77 BANK : INTEGRATED REPORT 2023

A future based on the premise of maintaining the status quo will fall into a "contracting equilibrium." The new management plan was guided by the question: What is our vision for the 77 Bank Group to continue to fulfill its mission?

2 0 2 3

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

Leading company creating a path to the future

"Vision 2030" sets forth our ideal image for the future of the 77 Bank Group and provides guiding principles for all officers and employees of the Group to come together and work toward, as we look to achieve the management philosophy (Mission) stated in the Bank Creed.

Integrated Report 2023 C O N T E N T S

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.

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

Editorial Policy

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.

The 77 Bank has prepared "THE 77 BANK INTEGRATED REPORT 2023" to help investors and other stakeholders understand the Bank's efforts for sustainable value creation.

In editing this report, we have referred to the "International Integrated Reporting Framework" proposed by the International Integrated Reporting Council (IIRC) and the "Guidance for Collaborative Value Creation" issued by the Ministry of Economy, Trade and Industry (METI) to provide an integrated explanation of the Bank's business model and sustainable value creation mechanism.

For detailed financial data and other information, please refer to DISCLOSURE 2023 (available on the Bank's website at https:// www.77bank.co.jp).

Guidance for Collaborative Value Creation

Introduction

Question

"Our Target Form" That the 77 Bank Group Aims for Over the Long Term

Answer

The 77 Bank Group aims to be a leading company that works to achieve prosperity in the local community, by continuing to offer the optimal solutions, which inspire and build trust, and at the same time working with our stakeholders to tap new areas of opportunity in Miyagi and Tohoku.

There is a concern that projections based on maintaining the status quo could lead us to a downward spiral since our community has issues such as a declining birthrate and aging population as well as a shrinking market due to the falling population. "Vision 2030" sets forth our ideal image for the future of the 77 Bank Group and provides guiding principles for all officers and employees of the Group to come together and work toward, as the 77 Bank Group looks to achieve the management philosophy (Mission) stated in the Bank Creed.

By achieving "our target form" to aim for over the long term in "Vision 2030," we shall continue to fulfill the missions presented to our stakeholders.

The 77 Bank Group's missions presented to our stakeholders

Create abundant local communities

Introduction Our Way to Enhance Corporate Value

The 77 Bank Group's whole picture of corporate value enhancement cycle

Based on the growth strategy set out in"Vision 2030"we shall aim to increase the income level and

enhance corporate value through improving management efficiency.

The 77 Bank Group's missions presented

to our stakeholders

Local communities

Financial strategy

Leading company creating a path to the future

Overview of "Vision 2030"

Create the highest level of financial functions and consulting, while also expanding the scope of our businesses in the non-financial sector

Create networks that combine the potential of Miyagi and the Sendai area with influential customers in the Tohoku region as a whole and elsewhere

Deepen capabilities as a leading company (a collection of people with the same aspiration, and a group of companies that act as leaders for local communities)

77 Bank Group direction

We will become the 77 Bank Group that is different from a mere extension of the status quo by focusing on "our target form," enhancing our strengths, improving our weaknesses, and revitalizing our organization.

E n h a n c e !

77 Bank Group strengths

◦Customer base ◦Consulting system

◦Trust from customers and local community

I m p r o v e !

77 Bank Group weaknesses

◦Profitability (low-profitability structure) ◦Cost consciousness (high-cost structure) ◦Competitiveness with other companies

E s t a b l i s h !

Revitalization points

◦Appetite for new challenges ◦Speed and flexibility ◦Cross-organization (vertical, horizontal, diagonal)

Introduction Basic strategies to achieve "our target form"

"Vision 2030" shows the directions to pursue for the sustainable growth of local communities and the 77 Bank Group, based on the purposes of our SDG Declaration such as the revitalization of the regional economy and the promotion of active participation of all people.

The 77 Bank

KPI Let's Try!

Increase the proportion of companies in Miyagi Prefecture for whom we are their main bank by 10%

Increase the number of corporate lending clients outside Miyagi Prefecture by 1.5 times

Raise proportion of households "holding assets" in Miyagi Prefecture above the national average

Inspire through consulting and digital technologies!

