HomeMy WebLinkAbout5H - 3rd Quarter Investment Report
4646 Dakota Street SE
Prior Lake, MN 55372
CITY COUNCIL AGENDA REPORT
MEETING DATE:
AGENDA #:
PREPARED BY:
PRESENTER:
OCTOBER 18, 2010
5H
JERIL YN ERICKSON, FINANCE DIRECTOR
JERIL YN ERICKSON
AGENDA ITEM:
CONSIDER APPROVAL OF 2010 3rd QUARTER INVESTMENT
REPORT
DISCUSSION:
Introduction
The purpose of this agenda item is for the council to consider approval of
the investment report for the third quarter.
Current Circumstances
Staff has prepared a list of investments as of September 30, 2010. The
Investment Report Summary Narrative provides some supplementary
information with respect to the investments currently held and the allowable
forms of investments permitted by Minnesota Statute.
If council members have questions please feel free to contact me at 952-
447-9841 for more information.
AL TE RNA TIVES: 1. A motion as part of the consent agenda to approve the 2010 3rd
Quarter Investment Report as submitted.
2. Take no action and provide the staff with specific direction.
RECOMMENDED Alternative 1. A motion as part of the consent agenda to approve the 2010
MOTION: 3rd Quarter Investment Report as submitted.
;'
Page 1
INVESTMENT REPORT SUMMARY NARRATIVE
The attached Investment Report Summary identifies the various types of investments and the brokers/banks the City
of Prior Lake uses for investment purposes.
As of September 30,2010, the balance of the investment portfolio is $22,817,260.03. This is a decrease of $1.75
million from June 30,2010.
The weighted average return of the investment portfolio is currently 2.864% which is close to the average of 2.821 %
as of June 30. The weighted average return fluctuates primarily due to the balances that are in the short term money
market accounts and the very low rate that is paid on money market funds. At the end of September, there was
$3.2M in the money market fund. Contributing to the higher money market balance were bonds being called at the
end of September. Bond issuers continue to take advantage of calling their bonds early and issuing refunding bonds
at lower interest rates. When these securities are called, there may not be an immediate investment option available
so the funds are invested short-term until a future settlement. During third quarter, $4.8M in bonds was called. Many
of these investments had been held for only six months.
It continues to be challenging to find competitive rates for short-term investments---30 to 120-day maturities. These
short-term securities are necessary to meet cash flow needs for payments to vendors (including construction
contracts) and payroll over the next few months. Current short-term rates being offered by financial institutions
continue to be very low. The following table shows the current money market rate for the 4M Fund and treasury
rates:
4M
Fund
(4MP) 1 mo 3mo 6mo 1 yr 2 yr 3 yr 5 yr 7 yr 10 yr
Current Rates
(10/08/10) 0.09 0.14 0.12 0.16 0.21 0.35 0.54 1.11 1.75 2.41
During the third quarter of 2010, the short-term rates remained relatively flat. Longer term rates (two- to ten-year
maturities) have declined 19 to 52 basis points since June and 60 to 137 basis points since March. As previously
mentioned, bond issuers take advantage of calling their bonds early and issuing refunding bonds at lower interest
rates. The following table illustrates the chanaes that have occurred in the treasury rates and the 4M Fund account
during the past twenty-one months:
4M
Fund
(4MP) 1 mo 3mo 6mo 1 yr 2 yr 3 yr 5 yr 7 yr 10 yr
Change from 3
mos aQo (0.11 ) (0.03) (0.02) (0.03) (0.05) (0.19) (0.36) (0.52) (0.51 ) (0.44 )
Change from 6
mos aQo (0.11 ) (0.01) - (0.05) (0.14) (0.60) (0.96) (1.28 ) (1.37) (1.31 )
Change from 1 yr
aQo (0.24 ) 0.08 0.02 0.01 (0.13) (0.53) (0.81) (1.04 ) (1.02) (0.78)
Change from
12/31/08 (0.67) 0.03 0.05 (0.08) (0.10) (0.34) (0.36) (0.28) 0.04 0.28
Investments for local governments are restricted to only those permitted by Minnesota Statutes. They are identified
as follows:
1. U.S. Treasury Bills and Notes which are direct obligations of the federal government.
2. U.S. Government Securities which are guaranteed or insured by the federal government Le.,
FHLB, FNMA, FHLMC agencies.
