State National Bank of Texas - PowerPoint

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					                                             Supervisory Information

Regulated Entities                Number of Entities
                                      (as of 6/30/10)

State-Chartered Banks                     318
                                                         The Department conducts
Trust Companies
                                    20 nonexempt         examinations of entities under
                                      25 exempt          its supervision to ensure
Offices of Foreign Bank               9 FBAs             entities operate in a safe and
Agencies                     18 representative offices   sound manner and are in
                                                         compliance with state and
Money Services
                                          127            federal laws.

Prepaid Funeral
Contract Sellers

Perpetual Care

Private Child Support

Check Verification

* Registration requirement only

Federally Insured Depository Institutions Assets Under
           Supervision in Texas $702.7 Billion
                                                                Texas State-Chartered
                                     Out-of-State Federally-
                                                                    $162.0 Billion
                                      Chartered Savings
          Out-of-State Nationally-        $1.0 Billion         (Regulated by the DOB)
             Chartered Banks                   0%                              Texas State-Chartered
               $220.1 Billion
                                                                                Savings Institutions
                                                                                    $7.8 Billion

                                                                               Texas State-Chartered
    Out-of-State State-
     Chartered Banks                                                               Credit Unions
       $36.7 Billion                                                               $22.0 Billion
            5%                                                                          3%

                                                                           Texas Nationally-
                                                                           Chartered Banks
                                                                            $151.3 Billion
      Texas Federally-                                            Texas Federally-
   Chartered Credit Unions                                       Chartered Savings
        $52.7 Billion                                               Institutions
             7%                                                     $49.1 Billion

                                                                               Information as of June 2009 /March 2010

   Bank Failures *
Bank failures in Texas have been

In 2009, 140 banks and thrifts
failed, 5 of which were in Texas.

      • 3 state-chartered banks;
      • 1 national bank; and
      • 1 thrift.

Some of the failures were due to
banking activities outside of

Through July 30, 2010, 108 banks
and thrifts had failed. Only 1
national bank has failed in Texas
in 2010.

*Does not include credit unions.
Problem Texas State-Chartered Bank Projections

70                                                                    Updated Projections
                       Original Projections                               (December 2009)
                            (January 2009)
60                                                              57
                                                       55                        54
                              Actual                                 50
                                             42                                             42
40                                                38



     Aug-06   Aug-07        Aug-08           Aug-09    Jul-10   Aug-10      Aug-11          Aug-12

       Commercial Bank Performance and Condition Ratio
          Comparison (State and Federal Charters)
                                                  Texas        Nation        Texas               Nation
                                                  12/31/2008   12/31/2008    3/31/2010              3/31/2010
Number of Banks                                      594          7,085         580                    6,772
Total Assets ($ in millions)                      $273,498     $12,312,914   $313,355             $12,086,503
% of Unprofitable Institutions                     14.14%        21.85%       11.90%                 18.43%
Net Interest Margin                                 3.82%        3.23%        3.85%                   3.89%
Return on Assets                                    0.82%        0.21%        0.90%                   0.53%
Net Charge-Offs to Loans                            0.50%        1.31%        1.06%                   3.00%
Loss Allowance to Loans                             1.31%        2.28%        2.07%                   3.69%
% CRE to Total Risk-Based Capital                  285.2%        148.6%       218.4%                 123.3%
% C & D Loans to Total RBC                         108.6%        46.4%        68.1%                   31.1%
Noncurrent Assets Plus ORE to Assets                1.14%        1.82%        2.71%                   3.47%
Core Capital (leverage) Ratio                       8.94%        7.42%        9.34%                   8.44%
Equity Capital to Assets                           10.40%        9.45%        10.77%                 10.92%
Tier 1 Risk-Based Capital Ratio                    10.62%        9.75%        12.96%                 11.74%
Total Risk-Based Capital Ratio                     12.67%        12.75%       14.94%                 14.51%
Total Bank Failures and Assistance Transactions       1            18             1                      36
                                                                              Source: FDIC As of 12-31-08 and 3-31-10
                      Implementing HB 2774
                 SDSI Authority and Requirements
•   Statutory Authority: Texas Finance Code, §16.002
•   Requirements:
    Agency budget approved by Finance Commission in 2010 and process on-going for FY 2011.
         • Public hearing on 2011 budget held on July 20th .
    Agency responsible for all direct and indirect costs; no cost to General Revenue Fund.
         • Must pay employee benefits and charges from other state agencies (i.e. Attorney
         • Continue to follow the State Payroll, Travel, Purchasing and Procurement rules and
           standards for all agency expenditures. Submit quarterly financial statements, including
           budget variance analysis, to the respective commission for review and approval.
         • Continue to coordinate with the Facilities Commission for regional office leases and
           other services.
    Funds maintained at Texas Treasury Safekeeping Trust.
    Biennial activity report submitted to Legislature and Governor to include:
         • Any audit performed by the State Auditor;
         • Financial report of previous fiscal year; and
         • Description of all new rules and changes in fees imposed on regulated industries.

