vs. ) CASE NO. 76-124
) STATE OF FLORIDA, DIVISION OF ) BANKING, DEPARTMENT OF BANKING ) AND FINANCE, )
Respondent. )
Pursuant to notice, final hearing was held before the undersigned Hearing Officer in Macclenny, Florida, on November 8, 1976.
For Petitioner: John E. Mathews, Jr., Esquire
Upon consideration of the oral and documentary evidence adduced at the hearing, the following pertinent facts are found:
In August of 1973, Petitioner submitted to Respondent their application in accordance with Section 659.02, F.S., for authority to organize a corporation for the purpose of conducting a general banking business to be located at the corner of U. S. Highway 90 and State Road 23-A in Macclenny, Florida. An investigation of the application was conducted by a State Supervising Examiner in April of 1974. The application received conditional approval from Fred O. Dickinson, Jr., then Comptroller of the State of Florida, in October of 1974.
In January of 1975 this conditional approval was revoked by Gerald A. Lewis, Mr. Dickinson's successor as Comptroller of the State of Florida.
By letters dated April 23, 1974, and March 7, 1975, W. A., Ruis, president of the Citizens Bank of Macclenny, Florida, a banking corporation,
registered with Respondent the Citizens Bank of Macclenny's objections to the granting of a charter for the proposed Security Bank of Macclenny.
On September 17, 1975, a Comptroller's Conference was held wherein testimony was taken by Respondent from witnesses presented on behalf of Petitioner and from W. A. Ruis on behalf of The Citizens Bank of Macclenny.
By Order and Statement dated November 17,1 975, Respondent, Gerald A. Lewis, Comptroller of Florida, concluded that Petitioner's application did not meet the requirements of Section 659.03(2), F.S., and that therefore the application should be denied. In his Statement accompanying the Order, Respondent Gerald A. Lewis found that the requirement that public convenience and advantage will be promoted by the establishment of the proposed bank may be met in this case, but specifically found that local conditions did not assure reasonable promise of successful operation for the proposed bank and those banks already established in the community. He specifically did not reach any conclusion with respect to the other four criteria found in Section 659.03(2), F.S.
Subsequent to the foregoing Order and Statement, Petitioner sought a hearing in accordance with Chapter 120, F.S., and a Hearing Officer was assigned to conduct such a proceeding at the request of Respondent.
The only commercial banking corporation operating in Baker County, Florida, is the Citizens bank of Macclenny, Florida. This bank has been the only commercial bank in Baker County for more than fifty years. On June 20, 1975, The Citizens bank of Macclenny opened a new, modern banking facility.
From the testimony presented, it appears that the existing banking corporation in Baker County, The Citizens bank of Macclenny, has, over the years, adhered to a very conservative lending policy with regard to the lending of money. Their conservative lending policies have apparently caused an unspecified but substantial number of respected Baker County citizens to go outside of the county to facilitate their banking needs in the areas of loans and other commercially supportive banking practices. Testimony of one banker with 30 years experience in the industry indicated that although local conditions to a large extent dictate an acceptable ratio between deposits and loans of a bank, the ratio of 60 percent of total deposits being involved in loans is desirable. Comparing The Citizens Bank of Macclenny's loan portfolio to its total IPC deposits it appears that in December of 1974 the ratio of loans to deposits was 39 percent, in June of 1975 it was 37 percent and in December of 1974 it was 40 percent. Thus, it appears that The Citizens Bank of Macclenny has had funds available for loans which have not been used for that purpose.
The evidence was not sufficient to conclusively establish whether this was the result of a conservative lending policy on behalf of the bank, a lack of demand for loans, or some other reason.
In his Order and Statement dated November 17, 1975, the Honorable Gerald
A. Lewis, Comptroller of the State of Florida, stated that "[o]n 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."
The existence of a second commercial banking corporation in Baker County, even though it is proposed to be built only a few blocks from the existing banking facility, would promote public convenience and advantage, at
least to some extent, by providing an alternative within Baker County to its citizens as they seek to fulfill their banking needs.
