STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
FLORIDA ASSOCIATION OF REGISTERED ) BANK HOLDING COMPANIES, INC. )
)
Petitioner, )
)
vs. ) CASE NO. 79-1229
)
U.S. TRUST COMPANY OF FLORIDA, )
and OFFICE OF THE COMPTROLLER, )
STATE OF FLORIDA, )
)
Respondents. )
) FLORIDA BANKERS ASSOCIATION, )
)
Petitioner, )
)
vs. ) Case No. 79-1235
)
U.S. TRUST COMPANY OF FLORIDA, )
and OFFICE OF THE COMPTROLLER, )
STATE OF FLORIDA, )
)
Respondents, )
and )
) FIRST NATIONAL BANK IN PALM BEACH, ) BESSEMER TRUST COMPANY OF FLORIDA, ) THE BANK OF PALM BEACH AND TRUST ) COMPANY, FIRST BANK AND TRUST COMPANY ) OF BOCA RATON, FIRST NATIONAL BANK ) AND TRUST OF RIVIERA BEACH, BOCA RATON ) NATIONAL BANK, ATLANTIC NATIONAL BANK ) OF PALM BEACH COUNTY, )
)
Intervenors. )
)
REPORT
A hearing was held in the above captioned matters, after due notice, at West Palm Beach, Florida, on November 1-2, and 5-8, 1979, before Thomas C. Oldham, Hearing Officer.
APPEARANCES
For Petitioners: J. Thomas Cardwell, Esquire
Michael McMahon, Esquire 17th Floor, CNA Building Post Office Box 231 Orlando, Florida 32302
For Respondent Phillip G. Newcomm, Esquire
U.S. Trust Company Bowman Brown, Esquire
of Florida: Arnold L. Berman, Esquire 1000 Southeast First National Bank Building
Miami, Florida 33131
For Respondent Eugene Cella, Esquire Comptroller of Florida: Franklyn J. Wollett, Esquire
Office of the Comptroller The Capitol
Tallahassee, Florida 32301
For Intervenors First Bank and Trust Company
of Boca Raton, First J. Thomas Cardwell, Esquire National Bank and Trust Michael McMahon, Esquire Company of Riviera Beach 17th Floor, CNA Building and Atlantic National Post Office Box 231
Bank of West Palm Beach: Orlando, Florida 32002
For Intervenors First James G. Pressly, Jr., Esquire National Bank in Palm Gunster, Yoakley, Criser, Beach and Bessemer Stewart and Hirsey, P. A. Trust Company of First National Bank Building Florida: Palm Beach, Florida 33480
For Intervenor The Bank H. David Faust, Esquire
of Palm Beach and Burns, Middleton, Farrell & Faust Trust Company: 205 Worth Avenue
Palm Beach, Florida 33480
For Intervenor Boca Robert I. MacLaren, II, Esquire Raton National Bank: Osborne and Hankins
Post Office Drawer 40
855 South Federal Highway Suite 200
Boca Raton, Florida 33432
The purpose of the hearing was to receive evidence concerning the application of proposed U.S. Trust Company of Florida for authorization to organize a trust company pursuant to Chapter 659, Florida Statutes.
The public hearing in this proceeding was preceded by prehearing conferences held on August 3 and September 17, 1979. As a result of those conferences, Petitions to intervene in this proceeding were granted to the above captioned Intervenors. Petitions for intervention filed by seventeen state financial institutions were denied because their locations were outside the primary service area of the proposed trust company.
Motions of the Petitioners and several Intervenors to consolidate these cases with four pending cases involving three similar applications in Palm Beach County were granted pursuant to Rule 28-5.07, Florida Administrative Code. Those cases consolidated with these for the purpose of hearing were Florida Association of Registered Bank Holding Companies, Inc., vs. DBT Trust Company of Florida and Office of the Comptroller, DOAH Case No. 79-1228; Florida Bankers
Association vs. DBT Trust Company of Florida and Office of the Comptroller, DOAH Case No. 79-1234; First National Bank in Palm Beach and Florida Bankers Association vs. Harris Trust Company of Florida and Office of the Comptroller, DOAH Case No. 79-1471; and Florida Association of Registered Bank Holding Companies, Inc. and Florida Bankers Association vs. Bankers Trust Company of Florida and Office of the Comptroller, DOAH Case No. 79-917. Motions to consolidate these cases with that involving a similar application in Miami, Florida, Florida Bankers Association vs. Manufactureres Hanover Trust Company of Florida and Office of the Comptroller, State of Florida, DOAH Case No. 79-1190, was denied for failure to meet the criteria of similarity of facts and identity of parties, as required under Rule 28-5.07, Florida Administrative Code.
Bankers Trust Company of Florida, Case No. 79-917, did not participate at the hearing pursuant to Order of the Comptroller of Florida, dated October 24, 1979, which granted the Applicant's motion to hold its application in abeyance.
A Prehearing Order was issued on October 5, 1979, which permitted discovery requests concerning the operations of investment advisory services being conducted in Palm Beach County by the applicant's parent corporation or affiliate, but denied discovery concerning the profitability of operations of the Applicant's parent corporation or affiliates in states other than Florida for the reason that such information would not reasonably lead to the discovery of relevant and admissible evidence in this proceeding. Various other discovery motions pending at the commencement of the hearing were rendered moot either by intervening compliance by the parties or failure to pursue the motions at that time.
A motion of Petitioner and certain Intervenors for continuance of the hearing, dated October 10, 1979, predicated on the pendency of judicial proceedings in the Supreme Court of the United States concerning the constitutionality of Section 659.141, Florida Statutes, was denied by Order dated October 23, 1979. Motions of the First National Bank of Palm Beach to Compel Responses of the Applicant to Interrogatories concerning the investment performance of the Applicant's parent corporation in New York was provisionally denied at the commencement of the hearing. Although some evidence concerning this issue was presented during course of the hearing, the provisional ruling is confirmed he re in for the reason that it was shown that investment decisions of the proposed trust company will be independently made by its officials. The Intervenors further motions to compel the Applicant to answer interrogatories concerning litigation against the New York based United Trust Company was denied as irrelevant to this proceeding.
A Motion for Continuance of the hearing filed by the Bank of Palm Beach and Trust Company on the general ground that insufficient time or information had been developed from prior discovery requests, and that the hearing was premature in view of current judicial and legislative events was denied as not constituting sufficient cause for continuance. It is considered that the possibility of legislative or judicial developments in the area under consideration is speculative and contingent, and that adequate time was allowed the parties to permit discovery sufficient for preparation for hearing.
The Applicant properly published Notice of Hearing in the Palm Beach Post on October 12, 1979, within the time period specified in Rule 3C-9.05, Florida Administrative Code (Exhibit 6)
Thirty-five exhibits were offered in evidence during the consolidated hearing. All were received in evidence except for Exhibits 23, 24, 33, and 34.
Exhibit 23 was the text of testimony by various representatives of Petitioner Florida Banking Association before a Congressional Subcommittee on October 16, 1979. Exhibit 24 purported to be excerpts of testimony received by the same Congressional Subcommittee that date. Exhibit 33 was a map of Boca Raton, Florida and vicinity, and Exhibit 34 was a purported application of Proposed Security Trust Company of Palm Beach to the Comptroller of Florida. All these documents wore hearsay in nature and the subject of objections by opposing parties. Exhibits 23 and 24 were rejected by the Hearing Officer as irrelevant to matters in issue in this state proceed Inc. Exhibit 33 purported to delineate affluent areas thereon, but was insufficiently supported by testimonial evidence. Exhibit 34 was rejected as irrelevant to this proceeding. Those exhibits used as a basis for a finding of fact herein are noted at the end of each numbered finding.
No member of the general public requested an opportunity to present oral or written communications at the hearing.
The Applicant filed a post-hearing Proposed Hearing Officer's Report, and post-hearing submissions were also filed by the Florida Bankers Association, and First National Bank in Palm Beach and Bessemer Trust Company of Florida. The latter submissions are predominantly conclusory in nature and therefore portions of the same should be considered by the Comptroller in any Final Order rendered in this proceeding. The proposed Findings of Fact contained In the foregoing submissions have been fully considered by the Hearing Officer and those portions thereof which have not been incorporated into the Findings of Fact herein are considered to be either irrelevant, unnecessary, or unwarranted by the evidence presented at the hearing.
Respondent Comptroller submitted a statement of current policy of the Division of Banking, Department of Banking and Finance, as to state trust companies, together with copies of final orders issued by the Comptroller in cases involving applications of First Family Trust Company, Security Trust Company of Palm Beach, Florida, Security Trust Company of Naples, and American Savings Trust, Inc., for authority to organize proposed new trust companies.
These documents were received in evidence without objection. The Comptroller's incipient policy was not controverted during the course of; the hearing. (Exhibit 5) The Comptroller and the Applicant filed post-hearing copies of; the Comptroller's Final Order in the case of Security Trust Company of Palm Beach, dated November 19, 1979, and requested that it he incorporated as a supplemental submission to Exhibit 5. It is considered inappropriate to include the requested document in the record of this proceeding, absent stipulation of all parties, since it was entered after the conclusion of the hearing. (Hearing Officer's Composite Exhibit 1)
FINDINGS OF FACT
On May 14, 1979, the Division of Banking, Department of Banking and Finance, received an application submitted by Berkeley D. Johnson, Thomas Melfe, Peter V. Van Beuren, John A. Rogers, III, and Carl J Stinchcomb (hereinafter Applicant) , pursuant to Section 650.02, Florida Statutes, for authority to organize a corporation for the purpose of conducting a trust business to be located at 125 Worth Avenue, Palm Beach, Florida. The proposed trust company will be named "U.S. Trust-Company of Florida." It will be a wholly owned subsidiary of U.S. Trust Corporation, New York, New York. U.S. Trust Corporation is also the parent of U.S. Trust Company of New York (Testimony of Melfe, Exhibit 4)
Each organizer of the proposed trust company will be a director and the full board will serve as the trust committee. Four of the five Proposed directors have had extensive experience in the trust business, and the other has had similarly long experience with financial institutions and one year as a trust officer. The proposed president and chief executive officer of the proposed trust company has had 18 years experience in the trust business. All of the proposed directors are United States citizens and there is no evidence that any has been convicted of a criminal offense. Three of the five proposed directors have resided in Florida for at least one year. (Testimony of Melfe, Stinchcomb, Exhibit 4)
The proposed capital structure of the trust company will be $2,000,000, allocated $1,000,000 to Common Stock, $700,000 to surplus and $300,000 to undivided profits. In the opinion of a former director of the Federal Deposit Insurance Corporation, the capital structure is considered adequate for the security of $300,000,000 in trust assets. (Testimony of Wille, Exhibit 4)
The proposed trust company will utilize 1900 square feet on the second floor of a professional building located at 125 Worth Avenue, Palm Beach, Florida. The office space is presently being used by an investment advisory representative office previously established by United States Trust Company of New York. That operation will be terminated when the proposed trust company becomes functional. The present lease is for a term of five years terminating in February 1982 at a current annual rent of $21,000, plus a share of the building's operating expenses. Total occupancy expense during the first, second and third years is expected to be $25,000, $25,000 and $30,000, respectively. The current lease will be assigned to the proposed trust company. (Testimony of Stinchcomb, Exhibit 4)
The Applicant's purpose in seeking to establish a trust company in Florida is to provide better service to a substantial portion of some 500 present customers of United States Trust Company of New York who reside in the State of Florida, and to seek now trust business in the Applicant's designated Palm Beach County primary service area which, in its view, constitutes an are that has great potential for significant growth as a trust market. Additionally, the Applicant desires to maintain a long-range corporate competitive position with other New York and Chicago based institutions with regard to the establishment of trust facilities in Florida.
