16 unchanged sentences
(i) earning assets and liabilities balances, (ii) composition of earning assets and liabilities, (iii) earning asset yields, (iv) cost of funds and (v) model projections, as well as current market interest rates, including the slope of the yield curve and projected changes in the slope of the yield curve over the twelve month period.
+Added: Due to increases in market interest rates on new loans and a significant increase in the Company’s loan balances during the third quarter of 2022, the base case NII projection increased significantly between the second quarter income simulation and the third quarter income simulation.
While a wide variety of strategic balance sheet and treasury yield curve scenarios are tested on an ongoing basis, the following reflects the Company’s estimated NII sensitivity as compared to the base case scenario over the subsequent twelve months based on:
−Removed: ● Balance sheet levels using June 30, 2022 as a starting point.
+Added: ● Balance sheet levels using September 30, 2022 as a starting point.
● The model assumes the Company’s average deposit balances will increase approximately 2.4% over the next twelve months.
1 unchanged sentence
● Cash flows on earning assets are based on contractual maturity, optionality, and amortization schedules along with applicable prepayments derived from internal historical data and external sources.
−Removed: The model assumes that the majority of remaining PPP loans will be forgiven and repayment of the balances would occur over the remaining two quarters of 2022.
−Removed: All other loan balances are generally projected to increase modestly throughout the forecast period.
+Added: All loan balances are generally projected to increase modestly throughout the forecast period.
● The model assumes no additional investment security purchases over the next twelve months.
+Added: Investment cash flows will be used to pay down overnight borrowings and fund loan growth.
● In the rising rates scenarios, the prime rate and federal funds rates are assumed to move up by the amounts listed below over a 12-month period while moving the long end of the treasury curve to spreads over the three month treasury that are more consistent with historical norms based on the last three years (normalized yield curve).
1 unchanged sentence
In the -100 basis point model, the prime and federal funds rates are dropped one hundred basis points each, and the treasury curve assumes the same slope as the rising rate scenarios, with all points normalizing off of the three month treasury rate, which is lowered by one hundred basis points from the flat rate scenario.
+Added: The same method is applied for the -200 and -300 basis point scenarios, with the rate moves being down 200 and 300 basis points for prime, federal funds, and the three month treasury rate.
Net Interest Income Sensitivity Model
Calculated annualized increase
+Added: Calculated annualized increase
(decrease) in projected net interest
−Removed: income at June 30, 2022
+Added: (decrease) in projected net interest
+Added: income at September 30, 2022
+Added: income at September 30, 2022
Interest rate scenario
3 unchanged sentences
+100 basis points
−Removed: Projected NII over the 12-month forecast period increases in the rising rate environments largely due to assumed higher rates on new loans, and assumed higher repricing rates on variable and adjustable rate loans.
−Removed: These increases are partially offset by anticipated increases in deposit and borrowing costs.
−Removed: Over the longer time period, the growth in NII continues to improve in both rising rate environments as the impact from lower yielding assets maturing and being replaced at higher rates is significantly more material than the increase in funding costs.
−Removed: In the -100 basis points scenario, the Company shows interest rate risk exposure to lower rates on all terms.
+Added: -100 basis points
+Added: -200 basis points
+Added: -300 basis points
+Added: Projected NII over the 12-month forecast period decreases in the rising rate environments largely due to deposits and overnight borrowings repricing higher in year 1, which are only partially offset by loans repricing higher.
+Added: Over the longer time period, the growth in NII begins to improve in all rising rate environments as the impact from lower yielding assets maturing and being replaced at higher rates is significantly more material than the increase in funding costs.
+Added: In the falling rate scenarios, the Company shows interest rate risk exposure to lower rates on all terms.
During the first twelve months, net interest income declines largely due to lower assumed rates on loan originations, and certain adjustable and variable rate loans.
−Removed: Modestly lower funding costs associated with deposits and borrowings only partially offset a small proportion of the decrease in interest income.
+Added: Modestly lower funding costs associated with deposits and borrowings only partially offset the decrease in interest income.
The analysis does not represent a Company forecast and should not be relied upon as being indicative of expected operating results.
4 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.