Fukuoka Financial : Investor Presentation in May, 2024

To be your Bank of choice

Fukuoka Financial Group

Investor Meeting

May 28, 2024

Fukuoka Financial Group

Contents

Part I: Management Strategy

 Overview of FY2023 Consolidated Financial Results	P5
 Progress of the 7th Medium-Term Management Plan	P6
 FY2024 Consolidated Earnings Projections	P7
 FY2024 Consolidated Earnings Projections (increase/decrease factors in core	P8
business profit)
 Capital Policy and Shareholder Returns	P9
 5 Key Points for FFG's Sustainable Growth	P10
I. Minna Bank #1	P11
I. Minna Bank #2	P12
I. [Reference] Minna Bank	P13
II. Transformation of the Existing Business Model (DX Investment)	P14
II. Growth of Kyushu Economy	P15
III. Growth of Kyushu Economy_Toward Realization of Silicon Island Kyushu	P16
IV. From Savings to Investment_Asset Management Business	P17
V. Rising Domestic Interest Rates_Impact on Net Interest Income	P18
 Toward Sustainable Profit Growth/ROE Improvement	P19
 [Reference] Structured Finance/Diversified Investment	P20

Part II: Financial Results & Earnings Projections (Reference)

 Summary of Profit & Loss (Breakdown of Banks Total)	P22
 Top Line (Consolidated Core Business Profit)	P23
 Bottom Line (Consolidated Net Income)	P24
 Net Interest Income (banks total)	P25
 Non-Interest Income (excluding gains (losses) on bonds)	P26
 Consolidated Expenses	P27
 Consolidated Credit Cost / NPLs Disclosed under the FRL, Reserve	P28
 Average Balance of Loans	P29
 Deposits, etc. (including CDs), Breakdown of Loans and Deposits & CDs by	P30-31
Type
 Securities	P32
 Minna Bank	P33

Part III: Topics (Reference)

 SX Support for Clients, Realizing SX at FFG	P35-36
 Financial and Economic Education	P37
 Human Resources Strategy	P38-39

FY2024 Investor Meeting

Fukuoka Financial Group

Introduction: Initiatives for Improving Corporate Value (Logic Tree)

• Initiatives for improving corporate value (overview)

Improvement of

ROE

(current profitability)

Improvement of

RORA

(optimization of risk-

return)

 Sales divisions: Improve ROE by transforming the existing

business model and strengthening structured finance

• Effective use of capital and increase in fee income

• Strengthen real estate, renewable energy, ships/aircraft,

LBO, etc.

• Strengthen solutions business and consulting business

through goal-based sales

 Market ALM divisions: Optimization of risk-free assets and

risk-weighted assets

	Today's presentation
P14	Transformation of the
	Existing Business Model
P15-16	Growth of Kyushu Economy
P17	Asset Management Business
P18	Rising Domestic Interest

Improvement of corporate value (PBR improvement)

Realization of expectations

New expectations

Financial leverage

control

• Optimize allocation to domestic and foreign risk assets and

control interest rate risk by diversifying revenue sources

 Manage capital in a way that balances growth investments

with shareholder returns

• Implement share buybacks flexibly, targeting a capital

adequacy ratio of about 10%

 Improve expected future earnings by taking on the challenge

	Rates
P20	Structured
	Finance/Diversified
	Investment
P9	Capital Policy and
	Shareholder Returns

Improvement of

growth rate

(expected future

earnings)

Improvement of

PER

Growth strategy

Human

resources

strategy

of new businesses

• Achieve returns in new businesses in excess of the cost of

shareholders' equity

• Generate new profit and expand customer base through

Minna Bank, etc.

