Post on 18-Jul-2020
House Committee on State Affairs
April 28, 2016
Condition of the Texas State Banking System
Charles G. Cooper Commissioner – Texas Department of Banking
Executive Director – Finance Commission of Texas
Tough But Fair
Ensuring Texas Has a Safe, Sound and Competitive Financial Services System
Profile of Regulated Entities
Regulated Entities Number of Entities
As of December 31, 2015
Total Assets ($ millions)
Commercial Banks 252 246,960
Trust Companies 20 nonexempt 17 exempt 97,453
Foreign Bank Agencies 9 FBAs
17 representative offices 77,941
Money Services Businesses 147 104,133
Prepaid Funeral Contract Sellers 378 3,638
Perpetual Care Cemeteries 245 308
Cemetery Brokers* 9 NA
Private Child Support Enforcement Agencies* 10 NA
Check Verification Entities* 2 NA
Texas Bullion Depository Agent Services* 0 NA
The Department conducts examinations of entities under its supervision to evaluate the safety and soundness and compliance with state and federal laws. Total assets of the regulated entities represented in the table are approximately $530.4 billion.
Eleven Texas state‐chartered banks operate branches in nine other states. (AZ, CA, CO, FL, GA, IL, MI, NM & OK)
* Registration requirement only. Presented by the Texas Department of Banking
3
Assets of Federally Insured Texas Financial Institutions
Source: FDIC Presented by the Texas Department of Banking
Texas State‐Chartered Banks $247.0 Billion
26.1%
Texas State‐Chartered Savings Institutions $13.6 Billion
1.4%
Texas State‐Chartered Credit Unions
$33.9 Billion 3.6%
Texas Nationally‐Chartered Banks
$117.4 Billion 12.4%
Texas Federally‐Chartered Savings Institutions
$73.7 Billion 7.8%
Texas Federally‐Chartered Credit Unions
$55.3 Billion 5.8%
Out‐of‐State State‐Chartered Banks
$57.3 Billion 6.1%
Out‐of‐State Nationally Chartered Banks
$347.5 Billion 36.7%
Out‐of‐State Federally‐Chartered Savings Institutions
$ 1 Billion <1%
$946.6 Billion As of December 31, 2015
4
Bank Failures ‐ Nationwide
5 Source: FDIC Presented by the Texas Department of Banking
Bank Failures ‐ Nationwide
6 Source: FDIC
Bank Failures in Texas 2008
Franklin Bank, SSB State Savings Houston November
Sanderson State Bank State Bank Sanderson December
2009 Millennium State Bank of Texas State Bank Dallas July
Guaranty Bank Federal Thrift Austin August
Citizens National Bank National Teague October
Madisonville State Bank State Bank Madisonville October
North Houston Bank State Bank Houston October
2010 The La Coste National Bank National La Coste February
2011 First International Bank State Bank Plano September
2013
First National Bank aka The National Bank of El Paso National Edinburg September
Texas Community Bank, National Association National The Woodlands December
Presented by the Texas Department of Banking Source: FDIC
7
FDIC Problem Banks Nationwide
# of
Problem
Ban
ks
The FDIC defines problem banks as any financial institution with a composite rating of “4” or “5”.
900
884800 813
700 702
600
651500
400
300 467
252200
100 291
0
1832008 2009 2010 2011 2012 2013 2014 2015
Years
As of December 31, 2015
Source: FDIC 8
Department Problem Banks The DOB defines problem banks as any financial institution with a composite rating of “3”, “4” or “5”.
