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County finance staff review Q1 investment performance, flag concentration risk in 1st Federal CDs
Summary
Clallam County finance staff reviewed first‑quarter LGIP rates and recent CD/bond activity, welcomed outside advisor input and discussed concentration risk from multiple CDs with 1st Federal as several holdings mature and are reinvested.
Jennifer White, the county treasurer, opened the discussion of first‑quarter investment performance and said the county’s portfolio has grown and now holds a mix of LGIP and fixed‑income securities.
Philip Johnson, the county’s Accountant Investment Officer, reported the Local Government Investment Pool (LGIP) rates for the quarter "were 3.7755%, 3.7423, and then and off 3.7101 for March" and summarized recent account activity: a 12‑month CD that matured and was rolled to a 13‑month CD, a 36‑month treasury that matured, a 59‑month agency that was called, a new SoundBank CD for $2,000,000 and a 60‑month agency purchased at about 4.125% that becomes callable in six months.
The treasurer said that with the LGIP at about 3.7% and most bonds at or above the high‑3s to 4% range, "we're in a pretty good position" but noted the county had only a single CD yielding less than LGIP.
County Chief Financial Officer Mark Lane and senior staff raised concentration risk from having multiple CDs at a single institution. Lane urged mindful diversification as CDs mature: "I do think we need to not make ... concentration risk," and staff discussed the practical tension of keeping higher‑yielding CDs at a competitive bank versus spreading deposits.
Outside advisor Mike Ablovich, who joined to fill in for a colleague, said the county's prior mix of fixed income and LGIP had served it well. "Now that rates had come down and you see LGIP rate coming down, that's where you're getting the real benefit of having been disciplined and about sticking with fixed income," Ablovich said, adding a common rule‑of‑thumb that callables generally should not exceed about 25% of a portfolio.
In response to questions about default risk, Ablovich and staff emphasized the difference between reinvestment risk (rates available later) and catastrophic bank failure. Ablovich noted that county deposits are "collateralized" and pointed to third‑party VeriBank ratings and recent bank resolutions as context, citing Silicon Valley Bank and Signature Bank as examples of fast resolution with limited client disruption.
Next steps described by staff included considering available agencies and bond offerings for laddering, running a short list of candidate purchases for CDs coming due in the next week, and balancing a desire to diversify with the market reality that the most competitive rates are sometimes concentrated at a single bank.
The committee did not vote on investment policy changes at the meeting; staff said they will continue to monitor maturities and present specific reinvestment recommendations when action is required.
