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Home My WebLink About5B 4th Qtr 2013 Investment Report et: P R /O4, 1 4646 Dakota Street SE Prior Lake, MN 55372 4 INNESO* CITY COUNCIL AGENDA REPORT MEETING DATE: FEBRUARY 10, 2014 AGENDA #: 5B PREPARED BY: JERILYN ERICKSON, FINANCE DIRECTOR PRESENTED BY: JERILYN ERICKSON AGENDA ITEM: CONSIDER APPROVAL OF 4th QUARTER 2013 INVESTMENT REPORT DISCUSSION: Introduction The purpose of this agenda item is for the Council to consider approval of the in- vestment report for the first quarter. Current Circumstances Staff has prepared a list of investments as of December 31, 2013. 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. Staff implemented new investment software during 2012. Prior to this implementa- tion, all of the investments were tracked on an Excel spreadsheet which had its limitations for extracting various data. The software provides the ability to gener- ate reports and charts by broker, security type, maturities, etc. The software also enables staff to track interest earned on an accrual basis versus a cash basis as well as changes in market value. If Council members have questions please feel free to contact me at 952 -447- 9841 for more information. Conclusion The City Council should approve the quarterly investment report. ALTERNATIVES: 1. A motion as part of the consent agenda to approve the 2013 4th Quarter Invest- ment Report as submitted. 2. Take no action and provide the staff with specific direction. RECOMMENDED Alternative 1. MOTION: INVESTMENT REPORT SUMMARY NARRATIVE The attached "Investment Portfolio - Detail, by Broker" identifies the various types of investments and the brokers /banks the City of Prior Lake uses for investment purposes. As of December 31, 2013, the balance of the investment portfolio is $27,716,052. This is a decrease of $1.2M from September 30, 2013. The second half tax settlement was received in December, bond payments were paid in November and December and ongoing construction project payments were made. The `weighted average yield to maturity at cost' of the investment portfolio is currently 2.07% which is an increase from 1.74% as of September 30. The yield will fluctuate due in part 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 December the balance in the 4M money market was $6.0M due to anticipated contract payments for the three major construction projects currently underway. It continues to be challenging to find competitive rates for short -term investments - - -30 to 120 -day ma- turities. These short-term securities are necessary to meet cash flow needs for payments to vendors (including construction contracts) and payroll. Current short -term rates being offered by financial insti- tutions 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 3 mo 6 mo 1 yr 2 yr 3 yr 5 yr 7 yr 10 yr Current Rates (1/6/14) .05 0.01 0.05 0.08 0.12 0.40 0.78 1.70 2.38 2.98 During the fourth quarter of 2013, the short -term rates have slightly increased. Mid -term rates (one- to three -year maturities) have also increased and longer term rates (five- to ten -year maturities) have increased from 36 -40 basis points. The following table illustrates the changes that have occurred in the treasury rates and the 4M Fund account during the past twenty -four months: 4M Fund (4MP) 1 mo 3 mo 6 mo 1 yr 2 yr 3 yr 5 yr 7 yr 10 yr Change from 3 mos ago - (0.02) 0.05 0.06 