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1. Except as provided by Subsection (b), the following are authorized investments under <br />this section: <br />a) obligations of the United States or its agencies and instrumentalities; <br />b) direct obligations of this state or its agencies and instrumentalities; <br />c) collateralized mortgage obligations directly issued by a federal agency or <br />instrumentality of the United States, the underlying security for which is guaranteed <br />by an agency or instrumentality of the United States; <br />d) other obligations, the principal and interest of which are unconditionally guaranteed <br />or insured by, or backed by the full faith and credit of, this state or the United States <br />or their respective agencies and instrumentalities; and <br />e) obligations of states, agencies, counties, cities, and other political subdivisions of any <br />state rated as to investment quality by a nationally recognized investment rating firm <br />not less than A or its equivalent. <br />2. The following are not authorized investments under this section: <br />a) obligations whose payment represents the coupon payment on the outstanding <br />principal balance of the underlying mortgage -backed security collateral and pays not <br />principal (Interest only bonded); <br />b) obligations whose payment represents the principal stream of cash from the <br />underlying mortgage -backed security collateral and pays no interest (Principal only <br />bonds); <br />c) collateralized mortgage obligations that have a final stated maturity date of greater <br />that 10 years; and <br />d) collateralized mortgage obligations, the interest rate of which is determined by an <br />index that adjusts opposite to the changes in a market index. <br />B. Certificates of Deposit and Share Certificates <br />1. A certificate of deposit is an authorized investment under this Subchapter if the <br />certificate is issued by a depository institution that has its main office or branch office in <br />this state and is: <br />a) guaranteed or insured by the Federal Deposit Insurance Corporation or its successor <br />or the National Credit Union Share Insurance Fund or its successor; <br />b) secured by obligations that are described by Section 2256.009 (a), including <br />mortgage backed securities directly issued by a federal agency or instrumentality that <br />have a market value of not less than the principal amount of the certificates, but <br />excluding those mortgage backed securities of the nature described by Section <br />2256.009 (b); or <br />4 <br />