- To be your Bank of choice - Fukuoka Financial Group. Investor Meeting. - FFG Growth Strategies - O c t o b e r

Transcription

1 - To be your Bank of choice - - To be your Bank of choice - Fukuoka Financial Group Investor Meeting - FFG Growth Strategies - O c t o b e r

2 Contents - To be your Bank of choice - 1 Part I Page Opening Presentation 4. An Overview of FFG 5. History of FFG 6. Improving Profit Structure & Changes in Business Results 7. FFG Growth Strategy 8. Second Year of Fifth Mid-Term Management Plan: Initiatives for Structural Reform 9. Consulting Services 10. Expansion of Asset-Management Business 11. Building up Consumer Loans 12. Securities 13. ibank Business 14. FinTech Initiatives: Accelerating Innovation 15. Financial Results for FY 2016 & Projections for FY One-Time Goodwill Amortization #1 17. One-Time Goodwill Amortization #2 18. One-Time Goodwill Amortization #3 19. ROE & Shareholder Returns Part II Fukuoka Financial Group Page 21. Corporate Data 22. Stock Data 23. Market Share of Subsidiary Banks FFG Head Office (Fukuoka City)

3 Contents - To be your Bank of choice - 2 Part III Financial Data Part IV Our Mother Market Kyushu Page 25. Financial Results for FY Projections for FY Transition of Top Line 28. Transition of Bottom Line 29. Loans 30. Loans (By Bank) 31. Loan Portfolio (Classified by Industry) 32. Deposits & CDs 33. Deposits & CDs (By Bank) 34. Interest Rates (Domestic Loan) 35. Interest Rates (By Bank) 36. Breakdown of Loans and Deposits & CDs by Interest Rate 37. Non-interest Income 38. Overhead Expenses 39. Credit Cost & NPL 40. Status of Reserves & Coverage: Bank of Fukuoka 41. Status of Reserves & Coverage: Kumamoto Bank 42. Status of Reserves & Coverage: Shinwa Bank 43. Capital Adequacy Ratio 44. Consolidated Balance Sheets Page 46. Potential of Our Local Kyushu 47. Feature of Kyushu Economy 48. Potential of Fukuoka Metropolitan Area 49. FFG s Growth Potential 50. Financial Map of Kyushu 51. Industrial Production Trends 52. Land Price Trends 53. Corporate Bankruptcies 54. Loans 55. Deposits

4 - To be your Bank of choice - Part I Opening Presentation Fukuoka Fukuoka Saga Oita Nagasaki Kyushu Sasebo(Nagasaki) Kumamoto Miyazaki Kumamoto Kagoshima

5 An Overview of FFG - To be your Bank of choice - FFG is a total financial group that includes 3 regional banks based in Kyushu and a securities company. Established the Single Platform / Multiple Brands management style best suited to the integration of Japanese regional banks. Company Outline Company name Head office Established 2007 Shareholders equity Number of employees Subsidiaries Branches in Japan Overseas offices Fukuoka Financial Group, Inc. Fukuoka City, Fukuoka Prefecture, Japan 563.1billion yen 6,656 ATMs 2, companies <Main subsidiaries> 3 regional banks Securities company Credit card company Consulting firm (as of March 31, 2017) 328 (including 321 in Kyushu) (as of June 30, 2017) 8 (China3, Taipei, Bangkok, Singapore, Ho Chi Minh, NY) (as of June 30, 2017) Single Platform / Multiple Brands Risk management Administration IT systems Single Platform Financial holding company Governance 100% 100% 100% The Shinwa The Bank The Kumamoto Bank of Fukuoka Bank Founded 1879 Founded 1877 Founded 1929 Sharing Product and Service Line-up Diversity in customer contact Commitment to the region Multiple Brands Products Services Customers and Local Communities Integrated management system Shared management infrastructure Internal control 4

6 History of FFG - To be your Bank of choice - Achievement of steady growth, including business expansion, while gradually progressing through phases over ten-year period since management integration. Preparation for growth Switch to growth trends Switch to stable earnings structure Phase Run-up Phase (Adjustment) Acceleration Phase (Cruising Speed) Rapid Growth Phase (Top Speed) 1st Phase of Evolution Mid- Term Plans First (Apr 2007 Sep 2007) Second (Oct 2007 Mar 2010) Third (ABC Plan) (Apr 2010 Mar 2013) Fourth (ABC Plan II) (Apr 2013 Mar 2016) Fifth (Apr 2016 Mar 2019) Changes in deposits and loans Increase of about 3 trillion in both deposits and loans 10, , , , trillion 11, , trillion Deposits 8, , , , , ,384.7 Loans 13, , , , , , , ,380.8 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 * Three banks total, average balance, Deposits = deposits + CDs. 5

7 Improving Profit Structure & Changes in Business Results - To be your Bank of choice - Improve profit structure by increasing management efficiency through the construction of a single platform Consolidated net income showed a consecutive increase in profit for five terms from FY11 to FY15 and stood at a record high for four consecutive terms from FY12 to FY15 under a harsh business environment with ultra-low interest rates, as a result of improvements in profit structure following management integration. OHR 62.5% Expenses 7, % 57.9% 55.6% FFG Core Business Profit Maintain the same level of profits in harsh business environment with ultra-low interest rates Staff 6, FY07 FY10 FY13 FY16 * 3 banks total * OHR=Overhead Expenses Gross Business Profit Streamline management efficiency by merging and closing 50 branches and integrating administration systems, etc. 14% reduction in expenses Simultaneously reduce the number of staff and increase sales force FFG Net Income FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 *Core business profit : 3 banks total *Net income : FFG consolidated From FY12 to FY15 Net income stood at a record high for the fourth consecutive terms

8 7 FFG Growth Strategy Evolve business model in a rapidly changing business environment, to achieve a sustained strong competitive edge and potential for growth. Under the Fifth Mid-Term Management Plan, achieve a virtuous cycle of contribution to regional economic development and improvement of FFG corporate value, aiming for our long-term vision to be the Best Regional Bank FFG long-term vision The Best Regional Bank achieving a sustained strong competitive edge and potential for growth Long-term strategy Development of a stable financial system covering the regional economic zone Initiatives for the development and invigoration of the regional economy Rapidly changing business environment Fifth Mid-Term Management Plan (FY ) Prolonged low interest rates Innovation s in ICT Basic policy Contribution to regional economic development Achieve a virtuous cycle Improvement of FFG corporate value Declining population and aging society Intensifyin g competitiv e environme nt Restructuri ng of industry Changing customer needs Entry of different sectors into banking Trend away from savings toward investment 1st stage of Evolution Establishment of a firm management base and business model Turnaround in earnings structure Targets for FY 2018 (final year of Mid-Term Management Plan) Profitability Consolidated net income ROE 54 billion yen 7% or more Health Capital adequacy ratio About 9% Efficiency Consolidated OHR About 60% Growth Size Average balance of total loans Average balance of total deposits and CDs Outstanding balance of assets under management 11.5 trillion yen 13.9 trillion yen 2.0 trillion yen

