CHAPTER 32. POWERS, ORGANIZATION, AND FINANCIAL REQUIREMENTS

Statutes > Texas Statutes > FINANCE CODE > TITLE 3. FINANCIAL INSTITUTIONS AND BUSINESSES > CHAPTER 32. POWERS, ORGANIZATION, AND FINANCIAL REQUIREMENTS

FINANCE CODE

TITLE 3. FINANCIAL INSTITUTIONS AND BUSINESSES

SUBTITLE A. BANKS

CHAPTER 32. POWERS, ORGANIZATION, AND FINANCIAL REQUIREMENTS

SUBCHAPTER A. ORGANIZATION AND POWERS IN GENERAL

Sec. 32.001. ORGANIZATION AND GENERAL POWERS OF STATE BANK. (a)

One or more persons, a majority of whom are residents of this

state, may organize a state bank as a banking association or a

limited banking association.

(b) A state bank may:

(1) receive and pay deposits with or without interest, discount

and negotiate promissory notes, borrow or lend money with or

without security or interest, invest and deal in securities, buy

and sell exchange, coin, and bullion, and exercise incidental

powers as necessary to carry on the business of banking as

provided by this subtitle;

(2) act as agent, or in a substantially similar capacity, with

respect to a financial activity or an activity incidental or

complementary to a financial activity;

(3) act in a fiduciary capacity, without giving bond, as

guardian, receiver, executor, administrator, or trustee,

including a mortgage or indenture trustee;

(4) provide financial, investment, or economic advisory

services;

(5) issue or sell instruments representing pools of assets in

which a bank may invest directly;

(6) with prior written approval of the banking commissioner,

engage in a financial activity or an activity that is incidental

or complementary to a financial activity; and

(7) engage in any other activity, directly or through a

subsidiary, authorized by this subtitle or rules adopted under

this subtitle.

considered a corporation and a limited banking association is

considered a limited liability company. To the extent consistent

with this subtitle, a banking association may exercise the powers

of a Texas business corporation and a limited banking association

may exercise the powers of a Texas limited liability company as

reasonably necessary to enable exercise of specific powers under

this subtitle.

(d) A state bank may contribute to a community fund or to

another charitable, philanthropic, or benevolent instrumentality

conducive to public welfare an amount that the bank's board

considers expedient and in the interests of the bank.

(e) A state bank may be organized or reorganized as a community

development financial institution or may serve as a community

development partner, as those terms are defined by the Riegle

Community Development and Regulatory Improvement Act of 1994

(Pub. L. No. 103-325).

(f) In the exercise of discretion consistent with the purposes

of this subtitle, the banking commissioner may require a state

bank to conduct an otherwise authorized activity through a

subsidiary.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by Acts 2001, 77th Leg., ch. 528, Sec. 4, eff. Sept. 1,

2001.

Sec. 32.002. ARTICLES OF ASSOCIATION OF STATE BANK. (a) The

articles of association of a state bank must be signed and

acknowledged by each organizer and must contain:

(1) the name of the bank, subject to Subsection (b);

(2) the period of the bank's duration, which may be perpetual,

subject to Subsection (c);

(3) the powers of the bank, which may be stated as:

(A) all powers granted by law to a state bank; or

(B) a list of the specific powers under Section 32.001 that the

bank chooses to exercise;

(4) the aggregate number of shares that the bank will be

authorized to issue and the number of classes of shares, which

may be one or more;

(5) if the shares are to be divided into classes:

(A) the designation of each class and statement of the

preferences, limitations, and relative rights of the shares of

each class, which in the case of a limited banking association

may be more fully set forth in the participation agreement;

(B) the number of shares of each class; and

that the shares are to be without par value;

(6) any provision limiting or denying to shareholders the

preemptive right to acquire additional or treasury shares of the

bank;

(7) any provision granting the right of shareholders to

cumulative voting in the election of directors;

(8) the aggregate amount of consideration to be received for all

shares initially issued by the bank and a statement that:

(A) all authorized shares have been subscribed; and

(B) all subscriptions received have been irrevocably paid in

cash;

(9) any provision that is otherwise required by this subtitle to

be set forth in the articles of association;

(10) the street address of the bank's initial home office;

(11) the number of directors constituting the initial board and

the names and street addresses of the persons who are to serve as

directors until the first annual meeting of shareholders or until

successor directors have been elected and qualified; and

(12) subject to Section 32.008, any provision consistent with

law that the organizers elect to set forth in the articles of

association for the regulation of the internal affairs of the

bank, including provisions permissible under the Business

Organizations Code for:

(A) a for-profit corporation, in the case of a proposed banking

association; or

(B) a limited liability company, in the case of a proposed

limited banking association.

(b) The banking commissioner may determine that a proposed bank

name is potentially misleading to the public and require the

organizers to select a different name.

August 31, 1993, is considered to have perpetual existence,

notwithstanding a contrary statement in its articles of

association, unless after September 1, 1995, the bank amends its

articles of association to reaffirm its limited duration.

(d) Repealed by Acts 2007, 80th Leg., R.S., Ch. 237, Sec. 80,

eff. September 1, 2007.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

237, Sec. 8, eff. September 1, 2007.

Acts 2007, 80th Leg., R.S., Ch.

237, Sec. 80, eff. September 1, 2007.

Acts 2007, 80th Leg., R.S., Ch.

735, Sec. 1, eff. September 1, 2007.

Sec. 32.003. APPLICATION FOR STATE BANK CHARTER; STANDARDS FOR

APPROVAL. (a) An application for a state bank charter must be

made under oath and in the form required by the banking

commissioner, who shall inquire fully into the identity and

character of each proposed director, officer, and principal

shareholder. The application must be accompanied by all charter

fees and deposits required by law.

