1 unchanged sentence
Market risk is defined as the risk of loss arising from an adverse change in the market value (or prices) of financial instruments.
−Removed: A significant form of market risk is interest rate risk, which is inherent in our investment, borrowing, lending and deposit gathering activities.
−Removed: The Bank manages interest rate sensitivity to minimize the exposure of our net interest margin, earnings, and capital to changes in interest rates.
+Added: A significant form of market risk is interest rate risk, which is inherent in our lending, investment, borrowing, and deposit gathering activities.
+Added: The Bank manages interest rate sensitivity to maximize our net interest margin, earnings, and capital over a variety of interest rate scenarios.
Interest rate changes can create fluctuations in the net interest margin due to an imbalance in the timing of repricing or maturity of assets or liabilities.
6 unchanged sentences
A simplified static statement of condition is prepared on a quarterly basis as a starting point, using instrument level data of our actual loans, investments, borrowings and deposits as inputs.
−Removed: If potential changes to net equity value and net interest income resulting from hypothetical interest rate changes are not within the limits established by the Board of Directors, management may adjust the asset and liability mix to bring the risk position within approved limits or take other actions.
+Added: If potential changes to net equity value and net interest income
+Added: resulting from hypothetical interest rate changes are not within the limits established by the Board of Directors, management may adjust the asset and liability mix to bring the risk position within approved limits or take other actions.
At December 31, 2021, interest rate risk was within policy guidelines established by ALCO and the Board.
1 unchanged sentence
These are provided in the following table as an example rather than an expectation of likely interest rate movements.
−Removed: Table 16 Effect of Interest Rate Change on Net Interest Income (NII)
+Added: Effect of Interest Rate Change on Net Interest Income (NII)
Immediate Changes in Interest Rates (in basis points) Estimated Change in NII in Year 1 (as percent of NII) Estimated Change in NII in Year 2 (as percent of NII)
9 unchanged sentences
Assets and liabilities may react differently to changes in market interest rates in terms of both timing and responsiveness to market rate movements.
−Removed: Important deposit modeling assumptions are the speed of deposit run-off and the amount by which interest-bearing deposit rates increase or decrease when market interest rates change.
+Added: Important deposit modeling assumptions are the speed of deposit run-off and the amount by which interest-bearing deposit rates increase or decrease when market interest rates change, otherwise known as the deposit beta.
+Added: We applied an average deposit beta of 58% to rates paid on interest-bearing deposits in rising rate scenarios, reflected in the table above.
+Added: However, our historical beta in the prior rising rate cycle was less than half of the modeled beta.
Further, the actual rates and timing of prepayments on loans and investment securities could vary significantly from the assumptions applied in the various scenarios.
3 unchanged sentences
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.