Commercial Loan Pricing Update (August 2022)

Looking at the August data in Q2 PrecisionLender, we focused on interest rates paid on deposit portfolios, as well as our normal look at SOFR, Prime and fixed activity. Some key takeaways:​

  • ​Rates paid on deposits mirror liquidity costs​
  • SOFR structures have gained competitiveness within the community space, and the average deal amount is increasing  ​
  • The performance gap has widened for fixed-rate loans

Volume Remains High Despite Rate Hikes

August volume rebounded from July levels and posted the highest year to date at 132. Note that the index changed to January 2022 versus July 2021. With the July rate hikes fully absorbed into the August run rates, the coupons, volume, and spreads all increased, which is an indicator of overall deep demand. Bankers and borrowers have absorbed the rate increases so far. With another rate hike expected later this month, we  will continue to monitor the degree to which rate increases affect activity volume.

Priced Commercial Loan Volume by Month, Indexed to January 2022 = 100 ​

Deposit Rates Paid Mirror Liquidity Costs​

In conjunction with the liquidity costs we reported in the July Market Update, we looked at the overall pace of interest rates paid on deposit portfolios within Q2 PrecisionLender. We have line of sight into aggregate time deposits and aggregate interest-bearing non-time deposits (savings, money market, and checking with interest).

The shape of the rate paid curves shown in the charts is equivalent to the shape of the liquidity curve. Rates paid overall began climbing in May after ebbing to overall lows in March 2022. The interest-bearing non-time group has moved from 17 bps in May to nearly 40 bps in August’s snapshot. Time deposits show an increase in rate paid from about 58 bps in April to nearly 100 bps in August's snapshot.  

Coupon Rate by Month, Rolling Trend

Interest-Bearing Non-Time Deposits Rate Paid

Time Deposits Rate Paid

Coupon Rate Convergence Continues

Floating rate structures posted upward-moving coupon rates in August compared to July—SOFR up 31 bps to 4.78% and Prime up 60 bps to 5.72%. Fixed-rate structures moved upward only 9 bps to 5.09%. SOFR climbed upward from an increase in the index with a partial offset of 6 bps decrease in spread to 2.45%. Convergence continues, with coupons on SOFR and fixed-rate structure now at 31 bps compared to 49 bps in July.

Coupon Rate by Month, Rolling Trend

SOFR and Prime Spreads Give Up a Bit

Bankers showed a small bit of easing on floating rate index spreads. SOFR contracted 6 bps and Prime fell 5 bps month over month. When you look at the Prime story, it clearly looks like it's going down, but the question is whether 4 to 5 bps is enough to be a trend. Prime-based book has not maintained its spread over the summer, where we've seen SOFR maintain its spread.​

Weighted Average Spread to SOFR

Weighted Average Spread to Prime

​SOFR Gains Popularity Among Community Segment

Back in May 2022 when we first drilled into the SOFR/Prime mix by banking segment, the community bank group had adopted SOFR for 35% of volume. This level has grown to 53% as of August. Meanwhile, the regional+ group is little changed with SOFR pushing toward 70% of floating rate activity. Community banks post 36 bps premium in spread to the SOFR index at 2.76% compared to the regional+ group, down from 60 bps premium back in May. This change suggests that SOFR structures have gained competitiveness within the community space. ​

​Related to typical deal size, the median amount for SOFR loans continues to climb year to date to $8.6 million as of August (up 11% overall). Deal size in the community space is growing faster than regional+ at $9 million and $8.4 million, respectively, in August 2022. In May, these medians showed $6 million (community) and $8 million (regional+).​

As a reminder, the key structures for overall mix show 33% fixed, 33% floating rate SOFR, 14% floating rate Prime, and 6% Swaps.​

Mix of Floating Rate Loans Priced, by Banking Segment, August 2022

Median Floating Rate Loan Amount, $ in 000s, August 2022

Performance Gap Widens for Fixed-Rate Loans

In December, the distance between SOFR and fixed margin was only 30 bps, and now it's 65 bps. Fixed-rate structures lag floating-rate structures in performance and are not keeping pace from relative coupon or interest rate risk adjusted spread to margin. The 1.85% net interest margin on fixed-rate strucures is now 20 bps above April 2022 lows, but it has dropped 27 bps year to date.  

In contrast, SOFR structures have expanded net interest margin percentage by 12 bps year to date to 2.53%. Prime structures carry a superior net interest rate margin to either fixed-rate or SOFR (driven by the index value itself). One possible explanation for the recent downward trend in spreads on Prime structures is that Prime-based structures have a 90 bps superior net interest margin to SOFR, so bankers are willing to give up a little more on spread to Prime.​

Net Interest Margin by Month, Rolling Trend

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 your questions to

About the Market Update   

Since March 2020, we’ve posted regular updates on the commercial loan pricing markets based on what we’ve seen when examining the Q2 PrecisionLender dataset. We look at several popular metrics and point out areas in which there have been noteworthy changes.  

Q2 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. 

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

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Commercial Loan Pricing Update (September 2022)
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