The Applicant proposes to offer all services normally associated with a non-deposit trust company at fees comparable to those presently being charged by existing trust institutions in the primary service area. Those services include estate planning and executor services, personal trust services, personal financial planning, real estate management and consulting, closely held and family business services, investment management services, income tax planning and preparation of returns, and custody service.
The proposed trust company will initially employ six individuals, three of whom will be corporate officers. Support services utilizing the staff and systems of the U.S. Trust Company of New York will he obtained by the Applicant under contractual arrangements at basically the same fees as those charged to correspondent banks for similar services. These services will include record keeping and data processing, investment and tax advice, custody service, and similar operational support. Personnel employed by the proposed trust company will solicit new accounts, maintain various account records, and provide independent investment and estate planning advice and services. (Testimony of Melfe, Stinchcomb, Exhibits 4, 30)
The Applicant's designated primary service area is all of the area located within Palm Peach County, Florida. The Applicant is of the opinion that the defined PSA encompasses the smallest area from which the proposed trust company can anticipate obtaining 75 percent or more of its prospective business, including transfer of existing accounts of customers of United States Trust Company of New York who reside in the primary service area. (Testimony of Melfe, Stinchcomb, Exhibit 4)
The population of Palm Beach County increased from 348,993 persons in 1970 to 534,551 persons in 1978, an increase of 53.2 percent. The population of the State of Florida increased during a similar period by 32 percent. It is projected that the county population will increase to 673,000 by mid-1985. In mid-1978, Palm Beach County ranked 6th in population in the state. Almost 91 percent of the county's increased population during the period 1970-1978 was due to migration of individuals moving into the area rather than natural increase of the population. About one-third of such migration consisted of New York residents moving to Palm Beach County.
Between 1970 and 1978, the 45 to 64 age group of Palm Beach County's population expanded from 79,298 to 120,469. The age group of 65 years and older increased from 60,655 to 110,825 during the same period. The 1970 to 1978 increase of county residents aged 45 years or more was 91,351 persons or 65.3 percent. The comparable percentage increase throughout Florida was 44 percent. It is estimated that from 1976 to 1985 the age group of 45 years and older will increase from 231,294 to 290,736. In 1978, those persons over 45 years of age constituted 43.2 percent of the population. The number of households in Palm Beach County in 1970 was 123,347 and is estimated to increase to 202,615 in 1980.
In 1976, the per capita income of Palm Beach County residents was
$7,165 as compared to $6,101 for the state population. In 1977, per capita income in Palm Beach County increased to $7,872 compared to $6,697 for the state. The average household effective buying income in Palm Beach County in 1978 was over $20,000 while the average for the state was $16,482. Such income is estimated to increase to $25,541 in Palm peach County by 1982 and to $21,101 for the state. During a one year period between 1977 and 1978, there were 483 estate tax returns filed in Palm Beach County, of which 40.2 percent had a gross value of over $500,000. The average value of the estates was $935,242. Those estates over one million dollars constituted 16.8 percent of the total number of estates. About 40 percent of the estates were over $500,000 and this group constituted 83 percent of the total gross value of all estates during that period. Of the total number of 483 estate tax cases, corporate fiduciaries were named as sole executor in only 72 estates, and served with individual cofiduciaries in 21 additional cases. Of 81 estates valued at one million dollars or more, only 15 estates were handled by corporate fiduciaries and in four additional cases a corporate fiduciary served jointly with an individual.
Between 1975 and 1978, deposits of Palm Beach County financial institutions increased by 59.3 percent, while deposits in the state as a whole increased by 44.8 percent during the same period. Palm Beach County's per capita deposits increased from $6,990 in 1975 to $9,954 in 1978. Per capital deposits in the state as a whole were $5,376 in 1975 and $7,364 in 1978. In 1978, personal intangible tax returns for Palm Beach County show that 51.4 percent of the 15,700 returns included taxable personal assets of $100,000 or more. Almost ten percent of the returns included taxable assets of $500,000 or more and 4.39
percent were of one million dollars or more. (Testimony of Badalich, Exhibits 1, 4, 26)
The application reflects that in 1977, some 800 million dollars in trust assets were under management in Palm Beach County by 15 insured commercial banks. About 40 percent of these assets were administered by the First National Bank in Palm Beach. During the period between 1972 and 1977, total trust assets under management by commercial banks in Palm Beach County increased over 32 percent while similar assets in banks throughout Florida increased 6.8 percent. Most of the banks providing trust services in Palm Beach County are affiliated with holding companies. There is one non-deposit trust company, Bessemer Trust Company of Florida, located in Palm Beach County, which is affiliated with out- of-state corporations. The combined total trust assets of all sixteen of the financial institutions in Palm Beach County totaled almost 938 million dollars as of December, 1978. In 1979, five of eight pending applicants for trust companies in Palm Beach County showed an existing volume of trust assets under management in Palm Beach County of almost 400 million dollars.
Although Palm Beach County has been experiencing substantial population growth which is expected to continue into the future, not all of the affluent areas of the county are susceptible to continuing growth. The Town of Palm Beach is limited in growth possibilities and has increased by only 2,539 persons in the last ten years. However, the Boca Raton, Delray Beach, Palm Beach Gardens, and Jupiter-Tequesta areas are expected to have significant population growth in the future. (Testimony of Badalich, Beck, Exhibits 1, 4, 26)
The factors determining the extent of demand for trust services in particular areas include considerations of population and age distribution, personal wealth and income levels, and income growth. There is a higher potential for increased trust business in a rapidly growing area. The presence of a substantial segment of older population is significant because wealth is normally concentrated in that portion of the population and they constitute the primary customer source for fiduciary services. The primary service area of Palm Beach County shows that it constitutes a substantial market for trust services due to rapid population growth, together with age and wealth characteristics of its population. However, there exist other competitors in the field, such as attorneys, accountants, insurance companies, financial advisors, and relatives or friends of potential customers. The amount and extent of this portion of the market is large, but unknown as to amount. (Testimony of Badalich, Beck, Exhibits 1, 2, 4, 26)
The national trust business is highly concentrated in a relatively small number of large banks, primarily in the eastern part of the nation. The largest 50 banks control almost two-thirds of the nation's trust assets and the largest 30 banks administer about as many trust assets as all other banks and trust companies. The United States Trust Company of New York is one of the largest managers of invested assets in the country with over 11 billion dollars under supervision. It employs 1450 individuals of whom 1100 are engaged in trust activities. In 1979, the United States Trust Company of New York had 517 Florida accounts with an asset value of almost 371 million dollars, with current annual fee revenue in excess of one million dollars. A substantial number of these accounts are located in Palm Beach County. The application reflects that the Applicant intends to receive 215 "transferred" such accounts with an asset value of almost 300 million dollars and revenue of $814,000 during its first year of operation. It is projected that during the second and third years of operations, the cumulative asset value of such accounts will reach approximately 354 million dollars and 390 million dollars respectively, with commission revenues of
$966,000 and $1,063,000 respectively. The accounts which are proposed to be transferred to the Applicant without cost to it are those of full-time Florida residents which purportedly can be transferred upon mutual agreement. Accounts involving irrevocable trust relationships and will appointments are excluded from transfer projections. However, none of the Florida customers has been contacted for consent to transfer of accounts, although the Applicant's proposed chief executive officer anticipates it to be likely that all will agree to transfer based on relationships which have been established by personnel of the current investment advisory office in Palm Beach. Assuming that it will be successful in achieving transfer of the accounts, together with an estimated 86 new accounts over the initial three-year period and income as return on investment of its initial capitalization, the Applicant projects gross income of
$1,199,000 for the first year of operation, $1,592,000 for the second year, and
$2,200,000 for the third year. After deduction of estimated expenses and taxes, the Applicant anticipates net income of $286,000 during the first year of operation, and net income of $417,000 and $528,000 during the second and third years. Although the Applicant states that it has projected operating expenses at a high level, the amount of projected profit greatly exceeds that normally generated through trust activities. (Testimony of Melfe, Stinchcomb, Myers, Exhibit 4)
The Applicant anticipates that it will secure new business, other than the transferred accounts, from (a) current customers of United States Trust Company of New York who migrate to Florida, (b) additional services sold to transferred customers, and (c) new customers obtained in the primary service area. The value of such projected new business is 30 million dollars during the first year of operations, 40 million during the second, and 50 million during the third year. Applicant will seek to obtain the larger, more profitable trust accounts with marketing efforts being directed to obtaining accounts of $500,000 or more. It will serve smaller accounts but not actively seek them. Due to the fact that the new company will not offer banking services, the Applicant will not place great emphasis on advertising, and expects most of its new business to come from customer referrals. The Applicant does not anticipate a significant number of new customers who have not previously been affiliated with U.S. Trust Company of New York, but intends to seek such customers primarily through local lawyers, and other such sources. It does not expect to generate a significant amount of new business from present customers of existing trust institutions in the primary service area. Trust customers usually remain with the institution which carries its account if acceptable services are being rendered. (Testimony of Melfe, Stinchcomb, Beck, LeMaistre, Exhibits 4, 21-22)
