Financial Report 2025

FFG Financial Report 2025

Fukuoka Financial Group

1 Independent Auditors' Report

1. Consolidated Balance Sheet

2. Consolidated Statement of Income

3. Consolidated Statement of Comprehensive Income

4. Consolidated Statement of Changes in Net Assets

5. Consolidated Statement of Cash Flows

6. Notes to Consolidated Financial Statements

The Bank of Fukuoka

1. Non-Consolidated Balance Sheet (Unaudited)

2. Non-Consolidated Statement of Income (Unaudited)

Independent Auditors' Report

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Independent Auditor's Report

The Board of Directors Fukuoka Financial Group, Inc.

The Audit of the Consolidated Financial Statements

We have audited the accompanying consolidated financial statements of Fukuoka Financial Group, Inc. and its consolidated subsidiaries (the Group), which comprise the consolidated balance sheet as at March 31, 2025, and the consolidated statements of income, comprehensive income, changes in net assets, and cash flows for the year then ended, and notes to the consolidated financial statements.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at March 31, 2025, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with accounting principles generally accepted in Japan.

We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Japan, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of the audit of the consolidated financial statements as a whole, and in forming the auditor's opinion thereon, and we do not provide a separate opinion on these matters.

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Accordingly, we have determined the classification of obligors whose repayment status, financial position, or business performance has deteriorated, and the estimation of default rates, as key audit matters.

(2) Estimation of default rates

For the estimation of default rates, we involved specialists from our network firm and mainly performed the following audit procedures.

We evaluated the effectiveness of the following internal controls to ensure that estimations of default rates are performed appropriately.

Review and approval of statistical methods used in default rate estimations

- Review and approval of significant source data used in default rate estimations

Review and approval of the future economic outlook and two scenarios (base scenario and downside scenario) based on it

We evaluated the appropriateness of statistical methods used in default rate estimations.

We evaluated the reasonableness of the future economic forecasts which forms the basis of the two scenarios (base scenario and downside scenario). This included a comparison of the future economic forecasts with available external information.

We evaluated the appropriateness of the calculation of estimates by performing assessments and recalculations of significant source data.

The other information comprises the information included in the Financial Report that contains audited consolidated financial statements, but does not include the consolidated financial statements and our auditor's report thereon. Management is responsible for preparation and disclosure of the other information. The Audit and Supervisory Committee is responsible for overseeing the Group's reporting process of the other information.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

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In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in Japan, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group's ability to continue as a going concern and disclosing, as required by accounting principles generally accepted in Japan, matters related to going concern.

The Audit and Supervisory Committee is responsible for overseeing the Group's financial reporting process.

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with auditing standards generally accepted in Japan, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.

Consider internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances for our risk assessments, while the purpose of the audit of the consolidated financial statements is not expressing an opinion on the effectiveness of the Group's internal control.

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

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Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or condiuons may cause the Group to cease to continue as a going concern.

Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation in accordance with accounting principles generally accepted in Japan.

Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the financial information of the entities or business units within the Group as a basis for forming an opinion on the consolidated financial statements. We are responsible for the direction, supervision and review of the group audit. We remain solely responsible for our audit opinion.

We communicate with the Audit and Supervisory Committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the Audit and Supervisory Committee with a statement that we have complied with the ethical requirements regarding independence that are relevant to our audit of the consolidated financial statements in Japan, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied to reduce threats to an acceptable level.

From the matters communicated with the Audit and Supervisory Committee, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our

auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2025 are presented solely for convenience. Our audit also included the translation of Japanese yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made on the basis described in Note 2 to the consolidated financial statements gg qg gg gg

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The fees for the audits of the financial statements of Fukuoka Financial Group, Inc. and its subsidiaries and other services provided by us and other EY member firms for the year ended March 31, 2025 are 270 million yen and 27 million yen, respectively.

Our firm and its designated engagement partners do not have any interest in the Group which is required to be disclosed pursuant to the provisions of the Certified Public Accountants Act of Japan.

Ernst & Young ShinNihon LLC Tokyo, Japan

August 6, 2025

Hirokazu Tanaka Designated Engagement Partner

Certified Public Accountant

Yuji Yoshimura Designated Engagement Partner

Certified Public Accountant

Hiroshi Miyagawa Designated Engagement Partner

Certified Public Accountant

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Consolidated Balance Sheet

Fukuoka Financial Group, Inc. and its subsidiaries As of March 31, 2025 and 2024

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Consolidated Statement of Income

Fukuoka Financial Group, Inc. and its subsidiaries For the years ended March 31, 2025 and 2024

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Consolidated Statement of Comprehensive Income

Fukuoka Financial Group, Inc. and its subsidiaries For the years ended March 31, 2025 and 2024

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Consolidated Statement of Changes in Net Assets

Fukuoka Financial Group, Inc. and its subsidiaries For the years ended March 31, 2025 and 2024

Millions of yen

Millions of U.S. dollars (Note 2)

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Consolidated Statement of Cash Flows

Fukuoka Financial Group, Inc. and its subsidiaries For the years ended March 31, 2025 and 2024

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Notes to Consolidated Financial Statements

Fukuoka Financial Group, Inc. and its subsidiaries Fiscal years ended March 31, 2025 and 2024

1. Summary of Significant Accounting Policies
   1. Basis of Presentation

      The accompanying consolidated financial statements of FFG and its consolidated subsidiaries are prepared in accordance with accounting principles generally accepted in Japan, which are different in certain respects as to application and disclosure requirements of International Financial Reporting Standards and are compiled from the consolidated financial statements prepared by FFG as required under the Financial Instruments and Exchange Act of Japan.

      As permitted by the Financial Instruments and Exchange Act of Japan, amounts of less than one million yen have been omitted. As a result, the totals shown in the accompanying consolidated financial statements (both in yen and U.S. dollars) do not necessarily agree with the sums of the individual amounts.

   2. Principles of Consolidation

      The accompanying consolidated financial statements include the accounts of FFG and all subsidiaries, excluding 12 subsidiaries controlled directly or indirectly by FFG such as FFG Venture Investment Limited Partnership No. 1. All significant intercompany balances and transactions have been eliminated in consolidation.

      FFG Lease Co., Ltd. was excluded from the scope of consolidation from the fiscal year ended March 31, 2025 as it became an affiliated company accounted for using equity method due to a decrease in ownership as a result of a capital increase through third-party allotment.

      The above-mentioned unconsolidated subsidiaries are excluded from the scope of consolidation because their assets, net income (loss) (amount corresponding to the FFG's equity position), retained earnings (amount corresponding to the FFG's equity position), accumulated other comprehensive income (amount corresponding to the FFG's equity position) and others are immaterial to the extent that their exclusion from the scope of consolidation does not preclude reasonable judgment of the FFG's financial position and results of operations.

      In addition, there are five companies that are not regarded as FFG's subsidiaries even though the majority of their voting rights (business execution rights) are held by FFG in its own accounts. Investments in these five companies were made by FFG's unconsolidated subsidiaries engaged in investment and related businesses for the purpose of rehabilitating their businesses and earning capital gains, not to control the decision-making bodies of the investees. Therefore, the five companies meet the requirements prescribed in Paragraph 16 of "Implementation Guidance on Determining a Subsidiary and an Affiliate" ("ASBJ Guidance No. 22), and are not treated as FFG's subsidiaries.

      There is one affiliated company, FFG Lease Co., Ltd. as aforesaid, over which FFG exercises significant influence in terms of their operating and financial policies. The abovementioned unconsolidated subsidiaries and two affiliated companies, Kumamoto Historical Town Development Investment Limited Partnership and Kyushu Open Innovation No. 2 Investment Business Limited Partnership, are excluded from the scope of the equity method because their net income (loss) (amount corresponding to the FFG's equity position), retained earnings (amount corresponding to the FFG's equity position), accumulated other comprehensive income (amount corresponding to the FFG's equity position) and others are immaterial to the extent that their exclusion from the scope of companies accounted for using equity method does not preclude reasonable judgment of the FFG's financial position and results of operations.

   3. Trading Assets and Liabilities

      Trading account transactions are the transactions in which profit opportunities arise from the differences between different markets and short-term movements in rates and other indices, including interest rates, currency exchange rates, and dealing in marketable securities. These transactions are included in the consolidated financial statements as of the respective trading dates.

      "Trading assets" and "Trading liabilities" are valued as follows: Securities and monetary assets are valued at fair value at the balance sheet date; swaps, futures, options and other derivative transactions are valued on the assumption that they were settled at the balance sheet date.