0.03 0.05 0.15 0.36 0.43 0.40 Change from 6 mos ago - (0.01) 0.03 - (0.02) 0.02 0.12 0.34 0.49 0.52 Change from 1 yr ago - (0.01) 0.02 (0.01) (0.03) 0.13 0.42 1.03 1.27 1.26 Change from 2 yrs ago - - 0.05 0.04 0.01 0.13 0.42 0.92 1.10 1.15 As rates have started to increase, the market value of the existing securities will decline. As of Decem- ber 31, 2012, market value exceeded the cost of the investments by $457k. As of December 31, 2013, the market value of the portfolio is Tess than the cost of the investments by $603k. The $1.06M reduction in the fair value of the securities is adjusted against interest earnings in each of the funds. This is a paper Toss; no actual loss is realized because the City holds the securities until maturity. 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 gov- ernment. 2. U.S. Government Securities which are guaranteed or insured by the federal government i.e., FHLB, FNMA, FHLMC agencies. 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 "Al +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 Corpora- tion 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. In addition to the "Investment Portfolio — Detail, by Broker" report, charts and tables showing the diver- sification by Broker and Security Type have been included for your reference. 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. The constraints for each of the funds are noted on the Treasurer's Report. CITY OF PRIOR LAKE, MINNESOTA o4 VR-10 Investment Portfolio - Detail, by Broker m December 31, 2013 a r�vnrtso�' Interest Purchase Maturity Broker Investment Cost Rate Date Date League of Minnesota Cities Liquid Asset Fund 6,001,202 0.05% Morgan Stanley - Smith Barney 1st Federal Bank - Harrison AR 1.05 8/20/2018 245,00000 1.05% 02/19/2013 08/20/2018 Ally Bank - UT 1.75 8/24/2016 96,000.00 1.75% 08/24/2011 08/24/2016 ALLY BK, UT 1.15 9/19/2016 150,000.00 1.15% 09/18/2013 09/19/2016 Banco Popular of Puerto Rico 1.2 8/25/2014 245,000.00 1.20% 08/24/2011 08/25/2014 Bank Baroda NY, NY 112/13/2016 245,000,00 1.00% 12/13/2013 12/13/2016 Barclays Bank- DE 1.9 1/19/2017 245,000.00 1.90% 01/19/2012 01/19/2017 BMW Bank NA, Utah 2.112/11/2018 245,000.00 2.10% 12/11/2013 12/11/2018 CIT Bank - UT 1.45 8/24/2015 150,000.00 1.45% 08/24/2011 08/24/2015 CIT Bank SLC 1.8 3/13/2020 -13 96,000.00 1,80% 03/13/2013 03/13/2020 CIT Bank, NA - NV 3 12/9/2014 96,000.00 3.00% 12/09/2009 12/09/2014 Compass Bank, Al. 2 8/28/2018 -14 245,000.00 2.00% 08/28/2013 08/28/2018 Discover Bank Greenwood DE 2 12/11/2018 245,000.00 2.00% 12/11/2013 12/11/2018 Doral Bank 0.75 7 /9/2014 245,000.00 0.75% 07/09/2012 07/09/2014 FHLB 1.5 12/19/2022 -13 1,000,000.00 1.50% 12/19/2012 12/19/2022 FHLB Step 11/9/2022.13 300,000.00 2.20% 11/09/2012 11/09/2022 FHLB Step 2/27/2023 -13 450,000.00 234% 02/27/2013 02/27/2023 FHLB Step 3/27/2023 -13 1,420,000.00 23796 03/27/2013 03/27/2023 F1-118 Step 5/18/202243 350,000.00 2.59% 05/18/201.2 05/18/2022 FIRSTBANK CD SANTURCE PR 1.1510/26/2016 245,000.00 1.15% 10/26/2012 10/26/2016 GE CAP BK INC RETAIL 1.8 7/13/2017 96,000.00 1.80% 07/13/2012 07/13/2017 GE Capital Financial Inc - UT 1.35 6/24/2014 150,000.00 1.35% 06/24/2011 06/24/2014 GE CAPITAL, UT 2.6 9/21/2020 150,000.00 2.60% 09/20/2013 09/21 /2020 Goldman Sachs Bank USA - NY 1.65 2/28/2017 96,000.00 1.65% 02/29/2012 02/28/2017 Goldman Sachs Bank USA - NY 1.85 8/24/2016 150,000.00 1.85% '08/24/2011 