Oscar Valdez Auditor-Controller/ Treasurer/Tax Collector San Bernardino County

1. Oscar ValdezAuditor-Controller/Treasurer/Tax CollectorSan Bernardino County AGA Inland Empire Chapter February 8, 2017

2. Oscar Valdez Oscar Valdez was appointed to the vacated elected position of Auditor- Controller/Treasurer/Tax Collector by the San Bernardino County Board of Supervisors on February 17, 2016. Prior to that appointment, he served as the Assistant Auditor-Controller/Treasurer/Tax Collector since May 2011, and was responsible for the management and oversight of the Auditor, Controller, Disbursements, and Treasurer divisions for the County of San Bernardino. Oscar has over 20 years of accounting, auditing, budgeting, finance, and management experience. Oscar began his career with San Bernardino County in 2000 at the Auditor-Controller-Recorder’s Office as an Internal Auditor II. He promoted through the ranks as General Accounting Supervisor, Accounting Manager, and Interim Chief Deputy Controller, where he directed activities for the General Accounting, Fund Accounting, Property Tax, Accounts Payable, and Payroll sections. Prior to his appointment to Assistant Auditor-Controller/Treasurer/Tax Collector, Oscar held the position of Chief Deputy Controller where he directed the daily activities for the General Accounting, Fund Accounting, Property Tax, Management Services, and Reimbursable Project sections. Prior to the County, Oscar was an Audit Supervisor for Vicenti, Lloyd & Stutzman LLP, planning and performing financial and compliance audits for a variety of areas, such as Colleges, School Districts K-12, and Non-Profit Organizations. From 1986-1991, Oscar served honorably with the United States Army as a Sergeant in the 782nd Maintenance Battalion, 82nd Airborne Division, and with the 758th Maintenance Company, attached to 18th Airborne Corps, in Operation Desert Storm. Mr. Valdez is a graduate of California State University, San Bernardino with a Bachelor of Science Degree in Business Administration with an emphasis in Accounting. 2

3. Treasury Organizational Chart Oscar Valdez Auditor-Controller/Treasurer/Tax Collector John Johnson Asst. Auditor-Controller/Treasurer/ Tax Collector Vacant Chief Deputy Treasurer Parth Bhatt Investment Officer Wendy Sieruga Treasury Manager Ian Capule Investment Analyst Isabel Morales Fiscal Assistant Lupe Perez Accounting Technician Robin Dixon Asst. Investment Officer Vacant Investment Analyst (Trainee) 3

4. MissionStatement To preserve the safety and liquidity of all investments within the County Investment Pool while obtaining the highest attainable yield within established credit guidelines through effective investing and management of banking services; to provide Pool participants with timely, accurate, understandable reports and information. 4

5. Treasury Division • Management of $5.043 billion* County Investment Pool • Approximately $56.6 billion in trades each year • AAAf/S1-rated by Fitch Ratings • Operates as County’s banker • Records County Investment Pool deposits • Clears all warrants issued by County and School Districts • Processed 850K warrants paid, 428K check deposits, 713K Image check deposit, 98K incoming ACH and wires, and 525K outgoing ACH and wire transactions (including payroll). • Invest County funds, school district operating funds, bond proceeds, and special district funds. • As guardian of the public’s money, we employ conservative County investment policies focused on the principles of safety, liquidity and yield. * FY15-16 average daily book value 5

6. Pool Participant Composition 6

7. Investment Pool Rated AAAf / S1 7

8. Investment Process 8

9. Investment Process • Daily Compliance and Reporting---Internal and PFM • Daily Monitoring of Credits and Ratings Actions • Quarterly Earnings Review and Tear-sheets on Credits • Bi-Weekly Analysis and Recommendations---PFM • Bi-Weekly Investment Strategy Meetings and Pre-Approval of Trades • Monthly Analysis and Statements with full pricing---PFM • Quarterly Audits for Interest Apportionment and Treasury Pool • Quarterly Stand-Alone Financial Reports for the Treasury Pool • Quarterly Review by Treasury Oversight Committee • All trades are documented for Strategy and Trading Practice Compliance 9

10. Investment Strategy 10

11. Investment Process 11

12. Market Conditions • Market is pricing in 3 rate hikes for 2017, as communicated by the Fed • Oil prices have stabilized near $50 per barrel after OPEC countries agreed to limit production • US economic data continues to show strong labor market conditions and increasing wage pressure • Yields have moved up across the yield curve since November, 2016 election in anticipation of tax reform, infrastructure spending and regulatory reform • US stock markets measured by the S&P, DOW and NASDAQ have all touched all time highs • US Dollar has strengthen to multi-year high against major currencies • Germany, France and Netherlands to hold elections in second half of 2017 12

13. 2 Year US Treasury Yields 13

14. Probability of Rate Hike 14

15. Market Conditions US Treasury Curve 15

16. Libor 16

17. Market Conditions Leading Economic Indicators YoY 17

18. Market Conditions Economic Growth 18

19. Market Conditions Unemployment Rate 19

20. Market Conditions Nonfarm Payrolls 20

21. Market Conditions Inflation 21

22. Market Conditions Consumer Confidence 22

23. Market Conditions US Nonfarm/Nonfinancial Capital Expenditures 23

24. Market Conditions Housing Starts & Permits 24

25. Market Conditions US Agency Issuance and Spreads 25

26. Market Conditions Corporate Issuance and Spreads 26

27. Market Conditions Potential Impact of the Election 27

28. Pool Characteristics

29. Pool Characteristics(12/31/2016) 29

30. Sector Distribution(12/31/2016)

31. Pool Characteristics(12/31/2016) 31

32. Pool Characteristics(12/31/2016) 32

33. Pool Characteristics(12/31/2016) 33

34. Cash Flows(12/31/2016) 34

35. Cash Flow Management 35

36. Pool Balance 36

37. Current Investment Strategy • Incrementally adding duration exposure using Treasuries to take advantage of higher yields, as Agency spreads are tight. • Generally avoiding adding convexity due to low vol’s and narrow spreads to bullets. Yield curve is still steep and offers roll-down • Continued focus on US, Canadian, Australian, & European issuers for short credit extensions. • A to AAA rated corporate spreads are still very tight, but adding exposure when attractive. • Taking advantage short floating rate debt in light of anticipated Fed rate increases. • Maintaining plenty of liquidity to while extending duration to take advantage of higher yields. 37

38. Investment Strategy 38

39. Investment Strategy 39

40. Investment Strategy 40

41. Investment Strategy 41

42. Investment Strategy 42

43. Investment Strategy 43

44. Recent Credit Changes • Added Bank of the West collateralized deposit account to increase cash holding capacity in money market instrument • Wells Fargo continues to be on hold in light of the consumer banking scandal 44

45. Near-Term Challenges • Changing main operating bank from BofA to Wells Fargo • Implementing new Enterprise Financial System (SAP) • Filling vacant Treasury positions: • Chief Deputy Treasurer • Credit Analyst/Trainee • Broker-Dealer RFI 45

46. Treasury ContactInformation Wendy Sieruga wendy.sieruga@atc.sbcounty.gov 909-382-3008 Parth Bhatt parth.bhatt@atc.sbcounty.gov 909-382-3033 46