Item 3. Quantitative and Qualitative Disclosures About Market Risk
ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are engaged primarily in the business of investing funds obtained from deposits and borrowings into interest-earning loans and investments. Consequently, our earnings significantly depend on our net interest income, which is the difference between the interest income on loans and other investments and the interest expense on deposits and borrowings. To the extent that our interest-bearing liabilities do not reprice or mature at the same time as our interest-earning assets, we are subject to interest rate risk and corresponding fluctuations in net interest income. Our ALCO meets regularly and is responsible for reviewing our interest rate sensitivity position and establishing policies to monitor and limit exposure to interest rate risk. The policies established by the ALCO are reviewed and approved by our Board of Directors. We have employed asset/liability management policies that seek to manage our net interest income, without having to incur unacceptable levels of credit or investment risk.
We use simulation modeling to manage our interest rate risk and review quarterly interest sensitivity. This approach uses a model which generates estimates of the change in our EVE over a range of interest rate scenarios. EVE is the present value of expected cash flows from assets, liabilities and off-balance sheet contracts using assumptions including estimated loan prepayment rates, reinvestment rates and deposit decay rates.
The following tables are based on an analysis of our interest rate risk as measured by the estimated change in EVE resulting from instantaneous and sustained parallel shifts in the yield curve as of March 31, 2026 (plus 400 basis points or minus 300 basis points, measured in 100 basis point increments) and December 31, 2025 (plus 400 basis points or minus 400 basis points, measured in 100 basis point increments). All changes are within our Asset/Liability Risk Management Policy guidelines ($ in thousands).
Sensitivity of EVE
As of March 31, 2026
EVE
EVE as a % of
Change in Interest Rates
$ Change
% Change
Total
Equity
in Basis Points (Rate Shock)
Amount
From Base
From Base
Assets
Book Value
Up 400
$
599,039
$
(84,907)
(12.41)
%
14.07
%
140.23
%
Up 300
632,333
(51,613)
(7.55)
%
14.86
%
148.02
%
Up 200
659,938
(24,008)
(3.51)
%
15.50
%
154.48
%
Up 100
679,561
(4,385)
(0.64)
%
15.96
%
159.07
%
Base
683,946
—
—
%
16.07
%
160.10
%
Down 100
677,707
(6,239)
(0.91)
%
15.92
%
158.64
%
Down 200
656,169
(27,777)
(4.06)
%
15.42
%
153.60
%
Down 300
618,170
(65,776)
(9.62)
%
14.52
%
144.70
%
Sensitivity of EVE
As of December 31, 2025
EVE
EVE as a % of
Change in Interest Rates
$ Change
% Change
Total
Equity
in Basis Points (Rate Shock)
Amount
From Base
From Base
Assets
Book Value
Up 400
$
580,061
$
(92,337)
(13.73)
%
14.33
%
137.16
%
Up 300
609,258
(63,140)
(9.39)
%
15.05
%
144.07
%
Up 200
635,000
(37,398)
(5.56)
%
15.69
%
150.16
%
Up 100
665,294
(7,104)
(1.06)
%
16.44
%
157.32
%
Base
672,398
—
—
%
16.61
%
159.00
%
Down 100
664,487
(7,911)
(1.18)
%
16.42
%
157.13
%
Down 200
636,039
(36,359)
(5.41)
%
15.71
%
150.40
%
Down 300
589,701
(82,697)
(12.30)
%
14.57
%
139.44
%
Down 400
496,404
(175,994)
(26.17)
%
12.26
%
117.38
%
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Our interest rate sensitivity is also monitored by management through the use of a model that generates estimates of the change in the NII over a range of interest rate scenarios. NII depends upon the relative amounts of interest-earning assets and interest-bearing liabilities and the interest rates earned or paid on them. In this regard, our model historically assumes that the composition of our interest sensitive assets and liabilities remains constant over the period being measured and also assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration to maturity or repricing of specific assets and liabilities. The results below are within our ALM Policy guidelines as of March 31, 2026 and December 31, 2025 ($ in thousands).
Sensitivity of NII
As of March 31, 2026
Adjusted NII
Change in Interest Rates
$ Change
in Basis Points (Rate Shock)
Amount
From Base
Up 400
$
147,724
$
15,512
Up 300
144,492
12,280
Up 200
141,097
8,885
Up 100
137,437
5,225
Base
132,212
—
Down 100
127,898
(4,314)
Down 200
123,705
(8,507)
Down 300
120,065
(12,147)
Sensitivity of NII
As of December 31, 2025
Adjusted NII
Change in Interest Rates
$ Change
in Basis Points (Rate Shock)
Amount
From Base
Up 400
$
138,460
$
12,036
Up 300
135,719
9,295
Up 200
132,912
6,488
Up 100
130,888
4,464
Base
126,424
—
Down 100
122,521
(3,903)
Down 200
117,838
(8,586)
Down 300
113,697
(12,727)
Down 400
109,356
(17,068)
Sensitivity of EVE and NII are modeled using different assumptions and approaches. Certain shortcomings are inherent in the methodology used in the above interest rate risk measurements. Modeling changes in EVE and NII sensitivity requires the making of certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. Accordingly, although the EVE tables and NII tables provide an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to, and do not, provide a precise forecast of the effect of changes in market interest rates on our net worth and NII.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.