Regulated Entities Number of Entities
(as of 6/30/10)
State-Chartered Banks 318
The Department conducts
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
127 federal laws.
Private Child Support
* Registration requirement only
Federally Insured Depository Institutions Assets Under
Supervision in Texas $702.7 Billion
Out-of-State Nationally- $1.0 Billion (Regulated by the DOB)
Chartered Banks 0% Texas State-Chartered
Chartered Banks Credit Unions
$36.7 Billion $22.0 Billion
Texas Federally- Texas Federally-
Chartered Credit Unions Chartered Savings
$52.7 Billion Institutions
7% $49.1 Billion
Information as of June 2009 /March 2010
Bank Failures *
Bank failures in Texas have been
In 2009, 140 banks and thrifts
failed, 5 of which were in Texas.
• 3 state-chartered banks;
• 1 national bank; and
• 1 thrift.
Some of the failures were due to
banking activities outside of
Through July 30, 2010, 108 banks
and thrifts had failed. Only 1
national bank has failed in Texas
*Does not include credit unions.
Problem Texas State-Chartered Bank Projections
70 Updated Projections
Original Projections (December 2009)
Aug-06 Aug-07 Aug-08 Aug-09 Jul-10 Aug-10 Aug-11 Aug-12
Commercial Bank Performance and Condition Ratio
Comparison (State and Federal Charters)
Texas Nation Texas Nation
12/31/2008 12/31/2008 3/31/2010 3/31/2010
Number of Banks 594 7,085 580 6,772
Total Assets ($ 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
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
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
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
• 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
• Clarify meeting requirements of the
Guaranty Fund Advisory Council.
• Establish third party provider
• Enhance enforcement authority against
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.
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
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.