Academic journal article Federal Reserve Bulletin

PlainsCapital Bank Dallas, Texas

Academic journal article Federal Reserve Bulletin

PlainsCapital Bank Dallas, Texas

Article excerpt

Order Approving the Establishment of Branches FRB Order No. 2017-05 (February 24, 2017)

PlainsCapital Bank, a state member bank subsidiary of Hilltop Holdings, Inc. ("Hilltop"), both of Dallas, Texas, has requested the Board's approval under section 9 of the Federal Reserve Act ("FRA") (1) and the Board's Regulation H (2) to establish two branches in Frisco, Texas. (3)

Notice of the proposal, affording interested persons an opportunity to submit comments, has been published in accordance with the Board's Rules of Procedure. (4) The time for submitting comments has expired, and the Board has considered the proposal and the comments received in light of the factors specified in the FRA.

Hilltop is the 13th largest depository organization in Texas with 63 branches throughout Texas, controlling approximately $6.3 billion in deposits, which represent less than 1 percent of the total amount of deposits of insured depository institutions in that state. (5) PlainsCapital Bank operates only in Texas, and the bank's main office is in Dallas, Texas. PlainsCapital Bank's wholly owned nonbank subsidiary, PrimeLending, A PlainsCapital Company ("PrimeLending"), engages in national mortgage lending and has approximately 300 offices in 42 states. (6)

Under section 208.6 of the Board's Regulation H, (7) which implements section 9 of the FRA, the factors that the Board must consider in acting on branch applications include (1) the financial history and condition of the applying bank and the general character of its management; (2) the adequacy of the bank's capital and its future earnings prospects; (3) the convenience and needs of the community to be served by the branch; (4) in the case of branches with deposit-taking capability, the bank's performance under the Community Reinvestment Act ("CRA"); (8) and (5) whether the bank's investment in bank premises in establishing the branch satisfies certain criteria. (9)

The Board has considered the application in light of these factors and the public comment received on the proposal. One commenter objects to the proposal, alleging that PlainsCapital Bank discriminates against African Americans and "redlines" African American neighborhoods, particularly in the Dallas and Houston areas, both in Texas, with respect to its branching, marketing, lending, and community development activities. (10)

Financial, Managerial, and Other Supervisory Considerations

In considering the financial history and condition, earnings prospects, and capital adequacy of PlainsCapital Bank, the Board has reviewed reports of examination, other supervisory information, publicly reported and other financial information, information provided by PlainsCapital Bank, and the comment received on the proposal. PlainsCapital Bank is well capitalized and would remain so upon consummation of the proposal. The asset quality, earnings, and liquidity of PlainsCapital Bank are consistent with approval, and PlainsCapital Bank appears to have adequate resources to absorb the costs of the proposal. In addition, future earnings prospects are considered consistent with approval. The Board also has reviewed PlainsCapital Bank's proposed investment in the branches and concludes that its investment is consistent with regulatory limitations on investment in bank premises. (11)

In considering PlainsCapital Bank's managerial resources, the Board has reviewed the bank's examination record, including assessments of its management, risk-management systems, and operations. The Board also has considered its supervisory experiences with PlainsCapital Bank and the bank's record of compliance with applicable banking laws, including consumer protection and anti-money-laundering laws. PlainsCapital Bank is considered to be well managed. PlainsCapital Bank's directors and senior executive officers have substantial knowledge of and experience in the banking and financial services sectors, and the bank's risk-management program appears consistent with approval. …

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