2 unchanged sentences
Market risk refers to potential losses arising from changes in interest rates, and other relevant market rates or prices.
−Removed: Interest rate risk, defined as the exposure of net interest income and Economic Value of Equity, or “EVE,” to adverse movements in interest rates, is the Company’s primary market risk, and mainly arises from the structure of the balance sheet (non-trading activities).
+Added: Interest rate risk, defined as the exposure of net interest income and Economic Value of Equity (“EVE”) to adverse movements in interest rates, is the Company’s primary market risk, and mainly arises from the structure of the balance sheet (non-trading activities).
The Company is also exposed to market risk in its investing activities.
−Removed: The Company’s Asset/Liability Committee, or “ALCO,” meets regularly and is responsible for reviewing the interest rate sensitivity position of the Company and establishing policies to monitor and limit exposure to interest rate risk.
+Added: The ALCO meets regularly and is responsible for reviewing the interest rate sensitivity position of the Company and establishing policies to monitor and limit exposure to interest rate risk.
The policies established by the ALCO are reviewed and approved by the Company’s board of directors.
1 unchanged sentence
These limits reflect the Company’s tolerance for interest rate risk over short-term and long-term horizons.
−Removed: The Company also performs valuation analyses, which are used for evaluating levels of risk present in the balance sheet that might not be considered in the net interest income simulation analyses.
+Added: The Company also performs valuation analyses, which are used for evaluating levels of risk present in the balance sheet that might not be taken into account in the net interest income simulation analyses.
Whereas net interest income simulation highlights exposures over a relatively short time horizon, valuation analysis incorporates all cash flows over the estimated remaining life of all balance sheet positions.
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EVE values only the current balance sheet, and does not incorporate the growth assumptions that are used in the net interest income simulation model.
−Removed: As with the net interest income simulation model, assumptions about the timing and variability of
−Removed: balance sheet cash flows are critical in the EVE analysis.
+Added: As with the net interest income simulation model, assumptions about the timing and variability of balance sheet cash flows are critical in the EVE analysis.
Particularly important are the assumptions driving prepayments and the expected changes in balances and pricing of the indeterminate life deposit portfolios.
−Removed: Core deposits are a more significant funding source for the Company, making the lives attached to core deposits more important to the accuracy of EVE modeling.
+Added: Core deposits are a more significant funding source for the Company, making the lives attached to core deposits more important to the accuracy of our modeling of EVE.
The Company periodically reassesses its assumptions regarding the indeterminate lives of core deposits utilizing an independent third-party resource to assist.
−Removed: These assumptions could see greater volatility due to changes in the level of interest rates and recent industry events.
−Removed: With higher interest rates, the average lives of core deposits have trended lower and unfavorably impacted model estimates of EVE.
−Removed: In addition, the Company’s acquisitions have changed the composition of the balance sheet, both of which have resulted in changes to our EVE profile.
The following table presents the projected impact of a change in interest rates on the balance sheet.
This change in interest rates assumes parallel shifts in the yield curve and does not take into account changes in the slope of the yield curve.
−Removed: Change in Interest Rates Economic Value of
−Removed: +3.00% (18.9)%
+Added: Change in Interest Rates % Change in
+Added: Economic Value of
+2.00% (14.1)%
+1.00% (6.0)%
−Removed: While an instantaneous and severe shift in interest rates is used in this analysis to provide an estimate of exposure under an extremely adverse scenario, a gradual shift in interest rates would have a much more modest impact.
+Added: While an instantaneous and severe shift in interest rates is used in this analysis, a gradual shift in interest rates would have a much more modest impact.
Since EVE measures the discounted present value of cash flows over the estimated lives of instruments, the change in EVE does not directly correlate to the degree that earnings would be impacted over a shorter time horizon, i.e., the next fiscal year.
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.