CMS Sept 2022

Internal Use Only

Traditional Back-to-Back Swap

Borrower’s Cash Flows: Borrower Pays Floating (Loan) Borrower Receives Floating (Swap)

(SOFR + 2.50%) SOFR + 2.50%

Borrower Pays Fixed

(5.50%)

Net Fixed Payment (5.50%) *Lender determines spread to SOFR based on credit and other customer relationship considerations.

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Internal Use Only

Traditional Back-to-Back Swap

Bank

Borrower

Receive 1m SOFR plus 2.50% floating

Floating Rate Loan

Floating Rate Loan

Offer of 5.30% Pay Fixed 5.50%

Receive Fixed 5.50%

Interest Rate Swap

Interest Rate Swap

Interest Rate Swap

Receive 1m SOFR plus 2.50% floating

Pay 1m SOFR plus 2.50% floating

Counterparty will pay the institution the PV difference between the market swap rate & retail swap rate. In this example, the rate was marked up 20bps, which generated ~$27k in fee income.

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