Although trust departments of banks do not usually generate large profits through trust activities, three of four trust representatives of banks which intervened in this proceeding have experienced substantial growth in trust business over the past few years. The fourth representative testified that the trust department had been marginally" profitable in recent years. All of these individuals are concerned that if a number of new competing trust companies are permitted to operate in Palm Beach County, such entry would result in the loss of larger more profitable accounts which tend to subsidize the smaller ones because the services rendered in each instance are virtually the same. One representative testified that an account has to be at least $250,000 to be profitable and another testified that any account less than $100,000 would not usually be profitable, dependent upon the services required to administer the account. All agreed that there is aggressive competition among trust institutions in Palm Beach County and that the influx of numerous new trust companies would affect their ability to secure large accounts and consequently affect profits. Smaller accounts of trust departments normally are with
customers of the commercial banking department whom the banks feels obliged to accommodate with trust services. Profits, of course, are generated from these customers from their use of other services of the bank. If the large accounts of the banks are not replenished as the current ones expire, it will be difficult to provide the same services for the smaller accounts or to maintain them at all. Large accounts have been "leveling out" in recent years and most of the high wealth individuals migrating to Palm Beach County already have existing trust relationships. Additionally, some of the affluent communities in the county lack room for expansion and many of the wealthy individuals tend to locate in areas to the north of Palm Beach County. There is little fear by these banks that their present customers will affiliate with new institutions, but they believe that their ability to secure new customers from those with either no current customer relationship or those with current accounts with out-of- state institutions will be impaired. (Testimony of LeMaistre (Deposition - Exhibit 21) , Kline, Northcraft, Myers, Southall, Beck)
The impact of the Applicant and other new trust companies entering the Palm Beach Bounty trust market is conjectural and speculative at this time. Although exact figures cannot be obtained as to the extent of the existing trust market in the county or as to the extent of "penetration" of such a market, various studies show that there is a market of approximately three billion dollars in trust assets and that it has been penetrated by both local and out- of-state institutions at least to the extent of 30 to 50 percent. Entry of new institutions into the market can benefit the public by providing new services and making the public more aware of the availability and extent of such services. Small trust departments of banks which are unaffiliated with holding companies generally are in a different market than the larger companies. Consequently, the Applicant and other new applicants representing large out-of- state corporations primarily will be competing with the larger local trust departments. Competition for the larger accounts will proceed on a gradual basis dependent upon the number of new entrants permitted to enter the market. At the outset, those newly formed companies who merely transfer existing accounts should have little or no impact on local institutions. In determining the number of applicants to be granted authority to operate in a particular area, a regulator should determine the size of the existing and potential market - and, after determining the number of entries which would not unduly affect competition, should approve applications on criteria of competence and range of services to be offered to the public. (Testimony of Wille, Beck, Myers, LeMaistre (Deposition-Ex. 21,26))
A telephone survey was made by a market research firm in October, 1979, that sought to determine the extent of the market for fiduciary services in the primary service area. The questions in the survey included such matters as length of residence in the area, age of the person called, current utilization of trust or other financial services, typos and amounts of potential trust accounts, and whether those called would establish new trust accounts or change existing ones to either a major out-of-state institution" which opened a trust office in the area, or a "Florida based institution." The survey included responses of 219 individuals to Palm Beach County. The results of the survey are not found to be a reliable or representative assessment of the potential trust market in the primary service area. Limitations on the geographical areas covered by the survey, elimination of certain individuals as potential users of trust services, and the misleading use of certain terms in the questions are the primary reasons for the above finding. (Testimony of McAleer, Legg, Badalich, Wille, Exhibit 27)
This Report is submitted pursuant to Section 120.57 (1)(b)(12), Florida Statutes, and Rule 3C-9.11, Florida Administrative Code.
ISSUED this 8th day of January, 1980, in Tallahassee, Florida.
THOMAS C. OLDHAM
Hearing Officer
Division of Administrative Hearings Room 101 Collins Building Tallahassee, Florida 32301
(904) 488-9675
=================================================================
AGENCY FINAL ORDER
=================================================================
STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
FLORIDA ASSOCIATION OF REGISTERED BANK HOLDING COMPANIES, INC.
Petitioner,
vs. CASE NO. 79-1229
U.S. TRUST COMPANY OF FLORIDA, and OFFICE OF THE COMPTROLLER, STATE OF FLORIDA,
Respondents.
/ FLORIDA BANKERS ASSOCIATION,
Petitioner,
vs. CASE NO. 79-1235
U.S. TRUST COMPANY OF FLORIDA, and OFFICE OF THE COMPTROLLER, STATE OF FLORIDA,
Respondents,
and
FIRST NATIONAL BANK IN PALM BEACH, BESSEMER TRUST COMPANY OF FLORIDA, THE BANK OF PALM BEACH AND TRUST COMPANY, FIRST BANK AND TRUST COMPANY OF BOCA RATON, FIRST NATIONAL BANK AND TRUST OF RIVIERA BEACH, BOCA RATON NATIONAL BANK, ATLANTIC NATIONAL BANK OF PALM BEACH COUNTY,
Intervenors.
/
FINDINGS OF FACT, CONCLUSIONS OF LAW AND FINAL ORDER
On May 14, 1979, the Division of Banking, Department of Banking and Finance (hereinafter Department) received an application submitted by five individuals, pursuant to Section 659.02, Florida Statutes (1979), for authority to organize a corporation for the purpose of conducting a trust business in Palm Beach, Florida. Petitioner, Florida Bankers Association, (hereinafter FBA), and Florida Association of Registered Bank Holding Companies, Inc., timely requested a public hearing on the application after receipt of the application was properly noticed in the Florida Administrative Weekly on May 18, 1979.
The public hearing in this proceeding was preceded by prehearing conferences held on August 3 and September 17, 1979. As a result of those conferences, petitions to intervene in this proceeding were granted to the
above-captioned Intervenors. Petitions for intervention filed by seventeen state financial institutions were denied because their locations were outside the primary service area of the proposed trust company.
Motions of the Petitioner and several Intervenors to consolidate these cases with four pending cases involving three similar applications in Palm Beach County were granted pursuant to Rule 28-5.07, Florida Administrative Code. Those cases consolidated with these for the purpose of hearing were Florida Association of Registered Bank Holding Companies, Inc., vs. DBT Trust Company of Florida and Office of the Comptroller, DOAH Case No. 79-1228; Florida Bankers Association vs. DBT Trust Company of Florida and Office of the Comptroller, DOAH Case No. 79-1234; First National Bank in Palm Beach and Florida Bankers Association vs. Harris Trust Company of Florida and Office of the Comptroller, DOAH Case No. 79-1471; and Florida Association of Registered Bank Holding Companies, Inc. and Florida Bankers Association vs. Bankers Trust Company of Florida and Office of the Comptroller, DOAH Case No. 79-917. Motions to consolidate these cases with that involving a similar application in Miami, Florida, Florida Bankers Association vs. Manufacturers Hanover Trust Company of Florida and Office of the Comptroller, State of Florida, DOAH Case No. 79-1190, was denied for failure to meet the criteria of similarity of facts and identity of parties, as required under Rule 28-5.07, Florida Administrative Code.
After publication of notice of hearing in the Palm Beach Post newspaper on October 12, 1979, within the time period specified in Rule 3C-9.05, Florida Administrative Code, (Exhibit 6), this matter came on for hearing in West Palm Beach, Florida, before the Division of Administrative Hearings, by its duly
designated Hearing Officer, Thomas C. Oldham, on November 1-2 and 5-8, 1979. At the hearing, the parties were represented by counsel as follows:
APPEARANCES
For Petitioners J. Thomas Cardwell, Esquire Michael McMahon, Esquire 17th Floor, CNA Building Post Office Box 231 Orlando, Florida 32802
For Respondent Phillip C. Newcomm, Esquire
U. S. Trust Company Bowman Brown, Esquire Company of Florida: Arnold L. Berman, Esquire
1000 Southeast First National Bank Building
Miami, Florida 33131
For Respondent Eugene Cella, Esquire
Comptroller of Franklyn J. Wollett, Esquire
Florida: Office of the Comptroller Tallahassee, Florida 32301
For Intervenors First Bank and Trust Company
of Boca Raton, First J. Thomas Cardwell, Esquire National Bank and Trust Michael McMahon, Esquire Company of Riviera Beach 17th Floor, CNA Building and Atlantic National Post Office Box 231
Bank of West Palm Beach: Orlando, Florida 32802
For Intervenors First James G. Pressly, Jr., Esquire National Bank in Palm Gunster, Yoakley, Criser, Beach and Bessemer Stewart & Hirsey, P.A.
Trust Company of First National Bank Building Florida: Palm Beach, Florida 33480
For Intervenor H. David Faust, Esquire The Bank of Palm Burns, Middleton, Farrell Beach and Trust and Faust
Company: 205 Worth Avenue
Palm Beach, Florida 33480
For Intervenor Robert I. MacLaren, II, Esquire
Boca Raton Osborne and Hankins
National Bank: Post Office Drawer 40
855 South Federal Highway Suite 200
Boca Raton, Florida 33432
Bankers Trust Company of Florida, Case No. 79-917, did not participate at the hearing pursuant to Order of the Comptroller of Florida, dated October 24, 1979, which granted the Bankers Trust motion to hold its application in abeyance.
A Prehearing Order was issued on October 5, 1979, which permitted discovery requests concerning the operations of investment advisory services being
conducted in Palm Beach County by the Applicant's parent corporation or affiliate, but denied discovery concerning the profitability of operations of the Applicant's parent corporation or affiliates in states other than Florida for the reason that such information would not reasonably lead to the discovery of relevant and admissible evidence in this proceeding. Various other discovery motions pending at the commencement of the hearing were rendered moot either by intervening compliance by the parties or failure to pursue the motions at that time.
