Take care of your banking with four clean sweeps.
Sweep Accounts and SOUTH CENTRAL BANK, N.A.
South Central Bank has been a very long-time provider of Sweep Accounts to Commercial banking customers. We own the web-site domain, www.sweepaccount.com because we were into the concept of sweep accounts very early, and continue to consider sweep accounts an important source of extra income for our banking customers.
About Sweep Accounts:
Since Federal Regulations prohibit interest payments on corporate checking accounts, a sweep account is designed to give bank customers the opportunity to invest excess funds each day into an interest bearing account. These sweep accounts are “not bank accounts” and are not deposit accounts as covered by FDIC insurance. Our internal sweep accounts are protected by the underlying securities, which are U.S. Treasury or U.S. Federal Agency bonds. Our external sweep accounts are invested in a money market mutual fund limited to U.S Treasury obligations.
Two types of Sweep Accounts allow transfers each day - South Central Bank normally offers both kinds of daily sweep accounts that are available in the market place that allow for transfers every day. From time to time, we may only be able to offer one of the two options, depending on market conditions. Customers will be advised if one or the other sweep process is unavailable.
- EXTERNAL SWEEP - Excess Funds wired out to a U.S.Treasury money market fund: Our outside money market fund is managed by SEI Investments, one of the world’s leading providers of sweep accounts. SEI manages over $200 Billion in assets and has the exclusive endorsement of the American Bankers Association and 15 State Banking Associations. South Central Bank clients are exclusively invested in SEI’s Treasury Fund, a mutual fund limited to U.S. Treasury bills and notes. Rates are controlled by SEI’s investment policy.
- INTERNAL SWEEP - Excess Funds invested in Overnight Repurchase Agreements(“Repos”): South Central Bank, under our Corporate Sweep Account Agreement with our bank customer, secures a one-day debt obligation to the customer with U.S. Treasury or U.S. Federal Agency bonds or notes which we own and hold in safekeeping in the Federal Reserve Bank of Chicago escrowed for Repos. Each Repo is fully collateralized with a specific CUSIP identified federal agency security, which is identified and emailed daily to our customer. Repo rates are established by our bank.
Why traditional bank money market or other interest bearing deposit accounts do not work for Sweep Accounts: Regulation D limits corporate transfers and withdrawals into interest bearing deposit accounts to six transactions per month, so true sweep accounts cannot utilize interest bearing bank accounts. Sweep Accounts need to be effective each and every day, and allow money to be transferred daily and available when needed daily, requiring funds swept through either of the two above “non-deposit” methods.
Sweep funds are not bank deposits: Your sweep funds are not in a deposit account in the bank for one day, although they are secured each day by collateral. Your daily confirmation will state: “NOT FDIC INSURED” because the FDIC fund is limited specifically to “bank deposits”, and our sweep accounts while secured are not bank deposits.
Your business account will have a “Sweep” and “Replenishment” feature: Your regular business checking account will have a “Target Balance” established, a collected amount of funds each day which will determine what happens to investable sweep funds. If the collected business account balance exceeds the Target Balance, the excess funds will go into the sweep account for that day. If the collected account balance is less than the Target Balance, all funds in the sweep account will replenish the checking account balance for that day.
How is the Target Balance established? The Target Balance can be any amount as determined by the bank and the business customer. Ideally, the amount should be established above an amount that pays for servicing the activity in the business account, so that the account does not pay a service charge. Each month the bank analyzes each business account’s activity and also provides an earnings credit based on current rates to offset the service cost of activity. From time to time, the earnings credit will change, as will the activity of the account, and so the Target Balance may need to be adjusted higher or lower. Typically our earnings credit to offset account activity is at a higher rate than the rate on sweep funds, so it would not be preferable to pay a service charge in order to have higher sweep balances.
How does a Sweep Account work? 
There is no difference to your regular business checking account in except the Target Balance and the disposition of sweep funds. All deposits and other credits, and all checks written and other disbursements are made through the checking account. When activity is concluded on the books of the bank for that day, and a collected balance is determined for the day, all funds above the Target Balance are invested in the sweep fund. Wire transfers and electronic clearing items for the day will be normally settled in determining the collected balance.
Rates paid on Sweep Accounts: Rates paid on our external sweep account are determined by the management of the money market mutual fund according to their prospectus, and the daily income on the securities in that fund. Often the interest rate in a money market mutual fund lags the general market, because it is determined by the security portfolio, and will be slightly higher in declining interest rate environments and slightly lower when there are increasing rates. Our internal sweep accounts are paid a short term rate determined by the bank. The security collateralizing the daily repo is generally earning a long term rate, and the rate paid by the bank is a rate based on a one-day investment, so the rate on the pledged security and the rate on the repo are quite different. The bank tries to pay a reasonable rate for an overnight investment and will change the rate as it deems necessary.
Documentation for Sweep Accounts: All sweep account customers will sign and execute a corporate sweep account agreement in addition to other regular business checking agreements.
- External Sweep Accounts: You will receive a prospectus from SEI Investments describing the Treasury Fund. Each month you will receive a separate statement from SEI Investments indicating the daily balance of your sweep account, the rate, and the interest earned.
- Internal Sweep Accounts: You will receive by email or regular mail a Daily Repurchase Agreement Confirmation indicating your repo balance, and the detail of the collateral including CUSIP number of the escrowed federal agency security and the fractional interest owned allocated to your repo balance. Monthly interest will be credited to your business checking account.
How do you apply for a sweep account?
Ask a personal banker for more information or e-mail rribordy@banksouthcentral.com or call Bob Ribordy at (312) 491-7118. When applying for a sweep account, you will be asked to sign an agreement authorizing South Central Bank to transfer funds between your checking account and the Sweep Fund and to pay interest on the Sweep Fund balances.
