State of Georgia Department of Banking & Finance 2014 Annual Report This page was intentionally left blank 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. Page 7 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. Page 9 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. Page 11 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