Okashin_H1-H4.indd 1 19/09/10 23:01

１ 2

About the Representative System Shinkin banks are the Japanese equivalent of a credit union, and are a form of financial institution with a cooperative structure based on the fundamental principles of "mutual trust" and "reciprocity" between members, and that maximizes the value of the opinions of each and every member. Each member of a shinkin bank therefore has a single voting right regardless of the number of asset accounts, and participates in the operation of the bank through the general meetings. However, because of the large number of members of the Okazaki Shinkin Bank, it is not possible in practice to actually hold general meetings. In order to maintain member consensus while ensuring the completeness of deliberations, a representative system is therefore used instead of general meetings. The representatives committee is the highest-level decision-making body for deciding important issues such as approval of accounts or change to statutes of the bank, and appointment of the board of directors and auditors. The representatives committee therefore conducts business through representatives that are selected by some appropriate procedure from among the members, and the opinions of each and every member are therefore reflected in the running of the bank in the same way as a general meeting. Furthermore, communication with representatives and members that occurs not only in the representative meetings, but also in everyday operations is treated as important, and is incorporated into various improvements in the running of the bank.

The Okazaki Shinkin Bank was established in 1924 in Okazaki City, Aichi Prefecture to serve small and medium-sized companies and their employees. Under its corporate mission of sincerely striving for the prosperity of society and the development of regional industry, the Bank continues to maintain sound operations, and is steadily widening its business scope. The Bank currently enjoys an overwhelming share of deposits and loans in Okazaki City, and is one of the top-ranked shinkin banks in Japan. Amid the present dramatic changes in the financial sector, the Bank reaffirms its customer-focused business stance. We are continuing to improve our services and lineup of financial products, streamline our corporate organization, raise operational efficiency, and further reinforce our risk management capability and earning power. As March 31, 2019, The Bank’s network – covering the whole of Aichi Prefecture – comprised 99 braches. The network was staffed by 1,926 employees serving 130,672 members. The total balance of deposits stood at ¥3,102,512 million (US$27,953 million), and loans and bills discounted totaled ¥1,585,405 million (US$14,284 million).(exchanging ¥110.99, end of March 2019)

OKAZAKI

NAGOYA

JAPAN

AICHI

• Established: July 1924• Head Office: 41 Motosuga, Sugo-cho, Okazaki• Members: 130,672• Capital: 3,132.7 million yen• Deposits: 3,102.5 billion yen• Loans: 1,585.4 billion yen• Full-time employees: 1,926• Location: 99 locations Number of Offices by Area

Profile of The Okazaki Shinkin Bank

29195

3016

Okazaki AreaNagoya AreaOwari AreaWest-Mikawa AreaEast-Mikawa Area

(As of March 31, 2019)

Thank you very much for your loyal patronage of the Okazaki Shinkin Bank.This year we once again issued a disclosure report, which is entitled "The State of Okashin 2019," in order to further deepen understanding regarding the Bank, and we humbly invite you to read it.In FY2018, the regional economy was in a moderate recovery trend, and this was due to factors such as robust production activities accompanying increased exports and capital investment, and an upturn in personal consumption resulting from improved employment and income conditions. Nevertheless, business conditions did not reach a full recovery, and this was partly due to personnel shortages and other structural problems among small and medium-sized enterprises, which are the main clients of the Bank. In addition, there has been a growing sense of uncertainty regarding the future of the economy due to factors such as a slowdown of the Chinese economy that has been the result of trade frictions between China and the United States. In terms of finance, interest rates have recently been at a very low level due to the negative interest rate policy of the Bank of Japan. As for future business prospects, in light of a slump in yield on investment resulting from the negative interest rate policy, it is expected that there will be a decline in the sustainability of traditional financial businesses that are based on the acquisition of deposits and loans. Also, in recent years, accompanying the advancement of financial technologies, companies from other industries such as IT and distribution have been entering the business areas of the Bank, centering on fund settlement services, and as such, it is expected that there will continue to be an increasingly intense competitive environment going forward. Amid these circumstances, based on a new medium-term business plan entitled the "Three-Year Plan for Reforms and Creation," the Bank has been working to provide high value-added services under the theme of creating new business models that go beyond existing financial business frameworks. These services are centered on areas in which the needs of clients have been expanding, such as business matching, business succession and inheritance, real estate utilization, medical care and welfare, and overseas business support. In FY2019, which is the middle year of the medium-term business plan, based on the traditional Japanese philosophy of sampo yoshi (achieving across-the-board benefits for the seller, buyer, and society), we will steadily carry out policies for boosting productivity and creating new added value in the five areas of sales, bank branches, clerical work, personnel, and finances without being bound by existing common practices, and will aim to please our customers and serve as a financial institution where employees can shine. Our employees and executives will continue to work devotedly on business operations in order to win the further trust of customers, and as such, we humbly ask for your ongoing support.

July 2019

Ichiro ObayashiChairman of the Board

Hideaki Tanaka President

Message from the Management

Okashin_AR_01-10_2019.indd 1 19/09/10 23:03

１ 2

About the Representative System Shinkin banks are the Japanese equivalent of a credit union, and are a form of financial institution with a cooperative structure based on the fundamental principles of "mutual trust" and "reciprocity" between members, and that maximizes the value of the opinions of each and every member. Each member of a shinkin bank therefore has a single voting right regardless of the number of asset accounts, and participates in the operation of the bank through the general meetings. However, because of the large number of members of the Okazaki Shinkin Bank, it is not possible in practice to actually hold general meetings. In order to maintain member consensus while ensuring the completeness of deliberations, a representative system is therefore used instead of general meetings. The representatives committee is the highest-level decision-making body for deciding important issues such as approval of accounts or change to statutes of the bank, and appointment of the board of directors and auditors. The representatives committee therefore conducts business through representatives that are selected by some appropriate procedure from among the members, and the opinions of each and every member are therefore reflected in the running of the bank in the same way as a general meeting. Furthermore, communication with representatives and members that occurs not only in the representative meetings, but also in everyday operations is treated as important, and is incorporated into various improvements in the running of the bank.

