San in Godo Bank : Integrated Report 2021

The creative bank that best fullls the dreams of the region and customers it serves

Integrated Report 2021

About the Cover

The cover illustration was designed with the notion of "Sustainable growth into the future" in mind.

The underlying concept for the work is "space," an image of the ocean, as the birthplace of all life, and the future. The colors of the many flowers each represent the 17 Sustainable Development Goals, while a supportive, all-encompassing hand, cultivating greenery and embracing the Earth, conveys the image that no single person is left behind. The outer ring of green leaves and the buds sprouting up from the planet represent rebirth and renewal. Together with the flowers and the enormous hand, these images form a circle symbolizing a never-ending cycle.

Gogin Challenged

Matsue Tottori

• Value creation through collaboration showcasing the talents of employees from both business sites. -

Drawings by Gogin Challenged Matsue employees were used for the illustration, designed by employees from Gogin Challenged Tottori.

Gogin Challenged is a business site for individuals with disabilities operated by San-in Godo Bank.

Artwork production is the main focus of Gogin Challenged Matsue operations, while Gogin Challenged Tottori is largely responsible for tasks that revolve around IT skills.

The San-in Godo Bank, Ltd.

10, Uomachi, Matsue, Shimane 690-0062, Japan TEL. [phone]

URL. https://www.gogin.co.jp

Published in January 2022 Planning and editing/

Management Planning Department

Editorial Policy

This publication is the Integrated Report 2021 prepared by San-in Godo Bank. Prepared in reference to the "International Integrated Reporting Framework" promoted by the International Integrated Reporting Council (IIRC), this report is comprised of both financial and non-financial information (ESG information), showcasing the Bank's management policies and measures for sustainable growth, along with medium- to long-term value creation and other efforts, in an integrated manner.

Items for disclosure stipulated by the enforcement regulations of Japan's Banking Act are detailed in a separate supplemental disclosure. The supplemental disclosure can be viewed on the Bank's website.

(https://www.gogin.co.jp)

Message regarding Forecasts

The materials in this report include statements regarding future business performance. There are no guarantees for the future performance found in such statements, which contain inherent risks and uncertainties. Please be aware that actual future business performance may differ materially due to changes in the operating environment and other factors.

Contents

2 Feature: Response to COVID-19

4 Message from the President

10 Profile

Management Policies

Trajectory of San-in Godo Bank

Notable Strengths

External Environment/Risks and Opportunities/Materiality

Value Creation Process

Financial Highlights

Non-financial Highlights

23 Source of Value Creation

Medium-term Management Plan

Financial and Capital Strategies

Corporate Strategies

Retail Strategies

Digital Strategies

Securities Strategies

Group Strategies

36 Initiatives for Sustainability

Policies governing Sustainability Initiatives Response to Climate Change

Initiatives for Environmental Protection

Extensive Support of the Region through Relationship Banking Provision of Stable Financial Infrastructure to All Customers Development of Unique and Far-reaching Social Contribution Activities

51 Power behind Value Creation

Personnel Strategies

Diversity & Inclusion

Corporate Governance

Messages from the Outside Directors

Directors and Executive Officers

Promotion of Structural Reform

Compliance and Risk Management

Risk Management

Conversations with Stakeholders

70 Corporate Information

Key Financial Indicators

Corporate Data

San-in Godo Bank Wide-ranging Branch Network

Mt. Daisen and sunrise ©Tottori pref.

1

	Feature	Message from	Profile	Source of Value	Initiatives for	Power behind	Corporate
	the President	Creation	Sustainability	Value Creation	Information

Response to COVID-19

The COVID-19 pandemic has dramatically altered the social environment in which we live. For its part, San-in Godo Bank has positioned financing and business support for clients hard hit by the pandemic as its highest priority, and focused management resources accordingly. Pursuing these initiatives throughout the Group, we are working to provide financial services amid the COVID-19 pandemic, ensuring the safety and comfort of customers and employees, even while addressing this new way of life. In this manner, San-in Godo Bank is fulfilling its social mission to maintain financial infrastructure amid these challenges. At the same time, we have implemented both measures unique to San-in Godo Bank and contribution activities for the region designed to energize areas suffering from the adverse effects of the pandemic. We will continue to meet our social responsibilities as the region's leading bank.

