Deposit Contracts and Collateral Van C. Carter Senior Vice President – Public Funds Frost Bank 46 th Annual County Treasurers’ 46 th Annual County Treasurers’ 46 th Annual County Treasurers’ Continuing Education Seminar Continuing Education Seminar 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 46 th Annual County Treasurers’ 46 th Annual County Treasurers’ Continuing Education Seminar Continuing Education Seminar 2
Key Terms 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 46 th Annual County Treasurers’ 46 th Annual County Treasurers’ deposits Continuing Education Seminar Continuing Education Seminar 3
Depository Services and Relationships Non-Deposits / Investments Types of Deposits Public entity deposits at a Bank MUST BE collateralized (Governed by PFIA) Checking Non-interest bearing / Interest bearing Brokerage Account Account for the purchase and redemption of non-bank investment instruments Time Deposits Money Market Savings Accounts (MMSA’s) Capital Markets Securities division of a financial Certificates of Deposit (CD’s); institution for purchasing and redeeming Contracted terms and rates non-bank investment securities Brokered / Insured CD’s placed across a variety of CD’s participating financial institutions in Safekeeping Division of a financial institution amounts exclusively covered by FDIC clearing and holding client’s investment 46 th Annual County Treasurers’ 46 th Annual County Treasurers’ securities Continuing Education Seminar Continuing Education Seminar 4
Depository Services and Relationships Funds Collection Funds Funds Funds Investment Control & Concentration Disbursement Monitoring Online Transfers ACH Deposits Online Banking Digital Deposit (RDC) Certificates of Deposit Zero Balance Wire Transfers Positive Pay / Payee ACH Drafts (Debits) Automated Sweep Accounts Review Lockbox Processing Controlled Brokerage Disbursement ACH Blocking & Consumer Bill Capital Markets Filtering Payment Collection Pay Card Account Analysis Business Credit Card / Merchant/Credit Card Statement Purchasing Card Acceptance Safekeeping 46 th Annual County Treasurers’ 46 th Annual County Treasurers’ Continuing Education Seminar Continuing Education Seminar 5
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 46 th Annual County Treasurers’ 46 th Annual County Treasurers’ Continuing Education Seminar Continuing Education Seminar 6
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) 46 th Annual County Treasurers’ 46 th Annual County Treasurers’ Continuing Education Seminar Continuing Education Seminar 7
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” • 46 th Annual County Treasurers’ 46 th Annual County Treasurers’ Continuing Education Seminar Continuing Education Seminar 8
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 46 th Annual County Treasurers’ 46 th Annual County Treasurers’ Continuing Education Seminar Continuing Education Seminar 9
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. 46 th Annual County Treasurers’ 46 th Annual County Treasurers’ Continuing Education Seminar Continuing Education Seminar 10
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 46 th Annual County Treasurers’ 46 th Annual County Treasurers’ Continuing Education Seminar Continuing Education Seminar 11
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 46 th Annual County Treasurers’ 46 th Annual County Treasurers’ Continuing Education Seminar Continuing Education Seminar 12
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 46 th Annual County Treasurers’ 46 th Annual County Treasurers’ Continuing Education Seminar Continuing Education Seminar 13
Account Analysis – Compensating Balances “No Fee” Position Benefit > Charges 46 th Annual County Treasurers’ 46 th Annual County Treasurers’ Continuing Education Seminar Continuing Education Seminar 14 14
Account Analysis – Compensating Balances “No Fee” Position Fee Position Benefit > < Charges Charges Benefit 46 th Annual County Treasurers’ 46 th Annual County Treasurers’ Continuing Education Seminar Continuing Education Seminar 15 14
Account Analysis – Compensating Balances “No Fee” Position Compensating Balance Fee Position (“No Fee” Position) Benefit = Benefit > < Charges Charges Charges Benefit 46 th Annual County Treasurers’ 46 th Annual County Treasurers’ Continuing Education Seminar Continuing Education Seminar 16 14
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