ACFR FY 2022 FINAL BOOK - Flipbook - Page 84
FINANCIAL SECTION
City of Eustis, Florida
NOTES TO FINANCIAL STATEMENTS
Note 5 - Cash, Cash Equivalents, and Investments (Continued)
Credit Risk
Credit risk is the risk of loss due to the failure of the security issuer� The City’s investment policy
limits the investments to obligations with the highest credit quality ratings� Ratings for debt securities are displayed in the above schedule� The State of Florida 185�06 and 175�06 has a provision
regarding investments which states for bonds and stocks that the corporation is listed on any one
or more of the recognized national stock exchanges or the National market System of the NASDAQ
Stock market and, in the case of bonds only, holds a rating in one of the three highest classifications by a primary rating service� Investment ratings are from moody’s Investors Service, Inc�, and
Standard and poor’s Ratings Group�
Custodial Credit Risk
For an investment, custodial credit risk is the risk that, in the event of the failure of the counterparty,
the City will not be able to recover the value of its investments or collateral securities that own an
outside party� The Government National mortgage Association (GNmA) investments of the City and
the City’s pension investments are held in the name of the counterparty, not in the name of the City�
Interest Rate Risk
Interest rate risk exists when there is a possibility that changes in interest rates could adversely
affect an investment’s fair value� The weighted average maturity of the City’s investments is displayed
in the above schedule� The City evaluates securities for other- than-temporary impairment every
quarter and more frequently when economic or market concerns warrant� Consideration is given
to the length of time and the extent to which the fair value has been less, than the cost, the financial
condition and near-term prospects of the issuer, and the intent and ability of the City to retain its
investment in the issuer for a period enough to allow for any anticipated recovery in the fair value�
In analyzing an issuer’s financial condition, the City considers whether the federal government or its
agencies issue the securities, whether downgrades agencies by bond, rating the results of reviews
of the issuer’s financial condition� The City has no formal policy concerning interest rate risk�
The Concentration of Credit Risk
The City’s non-pension holdings at U�S� bank Corp� contains approximately 52% of total investments,
and a United Southern bank (USb) bank contains approximately 48% of total investments and the
breakdown comprises securities at 4�57%, money market account at �25%, and government-guaranteed bonds (Gennie mae) of 4�10%, As the investments mature, the money is deposited into the City
master account at TD bank, which is highly liquid and offers interest rates that range from 1�52% to
2�42%� Certificate of Deposits is held by banks that are qualified public depositories of the State of
Florida� Currently, the City has three Certificates of Deposit with a maturity of less than one year�
Foreign Currency Risk - the City is not exposed to this type of risk�
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Annual Comprehensive Financial Report | September 30, 2022