CHAPTER 34. INVESTMENTS, LOANS, AND DEPOSITS
FINANCE CODE
TITLE 3. FINANCIAL INSTITUTIONS AND BUSINESSES
SUBTITLE A. BANKS
CHAPTER 34. INVESTMENTS, LOANS, AND DEPOSITS
SUBCHAPTER A. ACQUISITION AND OWNERSHIP OF BANK FACILITIES AND
OTHER REAL PROPERTY
Sec. 34.001. DEFINITION. In this subchapter, "bank facility"
means real property, including an improvement, that a state bank
owns or leases, to the extent the lease or the leasehold
improvement is capitalized, for the purpose of:
(1) providing space for bank employees to perform their duties
and for bank employees and customers to park;
(2) conducting bank business, including meeting the reasonable
needs and convenience of the public and the bank's customers,
computer operations, document and other item processing,
maintenance and storage of foreclosed collateral pending
disposal, and record retention and storage;
(3) holding, improving, and occupying as an incident to future
expansion of the bank's facilities; or
(4) conducting another activity authorized by rules adopted
under this subtitle.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Sec. 34.002. INVESTMENT IN BANK FACILITIES. (a) Without the
prior written approval of the banking commissioner, a state bank
may not directly or indirectly invest an amount in excess of its
unimpaired capital and surplus in bank facilities, furniture,
fixtures, and equipment. Except as otherwise provided by rules
adopted under this subtitle, in computing this limitation the
bank:
(1) shall include:
(A) its direct investment in bank facilities;
(B) an investment in equity or investment securities of a
company holding title to a facility used by the bank for a
purpose specified by Section 34.001;
(C) a loan made by the bank to or on the security of equity or
investment securities issued by a company holding title to a
facility used by the bank; and
(D) any indebtedness incurred on bank facilities by a company:
(i) that holds title to the facility;
(ii) that is an affiliate of the bank; and
(iii) in which the bank is invested in the manner described by
Paragraph (B) or (C); and
(2) may exclude an amount included under Subdivisions (1)(B)-(D)
to the extent a lease of a facility from the company holding
title to the facility is capitalized on the books of the bank.
(b) Real property acquired for the purposes described by Section
34.001(3) and not improved and occupied by the bank ceases to be
a bank facility on the third anniversary of the date of its
acquisition unless the banking commissioner on application grants
written approval to further delay in the improvement and
occupation of the property by the bank.
(c) A bank shall comply with regulatory accounting principles in
accounting for its investment in and depreciation of bank
facilities, furniture, fixtures, and equipment.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
110, Sec. 3, eff. September 1, 2007.
Sec. 34.003. OTHER REAL PROPERTY. (a) A state bank may not
acquire real property except:
(1) as permitted by this subtitle or rules adopted under this
subtitle;
(2) with the prior written approval of the banking commissioner;
or
(3) as necessary to avoid or minimize a loss on a loan or
investment previously made in good faith.
(b) With the prior written approval of the banking commissioner,
a state bank may:
(1) exchange real property for other real property or personal
property;
(2) invest additional money in or improve real property acquired
under this subsection or Subsection (a); or
(3) acquire additional real property to avoid or minimize loss
on real property acquired as permitted by Subsection (a).
(c) A state bank shall dispose of real property subject to this
section not later than:
(1) the fifth anniversary of the date:
(A) it was acquired except as otherwise provided by rules
adopted under this subtitle; or
(B) it ceases to be used as a bank facility; or
(2) the second anniversary of the date it ceases to be a bank
facility as provided by Section 34.002(b).
(d) The banking commissioner on application may grant one or
more extensions of time for disposing of real property if the
banking commissioner determines that:
(1) the bank has made a good faith effort to dispose of the real
property; or
(2) disposal of the real property would be detrimental to the
bank.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Sec. 34.004. PASSIVE INVESTMENT IN MINERAL INTERESTS. (a)
Notwithstanding Section 34.003(a), a state bank may hold
nonworking mineral or royalty interests if:
(1) the state bank acquires the interest pursuant to Section
34.003(a)(3);
(2) the interest is not subject to expenses of exploration,
development, production, operation, maintenance, or abandonment,
or any other expense associated with extracting and marketing the
minerals subject to the rights or interest;
(3) the interest is reasonably valued on the books of the state
bank for not more than a nominal amount, and the aggregate amount
of earnings from such interests is separately disclosed in the
annual financial statements of the state bank;
(4) the state bank does not make any new investments relating to
the rights or interests without the approval of the banking
commissioner; and
(5) the banking commissioner determines that the possession of
such rights and interests is not inconsistent with the safety and
soundness of the state bank.
(b) The banking commissioner may order a state bank that holds
nonworking mineral or royalty interests to divest such interests
at any time if the banking commissioner determines that continued
ownership of such interests is detrimental to the state bank.
