Banking Conditions Survey

Special Questions

June 2023

For this survey, respondents were asked supplemental questions about their outlook, deposits, and lending. Data were collected June 13-21, and 62 bankers responded to the survey.

1. What are the top three concerns around your institution’s outlook over the next six months, if any? Please rank in order of importance.

	May '23	Jun. '23
	Total (percent)	Total (percent)	Rank 1 (percent)	Rank 2 (percent)	Rank 3 (percent)
Liquidity/deposit volume	61.3	54.8	33.9	18.3	3.4
Net interest margin	46.8	54.8	19.4	21.7	15.3
Financial/economic uncertainty	46.8	43.5	9.7	18.3	16.9
Regulatory burden	35.5	29.0	11.3	11.7	6.8
Cybersecurity	22.6	19.4	9.7	5.0	5.1
Overall profitability	17.7	16.1	1.6	6.7	8.5
Unrealized losses on securities portfolio	14.5	16.1	3.2	1.7	11.9
Difficulty hiring and/or retaining employees	11.3	14.5	1.6	3.3	10.2
Loan demand	19.4	12.9	3.2	5.0	5.1
Commercial real estate risks	6.5	12.9	3.2	5.0	5.1
Noncurrent loans	4.8	11.3	3.2	1.7	6.8
Competition for loans	8.1	3.2	0.0	1.7	1.7
Other	1.6	3.2	0.0	0.0	3.4

NOTE: 62 responses.

1a. What is your main concern regarding liquidity/deposit volume?

	Jun. '23 (percent)
Paying a higher interest rate to retain core deposits	73.5
Declining deposit volume	23.5
Increased cost of noncore funding	2.9
Difficulty accessing liquidity	0.0
Other	0.0

NOTES: 34 responses. This question only posed to those who selected "Liquidity/deposit volume" on question 1.

2. Over the past six weeks, how has your volume of core deposits changed?

	Jun. '23 (percent)
Increased slightly	26.2
Increased significantly	0.0
No change	23.0
Decreased slightly	45.9
Decreased significantly	4.9

NOTE: 61 responses.

3. Over the next six weeks, how do you expect your volume of core deposits to change?

	Jun. '23 (percent)
Increase slightly	30.6
Increase significantly	1.6
No change	33.9
Decrease slightly	33.9
Decrease significantly	0.0

NOTE: 62 responses.

4. What are you doing with the majority of your excess deposits?

	Jun. '23 (percent)
Keeping them at the Fed	47.5
Lending them to customers	29.5
Lending them to other banks or third parties	11.5
Paying down Federal Home Loan Bank borrowings	3.3
Investing them in short-term securities	3.3
Investing them in long-term securities	0.0
Other	4.9

NOTES: 61 responses.

5. Over the past six weeks, which category of lending experienced the largest increase in loan pricing, if any?

	Jun. '23 (percent)
Commercial real estate loans	52.8
Commercial & industrial loans	26.4
Consumer loans	11.3
Residential real estate loans	9.4

NOTES: 62 responses. The results exclude the 14.5 percent of respondents that answered, "Not applicable; we did not increase loan pricing."

6. Over the past six weeks, which category of lending experienced the most significant tightening of credit standards and terms, if any?

	Jun. '23 (percent)
Commercial real estate loans	72.5
Consumer loans	12.5
Commercial & industrial loans	7.5
Residential real estate loans	7.5

NOTES: 62 responses. The results exclude the 35.5 percent of respondents that answered, "Not applicable; we did not tighten credit standards and terms."

7. Over the past six weeks, did you tighten credit standards and terms for any of the following categories of commercial real estate lending?

	No	Yes, some tightening	Yes, significant tightening
Construction and land development	27.5	56.9	15.7
Industrial	50.0	48.0	2.0
Retail	37.3	54.9	7.8
Multifamily	35.6	51.1	13.3
Office	34.8	43.5	21.7
Hotels/lodging	33.3	41.0	25.6
Other	56.0	40.0	4.0

NOTE: 52 responses.

Special Questions Comments

These comments have been edited for publication.

Our chief deposit concern is that consumer access to treasuries and nonbank alternatives is becoming easier, creating greater pricing parity. The unprecedented pace of Fed funds rate increases has put the industry far behind the curve of the nonbank markets. We believe the industry will come out of this situation with a much tighter deposit cost and margin that will promote consolidation and cheaper digital channels. The tighter margins will force it. Our strategic focus is redesigning our business model to align with that future.

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