GM Report—New Banking, Lockbox Service
June 19, 2018
By Bob Mariani
LWA Geneeral Manager
Due to questions that have been asked about the Association's new banking and lockbox services, I thought the following questions and answers may be useful to our Members.
Why are members writing checks to Alliance Bank and sending them to a lock box in Las Vegas? Which bank has access to funds in that box?
Assessment checks should be made out to Lake Wildwood Association and sent to the bank's lockbox service department that happens to be located in Las Vegas. Our direct banking relationship is with Alliance Association Bank a division of Western Alliance Bank. Considerable information was providing on this bank in Ebits prior to our use of the bank. The end result of using the lockbox service is fewer errors in processing assessment payments and a reduction of overtime labor. There is no cost for the lockbox service and no banking fees with Alliance, which saves thousands of dollars annually compared to the Association's previous banking relationship with Bank of the West.
In which bank will those funds be deposited and at what location?
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The funds are deposited with Alliance Association Bank a division of Western Alliance Bank a very reputable FDIC insured bank, which is headquartered in Chandler Arizona. Keep in mind that banking and other industries conduct business in an electronic world. As a result, I am confident that whether we're referring to Alliance or any other bank, the Association's funds wouldn't be sitting in a vault in Chandler or any other particular location.
Did the Association have to agree to deposit all of our $7 million in assessment revenues in a Las Vegas bank in order to borrow funds to repay the $1.125 million loan from replacement reserves last November?
The Association agreed to deposit Reserve Funds with Alliance Association Bank as a stipulation of the loan. This was also a requirement of Bank of the West had the Association taken out a loan with that bank. As with most any bank, Alliance will directly maintain some of these funds and with use of the CDARS program invest funds so that all funds are FDIC insured. This is a common practice that banks use when dealing with HOA management companies and large-scale communities.
How much money will the Association be borrowing from that lender?
A line of credit was originally taken out with Bank of the West for the Clubhouse construction. This line of credit was paid down to slightly over $1,000,000 over time then completely paid off with use of funds borrowed from the Reserve Fund. A loan will be taken out with Alliance Association Bank so that funds may be paid back to the Reserve Fund. The final amount of the loan to pay back the Reserve Fund loan has not been determined; however, it will be $1,125,000 or less. The loan may be less as available funds from the Clubhouse special assessment collected may be used to repay the reserve fund thereby reducing the loan amount.
Why would the Association make a change away from a local bank?
The Association's primary banking relationship has been with Bank of the West. Although Bank of the West has local branches, that bank is far from a local bank as its holding company BancWest Corporation became wholly-owned subsidiary of BNP Paribas, a French bank, in 2001. I also want to point out that millions of business and people have investments with banks that do not use the brick and mortar model yet those business and individuals are confident their investments are as secure as those who have funds in a local branch of a brick and mortar bank.