CITY OF LEVELLAND REQUEST FOR PROPOSALS DEPOSITORY SERVICES

The City is seeking to contract with a qualified local financial institution to provide banking depository services for the City of Levelland. Sealed proposals must be received in the office of the City Secretary, City of Levelland, P.O. Box 1010, 1709 Avenue H, Levelland, Texas 79336, by no later than 11:00 a.m. on June 11, 2014. One original and two copies of the proposal must be in a sealed envelope marked on the outside with "Do not Open in Mail Room: Depository Application Enclosed". A copy of the Request for “Depository Application” Proposals can be obtained on the City’s website at www.levellandtexas.org or by contacting Dan Downs at (806) 894-0113. The City reserves the right to negotiate with any and all local financial institutions that submit a Depository Application. The City of Levelland is an Affirmative Action/Equal Opportunity Employer.

CITY OF LEVELLAND TEXAS

DEPOSITORY APPLICATION

April 2014

1709 Avenue H Levelland, Texas 79336 (806) 894-0113

TABLE OF CONTENTS

I. Introduction

II. Calendar of Events

III. Criteria for Evaluation

IV. Account Activities A. Number of Accounts B. Services and Volumes C. Collateral Required D. Daily Access to Transactions and Balances E. Statements F. Method of Payment and Reporting G. Availability of Funds H. Interest Rate I. Payroll Tax Remittances J. Research Requests K. Bank Errors L. Check Receipt Processing (NSFs)

V. Collateral Requirements for Public Funds A. Grant of Security Interest B. Authorized Collateral C. Substitutions and Withdrawals D. Designation of Custodian: Permitted Institution E. Default and Remedies F. Events of Default G. Initial Delivery of Collateral H. Official Financial Institution Board Action Required

VI. Overdraft Provisions

VII. Other Stipulations A. Regulation Notices B. Wire Transfers C. Agreement Provisions D. Right to Audit Records E. Financial Reports F. Term of the Depository and Collateral Agreement

VIII. Proposal Requirements A. Date, Time, Location B. Responding to this Application C. Additional Information D. Right to Reject Applications E. Minimum Qualification F. Questions Regarding Depository Application G. Transfer of Funds H. Contact with Other City Officials or Employees I. Unit Prices and Extension Discrepancies J. Use of Quantity Estimates K. Confidentiality of Documents L. Reimbursements

IX. Other Miscellaneous A. Periodic Review B. Depository Application and Resulting Agreement C. Proposal Advertisement D. Designating Officials E. Texas Ethics Commission Conflict of Interest Questionnaire

X. Depository Application Submitted By (Must be completed by Proposer)

EXHIBITS 1 Transactions 2 Average Monthly Collected Bank Balances 3 City Investment Policy (Refer to Separate Document File)

APPENDIX 1 Other Requests for Information

ATTACHMENTS - (To Be Provided By Proposer)

A. Banking Service Charges B. Sample of Monthly Account Analysis Statement C. Availability of Funds Schedule D. Interest Rate(s) Offer E. Proposed Designated Custodian F. Overdraft Provisions G. Financial Information H. Designated Financial Institution Officials I. Conflict of Interest Questionnaire J. Balance Reporting K. Direct Payment for Utilities Charges L. Check Imaging M. One-Time Setup Fee and Software Fee N. Positive Pay and Complete Reconciliation O. Other Bank Services Available P. Controlled Disbursement Q. Employee Bank Benefits R. Confirmation of City Investment Policy being Read I. INTRODUCTION

The City of Levelland (the "City") is requesting a Depository Application from eligible qualified financial institutions to serve as the Depository Financial Institution to the City acting for itself and on behalf of the Component Units of Levelland Economic Development Corporation (the “LEDC”) and the Levelland Community Development Corporation (the “LCDC”) to provide the banking services as described herein. The services provided are to be in accordance with the Depository Application and Attachments, which would then become part of the final executed Financial Institution Depository and Collateral Agreement (the “Agreement”) between the City and the selected financial institution.

The philosophy incorporated into this Depository Application is to solicit proposals for banking services based on current activity and transaction volumes. Bank Depository Service requirements are guided by the City Investment Policy, wherein the primary objectives in order of importance are (1) Safety, (2) Liquidity, and (3) Return on Investment. Therefore the City desires to safely invest its funds, maintain liquidity, and receive interest earnings as authorized by the City Investment Policy and as permitted by state law. Therefore the net cost/benefit of the relationship with the City will be an important element of consideration. In connection with the City managing its own investments in accordance with the City Investment Policy (Exhibit 3), financial institutions desiring to respond to this Depository Application should be cognizant that the City reserves the right to withdraw, from time to time, any amount of City funds on deposit in any City account and invest those funds in other places in accordance with the City's investment policy.

The new Depository and Collateral Agreement contract term will be for the period of July 1, 2014, through June 30, 2017, with a provision for two one-year continuation options under the same terms and conditions of the Agreement, subject to acceptance by the mutual consent of both parties. The Agreement term also provides for an extension period not to exceed ninety (90) days for the transition to a new Depository Financial Institution at the end of the term.

The Depository Financial Institution is an important component of the treasury and cash management system of the City. From this perspective, the City is seeking a financial institution that is:

~ continuously meeting the requirements of Chapter 105 of the Texas Government Code; ~ financially sound and willing to properly secure the City’s deposit funds; ~ capable of providing the services required by the City at the least possible cost; ~ willing to provide a fair rate of interest income on deposits; and ~ willing to be attentive and responsive to the City's needs.

This Depository Application is intended to serve as the OFFICIAL PROPOSAL FORM and then as the framework for the Financial Institution Depository and Collateral Agreement (the “Agreement”). Therefore any exceptions, conditions, or qualifications to the provisions of the City's specifications or requirements herein must be clearly identified as such, with the reasons therefore, and alternate language by proposer, if any, clearly stated and inserted in the appropriate place in the proposal submission. Items and matters not explicitly excepted in this manner will be deemed to be in conformance with the City's specifications and requirements. The Depository Application also requests certain information to be attached and specifically labeled as formal Attachments hereto. Proposals must be complete, address all aspects of the Depository Application, and include all requested information to receive full consideration by the City in the selection process. The requested information is stated in the Table of Contents under "ATTACHMENTS (To Be Provided by Proposer)". The evaluation of the Proposer's depository application will also be based on these responses. Please complete Section X. “Depository Application Submitted By”.

The City has designated the City Finance Director as coordinator and contact person through the proposal process. The City desires to enter into an Agreement of mutual party benefit and will be happy to answer all questions pertaining to this Depository Application. Please note the following section of the calendar of events for the dates and times of key elements in the proposal procedure.

