Session of 2000
         
SENATE BILL No. 439
         
By Committee on Financial Institutions and Insurance
         
1-19
         
  9             AN  ACT relating to the state banking board; transferring certain powers
10             of the board to the state bank commissioner; amending K.S.A. 9-802,
11             9-804, 9-812, 9-908, 9-912, 9-1001, 9-1101a, 9-1107, 9-1127b, 9-1127c,
12             9-1127d, 9-1301, 9-1601, 9-1609, 9-1702, 9-1713, 9-1714, 9-1716, 9-
13             1719, 9-1721, 9-1805, 9-1806, 9-1807, 9-2106 and 74-3005 and K.S.A.
14             1999 Supp. 9-535, 9-539, 9-904, 9-1101, 9-1111, 9-1135, 9-1402, 9-
15             1801, 9-1904, 9-2107, 9-2108, 74-3004, 74-3006, 74-3007 and 74-3008
16             and repealing the existing sections; also repealing K.S.A. 9-901b.
17      
18       Be it enacted by the Legislature of the State of Kansas:
19             Section  1. K.S.A. 1999 Supp. 9-535 is hereby amended to read as
20       follows: 9-535. (a) The commissioner shall approve the application if the
21       commissioner determines that the application favorably meets each and
22       every factor prescribed in K.S.A. 9-534 and amendments thereto, the
23       proposed acquisition is in the interest of the depositors and creditors of
24       the Kansas bank or Kansas bank holding company which is the subject of
25       the proposed acquisition and in the public interest generally. Otherwise,
26       the application shall be denied.
27             (b) Within 15 days after the commissioner's approval or denial, the
28       applicant shall have the right to appeal in writing to the state banking
29       board the commissioner's determination request a hearing by filing a no-
30       tice of appeal written request with the commissioner. The state banking
31       board shall fix a date for hearing, which hearing shall be held within 45
32       days after such notice of appeal is filed. The board commissioner shall
33       conduct the hearing in accordance with the provisions of the Kansas ad-
34       ministrative procedure act and render its decision affirming or rescinding
35       the determination of the commissioner within 45 days after such request
36       is filed. Any action of the board commissioner pursuant to this section is
37       subject to review in accordance with the act for judicial review and civil
38       enforcement of agency actions. An applicant who files an appeal to the
39       state banking board of the commissioner's determination requests a hear-
40       ing shall pay to the commissioner a fee in an amount established by rules
41       and regulations of the commissioner, adopted pursuant to K.S.A. 9-1713
42       and amendments thereto, to defray the board's commissioner's expenses
43       associated with conducting the appeal hearing.


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  1             Sec.  2. K.S.A. 1999 Supp. 9-539 is hereby amended to read as fol-
  2       lows: 9-539. The commissioner shall adopt such rules and regulations as
  3       shall be necessary to carry out the intent and purposes of K.S.A. 9-519
  4       through 9-524, and amendments thereto, and K.S.A. 9-532 through 9-
  5       539, and amendments thereto, which shall be known as the bank holding
  6       company act. All rules and regulations of general application shall first be
  7       submitted by the commissioner to the state banking board for its approval
  8       and upon approval shall be filed as provided by article 4 of chapter 77 of
  9       the Kansas Statutes Annotated.
10             Sec.  3. K.S.A. 9-802 is hereby amended to read as follows: 9-802.
11       The existence of any bank or trust company as a corporation shall date
12       from the filing of its articles of incorporation from which time it shall
13       have and may exercise the incidental powers conferred by law upon cor-
14       porations, except that no bank or trust company shall transact any business
15       except the election of officers, the taking and approving of their official
16       bonds, the receipts of payment upon stock subscriptions and other busi-
17       ness incidental to its organization, until it has secured the approval of the
18       board and the authorization of the commissioners commissioner to com-
19       mence business.
20             Sec.  4. K.S.A. 9-804 is hereby amended to read as follows: 9-804.
21       When the capital of any bank or trust company shall have been paid in,
22       the president or cashier shall transmit to the commissioner a verified
23       statement showing the names and addresses of all stockholders, the
24       amount of stock each subscribed, and the amount paid in by each. The
25       commissioner shall examine such bank or trust company and shall charge
26       the statutory examination fee and shall examine especially as to the
27       amount of money paid in for capital, surplus and undivided profits, by
28       whom paid, and the amount of capital stock owned in good faith by each
29       stockholder, and generally whether such bank or trust company has com-
30       plied with the provisions of law. If the commissioner finds from such
31       examination that the bank or trust company has been organized as pro-
32       vided by law, has complied with the provisions of law and has secured
33       the preliminary approval of the board or the approval of the commissioner
34       as authorized by subsection (b) of K.S.A. 9-1801, and amendments
35       thereto, or the approval of the board, the commissioner shall issue a
36       certificate showing that such bank or trust company has been organized
37       and its capital paid in as required by law, and that it is authorized to
38       transact a general banking or trust business as provided by law.
39             Sec.  5. K.S.A. 9-812 is hereby amended to read as follows: 9-812. A
40       bank corporation shall not change its name until such name change has
41       been submitted to and approved by the state banking board bank
42       commissioner.
43             Sec.  6. K.S.A. 1999 Supp. 9-904 is hereby amended to read as fol-


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  1       lows: 9-904. (a) The capital stock of any bank or trust company may be
  2       reduced to the minimum provided by law for a new bank or trust company
  3       by resolution adopted by the stockholders representing 2/3 of the voting
  4       stock of such bank or trust company, except that no such reduction shall
  5       become effective until the commissioner approves the same.
  6             (b) With prior approval of the state banking board bank commis-
  7       sioner, a bank or trust company may reduce its capital stock below the
  8       minimum amount allowed by subsection (a) by transferring capital stock
  9       to its surplus fund. No such reduction shall be approved unless the state
10       banking board bank commissioner finds:
11             (1) The proposed reduction is necessary to provide greater opera-
12       tional flexibility to an adequately capitalized, well-managed institution;
13             (2) the proposed reduction does not result in or is not in furtherance
14       of a reduction in the institution's capital to an amount below 8% of total
15       deposits for a bank or below $250,000 for a trust company;
16             (3) the proposed reduction is not intended to delay, prevent or be in
17       lieu of capital stock impairment or a stockholder's assessment pursuant
18       to K.S.A. 9-906 and amendments thereto; and
19             (4) the proposed reduction poses no significant risk to the financial
20       stability, safety or soundness of the institution.
21             (c)  After the commissioner or state banking board has approved such
22       reduction a certificate signed by the president and cashier of the bank or
23       trust company setting forth the result of such reduction of its capital stock,
24       the names of its stockholders and the amount of stock held by each, shall
25       be filed with the secretary of state and a duplicate shall be filed with the
26       commissioner.
27             (d)  Whenever the capital stock of any bank or trust company shall
28       be reduced as herein provided, every stockholder, owner or holder of any
29       stock certificate shall surrender the same for cancellation and shall be
30       entitled to receive a new certificate for such person's proportion of the
31       new stock. No dividends shall be paid to any such stockholder until the
32       old certificate is surrendered.
33             Sec.  7. K.S.A. 9-908 is hereby amended to read as follows: 9-908.
34       Any bank or trust company may issue preferred stock of one or more
35       classes in such amounts as shall be approved by the state banking board
36       bank commissioner. The holders of 2/3 in amount of the common stock of
37       such bank or trust company must approve such issuance at a meeting held
38       for that purpose and for which notice by registered mail must be given
39       to each stockholder by mailing such notice at least five days in advance
40       of the date of the meeting. No issue of preferred stock shall be valid until
41       the par value of all stock so issued shall be paid in. With the approval of
42       the board the common stock may be reduced below the requirements
43       contained in K.S.A. 9-901a, and amendments thereto. No preferred stock


4

  1       shall be retired unless the common stock shall be increased in an amount
  2       equal to the amount of the preferred stock retired. All preferred stock
  3       shall be retired consistent with safety to the depositors.
  4             Sec.  8. K.S.A. 9-912 is hereby amended to read as follows: 9-912.
  5       Any losses sustained by a bank or trust company in excess of its undivided
  6       profits may be charged to its surplus fund. Any bank or trust company,
  7       after receiving approval from the commissioner, may declare a stock div-
  8       idend from its surplus fund, but no such dividend shall reduce the surplus
  9       fund to an amount less than 30% of the resulting total capital and. Any
10       bank or trust company may reduce its surplus with permission of the state
11       banking board bank commissioner.
12             Sec.  9. K.S.A. 9-1001 is hereby amended to read as follows: 9-1001.
13       Each bank shall maintain reserves against its deposits in such ratios as
14       shall be determined from time to time by the commissioner with approval
15       of the board. Such determinations by the commissioner and the board
16       shall not be subject to the provisions of article 4 of chapter 77 of the
17       Kansas Statutes Annotated, and amendments thereto.
18             The reserves shall be kept in cash in its vaults or in net balances with
19       correspondent federal reserve banks or a correspondent bank maintaining
20       a balance in a pass through account with a federal reserve bank. A bank
21       shall be given credit against the reserve requirements determined by the
22       commissioner with approval of the board for any reserves held as required
23       by the laws or regulations of the federal government or agencies thereof.
24             Sec.  10. K.S.A. 1999 Supp. 9-1101 is hereby amended to read as
25       follows: 9-1101. Any bank hereby is authorized to exercise by its board of
26       directors or duly authorized officers or agents, subject to law, all such
27       powers, including incidental powers, as shall be necessary to carry on the
28       business of banking, and:
29             (1) To receive deposits and to pay interest thereon at rates which
30       need not be uniform. The state bank commissioner, with approval of the
31       state banking board, may by regulations of general application fix maxi-
32       mum rates of interest to be paid on deposit accounts other than accounts
33       for public moneys;
34             (2) to buy and sell exchange, gold, silver, foreign coin, bullion, com-
35       mercial paper, bills of exchange, notes and bonds;
36             (3) to buy and sell bonds, securities, or other evidences of indebt-
37       edness of the United States of America or those fully guaranteed, directly
38       or indirectly, by it, and general obligation bonds of the state of Kansas or
39       any municipality or quasi-municipality thereof, and of other states, and
40       of municipalities or quasi-municipalities in other states of the United
41       States of America. No bank shall invest an amount in excess of 15% of its
42       capital stock paid in and unimpaired and the unimpaired surplus fund of
43       such bank in bonds, securities or other evidences of indebtedness of any


5

  1       municipality or quasi-municipality of any other state or states of the
  2       United States of America: (a) If and when the direct and overlapping
  3       indebtedness of such municipality or quasi-municipality is in excess of
  4       10% of its assessed valuation, excluding therefrom all valuations on in-
  5       tangibles and homestead exemption valuation; (b) or if any bond, security,
  6       or evidence of indebtedness of any such municipality or quasi-munici-
  7       pality has been in default in the payment of principal or interest within
  8       10 years prior to the time that any bank acquires any such bonds, security
  9       or evidence of indebtedness;
10             (4) to make all types of loans, including loans on real estate, subject
11       to the loan limitations contained in this act. Every real estate loan shall
12       be secured by a mortgage or other instrument constituting a lien, or the
13       full equivalent thereof, upon the real estate securing the loan, according
14       to any lawful or well recognized practice, which is best suited to the
15       transaction. The mortgage may secure future advances. The lien of such
16       mortgage shall attach upon its execution and have priority from time of
17       recording as to all advances made thereunder until such mortgage is re-
18       leased of record. The lien of such mortgage shall not exceed at any one
19       time the maximum amount stated in the mortgage;
20             (5) to discount and negotiate bills of exchange, negotiable notes and
21       notes not negotiable;
22             (6) to buy and sell investment securities which are evidences of in-
23       debtedness. The buying and selling of investment securities shall be lim-
24       ited to buying and selling without recourse marketable obligations evi-
25       dencing indebtedness of any person, copartnership, association,
26       corporation, or state or federal agency, including revenue bonds issued
27       pursuant to K.S.A. 76-6a15, and amendments thereto, or the state armory
28       board in the form of bonds, notes or debentures or both, commonly
29       known as investment securities, under such further definition of the term
30       "investment securities" as prescribed by the board, but the total amount
31       of such investment securities of any one obligor or maker held by such
32       bank shall at no time exceed 15% of the capital stock paid in and unim-
33       paired and the unimpaired surplus fund of such bank except that this
34       limit shall not apply to obligations of the United States government or
35       any agency thereof. If the obligor is a state agency including any agency
36       issuing revenue bonds pursuant to K.S.A. 76-6a15, and amendments
37       thereto, or the state armory board, the total amount of such investment
38       securities shall at no time exceed 25% of the capital stock paid in and
39       unimpaired and the unimpaired surplus fund of such bank;
40             (7) to subscribe to, buy and own such stock of the federal national
41       mortgage association as required by title 3, section 303 of the federal act
42       known as the national housing act as amended by section 201 of public
43       law No. 560, of the United States (68 Stat. 613-615), known as the housing


