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Article: Instead of Cutting to the Bone, Consider Creative Building.(community banks, falling margins )
- Article from:
- American Banker
- Article date:
- August 19, 2003
- Author:
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Community banks have been hit hard by margin compression in the past 18 months.
Many true commercial lenders have mostly variable loans that reprice downward each time the Fed lowers rate. Deposit rates, by contrast, can go only so low; the market won't accept 0%. The result: shrinking margins.
This is a particularly acute problem for community banks for several reasons:
- They typically depend more on margins, because their fee-income sources are more limited than those of larger banks. Community banks lack the scale for meaningful investment income, and they lag on many other fee-income products because of scale issues or lack of market demand.
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