(c) Subject to compliance with this section, nonworking mineral
or royalty interests are not considered to be real property for
purposes of this subtitle.
Added by Acts 2007, 80th Leg., R.S., Ch.
110, Sec. 4, eff. September 1, 2007.
SUBCHAPTER B. INVESTMENTS
Sec. 34.101. SECURITIES. (a) A state bank may purchase and
sell securities without recourse solely on the order and for the
account of a customer.
(b) Except as otherwise provided by this subtitle or rules
adopted under this subtitle, a state bank may not:
(1) underwrite an issue of securities; or
(2) invest its money in equity securities except as necessary to
avoid or minimize a loss on a loan or investment previously made
in good faith.
(c) A state bank may purchase investment securities for its own
account under limitations and restrictions prescribed by rules
adopted under this subtitle. Except as otherwise provided by
this section, the amount of the investment securities of any one
obligor or maker held by the bank for its own account may not
exceed an amount equal to 15 percent of the bank's unimpaired
capital and surplus. The banking commissioner may authorize
investments in excess of this limitation on written application
if the banking commissioner determines that:
(1) the excess investment is not prohibited by other applicable
law; and
(2) the safety and soundness of the requesting state bank is not
adversely affected.
(d) Notwithstanding Subsections (a)-(c), a state bank may,
without limit and subject to the exercise of prudent banking
judgment, deal in, underwrite, or purchase for its own account:
(1) bonds and other legally created general obligations of a
state, an agency or political subdivision of a state, the United
States, or an instrumentality of the United States;
(2) obligations that this state, an agency or political
subdivision of this state, the United States, or an
instrumentality of the United States has unconditionally agreed
to purchase, insure, or guarantee;
(3) securities that are offered and sold under 15 U.S.C. Section
77d(5);
(4) mortgage related securities or small business related
securities, as those terms are defined by 15 U.S.C. Section
78c(a);
(5) mortgages, obligations, or other securities that are or ever
have been sold by the Federal Home Loan Mortgage Corporation
under 12 U.S.C. Sections 1434 and 1455;
(6) obligations, participation, or other instruments of or
issued by the Federal National Mortgage Association or the
Government National Mortgage Association;
(7) obligations issued by the Federal Agricultural Mortgage
Corporation, the Federal Farm Credit Banks Funding Corporation,
or a Federal Home Loan Bank;
(8) obligations of the Federal Financing Bank or the
Environmental Financing Authority;
(9) obligations or other instruments or securities of the
Student Loan Marketing Association;
(10) qualified Canadian government obligations, as defined by 12
U.S.C. Section 24; or
(11) if the state bank is well capitalized, as defined by
Section 38, Federal Deposit Insurance Act (12 U.S.C. Section
1831o), obligations, including limited obligation bonds, revenue
bonds, and obligations that satisfy the requirements of 26 U.S.C.
Section 142(b)(1), issued by or on behalf of a state or a
political subdivision of a state, including a municipal corporate
instrumentality of one or more states or a public agency or
authority of a state or political subdivision of a state.
(e) Notwithstanding Subsections (a) and (b), subject to the
exercise of prudent banking judgment, a state bank may deal in,
underwrite, or purchase for its own account, including for
purposes of Subsection (c) obligations as to which the bank is
under commitment, the following:
(1) obligations issued by a development bank, corporation, or
other entity created by international agreement if the United
States is a member and a capital stock shareholder;
(2) obligations issued by a state or political subdivision or an
agency of a state or political subdivision for housing,
university, or dormitory purposes, that are at the time eligible
for purchase by a state bank for its own account; or
(3) bonds, notes, and other obligations issued by the Tennessee
Valley Authority or by the United States Postal Service.
(f) A state bank may not invest more than an amount equal to 25
percent of the bank's unimpaired capital and surplus in
investment grade adjustable rate preferred stock and money market
(auction rate) preferred stock.
(g) A state bank may deposit money in a federally insured
financial institution, a Federal Reserve Bank, or a Federal Home
Loan Bank without limitation.
(h) The finance commission may adopt rules to administer and
carry out this section, including rules to:
(1) define or further define terms used by this section;
(2) establish limits, requirements, or exemptions other than
those specified by this section for particular classes or
categories of securities; and
(3) limit or expand investment authority for state banks for
particular classes or categories of securities.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Amended by Acts 2001, 77th Leg., ch. 528, Sec. 9, eff. Sept. 1,
2001.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
110, Sec. 5, eff. September 1, 2007.
Sec. 34.102. TRANSACTION IN BANK SHARES. (a) A state bank may
not acquire a lien by pledge or otherwise on its own shares, or
otherwise purchase or acquire title to its own shares, except:
(1) as necessary to avoid or minimize a loss on a loan or
investment previously made in good faith; or
(2) as provided by Subsection (b).
