77 Bank : (Delayed)IR Presentation Results for the Fiscal Year Ended March 31,2020(June 2,2020)

IR Presentation

Results for the Fiscal Year Ended March 31, 2020

June 2, 2020

Materials were prepared for the Bank's presentation of its results for the fiscal year ended March 31, 2020 held on June 2, 2020.

Contents

I. Financial Summary

□ Summary of profits and losses	3
□ Interest income	4
□ Loans and bills discounted/Deposits	5
□ Securities	6
□ Fees and commissions	8
□ Expenses	9
□ Credit-related expenses/reserve for
possible loan losses/credits disclosed	10
under the Financial Reconstruction Law

II. Projected Performance

□ Response to COVID-19	12
□ Projected performance for FY2021	15
□ Quantitative	16
□ Progress of the Medium-term
Management Plan	17

Fiscal Year Ended March 31, 2020

III. Management Strategy

□ Principal markets	19
□ Management philosophy/Bank image
sought by The 77 Bank	20
□ Growth Strategy
・Consulting-based sales	21
・HR development	26
・Marketable securities trading	27
□ Productivity enhancement strategy
・Paperwork-free/Digital strategy	28
□ Governance strategy
・Capital policies	29
・Improvements in governance	30

• Regional economy vitalization strategy

・SDGs/ESG

31

1

I. Financial Summary

2

I. Financial Summary		Summary of profits and losses
													(JPY bn, %)
Summary of profits and losses								YoY change
	FY2019			FY2020			Increase/			Rate of
(Non-consolidated)
							Decrease			change %
Gross operating income		69.2			72.1			2.9			4.2
[Core gross operating income]	[	72.0	]	[	74.6	]	[	2.6	]	[	3.6	]
	Interest income		65.9			68.5			2.6			3.9
	Fees and commissions		9.6			9.7			0.1			1.2
	Other operating income		(6.3)			(6.1)			0.2
		Gains (losses) on bonds		(2.8)			(2.5)			0.3
Expenses		52.8			53.2			0.4			0.9
Substantial operating income (Operating income		16.4			18.9			2.5			15.1
before provision of general reserve for possible loan losses)
[Core operating income]	[	19.2	]	[	21.4	]	[	2.2	]	[	11.1	]
[Core operating income (excl. gains (losses) on	[	15.7	]	[	14.3	]	[	(1.4)	]	[	(9.4)	]
cancellation of investment trusts)]
Provision of general reserve for possible loan		(0.2)			1.2			1.4
losses
Operating income		16.6			17.7			1.1			6.5
Special income and losses		5.4			6.9			1.5
	Bad debt disposals (-)		2.5			6.1			3.6
	Gains (losses) on stocks		5.8			4.6			(1.2)
	Gains (losses) on investments in money held in		3.1			8.8			5.7
	trust
Ordinary income		22.0			24.6			2.6			11.6
Extraordinary income		1.4			－			(1.4)
Extraordinary loss		0.8			0.1			(0.7)
Income taxes (incl. deferred taxes)		4.7			7.2			2.5
Net income		17.9			17.3			(0.6)			(3.6)
Credit-related expenses		2.3			7.3			5.0
Summary of profits and losses	(Consolidated)
Ordinary income		23.4			26.3			2.9			12.6
Net income attributable to owners of the parent		17.6			18.2			0.6			3.3

Fiscal Year Ended March 31, 2020

Core operating income increased JPY 2.2 billion year-on-year because of an increase in interest income due to an increase in interest and dividends on securities.

Ordinary income increased JPY 2.6 billion year-on-year because of an increase in securities-related income, despite an increase in credit-related expenses.

Net income decreased JPY 0.6 billion year-on-year because of a decrease in gains on liquidation of subsidiaries associated with the liquidation of three consolidated subsidiaries recorded during the previous fiscal year.

3

I. Financial Summary

Interest income

Fiscal Year Ended March 31, 2020

					(JPY bn)
			FY2019
			FY2020	YoY change
Interest income	65.9	68.5	2.6
	Investment income	69.4	70.8	1.4
		[Interest on loans and bills	42.0	41.9	(0.1)
		discounted]
		[Interest and dividends on	27.1	28.7	1.6
		securities
	Fund procurement costs	3.5	2.3	(1.2)
		[Interest on deposits]	1.5	0.8	(0.7)
					(JPY bn)
		Major accounts
		(average balances)	FY2019	FY2020	YoY change
Loans and bills discounted	4,662.3	4,747.5	85.2
Securities	2,930.2	2,789.3	(140.9)
Deposits and certificates of	7,766.8	7,790.8	24.0
deposits
					(%)
		Interest rates	FY2019
		FY2020	YoY change
Loans and bills discounted interest	0.90	0.88	(0.02)
rate
Securities interest rate	0.92	1.02	0.10
Interest rate on deposits	0.01	0.00	(0.01)

* Figures in YoY change (increase/decrease) show percentage points.

Interest income increased JPY 2.6 billion year-on-year due to an increase in interest and dividends on securities and a decrease in interest on deposits.

Factors in securities

(JPY bn)

		+1.6
		Yield	Factors
		+2.9	in deposits
			+0.7
Average balances		Yield	Other
	+0.8
		+0.7
		+0.4
			FY2020
					Interest
FY2019		Average balances		income
		(0.0)		68.5
Interest
Yield	Average
income	(0.9)	balances
65.9		(1.3)

Factors in loans

(0.1)

4

I. Financial Summary

Loans and bills discounted/Deposits

Fiscal Year Ended March 31, 2020

				(JPY bn, %)
		FY2019	FY2020
		YoY change (%)
Loans and bills discounted	4,662.3	4,747.5	1.8
(average balances)
	Corporate loans	2,886.3	2,945.0	2.0
	Retail loans	1,119.4	1,154.9	3.1
	Loans for local governments	656.6	647.6	(1.3)

Corporate loans (yen-denominated, average balances)

(JPY bn, %)

	FY2019	FY2020	YoY change (%)
Deposits and certificates of	7,766.8	7,790.8	0.3
deposits (average balances)
Retail deposits	4,953.7	5,054.4	2.0
Corporate deposits	1,803.9	1,850.5	2.5
Public deposits	957.3	856.3	(10.5)

Loans and bills discounted interest rate (Yen-denominated)

(JPY bn)

4,000 Miyagi Pref.

3,000 2,617.8

2,000906.3

205.5

1,000

1,506.0

Tohoku region, etc. (excl. Miyagi Pref.) Tokyo/Nagoya/Osaka

2,717.1	2,823.4	2,881.6
869.8	864.8	869.0
	269.6
224.5	246.5
1,622.8	1,712.1	1,743.0

YoY change

＋2.0%

+0.4%

+9.3%

+1.8%

1.1%
1.0%	1.03%
0.9%	0.93%
	0.90%
		0.87%
0.8%			0.85%
	(10) bp
0.7%	(3) bp	(3) bp		(2) bp

0

FY2017

FY2018

FY2019

FY2020

0.6%
FY2016	FY2017	FY2018	FY2019	FY2020

Retail loans (average balances)	YoY change in interest
on loans and bills discounted (Yen-denominated)

Housing loans	Unsecured loans	Others	YoY		(JPY bn)		Factors in average balance
change
(JPY bn)					(JPY bn)	3.0		Factors in yield
			1,154.9				Interest on loans and bills discounted
			1,119.4	120	2.0
		1,056.3
962.8		+3.1%		1.0				1.6	0.1
			90	0.8	1.3
1,000			1,066.0	1,098.3	0.0		0.7
		1,006.9
922.2							(0.8)
					(1.5)	(0.2)	(1.5)
		+3.0%	60	-1.0
						(0.1)
500				51.9		-2.0	(4.0)
		47.9
		43.0	30
33.1			+8.3%
				-3.0		(3.2)
7.5	6.4	5.5	4.7
0					0	-4.0
FY2017	FY2018	FY2019	FY2020			FY2017	FY2018		FY2019		FY2020

5

I. Financial Summary	Securities (1)	Fiscal Year Ended March 31, 2020
Balance of marketable securities (on an amortized cost base)

National gov. bonds		Local gov. bonds
Corporate bonds		Others

(JPY bn)	Stocks					Balance of public, etc. (at term-end)
4,000
		Balance of marketable securities
				3,601.9	3,500.0
				62.2
3,500				62.2	3,326.8
		3,312.0
			61.5	416.1		61.4	3,086.4
				447.3
3,000		2,811.3	347.1			527.7	72.4	2,963.2	2,820.5	2,835.3
					69.7
		66.9
								65.5	65.5
							593.9
		255.6		918.0
						588.2
				935.0
2,500			846.3					608.4	623.5
	2,083.0
				75.9		978.3
		851.0
2,000	70.4	86.8		74.7
				969.3
	310.7						950.3
		80.6				223.5			936.3	957.0
1,500
	750.7						242.4
				2,129.7				377.4
1,000			1,970.3	1,980.8
106.2						507.8
									739.6
		1,557.2				1,535.9
							1,208.4
500	845.0							977.6
								702.5
										449.7
0
	2011/3	2012/3	2013/3	2014/3	2015/3	2016/3	2017/3	2018/3	2019/3	2020/3
										(JPY bn)

Balance
of public,
etc.	479.7	1,342.8	1,835.6	1,819.6	1,711.7	1,638.1	1,312.0	1,258.2	1,106.0	939.7
(at term-
end)

Balance of marketable securities increased JPY 14.8 billion year-on-year, due to increased investments in local gov. bonds, despite decreased investments in national gov. bonds.