A motion of Petitioner and certain Intervenors for continuance of the hearing, dated October 10, 1979, predicated on the pendency of judicial proceedings in the Supreme Court of the United States concerning the constitutionality of Section 659.141, Florida Statutes, was denied by Order dated October 23, 1979. Motions of the First National Bank in Palm Beach to Compel Responses of the Applicant to Interrogatories concerning the investment performance of the Applicant's parent corporation in New York was provisionally denied at the commencement of the hearing. Although some evidence concerning this issue was presented during the course of the hearing, the provisional ruling is confirmed herein for the reason that it was shown that investment decisions of the proposed trust company will be independently made by its officials. The Intervenors' further motions to compel the Applicant to answer interrogatories concerning litigation against the New York based U.S. Trust Company was denied as irrelevant to this proceeding.
A Motion for Continuance of the hearing filed by the Bank of Palm Beach and Trust Company on the general ground that insufficient time or information had been developed from prior discovery requests, and that the hearing was premature in view of current judicial and legislative events was denied as not constituting sufficient cause for continuance. The Hearing Officer considered that the possibility of legislative or judicial developments in the area under consideration is speculative and contingent, and that adequate time was allowed the parties to permit discovery sufficient for preparation for hearing.
The purpose of the hearing was to receive evidence concerning the application of proposed U.S. Trust Company of Florida for authorization to organize a trust company pursuant to Chapter 659, Florida Statutes.
Thirty-five exhibits were offered in evidence during the consolidated hearing. All were received in evidence except for Exhibits 23, 24, 33, and 34. Exhibit 23 was the text of testimony by various representatives of Petitioner Florida Bankers Association before a Congressional Subcommittee on October 16, 1979. Exhibit 24 purported to die excerpts of testimony received by the same Congressional Subcommittee on that date. Exhibit 33 was a map of Boca Raton, Florida and vicinity, and Exhibit 34 was a purported application of proposed Security Trust Company of Palm Beach to the Comptroller of Florida. All these documents were hearsay in nature and the subject of the objections by opposing parties. Exhibits 23 and 24 were rejected by the Hearing Officer as irrelevant to matters in issue in this state proceeding. Exhibit 33 purported to delineate affluent areas thereon, but was insufficiently supported by testimonial evidence. Exhibit 34 was rejected as irrelevant to this proceeding. Those exhibits used as a basis for a finding of fact herein are noted at the end of each numbered finding.
No member of the general public requested an opportunity to present oral or written communications at the hearing.
The Applicant filed a post-hearing Proposed Hearing Officer's Report, and post-hearing submissions were also filed by the Florida Bankers Association, and First National Bank in Palm Beach and Bessemer Trust Company of Florida. The latter submissions were predominantly conclusory in nature and therefore portions of the same shall be considered by the Comptroller at the conclusion of this Order. The proposed Findings of Fact contained in the foregoing submissions have been fully considered by the Hearing Officer and those portions thereof which have net been incorporated Into the Findings of Fact herein are considered to be either irrelevant, unnecessary, or unwarranted by the evidence presented at the hearing.
Respondent Comptroller submitted a statement of current policy of the Division of Banking, Department of Banking and Finance, as to state trust companies, together with copies of final orders issued by the Comptroller in cases involving applications of First Family Trust Company, Security Trust Company of Palm Beach, Florida, Security Trust Company of Naples, and American Savings Trust, Inc., for authority to organize proposed new trust companies.
These documents were received in evidence without objection. The Comptroller's incipient policy was not controverted during the course of the hearing. (Exhibit
5) The Comptroller and the Applicant filed post-hearing copies of the Comptroller's Final Order in the case of Security Trust Company of Palm Beach, dated November 19, 1979, and requested that it be incorporated as a supplemental submission to Exhibit 5. The Hearing Officers considered it inappropriate to include the requested document in the record of this proceeding, absent stipulation of all parties, since it was entered after the conclusion of the hearing. (Hearing Officer's Composite Exhibit l)
The Report of the Hearing Officer was submitted to the Comptroller on January 8, 1980.
Preliminary to a discussion of the specific Findings of Fact concerning the particulars of the instant application, a brief summary of the history and circumstances surrounding this application by an out-of-state bank holding company may prove beneficial to understanding the time delay in rendering a final order in this matter.
HISTORICAL AND LEGAL PERSPECTIVE
The proposed trust company will be a wholly-owned subsidiary of U.S. Trust Corporation, New York, New York, a bank holding company whose principal subsidiary is U.S. Trust Company of New York, which is primarily engaged in commercial banking and trust business in New York. As a subsidiary of a bank holding company the proposed trust company is subject to both federal and state legislation.
Bank holding companies that control one or more banks have been regulated under the Bank Holding Company Act of 1956, as amended, 12 U.S.C. 1841 et seq., which places fairly narrow limits on the scope of activities in which affiliated companies can engage.
Generally, 12 U.S.C. Section 1843(a)(1) prohibits a bank holding company from acquiring, directly or indirectly, ownership or control of any voting shares of any company which is not a bank. However, Section 1843(c)(8) provides that the above prohibition shall not apply to the acquisition or control of shares of any company the activities of which the Board of Governors of the Federal Reserve has determined by order or regulation to be "so closely related to banking or managing or controlling banks as to be a proper incident thereto."
The Board has determined that performing or carrying on any one or more of the functions or activities that may be performed or carried on by a trust company and acting as investment or financial advisor are such activities deemed "so closely related to banking. as to be a proper incident thereto.", 12 C.F.R. Section 225.4(a)(4) and (5).
Of equal significance was the 1956 enactment of Section 3(d) of the Act, 12
Section 1842(d), which respects the intention of the McFadden Act of 1927 to maintain state law as the prevailing authority over bank expansion. As originally enacted, Section 3(d) stated in part, that no application shall be approved that would permit a bank holding company to acquire a bank located outside the company's state of primary activity, "....unless the acquisition...of a state bank by an out-of-state hank holding company is specifically authorized by statute laws of the state in which such bank is located..."
In 1972, the Florida Legislature enacted Section 659.141, Florida Statutes, prohibiting a bank, trust company or holding company, the operations of which were principally conducted outside of the state, from owning or controlling, directly or indirectly, a Florida trust company or an Investment advisory business furnishing services to trust companies or banks in Florida. This statute was enacted by the Florida Legislature and became law March 29, 1972, and was amended by statute that became effective December 21, 1972. Therefore, the Florida Legislature clearly expressed its intention to prohibit the acquisition or ownership of a trust company in the State of Florida by a bank, trust company or holding company operating primarily outside the state.
In October, 1973, Bankers Trust New York Corporation, a holding company, and B.T. Investment Managers, Inc., its subsidiary, filed suit against the Comptroller of the State of Florida as head of the Department of Banking and Finance, challenging the constitutionality of Section 659.141, Florida Statutes. Ultimately, on December 15, 1978, the United States District Court, Northern District of Florida held that a portion of Section 659.141, Florida Statutes, was unconstitutional as being violative of the Commerce Clause of the United States Constitution. The Comptroller was specifically enjoined from enforcing certain provisions of Section 659.141, Florida Statutes (1977).
On May 11, 1979, the Comptroller of Florida filed a direct appeal from the Final Order of the United States District Court to the United States Supreme Court. The District Court declined to stay its Order during the pending of the appeal. As a result, this Applicant filed an application to establish a trust company subsidiary.
After the conclusion of a public hearing, and the submission of the recommended Findings of Fact by the hearing officer, the Applicant and Department agreed to withhold the rendering of the final order. At that time, the Supreme Court had not rendered its decision in the B.T. Investment Managers, Inc. case. See Lewis v. B.T. Investment Managers, Inc. 447 U.S. 27 (1980).
Subsequently, in March, 1980, Congress enacted Section 12 of the 1980 Financial Institutions Deregulation and Monetary Control Act, Public Law 96-221, 94 Stat. 132, imposing a moratorium on bank holding company establishment of trust company subsidiaries across state lines. The moratorium expired on October 1, 1981.
FINDINGS OF FACT
Under consideration of the evidence adduced at the hearing, the Report of the Hearing Officer submitted on January 8, 1980, is hereby adopted and incorporated herein.
On May 14, 1979, the Division of Banking, Department of Banking and Finance, received an application submitted by Berkeley D. Johnson, Thomas Melfe, Peter V. Van Beuren, John A. Rodgers, III, and Carl J. Stinchcomb (hereinafter Applicant), pursuant to Section 659.02, Florida Statutes, for authority to organize a corporation for the purpose of conducting a trust business to be located at 125 Worth Avenue, Palm Beach, Florida. The proposed trust company will be named "U.S. Trust Company of Florida." It will be a wholly-owned subsidiary of U.S. Trust Corporation, New York, New York. U.S. Trust Corporation is also the parent of U.S. Trust Company, New York, New York. (Testimony of Melfe, Exhibit 4)
Each organizer of the proposed trust company will be a director and the full board will serve as the trust committee. Four of the five original proposed directors have had extensive experience in the trust business, and the other has had similarly long experience with financial institutions and one year as a trust officer. The proposed president and chief executive officer of the proposed trust company has had 18 years experience in the trust business. All of the original proposed directors are United States citizens and there is no evidence that any has been convicted of a criminal offense. Three of the five proposed directors have resided in Florida for at least one year. (Testimony of Melfe, Stinchcomb, Exhibit 4)
2A. Recently, the Department was advised that the composition of the original proposed board had changed. Messrs. Melfe, Van Beuren and Rogers, have been replaced by Frederick S. Wonham, B. J. Harris and Howard Falcon, Jr. The newly proposed directors have met submitted any biographical or financial information to the Department.
The original proposed capital structure of the trust company will be
$2,000,000, allocated $1,000,000 to common stock, $700,000 to surplus and
$300,000 to undivided profits. In the opinion of a former director of the Federal Deposit Insurance Corporation, the capital structure is considered adequate for the security of $300,000,000 in trust assets. (Testimony of Wille, Exhibit 4)
3A. The Applicant has recently proposed to amend the capital composition. The newly proposed capital structure is $2,000,000, allocated $400,000 to common stock, $1,500,000 to surplus, and $100,000 to undivided profits.
The proposed trust company will utilize 1900 square feet on the second floor of a professional building located at 125 Worth Avenue, Palm Beach, Florida. The office space is presently being used by an investment advisory representative office previously established by U.S. Trust Company of New York. That operation will be terminated when the proposed trust company becomes functional. The present lease is for a term of five years terminating in February, 1982 at a current annual rent of $21,000, plus a share of the building's operating expenses. Total occupancy expense during the first, second and third years is expected to be $25,000, $28,000 and $30,000, respectively. The current lease will be assigned to the proposed trust company. (Testimony of Stinchcomb, Exhibit 4)
The Applicant's purpose in seeking to establish a trust company in Florida is to provide better service to a substantial portion of some 500 present customers of U.S. Trust Company of New York who reside in the State of Florida, and to seek new trust business in the Applicant's designated Palm Beach County primary service area which, in its view, constitutes an area that has great potential for significant growth as a trust market. Additionally, the Applicant desires to maintain a long-range corporate competitive position with other New York and Chicago based institutions with regard to the establishment of trust facilities in Florida.