(b) With the prior written approval of the banking commissioner
or as permitted by rules adopted under this subtitle, a state
bank may acquire title to its own shares and hold those shares as
treasury stock. Treasury stock acquired under this subsection is
not considered an equity investment.
(c) If a state bank acquires a lien on or title to its own
shares under this section, the lien may not by its original terms
extend for more than two years. Except with the prior written
approval of the banking commissioner, the bank may not hold title
to its own shares for more than one year.
(d) A state bank may make loans on the collateral security of
securities issued by an affiliate, if the loan is subject to and
in compliance with the provisions of Sections 23A and 23B,
Federal Reserve Act (12 U.S.C. Sections 371c and 371c-1), as
amended, applicable to nonmember insured state banks by virtue of
Section 18(j)(1), Federal Deposit Insurance Act (12 U.S.C.
Section 1828(j)(1)), as amended.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Amended by Acts 2001, 77th Leg., ch. 412, Sec. 2.12, eff. Sept.
1, 2001.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
237, Sec. 36, eff. September 1, 2007.
Sec. 34.103. BANK SUBSIDIARIES. (a) Subject to this section
and except as otherwise provided by this subtitle or rules
adopted under this subtitle, a state bank may conduct any
activity or make any investment through an operating subsidiary
that a state bank or a bank holding company, including a
financial holding company, is authorized to conduct or make under
state or federal law if the operating subsidiary is adequately
empowered and appropriately licensed to conduct its business.
(b) Except for investment in a subsidiary engaging solely in
activities that may be engaged in directly by the bank and that
are conducted on the same terms and conditions that govern the
conduct of the activities by the bank, a state bank without the
prior written approval of the banking commissioner may not invest
more than an amount equal to 10 percent of its unimpaired capital
and surplus in a single subsidiary. For purposes of this
subsection, the amount of a state bank's investment in a
subsidiary is the sum of the amount of the bank's investment in
securities issued by the subsidiary and any loans and extensions
of credit from the bank to the subsidiary.
(c) A state bank may not establish or acquire a subsidiary or a
controlling interest in a subsidiary that engages in activities
as principal in which the bank is prohibited from engaging
directly unless:
(1) the state bank's investment in the subsidiary has been
approved by the Federal Deposit Insurance Corporation under
Section 24, Federal Deposit Insurance Act (12 U.S.C. Section
1831a); or
(2) with respect to a subsidiary engaged in activities as
principal that a national bank may conduct only through a
financial subsidiary, including firm underwriting of equity
securities other than as permitted by Section 34.101, and not
otherwise engaged in activities as principal that are
impermissible for a state bank or a financial subsidiary of a
national bank, the subsidiary's activities and the bank's
investment are in compliance with the restrictions and
requirements of Section 46, Federal Deposit Insurance Act (12
U.S.C. Section 1831w).
(d) Except as otherwise provided by this subtitle or a rule
adopted under this subtitle, a state bank may not make a
non-controlling minority investment in equity securities of a
company unless:
(1) the investment or company is described by Subsection (c)(2)
or Section 34.104 or 34.105;
(2) the company engages solely in activities that are part of or
incidental to the permissible business of a state bank under this
subtitle and:
(A) the state bank is adequately empowered to prevent the
company from engaging in activities not part of or incidental to
the permissible business of a state bank or, as a practical
matter, is otherwise enabled to withdraw or liquidate its
investment in the company in such an event;
(B) as a legal and accounting matter, the loss exposure of the
state bank with respect to the activities of the company is
limited and does not include any open-ended liability for an
obligation of the company; and
(C) the investment is convenient or useful to the state bank in
carrying out its business and is not a mere passive investment
unrelated to the bank's banking business; or
(3) the investment is made indirectly through an operating
subsidiary in equity securities issued by:
(A) another bank;
(B) a company that engages solely in an activity that is
permissible for a bank service corporation or a bank holding
company subsidiary; or
(C) a company that engages solely in activities as agent or
trustee or in a brokerage, custodial, advisory, or administrative
capacity, or in a substantially similar capacity.
(e) A state bank that intends to acquire, establish, or perform
new activities through a subsidiary shall submit a letter to the
banking commissioner describing in detail the proposed activities
of the subsidiary. The bank may acquire or establish a subsidiary
or perform new activities in an existing subsidiary beginning on
the 31st day after the date the banking commissioner receives the
bank's letter unless the banking commissioner specifies an
earlier or later date. The banking commissioner may extend the
30-day period on a determination that the bank's letter raises
issues that require additional information or additional time for
analysis. If the period is extended, the bank may acquire or
establish a subsidiary, or may perform new activities in an
existing subsidiary, only on prior written approval of the
banking commissioner.