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Ensure that 20% of the population of Miyagi Prefecture (aged 20 to 74) use loans from the Bank

Establish 10 projects in new businesses or sectors with promise for future commercialization (by FY2023)

To double the net income of Group companies by entering new businesses and sectors and expanding existing businesses

Group direction

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Cut amount of administrative work at bank branches by 50%

Strengthen financial foundations (key factor)

03 Regional growth strategy

KPI Let's Try!

To support increased economic growth rate in

Miyagi Prefecture

To triple the number of growth support cases for business founders

Achieve sustainable growth in the local community!

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Aim for 100% participation in regional development projects in Miyagi Prefecture, such as "Sendai Urban Restructuring Project" and "Next-generation synchrotron radiation facility

As for the 77 Bank Group's CO2 emissions, achieve carbon neutrality by FY2030 and support cuts to greenhouse gas emissions in Miyagi Prefecture

* Capital adequacy ratio is calculated through the early application of finalized Basel III from the end of March 2023.

KPI Let's Try!

To implement various initiatives to "foster an ambitious spirit"

To increase the proportion of women in management positions to 30% or more

Virtuous circle of ambition, confidence, and cheerfulness!

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Increase the number of "specialist personnel" that serve a purpose for customers and local communities

Top Message

Toward the realization of a sustainable society, we will continue to fulfill our mission as a regional financial institution.

President

Hidefumi Kobayashi

Looking back on FY2022

It has been two years since the management plan "Vision 2030" was developed and launched in April 2021. In "Vision 2030" we defined "our target form" to aim for over the long term to be a "leading company creating a path to the future" and promoted and reinforced various initiatives. In our financial results for FY2022, we attained a record high for two consecutive

Spread of "Vision 2030"

"Vision 2030" serves as the guiding principles for all officers and employees of the 77 Bank Group to come together and work toward "our target form." For each employee to understand and practice "Vision 2030," we focused on having them get a better grasp of it and having it take root. Responsible Directors provided briefings at branches, and I also visited every branch

Main achievements in FY2022

I would like now to explain the main achievements in FY2022.

The first achievement is that consulting services have been put into practice through cooperation among branches, headquarters and group companies, which started resulting in the increase in loans and bills discounted as well as fees and commissions.

The second achievement is the effect of branches within branches, which is becoming evident in various areas such as reduced expenses, efficient sales with centralized information and human resources development. The third achievement is the initiatives for "digital transformation."

To support the digitalization of local companies, we decided to establish an IT consulting company, 77 Digital Solutions Co., Ltd. In addition, we carried out internal measures such as reinforcing structures by setting up the Data Analysis Team and developing digital technology human resources.

The fourth achievement is the initiatives for "new businesses and sectors." "Vision 2030" sets KPI to establish 10 projects in new businesses or sectors with the potential to become viable businesses in the future

terms, and so we feel that we are steadily approaching "our target form."

We identified the "77 Bank Group's important issues (materiality)" in April 2023, and would like to continue to resolve these important issues and reinforce our initiatives to achieve a sustainable society through "Vision 2030."

and directly explained it to employees. Recently, we started receiving customers' positive comments such as "The 77 Bank has changed. It started actively tackling new challenges." It made me realize that employees' understanding has been deepening and started showing in their behavior.

by FY2023. In FY2022, we decided to launch five projects including a new company. The number of such projects since April 2021 amounts to six.

The fifth achievement is return to our shareholders. In January 2022, the Bank announced the policy of return of profits to shareholders, which states that "The basic policy of the Bank in this regard is to continue to distribute steady dividends while taking factors such as its public character as a bank business and the preservation of the soundness of its management into consideration. Additionally, based on the premise of strengthening its financial foundation, the Bank will proceed to gradually elevate its divided ratio relative to net income attributable to owners of the parent with a target of 30% by FY2023 as it aims to improve shareholder returns and capital efficiency." As for FY2022, we increased the term-end dividends per share to ¥50, up ¥10 from the forecast. As a result, the dividend payout ratio for FY2022 including interim dividends was 26.5%. As for FY2023, we disclosed our dividend forecast of achieving a 30% dividend payout

ratio.

Top Message

Initiatives to realize "Vision 2030"

As the basic strategies to achieve "our target form," "Vision 2030" defines four strategies of "top customer satisfaction strategy," "double productivity strategy," "regional growth strategy" and "corporate culture reform strategy."