      Gains and losses on trading account transactions are recorded by adding or deducting differences between valuation gains or losses at the previous balance sheet date and those at the current balance sheet date to the interest earned or paid in the current year for securities, monetary assets, etc. With respect to derivatives, the differences between the gains and losses from assumed settlement at the previous balance sheet date and those at the current balance sheet date are added to or deducted from the interest earned or paid in the current year.

   4. Securities

      Held-to-maturity debt securities are stated at cost computed by the moving-average method or amortized cost (straight-line method).

      Available-for-sale securities are stated at fair value (cost of securities sold is calculated using the moving-average method), and equity securities, etc. that do not have a market price are stated at cost computed by the moving-aver-age method.

      With respect to translation difference of available-for-sale securities (bonds) denominated in foreign currencies, among amounts that resulted from translating foreign currency-based fair value at the exchange rates on the balance

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      sheet date, translation difference due to changes in foreign currency-based fair value (the amount translated changes in foreign currency-based fair value at the spot exchange rates on the balance sheet date) is treated as valuation difference, while the other difference is treated as net exchange losses (gains).

      Valuation difference on available-for-sale securities is included in net assets, net of income taxes.

      Securities held as components of individually managed money held in trust whose principal objective is investments in securities are stated at fair value.

   5. Derivative Transactions

      Derivatives for purposes other than trading are stated at fair value.

   6. Depreciation and Amortization of Fixed Assets Depreciation of buildings is principally computed using the straight-line method. Other tangible fixed assets are principally depreciated using the declining-balance method.

      The estimated useful lives of the tangible fixed assets are as follows:

      Buildings 3 years to 50 years

      Other 2 years to 20 years

      Intangible fixed assets are amortized using the straight-line method. Costs of computer software developed or obtained for internal use are amortized using the straight-line method for the estimated useful life of 5 years.

      Lease assets under finance leases which do not transfer ownership of leased assets to lessees, consisting primarily of office equipment, are depreciated by the straight-line method over the lease terms of the respective assets. Residual value of the tangible fixed assets under finance leases which do not transfer ownership of leased assets to lessees is guaranteed residual value on lease agreements or zero value.

   7. Allowance for Loan Losses

      The allowance for loan losses in consolidated subsidiaries conducting banking businesses is maintained in accordance with internally established standards for write-offs and allowances:

      • For credits extended to obligors that are legally bankrupt under the Bankruptcy Law, Special Liquidation in the Commercial Law or other similar laws ("Bankrupt Obli-gors"), and to obligors that are effectively in similar conditions ("Effectively Bankrupt Obligors"), allowances are maintained at 100% of amounts of claims, net of expected amounts from the disposal of collateral and/or on the amounts recoverable under guarantees.

      • For credits extended to obligors that are not Bankrupt Obligors or Effectively Bankrupt Obligors but have a substantial chance of business failure going forward

        ("In-Danger-of-Bankruptcy Obligors"), allowances are maintained at the amount deemed necessary based on overall solvency analyses, on the amount of claims less expected amounts recoverable from the disposal of collateral and/or on the amounts recoverable under guarantees.

      • For credits extended to obligors that are In-Danger-of-Bankruptcy Obligors or whose credit terms are rescheduled or reconditioned, and exceed a certain threshold, the Discounted Cash Flow Method (the DCF Method) is applied if cash flows on repayment of principals and collection of interest of the loan can be reasonably estimated. The DCF Method requires that the difference between the cash flows discounted by the original interest rate and the carrying value of the loan be provided as allowance for loan losses.

      • For credits extended to other obligors, allowances are maintained principally at the amounts of expected losses for the next 1 year or 3 years by estimating, based on an economic outlook, default rates for each of the 17 categories: 10 categories under Normal Obligors, 6 categories under Obligors Who Need Attention and 1 category under In-Danger-of-Bankruptcy Obligors.

        All credits are assessed by each credit origination department, and the results of the assessments are verified and examined by the independent examination department.

        Allowances for loan losses are provided for on the basis of such verified assessments.

        Allowance for loan losses in consolidated subsidiaries not conducting banking businesses is provided by the actual write-off ratio method, etc.

   8. Retirement Benefits

      The expected benefit payments are attributed to each period by the benefit formula method upon calculating projected benefit obligations.

      Prior service cost and actuarial gains or losses are amortized mainly in the following manner:

      • Prior service cost is amortized by the straight-line method over certain periods (5-9 years), which are shorter than the average remaining years of service of the employees.

      • Actuarial gains or losses are amortized by the straight-line method from the following year over certain periods (5-11 years), which are shorter than the average remaining years of service of the employees.

        Certain consolidated subsidiaries apply a simplified method where the amount to be required for voluntary termination at the fiscal year-end is recorded as projected benefit obligations in the calculation of their net defined benefit liabilities and retirement benefit expenses.

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        Notes to Consolidated Financial Statements

   9. Provision for Losses from Reimbursement of Inactive Accounts

      The provision for losses from reimbursement of inactive accounts for the necessary amount for deposits discontinued from liabilities in consideration of past payment performance, owing to depositor requests for reimbursement.

   10. Provision of Share Awards

       The provision for share awards is provided at the amount of estimated share award obligations at the fiscal year-end for share-based payments to directors, etc. of FFG and some of its consolidated subsidiaries under the stock compensation plan.

   11. Reserves under the Special Laws

       Reserves under the special laws corresponds to the financial instruments transaction liability reserves of FFG Securities Co., Ltd., as reserves against losses resulting from a securities-related accident. These reserves are calculated in accordance with the provisions of Article 46-5, Paragraph 1, of the Financial Instruments and Exchange Act and Article 175 of the Cabinet Office Ordinance on Financial Instruments Businesses, etc.

   12. Translation of Assets and Liabilities Denominated in Foreign Currencies

       Assets and liabilities denominated in foreign currencies are translated into Japanese yen at the exchange rates prevailing at the balance sheet date.

   13. Revenue and Expenses for Lease Transactions Regarding revenue for finance leases, net sales and cost of sales are recorded upon receipt of lease payments.
   14. Hedge Accounting

       1. Hedge accounting for interest rate risks

          For derivatives to hedge the interest rate risk associated with various financial assets and liabilities, FFG applies the deferred method which is stipulated in "Accounting and Auditing Treatment of Accounting Standards for Financial Instruments in Banking Industry" (JICPA Industry Committee Practical Guideline No. 24, March 17, 2022). FFG assesses the effectiveness of such hedge for offsetting changes in interest rate, by classifying the hedged items (such as deposits and loans) and the hedging instruments (such as interest rate swaps) by their maturity. FFG assesses the effectiveness of such hedges for fixing cash flows by verifying the correlation between the hedged items and the hedging instruments.

       2. Hedge accounting for foreign exchange risks

       FFG applies the deferred method of hedge accounting for derivatives to hedge foreign exchange risks associated with various foreign currency denominated monetary assets and

       liabilities as stipulated in "Accounting and Auditing Treatment Concerning Accounting for Foreign Currency Transactions in Banking Industry" (JICPA Industry Committee Practical Guideline No. 25, October 8, 2020). The effectiveness of the currency swap transactions, exchange swap transactions and similar transactions hedging the foreign exchange risks of monetary assets and liabilities denominated in foreign currencies is assessed based on comparison of foreign currency position of the hedged monetary assets and liabilities and the hedging instruments.

       For certain assets and liabilities, the exceptional accounting is applied to interest rate swaps that meet specific requirements for hedge accounting.

   15. Income Taxes

       Deferred tax assets and liabilities are determined based on the differences between financial reporting and the tax bases of the assets and liabilities and are measured using the enacted tax rates and laws which will be in effect when the differences are expected to reverse.

       FFG and some of its domestic subsidiaries adopt the group tax sharing system.

   16. Appropriation of Retained Earnings

       Under the Companies Act, the appropriation of retained earnings with respect to a given financial period is made by resolution of the shareholders at a general meeting held subsequent to the close of such financial period. The accounts for that period do not, therefore, reflect such appropriations. See Note 24.

   17. Cash and Cash Equivalents

       For purposes of the consolidated statement of cash flows, cash and cash equivalents consist of cash and deposits with the Bank of Japan which are included in "Cash and due from banks" in the consolidated balance sheet.

   18. Principles and Procedures of Accounting Treatments Adopted When Relevant Accounting Standards, etc. Are Not Clear

       With respect to gains or losses on cancellation or redemption of investment trusts, in case of gains as a whole of investment trusts including dividends from revenue during the fiscal year, etc., it is recorded in "Interest and dividends on securities." In case of losses, it is recorded in loss on redemption of bonds under "Other operating expenses."

