NYCB is paying the nation’s highest interest rate (APY)

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

According to Ken Tumin, an analyst who tracks rates for his DepositAccounts website, NYCB increased the annual percentage yield offered through its online subsidiary, My Banking Direct, to 5.55%, higher than that of any other account widely available than any other bank.

The exceptional rate could be a sign that NYCB is facing funding pressures, Tumin said.

“It seems like they are doing everything they can to attract deposits,” Tumin said. “My Banking Direct has been around for a long time, more than 10 years, so an aggressive rate could be a sign of need” for financing.

NYCB’s problems began in January, when it said it was bracing for much larger losses on commercial real estate loans than analysts expected. This triggered a downward spiral in its stock price, downgrades by rating agencies and multiple management changes. On March 6, the bank announced a capital injection from investors led by former Treasury Secretary Steven Mnuchin’s Liberty Strategic Capital.

In the month before the bailout announcement, the Bank of New York shed 7% of its deposits, falling to $77.2 billion by March 5, the bank said in a presentation.

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

“We haven’t done anything crazy regarding deposit prices,” responded NYCB President Sandro DiNello. “We didn’t offer CDs at 6% or anything like that to make the numbers look good, if that’s what you’re interested in.”

NYCB did not respond to a request for comment on its financing strategy.

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

Despite the turnaround plan, NYCB shares still trade for less than $4 each and are down more than 68% year to date.

According to Tumin, other banks offering rates above 5% right now tend to be newer or smaller operators than NYCB.

Among established banks, the average high-yield savings rate is around 4.4%, and many of them (including American Express, Goldman Sachs AND Ally) they have lowered rates in the last month, he said. The NYCB rate also beats accounts listed on NerdWallet and Bankrate.

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

Over the past two years, savings account rates have been substantially on the rise.

Since the regional banking crisis consumed Silicon Valley Bank and First Republic last year, smaller operators have been forced to pay higher rates for deposits than giants like JP Morgan Chase to compete, said Matt Stucky, chief portfolio manager for equities at Northwestern Mutual.

“When a bank has to advertise a much higher rate, it’s usually because they have a problem with deposits,” Stucky said. “It is no longer difficult for customers to switch banks.”