Composition ratio by type (on an amortized cost base)

	End-Mar.	End-Mar.	End-Mar.
	2018	2019	2020
National gov. bonds	33.0%	24.9%	15.9%
Local gov. bonds	12.7%	18.0%	26.1%
Corporate bonds	32.1%	33.2%	33.7%
Other	19.9%	21.6%	22.0%
Investment	13.9%	15.5%	17.8%
trusts, etc.
Foreign bonds	6.0%	6.1%	4.2%
Stocks	2.3%	2.3%	2.3%

Yields and modified duration of yen-denominated bonds

* Yen-dominated bonds other than investment trusts

		Modified duration	Yield (%)	0.8
4.0
					4.17
3.0	3.23			3.30	0.6
	3.07	3.09
2.0
	0.44	0.44			0.4
1.0	0.42	0.39
				0.34
0.0					0.2
	2016/3	2017/3	2018/3	2019/3	2020/3

6

I. Financial Summary	Securities (2)	Fiscal Year Ended March 31, 2020
Gains (losses) from evaluation of securities

National gov. bonds		Local gov. bonds

(JPY bn)	Corporate bonds				Others
200	Stocks					Gains (losses) from evaluation of securities
				183.6
175							162.8
					152.1	156.2
150								144.4
				80.3
			114.6
125					63.8
					78.6	89.8
		90.9						72.3
100
								78.1
			50.6
75		36.8		64.2
			38.9
35.1	38.1
			24.8			42.1			51.1
50	18.2	10.8				47.7	49.2
23.5
			18.9
		19.4
10.0	14.7	15.9	15.7	5.5	13.9
25		1.1	0.6	0.9
1.7	1.6		4.5	9.9	8.6	17.4
19.9	19.9	22.8	22.7	22.5	25.0	17.1	4.5	7.0	2.1
	10.9
							7.3	3.8
0								3.7
(20.0)	(16.3)
(25)
2011/3	2012/3	2013/3	2014/3	2015/3	2016/3	2017/3	2018/3	2019/3	2020/3

(JPY bn)

17.5		Money held in trust (Reference)

7.5													18.9				15.0	17.6
													11.3			12.6
												7.0
(2.5)			(1.5)				(1.4)			2.9														0.9
		2011/3	2012/3			2013/3	2014/3	2015/3		2016/3	2017/3	2018/3		2019/3	2020/3

Gains (losses) from evaluation of securities decreased JPY 66.3 billion year-on-year due to a decrease in stock prices.

Gains (losses) on securities

					(JPY bn)
			FY2019	FY2020
			YoY change
Interest and dividends	27.1	28.7	1.6
on securities
	Interests on yen-denominated	9.0	7.5	(1.5)
	bonds
	Stock dividends	5.2	5.1	(0.1)
	Distributions from investment	4.5	5.2	0.7
	trusts
	Gains on cancellation of	3.5	7.1	3.6
	investment trusts
Gains (losses) on bonds	(2.8)	(2.5)	0.3
	Gains on sales of bonds	0.1	0.1	0.0
	Losses on sales of bonds	0.8	0.1	(0.7)
	Losses on redemption of	2.1	2.5	0.4
	bonds
		Losses on cancellation of	1.7	1.9	0.2
		investment trusts
Gains (losses) on stocks	5.8	4.6	(1.2)
	Gains on sales of stocks	6.0	5.0	(1.0)
	Losses on sales of stocks	0.1	0.1	0.0
	Amortization of stocks	0.1	0.3	0.2
Gains (losses) on investments in	3.1	8.8	5.7
money held in trust

7

I. Financial Summary

Fees and commissions

Fiscal Year Ended March 31, 2020

Fees and commissions increased JPY 0.1 billion year-on-year because of a favorable increase in fees and commissions from corporate clients for the services including syndicated loans, commitment lines and M&A, despite increased loan repayment guarantee fees due to an increase in unsecured loans.

(JPY mn)

	FY2019	FY2020	YoY change		FY2019	FY2020	YoY change
Fees and commissions proceeds	16,742	16,968	226	Fees and commissions payments	7,171	7,279	108
Fees and commissions from	6,820	6,725	(95)	Creditor group insurance	2,361	2,354	(7)
forex	premiums
Fees and commissions from	2,666	2,731	65	Loan repayment guarantee	2,098	2,350	252
account transfer	fees
Fees and commissions from	1,260	1,530	270	Other commission payments	2,712	2,575	(137)
corporate clients
Sales commissions of assets	1,633	1,511	(122)
in custody
Other fees and commissions	4,363	4,471	108	Fees and commissions	9,571	9,688	117

Fees and commissions from corporate clients

						1,530
(JPY mn)			Syndicated loans,
1,500			commitment lines
			Business matching		1,260
			M&A			650
			Privately placed		437
1,000			corporate bonds
			Manager insurance	642	240	281
500		400	319	125	308
				135
		264	122	322	171
		84 49	83
		68		118
0				46
		FY2017	FY2018	FY2019	FY2020

Sales commissions of assets in custody

			Operating revenue of 77 Securities			Structured bonds, etc. (brokerage)
			Public bonds						Insurance
			Investment trusts									Group total
(JPY mn)						Group total
							2,631
						Group total
									2,254
	1,898				2,359
2,000						1,656		1,633
	247						1,511
	33			144			110
	552			24			27			208	1,120
											32
						631
								799
1,000							703			642
									621
	1,065			855
								696			628
0			77 Bank			77 Bank		77 Securities		77 Bank		77 Securities		77 Bank		77 Securities
			FY2017				FY2018				FY2019			FY2020

8

I. Financial Summary

Expenses

Fiscal Year Ended March 31, 2020

Expenses increased JPY 0.4 billion year-on-year, because of increased non-personnel expenses due to an increase in system- related expenses, as well as increased taxes due to a consumption tax rate hike, despite decreased personnel expenses due to a decrease in the number of employees from retirement, as well as the establishment of the retirement benefit trust at the end of the previous fiscal year.

(JPY bn)	(JPY bn)

FY2019

FY2020

YoY change

Key change factors in expenses (FY2020)

Expenses

52.8

53.2

0.4

Personnel

Decrease in the number of

(0.3)

employees

Expenses

Establishment of the retirement

(0.2)

Personnel Expenses

27.6

27.0

(0.6)

benefit trust

Non-personnel

Increase in system-related

＋

1.0

Non-personnel

22.0

22.7

0.7

expenses

expenses

expenses

Decrease in depreciation

(0.3)

Tax

3.2

3.5

0.3

Tax

Consumption tax rate hike

＋ 0.2

Personnel Expenses

Non-personnel expenses

(JPY bn)

Tax

Core OHR

90	72.2%	69.5%	73.3%	71.4%	80%
80
				70%
70					60%
	53.2			53.2
60	52.8	52.8	50%
	3.2			3.5
50	3.3	3.2
					40%
40	22.5	22.3	22.0	22.7
	30%
30
20					20%
27.5		27.6
10	27.2	27.0	10%
0					0%
	FY2017	FY2018	FY2019	FY2020

	FY2017	FY2018	FY2019	FY2020
Number of manned branches	141	141	142	142
(at term-end)
Branches within branches	3	3	4	6
(at term-end)
Number of ATMs installed	806	814	814	800
(at term-end)
Average number of employees	2,768	2,799	2,821	2,768
(excl. secondees)

• The average number of employees in FY2019 increased because some employees of a subsidiary were transferred to the Bank as a result of operational internalization at the subsidiary.

9

I. Financial Summary	Credit-related expenses/reserve for possible loan losses	Fiscal Year Ended March 31, 2020
/credits disclosed under the Financial Reconstruction Law

Credit-related expenses increased JPY 5.0 billion year-on-year, due to a downgrade on the back of the tapering off of demand associated with the recovery from the Great East Japan Earthquake, as well as the impact of the spread of COVID-19.

