7 unchanged sentences
Our net interest income results from the difference between the yields we earn on our interest-earning assets, primarily loans and investments, and the rates that we pay on our interest-bearing liabilities, primarily deposits and borrowings.
−Removed: When interest rates change, the yields we earn on our interest-earning assets and the rates we pay on our interest-bearing liabilities do not necessarily move in tandem with each other because
−Removed: of the difference between their maturities and repricing characteristics and which can negatively impact net interest income.
+Added: When interest rates change, the yields we earn on our interest-earning assets and the rates we pay on our interest-bearing liabilities do not necessarily move in tandem with each other because of the difference between their maturities and repricing characteristics and which can negatively impact net interest income.
Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the Federal Reserve.
20 unchanged sentences
The model does not take into account any future actions that management may take to mitigate the impact of interest rate changes, and it is our strategy to proactively change the volume and mix of our balance sheet in order to mitigate our interest rate risk.
−Removed: There has been no significant change in the Company's estimated net interest income sensitivity position from December 31, 2023.
−Removed: From a net interest income perspective, the Company generally has a fairly neutral interest sensitivity position in the short-term (within a twelve-month period) and within the lower ranges (+ - 100 to 200 basis points) of interest rate changes.
−Removed: With the current inverted interest rate yield curve, modeling of net interest income in changing rate environments presents particular challenges.
−Removed: As of September 30, 2024, the net interest income sensitivity indicates a slight asset sensitive position in both rising and falling rates over a one year period;
−Removed: however, a steepening of the yield curve reduces the impact of a 200 basis point reduction in rates to less than 2% of net interest income over a one year period and less than a 1% reduction over a two year period.
−Removed: The interest rate yield curve remains flat/inverted as of September 30, 2024.
−Removed: A flat or inverted interest rate yield 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.
−Removed: When these rates converge or
−Removed: invert, the profit spread we realize between loan yields and deposit rates narrows, which pressures our NIM, as was the case in 2022 and 2023.
−Removed: With regard to rising rates, with an immediate increase or shock of 200 basis points in market rates we would expect to realize an increase in net interest income of approximately 3% over both a one-year and two-year horizon.
−Removed: As previously noted, these assumptions are inherently uncertain, and actual results may differ from simulated results.
−Removed: Subsequent to September 30, 2024 market indications indicate that the yield curve may begin to normalize and steepen.
−Removed: In addition to the 50 basis points reduction in September 2024, the market consensus is that the Federal Reserve will continue to reduce short-term rates through late 2024 and into 2025.
−Removed: With reductions by the Federal Reserve, we are actively managing the cost of funds.
−Removed: Further, variable rate interest-earning assets will likely reprice to lower rates.
−Removed: Our ability to reduce cost of funds may be impacted by market competition for deposits.
+Added: As of March 31, 2025, the net interest income sensitivity indicated an asset sensitive position to net interest income from immediate parallel rate shifts in both rising and falling rates over a one year period with an increase of 5.5% in + 200 rate scenario, an increase of 5.7% in +100 rate scenario, a decrease of 1.2% in -100 scenario and a decrease of 2.5% in a -200 rate scenario.
+Added: These scenarios assume an immediate change in rates and no change in the shape of the yield curve.
+Added: Management also evaluates a steepening of the yield curve in rate reduction scenarios.
+Added: For a -100 rate scenario, net interest income would increase by 2.1% and for a -200 rate scenario,net interest income would decrease by 1.2%.
+Added: Assumptions utilized in the net interest income sensitivity analyses are inherently uncertain, and actual results may differ from simulated results.
Economic Value Simulation
4 unchanged sentences
The same assumptions are generally used in the economic value simulation as in the earnings simulation, including immediate and parallel rate shocks and static assumptions for deposit average decay rate and average lives.
−Removed: As of December 31, 2023, the Company’s economic value of equity ("EVE") was generally liability sensitive in both a rising and falling interest rate environment, which continues to be the case as of September 30, 2024.
−Removed: In the rising rate scenarios, EVE declines and in the falling rate scenarios, EVE improves.
+Added: As of March 31, 2025, the Company’s economic value of equity ("EVE") generally declines in rising rate scenarios and improves in falling rate scenarios.
The decline in EVE under a rising rate environment is driven by the composition of the loans and investment portfolios, primarily related to fixed rate loans and fixed rate mortgage-backed securities as compared to a higher proportion of deposits having variable rates.
−Removed: In a rising rate environment, the fixed rate loan and securities portfolios tend to extend due to slower prepayments, thus lowering their relative valuation in the EVE calculation.
−Removed: In declining rate environments, these same loan and securities portfolios tend to prepay.
−Removed: As of September 30, 2024, the impact of increasing rates on EVE are less severe than at December 31, 2023.
−Removed: Further, at the same date, the benefit from declining rates on EVE remains positive in most declining rate scenarios, but at a lower level than at December 31, 2023.
+Added: In addition to impacts on market values from changes in interest rates, fixed rate loans and securities tend to prepay more quickly in lower rate environments and prepay more slowly in rising rate environments, leading to impacts on their relative valuation in the EVE calculation.
+Added: As of March 31, 2025, the impact of increasing rates on EVE were -2.3% in +100 rate scenario and -10.5% in +200 rate scenario, compared to +3.8% in -100 rate scenario and +4.1% in -200 rate scenario.
Additional discussion concerning our exposure to interest rate risk is presented in Item 7A of the 2024 Annual Report on Form 10-K filed with the SEC.
3 unchanged sentences
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.
−Removed: 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: We review the 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.
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.