STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
PUBLIC BAN OF ST CLOUD )
(proposed new bank), )
)
Petitioner, )
)
vs. ) CASE NO. 76-088
) STATE OF FLORIDA, DIVISION OF ) BANKING, )
)
Respondent. )
and )
)
SUN BANK OF ST. CLOUD, )
)
Intervenor. )
)
RECOMMENDED ORDER
Pursuant to notice, an administrative hearing was held before Diane D. Tremor, Hearing Officer with the Division of Administrative Hearings, in Room
103 of the Collins Building, Tallahassee, Florida, commencing at 1:00 P.M.. on June 15, 1976, and continuing on June 16th and 17th, 1976.
APPEARANCES
For Petitioner: Mr. Clyde M. Taylor and
Mr. Wilbur E. Brewton
Taylor, Brine, Buker & Greene, P.A. Post Office Box 1796
Tallahassee, Florida 32302 For Respondent: None
For Intervenor: Mr. Nicholas Yonclas
Akerman, Senterfitt & Eidson Post Office Box 231 Orlando, Florida 32802
INTRODUCTION
Prior to the commencement of the hearing in this cause, various motions were filed. On May 25, 1976, the Division of Administrative Hearings received respondent's motion in limine, and petitioner's memorandum in opposition to said motion was received on June 1, 1976. On June 3, 1976, the undersigned Hearing Officer telephonically notified Mr. Earl Archer, assistant general counsel in the Office of the Comptroller, that said motion in limine had been denied. The actual order of denial was signed and entered on June 4, 1976.
On the afternoon of June 14, 1976, respondent filed a motion for a continuance of the hearing which by notice of hearing dated April 28, 1976, had been scheduled to begin at 10:00 A.M. on June 15, 1976. At an approximate one hour long hearing on the motion for continuance, the undersigned hearing officer orally denied the motion. Respondent then moved to stay the hearing pending judicial review of the denial. This motion was also denied, but the scheduled hearing time was changed from 10:00 A.M. to 1:00 P.M. in order to allow respondent time to seek other remedies. At the hearing on the motion for continuance, petitioner agreed that the testimony of respondent's witnesses could be limited to matters of public record which were not of a confidential nature. The undersigned Hearing Officer thus ruled that the respondent, within its discretion, would be permitted to claim the privilege of confidentiality in response to any information sought. Thereafter, respondent filed various pleadings and motions in the Circuit Court of Leon County, the First District Court of Appeal ad the Supreme Court of Florida seeking to enjoin, stay or prohibit the commencement of the administrative hearing.
At the time scheduled for the hearing to begin, 1:00 P.M. on June 15th, only the Circuit Court of Leon County had entered an order on respondent's pleadings. In that Court, respondent filed a complaint for declaratory judgment and injunctive relief and the cause was heard, without notice, before Judge Ben
Willis on June 15, 1976. Judge Willis entered a temporary restraining order restraining the Division of Administrative Hearings from
"rendering findings of fact and recommendations in that certain ad ministrative hearing before it as case no. 76-088, but nothing herein
shall prevent the conducting of hearings, taking evidence and receiving arguments on the issues."
With this order before her, the hearing officer was prepared to commence the administrative hearing, again informing the respondent that it would be permitted to refuse to answer questions which it determined to involve a disclosure of confidential information.
At this point, respondent again submitted its motion to stay the hearing for the reason that "the Division intends to seek preliminary, procedural, or intermediate review of actions taken herein by the Division of Administrative Hearings." F.S. s 120.68(3) was cited in support of the motion. That section provides:
"The filing of the petition does not itself stay enforcement of the
agency decision. The agency may grant, or the reviewing court may order, a stay upon appropriate terms."
After oral argument on the motion, it was determined by the Hearing Officer that Section 120.68, pertaining to judicial review of final agency action, was not pertinent to a decision involving the stay of an administrative hearing. The motion to stay was therefore denied and the undersigned informed the parties that she was prepared to commence the hearing.
An "Order Staying Administrative Hearing" signed by Gerald A. Lewis, Comptroller of the State of Florida, was then hand delivered to the hearing
officer. This order again cited F.S. s 120.68(3) and purported to stay the hearing "for a period of three (3) months or until the Florida Supreme Court enters a final order in the cause styled Gerald A. Lewis vs. Bank of Pasco County et al., Number 48,411." Upon consideration of the order and oral argument thereon, it was determined by the hearing officer that the order was without lawful authority and therefore not binding upon the hearing officer.
It then being approximately 3:00 P.M. on June 15th, the hearing officer formally opened the proceedings. The attorney for the respondent, Mr. Earl Archer, announced that respondent would not participate in the administrative hearing. It was further announced that the respondent would assume none of the costs of the proceeding, including court reporter fees beyond 3:30 P.M. of June 15, 1976, which is the time that respondent's representatives departed from the hearing room.
The hearing commenced with representatives of the petitioner and the intervenor, the Sun Bank of St. Cloud, present and continued through 1:00 P.M. on June 17, 1976. The parties present announcing that they had no further evidence or witnesses to present, the hearing officer heard closing arguments and closed the proceedings thereafter.
By Order dated June 17, 1976, the District Court of Appeal, First District denied respondent's motion for a stay order. This motion sought to stay the commencement of the administrative hearing pending a decision on the merits of respondent's petition for immediate review of the hearing officer's orders denying the motion in limine and the motion for continuance.
