Review of MapleMark Bank’s Market-Linked CD

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Deal Summary: 5-year term, Max APY: 2%, Min APY: 0%

Availability: Nationwide

Last month, I reviewed the traditional CDs from MapleMark Bank. Those CDs remain competitive, but in today’s low interest rate environment, it’s hard to find any CD attractive. If you’re looking for the potential for higher yield without risking your principal, MapleMark Bank’s new Market-Linked CD may be something to consider.

It has been a long time since I reviewed any market-linked CDs. In the past, they’ve been called by other names, such as Equity-Index CDs and Market Rate CDs. The basic features that they have in common is that you are able to earn some of the upside of a market benchmark, but you are guaranteed not to lose any principal. An important negative feature is that your upside gain is capped. In return, you avoid the risk of losing any of your principal. The lowest return that you could earn would be 0% if the market performs badly throughout the term.

Here are the important features of the MapleMark Bank Market-Linked CD:

  • Performance based on the S&P 500 Index
  • 5-year term with up to 5 payouts
  • Maximum rate of return = 2% APY
  • Minimum rate of return = 0% APY
  • $25,000 minimum deposit
  • Available online directly from MapleMark Bank’s website
  • Interest payments and maturing funds will be deposited into your MapleMark checking account

More details are available at MapleMark Bank’s Market-Linked CD page. At this page, there’s a link to the Market-Linked CD term sheet which has the full details. Note, that this Market-Linked CD offer has a funding deadline of July 23. I was told that a new offer for August will have the same rates and terms. Update 7/24/21: A new term sheet has been released with the new funding deadline of August 24, 2021. The new offer for August does have the same rates and terms.

The term sheet details when the five interest payments will be made during the term and the Index performance that must occur for the interest payments to be made. In the first year, the Index must at least not fall and be no less than the Initial Index Level to qualify for the 2% interest payout. For the second year, the Index needs to grow 104% of the Initial Index Level to qualify for another 2% interest payout. Similar growth must then be made in year three, four and five to qualify for the 2% interest payouts.

The term sheet also lists the early withdrawal penalties. The penalty is a percentage of the principal and it varies based on when the early withdrawal is made. The penalty size goes down as time advances. During the first year, the penalty is 5% of the principal. Each year, the penalty reduces by a percent until it reaches 1% during the last year.

My Take

Of course, the Market-Linked CD would be better if there were more upside potential and if the minimum guaranteed return were higher than 0%. The downside protection is expensive, and it makes you wonder if there is actually more risk in the stock market than experts care to admit.

You can try to create your own market-linked CD by splitting funds between an S&P 500 Index fund and a traditional CD. DA has this Zero Risk Investment Calculator that allows you to determine how much to put into the fund and how much to put into a CD to avoid any risk. For example, if you have $100k and you find a traditional 5-year CD with a 1.35% APY, you could put $93,515 into the CD and the rest into the index fund. If the fund loses its entire value, the $93,515 will grow to your original principal value of $100k within five years. On the other hand, if the S&P 500 Index has an annual return of 12%, your total annual return (combining the CD and the fund) would be 2.19%.

Of course, the worst case scenario in which the S&P 500 Index loses its entire value is not realistic. That’s a world ending scenario. A more realistic worst case would be if the S&P 500 Index falls by 50% in five years. The calculator lets you change the worst case scenario and regenerate the required initial deposits. In this case, the calculator determines that you should fund the CD with $87,820 and the rest would be put into the index fund. If the S&P 500 Index has an annual return of at least 8%, your total annual return (combining the CD and the fund) would be 2.26%.

As you can see by using this calculator, you can’t exactly match the risk/return profile of the Market-Linked CD by just splitting your funds between an index fund and a traditional CD.

Availability

Headquartered in Dallas, Texas, MapleMark Bank offers its product line nationwide to US citizens and resident aliens with valid Social Security numbers. While individual and joint accounts can be opened online, all other ownership types of account require contacting MapleMark.

The online application is available from MapleMark Bank’s Market-Linked CD page. When a new customer opens a CD, a checking account will also be opened. This checking account will receive interest payouts and the maturing funds. Accounts can be funded electronically from an existing bank account. If you have a freeze on your credit, you'll need to lift the freeze temporarily before you submit your application.

Bank Overview

MapleMark Bank has an overall health grade of "A+" at DepositAccounts.com, with a Texas Ratio of 0.40% (excellent), based on March 31, 2021 data. In the past year, MapleMark Bank has increased its total non-brokered deposits by $148.14 million, an excellent annual growth rate of 29.41%. Please refer to our financial overview of MapleMark Bank (FDIC Certificate # 3182) for more details.

As the newest bank in the Dallas metropolitan area, MapleMark Bank was formed in late 2017 when Maple Financial Holdings acquired First National Bank of Edgewood, a $23 million bank with a 118-year history. According to a Dallas Business Journal May 2018 article, MapleMark Bank had raised $90 million within six months,

marking one of the largest initial capital raises to help a firm get off the ground in the U.S.

The investments came mostly from wealthy family investment offices in Dallas, elsewhere in Texas and in nearby Oklahoma, the bank said Tuesday.

These so-called “de-novo” formations, where a bank is started from the ground up with capital raised by investors, all but vanished in the wake of the 2008 financial market collapse. New regulations, tougher oversight and a bustling market for acquiring smaller banks since then have made the process more difficult.

In July 2018, MapleMark opened a branch in Tulsa, Oklahoma, the town where MapleMark’s Chairman/CEO, Anthony Davis, and President, Eric Davis, established reputations in the banking industry. The brothers were former principals with F&M Bank, which was purchased by Prosperity Bank in 2013. At that time, the Davis brothers held the same positions at F&M as they do today at MapleMark.

Related Pages: Dallas CD rates, Tulsa CD rates, 5-year CD rates, nationwide deals, Internet banks

Comments
me1004
  |     |   Comment #1
Very interesting, Of course that talk 2% is a very appealing come on, but you will have to make your own assessment of where the market is going for the next five years to consider how close to 2% you actually will get.

Frankly, my expectation is that it is very possible the market will be crashing before that time frame is out, and you will get 0% from that point on. But at least your principle will be protected, unlike if you put the money in a mutual fund -- but then, the mutual fund could get you a lot more than 2% prior to that market crash.

The big question is when will it crash, and BIden and the Fed are making it clear they intend to keep pumping and pumping the economy for probably the next year and a half or more. Inflation is already taking a toll on savings, but could start pushing up rates at some point going forward. I think rates will be edge up or go up faster than edging before the Fed acts. Nonetheless, when the Fed acts, rates will go up, maybe to 2% or more. in 3-4 year from now could be well over 2%, even as the market it going down and you get less than that 2%. But who knows.

I dont know if you will do better. I'm afraid it is less likely than you will get better than another sure one locked in at 1.5% or even 1.25% and without the speculation. But only time will tell.
kcfield
  |     |   Comment #2
Even though the floor is 0% that doesn't eliminate the other downside risks: The steep EWPs which don't just cut into interest, but take money out of principal, means that one loses all their liquidity for five years (to avoid the EWP) for a potential return of 0%. The upside of a possible 2% return is not worth the steep downside risk with respect to EWP and therefore to liquidity.
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