INTEGRATED REPORT

Economic Overview of Shizuoka Prefecture
Osaka

Industrial Characteristics

Tokyo

Shizuokaaspect to the regional
economy. We expect that
Shizuoka prefecture will be
more internationalized,
stimulating the interchange of
people and ideas with the majorurban centers of Eastern Asia, and act as an important driving force
for the regional economy.
In recent years the prefectural authorities have been operating a
number of schemes to encourage companies in the medical
treatment, pharmaceuticals, chemicals, and optical technology
industries, among others, to set up operations in the so-called“Shizuoka Triangle Research Cluster” (spread across the prefecture’s
eastern, central, and western districts) as a means of developing anext-generation industrial base.

Shizuoka Prefecture is situated midway between the two major
consumer markets and industrial centers of Japan — the Nagoya
region plus the Osaka-Kyoto region to the west, and the YokohamaTokyo region to the east. Because of this location at a busy
“crossroads” of the nation, it has historically developed into asignificant center of manufacturing industry. The convenient locationof Shizuoka Prefecture in transportation terms has caused the growthof a strong industrial base. The prefecture is one of the country’s
leading manufacturing areas. The wide variety of industries
represented within Shizuoka has led to it being dubbed “the industrial
department store.” Corporations active in Shizuoka include worldleading enterprises such as Toyota, Honda, Suzuki, and Yamaha, andthe prefecture is renowned for its concentration of export-oriented
manufacturing companies. Many of these firms have set up production
subsidiaries overseas, which are creating a growing international

Economy in Shizuoka Prefecture and Current State● Positions as distribution hub between Tokyo and Osaka/Nagoya.
●R epresents leading manufacturing prefecture in Japan.
● Owns a lot of export-driven companies handling machinery of transportation andmusical instruments and etc.

● Has many representative tourist locations with rich natural resources.
● The Izu Peninsula was certificated as a UNESCO Global Geopark in Apr. 2018. Global

Industrial structure in Shizuoka Prefecture• Amount of shipments of manufactured goods etc.
: JPY 16,451.3bn 3rd largest in Japan (2020)
Transportation
Machine26%

Geoparks are natural parks of topographical and geological significance. There are nine
UNESCO Geoparks in Japan.
Others28%

Mt. FujiPulp, Paper
5%
Source :Shizuoka Prefectural
Tourism Association

UNESCO World Cultural Heritage

Chubu Odan Expressway

Beverage,
Tobacco, Feed
6%

The Port ofTagonoura●Shizuoka Bank

No. of listed companies with
HQs in Shizuoka Prefecture

The Port of Shimizu●Star Micronics

Tomei
Expressway

Listing

Mt. Fuji Shizuoka Airport

No. ofcompanies

TSE Prime
TSE Standard
TSE Growth
Total●Hamamatsu Photonics●Yamaha●SuzukiElectronic
Machine15%

Source: Survey on industrial statistics by METI

●Shibaura Machine

Shin-Tomei
Expressway

Food
7%

ChemicalIndustry
13%●Yamaha Motor
The Port of Omaezaki
Izu Peninsula

20
30
1
51

*As of the end of Mar. 2023

Economic scale of Shizuoka Prefecture● Accounts for 3% share of all-Japan and ranks 10th in the scale of economy in Japan.
●H as greater GDP than total GDP of 4 prefectures in Shikoku or 3 prefectures in Hokuriku.
● Its GDP is ranked next to those in Kazakhstan, Qatar, Algeria.

Shizuoka Prefecture indices
Share of all-Japan

Population

3.58m

2.9%

10th of 47 (2022)

No. of households

1.62m

2.7%

10th of 47 (2022)

Nominal prefectural GDP

JPY 17.8tn

3.1%

10th of 47 (FY2019)

Per-capita income

JPY 3.407m-

3rd of 47 (FY2019)

190k

3.0%

10th of 47 (2019)

JPY 16.5tn

5.4%

3rd of 47 (2020)

No. of business establishments
Amount of shipments of manufactured goods, etc.

JPY 208.4bn

2.4%

15th of 47 (2021)

Fishery production volume

250k tons

7.7%

3rd of 47 (2021)

No. of industrial locations

49

5.7%

4th of 47 (2021)

No. of new housing starts

21k

2.5%

10th of 47 (2021)

Agricultural output

1

National ranking

Shizuoka Prefecture economic scale
Rank

9
10
11
Rank

54
55
56
57
58

Prefectural GDP (FY2019, Nominal)
Prefecture/Region(US$ billions)

Fukuoka Prefecture
Shizuoka Prefecture
Ibaraki Prefecture
4 prefectures in Shikoku
3 prefectures in Hokuriku

183.5
164.4
129.7
136.6
123.2

GDP comparison with countries (2019)
Country (Region)(US$ billions)Kazakhstan
Qatar
Algeria
Shizuoka Prefecture
Hungary
Ukraine

181.7
176.4
171.7
164.4
164.0
153.9

*Sources: Economic and Social Research Institute (ESRI)
Cabinet Office, Government of Japan

Shizuoka Financial Group at a Glance
NURTURING THE VISION OF A PROSPEROUS COMMUNITY
True to the corporate philosophy, which aims to “expand dreams and affluence with our community,” the Shizuoka Financial
Group (the “Group”) makes an ongoing contribution to the development of the region around Shizuoka Prefecture, whichforms the core of its business base. This corporate philosophy incorporates not only an economic dimension but also acultural one: living in harmony with the local communities and the people we serve, sharing prosperity with them as a homegrown local banking group and a member of the regional community, and also helping local people to live more fulfilling lives.

A FIRST-CLASS REGIONAL FINANCIAL GROUPThe Shizuoka Financial Group comprises The Shizuoka Bank, Ltd. (the “Bank”) and thirteen group companies, and is one of
the largest regional financial groups in Japan. Centered on Shizuoka Bank with the Head Office, 177 branches and 26
sub-branches, the Group serves the needs of customers not only within Shizuoka Prefecture, its home region, but also inthree major economic centers in Japan, namely Tokyo, Osaka, and Nagoya, all of which are comparatively nearby. For
overseas operation, the Bank operates in New York, Silicon Valley, Brussels, Hong Kong, Singapore, and Shanghai.
The Structure of the Shizuoka Financial Group
Shizuoka
Financial
Group, Inc.

(As of July 1, 2023)

Domestic
Head Office and Branches 178

Shizugin IT Solution Co., Ltd.

Sub-branches 26

Shizugin Credit Guaranty Co., Ltd.

Subsidiaries 10

Shizugin DC Card Co., Ltd.*
Shizugin General Service Co., Ltd.

Consolidated Subsidiaries

Shizugin Mortgage Service Co., Ltd.
Shizugin Business Create Co., Ltd.
Shizugin Heartful Co., Ltd.

The Shizuoka
Bank, Ltd.

Shizuoka Liquidity Reserve Limited
Shizugin Saison Card Co., Ltd.

Equity-method Affiliate

Commons Asset Management, Inc.

AmericasBranch 1

New York

Representative Office 1

Silicon Valley*Aug. 1, 2023, the company namechanged to Shizugin Card.

EuropeSubsidiary 1

Shizuoka Bank (Europe) S.A.

Asia
Branches 2
Representative Office 1

Hong Kong, Singapore
ShanghaiShizugin Management Consulting Co. Ltd.
Shizugin Lease Co. Ltd.
Shizuoka Capital Co. Ltd.
Shizugin TM Securities Co. Ltd.
Equity-method affiliate
Manex Group, Inc.

Contents
Economic Overview of Shizuoka Prefecture................................................ 1
Shizuoka Financial Group at a Glance......................................................... 2Group CEO Message................................................................................. 3Group CFO Message................................................................................ 11Group CxO Message................................................................................ 15
Dialogue between Chairman of the Board of Directors and Outside Director.... 17
Message from the Representative of the Shizuoka Bank........................... 23
Alliance with Regional Banks.................................................................... 24
Shizuoka Financial Group’s Value Creation Process................................. 25
Materiality identification process............................................................... 27
The first medium-term business plan........................................................ 29
Financial Highlights................................................................................... 31
Non-Financial Highlights........................................................................... 32
Initiatives for SDGs................................................................................... 33
Initiatives for the Environment................................................................... 35
Initiatives to Implement Human Capital Management................................ 43

Strengthening Corporate Governance...................................................... 59
Thorough Enforcement of Compliance and Risk Management.................. 65
Meet needs of corporate customers......................................................... 71
Region-based Relationship Banking......................................................... 73
Support for Overseas Business Development........................................... 74
Cross-industry Collaboration and Support for Start-ups........................... 75
New Business Fields................................................................................. 77
Independent Auditor’s Report................................................................... 79
Consolidated Balance Sheet..................................................................... 83
Consolidated Statement of Income........................................................... 84
Consolidated Statement of Comprehensive Income................................. 84
Consolidated Statement of Changes in Equity.......................................... 85
Consolidated Statement of Cash Flows.................................................... 86
Notes to Consolidated Financial Statements............................................. 87
Key Consolidated Financial Indicators..................................................... 110
The Shizuoka Financial Group............................................................... 113
2

Aiming to be a Corporate Group Committing
itself to the Future of the Region and
Producing Growth of the Region

President & CEO
Hisashi Shibata

3

e
g
a
s
s
e
M

CEO Message

Transition to a holding company structure
On October 3, 2022, the Shizuoka Bank Group transitioned toa holding company structure, making a new start as the
Shizuoka Financial Group.
Beginning with the 9th Medium-term Business Plan launched infiscal 2005, the Shizuoka Bank Group has worked to strengthengroup management to provide comprehensive financial services.
We have grown into a corporate group boasting one of thelargest regional financial institutions, while refining the expertiseof each group company. At the same time, we also perceived
the need to further accelerate our own transition to keep up
with the times and find solutions to the increasingly diverse andcomplex challenges currently faced by our regional customers.
It just so happened that this perception coincided withrevisions to the Banking Act, which expanded the scope ofoperations of banks and bank holding companies and enabledbank holding companies that meet certain criteria to establish
subsidiaries simply by filing a notification. New measures suchas these created an environment where we could expand into
new domains with a sense of speed.
Based on these factors, we determined to transition to aholding company structure to adapt more flexibly to changes
and further boost the Group’s combined strength. The new
structure inherits the Group’s corporate philosophy of“expanding dreams and affluence with our community.” We willcontinue to contribute to sustainable growth in the region by
striving to create new value for the future.

Review of the 14th Medium-term Business Plan “COLORs”
Looking at the current economic environment, despite theprogressive normalization of economic activity in the wake of
the COVID-19 crisis, the recovery in business conditions has
been hampered by the effect of soaring raw materials prices,supply chain constraints, personnel shortages and otherfactors against the backdrop of geopolitically unstableinternational affairs. Amid the continuing easing of the monetary
policy within Japan, business sentiment remains clouded,
partly due to concerns over economic slowdowns overseas
and the impact of elevated commodities prices due todramatic movements in foreign exchange rates, as countries
around the world revise their policies to combat inflation.
Under these circumstances, the Group launched its 1st
Medium-term Business Plan in April 2023. This, our first suchbusiness plan under the new holding company structure, isaimed at steadily progressing towards sustainable growth
together with the region, in any business environment. Before
explaining this new plan in detail, I would like to take sometime to review the 14th Medium-term Business Plan
“COLORs,” which we implemented over three years as the
Shizuoka Bank Group.
[Figure 1] Aim to “change to a problem-solving corporate group” in the 14th
Medium-term Business Plan with a view to realize the picture
targeted in the long term (10-year Vision)

Picture Targeted in the Long Term (10-year Vision)
A corporate group committing itself to the futureof the region and producing growth of the region
14th Medium-term Business Plan

“COLORs”

VisionChange to a problem-solving
corporate group assistingregional customers withhands-on support

Three Basic Strategies and10-year Strategy
1. Group Sales Strategy
2. Innovation Strategy
3. Business Portfolio Strategy+ Region-producing Strategy

Three basic strategies and 10-year strategy
Under the 14th Medium-term Business Plan, unlike previous
such plans, we established for the first time our 10-year visionof “a corporate group committing itself to the future of theregion and producing growth of the region,” committing
ourselves to the region from a longer-term perspective. We
engaged in three basic strategies and a 10-year strategy overthis time, which we designated as a period of business modeltransformation aimed at achieving our vision.
In our first basic strategy, the “Group Sales Strategy,” wemade maximum use of our group functions to implement oursolutions business, based on the theme of “finding a way out
from the banking-centered sales style.” We worked tostrengthen our group-wide integrated sales structure throughmeasures such as promoting sustainable finance, which
provided financing for customers’ ESG and SDGs initiatives,support for business succession, and interaction of humanresources of over 200 people among our group companies. As
a result, our consolidated profits from fees andcommissions obtained by providing services such as
consulting functions increased by 6.5 billion yen over 3 years.
[Figure 2] Results of the “Group Sales Strategy”

Main Measures
Enhance solution
programs Strengthen
the group comprehensive
sales system

Results of Related Items
Fees and commissions (Consolidated)
37.3 (JPY bn)+JPY6.5bn

30.8

FY2019FY2022In the “Innovation Strategy,” our second basic strategy, we
pursued new profit opportunities through initiatives toincorporate the latest technologies adapted to the era andexpand into new business fields. In addition to launching an
4

open-structure next-generation core system in January 2021,
the first such system used at a Japanese bank, we beganoffering loans to startup companies in the growth stage(venture debt) as a new business expected to drive growth.
We also restructured our network of overseas offices based on
the changing business environment. As part of this, we were
the first regional bank to establish a representative office in
Silicon Valley. We enhanced our business structure to bolster
our overseas businesses while incorporating the latest
information and technology.
[Figure 3] Initiatives of the “Innovation Strategy”

Main Measures

Results of Related Items

Start operating the next
generation account system

Execution amount of venture debt

Established Silicon Valley
Rep. Office
Reorganize overseas bases

Applied (Case)
Executed (Case)

95

100.0

by FY2027

FY2022bn[Figure 4] Initiatives of the “Business Portfolio Strategy”

Main Measures

Results of Related Items

Increase market credit
investment earnings

Market credit investment free income
15.9 (JPY bn)
Earnings increased to

10.1

1.6 times

FY2019(consolidated)

By the end of FY2022,

12.5

bn
approx. JPY
earnings effect (in 5-year basis)

Transition to holding
company structureWith the COVID-19 pandemic and a succession of other
unforeseeable events, these three years have tested our true
value as a financial institution. We gained a deeper level of trustfrom the region and our customers by demonstrating the
integrated consulting functions of the Group, in addition to
support for cash flow and business restructuring during the
pandemic. This enabled us to boost our consolidated ordinary
profit by approximately 20.0 billion yen, mainly through thegrowth of loans, fee business, and other core businesses.
Faced with a significantly different market and investment
environment to the one we originally anticipated when the plan
was established, we implemented operations to improve thesoundness and profitability of our securities portfolio for the
future. As a result, although unable to achieve our earnings
targets, we were able to execute a variety of reforms, our next
move towards the future, while laying the groundwork for our
1st Medium-term Business Plan as the Group.

FY2022[Figure 6] Financial Targets in the 14th Medium-term Business Plan

ROE

Alliance effect(The Yamanashi Chuo Bank andthe Bank of Nagoya)(The Yamanashi Chuo Bank andthe Bank of Nagoya)

due to growth ineach area.
FY2019Ordinary profit

Results of Related Items

Make alliance with tworegional banks

Aim at the averagebalance ofJPY

In our third basic strategy, the “Business Portfolio Strategy,”
we aimed to optimize the allocation of management resources.
We engaged in portfolio optimization to expand groupearnings. As an example of this, in the structured financefield, we successfully improved profitability while maintaining
the soundness of our assets, based on an appropriate riskreturn analysis, and were able to achieve significantly higher
earnings. For our human capital, a key management resource,
we engaged in the first drastic reform of the personnel
management system after around two decades. In addition to
introducing a new evaluation system, “OKR,” we pushedahead with the transformation of corporate culture toencourage new ideas for problem-solving while combining theFundamentally reform
personnel system

Main Measures

7.2

executed JPY
bn(accumulated basis)

46

11

Income from PE and others
Fee income
Income and expenditure on loans[Figure 5] Initiatives of the “Region-producing Strategy”

By the end of FY2022,
294

FY2021

diverse value perceptions and individualities of each officer or
employee through the promotion of diversity.
Lastly, in the “Region-producing Strategy,” our 10-year
strategy encompassing a medium- to long-term perspective,
we formed business alliances with The Yamanashi Chuo
Bank in October 2020 and The Bank of Nagoya in April 2022,
as a growth strategy for the future of the region. By leveraging
each other’s strengths, we have been able to realize benefits
from these alliances that surpass our initial expectations. These
include cooperation in the regional revitalization field like
individual business talks across different regions, as well as
cooperation in the fields of finance and life planning and further,
initiatives to support the transformation of regional industries.

JPY 54.6bn

3.8%

FY2020

FY2021

FY2022
JPY 74.0bn

JPY 63.3bn

80bn

Over JPY

JPY 54.2bn

4.1%

Target14th MBP

Target
1st MBP

90bn

Over JPY

4.6%
3.8%

5%

Approx.

55%

Approx.

14%

Over

Over

6%

64.2%*1

OHR(consolidated)

58.9%

60.2%

59.5%

Approx.

55%

18.42%

CET1(consolidated)

Shareholder
return ratio(consolidated)

15.59%

16.56%

16.08%

56.2%

54.9%

14.17%*2

51.1%

Over

Mid to long-term
shareholder return ratio of

32.8%

over

50%

13%

Dividend pay out ratio of

over

40%

*1 Effect of depreciation of the first generation account system *2 Preliminary estimate after the full application of the Basel III finalization5

Formulation of the 1st Medium-term Business Plan “Xover – Clearing the way to a new era”
 asic concept of the 1st Medium-term
B
Business Plan
Next, I would like to help our stakeholders gain a deeper
understanding of our 1st Medium-term Business Plan “Xover– Clearing the way to a new era,” which began in fiscal 2023, by
explaining its basic concept and the aspirations it embodies.
First of all, I should mention that we formulated the 1st
Medium-term Business Plan using a totally different approachto previous business plans. In the past, we depicted our group
image both extended from the past and attainable in the shortfuture as “forecasting approach,” to formulate our businessplans. This time, however, considering the era of VUCA, when
the outlook is no longer accessible to forecasting, we adopted“backcasting approach” to plan how to achieve our vision
for the future after designing the vision.
We have also changed the duration of the plan from three tofive years. We hope to progress towards our vision from along-term perspective, moving with agility to correct our course
as necessary to match changes in the business environment.

[Figure 7] Target State of the 1st Medium-term Business Plan

Target state to be achieved in 2030 “A state in which all stakeholders are sustainable and their well-being is improved”
Continuously improving the well-being of stakeholders by solving problems and meeting needs of the community and customers, and increasing corporate value of SFG
Shareholder
RegionTarget State
Shizuoka, a city of innovationthat continues to attract
people and enterprises

Target State
Satisfaction with expected
investment returns
SFG’s Support Group

FutureGeneration

Target State(SFG)
CustomerTarget State

Employees

Sense of security that all problems andneeds can be discussed and resolved
Customers can enjoy convenience and efficiency
through cashless and digital technology.
Sustainable corporate activities

1st Medium-term Business Plan
(FY2023-FY2027)

Present

Social Value Creation

Rich natural environment
×
Bright future and hope
Increase in Corporate Value
Create a sustainable
society

Target State
Diverse and highly specialized group of
professionals
Flexible work styles to suit each individual’svalues and work ethic
Feeling that we are contributing to thecommunity and our customers

Corporate
Philosophy

Expand dreams andwealth together withour community.

10-year Vision

Sustainability Indicators

Back-casting

Future(2030)We have newly included “future generations” among our
stakeholders. By this, we mean the human capital that will
drive the future of the region, as well as the future of the region
itself. By fiscal 2030, we aim to achieve a balance between thecontinuing improvement of shareholders’ wellbeing and theenhancement of the Group’s corporate value.
The name “Xover (Crossover) – Clearing the way to a new era”
was chosen from among submissions from the Group’s
employees. “Xover (Crossover)” refers to the integration ofdifferent fields and elements across genres. As our first Mediumterm Business Plan in our new holding company structure, it
embodies our commitment to pioneer the future in this era ofuncertainty, co-creating new value together with our
stakeholders.
In this 1st Medium-term Business Plan, we set forth two
visions. The first is our “10-year Vision.” This carries on fromthe long-term vision set forth in the 14th Medium-term
Business Plan. We aim to be the presence that enhances theregion’s attractiveness and leads the region. The second is our“1st Medium-term Business Plan Vision,” our aim for the five
years of the plan: to be “a problem-solving corporate group
creating new value for the future.” We aspire to create newvalue by leveraging our new holding company structure torefine our customer problem-solving capabilities as acomprehensive financial group.

 reating social value while enhancing
C
corporate value
We have newly established “sustainability indicators”
among our management indicators for the 1st Medium-term
Business Plan. These are measures of the sustainable growthof both the region and the Group, as well as progress towards
6

our vision for 2030. With an awareness of the impact offinancial institutions on the future of the region, we haveidentified priority issues (materiality) for the Group, and we aim
to achieve our targets for each indicator by addressing theseissues through our four basic strategies.
We have established three sets of sustainability indicators:
the “social impact indicators,” measuring our impact onsocial value creation and the “financial targets” and“engagement indicators,” through which we aim to enhance
our value as a company.
Our “social impact indicators” include three “aims” establishedwith an awareness of social impact within Shizuoka Prefecture:
rate of social change in Shizuoka Prefecture’s population, real
gross product in Shizuoka Prefecture, and percentage of the
reduction of GHG emissions in Shizuoka Prefecture. We hope tolink these to the sustainable economic growth in the region.
We have established four “financial targets” from the threeperspectives of profitability, efficiency, and soundness:consolidated ordinary profit, consolidated ROE, consolidated
OHR, and consolidated CET1 ratio. The “engagement
indicators” include three indicators: customer satisfaction withthe transactions with the Group, engagement of the Group’s
employees, and carbon neutrality as targets. We have set
targets for each. We aim to enhance our corporate value
through the achievement of these seven “indicators tocommit.”The basic concept of the 1st Medium-term Business Plan is
not limited to the conventional “pursuit of economic value” butis founded on the aspiration to boost the Group’s economic
value, thus corporate value, through initiatives to create newvalue for the region.
Until now, we tended to focus on the economic value
reflected in figures, such as the growth of balance of loans andearnings. In the future, we hope to co-create the region’s future
together with our stakeholders in the region and so on throughinitiatives such as creation of employment and new industries
to boost the attractiveness of the region, execution ofsustainable finance to achieve carbon neutrality in the region,and support of businesses that contribute to reducing
greenhouse gas emissions. We hope to transform these
initiatives into the power to drive sustainable growth for both
the region and the Group.
It will not be a simple task to balance the creation of social
value and the enhancement of corporate value. However, weare proud of this ambitious and extremely meaningful plan.
I should mention that although our “social impact indicators”
apply to Shizuoka Prefecture only, we perceive the “region” as
all the Group’s areas of operation where we have customers.
We will expand the concept of the 1st Medium-term Business
Plan outside Shizuoka Prefecture to achieve the sustainablegrowth of those regions, as well as the Group itself, by
pursuing our basic strategies to realize the goals of all our
stakeholders.

[Figure 8] Sustainability Indicators

Indicators

aim

Social Value
Creation

Social Impact

EffectivenessSoundness

commitSFG

Financial Targets

Profitability

Target for FY2027

Rate of Social Change in Shizuoka
Prefecture’s Population

Continuously Increasing

Real Gross Output in Shizuoka Prefecture (GDP)

Sustainably Developing

Percentage Reduction of GHG Emissions in
Shizuoka Prefecture-46% compared to FY2013 (FY2030)

Consolidated ordinary income
Consolidated ROE
Consolidated OHR
Consolidated CET1 Ratio*1

Customer satisfaction with Group Transactions*2

Engagement

Engagement of Group Employees*3

Carbon Neutrality (Scope 1 and 2)

More than 90.0 billion yen
Approx. 6%
Approx. 55%
13% or more

Increase from the Previous
Fiscal Year

4.0 or above
Achieved (FY2030)*1: Basel III finalization basis *2: Measured by “NPS” through customer surveys. NPS: Net Promoter Score [Degree of willingness to recommend the product, service, or company itself to family, friends, or others.]*3: Overall employees’ satisfaction which is measured as averaged score of the five factors: fulfillment at work, adaptation to work, satisfaction with workplace, satisfaction with superiors, and loyalty to company (on a scale of 1 to 5).

Basic strategies of the 1st Medium-term Business Plan
Four basic strategies
In this section, I would like to present an overview of the fourbasic strategies of the 1st Medium-term Business Plan.
The “Regional Joint Creation Strategy,” our first basic
strategy, targets the revitalization of the business base throughregional problem-solving to achieve the expansion of theGroup’s earnings opportunities. It is not possible for regional
financial institutions such as the Group to achieve sustainablegrowth in the absence of regional economic development. In
this strategy, we will leverage our personal networks and7

coordinating capabilities to create platforms for each region
and issue in collaboration with local governments, companies
in different industries, and others.
By solving problems through each platform, we aim to build
a “regional ecosystem,” establishing a virtuous cycle where thecreation of social value leads to the enhancement of corporate
value for the Group. This includes driving an increase in ourcustomers’ corporate value and the lifestyle convenience of all,as well as developing more attractive local communities andboosting the relevant populations.

[Figure 9] Four Basic Strategies in the 1st Medium-term Business Plan

Basic Strategies

Transformation Strategy
Transform “Customer Contact,” “Sales,” “Human
Resources,” and “Expenses” to generatemanagement resources and increase revenue.

Sophisticate the corporate governance system under a holding company structureand drive group synergies and agile management.

The “Group Business Strategy” is our second basic
strategy. Through our group functions, we will thoroughly
address the social issues and needs of the region and ourcustomers, based on the key words “deepen, expand, andrenew.” Under the 1st Medium-term Business Plan, we will not
only strive for further growth in our existing core business fields
for corporation and life planning and so on, but also pioneer
new fields across the Group through deepening and expanding
their existing business domains by each of our groupcompanies.
For example, our consulting business has always focusedon support in the three areas of M&A, business succession,and business restructuring. Going forward, however, we mustalso increase our support in fields related to regionalsustainability, such as decarbonization. Among our initiatives innew business fields, we acquired TJS Co., Ltd. as a whollyowned subsidiary in February 2023, with the aim of promoting
IT and DX and resolving the shortages of human resources at
local companies. In July, we went on to establish the Group’s
first new consolidated subsidiary under the holding company
structure, SFG Marketing Co., Ltd. This new company will
revitalize the region through the expansion of sales channels,
branding, and other services for the region and our customers.
We will continue to adapt to changes in the structure ofsociety. We hope to create a social impact and actively
increase our businesses to enhance corporate value.
Our third basic strategy is the “Transformation Strategy,”which is aimed at leveraging digital technology and data toachieve drastic reforms in the four areas of customer
touchpoints, sales, human resources, and expenses. For the

SFG

Group Governance Strategy

Sustainability Indicators

Revitalizing the community(management base) throughsolving regional problems
and expanding revenue
opportunities.

Group Business Strategy
Resolve social problems and meet needs of local
communities and customers through our diversified
financial services.

Social Impact

Regional-Co-Creation Strategy

Indicators

sustainable growth of the Group, we must transform ourbusiness bases, human capital, and other management
resources into an optimal form to achieve our vision for the
future, based on the progress of digitalization, the decline inface-to-face transactions, and other changes in the businessenvironment. We will reform the structure of our sales andservice channels, including the creation of an environment
where customers can complete all their everyday transactions
through digital contact points such as apps and websites. At
the same time, we will allocate human capital to key fields,
enhancing our earning power through our group businessstrategy while further boosting productivity.
Our fourth and last basic strategy is the “Group
Governance Strategy,” in which we expect the holding
company creates the synergies among the Group’s
companies, allocates the Group’s management resources
optimally and sophisticates their business activities. The Boardof Directors of the holding company, incorporating the diverse
insights of Outside Directors, will discuss and refine theGroup’s policies for addressing the challenges to adapt tosocial change. Meanwhile, we will proceed with the delegationof authority to the executive division. By engaging in the overall
optimization of our business activities with a sense of urgency,
as the Group’s Chief Officers allocated to each field theGroup’s integration and enhancement, we aim to maximize theeffect of the first three basic strategies.
We will pursue these four basic strategies to achieve boththe creation of new social value and the enhancement ofcorporate value through business growth for the Group.

To Our Stakeholders
Towards a Higher Share Value
We regard the sustainable improvement of corporate value andthe enhancement of shareholder returns as key management
issues. Under our 1st Medium-term Business Plan, we willraise the dividend payout ratio from the standpoint of boosting
the attractiveness of our shares, aiming for the co-creation ofvalue with our shareholders. At the same time, we will flexibly
implement purchases of treasury stock based on the market
environment, including the share price. We have never lowered

our dividends, and we will maintain our approach of
progressively increasing dividend payouts, aiming to “raise thedividend payout ratio to 40% or more by fiscal 2027.” Wealso hope to attract new shareholders, especially from within
the region to create a virtuous cycle where the value cocreated with the region and our customers through our efforts
to generate social value is then returned to shareholders in theform of the Group’s profits.
Markets are increasingly focusing on each company’s
management policy based on the share price and the cost of8

capital. Companies are required to make efforts to improvetheir PBRs, in particular. PBRs are stuck at a low level amid thepersistence of monetary easing and other environmental
changes in the finance industry. The group has engaged inmanagement with a consciousness of continually growing EPS
and BPS from the standpoint of enhancing share value. We will
maintain this management policy unchanged as we continue
to aim for higher share value, boosting our attractiveness as acompany while working to improve our PBR by raising profit
levels.
To this end, we will steadily implement our strategies underthe 1st Medium-term Business Plan, enhancing shareholder

returns and boosting business profitability to achieve ourtargets, such as a “dividend payout ratio of 40% or more” and“consolidated ROE of around 6%.” We are also aware of theneed to continue to show our efforts to grow through andbeyond the term of the Medium-term Business Plan. These
management strategies are our guideposts to achieving
sustainable growth for both the region and the Group. By
promoting initiatives that contribute to enhancing corporate
value over the medium and long term while steadily addressing
the immediate issues confronting us, we aspire to corporate
management that is valued by our stakeholders, including
future generations.

[Figure 10] Profit distribution to shareholders
Annual dividend (JPY bn)

Average in the period
Share buybacks (JPY bn)of the past mid-term
Annual dividend per share（JPY）
business plan
21.7

18.7

14.7

15.2

8.9

25.0

26.0

9.5

Increase by
JPY 4
30.0

8.8

Increase by
JPY 4
34.0

Average in themost recent
ten years
21.8

18.8

16.8

14.7

14.4

12.7

11.4

9.4

Increase by
JPY 3

Increase by
JPY 1

12.8
10.0*

9.7

Average in the period of the
11th mid-term business plan(2011−2013)

Average in the period of the
12th mid-term business plan(2014−2016)

Average in the period of the
13th mid-term business plan
(2016−2019)

FY2020

FY2021

FY2022

FY2023(E)Average results forthe last 10 years(FY 2013-2022)

20.1%
52.3%
JPY47.0bn

27.0%
48.1%
JPY42.4bn

28.5%
48.9%
JPY45.2bn

32.8%
32.8%
JPY43.6bn

35.4%
56.2%
JPY41.6bn

32.2%
51.1%
JPY52.4bn

33.7%—
JPY56.0bn

28.6%
50.2%
JPY44.7bn

Dividend payout ratio
Shareholder return ratio
Profit attributable to owners of the parent*Shareholder returns for FY2022 include implemented share buybacks (amount: 10.0 billion yen, period: February to May 2023).

[Figure 11] EPS/BPS Trends (Consolidated)

2050.65

EPS (Earnings Per Share) (JPY)92.92

BPS (Book value Per Share) (JPY)632.1820.84
FY1998FY2001

FY2004

FY2007FY2010FY2013

FY2016FY2019FY2022Be the Place Where the Future Starts.
“Be the Place Where the Future Starts.” We have establishedthis new group slogan to achieve our vision for the future: “astate of sustainability and enhanced happiness for all our
stakeholders.” We have expressed their relationships with theGroup as a “place.” This message encapsulates ourdetermination to pioneer a bright future for the region as eachindividual officer and employee works to co-create value
together with our stakeholders.
To achieve our vision, it is vital that we co-create social value
with our stakeholders through the 1st Medium-term Business
Plan and establish a virtuous cycle where this will lead tohigher corporate value for the Group. To this end, it isimportant to share the same vision and advance together
towards our common aspirations for the future. We will work to
spread and embed this message. At the same time, we aim tocontinue our efforts to enable our stakeholders to feel its actual
embodiment in the Group.
In closing, I would like to reiterate our commitment to takeresponsibility in the future of the region and achieve our 10year Vision: “a corporate group committing itself to the futureof the region and producing growth of the region.” We willbring together the Group’s combined strengths and strive tosolve social issues to maximize value for all stakeholders.
I would be grateful for your continued understanding andsupport in the years ahead.

9

PICK UP

Initiatives to enhance corporate value
The Group is working to improve PBR by lowering the cost of capital and raising ROE with the aim of further
enhancing corporate value.

Trends in ROE and PBR
Amid increasingly severe changes in the business environment for thefinance industry and low levels of PBR, we have worked to boost ROE
through initiatives such as transforming the revenue and cost structure.
Sep. 2008
Collapse of Lehman
Brothers

5.9%
4.7%

ROE

5.1%

PBR FormulaJan. 2016
Introduction of negativeinterest rates

5.7%

shareholders’( cost ofcapital

PBR

ROE

ROE

cost of shareholders’capitalexpected
growth rate

expected
growth rate)

PBR of 1.0 or more

4.6%
3.8%
3.1%

Initiatives to Lower the Cost of Capital

PBR
1.23

FY 2004

1.17

FY 2007

0.67

0.78

0.58

FY 2010

FY 2013

FY 2016

0.38

0.46

FY 2019

FY 2022

We aim to lower the cost of capital through deeper
dialogue with the market, and by increasing the probabilityof success of our growth strategies while reducing
information asymmetry.
Fuller Disclosure of Information,
Including Non-financial Information

Towards a Higher PBR

Reduce the uncertainty of business performance
Increase understanding of the sustainability of theregion and the GroupWe aim to improve PBR by working to raise ROE throughsustainable profit growth while lowering the cost ofshareholders’ capital.

ROE
Furtherenhancementof ROE

Cost ofshareholders’capital

Expected
growth rate
Sustainableprofit growth

Proactive Communication with Shareholders
and Investors (IR Activities)

Increase understanding of our strategies, including
progress on the Medium-term Business Plan

Lowering the costof shareholders’capitalShare information of interest to the market in a timely manner andreflect it as appropriate in the promotion of management strategy

Approach to enhancing ROE
We aim to enhance ROE by enhancing profitability with a consciousness of the top line, expenses, and asset efficiency,
as well as appropriately controlling the level of capital through a balance of growth investment and returns.
Direction in the first medium-term business plan

Enhancementof profitability(Improve RORA)
Net income
Risk assets
Enhancementof ROE

Control of
expensesStrengtheningof the Top LineStrengthen profitability through our basic strategies•

Expand the top line in the following business fields by 26.0 billion yen in the 1st
Medium-term Business Plan*(1) Core businesses (loans and deposits, fees) +6.0 to 8.0 billion yen; ALM & market
investment, SF, overseas +6.0 to 8.0 billion yen

Optimal Asset
Allocation

Net income

Transform the structure of investment and expenses
Reduce current expenses by at least 15 billion yen by curbing existing system costs andachieving more efficient back-office operations, etc.
At the same time, expand aggressive investment in key fields based on the level of profits(2) Start-up wealth businesses +6.0 to
8.0 billion yen(3) New business fields +3.0 to
4.0 billion yen*The level without taking account of the increase in Profits due to rising interest rates

Revitalize the region (business base) through regional problem-solving and achievesustainable profit growth throughout the 1st Medium-term Business Plan and beyond

CapitalControl of thelevel of capital
Risk assets
CapitalCapital
Allocation

Furtherenhancementof shareholder
returns

Management of capital allocation for overall optimization of the Group
Accumulate an additional 1.8 trillion yen in risk assets during the term of the 1st
Medium-term Business Plan with an awareness of RORA and enhance the profitability ofcapital through the overall optimization of capital allocation based on RAF

Shareholder returns and strategic shareholdings
In addition to progressively increasing the dividend payout ratio to 40% or more, aiming tosustainably enhance ROE, EPS and BPS with an awareness of total returns, including theflexible implementation of purchases of treasury stock• Aim to reduce strategic shareholdings to 87.0 billion yen on an acquisition cost basis to enhance capital efficiency.
Utilize the gain on sales of these shareholdings for growth investment (systems, human resources, newbusinesses, etc.)•*For detailed information, please visit our website by scanning the QR code on the left.

10

CFO Message

We will create new value through financial
strategies for the future to achieve sustainablegrowth for the region and the Group

Hiromitsu Umehara
Executive Officer & CFO

1. Current Performance and Outlook
Results for fiscal year 2022

Fiscal year 2022, the final year of the 14th Medium-term
Business Plan, we saw the progressive normalization ofsocioeconomic activity in the wake of the COVID-19 crisis.
However, financial management was overshadowed bysignificant changes in the business environment, such as soaring
prices of raw materials and fuel, the Russia-Ukraine situation,and movements in interest rates and foreign exchange rates.
Consolidated gross profit for the Bank increased by 8.7
billion yen year on year on a nonconsolidated basis. Profits
from fees and commissions increased, primarily corporatebanking-related fees and revenue on customer assets, as didearnings from the Bank’s main business, indicated by coregross operating profit, mainly due to an improvement in the net
gain on Japanese government bonds and other bonds.
Consolidated ordinary profit increased by 19.7 billion yen
year on year and consolidated net income increased by 10.8
billion yen year on year, both rising for the first time in two fiscal
years. Profits were boosted by factors such as a decline insales expenses and credit-related costs and an increase ingain on stocks, in addition to the increase in consolidated
gross profit. As a result, we succeeded in raising ROE by 0.8
percentage points year on year to 4.6%.
These results fell short of our target consolidated ordinary
profit of 80 billion yen, established when we first formulated theplan, due to the impact of adjustments to our foreign bondpositions aimed at maintaining the soundness of ourinvestment securities portfolio and improving net interest
income amid market interest rate movements. However, we
steadily began to see our initiatives in the problem-solving
business come to fruition. These included cash flow support
for our customers during the COVID-19 crisis and the provisionof integrated consulting functions across the entire group. As aresult, we were able to lay out a pathway to stable growth.
11

Results of FY2022 (Consolidated)(JPY bn,%)

FY2022

YoY*1 Increase/Decrease

Gross operating profit

160.2

+8.7

operating expenses (-)

95.9

-1.8

Profit based on the equity-method
investment balance

0.4

-1.5

2

Net operating profit*

65.5

+12.8

Credit-related costs (-)

5.6

-1.2

Gain (loss) on stocks

13.8

+10.2

Ordinary profit

74.0

+19.7

Extraordinary profit and loss

-0.6

-5.2

Net income before taxes

73.3

+14.5

Corporate taxes (-)

20.9

+3.8

Net income*3

52.4

+10.8

Net asset basis*4

4.6

+0.8

Shareholders’equity basis

5.8

+1.1

ROE

*1 Consolidated results of the Bank for fiscal years 2021 and before*2 Net operating profit = Net operating profit of the Bank nonconsolidated +Consolidated ordinary profit – Ordinary profit of the Bank nonconsolidated*3 Net income attributable to owners of the parent*4 Net income attributable to owners of the parent / {(Total net assets – Subscription rights toshares – Noncontrolling interests)} x 100

2. Financial Targets of the 1st Medium-term Business Plan

Consolidated ordinary profit

The Group has established a medium- to long-term profit
target of 100 billion yen in consolidated ordinary profit by fiscal
2030. We set our profit target of 90 billion yen for fiscal 2027,
the final year of the 1st Medium-term Business Plan, bybackcasting from this figure.
To achieve this, in the Group Business Strategy (page 33),
one of the basic strategies under the 1st Medium-term
Business Plan, we aim to raise the profitability of our existing
businesses through initiatives such as stronger market
operations management and further growth in the structured
finance field, in addition to strengthening our core businesses
such as loans and fees income. We also aim to expand our
top line (consolidated gross profit) by boldly and actively taking
challenges in new business fields while further expanding ourFinancial Targets of 1st Medium-term Business Plan
Indicators

Financial
Targets

Under the 1st Medium-term Business Plan launched in April
2023, we have established four financial targets for fiscal 2027,
the final year of the plan: consolidated ordinary profit of morethan 90 billion yen, consolidated ROE of around 6%,
consolidated OHR of around 55%, and a consolidated CET1
ratio of 13% or more.

Target for FY2027

Consolidated ordinary income More than 90.0 billion yen
Consolidated OHR

Approx. 55%

Consolidated CET1 Ratio

13% or more

Consolidated ROE

Approx. 6%

business domains, including the enhancement of our start-uprelated businesses and businesses that support our customers
in asset building.
In addition, under our Regional Joint Creation Strategy (page33) we aim to generate earnings opportunities through regional
problem-solving, linking this back to our Group Business
Strategy. Under our Transformation Strategy (page 47) we aim
to achieve our highest-ever level of consolidated ordinary profitof 90 billion yen and further growth beyond by actively
undertaking “aggressive investment” — growth investment for
the future.

Roadmap to Consolidated Ordinary Income Target
Generation of management resources
through aggressive investment

Basic Strategies to increase revenue
Regional-Co-Creation Strategy

Transformation Strategy

Expand the management base by revitalizing theregional economy.
Expand revenue opportunities by solving regional problems.

Increase productivity and raise revenue throughtransformations in four categories.

×

Touch points

Sales

Human
resources Expenses

Group Business Strategy
Cost Reduction+15 +Including decreasein depreciation of the“Next-Generation System”

Increase revenue by “deepening,” “expanding,” and“renewing” our business domain, and by solving social
problems and meeting needs of the community andcustomers through our group functions.
New Businesses Domain+3-4Venture &Wealth Business+6-8(JPY bn)

Increase in
expenses due
to aggressive
investment-27 +ALM*1, Market*2,and Overseas
+8-10

100
or moreCore Business Domain *1 Asset Liability Management(Deposits, Loans and Fees) *2 including market credit investment
+6-8

74

Difference from the actual result in FY2022 +16

Actual in FY2022

Consolidated OHR

90

Through strategic investments in anticipation of the digital shiftacross all transactions and procedures, based on factors suchas the progress of digitalization and changes in customer
behavior, we will endeavor to optimize our business bases andhuman capital to further strengthen the Group’s management.
Under the 1st Medium-term Business Plan, we will leverage
the advantage gained from the launch of our next-generationcore system* to implement aggressive investment in IT
systems totaling more than 50 billion yen over five years, while
progressively reducing operating expenses through BPR andother initiatives. This will enable us to transform our approachto service channels and sales activities to contact with ourcustomers.

Plan in FY2027

Goal in FY2030

When making investments, we will verify the effects of each
initiative and appropriately monitor its timeframe, monetaryamount, and priority as we proceed. We will review ourinvestments whenever necessary and control the consolidated
OHR across all expenses at around 55%, which is anappropriate level.
*With the launch of the next-generation core system, we are able tocomplete approximately 1.5 times the number of IT system development
projects as before, for the same cost and over the same timeframe.

12Consolidated CET1 ratio and consolidated ROE

We have established a target for the consolidated CET1 ratioof 13% or more, based on a consideration of both capitalefficiency and the minimum level of capital required. The
minimum capital adequacy ratio under BASEL III, including thecapital conservation buffer, is 10.5%. We have set our target at
13% or more to account for factors such as the potential
impact of earthquake and climate change risks.
During the five years of our 1st Medium-term Business Plan,
while deploying our profits to boost our level of risk assets* andreturn profits to shareholders, we will also endeavor to shrink
our strategic shareholdings. It is our policy to control ourconsolidated CET1 ratio at an appropriate level, taking into
account the impact of the finalization of BASEL III. We aim to
accumulate risk assets through the optimized group-wide
allocation of capital based on our Risk Appetite Framework(RAF) (page 67), while increasing our capital efficiency with
ROA, Return on Risk Assets (RORA), and other profitability
measures in mind. By fiscal 2027, the final year of our 1st
Medium-term Business Plan, we aim to achieve a consolidated
ROE of 6%.

Capital Allocation
Increase inriskConsolidated weighted
net Income
assets18%

FY2022

FY2027

Consolidated net income

JPY 52.4bn

JPY 64.0bn

CapitalJPY 1,000bn

JPY 1,000-1,100bn

ROE

4.6%

Approx. 6%

Shareholder
Returns
Strategic
shareholdings

Finalizationof Basel III

4.1%

Equivalent to valuation difference on
available-for-sale securities

1.6%

Assume buffer capital of approx. JPY 90bn, taking
earthquake risk and climate change risk into account.
Increase in riskweighted assets

13%
or moreStrategic
shareholdings
Reduce policy investment
Build upstocks in accordance withrisk-weighted assets,
Progressive dividend the Corporate Code oftaking ROA and
Governance+
RORA into account+Implement buybacks+
Leverage gains fromflexibly
Invest in new
the sale of strategic
businesses
shareholdings*Risk assets: The value of risky assets such as loans and securities,
adjusted for their degree of risk.