6

  1       act of 1954, or and amendments thereto;
  2             (8) to subscribe to, buy and own stock in one or more small business
  3       investment companies in Kansas as otherwise authorized by federal law,
  4       except that in no event shall any bank acquire shares in any small business
  5       investment company if, upon the making of that acquisition the aggregate
  6       amount of shares in small business investment companies then held by
  7       the bank would exceed 5% of its capital and surplus. Nothing in this act
  8       contained shall prohibit any bank from holding and disposing of such real
  9       estate and other property as it may acquire in the collection of its assets;
10             (9) to subscribe to, buy and own stock in any agricultural credit cor-
11       poration or livestock loan company, or its affiliate, organized pursuant to
12       the provisions of the laws of the United States providing for the infor-
13       mation and operation of agricultural credit corporations and livestock loan
14       companies, in an amount not exceeding either the undivided profits or
15       10% of the capital stock and surplus and undivided profits from such
16       bank, whichever is greater;
17             (10) to subscribe to, buy and own stock in minbanc capital corpora-
18       tion, a company formed for the purpose of providing capital to minority-
19       owned banks. No bank's investment in such stock shall exceed 2% of its
20       capital and surplus;
21             (11) to buy, hold, and sell any type of investment securities not enu-
22       merated in this section with approval of the commissioner and upon such
23       conditions and under such regulations as are prescribed by the state bank-
24       ing board;
25             (12) to act as escrow agent;
26             (13) to subscribe to, acquire, hold and dispose of stock of a corpo-
27       ration having as its purpose the acquisition, holding and disposition of
28       loans secured by real estate mortgages, and to acquire, hold and dispose
29       of the debentures and capital notes of such corporation. No bank's in-
30       vestment in such stock, debentures and capital notes shall exceed 2% of
31       its capital stock, surplus and undivided profits and such investment shall
32       be carried on the books of the bank as directed by the commissioner;
33             (14) to purchase and sell securities and stock without recourse solely
34       upon the order, and for the account, of customers;
35             (15) to subscribe to, acquire, hold and dispose of any class of stock,
36       debentures and capital notes of MABSCO agricultural services, inc. or
37       any similar corporation having as its purpose the acquisition, holding and
38       disposition of agricultural loans originated by Kansas banks. No bank's
39       investment in such stock, debentures and capital notes shall exceed 2%
40       of its capital stock, surplus and undivided profits. Such investment shall
41       be carried on the books of the bank as directed by the commissioner;
42             (16) to buy, hold and sell mortgages, stock, obligations and other se-
43       curities which are issued or guaranteed by the federal home loan mort-


7

  1       gage corporation under sections 305 and 306 of the federal act known as
  2       the federal home loan mortgage corporation act (P.L. 91-351);
  3             (17) to buy, hold and sell obligations or other instruments or securi-
  4       ties, including stock, issued or guaranteed by the student loan marketing
  5       association created by (P.L. 92-318) of the United States;
  6             (18) to engage in financial future contracts on United States govern-
  7       ment and agency securities subject to such rules and regulations as the
  8       state bank commissioner may prescribe pursuant to K.S.A. 9-1713, and
  9       amendments thereto, to promote safe and sound banking practices;
10             (19) to subscribe to, buy and own stock in a state or federally char-
11       tered bankers' bank or a one bank holding company which owns or con-
12       trols such a bankers' bank, except no bank's investment in such stock shall
13       exceed 10% of its capital stock, surplus and undivided profits;
14             (20) subject to such rules and regulations as the state bank commis-
15       sioner may adopt pursuant to K.S.A. 9-1713, and amendments thereto,
16       to promote safe and sound banking practices, upon recorded prior ap-
17       proval by the board of directors of the initial investment in a specific
18       company and pursuant to an investment policy approved by the board of
19       directors which specifically provides for such investments to buy, hold
20       and sell shares of an open-end investment company registered with the
21       federal securities and exchange commission under the federal investment
22       company act of 1940 and the federal securities act of 1933 and of a pri-
23       vately offered company sponsored by an affiliated commercial bank, the
24       shares of which are purchased and sold at par and the assets of which
25       consist solely of securities which may be purchased by the bank for its
26       own account. Such shares may be purchased without limit if the assets of
27       the company consist solely of and are limited to obligations that are eli-
28       gible for purchase by the bank without limit. If the assets of the company
29       include securities which may be purchased by the bank subject to limi-
30       tation, such shares may be purchased subject to the limitation applicable
31       to purchase by the bank of such securities;
32             (21) subject to the prior approval of the state bank commissioner and
33       the state banking board and subject to such rules and regulations as are
34       adopted by the state bank commissioner pursuant to K.S.A. 9-1713, and
35       amendments thereto, to promote safe and sound banking practices, a
36       bank may establish a subsidiary which engages in the following securities
37       activities: (a) selling or distributing stocks, bonds, debentures, notes, mu-
38       tual funds and other securities, (b) issuing and underwriting municipal
39       bonds, (c) organizing, sponsoring and operating mutual funds, (d) acting
40       as a securities broker-dealer;
41             (22) to subscribe to, acquire, hold and dispose of stock of any class
42       of the federal agricultural mortgage corporation, a corporation having as
43       its purpose the acquisition, holding and disposition of loans secured by


8

  1       agricultural real estate mortgages. No bank's investment in such corpo-
  2       ration shall exceed 5% of its capital stock, surplus and undivided profits
  3       and such investment shall be carried on the books of the bank as directed
  4       by the commissioner;
  5             (23) to subscribe to, buy and own stock in an insurance company
  6       incorporated prior to 1910, under the laws of Kansas, with corporate
  7       headquarters in this state, which only provides insurance to financial in-
  8       stitutions. The investment in such stock shall not exceed 2% of the bank's
  9       capital stock, surplus and undivided profits;
10             (24) to purchase and hold an interest in life insurance policies on the
11       life of its executive officers and directors, and to purchase life insurance
12       policies for the sole purpose of providing employee deferred compensa-
13       tion and benefit plans subject to the limitations listed herein. If the bank
14       has the authority to direct the investments of the cash surrender value of
15       the policy, those investments shall be limited solely to assets which may
16       be directly purchased by the bank for its own account. The limitations
17       set forth in paragraphs (a) and (b) of this subsection do not apply to any
18       such life insurance policies in place before July 1, 1993. Funding for the
19       payment of employee compensation and benefit plans as well as the ben-
20       efits derived may be made or split in a joint manner between the bank,
21       employee or bank holding company as in "split dollar" or other insurance
22       plans:
23             (a) Life insurance purchased and held on the life of executive officers
24       and directors are subject to the following limitations:
25             (i) The cash surrender value of any life insurance policy on an exec-
26       utive officer or director underwritten by any one life insurance company
27       cannot at any time exceed 15% of the bank's capital stock, surplus, un-
28       divided profits, loan loss reserve, capital notes and debentures and reserve
29       for contingency, unless the bank has obtained the prior approval of the
30       state bank commissioner;
31             (ii) the cash surrender value of life insurance policies on executive
32       officers or directors, in the aggregate from all companies, cannot at any
33       time exceed 25% of the bank's capital stock, surplus, undivided profits,
34       loan loss reserve, capital notes and debentures and reserve for contin-
35       gency, unless the bank has obtained the prior approval of the state bank
36       commissioner;
37             (iii) the authority to hold life insurance on any executive officer ceases
38       if the executive officer is no longer employed by the bank or no longer
39       meets the definition of an executive officer;
40             (iv) the authority to hold life insurance on a director ceases when that
41       director is no longer a member of the board of directors;
42             (v) the bank's board of directors must approve and document the
43       purchase of any life insurance, including the reasonableness of such pur-


9

  1       chase; and
  2             (vi) except as part of a reasonable compensation or benefit plan, a
  3       bank is not authorized to purchase life insurance as an estate management
  4       device for the benefit of officers, directors or employees who are also
  5       controlling shareholders of the bank.
  6             (b) Life insurance purchased for the sole purpose of providing de-
  7       ferred compensation and benefit plans are subject to the following
  8       limitations:
  9             (i) The bank may purchase individual or group policies for the sole
10       purpose of providing deferred compensation agreements entered into
11       with its officers and employees;
12             (ii) the bank may purchase policies on directors to fund a deferred
13       directors fees program;
14             (iii) the board of directors must approve and document such deferred
15       plans including the reasonableness of the plans;
16             (iv) the bank is not authorized to hold the policies unless specifically
17       approved by the state banking board bank commissioner if no liability
18       exists under the deferred compensation plans;
19             (v) the cash surrender value of any life insurance policy purchased
20       for the sole purpose of providing deferred compensation and benefit
21       plans, underwritten by any one life insurance company, cannot exceed at
22       any time, 15% of the bank's capital stock, surplus, undivided profits, loan
23       loss reserve, capital notes and debentures and reserve for contingency,
24       unless the bank has obtained the prior approval of the state bank com-
25       missioner; and
26             (vi) the cash surrender value of life insurance policies purchased for
27       the sole purpose of providing deferred compensation and benefit plans,
28       in the aggregate from all companies, cannot at any time exceed 25% of
29       the bank's capital stock, surplus, undivided profits, loan loss reserve, cap-
30       ital notes and debentures and reserve for contingency, unless the bank
31       has obtained the prior approval of the state bank commissioner;
32             (25) subject to such rules and regulations as the state bank commis-
33       sioner may adopt pursuant to K.S.A. 9-1713 and amendments thereto to
34       promote safe and sound banking practices, to act as an agent and receive
35       deposits, renew time deposits, close loans, service loans, and receive pay-
36       ments on loans and other obligations for any company which is a subsid-
37       iary, as defined in subsection (d) of K.S.A. 9-519 and amendments thereto
38       of the bank holding company which owns the bank. Nothing in this sub-
39       section shall authorize a bank to conduct activities as an agent which the
40       bank or the subsidiary would be prohibited from conducting as a principal
41       under any applicable federal or state law. Any bank which enters or ter-
42       minates any agreement pursuant to this subsection shall within 30 days
43       of the effective date of the agreement or termination provide written


10

  1       notification to the commissioner which details all parties involved and
  2       services to be performed or terminated;
  3             (26) to make loans to the bank's stockholders or the stockholders of
  4       the bank's controlling bank holding company on the security of the shares
  5       of the bank or shares of the bank's controlling bank holding company,
  6       with the limitation that this may occur only if the bank would have ex-
  7       tended credit to such stockholder on exactly the same terms without the
  8       shares pledged as collateral, and provided the shares pledged are not a
  9       director's qualifying shares per K.S.A. 9-1117, and amendments thereto;
10             (27) to make investments in and loans to community development
11       corporations (CDCs) and community development projects (CD pro-
12       jects) as defined in K.S.A. 9-701 and amendments thereto, subject to the
13       limitations prescribed by the comptroller of the currency as interpreted
14       by rules and regulations which shall be adopted by the state bank com-
15       missioner as provided by K.S.A. 9-1713 and amendments thereto; and
16             (28) to participate in a school savings deposit program authorized
17       under K.S.A. 1999 Supp. 9-1138, and amendments thereto.
18             Sec.  11. K.S.A. 9-1101a is hereby amended to read as follows: 9-
19       1101a. In accordance with normal business considerations and upon ap-
20       proval of stockholders owning two-thirds 2/3 of the voting stock of the
21       bank, the bank may issue convertible or nonconvertible capital notes or
22       debentures in such amounts and under such terms and conditions as shall
23       be approved by the state banking board bank commissioner: Provided,
24       That The principal amount of capital notes or debentures outstanding at
25       any time shall not exceed an amount equal to one hundred percent
26       (100%) 100% of the bank's paid-in capital stock plus fifty percent (50%)
27       50% of the amount of its unimpaired surplus fund. Capital notes or de-
28       bentures which are by their terms expressly subordinated to the prior
29       payment in full of all deposit liabilities of the bank shall be considered as
30       part of the unimpaired capital funds of the bank for purpose of the com-
31       putation of the bank's loan limit.
32             Sec.  12. K.S.A. 9-1107 is hereby amended to read as follows: 9-1107.
33       Any bank may borrow an amount not to exceed 100% of its capital stock
34       and surplus for temporary purposes. This limitation shall not apply to any
35       borrowing secured by legal investment securities, for borrowing author-
36       ized under the provisions of K.S.A. 1980 Supp. 12-5201 through 12-5218,
37       inclusive, and any amendments thereto or for borrowing authorized under
38       the provisions of public law 94-499[*], the mortgage subsidy bond tax act
39       of 1980. The state bank commissioner may authorize borrowing in excess
40       of such limitation. Any bank may borrow upon legal investment securities
41       and rediscount and endorse in good faith any of its negotiable notes,
42       without limitation.
43             Sec.  13. K.S.A. 1999 Supp. 9-1111 is hereby amended to read as