9 Second Year of Fifth Mid-Term Management Plan: Initiatives for Structural Reform Prolonged low interest rates and greater competition are continuing to place downward pressure on interest on loans and interest on securities (core components of banking earnings). To realize sustainable growth even under such circumstances, efforts for structural reform are needed, centered around reform of existing business and non-traditional new business initiatives. Prolonged low interest rates Entry of different sectors into banking, intensified competition Declining population and aging society Predicted population in Kyushu region (million people) Number of customers visiting branches / Number of IB users Number of IB users 2.2 million 30% Number of customers visiting branches Decline in interest on loans Decline in interest on securities Sluggish growth in fees and commissions income Yield/interest on domestic loans ( bil., %) bp (Mid-Term Plan) FY2013 FY2016 Yield/interest on domestic securities ( bil., %) FY bp (Mid-Term Plan) 21.1 FY2016 Reshaping of 10-year growth strategy Initiatives for structural reform Reform of existing business Consulting services for business owners Assessment of business potential Asset-management business Diversification of loans Demonstration of Group s collective strength Initiatives for new business ibank business Active use of digital technologies in operating activities Marketing sophistication Improvement in productivity through work style reforms Strengthening of front-line sales capabilities 8

10 Consulting Services Provide a one-stop service satisfying all the needs of business owners, who are the decision-makers for both corporate and individual transactions. Expand both corporate and individual transactions by means of Group-wide efforts and by training specialized human resources to strengthen the consulting services. Structure for the provision of consulting services for business owners Human resource development through trainee system Loans Support on business turnaround Branches M&A Number of supported clients Business succession FY16 Support for M&A 28 Support for business succession 587 Expansion of distribution routes 761 Future efforts for business owner consulting services Promote utilization of a tool for assessing business potential Offer optimal solutions that integrate all FFG services Ensure thorough traceability of funds (monitor the flow of funds arising from transactions) Financial support for company Bank Ensure thorough traceability Management proposals for owner Company owners Company Funds Owner Overseas business Real estate owners High-net-worth individuals Expansion of distribution routes Purchase of equity in shares/investment Payment of retirement benefits, etc. Achievements in consulting services for business owners Management of surplus funds Inheritance measures Asset management Utilization of real estate Amount of loans provided Plan Sale of asset management products 60.0 Plan 49.5 Headquarters front Asset succession Inheritance measures Affiliated companies, etc Wealth management Business succession M&A, Business turnaround FFG Business Consulting Fukuoka Securities FFG Insurance Service Fukuoka Servicing External funds FY16 1H FY16 2H FY16 1H FY16 2H 9

11 Expansion of Asset-Management Business Expand asset-management business that meets diverse customer needs, through integrated Group banking, securities and insurance operations. Strive to increase balance of assets under management by improving products and services, as well as through sales structure tailored to segment/needs. Banks Fukuoka Securities FFG Insurance Service Asset-management business Buildup of personnel and placement of specialist human resources on front-line Collaboration with group banks utilizing the strengths of securities company Allocation and coordination of insurance specialists Integrated Group operations Diverse needs of corporate and individual customers One-stop service Investment trusts and insurance: Measures and schedule Investment trusts: Measures Strengthen the acquisition of new customers and deepen relationships with existing customers, by developing more in-depth segment-based business, from high-net-worth individuals to mass customers Strengthen proposals for asset diversification (core & satellite, fund wraps) and time variation (savings-type investment trusts, NISA) (Monthly savings in timepayment investment trusts) <Balance of investment trusts / Number of time-payment investment trusts> * Including Fukuoka Securities 39, , , Products and services tailored to diverse needs Asset formation Savings-type investment trusts NISA / Junior NISA Security Level premium insurance Accident insurance New Protection (inflation hedges) Core funds Fund wraps New Money-making Satellite funds Shares (Fukuoka Securities) Bequests (inheritance) Single-premium insurance Inheritance services (calendar year gifts / testamentary trusts) Mar 2016 Mar 2017 P:Mar 2018 Insurance: Measures Strengthen incorporation of inheritance/gift needs Strengthen ability to attract corporate/individual customers through full lineup of insurance products (Earnings from corporate insurance) Mar 2016 Mar 2017 P:Mar 2018 <Balance of insurance / Number of level premium insurance contracts> 235, , , FY15 FY16 P:FY17 Mar 2016 Mar 2017 P:Mar

12 Building up Consumer Loans Steadily built up balance of consumer loans almost to plan, by introducing new products (online-only products and group credit life insurance products) and by utilizing non-face-to-face channels. Strive to further increase balance of consumer loans, by offering products, services and appropriate channels tailored to the customer attributes and their various needs. Main measures Expansion of online-only products Strengthen appeal of products with life insurance Sophistication of direct marketing (one-to-one) Shift of guarantee services to in-house Establishment of dedicated center for card loans Interest rate 15.0% Upper rate 12.0% 9.0% Middle rate 6.0% 3.0% Lower rate High risk ATM credit-card loans Middle risk Mass retail Balance of consumer loans ( bil) Expansion of online-only Free-purpose loans [Branches] Average return on consumer loans: 7.3% Free-purpose loans Bank card loans New [Direct channels] Products with life insurance Car loans / Education loans Products with life insurance (from Nov 2016) Name of product Mortgage customers Business owners Client employees, etc. Multipurpose loans Percentage with insurance Education loans 15.0% Sumairu loans 14.8% Multipurpose loans 11.4% Free-purpose loans 8.3% Car loans 7.9% Total 9.7% Low risk 100% 75% 50% 25% 0% Card loans Loans on deeds Ratio of online applications Card Loans 45.7% 26.9% % 31.6% % 44.3% Mar 2015 Mar 2016 Mar % 62.6% Loans on deeds FY15 1H FY15 2H FY16 1H FY16 2H P:Mar

13 Securities To prepare for interest rate rise (mild inflation) in medium to long term, proceed to diversify revenue sources away from focus on Japanese-yen fixed-rate bond investments. Key policy initiatives * FFG consolidated Unrealized gain 3 banks' total (YoY change) Foreign bonds, etc. Corporate bonds Local government bonds National government bonds Stocks Yen-bond operations 2. Diversification of investment 3. Foreign-currency operations, etc. Securities Balance / Unrealized gain (3 banks total) ,659.9 (+93.2) Shinwa Kumamoto Fukuoka 1, , ,114.8 (+454.9) , , ,291.4 (+176.6) ,307.3 (+15.9) , , , , Mar 2014 Mar 2015 Mar 2016 Mar 2017 Keep under control fixed-rate bond investments at low interest rates, and prepare for investment opportunities when interest rates rise Maintain unrealized gains on bonds, which increased significantly due to declining interest rates Reinforce earnings by investing outside of Japanese-yen fixed-rate bond investments Stock investment, credit risk taking, etc. Secure interest income in currencies other than Japanese yen (U.S. dollar, etc.) using stable procurement funds Bond duration / Outlier ratio 4.67 Domestic bonds Foreign bonds Outlier ratio % 4.07 * Bond duration: After considering hedges Outlier ratio: Based on 99% 1% percentile norms % 2.6% % Mar 14/32014 末 Mar 15/32015 末 Mar 16/32016 末 Mar 17/32017 末 Securities-related profit & loss Stocks Bonds Stocks: 0.3 Bonds: * 3 banks total FY13 FY14 FY15 FY16 (Year) 12

14 13 ibank Business ibank new smartphone money service launched in July 2016 User base is in very good shape, with downloads topping 200,000 Downloads top 200,000! Jul 2016 Debut Jul 2016 Debut Oct 2016 Debut Information content Money management app Cash-like payment card

