Lauren,
Our bank initiated an arrangement with CenterState Bank for their Assumable Rate Conversion (ARC) Program that allows us to provide a hedge product to our borrowers, swapping floating rate loans for a fixed term. CenterState acts as the primary party of the derivatives contract; the bank's role is as servicing agent. Therefore, we are not subject to accounting and disclosure rules for derivatives. We are very selective about the borrowers that we introduce into this program. Not only is that a qualification from CenterState, but we want to make sure that our customer understands the market risks.
We executed a master agreement with CenterState about a year ago and booked our first loan swap in May. We have 5 borrowers in this program. We have lived through both a FRB exam and year-end auditors. CenterState provided good training, so we are comfortable explaining it to our examiners and auditors. We didn't get any unusual questions or criticisms from them.
This may not be the same as the PCBB program, but very likely it is similar.
Dawne Stafford | President & CFO
Ph: (918) 664.6100 | Fax: (918) 664.8778
10727 East 51st Street | Tulsa, OK 74146 | PO Box 471316 | Tulsa, OK 74147-1316
Please note my new email address: dstafford@sbtulsa.bank
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------Original Message------
Does anyone have experience using PCBB's interest rate swap program to offer long term fixed rates to your loan customers without putting a derivative on the bank's balance sheet? (They refer to it as Borrower's Loan Protection.) I'm wondering if anyone has encountered any issues with auditors or regulators with the program.
Thanks
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