2 unchanged sentences
For a complete discussion of the Bank's asset and liability management policies, as well as the potential impact of interest rate changes upon the market value of the Bank's portfolios, see "Part II, Item 7A.
−Removed: Quantitative and Qualitative Disclosures about Market Risk" in the Company's Annual Report on Form 10-K for the year ended September 30, 2021.
+Added: Quantitative and Qualitative Disclosures about Market Risk" in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2021.
The analysis presented in the tables below reflects the level of market risk at the Bank, including the cash the holding company has on deposit at the Bank.
54 unchanged sentences
liabilities as a percent of total Bank assets at:
+Added: June 30, 2022 (14.0) % (14.5) % (6.8) % 8.1 %
March 31, 2022 (15.3)
−Removed: December 31, 2021 (9.66)
September 30, 2021 (6.9)
Cumulative one-year gap - interest rates +200 bps at:
+Added: June 30, 2022 (14.4)
March 31, 2022 (16.2)
−Removed: December 31, 2021 (14.97)
September 30, 2021 (13.4)
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, 2022, at amortized cost.
+Added: Investment securities are presented based on contractual maturities, term to call dates or pre-refunding dates as of June 30, 2022, 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.
4 unchanged sentences
The repricing for these liabilities is projected to occur at the maturity date of each interest rate swap.
−Removed: At March 31, 2022, the Bank's gap between the amount of interest-earning assets and interest-bearing liabilities projected to reprice within one year was $(1.46) billion, or (15.3)% of total assets, compared to $(928.0) million, or (9.7)% of total assets, at December 31, 2021.
−Removed: The change in the one-year gap amount was due primarily to a decrease in the amount of asset cash flows projected at March 31, 2022 compared to December 31, 2021.
−Removed: As interest rates rise, 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.
+Added: At June 30, 2022, the Bank's gap between the amount of interest-earning assets and interest-bearing liabilities projected to reprice within one year was $(1.33) billion, or (14.0)% of total assets, compared to $(1.46) billion, or (15.3)% of total assets, at March 31, 2022.
+Added: The change in the one-year gap amount was due primarily to a decrease in the amount of liability cash flows projected at June 30, 2022 compared to March 31, 2022, specifically due to lower deposit balances.
+Added: In addition, the Bank projected higher cash flows on mortgage-related assets at June 30, 2022 compared to March 31, 2022, despite higher interest rates.
+Added: As interest rates rise, 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, which would typically result in lower projected cash flows on these assets.
+Added: However, during the current quarter, the Bank upgraded its interest rate risk model, which resulted in the third-party mortgage prepayment model projecting faster prepayment speeds for mortgage-related assets, even though
+Added: interest rates were higher at June 30, 2022.
+Added: The prepayment speeds in the upgraded interest rate risk model are more reflective of the Bank's actual experience at current market interest rates.
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.
−Removed: If interest rates were to increase 200 basis points, as of March 31, 2022, the Bank's
−Removed: one-year gap is projected to be $(1.54) billion, or (16.2)% of total assets.
+Added: If interest rates were to increase 200 basis points, as of June 30, 2022, the Bank's one-year gap is projected to be $(1.36) billion, or (14.4)% of total assets.
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.
−Removed: This compares to a one-year gap of $(1.44) billion, or (15.0)% of total assets, if interest rates were to have increased 200 basis points as of December 31, 2021.
+Added: This compares to a one-year gap of $(1.54) billion, or (16.2)% of total assets, if interest rates were to have increased 200 basis points as of March 31, 2022.
Change in Net Interest Income.
2 unchanged sentences
Projected cash flows for each scenario are based upon varying prepayment assumptions to model likely customer behavior changes as market rates change.
−Removed: For the current quarter, multiple yields along the yield curve were less than one percent, so the -100 basis points scenario was not applicable.
+Added: At September 30, 2021, multiple yields along the yield curve were less than one percent, so the -100 basis points scenario was not applicable.
Estimations of net interest income used in preparing the table below were based upon the assumptions that the total composition of interest-earning assets and interest-bearing liabilities does not change materially and that any repricing of assets or liabilities occurs at anticipated product and market rates for the alternative rate environments as of the dates presented.
