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On today’s episode of The Property Management Show, we’ve asked the experts in property management and HOA banking to join us. Allison DiSarro and Ken Carteron from Enterprise Bank and Trust, formerly Seacoast Commerce Bank, are on the podcast to talk about the differences in banking for property managers and banking for HOAs.
Whether you’re already doing both property management and HOA management or you’re thinking about expanding into one or the other, today’s episode is for you.
Introducing Ken and Allison – The Faces of HOA and Property Management Banking
Ken Carteron has been an HOA banking professional since 1992, and he’s been in the general banking industry since 1980. His 40th anniversary in the field has come and gone, and one association manager he works with once said that Ken has forgotten more about HOA banking than anyone else will learn in their lifetime. It’s what he does and he’s good at it. His clients would agree.
Allison DiSarro has been with us on The Property Management Show before (check out Property Management Banking & Trust Accounts). She’s an expert in property management banking and introduced to us the concept of analysis credits for property managers before Seacoast joined Enterprise Bank and Trust. Allison says she was skeptical of the merger at first, but now she’s excited about the growth of opportunity available for the property managers she works with.
The Merger: Seacoast Commerce Bank Joins Enterprise Bank and Trust
If you’re not already aware of the merger between Seacoast Commerce Bank and Enterprise Bank and Trust, we want to talk about what that will mean for customers of the bank.
Prior to the change, Seacoast had been successful in becoming the face of property management banking. Growth was never a problem, but there were some things missing.
The benefits were the analysis credit program, the high rates, and the compliance. Those were always the driving factors. What was missing, however, was a solid product provider. The online capabilities and flexibility of the bank was hampered by the system they were using, and investing in a new software system wasn’t possible.
Customers of Seacoast needed the tools and support to do online banking more effectively. Relationship managers were advocating for that, and the system that Enterprise Bank and Trust uses is exactly the one they wanted.
What Seacoast Clients Can Expect with the Merger
Property managers who have been working with Seacoast will notice a positive impact. The system is sophisticated and easy to use. On February 12, everything will convert to the online banking system used by Enterprise.
Beyond the new technology, everything property managers loved about their relationship with Seacoast is the same. The merger has felt less like being absorbed into another company and more like a collaborative move forward. Most importantly, the specialty deposit team is getting what has been needed.
Ken has been in banking for a long time, and this is hardly his first merger. He says he’s been through some terrible ones, and is impressed that this has been handled so well. Enterprise has been good about coming to Seacoast for guidance in moving forward. That doesn’t usually happen.
Another major benefit to the merger is the flexibility that comes with having onsite programmers. They can build integrations into existing software programs and expand the product that’s already provided.
There’s also a larger lending product for HOAs. The lending limits with Enterprise Bank and Trust are a lot different than they were before Seacoast merged. Ken can now present a package on behalf of an HOA client who needs a $10 million loan and expect it to be accepted. That allows him to provide more value to his clients.
One thing they both mourn is the loss of the Seacoast Commerce name. It was a security blanket that’s hard to let go of, even if it’s a normal process.
But this is a new bank with a new executive team and new owners. There’s been a merger into a bigger bank and it’s creating new opportunities for property manager and HOA clients.
How Has HOA Banking Changed?
Long ago, an HOA would have a trust account. That’s not the case any longer, and in the reserve accounts that are used instead, Ken works with HOA management companies to set up insured money market accounts.
Here’s why that matters:
The FDIC covers $250,000 per Tax ID number. An HOA will have two accounts; an operating account and a reserve account. To keep that money safe, those accounts should not go over the $250,000 limit. But they can and they do because operating funds go up and down throughout the month.
It’s Ken’s job to find a place for the rest of the funds – those that exceed the $250,000 limit.
Many HOAs will have millions of dollars, and that money needs to be scattered into different accounts so they can maintain FDIC protection. The ICS program helps them. It allows Ken to place all excess funds into one set of accounts which are split up into $250,000 increments, but deposited and consolidated onto one bank statement. This allows the management company, when they’re doing their financials, to deal with one statement only. Other banks use products similar to this. It blends everything together and acts like a normal money market account and the funds are still easy to access. It acts as a broker account, with all the funds in one location but split up into several different accounts to stay insured.