Historical State‐Chartered Problem Banks Data
Num
ber o
f Problem
Ban
ks
60
50
40
30
20
10
0
14
21
42
56 58
51
41
24
9 7 8
Aug‐07 Aug‐08 Aug‐09 Aug‐10 Nov‐10 Aug‐11 Aug‐12 Aug‐13 Aug‐14 Aug‐15 Mar‐16
Source: Texas Department of Banking 9
Bank Performance and Condition Ratios
Texas Nation
12/31/2015 12/31/2015
Number of Banks 480 6,182
Total Assets ($ in millions) $451,713 $15,967,923
% of Unprofitable Institutions 2.71% 4.61%
Net Interest Margin 3.58% 3.07%
Return on Assets 1.12% 1.04%
Return on Equity 10.16% 9.31%
Net Charge‐Offs to Loans 0.31% 0.44%
Loss Allowance to Loans 1.31% 1.34%
Efficiency Ratio 63.27% 59.91%
Equity Capital to Assets 11.02% 11.24%
Total Risk‐Based Capital Ratio 14.62% 14.21%
Earnings Coverage of Net Loan Charge‐Offs (x) 8.98 7.22
10Source: FDIC
In 1985, there were more than 18,000 active bank charters in the United States. Since then, the US has seen a 65% decrease in the number of active bank charters. Despite this rapid consolidation, the state charter remains strong. Of the 6,127 banks in operation as of April 2016, 4,748 (77%) hold a state charter.
Source: FDIC and CSBS
77% State Chartered
16% OCC Banks
7% OCC Thrifts
11
U.S. Bank Charters by Authority
Challenges for Banks
1. Increasing federal regulatory burden stemming from the financial crisis, i.e. Dodd‐Frank, etc.
2. Cyber crimes. 3. Economic impact of the Texas oil and gas industry.
• Only 7% of state banks have a significant activity in oil and gas loans. • Ancillary industries could be affected by decreased investments in the oil industry.
4. Narrowing net interest margin in a low rate environment. 5. Revenue diversification through noninterest income sources.
Due to these challenges, we have seen an increased number of bank consolidations.
Presented by the Texas Department of Banking 12
7,658 All U.S. Banks As of December 31, 2010
1,531 less
6,127 All U.S. Banks As of April 14, 2016
Presented by the Texas Department of Banking Source: FDIC
13
615 All Texas Banks As of December 31, 2010
139 less
476 All Texas Banks As of April 14, 2016
Presented by the Texas Department of Banking Source: FDIC
14
260
270
300
310
320
330
Changes Over the Years
327
318 314
304
294
283
267
252
$164.6 $162.8 $162.6
$170.4
$205.8
$216.2
$235.4
$247.0
2008 2009 2010 2011 2012 2013 2014 2015
# of Banks Total Assets
$290.0
$270.0
$250.0
# of
Ban
ks
290 $230.0
280 $210.0
$190.0
$170.0
Total A
ssets in Billion
s
$150.0240
15 Source: FDIC
250
Number of De Novo State Bank Charters In Texas Since 2000
18
16
14
12
10
8
6
4
2
0
5
6
3
8
3
6
4
5
17
4
0 0 0 0 0 0
Presented by the Texas Department of Banking Source: Texas Department of Banking Data
16
Commissioned vs. Non-Commissioned
Non-commissioned Examiners
Commissioned Examiners
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
41.9%
53.7% 56.4% 59.2% 64.4% 64.5% 67.0% 63.0%
58.1% 46.3% 43.6% 40.8%
35.6% 35.5% 33.0% 37.0%
FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015
Department Tenure
< 2yrs
2‐ 5 yrs
5 to 10 yrs
10 ‐ 15 yrs
> 15 yrs
21%
19%
23%
22%
16%
As of February 29, 2016
Department Initiatives
Industry leader in Cybersecurity. Hosted first Executive Leadership on Cybersecurity event in the nation.
Recognized nationally on banking and money service business issues.
Regulatory leader in developing supervisory policies, procedures and training, and only state regulator to have formal testing program for commissioning examiners.
Extensive financial literacy outreach and community involvement. Active with: Conference of State Bank Supervisors ‐ CSBS Money Transmitter Regulators Association ‐MTRA
Presented by the Texas Department of Banking 19