Initiatives for Corporate Clients

Initiatives for Individual Customers

In this area, the Bank has firstly taken measures to provide seamlessly financial services essential to daily life and to keep stable settlement functions. This has included steps to prevent the spread of the virus, such as adding anti-viral and anti-bacterial films to ATM touch panels and the installation of acrylic boards at branches and key points of contact with customers to prevent the spread through droplet infection. We are also taking steps to upgrade and expand our digital channel to enable access to a host of banking transactions without visiting a branch. In parallel, we have put structures in place, including establishment of exclusive COVID-19- related financing, toll-free consulting service, to allow consultation with individual customers with borrowing needs due to the pandemic to discuss financing, changes in loan terms or other concerns.

Initiatives for the Region

To fulfill its social responsibilities as the region's leading bank, San-in Godo Bank is engaged alongside customers in initiatives to support the region.

We have engaged to support clients experiencing a decline in sales and other impacts from the spread of the COVID-19 pandemic, providing a range of measures designed to meet their needs for financing.Centered on the work of the "COVID-19 Business Support Team," and along with business continuity support, we propose future-looking management reform measures to conduct implementation support. Depending on clients' increasingly diverse and sophisticated needs and evaluation of business viability, the multifaceted, partnership-modeled business support activities we offer can extend to include helping clients to solve any emergent management issues.

Cheer on the region through Gogin Duo Card

Guided by the theme of "Let's energize San-in!", we conducted various campaigns to cheer on San-in accommodations, restaurants and region residents taking advantage of the Duo Card.

"Cheer on San-in-based hotels and accommodations" campaign (July - Nov. 2020)

Duo Kore Catalog campaign (July - Nov. 2020)

	Financing
	No. of loans executed		Execution amount (¥ billion)
	initiatives
Shimane and	Outside Shimane	Total	Shimane and	Outside Shimane	Total
		Tottori prefectures	and Tottori	Tottori prefectures	and Tottori
	Loans	964	439	1,403	72.5	118.9	191.5
Loans guaranteed by the Credit	7,301	593	7,894	158.6	17.7	176.4
	Guarantee Corporations
	Total

We also support the region by actively pursuing proper loans as well as risk taking.

These became opportunities to serve regional industry while helping cardholders rediscover the charm of the San-in region they call home.

Cheer on with Duo Card! #WeLoveSanin campaign* (Mar. 2021)

Energize the town with Duo Card! GoToEat campaign (Apr. - Aug. 2021)

(As of July 1, 2021)

8,265

1,032

9,297

231.2

136.7

368.0

Support for the #WeLoveSan-in Campaign*

Other Initiatives

COVID-19 Business Support Team

(Results for Feb. 1, 2020 - Mar. 31, 2021)

- Supporting Group's directors, executive officers and employees

Conducted the "Support San-in Time Deposit" campaign,

Once clear impacts from the COVID-19 pandemic began to emerge, we moved to quickly launch this team in April 2020, putting support activities into motion with a 50-person structure (including concurrent appointments). In December 2020, we conducted a review of those clients, heavily impacted by the pandemic and identified for "priority support" (from 85 to 168 clients), providing them with intensive support in business plan formulation.

	Funding	Situational	Business	Plan formulation support	Execution	Support	Debt
Phase	continuation	In proposal			support	No problems	Total
support	assessment		In formulation	completed	arrangement
	determination		monitoring
			(negotiations)
No. of clients	0	0	4		14	147	0	1	2	168
for support	5		9

(Results as of March 31, 2021)

in making the most of their time off and relaxation -

As a unique support project from San-in Godo Bank, we partially covered the cost of stays at participating #WeLoveSan- in campaign hotels for Group's directors, executive officers and employees and their families.

