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10  AN ACT concerning limitations on loans by banks and banking; amend-
11    ing K.S.A. 1996 Supp. 9-1104 9-1101, 9-1104 and 9-1111 and re-
12    pealing the existing section sections.
13
14  Be it enacted by the Legislature of the State of Kansas:
15    New Section 1.  (a) As used in this section:
16    (1)  ``Accredited school'' means any school operated by a public
17  school district organized under the laws of this state and any non-
18  public school accredited by the state board of education.
19    (2)  ``Board'' means the board of education of a school district
20  and the governing authority of an accredited nonpublic school.
21    (b)  In order to encourage savings among school children, a
22  bank may enter into a written agreement with a board of an ac-
23  credited school to establish a school savings deposit program. Such
24  program shall be limited to the opening of accounts and the pe-
25  riodic collection, by bank employees or school personnel, of de-
26  posits from school children for deposit in such bank accounts. No
27  such program shall be implemented until the executed agreement
28  and any information deemed necessary has been submitted to the
29  Kansas state bank commissioner. If the commissioner determines
30  the agreement and proposed program primarily promote educa-
31  tional objectives and the purpose of this section, the commissioner
32  shall provide the bank with written approval to implement the pro-
33  gram. Any bank participating in such school savings deposit pro-
34  gram shall have its main or branch office located in the same
35  county as the participating school, or if no bank in the county wants
36  to participate in such program, then banks in any contiguous
37  county may participate. The school savings deposit program may
38  be conducted in any elementary or secondary school.
39    Sec. 2.  K.S.A. 1996 Supp. 9-1101 is hereby amended to read
40  as follows: 9-1101. Any bank hereby is authorized to exercise by
41  its board of directors or duly authorized officers or agents, subject
42  to law, all such powers, including incidental powers, as shall be
43  necessary to carry on the business of banking, and:
SB 132--Am. by H
                                     

 1    (1)  To receive deposits and to pay interest thereon at rates
 2  which need not be uniform. The state bank commissioner, with
 3  approval of the state banking board, may by regulations of general
 4  application fix maximum rates of interest to be paid on deposit
 5  accounts other than accounts for public moneys;
 6    (2)  to buy and sell exchange, gold, silver, foreign coin, bullion,
 7  commercial paper, bills of exchange, notes and bonds;
 8    (3)  to buy and sell bonds, securities, or other evidences of in-
 9  debtedness of the United States of America or those fully guar-
10  anteed, directly or indirectly, by it, and general obligation bonds
11  of the state of Kansas or any municipality or quasi-municipality
12  thereof, and of other states, and of municipalities or quasi-munic-
13  ipalities in other states of the United States of America. No bank
14  shall invest an amount in excess of 15% of its capital stock paid in
15  and unimpaired and the unimpaired surplus fund of such bank in
16  bonds, securities or other evidences of indebtedness of any mu-
17  nicipality or quasi-municipality of any other state or states of the
18  United States of America: (a) If and when the direct and overlap-
19  ping indebtedness of such municipality or quasi-municipality is in
20  excess of 10% of its assessed valuation, excluding therefrom all
21  valuations on intangibles and homestead exemption valuation; (b)
22  or if any bond, security, or evidence of indebtedness of any such
23  municipality or quasi-municipality has been in default in the pay-
24  ment of principal or interest within 10 years prior to the time that
25  any bank acquires any such bonds, security or evidence of indebt-
26  edness;
27    (4)  to make all types of loans, including loans on real estate,
28  subject to the loan limitations contained in this act. Every real
29  estate loan shall be secured by a mortgage or other instrument
30  constituting a lien, or the full equivalent thereof, upon the real
31  estate securing the loan, according to any lawful or well recognized
32  practice, which is best suited to the transaction. The mortgage may
33  secure future advances. The lien of such mortgage shall attach
34  upon its execution and have priority from time of recording as to
35  all advances made thereunder until such mortgage is released of
36  record. The lien of such mortgage shall not exceed at any one time
37  the maximum amount stated in the mortgage;
38    (5)  to discount and negotiate bills of exchange, negotiable
39  notes and notes not negotiable;
40    (6)  to buy and sell investment securities which are evidences
41  of indebtedness. The buying and selling of investment securities
42  shall be limited to buying and selling without recourse marketable
43  obligations evidencing indebtedness of any person, copartnership,
SB 132--Am. by H
                                     

