Bank of the Ryukyus Management Briefing for FY2015

By Masaru Mukaesato

Winner of the 23nd (fiscal 2014) Bingata Design Contest presented by the Bank of the Ryukyus

The Financial and Economic Environment of Okinawa Prefecture

1

2

From Japan’s Southern Tip to the Heart of East Asia

Population growth rate 0.40% (Ranked second in Japan, 2014)* No. 1 ranked Tokyo: 0.68%

1.07% (highest in Japan: 2007-2020 forecast rate of real economic growth (Japan Center for Economic Research))

Okinawa

China 1.3 billion

Japan 130 million

Center of a massive market with a population of 2.0 billion

Within a four-hour traveling distance by air

ASEAN 600 million

Forecast rate of economic growth

Prefectural Income (per person)

¥2.10 million (worst in Japan, 2013)* National average: ¥2.84 millionTokyo: ¥4.50 million

Savings per Household¥5.19 million (worst in Japan, 2015)* No. 1 ranked Tokyo Metropolitan Area: ¥24.64 million

National average: ¥18.05 million

Sources: Okinawa Prefecture, Cabinet Office, Ministry of Internal Affairs and CommunicationsSources: Okinawa Prefecture

■Overview of Okinawa Prefecture

-60

-40

-20

0

20

40

60

Feb.'92 Feb.'94 Feb.'96 Mar.'98 Mar.'00 Mar.'02 Mar.'04 Mar.'06 Mar.'08 Mar.'10 Mar.'12 Mar.'14 Mar.'16

Bank of Japan Tankan

Japan Okinawa（ Business condition diffusion index : Strong-Week）

Mar.’16+7

Mar.’16+46

3

■Economic Trends (Bank of Japan Tankan)

High Level Exceeding 40

* Drawn up using “new base” numerical values from December 2014Source: Bank of Japan, Naha Branch

4

OKINAWA PREFECTURESHIKOKU AREA

TOKAI AREA

KINKI AREA

CHUGOKU AREA

KYUSYU AREA

KANTO ARE

KOSHINETSU AREA

HOKURIKU AREA

TOHOKU AREA

HOKKAIDO AREAFine

Fine, partly cloudy

Cloudy

Rain

Cloudy, rain in places

Fine since July 2013

Fine in Okinawa only

■Regional Economic Climate Chart (April 2016)

Source: Regional Banks Association of Japan

100.0 101.0

101.7 101.9 100.8 98.8

96.0

92.8

89.2

85.4

100.0

103.5

106.9 109.4

110.7 111.3 111.0 110.3 109.2 107.5

70

80

90

100

110

120

1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

Projected Population

Japan Okinawa

（1995年＝100）

10 Years

5

2.13%1.91%

1.75% 1.76%1.54%

1.42%1.29% 1.37% 1.42%

2.88%

2.38% 2.31%

1.95% 1.87% 1.82%1.72%

1.87% 1.94%

1.0%

1.5%

2.0%

2.5%

3.0%

1975 1980 1985 1990 1995 2000 2005 2010 2015

Birthrate TrendsJapan Okinawa Government Target（1.8％）

325 300 264 247 226 201 191

694 793

862 904 866 831 763

86 121 183

243 324 373 415

8.6%11.7%

16.1%19.8%

25.0%28.1% 30.3%

0%

10%

20%

30%

0

200

400

600

800

1,000

1980 1990 2000 2010 2020 2030 2040

Youth population Working-age populationElderly population Elderly population ratio (Right scale)（Thousands）

■Population (Future Estimates, Birthrates)

Okinawa Prefecture’s population is projected to increase for the foreseeable future

(Source: Prepared from census figures provided by Japan’s Ministry of Internal Affairs and Communications through to 2010 as well as estimates for 2015 and beyond provided by the National Institute of Population and Social Security Research)

Okinawa Prefecture Population Seen in Relation to Age Groups

(Source: Prepared from census figures provided by Japan’s Ministry of Internal Affairs and Communications through to 2010 as well as estimates for 2015 and beyond provided by the National Institute of Population and Social Security Research)

Source: MHLW

Peak

100.0 106.5

111.7 114.5 115.2 114.8 113.5 111.1

100.0

110.3

120.8

128.9 135.1

139.6 143.0 145.5

65

75

85

95

105

115

125

135

145

1995 2000 2005 2010 2015 2020 2025 2030

Estimates of the Number of HouseholdsJapan Okinawa（1995年＝100）

Peak

6(Source: Prepared from estimates as of March 2014 provided by the National Institute of Population and Social Security Research)

■Estimates of the Number of HouseholdsContinued increase in the number of households

