ORDER NO c72r:,1 AWARD KERB COUNTY DEPOSITORY CONTRRCT SECURITY STRTE RANK RND TRUST On this the 14th day of May 2001, upon motion made by Commissioner Let z, seconded by Commissioner Baldwin, the Cour^t appr^oved by a vote of 3-0-0, (Commissioner Griffin recused), to away^d the Kerr^ County Depository contract to Sec~ar^ity 5t ate Rank and Tr^ust and author^ize the Co~_inty .Ii_idge to sign same. COMMISSIONERS' COURT AGENDA REQUEST _ PLEASE FURNISH ONE ORIGINAL AND NINE COPIES OF THIS REQUEST AND DOCUMENTS TO BE REVIEWED BY THE COURT. MADE BY: BARBARA NEMEC MEETING DATE MAY 14, 2001 OFFICE: COUNTY TREASURER TIME PREFERRED: 9:45 A.M. SUBJECT: (PLEASE BE SPECIFIC) CONSIDER AND DISCUSS AWARDING OR REJECTING BIDS FOR KERR COUNTY DEPOSITORY EXECUTIVE SESSION REQUESTED: (PLEASE STATE REASON) NAME OF PERSON ADDRESSING THE COURT: . ESTIMATED LENGTH OF PRESENTATION: IF E.ERSONNEL MATTER -NAME OF EMPLOYEE: 15 MINUTES Time for submitting this request for Court to assure that the matter is posted in accordance with Title 5, Chaptc 551 and 552, Govenunent Code, is as follows: Meeting scheduled for Mondays: THIS REQUEST RECEIVED BY: THIS REQUEST RECEIVED ON: All Agenda Requests will be screened by the County Judge's Office to determine if adequate information has bee prepared for the Court's fotinal consideration and action at time of Court Meetings. Your cooperation will t appreciated and contribute towards you request being addressed at the earliest opportunity. See Agenda Request Rulc Adopted by Commissioners' Court. 5:00 P.M. previous Tuesday. Tommy Tomlinson KERR COUNTY AUDITOR NOTICE TO BIDDERS OF KERB COUNTY DEPOSITORY BY VIRTUE OF THE AUTHORITY INVESTED IN ME BY LAW, I FREDRICK HENNEKE, COUNTY JUDGE OF KERB COUNTY, TEXAS, HEREBY GIVE NOTICE THAT BIDS WILL BE RECEIVED BY THE COMMISSIONERS' COURT OF KERB COUNTY, TEXAS, AT ITS MAY REGULAR TERM THEREOF ON THE 141E DAY OF MAY, 2001, FROM ANY BANKING CORPORATION, ASSOCIATION, OR INDMDUAL BANK OF KERR COUNTY, TEXAS FOR THE NEXT FOUR SUCEEDING YEARS AS COUNTY DEPOSITORY AS PROVIDED BY LAW; SUCH BIDS SHALL BE FILED WITH THE COUNTY JUDGE OF SAID COUNTY ON OR BEFORE, THE 141" DAY OF MAY, 2001 AND NOT LATER THAN 9:00 O'CLOCK A.M. ON SAID DAY, AND EACH BID SO MADE SHALL BE BY SEALED PROPOSAL STATING THE RATE IN INTEREST SAID BANKING CORPORATION, ASSOCIATION, OR INDIVIDUAL BANKER OFFERS TO PAY ON SAID FUNDS OF SAID COUNTY AND FOR THE TERM BETWEEN THE DATE OF SUCH BIDS AND THE NEXT REGULAR TERM FOR THE SELECTION OF THE NEXT DEPOSITORY. SPECIFICATIONS AND BID SHEET PACKETS MAY BE OBTAINED FROM THE KERB COUNTY TREASURER'S OFFICE. SAID BID SHALL BE ACCOMPANIED BY A CERTIFIED CHECK FOR NOT LESS THAN ONE- HALF OF ONE PER CENT OF THE COUNTY REVENUES OF THE PRECEDING YEAR AS GUARANTEE OF GOOD FAITH ON THE PART OF THE BIDDER. THE COURT RESERVES THE RIGHT TO REJECT ANY AND ALL BIDS. AND LIKEWISE AT THE SAME TIME AND IN THE SAME MANNER, BIDS SHALL BE RECEIVED FROM SAID BANKING CORPORATION, ASSOCIATION, OR INDIVIDUAL BANKERS AS DEPOSITORY OF THE COUNTY TRUST FUNDS OF SAID COUNTY. Please publish on the following days: Wednesday, Apri125, 2001 Wednesday, May 2, 2001 Wednesday, May 9, 2001 Please send bill; affidavit and teat sheets to: Commissioners' Court Attn: Linda Kneese 700 Main, Room 122, Courthouse Kerrville, Texas 78028 Phone: 792-2255 100 MAIN, ROOM 103 (830) 792-2235 KERRVILLE, TEXAS 78028 SPECIFICATIONS AND BID SHEET FOR COUNTY DEPOSITORY OF KERR COVNTY, TEXAS Honorable Commissioners' Court Kerr County, Texas Members of the Court The undersigned Bank, hereinafter referred to as Depository Bank desires to offer its bid for the depositing of Kerr County funds, road and school funds, trust funds of the County and District Clerks of Kerr County, Tax collector's funds and all general and special funds of every nature, which the County of Xerr may tender for deposits for the term beginning with June 1, 2001 through May 31, 2005. 1. Bank Information Amount of Paid-up Capital Stock Permanent Surplus Total Stockholder's Equity as of S 67.420 $ 1,282,580 Date 3-31-01 Current Bank Credit Rating ey: Moody's Standard s Poors $ 2,212,023 2. The Depository Bank will comply with all provisions of Section 116 and 117, of the Texas Local Government Code, and all other laws of the State of Texas relating to County Depositories, Depositories for the trust funds of County and District Clerks, and School Fund Depositories or general or special funds herein enumerated now in effect or that may hereafter be passed. We also agree to perform all duties therein specified all will execute any and all instruments and documents necessary to evidence our obligation to the County of Kerr. In accordance with Section 116, of the Texas Local Government Code, within fifteen (15) days after the selection of the Depository Bank, it shall be the duty of the Bank to qualify as Depository in the manner set forth by the Commissioners' Court. 3. The Commissioners' Court will select the form of securities pledge contract or surety bond used to secure the funds of the County. The condition of the personal bond or bonds, or contract for securities pledged shall be conditioned for the faithful performance of all the duties and obligations devolving by law upon such depository, and for the payment upon presentation of all checks drawn upon any "demand deposit" account in any depository by the County Treasurer or Kerr County, and all checks drawn upon and "time deposit" account; upon presentation after the expiration of the period of notice required in the case of "time deposits"; and that said County funds shall be faithfully kept by said Depository and accounted for according to law. The amount of the securities so pledged or surety bond executed shall be fixed by the Commissioners' Court and the market value of said securities or amount of surety bond shall be equal to or exceed total collected funds on deposit at any and all times. Whenever there shall accrue to Kerr County or any subdivision thereof, fund in excess of the amount of securities so pledged or surety bond so executed, the Depository Bank agrees to make additional pledges or provide additional surety in amounts sufficient to cover the increased deposits. Correspondingly, when Kerr County funds shall be reduced below the amount of securities pledged or surety bond executed, the Commissioners' Court will permit the Depository Bank to withdraw securities or reduce the bond in the amount of such excess. Kerr County is to be placed at no expense in connection with the supervision or substitution of the securities pledged, or the handling of surety bonds. Said securities shall be placed for safekeeping with any approved financial institution which shall provide the County Treasurer with safekeeping receipts for all transactions. Monthly reports, or more often if required, of all collateral securities shall be provided to the County Treasurer which shall be include the par value and market value of each. Sutety Bonds approved by the Commissioners' Court shall be handled and filed in accordance with the Statutes of the State of Texas. 4. The Depository Bank will furnish bond and/or collateral as required by law. It is understood that the Commissioners' Court of Kerr County shall approve all collateral and/or surety bond executed by the Depository Bank in behalf of or pursuant to this Contract. It is understood that the Depository Bank may substitute securities between meetings of the Commissioners' Court with right of approval maintained for the next official meeting of the Commissioners' Court, provided that the minimum collateral as required by law, is maintained at all times. S. In accordance with these statutes, this Contract will take effect as soon as bond be given and approved by Commissioners' court and/or as soon as a pledge contract be approved by Commissioners' Court and said Contract shall remain in effect until sixty (60) days after the time fixed for the next selection of a Depository Bank. The maximum maturity date of any time deposit oz other interest bearing instrument with the Depository Bank under the terms of this Contract shall be 90 days beyond the time fixed for the selection of the next Depository Contract. 6. The Depository Bank shall serve as a Repository for Kerr County, and as a source of Kerr County investments, along with Financial Brokers, contracted with Kerr County, in secured investments allowed under Federal and State law and in accordance with the Kerr County Znvestments Policy. 7. The Commissioners' Court of Kerr County shall determine and designate from time to time, as outlined in Section 6. of this Contract the character and amount of Kerr County Funds which wilt be deposited by it in the Depository Bank that shall be "demand deposits^, and similarly the character and amount of funds which shall be "time deposits" at such rate or rates as may be laxful and stipulated in the Depository Contract. The term "demand deposits" as used herein shall mean any deposit which is payable on demand and the term "time deposits^ as used herein shall mean any deposit placed with the Depository Bank for a specified period of time, in a specific investment instrument as legally allowable. Time deposits and other investment instruments may be withdrawn by Kerr County prior to the expiration of the specified time period upon written notice in advance of said withdrawals and subject to routine penalties, if any, imposed by banking law, which shall be paid from earnings credits. 6. The Depository Bank will pay interest on Kerr County time deposits, on funds outlined under Section 6. of this Contract, at a fixed rate if Bid Alternative #1 is accepted or a variable rate if Bid Alternative #2 is accepted. BZD ALTERNATIVE #1 FIXED RATE Time Period 1 - 6 days T - 13 days 14 - 29 days 30 - 59 days 60 - 89 days 90 - 179 days 180 - 365 days Rate of Interest N/A $ N/A 8 N/A ~ 90 Day T-Bill Asked ate - 100 kp ~ 90 Day T-Bill Asked Rate - 75 by $ 90 Day T-Bill Asked Rate - 50 by 8 90 Day T-Bill Asked ~atg - 50 by $ BID ALTERNATIVE #2 VARIABLE RATE 1 - 30 days 91 day Treasury Bill Bond Equivalent Yield plus N/A Basis Point 31 - 60 days 91 day Treasury Bill Bond Equivalent Yield plus - 100 Basis Point 61 - 90 days 91 day Treasury Sill Bond Equivalent Yield plus - 75 Basis Point 91 - 180 days 180 day Treasury Bill Bond Equivalent Yield plus - 50 , Basis Point 181 - 365 days = 180 day Treasury Bill Bond Equivalent Y1eld plus _ 50 Basis Point 9. Under the acceptance of either Bid Alternative #1 or #2 in Section 8. of the Specifications and Bid Sheet and in accordance with the Depository Institutions Amendments of 1982 the Depository Bank will allow Kerr County to maintain Money Market Investment Accounts, or equivalents, for funds as outlined in Section 6 of this Contract. The Depository Sank will pay interest on the accounts on the following basis and rate: Union State Bank MMA posted rate 10. Under the acceptance of either of the Bid Alternatives in Section 8. of the Specifications and Bid Sheet and in accordance with the Depository Institutions Amendments of 1982 the Depository Bank will allow Kerr County to maintain Negotiable Orders of Withdrawal (NOW) Accounts, or equivalents, for funds as outlined in Section 5 of this Contract. The Depository Bank will pay interest on the accounts on the following basis and sate: Union State Bank NOW account posted rate. 11. Article 837a, Revised Civil Statutes of Texas, requires the Depository Bank to provide for the care, safekeeping and custody of securities in which the sinking funds fvr the redemption any payment of outatahding bonds may be invested. Access to said securities wi12 be permitted only by Commissioners' Court Order and in the presence of authorized representatives of the Depository Bank, County Treasurer, and County Auditor. No original Seturities shall be withdrawn except vn written order of Commissioners' Court recorded in its minutes. Appropriate records for maintaining the securities will be prescribed by the County Auditor. In accordance with Article 337a, Revised Civil Statutes of Texas, Section 140.002 of the Local Government Code, and Article 836, Revised Civil Statutes of Texas, it is understood that Kerr County may invest any interest and sinking funds and year-and balance genetal funds in accordance with Section 6. of this Contract. 12. In accordance with Section 6. of this Contract, Kerr County may invest Kerr County funds in Security Repurchase Agreements, with the Depository Bank in accordance with Section 116.112 of the Texas Local Government Code in amounts specified to the Depository Bank by the County Treasurer and authorized by the Commissioners' Court. The county Treasurer will notify the Depository Bank of such transactions by an agreeable time daily. It is understood that Securities involved in Repurchase Agreement purchase shall be held in a safekeeping account subject to the direction, control, and custody of Kerr County, through the County Treasurer. 13. The Depository Bank will pay interest earned on all time deposits, Money market Investment Accounts, NOW Accounts, or equivalents, security Repurchase Agreements and any other investments of Kerr County funds invested with the Depository Bank under Section 6. of this Contract on the date of maturity and will make interest payments available to the County Treasurer in an agreeable form by and agreeable time daily. 