11

  1       follows: 9-1111. The general business of every bank shall be transacted
  2       at the place of business specified in its certificate of authority and at one
  3       or more branch banks established and operated as provided in this sec-
  4       tion. Except for the establishment or operation of a trust branch bank or
  5       the relocation of an existing trust branch bank pursuant to K.S.A. 1999
  6       Supp. 9-1135 and amendments thereto, it shall be unlawful for any bank
  7       to establish and operate any branch bank or relocate an existing branch
  8       bank except as hereinafter provided. Notwithstanding the provisions of
  9       this section, any location at which a depository institution, as defined by
10       K.S.A. 9-701 and amendments thereto, receives deposits, renews time
11       deposits, closes loans, services loans or receives payments on loans or
12       other obligations, as agent, for a bank pursuant to subsection (25) of
13       K.S.A. 9-1101 and amendments thereto or other applicable state or fed-
14       eral law, or is authorized to open accounts or receive deposits under
15       subsection (28) of K.S.A. 9-1101, and amendments thereto, shall not be
16       deemed to be a branch bank:
17             (a) For the purposes of this section, the term "branch bank" means
18       any office, agency or other place of business located within this state,
19       other than the place of business specified in the bank's certificate of
20       authority, at which deposits are received, checks paid, money lent or trust
21       authority exercised, if approval has been granted by the state bank com-
22       missioner, under K.S.A. 9-1602, and amendments thereto;
23             (b) after first applying for and obtaining the approval of the state
24       banking board, one or more branch banks may be established and oper-
25       ated anywhere within this state by a bank incorporated under the laws of
26       this state;
27             (c) an application to establish and operate a branch bank or to relo-
28       cate an existing branch bank shall be in such form and contain such in-
29       formation as the may be prescribed in rules and regulations of the state
30       bank commissioner, adopted pursuant to K.S.A. 9-1713, and amendments
31       thereto, shall provide;
32             (d) the application shall include estimates of the annual income and
33       expenses of the proposed branch bank, the annual volume of business to
34       be transacted by it, the nature of the banking business to be conducted
35       at the proposed branch bank, the primary geographical area to be served
36       by it and the personnel and office facilities to be provided at the proposed
37       branch bank;
38             (e) the application shall include the name selected for the proposed
39       branch bank. The name selected for the proposed branch bank shall not
40       be the name of any other bank or branch bank doing business in the same
41       city or town nor shall the name selected be required to contain the name
42       of the applicant bank. If the name selected for the proposed bank does
43       not contain the name of the applicant bank, the branch bank shall provide


12

  1       in the public lobby of such branch bank, a public notice that it is a branch
  2       bank of the applicant bank;
  3             (f) the application shall include an affidavit of publication of notice
  4       that applicant bank intends to file an application to establish a branch
  5       bank or relocate an existing branch bank. The notice shall be published
  6       in a newspaper of general circulation in the county where the applicant
  7       bank proposes to locate the branch bank. The notice shall be in the form
  8       prescribed by the state banking board and at a minimum shall contain,
  9       the name and address of the applicant bank, the location of the proposed
10       branch, a solicitation for written comments concerning the proposed
11       branch be submitted to the state banking board, and provide for a com-
12       ment period of not less than 10 days prior to the board's final consider-
13       ation of the application;
14             (g) upon receipt of an application meeting the above requirements,
15       if there is any written objection to the application filed with the board,
16       within 60 days after receipt of the application, the state banking board
17       bank commissioner shall hold a hearing in the county in which the ap-
18       plicant bank seeks to establish and operate a branch bank. If there is no
19       written objection filed with the board within the time period specified
20       under subsection (f), the board may hold a hearing on the application in
21       such county. Notice of the time, date and place of such hearing if one is
22       to be held shall be published in a newspaper of general circulation in such
23       county by the bank seeking to establish and operate the branch bank not
24       less than 10 or more than 30 days prior to the date of the hearing, and
25       an affidavit of publication thereof shall be filed with the commissioner.
26       Not less than 10 days or more than 30 days prior to any such date of the
27       hearing, the commissioner shall give notice of the time, date and place
28       of such hearing by registered or certified mail to all banks and national
29       banking associations having their principal places of business or branch
30       banks in the county wherein the applicant bank seeks to locate a branch
31       bank. At any such hearing, all interested persons shall be allowed to pres-
32       ent written and oral evidence to the board in support of or in opposition
33       to the application. Upon completion of a transcript of the testimony given
34       at any such hearing, the transcript shall be filed in the office of the com-
35       missioner and copies shall be furnished to the members of the state bank-
36       ing board not less than 14 days prior to the meeting of the board at which
37       the application will be considered;
38             (h) (g) the state banking board shall approve or disapprove the ap-
39       plication, upon receipt of a completed application, and within 90 days
40       after consideration of the application and the evidence gathered during
41       the board's investigation. If, the state banking board shall approve or
42       disapprove the application if the board finds that:
43             (1) There is or will be at the time the branch bank is opened the need


13

  1       for the same in the community to be served by it;
  2             (2) there is a reasonable probability of usefulness and success of the
  3       proposed branch bank;
  4             (3) the applicant bank's financial history and condition is sound; and
  5             (4) the proposed branch bank can be established without undue in-
  6       jury to properly conducted existing banks and national banking associa-
  7       tions, the application shall be granted, otherwise, the application shall be
  8       denied;
  9             (i) (h) upon the petition of the applicant any final action of the board
10       approving or disapproving an application shall be subject to review in
11       accordance with the act for judicial review and civil enforcement of
12       agency actions upon the petition of any adversely affected or aggrieved
13       person who appeared and offered evidence at the hearing upon the
14       application;
15             (j) (i) any branch bank lawfully established and operating on the ef-
16       fective date of this act may continue to be operated by the bank then
17       operating the branch bank and by any successor bank;
18             (k) (j) branch banks which have been established and are being main-
19       tained by a bank at the time of its merger into or consolidation with
20       another bank or at the time its assets are purchased and its liabilities are
21       assumed by another bank may continue to be operated by the surviving,
22       resulting or purchasing and assuming bank. The surviving, resulting or
23       purchasing and assuming bank, with approval of the state bank commis-
24       sioner, may establish and operate a branch bank or banks at the site or
25       sites of the merged, constituent or liquidated bank or banks;
26             (l) (k) any state bank or national banking association having its prin-
27       cipal office and main banking house in this state may provide and engage
28       in banking transactions by means of remote service units wherever lo-
29       cated, which remote service units shall not be considered to be branch
30       banks authorized herein. Any banking transaction effected by use of a
31       remote service unit shall be deemed to be transacted at a bank and not
32       at a remote service unit;
33             (m) (l) as a condition to the operation and use of any remote service
34       unit in this state, a state bank or national banking association, each here-
35       inafter referred to as a bank, which desires to operate or enable its cus-
36       tomers to utilize a remote service unit must agree that such remote serv-
37       ice unit will be available for use by customers of any other bank or banks
38       upon the request of such bank or banks to share its use and the agreement
39       of such bank or banks to share all costs, including a reasonable return on
40       capital expenditures incurred in connection with its development, instal-
41       lation and operation. The owner of the remote service unit, whether a
42       bank or any other person, shall make the remote service unit available
43       for use by other banks and their customers on a nondiscriminatory basis,


14

  1       conditioned upon payment of a reasonable proportion of all costs, includ-
  2       ing a reasonable return on capital expenditures incurred in connection
  3       with the development, installation and operation of the remote service
  4       unit. Notwithstanding the foregoing provisions of this subsection, a re-
  5       mote service unit located on the property owned or leased by the bank
  6       where the principal place of business of a bank, or an attached auxiliary
  7       teller facility or branch bank of a bank, is located need not be made
  8       available for use by any other bank or banks or customers of any other
  9       bank or banks;
10             (n) (m) for purposes of this section, "remote service unit" means an
11       electronic information processing device, including associated equip-
12       ment, structures and systems, through or by means of which information
13       relating to financial services rendered to the public is stored and trans-
14       mitted, whether instantaneously or otherwise, to a bank and which, for
15       activation and account access, is dependent upon the use of a machine-
16       readable instrument in the possession and control of the holder of an
17       account with a bank. The term shall include "online" computer terminals
18       and "offline" automated cash dispensing machines and automated teller
19       machines, but shall not include computer terminals or automated teller
20       machines or automated cash dispensing machines using systems in which
21       account numbers are not machine read and verified. Withdrawals by
22       means of "offline" systems shall not exceed $300 per transaction and shall
23       be restricted to individual not corporate or commercial accounts.
24             Sec.  14. K.S.A. 9-1127b is hereby amended to read as follows: 9-
25       1127b. (a) A bank service corporation may provide to any person any
26       service authorized by this section, except that a bank service corporation
27       shall not take deposits.
28             (b) Except with the prior approval of the state bank commissioner
29       and the state banking board, a bank service corporation shall not perform
30       the services authorized by this section in any state other than this state
31       and all shareholders of a bank service corporation shall be located in this
32       state.
33             (c) A bank service corporation in which a state bank is a shareholder
34       shall perform only those services that such state bank shareholder is au-
35       thorized to perform under the law of this state and shall perform such
36       services only at locations in this state in which such bank shareholder
37       could be authorized to perform such services.
38             (d) A bank service corporation in which a national bank is a share-
39       holder shall perform only those services that such national bank share-
40       holder is authorized to perform under federal law and shall perform such
41       services only at locations in this state at which such national bank share-
42       holder could be authorized to perform such services.
43             (e) A bank service corporation that has both national bank and state


15

  1       bank shareholders shall perform only those services that may lawfully be
  2       performed by both its national bank shareholder or shareholders under
  3       federal law and its state bank shareholder or shareholders under the law
  4       of this state and shall perform such services only at locations in this state
  5       at which both its state bank and national bank shareholders could be
  6       authorized to perform such services.
  7             (f) Notwithstanding the other provisions of this section or any other
  8       provision of law, other than the provisions of federal branching law and
  9       the branching law of this state regulating the geographic location of banks
10       to the extent that those laws are applicable to an activity authorized by
11       this subsection, a bank service corporation may perform at any geographic
12       location any service, other than deposit taking, that the board of governors
13       of the federal reserve system has determined, by regulation, to be per-
14       missible for a bank holding company under section 4(c)(8) of the federal
15       bank holding company act.
16             Sec.  15. K.S.A. 9-1127c is hereby amended to read as follows: 9-
17       1127c. (a) No state bank shall invest in the capital stock of a bank service
18       corporation that performs any service under the authority of subsections
19       subsection (c), (d) or (e) of K.S.A. 9-1127b, and amendments thereto,
20       without the prior approval of the state bank commissioner and the state
21       banking board.
22             (b) No state bank shall invest in the capital stock of a bank service
23       corporation that performs any service under authority of subsection (f) of
24       K.S.A. 9-1127b, and amendments thereto and no bank service corporation
25       shall perform any activity under subsection (f) and K.S.A. 9-1127b, and
26       amendments thereto, without the prior approval of the state bank com-
27       missioner and the state banking board.
28             (c) In determining whether to approve or deny any application for
29       prior approval under this section, the state bank commissioner and the
30       state banking board are is authorized to consider the financial and man-
31       agerial resources and future prospects of the bank or banks and bank
32       service corporation involved, including the financial capability of the bank
33       to make a proposed investment under this act, and possible adverse af-
34       fects such as undue concentration of resources, unfair or decreased com-
35       petition, conflicts of interest or unsafe or unsound banking practices.
36             (d) In the event the state bank commissioner and the state banking
37       board fail fails to act on any application under this section within 90 days
38       of the submission of a complete application to them, the application shall
39       be deemed approved.
40             Sec.  16. K.S.A. 9-1127d is hereby amended to read as follows: 9-
41       1127d. (a) Whenever a bank, or any subsidiary or affiliate of such bank
42       that is subject to examination by the state bank commissioner, causes to
43       be performed for itself, by contract or otherwise, any services authorized


