24 unchanged sentences
Qualitative Disclosure about Market Risk
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: In addition, the decrease was due to an increase in non-maturity deposits during the quarter.
−Removed: 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 reprice in the short term.
−Removed: This resulted in an increase in the amount of liabilities repricing in the one-year horizon.
+Added: At June 30, 2021, the Bank's gap between the amount of interest-earning assets and interest-bearing liabilities projected to reprice within one year was $(478.2) million, or (5.0)% of total assets, compared to $(652.3) million, or (6.7)% of total assets, at March 31, 2021.
+Added: The change in the one-year gap amount was due primarily to a decrease in the amount of liabilities projected to reprice at June 30, 2021.
+Added: During the current quarter, the Bank replaced $200.0 million of adjustable-rate FHLB advances with long-term fixed-rate advances with maturities greater than one year.
+Added: In addition, the amount of assets projected to reprice decreased due to a lower balance of cash and investment securities at June 30, 2021 compared to March 31, 2021.
+Added: This was somewhat offset by lower interest rates as of June 30, 2021 compared to March 31, 2021.
+Added: As interest rates decrease, borrowers have more economic incentive to refinance their mortgages, resulting in higher projected cash flows on these assets.
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.
−Removed: 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 March 31, 2021, the Bank's one-year gap is projected to be $(1.32) billion, or (13.6)% of total assets.
−Removed: 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 $(995.3) million, or (10.36)% of total assets, if interest rates were to have increased 200 basis points as of December 31, 2020.
+Added: The amount of interest-bearing liabilities expected to reprice in a given period is not typically significantly impacted by changes in interest rates, because the Bank's borrowings and certificate of deposit portfolios have contractual maturities and generally cannot be terminated early without a prepayment penalty.
+Added: If interest rates were to increase 200 basis points, as of June 30, 2021, the Bank's one-year gap is projected to be $(1.12) billion, or (11.7)% of total assets.
+Added: The change 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.
+Added: This compares to a one-year gap of $(1.32) billion, or (13.6)% of total assets, if interest rates were to have increased 200 basis points as of March 31, 2021.
During the current quarter, loan repayments totaled $511.2 million and cash flows from the securities portfolio totaled $211.3 million.
The majority of these cash flows were reinvested into new loans and securities at current market interest rates.
−Removed: Total cash flows from term liabilities that matured and/or repriced into current market interest rates during the current quarter were $542.6 million, including $150.0 million in term borrowings.
+Added: Total cash flows from term liabilities that matured and/or repriced into current market interest rates during the current quarter were $457.3 million.
These offsetting cash flows allow the Bank to manage its interest rate risk and gap position more precisely than if the Bank did not have offsetting cash flows due to its mix of assets or maturity structure of liabilities.
2 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 March 31, 2021 was 2.3 years.
−Removed: 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.
+Added: The WAL of the Bank's term borrowings as of June 30, 2021 was 2.6 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 June 30, 2021 was 3.5 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 decreased its 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, and the low rate environment has continued midway through calendar year 2021.
The Bank will continue to adjust rates as market conditions allow.
34 unchanged sentences
liabilities as a percent of total Bank assets at:
−Removed: March 31, 2021 (6.73) % (5.20) % (0.59) % 8.69 %
+Added: June 30, 2021 (4.96) % (2.71) % 1.96 % 7.96 %
September 30, 2020 4.58
Cumulative one-year gap - interest rates +200 bps at:
−Removed: March 31, 2021 (13.58)
+Added: June 30, 2021 (11.66)
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 March 31, 2021, at amortized cost.
+Added: Investment securities are presented based on contractual maturities, term to call dates or pre-refunding dates as of June 30, 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) March 31, 2021 September 30, 2020
+Added: (in Basis Points) June 30, 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 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.
−Removed: 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.
−Removed: This was partially offset by an increase in the balance of deposits.
−Removed: 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.
−Removed: The Bank terminated two interest rate swaps during the quarter, leaving the adjustable-rate advances outstanding.
−Removed: This resulted in a significant decrease in the effective cost of the borrowings portfolio.
−Removed: In addition, the Bank modified $200.0 million of fixed-rate advances during the fiscal year into lower costing long-term fixed-rate advances.
−Removed: The lower interest expense projection was offset by a lower income projection on the Bank's loan portfolio.
+Added: The net interest income projection was lower in the base case scenario at June 30, 2021 compared to September 30, 2020 due to a decrease in the interest income projection on the Bank's loan portfolio.
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: The net interest income projections increase from the base case in all rising interest rate scenarios at March 31, 2021 and September 30, 2020.
−Removed: 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.
−Removed: The positive impact of rising interest rates is diminished as interest rates increase.
−Removed: 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.
−Removed: In addition, the negative gap results in liabilities repricing at a faster pace in the rising interest rate scenarios.
+Added: The decrease in interest income was somewhat offset by 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 June 30, 2021 compared to September 30, 2020.
+Added: This was partially offset by an increase in the balance of deposits.
+Added: The decrease in 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 March 31, 2021 quarter, and replaced them with lower costing fixed-rate advances.
+Added: This resulted in a 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: Despite a negative gap, net interest income increases in all rising interest rate scenarios due to the assumption that the Bank's deposit balances are not expected to reprice to the full extent of the interest rate change.
+Added: This assumption is based on a historical analysis of the Bank's deposit pricing behavior.
Change in MVPE.
7 unchanged sentences
Change Market Value of Portfolio Equity At
−Removed: (in Basis Points) March 31, 2021 September 30, 2020
+Added: (in Basis Points) June 30, 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 March 31, 2021 and September 30, 2020 was negative in all scenarios.
−Removed: The negative impact to the Bank's MVPE is greater at March 31, 2021 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 March 31, 2021 compared to September 30, 2020.
−Removed: This was due in part to higher interest rates at March 31, 2021.
+Added: The percentage change in the Bank's MVPE at June 30, 2021 and September 30, 2020 was negative in all scenarios.
+Added: The negative impact to the Bank's MVPE is greater at June 30, 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 June 30, 2021 compared to September 30, 2020.
+Added: This was due in part to higher interest rates at June 30, 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.
2 unchanged sentences
The higher expected average lives of these assets, relative to the assumptions in the base case interest rate environment, increases the sensitivity of their market value to changes in interest rates.
−Removed: 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, non-maturity deposit durations increased between periods due to a recalibration of the Bank's core deposit analytics model.
−Removed: The Bank uses historical deposit behavior to project future behavior.
−Removed: 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.
−Removed: 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.
−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 March 31, 2021.
+Added: In addition, as mortgage loans are refinanced or endorsed to lower interest rates, their average lives also increase as further prepayments are expected to be diminished.
+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 June 30, 2021.
Yields presented for interest-earning assets include the amortization of fees, costs, premiums and discounts, which are considered adjustments to the yield.
26 unchanged sentences
Non-maturity deposits $ 3,756,725 0.14 5.8 56.6 % 45.7 %
−Removed: Retail/business certificates of deposit 2,730,354 1.55 1.3 41.1 33.1
+Added: Retail certificates of deposit 2,412,806 1.50 1.3 36.4 29.3
+Added: Commercial certificates of deposit 214,956 0.71 0.6 3.2 2.6
Public unit certificates of deposit 253,807 0.36 0.4 3.8 3.1
3 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.