Trends in community banks' net interest margins

Net interest margins are clearly under pressure at community banks, but this trend is not new. It is a product of a highly competitive banking industry and a direct result of today?s lower lending levels and abundant balance sheet liquidity. The net interest margin is the difference between interest income and interest expense. Interest income and interest expense fluctuated considerably through the business cycle, but the long-term trend indicates that asset yields are falling faster than deposit and other funding costs.