The Okazaki Shinkin Bank was established in 1924 in Okazaki City, Aichi Prefecture to serve small and medium-sized companies and their employees. Under its corporate mission of sincerely striving for the prosperity of society and the development of regional industry, the Bank continues to maintain sound operations, and is steadily widening its business scope. The Bank currently enjoys an overwhelming share of deposits and loans in Okazaki City, and is one of the top-ranked shinkin banks in Japan. Amid the present dramatic changes in the financial sector, the Bank reaffirms its customer-focused business stance. We are continuing to improve our services and lineup of financial products, streamline our corporate organization, raise operational efficiency, and further reinforce our risk management capability and earning power. As March 31, 2019, The Bank’s network – covering the whole of Aichi Prefecture – comprised 99 braches. The network was staffed by 1,926 employees serving 130,672 members. The total balance of deposits stood at ¥3,102,512 million (US$27,953 million), and loans and bills discounted totaled ¥1,585,405 million (US$14,284 million).(exchanging ¥110.99, end of March 2019)

OKAZAKI

NAGOYA

JAPAN

AICHI

• Established: July 1924• Head Office: 41 Motosuga, Sugo-cho, Okazaki• Members: 130,672• Capital: 3,132.7 million yen• Deposits: 3,102.5 billion yen• Loans: 1,585.4 billion yen• Full-time employees: 1,926• Location: 99 locations Number of Offices by Area

Profile of The Okazaki Shinkin Bank

29195

3016

Okazaki AreaNagoya AreaOwari AreaWest-Mikawa AreaEast-Mikawa Area

(As of March 31, 2019)

Thank you very much for your loyal patronage of the Okazaki Shinkin Bank.This year we once again issued a disclosure report, which is entitled "The State of Okashin 2019," in order to further deepen understanding regarding the Bank, and we humbly invite you to read it.In FY2018, the regional economy was in a moderate recovery trend, and this was due to factors such as robust production activities accompanying increased exports and capital investment, and an upturn in personal consumption resulting from improved employment and income conditions. Nevertheless, business conditions did not reach a full recovery, and this was partly due to personnel shortages and other structural problems among small and medium-sized enterprises, which are the main clients of the Bank. In addition, there has been a growing sense of uncertainty regarding the future of the economy due to factors such as a slowdown of the Chinese economy that has been the result of trade frictions between China and the United States. In terms of finance, interest rates have recently been at a very low level due to the negative interest rate policy of the Bank of Japan. As for future business prospects, in light of a slump in yield on investment resulting from the negative interest rate policy, it is expected that there will be a decline in the sustainability of traditional financial businesses that are based on the acquisition of deposits and loans. Also, in recent years, accompanying the advancement of financial technologies, companies from other industries such as IT and distribution have been entering the business areas of the Bank, centering on fund settlement services, and as such, it is expected that there will continue to be an increasingly intense competitive environment going forward. Amid these circumstances, based on a new medium-term business plan entitled the "Three-Year Plan for Reforms and Creation," the Bank has been working to provide high value-added services under the theme of creating new business models that go beyond existing financial business frameworks. These services are centered on areas in which the needs of clients have been expanding, such as business matching, business succession and inheritance, real estate utilization, medical care and welfare, and overseas business support. In FY2019, which is the middle year of the medium-term business plan, based on the traditional Japanese philosophy of sampo yoshi (achieving across-the-board benefits for the seller, buyer, and society), we will steadily carry out policies for boosting productivity and creating new added value in the five areas of sales, bank branches, clerical work, personnel, and finances without being bound by existing common practices, and will aim to please our customers and serve as a financial institution where employees can shine. Our employees and executives will continue to work devotedly on business operations in order to win the further trust of customers, and as such, we humbly ask for your ongoing support.

July 2019

Ichiro ObayashiChairman of the Board

Hideaki Tanaka President

Message from the Management

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3 4

The Okazaki Shinkin Bank has established a fundamental policy of prioritizing compliance as our most important management issue, and all of our executives and employees are active in efforts to comply with laws and regulations, etc. A set of "in-house rules for supervising compliance" have been established based on the compliance policy, and these rules determine the basic items related to preparations for complying with laws, etc. A strong management system has also been built with the board of directors at the top. In terms of actions, the "compliance program" that details specific implementation plans is decided every year. Through this program, all of our executives and employees strive to be active in each of the areas for improving employee awareness and building systems for complying with laws, etc.

The final decision-making body in relation to compliance is the board of directors. In addition to deciding on our fundamental policies and compliance standards, the board of directors appropriately evaluates the range of compliance measures in addition to the state of compliance. The compliance committee was established in accordance with our compliance policy and is involved in investigating, planning, and evaluating from the standpoint of comprehensive business management. Furthermore, the risk management division (legal affairs administration office) has been established as the supervising office, and in addition to performing business and planning related to compliance measures, also undertakes guidance and training, and responds to questions and consultations. Regarding the organization of each position, a "compliance officer" is stationed in the primary work supervision role, and a "compliance supervisor" is stationed in each branch. They provide instruction, guidance, and verification related to the work within their branch and to the staff within their branch. In order to respond swiftly and appropriately in the rare event that a violation of the law occurs, there is a system in place to facilitate a prompt response, so that when a staff member becomes aware of a compliance violation or that there is a risk of a compliance violation, the staff member is to notify a compliance officer or compliance supervisor, and in addition, there is a hotline through which the risk management division (legal affairs administration office), corporate auditors or advising lawyers can be notified directly.

