2 unchanged sentences
As a financial institution, our primary component of market risk is interest rate volatility.
−Removed: Our financial management policy provides management with the guidelines for effective funds management,
−Removed: and we have established a measurement system for monitoring our net interest rate sensitivity position.
+Added: Our financial management policy provides management with the guidelines for effective funds management, and we have
+Added: established a measurement system for monitoring our net interest rate sensitivity position.
We have historically managed our sensitivity position within our established guidelines.
−Removed: Fluctuations in interest rates will ultimately impact both the level of income and expense recorded on most of our assets and liabilities, and the market value of all interest-earning assets and
−Removed: interest-bearing liabilities, other than those which have a short term to maturity.
+Added: Fluctuations in interest rates will ultimately impact both the level of income and expense recorded on most of our assets and liabilities, and the market value of all interest-earning assets and interest-bearing
+Added: liabilities, other than those which have a short term to maturity.
Interest rate risk is the potential of economic losses due to future interest rate changes.
−Removed: These economic losses can be reflected as a loss of future net
−Removed: interest income and/or a loss of current fair market values.
+Added: These economic losses can be reflected as a loss of future net interest income and/or a
+Added: loss of current fair market values.
The objective is to measure the effect on net interest income and to adjust the balance sheet to minimize the inherent risk while at the same time maximizing income.
We manage our exposure to interest rates by structuring our balance sheet in the ordinary course of business.
−Removed: We do not enter into instruments such as leveraged derivatives, financial options or
−Removed: financial future contracts to mitigate interest rate risk from specific transactions.
+Added: We do not enter into instruments such as leveraged derivatives, financial options or financial future
+Added: contracts to mitigate interest rate risk from specific transactions.
Based upon the nature of our operations, we are not subject to foreign exchange or commodity price risk.
1 unchanged sentence
Our exposure to interest rate risk is managed by the Asset/Liability Committee, or the ALCO Committee, in accordance with policies approved by our board of directors.
−Removed: The ALCO Committee formulates
−Removed: strategies based on appropriate levels of interest rate risk.
−Removed: In determining the appropriate level of interest rate risk, the ALCO Committee considers the impact on earnings and capital on the current outlook on interest rates, potential changes
−Removed: in interest rates, regional economies, liquidity, business strategies and other factors.
−Removed: The ALCO Committee meets regularly to review, among other things, the sensitivity of assets and liabilities to interest rate changes, the book and market
−Removed: values of assets and liabilities, commitments to originate loans and the maturities of investments and borrowings.
−Removed: Additionally, the ALCO Committee reviews liquidity, cash flow flexibility, maturities of deposits and consumer and commercial
−Removed: deposit activity.
−Removed: Management employs methodologies to manage interest rate risk, which include an analysis of relationships between interest-earning assets and interest-bearing liabilities and an interest rate shock simulation model.
−Removed: We use interest rate risk simulation models and shock analyses to test the interest rate sensitivity of net interest income and fair value of equity, and the impact of changes in interest rates on
−Removed: other financial metrics.
+Added: The ALCO Committee formulates strategies based on
+Added: appropriate levels of interest rate risk.
+Added: In determining the appropriate level of interest rate risk, the ALCO Committee considers the impact on earnings and capital on the current outlook on interest rates, potential changes in interest rates,
+Added: regional economies, liquidity, business strategies and other factors.
+Added: The ALCO Committee meets regularly to review, among other things, the sensitivity of assets and liabilities to interest rate changes, the book and market values of assets and
+Added: liabilities, commitments to originate loans and the maturities of investments and borrowings.
+Added: Additionally, the ALCO Committee reviews liquidity, cash flow flexibility, maturities of deposits and consumer and commercial deposit activity.
+Added: employs methodologies to manage interest rate risk, which include an analysis of relationships between interest-earning assets and interest-bearing liabilities and an interest rate shock simulation model.
+Added: We use interest rate risk simulation models and shock analyses to test the interest rate sensitivity of net interest income and fair value of equity, and the impact of changes in interest rates on other financial
Contractual maturities and re-pricing opportunities of loans are incorporated in the model.
The average lives of non-maturity deposit accounts are based on decay assumptions and are incorporated into the model.