   19. Significant Accounting Estimates

       Items whose recorded amount in the consolidated financial statements for the current fiscal year for accounting determined based on the account estimates, may have a significant impact on the consolidated financial statements for the following fiscal year were as follows:

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       Allowance for loan losses

       1. The amount recorded in the consolidated financial statements for the fiscal years ended March 31, 2025 and 2024

          (Millions of yen)

          	2025	2024
          Allowance for loan losses	¥192,762	¥200,929

       2. Information on the details of significant accounting estimates for identified items

          1. Calculation method

             See "g. Allowance for Loan Losses" of Note 1 for the method of calculating allowance for loan losses.

          2. Main assumptions

             The main assumptions used in the method of calculating allowance for loan losses are "future performance forecasts of borrowers for judgement on category of obli-gors" and "future business forecasts for estimating default rates." Details of assumptions are as follows:

             • Future performance forecasts of borrowers for judgement on category of obligors

               They are set by assessing the capability to generate future earnings of each obligor on an individual basis.

               •Future business forecasts for estimating default rates The default rates are statistically estimated and calculated based on an economic outlook, past business trends and historical data of bankruptcy, and a GDP growth rate is used as an economic indicator.

               In forecasting economic outlook, expected annual GDP growth rate is calculated using two scenarios, that is a baseline scenario and a downside scenario, based on future prospect of economics, which is then determined semiannually in principle by the Board of Directors.

               At the end of the fiscal year ended March 31, 2025, despite rising expectation for recovery in consumer spending owing to an increase in real wages, FFG assumes that there will be a strong sense of uncertainty over the economic situation arising from cost hikes caused by continuous rises in prices, supply constraints due to labor shortage, and changes in the financial environment resulting from an interest rate hike, as well as prospect of U.S. trade policies and concern over the U.S.-China trade war.

          3. Impact on the consolidated financial statements for the following fiscal year

       Main assumptions may be affected by uncertainties such as economic trends, real estate prices, and changes in the business conditions of client companies. Accordingly, when assumptions used for initial estimates change, it may have a significant impact on allowance for loans losses in the consolidated financial statements for the fiscal year ending March 31, 2026.

   20. Changes in Accounting Policies

       Adoption of Accounting Standard for Current Income Taxes, etc.

       FFG adopted the "Accounting Standard for Current Income Taxes" (ASBJ Statement No. 27, October 28, 2022), etc. from the beginning of the fiscal year ended March 31, 2025. There was no effect on the consolidated financial statements due to this adoption.

   21. Accounting Standards Issued but Not Yet Effective

       ASBJ issued the "Accounting Standard for Leases" (ASBJ Statement No. 34, September 13, 2024) and "Im-plementation Guidance on Accounting Standard for Leases" (ASBJ Guidance No. 33, September 13, 2024). In addition, other related guidance, including Accounting Standards, Implementation Guidance, Practical Solutions, and Transferred Guidance were revised by ASBJ.

       1. Overview

          These standards and guidance prescribe the accounting treatment whereby lessees are required to recognize assets and liabilities for all leases in the same manner as accounting principles generally accepted internationally.

       2. Scheduled date of adoption

          FFG expects to adopt these accounting standards from the beginning of the fiscal year ending March 31, 2028.

       3. Impact of adopting the implementation guidance

       FFG is currently evaluating the impact of adopting these accounting standards on its consolidated financial statements.

   22. Additional Information

Transactions for delivering own shares through a trust

1. Overview of the transaction

   FFG has introduced a performance-linked stock compensation plan for FFG's directors (excluding directors serving as Audit & Supervisory Committee members and external directors) which seeks to clarify the link between directors' remuneration and the Group's performance and shareholder value, raise the motivation of directors to contribute to the medium- to long-term improvement of business performance and the growth of corporate value, and have directors share with all shareholders the risks and returns of share price fluctuations.

   In addition to FFG's directors, FFG's executive officers, and directors and executive officers of The Bank of Fukuoka, Ltd., The Kumamoto Bank, Ltd., The Juhachi-Shinwa Bank, Ltd. and Minna Bank, Ltd. (collectively, the "Eligible Directors, etc.") are covered by this plan.

   This plan adopts the Board Incentive Plan ("BIP") Trust scheme whereby FFG's shares and money are delivered to the Eligible Directors, etc. according to their position and the degree of attainment of the target per-

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   Notes to Consolidated Financial Statements

   formance, etc.

   In addition, FFG has introduced a stock compensation plan for directors and executive officers of The Fukuoka Chuo Bank, Ltd. This is because FFG has succeeded the plan introduced by The Fukuoka Chuo Bank, Ltd. as a result of making it a wholly owned subsidiary through a share exchange.

2. FFG's shares held in the trust

   FFG's shares held in the trust are recorded as treasury stock under shareholders' equity at the carrying value in

   • Held-to-maturity debt securities

     There were no held-to-maturity debt securities at March 31, 2025 and 2024.

   • Available-for-sale securities

The following tables summarize acquisition costs, carrying values and differences of securities with available fair values at March 31, 2025 and 2024:

(Millions of yen)

2025

the trust. The carrying value of such treasury stock as of

Acquisition cost

Carrying value

Difference

1. Securities

   Securities at March 31, 2025 and 2024 were as follows:

   (Millions of yen)

   2024

   	National government bonds	¥ 475,310	¥ 477,170	¥	1,860
   Securities with	Local government bonds	19,811	19,875		63
   carrying value exceeding	Corporate bonds	35,261	35,436		174
   acquisition cost	Equity securities	99,024	253,254		154,230
   	Other	757,718	813,011		55,293
   	Subtotal	¥1,387,126	¥1,598,748	¥ 211,622
   	National government bonds	¥1,787,699	¥1,695,992	¥ (91,706)
   Securities with	Local government bonds	129,482	127,531	(1,951)
   carrying value not exceeding	Corporate bonds	365,406	352,753	(12,652)
   acquisition cost	Equity securities	6,053	5,620	(432)

   Acquisition cost

   Carrying value

   Difference

   	2025	2024
   National government bonds	¥2,660,080	¥2,173,163
   Local government bonds	147,211	147,406
   Corporate bonds	355,207	388,190
   Equity securities	236,569	270,221
   Other securities	2,152,216	1,998,541
   Total	¥5,551,286	¥4,977,523

   Equity securities included investments in unconsolidated subsidiaries and affiliated companies of ¥4,717 million and ¥46 million at March 31, 2025 and 2024, respectively.

   Other securities included investments in unconsolidated subsidiaries and affiliated companies of ¥19,714 million and

   ¥16,753 million at March 31, 2025 and 2024, respectively.

   Corporate bonds included bonds offered through private placement. FFG's guarantee obligation for such private placement bonds was ¥28,194 million and ¥33,446 million at March 31, 2025 and 2024, respectively.

   Other 1,168,573 1,107,896 (60,676)

   Subtotal ¥3,457,215 ¥3,289,795 ¥(167,419)

   Total ¥4,844,341 ¥4,888,544 ¥ 44,202

   Securities other than securities held for trading purpose (excluding equity securities, etc. that do not have a market price and investments in partnerships) that have fallen substantially below the acquisition cost and are not expected to recover to the acquisition cost are carried at their fair values. The unrealized losses have been recognized for such securities during the period (hereinafter, "impairment losses"). FFG recognized impairment losses of ¥57 million for equity securities for the fiscal year ended March 31, 2025 while no impairment losses were recognized for the fiscal year ended

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   March 31, 2024. The determination of whether the fair value has fallen significantly is based on independent asset classification, with issuers of securities divided into the following classifications.

2. Money Held in Trust

   The following table summarizes carrying value and gains (losses) on valuation included in the consolidated statement

   Bankrupt, effectively bankrupt, in danger of bankruptcy

   Fair value below acquisition cost

   of income regarding money held in trust for trading purpose

   at March 31, 2025 and 2024 and for the fiscal years then ended:

   Needs attention Fair value 30% or more below acquisition

   cost

   Normal Fair value 50% or more below acquisition cost, or fair value 30% or more but less than 50% below acquisition cost and market price below a certain level

   A bankrupt issuer is one that is currently bankrupt, under special liquidation, or legally or formally bankrupt from the standpoint of effective management. Effectively bankrupt indicates that an issuer is experiencing business failure in substance. An issuer in danger of bankruptcy is one that is highly likely to be classified as bankrupt in the future. Needs attention indicates an issuer that will require care in management. A normal issuer is one that falls outside the above-stated categories of bankrupt issuer, effectively bankrupt issuer, issuer in danger of bankruptcy and issuer who needs attention.

