Fukuoka Financial : Final Agreement on Business Integration by way of Share Exchange between Fukuoka Financial Group, Inc. and THE FUKUOKA CHUO BANK, LTD.

March 14, 2023

To whom it may concern:

Company	Fukuoka Financial Group, Inc.
Name:
Representative:	Hisashi Goto, President
Head Office:	8-3, Otemon 1 chome, Chuo-ku, Fukuoka
(Code No. 8354 TSE Prime Market, FSE)
Contact:	Teppei Mizoe, General Manager,
	Corporate Planning Division
	(Phone [phone])
Company	THE FUKUOKA CHUO BANK, LTD.
Name:
Representative:	Eiji Araki, President
Head Office:	12-1, Daimyo 2 chome, Chuo-ku, Fukuoka
(Code No. 8540 FSE)
Contact:	Miyuki Okano, Managing Director; and
	General Manager, General Planning
	Division
	(Phone [phone])

Final Agreement on Business Integration by way of Share Exchange between Fukuoka

Financial Group, Inc. and THE FUKUOKA CHUO BANK, LTD.

We announce, as below, that Fukuoka Financial Group, Inc. (President: Hisashi Goto; hereinafter referred to as "Fukuoka Financial Group") and THE FUKUOKA CHUO BANK, LTD. (President: Eiji Araki; hereinafter referred to as "Fukuoka Chuo Bank"; hereinafter Fukuoka Financial Group and Fukuoka Chuo Bank are collectively referred to as the "Companies") resolved, at their respective board of directors meetings held today, and pursuant to the memorandum of understanding executed on November 11, 2022, to implement a business integration by way of share exchange, setting the effective date of the share exchange for October 1, 2023, (hereinafter referred to as the "Share Exchange") (hereinafter referred to as the "Business Integration") on the condition that the approval of a general meeting of shareholders of Fukuoka Chuo Bank and authorization or approvals from the relevant authorities are obtained; and a share exchange agreement (hereinafter referred to as the "Share Exchange Agreement") has been executed by and between the Companies as of today.

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1. Background of the Business Integration

Fukuoka Financial Group operates as a financial group that has broad business operations covering the entire Kyushu area and focusing primarily on the prefectures of Fukuoka, Kumamoto, and Nagasaki. Fukuoka Financial Group has set a long-term vision for the period from this fiscal year to the fiscal year 2030, under which it aims to become "the best regional bank, which contributes to the growth of all stakeholders through finance and consulting," and is working together as a group to achieve this goal. On the other hand, Fukuoka Chuo Bank maintains its management philosophy of "fulfilling its mission and role as a financial institution specializing in small- and medium-sized enterprises (SMEs) and developing together with local communities, with Fukuoka Prefecture as its sales base," and it is building strong relationships with SME customers and conducts community-based operations.

Fukuoka Prefecture, where the Companies are headquartered, is one of the most populous prefectures in Japan in terms of the number of SMEs located therein, and in particular, the rate of incorporation of SMEs in Fukuoka City is at top level, even amongst major cities. Therefore, in the context of regional financial institutions, it can be said that Fukuoka Prefecture is an attractive market where business operations of SMEs are active. On the other hand, the business environment surrounding the Companies continues to be challenging, with persistent low interest rates, competition intensifying due to the entry of companies from other industries into the financial field, and so on. Moreover, significant societal changes are occurring at an unprecedented pace as a result of (i) changes in social structures due to the evolution of technology and decarbonization, etc. and (ii) increased geopolitical risks, in addition to (iii) structural issues such as a declining population and an aging society with a declining birthrate in the region.

In order to continuously respond to this business environment and contribute to the sustainable development of the regional economy, the Companies have determined that it is necessary (i) to further solidify the management foundations of Fukuoka Chuo Bank by utilizing the creditworthiness and capital strength of Fukuoka Financial Group, and (ii) to support a wide range of customers in Fukuoka Prefecture in resolving their issues and in their growth by leveraging the management resources and strengths of each of the Companies. Pursuant to such determination, as already announced in the timely disclosure document published on November 11, 2022, "Memorandum of Understanding regarding Business Integration between Fukuoka Financial Group, Inc. and THE FUKUOKA CHUO BANK, LTD.," the Companies have discussed and examined the implementation of the Business Integration by way of share exchange as of October 1, 2023; and today the Companies formally reached final agreement.

2. Purpose and Philosophy of the Business Integration

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Through the Business Integration, the Companies will contribute to the sustainable development of the local economy by further leveraging their collective strengths as a group and supporting an entire range of regional customers.

