Review of financial targets andshareholder return policy

Progress on the First Medium-term Business Plan
Progress has been made on efforts toward medium- and long-term growth strategies, such as by expanding new business areas and reviewing expenses structures, in addition
to steady growth in core businesses centered on deposits and loans.
Aim for sustained growth by responding appropriately to changes in the current environment, including rising interest rates in Japan and labor shortage issues.

Progress on the First Medium-term Business Plan1

Main progress on growth strategies

Future outlook based on changes in the environment

Powerful growth in sales sections

Recent environmental changes• Deposit and loan balances show stable growth while consulting andother commission revenues are also favorable.
Deposits

Region-CoCreation
strategy
×GroupBusinessstrategy

Loans

Consolidated fees and commissions

32.6(JPY bn)

27.6

23

Loan balancereaches
JPY 10 tn

11,409.3
9,761.3

11,730.3
10,149.8

FY2022 3Q

FY2023 3Q

Deposits, loans
Rising investment efficiency centered on loans linked to market interest rates
in the event that negative interest rates are discontinued⇒ Increased earnings driven by growth in deposit and loan balances

Securities

Growth in new business areas• TJS made a subsidiary (Feb. 2023), SFG Marketing established (July 2023),
SFG Real Estate Investment Advisors established (Nov. 2023)• Autonomous growth in Group companies under the holding company structure

Rising yields on new investments while revaluation losses on JPY bonds
holdings increase⇒ Earning potential will be impacted by whether or not management has thecapacity to build up JPY bonds.

Improving investment capacity by revising methods ofevaluating fixed assets

Recent environmental changes• Suppressing future branch-related costs through one-time amortizationof estimated asset write-downs

Transformationstrategy

Rising long-term interest rates in Japan spurred by review of BoJ monetary
policy⇒ Strategic portfolio management prepared for dealing with conditions of positive
interest rates-3.0-5.0-5.0(JPY bn)-3.0

Growth investment

Nonpersonnel
costs
FY2023

FY2024FY2025

FY2026

Effects of rising wages and labor shortages are being felt, especially inprovincial regions.

FY2027

Enhancement of investment in digital transformation (DX) and human capital
to realize more efficient management⇒ Investments with an eye on population trends, etc. will directly translate into
medium- to long-term competitive strength.

2

Revision of Financial Targets and Policy on Shareholder Returns under the First Medium-term Business Plan
Revision to a target of progressively increasing the payout ratio to 50% or higher by FY2027 while also aiming for sustained growth
in ROE by setting a target based on shareholders’ equity in addition to the existing ROE target (based on net assets)
Revision of financial targets and policy on shareholder returns

AfterBefore• FY2027: Consolidated ROE of approx. 6% (based on net assets)
FY2027: Consolidated ROE of approx. 7% (based on shareholders’equity)• Progressively increasing the dividend payout ratio to 50% or higher• FY2027: Consolidated ROE of approx. 6%• Progressively increasing the dividend payout
ratio to 40% or higher

Revision of policy on shareholder returns

Additional ROE target
Aim ofadditionaltarget

Aims ofrevision

To clarify our approach of aiming for sustained growth in ROE throughexecuting growth strategies, regardless of fluctuations in net assets due
to increases and decreases in valuation of stocks, etc.

[ROE trend]
Based on shareholders'equityBased on net assets

Sustainedincreases

5.8%
4.6%
FY2022 (actual)

6.0%
5.0%

[Distribution of earnings to shareholders]
Aiming for a shareholder return ratio of 50% or more over the medium to long term
through dividends on shares only, alongside steady implementation of dynamic
purchasing and retirement of treasury shares based on capital market conditions

Increase related directly torising profit levels

7.0%

Based onshareholders’ equity NEW
Based on net assets

Aiming for growth while taking into
consideration fluctuations in net assets
levels including valuation gains on stocks

FY2023 (planned) FY2027 (planned)

To make Shizuoka Financial Group shares more attractive by
increasing the dividend payout ratio, in order to attract newshareholders and realize wellbeing for all stakeholders

FY2022 (actual)

FY2023 (projected)

Dividend payout
ratio

32.2%

38.4%

Dividend pershareJPY 30.0(+JPY 5.0 vs. previousannouncement)-

Total payout ratio

51.1%*

50.9%*-

JPY 39.0

FY2027 (target)
50.0% or higher(+10.0 pts. vs. initial plan)* (Actual) returns to shareholders in FY2022 include purchase of treasury shares announced and implemented during the period.
(Projected) returns to shareholders in FY2023 are estimated based on projected financial results and the maximum amount ofpurchase of treasury shares announced February 1, 2024.

3

The First Medium-term Business Plan from a capital-cost perspective<Assumptions of analysis>(1) Analyzing the First Medium-term Business Plan from a capital-cost perspective• Since we are targeting consolidated ROE of approx. 6% in FY2027, capital costs of 8% would mean anegative ROIC spread.
• Results of estimates show that the ROIC spread would be positive, assuming a reduction of JPY 300.0 bn
in equity capital (i.e., the level of equity capital deemed to have leeway of approx. JPY 300.0 bn).

