Commercial Loan Pricing Update (April 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 April 2022, we saw significant upward moves in coupon rates following last month’s 25 bps rate hike, steady pricing activity, more increases in marginal funding costs, and continued lower levels on fixed-rate spreads. In this report, we outline what that means for pricing performance and provide a baseline view of 2022 fee income metrics.   

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 in April Matches March’s High Level  

We previously reported the strong start to 2022, and for April the pace matched March. March 2022 brought the first Fed rate hike since 2018—a 25 bps increase in mid-month. Indexed volume shows 144 for April and March compared to 118 in February.    

Priced Commercial Loan Volume by Month 
(Indexed to July 2021 = 100)

SOFR and Swap Activity Continue to Grow Faster Than Other Rate Types 

SOFR and Swap rate structures increased again in April, while fixed and Prime structures contracted in comparative volume month over month. Our observations on rate type mix continue to be consistent with prior reports: Swap activity and SOFR activity are growing at a faster pace than other rate types. In April, fixed-rate loans dropped to 35% of the total activity, down from a run rate of about 40% since we began tracking this measure in March 2020. In addition, SOFR activity bumped up to 30% of the total activity—its highest mark since inception. Bankers appear to show nimble reaction to the Fed’s rate hike in March, turning away from incremental interest rate risk of fixed-rate loans.  ​  

Balance Mix by Rate Type 
(Indexed to October 2021 = 100)

Overall Balance Mix by Rate Type, April 2022 

Spreads on Floating Rate Structures Increase; Fixed-Rate Structures Contract Further 

Overall, spread to SOFR moved up 2 bps to 2.46%. Prime-based structures moved up 6 bps to 37 bps. Fixed-rate structures dropped 18 bps to 1.47% measured by coupon spread (4.50% coupon minus 3.03% cost of funds).

Weighted Average Spread to SOFR

Weighted Average Spread to Prime

Coupon Rate by Month, Rolling Trend

Net Interest Margin by Month, Rolling Trend

For SOFR loans, coupon rate increased 30 bps month over month and generated an additional 10 bps in net interest margin to 2.39%. Cost of funds increased 17 bps month over month and offset some of the improvement in coupon. Bankers showed strength in maintaining spread to index in the face of a rate hike and pushing incremental origination fee income into pricing conversations.       

Prime results show a timing difference in April over March because of the March mid-month step up of the prime rate. Therefore, the results are mixed (last half of March generates coupons equivalent to April). With that said, Prime-based loans post a net interest margin of 3.43% based on 3.87% coupon and 0.76% funding cost. When considering April over February, coupons show the full 25 bps increase and a 9 bps increase in spread to Prime. 

Turning to fixed-rate activity, bankers moved coupons upward in April over March by 41 bps to 4.50% (well above the January 2020 reading of 4.06%). However, funding costs moved even more: up 48 bps on 84-month Treasury as a proxy. The overall result for fixed-rate loans shows the net interest margin contracted to 1.65%, down 12 bps. The performance gap, measured by net interest margin, to SOFR loans is now 74 bps versus 44 bps in October.     

Funding Curves Continue Upward 

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 April; the one-month rate increased 46 bps to 0.77% and the 12-month rate increased 47 bps to 2.18%.   

The Treasury curve serves as a proxy for the change in fixed-rate funding costs: 60-month rates increased 150 bps in the past 90 days. In addition, the curve is flat between 60 and 240 months, the area that covers most fixed-rate loan maturity structures.     

Term SOFR Curve, March 1—April 30, 2022

*Term SOFR curve March 2022—April 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.  

Treasury Curve, Selected Dates

*The carry between the 60- and 240-month points on the curve show 2 bps as of April 30, 2022, compared to 40 bps as of January 29, 2022. 

Baseline 2022 Origination Fee Income Measures  

Within pricing activity, we track the incidence of origination fee income and its amount. We’re checking in now as a baseline for SOFR structures with seven months of activity to review. Across the three main rate structures, fee income is present between 75% and 78% of opportunities and is nearly identical across rate types. However, when present, the amount of fee income as a percentage of loan amount varies. SOFR to date has been at the 55 bps level but increased to 61 bps in April. Prime-based loans contracted marginally to 63 bps. Fixed-rate structures post 47 bps. 

Fee Income as Percentage of Amount, by Rate Type

Finally, we showcase the composition of the net interest margin as a percentage of average balance for the SOFR loans year to date. Spreads have been consistent at about 250 bps, and net fee income (fees net of origination costs, amortized over the life of the loan) adds about 20 bps. These two elements drive banker/borrower conversations.  

SOFR Loans, Net Interest Rate Margin Composition

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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