THE OITA BANK, LTD.

As of the end of March 2026, the non-performing loan ratio stood at 1.49%; however, deterioration of the global or Japanese economy, fluctuations in real estate and stock prices, or deterioration in the financial condition of borrowers could cause non-performing loans to increase. In addition, with respect to credit extended overseas, there is a risk of incurring losses due to the political and economic conditions of the countries of the borrowers. If credit costs exceed current expectations, this could adversely affect business performance and financial condition.

The principal source of earnings is the interest margin income from fund management and fund procurement, and there may be a time lag between changes in market interest rates and the repricing of deposit and loan rates. Amid mismatches in the interest rates or maturities of assets and liabilities, fluctuations in interest rates could narrow the margin between funding yields and investment yields, reducing net interest income. This could adversely affect business performance and financial condition.

The Group holds securities such as government bonds and other bonds, as well as stocks with market prices, and there is a risk that asset values may decline due to future price fluctuations. The occurrence of impairment or valuation losses could adversely affect business performance and financial condition. In addition, there is exchange rate risk arising from net positions in foreign currency-denominated assets and liabilities.

The Group has adopted the domestic standard, and if the capital adequacy ratio falls below the required level (4%), the Commissioner of the Financial Services Agency may issue an order for the suspension of all or part of its business operations, among other measures. Factors that could affect the capital adequacy ratio include a decline in the value of the securities portfolio, an increase in credit-related expenses, a decline in the recoverability of deferred tax assets, and changes in the method of calculating the capital adequacy ratio. The write-down of deferred tax assets carries the risk of both worsening business performance and lowering the capital adequacy ratio.

Oita Prefecture is the Group's principal operating base, and Oita Prefecture accounts for a large share of credit extended by region. If economic conditions in Oita Prefecture deteriorate, credit risk could increase, which could adversely affect business performance and financial condition. The high degree of dependence on the regional economy is a structural vulnerability whereby region-specific risks are directly linked to overall business performance.

In Oita Prefecture, competition is intensifying due to rivalry with local competitor banks, megabanks, regional financial institutions in neighboring prefectures, and non-bank operators, as well as the expansion of Japan Post Bank's business scope and entry into the banking business by companies from other industries. If the Group is unable to secure a competitive advantage, it may be unable to offset rising funding costs through fund management. This could adversely affect business performance and financial condition.

Amid the growing severity of cybersecurity threats, the Group is working to gather and understand information on attack trends and vulnerabilities and to strengthen its security management framework. Nevertheless, if a cyber attack results in service disruption, data tampering, information leakage, or unauthorized use, this could adversely affect business performance and financial condition. This risk is also linked to information asset risk, and there are concerns about reputational damage arising from the leakage of customer information, among other issues.

The Group has positioned the prevention of money laundering and terrorist financing as one of its most important management priorities and is implementing countermeasures based on its basic policy. If these preventive measures fail to function effectively and unfair or improper transactions cannot be prevented, this could result in unexpected losses or loss of credibility, which could adversely affect business performance and financial condition.

The Group faces a range of operational risks, including administrative risk, system risk, human resources risk, reputational risk, and information asset risk. Misconduct or accidents involving officers and employees, computer system failures or malfunctions, difficulty in retaining or securing personnel, and leakage of customer information, among other issues, could lead to losses. Although the Group has implemented measures such as strengthening its internal control framework, enhancing its compliance framework, and centralizing administrative processing, if these risks materialize despite such measures, this could adversely affect business performance and financial condition.

Retirement benefit expenses and obligations are calculated based on actuarial assumptions such as the discount rate, and if these assumptions change or the market value of pension assets declines, this could adversely affect business performance and financial condition. A downgrade in external credit ratings is also recognized as a risk that could adversely affect fund and capital procurement.