Page 2
3. State and Local Government bonds that are rated "A" or better.
4. Bankers' Acceptances of a United States Bank.
5. Commercial Paper that is rated "A 1 +P1" and matures in 270 days or less.
6. Repurchase Agreements with banks having capitalization exceeding $10,000,000.
7. Time deposits that are fully insured by the Federal Deposit Insurance Corporation or bankers
acceptances of United States banks.
Also allowable, but of higher risk, are guaranteed investment contracts (GIC's) and mortgage-backed securities
(CMO's) which because of their sophisticated nature and inherent risk, Prior Lake does not participate in.
The following chart shows the amount and percentage the City of Prior Lake has invested in each investment type.
Currently, Federal Home Loan Mortgage Corporation (FHLMC) comprises twenty-eight percent (28%) of the portfolio
($6.4 million) followed by Federal National Mortgage Association (18%, $4.0M), Certificates of Deposit (16%, $3.7M),
Money Market Funds (14%, $3.2M), OPEB Bonds (11%, $2.5M), Federal Home Loan Bank (5%, $1.0M), Financing
Corporation Bonds (FICO, 3%, $.7M), Federal Farm Credit (FFC, 2%, $.5M), General Obligation Bonds (2%, $.5M)
and Economic Development Bonds (1%, $.2M).
Investment by Type
FHLB
5%
Economic Dev
Bonds
1%
Certificates of
Deposit
16%
FNMA
18%
Money Market Funds
14%
G.O.Bonds
2%
FHLMC
28%
The City's investment portfolio amount is a pool of funds identified on the monthly Treasurer's Report. Because City
funds are pooled for investment purposes, interest is allocated to each fund on a monthly basis, and is based upon
each individual fund's proportionate share of the total amount. Overall, the total investment pool does not represent
excess reserves but rather available financial resources. In most instances these funds were established and
restricted for specific and designated purposes by either Minnesota Statutes or City Code to accomplish the goals
and objectives of the City of Prior Lake.
Page 3
City of Prior Lake
Investment Summary
As of 09/30/201 0
Interest Purchase Maturity
Broker Investment Cost Rate Date Date
League 4M Fund:
Liquid Asset Fund 3,201,183.55 0.090%
New Market State Bank
Certificate of Deposit 245,000.00 1.800% 9/9/10 9/9/13
Northland Securities:
Waite Park G.O. bonds 183,051.00 5.600% 12/21/01 12/01/'10
Waite Park G.O. bonds 170,721.00 5.750% 12/21/01 12/01/'11
Waite Park G.O. bonds 159,606.00 5.850% 12/21/01 12/01/'12
FHLMC gOY!. agency 2,000,000.00 3.000% 06/30/10 12/31/'12
FNMA gOY\. agency 800,000.00 3.000% OS/26/10 11/27/'13
S\. Francis MN ISD OPEB 500,000.00 4.400% 4/16/09 04/01/'17
Aurora MN ISO OPEB 500,000.00 4.650% 02/12/09 02/01/'18
Stillwater MN ISO OPEB 500,000.00 4.750% 02/17/09 03/01/'18