19. The Depository Bank xill provide Kerr County with wire transfer service through correspondent banks of the Depository Bank, through the Federal Reserve System, and as may be otherwise required, at no charge to Kerr County. 15. The Depository Bank will provide Kerr County deposit access to meet a21 Depository Bank deadlines for credit of check through all Clearinghouse Systems. 16. The Depository Bank will credit all cash, checks, drafts, exchange, etc., direct to the accounts of Kerr County on the day that they are actually deposited. The County Treasurer and Tax Assessor-Collector may make deposits for same day credit until 3:00 P. M. on business days. 17. The Depository Bank will handle all deposits and fund transfers as directed by the County Treasurer of Kerr County, except for those funds under the legal authority of the Tax Assessor-Collector, who shall direct those transactions. County funds shall be disbursed by the Depository Bank only in accordance with Sections 113.041-113.093 of the Texas Local Government Code. 16. The County Treasurer of Kerr County x111 be the primary liaison between Kerr County and the Depository Bank and shall handle dealings between Kerr County and the Depository Sank, unless otherwise directed by Commissioners' Court, except for those items under the direct control of the Tax Assessor-Collector, prior to deposit with the County Treasurer. The County Auditor shall have general oversight and involvement in dealings between Kerr County and the Depository Bank as may be deemed necessary, and as in accordance with the law. 19. The Depository Bank will provide Kerr County with and acceptable Account Executive Service whose responsibility shall be to serve as primary liaison between the Depository Bank and Kerr County. 20. The Depository Bank will charge back to various Kerr County accounts all checks, drafts, exchange, etc. which may be returned uncollected or unpaid for any reason, on the same day of rejection and to release such checks, drafts, exchanges, etc., to the County Treasurer or the Tax Assessor-Collector for purposes of collection. The Depository Bank will debit Kerr County accounts for purposes of reimbursement of such returned items, as directed by the County Treasurer. The Depository Bank will provide Kerr County with an automated stop payment program, or its equivalent. 21. The Depository Bank will furnish the County Treasurer a statement of the balance in each account, together with total warrants cleared and total warrants held against each account, in numeric order, as at the end of each month. The Depository Bank agrees to reconcile any differences in accou~it balances within 30 days following written notification of such imbalances by the County Treasurer. 22. The Depository Bank will furnish the County Treasurer a monthly report of Account Analysis for all Kerr County funds, on or before the last day of the following month, which shall include the average daily interest bearing and non-interest bearing balances for such month. 23. A certified check in the amount of $62,483.00 as required by law, payable to the Honorable Frederick Henneke, County Judge for County of Kerr is attached hereto as our guarantee of good faith in making the application for becoming the Depository Sank for the Public Ends under the jurisdiction of Kerr County. 29. A Bank shall respond only to the Specifications and Bid Sheet and in order to be considered a responsive bid, the Bank shall fill in all blanks on the Specification and Bid Sheet, complete only the provided copy as presented, make no changes to the terminology contained herein, and provide all attachments, in completed form, as called for in this Contract. The Specifications and Bid Sheet must be signed by a duly authorized Bank Official. upon selection of a Depository Bank and the award of the Depository Contract by the Commissioners' Court, the Specifications and Sid Sheet, and all attachments hereto, shall became the official Depository Contract between Kerr County and the Depository Bank. 25. The Commissioners' Court of Kerr County reserves the right to reject any and all bids for the June 1, 2001 - May 31, 2005 Bank Depositozy Contract. Respectfully submitted, Union State Bank Bank Name Signature of Bank Official May 11, 2001 Date DEPOSITORY BANK FEE SCHEDULE (FOR2001-2005) MAINTENANCE COST FOR MONTH ACCOUNT MAINTENANCE DEPOSITS CREDITED CHECKS PAID ITEMS DEPOSITED-ENCODED ITEMS DEPOSITED-UNENCODED STOP PAYMENTS CHECKS DEPOSITED RETURNED EXTRA STATEMENTS ACCOUNT ANALYSIS REPORT WIRE TRANSFER OF FUNDS FROM NON-CORRESPONDENT BANKS PAID ITEMS LIST AND ACCOUNT RECONCILIATIONS WITH SORT MAGNETIC TAPE OF PAID ITEMS $ 12.00 per acct S .3n nar item $ .11 per item on-us .03 per item 5 not on-us .07 on-us .03 per item $ not on-us .07 S 20.00 S 3.00 $ no charge S no charee $ 5.00 $ N/A $ N/A BALANCE REPORTING INVESTMENT PROGRAM, OR EQUIVALENT CUSTOMER DIRECT LINK OR ACCESS {COL/CDA) TRANSFER LOCK BOX bEPOSITORY SYSTEM ZERO BALANCE ACCOUNTS VAULT SERVICES PURCHASE OF U.3. GOVERNMENT SECURITIES MICRO ENCODED DEPOSIT TICKET BOOKS U.S. SAVINGS BOND CUSTOMERS PAYROLL DIRECT DEPOSIT CUSTOMERS LOOSE COIN ENVELOPES COIN WRAPPERS CASH STRAPS $ N/A UNIT COST PER MONTH PER ITEM 12.00_ppr arrt, .30 per item .ll~nPi item on-us .03 per item not on-us .07 on-us .03 per item not on-us .n7 2n_nn 3.00 no charee no. charoeP 5.00 N/A N/A $ N/A ~/A S N/A ~e $ no charge no chime coin - $ 07 per roll coin - $.07 per roll $ strap - $.30 per strap strap - $.30 per strap $ N/A $ N/A $ N/A Broker'~rha3$e vendor charee no charge $ N/A $ no ch~pP $ no charge $ no charge bank cwt nn rhP ~0 no charge no charee ENCODING BATCH HEADERS ENCODING CHECK CARRIERS ENCODING LABELS PLASTIC DEPOSIT BAG SEALS OTHER ITEMS S no charge S no charHe $ no charge S N/A S S S no charge no rharga no charg~_ vendor charee as needed, as agreed Bank errors on debits, credits, stop payments, etc. will not be compensated by Kerr County. Other items may be added as agreeable. S~cuxi~ SrrAr~ B~vx ~ ~`RU5T ~ ~\ P.O. Box 29004.1130 Junction Hwy • Kerrville, Texas 78029 • (830) 895-2000 • Fax (830) 895-2012 MARK T. COWDEN SENIOR VICE PRESIDENT/BRANCH MANAGER May 11, 2001 Kerr County 700 Main Street Kemille, TX 78028 Attn: Ken• County Commissioners Dear Commissioners: 1 -~ ~~ Security State Bank and Trust would like to thank you for the opportunity to bid on the County's depository contract. Should the County desire to change the manner in which accounts have been handled in the past, Security State Bank and Trust would work to accommodate it's needs. We are currently researching vazious automated products that could assist in funds management. We hope to have these products available in the very near future. Security State Bank and Trust has enjoyed the relationship with the County over the past years and feel that we have worked well together. Thank you for considering the enclosed bid. Should you have any questions, please feel free to contact me. Sincerely, Mazk T. Cowden Sr. Vice President MTC/dlh HOME OFFICE BRANCH OFFICE BRANCH OFFICE BRANCH OFFICE BRANCH OFFICE BRANCH OFFICE BRANCH OFFICE BRANCH OFFICE FreMNCkeWrg Kingelentl Harper Marble Falls Berne Bulvoke COmbrt Paleface Park P0. Bax 4]t P.0. Bax 1545 P0. Box 36 PD. Bax ]69 PO Pox 164] PO Box 85 PO Box 22C PO Bax 250 201 Wasi Main Ranch Road 2900 Highway 290 608 Highway 261 fi0] N. Main 3131 Bulverde Road 832 Front SL 3610 Paca Band Rd. Souih FredencksWrg, Texas ]9624 Kingsland. Texas ]Bfi39 Harper, Texas ]9631 Marble Falls. Texas ]8654 Boerne. Texas ]8006 Bulvertle. Texas ]6163 Comlori, Texas ]6013 Spicewood Texas ]6669 (630)99]-]5]5 (915)306-3535 (630)6664400 (630)0935553 (930)269-9292 (83016384866 (830!9954488 j512)2649900 Fax (830)99A]99d Fax (915)388-9[53 Fax f630)fl64-5828 Fax (03)16934]52 Fax 19307249-9099 Fax (830)6383663 Fax (6301995-6655 Fax (5121264-2066 MEMBFA FDIC SPECIFICATIONS AND BID SHEET FOR COUNTY DEPOSITORY OF KERR COUNTY, TEXAS Honorable Commissioners' Court Kerr County, Texas Members of the Court The undersigned Bank, hereinafter referred to as Depository Bank desires to offer its bid for the depositing of Kerx County funds, road and school funds, trust funds of the County and District Clerks of Kerr County, Tax Collector's funds and a17. general and special funds of every nature, which the County of Kerr may tender for deposits for the term beginning with June 1, 2001 through May 31, 2005. 1. Bank Information Amount of Paid-up Capital Stock Permanent Surplus Total Stockholder's Equity as of Date 12/31/00 Current Bank Credit Rating By: Moody's S 500,000.00 S 19,500,000.00 $ 43,969,000.00 See addendum Standard & Poors See addendum 2. The Depository Bank will comply with all provisions of Section 116 and 117, of the Texas Local Government Code, and all other laws of the State of Texas relating to County Depositories, Depositories for the trust funds of County and District Clerks, and School Fund Depositories or general or special funds herein enumerated now in effect or that may hereafter be passed. We also agree to perform all duties therein specified all will execute any and all instruments and documents necessary to evidence our obligation to the County of Kerr. In accordance with Section 116, of the Texas Local Government Code, within fifteen (15) days after the selection of the Depository Bank, it shall be the duty of the Bank to qualify as Depository in the manner set forth by the Commissioners' Court. 3. The Commissioners' Court will select the form of securities pledge contract or surety bond used to secure the funds of the County. The condition of the personal bond or bonds, or contract for securities pledged shall be conditioned for the faithful performance of all the duties and obligations devolving by law upon such depository, and for the payment upon presentation of all checks drawn upon any "demand deposit' account in any depository by the county Treasurer or Kerr County, and all checks drawn upon and "time deposit" account; upon presentation after the expiration of the period of notice required in the case of "time deposits"; and that said County funds shall be faithfully kept by said Depository and accounted for according to law. The amount of the securities so pledged or surety bond executed shall be fixed by the Commissioners' Court and the market value of said securities or amount of surety bond shall be equal to or exceed total collected funds on deposit at any and all times. Whenever there shall accrue to Kerr County or any subdivision thereof, fund in excess of the amount of securities so pledged or surety bond so executed, the Depository Bank agrees to make additional pledges or provide additional surety in amounts sufficient to cover the increased deposits. Correspondingly, when Kerr county funds shall be reduced below the amount of securities pledged or surety bond executed, the Commissioners' Court will permit the Depository Bank to withdraw securities or reduce the bond in the amount of such excess. Kerr County is to be placed at no expense in connection with the supervision or substitution of the securities pledged, or the handling of surety bonds. Said securities shall be placed for safekeeping with any approved financial institution which shall provide the County Treasurer with safekeeping receipts for all transactions. Monthly reports, or more often if required, of all collateral securities shall be provided to the County Treasurer which shall be include the par value and market value of each. Surety Bonds approved by the Commissioners' Court shall be handled and filed in accordance with the Statutes of the State of Texas. 4. The Depository Bank will furnish bond and/or collateral as required by law. It is understood that the Commissioners' Court of Kerr County shall approve all collateral and/or surety bond executed by the Depository Bank in behalf of or pursuant to this Contract. It is understood that the Depository Bank may substitute securities between meetings of the Commissioners' Court with right of approval maintained for the next official meeting of the Commissioners' Court, provided that the minimum collateral as required by law, is maintained at all times. 5. In accordance with these statutes, this Contract will take effect as soon as bond be given and approved by Commissioners' Court and/or as soon as a pledge contract be approved by Commissioners' Court and said Contract shall remain in effect until sixty (60) days after the time fixed for the next selection of a Depository Hank. The maximum maturity date of any time deposit or other interest bearing instrument with the Depository Bank under the terms of this Contract shall be 90 days beyond the time fixed for the selection of the next Depository Contract. 6. The bepository Bank shall serve as a Repository for Kerr County, and as a source of Kerr County investments, along with Financial Brokers, contracted with Kerr County, in secured investments allowed under Federal and State law and in accordance with the Kerr County Investments Policy. 7. The Commissioners' Court of Kerr County shall determine and designate from time to time, as outlined in Section 6. of this Contract the character and amount of Kerr County funds which will be deposited by it in the Depository Bank that shall be "demand deposits", and similarly the character and amount of funds which shall be "time deposits" at such rate or rates as may be lawful and stipulated in the Depository Contract. The term "demand deposits" as used herein shall mean any deposit which is payable on demand and the term "time deposits^ as used herein shall mean any deposit placed with the Depository Sank for a specified period of time, in a specific investment instrument as legally allowable.