An interest rate swap is a straightforward risk management tool that lets your bank offer borrowers the long-term fixed rates they want — while keeping a floating-rate asset on your balance sheet. In a back-to-back swap program, the borrower pays a fixed rate, the swap counterparty absorbs the duration risk, and your bank retains the customer relationship plus a floating-rate spread.
For community banks in the $300M–$10B asset range, swap programs have become one of the most practical ways to manage three challenges simultaneously:
Every time you book a 10-year fixed-rate commercial loan, you're taking on duration risk — the risk that rising rates will erode the value of that asset while your funding costs climb. A swap converts that fixed-rate loan into a floating-rate asset, removing the mismatch.
In practice: A borrower wants a 10-year fixed-rate CRE loan at 6.25%. With a swap, your bank books a floating-rate asset (say SOFR + 2.50%) and earns an upfront origination fee — while the borrower still gets their fixed rate.
Your commercial borrowers are comparing your 5-year ARM to a competitor's 10-year fixed rate. Without a swap program, you either lose the relationship or take on duration risk you shouldn't. With a swap program, you can match any term the borrower needs without extending your own interest rate exposure.
In practice: Banks with swap programs report 3–5% CPR (prepayment speeds) on hedged loans versus 25–35% on unhedged — borrowers stay longer when they have the terms they want.
Each swap transaction generates an upfront fee (typically 1.0–2.0% of notional) that flows directly to noninterest income. For banks that are heavily dependent on net interest income, this creates a meaningful new revenue stream with no additional capital consumption.
In practice: A $10M CRE swap at a 1.5% fee generates $150,000 in upfront fee income — with no ongoing operational burden and no balance sheet impact beyond the loan itself.
This self-assessment is designed for bank CEOs, CFOs, and ALM committee members at FDIC-insured commercial banks with $300M–$10B in total assets. It uses your bank's actual Call Report data to evaluate whether your balance sheet profile suggests a swap program could be beneficial.
The assessment is not a recommendation — it's a data-driven starting point for an internal conversation about rate risk management.
Note: All data is sourced from publicly available FFIEC Call Reports (Q4 2025). No proprietary bank data is used or required.
We evaluate five dimensions of your bank's balance sheet that indicate how well-suited your institution is for a back-to-back swap program. Each dimension is scored 0–20 based on publicly available Call Report data, producing a composite score out of 100.
Search by name or state to see your bank's interest rate risk profile and swap suitability assessment.
Schedule a confidential conversation to discuss how these findings apply to your specific balance sheet strategy.
Request a ConsultationThis section explains exactly how each dimension is scored, so you can understand precisely what drives your bank's suitability assessment. All thresholds are based on industry benchmarks and regulatory guidance.
Before scoring, we verify that your bank meets the baseline eligibility criteria for a back-to-back swap program:
| Requirement | Threshold | Rationale |
|---|---|---|
| Total Assets | $300M – $10B | Optimal range where swap programs provide the greatest balance sheet benefit relative to operational complexity |
| Tier 1 Leverage | ≥ 5.0% | Well-capitalized status ensures regulatory readiness for derivative activity |
| Total Risk-Based Capital | ≥ 10.0% | Well-capitalized under PCA framework |
| Charter Type | FDIC-insured commercial bank | Back-to-back programs are designed for traditional commercial bank structures |
This measures whether your bank currently uses interest rate derivatives. Banks with no hedging activity have the greatest opportunity to benefit from implementing a program.
| Your Situation | Score | What It Means |
|---|---|---|
| No derivatives on the books | 20 | Maximum opportunity — you're managing rate risk without the most common tool available |
| Derivatives < 5% of total assets | 12 | You've started hedging but are using it minimally relative to your balance sheet |
| Derivatives 5–15% of total assets | 5 | Active hedging program in place; a back-to-back program could still complement your approach |
| Derivatives > 15% of total assets | 0 | Robust hedging activity — you may already be running a swap program or equivalent |
Measures how much of your loan portfolio is locked into long-term fixed rates, creating duration mismatch with your shorter-duration funding.
| Your Situation | Score | What It Means |
|---|---|---|
| ≥ 30% of loans repricing beyond 5 years | 20 | Significant duration risk — rising rates could materially impact asset values |
| 20–30% repricing beyond 5 years | 15 | Meaningful exposure that warrants active management |
| 10–20% repricing beyond 5 years | 8 | Moderate exposure — some benefit from hedging, less urgency |
| < 10% repricing beyond 5 years | 2 | Short-duration book — less immediate need for swap-based hedging |
| Bonus: Net LT Assets / TA > 30% | +5 | Structural balance sheet mismatch amplifies the benefit of duration management tools |
CRE and C&I borrowers are the segments that most frequently request long-term fixed-rate financing. Higher commercial concentration means more transactions eligible for swap structuring.
