2014 annual report [Dec. 31, 2014]

State of Georgia
Department of Banking & Finance
2014 Annual Report

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State of Georgia
Department of Banking and Finance
ANNUAL REPORT
For Year Ending December 31, 2014
Nathan Deal 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 . . . . . . . . . . . . . . . . . . . . . . . . .

7

State-Chartered Credit Union Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . .

8

State-Chartered Credit Union Financial Summary. . . . . . . . . . . . . . . . . . . . . .

9

Examination Districts and Work Areas (Map) . . . . . . . . . . . . . . . . . . . . . . . .

10

Non-Depository Financial Institution Supervision . . . . . . . . . . . . . . . . . . . . . .

11

Mortgage Licensee and Registrant Statistics . . . . . . . . . . . . . . . . . . . . . . . .

11

Money Services Businesses (MSB) 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 2014

Message from the
Commissioner

Georgia's economy continued to grow and improve in 2014, which had a strong positive effect on the industries the Department regulates. Collectively, state chartered banks showed significant improvement across essentially all key measures as problem assets continued to decline, resulting in improved earnings and rising capital levels. Bank charter consolidation accelerated in 2014 as the number of state chartered banks declined from 182 to 174; the product of one closure and seven mergers as banks seek economies of scale and liquidity for shareholders. Despite the consolidations, the total banking assets under Department supervision increased to $273 billion placing Georgia fourth among state regulators and highlighting a trend of fewer but larger, more complex institutions in the state. State chartered credit unions collectively showed modest increases in earnings and total assets in 2014 despite the challenges of an extremely low interest rate environment and soft loan demand - circumstances shared by all financial institutions. Credit union charter consolidation continued in 2014, with key personnel retirements being the primary driver.

Kevin B. Hagler

With the improvement of our regulated entities, the Department was able to accept additional leadership roles at the national level, which will give the Department a better understanding of the systemic issues facing the financial institutions we regulate and the impact those issues have on the broader economy. In May 2014, I joined the Board of the Conference of State Bank Supervisors (CSBS) as a Member at Large. Senior Deputy Commissioner Steve Pleger became the Board Chair of the National Association of State Credit Union Supervisors (NASCUS) in August 2014, and Deputy Commissioner Rod Carnes took on the role of President of the American Association of Residential Mortgage Regulators (AARMR) that same month. The Department has long held membership and leadership roles in CSBS, NASCUS, and AARMR as a means to gain greater perspective on issues that affect the industries we regulate and to give us increased influence with our federal counterparts. With the rapid expansion of federal laws and a new federal agency, the Department felt it was important that we redouble our efforts to raise Georgia's profile, and that of the state system, in Washington, DC.

We have also increased our involvement at home by partnering with the Georgia Bankers Association to form the Code Review Task Force (CRTF). Deputy Commissioner for Legal Affairs Bo Fears leads the Department's efforts in this area and is working alongside a number of banking attorneys and bankers to review and make consensus recommendations for improvements to state statues that directly affect banks chartered by the Department. The CRTF will focus on the statutory provisions contained in Title 7, most of which are primarily enforced by the Department, as well as provisions outside of Title 7 that also impact banks. It is commonly recognized as a best practice that financial institution laws be examined and updated every five years; however, the Financial Institutions Code of Georgia has not been subject to such a thorough review since 1999.

The Department has consistently sought legislative revisions to modernize and streamline Georgia law since 1999, and 2014 was no exception with a number of bills either introduced at the request of the Department or actively supported by the Department. Much of the Department's focus during the 2014 legislative session

Page 1

2014 Annual Report

Message from the
Commissioner
involved our non-depository regulated entities with House Bill 982, which modernized the law related to check cashers, money transmitters, and sellers of payment instruments. Among a host of other changes, the law provided that these money service businesses (MSBs) must apply for licensure and renewal through the Nationwide Multistate Licensing System (NMLS). The Department substantially revised its rules and regulations dealing with MSBs in order to implement these statutory changes. House Bill 750 amended the Georgia Residential Mortgage Act to exempt employees of certain nonprofit corporations who originate mortgage loans and have been determined by the Department to satisfy certain enumerated criteria from having to obtain mortgage loan originator licenses. House Bill 883 corrected a couple of Code section crossreferences contained in the Georgia Merchant Acquirer Limited Purpose Bank Act passed during the 2012 session.
While not as directly involved, the Department was nonetheless highly supportive of House Bill 824 which confirmed and clarified that overdraft fees and other common bank fees are not considered interest for purposes of usury. This law codified the parity orders issued by the Department in 2013 related to overdraft fees. We were also very supportive of House Bill 809 which added the bad-faith assertion of patent infringement to the list of violations of the Georgia Fair Business Practices Act. The bill was introduced as a result of banks and other businesses receiving vague and threatening demand letters alleging patent infringement from out-of-state patent trolls.
As touched on above, our non-depository section was positively impacted by a transition of all MSBs to the NMLS. The Department now has over 11,000 licensees on the NMLS including the mortgage entities that have been on the system since 2009. The NMLS provides both the Department and our regulated entities much greater efficiency during the licensing and license renewal process.
On a final note, the Department reached a significant milestone in 2014 with the approval of Credorax Bank North America, MALPB as the first merchant acquirer limited purpose bank charter in the state and, for that matter, the country. We look forward to working with Credorax and helping foster the payments industry which already plays such a crucial role in Georgia's economy.
Kevin B. Hagler, CEM Commissioner

