Annual report, 2016

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State of Georgia
Department of Banking and Finance
ANNUAL REPORT
For Year Ending December 31, 2016
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 Service Businesses 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 2016

Message from the
Commissioner

Throughout 2016, banking in Georgia continued a trend of growth and

financial improvement as the industry continued to distance itself from the

dark days of the Great Recession. The number of banks in problem status,

those with a CAMELS composite rating of 3, 4, or 5, declined significantly

during the year from 40 to 32, and now represents 21% of the portfolio.

This progress is remarkable considering that 66% of the banking portfolio

was in problem status in 2010. The decline in the number of banks in

problem status actually undersells the improvement in the industry as the

vast majority of banks still in problem status are trending positively and are

much closer to shedding that designation than in previous years. A broad

analysis of banking financials further reveals a positive trend as practically every key ratio - net income, return on average assets, capital levels, the

Kevin B. Hagler

level of non-performing assets, etc. - showed improvement. The lone outlier

was that the net interest margin appeared to remain flat, but there is a general expectation that this

too will begin a positive trend as it is anticipated the Federal Reserve Bank will continue raising

interest rates.

The banking portfolio experienced a net decline of 10 charters during the year; the bulk of which was the result of industry consolidation. Fortunately, there was only one bank closure, The Woodbury Banking Company, Woodbury, during the year. The other departures from the banking landscape were the result of one voluntary dissolution and nine mergers, though three of the mergers would best be described as corporate reorganizations under a common holding company. On a positive note, the Department welcomed AB&T, Albany into the family of state-chartered banks in 2016 with its conversion from a national bank charter. Industry consolidation is certainly not unique to Georgia, and the state remains well banked with 149 state-chartered banks working to serve the needs of our citizens. The Department has the fourth largest banking portfolio in the country as measured by total assets under supervision, and 78% of all banks chartered in the United States are state-chartered.

There were 49 state-chartered credit unions at the end of 2016, a reduction from 53 the previous year. This reduction is entirely due to merger activity, which is a continuing trend in the industry particularly among the state's smallest credit unions. Notwithstanding the consolidation, the Department's credit union portfolio continues to grow in asset size, totaling nearly $18 billion in total assets and serving many of Georgia's citizens. Overall, the credit union industry remains healthy.

At the end of 2016, the Department had regulatory oversight of 15,085 non-depository entities. Growth in the number of mortgage loan originator licenses remains significant year-over-year, with an increase of nearly 23% over 2015. The Department also continues to see an increase in the number of mortgage companies licensed in Georgia. The number of money service businesses declined slightly over the year due to a decline in the number of check casher license renewals; however, the volume of sellers of payment instruments and money transmitters increased modestly during the year.

Page 1

2016 Annual Report

Message from the
Commissioner
The Department's continued work with the Code Review Task Force, a public/private partnership with the banking industry, along with collaborative efforts with representatives of the credit union industry and the non-depository industry resulted in the enactment of the Department's housekeeping bill (HB 811, Bruce Williamson of the 115th) for the 2016 legislative session. The bill revised statutory provisions related to the majority of entities regulated by the Department banks, credit unions, bank holding companies, money service businesses, mortgage loan originators, and merchant acquirer limited purpose banks as well as certain provisions addressing the Department's general powers. Although the majority of the modifications related to eliminating antiquated requirements or provisions found in Title 7, some of the revisions focused on modernizing the Code. Of particular interest, in an effort to try and keep pace with technological innovation, the bill defined virtual currency as well as provided that money transmitters or sellers of payment instruments that transmit virtual currency are governed by the money service businesses laws.
Kevin B. Hagler, CEM Commissioner

2016 Annual Report

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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.

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2016 Annual Report

Financial Institution Supervision
STATE-CHARTERED BANKING STATISTICS
As of the end of the year, the number of state-chartered banks totaled 149, representing a net decrease of 10 or roughly 6.3 percent from the previous year. This decrease was the result of one bank being closed by the Department and placed into FDIC receivership, one bank self-liquidated, nine banks being merged out of existence, and one bank converted from a federal charter to a state charter. Total state-chartered bank assets under the Department's supervision was approximately $293 billion at the end of 2016. A five-year financial performance summary for statechartered banks can be found on Page 7 of this Report.

Detailed information about failed banks can be found on the FDIC's website at: https://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.

2016 Annual Report

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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 2016. NOTE: Savings banks are not included in the asset figures below.

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2016 Annual Report

Financial Institution Supervision
BANK HOLDING COMPANIES
A total of 122 bank holding companies were supervised by or registered with the Department at the end of 2016. The number of bank holding companies declined significantly from the prior year primarily due to a change in the definition of "bank" in O.C.G.A. 7-1-600 through the passage of HB 811 during the 2016 legislative session.
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 to be a main office or a branch office. There were 50 entities registered with the Department as having representative offices operating in Georgia at the end of 2016.
FOREIGN BANKING ORGANIZATIONS
One international banking facility was licensed by the Department and four international representative offices were registered with the Department at the end of 2016.

2016 Annual Report

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Financial Institution Supervision

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2016 Annual Report

Financial Institution Supervision
STATE-CHARTERED CREDIT UNION STATISTICS
There were 49 state-chartered credit unions in Georgia at the end of 2016. During the year, four credit unions merged out of existence. A five-year balance sheet and income statement snapshot for state-chartered credit unions can be found on Page 9 of this Report.

2016 Annual Report

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Financial Institution Supervision
State-Chartered Credit Union Financial Summary

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2016 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.

2016 Annual Report

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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 2016, active mortgage licensees and registrants totaled 13,989, representing a net increase of 2,471 or roughly 21 percent from the previous year. The year-over-year increase is largely due to mortgage loan originator licenses.

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2016 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. At the end of 2016, the number of money service businesses licensed by the Department totaled 1,096, representing a net decrease of 11 licenses or roughly 1 percent from the previous year. The year-over-year decrease is attributable to fewer check casher license renewals.

2016 Annual Report

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Administration
FISCAL YEAR 2016 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.

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2016 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 2016

2016 Annual Report

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Our Mission is to promote safe, sound, competitive financial services in Georgia through innovative, responsive regulation and supervision.
Our Vision is to be a willing and able partner with our regulated entities in order 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 Email: dbfpress@dbf.state.ga.us

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