The proposed Security Bank of Macclenny is primarily intended to serve Baker County. However, there are areas on the periphery of Baker County such as Baldwin in Duval County, the South Georgia area, parts of Union County and the area between baker County and Lake City, Florida, which may reasonably be expected to be part of the market area of a bank located in Macclenny, Florida. As shown by the testimony of the president of The Citizens Bank of Macclenny, that bank now advertises in the Baldwin area and the South Georgia area and draws customers from the aforementioned areas on the periphery of Baker County, including 511 depositors from Baldwin. The Florida Estimates Of Population prepared for the Florida Department of Administration in accordance with Section 23.019, F.S., estimate the population of Baker County as of July 1, 1975, as 12,256 people of which 1,002 were patients of the Northwest Florida State Hospital outside of Macclenny. Petitioner presented date based on an active electric meter count in Baker County which estimated the population of Baker County as of September 1976, at 15,850 people. In his Order and Statement dated November 17, 1975, the Respondent, Gerald A. Lewis, Comptroller of the State of Florida, concluded that the population of Baker County as of the date of that Order was approximately 14,000 people. Based upon the Florida Estimates Of Population, July 1, 1975, Baker county had an average yearly increase in population of 6.21 percent from April 1, 970, to July 1, 1975, compared to a statewide average of 4.75 percent. Therefore, it appears reasonable to conclude from the facts presented that the present population of Baker County lies between 14, 000 and 16,000 people. The population of the areas on the periphery of Baker County presently being served by the existing bank in Baker County and which would be reasonably expected to be included in the service area of the proposed bank would increase the number of people, probably by several thousand, in the total area to be served by The Citizens Bank of Macclenny and the proposed Security Bank of Macclenny should be granted a charter.
The public school enrollment for the school year ending in 1971 was 2,558. At the opening of school in 1976 school enrollment was 3,453 which represents an increase of approximately 35 percent in Baker County's public school enrollment over the seven school years addressed. The voter registration in Baker County has increased from 5,180 as of July 31, 1974, to 6,425 on July 24, 1976. The next assessed property value of the real property, personal property and railroad-telegraph property in Baker County increased 133 percent from 1969 to 1976 and showed a total dollar increase over the last five years from $37,304,000 in 1972 to $61,586,000 in 1976.
The dominant employer in Baker County is the Northeast Florida State Hospital with approximately 990 full-time employees and a 1976 payroll of over
$8,000,000. The state prison system at Lake Butler, Starke and Raiford also employs a substantial number of Baker County residents. New employers in the area since 1973 are the Baker Square Retail Stores, the Florida Steel Corporation in Baldwin, and several other industries, employing all together several hundred people. The Baker County unemployment rate through 1975 was just over 3 percent of the work force compared to almost 9 percent for the Jacksonville metropolitan area which includes Baker, Duval, Clay, Nassau and St. Johns counties.
Ms. Ruis, president of the opposing bank, testified that although he did not se "any great boom" in the economy of Baker County, he did see "a normal, healthy, growth patter." The sales and use tax collections in Baker County have grown from $193,410.32 in fiscal year 1968-69 to $532,246.55 in
fiscal year 1975-76. There was an 11 percent increase in sales and use tax collections from fiscal year 1974-75 to 1975-76 in Baker County compared to an increase for the entire state of Florida of 4.5 percent.
Petitioner's economist, Dr. Stuart W. McFarland, testified that in his opinion the prospect of growth for the existing banking institutions in Baker County is good and that the opening of an additional commercial bank would stimulate community banking services.
In 1967 the Baker County Federal Credit Union was founded and as of September 30, 1976, it had $1,267,657.19 outstanding in loans. Its general manager expressed her opinion that Baker County was in need for a second commercial bank and that it could support the existing bank as well as the proposed bank. At the date of final hearing the Baker County Federal Credit Union had approximately $1,300,000 in assets representing a significant increase over their assets of $729,000 in January 1975.
The Citizens Bank of Macclenny opened on January 3, 1924. It has made a profit every year since. The total IPC deposits for The Citizens Bank of Macclenny have grown from $8,873,000 in 1971 to $14,096,000 in 1976, with a net increase in total deposits in each of the intervening years. The increase in total IPC deposits for The Citizens Bank of Macclenny from 1975 to 1976 was
$373,000. Mr. Ruis testified that during 1975 and 1976 his bank lost many deposits because the Lake City Federal Savings and Loan facility was opened in Baker County and the Baker County Federal Credit Union began to experience substantial growth. The Citizens bank of Macclenny showed a rate of return on its total assets of 1.38 percent for 1974. This decreased significantly to .43 percent as of December 1975 and as of June 30, 196, stood at .42 percent. It was the testimony of the witnesses for Respondent that The Citizens Bank of Macclenny is not producing income that is reasonable in relationship to its total capitalization and that this is due primarily to the basic overall economic factors and the troubles that banks have in tight economic times in earning a sufficient spread on their total assets and creating a reasonable profit.
On July 17, 1975, Petitioner amended his application with regard to the future earnings prospects. (Exhibit 18) This amendment estimated the net current operating income for each of the first three years of operation of the proposed bank. For the first year it shows an estimated net loss of $36,700. For the second year it shows a net loss of $5,400. For the third year it shows a net gain of $39,900. Petitioner's estimate of its total deposits at the end of three years of operation as contained in its future earnings prospects as amended is $5,000,000. Mr. Ruis, president of The Citizens Bank of Macclenny, testified that in his opinion that after one year of operation the proposed bank could drain off $5,000,000 in deposits from The Citizens Bank of Macclenny. He further stated his opinion that the proposed bank might be able to get
$1,000,000 in deposits after a year's operation in addition to that which the proposed bank would drain off from the Citizens Bank.
