Main Questions and Answers

Q1

A1

Q2

A2

Q3
A3

What are your thoughts on the meaning of holding the stock portfolio and its
balance in terms of economic capital from the perspectives of (i) balance withhedging against interest rate risks, (ii) volatility management for equity capital, and(iii) the downside risks of a crisis?
While we estimate surplus equity capital from an economic-capital perspective to be about
300.0 billion yen at a capital cost of 8%, the capital level required to maintain a surplus of
2–3% over the regulatory capital needed for stable management is about 200.0–250.0
billion yen after deducting 7.5 trillion yen in risk assets. Since this is about the same as thegain/loss on the valuation of our share holdings, we consider the current balance ofshareholdings to be appropriate, based on the thinking referred to earlier.
Although 200.0–250.0 billion yen may seem high when considering stocks as hedging ofbonds from an interest rate risk perspective, our thinking on the meaning of bond holding
differs from that for stock holding. Decisions concerning bond holdings are made based onconsiderations on interest rate risks in both deposits and loans, as they should play a roleto achieve stable management in the gap between deposits and loans. In the case of theShizuoka Financial Group, gains/losses on the valuation of bonds are much smaller thangains/losses on the valuation of stocks. For this reason, it would be unrealistic to strike abalance in amounts held between stocks and bonds.
As for managing the volatility of equity capital, in our case, we conduct capital allocationin the amount minus unrealized gains on stocks. Thus, the stock volatility does not affectour risk tolerance.
Also, since the level of the Nikkei Average at which gains on valuation of our stock
holdings would be zero is about 6,500 yen, we believe the downside risk is extremely
limited.

Do you plan to disclose the amount of dividend income on stocks? Also, in thisannouncement, you stated that in determining year-end dividends, you considered
about 50% of dividend income on stocks. What is your thinking on dividend
amounts for the next fiscal year and beyond?
At this time, we do not expect to disclose the amount of dividend income on stocks to thepublic. Under the tax rates in effect, the amount of dividend income on stocks divided by
the current number of shares issued and outstanding is about 10 yen per share. In thisrevision, in determining year-end dividends, we considered an amount of five yen per
share, or 50% of that amount, in connection with the resolution being passed in the second
half.
I can’t comment at this time on dividend amounts for the next fiscal year and beyond, but
our basic thinking calls for making dividend decisions based on a comprehensive
consideration of dividend income on stocks with regard to full-year dividends.

Future cooperation with the Monex GroupAt this time there has been no particular change regarding the Monex Group. The deal
with NTT Docomo was just completed in January 2024.

Main Questions and Answers
Q4

A4

Assuming a target dividend payout ratio of 50%, is there any chance the total
payout ratio might exceed 50% if you happen to acquire treasury stock in thefuture?
Our policy is to strive to achieve this target by progressively increasing the payout ratio.
In doing so, we expect to continue to acquire treasury stock dynamically, keeping in mind
the difference between the total payout ratio and the dividend payout ratio. While we’reseeking to increase the total payout ratio over the medium to long term, it might also
surpass 50% on a single-year basis at times.
This policy has made our approach emphasizing dividends clearer, but it is not intended
to rule out the acquisition of treasury stock. However, doing so would also requireconsideration of other matters, including share liquidity.

Q5A5Q6A6

What kind of discussions are proceeding concerning efforts to increase ROE fromthe perspective of increasing profitability?
At this stage, we are proceeding with studies while reviewing the scenarios of theMedium-term Business Plan. We hope to disclose these efforts in the large meeting
planned for May. While we aren’t adding any large-scale factors like new fields, SFG
Real Estate Investment Advisors, which was established last year, was duly authorized
and is now prepared to begin operations in April. This is a field for which there are highexpectations in the region as well. We will prioritize this as we move forward.