   (Millions of yen)

   Carrying Gains (losses) value on valuation

   Money held in trust for trading purpose

   ¥(66)

   ¥ 7,911

   2025

   		(Millions of yen)
   2024
   	Carrying value	Gains (losses) on valuation
   Money held in trust for trading purpose	¥13,053	¥ 22

   Acquisition Carrying

   cost

   value

   Difference

   Money held in trust for other purpose

   ¥-

   ¥10,109 ¥10,109

   2025

   The following tables summarize acquisition costs, carrying values and differences of money held in trust for other purpose (i.e. not for trading or held-to-maturity) at March 31, 2025 and 2024:

   2025

   The following table summarizes total sales amounts of available-for-sale securities sold, and amounts of the related gains and losses for the fiscal years ended March 31, 2025 and 2024:

   (Millions of yen)

   Sales amounts

   Amounts of the related gains

   (Millions of yen)

   Amounts of the related losses

   2024

   Acquisition cost

   (Millions of yen)

   Carrying

   value Difference

   National government bonds	¥ 930,253	¥ 89	¥17,215
   Local government bonds	-	-	-
   Corporate bonds	2,034	0	0
   Equity securities	23,309	6,458	606
   Other	68,582	7,334	2,374
   Total	¥1,024,180	¥13,882	¥20,195

   Money held in trust for other purpose

3. Claims

   ¥ 6,200 ¥ 6,200 ¥-

   2024

   Sales amounts

   National government bonds	¥179,579	¥	664	¥20,215
   Local government bonds	5,796		59	4
   Corporate bonds	9,234		44	-
   Equity securities	7,691	2,967		268
   Other	51,354	2,345		1,391
   Total	¥253,656	¥6,080		¥21,879

   Amounts of the related gains

   (Millions of yen)

   Amounts of the related losses

   Claims based on the Banking Act and Act on Emergency Measures for the Revitalization of the Financial Functions at March 31, 2025 and 2024 were as follows. The claims consist of those recorded in the consolidated balance sheet as corporate bonds in "Securities" (limited to those guaranteeing all or a part of principal and interest, and offered through private placement in accordance with Article 2, Paragraph 3 of the Financial Instruments and Exchange Act), loans and bills discounted, foreign exchanges, accrued interest and suspense payments in "Other assets" and customers' liabilities for acceptances and guarantees, as well as securities in securities lending transactions indicated in the notes (limited to those under loan for use or lease contracts).

   18

   Notes to Consolidated Financial Statements

   (Millions of yen)

   	2025	2024
   Bankrupt or quasi-bankrupt claims	¥ 48,481	¥ 50,399
   Doubtful claims	144,417	152,604
   Claims past due for three months or more	1,312	1,337
   Restructured claims	115,392	107,251
   Total	¥309,603	¥311,592

   Bankrupt or quasi-bankrupt claims are claims made against obligors who have fallen into bankruptcy for reasons such as the commencement of bankruptcy proceedings or reorganization proceedings, or the petition for commencement of rehabilitation proceedings, and claims similar to these.

   Doubtful claims are claims that are made against obligors who are yet to have fallen into bankruptcy, but it is highly probable that the contractual principal and interest cannot be collected/received due to deterioration of the ob-ligor's financial condition and business performance, and those not classified as bankrupt or quasi-bankrupt claims.

   Claims past due for three months or more represent claims for which payments of principal or interest have been in arrears for three months or more from the day following the agreed-upon payment date, but do not meet the criteria for bankrupt or quasi-bankrupt claims, or doubtful claims.

   Restructured claims are claims that have been restructured to support the rehabilitation of certain obligors who are encountering financial difficulties, with the intention of ensuring recovery of the loans by providing easier repayment terms for the obligors (such as by reducing the rate of interest or by providing a grace period for the payment of principal/interest, etc.), and are not classified in any of the above categories.

   The amounts of claims in the above table are before deduction of allowance for loan losses.

   Notes discounted are recorded as cash lending/borrow-ing transactions in accordance with "Accounting and Auditing Treatment of the Application of Accounting Standards for Financial Instruments in the Banking Industry" (JICPA Industry Committee Practical Guideline No. 24, March 17, 2022). FFG has a right to sell or collateralize such bills at the discretion of FFG. At March 31, 2025 and 2024, total face value of commercial bills and bills of exchange acquired through discounting amounted to ¥23,255 million and ¥38,791 million, respectively.

   Line-of-credit agreements relating to overdrafts and loans are agreements which oblige FFG to lend funds up to a certain limit agreed in advance. FFG makes the loan upon the request of an obligor to draw down funds under such a loan agreement as long as there is no breach of the various terms and conditions stipulated in the relevant loan agreement. The unused line-of-credit balance relating to these overdrafts and loan agreements at March 31, 2025

   and 2024 amounted to ¥5,043,451 million and ¥4,859,003 million, respectively. The amount related to overdrafts and loans with a term of one year or less or overdrafts and loans which permit unconditional cancellation at any time were

   ¥4,554,121 million and ¥4,452,148 million at March 31, 2025 and 2024, respectively.

   As many of these contracts expire undrawn, the aggregate total of the undrawn amount does not necessarily affect the future cash flows of FFG and its consolidated subsidiaries. Many of these contracts have clauses that allow FFG's consolidated subsidiaries to turn down a loan request or reduce the amounts of the credit line if there is a change in financial conditions, a need to establish increased securities, or other similar reasons. In addition to obtaining necessary collateral (real estates, securities, etc.) at the time the commitment contract is entered into, FFG's consolidated subsidiaries assess the condition of the customer's business operations, and analyze other information, based on internal procedures and standards. If necessary, the contract is reviewed and revised, or additional steps are taken to secure the credit extended to the customer.

4. Tangible Fixed Assets

   Land used for the Bank of Fukuoka's business activities has been revalued on the basis prescribed by the Law Concerning Land Revaluation (Proclamation No. 34 dated March 31, 1998). As for the revaluation difference, the income tax account corresponding to the revaluation difference amount is included in liabilities as "Deferred tax liabilities for land re-valuation," and the revaluation difference, net of this deferred tax liability, is included in net assets as "Revaluation reserve for land."

   Date of revaluation: March 31, 1998

   Revaluation method as stated in Article 3, Paragraph 3 of the Law Concerning Land Revaluation: The value of land is based on the official notice prices calculated as directed by public notification of the Commissioner of the National Tax Administration and as provided in the Law Concerning Public Notification of Land Prices, as stipulated in Article 2-4 of the Ordinance Implementing the Law Concerning Land Revaluation (Government Ordinance No. 119 dated March 31, 1998), after making reasonable adjustments.

   Accumulated depreciation for tangible fixed assets amounted to ¥169,000 million and ¥169,261 million at March 31, 2025 and 2024, respectively.

   The accelerated depreciation entry for tangible fixed assets amounted to ¥16,898 million and ¥17,013 million at March 31, 2025 and 2024, respectively.

   19

5. Pledged Assets

   Assets pledged as collateral at March 31, 2025 and 2024 consisted of the following:

   (Millions of yen)

   	2025	2024
   Assets pledged as collateral:
   Securities	¥3,556,626	¥3,446,494
   Loans and bills discounted	4,915,135	5,013,750
   Other assets	4	4
   Liabilities corresponding to assets
   pledged as collateral:
   Deposits	45,431	41,916
   Payables under repurchase agreements	1,272,836	317,101
   Cash collateral received for securities lent	1,495,995	915,202
   Borrowed money	3,993,128	6,128,154
   Other liabilities	143	14

   In addition, the following assets were pledged as collateral for settlement of exchange, etc. at March 31, 2025 and 2024.