Shareholder returns

End of FY2022

End of FY2027

Reducing strategic shareholdings

The Group has established a policy on strategic shareholdings,
setting forth its basic policy to reduce strategic shareholdingsin accordance with Japan’s Corporate Governance Code. We
will maintain only those shareholdings deemed meaningful fromthe three perspectives of “business investment,” “strengthening
business relationships,” and “contribution to the regional
economy.” To boost capital efficiency, we have set a target of
reducing our strategic shareholdings to a total of 200 stocks
with an acquisition cost of 87 billion yen during the five years ofour 1st Medium-term Business Plan.
Even before now, we have been steadily reducing the number
and outstanding balance of these shareholdings on an
acquisition cost basis, using the gains from the sale of shares toinvest for growth. Under the 14th Medium-term Business Planof the Bank, we allocated these funds to cover the development
costs for our next-generation core system. Under our 1st
Medium-term Business Plan, in addition to allocating them tothe amortization of this system, we will use them for strategic
investment such as in digital transformation (DX), human capitaland new businesses linked to our growth strategies.
We will make up for the reduction in risk assets due to thesales of these shareholdings by reinvesting funds in highly
profitable fields such as start-up-related businesses andprivate equity investments* to boost our capital efficiency.
*Private equity investments: Investments in companies that are not yet
publicly listed or in real estate.
Acquisition cost of strategic shareholdings*1
Figures in parentheses indicate listed shares.
About 500
About 170.0

288
About 33%

(JPY bn)

Strengthening business relationships
Business investment and community contribution
Retirement benefit equivalent trust
Ratio of acquisition cost to equity
No. of companies whose shares the Bank holds

About 110.0

287
106.0

267
100.6
(93.8)

Policy on Use of Gain on Sales of Policy Investment Stocks
14th Medium-term Business Plan (2020-2022)
Allocated to Next-Generation System expenses.
Improve system development productivity by renewing
software (applications) that was developed more than 30
years ago. Establish system infrastructure that can easily
incorporate advanced technology through open hardware,
etc.

•

Further reduction
200
87.0(80.0)

1st Medium-term Business Plan (2023-2027)
10.7%

8.8%

About 11%End of
End of
End of
End ofMar. 2017
Mar. 2020
Mar. 2023
Mar. 2000*1 Excluding shares of group companies and equity method affiliate

13

Allocate to Next-Generation System expenses.
• Invest in strategic fields such as DX, human capital,and new businesses.
Increase revenue by investing in systems for the next 10
years based on progress in and superiority of the systeminfrastructure.
•

About 8%End of Mar. 2028
(Plan)

3. Outlook for Fiscal Year 2023
For fiscal year 2023, we target an increase in profits, withconsolidated ordinary profit of 80.0 billion yen (up 6.0 billion
yen year on year) and net income of 56.0 billion yen (up 3.6
billion yen year on year).
The Group will engage in solving the issues faced by theregion and its customers to maximize revenue through value
creation. Because of the increasingly diverse and complex
nature of the issues faced by our customers and thedifferences between each region and field, we will not adopt a
uniform strategy; rather, we will engage in a cost and profit
analysis appropriate to each market, making proposals tailoredto each customer’s characteristics.
Specifically, for corporate customers, we will focus on
proposing solutions linked to their sustainability, such as
decarbonization, ESG, support for industrial transformation,and business succession. For individual customers, we will
actively engage in supporting asset inheritance to the next
generation in addition to medium- to long-term asset-building
support such as guidance on handling the new NISA system
and accumulation-type products.
The incremental growth of each company in the Group,
including the Bank, is crucial to achieving our targets. Under
the holding company structure, each group company isleveraging its strengths to pursue its growth strategies. At thesame time, we are working to boost the combined strength of
the Group, boldly and actively taking challenges in new

Projected performance in FY2023(JPY bn)

FY2022(A)

FY2023(Projected)(B)

Ordinary profit

74.0

80.0

+6.0

Profit attributable toowners of the parent

52.4

56.0

+3.6

ROE

4.6%

5.0%

+0.4pt

OHR

60.2%

58.3%

-1.9ptCET1 ratio*

18.42%(14.17%)17.14%(13.44%)-1.28pt(-0.73pt)

YoY
(B-A)

*Actual results for FY2022 and forecast for FY2023 are ratios after the application of the
finalization of Basel III.
Figures in parentheses are estimates assuming full application of the finalization of Basel III.

business fields. We will strive wholeheartedly to achieve a
positive start in this first fiscal year of our 1st Medium-term
Business Plan.

4. Dialogue with Shareholders and Investors
We believe it is vital to disclose and explain the necessary
information in a timely and appropriate manner to enable ourshareholders and other stakeholders to gain an understandingof our management strategies.
In fiscal year 2022, we had many opportunities for dialogue
with shareholders and investors, such as breifing sessions
about financial results for institutional investors and analysts,
as well as company information sessions for individual
investors in the region. This enabled us to gather a wider range
of opinions. These forums for dialogue provide very valuable
opportunities to gain insights to enhance the corporate valueof the Group. The opinions we receive are shared within theGroup, including senior management, and provide a valuablereference for us in pursuing our management strategies.
We will continue to strive to expand our IR and SR activities,
further deepening our communication with shareholders andother stakeholders to boost the Group’s corporate value.
I would be grateful for your continued understanding andsupport in the years ahead.

IR activities (fiscal year 2022)
We engaged in the following dialogues with shareholders and investors utilizing both face-to-face and online forums.
Briefing sessions for institutional investors
and analysts ... 8 times
In addition to biannual financial results briefing
sessions, we held small meetings on specificthemes, led by the CEO (management
strategy), the CFO (quarterly financial results),
and the CIO (IT systems strategy).

Individual interviews with institutional
investors and analysts ... 98 times
Company information sessions for individual investors in the region ... 3 times
Conferences organized by securities companies (meeting events with overseas
institutional investors) ... twice
Overseas IR ... twice: Europe & North America (online) and Asia

14

CxO Messages
The Group has appointed Group Chief Officers (CxO) as the chief executive for each field of business operations.
By clarifying the roles and responsibilities related to establishing the management systems for the wholegroup, as well as overseeing business execution and keeping it in check, we aim to enhance corporate value
from the standpoint of group-wide optimization under the overall leadership of the Group CEO.

Group CEO
Chief Executive
Officer
Message: Page 3

Group CFOGroup CIO

Group CRO

Group CIAO

Chief Financial
Officer

Chief Information
Officer

Chief Risk andCompliance Officer

Chief Internal
Audit Officer

Message: Page 11

Proactive IT investment to accelerate digital strategies
CIO

Motoya Suzuki

For over half a century, the banking industry has engaged intransforming its operations and services using digital technology.
Since savings accounts went online in the 1960s, the industry has
introduced online foreign exchange, automatic account transfers,
ATMs, 24-hour and 365-day operation, internet banking, and other
innovations.
Meanwhile, it has been pointed out that this early adoption ofdigital technology has made it difficult for the industry to adapt
smoothly to recent technological trends, leading to inflexible andoutdated systems.
The Group has addressed this issue by establishing a medium- tolong-term road map and progressively updating to next-generation
systems.
The next-generation core system launched in January 2021
provides services for our main banking operations: deposits,exchange and loans. It represents the first complete system renewal
after 32 years. In addition to applications (software) updates, itfeatures the first open system architecture infrastructure (hardware,etc.) successfully adopted by a major bank. This flexible and highly
advanced system enables high development productivity and speed,
as well as compatibility with the latest digital technology.
The shift to digital technology will continue to progress at an everfaster rate, and we must further accelerate our efforts at
transformation.
15

Under the 1st Medium-term Business Plan, we will leverageadvanced digital technology to promote measures to provide higher
value-added services. These include, for example, completely
digitalized transactions and cashless transactions for individuals, aswell as expanded contact points and stronger relations withcorporate customers. We plan to achieve each measure more
effectively and swiftly by making maximum use of the advantages of
our next-generation core system, the foundation for these measures.
Due to these proactive digital strategies, we expect to invest a
record-high amount in IT during the term of the Medium-term
Business Plan.
When making these IT investments, we will adopt the standpointof overall optimization of the Group. We aim for each groupcompany to achieve its business targets and maximize its results
through initiatives such as the prioritization of measures, theoptimization of system resources, and more stringent project
management.
The utilization of digital technology will be a source of competitive
strength for each Group company. By enhancing the digital
capabilities of the Shizuoka Financial Group, we will strive to achieve
the vision of our Medium-term Business Plan: to be “aproblem-solving corporate group creating new value for the future.”Practicing firm and reliable risk management andpositive complianceCRO

Yasuhiro Ogawa

Under the Group’s 1st Medium-term Business Plan, we aim tobalance the creation of social value and the enhancement ofcorporate value to achieve our vision to be “a problem-solving
corporate group creating new value for the future.”
The independence, autonomy, and collaboration of our groupcompanies will be crucial in achieving this. After they make active
efforts to seek and capture growth opportunities, organicallyintegrating their management resources within the Group will be thekey to maximizing synergies in the process of deepning theirbusinesses. As the CRO, I will oversee the appropriate practice ofrisk-taking, risk management, and compliance from across-functional standpoint across the Group, as we work toachieve the vision of our Medium-term Business Plan.
Regarding risk management, we will firmly manage each type ofrisks, such as credit and market risks, under the holding company’s
integrated risk management of the entire group. With the nature of
key risks changing constantly, as illustrated by the rise in cyber risk,
we have established the New Businesses Review Committee
chaired by the CRO within the holding company. The committee
deliberates on strategic projects aimed at expanding the scope of
the Group’s businesses, including aspects such as the identificationof risks, the feasibility of controlling these risks, and compliance.
Social and economic conditions are becoming increasingly
uncertain, both in Japan and overseas. We will be involved in risk

management at each group company to promote their
independence, autonomy, and collaboration, and practice effective
risk management as a corporate group.
We regard compliance as a key management issue. We focus on
activities aimed at reinforcing the importance of compliance, not only
complying with laws and regulation but also behaving with a social
conscience. An overly negative approach to compliance may delay
problem resolution, and can drastically inflate the scale of the
problem. In practicing the Ethical Charter (page 65), established as
our basic compliance policy, we therefore aim to enhance ourorganizational self-corrective capabilities by endeavoring to foster anopen workplace culture that values communication and a corporate
culture where compliance is perceived positively as “doing the rightthing,” rather than “not doing the wrong thing.”
Please refer to the latter part of this Integrated Report for an
explanation of our specific initiatives (pages 65-69).
We will promote the practice of effective risk management andpositive compliance to enable the Group newly established, throughthe independence, autonomy, and collaboration of its groupcompanies, to contribute to the region and its customers in this ageof uncertainty and together envisage a sustainable future.

Three approaches aimed at improving governance
CIAO

Toru Atsumi

The purpose of “internal auditing” is to evaluate and verify whether
each enterprise is accurately identifying and controlling risks arisingin the course of its business activities – in other words, whether
internal controls are functioning appropriately and effectively – and toencourage efforts toward improvement, leading to better
governance as a result.
The banking industry, with its tradition of prioritizing firm andreliable administration, has a long history of emphasizing“inspection.” This culture has made it relatively easy for the industry
to accept its development as “internal auditing.” On the other hand,today, with risks changing due to the expanded scope of operations
and the centralization of administrative work, there are limits to theeffectiveness of simply checking for clerical errors or rule violations.
In response to internal and external environmental changes, internal
audit divisions are now required to perform functions such asproviding assurance to facilitate management and advice to facilitate
management strategies as trusted advisory bodies. Moreover, theGroup has grown to include many companies that engage inbusinesses outside the scope of banking.
When I was appointed Chief Internal Audit Officer (CIAO), I therefore
proposed three approaches to the performance of these duties.
The first approach is “more sophisticated internal auditing.” Whilemaintaining the conventional, firm stance of “defensive auditing” toreinforce the certainty of defensive governance, we will further
promote the study of “aggressive auditing” that contributes to swift
and bold management decision-making, as well as internal auditing

methods aimed at making the most of our advisory function, toachieve more sophisticated internal auditing under the holding
company structure.
The second approach is a “homogeneous level of internal auditing.”
Our group companies come from a range of different industries, havedifferent scales, and must deal with different risks. Previously, theinternal audit function was also different in each company. Under theholding company structure, we will aim to achieve a homogeneouslevel of internal auditing across the Group. This includes the upgradeof the internal audit divisions at each group company to ensure theinternal auditing function meets each company’s risk profile, as well as
oversight of the internal auditing function by the holding company.
The third approach is “greater awareness and understanding ofinternal auditing.” Unlike compliance and risk management, there are
only limited opportunities for employees to become aware of internal
audits in the course of their everyday duties and, in the past, there
have occasionally been misconceptions regarding the nature ofinternal auditing. Under the holding company structure, the Internal
Audit Division will actively communicate the attitude and position ofinternal auditing to the Group’s officers and employees. By
promoting more dialogue, we aim to improve awareness ofunderstanding of internal auditing.
In this way, we will steadily practice the “Group Governance
Strategy,” one of the basic strategies under the 1st Medium-term
Business Plan, from the standpoint of internal audits.

16

Dialogue between Chairman of theBoard of Directors and Outside Director
Katsunori Nakanishi

Kazutoshi Inano

Chairman,
The Shizuoka Financial Group, Inc.

Director,
The Shizuoka Financial Group, Inc.

Our Target Approach to Governance under theHolding Company Structure and Growth Strategies
for the Future
The Group reached a major turning point in October 2022 with the transition to a holding company structure.
Chairman of the Board of Directors (the Group’s Chairman) Mr. Katsunori Nakanishi talks with Outside Director Mr.
Kazutoshi Inano about the approach to governance that the Group should target and its growth strategies as it
continues to develop together with the region.

17

Changes in the operation of the Boardof Directors after the transition to aholding company structure
Nakanishi: Mr. Inano, we’ve known each other for over two
decades now. Back when I was the president of the Bank, I
remember we often met on the plane during business trips.
Inano: Yes, I think that was the period from around 2002 to
2008. At the time, I was the president of an asset managementcompany. We’ve known each other since then.
Nakanishi: Back then, I had just begun to steer the Bank
towards group management, and I felt I needed some external
advice about the collaboration among group companies inbanking, securities, and other fields. Then, as we adopted
full-fledged group management, you were the first person whocame to my mind as a potential member of the Advisory
Board* and Outside Director. As it turned out, during theprocess of considering the structure of the organization andcorporate officers we should adopt for the establishment of theGroup, you helped me out numerous times from the positionof Outside Director.
*A management advisory committee under the President (CEO) aimed atensuring objectivity and reflecting advanced external approaches inmanagement execution

Inano: The company where I worked previously alsotransitioned to a holding company structure, and I had
experience in establishing a company with committees, etc. I
was therefore able to provide opinions, based on myexperience and the lessons I had learned, upon theestablishment of the Group.
Nakanishi: We have also become a company with an audit
and supervisory committee. At the start, we felt a little
overburdened. We felt uncertain about whether we had
enough experience to do this and whether this structure wasreally suitable for a holding company. Looking back, however, I
think that this structure was the correct choice.
Inano: Now the new structure is in place, we are finding that
not only has it led to fewer constraints but also increased the
speed and accuracy of decision-making. It has expedited theprogress of a whole range of projects. I’m extremely pleased
with this sense of urgency and direction. I don’t think theGroup is pushing too hard, nor is it overstretching itself.
According to my rule of thumb, the Group is managing tobalance itself just at the right level. Moreover, the fact that theNomination & Remuneration Committee, although an optional
committee, is properly established and functioning will enable
the Group to advance to the next stage.
Nakanishi: Looking ahead, we will need to formulate asuccession plan for the Group with the help of our Outside
Directors. This is not something we can accomplish overnight.
Inano: Yes, I agree. I think it’s important to change systems
progressively, rather than shifting abruptly from one to another.
Nakanishi: The Group has an executive officer system, so thatdecisions are made on each individual matter that arises by the
executive division, rather than based on the long-term visionsuch as management strategies. The Board of Directors,
through the internal control system, determines whether thisexecution is appropriate. Officers’ evaluation is deliberated by
the Nomination & Remuneration Committee, and theirremuneration and promotion are based on performance. Thisis quite different from the case of employees, where evaluation
is based on factors such as the level of challenges taken on. I
believe that governance will be effective as long as thesemechanisms are functioning.

Inano: I think that is the right direction. When people create
new mechanisms, they tend to push too hard to ensure themechanism functions quickly. However, this sometimes shifts
the stress onto other areas, causing problems. This is one of
the areas where we would generally like to express ouropinions as Outside Directors. At the moment, however, there
is no need. I feel that the transition is progressing smoothly.

Pursuing synergies among groupcompanies
Nakanishi: By transitioning to a holding company structure,
we aimed to separate “supervision” and “execution” as far as
possible. Of course, subjective viewpoints are important, but
we hope to make decisions incorporating objective
perspectives, with reference to the opinions of Outside
Directors, as well as industry trends and circumstances.
Previously, I remember you expressing the opinion that “if theform of a company with an audit and supervisory committee
functions properly, then group companies will naturally become
separated.” Did you mean “separated” in the sense that it isbetter for group companies to consider physically separating
their offices?
Inano: When making a break with the past and seeking to findor create something new, a “change of mood” is sometimes
effective, brought about by physical separation such as
different offices.
Nakanishi: In the case of the Group, there is substantial
overlap among banking, securities, and the Group’s otherbusinesses. This can make it difficult to suddenly separate ourgroup companies from the standpoint of preventing omissions.
I think we need to approach this as a phased separation.
Inano: Even as the operations of group companies become
more strongly independent, human resources are more
optimally allocated from a group-wide perspective. This is acycle. It’s vital to balance this cycle of independence andoverall optimization. Experience counts for everything in thiscase.
Nakanishi: Until now, the Bank was the center of our group,
and all of the group companies were subsidiaries of the Bank.
Under the holding company structure, Shizugin Management
Consulting Co., Ltd., Shizugin Lease Co., Ltd., Shizuoka
Capital Co., Ltd., and Shizugin TM Securities Co., Ltd. havebecome subsidiaries at the same level as the Bank. The
independence of each company is crucial for this structure tofunction properly and generate synergies. The synergies wetarget can only come about if each group company engages inmanagement that combines “independence” and “autonomy.”
Inano: You’re absolutely right. The banking business is only
made possible by functioning both as a public and acommercial enterprise. We must clear many more regulations
than other industries to secure the public nature of thisenterprise. However, regulations are imposed by others, notourselves. If workers get used to this, then it can affect“independence” and “autonomy.” I think it is great that, with ahorizontal structure among the Bank and other groupcompanies with functions and services that differ from it, theGroup can integrate its services to pursue a vision unattainable
for other companies.
Nakanishi: I agree that it’s important to develop characteristics
appropriate to the work of each group company.
Inano: In bank-centered corporate groups, the strong
presence of the bank means that the group tends to use thebank’s influence to promote the penetration of its other nonbanking services. Taken to an extreme, this may represent the18

Nakanishi: Our Outside Directors possess perspectives fromindustries outside finance and the viewpoints of the broader
public, and it is crucial that we incorporate their opinions into
management. I believe that this will invigorate the Board of
Directors and ensure robust and effective governance. In thatsense, we really owe a lot to you.
Inano: Representing perspectives from other industries is an
important element. For the perspectives of Outside Directors
to contribute to management decision-making, there needs tobe a forum for free communication and Outside Directors needto freely express their thoughts. I feel that the Group’s Board of
Directors meetings are just such forums for freecommunication.
Nakanishi: Have you noticed any change in the content or
quality of discussions since the transition to a holding company
structure?
Inano: In quantitative terms, there are fewer items on theagenda of the holding company’s Board of Directors,
compared to before the transition. The amount of time
available for deliberation of each item, and the number ofcomments made by Directors, have both increased. This
enables extremely thorough discussions, with an increase oftime spent on substantial debate on topics apart from mattersfor resolution and regular reporting.
Nakanishi: The most important thing for discussions is toexpress different opinions from the same perspective. Goingforward, I would like to create opportunities, such as training
camps and onsite tours of our group companies, to enable
Directors to discuss and exchange opinions in forums otherthan Board meetings.
Inano: Certainly, Board of Directors meetings shouldn’t be theonly forum for discussion and the exchange of opinions. I thinkit’s very meaningful to have a variety of forums for theexchange of opinions and communication.

abuse of the bank’s dominant bargaining position. Constantdependence on the influence of the bank creates issues suchas uncertainty over whether the group can actually provide
useful services to customers and whether it can succeed
against the competitors. It’s vital for each company to attainthe skills to grow with independence and autonomy, outside
the influence of the bank. In this sense, I think the structure of
the Group, with group companies positioned horizontally under
the holding company, is extremely meaningful. It will give rise
to completely new possibilities.

Towards effective group governanceNakanishi: What is your view on how we should understandthe role of Outside Directors and their relationship with theexecutive division from the standpoint of achieving effective
group governance?
Inano: Ideally, the separation of the supervisory and executivefunctions should expedite decision-making and theperformance of operations by the executive division. However,it’s not easy to mark a clear line between supervision andexecution in actual discussions by the Board of Directors. For
example, even if it is a discussion on execution, the Board mayundertake a checking function from a supervisory perspective.
It is very difficult to differentiate between executive andsupervisory functions within the discussion itself. I think the key
point here is the ability to engage in free discussions. I believe
it is vital for us Outside Directors to say what is on our minds
and freely put words to our thoughts.
19

Speedy management through theholding company structure
Nakanishi: About ten months have passed since the transition
to a holding company structure in October 2022. During thisperiod, we have launched new businesses, acquiring whollyowned subsidiaries through M&A and establishing newcompanies. How do you regard the significance and effects ofour transition to a holding company structure, including thesense of speed?
Inano: I think the transition to a holding company structure
was extremely meaningful. In particular, whereas it would havebeen possible for the top management of the holding company
to lead the banking subsidiary as well, I felt the strong will of
the Group in separating these positions from the very start.
Nakanishi: We were very careful about appointing different top
management to clarify the supervisory and executive roles.
Inano: I think it’s very meaningful that different missions havebeen set for the top management of the holding company andthe Bank. This simple personnel decision will lead to fasterbusiness execution. In fact, it’s already begun to do so.
Nakanishi: I’m looking forward to seeing this deployment of
human capital bearing fruit.
Inano: Under the 1st Medium-term Business Plan, the Grouphas established ambitious targets in new business fields, and I
feel a strong will power behind this. The profit targets for groupcompanies apart from the Bank have also been set at a higher
level than current results, and I think this reflects everyone’s
awareness. I really hope that everyone perceives this as anencouragement to put in their best performance.

Nakanishi: We designed these targets separately for the
expansion of existing businesses and initiatives to challenge
ourselves in new businesses. I look forward to seeing eachGroup company pushing ahead with the plan with speed andconfidence.

Management diversity and humancapital development
Nakanishi: How do you perceive the Group’s management
diversity and human capital development?
Inano: First of all, I regard the low number of female officers as
an issue with the Group’s current state. The key here is building
up a list of potential candidates. This process is steadily
progressing, and I really hope to see the Group achieve its
vision at an earlier stage. I also think that, from the standpointof appointing diverse officers, there has been good progress
made in the diversification of the career paths that potentiallylead to the position of officer of group companies or theholding company. It’s pleasing that this diversification of career
paths has happened as a result of the Group’s initiatives so far,rather than a deliberate effort to expand it.
Nakanishi: Greater diversity is the only route to corporate
survival. We’ve been conscious of this issue for some time. We
have actively implemented mid-career recruitment andwelcomed applications from employees for external
secondment, which I see as a way of encouraging diversity.
Inano: Then this has led to greater diversity in potential career
paths. In some cases elsewhere, the officers of acquiredcompanies become the top managers of the acquiring
company.
Nakanishi: I believe firmly in the need for diversity. In the past,
it was important to maintain traditions and follow in thefootsteps of our predecessors. Now, it’s vital to manage fromthe standpoint of “backcasting” to identify the human capitalneeded to build the ideal company. Otherwise, we would not
be able to develop our human capital, nor could we select newhuman capital. We would be stuck in a cycle where our only
choice is to supplement our deficiencies in human capitalthrough mid-career recruitment.
Inano: It seems to me that the Group is one step ahead ofother regional banking groups. I think that this is in large partdue to the Group’s own policy and its capacity to analyze
issues. The Group is steadily considering the performance of
its human capital a decade or two decades hence. This is true
“backcasting.”
Nakanishi: I have always thought about whether our current
personnel and skill-set would enable us to achieve our aims
ten years into the future.
Inano: That’s a really crucial point.
Nakanishi: Until now, the Bank’s planning division has
considered what kind of organization to build and the HR
division has worked out the necessary human capital, anddeveloped and assigned it based on this plan. Going forward,
the Group will design the future vision for the whole group. In
this context, the key will be finding a way to develop thehuman capital needed to achieve this vision.
Nakanishi: How do you think we should structure officer
succession plans?
Inano: It’s not easy for us as Outside Directors to accurately
evaluate officers and determine whether their positions have afuture, no matter how many opportunities we are given tointeract with them. There are some elements that cannot bemeasured quantitatively or expressed in a definite form. In thissense, there is no objectively correct solution to the issue ofsuccession planning. What’s important is to successfully
combine the common sense of Outside Directors with theperspectives of the officers and employees who have beenworking together in the Group.
Nakanishi: To take an extreme example, if ten officers wererequired and there were only six suitable candidates within theGroup in terms of experience and abilities, how would you
regard appointing the remaining four from outside the Group?
Inano: It’s first of all a question of whether suitable candidates
can actually be found outside the Group. This is difficult toanswer, as it’s not simply a matter of numbers.
Nakanishi: Such cases are rare in Japan, but quite common
overseas. What is the cause of this difference?

ProfileKazutoshi Inano
Born on September 4, 1953. After graduating from The University of Tokyo, Faculty of Law in1976, he joined Nomura Securities Co., Ltd. (currently NOMURA HOLDINGS, INC.). He wassubsequently appointed Executive Vice President of Nomura Securities Co., Ltd. in 2000 and
Director, President of Nomura Asset Management Co., Ltd. in 2002. In April 2003, he became
Director, Deputy President & Co-COO of NOMURA HOLDINGS, INC., then Director, Executive
Managing Director, Deputy President & Co-COO of NOMURA HOLDINGS, INC. and Director,
Executive Managing Director, President & CEO of Nomura Asset Management Co., Ltd. inJune the same year. He was appointed Director, Chairman of The Nomura Trust and Banking
Co., Ltd. in 2005, Executive Managing Director, Deputy Chairman of Nomura Securities Co.,
Ltd. in 2008, and Director, Chairperson, Representative Executive Managing Director of
Nomura Asset Management Co., Ltd., Vice Chairman of Japan Association of Corporate
Executives, Chairman of The Investment Trusts Association, and Chairman of The Securities
Analysts Association of Japan in 2009. In 2011, he went on to become Chairperson of theBoard of Directors of Nomura Asset Management Co., Ltd., then Chairman of Japan Securities
Dealers Association in 2013, before his appointment as Director of The Shizuoka Bank, Ltd. in
2021 and Director of Shizuoka Financial Group, Inc. in 2022.

20

Inano: I think it is a labor market issue. It’s a difference
between an environment where there is a pool of potential
senior managers, where human resources are mobile, and an
environment where they are not. In the future, managementhuman resources will become even more mobile than today,
and there will be more cases where senior company managers
leave to take up management appointments in other lines ofbusiness. Nonetheless, I believe it will be difficult for thisturnover to happen on an everyday basis.
Nakanishi: That’s reinforced for me the need to create clear
succession plans.
Inano: It’s crucial to build up a pool of human resources from areasonably early stage, on the assumption that there will besome movement in and out of the Group, and to provide
potential candidates with an appropriate amount of stimulationand opportunities. Potential candidates will not develop if they
are left to their own devices.
Nakanishi: It is important to set forth clear career paths.

The 1st Medium-term Business Plan:
Taking the challenge to solve social
issues together with the region
Nakanishi: The 1st Medium-term Business Plan, our first since
the transition to a holding company structure, was launched in
April. Under our previous Medium-term Business Plan, we
strove to achieve meticulously prepared target figures. Thistime, however, we had to adopt a significantly different
approach, aiming for purpose-driven management. This
consciousness was shared by all members of the management
team, and was also endorsed by our Outside Directors.
Governments, companies, and citizens must work toachieve the SDGs adopted at the UN summit in 2015 by 2030.
In view of the public nature of the Group, we have included“social impact indicators*” among our performance indicators
under the 1st Medium-term Business Plan. I feel we need to21

engage in even deeper and more extensive discussions withthe prefectural, city and town governments, economic groups,
and others.
*Indicators designed to measure our impact on social value creation fromthe standpoint of a regional financial institution (the rate of social change in
Shizuoka Prefecture’s population, real gross product in Shizuoka
Prefecture, and percentage of the reduction of GHG emissions in Shizuoka
Prefecture)

Inano: Yes, I agree. Although the Bank has always had asignificant presence in the region, up until now it was
overwhelmingly perceived not so much to lead from the front
as to work behind the scenes in the discussion of social
issues. In the future, I think the Group should display its
leadership more visibly.
Nakanishi: Other Outside Directors have also expressed theopinion that the Group would do well to demonstrate somemore leadership in Shizuoka Prefecture, and we will proceedwith this in mind. To be honest, we have generally been a little
hesitant to adopt a prominent leadership position in the region,
but I feel that we shold not maintain this attitude forever.
Inano: I think it’s extremely commendable that under the 1st
Medium-term Business Plan, the Group has set both social
impact indicators and financial targets aimed at enhancing
corporate value. The social impact indicators include factorsthat are out of the Group’s control, such as the rate of socialchange in Shizuoka Prefecture’s population and its real grossproduct, and I feel that this represents a significant declarationof commitment. Fortunately, Shizuoka Prefecture is anextremely attractive region, and ranks highly among the mostsought-after prefectures for relocation within Japan. By helping
diverse industries and companies to grow and contributing to
the creation of employment, the Group can provide more job
options for people relocating into the prefecture. I image that
activities such as these will help the Group to achieve its
sustainability indicator targets.
Nakanishi: That was the idea behind the establishment of SFG
Marketing* in July this year. We aspire to contribute to building

a rich local community and developing local industries throughmarketing support for local companies and businesses linked
to solving social issues. This is a difficult challenge, but webelieve it will lead to higher added value across the region.
*A new company that aims to provide multifaceted solutions tosocial issues in the region from a marketing perspective tobring about revitalization
Inano: Everything is born small, but what is important is how it
grows – how we nurture it – over a five, ten, or twenty-year
cycle. I hope to see this new initiative follow the correct path,even if it seems like a detour. The presence of companies like
SFG Marketing and Shizugin Heartful* that create social value
is very significant for the region.
*A company that promotes the employment of people withdisabilities through the business of making, printing, andbinding documents
Nakanishi: Around four years have passed since weestablished Shizugin Heartful. Its presence has cultivated afeeling of mutual consideration and compassion among theGroup’s officers and employees. Its positive psychologicalcontribution has been even more marked than its financial
value. It’s really made me feel the growth and enrichment of
everyone’s spirit.

A second home:
Striving to contribute to
Shizuoka’s growth
Nakanishi: Lastly, let me ask you about your aspirations forthe future as an Outside Director and what you hope to seefrom the Group.
Inano: My very first place of work when I joined a securities
company in 1976 was Shizuoka. That’s almost 50 years ago
now, but even back then I was impressed by the tremendous
presence of the Bank in the region. It’s a really happy thing forme to be able to play a part in the management of the Group
based here in Shizuoka, my second home. I hope to be able torepay Shizuoka’s kindness to me by leveraging the experienceand insight in group business and holding company
management that I gained in my previous works to contributeto the development of the region through the growth of theGroup.
Nakanishi: I look forward to your contribution. What are yourhopes for the Group?
Inano: I would like the Group to be conscious of the coremanagement philosophy it has nurtured over the years and act
in accordance with this philosophy. I would like the Group to
be careful, more than anything, of the “temptation of trends.”
Corporate managers are apt to be overly conscious of trends,
and there are innumerable examples of managers being carriedaway by the latest fad, with undesirable consequences. Thistendency was especially marked in the era of Japan’s
economic bubble. History proves that the senior managementof the Bank had the sense and insight to clearly distinguishthemselves from the trends of that time, and I think that thisdemonstrates the existence of a firm and resilient management
philosophy.
Nakanishi: I think that corresponds to the Group’s corporate
philosophy of “expanding dreams and affluence with ourcommunity.” We mustn’t forget that regional financial
institutions depend on society for their survival. Persistent andearnest efforts with the hope of regional development will
enrich the region and enable the Group itself to grow as well.
Inano: That also links in with what I was just saying about thedual public and commercial nature of the Group’s businesses.
As the Group pursues its 1st Medium-term Business Plan
based on these dual criteria, it’s important to maintain a strong
awareness of the fact that the Group’s commercial success is
not possible without the conscious performance of its public
function. I hope that by acting with sufficient consciousness of
its public role, the Group will further deepen its relationship oftrust with the local community and become an indispensable
presence in the region. I intend to make a solid contribution aspart of this effort.

22

Message from the Representative of the Shizuoka Bank, Ltd.

Celebrating our 80th anniversary

On March 1, 2023, the Bank celebrated the 80th anniversaryof its founding. I would like to take this opportunity to express
my sincere gratitude to our customers and shareholders fortheir unwavering support.
The Shizuoka Bank was established in 1943 througha merger of two banks: The Shizuoka 35 Bank, which
was rooted in the national bank and had a solid corporate
culture, and The Enshu Bank, which had progressed withmany challenging companies in a place where the spirit ofchallenge has taken root. Going further back, the Bank has
128 predecessors and can trace its roots to the beginning of
the Meiji era. The DNAs of both The Shizuoka 35 Bank and
The Enshu Bank live on in our sound corporate management
and our readiness to take on challenges. We will not forget
our gratitude to the local community that has nurtured us andenabled us to grow. We will continue to boldly and actively
take on new challenges, aiming to achieve wellbeing for all our
stakeholders.

Accelerating the Group’s growth as its hub

The transition to a holding company structure in October
2022 has enabled the Group to swiftly increase the range ofsolutions it offers to address the increasingly complex anddiverse issues encountered by the region and its customers.
Under the new structure, the Bank has developed its own
growth strategies. We are implementing a variety of measures
making maximum use of our management resources tomaximize performance.
In this context, I believe the Bank’s role should be that of a“hub,” connecting each group company, and a “promoter,”
expanding and providing a greater range of solutions to theregion.
We will leverage the relationships of trust and social credit
that the Bank has built up with the local community and ourcustomers to connect the region, customers, and each groupcompany, strengthening collaboration to solve issues from astandpoint of the question: “what should we do to solve all
the issues that face the region?” Moreover, by providing theGroup’s diverse functions and services to a broad range ofcustomers in the region, we hope to contribute to the creationof social value, bringing about growth for both the region and
the Group.

On the launch of the 1st Medium-term
Business Plan

In our 1st Medium-term Business Plan under the new groupstructure, we position “human capital management” at thecenter of management strategy as we pursue our four basic
strategies: the Regional Joint Creation Strategy, Group
Business Strategy, Transformation Strategy, and Group
Governance Strategy. This approach is based on the belief thatthe true strength of the Bank lies in human capital responsible
for achieving these strategies – the thoughts and passions
buried in the heart of each individual officer and employee –which form a key element in the trust placed in the Bank by

23

Minoru Yagi
President

the local community. As we push ahead with the plan, it is vitalthat we create environments that maximize the power of ourhuman capital. Rather than controlling, we seek to nurture andencourage this human capital to enhance corporate value anddistinguish our presence as a financial institution committed to
the region.
We have designed our vision for the future in ourmanagement strategy. In our human capital strategy, we aim to
maximize the human capital needed to achieve this vision. By
linking our management and human capital strategies, we aim
to achieve the dual goals of the 1st Medium-term Business
Plan – the creation of social value and the enhancement ofcorporate value – and create a virtuous cycle where individuals
can grow together with the organization.

Treasuring our unchanging essential quality

We are a regional financial institution that exists for the local
community. This essential quality remains unaltered throughout
the changing eras. We will pioneer a sustainable future
together with the local community by drawing on this essential
quality, striving wholeheartedly to solve every regional issue
toward the vision for the region and creating new social value
across the entire group.
I would be grateful for your continuing support in the years
ahead.

PICK UP

Alliance with Regional Banks
We aim to achieve sustainable growth for both groups and the regions where both the Group and its
partner financial institutions are rooted by sharing each other’s management resources and regional
information and creating synergy effects through collaboration in various fields.
The Bank concluded a comprehensive business alliance “Shizuoka Yamanashi Alliance” with
Yamanashi Chuo Bank on October 28, 2020. Aiming at economic development in Shizuoka
and Yamanashi Prefectures through cooperation mainly in the area of regional revitalization,
both bank groups we are working on a wide range of cooperative measures, including
collaboration in the field of securities at the “Shizugin TM Securities Yamanashi Head Office”(the “Office”) and holding individual business meetings with clients of both groups.

Collaboration in Securities Services
Shizugin TM Securities Yamanashi Head Office, which opened
in April 2021, provides value-added products and services tocustomers in Yamanashi
Customer assets in Yamanashi
Prefecture and the Tokyo
Head Office
metropolitan area throughJPY bn30.0
referrals from Yamanashi
26.5
Chuo Bank.
20.0
15.4
As of March 31, 2023, thebalance of customer asset in 10.0
5.8
the Office approximately 26.5
0billion yen.
End of
End of
End ofInitiatives for regional revitalization andactive interaction between Shizuoka andYamanashi Prefectures
We are working to further revitalize the local economy by holding
individual business matching sessions with the aim of expanding
sales channels and consumption of local products by bothgroups’ clients, inviting tourists from the Tokyo metropolitan and
Chukyo areas in cooperation with NEXCO, selling driving plans
aimed at revitalizing regional circulation, and promoting sales of
local products through participation in product sales events
sponsored by Shizuoka Prefecture.

Sep. 2021 Mar. 2022 Mar. 2023

The Bank concluded a comprehensive business alliance “Shizuoka Nagoya Alliance” withThe Bank of Nagoya on April 27, 2022. Both bank groups have positioned our responseto the structural transformation of the automobile industry and other regional industries as
our most important theme, and will leverage the management resources of both bankgroups to achieve sustainable growth for the region and ourselves.

Supporting Industrial Reform
Through collaboration between the Bank’s “Industrial
Transformation Advisory Project Team” and Nagoya Bank’s“Automotive Supply Chain Assistance Office”, we areaccelerating efforts to support regional industries by organizing
supply chains, co-hosting various seminars, and sharing knowhow through the exchange of human resources in the field of
business revitalization.

Established “Shizuoka-Nagoya Alliance Fund”
In June 2023, we jointly established the “Shizuoka-Nagoya
Alliance Fund” with the aim of revitalizing local industries andmaintaining and creating employment opportunities by solving
issues faced by our business partners. Through this fund, we
will proactively develop initiatives to solve issues faced byregional companies, such as supporting the business
transformation of motorcycle- and automobile-related
businesses in the context of “decarbonization” and “EVs.

Agreement conclusion by three banks at the timeof occurrence of disasters
On March 31, 2023, the Bank, The Nagoya Bank, and The
Yamanashi Chuo Bank concluded the “Mutual Support
Agreement on Deposit Refunds at the Time of Large
Disasters”.
A mutual support/cooperation system has been establishedso that each bank may stably provide financial functions
even when large disasters occur. These three banks havealso held a joint disaster management meeting and willcontinue to strengthen cooperation in case of emergency.

24

Shizuoka Financial Group’s Value Creation Process
The Group will develop corporate activities based on materiality in accordance with ourbasic philosophy, “Expand dreams and affluence with our community”. In this way, we aim to both createsocial value and improve corporate value by providing diverse value to all stakeholders.

Corporate
Corporate
Philosophy
Philosophy
Activity
Activity

Materiality
Materiality Input Input
P28

P28

Achieving
Achieving
Sustainable
Sustainable
GrowthGrowthTogether
Togetherwith thewithRegion
the Region
Prov Prov
CompCreohmep
id
r id
nsei heinngsi ing
ve Ave A
Fin d Fin daaes
ed rvic
nc l Seva cian ed rvices
nc l Seva cianAddressing
Addressing
Financial
Financial
population
population
CapitalCapitaldecline,decline,
the lowthe low
A soundA soundbirthrate,birthrate,
and theand the financialfinancial
andandaging population
aging population earningsearnings
foundation
foundation

HealthyHealthy
growth growthof the localof the local
communitycommunity

HumanHuman
CapitalCapital
Diverse professional
Diverse professional

ive

st

o

ng

i

i

ng

Br

Br

comprehensive
comprehensive
financialfinancial
institution
institution
with close
with
ties
close ties
to the region
to the regionoSocietySociety
that
that
balancesbalancesthetheIntellectual
CapitalCapitalenvironment
environment
andand Intellectual
Our knowledge
Our knowledge
as a
as a
economyeconomystCollaboration
Collaboration
with
with
companies
companies
over theover theboundaries
boundaries
of industries
of industries

I n iti a t

Abundant
points ofpoints
contactof contact
Creating
Creating
a digitala digital Abundantwith our withcustomers
our customers
societysociety

iveSocialSocial
and andRelationship
Relationship
CapitalCapitalI n iti a t

personnel
personnel
Industrial
Industrial
development
development
andandfinancialfinancial
innovation
innovation

Promotion
Promotionofofregion-based
region-based
relationshiprelationshipIntegrationofofbankingbanking Integration
the entire
the entire
GroupGroupto provide
to provide
a comprehensive
a comprehensive
financialfinancial
Regional
Regionalfunction,function,
etc. etc.
revitalization,
revitalization,
regional
regional
contribution
contribution
activities
activities
etc. etc.
Protection
Protectionofofthe richthenaturalrich naturalenvironment
environmentAbAou bouta ta
SustaSusta
inableinable

CorpoCnn
rpG
oroavtern
raote
Gaonvceernaasna
asunadFaotiuondatio
ceFo
to Suptp
ooSrtutphpeoC
rtrtehaetio
CnreoaftiVoanluoef ValueManaging
Managing
human humancapital capital

NaturalNatural
CapitalCapital
The region’s
The region’s
rich
rich

ImproveImprove
tourism tourism
corporate
corporate
value value resources
resources

P29
1st Medium-term
1st Medium-term
Business
Business
Plan Plan

P29

10-year10-year
VisionVision
1st Medium-term
1st Medium-term
Business
Business
Plan Vision
Plan Vision25

Expand
Expanddreamsdreamsand andaffluence
affluence
withwith
our community
our community
Outcome
OutcomeSustainable
Sustainable
development
development
Revitalization
Revitalizationof the of theregionalregional
economyeconomyRealizinga decarbonizeda decarbonized
RegionRegion Realizing
societysociety
Developing
Developinga regiona thatregion that
continues
continues
to attract
to attract
peoplepeople
and enterprises
and enterprises

Problem
Problemsolving,optimalsolving,optimal
solutionssolutionsCustomers
Customers
High convenience
High convenience
Unshakable
Unshakable
trust trust

Achievementof Sustainability
Achievementof Sustainability
Indicators
Indicators
P30

P30

SocialSocialValue
Value
Creation
Creation

Enhancement
Enhancementofof
medium-to
medium-to
long-term
long-term
corporate
corporate
value value
Highlytransparent
Highlytransparent
Shareholders
Shareholders
disclosure
disclosureof information,of information,
includingincludingnon-financial
non-financial
information
information
Proactive
Proactive
discussion
discussion
Work satisfaction
Work satisfaction
and andawareness
awarenessof growthof growthDiverseDiverse
workingworking
styles styles
Employees
Employees
FeelingFeelingthat wethat
are we arecontributing
contributing
to the to thecommunitycommunityand ourand ourcustomers
customers

Improve
Improve
corporate
corporate
value
value

Create Createa sustainablea sustainable

FutureFuture societysocietyRich natural
Rich naturalenvironment
environment
Generation
Generation
Bright future
Bright andfuturehope
and hope

26

Materiality identification process
Identified seven Materiality in social, economic, and environmental themes to create social value and improve
corporate value. Created social impact through the resolution of local issues.

Materiality Identification Procedure
Identified issues
to consider

Evaluated and narrowed
down the issues

Decided on Materiality

Identified issues for local communities and the Group from various
perspectives (social, economic, and environmental)

From the perspective of creating social value and enhancing corporate
value, evaluated opportunities and risks for both local communities
and the Group, and narrowed down issues

Grouped issues and decided on Materiality

Issues to consider
From a social, economic, and environmental perspective, we identified issues for both the regional
community and the Group to consider. The community issues were identified based on Shizuoka
Prefecture's Action Plan, and common issues in the business areas of the Group and its alliance partners
were also identified.

Issues in Shizuoka Prefecture*
Creating safe communities that protect lives
Improving medical care and welfare to live withpeace of mind
Creating a digital society
Forming a society where the environment andthe economy are compatible
Forming a society where children can learn andgrow in good health
Developing people with talent and virtue
Realizing a society where everyone can play
an active role
Developing wealth-creating industries
Proposing a variety of lifestyles
Enhancing transportation networks to increase
the region’ s value
Enhancing and disseminating the attractivenessof “Fuji no Kuni”
Expanding exchanges with people around theworld

Issues within SFG
Addressing population decline, the lowbirthrate, and the aging population
Industrial development and financial innovation
Healthy growth of the local community
Expanding group business areas (addressing thedeteriorating profitability of existing businesses)
Challenge for new business (revision of the
Banking Act)DX realization and modernization
DE&I penetration
Transformation of the corporate culture
Providing customer-driven products and services
Enhancing group governance (groupindependence and collaboration)
Dealing with complex and advanced security
Developing environmentally friendly products
and services* Shizuoka Prefecture New Vision, Late-Stage Action Plan: 12 Policies to embody the Basic Philosophy
Issues common to Shizuoka, Kanagawa, Yamanashi and Aichi Prefectures

27

Definition of Materiality
We mapped the issues identified and prioritized issues that are essential to both social value creation andcorporate value improvement.