(b) The banking commissioner shall grant a state bank charter

only if the commissioner determines that the organizers have

established that public convenience and advantage will be

promoted by the establishment of the state bank. In determining

whether public convenience and advantage will be promoted, the

banking commissioner shall consider the convenience of the public

to be served and whether:

(1) the organizational and capital structure and amount of

initial capitalization is adequate for the business plan;

(2) the anticipated volume and nature of business indicates a

reasonable probability of success and profitability based on the

market sought to be served;

(3) the officers and directors as a group have sufficient

banking experience, ability, standing, competence,

trustworthiness, and integrity to justify a belief that the bank

will operate in compliance with law and that success of the bank

is probable;

(4) each principal shareholder has sufficient experience,

ability, standing, competence, trustworthiness, and integrity to

justify a belief that the bank will be free from improper or

unlawful influence or interference with respect to the bank's

operation in compliance with law; and

(5) the organizers are acting in good faith.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by Acts 2001, 77th Leg., ch. 528, Sec. 5, eff. Sept. 1,

2001.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

237, Sec. 9, eff. September 1, 2007.

Sec. 32.004. NOTICE AND INVESTIGATION OF CHARTER APPLICATION.

(a) The organizers shall solicit comments and protests by

publishing notice of the application, its date of filing, and the

identity of the organizers, in the form and frequency specified

by the banking commissioner, in a newspaper of general

circulation in the county in which the bank is to be located, or

in another publication or location as directed by the banking

commissioner.

(b) At the expense of the organizers, the banking commissioner

shall thoroughly investigate the application. The banking

commissioner shall prepare a written report of the investigation.

confidential or nonconfidential character of information obtained

or prepared by the department under this chapter. Except as

provided by Subchapter D, Chapter 31, or in rules regarding

confidential information, the business plan of the applicant and

the financial statement of a proposed officer or director are

confidential and not subject to public disclosure.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by Acts 2001, 77th Leg., ch. 412, Sec. 2.07, eff. Sept.

1, 2001.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

237, Sec. 10, eff. September 1, 2007.

Acts 2007, 80th Leg., R.S., Ch.

735, Sec. 2, eff. September 1, 2007.

Acts 2009, 81st Leg., R.S., Ch.

87, Sec. 10.003, eff. September 1, 2009.

Sec. 32.005. PROTEST; HEARING; DECISION ON CHARTER APPLICATION.

(a) A protest of a charter application must be received by the

department before the 15th day after the date the organizers

publish notice under Section 32.004(a) and must be accompanied by

the fees and deposits required by law. If the protest is

untimely, the department shall return all submitted fees and

deposits to the protesting party. If the protest is timely, the

department shall notify the applicant of the protest and mail or

deliver a complete copy of the nonconfidential sections of the

charter application to the protesting party before the 15th day

after the later of the date of receipt of the protest or receipt

of the charter application.

(b) A protesting party must file a detailed protest responding

to each contested statement contained in the nonconfidential

portion of the application not later than the 20th day after the

date the protesting party receives the application from the

department, and relate each statement and response to the

standards for approval set forth in Section 32.003(b). The

applicant must file a written reply to the protesting party's

detailed response on or before the 10th day after the date the

response is filed. The protesting party's response and the

applicant's reply must be verified by affidavit and must certify

that a copy was served on the opposing party. If applicable,

statements in the response and in the reply may be supported by

references to data available in sources of which official notice

may properly be taken. Any comment received by the department

and any reply of the applicant to the comment shall be made

available to the protesting party.

hearing before granting or denying the charter application. In

the exercise of discretion, the banking commissioner may consider

granting a hearing on a charter application at the request of the

applicant or a protesting party. The banking commissioner may

order a hearing regardless of whether a hearing has been

requested by a party. A party requesting a hearing must indicate

with specificity the issues involved that cannot be determined on

the basis of the record compiled under Subsection (b) and why the

issues cannot be determined. A request for hearing and the

banking commissioner's decision with regard to granting a hearing

shall be made a part of the record. If the banking commissioner

sets a hearing, the banking commissioner shall conduct a public

hearing and one or more prehearing conferences and opportunities

for discovery as the banking commissioner considers advisable and

consistent with the applicable law, except that the banking

commissioner may not permit discovery of confidential information

in the charter application or the investigation report.

(d) Based on the record, the banking commissioner shall

determine whether the application meets the requirements of

Section 32.003(b) and shall enter an order granting or denying

the charter.

(e) The banking commissioner may make approval of an application

conditional. The banking commissioner shall include any

conditions in the order approving the application.

(f) Chapter 2001, Government Code, does not apply to a charter

application filed for the purpose of assuming the assets and

liabilities of a financial institution considered by the banking

commissioner to be in hazardous condition.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

735, Sec. 3, eff. September 1, 2007.

Sec. 32.006. ISSUANCE OF CERTIFICATE OF AUTHORITY. A state bank

may not engage in the business of banking until it receives a

certificate of authority from the banking commissioner. The

banking commissioner may not deliver the certificate of authority

until the bank has:

(1) received cash for the issuance of all authorized shares in

the full amount subscribed;

(2) elected or qualified the initial officers and directors

named in the application for charter or other officers and

directors approved by the banking commissioner; and

(3) complied with all the other requirements of this subtitle

relating to the organization of state banks.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

237, Sec. 11, eff. September 1, 2007.

