HB3804

Regular Session

Relating to the regulation of state banks.

ModeratePlan for compliance

Low Cost

Effective:2025-06-20

Enforcing Agencies

Texas Department of Banking

Compliance Analysis

Key implementation requirements and action items for compliance with this legislation

Implementation Timeline

Effective Date: June 20, 2025 (Immediately effective).
Compliance Deadline: Immediate. Any vote cast using shares acquired via foreclosure/inheritance after June 20, 2025, without prior notice is legally voidable. Any non-cash dividend declared by a supervised bank after this date without approval is a statutory violation.
Agency Rulemaking: The Texas Department of Banking is not explicitly required to create new rules, but the format for the newly required "written notice" under Section 33.005 remains undefined, creating a regulatory gray zone until guidance is issued.

Immediate Action Plan

1. Freeze Non-Cash Dividends: If your bank is under a supervision order, immediately halt any planned stock or property dividend distributions unless you possess a specific written waiver from the Commissioner.
2. Update Foreclosure Workflows: Insert a mandatory "File Regulatory Notice" step in the foreclosure process for any loan secured by state bank stock. Do not attempt to vote these shares without proof of delivery of this notice.
3. Audit Pending M&A: Identify any pending acquisition applications from existing 25% shareholders. Withdraw the full application and utilize the new exemption to expedite the transaction.
4. Draft Template Notice: Legal counsel should draft a formal "Notice of Acquisition" letter template for use in foreclosure/inheritance scenarios to ensure all relevant details (identity, share count, date of acquisition) are conveyed to the Commissioner proactively.

Operational Changes Required

Contracts

Commercial Loan Agreements: Review all security agreements where state bank stock is pledged as collateral. Default remedies must be updated to reflect that the lender cannot exercise voting rights upon foreclosure until a written notice is filed with the Banking Commissioner.
Shareholder Agreements: Buy-sell agreements involving existing controlling shareholders (holding 25%+) can be expedited. The requirement for a full regulatory application for these specific acquirers has been removed.

Hiring/Training

Board of Directors: Directors of banks under supervision must be retrained immediately to understand that the dividend ban now extends to stock and property dividends, not just cash.
Loan Workout Officers: Staff handling foreclosures on pledged securities must be trained to file the regulatory notice immediately upon taking title to bank stock.

Reporting & Record-Keeping

New Filing (Notice of Acquisition): A "Written Notice of Acquisition" is now required for parties acquiring bank stock through foreclosure or inheritance. This must be filed *before* voting the shares.
Corporate Minutes: For banks under supervision, minutes must explicitly document that no dividends of any kind (cash or non-cash) are declared without written regulatory approval.

Fees & Costs

Cost Reduction: Existing controlling shareholders (25%+) acquiring additional shares are now exempt from the application fees associated with Section 33.001.
No New Fees: The bill does not introduce new statutory fees.

Strategic Ambiguities & Considerations

Format of "Written Notice": Section 33.005 requires "written notice" for foreclosure/inheritance acquisitions but fails to prescribe the specific data points required (e.g., bio of holder, percentage held). Until the Department of Banking issues a standardized form, there is a risk that a generic letter may be deemed insufficient by the Commissioner.
Chapter 152 Reference: The bill updates a reference regarding "Deposits" from Chapter 151 to Chapter 152. This implies a reclassification of how certain money service obligations are treated. Banks holding funds related to money transmission or currency exchange should monitor Finance Commission minutes for interpretation of this shift.

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Legislative Timeline

This bill's path through the Texas Legislature

TopicsFinancial Financial--banks Financial--general

Official Analysis

View HRO Analysis View All Bill Documents

BILL ANALYSIS

H.B. 3804

By: Lambert

Pensions, Investments & Financial Services

Committee Report (Unamended)

BACKGROUND AND PURPOSE

The 88th Legislature enacted legislation modernizing the statutes governing banks; however, the Department of Banking, which oversees banks with a state charter, has found that some additional changes are needed to correct drafting errors enacted into law during the 88th Legislative Session. H.B. 3804 seeks to address this issue by clarifying the applicability of an exemption from restrictions on the acquisition of control of a state bank regarding voting securities and to remove a specification on the form of dividends which a bank may not pay to a bank's shareholders during a period of supervision.

CRIMINAL JUSTICE IMPACT

It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.

ANALYSIS

H.B. 3804 amends the Finance Code to revise the exemption from the change of control requirements applicable to the controlling person of a state bank with respect to an acquisition of voting securities in any class or series by the controlling person. The bill, in revising that exemption, clarifies that the state bank to which the controlling person's exemption applies is the state bank for which the applicable controlling person was previously identified as a controlling person in a prior application filed with and approved by the banking commissioner, provided that the person, as specified in current law:

·has from the date of receipt of that approval continuously held power to vote 25 percent or more of any class of voting securities of the state bank; or

·is considered to have from the date of receipt of that approval continuously controlled the state bank under applicable state law.

H.B. 3804, with respect to the prohibition against a bank paying a cash dividend to the bank's shareholders during a period of supervision and without the prior approval of the banking commissioner or the supervisor or as otherwise permitted or restricted by the order of supervision, makes the prohibition applicable to the payment of any dividend rather than only a cash dividend as provided under current law.

EFFECTIVE DATE

On passage, or, if the bill does not receive the necessary vote, September 1, 2025.