 1  association, corporation, or state or federal agency, including rev-
 2  enue bonds issued pursuant to K.S.A. 76-6a15, and amendments
 3  thereto, or the state armory board in the form of bonds, notes or
 4  debentures or both, commonly known as investment securities, un-
 5  der such further definition of the term ``investment securities'' as
 6  prescribed by the board, but the total amount of such investment
 7  securities of any one obligor or maker held by such bank shall at
 8  no time exceed 15% of the capital stock paid in and unimpaired
 9  and the unimpaired surplus fund of such bank except that this limit
10  shall not apply to obligations of the United States government or
11  any agency thereof. If the obligor is a state agency including any
12  agency issuing revenue bonds pursuant to K.S.A. 76-6a15, and
13  amendments thereto, or the state armory board, the total amount
14  of such investment securities shall at no time exceed 25% of the
15  capital stock paid in and unimpaired and the unimpaired surplus
16  fund of such bank;
17    (7)  to subscribe to, buy and own such stock of the federal na-
18  tional mortgage association as required by title 3, section 303 of
19  the federal act known as the national housing act as amended by
20  section 201 of public law No. 560, of the United States (68 Stat.
21  613-615), known as the housing act of 1954, or amendments
22  thereto;
23    (8)  to subscribe to, buy and own stock in one or more small
24  business investment companies in Kansas as otherwise authorized
25  by federal law, except that in no event shall any bank acquire
26  shares in any small business investment company if, upon the mak-
27  ing of that acquisition the aggregate amount of shares in small
28  business investment companies then held by the bank would ex-
29  ceed 5% of its capital and surplus. Nothing in this act contained
30  shall prohibit any bank from holding and disposing of such real
31  estate and other property as it may acquire in the collection of its
32  assets;
33    (9)  to subscribe to, buy and own stock in any agricultural credit
34  corporation or livestock loan company, or its affiliate, organized
35  pursuant to the provisions of the laws of the United States provid-
36  ing for the information and operation of agricultural credit cor-
37  porations and livestock loan companies, in an amount not exceed-
38  ing either the undivided profits or 10% of the capital stock and
39  surplus and undivided profits from such bank, whichever is
40  greater;
41    (10)  to subscribe to, buy and own stock in minbanc capital cor-
42  poration, a company formed for the purpose of providing capital
43  to minority-owned banks. No bank's investment in such stock shall
SB 132--Am. by H
                                     

 1  exceed 2% of its capital and surplus;
 2    (11)  to buy, hold, and sell any type of investment securities not
 3  enumerated in this section with approval of the commissioner and
 4  upon such conditions and under such regulations as are prescribed
 5  by the state banking board;
 6    (12)  to act as escrow agent;
 7    (13)  to subscribe to, acquire, hold and dispose of stock of a
 8  corporation having as its purpose the acquisition, holding and dis-
 9  position of loans secured by real estate mortgages, and to acquire,
10  hold and dispose of the debentures and capital notes of such cor-
11  poration. No bank's investment in such stock, debentures and cap-
12  ital notes shall exceed 2% of its capital stock, surplus and undivided
13  profits and such investment shall be carried on the books of the
14  bank as directed by the commissioner;
15    (14)  to purchase and sell securities and stock without recourse
16  solely upon the order, and for the account, of customers;
17    (15)  to subscribe to, acquire, hold and dispose of any class of
18  stock, debentures and capital notes of MABSCO agricultural serv-
19  ices, inc. or any similar corporation having as its purpose the ac-
20  quisition, holding and disposition of agricultural loans originated
21  by Kansas banks. No bank's investment in such stock, debentures
22  and capital notes shall exceed 2% of its capital stock, surplus and
23  undivided profits. Such investment shall be carried on the books
24  of the bank as directed by the commissioner;
25    (16)  to buy, hold and sell mortgages, stock, obligations and
26  other securities which are issued or guaranteed by the federal
27  home loan mortgage corporation under sections 305 and 306 of
28  the federal act known as the federal home loan mortgage corpo-
29  ration act (P.L. 91-351);
30    (17)  to buy, hold and sell obligations or other instruments or
31  securities, including stock, issued or guaranteed by the student
32  loan marketing association created by (P.L. 92-318) of the United
33  States;
34    (18)  to engage in financial future contracts on United States
35  government and agency securities subject to such rules and reg-
36  ulations as the state bank commissioner may prescribe pursuant
37  to K.S.A. 9-1713, and amendments thereto, to promote safe and
38  sound banking practices;
39    (19)  to subscribe to, buy and own stock in a state or federally
40  chartered bankers' bank or a one bank holding company which
41  owns or controls such a bankers' bank, except no bank's investment
42  in such stock shall exceed 10% of its capital stock, surplus and
43  undivided profits;
SB 132--Am. by H
                                     