5.0%5.3%

4.4%3.9%

5.1%4.6%

4.0%

3.4%

8.4%

7.8% 7.9%7.4% 7.5%

7.1%

5.7%

5.1%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

2001 2003 2005 2007 2009 2011 2013 2015

Trends in the Overall Unemployment RateJapan Okinawa

7

8.5%8.1% 8.4%

7.9%

6.8%5.9%

4.6%3.9%

5.3%4.9%

4.3%3.6%

0%

2%

4%

6%

8%

10%

2005 2007 2009 2011 2013 2015

Male Unemployment Rate TrendsOkinawa Japan

7.0%6.3% 6.6%

5.6%4.7%

4.2%

4.2%3.7%

4.8%4.2%

3.7%3.1%

0%

2%

4%

6%

8%

10%

2005 2007 2009 2011 2013 2015

Female Unemployment Rate Trends

Okinawa Japan

Employment conditions on improving trend

(Source: Labor force survey by Japan’s Ministry of Internal Affairs and Communications, Okinawa Prefecture)

■Employment Conditions (Trends in the overall unemployment rate)

-10.0-8.0-6.0-4.0-2.00.02.04.06.08.0

10.0

1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2

2013 2014 2015 2016

Actual Salary Amounts (Comparison with Same Month in Previous Year)

Japan Okinawa

8

-18

-33

-40

-30

-20

-10

0

10

20

Mar.'11 Sep.'11 Mar.'12 Sep.'12 Mar.'13 Sep.'13 Mar.'14 Sep.'14 Mar.'15 Sep.'15 Mar.'16

Trends in Employment Conditions DI (Bank of Japan TANKAN)

Japan Okinawa

Importance of Improving Labor Productivity■Employment Conditions (Bank of Japan TANKAN, Actual Salary Amounts)

(Employee Surplus) – (Employee Shortage) / % point

Employee Surplus

Employee Shortage

(Source: Bank of Japan, Naha Branch Short -Term Economic Survey of Enterprises in Okinawa (Tankan)

Business size of five or more employee

(Source: Okinawa Prefecture Department of Planning , Statistics Division Monthly Labor Statistics

Both Commercial and Residential Land Prices in Okinawa Rising at More Than National Levels

+2.0%

-12.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Jan.'91 Jan.'96 Jan.'01 Jan.'06 Jan.'11 Jan.'16

Commercial-use land (YoY)

Japan Okinawa

0.9％

+1.7%

-12.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Jan.'91 Jan.'96 Jan.'01 Jan.'06 Jan.'11 Jan.'16

Residential-use land (YoY)Japan Okinawa

-0.2％

9

■Trends in Land Prices

(Source: Land prices published by Japan’s Ministry of Land, Infrastructure, Transport and Tourism)

280 376 550 893 1,501

5,135 5,459

5,862

6,164 6,261

5,415 5,835

6,413

7,058

7,763

373.4 390.5

433.9

516.9

0

100

200

300

400

500

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2011 2012 2013 2014 2015

Billions of YenVisitors from other parts of Japan (Left scale)Visitors from overseas (Left scale)Revenues from tourism (Right scale)

(19.3%)(8.6%)(5.2%) (6.5%)(4.9%)

(87.3%)(91.4%)

(93.5%)

(94.8%)

(95.1%)

(Source: Statistical overview of the number of tourists entering Okinawa Prefecture）* Figures inside ( ) show composition ratios

？

10

Taiwan

340,000

38%

Korea

160,000

17%

Hong

Kong

120,000

14%

Chaina

110,000

13%

Others

150,000

18%

Taiwan470,000

32%

Korea290,000

20%

Hong Kong

180,00012%

Chaina290,000

20%

Others240,000

16%

2014 Total: 0.89 million

2015 Total: 1.5 million

Breakdown of Foreign Travelers by NationalityVisitor Numbers to Okinawa

■Tourism (Visitor Numbers to Okinawa)

(Thousands)

145 163 229 377

654

1,077

138 116 146

173

238

424

283 279 375

550

892

1,501

0

200

400

600

800

1,000

1,200

1,400

1,600

2010 2011 2012 2013 2014 2015

Okinawa Visitor Numbers by Air/Sea RoutesAir Routes Sea Routes

（Thousands）

11

Scheduled Overseas Routes (Fiscal 2015)10 Routes

Number of Overseas Flights Operated from Naha Airport in a WeekFiscal2010 Fiscal201530Flights ⇒ 153Flights

52 53 67 5680

115

18747 49

52 65

73

84

144

0 55 1

3

13

109

102 112125 130

162

219

457

0

50

100

150

200

250

300

350

400

450

500

2010 2011 2012 2013 2014 2015 2016

Trends in Numbers of Cruise Ships Visiting Ports in Okinawa Prefecture

Naha PortIshigaki PortTaira PortNakagusuku PortOthers

Needs survey of cruise ships visiting main ports in Okinawa being conducted

In April 2016, large cruise ship visited Port of Nakagusuku for first time in about 10 years

★Topics

（Times）

Five-Fold Increase

PlannedActual

■Tourism (Overseas Visitors by Air/Sea Routes)

(Source: Statistical overview of the number of tourists entering Okinawa Prefecture） (Source: Created by the Bank of the Ryukyus from documents drawn up by Okinawa General Bureau that were based on interviews with port operators (Okinawa Prefecture, Naha Port Authority, City of Miyakojima, City of Ishigaki).）

（Forecast）

12

Airport name Number of service routes

1 Tokyo International 492 Naha 273 Fukuoka 264 New Chitose 265 Osaka International 24

Takeoff and Landing Handling CapacityCurrent After expansion135,000/year

【Second Runway at Naha Airport】Additional construction of a 2,700m runway to address the increase in air travel demand

