THE SHIMIZU BANK,LTD.

Non-performing loans may increase and credit-related expenses may expand due to trends in the domestic economy and regional economy, fluctuations in real estate prices and stock prices, and changes in the business conditions of borrowers. In addition, the allowance for loan losses is recorded based on past loan loss ratios and other factors, but depending on economic trends, actual loan losses may diverge from estimates, potentially requiring an increase in the allowance. The Bank Group practices risk management through the use of VaR (99% confidence interval) to grasp risk volume and through its capital allocation system.

Sharp fluctuations in interest rates, stock prices, and foreign exchange rates may generate valuation losses on marketable securities held, affecting business results. Since banking operations are significantly affected by economic trends and changes in the financial and economic environment, a deterioration in market conditions could impact both earnings and financial condition. The Bank manages risk through measurement of risk volume using VaR and its capital allocation system so that risk volume remains within the scope of capital.

The Bank Group must comply with the domestic standard (4%) for the capital adequacy ratio regulation, and while it currently exceeds this standard by a wide margin, the ratio may decline due to increases in credit-related expenses, recognition of impairment on held securities, changes in loans and securities, and restrictions on the recognition of deferred tax assets, among other factors. A decline in the capital adequacy ratio poses a risk of constraining business operations.

Deferred tax assets are recorded based on various assumptions, including forecasts of future taxable income, and actual results may diverge from these assumptions. If it is determined that part or all of the deferred tax assets cannot be recovered, or if there is a change in accounting standards, the deferred tax assets may be reduced, adversely affecting business results.

Maturity mismatches between fund investment and fund procurement, as well as unexpected outflows of funds, may make it difficult to secure necessary funds. There is also a risk that transactions may be forced under conditions less favorable than usual during periods of market turmoil.

When accidents occur due to negligence or misconduct by officers and employees in administrative processing, costs for post-event handling and compensation for damages may arise, affecting business results. In addition, computer system accidents or failures, destruction or leakage of information due to unauthorized use or cyber-crime, and service interruptions including settlement functions may result in a loss of public trust and unforeseen losses.

Insufficient compliance with various rules and laws, or future changes in laws, rules, business practices, interpretations, fiscal policy, etc., may affect business results. The Bank Group positions compliance as a top management priority, and is also working to build an internal control framework based on a risk-based approach with respect to anti-money laundering and counter-terrorism financing measures.

The 29th Medium-Term Management Plan, "KASOKU-Acceleration - Passing the Baton" ("加速-KASOKU-Acceleration～たすきを繋ぐ～"), which starts in April 2026, is based on the fundamental policies of "human capital," "solution sales," and "management foundation." If the various measures do not succeed, the initially envisioned results may not be achieved, potentially affecting business results.

The Bank Group's primary business base is Shizuoka Prefecture, and economic trends and industry trends in the prefecture directly affect changes in loan balances and credit risk. In addition, competition, including from other industries and business types, is intensifying due to the progress of deregulation in the financial industry, and if the Bank Group fails to secure a competitive advantage, it may affect business results.

The Bank Group's business area is dotted along the assumed epicentral region of the Tokai earthquake, and business infrastructure may be damaged by large-scale earthquakes, natural disasters, epidemics, and other events. The progression of climate change may not only directly affect the Bank Group's business operations but also increase credit risk through deterioration in the business activities of client companies. The Bank announced its support for the TCFD recommendations in February 2022 and is advancing its risk management accordingly.