16

  1       under this act on or off its premises:
  2             (1) Such performance shall be subject to regulation and examination
  3       by the state bank commissioner to the same extent as if such services
  4       were being performed by the bank itself on its own premises; and
  5             (2) the bank shall notify the state bank commissioner of the existence
  6       of the service relationship within 30 days after the making of such service
  7       contract or the performance of the service, whichever occurs first.
  8             (b) The state bank commissioner and the state banking board are is
  9       authorized to adopt such rules and regulations as may be necessary to
10       enable them to administer and carry out the purpose of this act and to
11       prevent evasions thereof.
12             Sec.  17. K.S.A. 1999 Supp. 9-1135 is hereby amended to read as
13       follows: 9-1135. (a) Notwithstanding the requirements contained in
14       K.S.A. 9-1111 and amendments thereto, a bank incorporated under the
15       laws of this state may establish or operate a trust branch bank anywhere
16       in this state.
17             (b) As used in this section, the term "trust branch bank" means any
18       office, agency or other place of business located within this state, other
19       than the place of business specified in the bank's certificate of authority,
20       the sole purpose of which is to exercise those trust powers granted to the
21       bank by the commissioner pursuant to K.S.A. 9-1602 and amendments
22       thereto. No trust branch bank established or operated pursuant to this
23       section shall be authorized to receive deposits, pay checks or lend money
24       without first applying for and obtaining approval as provided in K.S.A. 9-
25       1111 and amendments thereto.
26             (c) No bank shall establish or operate a trust branch bank or relocate
27       an existing trust branch bank until the bank has applied for and obtained
28       approval from the commissioner as provided by this section.
29             (d) An application to establish a trust branch bank as provided in this
30       section shall be in such form and contain such information as is required
31       by the commissioner and shall include certified copies of the following
32       documents:
33             (1) The written action taken by the board of directors of the bank
34       approving the proposed trust branch bank or the relocation of an existing
35       trust branch bank;
36             (2) all other required regulatory approvals; and
37             (3) an affidavit of publication of notice of intent to file an application
38       to establish or operate a trust branch bank or relocate an existing trust
39       branch bank. The publication of the notice shall be on the same day for
40       two consecutive weeks in the official newspaper of the city or county
41       where the proposed trust branch bank is to be located. The notice shall
42       be in the form prescribed by the commissioner and shall contain the name
43       of the applicant, the location of the proposed trust branch bank, the pro-


17

  1       posed date of filing of the application with the commissioner, and a so-
  2       licitation for written comments concerning the application and a notice
  3       of the public's right to file a written request for a public hearing for the
  4       purpose of presenting oral or written evidence regarding the proposed
  5       trust branch bank. All comments and requests for public hearing shall be
  6       filed with the commissioner on or before the 30th day after the date the
  7       application is filed.
  8             (e) A bank making application to the commissioner for approval of a
  9       trust branch bank pursuant to this section shall pay to the commissioner
10       a fee, in an amount established by rules and regulations of the commis-
11       sioner, adopted pursuant to K.S.A. 9-1713 and amendments thereto, to
12       defray the expenses of the commissioner or designee in the examination
13       and investigation of the application. The commissioner shall remit all
14       amounts received under this section to the state treasurer who shall de-
15       posit the same to a separate account in the state treasury for each appli-
16       cation. The moneys in each such account shall be used to pay the expenses
17       of the commissioner or designee in the examination and investigation of
18       the application to which it relates and any unused balance shall be trans-
19       ferred to the bank commissioner fee fund.
20             (f) Upon the filing of any such application with the commissioner,
21       the commissioner shall make or cause to be made, a careful examination
22       and investigation concerning:
23             (1) The reasonable probability of usefulness and success of the pro-
24       posed trust branch bank;
25             (2) the applicant bank's financial history and condition including the
26       character, qualifications and experience of the officers employed by the
27       bank; and
28             (3) whether the proposed trust branch bank can be established with-
29       out undue injury to properly conducted existing banks, national banking
30       associations and trust companies.
31             If the commissioner determines any of such matters unfavorably to the
32       applicants, the application shall be disapproved, but if not,; otherwise the
33       application shall be approved.
34             (g) If no written request for public hearing is filed, the The commis-
35       sioner shall render approval or disapproval of approve or disapprove the
36       application within 60 days after the date upon which the application was
37       filed.
38             (h) If a written request for public hearing is filed, the commissioner
39       shall hold a public hearing in a location determined by the commissioner
40       within 30 days of the close of the comment period. Notice of the time,
41       date and place of such hearing shall be published, by the applicant, in a
42       newspaper of general circulation in the county where the proposed trust
43       branch bank is to be located, not less than 10 or more than 30 days prior


18

  1       to the date of the hearing, and an affidavit of publication shall be filed
  2       with the commissioner. At any such hearing, all interested persons shall
  3       be allowed to present written and oral evidence to the commissioner in
  4       support of or in opposition to the application. Upon completion of a tran-
  5       script of the testimony given at such hearing, the transcript shall be filed
  6       in the office of the commissioner. Within 14 days after the public hearing,
  7       the commissioner shall approve or disapprove the application after con-
  8       sideration of the application and evidence gathered during the commis-
  9       sioner's investigation.
10             (i) The commissioner may extend the period for approval or disap-
11       proval if the commissioner determines that any information required by
12       this section has not been furnished, any material information submitted
13       is inaccurate or additional investigation is required. The commissioner,
14       prior to Prior to expiration of the application period provided in this
15       section, the commissioner shall give written notice to the applicant of the
16       commissioner's intent to extend the period. Such notice shall include a
17       specific date for expiration of the extension period. If any information
18       remains incomplete or inaccurate upon the expiration of the extension
19       period the application shall be disapproved.
20             (j) (i) Within 15 days after the date of the commissioner's approval
21       or disapproval of the application, the applicant or any individual or cor-
22       poration who filed a request for and presented evidence at the public
23       hearing shall have the right to appeal in writing to the state banking board
24       the commissioner's determination request a hearing by filing a notice of
25       appeal written request with the commissioner. The board shall fix a date
26       for a hearing, which hearing shall be held within 45 days from the date
27       the notice of appeal is filed. The board commissioner shall conduct the
28       hearing in accordance with the provisions of the Kansas administrative
29       procedure act and render its decision affirming or rescinding the deter-
30       mination of the commissioner within 45 days after such request is filed.
31       Any action of the board the commissioner pursuant to this section is sub-
32       ject to review in accordance with the act for judicial review and civil
33       enforcement of agency actions. Any party which files an appeal of the
34       commissioner's determination to the board applicant who requests a
35       hearing shall pay to the commissioner a fee in an amount established by
36       rules and regulations of the commissioner, adopted pursuant to K.S.A. 9-
37       1713 and amendments thereto, to defray the board's commissioner's ex-
38       penses associated with the conduct of the appeal.
39             (k) (j) When the commissioner determines that any bank domiciled
40       in this state has established or is operating a trust branch bank in violation
41       of the laws governing the operation of such bank, the commissioner shall
42       give written notice to the bank of such determination. Within 15 days
43       after receipt of such notification, the bank shall have the right to appeal


19

  1       in writing to the board the commissioner's determination to file a written
  2       request for a hearing. The board commissioner shall fix a date for hearing,
  3       which hearing shall be held within 45 days after the date of such appeal
  4       and shall be conducted conduct the hearing in accordance with the pro-
  5       visions of the Kansas administrative procedure act within 45 days after
  6       such request is filed. At such hearing the board shall hear all matters
  7       relevant to the commissioner's determination and shall approve or dis-
  8       approve the commissioner's determination, and the decision of the board
  9       shall be final and conclusive. If the bank does not appeal to the board
10       from the commissioner's determination or if an appeal is made and the
11       commissioner's determination is upheld by the board request a hearing,
12       the commissioner may proceed as provided in K.S.A. 9-1714 and amend-
13       ments thereto, until such time as the commissioner determines the bank
14       is in full compliance with the laws governing the operation of a trust
15       branch bank.
16             Sec.  18. K.S.A. 9-1301 is hereby amended to read as follows: 9-1301.
17       Every bank operating under the provisions of this act and authorized to
18       receive deposits of money shall insure the deposits of each depositor with
19       the federal deposit insurance corporation, or its successor, or with an
20       insurer approved by the state commissioner of insurance in an amount
21       not less than that provided by the federal deposit insurance corporation
22       and shall pay all charges or assessments levied by such deposit insurance
23       corporation, or its successor or such other insurer. Every state bank that
24       accepts deposits of money which does not insure with the federal deposit
25       insurance corporation shall furnish a blanket fidelity bond on all of its
26       officers and employees in a principal amount of not less than 100% of
27       the average total amount of all deposits in the bank, that average total
28       deposits shall mean the average of the total amounts on deposit in such
29       bank on June 30 and December 31 next preceding. The bond shall be
30       executed by a corporate surety authorized to do business in the state and
31       shall be held by the state bank commissioner for the benefit of the de-
32       positors of the bank; and if a receiver is appointed, the commissioner shall
33       collect any moneys due under such bond for the benefit of the depositors.
34       The bond shall provide that it cannot be canceled until at least 30 days
35       after notice has been given to the state bank commissioner unless the
36       commissioner shall authorize its cancellation at an earlier date. The pre-
37       mium on such bond shall be paid by the bank.
38             Any bank furnishing the bond shall also cause a certified audit of its
39       books and accounts to be made once in each calendar year by an inde-
40       pendent certified public accountant licensed to do business in the state
41       or an independent auditor approved by the commissioner, and the ac-
42       countant or auditor shall audit and verify every account of the bank. The
43       cost of any such audit shall be paid by the bank, and a copy of the report


20

  1       of such audit shall be filed with the state bank commissioner. Upon re-
  2       ceipt of the report, the bank commissioner shall examine the report and
  3       shall transmit the report, with any recommendations as to action thereon,
  4       to the state banking board and the state banking board the commissioner
  5       shall, without delay, take such necessary action as may be indicated by
  6       the audit report and the recommendations of the commissioner.
  7             Whenever a bank shall fail to comply with the provisions of this section,
  8       the commissioner shall notify the bank that a continuation of such failure
  9       will result in the revocation of its authority to do business. If after receipt
10       of such notice the bank fails or refuses to comply, the commissioner shall
11       after a hearing or an opportunity for a hearing has been given to such
12       bank, revoke its authority to transact business in this state. Hearings shall
13       be conducted in accordance with the provisions of the Kansas adminis-
14       trative procedure act. The bank commissioner may grant a reasonable
15       extension of time for compliance with this section under such rules and
16       regulations as the state banking board bank commissioner may adopt.
17       During the period of any such extension of time, the bank receiving the
18       same shall give notice to persons making deposits, and include in all ad-
19       vertisements made for the purpose of securing deposits, a statement that
20       the deposits of such bank are uninsured. The commissioner shall give
21       written notice of such revocation to the president, cashier, or other man-
22       aging officer of such bank, and by publishing a copy of the order of rev-
23       ocation in the Kansas register. The attorney general shall, at the request
24       of the commissioner, then begin action for the appointment of a receiver
25       for such bank and to dissolve same; and the receiver appointed shall take
26       charge of such bank and liquidate the affairs and business in the same
27       manner as provided in article 19 of chapter 9 of the Kansas Statutes
28       Annotated, and any amendments thereto.
29             Sec.  19. K.S.A. 1999 Supp. 9-1402 is hereby amended to read as
30       follows: 9-1402. (a) Before any deposit of public moneys or funds shall
31       be made by any municipal corporation or quasi-municipal corporation of
32       the state of Kansas with any bank, savings and loan association or savings
33       bank, such municipal or quasi-municipal corporation shall obtain security
34       for such deposit in one of the following manners prescribed by this
35       section.
36             (b) Such bank, savings and loan association or savings bank may give
37       to the municipal corporation or quasi-municipal corporation a personal
38       bond in double the amount which may be on deposit at any given time.
39             (c) Such bank, savings and loan association or savings bank may give
40       a corporate surety bond of some surety corporation authorized to do busi-
41       ness in this state, which bond shall be in an amount equal to the public
42       moneys or funds on deposit at any given time less the amount of such
43       public moneys or funds which is insured by the federal deposit insurance


