Tag

Grid-based pricing is typically used to set the applicable margin of a loan based on performance measures such as credit rating or cash flow coverage.  But the same concept can be pointed at a different target: deposit balances.  The average commercial borrower focuses more on their cost of borrowing and less on return on deposits…

Across second-quarter 2026 earnings calls, one theme stood out: banks are originating loans at a healthy clip, yet balance sheets are barely growing because loan payoffs are running just as fast. S&P Global Market Intelligence reported that banks attributed the elevated payoffs to refinancing, asset and collateral sales driven by borrower liquidity events, normal project…

If you are a commercial lender at a community or regional bank, the prepayment provision on your fixed-rate loans is probably the least-discussed and most valuable term in your credit agreement. Most banks either negotiate away prepayment protection entirely or rely on a step-down penalty that borrowers routinely force banks to waive at payoff. A…

Every commercial lender knows the feeling.  The bank took the hardest risk on a project – the construction phase. The bank managed the draws, monitored the budget, inspected the site, and shepherded the borrower through permitting delays and cost overruns.  Then, just as the project stabilizes and the loan finally becomes easy to hold, the…

We were recently collaborating with a community banker who was trying to win a relationship client from a regional bank. The issue was that the incumbent bank was pricing this client at a credit spread of 1.25% over SOFR and our client banker was told that his bank would not accept less than 2.40% credit…

We are often asked by lenders about pricing differentials for fixed-rate commercial loans with and without prepayment provisions.  For example, if a bank were to price a loan with a yield maintenance provision the loan would have a much longer expected life, and under most circumstances the bank would not have negative impact if rates…

We are often asked by lenders about pricing differentials for fixed-rate commercial loans with and without prepayment provisions.  For example, if a bank were to price a loan with a yield maintenance provision the loan would have a much longer expected life, and under most circumstances the bank would not have negative impact if rates…

In our previous article (HERE) we discussed differences between how various banks price commercial loans.  When it comes to setting commercial loan rates, we contrasted “ideal” and real-world pricing strategies employed by banks. We highlighted the objectives of loan pricing and summarized seven tools that community banks can use to price commercial loan relationships. In…

In recent articles (last one HERE) we discussed the importance of commercial loan prepayment speeds.  We explained the importance of keeping loans vs. making loans in driving bank profitability.  The key factor affecting a loan’s expected life, after contractual term of the loan, is the specific loan prepayment provision.  The most acceptable, marketable, and enforceable…

In recent articles (HERE) we discussed the importance of commercial loan prepayment speeds.  We explained why loan prepayment speed is a major factor influencing a bank’s profitability, and how national banks use historical analysis, quantitative modeling, and predictive analytics to structure loans to increase loan retention (decrease loan prepayments). We also outlined how various input…

In a recent article (HERE) we discussed the importance of loan prepay speeds.  We explained why loan prepayment speed is a major factor influencing a bank’s profitability, how national banks use historical analysis, quantitative modeling, and predictive analytics to structure loans to increase loan retention (decrease loan prepayments).  We introduced the crucial factors influencing commercial…

With regard to commercial real estate, an assumable commercial loan allows a buyer of the property to take over the seller’s existing mortgage, keeping the basic economics of the loan in place. The basic economics of the loan include rate, term, prepayment provisions, and other key features. However, the basic economics may be adjusted to…