SOURCE: Weiss Ratings

Weiss Ratings

April 20, 2011 11:13 ET

74% of U.S. Banks Vulnerable to Rising Short-Term Interest Rates

States in Northeast and Mid-Atlantic Have Highest Concentration of At-Risk Banks

JUPITER, FL--(Marketwire - Apr 20, 2011) - Nearly three quarters of the nation's banks are vulnerable to rising short-term interest rates, according to a new study by Weiss Ratings, the nation's leading independent provider of bank, credit union and insurance company financial strength ratings.

In a study of 6,949 banks, Weiss found that a total of 5,165, or 74%, are vulnerable to rising interest rates, due largely to liabilities with rates scheduled to reprice within one year that were far greater than assets with rates scheduled to reprice within one year. This measure, called the negative gap ratio,(1) indicates that the banks will be at a disadvantage in a rising interest rate environment, as their cost for deposits and other borrowings rise more quickly than their income on loans and investments of a similar maturity.

"With short-term interest rates at historic lows and ongoing speculation about when they will rise, it's important for consumers to understand that any future rate rise will put the profitability of many financial institutions at risk," said Gene Kirsch, senior banking analyst at Weiss Ratings. "In this environment, consumers may be drawn to the highest rates paid on deposits, but they mustn't forget the importance of financial strength when selecting a bank or thrift."

Large banks ($10 billion or more in assets) most vulnerable to rising interest rates based on their extremely negative one-year gap ratios include:

Institution NameCityStateTotal Assets ($bil)1-Year Gap Ratio (%)
Bank of America Oregon, NAPortlandOR14.0-70.5
FirstBankLakewoodCO10.4-68.8
Bank of America Rhode Island, NAProvidenceRI20.2-67.3
Signature BankNew YorkNY11.7-63.8
Bank of America California, NASan FranciscoCA23.2-62.9
Bank of HawaiiHonoluluHI13.1-61.2
Webster Bank, NAWaterburyCT18.0-58.7
City National BankLos AngelesCA21.0-55.3
First Niagara Bank, NABuffaloNY21.0-50.8
Umpqua BankRoseburgOR11.7-49.8

In contrast, large banks ($10 billion or more in assets) with positive one-year gap ratios that are well positioned for rising short-term interest rates include:

Company NameCityStateTotal Assets ($bil)1-Year Gap Ratio (%)
American Express Centurion BankSalt Lake CityUT29.953.8
Northern Trust CoChicagoIL70.446.3
Chase Bank USA, NANewarkDE131.145.9
Barclays Bank DelawareWilmingtonDE14.342.0
JPMorgan Bank and Trust Co, NASan FranciscoCA22.434.3
Discover BankNew CastleDE62.533.8
State Street Bank & Trust CoBostonMA155.530.6
USAA Savings BankLas VegasNV14.427.4
Bank of New York MellonNew YorkNY181.926.5
Citibank, NALas VegasNV1,154.323.0

Regionally, Weiss' study found that the Northeast(2) and Mid-Atlantic(3) have the highest concentration of banks most vulnerable to a rise in short-term interest rates with 82.7% and 80.0% respectively. In contrast, states in the West(4) region have the lowest percentage (58.5%) of institutions most vulnerable to rising short-term rates.

Institutions' Vulnerability to Rising Short-Term Interest Rates by Region

In a Rising Interest Rate Environment:
Region# of Least Vulnerable Institutions ( > = 0%)# of Moderately Vulnerable Institutions (0% to 20%)# of Most Vulnerable Institutions ( > = -20%)% of Most VulnerableTotal
Northeast (NE) 715359182.7%715
Mid-Atlantic (MA) 2811858380.0%729
Southeast (SE) 3511653878.1%689
Midwest (MW) 1063761,43074.8%1,912
Central (C) 7123280972.8%1,112
Southwest (SW) 5219868773.3%937
Northwest (NW) 3310626165.3%400
West (W) 7011425958.5%443
U.S. Territories (Ter) 05758.3%12
Total 4661,3185,16574.3%6,949

To view the 1-year gap ratio of all U.S. banks with $10 billion or more in assets as well as a detailed explanation of the gap ratio and its effect on profitability, individuals can visit http://www.weissratings.com/ratings/banks-vulnerability-to-rising-interest-rates.aspx.

In addition, to view Weiss Ratings' free list of the weakest and strongest banks and thrifts, consumers should visit www.weissratings.com/banklists.

About Weiss Ratings
Weiss Ratings, the nation's leading independent provider of bank, credit union and insurance company financial strength ratings, accepts no payments for its ratings from rated institutions. It also distributes independent investment ratings on the shares of thousands of publicly traded companies, mutual funds, closed-end funds and ETFs.


(1)One-year gap ratio is defined as assets with maturities one year or less minus liabilities with maturities of one year or less as a percentage of total assets (which are exposed to changing interest rates).

(2) Connecticut, Delaware, Massachusetts, Maine, New Jersey, New Hampshire, New York, Pennsylvania, Rhode Island, and Vermont.

(3) District of Columbia, Kentucky, Maryland, North Carolina, South Carolina, Tennessee, Virginia, West Virginia.

(4) California, Colorado, Hawaii, Nevada, and Utah.

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