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Home My WebLink About5D 1st Quarter 2015 Annual Investment Report PR/04, 4646 Dakota Street SE Prior Lake,MN 55372 'yr so* CITY COUNCIL AGENDA REPORT MEETING DATE: MAY 11, 2015 AGENDA#: 5D PREPARED BY: CATHERINE ASMUS, ACCOUNTANT PRESENTED BY: CATHY ERICKSON, ACCOUNTING MANAGER AGENDA ITEM: CONSIDER APPROVAL OF 1ST QUARTER 2015 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 2015. Current Circumstances Staff has prepared a list of investments as of March 31, 2015. The Investment Re- port 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- 9842 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 2015 1st 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 March 31, 2015, the balance of the investment portfolio is $23,862,830. This is a decrease of $2.7M from December 31, 2014, primarily due to operational expenditures. The `weighted average yield to maturity at cost' of the investment portfolio is currently 2.09% which is a decrease from 2.10% as of December 31. 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 March the balance in the 4M money market was $2.3M. 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 (4/24/15) 0.05 0.03 0.03 0.10 0.24 0.54 0.84 1.34 1.68 1.93 During the first quarter of 2015, the short-term rates have remained essentially flat. Mid-term rates (one- to three-year maturities) have decreased up to 21 basis points. Longer term rates (five- to ten-year maturities) have decreased from 23 to 28 basis points. The following table illustrates the chancles 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 (0.01) 0.02 0.01 (0.11) (0.21) (0.28) (0.26) (0.23) Change from 6 mos ago - 0.03 0.01 0.11 0.13 (0.02) (0.18) (0.41) (0.51) (0.58) Change from 1 yr ago - 0.02 (0.02) 0.07 0.13 0.12 (0.01) (0.36) (0.59) (0.79) Change from 2 yrs ago - 0.01 (0.04) 0.03 0.12 0.31 0.53 0.60 0.47 0.07 As rates decrease, the market value of the existing securities will increase. As of December 31, 2014, the market exceeded the cost value of the investments by $22k. As of March 31, 2015, the market value of the portfolio has increased and is greater than the cost of the investments by $258k. The increase in the fair value of the securities is adjusted against interest earnings in each of the funds. This is a paper gain for 1st quarter 2015; 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+Pl" 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 CYR/04. Investment Portfolio-Detail,by Broker .a. ) 46, March 31,2015 v 'M'kxcs . Interest Purchase Maturity Broker Investment Cost Rate Date Date League of Minnesota Cities Liquid Asset Fund 2,301,097 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 2.212/11/2019 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 CITY UT 2.611/24/2021 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 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 1.85 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 JPMorgan Chase Bk Step 2/19/2021-15 245,000.00 2.45% 2/19/2015 2/19/2021 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 Morgan Stanley Cash 49,544.17 0.00% 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 STATE BK INDIA NEW YORK NY 2.612/6/2021 245,000.00 2.60% 12/5/2014 12/6/2021 Toyota Finl Svgs Henderson,NV 2 2/20/2020-15 110,000.00 2.00% 2/20/2015 2/20/2020 Webster 5 Cnts CD,Webster,MA 2.25 2/28/2022-16 245,000.00 2.25% 2/27/2015 2/28/2022 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 10,412,544 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 262,109.44 0.00% 6/30/2012 N/A 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 2 12/18/2020-13 515,000.00 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 4.60% 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 6,702,109 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 FHLMC 212/18/2020-13 1,147,125.00 2.03% 6/18/2012 12/18/2020 Wells Fargo Advisors Cash 1,051,230.01 0.00% 12/27/2011 N/A Subtotal 4,447,080 Investment Portfolio Total 23,862,830 City of Prior Lake-Quarterly Investment Report CITY OF PRIOR LAKE, MINNESOTA o l'a164. Investment Portfolio - Diversification, by Broker (Portfolio) 0 re March 31,2015 "r+r1.Esdtt` Portfolio Holdings Distribution by Portfolio Name Northland Securities 28.09% ._ __.____ 411 411PIP — - -� _Wells Fargo Advisors 18.64% League of Minnesota Cities 9.64% Morgan Stanley,*-Smith Barney_ 43.63% -, � YTM @ Days to %of Description Cost Cost Value Maturity Portfolio League of Minnesota Cities f 0.050 2,301,097 1 9.64% Morgan Stanley-Smith Barney 2 092 10,412,544 1,981 43.63% Northland Securities '3.028 6,702,109 1,757 28.09% Wells Fargo Advisors = 1.697 4,447,080 1,746 18.64% Total/Average 2.085 23,862,830 1,683 100.00% City of Prior Lake-Quarterly Investment Report CITY OF PRIOR LAKE, MINNESOTA o Investment Portfolio - Diversification, by Security Type March 31, 2015 "! Portfolio Holdings Distribution by Security Type FHLMC Bond FNMA Bond 14.47% _._-._ _____ _-_2.10% f _ ._ a �_.., Local Government Investment Pool 9.64% FHLB Bond iMunicipal Bond 24.45% , 11.50% Cash 5.?1% FFCB Bond ,,,,;440 k Certificate Of Deposit 4.19% ._.--.�.---°'�'"` 27.91% YTM @ Days to %of Description Cost Cost Value Maturity Portfolio 1i Cash 1,362,884 1 5.71% Certificate of Deposit 6,668,000 1,463 27.94% FFCB Bond 999,350 1,765 4.19% FHLB Bond 5,834,375 2,873 24.45% FHLMC Bond 2 $1,f. 3,452,125 2,080 14.47% FNMA Bond 1 2.500 500,000 2,918 2.10% LGIP 0.050 2,301,097 1 9.64% Municipal Bond 4.569 2,745,000 1,183 11.50% Total/Average 2.085 23,862,830 1,683 100.00% City of Prior Lake-Quarterly Investment Report