M Meetings, Incentive Travel⇒Able to hold conferences, side meetings and linked exhibitions for

5,000 people at the same time⇒Able to accommodate 4,000 people in seated dinner style

Conventions, Events⇒Capable of holding academic conferences that are increasing in

size in Asia and elsewhere⇒Enables integrated use of exhibition and multipurpose halls as an

exhibition space covering approx. 40,000㎡⇒Can accommodate large-scale concerts for audiences of approx. 27,000

■Tourism (Second Runway at Naha Airport, MICE)

Total project expenses

Commencement of construction

Completion of construction

About ¥198 Billion January-2014 December-2019

(Source: Okinawa Prefecture)

185,000/year

Schematic Layout Diagram of Large-Scale MICE Facility

Basic Functions of FacilityMulti-purpose hall Approx. 7,500㎡

Foyer, etc. Approx. 2,500㎡Exhibition hall 30,000㎡

Small- and medium-size conference rooms (second floor) Approx. 7,500㎡

Layout diagramA schematic view that matches facility’s functions and scale with site’s shape, this diagram is designed to effectively position the facility’s basic functions and its other necessary functions at fitting out stage.

■Okinawa Promotion Budget

0

100

200

300

400

94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

（Billions of Yen）

Excerpt from a comment by Prime Minister Shinzo Abe on December 24, 2013

Secured an annual budget of more than ¥300 billion to help develop and promote Okinawa throughout the current Okinawa Development and Promotion Plan period (fiscal 2012 to fiscal 2021)

13(Source: Japan’s Cabinet Office)

14

■Projects in Okinawa Prefecture (Planned)

Redevelopment of vacant lot at former postal service’s Furujima public housing complex

Kinser landfill development

Aircraft overhaul base upgrade project Smart City development

Land adjustment project in Taketomi district of Itoman City

Itoman City/Itoman City Central Market upgrade projects

Fishing harbor development project

Land adjustments

Okinawa Electric LNG Power Station Project to extend the Okinawa Municipal monorail

Multipurpose arena

Use of vacant lot at Gimbal Training Ground

Project to develop the Naha City Agricultural Market disaster prevention district

Hotel

University of the Ryukyus Hospital

Sale of lots for Toyosaki Town/airport logistics use

Hotel

Hotel

Hotel

Hotel

Development of seven properties, including hotels, near Kokusai Street

Hotel Hotel

Hotel Hotel

Hotel

Hotel

Hotel

Hotel Naha Port Comprehensive Logistics Center

Hotel

Hotel Shimoji-shima Airport utilization

Hotel

Hotel Okinawa Prefectural Yaeyama Hospital

Hotel

Hotel

Hotel

Hotel

Hotel

Awase land readjustment project

Private-sector businesses Public worksMain island of Okinawa

Miyako island / Shimoji island / Irabu island Ishigaki island / Taketomi island

Financial Results for FY2015

15

Profit/Loss

Business Scope

Topics

Consolidated

Non-consolidated

Total financing surpassed ¥2 trillion milestone

OCS, Ltd. made wholly owned subsidiary

16

■Financial Highlights

First final profit* broke through ¥10.0 billion barrier

Increased revenue and earnings for three consecutive periods

* Net income for the period attributable to the owners of parent company

■Financial Summary (Non-Consolidated)

Increased revenue and earnings for three consecutive periods

FY2015 FY2014Year-on-year change

Ordinary revenue 40.2 +1.5 38.7

Business gross profit (a) 31.7 +0.5 31.2Expenses (b) 22.4 +0.4 22.0

Real net business profit (c=a-b) 9.3 +0.2 9.1

Net credit costs (d) 1.3 ▲0.2 1.5

Other extraordinary gain/loss (e) 0.3 ▲0.1 0.4

Ordinary profit (f=c-d+e) 8.3 +0.3 8.0

Net income 5.0 +0.8 4.2

（Billions of Yen）

* Increase and decrease is presented on a financial statement basis.17

FY2015 FY2014Year-on-year change

Ordinary revenue 59.9 +4.9 55.0

Ordinary expenses 49.8 +4.4 45.4

Ordinary profit 10.0 +0.5 9.5

Extraordinary gains or losses 4.0 +3.5 0.5

Gain on negative goodwill 4.3 +3.8 0.5

Net income for the period attributableto the owners of parent company 10.3 +4.8 5.5

Besides Individual Contributory Factors, Making OCS into Subsidiary Increased Revenue and Earnings

18

■Financial Summary (Consolidated)

（Billions of Yen）

* Due to revision under the Accounting Standard for Business Combinations “consolidated net income” has been revised to ““net income for the period attributable to the owners of parent company.”

* Increase and decrease is presented on a financial statement basis.

