Questions to ask your Banker

Published in the ECHO Journal, October 2013

The selection of a banking relationship for your association is just as important, (if not the most important), as the selection of any other vendor for the property. The best option is a bank that is familiar with the HOA industry at a minimum and preferably one that has a specialized department or staff who understand your needs.

Common interest developments (CID’s) are unique in their banking needs. The association will have multiple deposits throughout the month, officers that may change every year or even more frequently, a management company or bookkeeper that needs access to account information but may not be a signer on the account and requirements for maintaining reserve accounts.

Although the CID is generally a non-profit corporation, it is still considered a commercial account. As such, many of the “special deals” offered are not available. It is important to understand what your bank can do to help your association keep your funds safe with a minimum of paperwork and hassle.

The following list of questions will be helpful in choosing the right bank for your association:

  1. Is this an “HOA Friendly” bank. Does it have staff, or better yet, a full department/division dedicated to handling association accounts?
  2. Are all accounts insured by FDIC? Your governing documents may require this.
  3. How are signature cards handled?

    1. Can one card be used for all accounts, including CD’s?
    2. How much personal information from the volunteer board members is required?
    3. What happens when there is a change of account signers? Do prior officers have to “sign-off”?
    4. Do the board members need to physically go into a branch?
  4. What are the charges and fees?

    1. Is there a minimum balance to maintain to avoid a service charge?
    2. Are there per check or per deposit charges?
    3. What are the charges for stop payments, wire transfers, returned homeowner assessment payments.
    4. Is there a charge to send a duplicate statement to another board member, accountant or management company?
  5. Does the bank provide Lockbox services for the homeowner’s assessment payments?

    1. What are the charges?
    2. What options are available for the homeowner?

      1. Automatic debit from their account each month.
      2. Credit card.
      3. Payment through the bank’s website.
      4. Personal online banking.
    3. How are the payments reported to the association? E-mail/PDF/Data file/Web access?
    4. Do homeowners need to have a coupon book or statement coupon?

      1. What are the costs?
      2. Will the bank assist with the ordering process?
    5. Is there a procedure to place an account “on hold” in the event of a delinquency collection process.
    6. What online banking options are available?

      1. Is Billpay an option?
      2. What information can be seen?
      3. Will information on CD’s or loans be available?
      4. Can additional board members, accountant, etc. be granted full or limited access?
    7. Are debit or credit cards available?

      1. Can limits be placed on purchases?
      2. Can access to cash be limited or denied?
      3. Are there fees?
    8. Does the bank provide a CD placement service for funds in excess of the FDIC limits?

      1. How does the service work?
      2. Are there fees?
      3. What is the procedure for placing or withdrawing funds?
      4. Are statements provided in summary form with a single 1099 at year end?
      5. How are renewal reminders provided?
      6. What controls are in place to avoid placing more than the FDIC limits in any one bank?
      7. Are the recipient banks “vetted” for safety and security?
    9. Does the bank have a loan program for CID’s? While this is not a frequent need, it is good to know that the bank understands the industry sufficiently to know how a loan should be processed.

      1. What amounts and terms might be available?
      2. What fees are involved?
      3. What requirements must the association meet to qualify?
    10. What will be the bank’s relationship with my bookkeeper, accountant and/or management company?

      1. Generally, a bank employee will only discuss account specifics with one of the account signers. This generally does not work for CID’s as the board member signers are off at their regular jobs or are out enjoying their retirement and don’t have time to be calling the bank all the time.
      2. An HOA friendly bank should have a procedure for authorizing your management company or other staff to receive information and discuss your accounts.
      3. The management company may require additional services, such as remote scanners to make deposits from their office, courier service, special data files for reporting the lockbox information, online access so statements can be printed close to the start of each month and cleared items can be viewed, etc.
    11. What are your rates?

      1. This is generally one of the first questions asked, however, it is probably the least important in the association’s quest for the best bank for their needs.
      2. Rates at the moment are still quite low, so the income involved has a minimal impact on the association’s bottom line.
      3. The banks are fairly competitive regarding rates so the dollar differences between the banks will be insubstantial.

This may seem like a daunting list, however most of the HOA Friendly banks will be ready with these answers and more! It should give you a great start however in choosing the bank that will best serve the needs of your association.

Geri Kennedy is Vice President of Focus Business Bank. She has been a member of the ECHO Board of Directors, continues to serve on the ECHO Legislative Committee and several Resource Panels, and is a frequent speaker and contributor to ECHO events. She was elected the ECHO Volunteer of the Year in 2002.