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that controls a bank eligible to be a custodian under Section 2257.041. (8) "Public agency" means a state or a political or governmental entity, agency, instrumentality, or subdivision of a state, including a municipality, an institution of higher education, as defined by Section 61.003, Education Code, a junior college, a district created under Article XVI, Section 59, of the Texas Constitution, and a public hospital. (9) "Public entity" means a public agency in this state, but does not include an institution of higher education as defined by Section 61.003, Education Code. (10) "State agency" means a public entity that: (A) has authority that is not limited to a geographic portion of the state; and (B) was created by the constitution or a statute. (11) "Trust receipt" means evidence of receipt, identification, and recording, including: (A) a physical controlled trust receipt; or (B) a written or electronically transmitted advice of transaction. 2257.25 High Risk Mortgage Security (a) For purposes of this chapter, a fixed rate colIateralized mortgage obligation is a high-risk mortgage security if the security: (1) has an average life sensitivity with a weighted average life that: (A) extends by more than four years, assuming an immediate and sustained parallel shift in the yield curve of plus 300 basis points; or (B) shortens by more than six years, assuming an immediate and sustained parallel shift in the yield curve of minus 300 basis points; and, (2) is price sensitive; that is, the estimated change in the price of the mortgage derivative product is more than 17 percent, because of an immediate and sustained parallel shift in the yield curve ofplus or minus 300 basis points. (b) For proposes of this chapter, a floating rate collateralized mortgage obligation is a high- risk mortgage security if the security: (1) bears an interest rate that is equal to the contractual cap on the instrument; or (2) is price sensitive; that is, the estimated change in the price of the mortgage derivative product is more than 17 percent, because of an immediate and sustained parallel shift in the yield curve or plus or minus 300 basis points. 2257.003. Chapter Not Applicable to Deferred Compensation Plans This Chapter does not apply to funds that a public entity maintains or administers under a deferred compensation plan, the federal income tax treatment of which is governed by Section 401(k) or 457 of the Internal Revenue Code of 1986 (26 U.S.C. Sections 401 (k) and 457). 2257.004. Conflict with Other Law This chapter prevails over any other law relating to security for deposit of public funds to the extent of any conflict. 2257.005 Contract Governs Legal Action A legal action brought by or against a public entity that arises out of or in connection with the duties of a depository, custodian, or permitted institution under this chapter must be brought and maintained as provided by the contract with the public entity. City of San Marcos Investment Policy Page 34