STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
RE: FARMERS AND MERCHANTS BANK )
OF TRENTON, Application for )
Authority to Purchase or Acquire ) CASE NO. 79-086 Majority Control by P. Douglas )
Freedle and Charles R. Koons )
)
REPORT
Pursuant to notice, an administrative hearing was held before Diane D. Tremor, Hearing Officer with the Division of Administrative Hearings, on March 19, 1979, in Room 106 of the Collins Building, Tallahassee, Florida. The purpose of the hearing was to receive evidence concerning the application of P. Douglas Freedle and Charles R. Koons for a Certificate of Approval to purchase or acquire the majority stock of Farmers and Merchants Bank of Trenton, an existing bank. This Report is prepared in two portions, a public portion and a confidential portion. The confidential portion relates to the financial statements of the applicants.
APPEARANCES
For Petitioners: Halley B. Lewis, Esquire
Box 337
Bell, Florida 32619
For Applicants: L. Peter Johnson, Esquire
Martin, Ade, Birchfield and Johnson Post Office Box 59
Jacksonville, Florida 32201
For Department of
Banking and Finance: Karlyn Anne Loucks
Assistant General Counsel Office of the Comptroller The Capitol
Tallahassee, Florida 32301
INTRODUCTION AND RULINGS ON EVIDENTIARY MATTERS
On December 8, 1978, P. Douglas Freedle and Charles R. Koons (hereinafter referred to as "applicants"), filed an application with the Division of Banking, Department of Banking and Finance (hereinafter referred to as the "Department"), for a certificate of approval to purchase or acquire the majority stock of an existing bank. Petitioners timely filed a request for public hearing on the application.
At a prehearing conference held on February 12, 1979, motions for a protective order concerning the discovery of confidential materials were granted. Information deemed confidential under Florida Statutes, Sec. 658.10, was subject to an in camera inspection by the Hearing Officer and by all counsel
for the parties to this proceeding. During the portion of the hearing eliciting testimony regarding the applicants' financial status, all persons excepting counsel for the parties, were excluded from the hearing and those portions of the transcript were directed to be sealed.
Each party has submitted to the Hearing Officer proposed findings of fact.
Those proposed findings not substantially incorporated in this report are rejected as being either immaterial to the issue in dispute, conclusions of law or as having not been supported by competent evidence.
FINDINGS OF FACT
(Public Portion)
Upon consideration of the oral and documentary evidence adduced at the hearing, the following facts are found:
On December 8, 1978, the applicants filed their application for a Certificate of Approval of a proposal to purchase or acquire a majority of the outstanding capital stock of the Farmers and Merchants Bank of Trenton, located in Gilchrist County, Florida. The pertinent statutory provision which governs the approval of the acquisition of majority stock or control in an existing bank is as follows:
[T]he Department shall issue
said certificate of approval only after it has become satisfied that the proposed new owner or owners of the controlling
stock or interest are qualified by character, experience and financial responsibility to control and operate the said bank or trust company in a legal and proper manner, and that the interests of the stockholders, depositors and creditors of the bank or trust company and the interests of the public generally will not be jeopardized by the proposed change in ownership, interest, and management.
F.S. Sec. 659.14(1)
With the exception of the application form which has been promulgated as a rule, the Department of Banking and Finance does not have any rules regarding the acquisition of majority control of an existing bank. Mr. Fred Brannen, Jr., Assistant Director of the Division of Banking, testified as to the incipient policy of the Division with regard to applications for majority control. In determining whether the applicant is qualified by character, the Division performs background investigations, checking to see whether there has been any criminal convictions or judgments based on fraud against the applicant, and generally looks to see if the individuals maintain reputations of honesty and integrity, are successful in their own affairs and are therefore entitled to public trust and confidence.
In determining whether the applicant is qualified by experience, the Department looks to the biographical information supplied by the applicant. Although it is not necessary that the applicant have direct prior banking experience, the Department looks to see whether the applicant has comparable business experience which would illustrate that the applicant possesses sound business judgment which would facilitate his understanding of banking and banking problems.
In determining whether the applicant is qualified by financial responsibility, the Department looks to see whether the applicant has the financial capacity to fund the purchase of the stock without jeopardizing the bank. Specifically, the Department looks at the liquid assets, net worth and income. There are no written standards for determining financial responsibility. Such determinations are made on a case by case basis.