II. CALENDAR OF EVENTS

TARGET DATE IN 2014 DESCRIPTION OF EVENTS

Tuesday, May 21 Depository Services Application distributed to prospective financial institutions

Wednesday & Sunday, May 21 Advertise the Bank Depository Services Notice to Proposers in the local & 24 News Press

Wednesday, June 11 Deadline for bid submission from interested financial institutions by no later than 11:00 AM

Wednesday, June 18 Review proposals and discuss recommendations with City Staff

Monday, June 23 Council presentation for the award of the Financial Institution Depository Services and Collateral Agreement.

Tuesday, June 24 Proposer Notification of the Financial Institution Depository Services and Collateral Agreement awarded

Monday, June 30 Execute Agreement; begin implementation

Tuesday, July 1 New Financial Institution Depository Services and Collateral Agreement period begins. (Prior contract provides an extension period of 90 days for transition to a new at the end of the April 30, 2014 term)

III. CRITERIA FOR EVALUATION

The City staff will carefully review the submitted applications. The City staffs’ recommendation to the City Council will be based on the depository application determined to be most advantageous to the City. The evaluation of the applications will be made based on the following criteria: ~ Reputation of proposer and quality of services; ~ Ability to perform and provide the required and requested services; ~ Cost of banking services; ~ Completeness and agreement to points outlined in the Depository Application; ~ Funds availability; ~ Interest rates paid on interest bearing accounts; ~ Earnings credit on average available account balances; ~ Financial strength and stability; ~ Ability to secure the City’s public funds; ~ Convenience of location; ~ Previous service/relationship with City and its related entities. (The City Staff and City Council will determine what weight to attribute to each of these criteria.)

IV. ACCOUNT ACTIVITIES

A. Number of Accounts. At this time the City maintains two (2) bank accounts, the LEDC maintains two (2) bank accounts, and the LCDC maintains one (1) bank account, all are interest bearing, as set forth in Exhibit 1. The number of accounts required is contingent to change in the future based on requirements of outside government agencies or contracts or possible new activities within the City or the Component Units.

The City Pooled Cash Fund Account serves as the City's master account into which all deposits will be made including electronic funds transfers. The City Pooled Cash Fund Account is utilized to issue payments to vendors, wherein the City issues an average of 400 checks plus other types of disbursements per month for an estimated $1,200,000 of disbursements per month through this account which includes payroll payments. However, this excludes disbursements for bi-annual debt service payments and any large capital project check payments, if any. The City has a bi-weekly payroll with an average of 100 employees representing an average monthly amount of $250,000 from the Pooled Cash Fund Account. The City offers its employees direct payroll deposit and approximately 80 employees utilize this service which represents approximately $200,000 of monthly payroll dollars.

The other City account for Federal Confiscated Forfeitures has almost no volume but is required by federal law to be a separate bank account.

The LEDC Operations account has deposits that average $85,000 per month. It has disbursements that average about $75,000 per month. This represents about 15 checks being issued per month, plus one electronic transfer per month to its other bank account in the amount of $27,000. Its other bank account is the LEDC Debt Reserve account which receives the single deposit of $27.000 per month as previously noted and disburses virtually all the funds collected in two electronic disbursements a year for debt service payments.

The LCDC Operations account normally receives one electronic deposit per month that averages about $38,000. It will be making primarily two electronic disbursements a year for an overall total of about $235,000. It will occasionally issue a check to make other payments. However during the next 12 months it will be making additional disbursements during the construction of the City’s Oxy Sports Park Complex.

The City reserves the right to open or close any number or type of deposit accounts as it deems necessary through the term of the Agreement. Fees are fixed for the entire contract period. No additional setup fees or software fees will be charged if the Depository financial institution is merged or is acquired by another financial institution.

B. Services and Volumes. The financial institution shall faithfully perform all of its duties and obligations required by the laws of the State of Texas for public funds depositories and shall upon presentation pay all checks and other debits drawn on it against collected funds on deposits. Services made available to the City include any services that are required to properly process various types and amounts of receipts and disbursements for the above interest bearing accounts. Exhibits 1 and 2 have also been included herein to provide additional banking information regarding transaction volumes and dollar amounts to assist in responding to this Depository Application. Bank Service Requirements include, but are not limited to the items identified in Attachment A, Banking Service Charges, to be completed by the financial institution. Other Bank Services that should also be made available to the City are also indentified in Attachment A. If new services become available and are provided during the period of the Agreement, they will charged at a mutually agreed upon rate. The City requires check-cashing services for City checks at no charge to the City, or City vendors, or its employees. There are also a number of requests for information to be provided to the City by the financial institution as listed in the Appendix hereto.

C. Collateral Required. The balances maintained in all accounts and account deposit types will be collateralized in the same manner and under the same stipulations as outlined in the Collateral Requirements for Public Funds section herein. The maximum ledger balances are estimated not to exceed $12,000,000 in the aggregate for the City. The maximum ledger balances for LEDC and LCDC are estimated not to exceed $1,000,000 for each entity, respectively. See Exhibit II for the average collected balances during calendar year 2013.

D. Daily Access to Transactions and Balances. For cash management control the City requires daily access to cash transactions and balance reporting on its bank accounts to obtain detail transaction and balance information. This would be accomplished by an Internet-based online reporting system which will provide the daily ending ledger balances, including all daily debit and credit transactions and ending collected balances from the prior day for all accounts., a detail of the prior day's debits and credits, one day float amount, two day float amount, total credits, total debits, and detail debits and credits, current day disbursements, including check numbers (if available), and current day incoming or outgoing, wires, and current day ACH. The system shall also allow online inter-and intra-bank transfers, ACH, stop payment, and wire transfer origination instruction processes with user-defined security requirements. As Attachment J, please confirm the capability of your financial institution to provide this service with samples of the reports, the options available, and the pricing thereof.

E. Bank Statements. Bank statements are to be rendered within five (5) working days after the close of the calendar month. The statements are to include debits and credits made on the last day of the period and the item details. Electronic downloads and hard copies are required by the City. At this time the City is receiving the check imaging within the monthly bank statements. Please confirm the capability of your Bank to provide check imaging services, the options available, and the pricing thereof in Attachment L.

F. Method of Payment and Reporting. If the financial institution intends to charge banking service fees for the required banking services provided, as identified in Attachment A, then the City has the right to choose whether fees are paid on a fee or compensating balance basis dependent on the rate available. Interest from interest bearing accounts will not be charged through the account analysis for this purpose.

