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 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.
+Added: The Company believes that its growing portfolio of longer duration, low-cost deposits generated from its BaaS business line 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.
+Added: A portion of the Company’s deposit balances are subject to variable card processing expenses, derived from contractual agreements with certain BaaS partners tied to a rate index, typically the EFFR.
+Added: These costs reprice immediately upon a change in the application rate index.
+Added: The Bank, acting as custodian of cardholder funds, places a portion of such cardholder funds at one or more third-party banks insured by the FDIC (each, a “Program Bank”).
+Added: These custodial deposits earn recordkeeping service fee income, typically reflective of the EFFR.
The Board of Directors and relevant government regulations establish limits on the level of acceptable interest rate risk at the Company, to which management adheres.
7 unchanged sentences
As a continuing part of its financial strategy, the Bank considers methods of managing an asset/liability mismatch consistent with maintaining acceptable levels of net interest income.
−Removed: In order to monitor interest rate risk, the Board of Directors has created an Asset/Liability Committee whose principal responsibilities are to assess the Bank’s asset/liability mix and implement strategies that will enhance income while managing the Bank’s vulnerability to changes in interest rates.
+Added: In order to monitor interest rate risk, the Company has created an Asset/Liability Committee whose principal responsibilities are to assess the Bank’s asset/liability mix and implement strategies that will enhance income while managing the Bank’s vulnerability to changes in interest rates.
The Company uses two approaches to model interest rate risk:
8 unchanged sentences
It models basis point parallel shifts in market interest rates over the next one-year period.
−Removed: The following table shows the results of the scenarios as of June 30, 2022:
+Added: The following table shows the results of the scenarios as of December 31, 2022:
Net Sensitive Earnings at Risk
7 unchanged sentences
Percentage change from base -11.7 % -5.9 % — % 5.6 % 11.2 % 16.7 % 22.3 %
−Removed: The EAR analysis reported at June 30, 2022 , shows that total interest-sensitive income will change more rapidly than total interest-sensitive expense over the next year.
+Added: The EAR analysis reported at December 31, 2022 , shows that total interest-sensitive income will change more rapidly than total interest-sensitive expense over the next year.
IRR is a snapshot in time.
5 unchanged sentences
It models immediate basis point parallel shifts in market interest rates.
−Removed: The following table shows the results of the scenarios as June 30, 2022:
+Added: The following table shows the results of the scenarios as December 31, 2022:
Economic Value Sensitivity
3 unchanged sentences
Percentage change from base -8.7 % -3.4 % 2.4 % 4.3 % 5.9 % 7.9 %
−Removed: The EVE at risk reported at June 30, 2022 shows that the economic value of equity position is expected to benefit from rising interest rates due to the large amount of noninterest-bearing funding.
+Added: The EVE at risk reported at December 31, 2022 shows that the economic value of equity position is expected to benefit from rising 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.