(f) A subsidiary of a state bank is subject to regulation by the
banking commissioner to the extent provided by Chapter 11 or 12,
this subtitle, or rules adopted under this subtitle. In the
absence of limiting rules, the banking commissioner may regulate
a subsidiary as if it were a state bank.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Amended by Acts 2001, 77th Leg., ch. 528, Sec. 10, eff. Sept. 1,
2001.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
110, Sec. 6, eff. September 1, 2007.
Sec. 34.104. MUTUAL FUNDS. (a) A state bank may invest for its
own account in equity securities of an investment company
registered under the Investment Company Act of 1940 (15 U.S.C.
Section 80a-1 et seq.) and the Securities Act of 1933 (15 U.S.C.
Section 77a et seq.) if the portfolio of the investment company
consists wholly of investments in which the bank could invest
directly for its own account.
(b) If the portfolio of an investment company described by
Subsection (a) consists wholly of investments in which the bank
could invest directly without limitation, the bank may invest in
the investment company without limitation.
(c) The bank may invest not more than an amount equal to 15
percent of the bank's unimpaired capital and surplus in an
investment company described by Subsection (a) the portfolio of
which contains an investment or obligation in which the bank
could not invest directly without limitation under this chapter.
(d) A state bank that invests in an investment company as
provided by Subsection (c) shall periodically determine that its
pro rata share of any security in the portfolio of the investment
company combined with the bank's pro rata share of that security
held by all other investment companies in which the bank has
invested and with the bank's own direct investment and loan
holdings is not in excess of applicable investment and lending
limitations.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
110, Sec. 7, eff. September 1, 2007.
Acts 2007, 80th Leg., R.S., Ch.
237, Sec. 37, eff. September 1, 2007.
Sec. 34.105. OTHER DIRECT EQUITY INVESTMENTS. (a) A state bank
may purchase for its own account equity securities of any class
issued by:
(1) a bank service corporation, except that the bank may not
invest more than an amount equal to 15 percent of the bank's
unimpaired capital and surplus in a single bank service
corporation or more than an amount equal to five percent of its
assets in all bank service corporations;
(2) an agricultural credit corporation, except that the bank may
not invest more than an amount equal to 30 percent of the bank's
unimpaired capital and surplus in the agricultural credit
corporation unless the bank owns at least 80 percent of the
equity securities of the agricultural credit corporation;
(3) a small business investment company if the aggregate
investment does not exceed an amount equal to 10 percent of the
bank's unimpaired capital and surplus;
(4) a banker's bank if the aggregate investment does not exceed
an amount equal to 15 percent of the bank's unimpaired capital
and surplus or result in the bank acquiring or retaining
ownership, control, or power to vote more than five percent of
any class of voting securities of the banker's bank; or
(5) a housing corporation if the sum of the amount of investment
and the amount of loans and commitments for loans to the housing
corporation does not exceed an amount equal to 10 percent of the
bank's unimpaired capital and surplus.
(b) On written application, the banking commissioner may
authorize investments in excess of a limitation of Subsection (a)
if the banking commissioner concludes that:
(1) the excess investment is not precluded by other applicable
law; and
(2) the safety and soundness of the requesting bank would not be
adversely affected.
(c) For purposes of this section:
(1) "Agricultural credit corporation" means a company organized
solely to make loans to farmers and ranchers for agricultural
purposes, including the breeding, raising, fattening, or
marketing of livestock.
(2) "Banker's bank" means a bank insured by the Federal Deposit
Insurance Corporation or a bank holding company that owns or
controls such an insured bank if:
(A) all equity securities of the bank or bank holding company,
other than director's qualifying shares or shares issued under an
employee compensation plan, are owned by depository institutions
or depository institution holding companies; and
(B) the bank or bank holding company and all its subsidiaries
are engaged exclusively in providing:
(i) services to or for other depository institutions, depository
institution holding companies, and the directors, officers, and
employees of other depository institutions and depository
institution holding companies; and
(ii) correspondent banking services at the request of other
depository institutions, depository institution holding
companies, or their subsidiaries.
(3) "Bank service corporation" has the meaning assigned by the
Bank Service Corporation Act (12 U.S.C. Section 1861 et seq.) or
a successor to that Act.
(4) "Housing corporation" means a corporation organized under
Title IX of the Housing and Urban Development Act of 1968 (42
U.S.C. Section 3931 et seq.), a partnership, limited partnership,
or joint venture organized under Section 907(a) or (c) of that
Act (42 U.S.C. Section 3937(a) or (c)), or a housing corporation
organized under the laws of this state to engage in or finance
low-income and moderate-income housing developments or projects.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
110, Sec. 8, eff. September 1, 2007.
Acts 2007, 80th Leg., R.S., Ch.
237, Sec. 38, eff. September 1, 2007.
Sec. 34.106. INVESTMENTS FOR PUBLIC WELFARE. (a) A state bank
may make investments of a predominantly civic, community, or
public nature, including investments providing housing, services,
or jobs or promoting the welfare of low-income and
moderate-income communities or families.