1. On a compensating balance basis, the financial institution agrees to offset monthly service fees against its customary or agreed upon earnings credit rate for balances in the City accounts. The City and the financial institution will settle net insufficiencies in earnings credits, or excess earning credits from excess balances, on a semi-annual basis calculated on the anniversary date of the Agreement. If sweep accounts are instituted for the City’s accounts as part of the Agreement, the balances in these accounts will be swept to the compensating balance on a nightly basis on a compensating balance basis. 2. On a fee basis the financial institution will be compensated for any and all services rendered to the City under the Agreement on a cost per item or monthly charge basis as set forth in the banking service charges of the financial institution response.

The City, LEDC, and LCDC require account analysis statements on a monthly basis by individual account and at group level which will reflect average ledger balance, average uncollected funds, average collected balance, reserve requirement, average available balance, rate and amount of earnings credit, and detail of services provided with quantities and unit fees for each to arrive at a total net service cost, if any. Please submit a sample of the monthly account analysis statement that will be provided to the City as Attachment B.

G. Availability of Funds. Please provide a schedule and detailed explanation of funds availability, showing both time and day of availability, and specify the institution location to which the availability is applicable. If more than one availability schedule is applicable, provide both. Please submit the availability schedule(s) as Attachment C.

H. Interest Rate. The collected balances in each account must be accessible by Internet and be available for investment at the option of the City. The City anticipates its deposits in the institution will be in interest bearing accounts and will earn interest to be deposited at the end of each month. Please provide the details of the institution's interest rate offer and exactly how the rate is determined for these interest bearing accounts. For example, indicate if they are based on a market rate such as a specific T-Bill term discount, Wall Street Prime Rate, other established yield rate, or the federal funds rate, etc., and when the rates are changed. Also, please provide any other proposed options, i.e. such as any type of automatic sweep account where funds could be invested at a higher rate other than a demand deposit investment option. Please provide the interest rate offer information in Attachment D.

I. Payroll Tax Remittances. The City requires the Depository Bank to process the ACH’s that the City will directly initiate with the U.S. Treasury to remit the following payroll taxes: Federal Income Tax Withheld, Social Security Tax, and Medicare Tax.

J. Research Requests. The City requests that the financial institution respond to any research requests within three business days of the request.

K. Bank Errors. The Bank will reimburse bank errors resulting in lost interest to the City. The method of reimbursement will be agreed upon by the Bank and the City.

L. Check Receipt Processing (NSFs). All checks deposited by the City which do not clear the first time should be returned to the City. However, on occasion the City may re-submit a check for a second processing.

v. COLLATERAL REQUIREMENTS FOR PUBLIC FUNDS

A. Grant of Security Interest. The Financial Institution shall pledge to the City and grant to the City a security interest in investment securities and shall assign and pledge investment securities owned by the Financial Institution and held by a Custodian for the benefit of the City which is referred to as “Collateral” upon which the City shall have first and prior lien.

B. Authorized Collateral. City deposits, inclusive of accrued interest, in excess of the Federal Deposit Corporation insurance or other federal deposit insurance, shall be secured at all times by collateral, acceptable to the City and in accordance with the Public Funds Collateral Act (Texas Government Code 2257) and the City Investment Policy, pledged by the Financial Institution and held in trust by the Custodian in an amount equal to at least 102% of the total of those funds, i.e. the Required Collateral Value. The pledged securities collateral is to be calculated using market value to determine if the Required Collateral Value is being met.

Acceptable collateral includes:

1. Obligations, including letters of credit, of the United States or its agencies and instrumentalities, which have a liquid market with a readily determinable market value; 2. Direct obligations of the State of Texas or its agencies and instrumentalities thereof; 3. Collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United States (however certain types of these collateralized mortgage obligations are not authorized by the Texas Public Funds Investment Act and therefore are excluded herein); 4. Other obligations, the principal and interest of which are unconditionally guaranteed by the State of Texas or the United States of America. 5. Obligations of the States, agencies thereof, Counties, Cities, and other political subdivisions of any state having been rated as investment quality by a nationally recognized investment rating firm, and having received a rating of not less than “A” or its equivalent.

Such pledged securities shall be subject only to the joint written instructions of both (a) specifically authorized representatives of the financial institution and (b) authorized representatives of the City. The financial institution shall have the right, with the prior written consent of the City, to substitute or to replace, any or all of the pledged securities with collateral acceptable to the City. Newly pledged collateral will be received by the Custodian before release of existing collateral by the Custodian.

Custodian shall promptly forward to City original safekeeping and/or trust receipts covering all collateral pledged. Receipts and Reports shall be clearly marked that as pledged to the City.

C. Substitutions and Withdrawals. If the aggregate market value of Collateral held by Custodian at any time exceeds the Required Collateral Value, Financial Institution may withdraw any excess Collateral by providing Custodian with a withdrawal notice signed by an authorized representative of both the Financial Institution and the City. The City agrees that approval of the withdrawal notice will not be unreasonably withheld if the Collateral exceeds the Required Collateral Value.

If the aggregate market value of the Collateral held by the Custodian at any time does not equal the Required Collateral Value, the financial institution shall provide additional Collateral within that business day to bring the total aggregate market value equal to the Required Collateral Value.

The financial institution may substitute authorized Collateral for any of the Collateral held by the Custodian at any time by providing Custodian with a withdrawal notice provided that the market value of the Collateral following such substitution would equal or exceed the Required Collateral Value. All substitutions require the City’s prior written consent and shall not be unreasonably withheld.

D. Designation of Custodian: Permitted Institution. The City requests to have a Custodian to hold in trust all securities pledged as depository collateral in accordance with the City’s Investment Policy and the Public Funds Collateral Act, Texas Government Code Section 2257. The financial institution shall designate a Custodian, a Permitted Institution, in accordance with Texas Government Code Section 2257.041, for the written approval consent of the City. Please include your proposed Designated Custodian along with its qualifications in Attachment E.

Any and all fees from the Custodian associated with the safekeeping of securities pledged to the benefit of the City shall be borne by the financial institution.

Custodian shall promptly provide the City with safekeeping and/or trust receipts for Collateral as received from the financial institution clearly marked as a pledge to the City. Custodian shall provide directly to the City a monthly report of Collateral to include the following.

1. The Report name shall indicate that this is Collateral Pledged to secure Deposits. 2. The name of the Financial Institution to indicate that it has pledged the collateral. 3. The name of the City to indicate that the collateral is pledged to secure the City. 4. A Report Date to reflect the specific time the Pledged Collateral is being reported at market value (At the end of each calendar month). 5. The Report shall reflect all individual Collateral pledged itemized with at least the following for each security. a. Safekeeping Receipt No. b. ID No. c. Cusip d. Type/Name Description of Collateral e. Par Value f. Maturity Date g. Market Value h. Ratings (for any collateral obligations not issued by the United States or its agencies and instrumentalities.)

