Banking Conditions Survey

Special Questions

October 2020

For this survey, respondents were asked supplemental questions on the impacts of the coronavirus (COVID-19). Data were collected Sept 22–30, and 74 bankers responded to the survey.

Results Tables

What share of your loan balance is currently on payment deferral or otherwise modified due to the coronavirus (COVID-19)?

	Sept. '20 (percent)
Total loans	5.7
Commercial and industrial loans	1.5
Commercial real estate loans	4.4
Residential real estate loans	1.6
Consumer loans	0.9

NOTES: 65 responses. Shown is the trimmed mean with the lowest and highest five percent of responses omitted.

When Section 4013 of the CARES Act expires on 12/31/2020, what percentage of your modified loan balance do you expect would become past due in the subsequent quarter?

	Sept. '20 (percent)
	4.0

NOTES: 48 responses. This question was only posed to those indicating they have a portion of their loan balance currently on payment deferral or otherwise modified due to COVID-19. Shown is the trimmed mean with the lowest and highest five percent of responses omitted.

How are you preparing for a potential increase in past due loans? Please select all that apply.

	Sept. '20 (percent)
Closer monitoring of loan performance	83.1
Setting aside additional reserves for loan losses	77.5
Discontinuing some loan modifications	16.9
Other	4.2
Not applicable; we are not expecting an increase in past due loans	5.6

NOTE: 71 responses.

Do you expect lower profitability over the next six months?

	Sept. '20 (percent)
Yes	69.0
No	31.0

NOTE: 71 responses.

How are you approaching cost cutting in response to expected lower profits? Please select all that apply.

	Sept. '20 (percent)
Lowering interest rates on deposits	87.8
Reducing wages, bonuses or benefits	24.5
Reducing employment	22.4
Reducing location-based costs (closing branches, reducing office space, etc.)	20.4
Cutting work hours	8.2
Reducing spending on cybersecurity/IT	2.0
Other	26.5
Not applicable; we are not cutting costs	6.1

NOTES: 49 responses. This question was only posed to those indicating they expect lower profitability over the next six months. The most common ‘other’ responses were reducing general discretionary or non-interest expenses, and implementing a hiring freeze.

Which loan type has the greatest downside risk in terms of credit performance over the next six months?

	Sept. '20 (percent)
Commercial and industrial loans	31.4
Commercial real estate loans	48.6
Residential real estate loans	1.4
Consumer loans	18.6

NOTE: 70 responses.

Special Questions Comments

These comments have been edited for publication.

Our outlook continues to be highly dependent on whether additional fiscal stimulus is provided over the next six months, as well as the trajectory of COVID-19.
We are not expecting a significant increase in past-due loans, but out of an abundance of caution, we will continue to add to our reserves and monitor our loans closely.

Questions regarding the Banking Conditions Survey can be addressed to Emily Kerr at emily.kerr@dal.frb.org.