2014 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, state-chartered credit unions, and state-chartered 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, brokers, processors, and loan originators; check cashers; sellers of payment instruments; money transmitters; international banking organizations; and bank holding companies conducting business in Georgia.
Functionally, the Department reports directly to the State's Chief Financial Officer and the Governor. The Department is headed by a Commissioner who is appointed by the Governor to serve a four-year term. 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. These divisions are headed by Deputy Commissioners.

Page 3

2014 Annual Report

Financial Institution Supervision
STATE-CHARTERED BANKING STATISTICS
As of the end of the year, the number of state-chartered banks totaled 174, representing a net decrease of eight or roughly 4.4% from the previous year. This decrease was the result of one bank being closed by the Department and placed into FDIC receivership and seven banks being merged out of existence. Total state-chartered bank assets under the Department's supervision at year-end was approximately $273 billion. A four-year financial performance summary for state-chartered banks can be found on Page 7 of this Report.

State-Chartered Georgia Banks Taken into Receivership During 2014

Name

Receivership

City

County

Date Transaction Type

Eastside Commercial Bank Conyers Rockdale 7/18/2014 All Deposit, Non-Conforming, Whole Bank P&A / No Loss Sharing

Detailed information about failed banks can be found on the FDIC's website at: http://www.fdic.gov/bank/individual/failed/banklist.html. This webpage contains useful information for the customers and vendors of these banks. This includes information on the acquiring bank (if applicable), how customer accounts and loans are affected, and how vendors can file claims against the receivership.

2014 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 ranked fourth in the country at the end of 2014. NOTE: Savings banks are not included in the asset figures below.
Commercial Bank Assets by State (in thousands)
Ranked by Total Assets per State Charter as of 12/31/2014

State NY CA MA GA IL NC TX AL OH UT DE MO PA IA VA MS TN LA FL AR KY WI MN CO OK MI IN HI NE KS WA NJ SC OR MT MD WV SD ND AZ NM NV RI WY ID CT ME VT AK NH DC

National Charter 122,959,931 232,647,221 1,997,338 8,223,548 141,953,284
1,576,315,782 123,973,390 10,069,701
2,686,125,503 153,951,783 779,300,145 29,690,605 64,959,855 6,694,551 531,637,609 16,170,975 32,286,833 4,767,145 80,310,015 12,348,085 6,097,812 38,355,482 22,661,976 3,102,973 43,480,373 4,179,090 25,946,836 640,346 24,255,823 17,170,043 16,191,681 23,979,591 3,024,825 372,925 615,131 612,713 4,406,611
2,913,889,055 3,313,942 6,860,187 7,192,945 6,767,979
103,082,714 1,512,542
24,346,727 21,272,528
1,388,959 3,312,586
675,812

State Charter 668,378,668 354,831,471 295,059,405 271,304,801 246,595,004 240,822,920 239,579,880 229,686,255 156,643,827 134,391,411 122,721,077 103,947,027
91,346,528 64,457,497 62,716,613 61,364,055 53,768,666 53,291,781 53,254,559 52,071,408 49,107,159 47,915,409 42,714,928 42,585,425 42,220,270 42,012,546 40,456,373 38,015,868 37,054,896 36,955,583 36,311,813 34,844,386 32,324,853 30,684,200 27,210,319 26,958,669 24,172,189 22,709,204 19,133,032 12,734,029
9,015,901 5,778,767 5,544,831 5,380,690 4,446,479 3,295,379 3,105,102 2,606,466 2,198,436 2,147,062 1,440,862

All Bank Charters 791,338,599 587,478,692 297,056,743 279,528,349 388,548,288
1,817,138,702 363,553,270 239,755,956
2,842,769,330 288,343,194 902,021,222 133,637,632 156,306,383 71,152,048 594,354,222 77,535,030 86,055,499 58,058,926 133,564,574 64,419,493 55,204,971 86,270,891 65,376,904 45,688,398 85,700,643 46,191,636 66,403,209 38,656,214 61,310,719 54,125,626 52,503,494 58,823,977 35,349,678 31,057,125 27,825,450 27,571,382 28,578,800
2,936,598,259 22,446,974 19,594,216 16,208,846 12,546,746
108,627,545 6,893,232 4,446,479
27,642,106 24,377,630
3,995,425 5,511,022 2,147,062 2,116,674