No. of users	Currently, 4,215
(incl. family members)	individuals in total
No. of	179 facilities
accommodations used	(Shimane -99, Tottori- 80)

*#WeLoveSanin campaign

offering San-in specialty goods as prizes (Nov. 2020 to Mar. 2021)

Donated paper face shields to medical professionals, and face masks and hand soap to local elementary schools by Gogin Hitotsubu No Mugi No Kai (One Kernel of Wheat Association), charitable giving organization (page 48) Donated activity funds for measures to counter the COVID-19 pandemic handling the SDGs private placement bonds (page 49)

Multifaceted, partnership-modeled structure

- Close ties with external entities

Support plan formulation through close ties with the SME Revitalization Support Committee, as well as CPAs, tax accountants and other outside professionals.

Share plans with other financial institutions to ensure robust financial support.

Address clients' growth and needs for business succession through ties with Nihon M&A Center Inc. and business succession funds.

Gogin Group

	San-in Godo Bank		Gogin Capital Co., Ltd.
	Support menu expansion		Brand and capital support
	Other financial	Close	SME Revitalization
	Support Councils
	institutions
	collaboration	Plan formulation
	Financial support
				support
Consultants/Tax				Regional Economy Vitalization
	accountants				Corporation of Japan (REVIC)
	Plan formulation				Plan formulation, business
				revitalization and
	support				discontinuation support

This project launched in Shimane and Tottori prefectures to promote tourism in the region. Residents of either prefecture received subvention of half at select accommodations. (Maximum of ¥5,000 off per person, per night)

Initiatives for Employees

Maintaining the health of employees and their families is vital even to maintaining operations essential as social infrastructure, and we pursue various initiatives to this end.

At branches in regions where infections are spreading, in addition to adopting a work shift system and lunch hour system under which we stop business operations, we are striving for seamless operational continuity through a host of other measures that include split operations at our headquarters, staggered time of arrival and work from home, working environment review, and a support system in the event of emergency. At the same time, we are defining COVID-19 response policies, taking extensive steps to prevent infections and striving to support employees in their everyday health management.

In fulfilling our social responsibilities as the region's leading bank, we are working hand in hand with the people of the region to support it wherever we can.

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Feature	Message from	Profile	Source of Value	Initiatives for	Power behind	Corporate
the President	Creation	Sustainability	Value Creation	Information

Message from the President

Thorough support for industries and businesses as the region's leading bank

July 2021

President and Representative Director

Critical Role that San-in Godo Bank Should Play

Amid a Changing Business Environment

One year and a half have passed since the threat posed by a novel coronavirus first emerged. Perhaps inevitably, stagnation in economic activity has grown protracted, with voluntary restraint from all but essential outings, which is now the norm in many areas of everyday life. Looking at the Bank's own business environment, while ongoing digitalization and the widespread diffusion of SDGs were already triggering massive changes, the COVID-19 pandemic seems to have suddenly shifted the pace of change into high gear. Most clients, too, have seen their businesses impacted in significant ways, among them dramatic declines in sales. And while the number of bankruptcies has been held in check thanks to the management effort of business owners themselves and a variety of government- and private industry-backed support measures, the economic landscape remains a challenging one overall. Under these conditions, setting business support for clients as its highest priority, San-in Godo Bank first took steps to stabilize the situation at hand by addressing the need for financing. We then developed future-looking activities, including the formulation of management reform plans to get businesses back up and running. In a situation in which doing the same actions as before is now leading businesses to struggle, we have worked hard to gain a deeper knowledge of our clients than ever before, with the goal of nailing down more successful and effective measures to break this deadlock. In the previous fiscal year, given the pervasive sense of uncertainty, any number of clients chose to formulate only temporary or interim plans. However, as the rollout of vaccines gains traction and projections become easier, the creation of more extensive measures will likely be possible. With the regional economy battered and exhausted, this is the moment to showcase the Bank's concentrated knowledge and expertise built in business support over the years. And this is exactly what we are here for, San-in Godo Bank would fulfill its responsibilities as the region's leading bank.

Action as a Responsible Corporate Citizen

The Corporate initiatives targeting Environmental, Social and Governance (ESG) have been further accelerated in recent years. With the news media reporting on either SDGs or ESG almost daily, public interest in environmental and social problems is rising. Given that the social and living environment in front of us is one where what used to be common sense is no longer so, and in which enormous changes have occurred, there is a sense that people's awareness has started to shift to the sustainability of human society as a whole. Accordingly, the metrics by which a company's value is measured have also diversified. In addition to financial- side evaluation in areas like profit, the move to rate companies on activities that rarely show up in financial considerations, namely

environmental, social and corporate governance performance, is growing. The demand for each company, as an individual corporate citizen, taking responsible actions for the sustainable society as a whole is now greater than ever before.

