This page is intentionally left blank State of Georgia Department of Banking and Finance ANNUAL REPORT For Year Ending December 31, 2022 Brian P. Kemp Governor Kevin B. Hagler, CEM Commissioner Table of Contents Message from the Commissioner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Organizational Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Financial Institution Supervision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 State-Chartered Banking Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 State-Chartered Bank Financial Summary . . . . . . . . . . . . . . . . . . . . . . . . . . 6 State-Chartered Credit Union Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 State-Chartered Credit Union Financial Summary . . . . . . . . . . . . . . . . . . . . . . 8 Examination Districts and Work Areas (Map) . . . . . . . . . . . . . . . . . . . . . . . . 9 Non-Depository Financial Institution Supervision . . . . . . . . . . . . . . . . . . . . . 10 Mortgage Licensee Statistics . . . . . . . . . . . . . . . . . . . . . . . . 10 Money Service Businesses Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Installment Lender Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Fiscal Year Receipts and Disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Summary of Activities for State-Chartered Financial Institutions and Other Entities . . . 14 Regulated by, Licensed by, or Registered with the Department of Banking and Finance During 2022 Benefits of the State Charter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Message from the Commissioner The economic impacts of the federal response to control rampant inflation, driven in large part by massive economic stimulus tied to the COVID-19 pandemic response as well as market disruption caused by the pandemic and Russia's invasion of Ukraine, continued to ripple through Georgia's economy and financial system in 2022. The most tangible evidence of the federal government's efforts was the seven interest rate increases by the Federal Reserve during the year, which rapidly raised the federal funds rate by 425 basis points. This precipitous increase in rates caused the securities portfolios of many banks to reflect significant unrealized losses, which negatively impacted a traditional source of liquidity. While most financial institutions still maintained an overabundance of deposits from federal stimulus programs in 2021 tied to COVID-19 relief, depositors' ability to chase higher interest rates and a conscious effort to right-size deposit levels by many institutions caused overall deposit levels to begin decreasing over the course of the year. The interest rate increases also had a pronounced chilling effect on the mortgage market, essentially ending any refinance activity and significantly impacting affordability in the home purchase market. The Department ended the year with 119 banks, a net decline of two, but with total assets growing to $134 billion. This continues a long trend of fewer but larger and more complex banks in the Department's portfolio. We were excited to welcome Moultrie Bank and Trust to the family of statechartered banks as it opened for business in May. The credit union portfolio experienced some consolidation as well, with a decline of five charters. At the end of the year, there were 41 statechartered credit unions with $32 billion in total assets. Despite the interest rate headwinds, we saw surprising growth of 17% in the total number of mortgage licensees. This increase continues a trend of very high growth in the mortgage industry spanning the last several years. Money service business licenses declined by 4% overall, driven by a decline in the number of licensed check cashers. However, we saw nearly 9% growth in entities receiving money transmitter or seller of payment instrument licenses as the fintech industry continued to expand. Several high-profile bankruptcy filings by crypto currency firms, many of which were licensed as a money service business by the Department, occurred during the year. Consumers are reminded of the Department's guidance on virtual currencies first published in April 2014 warning of the risks and suitability of these instruments as investments. Finally, the Department continued its close working relationship with the installment lending industry which came under the purview of the Department in July of 2020 and we saw a slight increase in the number of licensees to 165. Page 1 2022 Annual Report Message from the Commissioner The Department's collaborative efforts with representatives of the banking, credit union, and nondepository industry resulted in the enactment of the Department's housekeeping bill (HB 891, Bruce Williamson of the 115th) for the 2022 legislative session. The bill revised statutory provisions related to the majority of entities regulated by the Department banks, credit unions, trust companies, installment lenders, mortgage lenders and brokers, and money service businesses. Of particular interest, many of the provisions in the bill reflected the Department's on-going critical review of its application processes. As a result