ACFR FY 2023 Final - Flipbook - Page 89
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 issuerÿ The City9s investment policy
limits the investments to obligations with the highest credit quality ratingsÿ Ratings for debt securities are displayed in the scheduleÿ The State of Florida 185ÿ06 and 175ÿ06 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 classiocations by a
primary rating serviceÿ Investment ratings are from moody9s Investors Service, Incÿ, and Standard
and poor9s Ratings Groupÿ
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 partyÿ The Government National mortgage Association (GNmA) investments of the City and
the City9s pension investments are held in the name of the counterparty, not in the name of the Cityÿ
Interest Rate Risk
Interest rate risk exists when there is a possibility that changes in interest rates could adversely affect
an investment9s fair valueÿ The weighted average maturity of the City9s investments is displayed in
the scheduleÿ The City evaluates securities for other- than-temporary impairment every quarter and
more frequently when economic or market concerns warrantÿ Consideration is given to the length
of time and the extent to which the fair value has been less than the cost, the onancial 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 long enough to allow for any anticipated recovery in the fair valueÿ In analyzing
an issuer9s onancial 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
issuer9s onancial condition. The City has no formal policy concerning interest rate risk.
The Concentration of Credit Risk
The City9s non-pension holdings at UÿSÿ bank Corpÿ contains approximately 52% of total investments,
and United Southern bank (USb) bank contains approximately 48% of total investments, the breakdown comprises securities at 4ÿ57%, money market accounts at ÿ25%, and government-guaranteed
bonds (Gennie mae) at 4ÿ10%, 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 1ÿ52% to
2.42%. Certiocate of Deposits are held by banks that are qualioed public depositories of the State
of Florida. Currently, the City has three Certiocates of Deposit with a maturity of less than one year.
Foreign Currency Risk
The City is not exposed to this type of riskÿ
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Annual Comprehensive Financial Report | September 30, 2023
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