Page 5

2014 Annual Report

Financial Institution Supervision
BANK HOLDING COMPANIES
A total of 201 bank holding companies were supervised by or registered with the Department at the end of the year.
TRUST COMPANIES
Trust activities continue to be conducted principally by bank trust departments. There is one state-chartered nondepository trust company in Georgia that is an independent trust company (Reliance Trust Company, Atlanta, Georgia).
REPRESENTATIVE OFFICES OF BANKS AND BANK HOLDING COMPANIES
A representative office is an office established by a bank, a bank holding company, or an agent or subsidiary of either for the purpose of conducting activities other than a banking business, and is not considered a main office or a branch office. As of the end of 2014, there were 49 entities registered with the Department having representative offices operating in Georgia.
FOREIGN BANKING ORGANIZATIONS
The number of foreign banking organizations licensed by or registered with the Department remained unchanged during the year. One international bank agency holds an agency license, but operates as an international representative office only. In addition, one international banking facility continued to be licensed and two international representative offices continued to be registered during the year.

2014 Annual Report

Page 6

Financial Institution Supervision
State-Chartered Bank Financial Summary

(dollar figures in millions)
Number of institutions reporting

12/31/2014 12/31/2013 12/31/2012 12/31/2011

174

182

186

199

AGGREGATE CONDITION AND INCOME DATA
Net income Total assets Earning assets Total loans & leases Other real estate owned Total deposits Equity capital
PERFORMANCE RATIOS (YTD, %)
Yield on earning assets Cost of funding earning assets Net interest margin Noninterest income to avg. earning assets Noninterest expense to avg. earning assets Net charge-offs to loans & leases Credit-loss provision to net charge-offs Net operating income to average assets Retained earnings to average equity Return on assets Return on equity Percent of unprofitable institutions
CONDITION RATIOS (%)
Net loans and leases to assets Loss allowance to:
Loans and leases Noncurrent loans and leases Noncurrent loans & leases to total loans & leases Nonperforming assets to assets Core deposits to total liabilities Equity capital to total assets Core capital (leverage) ratio Total capital to risk-weighted assets

2,466 273,006 247,804 196,981
1,103 216,470
32,303
3.64 0.30 3.34 1.47 3.26 0.34 70.90 0.94 3.68 0.94 7.83 12.64
71.12
1.42 98.13
1.45 1.45 83.63 11.83 9.86 13.00

1,950 255,331 229,595 185,814
1,451 203,963 30,649
3.83 0.34 3.49 1.43 3.63 0.59 70.57 0.77 2.71 0.78 6.35 15.93
71.59
1.62 77.90
2.08 2.09 83.79 12.00 9.98 13.50

2,038 252,690 225,316 179,647
2,044 204,129 30,670
4.08 0.48 3.60 1.50 3.63 1.47 79.90 0.62 6.53 0.80 6.85 25.27
69.77
1.86 68.77
2.71 2.74 84.29 12.14 9.63 14.30

414 256,839 227,862 180,729
2,571 203,067 29,043
4.39 0.75 3.64 1.38 3.59 1.94 80.66 0.12 1.30 0.16 1.45 42.21
68.83
2.18 45.78
4.76 4.35 80.21 11.31 8.97 13.75

Performance information above was obtained from the FDIC's State Banking Performance Summary.
The State Banking Performance Summary provides up to three years' key financial and ratio data for commercial banks and savings institutions in each state.

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2014 Annual Report

Financial Institution Supervision
STATE-CHARTERED CREDIT UNION STATISTICS
There were 53 state-chartered credit unions in Georgia at year-end 2014. During the year, one credit union merged out of existence. A four-year balance sheet and income statement snapshot for state-chartered credit unions can be found on Page 9 of this Report.

