A prolonged run of low interest rates on bank certificates of deposit could be coming to an end.
But Wichita bankers doubt that they will be changing their rates significantly anytime soon, even if rising CD rates turn out to be a trend.
Economist Dan Geller said that in his examination of CD rates in the first quarter of 2012, he found six states where rates actually moved up.
“At this point it’s not a trend but a significant event,” said Geller, executive vice president at Market Rates Insight, a California-based provider of pricing information and analysis to the financial industry.
Geller said his analysis of CD rates showed as much as a 0.08 percent increase in five-year CD rates in Illinois. Also marked was a 0.01 percent increase in one-year CD rates in West Virginia. Other states with an increase in rates were Massachusetts, Michigan, Ohio and Pennsylvania, ranging from 0.01 percent to 0.02 percent increases on CDs with a variety of maturity dates.
He said 0.08 percent or even 0.01 percent may not sound like much of an increase. But the increases are based on the averages of all financial institutions in those states. “It has to be substantial, across-the-board, to impact the average,” Geller said. “This is not the case of one” bank offering a one-time, 0.08 percent CD rate increase.
Before Geller declares a trend of rising CD rates, he said he’ll want to see data from the second quarter that shows an uptick in rates in those states and other states joining in with rate increases. “I would say the (first quarter data) shows there is some possibility that rates might go up at some point,” he said.
Geller said CD rates across the country have been at historical lows for the past five years. And there’s never been a point in history — going back 30 years — to refer to when rates were this low, or to discern what factors moved them higher.
Two Wichita bank executives, however, said it’s going to take only one thing to move rates substantially higher than the current 1 to 1.5 percent levels.
“I don’t see us raising our CD rates in the foreseeable future,” said Trish Minard, CEO of Southwest National Bank. “There’s too much liquidity and not enough loan demand.”
Steve Carr, president of Community Bank of Wichita, also said loan demand will be the driver of higher CD rates.
“When we can take those funds — and right now there’s a lot of excess — and put those out in the market in the form of loans, then I can afford to pay more for deposits,” Carr said.
Carr said customers have $19.4 million in CDs at Community Bank. He estimates that would increase by at least $5 million if he could offer his customers a rate better than 1 or 1.5 percent.