* Time deposits would also include Money Market Accounts which have limited check writing ability. Time deposits and other investment instruments may be withdrawn by Kerr County prior to the expiration of the specified time period upon written notice in advance of said withdrawals and subject to routine penalties, if any, imposed by banking law, which shall be paid from earnings credits. 6. The Depository Bank will pay interest on Kerr County time deposits, on funds outlined under Section 6. of this Contract, at a fixed rate if Bid Alternative #1 is accepted ox a variable rate if Bid Alternative #2 is accepted. BID ALTERNATIVE #1 Time Period 1 - 6 days 7 - 13 days 14 - 29 days 30 - 59 days 60 - 89 days 90 - 179 days 180 - 365 days FIXED RATE Rate of Interest n/a ~ n/a ~ n/a $ n/a ~ n/a ~ n/a ~ ~a 9 BID ALTERNATIVE #2 VARIABLE RATE 1 - 30 days 91 day Treasury Bill Bond Equivalent see Yield plus addendum Basis Point 31 - 60 days 91 day Treasury Bill Bond Equivalent see Yield plus addendum Basis Point 61 - 90 days 91 day Treasury Bill Bond Equivalent see Yield plus addendum Basis Point 91 - 180 days 180 day Treasury Bill Bond Equivalent see Yield plus addendum Basis Point 181 - 365 days = 180 day Treasury Bill Bond Equivalent see Yield plus addendum Basis Point 9. Under the acceptance of either Bid Alternative #1 or #2 in Section 8. of the Specifications and Bid Sheet and in accordance with the Depository Institutions Amendments of 1982 the Depository Hank will allow Kerr County to maintain Money Market Investment Accounts, or equivalents, for funds as outlined in Section 6 of this Contract. The Depository Bank will pay interest on the accounts on the following basis and rate: See addendum 10. Under the acceptance of either of the Bid Alternatives iri Section 8. of the Specifications and Bid Sheet and in accordance with the Depository Institutions Amendments of 1982 the Depository Aank will allow Kerr County to maintain Negotiable Orders of Withdrawal (NOW) Accounts, or equivalents, for funds as outlined in Section 6 of this Contract. The Depository Bank will pay interest on the accounts on the following basis and rate: See addendum 11. Article 837 a, Revised Civil Statutes of Texas, requires the Depository Bank to provide for the care, safekeeping and custody of securities in which the sinking funds for the redemption any payment of outstanding bonds may be invested. Access to said securities will be permitted only by Commissioners' Court Order and in the presence of authorized representatives of the Depository Bank, County Treasurer, and County Auditor. No original Securities shall be withdrawn except on written order of Commissioners' Court recorded in its minutes. Appzopriate records for maintaining the securities will be prescribed by the County Auditor. In accordance with Article 837a, Revised Civil Statutes of Texas, Section 140.002 of the Local Government Code, and Article 836, Revised Civil Statutes of Texas, it is understood that Kerr County may invest any interest and sinking funds and year-erid balance general funds in accordance with Section 6. of this Contract. 12. In accordance with Section 6, of this Contract, Kerr County may invest Kerr County funds in Security Repurchase Agreements, with the Depository Bank in accordance with Section 116.112 of the Texas Local Government Code in amounts specified to the Depository Bank by the County Treasurer and authorized by the Co[tmiissioners' Court. The County Treasurer will notify the Depository Sank of such transactions by an agreeable time daily. It is understood that Securities involved in Repurchase Agreement purchase shall be held in a safekeeping account subject to the direction, control, and custody of Kerr County, through the County Treasurer. 13. The Depository Bank will pay interest earned on all time deposits, Money market Investment Accounts, NOW Accounts, or equivalents, Security Repurchase Agreements and any other investments of Kerr County funds invested with the Depository Bank under Section 6. of this Contract on the date of maturity and will make interest payments available to the County Treasurer in an agreeable form by and agreeable time daily. 14. The Depository Bank will provide Kerr County with wire transfer service through correspondent banks of the Depository Bank, through the Federal Reserve System, and as may be otherwise required, at no charge to Kerr County. 15. The Depository Bank will provide Kerr County deposit access to meet all Depository Bank deadlines for credit of check through all Clearinghouse Systems. 16. The Depository Bank will credit all cash, checks, drafts, exchange, etc., direct to the accounts of Kerr County on the day that they are actually deposited. The County Treasurer and Tax Assessor-Collector may make deposits for same day credit until 2:00 P.M. on business days. 17. The Depository Bank will handle all deposits and fund transfers as directed by the County Treasurer of Kerr County, except for those funds under the legal authority of the Tax Assessor~Collector, who shall direct those transactions. County funds shall be disbursed by the Depository Bank only in accordance with Sections 113.041-113.043 of the Texas Local Government Code. 18. The County Treasurer of Kerr County will be the primary liaison between Kerr County and the Depository Bank and shall handle dealings between Kerr County and the Depository Bank, unless otherwise directed by Commissioners' Court, except for those items under the direct control of the Tax Assessor-Collector, prior to deposit with the County Treasurer. The County Auditor shall have general oversight and involvement in dealings between Kerr County and the Depository Bank as may be deemed necessary, and as in accordance with the law. 19. The Depository Bank will provide Kerr County with and acceptable Account Executive Service whose responsibility shall be to serve as primary liaison between the Depository Bank and Kerr County. 20. The Depository Bank will charge back to various Kerr County accounts all checks, drafts, exchange, etc, which may be returned uncollected or unpaid for any reason, on the same day of rejection and to release such checks, drafts, exchanges, etc., to the County Treasurer or the Tax Assessor-Collector for purposes of collection. The Depository Bank will debit Kerr County accounts for purposes of reimbursement of such returned items, as directed by the County Treasurer. The Depository Bank will provide Kerr County with an automated stop payment program, or its equivalent. 21. The Depository Bank will furnish the County Treasurer a statement of the balance in each account, together with total warrants cleared and total warrants held against each account, in numeric order, as at the end of each month. The Depository Bank agrees to reconcile any differences in account balances within 30 days following written notification of such imbalances by the County Treasurer. 22. The Depository Bank will furnish the County Treasurer a monthly report of Account Analysis for all Kerr County funds, on or before the last day of the following month, which shall include the average daily interest beating and non-interest bearing balances for such month. 23. A certified check in the amount of $62,403.00 as required by law, payable to the Honorable Frederick Henneke, County Judge for County of Kerr is attached hereto as our guarantee of good faith in making the application for becoming the Depository Bank for the Public Funds under the jurisdiction of Kerr County. 24. A Bank shall respond only to the Specifications and Bid Sheet and in order to be considered a responsive bid, the Bank shall fill in all blanks on the Specification and Bid Sheet, complete only the provided copy as presented, make no changes to the terminology contained herein, and provide all attachments, in completed form, as called for in this Contract. The Specifications and Bid Sheet must be signed by a duly authorized Bank Official. Upon selection of a Depository Bank and the award of the Depository Contract by the Commissioners' Court, the Specifications and Bid Sheet, and all attachments hereto, shall become the official Depository Contract between Kerr County and the Depository Bank. 25. The Commissioners' Court of Kerr County reserves the right to reject any and all bids for the June 1, 2001 - May 31, 2005 Bank Depository Contract. Respectfully submitted, Securitv State Bank & Trust Bank Name Signature of Bank Official Mav 11,2001 Date DEPOSITORY BANK FEE SCHEDULE (FOR - ) MAINTENANCE COST FOR MONTH VNIT COST PER ACCOUNT MAINTENANCE $ $5.00 DEPOSITS CREDITED $ .25 CHECKS PAID $ .10 ITEMS DEPOSITED-ENCODED S .03 ITEMS DEPOSITED-UNENCODED $ .OS STOP PAYMENTS S No charge CHECKS DEPOSITED RETURNED $ 2.00 EXTRA STATEMENTS $ 2.00 ACCOUNT ANALYSIS REPORT $ No charge WIRE TRANSFER OF PONDS FROM NON-CORRESPONDENT BANKS $ No charge PAID ITEMS LIST AND ACCOUNT RECONCILIATIONS WITH SORT $ N/A MAGNETIC TAPE OF PAID ITEMS $ ~A BALANCE REPORTING INVESTMENT PROGRAM, OR EQUIVALENT $ No charge CUSTOMER DIRECT LINK OR ACCESS (CDL/CDR) TRANSFER $ N/A LOCK BOX DEPOSITORY SYSTEM $ N/A ZERO BALANCE ACCOUNTS $_ N/A VAULT SERVICES S No charge PURCHASE OF U.S. GOVERNMENT SECURITIES $ See addendum MICRO ENCODED DEPOSIT TICKET BOOKS $ No charge U.S. SAVINGS BOND CUSTOMERS $ No charge PAYROLL DIRECT DEPOSIT CUSTOMERS S See addendum LOOSE COIN ENVELOPES $ No charge COIN WRAPPERS S No charge CASH STRAPS S No charge ENCODING BATCH HEADERS ENCODING CHECK CARRIERS ENCODING LABELS PLASTIC DEPOSIT BAG SEALS OTHER ITEMS Merchant Services $ No charge S No charge S No charge $ No charge S See attached S $ Bank errors on debits, credits, stop payments, etc. will not be compensated by Kerr County. Other items may be added as agreeable. KERR COUNTY DEPOSITORY BID ADDENDUM I. Enclosed is a Disclosure Notice, which compares balance sheets for the years ending December 31, 1999 and December 31, 2000. As the disclosure indicates, Security State Bank and Trust has continued to grow and at the same time maintained capital ratios and earnings ratios above [he Bank's peer group. Also enclosed is a copy of the Bank's balance sheet as of March 31, 2001 for the first quarter Call Report. 3. &4. We would continue to maintain, as required by State Law, adequate collateral pledged to the County's funds on deposit with Security State Bank and Trust. We had $10,126,565.11 pledged against $6,605,488.81in deposits as of April 30, 2001. The securities would continue to be held in safekeeping with a third party bank. 1 know that both the County and Security State Bank and Trust have worked well over the past few years in maintaining adequate collateral as deposit balances fluctuated. 8. Security State Bank and Trust would pay interest on time deposits at 25 basis points less than a U.S. Government security with a like maturity. The rate would be fixed for the term of the Certificate of Deposit. Interest would be simple interest. We would give the County the option of receiving the Bank's current posted rates should they be higher. 9. The County may want to maintain money market investment accounts for some funds. These accounts have limited check writing. There can only be six (6) third party withdrawals from these accounts with three (3) of those withdrawals being checks per month. There can be unlimited in-house transfers, so long as those transfers are not automatic transfers. Interest would be calculated the same as on the interest bearing checking accounts and the interest rate would be the same (35 basis points below the 91-Day T-Bill discount rate as published in the Wall Street Journal). 