ARC – ALCO

Long-Term Fixed Rates Create Risk... ARC Reduces It

Reduce Interest Rate Risk at the Source

Long-term fixed-rate loans are one of the biggest sources of IRR pressure.

ARC changes that dynamic:

• Convert fixed-rate loan production into floating-rate exposure for the bank

• Significantly reduce duration risk from new production

• Limit exposure to rising funding costs compressing asset yields

Result: Lower structural interest rate risk—without constraining lending.

Stabilize Net Interest Margin (NIM)

NIM volatility often comes down to one imbalance: fixed-rate assets vs. floating-rate liabilities.

ARC helps realign both sides:

• Asset yields move with rates, tracking closer to cost of funds

• Reduce margin compression in rising rate environments

• Create more consistent spread performance across cycles

Result: A more stable, predictable NIM profile.

Improve Asset-Liability Alignment

ALCO spends significant time managing repricing mismatches after the fact.

ARC simplifies that process:

• Shortens the effective duration of fixed-rate loan production

• Improves repricing alignment across assets and liabilities

• Reduces the need for portfolio-level fixes or derivatives

Result: A cleaner balance sheet that behaves the way you expect it to.

Retain Long-Term Loans Without Taking Long-Term Risk

ALCO is often forced into a tradeoff:

• Support long-term fixed-rate lending

• or protect the bank from duration risk

ARC eliminates that tension:

• Borrowers get long-term fixed-rate certainty

• Loans tend to stay on the books longer

• The bank avoids taking on the full interest rate risk

Result: Stronger customer relationships—without compromising your IRR posture.

Hedged vs. Unhedged Loans by the Numbers

3X
Higher Contribution to Overhead
2.5X
Longer Loan Life
18X
Less likely to be unprofitable

New to Loan Hedging?

Get our ebook that tells you everything you need to know.

• Learn how swaps, caps, and collars really work

• ARC vs. traditional derivatives—what’s best for your bank?

• Profitability benchmarks and case studies

• Step-by-step adoption framework for your team

Download the Ebook
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Using the Bank Balance Sheet Monitor [Free Tool]

The Bank Balance Sheet Monitor gives bank executives a weekly and year-to-date view of how the industry is changing across loans, investments, liquidity, deposits, and other funding sources. Rather than looking at a bank’s own results in isolation, management can compare the entire industry, the 25 largest banks, and community banks to help banks understand...
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Managing Commercial Lender’s Portfolio Profitability

Most community bankers manage their lenders by loan volume, loan count and credit quality.  Few community banks look at the client level contribution to overhead or the risk-adjusted return on capital (RAROC) for each lender’s portfolio profitability .  We analyzed one lender’s portfolio of 146 relationships, and a very uneven picture emerged.  This picture is...
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10 Lessons For Management from the 2026 ABA Bank Marketing Conference

For years, bank marketing conferences were largely about advertising channels, branding campaigns, social media, and creative tactics. This year, the 2026 ABA Bank Marketing Conferece was different. This year, the major themes centered on hyperscaling bank marketing by leveraging generative and agentic AI to fuel growth. Whether the topic was deposits, branding, social media, analytics,...
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