Social value

Red: Materiality
Black: Issues

Addressing population decline, the low birthrate,
and the aging population
Forming a society where theIndustrial development and financial innovation
environment and the economy
Healthy growth of the local community
are compatible
Developing wealth-creating industries
DE&I penetration
Creating a digital society
Realizing a society where everyone can play an active role

Corporate value

Materiality of Shizuoka Financial GroupWe have established business activities and output/outcome for the materiality we have identified, and haveset sustainability indicators to contribute social impact. We will monitor the progress of these activities andimplement the PDCA cycle to create social value and improve corporate value at the same time.

SocialMateriality

Business activities

Addressing population
decline, the low birthrate,
and the aging population

Support the creation of
towns that attract people

Output/Outcome
No. of tourist
destinations
created

Healthy growth of thelocal community

Improve financial literacy No. of consultations
on asset formationin the region

Industrial development
and financial innovation

Support customertransformation towarda change in industrial
structure

No. of cases of
support forindustrial
transformation

Creating a digital society

Support regional DX

No. of DX-certified
businesses

EconomyPromote regional
Amount ofdevelopment that balances
Environment
environmental
decarbonization andfinancing executedbusiness needs
Creation of
Employees Managing human capital Transform human capital problem-solving
and value-creating
human resources
Society that balances
the environment andeconomyShareholder Improve corporate value

Increase productivity andRevenue expansion
revenue through each
Cost reduction
strategy

ImpactRate of social change inIncrease in therelevant population Shizuoka Prefecture’s
populationin Shizuoka Pref.
(Continuously increasing)

Increase in theno. of companies
in Shizuoka Pref.

Penetration ofcarbon offsets

Real gross prefectural
product(Developing sustainably)

Rate of reduction of GHG
emissions in Shizuoka
Prefecture(-46% compared to FY2013 (FY2030))

Employeeengagement

Well-being of employees

Profit increase

Financial targets:Profitability Soundness
Effectiveness(Engagement)

28

The first medium-term business plan［Term of the Plan FY2023‒2027］
Crossover

Xover
クロスオーバー～新時代を拓く– Clearing the way to a new era

The first medium-term business plan, “Xover(Crossover) - Clearing the way to a new era” wasformulated based on a backcasting approach to create a vision of the future that we should aim
for and a plan to realize that vision.

10-year Vision

A corporate group committing itself to future of the region andproducing growth in it
1st Medium-term Business Plan Vision

A problem-solving corporate group creating new value for the future
Taking advantage of the transition to a holding company structure, we will further
enhance our functions as a comprehensive financial group, refine our ability to solve
problems faced by regional communities and customers, and create new value.

Vision for 2030

Materiality of SFG

RegionEnhancing society so the needs of

Employees Shareholders

29

Shareholders

Industrial development andfinancial innovation
Forming a digital society

Environment

Future Generations
Newly added stakeholders

Employees

EconomyState of sustainability andenhanced happinessfor all our stakeholders.

Sosiety

Customers

Addressing population decline,

low birthrate, and the aging population
Healthy growth of the local community

the environment andsociety are balanced

Practicing human capitalmanagement

Increase in SFG’ s corporate
value

Sustainability
Indicators

Target for FY2027

Indicators

Profitability

Consolidated ordinary income
Consolidated ROE

More than 90 billion yen
Approx. 6%

EffectivenessConsolidated OHR

Approx. 55%

Consolidated CET1 Ratio*1

13% or more

Customer satisfaction with Group
Transactions*2
Engagement of Group Employees*3
Carbon Neutrality (Scope 1 and 2)

Increase from the Previous
Fiscal Year
4.0 or above
Achieved (FY2030)

Soundness

commitFinancial Targets

SFG

Continuously Increasing

aim

Social Value Creation

Rate of Social Change in Shizuoka
Prefecture’ s Population
Real Gross Output in Shizuoka Prefecture
Percentage Reduction of GHG Emissions
in Shizuoka Prefecture

SocialImpactEngagement

Sustainably Developing-46% compared to FY2013(FY2030)*1: Basel III finalization basis*2: Measured by “NPS” through customer surveys. NPS: Net Promoter Score [Degree of willingness to recommend the product, service, or company
itself to family, friends, or others.]*3: Overall employees’ satisfaction which is measured as averaged score of the five factors: fulfillment at work, adaptation to work, satisfaction withworkplace, satisfaction with superiors, and loyalty to company (on a scale of 1 to 5).

Basic Strategies

Group
Governance
Strategy

Transformation
Strategy

Resolve social problems
and meet needs of local
communities and customers
through our diversified
financial services.
Transform “Customer
Contact,” “Sales,”“Human Resources,” and“Expenses” to generatemanagement resources
and increase revenue.

Improve productivity and expand profit
opportunities through each strategy

SFG

Strengthen the corporate governance system under theholding company structure to promote our group synergies
and to speed up management’ s decision-making

Sustainability Indicators

RegionalCo-Creation
Strategy

Group
Business
StrategySocial Impact

Revitalizing the community(management base) throughsolving regional problems
and expanding revenue
opportunities.

Indicators

Socialvalue
Corporate
value

Balance the creation ofsocial value and theenhancement ofcorporate value

30

Financial Highlights
Main Items

74.0

Ordinary profit (consolidated)
Billions of Yen
80
70

63.4

60

billion yen

Net profit attributable toowners of the parent

74.0

Billions of Yen
60

63.3
54.6

54.2

40

40

30

30

43.6

41.6

FY 2020

FY 2021

38.7

20

20

10

10
0

FY 2018

FY 2019

Balance of total loans(average balance, Shizuoka
Bank Nonconsolidated)

FY 2020

FY 2021

9,815.0

Billions of Yen
10,0009,000

8,336.9

8,740.1

9,382.1

9,234.2

0

FY 2022billion yen

FY 2018

9,000

6,000

8,000
FY 2020

FY 2021

FY 2022

1.02

Billions of Yen ■Risk-management loans (Shizuoka Bank Nonconsolidated)

Ratio of risk-management loans

%

160
140

102.9

92.2

91.9

100

98.4

104.9

FY 2020

FY 2021

FY 2022

18.42

BIS capital adequacy ratio (consolidated)(14.17*)%

Common Equity Tier I ratio

18.42

16

60

1.05%

1.01%

1.08%

1.01%

1.02%

Credit Ratings (Moody’s)(As of July 1, 2023)

A1

16.08

15.59

15

14.17
As of March 31,
2019

As of March 31, As of March 31, As of March 31, As of March 31, As of March 31,
2019
2020
2021
2022
2023

*Reconcile risk-management loans with loans based on the Financial Reconstruction Act
according to revision of Order for Enforcement of the Banking Act since the end of Mar. 2022.
Adopt the standard retroactively to the past.

16.56

17

16.05

80

0

FY 2019

18

120

20

11,441.0

9,914.0

BIS capital adequacy ratio(consolidated)(%)
19

billion yen

10,582.3
9,641.2

FY 2018

Ratio of risk-management loans(Shizuoka Bank Nonconsolidated)40

11,228.3

11,0007,000

FY 2022

11,441.0

Billions of Yen
12,0009,815.0

10,000FY 2019

FY 2019

Total deposits(average balance, Shizuoka
Bank Nonconsolidated)

8,000

FY 201831

billion yen
52.4

46.9

50

50

52.4

As of March 31,
2020

As of March 31,
2021

As of March 31,2022

As of March 31,2023*Preliminary estimate after full application of the Basel III finalization when taking the capital floor,
etc. into account (tentatively calculated with the affected value at the end of September 2022)

50.2

Shareholder return ratio(10-year average, consolidated)%

Long-term
ratingShort-term
ratingImportant
Items

FY 2018

FY 2019

FY 2020

FY 2021

FY 2022

FY 2013–FY 2022
(10-year average)

Shizuoka Financial Group
Rating and Investment
Information, Inc.
Shizuoka BankA+−

Dividend per
share

22.0 yen

22.0 yen25.0 yen

26.0 yen30.0 yen

−

27.6%

32.6%

32.8%

35.4%

32.2%

28.6%

Moody’s

A1

P-1

Dividend
payout ratio

Standard & Poor’s

A-

A-2

Shareholder
return ratio

49.1%

54.9%

32.8%

56.2%

51.1%

50.2%

Rating and Investment
Information, Inc.

AA-−

Non-Financial Highlights(results for fiscal year 2022)

Environment

CO2

Reduction in CO2 emissions by the
Shizuoka Financial Group

Cumulative amount of sustainable finance executed(of which finance related environment)

31.3%

461.6

reduction in CO2(FY 2022 results, compared to FY 2013)

billion yen(229.7 billion yen)
(Total until FY2022)

SocialSupporting co-creation of companies in
the prefecture through open innovation

Total Participants of
TECH BEAT Shizuoka*

Held online businesstalks

33,859 1,412

cases*Forum for business matching between technology start-ups and companies within
Shizuoka Prefecture (Total since FY 2019)301
26,747

Completedcases
of corporate rehabilitation support
initiatives and helped
peoplesecure continued employment or
re-employment through corporate
rehabilitation and business succession
support (Total since FY 2005)

Corporate rehabilitation support initiatives:
Number completed:60
14Governance （2023年7月現在）
Composition of the Board of Directors

Directors from within
the C ompany:

Outside Directors:[5 males][3 males, 2 female]5

5

Hosted Shizuoka Kids’ Academy

26

times

(Total since FY 2016)

Ratio of women in
leadership positions*

Percentage of men
taking childcare leave*

22.6%

136.3%*Shizuoka Bank, Shizugin TM Securities, Shizugin IT Solution, Shizugin Business
Create, Shizugin Mortgage Service

External Recognition and Endorsement of external initiatives
Certifications related to women’s activities
Platinum Kurumin

Platinum Eruboshi

Eruboshi

Certified 4 companies
as those that provide ahigher level of childcare
support than “Kurumin”.

Certified 1 company as
having a higher level ofworkplace environment for
women than “Eruboshi”.

Certified 4 companies
as having a workplaceenvironment for women

Shizuoka Bank
Shizugin TM Securities,
Shizugin IT Solution
Shizugin Business Create

Shizugin Business Create

Certified “Health & Productivity
Management Organization 2023”

Shizuoka Bank
Shizugin TM Securities,
Shizugin IT SolutionS hizugin Mortgage
ServiceEndorsed The Valuable 500

Representative Directors: 2
Directors not members of the
Audit and Supervisory Committee: 2
Directors who are members of the
Audit and Supervisory Committee: 1

Composition of Audit and Supervisory Committee

Audit & Supervisory Board Members Outside Audit & Supervisoryfrom within the Company:
Board Members:

1[1 male]3[2 males, 1 female]Certified 3 companies as
excellent corporations engaged
in health management.
Shizuoka Financial Group
Shizuoka Bank
Shizugin IT Solution

Endorsed aninternational initiative topromote the success ofpeople with disabilities
Shizuoka Bank

32

Initiatives for SDGs
Services
Region-based RelationshipBanking• Solutions for Various management Issues• Smooth Supply of Funds to Companies in the Region
P71-73• Meet needs of corporate customers• Support for overseas business development P74• Regional revitalization• Coordinate among industry, government, academia, etc. and facilitate the development of businesses that contribute to regional
development• Hosting the Shizuoka Kids Academy, an event for elementary school
children in the region, where they can learn about local history,
culture and industries• Support for business restructuring and turn-around		Support business restructuring and turn-around of customers
through building business plans, alliances with external agencies,
and utilizing business regeneration fund		301 companies completed business turn-around since 2005 andsecured local employment for 26,747 people, maintaining a vibrantlocal economy.

Cross-industry Collaboration and Support for Start-ups
P75-76

New Business Fields
P77-78Life-plan Support for our Customers

Environment
The Group’s Environmental Policy
P35

Response to Climate Change(Initiatives to Support the TCFD
Recommendation)
P36-42

Investment and Loan Policy forSpecific Sectors
In April 2021, we established the “Investment and Loan Policy for Specific
Sectors (the “Policy”)” in order to make prudent decisions on investments
and loans that are likely to contribute to negative impacts on the environment and society, and to reduce or avoid such impacts.
The Policy clarifies our resolution that we in principle do not invest in andloan to coal-fired power generation that is considered to have high environmental effect, and our policy against cluster bombs, inhumane weapons
manufacturing, palm oil plantation development, and deforestation.
Investment and Loan Policy for Specific Sectors (excerpt)
Coal-fired Power Generation
Initiatives for environmental protection, climate change, and sustainable energy are positioned as some of the most important social
missions of financial institutions.
The Group actively supports renewable energy projects while notinvesting in and loaning to new coal-fired power generation in principle.

Support for Regional Decarbonization Initiatives
P37

Promote Sustainable Finance
P38• Proposals personally tailored to each individual customer
		We provide a full range of products and services to meet customers’
financial needs for each life event, such as starting work, getting
married, giving birth or buying their own home
• Inheritance solutions and asset succession support
	 We present a range of services related to inheritance andadvancements, allowing customers wishing for a smooth succession to spend their old age in security

Providing environment-related products
P39

Achieving carbon neutrality by FY2030 (Scope 1 & 2)
P41

Scope 3 (Categories 1 to 15)
P41-4233

Reducing the Environmental
Impact of the Groupagainst phishing and spyware
		Sophisticated authentication by the use of one-time password

As a part of the environmental protection activities, we are working to
reduce CO2 emissions in order to mitigate global warming.
• Reduction of energy consumption• Reduction of paper usage• Recycling of paper• Zero emissions• Green purchasing• Prioritize purchase of environmentally conscious products for use as
novelties• Introduction of advanced energy-saving facilities• Introduction of eco-friendly cars

Development of Human Resources in the Region

Reinforcing Employee Efforts to
Tackle Environmental Issues in
the Community and at Home

Promotion of Culture and Sports• Holding of concerts featuring leading artists from Japan and abroad•	Holding of performances of rakugo, the traditional Japanese performing art of comic storytelling•	Sponsorship of children’s soccer competitions and baseball competitions
Countermeasures against Large-scale Disasters

We are reinforcing our employees’ efforts to tackle environmental
issues in the community and at home by conducting an awarenesssurvey on the mitigation of global warming and disseminating information on the environment.
• Small Kindness Movement•	Voluntary activities, including tree planting, forest maintenance, andclean-ups. Administrative offices are established within a groupcompany to facilitate employees’ vigorous involvement.
•	Shizugin Furusato* Environmental Protection Fund Charitable Trust•	Financial support is provided through the Trust to individuals andgroups in Shizuoka Pref. that promote environmental protection.
• Financial education• Organizing bank visits and providing presentations for elementary,junior high, and high school students• Holding a financial quiz competition for high school students• Acceptance of internships*Furusato = hometown

SocialDiversity, Equity & Inclusion
P51-53

Countermeasures against Financial Crime• Compensation system for victims of financial crimes• Compensation for losses attributable to counterfeit or unauthorized
use of stolen cards• Compensation for losses attributable to unauthorized withdrawals
using stolen bankbooks• Compensation for losses attributable to unauthorized withdrawals
using online banking services• Various security measures• Cash card security measures		PIN Code Reset Service on ATMs, issuing of IC cash cards which
are difficult to counterfeit• Online security measures		Implementation of strict personal identification, countermeasure• Establishment of a system for ensuring business continuity• A business continuity plan (BCP) has been established for continuation or early recovery of critical operations in the event of a largescale disaster or the outbreak of an infectious disease posing a highrisk. The BCP is reviewed and updated on a continuous basis.
• Measures are taken to protect buildings from earthquakes, andprivate power generation systems, emergency communicationequipment, and other materials and equipment for disaster countermeasures are installed.
• The Emergency Countermeasures Office is located at the headquarters to enable us to assist people in the region in the event of adisaster.
• Countermeasures against tsunami• When rebuilding a branch in an area that may be affected by atsunami, the new building will be designed such that the roof ishigher than the expected height of the tsunami.
• A staircase is installed enabling direct access from outside thebranch to the roof so that anyone can use it as a safe haven in theevent of a disaster.
Raising Awareness about Human Rights•	Provision of education and training about human rights to new
employees and employees at various levels

GovernanceFurther Strengthening Corporate GovernanceP59-64

Thorough Enforcement of Compliance and Risk Management
P65-70Countermeasures to Prevent Money Laundering andProvision of Funds to Terrorists
P66
34

Initiatives for the Environment
Based on our corporate philosophy, which aims to “expand dreams and affluence with our community,” theShizuoka Financial Group protects the rich and comfortable natural environment in our hometown andcontributes to the realization of a sustainable society not only by considering the environment in our own
corporate activities but also by actively addressing environmental issues through our core business centering
on finance in the local community.

Message from an Outside Director
Debate on decarbonization initiatives is gathering paceacross Japan. The move towards decarbonization began inearnest in 2020, under Prime Minister Suga. The Kishida
government has since worked further to promote green
transformation (GX) initiatives. GX is crucial for thepreservation of the global environment. At the same time, it
is hoped that GX will lead to economic revitalization byencouraging investment and technological innovation.
Financial institutions have a large part to play in this.
Regional financial institutions such as the Group, inparticular, are expected to play a central role in promoting
efforts towards local decarbonization. As part of thismovement, the Group is engaging in deeper internal
discussions and implementing specific measures to achieve
GX. Under the 1st Medium-term Business Plan, we haveestablished the targets for fiscal 2030 of achieving Scope 1& 2 carbon neutrality and implementing 2 trillion yen inMotoshige ItohDirector(Member of the Cabinet Secretariat“GX Implementation Council”)

sustainable finance. We have already started work on
achieving these targets.
Of course, the Group is not requested only to take a
responsibility to reduce its own emissions. It is also called on
to perform the role of a core financial institution in the region,
and must consider, as a corporate group, how to approach
decarbonization initiatives for the whole region. The Group’s
Medium-term Business Plan presents a range of impact
indicators. In particular, the Group must contribute in various
ways to achieving the target for fiscal 2030 of reducing
greenhouse gas emissions in Shizuoka Prefecture by 46%(compared to fiscal year 2013). I would like to see asignificant contribution from sustainable finance and theGroup’s other activities as a financial institution.
GX does not simply imply superficial measures to achievea reduction in greenhouse gas emissions, but it
encompasses substantial changes in industrial andeconomic structures. For Shizuoka Prefecture, where themain industries are automobile-related, the transformation ofindustry structure is expected to be an especially significant
movement. One of the Group’s key roles is connecting thistransformation with the further development of theprefectural economy, instead of negative movement.
If we expand our perspective to include the transformationof industry structure, we must understand that the various
initiatives associated with GX transcend the narrow definitionof environmental measures, and they are significant initiatives
related to all aspects of economic activity and thetransformation of society. In this context, each officer andemployee of the Group must be prepared to engage in GX
initiatives as key priorities. I would like to see thisconsciousness and the actions of each officer and employee
lead to stronger GX initiatives across the entire group.

Shizuoka Financial Group Environmental Policy
1. Compliance with relevant laws and regulations: We comply with laws and regulations related to the environment. We also take asincere approach to the requirements from domestic and international guidelines for realization of sustainable society, reflecting itin our corporate activities.
2. Reduction of environmental impact: We strive to reduce our environmental impact by introducing new technologies and renewableenergy and promoting energy and resource conservation.
3. Development of products and services: We contribute to realization of sustainable society together with our business partners bydeveloping environmentally friendly products and services.In particular, we will actively support renewable energy projects such as
solar and wind power, and our customers’ initiatives to decarbonize their operations, thereby promoting the reduction ofgreenhouse gas emissions.
4. Recognition of climate change risks: We recognize that the impact of climate change will continue to be a management risk for the
Shizuoka Financial Group in the future and strive to enhance our risk management and information disclosure. We also set specificenvironmental targets and work to achieve them.
5. In order to maintain and preserve the rich natural environment and biodiversity, we will strive to ensure that the products andservices of our group companies do not have a negative impact on forests and biodiversity.
6. Enlightening activities: We engage in environmental conservation activities as a company, raising awareness of environmental
issues among each and every executive and employee of the Shizuoka Financial Group and leading to actions that contribute torealization of sustainable society.
7. Governance: We report to management on the status of our initiatives for environmental conservation and climate change andverify their effectiveness. In addition, we strive to enhance our efforts through repeated communication with each stakeholder.
35

Response to Climate Change (disclosure based on TCFD* recommendations)
The Group has formulated a transition plan to achieve carbon neutrality. In
addition to accelerating initiatives to transition the Group and the region to a
decarbonized society, we are considering new initiatives in line with the trendof the times. We have established sustainability indicators as metrics for our efforts to create social value as a regional
financial institution under the 1st Medium-term Business Plan. The Group will proceed to implement its transition planand ensure full disclosure based on the TCFD recommendations. Working in concert with the rest of the region, theGroup will strive to achieve a decarbonized society.
*Task Force on Climate-related Financial Disclosures

2020

2021

2022

2023

2030

Promote net-zero internal GHG emissions (Scope 1 & 2)
Achieve carbon neutrality (sustainability indicator)

P41

Endorse the TCFD recommendations· Switch all our contracted
power usage to renewable energy· Target: 73% reduction (vs. FY2013)

2040

FY2030
Achieve carbon neutrality(Scope 1 & 2)
Reduce greenhouse gas (GHG)
emissions in Shizuoka
Prefecture by 46%(vs. FY2013)

By FY2022
31.3% reduction (vs. FY2013)

Promote initiatives to transition to a decarbonized society – Promote Scope 3 net zero –Setgoals Promote sustainable finance

P37, P38, P40

2 trillion yen by FY2030(including 1 trillion yen in
environmental finance)

Reduce to zeroby around FY2040

Reduce the balance of investments and loans for coal-fired power generation to zero

P40

Support the measurement and reduction of GHG emissions

P37, P42

Scope 3
Achieve carbon
neutrality

Estimate and disclose Scope 3 (category 15)

1

Governance einforcement of the governance structure following the transformationR
to a holding company structure
To achieve the Group’s sustainability management after its transformation to a holding
company structure, we have established the Environmental Committee and its
subcommittee, the Environmental Working Group, including members from thesubsidiaries of Shizuoka Financial Group, Inc. (the “Company”).
These bodies conduct cross-sectional discussions of policies and measuresrelating to environmental management, such as our response to climate change,
which then pass through the Sustainability Committee (Group Executive Committee)
and are submitted for deliberation by the Board of Directors. In this way, we not only
aim to ensure good governance to achieve a decarbonized society but also theflexible promotion of highly effective measures.

Board of Directors
Submit/Report

Policy/Supervision

Sustainability Committee (Group Executive Committee)
Submit/Report

Policy/Management

Environmental Committee

Environmental Working GroupThe Shizuoka Bank Headquarters
Related Departments

Group Companies

Establishment of the Shizuoka Financial Group Environmental Policy
With our recognition that the impact of climate change is a business risk for the Shizuoka Financial Group, we established ourgroup-wide environmental policy to clarify our intention to contribute to realizing a sustainable society through our main business.
Each company within the Shizuoka Financial Group will continue its initiatives to improve the precision of its GHG emissions
measurements and to reduce GHG emissions while working to realize a sustainable society through its own services.
36

2Strategy

Through the Group’s main businesses, such as comprehensive financial services and consulting, we will actively
support local companies working to achieve the SDGs and contribute to regional sustainability.

Support for Regional Decarbonization Initiatives
Engagement (interview activities)

Companies undertaking specificmeasures for decarbonization

The Group has been conducting a series of interviews
regarding decarbonization initiatives with our corporate
customers in Shizuoka Prefecture since fiscal year 2021.
In fiscal year 2022, we received responses from 2,282
companies. While the proportion of companies undertaking
specific measures rose from 30% to 50% year on year, aboutnine out of ten companies have not yet started to measure
their own GHG emissions. We will continue to reinforce ourawareness activities targeting the region and work with local
governments and local companies to strengthen our support
for decarbonized management, aiming to encourage theformulation and implementation of emissions reduction plans
through “measurement.”

Decarbonization trends survey and analysis
In fiscal year 2022, Shizugin Management Consulting
implemented a survey and analysis of decarbonization trends
among companies in Shizuoka City’s First-Round Decarbonization
Leading Area. In May 2023, it was entrusted by a group of fivecities and two towns in central Shizuoka Prefecture to undertakea viability study for the creation of new Decarbonization Leading
Areas. We will strive to promote decarbonization in the region,
supporting local governments from the application stage of theselection process for Decarbonization Leading Areas.

Collaboration with regional companies

50%

Companies measuring
GHG emissions

11.5%

of allcompanies

Currently undertaking measures
Plan to undertake measures
No planof allcompanies

Measuring emissions
Not measuring emissions*Interview period: From August 12 to September 30, 2022
Interviewees: 2,282 companies with annual sales of ¥1 billion and above

Collaboration with local governments
We are working in collaboration with local governments toachieve carbon neutrality in the region. This includes acomprehensive collaboration agreement for carbon neutrality
with Hamamatsu City, which we signed in July 2023.
We will contribute to creating a sustainable region byworking with local governments, which are best placed toascertain the issues and characteristics of the region, to
expand the range of carbon neutrality solutions offered by theGroup, such as support for local companies to measure GHG
emissions.

The Bank has entered into an agreement on comprehensive
collaboration to support initiatives for decarbonizedmanagement with SHIZUOKA GAS CO., LTD. and Suzuyo
Shoji Co., Ltd.
Our policy is to fuse together each company’s knowledge
and expertise to provide partnership-style support for
decarbonized management initiatives by local businesses overthe medium and long term.

TOPICS

Case Study of Support for Initiatives by Local Companies—How PIF led a company to begin measuring its CO2 emissions and disclosing them on its website
The Bank entered into a positive impact finance (PIF) agreement in September 2021 with Nozue Shouten, which operates
the ferrous and non-ferrous metal scrap recycling business. Through PIF, Nozue Shouten reaffirmed the vital role of its workin the circular economy. It had already installed solar panels on its factory buildings and actively adopted renewable energy,
and the PIF agreement further boosted its awareness of the environment, leading it to begin the measurement of its CO2
emissions in 2022, in an effort to reduce these emissions. It now discloses these emissions on its website. (Please refer tothe Impact Report published by the Group in March 2023 for details of these initiatives.)
Impact Report URL (in Japanese only): https://www.shizuokabank.co.jp/pdf.php/5768/230331_NR_1.pdf

37

Promote Sustainable Finance
The Group offers a range of services to provide financial support for our customers’ ESG initiatives.
In October 2021, we established sustainable finance targets aimed at strengthening these efforts.
Target amounts by
FY2030Target amounts for
FY2022

Results for FY2022

Cumulative results
up to FY2022

Sustainable finance¥2,000 billion¥115.0 billion¥348.3 billion¥461.6 billion(of which, environmentrelated finance)¥1,000 billion¥57.5 billion¥175.0 billion¥229.7 billion

Our history of promoting sustainable finance
Sustainablefinance

2021
Jan.

Sep.

Oct.

Ministry of theEnvironment ESG
Regional Finance
Promotion ProgramFirst PIF for
an SMEin Japan

Positive impact finance (PIF)

Sustainability-linked loans

Support for initiatives based on
the results of a comprehensive
analysis of their environmental,social, or economic impact

Loans based on theestablishment of KPIs and SPTs*
as targets compatible with ESG
and SDGs strategies, linked tolending conditions dependent on
the achievement of SPTs

First
sustainability-linked
loan in Shizuoka
Prefecture*SPTs: Sustainability performance targets

Establishedsustainablefinance targets

2022
Apr.

ESG
FinanceAwards Japan

Main sustainable finance initiatives

Began offering
SDGs support
guarantees

Received the SilverAward for FY2021

Selected in
FY2022

2023

Received the Gold
Award for FY2022

Published our
Impact Report
Selected in
FY2023

Green loans

Social loans

Support for initiatives to achieve a
low-carbon, recycling society, withloaned funds only available for use
in projects that have a positive
impact on the environment

Support for initiatives to create
a positive social impact, withloaned funds only available foruse in projects that contribute tosolving specific social issues

SDGs support guarantees
 eveloped jointly by The Shizuoka
D
Bank and the Shizuoka Credit
Guarantee Association
Encouraging initiatives for SDGs/
ESG-focused management throughsimple evaluations based on
dialogue with customers andimplementing partnership-stylesupportSelected for the Ministry of the Environment ESG Regional Finance Promotion Program for two consecutive years[Name of projects selected]
FY2022: Establishment of impact visualization and impact measurement and management (IMM) frameworks in the region
FY2023: Formulation of joint KPIs linked to both the enhancement of corporate value and the creation of social value

 warded in the indirect finance category of the ESG Finance Awards Japan for twoAconsecutive years
In fiscal year 2021, we received the Silver Award in the indirect finance category of the ESG FinanceAwards Japan, held by the Ministry of the Environment. This was followed in fiscal year 2022 by theGold Award. These awards recognize our broad range of initiatives to support companies
promoting efforts to address the SDGs through PIF, the ESG Regional Finance Promotion Program,and the development and penetration of SDGs support guarantees, as well as the flow-on effectsof these initiatives in the region.
38

Scenario analysis
We implement scenario analysis (comprehending the risks related to climate change and their impact on our credit portfolio) tounderstand the impact of climate change on the Group.
The Group perceives climate change risks in terms of transition risks and physical risks. We estimate each of these risks in our
scenario analysis.
In fiscal year 2022, we added the electric power industry to the subjects of our analysis of transition risks and further deepened
our analysis for the automobile and accessory parts manufacturing industry. Regarding physical risks, we added SMEs and housing
loan customers in Kanagawa Prefecture and Tokyo to our analysis.
The risks associated with climate change for the Shizuoka Financial Group, as identified through the scenario analysis, are as
follows.
1. Transition Risk
Electricity Energy

Industry

Paper manufacture

Manufacture of motor vehicles
and their accessories

Scenario

IEA net zero by 2050 (NZE2050)
NGFS Net Zero 2050

IEA / ETP2017Beyond2°C
NGFS Net Zero 2050

MethodAnalyze changes in credit costs based on scenarios, using carbon tax and other forecast data to project changes in profit/ loss andfinancial position by 2050

Analysis Result[Increase in credit cost] Up to approximately JPY18.8bn in total by 2050

2. Physical Risk
Scope of coverage

Calculate credit costs related to risk of damage for building andbusiness continuity for SMEs in Shizuoka Pref, Kanagawa Pref,and Tokyo

Scenario

RCP8.5 in the IPCC WG AR6 (4°C Scenario)

MethodAnalyzes the risk of inundation in the event of flooding by overlaying business and collateral location information with hazard maps

Analysis Result[Increase in credit cost] Up to approximately JPY14.8bn by 2050

Calculate building damage costs and credit costs for mortgage
borrowers in Shizuoka Pref, Kanagawa Pref, and Tokyo

Providing environment-related products
We donate part of the costs saved from accounts without a passbook and the interest from specified time deposits to the FUJISAN
Fund* and other causes as an initiative for environmental conservation through financial services. For customers who wish tocontribute to environmental conservation and regional revitalization through their investments, we also offer investment trusts andother vehicles that incorporate an ESG perspective in all their investment assets.
Shizugin ECO Accounts
We provide two products – Online General Accounts opened
without a passbook and WebWallet Internet branch accounts– as Shizugin ECO Accounts.
We donate part of the costs saved from accounts without apassbook to charity. Since fiscal year 2021, the Bank and The
Yamanashi Chuo Bank have made joint donations to the
FUJISAN Fund based on the number of new accounts opened
without a passbook, under the “Shizuoka Yamanashi Alliance.”
73% of the new accounts opened in fiscal year 2022 were
ECO Accounts, and we jointly donated approximately ¥2.7 million.

Investment Trusts
Global ESG Balanced Fund — Nickname: Blue EarthThis product, offered by Shizugin TM Securities since fiscal
year 2020, incorporates ESG perspectives into all the assets it
invests in, to enable it to contribute to environmental
conservation and regional revitalization. The Bank also beganoffering this product in fiscal year 2022.
In addition, we have launched an initiative to donate part of
the trust fees for this product to Shizuoka Prefecture.

 roportion of new accounts opened that are ECO
PAccounts (fiscal 2022)
Passbook
Accounts

27%

Shizugin
ECO
Accounts

73%

39*FUJISAN Fund:This fund is operated by the National Council on FujisanWorld Heritage, a certified NPO. It is used for conservation
activities and related awareness activities aimed atpreserving the Mt. Fuji World Heritage site for the future.

FUJISAN asa World
Heritage forever.

3

Risk Management

Climate change-related risk management
The Group classifies classify the risks arising from climate change based on the TCFD recommendations. We anticipate transition
risks and physical risks for each category, as shown in the table below.
We will appropriately manage and review these considering the impact of climate change, based on the characteristics of each risk.
Transition risk

Risk category

Credit risk

The risk of an increase in credit-related costs for
the Group due to a deterioration in customers’
business performance arising from changes inpolicy, regulations, technical development, andother changes in the business environment

Market risk

The risk of a decline in the price of strategic
shareholdings, funds, and other assets held by
the Group arising from changes in policy,
regulations, technical development, and otherchanges in the business environment

Liquidity risk

The risks of a deterioration in the Group’s credit
ratings due to the perception that it has not
responded adequately to transition risks, resulting
in limited access to market funding

Operational risk

The risk of losses from litigation brought against
the Group by stakeholders and damage to its
reputation resulting from its inability to respond
appropriately to decarbonization

TimelineShortandmidlong
term*1

Physical risk
The risk of an increase in credit-related costs for theGroup due to a deterioration in business performance
resulting from damage to customer assets or thedestruction of social infrastructure from storm and flood
damage, etc. or due to damage to assets held ascollateral by the Group· The risk of a decline in the price of strategic
shareholdings, funds, and other assets held by the Grouparising from a deterioration in customers’ businessperformance from storm and flood damage, etc.
· The risk of a decline in the price of securities and otherassets held by the Group due to market participants
adopting a pessimistic view of economic growth in thewake of storm and flood damage, etc.
· The risk of an outflow of deposits due to the immediate
cash needs of customers affected by storm and flood
damage, etc.
· The risk that large-scale, widespread storm and flood
damage, etc. will disrupt financial markets, making it
difficult to procure funds from the market

TimelineShortandmidlong
term*2

The risk of damage to buildings and other assets held by
the Group due to storm and flood damage, etc., and theconsequent risk of a suspension of business operations*1 Short term: Impact of movements in energy prices on customers’ business performance; Mid-long term: Impact of introduction of carbon tax, regulations, etc. on customers’
business performance*2 Short and mid-long term: Damage to collateral values and changes in customers’ business performance due to expansion in the scale and frequency of floods

Investment and Loan Policy
We determine whether or not to redeem investments and loans that may affect the environment and society, with reference to ourcredit policy.
We have established our Investment and Loan Policy for Specific Sectors, which articulates that in principle we do not fundcoal-powered electricity generation due to high environmental impact, in order to strengthen our efforts to achieve sustainable growth
and a decarbonized society in the region.

4

Indicators and goals

Sustainable finance of 2 trillion yen(Cumulative amount executed by FY2030)
We have set a target to execute a cumulative total of 2 trillion
yen in sustainable finance by FY2030. We have executed acumulative total of 461.6 billion yen in sustainable finance as of
FY2022.

Reduce the balance of investments and loans
for coal-fired power generation to zero(by around FY2040)
We have set a target to reduce the balance of investments andloans for coal-fired thermal power generation to zero byaround FY2040. The balance of investments and loans forcoal-fired thermal power generation at the end of March 2023
was 15.9 billion yen, or 0.12% of total outstanding credit.

Rated “B-” based on the CDP climate change questionnaire
We received a rating of “B-” in the climate change questionnaire implemented by CDP, an international NGO that rates and certifies
companies’ environmental strategies and initiatives.

40

Achieving carbon neutrality by FY2030 (Scope 1 & 2)
The Group has set a target of carbon neutrality (Scope 1 & 2)
by FY2030 to accelerate our efforts to achieve a decarbonizedsociety for the region.
To achieve our sustainability target under the 1st Mediumterm Business Plan of reducing GHG emissions in Shizuoka
Prefecture by 46% (compared to FY 2013) by FY2030, we areleading the region in the introduction of energy conservation
and renewable energy.
GHG emissions (Scope 1 & 2) of the Group in FY2022 were
12,714 tons (-31.3% compared to FY2013) due to theintroduction of renewable energy at the Headquarters andTraining Center.
In FY2023, we expect to reduce emissions by approximately
70% compared to FY2013 due to the progressive switch of
our contracted power usage to renewable energy, in addition
to power generation from renewable energy at the Shizugin
Solar Park, scheduled to begin operation in October.

Trend in the Group’s GHG emissions

Scope 1

Scope 2
Unit: t-CO2e-31.3%

18,514
1,377

16,207

15,653

1,360

1,442

14,696
1,271

12,714
1,177

17,137
14,848

14,211

13,425
11,538FY2013

FY2019FY2020

FY2021

FY2022*We have expanded the scope of measurement in line with TCFD guidance, in addition to thescope stipulated under the Act on Rationalizing Energy Use.

Scope 3 (Categories 1 to 14)
We recognize the importance of reducing GHG emissions from other companies related to our business activities (Scope 3) inaddition to GHG emissions from the Group’s own business activities (Scope 1 & 2) in order to achieve a decarbonized society, andhave therefore measured emissions in each category.
Unit: t-CO e
2

Items measured

Emissions in FY2022

Items measured

Category 1

Purchased goods andservices

30,426

Category 8

Category 2

Capital goods

23,022Category 9

2,031

Category 10

Included in Category 1

Category 11

Use of sold products

99

Category 12

End-of-life treatment ofsold products

560

Category 13

Downstream leased assets

1,469

Category 14

Franchises

Category 3
Category 4
Category 5

Fuel- and energy-related
activities
Upstream transportationand distribution
Waste generated inoperations

Category 6

Business travel

Category 7

Employee commuting

Emissions in FY2022

Upstream leased assets
Downstream transportationand distribution
Processing of soldproducts

Excluded*1

0*2
Excluded*1*1 Categories 8 to 12 and Category 14 are not applicable and have been excluded*2 The measurement of Category 13 excludes Shizugin Lease
Measurements include all of the Group (excluding overseas representative offices and overseas subsidiary).

Installation of “Shizugin Solar Park” (off-site corporate PPA)
Aiming to achive carbon neutrality, the Shizuoka Bank Group has decided to newly build a energy solar power plant, “Shizugin Solar
Park,” in Shizuoka City.
This is an off-site corporate PPA* with Chubu Electric Power Group to introduce renewable energy with additionality (the effect of
encouraging new capital investment in renewable energy).
*An abbreviation for “Power Purchase Agreement,” which refers to the purchase of electricity from a power generation facility located offsite in a remote area.

Outline of the Shizugin Solar Park
Start of operation October 2023 (scheduled)
Off-Site Corporate PPA Agreement
Date of conclusion May 20, 2022
Concluding party Chubu Electric Power Miraiz Co.
Annual power generation amount:approx. 2,900,000 kWh/ year (panel output: 1,995 kW)
Location: Miho, Shimizu-ku, Shizuoka City
Installer Chubu Electric Power Co.
Site area: Approximately 23,000 square meters
Amount of GHG emission reduction:
1,100 tons per year (estimated)

41

Groundbreaking ceremony on March 1, 2023

Scheduled completion drawing

Scope 3 (Category 15)
We estimated GHG emissions associated with the Bank’s corporate loan transactions (Scope 3 Category 15), based on the PCAF
Standard*1. We will continue to support our corporate customers to reduce their GHG emissions through the Group’s comprehensive
financial services and consulting work.
Estimation results (classified by the 18 industry sectors used by the TCFD)*2
Industry sector

Carbon intensity

Emissions*3

Carbon intensity: t-CO2e/¥ million; Emissions: t-CO2e

Industry sector

Carbon intensity

Emissions*3

Beverages

0.33

2,919

Oil and Gas

9.80

2,737,911

Agriculture

6.73

47,461Coal

3.32

12,6590.82

219,806

Electric Utilities

11.99

246,0612.28

594,780

Metals and Mining

12.24

4,550,676—

0Chemicals

3.32

269,714

4.75

15,0809.81

170,359

Rail Transportation

1.12

28,271

Trucking Services

2.73

Automobiles andComponents

0.20

Packaged Foodand Meats
Paper and Forest
Products
Air Freight
Passenger Air
Transportation
Maritime
Transportation

Construction
Materials
Capital Goods(construction, etc.)
Real Estate Management
and Development

0.11

1,017

0.34

71,341

0.02

199,539

416,065

Other

0.67

2,216,874

121,704

Total*4

11,922,235

FormulaCarbon=intensity

GHG emissions by each corporate
customer*5

Emissions =GHG emissions by each corporate
customer*5

Net sales of eachcorporate customer
attribution coefficient(loan balance/corporate customer’s
total financing)*1 The measurement method for Scope 3 Category 15 published by PCAF (the Partnership for Carbon Accounting Financials: an international partnership that developed theworld’s first standard method for GHG emissions measurement in the investment and loans portfolios of financial institutions)*2 The results of measurement may vary considerably in the future due to factors such as increases in the number of companies which measure and disclose emissions owing tosupport for decarbonization initiatives, as well as changes in measurement standards and industry sector classifications*3 Including Scope 1 & 2 emissions for our corporate loans customers*4 Excluding customers for which the data necessary for estimation could not be collected as their fiscal years had not concluded or for other reasons (coverage: 96.4%)*5 Calculated based on factors such as the net sales of corporate customers and the emissions coefficients provided by PCAF, with the exception of part of Metals and Mining,which was calculated based on the figures published by the relevant company

Carbon-related assets
We ascertain the balance of loans for carbon-related assets to gain a quantitative understanding of climate change risks.
The table below shows the balance of carbon-related assets associated with corporate loans by the Bank and their proportion of
total loans.
EnergyTransportation

Materials andBuildings

Agriculture, Food,and Forest Products

Total

Proportion

2.33%

8.05%

14.09%

4.30%

28.77%

Balance of loans(¥ billion)

234.2

810.0

1,417.8433.0

2,895.0

Sector[Notes] “Energy” includes Oil and Gas, Coal, and Electric Utilities“Transportation” includes Air Freight, Passenger Air Transportation, Maritime Transportation, Rail Transportation, Trucking Services, and Automobiles and Components“Materials and Buildings” includes Metals and Mining, Chemicals, Construction Materials, Capital Goods (construction, etc.), and Real Estate Management andDevelopment“Agriculture, Food, and Forest Products” includes Beverages, Agriculture, Packaged Food and Meats, and Paper and Forest Products

42

Initiatives to Implement Human Capital Management
In order to continue to embody our corporate philosophy in the midst of drastic changes in theenvironment surrounding local communities and customers, it is important to change the awarenessand behavior of each and every officer and employee who supports the Group. In the 1st Mediumterm Business Plan, we promote initiatives for the “ Co-Growth of Individuals and Organizations” andaim to “Create Social Value and Improve Corporate Value at the Same Time”.

Organic linkage between management strategies and HR strategies
In our management strategy, we will develop a future-oriented vision of what we want the Group to aim for, and in our human capital
strategy, we will maximize the human capital needed to realize this vision. By linking the two strategies together, we aim to increase
the feasibility of management strategies and to enhance the superiority of our human resources.

HR strategies
increase thefeasibilityof management
strategies

corporatephilosophy

HR strategies

Initiatives to achieve our vision

Human resources that canvoluntarily consider, act,
accept various opinions
and continue to challenge

1. Human Resources System for establishingautonomy, challenge, and diversity
2. Optimize Human Resource Allocation
and Training

Purpose-type mission

Expand dreams andaffluence withour community
Management
Management
strategies
A problem-solving
corporate group creating
new values for the future

TOPICS

strategies enhance
the superiority ofhuman resources

3. Penetration of DE&I*1 to maximize humanresource value
4. Culture & Wellbeing Innovation*2*1 Diversity, Equity & Inclusion*2 Initiatives to encourage an internal corporate culture to realize the vision aimed
for in the 1st Medium-term Business Plan

Held a dialogue focused on “Human Capital Management.”

We invited two leading experts in human capital management to hold a dialogue on the topic of human capital management
at the Group.
This dialogue was held as part of the training
program (P46 Sustainability training program) for
executives and employees to realize human capitalmanagement.
During the dialogue, the participants exchanged
opinions on the Group’s initiatives, including thepersonnel evaluation system consisting of OKR
and Value, as well as the penetration of corporate
culture and its vision for the implementation ofhuman capital management.
Pronoia Group
Shizuoka Financial Group
Hitotsubashi University
CEO
Director
Director of Hitotsubashi CFO
The dialogue is posted on the
Chair of Human Capital
Education and Research
Piotr Feliks Grzywacz
Group’s website.
Management Committee
CenterShizuoka Bank President
Kunio Ito
Minoru Yagi
QR code for the homepage is here.

43

Initiatives to achieve our vision
To maximize human capital, we will implement human capital management from the four perspectives of personnel system, humanresource allocation and development, DE&I, and employee engagement, to close the gap between the current situation and our vision.

