MISSISSIPPI LEGISLATURE

1999 Regular Session

To: Business and Financial Institutions

By: Senator(s) Woodfield

AN ACT TO AMEND SECTION 27-105-5, MISSISSIPPI CODE OF 1972, TO PROVIDE THAT ANY FINANCIAL INSTITUTION MAINTAINING A DEPOSIT-TAKING FACILITY IN MISSISSIPPI WHOSE ACCOUNTS ARE FEDERALLY INSURED MAY QUALIFY AS A STATE DEPOSITORY; TO AMEND SECTION 27-105-9, MISSISSIPPI CODE OF 1972, TO REVISE THE FORMULA FOR ALLOCATING STATE FUNDS AMONG STATE DEPOSITORIES; AND FOR RELATED PURPOSES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:

SECTION 1. Section 27-105-5, Mississippi Code of 1972, is amended as follows:

27-105-5. (1) Any financial institution maintaining a deposit-taking facility in this state whose accounts are insured by the Federal Deposit Insurance Corporation or any successors to such insurance corporation, may qualify as a state depository by submitting an application to the State Treasurer as provided by Section 27-105-9, if such institution has a primary capital to total assets ratio of five and one-half percent (5-1/2%) or more. Such ratio shall be determined not later than December 1 in each calendar year by the State Treasurer on the basis of balance sheets of applying institutions at June 30 of the same calendar year, and an institution shall not be a qualified depository and shall not receive any state funds unless its ratio has been certified annually by the Treasurer as meeting the prescribed requirement. Each applicant shall furnish to the State Treasurer such financial statements, balance sheets or other documentation, sworn to by a duly elected officer, on such date or dates and on such forms as the State Treasurer may require. Any knowing or willful misstatement of fact on such forms shall subject the officer swearing thereto to the penalty of perjury, and the financial institution of which he is an officer shall not be eligible to serve as a depository for a period of one (1) year commencing with the date on which the State Treasurer certifies that such a misstatement has been made. When so approved by the State Treasurer, such institution shall place on deposit with the State Treasurer the following bonds, notes and liquid securities in an aggregate amount at least equal to one hundred five percent (105%) of the amount of funds on deposit in the aggregate by the State of Mississippi or any agency or department thereof in excess of that portion of accounts insured by the Federal Deposit Insurance Corporation, or any successor thereto, to wit:

(a) All securities that are direct obligations of the United States Treasury or any other obligations fully guaranteed by the United States Government.

(b) Bonds, notes and other obligations of the Federal Home Loan Bank, Federal National Mortgage Association, Federal Land Banks, Banks for Cooperatives, and Federal Intermediate Credit Banks, the Government National Mortgage Association, the Federal Housing Administration, the Farmers Home Administration, the Farm Credit System Financial Assistance Corporation, the United States Postal Service, the Federal Financing Bank, the Student Loan Marketing Association, the Small Business Administration, the General Services Administration, the Washington Metropolitan Area Transit Authority, the Maritime Administration, the Export-Import Bank, the International Bank for Reconstruction and Development, the Inter-American Development Bank, the Asian Development Bank, loan participations which carry the guarantee of the Commodity Credit Corporation, an instrumentality of the United States Department of Agriculture or other similar agencies approved by the State Treasurer.

(c) Obligations of the Tennessee Valley Authority.

(d) Legal obligation or revenue bonds of the State of Mississippi, its agencies, or any political subdivision thereof, or any municipality located in the State of Mississippi, or the Yazoo Mississippi Delta and the Mississippi Levee Districts, or the Mississippi Higher Education Assistance Corporation or its successors, or any body corporate and politic created pursuant to the laws of the State of Mississippi.

(e) General obligations issued by any state or by a county, parish or municipality of any state, the full faith and credit of which are pledged to the payment of principal and interest, that are rated "A" or better by any recognized national rating agency engaged in the business of rating bonds.

(f) Surety bonds of any surety company authorized to do business in the State of Mississippi.

(g) All bonds authorized as security for state funds under items (c), (d) and (e), inclusive, shall be investment quality, and any bonds under said items (c), (d), (e) and (f), inclusive, which are rated substandard by any of the appropriate supervisory authorities having jurisdiction over said depository or by any recognized national rating agency engaged in the business of rating bonds, shall not be eligible for pledging as security to the State of Mississippi by any qualified state depository.