 Realize sustainability management at FFG

• Sustainable growth through the provision of social value

and the improvement of economic value

• Regional revitalization that only FFG can realize

• Human resources strategy integrated with the growth

strategy

 Enhance disclosure of information, including non-financial

information

• Improve understanding of the business strategy and growth

P11-13	Minna Bank
P18	Rising Domestic Interest
	Rates
P19	Toward Sustainable Profit
	Growth/ROE Improvement
[Non-financial information]
P35	SX Support for Clients

Reduced cost of		Reduction of risk
shareholders'		factors
equity		(from an investor
	perspective)

strategy

 Proactive communication with investors

• Improve understanding of the business strategy and growth

strategy

P36	Realizing SX at FFG
P37	Financial and Economic
	Education
P38-39	Human Resources Strategy

3

To be your Bank of choice

Fukuoka Financial Group

Part I: Management Strategy

FY2024 Investor Meeting

Fukuoka Financial Group

Overview of FY2023 Consolidated Financial Results

[Summary of financial results for FY2023]

FFG Consolidated

FY2023		(excluding non-	FY2022
(Unit: ¥ bil.)	YoY chg.	consolidated impact of
		Fukuoka Chuo Bank)

Core gross business profit	250.7		+16.6	(+12.8)	234.0
	4 banks total *1	231.6		+15.1	(+11.3)		216.5
		Interest on deposits and loans (domestic)	146.2		+6.4	(+3.3)	139.8
		Loans	146.6	(1)	+6.4	(+3.3)	140.1
		Deposits	-0.4		-0.0	(+0.0)	-0.3
		Interest on securities, etc.		56.5	(2)	+9.9	(+9.4)		46.6
		Non-interest income *2	28.9		-1.2	(-1.4)	30.1
		Net fees and commissions	29.0	(3)	+3.5	(+3.3)		25.5
	Consolidation adjustment, subsidiaries, etc.*2	19.1		+1.5	(+1.5)	17.6
Overhead expenses	-150.2	(4)	-9.6	(-6.6)	-140.6

Financial highlights (FFG consolidated)

• Consolidated core business profit increased by ¥7.0 billion due to strong performance of core business
• Achieved net income as planned after implementing measures to secure future earnings and control risks (+¥3.5 billion year-on-year excluding special factors)

[Increase/decrease factors in consolidated core business profit]

1. Interest income on loans increased due in part to accumulation of loans to SMEs
2. Interest on securities, etc. increased due in part to the effect of measures capitalizing on the rise in medium- and long-term interest rates
3. Net fees and commissions increased due to higher asset management revenue, capitalizing on the growing momentum for shift "from savings to investment"
4. Overhead expenses increased due to DX-related investment, campaigns promoting banking apps and NISA, etc.

Core business profit		100.4	+7.0	(+6.2)			93.4
	(excluding loss (gain) on cancellation of	103.3	+7.8	(+7.1)			95.4
	investment trusts)
Ordinary profit	56.9	+6.9	(+9.3)		50.1
Extraordinary profit (loss)	20.6	+25.4	(+25.4)		-4.8
	Gain on negative goodwill	21.5	+21.5	(+21.5)		-
Consolidated net income	61.2	+30.0	(+31.5)			31.2
Special factors (after-tax)	0.5	+26.6				-26.1
	FY2023 special factors		0.5	+0.5				-
	FY2022 special factors	-	+26.1			-26.1
Consolidated net income (excluding special	60.7	+3.5				57.3
factors)

Special factors (FY2023, FY2022)

			FY2023	FY2022
		(Unit: ¥ bil.)
		Before	After	Before	After
			tax	tax	tax	tax
Special factors, total	-8.4	0.5	-37.5	-26.1
	Gain on negative goodwill	21.5	21.5	－	－
	Loss-cutting in bonds*1	-19.1	-13.4	-37.5	-26.1
	Credit cost (existing 3 banks, Fukugin	-9.4	-6.6	－	－
	Guarantee)
	Fukuoka Chuo Bank	-2.2	-1.5	－	－
		Unification of FFG standards on	-1.9	-1.3	－	－
		credit cost
		Integration-related expenses	-0.3	-0.2	－	－
	Fukuoka Chuo Bank 2H profit*2	0.9	0.5	－	－

