HomeMy WebLinkAbout5B - 3rd Quarter Investment Report 04 PRION,
U 4646 Dakota Street SE
Prior Lake,MIN 5 53 72
'��NrvsSolP
CITY COUNCIL AGENDA REPORT
MEETING DATE: NOVEMBER 10, 2014
AGENDA#: 5B
PREPARED BY: JERILYN ERICKSON, FINANCE DIRECTOR
PRESENTED BY: JERILYN ERICKSON, FINANCE DIRECTOR
AGENDA ITEM: CONSIDER APPROVAL OF 3rd QUARTER 2014 INVESTMENT REPORT
DISCUSSION: Introduction
The purpose of this agenda item is for the Council to consider approval of the in-
vestment report for the third quarter.
Current Circumstances
Staff has prepared a list of investments as of September 30, 2014. 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.
The investment software provides the ability to generate reports and charts by bro-
ker, 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 2014 3rd 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 September 30, 2014, the balance of the investment portfolio is $27,712,303. This is a decrease
of$1.25M from June 30, 2014. Approximately $2.67M in bond proceeds were received in September,
2014.
The `weighted average yield to maturity at cost' of the investment portfolio is currently 2.21% which is
an increase from 2.00% as of June 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 September the balance in the 4M money market was $4.9M.
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 r 5 r 7 r 10 r
Current Rates
10/31/14 0.05 10.01 0.01 0.05 0.11 0.50 0.95 1.62 2.05 2.35
During the third quarter of 2014, the short-term rates declined slightly and mid-term rates (one-to three-
year maturities) have increased from 2 to 19 basis points. Longer term rates(five-to ten-year maturities)
have increased from 9-16 basis points although the ten-year maturities declined by one basis point.
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 r 3 r 5 r 7 r 10 yr
Change from
3 mos ago - - 0.02 0.04 0.02 0.11 0.19 0.16 0.09 0.01
Change from
6 mos ago - 0.01 0.03 0.04 - 0.14 0.17 0.05 0.08 0.21
Change from
1 yr ago - 0.01 - 0.01 0.03 0.25 0.44 0.39 0.20 0.12
Change from
2 yrs ago - 0.04 0.08 0.11 0.04 0.35 0.76 1.16 1.18 0.87
As rates increase, the market value of the existing securities will decrease. As of December 31, 2013,
the cost exceeded the market value of the investments by$603k. As of September 30, 2014,the market
value of the portfolio has decreased and is still less than the cost of the investments by $76k. The
decrease in the fair value of the securities is adjusted against interest earnings in each of the funds.
This is a paper loss for third quarter 2014; 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 of p"`OR
Investment Portfolio-Detail,by Broker !:
U err
September 30,2014
4q v vesot�
Interest Purchase Maturity
Broker Investment Cost Rate Date Date
League of Minnesota Cities
Liquid Asset Fund 4,664,240 0.05%
Morgan Stanley-Smith Barney
1st Federal Bank-Harrison AR 1.05 8/20/2018 245,000.00 1.05% 2/19/2013 8/20/2018
Ally Bank-UT 1.75 8/24/2016 96,000.00 1.75% 8/24/2011 8/24/2016
ALLY BK,UT 1.15 9/19/2016 150,000.00 1.15% 9/18/2013 9/19/2016
American Exp BK FSB,UT 1.95 7/17/2019 245,000.00 1.95% 7/17/2014 7/17/2019
Bank Baroda NY,NY 112/13/2016 245,000.00 1.00% 12/13/2013 12/13/2016
Barclays Bank-DE 1.91/19/2017 245,000.00 1.90°/ 1/19/2012 1/19/2017
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% 8/24/2011 8/24/2015
CIT Bank SLC 1.8 3/13/2020-13 96,000.00 1.80% 3/13/2013 3/13/2020
CIT Bank,NA-NV 3 12/9/2014 96,000.00 3.001/ 12/9/2009 12/9/2014
Compass Bank,AL 2 8/28/2018-14 245,000.00 2.00% 8/28/2013 8/28/2018
Discover Bank Greenwood DE 212/11/2018 245,000.00 2.00% 12/11/2013 12/11/2018
Enerbank USA,UT 2.25 8/28/2020 245,000.00 2.25% 8/28/2014 8/28/2020
FHLB 1.512/19/2022-13 1,000,000.00 1.50% 12/19/2012 12/19/2022
FHLB Step 11/9/2022-13 300,000.00 2.20% 11/9/2012 11/9/2022
FHLB Step 2/27/2023-13 450,000.00 2.54% 2/27/2013 2/27/2023