In this climate, in addition to development of a host of business support activities designed to revitalize the region's economy, the people of San-in Godo Bank have continuously taken it upon themselves to personally participate in and carry out unique environmental protection and social contribution activities, among them forest conservation, employment opportunities for individuals with disabilities, J-Credit intermediary services, and healthy youth education. At the same time, we promote to raise awareness in activities among local companies and authorities, for example, to deepen understanding of SDGs, while also taking steps to enhance continually our corporate governance structure.

In addition to initiatives related to the declaration for Task Force on Climate-related Financial Disclosures (TCFD) and reductions in greenhouse gas emissions, our policy going forward is to widely promote ESG management. The goal here is to use relationship banking activities as a base to enhance local economic sustainability, including, for example, by raising the level of investment and lending to companies seeking to decarbonize.

A Look Back and Vision for the Future

This fiscal year marks the start of a new Medium-term Management Plan. Before explaining the Bank's management strategy going forward, let's take a look back at the previous plan, then discuss the outlook for the future.

Progress in strengthening foundations for growth strategies

To briefly summarize the previous Medium-term Management Plan, although profit levels fell below targets due mainly to the impact of the COVID-19 pandemic, the plan did succeed in building the management base that will become the foundation for growth strategies going forward. This was the result of implementing structural reforms in a steady manner, specifically by reviewing earnings structures and streamlining organizations and operations. First, let's discuss profit levels. In fiscal 2020, consolidated net income declined ¥0.7 billion year on year, to ¥9.6 billion. The main reason for this challenging fiscal outcome was the preemptive accumulation of credit expenses to account for future uncertainty. And while capital adequacy ratio also lower, this can be seen as evidence of the Bank's extensive support in meeting customers' funding needs despite the risks involved. On the other hand,

the core banking profit (excluding gains/loss on investment trust cancellations), the measure of success in the Bank's key business functions, increased a substantial 25% year on year, offering promising feedback on our positioning for growth going

4				5

Feature	Message from	Profile	Source of Value	Initiatives for	Power behind	Corporate
the President	Creation	Sustainability	Value Creation	Information

Message from the President

forward. Where the management base is concerned, in addition to several important structural reforms carried out over the last three years, including core system innovation and branch network restructuring, as well as an alliance in the securities business with Nomura Securities Co., Ltd. and affiliate realignment, we have steadily taken steps toward rationalization and improved efficiency in a range of operational areas. As a result, we made progress in the strategic allocation of personnel, and have seen a level of success in terms of cost control as well. We also oversaw dramatic increases in two core banking operaions - loans and deposits. I am confident that the results of the past three years will contribute heavily to performance on both the financial side, particularly with respect to earnings, as well as to human resource development, organizational capacity and other non-financial areas.

Getting Back to Our Philosophy, Showcasing Our Vision

Ultimately, our goal is to embody San-in Godo Bank's management philosophy, to be "The creative bank that best fulfills the dreams of the region and customers it serves." The recently formulated Medium-term Management Plan is a growth strategy that aims for this ideal. During the course of this process, we came together as a group to deliberate the management philosophy, then pursued new measures, most notably defining a new growth vision. During the deliberation process for the management philosophy, we learned that most Bank employees would share a commitment

to the management philosophy, and feel strongly about being useful to the customers they serve, and want to build closer ties with them. On the one hand, this shared commitment and approach with respect to customers are due in part to management taking every opportunity to repeatedly stress their importance over the years, and are also unspoken assumptions within the Bank itself. As a result, the chance to reconfirm just how firmly these shared values are rooted through San-in Godo Bank has deepened my confidence in sense of unity throughout the organization.

This sense of unity is a huge advantage in the push to embody our management philosophy. And to ensure the Bank, with this advantage in hand, can clearly articulate the path it should take in a highly volatile business environment, we formulated a long- term vision that sees San-in Godo Bank as "A wide-reaching and sustainably-growing regional bank with unmatched problem- solving skills."