Credit-related expenses

Reserve for possible loan losses

(JPY bn)													(JPY bn)		Specific reserve for	General reserve		Ratio of reserve for
													150		possible loan losses	for possible loan losses		possible loan losses
60	56.9											1.8%									(Reserve for possible
													2.8%
			Credit-related expenses							2.7%	2.4%					loan losses/balance	3.0%
																	2.1%				of loans and bills
		1.64%																1.8%			discounted)
													1.2%	95.6	100.5		1.6%					2.0%
				Ratio of Credit-related expense rate (Credit-		100	89.2			1.4%	1.2%	1.2%	1.2%
50				1.5%				84.4
			related expenses / Average balances of loans and						76.0
											68.1
				bills discounted)														64.0			58.2	1.0%
																57.6					56.8	55.5
																51.5
														43.0	70.7		42.5	38.8
																						0.0%
													50					33.9	30.3
																			27.7		28.7
40																					27.5
											1.2%
														22.0
																42.9	37.7	41.9	37.2	34.2	33.7	29.1	28.0	29.5
														21.0	24.9
													0
30												0.9%		2010/3	2011/3	2012/3	2013/3	2014/3	2015/3	2016/3	2017/3	2018/3	2019/3	2020/3
													Credits disclosed under the Financial Reconstruction Law
20												0.6%	(JPY bn)		Substandard loans			Doubtful loans
														Loans to bankrupt and quasi-bankrupt	Ratio of bad debts
		0.24%													4.71%
													250											5.0%
											0.15%
		8.8													3.77%
10									7.3	0.3%		3.00%	3.16%		3.31%	2.91%
										200		174.2
										0.04%					2.63%	2.35%				3.0%
																		2.12%
0.02%																				2.00%	2.09%
																144.0
										2.3						37.6	134.7
0.7												150				124.8
												112.8			116.3
													105.2		28.1	28.8		105.7	99.5	96.0	104.4	1.0%
0												0.0%				18.3
																14.8
											100		27.3
												27.0					19.1	13.4		23.0
													96.7					15.3
		(0.03%) (0.01%)			(0.03%)							77.1
				(0.05%)						56.5		73.4	74.7	68.2	59.0	58.0
				(0.7)	(0.08%)							52.1			53.9	52.0
			(1.4)		(1.6)				50
				(3.8)	(0.14%)	(2.3)
												39.9	38.9
(10)						(6.2)						-0.3%		26.0	29.0	32.5	31.8	33.3	27.6	28.1	26.8	29.4
											0
2010/3	2011/3	2012/3	2013/3	2014/3	2015/3	2016/3		2017/3	2018/3	2019/3	2020/3
			2010/3	2011/3	2012/3	2013/3	2014/3	2015/3	2016/3	2017/3	2018/3	2019/3	2020/3

10

II. Projected Performance

11

II. Projected Performance

Response to COVID-19 (1)

Fiscal Year Ended March 31, 2020

Results of the survey of trends in business activities in Miyagi Prefecture

(Survey by 77 Research and Consulting Co., Ltd.; survey period: between March 13 and April 15)

Proportion of companies whose business conditions (order receipt, sales, profit, etc.)

have been impacted by COVID-19 (ongoing)

Significantly negative impact Reasonably negative impact No major impact Positive impact

All industries		13.7		32.4				51.3			2.6
Manufacturing		10.5		37.1				47.6			4.8
Non-manufacturing		15.2		30.1				53.1			1.6
	0%	20%	40%	60%	80%	100%
				Proportion among respondents (%)

Note: Guidelines for the classification of impact: Significantly negative impact means "YoY decrease

of 20% or more"; Reasonably negative impact means "YoY decrease of 5 - 20%"; and No major

impact means "YoY decrease of 5% or less" (hereinafter the same)

Proportion of companies whose business conditions (order receipt, sales, profit, etc.)

have been impacted by COVID-19 (future projection)

		Significantly negative impact		Reasonably negative impact		No major impact		Positive impact
		All industries		27.6			53.8				18.0 0.5
		Manufacturing		28.9			49.6			20.7 0.8
Non-manufacturing		27.0			55.9				16.8 0.4
0%	20%	40%	60%	80%	100%
								Proportion among respondents (%)

Business confidence among companies is deteriorating rapidly on a significant scale (downward adjustment for the first time in four fiscal years).

• The level of business conditions DI in Miyagi Prefecture indicates a rapid record deterioration on a significant scale, sinking below the levels immediately after the Great East Japan Earthquake or at the time of the collapse of Lehman Brothers.
• Retail and service industries experienced strong downward pressure from the abrupt mobility restrictions and voluntary restraints on consumption activities, in addition to the unusually mild winter and consumption tax rate hike, resulting in a significant deterioration at some companies.
• Mainly because of the constraints on economic activities due to COVID-19, further deterioration is expected in both business confidence and future business conditions in all industries.

(Reference) Number of people who tested positive within Miyagi Prefecture (per day) *As of May 27

Total number of people	88
who tested positive

Source: Miyagi Prefecture

12

II. Projected Performance

Response to COVID-19 (2)

Fiscal Year Ended March 31, 2020

Status of funding support

Lending activities for corporate loan customers

		(Number of corporate loan customers (net) as of the end of February
		(Customers)	2020): 18,697)
7,000					(Cases)
							60,000
							40,000
3,500
							20,000
0					0
			Apr. 10	May 7	May 10	May 20
		Customers affected by	5,222	6,212	6,507	6,950
		COVID-19
		Customers applying for
		borrowings (including	2,119	3,006	3,214	3,527
		prospects)
		Of which, borrowings for
		working capital (number of	1,832	2,630	2,822	3,116
		customers/prospects)
		Of which, changing loan
		conditions (number of	287	376	392	411
		customers/prospects)
		Number of contacts made	30,757	48,781	50,650	55,080
		with the customers

＜Readiness for providing funding support＞

• Establishment of contact points for consultation/enquiry outside business days (for both corporate/individual customers) * Open for service during the Golden Week (the spring consecutive holidays)
• Establishment of toll-free number (for both corporate/individual customers)
• Exemption of fees for changing loan conditions
• Establishment of the COVID-19 Emergency Support Team (March 26)

This team is staffed by 21 employees from Consulting Promotion Division and Credit Supervision Division. One or two team members from the Consulting Promotion Division are stationed full-time in each of the 14 core branches in Miyagi Prefecture, providing support in overall management, including consultation with a view toward expanding sales channels after the containment of the pandemic, in addition to the financial aspects such as funding and loans. Meanwhile, four members from the Credit Supervision Division visit each branch to promptly approve loans on site.

(Cases) Status of loan provision to businesses affected by COVID-19

1,600				(cumulative number of loans provided, including change in loan
								conditions)
							Number of loans executed
1,200			Number of loans	1,507
		executed (cumulative)
			Those executed with the				Those executed with the endorsement by
			endorsement by Miyagi	1,086
			Guarantee (cumulative)				Miyagi Guarantee
800					* As of May 28
400
0

		Status of loan provision to businesses affected by COVID-19
(JPY mn)	(cumulative amount of loans provided, including change in loan
200,000								conditions)
	Amount of loans executed		Those executed with the endorsement by Miyagi Guarantee
150,000		Amount of loans	JPY 181.1 bn
	executed (cumulative)
		Those executed with the
		endorsement by Miyagi	JPY 22.1 bn
		Guarantee (cumulative)
100,000					* As of May 28
50,000
0
	Provision of loans with effectively nil interest rate, involving
(JPY mn)	no collateral - application and execution (cumulative)
20,000		Amount of loans applied	JPY 21.6 bn
	(cumulative)
		Amount of loans executed	JPY 11.5 bn
		(cumulative)
15,000					* As of May 29
			Amount of loans applied
10,000

Amount of loans executed

5,000

0

13

II. Projected Performance

Response to COVID-19 (3)

Fiscal Year Ended March 31, 2020

Various services

• Expansion of services not requiring visits to branches
  Launch of consultation by e-mail (77 Consulting Mail or "77C Mail")
  Launch of "100% Web-based Loan"
  Launch of "Investment Trust Information Distribution Service"
• Implementation of Interest Cash-back Special Plan for Card Loan Customers
• Establishment of IT Support Desk
  Established a contact point that addresses the needs for IT-based operational streamlining and development of IT-based working environment

Operation framework within The 77 Bank

(Maintaining financial intermediary functions while preventing the spread of COVID-19)

• Implementation of split operations
  Headquarters: Approximately 300 staff members are working on separate floors, maintaining social distance
  Branches: Some branches have implemented lunchtime closures.
• Implementation of staggered working hours
• Implementation of working from home
• Granting special leave
  Paid special leave is granted to employees unable to work due to temporary closures of elementary schools, etc.

Public-private collaboration

• Information provision to municipal governments (March 24 and April 28)

By utilizing the video conference system of the Bank, Miyagi Prefecture, Sendai City, Tohoku Bureau of Economy, Trade and Industry, Miyagi Labour Bureau, and Miyagi Guarantee collectively provided information to all municipal governments in Miyagi Prefecture as well as some of the municipal governments in Fukushima Prefecture, on the topics including the emergency economic measures, employment support measures, and financial support measures.

