quarterly investment report - ada county, idaho€¦ · portfolio manager & analyst...

Client Management Team

Rick Phillips President & Chief Investment Officer

702-575-6666

[email protected]

Tonya Dazzio Chief Operating & Compliance Officer

702-575-6592

[email protected]

Greg Balls, CFA Portfolio Manager & Analyst

702-575-6655

[email protected]

Christine Wilson Operations Analyst

702-575-6640

[email protected]

Dan Rusk Portfolio Analyst

702-575-6633

[email protected]

Ada County

December 2017

10655 Park Run Drive Suite 120 | Las Vegas, NV 89144 | Toll Free 888.278.7350 | www.FTNMainStreet.com

Quarterly Investment Report

Portfolio Summary

State of Idaho LGIP

Federal Home Loan Mtg Corp

Market Value Federal Home Loan Bank

Book Value* Federal Farm Credit Bank

Variance Sunwest Bank

Zions Bank

Par Value State Of Idaho DBF TR

Federal National Mtg Assn

Net Asset Value Boise State Revenue Bonds

Ada & Canyon School Districts

Purchase Yield Ada County

Wells Fargo

Years to Maturity

Modified Duration

*Book Value is at Original Cost, Not Amortized

#Sector Allocation Key: Agy=Federal Agencies, CD=Cert of Deposit, DBF= State Diversifed Bond Fund, LGIP=State Pool, Mkt Act=Bank Mkt Acct, MMF=Money Mkt Acct, Muni=Municipals, Tsy=Treasuries

-$271,099 -$85,918

$144,530,935 $165,093,551

$99.812 $99.948

12/31/17 9/30/17

$144,309,691 $165,060,535

$144,580,790 $165,146,453

3.5%

2.9%

1.6%

0.7%

0.6%

0.2%

0.1%

57.0%

13.2%

9.6%

6.9%

3.6%

ACCOUNT SUMMARY PORTFOLIO PURCHASE YIELD HISTORY TOP ISSUERS

Issuer % Portfolio

12/31/2017

SECTOR ALLOCATION# MATURITY DISTRIBUTION CREDIT QUALITY (MOODY'S)

Ada County

1.27% 1.19%

0.61 0.50

0.57 0.48

Agy 31.4%

CDs 0.0%

Muni 1.5%

LGIP 57.0%

DBF 2.9%

MMF 3.5%Mkt Acct

3.8% 79.5%

7.8%4.3%

8.2%

0.0% 0.2%0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

0-1Y 1-2Y 2-3Y 3-4Y 4-5Y 5+Y

57.0%

2.9%

3.5%

3.8%

0.0%

0.2%

0.0%

0.0%

0.0%

0.0%

0.7%

0.0%

0.0%

32.1%

0.0%

0% 20% 40% 60% 80%

NR-LGIP

NR-DBF

NR-MMF

NR-Bank

NR-CD

NR-Ada Co

NR

A3

A2

A1

Aa3

Aa2

Aa1

Aaa

P-1

0.75%

0.85%

0.95%

1.05%

1.15%

1.25%

1.35%

Jan

-17

Fe

b-1

7

Mar-

17

Ap

r-1

7

May-

17

Jun

-17

Jul-

17

Au

g-1

7

Se

p-1

7

Oct

-17

No

v-1

7

De

c-1

7

NR: Not RatedPer Book ValuePer Book Value

Per Book Value

2

Investment Policy Compliance

0.61 Yrs

0.0%

1.5%

2.9%

31.4%

57.0%

3.5%

0.0%

3.8%

0.0%

FTN Financial Main Street Advisors relies on the accuracy of the data provided by Ada County to compile this report.

Yes:No limit, maximum maturity 5 years.Deposit Accounts in State/Federal

Credit Unions

Collateralized Business Market

Banking Accounts/Time Deposits-

State Depositories

Yes:No limit, maximum maturity 5 years.

Yes:

U.S. Federal Agencies

Idaho Diversified Bond Fund (DBF)

Idaho Local Govt Investment Pool

30% limit,15% issuer limit, maximum maturity 90 days, allowable collateral at 102% of investment,

transacted with Federal Reserve Primary Dealers.

Idaho Public Corporations

Repurchase Agreements

Municipal Securities

20% limit, 5% issuer limit.

Money Market Funds

Yes:

Item / Sector

0.0%Yes:No limit, maximum maturity 5 years.

Maturity Limits

Parameters In Compliance

Yes

Investment Ratings At time of purchase, all investments must have an A (S&P), A2 (Moody's), or A (Fitch) rating or better. Yes

Maturities of investments must not exceed 5 years, unless unanimous consent of the Board of County

Commissioners is given.

Weighted Average Maturity Weighted Average Maturity (WAM) must be less than 3 years.

U.S. Treasuries

Ada County

20% limit, 10% issuer limit for State of Idaho Bonds, 5% issuer limit Idaho Counties, Cities, and District

Bonds.

30% limit, 10% issuer limit, rated AAA (S&P), Aaa (Moody's), or AAA (Fitch).

No limit, issuer limit 40%, maximum maturity 5 years.

12/31/2017

Yes:

Yes:

Yes:

Yes:

Yes:

70% limit.

Yes:

30% limit.