   (1) Defined benefit plans

   The changes in the projected benefit obligation during the fiscal years ended March 31, 2025 and 2024 were as follows:

   (Millions of yen)

   	2025	2024
   Projected benefit obligation at the beginning of the fiscal year	¥141,127	¥162,283
   Increase by share exchange	-	3,035
   Service cost	3,442	4,548
   Interest cost	1,285	265
   Actuarial losses (gains)	3,006	(21,175)
   Retirement benefits paid	(8,272)	(8,282)
   Prior service cost	-	-
   Contributions by participants of plans	457	450
   Other	223	0
   Projected benefit obligation at the end of the fiscal year	¥141,270	¥141,127

   The changes in plan assets during the fiscal years ended March 31, 2025 and 2024 were as follows:

   	2025	2024
   Plan assets at the beginning of the fiscal year	¥209,848	¥186,389
   Increase by share exchange	-	5,668
   Expected return on plan assets	7,267	6,578
   Actuarial gains (losses)	(15,612)	12,982
   Contributions by FFG's subsidiaries	5,924	5,705
   Retirement benefits paid	(7,683)	(7,926)
   Partial return of retirement benefit trusts	(32,499)	-
   Contributions by participants of plans	457	450
   Other	-	-
   Plan assets at the end of the fiscal year	¥167,702	¥209,848

   (Millions of yen)

   (Millions of yen)

   	2025	2024
   Cash and due from banks	¥ 1	¥ 2
   Securities	183,040	-
   Other assets	716	712

   Initial margins of futures markets, cash collateral paid for financial instruments and guarantee deposits included in other assets at March 31, 2025 and 2024 were as follows:

   (Millions of yen)

   	2025	2024
   Initial margins of futures markets	¥ 358	¥ 199
   Cash collateral paid for financial instruments	53,389	183,219
   Guarantee deposits	2,517	2,475

   	2025	2024
   Funded projected benefit obligation	¥ 139,629	¥ 139,458
   Plan assets at fair value	(167,702)	(209,848)
   	(28,072)	(70,390)
   Unfunded projected benefit obligation	1,641	1,669
   Net asset for retirement benefits in the balance sheet	¥ (26,431)	¥ (68,720)

   The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance sheet as of March 31, 2025 and 2024.

6. Retirement Benefit Plans

   The consolidated subsidiaries engaged in banking businesses primarily have a cash balance plan-type corporate pension plan as a defined benefit plan and established retirement benefit trusts.

   FFG and certain consolidated subsidiaries have a defined contribution-type corporate pension plan as a defined contribution plan.

   Certain consolidated subsidiaries apply a simplified method in the calculation of their net defined benefit liabilities and retirement benefit expenses concerning lump-sum payment plans.

   (Millions of yen)

   	2025	2024
   Net defined benefit liabilities	¥ 835	¥ 1,163
   Net defined benefit assets	(27,266)	(69,884)
   Net asset for retirement benefits in the balance sheet	¥(26,431)	¥(68,720)

   (Millions of yen)

   20

   Notes to Consolidated Financial Statements

   The components of retirement benefit expenses for the fiscal years ended March 31, 2025 and 2024 were as follows:

   (Millions of yen)

   	2025	2024
   Service cost	¥ 3,442	¥ 4,548
   Interest cost	1,285	265
   Expected return on plan assets	(7,267)	(6,578)
   Amortization of actuarial losses (gains)	(1,508)	328
   Amortization of prior service cost	61	71
   Other	-	-
   Retirement benefit expenses	¥(3,986)	¥(1,363)

   The components of remeasurements of defined benefit plans included in other comprehensive income (before income taxes and tax effect) for the fiscal years ended March 31, 2025 and 2024 were as follows:

   (Millions of yen)

   	2025	2024
   Prior service cost	¥ 61	¥ 71
   Actuarial gains (losses)	(20,127)	34,486
   Other	-	-
   Total	¥(20,066)	¥34,557

   The components of remeasurements of defined benefit plans included in accumulated other comprehensive income (before income taxes and tax effect) as of March 31, 2025 and 2024 were as follows:

   (Millions of yen)

   	2025	2024
   Unrecognized prior service cost Unrecognized actuarial losses (gains) Other	¥ 546 (9,145) -	¥ 607 (29,273) -
   Total	¥(8,599)	¥(28,665)

   The fair value of plan assets, by major category, as a percentage of total plan assets as of March 31, 2025 and 2024 was as follows:

   	2025	2024
   Debt securities	38%	33%
   Equity securities	25%	39%
   Cash and due from banks	3%	2%
   Other	34%	26%
   Total	100%	100%

   Total plan assets included retirement benefit trusts of 10% and 29% as of March 31, 2025 and 2024, respectively, which were set for corporate pension plans.

   The long-term expected rate of return on plan assets has been estimated based on the current and anticipated allocation of plan assets and the current and long-term expected return on plan assets composed of various assets.

   21

   The main assumptions used in accounting for the above plans were as follows:

   	2025	2024
   Discount rate Long-term expected rate of return on plan assets Estimated rate of increase in salary	Mainly 1.4% Mainly 3.5% Mainly 3.2%	Mainly 1.4% Mainly 3.5% Mainly 3.2%

   (2) Defined contribution plans

   The amounts to be paid to defined contribution plans by consolidated subsidiaries were ¥411 million and ¥386 million for the fiscal years ended March 31, 2025 and 2024, respectively.

7. Acceptances and Guarantees

   All contingent liabilities arising from acceptances and guarantees are included in this account. As a contra account, "Customers' liabilities for acceptances and guarantees" is shown on the assets side, which represents FFG's right of indemnity from the applicants.

8. Valuation Difference on Available-for-sale Securities

   Valuation difference on available-for-sale securities at March 31, 2025 and 2024 consisted of the following:

   (Millions of yen)

   	2025	2024
   Gross valuation difference on available-for-sale securities Deferred tax assets (liabilities) applicable to valuation difference Valuation difference on available-for-sale securities, net of the applicable income taxes before adjustment for non-controlling interests Amount attributable to non-controlling interests Amount attributable to the parent of valuation difference on available-for-sale securities held by affiliated companies Valuation difference on available-for-sale securities	¥(116,871) 38,791 (78,080) - 6 ¥ (78,074)	¥ 44,715 (11,246) 33,469 - - ¥ 33,469

9. Other Income

   Other income for the fiscal years ended March 31, 2025 and 2024 included the following:

   (Millions of yen)

   	2025	2024
   Recoveries of written off receivables	¥ 152	¥ 119
   Gains on sale of equity securities	12,354	4,817
   Gains on disposal of fixed assets	1,979	582
   Gain on negative goodwill	-	21,496

10. General and Administrative Expenses

    General and administrative expenses for the fiscal years ended March 31, 2025 and 2024 included the following:

    (Millions of yen)

    	2025	2024
    Salaries and allowances	¥60,927	¥57,900
    Retirement benefit expenses	(3,574)	(976)
    Outsourcing expenses	16,170	13,152

11. Other Expenses

Other expenses for the fiscal years ended March 31, 2025 and 2024 included the following:

The significant components of the deferred tax assets and liabilities as of March 31, 2025 and 2024 were as follows:

(Millions of yen)

(Millions of yen)

Research and development expenses included in general and administrative expenses, and other expenses for the fiscal years ended March 31, 2025 and 2024 was follows:

(Millions of yen)

The following table summarizes the significant differences between the statutory tax rate and the effective tax rate for consolidated financial statement purposes for the fiscal years ended March 31, 2025 and 2024.

(%)

Note: The above information for the fiscal year ended March 31, 2025 is omitted because the difference between the statutory tax rate and the effective tax rate was less than 5% of the statutory tax rate.

22

Notes to Consolidated Financial Statements

FFG and some of its domestic consolidated subsidiaries adopt the group tax sharing system. Accordingly, the accounting and disclosure of corporation taxes, local corporation taxes and tax effect accounting are treated in accordance with the "Practical Solution on the Accounting and Disclosure Under the Group Tax Sharing System" (ASBJ PITF No. 42, August 12, 2021).

Following the enactment of the Act on Partial Revision of the Income Tax Act (Act No. 13 of 2025) by the Diet on March 31, 2025, a special defense surtax will be imposed on corporate income tax for fiscal years starting on or after 1 April 2026. Consequently, the statutory tax rate used to calculate deferred tax assets and deferred tax liabilities was changed from 30.4% to 31.3% for those expected to be realized or settled on or after April 1, 2026. Due to this change, deferred tax assets and valuation difference on available-for-sale securities increased by ¥1,235 million and ¥1,114 million, respectively, while deferred gains or losses on hedges, remeasurements of defined benefit plans, deferred income taxes decreased by ¥87 million, ¥71 million, and ¥135 million, respectively, for the fiscal year ended March 31, 2025. In addition, deferred tax liabilities for land revaluation increased by ¥676 million while revaluation reserve for land decreased by the same amount.