Petitioner's application originally proposed a capitalization totaling
$500,000. At the request of Respondent, under the previous administration, Petitioner revised his application to show a total capitalization of $600,000, which was then recommended as adequate by the State Bank Examiner who received the application for Respondent. At the final hearing of this matter, Respondent's witness testified that the Comptroller feels that a minimum capitalization of $1,000,000 is necessary. This was the first knowledge Petitioner had of such a capitalization requirements. Respondent's witness
suggested that were this inadequacy of capitalization the only deficiency in the application, Petitioner would be given an opportunity to amend his application by making provision for a capitalization of $1,000,000. Beyond the foregoing problem there were no objections to the adequacy of the proposed capital structure of Petitioner.
The evidence presented indicates that the persons proposed as officers and directors by Petitioner are mature, respected citizens of Baker County and the State of Florida and are of sound financial character. Neither Respondent nor the president of The Citizens Bank of Macclenny disputed the banking experience, ability or standing of the proposed officers and directors. Therefore, it is found that they have sufficient banking or trust experience, ability and standing to assure reasonable promise of successful operation of the proposed bank.
The name of the proposed bank is The Security Bank of Macclenny. There is only one existing commercial banking institute in Baker County. Its name is The Citizens Bank of Macclenny. No objection was made by the existing bank or by Respondent to the name of the proposed bank and it is clearly not so similar to that of the existing bank to cause confusion.
The banking house quarters, as proposed, will be located at a convenient place in the city of Macclenny, Florida. The bank building is to be a single story and have 6,400 square feet of space with provision for four inside tellers and two drive-in tellers with space provided for one additional drive-in teller. Petitioner does not propose to attempt operation in temporary quarters. No evidence was introduced which would tend to show that the banking house quarters, as proposed, are not suitable. Therefore, it is found as fact that provision has been made by Petitioner for suitable banking housing quarters in the area specified in the application.
CONCLUSIONS OF LAW
When an application for authority to organize and operate a state banking facility is filed, it is the applicant's or Petitioner's responsibility to prove that 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 659.03(1), F.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 Section 659.03(2), F.S., wherein it is provided 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 of trust company is not so similar as to cause confusion with the name of an existing bank.
Provision has been made for suitable banking house quarters in the area specified in the application.
If, in the opinion of Respondent, any of the six foregoing requirements have not been met, it cannot approve an application. If the six foregoing requirements have been met, it still remains within the discretion of the department of approve or disapprove the application. The evidence presented by Petitioner and essentially undisputed by Respondent reasonably establishes that the requirements in Subsection 659.03(2)(a)(c)(d)(e) and (f), F.S., have been met.
Of the six criteria, the only one factually in dispute between Petitioner and Respondent is that found in Subsection 659.03(2)(b), F.S., wherein it is required that:
Local conditions assure reasonable promise of successful operation for the proposed bank
. . . and those banks . . . already established in the community.
The facts established in this proceeding show that for more than 50 years there has been only one commercial banking corporation in Baker County and that for every year of its existence that banking corporation has shown a profit. The deposits of the existing bank have increased approximately 59 percent since 1971 and are in excess of $14,000,000. The population of Baker County has been steadily growing with no evidence that such growth will cease in the near future. These facts and the others outlined in the Findings of Fact above paint a picture, in the words of the president of the existing bank of a normal, healthy growth pattern for the economy of Baker County. These facts, when considered together show, in the opinion of the Hearing Officer, that the local conditions assure a reasonable promise of successful operation for the proposed bank as well as the continued successful operation of that bank already established in the community. Therefore, it is concluded as a matter of law that the six requirements set out in Section 659.03(2), F.S., have been met by petitioner.
Based upon the Findings of Fact and Conclusions of Law recited above, it is RECOMMENDED that the specific statutory requirements for the granting of an application for a general banking corporation have been met and that it would, therefore, be within the lawful discretion of the Department of Banking and Finance to grant the application of Petitioner and it is further RECOMMENDED that no facts have been established to show that the department should not so exercise its discretion. In light of the matters discussed in paragraph 18, above, it would not be unreasonable to condition the granting of authority to establish a general banking corporation upon Petitioner's provision for a capitalization of $1,000,000.
DONE AND ENTERED this 4th day of March 1977 in Tallahassee, Florida.
CHRIS H. BENTLEY
John E. Mathews, Jr., Esquire
Ryland T. Rigsby, Esquire Office of the Comptroller Legal Annex
