CHAPTER 57 HOUSE BILL No. 2224 An Act relating to banking; concerning certain powers; amending K.S.A. 9-1101 and 9-1713 and repealing the existing sections. Be it enacted by the Legislature of the State of Kansas:

      Section  1. K.S.A. 9-1101 is hereby amended to read as follows: 9-
1101. Any bank hereby is authorized to exercise by its board of directors
or duly authorized officers or agents, subject to law, all such powers,
including incidental powers, as shall be necessary to carry on the business
of banking, and:

      (1) To receive deposits and to pay interest thereon at rates which
need not be uniform. The state bank commissioner, with approval of the
state banking board, may by regulations of general application fix maxi-
mum rates of interest to be paid on deposit accounts other than accounts
for public moneys;

      (2) to buy and sell exchange, gold, silver, foreign coin, bullion, com-
mercial paper, bills of exchange, notes and bonds;

      (3) to buy and sell bonds, securities, or other evidences of indebt-
edness of the United States of America or those fully guaranteed, directly
or indirectly, by it, and general obligation bonds of the state of Kansas or
any municipality or quasi-municipality thereof, and of other states, and
of municipalities or quasi-municipalities in other states of the United
States of America. No bank shall invest an amount in excess of 15% of its
capital stock paid in and unimpaired and the unimpaired surplus fund of
such bank in bonds, securities or other evidences of indebtedness of any
municipality or quasi-municipality of any other state or states of the
United States of America: (a) If and when the direct and overlapping
indebtedness of such municipality or quasi-municipality is in excess of
10% of its assessed valuation, excluding therefrom all valuations on in-
tangibles and homestead exemption valuation; (b) or if any bond, security,
or evidence of indebtedness of any such municipality or quasi-munici-
pality has been in default in the payment of principal or interest within
10 years prior to the time that any bank acquires any such bonds, security
or evidence of indebtedness;

      (4) to make all types of loans, including loans on real estate, subject
to the loan limitations contained in this act. Every real estate loan shall
be secured by a mortgage or other instrument constituting a lien, or the
full equivalent thereof, upon the real estate securing the loan, according
to any lawful or well recognized practice, which is best suited to the
transaction. The mortgage may secure future advances. The lien of such
mortgage shall attach upon its execution and have priority from time of
recording as to all advances made thereunder until such mortgage is re-
leased of record. The lien of such mortgage shall not exceed at any one
time the maximum amount stated in the mortgage;

      (5) to discount and negotiate bills of exchange, negotiable notes and
notes not negotiable;

      (6) to buy and sell investment securities which are evidences of in-
debtedness. The buying and selling of investment securities shall be lim-
ited to buying and selling without recourse marketable obligations evi-
dencing indebtedness of any person, copartnership, association,
corporation, or state or federal agency, including revenue bonds issued
pursuant to K.S.A. 76-6a15, and amendments thereto, or the state armory
board in the form of bonds, notes or debentures or both, commonly
known as investment securities, under such further definition of the term
``investment securities'' as prescribed by the board, but the total amount
of such investment securities of any one obligor or maker held by such
bank shall at no time exceed 15% of the capital stock paid in and unim-
paired and the unimpaired surplus fund of such bank except that this
limit shall not apply to obligations of the United States government or
any agency thereof. If the obligor is a state agency including any agency
issuing revenue bonds pursuant to K.S.A. 76-6a15, and amendments
thereto, or the state armory board, the total amount of such investment
securities shall at no time exceed 25% of the capital stock paid in and
unimpaired and the unimpaired surplus fund of such bank;

      (7) to subscribe to, buy and own such stock of the federal national
mortgage association as required by title 3, section 303 of the federal act
known as the national housing act as amended by section 201 of public
law No. 560, of the United States (68 Stat. 613-615), known as the housing
act of 1954, or amendments thereto;

      (8) to subscribe to, buy and own stock in one or more small business
investment companies in Kansas as otherwise authorized by federal law,
except that in no event shall any bank acquire shares in any small business
investment company if, upon the making of that acquisition the aggregate
amount of shares in small business investment companies then held by
the bank would exceed 5% of its capital and surplus. Nothing in this act
contained shall prohibit any bank from holding and disposing of such real
estate and other property as it may acquire in the collection of its assets;

      (9) to subscribe to, buy and own stock in any agricultural credit cor-
poration or livestock loan company, or its affiliate, organized pursuant to
the provisions of the laws of the United States providing for the infor-
mation and operation of agricultural credit corporations and livestock loan
companies, in an amount not exceeding either the undivided profits or
10% of the capital stock and surplus and undivided profits from such
bank, whichever is greater;

      (10) to subscribe to, buy and own stock in minbanc capital corpora-
tion, a company formed for the purpose of providing capital to minority-
owned banks. No bank's investment in such stock shall exceed 2% of its
capital and surplus;

      (11) to buy, hold, and sell any type of investment securities not enu-
merated in this section with approval of the commissioner and upon such
conditions and under such regulations as are prescribed by the state bank-
ing board;

      (12) to act as escrow agent;