 1    (20)  subject to such rules and regulations as the state bank
 2  commissioner may adopt pursuant to K.S.A. 9-1713, and amend-
 3  ments thereto, to promote safe and sound banking practices, upon
 4  recorded prior approval by the board of directors of the initial
 5  investment in a specific company and pursuant to an investment
 6  policy approved by the board of directors which specifically pro-
 7  vides for such investments to buy, hold and sell shares of an open-
 8  end investment company registered with the federal securities and
 9  exchange commission under the federal investment company act
10  of 1940 and the federal securities act of 1933 and of a privately
11  offered company sponsored by an affiliated commercial bank, the
12  shares of which are purchased and sold at par and the assets of
13  which consist solely of securities which may be purchased by the
14  bank for its own account. Such shares may be purchased without
15  limit if the assets of the company consist solely of and are limited
16  to obligations that are eligible for purchase by the bank without
17  limit. If the assets of the company include securities which may be
18  purchased by the bank subject to limitation, such shares may be
19  purchased subject to the limitation applicable to purchase by the
20  bank of such securities;
21    (21)  subject to the prior approval of the state bank commis-
22  sioner and the state banking board and subject to such rules and
23  regulations as are adopted by the state bank commissioner pur-
24  suant to K.S.A. 9-1713, and amendments thereto, to promote safe
25  and sound banking practices, a bank may establish a subsidiary
26  which engages in the following securities activities: (a) selling or
27  distributing stocks, bonds, debentures, notes, mutual funds and
28  other securities, (b) issuing and underwriting municipal bonds, (c)
29  organizing, sponsoring and operating mutual funds, (d) acting as
30  a securities broker-dealer;
31    (22)  to subscribe to, acquire, hold and dispose of stock of any
32  class of the federal agricultural mortgage corporation, a corpora-
33  tion having as its purpose the acquisition, holding and disposition
34  of loans secured by agricultural real estate mortgages. No bank's
35  investment in such corporation shall exceed 5% of its capital stock,
36  surplus and undivided profits and such investment shall be carried
37  on the books of the bank as directed by the commissioner;
38    (23)  to subscribe to, buy and own stock in an insurance com-
39  pany incorporated prior to 1910, under the laws of Kansas, with
40  corporate headquarters in this state, which only provides insur-
41  ance to financial institutions. The investment in such stock shall
42  not exceed 2% of the bank's capital stock, surplus and undivided
43  profits;
SB 132--Am. by H
                                     

 1    (24)  to purchase and hold an interest in life insurance policies
 2  on the life of its executive officers and directors, and to purchase
 3  life insurance policies for the sole purpose of providing employee
 4  deferred compensation and benefit plans subject to the limitations
 5  listed herein. If the bank has the authority to direct the invest-
 6  ments of the cash surrender value of the policy, those investments
 7  shall be limited solely to assets which may be directly purchased
 8  by the bank for its own account. The limitations set forth in para-
 9  graphs (a) and (b) of this subsection do not apply to any such life
10  insurance policies in place before July 1, 1993. Funding for the
11  payment of employee compensation and benefit plans as well as
12  the benefits derived may be made or split in a joint manner be-
13  tween the bank, employee or bank holding company as in ``split
14  dollar'' or other insurance plans:
15    (a)  Life insurance purchased and held on the life of executive
16  officers and directors are subject to the following limitations:
17    (i)  The cash surrender value of any life insurance policy on an
18  executive officer or director underwritten by any one life insur-
19  ance company cannot at any time exceed 15% of the bank's capital
20  stock, surplus, undivided profits, loan loss reserve, capital notes
21  and debentures and reserve for contingency, unless the bank has
22  obtained the prior approval of the state bank commissioner;
23    (ii)  the cash surrender value of life insurance policies on ex-
24  ecutive officers or directors, in the aggregate from all companies,
25  cannot at any time exceed 25% of the bank's capital stock, surplus,
26  undivided profits, loan loss reserve, capital notes and debentures
27  and reserve for contingency, unless the bank has obtained the
28  prior approval of the state bank commissioner;
29    (iii)  the authority to hold life insurance on any executive officer
30  ceases if the executive officer is no longer employed by the bank
31  or no longer meets the definition of an executive officer;
32    (iv)  the authority to hold life insurance on a director ceases
33  when that director is no longer a member of the board of directors;
34    (v)  the bank's board of directors must approve and document
35  the purchase of any life insurance, including the reasonableness
36  of such purchase; and
37    (vi)  except as part of a reasonable compensation or benefit
38  plan, a bank is not authorized to purchase life insurance as an
39  estate management device for the benefit of officers, directors or
40  employees who are also controlling shareholders of the bank.
41    (b)  Life insurance purchased for the sole purpose of providing
42  deferred compensation and benefit plans are subject to the follow-
43  ing limitations:
SB 132--Am. by H
                                     

