After developing and implementing a clear liquidity plan over the last year, Beaufort County, SC has increased its interest earning by over 300%. Treasurer Maria Walls, CPA has worked closely with her bank, investment advisors, and threeplusone to make sure every dollar that she has on hand is being put to work to earn more.
Beaufort County has an annual budget of $245 million. For fiscal year 2018 (July 2017-June 2018), Treasurer Walls recorded a record $2.9 million in interest earnings for her county. As she continues to proactively implement the County’s monthly cashVest® updates, we anticipate the County to earn over $3.5 million in interest earning for the next fiscal year.
With significant advances in all five components of the County’s cashVest update, Treasurer Walls was able to increase her score by over 20 points since the initial analysis. Here are a few ways the County has achieved over $2 million in interest earnings:
1.) By ensuring 100% of all the County funds are providing value, either through direct interest earnings or by offsetting banking fees.
2. ) The Treasurer continues to work on balancing the County’s operating balances and using threeplusone’s time-horizon data to ensure all low- and non-performing cash is receiving the maximum rate potential.
3.) The County increased the interest on operating liquidity by over 215% during the 2018 fiscal year.
4.) The Treasurer’s office adopted an investment policy that guides current and future employees in the allowable investments and restraints that maximize the County’s cash assets within the appropriate confines of safety and liquidity.
As budget season approaches, it’s time to focus on liquidity management. Let us help you achieve greater interest earnings in 2019 by identitying the value of your cash and putting it to work the way Beaufort County has.
Yes, the bank merger trend is back, but on a much different level. As mentioned over the last two years, the trend would rekindle itself after more than a decade-long lag following the financial crisis of 2008.
Once again, the circle of life in the banking industry evolves.
Instead of the mega banks gobbling each other up to capture the top five slots, as witnessed in the late ’90s and early 2000s, the new trend that’s underway is with regional and community banks. By merging they combine & strengthen technology, become more efficient, and achieve a more level playing field with much larger banks (e.g., J.P. Morgan, Bank of America, Wells Fargo, Citibank, etc.).
The $66 billion merger of BB&T and SunTrust has led to speculations that other regional banks may follow suit. These include, but are not limited to PNC, Fifth Third, Key Bank, TD Bank, M&T Bank, Huntington, Capital One, Citizens Bank, Key Bank, Regions, and Synovus.
What does this mean for the public entity and higher Ed marketplace?
The same as it did over a decade ago: account conversions, personnel turnover, pricing changes, branch consolidation, stronger competition to preserve business, and a trickling down to community banks wanting to join in on the trend.What can one do to prepare for another round of bank mergers?
First, have a conversation with your banker(s). Discuss the change that is occurring or may occur with their financial institutions and in the marketplace, including possible implications if a merger were to happen.
Second, if a merger or takeover were to occur, have patience. Issues with regulators, shareholders, and Day 1 processes often take a year or more to be resolved. While each bank will still need to operate independently until Day 1, the work behinds the scenes is both extensive and exhaustive.
Third, in many cases merging banks may have to shift deposits due to regulatory caps, which may mean that you will be asked to consider Treasuries instead of bank CDs or deposit accounts. For example, with the BB&T/SunTrust merger, they may be required to shift as much as $4 billion in bank deposits from on-balance sheet to off-balance sheet investments.
Fourth, if the changes require a new banking RFP (Request For Proposal), discuss it with your banker(s). Given the new technology of threeplusone’s rfpPrep® (www.bankingrfp.com), the ease of conduct a banking RFP could never be easier. The whole process is 100% online and can be done in 85% less time than typical RFPs.
In my 35 years in the financial, higher Ed, and governmental banking world, I’ve often seen history repeat itself. With new technologies, better online services, greater efficiencies and transparency, the evolution of banking will only get better, one bank merger at a time.
Over the last four years, we have encouraged public entities and higher Ed institutions to hold off on a banking services Request for Proposal (RFP) due to the low-interest-rate environment and the burdensome process in conducting a RFP. The value was not there, given the time required to conduct a banking RFP.
Well, that is now changing. With higher short-term-interest rates, new technology, and more banks pursuing public and higher Ed clients, the time has come to start taking advantage of the marketplace.
Over the last month, we have seen bank Earning Credit Rates (ECR) jump to as high as 1.90% in a competitive setting, with savings rates on cash balances north of 2.00%. All of this follows a trend that we see continuing in 2019.
In considering a bank RFP, it is essential that you have a forward-thinking document that reaches the greatest number of the banks in your marketplace. The idea of pulling one out of a drawer from a few years back, or from a neighboring entity, will not serve you well. An RFP needs to reflect your own banking needs, now and in the future. With technology changing so quickly, the ability to conduct a banking RFP is now at your fingertips.
The process to conduct a banking RFP no longer needs to be a burdensome paper-intensive process. With threeplusone’s new rfpPrep®—an online RFP process (at www.bankingrfp.com)that includes a custom-tailored threeplusone liquidity analysis—you’ll no longer have to read thousands of pages of responses. In fact, comparing banking services and pricing becomes an easy “apples to apples” exercise.
Just imagine being able to know which banks have the best services and pricing within minutes from a final bid deadline; what used to take months to perform now can take a couple of weeks.
Under this approach, your time in conducting an RFP can be cut down by 75%, while focusing on the relationship rather than figuring out comparative pricing and confusing disclaimers through reams of paper.
The time has come to determine if a banking RFP is a priority for 2019. If so, threeplusone can demonstrate the power of rfpPrep and the ease of conducting a bank RFP right at your desk.
Your time is valuable and so are your banking relationships. If it has been over five years since your last bank RFP, now might be time to consider a new one.
The results may surprise you, both in ease and in value.
The Federal Reserve has recently signaled a level of patience on its path of raising short-term interest rates. This is a major shift since it embarked on raising short-term rates beginning in late 2016.
On January 30, the Federal Reserve decided to maintain the current rate target range of 2.25% to 2.50%.
There are several reasons for this change in temperament: the increased volatility in the equity markets; a possible economic slowdown due to the recent government shutdown; uncertainty in other economic indicators from international trade tariffs; and concern over corporate earnings.
While these market signals of a possible slowdown may be brief (counter to my own personal beliefs), the ability to capture higher rates on your cash still exists in the marketplace.
As mentioned in previous blogs, while short-term rates may stay within a narrow range, the ability to extend your cash investments over a longer period may exist. This is a conversation you should have with your financial institution or financial advisor.
Knowing when you need your cash and how far your can extend your cash investments are the core elements of liquidity management.
At threeplusone we can provide you with time-horizon levels on all your cash, allowing you to take advantage of several opportunities that exist in today’s marketplace.
Keep in mind that every dollar you hold has value in the marketplace. As a result, having patience has its rewards. The longer you can sustain your cash investments, the greater the earnings your cash will likely produce.
Let us show you how our proprietary liquidity algorithms can help your entity—and your financial institutions—capture more earnings on your cash while staying legal, safe, and liquid.