2014 Annual Report

Page 8

Financial Institution Supervision
State-Chartered Credit Union Financial Summary

(dollar figures in millions)
ASSETS:
Cash & Equivalents TOTAL INVESTMENTS
TOTAL LOANS (Allowance for Loan & Lease Losses) Land And Building Other Fixed Assets NCUSIF Deposit All Other Assets
TOTAL ASSETS
LIABILITIES & CAPITAL:
TOTAL LIABILITIES TOTAL SHARES & DEPOSITS Regular Reserve Other Reserves Undivided Earnings TOTAL EQUITY TOTAL LIABILITIES, SHARES, & EQUITY

12/31/2014 12/31/2013 12/31/2012 12/31/2011

817 3,817 8,819
80 208
31 118 306
14,054

1,156 4,053 7,912
84 209
30 116 264
13,660

1,190 3,943 7,395
87 203
29 110 205
13,003

1,122 3,882 7,023
92 207
32 103 202
12,500

218 12,244
224 (24) 1,391 1,591 14,054

192 11,990
222 (32) 1,288 1,478 13,660

182 11,448
218 (12) 1,166 1,372 13,003

253 10,954
220 (9)
1,082 1,294 12,500

INCOME & EXPENSE
Loan Income Investment Income Other Income Total Employee Compensation & Benefits Temporary Corporate CU Stabilization
Expense & NCUSIF Premiums Total Other Operating Expenses Non-operating Income & (Expense) Provision for Loan/Lease Losses Cost of Funds

384

383

390

402

47

39

41

51

187

175

161

138

210

192

180

169

-

9

10

26

208

195

185

239

1

2

(2)

2

41

44

52

58

57

64

80

106

NET INCOME (LOSS) EXCLUDING STABILIZATION

EXPENSE & NCUSIF PREMIUM

103

105

95

20

Net Income (Loss)

103

96

85

(6)

Total Credit Unions Reporting

53

54

54

60

Performance Data above was generated using the NCUA's Financial Performance Report (FPR) System.

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2014 Annual Report

Financial Institution Supervision
Examination Districts and Work Areas

DISTRICT
Main Office 1 - Northwest 2 - Northeast/Central 4 - Southeast 5 - Southwest

LOCATION
Atlanta Woodstock Loganville Dublin Tifton

Main Office Location District Field Office Locations

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.

2014 Annual Report

Page 10

Non-Depository Financial Institution Supervision
MORTGAGE LICENSEE AND REGISTRANT STATISTICS
Article 13 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 2014, active mortgage licensees and registrants totaled 10,108, representing a net increase of 808 or roughly 9% from the previous year. The increase year over year continues to be largely due to continued licensing of mortgage loan originators.

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2014 Annual Report

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 Title 7 of the O.C.G.A.
On April 29, 2014, Governor Deal signed House Bill 982 into law. This law, which became effective July 1, 2014, modernized and revised Articles 4 and 4A of Title 7 of the O.C.G.A.. Among a host of other changes was a provision that money service businesses (MSBs) apply for licensure and renewal through the Nationwide Multistate Licensing System (NMLS). As a result, beginning November 1, 2014, the Department began using the NMLS to manage its MSB licensees.

2014 Annual Report

Page 12

Administration
FISCAL YEAR 2014 RECEIPTS AND DISBURSEMENTS

NOTE: Revenues collected are remitted to the Office of the State Treasurer. The level of expenditures is subject to the state budgetary process.

Page 13

2014 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 2014

FINANCIAL INSTITUTION, REGISTRANT, OR LICENSEE
BANKS
MERCHANT ACQUIRER LIMITED PURPOSE BANKS (MALPBs)
TRUST COMPANIES
CREDIT UNIONS
BANK HOLDING COMPANIES (Supervised and/or Registered)
CHECK SELLERS
MONEY TRANSMITTERS
CHECK CASHERS
INTERNATIONAL BANK AGENCIES INTERNATIONAL BANKING FACILITIES INTERNATIONAL BANK REPRESENTATIVE OFFICES
REPRESENTATIVE OFFICES
MORTGAGE BROKERS, LENDERS, REGISTRANTS AND ORIGINATORS

Totals 12/31/2013
182 0 1 54
207 36 76 1,012 1 1
2 57
9,300

Opened Registered Licensed
0

Converted 0

0

0

0

0

0

0

3

0

6

0

16

0

129

0

0

0

0

0

0

0

12

0

3,672

0

Merged (7)

Closed Liquidated Deregistered

Totals 12/31/2014

(1)

174

0

0

0

0

0

1

(1)

0

53

(6)

(3)

201

0

0

42

0

(3)

89

0

(94)

1,047

0

0

1

0

0

1

0

0

2

0

(20)

49

0

(2,864)

10,108

2014 Annual Report

Page 14

Our Mission is to promote safe, sound, competitive financial services in Georgia through innovative, responsive regulation and supervision.
Our Vision is to be the best financial services industry regulator in the country Progressive. Proactive. Service-Oriented.

2990 Brandywine Road, Suite 200 Atlanta, Georgia 30341-5565
Phone: (770) 986-1633 Toll-free: (888) 986-1633 Email: dbfpress@dbf.state.ga.us

GEORGIA DEPARTMENT OF BANKING AND FINANCE
Visit us on the web at: http://dbf.georgia.gov