Ch. 180 1997 Session Laws of Kansas 1297
An Act concerning depository institutions; amending K.S.A.
9-1401, 9-1403, 9-1406, 9-
1407, 12-1676, 17-5002 and 68-2060 and K.S.A. 1996 Supp. 9-1101,
9-1104, 9-1111,
9-1402, 9-1405, 12-1675, 12-1677a, 12-1677b, 12-1677d, 75-4201,
75-4208, 75-4209,
75-4210, 75-4212a, 75-4217, 75-4218, 75-4220 and 75-4263 and
repealing the existing
sections.
Be it enacted by the Legislature of the State of
Kansas:
New Section 1. (a) The director of investments shall accept
requests
from banks interested in obtaining investment accounts of state
moneys.
Such requests may be submitted any business day and shall specify
the
dollar amount, maturity or maturity range and interest rate. If the
interest
rate bid by the bank is at or greater than the market rate
determined by
the director of investments in accordance with subsection (b), the
director
of investments is authorized to award the investment account to the
bid-
ding bank at the market rate. Awards of investment accounts
pursuant to
this section shall be subject to investment policies of the pooled
money
investment board. When multiple bids are received and are in excess
of
the amount available for investment that day for any maturity,
awards
shall be made available in ascending order from smallest to largest
dollar
amount bid, subject to investment policies of the board.
(b) The market rate shall be determined each business day by
the
director of investments, in accordance with any procedures
established
by the pooled money investment board. Subject to any policies of
the
1298 1997 Session Laws of Kansas Ch. 180
board, the market rate shall reflect the highest rate at which
state moneys
can be invested on the open market in investments authorized by
sub-
section (a) of K.S.A. 75-4209 and amendments thereto for
equivalent
maturities.
New Sec. 2. As used in article 14 of chapter 9 of the Kansas
Statutes
Annotated:
(a) ``Bank'' means any bank incorporated under the laws of this
state,
or organized under the laws of the United States and which has a
main
office in this state;
(b) ``savings and loan association'' means any savings and loan
asso-
ciation incorporated under the laws of this state, or organized
under the
laws of the United States and which has a main office in this
state;
(c) ``savings bank'' means any savings bank organized under the
laws
of the United States and which has a main office in this
state;
(d) ``centralized securities depository'' means a clearing
agency reg-
istered with the securities and exchange commission which provides
safe-
keeping and book-entry settlement services to its
participants;
(e) ``municipal corporation'' or ``quasi-municipal corporation''
in-
cludes each investing governmental unit under K.S.A. 12-1675,
and
amendments thereto;
(f) ``main office'' means the place of business specified in the
articles
of association, certificate of authority or similar document, where
the
business of the institution is carried on and which is not a
branch;
(g) ``branch'' means any office, agency or other place of
business
within this state, other than the main office, at which deposits
are re-
ceived, checks paid or money lent with approval of the appropriate
reg-
ulatory authorities. Branch does not include an automated teller
machine,
remote service unit or similar device;
(h) ``securities,'' ``security entitlements,'' ``financial
assets,'' ``securities
account,'' ``security agreement,'' ``security interest,''
``perfection'' and
``control'' shall have the meanings given such terms under the
Kansas
uniform commercial code.
Sec. 3. K.S.A. 9-1401 is hereby amended to read as follows:
9-1401.
(a) The governing body of any municipal corporation or
quasi-municipal
corporation shall designate by official action recorded upon its
minutes
the state and national banks, state and
federally chartered savings and
loan associations and federally chartered savings
banks with home offices which shall serve as
depositories of its funds
located in the state of Kansas
and the officer and official having the custody of such funds shall
not
deposit such funds other than at such designated banks,
state or federally savings and loan associations and
charteredfederally chartered savings
banks. The state and national banks, state
and federally chartered savings
and loan associations and federally chartered
savings banks which have
main or branch offices in the county or counties in which
all or part of
Ch. 180 1997 Session Laws of Kansas 1299
such municipal corporation or quasi-municipal corporation is
located shall
be designated as such official depositories if the municipal or
quasi-mu-
nicipal corporation can obtain satisfactory security
therefor, and such of-. For
ficial depositories have a home office located in the state of
Kansas
purposes of this subsection, banks, savings and loan associations
or sav-
ings banks organized under the laws of the United States or another
state
which do not have a main office in this state, may be designated as
de-
positories of such municipal corporation's or quasi-municipal
corpora-
tion's funds in accordance with this subsection, if such banks,
savings and
loan associations and savings banks have branch offices in the
county or
counties in which all or part of such municipal corporation or
quasi-
municipal corporation is located, except that such banks, savings
and loan
associations or savings banks shall not be eligible to receive
deposits except
in accordance with subsection (c).
(b) Every officer or person depositing public funds shall
deposit all
such public funds coming into such officer or person's possession
in their
name and official title as such officer. If the governing body of
the mu-
nicipal corporation or quasi-municipal corporation fails to
designate an
official depository or depositories, the officer thereof having
custody of
its funds shall deposit such funds with one or more state
or national banks,
state or federally chartered savings and loan
associations or federally char- savings banks which have main or branch
offices in the county or
tered
counties in which all or part of such municipal corporation or
quasi-mu-
nicipal corporation is located if satisfactory security can be
obtained there-
for and if not then elsewhere, but upon so doing shall serve notice
in
writing on the governing body showing the names and locations of
such
banks, state or federally chartered savings and
loan associations and fed- savings banks where such funds are
deposited, and upon
erally chartered
so doing the officer having custody of such funds shall not be
liable for
the loss of any portion thereof except for official misconduct or
for the
misappropriation of such funds by such officer.
(c) As used in this section and K.S.A. 9-1402, 9-1403
and 9-1405, and If eligible banks, savings and
loan associations
amendments thereto, ``municipal corporation or quasi-municipal
corpo-
ration'' includes each investing governmental unit under K.S.A.
12-1675,
and amendments thereto
or savings banks under subsections (a) or (b) cannot or will not
provide
an acceptable bid, which shall include services, for the depositing
of public
funds under this section, then banks, savings and loan associations
or
savings banks organized under the laws of the United States or
another
state which do not have a main office in this state, may receive
deposits
of such municipal corporation or quasi-municipal corporation, if
such
banks, savings and loan associations or savings banks have been
desig-
nated as official depositories under subsection (a), have branch
offices in
the county or counties in which all or part of such municipal
corporation
1300 1997 Session Laws of Kansas Ch. 180
or quasi-municipal corporation is located and the municipal
corporation
or quasi-municipal corporation can obtain satisfactory security
therefor.
Sec. 4. K.S.A. 1996 Supp. 9-1402 is hereby amended to read as
fol-
lows: 9-1402. (a) Before any deposit of public moneys or funds
shall be
made by any municipal corporation or quasi-municipal corporation of
the
state of Kansas with any state or national bank,
state or federally chartered
savings and loan association or federally
chartered savings bank, such
municipal or quasi-municipal corporation shall obtain security for
such
deposit in one of the following manners prescribed by this
section.
(b) Such bank, state or federally chartered
savings and loan associa-
tion or federally chartered savings bank may give
to the municipal cor-
poration or quasi-municipal corporation a personal bond in double
the
amount which may be on deposit at any given time.
(c) Such bank, state or federally chartered
savings and loan associa-
tion or federally chartered savings bank may give
a corporate surety bond
of some surety corporation authorized to do business in this state,
which
bond shall be in an amount equal to the public moneys or funds on
deposit
at any given time less the amount of such public moneys or funds
which
is insured by the federal deposit insurance corporation or its
successor
and such bond shall be conditioned that such deposit shall be
paid
promptly on the order of the municipal corporation or
quasi-municipal
corporation making such deposits.
(d) Any state or national Such bank,
state or federally chartered sav-
ings and loan association or federally chartered
savings bank may deposit,
maintain, pledge and, assign, and grant
a security interest in, or cause its
agent, trustee, wholly-owned subsidiary or
an affiliate bank having
iden-
tical ownership as the bank receiving the deposit of public
moneys or to deposit, maintain, pledge
fundsand, assign, and grant a security
in-
terest in, for the benefit of the governing body of the
municipal corpo-
ration or quasi-municipal corporation in the manner provided in
this act,
securities, security entitlements, financial assets and
securities accounts
owned by it the depository institution
directly or indirectly through its
agent or trustee holding securities on its behalf, or owned by
the depos-
itory institutions wholly-owned subsidiary or by such affiliate
bank, the
market value of which is equal to 100% of the total deposits at any
given
time, and such securities, security entitlements, financial
assets and se-
curities accounts, may be accepted or rejected by the governing
body of
the municipal corporation or quasi-municipal corporation and shall
con-
sist of the following and security entitlements
thereto:
(1) Direct obligations of, or obligations that are insured as to
principal
and interest by, the United States of America or any agency thereof
and
obligations, including but not limited to letters of credit, and
securities
of United States sponsored corporations which under federal law may
be
accepted as security for public funds;
Ch. 180 1997 Session Laws of Kansas 1301
(2) bonds of any municipal corporation or quasi-municipal
corpora-
tion of the state of Kansas which have been refunded in advance of
their
maturity and are fully secured as to payment of principal and
interest
thereon by deposit in trust, under escrow agreement with a bank, of
direct
obligations of, or obligations the principal of and the interest on
which
are unconditionally guaranteed by, the United States of
America;
(3) bonds of the state of Kansas;
(4) general obligation bonds of any municipal corporation or
quasi-
municipal corporation of the state of Kansas;
(5) revenue bonds of any municipal corporation or
quasi-municipal
corporation of the state of Kansas if approved by the state bank
commis-
sioner in the case of banks and by the savings and loan
commissioner in
the case of savings and loan associations or federally chartered
savings
banks;
(6) temporary notes of any municipal corporation or
quasi-municipal
corporation of the state of Kansas which are general obligations of
the
municipal or quasi-municipal corporation issuing the same;
(7) warrants of any municipal corporation or quasi-municipal
corpo-
ration of the state of Kansas the issuance of which is authorized
by the
state board of tax appeals and which are payable from the proceeds
of a
mandatory tax levy;
(8) bonds of either a Kansas not-for-profit corporation or of a
local
housing authority that are rated at least Aa by Moody's Investors
Service
or AA by Standard & Poor's Corp.;
(9) bonds issued pursuant to K.S.A. 12-1740 et seq., and
amendments
thereto, that are rated at least MIG-1 or Aa by Moody's Investors
Service
or AA by Standard & Poor's Corp.;
(10) notes of a Kansas not-for-profit corporation that are
issued to
provide only the interim funds for a mortgage loan that is insured
by the
federal housing administration;
(11) bonds issued pursuant to K.S.A. 74-8901 through 74-8916,
and
amendments thereto;
(12) bonds issued pursuant to K.S.A. 68-2319 through 68-2330,
and
amendments thereto; or
(13) commercial paper that does not exceed 270 days to
maturity and
which has received one of the two highest commercial paper credit
ratings
by a nationally recognized investment rating firm; or
(13) (14) (A) negotiable promissory
notes together with first lien
mortgages on one to four family residential real estate located in
Kansas
securing payment of such notes when such notes or
mortgages:
(i) Are underwritten by the federal national mortgage
association, the
federal home loan mortgage corporation, the federal housing
administra-
tion or the veterans administration standards; or are valued
pursuant to
rules and regulations which shall be adopted by both the state bank
com-
missioner and the savings and loan commissioner after having first
being
1302 1997 Session Laws of Kansas Ch. 180
submitted to and approved by both the state banking board under
K.S.A.
9-1713, and amendments thereto, and the savings and loan board.
Such
rules and regulations shall be published in only one place in the
Kansas
administrative regulations as directed by the state rules and
regulations
board;
(ii) have been in existence with the same borrower for at least
two
years and with no history of any installment being unpaid for 30
days or
more; and
(iii) are valued at not to exceed 50% of the lesser of the
following
three values: Outstanding mortgage balance; current appraised value
of
the real estate; or discounted present value based upon current
federal
national mortgage association or government national mortgage
associa-
tion interest rates quoted for conventional, federal housing
administration
or veterans administration mortgage loans.
(B) Securities under (A) shall be taken at their value for not
more
than 50% of the security required under the provisions of this
section.
(C) Securities under (A) shall be withdrawn immediately from
the
collateral pool if any installment is unpaid for 30 days or
more.
(D) A status report on all such loans shall be provided to the
investing
governmental entity by the financial institution on a quarterly
basis.
