3 unchanged sentences
Other than the developments described thereunder, there have been no material changes in our exposure to market risk since December 31, 2021.
−Removed: The following table projects the potential impact on interest for a 12-month period, assuming an instantaneous increases of 25 basis points and 50 basis points in LIBOR (in thousands).
−Removed: Since LIBOR rates were close to zero at September 30, 2021, we have excluded the impact of a decrease in LIBOR.
+Added: The following table projects the potential impact on interest (in thousands) for a 12-month period, assuming hypothetical instantaneous increases of 50 basis points and 100 basis points in LIBOR, or other applicable index rate, such as SOFR (collectively referred to as the “Index Rates” below).
+Added: Since the Index Rates were close to zero at March 31, 2022, we have excluded the impact of a decrease in the Index Rates.
Assets (Liabilities)
4 unchanged sentences
Impact to net interest income (3)
−Removed: Interest from cash, restricted cash and escrows (2)
−Removed: Net change to interest
(1) Represents the UPB of our loan portfolio and the principal balance of our debt.
−Removed: (2) The interest rates on these balances are not indexed to LIBOR and are negotiated periodically with each corresponding bank based on certain benchmark rates, therefore, these amounts are provided for illustrative purposes only since the actual amounts earned could be materially different from the amounts provided.
−Removed: Based on our structured loans and investments and corresponding debt as of September 30, 2021, increases in LIBOR of 0.25% and 0.50% would decrease our annual net interest income as a result of LIBOR floors on a portion of our loan portfolio that are above LIBOR as of September 30, 2021, which would limit the effect of an increase on interest income.
−Removed: Conversely, these LIBOR floors would reduce the impact on interest income from decreases in LIBOR, which would result in increases to net interest income.
+Added: (2) Interest rate floors on our loan portfolio that are above Index Rates could limit the effect of an increase on interest income.
+Added: Conversely, these floors could reduce the impact on interest income from decreases in the Index Rates, which could result in increases to net interest income.
+Added: (3) The impact of hypothetical rate changes to net interest income are further benefited by interest income earned on our cash, restricted cash and escrow balances.
+Added: At March 31, 2022, we had $2.98 billion of cash, restricted cash and escrows, which is
+Added: earning interest at a weighted average rate of 0.27%, or approximately $8.0 million annually.
+Added: The interest rates on these balances are not indexed to a benchmark rate and are negotiated periodically with each corresponding bank, therefore, the interest rates may not change in conjunction with changes in Index Rates.
We enter into interest rate swaps to hedge our exposure to changes in interest rates inherent in (1) our held-for-sale Agency Business Private Label loans from the time the loans are rate locked until sale and securitization, and (2) our Agency Business SFR – fixed rate loans from the time the loans are originated until the time they can be financed with match term fixed rate securitized debt.
Our interest rate swaps are tied to the five-year and ten-year swap rates and hedge our exposure to Private Label loans, until the time they are securitized, and changes in the fair value of our held-for-sale Agency Business SFR – fixed rate loans.
−Removed: A 25 basis point and a 50 basis point increase to the five-year and ten-year swap rates on our interest rate swaps held at September 30, 2021 would have resulted in a gain of $4.4 million and $8.7 million, respectively, in the nine months ended September 30, 2021, while a 25 basis point and a 50 basis point decrease in the rates would have resulted in a loss of $4.5 million and $9.1 million, respectively.
+Added: A 50 basis point and a 100 basis point increase to the five-year and ten-year swap rates on our interest rate swaps held at March 31, 2022 would have resulted in a gain of $3.4 million and $6.6 million, respectively, in the three months ended March 31, 2022, while a 50 basis point and a 100 basis point decrease in the rates would have resulted in a loss of $3.6 million and $7.3 million, respectively.
Our Agency Business originates, sells and services a range of multifamily finance products with Fannie Mae, Freddie Mac and HUD.
3 unchanged sentences
In addition, the fair value of our MSRs is subject to market risk since a significant driver of the fair value of these assets is the discount rates.
−Removed: A 100 basis point increase in the weighted average discount rate would decrease the fair value of our MSRs by $16.2 million as of September 30, 2021, while a 100 basis point decrease would increase the fair value by $17.2 million.
+Added: A 100 basis point increase in the weighted average discount rate would decrease the fair value of our MSRs by $16.6 million at March 31, 2022, while a 100 basis point decrease would increase the fair value by $17.6 million.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.