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“PRM Swap Desk”.

Add value for borrowers, generate fees for the bank.

Community bankers face challenges to deliver the best solutions to their commercial customers. 
Commercial borrowers want fixed rate loans.  Community Banks want rate sensitive assets.  By using Customer Swaps to create fixed rate borrowings Community Banks manage risk, add value for borrowers, and generate fees!

How Customer Swaps Work
A borrower wants a 4.25% fixed rate on a $3 million five year loan.  The community bank has priced a 250bp credit spread for the loan.  Both the borrower and the community bank “win” with a “back to back” swap strategy.
 
  • Promissory Note – Borrower Pays 1mo LIBOR plus 2.50%
  • Customer Swap – Borrower pays fixed 4.25%, Community Bank pays 1mo LIBOR plus 2.50%
  • Swap Dealer Hedge – Bank pays 4.25%, Swap dealer pays 1mo LIBOR plus 2.50% PLUS $50,000.
     
    The net result?
  • The borrower pays 4.25% fixed, 1 mo. LIBOR cash flows on the loan and swap offset.
  • The bank has no fixed rate exposure as fixed rates on the Customer and Dealer swaps offset.
  • The dealer takes the rate risk and the dealer pays the swap fee.
     
    PRM supports swap marketing and disclosure, hedge execution, accounting, ISDA documentation and all of the bank's swap reporting requirements.
     
  • No hedge accounting; offsetting swap valuations create no income volatility.
  • Two-way pre-payment terms benefit the borrower if rates rise.
  • Dodd Frank offers a simplified regulatory path for community banks with less than $10 billion in assets.