of the Department's internal review, the processes related to acquisitions and changes in control involving banks and bank holding companies were significantly modernized and streamlined. In addition, a number of the changes in the bill for money service businesses were related to the Money Transmission Modernization Act ("Act") developed by the Conference of State Bank Supervisors ("CSBS") and the money service business industry. The Act was put out in two phases and the bill incorporated the revisions proposed in the first phase involving individuals or entities that exercise control over money service businesses. The Department intends on pursuing changes related to the second phase of the Act in the 2023 legislative session. Kevin B. Hagler, CEM Commissioner 2022 Annual Report Page 2 Organizational Structure The Department of Banking and Finance (Department) is the state agency that regulates and examines Georgia state-chartered banks, holding companies, credit unions, and trust companies. The Department also has responsibility for the supervision, regulation, and examination of merchant acquirer limited purpose banks (MALPBs) chartered in Georgia. In addition, the Department has regulatory and/or licensing authority over mortgage lenders, mortgage brokers, mortgage processors, and mortgage loan originators, as well as installment lenders, check cashers, sellers of payment instruments, money transmitters, and international banking organizations conducting business in Georgia. The Department is headed by a Commissioner who is appointed by the Governor to serve a fouryear term. Functionally, the Commissioner reports directly to the state's Chief Financial Officer, who reports to the Governor. Commissioner Kevin B. Hagler is assisted by Senior Deputy Commissioner Steve Pleger. The Department's operations are divided along functional lines: Financial Institution Supervision, Non-Depository Financial Institution Supervision, Legal Affairs, and Administration. Each of these divisions is headed by a Deputy Commissioner. Page 3 2022 Annual Report Financial Institution Supervision STATE-CHARTERED BANKING STATISTICS At the end of 2022, the number of Georgia state-chartered banks totaled 119, representing a net decrease of two banks from the previous year. The net decrease resulted from three state-chartered banks being merged out of existence and one new state-chartered bank being opened. A five-year financial performance summary for Georgia state-chartered banks can be found on Page 6 of this Report. BANK HOLDING COMPANIES A total of 100 bank holding companies were supervised by, or registered with, the Department at the end of 2022, representing no net change from 100 in the previous year. TRUST COMPANIES Trust activities continue to be conducted principally by bank trust departments. There is one statechartered non-depository trust company in Georgia that is an independent trust company (Reliance Trust Company, Atlanta). FOREIGN BANKING ORGANIZATIONS Five international representative offices were registered with the Department at the end of 2022. This number remained unchanged from the previous year. 2022 Annual Report Page 4 Financial Institution Supervision STATE-CHARTERED BANKING STATISTICS As shown in the table below, Georgia state-chartered commercial bank assets under supervision remained fifteenth in the country by the end of 2022 (savings banks not included in totals below). The table is sorted by total state charter assets and dollar figures are in millions. Page 5 2022 Annual Report Financial Institution Supervision State-Chartered Bank Financial Summary 2022 Annual Report Page 6 Financial Institution Supervision STATE-CHARTERED CREDIT UNION STATISTICS The number of Georgia state-chartered credit unions decreased by five to a total of 41. Through year-end 2022, state-chartered credit union assets grew by roughly $1.9 billion to roughly $32 billion, as compared to $4 billion in total assets for federally-chartered credit unions in Georgia. There are now three fewer state-chartered credit unions compared to federally-chartered credit unions in Georgia. A five-year financial performance summary for Georgia state-chartered credit unions can be found on Page 8 of this Report. Page 7 2022 Annual Report Financial Institution Supervision State-Chartered Credit Union Financial Summary 2022 Annual Report Page 8 Financial Institution Supervision Examination Districts and Work Areas The above map is primarily for the purpose of exhibiting geographical district boundaries based on current institution assignments. However, some districts may have institutions assigned in other areas of the state due to multibank holding companies and/or district workload and scheduling issues. Note: District 3 was merged into Districts 1 and 2 on December 31, 2010. Page 9 2022 Annual Report Non-Depository Financial Institution Supervision MORTGAGE LICENSEE AND REGISTRANT STATISTICS Article 13 of Chapter 1 of Title 7 of the Official Code of Georgia Annotated (O.C.G.A.) requires all persons who transact business as a residential mortgage lender, broker, processor or loan originator be licensed or registered with the Department, unless they are exempt. At the end of 2022, active mortgage licensees and registrants totaled 37,212, representing a net increase of 5,478 or roughly 17 percent from the previous year. The year-over-year increase is largely due to heightened demand for mortgage loan originator licenses, which reflects the continuation of a longer-term trend. 