In their quest for deposits, many banks are paying attractive interest rates these days, said bankers and other experts Monday.
Banks view gathering deposits during these uncertain times as a better way to fund their operations than issuing stock or other means of raising capital, said Greg McBride, senior financial analyst for Bankrate.com, North Palm Beach, Fla., which tracks financial rates.
First Commonwealth Bank, for instance, is paying a handsome 3.00 percent (annual percentage yield) on its money market accounts. That's a result of "a pretty aggressive money-market campaign" that recently ended, said J. Eric Renner, executive vice president of the Indiana, Pa., bank.
The bank is paying 3.00 percent APY on 1-year certificates of deposit accounts. The national average is 0.74 percent on money markets, and 2.61 percent APY on 1-year CDs, said bankrate.com.
"Our intent is to grow core deposits and households, and offer the best rates possible for our depositors, while making money for our shareholders," said Renner.
Citizens Bank is also paying 3.00 percent on a 1-year CD. The bank's rates have "held steady for the past few weeks," said spokesman Mike Jones, and are "priced competitively to provide value to existing customers and to attract new ones."
First Commonwealth's money-market rate was higher -- 3.30 percent -- a few weeks ago. But it came down after the Federal Reserve lowered its benchmark rate by 1 percentage point, in October. Such adjustments are common in the industry, said McBride.
"Typically, we'd see (savings) rates fall off a cliff when the Federal Reserve cuts... . But instead, we've seen tame decreases," said McBride.
By comparison, Parkvale Savings Bank is paying 2.20 percent on 1-year CDs, and S&T Bank is paying 1.85 percent, according to the banks' Web sites. PNC Bank, the region's largest, is paying 1.81 percent.
"What we do on our CDs are to run specials," said Tom Ondek, Parkvale's senior vice president of deposit operations. "We'll run better rates on the CDs and tie them into a checking account, giving you a better CD rate if you open a checking account."
Like most banks, Parkvale's 1-year CD rates have bounced around this year in line with Federal Reserve rate activity. Parkvale's was 3.40 percent in January, but stepped down to 2.15 percent by May and is 2.20 percent today.
Early this year, most observers thought the Fed would raise interest rates, said McBride, and that was reflected in CD rates. But the central bank cut its benchmark rates 1.25 points in January, another 1.00 point in March and April combined, and another 1.00 point in October.
"Consumers are in a hunker-down mode in terms of investing," said McBride. "Volatility in the stock market and uncertainty with respect to the broader economy has consumers seeking safe havens, so they typically flock to bank deposits."
"I keep my checking account at Dollar, but will take my CDs to other banks if their rates are better," said Joe Bellissimo, 48, of Franklin Park.
A Dollar Bank customer for about 25 years, Bellissimo doesn't pay strict attention to all savings rates but will "shop around a little" for the best rates on CDs, he said.
Dollar Bank officials could not be reached yesterday.
National City Bank, the region's second-largest bank, declined to comment.
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