3

Historical Book Values

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Avg

FY 13 $167.8 $162.8 $156.6 $198.3 $191.6 $183.9 $182.8 $171.1 $164.4 $196.7 $186.9 $177.0 $178.3

FY 14 $173.6 $162.2 $160.6 $161.5 $191.5 $191.0 $180.0 $175.3 $176.7 $226.2 $192.9 $183.5 $181.2

FY 15 $169.2 $168.1 $156.7 $230.5 $200.3 $193.3 $184.5 $181.9 $176.8 $234.0 $164.9 $153.3 $184.5

FY 16 $140.7 $137.5 $129.7 $258.6 $179.7 $171.4 $158.5 $154.7 $149.0 $221.6 $174.8 $165.7 $170.2

FY 17 $152.2 $148.7 $139.0 $286.6 $191.5 $183.5 $172.8 $169.5 $161.6 $249.1 $186.8 $177.3 $184.9

FY 18 $165.8 $162.0 $152.4

Figures in Millions, Average Daily Balance

12/31/2017 Ada County

$100

$125

$150

$175

$200

$225

$250

$275

$300

Oct-

12

Dec-1

2

Feb

-13

Ap

r-13

Jun

-13

Au

g-1

3

Oct-

13

Dec-1

3

Feb

-14

Ap

r-14

Jun

-14

Au

g-1

4

Oct-

14

Dec-1

4

Feb

-15

Ap

r-15

Jun

-15

Au

g-1

5

Oct-

15

Dec-1

5

Feb

-16

Ap

r-16

Jun

-16

Au

g-1

6

Oct-

16

Dec-1

6

Feb

-17

Ap

r-17

Jun

-17

Au

g-1

7

Oct-

17

Dec-1

7

Millio

ns

4

Historical Book Values by Fiscal Year

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Avg

FY 13 $167.8 $162.8 $156.6 $198.3 $191.6 $183.9 $182.8 $171.1 $164.4 $196.7 $186.9 $177.0 $178.3

FY 14 $173.6 $162.2 $160.6 $161.5 $191.5 $191.0 $180.0 $175.3 $176.7 $226.2 $192.9 $183.5 $181.2

FY 15 $169.2 $168.1 $156.7 $230.5 $200.3 $193.3 $184.5 $181.9 $176.8 $234.0 $164.9 $153.3 $184.5

FY 16 $140.7 $137.5 $129.7 $258.6 $179.7 $171.4 $158.5 $154.7 $149.0 $221.6 $174.8 $165.7 $170.2

FY 17 $152.2 $148.7 $139.0 $286.6 $191.5 $183.5 $172.8 $169.5 $161.6 $249.1 $186.8 $177.3 $184.9

FY 18 $165.8 $162.0 $152.4 $160.0

Figures in Millions, Average Daily Balance


$120

$140

$160

$180

$200

$220

$240

$260

$280

$300

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

Millio

ns

FY 18

FY 17

FY 16

FY 15

FY 14

FY 13

5

Weighted Average Maturity and Book Yield12/31/2017 Ada County

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Years

Weighted Average Maturity History

0.2

0.4

0.6

0.8

1.0

1.2

1.4

Perc

en

t

Month-End Book Yield vs 0-3Yr Treasury Index (24 month moving avg)

Portfolio

Index

6

Book Yield per WAM per Percent of Portfolio12/31/2017 Ada County

DBF

Agy

LGIP

MMF

Muni

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

-0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0

Yie

ld t

o M

atu

rity

Weighted Average Maturity (Years)

Bubble Size = Percent of Portfolio

7

Interest Rate Shock Analysis

$171,488,246

Portfolio Value Value Change Percent Change

$966,034

$705,205

$483,017

-$1,017,786

0.00%

-0.31%

-0.59%

$172,241,408 -$264,624 -0.15%

-$529,249$171,976,784


$173,472,066

$173,211,237

$172,989,049

0.56%

0.41%

0.28%

+100 Basis Points

Interst Rate Change

-100 Basis Points

-75 Basis Points

-50 Basis Points

No Change

-25 Basis Points

+75 Basis Points

+25 Basis Points

+50 Basis Points

$171,742,693 -$763,339 -0.44%

$172,747,540 $241,508 0.14%

$0$172,506,032

0.56%

0.41%

0.28%

0.14%

0.00%

-0.15%

-0.31%

-0.44%

-0.59%

-0.80%

-0.60%

-0.40%

-0.20%

0.00%

0.20%

0.40%

0.60%

0.80%

-100BP -75BP -50BP -25BP No Change +25BP +50BP +75BP +100BP

Perc

en

t C

han

ge in

Po

rtfo

lio

Valu

e

Interest Rate Changes/Scenarios

Instantaneous Interest Rate Changes and Estimated Changes in Portfolio's Market Value

8

Next Twelve Months Maturities

Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18

$97.0 $5.5 $5.0 $2.0 $0.0 $3.5 $0.0 $0.0 $0.0 $0.0 $2.0 $0.0

Par Value in Millions. The DBF investment is included in the closest month.

