STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

IN RE: NEW RIVER BANK AND )

1ST UNITED BANK, ) CASE NO. 93-6195

)

REPORT OF PUBLIC HEARING

Pursuant to notice, the Division of Administrative Hearings, by its designated Hearing Officer, Joyous D. Parrish, held a public hearing in the above-styled case on December 13, 1993, in Tallahassee and Boca Raton, Florida.

APPEARANCES

For New River Bank: Donald E. Thompson, II

Proskauer Rose Goetz and Mendelsohn

One Boca Place, Suite 340 2155 Glades Road

Boca Raton, Florida 37431

For 1st United Bank: Michael W. Ford

Mershon, Sawyer, Johnston, Dunwody & Cole

Phillips Point East Tower

777 South Flagler Drive, Suite 900 West Palm Beach, Florida 33401

For the Department: Jeffrey D. Jones

Department of Banking and Finance Division of Banking

The Capitol, Suite 1302 Tallahassee, Florida 32399-0350

STATEMENT OF THE ISSUES

The purpose of the public hearing was to review the application to consolidate New River Bank, Oakland Park, Florida, and 1st United Bank, Boca Raton, Florida, in accordance with Florida law.

PRELIMINARY STATEMENT

This case began on September 7, 1993, when the 1st United Bank, Boca Raton, Florida (1st United), filed an application for approval to consolidate with New River Bank, Oakland Park, Florida (New River). The application alleged that the resulting bank would hold status as a State member bank.

In accordance with Rule 3C-9.012, Florida Administrative Code, the Department of Banking and Finance, Office of the Comptroller (Department) intends to issue a final order which will determine whether the proposed consolidation should be approved. In anticipation of the final order, the Department forwarded the matter to the Division of Administrative Hearings to conduct a public hearing. After notice to the public, such hearing was

conducted on December 13, 1993, in Tallahassee and Boca Raton, Florida. A telephone conference line connected the two locations and allowed persons in Boca Raton to participate in the hearing.

Prior to hearing, the parties filed a prehearing stipulation together with exhibits. Such stipulated facts are set forth below. Additionally, 1st United presented the testimony of Warren Orlando, president and CEO of the bank; Peter

1. Cummings, Jr., chairman of the board of New River; Thomas Mecredy, a senior vice president with Alex Sheshunoff & Co. Investment Banking who is an expert in the valuation of bank and bank holding companies and who gave expert testimony regarding the fairness of the proposed consolidation.

   
   

   According to the sign-in sheet, the following individuals attended the public hearing in Boca Raton: Dana Kilborne, senior vice president of 1st United; Shirley G. Cummings, a stockholder; Howard Coates, attorney for New River; D.B. Unwalla, director; E.D. Hittson, stockholder; John Schultz, stockholder; C. Edward Meehan, stockholder; MaryAnn Cassel; James Weck, stockholder; Beverly Watts, officer; Barry Unterbrink, stockholder; Amine Semaan, shareholder; and John Maclean. E. D. Hittson, Amine Semaan, and James Weck made comments which are noted in the findings of fact below.

   
   

   The parties filed a stipulated protective order and made an ore tenus motion to hold portions of the application, identified by the Department as confidential, subject only to inspection by the Hearing Officer, Department, applicants and their counsels. Such motion is granted and all confidential portions of the file will remain sealed.

   
   

   FINDINGS OF FACT

   
   

   1. 1st United Bancorp (Bancorp) is a Florida bank holding company which maintains its principal place of business at 980 North Federal Highway, Boca Raton, Florida.

      
      

   2. 1st United is a Florida chartered bank and is a wholly-owned subsidiary of Bancorp and operates full service banking facilities at seven locations in Palm Beach and Martin Counties.

      
      

   3. New River is a Florida chartered bank which maintains its executive offices at 2901 West Oakland Park Boulevard, Oakland Park, Florida, and operates two banking facilities in Broward County, Florida.

