Risk of Stagnation in Local Economic and Business Activity Due to the Spread of Infectious Diseases

「No new business or other risks arose during the interim consolidated accounting period. In addition, there were no material changes to the business or other risks described in the securities report for the previous fiscal year.」

「During the cumulative third quarter of the current consolidated fiscal year (April-December), Japan's economy recovered moderately as economic and social activity normalized following the reclassification of COVID-19 as a Category V infectious disease.」

「The Bank also considers COVID-19 to be moving toward containment, including through its reclassification in May 2023 as a Category V infectious disease without particular restrictions. However, there remain debtors whose operating results continue to be materially affected by COVID-19 and debtors whose future operating results could be affected by it, and changes in the infection situation or its impact on economic activity could result in a material change in the allowance for loan losses in the future.」

「COVID-19 is considered to be moving toward containment, including through its reclassification in May 2023 as a Category V infectious disease without particular restrictions. However, there remain debtors whose operating results continue to be materially affected by COVID-19 and debtors whose future operating results could be affected by it.」

「The spread of COVID-19 remains difficult to predict. Its impact has extended across the regional economy, including Gunma Prefecture, affecting not only tourism, restaurants and services but also construction, manufacturing and other broad sectors. This could cause changes in the business conditions of borrowers, result in unexpected non-performing loans and adversely affect the Bank's operating results.」

「The Bank estimated the allowance for loan losses on the assumption that loan losses resulting from the impact of COVID-19 would not increase substantially due to economic measures by the national and local governments and liquidity support from financial institutions. However, the timing of containment of the infectious disease remains uncertain, and changes in the infection situation or its impact on economic activity could result in a material change in the allowance for loan losses in the future. The Bank has made no material changes to the estimation assumptions concerning the impact of COVID-19 described under "Significant Accounting Estimates" in the annual securities report for the previous consolidated fiscal year.」

「However, the timing of containment of the infectious disease remains uncertain, and changes in the infection situation or its impact on economic activity could result in a material change in the allowance for loan losses in the future.」

「The Bank estimated the allowance for loan losses on the assumption that loan losses resulting from the impact of COVID-19 would not increase substantially due to economic measures by the national and local governments and liquidity support from financial institutions. However, the timing of containment of the infectious disease remains uncertain, and changes in the infection situation or its impact on economic activity could result in a material change in the allowance for loan losses in the future.」

「The spread of COVID-19 remains difficult to predict. Its impact has extended across the regional economy, including Gunma Prefecture, affecting not only tourism, restaurants and services but also construction, manufacturing and other broad sectors. This could cause changes in the business conditions of borrowers, result in unexpected non-performing loans and adversely affect the Bank's operating results.」

「Although the impact of the spread of COVID-19 on economic activity was significant in the first half of the current consolidated fiscal year, signs of recovery emerged in the third quarter of the current consolidated fiscal year. While near-term economic conditions have become more uncertain due to the renewed spread of the infectious disease, a gradual recovery is expected. The Bank continues to recognize that the impact of the infectious disease on debtors' operating results and cash flows is significant, but estimates the allowance for loan losses on the assumption that government and local government economic measures and liquidity support from financial institutions will prevent a substantial increase in loan losses. The timing of containment of the infectious disease remains uncertain, and changes in the infection situation or its impact on economic activity could have a material effect on the allowance for loan losses from the fourth quarter of the current consolidated fiscal year onward.」

「However, the timing of containment of the infectious disease remains uncertain, and changes in the infection situation or its impact on economic activity could have a material effect on the allowance for loan losses from the third quarter of the current consolidated fiscal year onward.」

「Although the impact of the spread of COVID-19 on economic activity was expected to be significant in the first half of the current consolidated fiscal year, it was expected to gradually recover toward the second half of the fiscal year. The Bank recognized that the impact on debtors' operating results and cash flows was significant, but estimated the allowance for loan losses on the assumption that government and local government economic measures and liquidity support from financial institutions would prevent a substantial increase in loan losses. However, the timing of containment of the infectious disease remains uncertain, and changes in the infection situation or its impact on economic activity could have a material effect on the allowance for loan losses from the second quarter of the current consolidated fiscal year onward.」

「However, the economy began to show weakness due to the consumption tax rate increase last October and damage caused by a major typhoon, and was subsequently pushed down substantially toward the end of the fiscal year by the global spread of COVID-19, rapidly turning into a severe situation.」

「There were no newly arising business or other risks during the second quarter of the current consolidated cumulative period. In addition, there were no material changes to the business or other risks described in the securities report for the previous fiscal year.」

「There were no newly arising business or other risks during the third quarter of the current consolidated cumulative period. In addition, there were no material changes to the business or other risks described in the securities report for the previous fiscal year.」

「There were no newly arising business or other risks during the second quarter of the current consolidated cumulative period. In addition, there were no material changes to the business or other risks described in the securities report for the previous fiscal year.」

「There were no newly arising business or other risks during the first quarter of the current consolidated cumulative period. In addition, there were no material changes to the business or other risks described in the securities report for the previous fiscal year.」

「During the current fiscal year, the Bank established a business continuity framework for an outbreak of novel influenza or another infectious disease, including by executing memoranda of understanding with medical institutions that would administer designated vaccinations under the Act on Special Measures for Pandemic Influenza and New Infectious Diseases.」

「There were no newly arising business or other risks during the third quarter of the current consolidated cumulative period. In addition, there were no material changes to the business or other risks described in the securities report for the previous fiscal year.」

「There were no newly arising business or other risks during the second quarter of the current consolidated cumulative period. In addition, there were no material changes to the business or other risks described in the securities report for the previous fiscal year.」

「There were no newly arising business or other risks during the first quarter of the current consolidated cumulative period. In addition, there were no material changes to the business or other risks described in the securities report for the previous fiscal year.」

「An outbreak of a novel influenza or other infectious disease could stagnate regional economic activity and disrupt the Bank's business operations, potentially adversely affecting the Bank's operating results and financial position.」