Imagine that you’re a banker with $750,000 for one HOA. At the bank, you’ll hold $250,000, and then you’ll disperse the rest into two other accounts. Those accounts will be at other banks, but the initial bank will manage those accounts through the ICS program.
HOA vs. Property Management Banking
Banking as a property manager and as an HOA management company is different.
As a property management company dealing with residential homes, funds are held in trust and insured to $250,000, as long as your bank has set up your accounts correctly. Each beneficiary in that account is insured up to $250,000. With an HOA, however, homeowners are not considered trustees.
Property managers aren’t going to use the ICS product because they don’t have the same concerns as an HOA. It’s rare that one account will hold over $250,000 for a single owner.
A lot of property management companies are thinking about getting into HOA management. You have to understand the big differences in the way funds are managed for each. You aren’t going to put HOA funds into a trust account.
It’s also important to remember that each state has its own laws when it comes to HOAs. For example, in California and Nevada, property managers cannot be designated signers for reserve accounts. They can’t even be secondary signers. It has to be an association board member. Often, board members serve only one term. With annual turnover, it can be difficult to get those signature cards done every time there’s a transition. Don’t open your HOA reserve account and forget about it.
A lot of education is necessary. If you’re a property manager who is thinking about HOA management, make sure you talk to your banking manager so you know what to expect.
How to Choose a Property Management or HOA Bank
It’s common to choose a bank based on the rates they offer. The industry is rate sensitive, especially for HOAs. But, you want to look past the introductory rates when you’re choosing your banking partner.
Analysis accounts give you credits, not interest, so you have to do your homework. That one percent rate may sound great when we’re talking about interest. But for analysis accounts, your credits first need to offset your transaction fees, which can vary from $100 to $1,000 depending on the bank. So what does that mean for you? Gross rate doesn’t matter as much as what you’ll net at the end of every month. So make sure the bank analyzes your transactions and is able to give you a realistic idea of your net return before you make a decision.
Banks are known to offer very good rates when they need an influx of deposits. Those high rates aren’t always sustainable, and while the rate you’re receiving is an important thing to consider, overall it’s always better to choose a banker who specializes in your industry. You’ll have an experienced professional who understands your needs and your compliance structure.
Take a look at the associations that the bank belongs to. The HOA industry and the property management industry has specific professional organizations that every management company belongs to. The bank offering you a great rate may not be a member of that organization, which means they’re not going to know the products and services you really need.
Branch Banking vs. Remote Banking for HOAs and Property Managers
Historically, homeowners association managers have preferred banking with a local bank where they can walk right into a branch and talk to someone who knows them and do their business. That may have been necessary when daily deposits had to be made, but it’s not so critical anymore. While it’s nice to see a familiar face, you want to know you’re working with someone who can do a lot more than small talk.
You should be aware that the people you know at your local bank can’t make a lot of decisions for you. You may have a polite relationship, but the level of expertise and the direct access to decisions is more important. You might know one of the tellers at your local Wells Fargo branch, but you probably don’t know the branch manager or the bankers. When it comes to specialized needs of businesses like property management and homeowners association (HOA) management, you likely won’t get efficiency or expertise in the local branch of your big bank.
HOA Lockbox Services
Lockboxes are a big part of HOA banking. With a lockbox, you don’t have to go through the hassle of going into the bank. You do everything electronically or remotely. Payments are mailed to the lock box and they can also accept credit cards, debit cards, and electronic payments. It’s safer and more secure than dropping off a check in a local bank branch office.
Ask Allison & Ken Your Questions at PM Grow Summit 2021
Enterprise Bank & Trust is the conference partner for the upcoming Virtual PM Grow Summit. Allison and Ken will be there, and this will be the first time that the HOA division is introduced to our property managers and partners. You’ll want to make sure you drop in and say hello.
We hope to see you there, too. If you have any questions about today’s podcast, be sure to contact us at Fourandhalf.
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