12/31/2017

Maturities

Ada County

$97.0

$5.5 $5.0

$2.0 $0.0

$3.5

$0.0 $0.0 $0.0 $0.0 $2.0

$0.0 $0

$20

$40

$60

$80

$100

$120


Millio

ns

9

Historical Sector Allocation


Agency 22.1% 23.1% 26.3% 26.7% 33.7% 32.7% 27.2% 29.1% 28.7% 27.0% 31.5% 31.4%

State of Idaho DBF 2.1% 2.2% 2.3% 2.4% 2.6% 2.7% 2.1% 2.3% 2.5% 2.5% 2.7% 2.9%

State of Idaho LGIP 65.4% 63.9% 60.0% 59.3% 51.1% 51.8% 60.3% 58.0% 61.2% 63.0% 57.7% 56.9%

Municipals 1.6% 1.7% 1.7% 1.7% 1.9% 1.9% 1.6% 1.2% 1.3% 1.3% 1.4% 1.5%

MMF 0.0% 0.0% 2.9% 2.9% 3.2% 3.2% 2.6% 2.8% 3.0% 3.0% 3.2% 3.5%

Business Mkt Acct 5.4% 5.6% 3.1% 3.2% 3.4% 3.5% 2.8% 3.0% 3.3% 3.2% 3.5% 3.8%

Certificates of Deposit 3.4% 3.5% 3.7% 3.8% 4.1% 4.2% 3.4% 3.6% 0.0% 0.0% 0.0% 0.0%

Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Sector


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

55%

60%

65%

70%


AGY

DBF

LGIP

MMF

Bs Mkt Acct

CD

Muni

10

Issuer Allocation12/31/2017 Ada County

0.1%

0.2%

0.6%

0.7%

1.6%

2.9%

3.5%

3.6%

6.9%

9.6%

13.2%

57.0%

0% 10% 20% 30% 40% 50% 60%

Wells Fargo

Ada County

ADA & CANYON SCHOOL D #2 GEN O

Boise State Revenue Bonds

Federal National Mtg Assn

State Of Idaho DBF TR

ZIONS BANK

SUNWEST BANK MMKT CHECKING

Federal Farm Credit Bank

Federal Home Loan Bank

Federal Home Loan Mtg Corp

STATE OF IDAHO LGIP TR

11

Historical Earnings and Book Rate of Return Performance


$173.7 $334.8 $498.5 $662.6 $832.7 $1,009.8 $1,187.5 $1,357.5 $1,531.6 $1,688.2 $1,853.4 $2,005.5

$178.2 $360.4 $496.4 $659.7 $812.5 $979.6 $1,133.8 $1,322.4 $1,540.0 $1,685.4 $1,839.0 $1,997.5

$178.6 $349.5 $451.2 $539.4 $633.2 $806.4 $963.4 $1,134.5 $1,228.6 $358.4 $282.8 $270.4

$75.9 $146.6 $220.6 $342.3 $375.0 $443.7 $585.9 $691.0 $790.5 $907.3 $1,018.2 $1,104.1

$105.0 $202.6 $296.7 $489.1 $623.2 $760.6 $905.5 $1,043.1 $1,172.7 $1,404.4 $1,565.0 $1,749.5

$191.8 $373.9 $539.4

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep1.36% 1.36% 1.34%

Custom Benchmark* 1.17% 1.20% 1.23%

0.19% 0.16% 0.11%*Benchmark: 12 Month Moving Avg of the 0-3 Year Treasury BAML Index (G1QA)--Average Builds Over the Fiscal Year Period

Ada County

Variance

Book Rate of Rtn

Fiscal YTD ($000)

FY 2013

12/31/2017

Fiscal YTD

FY 2014

FY 2015

FY 2016

FY 2017

FY 2018

$0

$500

$1,000

$1,500

$2,000

$2,500


Th

ou

san

ds

Fiscal Year-to-Date Earnings

FY 2013

FY 2014

FY 2015

FY 2016

FY 2017

FY 2018

1.0%

1.1%

1.2%

1.3%

1.4%

1.5%


Book Rate of Return vs Benchmark

Portfolio

Benchmark

12

Historical Book Rate of Return Performance

FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24

1.15% 1.09% 0.15% 0.65% 0.95% 1.34%

0.23% 0.26% 0.37% 0.58% 0.85% 1.23%

0.92% 0.83% -0.22% 0.07% 0.10% 0.11%

*Benchmark: 12 Month Moving Avg of the 0-3 Year Treasury BAML Index (G1QA)--Average Builds Over the Fiscal Year Period

Benchmark*

Variance


Fiscal YTD

Portfolio

0.92%0.83%

-0.22%

0.07% 0.10% 0.11%

-0.6%

-0.4%

-0.2%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%


Portfolio vs. Benchmark: Annual Variance

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%


Portfolio vs Benchmark Portfolio

Benchmark

13

Investment Activity

Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-1748 48 36 36 38 37 37 36 34 31 35 33


1 0 4 0 2 0 3 0 0 0 5 0

1 0 16 0 0 1 1 2 3 2 2 2

2 0 20 0 2 1 4 2 3 2 7 2

Ada County12/31/2017

Purchases

Total Transactions

Positions

Redemptions

30

32

34

36

38

40

42

44

46

48

50


Po

sit

ion

s

Number of Positions at Month End

0

2

4

6

8

10

12

14

16

18


Nu

mb

er

of

Tra

nsacti

on

s

Purchases and Redemptions* (Excluding LGIP, MMF, & Bank Accounts) Purchases

Redemptions

*Redemptions include maturities, calls, and sells

14

Quarterly Economic and Market Update

December 2017

15

Economic and Market Update

*Estimates for the current quarter/month, some data are lagged Sources: FTN Main Street and Bloomberg

