Letter of Credit Pledge for Public Deposits

Guidelines

Bank of North Dakota will issue a Letter of Credit (LOC) for public deposits* using the following procedure:

A North Dakota bank submits a written request to BND for a LOC. This request includes the name of pledgor, name of pledgee, term of LOC, and dollar amount of LOC requests.
* LOC also may be pledged to pledge pools.

Total outstanding LOC’s for Public Deposits are limited to a financial institutions total equity.

Documentation Requirements

Before a LOC for public deposits is issued, the following documents must be executed and on file at BND:

An Irrevocable Standby Letter of Credit Reimbursement Agreement outlining terms and conditions of a LOC is required along with a certified copy of Board of Directors minutes indicating approval of this agreement.
A Certificate of Available Eligible Collateral, signed by authorized bank officer certifying that all loans pledged are not encumbered by prior lien, pledge, participation, or any other form of encumbrance, also is required.
A current list of collateral pledged is required to be sent to BND every 60 days along with an executed copy of the Certificate of Available Eligible Collateral, during the term of the LOC. Substitutions also require this certificate.

Collateral Requirements

Collateral pledged was originated by Customer, and is serviced and owned by the same, and therefore is not encumbered by any prior lien, pledge, participation, or any other form of encumbrance; and
No collateral pledged is 60 days or more past due, on nonaccrual or in foreclosure; and
The borrower of collateral pledged is not an officer, director, attorney, or agent of the Customer; and
No construction or operating loans are included in list below; and
No loans included in list are currently classified as substandard, doubtful, or loss either internally or by a regulator; and
Collateral pledged will be of the following type and percentage of collateral coverage:
- Government guaranteed portion only – 105% (SBA loans do not qualify)
- Single family, Conventional, and VA – 120%
- Commercial, Farm, and Multi-family term debt – 150%

Substitutions are required for paydowns, payoffs, or other changes in eligibility. BND reserves the right to review the collateral prior to acceptance.