Loss-cutting in foreign bonds: +¥10 billion/year Loss-cutting in domestic bonds: +¥1 billion/year

Revised reserve standards in preparation for future increase in credit cost

*1. Realized losses on foreign bonds in FY2022 and on domestic bonds in FY2023 (existing 3 banks)

*2. Contribution after consolidation adjustment

*1. Bank of Fukuoka, Kumamoto Bank, Juhachi-Shinwa Bank and Fukuoka Chuo Bank (from 2H of FY2023)

*2. After CVA offset on intragroup transactions

5

FY2024 Investor Meeting

Fukuoka Financial Group

Progress of the 7th Medium-Term Management Plan

• While steady progress is being made in "transformation of the existing business model" and sales divisions are performing well, the challenge for Minna Bank is profitability
• Nevertheless, we plan to achieve all target management indicators in the 7th Medium-Term Management Plan, including ROE, net income, balance of loans to SMEs

[Progress and evaluation of key measures]

[7th MTMP target management indicators]

	Priority initiative	Progress/outcomes through FY2023
Transformation of the	• Steady progress is being made in measures, and synergies
existing business model	are gradually materializing. Sales divisions performed well.
	Utilization of digital	• Released banking app for retail customers, portal site for
	corporate customers, and SFA. Number of users
	technologies
	increased
	Business reforms	• Progress made in shifting transactions to digital channels
	• Developed new branch format
		• Goal-based marketing approach spread across all
	Sales reforms	companies
		• Reviewed sales system (area/unit system)
	Strengthening	• Expanded solutions function of each company
	• Strengthened collaboration between headquarters,
	strategic subsidiaries
	branches, and strategic subsidiaries
		• Number of accounts reached 960,000, balance of loans
Minna Bank	reached ¥11.8 billion, and BaaS partners increased to 10.
		On the other hand, profitability is an issue.
		• Commenced new businesses, including FFG Industries
Other new businesses, etc.	(trading company focused on metalworking products) and
		venture debt
Business integration with	• Unification of management philosophy and governance
• Strengthened collaboration framework with Bank of
Fukuoka Chuo Bank
Fukuoka

ROE

			Mid 6%	Expected to
5.7%		6.4%	achieve target
	3.4%
			Approx. 6%
FY21	FY22	FY23	FY24
	Capital adequacy ratio
10.2%			Approx. 10%	Expected to
	9.6%	9.7%		achieve target
				Approx. 10%
22/3	23/3	24/3	25/3
	Consolidated OHR (%)
64.6%	72.6%	65.6%		Expected to
			Approx. 60% achieve target
				Approx. 60%
FY21	FY22	FY23	FY24

Net income (¥ bil.)

			61.2	68.5				Expected to
54.1
					achieve target
		31.1
								¥65 billion
	FY21	FY22	FY23	FY24
		Loans to SMEs (¥ bil.)
		6,612.	7,089.	7,286.				Expected to
6,391.	0	1
2				achieve target
3
								¥6,885.1 billion
	FY21	FY22	FY23	FY24
	Balance of investment trusts (¥ bil.)
			1,036.	1,215.
685.8	773.2	2	8				Expected to
					achieve target
								¥1,200 billion
22/3	23/3	24/3	25/3

6

FY2024 Investor Meeting

Fukuoka Financial Group

FY2024 Consolidated Earnings Projections

[Summary of earnings projections for FY2024]

Increase/decrease factors in earnings projections (FFG consolidated)

FFG consolidated

FY2024

(excluding non-

projected

(Unit: ¥ bil.)

YoY chg.

consolidated impact of

Fukuoka Chuo Bank)

Core gross business profit

261.2

+10.5

(+6.7)

4 banks total *1

241.8

+10.2

(+6.4)

Interest on deposits and loans (domestic)

150.0

(1)

+3.8

(+0.6)

Loans

154.1

+7.5

(+4.2)

Deposits

-4.1

-3.7

(-3.6)

Interest on securities, etc.

