Commercial Loan Pricing Market Update (February 2022)

Since March 2020, we’ve posted regular updates on the commercial loan pricing markets, based on what we’ve seen when examining the PrecisionLender dataset. We look at several popular metrics and point out areas in which there have been noteworthy changes.

In today’s analysis, we looked at the continued increase in SOFR pricing activity, the increase in initial coupon rates month over month, and the continued erosion in fixed rate loan performance.  

If you’d like to see our previous loan pricing market updates, you can find them here. 

If you have questions about metrics that have appeared in previous posts, but not this latest one, please reach out to us at

NOTE: PrecisionLender’s data reflects actual commercial opportunities priced (loans, deposits, and other fee-based business) by more than 150 banks in the United States, ranging in size from small community banks to top 10 U.S. institutions. In addition to their variance in size, these banks are also geographically diverse, with borrowers in all 50 states.

Pricing Volume Stays Strong in 2022

Since we’ve started a new year, we moved up the month we’re indexing current volume against—from January 2021 to July. February 2022 volume indicates that bankers stayed busy at levels equivalent to January. Volume average is 104 for the past 8 months—driven by January and February activity. This pattern from 4Q21 (average 97) to 1Q22 corresponds to the beginning of 2021, where we saw a lift from 4Q20 activity into the new year.  

Priced Commercial Loan Volume by Month

(Indexed to July 2021 = 100)

SOFR and Swap Volume Continue to Advance

Using October 2021 as the “launch date” for SOFR activity, we indexed the amount priced by rate type back to October = 100 for each rate type breakout. February shows continued expansion in SOFR and swap-based structures, as SOFR represents 27% of the activity and has grown to nearly 4x its October base value. Fixed rate loan pricing dropped to 37% of the total—tied for the lowest reading in 14 months back to August 2021 levels. Bankers may face headwinds for maintaining profitability on fixed rate structures, as market interest rates are on the rise at a faster pace than fixed rate coupons. For more context, there is further detail on fixed rate performance later on in this post.

Balance Mix by Rate Type

(Indexed to October 2021 = 100)

Overall Balance Mix by Rate Type, February 2022

Spread to Index on SOFR Floating Rate Loan Types

Overall, spread to SOFR moved up 7 bps to 2.51% and reversed the recent 5-month trend of lower spreads. We note that volume continues to build in the segment, and we’d expect some variability in spread results as bankers find their footing. Meanwhile, spreads to SOFR on swaps had an average spread of just 1.84% in February—something we’ll continue to monitor.  

A separate note: Spreads to prime remained above 4Q21 levels but dropped 5 bps to 28 bps in February. As reported above, prime-based volume is not growing as a percentage of total. We’ll continue to monitor these spreads and performance moving forward.

 Weighted Average Spread to SOFR

Increase in SOFR Spreads Across all Balance Tranches

Digging down another layer on SOFR loans priced, we found that the mix of SOFR loans priced in February continued to shift toward the largest deals: 84% of the February SOFR mix were loans >$10M, vs. 74% in November 2021. In addition, spreads across the tranches are consistent with the overall 7 bps increase—and all balance tranches remain steady or show an uptick, reversing January's spread decrease.

Spread to Index, SOFR Loans Priced by Loan Amount    

Increases in Short-Term Funding Costs 

As a proxy for both floating rate pricing index and short-term funding costs, we are posting the SOFR curve over the past 60 days. We note that 1-month SOFR moved upward in late February from 5 bps (where it sat for most of 2021) to 22 bps as of March 1, 2022. The higher index value combined with the higher spreads to the index cited above may signal higher initial coupon rates for borrowers in future periods. Meanwhile, the curve shows that the increase in short-term rates may have an impact on borrowing costs for these loan structures. We had noted during much of 2021 that funding costs for both short-term loans and floating rate structures were largely unchanged for most of the year. We are now seeing movement in this segment and will continue to monitor.

On a separate note: Fixed rate funding costs, as measured by the FHLB curve, continue to climb. The 60-month terms show as 2.12% on March 1, 2022—up from 1.95% one month prior.   

Term SOFR Curve


*Term SOFR curve December 2021 – February 2022. 4 maturity points 1-month, 3-month, 6-month, 12-month. We will extend the maturity points over time as that information becomes available to us.

Fixed Rate Activity Details

Due to climbing interest rates and unusual changes in the shape of the yield curve, clients are increasingly interested in fixed rate loan performance. In response, we dug into fixed rate activity to show a baseline set of metrics for 60 and 120-month tranches (~78% of volume). Results show that there has not been an observable coupon premium for the 120-month tranche vs. the 60-month tranche. These coupon rates are virtually the same in February, at 3.94% and 3.95%. Next, the coupon spread over the cost of funds, which excludes the contribution of net origination fee income that’s included in the net interest margin measure, shows deterioration over the past 5 months in particular. The coupon spread shows that the 60-month tranche has given up 23 bps since October to 1.96%, compared to only 12 bps for the 120-month tranche. We will continue to monitor these maturity segments and their details moving forward.

WAC Coupon

Coupon Spread (WAC – COF)

Got Questions?  

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


Previous Article
Commercial Loan Pricing Update (March 2022)
Commercial Loan Pricing Update (March 2022)

A look at what Q2|PrecisionLender data tells us about the commercial loan pricing market for March 2022.

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Commercial Loan Pricing Market Update (January 2022)
Commercial Loan Pricing Market Update (January 2022)

A look at what Q2|PrecisionLender data tells us about the commercial loan pricing market for January 2022.