Commercial Loan and Deposit Pricing Market Update: July 2025
Our July analysis of the Q2 PrecisionLender commercial loan and deposit pricing database took a look at the continued struggle to improve revenue generation in 2025, despite the lower rate environment from 2024. But when we looked at the data at the segment level - community vs. regional+ banks - the story began to shift.
Read on for 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 (historical) cost of funds.
• We define Regional+ as institutions with $8B+ in assets, while Community are <$8B.
Volume rebounds in June
After dipping a bit in May, June pricing volume returned to April levels. Overall the volume for the second quarter was the highest of the past four quarters. As noted previously, repricing plays a role here - as Q2 2025 was anticipated to see a good deal of this activity.
Priced Commercial Loan Volume in $
Indexed to January 2024 = 100
Yield curve reflecting shifting rate cut expectations
The June 27 snapshot of the FHLB Curve showed a deepening of the trough in the 12-36 month range, dropping ~20 bps below the May 30 snapshot.
FHLB Curve
Selected Dates
While the carry from 1-60 months reflected that 20 bps drop (-0.31 down to -0.51%), the carry from 24-120 months actually steepened a bit, by 4 bps, from .70 to .74%. As we've noted before, this behavior suggests that bankers may be expecting a rate cut in the near term, but not enough to move long-term rates downward.
FHLB Curve Carry
Between Common Tenors
Caution shown with liquidity costs
Looking back over the past year of liquidity cost data, we were struck by how they have remained either essentially level—in the case of floating-rate premiums— or have had a drop that is still only a fraction of the 100 bps of fed rate cuts during this time period.
From July 2024 to June 2025, floating-rate premiums have risen 4 bps (from 0.61 to 0.65%) while fixed-rate premiums have dropped 18 bps during that same period (0.52 to 0.34%).
Approximate Liquidity Cost
Rolling Trend
Fixed-rate COF drops
While floating-rate funding costs were relatively stable in June (5.04% compared to 5.09% in May), fixed-rate COF all-in dropped 13 bps last month (4.41% to 4.28%).
Often this sort of drop presents an opportunity to improve relative pricing, but as we will show in subsequent charts for coupon and spread, we’re not seeing the overall market make progress to protect these key revenue items.
All in COF by Month
Rolling Trend
Floating rate spreads continue to lag in 2025
Spreads to SOFR remained steady in June, at 2.27%, while spreads to Prime dropped by 4 bps, down to 0.08%. Both are down in 2025, as compared to their Q4 2024 levels.
Weighted Average Spread to SOFR
Weighted Average Spread to Prime
Fixed-rate spreads drop
As noted above, the 14 bps drop in COF in June might have presented a revenue opportunity for fixed-rate pricing. Instead, the fixed-rate coupon over COF dropped 11 bps, from 1.80% to 1.69%.
Fixed-Rate Coupon Over COF
Fixed-rate coupon falls nearly a quarter point
The drops in COF and spread combined to lower fixed-rate coupons by 24 bps in June, from 6.21%. We notice that the coupon rate is its lowest over the past year, and that bankers reduced borrowing costs by the full change in COF plus spread give up.
As for floating-rate coupons, June was a continuation of essentially the same story for much of 2025. Since January, both the Prime and SOFR coupons have remained with a narrow 6 bps band.
Coupon Rate by Month
Rolling Trend
Modest improvements in NIM
Despite the lack of lift from the available revenue generation levers, increases in yield (accruals, fee income, etc.) did improve NIM slightly in June. NIM for SOFR-based loans rose 6 bps (1.80 to 1.86%), while fixed-rate NIM rose 3 bps to creep back over the 2.0% mark (1.99 to 2.02%).
NIM by Month
Rolling Trend
Fixed rate new/renewed vs. roll-off: Second-quarter review
At the end of the second quarter, we checked in again on how fixed-rate pricing on new deals in 2025 is measuring up to the pandemic-era loans that are rolling off the books this year.
For context, we note that the volume of loans rolling off in Q2 was ~25% higher than in Q1. NIM for new deals in Q2 rose to 1.66%, closing the gap to the roll-off NIM for that period (1.80%) down to -14 bps. Recall that the gap in our Q1 comparison was -40 bps (1.66% new vs. 2.06% roll-off). It’s also notable that coupons for new and re-priced fixed-rate loans in Q2 (6.20%) was 135 bps higher than deals rolling off in this period (4.85%). That gap was 121 bps in Q1 (6.31% to 5.10%).
A reminder that Q2 and Q3 2025 have greater expected roll-off amounts than Q1 and Q4.
NIM and Rates, Roll-Off vs. New
2Q 2025
A segmented view: Balance in Community, SOFR dominance in Regional+
Periodically we go a level deeper in our analysis of the commercial pricing market, to see how things are unfolding in the community bank segment (<$8B in assets) vs. the regional+ segment (>$8B in assets).In this update we looked at several key comparison points.
First, we wanted to get a sense of loan mix and participation. We found that the mix of rate types by loan balances priced was much more balanced in the community segment, where fixed-rate loans make up 35% of the mix, vs. 25% for SOFR-based floating-rate loans, 14% for primed-based floaters, and 26% for all other types (adjustable, swap, etc.). Compare that to the Regional+ segment, where SOFR-based floaters make up 70% of the mix, with 16% for fixed-rate loans, 8% for prime-based floaters, and 6% for other types.
Community Mix on Loan Balances Priced
Regional+ Mix on Loan Balances Priced
We were also struck by the gap between the community and regional+ segments when noting the percentage of institutions that participate in SOFR-based floating-rate loans. Just 33% of community institutions do so, vs. 93% of the regional+ segment.
2Q2025 Degree of FI Participation
A segmented view: Stronger spreads for Community
Finally, we looked at spread performance by segment. We noted that the pricing story seems considerably more positive here from the community perspective. These institutions outperformed the overall market in spread for all three major rate types, from fixed (2.27% to 1.80%) to SOFR (2.63% to 2.27%) and Prime (0.20% to 0.10%)
Spreads: Community vs. Overall
2Q 2025
Looking specifically at fixed-rate loans, we note also that the community coupon is on average 43 bps higher than the overall market for this metric (6.55% to 6.21%).
Fixed-Rate Coupon 2Q 2025
Community vs. Overall
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.