**Next Projected Fed Funds Hike is first month Fed Funds Futures are 1.625% or higher

12/31/2017

Item 12/31/2017 9/30/2017 Change

U.S. Payrolls Monthly Change 148,000 38,000 110,000

Unemployment Rate 4.1% 4.2% -0.1%

Labor Force Participation 62.7% 63.0% -0.3%

Effective Fed Funds Rate 1.33% 1.06% 0.27%

2 Year T-Note 1.885% 1.486% 0.399%

3 Month T-Bill 1.382% 1.049% 0.333%

Next Fed Funds Hike** Jun 2018 Jan 2019 -7 Months

3 Year T-Note 1.972% 1.624% 0.348%

5 Year T-Note 2.207% 1.937% 0.270%

10 Year T-Note 2.406% 2.334% 0.072%

U.S. Fed Debt Avg Yield* 2.120% 2.094% 0.026%

30 Year Mortgage Rate 3.85% 3.800% 0.05%

1-5 Yr Agency Spread 0.09% 0.10% -0.01%

1-5 Yr Corporate Spread 0.46% 0.51% -0.05%

Dow Jones 24,719 22,405 10.3%

S&P 500 2,674 2,519 6.1%

Consumer Price Index YOY* 2.1% 2.2% -0.1%

U.S. Avg Regular Unleaded $2.49 $2.56 -$0.07

Retail Sales YOY* 4.6% 5.0% -0.4%

Case-Shiller Home Prices YOY* 6.4% 5.8% 0.6%

Consumer Confidence 122.10 126.20 -4.10

Gold (per ounce) $1,302.80 $1,279.75 $23.05

Dollar Index 92.12 93.08 -0.95

16


* Real Rate (Inflation Adjusted)

Source: Bureau of Economic Analysis

Estimate: Bloomberg's Survey of Economists

As of: 12/31/17

12/31/2017

-5.4

-0.5

1.3

3.9

1.7

3.9

2.7

2.5

-1.5

2.9

0.8

4.6

2.7

1.9

0.5

0.1

2.8

0.8

3.1

4.0

-0.9

4.6 5

.2

2.0

3.2

2.7

1.6

0.5

0.6

2.2

2.8

1.8

1.2

3.1 3.2

2.7

2.3 2.5

2.3

-8

-6

-4

-2

0

2

4

6

8

Q1

20

09

Q2 2

00

9

Q3 2

00

9

Q4

20

09

Q1

20

10

Q2 2

010

Q3 2

010

Q4

20

10

Q1

20

11

Q2 2

011

Q3 2

011

Q4

20

11

Q1

20

12

Q2 2

012

Q3 2

012

Q4

20

12

Q1

20

13

Q2 2

013

Q3

20

13

Q4

20

13

Q1

20

14

Q2 2

014

Q3 2

014

Q4

20

14

Q1

20

15

Q2 2

015

Q3 2

015

Q4

20

15

Q1

20

16

Q2 2

016

Q3 2

016

Q4

20

16

Q1

20

17

Q2 2

017

Q3 2

017

Q4

20

17

Q1

20

18

Q2 2

018

Q3 2

019

Perc

en

t

U.S. GDP (Quarter over Quarter Annualized)*

Estimates

17


* Real Rate (Inflation Adjusted)

Source: Bureau of Economic Analysis

12/31/2017

Estimate: Bloomberg's Survey of Economists

As of: 12/31/17

8.7

8.1

4.1

4.7

-0.6

7.1

2.1

2.1

-0.7

6.9

2.6

2.6

6.1

4.4

5.8

6.5 6.6

2.7

4.9

3.1

0.2

3.3

5.3 5

.6-0

.5-0

.25.4

4.6

5.6

3.2

-0.2

2.6

-1.9

4.6

7.3

4.2

3.5

3.5

4.2

3.7

1.9

-0.1

3.6

2.7

4.0

2.7

3.8

4.5

4.4 4

.74

.11.0

1.8

2.8

3.8

3.3

2.7

1.8

-0.3

-2.8

2.5

1.6

2.2

1.7

2.6 2

.91.5

2.3

-5

-4

-3

-2

-1

0

1

2

3

4

5

6

7

8

9

1950

1952

1954

1956

1958

196

0

196

2

196

4

196

6

196

8

1970

1972

1974

1976

1978

198

0

198

2

198

4

198

6

198

8

199

0

199

2

199

4

199

6

199

8

20

00

20

02

20

04

20

06

20

08

20

10

20

12

20

14

20

16

Perc

en

t

U.S. Annual GDP *

1980s 3.15% 1990s 3.22% 2000s 1.82% 2010s 2.11%1960s 4.53% 1970s 3.25%1950s 4.25%

