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Home My WebLink About5K 2016 First Qtr Investment 4646 Dakota Street SE Prior Lake, MN 55372 CITY COUNCIL AGENDA REPORT MEETING DATE: APRIL 25, 2016 AGENDA #: 5K PREPARED BY: CATHERINE ASMUS, ACCOUNTANT PRESENTED BY: DON URAM, FINANCE DIRECTOR AGENDA ITEM: CONSIDER APPROVAL OF 1st QUARTER 2016 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 of 2016. Current Circumstances Staff has prepared a list of investments as of March 31, 2016. 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. Conclusion The City Council should approve the quarterly investment report. ALTERNATIVES: 1. A motion and second as part of the consent agenda to approve the 2016 1st Quarter Investment Report as submitted. 2. Remove this item from the consent agenda and provide the staff with specific direction. RECOMMENDED MOTION: Alternative 1. 2 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, 2016, the balance of the investment portfolio is $24,482,606. This is an increase of $903k from December 31, 2015. The ‘weighted average yield to maturity at cost’ of the investment portfolio is currently 1.72% which is a decrease from 1.91% 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 December, the balance in the 4M money market was $1.45M. 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 (4/15/16) 0.05 0.19 0.22 0.37 0.53 0.74 0.87 1.22 1.52 1.76 During the first quarter of 2016, the short-term rates have decreased up to 10 basis points. Mid-term rates (one- to three-year maturities) have also decreased up to 44 basis points. Longer term rates (five- to ten-year maturities) have decreased up to 55 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 - 0.04 0.05 (0.10) (0.06) (0.33) (0.44) (0.55) (0.55) (0.49) Change from 6 mos ago - 0.18 0.21 0.31 0.26 0.09 (0.05) (0.16) (0.21) (0.28) Change from 1 yr ago - 0.13 0.18 0.25 0.33 0.17 (0.02) (0.16) (0.17) (0.16) Change from 2 yrs ago - 0.15 0.16 0.32 0.46 0.29 (0.03) (0.52) (0.76) (0.95) As rates decrease, the market value of the existing securities will increase. As of December 31, 2015, the market value of the portfolio is greater than the cost of the investments by $272k. The change 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 2016; no actual gain is realized because the City holds the securities until maturity. 3 Investments for local governments are restricted to only those permitted by Minnesota Statutes. Ac- cording to the City of Prior Lake Investment Policy, the City has chosen to limit its allowable investments as follows: 1. Bonds, notes certificates of indebtedness, treasury bills or other securities now or hereafter issued by the United States of America, its agencies and allowable instrumentalities; 2. Interest bearing checking and savings accounts, or any other investments con- stituting direct obligations of any bank; 3. Certificates of deposit at state and federally chartered institutions that are lim- ited to the amount of coverage provided by the Federal Deposit Insurance Cor- poration; 4. Money market accounts that are invested in above referenced government se- curities; 5. State and local securities which have at the time of investment one of the three highest credit ratings by a nationally recognized rating agency; 6. Investments may be made only in those savings banks or savings and loan associations the shares, or investment certificates of which are insured by the Federal Deposit Insurance Corporation; 7. Investment products that are considered as derivatives are specifically ex- cluded from approved investments. In addition to the “Investment Portfolio – Detail, by Broker” report, charts and tables showing the diver- sification by Maturity 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. YTM @ Cost Cost Value Days to Maturity % of Portfolio Cash - 1,702,555 1 6.95% Certificate of Deposit 1.483 10,946,000 798 44.72% Negotiable Certificate of Deposit 0.947 493,000 1,316 2.01% FHLB Bond 1.766 3,190,000 1,640 13.03% FHLMC Bond 2.011 3,452,125 1,714 14.10% FNMA Bond 2.456 1,000,000 2,006 4.08% LGIP 0.136 1,453,926 1 5.94% Municipal Bond 4.528 2,245,000 843 9.17% Total / Average 1.72 24,482,606 998 100.00% CITY OF PRIOR LAKE, MINNESOTA Investment Portfolio - Diversification, by Security Type March 31, 2016 Description City of Prior