Sarasota County Comprehensive Annual Financial Report 2019

Sarasota County, Florida Notes to Financial Statements September 30, 2019 In accordance with the County’s investment policy, the County invests in government agency mortgage backed securities and other similar investments. In management’s 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. Credit Risk The County’s investment policy limits credit risk by restricting the authorized investments to those illustrated in Note 1, Section D. The following table illustrates the credit quality distribution with credit exposure as a percentage of the County’s investment securities. Credit Ratings Percent of Investment Type S&P/Moody's/Fitch Portfolio U.S. Treasury AA+/Aaa/AAA 2.2% GNMA * AA+/Aaa/AAA 17.9% U.S. Agencies Federal Home Loan Bank AA+/Aaa/AAA 9.7% Federal Home Loan Mortgage Corporation AA+/Aaa/AAA 13.4% Federal National Mortgage Association AA+/Aaa/AAA 16.6% Federal Farm Credit Bank AA+/Aaa/AAA 8.0% Tennessee Valley Authority AA+/Aaa/AAA 0.3% Bank Certificates of Deposit (Chapter 280)** - 6.5% FLFIT AAAf 11.0% FLSAFE AAAm 2.8% FLGIT AAAm 2.2% FLPALM AAAm 8.2% Short term cash*** - 1.0% * GNMA is backed by the full faith of the U.S. Government. ** Non-Negotiable with a FL Qualified Public Depository ***Qualified Public Funds bank money market Concentration of Credit Risk The County’s investment policy establishes limitations on portfolio composition, both by investment type and dealer, in order to control concentration of credit risk. The following maximum limits are guidelines established for diversification by instrument: Repurchase Agreements 50% Certificates of Deposits 40% U.S. Agencies 65% State Investment Pools 75% Commercial Paper 25% Bankers' Acceptances 25% The policy provides that no more than 25% of the entire portfolio may be placed with any one security dealer or bank. 97