 1    (i)  The bank may purchase individual or group policies for the
 2  sole purpose of providing deferred compensation agreements en-
 3  tered into with its officers and employees;
 4    (ii)  the bank may purchase policies on directors to fund a de-
 5  ferred directors fees program;
 6    (iii)  the board of directors must approve and document such
 7  deferred plans including the reasonableness of the plans;
 8    (iv)  the bank is not authorized to hold the policies unless spe-
 9  cifically approved by the state banking board if no liability exists
10  under the deferred compensation plans;
11    (v)  the cash surrender value of any life insurance policy pur-
12  chased for the sole purpose of providing deferred compensation
13  and benefit plans, underwritten by any one life insurance com-
14  pany, cannot exceed at any time, 15% of the bank's capital stock,
15  surplus, undivided profits, loan loss reserve, capital notes and de-
16  bentures and reserve for contingency, unless the bank has ob-
17  tained the prior approval of the state bank commissioner; and
18    (vi)  the cash surrender value of life insurance policies pur-
19  chased for the sole purpose of providing deferred compensation
20  and benefit plans, in the aggregate from all companies, cannot at
21  any time exceed 25% of the bank's capital stock, surplus, undivided
22  profits, loan loss reserve, capital notes and debentures and reserve
23  for contingency, unless the bank has obtained the prior approval
24  of the state bank commissioner;
25    (25)  subject to such rules and regulations as the state bank
26  commissioner may adopt pursuant to K.S.A. 9-1713 and amend-
27  ments thereto to promote safe and sound banking practices, to act
28  as an agent and receive deposits, renew time deposits, close loans,
29  service loans, and receive payments on loans and other obligations
30  for any company which is a subsidiary, as defined in subsection (d)
31  of K.S.A. 9-519 and amendments thereto of the bank holding com-
32  pany which owns the bank. Nothing in this subsection shall au-
33  thorize a bank to conduct activities as an agent which the bank or
34  the subsidiary would be prohibited from conducting as a principal
35  under any applicable federal or state law. Any bank which enters
36  or terminates any agreement pursuant to this subsection shall
37  within 30 days of the effective date of the agreement or termina-
38  tion provide written notification to the commissioner which details
39  all parties involved and services to be performed or terminated;
40    (26)  to make loans to the bank's stockholders or the stockhold-
41  ers of the bank's controlling bank holding company on the security
42  of the shares of the bank or shares of the bank's controlling bank
43  holding company, with the limitation that this may occur only if
SB 132--Am. by H
                                     

 1  the bank would have extended credit to such stockholder on ex-
 2  actly the same terms without the shares pledged as collateral, and
 3  provided the shares pledged are not a director's qualifying shares
 4  per K.S.A. 9-1117, and amendments thereto; and
 5    (27)  to make investments in and loans to community develop-
 6  ment corporations (CDCs) and community development projects
 7  (CD projects) as defined in K.S.A. 9-701 and amendments thereto,
 8  subject to the limitations prescribed by the comptroller of the cur-
 9  rency as interpreted by rules and regulations which shall be
10  adopted by the state bank commissioner as provided by K.S.A. 9-
11  1713 and amendments thereto; and
12    (28)  to participate in a school savings deposit program authorized
13  under section 1.
14    Section 1. Sec. 3.  K.S.A. 1996 Supp. 9-1104 is hereby amended to
15  read as follows: 9-1104. (a) Definitions. As used in this section:
16    (1)  ``Borrower'' means an individual, sole proprietorship, partnership,
17  joint venture, association, trust, estate, business trust, corporation, limited
18  liability company, not for profit corporation, government unit or agency,
19  instrumentality, or political subdivision thereof, or any similar entity or
20  organization.
21    (2)  ``Capital'' means the total of capital stock, surplus, undivided prof-
22  its, 100% of the allowance for loan and lease loss, capital notes and de-
23  bentures, and reserve for contingencies. Intangibles, such as goodwill,
24  shall not be included in the definition of capital when determining lending
25  limits.
26    (3)  ``Loan'' means:
27    (A)  A bank's direct or indirect advance of funds to or on behalf of a
28  borrower based on an obligation of the borrower to repay the funds;
29    (B)  a contractual commitment to advance funds;
30    (C)  an overdraft;
31    (D)  loans that have been charged off the bank's books in whole or in
32  part, unless the loan is unenforceable by reason of:
33    (i)  Discharge in bankruptcy;
34    (ii)  expiration of the statute of limitations;
35    (iii)  judicial decision; or
36    (iv)  the bank's forgiveness of the debt.
37    (b)  General Lending Limit Rule. Subject to the provisions in (d), (e)
38  and (f), loans to one borrower, including any bank officer or employee,
39  shall not exceed 25% of a bank's capital.
40    (c)  Calculation of the Lending Limit. (1)  The bank's lending limit
41  shall be calculated on the date the loan or written commitment is made.
42  The renewal or refinancing of a loan shall not constitute a new lending
43  limit calculation date unless new funds are advanced.
SB 132--Am. by H
                                     