08/24/2016 Mercantil Commerce Bank, FL 1.9 8/29/2018 245,000.00 1.90% 08/29/2013 08/29/2018 SALLIE MAE BK CD Murray UT 1.5 10/24/2017 245,000.00 1.50% 10/24/2012 10/24/2017 Sovereign Bank 0.85 7/7/2014 245,000.00 0.85% 07/05/2012 07/07/2014 State Bank of India 1,5 3/24/2014 245,000.00 1.50% 03/24/2011 03/24/2014 Stockman Bank - Miles City MT 1.75 2/27/2020 -14 245,000.00 1.75% 02/27/2013 02/27/2020 World Financial Jumbo 1.85 /31/2017 200,000.00 1.80% 05/31/2012 05/31/2017 . Subtotal 8,380,000 - Northland Securities Aurora ISD -.MN 4.65 2/1/2018-17 500,000.00 4.65% 02/12/2009 02/01/2018 FHLB 2.09 11/9/2021.12 545,000.00 2.09% 08/09/2012 11/09/2021 FHLB 2.19 12/19/2022 -13 345,000.00 2.19% 12/20/2012 12/19/2022 FHLMC 211 /30/2020 -14 1,790,000.00 2.00% 05/30/2012 11/30/2020 FHLMC 212/18/2020 -13 515,000.00 2.00% 06/18/2012 12/18/2020 FNMA 2.5 3/27/2023 -13 500,000.00 2.50% 03/27/2013 03/27/2023 Robbinsdale !SD - MN 4.6 2/1/2019 1,000,000.00 4.6096 05/14/2009 02/01/2019 Saint Francis ISD - MN 4.4 4/1/2017 500,000.00 4.40% 04/16/2009 04/01/2017 Stillwater ISO - MN 4.75 3/1/2018 -16 500,000.00 4.75% 02/17/2009 03/01/2018 Washington County Housing 4.25 1/1/2020 -10 245,000.00 4.25% 07/01/2010 01/01/2020 Subtotal 6,440,000 Wells Fargo Advisors FHLB Step 12 /28/2022 -13 1,999,500.00 2.97% 12/28/2012 12/28/2022 FHLB Step 2/22/202343 1,249,375.00 2.57% 02/22/2013 02/22/2023 FHLMC 2 12/18/202043 1,147,125.00 2.03% 06/18/2012 12/18/2020 FHLMC Step 10 /30/2023 -14 999,750.00 4.04% 10/30/2013 10/30/2023 FHLMC Step 12/27/2023 -14 1,499,100.00 3.86% 12/27/2013 12/27/2023 Subtotal 6,894,850 Investment Portfolio Total 27,716,052 City of Prior Lake - Quarterly Investment Report CITY OF PRIOR LAKE, MINNESOTA U "° of PR 'O 'P I Investment Portfolio - Detail, by Broker '� „) December 31, 2013 •4tvESdl Interest Purchase Maturity Broker Investment Cost Rate Date Date League of Minnesota Cities Liquid Asset Fund 6,001,202 0.05% Morgan Stanley - Smith Barney 1st Federal Bank - Harrison AR 1.05 8/20/2018 245,000.00 1.05% 02/19/2013 08/20/2018 Ally Bank - UT 1.75 8/24/2016 96,000.00 1.75% 08/24/2011 08/24/2016 ALLY BK, UT 1.15 9/19/2016 150,000.00 1.15% 09/18/2013 09/19/2016 Banco Popular of Puerto Rico 1.2 8/25/2014 245,000.00 1.20% 08/24/2011 08/25/2014 Bank Baroda NY, NY 1 12/13/2016 245,000.00 1.00% 12/13/2013 12/13/2016 Barclays Bank - DE 1.9 1/19/2017 245,000.00 1.90% 01/19/2012 01/19/2017 BMW Bank NA, Utah 2.1 12/11/2018 245,000.00 2.10% 12/11/2013 12/11/2018 CIT Bank - UT 1.45 8/24/2015 150,000.00 1.45% 08/24/2011 08/24/2015 CIT Bank SLC 1.8 3/13/2020 -13 96,000.00 1.80% 03/13/2013 03/13/2020 CIT Bank, NA - NV 3 12/9/2014 96,000.00 3.00% 12/09/2009 12/09/2014 Compass Bank, AL 2 8/28/2018 -14 245,000.00 2.00% 08/28/2013 08/28/2018 Discover Bank Greenwood DE 2 12/11/2018 245,000.00 2.00% 12/11/2013 12/11/2018 Doral Bank 0.75 7 /9/2014 245,000.00 0.75% 07/09/2012 07/09/2014 FHLB 1.5 12/19/2022 -13 1,000,000.00 1.50% 12/19/2012 12/19/2022 FHLB Step 11/9/2022 -13 300,000.00 2.20% 11/09/2012 11/09/2022 FHLB Step 2/27/2023 -13 450,000.00 2.54% 02/27/2013 02/27/2023 FHLB Step 3/27/2023 -13 1,420,000.00 2.57% 03/27/2013 03/27/2023 FHLB Step 5/18/2022 -13 350,000.00 2.59% 05/18/2012 05/18/2022 FIRSTBANK CD SANTURCE PR 1.15 10/26/2016 245,000.00 1.15% 10/26/2012 10/26/2016 GE CAP BK INC RETAIL 1.8 7/13/2017 96,000.00 1.80% 07/13/2012 07/13/2017 GE Capital Financial Inc - UT 1.35 6/24/2014 150,000.00 1.35% 06/24/2011. 