Through the annual compliance program, in addition to branch guidance by managers and training workshops being held, efforts are progressing towards appropriate work management, centered on each of the officers and supervisors, such as holding study seminars that utilize tools such as the compliance manual.

Compliance-Related Activities

Compliance Management System

Fundamental Compliance Policy

ComplianceOfficer

Compliance Committee

Executive Committee

Board of Directors Corporate auditors

Hotline

ComplianceSupervisor

Risk Management Division(Legal Affairs Administration Office)

Staff

Review of Operations Efforts towards Compliance (Adhering to Laws)

Deposits and Savings Loans

Profit and Loss Situation Non-performing Loan Situation

Capital adequacy ratio

46,286

Deposits and savings increased by 59.2 billion yen from the end of the previous year, and the year-end balance was 3,102.5 billion yen. Within this amount, personal deposits stood at 2,331.9 billion yen.

End of March 2019End of March 2017 End of March 20180

(Unit: 100 million yen)29,105

22,435

30,432

22,886

31,025

23,319

Personaldeposits

Loans increased by 1.1 billion yen from the end of the previous year, and the year-end balance was 1,585.4 billion yen.

End of March 2019End of March 2017 End of March 20180

(Unit: 100 million yen)15,706

6,237

15,842

6,393

15,854

6,501

Loans toindividuals

Our non-consolidated capital adequacy ratio was 12.32%, which is more than three times the domestic standard of 4%, and this demonstrates the soundness and security of the management of the Bank. To further prepare for risks, we increased our amount of owned capital by 4.3 billion yen to 204.3 billion yen, and as such, the Bank has excellent operational strength that is at the top level in Japan.

End of March 2019End of March 2017 End of March 20180

(Unit: 100 million yen)

1,953 2,000 2,043

Operating profit was 6.978 billion yen, and current net profit was 4.820 billion yen.

Year ended March 2019Year ended March 2017 Year ended March 2018

0

(Unit: 1 million yen)

4,338

3,258

6,779

5,204

6,978

4,820

Operatingprofit

Current net profit

The non-performing loan amount based on the Financial Revitalization Act was 46.286 billion yen.

198,756

End of March 2019End of March 2017 End of March 20180

(Unit: 1 million yen)

51,26546,225

3.24

Retained earningsRetained earnings

Non-performing loan ratio (%)

2.90 2.90

12.81Non-consolidated capital adequacy ratio (%)

12.47

Amount ofowned capital

Non-performingloan amount

12.32

Okashin_AR_01-10_2019.indd 3 19/09/10 23:03

3 4

The Okazaki Shinkin Bank has established a fundamental policy of prioritizing compliance as our most important management issue, and all of our executives and employees are active in efforts to comply with laws and regulations, etc. A set of "in-house rules for supervising compliance" have been established based on the compliance policy, and these rules determine the basic items related to preparations for complying with laws, etc. A strong management system has also been built with the board of directors at the top. In terms of actions, the "compliance program" that details specific implementation plans is decided every year. Through this program, all of our executives and employees strive to be active in each of the areas for improving employee awareness and building systems for complying with laws, etc.

The final decision-making body in relation to compliance is the board of directors. In addition to deciding on our fundamental policies and compliance standards, the board of directors appropriately evaluates the range of compliance measures in addition to the state of compliance. The compliance committee was established in accordance with our compliance policy and is involved in investigating, planning, and evaluating from the standpoint of comprehensive business management. Furthermore, the risk management division (legal affairs administration office) has been established as the supervising office, and in addition to performing business and planning related to compliance measures, also undertakes guidance and training, and responds to questions and consultations. Regarding the organization of each position, a "compliance officer" is stationed in the primary work supervision role, and a "compliance supervisor" is stationed in each branch. They provide instruction, guidance, and verification related to the work within their branch and to the staff within their branch. In order to respond swiftly and appropriately in the rare event that a violation of the law occurs, there is a system in place to facilitate a prompt response, so that when a staff member becomes aware of a compliance violation or that there is a risk of a compliance violation, the staff member is to notify a compliance officer or compliance supervisor, and in addition, there is a hotline through which the risk management division (legal affairs administration office), corporate auditors or advising lawyers can be notified directly.

Through the annual compliance program, in addition to branch guidance by managers and training workshops being held, efforts are progressing towards appropriate work management, centered on each of the officers and supervisors, such as holding study seminars that utilize tools such as the compliance manual.

Compliance-Related Activities

Compliance Management System

Fundamental Compliance Policy

ComplianceOfficer

Compliance Committee

Executive Committee

Board of Directors Corporate auditors

Hotline

ComplianceSupervisor

Risk Management Division(Legal Affairs Administration Office)

Staff

Review of Operations Efforts towards Compliance (Adhering to Laws)

Deposits and Savings Loans

Profit and Loss Situation Non-performing Loan Situation

Capital adequacy ratio

46,286

Deposits and savings increased by 59.2 billion yen from the end of the previous year, and the year-end balance was 3,102.5 billion yen. Within this amount, personal deposits stood at 2,331.9 billion yen.

End of March 2019End of March 2017 End of March 20180

(Unit: 100 million yen)29,105

22,435

30,432

22,886

31,025

23,319

Personaldeposits

Loans increased by 1.1 billion yen from the end of the previous year, and the year-end balance was 1,585.4 billion yen.

