12 unchanged sentences
One such technique utilizes an earnings simulation model to analyze the sensitivity of net interest income to movements in interest rates.
−Removed: The model is based on actual cash flows and repricing characteristics for on and off-balance sheet instruments and incorporates market-based assumptions regarding the impact of changing interest rates on the prepayment rate of certain assets and liabilities.
+Added: The model is based on actual cash flows and repricing characteristics for on and off-balance sheet instruments and incorporates market-based assumptions regarding the impact of changing interest rates on the prepayment rate of certain
+Added: assets and liabilities.
The model also includes executive management projections for activity levels in product lines offered by United.
8 unchanged sentences
United closely monitors the sensitivity of its assets and liabilities on an on-going basis and projects the effect of various interest rate changes on its net interest margin.
−Removed: The following table shows United’s estimated earnings sensitivity profile as of September 30, 2022 and December 31, 2021:
+Added: The following table shows United’s estimated earnings sensitivity profile as of March 31, 2023 and December 31, 2022:
Change in Interest Rates
1 unchanged sentence
Percentage Change in Net Interest Income
−Removed: September 30, 2022
+Added: March 31, 2023
December 31, 2022
−Removed: At September 30, 2022, given an immediate, sustained 100 basis point upward shock to the yield curve used in the simulation model, net interest income for United is estimated to decrease by 0.50% over one year as compared to an increase by 2.70% at December 31, 2021.
−Removed: A 200 basis point immediate, sustained upward shock in the yield curve would decrease net interest income by an estimated 3.97% over one year as of September 30, 2022, as compared to an increase of 4.61% as of December 31, 2021.
−Removed: A 100 basis point immediate, sustained downward shock in the yield curve would decrease net interest income by an estimated 0.08% over one year as of September 30, 2022 as compared to a decrease of 0.98%, over one year as of December 31, 2021.
−Removed: A 200 basis point immediate, sustained downward shock in the yield curve would decrease net interest income by an estimated 1.93% over one year as of September 30, 2022 as compared to a decrease of 2.42% over one year as of December 31, 2021.
+Added: At March 31, 2023, given an immediate, sustained 100 basis point upward shock to the yield curve used in the simulation model, net interest income for United is estimated to decrease by 2.84% over one year as compared to a decrease by 3.00% at December 31, 2022.
+Added: A 200 basis point immediate, sustained upward shock in the yield curve would decrease net interest income by an estimated 6.71% over one year as of March 31, 2023, as compared to a decrease of 6.83% as of December 31, 2022.
+Added: A 100 basis point immediate, sustained downward shock in the yield curve would increase net interest income by an estimated 1.52% over one year as of March 31, 2023 as compared to an increase of 2.12%, over one year as of December 31, 2022.
+Added: A 200 basis point immediate, sustained downward shock in the yield curve would decrease net interest income by an estimated 1.45% over one year as of March 31, 2023 as compared to an increase of 2.16% over one year as of December 31, 2022.
In addition to the one year earnings sensitivity analysis, a two-year analysis is also performed.
Compared to the one year analysis, United is projected to show improved performance in year two within the upward rate shock scenarios.
−Removed: Given an immediate, sustained 100 basis point upward shock to the yield curve used in the simulation model, net interest income for United is estimated to increase by 1.65% in year two as of September 30, 2022.
−Removed: A 200 basis point immediate, sustained upward shock in the yield curve would decrease net interest income by an estimated 0.06% in year two as of September 30, 2022.
−Removed: A 100 basis point immediate, sustained downward shock in the yield curve would decrease net interest income by an estimated 3.18% in year two as of September 30, 2022.
−Removed: A 200 basis point immediate, sustained downward shock in the yield curve would decrease net interest income by an estimated 7.41% in year two as of September 30, 2022.
+Added: Given an immediate, sustained 100 basis point upward shock to the yield curve used in the simulation model, net interest income for United is estimated to increase by 0.55% in year two as of March 31, 2023.
+Added: A 200 basis point immediate, sustained upward shock in the yield curve would decrease net interest income by an estimated 0.19% in year two as of March 31, 2023.
+Added: A 100 basis point immediate, sustained downward shock in the yield curve would decrease net interest income by an estimated 2.34% in year two as of March 31, 2023.