Top customer satisfaction strategy

I believe that "Finance × Consulting" is a very compatible business model for banks, where a lot of information and companies' challenges come together. Providing financial and various other solutions to our customers' challenges leads to a higher corporate value for customers and boosts the profitability of the 77 Bank Group as well. We are aware that local companies face the challenge of a lack of human resources, equity, digital utilization, and know-how, and established four companies to respond to them. The 77 Bank Group as a whole would like to expand the range of consulting and provide the best solutions.

Moreover, we established the Aomori Branch in September 2022 and Utsunomiya Corporate Sales Office in August 2023. Having transportation infrastructure including the Tohoku Shinkansen and Tohoku Expressway as its backdrop, Sendai and Utsunomiya are mutually willing to expand to each other's areas and have high matching needs. Therefore, we would like to play the role of a bridge between the Tohoku and North Kanto economic zones.

As for retail sales, with one of our group companies,

77 Securities, we set out the goal of "We will continue to be the best partner to realize the 'target form' of individual customers" as the Retail Sales Policy. We will ensure we conduct customer-centric business operations taking an approach based on customers' dreams, purposes and goals and providing proposals from a medium- to long-term viewpoint. In April 2023, the Bank itself entered trust services and established the Customers' Asset Formation Promotion Committee to strengthen the structure. As our customers' best partner, we will serve better their needs for asset formation and management, and inheritance, etc.

As for one of the key factors of "Vision 2030," "new businesses and sectors," in addition to strengthening Group governance and having coordination with the Bank and promoting human interactions, we shall also start working on a review of the long-term strategies of Group companies and set forth a new future for the 77 Bank Group.

Double productivity strategy

In Japan, a country with an aging society, low birthrate and falling population, improving productivity is a c h a l l e n g e f o r a n y c o m p a n y , a n d t h e B a n k acknowledges as the highest priority . While headquarters and branches work together to promote paperwork-free operations and accelerate initiatives such as utilizing digital tools, we will shift management resources including human resources and capital to strategical areas to improve productivity. For example, we have introduced the "77 Business Portal," the first business portal website from a regional bank in the Tohoku, which is a one-stop service enabling corporate and sole proprietorship customers to carry out various transactions online, such as confirming deposits and withdrawals. We also renewed the top screen of the 77 Bank App and extended the period for which deposits and withdrawals records can be viewed. In September 2023, we plan to introduce "branch tablets" that enable users to complete many transactions through "paperless," "seal-less" method, to all branches. Through our DX initiatives that release our members from paperwork, we would like to keep trying to convert our branches into a place that can concentrate on consulting services.

As for the optimization of our branch network, we are shifting management resources through branches within branches. This is resulting in not only expense reductions but also efficient sales and human resources development due to centralization. By June 2023, we made branches within branches at 30 branches. We will keep reviewing the network to make it the most appropriate one considering matters such as the characteristics of markets and actual situation at local communities.

Regional growth strategy

Regional banks support the local economy and exist based on an economic foundation. Therefore, we need to think about and implement what we can do to create attractive communities. Since 2016 for regional revitalization, the 77 Bank Group has been working on four key items of implementation: Support for founding and new businesses; support and development of regional core companies; promotion of urban development; and support for promotion of tourism, etc.

The Bank is acting as the secretariat of the "Miyagi Wide-area PPP Platform" (nickname: MAPP), which was established in January 2020. Through MAPP, under a comprehensive cooperation agreement, etc. with parties including all regional public bodies, government-affiliated financial institutions and local universities in Miyagi Prefecture, we have been consolidating the expertise of each domain of specialization in liaison with private companies in the area of real estate, construction, trading company, leases, IT services, consulting, communication, media, etc. to implement various revitalization projects to improve sustainability in local communities.

("Vision 2030" briefing held by President Kobayashi)

In FY2022, we held a matching event for regional revitalization aiming to promote the utilization of corporate Furusato Nozei (Hometown Tax Donation). People including 13 heads of regional public bodies in Miyagi Prefecture gave a presentation on the attractiveness of the region to about 130 private companies and successfully sealed more than 10 corporate Furusato Nozei contracts. Moreover, we held the "IPO Management Human Resource Development Program TOHOKU - 77 Bank × Tohoku University × JPX -" based on a three-party partnership agreement signed by the Bank, Tohoku University, National University Corporation, and Tokyo Stock Exchange, Inc. for the development of human resources that are serving as the management of companies aiming to be listed. We will continue to help create an attractive region by working on regional revitalization through MAPP, etc.

