2023 Texas Statutes › Finance Code › Title 3 - Financial Institutions and Businesses › Subtitle A - Banks › Chapter 31 - General Provisions › Subchapter A. General Provisions › Section 31.002. Definitions

Sec. 31.002.  DEFINITIONS.  (a)  In this subtitle:
(1)  "Affiliate" means a company that directly or indirectly controls, is controlled by, or is under common control with a bank or other company.
(2)  "Bank" means a state or national bank.  If the context requires, the term includes a bank as defined by Section 201.002(a)(4) that is organized under the laws of another state or country.
(3)  "Bank holding company" has the meaning assigned by the Bank Holding Company Act of 1956 (12 U.S.C. Section 1841 et seq.) or a successor to that Act.
(4)  "Banking" means the performance of the exclusive depository institution functions of accepting deposits and discounting loans and the performance of related activities that are not exclusive to banks or other depository institutions, including paying drafts or checks, lending money, and providing related financial services authorized by this subtitle.
(5)  "Banking association" means a state bank that is organized under this subtitle as a corporation, authorized to issue shares of stock, and controlled by its shareholders.
(6)  "Banking commissioner" means the banking commissioner of Texas or a person designated by the banking commissioner and acting under the banking commissioner's direction and authority.
(7)  "Board" means the board of directors of, or a person or group of persons acting in a comparable capacity for, a state bank or other entity.  As the context requires, the term includes the board of managers of a limited banking association.
(8)  "Branch" means a location of a bank, other than the bank's home office, at which the bank engages the public in the business of banking.  The term does not include:
(A)  a drive-in facility located not more than 2,000 feet from the nearest wall of the home office or an approved branch office of the bank;
(B)  a night depository;
(C)  an electronic terminal;
(D)  a deposit or loan production office as described by Section 32.204;
(E)  a state or federally licensed armored car service or other courier service transporting items for deposit or payment, unless:
(i)  the risk of loss of items in the custody of the service is borne by the employing bank; or
(ii)  the items in the custody of the service are considered to be in customer accounts at the employing bank or federally insured through the employing bank;
(F)  a location at which the bank offers exclusively nondepository financial products or services to the public, including financial, investment, or economic advisory services;
(G)  a location that combines permissible non-branch functions or facilities; or
(H)  another office or facility as provided by this subtitle or a rule adopted under this subtitle.
(9)  "Capital" means:
(A)  the sum of:
(i)  the par value of all shares of the state bank having a par value that have been issued;
(ii)  the consideration set by the board for all shares of the state bank without par value that have been issued, except a part of that consideration that:
(a)  has been actually received;
(b)  is less than all of that consideration; and
(c)  the board, by resolution adopted not later than the 60th day after the date of issuance of those shares, has allocated to surplus with the prior approval of the banking commissioner; and
(iii)  an amount not included in Subparagraphs (i) and (ii) that has been transferred to capital of the state bank, on the payment of a share dividend or on adoption by the board of a resolution directing that all or part of surplus be transferred to capital, minus each reduction made as permitted by law; less
(B)  all amounts otherwise included in Paragraphs (A)(i) and (ii) that are attributable to the issuance of securities by the state bank and that the banking commissioner determines, after notice and an opportunity for hearing, should be classified as debt rather than equity securities.
(10)  Repealed by Acts 2007, 80th Leg., R.S., Ch. 110, Sec. 14, eff. September 1, 2007.
(10-a) "Commercial activity" means an activity in which a bank holding company, financial holding company, national bank, or national bank financial subsidiary may not engage under United States law.
(11)  "Company" includes a bank, trust company, corporation, partnership, association, business trust, or another trust.
(12)  "Conservator" means the banking commissioner or an agent of the banking commissioner exercising the powers and duties provided by Subchapter B, Chapter 35.
(13)  "Control" means:
(A)  the ownership of or ability or power to vote, directly, acting through one or more other persons, or otherwise indirectly, 25 percent or more of the outstanding shares of a class of voting securities of a bank or other company;
(B)  the ability to control the election of a majority of the board of a bank or other company;
(C)  the power to exercise, directly or indirectly, a controlling influence over the management or policies of the bank or other company as determined by the banking commissioner after notice and an opportunity for hearing; or
(D)  the conditioning of the transfer of 25 percent or more of the outstanding shares of a class of voting securities of a bank or other company on the transfer of 25 percent or more of the outstanding shares of a class of voting securities of another bank or other company.
