NYCB pays the highest interest rate in the country (APY)

Community Bank of New Yorkthe regional lender that needed a more than $1 billion lifeline last month is offering the nation’s highest interest rate on a savings account.

NYCB increased the annual returns offered through its online arm, My Direct Bankingup to 5.55%, higher than any other bank’s generally available account, according to Ken Tumin, an analyst who tracks rates for his website Deposit accounts.

The striking figure could be a sign that NYCB is under funding pressure, Tumin said.

“It seems like they are trying very hard to attract deposits,” Tumin said. “My Banking Direct has been around for a long time, more than a decade, so charging an aggressive interest rate can be a sign of a need for financing.”

NYCB’s troubles began in January, when the company prepared for much larger losses on commercial real estate loans than analysts expected. That caused a downward spiral in the stock price, rating agency downgrades and multiple management changes. The bank announced on March 6 a capital injection from investors led by former Treasury Secretary Steven Mnuchin’s Liberty Strategic Capital.

In the month before the bailout was announced, NYCB lost 7% of its deposits, which fell to $77.2 billion as of March 5, the bank said in a report. presentation.

During a conference call after the capital raise, analysts asked how NYCB managed to retain so many of its deposits during the tumultuous period.

“We haven’t done anything crazy in terms of deposit pricing,” says NYCB chairman Sandro DiNello replied. “We haven’t gone out and offered 6% CDs or anything like that to make the numbers look good, if that’s what you’re worried about.”

NYCB did not return calls for comment on its funding strategy.

Joseph Otting, a former comptroller of the currency, took over as the bank’s CEO on April 1, about a week before the rate hike.

Despite the turnaround plan, NYCB shares are still trading at less than $4 each and are down more than 68% so far this year.

Other banks currently offering rates above 5% tend to be newer or smaller players than NYCB, according to Tumin.

Among established banks, the average high-yield savings rate is about 4.4%, and some of them (including American Express, Goldman Sachs And Alley) have lowered rates in the past month, he said. The NYCB rate is also at the top of the bills listed NerdWallet And Bank rate.

Customer deposits with My Banking Direct are insured by the FDIC up to the standard $250,000.

Interest rates on savings accounts have generally increased over the past two years.

Since the regional banking crisis seized Silicon Valley Bank and First Republic last year, smaller players have been forced to pay higher interest rates on deposits compared to giants like JPMorgan Chase to compete, said Matt Stuckylead equity portfolio manager at Northwestern Mutual.

“If a bank has to advertise a much higher rate, it’s usually because they have a deposit problem,” says Stucky. “It is no longer difficult for customers to change banks.”