Fiscal Management Conference Georgia Office of the State Treasurer (OST) Scott Austensen, Deputy Treasurer October 2, 2017

OST Bank Program (7 Banks) 84% Reduction in Bank Fees over FY10-FY17 Year over Year Savings Total Bank Fees Year YoY Savings ($) YoY Savings (%) FY11 $2,205,892 25.68% FY12 $2,228,055 34.89% FY13 $433,507 10.43% FY14 $219,402 5.89% FY15 $64,663 1.85% FY16 -$145,134 -4.22% FY17 -$1,070 -0.03% Total Bank Fees Net of ECR Year YoY Savings ($) YoY Savings (%) FY11 $2,637,420 32.52% FY12 $2,723,688 49.77% FY13 $488,656 17.78% FY14 $434,818 19.24% FY15 -$4,998 -0.27% FY16 $82,638 4.52% FY17 $465,818 26.65% To add another fiscal year’s data point to this chart, click inside the chart and then right click to select Edit Data in Excel. The line chart is pulling from the three row table in green. The YoY savings tables on this slide must be manually edited (not in Excel). Just click on the chart, add another row and then the data for the new row can be automatically calculated in the Excel spreadsheet linked to the graph. Total Bank Fees (58% Reduction over 7 Years) Total Bank Fees Net of ECR (84% Reduction over 7 Years)

$15.4 Million Earnings on State General Fund from Bank Relationships (Fiscal Years 2015-2017) Addtl. Earnings to State (Only) The green lines are calculated based on the total returns from the 7 key banks less the total bank fees net of ECR. Just open up the bank relationship scoring model to see the returns data and then subtract out the total bank fees net of ECR (orange line chart) which you already verified on the previous slide. The FY balance numbers at the bottom of the slide were changed the day before the board prep meetings and calculated by taking the sum of the average balances from the 11 banks and then taking that sum and multiplying by that year’s percentage of state general funds. The number in the title of the slide was calculated by taking the sum of the three fiscal years’ risk adjusted return totals for each year after multiplying by the state general fund percentage by each year. Total Bank Fees Net of ECR Total Bank Fees FY 2015 Balance: $962 million FY 2016 Balance: $1.23 billion FY 2017 Balance: $1.21 billion

Why RFQB Process? OST has historically worked with about 11 “Relationship Banks” The Goal of the RFQB process was to deepen these relationships in a way that would reduce bank fees and increase risk adjusted returns to General Fund and other investments The RFQB process will lead to fewer banks to be included in evaluations, and more choice for Merchant Card Services

RFQB Evaluation Process Out of 10 official responses, six finalists were identified for additional presentation using submitted line item pricing; and 3-year historical, risk adjusted, weighted average investment returns The four banks with the highest “net” benefit were named as Primary Banks for FY18

REQB Pro-Forma Results of Bids

Future Primary Bank Selection Each fiscal year, OST will review the RFQB banks, using updated (rolled forward) information for risk adjusted returns and ensuring the highest overall net benefit to the state Primary Banks in future fiscal years may change, which could affect future bank evaluations

OST Bank Evaluation Overview BANK REGISTRY UPDATED Step 9 Step 1: OST Letter and Evaluation Packet with Banking Questionnaire Step 2: Agency completes and returns Questionnaire Step 5: OST Banking Evaluation Report Identifies lowest cost bank TREASURY STATE AGENCY Step 6: Agency response to OST selecting lowest cost Bank(s) Step 7: OST Notifies Agency & SAO of Bank Approval by State Depository Board Step 8: Agency & SAO complete process to open accounts; Execute Signature Card(s) Step 4: Banks Complete Templates and Proformas Step 3 B: OST Requests the Primary Banks + Incumbent prepare Proformas For Non-OST Bank Program Accts INCUMBENT BANK Step 4: Banks Complete Templates and Proformas PRIMARY BANKS Step 3 A: OST Requests the Primary Banks prepare Proformas for OST Bank Program Accts

Bank Evaluation Calendar FY 2018 July 2017-Nov 2017 Nov 2017-Jan 2018 Feb 2018-April 2018 May 2018-Jun 2018 Dept. of Community Affairs Dept. of Public Health Dept. of Revenue State Properties Commission Dept. of Community Supervision Dept. of Transportation Dept. of Veterans Services Office of Insurance Commissioner Board of Regents Dept. of Community Health Dept. of Driver Services Georgia Bureau of Investigation Public Service Commission .

Statewide Merchant Card Services (“MCS”) Agreements OST has entered into statewide agreements with three merchant card service providers for use by all state agencies Starting in Oct. of 2017, state and local entities will be able to select from among these 3 MCS providers

Statewide MCS Agreements The 3 MCS Providers will be: Branch Banking and Trust Company SunTrust Bank/SunTrust Merchant Services LLC Wells Fargo Bank NA/Wells Fargo Merchant Services LLC Note that the existing, Banc of America Merchant Services contract will expire in April 2018; state agencies will need to migrate

MIGRATION TO NEW MCS PROVIDERS Each MCS provider will have a statewide Master Services Agreement (MSA), executed by OST. Each MSA defines lower costs than the existing MCS Agreement Each vendor is highly qualified and staffed to accommodate the diverse set of state entities using MCS It is incumbent upon each state entity to explore each of the three options available and determine the most efficient provider for its needs

State Agency Contract Considerations The State Treasurer is not a party to nor has approved the terms of the Participation Agreements Participation Agreements define specific MC services (such as security or portal functionality) After selecting an MCS provider and services, Agencies should obtain necessary approvals (internal and OST) to execute Participation Agreements Agencies using BAMS should do so before April 26, 2018

State Agency Selection Considerations State entities should carefully compare costs among the three approved providers as well as compatibility of equipment and gateway services in order to determine which approved provider offers the most efficient solution OST recommends that state agencies seek bids from all 3 MCS providers and request a detailed proforma of costs based upon FY 17 actual transactions

State Entity MCS Approval Agencies selecting one of the approved 3 MCS should submit a request by email to OST asking for SDB approval. The request should include a statement that the state entity is requesting the most efficient provider for the MCS that it expects to transact annually As in the past, SDB approval requires approval from: OPB if state general funds are to be used to pay MCS fees GTA for payments to be collected by electronic means (website or Gateways, etc.)

OTHER GOVERNMENT PARTICIPATION Under the Policy, state universities and colleges, and units of local governments are not considered state agencies and have the option, but not the requirement, to participate in the statewide card services program These entities can apply to utilize any of the three approved MCS providers by submitting a request for approval to OST These entities should note the expiration of the BAMS contract (April 26, 2018)

MISC. SLIDES

$98 Million Earnings on All OST Managed Funds from Bank Relationships (Fiscal Years 2015-2017) Gross Returns from OST Bank Relationships Risk Adjusted Returns from OST Bank Relationships The balance numbers at the bottom of the slide are the sum of the average balances of the 11 banks. The FY 2015 Balance: $7.64 billion FY 2016 Balance: $7.41 billion FY 2017 Balance: $7.40 billion