As you may be aware, the long-standing index reference rate known as the London Interbank Offer Rate (LIBOR) is retiring. Following are several key dates and activities that will impact LIBOR-based loans with us in the future. 

  • December 31, 2021: Nevada State Bank will no longer offer any term of LIBOR for new loan originations or renewals 
  • January 1, 2022: 1-week and 2-month LIBOR will no longer be published or available for use 
  • No later than June 30, 2023: All remaining LIBOR terms will be retired 

How we are preparing for the end of LIBOR

While many terms of LIBOR are expected to be published until June 30, 2023, several situations could accelerate that date and lead to LIBOR being unusable sooner than scheduled. Until such a situation occurs, but no later than June 30, 2023, loans already using LIBOR as a reference rate can continue to do so for the purposes of periodic rate resets. Loans that are maturing and subsequently renewing between now and June 30, 2023 will be moved to an alternative reference rate to be negotiated between the borrower and their banker. 

Once LIBOR officially expires no later than June 30, 2023, all remaining loans using LIBOR as a reference rate will be migrated to a replacement rate in accordance with the terms and conditions of your existing promissory note or corresponding loan agreement. Nevada State Bank will select a replacement index rate that historically behaves similarly to the current index rate on your loan. 

Our intention is to select a replacement rate that preserves the loan economics for both parties. Since there is not a direct comparative replacement for LIBOR, there will be a need in some situations to adjust the margin charged to your loan so that the replacement rate is as similar as possible to what was experienced with LIBOR. This adjustment could result in either an increase or decrease to the margin. Again, our goal will be to preserve the economics for both parties, and we will make every reasonable effort to achieve that goal.  

What clients can do to prepare for the LIBOR cessation

Customers with loans tied to LIBOR will be offered an opportunity to modify the loan to a replacement index prior to final LIBOR cessation. This modification will be at no charge and will be available between January 1, 2022 and October 31, 2022. For the purposes of this modification, we will only be able to modify the replacement index and the margin, if applicable. Other changes in terms will need to be negotiated separately and may result in additional costs. If you would like to take advantage of this opportunity, please reach out to your banker for details.   

All loans that have not requested a modification by October 31, 2022, and closed by December 31, 2022, will be modified in accordance with the existing terms and conditions of the loan documents as detailed in this letter. 

How do I find out more about my specific LIBOR loan?

We want to make this transition from LIBOR as transparent and as seamless as possible for all parties and encourage you to reach out to your banker with questions.