5,052

10,3311,193

4,374

235 54

Non-consolidated Consolidated

（Millions of Yen）

Non-consolidated/Consolidated Scale Factor Attributable to Making OCS into Consolidated Subsidiary: 2.04 Times

+ ¥5,279 million

19

■Factors Contributing to Non-consolidated /Consolidated Differences in Net Income for Current Fiscal Year

Factors Contributing to Non-consolidated / Consolidated Differences in Net Income for Current Fiscal Year

Total profit from subsidiaries

Gain on negative goodwill

Minority interest

Others

2.3 2.4

3.4

4.2

5.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

End Mar.'12 End Mar.'13 End Mar.'14 End Mar.'15 End Mar.'16

Net Income

Increase in Actual Business Net Income, Increase in Net Income due to Decreased Credit Limit Costs/Income Taxes

4,2965,052

136

279

758

251

166

Factors Behind the Change in Net Income

End Mar.’16End Mar.’15

(Millions of Yen)

+ ¥756 million

20

■Factors Behind the Change in Net Income (Non-Consolidated)

(Billions of Yen)

Decrease in net credit costs

Increase in real net business profit

Decrease in total income taxes

Decrease in gains/losses on shares

Others

7.27.8

8.59.1

9.3

0

1

2

3

4

5

6

7

8

9

10

11

End Mar.'12 End Mar.'13 End Mar.'14 End Mar.'15 End Mar.'16

9,1679,303

365

359

18

163

382

25

End Mar.’16End Mar.’15

(Millions of Yen)

Increases for Three Consecutive Periods Due to Increased Loan Interest/Gain on Sale of Securities

+ ¥136 million

21

■Factors Behind the Change in Real Net Business Profit (Non-Consolidated)

(Billions of Yen)

Real Net Business Profit Factors Behind the Change in Real Net Business Profit

Increase in interest on loans and bills discounted

Increase in interest on deposits

Decrease in service profit Increase in expenses

Others

Increase in interest on securities / Gain on sale of securities

572.3 611.1 649.1 694.5 741.5

529.7 520.7 559.7

584.0

600.2 114.5 109.7

121.1 120.7

123.7

1,216.6 1,241.6 1,330.0

1,399.2 1,465.5

0.5%

2.1%

7.1%

5.2%

4.7%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

0

200

400

600

800

1,000

1,200

1,400

1,600

End Mar.'12 End Mar.'13 End Mar.'14 End Mar.'15 End Mar.'16

IndividualsCorporationsLocal public authorities and otherRate of increase (Compared with the end of the previous period:Right scale)

22

6.3% in Okinawa Prefecture

■Loans (Non-Consolidated)

Favorable increases in both private and corporate businesses

(Billions of Yen)

Loans (Non-Consolidated)

23

265.9 298.7 320.7 349.4 393.9

104.2 102.2

105.9 97.3

90.9 62.5

60.4 59.8 59.1

55.0

53.8 49.6

61.8 67.7

76.1

65.0 50.2 52.5

49.5 43.5 153.6 144.3

151.6 166.5

161.4 705.3 705.6 752.5

789.8 821.1

-1.6%0.1%

6.6%

5.0%

4.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

0

200

400

600

800

End Mar.'12 End Mar.'13 End Mar.'14 End Mar.'15 End Mar.'16

Real estate, rental and leasing Wholesale and retailConstruction Medical and welfareManufacturing OthersRate of increase (Right scale)

347.1 370.4

390.7 406.5 425.2

59.0

60.3

64.1 69.6

73.3

406.2

430.7

454.9 476.1

498.5

6.3%

6.0%5.6%

4.7% 4.7%

0.0%

2.0%

4.0%

6.0%

8.0%

0

100

200

300

400

500

End Mar.'12 End Mar.'13 End Mar.'14 End Mar.'15 End Mar.'16

Other loans Mortgage loans Rate of increase (Right scale)

Steady Increases in Business/Consumer Loans■Loans (Business/Consumer Loans)

(Billions of Yen)

Business Loans Consumer Loans

(Billions of Yen)

* Individual business loans are handled in a different manner and as such data does not reconcile with data for loans to corporations on page 22

* Individual business loans are handled in a different manner and as such data does not reconcile with data for loans to corporations on page 22

*“Loan investment yields (nationwide regional banks)” compiled from Regional Banks Association of Japan data 24

91

775 999 1,618 1,320

▲ 1,079 ▲ 1,358 ▲ 1,884 ▲ 1,452 ▲ 1,042

▲ 988 ▲ 583

▲ 885

166365

-2,000

-1,500

-1,000

-500

0

500

1,000

1,500

2,000

End Mar.'12 End Mar.'13 End Mar.'14 End Mar.'15 End Mar.'16

(Millions of Yen)Earnings yield factorsBalance factorsIncrease/decrease in loan interest compared with same period in previous year

Increased Income for Two Consecutive Periods by Decreased Loan Investment Yields and BalanceIncrease Factors

2.50%2.41%

2.29%2.14%

2.02%1.94%

1.82%1.71%

1.59%1.47% 1.40%

1.31%

0.28% 0.26%0.15% 0.10% 0.09% 0.09%

0.75%0.60%

0.50%0.58% 0.55% 0.57%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

End Mar.'11 End Mar.'12 End Mar.'13 End Mar.'14 End Mar.'15 End Mar.'16

Loan investment yieldsLoan investment yields (nationwide regional banks)Deposit yieldsSecurities yields