In determining whether the interest of the stockholders, creditors, depositors or the public generally is affected, the Department reviews any proposed changes in the policy, management or services of the bank. While recognizing that those stockholders who have agreed to sell their stock have made a business decision and are therefore protected, the Department feels that it has a duty to protect minority shareholders by requiring the proposed purchasers of majority stock to tender an offer to buy all of the stock for the same consideration and terms offered to other shareholders. Purchases for majority stock or control are generally made on a cash basis.
While a single application was filed with the Department, the two applicants are both purchasing as individuals, with each applicant contributing equally. There is no written agreement between Mr. Freedle and Mr. Koons with respect to the acquisition of the ownership of the bank.
Mr. Freedle received an undergraduate degree from the University of North Carolina in 1963, a law degree from the University of North Carolina in 1965 and a masters degree in tax law from New York University in 1967. He has been a member of the North Carolina Bar since 1965 and was employed as a tax attorney by Coopers and Lybrand from 1967 to 1970. Mr. Freedle is presently a joint owner and president of Janus Corporation and subsidiaries. Janus Corporation has no interests in banks. He is presently serving as chairman of the board, chief executive officer and director of a commercial bank in Corinth, Kentucky, known as the Corinth Deposit Bank of which he owns 46 percent. He is also director and a member of the finance committee of the Bank of Flagler Beach, Flagler Beach, Florida, and Farmers and Merchants Bank of Trenton, Trenton, Florida. Mr. Freedle formerly served as a director and chief executive officer of Community National Bank of Mt. Gilead, Ohio, and as a director of the Central Bank of South Daytona, Florida. To the best of his knowledge, all information contained in Mr. Freedle's biographical report filed with the Department is true and correct, with the exception that he no longer has an interest in the Community National Bank in Ohio and an agreement presently exists to sell the Central Bank of South Daytona back to the Directors at their cost.
Mr. Koons received a B.S. degree in accounting and economics from Pennsylvania State University in 1959 and a degree in corporate finance from the University of Pennsylvania, Wharton School of Finance, in 1964. He was employed by Goldman-Sachs as vice president of corporate finance from 1966 to 1970, and he has worked as an investment analyst for the First Pennsylvania Bank and Trust Company. He is presently a joint owner and executive vice president of Janus Corporation. Mr. Koons presently serves as a director, chairman of the board, and member of the finance committee of the Bank of Flagler Beach, Flagler Beach, Florida. He owns 46 percent of the Corinth Deposit Bank in Corinth, Kentucky. He serves as a director in the subject Trenton Bank. Mr. Koons formerly served as a director of Community National Bank in Mt. Gilead, Ohio, the Everett Bank in Everett, Pennsylvania, and the Central Bank of South Daytona. To the best of his knowledge, all information contained in Mr. Koons' biographical report is
true and correct, with the same exceptions noted above for Mr. Freedle and with the exception that he is now divorced.
According to testimony of Mr. Warren Wintaub, a general partner of Coopers and Lybrand who has known the applicants for 13 years and who was qualified as an expert in finance, both applicants have experience in banking and are highly regarded for their expertise in the area of financial affairs. Both are gentlemen of honor and have a high caliber of financial knowledge.
Both applicants have taken an active part in the Board of Director meetings of Farmers and Merchants Bank of Trenton and have brought experience and expertise in financial matters to the Board. There have been no complaints by the public about Mr. Freedle or Mr. Koons. The applicants have brought more stability and a wealth of knowledge in financial affairs to the Board of Directors of the Bank of Flagler Beach.
The applicants have never been arrested or indicted for a crime; are not under investigation by an agency, police department or other law enforcement agency; have not had a judgment entered against them in a case involving acts of fraud or dishonesty and have no pending litigation against them.
The present capital structure of the Farmers and Merchants Bank of Trenton consists of 20,000 outstanding shares of common stock at a par value of
$10.00 per share, for a total par value of $200,000.00. In addition, Farmers and Merchants Bank of Trenton has capital surplus in the amount of $550,000.00, and undivided profits in the amount of $195,000.00. Valuation reserves total
$65,000.00. There is no preferred stock and there are no capital reserves or capital notes. Thus the total amount of capital is $1,010,000.00.
