deposit contracts and collateral - county prese… · continuing education seminar thth deposit...
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46th Annual County Treasurers’ Continuing Education Seminar46th Annual County Treasurers’ Continuing Education Seminar46th Annual County Treasurers’ Continuing Education Seminar
Deposit Contracts and Collateral
Van C. CarterSenior Vice President – Public FundsFrost Bank
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46th Annual County Treasurers’ Continuing Education Seminar46th Annual County Treasurers’ Continuing Education Seminar
Discussion Points
• Key Terms• Depository Services and Relationships • RFP Process & Components• Evaluation Process and Factors• Account Analysis• Collateral• Grab Bag• Questions / Comments
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46th Annual County Treasurers’ Continuing Education Seminar46th Annual County Treasurers’ Continuing Education Seminar
Key Terms
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Terms / Phrase Referring to . . .
RFP / RFA Request for Proposal; Request for Application
Public Funds Monies or revenues of a government, state or municipal corporation
Depository The Bank into which money and receipts are deposited, and from which disbursements are drawn
Collateral Bank assets pledged to a government depositor in excess of FDIC coverage
Account Analysis The billing process used by commercial banks for associating a value of deposits for offsetting accrued charges for services and activity
ECR Earnings Credit Rate; The factor used to calculate the value of applicable deposits
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46th Annual County Treasurers’ Continuing Education Seminar46th Annual County Treasurers’ Continuing Education Seminar
Depository Services and Relationships
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Types of DepositsPublic entity deposits at a Bank MUST BE collateralized
Checking Non-interest bearing / Interest bearing
Time Deposits Money Market Savings Accounts (MMSA’s)
Certificates of Deposit (CD’s); Contracted terms and rates
Brokered / Insured CD’s
CD’s placed across a variety of participating financial institutions in amounts exclusively covered by FDIC
Non-Deposits / Investments(Governed by PFIA)
Brokerage Account Account for the purchase and redemption of non-bank investment instruments
Capital Markets Securities division of a financial institution for purchasing and redeeming non-bank investment securities
Safekeeping Division of a financial institution clearing and holding client’s investment securities
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46th Annual County Treasurers’ Continuing Education Seminar46th Annual County Treasurers’ Continuing Education Seminar
Depository Services and Relationships
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Funds Collection
Digital Deposit (RDC)ACH Drafts (Debits)Lockbox ProcessingConsumer Bill Payment CollectionMerchant/Credit Card Acceptance
Funds Concentration
Online TransfersZero Balance Accounts
Funds Disbursement
ACH DepositsWire TransfersControlled DisbursementPay CardBusiness Credit Card / Purchasing Card
Funds Investment
Certificates of DepositAutomated SweepBrokerageCapital Markets
Control & Monitoring
Online BankingPositive Pay / Payee ReviewACH Blocking & FilteringAccount Analysis StatementSafekeeping
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46th Annual County Treasurers’ Continuing Education Seminar46th Annual County Treasurers’ Continuing Education Seminar
RFP Process & ComponentsRFP 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
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46th Annual County Treasurers’ Continuing Education Seminar46th Annual County Treasurers’ Continuing Education Seminar
RFP Process & Components
Key LegislationChapter 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)
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46th Annual County Treasurers’ Continuing Education Seminar46th Annual County Treasurers’ Continuing Education Seminar
RFP Process & ComponentsWho, 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”
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46th Annual County Treasurers’ Continuing Education Seminar46th Annual County Treasurers’ Continuing Education Seminar
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
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46th Annual County Treasurers’ Continuing Education Seminar46th Annual County Treasurers’ Continuing Education Seminar
RFP Process & ComponentsStructure 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.
