HomeMy WebLinkAboutPR 20166: CAPITAL ONE BANK City of Port Arthur Memorandum To: Harvey Robinson, Interim City Manager From: Andrew Vasquez, Director of Finance Date: March 20, 2018 Re: PR 20166 Recommendation I recommend that the City Council adopt Proposed Resolution 20166 which designates Capital One Bank, N.A., as the primary depository for the City of Port Arthur for the period of April 1, 2018 through March 31, 2020 with a provision for three one-year extensions under the same terms and conditions of the contract. Background Pursuant to the Chapter 105 of the Local Government Code, the City is required to solicit proposals for banking services at least every five years. On February 28, 2018, the City received applications from four banks, BBVA Compass Bank, Capital One Bank, First Financial Bank and JP Morgan/Chase Bank. The applications were evaluated based on,but not limited to,the following criteria: 1. Ability to perform and provide the required and requested services; 2. Reputation of applicant and quality of services; 3. Cost of services; 4. Funds availability; 5. Interest paid on interest bearing accounts and deposits; 6. Earnings credit calculation of account balances; 7. Completeness of application and agreement to points outlined in the RFA; 8. Physically located within the City's boundaries; 9. Convenience of locations; 10. Previous service relationship with the City; and 11. Financial Strength and stability of institution. The analysis began with an overall review of each bank's general financial strength and ability to provide the bank services necessary to meet the City's current and future service needs. Each of the responding banks exhibited acceptable financial strength and adequately passed the banks service test, with a few exceptions as noted in the recap of the Bank Depository analysis which is attached as exhibit A. Budgetary Effect Each bank's fee schedule was analyzed based on the City's banking service needs and estimated activity levels. The banks offered various waivers, credits and incentives. BBVA proposed a 1,000 credit for deposit bags and supplies, First Financial proposed a waiver of 3 months of fees and JP Morgan/Chase proposed a waiver of 12 months of fees. Where quantifiable, the value of the waivers, credits and incentives are reflected in the estimates below beginning in year 1. 1 Year Fees 2 Year Fees 5 Year Fees BBVA Compass 56,684 114,368 287,420 Capital One 42,396 84,792 211,980 First Financial 29,448 68,712 186,504 JP Morgan/Chase 0 56,868 227,472 The City recognized that in addition to bank service charges, the bank's desire to pay for bank balances augments a relationship. Those balances fluctuate month-to-month and within individual months. Therefore, attractive bank-originated interest earning options are important. There are two potential earnings sources: soft-dollar earnings credit and hard-dollar interest. Earnings credit generates "soft-dollar earnings" that can only be used to offset banking fees. Earnings credit, hard- dollar interest, or a combination of the two, can be used to offset any service charges. Earnings above the applicable service charges are kept by the City as earned interest income. The analysis uses a target $15,000,000 average collected bank balance to generate the potential earnings credit. Once the City's target compensating balance generated enough earnings credit to offset most fees, any excess balance was assumed to be invested in that bank's most attractive hard-dollar interest earnings alternative. It should be noted that all banks with the exception of First Financial waived the 10%reserve requirement when earnings credit is utilized, thereby increasing the amount of potential interest earnings. BBVA and Capital One offered interest bearing checking accounts with variable managed bank rates. First Financial offered an interest bearing checking account with a fixed rate. And JP Morgan/Chase offered an overnight sweep account with a variable rate as the interest earning alternative. The following table reflects the potential estimated net earnings/(cost)to the City for each bank over the life of the contract. 