Custodian shall permit designated City officials or its independent auditor to examine Collateral in the presence of the appropriate officials or representatives of the financial institution at any time during normal business hours.

E. Default and Remedies. Should the financial institution at any time fail to pay and satisfy, when due, any check, transfer, draft or voucher lawfully drawn against the City’s deposits, or in any manner breach its agreement with the City, the City shall give written notice of such failure or breach and the financial institution shall have three (3) business days to cure such failure or breach. In the event the financial institution shall fail to cure such failure or breach within the three (3) days or should the financial institution be declared insolvent by a Federal financial institution regulatory agency, or if a receiver is appointed for the financial institution (each an Event of Default) it shall be the duty of the Custodian, upon demand by the City (supported by proper evidence of an Event of Default) to surrender the collateral to the City. However, if a Federal Banking Regulatory agency intends to have the remaining assets and deposits of the financial institution in default sold to another financial institution that is solvent and is also willing to accept this Depository and Collateral Agreement with the City, then the City may accept the transfer of its deposits to the solvent financial institution, if it is in the best interest of both parties.

Wherein the City decides that receiving the collateral is in its best interest, the City may sell all or part of such collateral and out of the proceeds thereof, pay the City all damages and loses sustained together with any expenses incurred by it of any kind on account of such failure. The collateral may be sold by the City at public or private sale provided however that the financial institution shall have one business day notice of the time and place of the sale and the financial institution and the custodian shall have the right to bid at such sale.

F. Events of Default. The financial institution shall be in default if it fails to pay all or part of a demand deposit or a matured or a , including accrued but unpaid interest, at a specified maturity date. The financial institution shall also be in default if ruled “bankrupt”, “insolvent” or “failed” by a federal or state banking regulator, or if a receiver is appointed for the financial institution.

In the event of a default, failure or insolvency of the financial institution, the City shall be deemed to have vested full title to all securities pledged under the Depository Services and Collateral Agreement. The City is empowered to take possession of and transfer and or sell any and all securities. If the security is liquidated, any proceeds over the defaulted amount, plus expenses related to the liquidation, shall be returned to the financial institution. This power is in addition to other remedies which the City may have under the Agreement and without prejudice to its rights to maintain any suit in any court for redress of injuries sustained by the City under the Agreement.

G. Initial Delivery of Collateral. In accordance with state law, the selected financial institution will be required to provide a commitment and delivery of the collateral to the custodian not later than five days before the commencement of the Agreement period.

H. Official Financial Institution Board Action Required. In accordance with Financial Institutions Resource and Recovery Enforcement Act (“FIRREA”) requirements, the selected Financial Institution will represent and warrant that the Agreement will to be made pursuant to and will be duly authorized by the Board of Directors of the Financial Institution and the authorizing resolution will be recorded in the official records of the Financial Institution. One original of this Board of Directors Resolution will be provided to the City.

VI. OVERDRAFT PROVISIONS

The City does not intend to have a net overdraft position occur during the course of the Agreement term. A net overdraft is to be defined as a negative balance in the City's accounts collectively, not by individual account. In case a net overdraft condition should occur, the proposal should include any and all financial institution policies regarding overdraft charges or handling procedures. Please include your response as Attachment F.

In the event a check or checks are presented for payment where there are insufficient funds for the purpose of paying checks, the Depository Bank agrees to promptly notify the City’s designated representative(s), by telephone or other means, of the overdraft condition, and to provide the City’s designated representative(s), a period not exceeding one business day to respond and rectify the condition.

VII. OTHER STIPULATIONS

A. Regulation Notices. The successful proposer is to notify the City in writing within ten (10) days of any changes in Federal or State regulations or laws that would affect the Financial Institution Depository and Collateral Agreement.

B. Wire Transfers. Notification of wire transfers will be made by written confirmation mailed to the City the same day of the transaction at no charge to the City. C. Agreement Provisions. If any provision of the Financial Institution Depository and Collateral Agreement is found to be illegal or unenforceable under applicable law, that provision shall be deemed reformed so as to be enforceable to the extent permitted by applicable law.

D. Right to Audit Records. The financial institution’s records relating to the City's accounts will be open for review during normal business hours by designated City staff members or City appointed independent auditors.

E. Financial Reports. The proposing financial institution will submit a copy of the latest annual audited financial statements including the independent auditors’ opinion letter thereon, the past two most recent quarterly call reports, and the Uniform Bank Performance Report for the latest fiscal year end, all as Attachment G.

During the term of the Depository and Collateral Agreement the financial institution shall promptly provide its annual audited financial statements including the independent auditors’ opinion letter thereon to the City each year.

F. Term of the Depository and Collateral Agreement. The term of the Financial Institution Depository and Collateral Agreement will be for the period July 1, 2014, through June 30, 2017, with a provision for two one-year continuation options under the same terms and conditions of the Agreement, subject to acceptance by the mutual consent of both parties. Further, the Agreement term also provides for an extension period not to exceed ninety days (90) for the transition to the new depository financial institution at the end of the term.

VIII. PROPOSAL REQUIREMENTS

A. Date, Time, Location. Sealed Applications (one original and two copies) clearly marked as. "Do Not Open in Mail Room; Depository Application Enclosed" must be received by 11:00 a.m., on Wednesday, June 11, 2014, to the following person:

Beth Walls, City Secretary City of Levelland 1709 Avenue H Levelland, Texas, 79336

NO DEPOSITORY APPLICATION WILL BE ACCEPTED AFTER 11:00 a.m.

B. Responding to this Application. The proposing institution is to use this Depository Application as the Official Proposal Form to submit prices, rates, and to answer questions.

C. Additional Information. The City reserves the right to request verification of submitted information and to request additional information or to meet with representatives from proposing organizations to discuss points in the application before and after submission, any and all of which may be used in forming a recommendation.

D. Right to Reject Applications. The City reserves the right to reject any and all applications, and to accept the application it considers to be the most advantageous to the City based upon the ability to perform the requested services, agreement to points outlined in the Depository Application, interest rates paid on deposits, cost of banking services, financial stability, and the capability to secure deposits, etc.

E. Minimum Qualification. Bidder must be a financial institution qualified by the laws of the State of Texas for public funds depositories to serve as the City's Depository financial institution.

F. Questions Regarding Depository Application. Any questions concerning this Depository Application should be directed to:

Daniel Downs, City Finance Director City of Levelland 1709 Avenue H Levelland, Texas 79336 Voice: (806) 894-0113; Fax: (806) 894-0119 Email: [email protected]

G. Transfer of Funds. Transfer of funds will commence at such time the successful bidder has provided the City with all required accounts setup, pledged collateral, forms and supplies necessary to insure uninterrupted day-to-day operations. The current Depository Bank will, if it is not the successful proposer herein, cooperate with the new Depository Bank for transfer of funds.