      (13) to subscribe to, acquire, hold and dispose of stock of a corpo-
ration having as its purpose the acquisition, holding and disposition of
loans secured by real estate mortgages, and to acquire, hold and dispose
of the debentures and capital notes of such corporation. No bank's in-
vestment in such stock, debentures and capital notes shall exceed 2% of
its capital stock, surplus and undivided profits and such investment shall
be carried on the books of the bank as directed by the commissioner;

      (14) to purchase and sell securities and stock without recourse solely
upon the order, and for the account, of customers;

      (15) to subscribe to, acquire, hold and dispose of any class of stock,
debentures and capital notes of MABSCO agricultural services, inc. or
any similar corporation having as its purpose the acquisition, holding and
disposition of agricultural loans originated by Kansas banks. No bank's
investment in such stock, debentures and capital notes shall exceed 2%
of its capital stock, surplus and undivided profits. Such investment shall
be carried on the books of the bank as directed by the commissioner;

      (16) to buy, hold and sell mortgages, stock, obligations and other se-
curities which are issued or guaranteed by the federal home loan mort-
gage corporation under sections 305 and 306 of the federal act known as
the federal home loan mortgage corporation act (P.L. 91-351);

      (17) to buy, hold and sell obligations or other instruments or securi-
ties, including stock, issued or guaranteed by the student loan marketing
association created by (P.L. 92-318) of the United States;

      (18) to engage in financial future contracts on United States govern-
ment and agency securities subject to such rules and regulations as the
state bank commissioner may prescribe pursuant to K.S.A. 9-1713, and
amendments thereto, to promote safe and sound banking practices;

      (19) to subscribe to, buy and own stock in a state or federally char-
tered bankers' bank or a one bank holding company which owns or con-
trols such a bankers' bank, except no bank's investment in such stock shall
exceed 10% of its capital stock, surplus and undivided profits;

      (20) subject to such rules and regulations as the state bank commis-
sioner may adopt pursuant to K.S.A. 9-1713, and amendments thereto,
to promote safe and sound banking practices, upon recorded prior ap-
proval by the board of directors of the initial investment in a specific
company and pursuant to an investment policy approved by the board of
directors which specifically provides for such investments to buy, hold
and sell shares of an open-end investment company registered with the
federal securities and exchange commission under the federal investment
company act of 1940 and the federal securities act of 1933 and of a pri-
vately offered company sponsored by an affiliated commercial bank, the
shares of which are purchased and sold at par and the assets of which
consist solely of securities which may be purchased by the bank for its
own account. Such shares may be purchased without limit if the assets of
the company consist solely of and are limited to obligations that are eli-
gible for purchase by the bank without limit. If the assets of the company
include securities which may be purchased by the bank subject to limi-
tation, such shares may be purchased subject to the limitation applicable
to purchase by the bank of such securities;

      (21) subject to the prior approval of the state bank commissioner and
subject to such rules and regulations as are adopted by the state bank
commissioner pursuant to K.S.A. 9-1713, and amendments thereto, to
promote safe and sound banking practices, a bank may establish a sub-
sidiary which engages in the following securities activities: (a) selling or
distributing stocks, bonds, debentures, notes, mutual funds and other
securities, (b) issuing and underwriting municipal bonds, (c) organizing,
sponsoring and operating mutual funds, (d) acting as a securities broker-
dealer;

      (22) to subscribe to, acquire, hold and dispose of stock of any class
of the federal agricultural mortgage corporation, a corporation having as
its purpose the acquisition, holding and disposition of loans secured by
agricultural real estate mortgages. No bank's investment in such corpo-
ration shall exceed 5% of its capital stock, surplus and undivided profits
and such investment shall be carried on the books of the bank as directed
by the commissioner;

      (23) to subscribe to, buy and own stock in an insurance company
incorporated prior to 1910, under the laws of Kansas, with corporate
headquarters in this state, which only provides insurance to financial in-
stitutions. The investment in such stock shall not exceed 2% of the bank's
capital stock, surplus and undivided profits;

      (24) to purchase and hold an interest in life insurance policies on the
life of its executive officers and directors, and to purchase life insurance
policies for the sole purpose of providing employee deferred compensa-
tion and benefit plans subject to the limitations listed herein. If the bank
has the authority to direct the investments of the cash surrender value of
the policy, those investments shall be limited solely to assets which may
be directly purchased by the bank for its own account. The limitations
set forth in paragraphs (a) and (b) of this subsection do not apply to any
such life insurance policies in place before July 1, 1993. Funding for the
payment of employee compensation and benefit plans as well as the ben-
efits derived may be made or split in a joint manner between the bank,
employee or bank holding company as in ``split dollar'' or other insurance
plans:

      (a) Life insurance purchased and held on the life of executive officers
and directors are subject to the following limitations:

      (i) The cash surrender value of any life insurance policy on an exec-
utive officer or director underwritten by any one life insurance company
cannot at any time exceed 15% of the bank's capital stock, surplus, un-
divided profits, loan loss reserve, capital notes and debentures and reserve
for contingency, unless the bank has obtained the prior approval of the
state bank commissioner;