Sec. 32.007. DEADLINE TO BEGIN BUSINESS. If the state bank does

not open and engage in the business of banking within six months

after the date of the granting of its charter, the banking

commissioner may forfeit the charter or cancel the conditional

approval of application for charter without judicial action.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 32.008. APPLICATION OF GENERAL CORPORATE LAW. (a) The

Business Organizations Code applies to a banking association as

if it were a for-profit corporation, and to a limited banking

association as if it were a limited liability company, to the

extent not inconsistent with this subtitle or the proper business

of a state bank, except that:

(1) a reference in the Business Organizations Code to the

secretary of state means the banking commissioner unless the

context requires otherwise; and

(2) the right of shareholders to cumulative voting in the

election of directors exists only if granted by the bank's

articles of association.

(b) The finance commission may adopt rules to limit or refine

the applicability of the laws listed by Subsection (a) or (d) to

a state bank or to alter or supplement the procedures and

requirements of those laws applicable to an action taken under

this chapter.

adopted under this subtitle, a state bank may not take an action

authorized by a law listed by Subsection (a) or (d) regarding its

corporate status, its capital structure, or a matter of corporate

governance, of the type for which those laws would require a

filing with the secretary of state if the bank were a business

corporation, without submitting the filing to the banking

commissioner and obtaining the banking commissioner's prior

written approval of the action.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by Acts 2001, 77th Leg., ch. 528, Sec. 6, eff. Sept. 1,

2001.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

237, Sec. 12, eff. September 1, 2007.

Sec. 32.009. PARITY BETWEEN STATE AND NATIONAL BANKS. (a)

Section 16(a), Article XVI, Texas Constitution, empowers the

legislature to authorize the incorporation of state banks and

provide for a system of state regulation and control of state

banks that will adequately protect and secure depositors and

creditors. Section 16(c), Article XVI, Texas Constitution, grants

to state banks created by virtue of the power vested in the

legislature by Section 16(a) of that article the same rights and

privileges that are or may be granted to national banks domiciled

in this state. The legislature finds that Section 16(c) of that

article does not restrict the legislature's power to provide a

system of state regulation under Section 16(a) of that article

that differs from the regulatory scheme imposed on national banks

under federal law or prevent the finance commission, acting under

authority granted by the legislature for the purpose of

implementing this subtitle, from adopting rules that differ from

federal statutes and regulations or that reasonably regulate the

method or manner by which a state bank exercises its rights and

privileges if the rules are adopted after due consideration of

the factors listed in Section 31.003(b). The legislature further

finds that Section 16(c), Article XVI, Texas Constitution, does

not limit any rights or powers specifically given to state banks

by the laws of this state.

(b) A state bank that intends to exercise a right or privilege

granted to national banks that is not authorized for state banks

under the statutes and rules of this state shall submit a letter

to the banking commissioner describing in detail the activity in

which the bank intends to engage and the specific authority of a

national bank to engage in that activity. The bank shall attach

copies, if available, of relevant federal law, regulations, and

interpretive letters. The bank may begin to perform the proposed

activity after the 30th day after the date the banking

commissioner receives the bank's letter unless the banking

commissioner specifies an earlier or later date or prohibits the

activity. The banking commissioner may prohibit the bank from

performing the activity only if the banking commissioner finds

that:

(1) a national bank domiciled in this state does not possess the

specific right or privilege to perform the activity the bank

seeks to perform; or

(2) the performance of the activity by the bank would adversely

affect the safety and soundness of the bank.

Subsection (b) if the banking commissioner determines that the

bank's letter raises issues requiring additional information or

additional time for analysis. If the 30-day period is extended,

the bank may perform the proposed activity only on prior written

approval by the banking commissioner, except that the banking

commissioner must approve or prohibit the proposed activity or

convene a hearing under Section 31.201 not later than the 60th

day after the date the banking commissioner receives the bank's

letter. If a hearing is convened, the banking commissioner must

approve or prohibit the proposed activity not later than the 30th

day after the date the hearing is completed.

(d) A state bank that is denied the requested right or privilege

to engage in an activity by the banking commissioner under this

section may appeal as provided by Sections 31.202, 31.203, and

31.204 or may resubmit a letter under this subsection with

additional information or authority relevant to the banking

commissioner's determination. A denial is immediately final for

purposes of appeal.

(e) To effectuate the Texas Constitution, the finance commission

may adopt rules implementing the method or manner in which a

state bank exercises specific rights and privileges granted under

Section 16(c), Article XVI, Texas Constitution, including rules

regarding the exercise of rights and privileges that would be

prohibited to state banks but for Section 16(c) of that article.

The finance commission may not adopt rules under this subsection

unless it considers the factors listed in Section 31.003(b) and

finds that:

(1) national banks domiciled in this state possess the rights or

privileges to perform activities the rule would permit state

banks to perform; and

(2) the rules contain adequate safeguards and controls,

consistent with safety and soundness, to address the concern of

the legislature evidenced by the state law the rules would

impact.

(f) The exercise of rights and privileges by a state bank in

compliance with and in the manner authorized by this section is

not a violation of any statute of this state.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 32.010. ADDITIONAL POWERS. (a) Notwithstanding another

law, a Texas state bank may perform an act, own property, or

offer a product or service that is at the time permissible within

the United States for a depository institution organized under

federal law or the law of this state or another state, if the

banking commissioner approves the exercise of the power as

provided by this section, subject to the same limitations and

restrictions applicable to the other depository institution by

pertinent law, except to the extent the limitations and

restrictions are modified by rules adopted under Subsection (e).