End of March 2019End of March 2017 End of March 20180

(Unit: 100 million yen)15,706

6,237

15,842

6,393

15,854

6,501

Loans toindividuals

Our non-consolidated capital adequacy ratio was 12.32%, which is more than three times the domestic standard of 4%, and this demonstrates the soundness and security of the management of the Bank. To further prepare for risks, we increased our amount of owned capital by 4.3 billion yen to 204.3 billion yen, and as such, the Bank has excellent operational strength that is at the top level in Japan.

End of March 2019End of March 2017 End of March 20180

(Unit: 100 million yen)

1,953 2,000 2,043

Operating profit was 6.978 billion yen, and current net profit was 4.820 billion yen.

Year ended March 2019Year ended March 2017 Year ended March 2018

0

(Unit: 1 million yen)

4,338

3,258

6,779

5,204

6,978

4,820

Operatingprofit

Current net profit

The non-performing loan amount based on the Financial Revitalization Act was 46.286 billion yen.

198,756

End of March 2019End of March 2017 End of March 20180

(Unit: 1 million yen)

51,26546,225

3.24

Retained earningsRetained earnings

Non-performing loan ratio (%)

2.90 2.90

12.81Non-consolidated capital adequacy ratio (%)

12.47

Amount ofowned capital

Non-performingloan amount

12.32

Okashin_AR_01-10_2019.indd 4 19/09/10 23:03

5 6

System risk is the risk of loss due to damage, incorrect operation due to malfunctions, illicit usage, information leaks, cyber-attacks, etc. involving our computer system. The Okazaki Shinkin Bank endeavors to ensure the stability and reliability of hardware and software based on the "Computer System Safety Guidelines for Financial Institutions" in order to provide stable, high quality, and appropriate system functionality. Furthermore, as measures for dealing with disasters such as large-scale earthquakes, the Okazaki Shinkin Bank has duplicated the system circuitry, and strives to ensure the effectiveness of emergency response by carrying out system failure training.

●System Risk

Administrative risk is the risk of loss due to any executive or employee neglecting to properly carry out their duties, or due to accidents or illegal activities. At the Okazaki Shinkin Bank, the Operations Management Division periodically updates the "Administrative Procedure Guidelines", and also strives to maintain an internal environment in which administrative work is carried out correctly and where employee knowledge of administrative procedures is acquired and improved through education, training, and in-branch lecture. Furthermore, when an administrative error occurs, the cause of the error is investigated, and all employees are notified of how to handle the situation in the future in order to prevent the mistake from occurring again. In addition, an internal control structure has been setup to prevent mistakes whereby each branch conducts a monthly internal inspection, and internal audits are carried out periodically by the Audit Division.

●Administrative Risk

Efforts are made to maintain the appropriate administrative readiness and reduce risks during normal business operations.●Other Risk

This is the risk of loss due to an executive or employee violating the law or behaving inappropriately while performing their duties.Legal Risk

This is the risk of loss due to employment problems with executives and employees or occupational injuries in the workplace.Personal Risk

This is the risk of loss due to the tangible assets being held by the Okazaki Shinkin Bank being destroyed by natural disasters, etc.Tangible Asset Risk

This is the risk of loss due to a dramatic drop in the level of trust in the Okazaki Shinkin Bank due to rumors of poor financial conditions or due to the words and actions of executives and employees.

Reputation Risk

Operational risk is a collective term for risks that have a major impact on operations and where losses are caused by errors in business process, the activities of managers and employees, computer system processing, etc. or from changes in external conditions. In response to operational risk, the Okazaki Shinkin Bank decides the basic policies for risk management each year for system risks and administrative risks and proceeds with preparations and maintenance, and also the relevant departments take efforts to prevent the occurrence of other risks, including legal risks, personal risks, tangible asset risks, and reputation risks.

Operational Risk

Credit risk is the risk of loss to a financial institution if the value of assets held by the financial institution is reduced or destroyed by worsening financial conditions, bankruptcy, etc. of borrowers. At the Okazaki Shinkin Bank, the basic attitude that executives and staff take part in our credit business is established by our "Credit Policy," and we strive to maintain a suitable screening and management system based on it. Furthermore, for all borrowers, a calculation of the credit risk is carried out by a VaR through the applicable credit rating based on the business conditions by considering quantitative information such as financial information, and qualitative information such as the strength of the business, and a rigorous asset assessment is carried out based on the "rules related to self-assessment" in order to ensure the soundness of loan assets. In addition to this, monitoring is performed periodically to ensure that there is no bias of credit to particular borrowers or industries (credit concentration risk) and the risk is dispersed. The Okazaki Shinkin Bank endeavors to appropriately manage the credit risk associated with market transactions by internal regulations decided by the bank.

Credit Risk

Market risk is the risk of loss to a financial institution if the value of assets or debts held by the financial institution, such as cash deposits and securities, fluctuates due to changes in interest rates or variations in the market. Specific examples of market risk include the interest risk that occurs when interest rates change, value variation risk that occurs when the value of securities, etc. change, and exchange risk due to variations in exchange rates. At the Okazaki Shinkin Bank, a cross-checking system has been established where the investment department that performs the market transactions (front office), and business administration department that performs the business processing (back office) are separate, and the risk management department (middle office) is organizationally separate from these market departments. Furthermore, the bank adheres to the appropriate risk limit (the limiting value on the amount of risk) that suits the equity capital approved by the board of directors, and the position limits (the limits on the amount invested and the amount retained). Furthermore, for the market risk, which varies daily due to market trends, rigorous management is performed by periodically monitoring the amount of risk as calculated by a VaR.