10. Security State Bank and Trust proposes to pay interest in the same manner as we currently pay interest to the County. All County accounts are interest bearing checking accounts with no minimum balance required. Interest is calculated on [he ledger balance and credited monthly. The accounts are maintained on an analysis basis to determine if a service charge is required. There is unlimited check writing on these accounts. Images of [he paid checks are returned in sequential order with the monthly statement. See attachment "A" for a listing of the analysis charges. Some of the charges do not pertain to the County. (have also enclosed a fee schedule of various fees for the County's use. Security State Bank and Trust proposes paying 35 basis points below the 91-Day T-Bill discount rate as published in the Wall Street Journal. This rate is subject to change weekly on the day following the weekly auction. The County can continue to purchase U.S. Government securities for investment through Security State Bank and Trust. The securities would be held in safekeeping at Frost National Bank, San Antonio in the County's own safekeeping account and settlement on purchases or maturities would be passed through Security State Bank and Trust's account with Frost at no chazge from Security State Bank and Trust. Security State Bank and Trust offers ACH origination services for direct deposit of County employees' payroll. The fee for this service is $.15 per transaction with a minimum $25.00 fee per transmission. The County could deliver a 3 '-<" disc or provide information in appropriate format by dial up modem. Sample contracts for this service are enclosed with this bid. As stated above, images of the checks paid are returned in sequential order. The Bank does not offer account reconciliation services on an automated basis. SECURITY STATE BANK and TRUST COMPANY AGREEMENT FOR ELECTRONIC FUNDS TRANSFERS TFIROUGII THE AUTOMATED CLEARING IIOUSE ti ~~ _ This agreement is entered into as of the day of , 19_ between ("Company"), a corporation, with its principal otT'ices located at ` and SECURTTY STATE BANK and TRUST ("Originating Bank"), a state banking association, with its principal offices located at 201 W. Main, Fredericksburg,.TX 78624. RECITALS A. Originating Dank is a participating financial institution in the Southwestern Automated Clearing Elouse Association ("SWACHA") which provides facilities for the exchange of electronic funds transfers among its members and other automated clearing house associations within the United States by utilizing the capabilities of the National Automated Clearing Elouse Association ("NACHA"), B. Company wishes to initiate Entries pursuant to the terms of this Agreement and the rules of NACHA and SWACHA (tile rules ofNACHA have been adopted as the rules of SWACHA, and such rules, including the operating guidelines and other applicable regulations published therewith, are herein referred to as the "Rules"), and Originating Bank is willing to act as an Originating Depository Financial Institution with respect to such Entries. C. Unless otherwise defined herein, terms used herein shall have the same meanings ,;:' provided in the Rules. The term "Entries" shall have the same meaning provided in the Rules and ; " shall also mean the data received from Company hereunder from which Originating Bank prepares • r Entries. The term "business day" as used herein means a day on which Originating Bank is open ' to the public for carrying on substantially all of its business (other than a Saturday or Sunday) and on which the ACH is also open for business. AGREEMENT 1, Transmittal of Entries by Comnanv. Company may deliver Entries to Originating Bank between the hours of 8;00 A.M. and 5:00 P.M, on a business day, at Originating Bank's Bookkeeping Department, ACH Unit, located at 201 W. Main, Fredericksburg, TX 78624 by means of the method indicated on.the Addendum attached. hereto. Entries shall be delivered ~o Originating Bank no later than 12:00 noon one business day prior to their Effective Entry Date for One Day Battlement, and no later than 12:00 noon two business days prior to their Effective Entry Date for Two Day Settlement. If Entries are delivered to Originating Bank after 12:00 noon on a business day, Originating Bank will send the Entries with no guarantee to settle on settlement date. Entries delivered to Originating Bank shall be prepared and submitted in compliance with the formatting and other requirements as set forth in the Rules and in accordance with the provisions with respect to such Entries set forth herein and on the Addendum attached hereto. The Effective Entry Dates specified for all Entries must be business days. Entries shall be deemed delivered to Originating Bank when the related security procedures provided for with respect to such transmittal as set forth on the Addendum attached hereto have been complied with and, (i) in tl~e case of transmittal by diskette, when received by Originating Bank at the location set forth above; or (ii) in the case of electronic data transmission, when the transmission to Originating Bank is completed. 2. Authorization of Entries. Company shall: (a) Obtain authorization from the "Receiver" of any Entry (i.e. Company's employee or customer or other person whose account is to be debited credited for the Entry) tltrouglt an authorization agreement, as required by the Rules, before initiating any Entry to the Receiver's account; such authorization agreement to authorize Company to initiate Debit Entries or Credit Entries, as the case maybe, to the Receiver's account and to initiate, if necessary, Debit Entries and adjustments for any Credit Entries made in error to the Receiver's account, and such authorization agreement to otherwise comply with the requirements of the Rules and applicable laws and regulations; (b) Retain each such authorization agreement for so long as same remains in effect and for a period of two {2) years after the termination or revocation of such authorization agreement; (c) Notwithstanding anything to the contrary in the Rules contained, provide positive notice to each Receiver that apre-authorized entry Itas been initiated or a corcecting entry has been made; and (d) Upon request from Originating Bank or any Receiving Depository Tinancial institution ("RDPI"), provide Originating Bank or such RDPI with a copy of such authorization agreement in accordance with the Rules. 3. Security Procedure. Company and Originating Bank shall comply with the security procedures with regard to the delivery/transmittal of Entries and requests for cancellation or amendment of Entries by Company to Originating Bank as provided on the Addendum attached hereto. 4. Limit/Per End Limit. The total dollar amount of all Entries delivered to Originating Bank in any one file of Entries shalt not exceed the "Limit" set forth on the Addendum attached hereto; and the maximum dollar amount of any one Entry delivered to Originating Bank, whether as a single Entry or included within a group oFEntries, shall not exceed the "Per Entry Limit" set forth on the Addendum attached hereto, If Company hereafter desires to change the applicable Limit and/or Per Entry Limit, Company shall, at least ten business days prior to the date on which it desires such new Limit and/or Per Entry Litnit to be effective, deliver to Originating Bank a written request far such change duly executed on behalf of Company. No reduction i» the Limit and/or Per Entry Limit shall be effective until ten business days after such request has actually been delivered to Originating Bank; and no increase in the Limit and/or Per Entry Limit shall be effective unless and unfit Originating I1ank expressly agrees thereto in writing, it being agreed that Originating Bank shall have no obligation to agree to any increase in the Litgjt and/or Per Entry Limit. Originating Bank shall have the right to reduce the applicable Limit and/or Per Entry Limit at any time immediately upon delivery of notice thereof to Company. Processin˘, Transmittal, and Settlement by Ori inating Bank. (a) Except as provided in Sections 6 and 7 hereof, Originating Bank shall (i) process Entries received from Company conforming with the requirements of this Agreement and the Rules; (ii) transmit such Entries as Originating Depository Financial Institution to the Southwestern Automated Clearing House (the "ACH") through the Federal Reserve Bank of Dallas acting as the Automated Clearing House processor; and (iii) settle for such Entries as provided in the Rules. (b) Originating Bank will transmit Credit Entries designated for One-Day Settlement to the ACH for One-Day Settlement by the evening deadline of the ACH one business day prior to the Effective Entry Date shown itt such Entries, provided that such Entries are delivered to Originating Bank by 12:00 Noon on a business day which is at least one business day prior to the Effective Entry Date For such Entries. Originating Bank will transmit Credit Entries designated for Two-Day Settlement to the ACH for Two-Day Settlement by the evening deadline of the ACH two business days prior to the Effective Entry Date shown in such Entries, provided that such Entries are delivered to Originating Bank by 12:00 Noon on a business day which is at least two business days prior to the Effective Entry Date for such Entries. (c) Originating Bank wilt transmit Debit Entries designated for One-Day Settlement to the ACH by the evening deadline of the ACH one business day prior to the Effective Entry Date shown in such Entries, provided that such Entries are delivered to Originating Bank by 12:00 Noon on a business day which is at least one business day prior to the Effective Entry Date for such Entries. Originating Bank will transmit Debit Entries designated for Two-Day Settlerent to the ACH by the morning deadline of the ACH one business day prior to the Effective Entry Date shown in such Entries, provided that such Entries are delivered to Originating bank by 12:00 Noon on a business day which is at least two business days prior to the Effective Entry Date for such Entries. (d} If Entries are delivered late (i.e., they are not delivered to Originating Bank by the lime specified for delivery for One-day settlement or Two-Day Sttilement; as the case may be, as set forth in Section 1. hereof), or if the Effective Entry Date specified for the Entries is not a business day, then Originating Bank may reject such Entries or Originating Bank may use its reasonable efforts to transmit such Entries to the ACI-I by the next reasonably available deposit deadline of the ACH following the deadline specited in sub-sections (b) and (c) above. If Entries designated for Two-day settlement are delivered late, Originating Bank may, if necessary to meet the Effective Entry Date for such Entries, use its reasonable efforts to transmit the Entries for One-Day Settlement, and in such event Originating Bank may charge its customary additional fees therefor. In no event will Originating Bank be liable for any loss resulting from any failure of a Receiver's account to be debited/credited for any Entry on its Effective Entry Date which results from late delivery of the Entry to Originating bank, or wlticlt results from the Effective Entry Data specified for such Entry not being a business day. 6. On-Us Entries. Except as provided in Section 7, hereof, in the case of an Entry received for debit/credit to an account maintained with Originating Bank ("an On-Us Entry"), Originating Bank will debit/credit the Receiver's account in the amount of such Entry on the Effective Entry Date contained in such Entry, provided that such Effective Entry Date is a business day, and (i) for any Entry designated for Two-Day Settlement, such Entry is delivered to Originating IIank by no later than 12:00 Noon on a business day which is at least two business days prior to the Effective Entry Date for such Entry; (ii) for an Entry designated for One-Day Settlement, such Entry is delivered to Originating Bank by no later titan 12:00 Noon on a business day which is at least one business day prior to the Effective Entry Date for such Entry. If such Entry is delivered late (i.e., it is not delivered to Originating Bank by the time specified above), or if the Effective Gntry Date specified for the Entry is not a business day, Originating Bank may reject such Entry or may use its reasonable efforts to debit/credit ttte Receiver's account in the amount of such Entry on the Effective Entry Date contained in such Entry or on the earliest business day thereafter as is reasonably possible. If On-Us Entries designated for Two-Day settlement are delivered late, Originating Bank may, if necessary to meet the Effective Entry Date for such Entries, use its reasonable efforts to process such Entries for One-Day Settlement and if On-Us Entries designated for One-Day Settlement are delivered late, Originating Bank may, if necessary to meet the Effective Entry Data for such Entries, use its reasonable efforts to process such Entries for Same-Day Settlement, and in such event Originating Bank may charge its customary additional fees therefore. In no event will Originating Bank be liable for any loss resulting from any failure of Receiver's Account to be debited credited for an Entry on its Effective Entry Date which results from late delivery of the Entry to Originating Bank, or which results from the Effective Entry Date specified for such Entry not being a business day. The Settlement Date for each On-Us Entry shall be the date on which such Entry is to be debited/credited to the Receiver's account as above provided. 