Quantitative and Qualitative Disclosure about Market Risk.
+Added: Management of Interest Rate Risk.
The majority of the Company’s assets and liabilities are monetary in nature.
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Senior management monitors the level of interest rate risk and the Asset/Liability Management Committee meets on a quarterly basis to review its asset/liability policies and position and interest rate risk position, and to discuss and implement interest rate risk strategies.
−Removed: Economic Value of Equity .
−Removed: The Company monitors interest rate risk through the use of a simulation model that estimates the amounts by which the fair value of its assets and liabilities (its economic value of equity, or “EVE”) would change in the event of a range of assumed changes in market interest rates.
−Removed: The quarterly reports developed in the simulation model assist the Company
−Removed: in identifying, measuring, monitoring and controlling interest rate risk to ensure compliance within the Company’s policy guidelines.
−Removed: The table below sets forth, as of September 30, 2020, the estimated changes in EVE that would result from the designated instantaneous changes in market interest rates.
+Added: The Company monitors interest rate risk through the use of a simulation model.
+Added: The quarterly reports developed in the simulation model assist the Company in identifying, measuring, monitoring and controlling interest rate risk to ensure compliance within the Company’s policy guidelines.
+Added: This quantitative analysis measures interest rate risk from both a capital and earnings perspective.
+Added: With regard to earnings, movements in interest rates and the shape of the yield curve significantly influence the amount of net interest income that is recognized.
+Added: Movements in market interest rates significantly influence the spread between the interest earned on our interest-earning assets and the interest paid on our interest-bearing liabilities.
+Added: Our internal interest rate risk analysis calculates the sensitivity of our projected net interest income over a one year period utilizing a static balance sheet assumption through which incoming and outgoing asset and liability cash flows are reinvested into similar instruments.
+Added: Product pricing and earning asset prepayment speeds are adjusted for each rate scenario.
+Added: With regard to capital, our internal interest rate risk analysis calculates the sensitivity of our economic value of equity (“EVE”) ratio to movements in interest rates.
+Added: EVE represents the present value of the expected cash flows from our assets less the present value of the expected cash flows arising from our liabilities.
+Added: EVE attempts to quantify our economic value using a discounted cash flow methodology while the EVE ratio reflects that value as a form of capital ratio.
+Added: The degree to which the EVE ratio changes for any hypothetical interest rate scenario from its base case measurement is a reflection of an institution’s sensitivity to interest rate risk.
+Added: For both net interest income and capital at risk, our interest rate risk analysis calculates a base case scenario that assumes no change in interest rates.
+Added: The model then measures changes throughout a series of interest rate scenarios representing immediate and permanent, parallel shifts in the yield curve up and down 100, 200 and 300 basis points with additional scenarios modeled
+Added: where appropriate.
+Added: The model requires that interest rates remain positive for all points along the yield curve for each rate scenario which may preclude the modeling of certain falling rate scenarios during periods of lower market interest rates such as that experienced in the current rate environment at March 31, 2021
+Added: The table below sets forth, as of March 31, 2021, the estimated changes in EVE and net interest income at risk that would result from the designated instantaneous changes in market interest rates.
Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions, including relative levels of market interest rates, loan prepayments and deposit decay, and should not be relied upon as indicative of actual results.
+Added: EVE EVE as a Percent of Portfolio Value of Assets Net Interest
+Added: Earnings at Risk
+Added: Change in Interest Rates in Basis Points Dollar Amount Dollar Change Percent Change NPV Ratio Basis Point Change Dollar Amount Dollar Change Percent Change
(Dollars in thousands)
−Removed: Economic Value of Equity EVE as a Percent of Portfolio Value of Assets Earnings at Risk
−Removed: Change in Interest Rates in Basis Points ("bp") Dollar Amount Dollar Change Percent Change NPV Ratio Change Dollar Amount Dollar Change Percent Change
−Removed: +300 bp $ 143,389 $ 7,252 5.3 % 11.07 % 132 bp $ 45,995 $ 9,177 24.9 %
−Removed: +200 bp 143,822 7,685 5.6 10.82 107 43,504 6,686 18.2 %
−Removed: +100 bp 142,697 6,560 4.8 10.45 70 40,052 3,234 8.8 %
+Added: +300 $ 161,400 $ 14,911 10.2 % 11.80 % 184 $ 48,197 $ 10,750 28.7 %
+Added: +200 158,791 12,302 8.4 11.34 138 45,044 7,597 20.3
+Added: +100 153,779 7,290 5.0 10.70 74 40,959 3,512 9.4
Flat 146,489 — — 9.96 — 37,447 — —
−Removed: -100 bp 140,703 4,566 3.4 9.97 22 34,449 (2,369) (6.4) %
+Added: -100 140,812 (5,677) -3.9 9.42 (54) 34,405 (3,042) -8.1
Certain shortcomings are inherent in the methodology used in the above interest rate risk measurement.
−Removed: Modeling changes in EVE require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates.
−Removed: In this regard, the EVE tables presented assume that the composition of the Company’s interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured, and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities.
−Removed: Accordingly, although the EVE tables provide an indication of the Company’s interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on EVE and will differ from actual results.
+Added: Modeling changes in EVE and net interest income require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates.
+Added: In this regard, the table presented assumes that the composition of the Company’s interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured, and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities.
+Added: Accordingly, although the table provides an indication of the Company’s interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on EVE and net interest income and will differ from actual results.
EVE calculations also may not reflect the fair values of financial instruments.
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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.