H. Contact with Other City Officials or Employees. In order to ensure fair and objective evaluation of Proposals, all questions should be addressed only to the person(s) so named herein. Contact with any other City employee or elected official without the prior written consent of the person(s) so named herein is expressly prohibited. Any contact with any other City employee or elected official without prior written consent will risk elimination of their proposal from further consideration.

I. Use of Quantity Estimates. Estimated quantities have been listed within the Proposal. The City reserves the right to increase or decrease quantities during the contract period, depending upon the City's needs.

J. Confidentiality of Documents. After opening of Proposals, except for amounts, names, and addresses of Proposers, all other information will be deemed confidential during the evaluation process until formal action to award a contract or reject all Proposals has been taken by the City Council. After contract award or rejection of Proposals, all information will be open and available for public inspection upon written request. In accordance with Local Government Code Section 252.049, trade secrets and confidential information, which the Proposer identifies as proprietary, is not available for public inspection.

K. Reimbursements. There is no express or implied obligation for the City to reimburse responding firms for any expenses incurred in preparing applications in response to this Proposal, and the City will not reimburse responding firms for these expenses, nor will the City pay any subsequent costs associated with the provision of any additional information or presentation, or to procure a contract for these services. IX. OTHER MISCELLANEOUS

A. Periodic Review. The City may require a review meeting every six months to evaluate the working relationship between the City and the Depository Financial Institution. The objectives include addressing any problems and to seek solutions, as well as keeping abreast of changes, new services, or new requirements.

B. Depository Application and Resulting Agreement. The final appointment of the Depository Financial Institution will be made by the City by a contract award of the City Council. The successful proposer will be required to execute the Financial Institution Depository and Collateral Agreement which incorporates the requirements of this Depository Application, accompanying related attachments, schedules, and materials as called for in this Depository Application, and any exceptions, conditions, or qualifications to the specifications included herein as deemed appropriate by the City.

C. Proposal Advertisement. This Depository Application has been duly advertised and is being offered for consideration to financial institutions as permitted by State law.

D. Designating Officials. The financial institution is to provide a list of the designated Officials authorized to represent the financial institution in the various matters for communication and assistance with the City. Please include list as Attachment H.

E. Texas Ethics Commission Conflict of Interest Questionnaire. Effective May 25, 2007, House Bill 1491, codified in the Texas Local Government Code, Chapter 176, requires any proposer that wishes to conduct business or to be considered for business with any political subdivision to complete a conflict of interest questionnaire (Form CIQ). Please provide this as Attachment I.

This questionnaire may be downloaded from the Texas Ethics Commission's web site at: http://www.ethics.state.tx.us/whatsnew/conflictforms.htm

This Depository Application is being offered by the following person duly authorized to act on behalf of the City of Levelland.

CITY OF LEVELLAND

Daniel Downs City Finance Director X. DEPOSITORY APPLICATION SUBMITTED BY

This Depository Application is being submitted to the City of Levelland, Texas, by the following person duly authorized to act on behalf of this financial institution. All terms contained herein, including the accompanying Attachments, Schedules, Exhibits, and any other materials, are agreed to by said financial institution.

______Name of Financial Institution

______

______

______Address of Financial Institution

______Telephone Number

______Officer Name & Title (Printed)

______Officer Signature

______Date

THIS PAGE MUST BE COMPLETED OR THE PROPOSAL WILL BE REJECTED.

* * * * * * * * * * * * * EXHIBIT 1

BANK TRANSACTIONS BY DEMAND ACCOUNT (Transactions for January 2014)

City of Service Levelland LEDC LCDC Memo Totals

Number of Debits 336 15 0 351

Number of Credits 97 5 0 102

Number of On US Items 652 0 0 652

Number Other Bank Items 1681 5 0 1686

Stop Payment Number 6 0 0 6

Charge Back Number 8 0 0 8 Interest Interest Interest All Interest Type of Account Bearing Bearing Bearing Bearing

Ending Ledger Balance $10,781,276 $692,134 $1,069,410 $12,542,820

EXHIBIT 2 AVERAGE MONTHLY COLLECTED BANK BALANCES (January – December 2013)

Pooled Cash Federal LEDC LEDC Debt LCDC Month in 2013 Account Forfeitures Operations Reserve Operations

January $ 9,680,354 $ 3,399 $ 492,411 $ 219,281 $ 593,020 February 11,232,868 14,154 520,242 85,598 629,987 March 10,746,521 23,485 518,835 24,738 669,526 April 10,306,401 23,507 532,513 47,872 698,505 May 10,003,493 22,640 452,875 76,062 740,850 June 9,909,214 19,152 408,768 101,061 775,488 July 9,693,944 14,008 436,599 129,418 811,593 August 9,537,184 9,184 462,319 111,141 874,740 September 9,404,312 9,590 475,610 106,933 906,265 October 8,827,432 9,996 447,303 128,232 933,672 November 9,374,948 11,115 409,887 157,044 971,912 December 9,604,104 12,317 429,450 187,179 1,014,735 Year Total $ 118,320,775 $ 172,547 $ 5,586,812 $ 1,374,559 $ 9,620,293 Average $ 9,860,065 $ 14,379 $ 465,568 $ 114,546 $ 801,691

EXHIBIT 3 CITY OF LEVELLAND INVESTMENT POLICY

See Attached File (PDF) FN: 2013 Investment Policy (The City’s Investment Policy is Required Reading to participate in this bidding process) (Please Confirm that this Policy has been read in Attachment R)

APPENDIX

OTHER REQUESTS FOR INFORMATION (To be completed by Financial Institution)

The City needs to know the service and cost information on services that it currently uses as follows.

The City is using a direct debit payment system for utilities charges. As Attachment K, please confirm the capability of your bank to provide this service, the options available, and the pricing thereof.

As Attachment M, please provide the pricing for any initial one-time conversion setup fee and software fee for the banking services currently being utilized in order for the City to move to your financial institution.

The City is also interested in obtaining service and cost information on additional services for possible use during the Agreement term. These services are not required but will be evaluated in terms of availability, feasibility, service levels, service providers and cost. The City will make its determination after receipt of proposals as to whether a service will be used. If the service is accepted later in the Agreement term the services and charges stipulated in the proposal will be applied.

The City is considering using positive pay, ACH debit block, and complete reconciliation services to prevent check fraud. The positive pay preference is for a system that allows for a three-way match (check number, payee, and check amount). As Attachment N, please confirm the capability of your bank to provide this service, the options available, and the pricing.

The City may consider other bank services which may benefit the City, including Remote Capture for Electronic Check Deposits. As Attachment O, please list and discuss additional services available and the pricing of each.

