Live Oak Bank 1-Year CD Rate Jumps Upward

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Deal Summary: 1-year CD, 4.50% APY, $2.5k min/$250k max deposit

Availability: Nationwide (internet bank)

It’s been six months since, North Carolina-based Live Oak Bank (Live Oak) had a blog-worthy CD. Following a 75-bp increase this week, the Live Oak 1-year CD earns 4.50% APY, which is currently the highest APY offered on an internet bank 1-year CD. The minimum opening deposit is $2.5k deposit, with a balance cap of $250k.

Live Oak does not offer IRA CDs, but Business CDs are available, having the same rates and deposit requirements as the personal account CDs. The details of the current 1-year CD rate and the rate history are available in the table below.

APYMINMAXINSTITUTIONPRODUCTDETAILS
4.60%$2.5k$250kLive Oak Bank1 Year CD
4.60%$2.5k$250kLive Oak BankBusiness 1 Year CD
Rates as of January 28, 2023.

Unfortunately, all of Live Oak's longer-term CDs have low rates. When the 1-year CD rate went up, the 18-month and 2-year CD rates went down, and now they match the 3-, 4- and 5-year rate (currently only 2.00% APY.) It's an odd situation when the 1-year CD has a rate so much higher than the longer-term CD rates. For much of this year, we've seen an inverted yield curve with Treasurys, and now it's becoming more common with CDs.

Early Withdrawal Penalties

As stated in the Truth-in-Savings disclosure (page 27):

You may make withdrawals of principal from your account before maturity. Principal withdrawn before maturity is included in the amount subject to early withdrawal penalty.

There is no mention of having to obtain the bank’s consent to withdraw some or all the principal before maturity.

The Truth-in-Savings disclosure also includes the actual Early Withdrawal Penalty (EWP).

If your account has an original maturity of less than 24 months: The fee we may impose will equal 90 days interest on the amount withdrawn subject to penalty.

While a description of an EWP can often be found on a bank’s website, the actual process of an early withdrawal is rarely detailed. As stated in the CD FAQs, the first step is to call a Live Oak Customer Success Manager (866.518.0286) to request a withdrawal or closure. An email confirming your request will be sent to the email address you provided when opening the CD.

The funds being withdrawn can be transferred to an external financial institution by ACH or wire transfer (1-2 business days, typically) or immediately transferred to a Live Oak High Yield Online Savings (HYOS) account, which currently earns 2.75% APY on all balances up to $5 million. The HYOS rate has not kept pace with other internet bank savings account, but having an HYOS would be convenient as a temporary “parking place.”

APYMINMAXINSTITUTIONPRODUCTDETAILS
3.50%-$5mLive Oak BankHigh Yield Online Savings
Rates as of January 28, 2023.

Funding and Other Particulars

  • Funding – online application allows you to link an external account from which to draw opening funds; after opening CD, you can add additional external accounts (4 max).
  • Maturing Funds – maturing funds can be distributed through an ACH or wire transfer, or transferred to an HYOS; Live Oak does not issue checks.
  • Interest – compounded/credited monthly and can be disbursed to any linked external account or an HYOS.
  • Grace Period – 10 calendar days before automatic renewal.
  • Beneficiaries – unlimited, but can only be a US citizen, a charity, a trust, or a non-profit organization; percentages assigned; Social Security numbers preferred but not required.
  • Credit Check – None.

Availability

Headquartered in Wilmington, North Carolina, Live Oak Bank is a pure internet bank, having no brick-and-mortar branches.

U.S. citizens and permanent residents (18 years or older) who have a valid Social Security number or a valid Individual Tax Identification Number are eligible to open an Live Oak CD and/or Online Savings account.

The CD Account FAQs specifically states that,

People lawfully admitted to the United States on a temporary basis who have DHS authorization to work are not eligible to open an account.