The Applicant proposes to offer all services normally
associated with a non-deposit trust company at fees comparable to those presently being charged by existing trust institutions in the primary service area. These services Include estate planning and executor services, personal trust services, personal financial planning, real estate management and consulting, closely held and family business services, investment management services, income tax planning and preparation of returns, and custody service.
The proposed trust company will initially employ six individuals, three of whom will be corporate officers. Support services utilizing the staff and systems of the U.S. Trust Company of New York will be obtained by the Applicant under contractual arrangements at basically the same fees as those charged to correspondent banks for similar services. These services will include record keeping and data processing, investment and tax advice, custody service, and similar operational support. Personnel employed by the proposed trust company will solicit new accounts, maintain various account records, and provide independent investment and estate planning advice and services. (Testimony of Melfe, Stinchccmb, Exhibits 4, 30)
The Applicant's designated primary service area is all of the area located within Palm Beach County, Florida. The Applicant is of the opinion that the defined PSA encompasses the smallest area from which the proposed trust company can anticipate obtaining 75 percent or more of its prospective business, including transfer of existing accounts of customers of U.S. Trust Company of New York who reside in the primary service area. (Testimony of Melfe, Stinchcomb, Exhibit 4)
The population of Palm Beach County increased from 348,993 persons in 1970 to 534,551 persons In 1978, an increase of 53.2 percent. The population of the State of Florida Increased during a similar period by 32 percent. It is projected that the county population will increase to 673,000 by mid-1985. In mid-1978, Palm Beach County ranked 6th in population in the state. Almost 91 percent of the county's increased population during the period 1970-1978 was due to migration of individuals moving into the area rather than natural increase of population. About one-third of such migration consisted of New York residents moving to Palm Beach County.
Between 1970 and 1978, the 45 to 64 age group of Palm Beach County's population expanded from 79,298 to 120,469. The age group of 65 years and older increased from 60,655 to 110,825 during the same period. The 1970 to 1978 increase of county residents aged 45 years or more was 91,351 persons or 65.3 percent. The comparable percentage increase throughout Florida was 44 percent. It is estimated that from 1978 to 1985 the age group of 45 years and older will increase from 231,294 to 290,736. In 1978, those persons over45 years of age constituted 43.2 percent of the population. The number of households in Palm Beach County in 1970 was 123,347 and is estimated to increase to 202,615 in 1980.
In 1976, the per capita income of Palm Beach County residents was $7,165 as compared to $6,101 for the state population. In 1977, per capita income in Palm Beach County increased to $7,872 compared to $6,697 for the state. The average household effective buying income in Palm Beach County in 1978 was over $20,000 while the average for the state was $16,488. Such income is estimated to increase to $25,541 in Palm Beach County by 1982 and to $21,101 for the state.
During a one year period between 1977 and 1978, there were 483 estate tax returns filed in Palm Beach County, of which 40.2 percent had a gross value of over $500,000. The average value of the estates was $935,242. Those estates over one million dollars constituted 16.8 percent of the total number of estates.
About 40 percent of the estates were over $500,000 and this group constituted 83 percent of the total gross value of all estates during that period. Of the total number of 483 estate tax cases, corporate fiduciaries were named as sole executor in only 72 estates, and served with individual co-fiduciaries in 21 additional cases. Of 81 estates valued at one million dollars or more, only 15 estates were handled by corporate fiduciaries and in four additional cases a corporate fiduciary served jointly with an individual.
Between 1975 and 1978, deposits of Palm Beach County financial institutions increased by 59.3 percent, while deposits in the state as a whole increased by
44.8 percent during the same period. Palm Beach County's per capita deposits increased from $6,990 in 1975 to $9,954 in 1978. Per capita deposits in the state as a whole were $5,376 in 1975 and $7,364 in 1978. In 1978, personal intangible tax returns for Palm Beach County show that 51.4 percent of the 15,700 returns included taxable personal assets of $100,000 or more. Almost ten percent of the returns included taxable assets of $500,000 or more and 4.39 percent were of one million dollars or more. (Testimony of Badalich, Exhibits 1, 4, 26)
The application reflects that in 1977, some 800 million dollars in trust assets were under management in Palm Beach County by 15 insured commercial banks. About 40 percent of these assets were administered by the First National Bank in Palm Beach. During the period between 1972 and 1977, total trust assets under management by commercial banks In Palm Beach County increased over 32 percent while similar assets in banks throughout Florida increased 6.8 percent. Most of the banks providing trust services in Palm Beach County are affiliated with holding companies. There is one non-deposit trust company, Bessemer Trust Company of Florida, located in Palm Beach County, which is affiliated with out- of-state corporations. The combined total trust assets of all sixteen of the financial institutions in Palm Beach County totaled almost 938 million dollars as of December, 1978. In 1979, five of eight pending applicants for trust companies in Palm Beach County showed an existing volume of trust assets under management in Palm Beach County of almost 400 million dollars.
Although Palm Beach County has been experiencing substantial population growth which is expected to continue into the future, not all of the affluent areas of the county are susceptible to continuing growth. The Town of Palm Beach is limited in growth possibilities and has increased .by only 2,539 persons in the last ten years. However, the Boca Raton, Delray Beach, Palm Beach Gardens, and Jupiter Tequesta areas are expected to have significant population growth in the future. (Testimony of Badalich, Beck, Exhibits 1, 4, 26)
The factors determining the extent of demand for trust services in particular areas include considerations of population and age distribution, personal wealth and income levels, and income growth. There is a higher potential for increased trust business in a rapidly growing area. The presence
of a substantial segment of older population is significant because wealth is normally concentrated in that portion of the population and they constitute the primary customer source for fiduciary services. The primary service area of Palm Beach County shows that it constitutes a substantial market for trust services due to rapid population growth, together with age and wealth characteristics of its population. However, there exist other competitors in the field, such as attorneys, accountants, insurance companies, financial advisors, and relatives or friends of potential customers. The amount and extent of this portion of the market is large, but unknown as to amount. (Testimony of Badalich, Beck, Exhibits 1, 2, 4, 26)
The national trust business is highly concentrated in a relatively small number of large banks, primarily in the eastern part of the nation. The largest 50 banks control almost two-thirds of the nation's trust assets and the largest 30 banks administer about as many trust assets as all other banks and trust companies. The U.S. Trust Company of New York is one of the largest managers of invested assets In the country with over 11 billion dollars under supervision. It employs 1,450 individuals of whom 1,100 are engaged in trust activities. In 1979, the U.S. Trust Company of New York had 517 Florida accounts with an asset value of almost 371 million dollars, with current annual fee revenue in excess of one million dollars. A substantial number of these accounts are located in Palm Beach County. The application reflects that the Applicant intends to receive 215 "transferred" such accounts with an asset value of almost
300 million dollars and revenue of $814,000 during its first year of operation. It is projected that during the second and third years of operation, the cumulative asset value of such accounts will reach approximately 354 million dollars and 390 million dollars, respectively, with commission revenues of
$966,000 and $1,063,000, respectively. The accounts which are proposed to be transferred to the Applicant without cost to it are those of full-time Florida residents which purportedly can be transferred upon mutual agreement. Accounts involving irrevocable trust relationships and will appointments are excluded from transfer projections. However, none of the Florida customers have been contacted for consent to transfer of accounts, although the Applicant's proposed chief executive officer anticipates it to be likely that all will agree to transfer based on relationships which have been established by personnel of the current investment advisory office in Palm Beach. Assuming that it will be successful in achieving transfer of accounts, together with an estimated 86 new accounts over the initial three-year period and Income as return on investment of its initial capitalization, the Applicant projects gross income of $1,199,000 for the first year of operation, $1,592,000 for the second year, and $2,200,000 for the third year. After deduction of estimated expenses and taxes, the Applicant anticipates net income of $286,000 during the first year of operation and net income of $417,000 and $528,000 during the second and third years.