(b) The bank may make the investments directly or by purchasing
equity securities in an entity primarily engaged in making those
investments. The bank may not make an investment that would
expose the bank to unlimited liability.
(c) A bank may serve as a community partner and make investments
in a community partnership, as those terms are defined by the
Riegle Community Development and Regulatory Improvement Act of
1994 (Pub. L. 103-325).
(d) A bank's aggregate investments under this section, including
loans and commitments for loans, may not exceed an amount equal
to 10 percent of the bank's unimpaired capital and surplus. The
banking commissioner may authorize investments in excess of this
limitation in response to a written application if the banking
commissioner concludes that:
(1) the excess investment is not precluded by other applicable
law; and
(2) the safety and soundness of the requesting bank would not be
adversely affected.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Amended by Acts 2001, 77th Leg., ch. 412, Sec. 2.13, eff. Sept.
1, 2001.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
110, Sec. 9, eff. September 1, 2007.
Sec. 34.107. ENGAGING IN COMMERCE PROHIBITED. (a) A state bank
may not buy, sell, or otherwise deal in goods in trade or
commerce or own or operate a business not part of the business of
banking except:
(1) as necessary to avoid or minimize a loss on a loan or
investment previously made in good faith; or
(2) as otherwise provided by this subtitle or rules adopted
under this subtitle.
(b) Engaging in an approved activity, directly or through a
subsidiary, that is a financial activity or incidental or
complementary to a financial activity, whether as principal or
agent, is not considered to be engaging in commerce.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Amended by Acts 2001, 77th Leg., ch. 528, Sec. 11, eff. Sept. 1,
2001.
SUBCHAPTER C. LOANS
Sec. 34.201. LENDING LIMITS. (a) Without the prior written
approval of the banking commissioner, the total loans and
extensions of credit by a state bank to a person outstanding at
one time may not exceed an amount equal to 25 percent of the
bank's unimpaired capital and surplus. This limitation does not
apply to:
(1) liability as endorser or guarantor of commercial or business
paper discounted by or assigned to the bank by its owner who has
acquired it in the ordinary course of business;
(2) indebtedness evidenced by bankers' acceptances as described
by 12 U.S.C. Section 372 and issued by other banks;
(3) indebtedness secured by a bill of lading, warehouse receipt,
or similar document transferring or securing title to readily
marketable goods, except that:
(A) the goods must be insured if it is customary to insure those
goods; and
(B) the aggregate indebtedness of a person under this
subdivision may not exceed an amount equal to 50 percent of the
bank's unimpaired capital and surplus;
(4) indebtedness evidenced by notes or other paper secured by
liens on agricultural products in secure and properly documented
storage in bonded warehouses or elevators if the value of the
collateral is not less than 125 percent of the amount of the
indebtedness and the bank's interest in the collateral is
adequately insured against loss, except that the aggregate
indebtedness of a person under this subdivision may not exceed an
amount equal to 50 percent of the bank's unimpaired capital and
surplus;
(5) indebtedness of another depository institution arising out
of loans with settlement periods of less than one week;
(6) indebtedness arising out of the daily transaction of the
business of a clearinghouse association in this state;
(7) liability under an agreement by a third party to repurchase
from the bank an investment security listed in Section 34.101(d)
to the extent that the agreed repurchase price does not exceed
the original purchase price to the bank or the market value of
the investment security;
(8) the portion of an indebtedness that this state, an agency or
political subdivision of this state, the United States, or an
instrumentality of the United States has unconditionally agreed
to repay, purchase, insure, or guarantee;
(9) indebtedness secured by securities listed in Section
34.101(d) to the extent that the market value of the securities
equals or exceeds the indebtedness;
(10) the portion of an indebtedness that is fully secured by a
segregated deposit account in the lending bank;
(11) loans and extensions of credit arising from the purchase of
negotiable or nonnegotiable installment consumer paper that
carries a full recourse endorsement or unconditional guarantee by
the person transferring the paper if:
(A) the bank's files or the knowledge of its officers of the
financial condition of each maker of the consumer paper is
reasonably adequate; and
(B) an officer of the bank designated for that purpose by the
board certifies in writing that the bank is relying primarily on
the responsibility of each maker for payment of the loans or
extensions of credit and not on a full or partial recourse
endorsement or guarantee by the transferor;
(12) the portion of an indebtedness in excess of the limitation
of this subsection that is fully secured by marketable securities
or bullion with a market value at least equal to the amount of
the overage, as determined by reliable and continuously available
price quotations, except that the exempted indebtedness or
overage of a person under this subdivision may not exceed an
amount equal to 15 percent of the bank's unimpaired capital and
surplus;
(13) indebtedness of an affiliate of the bank if the transaction
with the affiliate is subject to the restrictions and limitations
of 12 U.S.C. Section 371c;
(14) indebtedness of an operating subsidiary of the bank other
than a subsidiary described by Section 34.103(c)(2); and
(15) the portion of the indebtedness of a person secured in good
faith by a purchase money lien taken by the bank in exchange for
the sale of real or personal property owned by the bank if the
sale is in the best interest of the bank.
