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.
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.
1st Centennial Bank in California was closed today by the California Department of Financial Institutions, marking the third bank closing of 2009. And we're still only in January!
1st Centennial Bank in California was closed today by the California Department of Financial Institutions, marking the third bank closing of 2009. And we're still only in January!
As of January 9, 2009, 1st Centennial had total assets of $803.3 million and total deposits of $676.9 million, of which there were approximately $12.8 million that exceeded the insurance limits. This amount is an estimate that is likely to change once the FDIC obtains additional information from these customers.
What will happen to the $12.8 million is unclear. In the case of Indymac Bank's closure, the FDIC paid out some money above FDIC insurance limits.
Customers with accounts in excess of $250,000 should contact the FDIC toll-free at 1-800-822-1918 to set up an appointment to discuss their deposits. This phone number will be operational this evening until 9:00 p.m., PST; on Saturday from 9:00 a.m. to 6:00 p.m., PST; on Sunday from 12:00 p.m. to 6:00 p.m., PST; and thereafter from 8:00 a.m. to 8:00 p.m., PST. Customers who would like more information on today's transaction should visit the FDIC's Web site at http://www.fdic.gov/bank/individual/failed/centennial.html.
Beginning Monday, depositors of 1st Centennial with more than $250,000 at the bank may visit the FDIC's Web page "Is My Account Fully Insured?" at http://www2.fdic.gov/dip/Index.asp to determine their insurance coverage.
First California agreed to assume the insured deposits for a 5.29% premium. It will also purchase approximately $293 million of the failed bank's assets. The assets are comprised mainly of cash, cash equivalents and marketable securities. The FDIC will retain the remaining assets for later disposition.
The big news this week was the drop today in DollarSavingsDirect's savings rate from 4% APY to 3.5% APY. DollarSavings represented the last 4% APY savings rate and its drop, along with several other banks brought the average rate on savings accounts from the BestCashCow rate table down below 3% APY.
January 23, 2008 Update
The big news this week was the drop today in DollarSavingsDirect's savings rate from 4% APY to 3.5% APY. DollarSavings represented the last 4% APY savings rate and its drop, along with several other banks brought the average rate on savings accounts from the BestCashCow rate table down below 3% APY.
The other big drop was in 12 month (1 year) CD rates, with the average rate falling a whopping 40 basis points from 3.32% APY to 2.93% APY. This was impacted by the removal of First Command Bank from the rate charts after they informed us their accounts are not available to the general public.
As the chart shows, rates continue to drop with no end in site. Looking at the chart, it seems possible that they may bottom out in the 2% APY average range, meaning that rates could come down by another percentage point before the cuts are done. If you locked in a CD in October you should be very happy with that move.
The changes from the pervious week are:
Savings Accounts: 7 basis point drop from 3.06% to 2.99% APY
1 Year CD: A whopping 40 basis point drop from 3.32% to 2.93% APY
3 Year CD: 13 basis point drop from 3.26% to 3.13%APY
5 Year CD: 18 basis point drop from 3.82% to 3.64% APY
Note: 100 basis points represents 1%. Thus a drop by 100 basis points would be a drop from 4% to 3%.
Here are the rate of drops for the past five weeks since the Fed dropped rate, in percentage points.
