Sweep Accounts
Not FDIC Insured
Putting Your Money to Work
Leaving idle balances in your checking account does not generate profit, but investing your operating funds each evening through a sweep account assures liquidity, generates interest income or investment yield, safeguards capital, and saves time.
Orlando National Bank offers you efficient answers to maximize your earnings. Our Sweep Account is a great way to utilize excess funds beyond those needed to support daily activity.
How It Works
The Sweep Account is actually two accounts in one. The first account is the Operating Account, a non-interest bearing account, which is used to make deposits and write checks. The second account is the Investment Account and is the interest bearing account.
Your cash manager and ONB work together to determine a target balance to be maintained in your operating account on a daily basis. This is known as your "Peg Balance". This Peg Balance remains in your operating account continually and is used to offset monthly account and transaction fees.
At the end of each business day, after all debits and credits have posted to your account, collected balances in excess of the predefined target are swept into a separate investment account to collect interest.
When funds are needed to cover checks and withdrawals, cash is swept back automatically into the operating account to both cover the debits and return the account balance to the required target balance.
If funds are available in excess of the specified Peg Balance at the end of the next business day, the cycle is repeated.
The investment account pays a tiered block rate, so that the rate increases as balances increase. The interest is paid monthly to your investment account. Sweep account rates are market related and may change at any time.
The Investment
Sweep Accounts utilize retail repurchase agreements or Repos. Repos are short-term debt obligations of the bank.
Repos are not FDIC insured, but are collateralized by U.S. securities, held by a correspondent bank and are fully guaranteed by the United States or one of its agencies.
Since Repos are not FDIC insured, they are an ideal investment vehicle for firms that exceed the $100,000 protection limit provided by the FDIC.
Repos are merely the sale of marketable securities from the bank to you, the investor, wherein the bank agrees to buy back the securities the next day at the same price plus interest. Since the bank collateralizes the Repos at 102%, the Repos take on the characteristics of a collateralized overnight loan from you to the bank.
Each depositor will receive a daily confirmation by fax or mail on the securities used for securing their Sweep Account.
Potential Users
All business checking accounts are eligible, but not all customers would benefit. Low transaction accounts are usually easy for customers to manage themselves through other Orlando National Bank products such as Money Market Account, Business Savings, and Certificates of Deposit.
A Orlando National Bank Representative can help you determine which product is best for your business.
