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NOTE 2—DEPOSITS AND INVESTMENTS (CONTINUED)
<br /> Minnesota Statutes require that all deposits be protected by federal deposit insurance,corporate surety bond,
<br /> or collateral. The market value of collateral pledged must equal 110%of the deposits not covered by federal
<br /> deposit insurance or corporate surety bonds. Authorized collateral includes treasury bills,notes,and bonds;
<br /> issues of U.S.government agencies;general obligations rated"A"or better;revenue obligations rated"AA"
<br /> or better; irrevocable standard letters of credit issued by the Federal Home Loan Bank; and certificates of
<br /> deposit. Minnesota Statutes require that securities pledged as collateral be held in safekeeping in a
<br /> restricted account at the Federal Reserve Bank or in an account at a trust department of a commercial bank
<br /> or other financial institution that is not owned or controlled by the financial institution furnishing the
<br /> collateral. The City has no additional deposit policies addressing custodial credit risk.
<br /> At year end, the carrying amount of the City's deposits was $5,118,394 while the balance on the bank
<br /> records was $6,053,430. At December 31, 2015, all deposits were fully covered by federal depository
<br /> insurance, surety bonds,or by collateral held by the City's agent in the City's name.
<br /> C. Investments
<br /> The City has the following investments at year end:
<br /> Credit Risk hterestRisk-Maturity Duration inYears
<br /> hvestment Type Rating Agency Less Than 1 Ito 5 6 to 10 11 to 15 >15 Total
<br /> U.S.Treasuries N/A N/A $ $ - $ 2,031 $ - $ - $ 2,031
<br /> U.S.Agencies AA+ S&P 4,910,931 4,227,838 4,535,064 1,149 13,674,982
<br /> MunicipalBonds Aal-Ba2 Moodys 584,337 5,800,440 2,619,643 747,000 - 9,751,420
<br /> MunicipalBonds A-AAA S&P 947,478 6,513,953 2,452,137 - - 9,913,568
<br /> Negotiable Certificates ofDeposit N/R N/A 6,944,048 10,159,284 238,349 17,341,681
<br /> bvestmentpools
<br /> MmnesotaMunicipalMoneyMarket N/R N/A 7,427,420 - - 7,427,420
<br /> Totallnvestments $ 58,111,102
<br /> N/A Not Applicable
<br /> N/R Not Ra to d
<br /> Investments are subject to various risks,the following of which are considered the most significant:
<br /> Custodial credit risk—For investments,this is the risk that in the event of a failure of the counterparty
<br /> to an investment transaction(typically a broker-dealer)the City would not be able to recover the value
<br /> of its investments or collateral securities that are in the possession of an outside party. The City does
<br /> not have a formal investment policy addressing this risk,but typically limits its exposure by purchasing
<br /> insured or registered investments,or by the control of who holds the securities.
<br /> Credit risk—This is the risk that an issuer or other counterparty to an investment will not fulfill its
<br /> obligations. Minnesota Statutes limit the City's investments to direct obligations or obligations
<br /> guaranteed by the United States or its agencies; general obligations rated "A" or better; revenue
<br /> obligations rated"AA" or better; general obligations of the Minnesota Housing Finance Agency rated
<br /> "A"or better;commercial paper issued by the United States corporations or their Canadian subsidiaries,
<br /> rated of the highest quality category by at least two nationally recognized rating agencies,and maturing
<br /> in 270 days or less; time deposits that are fully insured by the Federal Deposit Insurance Corporation
<br /> or bankers acceptances of the United States banks and Guaranteed Investment Contracts guaranteed by
<br /> a United States commercial bank or domestic branch of a foreign bank, or a United States insurance
<br /> company,or their Canadian subsidiary,and with a credit quality in one of the top two highest categories
<br /> by a nationally recognized rating agency. The City's investment policies do not further address credit
<br /> risk.
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