Although the Applicant states that it has projected operating expenses at a high level, the amount of projected profit greatly exceeds that normally generated through trust activities. (Testimony of Melfe, Stinchcomb, Myers, Exhibit 4)
The Applicant anticipates that it will secure new business, other than the transferred accounts, from (a) current customers of U.S. Trust Company of New York who migrate to Florida, (b) additional services sold to transferred customers, and (c) new customers obtained in the primary service area. The value of such projected new business is 30 million dollars during the first year of operations, 40 million during the second, and 50 million during the third year. Applicant will seek to obtain the larger, more profitable trust accounts with marketing efforts being directed to obtaining accounts of $500,000 or more. It will serve smaller accounts but not actively seek them. Due to the fact that the new company will not offer banking services, the Applicant will not place great
emphasis on advertising, and expects most of its business to come from customer referrals. The Applicant does not anticipate a significant number of new customers who have not previously been affiliated with U.S. Trust Company of New York, but intends to seek such customers primarily through local lawyers, and other such sources. It does not expect to generate a significant amount of new business from present customers of existing trust institutions in the primary service area. Trust customers usually remain with the institution which carries its account if acceptable services are being rendered. (Testimony of Melfe, Stinchcomb, Beck, LeMaistre, Exhibits 4, 21-22)
Although trust departments of banks do not usually generate large profits through trust activities, three of four trust representatives of banks which intervened in this proceeding have experienced substantial growth in trust business over the past few years. The fourth representative testified that the trust department had been "marginally" profitable in recent years. All of these individuals are concerned that if 2 number of new competing trust companies are permitted to operate in Palm Beach County, such entry would result in the loss of larger more profitable accounts which-tend to subsidize the smaller ones because the services rendered in each instance are virtually the same. One representative testified that an account has to be at least $250,000 to be profitable and another testified that any account less than $100,000 would not usually be profitable, dependent upon the services required to administer the account. All agreed that there is aggressive competition among trust institutions in Palm Beach County and that the influx of numerous new trust companies would affect their ability to secure large accounts and consequently affect profits. Smaller accounts of trust departments normally are with customers of the commercial banking department whom the bank feels obliged to accommodate With trust services. Profits, of course, are generated from these customers from their use of other services of the bank. If the large accounts of the banks are not replenished as the current ones expire, it will be difficult to provide the same services for the smaller accounts or to maintain them at all. Large accounts have been "leveling out" in recent years and most of the high wealth individuals migrating to Palm Beach County already have existing trust relationships. Additionally, some of the affluent communities in the county lack room for expansion and many of the wealthy individuals tend to locate in areas to the north of Palm Beach County. There is little fear by these banks that their present customers will affiliate with new institutions, but they believe that their ability to secure new customers from those with either no current customer relationship or those with current accounts with out-of- state institutions will be impaired. (Testimony of LaMaistre (Deposition-Exhibit 21), Kline, Northcraft, Myers, Southall, Beck)
The impact of the Applicant and other new trust companies entering the Palm Beach County trust market is conjectural and speculative at this time. Although exact figures cannot be obtained as to the extent of the existing trust market in the county or as to the extent of "penetration of such a market, various studies show that there is a market of approximately three billion dollars in trust assets and that it has been penetrated by both local and out- of-state institutions at least to the extent of 30 to 50 percent. Entry of new institutions into the market can benefit the public by providing new services and making the public more aware of the availability and extent of such services. Small trust departments of banks which are unaffiliated with holding companies generally are in a different market than the larger companies. Consequently, the Applicant and other new applicants representing large out-of- state corporations primarily will be competing with the larger local trust departments. Competition for the larger accounts will proceed on a gradual basis dependent upon the number of new entrants permitted to enter the market. At the
outset, those newly formed companies who merely transfer existing accounts should have little or no impact on local institutions. In determining the number of applicants to be granted authority to operate in a particular area, a regulator should determine the size of the existing and potential market and, after determining the number of entries which would not unduly affect competition, should approve applications on criteria of competence and range of services to be offered to the public. (Testimony of Wille, Beck, Myers, LeMaistre (Deposition-Exhibit 21, 26)
A telephone survey was made by a market research firm in October, 1979, that sought to determine the extent of the market for fiduciary services In the primary service area. The questions in the survey included such matters as length of residence In the area, age of the person called, current utilization of trust or other financial services, types and amounts of potential trust accounts, and whether those called would establish new trust accounts or change existing ones to either a "major out-of-state institution." which opened a trust office in the area, or a "Florida based institution." The survey included responses of 219 individuals in Palm Beach County. The results of the survey are not found to be a reliable or representative assessment of the potential trust market in the primary service area. Limitations on the geographical areas covered by the survey, elimination of certain individuals as potential users of trust services, and the misleading use of certain terms in the questions are the primary reasons for the above finding. (Testimony of McAleer, Legg, Badalich, Wille, Exhibit 27)
CONCLUSIONS OF LAW
When an application for authority to organize and operate a new trust company is filed, it is the applicant's responsibility to prove that the statutory factors warranting the grant of authority are met. It is the Department's duty to make an investigation of the five matters listed in 659.03(1), Florida Statutes, which was done in this case, and then approve or disapprove the application in its discretion. This discretion is neither absolute nor unqualified, but is instead conditioned by a consideration of the factors listed in Section 659.03(2), Florida Statutes, 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 and 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 house quarters in the area specified in the application.
If, in the opinion of the Department, any of the six foregoing requirements has not been met, and cannot be remedied by an applicant, it cannot approve the application. The Department believes that the applicant can, at least under certain circumstances, remedy the factors set forth in Section 659.03(2)(c), (d), (e) or (f), Florida Statutes, if they are found to be partially inadequate. For example, if all other statutory criteria are met, an applicant may increase capital, or make certain changes in the board of directors, or change the name, or alter their provisions for suitable trust company quarters, because these factors are within the control, at least to some degree, of the applicant. Furthermore, it is the Department's policy to allow applicants to make certain changes to these factors if all other criteria are met; to do otherwise, would be to subject applicants to unnecessary red tape. However, it is the Department's position that there is little, if anything, that an applicant may do to alter the factors set forth in Section 659.03(2)(a) and (b), Florida Statutes, since the applicant cannot easily change the economic and demographic characteristics of an area. Therefore, if either one or both of these criteria are not met, the Comptroller cannot approve the application.
It is the opinion and conclusion of the Department that public convenience and advantage will be promoted by the establishment of the proposed trust company in this case. Therefore, the criterion in Section 659.03(2)(a), Florida Statutes, is met.
The location and services offered by existing trust company facilities In the service area are considered indicative of the competitive climate of the market. The area's general economic and demographic characteristics are also considered in evaluating this statutory criterion. Because it is recognized that the establishment of a new trust company ANYWHERE would promote convenience and advantage for at least a few people, SUBSTANTIAL convenience and advantage for a SIGNIFICANT number of people must be shown, relative to the trust market potential.
The PSA, for purposes of applications for authorization to organize and operate a trust company pursuant to Chapter 659, Florida Statutes, is the smallest area from which the proposed trust company expects to draw approximately 75 percent of its accounts. It should be drawn around a natural customer base and should not be unrealistically delineated to exclude competing trust offices or to include areas of concentrated population.
It is the nature of the trust business that a neighborhood location is not a necessity. Unlike retail banking, frequent transactions in an account do not occur, and the trust account, once established, can usually continue without modification for a period of years.
The PSA designated by the Applicant has been realistically drawn to include Palm Beach County. The proposed location on Worth Avenue is easily accessible, and would conveniently serve the Applicant's existing customers in the PSA, as well as new customers. The age and income characteristics of the PSA's population would indicate the potential for high levels of trust consciousness. These levels are determined by the socioeconomic characteristics of the population and the Record's most recent trends of utilization of fiduciary services. As noted by the Hearing Officer, the PSA shows that it constitutes a substantial market for trust services due to rapid population growth especially
rapid growth of the county's typically trust conscious 45-and-over (hereinafter 45+) age group. A high percentage of professional and managerial occupations in the labor force, with their relatively high incomes, would indicate a potential demand for trust services, as wealth accumulates. The Hearing Officer's Findings of Fact clearly indicate Palm Beach County to be, by Florida standards, an area of substantial wealth. Finding of Fact numbers seven, eight, and thirteen further indicate the PSA to be an area where a substantial portion of the potentially marketable trust business has gone unpenetrated by corporate fiduciaries. The Applicant's primary purpose in seeking to establish a trust company in Florida is to provide better service to a substantial portion of some
517 present customers of U.S. Trust Company of New York, who reside in Florida. The Applicant estimates that during its first operating year, 215 of the 517 existing Florida accounts would be transferred to the proposed trust company, representing nearly $300,000,000 in asset value. The Applicant also Intends to seek new trust business.
The Applicant proposes to offer all services normally associated with a non-deposit trust company at fees comparable to those presently being charged by existing trust institutions in the PSA, as noted by the Hearing Officer in Finding of Fact number 5. Furthermore, among the advantages that would accrue to the Applicant's customers are the availability of quality portfolio and investment management tools through dissemination of information from U.S. Trust Company of New York, and the availability of top quality personnel.
Therefore, given the above facts and conclusions, the Department is of the opinion that the "public convenience and advantage" criterion is met.
It is the opinion and conclusion of the Department that local conditions do assure reasonable promise of successful operation for the proposed trust company and those trust companies already established in the community. Therefore, the criterion in Section 659.03(2(b), Florida Statutes, IS met.
Current economic conditions and, to a lesser extent, the growth potential of the area in which the new trust company proposes to locate are Important considerations in determining its probable success. Essential to the concept of trust company opportunity is that there does and will exist a significant volume of business for which the new trust company may realistically compete. The growth rate, size, financial strength and operating characteristics of other fiduciary institutions in the PSA are also important indicators of economic conditions and potential business for a new trust company. It is noted that the statutory standard requires that local conditions ASSURE reasonable PROMISE of successful operation for the proposed trust company and those already established in the community, NOT merely that local conditions INDICATE a POSSIBILITY of such success.
Fiduciary management involves a public trust. Unlike private enterprise establishments generally, trust companies manage and control large sums of the public's assets and therefore the Department has a responsibility to protect the public's interest. Only persons with the highest standards of integrity and demonstrated expertise should be authorized to accept responsible positions in trust institutions.
Public interest is best served by having a trust service system whereby new competition is encouraged where appropriate, yet at the same time ensuring that the financial resources of the residents in the community are stable and safe.
That was the obvious intent of the Legislature in regulating corporate entry into the trust service Industry.
4A. As noted by the Hearing Officer, Palm Beach County (alternately the PSA) proved to be an area of strong 1970- 1978 population expansion, a large proportion of which rose from in-migration from the Applicant's, that is the
U.S. Trust Corporation's, home state of New York. PSA population growth between 1970 and 1978 was 53.2 percent, an increase significantly above Florida's 32 percent. Nearly 91 percent of the county's 1970-1978 population expansion resulted from net migration; and according to the Hearing Officer's seventh Finding of Fact, about one-third of such migration consisted of New York residents moving to the PSA.
The 45-64 and 65-and-above (hereinafter 65+) age groups (collectively the 45+ age group) are population components most receptive to trust services.
During the 1970-1978 period, the number of county and state residents aged 45 years or over increased 65.3 percent and 44.0 percent, respectively. In 1978, those within the 45+ age group constituted 43.2 percent of PSA residents and a lesser 39.5 percent of Florida's population.
Compared with Florida, the county experienced a higher percentage population growth between 1970 and 1978; had a more rapidly expanding trust- conscious population component (45+ age group) between 1970 and 1978; and had a larger 1978 population proportion within the trust-conscious age groups.
4B. Palm Beach County was shown to be a high-income area relative to Florida. According to the Hearing Officer's Finding of Fact number seven, the county's 1977 per capita income was $7,872, a level approximately 17.5 percent above the state's $6,697. In 1978, the PSA's average household effective buying income (over $20,000) exceeded the $16,488 state level.
4C. Analysis of Palm Beach County's 1978 intangible tax returns and 1977- 1978 estate tax returns indicate the PSA to be an area of wealthy individuals (or households), and where only a nor portion of the large estates are handled by a corporate fiduciary.