(14)  "Department" means the Texas Department of Banking.
(15)  "Deposit" means the establishment of a debtor-creditor relationship represented by the agreement of the deposit debtor to act as a holding, paying, or disbursing agent for the deposit creditor.  The term:
(A)  includes:
(i)  an unpaid balance of money that is received by the deposit debtor in the usual course of business in exchange for conditional or unconditional credit to a commercial, checking, savings, or time account of the deposit creditor or the creditor's designee, or that is evidenced by a certificate of deposit or similar instrument, a certified check or draft drawn against a deposit account, or a letter of credit or traveler's check on which the deposit debtor is primarily liable, but excluding an obligation arising under Chapter 151;
(ii)  money or credit given for money received by the deposit debtor in the usual course of business for a special purpose, including money:
(a)  held as escrow money, as security for an obligation due to the deposit debtor or another person, or as security for a loan;
(b)  left with a deposit debtor by a deposit creditor to meet maturing obligations that are not yet due; and
(c)  held by the deposit debtor to meet an acceptance or letter of credit;
(iii)  an outstanding draft, cashier's check, money order, or other officer's check issued by the deposit debtor in the usual course of business for any purpose, including payment for services, dividends, or purchases; and
(iv)  an obligation that the finance commission by rule defines as a deposit liability, except that the term may not include money received for immediate application to reduction of an indebtedness; and
(B)  does not include an obligation that this subtitle or finance commission rule determines not to be a deposit liability.
(16)  "Depository institution" means an entity with the power to accept deposits under applicable law.
(17)  "Discount" means the retention by a lender of advance interest from loan proceeds.  The term does not include the purchase of a promissory note or similar instrument at less than its face value unless the party selling the note is liable on the note as a maker, endorser, or guarantor.
(18)  "Drive-in facility" means a facility offering one or more banking services other than originating or establishing a lending or deposit relationship solely to persons who remain outside the facility.
(19)  "Electronic terminal" means an electronic device, other than a telephone or modem operated by a customer of a depository institution, through which a person may initiate an electronic fund transfer, as defined by 15 U.S.C. Section 1693a(6).  The term includes a point-of-sale terminal, automated teller machine, or cash dispensing machine.
(20)  "Equity capital" means the amount by which the total assets of a state bank exceed the total liabilities of the bank.
(21)  "Equity security" means:
(A)  stock, other than adjustable rate preferred stock and money market (auction rate) preferred stock;
(B)  a certificate of interest or participation in a profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share or participation share, investment contract, voting-trust certificate, or partnership interest;
(C)  a security immediately convertible at the option of the holder without payment of substantial additional consideration into a security described by this subdivision;
(D)  a security carrying a warrant or right to subscribe to or purchase a security described by this subdivision;  and
(E)  a certificate of interest or participation in, temporary or interim certificate for, or receipt for a security described by this subdivision that evidences an existing or contingent equity ownership interest.
(22)  "Federal savings association" means a savings and loan association organized under federal law.
(23)  "Federal savings bank" means a savings bank organized under federal law.
(24)  "Finance commission" means the Finance Commission of Texas.
(25)  "Financial institution" means a bank, savings association, or savings bank maintaining an office, branch, or agency office in this state.
(26), (27) Repealed by Acts 1999, 76th Leg., ch. 344, Sec. 9.002(1), eff. May 29, 1999.
(28)  Repealed by Acts 2007, 80th Leg., R.S., Ch. 237, Sec. 80, eff. September 1, 2007.
(29)  "Hazardous condition" means:
(A)  a refusal by a state bank to permit examination of its books, papers, accounts, records, or affairs by the banking commissioner;
(B)  a circumstance or condition in which an unreasonable risk of substantial loss is threatened to the depositors, creditors, or shareholders of a state bank, including a circumstance or condition in which a state bank:
(i)  has inadequate equity capital, or the adequacy of its equity capital is threatened;
(ii)  has concentrated an excessive or unreasonable portion of its assets in a type or character of loan or investment;
(iii)  violates or refuses to comply with this subtitle, another statute or rule applicable to state banks, or a final and enforceable order of the banking commissioner;
(iv)  is in a condition that renders the continuation of a particular business practice hazardous to the public or to its depositors and creditors;
(v)  conducts business in an unsafe and unsound manner; or
(vi)  is insolvent; or
(C)  a violation by a state bank of a condition of its chartering or an agreement entered into between the bank and the banking commissioner or the department.
