This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
See Cramer's multi-million dollar portfolio for FREE and get his new book Get Rich Carefully! Learn More

Community Banks Prepare for Rate Hikes

NEW YORK (TheStreet) -- With The Federal Reserve's second round of quantitative easing (QEII) set to end in June, community bank executives are ready for a rise in interest rates. But that could mean trouble for consumers.

"Most banks are prepared for rates to move up. Banks, generally speaking, are more likely to earn more," said New York Community Bancorp (NYB) CEO Joseph Ficalora.

"We expect the Fed to raise the rates soon," said First California Financial Group (FCAL) CEO C.G. Kum. "Interest rates on a ten year Treasury could be as high as four percent by the end of this year."

With interest rates at near zero levels since 2008, banks have been adding assets in anticipation of their eventual increase.

Flushing Financial (FFIC), with $4.3 billion is assets, is one of those banks that has been building out its portfolio to take advantage of a rise of interest rates by transitioning to a commercial bank from a thrift bank. The bank has added to their mortgage portfolio, lends to small businesses and built a commerical banking revenue stream through an interent banking option.

"We are taking advantage of the low interest rate environment at the moment and will be protecting our selves as interest rates rise by getting into long liability products," Flushing Financial (FFIC) CEO John Buran said at a recent American Bankers Association conference.

While a rise in rates helps banks' balance sheets, if they rise too rapidly it could potentially harm consumers, prompt foreclosures and decrease lending.

"The real question for us is how rapidly the rates will rise," saysHF Financial Corp. (HFFC) CEO Curtis Hage. "How the consumer will adapt to the shock and can they afford the rising rate is also a large concern," he added.

Hage says his bank, which has a market cap of $77 million, has grown in residential and consumer direct loans as well as interest bearing checking accounts since the crisis. While a rise in interest rates would be beneficial to the bank's bottom line, if rates rise too rapidly and consumers can't keep up with mortgage payment, it could trigger a round of premature foreclosures, he said.

"All loans would be at a higher rate and many consumers would not qualify to get a loan if rates rise too rapidly," said Ficalora. "There would be fewer consumers eligable to purchase a home, and when you have too few buyers housing prices go down."

--Written by Maria Woehr in New York.



To contact the writer of this article, click here: Maria Woehr.

To follow the writer on Twitter, go to http://twitter.com/newsgirlmw.

To submit a news tip, send an email to: tips@thestreet.com.

Stock quotes in this article: FCAL, FFIC, HFFC 

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
DOW 16,501.65 0.00 0.00%
S&P 500 1,878.61 +3.22 0.17%
NASDAQ 4,148.3380 +21.3710 0.52%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs