The years since the Great Recession generally demonstrate that protracted periods of low interest rates tend to compress net interest margin (NIM) at FDIC-insured banks. NIM decreased during the period of historically low interest rates after that recession, increased during the upward interest rate cycle between 2015 and 2019, and decreased again as interest rates fell toward zero with the onset of the COVID-19 pandemic. In most rate cycles since the 1980s, the median NIM, representative of typical banks, has moved in the same direction as changes in the federal funds rate. But this relationship has been much less pronounced for banks with high concentrations of long-term assets. Those banks with a relatively high proportion of long-term assets to total assets report greater insulation from changes in short-term interest rates. This means that their NIM falls less during downward rate cycles but rises less during upward rate cycles. The overall positive relationship between short-term interest rates and NIM and the effect of maturity structure on this relationship generally hold true over time for both community and noncommunity banks.
Last Updated: November 19, 2025