1. Synergies Expected from the Business Integration
2. 1. Enhancement of customer support in Fukuoka Financial Group after the Business Integration
      The Business Integration will enhance networks with customers by combining the strong relationships that the Companies have cultivated through transactions with an entire range of customers in Fukuoka Prefecture. After the Business Integration, Fukuoka Financial Group will, on a group-wide basis, provide multi-layered,high-quality and best-in-class financial services to customers in all segments by making maximum use of the management resources of the Companies and also by utilizing digital technologies to respond to diversifying customer needs quickly and accurately.
   2. Development of financial services for SMEs in Fukuoka Chuo Bank
      Fukuoka Chuo Bank will promote business efficiency and build an optimal sales system, by consolidating the functions of the Companies' respective headquarters, integrating overlapping banking operations, and entrusting common operations to Fukuoka Financial Group. In addition, Fukuoka Chuo Bank will actively invest the management resources arising from such business efficiency and optimal sales system in areas that will lead to strengthened customer relationships. Moreover, Fukuoka Chuo Bank will function as a stable financial intermediary in the future and fulfill its mission and role as a "financial institution specializing in SMEs" more than ever before, by making full use of Fukuoka Financial Group's know-how and services in finance, information networks, the digital channels that are currently being developed, and the like, to expand customer engagement and respond precisely to the diversifying needs of customers.
3. Overview of the Business Integration
4. 1. Timetable of the Business Integration

November 11, 2022		Execution of Memorandum of Understanding
		regarding the Business Integration
March 14, 2023	(Today)	Resolutions of Board of Directors Meetings
		3

		of the Companies
		Execution of the Share Exchange Agreement
March 31, 2023	(Planned)	Record Date for Ordinary General Meeting of
		Shareholders of Fukuoka Chuo Bank
June 29, 2023	(Planned)	Date of Ordinary General Meeting of
		Shareholders and General Meeting of Class
		Shareholders Constituted of Shareholders of
		Common Stock
September 27, 2023	(Planned)	Last Trading Date of Stocks of Fukuoka Chuo
		Bank
September 28, 2023	(Planned)	Date of Delisting of Fukuoka Chuo Bank
October 1, 2023	(Planned)	Effective Date of the Share Exchange

(Note 1) Fukuoka Financial Group will carry out the Share Exchange without obtaining approval by a resolution at a general meeting of shareholders, by implementing the procedures for a simplified share exchange pursuant to the provisions of Paragraph 2 of Article 796 of the Companies Act.

(Note 2) The timetable shown above may be subject to change, upon the agreement of the Companies, due to necessity with regard to the proceedings of the Business Integration or for other reasons.

1. Method of the Share Exchange
   Fukuoka Financial Group will be the wholly-owning parent company after the share exchange and Fukuoka Chuo Bank will be the wholly-owned subsidiary after the share exchange. Fukuoka Financial Group will carry out the Share Exchange without obtaining approval of a general meeting of shareholders by implementing the procedures for a simplified share exchange pursuant to the provisions of Paragraph 2 of Article 796 of the Companies Act, whereas Fukuoka Chuo Bank will obtain approval of the Share Exchange Agreement at the ordinary general meeting of shareholders and the general meeting of class shareholders constituted of shareholders of common stock that are scheduled to be held on June 29, 2023.
   In addition, the Companies have no plans to conduct a merger between Fukuoka Chuo Bank and The Bank of Fukuoka, Ltd. (President: Hisashi Goto; hereinafter referred to as "Fukuoka Bank"), a subsidiary of Fukuoka Financial Group, after the Business

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Integration because the two banks' development of their businesses by leveraging their respective strengths will achieve the purpose of the Business Integration.

1. Allotment Details of the Share Exchange
2. 1. Common Stock

			Fukuoka Financial Group		Fukuoka Chuo Bank
	Share Exchange		1		0.81
	Ratio

(Note 1) Allotment Details of the Share Exchange

Fukuoka Financial Group will allot and deliver 0.81 shares of its stock against each share of common stock of Fukuoka Chuo Bank. Upon the Share Exchange, if the number of shares of common stock of Fukuoka Financial Group to be delivered to the common shareholders of Fukuoka Chuo Bank includes fractions that are less than one share, such shareholders shall be paid the amount equivalent to such fractions in accordance with the provisions of Article 234 of the Companies Act and other related laws and ordinances. It is to be noted that the share exchange ratio stated above may be subject to change upon consultation between the Companies if any significant change will occur or be found in the preconditions which are the basis of calculation.

(Note 2) Number of Shares to be Delivered by Fukuoka Financial Group upon the Share Exchange Common stock: 1,890,824 shares (planned)

The number of the common stock stated above is calculated based on the total number of issued and outstanding shares of common stock of Fukuoka Chuo Bank as of December 31, 2022 (2,737,160 shares including the treasury stock). However, as Fukuoka Chuo Bank plans to cancel all of the treasury stock held by itself, including the shares to be acquired in response to the share purchase demand related to the Share Exchange by dissenting shareholders pursuant to Paragraph 1 of Article 785 of the Companies Act, by the time immediately before the effective time of the Share Exchange (hereinafter referred to as the "Base Time"), the number of shares of the treasury stock held by Fukuoka Chuo Bank as of December 31, 2022 (551 shares) is excluded in the calculation of the number of shares of the common stock stated above. Shares of Fukuoka Chuo Bank held in the executive compensation BIP trust are not included in the number of shares of the treasury stock stated above. In addition, prior to the Share Exchange, as Fukuoka Bank, a subsidiary of Fukuoka Financial Group, plans to deliver 402,258 shares of common stock of Fukuoka Chuo Bank and 30,000 shares of first series class A preferred stock held by Fukuoka Bank to Fukuoka Financial Group as dividends, the 402,258 shares of common stock of Fukuoka Chuo Bank held by Fukuoka Bank are also excluded from the calculation of the number of shares of the common stock stated above.

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