15 Area of Reform Strategy Corporate and individual business customers Information held by bank External information Goal FinTech Initiatives: Accelerating Innovation Promote innovation actively using ICT, such as reform of channels, more sophisticated marketing and reform of business processes. Realize profit expansion by creating new businesses and services inconceivable in the conventional framework. Active use of digital technologies in operating activities Efforts to accelerate innovation Expansion of customer base Understand customers Profit expansion X Expand points of contact Securing of customers (cross-selling) Improve convenience New loan products making use of cloud accounting Business loans utilizing financial information, account information, settlement/commercial information New way of financing for small enterprises/sole proprietors Development of screening model making use of AI Future vision Bank of Fukuoka Provision of new financial services Sophistication of screening model API links External partner companies Greater information Active use of ICT Actively utilize ICT (digital technologies) Screening model EC sites (settlement/transaction information) Settlement agency Sophistication of marketing technologies Establish data marketing techniques Introduce VOC Develop ibank business Reform of channels Omnichannel alignment Remote, face-to-face business channels Next-generation real channels Collaboration with other sectors / FinTech Reform of business processes Screening techniques (utilize AI) Customer paperwork (simplification) Business automation (RPA) Loan Process is completed online Logistics/inventory information Account information at other banks Financial information Account information Logistics company Cloud accounting software company Money Forward Equipped with AI functions (collaborative research with RDB) Demonstration testing using blockchain technology Verify applicability for remittance/settlement services Introduction of face-to-face and non-face-to-face robotic advisor functions in asset management Introduction of robotics operations Utilizing cognitive technologies, automate business operations Improve productivity 14

16 Financial Results for FY2016 & Projections for FY To be your Bank of choice - FFG plans to achieve a core business profit of 73.2 billion yen and a net income of 49 billion yen in FY2017. The first quarter result was on track with a progression rate of 25% for net income. 3 banks total Actual Planned Actual FY2016 FY2017 YoY 1Q Progress Gross Business Profit % Net Interest Income % Domestic % Non-interest Income % Net fees & commissions % Overhead Expenses % Business Profit % Core Business Profit % Ordinary Profit % Net Income % Credit Cost Changes in Credit Cost (3 banks total, bil.) compared to previous year /1Q 16/2Q 16/3Q 16/4Q 17/1Q Changes in Quarterly Net Incomes (FFG consolidated, bil.) compared to previous year 2.3 FFG consolidated Ordinary Profit % Net Income % Exclude One-time Goodwill Amortization 40.5 EPS(yen) ~ /1Q 16/2Q 16/3Q 16/4Q 17/1Q 15

17 1 月 5 月 9 月 1 月 5 月 9 月 1 月 5 月 9 月 1 月 5 月 9 月 1 月 5 月 9 月 1 月 5 月 9 月 1 月 5 月 9 月 1 月 5 月 9 月 1 月 5 月 9 月 1 月 5 月 9 月 1 月 Book value of subsidiary shares [A] A x 50% Net assets of subsidiary* Book value of subsidiary shares [A] A x 50% External evaluation One-time Goodwill Amortization #1 Prolonged low interest rates had not been anticipated at time of business integration. Last year's introduction of negative interest rates in particular has led to considerable change in the earnings environment for financial institutions. Previously, impairment of subsidiary shares was determined according to the commonly used "net assets of the subsidiary." However, with the impending business integration with the Eighteenth Bank, impairment to be determined according to the evaluation method generally used in M&A (DDM method). Yields on 10-year Japanese government bonds Impairment of subsidiary shares Apr 2007 Establishment of FFG (joint stock transfer by the Bank of Fukuoka and Kumamoto Bank) Sep 2007: Shinwa Bank became subsidiary (%) Previously Impairment of subsidiary shares determined according to commonly used "net assets of subsidiary" Impairment of subsidiary shares determined according to evaluation method generally used in M&A (external evaluation) Now 1.50 Level does not conflict with impairment Level does conflict with impairment (0.50) Feb 2016 Introduction of negative interest rates MOU for business integration with the Eighteenth Bank < > 07 年 08 年 09 年 10 年 11 年 12 年 13 年 14 年 15 年 16 年 17 Source: Data released by the Ministry of Finance 年 * Figures are as of Sep 30, 2016 Decline in valuation is due to prolonged low interest rates following introduction of negative interest rates 16

18 After Before One-time Goodwill Amortization #2 Goodwill had previously been amortized on straight-line basis. But amortizing goodwill all at once will eliminate the burden of amortization in the future, and stabilize profit levels from next fiscal year. Except for a temporary deficit, there are no negative effects, including on soundness (capital adequacy ratio), and there will be positive effects from next fiscal year. Goodwill amortization schedule Impact of this one-time amortization At integration Balance of goodwill Amortized a cumulative total of 88.6 billion yen on a straight-line basis (9.2 billion yen each year) over a period of about 10 years following integration Mar 31, Plan to continue amortizing on a straightline basis (9.2 billion yen each year) for about the next 10 years Sep 30, 2027 Zero balance Item Capital adequacy ratio FY2016 Impact FY2017 onwards 10 years 20 years Net income At integration Balance of goodwill Amortized a cumulative total of 88.6 billion yen on a straight-line basis (9.2 billion yen each year) over a period of about 10 years following integration + One-time amortization: 94.8 billion yen Mar 31, 2017 Zero balance Future burden is brought forward and amortized all at once (No need to amortize 9.2 billion yen each year for the next 10 years) Burden of amortization is eliminated Return on equity (ROE) Earnings per share (EPS) Dividends (per share) 10 years 20 years 17

19 One-time Goodwill Amortization #3 Business performance of Kumamoto Bank and Shinwa Bank have greatly improved since business integration. Benefits of business integration over 10-year period following integration (net income of both banks plus Group profits (tax effects recorded by the Bank of Fukuoka resulting from business divestiture, etc.)) equal to 75% of goodwill recorded at time of integration. Remaining 25% could also produce adequate effects with future profits. Goodwill and effect of business integration Effects of business integration Remainder about Business divestiture (Feb 2009) Cumulative total Approx. 140 billion yen 200 Balance of goodwill at time of integration Effect of integration Approx. 140 Equivalent to 75% 00 (100) -10 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 Focused on improving balance sheet Group profits * Net income of Kumamoto/Shinwa (200) -20 * Group profits Tax effects/net interest income, etc. recorded by the Bank of Fukuoka following business divestiture Effects are on internal accounting basis 18

20 ROE & Shareholder Returns FFG aims to improve capital efficiency in the mid- and long-term by achieving reform in earnings structure and expanding our business base. Shareholder returns shall be conducted based on the balance between securing capital adequacy and enhancing capital efficiency for growth. ROE (%) EPS (yen) Capital Efficiency FY11 FY12 FY13 FY14 FY15 FY16 P:FY17 ~ 63.2 Dividend Policy Adopt a performance-based dividend formula Set table for dividend payout ratio of 30% [Table of target dividends] FFG consolidated net income* ( ) Target dividend Dividend payout ratio 50 - billion yen 17 yen -29% billion yen 15 yen 26-29% billion yen 13 yen 25-28% billion yen 12 yen 26-30% billion yen 11 yen 27-32% billion yen 10 yen 29-34% billion yen 9 yen 31-39% billion yen 8 yen 34-46% Below 15 billion yen 7 yen At least 40% *Refers to the net income attributable to parent company shareholders FY11 FY12 FY13 FY14 FY15 FY16 P:FY17 Dividend Payout Ratio 25% 27% 29% 28% 25% - 26% 19