House Authors

Rep. Stan LambertRepublican · Primary Author

Senate Sponsor

Sen. Judith ZaffiriniDemocrat · Primary Sponsor

Bill Text(with markup)

H.B. No. 3804

View bill text in multiple formats on Texas Legislature website

Fiscal NoteView Original

	AN ACT
	relating to the regulation of state banks.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
	SECTION 1. Section 31.002(a)(15), Finance Code, is amended
	to read as follows:
	(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 152 [~~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.
	SECTION 2. Section 33.005, Finance Code, is amended to read
	as follows:
	Sec. 33.005. EXEMPTIONS. The following acquisitions are
	exempt from Section 33.001:
	(1) an acquisition of securities in connection with
	the exercise of a security interest or otherwise in full or partial
	satisfaction of a debt previously contracted for in good faith and
	the acquiring person files written notice of acquisition with the
	banking commissioner before the person votes the securities
	acquired;
	(2) unless the banking commissioner provides
	otherwise in writing, an acquisition of voting securities in any
	class or series by a controlling person who[:
	[~~(A)~~] was identified as a controlling person of
	the [~~in a~~] state bank in a prior application filed with and approved
	by the banking commissioner and:[;]
	(A) [~~(B)~~] has from the date of receipt of
	approval under this subchapter continuously held power to vote 25
	percent or more of any class of voting securities of the state bank;
	or
	(B) [~~(C)~~] is considered to have from the date of
	receipt of approval under this subchapter continuously controlled
	the state bank under Section 33.001(b);
	(3) an acquisition or transfer by operation of law,
	will, or intestate succession and the acquiring person files
	written notice of acquisition with the banking commissioner before
	the person votes the securities acquired;
	(4) a transaction subject to Chapter 202 if:
	(A) the acquiring bank holding company currently
	owns and controls a state bank; or
	(B) the post-transaction controlling person is
	identified as the controlling person in a merger or other
	acquisition-related application filed with the banking
	commissioner concurrently with the submission required by Section
	202.001; and
	(5) a transaction exempted by the banking commissioner
	or by rules adopted under this subtitle because the transaction is
	not within the purposes of this subchapter or the regulation of the
	transaction is not necessary or appropriate to achieve the
	objectives of this subchapter.
	SECTION 3. Section 35.106, Finance Code, is amended to read
	as follows:
	Sec. 35.106. AUTHORITY OF SUPERVISOR. During a period of
	supervision, a bank, without the prior approval of the banking
	commissioner or the supervisor or as otherwise permitted or
	restricted by the order of supervision, may not:
	(1) dispose of, sell, transfer, convey, or encumber
	the bank's assets;
	(2) lend or invest the bank's money;
	(3) incur a debt, obligation, or liability;
	(4) pay a [~~cash~~] dividend to the bank's shareholders;
	(5) remove an executive officer or director, change
	the number of executive officers or directors, or have any other
	change in the position of executive officer or director; or
	(6) engage in any other activity determined by the
	banking commissioner to threaten the safety and soundness of the
	bank.
	SECTION 4. This Act takes effect immediately if it receives
	a vote of two-thirds of all the members elected to each house, as
	provided by Section 39, Article III, Texas Constitution. If this
	Act does not receive the vote necessary for immediate effect, this
	Act takes effect September 1, 2025.

LEGISLATIVE BUDGET BOARD
Austin, Texas

FISCAL NOTE, 89TH LEGISLATIVE REGULAR SESSION


April 4, 2025

TO:	Honorable Stan Lambert, Chair, House Committee on Pensions, Investments & Financial Services

FROM:	Jerry McGinty, Director, Legislative Budget Board

IN RE:	HB3804 by Lambert (Relating to the regulation of state banks.), As Introduced

No significant fiscal implication to the State is anticipated.

The Department of Banking is a self-directed, semi-independent agency that is responsible for its costs of operations, prohibited from causing the General Revenue Fund to incur any cost, and not subject to the legislative budgeting process.

Local Government Impact

No significant fiscal implication to units of local government is anticipated.

Source Agencies:

451 Department of Banking

LBB Staff:

JMc, FV, GDZ, KSi

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Frequently Asked Questions

Common questions about HB3804

What does Texas HB3804 do?

HB3804 is effective immediately, altering the operational landscape for Texas state-chartered banks regarding ownership transfer and regulatory supervision. The law prohibits banks under supervision from paying any dividends (closing a loophole for stock/property dividends) and imposes a strict "notice-before-voting" requirement on bank shares acquired via foreclosure or inheritance. Implementation Timeline Effective Date: June 20, 2025 (Immediately effective).

Who authored HB3804?

HB3804 was authored by Texas Representative Stan Lambert during the Regular Session.

When was HB3804 signed into law?

HB3804 was signed into law by Governor Greg Abbott on June 20, 2025.

Which agencies enforce HB3804?

HB3804 is enforced by Texas Department of Banking.

How urgent is compliance with HB3804?

The compliance urgency for HB3804 is rated as "moderate". Businesses and organizations should review the requirements and timeline to ensure timely compliance.

What is the cost impact of HB3804?

The cost impact of HB3804 is estimated as "low". This may vary based on industry and implementation requirements.

What topics does HB3804 address?

HB3804 addresses topics including financial, financial--banks and financial--general.

Legislative data provided by LegiScanLast updated: November 25, 2025

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