Commercial Loan Pricing Update (March 2023)

Looking at the March data in Q2 PrecisionLender, we continued to monitor the key metrics that help us tell the story of how the market is faring in this high-rate environment. Key takeaways include: ​​ 

  • Banking sector uncertainty entered in early March with SVB's failure and was followed by a 25 bps Fed rate hike. Banks and bankers working with PrecisionLender experienced a widespread and sharp increase in pricing activity potentially fueled by that uncertainty.   
  • The sharp increase in March pricing activity outpaces the most recent high-water mark and is 42% higher than mid-year last year.  
  • Bankers passed on higher borrowing costs across the loan structure set.     
  • The 25 bps Fed rate hike contributed to spreads contracting about 6 bps for both SOFR and Prime structures.     
  • Deposit costs continued their upward journey, adding 10 bps month over month for 98 bps overall.

Pricing Volume Jumps 

Banker pricing activity increased sharply in March over February and outpaced both October 2022 and January 2023, the most recent high-activity marks. Volume was 42% higher than July 2022. This heightened activity and the sector uncertainty reminded us of the early pandemic activity, which we’ve brought back as a reference. March 2020 uncertainty drove a similar spike in activity.   

We examined the distribution of March 2023 activity across banking segments and found 50% of institutions within the Community Banking segment of less than $1 billion in assets experienced a month-over-month increase in pricing activity volume compared to the 88% of institutions in the Regional+ segment ($10 billion or more in assets). This separation may reflect some of the uncertainty across the banking sector in March.  ​ 

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

Review of Early 2020 Pricing Activity, Indexed to January 2020 = 100

SOFR Spreads Contract Modestly While Prime Spreads Continue to Erode 

SOFR moves within this 10 bps or so range of 2.45% to 2.55%, posting 2.48% in March, down 6 bps month over month. Within banking segments, the Community space holds 285 bps spread to SOFR on very low comparative volume versus the Regional+ at 246 bps.  ​ 

Weighted Average Spread to SOFR​ 

Prime spread decreased again, giving up 5 bps from 13 to 8. Again this month, we observe that the relative high coupon rate on Prime-based structures provides headwinds for bankers' ability to maintain or expand spreads on this index.

Weighted Average Spread to Prime


Separation in Coupon Ranges Continues

The separation in coupon ranges continues the January and February pattern for March's activity. Bankers pass higher coupon rates onto the borrower. Where possible, borrower awareness of these structure options can help bankers focus on better fits among alternatives.   

In addition, Swap structures offer an indicative fixed rate of 5.71% in March and continue as the low-cost borrower alternative. Prime structures drift toward 8% coupon, representing the highest nominal borrowing costs.

Coupon Rate by Month, Rolling Trend


Fed Hike Results in COF Increase 

In March, the 25 bps Fed rate hike came through as a 24 bps increase in cost of funds for SOFR structures. The implication here is that liquidity costs as a component of COF were little changed month over month. The change in COF can be attributed to the change in the index value. Meanwhile, fixed-rate structures saw a 5 bps increase in funding costs to 4.46%.

Cost of Funds by Month, Rolling Trend 

Adjustable Structures Continue to Provide Better NIM 

Adjustable structures continue to show better relative performance from the bank's perspective than either SOFR or fixed. SOFR NIM dropped 12 bps to 2.25% while fixed NIM picked up 13 bps to 2.16%. This is the highest mark over the past nine months.

Net Interest Margin by Month, Rolling Trend 

Check-In With Fixed-Rate Structure Details​ 

We have tracked overall maturity on fixed-rate structures since we began reporting in January 2020, and the concentration around the 60-month point remains intact. During recent months with the inverted curve, we have not observed a material shift away from this anchor point. The tight maturity range has been 69 to 78 months. We have seen a shortening of amortization terms. March 2023 measures for both were worth sharing as duration risk has been in recent conversations. The March read at 78 months is at the high end of the range.  

While fixed-rate loans beyond 60 months represent about 20% of fixed volume, the performance measured by NIM is a sharp discount to other maturity tranches. It seems clear that bankers have less ability to pass on higher coupon rates to cover the funding costs in the 61- to 120-month tranche compared to shorter maturities. We know from conversations with banks and bankers there may be 60-month policy limits in play.  For those extending past 60 months, we note that the March NIM performance for the 61- to 120-month structure lags the 60-month structure by about 36 bps.

NIM Fixed-Rate Structures, Selected Maturities


Deposit Costs Trend Upward 

Overall rate paid includes all aspects of the mix—non-interest-bearing, money market deposits, savings, and time deposits. For March, time deposits jumped 27 bps, interest-bearing non-time moved 12 bps for 10 bps move overall.

Deposit Rate Paid Trend 

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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  

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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