−Removed: third-party experts to periodically evaluate the performance of our non-maturity deposit accounts to develop the decay assumptions.
−Removed: All of the assumptions used in our analyses are inherently uncertain and, as a result, the model cannot precisely
−Removed: measure future net interest income or precisely predict the impact of fluctuations in market interest rates on net interest income.
−Removed: Actual results will differ from the model’s simulated results due to timing, magnitude and frequency of interest
−Removed: rate changes as well as changes in market conditions and the application and timing of various management strategies.
+Added: We utilize third-party
+Added: experts to periodically evaluate the performance of our non-maturity deposit accounts to develop the decay assumptions.
+Added: All of the assumptions used in our analyses are inherently uncertain and, as a result, the model cannot precisely measure future
+Added: net interest income or precisely predict the impact of fluctuations in market interest rates on net interest income.
+Added: Actual results will differ from the model’s simulated results due to timing, magnitude and frequency of interest rate changes as
+Added: well as changes in market conditions and the application and timing of various management strategies.
On a quarterly basis, we run various simulation models including a static balance sheet and dynamic growth balance sheet.
−Removed: These models test the impact on net interest income and fair value of equity
−Removed: from changes in market interest rates under various scenarios.
−Removed: Under the static model and dynamic growth models, rates are shocked instantaneously and ramped rates change over a 12-month and 24-month horizon based upon parallel and non-parallel
−Removed: yield curve shifts.
+Added: These models test the impact on net interest income and fair value of equity from changes in
+Added: market interest rates under various scenarios.
+Added: Under the static model and dynamic growth models, rates are shocked instantaneously and ramped rates change over a 12-month and 24-month horizon based upon parallel and non-parallel yield curve shifts.
Parallel shock scenarios assume instantaneous parallel movements in the yield curve compared to a flat yield curve scenario.
−Removed: Non-parallel simulation involves analysis of interest income and expense under various changes in the
−Removed: shape of the yield curve.
−Removed: Our internal policy regarding internal rate risk simulations currently specifies that for gradual parallel shifts of the yield curve, estimated net interest income at risk for the subsequent one-year period should not
−Removed: decline by more than 10% for a -100 basis point shift, 5% for a 100 basis point shift, 10% for a 200 basis point shift, 15% for a 300 basis point shift, and 20% for a 400 basis point shift.
+Added: Non-parallel simulation involves analysis of interest income and expense under various changes in the shape of the yield
+Added: Our internal policy regarding internal rate risk simulations currently specifies that for gradual parallel shifts of the yield curve, estimated net interest income at risk for the subsequent one-year period should not decline by more than
+Added: 10% for a -100 basis point shift, 5% for a 100 basis point shift, 10% for a 200 basis point shift, 15% for a 300 basis point shift, and 20% for a 400 basis point shift.
The following table summarizes the simulated change in net interest income and fair value of equity over a 12-month horizon as of the dates indicated:
−Removed: September 30,
Change in Interest Rates (Basis Points)
8 unchanged sentences
The results are primarily due to behavior of demand, money market and savings deposits during such rate fluctuations.
−Removed: We have found that, historically, interest rates on these deposits change more
−Removed: slowly than changes in the discount and fed funds rates.
+Added: We have found that, historically, interest rates on these deposits change more slowly than changes
+Added: in the discount and fed funds rates.
This assumption is incorporated into the simulation model and is generally not fully reflected in a gap analysis.
−Removed: The assumptions incorporated into the model are inherently uncertain and,
−Removed: as a result, the model cannot precisely measure future net interest income or precisely predict the impact of fluctuations in market interest rates on net interest income.
−Removed: Actual results will differ from the model’s simulated results due to
−Removed: timing, magnitude and frequency of interest rate changes as well as changes in market conditions and the application and timing of various strategies.
+Added: The assumptions incorporated into the model are inherently uncertain and, as a result, the model
+Added: cannot precisely measure future net interest income or precisely predict the impact of fluctuations in market interest rates on net interest income.
+Added: Actual results will differ from the model’s simulated results due to timing, magnitude and
+Added: frequency of interest rate changes as well as changes in market conditions and the application and timing of various strategies.
Impact of Inflation
8 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.