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EDC finance review: pledged collateral at Bandera Bank, FDIC coverage explained
Summary
Board finance staff explained that Bandera Bank uses pledged collateral (also called a collateral agreement) to cover deposits above FDIC limits; staff said the EDC's accounts are fully covered and will ask the auditor to confirm documentation.
During the Aug. 18 meeting the EDC received an explanation of how its deposits are secured. Finance presenter Nancy walked the board through reconciliations and explained that Bandera Bank uses pledged collateral to cover amounts above FDIC insurance limits. "The amount pledged plus the FDIC brings us into compliance," she said while noting that pledged balances and CDs together covered the board's deposits.
Members asked for the formal collateral agreement and for staff to ensure the auditor follows up in the next audit cycle. The board noted it did not need immediate action on the collateral discussion but directed staff to obtain the written pledge/collateral agreement so documentation is on file.
The discussion clarified that pledged collateral is a bank practice that, alongside FDIC insurance, is intended to protect public funds held above standard FDIC limits; staff will provide the formal documentation to the board and auditor.
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