This section may not be used by a Texas state bank to alter or

negate the application of the laws of this state with respect to:

(1) establishment and maintenance of a branch in this state or

another state or country;

(2) permissible interest rates and loan fees chargeable in this

state;

(3) fiduciary duties owed to a client or customer by the bank in

its capacity as fiduciary in this state;

(4) consumer protection laws applicable to transactions in this

state; or

(5) licensing and regulatory requirements administered by a

functional regulatory agency in this state, as defined by Section

31.303, including licensing and regulatory requirements

pertaining to:

(A) insurance activities;

(B) securities activities; and

(b) A state bank that intends to exercise a power, directly or

through a subsidiary, granted by Subsection (a) that is not

otherwise authorized for state banks under the statutes of this

state shall submit a letter to the banking commissioner

describing in detail the power that the bank proposes to exercise

and the specific authority of another depository institution to

exercise the power. The bank shall attach copies, if available,

of relevant law, regulations, and interpretive letters. The bank

may begin to exercise the proposed power after the 30th day after

the date the banking commissioner receives the bank's letter

unless the banking commissioner specifies an earlier or later

date or prohibits the activity. The banking commissioner may

prohibit the bank from exercising the power only if the banking

commissioner finds that:

(1) specific authority does not exist for another depository

institution to exercise the proposed power;

(2) if the state bank is insured by the Federal Deposit

Insurance Corporation, the state bank is prohibited from

exercising the power pursuant to Section 24, Federal Deposit

Insurance Act (12 U.S.C. Section 1831a), and related regulations;

(3) the exercise of the power by the bank would adversely affect

the safety and soundness of the bank.

Subsection (b) if the banking commissioner determines that the

bank's letter raises issues requiring additional information or

additional time for analysis. If the 30-day period is extended,

the bank may exercise the proposed power only on prior written

approval by the banking commissioner, except that the banking

commissioner must approve or prohibit the proposed power or

convene a hearing under Section 31.201 not later than the 60th

day after the date the banking commissioner receives the bank's

letter. If a hearing is convened, the banking commissioner must

approve or prohibit the proposed power not later than the 30th

day after the date the hearing is completed.

(d) A state bank that is denied the requested power by the

banking commissioner under this section may appeal as provided by

Sections 31.202, 31.203, and 31.204 or may resubmit a letter

under this section with additional information or authority

relevant to the banking commissioner's determination. A denial is

immediately final for purposes of appeal.

(e) To effectuate this section, the finance commission may adopt

rules implementing the method or manner in which a state bank

exercises specific powers granted under this section, including

rules regarding the exercise of a power that would be prohibited

to state banks under state law but for this section. The finance

commission may not adopt rules under this subsection unless it

considers the factors listed in Section 31.003(b) and finds that:

(1) the conditions for prohibition by the banking commissioner

under Subsection (b) do not exist; and

(2) if the rights and privileges would be prohibited to state

banks under other state law, the rules contain adequate

safeguards and controls, consistent with safety and soundness, to

address the concern of the legislature evidenced by the state law

the rules would affect.

(f) The exercise of a power by a state bank in compliance with

and in the manner authorized by this section is not a violation

of any statute of this state.

Added by Acts 1999, 76th Leg., ch. 344, Sec. 2.006, eff. Sept. 1,

1999. Amended by Acts 2001, 77th Leg., ch. 528, Sec. 7, eff.

Sept. 1, 2001.

Sec. 32.011. FINANCIAL ACTIVITIES. (a) The finance commission

by rule may determine that an activity not otherwise approved or

authorized for a state bank under this subtitle or other law is:

(1) a financial activity;

(2) incidental to a financial activity; or

(3) complementary to a financial activity.

(b) In adopting a rule under Subsection (a), the finance

commission shall consider:

(1) the purposes of this subtitle and the Gramm-Leach-Bliley Act

(Pub. L. No. 106-102);

(2) changes or reasonably expected changes in the marketplace in

which state banks compete;

(3) changes or reasonably expected changes in the technology for

delivering financial services;

(4) whether the activity is necessary or appropriate to allow a

state bank to:

(A) compete effectively with another company seeking to provide

financial services;

(B) efficiently deliver information and services that are

financial in nature through the use of technological means,

including an application necessary to protect the security or

efficacy of systems for the transmission of data or financial

transactions; or

for using financial services or for the document imaging of data;

(5) whether the activity would pose a substantial risk to the

safety or soundness of a state bank or the financial system

generally;

(6) if otherwise determined to be permissible, whether the

conduct of the activity by a state bank should be qualified

through the imposition of reasonable and necessary conditions to

protect the public and require appropriate regard for safety and

soundness of the bank and the financial system generally; and

(7) whether a state bank would be permitted to engage in the

activity under applicable federal law, including 12 U.S.C.

Section 1831a, and related regulations.

does not alter or negate applicable licensing and regulatory

requirements administered by a functional regulatory agency of

this state, as defined by Section 31.303, including licensing and

regulatory requirements pertaining to:

(1) insurance activities;

(2) securities activities; and

(3) real estate development, marketing, and sales activities.

Added by Acts 2001, 77th Leg., ch. 528, Sec. 8, eff. Sept. 1,

2001.

SUBCHAPTER B. AMENDMENT OF ARTICLES; CHANGES IN CAPITAL AND

SURPLUS

Sec. 32.101. AMENDMENT OR RESTATEMENT OF STATE BANK ARTICLES OF

ASSOCIATION. (a) A state bank that has been granted a

certificate of authority may amend or restate its articles of

association for any lawful purpose, including the creation of

authorized but unissued shares or participation shares in one or

more classes or series.