18


Source: Bureau of Labor Statistics

12 Month Average Job Change 171,250

12/31/2017

0

50

100

150

200

250

300

350

400

Jun

-13

Sep

-13

Dec-1

3

Mar-

14

Jun

-14

Sep

-14

Dec-1

4

Mar-

15

Jun

-15

Sep

-15

Dec-1

5

Mar-

16

Jun

-16

Sep

-16

Dec-1

6

Mar-

17

Jun

-17

Sep

-17

Dec-1

7

Th

ou

san

ds

U.S. Monthly Non-Farm Payrolls Change

2

3

4

5

6

7

8

9

10

Jun

-13

Au

g-1

3

Oct-

13

Dec-1

3

Feb

-14

Ap

r-14

Jun

-14

Au

g-1

4

Oct-

14

Dec-1

4

Feb

-15

Ap

r-15

Jun

-15

Au

g-1

5

Oct-

15

Dec-1

5

Feb

-16

Ap

r-16

Jun

-16

Au

g-1

6

Oct-

16

Dec-1

6

Feb

-17

Ap

r-17

Jun

-17

Au

g-1

7

Oct-

17

Dec-1

7

Perc

en

t

Unemployment Rates

Nevada

U.S.A

California

Idaho

Washington

19


Source: Bureau of Labor Statistics

12/31/2017

128

129

130

131

132

133

134

135

136

137

138

139

140

141

142

143

144

145

146

147

148

149

Dec-0

7

May-0

8

Oct-

08

Mar-

09

Au

g-0

9

Jan

-10

Jun

-10

No

v-1

0

Ap

r-11

Sep

-11

Feb

-12

Jul-

12

Dec-1

2

May-1

3

Oct-

13

Mar-

14

Au

g-1

4

Jan

-15

Jun

-15

No

v-1

5

Ap

r-16

Sep

-16

Feb

-17

Jul-

17

Dec-1

7

Millio

ns

U.S. Number of EmployedFull-Time and Part-TIme

62.0

62.5

63.0

63.5

64.0

64.5

65.0

65.5

66.0

66.5

Dec-0

7

May-0

8

Oct-

08

Mar-

09

Au

g-0

9

Jan

-10

Jun

-10

No

v-1

0

Ap

r-11

Sep

-11

Feb

-12

Jul-

12

Dec-1

2

May-1

3

Oct-

13

Mar-

14

Au

g-1

4

Jan

-15

Jun

-15

No

v-1

5

Ap

r-16

Sep

-16

Feb

-17

Jul-

17

Dec-1

7

Perc

en

t

U.S. Labor Force Participation Rate

20


########

Source: Department of Labor and Bloomberg

12/31/2017

Weekly Initial Jobless Claims is the actual number of people who have filed for Unemployment benefits for the first time. The following five eligibility criteria must be met in

order to file for unemployment benefits: 1. Meet the requirements of time worked during a 1 year period (full time or not). 2. Become unemployed through no fault of your own

(cannot be fired). 3. Must be able to work; no physical or mental holdbacks. 4. Must be available for work. 5. Must be actively seeking work.

200

250

300

350

400

450

500

550

600

650

700

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

Th

ou

san

ds

Weekly Initial Jobless Claims (4 Week Moving Average)

21


*Real: Inflation Adjusted

Source: U.S. Census Bureau Source: Conference Board

12/31/2017

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

Jun

-13

Au

g-1

3

Oct-

13

Dec-1

3

Feb

-14

Ap

r-14

Jun

-14

Au

g-1

4

Oct-

14

Dec-1

4

Feb

-15

Ap

r-15

Jun

-15

Au

g-1

5

Oct-

15

Dec-1

5

Feb

-16

Ap

r-16

Jun

-16

Au

g-1

6

Oct-

16

Dec-1

6

Feb

-17

Ap

r-17

Jun

-17

Au

g-1

7

Oct-

17

Perc

en

t

U.S. Real* Retail Sales YOY % Change

20

40

60

80

100

120

140

Jun

-07

No

v-0

7

Ap

r-0

8

Sep

-08

Feb

-09

Jul-

09

Dec-0

9

May-1

0

Oct-

10

Mar-

11

Au

g-1

1

Jan

-12

Jun

-12

No

v-1

2

Ap

r-13

Sep

-13

Feb

-14

Jul-

14

Dec-1

4

May-1

5

Oct-

15

Mar-

16

Au

g-1

6

Jan

-17

Jun

-17

No

v-1

7

Ind

ex V

alu

e

U.S. Consumer Confidence

22


CPIX: Consumer Price Index, excluding food and energy PCEC: Personal Consumption Expenditure Core

Source: Bureau of Labor Statistics and Bureau of Economic Analysis

12/31/2017

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Jul-

13

Sep

-13

No

v-1

3

Jan

-14

Mar-

14

May-1

4

Jul-

14

Sep

-14

No

v-1

4

Jan

-15

Mar-

15

May-1

5

Jul-

15

Sep

-15

No

v-1

5

Jan

-16

Mar-

16

May-1

6

Jul-

16

Sep

-16

No

v-1

6

Jan

-17

Mar-

17

May-1

7

Jul-

17

Sep

-17

No

v-1

7

Perc

en

t

CPI and CPIX YOY % Change

CPI CPIX

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Jul-

13

Sep

-13

No

v-1

3

Jan

-14

Mar-

14

May-1

4

Jul-

14

Sep

-14

No

v-1

4

Jan

-15

Mar-

15

May-1

5

Jul-

15

Sep

-15

No

v-1

5

Jan

-16

Mar-

16

May-1

6

Jul-

16

Sep

-16

No

v-1

6

Jan

-17

Mar-

17

May-1

7

Jul-

17

Sep

-17

No

v-1

7

Perc

en

t

PCE and PCEC YOY % Change

PCE PCEC

23


Sources: New (U.S. Census Bureau),Existing (National Assoc. of Realtors)