There is no new capital proposed or contemplated at this time if the acquisition is approved. Recent market sales of the stock of Farmers and Merchants Bank of Trenton are not available. No exchange of corporate stock for bank stock has occurred in the past year.
The applicants presently do not own any stock in Farmers and Merchants Bank of Trenton and seek to acquire up to 10,000 shares for which no loan or loan commitment has been secured, according to the application. The total shares proposed to be acquired constitute 50 percent or more of the outstanding capital stock of the bank. The applicants will not utilize securities in connection with the proposed acquisition.
The proposed sellers of the stock are as follows: Elizabeth S. Hagan
4,481 shares; Carolyn S. Osteen - 200 shares; H.E. Osteen - 2,450 shares; and Helen D. Scott - 2,896 shares. The applicants have agreed to purchase these shares at 130 percent of the book value of the bank as of December 31, 1978.
Under the terms of the purchase agreement, 20 percent of the purchase price shall be payable in cash on the date of the sale with four equal annual payments of 20 percent payable on the four succeeding anniversary dates of the initial payment. Two other stockholders have tendered their shares pursuant to the same offer of purchase. These financial arrangements derive a tax benefit to the sellers.
The applicants initially offered to purchase all of the outstanding capital stock of Farmers and Merchants Bank of Trenton at 130 percent of the book value of the bank as of December 31, 1978, pursuant to the same terms and conditions offered to the proposed sellers. Subsequently, applicants authorized their counsel to offer to purchase Petitioners' stock at 130 percent of the book
value of the bank as of December 31, 1978, payable in cash within six months of obtaining a certificate of approval from the Comptroller. According to the letter from Halley Lewis to L. Peter Johnson, Petitioners authorized their counsel to accept a purchase price of 130 percent of the book value of the bank as of December 31, 1978 plus compensation (dividends and growth), payable in cash within six months after the issuance of a certificate of approval. The latter offer to petitioners has been withdrawn by the applicant.
Petitioner Cola H. Lewis, Petitioner Johnny H. Johnson and Petitioner Betty H. Pittman rejected the original offer because it was not a cash offer. They also felt applicants were not financially responsible or of sufficient character because they sought to purchase the stock on an installment basis rather than pay cash. Petitioner Lewis was also concerned that since the applicants do not live in the immediate area of the Trenton Bank, money would be removed from the community.
The acquisition of majority control by Freedle and Koons of the Bank of Flagler Beach has not jeopardized the interests of the stockholders, depositors and creditors of said Bank, according to the president of that Bank. Since 1975, when the applicant's purchased their controlling interest, the financial condition of the Corinth Deposit Bank in Kentucky has improved.
In accordance with the provisions of Florida Statutes, Sec. 120.57 (1)(a)(12), conclusions of law and a recommendation are not included in this Report.
Respectfully submitted and entered this 19th day of April, 1979, in Tallahassee, Florida.
DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304
(904) 488-9675
COPIES FURNISHED:
Comptroller Gerald A. Lewis State of Florida
The Capitol
Tallahassee, Florida 32301
L. Peter Johnson Post Office Box 59
Jacksonville, Florida 32201
Halley B. Lewis Route 1, Box 337
Bell, Florida 32619
Karlyn Anne Loucks Assistant General Counsel Office of the Comptroller The Capitol
Tallahassee, Florida 32304
================================================================= AGENCY FINAL ORDER
=================================================================
STATE OF FLORIDA DEPARTMENT OF BANKING AND FINANCE
DIVISION OF BANKING
RE: FARMERS AND MERCHANTS BANK
OF TRENTON, Application for
Authority to purchase or CASE NO. 79-086 Acquire Majority Control by P.
Douglas Freedle and Charles
R. Koons
/
FINDINGS OF FACTS, CONCLUSIONS OF LAW AND FINAL ORDER
Pursuant to Notice, an administrative hearing was held before Diane D. Tremor, Hearing Officer, with the Division of Administrative Hearings, on March 19, 1979, in Room 106 of the Collins Building, Tallahassee, Florida. The purpose of the hearing was to receive evidence concerning the application of P. Douglas Freedle and Charles R. Koons for a Certificate of Approval to purchase or acquire the majority stock of Farmers and Merchants Bank of Trenton, an existing bank. This Final Order is prepared in two sections, a public section and a confidential section. The confidential section relates to the financial statements of the applicants, and must remain confidential pursuant to Section 658.10, Florida Statutes.