 1    (2)  If the bank's lending limit increases subsequent to the origination
 2  date, a bank may use the current lending limit to determine compliance
 3  when advancing funds. An advance of funds includes the lending of
 4  money or the repurchase of any portion of a participation.
 5    (3)  If the bank's lending limit decreases subsequent to the origination
 6  date, a bank is not prohibited from advancing on a prior commitment
 7  that was legal on the date the commitment was made.
 8    (d)  Exemptions. That portion of a loan which is continuously secured
 9  on a dollar for dollar basis by any of the following will be exempt from
10  any lending limit:
11    (1)  A guaranty, commitment or agreement to take over or to pur-
12  chase, made by any federal reserve bank or by any department, bureau,
13  board, commission, agency or establishment of the United States of
14  America, including any corporation wholly owned, directly or indirectly
15  by the United States;
16    (2)  a perfected interest in a time deposit account in the lending bank.
17  In the case of a time deposit which may be withdrawn in whole or in part
18  prior to maturity, the bank shall establish written internal procedures to
19  prevent the release of the deposit;
20    (3)  a bonded warehouse receipt issued to the borrower by some other
21  person;
22    (4)  treasury bills, certificates of indebtedness, or bonds or notes of
23  the United States of America or instrumentalities or agencies thereof, or
24  those fully guaranteed by them;
25    (5)  general obligation bonds or notes of the state of Kansas or any
26  other state in the United States of America;
27    (6)  general obligation bonds or notes of any Kansas municipality or
28  quasi-municipality; or
29    (7)  a perfected interest in a repurchase agreement of United States
30  government securities with the lending bank.
31    (e)  Special Rules. (1)  The total liability of any borrower may exceed
32  the general 25% limit by up to an additional 10% of the bank's capital.
33  To qualify for this expanded limit:
34    (A)  The bank shall have as collateral a first lien or liens on real estate
35  securing a portion of the liability equal to at least the amount by which
36  the total liability exceeds the 25% limit;
37    (B)  the amount of the recorded lien or liens shall equal at least the
38  amount of the excess liability;
39    (C)  the appraised value of the real estate shall equal at least twice
40  the amount of the excess liability; and
41    (D)  a portion of the loan equal to at least the excess liability shall
42  have installment payments sufficient to amortize that portion within 20
43  years.
SB 132--Am. by H
                                     

 1    (2)  That portion of any loan endorsed or guaranteed by a borrower
 2  will not be added to that borrower's liability until the endorsed or guar-
 3  anteed loan is past due 10 days.
 4    (3)  If the total liability of any active bank officer will exceed $50,000,
 5  prior approval from the bank's board of directors shall be noted in the
 6  minutes.
 7    (4)  To the extent they are insured by the federal deposit insurance
 8  corporation, time deposits purchased by a bank from another financial
 9  institution shall not be considered a loan to that financial institution and
10  shall not be subject to the bank's lending limit.
11    (5)  Third-party paper purchased by the bank will not be considered
12  a loan to the seller unless and until the bank has the right under the
13  agreement to require the seller to repurchase the paper.
14    (f)  Combination Rules.
15    (1)  General Rule. Loans to one borrower will be attributed to another
16  borrower and their total liability will be combined:
17    (A)  When proceeds of a loan are to be used for the direct benefit of
18  the other borrower, to the extent of the proceeds so used; or
19    (B)  when a common enterprise is deemed to exist between the bor-
20  rowers.
21    (2)  Direct Benefit. The proceeds of a loan to a borrower will be
22  deemed to be used for the direct benefit of another person and will be
23  attributed to the other person when the proceeds, or assets purchased
24  with the proceeds, are transferred to another person, other than in a bona
25  fide arm's length transaction where the proceeds are used to acquire
26  property, goods or services.
27    (3)  Common Enterprise. A common enterprise will be deemed to
28  exist and loans to separate borrowers will be aggregated:
29    (A)  When the expected source of repayment for each loan or exten-
30  sion of credit is the same for each borrower and neither borrower has
31  another source of income from which the loan, together with the borrow-
32  er's other obligations, may be fully repaid;
33    (B)  when both of the following circumstances are present:
34    (i)  Loans are made to borrowers who are related directly or indirectly
35  through common control, including where one borrower is directly or
36  indirectly controlled by another borrower. Common control means to
37  own, control or have the power to vote 25% or more of any class of voting
38  securities or voting interests or to control, in any manner, the election of
39  a majority of the directors, or to have the power to exercise a controlling
40  influence over the management or policies of another person; and
41    (ii)  substantial financial interdependence exists between or among
42  the borrowers. Substantial financial interdependence is deemed to exist
43  when 50 percent or more of one borrower's gross receipts or gross ex-
SB 132--Am. by H
                                     