21

  1       corporation or its successor and such bond shall be conditioned that such
  2       deposit shall be paid promptly on the order of the municipal corporation
  3       or quasi-municipal corporation making such deposits.
  4             (d) Such bank, savings and loan association or savings bank may de-
  5       posit, maintain, pledge, assign, and grant a security interest in, or cause
  6       its agent, trustee, wholly-owned subsidiary or affiliate having identical
  7       ownership to deposit, maintain, pledge, assign, and grant a security in-
  8       terest in, for the benefit of the governing body of the municipal corpo-
  9       ration or quasi-municipal corporation in the manner provided in this act,
10       securities, security entitlements, financial assets and securities accounts
11       owned by the depository institution directly or indirectly through its agent
12       or trustee holding securities on its behalf, or owned by the depository
13       institutions wholly-owned subsidiary or by such affiliate, the market value
14       of which is equal to 100% of the total deposits at any given time, and such
15       securities, security entitlements, financial assets and securities accounts,
16       may be accepted or rejected by the governing body of the municipal
17       corporation or quasi-municipal corporation and shall consist of the fol-
18       lowing and security entitlements thereto:
19             (1) Direct obligations of, or obligations that are insured as to principal
20       and interest by, the United States of America or any agency thereof and
21       obligations, including but not limited to letters of credit, and securities
22       of United States sponsored corporations which under federal law may be
23       accepted as security for public funds;
24             (2) bonds of any municipal corporation or quasi-municipal corpora-
25       tion of the state of Kansas which have been refunded in advance of their
26       maturity and are fully secured as to payment of principal and interest
27       thereon by deposit in trust, under escrow agreement with a bank, of direct
28       obligations of, or obligations the principal of and the interest on which
29       are unconditionally guaranteed by, the United States of America;
30             (3) bonds of the state of Kansas;
31             (4) general obligation bonds of any municipal corporation or quasi-
32       municipal corporation of the state of Kansas;
33             (5) revenue bonds of any municipal corporation or quasi-municipal
34       corporation of the state of Kansas if approved by the state bank commis-
35       sioner in the case of banks and by the savings and loan commissioner in
36       the case of savings and loan associations or federally chartered savings
37       banks;
38             (6) temporary notes of any municipal corporation or quasi-municipal
39       corporation of the state of Kansas which are general obligations of the
40       municipal or quasi-municipal corporation issuing the same;
41             (7) warrants of any municipal corporation or quasi-municipal corpo-
42       ration of the state of Kansas the issuance of which is authorized by the
43       state board of tax appeals and which are payable from the proceeds of a


22

  1       mandatory tax levy;
  2             (8) bonds of either a Kansas not-for-profit corporation or of a local
  3       housing authority that are rated at least Aa by Moody's Investors Service
  4       or AA by Standard & Poor's Corp.;
  5             (9) bonds issued pursuant to K.S.A. 12-1740 et seq., and amendments
  6       thereto, that are rated at least MIG-1 or Aa by Moody's Investors Service
  7       or AA by Standard & Poor's Corp.;
  8             (10) notes of a Kansas not-for-profit corporation that are issued to
  9       provide only the interim funds for a mortgage loan that is insured by the
10       federal housing administration;
11             (11) bonds issued pursuant to K.S.A. 74-8901 through 74-8916, and
12       amendments thereto;
13             (12) bonds issued pursuant to K.S.A. 68-2319 through 68-2330, and
14       amendments thereto;
15             (13) commercial paper that does not exceed 270 days to maturity and
16       which has received one of the two highest commercial paper credit ratings
17       by a nationally recognized investment rating firm; or
18             (14)  (A) negotiable promissory notes together with first lien mort-
19       gages on one to four family residential real estate located in Kansas se-
20       curing payment of such notes when such notes or mortgages:
21             (i) Are underwritten by the federal national mortgage association, the
22       federal home loan mortgage corporation, the federal housing administra-
23       tion or the veterans administration standards; or are valued pursuant to
24       rules and regulations which shall be adopted by both the state bank com-
25       missioner and the savings and loan commissioner after having first being
26       submitted to and approved by both the state banking board under K.S.A.
27       9-1713, and amendments thereto, and the savings and loan board. Such
28       rules and regulations shall be published in only one place in the Kansas
29       administrative regulations as directed by the state rules and regulations
30       board;
31             (ii) have been in existence with the same borrower for at least two
32       years and with no history of any installment being unpaid for 30 days or
33       more; and
34             (iii) are valued at not to exceed 50% of the lesser of the following
35       three values: Outstanding mortgage balance; current appraised value of
36       the real estate; or discounted present value based upon current federal
37       national mortgage association or government national mortgage associa-
38       tion interest rates quoted for conventional, federal housing administration
39       or veterans administration mortgage loans.
40             (B) Securities under (A) shall be taken at their value for not more
41       than 50% of the security required under the provisions of this section.
42             (C) Securities under (A) shall be withdrawn immediately from the
43       collateral pool if any installment is unpaid for 30 days or more.


23

  1             (D) A status report on all such loans shall be provided to the investing
  2       governmental entity by the financial institution on a quarterly basis.
  3             (e) No such bank, savings and loan association or savings bank may
  4       deposit and maintain for the benefit of the governing body of a municipal
  5       or quasi-municipal corporation of the state of Kansas, any securities which
  6       consist of:
  7             (1) Bonds secured by revenues of a utility which has been in opera-
  8       tion for less than three years; or
  9             (2) bonds issued under K.S.A. 12-1740 et seq., and amendments
10       thereto, unless such bonds have been refunded in advance of their ma-
11       turity as provided in subsection (d) or such bonds are rated at least Aa by
12       Moody's Investors Service or AA by Standard & Poor's Corp.
13             (f) Any expense incurred in connection with granting approval of rev-
14       enue bonds shall be paid by the applicant for approval.
15             Sec.  20. K.S.A. 9-1601 is hereby amended to read as follows: 9-1601.
16       Any bank, upon the affirmative vote of at least two-thirds 2/3 2/3 of the
17       voting stock, may apply to the commissioner and upon approval granted
18       by the commissioner and a special permit issued thereon shall be au-
19       thorized and empowered, subject to such conditions as the commissioner
20       may require, to act as agent, trustee, executor, administrator, registrar of
21       stocks and bonds, conservator, assignee, receiver, custodian, transfer
22       agent, corporate trustee, corporate agent or in any other fiduciary capacity
23       in the same manner in which trust companies incorporated under the
24       laws of this state are permitted to act, including but not limited to the
25       right of succession to individuals, corporations, associations, national bank
26       associations or others, with or without reappointment, in any such office
27       or capacities. The commissioner may approve and issue a special permit
28       to the bank to act in one or more of such fiduciary capacities. However,
29       if the governing instrument limits investment of funds to deposit in time
30       or savings deposits in the bank, any bank may act as trustee or custodian
31       of individual retirement accounts established pursuant to section 408 of
32       the federal internal revenue code of 1954 1986, and amendments thereto,
33       or trusts established pursuant to section 401 of the federal internal rev-
34       enue code of 1954 1986, and amendments thereto, without being issued
35       a special permit to act in such capacity. Any state bank having been
36       granted trust authority by the bank commissioner of the state of Kansas
37       may add "and trust company" to its corporate name as previously ap-
38       proved by the state banking board or bank commissioner.
39             Sec.  21. K.S.A. 9-1609 is hereby amended to read as follows: 9-1609.
40       Any state or national bank or trust company qualified to act as fiduciary
41       in this state may establish common trust funds for the purpose of fur-
42       nishing investments to itself as fiduciary, or to itself and others, as cofi-
43       duciaries or to another state or national bank or trust company, as fidu-


24

  1       ciary, which is a subsidiary of the same bank holding company of which
  2       it is a subsidiary, as such terms are defined in K.S.A. 9-519, and amend-
  3       ments thereto; and any state or national bank or trust company qualified
  4       to act as fiduciary in this state may, as such fiduciary or cofiduciary, invest
  5       funds which it lawfully holds for investment in interests in such common
  6       trust funds, if such investment is not prohibited by the instrument, judg-
  7       ment, decree or order creating such fiduciary relationship, and if, in the
  8       case of cofiduciaries, the bank or trust company procures the consent of
  9       its cofiduciaries to such investment. The state banking board bank com-
10       missioner is hereby authorized to adopt rules and regulations for a plan
11       of operation for the management of funds for state banks and trust
12       companies.
13             Sec.  22. K.S.A. 9-1702 is hereby amended to read as follows: 9-1702.
14       If upon the examination of any bank or trust company the state banking
15       board bank commissioner shall deem it necessary, the commissioner
16       hereby is authorized to make or have made by the commissioner's assis-
17       tant or examiners an examination of the fiduciary affairs of any officer or
18       employee of any bank or trust company which officer or employee is
19       serving in any fiduciary capacity; and upon similar determination by the
20       state banking board bank commissioner the commissioner hereby is au-
21       thorized to make or have made by the commissioner's assistant or ex-
22       aminers an examination of any investment company or holding company
23       or corporation which is affiliated with any bank or trust company.
24             Sec.  23. K.S.A. 9-1713 is hereby amended to read as follows: 9-1713.
25       The state bank commissioner shall adopt such rules and regulations as
26       shall be necessary to carry out the intent and purposes of K.S.A. 9-701 et
27       seq., commonly known as the state banking code. All rules and regulations
28       of general application shall first be submitted by the commissioner to the
29       state banking board for its approval and upon approval shall be filed as
30       provided by article 4 of chapter 77 of the Kansas Statutes Annotated.
31             Sec.  24. K.S.A. 9-1714 is hereby amended to read as follows: 9-1714.
32       Whenever the state bank commissioner shall determine that the business
33       of any bank or trust company is being conducted in an unlawful or un-
34       sound manner, such commissioner may appoint a special deputy bank
35       commissioner who shall immediately take charge of the operation of such
36       bank or trust company for the purpose of correcting any unlawful or
37       unsound condition or operation. Such appointment shall be made in ac-
38       cordance with the provisions of K.S.A. 77-536 and amendments thereto.
39       After appointment, the special deputy bank commissioner shall continue
40       to serve under the direction of the commissioner for such period of time
41       as may be deemed reasonable and necessary by the commissioner, or
42       until relieved by order of the state banking board bank commissioner,
43       and, during such period, such special deputy bank commissioner's salary,


25

  1       which shall be determined by the commissioner, and expenses shall be
  2       borne by the bank or trust company under supervision. After such ap-
  3       pointment, any such bank or trust company shall have the right within
  4       15 days from the date of the notice of such appointment to appeal in
  5       writing to request a hearing by filing a written request with the state
  6       banking board, bank commissioner. and upon such appeal, the state bank-
  7       ing board shall fix a date for a hearing, which hearing shall be within 30
  8       days from the date of such appeal and Such hearing shall be conducted
  9       in accordance with the provisions of the Kansas administrative procedure
10       act. The board shall render an order as to the correctness or incorrectness
11       of the commissioner's decision to take over the conduct of such bank or
12       trust company, and the order of such board shall be final and conclusive
13       within 30 days from the date such request is filed.
14             Sec.  25. K.S.A. 9-1716 is hereby amended to read as follows: 9-1716.
15       If the state bank commissioner shall determine that the condition of any
16       bank is such that dividends should not be declared and paid upon its
17       capital stock or that such dividends should be declared and paid only
18       subject to certain conditions, the commissioner shall render an order in
19       accordance with the provisions of K.S.A. 77-536 and amendments thereto
20       that no such dividends be declared and paid or that such dividends be
21       declared and paid only subject to certain conditions. The board of direc-
22       tors of the bank shall comply with such order until such time as it is
23       rescinded or modified by the commissioner by subsequent order served
24       upon the bank or by the state banking board upon appeal. Within 15 days
25       after receiving notice of the order, the bank shall have the right to appeal
26       in writing to the board from the commissioner's determination and order
27       by filing a notice of appeal request a hearing by filing a written request
28       with the commissioner,. and thereupon the board shall fix a date for a
29       hearing, which hearing shall be held within 30 days from the date such
30       notice of appeal is filed. The board commissioner shall conduct the hear-
31       ing in accordance with the provisions of the Kansas administrative pro-
32       cedure act and render its order affirming, modifying or rescinding the
33       order of the commissioner, and the order of the board shall be final and
34       conclusive and shall be complied with by the board of directors of the
35       bank within 30 days after such request is filed.
36             Sec.  26. K.S.A. 9-1719 is hereby amended to read as follows: 9-1719.
37       As used in K.S.A. 9-1719 to 9-1723, inclusive:
38             (a) "Control" means the power directly or indirectly to direct the
39       management or policies of a financial institution or to vote 25% or more
40       of any class of voting shares of a bank.
41             (b) "Bank" means a state bank or trust company incorporated under
42       the laws of Kansas.
43             (c) "Commissioner" means the Kansas state bank commissioner.


