Commercial Loan and Deposit Pricing Market Update: February 2024

February 15, 2024 Anna-Fay Lohn

Reminder No. 1: Our market updates are listed by the month we publish them, but are based on the previous month’s data in the Q2 PrecisionLender database. Thus, this February update is based on January pricing data.

Reminder No. 2: Throughout 2023, banks continually asked about what we’re seeing on deposits in our commercial pricing database, so we’re now including deposit metrics in our updates.
The main focus in this week’s update will be a closer look at some unusual trends that have developed in pricing fixed- rate loans.
As one banker put it to us:

“I continue to be surprised that we aren’t seeing (fixed-rate) margin expansion in this environment.” 

We will also answer some reader questions about:

•    SOFR spreads at various commitment levels
•    The loan pricing mix by segment 
•    The credit type mix by segment. 

Read on to get the full story, and updates on other key market metrics. 

Pricing Activity Rebounded in January

Fourth quarter 2023 pricing activity appeared to point toward a potential market slow down. It also aligned with what bankers were telling us about taking a more selective approach to the deals they were pricing. But that trend did not continue in January, as pricing volume rose to its highest monthly level since August – and above the average of the past seven months. 
It is also worth noting that July and August were the highest volume months of 2023, and that the lift in January pricing activity occurred across all banking segments.

Priced Commercial Loan Volume in $

Indexed to July 2023 = 100

Fixed-Rate Base COF Drops ... but FHLB Curve Rises

When we looked at the latest data on cost of funds, we saw the first of several unusual data points related to fixed-rate loans. 

The Jan. 31 snapshot of the FHLB Curve was 18 bps higher than the Dec. 29 snapshot, while on those same dates, the base COF that bankers were using for fixed-rate deals actually dropped 11 bps. Those contrasting moves brought the FHLB curve to within 11 bps of the fixed-rate base COF, after the two metrics have moved apart from October to the end of 2023. 

Trends in Fixed Funding Cost Composition

The volatile trend lines for fixed-rate COF stands in stark contrast to the steady relationship of the SOFR curve to the base COF for SOFR loans. 

Trends in SOFR Funding Cost Composition

Fixed-Rate Spreads Also Drop

Despite the aforementioned drop in base funding costs, fixed-rate spreads overall also dropped, by 4 bps. There is some variance by commitment amount, with larger deals (above 10M) gaining 4 bps, while smaller deals (below 10M) dropped 2 bps. 

Fixed Spread Over COF

Fixed-Rate & SOFR Coupons Continue to Diverge

The drop in both COF and spread meant that the fixed-rate coupon continued to drop. The chart below shows that October 2023 was the clear inflection point for the fixed-rate coupon, which has now dropped 61 bps over the past three months – after having risen 116 bps from January-October 2023. 

Coupon Rate by Month, Roll Trend

The chart also illustrates the marked difference in the performance of the fixed-rate coupon versus the SOFR coupon. The two trend lines were essentially parallel to each other from January-October 2023, but since then, the gap has grown from 70 bps in October to 137 bps in January. 

NIM Again Holds Steady

So why would fixed-rate coupons continue to drop in an environment in which SOFR coupons have been essentially unchanged?

We prefer to stick to the data and leave the theories to others, but it was worth noting that throughout all of this, fixed-rate NIM has remained largely unchanged. While it hasn’t dropped, as the banker we referenced earlier noted, this could be a missed opportunity for margin expansion. 

NIM By Month, Rolling Trend

Reader Questions: SOFR Spreads by Commitment Amount

Recently, Market Update readers have asked us for more detailed information re: SOFR spreads. While the overall metric has remained essentially flat in recent months, readers were curious if  there was still the case when the size of the loan changed. 

In July 2023, spreads for loans from $10-25M were 23 bps higher than those for loans >$25M. Since then, those two metrics have moved a good deal and sometimes in opposite directions. The gap between the two narrowed to 10 bps in September, then expanded to 47 bps in December, before narrowing back down to 18 bps in January. 

In terms of volume distribution, the $10-25M loans represent about 30% of volume and >$25M comes in at nearly 60%. 

Spreads to SOFR on Floating Rate Loans, by Commitment Amount

Reader Questions: Loan Pricing & Credit Type Mixes

Readers have also requested more information about the mix of pricing activity, by product and by rate type. We have a baseline view which varies across banking segment, so we are presenting our findings via that lens. 

For example, the community space shows less C&I activity, which is dominated by LOC type structures. Those loans represent 56% of the mix for community institutions vs. 66% for regional+ banks. Community institutions have a greater proportion of CRE in their mix (39%) vs. regional+ (28%).

Approximate Mix of Credit Types
Jan 2024

With respect to rate type concentrations, there was a notable difference in floating rate structures between the segments. Regional+ institutions are concentrated in floating rates (70% of their mix), while their community counterparts have a more balanced mix between fixed (38%), floating (43%) and adjustable (15%) rates. 

Rate Type Mix by Segment

Jan 2024

Got Questions? 

Our banking consultants and data scientists are combing through Q2 PrecisionLender pricing data every day. If there is anything you’d like to know about what they’re seeing, please send your questions to  


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