FHLB Step 3/27/2023-13 1,420,000.00 2.57% 3/27/2013 3/27/2023
FHLB Step 5/18/2022-13 350,000.00 2.59% 5/18/2012 5/18/2022
FHLB Step 6/26/2024-15 525,000.00 3.25% 6/26/2014 6/26/2024
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% 7/13/2012 7/13/2017
GE Cap Bk Inc Retail 2.55 7/19/2021 150,000.00 2.55% 7/18/2014 7/19/2021
GE Cap Ret BK,Draper UT 2.65 3/29/2021 96,000.00 2.65% 3/28/2014 3/29/2021
GE CAPITAL,UT 2.6 9/21/2020 150,000.00 2.60°/ 9/20/2013 9/21/2020
Goldman Sachs Bank USA-NY 1.65 2/28/2017 96,000.00 1.65% 2/29/2012 2/28/2017
Goldman Sachs Bank USA-NY 1.858/24/2016 150,000.00 1.85% 8/24/2011 8/24/2016
HSBC Bank USA NA Step 12/18/2019-17 245,000.00 2.02% 6/19/2014 12/18/2019
Medallion Bk Utah 1.45 6/29/2018 248,000.00 1.45% 6/30/2014 6/29/2018
Mercantil Commerce Bank,FL 1.9 8/29/2018 245,000.00 1.90% 8/29/2013 8/29/2018
Morgan Stanley Cash 33,254.37 12/31/2010 N/A
NBT Bank,NY 2.18/27/2019 245,000.00 2.10% 8/27/2014 8/27/2019
SALLIE MAE BK CD Murray UT 1.5 10/24/2017 245,000.00 1.50% 10/24/2012 10/24/2017
Stockman Bank-Miles City MT 1.75 2/27/2020-14 245,000.00 1.75% 2/27/2013 2/27/2020
Wells Fargo Bank,SD Step 3/29/2021-17 225,000.00 3.02% 3/28/2014 3/29/2021
World Financial Jumbo 1.85/31/2017 200,000.00 1.80% 5/31/2012 5/31/2017
Subtotal 9,507,254
Northland Securities
Aurora ISD-MN 4.65 2/1/2018-17 500,000.00 4.65% 2/12/2009 2/1/2018
Cash-Northland Securities Cash 159,435.81
FHLB 2.09 11/9/2021-12 545,000.00 2.090/ 8/9/2012 11/9/2021
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% 5/30/2012 11/30/2020
FHLMC 212/18/2020-13 515,000.00 2.00% 6/18/2012 12/18/2020
FNMA 2.5 3/27/2023-13 500,000.00 2.50% 3/27/2013 3/27/2023
Robbinsdale ISD-MN 4.62/1/2019 1,000,000.00 4.60% 5/14/2009 2/1/2019
Saint Francis ISD-MN 4.4 4/1/2017 500,000.00 4.40°/ 4/16/2009 4/1/2017
Stillwater ISD-MN 4.753/1/2018-16 500,000.00 4.75% 2/17/2009 3/1/2018
Washington County Housing 4.25 1/1/2020-10 245,000.00 4.25% 7/1/2010 1/1/2020
Subtotal 6,599,436
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% 2/22/2013 2/22/2023
FHLB Step 4/30/2024-14 1,000,000.00 4.00% 4/30/2014 4/30/2024
FHLB Step 8/21/2024-14 500,000.00 3.30% 9/10/2014 8/21/2024
FHLMC 212/18/2020-13 1,147,125.00 2.031/ 6/18/2012 12/18/2020
FHLMC Step 6/26/2024-14 1,045,372.40 3.631 6/27/2014 6/26/2024
Subtotal 6,941,372
Investment Portfolio Total 27,712,303
City of Prior Lake-Quarterly Investment Report
I pxr°R
CITY OF PRIOR LAKE, MINNESOTA o
Investment Portfolio - Diversification, by Broker (Portfolio)
M
September 30, 2014
Portfolio Holdings Distribution by Portfolio Name
Northtand Securities __._— -- Wells FargoAdvlsors
23.81% -- 25.05%
Morgan Stanley-Smith Barney_-„._.,-- ”' _._ League of Minnesota Cities
34.31% 16.83%
YTM @ Days to %of
Description Cost Cost Value Maturity Portfolio
League of Minnesota Cities 0.050 4,664,240 1 16.83%
Morgan Stanley-Smith Barney 2.067 9,507,254 2,128 34.31%
Northland Securities 3.075 6,599,436 1,962 23.81%
Wells Fargo Advisors 3.014 6,941,372 3,095 25.05%
Total/Average 2.205 27,712,303 1,973 100.00%
City of Prior Lake-Quarterly Investment Report
CITY OF PRIOR LAKE, MINNESOTA o� pRrR
Investment Portfolio - Diversification, by Security Type
V �
September 30, 2014
'�'�NNtisot*
Portfolio Holdings Distribution by Security Type
FNMA Bond
T - "
1.80%
FH LMC Bond _.. . --
-- �-- _ Local Government investment Pool
16.23% _ 16.83%
Municipal Bond
9.91%
FHLB Bond Cash
0.70%
Certificate Of Deposit
19.59%
YTM @ Days to %of
Description Cost Cost Value Maturity Portfolio
Cash - 192,690 1 0.70%
Certificate of Deposit 1.860 5,429,000 1,421 19.59%
FHLB Bond 2.710 ! 9,683,875 3,111 34.94%
FHLMC Bond 2.387 4,497,497 2,563 16.23%
FNMA Bond 2.500 500,000 3,100 1.80%
LGIP 0.050 4,664,240 1 16.83%
Municipal Bond 4.569 2,745,000 1,365 9.91%
Total/Average 2.205 27,712,303 1,973 100.00%
City of Prior Lake-Quarterly Investment Report