      
      

   4. The Department is the duly designated state agency vested with the responsibility of processing and approving or disapproving a plan of any financial entity to acquire the assets and assume the liabilities of another financial entity pursuant to Section 655.414, Florida Statutes.

      
      

   5. On July 13, 1993, Bancorp and New River entered into a Sale and Purchase Agreement which provides that Bancorp will cause 1st United to purchase substantially all of the assets and to assume substantially all of the liabilities of New River, after which New River will be liquidated and dissolved.

      
      

   6. The agreement noted above was duly adopted by majority vote of the respective Boards of Directors of Bancorp, 1st United and New River.

   7. In addition, the respective Boards of Directors of Bancorp, 1st United and New River duly adopted by majority vote a Plan of Acquisition of Assets and Assumption of Liabilities which summarized pertinent portions of the agreement and which includes all of the terms and conditions required by Section 655.414 (1), Florida Statutes.

      
      

   8. On September 7, 1993, 1st United and New River submitted an application to the Department seeking the Department's approval for the purchase of New River's assets and assumption of its liabilities as set forth in the agreement and as summarized by the plan.

      
      

   9. Submitted with the application were the requisite filing fee and all of the required documents including copies of the agreement, the plan and certified copies of the authorizing resolutions of the respective boards of directors.

      
      

   10. On September 17, 1993, the Department caused notice of the receipt of the application to be published in the Florida Administrative Weekly. This published notice met the requirements of Rule 3C-9.003(1), Florida Administrative Code.

       
       

   11. On September 7, 1993, Warren Orlando, in his capacity as president of 1st United, filed a petition for public hearing and notice of intention to appear on behalf of 1st United.

       
       

   12. On October 27, 1993, the Department referred the matter to the Division of Administrative Hearings for the purpose of conducting a public hearing pursuant to Section 120.60(5), Florida Statutes, and Rule 3C-9.004, Florida Administrative Code.

       
       

   13. Notice that a public hearing would be held on the application on December 13, 1993, was duly published in conformity with Rule 3C-9.005, Florida Administrative Code, in the Fort Lauderdale Sun-Sentinel, Palm Beach Post, and Stuart News, newspapers of general circulation in the communities in which 1st United and New River do business.

       
       

   14. The agreement provides that New River will receive a combination of cash and Bancorp common stock equal to the net asset value, as defined in the plan, of the assets and liabilities of New River being purchased or assumed.

       
       

   15. The agreement further provides that after the closing of the asset acquisition, New River shall cease operations and commence dissolution and liquidation proceedings. Substantially all of the Bancorp common stock and available cash received by New River from Bancorp will be distributed to New River shareholders, other than dissenting shareholders. New River stockholders will receive a pro rata portion of the Bancorp common stock and cash available for distribution.

       
       

   16. After the acquisition of the assets and assumption of liabilities as set forth in the agreement and as summarized in the plan, 1st United will have adequate capital structure in relation to its activities and its deposit liabilities.

       
       

   17. The acquisition of the assets and assumption of liabilities as set forth in the agreement and as summarized in the plan, if consummated, are not contrary to the public interest.

   18. The respective boards of directors of Bancorp and New River requested the opinion of Alex Sheshunoff & Co. Investment Banking with regard to the fairness to the respective shareholders of each corporation, from a financial point of view, of the terms and conditions of the agreement.

       
       

   19. Alex Sheshunoff & Co. Investment Banking is regularly engaged in and is an expert authority in the valuation of bank and bank holding company securities in connection with bank mergers and acquisitions.

       
       

   20. Thomas Mecredy is an expert in the valuation of bank and bank holding companies in connection with bank mergers and acquisitions.

       
       

   21. On December 8, 1993, Alex Sheshunoff & Co. Investment Banking through Thomas Mecredy issued its opinion to the respective Boards of Directors of Bancorp and New River that the terms and conditions of the agreement were fair and equitable to the shareholders of each corporation.

