Who Wants Public Deposits?

Who Wants Public Deposits?

Who Wants Public Deposits?

The answer is not a firm “yes” or “no,” but rather “it depends.”

First, let me qualify by stating that most banking institutions consider public deposits to be not just a community obligation but also a challenge, due to collateral and legal requirements. Two factors can make such deposits appeal to a bank: longevity and predictability.

As three+one people talk to bank executives around the country, we hear that most of the larger banks are boosting up their balance sheets and are looking to pay up for public deposits. However, they are also looking for general operating accounts or other banking business to justify taking on these deposits. Clearly there are no large banks that are looking for “hot” money.

Who Wants Public Deposits?

Right now, smaller community banks are more interested in just boosting their operating money. They don’t want to get caught in an“inverted” yield curve where short-term rates are rising and longer-term rates fail to keep pace. It such cases, public deposits become a losing proposition.

So what options does a public entity have? Consider these tips:

1.) The days of bidding hot money is over. Pick a bank and build a strong relationship with them. The stronger the relationship, the more your bank will respond to keep—and grow—your business. Having multiple bank relationships and accounts stand to work against you, not for you.

2.) Look outside making just bank deposits. Options such as U.S. Treasuries and other public short-term paper may work better, depending on their credit rating.

3.) If available, look into your state’s liquidity pool. Make sure you know all the requirements of the pool’s rates and the ease and ability to access your funds.

4.) Explore any government money market funds with a constant Net Asset Value (NAV). These must be allowed in your state and meet local investment guidelines. Such funds are starting to look extremely appealing in a rising rate environment.

5.) Consider a separately managed account through a Registered Investment Advisor (RIA). Where permitted and with the correct liquidity data, an RIA can manage your short/long-term cash, capture higher yields, and meet all your legal, liquidity, and safety requirements.

Cash is an asset that has a lot of value in today’s markets—and that’s likely to rise. Banks may be specific in what they want and don’t want, but you do have options.

At three+one, we can help you right from the start. Through our proprietary cashVest® liquidity analysis and quarterly data feed, we can pinpoint your exact liquidity needs and provide the assurance that you are making the highest income while maintaining all the necessary requirements.

Your deposits do have value and are wanted; you just need to know where to put them.

Budget 2.0%+ for 2019

Budget 2.0%+ for 2019

Last year, I blogged that short-term rates would reach 2.0%+ by the end of 2018. Looking out a bit further, I am going to be so bold as to provide guidance for 2019’s short-term-rate expectations.

Budget 2.0%+ for 2019

What will this mean for the value of your entity’s cash as you look to budget interest income for the coming fiscal year? Only time will tell. That said, here is what I recommend you use as a guide to calculate your interest income for 2019:

1.) All cash should be considered as an asset and having a marketplace value. While most bank deposit rates—both checking and savings—may lag behind the upcoming Federal Reserve rate hikes, a strong banking relationship will help you negotiate higher Certificates of Deposit for 30 to 90 days. Currently these rates are hovering in the 1.30%+ range. If the Fed approves three .25% rate hikes in 2018, as expected, that will put 30-to-90-day CD rates over 2.0%.

2.) State pool and money market funds, where permitted, will also exceed the 2.0% level as well.

3.) Commercial paper, where permitted, and other short-term instruments will likely break through the 2.5% level.

4.) Average Earning Credit Rates (ECR) at many banks will climb well over 1.0%.

5.) With a properly structured liquidity plan, a professionally managed and laddered Treasury portfolio could provide a rate above 3.0% in 2019. This can be accomplished by stretching maturity dates out a bit further than what you may have been doing.

How can you best prepare a proactive approach to achieve such rates as expected rate hikes occur? My best answer is to view “all” cash as an asset. The days of leaving cash on the sidelines are over; doing so is a disservice to your entity and those you serve. The time and effort it takes will be well worth the added interest income to your bottom line.

