CMS Sept 2022

Internal Use Only

Implications of Average Life Assumptions  EVE = NPV Assets – NPV Liabilities

The longer the time period, the lower the NPV. For Liabilities in a positive yield curve (holding assets constant), a lower NPV equates to a higher EVE or more Asset Sensitive.

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Internal Use Only

Sensitivity Testing of Assumptions

• Assumptions drive simulation results

• Assumptions are (hopefully) based on historical analysis and expected behavior

• But what if the assumptions are wrong….  What if loans prepay faster than expected…

 What if depositors require higher interest rate increases…  What if surge deposits leave…  What if our deposits are not as long-lived as we think…

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