1 Yr Estimated 2 Yr Estimated 5 Yr Estimated Earnings/(Cost) Earnings/(Cost) Earnings/(Cost) BBVA Compass125,395 249,540 621,975 Capital One 111 152,423 First Financial 84,414 161,466 392,622 JP Morgan/Chase 128,740 195,304 394,997 Summary Based on the evaluation criteria listed above and the preceding financial analysis, Capital One Bank emerges as the bank offering the "best value" to the City by generating the greatest net earnings over the life of the contract. Capital One Bank is currently the City's primary depository and has provided excellent service during the previous contract period. Therefore, I recommend that the City Council adopt Proposed Resolution 20166 which designates Capital One Bank,N.A., as the primary depository for the City of Port Arthur for the period of April 1, 2018 through March 31, 2020 with a provision for three one-year extensions under the same terms and conditions of the contract. P. R. NO. 20166 AV: 3/20/2018 RESOLUTION NO. A RESOLUTION OF THE CITY OF PORT ARTHUR, TEXAS, DESIGNATING A PRIMARY BANK DEPOSITORY AND AUTHORIZING THE CITY MANAGER TO SIGN AND EXECUTE A BANK DEPOSITORY SERVICES AGREEMENT WITH CAPITAL ONE BANK, N.A. AND TO AUTHORIZE THE DIRECTOR OF FINANCE AND CITY SECRETARY TO EXECUTE ALL DOCUMENTS NECESSARY TO IMPLEMENT THE CONTRACT TO BE EFFECIVE APRIL 1, 2018. WHEREAS, the City of Port Arthur, Texas ("City") received applications in the manner required by state law for depository services on Wednesday, February 28, 2018; and, WHEREAS, the City Council has been furnished a copy of the recap of the responding banks' applications, which is attached hereto as Exhibit"A" and made a part hereof for all purposes; and, WHEREAS, the City Council of the City, in the exercise of its discretion, determined that the application submitted by Capital One Bank,N.A. represented the "best value", offering the most favorable terms and conditions for the handling of the City's funds; now therefore; BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PORT ARTHUR: Section 1. That the facts and opinions in the preamble are true and correct. Section 2. That the City does hereby designate Capital One Bank, N.A. as the Primary Depository of the City. Section 3. That the Capital One Bank, N.A. application as recapped in Exhibit"A" is accepted, with the new depository contract commencing on April 1,2018. Section 4. That the City Manager is hereby authorized to execute a Depository Services Agreement with Capital One Bank,N.A., according to the terms of their application. Section 5. The Director of Finance, along with the City Secretary when necessary, is hereby authorized to execute all documents to implement the services set forth in the agreement on behalf of the City. Section 6. That the initial agreement is for two (2) years, with the City having the option to extend the agreement for three(3) additional one (1)year periods, under the same terms and conditions. Section 7. That a copy of the caption of this Resolution shall be spread upon the Minutes of the City Council. READ, ADOPTED, AND APPROVED, this 27th day of March, 2018, AD, at a Regular Meeting of the City Council of the City of Port Arthur, Texas by the following vote: AYES: Mayor: Councilmembers: NOES: Derrick Freeman, Mayor ATTEST: Sherri Bellard, City Secretary APPROVED AS TO FORM: U�► )t--'(0A eke( f6 Val Tizeno, City Attorney APPROVED FOR AVAILABILITY OF FUNDS: ASSiss4d.o-F a.14r4cf Drpe'f "— Ala / �. � ,.. , . 40 6ehq/c Andrew Vasquez, Director of Finance APPROV !� %'' ADMINISTRATION: 1' HarveyRobinson, Interim City Manager EXHIBIT "A" City of Port Arthur Bank RFA 2018 Analysis BBVA Capital One First Financial JP Morgan/Chase Proposed Fee Calculations: Monthly Estimated Fee 4,807 3,533 3,272 4,739 Year 1 Estimated Fee 57,684 42,396 39,264 56,868 2 Year Estimated Fee J___-___ 115,368 84,792 78,528 113,736 5 Year Estimated Fee288,420 211,980 196,320 284,340 -i Contract Incentatives-waived fees (1,000) (9,816) (56,868) Total fees 1 year term lessincentatives 56,684 42,396 29,448 - Total fees 2 year term less incentatives 114,368 84,792 68,712 56,868 Total fees 5 year term less incentatives 287,420 211,980 186,504 227,472 Earnines Credit/Interest Calculations. YEAR 1 Target Average Collected Balance 15,000,000 15,000,000 15,000,000 15,000,000 Less Reserve Requirement(if applicable) 0% 0% 10% 0% Investable Balance 15,000,000 15,000,000 13,500,000 15,000,000 Earnings Credit Formula Current Earnings Credit Rate 1.00% 1.00% 1.00% 0.75% Required Balance To Offset Fees 5,668,400 4,239,600 2,944,800 - Estimated Annual Earnings Credit 56,684 42,396 29,448 - Interest Earnings (Concentration Acct) Fonnila Current Interest Rate 1.25% 1.33% 0.75% 0.82% Balance Available for Investment 9,331,600 10,760,400 10,555,200 15,000,000 Estimated Annual Earnings 116,645 143,113 79,164 123,000 Interest Earnings (Limited Actisity Account) Formula Current Interest Rate 1.25% 1.33% 0.75% 0.82% _ Balance Available for Investment 700,000 700,000 700,000 700,000 _ Estimated Annual Earnings 8,750 9,310 5,250 5,740 Est Annual Net Earnings/(Cos t)NEAR 1 125,395 152,423 84,414 128,740 YEAR2-5 i Target Average Collected Balance 15,000,000 15,000,000 15,000,000 15,000,000 - Less Reserve Requirement(if applicable) 0% 0% 10% 0% Investable Balance 15,000,000 15,000,000 13,500,000 15,000,000 Famines Credit Formula Current Earnings Credit Rate 1.00% 1.00% 1.00% 0.75% Required Balance To Offset Fees 5,768,400 4,239,600 3,926,400 7,582,400 Estimated Annual Earnings Credit 57,684 42,396 39,264 56,868 jnterest Earnings (Concentration Acct) Formula _ Current Interest Rate 1.25% 1.33% 0.75% 0.82% Balance Available for Investment 9,231,600 10,760,400 9,573,600 7,417,600 Estimated Annual Earnings 115,395 143,113 71,802 60,824 _ Interest Farnine (Limited Actisity Account) Formula Current Interest Rate 1.25% 1.33% 0.75% 0.82% - Balance Available for Investment 700,000 700,000 700,000 700,000 Estimated Annual Earnings 8,750 9,310 5,250 5,740 Es Annual\et Eirnings/{(Cast)YEAR 2-5 124,145 152,423 77,052 66,564 1 year term Net Earnings/(cost) 125,395 152,423 84,414 128,740 2 year term Net Earnings/(cost) 249,540 304,847 161,466 195,304 5 year term Net Earnings/(cost) 621,975 762,117 392,622 394,997 City of Port Arthur Bank RFA 2018 Analysis BBVA Capital One First Financial JP Morgan/Chase Required and Optional Services' 1 Required accounts available Yes Yes No Control)Disb No Control)Disb 2 Deposits/Cash/Vault Services Yes Yes Yes Yes Deposits&chg orders can be made at branch Yes No-Vault in Bmt yes Yes Armor car svc pref-for a fee 3 Returned Check Reprocessing Yes Yes Yes Yes 4 Remote Deposit Capture Yes Yes Yes Yes 1 scanner n/c 3 scanners n/c 2 scanners n/c Scanner not provided 5 Stop Payment Services Yes Yes Yes Yes 6 Fraud Protection Services Yes Yes Yes Yes 7 Reconciliation Services Yes Yes Yes Yes,but nocontrol'disb 8 Funds Transfer Services Yes Yes Yes Yes 9 ACH Services Yes Yes Yes Yes 10 On-Line Balance Reporting Yes Yes Yes Yes 11 Bank Statements Yes Yes Yes Yes,but avail in 2-3 days 12 Employee Check Cashing Yes,reserve right to chrge later No Yes Yes $10/non cust w/90 day Notice $7/non cust n/c n/c 13 Credit&Debit Card Payments Yes Yes Yes Yes 14 Research Yes Yes Yes Yes 15 Bank Errors Yes Yes Yes Yes 16 Acceptable Tamperproof Bank Bags Provided No Yes Yes Yes $1,000 for initial supply purch Unlimited 6 Free locking Bags Unlimited 17 Audit Confirmation Yes Yes Yes Yes 18 Disaster Preparedness No Yes Yes Yes Will attempt but cannot commit Will make best effort 19 Payroll Cards(Optional) Yes Yes Yes No-not available 20 Automatic Bill Payment(Optional) Yes Yes Yes Yes Cost of Banking Services* 21 Payment for Services Yes Yes Yes Yes Waive Charges 3 months Waive Charges 12 months 22 Account Analysis Yes Yes Yes Yes 23 Interest Bearing or Sweep Acct Yes-Interest cking recommend Yes-Interest[king recomended Yes-Interest cking recomended Yes-sweep recommended Reserve Requirement? Waived Waived 10% Waived 24 Rate Information available on-line No-Bank managed rate No-Bank managed rate Fixed Rate.75% Yes 25 Safekeeping Services Yes Yes Yes No-Svc not offered Collateral Requirements: 26 Pledge Requirements Yes Yes Yes Yes 27 Balances&Monitoring Yes Yes Yes Yes 28 Custodian Yes Yes Yes Yes 29 Substitution Yes Yes Yes Yes 30 Board Acceptance Yes Yes Yes Yes 31 Monthly Reporting Yes Yes Yes Yes 32 Overdraft Provisions Yes Yes,3% Yes,prime+2% Yes,n/c Other Stipulations' 33 Notification of rules or regulations changes No,except as related to agreement Yes Yes Yes 34 Wire Transfer notificatins Yes Yes Yes Yes 35 Cancillation provisions in event of compliance Yes Yes Yes Yes 36 City Bank Records Open for Review Yes Yes Yes Yes 37 Rights to Other Bank Accts Yes Yes Yes Yes 38 Rights to Terminate Yes Yes Yes Yes 39 All Fees Fixed for the entire contract period Yes Yes Yes Yes 40 Relationship Manager John Morrell Thomas Govan Blaine Caillier Cary Gilliam 41 Support Manager April Blanchard Anita Hand Sarah Coffey