 1  penditures (on an annual basis) are derived from transactions with the
 2  other borrower. Gross receipts and expenditures include gross revenues,
 3  expenses, intercompany loans, dividends, capital contributions and similar
 4  receipts or payments; or
 5    (C)  when separate persons borrow from a bank to acquire a business
 6  enterprise of which those borrowers will own more than 50% of the voting
 7  securities or voting interests, in which case a common enterprise is
 8  deemed to exist between the borrowers for purposes of combining the
 9  acquisition loan.
10    (D)  An employer will not be treated as a source of repayment for
11  purposes of determining a common enterprise because of wages and sal-
12  aries paid to an employee.
13    (4) Special Rules for Loans to a Corporate Group. (A)  Loans by a
14  bank to a borrower and the borrower's subsidiaries shall not, in the ag-
15  gregate, exceed 50% of the bank's capital. At no time shall loans to any
16  one borrower or to any one subsidiary exceed the general lending limit
17  of 25%, except as allowed by other provisions of this section. For purposes
18  of this paragraph, a corporation or a limited liability company is a subsid-
19  iary of a borrower if the borrower owns or beneficially owns directly or
20  indirectly more than 50 percent of the voting securities or voting interests
21  of the corporation or company.
22    (B)  Loans to a borrower and a borrower's subsidiaries that do not
23  meet the test contained in subsection (f)(4)(A) will not be combined un-
24  less either the direct benefit or the common enterprise test is met.
25    (5)  Special Rules for Loans to Partnerships, Joint Ventures and As-
26  sociations. (A)  As used in this subpart (5), the term ``partnership'' shall
27  include a partnership, joint venture or association. The term partner shall
28  include a partner in a partnership or a member in a joint venture or
29  association.
30    (B)  General Partner. Loans to a partnership are considered to be
31  loans to a partner, if by the terms of the partnership agreement that
32  partner is held generally liable for debts or actions of the partnership.
33    (C)  Limited Partner. If the liability of a partner is limited by the terms
34  of the partnership agreement, the amount of the partnership debt attrib-
35  utable to the partner is in direct proportion to that partner's limited part-
36  nership interest liability.
37    (D)  Notwithstanding the provisions of subsections (f)(5)(B) and
38    (f)(5)(C), if by the terms of the loan agreement the liability of any partner
39  is different than delineated in the partnership agreement, for the purpose
40  of attributing debt to the partner the loan agreement shall control.
41    (E)  Loans to a partner are not attributed to the partnership unless
42  either the direct benefit or the common enterprise test is met.
43    (F)  Loans to one partner are not attributed to other partners unless
SB 132--Am. by H
                                     