APPEARANCES
For Petitioners: Halley B. Lewis, Esquire Box 337
Bell, Florida 32619
For Applicants: L. Peter Johnson, Esquire
Martin, Ade, Birchfield and Johnson Post Office Box 59
Jacksonville, Florida 32201
For Department Karlyn Anne Loucks
of Banking and Assistant General Counsel Finance: Office of the Comptroller
The Capitol
Tallahassee, Florida 32301
Upon consideration of the oral and documentary evidence adduced at the hearing, the Report of the Hearing Officer submitted on April 19, 1979, is hereby adopted and incorporated heroin, except the fifth, seventh and eighth sentences of paragraph four and the third sentence of paragraph 19 have been revised, and paragraphs 16 and 17 have been amended to comply with the facts in the record.
INTRODUCTION AND RULINGS ON EVIDENTIARY MATTERS
On December 8, 1978, P. Douglas Freedle and Charles R. Koons (hereinafter referred to as "Applicants"), filed an application with the Division of Banking, Department of Banking and Finance (hereinafter referred to as the "Department", for a certificate of approval to purchase or acquire the majority stock of an existing bank. Petitioners timely filed a request for public hearing on the application.
At a prehearing conference held on February 12, 1979, motions for a protective order concerning the discovery of confidential materials were granted. Information deemed confidential under Florida Statutes, 658.10, was subject to an in camera inspection by the Hearing Officer and by all counsel for the parties to the proceeding. During the portion of the hearing eliciting testimony regarding the applicants' financial status, all persons excepting counsel for the parties, were excluded from the hearing and those portions of the transcript were directed to be sealed.
Each party submitted to the Hearing Officer proposed findings of fact.
Those proposed findings not substantially incorporated in the Hearing Officer's report were rejected as being either immaterial to the issue in dispute, conclusions of law or as having not been supported by competent evidence.
FINDINGS OF FACT (PUBLIC SECTION)
Upon consideration of the oral and documentary evidence adduced at the hearing, the following facts are found:
On December 8, 1978, the Applicants filed their application for a Certificate of Approval of a proposal to purchase or acquire a majority of the outstanding capital stock of the Farmers and Merchants Bank of Trenton, located in Gilchrist County, Florida. The pertinent statutory provision which governs the approval of the acquisition of majority stock or control in an existing bank is as follows:
. . . [T]he Department shall issue said certificate of approval only after it has become satisfied that the proposed new owner or owners of the controlling stock or interest are qua- lified by character, experience and
financial responsibility to control and operate the said bank or trust company in a legal and proper manner, and that the interests of the stockholders, depo-
sitors and creditors of the bank or trust company and the interests of the public
generally will not be jeopardized by the proposed change in ownership, interest, and management. F.S. Section 659.14(1)
With the exception of the application form which has been promulgated as a rule, the Department of Banking and Finance does not have any rules regarding the acquisition of majority control of an existing bank. Mr. Fred Brannen, Jr., Assistant Director of the Division of Banking, testified as to the incipient policy of the Division with regard to applications for majority control. In determining whether the applicant is qualified by character, the Division performs background investigations, checking to see whether there has been any criminal convictions or judgments based on fraud against the applicant, and generally looks to see if the individuals maintain reputations of honesty and integrity, are successful in their own affairs and are therefore entitled to public trust and confidence.
In determining whether the applicant is qualified by experience, the Department looks to the biographical information supplied by the applicant. Although it is not necessary that the applicant have direct prior banking experience, the Department looks to see whether the applicant has comparable business experience which would illustrate that the applicant possesses sound business judgment which would facilitate his understanding of banking and banking problems.
In determining whether the applicant is qualified by financial responsibility, the Department looks to see whether the applicant has the financial capacity to fund the purchase of the stock without jeopardizing the bank. Specifically, the Department looks at the liquid assets, net worth and income. There are no written standards for determining financial responsibility. Such determinations are made on a case by case basis.
