24 unchanged sentences
Qualitative Disclosure about Market Risk
−Removed: At December 31, 2020, the Bank's gap between the amount of interest-earning assets and interest-bearing liabilities projected to reprice within one year was $86.8 million, or 0.90% of total assets, compared to $436.4 million, or 4.6% of total assets, at September 30, 2020.
−Removed: The decrease in the one-year gap amount was due primarily to an increase in non-maturity deposits during the quarter.
+Added: At March 31, 2021, the Bank's gap between the amount of interest-earning assets and interest-bearing liabilities projected to reprice within one year was $(652.3) million, or (6.7)% of total assets, compared to $86.8 million, or 0.9% of total assets, at December 31, 2020.
+Added: The decrease in the one-year gap amount was due primarily to higher interest rates as of March 31, 2021 compared to December 31, 2020.
+Added: As interest rates increase, borrowers have less economic incentive to refinances their mortgages and agency debt issuers have less economic incentive or opportunity to exercise their call options in order to issue new debt at lower interest rates, resulting in lower projected cash flows on these assets.
+Added: In addition, the decrease was due to an increase in non-maturity deposits during the quarter.
In the Bank's interest rate risk model, short-term increases in non-maturity deposits are assumed to be unstable and thus are not considered to be long-term core deposits.
−Removed: As a result, these deposits are assumed to mature or reprice in the short term.
−Removed: At December 31, 2020, the amount of the Bank's non-maturity deposits projected to reprice in the first month was $829.5 million, which is $274.7 million higher than at September 30, 2020.
+Added: As a result, these deposits are assumed to reprice in the short term.
This resulted in an increase in the amount of liabilities repricing in the one-year horizon.
−Removed: Additionally, interest rates were higher at December 31, 2020 compared to September 30, 2020, resulting in a decrease in the prepayment projections of mortgage-related assets compared to the previous quarter.
The majority of interest-earning assets anticipated to reprice in the coming year are repayments and prepayments on one- to four-family loans and MBS, both of which include the option to prepay without a fee being paid by the contract holder.
The amount of interest-bearing liabilities expected to reprice in a given period is not typically impacted significantly by changes in interest rates, but did increase this quarter, because the Bank's borrowings and certificate of deposit portfolios have contractual maturities and generally cannot be terminated early without a prepayment penalty.
−Removed: If interest rates were to increase 200 basis points, as of December 31, 2020, the Bank's one-year gap is projected to be $(995.3) million, or (10.36)% of total assets.
+Added: If interest rates were to increase 200 basis points, as of March 31, 2021, the Bank's one-year gap is projected to be $(1.32) billion, or (13.6)% of total assets.
The decrease in the gap compared to when there is no change in rates is due to lower anticipated net cash flows primarily due to lower repayments on mortgage-related assets in the higher rate environment.
−Removed: This compares to a one-year gap of $(609.6) million, or (6.43)% of total assets, if interest rates were to have increased 200 basis points as of September 30, 2020.
+Added: This compares to a one-year gap of $(995.3) million, or (10.36)% of total assets, if interest rates were to have increased 200 basis points as of December 31, 2020.
During the current quarter, loan repayments totaled $606.9 million and cash flows from the securities portfolio totaled $112.5 million.
5 unchanged sentences
These borrowings are laddered in order to prevent large amounts of liabilities repricing in any one period.
−Removed: The WAL of the Bank's term borrowings as of December 31, 2020 was 2.0 years.
−Removed: However, including the impact of interest rate swaps related to $640.0 million of adjustable-rate FHLB advances, the WAL of the Bank's term borrowings as of December 31, 2020 was 3.0 years.
+Added: The WAL of the Bank's term borrowings as of March 31, 2021 was 2.3 years.
+Added: However, including the impact of interest rate swaps related to $440.0 million of adjustable-rate FHLB advances, the WAL of the Bank's term borrowings as of March 31, 2021 was 3.3 years.
The interest rate swaps effectively convert the adjustable-rate borrowings into long-term, fixed-rate liabilities.
5 unchanged sentences
Additionally, as we expand the commercial banking business, we expect to have the ability to obtain lower-costing commercial deposits, which could be used to reduce the cost of funds by replacing FHLB borrowings and wholesale deposits.
−Removed: With the significant decrease in interest rates during calendar year 2020, the Bank has decreased the rates on certificates of deposit and money market accounts on pace with competitors in its market areas.
+Added: With the significant decrease in interest rates during calendar year 2020, the Bank decreased its rates on certificates of deposit and money market accounts on pace with competitors in its market areas.
The Bank will continue to adjust rates as market conditions allow.
34 unchanged sentences
liabilities as a percent of total Bank assets at:
−Removed: December 31, 2020 0.90 % 7.66 % 6.80 % 8.13 %
+Added: March 31, 2021 (6.73) % (5.20) % (0.59) % 8.69 %
September 30, 2020 4.58
Cumulative one-year gap - interest rates +200 bps at:
−Removed: December 31, 2020 (10.36)
+Added: March 31, 2021 (13.58)
September 30, 2020 (6.44)
3 unchanged sentences
(2) MBS reflect projected prepayments at amortized cost.
−Removed: Investment securities are presented based on contractual maturities, term to call dates or pre-refunding dates as of December 31, 2020, at amortized cost.
+Added: Investment securities are presented based on contractual maturities, term to call dates or pre-refunding dates as of March 31, 2021, at amortized cost.
(3) Although the Bank's checking, savings, and money market accounts are subject to immediate withdrawal, management considers a substantial amount of these accounts to be core deposits having significantly longer effective maturities.
