Since early March, 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.
After posting weekly updates through March and April, we took a step back for a few weeks in May, when ebbing volumes and an industry-wide focus on processing PPP applications made it difficult to separate signal from noise in the data.
Today’s update is through the end of last week – May 29. If you’d like to see our previous weekly pricing market updates, you can find them here.
We track many more metrics each week than are spotlighted in these posts. The ones that didn’t “make the cut,” usually don’t get displayed because there’s either a) nothing much new to say about them, or b) the data is too murky and needs a few more weeks of monitoring before it can be shared.
That said, if you have questions about metrics that have appeared in previous posts, but not this latest one, please reach out us at to firstname.lastname@example.org.
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 Rebounds to Pre-COVID Levels
After spiking upward in March – when interest rates dropped significantly – and then dropping in April – when many PPP deals were processed without being priced in the PrecisionLender platform – volume appears to have normalized in May. The pricing volume numbers now are very similar to pre-COVID levels in January and February.
Average Weekly Priced Commercial Loan Volume
Rate/Spread Changes Reflected in Fixed-Rate/LIBOR Incidence
During the past three weeks, as spreads and rates have shifted, so has the incidence of fixed-rate and 1-month LIBOR-based floating deals. When fixed-rate incidence has increased (as it did the weeks of May 11 and May 25), LIBOR-based incidence has dropped. Conversely, when LIBOR-based deals were more prevalent the week of May 18, fixed-rate deals were not as common.
Mix by Rate Type
LIBOR Spreads up in May
As mentioned above, spreads on LIBOR-based deals shifted quite a bit during the month of May – with a 19 bps variance between its highest and lowest marks – but overall they were well above the YTD levels. The 2.62% average for May was 16 bps higher than the year-to-date average, and 5 bps higher than April.
Average Weekly Spread to 1-Month LIBOR
LIBOR Swap Curve Rises, While FHLB Stays Consistent
We monitor the FHLB composite curve and the 3-Month LIBOR swap curve as proxies for the funding source used by PrecisionLender clients. In the most recent observation, 10 year FHLB rates dropped about 12 bps while 3 month LIBOR swap rate increased 10 bps.
FHLB rates remained largely consistent during May, up until the 5-year mark, where they shifted downward toward the end of the month. Ten-year FHLB rates have dropped about 12 bps since the end of April.
Meanwhile the 3-Month LIBOR Swap Curve remained constant at the 1-month mark after a large drop at the start of May. But, beginning at 12 months, the May 29 curve rose up above May 8 levels. Eventually, around the 120-month mark, the May 29 curve also surpassed April 23 levels.
3-Month LIBOR Swap
Fixed-Rate NIM Consistently Higher in May
Spreads on fixed-rate deals have stayed very consistent since the start of the COVID crisis in March. But funding costs dropped in early May and continued to fall off throughout the month – influenced by funding sources and the use of liquidity premiums. The result was NIM levels for the month that were approximately 30 bps higher than what banks garnered in March and April.
Fixed-Rate NIM Composition
Floating-Rate NIM Rose More Modestly
Funding costs for floating-rate deals dropped significantly at the start of May but then remained very consistent over the following weeks. Yields, though, were much more variable than their fixed-rate counterparts. The result was a NIM that also bounced up and down, but also stayed above March/April averages by approximately 20 bps.
Floating Rate NIM Composition
Median Deal Size in Pre-COVID Range
We have also been monitoring deal sizes to see what – if any – effect the COVID crisis has had on them. After jumping up above $800,000 in March – likely due to dropping rates – the median deal size dropped down to $750,000 for April and May, in the same range as January/February levels.
Median Loan Amount Priced
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 email@example.com.