Source: Case-Shiller Seasonally Adjusted Annual Rate

12/31/2017

-20

-15

-10

-5

0

5

10

15

Jul-

09

No

v-0

9

Mar-

10

Jul-

10

No

v-1

0

Mar-

11

Jul-

11

No

v-1

1

Mar-

12

Jul-

12

No

v-1

2

Mar-

13

Jul-

13

No

v-1

3

Mar-

14

Jul-

14

No

v-1

4

Mar-

15

Jul-

15

No

v-1

5

Mar-

16

Jul-

16

No

v-1

6

Mar-

17

Jul-

17

YO

Y P

erc

en

t

Case-Shiller 20 City U.S. Home Price IndexYOY % Increase

200

300

400

500

600

700

800

3

4

5

6

Jun

-09

No

v-0

9

Ap

r-10

Sep

-10

Feb

-11

Jul-

11

Dec-1

1

May-1

2

Oct-

12

Mar-

13

Au

g-1

3

Jan

-14

Jun

-14

No

v-1

4

Ap

r-15

Sep

-15

Feb

-16

Jul-

16

Dec-1

6

May-1

7

Oct-

17

New

-Th

ou

san

ds

Exis

tin

g-M

illio

ns

U.S. New and Existing Home Sales

Existing-Left

New-Right

24


Source: U.S. Treasury

12/31/2017

$6

$7

$8

$9

$10

$11

$12

$13

$14

$15

$16

$17

$18

$19

$20

$21

$22

Dec-0

7

May-0

8

Oct-

08

Mar-

09

Au

g-0

9

Jan

-10

Jun

-10

No

v-1

0

Ap

r-11

Sep

-11

Feb

-12

Jul-

12

Dec-1

2

May-1

3

Oct-

13

Mar-

14

Au

g-1

4

Jan

-15

Jun

-15

No

v-1

5

Ap

r-16

Sep

-16

Feb

-17

Jul-

17

Tri

llio

ns

U.S. Federal Debt Outstanding

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Dec-0

7

May-0

8

Oct-

08

Mar-

09

Au

g-0

9

Jan

-10

Jun

-10

No

v-1

0

Ap

r-11

Sep

-11

Feb

-12

Jul-

12

Dec-1

2

May-1

3

Oct-

13

Mar-

14

Au

g-1

4

Jan

-15

Jun

-15

No

v-1

5

Ap

r-16

Sep

-16

Feb

-17

Jul-

17

Perc

en

t

U.S. Treasury Interest Bearing Debt Avg Rate

25


Fed Funds Anticipated Rate from the December 13, 2017 FOMC Meeting

Source: Bloomberg

12/31/2017

1.20

1.40

1.60

1.80

2.00

2.20

2.40

2.60

2.80

3.00

3.20

Jan

-20

18

Feb

-20

18

Mar-

20

18

Ap

r-20

18

May-2

018

Jun

-20

18

Jul-

20

18

Au

g-2

018

Sep

-20

18

Oct-

20

18

No

v-2

018

Dec-2

018

Jan

-20

19

Feb

-20

19

Mar-

20

19

Ap

r-20

19

May-2

019

Jun

-20

19

Jul-

20

19

Au

g-2

019

Sep

-20

19

Oct-

20

19

No

v-2

019

Dec-2

019

Jan

-20

20

Feb

-20

20

Mar-

20

20

Ap

r-20

20

May-2

020

Jun

-20

20

Jul-

20

20

Au

g-2

020

Sep

-20

20

Oct-

20

20

No

v-2

020

Dec-2

020

Perc

en

t

Fed Funds vs. Fed's Anticipated Fed Funds Rate

Fed's Anticipated Rates

Fed Funds Futures

26


Source: Bloomberg

Figures may not total due to rounding

3M

Maturity

0.401.891.492Y

0.441.741.291Y

0.341.531.196M

0.331.381.05

2.33 2.41 0.07

Change12/29/179/29/17

12/31/2017

3Y 1.62 1.97 0.35

30Y 2.86 2.74 -0.12

5Y 1.94 2.21 0.27

10Y

0.5

1.0

1.5

2.0

2.5

3.0

3M 6M 1Y 2Y 3Yr 5Y 10Y 30Y

Perc

en

t

U.S. Treasury Yield Curve Change

12/29/17

9/29/17

-20

-10

0

10

20

30

40

50

3M

6M 1Y 2Y

3Y

r

5Y

10Y

30

Y

Basis

Po

ints

Basis Point Change

27


Source: Bloomberg

12/31/2017

-0.10

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

1.10

1.20

1.30

1.40

1.50

1.60

1.70

1.80

1.90

Dec-1

2

Mar-

13

Jun

-13

Sep

-13

Dec-1

3

Mar-

14

Jun

-14

Sep

-14

Dec-1

4

Mar-

15

Jun

-15

Sep

-15

Dec-1

5

Mar-

16

Jun

-16

Sep

-16

Dec-1

6

Mar-

17

Jun

-17

Sep

-17

Perc

en

t

U.S. Treasury Yields: 3M and 1Y

1Y

3M

0.00

0.25

0.50

0.75

1.00

1.25

1.50

1.75

2.00

2.25

2.50

Dec-1

2

Mar-

13

Jun

-13

Sep

-13

Dec-1

3

Mar-

14

Jun

-14

Sep

-14

Dec-1

4

Mar-

15

Jun

-15

Sep

-15

Dec-1

5

Mar-

16

Jun

-16

Sep

-16

Dec-1

6

Mar-

17

