3 unchanged sentences
The First Bancorp, Inc.'s market risk is composed primarily of interest rate risk.
−Removed: The Bank's Asset/Liability Committee ("ALCO") is responsible for reviewing the interest rate sensitivity position of the Company and establishing policies to monitor and limit exposure to interest rate risk.
+Added: The Bank's ALCO is responsible for reviewing the interest rate sensitivity position of the Company and establishing policies to monitor and limit exposure to interest rate risk.
All guidelines and policies established by ALCO have been approved by the Board of Directors.
7 unchanged sentences
A gap is defined as the difference between the principal amount of assets and liabilities that reprice within a specified time period.
−Removed: The Company's cumulative one-year gap at September 30, 2021 was 6.77% of total assets compared to 5.54% of total assets at December 31, 2020.
+Added: The Company's cumulative one-year gap at March 31, 2022 was (0.56)% of total assets compared to 7.09% of total assets at December 31, 2021.
Core deposits with non-contractual maturities are presented based upon historical patterns of balance attrition and pricing behavior, which are reviewed at least annually.
1 unchanged sentence
Mortgage prepayments are estimated by applying industry median projections of prepayment speeds to portfolio segments based on coupon range and loan age.
−Removed: A summary of the Company's static gap, as of September 30, 2021, is presented in the following table:
+Added: A summary of the Company's static gap, as of March 31, 2022, is presented in the following table:
0-90 90-365 1-5 5+
22 unchanged sentences
This analysis is also most useful in determining the short-run earnings exposures to changes in customer behavior involving loan payments and deposit additions and withdrawals.
−Removed: The Company's most recent simulation model projects net interest income would decrease by approximately 1.6% of stable-rate net interest income if short-term rates affected by Federal Open Market Committee actions fall gradually by one percentage point over the next year, and increase by approximately 0.3% if rates rise gradually by two percentage points.
+Added: The Company's most recent simulation model projects net interest income would increase by approximately 0.2% of stable-rate net interest income if short-term rates affected by Federal Open Market Committee actions fall gradually by one percentage
+Added: point over the next year, and decrease by approximately 5.1% if rates rise gradually by two percentage points.
Both scenarios are well within ALCO's policy limit of a decrease in net interest income of no more than 10.0% given a 2.0% move in interest rates, up or down.
Management believes this reflects a reasonable interest rate risk position.
−Removed: In year two, and assuming no additional movement in rates, the model forecasts that net interest income would be lower than that earned in a stable rate environment by 8.8% in a falling-rate scenario, and higher than that earned in a stable rate environment by 1.2% in a rising rate scenario, when compared to the year-one base scenario.
+Added: In year two, and assuming no additional movement in rates, the model forecasts that net interest income would be higher than that earned in a stable rate environment by 0.6% in a falling-rate scenario, and lower than that earned in a stable rate environment by 4.4% in a rising rate scenario, when compared to the year-one base scenario.
Both year two scenarios are well within ALCO's policy limit of a decrease of no more than 20% given a 2.0% move in interest rates, up or down.
−Removed: A summary of the Bank's interest rate risk simulation modeling, as of September 30, 2021 and December 31, 2020 is presented in the following table:
−Removed: Changes in Net Interest Income September 30, 2021 December 31, 2020
+Added: A summary of the Bank's interest rate risk simulation modeling, as of March 31, 2022 and December 31, 2021 is presented in the following table:
+Added: Changes in Net Interest Income March 31, 2022 December 31, 2021
Projected change if rates decrease by 1.0% 0.2% -1.5%
15 unchanged sentences
Frequently called interest rate derivatives, interest rate swaps, caps and floors have characteristics similar to securities but possess the advantages of customization of the risk-reward profile of the instrument, minimization of balance sheet leverage and improvement of liquidity.
−Removed: As of September 30, 2021, the Company was using interest rate swaps for interest rate risk management.
+Added: As of March 31, 2022, the Company was not using interest rate swaps for interest rate risk management.
The Company engages an independent consultant to periodically review its interest rate risk position, as well as the effectiveness of simulation modeling and reasonableness of assumptions used.
−Removed: As of September 30, 2021, there were no significant differences between the views of the independent consultant and Management regarding the Company's interest rate risk exposure.
+Added: As of March 31, 2022, there were no significant differences between the views of the independent consultant and Management regarding the Company's interest rate risk exposure.
Management expects interest rates will increase slightly in the next year and believes that the current level of interest risk is acceptable.
1 unchanged sentence
The Company is aware that 1) certain tenors of USD denominated LIBOR indices will no longer be published after December 31, 2021, while other tenors are expected to continue being published until June 30, 2023, and 2) no new contracts referencing LIBOR are to be written after December 31, 2021.
−Removed: The Federal Reserve formed the Alternative Reference Rates Committee ("ARRC") to guide the transition process in the United States.
−Removed: ARRC has issued a number of recommendations including the adoption of the Secured Overnight Financing Rate ("SOFR") as a replacement for LIBOR.
−Removed: The International Swap and Derivatives Association (ISDA), the organization that oversees and guides swap and derivatives markets and participants, continues to work on transitions and has issued a voluntary fallback protocol for market participants.
−Removed: The Company formed a working group to address LIBOR cessation, which continues to monitor developments from ARRC and ISDA, along with guidance from US banking regulators.
−Removed: A replacement reference rate index for new transactions will be selected prior to year-end 2021 as required.
−Removed: Each of the interest rate swap contracts the Company has in place as of September 30, 2021 is tied to a LIBOR tenor expected to be published until June 2023.
−Removed: Two contracts with a total notional value of $45 million mature prior to June 30, 2023, while an additional seven contracts with a total notional amount of $165 million have maturity dates beyond
−Removed: June 30, 2023.
−Removed: The six customer loan swap contracts shown in the table immediately above have maturity dates of December 19, 2029, August 21, 2030, April 1, 2031, July 1, 2035, October 1, 2035 and October 1, 2039.
+Added: The Federal Reserve formed the ARRC to guide the transition process in the United States.
+Added: ARRC has issued a number of recommendations including the adoption of the SOFR as a replacement for LIBOR.
+Added: The ISDA, the organization that oversees and guides swap and derivatives markets and participants, continues to work on transitions and has issued a voluntary fallback protocol for market participants.
+Added: The Company has adopted SOFR as its replacement reference rate index for new transactions.
+Added: Each of the interest rate swap contracts the Company has in place as of March 31, 2022 is tied to a LIBOR tenor expected to be published until June 2023.
+Added: The six customer loan swap contracts that the Company has in place have maturity dates of December 19, 2029, August 21, 2030, April 1, 2031, July 1, 2035, October 1, 2035 and October 1, 2039.
It is anticipated that necessary actions to amend these legacy contracts and designate a replacement reference rate index will be undertaken in late 2022.
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.