In determining whether the interest of the stockholders', creditors, depositors or the public generally is affected, the Department reviews any proposed changes in the policy, management or services of the bank while recognizing that those stockholders who have agreed to sell their stock have made a business decision and are therefore protected, the Department feels that it has a duty to protect minority shareholders by requiring the proposed purchasers of majority stock to tender an offer to buy all of the stock for the same consideration and terms offered to other shareholders. Purchases for majority stock or control are generally made on a cash basis.
While a single application was filed with the Department, the two applicants are both purchasing as individuals, with each applicant contributing equally. There is no written agreement between Mr. Freedle and Mr. Koons with respect to the acquisition of the ownership of the bank.
Mr. Freedle received an undergraduate degree from the University of North Carolina in 1963, a law degree from the University of North Carolina in 1965 and a masters degree in tax law from New York University in 1967. He has been a member of the North Carolina Bar since 1965 and was employed as a tax attorney by Coopers and Lybrand from 1967 to 1970. Mr. Freedle is presently a joint owner and president of Janus Corporation and subsidiaries. Janus Corporation has no interests in banks. He is presently serving as chairman of the board and director of a commercial bank in Corinth, Kentucky, known as the Corinth Deposit Bank of which he owns 46 percent. He is also director and a member of the finance committee of the Bank of Flagler Beach, Flagler Beach, Florida, and Farmers and Merchants Bank of Trenton, Trenton, Florida. Mr.
Freedle formerly served as a director and president of Community National Bank of Mt. Gilead, Ohio, and as a director of the Central Bank of South Daytona, Florida. To the best of his knowledge, all information contained in Mr.
Freedle's biographical report filed with the Department is true and correct, with the exception that he no longer has an interest in the Community National Bank of Ohio.
Mr. Koons received a B.S. degree in accounting and economics from Pennsylvania State University in 1959 and a degree in corporate finance from the University of Pennsylvania, Wharton School of Finance, in 1964. He was employed by Goldman-Sachs as vice president of corporate finance from 1966 to 1970, and he has worked as an investment analyst for the First Pennsylvania Bank and Trust Company. He is presently a joint owner and executive vice president of Janus Corporation. Mr. Koons presently serves as a director, chairman of the board, and member of the finance committee of the Bank of Flagler Beach, Flagler Beach, Florida. He owns 46 percent of the Corinth Deposit Bank in Corinth, Kentucky. He serves as a director in the subject Trenton Bank. Mr. Koons formerly served as a director of Community National Bank in Mt. Gilead, Ohio, the Everett Bank in Everett, Pennsylvania, and the Central Bank of South Daytona. To the best of his knowledge, all information contained in Mr. Koons' biographical report is true and correct, with the same exceptions noted above for Mr. Freedle and with the exception that he is now divorced.
According to testimony of Mr. Warren Wintrub, a general partner of Coopers and Lybrand who has known the Applicants for 13 years and who was qualified as an expert in finance, both Applicants have experience in banking and are highly regarded for their expertise in the area of financial affairs. Both are gentlemen of honor and have a high caliber of `financial knowledge.
Both Applicants have taken an active part in the Board of Director meetings of Farmers and Merchants Bank of Trenton and have brought experience and expertise in financial matters to the Board. There have been no complaints by the public about Mr. Freedle or Mr. Koons. The Applicants have brought more stability and a wealth of knowledge in financial affairs to the Board of Directors of the Bank of Flagler Beach.
The Applicants have never been arrested or indicted for a crime; are not under investigation by an agency, police department or other law enforcement agency; have not had a judgment entered against them in a case involving acts of fraud or dishonesty and have no pending litigation against them.
The present capital structure of the Farmers and Merchants Bank of Trenton consists of 20,000 outstanding shares of common stock at a par value of
$10.00 per share, for a total par value of $200,000.00. In addition, Farmers and Merchants Bank of Trenton has capital surplus in the amount of $550,000.00, and undivided profits in the amount of $195,000.00. Valuation reserves total
$65,000.00. There is no preferred stock and there are no capital reserves or capital notes. Thus, the total amount of capital is $1,010,000.00.
There is no new capital proposed or contemplated at this time if the acquisition is approved. Recent market sales of the stock of Farmers and Merchants Bank of Trenton are not available. No exchange of corporate stock for bank stock has occurred in the past year.
