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

Rate information contained on this page may have changed. Please find latest savings rates.

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.

See the best 1-year CD rates here.


Savings and Certificate of Deposit Rates Still Tumbling - Jan 23, 2009

Rate information contained on this page may have changed. Please find latest savings rates.

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.

  • Savings Accounts: -.07, -.05, -.11, -.04, -.05 , -0.7
  • 1 Year CD: -.14, -.24, -.16, -.11 , +.08 , -.40
  • 3 Year CD: -0.0, -.33, -.13, -.09, -.16 , -.13
  • 5 Year CD: -.01, -.36, -.08, -.01 ,- .17 , -.18

 

  CDandSavingsRateTracker

DollarSavings Direct Cuts Savings Rate to 3.5% APY But Still Competitive

Rate information contained on this page may have changed. Please find latest savings rates.

DollarSavingsDirect's savings rate finally succumbed to gravity as the bank cut its rate from 4% APY to 3.5% APY.  That rate is still significantly above the BestCashCow savings rate average of 2.99% APY.

As the graph below shows, DollarSavingsDirect bucked the decrease in overall rates since mid-October.  Even though it has dropped its rate by half a percentage points, it's still well above the average of the top bank savings rates in the US and is now third on the BestCashCow rate tables. 

Will it stay at the top of the rate tables?  History suggests it might not.  DollarSavingsDirect was started by Emigrant Bank, the parent of another online bank EmigrantDirect.com.  As we discussed in an earlier article on the launch of DollarSavings, it was odd that the company started another online brand.  The motive seemed to be a desire to not have to reprice the rates of all of the deposit money sitting in EmigrantDirect.  The biggest difference between the two online divisions other than rate is the $1,000 minimum balance requirement for DollarSavingsDirect.  Emigrant Direct as a $1 minimum balance.

In general, DollarSavingsDirect has received favorable reviews for the ease of its account opening process (see comments at bottom of linked article).

Whether DollarSavingsDirect cuts its rate further depends on its need for deposits and the competitive environment.  Several other banks that offer savings rates include Clear Sky Accounts at 3.75% APY, Bank of Internet at 3.51% APY, and CNB Bank Direct at 3.5% APY.

Time will tell if DollarSavings remains competitive but as we've seen in the past, when one bank decides to cut rates, other banks are ready to move up to the top.