6 unchanged sentences
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’ 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.
+Added: Interest rate risk arises from timing differences in the repricing 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).
2 unchanged sentences
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: We have basis risk primarily in the SFR mortgage loan portfolio, the multi-family loan portfolio, and our securities portfolio.
Our ALCO establishes broad policy limits with respect to interest rate risk.
1 unchanged sentence
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: The ALCO meets at least quarterly 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.
+Added: The ALCO monitors 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 interest-earning assets would reprice upward more quickly than rates paid on interest-bearing liabilities, thus expanding the 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 interest-bearing liabilities would reprice upward more quickly than rates earned on interest-earning assets, thus compressing the net interest margin.
+Added: An asset sensitive position refers to a balance sheet position in which a short-term decrease in interest rates is expected to generate lower net interest income, as rates earned on interest-earning assets would reprice downward more quickly than rates paid on interest-bearing liabilities, thus compressing the net interest margin.
+Added: Conversely, a liability sensitive position refers to a balance sheet position in which a short-term decrease in interest rates is expected to generate higher net interest income, as rates paid on interest-bearing liabilities would reprice downward more quickly than rates earned on interest-earning assets, thus expanding the net interest margin.
Income Simulation and Economic Value Analysis.
3 unchanged sentences
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 over a 12 month horizon assuming a flat balance sheet and an instantaneous and parallel shift in market interest rates in 100 basis point increments.
+Added: Under NII at Risk, net interest income is modeled utilizing various assumptions for assets, liabilities, and derivatives over a 12 month time horizon assuming a flat balance sheet and an instantaneous and parallel shift in market interest rates in 100 basis point increments.
We report NII at Risk to isolate the change in income related solely to interest-earning assets and interest-bearing liabilities.
−Removed: The model results do not take into consideration any steps management might take to respond to the changes in interest rates.
+Added: The model results do not take into consideration any steps management might take to respond to the changes in interest rates or changes in competitor or customer behavior.
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: At December 31, 2024, our NII at Risk profile is liability sensitive in the down and up rate scenarios.
−Removed: This is directionally consistent with our profile at December 31, 2023 for the down rate and a change from neutral in the up rate scenario.
−Removed: For the up rate scenarios, we are more liability sensitive due to fixed rate debt approaching its maturity date in the first quarter of 2025.
+Added: At December 31, 2025, our NII at Risk profile is liability sensitive.
+Added: This is directionally consistent with our profile at December 31, 2024.
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.
9 unchanged sentences
Percent change
−Removed: At December 31, 2024, the EVE position is projected to decrease in the up rate scenarios.
+Added: At December 31, 2025, the EVE position is projected to increase in the down 100 and 200 rate scenarios and decrease in the up rate scenarios and down 300 rate scenario.
When interest rates rise, fixed rate assets generally lose economic value as these instruments are discounted at a higher rate demonstrating the relative longer asset duration as compared to the overall liability duration.
−Removed: In the down rate scenario, the EVE position is projected to initially increase as assets gain in value at a faster rate than the decrease in the value of noninterest-bearing deposits.
−Removed: However, as the down rate shocks become more severe, the pace of the increase in the value of loans slows a loan prepayments increase and discount rates reach their floors, resulting in a lower EVE position in the down 300 scenario.
+Added: When interest rates decrease, the value of noninterest-bearing deposits also decreases.
+Added: In addition, as the down rate shocks become more severe, the pace of the increase in the value of loans also slows due to an increase in loan prepayments and the impact of discount rates reaching their floors;
+Added: this results in a change of EVE volatility from positive to negative between the down 200 and 300 rate scenarios.
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.
1 unchanged sentence
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.