A Unique Loan-Hedging Solution Built for Your Bank
It's a common theme in the community bank arena today — your customers want long-term, fixed-rate loans, the large banks are willing to offer them and you're left looking for a way to compete. In order to protect these relationships, meet your customers' needs and keep your workload to a minimum, consider hedging long-term credits through our BLP program.
BLP gives your bank the ability to provide customers long-term, fixed-rate loans without the derivative accounting or ISDA documents, while at the same time reducing your interest rate risk. Your customer gets the fixed-rate payment structure they want and your bank gets the floating rate loan on your books that you want. Check out the chart below to see additional benefits of utilizing our BLP program.
|Our Solution||Modified Swap||Back-to-back Swap||Fixed Rate Loan Swap|
|Description of Solution||Bank provides floating rate loan to borrower, we provide rate protection to borrower.||Amended loan documents with swap between bank and broker.||Hedge between bank and broker. Another swap between borrower and bank.||Fixed rate loan to borrower. Bank enters into a swap with broker.|
|Floating Rate + Modification||X||X|
|Derivative is off balance sheet||X|
|Is a floating rate term note||X|
|Eliminates derivative accounting for your bank||X|
|Documentation is only an addendum to note||X||X|
|Your borrower must be an eligible contract participant||X||X||X|
|Reduces rate risk||X||X||X||X|
|Can be structured to provide an up front fee to your bank||X||X||X|
|Your borrower has gain potential||X||X||X||X|
|Option to prepay without penalty||X||X||X||X|
|Allows funding flexibility||X||X||X||X|
|Fixed-to-floating rate structure||X||X||X||X|
BLP uses your loan origination and credit underwriting documents, keeping the process consistent with your current practices. BLP allows you to provide the long-term, fixed-rate loans that your customer is looking for, while you enjoy a floating-rate asset on your books and gain better management of interest rate risk. PCBB manages the swap on our books so that you and your customers don't have to deal with ISDA documents and derivative accounting.