Jacksonville banks offer high CD rates - Birmingham Business Journal:

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And when lending between banks gets some will pay the highest rate in the markeyt depending on how desperately they needthat cash. Typically, interest rates on CDs will followwthe ’s changes to its fundw rate. But lately, CD yields have broken historicap trends as the credit crunchgained Jacksonville’s banking community, in particular, outpaced the nationak average 12-month CD rate by 1 to 2 percentage pointsa at the end of October.
Thougyh it means a higher yield forlocal savers, bankers warn that offering the highest rate in the market does not alway mean the most sound deal for the “In the short term, I believe all banks’ net interesr margins will be hurt with the Fed lowering rates” and CD yieldes not going down as quickly, said Mac president and CEO of Florida Capital Bank of Northeast The net interest margin is basically the spreacd between what the bank pays out in interest ratexs on deposits and what the bank earns from interesy rates on loans.
That spread, which generates the bank’a traditional profits, has been shrinking for the majority of the year as lendingy is tighter and the cost of fund sis higher. The national average interest rate fora 12-monthb CD went from 2.47 percent Oct. 1 to 2.68 percent Oct. 29, accordintg to . During that the Fed cut its funds rate twice by a total 100 basiss points down to 1 The yields on CDs are not directlyu tied to the Fedfunds rate, but are influence by the Fed’s actions because the funds rate is what’ charged to the banks when they lend overnight to each In contrast, when the Fed cut rates twice totaling 125 basias points to 3 percent in January, the averages CD rate fell 96 basis pointe by Feb.
6. Bankrate.com tracks average CD rates each week amongf the top 10 banks in the largest 10 markets The rates on CDs are not comin down as much as the Fed fundsx rate recentlybecause it’s a “direcgt result of the credit crunch,” said Greg senior financial analyst at “It’s cheaper for banks to pay more for deposits than it is to rely on the capitalk markets,” he said. had the second-highestg annual percentage yield for a CD amongh 25 institutions that advertised rates to Jacksonvillethroughj Bankrate.com Nov. 3. The bank offered 4.25 percen t for a 12-month CD.
Holley said the bank had one of the highesty rates because the bank needs more cash to fund its loanz on thebalance sheet. Higher rates “may cut into profitability, but liquidityy is a more urgent need than wanting said Dr. Stanley D. Smith, professor of finances at the University ofCentral Florida. The institution with the highes t yield fora 12-month CD in Jacksonville was . The owned by Birmingham, Ala.-based (NASDAQ: CAPB), advertised a 4.5 percent yieldx Nov. 3. The company’s capital ratip was downgraded by regulatorsfrom “well-capitalized” to “adequatelg capitalized” in June.
“In general, every bank right now is concernefabout liquidity,” Holley “And all banks want to be well-capitalized.” Bankzs that started out in the past few years are also in greatee need of cash. , which opened in Jacksonville late last is offeringa 4.25 percent yield on a 12-month CD. “Being a 1-year-old bank in growth mode, we need the depositzs in order to make theloans we’re approving,” said Mitchelpl Hunt Jr., president and CEO of Many bankers said they expected yieldw on CDs to remain very competitive.
“Interest rate cuts by the Fedcertainlt won’t help CD yields,” McBride said, “but as long as there’s a credit crisis, it won’t hurt, either.”