       
       

   22. Pursuant to the agreement, New River's Board of Directors duly adopted a plan of dissolution and complete liquidation for New River. The plan of dissolution provides that after the sale of assets and assumption of liabilities the Board of Directors will reserve a sufficient amount of Bancorp stock and cash for payment of liquidation expenses and payment of liabilities not assumed by 1st United, including contingent liabilities (general reserves).

       
       

   23. In addition to the general reserves, New River will create a special reserve (special reserve) in an amount which it considers sufficient to defend and satisfy certain potential claims which may be asserted against New River by shareholders of New River in conjunction with the organization and initial offering of common stock of New River.

       
       

   24. In determining the amounts necessary to establish the general reserves and special reserve, New River's board of directors consulted with the national law firm of Proskauer Rose Goetz and Mendelsohn with respect to both reserves and the Florida law firm of Shutts & Bowen with respect to the special reserve for advice concerning the potential liability on the part of New River in connection with both known claims and potential claims and the amounts, if any, for which New River could be held liable.

       
       

   25. Shareholder E.D. Hittson noted that the book value of the New River stock is approximately $11.00 per share versus the $4.50 per share value of the 1st United stock. In response, bank officials noted that 1st United has dividend and strong growth potential not available to New River.

       
       

   26. Shareholder James Weck questioned provisions being made to satisfy outstanding lawsuit liabilities, the future location of the facility, and the effect on New River employees. In response, bank officials stated that the potential lawsuit liability is included in the reserve amounts, that no decision has been made as to the future location of the banking facility but that the needs of the service area will be met, and that it is their intention to draw talent from the New River staff.

       
       

   27. Shareholder Amine Semaan questioned whether New River would be represented on the Board of Directors at 1st United, whether minority areas would be a priority for the future location of the facility, and whether another buyer would have paid $10.50 per share. In response, bank officials maintained

       that New River will have one member on the Board of Directors at 1st United, that the needs of the service area will be met, and that no other, more attractive, buyer is available.

       
       

   28. On January 11, 1994, MaryAnn Cassel, a shareholder who reportedly attended the public hearing on December 13, 1993, filed a motion for leave to become a party. Such motion alleged that the movant, a minority shareholder, will be forced to accept Bancorp common stock in exchange for her New River shares or be forced to accept appraisal rights in lieu of her shares.

       
       

   29. Further, movant claimed that the plan is not fair to all parties because the shares of New River have been undervalued.

       
       

   30. Having deemed such motion untimely, and having determined such request does not allege circumstances unknown to movant prior to the December 13, 1993 public hearing, it is denied.

DONE AND ENTERED this 24th day of January, 1994, in Tallahassee, Leon County, Florida.

Joyous D. Parrish Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904)488-9675

Filed with the Clerk of the Division of Administrative Hearings this 24th day of January, 1994.

COPIES FURNISHED:

Honorable Gerald Lewis Comptroller, State of Florida The Capitol, Plaza Level Tallahassee, Florida 32399-0350

William G. Reeves General Counsel Department of Banking

and Finance

Room 1302, The Capitol Tallahassee, Florida 32399-0350

Donald E. Thompson, II Proskauer Rose Goetz and

Mendelsohn

One Boca Place, Suite 340 2155 Glades Road

Boca Raton, Florida 37431

Michael W. Ford

Phillip T. Ridolfo, Jr. Mershon, Sawyer, Johnston,

Dunwody & Cole

Phillips Point East Tower

777 South Flagler Drive, Suite 900 West Palm Beach, Florida 33401

Jeffrey D. Jones

Department of Banking and Finance Division of Banking

The Capitol, Suite 1302 Tallahassee, Florida 32399-0350

David S. Zimble

Zimble Formoso-Murias, P.A. 1401 Brickell Avenue, Suite 730

Miami, Florida 33131

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions to this report. All agencies allow each party at least 10 days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should contact the agency that will issue the final order in this case concerning agency rules on the deadline for filing exceptions to this report. Any exceptions to this report should be filed with the agency that will issue the final order in this case.