(2) We will improve the earnings capabilities of each business segment by promoting the basic
strategies of the First Medium-term Business Plan.

(1) Capital cost of 8%(2) Consolidation basis distributed over three segments
Customer
account (JPY)

Customer transactions (deposits,loans, etc.) business segment

Foreign-currency Profit/loss in foreign-currency
account
portfolio
Investment
account (JPY)

Business segment consisting ofinvestment accounts other thancustomer transactions

Results of analysis of the First Medium-term Business Plan from a capital-cost perspective
Consolidated

FY2030

ROIC spread

-0.26

-0.10

-0.09

ROIC

0.71

0.64

0.60

WACC

0.97

0.74

0.69

Customer
accountFY2027

ROIC spread

+0.03

+0.04

+0.06

ROIC

0.27

0.28

0.30

WACC

0.24

0.24

0.24

Foreign-currency
account

FY2022

ROIC spread

-0.60

+0.12

+0.11

ROIC

4.20

3.41

2.91

WACC

4.80

3.29

2.80

Investment
account（%）

ROIC spread

-0.71

-0.54

-0.48

ROIC

0.53

0.72

0.78

WACC

1.24

1.26

1.26

 Negative ROIC spread in final FY ofthe First Medium-term Business Plan
(FY2027)
 Negative spread reduced throughpromotion of basic strategies of theFirst Medium-term Business Plan

ROIC spread turns positive
if equity capital is decreased by
JPY 300.0 bn:
leeway of approx. JPY 300.0 bn inequity capital.

FY2027

FY2030

+0.04

+0.04

0.65

0.61

0.61

0.57

+0.04

+0.06

0.28

0.30

0.24

0.24

+0.12

+0.11

3.41

2.91

3.29

2.80

 Negative ROIC spread in final FY of the First Medium-term Business Plan

+0.01+0.07

Reasons fornegative spread

0.77

0.84

0.76

0.77

 Positive ROIC spread on transactions with customers (deposits, loans, etc.)
 Growing the positive spread by promoting basic strategies under the FirstMedium-term Business Plan Negative ROIC spread due to worsening of foreign bonds balances following
recent reversal of long- and short-term interest rates in the US Returning to positive territory under the Medium-term Business Plan’s scenario
of a positive yield curve(i) Lower investment efficiency on securities due to the effects of long-term monetary easing⇒ Restructuring the portfolio under the Medium-term Business Plan will improve ROIC.
(ii) All capital not falling under customer or foreign currency accounts is in this account undermanagerial accounting practices.

4Management risks at regional financial institutions
Setting a target CET1 ratio of 13% or higher as the equity capital level needed for stable management as a basis for growth strategies, in light of themanagement risks to regional financial institutions
Shizuoka Financial Group’s stock price remained stable even during previous financial crises owing to its high level of soundness.

Risks to regional financial institutions

Target equity capital level(Full-scale application phase of final Basel III standards)[Common to all banks]

Maintaining a regulatory capital adequacy ratio of +2 to 3% supports stable
management as a basis for growth strategies
13.78%

13% or higher

Approx. 3% pts.
higher than theregulatory ratio
level needed forstable management↓
Equity capitalamount JPY 200.0
to 250.0 billion

10.5%(Regulatorycapital)
Sept. 30, 2023
(Actual)Features ofbusiness

Banking-business assets
are generally assets at risk

Business dependent on
specific region

Managementrisks

Asset value decreases
during risk events

Major impact on region ofnatural disasters, etc.

Enhanced equity capitalHigh level of soundness

March 31, 2028(Planned)

Shizuoka Financial Group’s share price during past risk events[Stock price index when the stock price is set to 1 at end of FY2006]

1.400

Shizuoka Financial GroupTOPIX
Banking industry (TSE Prime)

1.200* Shizuoka Bank’s share price for Sept. 2022 and earlier

1.000
0.800
0.600
0.400
Sept. 2008

0.200
0.000

Global financial
crisis
March
2007

March
2008

March
2009

March
2010

March 2011

Feb. 2016

Great East Japan
Earthquake
March2011

March
2012

Feb.–March 2020

Adoption ofnegative interest rates
March2013

March2014

March2015

March2016

March2017

March2018

COVID-19

March2019

March
2020

[Regional financial institutions]

March2021

March2022

March2023

・Demonstrating stable financial intermediary functions
・Maintaining profit levels and stable dividends even in a crisis

Rate of decrease in share prices in response torisk events (over six months)

 Shizuoka Financial Group’s share price remained stable evenduring bearish stock markets
Global financial Great East Japan
COVID-19crisis
Earthquake
Shizuoka
Financial-26.5%+2.8%-3.5%
GroupTOPIX-40.5%-18.8%-4.2%

