Annual report, 2017

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State of Georgia
Department of Banking and Finance
ANNUAL REPORT
For Year Ending December 31, 2017
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5

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 and Registrant Statistics . . . . . . . . . . . . . . . . . . . . . . . .

10

Money Service Businesses Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11

Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12

Fiscal Year Receipts and Disbursements . . . . . . . . . . . . . . . . . . . . . . . . . .

12

Summary of Activities for State-Chartered Financial Institutions and Other Entities . . .

13

Regulated by, Licensed by, or Registered with the Department of Banking and Finance

During 2017

Benefits of the State Charter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14

Message from the
Commissioner

Years of moderate, steady improvement in Georgia's banking industry culminated in a significant milestone in 2017; the first full year without a bank closure in Georgia since the Great Recession. August of 2008 through August of 2016 bookends a dark chapter in which 81 statechartered banks were closed alongside 10 federally-chartered banks. While some banks in the state continue to work through legacy issues from the recession, and the number of state-chartered banks has declined to 145, the industry as a whole is much stronger than it was pre-recession with higher capital positions, far less reliance on concentrations in acquisition, development, and construction lending, and improved risk management. Despite a decline in the total number, state-chartered banks have grown by $19 billion in total assets since year-end 2008, reflecting not just larger size but expanded capacity and capabilities to meet the growing needs of Georgia's economy.

Kevin B. Hagler

Consolidation in the bank portfolio due to merger activity slowed to 5 transactions in 2017 compared to 9 in 2016 and 13 in 2015 - but a backfilling of the industry by de novo banks in Georgia remains conspicuously absent, though conversations with interested groups have notably increased. The Department welcomed FNB South, Alma into the family of state-chartered banks with its conversion from a national bank charter. The Department has the fifth largest banking portfolio in the country measured by total assets under supervision, and regulates 82 percent of all banks headquartered in the state.

The number of state-chartered credit unions remained unchanged from the previous year at 49, but the portfolio grew by $1.3 billion in total assets reflecting solid growth. Merger activity in the credit union portfolio slowed, with just one transaction in 2017 down from four in 2016. The Department welcomed Coosa Valley Credit Union, Rome, to the family of state-chartered credit unions with its conversion from a federal charter.

Non-depository financial institution licenses under the Department's regulatory oversight grew to 17,702 in 2017. Strong demand for mortgage loan originator licenses continues with a year-overyear increase of 20 percent. In fact, the number of mortgage loan originator licenses has nearly doubled in five years, and now stands at 15,561. The Department also continues to see strong growth in the number of mortgage companies licensed in Georgia. The number of licensed money service businesses continues to decline slightly year-over-year driven primarily by a decline in the number of licensed check cashers. In 2017 we saw a slight increase in seller of payment instrument licenses and a slight decline in money transmitter licenses, due in part to fintech companies moving from one license type to the other as their business offerings expand.

Page 1

2017 Annual Report

Message from the
Commissioner
The culmination of the Department's work with the Code Review Task Force, a public/private partnership with the banking industry, its initiation of a similar working group with the credit union industry, and collaborative efforts with representatives of the mortgage industry resulted in the enactment of the Department's housekeeping bill (HB 143, Bruce Williamson of the 115th) for the 2017 legislative session. The bill revised statutory provisions related to the majority of entities regulated by the Department banks, credit unions, trust companies, bank holding companies, money service businesses, and mortgage lenders and brokers as well as certain provisions addressing the Department's general powers. Generally speaking, the revisions focused on modernizing the Code, eliminated antiquated requirements or provisions found in Title 7 to reduce regulatory burden, and provides for greater consumer protection. Of particular interest, the bill authorized the Department to issue stand-alone trust company charters and removed prohibitions against trust companies that are chartered out of state from acting as a fiduciary in this state. In addition, the bill attempted to address long-standing confusion related to the legal lending limit for banks by simplifying the underlying calculation.
Kevin B. Hagler, CEM Commissioner

2017 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, as well as check cashers, sellers of payment instruments, money transmitters, international banking organizations, and bank holding companies 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.

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2017 Annual Report

Financial Institution Supervision
STATE-CHARTERED BANKING STATISTICS
At the end of 2017, the number of Georgia state-chartered banks totaled 145, representing a net decrease of four banks from the previous year. This decrease resulted from five state-chartered banks merging out of existence while one national-chartered bank converted to a state-chartered bank. Despite the decrease in number, total assets for Georgia state-chartered banks increased by roughly $5.0 billion or 1.7 percent to $298.2 billion at the end of 2017. 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 119 bank holding companies were supervised by, or registered with, the Department at the end of 2017, representing a slight decrease from 122 in the previous year. This decline is attributed to the deregistration of three bank holding companies during the 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, 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. A representative office is not considered to be a main office or a branch office. There were 50 representative offices registered in Georgia at the end of 2017.
FOREIGN BANKING ORGANIZATIONS
Four international representative offices were registered with the Department at the end of 2017. The remaining international banking facility licensed by the Department deregistered during the year.

2017 Annual Report

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Financial Institution Supervision
STATE-CHARTERED BANKING STATISTICS
As shown in the table below, Georgia state-chartered bank assets totaled $298.2 billion and ranked fifth in the country at the end of 2017. NOTE: Savings banks are not included in the asset figures below.

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2017 Annual Report

Financial Institution Supervision
State-Chartered Bank Financial Summary

2017 Annual Report

Page 6

Financial Institution Supervision
STATE-CHARTERED CREDIT UNION STATISTICS
The number of Georgia state-chartered credit unions remained unchanged at 49 at the end of 2017, but total assets grew by roughly $1.3 billion or 7.1 percent. A five-year financial performance summary for Georgia state-chartered credit unions can be found on the Page 8 of this Report.

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2017 Annual Report

Financial Institution Supervision
State-Chartered Credit Union Financial Summary

2017 Annual Report

Page 8

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 Ti on

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.

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2017 Annual Report

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 2017, active mortgage licensees and registrants totaled 16,662, representing a net increase of 2,673 or roughly 19.1 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.

2017 Annual Report

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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 2017, the number of money service businesses licensed by the Department totaled 1,040, representing a net decrease of 56 licenses or roughly 5.1 percent from the previous year. The year-over-year decrease is primarily attributable to fewer renewals of check casher licenses, although there was a modest decrease in the number of money transmitter licenses as well.

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2017 Annual Report

Administration
FISCAL YEAR 2017 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.

2017 Annual Report

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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 2017

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2017 Annual Report

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. A recent example: on May 3, 2018, Governor Deal signed House Bill 780 into law, which provides 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.

2017 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

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