(b) An amendment authorizing the issuance of shares or

participation shares in series must contain:

(1) the designation of each series and a statement of any

variations in the preferences, limitations, and relative rights

among series to the extent that the preferences, limitations, and

relative rights are to be established in the articles of

association; and

(2) a statement of any authority to be vested in the bank's

board to establish series and determine the preferences,

limitations, and relative rights of each series.

a state bank and approval of the bank's board and shareholders

must be made or obtained as provided by the Business

Organizations Code for the amendment or restatement of a

certificate of formation by a for-profit corporation except as

otherwise provided by this subtitle or rules adopted under this

subtitle. The original and one copy of the articles of amendment

or restated articles of association must be filed with the

banking commissioner for approval. Unless the submission

presents novel or unusual questions, the banking commissioner

shall approve or reject the amendment or restatement not later

than the 31st day after the date the banking commissioner

considers the submission informationally complete and accepted

for filing. The banking commissioner may require the submission

of additional information as considered necessary to an informed

decision to approve or reject any amendment or restatement of

articles of association under this section. If the banking

commissioner finds that the amendment or restatement conforms to

law and any conditions imposed by the banking commissioner, and

any required filing fee has been paid, the banking commissioner

shall:

(1) endorse the face of the original and copy of the amendment

or restatement with the date of approval and the word "Approved";

(2) file the original of the amendment or restatement in the

department's records; and

(3) deliver a certified copy of the amendment or restatement to

the bank.

(e) An amendment or restatement, if approved, takes effect on

the date of approval unless the amendment or restatement provides

for a different effective date.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

237, Sec. 13, eff. September 1, 2007.

Sec. 32.102. ESTABLISHING SERIES OF SHARES. (a) If the

articles of association expressly give the board of a state bank

authority to establish shares in series and determine the

preferences, limitations, and relative rights of each series, the

board may do so only in compliance with this section and any

rules adopted under this subtitle.

(b) A series of shares may be established in the manner provided

by the Business Organizations Code as if the state bank were a

domestic entity, but the shares of the series may not be issued

and sold without the prior written approval of the banking

commissioner under Section 32.103. The bank shall file the

original and one copy of the statement of action required by the

Business Organizations Code with the banking commissioner.

the banking commissioner shall approve or reject the series not

later than the 31st day after the date the banking commissioner

considers the submission informationally complete and accepted

for filing. The banking commissioner may require the submission

of additional information as considered necessary to an informed

decision to approve or reject a proposed series under this

section.

(d) If the banking commissioner finds that the interests of

depositors and creditors will not be adversely affected by the

series, that the series conforms to law and any conditions

imposed by the banking commissioner, and that any required filing

fee has been paid, the banking commissioner shall:

(1) endorse the face of the original and copy of the statement

with the date of approval and the word "Approved";

(2) file the original of the statement in the department's

records; and

(3) deliver a certified copy of the statement to the state bank.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

237, Sec. 14, eff. September 1, 2007.

Acts 2007, 80th Leg., R.S., Ch.

237, Sec. 15, eff. September 1, 2007.

Sec. 32.103. CHANGE IN OUTSTANDING CAPITAL AND SURPLUS. (a) A

state bank may not reduce or increase its outstanding capital and

surplus through dividend, redemption, issuance of shares, or

otherwise, without the prior written approval of the banking

commissioner, except as permitted by this section or rules

adopted under this subtitle.

(b) Unless restricted by rule, prior written approval is not

required for an increase in capital and surplus accomplished

through:

(1) issuance of shares of common stock for cash, or a cash

contribution to surplus by shareholders that does not result in

issuance of additional common stock or other securities;

(2) declaration and payment of pro rata share dividends as

defined by the Business Organizations Code; or

(3) adoption by the board of a resolution directing that all or

part of undivided profits be transferred to capital or surplus.

(1) a decrease in capital or surplus caused by losses in excess

of undivided profits; or

(2) a change in capital and surplus resulting from accounting

adjustments required by a transaction approved by the banking

commissioner if the accounting adjustments are reasonably

disclosed in the submitted application.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

237, Sec. 16, eff. September 1, 2007.

Acts 2007, 80th Leg., R.S., Ch.

735, Sec. 4, eff. September 1, 2007.

Sec. 32.104. CAPITAL NOTES OR DEBENTURES. (a) With the prior

written approval of the banking commissioner, a state bank may at

any time, through action of its board and without requiring

action of its shareholders, issue and sell its capital notes or

debentures. The capital notes or debentures must be subordinate

to the claims of depositors and may be subordinate to other

claims, including the claims of other creditors or the

shareholders.

(b) Capital notes or debentures may be convertible into shares

of any class or series. The issuance and sale of convertible

capital notes or debentures are subject to satisfaction of

preemptive rights, if any, to the extent provided by law.

commissioner, a state bank may not pay interest due or principal

repayable on outstanding capital notes or debentures when the

bank is in hazardous condition or is insolvent, or to the extent

that payment will cause the bank to be in hazardous condition or

insolvent, as determined by the banking commissioner.

(d) The amount of any outstanding capital notes or debentures

that meet the requirements of this section and that are

subordinated to unsecured creditors of the bank may be included

in equity capital of the bank for purposes of determining

hazardous condition or insolvency and for other purposes provided

by rules adopted under this subtitle.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

237, Sec. 17, eff. September 1, 2007.

SUBCHAPTER C. BANK OFFICES

Sec. 32.201. CONDUCT OF THE BUSINESS OF BANKING. (a) A state

bank may engage in the banking business at its home office, at an

approved branch office location, and through electronic

terminals. A drive-in facility must be approved as a branch if it

is more than 2,000 feet from the nearest wall of the bank's home

office or another approved branch office.