【Reference】End Sep.’15

■Trends in Earnings Yields (Non-Consolidated)

Trends in Loan Interest Increases/Decreases Trends in Earnings Yields

Significant Increases in Private/Public Money, Including Corporations, Surpassed Two Trillion Yen

25

1,155.9 1,199.6

1,226.2 1,258.5 1,274.2

437.7 468.8 494.6 529.2 580.8

165.2 129.3

161.9 179.4

183.3 1,758.9 1,797.8

1,882.8 1,967.2

2,038.4 7.2%

2.2%

4.7% 4.5%

3.6%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

End Mar.'12 End Mar.'13 End Mar.'14 End Mar.'15 End Mar.'16

Deposits (Non-Consolidated)Individuals Corporations Public funds Rate of increase (Right scale)

(Billions of Yen)

■Deposits (Non-Consolidated)

55.5 45.5 38.0 28.115.0

62.0 66.8

61.5 69.9

64.5

47.0 38.3 51.6 64.5

80.8

164.6

150.7 151.1 162.5 160.4

0

50

100

150

200

End Mar.'12 End Mar.'13 End Mar.'14 End Mar.'15 End Mar.'16

(Billions of Yen) Assets in Custody

JGBs Investment trusts Single-premium insurance

Increased Single-Premium Insurance but Decreased Investment Trust, JGB Balances

Cumulative sales total Balance

Aggregation method for single-premium insurance

26

■Assets in Custody (Non-Consolidated)

* Single-premium insurance: Contract value of single-premium individual pension insurance, single-premium whole life insurance, and single-premium medical care insurance* Not simply comparable as the aggregation method for single-premium insurance up to and including March 31, 2012, was different to that from March 31, 2013, onward

304.6 251.5 279.2 262.9

207.5

122.7 176.5

204.0 187.5

151.8

16.1 12.6

13.1 19.4

15.0

22.6 15.3

29.0 107.7

96.7

466.2 456.1

525.5

577.6

471.3

2.64

2.45

3.44

2.90 2.80

0.00

1.00

2.00

3.00

0

100

200

300

400

500

600

End Mar.'12 End Mar.'13 End Mar.'14 End Mar.'15 End Mar.'16

(Years)(Billions of Yen)

JGBs BondsLocal government bonds Other (foreign bonds, etc.)Yen bond duration (Right scale)

Balance Decrease by Redemption of JGBs, Steady Increase in Revenue

27

278.0 246.7

285.1 320.6 314.7

30.7

6.06.4

▲ 2.1

73.4

▲ 260.5

▲ 29.4 0

14.9

▲ 10.2

48.1

223.3

291.6 333.4

378.0

-300

-200

-100

0

100

200

300

400

End Mar.'12 End Mar.'13 End Mar.'14 End Mar.'15 End Mar.'16

(Billions of Yen)

Interest and dividends Class 5 bondsShare 3 balance of account Total

■Securities (Non-Consolidated)

Securities (Non-Consolidated) Trends in Securities-Related Payments

■Expenses (Non-Consolidated)

10.0 10.1 10.1 9.9 9.8

10.1 10.1 10.4

10.7 11.0

1.1 1.1 1.1 1.3 1.4 21.3 21.4 21.7 22.0 22.4

74.73%73.13%

71.72%70.64% 70.69%

60%

65%

70%

75%

80%

0

5

10

15

20

25

End Mar.'12 End Mar.'13 End Mar.'14 End Mar.'15 End Mar.'16

(Billions of Yen) Personnel expenses Non-personnel expensesTaxes OHR(Right scale)

Increase, Due to Increases in Non-Personnel Expenses and Taxes ; OHR Flat

28

Trends in Expenses and OHR

■Credit Limit Costs/Written-off Loans (Non-Consolidated)

▲ 1.4

0.4▲ 0.2 0

0.70.3

1.2 2.5

1.50.7

1.0

1.3

0.9

0.60.40.3

0.3

0.2

00

▲ 0.6

-0.5

-1.0

-0.5 -0.7▲0.3

2.8 2.5

1.51.3

8.1%9.8%

13.4%

16.2%17.1%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

-2.5

-1.5

-0.5

0.5

1.5

2.5

3.5

End Mar.'12 End Mar.'13 End Mar.'14 End Mar.'15 End Mar.'16

Gain on amortized loansOther amountsLoan amortizationSpecific allowance for credit lossesGeneral provision for credit lossesTotalReserve ratio for risk management loans (Right scalr)

29

2.5

10.2

2.4 2.9 3.1

9.6

13.8

20.4 19.4 18.9

9.1

8.28.0 8.4 8.7

21.2

32.231.0 30.7 30.81.73%

2.57%

2.31%

2.18% 2.09%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

0

5

10

15

20

25

30

35

40

45

50

End Mar.'12 End Mar.'13 End Mar.'14 End Mar.'15 End Mar.'16

Substandard loans Loans in danger of defaultClaims in bankruptcy Written-off loan ratio (Right scale)

(Billions of Yen)

Credit Limit Costs/Written-off Loans on Downward TrendTrends in Net Credit Limit Costs

