(a)

(1) Counties, municipalities, districts, and other public or quasi-public corporations and public officials, boards, agencies, or other public or quasi-public entities, other than the state, are expressly authorized and empowered to invest or deposit funds held by them, including sinking funds and pension and retirement funds in accounts of federal savings banks, whose deposits are insured by the federal deposit insurance corporation.

(2) Deposits in excess of the limits of insurance on such accounts are authorized where the collateral given is of the character set forth in § 9-4-103, or where the collateral given is an irrevocable letter of credit issued by the federal savings bank, or where the collateral consists of a promissory note secured by a first mortgage or a first deed of trust upon residential real property located in Tennessee; provided, that:

(A) The promissory note shall at all times be in an amount in value at least fifty percent (50%) in excess of the amount deposited with the bank, such value to be determined in accordance with procedures established by regulations hereby authorized to be issued by the comptroller of the treasury;

(B) The bank may exercise, enforce, or waive any right or power granted to it by promissory note, mortgage, or deed of trust; provided, that the security for the note shall not be released or diminished in value by such action;

(C) The following may not be used as security for deposits:

(i) Any promissory note on which any payment is more than ninety (90) days past due;

(ii) Any promissory note secured by a mortgage or deed of trust as to which there is a lien prior to the mortgage or deed of trust; or

(iii) Any promissory note secured by a mortgage or deed of trust as to which notice of default has been recorded or an action has been commenced. In addition, no promissory note on which payment is more than thirty (30) days past due shall be used initially as such security;

(D) If the security or any note is released, or if the note is diminished in value by action of the bank as set forth in subdivision (a)(2)(B), or if any note becomes delinquent as set forth in subdivision (a)(2)(C), or if for any other reason the value of the note or security is impaired, the bank shall promptly substitute collateral meeting the requirements hereof sufficient to cover the deposits to be secured hereunder; and

(E) Such deposits in excess of the limits of insurance shall, as to each bank, be limited to no more than five percent (5%) of the assets of such bank with respect to each depositor hereunder, and shall be limited to no more than ten percent (10%) of the assets of such association with respect to all depositors hereunder.

(b) Counties, municipalities, districts and other public or quasi-public entities are authorized to deposit or invest funds in the local government investment pool under chapter 4, part 7 of this title. The governing body of such local government may delegate revocable investment authority to the financial officer charged with custody of the funds of the local government, who shall thereafter assume full responsibility for transactions with the local government investment pool.