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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 />CieditRisk Interest Risk- MatuntyDuration in Years
<br />Investment Type Ratmg Agency Less Than 1 Ito 5 6 to 10 Ilto 15 -=15 Total
<br />U S Treasunes N/A N/A $ - $ - $ 2,031 $ - $ - $ 2,031
<br />U S Agencies AA+ SRP - 4,910,931 4,227,838 4,535,064 1,149 13,674,982
<br />MumcipalBonds Aa1-Ba2 Moodys 584,337 5,800,440 2,619,643 747,000 9,751,420
<br />MumcipalBonds A -AAA S&P 947,478 6,513,953 2,452,137 - 9,913,568
<br />Negotiable Certificates of Deposit N/R N/A 6,944,048 10,159,284 238,349 - 17,341,681
<br />Investment pools
<br />Minnesota MunicipalMoneyMarket N/R N/A 7,427,420 - - - - 7,427,420
<br />Totallnvestments $ 58,111,102
<br />N/ANotApphcable
<br />N/R Not Rated
<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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