2022 Annual Report Page 10 Non-Depository Financial Institution Supervision MONEY SERVICE BUSINESSES STATISTICS Unless otherwise exempt, anyone that engages in the cashing of payment instruments for a fee must be licensed by the Department under Article 4A of Title 7 of the O.C.G.A. Unless otherwise exempt, anyone that engages in the sale of payment instruments or money transmission must be licensed by the Department under Article 4 of Chapter 1 of Title 7 of the O.C.G.A. At the end of 2022, the number of money service businesses (MSB) licensed by the Department totaled 1,045, a net decrease of 4 licensees from the previous year. Page 11 2022 Annual Report Non-Depository Financial Institution Supervision INSTALLMENT LENDER STATISTICS Chapter 3 of Title 7 of the O.C.G.A. requires a person that makes consumer installment loans of $3,000 or less to be licensed with the Department unless such person is expressly exempt from licensure. At the end of 2022, the number of installment lenders licensed by the Department totaled 165, a net increase of 4 licensees from the previous year. 2022 Annual Report Page 12 Administration FISCAL YEAR 2022 RECEIPTS AND DISBURSEMENTS NOTE: Revenues of the Department are collected and remitted to the Office of the State Treasurer. The level of the Department's expenditures is subject to the state's budgetary process. Page 13 2022 Annual Report SUMMARY OF ACTIVITIES FOR STATE-CHARTERED FINANCIAL INSTITUTIONS AND OTHER ENTITIES REGULATED BY, LICENSED BY, OR REGISTERED WITH THE DEPARTMENT OF BANKING AND FINANCE DURING 2022 2022 Annual Report Page 14 Benefits of the State Charter $ Local, Responsive, and Timely Decision Making State-chartered financial institutions have access to local decision makers in Georgia who are familiar with their unique marketplace and competitive environment. Decision makers in our Atlanta office and in field offices located around the state are easily reached for timely responses to questions and concerns from state-chartered institutions. $ Local Community and Market Knowledge Examination staff live in the districts where they work and are familiar with the local markets and communities. The Department's culture promotes decision-making by staff that have first-hand knowledge of your financial institution but with quick access for escalation to the Commissioner, when necessary, to ensure responsive and timely action on issues of concern to you. $ Effective Regulation and Supervision The Commissioner believes that all financial institutions deserve right-sized regulation and supervision scaled to their size, complexity, and risk profile. The Department is nationally accredited through the Conference of State Bank Supervisors (CSBS) and the National Association of State Chartered Credit Union Supervisors (NASCUS) to ensure that "best practice" regulation and supervision principles are implemented. Supervisory activities of the Department are conducted in coordination with federal and other state regulators, as applicable, through joint examinations and interstate cooperative agreements to deliver a seamless supervisory experience that minimizes duplication and regulatory burden. $ Efficient Regulation and Supervision Annual regulatory fees and assessments to cover costs of the Department's regulation and supervision activities are typically far less than those charged to comparable federally-chartered financial institutions. $ Powers Comparable or Superior to Federal Charters State-chartered financial institutions frequently enjoy powers that equal or exceed those available to federally-chartered financial institutions. To maintain competitiveness of the state charter, the Department routinely assesses laws and regulations, in coordination with the industry and our federal regulatory peers, to identify opportunities to expand powers or reduce unnecessary regulatory burden. O.C.G.A. 7-1-296 and 7-1-671 provide that a state-chartered bank or credit union may exercise any power available to a similar federally-chartered financial institution so long as the bank or credit union provides advance notice and the Department offers no objection to the exercise of such power. Firm, but fair, right-sized regulation and supervision are guiding principles for promoting safe, sound, competitive financial services in Georgia. Page 15 2022 Annual Report Our Mission is to promote safe, sound, competitive financial services in Georgia through innovative, responsive regulation and supervision. Our Vision is to support vibrant economic growth and prosperity in Georgia. 2990 Brandywine Road, Suite 200 Atlanta, Georgia 30341-5565 Phone: (770) 986-1633 Toll-free: (888) 986-1633 DEPARTMENT OF BANKING AND FINANCE Visit us on the web at: dbf.georgia.gov