Our November analysis of the Q2 PrecisionLender commercial loan and deposit pricing database looks at how the market "digested" the September 2025 Fed rate cut, during a period of increased pricing activity before an additional rate cut at the end of October.
Bankers held their ground for both fixed and floating-rate loans. We have those details, as well as updates on shifts in the funding curve and deposit pricing metrics.
Read on for more details.
Data Notes:
Regional+ institutions drove increase in October pricing activity, as volume in this segment rose 15%, compared to a 5% uptick in pricing volume among Community institutions month over month.
As noted in the headline, this was the most active pricing month in 2025, 36% higher than the January benchmark (100) and well above the year-to-date average (112).
This sort of increase naturally led us to wonder whether bankers could hold on to revenue and profitability in this context. More on that below.
Commercial Loan Pricing Volume
Indexed to January 2025 = 100
In light of the aforementioned increased volume in October, we found mixed results on the key revenue indicator, spreads. While bankers yielded three basis points (bps) on spreads to SOFR (down from 2.23% in September to 2.20% in October), Prime spreads were down just one basis point month-over-month (0.16% to 0.15%) and fixed-rate coupon over cost-of-funds rose by 3 bps.
Weighted Average Spread to SOFR
This is the third straight month in which bankers have been able to make marginal gains on the fixed-rate coupon over COF.
Fixed Rate Coupon Over COF
Turning to funding costs, we observed another interesting shift in the FHLB curve in October. Short- and long-term rates both fell ~10-15 bps month-over-month. Meanwhile though, the midsection of the curve (from about 24-84 months) showed minimal change.
FHLB Curve
Selected Dates
These contrasting shifts reduced the inversion from the short end of the curve to the middle (1-60 months) by 13 bps, down to -24 bps for the Oct. 31 snapshot. That’s the lowest level of inversion for this section of the curve since the Jan. 31 snapshot.
FHLB Curve Carry
Between Common Tenors
The FHLB 60-month rate, which typically serves an indicator of fixed-rate loan pricing, had moved in lockstep with the fixed-rate coupon until this month, when the rate fell 2 bps between end of September and end of October (3.91% to 3.89%), while the fixed-rate coupon rose 10 bps during October. More on coupon rates below.
FHLB 60-month Rate vs. Fixed Coupon
2025 Trend
That variance between the FHLB 60-month rate and the fixed-rate coupon shows up in all-in COF for fixed-rate loans, which rose by 7 bps in October. In looking for an explanation, we noted that, while fixed liquidity premiums rose slightly in October (+2 bps to 33 bps) that the average maturity on fixed-rate loans rose from 65 to 70 months in October. That shift to the right on the curve came at the point where it began to climb from its mid-range trough.
All in COF by Month
Rolling Trend
That 7-bps increase in fixed-rate funding combined with the 3-bps increase in spread over COF, resulted in a 10-bps increase in the fixed-rate coupon in October (from 5.75% to 5.85%).
Meanwhile, both SOFR and Prime coupons continued their fall after the mid-September rate cut. The SOFR coupon was down 16 more bps in October, to 6.24%, after falling 16 bps in September as well. After holding steady in September, the Prime coupon fell 14 bps in October, to 7.37%.
Coupon Rate by Month
Rolling Trend
In the final analysis, bankers held their ground on NIM for both fixed- and floating-rate loans, despite the significant increase in pricing activity in October.
That said, it should still be noted that NIM levels remain below their Q1 2025 marks.
NIM by Month
Rolling Trend
Finally, we checked in again on deposits. We wanted to see whether the rates here would continue to drop in the wake of the Fed rate cut, or whether the increased pricing activity might temper things.
The overall deposit rate fell again and is now down 8 bps since August at Regional+ institutions and 7 bps for the Community segment.
Overall Deposit Rate Paid
Includes NIB Base
The drop was even more significant when looking at interesting-bearing non-time rates. Those are now down 24 bps since August for Regional+ institutions and 12 bps in the Community segment.
It will be interesting to see whether the deposit rate activity is unimpacted by the volume increase, or whether there is a slight lag in pricing here. We’ll continue to monitor it closely.
Interest-Bearing Non-Time (MMDA, CWI, Savings) Rate Paid
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.