Live Oak Bank has done away with its “Get Started” page, which was previously the first step toward initiating the “quick three-step application.” The online application can be accessed from the Personal Banking page of Live Oak Bank’s website. (Make sure you select the correct CD term-length on the Personal Banking page before clicking on “Open Now,” as the online application is customized based on the term-length chosen.)

Bank Overview

Live Oak Bank has an overall health grade of "A" at DepositAccounts.com, with a Texas Ratio of 0.82% (excellent), based on June 30, 2022 data. In the past year, the Live Oak Bank has increased its total non-brokered deposits by $1.08 billion, an excellent annual growth rate of 20.22%. Please refer to our financial health overview of Live Oak Bank (FDIC Certificate # 58665) for more details.

Opening its doors in 2008, Live Oak Bank is currently the fifth largest bank headquartered in North Carolina and the 166th largest bank in the country, with more than $9 billion in assets and more than 78,000 customer accounts. As stated on the Bank’s About Us page,

Live Oak is a digital, cloud-based bank serving small business owners in all 50 states. We are the leading USDA B&I lender and the #1 SBA 7(a) lender by dollar volume* in the country and our mission is to be America’s small business bank.

*The data supplied by the SBA reflects 7(a) highest dollar volume during FY 2021. The data supplied by the USDA for the highest dollar volume during FY 2021.

How the 1-Year CD Compares

When compared to similar length-of-term CDs tracked by DepositAccounts.com which are available nationally and have minimum deposit requirements of $10k or less, only one bank has a higher rate than currently offered on the Live Oak Bank 1-year CD. The following table compares the 1-year CD to the two highest-rate CDs from other banks and the two highest-rate CDs from credit unions.

4.15%12-Month Special Certificate (EWP=90 days)Justice Federal Credit Union

The above information and rates are accurate as of 11/11/2022.

To look for the best CD rates, both nationwide and state specific, please refer to our CD Rates Table page.

Related Pages: 1-year CD rates, nationwide deals, Internet banks

Comments
Kirkland
  |     |   Comment #1
Note that yesterday, Live Oak Bank was offering brokered CD's of long maturities, rates over 5%, but every single offering was callable.

Example: 7 year callable beg. 5/25/23, 5.25%, payable monthly beg. 12/25/22.

Call schedule not filled out, but likely this could be callable monthly thereafter (6/25/23, 7/25/23.... )
boston61
  |     |   Comment #2
I imagine if the Fed lowers interest rates, all these banks with callable CD will do just that. They expect cusotmers to make commitments but they don't.
GG7
  |     |   Comment #11
I don't care how attractive some of these Non-Call Protected CDs might appear at first glance... Having that callable CD hanging over your head for the duration isn't worth the .05% to 1% higher rate. Especially if it gets called in way ahead of the original maturity date, likely leaving you hung out to dry with rates far lower than the one you just got rug pulled out of.

I'll stick to 100% Call Protected CDs or nothing, thank you very much! ;o)
sharon907
  |     |   Comment #12
Great! And, congratulations. Americans simply don't understand or appreciate how lucky they are to live in a country with a strong currency, a strong army, and bank insurance.

However, if you think about it, rates may not, in fact decline. Callable fixed-income that yields say 1 point more than non-callable, may be some minor hedge against rising rates.

Don't worry about it. Just be glad you are more than content with whatever you choose to do.
QuickSilver
  |     |   Comment #3
On the Schwab brokered CD page , there were several 5 yr callable CDs at 5.15. All had either 3mo or 6mo calls. 15 basis points is nowhere close to the value of the call you are selling when you buy such a CD. I use the filter to weed out callables.

"Heads, I win; Tails, you lose."
Kirkland
  |     |   Comment #6
I might consider a long term callable brokered CD with a small purchase if it is not callable beg. for 1 year out from now (and then monthly) and in the meantime, they are paying you interest monthly. As soon as rates dropped, yes they would call and immediately you could purchase a new brokered CD at the slightly lower rate. (after a year, within a month). You would lose out if rates went to 6% or more and stayed there for a few years.