Briefing: Video conference at Shiogama Branch (March 24) Briefing: Video conference at Head Office (April 28)

Briefing: Video conference at Furukawa Branch (April 28)

14

II. Projected Performance

Projected performance for FY2021

Fiscal Year Ended March 31, 2020

(JPY bn)

Summary of profits and losses		FY2019			FY2020			YoY
(Non-consolidated)		(Results)			(Forecast)			change
Gross operating income		72.1			70.0			(2.1)
[Core gross operating income]	[	74.6	]	[	72.1	]	[	(2.5)	]
	Interest income		68.5			65.1			(3.4)
	Fees and commissions		9.7			9.2			(0.5)
	Other operating income		(6.1)			(4.3)			1.8
		Gains (losses) on bonds		(2.5)			(2.1)			0.4
Expenses		53.2			50.8			(2.4)
Substantial operating income (Operating income		18.9			19.2			0.3
before provision of general reserve for possible loan losses)
[Core operating income]	[	21.4	]	[	21.3	]	[	(0.1)	]
[Core operating income (excl. gains (losses) on	[	14.3	]	[	12.3	]	[	(2.0)	]
cancellation of investment trusts)]
Provision of general reserve for possible loan		1.2			1.5			0.3
losses
Operating income		17.7			17.7			0.0
Special income and losses		6.9			2.3			(4.6)

				(%)
Interest rates/ Interest	FY2020	FY2021
margin	(Results)	(Forecast)	YoY change
Loans and bills discounted	0.88		0.86	(0.02)
interest rate
Securities interest rate	1.02		0.86	(0.16)
Interest rate on deposits	0.00		0.00	0.00
Interest rate spread	0.84		0.78	(0.06)
Net interest margin	0.17		0.15	(0.02)

• Figures in YoY change (increase/decrease) show percentage points.
  (JPY bn)

	FY2020	FY2021
	(Results) (Forecast)YoY change
Expenses	53.2	50.8	(2.4)
Personnel Expenses	27.0	26.5	(0.5)
Non-personnel expenses	22.7	21.3	(1.4)
Tax	3.5	3.0	(0.5)

	Bad debt disposals (-)	6.1		6.5	0.4
	Gains (losses) on stocks	4.6		4.8	0.2
	Gains (losses) on investments in money held in	8.8		4.7	(4.1)
	trust
Ordinary income	24.6		20.0	(4.6)
Extraordinary income	－		－		ー
Extraordinary loss	0.1		0.2	0.1
Income taxes (incl. deferred taxes)	7.2		5.8	(1.4)
Net income	17.3		14.0	(3.3)
Credit-related expenses	7.3		8.0	0.7

	FY2020
	(Results)
Unsecured call rate O/N	(0.06)%
JPY TIBOR (3 months)	0.07%
USD LIBOR (3 months)	2.02％
10-year JGBs	(0.12)%
10-year US treasury bonds	1.71%
Exchange rate (JPY/USD)	¥109
Nikkei Average (At term-end)	¥18,917

FY2021 (Forecast)

(0.05)%

0.07%

1.20%

(0.05)%

0.75%

¥108

¥19,000

Summary of profits and losses (Consolidated)

Ordinary income	26.3	21.0	(5.3)
Net income attributable to owners of the parent	18.2	14.5	(3.7)

Impact of COVID-19

JPY 5.0 billion out of JPY 8.0 billion

15

II. Projected Performance		Quantitative			Fiscal Year Ended March 31, 2020
1. Major accounts (average balance)							(JPY bn, %)
					FY2018	FY2019	FY2020		FY2021
						Increase compared to FY2018
					(Results)	(Results)	(Results)		(Forecast)
							change %
	Loans and bills discounted		4,494.0	4,662.3	4,747.5		4,900.0	406.0	9.0
		Corporate loans		2,789.7	2,886.3	2,945.0		3,087.0	297.3	10.6
		Retail loans		1,056.3	1,119.4	1,154.9		1,193.0	136.7	12.9
			Housing loans		1,006.9	1,066.0	1,098.3		1,131.0	124.1	12.3
			Unsecured loans		43.0	47.9	51.9		57.0	14.0	32.5
	Deposits and certificates of deposits		7,761.0	7,766.8	7,790.8		7,832.0	71.0	0.9
2. Term-end balance							(JPY bn, %)
					FY2018	FY2019	FY2020		FY2021
						Increase compared to FY2018
					(Results)	(Results)	(Results)		(Forecast)
							change %
	Loans and bills discounted		4,627.1	4,725.0	4,894.6		4,964.0	336.9	7.2
		Corporate loans *		2,796.0	2,868.5	3,027.2		3,055.0	259.0	9.2
		Retail loans		1,101.4	1,140.4	1,181.6		1,211.0	109.6	9.9
			Housing loans		1,048.9	1,085.7	1,122.9		1,147.0	98.1	9.3
			Unsecured loans		46.5	49.7	54.5		59.0	12.5	26.8
	Deposits and certificates of deposits		7,964.3	7,891.8	7,888.5		7,931.0	(33.3)	(0.4)
	*Term-end balance of "corporate loans" is yen-denominated only.

16

II. Projected Performance Progress of the Medium-term Management Plan

Fiscal Year Ended March 31, 2020

１．Targets						(JPY bn, %)
								Medium-term
		Item		Results		Forecast		Management
							Plan target
			FY2018	FY2019	FY2020	FY2021		FY2021
・Net income (consolidated)	18.3	17.6	18.2	14.5	19.0
・Interest on loans and bills discounted	41.4	42.0	41.9	42.5	45.0
・Fees and commissions	9.3	9.6	9.7	9.2	11.5
・Core OHR (core gross operating	69.5	73.3	71.4	70.5	70.0
income expense ratio)
・ROE (consolidated)	3.8	3.6	3.9	3.3	3.7
・Capital adequacy ratio (consolidated)	10.4	10.4	10.3	10.1	10.0
・Balance of corporate loans (term-end)	2,796.0	2,868.5	3,027.2	3,055.0	3,000.0
*1
	Of which, Miyagi Prefecture	1,698.9	1,746.0	1,778.2	1,868.0	1,900.0
		Of which, Sendai City	1,223.3	1,276.6	1,306.6	1,389.0	1,370.0
・Balance of assets in custody, Group	606.2	619.3	600.4	652.4	740.0
(term-end) *2
・Balance of retail loans (term-end)	1,101.4	1,140.4	1,181.6	1,211.0	1,200.0

*1. Yen-denominated only *2. Sum of assets in custody of The 77 Bank and those of 77 Securities (foreign currency deposits exclude deposits by financial institutions and offshore accounts)

		(%, JPY)
	FY2019	FY2020	FY2021
		At the time of		At the time of		At the time of
		formulation of		formulation of		formulation of
	Result	the Medium-	Result	the Medium-	Forecast	the Medium-
	term	term	term
		Management		Management		Management
		Plan		Plan		Plan
Unsecured call rate O/N	(0.06)	(0.05)	(0.06)	(0.05)	(0.05)	0.00
JPY TIBOR (3 months)	0.07	0.07	0.07	0.07	0.07	0.10
USD LIBOR (3 months)	2.51	2.23	2.02	2.35	1.20	2.35
10-year JGBs	0.04	0.05	(0.12)	0.05	(0.05)	0.20
10-year US treasury bonds	2.84	2.85	1.71	3.00	0.75	3.10
Exchange rate (JPY/USD)	111	111	109	112	108	113
Nikkei Average (At term-end)	21,205	23,500	18,917	23,500	19,000	23,500

２．Key performance indicators (KPIs) for strengthening consulting capabilities
							Medium-term
Item			Results		Forecast		Management Plan
						target
		FY2018	FY2019	FY2020	FY2021		FY2021
・No. of employees with qualifications (1st grade Certified Financial Planner, CFP,	(persons)	111	118	141	700		700
and Small and Medium enterprise Management Consultant)
・No. of corporate loan borrowers	(borrowers)	12,290	12,204	12,106	13,000		13,000
・No. of clients who signed contracts for customized solutions based on business	(clients)	(1,114)	1,244	1,978	2,000		2,000
evaluation (cumulative total for 3 years) *3
・Fees and commissions from corporate clients *4	(JPY bn)	0.6	1.3	1.5	1.8		1.8
・No. of business succession, inheritance, and asset succession support recipients	(recipients)	(677)	904	2,126	3,300		3,300
(cumulative total for 3 years) *3
・No. of increases in contracts for installment-type assets in custody [compared	(contracts)	(10,856)	13,633	28,921	40,000		40,000
with FY2018 term-end] *3
・No. of seminars for customers (cumulative total for 3 years) *3	(times)	(80)	430	927	1,100		1,100

*3. Results indicated for FY2018 are results for the single year.

*4. Fees and commissions for syndicated loans, commitment lines, business matching, M&A, privately placed corporate bonds, manager insurance products, etc.