During 1978, residents with taxable intangible assets of at least $20,000 were required to file intangible tax returns with the Intangible Tax Bureau of the Florida Department of Revenue. According to the results of a sampling analysis of the county's 15,700 returns: over half of the returns included intangible assets of at least $100,000; nearly 10 percent of the returns included intangible assets of at least $500,000; and over four percent of the returns included intangible assets of at least $1,000,000. The number of county returns including at least $100,000 of intangible assets exceeded the number including less than $100,000 of such assets.
For a 12-month interval between 1977 and 1978, 483 Palm Beach County estate tax returns were filed. Analysis of these 1978 returns rendered three findings which indicate that Palm Beach County encompassed a significant number of wealthy estates, of which only a minor proportion were handled by a corporate fiduciary. First, the average valuation of the 483 estates for which 1978 estate tax returns were filed was a substantial $935,242. Second, a large share (40.2 percent) of the 483 estates Were valued at $500,000 or more; and such estates accounted for most (83 percent) of the 483-estate valuation total. Third, corporate fiduciaries acted as sole executor and as co-fiduciary for only 72 (or
14.91 percent) and only 21 (or 4.35 percent) of the 483 estates, respectively. In fact, 15 of the 81 larger estates valued at $1,000,000 or more had a corporate fiduciary serving as executor.
4D. Between 1975 and 1978, the county's total financial institution deposits (hereinafter deposits) increased 59.3 percent, a higher percentage growth than Florida's 44.8 percent. Over the same period, the county's per capita deposits increased 42.4 percent, while Florida's per capita deposits rose a lesser 36.98 percent. In 1975 and 1978, county per capita deposits exceeded Florida levels, and by a larger margin in 1978 (35.17 percent) than in 1975 (30.02 percent). Therefore, insofar as total deposits and per capita deposits are indicative of an area's wealth, the county, by Florida standards, appears to be a wealthier area because of its faster 1975-1978 total and per capita deposit
.growth rate; its higher per capita deposit levels in 1975 and 1978; and its increasing margin of excess of per capita deposits over Florida levels over the 1975-1978 period.
4E. According to the Hearing Officer's Finding of Fact number twelve, a widespread trust account transfer from the PSA's existing institutions to the Applicant would not be expected. However, local trust institutions fear that the PSA entry of a number of new trust companies such as the Applicant would result in the local trust institutions' loss of new, larger, and more profitable accounts needed to subsidize the service of smaller accounts. The Hearing Officer also indicated that trust accounts valued less than $100,000 are not generally profitable; that trust accounts with asset valuations of at least
$250,000 tend to be profitable; and that in recent years, the number of large new trust accounts flowing into the PSA have been "leveling out." An impairment in the ability to secure these large new incoming accounts may affect the PSA trust institutions' capability to adequately serve all PSA trust accounts (large and small). From the Hearing Officer's Finding of Fact number twelve, the Department concludes that the Applicant and other new trust companies would have a competitive impact upon the PSA trust market. The Department agrees with the Hearing Officer's Finding of Fact number thirteen, which states the exact magnitude of such an impact to be unknown. However, based upon all of the Hearing Officer's Findings, the Department concludes that the PSA trust market has been experiencing sufficient growth, encompasses substantial enough wealth, and has enough potentially marketable trust business to ensure the proposed trust company and the PSA's trust institutions a reasonable promise of successful operation. Five basic reasons are cited. First, by Florida standards, Palm Beach County was shown to be an area with a rapidly expanding & trust- receptive population component, and an area of substantial wealth. Second, Palm Beach County's trust market has been expanding far faster than Florida's market. Third, the PSA trust market was shown to be only partially penetrated, and as harboring substantial volumes of potentially marketable business. Fourth, most of the Applicant's projected business would flow Into the PSA trust market from New York, and expand, rather than strain, the PSA market. Only a minor proportion of the Applicant's projected business is expected to be PSA- generated. And fifth, even without considering the potentially marketable volumes of PSA trust assets, the PSA trust market was shown to be highly concentrated.
Based on the Hearing Officer's Findings of Fact, the Department concludes that the PSA has a large and expanding trust-receptive population of substantial wealth. First, Palm Beach County's trust-receptive population component-those within the 45+ age group-experienced a significantly higher 1970-1978 percentage increase than did Florida's 45+ age group. Second, county levels of per capita personal income and average household effective buying income substantially exceeded state levels. Third, of the 15,700 county intangible tax returns filed in 1978, over 50 percent included taxable intangible assets of at least
$100,000. Fourth, during the 1975-1978 period, Palm Beach County experienced faster financial institution deposit growth (hereinafter deposit growth), had
higher per capita deposits, and experienced faster per capita deposit growth than did Florida. And fifth, a substantial proportion (over 40 percent) of Palm Beach County's 1978 estate tax returns included assets valued at $500,000 or more. These five reasons clearly support the Department's conclusion that Palm Beach County, by Florida standards, has a rapidly increasing population component typically receptive to trust services, and harbors substantial wealth.
The Hearing Officer's eighth Finding of Fact indicates that Palm Beach County's 1972-1977 percentage increase in trust assets managed by its 15 insured commercial bank trust facilities was over 4.5 times the corresponding state increase. By Florida's standard, the county's trust market was shown to be in very rapid expansion.
The Hearing Officer's Findings of Fact numbers nine and twelve indicate that despite the high degree of competition for the PSA's trust assets under present management, there are significant volumes of trust business which have yet to be marketed. Finding of Fact number thirteen states that the county's trust market is only partially penetrated, and has substantial volumes of untapped, but potentially marketable, trust business. The Hearing Officer estimates that the county market encompasses a total of $3.0 billion in marketable trust business, which has been penetrated to a degree of 30 percent to 50 percent. Such implies $1.5 billion to $2.1 billion in potentially marketable trust business. That Palm Beach County's untapped trust potential is significant is supported by the results of the analysis of the county's 483 estate tax returns filed in 1978 (Hearing Officer Finding of Fact number seven). Of the 483 estates for which such returns were filed, only minor proportions had corporate fiduciaries serving in executor or co-fiduciary capacities. Only 15 of the 81 larger estates valued at $1.0 million or more had a corporate fiduciary serving as executor. Therefore, the PSA trust market encompasses large volumes of potentially marketable trust business which could support the Applicant without significantly affecting the successful operation of existing PSA trust institutions. Many large estates whose accounts would be desirable by the PSA trust institutions have not engaged corporate fiduciary services.
The Hearing Officer's Findings of Fact indicate that the Applicant's projected trust business would not significantly hinder the successful operation of existing trust institutions, given the origins and nature of such projected business. According to Finding of Fact number 10, the proposed trust company would receive approximately 215 transferred accounts totalling nearly $300 million in asset valuation during its first operating year (hereinafter year- one) from the U.S. Trust Company of New York. Such assets, totaling approximately 32 percent of the $938 million in 1978 trust assets estimated by the Hearing Officer to have been managed by the PSA's 15 bank trust departments and one non-deposit trust company, would substantially add to, rather than place excessive competitive pressure upon, the PSA market. Finding of Fact number 11 further concludes that the proposed trust company would generate $30 million,
$40 million, and $50 million in new PSA trust business during its first, second, and third operating years, respectively. This PSA-generated trust business would constitute only minor proportions of the market's total trust assets under bank or trust company management, and would not likely place excessive competitive pressure upon the existing PSA trust institutions, especially when the rapid PSA trust market growth of recent years and its unpenetrated, but marketable, portions are considered. Given that the proposed trust company's projected business would arise primarily from New York trust business being transferred to the PSA, and that the envisioned PSA-generated business volumes would be small with respect to the entire PSA market, the Department concludes that the
Applicant's projected business volumes would expand, rather than competitively strain, the PSA trust market.
Despite the keen trust market competition, a number of the intervening PSA trust institutions were experiencing substantial growth in what was shown to be a highly concentrated market. In Finding of Fact number twelve, the Hearing Officer states that "...three of four trust representatives of banks which intervened in this proceeding experienced substantial growth in trust business over the past few years." The Hearing Officer elsewhere states that about 40 percent of the 1977 trust asset total managed by the PSA's 15 insured-commercial bank trust departments were concentrated in a single such trust department. High growth levels for those cited trust facilities and for the PSA trust asset market lead the Department to conclude that the Applicant, with most of its projected business volume expected to arise from out of state, will not place excessive competitive pressure upon the PSA's existing trust institutions.
Based upon the Hearing Officer's Findings of Fact, the Department concludes that the Applicant will not place excessive competitive pressure upon the PSA trust market or impair the existing PSA trust institutions' ability to secure the large and profitable accounts, which are flowing into the PSA and which subsidize the service of small, less profitable accounts. By state standards, Palm Beach County is clearly an area with an expanding trust-receptive population. In recent years, the PSA's trust assets under commercial bank management have grown in percentage terms far above Florida's growth. Such trust asset growth would be able to absorb the $30 million to $50 million of the Applicant's expected PSA-generated business during each of its first three operating years. Furthermore, the PSA contains large volumes of potentially marketable business, as yet not marketed by existing PSA trust institutions.
Such unpenetrated market potential could support the Applicant. Finally, the PSA's presently managed trust market does not resemble one approaching competitive saturation, in that a substantial share of the PSA's trust institutions have been experiencing healthy trust business growth, and that the market was shown to be fairly concentrated. Therefore, the PSA has ample and expanding trust business volumes capable of supporting the Applicant without hindering the existing PSA trust Institutions or impairing their ability to secure large, new, and profitable trust accounts flowing into the PSA. The Department concludes that the healthy and expanding PSA trust market assures the Applicant and present PSA trust institutions a reasonable promise of successful operation, and deems the "reasonable promise of success" criterion as met.
It is the opinion and conclusion of the Department that the newly proposed capital structure of the proposed new trust company is adequate. Therefore, the criterion in 659.03(2)(c), Florida Statutes, IS met.
Capital should be adequate to enable the new trust company to provide the necessary trust services, including hiring and training qualified personnel and developing investment and management systems to meet the needs of prospective customers. It should be sufficient to purchase, build or lease a suitable permanent trust company facility and acquire equipment. The Department believes that the initial capital for a new trust company generally should not be less than $2.0 million, the Applicant's proposed level of initial capitalization.
Therefore, this criterion is met.
