Community banks in the Northeast are reporting another quarter of strong earnings, but analysts are raising a red flag over tighter interest margins that could take a toll on bottom lines.

With pressure mounting on banks to raise deposit rates to keep them more in line with last year's interest rate hikes - most institutions have delayed raising rates - banks are paying more for their funds. That's tightened the spread between the interest banks earn on loans and the yields they pay out on deposits, which is reflected in lower interest income.

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