(b) A function of a state bank that does not involve banking

contact with the public may be conducted at any location without

prior written approval of the banking commissioner. The finance

commission may adopt rules further defining functions of a state

bank that are not required to be conducted at an approved

location.

authorize a new form of banking facility. The banking

commissioner may approve a new form of banking facility other

than as provided by this subchapter if the banking commissioner

does not have a significant supervisory or regulatory concern

regarding the proposed facility.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 32.202. HOME OFFICE. (a) Each state bank must have and

continuously maintain in this state a home office. The home

office must be a location at which the bank does business with

the public and keeps its corporate books and records. At least

one officer of the bank must maintain an office at the home

office.

(b) A state bank may change its home office to one of its

previously established branch locations in this state, if the

location that is the home office before the change is to remain

as a branch of the bank, by filing a written notice with the

banking commissioner. The notice must set forth the name of the

bank, the street address of its home office before the change,

the street address of the location to which the home office is to

be changed, and a copy of the resolution adopted by the bank's

board authorizing the change. The change of home office takes

effect on the 31st day after the date the banking commissioner

receives the notice unless the banking commissioner consents to a

different effective date.

this state, other than as permitted by Subsection (b), on prior

written approval of the banking commissioner. The banking

commissioner shall grant an application under this subsection if

the banking commissioner does not have a significant supervisory

or regulatory concern regarding the proposed banking facility,

the applicant, or an affiliate of the applicant. Any standard

established by the banking commissioner or the finance commission

regarding the establishment of a branch under Section 32.203

applies to an application for a change of home office that is

subject to this subsection, except as otherwise provided by rules

adopted under this subtitle.

(d) If the proposed relocation of the bank's home office would

effect an abandonment of all or part of the community served by

the bank, the bank must establish to the satisfaction of the

banking commissioner that the abandonment is consistent with the

original determination of public necessity for the establishment

of a bank at that location.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by Acts 1999, 76th Leg., ch. 344, Sec. 2.007, eff. Sept.

1, 1999.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

244, Sec. 2, eff. September 1, 2007.

Sec. 32.203. BRANCH OFFICES. (a) A state bank may establish

and maintain a branch office at any location on prior written

approval of the banking commissioner. If the banking commissioner

does not have a significant supervisory or regulatory concern

regarding the proposed branch, the applicant, or an affiliate of

the applicant, the banking commissioner shall approve the

application.

(b) The finance commission may adopt rules establishing

additional standards for the approval of branch offices.

premises or property of an affiliate if the affiliate engages in

a commercial activity.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

217, Sec. 2, eff. May 25, 2007.

Sec. 32.204. LOAN PRODUCTION OFFICES. (a) A state bank may

establish one or more loan production offices for the purpose of

soliciting loans or equivalent transactions, accepting loan

applications, and performing ministerial duties related to

consummating a granted loan, such as execution of loan documents

and dispensation of loan proceeds by check or other draft,

including a certified or cashier's check, but not by cash. A

credit decision, commitment to make a loan, and preparation of a

check or other draft to dispense loan proceeds must occur at the

bank's home office or a branch office and may not occur at a loan

production office.

(b) The bank shall notify the banking commissioner in writing

before the 31st day before the date of establishment of a loan

production office, except that the banking commissioner may waive

or shorten the period if the banking commissioner does not have a

significant supervisory or regulatory concern regarding the bank

or its planned loan production office.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by Acts 2001, 77th Leg., ch. 412, Sec. 2.08, eff. Sept.

1, 2001.

SUBCHAPTER D. MERGER

Sec. 32.301. MERGER AUTHORITY. (a) Two or more financial

institutions, corporations, or other entities with the authority

to participate in a merger, at least one of which is a state

bank, may adopt and implement a plan of merger in accordance with

this section. The merger may not be made without the prior

written approval of the banking commissioner if any surviving,

new, or acquiring entity that is a party to the merger or created

by the terms of the merger is a state bank or is not a financial

institution.

(b) Implementation of the merger by the parties and approval of

the board, shareholders, or owners of the parties must be made or

obtained in accordance with the Business Organizations Code as if

the state bank were a domestic entity and all other parties to

the merger were foreign entities, except as may be otherwise

provided by applicable rules.

Organizations Code. A separate application is not required to

relocate the home office of a surviving state bank or to grant

authority to a surviving bank to operate new branch offices that

previously existed as part of a merging financial institution if

the intent of the surviving bank is clearly stated as part of the

plan of merger.

(d) A merger under this subchapter does not confer additional

powers on a state bank beyond the powers conferred by other

provisions of this subtitle.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

237, Sec. 18, eff. September 1, 2007.

Sec. 32.302. APPROVAL OF BANKING COMMISSIONER. (a) If the

merger is subject to the prior written approval of the banking

commissioner, the original articles of merger and a number of

copies of the articles equal to the number of surviving, new, and

acquiring entities must be filed with the banking commissioner.

On this filing, the banking commissioner shall investigate the

condition of the merging parties. The banking commissioner may

require the submission of additional information the banking

commissioner determines necessary to an informed decision to

approve or reject a merger under this subchapter.

(b) The banking commissioner shall approve the merger only if:

(1) each resulting state bank:

(A) has complied with the laws of this state relating to the

organization and operation of state banks; and

(B) will be solvent and have adequate capitalization for its

business and location;

(2) all deposit and other liabilities of each state bank that is

a party to the merger have been properly discharged or otherwise

assumed or retained by a financial institution;

(3) each surviving, new, or acquiring entity that is not a

depository institution will not be engaged in the unauthorized

business of banking, and each state bank will not be engaged in a

business other than banking or a business incidental to banking;

(4) the parties have complied with the laws of this state; and

(5) all conditions imposed by the banking commissioner have been

satisfied or otherwise resolved.

that all required filing fees and investigative costs have been

paid, the banking commissioner shall:

(1) endorse the face of the original and each copy of the

articles of merger with the date of approval and the word

"Approved";

(2) file the original of the articles of merger in the

department's records; and

(3) deliver a certified copy of the articles of merger to each

surviving, new, or acquiring entity.