21 - To be your Bank of choice - Part II Fukuoka Financial Group

22 Corporate Data Corporate Governance General Meeting of Shareholders Group Compensation & Nominating Advisory Committee Board of Directors 13 Group Management Conference Audit & Supervisory Board 3 (2 external members) (2 external directors) Group Risk Management Committee Representative Directors Group IT Special Committee Senior Management Photo Masaaki Tani FFG Chairman Bank of Fukuoka Chairman Takashi Yoshikai FFG Deputy President Bank of Fukuoka Deputy President As of June 30, 2017 Takashige Shibato FFG President Bank of Fukuoka President Board of Directors 8 (1 external director) Credit Ratings Board of Directors 13 (2 external directors) Board of Directors 8 (1 external director) *1 *2 *3 R&I JCR Moody s FFG A+ A - Bank of Fukuoka AA- A+ A3 Kumamoto Bank A+ A - Shinwa Bank A+ A - *1 Issuer rating *2 Senior long-term credit rating *3 Long-term deposit rating 6/6/2017 Baa1 to A3 Ei Takeshita FFG Director Kumamoto Bank President External Directors Masahiko Fukasawa FFG, Bank of Fukuoka External Director Alix Partners Asia LLC Joint Supervisor of Asian Region and Joint Representative of Japan External Directors have been introduced in Syunsuke Yoshizawa FFG Director Shinwa Bank President Toshiya Kosugi FFG, Bank of Fukuoka External Director Truth,Human Science and Management Organization Laboratory LLC Representative Mr. Fukasawa possesses extensive practical experience and specialized knowledge in consulting on management strategy and business revitalization of a wide variety of companies. Mr. Kosugi possesses abundant practical experience and expertise in organizational reform and personnel training and management. 21

23 Stock Data Share Information Number of authorized shares Number of shares Issued Number of Shareholders Common stock 1,800,000, ,761,868 Composition of Shareholders 18,437 Major Shareholders -To be your Bank of choiceas of March 31, 2017 (thousands of shares) Major Shareholders Shares held Ratio* Japan Trustee Services Bank,Ltd.(Trust account) 56, The Master Trust Bank of Japan,Ltd.(Trust account) 52, Japan Trustee Services Bank,Ltd.(Trust account 9) 27, Nippon Life Insurance Company 17, Meiji Yasuda Life Insurance Company 17, Sumitomo Life Insurance Company 17, The Dai-Ichi Life Insurance Company, Limited 17, Japan Trustee Services Bank,Ltd.(Trust account 5) 14, Japan Trustee Services Bank,Ltd.(Trust account 4) 12, STATE STREET BANK WEST CLIENT-TREATY , Overseas corporations,etc. 29% Others 3% Individuals 10% Other corporations 11% Financial institutions 47% *Ratio of shares held to issued number of shares Stock Indicator (yen) FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 EPS BPS ROE 5.3% 4.6% 4.7% 4.9% 5.2% 5.1% 5.8% 7.3% Exclude One-time Goodwill Amortization 5.1% 22

24 Market Share of Subsidiary Banks Fukuoka Prefecture Kumamoto Prefecture Nagasaki Prefecture Share of loans 35% 30% 25% 20% 15% 10% 5% Nishi-nippon City Bank Mega & Major Savings Unions Bank of Fukuoka 32.7% 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% Savings Unions Mega & Major Higo bank Kumamoto Bank 22.4% 40% 35% 30% 25% 20% 15% 10% 5% 18 bank Savings Unions Mega & Major Shinwa Bank 33.6% 0% Mar.01 Mar.06 Mar.11 Mar.16 0% Mar.01 Mar.06 Mar.11 Mar.16 0% Mar.01 Mar.06 Mar.11 Mar.16 Share of deposits & CDs 35% Postal Savings 30% Bank of Fukuoka 25% 26.4% 20% Nishi-nippon City Bank 15% Savings Unions 10% Mega & Major 5% 0% Mar.01 Mar.06 Mar.11 Mar.16 40% 35% 30% 25% 20% 15% 10% 5% Mega & Major Higo bank Savings Unions Postal Savings Kumamoto Bank 12.0% 0% Mar.01 Mar.06 Mar.11 Mar.16 40% 35% 30% 25% 20% 15% 10% 5% Postal Savings Savings Unions Mega & Major 18 bank 0% Mar.01 Mar.06 Mar.11 Mar.16 Shinwa Bank 23.9% Source: Monthly Kinyu Journal 23

25 - To be your Bank of choice - Part III Financial Data

26 Financial Results for FY2016 Profit & Loss (3 banks total) 3 banks nonconsolidated total Comparison to Projection of Nov.10,2016 FY2016 YoY Chg. FY2016 YoY Chg. FY2016 YoY Chg. FY2016 YoY Chg. Gross business profit Net interest income Domestic International Non-interest income Net fees and commissions Specified trade income Bond-related income Overhead expenses Actual Business Profit Transfer to general reserve for possible loan losses Business profit Core business profit +0.9 (except for market related profit [loss]) Other operating profit (loss) Ordinary profit Extraordinary profit (loss) Income (loss) before income taxes Income taxes Net income Credit cost Profit & Loss (FFG consolidated) Gross business profit Actual business profit Core business profit Bank of Fukuoka (non-consolidated) Consolidation adjustments Ordinary profit Consolidated net income Amortization of goodwill * Consolidated net income is Net income attributable to owners of the parent Kumamoto Bank (non-consolidated) Shinwa Bank (non-consolidated) FFG non-consolidated income 53.1 FFG non-consolidated 6.8 Amortization of goodwill Subsidiary income 3.8 Others 0.4 Total Consolidation adjustments 54.3 Exclude One-time Amortization of goodwill< 94.8> 40.5 Point2 Point1 Net interest income is almost the same as the previous year. Yields declined due to negative interest rates, etc. However, by covering the increase in loan volume, buildup of consumer loans, reduction of fund procurement cost, etc., almost the same level as the previous year was secured. Core business profit is 71.3billion yen. (YoY Chg.) 5billion yen The decrease was mainly due to a decrease in insurance sales, an increase in loan guarantee fee, a decrease in share of group credit life insurance (a decline in special factors in the previous fiscal year), an increase in dual corporate tax system, an increase in expenses due to strategic investment, etc. Comparison with publication +9billion yen Although we struggled to sell insurance, we covered it with investment diversification etc. in the market sector. Point3 Consolidated net income is 54.3billion yen. Exclude One-time Amortization of goodwill is 40.5billion yen Although it was a deficit settlement due to One-time amortization of goodwill 94.8 billion yen, except for this factor, the main reason for core business profit was mainly attributable to the publication +0.5billion yen. In comparison with the previous year (excluding Onetime amortization of goodwill), it was 4.2 billion yen due to a decrease in core business profits and an increase in credit costs. 25

27 Projections for FY2017 Profit & Loss (3 banks total) 3 banks nonconsolidated total Bank of Fukuoka (non-consolidated) Kumamoto Bank (non-consolidated) Shinwa Bank (non-consolidated) P:FY17 YoY Chg. P:FY17 YoY Chg. P:FY17 YoY Chg. P:FY17 YoY Chg. Gross business profit Net interest income Domestic International Non-interest income Net fees and commissions Supecified trade income Bond-related income Overhead expenses Actual Business Profit Core business profit Ordinary profit Net income Credit cost Profit & Loss (By bank) Bank of Fukuoka FY14 FY15 FY16 P:FY17 Kumamoto Bank Core business profit Net income Core business profit Net income FY14 FY15 FY16 P:FY17 Profit & Loss (FFG consolidated) Gross business profit Actual business profit Core business profit Ordinary profit Consolidated net income Total Consolidation adjustments 49.0 * Consolidated net income is Net income attributable to owners of the parent Consolidation adjustments P:FY17 Net income (3 banks total) 51.4 FFG non-consolidated income 6.2 Amortization of goodwill 0.0 Subsidiary income 4.1 Others 0.2 Shinwa Bank Core business profit Net income FY14 FY15 FY16 P:FY17 26