The temporary restraining order issued by the Circuit Court of Leon County provided for a hearing to be held at 2:30 P.M. on June 18, 1976, to determine whether the temporary order would be made permanent. Prior to the scheduled hearing, respondent filed with the Circuit Court its motion for voluntary dismissal of its action. By order dated June 18, 1976, Judge Ben C. Willis dismissed the action and dissolved the temporary restraining order.
On June 25, 1976, the First District Court of Appeal sua sponte dismissed respondent's petition for review on the ground that the "ore tenus order" entered on June 14, 1976, was a non- reviewable order.
On July 14, 1976, the Supreme Court of Florida, with two judges dissenting, denied respondent's suggestion for writ of prohibition.
At the close of the hearing on June 17, 1976, the parties present stipulated that the thirty day period for submission of the hearing officer's recommended order would commence on the date of receipt of the transcript. It was later determined that a full transcript would not be ordered, and hence the thirty-day period began to run on the date set for the filing of proposed recommended orders -- July 12, 1976.
FINDINGS OF FACT
Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found:
On July 31, 1973, petitioner submitted to respondent its application to organize and operate a new banking facility in St. Cloud, Osceola County, Florida. A filing date of August 20, 1973, was assigned by respondent. Accompanying the application was a long and detailed Economic Survey dated June,
1973, containing economic information and statistics pertaining to the City of St. Cloud and its environs.
By letter dated October 26, 1973, the management of the Sun Bank of St. Cloud, the only bank existing in St. Cloud, opposed the establishment of petitioner's proposed bank, citing as grounds therefore the present economic conditions and the limited economic growth prospects for the St. Cloud area.
By letter dated February 20, 1974, The First National Bank of Kissimmee protested the granting of a charter for any new bank in Osceola County, contending that "additional banks could only dilute the deposits of the existing banks, and this would not be in the areas' interest."
An investigation of petitioner's application was conducted by Frank C. Dobson, a state bank examiner for respondent, on February 19, 1974. By a report dated February 22, 1974, Mr. Dobson recommended disapproval of the application on the ground that three of the five factors were considered unfavorable. Mr. Dobson considered the factor of "financial history, condition of the bank, and fixed assets" to be favorable, as well as the factor of "adeqeacy of capital." Considered unfavorable were future earnings prospects," "general character of management" and "convenience and needs of the community." In contrast to the petitioner's original estimate of total deposits in the amount of $10,000,000.00 at the end of its third year of operation, Examiner Dobson projected deposits of only $6,000,000.00 at the end of the third year and therefore concluded that petitioner would not achieve a profitable position. Based upon his observation that the originally proposed chief executive officer, Mr. John J. Jenkins, might possibly he unable to await favorable action on petitioner's application and that the proposed Vice President and Cashier, Mr. Robert J. McTeer, would need supervision and guidance, Mr. Dobson considered the factor of "general character of management" unfavorable. After a brief resume of each of the proposed directors and officers, Dobson concluded that each was considered "satisfactory" with the exception of McTeer, who was considered only "fair." The unfavorable rating on the factor of "convenience and needs of the community" was based upon Dobson's opinion that the proposed site did not appear conducive to convenient service, the existing bank in St. Cloud was completing a new facility which would provide adequate service for its customers and a national bank application was pending.
On October 16, 1974, Fred O. Dickinson, Jr., then State Commissioner of Banking, issued his conditional approval order on petitioner's application.
This order indicates that a change in location of petitioner's proposed bank was made and that M. Raymond Daniel was designated as president. Mr. Daniel accepted the conditions on October 18, 1974.
In January of 1975, present Comptroller Gerald A. Lewis revoked the conditional approval of Mr. Dickinson. An updated economic survey dated April of 1975 was submitted to respondent on behalf of petitioner. An update investigation was conducted by State Bank Examiner Fred H. Brannen, Jr. on May 21, 1975. Mr. Brannen reviewed the file and found as favorable the factors of "financial history, condition of the bank and fixed assets" and "adequacy of capital." Listed as "borderline-favorable" was the factor of "general character of management." Brannen agreed with the projected figures of the original examiner, Mr. Dobson, and thus reported the factor of "future earnings prospects" as unfavorable. Mr. Brannen found the factor of "convenience and needs of the community" to be unfavorable, noting that the proposed site appeared to be somewhat removed from the existing businesses, Sun Bank of St. Cloud had completed its new facility and planned to use its old building as a
remote facility and that the proposed national bank was rejected by regulatory authorities. Based upon his examination, Mr. Brannen concurred with the original recommendation of disapproval.
On April 1, 1975, the Sun Bank of St. Cloud filed with respondent its application for authority to open a remote facility at 1001 New York Avenue in St. Cloud. A Comptroller's Conference was held in regard to this application on August 8, 1975, and respondent granted approval for the remote facility on or about September 25, 1975.
On June 10, 1975, a Comptroller's Conference was held for the purpose of updating and culminating the investigation of petitioner's application. By a supplement dated June, 1975, petitioner presented additional data concerning existing financial institutions in Osceola County and in six other counties with similar populations as Osceola County. No protestants of the application appeared at this conference.
On June 20, 1975, respondent received from the Sun Bank of St. Cloud a 37-page booklet containing comments relating to petitioner's application. It was Sun Bank's conclusion that public convenience and advantage would not be promoted by the establishment of petitioner's bank and that local conditions did not assure reasonable promise of successful operation for petitioner and those banks already established in the community.