Robbinsdale OPEB 1,000,000.00 4.600% 05/14/09 02/01/'19
Washington County MN Redev Auth 245,000.00 4.250% 07/01/10 01/01/20
FFC gOY!. agency 500,000.00 3.000% 09/08/10 06/08/20
FHLMC gOY\' agency 1,700,000.00 3.125% 07/27/10 07/27/20
Subtotal 8,258,378.00
Morgan Stanley Smith Barney:
GMAC Bank UT CD 96,000.00 2.750% 01/02/09 01/03/11
Bank Santander PR CD 96,000.00 2.550% 01/23/09 01/24/'11
Flagstar Bank FSB MI CD 96,000.00 2.650% 01/23/09 01/24/'11
FICO zero gOY\' agency 673,760.00 4.790% 12/05/02 04/06/'11
Keybank Natl Assn OH CD 96,000.00 2.600% 03/25/09 09/26/'11
Doral Bank PR CD 96,000.00 2.750% 03/30/09 09/30/'11
FHLB gOY\. agency 1,000,000.00 4.875% 12/20/02 11/15/'11
Goldman Sachs Bank CD 96,000.00 2.850% 01/21/09 01/23/12
GE Capital Financial UT CD 96,000.00 3.000% 01/23/09 01123/'12
Capital One CD 96,000.00 4.400% 01/23/08 01/23/'12
Capital One CD 96,000.00 4.400% 01/23/08 01/231'12
Washington Mutual CD 96,000.00 4.400% 01/23/08 01/23/'12
Capmark Bank UT CD 96,000.00 3.000% 02/18/09 02/21/12
United Community Bank GA CD 240,000.00 2.200% 10/07/09 04/091'12
First Bank of PR CD 240,000.00 2.300% 10/09/09 04/091'12
Sallie Mae Bank CD 96,000.00 3.050% OS/20/09 OS/21/12
FNMA govt. agency 1,050,000.02 2.000% 09/29/10 09/29/12
GE Money Bank UT CD 149,000.00 2.400% 11/20/09 11/20/12
Flagstar Bank FSB MI CD 150,000.00 2.500% 11/27/09 11/27/12
BMW Bk of North America UT CD 96,000.00 3.600% 12/31/08 12/31/12
CIT Bank UT CD 96,000.00 3.150% 01/22/09 01/22/13
Ally Bank (formerly GMAC Bk) CD 150,000.00 1.450% 09/17/10 09/17/13
American Express Bank FSB CD 149,000.00 2.800% 11/25/09 11/25/13
American Express Centurion Bk CD 149,000.00 2.800% 11/25/09 11/25/13
FNMA gOY\. agency 650,000.00 3.000% OS/26/10 11/27/13
Discover Bank DE CD 240,000.00 2.650% 12/09/09 12/09/13
BMW Bk of North America UT CD 150,000.00 2.700% 12/11/09 12/11/13
American Express Bank FSB CD 96,000.00 4.750% 12/24/08 12/24/13
American Express Centurion Bk CD 96,000.00 4.750% 12/24/08 12/24/13
Morgan Stanley Bk-UT CD 96,000.00 4.250% 12/24/08 12/26/13
GE Money Bank UT CD 96,000.00 4.100% 12/30/08 12/30/13
FNMA govt. agency 550,000.00 3.250% 06/30/10 06/30/14
FHLMC govt. agency 1,000,000.00 3.000% 06/30/10 06/30/14
Cltibank NA NV CD 96,000.00 3.000% 12/09/09 12/09/14
FN MA govt. agency 500,000.00 2.000% 07/28/10 10/28/16
Subtotal 8,864,760.02
Wells Fargo (formerly Wachovia Securities):
FHLMC gOY\' agency step-up 500,000.00 2.000% 09/07/10 09/07/13
FHLMC gOY\' agency step-up 1,248,437.50 3.000% 06/28/10 12/28/13
FNMA govt. agency step-up 499,600.00 2.000% 07/12/1 0 07/12/19
Money Market 0.96 0.100%
Subtotal 2,247,938.46
Investment Portfolio Total 22,817,260.03 2.864% (weighted average)
Page 1 or1 6:48 PM10/12J2010
2010 Investment Report!>: 3Q2010 Report