      (ii) the cash surrender value of life insurance policies on executive
officers or directors, in the aggregate from all companies, cannot at any
time exceed 25% of the bank's capital stock, surplus, undivided profits,
loan loss reserve, capital notes and debentures and reserve for contin-
gency, unless the bank has obtained the prior approval of the state bank
commissioner;

      (iii) the authority to hold life insurance on any executive officer ceases
if the executive officer is no longer employed by the bank or no longer
meets the definition of an executive officer;

      (iv) the authority to hold life insurance on a director ceases when that
director is no longer a member of the board of directors;

      (v) the bank's board of directors must approve and document the
purchase of any life insurance, including the reasonableness of such pur-
chase; and

      (vi) except as part of a reasonable compensation or benefit plan, a
bank is not authorized to purchase life insurance as an estate management
device for the benefit of officers, directors or employees who are also
controlling shareholders of the bank.

      (b) Life insurance purchased for the sole purpose of providing de-
ferred compensation and benefit plans are subject to the following limi-
tations:

      (i) The bank may purchase individual or group policies for the sole
purpose of providing deferred compensation agreements entered into
with its officers and employees;

      (ii) the bank may purchase policies on directors to fund a deferred
directors fees program;

      (iii) the board of directors must approve and document such deferred
plans including the reasonableness of the plans;

      (iv) the bank is not authorized to hold the policies unless specifically
approved by the state bank commissioner if no liability exists under the
deferred compensation plans;

      (v) the cash surrender value of any life insurance policy purchased
for the sole purpose of providing deferred compensation and benefit
plans, underwritten by any one life insurance company, cannot exceed at
any time, 15% of the bank's capital stock, surplus, undivided profits, loan
loss reserve, capital notes and debentures and reserve for contingency,
unless the bank has obtained the prior approval of the state bank com-
missioner; and

      (vi) the cash surrender value of life insurance policies purchased for
the sole purpose of providing deferred compensation and benefit plans,
in the aggregate from all companies, cannot at any time exceed 25% of
the bank's capital stock, surplus, undivided profits, loan loss reserve, cap-
ital notes and debentures and reserve for contingency, unless the bank
has obtained the prior approval of the state bank commissioner;

      (25) subject to such rules and regulations as the state bank commis-
sioner may adopt pursuant to K.S.A. 9-1713 and amendments thereto to
promote safe and sound banking practices, to act as an agent and receive
deposits, renew time deposits, close loans, service loans, and receive pay-
ments on loans and other obligations for any company which is a subsid-
iary, as defined in subsection (d) of K.S.A. 9-519 and amendments thereto
of the bank holding company which owns the bank. Nothing in this sub-
section shall authorize a bank to conduct activities as an agent which the
bank or the subsidiary would be prohibited from conducting as a principal
under any applicable federal or state law. Any bank which enters or ter-
minates any agreement pursuant to this subsection shall within 30 days
of the effective date of the agreement or termination provide written
notification to the commissioner which details all parties involved and
services to be performed or terminated;

      (26) to make loans to the bank's stockholders or the stockholders of
the bank's controlling bank holding company on the security of the shares
of the bank or shares of the bank's controlling bank holding company,
with the limitation that this may occur only if the bank would have ex-
tended credit to such stockholder on exactly the same terms without the
shares pledged as collateral;

      (27) to make investments in and loans to community development
corporations (CDCs) and community development projects (CD pro-
jects) as defined in K.S.A. 9-701 and amendments thereto, subject to the
limitations prescribed by the comptroller of the currency as interpreted
by rules and regulations which shall be adopted by the state bank com-
missioner as provided by K.S.A. 9-1713 and amendments thereto;

      (28) to participate in a school savings deposit program authorized
under K.S.A. 9-1138, and amendments thereto; and

      (29) with prior approval of the commissioner, to offer through one
or more financial subsidiaries any products or services which a national
bank may offer through its financial subsidiaries, subject to safety and
soundness requirements imposed by the commissioner. As used in this
paragraph, ``financial subsidiary'' shall have the same meaning given to
such term under the Gramm-Leach Bliley act of 1999 (P.L. 106-102).;
and

      (30) to purchase or hold an annuity for the sole purpose of funding
an employee deferred compensation and benefit plan subject to the limi-
tations prescribed by rules and regulations which shall be adopted by the
state bank commissioner as provided by K.S.A. 9-1713, and amendments
thereto.

      Sec.  2. K.S.A. 9-1713 is hereby amended to read as follows: 9-1713.
Except as otherwise provided by law, in order to promote safe and sound
practices for entities regulated by the state bank commissioner, the state
bank commissioner shall adopt such rules and regulations as shall be nec-
essary to carry out the intent and purposes implement the provisions of
K.S.A. 9-542, and amendments thereto, commonly known as the state
banking code. All rules and regulations of general application shall first
be submitted by the commissioner to the state banking board for its ap-
proval and upon approval shall be filed as provided by article 4 of chapter
77 of the Kansas Statutes Annotated.

 Sec.  3. K.S.A. 9-1101 and 9-1713 are hereby repealed.

 Sec.  4. This act shall take effect and be in force from and after its
publication in the Kansas register.

Approved April 14, 2003.
 Published in the Kansas Register April 24, 2003.
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