================================================================= AGENCY FINAL ORDER

=================================================================

STATE OF FLORIDA DEPARTMENT OF BANKING AND FINANCE

DIVISION OF BANKING

IN RE:

AUTHORITY TO CONSOLIDATE NEW RIVER BANK, OAKLAND

PARK, FLORIDA, WITH 1ST DBF # 3216-B

UNITED BANK, BOCA RATON, (DOAH # 93-6195) FLORIDA

Applicants

/

FINAL ORDER

This matter has come before the State of Florida Department of Banking and Finance, Division of Banking (hereinafter the Department) for the entry of a final order in the above- referenced proceeding based upon a review of the entire record and upon the following grounds:

1. BACKGROUND

   
   

   This matter relates to an application for authority to consolidate by the purchase of certain assets and the assumption of designated liabilities of New River Bank, Oakland Park, Florida (hereinafter New River), by 1st United Bank, Boca Raton, Florida (hereinafter 1st United) (hereinafter New River and 1st United shall be collectively referred to as Applicants) , and an application to establish branches at the present locations of New River. On January 24, 1994, a Report of Public Hearing (hereinafter Report) was issued. On February 2, 1994, Mary Ann Cassel submitted a letter to Terry Straub, Director, Division of Banking. On February 8, 1994, the Hearing Officer entered an Order on Motion for Clarification (hereinafter Order). Finally, no transcript of the hearing held on this matter on December 13, 1993, was provided to the Department.

   
   

2. PRELIMINARY MATTERS

   
   

   1. Intervention

      
      

      On or about January 14, 1993, Mary Ann Cassel (hereinafter Cassel) filed a motion for leave to become a party which was denied by the hearing officer as being untimely. Cassel argues in her letter which was received by the Department on February 2, 1994, letter (hereinafter Letter) that the motion should have been granted as it was filed prior to the entry of the Hearing Officer's Report. The Department respectfully disagrees.

      
      

      Florida Admin. Code R. 3C-9.006 pertains to who may be a party to a hearing. Subsection (3)(d) provides in part that "[p]etitions for leave to become a party may be filed with the hearing officer at any time prior to the termination of the hearing...." Generally, words should be given their common

      and ordinary meaning. 1/ According to Black's Law Dictionary (6th ed 1990) the word "termination" on page 1471 is defined in part as, "End in time or existence; close; cessation; conclusion." On page 721 "hearing" is defined in part as, "A proceeding of relative formality (though generally less formal than a trial), generally public, with definite issues of fact or of law to be tried, in which witnesses are heard and evidence presented." Accordingly, in applying the plain meaning to the rule, it is clear that Cassel's motion was not timely as it was not filed until after a month after the hearing had been concluded.

      Although Cassel attempts to bolster her argument by reference to Fla. Admin. Code R. 3C-9.012(2), her reliance on said rule is misplaced as the rule pertains to the date that the final order of the Department must be entered rather than to participation in administrative proceedings. 2/ Based upon the foregoing, the Hearing Officer properly denied Cassel's request to become a party.

      
      

   2. Cassel Letter

      
      

      Assuming that Cassel did obtain party status entitling her to file exceptions, it seems apparent that they should be rejected for various reasons. First, Cassel's failure to provide the Department with a transcript precludes her from alleging that the Department should not accept the Hearing Officer's findings of fact. 3/ Second, as Cassel has pointed to no place in the record where she has presented the arguments contained in the Letter to the Hearing Officer, consideration of them seems inappropriate. 4/ Third, much of Cassel's argument In the Letter might be properly characterized as speculation without citation to authority in the record. For example, Cassel surmises that, "it is now questionable whether the Investment Bankers would agree that the transaction is fair based on the current market price." 5/ However, no evidence is cited to in the record indicating that a 10 percent price decrease would be material to a finding of fairness. 6/ Fourth, Cassel argues in paragraph 1. (d) of the Letter:

      
      

      Thus, a price in the $15 to $20 range per share, and not the $10.60 - $10.70 offered (or even the $11.71 deemed fair by the Investment Bankers), is the appropriate price range for the New River stock. However, it seems settled that it is not the Department's role to reweigh the evidence, which is what

      Cassel appears to be requesting the Department to do.

