This page is intentionally left blank State of Georgia Department of Banking and Finance ANNUAL REPORT For Year Ending December 31, 2018 Brian P. Kemp Governor Kevin B. Hagler, CEM Commissioner Table of Contents Message from the Commissioner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Organizational Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Financial Institution Supervision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 State-Chartered Banking Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 State-Chartered Bank Financial Summary . . . . . . . . . . . . . . . . . . . . . . . . . . 5 State-Chartered Credit Union Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 State-Chartered Credit Union Financial Summary . . . . . . . . . . . . . . . . . . . . . . 7 Examination Districts and Work Areas (Map) . . . . . . . . . . . . . . . . . . . . . . . . 8 Non-Depository Financial Institution Supervision . . . . . . . . . . . . . . . . . . . . . 9 Mortgage Licensee Statistics . . . . . . . . . . . . . . . . . . . . . . . . 9 Money Service Businesses Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Fiscal Year Receipts and Disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Summary of Activities for State-Chartered Financial Institutions and Other Entities . . . 12 Regulated by, Licensed by, or Registered with the Department of Banking and Finance During 2018 Benefits of the State Charter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Message from the Commissioner Georgia's banking environment was strong in 2018 and the Department proudly welcomed Heritage First Bank (Rome), as a result of a conversion, into the family of state-chartered banks. However, consolidation trends in the banking industry continued with several Georgia banks acquiring out-of- state banks while two merged into other Georgia state-chartered banks, three merged into non-Georgia state-chartered banks, and one merged into a national bank. Also, there were two Georgia banks acquired by credit unions. Despite an overall reduction in charters, total bank assets under the Department's supervision increased to a total of $308 billion with Georgia banks operating 2,384 branches in 15 states. The Department ended 2018 with the third largest state-chartered banking portfolio in the country, trailing only New York and California. Georgia's credit unions continued to grow in 2018 with total assets under the Kevin B. Hagler Department's supervision rising to $20 billion. Credit unions did not escape the consolidation trends in the financial industry as mergers led to an overall reduction in charters, even though Georgia state-chartered credit unions acquired four federal credit unions and two banks during the year. Growth in the non-depository portfolio remained strong in 2018 driven primarily by the mortgage industry. Mortgage licenses and registrations totaled 18,875, representing growth of 13% year over year. The number of licensed money service businesses remained steady at 1,040 for the year, but that figure reflects an increase in the number of money transmitters and sellers of payment instruments, with a modest decline in the number of check cashers. In other matters, Hurricane Michael caused an estimated $2.5 billion in agriculture losses in Georgia in October 2018. While the impact to Georgia's financial institutions has not yet been fully realized, the Department is actively coordinating with our federal counterparts to provide relief to banks, credit unions, and their impacted customers. The Department's continued work with the credit union task force, a public/private partnership with the credit union industry, along with collaborative efforts with representatives of the banking and non-depository industries resulted in the enactment of the Department's housekeeping bill (HB 780, Bruce Williamson of the 115th) in the 2018 legislative session. HB 780 modernized statutory provisions related to the majority of entities regulated by the Department banks, credit unions, mortgage lenders and brokers, mortgage loan originators, and money service businesses as well as certain provisions addressing the Department's general powers. Of particular interest, in an effort to provide parity with favorable enactments at the federal level, HB 780 authorized Georgia financial institutions to exercise powers available to their federal counterparts so long as the bank or credit union provides advance notice and the Department offers no objection to the exercise of such power. Kevin B. Hagler, CEM Commissioner Page 1 2018 Annual Report 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. 2018 Annual Report Page 2 Financial Institution Supervision STATE-CHARTERED BANKING STATISTICS At the end of 2018, the number of Georgia state-chartered banks totaled 139, representing a net decrease of six banks from the previous year. This decrease resulted from six state-chartered banks merging out of existence while one national-chartered bank converted to a state-chartered bank and one state-chartered bank voluntarily self-liquidated. Despite the decrease in number, total assets for Georgia state-chartered banks increased by roughly $10 billion to a total of $308 billion at the end of 2018. A five-year financial performance summary for Georgia state-chartered banks can be found on Page 5 of this Report. BANK HOLDING COMPANIES A total of 114 bank holding companies were supervised by, or registered with, the Department at the end of 2018, representing a modest decrease from 119 in the previous year. This decline is attributed to the bank merger activity mentioned above. 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). 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 2018, unchanged from the prior year. FOREIGN BANKING ORGANIZATIONS Four international representative offices were registered with the Department at the end of 2018. This number is unchanged from the prior year. Page 3 2018 Annual Report Financial Institution Supervision STATE-CHARTERED BANKING STATISTICS As shown in the table below, Georgia state-chartered commercial bank assets under supervision increased to third in the country by the end of 2018 (savings banks not included in totals below). The table is sorted by total state charter assets and dollar figures are in millions. 2018 Annual Report Page 4 Financial Institution Supervision State-Chartered Bank Financial Summary Page 5 2018 Annual Report Financial Institution Supervision STATE-CHARTERED CREDIT UNION STATISTICS The number of Georgia state-chartered credit unions declined by two to a total of 47, but credit union assets grew by roughly $1 billion to a total just over $20 billion at the end of 2018. A five-year financial performance summary for Georgia state-chartered credit unions can be found on Page 7 of this Report. 2018 Annual Report Page 6 Financial Institution Supervision State-Chartered Credit Union Financial Summary Page 7 2018 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 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. 2018 Annual Report Page 8 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 2018, active mortgage licensees and registrants totaled 18,875, representing a net increase of 2,213 or roughly 13 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. Page 9 2018 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 2018, the number of money service businesses (MSB) licensed by the Department totaled 1,040, unchanged from the previous year. 2018 Annual Report Page 10 Administration FISCAL YEAR 2018 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 11 2018 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 2018 2018 Annual Report Page 12 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. HB 780 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. Page 13 2018 Annual Report 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