An Act concerning banks and trust companies; stock; bank hours of business; liquidation, merger or consolidation; mortgages; mortgage business and mortgage loans; amending K.S.A. 9-903, 9-904, 9-1108, 9-1110, 9-1122 and 9-1604 and K.S.A. 1995 Supp. 9-519 and repealing the existing sections.

Be it enacted by the Legislature of the State of Kansas:

New Section 1. As used in this act:

(a) ``Commissioner'' means the Kansas state bank commissioner.

(b) ``Mortgage business'' means engaging in, or holding out to the public as willing to engage in, for compensation or gain, or in the expec- tation of compensation or gain, directly or indirectly, the business of mak- ing, originating, servicing, soliciting, placing, negotiating, acquiring, sell- ing, or arranging for others, or offering to solicit, place, negotiate, acquire, sell or arrange for others, five or more mortgage loans in a calendar year.

(c) ``Mortgage loan'' means a loan made to a natural person which is secured by a first mortgage or other similar instrument or document, and which creates a first lien on a one-to-four family dwelling, located in this state, occupied or intended to be occupied for residential purposes by the owner, including the renewal or refinancing of such a loan.

(d) ``Person'' means any individual, sole proprietorship, corporation, partnership, trust, association, joint venture, pool syndicate, unincorpor- ated organization or other form of entity, however organized.

New Sec. 2. The following are exempt from the registration require- ments of this act:

(a) Any bank, bank holding company, savings bank, trust company, savings and loan association, credit union or any other financial institution regulated by an agency of the United States or of any state;

(b) any entity directly or indirectly regulated by an agency of the United States or of Kansas which is a subsidiary or affiliate of any entity in subsection (a);

(c) any person who is registered with the Kansas securities commis- sioner as a loan broker pursuant to K.S.A. 50-1001 et seq. and amend- ments thereto or who is licensed by the Kansas consumer credit com- missioner as a supervised lender pursuant to K.S.A. 16a-2-301 et seq. and amendments thereto; and

(d) the United States of America, the state of Kansas, any other state, or any agency or instrumentality of any governmental entity.

New Sec. 3. On and after November 1, 1996, no person shall conduct mortgage business in Kansas unless registered with the office of the state bank commissioner pursuant to this act.

New Sec. 4. (a) Any person required to register pursuant to this act shall submit to the commissioner an application for registration on forms prescribed and provided by the commissioner. The application shall con- tain information the commissioner deems necessary to adequately iden- tify:

(1) The location and nature of the business to be conducted;

(2) the identity, character and qualifications of an individual appli- cant;

(3) the identity, character and qualifications of the officers and di- rectors of the entity, if the applicant is a partnership, corporation or other business entity;

(4) the name under which the applicant intends to conduct business; and

(5) other information the commissioner requires to evaluate the fi- nancial responsibility, character, qualifications and fitness of the appli- cant.

(b) Each application for registration shall be accompanied by a non- refundable fee of not less than $100, which may be increased by rules and regulations pursuant to section 9.

(c) An application for registration shall be approved, and a nonas- signable certificate of registration shall be issued to the applicant by the commissioner provided:

(1) The commissioner has received the complete application and fee required by this section; and

(2) the commissioner determines the financial responsibility, char- acter, qualifications and fitness of the applicant warrants a belief that the business of the applicant will be conducted competently, honestly, fairly and within the purposes of this act.

New Sec. 5. (a) A certificate of registration shall become effective as of the date specified on the face of the original certificate and is effective for one year. The registration shall be renewed annually by filing with the commissioner, at least 30 days prior to the expiration of the registration, a renewal application, containing information the commissioner requires to determine the existence of material changes from the information con- tained in the applicant's original registration application or prior renewal applications.

(b) Each renewal application shall be accompanied by a nonrefund- able fee which shall be established by rules and regulations pursuant to section 9.

New Sec. 6. If the commissioner notifies the applicant, in writing, that any application has been denied, or the commissioner fails to issue a certificate of registration within 60 days or grant a renewal within 30 days after a filed application is deemed complete by the commissioner, the applicant may make written request for an appeal on the issue of the applicant's registration or renewal qualifications. The commissioner shall conduct a hearing in accordance with the Kansas administrative proce- dure act.