(e) No state or national such bank,
state or federally chartered savings
and loan association or federally chartered
savings bank may deposit and
maintain for the benefit of the governing body of a municipal or
quasi-
municipal corporation of the state of Kansas, any securities which
consist
of:
(1) Bonds secured by revenues of a utility which has been in
opera-
tion for less than three years; or
(2) bonds issued under K.S.A. 12-1740 et seq., and
amendments
thereto, unless such bonds have been refunded in advance of their
ma-
turity as provided in subsection (d) or such bonds are rated at
least Aa by
Moody's Investors Service or AA by Standard & Poor's
Corp.
(f) Whenever a bond is authorized to be pledged as a
security under
this section, such bond shall be accepted as a security
if
(1) In the case of a certificated bond, it is assigned,
delivered or
pledged to the holder of the deposit for security;
(2) in the case of an uncertificated bond, registration
of a pledge of
the bond is authorized by the system and the pledge of the
uncertificated
bond is registered; or
(3) in a form approved by the attorney general, which
assures the
availability of the bond proceeds pledged as a security for public
deposits.
(g) (f) Any expense incurred in
connection with granting approval of
revenue bonds shall be paid by the applicant for approval.
Sec. 5. K.S.A. 9-1403 is hereby amended to read as follows:
9-1403.
(a) During the periods of peak deposits occurring at tax paying
time and
Ch. 180 1997 Session Laws of Kansas 1303
tax distributing time and continuing for a period of not to
exceed 60
continuous days at any given time and not to exceed 120 days in
any
calendar year the amount of security for the deposit of public
moneys as
required under K.S.A. 9-1402, and amendments thereto, may be
reduced
by not more than 1/2 in an amount thereof.
(b) The provisions of this section shall apply only to the
deposits of
all municipal corporations and quasi-municipal corporations, but
the cus-
todian of the funds of each of such municipal corporations or
quasi-mu-
nicipal corporations together with an officer of the depository
state or bank,
nationalstate or federally
chartered savings and loan association or
federally chartered savings bank may enter into an
agreement which des-
ignates in writing the beginning of each such sixty-day period, and
a copy
thereof, fully executed, shall be kept on file in the office of the
governing
body of such municipal corporation or quasi-municipal corporation
and
in the files of such bank, state or federally
chartered savings and loan
association or federally chartered savings
bank.
Sec. 6. K.S.A. 1996 Supp. 9-1405 is hereby amended to read as
fol-
lows: 9-1405. (a) All bonds and securities given by any bank,
state or savings and loan association or
federally charteredfederally chartered
savings bank to secure public moneys of the United States or any
board,
commission or agency thereof, shall be deposited as required by
the
United States government or any of its designated agencies.
(b) All bonds and securities pledged to secure
securities, security en-
titlements and financial assets securing the deposits of any
municipal cor-
poration or quasi-municipal corporation shall be deposited in a
securities
account with a bank, trust company, or national bank
authorized to do
bank incorporated
business in Kansas having adequate modern facilities for the
safekeeping
of securities, the federal reserve bank of Kansas City
under the laws of this state, or organized under the laws of the
United
States or another state and which has a main or branch office in
this state,
a trust company incorporated under the laws of this state or
another state,
the federal home loan bank of Topeka or with the state
treasurer, pur-
suant to a written custodial agreement and a joint
custody receipt taken
therefor with one copy going to the municipal corporation or
quasi-mu-
nicipal corporation making the public deposit and one copy going to
the
bank, state or federally chartered savings and
loan association or federally savings bank which has secured such public
deposits. The re-
chartered
ceipt shall identify the securities, security entitlements and
financial assets
which are subject to a security interest to secure payment of the
deposits
of the municipal corporation or quasi-municipal corporation.
This section
shall not prohibit any custodial bank or trust company
receiving securities
for safekeeping, security entitlements and
financial assets on deposit from
issuing a joint custody receipt and
placing those depositing securities,
security entitlements and financial assets identified in the
receipt in such
1304 1997 Session Laws of Kansas Ch. 180
bank's account with any bank chartered in Kansas or any other
state, any
trust company chartered in Kansas or any other state, any national
bank,
or any centralized securities depository wherever located within
the
United States. No bonds or securities
pledged to secure, security entitle-
ments and financial assets securing public deposits shall be
left for safe- deposited in any bank, trust company, or
national bank which is
keeping
owned directly or indirectly by any parent corporation of the
depository
bank, or with any bank, trust company, or national bank, having
common
controlling shareholders, having a common majority of the board of
di-
rectors or having common directors with the ability to control or
influence
directly or indirectly the acts or policies of the bank,
state or federally savings and loan association or
charteredfederally chartered savings bank
securing such public deposits. When bonds and
securities, security enti-
tlements and financial assets are deposited with the state
treasurer as
authorized by this subsection, the state treasurer shall make a
charge for
such service which is equivalent to the reasonable and customary
charge
made therefor. Securities, security entitlements and financial
assets se-
curing the deposits of any municipal corporation or quasi-municipal
cor-
poration may be deposited with the federal reserve bank of Kansas
City
to be there held in such manner, under regulations and operating
letters
of the bank, as to secure payment of the deposits of the municipal
cor-
poration or quasi-municipal corporation in the depository
institution.
(c) All such bonds and securities shall be deposited
under a joint The depository bank,
savings and loan asso-
custody receipt issued by a bank or trust company within the state
of
Kansas or the federal reserve bank of Kansas City, the federal home
loan
bank of Topeka or with the state treasurer. All bonds or securities
held
by any depository and for which a joint custody receipt has been
issued
shall be retained by such depository and not released except upon
consent
of both the municipal corporation or quasi-municipal corporation
making
the deposit and the bank, state or federally chartered savings and
loan
association or federally chartered savings bank taking or securing
such
deposit. In every report required to be published by any bank,
state or
federally chartered savings and loan association or federally
chartered
savings bank it shall show in full all of the assets pledged or
deposited as
security for public moneys.
ciation or savings bank and any agent, trustee, wholly-owned
subsidiary
or affiliate having identical ownership granting a security
interest shall
enter into a written agreement with the municipal corporation or
quasi-
municipal corporation granting the municipal corporation or
quasi-mu-
nicipal corporation a security interest in the securities, security
entitle-
ments and financial assets qualified under K.S.A. 9-1402, and
amendments thereto, to secure payment of deposits of public moneys
of
the municipal corporation or quasi-municipal corporation. Such
security
interests shall be perfected by the depository bank, savings and
loan as-
sociation or savings bank and any agent, trustee, wholly-owned
subsidiary
Ch. 180 1997 Session Laws of Kansas 1305
or affiliate having identical ownership granting a security
interest causing
control of the securities, security entitlements and financial
assets under
the Kansas uniform commercial code to be given to the municipality
or
quasi-municipality. The security agreement and the custodial
agreement
shall be in writing, executed by all parties thereto, maintained as
part of
their official records, and except for the municipal corporations
or
quasi-municipal corporation, approved by their boards of directors
or
their loan committees, which approvals shall be reflected in the
minutes
of the boards or committees.
(d) A bank, state or federally chartered
savings and loan association
or federally chartered savings bank which fails to
pay according to its
terms any deposit of public moneys of any municipal or
quasi-municipal
corporation shall immediately take such actions as are required to
enable
bonds and securities pledged to secure such deposit to be sold to
satisfy
its obligation to the municipal or quasi-municipal
corporation.
(e) As used in this section:
``Centralized securities depository'' means a clearing
agency regis-
tered with the securities and exchange commission which provides
safe-
keeping and book-entry settlement services to its
participants.
Sec. 7. K.S.A. 9-1406 is hereby amended to read as follows:
9-1406.
No public officer nor the sureties upon such officer's bond shall
be liable
for any loss sustained by the failure or default of any designated
depository
or depositories after a deposit or deposits have been made in an
officially
designated bank, state or federally chartered
savings and loan association
or federally chartered savings bank as provided in
this act. This exemption
from liability shall apply even though other statutes shall require
the fur-
nishing of a bond or other securities by the designated
depositories of
public moneys.
Sec. 8. K.S.A. 9-1407 is hereby amended to read as follows:
9-1407.
That portion of any deposit of public moneys or funds which is
insured
by the federal deposit insurance corporation, or its successor,
or the fed- need not be
eral savings and loan insurance corporation, or its
successor,
secured as provided in this act.
New Sec. 9. (a) As used in this section:
(1) ``Accredited school'' means any school operated by a public
school
district organized under the laws of this state and any nonpublic
school
accredited by the state board of education.
(2) ``Board'' means the board of education of a school district
and the
governing authority of an accredited nonpublic school.
(b) In order to encourage savings among school children, a bank
may
enter into a written agreement with a board of an accredited school
to
establish a school savings deposit program. Such program shall be
limited
to the opening of accounts and the periodic collection, by bank
employees
or school personnel, of deposits from school children for deposit
in such
1306 1997 Session Laws of Kansas Ch. 180
bank accounts. No such program shall be implemented until the
executed
agreement and any information deemed necessary has been submitted
to
the Kansas state bank commissioner. If the commissioner determines
the
agreement and proposed program primarily promote educational
objec-
tives and the purpose of this section, the commissioner shall
provide the
bank with written approval to implement the program. Any bank
partic-
ipating in such school savings deposit program shall have its main
or
branch office located in the same county as the participating
school, or if
no bank in the county wants to participate in such program, then
banks
in any contiguous county may participate. The school savings
deposit pro-
gram may be conducted in any elementary or secondary
school.
Sec. 10. K.S.A. 1996 Supp. 9-1101 is hereby amended to read
as
follows: 9-1101. Any bank hereby is authorized to exercise by its
board of
directors or duly authorized officers or agents, subject to law,
all such
powers, including incidental powers, as shall be necessary to carry
on the
business of banking, and:
(1) To receive deposits and to pay interest thereon at rates
which
need not be uniform. The state bank commissioner, with approval of
the
state banking board, may by regulations of general application fix
maxi-
mum rates of interest to be paid on deposit accounts other than
accounts
for public moneys;
(2) to buy and sell exchange, gold, silver, foreign coin,
bullion, com-
mercial paper, bills of exchange, notes and bonds;
(3) to buy and sell bonds, securities, or other evidences of
indebt-
edness of the United States of America or those fully guaranteed,
directly
or indirectly, by it, and general obligation bonds of the state of
Kansas or
any municipality or quasi-municipality thereof, and of other
states, and
of municipalities or quasi-municipalities in other states of the
United
States of America. No bank shall invest an amount in excess of 15%
of its
capital stock paid in and unimpaired and the unimpaired surplus
fund of
such bank in bonds, securities or other evidences of indebtedness
of any
municipality or quasi-municipality of any other state or states of
the
United States of America: (a) If and when the direct and
overlapping
indebtedness of such municipality or quasi-municipality is in
excess of
10% of its assessed valuation, excluding therefrom all valuations
on in-
tangibles and homestead exemption valuation; (b) or if any bond,
security,
or evidence of indebtedness of any such municipality or
quasi-munici-
pality has been in default in the payment of principal or interest
within
10 years prior to the time that any bank acquires any such bonds,
security
or evidence of indebtedness;
(4) to make all types of loans, including loans on real estate,
subject
to the loan limitations contained in this act. Every real estate
loan shall
be secured by a mortgage or other instrument constituting a lien,
or the
full equivalent thereof, upon the real estate securing the loan,
according
Ch. 180 1997 Session Laws of Kansas 1307
to any lawful or well recognized practice, which is best suited
to the
transaction. The mortgage may secure future advances. The lien of
such
mortgage shall attach upon its execution and have priority from
time of
recording as to all advances made thereunder until such mortgage is
re-
leased of record. The lien of such mortgage shall not exceed at any
one
time the maximum amount stated in the mortgage;
(5) to discount and negotiate bills of exchange, negotiable
notes and
notes not negotiable;
(6) to buy and sell investment securities which are evidences of
in-
debtedness. The buying and selling of investment securities shall
be lim-
ited to buying and selling without recourse marketable obligations
evi-
dencing indebtedness of any person, copartnership, association,
corporation, or state or federal agency, including revenue bonds
issued
pursuant to K.S.A. 76-6a15, and amendments thereto, or the state
armory
board in the form of bonds, notes or debentures or both,
commonly
known as investment securities, under such further definition of
the term
``investment securities'' as prescribed by the board, but the total
amount
of such investment securities of any one obligor or maker held by
such
bank shall at no time exceed 15% of the capital stock paid in and
unim-
paired and the unimpaired surplus fund of such bank except that
this
limit shall not apply to obligations of the United States
government or
any agency thereof. If the obligor is a state agency including any
agency
issuing revenue bonds pursuant to K.S.A. 76-6a15, and
amendments
thereto, or the state armory board, the total amount of such
investment
securities shall at no time exceed 25% of the capital stock paid in
and
unimpaired and the unimpaired surplus fund of such bank;
(7) to subscribe to, buy and own such stock of the federal
national
mortgage association as required by title 3, section 303 of the
federal act
known as the national housing act as amended by section 201 of
public
law No. 560, of the United States (68 Stat. 613-615), known as the
housing
act of 1954, or amendments thereto;
(8) to subscribe to, buy and own stock in one or more small
business
investment companies in Kansas as otherwise authorized by federal
law,
except that in no event shall any bank acquire shares in any small
business
investment company if, upon the making of that acquisition the
aggregate
amount of shares in small business investment companies then held
by
the bank would exceed 5% of its capital and surplus. Nothing in
this act
contained shall prohibit any bank from holding and disposing of
such real
estate and other property as it may acquire in the collection of
its assets;
(9) to subscribe to, buy and own stock in any agricultural
credit cor-
poration or livestock loan company, or its affiliate, organized
pursuant to
the provisions of the laws of the United States providing for the
infor-
mation and operation of agricultural credit corporations and
livestock loan
companies, in an amount not exceeding either the undivided profits
or
1308 1997 Session Laws of Kansas Ch. 180
10% of the capital stock and surplus and undivided profits from
such
bank, whichever is greater;
(10) to subscribe to, buy and own stock in minbanc capital
corpora-
tion, a company formed for the purpose of providing capital to
minor-
ity-owned banks. No bank's investment in such stock shall exceed 2%
of
its capital and surplus;
(11) to buy, hold, and sell any type of investment securities
not enu-
merated in this section with approval of the commissioner and upon
such
conditions and under such regulations as are prescribed by the
state bank-
ing board;
(12) to act as escrow agent;
(13) to subscribe to, acquire, hold and dispose of stock of a
corpo-
ration having as its purpose the acquisition, holding and
disposition of
loans secured by real estate mortgages, and to acquire, hold and
dispose
of the debentures and capital notes of such corporation. No bank's
in-
vestment in such stock, debentures and capital notes shall exceed
2% of
its capital stock, surplus and undivided profits and such
investment shall
be carried on the books of the bank as directed by the
commissioner;
(14) to purchase and sell securities and stock without recourse
solely
upon the order, and for the account, of customers;
(15) to subscribe to, acquire, hold and dispose of any class of
stock,
debentures and capital notes of MABSCO agricultural services, inc.
