§ 21-04-09 — Pledge of security in place of depository bond

The treasurer of a public corporation and every other individual legally charged with the
custody of public funds may accept from any financial institution, as security for repayment of
deposits, a pledge of securities in lieu of a personal or surety bond. When securities are
pledged to the board of any public corporation, the treasurer or other individual legally charged
with the custody of public funds shall require security in the amount of one hundred ten dollars
for every one hundred dollars of public deposits. Securities that are eligible for the pledge are
bills, notes, or bonds issued by the United States government, its agencies or instrumentalities,
all bonds and notes guaranteed by the United States government, irrevocable standby letters of
credit issued by federal home loan banks of a rating of AA or better by Moody's Investors
Service, Inc. or Standard & Poor's Corporation, federal land bank bonds, bonds, notes,
warrants, certificates of indebtedness, insured certificates of deposit, shares of investment
companies registered under the Investment Companies Act of 1940, letters of credit issued by
the Bank of North Dakota, and all other forms of securities issued by the state of North Dakota,
its boards, agencies, or instrumentalities, or by any county, city, township, school district, park
district, or other political subdivision of the state of North Dakota, whether payable from special
revenues or supported by the full faith and credit of the issuing body, and bonds issued by any
other state of the United States or other securities approved by the banking board. The
securities and securities sold under agreements to repurchase as described in section 21-06-07
must be delivered to and held for safekeeping by any financial institution, other than the
depository, which the depository and the public corporation may agree upon. Whenever any
securities are deposited for safekeeping with a custodian, the custodian shall issue a joint
receipt to the depository and the public corporation.
Any financial institution pledging securities, at any time it deems it advisable or desirable,
and without the consent of the board of the public corporation, may substitute other eligible
securities for all or any part of the securities pledged. The securities substituted must, at the
time of the substitution, have a market value at least equal to the market value of the securities
released and delivered to the depository.
In the event of the substitution the holder or custodian of the pledged securities shall, on the
same day, forward by mail or electronic transmission to the public corporation and the
depository financial institution a receipt specifically describing and identifying both the securities
substituted and those released and returned to the depository financial institution.
A depository financial institution may fulfill the pledge of securities requirements of this
section by maintaining a security pledge schedule that establishes the following:
1. The names of all public bodies maintaining deposits with the financial institution.
2. The amount of each deposit maintained by each public body.
3. The amount of federal deposit insurance corporation insurance applied to each
account.
4. The net deposits exceeding federal deposit insurance corporation coverage for each
account.
5. The amount of net deposit exceeding federal deposit insurance corporation deposit
insurance multiplied by one hundred ten percent for each account.
6. The amount of securities needed to be pledged to fulfill the requirements of this
section.
7. The total number of qualified securities pledged by the financial institution under the
requirements of this section.
A financial institution is in compliance with this section as long as the security pledge
schedule discloses the total qualified securities pledged in excess of the total pledges needed
for a total amount of deposits maintained by all the public bodies with the financial institution as
verified by the custodian of the securities every three months and copies are provided to the
custodian of the securities and to each of the public corporations maintaining deposits with the
financial institution.
No pledge of security or bond may be required for any funds deposited with a financial
institution directly or by a financial institution's participation as a member of a deposit placement
service to the extent that the deposits are insured or guaranteed by the federal deposit
insurance corporation or the national credit union administration as determined by the

commissioner of financial institutions or an insurance company that is qualified to offer excess
deposit insurance in this state and which has a rating of A- or better by A.M. Best Company Inc.,
or the equivalent rating by another recognized rating organization as determined by the
insurance commissioner.