26

  1             (d) "Person" means an individual or a corporation, partnership, trust,
  2       association, joint venture, pool, syndicate, sole proprietorship, unincor-
  3       porated organization or any other form of entity not specifically listed in
  4       this subsection.
  5             (e) "Board" means the Kansas banking board.
  6             Sec.  27. K.S.A. 9-1721 is hereby amended to read as follows: 9-1721.
  7       (a) The commissioner shall be given at least 60 days' prior written notice
  8       of any proposed bank acquisition. If the commissioner does not issue an
  9       order disapproving the proposed acquisition within that time or extend
10       the period during which a disapproval may issue for another 30 days, the
11       proposed acquisition shall stand approved. The period for disapproval
12       may be further extended only if the commissioner determines that any
13       acquiring party has not furnished all the information required under
14       K.S.A. 9-1722 and amendments thereto or that in the commissioner's
15       judgment any material information submitted is substantially inaccurate.
16       An acquisition may be made prior to expiration of the disapproval period
17       if the commissioner issues written notice of the commissioner's intent not
18       to disapprove the action.
19             (b) The commissioner shall serve the acquiring party with an order
20       of disapproval. The order shall provide a statement of the basis for the
21       disapproval.
22             (c) Within 15 days after service of an order of disapproval, the ac-
23       quiring party may request a hearing on the proposed acquisition with the
24       board commissioner. Upon receipt of a timely request, the board com-
25       missioner shall conduct a hearing in accordance with the provisions of the
26       Kansas administrative procedure act.
27             (d) Any disapproval by the board commissioner of a proposed acqui-
28       sition is subject to review in accordance with the act for judicial review
29       and civil enforcement of agency actions.
30             (e) Actual expense incurred by the commissioner or board in carrying
31       out any investigation that may be necessary or required by statute shall
32       be paid by the person submitting the proposed acquisition.
33             Sec.  28. K.S.A. 1999 Supp. 9-1801 is hereby amended to read as
34       follows: 9-1801. (a) No bank or trust company hereafter shall be organized
35       or incorporated under the laws of this state, nor shall any such institution
36       transact either a banking business or a trust business in this state, until
37       the application for its incorporation and application for authority to do
38       business has been submitted to and approved by the board. The board
39       shall approve or disapprove the organization and establishment of any
40       such institution in the city or town in which the same is sought to be
41       located. The form for making any such application shall be prescribed by
42       the board and any application made to the board shall contain such in-
43       formation as it shall require. The board shall not approve any such ap-


27

  1       plication until it first investigates and examines such application and the
  2       applicants.
  3             (b) If upon the dissolution, insolvency or appointment of a receiver
  4       of any bank, trust company, national bank association, savings and loan
  5       association, savings bank or credit union, it is the opinion of the commis-
  6       sioner that by reason of the loss of services in the community, an emer-
  7       gency exists which may result in serious inconvenience or losses to the
  8       depositors or the public interest in the community, the commissioner may
  9       accept and approve an application for incorporation and application for
10       authority to do business from applicants for the organization and estab-
11       lishment of a successor bank or trust company, subject to confirmation
12       and subsequent approval by the board. Upon approval of an application
13       for the organization and establishment of any such successor bank or trust
14       company, the commissioner shall no later than the next regular meeting
15       of the board submit such application to the board for its confirmation and
16       approval.
17             Sec.  29. K.S.A. 9-1805 is hereby amended to read as follows: 9-1805.
18       (a) If the board commissioner finds in accordance with this section that
19       any officer or director of any bank or trust company has been dishonest,
20       reckless or incompetent in performing duties as such officer or director
21       or willfully or continuously fails to observe any legally made order of the
22       commissioner or board, the board commissioner may remove such officer
23       or director.
24             (b) Prior to removing such officer or director, the board commis-
25       sioner shall conduct a hearing in accordance with the provisions of the
26       Kansas administrative procedure act.
27             (c) The board commissioner may recess or continue any hearing from
28       time to time. If upon the conclusion of such hearing the board commis-
29       sioner determines that the officer or director has been dishonest, reckless
30       or incompetent in performing duties as such an officer or director, or has
31       willfully or continuously failed to comply with any legally made order of
32       the commissioner or board, the board commissioner may order the offi-
33       cer's or director's office forfeited and vacated. The board commissioner
34       shall mail a copy of its order to the bank or trust company which such
35       officer or director was serving. During the time from and after any legally
36       made order by the commissioner and upheld by the board, or order made
37       by the board, and not complied with by any officer or director the board
38       commissioner may place a special deputy in the bank up to and until the
39       final disposition of the order by compliance or final disposition by order
40       of the district court.
41             (d) Any action of the board commissioner pursuant to this section is
42       subject to review in accordance with the act for judicial review and civil
43       enforcement of agency actions. If on review the court upholds an order


28

  1       of the board commissioner removing an officer or director or if review of
  2       such an order is not sought within the time allowed by law, the office of
  3       the officer or director shall be forfeited and vacated by law and such office
  4       shall then be filled in accordance with existing statutes and bylaws by
  5       another person or persons.
  6             Sec.  30. K.S.A. 9-1806 is hereby amended to read as follows: 9-1806.
  7       The state recognizes that a bank may pay an excessive rate of interest on
  8       deposits and that a continuation thereof will result in an impairment of
  9       its capital stock and a loss to its depositors. Hence, it is declared to be
10       the policy of this state that all depositors and creditors of a bank should
11       be protected therefrom and for that purpose the board commissioner shall
12       have authority to prescribe the maximum rate of interest to be paid by
13       any bank on its deposits, which maximum rate shall be established in the
14       following manner.
15             The board in a notice signed by the commissioner, shall notify such
16       bank that it the commissioner believes that such bank is paying an exces-
17       sive rate of interest on its deposits and that a hearing thereon will be held
18       before the board at its next regular meeting which shall not be less than
19       20 days from the day such notice is given. The board commissioner may
20       recess or continue any hearing from time to time. If upon the conclusion
21       of such hearing the board commissioner determines that the rate of in-
22       terest paid by such bank on its deposits will result in an impairment of
23       its capital stock, the board commissioner may prescribe the maximum rate
24       of interest to be paid by such bank upon its deposits. Any order so made
25       shall not impair the validity of existing contracts.
26             Hearings under this section shall be conducted in accordance with the
27       provisions of the Kansas administrative procedure act.
28             Sec.  31. K.S.A. 9-1807 is hereby amended to read as follows: 9-1807.
29       If the state bank commissioner shall determine that any bank or trust
30       company is engaging or has engaged, or the commissioner has reasonable
31       cause to believe that the bank or trust company is about to engage, in an
32       unsafe or unsound practice in conducting the business of such bank or
33       trust company, or if the commissioner shall determine that any bank or
34       trust company is violating or has violated, or the commissioner has rea-
35       sonable cause to believe that the bank or trust company is about to violate
36       a law, rule, regulation or order of the commissioner or state banking
37       board, the commissioner may issue and serve upon the bank or trust
38       company a notice of charges in respect thereof. The notice shall contain
39       a statement of the facts constituting the alleged unsafe or unsound prac-
40       tice or practices or the alleged violation or violations, and shall state the
41       time and place at which a hearing will be held by the board commissioner
42       to determine whether an order to cease and desist therefrom should be
43       issued by the board commissioner against the bank or trust company. Such


29

  1       hearing shall be fixed for a date not earlier than thirty (30) 30 days nor
  2       later than sixty (60) days 60 after service of such notice.
  3             Unless the bank or trust company shall appear at the hearing by a duly
  4       authorized representative, it shall be deemed to have consented to the
  5       issuance of the cease and desist order. In the event of such consent, or
  6       if upon the record made at any such hearing, the board commissioner
  7       shall find that any unsafe or unsound practice or violation specified in the
  8       notice of charges has been established, the board commissioner may issue
  9       and serve upon the bank or trust company an order to cease and desist
10       from any such practice or violation. Such order may, by provisions which
11       may be mandatory or otherwise, require the bank or trust company and
12       its directors, officers, employees and agents to cease and desist from the
13       same, and, further, to take affirmative action to correct the conditions
14       resulting from any such practice or violation. A cease and desist order
15       shall become effective at the time specified therein, and shall remain
16       effective and enforceable as provided therein, except to such extent as it
17       is stayed, modified, terminated or set aside by action of the board
18       commissioner.
19             Whenever the commissioner shall determine that the unsafe or un-
20       sound practice or practices or the violation or violations specified in the
21       notice of charges served upon the bank or trust company, or the contin-
22       uation thereof, is likely to cause insolvency or substantial dissipation of
23       assets or earnings of the bank or trust company, or is likely to otherwise
24       seriously prejudice the interests of its depositors, the commissioner may
25       issue a temporary order requiring the bank or trust company to cease and
26       desist from any such practice or practices or violation or violations. Such
27       order shall be effective upon service thereof upon the bank or trust com-
28       pany, and shall remain effective and enforceable pending the completion
29       of the proceedings pursuant to such notice and until such time as the
30       board commissioner shall dismiss the charges specified in such notice, or
31       if a cease and desist order is issued against the bank or trust company,
32       until the effective date of any such order.
33             Sec.  32. K.S.A. 1999 Supp. 9-1904 is hereby amended to read as
34       follows: 9-1904. The stockholders of any insolvent or critically undercap-
35       italized bank or trust company and its depositors and creditors may for-
36       mulate a plan for the reorganization of such bank or trust company while
37       the same is in charge of the commissioner or a special deputy commis-
38       sioner or a receiver, at any time before a dividend has been paid. The
39       depositors and creditors of such insolvent or critically undercapitalized
40       bank or trust company may formulate a plan for the reorganization
41       thereof, and if such plan is subscribed to in writing by creditors and
42       depositors having not less than 80% in amount of the known claims
43       against such bank or trust company, and such plan shall be approved by


30

  1       the board, and a copy thereof filed with the commissioner, the same shall
  2       be held to be legal, valid and binding upon all depositors and creditors
  3       of such insolvent or critically undercapitalized bank or trust company to
  4       the same extent and with the same effect as if all of the depositors and
  5       creditors had joined in the execution thereof.
  6             As used in this section "depositors" and "creditors" shall mean and
  7       include the pooled money investment board acting for and on behalf of
  8       the state of Kansas and the governing body of any county, township, city,
  9       drainage district, school district, sewer district or other governmental sub-
10       division and as such they are hereby authorized to join in the execution
11       of any plan for the reorganization of any insolvent or critically undercap-
12       italized bank or trust company with the same legal effect and validity as
13       any individual depositor or creditor.
14             Sec.  33. K.S.A. 9-2106 is hereby amended to read as follows: 9-2106.
15       No trust company shall take the name of any other trust company incor-
16       porated in the state of Kansas, or a name so near like another as to be
17       easily confused with it. No trust company shall change its name until such
18       name change has been submitted to and approved by the state banking
19       board bank commissioner. The bank commissioner shall have power to
20       refuse authority to any trust company violating this provision.
21             Sec.  34. K.S.A. 1999 Supp. 9-2107 is hereby amended to read as
22       follows: 9-2107. (a) As used in this section:
23             (1) "Contracting trustee" means any trust company, as defined in
24       K.S.A. 9-701, and amendments thereto, any bank that has been granted
25       trust authority by the state bank commissioner under K.S.A. 9-1602, and
26       amendments thereto, or any national bank chartered to do business in
27       Kansas that has been granted trust authority by the comptroller of the
28       currency under 12 USC U.S.C. 92a, or any bank, regardless of where
29       located, that has been granted trust authority and which is controlled, as
30       defined in K.S.A. 9-1612 and amendments thereto by the same bank
31       holding company as any trust company, state bank or national bank char-
32       tered to do business in Kansas, which accepts or succeeds to any fiduciary
33       responsibility as provided in this section;
34             (2) "originating trustee" means any trust company, bank, national
35       banking association, savings and loan association or savings bank which
36       has trust powers and its principal place of business is in this state and
37       which places or transfers any fiduciary responsibility to a contracting trus-
38       tee as provided in this section;
39             (3) "financial institution" means any bank, national banking associa-
40       tion, savings and loan association or savings bank which has its principal
41       place of business in this state but which does not have trust powers.
42             (b) Any contracting trustee and any originating trustee may enter into
43       an agreement by which the contracting trustee, without any further au-


