9-1136.   Powers; authority to lease certain personal property;definitions.In addition to powers and limitations conferred or imposedon any bank by K.S.A. 9-1101 and amendments thereto, any bank is herebyauthorized to exercise by its board of directors or duly authorized officers oragents, subject to law, all such powers including incidental powers as shall benecessary or convenient to do what is authorized by this section:

      (a) (1)   A bank may become the legal or beneficial owner of tangiblepersonal property for the purpose of leasing such property;

      (2)   to obtain an assignment of a lessor's interest in a lease of suchproperty; or

      (3)   to incur obligations incidental to its position as the legal orbeneficial owner and lessor of the leased property;

so long as each lease entered into by the bank is a net, full-payout lease.

      (b)   A bank may acquire specific property to be leased only after the bankhas entered into either:

      (1)   A legally binding written agreement to lease the property on terms whichcomply with this section; or

      (2)   a legally binding written agreement which indemnifies the bank againstloss in connection with its acquisition of the property.

      (c)   In the event of the lessee's default, early termination of a lease or atthe expiration of the lease, the bank's interest in the property shall beliquidated or re-leased in accordance with this section as soon as practicable,but in no case shall the off-lease property be carried on the bank's books fora period exceeding one year.

      (d)   Each lease financing transaction entered into by the bank pursuant tothis section shall be considered a loan for the purposes of applying all legallending limitations and prior approval requirements contained in K.S.A. 9-1104and amendments thereto.

      (e)   For purposes of this section:

      (1) (A)   "Net lease" means a lease under which the bank will not, directlyor indirectly, provide or be obligated to provide for:

      (i)   The servicing, repair or maintenance of the leased property during thelease term;

      (ii)   the purchasing of parts and accessories for the leased property,except that improvements and additions to the leased property may be leased tothe lessee upon such lessee's request in accordance with the full-payoutrequirements of this section;

      (iii)   the loan of replacement or substitute property while the leasedproperty is being serviced;

      (iv)   the purchasing of insurance for the lessee, except where the lessee hasfailed to discharge a contractual obligation to purchase or maintain insurance;or

      (v)   the renewal of any license, registration or filing for the propertyunless such action by the bank is necessary to protect the bank's interest asan owner or financier of the property;

      (B)   if, in good faith, a bank believes there has been an unanticipatedchange in conditions which threaten its financial position by significantlyincreasing its exposure to loss, the provisions of (e)(1)(A) shall notprevent the bank:

      (i)   As the owner and lessor under a net, full-payout lease, from takingreasonable and appropriate action to salvage or protect the value of theproperty of its interest arising under the lease;

      (ii)   as the assignee of a lessor's interest in a lease, from becoming theowner and lessor of the leased property pursuant to its contractual right, orfrom taking any reasonable and appropriate action to salvage or protect thevalue of the property or its interest arising under the lease; or

      (iii)   from including any provisions in a lease, or from making anyadditional agreements, to protect its financial position or investment in thecircumstances set forth in provisions (i) or (ii).

      (2) (A)   "Full-payout lease" means a lease from which the lessor canreasonably expect to realize a return of its full investment in the leasedproperty, plus the estimated cost of financing the property over the term ofthe lease, from rentals, estimated tax benefits and the estimated residualvalue of the property at the expiration of the initial term of the lease.

      (B)   Except as provided in subsection (f), the estimated residual value ofthe property shall not exceed 25% of the original cost of the property to thelessor unless the estimated residual value is guaranteed by a manufacturer, alessee or a third party not an affiliate of the bank and the bank properlydocuments that the guarantor has the resources to meet the guarantee. In allcases both the estimated residual value of the property and that portion of theestimated residual value relied upon by the lessor to satisfy the requirementsof a full-payout lease must be reasonable in light of the nature of the leasedproperty and all relevant circumstances so that realization of the bank's fullinvestment plus the cost of financing the property depends primarily on thecreditworthiness of the lessee and of any guarantor of the residual value, andnot on the residual market value of the leased property.

      (f)   Notwithstanding the limit on residual value contained in(e)(2)(B), the bank may enter into lease financing transactions in which theresidual value relied upon for realization of a return of its full investmentplus costs of financing exceeds 25% of the original cost of the propertyprovided:

      (1)   The lease financing transaction conforms with all other requirements ofthis section;

      (2)   the lease financing transaction has a term in excess of 90 days;

      (3)   the records relating to lease financing transactions entered intopursuant to this provision are clearly segregated and specifically identifiedto distinguishthem from the records relating to lease financing transactions entered intopursuant to the other provisions; and

      (4)   the aggregate book value of all tangible personal property held forlease pursuant to this subsection does not exceed 10% of the consolidatedassets of the bank.

      (g)   This section shall not apply to any leases executed by a bank prior tothe effective date of this act. Any lease which was entered into in good faithprior to the effective date of this act that does not comply with theprovisions of this section may be renewed only if there is a binding agreementin the expiring lease which requires the bank to renew the lease at thelessee's option, and the bank cannot otherwise reasonably or properly avoid itscommitment to renew. Except for those leases renewed pursuant to such abinding agreement, any prior lease renewed after the effective date of this actshall be included for purposes of determining compliance with the legal lendinglimitations contained in K.S.A. 9-1104 and amendments thereto and subsection(d).

      History:   L. 1995, ch. 19, § 3; Mar. 9.