22 unchanged sentences
For loans that are not originated under Fannie Mae procedures, the Association’s ability to reduce interest rate risk via loan sales is limited to those loans that have established payment histories, strong borrower credit profiles and are supported by adequate collateral values that meet the requirements of the FHLB's Mortgage Purchase Program or of private third-party investors.
−Removed: The Association actively markets equity lines of credit, an adjustable-rate mortgage loan product and a 10-year fixed-rate mortgage loan product.
+Added: The Association actively markets home equity lines of credit, an adjustable-rate mortgage loan product and a 10-year fixed-rate mortgage loan product.
Each of these products provides us with improved interest rate risk characteristics when compared to longer-term, fixed-rate mortgage loans.
22 unchanged sentences
The simulation model uses a discounted cash flow analysis and an option-based pricing approach in measuring the interest rate sensitivity of EVE.
−Removed: The model estimates the economic value of each type of asset, liability and off-balance sheet contract under
−Removed: the assumption that instantaneous changes (measured in basis points) occur at all maturities along the United States Treasury yield curve and other relevant market interest rates.
+Added: The model estimates the economic value of each type of asset, liability and off-balance sheet contract under the assumption that instantaneous changes (measured in basis points) occur at all maturities along the United States Treasury yield curve and other relevant market interest rates.
A basis point equals one, one-hundredth of one percent, and 100 basis points equals one percent.
1 unchanged sentence
The model is tailored specifically to our organization, which, we believe, improves its predictive accuracy.
−Removed: The following table presents the estimated changes in the Association’s EVE at September 30, 2021 that would result from the indicated instantaneous changes in the United States Treasury yield curve and other relevant market interest rates.
+Added: The following table presents the estimated changes in the Association’s EVE at September 30,
+Added: 2022 that would result from the indicated instantaneous changes in the United States Treasury yield curve and other relevant market interest rates.
Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions, including relative levels of market interest rates, loan prepayments and deposit decay, and should not be relied upon as indicative of actual results.
19 unchanged sentences
The table above indicates that at September 30, 2022, in the event of an increase of 200 basis points in all interest rates, the Association would experience a 29.92% decrease in EVE.
−Removed: In the event of a 100 basis point decrease in interest rates, the Association would experience a 5.31% decrease in EVE.
+Added: In the event of a 100 basis point decrease in interest rates, the Association would experience a 11.43% increase in EVE.
The following table is based on the calculations contained in the previous table, and sets forth the change in the EVE at a +200 basis point rate of shock at September 30, 2022, with comparative information as of September 30, 2021.
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Accordingly, although the EVE table provides an indication of our interest rate risk exposure as of the indicated dates, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our EVE and will differ from actual results.
−Removed: In addition to our core business activities, which primarily sought to originate
−Removed: Smart Rate (adjustable), home equity lines of credit (adjustable) and 10-year fixed-rate loans funded by borrowings from the FHLB and intermediate term CDs (including brokered CDs) and which are intended to have a favorable impact on our IRR profile, the net impact of several other items resulted in the 3.58% deterioration in the Percentage Change in EVE measure at September 30, 2021, when compared to the measure at September 30, 2020.
−Removed: Factors contributing to this decline included changes in market rates, capital actions by the Association, and changes due to business activity.
−Removed: Movement in market interest rates included an increase of 15 basis points for the two-year term, an increase of 69 basis points for the five-year term and an increase of 80 basis points for the ten-year term.
+Added: In addition to our core business activities, which primarily sought to originate Smart Rate (adjustable), home equity lines of credit (adjustable) and 10-year fixed-rate loans funded by borrowings from the FHLB and intermediate term CDs (including brokered CDs) and which are intended to have a favorable impact on our IRR profile, the net impact of several other items resulted in the 21.70% deterioration in the Pre-Shock EVE Ratio (base valuation) measure at September 30, 2022, when compared to the measure at September 30, 2021.
+Added: Factors contributing to this decline
+Added: included changes in market rates, capital actions by the Association, and changes due to business activity.
Negatively impacting the Percentage Change in EVE was a $56.0 million cash dividend that the Association paid to the Company in December 2021.
−Removed: Because of its intercompany nature, this payment had no impact on the Company's capital position, or the Company's overall IRR profile, but reduced the Association's regulatory capital and regulatory capital ratios and negatively impacted the Association's Percentage Change in EVE by approximately 0.21%.
+Added: Because of its intercompany nature, this payment had no impact on the Company's capital position, or the Company's overall IRR profile, but reduced the Association's regulatory capital and regulatory capital ratios and negatively impacted the Association's Percentage Change in EVE.
While our core business activities, as described at the beginning of this paragraph, are generally intended to have a positive impact on our IRR profile, the actual impact is determined by a number of factors, including the pace of mortgage asset additions to our balance sheet (including consideration of outstanding commitments to originate those assets), in comparison to the pace of the addition of duration extending funding sources.
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The simulation process is subject to continual enhancement, modification, refinement and adaptation in order that it might most accurately reflect our current circumstances, factors and expectations.
−Removed: As of September 30, 2021, we estimated that our EaR for the 12 months ending September 30, 2022 would increase by 3.47% in the event that market interest rates used in the simulation were adjusted in equal monthly amounts (termed a "ramped" format) during the 12 month measurement period to an aggregate increase in 200 basis points.
+Added: As of September 30, 2022, we estimated that our EaR for the 12 months ending September 30, 2023 would decrease by 0.29% in the event that market interest rates used in the simulation were adjusted in equal monthly amounts (termed a "ramped" format) during the 12 month measurement period to an aggregate increase in 200 basis points.
The Association uses the "ramped" assumption in preparing the EaR simulation estimates for use in its public disclosures.
In addition to conforming to predominate industry practice, the Association also believes that the ramped assumption provides a more probable/plausible scenario for net interest income simulations than instantaneous shocks which provide a theoretical analysis but a much less credible economic scenario.
−Removed: The Association continues to calculate instantaneous scenarios, and as of September 30, 2021, we estimated that our EaR for the 12 months ending September 30, 2022, would increase by 4.05% in the event of an instantaneous 200 basis point increase in market interest rates.
+Added: The Association continues to calculate instantaneous scenarios, and as of September 30, 2022, we estimated that our EaR for the 12 months ending September 30, 2023, would decrease by 15.06% in the event of an instantaneous 200 basis point increase in market interest rates.
Certain shortcomings are also inherent in the methodologies used in determining interest rate risk through changes in EaR.
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From that similar starting point, the models follow divergent paths.
−Removed: EVE is a stochastic model using 150 different interest rate paths to compute
−Removed: market value at the account level for each of the categories on the balance sheet whereas EaR uses the implied forward curve to compute interest income/expense at the account level for each of the categories on the balance sheet.
+Added: EVE is a stochastic model using 150 different interest rate paths to compute market value at the account level for each of the categories on the balance sheet whereas EaR uses the implied forward curve to compute interest income/expense at the account level for each of the categories on the balance sheet.
EVE is considered as a point in time calculation with a "liquidation" view of the Association where all the cash flows (including interest, principal and prepayments) are modeled and discounted using discount factors derived from the current market yield curves.
−Removed: It provides a long term view and helps to define changes in equity and duration as a result of changes in interest rates.
+Added: It provides a long term view and helps to define changes in equity and duration as a result of changes in
+Added: interest rates.
On the other hand, EaR is based on balance sheet projections going one year and two years forward and assumes new business volume and pricing to calculate net interest income under different interest rate environments.
9 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.