or
any similar corporation having as its purpose the acquisition,
holding and
disposition of agricultural loans originated by Kansas banks. No
bank's
investment in such stock, debentures and capital notes shall exceed
2%
of its capital stock, surplus and undivided profits. Such
investment shall
be carried on the books of the bank as directed by the
commissioner;
(16) to buy, hold and sell mortgages, stock, obligations and
other se-
curities which are issued or guaranteed by the federal home loan
mort-
gage corporation under sections 305 and 306 of the federal act
known as
the federal home loan mortgage corporation act (P.L.
91-351);
(17) to buy, hold and sell obligations or other instruments or
securi-
ties, including stock, issued or guaranteed by the student loan
marketing
association created by (P.L. 92-318) of the United States;
(18) to engage in financial future contracts on United States
govern-
ment and agency securities subject to such rules and regulations as
the
state bank commissioner may prescribe pursuant to K.S.A. 9-1713,
and
amendments thereto, to promote safe and sound banking
practices;
(19) to subscribe to, buy and own stock in a state or federally
char-
tered bankers' bank or a one bank holding company which owns or
con-
trols such a bankers' bank, except no bank's investment in such
stock shall
exceed 10% of its capital stock, surplus and undivided
profits;
(20) subject to such rules and regulations as the state bank
commis-
sioner may adopt pursuant to K.S.A. 9-1713, and amendments
thereto,
to promote safe and sound banking practices, upon recorded prior
ap-
Ch. 180 1997 Session Laws of Kansas 1309
proval by the board of directors of the initial investment in a
specific
company and pursuant to an investment policy approved by the board
of
directors which specifically provides for such investments to buy,
hold
and sell shares of an open-end investment company registered with
the
federal securities and exchange commission under the federal
investment
company act of 1940 and the federal securities act of 1933 and of a
pri-
vately offered company sponsored by an affiliated commercial bank,
the
shares of which are purchased and sold at par and the assets of
which
consist solely of securities which may be purchased by the bank for
its
own account. Such shares may be purchased without limit if the
assets of
the company consist solely of and are limited to obligations that
are eli-
gible for purchase by the bank without limit. If the assets of the
company
include securities which may be purchased by the bank subject to
limi-
tation, such shares may be purchased subject to the limitation
applicable
to purchase by the bank of such securities;
(21) subject to the prior approval of the state bank
commissioner and
the state banking board and subject to such rules and regulations
as are
adopted by the state bank commissioner pursuant to K.S.A. 9-1713,
and
amendments thereto, to promote safe and sound banking practices,
a
bank may establish a subsidiary which engages in the following
securities
activities: (a) selling or distributing stocks, bonds, debentures,
notes, mu-
tual funds and other securities, (b) issuing and underwriting
municipal
bonds, (c) organizing, sponsoring and operating mutual funds, (d)
acting
as a securities broker-dealer;
(22) to subscribe to, acquire, hold and dispose of stock of any
class
of the federal agricultural mortgage corporation, a corporation
having as
its purpose the acquisition, holding and disposition of loans
secured by
agricultural real estate mortgages. No bank's investment in such
corpo-
ration shall exceed 5% of its capital stock, surplus and undivided
profits
and such investment shall be carried on the books of the bank as
directed
by the commissioner;
(23) to subscribe to, buy and own stock in an insurance
company
incorporated prior to 1910, under the laws of Kansas, with
corporate
headquarters in this state, which only provides insurance to
financial in-
stitutions. The investment in such stock shall not exceed 2% of the
bank's
capital stock, surplus and undivided profits;
(24) to purchase and hold an interest in life insurance policies
on the
life of its executive officers and directors, and to purchase life
insurance
policies for the sole purpose of providing employee deferred
compensa-
tion and benefit plans subject to the limitations listed herein. If
the bank
has the authority to direct the investments of the cash surrender
value of
the policy, those investments shall be limited solely to assets
which may
be directly purchased by the bank for its own account. The
limitations
set forth in paragraphs (a) and (b) of this subsection do not apply
to any
such life insurance policies in place before July 1, 1993. Funding
for the
1310 1997 Session Laws of Kansas Ch. 180
payment of employee compensation and benefit plans as well as
the ben-
efits derived may be made or split in a joint manner between the
bank,
employee or bank holding company as in ``split dollar'' or other
insurance
plans:
(a) Life insurance purchased and held on the life of executive
officers
and directors are subject to the following limitations:
(i) The cash surrender value of any life insurance policy on an
exec-
utive officer or director underwritten by any one life insurance
company
cannot at any time exceed 15% of the bank's capital stock, surplus,
un-
divided profits, loan loss reserve, capital notes and debentures
and reserve
for contingency, unless the bank has obtained the prior approval of
the
state bank commissioner;
(ii) the cash surrender value of life insurance policies on
executive
officers or directors, in the aggregate from all companies, cannot
at any
time exceed 25% of the bank's capital stock, surplus, undivided
profits,
loan loss reserve, capital notes and debentures and reserve for
contin-
gency, unless the bank has obtained the prior approval of the state
bank
commissioner;
(iii) the authority to hold life insurance on any executive
officer ceases
if the executive officer is no longer employed by the bank or no
longer
meets the definition of an executive officer;
(iv) the authority to hold life insurance on a director ceases
when that
director is no longer a member of the board of directors;
(v) the bank's board of directors must approve and document
the
purchase of any life insurance, including the reasonableness of
such pur-
chase; and
(vi) except as part of a reasonable compensation or benefit
plan, a
bank is not authorized to purchase life insurance as an estate
management
device for the benefit of officers, directors or employees who are
also
controlling shareholders of the bank.
(b) Life insurance purchased for the sole purpose of providing
de-
ferred compensation and benefit plans are subject to the following
limi-
tations:
(i) The bank may purchase individual or group policies for the
sole
purpose of providing deferred compensation agreements entered
into
with its officers and employees;
(ii) the bank may purchase policies on directors to fund a
deferred
directors fees program;
(iii) the board of directors must approve and document such
deferred
plans including the reasonableness of the plans;
(iv) the bank is not authorized to hold the policies unless
specifically
approved by the state banking board if no liability exists under
the de-
ferred compensation plans;
(v) the cash surrender value of any life insurance policy
purchased
for the sole purpose of providing deferred compensation and
benefit
Ch. 180 1997 Session Laws of Kansas 1311
plans, underwritten by any one life insurance company, cannot
exceed at
any time, 15% of the bank's capital stock, surplus, undivided
profits, loan
loss reserve, capital notes and debentures and reserve for
contingency,
unless the bank has obtained the prior approval of the state bank
com-
missioner; and
(vi) the cash surrender value of life insurance policies
purchased for
the sole purpose of providing deferred compensation and benefit
plans,
in the aggregate from all companies, cannot at any time exceed 25%
of
the bank's capital stock, surplus, undivided profits, loan loss
reserve, cap-
ital notes and debentures and reserve for contingency, unless the
bank
has obtained the prior approval of the state bank
commissioner;
(25) subject to such rules and regulations as the state bank
commis-
sioner may adopt pursuant to K.S.A. 9-1713 and amendments thereto
to
promote safe and sound banking practices, to act as an agent and
receive
deposits, renew time deposits, close loans, service loans, and
receive pay-
ments on loans and other obligations for any company which is a
subsid-
iary, as defined in subsection (d) of K.S.A. 9-519 and amendments
thereto
of the bank holding company which owns the bank. Nothing in this
sub-
section shall authorize a bank to conduct activities as an agent
which the
bank or the subsidiary would be prohibited from conducting as a
principal
under any applicable federal or state law. Any bank which enters or
ter-
minates any agreement pursuant to this subsection shall within 30
days
of the effective date of the agreement or termination provide
written
notification to the commissioner which details all parties involved
and
services to be performed or terminated;
(26) to make loans to the bank's stockholders or the
stockholders of
the bank's controlling bank holding company on the security of the
shares
of the bank or shares of the bank's controlling bank holding
company,
with the limitation that this may occur only if the bank would have
ex-
tended credit to such stockholder on exactly the same terms without
the
shares pledged as collateral, and provided the shares pledged are
not a
director's qualifying shares per K.S.A. 9-1117, and amendments
thereto;
and
(27) to make investments in and loans to community
development
corporations (CDCs) and community development projects (CD pro-
jects) as defined in K.S.A. 9-701 and amendments thereto, subject
to the
limitations prescribed by the comptroller of the currency as
interpreted
by rules and regulations which shall be adopted by the state bank
com-
missioner as provided by K.S.A. 9-1713 and amendments thereto;
and
(28) to participate in a school savings deposit program
authorized
under section 9.
Sec. 11. K.S.A. 1996 Supp. 9-1104 is hereby amended to read
as
follows: 9-1104. (a) Definitions. As used in this
section:
(1) ``Borrower'' means an individual, sole proprietorship,
partnership,
1312 1997 Session Laws of Kansas Ch. 180
joint venture, association, trust, estate, business trust,
corporation, limited
liability company, not for profit corporation, government unit or
agency,
instrumentality, or political subdivision thereof, or any similar
entity or
organization.
(2) ``Capital'' means the total of capital stock, surplus,
undivided prof-
its, 100% of the allowance for loan and lease loss, capital notes
and de-
bentures, and reserve for contingencies. Intangibles, such as
goodwill,
shall not be included in the definition of capital when determining
lending
limits.
(3) ``Loan'' means:
(A) A bank's direct or indirect advance of funds to or on behalf
of a
borrower based on an obligation of the borrower to repay the
funds;
(B) a contractual commitment to advance funds;
(C) an overdraft;
(D) loans that have been charged off the bank's books in whole
or in
part, unless the loan is unenforceable by reason of:
(i) Discharge in bankruptcy;
(ii) expiration of the statute of limitations;
(iii) judicial decision; or
(iv) the bank's forgiveness of the debt.
(b) General Lending Limit Rule. Subject to the provisions
in (d), (e)
and (f), loans to one borrower, including any bank officer or
employee,
shall not exceed 25% of a bank's capital.
(c) Calculation of the Lending Limit. (1) The bank's
lending limit
shall be calculated on the date the loan or written commitment is
made.
The renewal or refinancing of a loan shall not constitute a new
lending
limit calculation date unless new funds are advanced.
