The Chiba Kogyo Bank, Ltd.

Due to economic downturn in Japan and Chiba Prefecture, deterioration in the business conditions of business partners, and decline in the value of collateral and guarantees resulting from falling real estate prices, losses such as additional recording of credit-related expenses may occur. As a regional financial institution, the Bank strives to minimize the impact on non-performing loans by continuously monitoring the credit status of individual borrowers and progress of restructuring plans, and by periodically verifying the value of collateral and guarantees.

Given mismatches in interest rates and maturities between held assets and liabilities, fluctuations in interest rates may cause a decrease in profit or losses. As a regional bank, this has a particularly large impact on the deposit-loan spread, which could adversely affect business performance and financial condition. The Bank implements appropriate risk control and reduction under a strict risk management framework.

Losses may occur due to a decline in asset value resulting from price fluctuations of held securities, which could also lead to a decline in the capital adequacy ratio. Position risk on foreign-currency-denominated assets and liabilities due to exchange rate fluctuations similarly exists. The Bank implements appropriate risk control and reduction under a strict risk management framework.

If the capital adequacy ratio falls below the domestic standard of 4% due to increased non-performing loan disposal costs, increased risk assets, impairment from declines in the market value of securities, or changes in the criteria or calculation methods for the capital adequacy ratio, the Bank may receive an order from the Commissioner of the Financial Services Agency to suspend all or part of its operations. A decline in the recoverability of deferred tax assets or a reduction in the corporate tax rate could also lead to a decline in the capital adequacy ratio. The Bank strives to maintain an appropriate level through timely and appropriate implementation of capital policy.

Chiba Prefecture is a promising market located in the greater Tokyo metropolitan area, and there is a risk that competition will intensify due to other financial institutions actively expanding operations there, as well as entry into the financial business by companies from other industries as a result of deregulation. The Bank formulated a new medium-term management plan, "Happiness Design Kizuna Project 2028 - Path to Evolution -," starting April 2025 to address this, but if the strategies and measures do not achieve the initially expected results, this could adversely affect business performance and financial condition.

As the Bank relies on information assets such as core banking and information systems, cyberattacks including targeted attacks, ransomware, DDoS attacks, and intrusions via the supply chain are becoming increasingly sophisticated and elaborate, which could adversely affect business operations and performance. Management has positioned cybersecurity as an important management issue and is working to build a framework for identifying, evaluating, monitoring, and controlling such risks.

As the Bank holds a large amount of personal and corporate customer information, if personal information or management information is leaked externally due to unauthorized access to computer systems from inside or outside the Bank or other incidents, this could result in losses such as damages and a loss of social credibility, adversely affecting business operations and performance. The Bank strives for strict information management through the development of regulations related to information management and the implementation of various education and training programs.

Natural disasters such as earthquakes and storm/flood damage, or the spread of infectious diseases, may damage the Bank's tangible assets or disrupt business activities, and could adversely affect business performance and financial condition through damage to borrowers and a decline in collateral value due to falling real estate prices. Since Chiba Prefecture is the Bank's main business base, the impact of a large-scale disaster centered on that prefecture would be particularly significant. The Bank responds by formulating contingency plans for various emergency scenarios and establishing emergency response systems.

If credit ratings are downgraded by external rating agencies, this may result in an increase in funding costs, difficulty in raising funds, and deterioration of market transaction terms. The Bank strives to steadily implement the strategies and measures of its management plan, achieve its performance targets, and maintain sound finances, while also working to maintain its external credit ratings through appropriate information disclosure.

If officers and employees fail to comply with laws and regulations, or due to differences in the interpretation of laws or procedural deficiencies, losses such as administrative sanctions and damages may occur, adversely affecting business operations and performance. There is also a risk of administrative sanctions such as surcharge orders or business improvement orders if the Bank fails to comply with laws and regulations related to anti-money laundering and counter-terrorist financing measures. The Bank positions compliance as its most important management issue and is working on developing regulations and frameworks as well as education and training.