1. Human Resources System for establishingautonomy, challenge, and diversity

2. Optimize Human Resource Allocation
and Training

join each employee’s dreams and actions withthe corporate vision

Develop and operate a human capital portfolio plan toachieve the strategy

Renewal of personnel evaluation system
OKR
Three Values
Operate and establish a personnel system
1-on-1 Meeting
Utilize Intra-company Social Media “Cheer*Chat”
Personnel Evaluation System Satisfaction
Ensure employees understand and embrace theFirst Medium-Term Management PlanInitiatives
Social Impact Roadmap, My Sustainability Book,
Sustainability Training Program, Town Meetings
In-house venture system

Develop leaders who can create a vision
Executive academy
Encourage active participation in outside
opportunities
D evelop value-creating human resources andfurther improve problem-solving skills
Targets for the Human Resource Portfolio
System to Certificate Intra-company Qualification
Expand the scope of learning
Shizuoka Financial Group Open College (Liberal Arts)
Initiatives for Career Autonomy
My career design system
Support for Career Autonomy
Value-up, Meet-up program

3. Promote DE&I to maximize humanresource value

4. Culture & Wellbeing Innovation

Multiply diverse values and personalities

Promoting autonomous and flexible work styles,
Enhancement of employee engagement

Initiatives for women’s active engagement
Women’s active engagement
Promote male maternity leave
Reduce the wage gap between men and womenInitiatives for DE&I
Diversification of human resources
Initiatives for Respecting Human Rights
Establishment of Human Rights Policy
Initiatives for LGBTQ
Supporting the Success of People with Disabilities
Eradication of Harassment

Promoting autonomous and flexible work styles
Support for Balancing Work and Personal Life
Promotion of Health Management
Major Initiatives for Health Management
Various benefit programs
Initiatives to increase the engagement of each
employee
Dialogue with executives and employees
labor-management dialogue
Strengthening human capital investment initiatives
Changes in Engagement Indicators

Initiatives for Human Capital Management in the 1st Medium-term Business Plan

Regional-Co-Creation Strategy
Initiatives for Materiality

Group Business Strategy
Risk-taking from the perspective of
the SDGs, based on regional strategies

human capital management
Achieving Happiness and Well-Being for
Employees and Their Families

Transformation Strategy

Group Governance Strategy

Transforming the group by eliminating
various restrictions

Sophisticate the corporate governancesystem under a holding company structure

In the 1st Medium-Term Business Plan, which started in April
2023, human capital management is positioned as animportant management strategy, and four basic strategies arebeing developed. We will aggressively invest in human capital,from human resource development and education to DE&I,
benefits and health management, to realize the dreams andwellbeing of each and every employee.

44

1. Human Resources System for establishing autonomy, challenge, and diversity
In order to continue practicing daily actions consistent with our corporate philosophy, we have introduced a personnel evaluation
system consisting of “OKRs” and “Values”. By setting forth challenging and attractive “dreams” and “ideal states” as OKRs that willbring happiness to all stakeholders, and by aligning the vector of everyone’s thoughts with management vision, we aim to take on thechallenge of autonomous change that will open up the future of the region.

Renewal of personnel evaluation system, Operate and establish a personnel system
We have introduced various systems step by step for the fundamental revision of the personnel evaluation system. In order todeepen employees’ understanding of the new personnel system and ensure that it takes root, “evaluation training” is conducted
every year in conjunction with the introduction of the OKR system.
2019 Introduced 1-on-1 meetings

April 2023 My Sustainability Book,
Sustainability Training Program, Town Meetings

Began evaluation training

2021
Introduced OKR, Value, Cheer*ChatApril-June 2022
Conducted personnel evaluations(Negotiation, calibration, and multifaceted evaluations)

OKR

Individual

In the personnel evaluation process, in addition to thenegotiation between the evaluator and the evaluated, and theimplementation of calibration that goes beyond the department
and branch to the block/area unit, etc., multifaceted opinions
such as those of customers and employees are reflected in theevaluation. The feedback is carefully shared with each other,leading to behavioral change by each and every employee.

Objective

SectionWe have introduced OKR in FY2021 and operated as shownon the right. OKR is an evaluation system that is composed of
Objective and Key Results, and is not biased solely toward
performance targets. Each team and each officer andemployee has a dream or vision that they want to realize for
their stakeholders as an “O”. They also set “KR” at themoonshot level toward that ideal, and are evaluated not only
the degree of achievement, but also the attitude of challenge.
In the OKR setting, we provide opportunities for a flat andfree exchange of ideas in order to align the organization andthe individual with what they want to achieve.

Key Results

Key Results

O

O

O

O

KR

KR

KR

KR

OKR Results
×
degree of challenge

negotiation
calibration

Reflects feedback
from customers andemployees in
evaluations

Calibration
After conducting a negotiation
with the supervisor, we conduct
a calibration, which transcends
departments and crossdivisional to increase theacceptability of the evaluation.

Three Values
In order to realize our corporate philosophy and group vision, we have established three keywords, “Value,” as the value standards
that we should embody in our daily actions, and we encourage our executives and employees to act in accordance with these values
by communicating them to each other.

Go Wild

Be Innovative

Do Collaboration

A state of repeated “learning from challenges andfailures” with “ambitions for change”

A state of ongoing “self-reformation” that aims forcreation from disruption through repeated “searchfor knowledge”.

A state of continuous creation of “added-value
through collaboration” with “flat relationship”
where opinions are freely exchanged.

1-on-1 Meeting
We have introduced 1-on-1 meetings to foster a culture of human capital development through communication between supervisorsand subordinates, and by extension, through the revitalization of communication within the workplace. We aim to deepen therelationship of trust between supervisors and subordinates, and to create an organization where subordinate thinks and acts on his
or her own by allowing them to lead 1-on-1 meetings. In FY2022, we introduced the Naname, Yoko-Shita 1-on-1 Meeting to create
opportunities for dialogue that transcends divisions and positions in order to promote autonomous growth through new insights thatare not bound by the division to which one belongs or the relationship between supervisor and subordinate.
45

Utilize Intra-company Social Media “Cheer*Chat”

Personnel Evaluation System Satisfaction

We have introduced “Cheer*Chat,”
an intra-company social media for
executives and employees to express
their appreciation and praise to eachother on a daily basis, in order tofoster a culture of mutual recognition.
The hashtag function is also used
to spread the “Value” and to manage
subordinates.

In the employee engagement survey, “satisfaction with theevaluation system” improved following the revision of thepersonnel evaluation system in FY2021. We will continue toimprove the system through training and 1-on-1 meetings toensure the system’s penetration among employees.

Trends in satisfaction with the evaluation system
FY

FY before/ FY
after

Shizuoka Bank Nonconsolidated 2020 2021 revision 2022

evaluation item

The personnel system is operated in a waythat encourages people to take onchallenges without excessive fear of failure.
In practicing the corporate philosophy, thepersonnel system is operated to evaluate
fairly.

2.94 3.12 +0.18 3.20
3.10 3.13 +0.03 3.18
Introduced OKR

Ensure employees understand and embrace the First Medium-Term Management Plan
In the 1st Medium-Term Business Plan, which started in FY2023, we aim to achieve a state in which all stakeholders are sustainable
and their well-being is improved. In order to ensure that all employees understand the concept of the Medium-Term Business Plan
and to further disseminate the plan, the following measures are being implemented.
Social Impact
Roadmap

OKR

Sustainability
Training Program

Consistent
1on1

My Sustainability
Book

Corporate
Philosophy
Medium-TermBusiness Plan

Create Social Value
×Improve Corporate Value
Corporate Philosophy
Purpose-type mission

Social Impact

Town Meetings

Initiatives
Social Impact Roadmap

In order to penetrate within the Group the concept of the 1st Medium-Term Business Plan, which aims to both createsocial value and improve corporate value, we have formulated a map that organizes the linkage between daily operations
and social impact for each operation.

My Sustainability Book

Introduced a booklet to learn about the concept and background of the 1st Medium-term Business Plan, to understandthe corporate philosophy and management strategy, and to connect one's own dreams with daily actions. The booklet isalso used in 1-on-1 meetings.

Sustainability Training
Program

Provide training to deepen understanding of Purpose Management, SX Management, and the use of My Sustainer Book,
which form the basis of the concept of the 1st Medium-Term Business Plan.

Town Meetings
Starting in fiscal year2023

This program provides an opportunity for direct dialogue between management and employees in order to deepen
understanding of the corporate philosophy and management strategy, as well as to foster an awareness of co-creation
and a culture that is necessary for sustainable growth.

In-house venture system (Implemented the 1st program in FY2021-2022)
In order to encourage “autonomy and challenge” and “learningfrom mistakes,” and to link the awareness of change to action,
we have established an “in-house venture system” foremployees to create their own business ideas and work
toward their realization. We will continue to foster an corporate
culture of challenge through internal ventures, and link this to
new measures and business innovation in the future.

No. of applications 59 entries 1 Grand Prize and 3
Excellence Awards

Grand Prize
Digital securitization of whiskey casks by using security
tokensExcellence Award
Financial service for foreign employees
Services for companies celebrating their anniversaryEntrusted business at whistle-blowing windows ofexternal companies46

2. Optimize Human Resource Allocation and Training
Develop leaders who can create a vision
We provide education and develop human capital for the future in a planned manner. In addition, we provide opportunities to build
new human networks and enhance “perspective and knowledge” of executives and employees as well as to encourage theirautonomy and challenge by letting them interact with human capital outside the Group, such as at business schools, as part of the“External Interaction” program.
Level

Training program
Executive
academyFormation of a basis for leadershipand fostering a sense of management

Line headManagement
academyDeveloping Leaders to Lead theGroup Transformation

Leader academy

Developing leaders who caninspire members

Managers
Young
employees
aspiring tobecomeleaders

Developing a vision for theOrganization
management workshop leadership of the Group

Next generation
leader workshop

Mastering the basics ofleadership and management

The “Executive Academy,” the highest level of leadershipeducation, was newly established in FY2022 to form the basisof leadership and foster a sense of management throughdiscussions in various fields based on themes such as liberal
arts, governance, ethical issues, and current trends. In addition
to our management team, we create opportunities to receive
essential learning from leading instructors in their respective
fields.

HidetoMatsushita
Shizuoka Bank
General Manager
of Business
Promotion Dept.

Outside opportunities

Block manager Division chiefGroup chief

Section chief Section chief
Crew

Crew

President

BusinessschoolGeneral manager

Section chief

Crew

Cross-industry
exchange

Bank branches Head office Group companies

No. of training program participants

Executive academy (Started in FY 2022)

At the Academy, I was able to think andrelearn about various qualities and themes
required of management personnel, including
liberal arts, through lectures by lecturers active
in a wide range of fields and discussions
with executives from group companies. At atime of rapid change and VUCA, companies
are required to make prompt and optimal
decisions in all aspects of their operations. In
my future work, I will always be conscious of
capturing the essence of things and finding
guidelines for my own decision-making, and I
will continue to actively and boldly take on new
challenges in order to gain new experienceand learn in various fields.

Work experience
Multiple career development
including group companies

Department head andmanager mentoring system

Officers

OJT

250
200
150
100
50
0

Kaori
Higashijima
Shizugin Heartful
President

237
129

165

FY2020

FY2021

FY2022

During the 8 sessions of the Academy, I had theopportunity to learn from renowned lecturers ina wide range of fields. Although it was difficult toread the assigned books carefully and complete
the assignments in advance, I was exposed tobooks in fields I would never have picked up
before and had many stimulating experiences
and insights through discussions with theother participants in the class. I was able tobroaden my thinking by learning about diverse
viewpoints, and the learning opportunities
that led me to delve deeper into the lectures
were very valuable experiences. I would like tocontinue learning so that I can see everythingfrom a bird’s eye view.

Encourage active participation in outside opportunities
Major Curriculum
Nikkei Executive Governance Program, Waseda University Top Management Training, Senior Management Course, Nomura
Management School (Management Strategy Course for Women Leaders, Digital Strategy Course for Managers), Keio MCC
Business Core Program, Greater Todai Juku(The University of Tokyo), 5G/IoT Design Girl, WiL 1-Day Design Thinking Workshop,
Boot Camp, etc.

47

Develop value-creating human resources and further improve problem-solving skills, Expand the scope of learning
By further refining the transformation into a problem-solving corporate group that was promoted in the 14th Medium-Term Business Plan,
and by working to increase the value of each and every employee and to optimize the allocation of human resources, we aim to realize
the goal of the 1st Medium-Term Business Plan of becoming a “problem-solving corporate group that creates new values for the future”.

Targets for the Human Resource Portfolio
Problem-solving

Value-creating

New businesses

975

984
10

Middle, back

4,150

4,060

4,004

287
155

Digitalization

810

Reallocation due
to digitalization

100
350

300

450

200
In addition to existing
business, create newvalue for customers.

2,578

2,575

FY2022(Actually)

FY2023(Planned)

2,440

FY2027(planned)

Digital Human Resources

Side-jobs at relevant divisions of theheadquarters
10 persons in FY2022

IT literacy improvement of the whole group
As of the end of
March 2023

IT passport acquirers: about 1,000 persons

System to Certificate Intra-company Qualification
This is a system to clarify the qualifications and skills required for
consultants to solve customers’ issues and to support the careerdevelopment that each individual is aiming for. We support skill
development through task-specific workshops and qualification
preparatory courses for required qualifications and skills.

No. of Certified Personnel (Silver and above)（人）

KPI 800

800
600

Professional expertise
acquisition

800

200
96
FY2020170
FY2021

Establishment of a new certification system

Professional expertise
acquisition

FY2027In-house qualification
certification system

Improvement/expansion of internal training

Certification requirement

Business
succession

Corporate
rehabilitation

Publicly qualified

M&A

Staffing, etc.

Business skill check

The number of certified personnel under the in-house qualification
certification system has been increasing year by year, with two
employees obtaining the highest level of certification,“Diamond,” in fiscal year 2022.
Certification Rank

Official
qualifications,etc.

SilverGold

PlatinumDiamond

In addition to the left, one or
2nd grade of FP
Senior M&A Expert or more of the following: small andLegal Affairs Level 3
In addition to
Senior Private Banker medium-sized enterprise
Qualification
the leftor Fundamental
diagnostician, labor and social
Examination
1st grade of FP
Information
security attorney, certified tax
IT Passport
Financial Services Technology Engineer accountant/lawyer, certified
Examination
Certification Level 2 in addition to those public accountant, real estate
Financial Services
listed on the left.
appraiser, administrative
Certification Level 3
scrivener, judicial scrivener
C

A

B

S

Trends in the Number of Major Qualifications Obtained
Qualification
MBA

285
FY2022

Practical skill acquisition(Dispatch to external enterprises, sidebusiness, etc.)(External training, research at graduate
schools, etc.)

Business Skill Check

4000

medical carewealthventure firm
and health decarbonization business establishmenthat can co-create and solve issues in cooperation with customers

Practical skill acquisition

Trainees outside the bank46 persons in FY2022

Development area
IT/DX
support

Problem-solving Human Resourcesthat can use cutting-edge technology

Professional expertise
acquisition

Value-creating Human Resources
Human resources that realize the creation of regional value by
leveraging expertise and networks

Certified Small and Mediam EnterpriseManagement Consultant

1st grade of FP
IT Passport Examination
Fundamental Information
Technology Engineer

FY2020
13
68
313
396
135

FY2021
13
70
351
748
180

FY2022
13
72
358
1207
199

Shizuoka Financial Group Open College (Liberal Arts)
We provide opportunities to “re-learn in new areas” such as seminars on liberal arts, IT/DX, green, and diversity, to promote“exploration of knowledge” of executives and employees and to improve their attractiveness as human capital.

Instructors in FY2022· Naohiko Kotake (Professor, Keio University Graduate School) · Kaori Sasaki (Founder & CEO, ewoman, Inc.) · Yukari Takamura(Professor, Institute for Future Initiatives, University of Tokyo) · Nobuko Nakano (Brain Scientist) · Takashi Maeno (Professor, Keio
University Graduate School) · Yasumasa Yamamoto (Visiting Professor, Kyoto University Graduate School) and others48

Changes in training hours, etc.
In addition to traditional face-to-face training, we utilize online training to create an environment in which each executive andemployee can develop their careers on their own initiative. In order to proactively provide recurrent training opportunities, we are
increasing training expenses per officer and employee. (In FY2021, in line with the revision of the personnel system, a number oftraining sessions were held to penetrate the system, resulting in a significant increase in training hours.)

Changes in training hours

Changes in training costs per personnel

Other than system revision
Of which, system revision（時間）
180,000

22,397

No. of participants in Open College

（千円）
80

（人）
6,000

60

5,000

8,980
135,000

4,956
40

90,000137,91745,000108,680

0

FY2020136,04120

FY20210

FY2022

4,000

69.2

32.2
FY2020

4,498

41.7

FY2021

5,696

3,000

FY2022

2,000

3,843

FY2020

FY2021

FY2022

Initiatives for Career Autonomy
We are enhancing the system to support each and every executive and employee in designing his or her own career to realize his or
her “dream” of working for the Group

Support for the realization of each individual’s dreams by systematizing support for autonomous
career development
Visualization

Career Training
Career CounselingTraining and career counseling bycareer counselors to support
diverse career development

My Career Design Sheet
Describe the dreams and visions that
employees want to achieve, and thedesired positions to achieve them(visualize the skills and experience
required to achieve them).

Utilization of systems
My career design system
Value-up,
Meet-up program

Achieving the Dream

motivator

My career design system
We support the autonomous career design and diverse career development of each and every employee, and in FY2023 we arepromoting diverse career development to cultivate problem-solving human resources who create new value.

Systems
Dispatch to
Regional
Companies
External
Dispatch/Internal
Trainee
Post Challenge/
Intra-company
side job

By providing precise solutions to the management issues faced byregional companies, our employees contribute to the growth anddevelopment of regional companies, which in turn leads to our own
personal growth.
Dispatch employees to outside companies and provide them withtraineeships in specialized departments with the aim to make themacquire expertise in business succession, financial market,
digitalization, etc.
Provide employees with “post challenge”, system to allow them towork at a department of their choice, and intra-company side job thatallows them to work one day a week in a department of their choice
while belonging to their current department.

No. of applicants to the My Career Design System
The number of applicants has been increasing year by
year, as we have been expanding the contents of the
program every year, including reviewing the dispatch
destinations.
165
155
145
135

This program is a specialized program that combines a side-job
system and interval training from outside consultants to develop digital
human resources.

125

Transfer System
Among Group
Companies

Allow each employee to transfer between group companies according
to his or her career vision regardless of employment status.

105

Side-job/Second
Business

Actively support side-job and dispatch to other companies for second
business in order for executives and employees to achieveself-fulfillment and acquire broad expertise and human network.

IT & DX Programs

49

Contents

158

115

95
85

117
107
FY2020

FY2021

FY2022External Dispatch (IBM Japan)

Nao Aoyama

External Dispatch (JAFCO Group)

At IBM Japan, I learned about various
solutions and the possibilities of financial DX
through consulting for financial institutions. I
once again recognized how highly the Groupis regarded outside the Group, and I also
realized that the Group is very fortunate tohave a system for career development, suchas dispatch. On the other hand, the rigid andclosed image of financial institutions persists,
and I feel it is necessary to change this existing
image for the future growth of the group.
While expanding my knowledge of IT/DX andupdating myself, I will utilize my experiencefrom the dispatch and practical experience atsales branches to realize IT measures that can
reduce the burden on the sales frontlines.

Kosuke Takai

At JAFCO Group, I was mainly assigned
to startup investment operations. I was
involved in the listing and initial considerationof new investment targets in the Investment
Department, and researched due diligencein the Investment and Research Department,
where I learned about the focus of making
investments. When I went outside the Groupfor the first time and saw the environment
surrounding the financial industry, I was
reminded of the importance of increasing
contacts with startups and promoting“innovation” and “DX”. I will make the most of
my experience during this external assignment
to become a bridge among start-ups, theGroup, and customers in the region.

Support for Career Autonomy
We have implemented a curriculum to support the autonomous career development of employees at rank-specific training sessions.
In addition, we have introduced a “Mentor System and Anchor System” to strengthen follow-up and career development support foryoung employees.
Mentor System

Anchor System

Target Employees

Employees in their first or second year of employment

Employees in their third or fourth year of employment

Training Objectives

For inexperienced employees, senior employees
who are close to them help them learn their jobs
and provide consultation on social life, thereby
fostering a mindset as a member of society andhelping them to settle into their jobs.

Senior employees who serve as role models foryoung employees with a certain level of experiencein career development provide them with practicalguidance and career development counseling tohelp them develop a growth mindset.

Career counseling by the Human Resources Counseling OfficeOnce a year, HR consultants who are qualified as career consultants visit all branches. The HR consultants address the issues
faced by each branch and the career development problems of individual executives and employees, and provide support inresolving these issues by providing information on various training programs and systems, thereby helping to maintain the
motivation of employees and motivate them to develop their own careers.

Value-up program

Meet-up programThis system provides financial support for skill development
initiatives planned by individual employees. The program isdesigned to improve the ability to “think” and “act” on one’s
own career development, as well as to improve one’s
qualifications through the acquisition of a broad perspective
and knowledge.

This program provides partial support for the cost ofparticipating in cross-industrial exchange meetings, regional
events, study groups, and other events organized by thegovernment, local companies, and other organizations. The
program is designed to help participants develop amultifaceted viewpoint and improve their human skills throughinformation and stimulation that they cannot obtain in their
daily work, such as the culture and ways of thinking of outsidecompanies, etc. In addition, the program helps them form
personal networks and further strengthen relationships withbusiness partners.

Details of support (examples)
Business schools
Programming schools (Python, TECH CAMP, etc.)
Qualification schools
Language schools

Details of support (examples)
Participation in cross-industrial exchange meetings(local revitalization exchange meetings and local problem solving
events hosted by business partners)

Seminars on the latest wine trends
Events to learn about local history (visits to historicalmuseums), etc.
Fishing classes (government, community revitalization)50

3. Promote DE&I to maximize human resource value
We will further promote “DE&I,” the creation of unprecedented ideas and new sensibilities by appreciating and crossing the diverse
backgrounds, careers, and values of each and every executive and employee, leading to the development of regional communities,
sustainable growth of the Group, and enhancement of corporate value.

Initiatives for women’s active engagement
In order to promote the women empowerment, we aim to achieve a ratio of at least 22% of women in leadership positions (managers
at the section manager level and above) by the end of March 2024 and 40% by the end of March 2031, while focusing on thedevelopment of human capital for the career development and management of women and actively assigning and appointing women
to these positions.

Promotion of Initiatives for women’s active
engagement at Group companies(Approaches to the General Employer Action Plan)
Five companies, including the Bank (Shizugin TM Securities,
Shizugin IT Solutions, Shizugin Mortgage Services, andShizugin Business Create) have formulated general employer
action plan, and are working on group-wide measures topromote the advancement of women, with the aim ofpromoting DE&I.

KPI

Ratio of women in leadership positions (the Bank)
22% or more at the end of March 2024 and 40% or moreat the end of March 2031

Number of female directors in the entire group companies

22.0

22.6

21.0

Ratio of women in leadership positions
19.4
Five companies with generalemployer action plan
4

Ratio of women in leadership
positions in
the Bank

16.1
2019年度

Support the “Challenge to 30% by 2030”

10
6
17.9

18.1

2021年度

2022年度

4
16.9
2020年度We support the “Challenge to 30% by 2030” promoted by the Japan Business Federation, which aims to increase the percentage ofwomen on the Executive Officers to 30% or more by 2030. We will transform our organization by bringing the perspectives of diverse
human resources, including women, into business execution and governance. 10 female executives, including the president of agroup company, are active as of April 2023.

Keiko Endo
Shizugin Mortgage Services
Director & Senior Executive Officer

Member of Human Capital Management Committee

Female Directors in the Group

Women often face turning points in their “work” due to various life events. In order
not to let go of your career, it is important to face your “want” and not give up. It isalso important to find your strengths and increase them. To all female executives
and employees, don’t set your boundaries and take on challenges. Jump into theopportunities. We will support you from behind and make the group a place where
those who work hard can take on challenges without worry. Let’s join forces andtogether create the future of the region and the Group.

Support for Women’s Careers
We are also supporting women’s careers by holding seminars (lecturer: Dr. Miho Takao, obstetrician/gynecologist) to raise awarenessof women’s health issues and to promote understanding of the issues among those around them.
136.3

Maintain 100% male childcare leave utilization rate
In April and October 2022, in line with the revision of the Child Careand Family Care Leave Law, we expanded our various childcarerelated programs, the “Ikusapo (child care) Program”.
In addition, to encourage male employees to participate inchildcare, we actively hold seminars on childcare and provide training
for all managers in accordance with the revised law. In addition toestablishing a system to promote gender-neutral participation inchildcare, we are focusing on eliminating resistance to men taking
childcare leave and correcting unconscious bias in balancing family
and work.
We will continue to strengthen our group-wide efforts and support
men taking essential childcare leave.

51

Average days of leave*
Percentage of leave taken*

63.5

104.1

63.6
12.0
7.2

5.0
2.9
FY2018FY2019FY2020

FY2021*Five companies with general employer action plan
Male childcare leave utilization rate (%) = “the number of male workers who took (started)childcare leave (in the relevant fiscal year)” / “the number of male workers whose spouses
gave birth (in the relevant fiscal year)” * 100

Reduce the wage gap between men and women
The wage gap between male and female regular employees by position classification is approximately 80-90%. The main reason forthe difference in wages between men and women is the low ratio of women in management positions, and we will work to minimize
the wage difference through efforts to promote women’s activities.
Whole

Position Classification

Bank’s FY2022( Shizuoka)
year-end base
Wage gap

Of which, there are transfer withrelocationof( Percentage)
women

Wage gapof( Percentage)
women

Of which, no transfer with relocation
Wage gapof( Percentage)
womenManagement (full-time)

81.7(18.1)

89.4

(4.8)

96.1

(43.6)

Non-managerial (full-time)

89.1(47.3)

87.4(33.0)

90.5(80.1)

Others

77.7(71.7)

—

—

—

—

Whole

65.7

(33.8)

59.9(19.7)

76.4(62.4)

Initiatives for DE&I
In addition to our traditional efforts to promote the women empowerment and expand employment of people with disabilities, we are
actively accepting human capital with diverse knowledge and experience by promoting the activities of experienced human capital, hiring
Mid-career professionals, global recruiting of foreigners and foreign students, accepting second jobs from other companies, recruiting
highly specialized professional human resources, recruiting sports and art (para-athletes), and resuming high the recruitment of highschool graduates.

Diversification of human resources

Ensure diversity in the appointment of core personnel, etc.

Change in the recruitment portfolio

We have set targets for the ratio of women, foreign nationals,
and mid-career recruits in management positions, and areworking to develop human resources and create anenvironment that ensures diversity.

New graduate recruitment
Global recruitment

Career recruitment
3
3

21

248

FY2020

57

23

261

FY2021256

FY2022

Sports & Arts Recruitment (10 enrolled)
To secure human capital with new knowledge and experiencebeyond finance and to create local employment, we hire
athletes who belong to local sports organizations, etc.

indicator Shizuoka BankFY2022

KPI

Percentage of foreign employees
in Managerial Positions

0%

10%(End of Mar. 2024)

No. of foreign
employees per year

joined( 8 employees)
in FY2023

A few per year

Percentage of mid-career employees
in Management Positions

67.2%

70%
(End of Mar. 2024)

No. of mid-career
employees per year

33 persons

15 per year

3

Global recruitment(7 new graduates and1 career employee
joined in FY2023.)
We employ people whohave problem-solving
skills and are expected tobe active globally, both
domestically andinternationally.
Career recruitment(57 employees joined in FY2022.)
We actively recruit people with experience in financial andnon-financial fields who can make an immediate impact inorder to respond to increasingly complex customer needs.
Acceptance of Side Job from Other Industries(Total 7 employees)
We employ side-job workers from other industries and promote
their activities through flexible work styles such as remote work inorder to actively embrace knowledge not available within the Group.

Azalea Seven, a women’s rugby team to which four employees of the Group belong

Recruitment of High School Graduates (19 employees
joined by 2023)
In FY2020, we have resumed hiring high school graduates forthe first time in 28 years. They are able to balance their
university studies while working at the Bank, thereby fostering
human capital and creating jobs in the region.

Recruitment of para-athletes
We hired a para-athlete, Hidefumi
Wakayama, a wheelchair rugby football
playerbelonging to Corporate Administration
Dept. of the Bank

52

Initiatives for Respecting Human Rights
Establishment of Human Rights Policy
Interest in and expectations of the responsibility of companies to respect human rights have been growing both in Japan andoverseas, and we have established the “ Shizuoka Financial Group Human Rights Policy” in accordance with the Universal
Declaration of Human Rights, the Guiding Principles on Business and Human Rights, and the ILO Declaration, which are international
standards on respect for human rights, including the prohibition of child forced labor. We will continue to contribute to the realizationof a society where human rights are respected by all.
*The full text of the Human Rights Policy is available on our website (Japanese only).
https://www.shizuoka-fg.co.jp/sustainability/action-policy.html

Major Initiatives· Establishment of human rights policy· Establishment of human rights consultation offices at each Group company· Strengthen education on human rights awareness (enhance training by job level)· Set themes related to human rights at harassment study sessions· Hold seminars on human rights enlightenment at open colleges

Initiatives for LGBTQ
We implement LGBTQ-related initiatives to prevent harassment
due to discrimination and other human rights violations related
to sexual minorities, as well as to foster a corporate culturethat respects diversity.
We aim to be a warm, open, and friendly corporate group to
all people, while recognizing each other.

LGBTQ Ally Badge

handbook

Major Initiatives· Open college seminars· Introduce same-sex partnership program· Conduct LGBTQ awareness training for all officers and employees· Explicitly state SOGI harassment prevention (added to harassment guidelines)· Distribution of LGBTQ ally badges (upon request)· Creation of a handbook (including information on how to respond to customers, etc.)· Establishment of internal and external consultation offices (internal: at each group company, external: at outside professionalorganizations)· Establishment of storefronts, etc. (replacement of multipurpose toilets with all-gender toilets, installation of pamphlets, etc.)

Supporting the Success of People with Disabilities
Shizugin Heartful was established in October 2019 for the purpose of creating a work environment where people with disabilities canwork with peace of mind while feeling rewarded and fulfilled, and to actively support their participation in society.
As of April 2023, the employment rate of persons with disabilities (group total) is 2.35%, exceeding the legally mandated
employment rate (2.3%).
In addition, we endorse the concept of “The Valuable 500,” an international initiative
to promote the success of people with disabilities, and became the first Japaneseregional bank to join this initiative.
We are trying to introduce
health keepers by accepting
massage treatment training
from special needs schools in
the Shizugin Headquarter
Tower from May 2023.

Operations at Shizugin Heartful

Eradication of Harassment
To enhance the happiness and satisfaction of executives and employees, we are strengthening our efforts to eradicate harassment.
In addition, through training for all managers and workplace-based study sessions, supervisors and subordinates discuss gaps inmutual awareness, etc., in order to build a favorable work environment and improve communication.

53

4. Culture & Wellbeing Innovation
Since July 2019, we have promoted “Work Style Innovation” as an initiative to realize flexible work styles for all executives andemployees, and have introduced and expanded various systems, including the introduction of a full-flex time system, etc. From April
2023, we are developing this initiative into “Culture & Wellbeing Innovation,” a set of measures to improve the engagement andwellbeing of each and every executive and employee.

Promoting autonomous and flexible work styles
Past Initiatives
13th Mid-Term Business Plan

14th Mid-Term Business Plan

SFG 1st Medium-Term Business Plan

WSI (July 2019-)

WSI 3.0 (October 2022-)

Culture & Wellbeing Innovation 1.0

Shift viewpoint from “internal rule” to“customers, community,” establishing
an autonomous style of work.

∙ Pursuit of the wellbeing of executives,
employees, and their families.
∙ Respect and maximize diversity.

(April 2023-)∙ Enhanced flexibility in the dress code
∙ Expanded flextime and telework (to all staff)∙ Developed side businesses step by step

∙ Enhanced leave and work systems forchildcare support∙ Expanded diversity-related leave and work programs

WSI 3.1 (March 2023-)

WSI 2.0 (April 2021-)
Create innovative ideas and new feelings by promoting diversity, recognizing
the value of each person, and bringing the best of their personalities.

∙ Introduced same-genderpartnership system∙ Introduced a full flextime system∙ Expanded work systems for diversity (relearning, life events, etc.)∙ Extended the age limit for employing veterans∙ Maintain the corporate culture and traditionof being close to the community and customers,
while simultaneously
reforming the Group’s internal culture.
∙ Improve health and wellbeing (deepening
health management, mutual growth of individuals
and organizations through acceptance of diversity).

∙ Hold town meetings between management andemployees∙ Eliminate titles among executives and employees∙ Start the Health Keeper System Trial (In-housephysiotherapist for the visually impaired)∙ Expand eligibility for using the personal injury andsick leave system, etc.

Major new initiatives implemented in FY2022· Initiatives for revision of the Child Care and Family Care Leave Law
Establishment of a new support system for long-term leave of absence for men and early return to work for women (Money tosupport households taking childcare leave of dad), etc.
· Extension of the period of childcare leave, shortened working hours, and other work measures under special circumstances,and establishment of a new leave of absence system

Support for Balancing Work and Personal LifeTo enable each and every executive and employee to maximize their performance in their respective environments, we havedeveloped and expanded systems to support a balance between work and family life, and are promoting their use. Through the useof teleworking, satellite work, and full flex-time systems, we are promoting autonomous work styles that match the work and private
lives of executives and employees with limited working hours, thereby enhancing their ability to develop skills and job satisfaction.
infertility treatment

pregnancymaternity leave

Infertility treatment
leave (365 days)

System of work measures
for infertility treatment(Short-time/Within specified/Overtime limit)

childcare leave

Postpartum
leave(8 weeks)

Childcare leave(until the child reaches the age of two
If a child is placed on a waiting list,
until the child reaches the age of three)

Spousal maternity
special leave(10 business days)

System of leave for childcareof children of relatives, etc.

Maternity leave(6 weeks)

Before elementary
schoolElementary school
1st-3rd grade

Elementary school
4th-6th grade

Nursing care leave(365 days)

In case of special circumstances
System of workmeasures for childcare related to a child, the period of
the limited working hours(Short-time/Within
system for childcare canspecified/Overtime limit)
be extended.

System of workmeasures for pregnancy(Short-time/Within specified/Overtime limit)

Nursing care

System of work measuresfor nursing care
(Short-time/Within specified/Overtime limit)

Return-to-Work Support ProgramChildcare support interviews(at the time of pregnancy and before leave)

Childcare support Childcare support Childcare support
meeting
meeting
meeting(during absence) (before returning to work) (after returning to work)
Child nursing care leave(5 days for one child, 10 days
for two children)celebration money
given at birth

Money to support households
taking childcare leave of dad

Nursing leave for care
(5 days for one person,
10 days for two persons)On-site childcare
facilities

Diversity leave of absence system under special circumstances of family care, etc.

54Promotion of Health Management
We position the maintenance and promotion of the health ofexecutives and employees as an important management issue,
and under the leadership of management, we have establisheda basic policy, the “Health and Productivity Management
Declaration” and are actively working to create a comfortable
work environment and support the health of executives andemployees.
We have formulated a strategy map based on the“Guidelines for Administrative Accounting of Investment in
Health and Productivity Management” set forth by the Ministryof Economy, Trade and Industry (METI), and are implementing
various health investments to solve management issues.

Health Management Promotion Structure
Health promotion supervisor
Human Capital Management Committee, etc.
General Manager of Corporate Administration Dept.
Employees Affairs Office

Corporate health insurance society Mutual Collaboration Industrial physicians and Medical specialists
Collaboration Health Psychological Counselors
Public health nurses and nurses

Strategy Map

Healthinvestment

Health investment effectSocial andgeneral health
Physical
HealthMentalhealthIndicators of
Health Initiatives

Index of change inawareness and behaviorof employees, etc.

Development and provisionof services related to healthmanagement, etc.

Number of services

Increased approachto healthAcquisition ofhealth knowledge

No. of students passed
the Health Mastercertification exam.

Increasing the No. of
health-literate employees

Utilization ofhealth apps

No. of health app users

Increased awareness ofdaily health carehealth checkup

Percentage of health checkups
Percentage of secondary
health checkups received

Early detection of disease

Exercise function check

Reduction in the No. of
work-related injuries

Increased awareness of
exercise function
Improved attention capacity

Stress checkStress Check
Inspection Rate

Development of self-care
Increased counselingopportunities

Reduction of total
working hours

Realization of diverse
work styles

Flexible work style

Health-related
final target index

Improvement of regional
health literacy

Management issues
to be solved throughhealth management

Health &Wellbeing

Reducing Absenteeism

Increased employee
engagement

Improving Presenteeism

Co-growth of
employees andthe Group

Health and Productivity Management Declaration· Based on our corporate philosophy, “Expand dreams and affluence with our community,” as a comprehensive regional financialgroup, we support the realization of dreams and affluence of our community, customers, employees, and shareholders throughthe provision of high-quality financial services.
· In order to realize our corporate philosophy, it is important for each and every employee to work with vitality and health, both
physically and mentally, and to continue to grow and develop to the fullest extent of their abilities.
· Employees are one of our most important management resources, and their health is an important asset not only for theemployees themselves and their families, but also for the Group.
· Based on this recognition, the Group positions the maintenance and promotion of employee health as an importantmanagement issue and promotes “health management” that proactively works to create a comfortable working environmentand supports health promotion by employees.

Certificated Health & Productivity Management Organization 2023
We received the “Certificated Health & Productivity Management Organization 2023” certification inrecognition of our efforts in health management. We aim to further promote health management for
co-growth of both employees and the Group.
55

Major Initiatives for Health Management
The Group has established health-related KPIs for the wellbeing of all executives and employees and their families, and supports their
physical and mental health so that each and every one of them can maximize their potential.

 ocial and general healthS“Well-happi (Well-being! Happy!) program”
We are implementing various initiatives to promote a change inthe health awareness of each and every executive andemployee and to improve health literacy. This program isdesigned to raise the health awareness of each and every
executive and employee and helps them develop healthy
behavioral habits, thereby revitalizing the Group’s organizationand improving its productivity. The system allows employees to
use the points awarded for actions that promote health fortheir benefit programs, thereby encouraging autonomous
health efforts.

Physical HealthIn order to change health behavior, we are working to improvethe consultation rate of secondary health checkups andspecific health guidance as a collaborative health program withhealth insurance societies.

Mental Health
We are working to enhance our mental health care system byproviding consultation services by our occupational healthstaff, stress checks, and support for employees returning towork after a leave of absence.

“Cafeteria plan” linked with health promotion
Promoting the autonomous and continuous health promotionof executives and employees by awarding points that can beused for the cafeteria plan, which offers a variety of benefit
options, to those who register on the application for healthmanagement, exercise, and other health-promoting activities,
quit smoking, and hold health certification certificates.
The points can be used to purchase goods andaccommodations from customers, and the health efforts ofexecutives and employees are also linked to support forcustomers.

Image of “cafeteria point” usage(1) Register actions, etc. thatlead to health improvementin the application(3) Using for customers’ products,
accommodations, etc.

(2) Awarding and using
cafeteria points

Various benefit programs
We are working on the following measures to maintain and promote the health of all executives, employees, and their families.

Vaccinations
As a countermeasure against infectious diseases, we
conducted workplace vaccination of officers, employees, andtheir families with the COVID-19 vaccine at six locations in andoutside of the prefecture from 2021 to 2022. We also subsidize
the cost of influenza vaccinations to ensure the health ofexecutives and employees.

Various leave systems
We support our executives and employees to realize theirindividual wellbeing through a well-developed leave systemthat includes leave for physical examinations and volunteer
leave to support social and community contribution activities
by executives and employees.

Long-service award ceremony
In addition to the special long-service leave to console
employees for 25 years of continuous work, we held a longservice award ceremony in face-to-face for the first time inthree years in FY2022. After the ceremony, the families ofexecutives and employees are invited to a mini-concert tocommemorate their long years of service and a social event isheld to provide them with an opportunity to express theirappreciation for their long years of labor.

Eco-Bicycle Support Program
The program encourages employees to switch means ofcommuting from cars and buses to bicycles by subsidizing thecost of purchasing bicycles in order to support healthimprovement, reduce environmental impact, and maintaintransportation functions in the event of a disaster.

Various welfare facilities
In order to promote the health of employees and their families,
foster cultural education, and make effective use of leisuretime, we have concluded contracts with various sports
facilities, museums, resorts, and other facilities.
56

Initiatives to increase the engagement of each employee
The Group is strengthening its efforts to increase the engagement of each and every officer and employee, which is an importantfactor from the perspective of providing high quality services and improving productivity.

Dialogue with executives and employees
The Human Capital Management Committee was newly established in October 2022 as a meeting place to discuss issues andstrategies to realize human capital management under the holding company structure. This committee is chaired by Director Yagi
(President of the Bank) and its members, which include the heads of the corporate administration departments of each groupcompany, engage in lively discussions across the organization.
In addition, working groups have been established under the Committee to discuss the three key themes of human capitalmanagement: human capital development, DE&I, and wellbeing. Each working group is implementing various initiatives based on theopinions of executives and employees, in addition to examining the content of disclosures on human capital and formulating a“Human Rights Policy”.

Establishment of Human Capital Management Committee and subordinate organizations
Human Capital Management Committee
Achieving Happiness and Well-Being for Executives, Employees and Their Families

Human Resource Development Working Group
Discuss direction of personnel and humanresources development measures, etc., and aim
to link the Group's management strategy with its
human resources strategy

DE&I Working Group
Aiming to realize DE&I across the Group

Wellbeing Working Group
Aiming to increase the engagement ofexecutives and employees to work withenthusiasm and vigor in good physical, mental
and social conditions

Major measures implemented by each working group in FY2022
Human Resource Development Working Group

DE&I Working Group

Wellbeing Working Group· Sharing the training system of eachgroup company and reflecting it in thehuman resource development policy(Group Human Resource Development
Recurrent 2.0)
· Introduced a recurrent program“Sekigaku 50 Kou”(Keio MCC) for
heads of each department (the Bank)· “The Nijiiro News Letter” is acommunication tool to promote
understanding of DE&I, with a focus
on unconscious bias.
· Discussions on women’s health issues
and LGBTQ system design· Implementation of E-learning on DE&I

· Proactively sharing information within
the Group through video news andemail· Discussions on the implementation ofculture and wellbeing innovations

Labor-management dialogue
Labor and management are working together to build a better organization through equal and cooperative labor-management
relations, such as by signing a union-shop contracts with a labor union. In addition to regular discussions on issues such ascompensation, human resource development, health and safety, and work-life balance, the union also organizes sports festivals andother events in which employees can participate to stimulate communication and foster a sense of unity.

57

Strengthening human capital investment initiatives
In the 1st Medium-Term Business Plan, which started in April
2023, we have positioned human capital management as animportant management strategy, aiming to create a positive
cycle between the enhancement of the human capital value of
executives and employees and the improvement of social andcorporate value. We will actively invest in human capital, not only
in wages, but also in DE&I, human resource development andeducation, benefits, and health management, to realize the
dreams and wellbeing of each and every executive andemployee.
We will continue to be proactive in our investment in humancapital so that our executives and employees will be encouraged
to study hard to enhance their own value and attractiveness.

Investment in education, etc.
Investment in employee benefits

Personnel Expenses

460

440

420

400

420
2
6

425
3
7

412

415

FY2020

FY2021

444
6
8

435
5
7

430

423
FY2022

FY2023plannedChanges in Engagement Indicators
Employee Engagement Survey
Since fiscal year 2008, we have conducted an employee engagement survey on a regular basis, with the aim of listening to thecandid opinions of employees and reflecting them in our human resources strategy, such as their diversifying attitudes toward
employment, work, and the organization.
Shizuoka Bank

Shizuoka Financial Group

4.00
4.00

3.80

3.79

3.76

3.77

3.76

FY2020

FY2021

FY2022

3.78
3.67

3.70

3.80
3.80

3.62
3.64

FY2008FY2009FY2010FY2016FY2023
PlannedFY2027
PlannedInitiatives for Financial Wellness
The Group is working to help its executives and employees, who are responsible for creating value, achieve “Financial Wellness*”by providing them with financial support through asset building, sickness and injury support, and other programs.
In anticipation of changes in the contribution limits of defined contribution pension plans and revisions to the NISA system, we
will further enhance and strengthen both the institutional and educational aspects of the plan to further improve financial literacy
and promote self-directed asset formation.
*A state of being secure about one’s future financial situation and being able to make choices to enjoy life.

Employee Stock Ownership Plan

Scholarship Repayment Support Program

With the transition to a holding company structure, we
increased the subsidy from 80 yen to 100 yen for acontribution of 1,000 yen per unit in order to foster anawareness and culture of enhancing the social value ofthe community and the corporate value of the Groupthrough the sharing of stock value, and to support theasset building of group executives and employees.
We aim to contribute to the community and ourcustomers with a high level of motivation by fostering a
sense of group unity, further promoting groupmanagement, and realizing the wellbeing of our
executives and employees.

Starting in April 2020, we have established a “Scholarship Repayment
Support Program”. We will provide repayment support to young employees
based on their years of employment, aiming to solve social issues andimprove job satisfaction by reducing the burden of scholarship repayments.
Other specific measures· Providing 30,000 yen per month for 5 years after marriage for those who live
in a rented house· Implementing investment education at rank-specific training sessions· Special salary and additional benefits provided by the health insurance union,such as 80% of the standard salary for a certain period after the expiration of
the sickness allowance (health insurance) for leave of absence due topersonal injury or illness

58

Strengthening Corporate Governance
The Group is strengthening its corporate governance system to both create social value andimprove corporate value.

Basic Approach to Corporate Governance
The Group aims to build a group-wide resilient corporate governance system that will enable sustainable growth, as well as to further
contribute to the happiness of all stakeholders, including local communities, customers, employees, and shareholders.
We will further enhance corporate governance based on the basic concept of "separation of supervision and execution," working tobuild a corporate governance system that our stakeholders demand.

