When Darby Bank failed last Friday and Ameris Bank assumed all deposits, we knew the 4% APY of those old Darby Step-Up CDs was in jeopardy. As I described on Tuesday, the acquiring bank can lower the interest rate on your CD. That appears to be case with Ameris Bank. Readers have reported that Ameris Bank has reduced their Step-Up CD rate to only 0.25% effective Tuesday (11/16/2010). The yield had been 4.00%. A reader also reported that his Darby 18-month breakable CD yield was cut from 2.50% to 0.25%.
The rate is so low, that it seems like it might violate one of the rules the FDIC mentioned in this consumer article. According to the FDIC, "the assuming institution cannot pay a lower interest rate than what it offers to its existing depositors for similar accounts." I would be very surprised if Ameris Bank is offering 3-year CDs with only a 0.25% rate. However, I guess since the CD has special step-up and add-on features, they could claim that it's not similar to their standard 3-year CDs.
With this very low rate, Ameris Bank has made the decision for an early withdrawal an easy one. When a bank fails, the acquiring bank must allow for a penalty-free early withdrawal. With the rate this low, you'll want to withdraw the money as fast as possible. One reader provided the instructions and the CD withdrawal form that he received from Darby in his blog post.
On Tuesday I described how banks that have assumed deposits of a failed bank have been slow in their communications to the CD holders. Ameris Bank appears to be the same way. The new 0.25% rate appears to have taken effect on Tuesday, and a reader reported that letters from Ameris about this change were going out on Thursday. By the time customers receive these letters, a week may have elapsed with their accounts earning this low rate.