The Gunma Bank, Ltd.

If the business conditions of counterparties deteriorate due to changes in domestic and overseas economic conditions or region/industry-specific factors, credit-related expenses and non-performing loans may increase, adversely affecting business results and financial condition. The Bank strives to curb short-term fluctuations in credit costs through rigorous screening, post-lending management, and management improvement support, as well as timely and appropriate debtor rating and self-assessment and the application of the DCF method.

If interest rates rise due to changes in monetary policy in major countries or market turmoil, the price of held bonds may decline, adversely affecting business results and financial condition. The Bank strives to minimize losses by diversifying risk through investments that take redemption balance into account and by establishing a monitoring system for various indicators.

If stock prices decline due to domestic and overseas economic conditions or deterioration in supply-demand balance in the stock market, the value of held equities and other securities may decline, adversely affecting business results and financial condition. The Bank has established a system for risk diversification through diversification of industries and issues, as well as a system for rapid response according to market trends.

As the Bank has overseas business locations, the internationally uniform standard applies, and if the capital adequacy ratio falls below the required level, the Bank may receive orders from the Financial Services Agency such as restrictions on external outflows or suspension of business. The Bank strives to maintain the required level through verification of sufficiency via stress tests, setting of alarm points, and formulation of capital plans and investment/lending plans each period.

Regulations concerning money laundering, terrorist financing, proliferation financing, and economic sanctions violations are constantly changing both domestically and internationally, and if the management framework becomes inadequate, adverse effects such as unexpected costs, termination of correspondent bank agreements, punitive fines, and loss of social credibility may occur. The Bank strives to build an effective management framework through risk-based tightening of customer identification at the time of transactions and the introduction of suspicious transaction detection systems.

If a system outage or malfunction occurs due to failure of computer equipment or communication lines or program defects, or if information is destroyed or leaked due to an external cyberattack, this may lead to suspension of settlement functions and services and loss of social credibility, adversely affecting business results and financial condition. The Bank, in addition to implementing safety measures based on FISC standards, is working to continuously strengthen its management framework through information sharing with external organizations and cyberattack drills and exercises.

In January 2026, the Bank decided to participate in the joint use of the TSUBASA core banking system and is proceeding with consideration toward operation during FY2029 (ending March 2030). If, due to unforeseen events, the migration is delayed or discontinued, or costs increase substantially, this may adversely affect business results and financial condition. As this is a large-scale system migration project, the execution risk is correspondingly high.

The Bank and Daishi Hokuetsu Financial Group, Inc. plan to carry out a business integration through a share exchange in April 2027, establishing the integrated holding company "Gunma Niigata Financial Group, Inc." If unexpected losses or expenses occur during the integration process, this may affect the business results, financial condition, and share price of the Bank Group.

Large-scale disasters caused by abnormal weather may result in direct damage to officers, employees, and branches, as well as deterioration in the financial condition of counterparties and the value of collateral assets, potentially increasing credit-related expenses. In addition, there is a risk that policy changes, tightened regulations, and technological innovation accompanying the rapid transition to a low-carbon society may deteriorate the business performance of counterparties, increasing credit-related expenses over the medium to long term.

If unauthorized access by insiders or outsiders results in the leakage, loss, falsification, or unauthorized use of customer information or management information, this may adversely affect business results and financial condition due to loss of social credibility. In addition, administrative errors resulting from improper handling of clerical work related to various transactions, as well as failures or information leaks at outsourcing contractors, pose similar risks, and the Bank addresses these through strengthening its information management framework and establishing regulations for managing outsourcing contractors.