(2) If the bank's lending limit increases subsequent to the
origination
date, a bank may use the current lending limit to determine
compliance
when advancing funds. An advance of funds includes the lending
of
money or the repurchase of any portion of a participation.
(3) If the bank's lending limit decreases subsequent to the
origination
date, a bank is not prohibited from advancing on a prior
commitment
that was legal on the date the commitment was made.
(d) Exemptions. That portion of a loan which is
continuously secured
on a dollar for dollar basis by any of the following will be exempt
from
any lending limit:
(1) A guaranty, commitment or agreement to take over or to
pur-
chase, made by any federal reserve bank or by any department,
bureau,
board, commission, agency or establishment of the United States
of
America, including any corporation wholly owned, directly or
indirectly
by the United States;
(2) a perfected interest in a time deposit account in the
lending bank.
In the case of a time deposit which may be withdrawn in whole or in
part
Ch. 180 1997 Session Laws of Kansas 1313
prior to maturity, the bank shall establish written internal
procedures to
prevent the release of the deposit;
(3) a bonded warehouse receipt issued to the borrower by some
other
person;
(4) treasury bills, certificates of indebtedness, or bonds or
notes of
the United States of America or instrumentalities or agencies
thereof, or
those fully guaranteed by them;
(5) general obligation bonds or notes of the state of Kansas or
any
other state in the United States of America;
(6) general obligation bonds or notes of any Kansas municipality
or
quasi-municipality; or
(7) a perfected interest in a repurchase agreement of United
States
government securities with the lending bank.
(e) Special Rules. (1) The total liability of any
borrower may exceed
the general 25% limit by up to an additional 10% of the bank's
capital.
To qualify for this expanded limit:
(A) The bank shall have as collateral a first lien or liens on
real estate
securing a portion of the liability equal to at least the amount by
which
the total liability exceeds the 25% limit;
(B) the amount of the recorded lien or liens shall equal at
least the
amount of the excess liability;
(C) the appraised value of the real estate shall equal at least
twice
the amount of the excess liability; and
(D) a portion of the loan equal to at least the excess liability
shall
have installment payments sufficient to amortize that portion
within 20
years.
(2) That portion of any loan endorsed or guaranteed by a
borrower
will not be added to that borrower's liability until the endorsed
or guar-
anteed loan is past due 10 days.
(3) If the total liability of any active bank officer will
exceed $50,000,
prior approval from the bank's board of directors shall be noted in
the
minutes.
(4) To the extent they are insured by the federal deposit
insurance
corporation, time deposits purchased by a bank from another
financial
institution shall not be considered a loan to that financial
institution and
shall not be subject to the bank's lending limit.
(5) Third-party paper purchased by the bank will not be
considered
a loan to the seller unless and until the bank has the right under
the
agreement to require the seller to repurchase the paper.
(f) Combination Rules.
(1) General Rule. Loans to one borrower will be attributed to
another
borrower and their total liability will be combined:
(A) When proceeds of a loan are to be used for the direct
benefit of
the other borrower, to the extent of the proceeds so used;
or
1314 1997 Session Laws of Kansas Ch. 180
(B) when a common enterprise is deemed to exist between the
bor-
rowers.
(2) Direct Benefit. The proceeds of a loan to a borrower will
be
deemed to be used for the direct benefit of another person and will
be
attributed to the other person when the proceeds, or assets
purchased
with the proceeds, are transferred to another person, other than in
a bona
fide arm's length transaction where the proceeds are used to
acquire
property, goods or services.
(3) Common Enterprise. A common enterprise will be deemed to
exist and loans to separate borrowers will be aggregated:
(A) When the expected source of repayment for each loan or
exten-
sion of credit is the same for each borrower and neither borrower
has
another source of income from which the loan, together with the
bor-
rower's other obligations, may be fully repaid;
(B) when both of the following circumstances are
present:
(i) Loans are made to borrowers who are related directly or
indirectly
through common control, including where one borrower is directly
or
indirectly controlled by another borrower. Common control means
to
own, control or have the power to vote 25% or more of any class of
voting
securities or voting interests or to control, in any manner, the
election of
a majority of the directors, or to have the power to exercise a
controlling
influence over the management or policies of another person;
and
(ii) substantial financial interdependence exists between or
among
the borrowers. Substantial financial interdependence is deemed to
exist
when 50 percent or more of one borrower's gross receipts or gross
ex-
penditures (on an annual basis) are derived from transactions with
the
other borrower. Gross receipts and expenditures include gross
revenues,
expenses, intercompany loans, dividends, capital contributions and
similar
receipts or payments; or
(C) when separate persons borrow from a bank to acquire a
business
enterprise of which those borrowers will own more than 50% of the
voting
securities or voting interests, in which case a common enterprise
is
deemed to exist between the borrowers for purposes of combining
the
acquisition loan.
(D) An employer will not be treated as a source of repayment
for
purposes of determining a common enterprise because of wages and
sal-
aries paid to an employee.
(4) Special Rules for Loans to a Corporate Group. (A) Loans by
a
bank to a borrower and the borrower's subsidiaries shall not, in
the ag-
gregate, exceed 50% of the bank's capital. At no time shall loans
to any
one borrower or to any one subsidiary exceed the general lending
limit
of 25%, except as allowed by other provisions of this section. For
purposes
of this paragraph, a corporation or a limited liability company is
a subsid-
iary of a borrower if the borrower owns or beneficially owns
directly or
Ch. 180 1997 Session Laws of Kansas 1315
indirectly more than 50 percent of the voting securities or
voting interests
of the corporation or company.
(B) Loans to a borrower and a borrower's subsidiaries that do
not
meet the test contained in subsection (f)(4)(A) will not be
combined un-
less either the direct benefit or the common enterprise test is
met.
(5) Special Rules for Loans to Partnerships, Joint Ventures and
As-
sociations. (A) As used in this subpart (5), the term
``partnership'' shall
include a partnership, joint venture or association. The term
partner shall
include a partner in a partnership or a member in a joint venture
or
association.
(B) General Partner. Loans to a partnership are considered to
be
loans to a partner, if by the terms of the partnership agreement
that
partner is held generally liable for debts or actions of the
partnership.
(C) Limited Partner. If the liability of a partner is limited by
the terms
of the partnership agreement, the amount of the partnership debt
attrib-
utable to the partner is in direct proportion to that partner's
limited part-
nership interest liability.
(D) Notwithstanding the provisions of subsections (f)(5)(B)
and
(f)(5)(C), if by the terms of the loan agreement the liability of
any partner
is different than delineated in the partnership agreement, for the
purpose
of attributing debt to the partner the loan agreement shall
control.
(E) Loans to a partner are not attributed to the partnership
unless
either the direct benefit or the common enterprise test is
met.
(F) Loans to one partner are not attributed to other partners
unless
either the direct benefit or common enterprise test is met.
(G) When a loan is made to a partner to purchase an interest in
a
partnership, both the direct benefit and common enterprise tests
are
deemed to be met, and the loan is attributed to the
partnership.
(6) Notwithstanding the provisions of this subsection, the
commis-
sioner may determine, based upon an evaluation of the facts and
circum-
stances of a particular transaction, that a loan to one borrower
may be
attributed to another borrower.
(g) The commissioner may order a bank to correct any loan not
in
compliance with this section. A violation of this section shall be
deemed
corrected if that portion of the borrower's liability which created
the
violation could be legally advanced under current lending limits.
Failure
to comply with the commissioner's order within 60 days shall be
grounds
for the proposed removal of a bank officer or director pursuant to
K.S.A.
9-1805 and amendments thereto.
Sec. 12. K.S.A. 1996 Supp. 9-1111 is hereby amended to read
as
follows: 9-1111. The general business of every bank shall be
transacted
at the place of business specified in its certificate of authority
and at one
or more branch banks established and operated as provided in this
sec-
tion. Except for the establishment or operation of a trust branch
bank or
1316 1997 Session Laws of Kansas Ch. 180
the relocation of an existing trust branch bank pursuant to
K.S.A. 1996
Supp. 9-1135 and amendments thereto, it shall be unlawful for any
bank
to establish and operate any branch bank or relocate an existing
branch
bank except as hereinafter provided. Notwithstanding the provisions
of
this section, any location at which a depository institution, as
defined by
K.S.A. 9-701 and amendments thereto, receives deposits, renews
time
deposits, closes loans, services loans or receives payments on
loans or
other obligations, as agent, for a bank pursuant to subsection
(28) (25) of
K.S.A. 9-1101 and amendments thereto or other applicable state or
fed-
eral law, or is authorized to open accounts or receive deposits
under sub-
section (28) of K.S.A. 9-1101, and amendments thereto, shall
not be
deemed to be a branch bank:
(a) For the purposes of this section, the term ``branch bank''
means
any office, agency or other place of business located within this
state,
other than the place of business specified in the bank's
certificate of
authority, at which deposits are received, checks paid, money lent
or trust
authority exercised, if approval has been granted by the state bank
com-
missioner, under K.S.A. 9-1602, and amendments thereto;
(b) after first applying for and obtaining the approval of the
state
banking board, one or more branch banks may be established and
oper-
ated anywhere within this state by a bank incorporated under the
laws of
this state;
(c) an application to establish and operate a branch bank or to
relo-
cate an existing branch bank shall be in such form and contain such
in-
formation as the rules and regulations of the state bank
commissioner,
adopted pursuant to K.S.A. 9-1713, and amendments thereto, shall
pro-
vide;
(d) the application shall include estimates of the annual income
and
expenses of the proposed branch bank, the annual volume of business
to
be transacted by it, the nature of the banking business to be
conducted
at the proposed branch bank, the primary geographical area to be
served
by it and the personnel and office facilities to be provided at the
proposed
branch bank;
(e) the application shall include the name selected for the
proposed
branch bank. The name selected for the proposed branch bank shall
not
be the name of any other bank or branch bank doing business in the
same
city or town nor shall the name selected be required to contain the
name
of the applicant bank. If the name selected for the proposed bank
does
not contain the name of the applicant bank, the branch bank shall
provide
in the public lobby of such branch bank, a public notice that it is
a branch
bank of the applicant bank;
(f) the application shall include an affidavit of publication of
notice
that applicant bank intends to file an application to establish a
branch
bank or relocate an existing branch bank. The notice shall be
published
in a newspaper of general circulation in the county where the
applicant
Ch. 180 1997 Session Laws of Kansas 1317
bank proposes to locate the branch bank. The notice shall be in
the form
prescribed by the state banking board and at a minimum shall
contain,
the name and address of the applicant bank, the location of the
proposed
branch, a solicitation for written comments concerning the
proposed
branch be submitted to the state banking board, and provide for a
com-
ment period of not less than 10 days prior to the board's final
consider-
ation of the application;
(g) upon receipt of an application meeting the above
requirements,
if there is any written objection to the application filed with the
board,
within 60 days after receipt of the application, the state banking
board
shall hold a hearing in the county in which the applicant bank
seeks to
establish and operate a branch bank. If there is no written
objection filed
with the board within the time period specified under subsection
(f), the
board may hold a hearing on the application in such county. Notice
of
the time, date and place of such hearing if one is to be held shall
be
published in a newspaper of general circulation in such county by
the
bank seeking to establish and operate the branch bank not less than
10
or more than 30 days prior to the date of the hearing, and an
affidavit of
publication thereof shall be filed with the commissioner. Not less
than
10 days or more than 30 days prior to any such date of the hearing,
the
commissioner shall give notice of the time, date and place of such
hearing
by registered or certified mail to all banks and national banking
associa-
tions having their principal places of business or branch banks in
the
county wherein the applicant bank seeks to locate a branch bank. At
any
such hearing, all interested persons shall be allowed to present
written
and oral evidence to the board in support of or in opposition to
the ap-
plication. Upon completion of a transcript of the testimony given
at any
such hearing, the transcript shall be filed in the office of the
commissioner
and copies shall be furnished to the members of the state banking
board
not less than 14 days prior to the meeting of the board at which
the
application will be considered;
(h) the state banking board shall approve or disapprove the
applica-
tion, within 90 days after consideration of the application and the
evi-
dence gathered during the board's investigation. If the board finds
that:
(1) There is or will be at the time the branch bank is opened
the need
for the same in the community to be served by it;
(2) there is a reasonable probability of usefulness and success
of the
proposed branch bank;
(3) the applicant bank's financial history and condition is
sound; and
(4) the proposed branch bank can be established without undue
in-
jury to properly conducted existing banks and national banking
associa-
tions, the application shall be granted, otherwise, the application
shall be
denied;
(i) any final action of the board approving or disapproving an
appli-
cation shall be subject to review in accordance with the act for
judicial
1318 1997 Session Laws of Kansas Ch. 180
review and civil enforcement of agency actions upon the petition
of any
adversely affected or aggrieved person who appeared and offered
evi-
dence at the hearing upon the application;
(j) any branch bank lawfully established and operating on the
effec-
tive date of this act may continue to be operated by the bank then
op-
erating the branch bank and by any successor bank;
(k) branch banks which have been established and are being
main-
tained by a bank at the time of its merger into or consolidation
with
another bank or at the time its assets are purchased and its
liabilities are
assumed by another bank may continue to be operated by the
surviving,
resulting or purchasing and assuming bank. The surviving, resulting
or
purchasing and assuming bank, with approval of the state bank
commis-
sioner, may establish and operate a branch bank or banks at the
site or
sites of the merged, constituent or liquidated bank or
banks;
(l) any state bank or national banking association having its
principal
office and main banking house in this state may provide and engage
in
banking transactions by means of remote service units wherever
located,
which remote service units shall not be considered to be branch
banks
authorized herein. Any banking transaction effected by use of a
remote
service unit shall be deemed to be transacted at a bank and not at
a remote
service unit;
(m) as a condition to the operation and use of any remote
service unit
in this state, a state bank or national banking association, each
hereinafter
referred to as a bank, which desires to operate or enable its
customers to
utilize a remote service unit must agree that such remote service
unit will
be available for use by customers of any other bank or banks upon
the
request of such bank or banks to share its use and the agreement of
such
bank or banks to share all costs, including a reasonable return on
capital
expenditures incurred in connection with its development,
installation
and operation. The owner of the remote service unit, whether a bank
or
any other person, shall make the remote service unit available for
use by
other banks and their customers on a nondiscriminatory basis,
condi-
tioned upon payment of a reasonable proportion of all costs,
including a
reasonable return on capital expenditures incurred in connection
with the
development, installation and operation of the remote service unit.
