North Carolina-based Live Oak Bank did something yesterday that we haven’t seen in a while: a substantial rate increase on its 5-year CD. The addition of 40 bps has boosted the APY to 1.00%. The minimum opening deposit is $2.5k, with a $250k balance cap.
The Truth-in-Savings disclosure details the Early Withdrawal Penalty (EWP).
If your account has an original maturity of 24 months or more: the fee we may
impose will equal 180 days interest on the amount withdrawn subject to penalty.
This mild EWP makes the 1.00% APY more palatable. If the 5-year CD is closed after one year, the effective yield becomes 0.50%, which is close to what many other online banks are currently offering on their one-year CDs.
Also stated in the Truth-in-Savings disclosure:
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 Principal withdrawn before maturity is included in the amount subject to early withdrawal penalty.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 obtaining the bank’s consent to withdraw some or all the principal before maturity.
The FAQs answers the question, “What is involved in the process to open a CD?”
The Certificate of Deposit can only be opened online. You may click ‘Get Started’ on the homepage and follow the prompts to begin the quick three-step application. We will ask for your personal information and external bank account information. Your information will be verified electronically. We may request documentation if additional verification is required. Once this information is confirmed, you will enter the amount of your deposit to schedule an ACH transfer from the verified bank account into your new CD account.
Live Oak does not lock in a CD rate until the funds have been received by the bank. Having your funding in place before beginning the application process affords you the best chance to lock in the current APY.
Headquartered in Wilmington, North Carolina, Live Oak Bank is a pure internet bank, having no brick-and-mortar branches. U.S. citizens/permanent residents who have a valid Social Security number are eligible to open a CD and/or a High Yield Online Savings account.
The Get Started page has a simple form that requests your name and email address. As explained on that page, “To begin the account opening process, please complete the information below.” According to CSR, this is the first step toward initiating the online application process.
Live Oak Bank’s online application is fairly straightforward, but CSR emphasized that there is no "back button" – meaning extra care needs to be taken when filling out the application. CSR also stated that having a copy of your Driver’s License (or other government-issued ID) uploaded on your computer will insure speedy completion of your online application.
Live Oak Bank has an overall health grade of "A" at DepositAccounts.com, with a Texas Ratio of 2.30% (excellent), based on June 30, 2020 data. In the past year, the Bank has increased its total non-brokered deposits by $1.28 billion, an excellent annual growth rate of 43.59%. Please refer to our financial overview of Live Oak Bank (FDIC Certificate # 58665) for more details.
Founded in 2008, Live Oak Bank is currently the fourth largest bank headquartered in North Carolina and the 174th largest bank in the country, with more than $8.1 billion in assets and nearly 80,000 customer accounts. The Bank specializes in small business loans in niche industries, such as self-storage companies, veterinary medicine, funeral homes, as well as more traditional industries like government contracting and hotels.
How the CD Compares
While there are a few easy membership requirement credit unions with 5-year CD rates above 1%, the same can’t be said about online banks. Hyperion Bank currently offers 1.25% APY on its nationally available 60-month CD, but Hyperion is a small bank in Philadelphia with no online application – not exactly a true online bank. (Hyperion Bank CDs can be opened via email and snail-mail.)
When compared to the similar length-of-term CDs tracked by DepositAccounts.com that require a similar minimum deposit that are offered by online banks, Live Oak Bank’s 1-year CD APY currently ranks second. (The 1.00% APY is also offered by three other online banks: Ally Bank, First National Bank of America, and North Country Savings Bank.)
When compared to all the nationally available similar length-of-term CDs tracked by DepositAccounts.com requiring a similar minimum deposit, Live Oak Bank’s 5-year CD APY currently ranks tenth. (I’ve included the top four APYs in addition to Live Oak Bank’s 1.00% APY.)
The above rates are accurate as of 11/13/2020.
To look for the best CD rates, both nationwide and state specific, please refer to our CD Rates Table page.