28 Transition of Top Line Top Line(Core business profit)(yoy Chg.) 76.4 FY Domestic loans rates factor +3.7 ( Domestic loans volume factor Corporate loan, Mortgage,etc ) Core Business profit 5.0 Net interest income : 0.3 Interest of deposits and loans: Consumption & new type loan Deposits and NCD Securities & International division Others Securities+0 International division 0.1 Non-interest income : 3.1 ( Exclude Bond-related income) Investment trust & Insurance commission Decrease in interest Swap costs+0.1 Declining interest rates of BOJ operation +0.9 Subordinated bond Redemption+0.3 Corporate related fee Others 1.6 Overhead expenses Group Credit Insurance Premium Refund 0.9 Loan Guarantee Fee 1.2 Foreign exchange & derivatives FY 16 Net interest income: Consumption & new type loan Core Business profit +1.8 Interest of deposits and loans:+0.4 Domestic loans rates factor ( Domestic loans volume factor Corporate loan, Mortgage,etc Deposits and NCD Securities & International division Securities 1.1 International division 0.4 Others Non-interest income:+3.4 (Exclude Bond-related income) +3.3 Investment trust & Insurance commission +2.5 Corporate related fee Decrease in interest Swap costs+1.0 Declining interest rates of BOJ operation Others 1.7 Overhead expenses Loan Guarantee Fee 1.0 Foreign exchange & derivatives P:FY 17 27

29 Transition of Bottom Line Bottom Line(Consolidated net income)(yoy Chg.) (Exclude One-time Goodwill Amortization) 44.7 FY Core business profit Before taxes: 8.8 Profit on sale of bond & stock Credit cost Retirement Benefits Cost 4.7 Profit on sale of bond 0.1 Profit on sale of stock Other operating profit / Extraordinary profit +5.8 Taxes 1.2 Consolidation adjustments(exclude One-time Goodwill Amortization) 40.5 FY Core business profit Before taxes: Profit on sale of bond & stock 6.6 Credit cost Profit on sales of bond+0.5 Profit on sale of stock+3.4 Retirement Benefits Cost Other operating profit / Extraordinary profit 1.7 Taxes +1.2 Consolidation adjustments(exclude One-time Goodwill Amortization) No Amortization required because of One-time Goodwill Amortization 49.0 P:FY 17 28

30 29 Loans Loans(Domestic + International) Loans by customer segment Excluding loans to FFG and Government Excluding loans to FFG and Government (annual rate ) 3 banks total Shinwa Kumamoto 9,732.6 (4.7%) 1,398.2 (1.6%) 1,027.9 (5.4%) 10,361.1 (6.5%) 1,446.8 (3.5%) 1,079.8 (5.1%) 10,757.6 (3.8%) 1,469.9 (1.6%) 1,118.4 (3.6%) 10.8 trillion yen 11,196.3 (4.1%) 1,498.3 (1.9%) 1,174.8 (5.0%) 11.2 trillion yen (annual rate ) 3 banks total International Public Retail 9,732.6 (4.7%) ,143.6 ( 4.0%) 2,821.9 (5.7%) 10,361.1 (6.5%) ,178.2 (3.0%) 2,956.8 (4.8%) 10,757.6 (3.8%) ,257.9 (6.8%) 3,059.1 (3.5%) 11,196.3 (4.1%) ,286.0 (2.2%) 3,164.8 (3.5%) Fukuoka 7,306.5 (5.2%) 7,834.4 (7.2%) The Fifth Medium-Term Management Plan 8,169.3 (4.2%) 8,523.2 (4.3%) Large-sized enterprises 1,626.8 (4.2%) 1,699.9 (4.5%) 1,645.3 ( 3.2%) 1,586.8 ( 3.5%) Small and medium-sized enterprises 3, , , ,786.2 (6.5%) (8.6%) (6.0%) (6.0%) FY14 FY15 FY16 P:FY17 FY14 FY15 FY16 P:FY17

31 30 Loans (By Bank) Bank of Fukuoka Kumamoto Bank Shinwa Bank Average loan balance by customer segment Public Retail * Excluding loans to FFG, Government 6, , , , , , , , , ,186.7 Corporate 3, , , , ,786.4 * Excluding subordinated beneficial interests 1, , , * Excluding subordinated beneficial interests 1, , , , , FY12 FY13 FY14 FY15 FY16 FY12 FY13 FY14 FY15 FY16 FY12 FY13 FY14 FY15 FY16 Average loan balance by region 7, , , , , ,158.6 Honshu 1, & Other Kyushu Nagasaki Kumamoto Fukuoka 5, , , , ,111.9 FY12 FY13 FY14 FY15 FY16 1, , , , FY12 FY13 FY14 FY15 FY16 1, , , , , , , , FY12 FY13 FY14 FY15 FY16

32 31 Loan Portfolio (Classified by Industry) Classification by industry Mar. 31, 2017 Total Fukuoka(BOF) Kumamoto(KMB) Shinwa(SWB) Domestic Loans 11, % 8, % 1, % 1, % Manufacturing % % % % Agriculture and Forestry % % % % Fishery % % % % Mining, quarrying and gravel % % % % Construction % % % % Electricity, Gas, Heat Supply and Water % % % % Information and Communications % % % % Transport and postal service % % % % Wholesale and retail trade 1, % % % % Finance and Insurance % % % % Real Estate and leasing 2, % 1, % % % (Real Estate) 2, % 1, % % % Services 1, % % % % Government, local public sector 1, % % % % Others 3, % 2, % % % Change from Mar. 31, 2016 Total BOF KMB SWB Risk monitored loans, classified by industry Mar. 31, 2017 Total Fukuoka(BOF) Kumamoto(KMB) Shinawa(SWB) Domestic Loans % % % % Manufacturing % % % % Agriculture and Forestry % % % % Fishery % % % % Mining, quarrying and gravel % % % % Construction % % % % Electricity, Gas, Heat Supply and Water % % - - Information and Communications % % % % Transport and postal service % % % % Wholesale and retail trade % % % % Finance and Insurance % % % - - Real Estate and leasing % % % % (Real Estate) % % % % Services % % % % Government, local public sector Others % % % % Change from Mar. 31, 2016 Total BOF KMB SWB

33 32 Deposits & CDs Deposits & CDs(Domestic + International) ( annual rate) 3 banks total Shinwa Kumamoto 12,448.6 (3.9%) 2,264.6 (3.4%) 1,331.1 (5.9%) 12,882.2 (3.5%) 2,254.3 ( 0.5%) 1,336.0 (0.4%) 13,328.2 (3.5%) 2,305.0 (2.3%) 1,434.6 (7.4%) 13.1 trillion yen 13,793.1 (3.5%) 2,336.3 (1.4%) 1,457.4 (1.6%) 13.6 trillion yen The Fifth Medium-Term Management Plan (annual rate ) 3 banks total International Public Retail Deposits & CDs by customer segment 12,448.6 (3.9%) ( 2.7%) 8,400.7 (3.9%) 12,882.2 (3.5%) ( 6.9%) 8,708.1 (3.7%) 13,328.1 (3.5%) (7.6%) 9,003.0 (3.4%) 13,793.1 (3.5%) (5.3%) 9,273.6 (3.0%) Fukuoka 8,852.8 (3.7%) 9, ,588.6 (5.0%) (3.2%) 9,999.4 (4.3%) Corporate 3, , , ,400.6 (6.1%) (5.7%) (1.8%) (4.7%) FY14 FY15 FY16 P:FY17 FY14 FY15 FY16 P:FY17