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46th Annual County Treasurers’ Continuing Education Seminar46th Annual County Treasurers’ Continuing Education Seminar
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
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46th Annual County Treasurers’ Continuing Education Seminar46th Annual County Treasurers’ Continuing Education Seminar
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
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46th Annual County Treasurers’ Continuing Education Seminar46th Annual County Treasurers’ Continuing Education Seminar
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
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46th Annual County Treasurers’ Continuing Education Seminar46th Annual County Treasurers’ Continuing Education Seminar
Account Analysis – Compensating Balances
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“No Fee” Position
Benefit > Charges
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46th Annual County Treasurers’ Continuing Education Seminar46th Annual County Treasurers’ Continuing Education Seminar
Account Analysis – Compensating Balances
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“No Fee” Position Fee Position
Benefit > Charges Benefit < Charges
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46th Annual County Treasurers’ Continuing Education Seminar46th Annual County Treasurers’ Continuing Education Seminar
Account Analysis – Compensating Balances
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“No Fee” Position Compensating Balance Fee Position(“No Fee” Position)
Benefit > Charges Benefit < ChargesBenefit = Charges
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46th Annual County Treasurers’ Continuing Education Seminar46th Annual County Treasurers’ Continuing Education Seminar
Account Analysis – Balances and Charges
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Description
Average Ledger Balance
Less Float
Average Collected Balance
Earnings Allowance (1.71% over 30‐day month)
Collected Balance x ECR = Earnings AllowanceDays in Year x Days in Month (to offset charges)
Current Period Charges
Amount Due
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46th Annual County Treasurers’ Continuing Education Seminar46th Annual County Treasurers’ Continuing Education Seminar
Account Analysis – Balances and Charges
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Description
“No Fee”
Average Ledger Balance $1,000,000
Less Float $25,000
Average Collected Balance $975,000
Earnings Allowance (1.71% over 30‐day month) $1,370Collected Balance x ECR = Earnings Allowance
Days in Year x Days in Month (to offset charges)
Current Period Charges $750
Amount Due $0 (no fee)
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46th Annual County Treasurers’ Continuing Education Seminar46th Annual County Treasurers’ Continuing Education Seminar
Account Analysis – Balances and Charges
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Description
“No Fee” “Fee”
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 $1,370Collected 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) $130
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46th Annual County Treasurers’ Continuing Education Seminar46th Annual County Treasurers’ Continuing Education Seminar
Account Analysis – Balances and Charges
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Description
“No Fee” Compensating Balance “Fee”
Average Ledger Balance $1,000,000 $558,625 $1,000,000
Less Float $25,000 $25,000 $25,000
Average Collected Balance $975,000 $533,625 $975,000
Earnings Allowance (1.71% over 30‐day month) $1,370 $750 $1,370Collected Balance x ECR = Earnings Allowance
Days in Year x Days in Month (to offset charges)Charge x Days in Year = Collected BalanceECR Days in Month
Current Period Charges $750 $750 $1,500
Amount Due $0 (no fee) $0 (no fee) $130
Begin calculation here
Available to Invest
To avoid fees deducted
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46th Annual County Treasurers’ Continuing Education Seminar46th Annual County Treasurers’ Continuing Education Seminar
Evaluation Process & Factors• Bank services are not “apples-to-apples”
Service Banks may call it: Unit of MeasurementDeposits (credits) posted Credits Posted
Branch/Vault DepositRemote Capture Deposit
Per itemPer item / per $ / per $100 / per $1,000 / per billPer item / per scanner / per month
Checks Deposited Deposited ItemsOn Us /Transit Items
Per itemPer item
Withdrawals (debits) posted Debits PostedCheck PostedCheck Cashed in Branch
Per itemPer itemPer item
Change Orders Change Order‐CurrencyChange Order‐CoinStrapped Currency FurnishedRolled Coin Furnished
Per order / per $ / per strapPer order / per $ / per rollPer order / per $ / per strapPer order / per $ / per roll
ACH Origination Services ACH Origination AccessACH Origination Items
Per module / per month / per accountPer item / per file / per settlement window
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46th Annual County Treasurers’ Continuing Education Seminar46th Annual County Treasurers’ Continuing Education Seminar
Evaluation Process & Factors
• Reserve Requirement (10%)
• Positive / Negative Collected Balance • FDIC Fee is no longer permitted
• Fil-33-2012 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
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46th Annual County Treasurers’ Continuing Education Seminar46th Annual County Treasurers’ Continuing Education Seminar
Collateral• FDIC -- $250,000 (x 2)
https://www.fdic.gov/deposit/deposits/factsheet.html
• 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
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46th Annual County Treasurers’ Continuing Education Seminar46th Annual County Treasurers’ Continuing Education Seminar
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 (§31.002 Utility Code)• Contract with a gas utility (§121.001 Utility Code)
https://www.ethics.state.tx.us/whatsnew/FAQ_Form1295.html#Changes
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46th Annual County Treasurers’ Continuing Education Seminar46th Annual County Treasurers’ Continuing Education Seminar
Questions / Comments
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