Banking Services Review

1. Banking Services Review Lawrence Township February 2008

2. Agenda • Objectives • Review and Results • Options for future banking services • Next steps

3. Objectives • To review terms and status of present banking services arrangement with Sun Bank • To identify strategic options for future banking services • To develop framework for evaluating strategic options • To develop a high level plan for procuring future banking services

4. Assessment was made after gaining quick understanding of banking service relationship with Sun… • Review of 1999 RFP documents and Sun’s proposal • Interview of Peter and Linda (together) • Sun’s (Bruce) responses to questions, gathered by Linda • Review of monthly Account Analysis Statements and interest earnings summary of individual accounts (Peter’s spreadsheet) Oct-Dec 2007 • Examination of monthly bank statements of select (9) accounts for service charges Oct-Dec 2007 • Research into 91-Day T-Bill rates and data sources (FRB and others)

5. Sun wishes to continue present services if we kept a perpetual balance of over $8 million dollars and forgo its interest… *12 months’ data in 2007 **Net of Float and FRB Reserve Equals to perpetual $35.01 per dollar per year or $420.14 per dollar per month @5% compounded monthly, this balance represents $418,051 interest Must include redefined service quality, service levels and reporting requirements

6. We have an unsustainable relationship… • Relationship based on 1999 proposal and letter of acceptance • Bank has provided all services free of charge • Bank states pressure for profitability and wishes to charge for future services, credit card service in particular • Of late, Township experiences service degradation, mainly due to personnel changes • Overall, Township is somewhat satisfied in day-to-day working with Bank and is weary of change to another bank • For Bank, Township account is the largest (Bank’s view unknown) • Each party may think of the other as dependent (Bank’s view unknown) • Township likes to preserve status quo, but its sense of competitive landscape is dated

7. We wish to define and shape new era of relationship… • Relationship based on mutual economic value • Formalized with executed contract • Decouples banking service from account balances • Meets defined service levels and investment objectives • Leverages new knowledge, tools and technology to maximize return on investable funds • Provides consistent service despite personnel/organizational changes • Adapts to needs and challenges of Township

8. Needs and Concerns of Finance Department Professional Money Management Pre-Screen Potential Banks Develop RFP Issue RFP Evaluate Proposals and Select Top 3 Revise Service Scope and Levels Issue Revised RFP to Top 3 Evaluate Modified Proposals, Check References and Select Top 1 Execute (Legally Binding) Contract Monitor Contract Compliance Realistic Expectations about Sustainable Free Banking Service Elements Week-2 Week-6 Week-10 Week-12 Week-18 Week-22 Our ideal pathway must be comprehensive and include open and competitive RFP process… Decouple banking service charges from account balances

9. We have some strategic options…there are pros and cons… 1 2 3

10. Account Rationalization & Optimization • Review all 32 accounts and re-confirm Need-to-Keep • Keep accounts required by law • Challenge accounts created for control • Seriously challenge accounts created for convenience and those that have been “always there.” • There are over 12 accounts earning less than $10 as monthly interest due to no/low balance • Develop Optimum Account Balance Model • Norms for • Minimum balance • Maximum balance • Review frequency • RFP and Contracting • Develop RFP based on all required services including credit card transactions, and special management reporting needs • Include in RFP requirements, migration plan, cost and our time • Include Service Level expectations such as response to request for armored car, cash, balance statements, etc. • Decouple service charges from account balances • Include realistic AAS and other management reports (mandatory and others) • Include money management goals • Execute Written Contract • Monitor Contract Compliance • Money Management • Dedicated • State-of-the-art • Bank account funds and others • Outsourced or in-house • Daily monitoring Strategy for optimal banking services management must include… 1 2 3

11. In preparation for new era of relationship…

12. Don’t be defensive…reality is, our business is very profitable to Sun… May justify dedicated Money Management Mutual value of a relationship is key to sustainability…requires recognition by both parties 1A reasonable expectation from professional money management *Net of Float, but includes FRB Reserve

13. Absorbed by Sun as creditbacks to us However, appreciate some of our major costs are entirely absorbed by Sun…we need to know if other banks will match…

14. There’s more…all service charges are only on paper – none ever applied to our accounts by Sun…we need to know if other banks will match…

15. No matter what, some cleanup may be in order…Account Rationalization has its pros and cons, but we may need a new balance…

16. Potential neighborhood banking survey Proposed Questions • Who are you banking with? • Do you have a written contract? • How along have you been with this bank? • Who were you banking with before? • Why did you switch? • Do you accept credit card payments (taxes, permit fees, court/police fines, recreation registration, fees in clerk's office)? • Does your bank provide credit card services? If not, who does? Who pays credit card fees? • What about armored car services? • What about payroll services? • Does your bank have Compensating Balance Requirement? If yes, how much per dollar per month? • Are you looking to change bank? • Do you have an RFP written up? • Which banks are you considering? • In selecting bank, how important is it that your bank is local? Proposed Municipalities • East Windsor • Ewing • Hopewell Township • Princeton Township • West Windsor Township

17. Next steps…