14 unchanged sentences
Change Net Interest Income At
−Removed: (in Basis Points) December 31, 2020 September 30, 2020
+Added: (in Basis Points) March 31, 2021 September 30, 2020
in Interest Rates (1)
6 unchanged sentences
(1) Assumes an instantaneous, parallel, and permanent change in interest rates at all maturities.
−Removed: The net interest income projection was lower in the base case scenario at December 31, 2020 compared to September 30, 2020 due primarily to a decrease in the balance and yield on the Bank's loans receivable portfolio.
−Removed: As a result of the low level of interest rates during the current quarter, the Bank continued to see a decrease in the yield on loans receivable due to refinances and endorsements.
+Added: The net interest income projection was higher in the base case scenario at March 31, 2021 compared to September 30, 2020 due to a decrease in the interest expense projection on deposits and borrowings.
+Added: The decrease in the deposit expense projection was due primarily to a decrease in the cost of deposits at March 31, 2021 compared to September 30, 2020.
+Added: This was partially offset by an increase in the balance of deposits.
+Added: The projected expense on borrowings was due primarily to the restructuring of the borrowings portfolio and a lower balance of borrowings compared to September 30, 2020.
+Added: The Bank terminated two interest rate swaps during the quarter, leaving the adjustable-rate advances outstanding.
+Added: This resulted in a significant decrease in the effective cost of the borrowings portfolio.
+Added: In addition, the Bank modified $200.0 million of fixed-rate advances during the fiscal year into lower costing long-term fixed-rate advances.
+Added: The lower interest expense projection was offset by a lower income projection on the Bank's loan portfolio.
+Added: As a result of the low level of interest rates during the current fiscal year, the Bank continued to see a decrease in the yield on loans receivable due to refinances and endorsements.
In addition, the Bank experienced a decrease in the overall balance of the loans receivable portfolio, resulting in these cash flows being deployed into lower yielding securities.
−Removed: This was partially offset by a decrease in the cost of the Bank's deposits and borrowings during the current quarter.
−Removed: The net interest income projections increase from the base case in all rising interest rate scenarios at December 31, 2020 and September 30, 2020.
−Removed: The increase in net interest income projection was smaller at December 31, 2020 compared to September 30, 2020, due primarily to a decrease in the positive gap during the quarter.
+Added: The net interest income projections increase from the base case in all rising interest rate scenarios at March 31, 2021 and September 30, 2020.
+Added: The increase in net interest income projection was smaller at March 31, 2021 compared to September 30, 2020, due primarily to a decrease in the gap during the quarter.
The positive impact of rising interest rates is diminished as interest rates increase.
Higher interest rates decreased the projected cash flows from the Bank's mortgage-related assets, thus decreasing the positive impact of rising interest rates compared to the base case.
+Added: In addition, the negative gap results in liabilities repricing at a faster pace in the rising interest rate scenarios.
Change in MVPE.
7 unchanged sentences
Change Market Value of Portfolio Equity At
−Removed: (in Basis Points) December 31, 2020 September 30, 2020
+Added: (in Basis Points) March 31, 2021 September 30, 2020
in Interest Rates (1)
6 unchanged sentences
(1) Assumes an instantaneous, parallel, and permanent change in interest rates at all maturities.
−Removed: The percentage change in the Bank's MVPE at December 31, 2020 and September 30, 2020 was negative in all scenarios.
−Removed: The negative impact to the Bank's MVPE is greater at December 31, 2020 compared to September 30, 2020.
−Removed: This change was due primarily to an increase in the duration of the Bank's mortgage-related assets at December 31, 2020 compared to the previous quarter.
−Removed: This was due in part to higher interest rates at December 31, 2020.
+Added: The percentage change in the Bank's MVPE at March 31, 2021 and September 30, 2020 was negative in all scenarios.
+Added: The negative impact to the Bank's MVPE is greater at March 31, 2021 compared to September 30, 2020.
+Added: This change was due primarily to an increase in the duration of the Bank's mortgage-related assets at March 31, 2021 compared to September 30, 2020.
+Added: This was due in part to higher interest rates at March 31, 2021.
As interest rates increase, borrowers have less economic incentive to refinance their mortgages and agency debt issuers have less economic incentive or opportunity to exercise their call options in order to issue new debt at lower interest rates, resulting in lower projected cash flows on these assets.
3 unchanged sentences
In addition, as mortgage loans are refinanced or endorsed to lower interest rates, their average lives also increase as further prepayments are diminished.
−Removed: On the liability side of the balance sheet, deposit durations decreased between periods due to the increase in the Bank's non-maturity deposits during the current quarter.
−Removed: Short-term increases in non-maturity deposits are not considered to be long-term liabilities in the Bank's interest rate risk model until sufficient time has passed for the model to reasonably assume that they will not leave the Bank in a rapid fashion.
−Removed: Both of these changes resulted in an increased risk to rising interest rates at December 31, 2020 compared to September 30, 2020.
−Removed: The following table presents the weighted average yields/rates and WALs (in years), after applying prepayment, call assumptions, and decay rates for our interest-earning assets and interest-bearing liabilities as of December 31, 2020.
+Added: On the liability side of the balance sheet, non-maturity deposit durations increased between periods due to a recalibration of the Bank's core deposit analytics model.
+Added: The Bank uses historical deposit behavior to project future behavior.
+Added: The Bank's core deposit analytics model is updated semi-annually or more frequently if back-testing identifies material variances between projected and actual behavior.
+Added: The update resulted in longer durations on the Bank's retail core deposits, which partially offset the impact of higher interest rates on the Bank's assets.
+Added: The following table presents the weighted average yields/rates and WALs (in years), after applying prepayment, call assumptions, and decay rates for our interest-earning assets and interest-bearing liabilities as of March 31, 2021.
Yields presented for interest-earning assets include the amortization of fees, costs, premiums and discounts, which are considered adjustments to the yield.
32 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.