Top Message

Corporate culture reform strategy

"Culture eats strategy for breakfast" is a famous quote. Even if we develop good strategies, unless our corporate culture changes, it will be difficult to realize the strategies. We believe that the workplace culture changes as each person grows and encourages and competes with others to improve. As for the corporate culture reform strategy, we endeavor to promote diversity and create a virtuous cycle where all officers and employees take on new challenges, leading to confidence and cheerfulness.

As a part of the initiative, we implemented personnel system reform in April 2023. It has been 57 years since we conducted drastic review of salary system last time. Moreover, from the viewpoint of improving employees' awareness of the need to participate in management and strengthen their morale, we provided a special incentive through the

Employee Stock Ownership Association in March 2023. As the Stock Ownership Association participation ratio increased to 97%, we believe that our employees' awareness of their need to participate in management is improving.

The financial business is part of the service industry, and the source of corporate value is human resources. Therefore, the importance of human capital management is high compared to other businesses. As measures for human capital management, in addition to the personnel system reform, we developed the Human Resources Development Policy and the Internal Environment Development Policy for the 77 Bank Group in April 2023. By implementing a human resources strategy that is linked to the management strategy, we would like to practice human capital management and improve our corporate value.

On March 31, 2023, Tokyo Stock Exchange, Inc. sent a request to listed companies to take "action to implement management that is conscious of the cost of capital and stock price." I would like to explain the 77 Bank Group's idea and future direction.

To improve corporate value, we believe that it is important to try to enhance profitability while maintaining soundness and share the growth of the 77

Bank Group with our shareholders who are our stakeholders by providing a return. Based on the growth strategy stated in "Vision 2030" we will aim to raise the income level and increase corporate value by improving management efficiency.

In due course, we would like to present specific goals based on further consideration and the discussion at the Board of Directors.

Progress of sustainability management

The spread of COVID-19, which began in 2020, drastically changed people's lifestyles and how

and the environment surrounding the regional economy remains severe.

Since we acknowledge that it is the role of regional financial institutions to spread the idea of sustainability among local communities, we are trying to raise awareness by holding workshops and seminars for customers and providing sustainable finance. In April 2023, we concluded the Cooperation Agreement for the Promotion of Carbon Neutrality with Tohoku Electric Power Co., Inc. In May 2023, with Tohoku Energy Service Co., Inc., which is a 100% subsidiary of Tohoku Electric Power Co., Inc., we concluded an agreement regarding an off-site corporate PPA [self- consignment system] service as the first regional bank to do so. This agreement allows us to supply

renewable energy generated with the solar power plant installed on the Bank's unused land to the Bank's head office building, etc. It is estimated it will cut our CO2 emissions by about 1,237 t-CO2, which is equivalent to 13% of the annual volume emitted by the entire Bank.

Furthermore, we upgraded the KPI regarding the

77 Bank Group's CO2 emissions in FY2030 from a 46% reduction (compared with FY2013) to the realization of carbon neutrality by FY2030. We will definitely continue our efforts to achieve carbon neutrality and continuously support our customers' decarbonization initiatives for the long term.

corporate activities should be and resulted in a downturn in economic activities. Moreover, disruption of the world has been accelerating due to the manifestation of geopolitical risk such as the situation in Ukraine. Raw material and energy prices are rising,

Under such harsh conditions, we are expected to support the local economy as a regional financial institution. We would like to steadily implement "Vision 2030" and fulfill the missions of the 77 Bank Group.

We ask for your continued support and patronage.

Our Path of Continuous Growth

Since its founding in 1878, The 77 Bank has overcome many difficulties and grown steadily while devoting itself to sound management under the management philosophy of "desiring communal prosperity and serving local communities." Aiming to be a leading company creating a path to the future, we will continue to move forward together with our region.

~More than ever, and forever, with our region.~

1878.12

Started operations as The 77th National Bank

Head Office at the time of our foundation in 1878 (former Hinoya site)

1893.5

Established Miyagi Savings Bank （Renamed Gojo Bank in 1921）

1898.3

Name changed to The 77 Bank, Ltd.

1972.10

Shares listed (Second Section of the Tokyo Stock Exchange and the Sapporo Securities Exchange)

1974.11

Established 77 Lease Co., Ltd.

1977.9

Head Office relocated to a new building at Sendai Chuo 3-chome

1978.10

Established 77 Shin-Yo

Hosyo Co., Ltd.

