2 unchanged sentences
The Company is subject to market risk primarily through the effect of changes in interest rates on its portfolio of assets held for purposes other than trading and interest rate derivative instruments that are used for managing interest rate risk.
−Removed: In addition, the Company’s trading desk engages in fixed income and equity securities, derivatives and foreign exchange transactions to support customer’s investing and hedging activities.
+Added: In addition, the Company has exposure to market risk through its trading desk that engages in fixed income and equity securities, derivatives and foreign exchange transactions to support the investing and hedging activities of customers.
The Company uses Value-at-Risk (“VaR”) as a means to measure, monitor, and limit aggregate market risk on the trading portfolio.
1 unchanged sentence
VaR provides a consistent cross-asset measure for risk profiles and allows for diversification benefit based on historical correlations across market moves.
+Added: As of December 31, 2023, the Company’s exposure through its trading desk does not pose a significant market risk to the Company.
All statistical models involve a degree of uncertainty and VaR is calculated at a statistical confidence interval of the 95th percentile based on one-year daily historic market moves.
1 unchanged sentence
The responsibility for managing market risk rests with the ALCO, which operates under policy guidelines established by the Company’s board of directors.
−Removed: Oversight of the Company’s compliance with these guidelines is the ongoing responsibility of the ALCO, with exceptions reported to the Executive Risk Committee, and to the board of directors, if necessary, on a quarterly basis.
+Added: Oversight of the Company’s compliance with the guidelines is the ongoing responsibility of the ALCO, with exceptions reported to the Executive Risk Committee and the board of directors, if necessary, on a quarterly basis.
Interest Rate Risk Management
−Removed: The Company’s interest rate sensitivity is illustrated in the following table.
+Added: The Company’s interest rate sensitivity as of December 31, 2023 is illustrated in the following table.
The table reflects rate-sensitive positions as of December 31, 2023 and is not necessarily indicative of positions on other dates.
4 unchanged sentences
A negative gap (liability sensitive) will generally have the opposite results on the net interest margin.
−Removed: To reflect anticipated prepayments, certain asset and liability categories are shown in the table using estimated cash flows rather than contractual cash flows.
Certain variable rate loans have embedded floors which limit the decline in yield on those loans at times when market interest rates are extraordinarily low.
1 unchanged sentence
The adverse effect of floors as market rates increase may also be offset by the positive gap, the extent to which rates on deposits and other funding sources lag increasing market rates for loans and changes in composition of funding.
−Removed: Interest Rate Sensitivity Gap Analysis
−Removed: December 31, 2022
−Removed: (in thousands) 0-3 months
−Removed: Balance 4-12 months
−Removed: Balance 1-3 years
−Removed: Balance 3+ years
−Removed: Balance Total
+Added: (in thousands) 0-3 months 4-12 months 1-3 years 3+ years Total
Interest bearing cash and cash equivalents $ 3,042,357 $ — $ — $ — $ 3,042,357
29 unchanged sentences
Interest rate derivative contracts may be used to manage exposure to adverse fluctuations in these primary interest rate exposures as is discussed in more detail under the heading Use of Derivatives to Manage Interest Rate and Other Risks below.
−Removed: For modeling purposes, the “shock test” scenarios as of December 31, 2022 assume immediate, sustained 100 and 200 basis point increases in interest rates as well as a 100 basis point decrease in interest rates.
−Removed: As of December 31, 2021, the scenarios assumed a sustained 100 and 200 basis point increase in interest rates.
−Removed: As short-term rates remained low through 2021, the Company did not believe that analysis of an assumed decrease in interest rates would provide meaningful results.
+Added: For modeling purposes, the “shock test” scenarios as of December 31, 2023 assume immediate, sustained 100 and 200 basis point increases in interest rates as well as 100 and 200 basis point decreases in interest rates.
+Added: As of December 31, 2022, the scenarios assumed a sustained 100 and 200 basis point increase in interest rates, as well as a 100 basis point decrease in interest rates.
The Company will continue to evaluate these scenarios as interest rates change.