7. Rejection of Entries. Originating Bank may reject any Entry (or group Entries) wlticlt does not comply with, and/or is not delivered in accordance with, the requirements hereof, or which contains an Effective Entry Date more than five (S) business days after the business day such Entry(s) are received by Originating Bank. Originating Bank shall have the right to reject any Entry (including On-Us Entries) for any reason for which an Entry maybe returned under the Rules. Originating Bank shall have the right to reject any Etttry if Company has failed to comply will[ its account balance obligations as provided in Section 10. hereof. Originating Bank will notify Company by telephone of any such rejection no later than the business day such Entry would otherwise have been transmitted by Originating Bank to the ACH as provided in sub- sections S(b), {c), and (d) above, or, in the case of an On-Us Entry, the business day such Entry would otherwise have been debited/credited to the Receiver's Account as provided in Section 6. above. Originating Bank shall have no liability to Company by reason of the rejection of any such Entry or the fact that such notice is not given at an earlier time than that provided for herein. S. Cancellation. Amendment, or Corcection of Entries. Company shall have no right to cancel or amend any Entry after its receipt by Originating Bank. However, Originating Bank will use reasonable efforts to act ou a request Cor cancellation or amendment of an Entry received from Company prior to Originating Bank's transmission of the Entry to the ACH or, in ttie case of an On-Us Entry, prior to Originating Bank's debit/credit ofthe Entry to a Receiver's account, but Originating Bank shall have no liability if such cancellation or amendment is not effected. ]f Company discovers that an Entry initiated by or on its behalf was in error, Company may notify Originating Bank of such error, however such notification must be provided to Originating Bank within twenty-four (24) hours after discovery of the error. If Company'teijuests correction of an erroneous Entry within four (4) business days following the Settlement Date of such Entry, Originating Bank may in its sole discretion initiate a correcting Entry through the ACH on behalf of Company in accordance with the Rules, however Originating Bank does not guarantee return of the subject funds. If Company requests correction of an erroneous Entry more than four (4) business days following the Settlement Date of such Entry, Originating Bank will utilize its reasonable efforts to attempt to obtain return of the subject funds on behalf of Company, consistent with the Rules, however Originating Bank does not guarantee return of the subject funds. Company shall send or deliver to the Receiver written notice of such correction and the reason therefore prior to requesting the correction. Company shall indemnify Originating Bank from end against any claims, demands, loss, liability, or expense, including attorney's fees and costs, resulting directly or indirectly from compliance by Originating Bank with any such request. All requests for cancellation, amendment or correction of Entries must be made by Company in compliance with the security procedures For such requests as set forth on the Addendum hereto. 9. Returned Entries. Originating Bank will notify company of Originating Bank's receipt of a returned Entry (or group of Entries) from the ACH by mailing notice thereof to Company no later than one business day after the business day of such receipt and will debit/credit Company's Account for the returned Entry(s) and provide confirmation thereof to Company. With respect to Credit Entries, Originating Bank will also notify Company of such returned Entry(s) by telephone no later than one business day after the business day Originating Bank receives tl~e returned Entry(s) from the ACH. Company shall assume the sole responsibility for remaking and resubmitting said Entry(s) in accordance with the requirements of this Agreement or otherwise handling the payments due the Receiver(s), unless the return was due to an error in the processing of such Entry(s) by Originating Bank and sufficient data is available to Originating Bank to permit it to remake and resubmit such Entry(s), in which event Originating Bank will remake and resubmit such Entry(s). Originating Bank assumes no other responsibility with respect to such returned Entries. Except for an Entry retransmitted by Company in accordance with the requirements of this Agreement, Originating Bank shall have no obligation to retransmit a returned Entry to the ACH if Originating Bank complied with the requirements of this Agreement with respect to the original Entry. 10. Debits/Credits to Company's Account. (a) Company will designate a demand deposit account (the "Company's Account") maintained by Company at Originating Bank to be used for settiing for all transactions hereunder. (b) Company authorizes Originating Bank to debit Company's Account for the amounts of Credit Entries processed for Company hereunder at such time on the Settlement Date with respect to such Entries as Originating Bank, in its discretion, may determine. It is provided, however, that Originating Bank may at any time, at its option, require that Company pay to Originating Bank the amounts of Credit Entries to be processed Hereunder on the date such Credit Entries are delivered to Originating Bank; and Company agrees that, upon Company's receipt pf notice (either written or oral) from Originating Bank that this requirement is in effect, Originating Bank is authorized to debit Company's Account for the amounts of all Credit Entries delivered to Originating Bank pursuant to this Agreement at or at any time after twelve noon on the date such Entries are delivered to Originating Bank. (c) Originating Bank shall credit Company's Account for the amounts of Debit Entries processed For Canpany hereunder on the Settlement Date for such Entries; it being expressly understood, however, that each credit to Company's Account on account of a Debit Entry is provisional until Originating Bank receives final settlement for such Entry, and Originating Hank may charge-back to Company's Account the amount of any Debit Entry credited to Company's Account for which Originating Bank does not, for any reason, receive final settlement. __ --~7~firia~iii~riluffi~6~7ViW ,~y,~„w (d) Company authorizes Originating Bank to credit Company's Account for any amount received by Originating Bank by reason of the return or cancellation of any Credit Entry transmitted by Originating Bank for which Originating Bank has previously received payment (such credit to Company's Account to be made on the date Originating IIank receives such amount), and to debit Company's Account for the amount of any returned Debit Entry (such debit to Company's Account to be made upon receipt by Originating Bank of the returned Entry), and to debit or credit (as applicable) Company's Account for any amendmen'fs made tb Entries or corrected Entries resubmitted. (e) Company also authorizes Originating Bank to debit Company's Account for the fees and charges (as provided in Section 18 hereof) which become owing to Originating Bank on account of Entries processed and services provided by Originating Bank for Company hereunder, as and when such fees become due. Such fees and charges shall be charged against the account analysis of Company's Account. (f) Company shall maintain in Company's Account a balance of collected funds sufficient at any time to cover the amounts then to be debited to Company's Account pursuant to this Agreement. It is understood and agreed that if, at the time Originating Bank is to debit Company's Account on account of an Entry or group of Entries received by Originating Bank, there are not sufficient collected funds on deposit in Company's Account to cover the total account then to be debited for such Entry(s), then Originating Bank shall have the right, but not the obligation, to reject any or all of such Entry(s) to the extent it is then possible for the Originating Bank to do so. It is further expressly agreed that if at any time Company's Account does not contain sufficient collected funds to cover the amount of debits or charges to Company's Account then to be made pursuant to this Agreement, Originating Bank may, but is not obligated to, debit Company's Account into overdraft, and Originating Bank shall not be liable for any damages to Company as the result of such debits or charges causing an overdraft in Company's Account; and if such an overdraft is created, Company agrees to repay Originating Bank upon demand the amount of such overdraft toget)ter with interest on the overdraft at the ltigltest rate of interest permitted by applicable law. Company hereby authorizes Originating Bank to charge any of Company's Accounts maintained with Originating Bank at any time for the amount of such overdraft plus the interest accrued thereon, and/or Originating Bank may set-off against any amount it may owe to Company, in order to obtain payment of Company's obligations under this Agreement. (g) AJvice of such debits and credits to Company's Account will be reflected Qn the periodic statements for Company's Account. (h) Company agrees and obligates itself to pay Originating Bank the amounts for which Originating Bank is authorized to debit Company's Account at the times on which Originating Bank is authorized to debit Company's Accortnt, as herein provided; and Company agrees that its obligation to pay such amounts shall not be affected by any failure or inability of Originating Bank to debit Company's Account for-any such amounts. 11. Account Reconciliation. The amounts of Debit Entries and/or Credit Entries transmitted by Originating Bank or debited/credited to a Receiver's account at Originating Baqk will be reflected on the periodic statements issued by Originating Bank will[ respect to Company's Account. Company agrees to notify Originating Bank promptly of any discrepancy between Company's records and the information shown on any such periodic statement. If Company fails to notify Originating Bank of any such discrepancy within thirty (30) days after receipt by Company of a periodic statement containing such information, company agrees that Originatipg Bank shall not be liable for any other losses resulting from Company's failure to give such notice, or for any loss of interest with respect to Entries reflected on such periodic statement, and Company shall be precluded from asserting such discrepancy against Originating Bank. 12. Company Representations and Agreement; Indemnity. In connection with the matters which are the subject of this Agreement, Company represents to Originating Bank and agrees that: (a) Eaclt person shown as the Receiver on a Credit Entry received by Originating Bank from Company Itas, by an authorization agreement in accordance with the Rules, authorized _- _ - _ 1' !Rnri!T ilj-I'~~!IIR'11!i'lyi'~}'fi''!P1F'~u~~TX'~1MAIMfi'T(M1P'NMrA!!I'R~kA Txn~~,~m, the initiation of such Entry and the crediting of the Receiver's account in the amount and on the Effective Entry Date shown such Entry, and has authorized the initiation, if necessary, of Debit Entries and adjustments for any Credit Entries made in error to the Receiver's account; (b) Each Debit Entry received by Originating Bank from Company is for a sum due and owing to Company by the Receiver of'such Debit Entry (i. e., the person to whose account the Entry is to be debited), or is for a sum specified by such ReCeivver to be paid to Company, or is a correction of a previously submitted erroneous Credit Entry, and such Receiver has duly authorized such Entry by an authorization agreement in accordance with the Rules; (c) Each such authorization with respect to an Entry is operative at the time of transmittal or debiting/crediting by Originating Bank as provided herein; and at the time each Entry is processed by Originating Bank, Company has no knowledge of revocation by such Receiver of such authorization, and Company ties no knowledge of any revocation by such Receiver's Receiving Depository Financial Institution ("RDF]") of its agreement to accept such Entry, or any knowledge that its Receiver's authorization for such Entry has been terminated in whole or in part, by operation of law or otherwise; (d) Entries transmitted to Originating Bank by Company are limited to those types of Entries set forth on the Addendum attached hereto; (e) Company shalt fully and timely perform its obligations under this Agreement and same will be performed in accordance with all applicable laws and regulations and the Rules as in effect from time to tune; and (f) Company shall be bound by and comply with the Rules as in effect from time to time, including, without limitation, the provision thereof making payment of an Entry 6y the RDFI to lire Receiver provisional until receipt by the RDFI of final settlement for such Entry; and Company specifically acknowledges that it has received notice of this rule and of the fact that, if such settlement is not received, the RDFI shall be entitled to a refund from the Receiver of the amount credited and Company shall trot be deemed to have paid the Receiver the amount of the Entry. To the extant allowed by law, Company agrees to indemnify Originating Bank against any loss, liability or expense (including reasonable attorney's fees and expenses) resulting from or arising out of any breach of any of fire foregoing representations and agreements by Company, 13. Liability Limitations on Liability; Indemnity. (a) Originating Bank shall be required only to exercise good fault and ordinary care in performing the services to be provided by it under the terms of this Agreement. Originating Bank's srtbstantisi compliance with the Rules and this Agreement shall be deemed to constitute good faith and the exercise of ordinary care by Originating Bank hereunder. (b) Originating Bank stroll not be responsible for Company's acts or omissions (including without (imitation, any acts or omissions relating to the amount, accuracy, timeliness of transmittal or due authorization of any Entry, or any failure to comply with the security procedures specified herein, or any failure to act in response to any notification given to Company), or those of any Agent/Service Bureau providing services to Company, or of any agent or employee of any of them, or of any outer person or entity, including without limitation, any Federal Reserve Bank, automated clearing house, or transmission, or communications facility, or any Receiver or