Co-leader in 6-month CD rates makes big cuts

Mike Sante

The big news in CDs comes out of California today, where one of our top-paying banks dropped its rates.

Pacific Mercantile Bank, based in Costa Mesa, was one of two Southern California banks offering the best nationally available return on 6-month CDs since Dec. 2.

It and CapitalSource, headquartered in Los Angeles, have been paying 0.90% APY.

The only way to do better than that is to find a local deal that pays more. (Check our database of the best CD rates from dozens of banks in your area to see what they're offering.)

But on Thursday, Pacific Mercantile cut that almost in half, to 0.50% APY.

That's still three times the average return on 6-month CDs — 0.15% APY in our weekly survey taken March 12 — but not nearly enough to be a top rate.

Pacific Mercantile also reduced returns on:

Pacific Mercantile had been paying the second-best rate in the country for all three of those terms prior to today's reductions.

Its return on 3-month CDs is now the fifth-best deal. The other two are so low that they're no longer in our rankings.

Pacific Mercantile has been losing money — $23.3 million last year — as it gets out of the mortgage business and tries to reinvent itself as a commercial lender.

But it's FDIC-insured, or you wouldn't find us writing about it, and it still earns a solid three out of five stars from Bankrate's "Safe & Sound" rating system.

Since Pacific Mercantile first hit our rankings in April 2011, the California bank has made lengthy runs among the top-paying banks for 3-month, 6-month, 1-year and 2-year, and even 3-year CDs.

It sells certificates of deposit to savers nationwide through its seven branches, online or by mail.

The bank has lowered its rates and dropped out of our rankings twice before.

The first was in March and April 2012, and then for more than a year from October 2012 until October 2013.

I can only hope Pacific Mercantile's restructuring works out and it returns to our rankings soon.

On the brighter side, take a look at what's happening with 5-year CDs.

Fourteen banks are now paying more than 2%, and our leaders are offering the best deals we've seen since September 2011.

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