The Applicants presently do not own any stock in Farmers and Merchants Bank of Trenton and seek to acquire up to 10,000 shares for which no loan or loan commitment has been secured, according to the application. The
total shares proposed to be acquired constitute 50 percent or more of the outstanding capital stock of the bank. The Applicants will not utilize securities in connection with the proposed acquisition.
The proposed sellers of the stock are as follows: Elizabeth S. Hagan
4,481 shares; Carolyn S. Osteen - 200 shares; H. E. Osteen - 2,450 shares; and Helen D. Scott - 2,896 shares. The Applicants have agreed to purchase these shares at 130 percent of the book value of the bank as of December 31, 1978.
Under the terms of the purchase agreement, 20 percent of the purchase price shall be payable in cash on the date of the sale with four equal annual payments of 20 percent payable on the four succeeding anniversary dates of the initial payment. Two other stockholders have tendered their shares pursuant to the same offer of purchase. These financial arrangements derive a tax benefit to the sellers.
The Applicants initially offered to purchase all of the outstanding capital stock of Farmers and Merchants Bank of Trenton at 130 percent of the book value of the bank as of December 31, 1978, pursuant to the same terms and conditions offered to the proposed sellers. Subsequently, Applicants authorized their counsel to offer to purchase Petitioners' stock at 130 percent of the book value of the bank as of December 31, 1978, payable in cash within six months of obtaining a certificate of approval from the Comptroller. According to the letter from Halley Lewis to L. Peter Johnson, Petitioners authorized their counsel to accept a purchase price of 130 percent of the book value of the bank as of December 31, 1978, plus compensation (dividends and growth) , payable in cash within six months after the issuance of a certificate of approval. The latter offer to Petitioners has been withdrawn by the Applicants.
Petitioner Cola H. Lewis, Petitioner Johny H. Johnson and Petitioner Betty H. Pittman rejected the original offer because it was not a cash offer. They also felt Applicants were not financially responsible or of sufficient character because they sought to purchase the stock on an installment basis rather than pay cash. Petitioner Lewis was also concerned that since the Applicants do not live in the immediate area of the Trenton Bank, money would be removed from the community.
The acquisition of majority control by Freedle and Koons of the Bank of Flagler Beach has not jeopardized the interests of the stockholders, depositors and creditors of said Bank, according to the president of that Bank. Since 1975, when the Applicant's purchased their controlling interest, the financial condition of the Corinth Deposit Bank of Kentucky has improved.
Paragraphs (16) through (20) of the Findings of Fact are contained in a confidential section to this Final Order.
(21) The Deputy Comptroller, Gerri Raines Dolan, and the Director of the Division of Banking, Ryland Terry Rigsby, as advisory staff members to the Comptroller, reviewed the Hearing Officer's Report and the entire record. They assisted and concurred with the Comptroller in the ultimate determination of this application.
RULINGS ON EXCEPTIONS TO REPORT
Pursuant to Rule 3C-9.11, Florida Administrative Code, the Petitioners filed exceptions to the Hearing Officer's Report on April 30, 1979. Neither the Applicants nor the Department filed exceptions to the Hearing Officer's Report. The Department rules on the Petitioners' exceptions as follows:
The Petitioners' position in their first exception is that the Hearing Officer should have submitted a recommended order pursuant to Section 120.57(1)(b)8, Florida Statutes, rather than a report pursuant to Section 120.57(1)(b)12, Florida Statutes, since the application for authority to purchase or acquire majority control is not an application for a license or merger.
The term "license" as used in Section 120.57(1)(b)12, Florida Statutes, applies to applications for a certificate of approval for authority to purchase or acquire majority control as well as applications for authority to organize a bank or savings and loan association; applications for authority to establish a branch bank or branch savings and loan association; credit union applications for a certificate of organization; applications for approval of merger; applications for a change in location of head office or branch of state chartered bank; applications for authority to establish a trust service office and applications for authority to exercise trust powers. All of these applications are considered applications for "licenses" or mergers pursuant to Titles XXXVI and XXXVII, Florida Statutes. Therefore, the Hearing Officer for the Division of Administrative Hearings properly submitted a report pursuant to Section 120.57(1)(b)12.