Not-
withstanding the foregoing provisions of this subsection, a remote
service
unit located on the property owned or leased by the bank where
the
principal place of business of a bank, or an attached auxiliary
teller facility
or branch bank of a bank, is located need not be made available for
use
by any other bank or banks or customers of any other bank or
banks;
(n) for purposes of this section, ``remote service unit'' means
an elec-
tronic information processing device, including associated
equipment,
structures and systems, through or by means of which information
relat-
ing to financial services rendered to the public is stored and
transmitted,
whether instantaneously or otherwise, to a bank and which, for
activation
Ch. 180 1997 Session Laws of Kansas 1319
and account access, is dependent upon the use of a
machine-readable
instrument in the possession and control of the holder of an
account with
a bank. The term shall include ``online'' computer terminals and
``offline''
automated cash dispensing machines and automated teller machines,
but
shall not include computer terminals or automated teller machines
or
automated cash dispensing machines using systems in which
account
numbers are not machine read and verified. Withdrawals by means
of
``offline'' systems shall not exceed $300 per transaction and shall
be re-
stricted to individual not corporate or commercial
accounts.
New Sec. 13. As used in K.S.A. 12-1675, 12-1676 and 12-1677
and
K.S.A. 1996 Supp. 12-1677a and 12-1677b, and amendments
thereto:
(a) ``Bank'' means any bank incorporated under the laws of this
state,
or organized under the laws of the United States and which has a
main
office in this state;
(b) ``savings and loan association'' means any savings and loan
asso-
ciation incorporated under the laws of this state, or organized
under the
laws of the United States and which has a main office in this
state;
(c) ``savings bank'' means any savings bank organized under the
laws
of the United States and which has a main office in this
state;
(d) ``municipality'' includes each investing governmental unit
under
K.S.A. 12-1675, and amendments thereto;
(e) ``main office'' means the place of business specified in the
articles
of association, certificate of authority or similar document, where
the
business of the institution is carried on and which is not a
branch;
(f) ``branch'' means any office, agency or other place of
business
within this state, other than the main office, at which deposits
are re-
ceived, checks paid or money lent with approval of the appropriate
reg-
ulatory authorities. Branch does not include an automated teller
machine,
remote service unit or similar device; and
(g) ``investment rate'' means a rate which is the equivalent
yield for
United States government securities having a maturity date as
published
in the Wall Street Journal, nearest the maturity date for
equivalent ma-
turities. The 0-90 day rate shall be computed on the average
effective
federal funds rate as published by the federal reserve system for
the
previous week.
Sec. 14. K.S.A. 1996 Supp. 12-1675 is hereby amended to read
as
follows: 12-1675. (a) The governing body of any county, city,
township,
school district, area vocational-technical school, community
college, fire-
men's relief association, community mental health center, community
fa-
cility for the mentally retarded or any other governmental entity,
unit or
subdivision in the state of Kansas having authority to receive,
hold and
expend public moneys or funds may invest any moneys which are
not
immediately required for the purposes for which the moneys were
col-
1320 1997 Session Laws of Kansas Ch. 180
lected or received, and the investment of which is not subject
to or reg-
ulated by any other statute.
(b) Such moneys shall be invested only:
(1) In temporary notes or no-fund warrants issued by such
investing
governmental unit;
(2) in time deposit, open accounts or,
certificates of deposit with ma- or time certificates of deposit
with maturities of not
turities of not more than two years: (A) In commercial banks which
have
offices located in such investing governmental unit; or (B) if the
office of
no commercial bank is located in such investing governmental unit,
then
in commercial banks
more than two years: (A) In banks, savings and loan associations
and
savings banks, which have main or branch offices located in such
investing
governmental unit; or (B) if no main or branch office of a bank,
savings
and loan association or savings bank is located in such investing
govern-
mental unit, then in banks, savings and loan associations and
savings
banks, which have main or branch offices in the county
or counties in
which all or part of such investing governmental unit is
located;
(3) in time certificates of deposit with maturities of
not more than
two years: (A) With state or federally chartered savings and loan
associ-
ations or federally chartered savings banks which have offices
located in
such investing governmental unit; or (B) if the office of no state
or fed-
erally chartered savings and loan association or federally
chartered savings
bank is located in such governmental unit, then with state or
federally
chartered savings and loan associations or federally chartered
savings
banks which have offices in the county or counties in which all or
part of
such investing governmental unit is located;
(4) (3) in repurchase agreements with:
(A) Commercial banks, state Banks, savings and loan associations and
savings banks,
or federally chartered savings and loan associations or federally
chartered
savings banks
which have main or branch offices located in such investing
governmental
unit, for direct obligations of, or obligations that are insured as
to principal
and interest by, the United States government or any agency
thereof; or
(B) (i) if the office of no commercial bank, state or
federally chartered no main
savings and loan association or federally chartered savings
bank
or branch office of a bank, savings and loan association or savings
bank,
is located in such investing governmental unit; or (ii) if no
commercialsuch bank, state or
federally chartered savings and loan association or
federally chartered savings bank has
an having a main or branch office
located in such investing governmental unit is willing to enter
into such
an agreement with the investing governmental unit at an interest
rate
equal to or greater than the investment rate, as defined in
subsection (l) (g) of
section 13, then such
of K.S.A. 75-4201, and amendments thereto
repurchase agreements may be entered into with
commercial banks, state savings and loan associations or
or federally charteredfederally chartered
savings banks which have main or branch offices in the
county or counties
Ch. 180 1997 Session Laws of Kansas 1321
in which all or part of such investing governmental unit is
located; or (C)
if no bank, state or federally chartered savings
and loan association or
federally chartered savings bank which has
its, having a main or branch
office in such county or counties is willing to enter into such an
agreement
with the investing governmental unit at an interest rate equal to
or greater
than the investment rate, as defined in subsection (l) of
K.S.A. 75-4201, (g) of section 13, then such
repurchase agree-
and amendments thereto
ments may be entered into with commercial banks,
state or federally savings and loan associations or
charteredfederally chartered savings
banks which have offices in the state of
Kansas;
(5) (4) in United States treasury bills
or notes with maturities as the
governing body shall determine, but not exceeding two years. Such
in-
vestment transactions shall only be conducted with the
following, which banks, savings and loan associations
and savings
is doing business within the state of Kansas, any state or national
bank,
state or federally chartered savings and loan association, or
federally char-
tered savings bank
banks; the federal reserve bank of Kansas City, Missouri; or
with primary
government securities dealers which report to the market report
division
of the federal reserve bank of New York, or any broker-dealer
engaged
in the business of selling government securities which is
registered in
compliance with the requirements of section 15 or 15C of the
securities
exchange act of 1934 and registered pursuant to K.S.A. 17-1254,
and
amendments thereto;
(6) (5) in the municipal investment pool
fund established in K.S.A.
1996 Supp. 12-1677a, and amendments thereto;
(7) (6) in the investments authorized
and in accordance with the con-
ditions prescribed in K.S.A. 1996 Supp. 12-1677b, and
amendments
thereto; or
(8) (7) in multiple municipal client
investment pools managed by the
trust departments of commercial banks which have
main or branch offices
located in the county or counties where such investing governmental
unit
is located or with trust companies incorporated under the laws
of this
state which have contracted to provide trust services under the
provisions
of K.S.A. 9-2107, and amendments thereto, with
commercial banks which
have main or branch offices located in the county or
counties in which
such investing governmental unit is located. Public moneys invested
un-
der this paragraph shall be secured in the same manner as provided
for
under K.S.A. 9-1402, and amendments thereto. Pooled investments
of
public moneys made by trust departments under this paragraph shall
be
subject to the same terms, conditions and limitations as are
applicable to
the municipal investment pool established by K.S.A. 1996 Supp.
12-
1677a, and amendments thereto.
(c) The investments authorized in paragraphs (4), (5),
(6), or (7) or of subsection (b) shall be utilized only if the
(8)appropriate eligible com-
mercial banks, which have offices located in the investing
governmental
1322 1997 Session Laws of Kansas Ch. 180
unit or in the county or counties in which all or a part
of such investing banks,
savings and loan
governmental unit is located if no such bank has an office which is
located
within such governmental unit, or the appropriate eligible state or
fed-
erally chartered savings and loan associations or federally
chartered sav-
ings banks, which have offices located in the investing
governmental unit
or in the county or counties in which all or a part of such
investing gov-
ernmental unit is located if no such state or federally chartered
savings
and loan association or federally chartered savings bank has an
office
which is located within such governmental unit
associations and savings banks eligible for investments authorized
in par-
agraph (2) of subsection (b), cannot or will not make the
investments
authorized in paragraph (2) or (3) of subsection
(b) available to the in-
vesting governmental unit at interest rates equal to or greater
than the
investment rate, as defined in subsection (l) of K.S.A.
75-4201, and (g) of section 13.
amendments thereto
(d) In selecting a depository pursuant to paragraph (2)
or (3) of sub-
section (b), if a commercial bank, state
or federally chartered savings and
loan association or federally chartered savings
bank eligible for an invest-
ment deposit thereunder has an office located in the investing
govern-
mental unit and such financial institution will make such deposits
available
to the investing governmental unit at interest rates equal to or
greater
than the investment rate, as defined in subsection (l) of
K.S.A. 75-4201, (g) of section 13, and such
financial institution
and amendments thereto
otherwise qualifies for such deposit, the investing governmental
unit shall
select one or more of such eligible financial institutions
for deposit of
funds pursuant to this section. If no such financial institution
qualifies for
such deposits, the investing governmental unit shall select for
such de-
posits one or more commercial eligible
banks, state or federally chartered
savings and loan associations or federally
chartered savings banks which
have offices in the county or counties in which all or a part of
such in-
vesting governmental unit is located which will make such deposits
avail-
able to the investing governmental unit at interest rates equal to
or greater
than the investment rate, as defined in subsection (l) of
K.S.A. 75-4201, (g) of section 13, and which
otherwise qualify
and amendments thereto
for such deposits.
(e) (1) All security purchases and repurchase agreements shall
occur
on a delivery versus payment basis.
(2) All securities, including those acquired by repurchase
agreements,
shall be perfected in the name of the investing governmental unit
and
shall be delivered to the purchaser or a third-party custodian
which may
be the state treasurer.
Sec. 15. K.S.A. 12-1676 is hereby amended to read as follows:
12-
1676. Except as otherwise provided in K.S.A. 12-1678a, and
amendments
thereto, the provisions of this act authorizing the investment of
moneys
Ch. 180 1997 Session Laws of Kansas 1323
shall not apply to moneys collected or received by a county for
appor-
tionment, credit or distribution to the state or any political
subdivision
thereof. Interest paid by commercial
eligible banks, savings and loan as-
sociations and savings banks on time deposit, open accounts,
time certif-
icates of deposit and certificates of deposit of investing
governmental units
and by state or federally chartered savings and loan
associations or fed- shall be at rates agreed upon by the
governmental
erally chartered savings banks on time certificates of deposit of
investing
governmental units
units and the eligible banks, state or federally
chartered savings and loan
associations or federally chartered savings
banks.
