2 unchanged sentences
We incur market risk in the normal course of business through exposures to market interest rates, equity prices, and credit spreads.
−Removed: We have identified three primary sources of market risk:
−Removed: interest rate risk price risk and basis risk.
+Added: We have identified three primary sources of market risk:
+Added: interest rate risk, price risk and basis risk.
Interest Rate Risk .
Interest rate risk is the risk to earnings and value arising from changes in market interest rates.
−Removed: Interest rate risk arises from timing differences in the repricings and maturities of interest-earning assets and interest-bearing liabilities (repricing risk), changes in the expected maturities of assets and liabilities arising from embedded options, such as borrowers’
−Removed: ability to prepay residential mortgage loans at any time and depositors’
−Removed: ability to redeem certificates of deposit before maturity (option risk), changes in the shape of the yield curve where interest rates increase or decrease in a nonparallel fashion (yield curve risk), and changes in spread relationships between different yield curves, such as U.S.
+Added: Interest rate risk arises from timing differences in the repricings and maturities of interest-earning assets and interest-bearing liabilities (repricing risk), changes in the expected maturities of assets and liabilities arising from embedded options, such as borrowers’ ability to prepay residential mortgage loans at any time and depositors’ ability to redeem certificates of deposit before maturity (option risk), changes in the shape of the yield curve where interest rates increase or decrease in a nonparallel fashion (yield curve risk), and changes in spread relationships between different yield curves, such as U.S.
Treasuries and SOFR (basis risk).
−Removed: Our ALCO establishes broad policy limits with respect to interest rate risk.
−Removed: ALCO establishes specific operating guidelines within the parameters of the board of directors’
+Added: Price risk represents the risk of loss arising from adverse movements in the prices of financial instruments that are carried at fair value and subject to fair value accounting.
+Added: We have price risk from the available for sale SFR mortgage loans and fixed-rate available for sale securities.
+Added: Basis risk represents the risk of loss arising from asset and liability pricing movements not changing in the same direction.
+Added: We have basis risk in the SFR mortgage loan portfolio, the multifamily loan portfolio and our securities portfolio.
+Added: Our ALCO establishes broad policy limits with respect to interest rate risk.
+Added: The ALCO establishes specific operating guidelines within the parameters of the board of directors’ policies.
In general, we seek to minimize the impact of changing interest rates on net interest income and the economic values of assets and liabilities.
−Removed: Our ALCO meets monthly to monitor the level of interest rate risk sensitivity to ensure compliance with the board of directors’
−Removed: approved risk limits.
+Added: The ALCO meets monthly to monitor the level of interest rate risk sensitivity to ensure compliance with the board of directors’ approved risk limits and to oversee management's balance sheet risk management strategies.
Interest rate risk management is an active process that encompasses monitoring loan and deposit flows complemented by investment and funding activities.
Effective management of interest rate risk begins with understanding the dynamic characteristics of assets and liabilities and determining the appropriate interest rate risk posture given business forecasts, management objectives, market expectations, and policy constraints.
−Removed: An asset sensitive position refers to a balance sheet position in which an increase in short-term interest rates is expected to generate higher net interest income, as rates earned on our interest-earning assets would reprice upward more quickly than rates paid on our interest-bearing liabilities, thus expanding our net interest margin.
−Removed: Conversely, a liability sensitive position refers to a balance sheet position in which an increase in short-term interest rates is expected to generate lower net interest income, as rates paid on our interest-bearing liabilities would reprice upward more quickly than rates earned on our interest-earning assets, thus compressing our net interest margin.
+Added: An asset sensitive position refers to a balance sheet position in which an increase in short-term interest rates is expected to generate higher net interest income, as rates earned on interest-earning assets would reprice upward more quickly than rates paid on interest-bearing liabilities, thus expanding the net interest margin.
+Added: Conversely, a liability sensitive position refers to a balance sheet position in which an increase in short-term interest rates is expected to generate lower net interest income, as rates paid on interest-bearing liabilities would reprice upward more quickly than rates earned on interest-earning assets, thus compressing the net interest margin.
Income Simulation and Economic Value Analysis.
−Removed: Interest rate risk measurement is calculated and reported to the board and ALCO at least quarterly.
+Added: Interest rate risk measurement is calculated and reported to the board and the ALCO at least quarterly.