XXXX Bank, 8 year callable, 5.20%, payable monthly, next call 11/18/23.

The highest 1 year brokered CD, is 4.70%, but interest on the 1 year is payable at maturity.

A lot to think about, but advantage to brokered CD's is the small lots you can buy, and easy to ladder, and easy to only select non-callable if you want guaranteed time period.
GG7
  |     |   Comment #9
Fidelity's lists of brokered CDs include a column for "Call Protected" YES or NO. You can sort them by this column, so you end up with all the "Non-Callable" CDs at the top of the list followed by all the callable ones below them. A lot nicer than Vanguard's listings IMHO.  I recently bought a 3YR Call Protected CD from UBS Bank USA with a 4.95% coupon and a Monthly interest payout.  This one sold out fast!  Already listed as Execution Pending on my Fidelity account despite a settlement date of 11/16/22.

As far as callable CDs go... No idea why anyone would buy a 3 -10 Year CD that carried with it the constant risk of being called in. Where is the security in that?
P_D
  |     |   Comment #10
"15 basis points is nowhere close to the value of the call you are selling when you buy such a CD."

What pricing model and values did you use to determine that?
Mak
  |     |   Comment #13
P_D..... good to see you're okay... haven't seen you post for a while, thought we might have to do a welfare check...;)
P_D
  |     |   Comment #14
Thanks Mak. Been busy trying to profit from the changing markets and a bunch of family business. Hope you and others here are doing well.
QuickSilver
  |     |   Comment #17
I didn't need a pricing model to make that determination.

I looked at recent issues of reasonably comparable securities with maturities anywhere from three to seven years and callable after three or six months.. The spread over non-callables from the same issuers was anywhere from 85-180 basis points.

For example, FHLB recently issued a 7yr/6mo at +200 to the 7yr Treasury note. FHLB 7yr non-callables trade at ~+20. In that case the value of the option was 180 bp.

Option valuation for a 7yr/6mo is reasonably comparable for brokered CDs versus GSE debt. Neither has material credit risk, so the variables affecting the value of the options are sufficiently similar to provide useful indications of relative value. Whatever differences there may be are not nearly significant enough to explain such a large difference in the offered spreads between the two types of issues.

The differences for callables over non-callables in the 3yr and 5yr maturities was in the area of +85 to +100 basis points.
spentcattle
  |     |   Comment #15
I found a took a few callable one year out call features on schwab a bit ago.
Sort of using it as a pseudo laddered concept for one year part. But maybe they changed the timing with Thursdays big move down in rates
RonPaul
  |     |   Comment #4
This bank is a nightmare to get money out of and their cuatomer service is terrible. I will never use them again.
QuickSilver
  |     |   Comment #5
I don't like that I cannot logon unless I give them my cell #. They refuse to allow an email for verification. Not happy with their foot-dragging on money market rate increases, either.

That said, I've never had a problem making withdrawals, either through ACH or the mail. As a 10+ year customer, I've had mixed experiences with CS, but I wouldn't say they were "terrible".
GregoryG
  |     |   Comment #8
I just transferred $50k from Live Oak to my E*Trade brokerage account. No issues. They are an internet bank for personal lending, so I never tried getting any money other than transfers. Never had a transfer issue. Best internet only bank i have ever dealt with. The app is flaky with forgetting biometrics.
LovinSomeCDs
  |     |   Comment #7
LOL. Where do you think rates will be in 1 year?

Not good.
smoky12
  |     |   Comment #16
Where did you see the word 'callable'? I started buying CD from Live Oak about five years ago. I had some 3-year CDs at 3.5% or higher. Live Oak never recalled them. They were the main source of my interest income for about 2 years since the rate was about ZERO.

The only callable CDs I know are from the investment companies, e.g., Fidelity.
#18 - This comment has been removed for violating our comment policy.
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Availability: Nationwide (internet bank)

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Availability: Nationwide (internet bank)

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Availability: Nationwide (internet bank)

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