(30)  "Home office" means a location registered with the banking commissioner as the bank's home office at which:
(A)  the bank does business with the public;
(B)  the bank keeps its corporate books and records;  and
(C)  at least one officer of the bank maintains an office.
(31)  "Insolvent" means a circumstance or condition in which a state bank:
(A)  is unable or lacks the means to meet its current obligations as they come due in the regular and ordinary course of business, even if the value of its assets exceeds its liabilities;
(B)  has equity capital equal to two percent or less of its assets, as determined under regulatory accounting principles;
(C)  fails to maintain deposit insurance with the Federal Deposit Insurance Corporation or its successor if the banking commissioner determines that deposit insurance is necessary for the safe and sound operation of the bank;
(D)  sells or attempts to sell substantially all of its assets or merges or attempts to merge substantially all of its assets or business with another entity other than as provided by Chapter 32;  or
(E)  attempts to dissolve or liquidate other than as provided by Chapter 36.
(32)  "Investment security" means a marketable obligation evidencing indebtedness of a person in the form of a bond, note, debenture, or commonly known as an investment security, subject to further definition by rule adopted under this subtitle.
(33)  "Limited banking association" means a state bank that is organized under this subtitle as a limited liability company, authorized to issue participation shares, and controlled by its participants.
(34)  "Loans and extensions of credit" means direct or indirect advances of money by a state bank to a person that are conditioned on the obligation of the person to repay the money or that are repayable from specific property pledged by or on behalf of the person.  The term includes a contractual liability of a state bank to advance money to or on behalf of a person, indebtedness evidenced by a lease financing transaction in which the bank is lessor, an overdraft funded by the bank on behalf of a person except for an intraday or daylight overdraft, or another indebtedness not otherwise classified as an investment security.  The term does not include accrued and unpaid interest or discounted interest.
(35)  "Manager" means a person elected to the board of a limited banking association.
(36)  Repealed by Acts 2007, 80th Leg., R.S., Ch. 237, Sec. 80, eff. September 1, 2007.
(37)  "National bank" means a banking association organized under 12 U.S.C. Section 21.
(38)  "Officer" means the presiding officer of the board, the principal executive officer, or another officer appointed by the board of a state bank or other company, or a person or group of persons acting in a comparable capacity for the state bank or other company.
(39)  "Operating subsidiary" means a company for which a state bank has the ownership, ability, or power to vote, directly, acting through one or more other persons, or otherwise indirectly, more than 50 percent of the outstanding shares of each class of voting securities or its equivalent of the company.
(40)  "Participant" means an owner of a participation share in a limited banking association.
(41)  Repealed by Acts 2007, 80th Leg., R.S., Ch. 237, Sec. 80, eff. September 1, 2007.
(42)  "Participation agreement" means the instrument stating the agreement among the participants of a limited banking association relating to the rights and duties of the participants, including:
(A)  allocations of income, loss, deduction, credit, distributions, liquidation rights, redemption rights, and liabilities of participants;
(B)  procedures for elections and voting by participants; and
(C)  any other matter not prohibited by or inconsistent with this subtitle.
(43)  "Participation shares" means the units into which the proprietary interests of a limited banking association are divided or subdivided by means of classes, series, relative rights, or preferences.
(44)  "Principal shareholder" means a person who owns or has the ability or power to vote, directly, acting through one or more other persons, or otherwise indirectly, 10 percent or more of the outstanding shares or participation shares of any class of voting securities of a bank or other company.
(45)  "Regulatory accounting principles" means generally accepted accounting principles as modified by rules adopted under:
(A)  this subtitle;  or
(B)  an applicable federal statute or regulation.
(46)  "Savings association" means a state or federal savings association.
(47)  "Savings bank" means a state or federal savings bank.
(48)  "Shareholder" means an owner of a share in a banking association.  As the context requires, the term includes a participant.
(49)  "Shares" means the units into which the proprietary interests of a banking association are divided or subdivided by means of classes, series, relative rights, or preferences.  As the context requires, the term includes participation shares.