34 33 Deposits & CDs (By Bank) Bank of Fukuoka Kumamoto Bank Shinwa Bank Average deposit balance by customer segment Public 1,915.2 Corporate Retail 8, , , , , , , , , , , , , ,521.6 FY12 FY13 FY14 FY15 FY16 1, , , , , ,045.6 FY12 FY13 FY14 FY15 FY16 2, , , , , , , , , ,435.9 FY12 FY13 FY14 FY15 FY16 Average deposit balance by deposit type CDs Time 8, , , , , , , , , , , , , , ,933.1 Demand 1, , , , , , , , , , , , , , ,206.0 FY12 FY13 FY14 FY15 FY16 FY12 FY13 FY14 FY15 FY16 FY12 FY13 FY14 FY15 FY16

35 34 Interest Rates (Domestic Loan) 3 banks total (%) Retail Loan Overall Corporate Public H/FY12 2H/FY12 1H/FY13 2H/FY13 1H/FY14 2H/FY14 1H/FY15 2H/FY15 1H/FY16 2H/FY

36 35 Interest Rates (By Bank) Bank of Fukuoka Kumamoto Bank Shinwa Bank Interest rates on loans (%) Interest rates on deposits Retail 1.53 Overrall Corporate Public Time & CDs Demand (%) FY12 FY13 FY14 FY15 FY Overall FY12 FY13 FY14 FY15 FY FY12 FY13 FY14 FY15 FY FY12 FY13 FY14 FY15 FY FY12 FY13 FY14 FY15 FY FY12 FY13 FY14 FY15 FY16

37 Breakdown of Loans and Deposits & CDs by Interest Rate Domestic Loans (As of Mar. 31, 2017) Domestic Deposits (As of Mar. 31, 2017) Based on shortterm prime rate 3 banks total Bank of Fukuoka Kumamoto Bank Shinwa Bank 9.9% 10.3% 9.0% 8.3% 3 banks total Bank of Fukuoka Kumamoto Bank Shinwa Bank Interest 50.4% 52.7% 45.7% 43.2% Short-term spread 7.0% 8.0% 2.7% 4.3% Short-term loan 16.9% 18.3% 11.7% 12.7% Based on flexible prime rate 26.5% 24.5% 43.1% 24.8% Money market loan 12.2% 13.9% 3.2% 9.2% Long-term fluctuation 38.7% 38.4% 46.4% 34.1% Fixed-rate mortgage loan 8.4% 8.1% 7.0% 10.7% Long-term fixed 44.5% 43.3% 41.9% 53.3% Long-term loan 83.1% 81.7% 88.3% 87.3% Non-interest 11.7% 12.5% 5.5% 11.9% Floating deposit 62.1% 65.3% 51.2% 55.1% Core deposit 27.8% 25.8% 40.0% 28.7% Large deposit 7.2% 6.0% 7.9% 12.2% Time and savings deposit 35.0% 31.8% 47.9% 40.8% Negotiable deposit 2.9% 3.0% 0.9% 4.0% Time and saving Deposit & Negotiable deposit 37.9% 34.7% 48.8% 44.9% Total 100.0% 100.0% 100.0% 100.0% Total 100.0% 100.0% 100.0% 100.0% Portfolio By Base Rate Short Term Prime Rate 36.3% 34.8% 52.1% 33.0% Short Term Flexible Prime Rate 19.2% 21.9% 5.9% 13.6% Long Term Prime Rate 0.1% 0.1% 0.1% 0.2% Fixed Rate 44.5% 43.3% 41.9% 53.3% Total 100.0% 100.0% 100.0% 100.0% 36

38 Non-interest Income Non-Interest Income (3 Banks & Fukuoka Securities Total) Asset Management Products Sales Excluding profit(loss) on bond Net Fees & Commissions( 3 banks total) 3 banks Total (YoY Chg.) Fukuoka Securities (Fee Income) Trade Income & Other Insurance Investment Trust Corporate-Related Fees Other Fees & Commissions Exchange Transaction fee Loan Guarantee Fee Group Credit Life Insurance Premium Refund Insurance Premium 27.6 (+1.9) (+1.8) ( 3.8) (+4.3) FY14 FY15 FY16 P:FY17 (External assuarance 3.9) FFG Total (YoY Chg.) 3 banks total Fukuoka Securities Government Bond (+28.3) Foreign Currency Deposit Insurance Investment Trust ( 114.2) ( 66.2) (+156.8) (+43.6) (+102.3) FY14 FY15 FY16 P:FY17

39 1,400 1,200 1, % 50% 40% 30% 20% 10% 0% Overhead Expenses By Category / OHR (3 banks total) FY16 Factor of Increasing and Decreasing (YoY Chg.) Core OHR 56.8% 3 banks total (YoY Chg.) Tax General Expenses Personnel Expenses ( 0.4) (+0.1) 57.4% (+0.8) ( 1.8) 57.4% % (+0.1) (+0.1) 58.7% 58.5% (+1.7) (+1.6) ( 0.2) ( 1.0) (+2.0) (+1.0) ( 1.4) (+0.6) (+1.0) (+0.4) (+0.2) (+0.4) (+1.5) ( 0.2) FY12 FY13 FY14 FY15 FY16 P:FY17 *Core OHR=Overhead Expenses / (Gross Business Profit Bond Related Profit(Loss)) FY15 Personnel Expenses Retirement Benefits Cost +0.3 ibank General Expenses Others Deposit Insurance Premium,other amortization,etc FY17 Factor of Increasing and Decreasing (YoY Chg.) FY16 Personnel Expenses 0.2 Retirement Benefits Cost ibank +0.3 Promotion Promotion +0.4 Strategic costs System Integration Cost General Expenses +1.5 Strategic costs Channel strengthening Sales support system renewal ) 0.5 ( Others Deposit Insurance Premium,other amortization,etc ) +0.6 ( Tax Dual Corporate Tax System Tax Sales tax, Dual Corporate Tax System, etc FY16 P:FY17 38

40 Increasing factors Decreasing factors 39 Credit Cost & NPL Credit cost (3 banks total) Non-Performing Loans & Ratio (3 banks total) 不良債権残高 比率 (3 行合算 ) 3 banks (Credit cost ratio) Shinwa Kumamoto Fukuoka 8.2 (8bp) ( 2bp) 3.6 ( 3bp) ( 2bp) (4bp) FY13 FY14 FY15 FY16 P:FY17 * After partial write-off Ratio Total Substandard Doubtful Bankrupt & Quasi-bankrupt 2.49% 2.34% 2.17% 1.97% Mar.2014 Mar.2015 Mar.2016 Mar.2017 FY2016 Credit cost breakdown 3 banks YoY chg. BOF YoY chg. KMB YoY chg. SWB YoY chg. New bankruptcies Downgrade Collateral decline Other Subtotal Upgrade Changes of default ratio Redemption, etc Subtotal Total Reserve ratio for uncovered claims Claims Uncovered Collateral Guarantee Status of other watch obligors 10.0% 10.3% 9.7% 9.2% 10.0% 8.5% 7.5% 7.0% *Finance Facilitation Act 6.1% implemented in Dec , , , , , , , , ,148.4 Mar Mar Mar Mar Mar Mar Mar Mar Mar. 2017