(d) An approved merger takes effect on the date of approval

unless the merger agreement provides for a different effective

date.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 32.303. RIGHTS OF DISSENTERS FROM MERGER. A shareholder

may dissent from the merger to the extent, and by following the

procedure provided, by the Business Organizations Code or any

rules adopted under this subtitle.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

237, Sec. 19, eff. September 1, 2007.

Sec. 32.304. LIMITATION ON CONTROL OF DEPOSITS. (a) A merger

is not permitted under this subchapter if, on consummation of the

transaction, the resulting state bank, including all insured

depository institution affiliates of the resulting state bank,

would control 20 percent or more of the total amount of deposits

in this state held by all insured depository institutions in this

state.

(b) On request of the banking commissioner the applicant shall

provide supplemental information to the banking commissioner to

aid in a determination under this section, including information

that is more current than or in addition to information in the

most recently available summary of deposits, reports of

condition, or similar reports filed with or produced by state or

federal authorities.

institution" have the meanings assigned by Section 3, Federal

Deposit Insurance Act (12 U.S.C. Section 1813), as amended.

Added by Acts 1999, 76th Leg., ch. 344, Sec. 2.008, eff. Sept. 1,

1999.

SUBCHAPTER E. PURCHASE OR SALE OF ASSETS

Sec. 32.401. AUTHORITY TO PURCHASE ASSETS. (a) A state bank

may purchase assets from another financial institution or other

seller, except that the prior written approval of the banking

commissioner is required if the purchase price exceeds an amount

equal to three times the bank's unimpaired capital and surplus.

The finance commission by rule may require a state bank to obtain

the prior written approval of the banking commissioner for a

transaction not otherwise subject to approval that involves

potentially substantial risks to the safety and soundness of the

purchasing bank.

(b) Except as otherwise expressly provided by another statute,

the purchase of all or part of the assets of the selling entity

does not make the purchasing bank responsible for any liability

or obligation of the selling entity that the purchasing bank does

not expressly assume.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

735, Sec. 5, eff. September 1, 2007.

Sec. 32.402. AUTHORITY TO ACT AS DISBURSING AGENT. (a) The

purchasing bank may hold the purchase price and any additional

money delivered to it by the selling institution in trust for, or

as a deposit to the credit of, the selling institution and may

act as agent of the selling institution in disbursing the money

in trust or on deposit by paying the depositors and creditors of

the selling institution.

(b) If the purchasing bank acts under written contract of agency

approved by the banking commissioner that specifically names each

depositor and creditor and the amount to be paid each, and if the

agency is limited to the purely ministerial act of paying those

depositors and creditors the amounts due them as determined by

the selling institution and reflected in the contract of agency

and does not involve discretionary duties or authority other than

the identification of the depositors and creditors named, the

purchasing bank:

(1) may rely on the contract of agency and the instructions

included in it; and

(2) is not responsible for:

(A) any error made by the selling institution in determining its

liabilities, the depositors and creditors to whom the liabilities

are due, or the amounts due the depositors and creditors; or

(B) any preference that results from the payments made under the

contract of agency and the instructions included in it.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 32.403. LIQUIDATION OF SELLING INSTITUTION. If the selling

financial institution is at any time after the sale of assets

voluntarily or involuntarily closed for liquidation by a state or

federal regulatory agency, the purchasing bank shall pay to the

receiver of the selling institution the balance of the money held

by it in trust or on deposit for the selling institution and not

yet paid to the depositors and creditors of the selling

institution. Without further action the purchasing bank is

discharged from all responsibilities to the selling institution

and to the selling institution's receiver, depositors, creditors,

and shareholders.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

237, Sec. 20, eff. September 1, 2007.

Sec. 32.404. PAYMENT TO DEPOSITORS AND CREDITORS. The

purchasing bank may pay a depositor or creditor of the selling

institution the amount to be paid the person under the terms of

the contract of agency by opening an account in the name of the

depositor or creditor, crediting the account with the amount to

be paid the depositor or creditor under the terms of the agency

contract, and mailing or personally delivering a duplicate

deposit ticket evidencing the credit to the depositor or creditor

at the person's address shown in the records of the selling

institution. The relationship between the purchasing bank and the

depositor or creditor is that of debtor to creditor only to the

extent of the credit reflected by the deposit ticket.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 32.405. SALE OF ASSETS. (a) A state bank may sell a

portion of its assets to another financial institution or other

buyer, except that the prior written approval of the banking

commissioner is required if the sales price exceeds an amount

equal to three times the bank's unimpaired capital and surplus.

The finance commission by rule may require a state bank to obtain

the prior written approval of the banking commissioner for a

transaction not otherwise subject to approval that involves

potentially substantial risks to the safety and soundness of the

selling bank.

(b) If the prior approval of the banking commissioner for a sale

of assets is not required under Subsection (a) and the sale

involves the disposition of a branch office or another

established location of the state bank, the state bank must

provide written notice of the transaction to the banking

commissioner at least 30 days before the expected closing date of

the transaction.

of the banking commissioner, may cause the bank to sell all or

substantially all of its assets without shareholder approval if:

(1) the banking commissioner finds the interests of depositors

and creditors are jeopardized because of insolvency or imminent

insolvency and that the sale is in their best interest; and

(2) the Federal Deposit Insurance Corporation or its successor

approves the transaction and agrees to provide assistance to the

prospective buyer under 12 U.S.C. Section 1823(c) or a comparable

law unless the deposits of the bank are not insured.

