1. BB&T Confidential and Proprietary. Copyright © 2016, Branch Banking and Trust Company. All Rights Reserved. Demystifying Account Analysis Carolinas Cash Adventure May 24, 2016 Linda Dinh, CTP LDinh@BBandT.com

2. 2 Objectives  To enhance our understanding of the Account Analysis statement, including its  Structure  Features  Options  To deepen our appreciation for the value of the Account Analysis statement

3. 3 What is an Account Analysis Statement?  A bill for services  Including Deposit and Cash Management  A reporting tool  Of balances, rates, services, volumes, and fees for each account  A tool for benchmarking volumes and fees for multiple banks  A resource for improving the cash flow cycle  To review the mix of services, volumes, and fees to optimize solutions  To identify opportunities to improve cash inflows  To identify opportunities that improve cash outflows  To identify opportunities to safeguard accounts

4. 4 The Account Analysis Statement We are about to enter the world of Account Analysis. As we do, keep in mind banks differ in their approaches to Account Analysis. Please talk with your bank to understand theirs.

5. 5 Deposit Checking Account CharacteristicsAnalyzedNon-Analyzed ActivityHigherLower BalancesHigherLower Earnings CreditYesNo Relationship ConsolidationYesNo Activity ThresholdsNoYes QualifiersNoYes Cash Management ServicesYesMaybe The type of checking account is relevant.

6. 6 Deposit Checking Account Which checking accounts are billed through Account Analysis? Banks manage this in different ways.  All accounts  Only those that are analyzed  Some of those that are analyzed (for example, only those with Cash Management Services)

7. 7 Statement Structure The statement consists of four main sections.  Client and bank information  Balances  Compensation  Service Activity

8. 8 Statement Structure: Client and Bank Information

9. 9 Statement Structure: Balance Summary

10. 10 Statement Structure: Compensation

11. 11 Statement Structure: Service Activity

12. 12 Statement Structure: Service Activity Characteristics  Services are grouped and subtotaled by product family.  Type of Charges  Analyzed  Hard (explicit)  Waived (no charge)  Debited (billed separately)  At the end of the services section, totals for each type of charge are provided.  Timing of Activity  Usually for the month of the analysis  Some activity volumes may be for a prior month

13. 13 Calculations within the Statement  Earnings credit  Balance required  Uncollected funds/overdraft interest charge  Deposit assessment fee  Interest (for hybrid accounts)

14. 14 Calculations: Earnings Credit  This is the credit amount that can be used to offset all or a portion of monthly service charges. These components are needed to calculate earnings credit.  Collected balance  Earnings credit rate  Reserve requirement  Days in the period  Days in the year  Earnings credit = collected balance * (1 – reserve rate) * earnings credit rate * days in period / days in year  Example: $773,843 * (1 - 0) *.0025 * 31 / 366 = $163.86

15. 15 Calculations: Balance Required  This is the amount required to offset total analyzed service charges.  These components are needed to calculate balance required.  Analyzed service charges  Reserve requirement  Earnings credit rate  Days in the period  Days in the year  Balance required = analyzed service charges / earnings credit rate / days in year * days in month)  Example: Maintenance Fee  $66 /.0025 * 31 / 366 = $311,690.32  Services that are not analyzed – hard charged or explicit – cannot be offset by earnings credit and will not have a balance required.

16. 16 Features of Account Analysis Some features of Account Analysis can help manage service charges.  Balance vs fee compensation  Grouping/consolidating accounts  Prior (excess) earnings credit

17. 17 Balance vs Fee Compensation A company has two strategies for determining how to compensate for service charges.  Fee  Maintain lower account balances  Since ECR has been low, treasurer may be able to find investments with higher rates of returns  Or may prefer to pay down short-term debt  Fees can be budgeted  Balance  Maintain higher account balances (transactions, unanticipated deposits)  ECR is not too low compared to other investment options  Covers the fees  Company may gain other benefits with the bank by maintaining higher balance  Earnings credits are not taxable, while interest on short-term investments or sweeps is generally taxable

18. 18 Grouping/Consolidating Accounts Grouping/consolidating accounts may allow excess earnings credit from one account to offset service charges in another.

19. 19 Prior (Excess) Earnings Credit  Excess earnings credit: when an account has more earnings credit than analyzed service charges  Deficit earnings credit: when an account has less earnings credit than analyzed service charges  Due to seasonality and other factors, an account may have excess earnings credit in some months, and deficit earnings credit in others. AprMayJunJulAugSepOctNovDec Net Available Balance 79,973.26367,539.88647,787.43274,031.39-187,419.35-153,667.05-763,894.95-559,296.86-1,166,682.79 Avg Positive Available Balance 1,320,823.401,279,894.881,840,682.211,886,932.751,617,636.851,058,582.051,167,851.591,333,536.871,235,795.99 Earnings Credit Allowance 705.64706.57983.371,041.69893.02565.54644.71712.43682.22 Service Charge Amount for Analyzed Services -662.92-503.67-637.30-890.41-996.49-647.64-1,066.43-1,011.24-1,326.30 Total Service Charge for Period 42.72202.90346.07151.28-103.47-82.10-421.72-298.81-644.08 Prior Credit for Period 42.72245.62591.69742.97639.50557.40135.68 Service Credit for Period 245.62591.69742.97639.50557.40135.68 Service Charge Amount 0.00 163.13644.08 Banks may allow excess earnings credit from one month to offset the deficit of another.

20. 20 Statement Delivery Methods Options for receiving an Account Analysis statement include:  Paper  Online  Email  822 EDI  BSB ISO 20022

21. 21 ANSI X12 EDI 822  American National Standards Institute  X12 is the standard transaction set for inter-industry electronic exchange of business transactions.  822 is the transaction set that contains Account Analysis information.  Balances  Rates  Earnings credit  Service activity -Includes both AFP and bank service codes  Fees The information in the EDI 822 should match the Account Analysis statement, but will be presented differently.

22. 22 BSB ISO 20022  TWIST and SWIFT  ISO 20022 is a set of standards developed for international financial communication between financial institutions and with their clients.  The Bank Services Billing standard was developed to obtain billing statements from international banks in a standard format.  The file contains relevant information about service charges, as well as tax and currency information.