(a) All general deposits of school funds in banks shall be secured by general obligation bonds of the United States, by bonds, notes, debentures, or other obligations issued by an agency of the United States Government, by bonds of the State of Arkansas, or by bonds of a political subdivision thereof which has never defaulted on any of its obligations, in an amount at least equal to the amount of the deposit, or by a bond executed by a surety company authorized to do business in the State of Arkansas, the surety on the bond to be approved by the Commissioner of Education.
(b) If the bank selected by the school district board of directors as a depository of its funds shall be unable to secure the school deposit as set out in this section, it shall be authorized to accept the funds as a preferred deposit, and in the event of insolvency, the preferred deposit shall be paid in full before other bank deposits are paid.