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NOTE 3—DEPOSITS AND INVESTMENTS <br /> A. Components of Cash and Investments <br /> Cash and investments at year-end consist of the following: <br /> Fair Value Interest Risk— <br /> Credit Risk Measurements Maturity Duration in Years <br /> Investment Type Rating Agency Using Less Than 1 1 to 5 Total <br /> U.S.agency securities <br /> Federal Home Loan Bank notes and bonds AA S&P Level 2 $ 8,265,303 $ 486,015 $ 8,751,318 <br /> Negotiable certificates of deposit N/R N/A Level 2 724,634 2,209,512 2,934,146 <br /> $ 8,989,937 $ 2,695,527 11,685,464 <br /> Investment pools/mutual funds <br /> 4M Fund AAA S&P Amortized Cost 9,286,630 <br /> Total investments 20,972,094 <br /> Deposits 277,028 <br /> Change funds 483 <br /> Total cash and investments $ 21,249,605 <br /> N/R—Not Rated <br /> N/A—Not Applicable <br /> The Minnesota Municipal Money Market(4M Fund)is an external investment pool not registered with the <br /> Securities and Exchange Commission (SEC) that follows the same regulatory rules of the SEC. The fair <br /> value of the position in the pool is the same as the value of the pool shares,which is based on an amortized <br /> cost method that approximates fair value. The 4M Fund is sponsored by the League of Minnesota Cities. <br /> Investments are purchased and regulated according to Minnesota Statutes. For this investment pool, there <br /> are no unfunded commitments,redemption frequency is daily, and there is no redemption notice required <br /> for the liquid class;the redemption notice period is 14 days for the Plus Class. <br /> B. Deposits <br /> In accordance with applicable Minnesota Statutes, the City maintains deposits at depository banks <br /> authorized by the City Council, including checking accounts and certificates of deposit. <br /> The following is considered the most significant risk associated with deposits: <br /> Custodial Credit Risk—In the case of deposits,this is the risk that in the event of a bank failure, the <br /> City's deposits may be lost. <br /> Minnesota Statutes require that all deposits be protected by federal deposit insurance, corporate surety <br /> bond, or collateral. The fair value of collateral pledged must equal 110 percent of the deposits not <br /> covered by federal deposit insurance or corporate surety bonds.Authorized collateral includes treasury <br /> bills, notes, and bonds; issues of U.S. government agencies; general obligations rated "A" or better; <br /> revenue obligations rated "AA" or better; irrevocable standard letters of credit issued by the Federal <br /> Home Loan Bank; and certificates of deposit. Minnesota Statutes require that securities pledged as <br /> collateral be held in safekeeping in a restricted account at the Federal Reserve Bank or in an account at <br /> a trust department of a commercial bank or other financial institution that is not owned or controlled <br /> by the financial institution furnishing the collateral. The City has no additional deposit policies <br /> addressing custodial credit risk. <br /> At year-end, the carrying and balance on the bank records of the City's deposits was $277,028. As of <br /> December 31, 2025, all deposits were fully covered by federal deposit insurance, surety bonds, or by <br /> collateral held by the City's agent in the City's name. <br /> -43- <br />