When Silver Falls Bank in Oregon failed,the acquiring bank, Citizens Bank of Corvallis lowered depositor CD rates from 4% to 1%. All deposits (except for brokered CDs) were purchased and protected, even if customers held above $250,000. But the downside is that the rich rates they had locked in with Silver Falls Bank CDs were gone.

Often, depositors dismiss bank soundness, figuring that if a bank fails the FDIC will insure their cash anyway. And as we've seen, the FDIC is quick to compensation depositors and make them whole. In most cases users never even lose access to their funds. But the downside is that the acquiring bank has the right to rip up CD contracts and offer new, often lower rates.

From an article in OregonLive.com.

"In receiverships or bankruptcies, all prior contracts are null and void unless they're reaffirmed," said Richard Renken, program manager for banks and trust at the Oregon Division of Finance and Corporate Securities.

However, Citizens was required to notify Silver Falls customers of any rate change and give them time to cancel their CD agreements without penalty, Renken said. The bank did so."

While Wells Fargo and JP Morgan Chase are honoring CDs they took over from Wachovia and Wamu, this isn't required and doesn't always happen. As we see here, it may be worth questioning whether that great long-term CD rate you are getting will hold if a bank fails.

State Bank of India, New York is offering a 36-month (3 year) CD paying 3.55% APY. That's the highest 36 month CD rate since early February.

Overall, we've seen CD rates with terms of 3 years and greater rising over the last couple of weeks. It appears that rates may have bottomed for longer-term certificates of deposit and are now on the rebound.

State Bank of India has periodicially offered aggressive rates to attract deposits. The bank is a subsidiary of one of the largest Indian Bank. The New York branch is FDIC insured, although it has been reported that some of the other US branches, including the LA and Chicago branches may not have valid FDIC insurance. I've had trouble getting through to customer service on occasion.

• Compare the top 36-month (3 year) cd rates.

Citibank is offering a competitive 12-month CD that pays 2.70% APY. Yesterday is was paying 2.75% APY but I didn't get a chance to post until today. Even at the lower rate though, it's still one of the top 12-month cd rates.

There are some limitations though. It must be opened in a branch and as far as I know it's only for Massachusetts customers.

If Citibank is offering it in other states, please post below.