 1  either the direct benefit or common enterprise test is met.
 2    (G)  When a loan is made to a partner to purchase an interest in a
 3  partnership, both the direct benefit and common enterprise tests are
 4  deemed to be met, and the loan is attributed to the partnership.
 5    (6)  Notwithstanding the provisions of this subsection, the commis-
 6  sioner may determine, based upon an evaluation of the facts and circum-
 7  stances of a particular transaction, that a loan to one borrower may be
 8  attributed to another borrower.
 9    (g)  The commissioner may order a bank to correct any loan not in
10  compliance with this section. A violation of this section shall be deemed
11  corrected if that portion of the borrower's liability which created the
12  violation could be legally advanced under current lending limits. Failure
13  to comply with the commissioner's order within 60 days shall be grounds
14  for the proposed removal of a bank officer or director pursuant to K.S.A.
15  9-1805 and amendments thereto.
16    Sec. 4.  K.S.A. 1996 Supp. 9-1111 is hereby amended to read
17  as follows: 9-1111. The general business of every bank shall be
18  transacted at the place of business specified in its certificate of
19  authority and at one or more branch banks established and oper-
20  ated as provided in this section. Except for the establishment or
21  operation of a trust branch bank or the relocation of an existing
22  trust branch bank pursuant to K.S.A. 1996 Supp. 9-1135 and
23  amendments thereto, it shall be unlawful for any bank to establish
24  and operate any branch bank or relocate an existing branch bank
25  except as hereinafter provided. Notwithstanding the provisions of
26  this section, any location at which a depository institution, as de-
27  fined by K.S.A. 9-701 and amendments thereto, receives deposits,
28  renews time deposits, closes loans, services loans or receives pay-
29  ments on loans or other obligations, as agent, for a bank pursuant
30  to subsection (28) (25) of K.S.A. 9-1101 and amendments thereto
31  or other applicable state or federal law, or is authorized to open
32  accounts or receive deposits under subsection (28) of K.S.A. 9-1101, and
33  amendments thereto, shall not be deemed to be a branch bank:
34    (a)  For the purposes of this section, the term ``branch bank''
35  means any office, agency or other place of business located within
36  this state, other than the place of business specified in the bank's
37  certificate of authority, at which deposits are received, checks
38  paid, money lent or trust authority exercised, if approval has been
39  granted by the state bank commissioner, under K.S.A. 9-1602, and
40  amendments thereto;
41    (b)  after first applying for and obtaining the approval of the
42  state banking board, one or more branch banks may be established
43  and operated anywhere within this state by a bank incorporated
SB 132--Am. by H
                                     

 1  under the laws of this state;
 2    (c)  an application to establish and operate a branch bank or to
 3  relocate an existing branch bank shall be in such form and contain
 4  such information as the rules and regulations of the state bank
 5  commissioner, adopted pursuant to K.S.A. 9-1713, and amend-
 6  ments thereto, shall provide;
 7    (d)  the application shall include estimates of the annual income
 8  and expenses of the proposed branch bank, the annual volume of
 9  business to be transacted by it, the nature of the banking business
10  to be conducted at the proposed branch bank, the primary geo-
11  graphical area to be served by it and the personnel and office fa-
12  cilities to be provided at the proposed branch bank;
13    (e)  the application shall include the name selected for the pro-
14  posed branch bank. The name selected for the proposed branch
15  bank shall not be the name of any other bank or branch bank doing
16  business in the same city or town nor shall the name selected be
17  required to contain the name of the applicant bank. If the name
18  selected for the proposed bank does not contain the name of the
19  applicant bank, the branch bank shall provide in the public lobby
20  of such branch bank, a public notice that it is a branch bank of the
21  applicant bank;
22    (f)  the application shall include an affidavit of publication of
23  notice that applicant bank intends to file an application to establish
24  a branch bank or relocate an existing branch bank. The notice shall
25  be published in a newspaper of general circulation in the county
26  where the applicant bank proposes to locate the branch bank. The
27  notice shall be in the form prescribed by the state banking board
28  and at a minimum shall contain, the name and address of the ap-
29  plicant bank, the location of the proposed branch, a solicitation for
30  written comments concerning the proposed branch be submitted
31  to the state banking board, and provide for a comment period of
32  not less than 10 days prior to the board's final consideration of the
33  application;
34    (g)  upon receipt of an application meeting the above require-
35  ments, if there is any written objection to the application filed with
36  the board, within 60 days after receipt of the application, the state
37  banking board shall hold a hearing in the county in which the ap-
38  plicant bank seeks to establish and operate a branch bank. If there
39  is no written objection filed with the board within the time period
40  specified under subsection (f), the board may hold a hearing on
41  the application in such county. Notice of the time, date and place
42  of such hearing if one is to be held shall be published in a news-
43  paper of general circulation in such county by the bank seeking to
SB 132--Am. by H
                                     

