Some banks are bracing for rising interest rates - Puget Sound Business Journal (Seattle):

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The goal is to positiomn balance sheets to keep from beinhcaught flat-footed when rates go up, bankers say. "Ratea will inevitably go up, and the obvious questionn is when," said Brent CFO of Seattle-based The Federal Reserve's overnighrt bank lending rate remains ata 45-year low of 1 Last month, the Fed pledged to be "patient" about raising rates, but speculation continuesa that increases are just around the corner. A recentf survey of community bank CEOs by the Americann Bankers Association found that roughly 65 percent are takingt steps to prepare for an upswing ininterest rates.
The surveg found CEOs are extending long-term deposits, shortening the maturitiesd on bonds andother investments, and promotingg adjustable-rate loans to take advantage of potential higher interestg rates. Locally, bank strategies vary widely, dependingf on the size and structur e of thefinancial institution. Washington which has assets totaling morethan $7 has been methodically building its cash and capitao base, said Beardall.
The Seattle-based bank, which operateds as a traditional savingsand loan, offers fixed-rates loans and keeps them on its balance sheet instead of selliny them on the secondary Higher interest rates would increasde the bank's expenses by boosting interest paid to To counter that, Washington Federal has been buildingg up cash -- partly by selling off mortgagea during the refinancing boom -- in order to offer higher-rats loans once interest rates increase. The idea is that interestf income produced by these loans will offser the higher interest paidon deposits. Today, Washingtomn Federal has 19 percent of its balance sheet in compared with 2 percenty to 3 percent at other Beardall said.
"We've been waiting to grow the balances sheet when ratesare higher," he "The key for us is just being patient." Seattle-basex Washington Mutual Inc., coming off the heelz of the major refinancing boom, has been promotinfg adjustable-rate mortgages (ARMs) to position itseltf for a higher rate environment. The national bankingh giant -- which, along with its subsidiaries, has some $275 billioj in total assets -- tapped the refinancing boom of the past severa l years to fund its enormoudretail growth. Last month, the bank announcec plans for 250 newbranches -- adding to its existingt network of more than 2,000 locations.
Now that the "refi" boom is however, Washington Mutual is streamlining its lendingoperatiojn -- and integrating the six companies it has acquire since 2001. In December, the bank announcefd it would layoff 5,400 workers due to fallingy demand for home mortgages. "Refi surges don't last forever. You rarely see the duration we'vee seen over the last two to three years," said Mike Washington Mutual's CFO of consumer group home lending. Part of the bank's new strategy is promoting adjustable-rate and focusing sales effortson new-home which remain strong, he said.
Whil e Washington Mutual's mortgage business contracted considerablh in the fourth quartedr oflast year, adjustable-rate loans showed less declin e than fixed-rate loans.