FEDERAL DEPOSIT INSURANCE CORPORATION
IN RE: BankDirect, SSB (Proposed New State Savings Bank)
Applications for Federal Deposit Insurance (Bank Insurance Fund) and for Consent to Purchase Assets and Liabilities
ORDER AND BASIS FOR CORPORATION APPROVAL
Pursuant to Sections 5 and 18(c) and other provisions of the Federal Deposit Insurance (FDI) Act, applications have been filed on behalf of BankDirect, SSB ("BankDirect"), Dallas, Dallas County, Texas, a proposed new state savings bank in organization, for deposit insurance with membership in the Bank Insurance Fund, and for consent to purchase assets and assume liabilities of Texas Capital Bank, National Association ("TCB"), Dallas, Dallas County, Texas. Notice of the proposed transaction, in a form approved by the FDIC, has been published pursuant to the FDI Act.
Essentially a corporate reorganization, the proposal would provide a means by which Texas Capital Bancshares, Inc. ("TCBI"), Dallas, Texas, a one-bank holding company presently controlling TCB with aggregate total deposits of $445,465,000 as of March 31, 2000, will spin-off the deposits1 of the internet division of TCB into BankDirect. The proposed transaction would allow TCBI to segregate their Internet banking goals from their traditional banking goals. It would not affect the structure of banking or the concentration of banking resources within the relevant market. Deposit services offered in the market by BankDirect would not differ materially from those presently offered by TCB.
A review of available information, including the Community Reinvestment Act ("CRA") Statements of the proponents discloses no inconsistencies with the purposes of CRA. The proposed institution is expected to meet the credit needs of its entire community, consistent with the safe and sound operation of the institution.
In connection with the applications, the FDIC has also taken into consideration the competitive effects of the proposed transaction; the financial and managerial resources and future prospects of the proponent institution; and the convenience and needs of the community to be served. For purposes of this proposal, the investment in fixed assets is reasonable, capital is adequate, future earnings prospects are favorable, and management is considered satisfactory. Corporate powers to be exercised are consistent with the purposes of the Federal Deposit Insurance Act. No formal objections to the proposal have been filed and no undue risk to the Bank Insurance Fund is apparent. Having found favorably on all factors required to be considered pertinent to each application and having considered all other relevant information, including any reports on the competitive factors furnished by the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Director of the Office of Thrift Supervision, and the Attorney General of the United States, it is the FDIC's judgment that the applications should be and hereby are approved, subject to the following conditions:
1. That beginning paid-in-capital funds of not less that $20,000,000 be provided and that the Tier 1 capital to assets ratio, as defined in Part 325 of the FDIC's Rules and Regulations, be maintained at no less than an 8 percent Tier 1 capital throughout the first three years of operation;
2. That any changes in proposed management or proposed ownership (10 percent or more of stock), including new acquisitions of or subscriptions to 10 percent or more of stock, will render this commitment null and void unless such proposal is approved by the Regional Director of the FDIC's Dallas Regional Office ("Regional Director") prior to opening of the bank;
3. That federal deposit insurance shall not become effective unless and until the applicant has been established as a state savings bank, that it has authority to conduct a banking business, and that its establishment and operation as a bank have been fully approved by the appropriate State authorities;
4. That a sound information security program be developed that identifies, measures, monitors, and manages potential risk exposures as detailed in FIL-68-99, Risk Assessment Tools and Practices for Information System Security, dated July 7, 1999. A comprehensive risk assessment of threats and vulnerabilities surrounding networked and/or Internet systems, including how EDS uses available risk assessment tools and practices should be completed. A copy of the bank's information security program, risk assessment and independent penetration tests run against EDS' systems should be submitted to the Regional Director prior to opening;
5. That the proposed bank make provisions for a domain separate from TCB to assure confidentiality of customer information. Evidence of these provisions should be provided to the Regional Director prior to opening;
6. That a contract be formulated that covers home page hosting for proposed bank by Exodus Communications, Inc. The contract should be reviewed by legal counsel, and cover applicable provisions under Vendors and Outsourcing contained in FIL-14-97, Examination Guidance on the Safety and Soundness Aspects of Electronic Banking Activities, dated February 26, 1997. The security clause of the contract should define the responsibilities of both parties with respect to data confidentiality, system security, web page code changes, and notification procedures in the event of data or system compromise. The contract should be submitted to the Regional Director for review prior to opening;
7. That the bank shall operate within the parameters of the business plan submitted to the FDIC. Furthermore, during the first three years of operations, the bank shall notify the Regional Director of any proposed major deviation or material change from the submitted plan 60 days before consummation of the change;
8. That prior to opening and hiring a chief lending officer, the bank shall submit information regarding the candidate's qualification and receive the Regional Director's non-objection;
9. That the bank will have adequate fidelity coverage;
10. That the bank will obtain an audit of its financial statements annually for at least the first three years after deposit insurance is effective, and furnish a copy of any reports (including any management letters) to the Regional Director within 15 days after their receipt. Furthermore, the bank shall notify the Regional Director within 15 days when a change in its independent auditor occurs; and
11. That if Federal deposit insurance has not become effective within twelve months from the date of this Order, or unless, in the meantime, a request for an extension of time has been approved by the FDIC, the consent granted herein shall expire at the end of the said twelve-month period.
By Order of the Associate Director of the Division of Supervision, acting pursuant to delegated authority for the Board of Directors of the FDIC.
Dated at Washington, D.C., this day of June 2000.
John M. Lane
Division of Supervision
1Estimated to be $180 million.