Bill Allen has had a hand in organizing three Texas banks, all of which had federal charters. For his current start-up and the second he has led, Bank Arlington, he has chosen a state charter.
His explanation: "I like dealing with a home-based regulator, and the ability to make larger loans."
Mr. Allen, Bank Arlington's president and chief executive, echoed the sentiments of many of the state's bank organizers these days.
According to the Texas Department of Banking, 15 of the 24 commercial banks organized in Texas since the beginning of 2003 have opted for state charters.
Larger loan limits and familiarity with the state regulators appear to be the primary drivers, but cost is part of the decision as well. State-chartered start-ups pay lower up-front fees, and once they are in business they pay lower examination fees than nationally chartered banks.
The dual banking system, developed in 1864 by President Lincoln, lets bankers choose to operate under the regulatory body they think best fits their business model. National charters are overseen by the Office of the Comptroller of Currency and examined by only the OCC. Texas state-chartered banks are overseen by the Texas Department of Banking and either the Federal Deposit Insurance Corp. or the Federal Reserve, which alternate examining the banks.
Each type of charter has its benefits, regulators said. For nationally chartered banks, the ability to open a bank and do business anywhere and have one set of laws is appealing, said Kevin Mukri, a spokesman for the OCC. Federally chartered banks likewise deal with just one regulator.
The Comptroller's Office regulates 1,788 banks, about 22% of the nation's banks, but oversees more than 50% of bank assets, Mr. Mukri said.
"The vast majority of the banks in the national banking system are community-sized banks, but the OCC also supervises midsized and big banks," he said. "So we have to have an examination force able to examine the full scope of business lines."
The $61 million-asset T Bank of Dallas opened in November 2004. Patrick Adams, T Bank's president, chief executive, and one of its founders, said a national charter seemed to suit the business plan, which involved remote banking from outside the state.
Also, Mr. Adams had been with five other nationally chartered banks since he started his banking career in 1981, and it's what he felt comfortable with.
"I knew the regulators and they knew me," he said.
The prestige of a national charter was another factor, Mr. Adams said.
"It's like, why we buy Polo shirts instead of Target no-name shirts," he said.
Start-up costs for Texas state-chartered banks are 60% less, and scheduled exam fees are 33% to 56% less than the OCC's, depending on asset size. The exam fees are often reduced further if the Texas State Banking Department has met its biennial budget.
Other advantages some banks might see in a Texas charter are legal protections ensuring fair market practices. Texas is the only state with a constitutional amendment ensuring parity with national banks, and it has a superparity law that provides a framework for a state-chartered bank to conduct any of the activities allowed by any other state-chartered or federally chartered institution in the nation.
Then there are the higher loan limits -- an increasingly important consideration for start-ups that have raised lots of cash and want to grow fast.
The OCC limits loans to one borrower to 15% of the bank's total capital, including allowance. In Texas, a state-chartered bank can make loans to one borrower equal to up to 25% of its capital and certified surplus, said Randall James, Texas' banking commissioner.
That difference can mean millions of dollars and a bigger, more established customer base, said Robert Kramer, the president of Westbound Bank in Katy, which is also in formation.
For Westbound, which plans to raise about $20 million in capital before opening, there is a difference of about $2 million in the lending limit between the two. Mr. Kramer spent 30 years at the nationally chartered First Community Bank in Houston until it was sold last year to Wells Fargo & Co.
The Texas Banking Department said that six formerly nationally chartered banks have switched to state charters since the beginning of 2003, but that no state-chartered banks have changed to national charters, unless it was because of an acquisition.
The $177 million-asset Texas Star Bank in Alstyne, part of Van Alstyne Financial Corp., went to a state charter in November 2003 after more than a century with a federal charter.
Randle Jones, Texas Star's president, said the board had come to see the OCC as being large-bank-oriented.
State regulators "know more of the smaller-town economy and what is taking place," Mr. Jones said. "If I need to talk to Randall James I can get him on the phone. Are we going to get that on the OCC side? I doubt it."