It appears that petitioner has changed the proposed location of its bank several times since submitting its original application. At the Comptroller's Conference on June 10th, the proposed site was described to be at the intersection of New York Avenue with U.S. Highway 192/441 In its Comments regarding petitioner's application, Sun Bank describes the location formerly proposed the intersection of Neptune Road and U.S. Highway 192/441. This is also the site discussed in the reports of both examiners.
13.. In August of 1975, petitioner presented to respondent a Supplemental Summary relevant to petitioner's application versus the Sun Bank's application for authority to open a remote facility in St. Cloud.
On November 17, 1975, Comptroller Lewis concluded that petitioner's proposal did not meet the requirements of F.S. s659. 03(2). As grounds therefore, the Comptroller cited the following:
... The primary service area had a 1970 population of 10,000; the applicants estimate that the service area has a current population of 16,000. The proposed bank's site is approximately
.4 of a mile from the existing bank
in St. Cloud. The proposed bank would not appear to be any more convenient for the residents of St. Cloud than the
existing bank. The applicants have made some showing that the proposed bank would have some pro-competitive advantage for the residents of St. Cloud. However, the banks in Kissimmee are accessible by some of the
St. Cloud residents. For this reason, the issue of a monopoly in the existing St. Cloud bank
is not as compelling as it might otherwise
be. On balance, it appears that the public convenience and advantage would be promoted to some extent by the establishment of the proposed bank, although the case is not an overwhelming one.
As shown above, the population base of the service area is fairly small and future growth is not expected to be significant.
The population of St. Cloud increased by
less than 1,000 persons between 1960 and 1970.
The existing bank in St. Cloud had total deposits, as of June 30, 1975, of less than $20 million
and its total deposits during the last two calendar years increased by less than $4 million. It appears that local conditions do not assure reasonable promise of successful operation
of the proposed bank and the existing banks.
On the basis of the foregoing, the Comptroller has concluded that, while the first criterion may be met in this case, the second criterion is not met. Therefore, the application is denied. Since the conclusion renders the other four criteria moot, the Comptroller has not reached any conclusions with respect to those other four criteria."
Four banks, all members of various statewide holding companies, presently exist in Osceola County. There is one bank, the intervenor herein, in St. Cloud, which bank also has a remote facility in St. Cloud, and there are three banks in Kissimmee, which is eight to ten miles west of St. Cloud. Petitioner's proposed primary service area is defined to be the City of St. Cloud and its environs. Its general service area is defined to be all of Osceola County. Population estimates by witnesses for petitioner and for the intervenor differed. Petitioner estimated the present population of the general service or trade area to be slightly in excess of 41,000, while figures contained in the booklet entitled "Florida Estimates of Population" show Osceola County to have an estimated population of 36,668 as of July 1, 1975. The petitioner estimates the primary service area population to be in excess of 16,000, and this figure was not disputed by the intervenor. In fact, in its application for a remote facility, the intervenor stated that the "Osceola Planning Commission is projecting that the population of the St. Cloud trade area will increase to approximately 45,000 by 1990."
As of the 1975 year end, the intervenor Sun Bank, the existing bank In St. Cloud, had total deposits of $21,210,955.50. During the first quarter of 1976, total deposits increased by over $1,600,000.00 at Sun Bank. Over the past five years, deposits at Sun Bank have doubled. The three Kissimmee banks have a combined total of over $40,000,000.00 in deposits. Net profits at the end of 1975 for the existing four banks in the County were as follows: approximately
$286,000.00 for the First National Bank of Kissimmee; $216,198.87 for Sun Bank of St. Cloud; $22,359.66 for the Exchange Bank of Osceola; and a figure of minus
$56,231.32 for the Flagship Bank of Kissimmee. The Flagship Bank opened in 1974 in a modular unit and moved into a new facility in its second year
Using twenty-four factors to measure the economic growth rating of Osceola County, Mr. William C. Payne, a bank marketing consultant, rated said County along with six other counties of similar size. Osceola was rated second, preceded only by Citrus County.
The Comparative Figures Report for December 31 1975, as compared with December 31, 1974, shows the following percentages for Osceola County and statewide:
OSCEOLA | STATEWIDE | |
TOTAL LOANS | 12.8+ | 4.7- |
TOTAL TIME DEPOSITS | 20.1+ | 7.5+ |
TOTAL DEMAND DEPOSITS | 0.4- | 2.0- |
TOTAL DEPOSITS | 10.1+ | 3.3+ |
The presidents of three of the four existing banks appeared and testified as protestants to petitioner's application. The presidents of Flagship and First National in Kissimmee felt that a new bank in St. Cloud would have an adverse effect upon them because they each have a number of customers who are residents of St. Cloud. First National estimates that it has 200 customers from St. Cloud representing approximately $500,000.00 in deposits. Sun Bank recognized than most of petitioner's customers would be derived from
Sun's bank, and estimated that probably one million dollars in deposits would be lost to petitioner, thus reducing Sun's profit figures. Sun opened its remote facility in St. Cloud in December of 1975 and First National submitted its application for a remote or branch facility in St. Cloud in January of 1976.
Due to financial backing and management expertise and assistance, all three presidents felt that a holding company bank, as opposed to an independent bank, would have a better chance of success in St. Cloud. Flagship pays over
$14,000.00 per year as a member of a holding company, while Sun and First National each pay approximately $90,000.00 per year. Sun Bank felt that a certain bank could exist in St. Cloud and that it would, in fact, promote competition. All three presidents noted that 1974 and 1975 were lean years for banking, but that loan demands and total deposits were now increasing.
