Seattle City Light 2016 ANNUAL REPORT | Audited Financial Statements 41 THE CITY OF SEATTLE—CITY LIGHT DEPARTMENT NOTES TO FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 - 41 - ● Commercial paper, bank and corporate notes combined may not exceed 25 % of the total portfolio. ● No single issuer of commercial paper may exceed 3% of the total portfolio. ● No single issuer of bank or corporate notes rated AA or better by all rating agencies may exceed 3% of the total portfolio. ● No single issuer of bank or corporate notes rated single A by all rating agencies may exceed 2% of the total portfolio. ● Investments in a single credit issuer, consisting of commercial paper, bank and corporate notes combined, may not exceed 3% of the total portfolio. The City subscribes to asset-backed commercial paper research from Moody’s Investors Service and public finance and non-U.S. bank research from Fitch Ratings. The City conducts internal due diligence of commercial paper, bank note and municipal issuers, and maintains an “approved list” of issuers. Finally, the City monitors the credit worthiness of its investments over time until they mature, or are potentially sold. Concentration Risk- Concentration Risk is the risk of loss attributed to the magnitude of investments in a single issuer. The City manages concentration risk by limiting its investments in any one issuer in accordance with the City’s investment policy and state statutes. State statute and the City’s Statement of Investment Policy do not stipulate concentration limits for holdings of U.S. Government or U.S. Government Agency Obligations. However, as noted under credit risk, the City’s Statement of Investment Policy outlines maximum percentage allocations for municipal securities, commercial paper as well as bank notes and corporate notes. The City’s investments in single issuers, including those maturing less than one year from date of purchase, and amounting to 5% or more of the total portfolio as of December 31, 2016, and 2015, are shown in the following table. ($ in millions) Issuer Fair Value Percent of Total Investments Fair Value Percent of Total Investments Federal Farm Credit Bank/ Federal Home Loan Bank 329.9 $ 19% 238.2 $ 14% Municipal Bonds 306.5 17% - - Federal National Mortgage Association 302.4 17% 243.7 14% United States Treasury 287.8 16% - - Federal Home Loan Mortgage Corp. 182.8 10% 220.6 13% 1,409.4 $ 79% 702.5 $ 41% 2016 2015 Custodial Credit Risk – Investments- Custodial credit risk for investments is the risk that, in the event of failure of the counterparty, the City will not have access to, or be able to recover, its investments or collateral securities that are in the possession of an outside party. The City mitigates custodial credit risk for its investments by having its investment securities held by the City’s contractual custodial agent. In April 2016, the City transferred its custody relationship from Bank of New York (BNY) Mellon to Wells