17

III. Management Strategy

18

III. Management Strategy

Principal markets

Fiscal Year Ended March 31, 2020

Sendai Urban Restructuring Project (launched by Sendai City in October 2019)

Project period: through FY2031

◆Reconstruction of obsolete buildings and promotion of corporate relocation into the city (the first measure)

• Establishment of "Subsidy System for Promoting Building Reconstruction in Sendai City Center"
• Relaxation of floor-area ratio with a view toward "developing highly functional office"
• Enhancement of business attraction framework and subsidy systems, etc.

(offices)		Number of offices
140,000
120,000	98,190	102,026
100,000		Growth rate +3.9％
80,000
60,000		No.1 in Japan in terms of
40,000		the growth rate since the last
20,000		survey (2012)
0
	2012	2016
Source: Statistics Bureau, Ministry of Internal Affairs and Communications

(JPY tn) Manufactured good shipment amounts

8.00

7.00 Increasing for six consecutive years

6.00 since the Great East Japan

5.00	Earthquake							4.47
3.42	3.97	4.02	4.11
4.00

3.00

2.00

1.00

0.00
2012	2013	2014		2015	2016	2017
Source: Tohoku Bureau of Economy, Trade and Industry

Publicly assessed land prices (change in

1. percentage) in Miyagi Prefecture

Next-generation synchrotron radiation facility

(scheduled for completion at the end of March 2023)

• Economic ripple effects of the synchrotron radiation facility (estimated by Tohoku Economic Federation)
• JPY 1,901.7 billion in ten years after the commencement of operation (including JPY 1,624.0 billion of market creation effects across Japan such as new product development utilizing the research results)
• Local ripple effects within Miyagi Prefecture is JPY 277.7 billion
• The project is believed to contribute particularly in the areas such as fuel cell, gene drugs and nanocarbon materials

Next-generation synchrotron

radiation facility (image)

8.0
		Commercial district				5.9	6.2
		Residential district
6.0
						4.7	4.8
4.0			1.7	2.3	3.2			3.5	3.5
2.0
		2.5	2.3		2.4	2.7
	0.0 1.4	1.9
0.0
	2013	2014	2015	2016	2017	2018	2019	2020

Commercial district: Increasing for seven consecutive years Residential district: Increasing for eight consecutive years

19

III. Management Strategy Management philosophy/Bank image sought by The 77 Bank Fiscal Year Ended March 31, 2020

Bank Creed

The Bank's mission is to absorb funds and create credit by exercising its own creativity based on the principle of self-responsibility, in a spirit of maintaining orderly credit conditions and protecting depositors, and thereby contribute to the growth of the national economy. In light of such public mission, the Bank shall contribute to the local community while seeking a harmonious balance between self-interest and public interest as a regional bank.

The venerable Eiichi Shibusawa

• The photograph in the possession of Fukaya City.

The Bank's management philosophy was established as the Bank Creed in 1961. The line that states "the Bank's progress goes hand in hand with prosperity in the local community" directly stems from the spirit of "harmony of morality and the economy" advocated by Eiichi Shibusawa, who is often called the "father of the Japanese capitalism" and provided both mental and practical support to the Bank at the time of its foundation.

Based on the aforementioned principles, the code of conduct to be observed by any and all persons employed by the Bank is set forth as follows.

1. Elevate the Spirit of Voluntary Service Acknowledge that the Bank's progress goes

hand in hand with prosperity in the local community, and seek to elevate the spirit of voluntary service at all times.

2. Improve Creditworthiness

Bear in mind that credit is the Bank's lifeblood, and endeavor to improve credit at all times.

3. Nurture the Spirit of Harmony Recognize that the spirit of harmony is

fundamental to the execution of duties, and strive to nurture such spirit at all times.

Bank image sought by The 77 Bank

"Best Consulting Bank" that responds to customers' needs by offering the optimum solutions

Key strategies to achieve

the "Best Consulting Bank"

1. Growth Strategy
2. Productivity enhancement strategy
3. Governance strategy
4. Regional economy vitalization strategy

20

III. Management Strategy	Growth Strategy (Consulting-based sales) (1)	Fiscal Year Ended March 31, 2020
Consulting-based sales through business evaluations
External support	The 77 Bank Group			Clients
organizations	Cultivate and
Development Bank of Japan	77	77	capture diverse	Issues for enhancement of corporate value
Japan Finance Corporation	Card	Bank	customer needs
by business	Business	Financial
The Shoko Chukin Bank
Nihon M&A Center	77 Shin-Yo	77	evaluations	plan	position	Funding
	formulation	improvement
Miyagi Organization for	Hosyo	Lease
Industry Promotion
		Offer solutions by	Securing of	Business
Tokyo Stock Exchange	77	77	M&A
Sendai Chamber of	demonstrating	HR	succession
Capital	Securities
Commerce and Industry	Consulting	Broader
		functions
REVIC	77 Research and	Overseas	Productivity
	marketing
Tohoku University		development	enhancement
Miyagi University, etc.	Consulting		channels

• Support of starting a company
• Support for corporate rehabilitation and business reform
• Funding
• Business matching
• Support for business succession and M&A
• Support for broader marketing channels
• Overseas business support
• Support for productivity enhancement
• Referral of external support organizations
• Application support for subsidies

• Scheduled to launch "staffing business" on September 1, 2020

21

III. Management Strategy Growth Strategy (Consulting-based sales) (2) Fiscal Year Ended March 31, 2020 Direction of corporate loans

			(2) Continuing rebalancing of loan assets	(3) Capture local development
(1) Response to COVID-19							projects
				Tohoku Region, etc.
			Within Miyagi Prefecture			Capture development projects such
				Develop new customers
Carrying out funding			Discover funding needs			as renewable energy power
			through support for broader		generation businesses and next-
		through deeper business
support to businesses				marketing channels in		generation synchrotron radiation-
		evaluations
			Miyagi Prefecture
						related projects

(JPY bn)

5,000

4,000

3,000

2,000

1,000

0

Loans and bills discounted (average balances)

		Corporate loans		Retail loans		Loans for municipal governments, etc.	4,355.1	4,494.0	4,662.3	4,747.5	4,900.0
									4,266.8			620.0
								4,054.5			647.6
				3,641.7	3,835.4			648.0	656.6
3,455.5	3,525.8			701.0
			747.3
				736.1				1,193.0
						687.9				1,119.4	1,154.9
708.9	688.3	676.9			962.8	1,056.3
			890.9
		774.9	833.2
				747.0
			751.6
756.1
								2,485.2	2,628.6	2,691.3	2,789.7	2,886.3	2,945.0	3,087.0
			2,085.9	2,217.8	2,372.6
1,990.5
FY2011	FY2012		FY2013		FY2014	FY2015	FY2016	FY2017	FY2018	FY2019	FY2020	FY2021 (Forecast)

Major ineventsMiyagi etc.Prefecture,

2011/3	2011/10	2012/7
The Great	Tokyo	Inauguration
East Japan	Electron's	of Toyota
Earthquake	expansion	Motor East
	into Miyagi	Japan
	Prefecture

2015/12	2016/2	2016/7	2019/10	2020/1-
Opening of	Introduction	Privatization	Launch of	The spread
Sendai	of negative	of Sendai	Sendai Urban	of COVID-19
Subway	interest rate	Airport	Restructuring
Tozai Line			Project

2020/4

Construction of the next- generation synchrotron radiation facility began

(scheduled for completion in 2023/3)

Earthquake-related loans

(cumulative total from the earthquake

to the end of Mar. 2020)

Corporate: 440.0 bn yen

Retail:	303.6 bn yen
Total:	743.6 bn yen

Loans for manufacturing		Loans for electricity/gas		Apartment loans (term-end		Housing loans (term-end
industry (term-end balance)		suppliers (term-end balance)			balance)		balance)
End-Mar. 2011: 347.4 bn yen		End-Mar. 2011:	71.9 bn yen		End-Mar. 2011: 179.4 bn yen		End-Mar. 2011:	708.0 bn yen
End-Mar. 2020: 445.9 bn yen		End-Mar. 2020: 203.4 bn yen		End-Mar. 2020: 596.6 bn yen		End-Mar. 2020: 1,122.9 bn yen
Increases:	98.5 bn yen		Increases:	131.5 bn yen		Increases:	417.2 bn yen		Increases:	414.9 bn yen