                             HB 2774 (continued)

•   Annual report submitted to Governor, House Appropriations, Senate Finance and LBB (First
    report submitted November 2009.):
        Salary of agency personnel and travel expenses, including Commission travel;
        Agency operating plan and annual budget; and
        Detailed report of revenues and expenditures for previous 12 months.

                             Success of SDSI Status

As a result of SDSI status, the agency has:
• Sustained and retained trained and tenured financial examiners. Agency has hired 24
    financial examiners since May 2009.
• Preserved its creditability with federal counterparts.
• Fulfilled its examination priorities while also assisting federal counterparts with their

                                          Turnover Rate
              FY 08                              FY 09                            FY 10 YTD
                             Anticipation of Competitive Salary Adjustments   SDSI Implementation

             11.4%                              8.8%                                5.3%

•    Seen an improvement in the quality of new hires with regard to years of regulatory
     and/or banking experience.
       Of the 24 new hires, 12 have a combined average experience level of over 15 years.

                  Implementing HB 3762
        Updating Prepaid Funeral Contract Regulation
•   All provisions have been implemented.

      Published prepaid funeral brochure.
      Created prepaid funeral informational website and launched on June 1, 2010 :
      Established the Insurance Advisory Counsel.
      Modified plain language contract disclosures.
      Established a financial capacity component for permit holder renewals.
      Published an examination manual, which is available on the website.

                  Possible Legislation for 82nd Session

•   Banking                                          •   Perpetual Care Cemeteries
    • Enhance powers to issue prohibition                • Establish timeframes to install lawn
      orders.                                              crypts.
    • Limit host state authority in our statute to       • Clarify requirements to issue or remove a
      match 12 USC 1828a(j) –currently                     Certificates of Authority.
      preempted to the extent of inconsistency.          • Enhance enforcement powers to include
    • Increase monetary penalties for violation            restitution.
      of a cease and desist order (currently             • Provide authorization for agency to serve
      $500/day).                                           as temporary receiver.
    • Clarify insolvency based on liquidity.
                                                     •   Prepaid Funeral Contract Sellers
                                                         • Revise Guaranty Fund coverage to include
                                                           insurance-funded providers.
                                                         • Clarify meeting requirements of the
                                                           Guaranty Fund Advisory Council.
                                                         • Establish third party provider
                                                         • Enhance enforcement authority against
                                                           unlicensed sellers.

Issues of significance to state bank regulation and the dual banking system:
   Dual banking system was preserved through the Federal Reserve's role as a supervisor of
    state member banks.
   Banks now have de novo interstate branching authority.
   The federal thrift charter preserved; however, the OTS will be merged into the OCC.
   Bank holding companies with $15 billion and under will have permanent grandfathering of
    capital treatment for existing trust-preferred securities.
   The 10% nationwide deposit cap that limits bank acquisitions will now apply to acquisitions
    by federal thrifts.
   State banking commissioners, as well as state insurance and securities regulators, will have
    non-voting representative on the Financial Stability Oversight Council.
   The Federal Reserve will now be responsible for conducting bank-like examinations for
    certain non-bank subsidiaries of bank holding companies. The Fed will be required to
    coordinate with state regulators for subsidiaries that are state-chartered/licensed, and may
    conduct joint and alternating exams with the States.
   Noninterest-bearing transaction accounts will be fully insured by the FDIC effective
    December 31, 2010, but this provision will be repealed effective January 1, 2013.
   Effective July 22, 2011, depository institutions will be permitted to pay interest on demand
   Basic FDIC insurance coverage permanently increased to $250,000 per depositor.
                             Highlights         (continued)

Bureau of Consumer Financial Protection (Title X)
 Bureau created on July 22, 2010.
 The Bureau must propose rules which combine Truth in Lending Act and Real Estate
  Settlement Procedures Act disclosures into a single document.
 The Bureau will be required to coordinate with state regulators in various aspects of its
  responsibilities, including supervision and registration.
 Should the Bureau choose to pursue registration of covered entities, the Bureau will be
  required to coordinate and consult with the states.
 The state-federal balance with regard to national bank preemption has been significantly re-
  balanced with a new requirement that preemption for national banks may only occur on a
  case-by-case basis and according to the Barnett decision's "prevent or significantly
  interfere" standard.
 State AGs will have the authority to enforce the Bureau's rules against national banks.
 Small banks with $10 billion or less in assets are carved out from the Bureau's supervision
  and enforcement, both of which are left to prudential regulators.


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