31

  1       thorization of any kind, succeeds to and is substituted for the originating
  2       trustee as to all fiduciary powers, rights, duties, privileges and liabilities
  3       with respect to all accounts for which the originating trustee serves in any
  4       fiduciary capacity, except as may be provided otherwise in the agreement.
  5       Notwithstanding the provisions of this section, no contracting trustee as
  6       defined in K.S.A. 9-2107(a)(1) and amendments thereto, having its home
  7       office outside the state of Kansas shall enter into an agreement except
  8       with an originating trustee which is commonly controlled as defined in
  9       K.S.A. 9-1612 and amendments thereto by the same bank holding
10       company.
11             (c) Unless the agreement expressly provides otherwise, upon the ef-
12       fective date of the substitution:
13             (1) The contracting trustee shall be deemed to be named as the fi-
14       duciary in all writings, including, without limitation, trust agreements,
15       wills and court orders, which pertain to the affected fiduciary accounts;
16             (2) the originating trustee is absolved from all fiduciary duties and
17       obligations arising under such writings and shall discontinue the exercise
18       of any fiduciary duties with respect to such writings, except that the orig-
19       inating trustee is not absolved or discharged from any duty to account
20       required by K.S.A. 59-1709, and amendments thereto, or any other ap-
21       plicable statute, rule of law, rules and regulations or court order, nor shall
22       the originating trustee be absolved from any breach of fiduciary duty or
23       obligation occurring prior to the effective date of the agreement.
24             (d) The agreement may authorize the contracting trustee:
25             (1) To establish a trust service desk at any office of the originating
26       trustee at which the contracting trustee may conduct any trust business
27       and any business incidental thereto and which the contracting trustee may
28       otherwise conduct at its principal place of business; and
29             (2) to engage the originating trustee as the agent of the contracting
30       trustee, on a disclosed basis to customers, for the purposes of providing
31       administrative, advertising and safekeeping services incident to the fidu-
32       ciary services provided by the contracting trustee.
33             (e) Any contracting trustee may enter into an agreement with a fi-
34       nancial institution providing that the contracting trustee may establish a
35       trust service desk as authorized by subsection (d) in the offices of such
36       financial institution and which provides such financial institution, on a
37       disclosed basis to customers, may act as the agent of contracting trustee
38       for purposes of providing administrative services and advertising incident
39       to the fiduciary services to be performed by the contracting trustee.
40             (f) No activity authorized by subsections (b) through (e) shall be con-
41       ducted by any contracting trustee, originating trustee or financial insti-
42       tution until an application for such authority has been submitted to and
43       approved by the commissioner. The application shall be in the form and


32

  1       contain the information required by the commissioner, which shall at a
  2       minimum include certified copies of the following documents:
  3             (1) The agreement;
  4             (2) the written action taken by the board of directors of the originat-
  5       ing trustee or financial institution approving the agreement;
  6             (3) all other required regulatory approvals;
  7             (4) an affidavit of publication of notice of intent to file the application
  8       with the commissioner. Publication of the notice shall be on the same day
  9       for two consecutive weeks in the official newspaper of the city or county
10       where the principal office of the originating trustee or financial institution
11       is located. The notice shall be in the form prescribed by the commissioner
12       and shall contain the name of the applicant contracting trustee, the orig-
13       inating trustee or financial institution, the proposed date of filing of the
14       application with the commissioner, and a solicitation for written com-
15       ments concerning the application, and a notice of the public's right to file
16       a written request for a public hearing for the purpose of presenting oral
17       or written evidence regarding the proposed agreement. All comments
18       and requests for public hearing shall be filed with the commissioner on
19       or before the 30th day after the date the application is filed; and
20             (5) a certification by the parties to the agreement that written notice
21       of the proposed substitution was sent by first-class mail to each cofidu-
22       ciary, each surviving settlor of a trust, each ward of a guardianship, each
23       person who has sole or shared power to remove the originating trustee
24       as fiduciary and each adult beneficiary currently receiving or entitled to
25       receive a distribution of principle or income from a fiduciary account
26       affected by the agreement, and that such notice was sent to each such
27       person's address as shown in the originating trustee's records. An unin-
28       tentional failure to give such notice shall not impair the validity or effect
29       of any such agreement, except an intentional failure to give such notice
30       shall render the agreement null and void as to the party not receiving the
31       notice of substitution.
32             (g) A contracting trustee making application to the commissioner for
33       approval of any agreement pursuant to this section shall pay to the com-
34       missioner a fee, in an amount established by rules and regulations of the
35       commissioner adopted pursuant to K.S.A. 9-1713 and amendments
36       thereto, to defray the expenses of the commissioner or designee in the
37       examination and investigation of the application. The commissioner shall
38       remit all amounts received under this section to the state treasurer who
39       shall deposit the same to a separate account in the state treasury for each
40       application. The money in each such account shall be used to pay the
41       expenses of the commissioner, or designee in the examination and inves-
42       tigation of the application to which it relates and any unused balance shall
43       be transferred to the bank commissioner fee fund.


33

  1             (h) Upon the filing of any such application with the commissioner,
  2       the commissioner shall make or cause to be made, a careful examination
  3       and investigation concerning:
  4             (1) The reasonable probability of usefulness and success of the con-
  5       tracting trustee;
  6             (2) the financial history and condition of the contracting trustee in-
  7       cluding the character, qualifications and experience of the officers em-
  8       ployed by the contracting trustee; and
  9             (3) whether the contracting agreement will result in any undue injury
10       to properly conducted existing banks, national banks and trust companies.
11             If the commissioner shall determine any of such matters unfavorably
12       to the applicants, the application shall be disapproved, but if not, then
13       the application shall be approved.
14             (i) If no written request for public hearing is filed, the The commis-
15       sioner shall render approval or disapproval of approve or disapprove the
16       application within 60 days of the date upon which the application was
17       filed.
18             (j) If a written request for public hearing is filed, the commissioner
19       shall hold within 30 days of the close of the comment period, a public
20       hearing in a location determined by the commissioner. Notice of the time,
21       date and place of such hearing shall be published by the applicant in a
22       newspaper of general circulation in the county where the originating trus-
23       tee or financial institution is located, not less than 10 nor more than 30
24       days prior to the date of the hearing, and an affidavit of publication shall
25       be filed with the commissioner. At any such hearing, all interested persons
26       may present written and oral evidence to the commissioner in support of
27       or in opposition to the application. Upon completion of a transcript of
28       the testimony given at any such hearing, the transcript shall be filed in
29       the office of the commissioner. Within 14 days after the public hearing,
30       the commissioner shall approve or disapprove the application after con-
31       sideration of the application and evidence gathered during the commis-
32       sioner's investigation.
33             (k) (j) The commissioner may extend the period for approval or dis-
34       approval if the commissioner determines that any information required
35       by this section has not been furnished, any material information submit-
36       ted is inaccurate or additional investigation is required. The commis-
37       sioner, prior to Prior to the expiration of the application period provided
38       for by this section, the commissioner shall give written notice to each party
39       to the agreement of the commissioner's intent to extend the period which
40       shall include a specific date for expiration of the extension period. If any
41       information remains incomplete or inaccurate upon the expiration of the
42       extension period the application shall be disapproved.
43             (l) (k) Within 15 days of the date of the commissioner's approval or


34

  1       denial, the applicant or any individual or corporation who filed a request
  2       for and presented evidence at the public hearing shall have the right to
  3       appeal in writing to the state banking board the commissioner's deter-
  4       mination request a hearing by filing a notice of appeal written request
  5       with the commissioner. The state banking board shall fix a date for hear-
  6       ing, which hearing shall be held within 45 days after such notice of appeal
  7       is filed. The board commissioner shall conduct the hearing in accordance
  8       with the provisions of the Kansas administrative procedure act and render
  9       its decision affirming or rescinding the determination of the commis-
10       sioner within 45 days after such request is filed. Any action of the board
11       commissioner pursuant to this section is subject to review in accordance
12       with the act for judicial review and civil enforcement of agency actions.
13       Any party which files an appeal to the state banking board of the com-
14       missioner's determination applicant who requests a hearing shall pay to
15       the commissioner a fee in an amount established by rules and regulations
16       of the commissioner, adopted pursuant to K.S.A. 9-1713 and amendments
17       thereto, to defray the board's commissioner's expenses associated with
18       the conduct of the appeal hearing.
19             (m) (l) When the commissioner determines that any contracting trus-
20       tee domiciled in this state has entered into a contracting agreement in
21       violation of the laws governing the operation of such contracting trustee,
22       the commissioner shall give written notice to the contracting trustee and
23       the originating trustee or financial institution of such determination.
24       Within 15 days after receipt of such notification, the contracting trustee
25       and originating trustee or financial institution shall have the right to ap-
26       peal in writing to the state banking board the commissioner's determi-
27       nation file a written request for a hearing. The board commissioner shall
28       fix a date for hearing, which shall be held within 45 days after the date
29       of the appeal and shall be conducted conduct the hearing in accordance
30       with the Kansas administrative procedure act within 45 days after such
31       request is filed. At such hearing the board shall hear all matters relevant
32       to the commissioner's determination and shall approve or disapprove the
33       commissioner's determination. The decision of the board shall be final
34       and conclusive. If the contracting trustee does not appeal to the board
35       from the commissioner's determination or if an appeal is made and the
36       commissioner's determination is upheld by the board request a hearing,
37       the commissioner may proceed as provided in K.S.A. 9-1714 and amend-
38       ments thereto, until such time as the commissioner determines the con-
39       tracting trustee, originating trustee and financial institution are in full
40       compliance with the laws governing the operation of a contracting trustee
41       and originating trustee or financial institution.
42             (n) (m) Any party entitled to receive a notice under subsection (f)(5)
43       may file a petition in the court having jurisdiction over the fiduciary re-


35

  1       lationship, or if none, in the district court in the county where the origi-
  2       nating trustee has its principal office, seeking to remove any contracting
  3       trustee substituted or about to be substituted as fiduciary pursuant to this
  4       section. Unless the contracting trustee files a written consent to its re-
  5       moval or a written declination to act subsequent to the filing of the pe-
  6       tition, the court, upon notice and hearing, shall determine the best in-
  7       terest of the petitioner and all other parties concerned and shall fashion
  8       such relief as it deems appropriate in the circumstances, including the
  9       awarding of reasonable attorney fees. The right to file a petition under
10       this subsection shall be in addition to any other rights to remove fiduciary
11       provided by any other statute or regulation or by the writing creating the
12       fiduciary relationship. If the removal of the fiduciary is prompted solely
13       as a result of the contracting agreement, any reasonable cost associated
14       with such removal and transfer, not to exceed $200 per account, shall be
15       paid by the originating trustee or financial institution entering into the
16       agreement.
17             Sec.  35. K.S.A. 1999 Supp. 9-2108 is hereby amended to read as
18       follows: 9-2108. It is unlawful for any trust company to establish or op-
19       erate a trust service office or relocate an existing trust service office except
20       as provided in this act:
21             (a) As used in this section: "Trust service office" means any office,
22       agency or other place of business located within this state other than the
23       place of business specified in the trust company's certificate of authority,
24       at which the powers granted to trust companies under K.S.A. 9-2103 and
25       amendments thereto are exercised. For the purposes of this section, any
26       activity in compliance with K.S.A. 9-2107 and amendments thereto does
27       not constitute a trust service office;
28             (b) after first applying for and obtaining the approval of the commis-
29       sioner under this section, one or more trust service offices may be estab-
30       lished or operated in any city within this state by a trust company incor-
31       porated under the laws of this state;
32             (c) an application to establish or operate a trust service office or to
33       relocate an existing trust service office shall be in such form and contain
34       such information as required by the commissioner and shall include cer-
35       tified copies of the following documents:
36             (1) The written action taken by the board of directors of the trust
37       company approving the establishment or operation of the proposed trust
38       service office or the proposed relocation of the trust service office;
39             (2) all other required regulatory approvals; and
40             (3) an affidavit of publication of notice of intent to file an application
41       to establish or operate a trust service office or relocate an existing trust
42       service office. Publication of the notice shall be on the same day for two
43       consecutive weeks in the official newspaper of the city where the pro-