Corporate Governance Policies
The Group establishes a suitable date to hold general meetings of shareholders and publishes notices of these meetings1(including English translations) on the Group’s website. By continually implementing initiatives such as these aimed at a morevigorous general meeting of shareholders and the smooth exercise of shareholders’ voting rights, we will secure the rights
and equality of shareholders.
So that the Group can continue to be a financial institution that is trusted and chosen by all stakeholders, including share-2

holders, region, customers, and employees, we will strive for balance in corporate management by addressing diverse
viewpoints, including economic, social, and environmental perspectives, and work towards enhancing sustainability.
The Group will engage in appropriate disclosure based on the Banking Act, Financial Instruments and Exchange Act, and3other laws and regulations, as well as securities listing regulations of Japanese stock exchanges. In addition, we will strive todisclose information voluntarily, including non-financial information, to ensure the soundness and transparency of management.
In accordance with the Basic Policy Regarding the Design of Internal Control Systems resolved by the Board of Directors
based on the Companies Act, we will design a system for ensuring that the execution of duties by directors complies withlaws and regulations and the Articles of Incorporation, and other systems to ensure the appropriateness of our operations

4and those of our group companies.
In addition to incorporating the supervision and advice from an independent perspective by outside directors on the
Board of Directors, etc., into corporate governance, we will improve the management supervisory function of the entire
group and seek to sustainably improve corporate value by appropriately utilizing the functions of the Audit and Supervisory
Committee and the Nomination and Remuneration Committee.

559

The Group engages in constructive dialogue with shareholders through proactive investor relations activities, in order to contribute to the sustained growth and enhanced corporate value over the medium to long term.

Structure Supporting Corporate Governance
Organization of the Group’s management structure
We have established and operate a corporate governancesystem aimed at sustainably enhancing the Group’s corporate
value, with management centered in the Company. By establishing the Board of Directors, the Audit & Supervisory Committee,
and the Nomination & Remuneration Committee, each with anappropriate composition of members, including Outside Directors, we have built a system that fully utilizes the independent
management supervisory function.

We also aim to strengthen group management in the executive
divisions through the establishment of group-wide Executive
Committee including the Sustainability Committee (Group Executive Committee), the group-wide Committee for Integrated Risk
and Budget Management, and the group-wide Compliance
Committee, as well as appointing Group Chief Officers (CxO) ineach executive field.

Corporate Governance System (as of July 1, 2023)

Supervision

General Meeting of Shareholders
Nomination andRemuneration Committee

President

Board of Directors

Audit andSupervisory Committee
Audit and Supervisory
Committee officeCommittee of
Administrative Supervision

Execution

Advisory Board

Group-wide
Executive Committee
Secretarial
OfficeBusiness
Development Dept.

Corporate
Planning Dept.

Group Chief Officers (CxO)
Corporate
Administration Dept.

Instruct/Manage
The Shizuoka Bank
(Including bank subsidiaries)

Shizugin Management
Consulting

Compliance
Dept.

Risk
Management Dept.

Audit Dept.

Discuss/Report
Shizugin Lease

Shizuoka Capital

Shizugin TM
Securities

Board of Directors

Audit & Supervisory Board

The Board of Directors consists of 10 directors, including 5
outside directors (all of whom are independent officers). As anorgan responsible for enhancing independence from the execution of business and supervising group-wide management, it
decides on management strategies such as medium-termbusiness plans and the general features of internal controls, aswell as supervising the execution of business across the Group.

The Audit & Supervisory Committee is composed of 1 full-time
Audit & Supervisory Committee member and 3 outside directors(all of whom are independent officers). It is chaired by an outside
director. It works together with the Internal Audit Division to ensurea structure that enables independent and detailed auditing.

Nomination & Remuneration Committee
The Nomination & Remuneration Committee is composed of the Company’s 2 representative directors and 5 outside directors. It responds to inquiries from the Board of Directors on matterssuch as the nomination of officers and the officer compensation system to ensure transparency in the supervision of the Group’s senior management team. As an organ authorized by the
Board of Directors to determine compensation, it deliberates on the allocation of fixed monetary compensation and performance-linked compensation.

Committee of Administrative Supervision

Advisory Board (Management Advisory Committee)

The Committee of Administrative Supervision has been established to reinforce
supervision of the execution of business by the Board of Directors. It is composed of the
Chairman of the Board of Directors, outside directors, Audit & Supervisory Committee
members, and the Group Chief Internal Audit Officer (CIAO), and engages in activities
such as monitoring the status of business execution.

The Advisory Board, established under the President (CEO) as a management advisorycommittee and composed primarily of external experts, is aimed at ensuring objectivity
and reflecting advanced external views in management execution.

60

Functioning the Board of Directors in the Realization of the Group-wide Management Strategy
The Group aims to strengthen group management and develop
new businesses that contribute to regional growth, in addition toproviding sound financial intermediary functions to thecommunity, etc., based on a flexible and strong governancestructure that serves as the foundation for sustainable growth.
The Board of Directors is charged with the mission ofoverseeing the execution of operations based on the diverse
expertise of the entire group, leading to the sustainable growth of
stakeholders and the Group.

The Board of Directors as a whole ensures an appropriatebalance by allowing each director and auditor to fulfill their roles
from the perspectives of "management," "society and theeconomy," and "business" from a comprehensive perspective
based on the knowledge they have gained from their professional
backgrounds and other experiences.

Board of Directors Skills Matrix (Fields where each member is expected to play important role)
Management
Name

Position

Katsunori Nakanishi
Hisashi Shibata

Representative Director(Chairman)
Representative Director(President) CEO

Minoru Yagi

Director

Yutaka Fukushima

DirectorSociety, Economy

Supervision of management Leading a comprehensive
Vision for regional
as s listing company
financial groupsociety and economy

Business

Response to socialchangeFunction for financial
intermediation

New businesses(development, composition)

Director (Audit & Supervisory
Koichi Kiyokawa
Committee Member)
Kumi Fujisawa

Outside Director

Kazutoshi Inano

Outside Director

Innovation

Outside Director (Audit &Motoshige Itoh Supervisory
Committee Member)

Environment

Outside Director (Audit &Kazuto Tsubouchi Supervisory Committee Member)

IT

Outside Director (Audit &Naomi Ushio Supervisory Committee Member)Diversity

Building a supervisory structure to ensure the independence of outside directors
An appropriate composition of outside directors is appointed for
the Group’s supervisory organs (the Board of Directors, the Audit& Supervisory Committee, and the Nomination & Remuneration

Board ofDirectors
5/10

61

Committee) to enable flexible business execution adapted to thebusiness environment under appropriate management
supervision.

Audit &
Supervisory
Committee

Nomination &Remuneration
Committee

3/4

5/7

The roles of the Board of Directors, the Group-wide Executive Committee, and the Group Chief Officers (CxO)
The Group aims to sustainably enhance corporate value while building appropriate relationships with our stakeholders. The Board of
Directors supervises the Group’s management from the perspectives of management strategy, decisions on important matters ofbusiness execution, internal controls, and management evaluation. The group-wide Executive Committee and the Group Chief
Officers (CxO), under the supervision of the Board of Directors, monitor the execution of business across the entire group, including
subsidiaries, to appropriately allocate management resources and generate group synergies.

Creating social value while enhancing corporate value
Improve the wellbeing of all stakeholders
Officers and employees

Customers

Community

Future generations

Shareholders

Management
strategy

Execution reports

Decisions on important mattersof business execution

Medium-termbusiness plan, etc.
Execution reports

Basic policy
Execution reports

Management
evaluation

Framework
development

Nomination &remuneration

Audit &
Supervisory
Committee
Nomination &Remuneration
Committee

Executive
organsGroup-wide management integration bodies
Group-wide Executive Committee
Business plan, etc.

Execution reports

Internal controls

Collaboration

Board ofDirectors

Shizuoka Financial Group

Supervision of Group management

Group Chief Officers (CxO)

Operational management

Execution reports

Framework operation

Execution reports

Shizuoka Financial Group subsidiaries, etc.

Role of Group-wide Executive Committee

Sustainability Committee(Group Executive Committee)

Group-wide Committee for Integrated
Risk and Budget Management

In addition to deliberating on agenda items to besubmitted to the Board of Directors, theSustainability Committee decides on matters ofbusiness execution, excluding those that are theprerogative of the Board of Directors or otherbodies delegated authority by the Board of
Directors. It also carries out the necessaryinter-company adjustments related to businessexecution by group companies.

The group-wide Committee for Integrated Risk
and Budget Management deliberates on theGroup’s basic policy for integrated risk
management, the status of risk management,
the status of progress on comprehensive budget
plans, and the overall management of assets
and liabilities, as well as the Group’s future
response regarding these matters.

Group-wide Compliance Committee
The group-wide Compliance Committee
oversees and manages all aspects ofcompliance in the Group, such as the basic
compliance policy (Ethical Charter) submitted to
the Board of Directors for approval, amendments
to the compliance policy, and theimplementation and evaluation of specificmeasures.

Roles of Group Chief Officers (CxO)
Group CEO

Chief Executive Officer

Group CFO

Chief Financial Officer

Group CIO

Chief Information Officer

Group CRO

Chief Risk and Compliance Officer

Group CIAO

Chief Internal Audit Officer

The CEO has responsibility for management of the entire group, directs the formulation of the Group’s management
policy to maximize value for all stakeholders, and oversees all aspects of the Group’s management.
The CFO has responsibility for the utilization of the entire group’s management resources to achieve its
management strategy, and oversees all aspects of the group management strategy from the perspectives ofenhancing the Group’s profitability, growth potential, and financial soundness.
The CIO has responsibility for the development and operation of IT strategy and systems management
frameworks for the entire group, overseeing business execution and keeping it in check across the Group
from the perspective of information systems management.
The CRO has responsibility for the development and operation of compliance and risk management frameworks forthe entire group, overseeing business execution and keeping it in check across the Group from the perspectives ofcompliance and risk management
The CIAO has responsibility for the development and operation of audit frameworks for the entire group,
keeping business execution in check and auditing it across the Group from a standpoint independent of theexecutive division.
62

Initiatives for Improvement Utilizing the Evaluation of the Effectiveness of the Board of Directors as a Whole
Since fiscal 2015, before our transition to a holding company
structure, we have conducted an evaluation of theeffectiveness of the Board of Directors as a whole each fiscal
year and used it to improve the Board’s effectiveness. In fiscal
2022, the Company’s Board of Directors discussed
approaches to the Board’s operation. Based on the key points
that emerged from this discussion, we conducted aquestionnaire survey of directors and reported the results ofanalysis and evaluation to the Board of Directors. Regarding
the issues recognized in the evaluation for the previous fiscal
year (at the Board of Directors of the Bank prior to thetransition to a holding company structure) – “activate
discussion of group management perspectives” and “enhance
information provided to outside directors and audits regarding

business sites” – the Company’s Board of Directors establishedopportunities for the presidents of the Company’s subsidiaries,
who oversee front-line business operations, to report to theBoard on matters such as management policy. The Board alsoendeavored to make improvements such as thecommencement of systematic reporting by Group Chief
Officers (CxO) on Group-wide business results. Looking ahead,
we will expand the opportunities provided for outside directors
to understand the business characteristics of subsidiaries, etc.,
as well as the opportunities for outside directors tocommunicate with Group Chief Officers (CxO) and otherexecutive officers, to enhance the effectiveness of the Board’s
supervision of the Group’s companies and the executive
division.

Shizuoka Bank

Shizuoka Financial Groupinitiatives
Issues

FY2020

FY2021

FY2022

1. Hold meetings for exchange of
opinions between independent
directors and the sales field
2. Hold governance study sessions forboard members held by outside lecturers
3. Establish the Nomination &Remuneration Committee

1. Ensure opportunities for discussion
within and outside the Board of
Directors prior to the resolution ofimportant matters
2. Let some outside officers participate
in internal committees as observers

1. Participation of the presidents of subsidiaries indeliberations on medium-term business plans andother business plans
2. Monitoring through the reporting of group-widebusiness results by Group Chief Officers (CxO)

1. Enhance opportunities forcommunication between outside
directors and the sales field
2. Clarify of issues in deliberations

1. Activate discussion of groupmanagement perspectives
2. Enhance information provided tooutside directors and audits
regarding business sites

1. Expand opportunities for outside directors tounderstand the business characteristics ofsubsidiaries, etc.
2. Expand opportunities for outside directors tocommunicate with Group Chief Officers (CxO) andother executive officers

Operation of the Shizuoka Financial Group’s Board of Directors
Under an appropriate supervisory framework, we will work
towards delegating authority to the group-wide Executive
Committee, Group Chief Officers (CxO), and subsidiaries, aswell as narrowing down the Board of Directors’ meeting
agendas and operation to matters of high importance forgroup-wide management. We have implemented systematic
reporting by the executive division and subsidiaries, etc. toestablish an appropriate supervisory framework. Specifically, in
addition to reports on group-wide business results in each fieldby the Group Chief Officers (CxO), there is also a framework inplace for regular reporting to the Board of Directors on thestatus of business operations at subsidiaries, based on thelevel of importance. We classify proposals and reporting items
to be discussed from various angles using directors’knowledge and insight as “special discussion matters,” andensure that ample time is set aside in meeting agendas fordeliberation on these matters.

Proposals

Reports

Ample time allocated for deliberation through classification as“special discussion matters”
Proposals and reporting items requiring discussion from various angles using directors’ knowledge
and insight are classified as “special discussion matters,” and ample time is set aside for themMore extensive discussion of important management themes
Ensures effective monitoring of Group-wide business results

63

Narrowing down of agenda items

Systematic reporting on business results

Authority is delegated to the group-wide Executive Committee, Group
Chief Officers (CxO), and subsidiaries, and agenda items for meetings ofthe Board of Directors are confined to management strategy,
governance, group-wide frameworks, and other matters of highimportance for group-wide management• The Group Chief Officers (CxO) report group-wide business results intheir areas of responsibility• The business results of subsidiaries are reported regularly, based on
the level of importanceCompensation Structure for Directors to Enhance Corporate Value

Basic policy on directors’ compensationT he framework of compensation for
directors shall be appropriately
established to function as a soundincentive based on our aim to be asustainable corporate group that can
maximize value for all the Group’s
stakeholders.

 irectors’ compensation shall reflect the rolesDand responsibilities that each director must
fulfill, as well as their results, to maintain andenhance the sound management of the Group
based on directors’ duty to accurately engage
in group-wide management.

In addition to fixed monetary compensation, compensation for
directors (excluding directors who are Audit & Supervisory
Committee members) shall be composed of performancelinked compensation, officers’ compensation based on apoints system linked to share price, and restricted share-based
compensation. This system of compensation encourages
morale and desire for enhanced performance, the motivation
to increase corporate value, and shareholder-oriented
management. Compensation for outside directors anddirectors who are Audit & Supervisory Committee members
shall comprise only fixed monetary compensation, from theperspective of ensuring neutrality and independence.

T he fairness and objectiveness in the process
for determining compensation, etc. shall beensured, under appropriate supervision fromthe Board of Directors, including the
involvement and advice of the Nomination &Remuneration Committee, while respecting
the resolutions of the General Meeting of
Shareholders.

Decisions on the allocation of each form of compensation
for directors (excluding directors who are Audit & Supervisory
Committee members) were delegated to the Board of Directors
by the 1st Annual General Meeting of Shareholders held on
June 16, 2023. Of these, the Nomination & Remuneration
Committee is entrusted to allocate fixed monetarycompensation and performance-linked compensation by
resolution of the Board of Directors.
The allocation of compensation (fixed monetarycompensation only) for directors who are Audit & Supervisory
Committee members is determined through discussion
between the directors who are Audit & Supervisory Committee
members, and is limited to no more than ¥90 million per year.

Composition of compensation for directors (excluding directors who are Audit & Supervisory Committee members)
Basic compensation (cash)
Fixed monetary compensation

Performance-linked compensation, etc. (cash)
Performance-linked compensation

Upper limits*1

Directors (excluding Audit & Supervisory Committee members)

Officers’ compensation based ona points system linked to share priceNon-monetary compensation (stock)
Restricted share-based compensation

Directors (excluding outside directors and Audit & Supervisory Committee members)

Proportion*2

No more than¥210 million per year

An amount corresponding to thelevel of net income attributableto owners of the parent,
from ¥0 to ¥140 million

No more than
50,000 points per year
(each point is worth one share)

No more than
50 million yen andno more than
50,000 shares per year

60%

20%

10%

10%

*1 Total for all eligible directors*2 Officers’ compensation based on a points system linked to share price and restricted share-based compensation are calculated with reference to historical share price levels, etc. The proportions of each type of compensation varydepending on the amount of performance-linked compensation paid and the Company’s share price.

Performance-linked compensation
The Company has introduced performance-linked compensation indexed
to net income attributable to owners of the parent, aimed at encouraging
morale and desire for enhanced consolidated performance among
directors (excluding outside directors and directors who are Audit &Supervisory Committee members) and reflecting the Group’s businessperformance in compensation.

Restricted share-based compensation
The Company has introduced restricted share-based compensation
aimed at raising awareness of the enhancement of corporate value andshareholder-oriented management among directors (excluding outside
directors and directors who are Audit & Supervisory Committee
members). Under this system, shares of the Company’s common stock,subject to a designated period of transfer restrictions, are granted toeligible directors after the elapse of a prespecified period of time after theycease to serve as either a director or executive officer of the Company
through retirement or resignation.

Officers’ compensation based on a points
system linked to share price
The Company has introduced compensation
based on a points system linked to share price,for directors (excluding outside directors anddirectors who are Audit & Supervisory Committee
members) with the aim of further strengthening
the incentive for directors to increase corporate
value and further deepen shareholder-oriented
management during their terms of office. Eligible
directors are allotted a specific number of points
each year under the system and receive anamount in cash equivalent to their accumulated
points multiplied by the average share closing
price of the Company during the six-month
period immediately prior to retirement.

64Thorough Enforcement of Compliance and Risk Management
The Group is engaged in initiatives to further strengthen its compliance and integrated risk
management systems in order to respond accurately and appropriately to changes in the businessenvironment, as well as factors such as the diversification and increasing complexity ofoperations.

Basic Compliance Policy
As a member of the local community, the Group
complies with laws, regulations, and social norms andembraces a spirit of fair play. To achieve a harmonious
relationship with the community for further development,

the Group established an Ethical Charter, which setsout our basic compliance policy.

Ethical Charter

Gaining Trust

We are constantly aware of the importance of the Group’s social responsibility and public mission. As a financialgroup, we strive to build unshakable trust through sound business management.

Compliance with Laws, Regulations
and Rules

In the conduct of our business, we comply with laws, regulations, and rules, and on the basis of honesty and fairness, we adhere to social norms as a member of society.
As executives and employees of the Group, we contribute to the development of the local commu­nity by fosteringa strong social etiquette and a spirit of fair play.
The Group adamantly rejects the unreasonable demands made by anti-social forces and groups that offend publicorder and morals and absolutely refuses to deal with such groups.
We actively communicate with stakeholders and cooperate with them to build a strong compliance system.

Social Etiquette and Fair PlayBreaking Contact with
Anti-Social Forces
Active Communication

Shizuoka Financial Group’s Compliance and Risk Management Systems

Sustainability Committee (Executive Committee)
Group-wide Compliance Committee
Group-wide Committee for Integrated Risk
and Budget Management

Risk management Office

Creditrisk

Marketrisk

Money
LaunderingriskCompliance

Operational
Risk Management OfficeBusiness operations

Liquidity
riskOperational risk
Administrative System risk Other risks
risk

Each department of our company and each company in our group

Audit Planning OfficeSite Audit Office

RiskManagement
OfficeCompliance Office

Audit Department

Credit Risk
Management
OfficeAnti-Money Laundering andOther Financial Crimes Management Office

Formulationof riskmanagement
policy andstandards

Risk types

65

Risk Management OfficeCompliance Department

Verification of effectiveness

Allocation
andmonitoringof risk
capitalRisk Management Department

External audit (audit firm)Compliance andRisk Management
Department

Audit & Supervisory Committee Members / Audit and Supervisory Committee / Audit and Supervisory Committee office

Board of Directors

Compliance System
At the Group, the Board of Directors formulates the Compliance Program, which is an annual action plan.
The Group-wide Compliance Committee, chaired by Group CRO (Chief Compliance and Risk Officer) with overall
responsibility for compliance and consisting of directors and other executives, meets monthly to deliberate on
important compliance-related matters and assess the operation of the compliance system across the Group,
including the progress toward achievement of the goals of the Compliance Program. The committee reviews andrevises the Compliance System as deemed necessary.
The Compliance Department monitors the functioning of the compliance system through integrated managementof compliance-related information to prevent possible compliance violations and strengthen the compliance system.
Compliance Officers and officers responsible for Customer Protection Supervisor assigned to the ComplianceDepartment provide guidance to the Bank’s branch offices and conduct monitoring, through on-site checks.
Each group company also promotes compliance through the formulation and implementation of complianceprograms, and reports on the status of compliance to the Compliance Committee of each company.

Cultivating Compliance-centered Corporate Culture
Management is actively involved in complianceactivities to enhance awareness of all employees of
the Group concerning compliance. For example,
directors directly give instructions about compliance,
taking the opportunity of branch managers’ meetingsand visits to branch offices.
The Group’s measures to foster and raisecompliance awareness include the following:“Opinion Box” Internal Reporting System
For early detection and remediation of compliancerelated issues, such as violation of laws andregulations, the Group has established the “Opinion
Box,” an internal reporting system via which all
executives and employees of the Group can directly
report, so as to enhance the self-corrective function.
Reports can be made to Group CRO, theCompliance Management Department, andattorneys’ offices by phone, in writing, by email, or
through groupware regardless of whether
anonymous or not. The content of the postings will
be handled by “trade call response personnel” whoare legally obligated to maintain confidentiality, andthe name of the person making a report will not be
disclosed without his or her consent. In order toencourage use of the Opinion Box, it is stipulated
that under no circumstances are executives or
employees permitted to seek to identify the person
reporting and no one who reports shall be treatedunfavorably.

Countermeasures to Prevent Money Laundering andProvision of Funds to Terrorists
The importance of countermeasures to combat
money laundering and the provision of funds toterrorists is increasing in recent years, as an issue
that Japan and the international community must
tackle. The Group regards these issues not only interms of compliance, but also in terms of coping withthe risks, which may develop into management
issues. As such, the Group is making a concerted
effort to enhance the effectiveness of suchcountermeasures, The control system established by
the Group is based on the idea of “three lines ofdefense” indicated in the “Guidelines for Anti-Money
Laundering and Combating the Financing ofTerrorism” established by the Financial Services
Agency.
The Group will continue to cooperate with related
government departments and agencies to strengthencountermeasures to combat money laundering andthe provision of funds to terrorists, aiming to eliminate
criminal organizations and activities from the Bank’s
finances, and continuing to provide safe andconvenient financial services.
Shizuoka Bank Group’s Control Systems 
Category
First line ofdefense(sales division)
Second line ofdefense(management
departments)
Third line ofdefense(Internal Audit
Division)

Department
Role
Branches, loan centers etc. Proper understanding andaccurate executing of policy andprocedures
Anti-Money Laundering and Monitoring and support of the firstline of defense (sales division)
Other Financial Crimes
Management Office,Department responsible atheadquarters
Audit Department
Verification of the effectiveness ofcountermeasures to combat
money laundering and theprovision of funds to terrorists

66

Risk Appetite Framework (RAF)
The Group has clarified the risk appetite (types andamount of risks that the Group is willing to take) in orderto realize its corporate philosophy and managementtargets, and uses RAF as a method of corporate
administration and risk management.
The specific process is shown in the table to the right.
The aim is to use RAF to realize optimum risk-return andachieve medium- to long-term growth of the Group.

1 Analysis of management environment
2 Compilation of business plan based on risk appetite
3 Monitoring of operating status
4 Flexible review of risk appetite

1st Medium-term Business Plan Group Risk Appetite Basic Policy
External Environment

Corporate Philosophy

Expand dreams and affluence with our community.

Monetary easing(low interest rates)

10-year Vision

A corporate group committing itself to the future of the region andproducing growth of the region

Population decline
Low birth rate and population aging

Medium-term
Business Plan Vision

Problem-solving corporate group that creates new value for the future

Restructuring of regional banks
Regulatory easing
Basic Policy on Risk Appetite

Increasingly evident andserious social issues
Increasingly diverse andcomplex customer needs
Evolution ofdigital technology
Entry of companies
from other industries
Climate change

Pursue group-wide problem-solving in the region, prioritizing management resources (people, investment,
expenses) to achieve both the creation of social value in the region, our business base, and the enhancementof corporate value, as well as the allocation of risk capital
Invest in growth fields/regions and engage in risk-taking (the allocation of risk capital) to enhance corporate
value, striving to expand revenue and create new businesses
Build a cycle of reinvestment of revenue generated by investing management resources from theperspectives of enhancing group-wide profitability and overall optimization

Create social value
×
Enhance corporate
value
Corporate Philosophy(Purpose-oriented
mission)Integrated Risk Management Systems
The Group has established a basic framework, including definitions of risk, an organizational structure for risk
management, and specific risk control procedures based on the Basic Risk Management Regulations, which lay
down the fundamental principles that underlie our approach to risk management.
To ensure an appropriate balance between raising earnings levels and financial sustainability, the Group’s risk
management is based on the allocation of risk capital as an integral part of its integrated risk management
system.
The allocation of risk capital is a mechanism to ensure the soundness of management by keeping risk within amanageable range. The Group defines core shareholder’s equity as capital for allocation and allocates it to all
departments involved in business execution. Even if market risk, credit risk and other risks were to materialize,
the resulting losses would be controlled within the bounds of shareholders’ equity.

Credit Risk Management System
The Credit Risk Management Office of the Compliance and Risk Management Department is responsible foroverall management of credit risk relating to the Group’s operations both in Japan and overseas in order tomaintain and enhance the soundness of the Group’s loan asset portfolio. In the Group’s internal rating system,
including its borrower credit rating system, which is the foundation stone of its credit risk management, the Credit
Risk Management Office of the Compliance and Risk Management Department is responsible for the design ofthe system and supervision of its operation; the Credit Planning Office of the Credit management departments ofgroup companies is responsible for the day-to-day operation of the credit rating system; and the Risk
Management Office is responsible for verification of the appropriateness of the system. Mutual checks andbalances among these three units facilitate greater precision and proper functioning of the Group’s internalratings system.
67

The Credit Risk Management Office uses statistical methods to quantify latent credit risk in the Group’s loan
portfolio. In this way, the Group accurately assesses the amount of future risk, monitors the concentration of loans
to particular large borrowers or specific industries, and thus controls the portfolio to avoid excessive credit risk.
The Audit Department, which is organizationally independent of the Banking Division, the Business Support
Department, and the Risk Management Department, audits the appropriateness and effectiveness of the designand operation of the credit risk management system.

Market Risk Management System
In market transactions, the Group limits the amount of risk capital allocated and sets various restrictions, such as
on gains or losses from valuation of investment securities, and on the amount of exposure or loss depending
upon the risk profile of each transaction or financial instrument. In this way, the Group keeps market risk withincertain defined levels.
For banking account transactions, centering on deposits, loans, and investment securities, the Business
Strategy Planning and Business Strategy Office of the Corporate Planning Department formulates the hedging
policies based on current risk conditions and on the outlook for interest rates so as to keep risk volume within acertain range, and these policies are deliberated at the Committee for Integrated Risk and Budget Management.
The market division of Shizuoka Bank and others is strictly separated into departments conducting transactions,administrative and control departments, and an independent risk management department for mutual checks andbalances. Moreover, the Audit Department, which is independent of the departments responsible for executing
transactions, verifies the effectiveness of the mutual checks and balances between these three departments.

Liquidity Risk Management System
The Group has separate yen and foreign currency-denominated financing management departments Fund andForeign Exchange Group of the Treasury Department, Business Strategy Planning and ALM Group of Corporate
Planning Department, Treasury and International Operations Center of Treasury and International Operations
Department etc. of Shizuoka Bank, and a liquidity risk management department (Risk Management Group of theCompliance and Risk Management Department) that is entirely independent of the financing management
departments. In this way, the Group has put in place a system that provides mutual checks and balances. The
Fund & Foreign Exchange Group of the Treasury Department, which is one of the financing management departments, controls fundraising requirements within procurable levels to avoid excessive fundraising. We conduct
stable fund management activities, paying close attention to market conditions. Moreover, the liquidity risk
management department monitors the status of financing management departments and assesses the stabilityof the assets-liabilities structure.
To handle unforeseen circumstances, we proactively prepared an emergency cash flow management system,
assuming four stages of emergency: “Stage 1 (preventive stage)”; “Stage 2 (attention required stage)”; “Stage 3(liquidity concern stage)”; and “Stage 4 (insufficient liquidity stage)”. We predefined countermeasures and authorized persons for each stage, thereby forming a structure capable of swiftly responding to issues should they arise.
With regard to market liquidity risk, the liquidity risk management department routinely monitors the status ofhighly liquid asset holdings that can be easily monetized. The market division of Shizuoka Bank and others
addresses market liquidity risk by selecting investment assets based on their liquidity and setting limits on specificstocks and holding periods.

Operational Risk Management System
Each risk category is managed by a dedicated unit of the Bank, while the Operational Risk Management Groupof the Compliance and Risk Management Department is responsible for overseeing and managing operationalrisk throughout the Group. In line with our basic policies on operational risk management, we are taking steps tostrengthen our operational risk management system through a range of measures including the compilation andanalysis of internal loss data and the implementation of a risk control self-assessment. The Audit Department,
which is organizationally independent from any of the units that it audits, verifies the effectiveness of the risk
management system through on-site inspection, etc.
68

Administrative Risk Management
The Group has established the Administrative Risk Management Rules that include the Group’s basic policy foradministrative risk management and executes operations in accordance with the rules. For administrative incidents that occur, we take preventive steps by according priority to measures for incidents involving higher risk to
reduce administrative risk. In response to diversification of operations and increasing transaction volumes, we arepromoting the shifting of the administrative function at our branches to a shared services center and the introduction of IT systems to enhance efficiency and thus avert operational risk.
System Risk Management
The Group positions IT systems as a part of information assets. We have established the Basic Policy for
Information Asset Security Measures (Security Policy) that includes our basic policy for dealing with system risk.
We are implementing various security measures based on the Standards for Information Asset Security Measures(Security Standards) to ensure secure operation of the IT systems.

Prompt and Appropriate Disclosure
To ensure prompt and appropriate provision of corporate information to the Group’s stakeholders, the Group
conducts comprehensive information disclosure in accordance with the Banking Law and the Financial
Instruments and Exchange Act and the securities listing regulations of the Japanese stock exchanges. The
Group also conducts voluntary proactive disclosure by appropriately disclosing information in a consistent, transparent, and impartial manner.
The Information Disclosure Regulations, which set out the policy, procedures, and systems, on information
disclosure (Information Disclosure Policy), have been determined by the Board of Directors. In accordance with
the Information Disclosure Regulations, the Corporate Planning Department centrally manages various information generated by each group, and the information is disclosed after implementing the predetermined approval
procedure according to the specified authorization classification. To maintain prompt and appropriate disclosure,when necessary, the Corporate Planning Department confers with the Compliance Department and the auditing
firm, while the Internal Audit Division periodically verifies the appropriateness and effectiveness of the systems
and operational administration concerning disclosure.

Cyber-security
Framework for managing cyber-security
Cyber-attacks have a serious impact on vital infrastructureservices in Japan and overseas. As economic activity andcommunication through the Internet become the norm, thethreat of these attacks is rising. The Group identifies the risk ofcyber-attacks as a key management issue. Since cyberattacks are becoming ever more sophisticated and ingenious,
in addition to continually promoting security measures, wehave established our Cyber-security Management Policy andwork daily to defend the Group from attack.
We have established the Group’s CSIRT*1 as a group-wide
body under the Group’s CRO, to implement a managementled response to cyber-attacks. The CSIRT collects andcommunicates information on cyber-security threats,
investigates and handles any attacks detected, andimplements various security measures.
The CSIRT has also concluded an agreement on joint
countermeasures with the Shizuoka Prefectural Police
Headquarters, joined the external organizations Financials
ISAC Japan*2 and the Nippon CSIRT Association*3, signed an
exclusive contract with a security company, and prepared aframework enabling a rapid response to any cyber-attack.
Through cooperation with these external organizations, we areworking to enhance the effectiveness of our cyber-security
management framework.
*1 An abbreviation of Computer Security Incident Response Team, the CSIRT
handles cases related to computer security*2 An incorporated organization established as a mechanism for sharing
information on cyber-security between financial institutions and cooperatingon the implementation of countermeasures*3 An organization possessing specialist knowledge of which many CSIRTs
within companies are members*4 Established within Shizugin IT Solution as the Group’s own specialist
organization (security operation center (SOC)) with centralized responsibility
for technical security assessment

69

Shizuoka Financial Group

Board of Directors/Group-wide Committee forIntegrated Risk and Budget Management
Group CRO
Instruct/
Approve

Reports

CSIRT
Risk Management Dept. Operational Risk Management Office, etc.
Subsidiaries
SOC*4

Share Information/Instruct/Collaborate
National authorities andlaw enforcement agencies
Japanese Bankers Association /Regional Banks Association of Japan
PoliceIndustry groups
Financials ISAC

Branches

Security vendors

Bank CEPTOAR

Customers

System vendors

JPCERT/CC

Education and training
The Group believes that improving the digital literacy of theGroup’s officers and employees is vital to prepare for possible
cyber-attacks. We engage in continuing education andawareness activities through initiatives such as information
security seminars and e-learning targeting all officers andemployees, sharing the latest security developments, andtraining on how to handle suspicious emails.
Our officers and employees, primarily the CSIRT, also
participate in various training sessions and exercises organized
by Financials ISAC, the National center of Incident readinessand Strategy for Cybersecurity (NISC), and other organizations,and we are working to develop an even more sophisticatedframework for managing cyber-security.

Internal Auditing
The Group aims to achieve more sophisticated corporate
governance from both offensive and defensive perspectives
making the holding company a company with an audit andsupervisory committee, in order to make the governancestructure flexible and robust in line with the expectations ofstakeholders, and to create a highly objective and transparent
management structure.
The Audit Department, which is the internal audit division of
the holding company, is engaged in continually enhancing thequality of internal auditing to give more support to thisgovernance structure through internal auditing.

 oordination between the internal audit divisionCand other bodies
The Audit Department has established regular opportunities forthe exchange of opinions and information sharing withdirectors, including outside directors, Audit & Supervisory
Committee members, including outside Audit & Supervisory
Committee members, representatives of Group companies,
and others associated with the internal audit division, andendeavors to provide advice and other communications that
contribute to group-wide management.
• The results of internal auditing are reported by the CIAO atmeetings of the Audit & Supervisory Committee.
• Moreover, when establishing internal audit plans, policies on
formulation, etc. are reported to the Audit & Supervisory
Committee and the opinions and advice of its members aresought before these policies are reported to the Board of
Directors.
• At the Shizuoka Financial Group, the Committee of
Administrative Supervision has been established as an
optional committee for the purpose of reinforcing theexecutive supervisory function of the Board of Directors. This
committee engages in activities such as monitoring thestatus of business execution by the executive division.
• The committee is composed of all the Company’s outside
directors, with all Audit & Supervisory Board members of The
Shizuoka Bank, including outside members, attending
meetings as observers. The Audit Department serves as thesecretariat for the committee. Meetings serve as a forum forthe opinions, advice, and other comments of each officer.

Coordination
with the Audit& Supervisory
Committee

The role of internal auditing (purpose and mission)
The mission of internal auditing is to raise and protect the valueof the organization. The Audit Department engages in various
activities to assist in achieving the organization’s goals.

Coordination withoutside directors

 perational framework for Group-wide internalO
auditing
The Audit Department conducts internal auditing activities
based on the directions of the Group’s Chief Internal Audit
Officer (CIAO), under the supervision of the Board of Directors.
To ensure objective and effective internal auditing, it isindependent of the executive division and ensures that theexecutive division is kept in check.
The Board of Directors establishes the Internal Audit Rules,
including auditing policy within the group, and resolves theinternal audit plan.
The Audit Department conducts internal audits of theCompany’s departments and group companies regarding theircompliance and risk management systems and other mattersconcerning the appropriateness and effectiveness of internal
controls.
The results of internal audits are reported regularly to theBoard of Directors and the Audit & Supervisory Committee,
and follow-up is carried out regarding proposals to remedy
issues and the status of reform measures and improvements.
The divisions and personnel responsible for internal audits atgroup companies also conduct internal auditing and related
activities, and a framework is in place for the integrated
management of internal auditing activities across the Group by
the Group’s CIAO.

Coordination withthe full-time Audit& Supervisory
Committee member
Coordination with
the CEO• A monthly information exchange session is held between the
full-time Audit & Supervisory Committee member, thefull-time auditors of the Bank, and the Audit Department.
• The CIAO attends the regular meetings of chief officers andendeavors to share information.

Initiatives to achieve higher-quality, moresophisticated internal auditing
The Audit Department is undertaking various initiatives to ensurethat it implements effective, high-quality internal auditing
adapted to changes in the management and businessenvironments.
After evaluating the risk inherent in the companies, sections,and operations subject to internal audit, it determines thetargets, frequency, depth, and other parameters of the internal
audits to be implemented each fiscal year to efficiently allocate
auditing resources.
The department works to develop its human capital bypromoting the acquisition of international internal auditing
qualifications and encouraging participation in external seminars
and similar events. It also strives to enhance the quality ofinternal auditing. This includes considering the use of external
agencies for areas where specialist knowledge is required.

General Meeting of Shareholders
Management
supervisory
function

Board of Directors

Audit & Supervisory Committee

Committee of Administrative Supervision

Audit & Supervisory Committee OfficeDirections/Orders

Business
executivefunctionGroup-wide Executive Committee
Operating division

CIAO

Secretariat

Reporting and coordination
Instructions as necessary

Internal audit division
Group Companies

Group Companies

Group Companies

Accounting
AuditorInternal audit division

Audit & Supervisory Board members/
Audit & Supervisory Board

Accounting
Auditor

Note: The bodies and divisions shown in white letters engage in mutual coordination70

Meet needs of corporate customers
While the impact of the COVID-19 crisis is easing, the management issues faced by our customers are
becoming more complex, such as soaring raw materials and fuel prices, personnel shortages, and theneed to decarbonize. As a partner to our customers, we will work to solve a variety of issues, thereby
enhancing their corporate value and contributing to the sustainable development of the region.

Support menu for solving management issues provided by our group
We support the sustainable growth of regional communities and customers by providing a menu of services that respond to theincreasingly diverse and complex business challenges of our business partners through group-wide cooperation.
Management
IssuesLack of
Successors

Exchange
Fluctuations

Financial
Instruments

Innovation

NaturalDisasters
Business
Succession,
M&A

DX

Sustainable
Financing

Securing
Human
Resources

Soaring raw
materials
and fuel prices

Fundraising

Environment &DecarbonizationHR
Solutions

Diversity

Business
Improvement

COVID-19

Restructuring
SDGs
consulting

Business
Matching

Cashless
Support

A close support system to help customers solve their management issues
Shizuoka Bank

Shizugin Management Consulting
Shizugin IT Solution

Shizugin Lease

Shizugin DC Card*

Monex Group

Shizuoka Capital

Shizuign Saison Card

Commons Asset Management

TJS

Shizugin TM Securities

SFG Marketing

Shizuoka Bank (Europe) S.A.
Turn The Tide

*Aug. 1, 2023, the company name changed to Shizugin Card.

Attentive support for customers
For customers affected not only by the COVID-19 crisis but also by the depreciation of the yen and high prices of raw materials, weare always close to them, providing the necessary support at the right time. In particular, we are strengthening our close support for
COVID-19 loan customers who are facing the expiration of their interest subsidy period, as well as support that leads to solving
management issues with perspectives on after COVID-19.

Financing Support

Core Business Support

Business Restructuring Support

Amount of COVID-19 related loans
executed

Number of business matching
contracts

Number of business restructuring subsidy
applications supported

20,314 cases

6,089 JPY bn

1,525 cases（FY2022）*Total by the end of September 2022

Actual utilization of COVID-19
Refinancing Guarantee Program*.

215 cases

55 JPY bn*Support Guarantee Programs for close support afterJanuary 10, 2023.

71

Number of HR referral Contracts

68 cases（FY2022）

542 cases

Of which 314
adoptedBusiness Succession and M&A
With the increasing age of business proprietors, smooth business succession has become a social issue. In this context, we makemaximum use of the Group’s problem-solving abilities, including our consulting and funding functions, to support businesssuccession for our customers.
We not only understand proprietors’ intentions and the direction of future business development, but also matters outside theimmediate scope of the business such as the family structure and situation, working with the Bank and Shizugin Management
Consulting playing a central role, and in cooperation with tax accountants and other external specialists to support our customers as
they carry out business succession within the same family or M&A.
Through the management of business succession funds, we also support the capital policy of our customers, in ways such as
aggregating shareholdings dispersed within and outside families, and responding to demand for the temporary holding of shares.

Number of business succession and M&A issues resolved*1

Results of M&A consulting*2
Number of consulting contracts（単位：件）
400

334
278

300
216

200

230

250

62

60

60

150

Number of concluded contracts
99
87
77

91

80

54

53

43

47
28

31

FY2017FY2018

40

100
0

100

20
FY2017FY2018FY2019FY2020

FY2021

FY2022*1 Total number of M&A and business succession consulting contracts and businessmatching contracts concluded by Shizuoka Bank and Shizugin Management Consulting.

0

FY2019FY2020

FY2021

FY2022*2 Total number of contracts and contracts concluded by Shizuoka Bank andShizugin Management Consulting

Business Improvement
The Bank established the Corporate Management Support
Group in 2003, and has been actively working to provide
customers with support for business improvement, not limited
to financial support. With the expansion of COVID-19 having asignificant impact on many customers, we increased the numberof staff in charge by approximately 20% in stages andstrengthened our support system. In FY2022, we worked tosupport 804 customers (excluding performing customers) for
business improvement, assisted 703 customers in formulating
and monitoring plans, and upgraded credit rating of 20
customers.
Looking ahead to after COVID-19, we will provide full support
for our customers’ business continuity by focusing more thanever on providing management improvement support in an
accompaniment style that is close to our customers.

Achievements of Business Improvement Support
FY2021

FY2022

6.4%

Percentage of Business Improvement Support

7.1%

Number of customers supported for business improvement A*

764

804

Number of borrowers at beginning of period

11,872

11,338Percentage of revitalization plans formulated (B÷A)

89.1%

85.6%

Number of customers with revitalization plans B

681

703

Number of customers supported for business improvement A*

764

804

3.9%

3.5%

Percentage of credit ratings upgraded (C÷A)
Number of customers with upgraded credit rating C

30

20

Number of customers supported for business improvement A*

764

804

*Excluding performing customers

Support for business restructuring and turn around
Customers that have a significant impact on the local economy
and require prompt and drastic support are selected forintensive support, and we are working to provide smoothbusiness revitalization support, mainly through the Bank,
Shizugin Management Consulting, and Shizuoka Capital, in
cooperation with experts from the Shizuoka Prefecture SME
Revitalization Council and outside consulting firms.
In FY2022, we supported 60 companies and completed
support for 14 companies by utilizing the most appropriate
scheme for each target company, such as business revitalization
funds and M&A.
With the prolonged expansion of COVID-19, we anticipate
that our customers’ needs for support in changing or closing
their businesses will increase. We will continue to respond indetail to the various issues faced by our customers, such as
business model conversion and business withdrawal.

No of projects
58

54

57

No of projects completed
58

60

59

15

13

12

12

14

14

FY2017FY2018FY2019FY2020

FY2021

FY2022

Has completed business restructuring
for about 300 firms since FY2005
Saves labor opportunities for opportunities for laborfor about 27,000 people and maintain economic
power in the local community
72Region-based Relationship Banking
Basic Policy
Region-based relationship banking is a business model whereby financial institutions cultivate long-term relationships
with customers and offer financial services based on their grasp of customer needs obtained through the relationships.
Our basic policy on region-based relationship banking is to “achieve sustained growth in tandem with the region
by adhering to the corporate philosophy, ‘expand dreams and affluence with our community.’” By putting this corporate philosophy into practice under the medium-term business plan and annual plans, we are promoting regionbased relationship banking and aim to achieve sustained growth by cultivating mutually beneficial relationships withour customers in the region through the provision of value-added services attuned to their needs.

Basic
policyOffer solutions and necessary support based on anassessment of commercial viability

Ascertain the business life stage

Identify the anxieties and management issues faced by thecustomer

Recognize and analyze the present situation and challenges
faced by the regional economy and industry

Specific
initiatives

Achieve sustainable growth through coexistence with the community, by implementing the Group’s
corporate philosophy, “expand dreams and affluence with our community.”

Start-upperiodGrowth period

Maturity/stability
periodSecond growth
periodDownturn andrehabilitation period(Decline period)

Start-up support
Loans emphasizing commercial viability, utilizing the Group’s assessment capabilities

Business matching
Overseas expansion support
Provision of a wide choice of financing methods
Support for business rehabilitation, etc.
Business succession support
Business change
and closure support

Initiatives to revitalize the regional economy

Proactive initiatives towards “regional revitalization”
Regional-Co-Creating Strategy

Clearly identify and promote these objectives under the business plan

Promotion

Information
dissemination73

Shizuoka Bank

Develop human resources with specialized
financial methods and expertise

PartnershipGroupcompanies

Actively provide information to local communities and users

Externalorganizations

Support for Overseas Business Development
Support for Overseas Business Development
We have established a support system to provide a wide range of consultation services to customers who are
considering expanding overseas or already doing business overseas, both domestically and internationally.
We utilize the overseas network of the Group to capture growth opportunities in global markets and strengthen thedissemination of information to customers.
Support Systems within Japan
Staff responsible for forex solutions, featuring bankpersonnel with overseas service experience, arestationed in the Bank’s International Department, whichis engaged in the planning and supervision of support
for overseas business development.
Staff responsible for forex solutions cooperate withdomestic branches to respond to diverse customer
needs, for example providing information on the overseas investment environment, support for expanding
sales channels, and financing for overseas businesses.
In addition, they provide information on a broad range
of issues, not limited to finance, for customers entering
overseas markets for the first time, including lifestyle,accommodation and education for Japanese staff
stationed overseas.