      
      

      Finally, Cassel asserts that there have been procedural irregularities in that the Cummings family owns too much stock. However, Cassel cites to no authority for the proposition that an alleged violation of a stock agreement would form the basis for concluding that the application in this action must be denied. Additionally, Cassel complains that New River has only three directors. However, it seems that the failure to have two additional directors would not have altered the outcome especially in view of the allegation that all three of the directors "were voted in by the Cummings family...." Based upon the foregoing, there does not appear to be a basis for rejecting the Hearing Officer's Report and Order as they appear to be correct in all material respects.

3. FINDINGS OF FACT

   
   

   The Department adopts and incorporates by reference the Findings of Fact as stated in the Hearing Officer's Report and the Order as if set forth herein at length.

   
   

4. CONCLUSIONS OF LAW

Applicants have the burden of establishing that the minimum requirements set forth in Sections 655.414, 658.26, 658.40 and 658.43, Florida Statutes, and Chapter 3C-14, Florida Administrative Code, are met. Section 655.414(2), Florida Statutes, provides that the Department shall approve the plan of acquisition, assumption, or sale if it appears that: (a) the resulting financial entity will have an adequate capital structure in relation to its activities and its deposit liabilities; (b) the plan is fair to all parties; and

1. the plan is not contrary to the public interest. Section 655.414(7) Florida Statutes, provides that branch applications should be filed for each proposed branch of the acquiring or assuming institution.

   
   

   Section 658.26(2), Florida Statutes, provides that, with the approval of the Department and upon such conditions as the Department prescribes, any bank may establish branches within the state upon a determination that the bank will be of sound financial condition.

   
   

   Section 658.40(2), Florida Statutes, provides that as used in the provisions of Chapter 658, Florida Statutes, the term "merger", includes consolidation.

   
   

   Section 658.43(3), Florida Statutes, provides that the Department shall approve the plan of merger and merger agreement if it appears that: (a) the resulting state bank meets all the requirements of state law as to the formation of a new state bank; (b) the agreement provides for adequate capital structure of the resulting state bank; (c) the valuation is fair; and (d) the merger is not contrary to the public interest.

   
   

   Upon consideration of the relevant statutory provisions, it is determined that the Applicants have either met the statutory criteria as set forth in Sections 655.414, 658.26, 658.40 and 658.43, Florida Statutes, and Chapter 3C- 14, Florida Administrative Code, or can meet such criteria by complying with the specific conditions which are contained herein. Accordingly, the two branch applications and the application to consolidate are approved, subject to the conditions specified within this order.

   
   

   FINAL ORDER

   
   

   IT IS THEREFORE determined and ordered that the applications herein are hereby approved subject to the following conditions:

   
   

   1. Approval of the transaction by any federal agency required.

      
      

   2. Certification of approval by the shareholders of each constituent bank by a vote of a majority of the outstanding voting stock at a meeting called to consider such action. Such certificate shall include information as to whether or not there were any dissenting shareholders.

   3. That the branch to be located at 2901 West Oakland Park Boulevard, Suite A-23, Oakland Park, Broward County, will be known as 1st United Bank - Oakland Park Office, and the branch to be located at 3650 North Federal Highway, Lighthouse Point, Broward County, Florida, will be known as 1st United Bank - Lighthouse Point Office.

      
      

   4. That, upon consummation of the consolidation, evidence should be submitted to the Department to confirm that the Articles of Dissolution for New River Bank have been filed with the Department of State.

      
      

   5. The approval shall expire six (6) months from this date, unless an extension of time has been granted by the Department.

      
      

   6. After the conditions stated above have been met, the Department will issue a Certificate of Merger. The effective date of the merger will be the date stated in the merger certificate.

