Iyogin Holdings, Inc.

The risk that non-performing loans and credit-related expenses increase due to domestic and overseas economic trends, significant fluctuations in real estate prices, stock prices, or exchange rates, or deterioration in the financial condition of borrowers. Additional provisioning for allowance for loan losses may be required when there is a divergence between estimated and actual losses, or when collateral values decline. The Company has established a credit risk management framework centered on an internal rating system, with the risk management department kept independent from sales-related departments.

The risk that mismatches between fund management (loans and securities investment) and fund procurement (deposits, etc.) cause interest rate fluctuations to reduce net interest income or lower the value of held bonds. In particular, during periods of rising interest rates, credit-related expenses may increase due to the deteriorating financial condition of borrowers resulting from higher interest burdens. The Group ALM Committee manages this risk on an integrated basis using multiple methods such as the gap method and VaR.

The Company holds marketable equity securities and foreign-currency-denominated securities, and a broad and significant decline in stock prices could result in impairment or valuation losses, leading to deteriorated business performance and a lower capital adequacy ratio. Yen appreciation in foreign exchange rates could adversely affect the value of unhedged securities. The Company addresses this through integrated risk management and consideration of hedging strategies by the Group ALM Committee.

As the Company has overseas business locations, it is required to maintain compliance with the capital adequacy ratio regulations and leverage ratio regulations under internationally uniform standards. If an increase in non-performing loan disposal, a decrease in unrealized gains on securities, and an increase in required capital occur in combination, the Company could fall below the required standards, potentially triggering prompt corrective action or a business suspension order. The Company evaluates the adequacy of its capital through stress testing, with integrated risk management and required capital management as key pillars.

The risk that computer system failures, malfunctions, or unauthorized use, as well as cyber attacks exploiting generative AI, unauthorized access, or virus infections, result in information leakage or system outages. This includes major failures during the development or renewal of critical systems, which could lead to business suspension or liability for damages. The Company has established a risk management department independent of transaction execution and operations departments to provide mutual checks.

The risk that violations of laws such as the Companies Act, the Banking Act, and the Financial Instruments and Exchange Act, or future changes to or enactment of new laws, adversely affect business performance and financial condition. If measures to prevent money laundering and terrorist financing fail to function effectively, this could result in administrative sanctions such as business suspension or fines, as well as reputational damage. The Company positions compliance as its most important management priority and continuously works to strengthen its AML/CFT framework.

The risk that fund procurement costs rise due to credit rating downgrades stemming from deteriorating creditworthiness or heightened credit concerns regarding Japanese financial institutions as a whole. During periods of financial market turmoil, the market liquidity of held securities could decline significantly, potentially forcing sales at unfavorable prices. The Company prevents the materialization of liquidity risk through monthly fund planning management and a reporting structure to the Group ALM Committee.

The Company recognizes transition risks such as tightening carbon emission regulations, as well as physical risks such as deterioration in borrowers' business performance, damage to collateral real estate, and damage to assets held by the Company Group due to natural disasters, which could affect business activities and financial condition through increased credit-related expenses, among other factors. The Company is enhancing information disclosure based on the TCFD recommendations framework and working to identify and analyze such risks.

As the Company conducts business primarily in Ehime Prefecture, with business partners, personnel, sales branches, and operations centers concentrated in the same region, a large-scale earthquake such as a Nankai Trough earthquake or a localized disaster could cause severe damage to the regional economy as well as to the Company Group's personnel and facilities. The Company strives to avoid or mitigate human and physical damage through the formulation of business continuity plans, disaster countermeasures for facilities, and regular training.

As a bank holding company, the Company relies on dividends and other payments from its subsidiary bank for the majority of its income. If regulatory or contractual restrictions, or a deterioration in the subsidiary bank's earnings, limit the receipt of such dividends, the Company may become unable to pay dividends to its shareholders. This entails a structural risk in which the subsidiary bank's business performance is directly linked to the holding company's financial condition.