Quantitative and Qualitative Disclosures About Market Risk
−Removed: Management of Interest Rate Risk (“IRR”)
+Added: Management of IRR
Market risk is the risk of loss from adverse changes in market prices and rates.
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and manage the risk consistent with Board approved guidelines.
−Removed: The Company’s Board maintains an Asset Liability Committee (“ALCO”) consisting of members of management, responsible for reviewing asset liability policies and the IRR position.
+Added: The Company maintains an ALCO consisting of members of management, responsible for reviewing asset liability policies and the IRR position.
ALCO meets regularly and reports the Company’s IRR position and trends to the Board on a regular basis.
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(2) attempting to reduce the overall interest rate sensitivity of liabilities by emphasizing stable relationship-based deposits and longer-term deposits;
−Removed: (3) selectively purchasing interest rate swaps and caps converting the rates for customer loans to manage individual loans and the Bank’s overall IRR profile;
+Added: (3) selectively purchasing interest rate swaps and caps converting the rates for customer loans to manage individual loans and the Company’s overall IRR profile;
(4) managing the investment portfolio IRR profile;
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and (6) purchasing interest rate swaps to manage overall balance sheet interest rate risk.
−Removed: The matching of assets and liabilities may be analyzed by examining the extent to which such assets and liabilities are “interest rate sensitive.” Interest rate sensitivity is monitored through the use of an IRR model, which measures the change in the institution’s economic value of equity (“EVE”) and net interest income under various interest rate scenarios.
+Added: The matching of assets and liabilities may be analyzed by examining the extent to which such assets and liabilities are “interest rate sensitive.” Interest rate sensitivity is monitored through the use of an IRR model, which measures the change in the institution’s EVE and net interest income under various interest rate scenarios.
EVE is the difference between the net present value of assets, liabilities and off-balance-sheet contracts.
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For loans, investments, borrowings and time deposits, the fair value used in the EVE closely aligns with the Company’s fair value measurements defined within Note 15, Fair Value Measurements to the consolidated financial statements.
−Removed: However, for non-maturity deposits, the fair value differs for EVE as it also considers the likelihood of deposit and withdrawals and current weighted average rate relative to market rates.
−Removed: The Company’s weighted average age of non-maturity deposit accounts is approximately 11 years, and the weighted average cost is 1.64%.
+Added: However, for non-maturity deposits, the fair value differs for EVE as it also considers the likelihood of deposit withdrawals and the current weighted average deposit rate relative to market rates.
+Added: The Company’s weighted average age of non-maturity deposit accounts was approximately 15.5 years, and the weighted average cost was 1.52%.
The Company performs a variety of EVE and twelve-month net interest income sensitivity scenarios.
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(300) (4.3) 3.0 (0.6) (2.6)
−Removed: The net interest income sensitivity results at December 31, 2024 was modestly asset sensitive to neutral as compared to the prior year.
−Removed: The change in sensitivity from prior year was impacted by an increase in floating-rate securities and term borrowings, a deposit mix shift within non-maturity deposits with lower betas as well as a change in loan prepayments, partially offset by an increase in overnight borrowings and a reduction in short-term time deposits.
−Removed: Overall, the measure of EVE at risk decreased in all rate scenarios from December 31, 2023 to December 31, 2024.
−Removed: This decrease was the result of an increase in floating-rate securities and term borrowings, a deposit mix shift within non-maturity deposits with lower betas and longer average lives, as well as a change in loan prepayments.
+Added: The net interest income sensitivity results at December 31, 2025 was modestly liability sensitive as compared to the prior year.
+Added: The change in sensitivity from prior year was impacted by an increase in fixed rate loans, an increase in short-term time deposits and overnight borrowings and non-maturity deposit growth with higher betas, partially offset by an increase in floating rate loans and securities.
+Added: Overall, the measure of EVE at risk slightly increased in all rate scenarios from December 31, 2024 to December 31, 2025.
+Added: This increase was the result of an increase in fixed rate loans, short-term time deposits and overnight borrowings and higher beta non-maturity deposits, offset by an increase in floating rate loans and securities.
Certain shortcomings are inherent in the methodology used in the EVE and net interest income IRR measurements.
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Accordingly, although the above measurements provide an indication of the Company’s IRR exposure at a particular point in time, such measurements are not intended to provide a precise forecast of the effect of changes in market interest rates.
−Removed: Given the unique nature of the post-pandemic interest rate environment and the speed with which interest rates have been changing, the projections noted above on the Company’s EVE and net interest income can be expected to significantly differ from actual results.
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.