As noted above, petitioner's proposed new bank is to be independently owned and operated at the corner of U.S. Highway 192/441 and New York Avenue in St. Cloud. This downtown intersection provides the only permanent stop light on the main thoroughfare through St. Cloud, and the site provides easy access from either the east/west direction of the main highway or the north/south direction of New York Avenue. It should be noted again that this proposed site is not the same site reviewed by the two state bank examiners in their reports nor by the Sun Bank in its Comments submitted to respondent in June 1975.
There was no evidence that the proposed name of petitioner's new bank
-- Public Bank of St. Cloud -- would create any conflict or confusion with the name of any other existing bank.
There is no evidence in the record that petitioner's proposed capital structure is other than adequate. Its total capitalization is proposed to be
$1,000,000.00 and its deposits are estimated to be $7,000,000.00 at the end of the third year of operation.
Mr. Payne's updated June, 1976, survey (Exhibit 13) contains drawings and details of petitioner's proposed banking house quarters. The physical structure will promote convenience to customers and the proposed costs are
sufficient and reasonable. Security and Federal Deposit Insurance Corporation requirements have been met.
Petitioner's proposed Board of Directors consists of ten men.
Included therein are attorneys, bankers, cattlemen, a physician, a pharmacist, a University of Florida athletic director and those engaged in real estate development and sales. While some directors do not reside in St. Cloud, others have lived there for years, with one director claiming to have some 1,200 blood relatives in the area. Two of the proposed directors, one of which is the proposed chief executive office, has previously been involved with newly chartered banks. At least three of the proposed directors presently serve as directors of other banks in Florida. The proposed president, Mr. Raymond Daniel, will move to St. Cloud and will devote all his time to his duties as president and director.
Two of the proposed directors, one of which is the largest shareholder and the other of which is the proposed vice president and cashier, have suits pending against them for considerable amounts of money. One has a judgment against him in the amount of approximately $40,000.00, and the presidents of two banks in Osceola County testified that his reputation in the community as a businessman was not good.
CONCLUSIONS OF LAW
An applicant for authority to organize and operate a state banking facility has the burden and responsibility of illustrating that the statutory factors warranting the grant of authority are met. It is the respondent's duty to make an investigation of the five matters listed in subsection (1) of F.S. s
and then to approve or disapprove the application in its discretion. This discretion is not absolute or unqualified, but is instead conditioned by a consideration of the factors listed in s 655.03. Section 659.03(2) provides that:
"The department shall approve or disapprove the application, in its discretion, but it shall not approve such application until, in its opinion:
Public convenience and advantage will be promoted by the establishment of the proposed bank or trust company
Local conditions assure reasonable promise of successful operation for the proposed bank or the principal office of the proposed trust company and those banks
or trust companies already established in the community.
The proposed capital structure is adequate.
The proposed officers and directors have sufficient banking or trust experience, ability and standing to assure reasonable promise of successful operation.
The name of the proposed bank or trust company is not so similar as to cause con fusion with the name of an existing bank.
Provision has been made for suitable banking house quarters in the areas specified
in the application."
Thus, the inquiry determinative of the issue of whether petitioner should be granted authority to organize and operate a state banking facility is whether petitioner meets each and all of the six criteria enumerated above.
Prior to approval of an application, promotion of public convenience and advantage must be established. The evidence in this cause illustrates that petitioner's downtown location, with easy ingress and egress, on the main thoroughfare through St. Cloud, which has only one existing bank, would promote convenience and competitive advantages for the residents of St. Cloud and its environs.
The criterion of whether local conditions assure a reasonable promise of successful operation for the proposed and existing banks in the community is difficult to measure and is one which is substantially beyond the control of the applicants. The evidence herein shows that the one existing bank in St. Cloud last reported profits in excess of $216,000.00 and has deposits which have doubled within the past five years and increased by $1.6 million the first quarter of this year alone. The Statement of the Comptroller dated November 17, 1975, iterates that "the existing bank in St. Cloud had total deposits, as of June 30, 1975, of less than $20 million and its total deposits during the last two calendar years increased by less than $4 million." The evidence at the hearing indicates that as of June 30, 1975, Sun Bank reported total deposits of
$19,637,234.46. As of December 31, 1975, total deposits in the amount of
$21,210,955.50 were reported. The testimony was that in the first quarter of this year, total deposits at Sun increased by $1.6 million. Thus, in a nine month period, Sun's total deposits increased by over $3,000,000.00.
St. Cloud and its environs contain approximately forty percent of the population of Osceola County and the intervenor Sun Bank of St. Cloud has approximately forty percent of the total deposits of the County. The remaining sixty percent of the population and deposits of Osceola County are serviced by the existing three banks in Kissimmee. One of these banks enjoyed a profit of some $286,000.00 last year and had total deposits of over $22,000,000.00. Another had deposits in excess of $15,000,000.00 and profits in excess of
$22,000.00. The third Kissimmee bank has less than $3,000,000.00 in deposits and experienced a loss in profits of over $56,000.00, however, this bank has been in operation only since January of 1974 and moved into expensive facilities during its second year.
The four existing banks in Osceola County are all members of statewide holding companies. A great deal of testimony was offered at the hearing regarding the merits and advantages of holding company banks as opposed to independent banks, and vice versa. At least some residents of St. Cloud expressed interest in and desire for an independently1 owned and operated local bank and there was testimony that independent banks compete favorably in areas dominated by holding company banks.