The Petitioners' position in their second exception is that the report should have included a finding of fact that the sellers of 10,027 shares of the bank stock had already committed themselves to sell before the offer was communicated to Petitioners which indicated that the Applicants lacked financial responsibility.
This finding is neither relevant nor material to the determination of financial responsibility.
CONCLUSIONS OF LAW AND REASONS
When an application for authority to purchase or acquire a majority of the outstanding capital stock of, or controlling interest in any state bank or trust company is filed, it is the applicant's responsibility to prove that the statutory and regulatory factors warranting the grant of authority are met. It is the Department's duty to consider and review the application and then approve or disapprove the application in its discretion. This discretion is neither absolute nor unqualified but is instead conditioned by consideration of the following factors:
That the proposed new owner or owners of the controlling stock or interest are qualified by character, experience and financial responsibility to control and operate the said bank or trust company in a legal and proper manner (Section 659.14(1), Florida Statutes).
That the interests of the stockholders, depositors and creditors of the bank or trust company will not be jeopardized by the proposed change in ownership, interest and management (Section 659.14(1), Florida Statutes).
The interest of the public generally will not be jeopardized by the proposed change in ownership, interest and management (Section 659.14(1), Florida Statutes).
That the proposed new owner of the controlling stock or interest is not a bank, trust company or holding company, the operations of which are
principally conducted outside of the State of Florida, and that each subscriber is purchasing the stock of the said bank in good faith in his own right and not as attorney or agent for any undisclosed person or entity (Section 659.141(1), Florida Statutes).
That the proposed new owner or owners of the controlling stock or interest have agreed to purchase all of the outstanding stock of the bank, upon demand at the option of every stockholder thereto, and to pay for same at the same price or consideration paid for any of the stock purchased in connection with the acquisition of the majority interest (Form DBF-C-11, Florida Administrative Code)
If, in the opinion of the Department, any of the five foregoing requirements set forth in paragraph one above have not been met, and cannot be remedied by the Applicants, it cannot approve the application. The Department believes that applicants can, at least under certain circumstances, remedy the factors set forth in requirements B, C, and E above, if they are found to be partially inadequate. For example, if all other statutory and regulatory criteria are met, the proposed new owner or owners may be required to enter into an agreement with the Department restricting certain activities of the bank, for the establishment of an escrow fund, for the filing of a bond, for the amendment of the articles of incorporation of the bank or any other restriction that the Department feels necessary to protect the interest of the shareholders, depositors and creditors of the bank as well as the interest of the public in general. Furthermore, it is the Department's policy to allow the applicants to make certain changes to these factors if all other criteria are met; to do otherwise, would be to subject the Applicants to unnecessary red tape. However, it is the Department's position that there is little, if anything, that the applicant or applicants can do to alter the factors set forth in requirement A and D above, since the applicants CANNOT easily change their character, experience and financial responsibility or their status as a foreign bank, trust company or holding company.
It is the opinion and conclusion of the Department that, based upon the record, the Applicant is qualified by character, experience and financial responsibility to control and operate the said bank or trust company in a legal and proper manner. Therefore, criterion A above IS met.
The Applicants have substantial educational qualifications and business experience, and appear to have reputations of honesty and integrity. Both of the Applicants have prior banking experience and extensive backgrounds in financial matters. Their individual net worths indicate that they have the financial capacity to fund the purchase of the stock. In addition,. the record indicates the Applicants are financially responsible in their personal and business dealings.
It is the opinion and conclusion of the Department that, based upon the record, the interest of the stockholders, depositors and creditors of the bank or trust company will not be jeopardized by the proposed change in ownership, interest and management. Therefore, criterion B above IS met.
The Department of Banking and Finance must look to the current motive and to the future intentions of the proposed owner or owners in taking control of an existing bank. This situation where a few individuals have control over a large amount of assets that belong to others, requires a severe scrutiny by the Department of the proposed takeover.
The record indicates that the Applicants have no immediate plans to change the management or the Board of Directors of the Farmers and Merchants Bank of Trenton. The Applicants are presently serving on its Board of Directors and have taken an active part in its meetings, utilizing their experience and expertise in financial affairs.
It is the opinion and conclusion of the Department that, based upon the record, the interest of the public in general will not be jeopardized by the proposed change in ownership, interest and management. Therefore, criterion C above IS met.
