21 unchanged sentences
Simulation analysis involves projecting a future balance sheet structure and interest income and expense under the various rate scenarios.
−Removed: Internal policy regarding internal rate risk simulations currently specifies that for instantaneous 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:
+Added: Internal policy regarding internal rate risk simulations currently specifies that for instantaneous parallel shifts of the yield curve, estimated net interest income at risk for the subsequent one-year period should not decline by more than:
6% for a 100 basis point shift;
12% for a 200 basis point shift;
−Removed: and 18% for a 300 basis point shift.
+Added: and 18% for a 300 basis point
Per Company policy, the Bank should not be outside these limits for twelve consecutive months unless the Bank's forecasted capital ratios are considered to be "well capitalized".
6 unchanged sentences
Rate Changes (basis points) 2020 2019
+Added: (100) 0.20 % 3.00 %
+Added: 200 (1.40) (6.80)
Parallel Shock
3 unchanged sentences
Rate Changes (basis points) 2020 2019
+Added: (100) (0.30) % 5.00 %
+Added: 100 (1.00) (6.20)
+Added: 200 (1.70) (12.90)
+Added: 300 (2.00) (19.50)
The net interest income at risk simulation results indicate that, as of December 31, 2020, we remain liability sensitive.
19 unchanged sentences
Rate Changes (basis points) 2020 2019
+Added: (100) (47.30) % (2.00) %
+Added: 100 9.30 (6.50)
+Added: 200 13.80 (17.20)
+Added: 300 18.40 (25.50)
While ALCO reviews and updates simulation assumptions and also periodically back-tests the simulation results to ensure that the assumptions are reasonable and current, income simulation may not always prove to be an accurate indicator of interest rate risk or future net interest margin.
−Removed: Over time, the repricing, maturity and prepayment characteristics of financial instruments and the composition of our balance sheet may change to a different degree than estimated.
−Removed: As market interest rates initially rose in the first half of 2019 and declined in the second half of 2019, the banking industry experienced fluctuating pricing on core deposits.
−Removed: ALCO recognizes that deposit balances generally shift into higher yielding alternatives as market rates change.
−Removed: ALCO has modeled changing costs of deposits in the simulation scenarios presented above.
+Added: Over time, the repricing, maturity and prepayment characteristics of financial instruments
+Added: and the composition of our balance sheet may change to a different degree than estimated.
+Added: ALCO recognizes that deposit balances could shift into higher yielding alternatives as market rates change.
+Added: ALCO has modeled increased costs of deposits in the rising rate simulation scenarios presented above.
+Added: In the minus 100 scenario above, the change in EVE of (47.3)% is outside of policy parameters.
+Added: However, because the Bank continues to be well-capitalized, the downward rate scenarios is extremely unlikely in the current economic and interest rate environment.
+Added: The result of this simulation was discussed with the ALCO committee and the Company has decided to not take any further action at this time.
It should be noted that the static balance sheet assumption does not necessarily reflect our expectation for future balance sheet growth, which is a function of the business environment and customer behavior.
4 unchanged sentences
Changes in prepayment speeds could also increase or decrease the amortization of premium or accretion of discounts related to such instruments, thereby affecting interest income.
−Removed: The Alternative Reference Rates Committee ("ARRC") has proposed that the Secured Overnight Funding Rate ("SOFR") replace USD-LIBOR.
−Removed: ARRC has proposed that the transition to SOFR from USD-LIBOR will take place by the end of 2021.
−Removed: The Company has limited material contracts that are indexed to USD-LIBOR.
−Removed: Industry organizations are currently working on the transition plan but there is no definitive information regarding the future utilization of LIBOR or of any particular replacement rate.
−Removed: The Company is currently monitoring this activity and evaluating the risks involved.
Impact of Inflation
6 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.