Hedging Strategies in Action

For the third consecutive quarter, receive-fixed swaps were the most discussed hedging strategy on bank earnings calls. Forward starting swaps and floors remain particularly popular as they reduce initial hedging expense. Rising rates strategies continue to be executed, though among our own clients we’ve seen a shift to collars and other strategies that include options. Lastly, customer swap programs are seeing real momentum- several banks highlighting strong year-over-year growth in non-interest fee income.

Read on for our complete summary

Rising Rates Hedging

Bank of Hawaii Corporation	Pay-Fixed Swaps	“At the end of the quarter, we had *$2.2 billion of active pay fixed received flow interest rate swaps at a weighted average fixed rate of 4%*. $1.5 billion of these swaps are hedging our loan portfolio, while $700 million are hedging our AFS securities. In addition, we have *$600 million of forward starting swaps at a weighted average fixed rate of 3.1%*. $200 million of these swaps will become active later this year, while the remaining $400 million will start in the middle of 2026.”
Cadence Bank	Pay-Fixed Swaps	“We put on about *$550 million in notional interest rate swaps to minimize any residual interest rate volatility* in these securities that remained on our balance sheet.”
CVB Financial Corp.	Pay-Fixed Swap Unwinds & Extensions	“In May of this year, we terminated pay-fixed swaps with a total nominal value of $700 million that was issued in June of 2023 and were scheduled to mature in June of 2028 and replaced them for the same *$700 million nominal value with new pay-fixed swaps that mature in May of 2029, 2030 and 2031. The swap replacement resulted in a 3 basis point lower weighted average fixed rate*. The positive carry on receiving daily SOFR compared to the fixed rate paid on the swaps *generated $1.3 million of interest income in the second quarter of 2025*.”
Hancock Whitney Corporation	Pay-Fixed Swaps	“Additionally, *another $40 million of our fair value hedges became effective this quarter* and contributed 3 basis points to the overall yield pickup.”
Huntington Bancshares Incorporated	Pay-Fixed Swaps	“We continue to manage our hedging program to accomplish our core objectives of *protecting capital from a potential higher rate environment…* As you know, we frequently review the most likely paths of interest rates and actively modulate our positioning to the most likely scenario.”
Metropolitan Bank Holding Corp.	Pay-Fixed Swaps	“Quarter-over-quarter, the cost of interest-bearing deposits and the cost of total deposits declined by 13 basis points and 7 basis points, respectively. The decline in the cost of interest-bearing deposits was driven by mix change as well as hedging activity. *In April, we executed a $500 million pay-fixed OIS swap at 3.52% versus Fed funds indexed deposits*.”

