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CITY OF RAMSEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 1995 Note 2. DEPOSITS AND INVESTMENTS A. Deposits In accordance with applicable Minnesota Statutes, the City maintains deposits at depository banks authorized by the City Council. Minnesota Statutes require that all deposits be protected by insurance, surety bond, or collateral. The market value of collateral pledged must equal 110% of the deposits not covered by insurance or bonds (140% in the case of mortgage- backed collateral). Authorized collateral includes the legal investments described below, as well as certain first mortgage notes and certain other State or local government obligations. Minnesota Statutes require that securities pledged as collateral be held in safekeeping by the City or in a financial institution other than that furnishing the collateral. Deposit balances at December 31, 1995, are as follows: Bank Deposits (checking accounts, savings accounts and certificates of deposit) Bank Carrying Balance Amount $ 1,598,394 $ 1,607,248 At December 31, 1995, all deposits were insured or collateralized by securities held by the City's agent in the City's name. B. Investments The City may also invest idle funds as authorized by Minnesota Statutes, as follows: * Direct obligations or obligations guaranteed by the United States or its agencies. * Shares of investment companies registered under the Federal Investment Company Act of 1940 and whose only investments are in securities described above. * General obligations of the State of Minnesota or any of its municipalities. * Bankers' acceptances of United States' banks eligible for purchase by the Federal Reserve System. * Commercial paper issued by United States' corporations or their Canadian subsidiaries, of the highest quality, and maturing in 270 days or less. * Repurchase or reverse purchase agreements with banks that are members of the Federal Reserve System with capitalization exceeding $10,000,000, a primary reporting dealer in U.S. government securities to the Federal Reserve Bank of New York, or certain Minnesota securities broker - dealers. * Futures contracts sold under authority of Minnesota Statutes Section 471.56, Subdivision 5. The City's investments are categorized, on the next page, to give an indication of the level of custodial credit risk assumed at year -end. Category 1 includes investments that are insured or registered or for which the securities are held by the City or its agent in the City's name Category 2 includes uninsured and unregistered investments for which the securities are held by the counterparty's trust department or agent in the City's name. Category 3 includes uninsured and unregistered investments for which the securities are held by the counterparty or by its trust department or agent but not in the City's name. —1.6—