The City may consider using a Controlled Disbursement account for vendor payments. As Attachment P, please confirm the capability of your bank to provide this service, the name and location of the disbursement bank which will be handling the City's checks, the options available, and the pricing.

As Attachment Q, please provide bank benefits that would be available to City employees, i.e., free checking, discounted , travelers' checks, etc., if any. ATTACHMENT A BANKING SERVICE CHARGES Any and all anticipated service charges must be shown on this form to be applicable under the Agreement. Add additional lines or sheets as required.

Service Unit Unit Charge Per Unit Cost Account Maintenance Per month Daily Balance Reporting Per month Zero Balanced Accounts Master Account Per month Subsidiary Accounts Per month Credit Posted Per transaction Debits Posted Per transaction Encoding charge Per transaction ACH Processing Per transaction Origination of file Per tape ACH deletions Per transaction ACH entries Per transaction Returned checks Per transaction Reconciliation Per month Sort list tape Per transaction Sort and list Per transaction Items Deposited Deposits Per transaction Commercial deposits Per transaction Group I items Per transaction Group II items Per transaction Group III items Per transaction Stop payments Per transaction Wire Transfers Incoming Per transaction Outgoing Per transaction Reconciliation Per month Image capture per item Per transaction Additional DDA Statement Per month Other Bank Services Large Safe Deposit Box 6 Deposit Bags, zipper w/lock

Earnings Credit Rate on available account balances for April 30, 2014: ______%.

Rate Basis:______CITY OF LEVELLAND INVESTMENT POLICY

INTRODUCTION

The purpose of this document is to set forth specific investment policy and strategy guidelines for the City of Levelland in order to achieve the goals of safety, liquidity, yield, and public trust for all investment activity. The City Council of the City of Levelland shall review and adopt, by resolution, its investment strategies and policy not less than annually. The resolution shall include a record of changes made to either the investment policy or strategy. This policy serves to satisfy the statutory requirement (specifically the Public Funds Investment Act, VTCA, Government Code, Chapter 2256 (the “Act”) to define, adopt and review a formal investment strategy and policy.

INVESTMENT STRATEGY

The City of Levelland maintains portfolios, which utilize four specific investment strategy considerations, designed to address the unique characteristics of the fund groups represented in the portfolios:

A. Investment strategies for operating funds and commingled pools containing operating funds have as their primary objective to assure that anticipated cash flows are matched with adequate investment liquidity. The secondary objective is to create a portfolio structure, which will experience minimal volatility during economic cycles. B. Investment strategies for debt service funds shall have as the primary objective the assurance of investment liquidity adequate to cover the debt service obligation on the required payment date. Securities purchased shall not have a stated final maturity date that exceeds the debt service payment date. C. Investment strategies for debt service reserve funds shall have as the primary objective the ability to generate a dependable revenue stream to the appropriate debt service fund from securities with a low degree of volatility. D. Investment strategies for special projects or special purpose fund portfolios will have as their primary objective to assure that anticipated cash flows are matched with adequate investment liquidity. The stated final maturity dates of securities held should not exceed the estimated project completion date.

Investment Policy

I. SCOPE

This investment policy applies to all financial assets of the City of Levelland. These funds are accounted for in the City’s Comprehensive Annual Financial Report (CAFR) and include:  General Fund  Special Revenue Funds  Debt Service Funds  Capital Projects Funds  Proprietary Funds  All Other Funds

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II. OBJECTIVES

The City of Levelland shall manage and invest its cash with four objectives, listed in order of priority: Safety, Liquidity, Yield, and Public Trust. The safety of the principal invested always remains the primary objective. All investments shall be designed and managed in a manner responsive to the public trust and consistent with State and Local law.

The City shall maintain a comprehensive cash management program that includes collection of accounts receivable, vendor payment in accordance with invoice terms, and prudent investment of available cash. Cash management is defined as the process of managing monies in order to insure maximum cash availability and maximum yield on -term investment of pooled idle cash.

Safety

The primary objective of the City’s investment activity is the preservation of capital in the overall portfolio. Each investment transaction shall be conducted in a manner to avoid capital losses, whether they are from securities defaults or erosion of market value.

Liquidity

The City’s investment portfolio shall be structured such that the City is able to meet all obligations in a timely manner. This shall be achieved by matching investment maturities with forecasted cash flow requirements and by investing in securities with active secondary markets. No individual investment of the City shall have more than a stated maturity of one year except as may be approved by the City Council. However, investments for which the Act states a shorter maturity, such shorter limitation shall govern.

Yield

The City’s cash management portfolio shall be designed with the objective of regularly exceeding the average rate of return on U. S. Treasury Bills at a maturity level comparable to the City’s weighted average maturity in days. The investment program shall seek to augment returns above this threshold consistent with risk limitations identified herein and prudent investment policies.

Public Trust

All participants in the City’s investment process shall seek to act responsibly as custodians of the public trust. Investment officials shall avoid any transaction which might impair public confidence in the City’s ability to govern effectively.

III. RESPONSIBILITY AND CONTROL

Investment Committee

The City Council hereby establishes an Investment Committee consisting of the Director of Finance, the City Manager, and the City Attorney, to advise and assist the Director of Finance in the implementation of this Investment Policy, and to establish practices and procedures as necessary. This does not constitute either the City Manager or the City Attorney as investment officers of the City.

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Delegation of Authority and Training

Authority to manage the City’s investment program is derived from a resolution of the City Council. The Director of Finance is designated as investment officer of the City and is responsible for investment decisions and activities. The Director of Finance is given the authority to deposit, withdraw, invest, transfer and manage the City’s funds. This grant of authority is subject to the supervision and oversight of the City Council acting through the City Manager. The Director of Finance shall establish written procedures for the operation of the investment program, consistent with this investment policy. The investment officer shall attend at least one training session relating to the officer’s responsibility under the Act within 12 months after assuming duties. A training session not less than once every two years and receive 10 hours of training. Such training from an independent source shall be approved or endorsed by either one of the following: the Government Finance Officers Association of Texas, the Government Treasurers Organization of Texas, the Texas Municipal League, or the North Central Texas Council of Governments.

Internal Controls

The Director of Finance is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the entity are protected from loss, theft or misuse. The internal control structure shall be designed to provide reasonable assurance that these objectives are met. The concept of reasonable assurance recognizes that (1) the cost of a control should not exceed the benefits likely to be derived; and (2) the valuation of costs and benefits requires estimates and judgements by management. The internal controls shall address the following points:

A. Control of collusion. B. Separation of transaction authority from accounting and record keeping. C. Custodial safekeeping. D. Avoidance of physical delivery securities. E. Clear delegation of authority to subordinate staff members. F. Written confirmation for telephone (voice) transactions for investments and wire transfers. G. Development of a wire transfer agreement with the depository bank or third party custodian.

