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Published: Wednesday, 3/12/2008

Bank CD rates signal hard economic times ahead

Toledo-area banks have signaled tough times in the economy.

Many are offering higher savings rates on shorter-term certificates of deposit than on longer term measures.

The Bank of Maumee, for example, has offered a three-month CD rate of 3.55 percent to certain customers, a 12-month CD for 2.75 percent, and a 36-month CD for 2.67 percent.

"When you're not sure what [federal] rates and going to do you like to stay short with lines of credit," bank president Lee Dunn said. "When rates keep dropping we don't want to offer an attractive four-year CD."

Said Linda Bowyer, a finance professor at the University of Toledo: "That's usually not a good sign for the economy. That means the economy (and bank) is predicting that we're going into a recession."

Michael Heller, president of the bank consulting firm Veribanc in Florida, said, "Whoever is offering that product is not too optimistic about the product. They're not optimistic about the future, and that's going to be reflective in their rates."

Other area banks are doing similar features as the Maumee bank. Fifth Third Bank has a four-month CD with a 2.75 percent yield but a 60-month CD with a 2.70 percent yield.

But some area banks still offer rising yields as the CD term lengthens. Genoa Bank has a six-month and a 12-month CD each paying 3 percent but a 60-month CD at 4 percent.

Not surprisingly, money-market savings generally pay less than CDs. Such money is hard to manage, said Mr. Heller from Veribanc, as CD deposits are there for a fixed period of time while money market deposits can be withdrawn at any time.

That may explain why Union Bank of Pemberville has a money market rate of 0.50 percent yield. Bank officials couldn't be reached for comment yesterday.

Some local banks help balance their finances by offering competitive home equity rates. Fifth Third, for example, has a home equity line of credit for 4 percent, relatively low compared to area competitors.

For customers, this means continued low earnings on savings at banks.

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