RDFI (including, without limitation, the return of an Entry by such Receiver or RDF[), and no such person or entity shall be deemed Originating Bank's agent. To the extent allowed by law, Company agrees to indemnify Originating Bank against any loss, liability or expense (including reasonable attorney's fees and expenses) resulting from or arising out of any claim of any person that Originating Bank is responsible for any act or omission of Company or any other person or entity described in this Section 13(b) except Originating Bank, its oflicers, employees, or agents.. (c) Originating Bank shall not be liable for any loss resulting from Company's failure to deliver or transmit Entries to Originating Bank by the times specified Fur delivery of such Entries set forth herein. (d) In no event shall Originating Bank be liable for any penalties or any consequential, special, punitive or indirect loss or damage which Company may incur or suffer resulting from the subject matter of this Agreement, including, without Iitnitation,Joss or damage from subsequent wrongful dishonor resulting from Originating Bank's acts or omissions pursuant to this Agreement, whether or not the likeli}rood of such loss or damage was known by Originating Bank. ` (e) Without limiting the generality of the foregoing provisions, Originating Bank shall be excused from failing to act or delay in acting if such failure or delay is caused by legal constraint, interruption of transmission, or communication facilities, equipment failure, war, emergency conditions, or other circumstances beyond Originating Bank's control. Additionally, Originating Bank shall be excused from failing to transmit or delay in transmitting an Entry if such transmittal would result in Originating Bank's having exceeded any limitation upon its infra-day net funds position established pursuant to present or future Federal Reserve guidelines or in Originating Bank's otherwise violating any provision of any present or fitture risk control program of the Federal Reserve or any rule or regulation of any other U.S. governmental regulatory authority. (f) Subject to the foregoing limitations, Originating $ank's liability for loss of interest resulting from its error or delay shall be calculated by using a rate equal to the average Federal Funds rate at the Federal Reserve Bank of New York for the period involved. 14. Compliance with Security Procedures. (a) If an Entry, or a request for cancellation or amendment of an Entry, received by Originating Bank purports to have been transmitted or authorized by Company, it will be deemed effective as Company's Entry or request even though the Entry or request was not actually authorized by Company, provided that Originating Bank acted in compliance with the security procedures set fortlr i» the Addendum attached hereto with respect to such Entry or request (which security procedures are acknowledged to be commercially reasonable and are expressly approved and agreed to by the parties hereto;) If signature comparison is to be used as apart of those security procedures, Originating Bank shall be deemed to have complied with that part of such procedures if it compares the signature accompanying a file of Entries, or request fpr cancellation or amendment of an Entry, received with the specimen signature of an authorized representative of Company (a "Company's Representative") and, on the basis of such comparisol, believes the signature accompanying such file or request to be that of such Company's Representative. (b) If an Entry, or request for cancellation or amendment of an Entry, received py Originating Bank was transmitted or authorized by Company, it will be deemed effective as Company's Entry or request, whether or not Originating Bank complied with the security procedures provided for herein and in the Addendum attached hereto with respect to that Entry or request and whether or not that Entry or request was erroneous in any respect or that such error would have been detected if Originating Bank had complied with such procedures. 15. Inconsistenev of Name and Account Number. Company acknowledges and agrees that, if an Entry describes the Receiver inconsistently by name and account number, payment of the Entry may be made by the Receiving Depository Financial Institution (or by Originating Bank in tfte case of an On-Us Entry) on the basis of the account number, even if the account number identifies a person different from the names Receiver, and that the obligation of Company to pay the amount of the Entry as provided herein is not excused in such circumstances. 16. Notifications of Chance. Originating Bank will notify Company of all Notifications of Change received by Originating Bank relating to Entries transmitted by Company by mailing a copy of such Notification of Change to Company no later than one (1) business day after Originating Bank's receipt thereof. 17. J'renotification. Notwithstanding anything to the contrary in the Rules, Company shall provide to Originating Bank, fourteen (J4) calendar days prior to initiation of any new Entry, a prenotification record which shalt include: Receiver's name, identification number, account nwnber, Receiving Depository Financial Institution's ranting transit number, and zero-dollar amount. If Company's prenotification record is rejected by a Receiving Depository Financial Institution and Company is so notified, Company must correct the reason for rejection, resubmit another prenotification record, and wait the prescribed Fourteen (14) calendar days before submitting any further Entries for tl;e Receiver(s) in question. 18. Fees and Charles. Company agrees to pay the customary Fees and charges charged by Originating Bank for providing the services to be provided by it hereunder. Such fees and charges shall be charged in accordance with Originating Bank's fee schedule in effect at the time such services are provided. Originating bank may change its fees and charges at any time, and from time to time, by providing notice thereof to Company, such change to be become effective after the date or period of time specified in the notice. Such fees and charges shall be charged against the account analysis of Company's Account as provided in Section ]0, above. 19. Notices, Instructions. &tc. (a) Except as otherwise expressly provided herein, Originating bank shall not be required to act upon any notice or instruction received from Company or any other person, or to provide any notice or advice to Company or any other person with respect to any matter. (b} Originating Bank shall be entitled to rely on any written or oral notice or other written or oral cotmunication with regard to the subject matter hereof believed by it in good faith to be genuine. (c) Except as otherwise expressly provided herein, any written notice or other written communication required or permitted to be given under this Agreement shall be delivered, or sent by United States mail, postage prepaid, or by express carrier, and addressed to: If to Originating Bank: Security State Battk and Trust 201 West Main Street ' P.O. Bos ~71 rredericksburg, TX 78G2A Atfentimtt Bookkeeping Department If to Company; Attention: unless another address is substituted by notice delivered or sent as provided herein. Except as otherwise expressly provided herein, any such notice she!! be deemed given when received. 20. Data Retention. Company shall retain data on file adequate to permit remaking of Entries For thirty (30) working days following tl~e date of their transmittal by Originating Bank as provided herein, and shall provide such data to Originating Bank upon its request. 21. Amendments. Originating Bank may amend the terms, provisions and conditions contained in this Agreement and any and all Addenda hereto at any time and from time to time by giving written notice of such amendment to Company at least forty-five (45) days prior to the date on which such amendment becomes effective. Notice of any such amendments shall be deemed given when such notice is placed in the United States mail, postage prepaid, addressed to Company at its address shown in Section 19. above or such other substituted address as provided in Section 19. 22, )_inancial Statements/Collateral. Company agrees that, during the existence of this Agreement, it will at any time and from time to time upon Originating Bank's request furnish to Originating Bank a true, correct, and complete financial statement with regard to Company prepared on the customary forms required by Originating Bank. Originating Bank shall have the right to at any time require that Company pledge collateral satisfactory to Originating Bank to secure performance by Company of Company's obligations under t}iis Agreement. ' 23. Termination. This Agreement may be terminated by Company at any time by giving thirty (30) days' prior written notice of such termination to Originating Bank. Originating Bank shall have the right to terminate this Agreement at any time by giving thirty (30) days' ~trior written notice of sttclt termination to Company. Any termination of this Agreement shall not affect eny obligation of any party hereto arising from matters occurring prior to such termination, nor shall any such termination affect the provisions of Sections 12. or 13. hereof. 24. Entire Agreement; This Agreement (including the Addenda attached hereto), together with the Depository Agreement with respect to Company's Account and any Security Agreement executed by Company in connection herewith, constitutes the entire agreements between Company and Originating Bank wit1~ respect to the subject matter hereof and supersedes any prior agreements between Company and Originating Bank with respect to such subject matter. In the event any of the term of this Agreement may be inconsistent with the terms of the Depository Agreement between Company and Originating Bank relating to Company's Accotmt, the terms of this Agreement shall control. In the event performance of the services provided t`or herein in accordance with the terms of this Agreement would result in a violation of any presgnt or future statute, regulation or government policy to which Originating Bank is subject, and which governs or affects the transactions contemplated by this Agreement, then this Agreement shall ˘e deemed amended to the extent necessary to comply with such statute, regulation or policy, and Originating Bank shall incur no liability to Company as the result of such violation or amendmegt. 25. Non-Assi ng ment. Company may not assign this Agreement or any of its rights or duties hereunder to any other party without Originating Bank's prior written consent. 26. Binding Agreement: Benefit. This Agreement shall be binding upon and shall inure to'the benefit of the respective parties hereta and their respective legal representativgs, successors and permitted assigns. This Agreement is not for the benefit of any other party whatsoever, and no such other party shall have any. rights against Company or Originating Ba~tk hereunder. 27. Headings. I-teadings era used for reference purposes only and shall not be deemed a part of this Agreement. 28~ Governing; Law. Entries transmitted under the terms of this Agreement will ˘e transmitted pursuant to the Rules through one or more automated clearing Douses; and, as provided in the Rules, Article 4A of the Uniform Commercial Code as enacted in the State of New York has been adopted by the National Automated Clearing House Association to govern the Rules and the rights and obligations ofthe parties to Entries which are subject to said Aricle 4A and initiated pursuant to the Rules. Tlie parties hereto expressly agree that the rights and obligations of the parties hereto shall be governed by and construed in accordance with Artiste 4~ of tl~e Uniform Commercial Code as enacted in the State of New York with respect to all governed by and construed in accordance with the laws of the State of Texas and any applicable Federal Law. The parties hereto agree to be bound by and to comply with the Rules, as in effect from time to time, with respect to the subject matter of this Agreement. 29. )?artist Unenforceabili_y. If any portion of this Agreement should be held to be invalid or unenforceable for any reason, the remainder hereof shall not be affected thereby. 30. Authori .Company represents and warcants to Originating Bank tftat it is empowered to make and enter into this Agreement, and that any person(s) executing this Agreement on its behalf or identified as having any authority to bind Company are fuliy authorized to so bind Company. 