(d) A sale under Subsection (c) must include an assumption and

promise by the buyer to pay or otherwise discharge:

(1) all of the bank's liabilities to depositors;

(2) all of the bank's liabilities for salaries of the bank's

employees incurred before the date of the sale;

(3) obligations incurred by the banking commissioner arising out

of the supervision or sale of the bank; and

(4) fees and assessments due the department.

(e) This section does not affect the banking commissioner's

right to take action under another law. The sale by a state bank

of all or substantially all of its assets with shareholder

approval is considered a voluntary dissolution and liquidation

and is governed by Subchapter B, Chapter 36.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

237, Sec. 21, eff. September 1, 2007.

Acts 2007, 80th Leg., R.S., Ch.

735, Sec. 6, eff. September 1, 2007.

Sec. 32.406. LIMITATION ON CONTROL OF DEPOSITS. (a) A purchase

of assets is not permitted under Section 32.401 if, on

consummation of the transaction, the acquiring state bank,

including all insured depository institution affiliates of the

resulting state bank, would control 20 percent or more of the

total amount of deposits in this state held by all insured

depository institutions in this state.

(b) On request of the banking commissioner the applicant shall

provide supplemental information to the banking commissioner to

aid in a determination under this section, including information

that is more current than or in addition to information in the

most recently available summary of deposits, reports of

condition, or similar reports filed with or produced by state or

federal authorities.

institution" have the meanings assigned by Section 3, Federal

Deposit Insurance Act (12 U.S.C. Section 1813), as amended.

Added by Acts 1999, 76th Leg., ch. 344, Sec. 2.009, eff. Sept. 1,

1999.

SUBCHAPTER F. EXIT OF STATE BANK OR ENTRY OF ANOTHER FINANCIAL

INSTITUTION

Sec. 32.501. MERGER OR CONVERSION OF STATE BANK INTO ANOTHER

FINANCIAL INSTITUTION. (a) Subject to Subtitle G, a state bank

may act as necessary under and to the extent permitted by the

laws of the United States, this state, another state, or another

country to merge or convert into another financial institution,

as that term is defined by Section 201.101.

(b) The merger or conversion by the state bank must be made and

approval of its board and shareholders must be obtained in

accordance with the Business Organizations Code as if the state

bank were a domestic entity and all other parties to the

transaction, if any, were foreign entities, except as provided by

rule. For purposes of this subsection, a conversion is

considered a merger into the successor form of financial

institution.

the supervision of the banking commissioner unless:

(1) the banking commissioner has been given written notice of

the intention to merge or convert before the 31st day before the

date of the proposed transaction;

(2) the bank has filed with the banking commissioner:

(A) a copy of the application filed with the successor

regulatory authority, including a copy of each contract

evidencing or implementing the merger or conversion, or other

documents sufficient to show compliance with applicable law; and

(B) a certified copy of all minutes of board meetings and

shareholder meetings at which action was taken regarding the

merger or conversion;

(3) the banking commissioner determines that:

(A) all deposit and other liabilities of the state bank are

fully discharged, assumed, or otherwise retained by the successor

form of financial institution;

(B) any conditions imposed by the banking commissioner for the

protection of depositors and creditors have been met or otherwise

resolved; and

(4) the bank has received a certificate of authority to do

business as the successor financial institution.

(d) Section 32.304 applies to a proposed merger under this

section.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by Acts 1999, 76th Leg., ch. 344, Sec. 2.010, eff. Sept.

1, 1999.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

237, Sec. 22, eff. September 1, 2007.

Acts 2007, 80th Leg., R.S., Ch.

735, Sec. 7, eff. September 1, 2007.

Sec. 32.502. CONVERSION OF FINANCIAL INSTITUTION INTO STATE

BANK. (a) A financial institution, as that term is defined by

Section 201.101, may apply to the banking commissioner for

conversion into a state bank on a form prescribed by the banking

commissioner and accompanied by any required fee if the

institution follows the procedures prescribed by the laws of the

United States, this state, another state, or another country

governing the exit of the financial institution for the purpose

of conversion into a state bank from the regulatory system

applicable before the conversion. A banking association or

limited banking association may convert its organizational form

under this section.

(b) A financial institution applying to convert into a state

bank may receive a certificate of authority to do business as a

state bank if the banking commissioner finds that:

(1) the financial institution is not engaging in a pattern or

practice of unsafe and unsound banking practices;

(2) the financial institution has adequate capitalization for a

state bank to engage in business at the same locations as the

financial institution is engaged in business before the

conversion;

(3) the financial institution can be expected to operate

profitably after the conversion;

(4) the officers and directors of the financial institution as a

group have sufficient banking experience, ability, standing,

competence, trustworthiness, and integrity to justify a belief

that the financial institution will operate as a state bank in

compliance with law;

(5) each principal shareholder has sufficient experience,

ability, standing, competence, trustworthiness, and integrity to

justify a belief that the financial institution will be free from

improper or unlawful influence or interference with respect to

the financial institution's operation as a state bank in

compliance with law; and

(6) if the converting financial institution did not have general

depository powers and the state bank will have those powers, the

factors set forth in Section 32.003(b) are satisfied.

(1) request additional information considered necessary to an

informed decision under this section;

(2) perform an examination of the converting financial

institution at the expense of the converting financial

institution; and

(3) require that examination fees be paid before a certificate

of authority is issued.

(d) In connection with the application, the converting financial

institution must:

(1) submit a statement of the law governing the exit of the

financial institution from the regulatory system applicable

before the conversion and the terms of the transition into a

state bank; and

(2) demonstrate that all applicable law has been fully

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Texas Codes and Statutes

CHAPTER 32. POWERS, ORGANIZATION, AND FINANCIAL REQUIREMENTS