10 unchanged sentences
The investment policy generally calls for funds to be invested among various categories of security types and maturities based upon the Company’s need for liquidity, desire to achieve a proper balance between minimizing risk while maximizing yield, the need to provide collateral for borrowings, and the need to fulfill the Company’s asset/liability management goals.
−Removed: The Company’s cost of funds responds to changes in interest rates due to the relatively short-term nature of its wholesale deposit portfolio and the relatively short-term nature of its borrowed funds.
−Removed: The Company believes that its growing portfolio of longer duration, low-cost deposits generated from its payments divisions provides a stable and profitable funding vehicle, but also subjects the Company to greater risk in a falling interest rate environment than it would otherwise have without this portfolio.
+Added: The Company’s cost of funds responds to changes in interest rates due to the relatively short-term nature of its wholesale deposit portfolio, and due to the relatively short-term nature of its borrowed funds.
+Added: The Company believes that its growing portfolio of longer duration, low-cost deposits generated from its payments division provides a stable and profitable funding vehicle, but also subjects the Company to greater risk in a falling interest rate environment than it would otherwise have without this portfolio.
This risk is due to the fact that, while asset yields may decrease in a falling interest rate environment, the Company cannot significantly reduce interest costs associated with these deposits, which thereby compress the Company’s net interest margin.
3 unchanged sentences
The Company actively manages interest rate risk, as changes in market interest rates can have a significant impact on reported earnings.
−Removed: The Bank, like other financial institutions, is subject to interest rate risk to the extent that its interest-bearing liabilities mature or reprice more rapidly than its interest-earning assets.
The Company's interest rate risk analysis is designed to compare income and economic valuation simulations in market scenarios designed to alter the direction, magnitude and speed of interest rate changes, as well as the slope of the yield curve.
8 unchanged sentences
The results are affected by projected rates, prepayments, caps and floors.
−Removed: Management exercises its best judgment in making assumptions regarding events that management can influence, such as non-contractual deposit re-pricing, as well as events outside of management's control, such as customer behavior on loan and deposit activity and the effect that competition has on both loan and deposit pricing.
+Added: Management exercises its best judgment in making assumptions regarding events that management can influence, such as non-contractual deposit re-pricing, as well as events outside of management's control, such as customer behavior on loan and deposit activity and the effect that competition has on both lending and deposit pricing.
These assumptions are subjective and, as a result, net interest income simulation results will differ from actual results due to the timing, magnitude, and frequency of interest rate changes, changes in market conditions, customer behavior and management strategies, among other factors.
−Removed: We perform various sensitivity analyses on assumptions of deposit attrition and deposit re-pricing, as well as market-implied forward rates and various likely and extreme interest rate scenarios, including rapid and gradual interest rate ramps, rate shocks and yield curve twists.
+Added: The Company performs various sensitivity analyses on assumptions of deposit attrition and deposit re-pricing, as well as market-implied forward rates and various likely and extreme interest rate scenarios, including rapid and gradual interest rate ramps, rate shocks and yield curve twists.
The EAR analysis used in the following table reflects the required analysis used no less than quarterly by management.
It models -100, +100, +200, +300, and +400 basis point parallel shifts in market interest rates over the next one-year period.
−Removed: Due to the current low level of interest rates, only -100 basis point parallel shift is represented.
−Removed: The Company was within Board policy limits for all interest rate scenarios.
−Removed: The following table shows the results of the scenarios at June 30, 2020:
+Added: The Company was within Board approved policy limits for all interest rate scenarios using the snapshot as of December 31, 2020.
+Added: The following table shows the results of the scenarios as of December 31, 2020:
Net Sensitive Earnings at Risk
8 unchanged sentences
Board policy limits — -8.0 % — % -8.0 % -10.0 % -15.0 % -20.0 %
−Removed: The EAR analysis reported at June 30, 2020 , shows that in all rising rate scenarios, more assets than liabilities would reprice over the modeled one-year period.
−Removed: Because of the static balance sheet assumption, excess interest-bearing cash and reduced wholesale funding at the end of the period result in more income sensitivity than would be typical, IRR is a snapshot in time.
−Removed: The Company’s business and deposits are very predictably cyclical on a weekly, monthly and yearly basis.
+Added: The EAR analysis reported at December 31, 2020 , shows that Total Interest Sensitive Income will change more rapidly than Total Interest Sensitive Expense over the next year.
+Added: IRR is a snapshot in time.
+Added: The Company’s business and deposits are predictably cyclical on a weekly, monthly and yearly basis.
The Company’s static IRR results could vary depending on which day of the week and timing in relation to certain payrolls, as well as time of the month in regard to early funding of certain programs, when this snapshot is taken.
5 unchanged sentences
It models immediate -100, +100, +200, +300 and +400 basis point parallel shifts in market interest rates.
−Removed: Due to the current low level of interest rates, only -100 basis point parallel shift is represented.
−Removed: The Company was within Board policy limits for rising rate scenarios and exceeded the limit for -100 due to rapid growth in noninterest-bearing deposits.
−Removed: The following table shows the results of the scenarios at June 30, 2020:
+Added: The Company was within Board policy limits for all scenarios.
+Added: The following table shows the results of the scenarios as December 31, 2020:
Economic Value Sensitivity
4 unchanged sentences
Board policy limits -10.0 % -10.0 % -20.0 % -25.0 % -35.0 %
−Removed: The EVE at risk reported at June 30, 2020 shows that as interest rates increase, the economic value of equity position will be asset sensitive due to growth in noninterest-bearing deposits.
+Added: The EVE at risk reported at December 31, 2020 shows that the economic value of equity position will be more sensitive to changes in interest rates due to the large amount of noninterest-bearing funding.
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.