Sec. 16. K.S.A. 1996 Supp. 12-1677a is hereby amended to read
as
follows: 12-1677a. (a) Moneys deposited by any municipality with
the
state treasurer for investment authorized in paragraph
(6) (5) of subsec-
tion (b) of K.S.A. 12-1675, and amendments thereto, shall be
deposited
in the municipal investment pool fund which is hereby created in
the
state treasury. The state treasurer shall provide the board a
monthly rec-
ord of the deposits and withdrawals of municipalities. Such record
may
include the amount of the deposit, the date of the deposit and such
other
information as the pooled money investment board may
require.
(b) The director of investments may invest and reinvest moneys
in
the municipal investment pool fund in accordance with investment
poli-
cies established by the pooled money investment board under
K.S.A.
75-4232, and amendments thereto, and in accordance with K.S.A.
1996
Supp. 75-4234 and K.S.A. 75-4209, and amendments thereto.
(c) The director of investments shall apportion earnings and
losses
among the accounts of the depositors in the various investment
options
of the municipal investment pool in accordance with policies
approved
and published by the board. A statement for each municipality
partici-
pating unit account showing deposits, withdrawals, earnings and
losses
distributions shall be provided monthly to the municipality. The
director
of investments shall make comprehensive reports monthly to those
mu-
nicipalities participating in the municipal investment pool fund
and to
other interested parties requesting such reports. Such reports
shall in-
clude a summary of transactions for the month, the current market
value
of the pooled money investment portfolio investments, the weighted
av-
erage maturity of the portfolio, the original costs of the
investments in
the portfolio, including any fees associated with such investments
and
such other relevant information the director of investments may
wish to
include in such report.
(d) The municipal investment pool reserve fund is abolished
effective
July 1, 1996, and any unencumbered balance remaining therein shall
be
applied to net losses in the municipal investment pool fund. The
munic-
ipal investment pool fund fee fund is abolished on July 1, 1997,
and any
unencumbered balance remaining therein shall be transferred to
the
1324 1997 Session Laws of Kansas Ch. 180
pooled money investment portfolio fee fund and such amounts
shall be
applied to net losses, as of July 1, 1996, in the municipal
investment pool
fund.
(e) The pooled money investment board may adopt rules and
regu-
lations necessary for the administration and operation of the
municipal
investment pool fund and may enter into agreements with any
munici-
pality as to methods of deposits, withdrawals and
investments.
(f) Deposits in the municipal investment pool fund: (1) May only
be
made for the same maturity as the maturity which is offered under
par- paragraph (2) of subsection (b)
of K.S.A. 12-1675 and
agraphs (2) and (3)
amendments thereto; and (2) upon the maturity of such deposits,
such
moneys shall be offered for investment under paragraphs (2)
or (3) par-
agraph (2) of subsection (b) of K.S.A. 12-1675, and amendments
thereto,
and may be reinvested in such fund only if the conditions contained
in
subsection (c) of K.S.A. 12-1675, and amendments thereto, have
been
satisfied.
(g) Moneys and investments in the municipal investment pool
fund
shall be managed by the pooled money investment board in
accordance
with investment policies provided for in K.S.A. 75-4209, and
amendments
thereto. A copy of such published policies shall be distributed to
all mu-
nicipalities participating in the municipal investment pool fund
and to
other interested persons requesting a copy of such policies. The
pooled
money investment board shall not contract for management of
invest-
ments by a money manager.
(h) For the purpose of this section, ``municipality''
means those en-
tities specified in subsection (a) of K.S.A. 12-1675, and
amendments
thereto, and K.S.A. 1996 Supp. 75-4263, and amendments
thereto.
Sec. 17. K.S.A. 1996 Supp. 12-1677b is hereby amended to read
as
follows: 12-1677b. (a) The governing body of any city or county
which
has a written investment policy approved by the governing body of
such
city or county and approved by the pooled money investment board
may
invest and reinvest pursuant to the approved investment policy in
the
following investments, as authorized under paragraph
(7) (6) of subsec-
tion (b) of K.S.A. 12-1675, and amendments thereto:
(1) Direct obligations of, or obligations that are insured as to
principal
and interest by, the United States of America or any agency thereof
and
obligations and securities of United States sponsored enterprises
which
under federal law may be accepted as security for public funds,
except
that such investments shall not be in mortgage-backed
securities;
(2) interest-bearing time deposits in any of the
following, which is banks, savings and loan associations and
savings banks; or
doing business within the state of Kansas, any state or national
bank, state
or federally chartered savings and loan association, or federally
chartered
savings bank
(3) repurchase agreements with a Kansas bank, savings
and loan as-
Ch. 180 1997 Session Laws of Kansas 1325
sociation, a federally chartered savings bank
banks, savings and loan as-
sociations and savings banks, or with a primary government
securities
dealer which reports to the market reports division of the federal
reserve
bank of New York for direct obligations of, or obligations that are
insured
as to principal and interest by, the United States government or
any
agency thereof and obligations and securities of United States
govern-
ment sponsored enterprises which under federal law may be accepted
as
security for public funds.
(b) The investment policy of any city or county approved by
the
pooled money investment board under this section shall be reviewed
and
approved at least annually by such board or when such city or
county
makes changes in such investment policy.
(c) City and county investment policies shall address liquidity,
diver-
sification, safety of principal, yield, maturity and quality, and
capability of
investment management staff.
(d) (1) All security purchases shall occur on a delivery versus
pay-
ment basis.
(2) All securities shall be perfected in the name of the city or
county
and shall be delivered to the purchaser or a third party custodian
which
may be the state treasurer.
(3) Investment transactions shall only be conducted with
the follow- banks, savings and
loan associations and
ing, which is doing business within the state of Kansas, any state
or na-
tional bank, state or federally chartered savings and loan
association, or
federally chartered savings bank
savings banks; or with primary government securities dealers
which re-
port to the market report division of the federal reserve bank of
New
York; or any broker-dealer which is registered in compliance with
the
requirements of section 15C of the securities exchange act of 1934
and
registered pursuant to K.S.A. 17-1254, and amendments
thereto.
(4) The maximum maturity for investments under subsection (a)
shall
be four years.
(e) Investments in securities under paragraph (1) of subsection
(a)
shall be limited to securities which do not have any more interest
rate
risk than do direct United States government obligations of similar
ma-
turities. For purposes of this subsection, ``interest rate risk''
means market
value changes due to changes in current interest rates.
(f) A city or county which violates subsection (c) or (d) of
K.S.A.
12-1675 and amendments thereto or the rules and regulations of
the
pooled money investment board shall forfeit its rights under this
section
for a two year period and shall be reinstated only after a complete
review
of its investment policy as provided for in subsection (b). Such
forfeiture
shall be determined by the pooled money investment board after
notice
and opportunity to be heard in accordance with the Kansas
administrative
procedure act.
1326 1997 Session Laws of Kansas Ch. 180
Sec. 18. K.S.A. 1996 Supp. 12-1677d is hereby amended to read
as
follows: 12-1677d. (a) As used in this act:
(1) ``Municipality'' means any city, county or other political
or taxing
subdivision of the state.
(2) ``Foundation'' means any not for profit charitable or
eleemosynary
corporation established by a municipality which is exempt
from taxation has
pursuant to section 501(c)(3) of the internal revenue code and
which
been in existence at least 15 years. Any such foundation is
hereby deemed
to be a public body.
(b) The board of directors of any foundation shall invest the
funds
held by such foundation which are not required immediately for the
pur-
poses of the foundation in the manner provided by this
section:
(1) Any funds in an amount equal to 110% of the average
annual
expenses of the foundation for the next preceding five years may be
in-
vested in the manner provided by K.S.A. 12-1675, and amendments
thereto. If funds in the amount required by this paragraph are
available
from the municipality which established the foundation, the
foundation
may invest all of its funds in the manner provided in paragraph
(2).
(2) Any funds exceeding the amount described in paragraph (1)
may
be invested in such investments that may be lawful for fiduciaries
in this
state and also may be invested in such investments as would be
lawful for
a private corporation or other foundation having purposes similar
to the
foundation. No moneys derived pursuant to any tax may be invested
un-
der this paragraph.
(c) Nothing in this act shall effect the status of the
foundation as a
municipal entity.
(d) The provisions of this section shall apply to foundations
whether
created before or after the effective date of this act. Any
investment of
funds by a foundation prior to July 1, 1997, which would have
complied
with the provisions of this section, as amended by this act, are
hereby
validated.
Sec. 19. K.S.A. 17-5002 is hereby amended to read as follows:
17-
5002. (a) Administrators, executors, conservators, trustees,
insurance
companies and other financial institutions, charitable,
educational, elee-
mosynary corporations and organizations are authorized, in addition
to
investments now authorized by law, to invest funds which they are
au-
thorized by law to invest, in shares or savings deposits of
federally insured
savings and loan associations or federally chartered savings banks
with
home main or branch offices, as defined
in section 13, in the state of
Kansas and in credit unions which are, in whole or in part, insured
with
an insurer or guarantee corporation as required under K.S.A.
17-2246,
and amendments thereto, and such investment shall be deemed and
held
to be legal investments for such funds.
(b) The governing body of any municipal corporation or
quasi-mu-
Ch. 180 1997 Session Laws of Kansas 1327
nicipal corporation, county, township, school district, area
vocational-
technical school, community college, firemen's relief association,
com-
munity mental health center, community facility for the mentally
retarded
or any other governmental entity, unit or division in the state of
Kansas
having authority to receive, hold and expend public moneys or funds
may
invest the same in state or federally chartered savings and
loan associa- subject to and as provided by K.S.A. 9-1401,
9-1402, 9-1405,
tions or federally chartered savings banks with home offices in the
state
of Kansas
9-1407, 12-1675 and 12-1676 and amendments to such
sections thereto.
Sec. 20. K.S.A. 68-2060 is hereby amended to read as follows:
68-
2060. All moneys received pursuant to the authority of this act,
whether
as proceeds from the sale of bonds or as revenues or otherwise,
shall be
deemed to be trust funds to be held and applied solely as provided
in this
act. Any officer with whom, or any bank or trust company with
which,
such moneys shall be deposited shall act as trustee of such moneys
and
shall hold and apply the same for the purposes hereof, subject to
such
regulations as this act and the resolution authorizing the bonds or
the
trust agreement securing such bonds may provide. Trust funds
received
pursuant to this act may be invested as determined by the authority
with
banks authorized to do business in Kansas at rates of interest not
less than
the investment rate, as defined in subsection (1) of K.S.A.
75-4201, and (g) of section 13 or in direct
obligations of the United
amendments thereto
States or in obligations that are fully guaranteed as to principal
and in-
terest by the United States.
Sec. 21. K.S.A. 1996 Supp. 75-4201 is hereby amended to read
as
follows: 75-4201. As used in this act, unless the context otherwise
re-
quires:
(a) ``Treasurer'' means state treasurer.
(b) ``Controller'' means director of accounts and
reports.
(c) ``Board'' means the pooled money investment board.
(d) ``Bank'' means a state bank incorporated
under the laws of Kansas of this state, or organized under the laws of
the United States or
or a national bank having such bank's home office within the state
of
Kansas
another state and which has a main or branch office in this
state.
(e) ``State moneys'' means all moneys in the treasury of the
state or
coming lawfully into the possession of the treasurer.
(f) ``State bank account'' means state moneys or fee agency
account
moneys deposited in accordance with the provisions of this
act.
(g) ``Operating account'' means a state bank account which is
payable
or withdrawable, in whole or in part, on demand.
(h) ``Investment account'' means a state bank account which is
not
payable on demand.
(i) ``Market rate'' means the average of the average
equivalent yields,
with equivalent maturities, of: (1) United States government
securities;
1328 1997 Session Laws of Kansas Ch. 180
and (2) debt obligations of the following United States
government agen-
cies, federal home loan banks, federal national mortgage
association and
federal farm credit bank.
(j) ``Investment rate'' means a rate which is the
equivalent yield for
United States government securities having a maturity date as
published
in the Wall Street Journal, nearest the maturity date for
equivalent ma-
turities. The 0-90 day rate shall be computed on the average
effective
federal funds rate as published by the federal reserve system for
the
previous week.