New Sec. 7. (a) The commissioner may deny, suspend or revoke the registration of a mortgage business if the commissioner finds:

(1) The applicant or registrant has repeatedly or willfully violated any section of this act or any rule and regulation or order lawfully made pur- suant to this act;

(2) facts or conditions exist which would have justified the denial of the registration or renewal had these facts or conditions existed or been known to exist at the time the application for registration or renewal was made;

(3) the applicant or registrant has filed with the commissioner any document or statement containing any false representation of a material fact or fails to state a material fact; or

(4) the applicant or registrant has been convicted, within 10 years before the date of an application, renewal or review of any crime involving fraud, dishonesty or deceit.

(b) The commissioner shall not revoke a registration until the regis- trant is provided written notice of the facts or conduct the commissioner believes to form the basis for the proposed revocation and of the regis- trant's right to request a hearing in accordance with the Kansas admin- istrative procedure act.

New Sec. 8. (a) Every certificate of registration shall be properly dis- played in a prominent place within the registrant's place of business in a way that reasonably assures recognition by customers and members of the general public who enter the registrant's place of business.

(b) Prior to entering into any contract for the provision of services or prior to the registrant receiving any compensation or promise of com- pensation the registrant shall acquire from the customer a signed ack- nowledgment that contains only the following items:

(1) The name and address of the mortgage business;

(2) the name and position of the individual presenting the acknow- ledgment to the customer for a signature;

(3) a statement in at least 10 point boldface letters which reads ``[name of the registrant] is a mortgage business registered with the Kan- sas Office of the State Bank Commissioner in accordance with the laws of the state of Kansas. This registration does not represent an endorse- ment or recommendation of the registrant's products or services by the Office of the State Bank Commissioner. As a consumer, you may submit a complaint or inquiry about this mortgage business by delivering a writ- ten statement to the Office of the State Bank Commissioner, 700 Jackson, Suite 300, Topeka, Kansas 66603''; and

(4) an original signature of the customer(s) and the date such signa- ture(s) was attached.

New Sec. 9. The commissioner may exercise the following powers:

(a) Adopt rules and regulations as necessary to carry out the intent and purpose of this act;

(b) make investigations and examinations of the registrant's opera- tions, books and records as the commissioner deems necessary for:

(1) Determining the adequacy or acceptability of any application for registration;

(2) pursuing a complaint or information which forms reasonable grounds for belief that an investigation or examination is necessary or advisable for more complete protection of the interests of the public;

(c) charge reasonable costs of investigation or examination to be paid by the registrant under investigation or examination;

(d) order any registrant to cease any activity or practice which the commissioner deems to be deceptive, dishonest, violative of state or fed- eral law or unduly harmful to the interests of the public; and

(e) exchange any information regarding the administration of this act with any agency of the United States or any state which regulates the registrant or administers statutes, rules and regulations or programs re- lated to mortgage loans.

New Sec. 10. All fees collected by the commissioner pursuant to this act shall be subject to the provisions of K.S.A. 75-1308 and amendments thereto.

Sec. 11. K.S.A. 9-903 is hereby amended to read as follows: 9-903. The shares of stock of any bank or trust company shall be deemed per- sonal property and shall be transferred on the books of the bank or trust company in such manner as the bylaws thereof may direct. No transfer of stock shall be valid against the issuing bank or trust company so long as the registered owner thereof shall be liable as principal debtor, surety or otherwise to the bank or trust company on a matured, charged off or forgiven obligation, nor shall any dividend, interest or profit be paid on such stock so long as the registered owner thereof is indebted to the bank or trust company on a matured, charged off or forgiven obligation, but all such dividends or profits shall be retained by the bank or trust company and applied to the discharge of any such matured obligations. No stock shall be transferred on the books of any bank or trust company when the bank or trust company is in a failing condition, or when its capital stock is impaired, except upon approval of the commissioner. Whenever a trans- fer of shares of stock of any bank or trust company occurs which results in direct or indirect ownership by a stockholder or an affiliated group of stockholders of 10% or more of the outstanding stock of the bank or trust company, and whenever additional shares of stock of the bank or trust company are transferred to such stockholder or affiliated group of stock- holders, the president or other chief executive officer of the bank or trust company shall report such transfer to the commissioner within 10 days after transfer of the shares of stock on the books of the bank or trust company.

Sec./007006/K.S.A. 9-904 is hereby amended to read as follows: 9-904. (a) The capital stock of any bank or trust company may be reduced to the minimum provided by law for a new bank or trust company by resolution adopted by the stockholders representing 2/3 of the voting stock of such bank or trust company, except that no such reduction shall become ef- fective until the board commissioner approves the same.