(b) The finance commission may adopt rules to administer this
section, including rules to:
(1) define or further define terms used by this section;
(2) establish limits, requirements, or exemptions other than
those specified by this section for particular classes or
categories of loans or extensions of credit; and
(3) establish collective lending and investment limits.
(c) The banking commissioner may determine whether a loan or
extension of credit putatively made to a person will be
attributed to another person for purposes of this section.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Amended by Acts 2001, 77th Leg., ch. 528, Sec. 12, eff. Sept. 1,
2001.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
110, Sec. 10, eff. September 1, 2007.
Sec. 34.202. VIOLATION OF LENDING LIMIT. (a) An officer,
director, or employee of a state bank who approves or
participates in the approval of a loan with actual knowledge that
the loan violates Section 34.201 is jointly and severally liable
to the bank for the lesser of the amount by which the loan
exceeded applicable lending limits or the bank's actual loss.
The person remains liable for that amount until the loan and all
prior indebtedness of the borrower to the bank have been fully
repaid.
(b) The bank may initiate a proceeding to collect an amount due
under this section at any time before the fourth anniversary of
the date the borrower defaults on the subject loan or any prior
indebtedness.
(c) A person who is liable for and pays amounts to the bank
under this section is entitled to an assignment of the bank's
claim against the borrower to the extent of the payments.
(d) For purposes of this section, an officer, director, or
employee of a state bank is presumed to know the amount of the
bank's lending limit under Section 34.201(a) and the amount of
the borrower's aggregate outstanding indebtedness to the bank
immediately before a new loan or extension of credit to that
borrower.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
237, Sec. 39, eff. September 1, 2007.
Sec. 34.203. LOAN EXPENSES AND FEES. (a) A bank may require a
borrower to pay all reasonable expenses and fees incurred in
connection with the making, closing, disbursing, extending,
readjusting, or renewing of a loan, regardless of whether those
expenses or fees are paid to third parties. A fee charged by the
bank under this section may not exceed the cost the bank
reasonably expects to incur in connection with the transaction to
which the fee relates. Payment for those expenses may be:
(1) collected by the bank from the borrower and:
(A) retained by the bank; or
(B) paid to a person rendering services for which a charge has
been made; or
(2) paid directly by the borrower to a third party to whom they
are payable.
(b) This section does not authorize the bank to charge its
borrower for payment of fees and expenses to an officer or
director of the bank for services rendered in the person's
capacity as an officer or director.
(c) A bank may charge a penalty for prepayment or late payment.
Only one penalty may be charged by the bank on each past due
payment. Unless otherwise agreed in writing, prepayment of
principal must be applied on the final installment of the note or
other obligation until that installment is fully paid, and
further prepayments must be applied on installments in the
inverse order of their maturity.
(d) Fees and expenses charged and collected as provided by this
section are not considered a part of the interest or compensation
charged by the bank for the use, forbearance, or detention of
money.
(e) To the extent of any conflict between this section and a
provision of Subtitle B, Title 4, the provision of Subtitle B,
Title 4, prevails.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
237, Sec. 40, eff. September 1, 2007.
Sec. 34.204. LEASE FINANCING TRANSACTION. (a) Subject to rules
adopted under this subtitle, a state bank may, directly or
indirectly through an operating subsidiary, provide the
equivalent of a financing transaction by acting as lessor under a
lease for the benefit of a customer.
(b) Without the written approval of the banking commissioner to
continue holding property acquired for leasing purposes under
this subsection, the bank may not hold personal property more
than six months or real property more than two years after the
date of expiration of the original or any extended or renewed
lease period agreed to by the customer for whom the property was
acquired or by a subsequent lessee.
(c) A rental payment received by the bank in a lease financing
transaction under this section is considered to be rent and not
interest or compensation for the use, forbearance, or detention
of money. However, a lease financing transaction is considered to
be a loan or extension of credit for purposes of Sections 34.201
and 34.202.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Amended by Acts 2001, 77th Leg., ch. 528, Sec. 13, eff. Sept. 1,
2001.
SUBCHAPTER D. DEPOSITS
Sec. 34.301. NATURE OF DEPOSIT CONTRACT. (a) A deposit
contract between a bank and an account holder is considered a
contract in writing for all purposes and may be evidenced by one
or more agreements, deposit tickets, signature cards, or notices
as provided by Section 34.302, or by other documentation as
provided by law.
