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<br />4. Obligations of states, agencies, counties, cities, and other <br />political subdivisions of any state rated as to investment quality <br />by a nationally recognized investment rating firm not less than A or <br />its equivalent, not to exceed two years to the stated maturity; <br /> <br />5. Certificates of Deposit, not to exceed two years to the stated <br />maturity, issued by state and national banks domiciled in this state <br />that are: <br /> <br />a. Guaranteed or insured by the Federal Deposit Insurance <br />Corporation, or its successor; or <br /> <br />b. Secured by obligations that are described by Subdivision <br />(1) - (4) of this subsection, which are intended to include all <br />direct agency or instrumentality issued mortgage backed <br />securities rated AAA by a nationally recognized rating agency; <br />and <br /> <br />6. Fully collateralized direct repurchase agreements having a defined <br />termination date, secured by obligations described by subdivision <br />(1) of this subsection, pledged with a third party selected or <br />approved by the City of San Marcos, and placed through a primary <br />government securities dealer, as defined by the Federal Reserve, or <br />a bank domiciled in this state, not to exceed two years to the <br />stated maturity; and <br /> <br />7. Investment Pools as provided for in Chapter 2256, Public Funds <br />Investment Act, of the Texas Government Code. <br /> <br />B. Criteria for Selection of Financial Intermediaries: <br /> <br />Although the City's policies for the purchase of investment securities are <br />designed to ensure complete safety, accompanied by appropriate liquidity <br />and competitive yields, the "providers" of such securities must also meet <br />specific financial and operational standards. <br /> <br />The City has no desire to "test" the FDIC insurance program, nor does it <br />wish to have to establish its legal right to securities held by <br />financially insolvent brokers or securities dealers. <br /> <br />The City does not choose to do business with "marginal" or financially <br />weak institutions. <br /> <br />Therefore financial intermediaries shall be subject to the following types <br />of selection criteria: <br /> <br />1. Commercial Banks: <br /> <br />Deposits of City funds into commercial banks may only be made with <br />institutions that possess the overall financial strength, <br />capitalization, and liquidity to reasonably ensure the safety and <br />availability of such monies. To assess the overall financial <br />strength of potential depositories, the City will utilize third- <br />party rating agencies to perform periodic reviews of various <br />commercial banks, relying upon their reports to determine the <br />appropriateness of the depository. Currently, the City uses the <br />services of Prudent Man Analysis, Inc. (PMA) to rate the strength of <br />the commercial banks with which the City does business. In as much <br />as PMA utilizes overall ratings of 1 through 5 .( 1 being strongest <br />and 5 being weakest), the City's current policy is to seek <br />depositories with a PMA rating of 1 or 2. Banks with ratings of 3 <br /> <br />City of San Marcos Cash Management and Investment Policy <br />Page 5 of 24 <br />