Sarasota County, Florida Notes to Financial Statements September 30, 2023 Custodial Credit Risk Custodial credit risk is defined as the risk that, in the event of failure of the counterparty, the County will not be able to recover the value of its securities that are in the possession of an outside party. At September 30, 2023, the Countys book balance of cash was $123,223,043 and the bank balance was $123,727,553. The Countys bank balances are insured by the Federal Deposit Insurance Corporation (FDIC) in the amount of $250,000 for each banking relationship. The remaining balances are collateralized pursuant to Chapter 280, Florida Statutes. The Countys investment policy requires that deposits be entirely covered by federal depository insurance or by collateral pledged with the State Treasurer pursuant to Chapter 280, Florida Statutes. Under this Chapter, in the event of default by a participating financial institution (a qualified public depository), all participating institutions are obligated to reimburse the governmental entity for the loss. The Countys investment policy requires that securities be secured through third-party custody in the Countys name and safekeeping procedures. All of the Countys investments are held by the counterpartys trust department in the Countys name. Interest Rate Risk As of September 30, 2023, the County had the following investments and maturities: The County limits interest rate risk by maintaining an investment portfolio with limited volatility. The policy states that no security shall be purchased having an estimated average return of principal exceeding five years, unless the investment is an adjustable rate security. Adjustable rate securities may have a final return of principal in up to 30 years. In accordance with the Countys investment policy, the County invests in government agency mortgage backed securities and other similar investments. In managements opinion, the credit and legal risk associated with these investments is comparable to other investments within the portfolio. The collateralized mortgage backed securities are based on cash flows from the underlying government agency guaranteed mortgages. The principal repayment portions could be sensitive to prepayment by mortgagees, which may be affected by interest rate changes. The prepayments and anticipated interest rate changes can therefore affect the fair values of the investments. Cost or Investment Type Fair Value <1 1-5 Greater than 5* U.S. Treasuries 133,767,040 $ 69,371,499 $ 64,395,541 $ $ - U.S. Agencies Fixed Debt 758,386,042 406,497,818 351,888,224 - Adjustable Debt 100,994,443 - 100,994,443 - Adjustable Mortgages* 13,218,907 - - 13,218,907 Fixed Mortgages ** 73,955,410 124,203 2,582,953.81 71,248,253 GNMA Mortgages Adjustable* 37,144,898 - - 37,144,898 Fixed Mortgages ** 45,939,901 - - 45,939,901 FLFIT 39,377 39,377 - - FLSAFE 10 10 - - FLGIT 557,304 557,304 - - FLPALM 114,933,204 114,933,204 - - FLCLASS 57,834,673 57,834,673 - - Short-term cash 11,880,404 11,880,404 - - Total 1,348,651,614 $ $ 661,238,493 $ 519,861,162 $ 167,551,960 *Adjustable U.S. Agency and GNMA mortgages have interest rate caps and floors with coupon resets on a monthly basis. As interest rates change, these securities adjust their coupons monthly. As a result, the bonds have effective durations corresponding to their reset frequencies. Weighted average effective duration of these securities contributes 0.05 years to the portfolio's effective duration of 1.22. **Represents fixed rate mortgages that also pay principal and interest monthly and contribute 0.31 years to the effective duration of the portfolio. Investment Maturities (in Years) 100
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