CMS Sept 2022

Internal Use Only

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Internal Use Only

Critical Assumptions • With heightened levels of NMDs in community banks today, it is important that banks apply appropriate decay rates, average lives, and price sensitivity assumptions (i.e., betas) in IRR modeling. • Traditional assumptions associated with NMDs (long average lives and lower price sensitivities). • Newer segments of NMDs acquired during the financial crisis may not behave like typical core deposits. • Institutions should update their model assumptions to capture changes in funding mix to ensure any adverse impact is appropriately considered and planned for so that management can make well-informed decisions.

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