Big Banks Hurting But Many; Community Banks Like Brookline Savings Doing Okay

While the headlines discuss the problems with the nation's biggest banks, many small community banks are doing great. Low borrowing costs and lack of competition from the big boys is helping the community bank grow quickly.

Steven Syre of The Boston Globe discussed this in an article and singled out two banks in Massachusetts, Brookline Savings Bank and Hingham Institution for Savings. While the article discussed Massachusetts banks there are thousands of small banks across the country that are also benefiting. As he writes:

"Access to ultracheap money and fading competition from mortgage companies are proving to be powerful advantages for many smaller banks. "Things are going well, particularly in the context of the economy," says Brookline Bancorp's chief executive, Richard Chapman.

Smaller banks are earning an unusually wide spread between the cost of money to them and the rate at which they lend to customers. They can borrow money from the Federal Home Loan Bank of Boston at rates in the range of 2 percent and use it to fund loans earning as much as 4 percent or even 4.5 percent more."

These banks are stable and offer somewhat competitive rates. Brookline is offering a 12 month CD at 2.40% APY, which is 85 basis points below the top 1 year cd rate on the BestCashCow rate tables. Still, that's significantly higher than some of the rates of the big banks. Bank of America was offering a 12 month CD for only 2.10% APY. So, for many, community banks offer stability with an above average return.

See the best 1-year CD rates here.