(b) A cause of action for denial of deposit liability on a
deposit contract without a maturity date does not accrue until
the bank has denied liability and given notice of the denial to
the account holder. A bank that provides an account statement or
passbook to the account holder is considered to have denied
liability and given the notice as to any amount not shown on the
statement or passbook.
(c) To the extent provided by Section 4.102(c), Business &
Commerce Code, the laws of this state govern a deposit contract
between a bank and a consumer account holder if the branch or
separate office of the bank that accepts the deposit contract is
located in this state.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Amended by Acts 1999, 76th Leg., ch. 344, Sec. 2.012, eff. Sept.
1, 1999.
Sec. 34.302. AMENDMENT OF DEPOSIT CONTRACT. (a) A bank and its
account holder may amend the deposit contract by agreement or as
permitted by Subsection (b) or other law.
(b) A bank may amend a deposit contract by mailing a written
notice of the amendment to the account holder, separately or as
an enclosure with or part of the account holder's statement of
account or passbook. The notice must include the text and
effective date of the amendment. The bank is required to deliver
the notice to only one of the account holders of a deposit
account that has more than one account holder. The effective date
may not be earlier than the 30th day after the date of mailing
the notice unless the amendment:
(1) is made to comply with a statute or rule that authorizes an
earlier effective date;
(2) does not reduce the interest rate on the account or
otherwise adversely affect the account holder; or
(3) is made for a reason relating to security of an account.
(c) Except for a disclosure required to be made under Section
34.303 or the Truth in Savings Act (12 U.S.C. Section 4301 et
seq.) or other federal law, before renewal of an account a notice
of amendment is not required under Subsection (b) for:
(1) a change in the interest rate on a variable-rate account,
including a money market or negotiable order of withdrawal
account;
(2) a change in a term for a time account with a maturity of one
month or less if the deposit contract authorizes the change in
the term; or
(3) a change contemplated and permitted by the original
contract.
(d) An amendment under Subsection (b) may reduce the rate of
interest or eliminate interest on an account without a maturity
date.
(e) Amendment of a deposit contract made in compliance with this
section is not a violation of the Deceptive Trade
Practices-Consumer Protection Act (Section 17.41 et seq.,
Business & Commerce Code).
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Sec. 34.303. FEES; DISCLOSURES. (a) Except as otherwise
provided by law, a bank may charge an account holder a fee,
service charge, or penalty relating to service or activity of a
deposit account, including a fee for an overdraft, insufficient
fund check, or stop payment order.
(b) Except as otherwise provided by the Truth in Savings Act (12
U.S.C. Section 4301 et seq.) or other federal law, a bank shall
disclose the amount of each fee, charge, or penalty related to an
account or, if the amount of a fee, charge, or penalty cannot be
stated, the method of computing the fee, charge, or penalty. The
disclosure must be made by written notice delivered or mailed to
each customer opening an account not later than the 10th business
day after the date the account is opened. A bank that increases
or adds a new fee, charge, or penalty shall give notice of the
change to each affected account holder in the manner provided by
Section 34.302(b) for notice of an amendment of a deposit
contract.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Sec. 34.304. SECURING DEPOSITS. (a) A state bank may not
create a lien on its assets or secure the repayment of a deposit
except as authorized or required by this section, rules adopted
under this subtitle, or other law.
(b) A state bank may pledge its assets to secure a deposit of:
(1) any state or an agency, political subdivision, or
instrumentality of any state;
(2) the United States or an agency or instrumentality of the
United States;
(3) any federally recognized Indian tribe; or
(4) another entity to the same extent and subject to the same
limitations as may be authorized by the law of this state or of
the United States for any other depository institution doing
business in this state.
(c) This section does not prohibit the pledge of assets to
secure the repayment of money borrowed or the purchase of excess
deposit insurance from a private insurance company.
(d) An act, deed, conveyance, pledge, or contract in violation
of this section is void.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
110, Sec. 11, eff. September 1, 2007.
Sec. 34.305. DEPOSIT ACCOUNT OF MINOR. (a) Except as otherwise
provided by this section, a bank lawfully doing business in this
state may enter into a deposit account with a minor as the sole
and absolute owner of the account and may pay checks and
withdrawals and otherwise act with respect to the account on the
order of the minor. A payment or delivery of rights to a minor
who holds a deposit account evidenced by an acquittance signed by
the minor discharges the bank to the extent of the payment made
or rights delivered.
(b) The disabilities of minority of a minor who is the sole and
absolute owner of the deposit account are removed for the limited
purpose of enabling:
(1) the minor to enter into a depository contract with the bank;
and
(2) the bank to enforce the contract against the minor,
including collection of an overdraft or account fee and
submission of account history to an account reporting agency or
credit reporting bureau.
