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CITY OF LINO LAKES, MINNESOTA <br />NOTES TO FINANCIAL STATEMENTS <br />December 31, 1997 <br />Note 2 DEPOSITS AND INVESTMENTS <br />DEPOSITS <br />In accordance with Minnesota Statutes, the City maintains deposits at those depository banks authorized by <br />the City Council, all of which are members of the Federal Reserve System. <br />Minnesota Statutes require that all City deposits be protected by insurance, surety bond, or collateral. The <br />market value of collateral pledged must equal 110% of the deposits not covered by insurance or bonds <br />(140% in the case of mortgage notes pledged). <br />Authorized collateral includes the legal investments described below, as well as certain first mortgage <br />notes, and certain other state or local government obligations. Minnesota Statutes require that securities <br />pledged as collateral be held in safekeeping by the City Treasurer or in a fmancial institution other than <br />that furnishing the collateral. <br />At year -end, the carrying amount of the City's deposits was $1,033,858 and the bank balance was <br />$1,042,992. The entire bank balance was covered by Federal depository insurance or by collateral held by <br />the City's agent in the City's name. <br />INVESTMENTS <br />Minnesota Statutes authorize the City to invest in the following: <br />a) Direct obligations or obligations guaranteed by the United States or its agencies, its instrumentalities, <br />or organizations created by an act of congress, excluding mortgage- backed securities defined as high <br />risk. <br />b) Shares of investment companies registered under the Federal Investment Company Act of 1940 and <br />whose only investments are in securities described in (a) above, general obligation tax- exempt <br />securities, or repurchase or reverse repurchase agreements. <br />c) General obligations of the State of Minnesota or any of its municipalities. <br />d) Bankers acceptance of United States banks eligible for purchase by the Federal Reserve System. <br />e) Commercial paper issued by United States corporations or their Canadian subsidiaries, of the highest <br />quality, and maturing in 270 days or less. <br />f) Repurchase or reverse repurchase agreements with banks that are members of the Federal Reserve <br />System with capitalization exceeding $10,000,000; a primary reporting dealer in U.S. government <br />securities to the Federal Reserve Bank of New York; certain Minnesota securities broker - dealers; or, a <br />bank qualified as a depositor. <br />RENEW <br />39 <br />