36

  1       posed trust service office is to be located. The notice shall be in the form
  2       prescribed by the commissioner and shall contain the name of the appli-
  3       cant, the location of the proposed trust service office, the proposed date
  4       of filing of the application with the commissioner, and a solicitation for
  5       written comments concerning the application and a notice of the public's
  6       right to file a written request for a public hearing for the purpose of
  7       presenting oral or written evidence regarding the proposed trust service
  8       office. All comments and requests for public hearing shall be filed with
  9       the commissioner on or before the 30th day after the date the application
10       is filed.
11             (d)  a trust company making application to the commissioner for ap-
12       proval of a trust service office under this section shall pay to the com-
13       missioner a fee, in an amount established by rules and regulations of the
14       commissioner, adopted pursuant to K.S.A. 9-1713 and amendments
15       thereto, to defray the expenses of the commissioner or designee in the
16       examination and investigation of the application. The commissioner shall
17       remit all amounts received under this section to the state treasurer who
18       shall deposit the same to a separate account in the state treasury for each
19       application. The moneys in each such account shall be used to pay the
20       expenses of the commissioner or designee in the examination and inves-
21       tigation of the application to which it relates and any unused balance shall
22       be transferred to the bank commissioner fee fund;
23             (e) Upon filing of any such application with the commissioner, the
24       commissioner shall make or cause to be made, a careful examination and
25       investigation concerning:
26             (1) The reasonable probability of usefulness and success of the pro-
27       posed trust service office;
28             (2) the applicant trust company's financial history and condition in-
29       cluding the character, qualifications and experience of the officers em-
30       ployed by the trust company; and
31             (3) whether the proposed trust service office can be established with-
32       out undue injury to properly conducted existing banks, national banking
33       associations and trust companies. If the commissioner determines any of
34       such matters unfavorably to the applicants, the application shall be dis-
35       approved, but if not,; otherwise the application shall be approved.
36             (f) If no written request for public hearing is filed, the The commis-
37       sioner shall render approval or disapproval of approve or disapprove the
38       application within 60 days of the date upon which the application was
39       filed.
40             (g) If a written request for public hearing is filed, the commissioner
41       shall hold a public hearing in a location determined by the commissioner
42       within 30 days of the close of the comment period. Notice of the time,
43       date and place of the hearing shall be published by the applicant in a


37

  1       newspaper of general circulation in the county where the proposed trust
  2       service office is to be located, not less than 10 or more than 30 days prior
  3       to the date of the hearing, and an affidavit of publication shall be filed
  4       with the commissioner. At any such hearing, all interested persons shall
  5       be allowed to present written and oral evidence to the commissioner in
  6       support of or in opposition to the application. Upon completion of a tran-
  7       script of the testimony given at any such hearing, the transcript shall be
  8       filed in the office of the commissioner. Within 14 days after the public
  9       hearing, the commissioner shall approve or disapprove the application
10       after consideration of the application and evidence gathered during the
11       commissioner's investigation.
12             (h) The commissioner may extend the period for approval or disap-
13       proval if the commissioner determines that any information required by
14       this section has not been furnished, any material information submitted
15       is inaccurate or additional investigation is required. The commissioner,
16       prior to Prior to expiration of the application period as provided in this
17       section, the commissioner shall give written notice to the applicant of the
18       commissioner's intent to extend the period and such notice shall include
19       a specific date for expiration of the extension period. If any information
20       remains incomplete or inaccurate upon the expiration of the extension
21       period the application shall be disapproved.
22             (i) (h) Within 15 days of the date after the commissioner's approval
23       or disapproval of the application, the applicant or any individual or cor-
24       poration who filed a request for and presented evidence at the public
25       hearing shall have the right to appeal in writing to the state banking board
26       the commissioner's determination, request a hearing by filing a notice of
27       appeal written request with the commissioner. The state banking board
28       shall fix a date for a hearing, which hearing shall be held within 45 days
29       from the date such notice of appeal is filed. The board commissioner shall
30       conduct the hearing in accordance with the provisions of the Kansas ad-
31       ministrative procedure act and render its decision affirming or rescinding
32       the determination of the commissioner within 45 days after such request
33       is filed. Action of the board commissioner pursuant to this section is sub-
34       ject to review in accordance with the act for judicial review and civil
35       enforcement of agency actions. Any party which files an appeal to the
36       state banking board of the commissioner's determination applicant who
37       requests a hearing shall pay to the commissioner a fee in an amount
38       established by rules and regulations of the commissioner, adopted pur-
39       suant to K.S.A. 9-1713 and amendments thereto, to defray the board's
40       commissioner's expenses associated with the conduct of the appeal
41       hearing.
42             (j) (i) When the commissioner determines that a trust company dom-
43       iciled in this state has established or is operating a trust service office in


38

  1       violation of the laws governing the operation of such trust company, the
  2       commissioner shall give written notice to the trust company of such de-
  3       termination. Within 15 days after receipt of such notification, the trust
  4       company may appeal in writing to the state banking board the commis-
  5       sioner's determination file a written request for a hearing. The board
  6       commissioner shall fix a date for hearing, which hearing shall be held
  7       within 45 days from the date of such appeal and shall be conducted con-
  8       duct the hearing in accordance with the provisions of the Kansas admin-
  9       istrative procedure act within 45 days after such request is filed. At such
10       hearing the board shall hear all matters relevant to the commissioner's
11       determination and shall approve or disapprove the commissioner's deter-
12       mination, and the decision of the board shall be final and conclusive. If
13       the trust company does not appeal to the state banking board from the
14       commissioner's determination or if an appeal is made and the commis-
15       sioner's determination is upheld by the board request a hearing, the com-
16       missioner may proceed as provided in K.S.A. 9-1714 and amendments
17       thereto, until such time as the commissioner determines the trust com-
18       pany is in full compliance with the laws governing the operation of a trust
19       service office.
20             Sec.  36. K.S.A. 1999 Supp. 74-3004 is hereby amended to read as
21       follows: 74-3004. (a) There is hereby created a state banking board which
22       shall be composed of nine members. Six members of the board shall be
23       bankers with not less than five years' actual banking experience in a state
24       bank in this state or persons with not less than five years' actual experience
25       in a state chartered savings and loan association in this state, or any
26       combination thereof and three shall represent the public interest in the
27       regulation, operation and control of state banks and trust companies. All
28       members shall be selected from the state at large. No nonbanker member
29       representing the public interest shall concurrently serve as an officer, em-
30       ployee or director in any state or national bank or trust company wherever
31       located. One of the nine members shall be elected annually The com-
32       missioner shall serve as chairperson of the board. The commissioner shall
33       not be a voting member of the board. The board shall be appointed by
34       the governor. Persons appointed to the board shall be subject to confir-
35       mation by the senate as provided in K.S.A. 75-4315b, and amendments
36       thereto. Except as provided by K.S.A. 1999 Supp. 46-2601, no person
37       appointed to the board shall exercise any power, duty or function as a
38       member of the board until confirmed by the senate. No more than five
39       members of the board shall be from the same political party. Subject to
40       the provisions of K.S.A. 75-4315c, and amendments thereto, of the six
41       banker or savings and loan association members, the governor shall ap-
42       point one from each Kansas congressional district as presently constituted
43       and the remainder from the state at large. Appointment of nonbanker


39

  1       members representing the public interest shall be made from the state at
  2       large with due consideration for achieving representation of the various
  3       geographic sectors of the state.
  4             (b) Except as provided by subsection (c), terms of members of the
  5       board shall be for three years. Each member shall serve until a successor
  6       is appointed and confirmed. No person shall serve more than two terms
  7       as a member of the board. In the event of a vacancy on the board, the
  8       governor shall appoint a new member of the same qualification to fill the
  9       unexpired term.
10             (c) The terms of members who are serving on the board on the ef-
11       fective date of this act shall expire on March 15, of the year in which such
12       member's term would have expired under the provisions of this section
13       prior to amendment by this act. Thereafter, members shall be appointed
14       for terms of three years and until their successors are appointed and
15       confirmed.
16             Sec.  37. K.S.A. 74-3005 is hereby amended to read as follows: 74-
17       3005. Members of the state banking board attending meetings of such
18       board, or attending a subcommittee meeting thereof authorized by such
19       board, shall be paid compensation, subsistence allowances, mileage and
20       other expenses as provided in K.S.A. 75-3223, and amendments thereto.
21       The commissioner shall act as secretary for said board and shall keep a
22       permanent record of all meetings and proceedings of said board in his
23       the commissioner's office.
24             Sec.  38. K.S.A. 1999 Supp. 74-3006 is hereby amended to read as
25       follows: 74-3006. (a) The board shall meet once each month, on dates it
26       agrees upon, and shall meet at other times as the board deems necessary
27       unless no applications which require the board's consideration are pend-
28       ing or when called by the chairperson or any three members of the board
29       state bank commissioner. Six members of the board shall constitute a
30       quorum, and a majority vote of the board shall be necessary to carry any
31       question. No action of the board shall be taken except in a formal meeting
32       and after a favorable vote of a majority of the entire board. The members
33       of the board during business hours shall have free access to all of the
34       records in the office of the commissioner. The board shall act in an ad-
35       visory capacity in all matters pertaining to the conduct and welfare of the
36       banking department and the administration of the banking laws of this
37       state except as otherwise specifically provided by law.
38             (b) The board, in accordance with K.S.A. 75-4319 and amendments
39       thereto, may recess for a closed or executive meeting to discuss infor-
40       mation deemed confidential by virtue of K.S.A. 9-1712 and amendments
41       thereto.
42             Sec.  39. K.S.A. 1999 Supp. 74-3007 is hereby amended to read as
43       follows: 74-3007. The savings and loan board created by K.S.A. 74-3113


40

  1       and amendments thereto is hereby abolished. All of the powers, duties
  2       and functions of the existing savings and loan board are hereby transferred
  3       to and imposed upon the state banking board bank commissioner estab-
  4       lished by K.S.A. 74-3004 and amendments thereto.
  5             Sec.  40. K.S.A. 1999 Supp. 74-3008 is hereby amended to read as
  6       follows: 74-3008. (a) The state banking board bank commissioner shall be
  7       the successor in every way to the powers, duties and functions of the
  8       savings and loan board in which the same were vested prior to the effec-
  9       tive date of this act. Every act performed in the exercise of such powers,
10       duties and functions by or under the authority of the state banking board
11       bank commissioner shall be deemed to have the same force and effect as
12       if performed by the savings and loan board in which such powers, duties
13       and functions were vested prior to the effective date of this act.
14             (b) Whenever the savings and loan board, or words of like effect, is
15       referred to or designated by a statute, contract or other document, such
16       reference or designation shall be deemed to apply to the state banking
17       board bank commissioner.
18             (c) All orders and directives of the savings and loan board in existence
19       on the effective date of this act shall continue to be effective and shall be
20       deemed to be orders and directives of the state banking board bank com-
21       missioner until revised, amended or nullified pursuant to law.
22             (d) On and after the effective date of this act, whenever any statute,
23       contract or other document concerns the power or authority of the savings
24       and loan board, the state banking board bank commissioner shall succeed
25       to such power or authority. 
26       Sec.  41. K.S.A. 9-802, 9-804, 9-812, 9-901b, 9-908, 9-912, 9-1001, 9-
27       1101a, 9-1107, 9-1127b, 9-1127c, 9-1127d, 9-1301, 9-1601, 9-1609, 9-
28       1702, 9-1713, 9-1714, 9-1716, 9-1719, 9-1721, 9-1805, 9-1806, 9-1807, 9-
29       2106 and 74-3005 and K.S.A. 1999 Supp. 9-535, 9-539, 9-904, 9-1101,
30       9-1111, 9-1135, 9-1402, 9-1801, 9-1904, 9-2107, 9-2108, 74-3004, 74-
31       3006, 74-3007 and 74-3008 are hereby repealed.
32        Sec.  42. This act shall take effect and be in force from and after its
33       publication in the Kansas register.