Banking involves a public trust. Unlike private enterprise establishments generally, banks operate on the public's capital and therefore, the legislature has vested with the Comptroller the responsibility to protect that public interest. Furthermore, the failure of a bank, as opposed to the private enterprise establishments generally, may have an unsettling effect on the overall economic welfare of the community, and that is why the Florida Legislature and the United States Congress have imposed stringent requirements for the industry. This Department is responsible for enforcing this legislative standard.
The Applicants' experience and expertise in banking and financial affairs indicate that they are qualified to continue the operation of the Farmers and Merchants Bank of Trenton in a reasonably successful manner, and thus ensure that the financial resources of the residents in the community will remain stable and safe.
It is the opinion and conclusion of the Department that the control of the Farmers and Merchants Bank of Trenton is not being acquired by a bank, trust company or holding company, the operations of which are principally conducted outside of this State and that each subscriber to purchase stock of the said bank is doing so in good faith in his own right and not as attorney or agent for any undisclosed person or entity. Therefore, criterion D above IS met.
Section 659.141(1), Florida Statutes, prohibits any bank, trust company or holding company, whose operations are principally conducted out of state, from acquiring or controlling directly or indirectly, all, or substantially all of the assets of a bank in this State. The record shows that the Applicants are purchasing controlling interests in the Farmers and Merchants Bank of Trenton as individuals, each in his own right, and not as agents or attorneys for an undisclosed person or entity.
It is the opinion and conclusion of the Department that the proposed new owner or owners have agreed to purchase all of the outstanding stock of the bank, upon demand, and at the option of every stockholder thereof, and to pay for same at the same price or consideration paid for any of the stock purchased in connection with the acquisition of the majority interest. Therefore, criterion E above IS met.
It is the duty of the Department of Banking and Finance to protect the interests of the minority stockholders in a bank takeover since they exercise less control in the operations of the bank and are in a position where their interests might not be as equitably represented. Thus, the Department requires that these minority shareholders have the opportunity to sell their interest at the same price and terms as the sellers of the majority control.
The Applicants have made an offer to purchase all of the stock of the bank pursuant to the same terms and conditions offered to the proposed sellers.
FINAL ORDER
Based upon the record, the Findings of Fact, and Conclusions of Law recited above, it is established that the statutory and regulatory criteria set forth above have been met. It is thereupon:
ORDERED that authority to acquire a majority of the outstanding capital stock in The Farmers and Merchants Bank of Trenton, located in Gilchrist County, State of Florida, is hereby granted to the Applicants, P. Douglas Freedle and Charles R. Koons, upon the following conditions:
The Applicants shall make an offer to purchase all of the stock of the bark from every shareholder at the time of consummation of purchase of control at the same price and pursuant to the same terms and conditions offered to the sellers of the majority control, and shall purchase these shares, provided that the holders present their shares for purchase within sixty days of the offer to purchase.
Any changes in the structure of ownership from that proposed in the application or the terms and conditions of the offer to purchase agreement must be reported to the Department to determine continued compliance with Section 659.14, Florida Statutes.
That appropriate notice be filed with the Federal Deposit Insurance Corporation, as required by the Financial Institutions Regulatory and Interest Rate Control Act of 1978.
Until the acquisition has been completed, the Department shall have the right to alter, suspend, or withdraw its approval should any interim development be deemed by the Department to warrant such action.
This Order shall constitute the Certificate of Approval of the Comptroller authorizing the proposed change of control. This Certification shall expire six months from today, unless the acquisition is completed prior to that time, or extended upon application submitted prior to that date.
DONE AND ORDERED this 21st day of May, 1979, in Tallahassee, Florida.
GERALD A. LEWIS
Comptroller, State of Florida The Capitol
Tallahassee, Florida 32301
| Issue Date | Proceedings |
|---|---|
| May 28, 1979 | Final Order filed. |
| Apr. 19, 1979 | Recommended Order sent out. CASE CLOSED. |
| Issue Date | Document | Summary |
|---|---|---|
| May 21, 1979 | Agency Final Order | |
| Apr. 19, 1979 | Recommended Order | Petitioners and Respondents debate whether bank should be licensed. No Recommended Order as per the statute. |