Market Risk

Liquidity risk is the risk of loss out of the necessity to obtain funds at much higher interest rates than are normally used to procure funds in the event that the required funds become difficult to secure and there is a shortfall in cash as a result of unexpected losses in liquid funds due to market turmoil or worsening of the financial conditions of the bank. In addition to taking care to hold securities that have a highly liquid market, such as national and municipal bonds, in order that sudden demands for cash can be handled adequately, strict management is made to ensure that surplus funding reserves are held, and that the liquidity risk is not actualized.

Liquidity Risk

Efforts to Strengthen the Risk Management System

The Bank has prioritized measures against money laundering and the financing of terrorism as issues that are important to management, and works to maintain effective risk management systems regarding money laundering and the financing of terrorism grounded on a risk-based approach. Moreover, the Bank regularly verifies the effectiveness of policies related to measures against money laundering and the financing of terrorism, and continuously enhances and strengthens relevant management systems, and this includes making improvements as necessary.

Actions against money laundering, etc.

In order to sever relations with antisocial forces, which threaten the public order and the public safety and hinder sound economic and social development, the Bank rejects unreasonable demands with a resolute attitude, based on taking both civil and criminal legal countermeasures, etc., and does not associate with such antisocial forces with regard to funding, inappropriate or unusual transactions, or the provision of benefits. The Bank has set forth these and other matters in a "Basic Policy regarding Antisocial Forces," and upholds this policy.

Actions against antisocial forces

Initiatives regarding Measures against Money Laundering and Financing of Terrorism

Okashin_AR_01-10_2019.indd 5 19/09/10 23:03

5 6

System risk is the risk of loss due to damage, incorrect operation due to malfunctions, illicit usage, information leaks, cyber-attacks, etc. involving our computer system. The Okazaki Shinkin Bank endeavors to ensure the stability and reliability of hardware and software based on the "Computer System Safety Guidelines for Financial Institutions" in order to provide stable, high quality, and appropriate system functionality. Furthermore, as measures for dealing with disasters such as large-scale earthquakes, the Okazaki Shinkin Bank has duplicated the system circuitry, and strives to ensure the effectiveness of emergency response by carrying out system failure training.

●System Risk

Administrative risk is the risk of loss due to any executive or employee neglecting to properly carry out their duties, or due to accidents or illegal activities. At the Okazaki Shinkin Bank, the Operations Management Division periodically updates the "Administrative Procedure Guidelines", and also strives to maintain an internal environment in which administrative work is carried out correctly and where employee knowledge of administrative procedures is acquired and improved through education, training, and in-branch lecture. Furthermore, when an administrative error occurs, the cause of the error is investigated, and all employees are notified of how to handle the situation in the future in order to prevent the mistake from occurring again. In addition, an internal control structure has been setup to prevent mistakes whereby each branch conducts a monthly internal inspection, and internal audits are carried out periodically by the Audit Division.

●Administrative Risk

Efforts are made to maintain the appropriate administrative readiness and reduce risks during normal business operations.●Other Risk

This is the risk of loss due to an executive or employee violating the law or behaving inappropriately while performing their duties.Legal Risk

This is the risk of loss due to employment problems with executives and employees or occupational injuries in the workplace.Personal Risk

This is the risk of loss due to the tangible assets being held by the Okazaki Shinkin Bank being destroyed by natural disasters, etc.Tangible Asset Risk

This is the risk of loss due to a dramatic drop in the level of trust in the Okazaki Shinkin Bank due to rumors of poor financial conditions or due to the words and actions of executives and employees.

Reputation Risk

Operational risk is a collective term for risks that have a major impact on operations and where losses are caused by errors in business process, the activities of managers and employees, computer system processing, etc. or from changes in external conditions. In response to operational risk, the Okazaki Shinkin Bank decides the basic policies for risk management each year for system risks and administrative risks and proceeds with preparations and maintenance, and also the relevant departments take efforts to prevent the occurrence of other risks, including legal risks, personal risks, tangible asset risks, and reputation risks.

Operational Risk

Credit risk is the risk of loss to a financial institution if the value of assets held by the financial institution is reduced or destroyed by worsening financial conditions, bankruptcy, etc. of borrowers. At the Okazaki Shinkin Bank, the basic attitude that executives and staff take part in our credit business is established by our "Credit Policy," and we strive to maintain a suitable screening and management system based on it. Furthermore, for all borrowers, a calculation of the credit risk is carried out by a VaR through the applicable credit rating based on the business conditions by considering quantitative information such as financial information, and qualitative information such as the strength of the business, and a rigorous asset assessment is carried out based on the "rules related to self-assessment" in order to ensure the soundness of loan assets. In addition to this, monitoring is performed periodically to ensure that there is no bias of credit to particular borrowers or industries (credit concentration risk) and the risk is dispersed. The Okazaki Shinkin Bank endeavors to appropriately manage the credit risk associated with market transactions by internal regulations decided by the bank.

Credit Risk

Market risk is the risk of loss to a financial institution if the value of assets or debts held by the financial institution, such as cash deposits and securities, fluctuates due to changes in interest rates or variations in the market. Specific examples of market risk include the interest risk that occurs when interest rates change, value variation risk that occurs when the value of securities, etc. change, and exchange risk due to variations in exchange rates. At the Okazaki Shinkin Bank, a cross-checking system has been established where the investment department that performs the market transactions (front office), and business administration department that performs the business processing (back office) are separate, and the risk management department (middle office) is organizationally separate from these market departments. Furthermore, the bank adheres to the appropriate risk limit (the limiting value on the amount of risk) that suits the equity capital approved by the board of directors, and the position limits (the limits on the amount invested and the amount retained). Furthermore, for the market risk, which varies daily due to market trends, rigorous management is performed by periodically monitoring the amount of risk as calculated by a VaR.