(50)  "State bank" means a banking association or limited banking association organized or reorganized under this subtitle, including an association organized under the laws of this state before September 1, 1995, with the express power to receive and accept deposits and possessing other rights and powers granted by this subtitle expressly or by implication.  The term does not include a savings association, savings bank, or credit union.  If the context requires, the term includes a bank as defined by Section 201.002(a)(4) that is organized under the laws of another state or country.
(51)  "State savings association" means a savings and loan association organized under the laws of this state.
(52)  "State savings bank" means a savings bank organized under or subject to Subtitle C.  If the context requires, the term includes a savings bank organized under the laws of another state.
(53)  "Subsidiary" means a bank or company that is controlled by another person.  The term includes a subsidiary of a subsidiary.
(54)  "Supervisor" means the banking commissioner or an agent of the banking commissioner exercising the powers and duties specified in Subchapter B, Chapter 35.
(55)  "Surplus" means the amount by which the assets of a state bank exceed its liabilities, capital, and undivided profits.
(55-a)  "Third-party service provider" means a person who performs activities relating to the business of banking on behalf of a depository institution for the depository institution's customers or on behalf of another person directly engaged in providing financial services for the person's customers.  The term:
(A)  includes a person who:
(i)  provides data processing services;
(ii)  performs activities in support of the provision of financial services, including lending, transferring funds, fiduciary activities, trading activities, and deposit taking activities;
(iii)  for the purpose of furnishing to third parties reports indicating a person's creditworthiness, credit standing, or credit capacity, regularly engages in the practice of assembling or evaluating, and maintaining, public record information and credit account information from persons who furnish that information regularly and in the ordinary course of business; or
(iv)  provides Internet-related services, including web services, processing electronic bill payments, developing and maintaining mobile applications, system and software development and maintenance, and security monitoring; and
(B)  does not include a provider of an interactive computer service or a general audience Internet or communications platform, except to the extent that the service or platform is specially designed or adapted for the business of banking and activities relating to the business of banking.
(56)  "Unauthorized activity" means an act or practice in this state by a person without a charter, license, permit, registration, or other authority issued or granted by the banking commissioner or other appropriate regulatory authority for which such a charter, license, permit, registration, or other authority is required.
(57)  "Undivided profits" means the part of equity capital of a state bank equal to the balance of its net profits, income, gains, and losses since the date of its formation, minus subsequent distributions to shareholders and transfers to surplus or capital under share dividends or appropriate board resolutions.  The term includes amounts allocated to undivided profits as a result of a merger.
(58)  "Voting security" means a share or other evidence of proprietary interest in a state bank or other company that has as an attribute the right to vote or participate in the election of the board of the state bank or other company, regardless of whether the right is limited to the election of fewer than all of the board members.  The term includes a security that is convertible or exchangeable into a voting security.
(b)  The definitions shall be liberally construed to accomplish the purposes of this subtitle.
(c)  The finance commission by rule may adopt other definitions to accomplish the purposes of this subtitle.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.  Amended by Acts 1999, 76th Leg., ch. 344, Sec. 2.002, 9.002, eff. Sept. 1, 1999;  Acts 2001, 77th Leg., ch. 528, Sec. 1, eff. Sept. 1, 2001.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 110 (H.B. 2007), Sec. 14, eff. September 1, 2007.
Acts 2007, 80th Leg., R.S., Ch. 217 (H.B. 944), Sec. 1, eff. May 25, 2007.
Acts 2007, 80th Leg., R.S., Ch. 237 (H.B. 1962), Sec. 2, eff. September 1, 2007.
Acts 2007, 80th Leg., R.S., Ch. 237 (H.B. 1962), Sec. 80, eff. September 1, 2007.
Acts 2013, 83rd Leg., R.S., Ch. 940 (H.B. 1664), Sec. 2, eff. June 14, 2013.
Acts 2017, 85th Leg., R.S., Ch. 599 (S.B. 1401), Sec. 1, eff. September 1, 2017.
Acts 2019, 86th Leg., R.S., Ch. 652 (S.B. 1823), Sec. 1, eff. September 1, 2019.
Acts 2023, 88th Leg., R.S., Ch. 768 (H.B. 4595), Sec. 9.001, eff. September 1, 2023.
Acts 2023, 88th Leg., R.S., Ch. 989 (H.B. 3574), Sec. 1, eff. June 18, 2023.