Jun

-17

Sep

-17

Perc

en

t

U.S. Treasury Yields: 2Y and 5Y

5Y

2Y

28


Source: Bloomberg

12/31/2017

0

2

4

6

8

10

12

14

16

18

20

22

Jan

-54

Jan

-56

Jan

-58

Jan

-60

Jan

-62

Jan

-64

Jan

-66

Jan

-68

Jan

-70

Jan

-72

Jan

-74

Jan

-76

Jan

-78

Jan

-80

Jan

-82

Jan

-84

Jan

-86

Jan

-88

Jan

-90

Jan

-92

Jan

-94

Jan

-96

Jan

-98

Jan

-00

Jan

-02

Jan

-04

Jan

-06

Jan

-08

Jan

-10

Jan

-12

Jan

-14

Jan

-16

Jan

-18

Perc

en

t

U.S. Treasury Yields 2Yr and 5Yr - Fed Funds Target Rate

5Yr

2Yr

Fed Funds

29


Source: Bloomberg

12/31/2017

Global Treasury Rates

2 Year Yields 5 Year Yields 10 Year Yields

-0.96%

-0.64%

-0.49%

-0.38%

-0.27%

-0.17%

-0.14%

0.43%

1.69%

1.88%

1.97%

-4.0% -2.0% 0.0% 2.0% 4.0%

Switzlnd

Germany

France

Spain

Italy

Portugal

Japan

England

Canada

USA

Australia

-0.56%

-0.21%

-0.11%

-0.01%

0.37%

0.40%

0.72%

0.73%

1.86%

2.21%

2.29%

-4.0% -2.0% 0.0% 2.0% 4.0%

Switzlnd

Germany

Japan

France

Spain

Portugal

England

Italy

Canada

USA

Australia

-0.18%

0.04%

0.42%

0.78%

1.19%

1.56%

1.91%

2.01%

2.04%

2.41%

2.63%

-2.0% 0.0% 2.0% 4.0%

Switzlnd

Japan

Germany

France

England

Spain

Portugal

Italy

Canada

USA

Australia

30


*BofA/Merrill Index (option adjusted spread vs. Treasury) *BofA/Merrill Index (option adjusted spread vs. Treasury)

Agency (GVP0) Corporate A-AAA (CV10)

Source: Bank of America Merrill Lynch Indices

12/31/2017

Current Spread is 9 Current Spread is 46

0

10

20

30

40

50

60

70

80

90

100

110

120

130

140

150

160

170

180

No

v-0

3

Jun

-04

Jan

-05

Au

g-0

5

Mar-

06

Oct-

06

May-0

7

Dec-0

7

Jul-

08

Feb

-09

Sep

-09

Ap

r-10

No

v-1

0

Jun

-11

Jan

-12

Au

g-1

2

Mar-

13

Oct-

13

May-1

4

Dec-1

4

Jul-

15

Feb

-16

Sep

-16

Ap

r-17

No

v-1

7

Basis

Po

ints

Spread: 1-5Yr Agency* vs Treasury

0

50

100

150

200

250

300

350

400

450

500

550

600

650

No

v-0

3

Jun

-04

Jan

-05

Au

g-0

5

Mar-

06

Oct-

06

May-0

7

Dec-0

7

Jul-

08

Feb

-09

Sep

-09

Ap

r-10

No

v-1

0

Jun

-11

Jan

-12

Au

g-1

2

Mar-

13

Oct-

13

May-1

4

Dec-1

4

Jul-

15

Feb

-16

Sep

-16

Ap

r-17

No

v-1

7

Basis

Po

ints

Spread: 1-5Yr A-AAA Corporate vs Treasury

31


*BofA/Merrill Index (option adjusted spread vs. Treasury) *BofA/Merrill Index (option adjusted spread vs. Treasury)

AAA Rated ABS (R0A1) CMO Agency 0-3Yr PAC (CM1P)

Source: Bank of America Merrill Lynch Indices

12/31/2017

Current Spread is 37 Current Spread is 51

0

50

100

150

200

250

300

350

400

450

500

550

600

650

700

750

800

No

v-0

3

Jun

-04

Jan

-05

Au

g-0

5

Mar-

06

Oct-

06

May-0

7

Dec-0

7

Jul-

08

Feb

-09

Sep

-09

Ap

r-10

No

v-1

0

Jun

-11

Jan

-12

Au

g-1

2

Mar-

13

Oct-

13

May-1

4

Dec-1

4

Jul-

15

Feb

-16

Sep

-16

Ap

r-17

No

v-1

7

Basis

Po

ints

Spread: AAA Asset Backed vs Treasury

-150

-100

-50

0

50

100

150

200

250

300

No

v-0

3

Jun

-04

Jan

-05

Au

g-0

5

Mar-

06

Oct-

06

May-0

7

Dec-0

7

Jul-

08

Feb

-09

Sep

-09

Ap

r-10

No

v-1

0

Jun

-11

Jan

-12

Au

g-1

2

Mar-

13

Oct-

13

May-1

4

Dec-1

4

Jul-

15

Feb

-16

Sep

-16

Ap

r-17

No

v-1

7

Basis

Po

ints

Spread: 0-3Yr Agency CMO vs Treasury

32


########

Source: Bloomberg

12/31/2017

-0.5 -0.3 -0.3 -0.2

0.2 0.2 0.41.3 1.4 1.6 1.8

2.5

3.8 3.8

4.9 5.35.9

6.46.8

11.1

15.1

(3)