1. Per Share Data

   Net income attributable to owners of the parent per share for the fiscal years ended March 31, 2025 and 2024 and net assets per share as of then were as follows:

   FFG's shares held in the trust for the stock compensation plan, which were recorded as treasury stock under shareholders' equity, were included in treasury stock to be deducted from the calculation of the weighted average number of shares of common stock outstanding during the fiscal year for the purpose of calculating basic net income attributable to owners of the parent per share. In addition, they were included in treasury stock to be deducted from the calculation of the number of shares of common stock outstanding at the fiscal year-end for the purpose of calculating net assets per share.

   (Yen)

   	2025	2024
   Net income attributable to owners of
   the parent per share:
   Basic	¥ 381.54	¥ 324.76
   Diluted	-	-
   Net assets per share	4,914.53	5,397.27

   Basic net income attributable to owners of the parent per share is computed by dividing net income attributable to owners of the parent by the weighted average number of shares of common stock outstanding during the fiscal year.

   For the fiscal years ended March 31, 2025 and 2024, as there were no dilutive securities, the amount of diluted net income attributable to owners of the parent per share of common stock is not stated.

   Net assets per share is computed by dividing net assets excluding non-controlling interests by the number of shares of common stock outstanding at the fiscal year-end.

   23

2. Other Comprehensive Income

   Each component of other comprehensive income for the fiscal years ended March 31, 2025 and 2024 was as follows:

   (Millions of yen)

3. Supplementary Cash Flow Information

   Reconciliation of cash and cash equivalents

   	2025	2024
   Valuation difference on available-for-
   sale securities:
   Gains (losses) arising during the year	¥ (178,824)	¥ 35,258
   Reclassification adjustments to profit or loss	17,236	18,386
   Amount before income taxes and tax effect	(161,587)	53,645
   Income taxes and tax effect	50,037	(15,363)
   Total	(111,549)	38,281
   Deferred gains or losses on hedges
   Gains (losses) arising during the year	(13,060)	13,827
   Reclassification adjustments to profit or loss	(6,803)	3,706
   Amount before income taxes and tax effect	(19,863)	17,534
   Income taxes and tax effect	5,950	(5,330)
   Total	(13,913)	12,203
   Revaluation reserve for land
   Gains (losses) arising during the year	-	-
   Reclassification adjustments to profit or loss	-	-
   Amount before income taxes and tax effect	-	-
   Income taxes and tax effect	(676)	-
   Total	(676)	-
   Remeasurements of defined benefit
   plans
   Gains (losses) arising during the year	(18,619)	34,299
   Reclassification adjustments to profit or loss	(1,446)	428
   Amount before income taxes and tax effect	(20,066)	34,727
   Income taxes and tax effect	6,028	(10,557)
   Total	(14,037)	24,170
   Share of other comprehensive income
   of entities accounted for using equity
   method:
   Gains (losses) arising during the year	6	-
   Reclassification adjustments to profit or loss	-	-
   Amount before income taxes and tax effect	6	-
   Income taxes and tax effect	-	-
   Total	6	-
   Total other comprehensive income	¥ (140,170)	¥ 74,656

   The reconciliation of cash and due from banks in the consolidated balance sheet to cash and cash equivalents in the consolidated statement of cash flows at March 31, 2025 and 2024 were as follows:

   (Millions of yen)

   	2025	2024
   Cash and due from banks	¥7,160,305	¥8,449,933
   Interest-earning deposits with other
   banks (Excluding deposits with the	(5,007)	(4,756)
   Bank of Japan)
   Cash and cash equivalents	¥7,155,297	¥8,445,177

4. Leases

   As lessee

   Finance leases which do not transfer ownership of leased assets to lessees

   The leased assets primarily consist of office machinery and equipment. See "f. Depreciation and Amortization of Fixed Assets" of Note 1 for the depreciation method of the leased assets.

   Operating leases

   Total future lease payments under non-cancelable operating leases at March 31, 2025 and 2024 were as follows:

   (Millions of yen)

   	2025	2024
   Within one year Over one year	¥28 41	¥ 61 139
   Total	¥70	¥201

5. Financial Instruments

1. Qualitative information on financial instruments

   1. Policies for using financial instruments

      FFG's operations center on the banking business with various financial services. Through these operations, FFG generates income primarily from interest on loans to customers, as well as through securities-mainly bonds-and call loans. FFG raises funds mainly through customer deposits, as well from call money, borrowed money and bonds. In this way, FFG principally holds financial assets and financial liabilities that are subject to interest rate fluctuations. FFG conducts asset-liability management (ALM) to minimize the negative impact of interest rate fluctuations. ALM includes the use of derivative transactions.

      24

      Notes to Consolidated Financial Statements

   2. Details of major financial instruments and their risk Loans and bills discounted

      Loans and bills discounted are mainly comprised of loans to domestic corporate and individual customers and are subject to credit risk which is a risk of decrease or loss in asset value due to deterioration of borrowers' financial condition, and interest rate risk which is a risk of decrease in profit or suffering loss due to interest rate fluctuation.

      Securities

      FFG holds equity and debt securities. Such securities are subject to issuer credit risk, interest rate risk, price fluctuation risk which is a risk of suffering loss from market price fluctuation and liquidity risk (market liquidity risk) owing to such factors as being unable to dispose of securities under certain conditions in the operating environment. FFG employs interest rate swap transactions to reduce its interest rate risk to a certain extent. In addition to the above-mentioned risks, securities denominated in foreign currencies are subject to exchange rate fluctuation risk which is a risk of suffering loss from exchange rate fluctuation. Currency swap transactions, etc. are used to reduce this risk to a certain extent.

      Deposits

      FFG accepts from corporate and individual customers' current deposits, ordinary and other demand deposits, time deposits with unregulated interest rates, and negotiable certificates of deposit. Such deposits are subject to liquidity risk (cash flow risk), which is the risk that FFG is unable to secure the funds required to honor these deposits because of unforeseen cash outflows.

      Derivative transactions

      Derivative transactions are used for providing customers with hedging instruments, etc., conducting asset-liability management (ALM) and other purposes. Such derivative transactions are subject to market risk (interest rate risk, price fluctuation risk and exchange rate fluctuation risk), credit risk and liquidity risk (market liquidity risk).

      Hedge accounting is employed for certain derivative transactions used as part of ALM to hedge interest rate risk and exchange rate fluctuation risk, and matters related to the hedge accounting such as hedging instruments, hedged items, the hedge policy and the method for assessing the effectiveness of hedges are described in "n. Hedge Accounting" of Note 1.

2. Financial risk management system

   1. Management of credit risk

      The principal risk that FFG encounters is credit risk, and appropriate management to maintain asset soundness while securing appropriate returns is a topmost priority for bank management.

      FFG's Board of Directors has formulated the "Credit Risk Management Policy," which establishes FFG's basic policy for credit risk management, and the "Credit Policy," which clarifies basic considerations and standards for decisions and actions for appropriate conduct of the credit operations, to manage credit risk appropriately. FFG also seeks to determine obligor status and supports initiatives targeting obligors, including management consultation, management guidance and management improvement. Furthermore, FFG calculates the amount of credit risk for individual obligors and portfolios, verifies the general allowance for loan losses, conducts comparisons with capital adequacy and employs credit risk management procedures to determine the rationality and quantity of credit risk.

      FFG's organization for handling credit risk management is separated clearly into the Credit Risk Management Department and the Risk Audit Department. To ensure the effectiveness of credit risk management, within the Credit Risk Management Department, FFG has established the Screening Department, Credit Management Department, Ratings Department and Problem Obligor Management Department. The Credit Management Department formulates plans and works to ensure risk management preparedness in line with the Risk Management Program that stipulates action plans regarding credit risk. The Risk Audit Department audits the appropriateness of credit risk management.

      The Credit Management Department reports appropriately and in a timely manner to the Board of Directors and the ALM Committee to communicate the status of credit risk and credit risk management regularly and on an as-needed basis.

      The Credit Risk Management Department regularly determines credit information and market prices to manage credit risk on issuers of securities and counterparty risk on derivative transactions.

   2. Management of market risk

      Along with returns on credit risk, the returns on interest rate risk and other market risks constitute one of FFG's largest sources of earnings. However, returns are highly susceptible to the risks taken, and fluctuations in market risk factors can have a major impact on profitability and financial soundness.

      25

      FFG's Board of Directors has formulated the "Mar-ket Risk Management Policy" as its basic policy on managing market risk. The board has also created management regulations, which prescribe specific risk management methods, to manage market risk appropriately.

