Commercial Loan and Deposit Pricing Market Update: April 2025

Anna-Fay Lohn

For our April analysis of the Q2 PrecisionLender commercial loan and deposit pricing database, we looked at underlying changes in the yield curve and their impact on fixed-rate deals. We also continued to compare fixed-rate pricing for new deals vs. those rolling-off in 2025, and to monitor deposit pricing, which has been largely unchanged in recent months

Read on to get more details.

Data Notes:

When we discuss the cost of funds (COF) on loan pricing activity, we refer to the marginal duration matched funding cost employed in pricing, not the bank’s actual average cost of funds.
We define Regional+ as institutions with $8B+ in assets, while Community are <$8B.

Fixed-rate portfolio: new/renewed vs. roll-off

We started this month's update by continuing our our examination of how fixed-rate pricing on new deals in 2025 are measuring up to the pandemic era loans that rolling off the books this year.

For those who missed the comparisons in the February and March market updates, here are the parameters of our analysis:

The KPI is the degree (+/-) to which original NIM compares with NIM for new and renewed loans. It is not a record-for-record match of matured loans and their replacement attributes.
Using the December 2024 portfolio snapshot as the basis, we’ve aggregated 2025 roll off activity by quarter and presented static coupon measures associated with each quarter. These values may change as 2025 progresses due to early payoffs, curtailments, or other activity.
We also used the December 2024 snapshot to capture the expected /implied interest rate shock for each quarter in 2025. This estimate may change as 2025 progresses: the expected rate shock now for 4Q25 will likely not be same then as it is today. Rate shock is an estimation of how much additional interest expense borrowers could face if they refinance their loans rolling off in 2025 at current market rates.

Bankers continued to pass on the rate increases to the borrower, as the coupon rate (6.30%) remained 120 bps higher than the rate on the pandemic era loans.

But the gap between new NIM and roll-off NIM in the first quarter widened from 38 bps at the end of February to 45 basis points through March. This was driven by a lower coupon on newly boarded loans in March, compared to February.

NIM and Rates: Roll-Off vs. New

Volume edges upward

Returning to our examination of current pricing activity, volume continued its upward trend in 2025, with March levels the highest so far this year, as well as the highest mark since October 2024.

Priced Commercial Loan Volume in $
Indexed to January 2024 = 100

Yield curve steepens as trough shifts headline

The trough on the FHLB curve, our proxy for the market yield curve, has undergone a shift in recent months. Where once the bottom could clearly be found at the 60-month mark, it has now moved left, toward the 24-month point. This shift may reveal borrower pricing preference toward shorter maturity fixed-rate loans. So far, we have not seen a material shift in fixed rate loan maturities: They averaged 72 months in 1Q25 compared to 71 months in 4Q24. We will continue to monitor this data point for shifts.

In conjunction with that shift, the curve has steepened upward from that low point to the far end of the curve.

FHLB Curve
Selected Dates

As a result of the trough shift, we looked at the usual 1- to 60-month carry and compared it to the carry from 24 to 120 months. The 1 to 60-month metric (the green line in the chart below) continues to show inversion (-0.36%) which has actually increased in 2025, going from +0.02% at the Dec. 31, 2024 snapshot and inverting each month down to its current point. But the positive carry from 24 to 120 months paints the portrait of a traditional yield curve at 0.73% (the blue line in the chart below) and has steeped by ~24 bps since year end 2024.

FHLB Carry
1 to 60 Months (Green) vs. 24 to 120 Months (Blue)

Fixed COF continue to drop

In sync with the latest FHLB Curve snapshot, the all-in COF metric pulled from the PrecisionLender database continued to drop, down 15 bps month over month and 28 basis points in the past two months. Meanwhile, SOFR funding costs remained stable.

All-in COF by Month
Rolling Trend

Fixed-rate coupons drop

The fixed-rate coupon fell 17 bps from February to March. This was a combination of the aforementioned drop in funding costs (14 bps) as well as a 3 bps drop in the the spread bankers were adding on top of those funding costs.

Meanwhile, the SOFR (+2 bps) and Prime (+6 bps) coupons both ticked up slightly, to 6.54% for SOFR and 7.64% for Prime.

Coupon Rates by Month
Rolling Trend

Fixed and floating spreads were largely unchanged

The 3 bps drop in the spread between the fixed-rate coupon and COF was actually the largest shift in the category. Both Prime and SOFR spreads increased by 1 bps in March.

Weighted Average Spread to SOFR

Fixed-Rate Coupon Over COF

Deposit rates are static so far in 2025

Finally, we checked again on deposit pricing. Rates paid have largely been static in Q1 2025. That’s of particular interest because many institutions had expected to achieve the full Fed funds rate cut – 100 bps – in their rates paid.

But since those cuts in September 2025, interest-bearing non-time rates have fallen 47 bps at regional+ insitutions, and just 12 bps at their community counterparts.

In Q1, deposit rates have dropped 5 bps at regional+ instituions while increasing by 7 bps in the community segment.

Interest Bearing Non Time (MMDA, CWI, Savings) Rate Paid

Additional context: Since December, deposit balances in both segments are virtually unchanged.

The deposit rate paid remains a significant discount to wholesale funding sources, which would appear to support the current rates paid. And the fact that deposit balances aren’t growing appears to indicate that the deposits added at the current rates are the funding vehicle for net new lending activity.

Note: Deposit rate paid information is from portfolio snapshots sent from institutions throughout the month and is not a single month-end view.

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 insights@q2.com.