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Case Study

Meeting customer demand for long-term fixed-rate financing

  • ben lewis headshot

    Authors

    Ben Lewis

    Managing Director
    Sales

    Financial Institutions | Denver, CO

Summary

A $2.8B community bank in the Midwest wanted to provide their commercial borrower with long-term fixed rate funding through a swap program with a correspondent bank. The correspondent bank denied their request due to a disagreement over loan-to-value proceeds.

Key goals

  • Meet customer demand for long-term fixed rate financing
  • Provide loan proceeds that are competitively priced and aligned with the bank’s credit culture
  • Generate fee income

Our approach

  • Enabled the bank to offer the swap agreement directly to the customer removing the correspondent bank from the customer relationship
  • Delivered a solution that met the customer’s needs and a credit risk profile acceptable to the bank without influence from a third party
  • Removed the interest rate risk by executing an offsetting swap with a dealer counterparty
  • Established procedures and provided training and a technology platform to manage the swaps
  • Leveraged long-term experience working with community banks and presence in capital markets to provide a solution customized to meet the needs of the bank

Results

  • Saved a customer relationship and booked a $12.1M 10-year loan
  • Generated $100K in additional fee income compared to what would have been earned with the correspondent bank
  • Enabled the bank to deliver a streamlined 100% local solution to the customer by removing the correspondent bank from the customer relationship

We’d like to hear from you

Learn how to grow and optimize your interest rate swap program.

About the author

  • Ben Lewis

    Managing Director
    Sales

    Financial Institutions | Denver, CO


Disclaimers

Chatham Hedging Advisors, LLC (CHA) is a subsidiary of Chatham Financial Corp. and provides hedge advisory, accounting and execution services related to swap transactions in the United States. CHA is registered with the Commodity Futures Trading Commission (CFTC) as a commodity trading advisor and is a member of the National Futures Association (NFA); however, neither the CFTC nor the NFA have passed upon the merits of participating in any advisory services offered by CHA. For further information, please visit chathamfinancial.com/legal-notices.

Transactions in over-the-counter derivatives (or “swaps”) have significant risks, including, but not limited to, substantial risk of loss. You should consult your own business, legal, tax and accounting advisers with respect to proposed swap transaction and you should refrain from entering into any swap transaction unless you have fully understood the terms and risks of the transaction, including the extent of your potential risk of loss. This material has been prepared by a sales or trading employee or agent of Chatham Hedging Advisors and could be deemed a solicitation for entering into a derivatives transaction. This material is not a research report prepared by Chatham Hedging Advisors. If you are not an experienced user of the derivatives markets, capable of making independent trading decisions, then you should not rely solely on this communication in making trading decisions. All rights reserved.

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