Current Head Office

2005.7

Opened the Shanghai Representative Office

2006.11

Established the Aomori Corporate Office

2000

2020

2010

1880

1960

1970

1980

1990

2016.1

Started operation of the common use system (MEJAR)

2016.5

Opened the Singapore

Representative Office

2016.9

Established the Hachinohe Corporate Office

2016.11

Converted 77 Lease Co., Ltd., 77 Shin-Yo Hosyo Co., Ltd., and The 77 Card Co., Ltd.

2021.12

Established 77 Partners Co., Ltd.

2022.8

Established 77 Human Design Co., Ltd.

2023.5

Established Tohoku Jitsugyo Bank, Ltd.

1932.1

1983.2

Established The 77 Card Co., Ltd.

1997.12

Established 77 Credit Services Co., Ltd.

1999.8

Merged The 77 Card Co., Ltd. and 77 Credit Services Co., Ltd., with The 77th Card Co., Ltd. as the surviving company

2016.7

Established The 77 Capital Co., Ltd.

2016.7

Established 77 Securities Preparatory Establishment Co., Ltd. (trading name was changed to 77 Securities Co., Ltd. in

into wholly-owned subsidiaries

2017.4

Started business of 77 Securities Co., Ltd.

2017.6

Transition to a company with an audit & supervisory committee

2018.7

Established 77 Digital Solutions Co., Ltd.

2023.8

Established Utsunomiya Corporate Office

The current The 77 Bank, Ltd. was established through the merger of The 77 Bank, Tohoku Jitsugyo Bank, and Gojo Bank

January 2017)

Established 77 Research and Consulting Co., Ltd.

Tohoku Region-The Economy and Potential of Miyagi

Miyagi Prefecture, which is our main business base, is located in the southeast area of the Tohoku region, and is a key transport hub connecting the Greater Tokyo Area with the Tohoku region.

The prefectural capital, Sendai City, which became the 11th city designated by government ordinance in Japan in 1989, is home to the branches of many major companies from across Japan, and functions as a core city in the Tohoku region.

Recently, construction investment that utilizes the Sendai Urban Restructuring Project has been active. In addition, due to the start of operation of NanoTerasu, a next-generation synchrotron radiation facility, economic growth is expected further.

Regional Development Project

The potential of Miyagi Prefecture, in numbers

Gross Prefectural Product (nominal)

We wish to help Sendai City attain the position of the "town of choice" by improving its urban characteristics, as a place where both the natural environment with abundant greenery and a city function exist in harmony. To this end, we support the remodeling of obsolete buildings and promote their reconstruction in Sendai's central business district, where people interact and conduct economic activities the most. In this way, we will create a virtuous economic cycle by supplying highly functional offices that satisfy companies' needs and attracting enterprises to new offices.

Reconstruction of obsolete buildings and promotion of corporate relocation into the city

·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.

Image of Urban Restructuring Project (Sendai Station area) Provided by: Sendai City

9,829.4billion

Ranking among prefectures in terms of Gross Prefectural Product (nominal)

Second highest growth rate

(21.0%) during the period FY2010, immediately after the financial crisis of 2007-2008, through FY2018

NanoTerasu is a next-generation synchrotron radiation facility located in New Aobayama Campus of Tohoku University, which is about 9 minutes by subway from Sendai Station. It will start operating in FY2024. It is also called "a huge microscope capable of seeing the nano-world" to observe and monitor the function of substances and the reaction of elemental surfaces at the atom/molecule level, something that is impossible with ordinary research facilities. It allows us to precisely analyze various materials and biological tissues. It is expected to create innovation in the area of research and development of various industries including chemistry, food products, medical services, pharmaceutical and energy.

NanoTerasu not only serves as "a huge microscope capable of seeing the nano-world" but also creates nano data that is essential for research and development in various domains in the

industrial and academic circles during the DX/GX era. In addition, it is expected to make a considerable contribution to boosting enterprise competitiveness by developing a new dimension of industry-academia cooperation.

4,358.0billion 190.2billion 71.8billion

Source: 2023 Shape of Miyagi (Miyagi Prefectural Handbook)

Economic ripple effects (estimated by Tohoku Economic Federation)

·JPY 1,901.7 billion over the first 10 years of operation

·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) Provided by: Photon Science Innovation Center