Support Systems Overseas
To support customers in the development of their overseas business, the Group has six overseas offices: twoin the U.S. (New York and Silicon Valley), one in Europe(Brussels), and three in Asia (Hong Kong, Singapore,and Shanghai).
In Asia where robust economic growth is continuing,in addition to the Bank’s own offices, we have established a network covering the region through businessalliances with local financial institutions, providing
hands-on support from overseas expansion to local
business development.
Many of our customers are developing their businesses in Thailand, Vietnam, and Indonesia. The Bank
has dispatched its staff to these countries to provide
customers proactive support in local business expansion.

Support Menu for Overseas Business Development•Consultation on overseas business development
The Group provides the latest information and fine-tuned services to meet diverse customer needs, including overseas business development, transactions with foreign companies, and foreign investment.
•Support for export and import transactions
Capitalizing on its experience and overseas network, the Group facilitates customers’ transactions.
•Financing services
The Group provides advice on a range of financing schemes for customers’ local subsidiaries overseas, including
cross-border loans from domestic branches, and stand-by letters of credit to facilitate loans in local currency fromour partner financial institutions.
•Guidance on foreign exchange, including overseas remittance and forex risk hedging

Topics

Initiatives to Support the Development ofOverseas Sales Channels

We gather information through our overseas offices and endeavor to coordinate
with local authorities and external bodies to support our customers to develop
overseas sales channels.
In fiscal 2022, we worked with The Yamanashi Chuo Bank to organize individual
business talks on food exports with buyers in China as part of our “Shizuoka
Yamanashi Alliance.” In January 2023, we also concluded a business partnershipagreement on business matching with Alibaba.com Japan Co., Ltd., which provides
Japanese companies with services from Alibaba.com, one of the world’s largest
online B2B matching platforms.

The Group’s Overseas Network(6 Overseas Offices, 16 Partner Financial Institutions)
As of July 1, 2022

Shizuoka Bank(Europe) S.A.

Silicon Valley
Representative New York Branch
OfficeMexico (Mexico City)
Business alliance:
BBVA Bancomer S.A.

France (Montrouge)
Business alliance:
Crédit Agricole S.A.

Network in Asia
China (Beijing, Shanghai)Business alliance:
China Construction Bank
Bank of Shanghai

Shanghai Representative Office
1 employees (total of 2 staff)

South Korea(Seoul, Daegu)
Business alliance:
Shinhan Bank
Daegu BankInternational Business Dept. (Shizuoka)
Planning and supervision of support
for overseas business development
Overseas Business Support
Office: 4 staff
Support for overseas businessdevelopment and advice on trade
Forex Solutions: 4 staff

Thailand (Bangkok)
2 dispatched employees

Taiwan (Taipei)

Business alliance:
Kasikorn Bank (2 employees)

Business alliance:
Chinatrust Financial Holding

Bangkok Bank

Hong Kong BranchSupervision of the Bank’s bases in Asia
7 employees (total of 14 staff)

Vietnam (Hanoi)

India (Mumbai)
Business alliance:
State Bank of India

1 dispatched employee
Business alliance:
Joint Stock Commercial Bank for Investment andDevelopment of Vietnam (BIDV) (1 employee)
ANZ Vietnam

Philippines (Manila, Makati)
Business alliance: Bank of the Philippine Islands
BDO Unibank

Singapore Branch
7 employees (total of 13 staff)

Indonesia (Jakarta)
1 dispatched employee

Business alliance: P.T. Bank CIMB Niaga Tbk (1 employee)
P.T. Bank Resona Perdania

74

Cross-industry Collaboration and Support for Start-ups
Ever since we began our capital and business alliance with Monex Group in April 2014, we have beenworking with companies from different industries to provide new added value. By leveraging the
networks we have developed through our investments in venture capital funds and other initiatives, wewill accelerate the return of leading-edge technologies to the region and step-up support for start-up
firms, building an ecosystem that generates new collaboration and innovation to contribute to therevitalization of the regional economy.

Cross-industry Collaboration
To achieve sustainable growth starting with the creation of a new business model, the Group is working with companies from otherindustries, including Monex Group, Money Forward, and Hoken no Madoguchi.
In fiscal year 2022, we entered into strategic partnerships with two companies and worked together on businesses that contributeto regional revitalization: asoview!, which provides solutions to the tourism and leisure industries, and Address, which promotes theutilization of vacant residences and accommodation facilities.
Cross-industry collaboration is an initiative that creates new added value over and above our existing financing function. We willcontinue to actively strive for regional problem-solving and innovation.

Efforts in cross-industry collaboration so far
New financial services

Utilization of leading-edge technology

Application development,
workers on loan (total 3)

Fund sales, workers
on loan (total 1)

AI utilization, workers on loan (total 3)

Shizugin Wrap, workers on loan (total 3)

Opening of partner stores

AI-based real estate income/expense simulation

Businesses in housing loan market

Offering affiliatedhousing loan

Financial services utilizing
digital technology

Revitalization of the region

Purchasing securitized products of Guaranty
Business by Shizugin Credit Guaranty Co., Ltd.

Utilization ofcommunity
platforms

Planning and examinationof projects and services that
contribute to the revitalizationof the tourism business

Promoting theutilizationof vacantresidences, etc.

TECH BEAT Shizuoka
TECH BEAT Shizuoka is an open innovation program aimed at revitalizing industry within Shizuoka Prefecture and creating new
businesses through collaboration between businesses in the prefecture and start-up firms with leading-edge technologies. The
prefectural government and the Bank act as the project’s secretariats. The project organizes business matching events such asindividual business talks and various seminars on leading-edge technologies to provide forums for problem-solving throughencounters between businesses in Shizuoka Prefecture and start-up firms. It is also involved in the operation of a visitor participationbased online business platform. A total of eight events have been held as of March 31, 2023, attracting a total of approximately
34,000 participants, as well as approximately 1,400 individual business talks.
Relationships with start-ups
Technology and services
Opportunities for businessgrowthCompanies
within theprefecture

Business opportunities
Environmental resourcesand opportunities fordemonstration testing

Start-ups
Management issues
Human resources
Support from sponsors

Technology
Ideas

Industry revitalization
Continuing industry
promotion schemes
Relationships withstart-ups

Management budgets
Human resourcesand environmental
resources

Local financial institutions and administrative bodies
ShizuokaPrefecture

75

TECH BEAT Shizuoka 2022
TECH BEAT Shizuoka 2022 was held for all industries on
July 20–21, 2022. It was held offline for the first time in three
years. It welcomed approximately 3,000 attendants andfeatured lively business talks with 59 start-up firms. This
event led to the creation of several cases of businesscollaboration between companies in Shizuoka Prefecture andstart-up firms.

Networking with Start-up Firms
We decided to invest in eight new venture capital funds in fiscal year 2022. To date, we have invested a cumulative total of 20.1
billion yen in 23 funds.
In addition to building a network with start-up firms by investing in venture capital funds and dispatching employees, we arestrengthening our efforts to develop human capital closely familiar with the businesses of start-up firms.
Under our 1st Medium-term Business Plan, we aim to expand our investments in venture capital funds to around 40.0 billion yen
by fiscal 2027. As well as supporting start-up firms and building a network through these funds, we aim to create an ecosystem that
introduces advanced technology to the community and creates new businesses.
Cooperation, build network
Invest, dispatch
personnel

Start-up
firms
Invest, support
growthVenture capital funds

Return of investment
Build
network

Management

Introduce advanced
technology to
the community

Domestic and foreign
professionals
Community

Loans to Start-up Firms (venture debt)
The Bank established “Start-up Supporting Project Team” andstarted offering venture debt in 2021.
The number of loans and the total amount are bothincreasing steadily. In October 2022, we revised theorganizational structure to establish the Start-up BusinessSupport Department, and we are working to enhance our
support framework for start-up firms, including investment,
loans, etc.
We engaged in a variety of projects, including social loans,loans to deep-tech start-ups under the METI’s debt guarantee
program, and loans with stock acquisition rights. We had
implemented 46 such projects totaling 7.2 billion yen by theend of fiscal 2022.
Under our 1st Medium-term Business Plan, we have set atarget to increase venture debt to around 100.0 billion yen by
fiscal year 2027, and we will further strengthen our support forstart-up firms.

TOPICS

Total amount of loans (cumulative, in billions of yen)
Total number of loans (cumulative)

46 loans/7.2 billion yen(Up to FY2022)
Increase in both number
and total amount of loans

46 loans
36 loans
7.15

25 loans
20 loans
11 loans
4 loans

6 loans

0.2
Oct.

3.45

2.6
1.5

0.3
Dec.
2021

5.2

Mar.

June

Sep.

Dec.

2022

Mar.
2023

Social Loan Initiatives for Start-up Firms

In June 2022, we entered into a “social loan*” agreement with Gojo &Company, Inc. (CEO: Taejun Shin) aimed at contributing to the resolutionof social issues and inclusive financing (the first time for the Bank).
Over a billion people around the world, mainly in developing countries,
are unable to adequately access financial services. To address this social
issue, Gojo & Company, Inc. currently provides financial services in fivecountries (India, Sri Lanka, Myanmar, Cambodia, and Tajikistan) throughthe implementation of technology and the optimization of operations.
The Bank has made a social loan to Gojo & Company, Inc. to fund themicrofinance business operated by its group company in India.
*A loan that can only be used to fund social projects (projects that address or mitigate social issues or aim toachieve a positive social impact)

Social loan for its group company in India

Gojo & Company, Inc.

Loan to subsidiary

Gojo & Company, Inc.
Group company in India

SATYA MicroCapital Ltd.

76

New Business Fields
By taking the challenge to enter new business domains linked to the resolution of social issues in theregion, we will strive to implement the Regional Joint Creation Strategy and the Group Business
Strategy set forth in our 1st Medium-term Business Plan, aiming to achieve both a sustainable local
community and sustainable growth for the Group.

Pioneering New Business Fields
With the revisions to the Banking Act, we are now able to handle a diverse range of businesses outside the financial field that
contribute to the sustainability of the region. We will effectively leverage the management resources of the Group to address labor
shortages, the expansion of sales channels, and other issues faced by the community and our customers, taking the challenge toenter business fields previously closed to us under laws and regulations. In this way, we aim to boost the attractiveness of the region
and contribute to its revitalization and growth.

Four Key Points to Pioneer
New Business Fields
1 Bring about a sustainable regional society
2 Develop businesses that capture

Issues faced by the regionand our customers

Needs of the regionand our customers

IT/DX

Sales channel expansion

Labor shortages

Branding

Effectively apply management resourceschanges in social structure

Shizuoka FG

3 Pursue profitability and growth
4 Effectively apply management resources

Trust

Channels

Information

Alliances

Human
capitalAcquisition of TJS Co., Ltd. as a Wholly-owned Subsidiary
On February 1, 2023, the Group acquired the shares of TJSCo., Ltd. (TJS), making it a wholly-owned subsidiary.
With the emergence of labor shortages in the context ofprogressive population decline and the aging of society, local
companies are confronted with challenges such as
implementing labor-saving and automation to supplement
these shortages and securing human capital with expertise in
IT and DX.
TJS has been engaged in the software development
business and the temporary staffing business ever since thetime of its foundation in 1979. In the software development
business, it provides high-quality information systems andsolutions based on its outstanding IT expertise and abundantachievements in system development. In the temporary staffing
business, it possesses an extensive track record and customer
base as a major temporary staffing operator in Shizuoka
Prefecture, with a large number of staff on its books.
Going forward, we will meld the Group’s management basewith TJS’s strength in IT/DX and its human resources support
capabilities to contribute to achieving a sustainable regionalsociety through regional problem-solving.
The acquisition of TJS as a wholly-owned subsidiary marked
the first time the Group had been authorized as an advanced
banking service company for other industries since the revised
Banking Act came into force in November 2021.

Software development

Support for customers’
introduction of IT

Temporary staffing

Personnel placement

We will combine the business fields covered by TJS, which has a
track record of over 40 years in the software development andtemporary staffing businesses, with those of the Group, aiming to
generate synergies to solve our customers’ IT, DX, and humanresources issues.
Company name:

TJS Co., Ltd.

Head office address:	13-9 Hirakawaji, Shimizu-ku, Shizuoka
City, Shizuoka
Representative:

Norimasa Yamamoto

Description of business:	Software development business,
Temporary staffing business
Capital stock:¥12 million

Date of establishment:

October 12, 1979

*Advanced banking service company for other industries:· A subsidiary of a banking holding company designated under Article 52-23, Paragraph 1 (xiv)of the Banking Act; specifically, a subsidiary of a banking holding company that uses digitaltechnology to engage in operations that contribute to greater convenience for the bank or
its users, or that contribute to the revitalization of the region77Establishment of SFG Marketing Co., Ltd. to Support
Regional Problem-solving and Development
In July 2023, we established SFG Marketing Co., Ltd. together
with Dentsu Group Inc. to support various marketing initiatives
in the region.
The social environment and lifestyles have undergone greatchanges due to the rapid progress of digitalization in society inthe wake of the COVID-19 pandemic, and the perceptions andbehavior of consumers are also becoming more diverse andcomplex. In this context, the branding of local specialties,
products and content, as well as marketing initiatives toopen-up and expand new sales channels, represent key issues
for the region and local companies. At the same time, demandis rising for digital marketing that duly respects the protectionof personal information.
SFG Marketing will maximize the synergies by leveraging
Dentsu Group’s insight and expertise in marketing in addition
to the platforms for data analysis and utilization, and highly
detailed information onattributes and payments progressively
established by the Group so far. In this way, we aim to provide
services transcending the conventional limits of the financebusiness.
Moreover, by pursuing the expansion of businesses that
contribute to marketing and other multifaceted solutions tosocial issues in the region, we will attract people, goods,
money, and information to revitalize the region.

Customer base with a broad
range of attributes
Trust and recognition of
the Group’s brandBusiness knowledge that
the Group lacks
Consulting capabilities thatadd new attractiveness<Anticipated Business Domains>
Additional implementation ofbusinesses linked tosolving social issues

Marketing support for theregion and our customers
Support for the development ofsales channels
Support for branding
Support for the formulation ofmarketing strategy
Company name:Regional development thatmakes work more comfortablefor overseas nationals
Regional super-app
Social business, etc.

SFG Marketing Co., Ltd.

Head office address:	2-1 Kusanagikita, Shimizu-ku, Shizuoka
City, Shizuoka
Representative:

Yasuhito Sawai

Description of business:	Marketing support for the region andcustomers	Advertising agency services, Advertising
media sales, etc.

Company name logo
This logo expresses ourvarious common connections
with the people of the region
through five overlapping andintermingling colors.

Capital stock:¥100 million

Date of establishment:

July 3, 2023

Shareholders:

Shizuoka Financial Group, Inc. 80%
Dentsu Group Inc. 20%*SFG Marketing Co., Ltd. is an advanced banking service company for other industries and aconsolidated subsidiary of the Group

Messages from the Presidents

TJS Co., Ltd.

SFG Marketing Co., Ltd.

TJS Co., Ltd. (TJS) was founded in October 1979. For more than
40 years, we have engaged in software development, temporary
staffing, and other businesses under our corporate philosophy:“TJS has its eyes on tomorrow.”
We pride ourselves on being the top leader in the region in eachof these business domains. Since the time of our founding, wehave been working to grow our businesses with an emphasis on
providing high-quality solutions, being a trusted company, andbeing a company that gains the goodwill of those around us.
In February 2023, we became a wholly-owned subsidiary of
Shizuoka Financial Group, Inc. Going forward, in addition tocontinuing to provide our customers with solutions, we hope to
expand our businesses to create value for the region andcontribute our capabilities in IT/DX and human resources as amember of the Group, to solve the increasingly diverse andcomplex issues of the region.
As a new wave and a committed
technical group, we will work to solve
the problems of the region. Go TJS!

SFG Marketing Co., Ltd. was the Group’s first consolidated
subsidiary to be established after the transition to a holding
company structure in October 2022.
Reforms to the Banking Act have broadened the range ofservices that we can provide to the region and our customers asa regional financial institution and enabled us to assist in solving
various different issues.
As our company name implies, our business pivots mainly on“marketing” support, and we refer to this business, which willcontribute to regional revitalization by attracting people, goods,
money, and information into the region, as “regional marketing.”
We will pursue initiatives with a broad perspective andprogressively expand the range of services we provide.
Moreover, we will earnestly engage in addressing the various
issues that face the region, and we hope to work together withyou all to create new businesses linked
to solving these issues.
We will do our utmost to help pioneer
a sustainable future together with theregion, and we hope for your support.

Representative Director

Representative Director

Norimasa Yamamoto

Yasuhito Sawai

78

79

80

81

82

Consolidated Balance Sheet
The Shizuoka Financial Group, Inc. and Consolidated Subsidiaries

March 31, 2023

Assets:Cash and due from banks (Notes 14 and 32)
Call loans and bills bought (Note 32)
Monetary claims bought
Trading assets (Notes 6 and 32)
Money held in trust (Note 7)
Securities (Notes 8, 14 and 32)
Loans and bills discounted (Notes 9, 14, 15 and 32)
Foreign exchanges (Note 10)
Lease receivables and investment assets (Note 30)
Other assets (Notes 11 and 14)
Tangible fixed assets (Note 12)
Intangible fixed assets (Note 12)
Asset for retirement benefits (Note 20)
Deferred tax assets (Note 29)
Customers’ liabilities for acceptances and guarantees (Note 13)
Allowance for loan losses (Note 32)
Allowance for investment losses
Total Assets
Liabilities and Equity:
Liabilities:
Deposits (Notes 14, 16 and 32)
Call money and bills sold (Note 32)
Payables under repurchase agreements (Notes 14 and 32)
Payables under securities lending transactions (Note 32)
Trading liabilities (Note 6)
Borrowed money (Notes 14, 17 and 32)
Foreign exchanges (Note 10)
Bonds payable (Note 18)
Borrowed money from trust account
Other liabilities (Note 19)
Liability for retirement benefits (Note 20)
Provision for directors’ retirement benefits
Provision for losses from reimbursement of inactive accounts
Provision for contingent losses
Provision for point program
Reserves under special laws
Deferred tax liabilities (Note 29)
Acceptances and guarantees (Note 13)
Total Liabilities
Equity: (Notes 21, 22, 23 and 37)
Capital stock:authorized, 2,000,000 thousand shares;
issued, 595,129 thousand shares
Capital surplus
Subscription rights to shares
Retained earnings
Treasury stock—at cost,
35,390 thousand shares
Accumulated other comprehensive income:
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustments
Defined retirement benefit plans
Total
Noncontrolling interests
Total Equity
Total Liabilities and Equity
See notes to consolidated financial statements.
83

Millions of Yen
2023

Thousands of
U.S. Dollars (Note 2)2023¥1,747,165
200,866
49,184
10,895110,095
2,996,076
10,037,128
7,903
84,379258,279
54,33842,19913,844
3,242
91,672(52,336)(49)¥15,654,886$13,083,460
1,504,167
368,315
81,586
824,437
22,435,801
75,161,960
59,183631,868
1,934,099
406,907
316,007
103,674
24,280686,478(391,916)(371)$117,229,943¥11,770,174
172,557$88,139,695
1,292,177
2,885,060

385,270
466,7813,495,442

6,319
1,325,573
540
44,932
141
157,526
3,879
439
485
1,324
288
11
78,86091,672
14,506,781

47,3209,926,418
4,049
336,474
1,061
1,179,618
29,054
3,291
3,631
9,916
2,161
87
590,539
686,478
108,632,481

90,000673,955

55,462272
805,354415,324
2,043
6,030,812(33,607)(251,666)

230,622
227,948(1,387)
3,242
818
1,148,105—
1,148,105¥15,654,886

1,726,992
1,706,971(10,392)
24,2846,130
8,597,461—
8,597,461$117,229,943

Consolidated Statement of Income
The Shizuoka Financial Group, Inc. and Consolidated Subsidiaries

Year ended March 31, 2023

Income:Interest Income:Interest on loans and discounts
Interest and dividends on securities
Other interest income
Subtotal
Fees and Commissions
Trading Income
Other Operating Income (Note 24)
Other Income (Note 25)
Total Income
Expenses:
Interest Expense:
Interest on deposits
Interest on borrowings and rediscounts
Other interest expense
Subtotal
Fees and Commission Payments
Other Operating Expenses (Note 26)
General and Administrative Expenses (Note 27)
Other Expenses (Note 28)
Total expenses
Income before income taxes
Income Taxes: (Note 29)
Current
Deferred
Total income taxes

Net Income
Net Income Attributable to Noncontrolling Interests
Net Income Attributable to Owners of the Parent

Per Share: (Note 37)
Basic net income
Diluted net income
Cash dividends applicable to the year

Millions of Yen
2023

Thousands of
U.S. Dollars (Note 2)2023¥118,641
33,592
6,374
158,608
76,941
3,723
26,824
21,474
287,573$888,436
251,551
47,735
1,187,723
576,170
27,886200,871
160,807
2,153,460

19,423
4,511
15,78439,71939,596
26,61695,857
12,461
214,252
73,320145,450
33,784
118,203
297,438
296,511
199,315
717,820
93,3181,604,404
549,055

20,060808
20,86852,45254¥52,397

150,219
6,053
156,273
392,782410$392,371

Yen

U.S. Dollars (Note 2)¥92.92
91.01
30.00

$0.69
0.68
0.22

See notes to consolidated financial statements.

Consolidated Statement of Comprehensive Income
The Shizuoka Financial Group, Inc. and Consolidated Subsidiaries

Year ended March 31, 2023

Millions of Yen
2023

Thousands of
U.S. Dollars (Note 2)
2023

Net Income
Other Comprehensive Income: (Note 34)
Valuation difference on available-for-sale securities
Deferred losses on hedges
Foreign currency translation adjustments
Defined retirement benefit plans
Share of other comprehensive income in associates
Total other comprehensive income¥52,452$392,782

34,530(1,612)(1,552)(1,818)236
29,782

258,576(12,077)(11,624)(13,620)
1,768
223,021Comprehensive Income¥82,234$615,803

Total Comprehensive Income Attributable To:
Owners of the parent
Noncontrolling interests¥82,21519$615,660
142

See notes to consolidated financial statements.

84

Consolidated Statement of Changes in Equity
The Shizuoka Financial Group, Inc. and Consolidated Subsidiaries

Year ended March 31, 2023

Thousands

Millions of Yen
Accumulated Other
Comprehensive Income

Balance at April 1, 2022
Change during the period
Purchase of shares of consolidated subsidiaries
Cash dividends, ¥28.50 per share
Net income attributable to owners of the parent
Purchase of treasury stock(4,546 thousand shares)
Disposal of treasury stock(137 thousand shares)
Transfer from capital to capital surplus
Net changes other thanshareholders’ equity
Balance at March 31, 2023

Valuation
DefinedDifference Deferred Foreign
on Available Gains or Currency Retirement
Treasury -for-Sale Losses on Translation Benefit
Stock
Securities Hedges Adjustments Plans

Number of
Shares ofCommon Stock
Outstanding

CapitalStock

CapitalSurplus595,129¥90,845¥54,884¥318¥769,036

—
—
—
—

(270)
—
—
—

—
—
—
—

—
(16,078)
52,397————(4,705)

—

2

—

—

(845)

845

—

—

—
¥90,000—¥55,462595,129

Subscription
Rights to Retained
Shares Earnings¥(29,030) ¥193,717(45)—¥272 ¥805,354

Noncontrolling
Interests

Total¥2,637 ¥1,086,858

Total
Equity¥223¥4,226

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

(270)
(16,078)
52,397(4,705)

—
—
—
—

(270)
(16,078)
52,397(4,705)

128

—

—

—

—

131

—

131

—

—

—

—

—

—

—

—

—
34,231¥(33,607) ¥227,948(1,611)¥(1,387)(983)¥3,242(1,818)29,772¥818 ¥1,148,105¥1,388 ¥1,088,247(1,388)28,383— ¥1,148,105

Thousands of U.S. Dollars (Note 2)
Accumulated Other
Comprehensive Income

CapitalStock

Balance at April 1, 2022
Change during the period
Purchase of shares of consolidated subsidiaries
Cash dividends, $0.21 per share
Net income attributable to owners of the parent
Purchase of treasury stock
Disposal of treasury stock
Transfer from capital to capital surplus
Net changes other thanshareholders’ equity
Balance at March 31, 2023
See notes to consolidated financial statements.

85

CapitalSurplus$680,288 $410,993
—
—
—
—
—
(6,333)(2,024)
—
—
—
22
6,333

—
—
$673,955 $415,324

Subscription
Rights to Retained
Shares Earnings

Valuation
DefinedDifference Deferred Foreign
on Available Gains or Currency Retirement
Treasury -for-Sale Losses on Translation Benefit
Stock
Securities Hedges Adjustments Plans$2,382 $5,758,846 $(217,390) $1,450,629
—
—
—
—
—
—

—
(120,405)
392,371
—
—
—

—
—
—
(35,237)
961
—

—
—
—
—
—
—

$1,674
—
—
—
—
—
—

(339)
—
— 256,341 (12,067)$2,043 $6,030,812 $(251,666) $1,706,971 $(10,392)

Total

Noncontrolling
Interests

Total
Equity$31,648 $19,751 $8,138,823 $10,401 $8,149,224
—
—
—
—
—
—

—
—
—
—
—
—

(2,024)(120,405)
392,371(35,237)
983—(7,364) (13,620) 222,949$24,284 $6,130 $8,597,461

—
—
—
—
—
—

(2,024)(120,405)
392,371(35,237)983—(10,401) 212,548— $8,597,461

Consolidated Statement of Cash Flows
The Shizuoka Financial Group, Inc. and Consolidated Subsidiaries

Year ended March 31, 2023

Millions of Yen
2023

Thousands of
U.S. Dollars (Note 2)2023¥73,320$549,055(12,877)
17,965258(417)(1,046)
5
464
111
56
(360)
68
(129)
(158,608)
39,719(6,281)
(84)
385
3,861
2,989
(482,517)
171,534(44,972)(40,649)(128,447)(10,832)(11,417)61,471
387,775
3,444(1,861)(2,066)4,367(56)
156,157(33,830)(59,991)(145,811)(72,490)(96,429)
134,532
1,935(3,126)(7,833)39
3,479(2,695)514(968)(1,187,723)
297,438(47,037)
(636)
2,884
28,91722,387(3,613,280)
1,284,515(336,769)(304,395)(961,864)(81,119)(85,496)460,319
2,903,818
25,794(13,941)(15,475)
32,708(422)
1,169,365(253,336)(449,241)(1,091,892)(542,836)(2,571,773)
1,987,567
174,800(5,295)(4,661)(8,104)677(426,789)(19,258,452)
14,883,688
1,308,976(39,654)(34,910)(60,688)
5,072(3,195,967)(16,043)(2)(4,705)
86(39,813)(1,400)(61,878)2(561,155)
2,129,843¥1,568,687(120,137)(18)(35,237)644(298,135)(10,483)(463,368)
16(4,202,155)
15,949,106$11,746,950

I. Operating Activities:
Income before income taxes
Adjustments for:
Income taxes paid
Depreciation and amortization
Impairment losses
Equity in earnings of affiliated companies
Decrease in allowance for loan losses
Increase in allowance for investment losses
Decrease in asset for retirement benefits
Increase in liability for retirement benefits
Increase in provision for directors’ retirement benefits
Decrease in provision for reimbursement of inactive accounts
Increase in provision for contingent losses
Decrease in provision for point program
Interest income
Interest expense
Gains on securities
Gains on money held in trust
Losses on sale of fixed assets
Net decrease in trading assets
Net increase in trading liabilities
Net increase in loans and bills discounted
Net increase in deposits
Net decrease in borrowed money
Net increase in due from banks (excluding deposits paid to Bank of Japan)
Net increase in call loans
Net increase in monetary claims bought
Net decrease in call money
Net increase in payables under repurchase agreements
Net increase in payables under securities lending transactions
Net decrease in foreign exchanges (assets)
Net decrease in foreign exchanges (liabilities)
Net increase in lease receivables and investment assets
Net increase in straight bonds-issuance and redemption
Net decrease in borrowed money from trust accountInterest and dividends received
Interest paid
Other-net
Total Adjustments
Net Cash Used in Operating Activities
II. Investing Activities:
Purchases of securities
Proceeds from sales of securities
Proceeds from redemptions of securities
Increase in money held in trust
Purchases of tangible fixed assets
Purchases of intangible fixed assets
Proceeds from sales of tangible fixed assets
Net Cash Used in Investing Activities
III. Financing Activities:
Dividends paid
Dividends paid to noncontrolling interests
Purchases of treasury stock
Proceeds from sales of treasury stock
Redemption of bonds with stock acquisition rights
Purchase of shares of subsidiaries not resulting in change in scope of consolidation
Net Cash Used in Financing Activities
IV. Foreign Currency Translation Adjustments on Cash and Cash Equivalents
V. Net Decrease in Cash and Cash Equivalents
VI. Cash and Cash Equivalents, Beginning of Year
VII. Cash and Cash Equivalents, End of Year

833
419

See notes to consolidated financial statements.
Cash and due from banks in the consolidated balance sheet at March 31, 2023, are reconciled with cash and cash equivalents in the consolidated statementof cash flows as follows:
Thousands ofMillions of Yen
U.S. Dollars
Cash and due from banks
Due from banks other than the Bank of Japan
Cash and cash equivalents

2023

2023

¥1,747,165(178,477)¥1,568,687$13,083,460(1,336,510)$11,746,950

86Notes to Consolidated Financial Statements
The Shizuoka Financial Group, Inc. and Consolidated Subsidiaries

Year ended March 31, 2023

1. BASIS OF PRESENTATION
The accompanying consolidated financial statements have been
prepared from the accounts maintained by The Shizuoka Financial
Group, Inc. (the “Company”) and its subsidiaries (the “Group”) in
accordance with the provisions set forth in the Companies Act ofJapan (the “Companies Act”), the Japanese Financial Instruments andExchange Act, the Banking Act of Japan, and the Accounting
Guideline for Banks in Japan stated by the Japanese Bankers’
Association, and in accordance with accounting principles generally
accepted in Japan (“Japanese GAAP”), which are different in certain
respects as to the application and disclosure requirements ofInternational Financial Reporting Standards (IFRS).
Since the Company was established on October 3, 2022, no information is presented for the previous fiscal year.
The consolidated financial statements for the fiscal year ended
March 31, 2023 (April 1, 2022 to March 31, 2023) were prepared bytaking over the consolidated financial statements of The Shizuoka
Bank, Ltd. (the “Bank”), which became a wholly owned subsidiarythrough a sole share transfer. Accordingly, the fiscal year ended
March 31, 2023 (April 1, 2022 to March 31, 2023) includes the firsthalf of the fiscal year of the Bank.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to the consolidated
financial statements issued domestically in order to present them in aform that is more familiar to readers outside Japan.

2. JAPANESE YEN AND U.S. DOLLAR AMOUNTS
As permitted by the Japanese Financial Instruments and ExchangeAct, Japanese yen amounts less than one million and U.S. dollars
amounts less than one thousand have been omitted. As a result, thetotals shown in the accompanying consolidated financial statements
and the notes (both in yen and U.S. dollars) thereto do not necessarily
agree with the sum of the individual account balances.
The consolidated financial statements are stated in Japanese yen,
the currency of the country in which the Company is incorporated andoperates. The translations of Japanese yen amounts into U.S. dollar
amounts are included solely for the convenience of readers outside
Japan and have been made at the rate of ¥133.54 to $1, the approximate rate of exchange at March 31, 2023. Such translation should
not be construed as a representation that Japanese yen amounts
could be converted into U.S. dollars at that or any other rate.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESConsolidation:
The accompanying consolidated financial statements as of March 31,
2023, include the accounts of the Company, its 14 subsidiaries andthree companies accounted for by the equity method.
Under the control and influence concepts, those companies in which
the Company, directly or indirectly, is able to exercise control over
operations are fully consolidated, and those companies over which
the Group has the ability to exercise significant influence areaccounted for by the equity method.
There are six companies that the Company has not made subsidiaries, although it owned a majority of the voting rights (business87

execution rights) of those companies in its own account, and there areseven companies that the Company has not made associated companies, although it owned at least 20% and not more than 50% of thevoting rights (business execution rights) of those companies in its own
account. They are not treated as subsidiaries or associated companies because they are owned by consolidated subsidiaries engaged in
the investment business as business transactions for the purpose of
acquiring capital gains through investment development, etc., and not
for the purpose of including them in the Group.
For investments in the remaining unconsolidated subsidiaries andassociated companies, if the equity method of accounting had been
applied, the effect on the accompanying consolidated financial statements would be immaterial.
The difference between the cost of an acquisition and the fair valueof net assets of the acquired subsidiary at the date of acquisition ischarged to income when incurred.
All significant intercompany accounts and transactions have been
eliminated in consolidation. All material unrealized profits resulting
from intercompany transactions are eliminated.
Unification of Accounting Policies Applied to Foreign
Subsidiaries for the Consolidated Financial Statements:
The accounting policies and procedures applied to a parent company
and its subsidiaries for similar transactions and events under similar
circumstances should, in principle, be unified for the preparation of
the consolidated financial statements. However, financial statements
prepared by foreign subsidiaries in accordance with either IFRS orgenerally accepted accounting principles in the United States ofAmerica tentatively may be used for the consolidation process, except
for the following items that should be adjusted in the consolidation
process so that net income is accounted for in accordance withJapanese GAAP, unless they are not material: (a) amortization of
goodwill; (b) scheduled amortization of actuarial gain or loss of pensions that has been recorded in equity through other comprehensive
income; (c) expensing capitalized development costs of R&D; and (d)cancellation of the fair value model of accounting for property, plantand equipment and investment properties and incorporation of thecost model of accounting; and (e) recording a gain or loss throughprofit or loss on the sale of an investment in an equity instrument forthe difference between the acquisition cost and selling price, andrecording impairment loss through profit or loss for other-than-temporary declines in the fair value of an investment in an equity instrument,
where a foreign subsidiary elects to present in other comprehensive
income subsequent changes in the fair value of an investment in an
equity instrument.

Trading-purpose transactions:“Transactions for trading purposes” (the purpose of seeking to capture gains arising from short-term fluctuations in interest rates,
currency exchange rates or market prices of securities, and othermarket-related indices or from gaps among markets) are included in“Trading assets” and “Trading liabilities” on a trade-date basis.
Trading securities and monetary claims purchased for trading purposes recorded in these accounts are stated at market value, andtrading-related financial derivatives are stated at the amounts thatwould be settled if they were terminated at the end of the fiscal year.
Profits and losses on transactions for trading purposes are shown
as “Trading income (expense)” on a trade-date basis.
Securities:
Held-to-maturity debt securities, which are expected to be held-tomaturity with the positive intent and ability to hold to maturity, arestated at amortized cost computed using the straight-line method.
Available-for-sale securities, which are not classified as either trading
account securities or held-to-maturity debt securities, are stated at fairvalue, with unrealized gains and losses, net of applicable taxes,
reported in a separate component of equity.
Available-for-sale securities whose fair value cannot be reliably
determined are stated at cost, determined by the moving-averagemethod.
For other-than-temporary declines in fair value, investment securities
are reduced to net realizable value by a charge to income.
Tangible fixed assets:
Tangible fixed assets are stated at cost, less accumulated depreciation. Depreciation of tangible fixed assets owned by the Company anddomestic consolidated subsidiaries engaged in the banking businessis computed mainly using the declining-balance method over the estimated useful lives, while the straight-line method is applied tostructures acquired on or after April 1, 2016.
The range of useful lives is principally from three to 50 years forbuildings and from two to 20 years for equipment.
Depreciation of tangible fixed assets owned by the other consolidated subsidiaries is computed mainly using the declining-balancemethod based on the criteria as stipulated in the Corporation Tax Act.
Lease assets under lease transactions, in which ownership of thelease property is not deemed to be transferred to the lessee, aredepreciated by the straight-line method over the lease term.
The residual value is zero or the guaranteed value if specified in thelease contracts.
Impairment loss:
The Group reviews its long-lived assets for impairment whenever
events or changes in circumstances indicate the carrying amount ofan asset or asset group may not be recoverable. An impairment loss
is recognized if the carrying amount of an asset or asset groupexceeds the sum of the undiscounted future cash flows expected toresult from the continued use and eventual disposition of the asset or
asset group. The impairment loss would be measured as the amountby which the carrying amount of the asset exceeds its recoverable
amount, which is the higher of the discounted cash flows from thecontinued use and eventual disposition of the asset or the net selling
price at disposition.

Software:
Internal­use software development costs are amortized using thestraight-line method over the useful life (five years) stipulated by theGroup.
Allowance for loan losses:
The amount of the allowance for loan losses is determined based on
management’s judgment and assessment system. This system
reflects the past experience of credit losses; possible future credit
losses; business experience of credit losses; possible future credit
losses; business and economic conditions; the character, quality, andperformance of the portfolio; and other pertinent indicators.
The Group implemented a self-assessment system to monitor thequality of its assets. The quality of all loans is assessed by branches
and the Credit Supervision Department, in accordance with a subsequent audit by the Credit Examination Department, in accordancewith the Group’s policy and rules for self-assessment of asset quality.
The Group has established a credit rating system under which its
borrowers are classified into five categories. The credit rating system
is used for self-assessment of asset quality. All borrowers are classified into five categories for self-assessment purposes - “normal,”“caution,” “possible bankruptcy,” “virtual bankruptcy,” and “legal
bankruptcy.”
Legal bankruptcy:
Borrowers who are legally or formally bankrupt, such as bankruptcy or
special liquidation.
Virtual bankruptcy:
Borrowers virtually in the same situation as legal bankruptcy.
Possible bankruptcy:
Borrowers who are not currently bankrupt, but are likely to fall into
bankruptcy in the future.
Caution:Borrowers who have problems with lending conditions or reimburse
performance, have slow growth or unstable business conditions.
Management required:
Borrowers in “caution” whose loans require management (being withrestricted loans and loans overdue for more than three months).
Normal:Borrowers who are recognized as having good business conditions
and no particular financial problems.
(a) For loans to borrowers classified as legal bankruptcy or virtual
bankruptcy, the Group fully provides the net amount of loans andestimated collectible amounts by collateral or guarantees.
Regarding loans to borrowers classified as possible bankruptcy, aspecific reserve is provided to the necessary extent for the net
amount of loans and estimated collectible amounts by collateral or
guarantees.

88

(b) For the borrower with certain loan amounts classified as possible
bankruptcy or being with restructured loans, if cash flows fromcollection of principals and interests can be reasonably estimated,
the Group provides the difference between the present value ofthese cash flows discounted at the initial contractual rates and thebook values of loans (the “DCF” method). For other loans, ageneral allowance is provided based on anticipation of the
expected loss for the average remaining life of loans, etc. The
expected loss amount is calculated by adjusting the loss ratio
considering future projections.
(c) For the borrower with certain loan amounts classified as caution or
management required, the Group provides the difference between
the present value of these cash flows discounted at the initial
contractual rates and the book values of loans (the “DCF” method)
if cash flows from collection of principals and interests can bereasonably estimated.
(d) For loans to borrowers classified as normal, caution and management required, a general allowance is provided based on
anticipation of the expected loss for the average remaining life ofloans, etc. The loss ratio is calculated based on the average valueof the actual loan loss ratio over a certain period in the past, andthe expected loss amount is calculated by adjusting the loss ratio
considering future projections.
Grouping in calculating loss ratio
In calculating loss ratio, borrowers are divided into consumer loanborrowers and business-lending borrowers. Business-lending borrowers are classified into two categories of normal (upper normal andlower normal), three categories of caution (upper caution, lower
caution, and management required), and one category of legal bankruptcy, for a total of seven categories.
A certain period of time in which the expected loss amount is
expected in the future
Allowance for loan losses is recorded based on anticipation of the
expected loss ratio for the period corresponding to the averageremaining period of receivables (the average remaining period is sevenyears for consumer loan borrowers, among business loan borrowersof (d) above, about three to four years for “normal,” about three years
for “caution,” and about four years for “management required” and“possible bankruptcy” of (b) above).
Revision of expected loss ratio due to future prospects, etc.
In the current fiscal year, the expected loss ratio has been revised for“management required,” but the impact on allowance for loan losses isminor.
The consolidated subsidiaries provide based on anticipation of the
expected loss for loan losses at the amount deemed necessary tocover such losses, principally based on past experience.
Allowance for investment losses:
The allowance for investment losses is provided at a necessaryamount based on the estimated possible losses on investments.

89

Retirement and pension plans:
Certain consolidated subsidiaries have lump-sum retirement benefit
plans, a contributory funded defined benefit pension plan, and anoncontributory funded pension plan.
The projected benefit obligations are attributed to periods on astraight-line basis. Actuarial gains and losses are amortized on astraight-line basis over 10 years within the average remaining service
period. Past service costs are recognized in the applicable year.
Provision for losses from reimbursement of inactive accounts:
The provision for losses from reimbursement of inactive accounts,
which are derecognized as liabilities under certain conditions, isprovided for possible losses on future claims of withdrawal based on
historical reimbursement experience.
Provision for retirement benefits to directors:
The provision for retirement benefits to directors is provided for thepayments that have occurred up to the end of the fiscal year to pay
for retirement benefits to directors.
Provision for contingent losses:
The provision for contingent losses is provided for the estimated future
payments to credit guarantee corporations due to the implementationof a loss-sharing system.
Provision for point program:
The provision for point program is provided for the reasonably estimated future usage of points given to credit card customers.
Reserves under special laws:
Reserves under special laws are reserves for financial product transaction liabilities in accordance with Section 1, Article 46-5 of theJapanese Financial Instruments and Exchange Act.
Asset retirement obligations:
An asset retirement obligation is recorded for a legal obligation
imposed either by law or contract that results from the acquisition,
construction, development, and normal operation of a tangible fixed
asset and is associated with the retirement of such tangible fixed
asset. The asset retirement obligation is recognized as the sum of the
discounted cash flows required for the future asset retirement and isrecorded in the period in which the obligation is incurred if a reasonable estimate can be made. If a reasonable estimate of the asset
retirement obligation cannot be made in the period the asset retirement obligation is incurred, the liability should be recognized when areasonable estimate of the asset retirement obligation can be made.
Upon initial recognition of a liability for an asset retirement obligation,
an asset retirement cost is capitalized by increasing the carrying
amount of the related fixed asset by the amount of the liability. The
asset retirement cost is subsequently allocated to expense throughdepreciation over the remaining useful life of the asset. Over time, theliability is accreted to its present value each period. Any subsequent
revisions to the timing or the amount of the original estimate of undiscounted cash flows are reflected as an adjustment to the carrying
amount of the liability and the capitalized amount of the related asset
retirement cost.

Leases:LessorFor financing leases in which the Group is a lessor, sales and cost of
sales are accounted for when lease payments are paid.
Stock options:
The accounting standard for stock options requires companies tomeasure the cost of employee stock options based on the fair value
at the date of grant and recognize compensation expense over thevesting period as consideration for receiving goods or services. The
standard also requires companies to account for stock options
granted to nonemployees based on the fair value of either the stock
options or the goods or services received. In the balance sheet, thestock options are presented as stock acquisition rights as a separate
component of equity until exercised. The standard covers equity­
settled, share-based payment transactions, but does not cover
cash­settled, share-based payment transactions. In addition, the standard allows unlisted companies to measure options at their intrinsic
value if they cannot reliably estimate fair value.
Translation of foreign currencies:
Assets and liabilities, which are payable or receivable in foreign currencies, are converted into Japanese yen at the rates prevailing at eachbalance sheet date.
The financial statements of the consolidated subsidiaries outside
Japan are translated into Japanese yen at the current exchange rate
at each balance sheet date, except for equity, which is translated at
the historical exchange rate.
Differences arising from such translation are shown as “Foreign
currency translation adjustments” in a separate component of equity.
Income taxes:
The Company and its consolidated subsidiaries in Japan allocate
income taxes based on the asset and liability method.
Deferred income taxes are recorded to reflect the impact of temporary differences between assets and liabilities recognized for financial
reporting purposes and such amounts recognized for tax purposes.
These deferred taxes are measured by applying currently enacted tax
laws to the temporary differences.
Derivatives and hedging activities:
All derivative transactions, except those entered into for hedging
purposes, are recognized as either assets or liabilities and measured
at fair value, with gains or losses on derivative transactions recognizedin the consolidated statement of income.
For derivative transactions used for hedging purposes, the methodsof hedge accounting are as follows:

hedging instruments, such as interest rate swaps, which offset theeffect of fair value fluctuations of the hedged items by identified maturities, and are designated as a hedge of the portfolio. The effectivenessof the fair value hedge is assessed by each group. Also, the effectiveness of a cash flow hedge is assessed on the basis of the correlation
between the base interest rate index of the hedged cash flow and thatof the hedging instrument.
(b) Special hedging treatment is applied for interest rate swaps
Transactions to hedge against foreign exchange fluctuation risk
Deferral hedge accounting is applied to hedges against foreignexchange fluctuation risks associated with foreign currency-denominated monetary assets and liabilities, stipulated in the JICPA Industry
Committee Practical Guideline No. 25, October 8, 2020, “Accounting
and Auditing Treatments of Accounting Treatments on Foreign
Currency Transactions in the Banking Industry.”
The effectiveness of currency swap transactions, exchange swap
transactions, and similar transactions hedging foreign exchange risks
of monetary assets and liabilities denominated in foreign currencies isassessed by comparison of the foreign currency position of thehedged monetary assets and liabilities and the hedging instruments.
In order to hedge the foreign exchange risk of foreign currencydenominated available-for-sale securities (except bonds), the Groupapplies the “general method,” using market value hedges in accordance with certain conditions, namely the stipulation in advance of
which foreign currency-denominated securities are to be hedged, andthe existence in foreign currency of a spot-forward liability In excess of
the acquisition cost of the relevant foreign currency-denominatedsecurities.
Consolidated statement of cash flows:
For the purpose of the consolidated statement of cash flows, cash andcash equivalents represent cash and due from the Bank of Japan.
Per share information:
Basic net income per share is computed by dividing net income attributable to common shareholders by the weighted-average number ofcommon shares outstanding for the period. The average number ofcommon shares used in the computation was 563,848 thousand
shares for 2023.
Diluted net income per share reflects the potential dilution that could
occur if the outstanding stock options were exercised. Diluted net
income per share assumes full exercise of the outstanding stock
options at the beginning of the year (or at the time of grant).
Cash dividends per share presented in the accompanying consolidated statement of income are dividends applicable to the year,
including dividends to be paid after the end of the year.