Market Risk

Liquidity risk is the risk of loss out of the necessity to obtain funds at much higher interest rates than are normally used to procure funds in the event that the required funds become difficult to secure and there is a shortfall in cash as a result of unexpected losses in liquid funds due to market turmoil or worsening of the financial conditions of the bank. In addition to taking care to hold securities that have a highly liquid market, such as national and municipal bonds, in order that sudden demands for cash can be handled adequately, strict management is made to ensure that surplus funding reserves are held, and that the liquidity risk is not actualized.

Liquidity Risk

Efforts to Strengthen the Risk Management System

The Bank has prioritized measures against money laundering and the financing of terrorism as issues that are important to management, and works to maintain effective risk management systems regarding money laundering and the financing of terrorism grounded on a risk-based approach. Moreover, the Bank regularly verifies the effectiveness of policies related to measures against money laundering and the financing of terrorism, and continuously enhances and strengthens relevant management systems, and this includes making improvements as necessary.

Actions against money laundering, etc.

In order to sever relations with antisocial forces, which threaten the public order and the public safety and hinder sound economic and social development, the Bank rejects unreasonable demands with a resolute attitude, based on taking both civil and criminal legal countermeasures, etc., and does not associate with such antisocial forces with regard to funding, inappropriate or unusual transactions, or the provision of benefits. The Bank has set forth these and other matters in a "Basic Policy regarding Antisocial Forces," and upholds this policy.

Actions against antisocial forces

Initiatives regarding Measures against Money Laundering and Financing of Terrorism

Okashin_AR_01-10_2019.indd 6 19/09/10 23:03

On February 18, 2019, an event was held at the large hall of the headquarters in which scholarship students of the "Okashin Advanced Science Scholarship Program" gave presentations on the outcomes of the program. The Bank created the "Okashin Advanced Science Scholarship Program" in August 2012 with the aim of contributing to the development of local communities and cultivation of human resources, based on a regional partnership agreement with the National Institutes of Natural Sciences in Okazaki City.

Revamping of Cash Cards and Cash Envelopes, Holding of Commemorative Gift Presentation Ceremony for Artists Whose Designs Were AdoptedOn March 2, 2019, a ceremony was held at the Nagoya Branch for the presentation of commemorative gifts to 31 artists whose designs were adopted for 12 companies in Aichi Prefecture, and Aichi Governor Hideaki Omura and the personnel of the companies were invited to the event. The Bank revamped cash cards and three types of cash envelopes for the first time in four years, and adopted the designs of the four artists for these items.The Bank supports the activities of the general incorporated association Attic Art, which supports the independence of disabled artists who have outstanding talent in the area of painting.

Holding of "Aichi Art Brut × Attic Art" Exhibition of Adopted Paintings

An "Aichi Art Brut × Attic Art" exhibition of the designs that were adopted for bank items was held at the Nagoya Branch from February 20 through March 3, 2019.

The Okazaki Shinkin Bank offers a wide variety of international operations, including overseas remittances and trade transactions, as part of an effort to better tailor services to the more diversified and sophisticated requirements of a client base increasingly engaged in cross-border activities. International Business Division and Market Operations Division are capable of offering a full range of foreign currency exchange services. Other services include providing exchange-rate information and holding seminars on overseas investment to support local companies as they seek to expand their trade and business connections with overseas countries. We have been broadening our range of international operations since 1986, when we first became involved in international correspondent banking. To support these operations, we set up international communications channels and a dedicated computer system for administration of correspondent banking in fiscal 1994, and a new online international accounts service in fiscal 2001. In May 2006, we launched our internet application service for foreign exchange transaction to enhance customer convenience. As of June 30, 2019 the Bank's international correspondent banking network encompassed 211 banks located in 35 countries.

7 8

total: 211ASIABANGLADESHCAMBODIACHINAHONG KONGINDIAINDONESIAKOREAMALAYSIAPAKISTANPHILIPPINESSINGAPORESRI LANKATAIWANTHAILANDVIETNAMJAPAN

NORTH AMERICACANADAU.S.A.

LATIN AMERICAARGENTINABRAZILPERUPARAGUAY

212

1311

OCEANIAAUSTRALIANEW ZEALAND

22

Offices of Correspondent Banks Abroad

EUROPE 20

ASIA140

OCEANIA4

LATIN AMERICA 6

NORTH AMERICA14

(As of June 30, 2019)

International Operations Topics

Winning of "First Aichi Kizukai Award" Prize for Excellence and "Third Okazaki Scenery Award"

Holding of "Okashin Advanced Science Scholarship Program" Outcome Presentation Event

On April 2, 2018, the Bank received a letter of appreciation from the Chief of the Aichi Prefectural Police for being an organization promoting traffic safety that contributed to the prevention of traffic accidents. Furthermore, on April 23, 2018, the Mizuho Branch received a letter of appreciation from the Mizuho Police Department for having contributed to the "prevention of damage from special fraud." In addition, on April 27, 2018, the Nagoya Branch received a letter of appreciation from the Naka Police Department for having contributed to the "prevention of damage from bank transfer fraud."

On May 19, 2018, Jokamachi Branch received the "First Aichi Kizukai Award" Prize for Excellence (Aichi Prefecture Forest Association Director’s Prize) from Aichi Prefecture for having a building that very effectively publicly promotes "kizukai," the environmentally-conscious use of wood, since it makes proactive use of Aichi-certified materials and enables visitors to experience the positive aspects of using wood. Furthermore, on June 17, 2018, the branch received the "Third Okazaki Scenery Award (Architecture Category)." In receiving the award on this occasion, the branch was praised for its open-style architectural design that provides an abundance of sunlight and natural warmth and is made extensively from local wood, and for the fact that the landscaping and the plants on the premises bring out the charm of the building in harmony with the surrounding cityscape.