−Removed: The interest rate risk exposure model incorporates assumptions regarding the level of interest rate on indeterminable maturity deposits (non-interest bearing deposits, interest bearing transaction accounts and savings accounts) for a given level of market rate change.
+Added: During 2023, the Company’s interest rate risk exposure model incorporated updated assumptions regarding the level of interest rate, including indeterminable maturity deposits (non-interest bearing deposits, interest bearing transaction accounts and savings accounts) and loan and security prepayments behaviors for a given level of market rate change.
In the current environment of changing short-term rates, deposit pricing can vary by product and customer.
1 unchanged sentence
Changes in prepayment behavior of mortgage-backed securities, residential and commercial mortgage loans in each rate environment are captured using industry estimates of prepayment speeds for various coupon segments of the portfolio.
−Removed: The impact of these changes is factored into the simulation model.
+Added: The impact of these changes is factored into the simulation model results for 2023.
This modeling indicated interest rate sensitivity as follows:
−Removed: Anticipated Impact Over the Next
−Removed: Twelve Months as Compared to Most Likely Scenario
+Added: Annualized Hypothetical Change in Net Interest Income
December 31, 2023 December 31, 2022
−Removed: (in thousands) 100 bps Increase 200 bps Increase 100 bps Decrease 100 bps Increase 200 bps Increase
−Removed: Change in net interest income $ 77,282 $ 140,354 $ (98,916) $ 48,802 $ 124,986
+Added: + 200 basis points 3.2 % 14.5 %
+Added: + 100 basis points 1.6 % 8.0 %
+Added: - 100 basis points (4.4) % (10.2) %
+Added: - 200 basis points (9.1) % N/A
The simulations used to manage market risk are based on numerous assumptions regarding the effect of changes in interest rates on the timing and extent of repricing characteristics, future cash flows and customer behavior.
7 unchanged sentences
For additional information regarding derivatives, see Note 14 - Derivative Financial Instruments in the accompanying notes to the consolidated financial statements included elsewhere in this report.
−Removed: LIBOR Transition
−Removed: In 2017, the U.K.
−Removed: Financial Conduct Authority announced that it would no longer compel banks to submit rates for the calculation of LIBOR after 2021.
−Removed: The administrator of LIBOR extended publication of the most commonly used U.S.
−Removed: LIBOR settings to June 30, 2023 and ceased publishing other LIBOR settings on December 31, 2021.
−Removed: federal banking agencies issued guidance strongly encouraging banking organizations to cease using U.S.
−Removed: dollar LIBOR as a reference rate in new contracts as soon as practicable and in any event by December 31, 2021.
−Removed: On March 15, 2022, President Biden signed into law the “Adjustable Interest Rate (LIBOR) Act,” as part of the Consolidated Appropriations Act, 2022, which provides for a statutory transition to a replacement rate selected by the Federal Reserve based on the SOFR for contracts referencing LIBOR that contain no fallback provisions or ineffective fallback provisions, unless a replacement rate is selected by a determining person as outlined in the statute.
−Removed: On December 16, 2022, the Federal Reserve adopted a final rule implementing the Adjustable Interest Rate (LIBOR) Act by identifying benchmark rates based on SOFR that will replace LIBOR in certain financial contracts after June 30, 2023.
−Removed: The Company has significant but declining exposure to financial instruments with attributes that are either directly or indirectly dependent on LIBOR to establish their interest rate and/or value, some of which mature after June 30, 2023.
−Removed: The Company established a working group, consisting of key stakeholders from throughout the company, to monitor developments relating to LIBOR changes and to guide the Bank’s response.
−Removed: This team has worked to successfully ensure that technology systems are prepared for the transition, loan documents that reference LIBOR-based rates have been appropriately amended to reference other methods of interest rate determinations and internal and external stakeholders have been apprised of the transition.
−Removed: Based on the transition progress to date, the Company ceased originating LIBOR-based products and began originating alternative indexed products in December 2021.
−Removed: The Company will continue to transition all remaining LIBOR-based products to an alternative benchmark.
−Removed: The Company will also continue to evaluate the transition process and align its trajectory with regulatory guidelines regarding the cessation of LIBOR as well as monitor new developments for transitioning to alternative reference rates.
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.