(a) Transactions to hedge against interest rate risk
Transactions to hedge against interest rate risk affecting the financial
assets and liabilities of the Group are accounted for using deferral
hedge accounting as stipulated in the Japanese Institute of Certified
Public Accountants (JICPA) Industry Committee Practical Guideline
No. 24, March 17, 2022, “Accounting and Auditing Treatments on the
Application of Accounting Standards for Financial Instruments in the
Banking Industry.” Regarding the effectiveness of a hedging relationship under fair value hedging, a portfolio of hedged items, such as
deposits or loans with common maturities, is matched with a group of90

6. TRADING ASSETS AND LIABILITIES

4. SIGNIFICANT ACCOUNTING ESTIMATE(Recording of allowance for loan losses)(1) Carrying amounts

Allowance for loan losses

Millions of Yen

Thousands of
U.S. Dollars

2023¥52,3362023$391,916(2) Information on the significant accounting estimate(a) Calculation method
The calculation method of allowance for loan losses is listed in“Allowance for loan losses” of “3. SUMMARY OF SIGNIFICANTACCOUNTING POLICIES.”(b) Main assumptions
Although the impact of the COVID-19 infection is weakening, there
continues to be concern about the impact on the repayment ability ofborrowers. However, an allowance for loan losses is calculated basedon the assumption that there will be no significant impact on borrower’s category of the Group. Regarding the assumptions about theeffects of COVID-19, there are no changes compared to the description on previous fiscal year’s Integrated Report of the Bank.
Assumptions are made in determining the impact on borrower’s
category, future forecasts, such as sales forecasts, cost reduction,and borrower’s repayment schedules on business plan used for theclassification of borrower’s category and the estimate of future cash
flow based on cash flow estimate method.
Future forecasts, such as sales forecasts, cost reduction, andborrower’s repayment schedules on business plan, are determinedbased on the impact of COVID-19 and market growth potential andprice trends in the industry to which the borrower belongs.
(c) The impact on the consolidated financial statements for the next
fiscal year
If the original assumption for estimates changes because of thechange in management environment for borrowers, the balance ofallowance for loan losses may fluctuate due to the change in borrower’s category, cash flow estimates, and expected loss ratio, and it
may affect the consolidated financial statements for the next fiscalyear.

5. CHANGES IN ACCOUNTING POLICIES(Application of the implementation guidance on accounting standards
for fair value measurement)
The “Implementation Guidance on Accounting Standard for Fair Value
Measurement” (ASBJ Guidance No. 31, June 17, 2021; the“IGASFVM”) has been applied since the beginning of the current fiscal
year, and will prospectively apply the new accounting policies stipulated by the IGASFVM in accordance with the transitional treatment
provided in Paragraph 27-2 of the IGASFVM. This does not affect theconsolidated financial statements for the current fiscal year.
In the “2. Fair values of financial instruments and a breakdown bylevel of the fair values of financial instruments, 32. FINANCIAL
INSTRUMENTS AND RELATED DISCLOSURES,” investment trusts
for the previous fiscal year are not stated in accordance with
Paragraph 27-3 of the IGASFVM.

91

Trading assets and liabilities at March 31, 2023, consisted of thefollowing:(a) Trading assets

Trading securities:
Japanese government bonds
Local government bonds
Industrial bonds
Subtotal
Financial derivatives:
Other (Note)
Subtotal
Other trading assets:
Commercial paper
Subtotal
Total

Millions of Yen
2023

Thousands of
U.S. Dollars
2023

¥45
481
353
880

$342
3,604
2,648
6,595

7,014
7,014

52,52852,5282,999
2,999¥10,895

22,462
22,462$81,586

Millions of Yen

Thousands of
U.S. Dollars

2023

2023

¥6,3196,319¥6,319$47,320
47,320$47,320(b) Trading liabilities

Financial derivatives:
Other (Note)
Subtotal
Total

Note: Other in assets and liabilities represents unrealized gains and losses, respectively.

7. MONEY HELD IN TRUST
Money held in trust at March 31, 2023, consisted of the following:

Cost

Money held in trustclassified as:
Held-to-maturity
Money held in trustclassified as:
Available-for-sale¥4,800¥2

100,000

Cost

Money held in trustclassified as:
Held-to-maturity
Money held in trustclassified as:
Available-for-saleMillions of Yen
Unrealized Unrealized
Gains
Losses$35,944748,839

Fair
Value

¥4,802100,000

Thousands of U.S. Dollars
Unrealized Unrealized
Gains
Losses

$21

Fair
Value

$35,965
748,839

8. SECURITIESImpairment losses on marketable available-for-sale equity securities
for the year ended March 31, 2023, were ¥70 million ($530 thousand).

Securities at March 31, 2023, consisted of the following:
Millions of Yen
2023¥854,509
244,658
498,153
479,042919,713¥2,996,076

Japanese government bonds
Local government bonds
Corporate bonds
Corporate stocks
Other securities
Total

Thousands of
U.S. Dollars
2023$6,398,906
1,832,098
3,730,368
3,587,255
6,887,172$22,435,801

As of March 31, 2023, securities included equity investments inunconsolidated subsidiaries and affiliated companies that amounted
to ¥24,196 million ($181,192 thousand).
In addition to securities, the following table presents details of trading securities and commercial paper classified as trading assets andnegotiable certificates of deposit classified as cash and due frombanks.
Information regarding each category of the securities classified as
trading, available-for-sale, and held-to-maturity at March 31, 2023,
was as follows:
Millions of Yen
Unrealized Unrealized
Gains
Losses

Cost

Securities classified as:
Trading
Available-for-sale:
Equity securities
Debt securities
Others
Held-to-maturity¥3,880¥  93,958
1,538,677
917,029
72,903

Cost

Securities classified as:
Trading
Available-for-sale:
Equity securities
Debt securities
Others
Held-to-maturity

Fair
Value

¥356,938
6,343
18,95422¥345
16,284
41,531
460

450,5521,528,736
894,452
72,465

Thousands of U.S. Dollars
Unrealized Unrealized
Gains
LossesFair
Value$29,058$703,596 $2,672,899
11,522,219
47,505
6,867,080
141,935
545,931168$2,584
121,946
311,007
3,449

3,373,910
11,447,778
6,698,008
542,650

Available-for-sale securities sold during the year ended March 31,
2023 were as follows:
Millions of Yen
Proceeds from Total Amount of Total Amount of
Sales
Gains on Sales Losses on Sales

Equity securities
Debt securities:
OthersTotal¥17,093
1,477,432
333,848¥1,828,374¥12,889
3,187
6,145¥22,221¥16
9,728
18,836¥28,582

Thousands of U.S. Dollars
Proceeds from Total Amount of Total Amount of
Sales
Gains on Sales Losses on Sales

Equity securities
Debt securities:
OthersTotal$128,006
11,063,591
2,499,985$13,691,583$96,523
23,86746,016$166,406$122
72,854141,058$214,035

Marketable available-for-sale securities whose fair value significantly
declines in comparison with their acquisition cost and whose fair valueof the securities will not recover to their acquisition cost are written
down and accounted for as impairment losses.
The Group recognizes securities as having significantly declined
when their fair value is more than 30% below their acquisition cost.

9. LOANS AND BILLS DISCOUNTED
Loans and bills discounted at March 31, 2023, consisted of thefollowing:

Bills discounted
Loans on bills
Loans on deeds
Overdrafts
Total

Millions of Yen
2023

Thousands of
U.S. Dollars
2023¥18,418
129,373
8,802,001
1,087,334¥10,037,128$137,926
968,800
65,912,845
8,142,387$75,161,960

Loans under bankruptcy proceedings, past-due loans on whichinterest payments are waived from borrowers who are financiallyassisted by the Bank, loans past due for three months or more (except
for loans under bankruptcy proceedings and past-due loans), andrestructured loans at March 31, 2023, consisted of the following:

Claims provable in rehabilitationfrom bankruptcy and equivalents
Doubtful claims
Loans past due for three months or more
Restructured loans
Total

Millions of Yen
2023

Thousands of
U.S. Dollars
2023¥16,515
76,904
191
13,110¥106,723$123,677
575,893
1,437
98,178$799,185

Notes: 1. Loans past due for three months or more include loans for which payments
of principal or interest are delinquent by three months or more as calculated
from the day following the contracted payment date, but do not include
loans under bankruptcy proceedings or past-due loans.
2. Restructured loans include loans for which certain conditions have beenrelaxed for the benefit of the borrower (through means, such as the reduction or elimination of interest payments, the deferral of principal repayments,or the relinquishment of claims) with the goal of supporting the recovery ofborrowers that have fallen into financial difficulty, and thereby promoting therecovery of the loan.

Bills discounted are accounted for as financial transactions in accordance with the JICPA Industry Audit Committee Report No. 24. As of
March 31, 2023, the Group had the right by contract or custom to sellor repledge bills discounted and foreign exchange bills bought andtheir total face values were ¥18,739 million ($140,327 thousand).

10. FOREIGN EXCHANGES
Foreign exchange assets and liabilities at March 31, 2023, consistedof the following:(a) Assets

Due from foreign banks
Foreign exchange bills bought
Foreign exchange bills receivable
Total

Millions of Yen
2023

Thousands of
U.S. Dollars
2023¥6,391
320
1,191¥7,903$47,859
2,400
8,923
$59,183

Millions of Yen
2023

Thousands of
U.S. Dollars
2023(b) Liabilities

Foreign exchange bills sold
Foreign exchange bills payable
Total

¥34
506
¥540

$256
3,792
$4,04992

11. OTHER ASSETS

14. ASSETS PLEDGEDOther assets at March 31, 2023, consisted of the following:

Assets pledged as collateral and their relevant liabilities at March 31,
2023, were as follows:

Accrued income
Derivative products
Guarantee deposits
Others
Total

Millions of Yen
2023

Thousands of
U.S. Dollars
2023¥16,384
34,316
1,863
205,715¥258,279$122,690
256,972
13,955
1,540,481$1,934,099

12. TANGIBLE FIXED ASSETS AND INTANGIBLE FIXEDASSETS
Tangible fixed assets and intangible fixed assets at March 31, 2023,
consisted of the following:

Tangible fixed assets:
Buildings
Land
Lease assets
Construction in progress
Other tangible fixed assets
Subtotal
Intangible fixed assets:
Software
Other intangible fixed assets
Subtotal
Total

Millions of Yen

Thousands of
U.S. Dollars

2023

2023

¥22,790
18,91020
2,434
10,182
54,338$170,661
141,610155
18,23076,248406,907

41,819380
42,199¥96,538

313,158
2,849
316,007$722,915

Tangible fixed assets are stated at cost, less accumulated depreciation of ¥118,854 million ($890,030 thousand) in 2023.
As of March 31, 2023, deferred gains for tax purposes of ¥9,033
million ($67,646 thousand) on tangible fixed assets sold and replacedwith similar assets have been deducted from the cost of newly
acquired tangible fixed assets.

13. CUSTOMERS’ LIABILITIES FOR ACCEPTANCESAND GUARANTEESAll contingent liabilities for acceptances and guarantees are recorded
and reflected in acceptances and guarantees. Customers’ liabilities for
acceptances and guarantees have been recorded and reflected asassets in the consolidated balance sheet, representing the Group’s
right of indemnity from the applicant.
The respective amounts of “Acceptances and Guarantees” and“Customers’ Liabilities for Acceptances and Guarantees” are netted inaccordance with the appendix forms of “Banking Act Enforcement
Regulations” (Ministry of Finance Ordinance No. 10, 1982).
Liabilities for guarantees on corporate bonds included in securities,
which were issued by private placement (Article 2, Paragraph 3 of the
Financial Instruments and Exchange Act) as of March 31, 2023,
amounted to ¥27,566 million ($206,429 thousand).

93

Assets pledged as collateral:
Trading assets
Securities
Loans and bills discounted
Relevant liabilities to above assets:
Deposits
Payables under repurchase agreements
Payables under securities lending transactions
Borrowed money

Millions of Yen
2023

Thousands of
U.S. Dollars
2023¥2,999
1,712,628
785,785$22,462
12,824,836
5,884,274¥27,518
385,270
466,7811,290,365$206,070
2,885,060
3,495,442
9,662,765

In addition to the above, the Bank has provided ¥24,130 million($180,699 thousand) in securities as collateral for foreign exchange
settlements and certain other transactions and as security for futuretransactions at March 31, 2023.
Guarantee deposits on office space of ¥1,863 million ($13,955 thousand), cash collateral paid for financial instruments of ¥30,369 million($227,416 thousand) and cash collateral paid to central counterpartyof ¥60,800 million ($455,294 thousand) are included in other assets at
March 31, 2023.

15. LOAN COMMITMENTS
Overdraft agreements and agreements for loan commitments areagreements under which the Bank pledges to lend funds up to acertain limit when applications for advances of loans are received from
customers, provided there are no violations of the terms written in theagreements.
The balances of loans undisbursed under these agreements at
March 31, 2023, were as follows:

Undisbursed loan commitments
outstanding:
Loans due within one year
Loans due over one year
Total

Millions of Yen
2023

Thousands of
U.S. Dollars
2023¥1,603,006
106,463¥1,709,470$12,003,940
797,243$12,801,184

Many of these agreements terminate without loans being disbursed,
and thus, the balance of loans as yet undisbursed will not necessarily
affect the future cash flow of the Company or its consolidated
subsidiaries. The Company or its consolidated subsidiaries can refuse
to advance loans and reject applications that have been received or
can reduce the maximum amounts under the agreements forreasonable reasons, such as changes in the financial situation andpreservation of credit. In addition, at the time the agreements areentered into, borrowers may, when necessary, be required to provide
collateral, such as real estate or securities, and after the agreements
have been signed, the state of the borrower’s business and otherfactors may be assessed regularly in accordance with in-houseprocedures. Moreover, agreements can be revised, if necessary, andsteps, such as the formulation of measures to preserve credit, may betaken.

16. DEPOSITS

19. OTHER LIABILITIES

Deposits at March 31, 2023, consisted of the following:

Current deposits
Savings deposits
Deposits at noticeTime deposits
Negotiable certificates of deposit
Other
Total

Other liabilities at March 31, 2023, consisted of the following:

Millions of Yen
2023

Thousands of
U.S. Dollars
2023¥615,249
7,208,156
10,791
3,045,633
65,104825,239¥11,770,174$4,607,229
53,977,512
80,80822,806,898
487,526
6,179,721$88,139,695

Income taxes payable
Accrued expenses
Unearned income
Derivative products
Cash collateral received for financial products
Other
Total

Millions of Yen
2023

Thousands of
U.S. Dollars
2023¥11,380
14,27817,16445,49914,76654,437¥157,526$85,218
106,925
128,534
340,717
110,573
407,648$1,179,618

17. BORROWED MONEY

20. RETIREMENT AND PENSION PLANS

At March 31, 2023, the weighted-average annual interest rate applicable to borrowed money was 0.28%.
Borrowed money consists of borrowings from financial institutions.
Annual maturities of borrowed money as of March 31, 2023, were as
follows:

The Company and certain consolidated subsidiaries have severance
payment plans for employees. Under most circumstances, employees
terminating their employment are entitled to retirement benefits determined based on the rate of pay at the time of termination, years ofservice, and certain other factors. Such retirement benefits are madein the form of a lump-sum severance payment from the Company orfrom certain consolidated subsidiaries in Japan and annuity paymentsfrom a trustee.

2024
2025
2026
2027
2028 and thereafter
Total

Millions of Yen
2023

Thousands of
U.S. Dollars
2023¥373,279
16,234
192,781740,9302,347¥1,325,573$2,795,260
121,571
1,443,625
5,548,381
17,580$9,926,418

18. BONDS PAYABLE
Bonds at March 31, 2023, consisted of the following:

The Bank’s first bonds payable in U.S.
dollars (only for qualified institutional
investors)
The Bank’s bonds payable in U.S. dollars
due December 2023
Shizugin Lease Co., Ltd.’s first private
placement bonds payable only for
qualified institutional investors
Total

Millions of Yen
2023

Thousands of
U.S. Dollars
2023¥ 2,214$ 16,585

37,718282,448

5,000¥44,932

37,441$336,474

The coupon amount of The Shizuoka Bank, Ltd.’s first U.S. dollardenominated bonds (only for qualified institutional investors), which
are discounted bonds, is ¥2,214 million ($16,585 thousand).

1. The changes in defined benefit obligation for the year ended March
31, 2023 were as follows:

Balance at beginning of year
Current service cost
Interest cost
Actuarial losses
Benefits paid
OthersBalance at end of year

Millions of Yen
2023

Thousands of
U.S. Dollars
2023¥61,155
1,671
596
278
(4,137)141¥59,707$ 457,958
12,5204,466
2,088(30,984)
1,062$ 447,111

2. The changes in plan assets for the year ended March 31, 2023,
were as follows:

Balance at beginning of year
Expected return on plan assets
Actuarial losses
Contributions from the employer
Benefits paid
OthersBalance at end of year

Millions of Yen
2023

Thousands of
U.S. Dollars
2023¥71,696
1,242(1,390)727(2,727)
123¥69,672$536,890
9,306(10,410)
5,445(20,422)921$521,731

Annual maturities of bonds as of March 31, 2023, were as follows:

2024
2025
2026
2027
2028
Total

Millions of Yen
2023

Thousands of
U.S. Dollars
2023¥39,932$299,033

5,000¥44,932

37,441$336,474

94

3. Reconciliation between the liability recorded in the consolidatedbalance sheet and the balances of defined benefit obligation andplan assets
Millions of Yen
2023

Thousands of
U.S. Dollars
2023¥57,982(69,672)(11,689)1,725$434,192(521,731)(87,538)
12,919¥(9,964)$(74,619)

Millions of Yen
2023

Thousands of
U.S. Dollars
2023¥3,879(13,844)$29,054(103,674)¥(9,964)$(74,619)

Funded defined benefit obligation
Plan assets
Total
Unfunded defined benefit obligation
Net asset arising from defined benefit
obligation

Liability for retirement benefits
Asset for retirement benefits
Net asset arising from defined benefit
obligation

4. The components of net periodic retirement benefit costs for theyear ended March 31, 2023, were as follows:
Millions of Yen
2023¥1,671596(1,242)(925)
19¥ 119

Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial gains and losses
OthersNet periodic retirement benefit costs

Thousands of
U.S. Dollars
2023$12,520
4,466(9,306)(6,929)144$895

5. Amounts recognized in other comprehensive income (before
income tax effect) in respect of defined retirement benefit plans forthe year ended March 31, 2023, were as follows:
Millions of Yen
2023

Thousands of
U.S. Dollars
2023¥(2,594)¥(2,594)$ (19,427)$ (19,427)

Actuarial losses
Total

6. Amounts recognized in accumulated other comprehensive income(before income tax effect) in respect of defined retirement benefit
plans as of March 31, 2023, were as follows:
Millions of Yen

Unrecognized actuarial losses
Total

Thousands of
U.S. Dollars

2023

2023

¥(1,172)¥(1,172)$(8,782)$(8,782)

7. Plan assets(1) Components of plan assets
Plan assets consisted of the following:2023

Debt investments
Equity investments
Cash and cash equivalents
General account of life insurance companies
Others
Total

95

51%
14%
1%
26%
8%
100%

(2) Method of determining the expected rate of return on plan assets
The expected rate of return on plan assets is determined considering the long-term rates of return that are expected currently and in
the future from the various components of the plan assets.
8. Assumptions used for the year ended March 31, 2023, were set
forth as follows:
Discount rate
Expected rate of return on plan assets
Expected rate of salary increase2023
Mainly 1.0%

0.8%-2.0%
8.4%

9. Defined contribution
The amounts to be contributed by the Company and the consolidated
subsidiaries for the year ended March 31, 2023, were ¥456 million($3,421 thousand).

21. EQUITY

22. STOCK OPTIONSJapanese companies are subject to the Companies Act. The significant provisions in the Companies Act that affect financial andaccounting matters are summarized below:

At the annual general meeting of shareholders of the Bank held on
June 17, 2022, Proposal No. 4, “Incorporation of Wholly Owning
Parent Company Through Share Transfer,” was approved. As a resultof the share transfer under the proposal, the Company issued stockacquisition rights in place of the stock acquisition rights issued by the
Bank before the establishment of the Company.
The Company’s stock option plans grant options to the Bank’s
directors to purchase certain shares of the Company’s common stockin the respective exercise periods.

(a) Dividends
Under the Companies Act, companies can pay dividends at any time
during the fiscal year in addition to the year-end dividend upon resolution at the shareholders’ meeting. Additionally, for companies thatmeet certain criteria, such as (1) having a board of directors, (2) having
independent auditors, (3) having an audit and supervisory board, and(4) the term of service of the directors being prescribed as one year
rather than the normal two-year term by its articles of incorporation,
the Board of Directors may declare dividends (except for dividends inkind) at any time during the fiscal year if the company has prescribedso in its articles of incorporation. However, the Bank cannot do so
because it does not meet all the above criteria. The Companies Act
permits companies to distribute dividends in kind (noncash assets) toshareholders subject to certain limitations and additional requirements.
Semiannual interim dividends may also be paid once a year upon
resolution by the Board of Directors if the articles of incorporation of
the company so stipulate. The Companies Act and the Banking Act
provide certain limitations on the amounts available for dividends or thepurchase of treasury stock.
(b) Increases/decreases and transfer of capital stock, reserve, andsurplusThe Banking Act requires that an amount equal to 20% of dividends
must be appropriated as a legal reserve (a component of retained
earnings) or as additional paid-in capital (a component of capitalsurplus) depending on the equity account charged upon the paymentof such dividends, until the total of the aggregate amount of the legal
reserve and additional paid-in capital equals 100% of capital stock.
The Companies Act also provides that capital stock, legal reserve,
additional paid-in capital, other capital surplus, and retained earnings
can be transferred among the accounts within equity under certain
conditions upon resolution of the shareholders.

The stock options outstanding as of March 31, 2023, were as follows:
Numberof Options
GrantedThe Company’s 1st
1 director 13,000
stock acquisition rights (the Bank) shares
Stock
Options

Persons
GrantedDate of Exercise
Exercise Period
Grant (*) Price
2007.
¥1 From October 3,
7.27 ($0.01) 2022 to July 27, 2032

The Company’s 2nd
1 director 13,000 2008.
¥1 From October 3,
stock acquisition rights (the Bank) shares 7.18 ($0.01) 2022 to July 18, 2033
The Company’s 3rd
1 director 20,000 2009.
¥1 From October 3,
stock acquisition rights (the Bank) shares 7.24 ($0.01) 2022 to July 24, 2034
The Company’s 4th
1 director 27,000 2010.
¥1 From October 3,
stock acquisition rights (the Bank) shares 7.23 ($0.01) 2022 to July 23, 2035
The Company’s 5th
1 director 27,000 2011.
¥1 From October 3,
stock acquisition rights (the Bank) shares 7.22 ($0.01) 2022 to July 22, 2036
The Company’s 6th
1 director 30,000 2012.
¥1 From October 3,
stock acquisition rights (the Bank) shares 7.24 ($0.01) 2022 to July 24, 2037
The Company’s 7th
1 director 13,000 2013.
¥1 From October 3,
stock acquisition rights (the Bank) shares 7.23 ($0.01) 2022 to July 23, 2038
The Company’s 8th
3 directors 38,000 2014.
¥1 From October 3,
stock acquisition rights (the Bank) shares 7.22 ($0.01) 2022 to July 22, 2039
The Company’s 9th
3 directors 17,000 2015
¥1 From October 3,
stock acquisition rights (the Bank) shares 7.21 ($0.01) 2022 to July 21, 2040
The Company’s 10th 3 directors 24,000 2016.
¥1 From October 3,
stock acquisition rights (the Bank) shares 7.19 ($0.01) 2022 to July 19, 2041
The Company’s 11th 3 directors 28,000 2017.
¥1 From October 3,
stock acquisition rights (the Bank) shares 7.18 ($0.01) 2022 to July 18, 2042
The Company’s 12th 3 directors 26,500 2018.
¥1 From October 3,
stock acquisition rights (the Bank) shares 7.17 ($0.01) 2022 to July 17, 2043
The Company’s 13th 3 directors 29,000 2019.
¥1 From October 3,
stock acquisition rights (the Bank) shares 7.16 ($0.01) 2022 to July 16, 2044(*) The date of grant is the original grant date at the Bank.

(c) Treasury stock and treasury stock acquisition rights
The Companies Act also provides for companies to purchase treasury
stock and dispose of such treasury stock by resolution of the Boardof Directors. The amount of treasury stock purchased cannot exceed
the amount available for distribution to the shareholders, which isdetermined using a specific formula.
Under the Companies Act, stock acquisition rights are presented asa separate component of equity.
The Companies Act also provides that companies can purchaseboth treasury stock acquisition rights and treasury stock. Such treasury stock acquisition rights are presented as a separate componentof equity or deducted directly from stock acquisition rights.

96

The stock option activity is as follows:
The Company’s The Company’s The Company’s The Company’s The Company’s The Company’s The Company’s The Company’s The Company’s The Company’s The Company’s The Company’s The Company’s
1st stock
2nd stock
3rd stock
4th stock
5th stock
6th stock
7th stock
8th stock
9th stock
10th stock
11th stock
12th stock
13th stockacquisition rights acquisition rights acquisition rights acquisition rights acquisition rights acquisition rights acquisition rights acquisition rights acquisition rights acquisition rights acquisition rights acquisition rights acquisition rights
Year Ended March 31, 2023
Non-vested
March 31, 2022—Outstanding
Granted
VestedMarch 31, 2023—Outstanding
VestedMarch 31, 2022—Outstanding
VestedExercised
March 31, 2023—Outstanding
Exercise price
Average stock price at exercise
Fair value price at grant date

13,00013,00020,00027,00027,00022,00048,00022,00030,00033,00032,10034,0009,000 10,000
5,000
6,000
5,000
5,600
5,000
13,000 13,000 20,000 27,000 27,000 30,000 13,000 38,000 17,000 24,000 28,000 26,500 29,000¥1 ¥1 ¥1 ¥1 ¥1 ¥1 ¥1 ¥1 ¥1 ¥1 ¥1 ¥1 ¥1($0.01) ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) ($0.01)
—
—
—
—
—
— ¥801 ¥801 ¥801 ¥801 ¥801 ¥801 ¥801
—
—
—
—
—
— ($5.99) ($5.99) ($5.99) ($5.99) ($5.99) ($5.99) ($5.99)¥1,153 ¥1,057 ¥875 ¥704 ¥709 ¥743 ¥1,135 ¥1,079 ¥1,351 ¥730 ¥899 ¥888 ¥733($8.63) ($7.91) ($6.55) ($5.27) ($5.30) ($5.56) ($8.49) ($8.07) ($10.11) ($5.46) ($6.73) ($6.64) ($5.48)

23. VALUATION DIFFERENCE ON AVAILABLE-FORSALE SECURITIESThe breakdown of “Valuation difference on available-for-sale securities” posted in the consolidated balance sheet is as follows:
Millions of Yen
2023

Thousands of
U.S. Dollars
2023¥324,075(95,645)$2,426,801(716,227)¥228,430—$1,710,574
—

(481)

(3,603)¥227,948$1,706,971

Valuation difference
Deferred tax liabilities
Amounts equivalent to difference on
available-for-sale securities
Noncontrolling interest adjustment
Share of valuation difference on availablefor-sale securities in affiliated companies
Valuation difference on
available-for-sale securities

24. OTHER OPERATING INCOME
Other operating income for the year ended March 31, 2023, consistedof the following:

Gains on foreign exchange transactions
Gains on sales of bonds
Gains on financial derivatives
Total

Millions of Yen
2023

Thousands of
U.S. Dollars
2023¥7,106
19,093624¥26,824$53,216
142,980
4,673$200,871

25. OTHER INCOME
Other income for the year ended March 31, 2023, consisted of thefollowing:

Gains on sales of stock andother securities
Equity in earnings of affiliated companies
Gains on disposal of fixed assets
Other
Total

97

30,000Millions of Yen
2023

Thousands of
U.S. Dollars
2023¥13,911
417
186
6,958
¥21,474$104,175
3,126
1,395
52,109$160,807

26. OTHER OPERATING EXPENSES
Other operating expenses for the year ended March 31, 2023,
consisted of the following:

Losses on sales of bonds
Losses on redemption of bonds
Total

Millions of Yen
2023

Thousands of
U.S. Dollars
2023¥25,706909¥26,616$192,502
6,813$199,315

27. GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for the year ended March 31,
2023, consisted of the following:

SalaryDepreciation expenses
Other
Total

Millions of Yen
2023

Thousands of
U.S. Dollars
2023¥33,959
16,962
44,935¥95,857$254,299
127,025
336,495$717,820

28. OTHER EXPENSES
Other expenses for the year ended March 31, 2023, consisted of thefollowing:

Provision of allowance for loan losses
Losses on written-off claims
Losses on sales of stocks andother securities
Losses on devaluation of stocks
and other securities
Losses on disposal of fixed assets
Impairment losses
Other
Total

Millions of Yen
2023

Thousands of
U.S. Dollars
2023¥4,543402$34,021
3,012

16

122

90
571
258
6,579
¥12,461

679
4,280
1,935
49,266$93,31829. INCOME TAXESThe Company and its domestic subsidiaries are subject to Japanesenational and local income taxes which, in the aggregate, resulted in anormal effective statutory tax rate of approximately 29.9% for the year
ended March 31, 2023.

Deferred tax assets:
Allowance for loan losses
Liability for retirement benefits
Valuation loss on securities
Other
Less: valuation allowance
Deferred tax assets
Deferred tax liabilities:
Valuation difference on
available-for-sale securities
Gain on establishment of
employee retirement benefit trust
Securities returned from
employee retirement benefit trust
Other
Deferred tax liabilities
Net deferred tax assets (liabilities)

Millions of Yen
2023

Thousands of
U.S. Dollars
2023¥14,765
5,730
3,197
11,526(4,203)31,015$110,572
42,91023,94286,311(31,477)
232,259(95,622)(716,056)(5,079)(38,035)(2,724)(3,207)(106,634)¥(75,618)(20,404)(24,021)(798,518)$(566,258)

A reconciliation between the normal effective statutory tax rates andthe actual effective tax rates reflected in the accompanying consolidated statement of income for the year ended March 31, 2023, isomitted because the difference between the normal effective statutory
tax rates and the actual effective tax rates is not more than 5/100 of
the normal effective statutory tax rates for the current fiscal year.

30. LEASES(1) Financial Lease(a) Lessor
The net lease investment assets are summarized as follows:

Gross lease receivables
Estimated residual values
Unearned interest income
Lease investment assets

Millions of Yen
2023

Thousands of
U.S. Dollars
2023¥81,475
3,046(6,625)¥77,896$610,118
22,815(49,613)$583,319

Maturities of lease receivables are as follows:Year Ending March 31

Millions of Yen
2023

Thousands of
U.S. Dollars
2023

2024
2025
2026
2027
2028
2029 and thereafter
Total¥1,503
1,213
912
728
635
2,107
¥7,102$11,255
9,088
6,836
5,457
4,761
15,782$53,183

Maturities of lease payment receivables of lease investment assets are
as follows:Year Ending March 31

Millions of Yen
2023

Thousands of
U.S. Dollars
2023

2024
2025
2026
2027
2028
2029 and thereafter
Total¥22,765
18,241
14,004
11,8096,215
8,438¥81,475$170,478
136,600
104,871
88,431
46,542
63,193$610,118(2) Operating Lease(a) Lessee
The minimum rental commitments under noncancelable operatingleases at March 31, 2023, were as follows:

Due within one year
Due after one year
Total

Millions of Yen
2023

Thousands of
U.S. Dollars
2023

¥428
578
¥1,007$3,208
4,334$7,542(b) Lessor
The future lease payment receivables under noncancelable operatingleases at March 31, 2023, were as follows:

Due within one year
Due after one year
Total

Millions of Yen
2023

Thousands of
U.S. Dollars
2023

¥479
665
¥1,144$3,590
4,982$8,573

31. SEGMENT INFORMATION
An entity is required to report financial and descriptive information
about its reportable segments. Reportable segments are operating
segments or aggregations of operating segments that meet specified
criteria. Operating segments are components of an entity about which
separate financial information is available and such information is evaluated regularly by the chief operating decision maker in deciding how
to allocate resources and in assessing performance. Generally,
segment information is required to be reported on the same basis as
is used internally for evaluating operating segment performance anddeciding how to allocate resources to operating segments.
1. Description of Reportable Segments
The Group’s reportable segments are those for which separate financial information is available and regular evaluation by the Committee
for Integrated Risk and Budget Management is being performed inorder to decide how resources are allocated among the Group.
Therefore, the Group’s reportable segments consist of the banking
operations and leasing operations. Banking operations consist of thebanking business centered on deposits, loans, investment securities,
and exchange transactions. Leasing operations consist of lease transactions centered on finance leases.
2. Changes in Reportable Segments
The Company reviewed the classification of its business segments as
the Company was established, and the Group was reorganized on
October 3, 2022. The business segment of subsidiaries of the Bank,
including Shizugin IT Solution Co., Ltd., which had been included in“Other,” was changed to “Banking Operation.”
3. Methods of Measurement of Ordinary Income, Profit (Loss), Assets,
Liabilities, and Other Items for Each Reportable Segment
The accounting policies of each reportable segment are consistent
with those disclosed in Note 3, “Summary of Significant Accounting
Policies.”98

4. Information about Ordinary Income, Profit (Loss), Assets, Liabilities and Other Items
Millions of Yen

Year ended March 31, 2023
Ordinary income:Ordinary income from external customers
Ordinary income from intersegment transactions
Total

Segment profit
Segment assets
Segment liabilities
Other:
Depreciation
Interest income
Interest expense
Equity in earnings of affiliated companies
Extraordinary income
Gain on disposal of non-current assets
Reversal of stock acquisition rights
Gains on dividend in kind
Extraordinary losses
Loss on disposal of non-current assets
Impairment losses
Investments in affiliated companies
Increase in property, plant and equipment andintangible assets

Reportable Segment
Banking
Leasing
Operations
Operations¥242,547
2,045¥244,592¥70,506
15,546,547
14,485,918

Other

Total

¥35,069 ¥277,617
1,137
3,182
¥36,206 ¥280,799¥1,566 ¥72,073
120,659 15,667,207
97,506 14,583,424

16,812
159,603
39,253
51
459
186
272

1,022
9
259

17,834
159,613
39,512
51
459
186
272

Total

2
2

12,057569

Consolidated¥9,769 ¥287,386¥287,386
531
3,713 ¥(3,713)¥10,300 ¥291,100 ¥(3,713) ¥287,386¥2,108 ¥74,182 ¥(217) ¥73,964
851,157 16,518,364(863,478) 15,654,886
18,665 14,602,089(95,308) 14,506,781
137
62
448
366
2,265

830
571
258
1,267

18,01917,972
159,675
39,960
417
2,724
186
272
2,265
830
571
258
19,287

12,626

149

12,776

2,265
827
569
258
1,267

Reconciliations(6)(1,067)(240)(2,538)17,965
158,608
39,719
417
186
186

(272)
(2,265)830
571
258
19,287(10)

12,766

Reconciliations

Consolidated

Thousands of U.S. Dollars

Year ended March 31, 2023

Reportable Segment
Banking
Leasing
Operations
Operations

Ordinary income:Ordinary income from external customers$1,816,292
Ordinary income from intersegment transactions
15,314
Total$1,831,606
Segment profit$527,981
Segment assets
116,418,660
Segment liabilities
108,476,248
Other:
Depreciation
125,898
Interest income
1,195,177
Interest expense
293,944
Equity in earnings of affiliated companies
385
Extraordinary income
3,439
Gain on disposal of non-current assets
1,395
Reversal of stock acquisition rights
2,043
Gains on dividend in kind
Extraordinary losses
6,199
Loss on disposal of non-current assets
4,264
Impairment losses
1,935
Investments in affiliated companies
9,491
Increase in property, plant and equipment andintangible assets
90,290

Other

Total

$262,615 $2,078,907 $73,156 $2,152,064$2,152,064
8,515
23,8303,97827,809 $(27,809)$271,131 $2,102,738 $77,134 $2,179,873 $(27,809) $2,152,064$11,731 $539,713 $15,790 $555,504 $(1,628) $553,875
903,544 117,322,205 6,373,803 123,696,008(6,466,065) 117,229,943
730,163 109,206,411
139,773 109,346,185(713,704) 108,632,481

Notes: 1. “Reconciliations” are mainly eliminations of intersegment transactions.
2. The Company, established on October 3, 2022, is included in “Other.”

99

Total

7,655
72
1,940

133,553
1,195,250
295,884
385
3,439
1,395
2,043

1,028
464
3,355
2,741
16,962

6,215
4,280
1,935
9,491

134,938

134,582
1,195,714
299,240
3,126
20,401
1,395
2,043
16,962
6,215
4,280
1,935
144,430

94,552

1,122

95,675

16,962
16
16

4,261

(50)
(7,990)(1,802)(19,005)

134,532
1,187,723
297,438
3,126
1,395
1,395

(2,043)(16,962)
6,215
4,280
1,935
144,430(76)

95,598

5. Related information(1) Information about services
Millions of Yen
Lending Investment Leasing
Operations Operations Operations

Year ended March 31, 2023

¥117,068¥66,588¥35,069

Other

Total

¥68,660¥287,386

Thousands of U.S. Dollars
Lending Investment Leasing
Operations Operations Operations
Other

Total

$876,654 $498,638 $262,615 $514,154 $2,152,064(2) Information about geographical areas(i) Ordinary income
The domestic share of ordinary income from external customers exceeds 90% of ordinary income in the consolidated statement of income, thus
information is not presented.
(ii) Tangible fixed assets
The domestic share of tangible fixed assets exceeds 90% of tangible fixed assets in the consolidated balance sheet, thus information is notpresented.
(3) Information about major customers
Ordinary income from a specific customer does not exceed 10% of ordinary income in the consolidated statements of income, thus information is
not presented.
6. Information about impairment losses of assets
Millions of Yen
Reportable Segment
Banking
Leasing
Operations Operations
Total

Year ended March 31, 2023

¥258

¥258

Other

Total

¥258

Thousands of U.S. Dollars
Reportable Segment
Banking
Leasing
Other
Operations Operations
Total$1,935$1,935

Total$1,935100

32. FINANCIAL INSTRUMENTS AND RELATEDDISCLOSURES(Financial Instruments)
1. Information on financial instruments(1) Policy for financial instruments
The Group provides comprehensive financial services, centering onbanking, along with leasing and financial instruments trading. Its
base of operations is Shizuoka Prefecture.
Banking operations, the core business of the Group, provide a
range of financial instruments, including deposits in Japanese yen,deposits in foreign currencies, Japanese government bonds,
investment trusts, and personal pension insurance. It also provides
stable financing for customers in the region through loans to individuals and lending operations for small and medium enterprises.
(2) Details of financial instruments and related risks
The financial assets of the Group consist primarily of loans and bills
discounted to domestic customers and securities, including bondsand equity securities.
The loans and bills discounted are exposed to credit risk arisingfrom potential default by borrowers. As about 50% of the loans
and bills discounted are for customers in Shizuoka Prefecture,credit-related losses could occur on a large scale if the regional
economic environment changes negatively or if a severe earthquake occurs.
The Group holds securities, such as debt securities (bonds),
equity securities, and investment trusts, under its investment policy
focused on the safety and liquidity of the investment. These securities are exposed to risks of market price fluctuations associatedwith the credit standing of issuers and interest rate changes. If theprices of equity securities and other securities held decline, impairment losses or valuation losses could adversely affect the operating
results and financial standing of the Group.
Financial liabilities consist primarily of deposits from domestic
customers and funds raised in the call market. If the Company
loses its credit status because of downgrades or other factors, or if
the market environment deteriorates, conditions for financing could
worsen or transactions could be constrained.
The Group enters into derivative transactions for customer needsof hedging exchange rates or interest rates, and for asset andliability management (ALM) or hedging individual transactions toappropriately manage the market risks of the Group. The Groupalso conducts short-term trading transactions.
Derivatives mainly include interest rate swaps, currency swaps,
and bond futures, and are exposed to market risk that could cause
losses in association with changes in interest rate markets andforeign exchange markets, as well as credit risk (counterparty risk),
that is, the risk of default on the initial contract due to the bankruptcy of the counterparty or other factors. Between financial
assets and financial liabilities, there are interest rate risks associated with mismatches of interest rates and terms.

101(3) Risk management systems for financial instruments(i) Integrated risk management system
Under the Basic Risk Management Regulations that stipulate
the Group’s basic risk management policy, the Group has
established a basic framework, including an organizational
structure for defining and managing risks and specific procedures for risk management.
To ensure a balance between profitability and financial soundness, the Group has introduced a management system basedon a risk capital allocation at the core of integrated risk
management.
The risk capital allocation is a system for avoiding excessive
risk taking by setting risk limits below which the Group will beable to withstand losses on its own. This system allocates coreregulatory capital to each operational department or section
and controls risk so that if market, credit or other risks emerge,
losses will be contained within the range of shareholders’equity.
(ii) Credit risk management system
Credit risk is the risk of incurring losses when collecting loans
and bills discounted becomes difficult because of the worsening of borrowers’ financial conditions.
The Credit Risk Management Office of the Risk Management
Department manages all credit risks associated with theGroup’s operations both in Japan and overseas in order toensure the soundness of the Group’s loan asset portfolio. The
borrower credit rating system, which is an essential part of its
credit risk management, together with other internal rating
systems, is operated by the Credit Planning Group of the Credit
Support Department, designed and supervised by the Credit
Risk Management Group of the Risk Management Department,
which is independent from the credit department (i.e., theCredit Support Department), and verified for appropriateness ofthe system by the Risk Management Group of the Risk
Management Department. This structure has been designed
such that the internal credit rating system will function appropriately through mutual checks and balances between these threegroups.
In addition, the Audit Department checks whether credit risk
management is conducted appropriately in accordance withthe relevant rules, through such means as validation of the self­
assessment process.
The Credit Risk Management Office uses statistical methods
to quantify latent credit risks intrinsic to the Group’s entire loan
portfolio. This enables the Bank to accurately assess the scaleof potential risk, monitor any concentration of loans to particularlarge-scale borrowers or specific industries, and thus control
the portfolio to avoid excessive credit risk.
The credit risk management status, together with the statusof market risk management and liquidity risk management
described below, is reported through monthly meetings of theCommittee for Group Integrated Risk and Budget Management,
which is chaired by the president, as well as through otherchannels of management.

(iii) Market risk management system
Market risk is the risk of incurring losses in association withchanges in the prices of financial assets and liabilities that arecaused by changes in interest rates, stock prices, and foreignexchange rates.
The Group controls the degree of market risks within a certain
range by setting limits about risk capital allocations, unrealized
profits and losses, position, and sensitivity, and so on.
The Group has established ALM hedge criteria for transactions in banking accounts, especially deposits, loans and bills
discounted, and investment securities to control the degree ofmarket risk within a certain range. The Business Strategy
Planning Office of the Corporate Planning Department
discusses ALM hedge policies based on the status of interest
rate risks and interest rate outlook at meetings of theCommittee for Group Integrated Risk and Budget
Management.
The Group has established a system of checks and balancesin the market division by strictly separating trading departments
and administration departments and by setting up an independent risk management department. The Audit Department,
which is independent of departments subject to audit, checks
the effectiveness of this system of checks and balances among
the three departments.
The Group measure the market risks (the estimation of possible losses) of financial assets and liabilities, such as securities
and derivatives held in trading portfolios, and loans, securities,
deposits, bonds payable, and derivative transactions held inbanking portfolios, using Value at Risk (VaR). VaR is utilized forthe quantitative analysis to manage market fluctuations.
A historical simulation model (a variance covariance model in2012) is used for the measurement of VaR. The Group performs
backtesting comparing VaR calculated by the model and actual
profit and loss, in order to determine whether the measurement
model captures market risks with sufficient accuracy.
Nevertheless, VaR measures possible market risk amounts
statistically calculated based on historical data and is unlikely tocapture risks under significant market fluctuations notpresumed.
The total amounts of market risks of the Group as of March
31, 2023, are as follows:

VaR

Millions of Yen
2023

Thousands of
U.S. Dollars
2023¥160,028$1,198,355

The assumptions used to measure VaR are as follows:
Observation period: Five years
Confidence interval: 99%
Holding period: 125 days for banking transactions and 10
days for trading transactions
Demand deposits staying long term without withdrawal are
estimated as core deposits and are reflected in the market risk
measurement.