06/24/2014 GE CAPITAL, UT 2.6 9/21/2020 150,000.00 2.6034, 09/20/2013 09/21/2020 Goldman Sachs Bank USA - NY 1.65 2/28/2017 96,000.00 1.65% 02/29/2012 02/28/2017 Goldman Sachs Bank USA - NY 1.85 8/24/2016 150,000.00 1.85% 08/24/2011 08/24/2016 Mercantil Commerce Bank, FL 1.9 8/29/2018 245,000.00 1.90% 08/29/2013 08/29/2018 SALLIE MAE BK CD Murray UT 1.5 10/24/2017 245,000.00 1.50% 10/24/2012 10/24/2017 Sovereign Bank 0.85 7/7/2014 245,000.00 0.85% 07/05/2012 07/07/2014 State Bank of India 1.5 3/24/2014 245,000.00 1.50% 03/24/2011 03/24/2014 Stockman Bank - Miles City MT 1.75 2/27/2020 -14 245,000.00 1.75% 02/27/2013 02/27/2020 World Financial Jumbo 1.85 /31/2017 200,000.00 1.80% 05/31/2012 05/31/2017 Subtotal 8,380,000 Northland Securities Aurora ISD - MN 4.65 2/1/2018 -17 500,000.00 4.65% 02/12/2009 02/01/2018 FHLB 2.09 11/9/2021 -12 545,000.00 2.09% 08/09/2012 11/09/2021 FHLB 2.19 12/19/2022 -13 345,000.00 2.19% 12/20/2012 12/19/2022 FHLMC 2 11/30/2020 -14 1,790,000.00 2.00% 05/30/2012 11/30/2020 FHLMC 2 12/18/2020 -13 515,000.00 2.00% 06/18/2012 12/18/2020 FNMA 2.5 3/27/2023 -13 500,000.00 2.50% 03/27/2013 03/27/2023 Robbinsdale ISD - MN 4.6 2/1/2019 1,000,000.00 4.60% 05/14/2009 02/01/2019 Saint Francis ISD - MN 4.44/1/2017 500,000.00 4.40% 04/16/2009 04/01/2017 Stillwater ISD - MN 4.75 3/1/2018 -16 500,000.00 4.75% 02/17/2009 03/01/2018 Washington County Housing 4.25 1/1/2020 -10 245,000.00 4.25% 07/01/2010 01/01/2020 Subtotal 6,440,000 Wells Fargo Advisors FHLB Step 12/28/2022 -13 1,999,500.00 2.97% 12/28/2012 12/28/2022 FHLB Step 2/22/2023 -13 1,249,375.00 2.57% 02/22/2013 02/22/2023 FHLMC 2 12/18/2020 -13 1,147,125.00 2.03% 06/18/2012 12/18/2020 FHLMC Step 10/30/2023 -14 999,750.00 4.04% 10/30/2013 10/30/2023 FHLMC Step 12/27/2023 -14 1,499,100.00 3.86% 12/27/2013 12/27/2023 Subtotal 6,894,850 Investment Portfolio Total 27,716,052 City of Prior Lake - Quarterly Investment Report CITY OF PRIOR LAKE, MINNESOTA of PR /04, Investment Portfolio - Diversification, by Broker (Portfolio) ti u De 31, 2013 H,„ Portfolio Holdings Distribution by Portfolio Name Northland Securities y- -- Wells Fargo Advisors 23.24 �� 24.88% Mcrgan Star,te; - Smith Barre, . -,, - League of Minnesota Cities 30.24': —� 21.65% YTM @ Days to % of Description Cost Cost Value Maturity Portfolio League of Minnesota Cities 0.050 6,001,202 1 21.65% Morgan Stanley - Smith Barney 1.849 `' 8,380,000 2,053 30.24% Northland Securities 3.152 6,440,000 2,284 23.24% Wells Fargo Advisors 3.088 6,894,850 3,295 24.88% Total / Average 2.070 27,716,052 1,971 100.00% City of Prior Lake - Quarterly Investment Report CITY OF PRIOR LAKE, MINNESOTA of v Ri o+ 0 Investment Portfolio - Diversification, by Security Type u rn December 31, 2013 ' Portfolio Holdings Distribution by Security Type FNMA Bond „ ------------__ _ Local Go.�ernment Invests ant Pant t.BO4 25.654 FHLMC Bond - Municipal. Bond 21.47% g _ 9.90 FHLB Bond Certificate Of Deposit 27.63% 17.53% YTM @ ` Days to % of Description Cost Cost Value Maturity Portfolio Cash - - - 0.00% Certificate of Deposit 1.572 4,860,000 1,151 17.53% FHLB Bond 2.467 7,658,875 3,270 27.63% FHLMC Bond 2.816 5,950,975 2,992 21.47% FNMA Bond 2.500 500,000 3,373 1.80% LGIP 0.050 6,001,202 1 21.65% Municipal Bond 4.569 2,745,000 1,638 9.90% Total/ Average 2.070 27,716,052 1,971 100.00% City of Prior Lake - Quarterly Investment Report