CERTIFICATES OF DEPOSIT (CD'S)

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Certificates of Deposit (CD's) and Brokered CD's

Certificates of Deposit (CD's)

Bank deposits have a special role in the economy as a significant source of funds for banks, savings and loans and thrifts.  Banks lend money to businesses, homeowners, corporations and others for years at a time.  In order to balance their assets and liabilities, they must also attract funds that will remain on deposit for a fixed term.

CD's represent "time deposits" that earn a contractual rate of interest over a specified period of time.  Investors agree to lend money to a bank for a fixed perod of time and, in return, investors receive a stated rate of interest, paid in various installments, over the life of that "loan."  Because investors give up the right to withdraw their money at any time, they receive a higher interest rate than on demand accounts, such as savings or money market accounts.

Brokered CD's¹

Most investors are familiar with the type of CD's that can be purchased at a local bank branch.  Many banks are highly motivated to gain depositors beyond local, walk-in customers.  As a result, many banks use the nationwide brokerage community for distribution of CD's.  CD's obtained in this manner are referred to as brokered CD's.  Like CD's¹ purchased at a bank, or any other bank deposit, brokered CD's are backed by the full faith and credit of the U.S. government through Federal Deposit Insurance Corporation (FDIC) insurance.

Brokered CD's are simply CD's that are issued by banks, purchased in bulk by securities firms and sold to clients through Financial Advisors.  CD transactions can be easily executed within a brokerage account with just a phone call to a Financial Advisor.  Investors do not receive physical certificates for their brokered CD's, but instead receive a periodic account statement detailing their CD holdings.

Brokered CD Advantages

Secondary Market - CD's are most suitable for purchasing and holding to maturity.  However, investors may find it necessary to dispose of CD's before maturity.  An important distinction between brokered CD's and bank CD's is the different means for early redemption.  Bank CD's typically carry an early withdrawal penalty.  Brokered CD's are traded in the secondary market, which provides an opportunity for investors to sell their CD's at prevailing market levels.  They may be worth more or less than the original amount invested.  Brokered CD's, like bank CD's, will return your original amount invested if held to maturity.

FDIC Coverage² - The standard insurance amount is $250,000 per depositor, per insured depository institution for each account ownership category.  These limits apply to all deposits with a particular issuer even if purchased through multiple institutions.

To learn more about brokered CD's, please take a look at our brochure.  If you are interested in our current brokered CD rates, please contact us and we'll get in touch with you.

¹ Brokered CD's may not be suitable for all investors.  Please read the disclosure materials provided by your Financial Advisor carefully before investing.
² For additional information about FDIC insurance, please refer to the FDIC website at www.FDIC.gov or by calling 1-877-ASK-FDIC (1-877-275-3342) and/or the FDIC brochure "Questions and Answers About Your Insured Deposit."