While it was the testimony of the presidents from three of the four existing banks in the County that the area would not support a new bank and that a new bank would prove harmful to their banking business, they also testified that a holding company bank could survive and the evidence shows that the amount of business which might be diverted from their institutions would be comparatively minimal. They further stated that their loan demands and deposits were increasing and that economic conditions in the area were improving. Such statements are substantiated by the Comparative Figures Report showing total
loans to have increased by 12.8 in Osceola County, while decreasing 4.7 percent statewide, and showing total deposits to have increased 10.1 percent, compared to an increase of only 3.3 percent statewide. Further, Sun Bank recently opened a remote facility in St. Cloud and First National has applied for authority to open a branch in St. Cloud, projecting deposits in the amount of $4,000,000.00 during the fourth year of operation. The evidence simply does not support the resulting conclusion of the protestants that a holding company bank, as well as branch banks, could successfully operate in St. Cloud while a bank independently and locally owned and operated could not.
In summary, the undersigned finds that the most recent competent evidence regarding economic conditions and indicators of the St. Cloud area and Osceola County demonstrates that local conditions assure a reasonable promise of successful operation for the proposed bank as well as those banks already established in the area.
The petitioner has carried its burden of proof relating to the adequacy of the proposed capital structure, the lack of confusion between the name of the proposed bank and any existing bank and the suitability of its banking house quarters. Petitioner presented evidence illustrating that it meets these three criteria, the examiners found these factors to be adequate in their original and updated investigations and the intervenor presented no evidence to the contrary.
Finally, F.S. s 659.03(2)(d) requires that an application not be approved until "the proposed officers and directors have sufficient banking or trust experience, ability and standing to assure reasonable promise of successful operation." The evidence illustrates that the makeup of the proposed ten-man board of directors is well balanced with regard to local participation and banking experience and its members represent a cross-section of the community. The evidence adduced at the hearing cast some doubt upon the financial standing and ability of two members of the proposed board of directors and indicates that one of those two members lacks a good reputation as a businessman in the community. Petitioner's own expert witness was of the opinion that one whose financial picture is bad should not be a director of a bank.
With the respondent declining to participate in the hearing, the undersigned hearing officer did not receive the benefit of testimony or evidence concerning the established practice of respondent in applying the criterion set forth in s 659.03(2)(d). The evidence concerning the judgment and pending law suits against the two directors appears to have occurred after the state bank examiners made their reports and after the Comptroller made his statement of denial. In said statement, the Comptroller admitted that he had reached no conclusion with respect to this criterion.
The undersigned has previously concluded that petitioner's application meets the criteria relating to public convenience and advantage, local conditions assuring a reasonable promise of success, adequacy of capital structure, proposed name and suitable quarters. The issue thus becomes whether petitioner's application should be denied on the ground that the applicant has failed to demonstrate that two of its proposed directors have sufficient ability and standing to assure a reasonable promise of successful operation. Section 659.03(2) is clear that an application shall not be approved until each of the six criteria listed therein is satisfied. What is not clear is the extent to which the applicant would be given the opportunity by respondent to remedy those factors which are primarily within the applicant's control namely the last four
criteria listed in s 659.03(2) when the factors concerning convenience, advantage and local conditions are favorable. As noted above, the statutes require the applicant to demonstrate compliance with all six criteria before approval can be granted. The undersigned concludes that petitioner has demonstrated that it meets the criteria listed in s 659.03(2)(a), (b)(c)(a) &
(f) but has not shown that its proposed officers and directors have sufficient ability and standing to assure reasonable promise of successful operation, as required by subsection (d). However, before a final decision of denial on this ground is reached, fairness and equity require that certain factors be considered. These factors include the recent nature of the events concerning the two directors standing and ability, the Comptroller's failure to reach a conclusion as to this criterion, the lengthy amount of time elapsing and the obvious expenses incurred by both parties in the processing of petitioner's application and the fact that this criterion is substantially within the control of the applicant. Consideration of these factors leads the undersigned to conclude that it would only be fair and equitable to allow petitioner a short amount of time within which to review the financial standing and ability of its proposed directors and, if it so desires, submit an amended list to respondent for its review.
Based upon the findings of fact and conclusions of law recited above, it is recommended that respondent disapprove petitioner's application to organize and operate a state banking facility in St. Cloud for the reason that petitioner, while showing that it satisfies all other criteria, has failed to illustrate that all its officers and directors possess sufficient ability and standing to assure a reasonable promise of successful operation. It is further recommended that such disapproval be without prejudice to petitioner to file with the respondent, if it so desires, within fifteen days of respondent's final order, an amended list of directors and/or officers and that respondent render a decision upon this criterion within twenty days from the filing thereof.
Respectfully submitted and entered this 30th day of July, 1976, in Tallahassee, Florida.
DIANE D. TREMOR
Hearing Officer
Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304
(904) 488-9675
COPIES FURNISHED:
Honorable Gerald A. Lewis Comptroller
State of Florida The Capitol
Tallahassee, Florida 32304
Mr. Clyde M. Taylor TAYLOR, BRION, BUKER & GREENE, P.A.
P.O. Box 1796
Tallahassee, Florida 32302 Attorney for Petitioner
Mr. Nicholas Yonclas AKERMAN, SENTERFITT & EIDSON
Box 231
Orlando, Florida 32802 Attorney for Intervenor
Mr. Earl Archer
The Comptroller's Office State of Florida
The Capitol
Tallahassee, Florida 32304 Attorney for Respondent
================================================================= AGENCY FINAL ORDER
=================================================================
STATE OF FLORIDA DEPARTMENT OF BANKING AND FINANCE
DIVISION OF BANKING
PUBLIC BANK OF ST. CLOUD
(proposed new bank), Petitioner.
vs. CASE NO. 76-088
STATE OF FLORIDA, DIVISION OF BANKING,
Respondent,
SUN BANK OF ST. CLOUD,
Intervenor.