31: Non-Waiver of Richts, Any delay or failure of either party hereto at any time tp require performance of the other party of any provisions of this Agreement shall in no way affdct the right of such party to require the performance of that or any other provision of this Agreement, and shall not Ue construed as a waiver of that or any other right under this Agreement. IN WITNESS WHEREOF the parties hereto have caused this Agreement tp be executed as of the day and year first above written. COMPANY: By: Name: Title: ORIGINATING RANI{: SECURITY STATE BANI{and TRiJST By: Name: Title: FEES EDYJI.E One-Time Fees: ConveCSion fee $ 0.00 Saftwara fee for diskette processing $ U3 0.00 ~ep,~ar Monthly 1~: Debit entries originated $ .15 Reversing/cotxectingriebit entries originated $ .15 Credit ehtries originated $ .15 Iteversing/correcti ng credit entries originated $ .15 Per file origihation fee $ 0.00 Prenote entries originated $ 15 F.eturn entries and Notifications of charge received S 0.00 Minimum per transmission fee $ I SECURITY STATE BANK AND TRUS CREDIT CARD SERVICES BUSINESS CARD MASTERCARD CREDIT CARD: Through our association with TIB The Independent Banker's Bank, we can offer a ntunber of options for the County of Kerr: A. Sub & Summary Account: The Sub & Summary has a Corporate Summary Account with a combined credit limit of one or more Sub Accounts. Each Sub .9ccount has an authorized individual named on the card Each Sub Account has it's own credit limit. The combination of the Sub Account credit fimits constitutes the combined SummaryAccount credit limit. At the end of the monthly cycle, a statement is issued for each Sub.9ccount. Shortly thereafter the balances roll out of the Sub.4ccount into the SummaryAccount. A statement for the Summary Account is then issued The Summary Account statement is the only statement that should be paid by the county. B. Combined Account. The Combined.9ccount has only one credit limit that is shared by all authorized users of the cazds. The cards can be issued in the individual user's names. C. Account with Grace Period Either of the above accounts can be set up to have a grace period of 25 days. ff an accotmt is paid in full within this grnce period, there will be no finance charge. There is a $40.00 annual fee per card issued. D. Account with No Grace Period Either of theA or B accotmts can be set up to have an account with no trace period There will be fittance chazged from the date of transaction. There is no annual fee. MERCHANT SERVICES Security State Bank and Tmst has a variety of options for t-ierchant Acceptance of G7SA and MasterCard Credit Cards. Some of the options aze as follows: A. Stand Alone Point of Sale Terminals 1. Impact or thermal printers 2. Single orAfulti-Merchant Terminals B. Computer Software L Our own L"rtal POS Partner Sofhvare - Can be set up for a single computer to access the transactions from multi terminals located at various stations. 2. Linking our processing system to software that you purchase elsewhere and install yourself or have a programmer install The Compatry selling the software will be the support of such a system. SECURITY STATE BANK AND TRUS CREDIT CARD SERVICE C. Internet Processing 1. Processing through an Internet Secured Gateway Provider Cazdholder enters card information and credit cazd transaction is processed at that time. The company selling the Secured Gateway Provider will be the support of such a system. 2. Retrieving credit card information through a Secured Web Site for entry into a stand-atone credit card terminal. D. Touchtone ETC The Merchant would ttand swipe credit card through a manual imprinter onto a sales slip and key the credit card information into the telephone for processing. Volume, average ticket, the method of processing, etc determines fees and rates for merchant processing. Our rates, fees and cost of point of sale equipment remain very competitive. When the County of Kerr determines they are ready to start accepting credit cards, we will be more than happy to come in person to speak to the persons in charge of setting up the program. We will at that time discuss all options [o determine what method and/or equipment would be most suitable. We will be able to bring two of the most populaz point of sale terminals for demonstration, if this is desired Most card types can be processed through ow system. Security State Bank and Trust is proud of the fact that we have developed a Merchant Sen~ices Department within ow Bank with the expertise to give outstanding personal service to ow customers. We stay up-to- date on the latest technology and remain competitive. We have a seven~ay, 24 how Help Desk for ow merchants. We are also able [o personally assist ow merchants in many situations. Our Merchant's VISA and MasterCazd Funds will be deposited next banking day to the designated checking account. '11/2001 -Security State Bank and Trust -Certificate Number 15809 The following report is provided to assist you in meeting your state publication requirements. It has not been approved by any state banking authorities. Before you submit this report to be published, be sure to add attestations and signatures as appropriate. Please refer to your state banking authorities for your state's publication requirements. Consolidated domestic subsidiaries of Security State Bank and Trust of Fredericksburg in the state of TX, at the close of business on March 31, 2001. Dollar Amounts in Thousands Cash & balances due: Noninterest-bearing balances .................................................................................................. 11 Cash & balances due: Interest-bearing balances ......................................................................................................... 3 ... Securities: Held-to-Maturity securities ..................................................................................................................... 63689 Securities: Available-for-sale securities ...................................................................................................................... 45,996 Federal funds sold ....................................................................................................................................................... 14,700 Loans and leases held for sale ....................................................................................... ............................................. 0 Loans and leases, net of unearned income .................................................................... ............................................. 254,964 Less: allowance far loan and lease losse ...................................................................... ............................................. 1,910 Loans and leases, net of unearned income and allowance ............................................ ............................................. 253,054 Trading assets ..................................................................................................................... .......................................... u Premises and fixed assets ................................................................................................. .......................................... 6,540 Other real estate owned .................................................................................................... .......................................... 674 Investments in unconsolidated subsidiaries ....................................................................... .......................................... 0 Customers' liability on acceptances outstanding ............................................................... .......................................... 0 Intangible assets: Goodwill ............................................................................................... .......................................... 0 Intangible assets: Other intangible assets ......................................................................... .......................................... 0 Other assets ....................................................................................................................... .......................................... 5,319 Total assets ........................................................................................................................................................ Dollar Amounts in Thousands Deposits: In domestic offices .............................................................................................................................. Deposits: In domestic offices, noninterest-bearing ............................................................................................... Deposits: In domestic offices, interest-bearing .................................................................................................... Federal funds purchased and securities sold ....................................................................................................... Trading liabilities ................................................................................................................................................. Other borrowed money ......................................................................................................................................... Bank's liability on acceptances ............................................................................................................................ Subordinated notes and debentures ................................................................................................................... Other liabilities ....................................................................................................................................................... Total liabilities ....................................................................................................................................................... 5!11/2001 -Security State Bank and Trust - Cert'rficate Number 15809 i~ Dollar Amounts in Thousands ~ 404,0171 2000 Annual Disclosure Statement Security State Bank & Trust Fredericksburg, TX Security State Bank & Trust Fredericksburg, TX 2000 ANNUAL DISCLO; PERFORMANCE ANALYSIS 2000 PROFITABILITY Return on Average Equity (R.O.E.) 20.82 Return on Average Assets (R.O.A.) 2.27 Net Interest Margin (Tax Adjusted) /Average Assets 5.39 Overhead Expense /Average Assets ASSET QUALITY Nonperforming Loans /Gross Loans Loan loss Reserve /Total Loans Net Charge-offs /Average Loans LIQUIDITY Time Deposits of $100,000 or more /Total Deposits CAPITAL Core Capital (Tier 1) /Assets Risk-Adjusted Capital Ratio iURE STATEMENT 1999 20.92 2.1 B 5.17 2.68 2.68 1.26 1.64 0.75 0.78 0.06 0.01 12.85 12.10 11.60 10.99 17.42' 18.24 R.O.E. is the return on the shareholders' investment in the bank, whereas R.O.A. is the return on all the assets of the bank. Net interest margin is the income available to cover net overhead expenses, taxes, and dividends of the bank. Overhead expense includes salaries and benefits, occupancy expense, and other operating expenses. This represents the percent of the banks loans which are past due 90+ days or are not accruing interest. The loan loss reserve is the account against which future uncollectible loans will be charged. Net charge-offs measure the amount of loans written off as losses, net of recoveries, giving an indication of past loan quality. Large deposits are usually the most costly type of deposits a bank has. Amounts exceeding $100,000 per account are not covered by FDIC Insurance. Capital ratios indicate the degree of capital a bank has to deal with earn- ings problems. The regulatory mini- mum for the core capital to assets ratio is 3.0% for the most highly rated banks. The regulatory minimum for the Risk-Adjusted Capital Ratio is 8.0% ' Estimated Security State Bank & Trust Fredericksburg, TX DEFINITIONS OF 2000 ANNUAL DISCLOSURE STATEMENT PERFORMANCE RATIOS PROFITABILITY Return on Average Equity (R.O.E.) = Income (loss) before extraordinary items and other adjustments Average total equity Return on Average Assets (R.O.A.) = Income (loss) before extraordinary items and other adjustments Average total assets Net Interest Margin (Tax Adj.) /Average Assets = Total interest income + [.515 x (Interest and divided income on tax-exempt securities issued by states and political subdivisions in the U.S. +Tax-exempt lease inwme from lease financing receivables + Interest income on tax-exempt obligations of states and political subdivisions in the U.S. + Estimated tax-exempt income on loans and leases to states and political subdivisions in the U.S)] - (Total interest ex- pense -Interest on mortgage indebtedness and obligations under capitalized leases) Average total assets Overhead Expenses /Average Assets = Total noninterest expense + Interest on mortgage indebtedness and obligations under capitalized leases Average total assets ASSET QUALITY Nonperforming Loans /Gross Loans = Past due 90 days or more + Nonaccrual loans and lease financing receivables Loans and leases, gross Loan Loss Reserve /Total Loans = Allowance for loan and lease losses Loans and leases, net of unearned income Net Charge-offs I Average Loans = Losses charged to allowance for loan and lease losses -Recoveries credited to allowance for loan and lease losses Average loans and leases, net of unearned income LIQUIDITY Time Deposits of $100,000 or more /Total Deposits = Time certificates of deposit of $100,000 or more + Open account time deposits of $100,000 ar more Deposits in domestic offices + Deposits in foreign offices, Edge and Agreement subsidiaries, and IBF's CAPITAL Core Capital (Tier 1) !Assets = Tier 1 Capital Average total assets Risk Adjusted Capital Ratio = Total qualifying capital (i.e., Tier 1 and Tier 2 capital) allowable under the risk- based capital guidelines Risk-weighted assets Security State Bank & Trust Fredericksburg, TX BALANCE SHEET December 31, 2000 1999 $(000) $(000) ASSETS Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin 16,270 17,802 Interest-bearing balances 1,330 1,731 Securities: 107,850 125,161 