(k) (i) ``Fee agency account'' means a
state bank account of any state
agency consisting of fees, tuition or charges authorized by law
prior to
remittance to the state treasurer.
(l) (j) ``Disbursement'' means a payment
of any kind whatsoever made
from the state treasury or from any operating account, except
transfer of
moneys between or among operating accounts and investment
accounts
or either or both of them.
(m) (k) ``Securities'' means, for the
purposes of this section and K.S.A.
75-4218, and amendments thereto, securities, security
entitlements, fi-
nancial assets and securities account consisting of any one or
more of the
following, and security entitlements thereto, which may be
accepted or
rejected by the pooled money investment board:
(1) Direct obligations of, or obligations that are insured as to
principal
and interest by, the United States government or any agency thereof
and
obligations, letters of credit and securities of United States
sponsored
enterprises which under federal law may be accepted as security for
pub-
lic funds.
(2) Kansas municipal bonds which are general obligations of the
mu-
nicipality issuing the same.
(3) Revenue bonds of any agency or arm of the state of
Kansas.
(4) Revenue bonds of any municipality, as defined by K.S.A.
10-101,
and amendments thereto, within the state of Kansas or bonds issued
by
a public building commission as authorized by K.S.A. 12-1761,
and
amendments thereto, if approved by the state bank commissioner,
except
(A) bonds issued under the provisions of K.S.A. 12-1740 et
seq., and
amendments thereto, unless such bonds are rated at least MIG-1 or
Aa
by Moody's Investors Service or AA by Standard & Poor's Corp.
and (B)
bonds secured by revenues of a utility which has been in operation
for
less than three years. Any expense incurred in connection with
granting
approval of revenue bonds shall be paid by the applicant for
approval.
(5) Temporary notes of any municipal corporation or
quasi-municipal
corporation within the state of Kansas which are general
obligations of
the municipal corporation or quasi-municipal corporation issuing
the
same.
(6) Warrants of any municipal corporation or quasi-municipal
cor-
poration within the state of Kansas the issuance of which is
authorized
Ch. 180 1997 Session Laws of Kansas 1329
by the state board of tax appeals and which are payable from the
proceeds
of a mandatory tax levy.
(7) Bonds of any municipal or quasi-municipal corporation of
the
state of Kansas which have been refunded in advance of their
maturity
and are fully secured as to payment of principal and interest
thereon by
deposit in trust, under escrow agreement with a bank, of direct
obligations
of, or obligations the principal of and the interest on which are
uncon-
ditionally guaranteed by, the United States of America. A copy of
such
escrow agreement shall be furnished to the treasurer.
(8) Securities listed in paragraph (13)
(14) of subsection (d) of K.S.A.
9-1402 and amendments thereto within limitations of K.S.A. 9-1402
and
amendments thereto.
(9) A corporate surety bond guaranteeing deposits in a bank,
savings
or savings and loan association in excess of federal deposit
insurance cor-
poration insurance, underwritten by an insurance company authorized
to
do business in the state of Kansas.
(10) Commercial paper that does not exceed 270 days to
maturity
and which has received one of the two highest commercial paper
credit
ratings by a nationally recognized investment rating firm.
(11) All of such securities shall be current as to interest
according to
the terms thereof.
(12) Whenever a bond is authorized to be pledged as a
security under
this section, such bond shall be accepted as a security if: (i) In
the case
of a certificated bond, it is assigned, delivered or pledged to the
holder
of the deposit for security; (ii) in the case of an uncertificated
bond,
registration of a pledge of the bond is authorized by the system
and the
pledge of the uncertificated bond is registered; or (iii) in a form
approved
by the attorney general, which assures the availability of the bond
pro-
ceeds pledged as a security for public deposits.
(n) (l) ``Savings bank'' means a
federally chartered savings bank or-
ganized under the laws of the United States or another state
insured by
the federal deposit insurance corporation or its successor
and doing busi- having a main or branch
office in the
ness within the state of Kansas
county in which a state agency making collection of any fees,
tuition, or
charges is located.
(o) (m) ``Savings and loan association''
means a state or federally char- savings and loan association incorporated under
the laws of this
tered
state or organized under the laws of the United States or another
state,
insured by the federal deposit insurance corporation or its
successor and
doing business within the state of Kansas
having a main or branch office
in the county in which a state agency making collection of any
fees, tuition
or charges is located.
(p) (n) ``Custodial bank'' means a bank
designated to keep safely hold-
ing on deposit collateral pledged as which
is security for state bank ac-
counts.
1330 1997 Session Laws of Kansas Ch. 180
(q) (o) ``Centralized securities
depository'' means a clearing agency
registered with the securities and exchange commission which
provides
safekeeping and book-entry settlement services to its
participants.
(r) (p) ``Depository bank'' means a
bank, savings bank or savings and
loan association authorized and eligible to receive state
moneys.
(q) ``main office'' means the place of business specified in
the articles
of association, certificate of authority or similar document, where
the
business of the institution is carried on and which is not a
branch;
(r) ``branch'' means any office, agency or other place of
business
within this state, other than the main office, at which deposits
are re-
ceived, checks paid or money lent with approval of the appropriate
reg-
ulatory authorities. Branch does not include an automated teller
machine,
remote service unit or similar device;
(s) ``securities,'' ``security entitlements,'' ``financial
assets,'' ``securities
account,'' ``security agreement,'' ``security interest,''
``perfection'' and
``control'' shall have the meanings given such terms under the
Kansas
uniform commercial code.
Sec. 22. K.S.A. 1996 Supp. 75-4208 is hereby amended to read
as
follows: 75-4208. The board shall follow the procedure prescribed
in rules
and regulations adopted under the provisions of K.S.A. 1996 Supp.
75-
4232, in designating banks to receive deposit of state moneys in
operating
accounts and investment accounts. The board shall determine
which
banks shall receive state operating and investment accounts and
shall
designate the types of accounts to be awarded each such bank and
the
initial amount of each award. Such initial awards which are
operating
accounts shall be made as provided in K.S.A. 75-4205, and
amendments
thereto. Such initial awards which are investment accounts shall be
ap- awarded as is provided in K.S.A. 75-4209,
and amendments
portioned
thereto. Upon making the awards provided for above, the board
shall
notify each bank of its award, and that the same is subject to
approval of
securities to be pledged as prescribed in this act.
Sec. 23. K.S.A. 1996 Supp. 75-4209 is hereby amended to read
as
follows: 75-4209. (a) After the director of investments
determines the
liquidity needs for the state, and determines the varying
maturities of the
investment accounts to be offered and the amount of state moneys to
be
invested in each of the maturities offered, in accordance with
rules and
regulations adopted pursuant to K.S.A. 1996 Supp. 75-4232, and
amend-
ments thereto, the director of investments shall make available
state mon-
eys eligible for investment accounts in the following
manner:
(1) (A) The director of investments shall offer to
qualified banks, on
a competitive bid basis, state moneys for deposit in investment
accounts
at maturities of not more than four years and such bids shall be at
a rate
of at least the market rate, as defined in subsection (k) of K.S.A.
75-4201,
and amendments thereto.
Ch. 180 1997 Session Laws of Kansas 1331
(B) As part of the offering under subparagraph (A) the
director of
investments shall offer to qualified banks, on a twelve-month
average,
50% of the amount of state moneys available for investment or
$350,000,000, whichever amount is greater, at maturities of not
more than
four years and at the investment rate as defined in subsection (l)
of K.S.A.
75-4201, and amendments thereto. Such accounts shall be
apportioned
by the director of investments among the banks which propose to
receive
such accounts and which qualify therefor on the basis of the ratio
of each
bank's combined capital, undivided profits and surplus to the total
capital,
undivided profits and surplus of all such banks.
(C) Qualified banks shall be determined in accordance
with require-
ments established by rules and regulations adopted pursuant to
K.S.A.
1996 Supp. 75-4232, and amendments thereto.
(2) The director of investments may invest and
reinvest state moneys
eligible for investment which are not invested in accordance with
para- section 1, in the following
investments:
graph (1)
(A) (1) Direct obligations of, or
obligations that are insured as to
principal and interest by, the United States of America or any
agency
thereof and obligations and securities of the United States
sponsored
enterprises which under federal law may be accepted as security for
pub-
lic funds, on and after the effective date of this act moneys
available for
investment under this subsection shall not be invested in
mortgage-
backed securities of such enterprises and of the government
national
mortgage association, except that any such mortgage-backed
securities
held prior to the effective date of this act may be held to
maturity;
(B) (2) repurchase agreements with a
Kansas bank or a primary gov-
ernment securities dealer which reports to the market reports
division of
the federal reserve bank of New York for direct obligations of, or
obli-
gations that are insured as to principal and interest by, the
United States
government or any agency thereof and obligations and securities
of
United States government sponsored enterprises which under federal
law
may be accepted as security for public funds;
(C) investments in SKILL act projects and bonds pursuant
to K.S.A.
1996 Supp. 74-8920, and amendments thereto, and investments in
any
state agency bonds or bond project;
(D) until July 1, 1996, in the municipal investment pool
fund, created
under K.S.A. 1996 Supp. 12-1677a, and amendments thereto, in
accor-
dance with the policies adopted by the board on January 30, 1995.
Any
investment of such state moneys in such fund prior to the effective
date
of this act are hereby authorized, confirmed and validated. On July
1,
1996, all state moneys invested in the municipal investment pool
fund
under this paragraph shall be removed from such fund;
or
(E) (3) commercial paper that does not
exceed 270 days to maturity
and which has received one of the two highest commercial paper
credit
ratings by a nationally recognized investment rating firm.
1332 1997 Session Laws of Kansas Ch. 180
(b) At any time moneys are available for deposits or
investments for When
a period of time which is insufficient to permit deposit in
investment
accounts or to provide for the liquidity needs for the state, the
director
of investments may invest such moneys in repurchase agreements as
au-
thorized in subparagraph (B) of paragraph (2) of subsection
(a)
moneys are available for deposit or investments, the director of
invest-
ments may invest in SKILL act projects and bonds pursuant to
K.S.A.
1996 Supp. 74-8920, and amendments thereto, and in state agency
bonds
and bond projects.
(c) When moneys are available for deposits or investments, the
di-
rector of investments may invest in preferred stock of Kansas
venture
capital, inc., under terms and conditions prescribed by K.S.A.
74-8203,
and amendments thereto, but such investments shall not in the
aggregate
exceed a total amount of $10,000,000.
(d) When moneys are available for deposits or investments, the
di-
rector of investments may invest in loans pursuant to legislative
mandates,
except that not more than the lesser of 10% or $80,000,000 of the
state
moneys shall be invested.
(e) Interest on investment accounts in banks is to be paid at
maturity,
but not less than annually.
(f) Investments made by the director of investments under the
pro-
visions of this section shall be made with judgment and care, under
cir-
cumstances then prevailing, which persons of prudence, discretion
and
intelligence exercise in the management of their own affairs, not
for spec-
ulation, but for investment, considering the probable safety of
their capital
as well as the probable income to be derived.
(g) Investments under subsection (a) or (b) of this section
or under
section 1 shall be for a period not to exceed four
years.
(h) Investments in securities under subparagraph (A) of
paragraph paragraph (1) of subsection (a) shall be
limited to securities which do
(2)
not have any more interest rate risk than do direct United States
govern-
ment obligations of similar maturities. For purposes of this
subsection,
``interest rate risk'' means market value changes due to changes in
current
interest rates.
(i) On and after July 1, 1996, The director of
investments shall not
invest state moneys eligible for investment under paragraph
(2) of sub-
section (a), in the municipal investment pool fund, created under
K.S.A.
1996 Supp. 12-1677a, and amendments thereto.
(j) The director of investments shall not invest moneys in the
pooled
money investment portfolio in derivatives. As used in this
subsection,
``derivatives'' means a financial contract whose value depends on
the value
of an underlying asset or index of asset values.
(k) Moneys and investments in the pooled money investment
port-
folio shall be invested and reinvested by the director of
investments in
accordance with investment policies developed, approved, published
and
Ch. 180 1997 Session Laws of Kansas 1333
updated on an annual basis by the board. Such investment
policies shall
include at a minimum guidelines which identify credit standards,
eligible
instruments, allowable maturity ranges, methods for valuing the
portfolio,
calculating earnings and yields and limits on portfolio
concentration for
each type of investment. Any changes in such investment policies
shall
be approved by the pooled money investment board. Such
investment
policies may specify the contents of reports, methods of crediting
funds
and accounts and other operating procedures.