(Billions of Yen)

Trends in Written-off Loans

■Capital Ratio (Non-Consolidated)

90.6 92.3

106.9 106.8 102.2

9.82% 9.68%

10.50%

9.15%8.75%

0%

2%

4%

6%

8%

10%

0

20

40

60

80

100

120

140

End Mar.'12 End Mar.'13 End Mar.'14 End Mar.'15 End Mar.'16

Regulatory capital Capital ratio (Right scale)(Billions of Yen)

Capital Adequacy Ratio Declines as Subordinated Debt Redemption Causes Capital Amount Decrease

922.1 953.5

1,017.7

1,167.1 1,168.5

0

200

400

600

800

1,000

1,200

1,400

End Mar.'12 End Mar.'13 End Mar.'14 End Mar.'15 End Mar.'16

(Billions of Yen)

Risk Assets

* Calculated by Basel III national standard from March 31, 2014 30

Capital Ratio

FY2016 FY2015(Forecasts) Year-on-year change

Ordinary revenue 38.7 ▲1.5 40.2

Ordinary profit 6.4 ▲1.9 8.3

Net income 4.3 ▲0.7 5.0

(Billions of Yen)

Decrease of ¥700 Million Expected in Current Period Net Income

31

* Increase and decrease is presented on a financial statement basis

■Earnings Forecasts for FY2016 (Non-Consolidated)

FY2016 FY2015(Forecasts) Year-on-year change

Ordinary revenue 59.0 ▲0.9 59.9

Ordinary profit 7.7 ▲2.3 10.0

Net income for the period attributable to the owners of parent company

4.9 ▲5.4 10.3

Annual dividend per share 35 - 35

Profit Decline Expected Due to Recoil from Gain on Negative Goodwill and Other Factors

* Due to revision under the Accounting Standard for Business Combinations “consolidated net income” has been revised to ““net income for the period attributable to the owners of parent company.”32

■Earnings Forecasts for FY2016 (Consolidated)

(Billions of Yen)

* Increase and decrease is presented on a financial statement basis

(Yen)

■ROE/PBR (Consolidated)

33

2,216 2,290 2,368

2,567

2,780

0.50

0.59 0.57

0.67

0.45

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0

500

1,000

1,500

2,000

2,500

3,000

End Mar.'12 End Mar.'13 End Mar.'14 End Mar.'15 End Mar.'16

(Magnification)(Yen)Net Assets per SharePBR (Right scale)

61 72

130146

271

88 131 156

2.8%3.2%

5.6%5.9%

10.2%

3.8%5.3%

5.9%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

0

50

100

150

200

250

300

End Mar.'12 End Mar.'13 End Mar.'14 End Mar.'15 End Mar.'16

(Yen)Net Income per ShareNet Income per Share (excluding negative goodwill, etc.)ROEROE (excluding negative goodwill, etc.)

* Calculated on share price at March 31 each year

Net Income/ROE per Share Net Assets/PBR per Share

Bank of the Ryukyus Strategy

34

■Long-Term Vision

Providing Our Customers with the Three “S’s” (Value)

Providing zero lead-time services

A partner that sympathizes with customers’ thoughts and feelings

Sympathy

Speed

The Bank of the Ryukyus Group that is our customers’ bank of preference and enjoys

the overwhelming support of the local community.”

Unique solutions from a bank that possesses local knowledge

Solution

35

■New Medium-Term Management Plan (April 2015 to March 2018)

Shared Value 2015－Establishing value provided to customers by displaying the Group’s comprehensive capabilities－

Boost growth strategies

Corporate Business StrategyGrowth Strategies

Promote comprehensive trading by building solid customer relations

‐Review BPR/organizations from perspectives that maximize customer relations‐

‐Create business opportunities that utilize information‐

‐Strategic rebuilding of human resources and promotion of diversity‐

‐Provide one-stop services that leverage Group capabilities－

Capability StrategyRebuild value creation capabilities

by strengthening IT/human resources, etc.

Individual Business Strategy

‐Provide growth-field support and comprehensive solutions‐

‐Establish life-plan sales stance by omni-channel processes‐

Group Strategy

IT/Sales Information Strategy

Organizational / Business Process Reengineering

(BPR) StrategyHuman Resource Strategy

36

■Priority Issues for Fiscal 2016 in Consideration of Negative Interest Rate

“Ahead of Schedule Realization” of Medium-Term Measures

Stimulation of Demandfor Finance

Encourage Flow from Savings to Investment

Diversification of Revenue Sources

Priority Issue Ⅰ

Strengthening of Field Capabilities

Based on understanding of customer businesses, steadily supply financing linked to customer growth

Sales branches/headquarters functions to cooperate and propose most suitable portfolios in accordance with customer life plans

Expand bank business fields by targeting innovative businesses, traditional and different demographics, etc.

Provide the Ryugin Group’s transaction value through the highest number of sales channels in Okinawa

Dealing with Negative Impact of Different Dimension in Quantitative Easing while Aiming to Improve Profitability by Boosting Policies!

37

Priority Issue Ⅱ Priority Issue Ⅲ

Priority Issue Ⅳ

Number of Successful Applicants for Medical Manager Exam Surpasses 100!

