The Bank of Toyama,Ltd.

The risk that non-performing loans and credit-related expenses increase due to deterioration in the financial condition of borrowers. Significant changes in the financial and economic environment, real estate prices, or stock prices could worsen the business conditions of borrowers, potentially resulting in credit costs exceeding current expectations. A management framework has been established through monitoring by the Credit Examination Division and quantification of credit risk via credit ratings and self-assessment.

The risk that, due to timing lags in the repricing of deposits and loans in response to fluctuations in market interest rates, as well as the composition of assets and liabilities, the spread between funding costs and investment yields narrows. This could adversely affect performance through a decline in net interest income. The Risk Management Office of the General Planning Division monitors this daily through gap analysis, interest rate sensitivity analysis, and other methods, and reports monthly to the Management Committee and other bodies.

The risk that the value of held securities, such as Japanese government bonds and other bonds and equities with market prices, decreases due to price fluctuations. If volatile market conditions continue, the value of held assets could decline further, potentially adversely affecting business performance and financial condition. Loss management lines and bond rating management lines have been established to minimize the risk of expanding losses.

The risk that, due to a decline in the value of the securities portfolio, increased credit-related expenses, or reduced recoverability of deferred tax assets, the capital adequacy ratio falls below the domestic standard (4%), resulting in an order from the Commissioner of the Financial Services Agency to suspend all or part of operations. Since deferred tax assets are based on forecasts and assumptions regarding future taxable income, if they are judged to be unrecoverable, a write-down could further reduce the capital adequacy ratio.

The risk that, due to a mismatch in the terms of fund investment and funding or unexpected fund outflows, necessary funds cannot be secured, causing disruption to cash flow. This may force fundraising at significantly disadvantageous costs, and global market turmoil or deterioration in the financial and economic environment could worsen domestic fundraising conditions and liquidity.

The risk that the safety of operational data is compromised by cyberattacks such as unauthorized intrusion, information theft, tampering, encryption (ransomware), or DDoS attacks. This could adversely affect business performance and financial condition through business disruption or leakage of customer information. Various security measures have been implemented, including the introduction of firewalls and Intrusion Prevention Systems (IPS).

The risk that a decline in credibility and losses occur for the Bank Group due to leakage, loss, tampering, improper acquisition or handling, or inappropriate provision to third parties of the vast amount of customer information held. While strict management is pursued through the development of regulations and systems related to information management and thorough employee training, complete prevention cannot be guaranteed.

Since the Bank Group's main business base is Toyama Prefecture, and Toyama Prefecture accounts for a large share of credit extended by region, a deterioration in Toyama Prefecture's economy would directly translate into increased credit risk. Toyama Prefecture has a higher weighting of secondary industry compared to the national average, and in addition to a deterioration in the overall Japanese economy, region-specific economic deterioration could adversely affect business performance.

The risk that the competitive environment within Toyama Prefecture is intensifying due to local competitor banks, megabanks, regional financial institutions from neighboring prefectures, and non-bank lenders, as well as the privatization of government-affiliated financial institutions, the expansion of Japan Post Bank's business scope, and entry into the banking business by companies from other industries. If competitive advantage cannot be secured, situations such as an inability to offset rising funding costs through investment returns may arise, potentially adversely affecting business performance.

The 7th Medium-Term Management Plan (FY2024–FY2028 (ending March 2029)) sets forth key strategies including "transforming the profit structure in a world with interest rates," "strengthening regional financial capability through business support," "pursuing management efficiency through organizational and DX reform," and "establishing an efficient and effective governance framework." However, there is a risk that, due to various factors, these strategies fail to achieve the originally expected results, leading to a deterioration in profitability. Failure of these strategies could adversely affect business performance and financial condition.