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Over the past five calendar years, our net interest margin has ranged from a low of 3.56% (realized in 2020) to a high of 4.09% (realized in 2018).
−Removed: The consistency of the net interest margin is aided by the relatively low level of long-term interest rate exposure that we maintain.
−Removed: At March 31, 2021 a majority of our interest-earning assets are subject to repricing within five years (because they are either adjustable rate assets or they are fixed rate assets that mature) and substantially all of our interest-bearing liabilities reprice within five years.
−Removed: Using stated maturities for all fixed rate instruments except mortgage-backed securities (which are allocated in the periods of their expected payback) and securities and borrowings with call features that are expected to be called (which are shown in the period of their expected call), at March 31, 2021, we had over $2 billion more in interest-bearing liabilities that are subject to interest rate changes within one year than earning assets.
+Added: The consistency of
+Added: the net interest margin is aided by the relatively low level of long-term interest rate exposure that we maintain.
+Added: At June 30, 2021 a majority of our interest-earning assets are subject to repricing within five years (because they are either adjustable rate assets or they are fixed rate assets that mature) and substantially all of our interest-bearing liabilities reprice within five years.
+Added: Using stated maturities for all fixed rate instruments except mortgage-backed securities (which are allocated in the periods of their expected payback) and securities and borrowings with call features that are expected to be called (which are shown in the period of their expected call), at June 30, 2021, we had over $2 billion more in interest-bearing liabilities that are subject to interest rate changes within one year than earning assets.
This generally would indicate that net interest income would experience downward pressure in a rising interest rate environment and would benefit from a declining interest rate environment.
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In addition to the effects of “when” various rate-sensitive products reprice, market rate changes may not result in uniform changes in rates among all products.
−Removed: For example, included in interest-bearing liabilities subject to interest rate changes within one year at March 31, 2021 were deposits totaling $4 .3 b illion comprised of checking, savings, and certain types of money market deposits with interest rates set by management.
+Added: For example, included in interest-bearing liabilities subject to interest rate changes within one year at June 30, 2021 were deposits totaling $3.8 b illion comprised of checking, savings, and certain types of money market deposits with interest rates set by management.
These types of deposits historically have not repriced with, or in the same proportion, as general market indicators.
Overall, we believe that in the near term (twelve months), net interest income will not likely experience significant downward pressure from rising interest rates.
−Removed: Similarly, we would not expect a significant increase in near term net
−Removed: interest income from falling interest rates.
+Added: Similarly, we would not expect a significant increase in near term net interest income from falling interest rates.
Generally, when rates change, our interest-sensitive assets that are subject to adjustment reprice immediately at the full amount of the change, while our interest-sensitive liabilities that are subject to adjustment reprice at a lag to the rate change and typically not to the full extent of the rate change.
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Assuming no significant changes in interest rates in the next twelve months, we expect continued pressure on our net interest margin (excluding the impact of PPP - see below) as a result of the flat yield curve and the expectation of lower interest rates on the redeployment of cash received on maturing loans and investments that will likely not be fully offset by lower funding costs.
−Removed: Since the announcement of the SBA's PPP program, we have originated at total of approximately $356 million in PPP loans, of which $241 million were outstanding at both December 31, 2020 and March 31, 2021.
+Added: Since the announcement of the SBA's PPP program, we have originated at total of approximately $358 million in PPP loans, of which $156 million and $241 million were outstanding at June 30, 2021 and December 31, 2020,
+Added: respectively.
These loans all have an interest rate of 1.00%.
In addition to the interest rate, the SBA compensated us with an origination fee for each loan of between 1% to 5% of the loan amount, depending on the size of each loan.
−Removed: We received a total of approximately $16.9 million in these fees, which were netted against the direct cost to originate each loan that totaled approximately $0.7 million, with the net amount deferral amount initially being amortized as interest income over their contractual lives of either two years or five years using the effective interest method of recognition.
+Added: We received a total of approximately $16.9 million in these fees, which were netted against the direct cost to originate each loan that totaled approximately $0.7 million, with the net deferral amount initially being amortized as interest income over their contractual lives of either two years or five years using the effective interest method of recognition.
Early repayments, including the loan forgiveness provisions contained in the PPP, result in accelerated amortization.
In 2020, we amortized $4.1 million of the PPP loan fees as interest income.
−Removed: For the first three months of 2021, we amortized $3.0 million of the PPP loan fees as interest income.
+Added: For the first six months of 2021, we amortized $5.7 million of the PPP loan fees as interest income.
The Company has $6.2 million in remaining deferred PPP loan fees, of which $0.9 million relates to 2020 originations and $5.3 million relates to 2021 originations.
−Removed: We expected the fees associated with the 2020 originations to be substantially realized during 2021, while we expect the fees associated with the 2021 originations to be recognized at a rate of approximately $150 thousand per quarter for the remainder of 2021, and accelerated amortization occurring in 2022 upon the forgiveness process.
+Added: While the exact timing of the forgiveness approvals from PPP loans is uncertain, we currently expect the majority of the remaining fees associated with the 2020 originations to be realized during the third quarter of 2021.
+Added: As it relates to the 2021 PPP originations, we expect approximately one-third of the remaining fees at June 30, 2021 to be recognized in the third quarter of 2021, half to be recognized in the fourth quarter of 2021, with substantially all of the remainder recognized in the first quarter of 2022.
As previously discussed in the section “Net Interest Income,” our net interest income has been impacted by certain purchase accounting adjustments related to the acquired banks.
The purchase accounting adjustments related to the premium amortization on loans, deposits and borrowings are based on amortization schedules and are thus systematic and predictable.
−Removed: The accretion of the loan discount on acquired loans amounted to $1.3 million and $1.8 million for the first three months of 2021 and 2020, respectively, is less predictable and could be materially different among periods.
+Added: The accretion of the loan discount on acquired loans amounted to $3.7 million and $2.0 million for the first six months of 2021 and 2020, respectively, is less predictable and could be materially different among periods.
This is because of the magnitude of the discounts that are initially recorded and the fact that the accretion being recorded is dependent on both the credit quality of the acquired loans and the impact of any accelerated loan repayments, including payoffs.
−Removed: If the credit quality of the loans declines, some, or all, of the
−Removed: remaining discount will cease to be accreted into income.
+Added: If the credit quality of the loans declines, some, or all, of the remaining discount will cease to be accreted into income.
If the underlying loans experience accelerated paydowns or improved performance expectations, the remaining discount will be accreted into income on an accelerated basis.
In the event of total payoff, the remaining discount will be entirely accreted into income in the period of the payoff.
+Added: For example, in the second quarter of 2021, we experienced pay-offs on five former failed-bank loans that resulted in the elevated level of discount accretion recorded for the quarter.
Each of these factors is difficult to predict and susceptible to volatility.
−Removed: The remaining loan discount on acquired loans amounted to $8.2 million at March 31, 2021 compared to $8.9 million at December 31, 2020.
+Added: The remaining loan discount on acquired loans amounted to $5.3 million at June 30, 2021 compared to $8.9 million at December 31, 2020.
We have no market risk sensitive instruments held for trading purposes, nor do we maintain any foreign currency positions.
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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.