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CITY OF ORONO
<br />NOTES TO BASIC FINANCIAL STATEMENTS
<br />DECEMBER 31, 2015
<br />
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<br />(37)
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<br />NOTE 2 DEPOSITS AND INVESTMENTS (CONTINUED)
<br />B. Deposits (Continued)
<br />
<br />Custodial Credit Risk (Continued)
<br />
<br />The City's investment policies further limit depositories to those located in the State of
<br />Minnesota, and must have a minimum capital and surplus of $10,000,000 and a net
<br />worth to asset ratio minimum of 5%, except for the City's main checking account at the
<br />First National Bank of the Lakes, Navarre.
<br />
<br />At year-end, the carrying amount of the City's deposits was ($135,214) while the balance
<br />on the bank records was $145,752. At December 31, 2015, all deposits were fully
<br />covered by federal depository insurance, surety bonds, or by collateral held by the City's
<br />agent in the City's name.
<br />
<br />C. Investments
<br />The City has the following investments at year-end:
<br />
<br />Total
<br />Fair Value Less than 1 1-5 More than 5 Rating Agency
<br />US Agencies:
<br />Federal Home Loan 1,871,250$ -$ 1,122,525$ 748,725$ Aaa/AA+ Moody's/S&P
<br />Federal National Mortgage 1,249,921 - 996,400 253,521 Aaa/AA+ Moody's/S&P
<br />Negotiable Certificates of Deposit 10,831,079 2,731,557 7,112,297 987,225 N/R N/A
<br />Municipal Bonds 554,040 - 554,040 - AA/BBB Moody's/S&P
<br />Money Market 1,020,312 - - - Aa2/AA- Moody's/S&P
<br />Federal Farm Credit Bank 694,600 - - 694,600 Aa2/AA- Moody's/S&P
<br />MN Municipal Money Market (4M) 3,810,250 3,810,250 - - N/R N/A
<br />20,031,452$ 6,541,807$ 9,785,262$ 2,684,071$
<br />N/R indicates "not rated"
<br />N/A indicates "not applicable"
<br />Interest - Risk: Maturity in Years Credit Risk
<br />
<br />Investments are subject to various risks, the following of which are considered the most
<br />significant:
<br />
<br />Custodial Credit Risk – For investments, this is the risk that in the event of a failure of
<br />the counterparty to an investment transaction (typically a broker-dealer) the City would
<br />not be able to recover the value of its investments or collateral securities that are in the
<br />possession of an outside party. The City typically limits its exposure by purchasing
<br />insured or registered investments, or by the control of who holds the securities. City
<br />investment policies require that security/broker/dealers be restricted to those regulated
<br />by the Securities and Exchange Commission, have a minimum capital of $40,000,000
<br />and may include "primary" dealers or regional dealers, and are located in Minnesota.
<br />The City limits the amount of investments with a specific dealer to 30% of the investment
<br />portfolio.
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