41 40 Status of Reserves & Coverage: Bank of Fukuoka Under Watch Obligors March 31, 2017 ( ) : March 31, 2016 Borrower s status Claims A Collateral Guarantee B Uncovered C =A-B Reserves D Covered ratio for claims disclosed pursuant to the Financial Reconstruction Act :77.1% Reserved ratio for claims Reserved ratio for Covered Uncovered ratio claims B+D D/A DCF D/C DCF A Bankrupt Quasi-bankrupt (20.7%) (100%) (100%) % 100% 100% Doubtful Substandard Disclosed claims Watch obligors Except substandard Watch obligors (40.9%) (75.0%) (77.1%) (95.7%) (87.8%) 44.2% 72.3% 78.4% 91.6% 87.8% (21.4%) (28.8%) (28.7%) (38.1%) (46.9%) 15.5% 25.7% 20.6% 32.1% 40.3% (33.3%) (54.3%) (57.6%) (70.5%) (75.5%) 34.9% 62.4% 60.4% 78.8% 77.1% (3.1%) (13.2%) (7.0%) (26.2%) (58.3%) 2.7% 10.2% 5.9% 18.6% 57.8% (4.1%) (16.5%) (8.8%) (29.6%) (57.7%) 3.2% 12.0% 6.8% 20.8% 57.1% Under watch obligors (7.5%) (28.6%) (16.0%) (47.3%) (60.7%) 7.2% 30.1% 15.5% 46.9% 60.5%

42 41 Status of Reserves & Coverage: Kumamoto Bank Under Watch Obligors March 31, 2017 ( ) : March 31, 2016 Borrower s status Claims A Collateral Guarantee B Uncovered C =A-B Reserves D Covered ratio for claims disclosed pursuant to the Financial Reconstruction Act :76.3% Reserved ratio for claims D/A DCF Reserved ratio for Uncovered claims DCF D/C Covered ratio B+D A Bankrupt Quasi-bankrupt (15.2%) (100%) (100%) % 100% 100% Doubtful Substandard Disclosed claims 33.7 Watch obligors except substandard Watch obligors (33.8%) (61.5%) (69.4%) (95.0%) (85.1%) 32.5% 63.5% 67.9% 95.2% 84.7% (18.3%) (38.4%) (25.8%) (45.3%) (47.3%) 14.2% 26.9% 20.5% 33.8% 44.9% (28.8%) (57.1%) (55.8%) (83.4%) (77.2%) 27.3% 55.1% 53.5% 79.1% 76.3% (3.0%) (16.4%) (7.0%) (33.8%) (60.3%) 3.5% 16.3% 7.8% 29.7% 58.2% (3.6%) (21.6%) (8.2%) (37.8%) (59.8%) 4.0% 17.7% 8.7% 30.5% 57.5% Under watch obligors (6.7%) (41.6%) (15.2%) (68.3%) (62.7%) 7.3% 31.9% 15.7% 52.5% 61.0%

43 42 Status of Reserves & Coverage: Shinwa Bank March 31, 2017 Borrower s status Under Watch Obligors ( ) : March 31, 2016 Claims A Collateral Guarantee B Uncovered C =A-B Reserves D Covered ratio for claims disclosed pursuant to the Financial Reconstruction Act :78.9% Reserved ratio for claims Reserved ratio for Uncovered claims Covered ratio B+D D/A DCF D/C DCF A Bankrupt 0.9 Quasi-bankrupt (21.5%) (100%) (100%) % 100% 100% Doubtful Substandard Disclosed claims Watch obligors except substandard Watch obligors Under watch obligors (38.5%) (71.4%) (76.2%) (96.2%) (88.0%) 37.2% 68.8% 72.6% 91.0% 85.9% (14.6%) (27.0%) (19.0%) (35.8%) (38.0%) 11.0% 17.2% 15.1% 23.5% 37.9% (33.9%) (66.3%) (65.4%) (89.2%) (82.1%) 31.6% 59.9% 59.9% 79.6% 78.9% (3.4%) (21.5%) (7.3%) (30.4%) (56.6%) 2.8% 10.6% 5.7% 14.8% 54.5% (3.7%) (22.3%) (7.8%) (31.3%) (56.1%) 3.0% 12.1% 6.2% 16.8% 54.0% (8.3%) (49.1%) (17.5%) (67.4%) (60.7%) 7.5% 41.1% 15.4% 55.6% 58.6%

44 43 Capital Adequacy Ratio Capital adequacy ratio (FFG consolidated) Breakdown of the capital (FFG consolidated) ( bil. %) 650 Items Mar, Fundamental items Capital stock (Common stock) Reserves 2.7 Subordinated debt 30.0 Revaluation reserve for land Transitional measure High- 8% Others 4.6 Adjusting items 11.9 Goodwill Implement temporary depreciation Fully adopted Low- 8% Deferred tax assets 0.3 Assets related to retirement benefits 5.2 Others 6.3 Core Capital Core Capital Mar Mar Mar E:Mar * Domestic Standard * Credit risk measurement: Foundation IRB * Operational risk measurement: Standardized approach Risk Asset 6,783.3 Reference Basel Ⅲ International Standard (Mar. 31, 2017) Common Equity Tier1 ratio 9.81% Preliminary calculation as fully adopted

45 44 Consolidated Balance Sheets ( bil.) Mar.31,2016 Mar.31,2017 Comparison Mar.31,2016 Mar.31,2017 Comparison Loans and bills discounted 10,707 11, Deposits and NCD 12,983 13, Domestic short-term loan 1,669 1, Domestic long-term loan 8,885 9, Domestic floating deposits 7,563 8, Domestic time and saving deposits 4,714 4, Foreign currency loan Foreign currency deposits ( 2) Securities 3,446 3, Borrowed money 1,341 1, JGB 2,183 2, Subordinated loan Foreign bonds and others Tangible fixed assets Borrowed money from BOJ 1,319 1, Bonds payable Intangible fixed assets Others 1,257 2,554 +1,297 Goodwill Total liabirities 15,621 17,401 +1,780 Others 1,943 3,007 +1,064 Total net assets Total assets Total liabirities and net assets 16,406 18,113 +1,707 16,406 18,113 +1,707

46 - To be your Bank of choice - Part IV Our Mother Market Kyushu

47 Potential of Our Local Kyushu Potential for Kyushu s economy Global GDP Ranking (2016) ($ bil.) Same economic size as Thailand GDP 43.9 trillion (9%) Population: million (10%) Businesses: 600,000 (10%) Austria Iran Thailand Kyushu Colombia Integration of Regional economy 20% increase in flow of people between Fukuoka and Kagoshima since the opening of all lines of the Kyushu Shinkansen in Higashi-Kyushu Expressway, Kyushu Shinkansen (West Kyushu route) Runway expansion at Fukuoka Airport New seeds for growth Needs from Asia Special Zones (Fukuoka City and Kitakyushu City) Hydrogen energy Third generation organic electroluminescence (EL) materials Number of incoming foreign nationals reached record high Exports of food items doubled in five years Amount of Food Exports in Kyushu Start-up café (Fukuoka City) (Source: Moji Customs) 46

48 Feature of Kyushu Economy Well-Balanced Industry Grouping Industries in Kyushu North Center of Car Island Number of Passenger Cars produced in Kyushu is 1,350 thousand vehicles in % share in Japan Center of Silicon Island Amount of Integrated Circuits produced in Kyushu is billion yen in % share in Japan Center of Food Island Amount of Agricultural Output produced in Kyushu is trillion in % share in Japan Middle South Passenger Car (thousand vehicles) 1,463 1,344 1,351 1,351 1, % 14.6% 14.7% 13.9% (Share in Japan %) 13.3% Integrated Circuits 39.2% % % 27.9% 27.0% (Share in Japan %) Agricultural Production 1,702 1,660 1,673 1, % 19.4% 19.3% 19.5% 1, % ( 全国シェア %) Source: Kyushu Bureau of Economy, Trade and Industry 47

