Commercial Loan Pricing Market Update, May 4

May 4, 2020 Anna-Fay Lohn

Given the low levels of commercial lending activity – particularly outside of PPP – we shifted the focus of this market update and instead chose to take a step back.

With the Main Street Lending Program poised to begin soon, and likely cause an uptick in commercial banking activity, we decided to spend this piece looking at what’s happened so far in 2020, through the month of April, and to also break things down by bank size. We looked at several key metrics for community banks – both small (below $1B in assets) and large ($1-8B in assets) – and for regional banks ($8-$50B). (Note: We left out Enterprise level banks from this analysis, as their strategies differ enough to warrant a separate analysis.)

NOTE: PrecisionLender’s data reflects opportunities 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.

Volume Stays at Low Levels

As we wrote about last week, commercial pricing activity outside of PPP has been very light. 

Priced Commercial Loan Volume by Week

Overall, volume for the month of April was down 23% from pre-COVID-19 levels. Looking at this from an asset category standpoint, it’s clear that regional banks have taken the biggest hit (down 35%) while the impact on large community banks has been much less (down 15%), by comparison. 

Reduction in Dollar Volume Priced (April vs. Jan/Feb Average)

NIM: Regionals Consistent While Communities Climb

Regional NIM has stayed within a very tight range each month, from 2.34 to 2.39. Community banks though, have seen NIM climb, with both the small and large groupings up 32 basis points since January due to the drop in COF in 2020. 

NIM by Month and Segment

ROE: Targets Are Being Reached

Taking a look at targets thus far in 2020, we noted that the community banks have stayed relatively consistent in pursuing ROEs in the 20% range. Regionals targets dropped about 110 bps during the past two months, as these banks made a moderate shift way from floating rate to fixed rate deals. 

Overall Target ROE by Month and Segment

Meanwhile, all three segments achieved their targets, with community banks improving ROE in the past two months as funding costs plummeted. Regionals stayed in a much tighter results range. 

Overall ROE Results by Month and Segment

Performance in the “Satisfactory” Risk Category

Finally, we took a look at the performance of commercial loans in the “Satisfactory” category, because – with 43% of regional loan balances and more than 74% of large community loan balances priced in this segment – it serves as a bellwether for risk inputs and results. 
Indeed, the target behaviors and ROE results mimic what we say in the overall data set. Regional banks lowered targets while large communities stayed steady. And large community banks boosted ROE more in the past two months. 

Also of note, loan loss allocations stayed consistent with both asset classes, while equity loads ticked up steadily. 

Regional Risk Results for “Satisfactory” Category

Large Community Risk Results for “Satisfactory” Category

Got Questions? 

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

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