Commercial Loan Pricing Market Update (May 16-30)

June 2, 2021 Anna-Fay Lohn

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.  

As we covered in our previous update, commercial banks have shifted their focus to growth. In today’s analysis, for the second half of May 2021, we took a deeper look at the impact that focus has had on returns/profitability in different banking segments. Some trends we discovered were expected, but others raised some eyebrows. 

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 Remains High 

While May’s pricing volume dropped a bit from March and April, it still posted the third-highest total since we started tracking this metric in July 2020. As the chart below shows, the past three months have been at a different level from the previous eight, when volume was in a relatively narrow track.   

Reminder: We are using the time period since July 2020 because this is when we saw the commercial market start to “settle” after the rate drops of March and then the PPP and Main Street activity in the following months. 

Priced Loan Volume, by Month 
(Indexed to July 2020 = 100) 

What’s Driving the Volume?   

We went a level deeper on the volume numbers, to see if there was a primary driver behind the increase. The credit (no pun intended) appears to lie with larger commercial deals. Loans in the $10-25M and $25M+ segments were up significantly in each of the past three months when compared to February – the last “pre-growth” month on record. 

Note the turquoise line below shows the overall growth (20%) from May vs. February. Both the larger deal-size segments were well above that rate and were for each of the previous two months as well. 

% Priced Loans by Amount 
Month-Over-Month Growth

Loan Size Grows Across Market Segments 

We then divided the data set into two market segments – “Community” (Below $10B in assets) and “Regional+” ($10B and above) - to see what else we could learn about the recent growth. We found that in the past three months the average loan size has increased noticeably in both segments. We also found no evidence that this increase in loan size is bringing increased risk, as LTV measures remained unchanged, at ~ 70%. 

Median Loan Amount 
Indexed to Jan. 2021 = 100 

Fixed-Rate Funding Costs Drop Again 

Using the 3-Month LIBOR Swap Curve as a proxy for interest rates and funding costs, we see that fixed-rate COF dropped in May, the second straight monthly decrease after peaking in March. As with the previous month, the separation (approximately 10 basis points) is most apparent with maturities in the 60–120-month range. Meanwhile, floating rate funding costs – as shown by the 1-Month LIBOR rates – again remained relatively unchanged.  

3-Month LIBOR Swap Curve, Selected Dates 


Floating Rate Spreads Fall 

LIBOR spreads moved to the low end of the post-pandemic range in May, with a weighted average of 2.53%. That’s more than 10 basis points down from late 2020 levels. The 6-point drop in May, along with the aforementioned static funding costs, led directly to a lower coupon rate for LIBOR-based floating rate loans.  

LIBOR Spread to Index, Selected Dates 

Prime spreads also fell in May, dropping 8 basis points to 0.37%. It’s the first time that average has been below 0.40% since March of 2020. As with LIBOR, the Prime spread drop was reflected in the lower Prime coupon rate, which also fell 8 basis points this month.  

Prime Spread to Index Selected Dates 


Meanwhile fixed-rate spreads had little movement in May, with the overall average decreasing 3 basis points, but the weighted average increasing by 4 basis points. It is worth noting that May was the second consecutive month with average spreads below 3.0%. Anecdotally, many bankers we’ve spoken to feel the 300 basis-point barrier won’t be surpassed while there’s still so much liquidity at their institutions. 

Fixed and LIBOR NIMs Converge 

As we noted in the previous update, the gap between fixed-rate and LIBOR NIM that had grown steadily since late 2020 converged significantly in May. Fixed-rate NIM improved by 10 basis points last month, thanks largely decreased funding costs and a steady coupon rate. Meanwhile, LIBOR NIM was impacted both by the spread decrease and lower yields in May. The 33 basis-point gap between the two metrics in April shrank to 10 basis points in May. 

Prime NIM stayed steady in May, as the drop in spreads was largely counterattacked by a decrease in liquidity premiums.  

NIM by Month, Rolling Trend 

Is Growth at the Expense of Profitability? 

Finally, to further test the hypothesis that the recent push for growth has come at the expense of profitability, we dug into the trends on spreads for the three loan types (Fixed, LIBOR, and Prime). We also looked at these trends by market segment, for “Community” (Less than $10B in assets) and “Regional+” ($10B and above in assets).  

The fixed-rate story is a familiar one that we’ve covered extensively in 2021. The median spread over COF has dropped steadily during the past 5 months. Since December 2020, it’s down 48 basis points for Community banks and 39 basis points for Regional+.  

Median Spread Over COF, Fixed-Rate Loans 
37-60 Month Maturities 

The picture begins to shift a bit when we look at spreads for LIBOR loans. There was no real trend found in the Community segment, but there was clear evidence of one in Regional+. Here, the median spread has stayed steady, moving in a narrow range since December 2020. But concessions are clearly occurring on the larger deals, as the weighted average spread for LIBOR loans in the segment has fallen 17 basis points during that same span and is now actually below the median average (at 2.51%).  

Regional + LIBOR Loans, Spread Trends 

Finally, we found an interesting divergence when we looked at spreads to Prime. Regional+ banks have conceded here as well, dropping 19 basis points on the weighted average spread in 2021, from 0.45% down to 0.26%. But Community banks have actually gone the opposite direction. Since posting a weighted average spread of 0.58% in December 2020, Community banks have either improved or held firm on Prime weighted average spreads in every month in 2021.  

Weighted Average Spread to Prime 

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 along your questions to  






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