■Corporate Business Strategy (Medical/Welfare Field)

47

66

82

967

7

10

10

54

73

92

106

49.6

61.8

67.7

76.1

0

20

40

60

80

0

20

40

60

80

100

120

End Mar.'13 End Mar.'14 End Mar.'15 End Mar.'16

Grade 2 Medical Managers Grade 3 Medical Managers Loans (Right scale)(Billions of Yen)(Persons) Medical and Welfare Promotion

Group established December 2014

Triumphal celebration jointly held with those from Okinawan medical institutions who passed exam

38

Based on declining birth rate and growing proportion of elderly people, strengthen support systems geared toward medical/welfare field

Medical Managers and Trends in Loan Balances Development of Human Resources Familiar with Medical Management

Holding of Medical Seminars

Overseas Sales Channel Development Backup by Holding Joint Meetings

Third Business Forum to Convey Okinawa’s Culinary and Visual Charms Held

Hong Kong Gourmet Food Business Meeting～ Yamagata Bank, Hachijuni Bank, Musashino Bank,

Bank of the Ryukyus ～

Other Joint Sponsorship

Nagano Prefectural, Nagano Prefectural SME Promotion Center, Yamagata International Economic Development Support Organization

2015 Japanese Foods“Premium”

Trade FairSponsor: JTB East Japan

Taiwan

October 2015Singapore

December 2015Hong Kong

February 2016

39

■Corporate Business Strategy (Sales Channel Expansion Support )

■Overseas NetworksBuilding frameworks capable of responding to various overseas development needs

Nippon Asia Halal Association

Okinawa Prefecture Department of Commerce, Industry and Labor, Asia Economic Strategy

Division

Chinatrust Financial Holding Co.,Ltd (Taiwan)

Halal business support

Overseas development

support

Foreign bank

partners

Bank of the Ryukyus

Okinawa Prefectural Government Hong Kong

Representative OfficeJoint Stock Commercial Bank for Foreign

Trade of Vietnam

Metropolitan Bank and Trust Company (Philippines)

Kasikornbank PCL. (Thailand)

MHC Co., Ltd.

Brand Research Institute, Inc.

Halal Japan Business Association

Employee dispatch

Asia Creative Works Pte Ltd

J-Will International (Thailand) Co., Ltd.

Nippon Export and Investment Insurance

DBJ Asia Financial Support Center

Aioi Nissay Dowa Insurance Co.,Ltd

Mitsui Sumitomo Insurance Company, Limited

Tokio Marine & Nichido Fire Insurance Co., Ltd.

Naha City/Bank of the RyukyusJoint Sponsorship

Establishment Support Seminar

Collaboration with Naha City

Collaboration with Yonabaru Town

41

Partnership Agreement with Aozora Bank

Entrepreneur Support/Training Implemented

【Student Category】Team name

Let’s begin!!（Chubu Agricultural High School）

Plan name

“Establishment of highly nutritious vegetable cultivation utilizing ocean’s untapped resources”

【General Category】Team name

Ryukyu Diet Chickens

Plan name

Activation of Okinawa poultry industry by accumulating poultry-related technologies

◆ Business matching ◆ Interregional cooperation◆ Industry, government, academia financial cooperation◆ Human resource development ◆ Increased sophistication of financing

【Main Business Alliance Areas】

■Corporate Business Strategy (Regional Regeneration [1])

Agreement signed January 26, 2016

Specialty Product Development Support

Agreement signed February 26, 2016

Providing a Variety of Finance Procurement MeansFinance Procurement by Crowd-Funding

Bank of the RyukyusCustomers(Cyber agent/crowd funding)

Posted on “Makuake” site, sponsor recruitmentProvision of financing

In Return (Provision of Premium Goods and Services)

Supporters

Introduction of “Makuake”

First Project

Cooperation Introduction of users wishing to buy products

Provision of financing

42

＜Schematic Diagram＞

Project OverviewTurning tuna into raw ham!? “Raw

ham from the sea,” smoked Okinawa-farmed tuna for which no

additives at all are used

■Corporate Business Strategy (Regional Regeneration [2])

Bank of the Ryukyus

Areas of joint research：Quality comparison of lettuces produced in plant factories and grown outdoors

Areas of joint research：Composition (mixing) of concrete repair material made with fly ash (coal ash) and performance-related research, including resistance to salt damage

Zero-emission Technology OkinawaFirst Project

in Okinawa

Areas of joint research：Preferential examination with regard to other Kibimaruton pork meats

Fukumaru Nojo Farming Corporation

Kamiya Sangyo Co., Ltd.

43

Research Results

■ Industry-Academia Collaboration (Corporate Business Strategy)Utilizing Bank of the Ryukyus networks to match University of the Ryukyus with local companies

Industry-Academia-Government Partnership Agreement with University of the Ryukyus

Housing-Related Loans Meeting Diverse Needs

Sales launched February 2015

Target area widened May 2016

An Okinawan Bank First!

44

■Corporate Business Strategy (Expansion of Product/Service Lineups)

Expansion of product/service lineups in tune with customers’ varying life plans

An Okinawan Bank First!

