KRS 355.4-210: Security interest of collecting bank in items, accompanying documents,

and proceeds.

(1) A collecting bank has a security interest in an item and any accompanying

documents or the proceeds of either:

(a) In case of an item deposited in an account, to the extent to which credit given

for the item has been withdrawn or applied;

(b) In case of an item for which it has given credit available for withdrawal as of

right, to the extent of the credit given, whether or not the credit is drawn upon

or there is a right of charge-back; or

(c) If it makes an advance on or against the item.

(2) If credit given for several items received at one (1) time or pursuant to a single

agreement is withdrawn or applied in part, the security interest remains upon all the

items, any accompanying documents or the proceeds of either. For the purpose of

this section, credits first given are first withdrawn.

(3) Receipt by a collecting bank of a final settlement for an item is a realization on its

security interest in the item, accompanying documents, and proceeds. So long as the

bank does not receive final settlement for the item or give up possession of the item

or possession or control of the accompanying documents for purposes other than

collection, the security interest continues to that extent and is subject to Article 9 of

this chapter, but:

(a) No security agreement is necessary to make the security interest enforceable

(KRS 355.9-203(2)(c)1.); and

(b) No filing is required to perfect the security interest; and

(c) The security interest has priority over conflicting perfected security interests

in the item, accompanying documents, or proceeds.