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CITY OF RAMSEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,1997 Note 2. DEPOSITS AND INVESTMENTS A 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. ' Authorized collateral includes treasury bills, notes and bonds; issues of U.S. Government agencies; general obligations rated "A" or better; revenue obligations rated "AA" or better; irrevocable standazd letters of credit issued by the Federal Home Loan Bond; and Certificates of Deposit. Minnesota Statutes require that securities ' pledged as collateral be held in safekeeping in a restricted account at the federal reserve bank or in an account at a trust department of a commercial bank or other financial institution that is not owned or controlled by the financial institution furnishing the collateral. At yeaz-end, the carrying amount of the City's deposits was $3,424,367, while the balance on the bank records was $3,407,062. At December 31, 1997, 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 obligations guazanteed by the United States or its agencies; shares of investment companies registered under the Federal Investment Company Act of 1940 and receives the highest credit rating, is rated in one of the two highest rating categories by a statistical rating agency, and all of the investments have a final maturity of thirteen months or less; general obligations rated "A" or better; revenue obligations rated "AA" or better; general obligations of the Minnesota Housing Finance Agency rated "A" or better, 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 category by at least two nationally recognized rating agencies, and maturing in 270 days or less; Guazanteed Investment Contracts guaranteed by a United States commercial bank, domestic branch of a foreign bank, or a United States insurance company, and with a credit quality in one ' of the top two highest categories; repurchase or reverse purchase agreements and securities lending agreements with financial institutions qualified as a "depository" by the government entity, 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. The City's investments aze categorized, on the following 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 counteiparty'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. ' -16-