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With CD rates falling, a 60-month certificate of deposit that pays 3.05% APY looks pretty good right about now.

Unless you bought a CD from Tennessee Commerce Bank when it offered that deal in the summer of 2010.

In that case, you’re probably going to lose those top CD rates.

Regulators seized the bank on Friday, making it the first Tennessee bank to fail since 2002. Bad loans were cited as the main culprit in the downfall.

Good news: Anyone who bought a certificate of deposit from Tennessee Commerce is protected by FDIC insurance.

This means your principal and interest are safe with the bank that took over Tennessee Commerce’s deposits, Republic Bank & Trust of Louisville, Ky.

So what’s the big deal?

The FDIC has announced bank seizures on a near-weekly basis since the recession. The closing of Tennessee Commerce is worth mentioning because, unlike most failed banks, it offered some of the best nationally available CD rates at the time it was shuttered.

The new bank doesn't have to honor those rates.

Of course, the new owners haven’t come right out and said they will cut CD rates. But Republic Bank has strongly hinted at it in an online FAQ for Tennessee Commerce customers: "Your rates on your Certificates of Deposit may change to more competitive rates."

Those competitive rates Republic Bank cites are not good.

On Tennessee Commerce’s best terms, Republic Bank pays:

• 0.95% APY on 36-month CDs (Tennessee Commerce paid 1.48% APY at the time of its closure).
• 1.60% APY on 60-month CDs (Tennessee Commerce paid 1.95% APY).

By law, the new bank cannot set rates that are lower than what it pays its current customers.

But that’s little comfort if your 3.05% APY CD rate suddenly gets cut nearly in half.

So, how can you protect yourself?

While it’s no guarantee, the Safe & Sound rating system at Bankrate.com offers a good measure of the health of banks and credit unions throughout the country.

Republic Bank carries five (out of five) stars on Bankrate.com’s Safe & Sound rating system. Bankate said this bank’s financial condition is “superior.”

And Tennessee Commerce?

It was a one-star bank at the time of its seizure.

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