Accordingly, if investments are made in other than money market mutual funds, investment pools or accounts offered by its depository bank in the form of certificates of deposit, or money market accounts or similar accounts, the quarterly reports prepared by the investment officer shall be formally reviewed at least annually by an independent auditor and the result of the review shall be reported to the City Council by that auditor.

Prudence

The standard of prudence to be applied by the investment officer shall be the “prudent investor” rule, which states: “Investments shall be made with judgment and care, under circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived.” This rule shall be applied in the context of managing an overall portfolio. Investment officers acting in accordance with written procedures and the investment policy and exercising due diligence shall be relieved of personal responsibility for an individual security’s credit risk or market price changes, provided deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse developments. All investment officials involved in investment transactions will be bonded. 4

Ethics and Conflicts of Interest

City staff involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the investment program, or which could impair their ability to make impartial investment decisions. Employees and investment officials shall disclose to the City Manager any material financial interests in financial institutions that conduct business within this jurisdiction, and they shall further disclose any large personal financial/investment positions that could be related to the performance of the City of Levelland.

An investment officer of the City who has a personal business relationship with an organization seeking to sell an investment to the City shall file a statement disclosing that personal business interest. An investment officer who is related within the second degree by affinity or consanguinity to an individual seeking to sell an investment to the City shall file a statement disclosing that relationship. A statement required under this subsection must be filed with the Texas Ethics Commission and the City Council.

IV. REPORTING

Quarterly Reporting

The Director of Finance shall submit a signed quarterly investment report to the City Council that provides a clear picture of the status of the current investment portfolio. The management report should include comments on current market conditions, economic developments and anticipated investment conditions. The written report must:

(1) describe in detail the investment position of the City on the date of the report; (2) be prepared and signed by the investment officer of the City; (3) contain a summary statement, prepared in compliance with generally accepted accounting principles, of each pooled fund group that states : (A) beginning market value for the reporting period; (B) additions and changes to the market value during the period; (C) ending market value for the period; and (D) fully accrued interest for the reporting period; (E) if applicable the average weighted yield to maturity of portfolio on entity investments as compared to applicable benchmarks (The benchmark for performance that is appropriate for the City’s cash flow cycle will be the average monthly TexPool Rate.) of ; (F) if applicable the percentage of the total portfolio which each type of investment represents; (4) the book value and market value of each separately invested asset at the beginning and end of the reporting period by the type of asset and fund type invested; (5) the maturity date of each separately invested asset that has a maturity date; (6) the account or fund or pooled group fund in the City for which each individual investment was acquired; and (7) the compliance of the investment portfolio as it relates to: (A) the investment strategy expressed in the agency’s or local government’s investment policy; and (B) the relevant provisions of this chapter.

Annual Report

The Director of Finance shall present an annual report on the investment program and investment activity. This report may be presented as a component of the fourth quarter report to the City Manager and City Council.

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V. INVESTMENT PORTFOLIO

Active Portfolio Management

The City may pursue an active versus a passive portfolio management philosophy. That is, securities may be sold before they mature if market conditions present an opportunity for the City to benefit from the trade. The investment officer will routinely monitor the contents of the portfolio, the available markets, and the relative value of competing instruments, and may adjust the portfolio accordingly.

Investments

Assets of the City of Levelland may be invested in the following instruments; provided, however, that at no time shall assets of the City be invested in any instrument or security not authorized for investment under the Act, as the Act may from time to time be amended. The City is not required to liquidate investments that were authorized investments at the time of purchase.

I. Authorized

A. Obligations of the United States of America, its agencies and instrumentalities, which have a liquid market with a readily determinable market value.

B. Direct obligations of the State of Texas and agencies thereof.

C. Certificates of Deposit of state and national , savings and associations, or a state or federal that has its main office or a office in Texas, if guaranteed or insured by either the Federal Deposit Insurance Corporation, National Credit Union Share Insurance Fund or the successor to either of them.

D. Other obligations, the principal of and interest on which are unconditionally guaranteed by the State of Texas or United States of America.

E. Fully collateralized direct repurchase agreements with a defined termination date secured by obligations of the United States or its agencies and instrumentalities pledged with a third party, selected by the Director of Finance, other than an agency for the pledgor. Repurchase agreements must be purchased through a primary government securities dealer, as defined by the Federal Reserve, or a bank domiciled in Texas. A Master must be signed by the bank/dealer prior to investment in a repurchase agreement.

F. Joint pools of political subdivisions in the State of Texas which invest in instruments and follow practices allowed by current law. A pool must be continuously rated no lower than AAA or AAA-m or at an equivalent rating by at least one nationally recognized rating service. This includes the Joint Pools investments in authorized commercial paper.

G. Obligations of the States, agencies thereof, Counties, Cities, and other political subdivisions of any state having been rated as investment quality by a nationally recognized investment rating firm, and having received a rating of not less than “A” or its equivalent.

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II. Unauthorized

State law specifically prohibits investment in the following securities:

A. Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal.

B. Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest.

C. Collateralized mortgage obligations that have a stated final maturity date of greater than ten years.

D. Collateralized mortgage obligations, the interest rate of which is determined by an index that adjusts opposite to the changes in a market index.

VI. SELECTION OF BANKS AND DEALERS

Depository

The City shall select a Depository through the City’s banking services procurement process, which shall include a formal request for proposal (RFP). The depository and collateral agreement shall be for a three year period with the City having the option to extend the contract a year at a time for a total of two extensions. The contract including extensions cannot exceed five years. In selecting a depository, the credit worthiness of institutions shall be considered, and the Director of Finance shall conduct a comprehensive review of prospective depositories’ credit characteristics and financial history. The financial institutions shall submit for review its annual financial statements including the opinion letter report by the independent CPA auditors, evidence of federal deposit insurance and other information as required by the Director of Finance. All deposits of the City in a depository financial institution shall follow this investment policy and the rules in the Safekeeping and Custody section as outlined in this policy. The depository and collateral agreement must be executed in compliance with FIRREA wherein the agreement is approved by the bank board or loan committee via a formal resolution and be recorded in the banks related minutes records. The depository bank must certify that a qualified representative has read the City’s investment policy.