      FFG's ALM Committee deliberates expeditious and specific measures to respond to changes in the market environment and determines response policies. The management committees of consolidated subsidiaries set FFG's risk capital and the ceilings necessary for managing other market risks, reviewing these settings every six months.

      FFG's organization for managing market risks comprises the Market Transaction Department (front office), the Market Risk Management Department (middle office), the Market Operations Management Department (back office) and the Risk Audit Department. This organizational structure ensures a mutual checking function. The Market Risk Management Department has established the "Risk Management Program," which establishes action plans related to market risk, and works to prepare for and confirm market risk management. The Risk Audit Department audits the appropriateness of market risk management.

      Furthermore, the Market Risk Management Department reports appropriately and in a timely manner to the Board of Directors and the ALM Committee to communicate the status of market risk and market risk management regularly and on an as-needed basis.

      Quantitative information related to market risk

      1. Financial instruments held for trading purposes

         FFG holds securities for trading purposes, classified as "Trading assets," and conducts certain derivative transactions for trading purposes, including interest rate-related transactions, currency-related transactions and bond-related transactions. These financial products are traded with customers or as their counter transactions, and risk is minimal.

      2. Financial instruments held for purposes other than trading

         Interest rate risk

         FFG's main financial instruments affected by interest rate fluctuations-the primary risk variable-are "Loans and bills discounted," bonds included in "Securities," "Deposits," "Borrowed money," "Bonds payable" and interest-related transactions included in "Derivative transactions."

         FFG calculates VaR of these financial assets and financial liabilities using the historical simulation

         method (holding period of 60 days, confidence interval of 99%, observation period of 1,250 days) and employs quantitative analysis in its interest rate fluctuation risk management.

         As of March 31, 2025 and 2024, FFG's amount of interest rate risk (value of estimated losses) was

         ¥104,309 million and ¥86,183 million, respectively.

         FFG conducts back-testing by comparing its VaR model calculations with estimated gains or losses based on its portfolio for the VaR measurement period. In the domestic banking department, losses exceeded the VaR several times in back-test-ing conducted for the fiscal year ended March 31, 2025. Therefore, FFG ensures a conservative estimate by measuring VaR using a fixed multiplier.

         Among financial liabilities, VaR for "liquid de-posits" that are included in "Deposits" and have no maturity is calculated using an internal model with an appropriate term that assumes long-term holding. Thus, VaR is a technique to measure interest rate risk using certain statistical probabilities based on historical market fluctuations, and consequently, this process may not capture risk in the event that interest rates fluctuate in a manner that has not been observed in the past. Therefore, FFG reviews the calculation models used, etc. in a timely and appropriate manner as necessary to improve the accuracy

         in capturing risk.

         Volatility risk

         FFG's main financial instruments affected by share price fluctuations-the primary risk variable-are listed equity securities and investment trusts included in "Securities."

         FFG calculates VaR of these financial assets using the historical simulation method (holding period of 120 days, confidence interval of 99%, observation period of 1,250 days for listed equity securities held for strategic investment purpose; holding period of 60 days, confidence interval of 99%, observation period of 1,250 days for listed equity securities held purely for investment purpose and investment trusts) and employs quantitative analysis in its volatility risk management.

         As of March 31, 2025 and 2024, FFG's amount of volatility risk was ¥94,365 million and ¥89,714 million, respectively.

         FFG conducts back-testing by comparing its VaR model calculations with estimated gains or losses based on its portfolio for the VaR measurement period. As a result of such back-testing conducted for

         26

         Notes to Consolidated Financial Statements

         the fiscal year ended March 31, 2025, losses exceeded the VaR four times. Therefore, FFG ensures a conservative estimate by measuring VaR using a fixed multiplier.

         Thus, VaR is a technique to measure volatility risk using certain statistical probabilities based on historical market fluctuations, and consequently, this process may not capture risk in the event that prices fluctuate in a manner that has not been observed in the past. Therefore, FFG reviews the calculation models it uses in a timely and appropriate manner as necessary to improve the accuracy in capturing risk.

   3. Management of liquidity risk

      FFG recognizes the need to manage liquidity risk thoroughly, as it believes that downplaying liquidity risk could lead to serious problems of business failure and, in turn, the systemic risk of a chain reaction of defaults by financial institutions.

      FFG's Board of Directors has formulated the "Li-quidity Risk Management Policy" as its basic policy on managing liquidity risk, management regulations defining specific management methods, and regulations defining the method of responding to liquidity crises to manage liquidity risk appropriately.

      FFG's ALM Committee deliberates expeditious and specific measures to respond to changes in the market environment and determines response policies. The management committees of consolidated subsidiaries set cash flow limits and pledged collateral limits, reviewing these limits every six months.

      FFG determines response policies corresponding to cash flow conditions (normal, concern, crisis). The Cash Flow Management Department assesses cash flow condition each month, and the ALM Committee deliberates response policies.

      FFG's organization for managing liquidity risk comprises the Cash Flow Management Department, which is in charge of daily cash flow management and operations; the Liquidity Risk Management Department, which monitors whether daily cash flow management and operations are carried out appropriately; and the Risk Audit Department. This organizational structure ensures a mutual checking function. The Liquidity Risk Management Department has established the "Risk Management Program," which establishes action plans related to liquidity risk, and work to prepare for and confirm liquidity risk management. The Risk Audit Department audits the appropriateness of liquidity risk management.

      Furthermore, the Liquidity Risk Management Department reports appropriately and in a timely manner to the Board of Directors and the ALM Committee to communicate the status of liquidity risk and liquidity risk management regularly and on an as-needed basis.

3. Fair values of financial instruments

   Carrying values and fair values of the financial instruments on the consolidated balance sheet at March 31, 2025 and 2024 were as follows. Equity securities, etc. that do not have a market price and investments in partnerships are not included in the table below. In addition, notes are omitted for items whose fair value approximates book value due to their short maturities, or whose carrying value is immaterial.

   (Millions of yen)

   2025

   Carrying value Fair value Difference

   Assets Securities Available-for-sale securities (*1) Loans and bills discounted (*2)	¥	5,440,775 18,780,388	¥	5,440,775 18,801,990	¥	- 21,602
   Total	¥24,221,163		¥24,242,766		¥	21,602
   Liabilities
   Deposits	¥21,820,743		¥21,816,532		¥	(4,210)
   Borrowed money	3,997,834		3,920,400		(77,433)
   Total	¥25,818,578		¥25,736,933		¥ (81,644)
   Derivatives (*3)
   Hedge accounting not applied	¥	1,704	¥	1,704	¥	-
   Hedge accounting applied		(11,623)		(11,623)	-
   Total	¥	(9,919)	¥	(9,919)	¥	-

   (Millions of yen)

   2024

   Carrying value Fair value Difference

   Securities
   Available-for-sale securities (*1)	¥ 4,888,544		¥ 4,888,544		¥	-
   Loans and bills discounted (*2)	18,345,549		18,445,599			100,050
   	Total	¥23,234,093	¥23,334,143		¥100,050
   Liabilities
   Deposits		¥21,680,861	¥21,681,267		¥ 405
   Borrowed money		6,132,375	6,059,379		(72,995)
   	Total	¥27,813,236	¥27,740,647		¥ (72,589)
   Derivatives (*3)
   Hedge accounting not applied	¥	2,317	¥	2,317	¥	-
   Hedge accounting applied (*4)		23,954		23,954		-

   Assets

   Total ¥ 26,272 ¥ 26,272 ¥ - (*1) Available-for-sale securities include investment trusts whose unit

   price is deemed as fair value by applying the treatment provided for in Paragraphs 24-3 and 24-9 of "Implementation Guidance on Accounting Standard for Fair Value Measurement" (ASBJ Guidance No. 31, June 17, 2021).

   (*2) Allowance for loan losses on loans and bills discounted are directly deducted from the amounts on consolidated financial statements.

   (*3) Derivatives indicate the sum of derivatives included within "Trading assets and liabilities" and "Other assets and liabilities." Net

   27

   amounts of receivables and payables arising from derivative transactions are indicated. Parentheses indicate totals that are net payable amounts.