Bankingindustry(TSE Prime)-47.5%-22.3%-17.4%
5

Dividend policy
Deciding on dividend amounts comprehensively while considering dividends received from stock, aiming for a progressive increase in the dividend payout ratio
to 50% or higher by FY2027. Making decisions on stock holdings based on matters such as their meaning as investments and investment efficiency, whileremaining conscious of the equity capital level needed for stable management

Shizuoka Financial Group’s thinking on
dividends<Breakdown of consolidated equity capital(JPY 1,133.3 bn)>
* FY2023 interim financial results<Dividend trends> * Dividend payout ratio for FY2023 estimated based on projected financial results<Shareholder return policy (target dividend payout ratio)>
Progressively increasing the dividend payout ratio
to 50% or higher

Shareholders’ equity: JPY 928.6 bn

We will enhancing returns to shareholders by setting dividends per
share with consideration for matters including dividends received
from stock holdings (cross-shareholdings 188
and pure investments),
168
to increase thepayout ratio.
We will announce the dividend policy for each fiscal year throughIR and other means after considering capital policies.

Stock portfolio policy

JPY 17Year-end dividend

JPY 15

JPY 17

Valuation differences on available-for-sale securities:
JPY 179.9 bn(Including approx. JPY 250.0 bn corresponding tostocks)

Annual dividends

JPY 30

JPY 34

Payout ratio

32.2%

33.5%

The portion of valuation differences on available-for-salesecurities corresponding to stocks plays a role in capital
adequacy from a capital cost perspective and contributes tostabilization of management in connection with regulatory
capital.

The amount corresponding to dividends received on stock (after deducting the effective tax rate) is
factored into decisions on Shizuoka Financial Group’s dividends. As this decision was made in thesecond half, year-end dividends for FY2023 are equivalent to 50% (+JPY 5).

Transfer to pureinvestment assets after
elimination of crossshareholdings

Held as investment
assets2963
96.3

March 31, 2023

Sept. 30, 2023

Systematicdecreases(Actual) JPY 17+JPY 5(Planned) JPY 22

JPY 3938.4%

1 Balance of cross-shareholdings (acquisition cost basis)

Systematically decreasing holdings not deemed worth holding under theCorporate Governance Code
Target reduction during the First Medium-2term Business Plan: −JPY 13.6 bn

Transfer to pure investment assets

Considering holding as investment assets in light of investment efficiency

3 Thinking on stock portfolio overall

Cause offluctuation inequity capital

100.6

FY2023(This announcement)

JPY 15(JPY bn)

Balance of cross-shareholdings (acquisition cost)
Revaluation gain/loss on cross-shareholdings

FY2023(Announced May)Interim dividend(Excluding valuation differences onavailable-for-sale securities, etc.)(Revised from initial target of 40% or higher in the First Mediumterm Business Plan)

FY2022(Actual)

3870
87.0

Making clear the meaning of holding shares and holding them if
appropriate, with consideration for the equity capital level necessary forstable management as the basis for growth strategies
Consolidated CET1 ratio target: 13% orhigher

1March 31, 2028

Stock portfolio yield: 1.8%; stock portfolio RORA: 1.6%
Nikkei Average level at which revaluation gain/loss would be zero: JPY 6,465 (asof FY2023 interim settlement of accounts)

6Enhancement of shareholder returns and generating impact through investment in growth strategies and human capitalThrough enhancement of returns to shareholders and further accelerating investment in growth strategies and human capital leveraging
use of Shizuoka Financial Group’s management resources, we will generate results to lead to well-being for all stakeholders.

Enhancement of shareholder returns and investment in growth strategies and human capitalManagement resources

Shareholder returns and investment in growth strategies andhuman capital[Shareholder returns] Making Shizuoka Financial Group’s shares more attractive

EquitycapitalEarnings
capabilities Stable management
 Shareholdings with low risk ofimpairment (use as sources ofnew returns)
 Growing funding for shareholder
returns through stable profit
growth Expand investment leeway
through revision of fixed-asset
valuation

Humanresources Diverse, specialized humanresources (value-creating HR,digital HR)

Systems Next-generation accounting
systems with high development
productivity

Method of return

Concept

Dividends

 Progressive increases: creating longterm shareholders

Purchase of treasurystock Dynamic purchase: increasing value
per share[Investment in growth strategies and human capital]

Investment areas

Effects, courses of action

Expanding investment in AIand digital transformation (DX) Further growth in touchpoint and sales
transformation initiatives and using
generative AI

Enhancing investment in
human capital More active investment in HR development,etc., to maximize human capital to help
realize strategy

Investment in highly
profitable nonfinancial fields

 Considering M&As if connected to prompt
profitability or social impact

Investment toward
generating regionalinnovation Reginal HR development and industrial
creation Promoting partnerships with local firms

Impacts
Increasing corporate
value
Profit levels
Stock price and market
capitalization

Returns to employees
and the region
Realizing financial
well-being

Increasing
engagement of Group
employees andofficers
Reskilling, etc.

Increasing regionalGDP
Increasing regional
population
7