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CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS ❑ECEMBER 31, 2019 NOTE 2. DEPOSIT AND INVESTMENT (CONTINUED) A. Deposits (Continued) Custodial Credit Risk — Custodial credit risk for deposits is the risk that in the event of a bank. failure, the City's. deposits may not be. returned. to it. The. City does not have a deposit policy for custodial credit risk and. follows Minnesota Statutes for deposits. 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 corporate surety bonds. Authorized .collateral include:. U.S. government treasury bills, notes, or bonds; issues .of a U.S. government agency; general obligations of a state or local government rated "A" or better; revenue obligations of a state or local government rated "AA". or better; irrevocable standby letter of .credit issued by a Federal Home Loan Bank; and time deposits insured by a. federal agency. Minnesota Statutes requiresecurities 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 not owned or controlled by the depository. At December 31, 2019, the bank balance of the City's deposits was $632,7.18: the entire amount of which was insured or collateralized. 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 received the highest credit rating, are rated in one. of the two `highest rating categories by a statistical rating agency and all of the investments have a finial. maturity of 13 months or leas. ■ General obligations rated "A" or better; revenue obligations rated "AA" or better. • General obligations of the Minnesota Housing Finance Agency rate "A" or better. • Bankers' acceptances of United States banks eligible for purchase by the Federal Reserve System. • Commercial paper issued by United States banks corporations or their Canadian subsidiaries, of highest quality category. by a least two nationally recognized rating agencies, and maturing in .270 days or less. Guaranteed investment contracts guaranteed by United States commercial banks or domestic branches. of foreign banks or United States insurance. companies if similar debt obligations of the issuer or the collateral' pledged by the issuer is in the top two rating categories. (21)