Does the dividend income on stocks that you’re considering as a funding sourcefor dividends include shares transferred from cross-shareholdings to pureinvestments? You’ve identified reducing cross-shareholdings as a basic policy
from a corporate governance perspective. Is this consistent with your new policy
on shareholder returns and your thinking on holding shares of stock?
Shares held after transfer from cross-shareholdings to the pure investment category are
considered shares that we decided to continue to hold based on investment efficiency.
We do consider dividends from these shares as a source for returns to investors.
Our policy on holding cross-shareholdings is to clarify the meaning of holding each, suchas business investments, enhancement of transaction relationships, and contributing tothe community. We plan to accelerate reduction in our holdings of shares for whichshareholding no longer appears meaningful, and we consider this policy to be consistent
with our basic policy of reducing cross-shareholdings in accordance with the Corporate
Governance Code.

Main Questions and Answers
Q7

Will the pace of reducing cross-shareholdings and levels of ROE targets be
included in future revisions of the Medium-term Business Plan?

A7

We’re considering revising the Medium-term Business Plan in light of changing external
environmental conditions, centered on domestic and overseas interest rate scenarios.
We do not, at this point, expect anything like a sharp increase in the ROE target from six
to eight percent. We do, however, consider matters like the details of investments andexpenses to be subject to revision, in addition to interest on loans, fees and commissions,and Group company earnings.

Q8A8Q9On what point did the Board of Directors demonstrate the widest divergence of opinion
in the process of deliberations on revising financial targets and shareholder returnpolicies?
The Board repeatedly deliberated on matters such as how to increase ROE and PBR
while stably demonstrating our financial intermediary functions as a regional financial
institution and maintaining our policies on holding and reducing cross-shareholdings.
Outside directors have commented that the recent revisions made to the capital policies
were beneficial. Some have also commented that directors need to be determined toenvision a fairly resolute growth strategy and continue to grow profits in order to increase
dividends and returns to shareholders as shown this time.

What points of this disclosure do you think most reflect your aspiration as CEO?
While we’ve pursued management to continually boost value per share in the form ofEPS and BPS, unfortunately these efforts have not been reflected in share price, and ourmarket capitalization has decreased as a result, which has concerned me.

A9We don’t know yet how the market will react to this revision, but we hope our shares will
be held by investors who understand and support the Shizuoka Financial Group’s
initiatives and thinking. We will also seek to achieve a virtuous circle in which we consider
dividend payout as a key to the shareholder returns policy while various stakeholders in
the region, including local customers and Group personnel, hold our shares, and ourdividends contribute to the wellbeing of all shareholders. In this way, I believe thesecapital policies reflect our vision embodied in the First Medium-term Business Plan.

Main Questions and Answers
Q10

A10Q11

Will there be some years in which you will not acquire any treasury stock under
the change in the shareholder returns policy?
Also, why did you choose FY2027 as the target year for achieving a payout ratio of
50% or higher?
We will consider the acquisition of treasury stock annually while taking into consideration
various factors, including share price levels, earnings forecast, and risk events, keeping in
mind the medium- to long-term total payout ratio.
From the management’s perspective, we definitely do not consider the target dividend
payout ratio of 50% to be low. Since our policy is to pay dividends progressively without
reducing them, this revision will not change our basic thinking, even if dividend income on
stocks fluctuates. We have also decided to continue targeting progressive increases
through FY2027 to demonstrate the management pursuit of steadily and progressively
growing dividends.

Reasons for revising the shareholder returns policy at this timing
We decided on the timing of implementation with consideration for various factors inaddition to the results of internal discussions concerning matters such as capital costs andshare prices.

A11For example, on the topic of the progress of the Medium-term Business Plan, weconsidered the steady expansion of the Plan’s measures in areas like DX initiatives andresponding to community issues through support for decarbonization and other efforts, inaddition to steady progress in profit from our main businesses due to growth in loans,
deposits, and fees and commissions. On the topic of growing new business domains, aGroupwide issue, each Group company is moving in a positive direction under its own
steady efforts. We have reached a state at which we are confident about future growth.
Furthermore, a new NISA system was launched in January 2024. We consider theserevisions an excellent opportunity to interest customers in stock as asset building
investments by making them more attractive.
With this Medium-term Business Plan, we’re seeking to enhance returns not just toshareholders, but to the region and Group personnel. We expect to proceed with various
studies in the run-up to April; this is why we have chosen this timing for the revisions.