Quantitative and Qualitative Disclosures about Market Risk
+Added: The economic effects of the COVID-19 outbreak has introduced significant volatility in the financial markets.
+Added: Federal Reserve and other central banks have reduced certain interest rates and LIBOR has decreased.
+Added: In addition, in a prolonged low interest rate environment, including a reduction of LIBOR to zero, our net interest margin will be compressed and adversely affect our operating results.
+Added: For additional information concerning the COVID-19 outbreak and its potential impact on our business and our operating results, see “ Part I - 1A.
+Added: Risk Factors” .
We are subject to financial market risks, including changes in interest rates.
3 unchanged sentences
A significant portion of our loans that are subject to the floating LIBOR rates are also subject to a minimum base rate, or floor, that we charge on our loans if the current market rates are below the respective floors.
−Removed: As of December 31, 2019 , substantially all of our floating rate loans were based on a floating LIBOR (not subject to a floor).
−Removed: Our outstanding SBA debentures and Unsecured Notes bear interest at a fixed rate.
−Removed: Our PWB Credit Facility and BNP Facility have floating interest rate provisions based on the Prime Rate and LIBOR, with effective interest rates of 6.03% and 4.72%, respectively, as of December 31, 2019 .
+Added: As of December 31, 2020, a substantial amount of our floating rate loans were based on a floating LIBOR, subject to a floor.
+Added: As of December 31, 2020, our outstanding SBA debentures and Unsecured Notes bore interest at a fixed rate.
+Added: Our PWB Credit Facility and BNP Facility had floating interest rate provisions based on the Prime Rate and LIBOR, with effective interest rates of 6.50% and 5.53%, respectively.
Assuming that the consolidated balance sheet as of December 31, 2020, were to remain constant and that we took no actions to alter our existing interest rate sensitivity, the following tables show the annualized impact of hypothetical base rate changes in interest rates (in thousands):
−Removed: Basis point increase
−Removed: Interest income
−Removed: Interest expense
−Removed: Basis point decrease
−Removed: Interest income
−Removed: Interest expense (1)
−Removed: (1) Our PWB Credit Facility contains a 5.25% interest rate floor, and therefore a decline in the Prime Rate would not materially impact interest expense.
+Added: Basis point increase Interest income Interest expense Net change
+Added: 25 $ 96 $ (84) $ 12
+Added: 50 206 (163) 43
+Added: 75 342 (243) 99
+Added: 100 828 (323) 505
+Added: 125 1,417 (402) 1,015
+Added: Basis point decrease Interest income Interest expense (1)
+Added: 25 $ (110) $ 70 $ (40)
+Added: 50 n/m (2) n/m (2) n/m (2)
+Added: 75 n/m (2) n/m (2) n/m (2)
+Added: 100 n/m (2) n/m (2) n/m (2)
+Added: 125 n/m (2) n/m (2) n/m (2)
+Added: (1) At December 31, 2020, our PWB Credit Facility contained a 5.25% interest rate floor, and therefore a decline in the Prime Rate would not materially impact interest expense.
The BNP Facility does not contain an interest rate floor.
+Added: (2) Not meaningful.
Although we believe that the foregoing analysis is indicative of our sensitivity to interest rate changes as of December 31, 2020, it does not adjust for potential changes in the credit market, credit quality, size and composition of the assets in our portfolio, and other business developments, including borrowings under our credit facility, that could affect net increase in net assets resulting from operations, or net income.
5 unchanged sentences
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.