| Your Situation | Score | What It Means |
|---|---|---|
| (CRE + C&I) > 65% of total loans | 20 | Heavily commercial — borrowers are asking for fixed rates regularly |
| 50–65% | 15 | Strong commercial presence with meaningful swap-eligible volume |
| 35–50% | 10 | Mixed portfolio — moderate volume of swap-eligible transactions |
| < 35% | 3 | Primarily residential — fewer borrowers seeking long-term commercial fixed rates |
| Bonus: NOO CRE concentration > 250% | +5 | Approaching supervisory CRE guidance — hedging can help demonstrate active risk management |
How dependent is your bank on net interest income? Swap fees provide a way to diversify revenue without adding operational complexity or capital requirements.
| Your Situation | Score | What It Means |
|---|---|---|
| Fee income < 10% of total revenue | 20 | Heavily NII-dependent — swap fees could meaningfully diversify your revenue mix |
| 10–15% | 15 | Below typical peer levels — swap fees would provide valuable diversification |
| 15–25% | 8 | Near peer median — swap fees are additive but not transformative |
| > 25% | 3 | Well-diversified revenue — swap fees would be incremental |
Banks experiencing margin compression or underperforming peers have the greatest urgency to explore tools that can protect and stabilize net interest income.
| Your Situation | Score | What It Means |
|---|---|---|
| NIM declined > 30bps YoY and below 50th percentile | 20 | Significant margin pressure relative to peers — rate risk tools could help stabilize |
| NIM declined > 15bps YoY | 12 | Margin compression underway — proactive rate risk management is important |
| NIM below peer 50th percentile (stable) | 8 | Underperforming peers — room to improve through better rate risk positioning |
| NIM above peer median and stable | 2 | Strong margin position — less urgency but hedging still provides structural benefits |
| Score | Suitability | What It Suggests |
|---|---|---|
| 80–100 | High Suitability | Your balance sheet profile is strongly aligned with what a swap program addresses. Multiple rate-risk indicators suggest this deserves board-level attention. |
| 60–79 | Good Fit | Several indicators suggest meaningful benefit. Worth exploring with your ALM committee and understanding the economics for your specific balance sheet. |
| 40–59 | Moderate Fit | Some indicators align, others less so. A swap program could be beneficial in targeted areas — consider evaluating specific loan segments. |
| < 40 | Limited Fit | Current balance sheet characteristics suggest less immediate need. Revisit as your loan mix, rate environment, or strategic priorities evolve. |
Note: Dimension 2 uses fixed-rate loans / total loans as a proxy for loans repricing beyond 5 years. Dimension 5 estimates YoY NIM change by annualizing QoQ delta. These are approximations based on available Call Report data. A detailed assessment would use your internal ALM data for greater precision.
This view shows how 2,100+ qualified community banks score across the five suitability dimensions. Use it to understand where your institution stands relative to the broader community banking landscape.
| # | Bank | State | Assets ($M) | Score | Suitability | Hedging | Duration | Commercial | Fee Gap | NIM |
|---|
If your assessment suggests that a swap program could benefit your bank, here's a practical roadmap for exploring it further.
Share this assessment with your CFO and ALM committee. The five-dimension breakdown provides a structured framework for discussing where your balance sheet is most exposed to interest rate risk and whether a swap program fits your strategic plan.
For many community bank boards, interest rate swaps are unfamiliar territory. The educational content in this assessment is designed to be shared with board members to build baseline understanding. A swap program requires board approval, so starting the education process early is valuable.
The suitability score tells you whether your balance sheet profile aligns with what swap programs address. The next step is a detailed economic analysis using your internal ALM data — specifically, how much fee income a program could generate based on your actual loan origination volumes, average deal sizes, and customer demand for fixed rates.
Back-to-back swap programs are offered by several providers with different structures, pricing models, and support levels. Key evaluation criteria include: counterparty credit quality, execution pricing, regulatory support (OCC/FDIC guidance compliance), technology integration, and ongoing operational requirements.
We provide confidential, no-obligation consultations to help community bank leadership teams evaluate whether a swap program is right for their institution. We'll walk through your specific balance sheet data and provide a detailed economic analysis.
Schedule a ConsultationNo. In a back-to-back structure, the program provider handles the swap execution, documentation, and ongoing mark-to-market reporting. Your bank originates loans using your existing processes and systems.
The OCC and FDIC have issued guidance supporting the use of interest rate derivatives by community banks for risk management purposes. Your bank needs a board-approved policy, appropriate risk limits, and ongoing reporting — all of which your program provider typically helps you establish.
Most programs become economically attractive with as few as 4–6 swap-eligible transactions per year. For a bank with $500M+ in assets and a meaningful commercial portfolio, this is typically achievable within the first year.
The borrower assumes the mark-to-market on the swap. If rates have risen, the borrower receives a termination payment. If rates have fallen, the borrower pays a termination fee. This is transparent to the borrower from origination and is a key reason hedged loans have lower prepayment speeds.
No. The score indicates how strongly your balance sheet characteristics align with what swap programs are designed to address. It's a data-driven starting point for internal discussion, not a product recommendation. A proper evaluation requires analysis of your internal ALM data, strategic plan, and competitive market.