An Okinawan Bank First! An Okinawan Bank First!

Sales launched March 2015

Sales launched March 2016

Sales launched September 2015

Immediate Settlement with no Need for Cash⇒Zero time spent waiting in line at ATMs and zero out-of-hours handling charges

Local Currency Withdrawals at Overseas ATMs⇒Convenient, effortless currency exchange

NO Worries of exceeding your deposit account credit limit⇒Targeted at private customers aged 15 and over

Efforts to Become Pioneer Even among Other Banks in JapanLaunched VISA debit card October 2015

More than 200,000

cards issued

45

Cash Back 0.2% of Amount Spent

■Corporate Business Strategy (Credit Card Business)

■Private Business Strategies (Non-Face-to-Face Sales Channels)

46

Transition from a mere Back Office to Profit Center

Sales Capability Strengthening for Non-Face-to-Face Channels⇒Proactive Service Proposals to Customers by Outbound Promotions

Increase in the Number of Seats ＜36seats ⇒ 50seats＞⇒In order to enhance customer support in keeping with the increasing number of loan applications

Installation of Refreshment Rooms⇒Providing a comfortable workplace for employees

DBC

MobileMay 2015 Ryugin Azukari Archive fully operational

May 2014 BankNeo sales support system fully operational

From February 2014 Distribution of 600 iPad devices

April 2015 Introduction of mobile printers

PC

November 2015 Extended functions

From May 2017Launch of occupation-related website

47

April 2016Prepared approx.

1,000 iPhones for employees

Evolution of One-to-One marketing × Transformation in Work Styles■IT/Sales Information Strategy

Home visits

Branch / Loan CenterSeminar

Range of workplaces

Sales support systems

■Group StrategyProvide comprehensive services that leverage Group capabilities

April 2014Ryukyu Leasing Co., Ltd. made consolidated subsidiary

April 2015Okinawa Credit Service Co., Ltd. made wholly owned subsidiary

April 2014Ryugin Hosho Co., Ltd . made wholly owned subsidiary

Ryukyu Leasing Co., Ltd.

Okinawa Credit Service Co., Ltd.

Ryugin Hosho Co., Ltd.

Ryugin DC Co., Ltd. Ryugin Research Institute., Ltd.

Ryugin Business Service Co., Ltd.

Ryugin Office Service Co., Ltd.*

June 2016Plan to Bring Ryugin OfficeService Co., Ltd. In-House

48

Diversity Promotion

33 38 45 57 6719 20 2423 25

35

39

106

44 4547

49

56

97 106121

168

254

0

50

100

150

200

250

End Mar.'12 End Mar.'13 End Mar.'14 End Mar.'15 End Mar.'16

(Staff)FP1 ClassSmall/Medium Enterprise ConsultantsMedical Management ConsultantsPoint of contact financial services

Lawyers 2

Certified Public Accountants 1

Grade 1 Architects 1 and others

Recruitment of Mid-Career Professionals

Human Resource Training

49

Further Improvements in Employment Environment for Women to Excel as Managers

Sending employees to Women Leader Committee

Sponsor: Okinawa Prefectural Management Association

Introduction of Chief System

Reinstatement Assistance

Sending female employees to information exchange meetings to promote the advancement of womenSponsor: Juudankai

Round-table discussion with external instructor(Instructor: Ms.Miura from ResonaBank)

Recommendation for Yukatsu,working

earlier in the morning

Work Style ReformCareer Support

Reinstatement Support

To increase number of female employees occupying management positions to 20 or more (planned timeframe: 5 years)

■ Human Resource Strategy

Trends in Numbers of Professionally Qualified Personnel

*Others actively employed include systems engineers, former megabank employees

■Local Responsibility Activities

50

Proactive Involvement in Local Society

Traditional dyed cloth design contest

Nice Heart Bazaar* Winning of Prefectural Governor’s Award at Okinawa Prefecture

Welfare Community Planning Awards

Sponsor of Ryukyu Golden Kings basketball team

Naha Marathon sponsorship/volunteers

Sports Promotion

Local Event

Support

StrongSupport

for Traditional Culture

Welfare Activity Support

All enquiries regarding this presentation should be addressed to:Bank of the Ryukyus,Limited

General Planning DepartmentTelephone: +81-98-860-3787

Fax: +81-98-862-3672E-mail: ryugin@ryugin.co.jp

The information in this presentation is on a non-consolidated basis unless otherwise specified.

Information is based on summaries of published data, and some totals presented in this presentation may not add up due to rounding.

This material contains information about the future(forward-looking information)such as forecasts, outlooks, objectives and plans concerning the Bank. The forward-looking information was created based on information available as of June 3,2016 and does not represent a guarantee of future performance. Certain assumptions and hypotheses are used for the description of forward-looking information, but these assumptions and hypotheses could be inaccurate from an objective perspective and may not materialize in the future. Forward-looking information involves risks and uncertainties, and we ask readers to refer to the brief notes on the settlement of accounts and securities report of the Bank for more details. The Bank will not update the forward-looking information contained in this material.

■About This Presentation