No bonds shall be accepted as security for more than their stated par value or market value, whichever is lower, except bonds and obligations of the State of Mississippi and Mississippi State Highway bonds or notes which may be accepted as security at par value or market value, whichever is greater.

The bonds, notes and liquid securities to be placed on deposit shall secure both deposits and the accrued interest thereon.

Money shall be drawn from the depositories so as to leave in each as near as practicable, its equitable proportion of state funds.

The State Treasurer is authorized and empowered to:

(i) Deposit for safekeeping in the vaults of any of the state or national banks located within this state which are members of the Federal Deposit Insurance Corporation and which have appropriate safekeeping facilities approved by the State Depository Commission, any federal reserve bank, any federal reserve branch bank, or any bank which is a member of the Federal Reserve System and is located in a city where there is a federal reserve bank or a federal reserve branch bank, the securities placed with him by financial institutions qualifying as state depositories; or

(ii) Accept, in lieu of the securities themselves, safekeeping trust receipts issued to the State Treasurer by the authorized safekeeping banks listed in subparagraph (i) above; such safekeeping trust receipts to describe the securities and show that such securities are held for safekeeping for the account of the State Treasurer. The securities so deposited shall not be commingled in any manner with the assets of the safekeeping bank.

The safekeeping banks listed in subparagraph (i) above are authorized to issue to the State Treasurer their safekeeping trust receipts based on safekeeping trust receipts issued to them by any of their correspondent banks which are members of the Federal Reserve System and are located in any federal reserve city and which have physical custody of the pledged securities.

In no event shall the State Treasurer deposit for safekeeping with any depository securities placed by said depository with the State Treasurer in qualifying as a state depository, nor shall he accept a safekeeping trust receipt by or from a depository covering securities it owns in order to secure state funds on deposit therewith.

(2) As used in this section, the following terms shall have the meanings set forth below:

(a) The term "primary capital" means the sum of common stock, perpetual preferred stock, capital surplus, undivided profits, capital reserves, mandatory convertible debt (to the extent of twenty percent (20%) of primary capital exclusive of such debt), minority interests in consolidated subsidiaries, net worth certificates issued pursuant to 12 USCS 1823(i) and the allowance for loan and lease losses, and minus assets classified loss and intangible assets other than mortgage servicing rights.

(b) The term "assets classified loss" means:

(i) When measured as of the date of examination of the financial institution, those assets that have been determined by an evaluation made by a state or federal examiner as of that date to be a loss; and

(ii) When measured as of any other date, those assets:

(A) That have been determined: 1. by an evaluation made by a state or federal examiner at the most recent examination of the financial institution to be a loss, or 2. by evaluations made by the financial institution since its most recent examination to be a loss; and

(B) That have not been charged off from the financial institution's books or collected.

(c) The term "intangible assets" means those assets that would be required to be reported in the item for intangible assets in a Federal Deposit Insurance Corporation (FDIC) banking institution's "Reports of Condition and Income" (Call Reports), regardless of whether such institution is insured by the FDIC.

(d) The term "mandatory convertible debt" means a subordinated debt instrument meeting the requirements of the Federal Deposit Insurance Corporation which requires the issuer to convert such instrument into common or perpetual preferred stock by a date at or before the maturity of the debt instrument. The maturity of these instruments must be twelve (12) years or less.

(e) The term "mortgage servicing rights" means the purchased rights to perform the servicing function for a specific group of mortgage loans that are owned by others. Mortgage servicing rights must be amortized over a period not to exceed fifteen (15) years or their estimated useful life, whichever is shorter.

(f) The term "perpetual preferred stock" means a preferred stock that does not have a stated maturity date or that cannot be redeemed at the option of the holder. It includes those issues of preferred stock that automatically convert into common stock at a stated date. It excludes those issues, the rate on which increases, or can increase, in such a manner that would effectively require the issuer to redeem the issue.

(g) The term "total assets" means the average of total assets of any financial institution which are or would be included in a Federal Deposit Insurance Corporation (FDIC) banking institution's "Reports of Condition and Income" (Call Reports), regardless of whether such institution is insured by the FDIC, plus the allowance for loan and lease losses, minus assets classified loss and minus intangible assets other than mortgage servicing rights.

SECTION 2. Section 27-105-9, Mississippi Code of 1972, is amended as follows:

27-105-9. The State Treasurer shall give notice of the provisions of this article once a month to each eligible bank and financial institution in the state having an amount of state funds less than the amount authorized to be allocated to the bank or financial institution under Section 27-105-33 and this section, and shall receive such applications as they or any of them may make for the privilege of keeping any part of the state funds on forms to be furnished by the Treasurer, and shall place the state funds with the institutions applying therefor if the depository application has been duly approved by the Treasurer.