At three+one, we can help you identity where all your cash is and develop a liquidity plan that will place a time horizon on all funds, while keeping you abreast of what the value of your cash is worth in the marketplace.

To capture the highest yields in the marketplace and ensure the most advanced and efficient Treasury services for your organization, consider having three+one perform a comprehensive liquidity analysis. Applying our extensive financial expertise, we can also help you negotiate more effectively with your banker(s) and/or financial advisors.

In 2019, your cash should be worth 2.0% or more and that should be reflected in your budget.

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Upcoming Events
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NYSGFOA Annual Conference
Pre-conference – March 20th, 2018
Annual Conference – March 21-23rd, 2018
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Are You Truly Protected? Part 2/2

Are You Truly Protected? Part 2/2

Last week, I told you about one of the biggest worries facing the banking world today: Identifying fraud and protecting clients from it!

Today we will look at measures you, as a public entity or higher Ed institution, can take to ensure that you’re protected from fraud or scams in the transfer or payment of your monies by phone, email, check, or online. Here are a few tips:

Are You Truly Protected?

1.) Have a conversation with your bank(s) on what fraud protection services they offer and to what level you are protected.

2.) Establish “Positive Pay” or “Payee Positive Pay” on each account that issues checks. Under this protection, your bank will ask you to verify the authenticity of a check before a check is paid out. Establish ACH blocks and filters on all appropriate accounts.

3.) Embrace new banking technology like electronic banking and purchasing cards.

4.) Be observant! Keep in mind, just like a common cold, fraud and viruses are looming and waiting for the right time to hit you. Don’t get caught off-guard.

5.) Train your full staff on a regular basis. Tell them to be suspicious of emails, phone calls that seem normal, and checks and wire transactions that appear standard—they could be fraudulent.

6.) Finally, trust your gut and those that work for you. Encourage them to ask questions, no matter how obvious or simple they may seem.

Every dollar you protect is one less dollar that is at risk to your entity.

At three+one, we can help you create the right mix of fraud-protection services for your entity and help you with those conversations with your bank. Our interest is wholly that of your entity and those you serve.

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Upcoming Events

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NYSGFOA Annual Conference
Pre-conference – March 20th, 2018
Annual Conference – March 21-23rd, 2018
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Are You Truly Protected? Part 2/2

Banking Relationship Banking Trends Are You Truly Protected (Part 1/2)

The phone call comes in on a Monday morning and you are informed a check for $60,871 was cashed by a major bank in Alaska, but not to the payee you had designated. Your signature is on the check clearing the main operating account from your local bank. The account number lines up and your money has been debited from your account. Your money is gone, the intended payee is still owed the amount, and your local bank says you have a problem. What a way to start a Monday morning and your week!

Who’s responsible? Your office, your local bank, or the large bank that cashed the check?

Are You Truly Protected?

Ultimately it comes down to how you established your banking relationship and if fraud-protection services have been set up with your local bank. First of all, do they offer such services? Is your bank committed to protect your entity, no matter what? Does the bank have the capital to protect itself from such events?

When I led teams at two major banking Institutions, it was in our DNA to protect both our clients and the bank. On a normal day, our banking division would have over 2,000 attempts to defraud the banks through phone calls, check/credit card scams, and online hacking of bank accounts. It was our goal to be the body armor around our client relationships. The cost the banks was significant but necessary since, to us, our clients always came first.

Is that true for all banks? Unfortunately the answer is “no.” Not all banks are equal in the level of their fraud protection and even if they’re able to offer such protection. But in any case, I can assure you that banks of all sizes work feverishly to stay ahead of scams before they reach you—and potentially cost you a large sum of money.

Next week, in Part 2 of this blog series, we will offer several suggestions that can go a long way in protecting your entity or institution from fraud.

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Upcoming Events
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NYSGFOA Annual Conference
Pre-conference – March 20th, 2018
Annual Conference – March 21-23rd, 2018
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