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Also, the model does not make estimates related to changes in the composition of the deposit portfolio that could occur due to rate competition, and the table does not necessarily reflect changes that management would make to realign the portfolio as a result of changes in interest rates.
−Removed: As described in more detail below, the Corporation made changes in the estimated rate sensitivity of nonmaturity deposits in the March 31, 2023 analysis presented in Table XI.
+Added: As described in more detail below, the Corporation made changes in the estimated rate sensitivity of nonmaturity deposits in the June 30, 2023 analysis presented in Table XI.
The Corporation’s Board of Directors has established policy guidelines for acceptable levels of interest rate risk, based on an immediate increase or decrease in interest rates.
The policy limits acceptable fluctuations in net interest income from the baseline (flat rates) one-year scenario and variances in the economic value of equity from the baseline values based on current rates.
−Removed: Table XI, which follows this discussion, is based on the results of calculations performed using the simulation model as of March 31, 2023 and December 31, 2022.
−Removed: In the analysis based on March 31, 2023 data, the amounts of net interest income and economic value of equity decrease in the upward rate scenarios.
−Removed: Further, net interest income also decreases slightly in the downward rate scenarios, reflecting the limitations on the benefit of falling rates on some deposit types due to a 0% assumed floor.
−Removed: The results based on March 31, 2023 data as presented in Table XI are significantly different from the results based on the modeling performed using December 31, 2022 data which showed the net interest income profile to be asset-sensitive.
−Removed: In the analysis based on March 31, 2023 data, management assumed that, in rising rate scenarios, the average rate to be paid on interest checking, savings and money market accounts would increase by a higher percentage of the baseline scenario as compared to the assumptions used in the December 31, 2022 analysis.
+Added: Table XI, which follows this discussion, is based on the results of calculations performed using the simulation model as of June 30, 2023 and December 31, 2022.
+Added: In the analysis based on June 30, 2023 data, the amounts of net interest income and economic value of equity decrease, as compared to the amounts based on current interest rates, in both the upward and downward rate scenarios.
+Added: The results based on June 30, 2023 data as presented in Table XI are significantly different from the results based on the modeling performed using December 31, 2022 data which showed the net interest income profile to be asset-sensitive.
+Added: In the analysis based on June 30, 2023 data, management assumed that, in rising rate scenarios, the average rate to be paid on interest checking, savings and money market accounts would increase by a higher percentage of the baseline scenario as compared to the assumptions used in the December 31, 2022 analysis.
This change reflects management’s assessment that, in light of significant increases in short-term interest rates that have occurred over the course of 2022 and year-to-date in 2023, the Corporation’s deposit rates would increase to a greater extent if such scenarios would occur.
−Removed: The Table also shows that as of the respective dates, despite the impact of the modeling changes related to deposits, the changes in net interest income and changes in economic value were within the policy limits in all scenarios.
−Removed: generally accepted accounting principles, available-for-sale debt securities are carried at fair value as of each balance sheet date.
−Removed: The difference between amortized cost and fair value of available-for-sale debt securities, net of deferred income tax, is included
+Added: The change in results also reflects changes in deposit mix, as the carrying amount of total deposits without stated maturities was $101.9 million lower at June 30, 2023 as compared to December 31, 2022, while time deposits were higher by $114.4 million.
+Added: Further, the reduction in net interest income in the downward rate scenarios reflects the limitations on the benefit of falling rates on some deposit types due to a 0% assumed floor.
+Added: The Table also shows that as of the respective dates, despite the impact of the modeling changes and changes in deposit mix, the changes in net interest income and changes in economic value were within the policy limits in all scenarios.
CITIZENS & NORTHERN CORPORATION – FORM 10-Q
−Removed: in accumulated other comprehensive income (loss) within stockholders’ equity.
−Removed: Increases in interest rates have caused the fair value of the Corporation’s available-for-sale debt securities to decrease, resulting in an accumulated other comprehensive loss of $43.3 million at March 31, 2023.
+Added: generally accepted accounting principles, available-for-sale debt securities are carried at fair value as of each balance sheet date.
+Added: The difference between amortized cost and fair value of available-for-sale debt securities, net of deferred income tax, is included in accumulated other comprehensive income (loss) within stockholders’ equity.
+Added: Increases in interest rates have caused the fair value of the Corporation’s available-for-sale debt securities to decrease, resulting in an accumulated other comprehensive loss of $48.5 million at June 30, 2023.
In contrast, most of the Corporation’s other financial instruments, including loans receivable (held for investment), deposits and borrowed funds are carried on the balance sheet at historical cost without adjustment for the impact of changes in interest rates.
TABLE XI – THE EFFECT OF HYPOTHETICAL CHANGES IN INTEREST RATES
−Removed: March 31, 2023 Data
+Added: June 30, 2023 Data
(In Thousands)
−Removed: Period Ending March 31, 2024
+Added: Period Ending June 30, 2024
Change in Rates
−Removed: Economic Value of Equity at March 31, 2023
+Added: Economic Value of Equity at June 30, 2023
Change in Rates
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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.