Commercial Loan Pricing Update (March 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 March 2022, we saw a sharp increase in pricing activity, rapid increases in marginal funding costs, and lower levels on fixed-rate spreads. In this report, we outline what that means for pricing performance and provide a baseline view of 2022 liquidity premiums.  

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 Moves Sharply Upward in March 2022  

We previously reported the strong start to 2022, and for March the pace accelerated with an approximately 30% increase in activity month over month. This pace was consistent across community and regional banking segments, following a similar pattern to March 2020 when interest rate cuts quickly affected banker activity and loan structures. March 2022 brought the first Fed rate hike since 2018—a 25 bps increase in mid-month. Indexed volume shows 144 for March compared to 118 in February.    

Priced Commercial Loan Volume by Month 

(Indexed to July 2021 = 100)

SOFR and Swap Volume Continue to Advance 

The indexed mix measurements show that all rate structures increased in March, and SOFR and Swaps show larger increases than the overall average. Notice the “Other Floating” rate category in the chart below. This comparatively small segment of floating rate loans (5% of overall volume) shows an uptick. While the volume is too small to report in detail, the segment includes several custom BSBY rates and Ameribor rates, along with structures tied to Treasury indices. Meanwhile, the overall mix is virtually unchanged month over month—down 2% in SOFR to 26%, up 2% in “Other Floating” to 5%, and all others unchanged. Fixed-rate loan pricing remains at 37% of total, which is tied for the lowest reading in 15 months.  

Balance Mix by Rate Type  

(Indexed to October 2021 = 100)

Overall Balance Mix by Rate Type, February 2022

Spreads on SOFR and Prime Move in Opposite Directions 

Overall, spread to SOFR moved down 7 bps to 2.44% and gave back the 7 bps February uptick. Prime-based structures moved higher by 5 bps to 0.33% in March. As a result of the 25 bps increase in the SOFR rate during March to about 28 bps, SOFR coupon rates increased despite the spread contraction.  

Meanwhile, spreads to SOFR on Swaps had an average spread of just 1.85% in March—something we’ll continue to monitor. Because of the 25 bps increase in the Prime rate during March to 3.50% and increased spread to index, the overall performance of Prime coupons increased during March to 3.71%, up 19 bps from February.

Weighted Average Spread to SOFR

Weighted Average Spread to Prime

Baseline Liquidity Premiums Remain Mostly Unchanged in 2022 

We have had several questions about movement in liquidity premiums during this time of rapidly moving interest rates. The information for 2022 indicates there has been little change in liquidity premiums for maturities less than 10 years. From PrecisionLender’s measure of liquidity, 10-year liquidity premium has increased 15 bps YTD to 45 bps. However, shorter maturities are generally flat for the year.  

The spike in early March, which has since flattened, was caused by relative differences in the brokered CD rates compared to SOFR Swap rates. 

On a separate note: Liquidity cost is a component of the cost of funds within the PrecisionLender profitability calculation. Also, some clients develop and maintain institution-specific liquidity premium term structures that may apply as an extra funding cost, while some clients employ the PrecisionLender standard liquidity curve, and others do not include a liquidity measure. As a result, liquidity premiums are not universally employed as a cost of funds measure across the PrecisionLender platform.    

PrecisionLender Liquidity Curve, Selected Dates, Selected Terms

Baseline Spreads on SOFR Loans Across Maturity Structures 

We dug into the maturity segments for SOFR-based floating-rate loans to examine shifts in spreads to SOFR. For the tranche of 13-36 months, which represents about 43% of SOFR loans, we noticed an increase in the spread to the index in March compared to decreases in spreads for the others. We will continue to check in on spreads by maturity for these floating rate loans. 

In addition, SOFR loans are at 46-month overall maturity. By comparison, Prime-based loans are 27 months in maturity. 

Spread to Index, SOFR Loans Priced by Maturity Tranche

Funding Cost Curves Increase in March 

As a proxy for both floating rate pricing index and short-term funding costs, we share the SOFR curve over the past 60 days. All points moved upward in March; the 12-month rate increased 63 bps to 1.71%.   

On a separate note: Fixed-rate funding costs as measured by the FHLB composite curve continue to climb. The 60-month term posts 2.12% on March 1 and adds 73 bps to finish the month at 2.87%, up from 1.95% the prior month.   

Term SOFR Curve

*Term SOFR curve December 2021–February 2022. Four maturity points: one-month, three-month, six-month, 12-month. We will extend the maturity points over time as that information becomes available. 

Fixed-Rate Activity Details 

We continued to monitor key fixed-rate performance metrics in March while market interest rates moved upward. The lack of a coupon difference between five- and 10-year structures is curious. In recent months, bankers reported that the expected life of the two structures may be similar because of prepayment or refinancing activity and may contribute to the coupon indifference between them. When measuring the coupon spread over the cost of funds, the five-year structure outperforms the 10-year structure by about 25 bps. The expectation of refinance activity may change and may drive coupon differentiation in the coming months. We'll continue to report.  

We looked back to the beginning of the pandemic and found 4% coupon and 2% coupon spread. Fast forward to March 2022, and we see the return of the 4% coupon but new low points in coupon spreads below 2% YTD 2022. March 2022 posts 1.65% overall.  

WAC Coupon

Coupon Spread, WAC - Cost of Funds

Overall Fixed-Rate Coupon Trends, January 2020 - March 2022

Coupon Minus Cost of Funds

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

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