/
FINAL ORDER
Pursuant to notice, a public hearing was held before Diane D. Tremor, Hearing Officer with the Division of Administrative Hearings, in Room 103 of the Collins Building, Tallahassee, Florida, commencing at 1:00 p.m. on June 15, 1976, and continuing on June 16th and 17th, 1976. A Recommended Order was issued on July 30, 1976.
APPEARANCES
For Petitioner: Mr. Clyde M. Taylor and
Mr. Wilbur E. Brewton
Taylor, Brion, Buker & Greene, P.A. Post Office Box 1796
Tallahassee, Florida 32302
For Respondent: Limited appearance by:
Earl H. Archer
Assistant General Counsel Office of the Comptroller Legal Annex
Tallahassee, Florida 32304
For Intervenor: Mr. Nicholas Yonclas
Akerman, Senterfitt & Eidson Post Office Box 231 Orlando, Florida 32802
IN GENERAL
Applicants seek authority to organize a corporation for the purpose of conducting a general banking business to be located at the corner of U.S. Highway 192 and U.S. Highway #441 and New York Avenue, in St. Cloud, Florida.
The statute which governs the investigation and approval or disapproval of bank applications is as follows:
Sec. 659.03, F.S. (1) Upon the filing of an application, the department shall make and investigation of:
The character, reputation, financial standing and motives of the organizers, incorporators and subscribers in organizing the proposed bank or trust company.
The need for banking or trust facilities, or additional banking or trust facilities
as the case may be, in the community where the proposed bank or the principal office of the proposed trust company is to be located, giving particular consideration to the adequacy of existing banking or trust facilities and the need for further
banking or trust facilities in the locality
The present and future ability of the community to support the proposed bank or the principal office of the proposed trust company and all other existing banking or trust facilities in the community.
The character, financial responsibility, business experience, and standing of the proposed stockholders and directors.
The department shall approve or disapprove the application, in its discretion, but it
shall not approve such application until, in its opinion:
Public convenience and advantage will be promoted by the establishment of the proposed bank or trust company.
Local conditions assure reasonable promise of successful operation for the proposed bank or the principal office of the proposed trust company and those banks or trust companies already established in the community.
The proposed capital structure is adequate.
The proposed officers and directors have sufficient banking or trust experience ability, and standing to assure reasonable promise of successful operation.
The name of the proposed bank or trust company is not so similar as to cause confusion with the name of an existing bank.
Provision has been made for suitable banking housequarters in the area specified in the application. (E.S.)
Pursuant to the above statutory requirements, an investigation of the application was initially begun on February 19, 1974, by State Bank Examiner, Frank C. Dobson, a professional in the field of processing applications for new state banks. On February 22, 1974, Dobson filed his report which recommended disapproval of the application, finding that three (3) of five (5) main factors were considered unfavorable, to wit: (1) future earnings prospects; (2) general character of management; and (3) convenience and needs of the community. Those considered favorable were: (1) history and (2) capital. The report by Dobson was reviewed by John H. Schooley, Jr., Assistant Director of the Division of Banking on March 19, 1974 and by Byron B. Karr, Director of the Division on March 19, 1974. Both Schooley and Karr concurred in Dobson's findings and recommended disapproval by former Comptroller Dickinson.
Notwithstanding the above recommendation, the application received conditional approval from former Comptroller Dickinson in December of 1974. In January of 1975, said conditional approval was revoked and updated economic data was requested. The updated economic data was provided in April of 1975. An update investigation was then conducted on or about May 21, 1975, by Fred H. Brannen, Jr., State Bank Examiner. Mr. Brannen likewise recommended disapproval of the application, by finding that two (2) of the five (5) factors stated above were unfavorable. On June 10, 1975, a Comptroller's Conference was held.
On November 17, 1975, the department notified the applicants that the application for authority to organize the Public Bank of St. Cloud had been denied. The department determined that while applicants' proposed bank would promote, to some degree, the public convenience in the area, the case was "not an overwhelming one." However, the department concluded that local conditions did not assure reasonable promise of successful operation of the proposed bank and the existing banks in the community as required by Section 659.03(2)(b),
F.S. No conclusions were reached with respect to the other four criteria set forth in 659.03(2), F.S.
Applicants requested and were granted an administrative hearing under F.S. Section 120.57(1) to determine the issue of whether they should be granted authority to organize and operate a general banking business at the proposed location.
The hearing officer concluded that five (5) of the six (6) criteria set forth in Section 659.03(2) had been met by the applicants. However, the hearing officer concluded that applicants failed to meet the statutory requirement that the officers and directors have sufficient banking or trust experience to assure reasonable promise of successful operation as provided in Section 659.03(2)(d),
F.S. As a result, the Hearing Officer concluded and recommended that the application be disapproved. Up to that point, the recommendation is compatible with Section 659.03, F.S., although the department does not agree with the Hearing Officer's finding that local conditions assure reasonable promise of successful operation of the proposed bank and those banks already established in the community under Section 699.03(2)(b), F.S. However, the recommended order did not stop there. It goes on with additional recommendations to the effect that such disapproval should be without prejudice and with the suggestion that the department allow petitioners to submit an amended list of officers and directors. Inherent in that suggestion is the requirement that the department will now have to reinvestigate the new officers and directors in order to determine their fitness. Such amendments to the application and "reinvestigation" are contrary to law and this places an unreasonable burden on the department. This is particularly true if we consider the fact that the applicant has the burden of proof and the duty to clearly demonstrate that the application meets all requirements of law and Rule 3C-10.02(5), F.A.C.