The information reported includes period-end results and identifies any policy limits exceeded, along with an assessment of the policy limit breach and the action plan and timeline for resolution, mitigation, or assumption of the risk.
1 unchanged sentence
Net Interest Income at Risk (NII at Risk), and Economic Value of Equity (“EVE”).
−Removed: Under NII at Risk, net interest income is modeled utilizing various assumptions for assets, liabilities, and derivatives.
+Added: Under NII at Risk, net interest income is modeled utilizing various assumptions for assets, liabilities, and derivatives over a 12 month and 24 month time horizon assuming a flat balance sheet and an instantaneous and parallel shift in market interest rates of -300, -200, -100, +100, +200 and +300.
+Added: We report NII at Risk to isolate the change in income related solely to interest-earning assets and interest-bearing liabilities.
+Added: The model results do not take into consideration any steps management might take to respond to the changes in interest rates.
EVE measures the period end market value of assets minus the market value of liabilities and the change in this value as rates change.
9 unchanged sentences
Percent change
−Removed: We report NII at Risk to isolate the change in income related solely to interest-earning assets and interest-bearing liabilities.
−Removed: The NII at Risk results included in the table above reflect the analysis used quarterly by management.
−Removed: It models gradual −200, −100, +100 and +200 basis point parallel shifts in market interest rates, implied by the forward yield curve over the next one-year period.
−Removed: The NII at Risk reported at December 31, 2022, projects that our earnings are expected to be asset sensitive to changes in interest rates over the next year.
−Removed: In recent periods, the amount of floating rate assets increased resulting in a position shift from neutral to asset sensitive.
+Added: At December 31, 2023, our NII at Risk profile is liability sensitive in the down rate scenarios and this is directionally consistent with our December 31, 2022 profile.
+Added: For the up rate scenarios, at December 31, 2023, our NII at Risk profile is “neutral” compared to “asset sensitive” at December 31, 2022.
+Added: The NII at Risk results are within board policy limits.
+Added: This shift is primarily due to the change in the mix of assets and funding sources during 2023 due to deleveraging the balance sheet and increasing our on balance sheet liquidity.
+Added: Actual results could vary materially from those calculated by our model, due to a variety of factors or assumptions such as the uncertainty of the magnitude, timing and direction of future interest rate movement or the shape of the yield curve.
Economic Value of Equity Sensitivity (Shock)
7 unchanged sentences
Percent change
−Removed: The EVE results included in the table above reflect the analysis used quarterly by management.
−Removed: It models immediate −200, −100, +100 and +200 basis point parallel shifts in market interest rates.
−Removed: We are within board policy limits for all rate scenarios.
−Removed: The EVE reported at December 31, 2022 projects that as interest rates increase immediately, the EVE position will be expected to increase, and if interest rates were to decrease immediately, the EVE position will be expected to decrease.
−Removed: When interest rates rise, fixed rate assets generally lose economic value;
−Removed: the longer the duration, the greater the value lost.
−Removed: The opposite is true when interest rates fall.
−Removed: Price risk represents the risk of loss arising from adverse movements in the prices of financial instruments that are carried at fair value and subject to fair value accounting.
−Removed: We have price risk from the available for sale SFR mortgage loans and fixed-rate available for sale securities.
−Removed: Basis risk represents the risk of loss arising from asset and liability pricing movements not changing in the same direction.
−Removed: We have basis risk in the SFR mortgage loan portfolio, the multifamily loan portfolio and our securities portfolio.
+Added: The EVE reported at December 31, 2023 indicates that if interest rates increased immediately, the EVE position is expected to decrease and if interest rates were to decrease immediately, the EVE position is expected to increase in the down 100 basis points scenario and then decrease for the down 200 basis points and down 300 basis points scenarios.
+Added: When interest rates rise, fixed rate assets generally lose economic value as these assets are discounted at a higher rate demonstrating that the longer duration causes greater value to be lost.
+Added: When interest rates fall, the opposite is true, however these positives are being offset by a decrease in the value of floating rate assets as well as the value of noninterest-bearing deposits.
+Added: Noninterest-bearing have a lower value in lower interest rate environments.
+Added: Actual results could vary materially from those calculated by our model, due to a variety of factors or assumptions such as the uncertainty of the magnitude, timing and direction of future interest rate movement or the shape of the yield curve.
+Added: The EVE results are within board policy limits.
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.