22

III. Management Strategy Growth Strategy (Consulting-based sales) (3) Fiscal Year Ended March 31, 2020

				Number of business evaluation						Number of issue resolution measures shared/agreed
(Customers)			customers/Issue resolution measure												(As of end-Mar. 2020)
7,000					agreement by entities																			7,529
						Provision of financing										4,349
6,000							5,835		Paid business matching	670									5,874
			Number of business
				4,978		Sales information mediation							3,085
				evaluation customers		696
5,000
			Issue resolution measure				Business succession,						2,516
				agreement by entities				inheritance, etc.	121				1,815
4,000							3,447		External support
				3,255			organization	140
														Issue resolution measures shared
					2,713			Business meeting				1,332
3,000								162								(32,739 in total)
									Manager insurance	899					Issue resolution measure agreements
		1,776					122
2,000
	1,469					M&A	842						(7,816 in total)
														27
1,000								Investment trusts, structured	648
	355					bonds, etc.					87
																								8,199
										Other				1,442
0
	2017/3	2018/3	2019/3	2020/3			0	1,000			2,000	3,000	4,000	5,000	6,000	7,000	8,000	(Cases)
				Number of business succession support							Number of inheritance and asset succession
				Referral of external experts	cases							Will trust			support recipients
(Cases)						(Recipients)
700				Share succession measures			700				Estate liquidation/Inheritance						631
							591						trouble support services
				Rough evaluation of own shares							Insurance									14
600					19	600				Apartment loans						500		37
500							68
				367	404		500				Rough evaluation of inheritance tax	36		178
400					18		400														69
				15	37											310
																				84
					11									255					11					137
300								300												73
		174			504							9			1		66
										40
200					200									65
	24	341	349						45
		16																		265
100					100										168				238
	134								160
0									0
			FY2017	FY2018	FY2019	FY2020						FY2017		FY2018				FY2019		FY2020

23

III. Management Strategy Growth Strategy (Consulting-based sales) (4) Fiscal Year Ended March 31, 2020

Fees and commissions for syndicated loans and

commitment lines

(JPY mn)	Number of transactions handled which involve	(Cases)
800		structured finance	35	40
		Fees and commissions for syndicated
		loans and commitment lines
600		Number of transactions handled which		30
		involve structured finance

400		16	20
15	14
	650
200	319	437	10
264
0			0
FY2017	FY2018	FY2019	FY2020

M&A fees and commissions/Number of M&A

(JPY mn)	advisory contract clients	(Clients)

400	M&A fees and commissions		30
	Number of M&A advisory	23	25
	25
300	contract clients
				20
		15
200				15
	10			308
				10
100
			125	5
		83
	49
0				0
	FY2017	FY2018	FY2019	FY2020

Business matching fees and commissions/Number

of business matching partners

(JPY mn)					(Partners)	(Cases)
400	Business matching fees and		125	140	2,500
	commissions		109
	Number of business matching		120
300	partners					2,000
				100
		82
	63				80	1,500
200
					60	1,000
				281
			240
100				40
		122				500
	84			20
0					0	0
	FY2017	FY2018	FY2019	FY2020
					24

Number of overseas business support cases

2,011

1,290 1,507

712

FY2017

FY2018

FY2019

FY2020

III. Management Strategy Growth Strategy (Consulting-based sales) (5) Fiscal Year Ended March 31, 2020

Balance of assets in custody (the Group)

Sales of assets in custody (the Group)

(JPY bn)

800

400

0

77 Securities

Structured bonds, etc. (brokerage)

Foreign currency deposits (excluding deposits by financial institutions and offshore accounts) Public bonds

Insurance
Investment trusts
616.6		17.4	606.2			619.3			600.4
		33.2		14.2	58.2		24.9	81.5
174.7	15.8	133.8					27.5
18.1	107.6			77.4
						13.4	14.8
300.1			309.8			324.4			327.2
108.6			97.1			90.8			72.0

(JPY bn)

200			77 Securities
		Public bonds
150			Investment trusts
	116.7
100	37.9
	3.9
50	30.1
	44.8
0

Structured bonds, etc. (brokerage)

Insurance

137.7		149.4
124.4
46.4		59.2
39.3
21.8	19.1	34.1
5.4
7.6
	7.5
33.2	34.8
23.1
30.9	23.6	25.5

(JPY mn)

2017/3

2018/3

2019/3

2020/3

Performance of 77 Securities

318

FY2017

FY2018

FY2019

FY2020

(JPY mn)

Performance of 77 Research and Consulting

300

200

100

0

Operating income

Net income

12 0

261

150

Operating income

Net income

99

69

50

12

(100)

1. (35)

FY2018

FY2019

FY2020

(4)

FY2019

FY2020

(50)

25

III. Management Strategy

Growth Strategy (HR development)

Fiscal Year Ended March 31, 2020

• Basic approach to human resource development

OJT at the workplace forms the basis for human resource development. Our basic approach toward the knowledge and skills that each employee believes to be necessary, or that they would like to study, involves personal development through self-study. A variety of training is conducted to complement OJT and personal development, and to provide opportunities to learn more specialized knowledge and skills, and for further skill improvements. We aim to develop human resources by repeating such OJT, personal development, and training.

■ Internal (external) training
				FY2020 (Results)	FY2021 (Plan)
	Inter-	FY2020 (Results)		FY2021 (Plan)		Exter-	Japan	191 employees	198 employees
	nal	5,282 employees		5,438 employees		nal	Overseas	23 employees	30 employees

• Training of specialists (46 specialists trained on a cumulative basis in the period under the Medium-term Management Plan, currently 27 specialists)

Digital field (three specialists)

Main deployment locations	Type of work engaged
	Research in the advancement of banking
Japan Digital Design, Inc.	operations as well as improvements in
customer convenience (since December
	2017)
MEJAR Digital Innovation	Joint digitalization promotion project with
Hub (MDIH), etc.	MEJAR banks (since December 2018)

International business/market field (10 specialists)

Main deployment locations	Type of work engaged
Miyagi Prefecture's Dalian office (Dalian, China)	Support for business in
China
Japanese financial institutions (Shanghai and	Support for overseas
Hong Kong, China)	units
Vietcombank (Vietnam)	Support for overseas
units
Japan External Trade Organization (London, UK)	Advisory business
Japanese financial institutions (New York,	Securities trading
USA), etc.	business

Solutions business field (11 specialists) Domestic financial institutions/specialists organizations

Main deployment locations	Type of work engaged
Trainees to Mizuho Bank	Syndicated loan arrangement
Trainees to Nihon M&A Center, etc.	M&A business
Local corporate customers
Main deployment locations	Industry
Iwaki Diecast Co., Ltd. (Yamamoto Cho)	Metal products manufacturing
Tsukasaya K.K. (Sendai City)	Retail of various types of
goods

*In addition to the above, employees were deployed to two seafood processing companies and one automotive equipment manufacturer (five secondees to five companies on a cumulative basis)

Regional revitalization field (three specialists)

Main deployment locations	Type of work engaged
Local municipalities (Miyagi Prefecture	Planning of regional
and Sendai City)	revitalization initiatives
(General Incorporated Association)	Planning/promotion of Tohoku
Tohoku Tourism Promotion Organization	tourism promotion

26

III. Management Strategy	Growth Strategy (Marketable securities trading)		Fiscal Year Ended March 31, 2020
Strengthening marketable securities trading structure	Composition ratio by type (on an amortized cost base)
		yen-bond taking market trends into consideration>
• Improve ability to structure deals by enhancing research
• Rebalance funds for redemption of national gov. bonds
	and analysis capabilities, and strengthen investment/risk	• Maintain soundness by managing portfolio taking risk assets
	management structure					and an increase in interest-rate risk into consideration
• HR development through dispatching of trainees to
					National gov. bonds			Local gov. bonds
	external organizations in and outside of Japan						Corporate bonds				Investment trusts, etc.
						Foreign bonds				Stocks
	○ Continue dispatching trainees to New York	100%
	○ February 2016: Started dispatching trainees to Singapore		80%
	○ April 2016: Started dispatching trainees to a Japanese securities
	company						60%
• Promote the acquisition of securities analyst qualifications		40%
	○ Number of qualified securities analysts: 6 (in the Treasury Div.)		20%
								Treasury Administration &		0%
									End-Mar. 2011		End-Mar. 2014	End-Mar. 2019 End-Mar. 2020	(Forecast)
	Risk Management Div.									End-Mar. 2021
				International Div.
											End-Mar.	End-Mar.	End-Mar.		End-Mar.	End-Mar.
																2011		2014	2019		2020	2021
																			(Forecast)
	Treasury Div. (28 people)				Established the Treasury		National gov.		40.6%		59.1%	24.9%		15.9%	7.6%
					bonds
					Planning Section to strengthen		Local gov. bonds		5.1%		2.1%	18.0%		26.1%	31.1%
				investment/management
				Corporate bonds		36.0%		25.5%	33.2%		33.7%	37.0%
	Employees from the Risk					structure (June 2016)
	Management Div.
					Other		14.9%		11.6%	21.6%		22.0%	21.8%
								Treasury Planning Section (8 people)			Investment		6.9%		5.2%	15.5%		17.8%	17.8%
										trusts, etc.
								〇 Planning and designing investment policies		Foreign		8.0%		6.4%	6.1%		4.2%	4.0%
									bonds
								Securities Section (10 people)		Stocks		3.4%		1.7%	2.3%		2.3%	2.5%
																								(JPY bn)
								〇 Managing investment securities
									Interest and		22.9		26.3	27.1		28.7	24.1
								Treasury Sales Section (9 people)		dividends
								〇 Raising and managing marketable funds	Gains (losses) on		0.8		(1.8)	3.0		2.1	2.7
								transactions, etc.
						* In the parentheses are the numbers of people excluding
						Gains (losses) on transactions, etc. = gains (losses) on bonds + gains (losses) on stocks
						external trainees and part-time employees