+Added: A 200 basis point immediate, sustained downward shock in the yield curve would decrease net interest income by an estimated 8.65% in year two as of March 31, 2023.
This analysis does not include the potential increased refinancing activities, which should lessen the negative impact on net income from falling rates.
14 unchanged sentences
Like other fixed-income securities, when interest rates rise, the value of mortgage- related securities generally declines.
−Removed: prepayments on underlying mortgages will affect the price and volatility of mortgage-related securities and may shorten or extend the effective maturity of the security beyond what was anticipated at the time of purchase.
+Added: The rate of prepayments on underlying mortgages will affect the price and volatility of mortgage-related securities and may shorten or extend the effective maturity of the security beyond what was anticipated at the time of purchase.
If interest rates rise, United’s holdings of mortgage-related securities may experience reduced returns if the borrowers of the underlying mortgages pay off their mortgages later than anticipated.
This is generally referred to as extension risk.
−Removed: At September 30, 2022, United’s mortgage related securities portfolio had an amortized cost of $2.2 billion, of which approximately $966.9 million or 44% were fixed rate collateralized mortgage obligations (“CMOs”).
+Added: At March 31, 2023, United’s mortgage related securities portfolio had an amortized cost of $2.1 billion, of which approximately $907.1 million or 44% were fixed rate collateralized mortgage obligations (“CMOs”).
These fixed rate CMOs consisted primarily of planned amortization class (PACs), sequential-pay and accretion directed (“VADMs”) bonds having an average life of approximately 5.6 years and a weighted average yield of 2.13%, under current projected prepayment assumptions.
2 unchanged sentences
The projected price decline of the fixed rate CMO portfolio in rates up 300 basis points would be 15.5%, or less than the price decline of a 7-year treasury note.
−Removed: By comparison, the price decline of a 30-year 2.50% coupon mortgage backed security (“MBS”) in rates higher by 300 basis points would be approximately 21.1%.
−Removed: United had approximately $628.2 million in fixed rate Commercial mortgage backed Securities (“CMBS”) with a projected yield of 2.07% and a projected average life of 4.9 years on September 30, 2022.
+Added: By comparison, the price decline of a 30-year 5% current coupon mortgage backed security (“MBS”) in rates higher by 300 basis points would be approximately 14.2%.
+Added: United had approximately $571.2 million in fixed rate commercial mortgage backed Securities (“CMBS”) with a projected yield of 2.00% and a projected average life of 4.8 years on March 31, 2023.
This portfolio consisted primarily of Freddie Mac Multifamily K securities and Fannie Mae Delegated Underwriting and Servicing (“DUS”) securities with a weighted average maturity (“WAM”) of 8.1 years.
−Removed: United had approximately $29 million in 15-year mortgage backed securities with a projected yield of 2.02% and a projected average life of 4.9 years as of September 30, 2022.
+Added: United had approximately $26.8 million in 15-year mortgage backed securities with a projected yield of 2.01% and a projected average life of 4.7 years as of March 31, 2023.
This portfolio consisted of seasoned 15-year mortgage paper with a weighted average loan age (“WALA”) of 3.5 years and a WAM of 11.8 years.
−Removed: United had approximately $360.8 million in 20-year mortgage backed securities with a projected yield of 1.81% and a projected average life of 7.3 years on September 30, 2022.
+Added: United had approximately $347.2 million in 20-year mortgage backed securities with a projected yield of 1.82% and a projected average life of 7.1 years on March 31, 2023.
This portfolio consisted of seasoned 20-year mortgage paper with a WALA of 2.1 years and a WAM of 17.8 years.
−Removed: United had approximately $166.8 million in 30-year mortgage backed securities with a projected yield of 2.45% and a projected average life of 7.8 years on September 30, 2022.
+Added: United had approximately $167 million in 30-year mortgage backed securities with a projected yield of 2.59% and a projected average life of 7.9 years on March 31, 2023.
This portfolio consisted of seasoned 30-year mortgage paper with a WALA of 3.8 years and a WAM of 24.6 years.
−Removed: The remaining 2% of the mortgage related securities portfolio on September 30, 2022, included floating rate CMO, CMBS and mortgage backed securities.
+Added: The remaining 2% of the mortgage related securities portfolio on March 31, 2023, included floating rate CMO, CMBS and mortgage backed securities.
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.