THE TOHOKU BANK,LTD.

If a borrower goes bankrupt or its business deteriorates, or if the value of collateral real estate or securities declines, new costs for disposing of non-performing loans may arise, which could adversely affect business performance. As of March 31, 2026, the coverage ratio for disclosed claims under the Financial Reconstruction Act was 75.13% on a non-consolidated (Bank-only) basis, and the amount of credit risk (VaR, 99.0% confidence interval, 1-year holding period) was ¥1,041 million (¥1,024 million in the previous fiscal year). The Bank manages this risk by ensuring the objectivity of credit screening based on its lending regulations, managing its credit portfolio, and discussing response policies for borrowers under intensive management.

There is a risk that interest margins may shrink due to interest rate fluctuations arising from a mismatch between investment and funding periods, as well as a risk of impairment or valuation losses arising from declines in the prices of held bonds and stocks. As of March 31, 2026, the amount of market risk (VaR, 99.0% confidence interval, 240-day holding period) was ¥9,548 million (¥8,422 million in the previous fiscal year), a level substantially exceeding the amount of credit risk. The ALM Committee confirms the market investment policy on a monthly basis and thoroughly manages investments within the established risk management limits.

Instability in the financial system or deterioration in the Bank's creditworthiness could make it difficult to secure necessary funds, potentially forcing the Bank to raise funds at significantly higher interest rates. Based on its liquidity risk management regulations, the Bank has established a system for regular daily and monthly reporting, and the ALM Committee manages medium- to long-term fund flow trends. The Bank conducts drills assuming a liquidity crisis once a year to improve the effectiveness of its business continuity plan.

If the Bank's consolidated or non-consolidated capital adequacy ratio falls below the domestic standard of 4%, the Bank may be subject to administrative dispositions such as business suspension by the Financial Services Agency. Capital could be impaired due to the materialization of losses from credit risk, market risk, and operational risk, changes in the method of calculating the capital adequacy ratio, and reductions in deferred tax assets, among other factors. The ALM Committee sets risk management limits by risk category and manages risk-taking commensurate with the Bank's financial strength.

The Bank has issued 4,000,000 shares of Class 1 Preferred Stock, and through the exercise of acquisition request rights or mandatory acquisition by the Bank up until September 28, 2037, up to 12,360,939 shares of common stock (equivalent to 129.97% of the 9,509,963 shares of common stock currently outstanding) may be issued. This poses a risk of significant dilution of the equity interests of existing common shareholders. Note that since September 29, 2022, the Bank has been in a position to acquire all or part of the Class 1 Preferred Stock by resolution of the Board of Directors.

As the Bank is a regional bank whose primary business area is Iwate Prefecture, a deterioration in the Iwate Prefecture economy could directly and adversely affect business performance through deterioration in the creditworthiness of business partners and a decline in loans. Given the Bank's business structure, which is highly dependent on the regional economy, it is more susceptible to region-specific economic trends than to nationwide economic fluctuations. As risk management measures, the Bank implements diversified management of its credit portfolio and provides support for the business improvement of its business partners.

If officers or employees make administrative errors, cause accidents, engage in misconduct, or leak customer information externally, economic losses such as damages and a decline in social credibility could adversely affect business performance. The Bank strives to establish rigorous administrative practices through the development of administrative regulations, training, and administrative guidance for branch offices.

The suspension or malfunction of computer systems, or unauthorized use resulting from cyberattacks, could adversely affect business operations and performance. The Bank outsources the operation and management of its core systems, and strives to prevent the materialization of system risk by holding regular meetings with the outsourcing contractor and establishing a joint management structure.

The establishment, amendment, or abolition of laws and regulations, or violations of laws and regulations by officers or employees, could result in losses or litigation, which could adversely affect business operations and creditworthiness. The Bank has designated departments responsible for compliance risk and legal risk and strives to strengthen its management structure.

If the Bank falls under any of the grounds for license revocation stipulated in Articles 27 and 28 of the Banking Act, it could hinder the Bank's principal business activities and have a material impact on its business performance. The Bank recognizes that, at present, there are no facts that would constitute grounds for revocation of its license or similar actions, but continues to maintain and strengthen its compliance structure in preparation for unforeseen circumstances in the future.