MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTEREST SENSITIVITY AND DISCLOSURES ABOUT MARKET RISK continued maturity products, e.g., savings, money market, NOW and demand deposits reflect management's best estimate of expected future behavior. The comparative rising and falling scenarios for the period ending December 31, 2004 assume further interest rate changes in addition to the base simulation discussed above. These changes are immediate and parallel changes to the base case scenario. In addition, total rate movements (beginning point minus ending point) to each of the various driver rates utilized by management in the base simulation for the period ended December 31, 2004 are as follows: Driver Rates RISING FALLING ================================================================================ Prime 200 Basis Points (200) Basis Points Federal Funds 200 (100) One-Year T-Bill 200 (138) Two-Year T-Bill 200 (194) Interest Checking 100 (14) MMIA Savings 100 (24) First Flex 100 (24) CD's 200 (59) FHLB Advances 200 (117) Results for the base, rising and falling interest rate scenarios are listed below. The net interest income shown represents cumulative net interest income over a 12-month time horizon. Balance sheet assumptions used for the base scenario are the same for the rising and falling simulations. BASE RISING FALLING =============================================================================== Net Interest Income (dollars in thousands) $100,873 $102,792 $ 87,217 Variance from base $ 1,919 $(13,655) Percent of change from base 1.90% (13.54)% The comparative rising and falling scenarios for the period ended December 31, 2003 assume further interest rate changes in addition to the base simulation discussed above. These changes are immediate and parallel changes to the base case scenario. In addition, total rate movements (beginning point minus ending point) to each of the various driver rates utilized by management in the base simulation for the period ended December 31, 2003 are as follows: Driver Rates RISING FALLING ================================================================================ Prime 200 Basis Points (50) Basis Points Federal Funds 200 (50) One-Year T-Bill 200 (20) Two-Year T-Bill 200 (59) Interest Checking 100 - MMIA Savings 100 - First Flex 100 (25) CD's 200 (53) FHLB Advances 200 (66) 14