Held-to-maturity securities 65,132 71,823 Available-for-sale securities 42,718 53,338 Federal funds sold and securities purchased under agreements to resell 3,850 0 loans and lease f nancing receivables: Loans and leases, net of unearned income 252,474 200,689 LESS: Allowance for loan and lease losses 1,905 1,574 LESS: Allocated transfer risk reserve 0 0 Loans and leases, net of unearned income, allowance, and reserve 250,569 199,115 Trading Assets 0 0 Premises and fxed assets (including capitalized leases) 7,069 5,912 Other real estate owned 467 2 Investments in unconsolidated subsidiaries and associated companies 0 0 Customers' liability to this bank on acceptances outstanding 0 0 Intangible assets 0 0 Other assets 4,730 4,255 Total assets 392,135 353,978 LIABILITIES Deposits: In domestic offces: 325,932 299,907 Noninterest-bearing 18,136 26,637 Interest-bearing 307,796 273,270 In foreign offices, Edge & Agreement subsidiaries, and IBFs: N/A N/A Noninterest-bearing N/A N/A Interest-bearing N/A N/A Federal funds purchased and securities sold under agreements to repurchase 5,970 9,237 Demand notes issued to the U.S. Treasury 1,524 1,127 Trading liabilities 0 0 Other borrowed money: 11,297 1,338 With a remaining maturity of one year or less 10,000 0 With a remaining maturity of more than one year through three years 1,297 0 With a remaining maturity of more than three years 0 1,338 Bank's liability on acceptances executed and outstanding 0 0 Notes and debentures subordinated [o deposits 0 0 Other liabilities 3,443 5,298 Total liabilities 348,166 316,907 EQUITY CAPITAL Perpetual preferred stock and related surplus 0 0 Common stock 500 500 Surplus (exclude all surplus related to preferred stock) 17,500 17,500 Undivided profits and capital reserves 26,282 20,051 Net unrealized holding gains (losses) on available-for-sale securities -313 -980 Net accumulated gains (losses) on cash flow hedges 0 0 Cumulative foreign currency Vanslation adjustments N/A N/A Total equity capital 43,969 37,071 Total liabilities and equity capital 392,135 353,978 Page 1 Security State Bank & Trust Fredericksburg, TX INCOME STATEMENT Year Ended December 31, 2000 1999 $(000) $(000) Interest income: Interest and fee income on loans: Loans secured by real estate 16,596 12,511 Loans to finance agricultural production and other loans to farmers 431 413 Commercial and industrial loans 3,351 2,578 Loans to individuals for household, family, and other personal expenditures: Credit cards and related plans 9 10 Other 2,383 1,948 Loans to foreign governments and offcial institutions 0 0 Obligations (other than securities and leases) of states and political subdivisions in the U.S.: Taxable obligations 3 3 Taz-exempt obligations 0 0 All other loans in domestic offices 0 0 Income from lease financing receivables: Taxable leases 0 1 Tax-exempt leases 23 17 Interest income on balances due from depository institutions 90 95 Interest and dividend income on securities: U.S. Treasury securities and U.S. Government agency obligations 3,667 4,020 Securities issued by states and political subdivisions in the U.S.: Taxable securities 0 0 Tax-exempt securities 2,853 2,962 Other domestic debt securities 0 0 Foreign debt securities 0 0 Equity securities (including investments in mutual funds) 85 55 Interest income from assets held in trading assets 0 0 Interest income on federal funds sold and securities purchased under agreements to resell 70 155 Total interest income 29,561 24,768 Interest expense: Interest on deposits: Transaction accounts (NOW accounts, ATS accounts, and telephone and preauthorized transfer accounts) 72 72 Nontransaction accounts: Money market deposit accounts (MMDAS) 3,212 2,930 Other savings deposits 466 445 Time deposits of $100,000 or more 2,035 1,422 Time deposits of less than $100,000 4,135 3,517 Expense of federal funds purchased and securities sold under agreements to repurchase 1,025 409 Interest on demand notes issued to the U.S. Treasury, trading liabilities, and on other bortowed money 125 115 Interest on subordinated notes and debentures 0 0 Total interest expense 11,070 8,910 Net interest income 18,491 15,858 Provisions: Provision for credit losses 471 354 Provision for allocated transfer risk 0 0 Noninterest income: Income from fduciary activities 714 746 Service charges on deposit accounts 2,013 1,855 Trading Revenue 0 0 Other noninterest income: Other fee income 524 550 All other noninterest income 207 189 Total noninterest income 3,458 3,340 Gains (losses) on securities not held in trading accounts 0 0 Realized gains (losses) on held-to-maturity securities 0 0 Realized gains (losses) on available-for-sale securities 0 0 Page 2 Security State Bank & Trust Fredericksburg, TX Page 3 INCOME STATEMENT (continued) Year Ended December 31, 2000 1999 $(000) $(000) Noninterest expense: Salaries and employee benefits 5,889 5,409 Expenses of premises and fixed assets (net of rental income) (excluding salaries and employee benefts and mortgage interest) 1,495 1,314 Other noninterest expense 2,542 2,282 Total noninterest expense 9,926 9,005 Income (loss) before income taxes and extraordinary items and other adjustments 11,552 9,839 Applicable income taxes 3,157 2,489 Income (loss) before extraordinary items and other adjustments 8,395 7,350 Extraordinary items and other adjustments, net of income taxes 0 0 Net income (loss) 8,395 7,350 Income statement memoranda: Interest expense incurred to carry tax-exempt securities, loans, and leases acquired after August 7, 1986, that is not deductible far federal income tax purposes 0 0 Income from the sale and servicing of mutual funds and annuities 134 145 Number of full-time equivalent employees at end of current period 166 153 If bank restated its balance sheet as a result of applying push down accounting this calendar year, report the date of acquisition N/A N/A Trading revenue: Interest rate exposures 0 0 Foreign exchange exposures 0 0 Equity securities and index exposures 0 0 Commodity and other exposures 0 0 Impact on income of off-balance sheet derivatives held for purposes other than trading: Net increase (decrease) to interest income 0 0 Net (increase) decrease to interest expense 0 0 Other (noninterest) allocations 0 0 Credit losses on off-balance sheet derivatives 0 0 Does the reporting bank have a Subchapter S election in effect for federal income tax purposes for the current tax yeaR No No Deferred portion of total applicable income taxes included in Schedule RI 0 0 CHANGES IN EQUITY CAPITAL Total equity capital originally reported at end of previous calendar year 37,071 33,555 Equity capital adjustments from amended Reports of Income, net 0 0 Amended balance at end of previous calendar year 37,071 33,555 Net income (loss) 8,395 7,350 Sale, conversion, acquisition, or retirement of capital stock, net 0 0 Changes incident to business combinations, net 0 0 LESS: Cash dividends declared on preferred stock 0 0 LESS: Cash dividends declared on common stock 2,530 2,200 Cumulative effect of changes in accounting principles from prior years 0 0 Corrections of material accounting errors from prior years 366 -225 Change in net unrealized holding gains (losses) on available-for-sale securities 667 -1,409 Change in net accumulated net gains (losses) on cash flow hedges 0 0 Other transactions with parent holding company 0 0 Total equity capital at end of period 43,969 37,071 Security State Bank & Trust Fredericksburg, TX CHANGES IN ALLOWANCE FOR CREDIT LOSSES December 31, 2000 1999 $(000) $(000) Balance originally reported at end of previous year 1,574 1,246 Recoveries 47 51 LESS. Charge-offs 187 77 Provision for credit losses 471 354 Adjustments 0 0 Balance at end of periotl 1,905 1,574 PAST DUE AND NONACCRUAL LOANS, LEASES, AND OTHER ASS ETS Loans, leases, and other assets past due 90 days or mare and still accruing: Loans secured by real estate: To U.S. addressees (domicile) 26 1 To non-U.S. addressees (domicile) 0 0 Loans to depository institutions and acceptances of other banks: To U.S. banks and other U.S. depository institutions 0 0 To foreign banks 0 0 Loans to fnance agricultural production and other loans to farmers 0 8 Commercial and industrial loans: To U.S. addressees (domicile) 865 0 To non-U.S. addressees (domicile) 0 0 Loans to individuals for household, family, and other personal expenditures: Credit cards and related plans 0 0 Other (includes single payment, installment, and all student loans) 22 12 Loans to foreign governments and otFcial institutions 0 0 All other loans 0 0 Lease fnancing receivables: Of U.S. addressees (domicile) 0 0 Of non-U.S. addressees (domicile) 0 0 Debt securities and other assets (exclude other real estate owned and other repossessed assets) 0 0 Loans antl leases which are wholly or partially guaranteed by the U.S. Government 0 0 Guaranteed portion of loans and leases 0 0 Nonaccrual loans, leases, and other assets: Loans secured by real estate: To U.S. addressees (domicile) 2,194 3,046 To non-U.S. addressees (domicile) 0 0 Loans to depository institutions and acceptances of other banks: To U.S. banks and other U.S. depository institutions 0 0 To foreign banks 0 0 Loans to finance agricultural production and other loans to farmers 0 98 Commercial and industrial loans: To U.S. addressees (domicile) 56 109 To non-U.S. addressees (domicile) 0 0 Loans to individuals for household, family, and other personal expenditures: Credit cards and related plans 0 0 Other (includes single payment, installments, and all student loans) 24 21 Loans to foreign governments and official institutions 0 0 All other loans 0 0 Lease financing receivables: Of U.S. addressees (domicile) 0 0 Of non-U.S. addressees (domicile) 0 0 Debt securities and other assets (exclude other real estate owned and other repossessed assets) 0 0 Loans and leases which are wholly or partially guaranteed by the U.S. Government 0 207 Guaranteed portion of loans and leases 0 170 Page 4 Security State Bank & Trust Fredericksburg, TX OFF-BALANCE SHEET ITEMS Standby letters of credit Amount of standby letters of credit conveyed to others 1,896 680 0 0 The information contained herein has been provided by this bank and the Federal Reserve Board. Sheshunoff Information Services Inc. has not independently verified any of the information provided to us and we have relied on its being complete and accurate in all material respects. Because of the possibility of human and mechanical error, the accuracy of this information is not guaranteed. Please note that there may be some institutions that have special agreements with regulators that could have an impact on how certain key ratios are calculated, the effect of which are not contained on the information herein. This statement has not been reviewed, or conf rmed for accuracy or relevance, by the Office of the Comptroller of the Currency. This statement has not been reviewed, or confirmed for accuracy or relevance, by the Federal Deposit Insurance Corporation. This statement has not been reviewed, or confirmed for accuracy or relevance, by the Federal Reserve System. I do hereby attest that this Disclosure Statement has been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true and correct to the best of my knowledge and belief. Page 5 Officer of the Bank A C C O U N T A N A L Y S I S - 01 1. BASIS FOR ANALYSIS: 02 CHARGES 1=AVG LEDGER BAL 2=COLE AVG BAL 5. MONTHLY FEE: 5.00000 6. CREDITS: .25000 Z. RESERVE REQUIREMENT: 7. CHECKS: .10000 REGULAR DDA: .10000 8. ITEMS DEP: .05000 NOW ACCOUNT: .10000 9. ACH ITEMS: .00000 h'A~IDA ACCOUNT: .10000 10. STOP PAY: .00000 SUPER NOW: .10000 11. REQUEST STMT: .00000 12. NSF AVG RATE: .00000 3. RATE OF CREDIT OVER: .00 13. INQUIRY FEE: .00000 REGULAR DDA: .09897 ADDITIONAL FEES ITEMS DEP: NOW ACCOUNT: .04897 14. W/ 1 DAY FLT: .00000 MMDA ACCOUNT: .04897 15. W/ 2 DAY FLT: .00000 SUPER NOW: .04897 16. W/ 3 DAY FLT: .00000 17. UCF RATE: .00000 9. CHARGE FOR INTEREST: Y 18. FDIC INS RAT: .00000 ENTER CHANGE KEY: (99 = NEXT PAGE) ACCOUNT ANALYSIS TC DESCRIPTION UNIT PRICE 160 FINE SORT ITEMS .03000 161 ROLLED COINS .05000 162 STRAPPED CURRENCY .10000 163 CASHIER CHECKS 1.00000 164 CHARGEBACK ITEMS 1.00000 165 WIRE TRANSFERS 15.00000 166 STOP PAYMENTS 10.00000 167 FACSIMILE FEE 3.00000 168 CURR STRAPS-PER M 3.00000 169 ENCODE DRAFTS .25000 ENTER TC: (999 = NEXT PAGE, = DELETE) ACCOUNT ANALYSIS TC DESCRIPTION UNIT PRICE 260 COIN WRAPS PER BOX 3.00000 261 SECURITY PURCH FEE 10.00000 262 SECURITY SAFEKEEPING .50000 263 FAX REPORTING 50.00000 264 ZERO BAL. TRANSFER 3.00000 265 ZERO BAL. MASTER 50.00000 266 FROST TRANSFERS 4.00000 267 FORCE PAY CHECK-FEE 10.00000 268 TELEPHONETRAN5 FER 3.00000 269 OVERDRAFT CHARGE 22.00000 ENTER TC: (999 = NEXT PAGE, = DELETE) ACCOUNT ANALYSIS TC DESCRIPTION UNIT PRICE 360 CASHIER'S CK MO. FEE 75.00000 361 NSF PAID 22.00000 362 NSF RETURNED 22.00000 363 ACH ORIG. TRANS FEE .15000 369 CYCLE 18 CHECKS 5.00000 365 ACH MIN TRANSMIT FEE 25.00000 366 DRAFT INT FEE 1 99.00000 367 DRAFT INT FEE 2 69.00000 368 DATA FLOW MO. FEE 30.00000 369 SPECIAL SIG REQUIRED .07000 ENTER TC: (999 NEXT PAGE, = DELETE) ACCOUNT ANALYSIS TC DESCRIPTION UNIT PRICE 460 COURIER FEE 1 99.00000 961 COURIER FEE 2 99.00000 962 COURIER FEE 3 99.00000 963 COURIER FEE 4 99.00000 464 COURIER FEE 5 77.30000 465 COURIER FEE 6 .00000 466 COURIER FEE 7 .00000 467 COURIER FEE 8 .00000 968 .00000 469 .00000 ENTER TC: (999 = NEXT PAGE, = AELETE)