Local interest rates among U.S. best

FORT COLLINS — Bank depositors in Fort Collins and Greeley are enjoying some of the best interest rates on certificates of deposit and savings accounts in the country, and that’s likely to continue even after the Federal Reserve’s action raising short-term interest rates, bankers say.

The reason for the top rates for CDs is simple — intense competition between banks along the Northern Front Range and a need for new banks to gain customers and capital in a hurry.

But it could also stem from the impact a Nebraska-based bank that is heavily into the credit card business and is using CD deposits to fund its credit card operation, some analysts believe.

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As of March 26, the interest rate for a one-year CD in the Fort Collins area was around 6.15 percent, and there were shorter-term CDs available for as high as 7.17 percent. Contrast that with 5.79 percent for a one-year CD with a $100,000 minimum deposit in New York banks, according to The Wall Street Journal on March 25.

“In the Fort Collins market, generally around 6.15 percent seems to be the market rate right now for what the bigger banks around town are paying,´ said Bill Kurtz, senior vice president with Norwest Bank in downtown Fort Collins. “There’s nearly a half-point difference with the national rate, and the spread has actually been higher. It’s a real benefit for the consumers in this area, because they are getting very high yields.”

What’s driving the competitive CD and savings rates is intense competition among Front Range banks.

“From a pricing standpoint, Northern Colorado is as competitive as I’ve seen it in 30 years,´ said Tom Byington, president of First State Bank of Fort Collins.

“It’s very competitive down there,” noted Sue Mecca, a vice president with American National Bank in Cheyenne, where average one-year CD interest rates are around 5.32 percent. “There are so many banks moving into the Fort Collins area, people are just fighting tooth and nail down there.”

“Competition obviously is a large factor,” noted Key Bank’s Fort Collins area president, Dave Armstrong. “Our deposit rates in Northern Colorado are higher than virtually anyplace in the country.”

Kurtz said he sees a combination of factors, including number of banks overall and number of new banks trying to make an inroad into both the Fort Collins and Greeley markets.

“I think a lot of it is driven by the fact that Fort Collins has a lot of new banks in town, and it’s also probably driven by the funding needs of individual banks, which makes it a little bit more unique,” Kurtz said. “You’ve got a lot of banks trying to grow quickly, and they don’t have a real established track record, and so they’re having to pay real premium rates in order to attract the growth and justify the expansion.”

“We have most of the same players in both Greeley and Fort Collins, so really it is a very similar market in Greeley as it is in Fort Collins,” Kurtz added. “It sure isn’t the same in other bank markets in Colorado. We make all of our pricing decisions locally in Fort Collins, so we pay what we think is appropriate for the market place, and it sure appears that we pay higher rates on our CDs and deposits than they do in the Denver metro area.”

Other bank analysts, who asked not to be quoted, suggested that another driving force behind the high interest rates on deposit is First National Bank of Omaha, which owns First National Bank in Fort Collins and Union Colony Bank in Greeley and has a large credit card operation.

“First National of Omaha is first and foremost a credit-card company … and credit cards yield a very high rate but do need a funding source,” one analyst said. “So it’s much easier to justify a high deposit rate if you’re funding an 18 percent credit card than a car loan to somebody in Fort Collins at 81/2 percent.”

Another analyst said: “They look to those banks to generate deposits, which then they can use to fund those credit-card portfolios. If you’ve got a credit-card portfolio at 18, 19, 20 percent, you can pay just about anything you want on CDs and be profitable.”

But if First National Bank of Omaha is driving up the deposit market, many other banks in the Fort Collins and Greeley area are matching them or at least ratcheting up their CD deposit rates to remain competitive.

As for the Federal Reserve’s action March 25 hiking short-term interest rates, most bankers along the Northern Front Range agree that there will be an impact on people with variable-interest loans or credit cards tied to the prime loan rate, but don’t expect much immediate impact on depositors .

“I don’t think a quarter percent frankly is going to have much effect on our local economy” or change either loan or deposit interest rates much, said Byington, adding that he hopes the Fed will stop with only one increase.

Armstrong and Kurtz predicted that interest rates on deposits probably would remain fairly stable in the Fort Collins and Greeley areas.

“The effect on deposit rates will not be immediate. There’s always a little lag,” Armstrong said. “Possibly CD rates will not go up in our area because we are so far above the national average.”

“Because the banks in this area are already paying premium interest rates, there probably is less pressure for us to increase them even more than it is for some other markets,” Kurtz said. “But it’s hard to predict. The most immediate impact is obviously on people who are on variable interest rates.”