Explicit Float Offers 100 Percent Availability of Funds

Last fall, the St. Louis Fed began offering an Explicit Float Pricing Option, which allows an institution to receive immediate credit for its entire deposit, rather than calculated credit. As a result, the institution has full use of its funds on the day its deposits are processed. There is no need to track multiple settlement entries.

Many Eighth District financial institutions have taken advantage of the Explicit Float Pricing Option and are already familiar with its benefits:

• Full credit for your total cash letter amount the same day it is processed;
• Simplified bookkeeping--a single entry records your entire deposit;
• Access to all your funds for investment; and
• Deposits credited to your Fed or correspondent account.

"It's great," says Jennifer Poston of Munford Union Bank, in Munford, Tenn. "Explicit Float has helped us invest and manage funds. Balancing has also been a lot easier. In the past, we had to add and track multiple credit entries."

"The Explicit Float service has been very beneficial to First State Bank," says David Estes, president and CEO of First State Bank in Lonoke, Ark. "It has simplified the process of reconciling and setting our daily position. I am very pleased that the St. Louis Fed continues to develop services for community banks that help hold the line on costs and increase productivity and efficiency."

Eligibility and Deadlines
Any Eighth District financial institution that deposits a Forward and Return Mixed and Other Fed cash letter is eligible for the service. All deposits, which would include Mixed, Unsorted Other Fed, Other Fed Group Sort and Nationwide City Sort, must be received by the following final deadlines:

St. Louis - 11:45 p.m.
Little Rock - 11 p.m.
Louisville - 1:30 a.m.
Memphis - 11 p.m.

Calculations
The daily fee for Explicit Float consists of the float charge reduced by 10 percent, multiplied by the New York Fed Funds rate. This amount is then divided by 360.

[(Aggregate Float Dollars x .90) x Fed Funds Rate] / 360

Note that there is a two-day lag in the Fed Funds rate. For example, deposits processed on Wednesday use Monday's rate. Fed Funds rates can be found at www.ny.frb.org/pihome/statistics/dlyrates.

Billing
Each day, the float charge is calculated and fed to the billing system. Charges appear on the customer's billing statement under service area 1508, product code 19530. Monthly earnings credits may be used to pay for Explicit Float fees, the same way many financial institutions pay for other Fed services.

Although you will receive a single credit on your Fed accounting statement, you will still be able to track deferred dollars. The Fed will continue to provide a mixed advice containing a complete breakdown of your cash letter deposits.

Apply Today
If you would like to simplify bookkeeping, expedite investing, improve your balance sheet and increase your bottom line, contact your local account executive about Explicit Float today.