By Shapleigh S.B. No. 1493 77R7827 ATP-D A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to requirements for a financial institution that serves as 1-3 a depository of public funds. 1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-5 SECTION 1. Subtitle Z, Title 3, Finance Code, is amended by 1-6 adding Chapter 278 to read as follows: 1-7 CHAPTER 278. DEPOSIT OF PUBLIC FUNDS 1-8 SUBCHAPTER A. GENERAL PROVISIONS 1-9 Sec. 278.001. DEFINITIONS. In this chapter: 1-10 (1) "Branch" means a location of a financial 1-11 institution, other than the financial institution's home office, at 1-12 which the financial institution does business. 1-13 (2) "County in which the financial institution does 1-14 business" means any county in which: 1-15 (A) the financial institution has a branch or a 1-16 home office; or 1-17 (B) a public agency that deposits funds in the 1-18 financial institution is wholly or partly located. 1-19 (3) "Depository of public funds" means a financial 1-20 institution in which funds are deposited by a public agency, 1-21 including funds deposited under Chapter 105 or 116, Local 1-22 Government Code, and funds deposited by the comptroller under 1-23 Chapter 404, Government Code. 1-24 (4) "Home office" means a location at which: 2-1 (A) the financial institution does business; 2-2 (B) the financial institution keeps its 2-3 corporate books and records; and 2-4 (C) at least one executive officer of the 2-5 financial institution maintains an office. 2-6 (5) "Financial institution" has the meaning assigned 2-7 by Section 201.101. 2-8 (6) "Public agency" means a state agency, political 2-9 subdivision, or publicly owned utility. 2-10 (7) "State agency" means any institution, agency, or 2-11 organ of state government established by the constitution or laws 2-12 of this state, including any department, bureau, board, commission, 2-13 office, or council of this state. 2-14 Sec. 278.002. RESTRICTION ON DEPOSITORY OF PUBLIC FUNDS. A 2-15 financial institution doing business in this state may serve as a 2-16 depository of public funds only if the financial institution: 2-17 (1) files the reports required by Sections 278.011 and 2-18 278.014; 2-19 (2) complies with the advertising regulations under 2-20 Section 278.012; and 2-21 (3) meets the rating requirements under Section 2-22 278.013. 2-23 (Sections 278.003-278.010 reserved for expansion 2-24 SUBCHAPTER B. REQUIREMENTS FOR DEPOSITORIES OF PUBLIC FUNDS 2-25 Sec. 278.011. ANNUAL REPORT OF DEPOSITS AND LOANS. A 2-26 financial institution doing business in this state may serve as a 2-27 depository of public funds only if the financial institution, on or 3-1 before June 30 of each year, submits an itemized report to the 3-2 state agency that regulates the financial institution or, if the 3-3 financial institution is not regulated by an agency of this state, 3-4 to the Texas Department of Banking, covering the preceding calendar 3-5 year and stating, separately for each county in which the financial 3-6 institution does business, the financial institution's: 3-7 (1) deposits; 3-8 (2) loans for home purchases or home improvements; 3-9 (3) commercial loans, as defined by Section 306.001; 3-10 (4) loans for small businesses, as defined by Section 3-11 2006.001, Government Code; and 3-12 (5) loans for the purchase or lease of goods or 3-13 services for personal, family, or household use. 3-14 Sec. 278.012. ADVERTISEMENT OF SMALL BUSINESS LOAN SERVICES. 3-15 A financial institution may serve as a depository of public funds 3-16 only if the financial institution does not display or publish, or 3-17 cause to be displayed or published, except to the extent permitted 3-18 by federal law, a written advertisement in a newspaper that 3-19 contains information regarding small business loan services offered 3-20 by the financial institution unless the advertisement states the 3-21 financial institution's prime lending rate for small businesses 3-22 printed in at least eight-point type. 3-23 Sec. 278.013. RATING OF FINANCIAL INSTITUTION. A financial 3-24 institution that has been assigned a rating below "satisfactory 3-25 record of meeting community credit needs" under 12 U.S.C. Section 3-26 2906 may not serve as a depository of public funds. 