource Strategy (2) TOCH GIN TOCHIGI BANK ―Improvement of internal environment, cultivation of the Tochigin mindset and a new organizational culture/climate- Internal Environment to Improve Employee Engagement environment Improvement of internal Cultivation of the Tochigin mindset Initiatives in health and productivity management, career support system, secondary job system, and diversity & inclusion Initiatives in Health and Productivity Management Foster health awareness through seminars on health care, mental health care, and other health- related topics to create a bright and healthy workplace. Promotion of Advancement of Women Continue discussions and proposals by the Council for Promoting the Advancement of Women to expand opportunities for women to play an even greater role. Commitment to contributing to customers and the region Development of Human Resources Enhancement and sophistication of training opportunities Develop human resources who understand our management philosophy and purpose through regular trainings, such as level-specific trainings, and who can act based on those principles. (Human resources with high human capabilities) Initiatives in Sustainability Engagement with sustainability Continue our sustainability initiatives and enhance our ability to contribute to the region by sharing regional issues across the organization and working together to resolve them. Development of Career Support System Develop a support and consultation system for each person's career, considering the medium and long-term perspective, to create a rewarding work environment that provides a sense of security and fulfillment. Diversity & Inclusion Utilization of Senior Personnel Provide opportunities for senior personnel with a variety of experience to play an active role. 0 organizational culture/climate Cultivation of a new Increase engagement through PDCA cycle with employee satisfaction surveys, etc. Introduction of Secondary Job System Improve employee engagement by improving their skills and fostering their self-directed nature. Expansion of Mid-career Recruitment Diversify recruitment methods and introduce the Alumni System to secure human resources with a variety of experience and strengthen our organizational capabilities. Risk taking, trial and error, speed, sensitivities Cultivation of a Sense of Organizational Unity Dialogue between the president and other executives, and the personnel Deepen mutual understanding and share the Bank's vision for the future between the management and branch personnel, and work as one to create and develop a new Tochigi Bank. Expansion of selectable trainings/trainee programs Expansion of trainings available by application and work experience as trainee Expand selectable trainings and trainee programs to provide educational opportunities for personnel who take the initiative in improving their knowledge and skills, and thereby develop self-directed personnel. 36#36TOCH GIN TOCHIGI BANK Contact for inquiries on these materials: Corporate Planning Division: Nakada, Saito, and Iwamoto Tel.: +81-28-633-1455 e-mail: [email protected]