(b) With prior approval of the state banking board, a bank or trust company may reduce its capital stock below the minimum amount allowed by subsection (a) by transferring capital stock to its surplus fund. No such reduction shall be approved unless the state banking board finds:

(1) The proposed reduction is necessary to provide greater opera- tional flexibility to an adequately capitalized, well-managed institution;

(2) the proposed reduction does not result in or is not in furtherance of a reduction in the institution's capital to an amount below 8% of total deposits for a bank or below $250,000 for a trust company;

(3) the proposed reduction is not intended to delay, prevent or be in lieu of capital stock impairment or a stockholder's assessment pursuant to K.S.A. 9-906 and amendments thereto; and

(4) the proposed reduction poses no significant risk to the financial stability, safety or soundness of the institution.

(c) After the commissioner or state banking board has approved such reduction a certificate signed by the president and cashier of the bank or trust company setting forth the result of such reduction of its capital stock, the names of its stockholders and the amount of stock held by each, shall be filed with the secretary of state and a duplicate shall be filed with the commissioner.

(d) Whenever the capital stock of any bank or trust company shall be reduced as herein provided, every stockholder, owner or holder of any stock certificate shall surrender the same for cancellation and shall be entitled to receive a new certificate for such person's proportion of the new stock. No dividends shall be paid to any such stockholder until the old certificate is surrendered.

Sec./007006/K.S.A. 9-1122 is hereby amended to read as follows: 9-1122. (a) Any bank or trust company may remain closed on any one business day of every week or may make a permanent change in bank hours of business, upon the adoption by its board of directors of a resolution au- thorizing the same to be done, and the posting of such the resolution in a conspicuous place within the bank or trust company premises at least fifteen (15) 15 days in advance of any such closing or change in hours. Thereafter, the bank or trust company may remain closed on the business day of every week designated in such the resolution, or may operate under the changed bank hours designated in the resolution, and such the reso- lution and the posting thereof shall control until the same be repealed or amended by subsequent resolution which shall require the same proce- dure in order to be effective: Provided, however, That. If the business day designated in such resolution shall be any resolution regarding closing is a legal public holiday, the bank or trust company may close on the business day next preceding or following the legal public holiday.

Should a legal public holiday fall on Sunday, any bank or trust company may close on the next preceding or following business day.

(b) Every day on which any bank or trust company shall remain closed pursuant to this act shall be deemed a holiday for all of the purposes of chapter 84 of the Kansas Statutes Annotated, and all acts amendatory thereof or supplemental amendments thereto, and with respect to any banking business of any character, with respect to any such bank or trust company; and. No such bank or trust company shall be required to permit access to its safe, deposit vault or vaults on any such day. Where a contract by its terms requires the payment of money or the performance of a condition on any such day by, through, with or at any such bank or trust company, then such the payment may be made or condition performed on the next business day with the same force and effect as if made or performed in accordance with the terms of the contract; and. No liability or loss of rights of any kind shall result from such the delay.

(c) The posting of the notice provided herein for in this section shall be notice to everyone of the closing of such or change in hours of the bank or trust company, and thereafter no liability shall be incurred by such the bank or trust company by reason of closing or changing the bank hours pursuant to this act.

Sec./007006/K.S.A. 9-1108 is hereby amended to read as follows: 9-1108. Upon the affirmative vote of at least two-thirds a majority of the outstand- ing voting stock, any bank may liquidate by paying in full all of its depos- itors and creditors. Any bank desiring to liquidate voluntarily shall file notice thereof with the commissioner and immediately surrender its cer- tificate of authority to transact a banking business. The commissioner may examine such the bank at any time during the period in which it is being liquidated and may compel such the bank to file reports with the com- missioner during the time it is being liquidated. Upon the completion of the liquidation the bank shall remove all advertising signs, and the com- missioner shall make a final examination to determine that all depositors and creditors have been paid before any distribution is made to stock- holders.

Sec./007006/K.S.A. 9-1110 is hereby amended to read as follows: 9-1110. Upon the affirmative vote of at least two-thirds a majority of the outstand- ing voting stock any bank for the purpose of liquidation or, merger or consolidation may sell all or any part of its assets to any other bank, either state or national, and may receive in payment therefor cash or its equiv- alent or, shares of stock in the purchasing bank, or both.

Sec./007006/K.S.A. 9-1604 is hereby amended to read as follows: 9-1604. Upon the affirmative vote of at least two-thirds a majority of the outstand- ing voting stock any bank having trust authority may liquidate, or may consolidate or merge its trust department with any other bank having trust authority or with any trust company, and any trust company may liquidate, or may consolidate or merge with any other trust company or with any bank having trust authority: Provided, except that such liquida- tion, consolidation or merger shall not be effective until the commissioner has approved the same in writing after the terms thereof have been sub- mitted to the commissioner for his or her examination and approval.