(1)

1

3

5

7

9

11

13

15

17

Perc

en

t

Selected Sector Quarterly Total Returns

33


########

Source: Bloomberg

12/31/2017

-9.1

0.3 0.7 0.7 1.32.5 2.6 2.9 3.6

4.96.5

9.2

12.8 12.9 13.2

16.3

21.7

25.1

28.1

31.532.7

(15)

(5)

5

15

25

35

45

Perc

en

t

Selected Sector Year-Over-YearTotal Returns

34


Sources: Bloomberg, FTN Main Street

12/31/2017

1.80

1.85

1.90

1.95

2.00

2.05

2.10

2.15

2.20

2.25

2.30

9/3

0/17

10/2/17

10/4

/17

10/6

/17

10/8

/17

10/10

/17

10/12

/17

10/14

/17

10/16

/17

10/18

/17

10/20

/17

10/22/17

10/24

/17

10/26

/17

10/28

/17

10/3

0/17

11/1/

17

11/3

/17

11/5/17

11/7/17

11/9

/17

11/11

/17

11/13

/17

11/15

/17

11/17

/17

11/19

/17

11/21/

17

11/23

/17

11/25

/17

11/27/17

11/29

/17

12/1/

17

12/3

/17

12/5/17

12/7/17

12/9

/17

12/11

/17

12/13

/17

12/15

/17

12/17

/17

12/19

/17

12/21/

17

12/23

/17

12/25

/17

12/27/17

12/29

/17

12/3

1/17

Perc

en

t

5 Year Treasury Note Yield

Concerns tax cuts phased-in over

time

Powell Nominated as

Fed Chair

FOMC members express concern over low unemployment

Fed Minutessuggests low

inflation concerns

Senate introduces Tax

Bill

Strong durable goods, higher stock prices, and higher probability of tax cuts, push yields higher

Yields rise on fears next Fed Chair will

be a Hawk

Consumer confidence slips

Probability of tax cuts increase

The Fed raises rates along with statement

on muted growth and inflation

5 Year Treasury hits six year high as tax bill

signed into law

35


########

Sources: Bloomberg, FTN Main Street

12/31/2017

22,300

22,500

22,700

22,900

23,100

23,300

23,500

23,700

23,900

24,100

24,300

24,500

24,700

24,900

9/3

0/17

10/2/17

10/4

/17

10/6

/17

10/8

/17

10/10

/17

10/12

/17

10/14

/17

10/16

/17

10/18

/17

10/20

/17

10/22/17

10/24

/17

10/26

/17

10/28

/17

10/3

0/17

11/1/

17

11/3

/17

11/5/17

11/7/17

11/9

/17

11/11

/17

11/13

/17

11/15

/17

11/17

/17

11/19

/17

11/21/

17

11/23

/17

11/25

/17

11/27/17

11/29

/17

12/1/

17

12/3

/17

12/5/17

12/7/17

12/9

/17

12/11

/17

12/13

/17

12/15

/17

12/17

/17

12/19

/17

12/21/

17

12/23

/17

12/25

/17

12/27/17

12/29

/17

12/3

1/17

Dow Jones Industrial Index

Kevin Warsh, critic of the Fed, rumored to be frontrunner for

Fed Chair

Apple beats estimates

Stronger retail sales despite

hurricanesInvestors view

FOMC minutes as "dovish"

ISM Manufacturing reaches 13 year high

Tax bill signed into law

Jay Powell confirmation

hearing implies lower financial

regulation Senate Passes tax bill

Financial stocks nudge Dow to all-time high

36

Disclosure

This report represents the opinions of FTN Financial Main Street Advisors, LLC and should not be considered predictive of any future market performance. Opinions are subject to change without notice. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered investment advice or a recommendation of any particular security, investment strategy, or investment product.

Although this information has been obtained from sources which we believe to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. This is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. All herein listed securities are subject to availability and change in price. Past performance is not indicative of future results, while changes in any assumptions may have a material effect on projected results. Ratings on all securities are subject to change.

FTN Financial Group, FTN Financial Capital Markets, FTN Financial Portfolio Advisors and FTN Financial Municipal Advisors are divisions of First Tennessee Bank National Association (FTB). FTN Financial Securities Corp (FTSC), FTN Financial Main Street Advisors, LLC, and FTN Financial Capital Assets Corporation are wholly owned subsidiaries of FTB. FTSC is a member of FINRA and SIPC—http://www.sipc.org/.

FTN Financial Municipal Advisors is a registered municipal advisor. FTN Financial Portfolio Advisors is a portfolio manager operating under the trust powers of FTB. FTN Financial Main Street Advisors, LLC is a registered investment advisor. None of the other FTN entities including, FTN Financial Group, FTN Financial Capital Markets, FTN Financial Securities Corp or FTN Financial Capital Assets Corporation are acting as your advisor and none owe a fiduciary duty under the securities laws to you, any municipal entity, or any obligated person with respect to, among other things, the information and material contained in this communication. Instead, these FTN entities are acting for their own interests. You should discuss any information or material contained in this communication with any and all internal or external advisors and experts that you deem appropriate before acting on this information or material.

FTN Financial Group, through FTB or its affiliates, offers investment products and services. Investment Products are not FDIC insured, have no bank guarantee and may lose value.

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