The Fukui Bank,Ltd.

Credit-related expenses may increase due to economic trends and real estate price fluctuations, potentially reducing capital. Deterioration in the business performance of counterparties resulting from geopolitical risks (the invasion of Ukraine, the situation in the Middle East, etc.) is also a factor that heightens credit risk. As a countermeasure, the Bank has established "Standards for Managing Credit Concentration Risk" and conducts regular portfolio analysis and monitoring by industry and region.

There is a risk that valuation losses on held Japanese government bonds and other assets may expand due to increases in the Bank of Japan's policy interest rate or fluctuations in overseas monetary policy, a risk of valuation losses and impairment on held equities due to a global economic slowdown, and a risk of erosion in the value of foreign-currency-denominated assets due to exchange rate fluctuations. As part of ALM, the Bank regularly measures and evaluates the amount of interest rate risk, sets position limits and loss limits, and conducts daily monitoring through the middle office.

Deterioration of the business base and stagnation of regional industry and the economy due to population decline and the falling birthrate and aging population are positioned as the top-priority risk, as they directly impact the Bank Group's revenue base and very reason for existence. Since Fukui Prefecture is the Bank's primary business base and the majority of operating revenue is derived from financial services in that region, the impact of region-specific risk events is relatively large. Risks are identified and managed through both top-down and bottom-up approaches by management and are reflected in the RAF.

Following the merger of The Fukui Bank and Fukuho Bank effective May 2, 2026, there is a risk that integration effects may not be fully realized, as well as a risk that intensifying competition could shrink the revenue base. Maximizing integration effects is positioned as one of the top risks, as it is directly linked to enhancing value provided to the region. The Bank regularly monitors progress on its Medium-Term Management Plan and flexibly reviews strategy in response to changes in the environment.

Declining competitiveness due to delays in responding to digitalization, and damage to the continuity and credibility of regional financial services caused by cyberattacks (unauthorized intrusion, information theft, DDoS attacks, etc.) or large-scale system failures, are recognized as top risks. The Bank has formulated its "Basic Policy for Cybersecurity Risk Management" and has built a multi-layered defense system through the introduction and enhancement of intrusion detection systems, regular vulnerability assessments, and security education for officers and employees.

If the consolidated or non-consolidated capital adequacy ratio, based on domestic standards, falls below 4%, the Bank may receive an order from the Commissioner of the Financial Services Agency to suspend all or part of its operations. Key factors that could affect this include an increase in risk assets, an increase in credit-related expenses, worsening securities valuation losses, and changes in the standards for calculating the capital adequacy ratio. The Bank thoroughly manages its operations by utilizing its "Risk Capital System" to take risks within the bounds of its capital.

Deterioration in business performance, credit rating downgrades, or worsening market conditions could force the Bank to raise funds under significantly less favorable terms than usual, and there is also a risk of rising foreign currency funding costs. Liquidity risk is managed by classifying it into three stages"normal," "of concern," and "crisis"with contingency plans established for each stage, while also diversifying funding sources and securing sufficient liquidity reserves.

Abnormal weather and stricter decarbonization regulations could lead to damage to the Bank Group's business locations or deterioration in the performance of counterparties, and disruption to business activities due to large-scale natural disasters or the spread of infectious diseases is also recognized as a top risk. The Bank is examining countermeasures for physical and transition risks through scenario analysis, developing BCPs and conducting regular drills, and establishing backup sites.

Difficulty in securing human resources, driven by the external environment, is positioned as a top risk that could stall sustainable growth, and the Bank also recognizes the adverse impact on business execution that could result from unfairness or inequity in personnel management. The Bank strives to maintain and improve a sound working environment through the development and operation of a fair and equitable personnel evaluation system, appropriate staff assignment, training and education, and the establishment of consultation channels to prevent harassment.

Changes in financial regulations, tax systems, accounting standards, and the like may affect business execution and performance, and there is also a risk of business suspension, fines, and loss of credibility due to inadequate anti-money laundering measures. The Bank continuously monitors trends in legal and regulatory revisions, and is enhancing the precision of customer management, transaction filtering, and transaction monitoring based on a risk-based approach, as well as conducting regular training for officers and employees.