Correspondent Blog

A common strategy for community banks, when faced with a borrower that wants a 10-year fixed rate loan, is to offer a five-year fixed rate that adjusts in five years. Historically, this has worked for some customers and banks because, over the last 40 years, five-year rates have generally fallen.  As interest rates fall, a…

Community banks have structured fixed-rate loans for many years with an adjustable repricing feature where a loan is fixed for a number of years and then resets based on a stated spread and an index. However, adjustable term loans have several drawbacks for banks, especially in a rising interest rate environment.  One of the most…