49 Potential of Fukuoka Metropolitan Area Number of Foreign Nationals Entering Kyushu Land price in Fukuoka metropolitan area The number of foreign people entering Japan through Kyushu has increased about five times in five years 5,000 4,000 3,721 3,000 (thousand people) 4,800+ Fukuoka city's land price increase rate greatly exceeds the nationwide and three major metropolitan areas. Rate of Change in Land Prices Compared with the Previous Year (All applications) 6% 4% Japan Fukuoka City Three major metropolitan areas (Toky o, Osaka, Nagoya) +4.9% 2,000 1, % 0% +1.1% +0.4% P: 2017 ( Source: Ministry of Land, Infrastructure, Transport and Tourism) -2% ( Source: Ministry of Land, Infrastructure, Transport and Tourism) The number of cruise ships calling to Kyushu (Including Shimonoseki port) Others Kagoshima port Nagasaki port Hakata port (number) ( quick estimation) ( Source: Ministry of Land, Infrastructure, Transport and Tourism) Future estimate population of Fukuoka city (thousand people) Ranked 5th in government ordinance city Population of the Fukuoka Metropolitan Area 1,460 1,530 1,570 1,590 1,600 1, ( Source: Fukuoka city) 48

50 FFG s Growth Potential Kyushu s Financial Market Japan Post Bank 20% FFG 16% Saving unions 17% FFG 24% Saving unions 21% Deposits Local and Mega banks 43% Loans Local and Mega banks 59% Kyushu JPY 78.6 trillion Kyushu JPY 40.0 trillion FFG JPY 12.8 trillion FFG JPY 9.5 trillion Room for market development JPY 65.8 trillion Room for market development JPY 30.5 trillion (Source: FFG) 49

51 Financial Map of Kyushu (Regional Bank & Regional Bank Ⅱ) Fukuoka pref. Loans Deposits Population 5,060,000 people Number of business establishments 233,000 Establishments Loans 19.7 trillion yen Deposits 33.3 trillion yen The Bank of Fukuoka 14.0 trillion yen Fukuoka Chuo Bank 0.5 trillion yen Kitakyushu Bank 1.2 trillion yen Nishi-Nippon City Bank 9.2 trillion yen Oita pref. Loans Deposits Population 1,170,000 people Number of business establishments 58,000 Establishments Loans 3.3 trillion yen Deposits 7.3 trillion yen Kumamoto pref. Loans Deposits Nagasaki pref. Deposits Population 1,800,000 people Population 1,390,000 People Number of business establishments 82,000 Establishments 38 Number of business establishments 67,000 Establishments 46 Loans 4.5 trillion yen 8 13 Loans trillion yen 5 Deposits 10.2 trillion yen % 20% 40% 60% 80% 100% Kumamoto Higo Credit unions Labor credit unions City banks Others Loans 0% 20% 40% 60% 80% 100% Fukuoka Nishi-Nippon C Credit unions Labor credit unions City banks Others Deposits 8.0 trillion yen % 20% 40% 60% 80% 100% Shinwa Eighteenth Credit unions Labor credit unions City banks Others Shinwa Bank 2.6 trillion yen Eighteenth Bank 2.9 trillion yen Bank of Saga 2.3 trillion yen Saga Kyoei Bank 0.2 trillion yen Nagasaki Bank 0.3 trillion yen Kagoshima Bank 4.3 trillion yen Chikuho Bank 0.8 trillion yen Higo Bank 5.3 trillion yen Kumamoto Bank 1.7 trillion yen Miyazaki Bank 3.0 trillion yen Miyazaki Taiyo Bank 0.7 trillion yen Oita Bank 3.2 trillion yen Howa Bank 0.6 trillion yen Miyazaki pref. Loans Deposits Kagoshima pref. 0% 20% 40% 60% 80% 100% Oita Howa Credit unions Labor credit unions City banks Others Population 1,120,000 people Population 1,670,000 people Number of business establishments 56,000 Establishments Number of business establishments 83,000 Establishments Loans 2.9 trillion yen Loans 4.6 trillion yen Deposits 5.7 trillion yen % 20% 40% 60% 80% 100% Miyazaki Miyazaki-Taiyo Credit unions Labor credit unions City banks Others Loans Deposits Deposits 9.1 trillion yen % 20% 40% 60% 80% 100% Kagoshima Minami-Nihon Credit unions Labor credit unions City banks Others Saga pref. Loans Deposits Population 840,000 People 33 Number of business establishments 40,000 Establishments Loans 1.9 trillion yen Deposits 5.0 trillion yen % 20% 40% 60% 80% 100% Saga Saga-Kyoei Credit unions Labor credit unions City banks Others Minami-Nippon Bank 0.8 trillion yen Bank trillion yen Regional Bank Regional Bank Ⅱ Total assets As of Mar. 31, 2017 Source : Financial Digests Kyushu as a Whole Population 13,070,000 people Number of business establishments 619,000 Establishments Loans 40.0 trillion yen Deposits 78.6 trillion yen Source: 2017 Economic Census for Business Activity, Ministry of Economy, Trade and Industry Source: Monthly Kinyu Journal 50

52 Industrial Production Trends Japan Kyushu Industrial production index(2010=100) Kyushu Main Industry trends ( million pieces ) 1, ( thousand vehicles ) 140 Quantity 120 YoY Chg Quantity YoY Chg. Integrated Circuits 15/5 15/11 16/5 16/11 17/5 Passenger Car (%) (%) /5 09/5 10/5 11/5 12/5 13/5 14/5 15/5 16/5 17/ /5 15/11 16/5 16/11 17/5 Source:Kyushu Bureau of Economy,Trade and Industry 51

53 Land Price Trends Volatility of standard land prices < Ministry of Land, Infrastructure and Transport: 2017 Outline of results of land prices survey > Volatility of standard land prices in major cities in Fukuoka Pref. In the national average, the average for all uses increased for the second consecutive year. By application, residential areas started to level off last year. Commercial land has risen for the second consecutive year, and the trend of rising is stronger. Looking at the three major metropolitan areas, the residential area shows a slight rise almost as same as the previous year. Commercial areas are generally on the rise. Looking at the regional areas, local cities show a rise that exceeds the three major metropolitan areas in all uses. In all other areas of the regional area, the falling width is narrowing in all applications. (Announced March, 2017 Ministry of Land, Infrastructure and Transport) Residential land (Unit:%) Commercial land Change Change Japan Tokyo Area major metropolitan areas Fukuoka Saga Nagasaki Kumamoto Oita Miyazaki Kagoshima Yamaguchi Residential land Commercial land Fukuoka City Kitakyushu City Volatility of standard land prices in major cities in Kumamoto Pref. Residential land Commercial land Kumamoto City Yatsushiro City Volatility of standard land prices in major cities in Nagasaki Pref. Residential land Commercial land Nagasaki City Sasebo City Source : Ministry of Land, Infrastructure, Transport and Tourism 52

54 Corporate Bankruptcies Number of bankruptcies and total liabilities transition Japan Kyushu 1,600 1,400 1,200 1, Left Axis :The total debts / Bar graph Right Axis:The number of bankruptcies / Line graph Takata Corporation 1, /6 15/12 16/6 16/12 17/6 (Number) /6 15/12 16/6 16/12 17/6 (Number) Fukuoka Kumamoto Nagasaki (Number) /6 15/12 16/6 16/12 17/6 (Number) /6 15/12 16/6 16/12 17/6 (Number) /6 15/12 16/6 16/12 17/6 Source: Tokyo Shoko Research 53