The Treasurer, when considering the various depository applications, shall review the financial statement of the applying depository and become satisfied regarding its liquidity and capital ratio so as to assure the safety of all state funds, and likewise to give the equitable apportionment of the state funds throughout the state.

State funds required for current operation, as determined pursuant to Section 27-105-33, shall be deposited in one or more demand accounts. State funds not required for current operation, as determined pursuant to Section 27-105-33, shall be deposited in one or more interest-bearing accounts or time certificates of deposit, or otherwise invested pursuant to Section 27-105-33. When any depository holding state demand accounts receives an order from the Treasurer or his designee to transfer collected funds out of such accounts to any interest-bearing accounts or time certificates of deposit in such depository or any other depository pursuant to the provisions of this chapter, the transfer shall be made immediately or as soon thereafter as practicable. If the Treasurer finds that any depository is not transferring funds as hereinabove provided, such depository shall be disqualified from holding or receiving any state demand accounts for a period of time not to exceed one (1) year.

All funds allocated to approved depositories under the provisions of subsection (b) of Section 27-105-33 shall be allocated to qualified depositories of the state on a pro rata basis determined as follows:

(a) Each qualified depository shall be assigned a numerator which shall be the sum of (i) thirty-five percent (35%) of that portion of its Mississippi-based deposits that does not exceed Two Hundred Fifty Million Dollars ($250,000,000.00), plus (ii) twenty-five percent (25%) of that portion of its Mississippi-based deposits that exceed Two Hundred Fifty Million Dollars ($250,000,000.00) but does not exceed Five Hundred Million Dollars ($500,000,000.00), plus (iii) fifteen percent (15%) of that portion of its Mississippi-based deposits that exceeds Five Hundred Million Dollars ($500,000,000.00).

(b) Each such numerator shall be divided by a denominator, which shall be the sum of (i) thirty-five percent (35%) of the first Two Hundred Fifty Million Dollars ($250,000,000.00) or portion thereof of the Mississippi-based deposits of each qualified depository, plus (ii) twenty-five percent (25%) of the next Two Hundred Fifty Million Dollars ($250,000,000.00) or portion thereof of the Mississippi-based deposits of each qualified depository, plus (iii) fifteen percent (15%) of the Mississippi-based deposits of each qualified depository in excess of Five Hundred Million Dollars ($500,000,000.00), being the sum of the numerators of all depositories. The resulting percentage shall be the pro rata share of such depository in funds allocated under Section 27-105-33(b).

(c) All such computations shall be determined annually by December 1 on the basis of the deposits held by the depositories at deposit facilities located in the State of Mississippi as reported in the Federal Deposit Insurance Corporation's Market Share Report -- Deposits of All FDIC-Insured Institutions Operating in Mississippi on June 30 of each year. For the purposes of this section, "Mississippi-based deposits" means the total deposits held at deposit facilities located in the State of Mississippi on June 30 as reported annually by the Federal Deposit Insurance Corporation in the above-referenced report.

State funds allocated to each approved depository shall not be more than four percent (4%) of the depository's Mississippi-based deposits. Interest-bearing time certificates of deposit and other interest-bearing deposits, either general or special, made pursuant to Section 27-105-33, may be treated as not coming within this percentage if, in the discretion of the Treasurer, the best interest of the state can be served to increase its earnings and decrease its expenses in the handling of the state funds; however, any and all depositories must first qualify and be approved by the Treasurer to receive demand deposits subject to withdrawal or transfer by check of the Treasurer when properly presented and so demanded. For the purposes of this section, the term "paid-in and earned capital funds" means the sum of common stock, perpetual preferred stock, surplus, undivided profits and capital reserves as these amounts are or would be reflected in a Federal Deposit Insurance Corporation (FDIC) banking institution's "Reports of Condition and Income" (Call Reports), regardless of whether such institution is insured by the FDIC.

The depository contract shall be for one (1) year, but may be renewed from year to year upon proper review and approval of the Treasurer. Each applicant shall furnish to the Treasurer a financial statement sworn to by a duly elected officer, and on such date or dates as the Treasurer may provide.

SECTION 3. This act shall take effect and be in force from and after July 1, 1999.