Division of Treasury Bureau of Collateral Management Public Deposit Program Chapter 280

1. Division of TreasuryBureau of Collateral ManagementPublic Deposit Program(Chapter 280)

2. 2 Who We Are The Bureau of Collateral Management serves as a centralized deposit location for specialized handling of regulatory collateral deposits that may be required of various entities as a condition of doing business or acts of financial guarantee under approximately 45 state statutes. The service ensures the deposits or pledges meet the requirements of each applicable law for eligibility, quality and market or par value. This deposit specialization allows state agencies and municipal entities to benefit from the use of custodial contracts for perfection of security interest and financial information services to assure value and quality.

3. 3 Our 3 Primary Responsibilities Collateral Administration Program Manage Collateral/Pledged Assets for State Agencies, Boards, or Other Political Subdivisions Qualified Public Deposits Program Protect Public Deposits in Financial Institutions (Chapter 280) Cash Escrow Program Provide Escrow Agent Services

4. Organizational Structure

5. 5 Current Service Levels Collateral Administration: 2,000+ Accounts (Approx ½ for Office of Insurance Regulation) (3-09) $20.2 billion held in custody (3-09) Qualified Public Deposit Program: 209 Qualified Public Depositories (included above) 1,583 Reporting Public Units (11-08 Annual Report Filings) $17.3 billion in Net Public Deposits in QPDs (3-09) Secured by $18.7 billion in Assets (3-09) Cash Escrow Program: $760+ million in Treasury Cash 500-600 individual accounts

6. Chapter 280, Florida StatutesFlorida Administrative Code 69C-2 Enacted in 1981 by the FBA and Treasury Modeled after the state of Virginia law Defined collateral standards for all public deposits (custody, rankings, participation) Established contingent liability requirements for Banks & Saving Institutions participating in the program

7. Program Design Program mandatory for Governmental Units (question of compliance) All Qualified Public Depositories (QPDs) share the exposure (Contingent Liability**) Florida State Treasury administers the program & monitors QPD condition Florida State Treasury has compliance responsibility and authority but no audit authority or capability How do you know if you are a Public Unit? How do you know if you are a Public Unit?

8. Primary Program Benefits Guarantees Public Depositors against loss Public Depositors have minimal responsibilities (no negotiation of protection) Provides the financial community a Standardized Cost Effective Program QPDs save over $5 Billion in collateral requirements (NOTE: Changes to deposit levels) QPDs qualify for State CD Program

9. 9 The Public Depositors How many of you are public depositors? How do you know if you are a public depositor? How do you protect your deposit accounts? Do you know the difference between a deposit & an investment? Are investments covered?

10. 10 Public Depositor’s Responsibility Make sure you are using a QPD Execute & Safekeep: “Public Deposit Identification & Acknowledgment Form” File a Public Depositor Annual Report Report any notices received from a regulator concerning a QPD’s condition

11. 11 As a Public Depositor Do you have your original/signed: Public Depositor Identification & Acknowledgment Form (DFS-J1-1295)? How Old is it? Have you filed your: Annual Report (DFS-J1-1009)? (As of 9-30, due to us 11-30)

12. Qualified Public DepositoriesInside The Numbers 209 Qualified Public Depositories (03-09) 1,583 Reporting Public Units (11-08) $18.7 Billion in Pledged Collateral (03-09) $17.3 Billion in Net Public Deposits* (03-09) (*Property tax increase in December each year for approximately 3 months increasing pledged collateral, SBA Money rolled into banks in November 2007)

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14. Pledge Level Determination QPDs file a quarterly Call Report with the Feds QPDs report monthly Gross/Net properly identified average deposits & key financial data Rankings are downloaded quarterly from two sources (IDC and Financial Information Services) based on Call Reports Collateral Administration Program (CAP) generates pledge level change suggestions Changes are analyzed for action Major changes added to Special Handling List

15. Pledge Levels & Rankings(3-09) Pledge Levels: 25%=70-100* 50%=30-69** 125%=16-29** 200%=0-15 *Based on 4 quarter averages for consistency **Based on 1 quarter average for rapid response

16. 16 The Issues Our ranking data can be 6 months behind Financial data can be 4 months behind We rely on multiple sources for information We have no examination/audit authority Section 655.057(3)(e), Florida Statutes (Public Records vs. Confidentiality issues) The Past The Present The Future (Public Deposits in non-QPDs; Accurate reporting in QPDs.)

17. 17 How We React:The Triggers Call Report Data Income Statement, Balance Sheet, Assets/Liabilities, Past Due/Non-accrual Loans, Capital Adequacy System Recommended Changes Performance Ratios Capital Adequacy (3), Asset Quality (7), Earnings (8), Liquidity (4) Peer Group Comparison Individual and Industry Trends

18. 18 Analysis Considerations What are the critical trends/changes? What are the sources of public deposits? What are the minimum collateral requirements? What type of collateral is pledged? How much is still available for pledging? What impact will increases in the MRC have on their adequacy/liquidity?

19. 19 Special Handling Requirements 0-15 Withdrawal (Cannot mandate withdrawal) Alternative Participation Agreement CFO Custody vs. Regular Custody 200% Collateral Capped Deposits No New Accounts Withdrawn-12 month requirement

20. 20 Your QPD Fails First: Notify our office Second: Determine if there is an uninsured loss with the FDIC Third: File a claim for uninsured deposits within 30 days: Public Deposit Claim Form and Agreement (DFS-J1-1012) & The Original Public Depositor Identification & Acknowledgment Form (DFS-J1-1295)

21. 21 What If? Failure History since 1981 Communication of Those Failures Type of Failures Collateral Levels Assessment Process *Recent History of Failure

22. 22 Recovery Timeline Historical Failures (Friday closings) We notify Public Depositors of record by first class mail (required by law) & email Claims filing deadline is 30 days from date of notice Each case can be different: Reported deposits Collateral level/value FDIC Action of disposition New FDIC coverage (history) QPD Assessment/No Assessment Worse case scenario?

23. 23 Critical Requirements Section 280.08(2) states that “The potential loss to public depositors shall be calculated by compiling claims received from such depositors. The Chief Financial Officer shall validate claims on public deposit accounts which meet the requirements of s. 280.17 and are confirmed as provided in subsection (1).” Section 280.17(2)(c) provides that each public depositor shall “Maintain the current public deposit identification and acknowledgment form as a valuable record. Such form is mandatory for filing a claim with the Chief Financial Officer upon default or insolvency of a qualified public depository.” Section 280.17(4)(b) provides that each public depositor shall “Submit to the Chief Financial Officer for each public deposit, within 30 days after the date of official notification from the Chief Financial Officer, the following: A claim form and agreement, as prescribed by the Chief Financial Officer, executed under oath, accompanied by proof of authority to execute the form on behalf of the public depositor. A completed public deposit identification and acknowledgment form, as described in subsection (2). Evidence of the insurance afforded the deposit pursuant to the Federal Deposit Insurance Act.” And finally, Section 280.17(8) states that “If a public depositor does not comply with this section on each public deposit account, the protection from loss provided in s. 280.18 is not effective as to that public deposit account.”

24. 24 Key Information Links http://www.fltreasury.org/ Collateral Management Link connects you to our web server Introduction QPDs Governmental Units (Key information) Links Forms FAQs

25. 25 Where is the information? www.fltreasury.org (follow link to Collateral Management) Program Administrator: Ken Lee kenneth.lee@myfloridacfo.com 850-413-3383 (Direct Line) Bureau Chief: Nat Toulon nat.toulon@myfloridacfo.com 850-413-3324 (Direct Line)

26. Questions?