This application does not meet the requirements of the Florida Banking Code. I reviewed the complete files and upon consideration thereof have determined that some of the conclusions of law in the recommended order are to be adopted, while others must be rejected in part and modified in part.
Further, I find that it is necessary to reject some of the Hearing Officer's gratuitous recommendations as to subsequent handling of this application.
First of all, and as mentioned above, every application to organize a new state bank must meet each and every criteria set forth in Section 659.03, F.S., before the department can lawfully issue a valid certificate of approval to organize a bank as provided in Section 659.05(1), F.S. National Bank of Tampa v. Green, 175 So.2d 545 (1 DCA 1965) at p. 546. Although Section 659.03, F.S. does not set forth specific criteria for disapproval, a reasonable interpretation of that section leads to the conclusions that an application must be disapproved if any single criteria therein is not met.
FINDINGS OF FACT
The department accepts the Hearing Officer's findings of fact as stated in the recommended order as set forth in paragraphs (1) through (16), inclusive, and paragraphs (18) through (21), inclusive, under "FINDINGS OF FACT". The department specifically disagrees with the Hearing Officer's findings as set forth in paragraph (17) thereof, which relate to local conditions as contemplated by Section 659.03(2)(b), F.S. However, since the department does not have before it, at this time, a complete transcript of testimony, it does not reject nor will it attempt to modify those findings in this order.
Therefore, it stands as is.
In paragraph (21) of the Hearing Officer's findings, it is stated: Those findings are accurate and fully supported by the evidence.
CONCLUSIONS OF LAW
As pointed out above, the statutory criteria for approval of an application to organize a new state bank are quite rigid. Since the hearing officer found that his application does not meet the statutory standards in Section 659.03, F.S., with regard to the officers and directors, the department has no alternative but to deny this application. The second step in the investigation process is set forth in Section 659.03(2), F.S. quoted above. It lists six criteria which must be met as minimum standards before an application can be "approved". This section does not, however, set out any procedures to be followed on a denial. However, a reasonable interpretation of that section indicates that, if all six (6) criteria must be met by an application, as a mandatory requirement before approval can be granted, then the failure of the applicant to meet any one of the statutory criterion similarly requires mandatory denial of the application. This is true whether or not the merits of the remaining criteria are reached or not.
The provisions of Section 659.03(2), F.S. are very significant with regard to denial of applications. Those provisions state, in part:
"(2) The department shall approve or disapprove the application, in its discretion, but it shall not approve such application until, in its opinion:
. . . " (E.S.)
The above statutory language is quite clear. The department has much greater discretion as to whether or not it will disapprove an application than it does to approve an application. The Petition for an Administrative Hearing in this cause sought to review the reason for disapproval of this application.
It is quite clear that the Petitioner-applicants have the burden of proof to establish that all the criteria under Section 659.03, F.S. have been met.
Petitioners have not met this burden, which is fully supported by the Hearing Officer's findings.
Notwithstanding the above stated principles and the Hearing Officer's recommendation of disapproval, it was also recommended that the Department should allow the Petitioners an opportunity to amend their list of officers and directors at this point in time. That recommendation is hereby rejected for several reasons. We have already pointed out above the fact that section 659.03, F.S. requires mandatory disapproval if all six (6) criteria have not been fully met. That section was thoroughly interpreted by the Courts in National Bank of Tampa v. Green, 175 So.2d 545 (1 DCA 1965) and Bay National Bank and Trust Co. v. Dickinson, 229 So.2d 302 (1 DCA 1969). In National Bank of Tampa, the Court said on page 550:
"Since we hold that the Commissioner's discretion in approving an application for a bank charter is not absolute but is rather a discretion the exercise of which is conditioned by the several statutory limitations discussed above,
we further hold that, if the Commissioner acts or threatens to act in violation of such statutory limitations his acts may be subjected to judicial review under
the provisions of Section 659.56, Florida Statutes, F.S.A." (E.S.)
On page 546 therein, the Court also said: "Under the laws of Florida, the State
Comptroller who serves ex officio as the State Commissioner of Banking, is endowed with the power to issue charters for the operation of banking institutions in this state. That authority, however, is cir- cumscribed by certain statutory requirements that must be followed before he can legally issue such a charter." (E.S.)
Those principles have also been adopted by the Federal Courts. In Webster Groves Trust Company v. Saxon, 370 F.2d, 381 (8th Cir. 1966) which involved a national bank application, the Court said on p. 387:
"We agree that the action by the Comptroller is not subject to review by trial de novo,
. . . The Comptroller, however, must be subordinate to the law from which he received his authority, and is subject to the limitations imposed by that law." (E.S.)
Thus, it is clear from the above court decisions that the department has no legal authority to approve an application that does not meet every requirement of law. Further, Rule 3C-10.02(5), of the Department (which is a part of the Florida Administrative Code) provides that changes in officers and directors are considered to be material changes to an application, which is deemed to be abandonment. Therefore, on the basis of the above statutes, court decisions and administrative rules, the department has no legal authority to approve this application.
In addition to the above set forth legal reasons, there are numerous practical reasons why this application cannot be rehabilitated and reinvestigated. First of all, many applications for new banks have been filed with the department. Some of those applications contained serious deficiencies, while others did not meet the requirements of Section 659.03, F.S. for various lesser reasons. If the department could (or would) allow applicants to go back and amend applications to cure defects, it would be virtually impossible for it to process new applications with present limitations on its budget/and staff.