3-27 Sec. 278.014. ANNUAL REPORT OF COMMUNITY LOANS. A financial 4-1 institution doing business in this state may serve as a depository 4-2 of public funds only if the financial institution, on or before 4-3 June 30 of each year, submits an itemized report to the state 4-4 agency that regulates the financial institution or, if the 4-5 financial institution is not regulated by an agency of this state, 4-6 to the Texas Department of Banking, covering the five preceding 4-7 calendar years and describing, separately for each year and each 4-8 county in which the financial institution does business: 4-9 (1) the community reinvestment initiatives and special 4-10 loan programs offered by the financial institution, including: 4-11 (A) the funding level for each program; and 4-12 (B) the amount of funds actually disbursed in 4-13 the program; 4-14 (2) the total number and amount of loans provided for 4-15 small businesses, as defined by Section 2006.001, Government Code; 4-16 (3) the total number and amount of loans for small 4-17 businesses, as defined by Section 2006.001, Government Code, 4-18 excluding extensions of credit made pursuant to a credit card 4-19 transaction; 4-20 (4) the total number and amount of loans guaranteed in 4-21 whole or in part by the Small Business Administration; 4-22 (5) the business planning and loan application 4-23 assistance programs offered to customers; 4-24 (6) the financial institution's total number of 4-25 employees, the number of employees who transferred to another 4-26 county or state, and the number of employees who left employment 4-27 with the financial institution; and 5-1 (7) the amount of charitable contributions. 5-2 (Sections 278.015-278.030 reserved for expansion) 5-3 SUBCHAPTER C. WITHDRAWAL OF PUBLIC FUNDS 5-4 Sec. 278.031. WITHDRAWAL WITHOUT PENALTY. The depository 5-5 contract between a financial institution and a public agency must 5-6 authorize the withdrawal without penalty of the public funds on 5-7 deposit if: 5-8 (1) the financial institution fails to make a report 5-9 under Section 278.011 or 278.014; 5-10 (2) the financial institution does not comply with 5-11 Section 278.012; or 5-12 (3) the rating of the financial institution is changed 5-13 to a rating below "satisfactory record of meeting community credit 5-14 needs" under 12 U.S.C. Section 2906. 5-15 Sec. 278.032. MANDATORY WITHDRAWAL. If a financial 5-16 institution is assigned a rating below "satisfactory record of 5-17 meeting community credit needs" under 12 U.S.C. Section 2906, the 5-18 public agency that deposited the funds shall take immediate action 5-19 to transfer all public funds on deposit with the institution to a 5-20 financial institution that complies with this chapter. 5-21 SECTION 2. Section 404.0212, Government Code, is amended by 5-22 adding Subsection (g) to read as follows: 5-23 (g) Not later than August 1 of each year, the comptroller 5-24 shall publish and make available for public inspection a report 5-25 that shows the ratings assigned under 12 U.S.C. Section 2906 to the 5-26 financial institutions that serve as depositories of public funds, 5-27 as defined by Section 278.001, Finance Code, for which the 6-1 comptroller has information of the ratings. 6-2 SECTION 3. (a) A financial institution must submit the first 6-3 reports under Sections 278.011 and 278.014, Finance Code, as added 6-4 by this Act, on or before June 30, 2002. 6-5 (b) Section 278.012, Finance Code, as added by this Act, 6-6 applies only to a written advertisement published or displayed in a 6-7 newspaper on or after September 1, 2001. 6-8 (c) Except as provided by Subsection (d) of this section, 6-9 the state and each state agency, political subdivision, and 6-10 publicly owned utility shall ensure that funds deposited by the 6-11 entity are deposited in compliance with Chapter 278, Finance Code, 6-12 as added by this Act, not later than January 1, 2003. 6-13 (d) A depository contract executed on or after the effective 6-14 date of this Act must comply with Chapter 278, Finance Code, as 6-15 added by this Act. 6-16 SECTION 4. This Act takes effect September 1, 2001.