VILLAGE OF GRAFTON NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2016 NOTE III - DETAILED NOTES ON ALL FUNDS (cont.) A. DEPOSITS AND INVESTMENTS (cont.) Bank accounts are also insured by the State Deposit Guarantee Fund in the amount of $400,000. However, due to the nature of this fund, recovery of material principal losses may not be significant to individual municipalities. This coverage has not been considered in computing custodial credit risk. The village categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. The valuation methods for recurring fair value measurements are as follows:  Market Value December 31, 2016 Investment Type Level 1 Level 2 Level 3 Total US agencies $ - $ 2,715,636 $ - $ 2,715,636 Certificates of deposit - negotiable - 1,589,613 - 1,589,613 US treasuries 1,994,624 - - 1,994,624 Repurchase agreements - US agencies 31,811 - - 31,811 Total $ 2,026,435 $ 4,305,249 $ - $ 6,331,684 Custodial Credit Risk Deposits Custodial credit risk is the risk that in the event of a financial institution failure, the village's deposits may not be returned to the village. As of December 31, 2016, $8,800,600 of the village's total bank balances were exposed to custodial credit risk as follows: Uninsured and uncollateralized $ 2,032,809 Uninsured and collateral held by the pledging financial institution 6,767,791 Total $ 8,800,600 Investments For an investment, custodial credit risk is the risk that, in the event of the failure of the counterparty, the village will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. 61