This would be grossly unfair to more recent applicants. Further, there are no funds appropriated to the department for the purpose of updating applications beyond the point where a decision is reached to approve or disapprove.
Last, but not least, it would create a dangerous precedent for the department to allow these applicants to amend without affording the same opportunity to many others in similar circumstances.
There is one additional matter that needs to be clarified. In the Recommended Order it is stated that the department did not participate in the
hearing before the Division of Administrative Hearings; and that it sought court action to postpone the hearing. The record in this cause shows that the department, by its Counsel, filed a Motion for Continuance which the Hearing Officer denied. The grounds stated in said motion were as follows:
"(1) That an important case is now pending in the Florida Supreme Court with regard to the authority of the Respondent to make public bank applications, investigation reports, examination reports and "related information" under Section 658.10(1), F.S.;
The Department has not had adequate time to update the investigation of the application since the Division (erroneously) ruled that it can and will hear all relevant evidence on the merits of the application up to the date of the hearing before it;
Immediate and irreparable harm may result to the public (and to other banks in the trade area) if the Respondent is compelled to disclose each and every fact known to him in violation of the provisions of Section 658.10(1), F.S."
With regard to ground #(2) above, the department was not prepared to rebut the wealth of economic data that the Petitioners were prepared to present. The Department had not had an opportunity to update its investigation of this application beyond the date the application was initially disapproved on November 17, 1975. At the time of the administrative hearing, the department was processing and investigating 45 new bank applications and 59 branch applications. Therefore, it was the position of the undersigned that the department was prevented from presenting material evidence which was vital to the issues for reasons beyond its control. This is contrary to Section 120.57(1)(b)4., F.S.
Finally, the department did not participate in the administrative proceeding for another very important reason. Section 659.03(2)(b), F.S. (quoted above) requires the department to not only be assured that there is a reasonable promise of success of the applicant, but it must also consider the assurance and promise of continued successful operation of other banks in the community. The precise financial condition of such other banks is substantially contained in bank examination reports and investigation reports on file with the department and made pursuant to its duties under Section 658.07, F.S. Accordingly, it may have become necessary for the department to introduce into evidence some of said reports relating to other banks in the area in order to present its case. However, the provisions of Section 658.10(1), F.S. prohibit the department from doing this because that section clearly states that these reports are confidential. These points were also raised in the department's Motion for Continuance (quoted above) as points (1) and (3). Additionally, Section 120.57(1)(b)4. of the A.P.A. provides that "all parties shall have an opportunity to respond, to present evidence and argument on all issues involved". The status of the other existing banks was clearly in issue.
Obviously there is a direct conflict of statutes when Section 658.10(1),
F.S. is considered in light of Section 120.57(1)(b)4., F.S. On its face, Section 658.10(1), F.S. appears to give the department the right to "consent" to disclosure. However, the Leon County Circuit Court had previously, on November 17, 1975, ruled that the department could not make such reports public for the reason that Section 658.10(1), F.S. was unconstitutional. See Bank of Pasco County, et al. v. Lewis, Case No. 75-1588. That ruling was on appeal to the Florida Supreme Court at the time the A.P.A. hearing was held and this was
explained to the Hearing Officer. Notwithstanding the aforesaid clear and certain conflict of laws between the confidentiality provisions of Section 658.10(1), F.S. and the department's right to present its evidence and its case as mandated by Section 120.57(1)(b)4., F.S., the Division of Administrative Hearings denied the department's Motion for Continuance. That ruling was most arbitrary and it was made without any attempt by the division to provide a satisfactory forum or procedures that could be reasonably followed to assure that the department would have a right to fully present its case on all relevant issues. Therefore, and for all the reasons set forth above, the undersigned directed his attorneys and staff not to participate in the proceedings which would not provide fairness nor any semblance of due process.
In view of all the above and foregoing facts and circumstances, principles of law and reasons, the Petitioner's application for authorization to organize a new state bank (at the corner of U.S. Highway 192 and U.S. Highway 441 and New York Avenue, St. Cloud, Florida) is hereby disapproved or denied in the discretion of the department; and because the application fails to meet all of the statutory standards in Section 659.03(2), F.S.
DONE AND ORDERED in this 28th day of October, 1976, at Tallahassee, Florida.
GERALD A. LEWIS
As State Comptroller The Capitol
Tallahassee, Florida 32304
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that a true copy of the foregoing Final Order was furnished to Mr. Clyde M. Taylor and Mr. Wilbur E. Brewton, Taylor, Brion, Buker & Greene, P.A., P.O. Box 1796, Tallahassee, Florida 32302; Mr. Nicholas Yonclas, Akerman, Senterfitt & Eidson, P.O. Box 231, Orlando, Florida 32802, and the Division of Administrative Hearings, Room 530, Carlton Building, Tallahassee, Florida 32304, by regular U.S. mail this 29th day of October, 1976.
Attorney for Respondent
| Issue Date | Proceedings |
|---|---|
| Nov. 01, 1976 | Final Order filed. |
| Jul. 30, 1976 | Recommended Order sent out. CASE CLOSED. |
| Issue Date | Document | Summary |
|---|---|---|
| Oct. 28, 1976 | Agency Final Order | |
| Jul. 30, 1976 | Recommended Order | Disapprove the opening of the new branch bank without prejudice on basis that the officers are not experienced enough to make a success. |
