In the past, we talked about the fees, profit and risk profile of why banks should utilize an automated loan sweep (ALS) that moves excess funds to pay down the outstanding balance on revolving line of credit (HERE). In this article, we look at an equally overlooked derivation of the product where excess operating funds are used to pay down a term facility instead of balances on a revolving line of credit.
One of the best predictors of bank performance is the level of fee income. The more fee income a bank has, the more likely they have above average performance. Fee income creates a more stable and less interest rate sensitive revenue stream. It amazes us how few banks offer a loan sweep (sometimes called an “ALS” or Automated Loan Sweep) where a customer can set their operating account to sweep balances to reduce their borrowings on their line of credit. CenterState Bank offers the product, and this lays out a case of why you may want to consider the product.