On January 29, 2019, Nagoya Branch received the 26th "Aichi Cityscape Architecture Award," making it the first financial institution to win the award. The branch’s building features an exterior aluminum cast screen with a hemp leaf motif, which is a traditional Japanese pattern, and thus the building was praised for having an outside appearance that is in harmony with the Japanese style of the surrounding Misono-za theater district.

Receipt of Letter of Appreciation from Aichi Prefectural Police

221

33276

1162317

196

1427

EUROPEBELGIUM DENMARKFRANCEGERMANYITALYLUXEMBOURGNETHERLANDSRUSSIASPAINSWITZERLANDU.K.

21135211211

Winning of 26th "Aichi Cityscape Architecture Award"

On July 31, 2018, an Okashin summer school entitled "Toray Kids Science School" was held at the Okazaki Plant of Toray Industries, Inc. The participating elementary school students and their parents carried out easy-to-follow

experiments using cutting-edge materials, and by doing so were able to experience the fun of manufacturing and learn about science.

Holding of Okashin Summer School, "Toray Kids Science School"

Support for Activities of Attic Art

Okashin_AR_01-10_2019.indd 7 19/09/10 23:04

On February 18, 2019, an event was held at the large hall of the headquarters in which scholarship students of the "Okashin Advanced Science Scholarship Program" gave presentations on the outcomes of the program. The Bank created the "Okashin Advanced Science Scholarship Program" in August 2012 with the aim of contributing to the development of local communities and cultivation of human resources, based on a regional partnership agreement with the National Institutes of Natural Sciences in Okazaki City.

Revamping of Cash Cards and Cash Envelopes, Holding of Commemorative Gift Presentation Ceremony for Artists Whose Designs Were AdoptedOn March 2, 2019, a ceremony was held at the Nagoya Branch for the presentation of commemorative gifts to 31 artists whose designs were adopted for 12 companies in Aichi Prefecture, and Aichi Governor Hideaki Omura and the personnel of the companies were invited to the event. The Bank revamped cash cards and three types of cash envelopes for the first time in four years, and adopted the designs of the four artists for these items.The Bank supports the activities of the general incorporated association Attic Art, which supports the independence of disabled artists who have outstanding talent in the area of painting.

Holding of "Aichi Art Brut × Attic Art" Exhibition of Adopted Paintings

An "Aichi Art Brut × Attic Art" exhibition of the designs that were adopted for bank items was held at the Nagoya Branch from February 20 through March 3, 2019.

The Okazaki Shinkin Bank offers a wide variety of international operations, including overseas remittances and trade transactions, as part of an effort to better tailor services to the more diversified and sophisticated requirements of a client base increasingly engaged in cross-border activities. International Business Division and Market Operations Division are capable of offering a full range of foreign currency exchange services. Other services include providing exchange-rate information and holding seminars on overseas investment to support local companies as they seek to expand their trade and business connections with overseas countries. We have been broadening our range of international operations since 1986, when we first became involved in international correspondent banking. To support these operations, we set up international communications channels and a dedicated computer system for administration of correspondent banking in fiscal 1994, and a new online international accounts service in fiscal 2001. In May 2006, we launched our internet application service for foreign exchange transaction to enhance customer convenience. As of June 30, 2019 the Bank's international correspondent banking network encompassed 211 banks located in 35 countries.

7 8

total: 211ASIABANGLADESHCAMBODIACHINAHONG KONGINDIAINDONESIAKOREAMALAYSIAPAKISTANPHILIPPINESSINGAPORESRI LANKATAIWANTHAILANDVIETNAMJAPAN

NORTH AMERICACANADAU.S.A.

LATIN AMERICAARGENTINABRAZILPERUPARAGUAY

212

1311

OCEANIAAUSTRALIANEW ZEALAND

22

Offices of Correspondent Banks Abroad

EUROPE 20

ASIA140

OCEANIA4

LATIN AMERICA 6

NORTH AMERICA14

(As of June 30, 2019)

International Operations Topics

Winning of "First Aichi Kizukai Award" Prize for Excellence and "Third Okazaki Scenery Award"

Holding of "Okashin Advanced Science Scholarship Program" Outcome Presentation Event

On April 2, 2018, the Bank received a letter of appreciation from the Chief of the Aichi Prefectural Police for being an organization promoting traffic safety that contributed to the prevention of traffic accidents. Furthermore, on April 23, 2018, the Mizuho Branch received a letter of appreciation from the Mizuho Police Department for having contributed to the "prevention of damage from special fraud." In addition, on April 27, 2018, the Nagoya Branch received a letter of appreciation from the Naka Police Department for having contributed to the "prevention of damage from bank transfer fraud."

On May 19, 2018, Jokamachi Branch received the "First Aichi Kizukai Award" Prize for Excellence (Aichi Prefecture Forest Association Director’s Prize) from Aichi Prefecture for having a building that very effectively publicly promotes "kizukai," the environmentally-conscious use of wood, since it makes proactive use of Aichi-certified materials and enables visitors to experience the positive aspects of using wood. Furthermore, on June 17, 2018, the branch received the "Third Okazaki Scenery Award (Architecture Category)." In receiving the award on this occasion, the branch was praised for its open-style architectural design that provides an abundance of sunlight and natural warmth and is made extensively from local wood, and for the fact that the landscaping and the plants on the premises bring out the charm of the building in harmony with the surrounding cityscape.