62.9

(2)

+6.4

(+5.8)

Non-interest income

*2

29.0

+0.1

(-0.0)

Net fees and commissions

29.3

+0.3

(+0.2)

Consolidation adjustment, subsidiaries, etc. *2

19.3

+0.3

(+0.3)

Overhead expenses

-159.2

(3)

-9.0

(-5.6)

Core business profit

102.0

+1.6

(+1.1)

(excluding loss (gain) on cancellation of

104.0

+0.7

(+0.3)

investment trusts)

Credit cost

-11.9

(4)

+12.3

(+10.5)

Gains (losses) on securities

8.0

+25.3

(+24.3)

After

Ordinary profit

99.5

+42.6

(+39.2)

tax,

Extraordinary profit (loss)

-0.2

approx.

-20.7

(-20.7)

+5.0

Gain on negative goodwill

-

(5)

-21.5

(-21.5)

Consolidated net income

[MTMP: ¥65 billion]

68.5

+7.3

(+5.1)

FY2023

250.7

231.6

146.2

146.6 -0.4

56.5

28.9

29.0

19.1

-150.2

100.4

103.3

-24.2

-17.3

56.9

20.6

21.5

61.2

• Consolidated net income is projected to increase by ¥7.3 billion year- on-year and by ¥3.5 billion compared to MTMP

[Increase/decrease factors in consolidated core business profit]

1. Funding costs will increase due to rising deposit interest rates, but interest on deposits and loans will increase year-on-year due to buildup of the balance of loans and higher interest rates
2. Interest on securities will increase year-on-year in both domestic and international divisions, due to investment in short- and medium-term domestic bonds and lower dollar funding costs resulting from lower U.S. interest rates
3. Overhead expenses will increase year-on-year due in part to an increase in base pay and system investment in relation to DX

[Other increase/decrease factors]

1. Profit will improve due to a turnaround from the special factors in FY2022, namely, the impacts of the increase in credit cost and loss-cutting in domestic bonds
2. Turnaround from the gain on negative goodwill associated with the business integration with Fukuoka Chuo Bank

[Increase/decrease factors from the initial MTMP]

Sales	 Net interest income will swing upward due to the buildup of
loans and higher interest rates
divisions
 Non-interest income is in line with the initial plan
Market, ALM	 Swing upward in part due to fund transactions capitalizing on
	the rise in medium- and long-term interest rates
Consolidated	 Swing downward in part due to an increase in base pay an
expenses	increase in DX investment
Minna Bank	 Swing downward in part due to lagging buildup of loans balance

*1. Bank of Fukuoka, Kumamoto Bank, Juhachi-Shinwa Bank and Fukuoka Chuo Bank (from 2H of FY2023) *2. After CVA offset on intragroup transactions

7

FY2024 Investor Meeting

Fukuoka Financial Group

FY2024 Consolidated Earnings Projections (increase/decrease factors in core business profit)

 In the 7th MTMP, we will raise profits while maintaining growth investments	➡ In FY2024, we will capitalize on past investment effects and the
- We will promote sustainable profit growthby strengthening core businesses	benefits of rising yen interest rates

consolidated core business profit	during the 7th MTMP
Change in

								+¥1.6 billion
							Existing areas: +¥1.5 billion	New areas:
(Monetary unit: ¥ bil.)						(including deposits)	+¥0.1 billion
		+¥7.0 billion					Existing areas: +¥5.6 billion

New areas:

+0.7

Existing areas: +¥6.9 billion

-4.1

934

+¥0.1 billion

+4.6

Other(international

Consolidated expenses (excludingMinnaBank, FukuokaChuoBank)

deposit interestrates

Raisingof

+9.6

division,etc.)

+6.2

-4.9

existing business model)

Sales buildup (transformation of the

-3.6

division, etc .

International

interest rates

Related to yen

interest rates, etc .