      
      

   7. Until the conditions stated above, and other reasonable requirements of the Department are met, or if any interim development is deemed by the Comptroller to warrant such action, the Comptroller shall have the right to alter, suspend, or withdraw this approval.

      
      

   8. Every effort will be made to meet the representations and commitments made by Applicants in the submitted applications, and all supplement information on which the Department has relied.

DONE and ORDERED in Tallahassee, Leon County, Florida this 14th day of February, 1994.

GERALD LEWIS, As Comptroller of the State of Florida and Head of the Department of Banking and Finance

ENDNOTES

1/ Humana, Inc. v. Department of Banking and Finance, 603 So.2d 672, 673 (Fla. 1st DCA 1992)(per curiam)

2/ [A]n agency's construction of its ... rules will be upheld unless clearly erroneous." Pershing Industries, Inc. v. Department of Banking and Finance, 591 So.2d 991, 993 (Fla. 1st DCA 1991)

3/ Edwards v. Department of Health and Rehabilitative Services, 592 So.2d 1249, 1250 (Fla. 4th DCA 1992); Florida Department of Corrections v. Bradley, 510 So.2d 1122, 1123 (Fla. 1st DCA 1987); Brooker Creek Preservation, Inc. v.

Department of Environmental Regulation. 415 So.2d ?50, 750 (Fla. 1st DCA 1982).

4/ Health Care and Retirement Corp. of America v. Department of Health and Rehabilitative Services, 593 So.2d 542, 544 (Fla. 1st DCA 1992)

5/ Letter para. l. (a)

6/ Similarly, Cassel speculates without any reference to support in the record: "Accordingly, the New River shareholders may be hard-pressed to realize even the

$10.60 - $10.70 range of value they have been promised by management," see Letter para. l. (b), "There is no indication that this reserve is adequate as protracted bank litigation may well prove highly expensive.... see Letter para.

l. (c), and "In the view of the many shareholders, this is a particularly inopportune time to sell their shares...." See Letter para. l. (e)

7/ Heifetz v. Department of Business Regulation, 475 So.2d 1277, 1281 (Fla. 1st DCA 1985)

NOTICE OF RIGHT TO JUDICIAL REVIEW

PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO JUDICIAL REVIEW PURSUANT TO SECTION 120.68, FLORIDA STATUTES. REVIEW PROCEEDINGS ARE GOVERNED BY THE FLORIDA RULES OF APPELLATE PROCEDURE. SUCH PROCEEDINGS ARE COMMENCED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF THE DIVISION OF ADMINISTRATIVE HEARINGS AND A SECOND COPY, ACCOMPANIED BY FILING FEES PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL, FIRST DISTRICT, OR WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE PARTY RESIDES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED.

cc: Terry Straub, Director Division of Banking

CERTIFICATE OF SERVICE

The undersigned certified that true and correct copies of the foregoing Order and Notice of Rights were duly sent by U.S. Certified Mail to the attached list this 14th day of February, 1994.

PAUL C. STADLER, JR.

Assistant General Counsel Office of the Comptroller The Capitol, Suite 1302

Tallahassee, Florida 32399-0350

(904) 488-9896

Service List Phillip T. Ridolfo

Mershon, Sawyer, Johnston, Dunwody & Cole Phillips Point, East Tower

777 South Flagler Dr., Suite 900 West Palm Beach, Fla. 33401

Donald E. Thompson

Proskauer, Rose, Goetz & Mendelson One Boca Place, Suite 340 West 2255 Glades Road

Boca Raton, Fla. 33431

David S. Zimble Zimble Formoso-Murias 1401 Brickell Ave.

Suite 730

Miami, Fla. 33131

Federal Reserve Bank of Atlanta Atlanta, Georgia

Federal Deposit Insurance Corporation Atlanta, Georgia

Bureau of Financial Institutions District II

Bureau of Research, Planning and Staff Development

Docket for Case No: 93-006195

Orders for Case No: 93-006195