Deposit Contracts and Collateral

Transcription

1 Deposit Contracts and Collateral Van C. Carter Senior Vice President Public Funds Frost Bank

2 Discussion Points Key Terms Depository Services and Relationships RFP Process & Components Evaluation Process and Factors Account Analysis Collateral Grab Bag Questions / Comments 2

3 Key Terms Terms / Phrase Referring to... RFP / RFA Public Funds Depository Collateral Request for Proposal; Request for Application Monies or revenues of a government, state or municipal corporation The Bank into which money and receipts are deposited, and from which disbursements are drawn Bank assets pledged to a government depositor in excess of FDIC coverage Account Analysis ECR The billing process used by commercial banks for associating a value of deposits for offsetting accrued charges for services and activity 46 th Earnings Credit Rate; The factor used to calculate the value of applicable Annual County Treasurers deposits 3

4 Depository Services and Relationships Types of Deposits Public entity deposits at a Bank MUST BE collateralized Non-Deposits / Investments (Governed by PFIA) Checking Time Deposits Non-interest bearing / Interest bearing Money Market Savings Accounts (MMSA s) Certificates of Deposit (CD s); Contracted terms and rates Brokerage Account Capital Markets Account for the purchase and redemption of non-bank investment instruments Securities division of a financial institution for purchasing and redeeming non-bank investment securities Brokered / Insured CD s CD s placed across a variety of participating financial institutions in amounts exclusively covered by FDIC Safekeeping Division of a financial institution clearing and holding client s investment securities 4

5 Depository Services and Relationships Funds Collection Funds Concentration Funds Disbursement Funds Investment Control & Monitoring Digital Deposit (RDC) ACH Drafts (Debits) Lockbox Processing Consumer Bill Payment Collection Merchant/Credit Card Acceptance Online Transfers Zero Balance Accounts ACH Deposits Wire Transfers Controlled Disbursement Pay Card Business Credit Card / Purchasing Card Certificates of Deposit Automated Sweep Brokerage Capital Markets Online Banking Positive Pay / Payee Review ACH Blocking & Filtering Account Analysis Statement Safekeeping 5

6 RFP Process & Components RFP Objectives Protection of Funds Financial Strength and Stability Collateral Availability of Funds Deposit float Earnings on deposits; Interest accrues on Collected balances Operational Efficiency Services offered; Technology Capability, Capacity, Compatibility and Reliability Rates and Fees Relationship Team & Support Customer Service Quality and Responsiveness Knowledge and Experience 6

7 RFP Process & Components Key Legislation Chapter 113 (Management of County Money) Chapter 116 (Depositories for County Public Funds) Chapter 262 (Purchasing and Contracting Authority of Counties Chapter 117 (Depositories for Certain Trust and Court Registry Funds) 7

8 RFP Process & Components Who, What, When, Where, How... Identify banking functions are currently being performed (need to be supported) Deposit preparation Cash handling Transaction initiation / confirmation / releasing File creation / submission / downloading / importing Reconciliation of transactions and accounts Develop the Questionnaire Describe (a) account structure and (b) processes / functions needing to be supported Interest bearing / non-interest bearing, Zero Balance Accounts, Sweep, Controlled Disbursement Accounts Describe and inquire about Funds collection and depositing process and options Funds disbursement, Fraud Detection, Account/Transaction monitoring options Relationship team References Optional and New Services What would help YOU be more Efficient? Not necessarily the way it s always been done 8

9 RFP Process & Components Notice At least 20 days before RFP responses (i.e. Applications / Proposals) are to be submitted In the Judge s name Newspaper Courthouse Door Applications / Proposals due date >60 days before expiration of the existing depository contract Bank s Paid-Up Capital Stock and Permanent Surplus Statement showing Financial Condition of the Bank Certified or Cashier s check >1/2% (.005) of the County s receding year revenue (i.e. Good Faith Check) NOTE: It is helpful to bidders to allow >4 weeks to prepare responses 9

10 RFP Process & Components Structure of RFP & Bidder Responses RFP released in DOC/DOCX and XLS/XLSX format Enables prospective Bidders to more easily respond WITHOUT inadvertent alterations to the RFP document If protected RFP, format response fields in a different color so that comments can be more easily recognized Any changes or modifications to the original RFP document which are not clearly and obviously indicated will disqualify your proposal. For consistency in Applications, specify the section divisions and order response content should be included Cover Letter, Title Page, Table of Contents, RFP responses, relationship team, financial center locations, references, financial statements, product descriptions, fee schedules, historical rates, sample agreements, sample statements, etc. 10

11 Evaluation Process & Factors Evaluation Do not forget your Objectives: Protection of Funds Availability of Funds Operational Efficiency Rates and Fees Relationship Team & Support Communication between Bidders and County is restricted during RFP & evaluation window Contract awarded based on the most favorable terms and conditions Not necessarily the low-cost provider Within 15 days: Bank must pledge collateral Dependent upon execution of the Depository and Security / Collateral agreements 11