(c) A parent or legal guardian of a minor may deny the minor's
authority to control, transfer, draft on, or make a withdrawal
from the minor's deposit account by notifying the bank in
writing. On receipt of the notice by the bank, the minor may not
control, transfer, draft on, or make a withdrawal from the
account during minority except with the joinder of a parent or
legal guardian of the minor.
(d) If a minor with a deposit account dies, the acquittance of
the minor's parent or legal guardian discharges the liability of
the bank to the extent of the acquittance, except that the
aggregate discharges under this subsection may not exceed $3,000.
(e) Subsection (a) does not authorize a loan to the minor by the
bank, whether on pledge of the minor's savings account or
otherwise, or bind the minor to repay a loan made except as
provided by Subsection (b) or other law or unless the depository
institution has obtained the express consent and joinder of a
parent or legal guardian of the minor. This subsection does not
apply to an inadvertent extension of credit because of an
overdraft from insufficient funds, a returned check or deposit,
or another shortage in a depository account resulting from normal
banking operations.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Sec. 34.306. TRUST ACCOUNT WITH LIMITED DOCUMENTATION. (a)
Subject to Chapter XI, Probate Code, a bank may accept and
administer a deposit account:
(1) that is opened with the bank by one or more persons
expressly as a trustee for one or more other named persons; and
(2) for which further notice of the existence and terms of a
trust is not given in writing to the bank.
(b) For a deposit account that is opened with a bank by one or
more persons expressly as a trustee for one or more other named
persons under or purporting to be under a written trust
agreement, the trustee may provide the bank with a certificate of
trust to evidence the trust relationship. The certificate must be
an affidavit of the trustee and must include the effective date
of the trust, the name of the trustee, the name of or method for
choosing successor trustees, the name and address of each
beneficiary, the authority granted to the trustee, the
disposition of the account on the death of the trustee or the
survivor of two or more trustees, other information required by
the bank, and an indemnification of the bank. The bank may accept
and administer the account, subject to Chapter XI, Probate Code,
in accordance with the certificate of trust without requiring a
copy of the trust agreement. The bank is not liable for
administering the account as provided by the certificate of
trust, even if the certificate of trust is contrary to the terms
of the trust agreement, unless the bank has actual knowledge of
the terms of the trust agreement.
(c) On the death of the trustee or of the survivor of two or
more trustees, the bank may pay all or part of the withdrawal
value of the account with interest as provided by the certificate
of trust. If the trustee did not deliver a certificate of trust,
the bank's right to treat the account as owned by a trustee
ceases on the death of the trustee. On the death of the trustee
or of the survivor of two or more trustees, the bank, unless the
certificate of trust provides otherwise, shall pay the withdrawal
value of the account with interest in equal shares to the persons
who survived the trustee, are named as beneficiaries in the
certificate of trust, and can be located by the bank from its own
records. If there is not a certificate of trust, payment of the
withdrawal value and interest shall be made as provided by
Chapter XI, Probate Code. Any payment made under this section for
all or part of the withdrawal value and interest discharges any
liability of the bank to the extent of the payment. The bank may
pay all or part of the withdrawal value and interest in the
manner provided by this section, regardless of whether it has
knowledge of a competing claim, unless the bank receives actual
knowledge that payment has been restrained by court order.
(d) This section does not obligate a bank to accept a deposit
account from a trustee who does not furnish a copy of the trust
agreement or to search beyond its own records for the location of
a named beneficiary.
(e) This section does not affect a contractual provision to the
contrary that otherwise complies with the laws of this state.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Sec. 34.307. RIGHT OF SET-OFF. (a) Except as otherwise
provided by the Truth in Lending Act (15 U.S.C. Section 1601 et
seq.) or other federal law, a bank has a right of set-off,
without further agreement or action, against all accounts owned
by a depositor to whom or on whose behalf the bank has made an
advance of money by loan, overdraft, or otherwise if the bank has
previously disclosed this right to the depositor. If the
depositor defaults in the repayment or satisfaction of the
obligation, the bank, without notice to or consent of the
depositor, may set off or cancel on its books all or part of the
accounts owned by the depositor and apply the value of the
accounts in payment of and to the extent of the obligation.
(b) For purposes of this section, a default occurs when an
obligor has failed to make a payment as provided by the terms of
the loan or other credit obligation and a grace period provided
for by the agreement or law has expired. An obligation is not
required to be accelerated or matured for a default to authorize
set-off of the depositor's obligation against the defaulted
payment.
(c) A bank may not exercise its right of set-off under this
section against an account unless the account is due the
depositor in the same capacity as the defaulted credit
obligation. A trust account for which a depositor is trustee,
including a trustee under a certificate of trust delivered under
Section 34.306(b), is not subject to the right of set-off under
this section unless the trust relationship is solely evidenced by
the account card as provided by Chapter XI, Probate Code.
(d) This section does not limit the exercise of another right of
set-off, including a right under contract or common law.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.