On January 29, 2019, Nagoya Branch received the 26th "Aichi Cityscape Architecture Award," making it the first financial institution to win the award. The branch’s building features an exterior aluminum cast screen with a hemp leaf motif, which is a traditional Japanese pattern, and thus the building was praised for having an outside appearance that is in harmony with the Japanese style of the surrounding Misono-za theater district.

Receipt of Letter of Appreciation from Aichi Prefectural Police

221

33276

1162317

196

1427

EUROPEBELGIUM DENMARKFRANCEGERMANYITALYLUXEMBOURGNETHERLANDSRUSSIASPAINSWITZERLANDU.K.

21135211211

Winning of 26th "Aichi Cityscape Architecture Award"

On July 31, 2018, an Okashin summer school entitled "Toray Kids Science School" was held at the Okazaki Plant of Toray Industries, Inc. The participating elementary school students and their parents carried out easy-to-follow

experiments using cutting-edge materials, and by doing so were able to experience the fun of manufacturing and learn about science.

Holding of Okashin Summer School, "Toray Kids Science School"

Support for Activities of Attic Art

Okashin_AR_01-10_2019.indd 8 19/09/10 23:04

Board of Directors and Corporate Auditors

9

(As of June 30, 2019)

Toshihiro Asayama Yuki Inaba Hisamoto Ujihara Kaoru Sugiyama Takahiro Ando Teiji TachibanaKenro Kobayashi Akiyoshi Sakakibara Takuji IkutaKazuo Kawahara

Directors Corporate AuditorsShigeki Sakai (standing) Jun Kawai Kazumoto Ozaki (standing) Tsuchio Hosoi

10

Directory

Organization Chart (As of June 30, 2019)

GeneralMember'sMeeting

Board of Corporate AuditorsCorporate Auditors

Board of Directors

Exective Committee

Directors

SeniorManaging Director

Managing Directors

Chairman of the Board

Deputy President

President

Audit Division

General Planning Division

General Affairs Division

Property Administration Division

Branch Banking Support Division No.1

Branch Banking Support Division No.2

Risk Management Division

Branch Banking Support Division No.3

Regional Development Division

International Business Division

Market Operations Division

Operations Management Division

Operations Administration Division

Financial Crimes Project

Operational Reform Project

Treasury & Securities Division

Offices

Nagoya Business Division

Sub-OfficeOkazaki Main Office(Business Div.)

Human Resources Division

Chairman of the Board Ichiro Obayashi

Deputy President Masahiko Ueno

Senior Managing Director Kazunari Uno

Managing Director Sugao Asakura

Managing Director Masahiro Kuroyanagi

PresidentHideaki Tanaka

(Note) Auditor Tsuchio Hosoi is a "non-member auditor" as stipulated in Shinkin Bank Act Article 32 Paragraph 5.

International Business Division41 Motosuga, Sugo-cho, Okazaki, Aichi 444-0035, Japan　Telephone: +81-564-25-7198Mailing Address: Okazaki P.O. Box No. 30, Aichi 444-8602, JapanSWIFT Address: OKSB JP JZ　Facsimile: +81-564-24-9660

Head OfficeTHE OKAZAKI SHINKIN BANK

41 Motosuga, Sugo-cho, Okazaki, Aichi 444-0035, Japan　Telephone: +81-564-21-6111

Okashin_AR_01-10_2019.indd 9 19/09/10 23:05

Board of Directors and Corporate Auditors

9

(As of June 30, 2019)

Toshihiro Asayama Yuki Inaba Hisamoto Ujihara Kaoru Sugiyama Takahiro Ando Teiji TachibanaKenro Kobayashi Akiyoshi Sakakibara Takuji IkutaKazuo Kawahara

Directors Corporate AuditorsShigeki Sakai (standing) Jun Kawai Kazumoto Ozaki (standing) Tsuchio Hosoi

10

Directory

Organization Chart (As of June 30, 2019)

GeneralMember'sMeeting

Board of Corporate AuditorsCorporate Auditors

Board of Directors

Exective Committee

Directors

SeniorManaging Director

Managing Directors

Chairman of the Board

Deputy President

President

Audit Division

General Planning Division

General Affairs Division

Property Administration Division

Branch Banking Support Division No.1

Branch Banking Support Division No.2

Risk Management Division

Branch Banking Support Division No.3

Regional Development Division

International Business Division

Market Operations Division

Operations Management Division

Operations Administration Division

Financial Crimes Project

Operational Reform Project

Treasury & Securities Division

Offices

Nagoya Business Division

Sub-OfficeOkazaki Main Office(Business Div.)

Human Resources Division

Chairman of the Board Ichiro Obayashi

Deputy President Masahiko Ueno

Senior Managing Director Kazunari Uno

Managing Director Sugao Asakura

Managing Director Masahiro Kuroyanagi

PresidentHideaki Tanaka

(Note) Auditor Tsuchio Hosoi is a "non-member auditor" as stipulated in Shinkin Bank Act Article 32 Paragraph 5.

International Business Division41 Motosuga, Sugo-cho, Okazaki, Aichi 444-0035, Japan　Telephone: +81-564-25-7198Mailing Address: Okazaki P.O. Box No. 30, Aichi 444-8602, JapanSWIFT Address: OKSB JP JZ　Facsimile: +81-564-24-9660

Head OfficeTHE OKAZAKI SHINKIN BANK

41 Motosuga, Sugo-cho, Okazaki, Aichi 444-0035, Japan　Telephone: +81-564-21-6111

Okashin_AR_01-10_2019.indd 10 19/09/10 23:05

41 Motosuga, Sugo-cho, Okazaki, Aichi 444-0035, JapanTEL : +81-564-21-6111 URL : http://www.okashin.co.jp

Okashin_H1-H4.indd 4 19/09/10 23:01