By leveraging the creativity and ingenuity of every employee to solve regional and customer issues, the reward will be some portion of the success that results. Anchored firmly in this win- win relationship, continuous growth will emerge into the future. Not only for San-in, but for the wide area encompassing the Sanyo and Hyogo-Osaka regions as well, this will make a more robust commitment to the region and customers possible, and consequently can bring the Bank closer to embodying its management philosophy. That is the concept at the heart of

our growth vision. As I have said before, San-in Godo Bank has a responsibility to uphold with respect to sustainability of the society. While a sustainable society is essential to the Bank's own survival, without the Bank's own sustainability, any continued contribution to society itself would also be unattainable. In years past, we have pursued a vision of San-in Godo Bank developing hand in hand with the region, and this remains our constant aim going forward.

New Medium-term Management Plan

Next, I'd like to discuss the Medium-term Management Plan, which encompasses management policies going forward based on these results and this vision. With "Thorough Support for the Region" as our guiding message, by taking on the responsibility to do everything possible, we have clearly showed our dedication to developing in step with the region and customers. Consulting, digitalization and our management base are three key elements that make this possible.

Leveraging Consulting and Digitalization to Meet Business Model Reform Challenges

Anchored by workforce-wide consulting, along with digital transformation (DX), the Bank is now moving to contribute to solving regional issues and to meet the challenges of reforming its own business model.

Traditionally, our business model has been relationship banking. Based on relationships of trust with clients, we promoted business support tailored to customer needs, centered on financing, as financial intermediary functions. Going forward, while continuing to emphasize the fundamental importance of these relationships of trust, we are ready to focus on consulting services. Of course, given the relatively high proportion of the Bank's earnings occupied by financing services, the importance of this work to our core banking operations remains unchanged. However, as client needs and

the issues they confront grow more complex and diverse, finding solutions to those issues will require broader and more highly specialized services. To firmly meet these needs, the Group has to move as one to reinforce systems, combined with steps currently under way that include changing the mindset of our employees. One such initiative underway is recruitment consultancy business. Until now, given that human resources tended to concentrate

in major urban areas, recruitment was always a major issue for regional companies. However, with the rise in people engaging in side or multiple jobs gaining momentum in recent years, the timing for moving human resources from major cities to regional areas has finally moved into place. For its part, San-in Godo Bank, too,

is widening its network connecting talented human resources to local enterprises. By providing opportunities to help professionals expand their careers in the region, we are broadening the potential not only for promoting the development of individual companies,

Regional Revitalization and Rebuilding by Solving Issues Individual Enterprises and Customers Face

Corporate issue resolution (consulting) Recovering and improving a company's added value

Resolve individual customer
issues (consulting)	Improved convenience in		Fund support for life		Assistance in asset
Abundant lifestyle	daily shopping		milestones		formation for the future
formulation support							Achieve

Issues company faces

Business continuation during the COVID-19 pandemic

Adapting to carbon-free society

Response to digitalization

Human resource and successor shortages

Substantial capital adequacy

Flexible financing support

Financial support for companies affected by sudden changes in the management environment

Support for company's growth strategies

*Credit expenses for 3 years of Medium-term Plan ¥22.0 billion [cumulative]

Diverse support menu

Provide broad-spectrum consulting

Business plan formulation, ICT, recruitment consultancy, M&A, business succession, etc.

Gogin Group

Move as a Group to develop in

multifaceted business support activities

				Close
San-in Godo Bank		collaboration
COVID-19 Business
Support Team
San-in		Gogin Capital
General Lease
	Co., Ltd.
Co., Ltd.

institutions External

Improved

Employment

regional

business

Positive

creation

results

cycle in the

Effects on

regional

entire regional

economy

economy

revitalization

Consumption

growth

Resolve regional issues

Proactive participation in

Involvement in administrative/

(cooperation)

town-development projects

fiscal reform (digitalization, etc.)

Efforts in each aspect of

Generation of region-linked,

Continuous business

Business initiative support

"town," "people" and "work"

interactive population

founding support

through region-specific PFI

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