12 Evaluation Process & Factors In-house vs. Consultant Criteria for most favorable terms and conditions Budgets, rates and fees are significant, but People do business with People If unsure of a Bidder s response, reach out with follow-up question(s) Have Bidder verify & confirm your interpretation and calculations of their submission Consider inviting top candidates for presentations 12

13 Account Analysis Account Analysis Balances & Charges Ledger Balance vs Collected Balance Ledger Checkbook register balance Collected Funds collected by Depository through settlement process Billables Service and Activity Fees accrued by Depository Compensating Balance Collected balance necessary to avoid (offset) owing of Bank fees 13

14 Account Analysis Compensating Balances No Fee Position Benefit > Charges 14

15 Account Analysis Compensating Balances No Fee Position Fee Position Benefit > Charges Benefit < Charges 15 14

16 Account Analysis Compensating Balances No Fee Position Compensating Balance Fee Position ( No Fee Position) Benefit > = Charges Benefit Charges Benefit < Charges 16 14

17 Account Analysis Balances and Charges Description Average Ledger Balance Less Float Average Collected Balance Earnings Allowance (1.71% over 30 day month) Collected Balance x ECR = Earnings Allowance Days in Year x Days in Month (to offset charges) Current Period Charges Amount Due 15 17

18 Account Analysis Balances and Charges No Fee Description Average Ledger Balance $1,000,000 Less Float $25,000 Average Collected Balance $975,000 Earnings Allowance (1.71% over 30 day month) $1,370 Collected Balance x ECR = Earnings Allowance Days in Year x Days in Month (to offset charges) Current Period Charges $750 Amount Due $0 (no fee)

19 Account Analysis Balances and Charges No Fee Fee Description Average Ledger Balance $1,000,000 $1,000,000 Less Float $25,000 $25,000 Average Collected Balance $975,000 $975,000 Earnings Allowance (1.71% over 30 day month) $1,370 $1,370 Collected Balance x ECR = Earnings Allowance Days in Year x Days in Month (to offset charges) Current Period Charges $750 $1,500 Amount Due $0 (no fee) $

20 Account Analysis Balances and Charges No Fee Compensating Balance Fee Description Average Ledger Balance $1,000,000 Available to Invest $558,625 $1,000,000 Less Float $25,000 $25,000 $25,000 Average Collected Balance $975,000 To avoid fees deducted $533,625 $975,000 Earnings Allowance (1.71% over 30 day month) $1,370 $750 $1,370 Collected Balance x ECR = Earnings Allowance Days in Year x Days in Month (to offset charges) Charge x Days in Year = Collected Balance ECR Days in Month Current Period Charges $750 Begin calculation here $750 $1,500 Amount Due $0 (no fee) $0 (no fee) $

21 Evaluation Process & Factors Bank services are not apples-to-apples Service Banks may call it: Unit of Measurement Deposits (credits) posted Checks Deposited Withdrawals (debits) posted Change Orders ACH Origination Services Credits Posted Branch/Vault Deposit Remote Capture Deposit Deposited Items On Us /Transit Items Debits Posted Check Posted Check Cashed in Branch Change Order Currency Change Order Coin Strapped Currency Furnished Rolled Coin Furnished ACH Origination Access ACH Origination Items Per item Per item / per $ / per $100 / per $1,000 / per bill Per item / per scanner / per month Per item Per item Per item Per item Per item Per order / per $ / per strap Per order / per $ / per roll Per order / per $ / per strap Per order / per $ / per roll Per module / per month / per account Per item / per file / per settlement window 16 21

22 Evaluation Process & Factors Reserve Requirement (10%) Positive / Negative Collected Balance FDIC Fee is no longer permitted Fil FDIC discourages Bank s from assessing a fee with this name A similar fee is named differently Premium Balance Fee Recoupment Fee Regulatory Balance Fee 17 22

23 Collateral FDIC -- $250,000 (x 2) Chapter 2256 (Public Funds Investment Act; PFIA) Chapter 2257 (Public Funds Collateral Act; PFCA) Minimum of 102% of combined relationship deposits LESS FDIC FHLB LOC vs Securities Should Pledged Collateral Report at least monthly Securities should be marked to market The relationship between Collateral and Depository s Investments 18 23

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25 Grab Bag... HB 89 (September 2017) Prohibition on Contracts with Companies Boycotting Israel Chapter 2270 LGC (State & Local Contracts; Written verification does not, and will not boycott Israel) Chapter 808 (Public Retirement Systems; No investment with or in boycotting companies) Form 1295 (January 2018) No longer notarized Unsworn Declaration No longer required for: Sponsored Research Contract of an institution of higher education Interagency Contract of a State agency or an institution of higher education Health / Human Services if (a) value cannot be determined and (b) any qualified vendor is eligible Contract with a publicly traded business entity (including a wholly owned subsidiary) Contract with an electric utility ( Utility Code) Contract with a gas utility ( Utility Code)

26 Questions / Comments 20 26