(l) The board shall adopt rules and regulations to establish an
overall
percentage limitation on the investment of moneys in investments
au-
thorized under subparagraph (E) of paragraph (2)
paragraph (3) of sub-
section (a), and within such authorized investment, the board shall
estab-
lish a percentage limitation on the investment in any single
business
entity.
Sec. 24. K.S.A. 1996 Supp. 75-4210 is hereby amended to read
as
follows: 75-4210. The director of investments shall calculate the
invest-
ment rate, as defined in subsection (l) of K.S.A. 75-4201
and amendments (g) of section 13, on Monday of each week
and publish such rate
thereto
that week in the Kansas register. The director of
investments shall also
calculate the market rate as defined in subsection (k) of K.S.A.
75-4201
and amendments thereto on the day before the offering of moneys
to
Kansas banks.
Sec. 25. K.S.A. 1996 Supp. 75-4212a is hereby amended to read
as
follows: 75-4212a. Whenever the balance in operating accounts is
insuf-
ficient to meet the state's obligations or withdrawals from the
municipal
investment pool fund, and there are state moneys in authorized
invest-
ments, the director of investments, with approval of the board,
may:
(a) Borrow upon the security of any one or more investment
accounts
an amount sufficient to meet the state's or the municipal
investment pool
fund's obligations. Any such loan shall be repaid in full within 60
days or
prior to July 1, whichever occurs first. Interest payment by the
state for
any loan under this section shall be made only by way of setoff
from
interest obligations to the state from the bank making such loan.
The
amount borrowed under this section from any bank, shall never
exceed
an amount equal to the amount of state moneys on deposit in such
bank;
or
(b) enter into reverse repurchase agreements utilizing
securities pur-
chased by the board pursuant to subsection
(a)(2)(A) of K.S.A. 75-4209,
and amendments thereto. Such reverse repurchase agreements may
be
entered into with Kansas banks or primary
government securities dealers
which report to the market reports division of the federal reserve
bank
of New York. Expenses of reverse repurchase agreements shall be
paid
by deducting such expenses against other interest income to the
state.
1334 1997 Session Laws of Kansas Ch. 180
Sec. 26. K.S.A. 1996 Supp. 75-4217 is hereby amended to read
as
follows: 75-4217. Awards of all state bank accounts,
aggregating more than shall be made pursuant to a written
$100,000,security agreement be-
tween the depository bank and the board, granting the state
of Kansas a. This agreement shall be approved by
the board of
security interest in securities pledged to secure payment of
deposits in
state bank accounts
directors of the depository bank, as and
reflected in the minutes of the
board of directors. From the time of execution, the
security agreement
shall remain continuously an official record of the depository
bank. Sep-
arate security agreements shall be entered into
for each class of account
in each depository bank.
Sec. 27. K.S.A. 1996 Supp. 75-4218 is hereby amended to read
as
follows: 75-4218. (a) All state bank accounts shall be secured
by pledge as provided in this section.
of securities
(b) The bank, savings bank or savings and loan
association receiving
or having a state bank account shall deposit or cause its
affiliate bank to
deposit securities acceptable to the board and owned by it or by
its affiliate
bank, in one of the following ways:
(1) Deposit with the treasurer.
(2) Deposit with a custodial bank having adequate modern
facilities
for the safekeeping of securities which shall have had the prior
approval
of the board. Any such custodial bank receiving securities for
safekeeping
shall be liable to the state for any loss suffered by the state in
the event
such custodial bank relinquishes the custody of any such securities
con-
trary to the provisions of this act or rules and regulations
adopted there-
under. This section shall not prohibit any custodial bank receiving
secu-
rities for safekeeping from issuing a joint custody receipt and
placing
those securities in such bank's account with any bank chartered in
Kansas
or any other state, any trust company chartered in Kansas or any
other
state, any national bank, or any centralized securities depository
wherever
located within the United States. No bonds or securities pledged to
secure
public deposits shall be left for safekeeping in any bank, trust
company,
or national bank which is owned directly or indirectly by any
parent cor-
poration of the depository bank, or with any bank, trust company,
or
national bank, having common controlling shareholders, having a
com-
mon majority of the board of directors or having common directors
with
the ability to control or influence directly or indirectly the acts
or policies
of the bank, state or federally chartered savings and loan
association or
federally chartered savings bank securing such public
deposits.
(3) Deposit with the federal reserve bank of Kansas
City, Missouri.
(4) Deposit with the federal home loan bank of Topeka,
Kansas.
(5) Any combination of (1), (2), (3) and
(4).
(c) The depository bank shall obtain a written agreement
from its
affiliate bank that the affiliate bank grants a security interest
to the state
Ch. 180 1997 Session Laws of Kansas 1335
of Kansas in securities owned by the affiliate bank
which are pledged on
behalf of the depository bank to secure payment of deposits made
with
the depository bank pursuant to this section. Such agreement shall
be
approved by the board of directors of the affiliate bank and
reflected in
its minutes. From the time of execution of such agreement, the
agree-
ment shall remain continuously an official record of the affiliate
bank.
Any such deposit of securities, except with the treasurer, shall
have a joint
custody receipt which shall constitute a perfected security
interest taken
therefor with one copy going to the treasurer and one copy going to
the
bank, savings bank or savings and loan association which deposits
such
securities. In lieu of the initial deposit of securities provided
for in this
subsection (c), the treasurer or the treasurer's duly authorized
deputy,
for a period of not to exceed 10 calendar days, may accept the
telephone
assurance of a bank qualified as provided in (2) or (3) of
subsection (b),
that the depository bank has requested the issuance of a joint
custody
receipt with the state of Kansas, specifying the securities
pledged, for the
purpose of compliance with this section and that such joint custody
re-
ceipt will be forthcoming.
(d) The depository bank, the board and the custodial
bank shall enter
into a written agreement for the safekeeping of securities and the
agree-
ment shall be maintained in the records of the depository
bank.
(e) Securities deposited to comply with this section may
be with-
drawn on application of the bank, savings bank or savings and loan
asso-
ciation depositing the securities, if such application is approved
by the
treasurer or the treasurer's duly authorized deputy for the reason
that
such deposit of securities is no longer needed to comply with this
section
or are required for collection by virtue of their maturity or for
exchange.
Securities withdrawn for collection by virtue of their maturity or
for
exchange shall be replaced within 15 calendar days, but until
replaced
the state shall retain a first lien on the withdrawn security or
the proceeds
therefrom.
(f) Operating accounts, investment accounts and fee
agency accounts
deposit, maintain,
shall be secured by pledge of securities, the market value of which
is
equal to 100% of the amount of the deposits in the account plus
accrued
interest, less the amount of deposits in the account protected by
the
federal deposit insurance corporation. Any agency responsible for a
fee
agency account shall transfer immediately all moneys not so secured
to
the state treasurer for deposit in the state treasury
pledge, assign, and grant a security interest in, or cause its
agent, trustee,
wholly-owned subsidiary, or affiliate having identical ownership to
de-
posit, maintain, pledge, assign, and grant a security interest in,
for the
benefit of the state of Kansas, in the manner provided in this act,
securities
owned by the depository bank directly or indirectly through its
agent or
trustee holding securities on its behalf, or owned by the
depository bank's
wholly-owned subsidiary or by such affiliate, the market value of
which
1336 1997 Session Laws of Kansas Ch. 180
is equal to 100% of the amount of the account plus accrued
interest, less
that portion of the amount of the account plus accrued interest
which is
insured by the federal deposit insurance corporation or its
successor.
(b) All securities securing state bank accounts shall be
deposited in a
securities account with a bank having the prior approval of the
board,
the federal home loan bank of Topeka or with the state treasurer
pursuant
to a written custodial agreement, and a receipt taken therefor with
one
copy going to the treasurer and one copy going to the bank, savings
bank
or savings and loan association which has secured such state bank
ac-
count. The receipt shall identify the securities which are subject
to a se-
curity interest to secure payment of the state bank account. This
section
shall not prohibit any custodial bank receiving securities on
deposit from
issuing a receipt and depositing securities identified in the
receipt in such
bank's account with any bank chartered in Kansas or any other
state, any
trust company chartered in Kansas or any other state, any national
bank,
or any centralized securities depository wherever located within
the
United States. No securities securing state bank accounts shall be
depos-
ited in any bank, trust company or national bank which is owned
directly
or indirectly by any parent corporation of the depository bank, or
with
any bank, trust company, or national bank having common
controlling
shareholders, having a common majority of the board of directors or
hav-
ing common directors with the ability to control or influence
directly or
indirectly the acts or policies of the bank, savings and loan
association or
savings bank securing such state bank account. Any custodial bank
which
releases securities securing a state bank account without being
authorized
to do so under the custodial agreement shall be liable to the state
for any
loss to the state resulting therefrom.
(c) Securities securing state bank accounts may be deposited
with the
federal reserve bank of Kansas City to be there held in such
manner, under
regulations and operating letters of the federal reserve bank, as
to secure
payment of the state bank account in the depository
bank.
(d) The depository bank, and any agent, trustee, wholly-owned
sub-
sidiary or affiliate having identical ownership granting a security
interest
shall enter into a written agreement with the state of Kansas
granting the
state of Kansas a security interest in the securities to secure
payment of
the state bank account. Such security interest shall be perfected
by the
depository bank and any agent, trustee, wholly-owned subsidiary or
af-
filiate having identical ownership granting a security interest
causing con-
trol of the securities under the Kansas uniform commercial code to
be
given to the state of Kansas. The security agreement and the
custodial
agreement shall be in writing, executed by all parties thereto,
maintained
as part of their official records, and, except for the state of
Kansas, ap-
proved by their boards of directors or their loan committees, which
ap-
provals shall be reflected in the minutes of the boards or
committees.
Ch. 180 1997 Session Laws of Kansas 1337
Sec. 28. K.S.A. 1996 Supp. 75-4220 is hereby amended to read
as
follows: 75-4220. (a) Each depository or
its affiliate bank pledging secu- bank and its agent, trustee,
wholly-owned sub-
rities for such depository
sidiary or affiliate having identical ownership granting a security
interest
pursuant to K.S.A. 75-4218, and amendments thereto, shall be liable
for
payment if: (1) (a) The depository bank
fails to: (A) (1) Pay any check,
draft or warrant drawn by the treasurer and director of accounts
and
reports; or (B) (2) account for any check,
draft, warrant, order, or certif-
icate of deposit, or any money entrusted to such bank by the
treasurer;
or (2) (b) a conservator or receiver is
appointed for the depository bank.
Any loss incurred by the state by reason of failure by any
depository
bank to safely keep and account for moneys and interest thereon
shall be
recovered by the state from the depository bank and a sale of the
secu-
rities pledged securing payment of such
moneys under this act. The at-
torney general is authorized to prosecute in the name of the state
any
and all actions for recovery of any loss incurred by the state
under this
act.
In case of default by any depository bank having a state bank
account
of any type, the securities pledged securing
payment of such account
under this act, if not in the possession of the treasurer, shall be
transferred
to the treasurer by the custodial bank to be sold by the treasurer
and
payment of the proceeds of such sale shall be made to the state to
the
extent of the state's interest, subject to the provisions of K.S.A.
75-4221,
and amendments thereto.
Sec. 29. K.S.A. 1996 Supp. 75-4263 is hereby amended to read
as
follows: 75-4263. (a) Except as provided in subsection (b), moneys
of a
state agency or public instrumentality of this state which may be
invested
by the director of investments in accordance with investment
policies
established by the pooled money investment board under K.S.A.
75-4232,
and amendments thereto, expressly for such agency or
instrumentality,
or invested directly by the agency or instrumentality, may be
invested in
the municipal investment pool fund established in K.S.A. 1996 Supp.
12-
1677a and amendments thereto. Such agency or instrumentality shall
be
treated as a municipality for purposes of participation in such
fund.
(b) On and after July 1, 1996, state moneys eligible for
investment
under paragraph (2) of subsection (a) of K.S.A.
75-4209, and amendments
thereto, shall not be invested in the municipal investment pool
fund.
Sec. 30. K.S.A. 9-1401, 9-1403, 9-1406, 9-1407, 12-1676,
17-5002
and 68-2060 and K.S.A. 1996 Supp. 9-1101, 9-1104, 9-1111, 9-1402,
9-
1405, 12-1675, 12-1677a, 12-1677b, 12-1677d, 75-4201, 75-4208,
75-
4209, 75-4210, 75-4212a, 75-4217, 75-4218, 75-4220 and 75-4263
are
hereby repealed.
1338 1997 Session Laws of Kansas Ch. 180
Sec. 31. This act shall take effect and be in force from and
after its
publication in the Kansas register.
Approved May 15, 1997.
Published in the Kansas Register: May 29, 1997.