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Community Banks Have Maintained Profitability in a High-Interest Rate Environment

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Abstract

Two-thirds of community banks have maintained their profitability—measured by net interest margins—since interest rates began increasing in 2022. More profitable banks have distinguished themselves by generating both higher asset returns and lower funding costs. Community banks with higher asset returns have achieved them primarily by rebalancing their asset holdings, while community banks with lower funding costs have more stable, low-cost deposit bases on average.

Suggested Citation

  • Mariia Dzholos, 2025. "Community Banks Have Maintained Profitability in a High-Interest Rate Environment," Economic Bulletin, Federal Reserve Bank of Kansas City, pages 1-4, April.
    • Handle: RePEc:fip:fedkeb:99900
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    File URL: https://www.kansascityfed.org/documents/10811/EconomicBulletin25Dzholos0416.pdf
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