Impact of lifting negative

(core)

Minna Bank

Impact of Fukuoka Chuo Bank integration (core)

+0.8

+3.9

-0.3

+0.4

Consolidated expenses (excludingMinnaBank, FukuokaChuo Bank)

-0.7

93.4

Sales buildup

Minna Bank(core)

Chuo Bank integration(core)

Impact ofFukuoka

100.4

• Increase in base pay -1.5

-4.0

•

Growth investments, etc. -2.6

⁃ DX/new businesses, etc. -1.0

⁃ Business reforms, etc. -0.5

• Loans V: +3.3

• Investment

trusts/insura

nce: +2.6

• Growth investments, etc. -4.0

…

• Loans V: +3.5

⁃

DX/new businesses, etc. -2.9

⁃

Business reforms, etc. -0.3

• Investment trusts/insurance +0.6

• Increase in base pay -0.9

…

FY2022

FY2023

results

results

102.0

FY2024

projected

8

FY2024 Investor Meeting

Fukuoka Financial Group

Capital Policy and Shareholder Returns

• Our basic policy is to manage capital in a way that balances shareholder returns with growth investments based on the premise of maintaining soundness.
• Shareholder returns are based on maintaining/increasing dividends. In FY2024, we plan to increase dividends by ¥15 year-on-year (+¥5 compared to MTMP) based on profit growth.

Overview of capital policy, Projected capital adequacy ratio

Shareholder returns

Basic		While maintaining soundness, we aim to manage capital in a way that
policy		balances shareholder returns and investment in growth for the
		development of the local economy and the enhancement of FFG's
		corporate value.
		Stable (maintain or increase) dividend payment based on profit

FY2024 dividend

DPS: ¥130 [Dividend payout ratio 35.9%]

(+¥15 year on year) (+¥5 compared to MTMP)

Consolidated net income

• Increase dividend payment based on profit growth
• Revise dividend table

DPS guideline

Dividend payout ratio

Shareholder returns	growth, and flexible share buybacks
⁃ Dividend payout ratio: About 35%
⁃ Share buybacks: We will consider flexibly executing share buybacks
after comprehensively considering business performance trends,
	capital conditions, growth investment opportunities, market
	environment, etc.

Dividend

table

(excerpt)

FY2024 projected

FY2024

MTMP

FY2023 results

¥67.5 billion or more New	¥130	Up to 36.4%
¥65.0-67.4 billion	¥125	35.0-36.4%
¥62.5-64.9 billion	¥120	34.9-36.3%
¥60.0-62.4 billion	¥115	34.8-36.2%

11.5% 11.5%

[Reference] Capital management perspective

				Capital
	Priority adequacy ratio		Perspective
						⁃ Additional growth
	Shareholder

	[Dividend amount per share]	Projected	[Capital allocation]
	Stable dividend payment	130	(Image)
	115

Transitional

measures

9.6% 9.7%

Fully

applied

Basel III finalization basis

Approx. 10%

returns		investments
Growth	⁃ Additional shareholder
investments		returns
	Target level	⁃	Growth investments
	Approx. 10%	⁃	Flexible share
			buybacks
		⁃	Capital accumulation
Soundness
Required level	⁃	RA control

				60 65 65	75	85 85 85 95105							RA		Approx
											buildup
												Shareholder returns
							9.7%		. 10%
35 40							Profit	Growth investments
																	Mar. 2025
07 10 13 15 16 17 18 19 20 21 22 23 24 Mar. 2024

Mar23/3. 末 Mar24/3. 末 Mar25/3. 末

2023 2024 2025

*Basel III finalization basis

9

FY2024 Investor Meeting

Fukuoka Financial Group

5 Key Points for FFG's Sustainable Growth

1. Making Minna Bank Profitable
2. Transformation of the Existing Business Model
3. Growth of Kyushu Economy
4. From Savings to Investment
5. Rising Domestic Interest Rates

10