15 unchanged sentences
Earnings simulation and economic value models, which more effectively measure the cash flow and optionality impacts, are utilized by management on a regular basis and are discussed further below.
−Removed: From the various model results and our expectations regarding future interest rate movements, the national, regional and local economies, and other financial and business risk factors, we quantify the overall magnitude of interest sensitivity risk and then determine appropriate strategies and practices governing asset growth and pricing, funding sources and pricing, and off-balance sheet commitments.
+Added: From the various model results and our
+Added: expectations regarding future interest rate movements, the national, regional and local economies, and other financial and business risk factors, we quantify the overall magnitude of interest sensitivity risk and then determine appropriate strategies and practices governing asset growth and pricing, funding sources and pricing, and off-balance sheet commitments.
Earnings Simulation Analysis
12 unchanged sentences
From a net interest income perspective, the Company has been fairly neutral historically with no significant change in the short-term (within a 12-month period) and within the lower ranges (+ - 100-200 basis points) of interest rate changes.
−Removed: Starting in 2022, the Company's sensitivity position shifted somewhat such that, in the short-term it is projected that net interest income will likely be essentially flat or fall in both a rising and falling
−Removed: rate environment.
+Added: Starting in 2022, the Company's sensitivity position shifted somewhat such that, in the short-term it is projected that net interest income will likely be essentially flat or fall in both a rising and falling rate environment.
This position is due in part to the changing market characteristics of certain loan and deposit products as well as to the shift in the yield curve.
−Removed: The rapid rate increases in 2022 resulted in a steepening of the yield curve on the short end (within 1 year), while the longer end of the curve has inverted between 1 and 10 years, meaning that the yield on short-term instruments (less than 1 year) are higher than longer-term instruments (10 years).
+Added: The rapid rate increases in 2022 resulted in a steepening of the yield curve on the short end (within one year), while the longer end of the curve has inverted between one and 10 years, meaning that the yield on short-term instruments (less than one year) are higher than longer-term instruments (10 years).
A flat or inverted interest rate curve is an unfavorable interest rate environment for many financial institutions, including the Bank, as short-term interest rates generally drive our deposit pricing and longer-term interest rates generally drive loan pricing.
4 unchanged sentences
As previously noted, these assumptions are inherently uncertain, and actual results may differ from simulated results.
−Removed: While we believe rates may continue to increase in 2023 at a slower pace than in the prior year, there is a possibility that the Federal Reserve may start to reduce rates later in the year or in 2024.
−Removed: We would expect net interest income to decline in a decreasing interest rate environment, as interest-earning assets reprice to lower rates and interest-bearing deposits repricing may lag given continued market competition for deposits.
+Added: While we believe rates may increase again moderately in 2023, the consensus is that the market rates may begin to stabilize and there is a possibility that the Federal Reserve may start to reduce rates in 2024.
+Added: We would expect net interest income to decline somewhat in a decreasing interest rate environment, as interest-earning assets reprice to lower rates and interest-bearing deposits repricing may lag given continued market competition for deposits.
Economic Value Simulation
1 unchanged sentence
Economic values are calculated based on discounted cash flow analysis.
−Removed: The net economic value of equity is the economic value of all assets minus the economic value of all liabilities.
+Added: The net economic
+Added: value of equity is the economic value of all assets minus the economic value of all liabilities.
The change in net economic value over different rate environments is an indication of the longer-term earnings capability of the balance sheet.
−Removed: The same assumptions are used in the economic value simulation as in the earnings simulation.
+Added: The same assumptions are generally used in the economic value simulation as in the earnings simulation.
The economic value simulation uses instantaneous rate shocks to the balance sheet.
As of December 31, 2022, the Company’s economic value of equity ("EVE") was generally liability sensitive in a rising interest rate environment and there has been no significant change in our EVE position from year end.
−Removed: The increase in EVE exposure to rising rates which occurred starting in 2022 is primarily due to the composition of the consolidated balance sheets combined with the pricing characteristics and assumptions of certain deposits.
+Added: The increase in EVE exposure to rising rates which occurred starting in 2022 was primarily due to the composition of the consolidated balance sheets combined with the pricing characteristics and assumptions of certain deposits.
Specifically, starting in 2022, non-maturity deposits, generally with lower betas, have decreased and were replaced with short-term FHLB advances and short-term brokered deposits.
+Added: Additional discussion concerning our exposure to interest rate risk is presented in Item 7A of the 2022 Annual Report on Form 10-K filed with the SEC.
Our financial statements have been prepared in accordance with GAAP, which requires the financial position and operating results to be measured principally in terms of historic dollars without considering the change in the relative purchasing power of money over time due to inflation.
Nearly all of the Company’s assets and liabilities are monetary in nature, and as such, changes in interest rates (as discussed above) generally affect the financial condition of the Company to a greater degree than changes in the rate of inflation.
−Removed: Although interest rates are greatly influenced by changes in the inflation rate, they do not necessarily change at the same rate or in the same magnitude as the inflation rate.
+Added: Although interest rates are influenced by changes in the inflation rate, they do not necessarily change at the same rate or in the same magnitude as the inflation rate.
Inflation affects the Company’s results of operations mainly through increased operating costs, and the impact of inflation on banks in general is normally not as significant as its influence on those businesses that have large investments in plant and inventories.
We review pricing of our products and services, as well as our controllable operating and labor costs in light of current and expected costs due to inflation, to mitigate the inflationary impact on financial performance to the extent possible.
+Added: Awards Made To Named Executive Officers
+Added: During the fiscal year ended December 31, 2022, the Company did not award an option or other right to purchase or acquire its common shares during any period beginning four business days before the filing of a periodic report on Form 10-Q or the filing or furnishing of a report on Form 8-K that disclosed material nonpublic information and ending one business day after the filing or furnishing of such a report to any the Company’s “named executive officers” (as such persons are specified in the Company’s Proxy Statements for its 2022 or 2023 Annual Meeting of Shareholders).
+Added: Trading Arrangements of Section 16 Reporting Persons.
+Added: During the quarter ended June 30, 2023, no person who is required to file reports pursuant to Section 16(a) of the Securities and Exchange Act of 1934, as amended, with respect to holdings of, and transactions in, the Company’s common shares (i.e.
+Added: directors and certain officers of the Company) maintained, adopted , modified or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1(c) arrangement”, as those terms are defined in Section 229.408 of the regulations of the SEC.
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.