27

III. Management Strategy	Productivity enhancement strategy	Fiscal Year Ended March 31, 2020
(Paperwork-free/Digital strategy)
Short-term perspective		Medium- to long-term perspective
Paperwork-free strategy		Digital strategy

Reduction and streamlining of branch administration

• Elimination and streamlining of excessive administration

Expansion of scope of work to be centralized to Headquarters

• Centralization of administrative work for loans/foreign exchange business to Headquarters
  Reduction of inefficient administration for specific individual company
• • Promotion of use of Electronic Banking

Expansion and enhancement of non- face-to-face channels

• Enhancement of functions/improvement of UI/UX
• Promotion of use of Internet Banking and applications

Establishment of support office

• Consolidation of branch back office functions

Promotion of paperwork-free mode of operation by utilizing digitalization

• Utilization of RPA, AI-OCR

Promotion of use/utilization of data

• Development of an environment for data accumulation and analysis
• Development of new products and services

Enhancement of employee capabilities by utilizing digitalization

• Enhancement of digital devices
• Improvement in IT literacy

(OTC service operation)

Deposit/Withdrawal:	about 423 k execution
Bank transfer:	about 121 k execution
Fee payments:	about 310 k execution
	about 854 k execution

(Loans operation)

Execution operation: about 3 k execution Determination of credit rating:

about 2 k execution

about 5 k execution

*All branches, monthly total

212,319

Number of individual customers using Internet Banking/Mobile Banking Number of application downloads

280,434

250,314

Achieving efficient and effective measures

through advanced cost management

174,014	183,564

140,236

120,631

(optimization of management resource allocation)

Development of efficient branch framework and

26,838

enhancement of consulting sales capabilities

FY2015

FY2016

FY2017

FY2018

FY2019

FY2020

28

III. Management Strategy		Governance strategy (Capital policies)	Fiscal Year Ended March 31, 2020
Dividends
(JPY)		Term-end dividends		Interim dividends			After consolidation of shares			(JPY)
10									50
										4.5	4.5	22.5	25.0		25.0	25.0
									4.5
5			3.5	3.5		4.0									25
			3.5	3.5		3.5	4.0	4.5	4.5	4.5	22.5		25.0	25.0
				※(22.5)
0
		2012/3	2013/3		2014/3	2015/3	2016/3	2017/3	2018/3	2019/3		2020/3	2021/3	0
															(Plan)	(Forecast)
Total sum paid out		2,616	2,617		2,805	3,180	3,368	3,353	3,364	3,550		3,713	3,713
(JPY mn)
Net income		10.6	12.1		14.7	16.9	15.7	16.6	16.7	17.9		17.3	14.0
(JPY bn)
Dividend ratio		24.6	21.5		19.0	18.8	21.5	20.2	19.9	19.6		21.3	26.3
(%)

• The Bank conducted a 1-for-5 consolidation of shares on October 1, 2017. If calculated based on the number of shares after the consolidation, the interim dividend for the fiscal year ended March 31, 2018 is JPY 22.50 per share and therefore the annual dividend equals JPY 45 per share.

Capital adequacy ratio (Consolidated)

									(JPY bn, %)
			End-Mar. 2019			End-Mar. 2020
						Change from end-Mar. 2019
Capital adequacy ratio		10.38			10.31			(0.07)
(domestic standards) (a/b)
Capital (a)		408.5			422.3			13.8
	[Core capital: instruments and reserves]	（	408.7	）（	422.5	）（	13.8	）
	[Core capital: regulatory adjustments]	（	0.2	）（	0.2	）（	0.0	）
Risk assets (b)		3,934.2			4,095.4			161.2

ROE (Consolidated)

(%)
8.0			(Consolidated) ROE (based on net income and net assets)
7.0
6.0
5.0		3.73	4.06	4.05			3.82	3.60	3.89
	3.52	3.54	3.56
4.0
3.0
2.0
1.0
0.0
	2012/3	2013/3	2014/3	2015/3	2016/3	2017/3	2018/3	2019/3	2020/3

29

III. Management Strategy Governance strategy (Improvements in governance) Fiscal Year Ended March 31, 2020

Improvements in governance

The Bank transitioned in June 2017 from a company with the Board of Corporate Auditors to a company with an Audit & Supervisory Committee to improve corporate value through further enhancement of corporate governance, which was followed by initiatives for developing further effective corporate governance structure through appointing Outside Directors and female Directors.

Jun. 2017				Director	Outside Director	Female Director
Director		Outside Director	Total number of	Ratio of Outside Directors	Remarks
	Directors
･･･	12 persons	2 persons		26.3 %
			19 persons	Transition to a company with an
			5/19 persons	Audit & Supervisory Committee
Audit & Supervisory		3 persons
2 persons
Committee Member
Jun. 2018
Director		Outside Director	Total number of	Ratio of Outside Directors	Remarks
	Directors
･･･	8 persons	3 persons		37.5 %	Revision of the executive officer
			16 persons	system and appointment of female
			6/16 persons	Directors
Audit & Supervisory		3 persons
2 persons			(Ratio of female Directors: 6.2%)
Committee Member
Jun. 2019
Director		Outside Director	Total number of	Ratio of Outside Directors	Remarks
	Directors
･･･	8 persons	3 persons		41.1 %	Addition of one Outside Director who
			17 persons	is an Audit & Supervisory Committee
			7/17 persons	Member (female)
Audit & Supervisory		4 persons		(Ratio of female Directors: 11.7%)
2 persons
Committee Member

Jun. 2020 (Plan)

Director		Outside Director	Total number of	Ratio of Outside Directors	Remarks
	Directors
･･･	7 persons	4 persons
			17 persons	47.0 %	Addition of
			8/17 persons	one Outside Director
Audit & Supervisory	2 persons	4 persons
Committee Member
			30

III. Management Strategy	Regional economy vitalization strategy	Fiscal Year Ended March 31, 2020
(SDGs/ESG) (1)

Vitalization of the regional economy (Regional revitalization and Earthquake reconstruction)

Support for starting

a new company or business

	Seminars held (second half of FY2020)	TSE IPO Seminar in Sendai	Provision of 77 Business
				Startup Support Package
	Dates	Seminar titles
	Sep. 25, 2019	Tomiya School, an entrepreneur development		(launched in April 2019)
	Nov. 6, 2019	support project		Support for a startup with a package of
		Woman Startup Seminar in Sendai
	Oct. 21, 2019	-Review of business incubation from female		products and services that facilitate
		perspective- vol. 3		streamlining of accounting and payments
	Nov. 20, 2019	Seminar on how to utilize subsidies
		processes
	Nov. 28, 2019	Exchange Meeting with Management Mentors
	2.0		Results as of the end of March 2020:
		Miyagi-Sendai Liaison Conference -
	Feb. 13, 2020		152 cases
		SME Promotion Strategies Briefing 2020
	Feb. 25, 2020	TSE IPO Seminar in Sendai

Support and develop regional core companies

Example of industry-academia collaboration

Kaneki-Yoshida Co., Ltd.

(Minami Sanriku-machi, Established in February 1982)

Example of business matching

1. K. Sugawara(Taiwa-cho, Established in December 1988)

Support for the steady supply of the seedlings of wakame seaweed, by utilizing the expertise of the institutions including Tohoku University

Unstable growth of wakame seaweed due to changes in ocean environment

Support for the post-disaster business	Difficult to continue aquaculture
businesses in the aftermath of Typhoon
restoration, by utilizing crowd-funding
No. 19 in 2019

• Enhancement of growth in regional industries
• Maintenance of employment in the areas affected by the Earthquake

Seedlings of

wakame seaweed

• Securing funds for business continuity
• Business continuity at regional industries
• Publicity for the value of "Date Iwana (Japanese char)"

Date Iwana, Miyagi	Scenes of damage
Prefecture's local
in the aftermath
specialty

Source: Project pages by Music Securities, Inc.

31

III. Management Strategy	Regional economy vitalization strategy	Fiscal Year Ended March 31, 2020
(SDGs/ESG) (2)

Vitalization of the regional economy (Regional revitalization and Earthquake reconstruction)

Support and develop regional core companies

Collaboration with Sendai Future Generating

Company Creation Program

Listing

The Bank provides support for the listing of local

companies through participation in the programCertified companies implemented by Sendai City.

Support for promotion of tourism, etc.

