National banks have a restriction on dividends paid out based on previous 2 years retained earnings. Does this apply to State banks as well and if so what is the rule cite?

This will depend on what agency is your chartering authority. State banks must look to the Texas Banking Department and state thrifts to the Texas Savings and Loan Department. It gets further complicated if there is a holding company involved, which could then involve either the Federal Reserve or the OTS. We are a state chartered savings bank with a unitary savings and loan holding company. Therefore, we must get approval from the TSLD and the OTS for dividend payments.