 1  establish and operate the branch bank not less than 10 or more
 2  than 30 days prior to the date of the hearing, and an affidavit of
 3  publication thereof shall be filed with the commissioner. Not less
 4  than 10 days or more than 30 days prior to any such date of the
 5  hearing, the commissioner shall give notice of the time, date and
 6  place of such hearing by registered or certified mail to all banks
 7  and national banking associations having their principal places of
 8  business or branch banks in the county wherein the applicant bank
 9  seeks to locate a branch bank. At any such hearing, all interested
10  persons shall be allowed to present written and oral evidence to
11  the board in support of or in opposition to the application. Upon
12  completion of a transcript of the testimony given at any such hear-
13  ing, the transcript shall be filed in the office of the commissioner
14  and copies shall be furnished to the members of the state banking
15  board not less than 14 days prior to the meeting of the board at
16  which the application will be considered;
17    (h)  the state banking board shall approve or disapprove the
18  application, within 90 days after consideration of the application
19  and the evidence gathered during the board's investigation. If the
20  board finds that:
21    (1)  There is or will be at the time the branch bank is opened
22  the need for the same in the community to be served by it;
23    (2)  there is a reasonable probability of usefulness and success
24  of the proposed branch bank;
25    (3)  the applicant bank's financial history and condition is
26  sound; and
27    (4)  the proposed branch bank can be established without un-
28  due injury to properly conducted existing banks and national bank-
29  ing associations, the application shall be granted, otherwise, the
30  application shall be denied;
31    (i)  any final action of the board approving or disapproving an
32  application shall be subject to review in accordance with the act
33  for judicial review and civil enforcement of agency actions upon
34  the petition of any adversely affected or aggrieved person who
35  appeared and offered evidence at the hearing upon the applica-
36  tion;
37    (j)  any branch bank lawfully established and operating on the
38  effective date of this act may continue to be operated by the bank
39  then operating the branch bank and by any successor bank;
40    (k)  branch banks which have been established and are being
41  maintained by a bank at the time of its merger into or consolidation
42  with another bank or at the time its assets are purchased and its
43  liabilities are assumed by another bank may continue to be oper-
SB 132--Am. by H
                                     

 1  ated by the surviving, resulting or purchasing and assuming bank.
 2  The surviving, resulting or purchasing and assuming bank, with
 3  approval of the state bank commissioner, may establish and op-
 4  erate a branch bank or banks at the site or sites of the merged,
 5  constituent or liquidated bank or banks;
 6    (l)  any state bank or national banking association having its
 7  principal office and main banking house in this state may provide
 8  and engage in banking transactions by means of remote service
 9  units wherever located, which remote service units shall not be
10  considered to be branch banks authorized herein. Any banking
11  transaction effected by use of a remote service unit shall be
12  deemed to be transacted at a bank and not at a remote service
13  unit;
14    (m)  as a condition to the operation and use of any remote serv-
15  ice unit in this state, a state bank or national banking association,
16  each hereinafter referred to as a bank, which desires to operate
17  or enable its customers to utilize a remote service unit must agree
18  that such remote service unit will be available for use by customers
19  of any other bank or banks upon the request of such bank or banks
20  to share its use and the agreement of such bank or banks to share
21  all costs, including a reasonable return on capital expenditures in-
22  curred in connection with its development, installation and oper-
23  ation. The owner of the remote service unit, whether a bank or
24  any other person, shall make the remote service unit available for
25  use by other banks and their customers on a nondiscriminatory
26  basis, conditioned upon payment of a reasonable proportion of all
27  costs, including a reasonable return on capital expenditures in-
28  curred in connection with the development, installation and op-
29  eration of the remote service unit. Notwithstanding the foregoing
30  provisions of this subsection, a remote service unit located on the
31  property owned or leased by the bank where the principal place
32  of business of a bank, or an attached auxiliary teller facility or
33  branch bank of a bank, is located need not be made available for
34  use by any other bank or banks or customers of any other bank or
35  banks;
36    (n)  for purposes of this section, ``remote service unit'' means
37  an electronic information processing device, including associated
38  equipment, structures and systems, through or by means of which
39  information relating to financial services rendered to the public is
40  stored and transmitted, whether instantaneously or otherwise, to
41  a bank and which, for activation and account access, is dependent
42  upon the use of a machine-readable instrument in the possession
43  and control of the holder of an account with a bank. The term shall
SB 132--Am. by H
                                     

 1  include ``online'' computer terminals and ``offline'' automated cash
 2  dispensing machines and automated teller machines, but shall not
 3  include computer terminals or automated teller machines or au-
 4  tomated cash dispensing machines using systems in which account
 5  numbers are not machine read and verified. Withdrawals by means
 6  of ``offline'' systems shall not exceed $300 per transaction and shall
 7  be restricted to individual not corporate or commercial accounts.
 8    Sec. 2. 5.  K.S.A. 1996 Supp. 9-1104 is 9-1101, 9-1104 and 9-1111
 9  are hereby repealed.
10    Sec. 3. 6.  This act shall take effect and be in force from and after its
11  publication in the statute book.