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HomeMy WebLinkAbout5C - 4th Quarter 2014 Investment Report O� PRIp+P ti U 4646 Dakota Street SE Prior Lake,MN 55372 �'iMvEso'o, CITY COUNCIL AGENDA REPORT MEETING DATE: FEBRUARY 9, 2015 AGENDA#: 5C PREPARED BY: JERILYN ERICKSON, FINANCE DIRECTOR PRESENTED BY: JERILYN ERICKSON AGENDA ITEM: CONSIDER APPROVAL OF 4T" 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 fourth quarter of 2014. Current Circumstances Staff has prepared a list of investments as of December 31, 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 4th Quarter Invest- ment Report as submitted. 2) Take no action and provide the staff with specific direction. RECOMMENDED Alternative#1 MOTION: CITY OF PRIOR LAKE, MINNESOTA a� PRION Investment Portfolio-Detail,by Broker ; December 31,2014 u m M2YN6sot� Interest Purchase Maturity Broker Investment Cost Rate Date Date League of Minnesota Cities Liquid Asset Fund 2,600,833 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 1st Natl Bk Sioux Falls SD Step 10/30/2020-15 245,000.00 2.33% 10/30/2014 10/30/2020 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 Amex Centurion,Salt Lake City UT 2.2 12/11/2019 245,000.00 2.20% 12/11/2014 12/11/2019 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 COMENITY BK SALT LAKE CIN UT 2.6 11/24/2021 245,000.00 2.60°/ 11/26/2014 11/24/2021 Compass Bank,AL 2 8/28/2018-14 245,000.00 2.00% 8/28/2013 8/28/2018 Discover Bank Greenwood DE 2 12/11/2018 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 1.5 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% 11/9/2012 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 1.87/13/2017 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 2.69/21/2020 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 1.85 8/24/2016 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 1.98/29/2018 245,000.00 1.90°/ 8/29/2013 8/29/2018 NBT Bank,NY 2.18/27/2019 245,000.00 2.100/ 8/27/2014 8/27/2019 SALLIE MAE BK CD Murray UT 1.5 10/24/2017 245,000.00 1.500/ 10/24/2012 10/24/2017 STATE BK INDIA NEW YORK NY 2.612/6/2021 245,000.00 2.60% 12/5/2014 12/6/2021 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 10,358,000 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 7,958.81 0.00% 6/30/2012 N/A FFCB 2.45 12/30/2020-15 195,000.00 2.45% 12/30/2014 12/30/2020 FHLB 2.09 11/9/2021-12 545,000.00 2.09% 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 4.6 2/1/2019 1,000,000.00 4.600/ 5/14/2009 2/1/2019 Saint Francis ISD-MN 4.44/1/2017 500,000.00 4.40% 4/16/2009 4/1/2017 Stillwater ISD-MN 4.75 3/1/2018-16 500,000.00 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 6,642,959 Wells Fargo Advisors FFCB 2 1/29/2020-15 999,350.00 2.01% 11/4/2014 1/29/2020 FHLB Step 2/22/2023-13 1,249,375.00 2.57% 2/22/2013 2/22/2023 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 2.03% 6/18/2012 12/18/2020 FHLMC Step 6/26/2024-14 1,045,372.40 3.63% 6/27/2014 6/26/2024 Wells Fargo Advisors Cash 2,010,372.23 0.00% 12/27/2011 N/A Subtotal 6,951,595 Investment Portfolio Total 26,553,386 City of Prior Lake-Quarterly Investment Report CITY OF PRIOR LAKE, MINNESOTA of Investment Portfolio - Diversification, by Broker (Portfolio) December 31, 2014 Portfolio Holdings Distribution by Portfolio dame Northtand Securities _ - - Wells Fargo Advisors 25.02% _. 26.18% League of Minnesota Cities 9.79% Morgan Stanley-Smith Barney _ 39.01% yTM @ Days to %of Description Cost Cost Value Maturity Portfolio League of Minnesota Cities 0.050 2,600,833 1 9.79% Morgan Stanley-Smith Barney 2.100 10,358,000 2,082 39.01% Northland Securities 3.127 6,642,959 1,925 25.02% Wells Fargo Advisors 1.$69 6,951,595 1,936 26.18% 411 Total/Average 2.096 26,553,386 1,800 100.00% City of Prior Lake-Quarterly Investment Report CITY OF PRIOR LAKE, MINNESOTA o� px�°R Investment Portfolio - Diversification, by Security Type U �. December 31, 2014 �NNtsot* Portfolio Holdings Distribution by Security Type FHLMC Bond_ _FNMA Bond 16.94% "'--.--- --� 1.88% Local Government Investment Pool _.—.._ 9.79% FHLB Bond Municipal Bond 25.17% --------- — 10.34% Gash ---- - 7.60% FFCB Bond - - Certificate Of Deposit _ - - 4.50% �� _- -_-_ _ 23.77% YTM @ Days to %of Description Cost Cost Value Maturity Portfolio Cash 2,018,331 1 7.60% Certificate of Deposit 1.931 6,313,000 1,492 23.77% FFCB Bond 2.084 1,194,350 1,910 4.50% FHLB Bond 2.439 6,684,375 2,991 25.17% FHLMC Bond 2.387; 4,497,497 2,471 16.94% FNMA Bond '2.500 500,000 3,008 1.88% LGIP 0.050 2,600,833 1 9.79% Municipal Bond 4.569 2,745,000 1,273 10.34% Total/Average 2.096 26,553,386 1,800 100.00% City of Prior Lake-Quarterly Investment Report 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, 2014, the balance of the investment portfolio is $26,553,386. This is a decrease of$1.15M from September 30, 2014. 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 2.10% which is a decrease from 2.21% 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 $2.6M. The $2M balance at year end in the Wells Fargo Advisors cash account is due to an investment called in late December. The intention is to reinvest these funds. 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 1/5/15 0.05 0.02 0.03 0.10 1 0.26 0.68 1.06 1.57 1.85 2.04 During the fourth quarter of 2014, the short-term rates increased slightly and mid-term rates (one- to three-year maturities) have increased from 3 to 12 basis points. Longer term rates (five- to ten-year maturities) have decreased from 13 to 35 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 r 3 r 5 yr 7 yr 10 yr Change from 3 mos ago - 0.01 0.02 0.09 0.12 0.09 0.03 0.13 0.25 0.35 Change from 6 mos ago - 0.01 - 0.05 0.14 0.20 0.22 0.03 0.16 0.36 Change from 1 yr ago - 0.02LOO 0.02 0.12 0.29 0.32 0.10 0.48 0.87 Change from 2 yrs ago - 0.010.01 0.09 0.42 0.74 0.93 0.79 0.39 As rates decrease, the market value of the existing securities increase. As of December 31, 2013, the cost exceeded the market value of the investments by $603k. As of December 31, 2014, the market value of the portfolio has increased and is greater than the cost of the investments by $22k. The in- crease in the fair value of the securities is adjusted against interest earnings in each of the funds. This is a paper gain of$625k for 2014; no actual gain 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.