Certificates of Deposit

Banks seeking to establish eligibility for the City’s certificate of deposit purchase program for deposits in excess of federal deposit insurance shall submit for review such information as its annual financial statements including the opinion letter report by the independent CPA auditors, evidence of federal deposit insurance and other information as required by the Director of Finance. All Certificates of Deposit are an investment and thus must follow this investment policy and the rules in the Safekeeping and Custody section as outlined in this policy. Each bank must enter into a collateral agreement with the City that has been accepted and authorized by a formal resolution of the Board of Directors of the Bank or its Loan Committee, which resolution has been signed and entered into the minutes of the bank in compliance with FIRREA. Each bank must certify that a qualified representative has read the City’s investment policy. The Director of Finance has the authority to purchase Certificates of Deposit from any bank without prior City Council approval, provided the total Certificate of Deposit investment(s) will either be within the banks federal deposit insurance coverage or that City Council has already approved and accepted a collateral agreement with the bank wherein the bank shall provide the appropriate pledged collateral to secure the City’s deposits in excess of the banks federal deposit insurance in accordance with the collateral agreement. Under this same policy the Director of Finance may also invest in bank money market or savings accounts. The Director of Finance must use prudence and adhere to this investment policy.

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Securities Dealers

For and dealers of government securities, the City shall select only those dealers reporting to the Market Reports Division of the Federal Reserve Board of New York, also known as the “Primary Government Security Dealers”, unless a comprehensive credit and capitalization analysis reveals that other firms are adequately financed to conduct public business. Investment officials will not knowingly conduct business with any firm with whom public entities have sustained losses on investments. All securities dealers shall provide the City with references from public entities that they are currently serving. The Investment Officer and City Manager may adopt and annually review a list of qualified brokers authorized to engage in investment transactions with the entity.

All financial institutions and /dealers who desire to become qualified bidders for investment transactions must supply the following as appropriate:

----- audited financial statements ----- proof of National Association of Securities Dealers (NASD) certification ----- proof of state registration ----- completed broker/dealer questionnaire ----- certification of having read the City’s investment policy signed by a qualified representative of the organization ----- acknowledgement that the organization has implemented reasonable procedures and controls in an effort to preclude imprudent investment activities arising out of investment transactions conducted between the City and the organization

Qualified representative means a person who holds a position with a business organization, who is authorized to act on behalf of the business organization, and who is one of the following:

A. For a business organization doing business that is regulated by or registered with a securities commission, a person who is registered under the rules of the National Association of Securities Dealers;

B. For a state or federal bank, a , or a state or federal credit union, a member of the loan Committee for the bank or branch of the bank or a person authorized by corporate resolution to act on behalf of and bind the banking institution; or

C. For an investment pool, the person authorized by the elected official or board with authority to Administer the activities of the investment pool to sign the certification on behalf of the investment pool.

Investment Pools

A thorough investigation of the pool is required prior to investing, and on a continual basis. All investment pools must supply the following information in order to be eligible to receive funds:

----- the types of investments in which money is allowed to be invested

----- the maximum average dollar-weighted maturity allowed, based on the stated maturity date, of the pool

----- the maximum stated maturity date any investment security within the portfolio has

----- the objectives of the pool

----- the size of the pool

----- the names of the members of the advisory board of the pool and the dates their terms expire 8

----- the custodian bank that will safekeep the pool’s assets

----- whether the intent of the pool is to maintain a net asset value of one dollar and the risk of market price fluctuation

----- whether the only source of payment is the assets of the pool at market value or whether there is a secondary source of payment, such as insurance or guarantees, and a description of the secondary source of payment

----- the name and address of the independent auditor of the pool

----- the requirements to be satisfied for an entity to deposit funds in and withdraw funds from the pool and any deadlines or other operating policies required for the entity to invest funds in and withdraw funds from the pool

----- the performance history of the pool, including yield, average dollar-weighted maturities, and expense ratios

----- a description of interest calculations and how interest is distributed, and how gains and losses are treated

An annual review of the financial condition and registration of qualified bidders will be conducted by the Director of Finance.

VII. SAFEKEEPING AND CUSTODY

Insurance or Collateral

All deposits and investments of City funds, other than direct purchases of U. S. Treasuries or Agencies or other authorized investment securities and investment pools, shall be secured at all times by collateral as follows: pledged securities collateral owned by the financial institution at market value, surety bonds, or letters of credit that meet the requirements of the Public Funds Collateral Act and the City’s Investment Policy. In order to anticipate market changes and provide a level of security for all funds, the Required Collateral Value will be 102% of principal and accrued interest of the deposits or investments in excess of an amount insured by the FDIC or other federal deposit insurance. Evidence of the pledged securities collateral at market value, surety bonds or letters of credit shall be maintained by the Director of Finance and a third party custodian: permitted institution as applicable A securities collateral report from the custodian: permitted institution shall be submitted directly to the City with a full description of the securities promptly after the end of each month with a report date as of the end of each month. Repurchase agreements, if any, shall be documented by a specific agreement noting the collateral pledge in each agreement.

Collateral Agreement

Collateral securities pledged to secure deposits of the City shall be held by a custodian: permitted institution in accordance with a Collateral Agreement which clearly defines the procedural steps for maintaining and/or gaining access to the collateral securities should the City of Levelland determine that the City’s funds are in jeopardy. The custodian: permitted institution, or Trustee, shall be the Federal Reserve Bank or a permitted institution not affiliated with the financial institution pledging the securities collateral. The Collateral Agreement shall include the signatures of authorized representatives of the City of Levelland, the financial institution pledging the collateral, and the Custodian Trustee. 9

Collateral Defined

The City of Levelland shall accept only the following securities as collateral:

A. Obligations, including letters of credit, of the United States or its agencies and instrumentalities; B. Direct obligations of this state or its agencies and instrumentalities; C. Collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United States; D. Other obligations, the principal and interest of which are unconditionally guaranteed or insured by, or backed by the full faith and credit of, this state or the United States or their respective agencies and instrumentalities; E. Surety Bonds that meet the requirements of the Public Funds Investment Act; F. Obligations of states, agencies, counties, cities, and other political subdivisions of any state rated as to investment quality by a nationally recognized investment rating firm not less than A or its equivalent; and that have sufficient liquidity to meet the City’s requirements regarding availability.

Subject to Audit

All collateral, surety bonds and letters of credit shall be subject to inspection and audit by the Director of Finance or the City’s independent auditors.

Delivery vs. Payment

Treasury Bills, Notes, Bonds, Repurchase Agreements and Government Agencies’ securities shall be purchased using the delivery vs. payment method. That is, funds shall not be wired or paid until verification has been made that the correct security was received by the Trustee. The security shall be held in the name of the City or held on behalf of the City. The Trustee’s records shall assure the notation of the City’s ownership of or explicit claim on the securities. The original copy of all safekeeping and trust receipts shall be delivered directly to the City.

VIII. INVESTMENT POLICY ADOPTION

The City of Levelland investment policy shall be reviewed for effectiveness on an annual basis by the Director of Finance and any modifications will be recommended for approval to the City Council. The City council shall review these investment policies and strategies not less than annually.