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the parent’s general unsecured creditors. If a depository institution fails to submit an acceptable capital restoration
plan, it shall be treated as if it is significantly undercapitalized. “Significantly undercapitalized” depository
institutions may be subject to a number of requirements and restrictions, including orders to sell sufficient voting
stock to become “adequately capitalized,” requirements to reduce total assets, and cessation of receipt of deposits
from correspondent banks. “Critically undercapitalized” institutions are subject to the appointment of a receiver or
conservator. Finally, FDICIA requires the various regulatory agencies to set forth certain standards that do not relate
to capital.  Such standards relate to the safety and soundness of operations and management and to asset quality and
executive compensation, and permit regulatory action against a financial institution that does not meet such
standards.
If an insured bank fails to meet its capital guidelines, it may be subject to a variety of other enforcement
remedies, including a prohibition on the taking of brokered deposits and the termination of deposit insurance by the
FDIC.  Bank regulators continue to indicate their desire to raise capital requirements beyond their current levels.
In addition to FDICIA capital standards, Texas-chartered banks must also comply with the capital requirements
imposed by the Texas Banking Department.  Neither the Texas Finance Code nor its regulations specify any
minimum capital-to-assets ratio that must be maintained by a Texas-chartered bank.  Instead, the Texas Banking
Department determines the appropriate ratio on a bank by bank basis, considering factors such as the nature of a
bank’s business, its total revenue, and the bank’s total assets. As of December 31, 2002, all of our Texas-chartered
banks exceeded the minimum ratios applied to them.
Our Support of Our Subsidiary Banks
Under Federal Reserve Board policy, we are expected to commit resources to act as a source of strength to
support each of our subsidiary banks. This support may be required at times when, absent such Federal Reserve
Board policy, we would not otherwise be required to provide it.  In addition, any loans we make to our subsidiary
banks would be subordinate in right of payment to deposits and to other indebtedness of our banks. In the event of a
bank holding company’s bankruptcy, any commitment by the bank holding company to a federal bank regulatory
agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and be subject to a
priority of payment.
Under the National Bank Act, if the capital stock of a national bank is impaired by losses or otherwise, the OCC
is authorized to require the bank’s shareholders to pay the deficiency on a pro-rata basis.  If any shareholder refuses
to pay the pro-rata assessment after three months notice, then the bank’s board of directors must sell an appropriate
amount of the shareholder’s stock at a public auction to make up the deficiency. To the extent necessary, if a
deficiency in capital still exists and the bank refuses to go into liquidation, then a receiver may be appointed to wind
up the bank’s affairs. Additionally, under the Federal Deposit Insurance Act, in the event of a loss suffered or
anticipated by the FDIC (either as a result of the default of a banking subsidiary or related to FDIC assistance
provided to a subsidiary in danger of default) our other banking subsidiaries may be assessed for the FDIC’s loss.
Interstate Banking and Branching Act
Pursuant to the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, or Riegle-Neal Act, a
bank holding company or financial holding company is able to acquire banks in states other than its home state. The
Riegle-Neal Act also authorized banks to merge across state lines, thereby creating interstate branches, beginning