(iv) Liquidity risk management system
There are two types of liquidity risk: (1) financing risk, which is
the risk of not being able to secure needed funds as a result ofworsening market conditions and other factors, or incurring
losses due to being forced to raise funds at much higher interest rates than usual; and (2) market liquidity risk, which is therisk of not being able to trade financial instruments, such as
bonds, because of market turmoil or other factors or incurring
losses due to being forced to trade financial instruments at far
less favorable prices than usual.
The Group has established a system of checks and balancesby setting up fund management departments for financing inJapanese yen and in foreign currencies, and a liquidity risk
management department that is independent of the fund management departments. The Fund and Foreign Exchange Groupof the Treasury Department of the Bank, which is one of thefund management departments, controls amounts raised inmarkets within a range of amounts permitted to be raised so as
to prevent excessive fund-raising in markets, and seeks stablefinancing, considering market circumstances. The Risk
Management Office of the Risk Management Department,
which is the liquidity risk management department, assesses
the stability of the asset and liability structure, including the status of the holding of liquid assets, and monitors the financing
position and the status of management by the fund management departments.
To deal promptly with unforeseeable circumstances, the Bank
has classified financing management in emergencies into fourphases -- Phase 1 (prevention), Phase 2 (caution needed),Phase 3 (concern over liquidity), and Phase 4 (lack of liquidity)--, and has appointed authorized personnel and countermeasures for each phase in advance.
To manage market liquidity risk, the liquidity risk management
department monitors the holding of liquid assets on a timely
basis, and the front office chooses assets to be managed after
taking into account their liquidity and sets limits by issue and byterm.
(4) Supplementary explanation of the fair values of financial instruments
The fair values of financial instruments include values based onmarket prices. If there are no market prices, values are reasonably
calculated. As these fair values are calculated based on certain
assumptions, fair values could differ if different assumptions areused for calculation.
2. Fair values of financial instruments and a breakdown by level of thefair values of financial instruments
The carrying values and fair values of financial instruments, the difference between these values, and their fair values by level are as
follows:
Please note that the table below does not include stocks or others
without quoted market prices and investments in partnerships.
Account items whose carrying values are of law significance havebeen omitted.

102

Financial Instruments Categorized by Fair Value Hierarchy
The fair value of financial instruments is categorized into the following
three levels, depending on the observability and significance of the
inputs used in making fair value measurements:
Level 1: Fair values measured by using quoted prices (unadjusted) in
active markets for identical assets or liabilities
Level 2: Fair values measured by using inputs other than quoted
prices included within Level 1 that are observable for theassets or liabilities, either directly or indirectly
Level 3: Fair values measured by using unobservable inputs for theassets or liabilities
If multiple inputs are used that have a significant impact on themeasurement of fair value, fair value is classified at the lowest level inthe fair value measurement among the levels to which each of these
inputs belongs.
(1) Financial instruments measured at the fair values in the consolidated balance sheet
March 31, 2023

Level 1Millions of Yen
Level 2
Level 3

Trading assets
Trading securities¥45¥3,834
Japanese government bonds
45
Local government bonds
481
Corporate bonds
3,353
Securities (*1)
Available-for-sale securities 1,444,452 1,157,755
Japanese government bonds
854,509
Local government bonds
235,913
Corporate bonds
246,444
Stocks446,162
4,389
Others143,779
671,008
Foreign bonds
143,779
428,477
Total assets¥1,444,498 ¥1,161,590
Derivative transactions (*2)(*3)(*4)
Interest rate-related¥(1,427)
Currency-related(9,060)Total derivative transactions¥(10,488)

March 31, 2023

Level 1

Trading assets
Trading securities$342
Japanese government bonds
342
Local government bonds
Corporate bonds
Securities (*1)
Available-for-sale securities 10,816,629
Japanese government bonds 6,398,906
Local government bonds
Corporate bonds
Stocks3,341,042
Others
1,076,680
Foreign bonds
1,076,680
Total assets$10,816,971
Derivative transactions (*2)(*3)(*4)
Interest rate-related
Currency-related
Total derivative transactions

103¥3,88045
481
3,353¥191,947

2,794,155
854,509
235,913
191,868
438,312450,552
79
814,867
572,257¥191,947 ¥2,798,036¥(1,427)(9,060)¥(10,488)

Thousands of U.S. Dollars
Level 2
Level 3

$28,715

Total$29,058342
3,604
25,111

3,604
25,111
8,669,727

Total$1,437,380

1,766,613
1,845,472
32,8685,024,773
3,208,610$8,698,443

20,923,737
6,398,906
1,766,613
1,436,785
3,282,258
3,373,910
594
6,102,048
4,285,291$1,437,380 $20,952,796$(10,693)(67,845)$(78,538)$(10,693)(67,845)$(78,538)(*1) Securities do not include investment trusts to which the treatment in Paragraph24-9 of the Implementation Guidance on Accounting Standard for Fair Value
Measurement is applied to deem the net asset value to be the fair value.
These investment trusts are carried at ¥10,300 million ($77,135 thousand) in the
consolidated balance sheet.
A reconciliation of the beginning balance to the ending balance of the investment trusts to which the treatment of net asset value as fair value was applied is
as follows:(Millions of Yen)
The Amount The Amount
Unrealized Gains/by Which the by Which the
Losses on Investment
Net Asset
Trusts Held at
Net Asset
Value of the Value of thethe Consolidated
Recorded in
Investment Investment
Balance Sheet Date
Net
Balance at Recorded
Other
Trusts is Trusts is Not Balance at of the Amount
Purchase,
Beginning in Profit/ Comprehensive Sales and Deemed to be Deemed to be Ending of Recorded in Profit/
of Year
Loss
Income (*) Redemption the Fair Value the Fair Value Year
Loss for the Year
¥15,647¥(101)¥(5,244) ¥10,300¥10,300
Profit/Loss or Other
Comprehensive Income(Thousands of U.S. Dollars)
The Amount The Amount
Unrealized Gains/by Which the by Which the
Losses on Investment
Net Asset
Trusts Held at
Net Asset
Value of the Value of thethe Consolidated
Recorded in
Investment Investment
Balance Sheet Date
Net
Balance at Recorded
Other
Trusts is Trusts is Not Balance at of the Amount
Purchase,
Beginning in Profit/ Comprehensive Sales and Deemed to be Deemed to be Ending of Recorded in Profit/
Lossof Year
Income (*) Redemption the Fair Value the Fair Value Year
Loss for the Year
$117,172$(763) $(39,273) $77,135$77,135
Profit/Loss or Other
Comprehensive Income(*) Included in “Valuation difference on available-for-sale securities” in “Other comprehensive income” in the consolidated statements of comprehensive income.
(*2) The total of all derivative transactions recorded in trading assets and liabilities andother assets and liabilities
Net claims and liabilities arising from derivative transactions are presented in net
amounts. Net negative amounts are marked with a bracket.
Transactions subject to special hedging treatment of interest rate swaps arevalued together with the hedged transactions, and have thus been excluded fromderivative transactions.
(*3) Of the derivative transactions, those subject to hedge accounting are carried at¥(21,659) million ($(162,194) thousand) in the consolidated balance sheet.
(*4) These transactions include, among others, interest rate swaps designated as
hedging instruments to reduce market fluctuation risk or foreign exchange fluctuation risk associated with loans to be hedged against. Deferred hedge accounting
is applied to these transactions. The Practical Solution on the Treatment of Hedge
Accounting for Financial Instruments that Reference LIBOR (ASBJ PITF No. 40,
March 17, 2022) is applied to these hedging relationships.

(2) Financial instruments not measured at the fair values in the consolidated balance sheet
Notes have been omitted for cash and due from banks, call loans and bills bought, call money and bills sold, payables under repurchaseagreements, and payables under securities lending transactions, as the carrying values of these financial instruments approximate their fairvalues due to short payment terms.
Millions of Yen
Fair Value
March 31, 2023
Securities
Held-to-maturity
Japanese government bonds
Local government bonds
Corporate bonds
OthersForeign bonds
Loans and bills discounted
Allowance for loan losses (*)

Level 1

Level 2

Level 3

¥14,764
8,617
2,054
4,092
4,092

Total assets
Deposits
Negotiable certificates of deposit
Borrowed money
Total liabilities¥14,764¥11,705,100
65,104
1,289,210¥13,059,415¥57,701

57,701

9,955,186¥10,012,887¥29,412¥29,412

Total

Carrying Value

Difference¥72,465¥72,903¥(438)

8,617
59,755
4,092
4,092

8,744
59,8404,318
4,318
10,037,128(47,946)
9,989,181¥10,062,085¥11,705,070
65,104
1,325,573¥13,095,748

(127)
(85)
(225)
(225)

9,955,186¥10,027,652¥11,705,100
65,104
1,318,623¥13,088,828(33,994)¥(34,432)¥30
0(6,950)¥(6,920)

Thousands of U.S. Dollars
Fair Value
March 31, 2023
Securities
Held-to-maturity
Japanese government bonds
Local government bonds
Corporate bonds
OthersForeign bonds
Loans and bills discounted
Allowance for loan losses (*)
Total assets
Deposits
Negotiable certificates of deposit
Borrowed money
Total liabilities

Level 1

Level 2
$110,561
64,52915,38330,64930,649$110,561$87,652,394
487,526
9,654,117$97,794,039

Level 3$432,088

432,088

74,548,351$74,980,439$ 220,252$ 220,252

Total

Carrying Value

Difference$542,650$545,931$(3,281)

64,529447,471
30,64930,64965,484448,11032,33632,33675,161,960(359,042)
74,802,917$75,348,848$87,652,168
487,526
9,926,418$98,066,114

(955)
(638)
(1,687)(1,687)74,548,351$75,091,001$87,652,394
487,526
9,874,370$98,014,291(254,565)$(257,846)$225
0(52,047)$(51,822)(*) General and individual allowances for losses are excluded from the corresponding loans and bills discounted.

Note 1: Description of the valuation methodologies and inputs used for measurementof the fair value of financial instruments
AssetsTrading assets
The fair values of trading assets are classified into Level 1 if their unadjusted
quoted prices in active markets are available. These trading assets primarily
include Japanese government bonds. If the market is not active, the fair values of trading assets are classified into Level 2 even if their publishedquoted prices are used. These trading assets primarily include local government bonds and corporate bonds.
Securities
The fair values of securities are classified into Level 1 if their unadjusted
quoted prices in active markets are available. These securities primarily
include listed stocks and Japanese government bonds. If the market is not
active, the fair values of securities are classified into Level 2 even if their
published quoted prices are used. These securities primarily include local
government bonds and corporate bonds. For investment trusts for which no
market trading prices exist, the net asset value is used as fair value andclassified into Level 2, if there are no material restrictions that would requirecompensation for the risk from market participants with respect to cancellation or repurchase requests. The fair values of securitized products(beneficial interests in trust) are classified into Level 3, because these fairvalues are measured based on prices obtained from third parties, and significant unobservable inputs are used to calculate these prices. The fairvalues of private placement bonds are classified into Level 3, because thesefair values are measured by discounting at a discount rate commensuratewith the bonds’ internal rating, remaining term, and coverage ratio, and thediscount rate is a significant unobservable input.

Stock acquisition rights are calculated using valuation techniques, such as
the option valuation model. Major inputs include probability of listing. Since
probability of listing is an unobservable input, the fair value of stock acquisition rights is classified into Level 3.
Loans and bills discounted
The fair values of loans and bills discounted are measured at their present
values, which are calculated separately for different categories createdbased on types and internal ratings of loans and bills discounted, the statusof their collateral and guarantees, and their periods, by discounting thefuture cash flows of the principal and interest at the interest rate expected
for similar new loans or at a discount rate calculated by reflecting credit risk,
expense rate, etc., on market interest rate. The fair values of floating-rateloans and bills discounted are measured at their carrying values, because
their carrying values approximate fair values if the borrowers’ credit status
has not changed significantly since disbursement, as they quickly reflectmarket interest rates. As for claims against borrowers classified as legal
bankruptcy, virtual bankruptcy or caution, since the loan loss estimates havebeen calculated based on, among other things, the amounts expected to be
recoverable from collateral and guarantees, the fair values of these claims
approximate their carrying values minus the amount of allowance for loan
losses on the consolidated balance sheet at the end of the fiscal year. The
remaining amounts are deemed to be their fair values. These fair values are
all classified into Level 3, since the discount rate is unobservable.

104

Liabilities
Deposits and Negotiable Certificates of Deposit
As for demand deposits payable immediately on demand at the end of the
fiscal year, the amounts payable are deemed to be their fair values. The fairvalues of time deposits and negotiable certificates of deposit are measured
at their discounted present value, which is calculated by classifying thembased on their periods and discounting the future cash flows at the interest
rate to be used when accepting new deposits. The fair values of deposits
with short terms (up to one year) or floating interest rates are measured attheir carrying values, since their carrying values approximate fair values.
These fair values are classified into Level 2.
Borrowed money
The fair value of borrowed money is measured at its present value, which is
calculated by classifying the borrowed money based on its period and by
discounting the future cash flows at the interest rate expected for similar
new borrowings. Floating rate borrowed money reflects market interest
rates in short periods, and the credit standing of the Group has not significantly changed since disbursement. Therefore, the carrying value of floating
rate borrowed money approximates the fair value. The fair value of borrowed
money with short terms (up to one year) is measured at its carrying value,
since its carrying value approximates fair value. This fair value is classified
into Level 3 if any significant unobservable input is used in its measurement,or otherwise into Level 2.
Derivative Transactions
The fair values of derivative transactions are classified into Level 1 if theirunadjusted quoted prices in active markets are available. These derivativetransactions primarily include bonds futures. However, since most derivatives are over the counter transactions without published quoted prices,
their fair values are measured using valuation techniques, such as the present value technique and the option valuation model depending on the typeof transaction and the maturity period. The main inputs used in those valuation techniques are interest rate, exchange rate, and volatility, among others.
In addition, price adjustments are made based on the credit risk of thecounterparty and that of the Group. The fair values of these transactions areclassified into Level 2 if no unobservable inputs are used or if the effect of
the unobservable inputs used is insignificant. These transactions primarily
include interest rate swaps and forward exchange contracts.
Note 2: Information on financial instruments measured at Level 3 fair values in the
consolidated balance sheet(1) Quantitative information on significant unobservable inputs (March 31, 2023)

Category
Securities

Valuation
TechniqueSignificant
Unobservable
Input

Range of
Input

Weighted
Average of
Input

Corporate bonds(2) Reconciliation between opening and closing balances and loss/gain on valuation recognized in profit/loss
Millions of Yen
Securities

March 31, 2023
Balance at beginning of the year
Profit or loss orother comprehensive income
for the period
Recorded in profit or loss (*1)
Recorded in othercomprehensive income (*2)
Net purchases, sales, issues,and settlements
Transfer into Level 3 fair value

Available-For-Sale Securities
Securitized
Products
Private(Beneficial
Stock
PlacementInterest in
Acquisition
Bonds
Trust)
Rights¥31,430¥108,028
¥25

(37)

(7)

(104)

(694)

10

(2,301)55,54651¥29,024¥162,843¥79

Transfer from Level 3 fair value
Balance at end of the year
Gains or losses on valuation offinancial assets and financial
liabilities held at the end of
the year included in profit orloss for the period

Thousands of U.S. Dollars
Securities

March 31, 2023
Balance at beginning of the year
Profit or loss orother comprehensive income
for the period
Recorded in profit or loss (*1)
Recorded in othercomprehensive income (*2)
Net purchases, sales, issues,and settlements
Transfer into Level 3 fair value

Available-For-Sale Securities
Securitized
Products
Private(Beneficial
Stock
PlacementInterest in
Acquisition
Bonds
Trust)
Rights$235,367$808,960
$188

(279)

(57)

(782)

(5,201)

77(17,236)415,957

386$217,348$1,219,437$594Transfer from Level 3 fair value

Privateplacement
bonds
Other

Present
value
technique

Discount
rates

0.3% – 2.0%

0.6%

Stock
acquisitionrights

Optionvaluation
model

Probability
0% – 50.0%
of listing

49.9%

Balance at end of the year
Gains or losses on valuation offinancial assets and financial
liabilities held at the end of
the year included in profit orloss for the period(*1) Included in “Interest Income” on the consolidated statement of income.
(*2) Included in “Valuation difference on available-for-sale securities” in “Other
Comprehensive Income” on the consolidated statement of comprehensive
income.
(3) Description of process of fair value measurement
The Group has established policies and procedures for fair value measurement in middle departments and back-end departments. Once a fair value ismeasured, verification is performed to test the validity of the valuation techniques and inputs used in the measurement of the fair value and theappropriateness of the classification of the fair value.
In calculating fair values, valuation models are used that most appropriatelyreflect the nature, characteristics, and risks of the individual assets.
Furthermore, when quoted prices obtained from a third party are used, thevalidity of these prices are verified by such appropriate methods as checking
the valuation techniques and inputs being used and/or comparing the resulting fair values with fair values of similar financial instruments.

105

(4) Description of the impact of changes in significant unobservable inputs onfair values
The significant unobservable inputs used in the measurement of fair values of
securitized products (beneficial interests in trust) are probability of default, loss
given default, and prepayment rate. Significant increase (decrease) in probability of default or loss given default will result in significant decrease (increase) infair values, whereas significant change in prepayment rate will result in significant decrease (increase) in fair values, depending on the structure of thefinancial instrument.
The significant unobservable input used in the measurement of fair values ofprivate placement bonds is discount rate. The discount rate is calculated
according to the internal rating of the issuer, the remaining term, and thecoverage ratio. Significant increase (decrease) in discount rate will result insignificant decrease (increase) in fair values.
Probability of listing is the significant unobservable input used to calculate
the fair value of stock acquisition rights. A significant increase (decrease) in
probability of listing will result in a significant increase (decrease) in fair value.

Note 3: Stocks and others without quoted market prices and investments in partnerships are measured as follows in the consolidated balance sheet. They are notincluded in “Available-for-sale securities” in the tables disclosed within thisfootnote under the heading, “2. Fair values of financial instruments and a
breakdown by level of the fair values of financial instruments” above.

2023¥10,472
90,224

Thousands of
U.S. Dollars
2023$78,419
675,640¥100,697$754,059

Millions of Yen
Unlisted stocks (*1, *2)
Investments in partnerships and others (*3)
Total(*1) Unlisted stocks are not included in the disclosure of fair value in accordance with Paragraph 5 of the “Implementation Guidance on Disclosuresabout Fair Value of Financial Instruments” (ASBJ Guidance No. 19, March
31, 2020).
(*2) The impairment losses on unlisted stocks for the year ended March 31,
2023, are ¥19 million ($148 thousand).
(*3) Investments in partnerships and others principally include investment partnerships. These are not included in the disclosure of fair value inaccordance with Paragraph 24-16 of the “Implementation Guidance on
Disclosures about Fair Value of Financial Instruments.”
These investments in partnerships and others include the investments in
non-consolidated subsidiaries as of March 31, 2023, of ¥3,252 million($24,359 thousand), among others.

Note 4: Maturity analysis for financial assets and securities with contractual maturities

March 31, 2023

Due from banks
Call loans and bills bought
Securities:
Held-to-maturity securities
Available-for-sale securities
Loans and bills discounted (*1)(*2)
Total

March 31, 2023

Due from banks
Call loans and bills bought
Securities:
Held-to-maturity securities
Available-for-sale securities
Loans and bills discounted (*1)(*2)
Total

Due in One Yearor Less¥1,656,893
200,866
101,636
1,000
100,636
2,162,432¥4,121,828

Due in One Yearor Less$12,407,469
1,504,167
761,090
7,488
753,602
16,193,141$30,865,868

Millions of yen
Due after One Year Due after Three Years Due after Five Years Due after Seven Years
through Three Years through Five Years through Seven Years through Ten Years¥125,496
9,096
116,399
1,811,687¥1,937,184¥304,989
28,643276,3451,457,401¥1,762,390¥126,429
1,364
125,064
917,043¥1,043,472¥531,993
1,100
530,893
1,003,438¥1,535,432

Thousands of U.S. Dollars
Due after One Year Due after Three Years Due after Five Years Due after Seven Years
through Three Years through Five Years through Seven Years through Ten Years$939,767
68,120871,647
13,566,630$14,506,397$2,283,877
214,491
2,069,385
10,913,598$13,197,476$946,751
10,220936,5316,867,182$7,813,934$3,983,775
8,237
3,975,537
7,514,143$11,497,918

Due after
Ten Years¥1,168,434
31,602
1,136,832
2,487,986¥3,656,421

Due after
Ten Years$8,749,699
236,649
8,513,049
18,631,020$27,380,720(*1) The amounts of loans and bills discounted without due dates, which have been excluded as of March 31, 2023 are ¥103,771 million ($777,081 thousand).
(*2) The amounts of loans and bills discounted for “possible bankruptcy,” “virtual bankruptcy,” and “legal bankruptcy,” excluding those without due dates, which have been excluded as of March 31, 2023 are ¥93,366 million ($699,162 thousand).

106

Note 5: Maturity analysis for borrowed money and other interest-bearing debt

Due in One Yearor Less

March 31, 2023

Deposits
Negotiable certificates of deposit
Call money and bills soldPayables under repurchase agreements
Payables under securities lending transactions
Borrowed money
Total¥11,376,656
65,104
172,557
385,270
466,781373,279¥12,839,649

Due in One Yearor Less

March 31, 2023

Deposits
Negotiable certificates of deposit
Call money and bills soldPayables under repurchase agreements
Payables under securities lending transactions
Borrowed money
Total$85,192,871
487,526
1,292,177
2,885,060
3,495,442
2,795,260$96,148,338

Millions of yen
Due after One Year Due after Three Years Due after Five Years Due after Seven Years
through Three Years through Five Years through Seven Years through Ten Years¥295,379¥26,327¥2,936¥3,770209,016¥504,395

742,457¥768,785

821¥3,757¥3,770Thousands of U.S. Dollars
Due after One Year Due after Three Years Due after Five Years Due after Seven Years
through Three Years through Five Years through Seven Years through Ten Years$2,211,918$197,152$21,990$28,235

1,565,196$3,777,114

5,559,812$5,756,965

6,149$28,140$28,235

Due after
Ten Years

Due after
Ten Years

Note: Demand deposits are included in “Due in One Year or Less.”

33. DERIVATIVES
Qualitative information on derivatives, such as the nature and the purpose of derivative financial instruments, is included in Note 32.
Derivative transactions to which hedge accounting is not applied at
March 31, 2023 consisted of the following:Over the counter:
Interest rate swaps
Currency swaps
Forward contracts
Currency options
Other

Unrealized
Gains(Losses)¥595,725
254,053
688,567
310,314
4,356

¥909
(47)
10,356
3,086
34

¥909
(47)
10,356(82)
34

Thousands of U.S. Dollars
Unrealized
Contract
Contract
Gains
or Notional Amount Due(Losses)Amount after One Year Fair Value

Over the counter:
Interest rate swaps
Currency swaps
Forward contracts
Currency options
Other$4,461,024 $4,296,617
1,902,451 1,692,280
5,156,263 2,258,195
2,323,755 2,323,755
32,61928,320$6,812(353)
77,554(618)
261

Hedged Item

Millions of Yen
Contract
Contract Amount Due
Amount after One Year Fair Value

Principled treatment:

Millions of Yen
Contract
Contract
or Notional Amount Due
Amount after One Year Fair Value¥573,770
225,987
301,559
310,314
3,781

Derivative transactions to which hedge accounting is applied at March
31, 2023, consisted of the following:$6,812(353)
77,554
23,114261

Note: Derivatives included in the table above were measured at fair value, and theunrealized gains and losses were recognized in income.

Interest rate swaps
Currency swaps

Securities classified
as available-for-sale ¥569,632
and borrowed money
Loans, deposits,
and securities in 147,486
foreign currencies

Special hedging treatment:Interest rate swaps
Loans

86,794¥410,599¥(2,337)

139,294(19,321)58,625

Thousands of U.S. Dollars
Contract
Contract Amount Due
Hedged Item Amount after One Year Fair Value

Principled treatment:Interest rate swaps
Currency swaps

Securities classified
as available-for-sale $4,265,631 $3,074,726
and borrowed money
Loans, deposits,
and securities in 1,104,438 1,043,092
foreign currencies

Special hedging treatment:Interest rate swaps
Loans

649,949$(17,506)(144,688)

439,007

Notes: 1. Principally, deferral hedge accounting is applied as stipulated in JICPA
Industry Committee Practical Guideline No. 24, March 17, 2022, and No. 25,
October 8, 2020.
2. The fair value of interest rate swaps with special hedging treatment is omitted as interest rate swaps and loans are treated unitary and their values areincluded in the fair value of loans and bills discounted in Note 32.

The contract or notional amounts of derivatives shown in the abovetable do not represent the amounts exchanged by the parties and do
not measure the Group’s exposure to credit or market risk.

10734. RELATED-PARTY TRANSACTIONS

36. BUSINESS COMBINATION

Related-party transactions for the year ended March 31, 2023, wereas follows:

Transactions under common control, etc.
1. Establishment of holding company through a sole share transfer(1) Summary of the transaction(i) Name of the combined entity and its business

Related-Party Transactions with the Company’s Consolidated Subsidiaries
Description of
Category
Transactions
Close relative of
Kiyokawa Building
a director of
Loans
Eiichiro Kiyokawa
Shizuoka Bank
Company in which
majority voting rights are
Kiyokawa
held by director or close Loans
Corporation
relative of a director of
Shizuoka Bank
Company in which
majority voting rights are
Kiyokawa Real
held by director or close Loans
Estate Co., Ltd.
relative of a director of
Shizuoka Bank

Thousandsof U.S.
Dollars

Millionsof YenRelated Party¥162$1,220¥189$1,418¥1,029$7,705

Notes: 1. Related-party transactions stated above are processed under equal conditions to transactions with general customers.
2. Amounts of loans are balances at the end of the fiscal year.

35. OTHER COMPREHENSIVE INCOME
The components of other comprehensive income for the year ended
March 31, 2023, were as follows:

Unrealized gain on available-for-salesecurities:
Gains arising during the year
Reclassification adjustments to profit
and lossAmount before income tax effect
Income tax effect
Total
Deferred losses on derivatives underhedge accounting:Losses arising during the year
Reclassification adjustments to profit
and lossAmount before income tax effect
Income tax effectTotal
Foreign currency translation adjustments:
Gains arising during the year
Reclassification adjustments to profit
and lossAmount before income tax effect
Income tax effect
Total
Defined retirement benefit plans:
Adjustments arising during the year
Reclassification adjustments to profit
and lossAmount before income tax effect
Income tax effect
Total
Share of other comprehensive income inaffiliated companies:
Gains arising during the year
Reclassification adjustments to profit
and lossAmount before income tax effect
Income tax effectTotal
Total other comprehensive income

Millions of Yen
2023

Thousands of
U.S. Dollars
2023¥44,306$331,783

5,616

42,06049,923(15,392)¥34,530

373,843(115,267)$258,576¥(7,304)$(54,700)

5,005

37,481(2,299)686¥(1,612)(17,219)
5,141$(12,077)¥3,377$25,293(5,115)(38,310)(1,738)185¥(1,552)(13,016)
1,391$(11,624)¥(1,669)$(12,498)(925)(6,929)(2,594)775¥(1,818)(19,427)
5,807$(13,620)¥236$1,768

236

1,768

¥236
¥29,782$1,768$223,021

Name of the combined entity

Business

The Shizuoka Bank, Ltd.

Banking service(ii) Date of business combination
October 3, 2022(iii) Legal form of business combination
Establishment of a holding company through a sole sharetransfer(iv) Name of company after combination
Wholly owning parent company in the share transfer
Shizuoka Financial Group, Inc.
(v) Other matters related to the summary of the transaction
The Company was established with the aim of “maximizing
value for all stakeholders” by further strengthening groupmanagement through independence and collaboration amonggroup companies, while building a flexible and robust governance structure that responds to the business environment andexpanding into new business areas that contribute to regional
growth.
On October 3, 2022, the Company acquired all of the sharesof subsidiary-affiliated companies below held by the Bank using
the method of receiving dividends in kind from the Bank andturned the five companies into consolidated subsidiaries andequity method affiliates directly owned by the Company.
A. Subsidiaries
Shizugin Management Consulting Co., Ltd.
Shizugin Lease Co., Ltd.
Shizuoka Capital Co., Ltd.
Shizugin TM Securities Co., Ltd.
B. Affiliate
Monex Group, Inc.
The shares of common stock of the Company held by the
Bank were allotted and delivered in equal numbers for eachshare of treasury stock held by The Shizuoka Bank, Ltd. at thetime the share transfer became effective, and were promptly
disposed of in accordance with the provisions of the relevantlaws and regulations.
(2) Summary of accounting procedures implemented
In accordance with the “Accounting Standard for Business
Combinations” (ASBJ Statement No. 21, January 16, 2019) andthe “Implementation Guidance on Accounting Standard forBusiness Combinations and Accounting Standard for Business
Divestitures” (ASBJ Guidance No. 10, January 16, 2019), thetransaction was treated as a transaction under common control.

108

2. Acquisition of additional shares of a subsidiary(1) Summary of the transaction(i) Name of the combined entity and its business
Name of the combined entity

Business

Shizuoka Capital Co., Ltd.

Initial public offering support
services, small and medium-sizedbusiness revitalization support
services(ii) Date of business combination
October 4, 2022(iii) Legal form of business combination
Acquisition of shares from noncontrolling shareholders(iv) Name of company after combination
No change(v) Other matters related to the summary of the transaction
With the transition to a holding company structure, theCompany acquired the shares held by the noncontrolling shareholders and turned it into a wholly owned subsidiary from theperspective of further strengthening collaboration and synergies
within the Group.
(2) Summary of accounting procedures implemented
In accordance with the “Accounting Standard for Business
Combinations” (ASBJ Statement No. 21, January 16, 2019) andthe “Implementation Guidance on Accounting Standard forBusiness Combinations and Accounting Standard for Business
Divestitures” (ASBJ Guidance No. 10, January 16, 2019), thetransaction was treated as a transaction with noncontrolling shareholders among transactions under common control.
(3) Matters listed in the case of acquisition of additional shares of a
subsidiary
Acquisition cost of the acquired company and breakdown by typeof consideration
Consideration for acquisition: Deposits in cash ¥1,400 million($10,483 thousand)Acquisition cost: ¥1,400 million yen ($10,483 thousand)(4) Matters related to changes in the Company’s interest in transactions with noncontrolling shareholders(i) Main reasons for changes in capital surplus
Additional acquisition of shares of a subsidiary(ii)	Amount of decrease in capital surplus due to transactions with
noncontrolling shareholders¥270 million ($2,024 thousand)109

37. NET INCOME PER SHARE
Net income per share (“EPS”) for the year ended March 31, 2023 iscomputed as follows:
Millions of Yen

Thousands ofSharesYen

U.S. Dollars

Net income attributable Weighted-Average
to Owners of the Parent
SharesBasic EPS:
Net income attributable tocommon shareholders¥52,397
Effect of dilutive securities:
Interest expenses
503(excluding tax amount)
Stock options
Convertible bonds withstock acquisition rights
Diluted EPS:
Net income for computation ¥52,900

563,848

EPS¥92.92$0.69¥91.01$0.68

315
17,061
581,225

Since the Company was established on October 3, 2022 through asole share transfer, the average number of shares of its common
stock during the period from April 1, 2022 to October 2, 2022 prior to
the establishment of the Company was calculated using the average
number of shares during the period of the Bank and it was calculatedusing the average number of shares of the Company during the period
from October 3, 2022 to March 31, 2023.

38. SUBSEQUENT EVENTS
1. Appropriation of Retained Earnings
The following appropriation of retained earnings was authorized at theannual general meeting of shareholders held on June 16, 2023:
Cash dividends,
15 yen ($0.11) per share
Total

Millions of Yen

Thousands of
U.S. Dollars¥8,396¥8,396$62,873$62,873

2. Retirement of Treasury StockAt the meeting of the Board of Directors held on May 11, 2023, theCompany resolved to retire treasury stock in accordance with Article
178 of the Companies Act as follows:
1. Class of shares to be retired: Shares of common stock of theCompany
2. Total number of shares to be retired: 10,000,000 shares
3. Date of retirement: May 31, 2023

Key Consolidated Financial Indicators
Summary of Profits (Losses)
Millions of Yen
Years ended March 31

Net interest income
Net fees and commissions
Net trading income
Net other operating income
General and administrative expenses
Net other ordinary income
Ordinary profits
Income before income taxes
Income taxes:
Current
Deferred
Net income
Net income attributable to noncontrolling interests
Net income attributable to owners of the parent
Comprehensive income

2023¥118,888
37,3453,723
207
95,857
9,656
73,96473,32020,060808
52,452
54
52,397
82,234

Breakdown of Net Interest Margin
Billions of Yen
Year ended March 31

Interest income
Average interest-earning assets
Average interest rate of interest-earning assets (%)
Interest expense (Note)
Average interest-bearing liabilities
Average interest rate of interest-bearing liabilities (%)
Net interest income2023¥158.6
13,339.0
1.18
39.7
13,383.2
0.29
118.8

Note: Interest expense here excludes interest paid in relation to investment in money held in trust.

Net Other Operating Income
Millions of Yen
Years ended March 31

Gains on foreign exchange transactions
Gains/losses on government bonds
Gains on sales
Losses on sales
Losses on redemptions
Gains/losses on derivative transactions
Proceeds from derivative transactions
Gains/losses on other business
Other operating income
Other operating expenses

2023¥ 7,106(7,523)19,093(25,706)
(909)
624
624

207
26,824(26,616)110

Loans Outstanding by Type of Borrower
March 31

Domestic branches:
Manufacturing
Agriculture and forestry
Fishery
Mining and quarrying
Construction
Utilities
Telecommunications
Transportation and mail service
Wholesale and retailing
Finance and insurance
Real estate, lease, and rental
Medical, welfare, lodging, and other services
Local governments
Other
Subtotal
Overseas branches and offshore accounts:
Governments and official institutions
Banks and other financial institutions
Other
Subtotal
Total

Billions of Yen, Percentage of Shares2023¥ 1,608.3
8.1
12.9
16.1
278.9
180.4
51.7
299.9
878.9
622.9
2,274.6
622.4
98.8
2,808.5
9,762.8

16.47%
0.08
0.13
0.17
2.86
1.85
0.53
3.07
9.00
6.38
23.30
6.38
1.01
28.77
100.00

4.1
36.0
234.0
274.3
¥10,037.1

1.51
13.15
85.34
100.00Financial Rehabilitation Law Disclosure Claims
March 31

Millions of Yen
2023

Claims provable in rehabilitation from bankruptcy and equivalents% of total credit
Doubtful claims% of total credit
Loans past due for three months or more
% of total credit
Restructured loans% of total credit
Financial Rehabilitation Law Disclosure Claims total% of total credit
Value covered with collateral, guarantees, etc.
Cover ratio(%)¥ 16,515
0.16
76,904
0.76
191
0.00
13,1100.13
106,723
1.06
90,11784.44

Notes: 1.	Capital ratios were calculated on a consolidated basis, according to the provision of the Article 52-25 of Banking Act,with the formula on the criteria, the 20th
notice by Financial Services Agency in 2006, to judge whether the sufficiency of the equity capital of the banking group is appropriate in light of the assets
owned by its group, and so on.
2.	Loans past due for three months or more include loans for which payments of principal or interest are delinquent by three months or more, as calculated
from the day following the contracted payment date, but do not include claims provable in rehabilitation from bankruptcy and equivalents and doubtful
claims.
3.	In addition, the leverage ratio, which was a complementary indicator of the capital ratio, was calculated on a consolidated basis,according to the provision of
the Article 52-25 of Banking Act, with the formula on the criteria, the 12th notice by Financial Services Agency in 2019, to judge the soundness of theleverage as a complementary indicator of the criteria on whether the sufficiency of the equity capital of the banking group is appropriate in light of the assets
owned by its group, and so on.
4.	Value covered with collateral, guarantees, etc., includes provisions in the specific reserve for possible loan losses. The covered value was stated on a pos­sible disposal basis.

Allowance for Loan Losses
Millions of Yen
2023

March 31

¥27,365
24,971¥52,336¥  (402)

General allowance for loan losses
Specific allowance for loan losses
Total[Loans on written-off claims for the year]

Financial Index
Years ended March 31

Consolidated
2023

Nonconsolidated
2023

Per share (Yen):
Net income
Net assets
Cash dividends¥92.92
2,050.65
30.00¥3.05
1,476.65
15.00
491.8099.96
310.89Dividend payout ratio (%)
Return on equity (%) (Note)
Price-earnings ratio (%)
Note: The amount of net income returned as a percentage of the average balance of shareholders’ equity.

111

4.69
10.23

Capital Adequacy Ratio
March 31

1. Total capital ratio (%)
2. Tier 1 ratio (%)
3. Common equity Tier 1 ratio (%)
4. Total capital
5. Tier 1 capital
6. Common equity Tier 1 capital
7. Total risk-weighted assets
8. Total capital requirements
Leverage ratio (%)

Billions of Yen
Consolidated
2023

18.42
18.42
18.42
1,006.1
1,006.1
1,006.1
5,459.2
436.7
6.89

Notes: 1.	Capital ratios were calculated both on consolidated and nonconsolidated bases, with the formula shown on the criteria, the 20th notice by Financial Services
Agency in 2006, to judge whether or not the adequacy of equity capital of the Bank is appropriate in light of the circumstances, such as the assets owned by
the Bank, according to the provision of the Article 52-25 of Banking Act.
2.	The Group adopted the Foundation Internal Rating-Based Approach to calculate credit risk assets and the Standardized Approach for operational risk, andapplies the Market Risk Capital Regulations.
3.	In addition, the leverage ratio, which was a complementary indicator of the equity ratio, was calculated both on consolidated and nonconsolidated bases,
with the formula shown on the criteria, the 12th notice by Financial Services Agency in 2019, to judge the soundness of the leverage as a complementary
indicator of the criteria on whether or not the adequacy of equity capital of the Bank is appropriate in light of the circumstances, such as the assets ownedby the Bank, according to the provision of the Article 52-25 of Banking Act.
4.	The Group has early adopted the finalization of Basel III from the end of March 2023.

112

The Shizuoka Bank
Corporate Data
HEAD OFFICE
10, Gofukucho 1-chome, Aoi-ku,
Shizuoka-shi, Shizuoka 420-8761, JapanHEADQUARTERS
2-1, Kusanagi-Kita, Shimizu-ku,
Shizuoka-shi, Shizuoka 424-8677, Japan
Phone: (81) 54-345-5411
URL: https://www.shizuokabank.co.jp/
NUMBER OF EMPLOYEES(As of March 31, 2023)

2,791

INTERNATIONAL BUSINESS DEPT.

DOMESTIC NETWORKINTERNATIONAL BUSINESSPROMOTION GROUP
Phone: (81) 54-345-5411
Fax: (81) 54-344-0090(As of July 1, 2023)

Treasury and International Operations Dept.

(As of July 1, 2023)

TREASURY & INTERNATIONALOPERATIONS CENTER
Phone: (81) 54-345-5700
Fax: (81) 54-349-5501
SWIFT address: SHIZJPJTHead Office, 177 branches,
26 subbranches
OVERSEAS NETWORK
3 branches,
2 representative offices, and1 subsidiary

DATE OF ESTABLISHMENT
March 1, 1943

Overseas Service Network
New York Branch
425 Lexington Avenue,
10th Floor,New York,
N.Y.10017, U.S.A
Phone: (1) 212-319-6260
Fax: (1) 212-319-6270
Hong Kong Branch
Suite 1001-1003, 10th Floor, Tower 6,
The Gateway, Harbour City,
9 Canton Road, Tsim Sha Tsui,
Kowloon, Hong Kong S.A.R., P.R.C.
Phone: (852) 2521-6547
Fax: (852) 2845-9257

Singapore Branch
10 Collyer Quay #09-08/10, Ocean
Financial Centre, Singapore
Phone: (65) 6225-3600
Fax: (65) 6225-9901

Silicon Valley Representative Office
873 Santa Cruz Avenue, Suite 204,
Menlo Park, CA, USA
Phone: (1) 650-240-3258
Fax: (1) 650-240-3259

Shanghai Representative Office
Room 1813, Shanghai
International Trade Centre,
2201 Yan-An Road (West),
Chang Ning Qu, Shanghai, P.R.C.
Phone: (86) 21-6209-8115
Fax: (86) 21-6209-8116

Shizuoka Bank (Europe) S.A.
Rue Jules Cockx 8-10, Box 9, 1160
Auderghem, Brussels, Belgium
Phone: (32) 2-646-0470
Fax: (32) 2-646-2462

Organization Chart
GeneralMeeting of
Shareholders

Domestic Branches

Eastern Area Business Unit

Domestic Branches

Western Area Business Unit

Domestic Branches

Metropolitan Business Unit

Domestic Branches(Excluding Tokyo Office)Sales Strategy Dept.

Audit &
Supervisory
Board Members

Corporate Business Support Dept.
Life Planning Support Dept.
Banking
Division

Board ofDirectors

Central Area Business Unit

Asset Building Support Dept.
International Business Dept.
Digital Business Promotion Dept.

President

Regional Revitalization Dept.

Advisory
Board

International Business Promotion GroupNew York Branch
Hong Kong Branch
Singapore Branch

Customer Support Dept.
Treasury and International Operations Dept.

Major
Committees

Credit Dept.
Business Support Dept.
Treasury Dept.
Credit Investment Dept.

Treasury & International
Operations Planning Group
Treasury & International
Operations Center
Securities Investment Group
Fund & Foreign Exchange GroupTokyo Office
Corporate Planning Dept.
Corporate Administration Dept.

Corporate
CenterRisk Management Dept.
Compliance Dept.
Secretarial OfficeInternal
Audit Division
113

Audit Dept.

Risk Management Group
Credit Risk Management GroupOperational Risk Management Group
Compliance Group
Anti-Money Laundering and Other Financial
Crimes Management GroupBoard of Directors and Audit & Supervisory Board
President

Director

Audit & Supervisory Board Members

Minoru Yagi

Hisashi Shibata

Director & Senior Managing Executive Officer

Director & Senior Executive Officer

Yutaka Fukushima

Hiromitsu Umehara
Toshiyasu Takizawa

Mitsuru Kobayashi
Koichi Kiyokawa
Yoshihiro Yamashita
Isamu Nakamura(As of July 1, 2023)

Investor Information (The Shizuoka Financial Group)
CAPITAL STOCK (As of March 31, 2023)
Common stock...................................

¥90,000 million

NUMBER OF SHARES (As of March 31, 2023)
Authorized.......................................... 2,000,000,000 shares
595,129,069 shares
Issued and outstanding......................

PRINCIPAL SHAREHOLDERS
The 10 largest shareholders of the Shizuoka Financial Groupand their respective shareholdings at March 31, 2023, were as
follows:
Number of Percentage ofshares intotal shares
thousands outstanding

NUMBER OF SHAREHOLDERS (As of March 31, 2023)
24,349STOCK LISTING
Prime Market of the Tokyo Stock Exchange
TRANSFER AGENT
Japan Securities Agents, Ltd.

The Master Trust Bank of Japan, Ltd. (trust account)

81,88814.62%

Nippon Life Insurance Company

29,745

5.31

Meiji Yasuda Life Insurance Company

29,117

5.20

Custody Bank of Japan, Ltd. (trust account)

27,148

4.85

Sumitomo Life Insurance Company

13,070

2.33

STATE STREET BANK WEST CLIENT - TREATY 505234

12,085

2.15

MUFJ Bank, Ltd.

11,884

2.12

DAIICHI SANKYO COMPANY, LIMITED

8,315

1.48

The Dai-ichi Life Insurance Company, Limited

7,505

1.34

SUZUKI MOTOR CORPORATION
Total

7,000

1.25

227,761

40.69%

Notes: 1. In addition to the above, the Shizuoka Financial Group holds 35,390 thousand treasury
shares.
2. Numbers of shares have been rounded down to the nearest 1,000 shares.
3. Percentages of total shares outstanding have been calculated after subtracting thenumber of treasury shares from the total number of shares outstanding, with results being
rounding down to two decimal places.

The Shizuoka Financial Group
Consolidated Subsidiaries
THE SHIZUOKA BANK, LTD.
Banking service
SHIZUGIN MANAGEMENT CONSULTING CO., LTD.
Corporate and financial managementadvisory services
Bill collection services
SHIZUGIN LEASE CO., LTD.
Leasing
SHIZUGIN IT SOLUTION CO., LTD
Computer system development and operation
SHIZUGIN CREDIT GUARANTY CO., LTD.
Guarantee of housing loans, etc.
SHIZUGIN CARD CO., LTD.
Credit card and guarantee of consumer loans

SHIZUOKA CAPITAL CO., LTD.
Public-offering assistance
Support for corporate rehabilitation
SHIZUGIN TM SECURITIES CO., LTD.
Securities
SHIZUGIN GENERAL SERVICE CO., LTD.
Fee-based job placement services
General administration
SHIZUGIN MORTGAGE SERVICE CO., LTD.
Appraisal of real estate for loan collateral
Operation center for loans

SHIZUGIN BUSINESS CREATE CO., LTD.
Operation center for remittance and billcollection
Part-time employee management
SHIZUGIN HEARTFUL CO., LTD.
Making, printing, and binding of documents
SHIZUOKA BANK (EUROPE) S.A.
Finance and securities-related services
SHIZUOKA LIQUIDITY RESERVE LIMITED
Purchases of monetary receivables

Affiliates under Equity Method
SHIZUGIN SAISON CARD CO., LTD.
Credit card and prepaid card
Guarantee of consumer loans*	Other than the above-mentioned Group companies, Monex Group, Inc. and Commons Asset Management, Inc. are equity-method affiliates of the Shizuoka Financial Group.

(As of August 1 , 2023)

114

Printed in JapanFor more detailed information, please refer to our website. https://www.shizuoka-fg.co.jp/english/