   2024

   (Millions of yen)

   (*4) Derivatives to which hedge accounting is applied are interest rate swaps and currency swaps, etc. designated as hedging instru-

   1 year or less

   More than 1 More than 3 More than 5 More than 7 year but years but years but years but

   less than 3 less than 5 less than 7 less than 10

   More than 10 years

   ments to fix cash flows, offset market fluctuation, or reduce

   foreign exchange risk of financial assets and financial liabilities of hedged items such as loans and securities. FFG applies deferred

   years

   years

   years

   years

   hedge accounting, interest rate swaps with exceptional accounting, or the allocation method to these derivatives.	Due from banks Call loans and bills bought	¥ 8,250,390 ¥ 16,806	- ¥ -	- ¥ -	- ¥ -	- ¥ -	- -
   In addition, "Practical Solution on the Treatment of Hedge

   Monetary claims bought 41,569 Securities		-	-	-	-	-
   Available-for-sale securities with maturities
   National government bonds	50,994	297,888	450,282	65,407	227,914	1,080,675
   Local government bonds	20,569	29,566	19,497	34,662	25,372	17,739
   Corporate bonds	19,774	73,346	57,438	8,376	11,710	209,164
   Other	56,962	132,005	138,759	77,912	138,449	879,265
   Loans and bills discounted (*)	6,085,447	2,749,089	2,268,944	1,601,921	1,663,529	3,757,222
   Total	¥14,542,514	¥3,281,896	¥2,934,922	¥1,788,280	¥2,066,975	¥5,944,067

   Accounting for Financial Instruments that Reference LIBOR" (ASBJ PITF No. 40, March 17, 2022) is applied to the hedging relationships.

   The carrying value of equity securities, etc. that do not have a market price and investments in partnerships at March 31, 2025 and 2024 were as follows. These are not included in "Available-for-sale securities" in the above tables.

   (Millions of yen)

   2025

   2024

   Carrying value

   Unlisted equity securities (*1) (*2)(*3)	¥ 9,323	¥11,346
   Investments in partnerships (*4)	96,516	77,632

   (*1) Unlisted equity securities are exempted from fair value disclosures in accordance with Paragraph 5 of "Implementation Guidance on Disclosures about Fair Value of Financial Instruments" (ASBJ Guidance No. 19, March 31, 2020).

   (*2) Impairment losses on unlisted equity securities were ¥2,504 million and ¥63 million for the fiscal years ended March 31, 2025 and 2024, respectively.

   (*) Loans do not include an estimated ¥196,417 million in uncollectible loans to Bankrupt Obligors, Effectively Bankrupt Obligors or In-Danger-of-Bankruptcy Obligors, and ¥220,608 million in loans that have no set term.

   The payment schedule for corporate bonds, borrowed money and other interest-bearing liabilities at March 31, 2025 and 2024 are summarized as follows:

   (Millions of yen)

   2025

   More than 1 More than 3 More than 5 More than 7

   (*3) Equity securities of an affiliated company accounted for using eq-

   1 year or

   year but

   years but

   years but

   years but

   More than

   Deposits (*)	¥ 21,354,331	¥ 311,602	¥126,702	¥4,666	¥23,440	¥ -
   Call money and bills sold	2,256,200	-	-	-	-	-
   Payables under repurchase agreements	1,205,552	22,428	44,856	-	-	-
   Cash collateral received for securities lent	1,495,995	-	-	-	-	-
   Borrowed money	1,285,754	2,419,078	291,663	-	604	733
   Total	¥ 27,597,833	¥2,753,109	¥463,222	¥4,666	¥24,044	¥733

   uity method (¥4,670 million and nil as of March 31, 2025 and

   less

   less than 3 less than 5 less than 7 less than 10

   10 years

   2024, respectively) are not included in the above.

   (*4) Investments in partnerships are exempted from fair value disclosures in accordance with Paragraph 24-16 of "Implementation Guidance on Accounting Standard for Fair Value Measurement" (ASBJ Guidance No. 31, June 17, 2021).

   The redemption schedule for monetary assets and securities with maturity dates at March 31, 2025 and 2024 are summarized as follows:

   years

   years

   years

   years

   (Millions of yen)

   2025

   More than 1 More than 3 More than 5 More than 7

   (*) Demand deposits are included in "1 year or less."

   2024

   (Millions of yen)

   1 year or less

   year but years but years but years but less than 3 less than 5 less than 7 less than 10

   More than 10 years

   1 year or

   More than 1 More than 3 More than 5 More than 7 year but years but years but years but

   More than

   years

   years

   years

   years

   less

   less than 3 less than 5 less than 7 less than 10

   10 years

   Due from banks	¥ 6,921,049	¥ -	¥ -	¥ -	¥ -	¥ -
   Call loans and bills bought	5,980	-	-	-	-	-
   Monetary claims bought	46,025	-	-	-	-	-
   Securities
   Available-for-sale securities with maturities
   National government bonds	12,923	597,047	669,134	120,598	328,936	931,441
   Local government bonds	20,078	17,146	44,315	13,556	37,286	14,827
   Corporate bonds	27,340	74,763	40,776	8,199	9,767	186,019
   Other	42,905	174,706	170,223	30,974	166,336	936,149
   Loans and bills discounted (*)	6,284,881	2,789,413	2,377,054	1,505,136	1,715,163	3,883,103
   Total	¥13,361,186	¥3,653,077	¥3,301,505	¥1,678.465	¥2,257,490	¥5,951,540

   years

   years

   years

   years

   Deposits (*)	¥21,260,643	¥ 310,043	¥ 87,891	¥5,633	¥16,650	¥ -
   Call money and bills sold	2,150,000	-	-	-	-	-
   Payables under repurchase agreements	264,108	52,993	-	-	-	-
   Cash collateral received for securities lent	915,202	-	-	-	-	-
   Borrowed money	2,869,683	1,475,493	1,785,484	1,100	495	119
   Total	¥27,459,637	¥1,838,529	¥1,873,375	¥6,733	¥17,145	¥119

   (*) Demand deposits are included in "1 year or less."

   (*) Loans do not include an estimated ¥185,298 million in uncollectible loans to Bankrupt Obligors, Effectively Bankrupt Obligors or In-Danger-of-Bankruptcy Obligors, and ¥230,260 million in loans that have no set term.

4. Fair value information by level within the fair value hierarchy

The fair value of financial instruments is classified into the following three levels according to the observability and materiality of inputs used to measure fair value.

28

Notes to Consolidated Financial Statements

Level 1: Fair value measured using observable inputs that are quoted prices for identified assets or liabilities in active markets

Level 2: Fair value measured using observable inputs other than those included within Level 1

Level 3: Fair value measured using unobservable inputs

In cases where multiple inputs with a significant impact on the fair value measurement are used, fair value is classified into the level to which the input with the lowest priority in the fair value measurement belongs.

1. Financial instruments carried at fair value in the consolidated balance sheet

   and 2024 was ¥19,576 million and ¥15,040 million, respectively. The carrying value of investment trusts applying the treatment provided for in Paragraph 24-9 as of March 31, 2025 and 2024 was ¥32,091 million and ¥30,539 million, respectively.

   (*2) Derivatives indicate the sum of derivatives included within "Trading assets and liabilities" and "Other assets and liabilities." Net amounts of receivables and payables arising from derivative transactions are indicated. Parentheses indicate totals that are net payable amounts.

2. Financial instruments not carried at fair value in the consolidated balance sheet

(Millions of yen)

2025

Fair value

Level 1 Level 2 Level 3 Total

(Millions of yen)

2025

Fair value

Level 1 Level 2 Level 3 Total

(Millions of yen)

2024

Fair value

Level 1 Level 2 Level 3 Total

Description of the valuation techniques and inputs used in the fair value measurement is as follows:

2024

Fair value

(Millions of yen)

Assets

Securities

The fair value of securities with an unadjusted quoted

Securities

Level 1 Level 2 Level 3 Total

prices in active markets available is classified as Level 1. This mainly includes listed equity securities and national government bonds. Even if there is a published quoted price, in cases such as when the market is not active, fair value is classified as Level 2. This mainly includes local government bonds and corporate bonds. For investment trusts with no transaction price in markets, if there are no material restrictions causing market participants to demand compensation for risk of cancellation or claims for repurchases, fair value is based on the trusts' unit price, and is classified as Level 2.

The fair value of securities with no quoted price available is determined based on the present value calculated

(*1) Investment trusts whose unit price is deemed as fair value by applying the treatment provided for in Paragraphs 24-3 and 24-9 of the "Implementation Guidance on Accounting Standard for Fair Value Measurement" (ASBJ Guidance No. 31, June 17, 2021) are not included. The carrying value of investment trusts applying the treatment provided for in Paragraph 24-3 as of March 31, 2025

by discounting estimated future cash flows generated from each transaction at a discount rate, that is a market interest rate plus factors such as credit risk based on an expected loss rate by obligors' classification in accordance with internal rating, and is classified as Level 3.

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