Declining Rates Hedging

Associated Banc-Corp	Receive-Fixed Swaps	“We continue to feel well positioned for any potential Fed rate changes that may materialize in the coming months, thanks to our modestly asset-sensitive balance sheet… *We’ve maintained receive-fixed swap balances of approximately $2.45 billion*, and we build a $3 billion fixed rate auto book with low prepayment risk and strong credit characteristics.”
Citizens Financial Group, Inc.	Receive-Fixed Swaps	“What we’ve been doing to try to quarter-over-quarter to protect that downside is *opportunistically putting on hedges in a forward starting way. And those hedges generally are well north of where we think the Fed will likely come out.* So they’ll be stable to providing protection against that lower end. So did a little bit of hedging in the second quarter, a little bit in the first quarter, and we’ll continue to opportunistically look for our spots given rate volatility.”
Great Southern Bancorp, Inc.	Receive-Fixed Swaps	“Our total capital also increased $2.8 million in the second quarter of 2025 as a result of increased market value of our available-for-sale investment securities and *interest rate swaps*.”
Huntington Bancshares Incorporated	Receive-Fixed Swaps	“We continue to manage our hedging program to accomplish our core objectives of…*protecting NIM from a potential lower rate environment. Over the last year, we have reduced our asset sensitivity to a near neutral position*, and we expect to maintain that relative neutrality for the next year. As you know, we frequently review the most likely paths of interest rates and actively modulate our positioning to the most likely scenario.”
Independent Bank Corporation	Receive-Fixed Swaps	“*The NII sensitivity position shows slightly more exposure to a declining rate environment. Some of the increase in asset repricing was offset by purchased floors* and faster liability repricing given an increase in short duration wholesale funding. Currently 37.1% of assets reprice in 1 month and 49.2% reprice in the next 12 months.”
S&T Bancorp, Inc.	Receive-Fixed Swaps	“That’s the benefit that we’ve been seeing just in the repricing on both the security side and the loans along with the swap book that is maturing for its received fixed swap book. We have about $50 million maturing each time. *So we’ll get a little bit more of those benefits in a flat environment versus having to be more aggressive on the deposit repricing side should rates drop down*.”
Texas Capital Bancshares, Inc.	Receive-Fixed Swaps	“We continue to effectively manage duration in anticipation of upcoming swap maturities, adding… $100 million in forward-starting received fixed swaps that will become active on October 1… We do still anticipate future interest rate derivative or securities actions over the course of 2025 as we look to augment potential rates fall earnings generation at materially better terms than available during our deliberate pause through the mid part of last year.”
The PNC Financial Services Group, Inc.	Receive-Fixed Swaps	“Regarding our swaps, *active receive-fixed rate swaps totaled $40 billion on June 30, with a receive rate of 3.62%*, which increased 13 basis points linked quarter. *Forward starting swaps were $16 billion with a receive rate of 4.07% and approximately 40% of these swaps will become active in 2025*.”

Customer Hedging Programs

Bank OZK	Customer Hedging	“Our interest rate hedging services, it’s run by Ryan Frette. Ryan is having nice success. I think *we saw a cap and a swap get done just last week…through a loan committee.*“
Bridgewater Bancshares, Inc.	Customer Hedging	“Noninterest income increased $773,000 or 37% during the quarter. *This was primarily driven by $938,000 of swap fee income as our bankers have begun to more actively offer the swap product to clients.* We have now generated swap fee income each of the past 4 quarters. While these fees have been lumpy, we expect to see additional swap fees going forward.”
Business First Bancshares Inc.	Customer Hedging	“We’re also seeing quite a bit of momentum in the derivatives business that we have serving our clients and other bank clients by offering interest rate swaps as a way to tailor their pricing on their loans. And we’re starting to see more and more wins come through the celebration channel…as we talk about what we’re doing, I’m seeing a greater pace of swap victories..”
Comerica Incorporated	Customer Hedging	“Capital markets income improved $11 million with higher syndication fees and derivative income, which included *increased interest rate hedging and foreign exchange activity* in addition to the quarter-over-quarter benefit in CVA.”
FB Financial Corporation	Customer Hedging	*“Our core noninterest income was $25.8 million, which represents a 9% increase over last quarter and an 8% increase over the same quarter last year.* These gains were led by stronger swap fees, higher mortgage banking revenue and a number of other increases across our fee categories.”
F.N.B. Corporation	Customer Hedging	“*Capital markets income grew strongly* from the year ago period due to record debt capital markets income, and contributions from international banking and *customer swap activity.*“
Hope Bancorp, Inc.	Customer Hedging	“Customer swap fee income *increased quarter-over-quarter by $1 million and year-over-year by $1.6 million*, reflecting improved customer demand.”
Origin Bancorp, Inc.	Customer Hedging	“Noninterest income increased to $16 million from $15.5 million in Q1, due in large part to normal seasonality in our mortgage business and continued strength in our customer swap business.”
Synovus Financial Corp.	Customer Hedging	“We’ve invested a lot in our treasury area, whether that’s simple things as an improved onboarding experience for our clients, but we also have added products like foreign exchange hedging.”