- The percent of loans and securities with a maturity or repricing date of less than three years has been steadily increasing across community banking organizations_ (CBOs) in recent years and now represents approximately half of all earning assets. Conversely, the share of longer-term earning assets has decreased from historic highs seen in late 2021.
- A previous Community Banking Bulletin article_ reviewed the significant growth in securities in 2020 and 2021 that resulted from the pandemic-induced influx of deposits, with the substantial growth in securities seen exclusively in those with a maturity or repricing date over three years.
- Since then, CBOs have reduced the duration of their loan and security portfolios. At the same time, market rates increased at a record pace as the Federal Open Market Committee (FOMC) raised the federal funds target rate throughout 2022 and 2023. Generally, shorter-term earning assets benefit net interest income in a rising rate environment, as they will reprice sooner.
- In September 2024, the FOMC reduced the federal funds target rate, resulting in a decrease in broader market rates. Typically, in a declining rate environment, net interest income is pressured downward by shorter-term assets that are quicker to reprice.
Questions or comments? Please contact KC.SRM.SRA.CommunityBankingBulletin@kc.frb.org