Lake - Quarterly Investment Report YTM @ Cost Cost Value Days to Maturity % of Portfolio 0-1 Month 0.164 4,145,481 4 16.93% 1-3 Months 0.350 245,000 70 1.00% 3-6 Months 0.848 1,137,000 132 4.64% 6-9 Months 0.766 1,473,000 204 6.02% 9-12 Months 2.389 1,331,000 333 5.44% 1-2 Years 2.242 1,779,000 547 7.27% 2-3 Years 2.789 2,718,000 953 11.10% 3-4 Years 1.971 3,931,000 1,315 16.06% 4-5 Years 2.149 4,903,125 1,712 20.03% 5-10 Years 2.201 2,820,000 2,264 11.52% Total / Average 1.720 24,482,606 998 100.00% CITY OF PRIOR LAKE, MINNESOTA Investment Portfolio - Diversification, by Maturity Range March 31, 2016 Description City of Prior Lake - Quarterly Investment Report Avg. YTM Purchase Maturity Broker/Institution Investment/Description Cost Rate Date Date League of Minnesota Cities Liquid Asset Fund 548,895 0.14% 2015A Bond Fund 141,736 0.14% 2015B Bond Fund 763,295 0.13% 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 1 12/13/2016 245,000.00 1.00%12/13/2013 12/13/2016 Bank Hapoalim NY NY 0.6 9/30/2016 245,000.00 0.60%9/30/2015 9/30/2016 Bank India NY NY City 0.65 9/28/2016 245,000.00 0.65%9/30/2015 9/28/2016 Bankwest SD 1.5 3/30/2023-17 245,000.00 1.50%3/30/2016 3/30/2023 Barclays Bank - DE 1.9 1/19/2017 245,000.00 1.90%1/19/2012 1/19/2017 beal bank usa 0.35 4/13/2016 245,000.00 0.35%10/14/2015 4/13/2016 BMO Harris Bk Natl Chicago 0.85 4/17/2017 245,000.00 85.00%10/14/2015 4/17/2017 BMW Bank NA, Utah 2.1 12/11/2018 245,000.00 2.10%12/11/2013 12/11/2018 Capital One Bank Glen Allen VA 2.25 9/30/2020 245,000.00 2.25%9/30/2015 9/30/2020 Capital One NA McLean VA 1.65 9/24/2018 245,000.00 1.65%9/28/2015 9/24/2018 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 2.6 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 Everbank CD Jacksonville FL 1.1 9/29/2017 245,000.00 1.10%9/30/2015 9/29/2017 FHLB Step 11/9/2022-13 300,000.00 2.20%11/9/2012 11/9/2022 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%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 1.9 8/29/2018 245,000.00 1.90%8/29/2013 8/29/2018 Merrick Bank So Jordan UT 0.9 3/30/2017 245,000.00 0.90%9/30/2015 3/30/2017 Morgan Stanley Cash 1,323,388.43 0.00%12/31/2010 N/A NBT Bank, NY 2.1 8/27/2019 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 santander Wilmington DE 0.6 10/14/2016 245,000.00 0.60%10/14/2015 10/14/2016 STATE BK INDIA NEW YORK NY 2.6 12/6/2021 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 1.55 9/17/2021-17 245,000.00 1.55%3/18/2016 9/17/2021 Wells Fargo Bank, SD Step 3/29/2021-17 225,000.00 3.02%3/28/2014 3/29/2021 World Financial Jumbo 1.8 5/31/2017 200,000.00 1.80%5/31/2012 5/31/2017 Subtotal 10,591,388 Northland Securities Aurora ISD - MN 4.65 2/1/2018-17 500,000.00 4.65%2/12/2009 2/1/2018 Cardinal Bk 0.55 12/29/2016 245,000.00 0.55%3/29/2016 12/29/2016 Cash - Northland Securities Cash 345,479.26 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 345,000.00 2.19%12/20/2012 12/19/2022 FHLMC 2 11/30/2020 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 4.4 4/1/2017 500,000.00 4.40%4/16/2009 4/1/2017 Washington County Housing 4.25 1/1/2020-10 245,000.00 4.25%7/1/2010 1/1/2020 Subtotal 6,530,479 Wells Fargo Advisors CITY OF PRIOR LAKE, MINNESOTA Investment Portfolio - Detail, by Broker March 31, 2016 City of Prior Lake - Quarterly Investment Report APPLE BK FOR SVGS 0.5 4/13/2016 248,000.00 0.50%1/13/2016 4/13/2016 Blue Hills Bank, Boston MA 0.5 9/9/2016 245,000.00 0.50%3/9/2016 9/9/2016 CITIZENS BANK NA 0.55 4/13/2016 248,000.00 0.55%1/13/2016 4/13/2016 FHLB 1.54 9/24/2019-16 2,000,000.00 1.54%9/24/2015 9/24/2019 FHLMC 2 12/18/2020-13 1,147,125.00 2.03%6/18/2012 12/18/2020 First National Community Bank, Dunmore, PA 0.35 6/245,000.00 0.35%3/9/2016 6/9/2016 First Niagara BK NA 1.15 10/10/2017 248,000.00 1.15%10/9/2015 10/10/2017 FNMA Step 3/30/2020-16 500,000.00 2.41%3/30/2016 3/30/2020 Investors Community Bank 0.4 6/30/2016 248,000.00 0.40%3/31/2016 6/30/2016 MERCHANTS BANK OF IN 0.55 4/19/2016 248,000.00 0.55%1/19/2016 4/19/2016 Mizuho Bank USA 0.5 7/14/2016 248,000.00 0.50%10/14/2015 7/14/2016 Safra National BK of NY 0.6 10/14/2016 248,000.00 0.60%10/15/2015 10/14/2016 Wells Fargo Advisors Cash 33,687.49 0.00%12/27/2011 N/A Subtotal 5,906,812 Investment Portfolio Total 24,482,606 1.72%Weighted Average YTM City of Prior Lake - Quarterly Investment Report