3 unchanged sentences
Change Net Interest Income At
−Removed: (in Basis Points) March 31, 2022 September 30, 2021
+Added: (in Basis Points) June 30, 2022 September 30, 2021
in Interest Rates (1)
1 unchanged sentence
(Dollars in thousands)
+Added: -100 bp $ 189,186 $ (17) (0.01) % N/A N/A N/A
000 bp 189,203 — — $ 185,285 $ — — %
3 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, 2022 compared to September 30, 2021 due to a larger increase in the income projections on the Bank's assets than the expenses projections on the Bank's liabilities.
−Removed: Despite a negative gap, the net interest income projection has increased as rates have increased due to the assumption that the Bank's deposit balances are not expected to reprice to the full extent of the interest rate change.
−Removed: This assumption is based on a historical analysis of the Bank's deposit pricing behavior.
−Removed: As interest rates continue to increase in the interest rate shock scenarios, this impact is more than offset by a further decrease in principal prepayment projections on the Bank's mortgage-related assets.
−Removed: This results in fewer assets repricing to higher interest rates and thus a decrease in the projected net interest income in the rising rate scenarios.
+Added: The net interest income projection was higher in the base case scenario at June 30, 2022 compared to September 30, 2021 due to higher income projections on the Bank's assets than expense projections on the Bank's liabilities as a result of higher interest rates at June 30, 2022.
+Added: In the rising rate scenarios, fewer assets reprice to higher interest rates, resulting in a decrease in projected net interest income.
+Added: This was not the case at September 30, 2021, as interest rates were lower than June 30, 2022, resulting in more mortgage-related cash flows projected to reprice than at June 30, 2022.
+Added: In the decreasing rate scenario at June 30, 2022, the net interest income projection remained relatively flat as the projected increase in mortgage-related assets repricing to lower interest rates was largely offset by liability cash flows repricing to lower interest rates as well.
Change in MVPE.
2 unchanged sentences
Projected cash flows for each scenario are based upon varying prepayment assumptions to model likely customer behavior as market rates change.
−Removed: For the current quarter, multiple yields along the yield curve were less than one percent, so the -100 basis points scenario was not applicable.
+Added: At September 30, 2021, multiple yields along the yield curve were less than one percent, so the -100 basis points scenario was not applicable.
The estimations of the MVPE used in preparing the table below were based upon the assumptions that the total composition of interest-earning assets and interest-bearing liabilities does not change, that any repricing of assets or liabilities occurs at current product or market rates for the alternative rate environments as of the dates presented, and that different prepayment rates were used in each alternative interest rate environment.
2 unchanged sentences
Change Market Value of Portfolio Equity At
−Removed: (in Basis Points) March 31, 2022 September 30, 2021
+Added: (in Basis Points) June 30, 2022 September 30, 2021
in Interest Rates (1)
1 unchanged sentence
(Dollars in thousands)
+Added: -100 bp $ 841,710 $ 94,738 12.68 % N/A N/A N/A
000 bp 746,972 — — $ 1,451,795 $ — — %
3 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, 2022 and September 30, 2021 was negative in all scenarios.
−Removed: The negative impact to the Bank's MVPE is greater at March 31, 2022 compared to September 30, 2021 due primarily to an increase in the duration of the Bank's mortgage-related assets at March 31, 2022 compared to September 30, 2021.
−Removed: This was due to higher interest rates at March 31, 2022.
+Added: The percentage change in the Bank's MVPE at June 30, 2022 and September 30, 2021 was negative in all rising rate scenarios.
+Added: The negative impact to the Bank's MVPE is greater at June 30, 2022 compared to September 30, 2021 due primarily to an increase in the duration of the Bank's mortgage-related assets at June 30, 2022 compared to September 30, 2021.
+Added: This was due to higher interest rates at June 30, 2022.
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 expected to be diminished.
−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, 2022.
+Added: In the decreasing interest rate scenario at June 30, 2022, the Bank's MVPE increased due to a larger increase in the market value of the Bank's asset than the Bank's liabilities.
+Added: This is because the Bank's mortgage-related assets continue to have a higher duration in this scenario which results in greater sensitivity in market value as rates change.
+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, 2022.
Yields presented for interest-earning assets include the amortization of fees, costs, premiums and discounts, which are considered adjustments to the yield.
23 unchanged sentences
Term borrowings 1,840,000 2.12 2.6 98.1 % 24.1
+Added: Line of credit borrowings 35,700 1.63 — 1.9 0.5
+Added: Total borrowings 1,875,700 2.11 2.5 100.0 % 24.6
Total interest-bearing liabilities $ 7,625,198 0.92 3.5 100.0 %
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.