Holding of the Second FINE + Tohoku Instagram Photo Contest (from November 11, 2019 to March 31, 2020)

Prize winners (in the past events)

Thousand Cherry Trees in One	Aomori Prefecture>
View), Miyagi Prefecture>

In FY2020, eight companies were selected as "businesses certified under the program"

Project Partners

The 77 Bank

						Cooperating companies
Tokyo Stock Exchange			Sendai City		and institutions
Tohoku University
		Administration

Promotion of urban development

Formation of Miyagi wide-area PPP platform (MAPP)

The 77 Bank (Secretariat)	[a core member]
	Holding dialogue
77 Research and Consulting, etc.	separately for
individual enquiries

[Support members] Financial institutions and universities, etc.

signing Cooperation Agreements

Development Bank of Japan

Think tanks

Tohoku PPP/PFI Association

Tohoku University, Miyagi University

Municipal governments

Signatories to Comprehensive Cooperation Agreements

for Regional Revitalization

(As of June 2, 2020: 31 signatories)

[Private companies]

Real estate

Construction

TradingLease

32

III. Management Strategy	Regional economy vitalization strategy	Fiscal Year Ended March 31, 2020
(SDGs/ESG) (3)

Vitalization of the regional economy (Regional revitalization and Earthquake reconstruction)

Earthquake-related loan performance (cumulative total after the earthquake to March 31, 2020)

26,750 cases/¥743.6 billion

Corporate

			Operating		Capital		Total
				expenditure
	Number of	6,044	2,605	8,649
	cases
	Amount		¥273.5 billion		¥166.5 billion		¥440.0 billion
	Retail
			Unsecured		Housing		Total
	Number of		4,389		13,712		18,101
	cases
	Amount		¥7.6 billion		¥296.0 billion		¥303.6 billion

Results of Loans related to Recovery and Development Subsidy Project for SME Group Facilities, etc. (Miyagi Prefecture)

Bridge financing results 860 cases/¥61.9 billion

Principal investment results 175 cases/¥12.8 billion

Results of response to the double debt problems of businesses affected by the disaster

Businesses affected by the Great East Japan Earthquake designated by the Corporation for Revitalizing Earthquake-Affected Business 188 cases

Organization for Industry Reconstruction support clients 75 cases

77 Earthquake Reconstruction Support Housing Loans (for collective relocation/leased land type) disbursements

943 cases/¥21.1 billion

Results of response to the double debt problems of retail customers affected by the disaster

Personal voluntary liquidation guideline support results

Consultations received: 507 cases	Repayment plan proposals received: 216 cases
Applications received: 258 cases	Repayment plan proposals agreed to: 216 cases

Partnership with local communities

NEW

Received a commendation from the minister as an example of commendable commitment to regional revitalization by a financial institution in FY2020

Holding of 77 Regional Revitalization Business Matching Event

■Presentation by municipal governments

■Information exchange session

Municipal governments provided private	Private businesses made business proposals to
businesses with explanation about their	local municipalities based on the local challenges,
commitment to regional revitalization as well as
local challenges, etc.	etc.

Holding of the "Exchange Meeting with Management Mentors 2.0 - Core project connecting the three Tohoku prefectures with Management Mentors"

Iwate Prefecture

9 financial institutions

14 business partners

Miyagi Prefecture

6 financial institutions

15 business partners

Fukushima Prefecture 10 financial institutions 14 business partners

100 Management

Mentors

33

III. Management Strategy	Regional economy vitalization strategy	Fiscal Year Ended March 31, 2020
(SDGs/ESG) (4)

Support for success of each and every employee (diversity)

NEW

Certified as "Health and Productivity Management Organization 2020 (White 500)"

NEW

Received "Commendation for a Model Business Committed to Creating Attractive Workplace" from Miyagi Prefecture and Miyagi Labour Bureau

Holding of "Career Seminar & Exchange Meeting" including female Directors

Participated by

46 female employees of the Bank

(Formulated in December 2018)

[Promotion of health and productivity

management]

Establishment of an environment where each and every employee can work actively in a healthy state of mind and body

・Enhancement of health management measures

・Improvement in working environment

・Raising employee awareness about health

management

External evaluations on the Bank's initiatives

Certified "Gold Certified Company" for Certified "Eruboshi (Grade 3)," commending general

successfully fulfilling potential of female business proprietors meeting the requirements for

talents in Miyagi Prefecture promoting female participation, pursuant to the Act on Promotion of Women's Participation and

Advancement in the Workplace

Certified Platinum Kurumin, a special certification pursuant to the Act on Advancement of Measures to Support Raising Next-Generation Children

Chosen as a constituent of MSCI Japan Empowering Women Index, which recognizes companies with outstanding efforts in promoting the participation and advancement of women in the workplace

* Notes on MSCI indexes and logos, etc.

THE INCLUSION OF The 77 Bank, Ltd., IN ANY MSCI INDEX, AND THE USE OF MSCI LOGOS, TRADEMARKS, SERVICE MARKS OR INDEX NAMES HEREIN, DO NOT CONSTITUTE A SPONSORSHIP, ENDORSEMENT OR PROMOTION OF The 77 Bank, Ltd., BY MSCI OR ANY OF ITS AFFILIATES. THE MSCI INDEXES ARE THE EXCLUSIVE PROPERTY OF MSCI. MSCI AND THE MSCI INDEX NAMES AND LOGOS ARE TRADEMARKS OR SERVICE MARKS OF MSCI OR ITS AFFILIATES.

34

III. Management Strategy	Regional economy vitalization strategy	Fiscal Year Ended March 31, 2020
(SDGs/ESG) (5)

Response to the global warming and climate change

Renewable energy-related funding

40 cases/¥32.8 billion (FY2020)

Conceptual image at completion

Constructing one of the largest wind farms in Miyagi Prefecture, capable of generating 42.0 MW, in Kami-machi,Kami-gun, Miyagi Prefecture

Actual sales of 77 ESG Japanese

Equities Open

(Alias: Miyagi no Kizuna)

85 cases/¥72 million (FY2020)

Part of the trust fee is donated to Miyagi Prefecture Greening Promotion Council.

*For the purpose of restoring seaside protection forests that were devastated by the Great East Japan Earthquake

ESG-based investment and lending

• Implementation of ESG Investments

(Results during Medium-term Management plan)

9 green bonds

(Japan Housing Finance Agency, etc.) 4 sustainability bonds

(Japan Railway Construction, Transport and Technology Agency, etc.)

5 social bonds

(Japan International Cooperation Agency, etc.)

• Sustainability Linked Loan

1 case/USD 10 million (FY2020)

■ Privately placed corporate bonds (FY2020)

• 77 Privately Placed Corporate Bonds for Social Contribution (Donation-Type)
  113 cases/¥7.3 billion
• 77 Privately Placed Corporate Bonds for Local Professional Sports Support (Donation-Type)
  10 cases/¥0.5 billion
• 77 ESG Privately Placed Corporate Bonds

28 cases/¥2.9 billion

Donation presentation ceremony

35

III. Management Strategy	Regional economy vitalization strategy	Fiscal Year Ended March 31, 2020
(SDGs/ESG) (6)
Social contribution activities

Interaction with the region

• Implemented "One branch, one social contribution campaign"
• Participated in Sendai Aoba Festival
• Participated in Dontosai Festival
• "Kids refuge houses" activity

Participation in regional events

Supporting cultural activities

• Held the 77 Fureai Concert
• Held the 77 Starlight Symphony concert
• Sponsored cultural activities

Responding to environmental issues

• Part of the proceeds from the sales of LINE Stickers was donated to Miyagi Prefecture Greening Promotion Council.
• Continued introducing fuel cell vehicles
• Established environment-friendly branches
• Implementation of street sweeping activities

LINE sticker of SHICHISHIKA-KUN

Promoting sports

• 77 Kids Challenge, joint sports workshops held by three sports clubs for first and second grade elementary school children
• Regional promotion through corporate sports clubs
• Volunteer activities at the Sendai International Half Marathon

Supporting financial education

• Implementation of financial education utilizing the Currency and Banking Museum, for pupils at elementary schools and students at junior and senior high schools
• Operation of a financial education website for children
• Continue providing educational courses at Tohoku Gakuin University

Currency and Banking Museum

Contributions to social welfare

• Made donations through the 77 Caring Fund Raising Committee
• Conducted a corporate blood donation campaign
• Small Kindness Movement
• Presentation of "traffic safety pencil boards" to the new first graders across the prefecture

77 Fureai Concert
	Sports workshop		77 Caring Fund Raising Committee

36

This is a Japanese-English translation of the presentation material for your convenience. In the case that there is any discrepancy between the Japanese and English versions, the Japanese version is assumed to be correct. Please note that the projections described in this document do not guarantee future performance. Future performance projections may differ from actual results due to uncertainty caused by factors such as changes in the business environment.