Quantitative and Qualitative Disclosures About Market Risk
−Removed: Quantitative and qualitative disclosures about market risk were presented at December 31, 2020 in Item 7A of the Holding Company’s Annual Report on Form 10-K, filed with the SEC on March 15, 2021.
+Added: Quantitative and qualitative disclosures about market risk were presented at December 31, 2021 in Item 7A of the Holding Company’s Annual Report on Form 10-K, filed with the SEC on February 28, 2022.
The following is an update of the discussion provided therein.
1 unchanged sentence
The Company is not subject to foreign currency exchange or commodity price risk.
−Removed: During the three and nine months ended September 30, 2021, the Company conducted zero transactions involving derivative instruments requiring bifurcation in order to hedge interest rate or market risk.
+Added: During the three months ended March 31, 2022, we conducted zero transactions involving derivative instruments requiring bifurcation in order to hedge interest rate or market risk.
Interest Rate Risk Exposure Analysis
−Removed: Economic Value of Equity ("EVE") Analysis .
+Added: Economic Value of Equity (“EVE”) Analysis .
In accordance with agency regulatory guidelines, the Company simulates the impact of interest rate volatility upon EVE using several interest rate scenarios.
3 unchanged sentences
The changes in the value of assets and liabilities due to fluctuations in interest rates measure the interest rate sensitivity of those assets and liabilities.
−Removed: In order to measure the Company’s sensitivity to changes in interest rates, EVE is calculated under market interest rates prevailing at a given quarter-end ("Pre-Shock Scenario"), and under various other interest rate scenarios ("Rate Shock Scenarios") representing immediate, permanent, parallel shifts in the term structure of interest rates from the actual term structure observed in the Pre-Shock Scenario.
+Added: In order to measure the Company’s sensitivity to changes in interest rates, EVE is calculated under market interest rates prevailing at a given quarter-end (“Pre-Shock Scenario”), and under various other interest rate scenarios (“Rate Shock Scenarios”) representing immediate, permanent, parallel shifts in the term structure of interest rates from the actual term structure observed in the Pre-Shock Scenario.
An increase in the EVE is considered favorable, while a decline is considered unfavorable.
−Removed: The changes in EVE between the Pre-Shock Scenario and various Rate Shock Scenarios due to fluctuations
−Removed: in interest rates reflect the interest rate sensitivity of the Company’s assets, liabilities, and off-balance sheet items that are included in the EVE.
+Added: The changes in EVE between the Pre-Shock Scenario and various Rate Shock Scenarios due to fluctuations in interest rates reflect the interest rate sensitivity of the Company’s assets, liabilities, and off-balance sheet items that are included in the EVE.
Management reports the EVE results to the Board of Directors on a quarterly basis.
8 unchanged sentences
No matter the care and precision with which the estimates are derived, actual cash flows could differ significantly from the Company’s estimates resulting in significantly different EVE calculations.
−Removed: The analysis that follows presents, as of September 30, 2021 and December 31, 2020, the estimated EVE at both the Pre-Shock Scenario and the +100 Basis Point Rate and +200 Basis Point Rate Shock Scenarios.
−Removed: September 30, 2021
+Added: The analysis that follows presents, as of March 31, 2022 and December 31, 2021, the estimated EVE at both the Pre-Shock Scenario and the +100 Basis Point Rate and +200 Basis Point Rate Shock Scenarios.
+Added: March 31, 2022
December 31, 2021
4 unchanged sentences
Pre-Shock Scenario
−Removed: The Company’s Pre-Shock Scenario EVE increased from $593.4 million at December 31, 2020 to $1.15 billion at September 30, 2021.
−Removed: The primary factor contributing to the significant increase in EVE at September 30, 2021, was the completion of the Merger in the first quarter.
−Removed: The Company’s EVE in the +100 Basis Point Rate and +200 Basis Point Rate Shock Scenarios increased from $597.4 million and $601.3 million, respectively, at December 31, 2020, to $1.28 billion and $1.37 billion, respectively, at September 30, 2021.
+Added: The Company’s Pre-Shock Scenario EVE increased from $1.22 billion at December 31, 2021 to $1.74 billion at March 31, 2022.
+Added: The primary factor contributing to the increase in EVE at March 31, 2022, was the increase in value of the Bank’s low-cost deposit base relative to the current rate environment.
+Added: During the first quarter of 2022, market interest rates utilized in the calculation of economic value increased materially across all yield curve points.
+Added: However, management held the Bank’s cost of deposits relatively flat during this same time period, resulting in additional economic value associated with this low-cost funding base.
+Added: The Company’s EVE in the +100 Basis Point Rate and +200 Basis Point Rate Shock Scenarios increased from $1.33 billion and $1.41 billion, respectively, at December 31, 2021, to $1.83 billion and $1.89 billion, respectively, at March 31, 2022.
Income Simulation Analysis .
2 unchanged sentences
Management reports the net interest income simulation results to the Company’s Board of Directors on a quarterly basis.
−Removed: The following table discloses the estimated changes to the Company’s net interest income over the 12-month period beginning September 30, 2021 assuming gradual changes in interest rates for the given rate scenarios:
−Removed: Percentage Change in
+Added: The following table discloses the estimated changes to the Company’s net interest income in various time periods assuming gradual changes in interest rates over a 12-month period beginning March 31, 2022, for the given rate scenarios:
+Added: Percentage Change in Net Interest Income
Gradual Change in Interest rates of:
−Removed: Net Interest Income
+ 200 Basis Points
+ 100 Basis Points
+Added: Management also examines the potential impact to net interest income by simulating the impact of instantaneous changes to interest rates.
+Added: The following table discloses the estimated changes to the Company’s net interest income in various time periods associated with the given interest rate shock scenarios.
+Added: Percentage Change in Net Interest Income
+Added: Instantaneous Rate Shock Scenarios
+Added: + 200 Basis Points
+Added: + 100 Basis Points
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.