(b) Collateral.—

1. (1) A depository designated under subsection (a) shall, upon receipt of notice of its designation, collateralize deposits of public money in accordance with the act of August 6, 1971 (P.L.281, No.72), entitled "An act standardizing the procedures for pledges of assets to secure deposits of public funds with banking institutions pursuant to other laws; establishing a standard rule for the types, amounts and valuations of assets eligible to be used as collateral for deposits of public funds; permitting assets to be pledged against deposits on a pooled basis; and authorizing the appointment of custodians to act as pledgees of assets," by pledging collateral in an account in the name of the county or utilizing a letter of credit from the Federal Home Loan Bank to secure public deposits in excess of Federal Deposit Insurance Corporation insurance limits. The depository shall provide a monthly report within 15 days after the end of each month to the county commissioners in accordance with the reporting requirements under the act of August 6, 1971 (P.L.281, No.72), including the composition of the collateral and related market value.

2. (2) A county may elect to require that a depository pledge collateral in an account in the name of the county to collateralize deposits above the Federal Deposit Insurance Corporation insurance limit. These accounts may be in the custody of the depository's trust department or at a third-party financial institution. The arrangement with the depository may be governed by a written agreement, approved by the board of directors or loan committee of the depository, with approval reflected in the minutes of the board or committee, which are kept continuously as an official record of the depository. The agreement shall include all of the following if collateral is pledged instead of a Federal Home Loan Bank letter of credit:

   1. (i) Collateral shall be marked to market daily.
   2. (ii) Collateral shall be in investments as prescribed in the investment program provided by the board of investment or the county commissioners.
   3. (iii) If the financial institution serves as the custodian, the pledged collateral shall be held in a separate account, established under the act of August 6, 1971 (P.L.281, No.72), in the depository's trust department.
   4. (iv) The market value of the pledged collateral shall be at least 102% of the county deposits in excess of federally insured limits.
   5. (v) A monthly report shall be provided as specified in paragraph (1).
3. (3) The depository may not be required to secure payment of deposits and interest insured by the Federal Deposit Insurance Corporation.