7 unchanged sentences
The objective is to measure the effect on net interest income and to adjust the consolidated balance sheets to minimize the inherent risk while at the same time maximizing income.
−Removed: We manage exposure to interest rates by structuring the consolidated balance sheets in the ordinary course of business.
−Removed: Additionally, from time to time, we enter into derivatives and futures contracts to mitigate interest rate risk from specific transactions.
+Added: We manage exposure to interest rates by structuring the consolidated balance sheet in the ordinary course of business.
+Added: We may utilize derivative financial instruments as part of an ongoing effort to mitigate interest rate risk exposure to interest rate fluctuations and facilitate the needs of our customers.
+Added: For more information about our derivative financial instruments, see Note 12 — Derivative Financial Instruments in the notes to our consolidated financial statements contained in Part II, Item 8 of this report.
Based on the nature of operations, we are not subject to foreign exchange or commodity price risk.
−Removed: We have entered into interest rate swaps to mitigate interest rate risk in limited circumstances, but it is not our policy to enter into such transactions on a regular basis.
Our exposure to interest rate risk is managed by the Bank’s Asset-Liability Management Committee in accordance with policies approved by the Bank’s board of directors.
5 unchanged sentences
We use interest rate risk simulation models and shock analyses to test the interest rate sensitivity of net interest income and fair value of equity, and the impact of changes in interest rates on other financial metrics.
−Removed: Contractual maturities and re-pricing opportunities of loans are incorporated in the model, as are prepayment assumptions, maturity data and call options within the investment portfolio.
−Removed: The average life of non-maturity deposit accounts is based on our balance retention rates using a vintage study methodology.
+Added: Our interest rate risk modeling incorporates a number of assumptions, including the repricing sensitivity of certain assets and liabilities, asset prepayment speeds, and the expected average life of non-maturity deposits.
The assumptions used are inherently uncertain, and, as a result, the model cannot precisely measure future net interest income or precisely predict the impact of fluctuations in market interest rates on net interest income.
19 unchanged sentences
-400 (1.0) (2.9)
−Removed: We have found that, historically, interest rates on deposits change more slowly than changes in the discount and federal funds rates.
+Added: We have found that, historically, interest rates on deposits do not change completely in tandem with the changes in the discount and federal funds rates.
+Added: Overall, interest rates on deposits typically experience lower rate increases than a cumulative full-cycle rising-rate environment exhibits.
This assumption is incorporated into the simulation model and is generally not fully reflected in a gap analysis, meaning that process by which we measure the gap between interest rate sensitive assets versus interest rate sensitive liabilities.
6 unchanged sentences
The Federal Reserve Board sets various benchmark rates, including the Federal Funds rate, and thereby influences the general market rates of interest, including the loan and deposit rates offered by financial institutions and the fair value of our available for sale securities.
−Removed: During 2022, the Federal Reserve increased the federal funds target rate range seven times from 25 to 450 basis points, which is the primary reason for the other comprehensive loss we have experienced during the year ended December 31, 2022.
+Added: The Federal Funds target rate range has increased 525 basis points starting with the Federal Reserve Board’s first rate increase in 2022, and in order to remain competitive as market interest rates increased, we increased interest rates paid on our deposits.
Impact of Inflation
9 unchanged sentences
Interest rates are highly sensitive to many factors that are beyond our control, including changes in the expected rate of inflation, the influence of general and local economic conditions and the monetary and fiscal policies of the United States government, its agencies and various other governmental regulatory authorities.
−Removed: Regulators expect banks to transition away from the use of the London Interbank Offered Rate ("LIBOR") as a reference rate.
−Removed: It is expected that the transition away from the widespread use of LIBOR to alternative rates will continue to occur over the course of the next several months, ahead of the FCA's announced cessation of the remaining LIBOR settings by June 30, 2023.
−Removed: Please see " Item 1A Risk Factors - Risks Related to Our Business" included in this report for further information.
+Added: In 2017, the United Kingdom’s Financial Conduct Authority announced that after 2021 it would no longer compel banks to submit the rates required to calculate the London Interbank Offered Rate (LIBOR).
+Added: Publication of the one week and two month LIBOR offered rates ceased on December 31, 2021, and the publication of the remaining LIBOR offered rates ceased to be representative on June 30, 2023.
+Added: The Company discontinued the use of LIBOR for new contracts after December 31, 2021, with limited exceptions as permitted by regulatory guidance and internal policy.
+Added: Regulators, industry groups and certain committees (e.g., the Alternative Reference Rates Committee (ARRC)) have, among other things, published recommended fallback language for LIBOR-linked financial instruments, identified recommended alternatives for certain LIBOR rates (e.g., AMERIBOR or the Secured Overnight Financing Rate (SOFR) as the recommended alternative to U.S.
+Added: Dollar LIBOR), and proposed implementations of the recommended alternatives in floating rate instruments.
+Added: Further, the Adjustable Interest Rate (LIBOR) Act, enacted in March 2022, provides a statutory framework to replace U.S.
+Added: dollar LIBOR with a benchmark rate based on the SOFR for contracts governed by U.S.
+Added: law that have no or ineffective fallbacks, and in December 2022, the Federal Reserve Board adopted related implementing rules.
+Added: In addition, where fallback language allows the Bank to select a benchmark rate, the statutory framework grants the authority to select the Board-selected benchmark replacement as the benchmark replacement, including the safe harbor provisions that, among other things, generally provide that such selection or use will not discharge or excuse performance under, give any person the right to unilaterally terminate or suspend performance under, or constitute a breach, of the contract.
+Added: Effective July 1, 2023, all remaining LIBOR instruments were transitioned in accordance with the statutory framework established by the Federal Reserve with no material financial impact to the Company.
+Added: In general, the Company converted the index rate of variable rate loans based on 1-Month LIBOR to an index rate equal to 1-Month Term SOFR as of June 30, 2023.
+Added: In addition, the Company converted the index rates of variable rate loans based on 3-Month LIBOR and 12-Month LIBOR to index rates equal to 3-Month Term SOFR and 12-Month Term SOFR, respectively, as of June 30, 2023, plus the incremental differences between the corresponding LIBOR and Term SOFR index rates on June 30, 2023.
+Added: Likewise, all LIBOR-based indexes in the Bank’s swap agreements were converted to appropriate SOFR-based indexes.
+Added: While we have not had any material issues to-date, the discontinuance of LIBOR could result in customer uncertainty and disputes arising as a consequence of the transition, and could result in damage to our reputation and loss of customers.
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.