Sec./007006/K.S.A. 1995 Supp. 9-519 is hereby amended to read as fol- lows: 9-519. For the purposes of K.S.A. 9-520 through 9-524, and amend- ments thereto, and K.S.A. 9-532 through 9-539 9-541, and amendments thereto, unless otherwise required by the context:

(a) (1) ``Bank holding company'' means any company:

(A) Which directly or indirectly owns, controls, or has power to vote 25% or more of any class of the voting shares of a bank or 25% or more of any class of the voting shares of a company which is or becomes a bank holding company by virtue of this act;

(B) which controls in any manner the election of a majority of the directors of a bank or of a company which is or becomes a bank holding company by virtue of this act;

(C) for the benefit of whose shareholders or members 25% or more of any class of the voting shares of a bank or 25% or more of any class of the voting shares of a company which is or becomes a bank holding com- pany by virtue of this act, is held by trustees; or

(D) which, by virtue of acquisition of ownership or control of, or the power to vote the voting shares of, a bank or another company, becomes a bank holding company under this act.

(2) Notwithstanding paragraph (1), no company:

(A) Shall be deemed to be a bank holding company by virtue of its ownership or control of shares acquired by it in connection with its un- derwriting of securities if such shares are held only for such period of time as will permit the sale thereof on a reasonable basis;

(B) formed for the sole purpose of participating in a proxy solicitation shall be deemed to be a bank holding company by virtue of its control of voting rights of shares acquired in the course of such solicitation;

(C) shall be deemed to be a bank holding company by virtue of its ownership or control of shares acquired in securing or collecting a debt previously contracted in good faith, provided such shares are disposed of within a period of two years from the date on which such shares could have been disposed of by such company;

(D) owning or controlling voting shares of a bank shall be deemed to be a bank holding company by virtue of its ownership or control of shares held in a fiduciary capacity except where such shares are held for the benefit of such company or its shareholders.

(b) ``Company'' means any corporation, trust, limited partnership, as- sociation or similar organization including a bank but shall not include any corporation the majority of the shares of which are owned by the United States or by any state, or include any individual or partnership.

(c) ``Bank'' means an insured bank as defined in section 3(h) of the federal deposit insurance act, 12 U.S.C. 1813(h), except the term shall not include a national bank which engages only in credit card operations, does not accept demand deposits or deposits that the depositor may with- draw by check or similar means for payment to third parties or others, does not accept any savings or time deposits of less than $100,000, accepts deposits only from corporations which own 51% or more of the voting shares of the bank holding company or its parent corporation of which the bank engaging only in credit card operations is a subsidiary, maintains only one office that accepts deposits, and does not engage in the business of making commercial loans.

(d) ``Subsidiary'' with respect to a specified bank holding company means:

(1) Any company more than 5% of the voting shares of which, ex- cluding shares owned by the United States or by any company wholly owned by the United States, is directly or indirectly owned or controlled by such bank holding company or is held by it with power to vote;

(2) any company the election of a majority of the directors of which is controlled in any manner by such bank holding company; or

(3) any company more than 5% of the voting shares of which is held by trustees for the benefit of such bank holding company or its share- holders.

(e) ``Commissioner'' means the Kansas state bank commissioner.

(f) ``Kansas bank'' means any bank, as defined by subsection (c), which, in the case of a state chartered bank, is a bank chartered under the authority of the state of Kansas, and in the case of a national banking association, a bank with its main office located in Kansas.

(g) ``Kansas bank holding company'' means a bank holding company, as defined by subsection (a), with total subsidiary bank deposits in Kansas which exceed the bank holding company's subsidiary bank deposits in any other state.

(h) ``Out-of-state bank holding company'' means any holding com- pany which is not a Kansas bank holding company as defined in subsection (g).

(i) ``Foreign bank'' means any company organized under the laws of a foreign country, a territory of the United States, Puerto Rico, Guam, American Samoa or the Virgin Islands, which engages in the business of banking, or any subsidiary or affiliate, organized under such laws, of any such company.

Sec./007006/K.S.A. 9-903, 9-904, 9-1108, 9-1110, 9-1122 and 9-1604 and K.S.A. 1995 Supp. 9-519 are hereby repealed.

Sec. 19. This act shall take effect and be in force from and after its publication in the Kansas register.

Approved April 17, 1996.

Published in the Kansas Register: April 25, 1996.