It is the opinion and conclusion of the Department that the original proposed officers and directors have sufficient trust experience, ability and standing to assure reasonable promise of successful operation. However, only two of the five original proposed directors remain. Three newly proposed directors
have not submitted biographical or financial information. Therefore, the department is unable to determine that the board, as a whole, meets the statutory requirement. Therefore, the criteria in 659.03(2)(d) Florida Statutes, ARE NOT met.
The organizers, proposed directors and officers should have reputations evidencing honesty and integrity. They should have employment and business histories demonstrating success, and should be responsible in financial affairs. Generally, at least one member of a proposed board of directors, other than the chief executive officer, should have direct trust experience. In addition, the organizers, proposed directors and officers shall meet the requirements of Section 659.11, Florida Statutes, and shall not have been convicted of an offense constituting a violation of the banking or trust laws involving moral turpitude or a breach of trust. Officers shall have demonstrated abilities and experience commensurate with the position for which proposed.
It is the opinion and conclusion of the Department that the name of the proposed new trust company, U.S. Trust Company of Florida, is not so similar as to cause confusion with the name of an existing non-affiliated trust company. Therefore, the criterion of 659.02(2)(e), Florida Statutes, IS met.
It is the opinion and conclusion of the Department that provision has been made for suitable quarters in the area specified in the application. Therefore, the criterion of 659.03(2)(f), Florida Statutes, IS met.
Temporary quarters are not contemplated by the Applicant. The proposed trust company's permanent quarters will comprise approximately 1,900 square feet, and appears to be sufficient. The permanent quarters should be of a sufficient size to handle the projected business for a reasonable period of time. The facility should be of a nature to warrant customer confidence in the trust company's security, stability and permanence. Other pertinent considerations include adequate parking and expansion possibilities. Based on the record, and the nature of the financial institution involved, the criterion of 659.03(2)(f), Florida Statutes, IS met.
FINAL ORDER
Based on the record, Findings of Fact and Conclusions of Law and policy considerations recited above, it is established that the statutory criteria set forth in Subsections 659.03(2)(a), (b), (c), (e) and (f), Florida Statutes, are met. The remaining criterion relating to the proposed directors as set forth in Section 659.03(2)(d), has not been met because of the recent change in composition of the original proposed board. However, since this criterion is within the control of the Applicant, the Department, in this case, will allow the Applicant to remedy the deficiency.
Based on the foregoing, the application for authority to organize and operate a trust company at 125 Worth Avenue, Palm Beach, Florida is APPROVED. It is thereupon
ORDERED that authority to organize and operate a trust company at 125 Worth Avenue, Palm Beach, Palm Beach County, Florida 33480 is hereby granted upon the following conditions:
The Applicant use the name U.S. Trust Company of Florida;
The Federal Reserve Board give final approval of the trust company in accordance with the federal Bank Holding Company Act;
The Applicant meet the pledge requirements of Section 660.27, Florida Statutes;
The beginning capital shall not be less than $2.0 million;
The chief executive officer of the trust company remains as indicated in the application;
The composition of the original board of directors of the new trust company has changed since the final hearing in this matter. Two of the original five men,
Berkeley D. Johnson, and Carl J. Stinchcomb, remain
as original directors. Three newly proposed directors, Frederick S. Wonham, B. J. Harris, and Howard Falcon, Jr., have not submitted biographical or financial information. Therefore, the biographical and financial information concerning these proposed directors shall be submitted to the Department for approval.
An appraisal by an Independent qualified appraiser directed to the comparability of the proposed lease with other leasing arrangements for similar business property, which represents the terms of the lease to be fair and reasonable, shall be submitted to the Department, as well as proof that full disclosure has been made to and approved by the proposed board of directors and subscribers.
Investment in fixed assets shall meet the statutory requirements and other reasonable requirements of
the Department of Banking and Finance. All leases and leasehold Improvements shall be submitted to and approved by the Department of Banking and Finance prior to their execution or purchase.
The Articles of Incorporation shall be filed width the Secretary of State within six months after approval by the Federal Reserve Board;
The trust company shall open within six months after filing of the Articles of Incorporation with the Secretary of State. This requirement may be subject to an extension upon written request to the Department;
Until the conditions herein specified and other reasonable requirements of the Department of Banking and Finance are met, or if any interim development is deemed by the Comptroller to warrant such action, the Comptroller shall have the right to alter, suspend or withdraw this ORDER.
Subsequent to the Applicant's compliance with all of the above conditions, the Department shall be given prior notice of the opening date. Upon receipt of such notice, the Department shall take the necessary steps to authorize opening of the trust company.
DONE AND ORDERED this day of * 1981, in Tallahassee, Florida.
*NOTE: Document filed with DOAH on 11/17/81 is undated.
GERALD LEWIS
Comptroller of Florida
cc: See Schedule "A" attached hereto.
RULINGS ON PROPOSED FINDINGS OF FACTS AND EXCEPTIONS
The Department rules on the Proposed Findings of Fact and Exceptions, submitted by the parties as follows:
APPLICANT'S PROPOSED FINDINGS AND CONCLUSIONS
The Applicant's request to Incorporate into the record, the Final Order of Security Trust Company of Palm Beach, in its entirety, dated November 19, 1979, Is denied, having been rejected by the Hearing Officer. Therefore those portions of the Applicant's Proposed Findings that refer to the Security Trust Order are ignored.
Applicant's Proposed Finding numbers 1-17 are accepted to the extent that they are not inconsistent with the Findings of Fact rendered by the Hearing Officer. (It should be noted that there is no Proposed Finding number 18)
Applicant's Proposed Finding numbers 19 and 20 are conclusions of law but are consistent with the Final Order.
Applicant's Proposed Finding numbers 21-24 are conclusions of law but are consistent with the Final Order. (Note, two Proposed Findings of Fact have been inadvertently designated as number "24".)
Applicant's Proposed Finding number 24 concerns several counter- arguments addressing contentions proposed by the Protestants and Intervenors. To the extent that no significant findings of fact, if any, were premised on these contentions, there is no necessity to respond to Applicant's counter-arguments. Paragraph 24(a) , concerning the telephone survey, has been discussed in Finding number 14 of the Final Order. Paragraph 24(b), concerning "saturation" has also been treated in the Final Order. Paragraph 24(e) concerning injury to existing institutions has been dealt with in the Final Order In paragraph 4 of the Conclusions of Law, as to the "reasonable promise." As to Paragraph 24(d), concerning "concentration and relocation" of trust assets, no findings were
premised on this contention, and therefore no response to the Applicant's arguments is required.
PROTESTANT'S (FLORIDA BANKERS ASSOCIATION) PROPOSED FINDINGS ON BEHALF
OF PROTESTANTS AND INTERVENORS
Proposed Findings 1-32 concern proposed facts relevant to all applications, and Proposed findings 32-44 concern proposed facts concerning the specific application of U.S. Trust Company of Florida.
Proposed Findings 1-5, 10-17, 26-30 are accepted to the extent that they are generally consistent with the Hearing Officer's Finding or with the Final Order.
Proposed Finding numbers 6-9, 18-25, 31 are rejected to the extent that they are inconsistent with the Hearing Officer's Findings of Fact or with this Final Order, or are otherwise irrelevant or immaterial.
Proposed Finding numbers 32-33, 35-38, 42-44 are rejected to the extent that they are inconsistent with the Hearing Officer's Findings of Fact or with this Final Order, or are otherwise irrelevant or immaterial.
Proposed Finding numbers 34, 39-41 are accepted to the extent that they are generally consistent with the Hearing Officer's Findings of Fact or with the Final Order.
PROTESTANT'S AND INTERVENOR'S EXCEPTIONS
Exception numbers 1, 3-7 are rejected and the Hearing Officer's ruling is affirmed.
Exception number 2 is rejected.
Exception number 8 is misplaced. Many Findings of Fact submitted by the parties were not specifically incorporated into the Findings, but were consistent with the Findings, and have been accepted in this Final Order. Those that have not, are deemed inconsistent with the Hearing Officer's Findings or are irrelevant or immaterial.
Exception number 9 is rejected. All parties had an opportunity to challenge the incipient policy of the Department, pursuant to McDonald vs. Department of Banking and Finance, 346 So.2d 569 (1st DCA Fla. 1977)
Exception number 10 was not considered a significant factor, and the Department followed its incipient policy and other trust company orders regarding capital adequacy.
Exception numbers 11-16 are rejected as inconsistent with the Hearing Officer's Findings of Fact, and the Final Order.
Exception number 17-26 concern Proposed Findings which have been discussed above, and considered In paragraphs 6-9.
SUPPLEMENTAL POST HEARING SUBMISSION OF FIRST NATIONAL BANK IN PALM BEACH AND
BESSEMER TRUST COMPANY OF FLORIDA
This submission is primarily limited to the issue of transfer accounts.
Points 1-3 are rejected to the extent that they are inconsistent with the Hearing Officer's Findings of Fact, and the Final Order. The Hearing Officer made specific findings, as the trier of fact, regarding the transfer of accounts, and those Findings have been adopted by the Comptroller.
cc: See Schedule "A" attached hereto.
SCHEDULE "A"
Thomas C. Oldham, Esquire Hearing Officer
Division of Administrative Hearings The Oakland Building
2009 Apalachee Parkway
Tallahassee, Florida 32301
Stephen E. Day
attorney for Respondent Bankers Trust Company of Florida
Taylor, Day, Rio & Mercier 701 Fisk Street, Suite 320
Jacksonville, Florida 32204
(904) 356-0700
John A. Jones Bruce Roberson
Attorneys for DBT Trust Company of Florida Case No. 79-1228; 79-1234
Holland and Knight
610 North Florida Avenue Tampa, Florida 33601
(813) 223-1621
John Radey
Holland and Knight Post Office Drawer 810
Tallahassee, Florida 32302
(904) 224-7000
J. Thomas Cardwell
Attorney for Petitioner Florida Bankers Association and Intervenor Atlantic National Bank of Palm Beach County Akerman, Senterfitt and Eidson
Post Office Box 231 Orlando, Florida 32802
(305) 843-7860
Bruce Culpepper
Attorney for Petitioner Florida Association of Registered Bank Holding Companies, Inc.
350 East College Avenue Tallahassee, Florida 32301 (904) 222-6071
James G. Pressly, Jr.
Attorney for Intervenor First National Bank in Palm Beach
Attorney for Intervenor Bessemer Trust Company of Florida
Gunster, Yoakley, Criser, Stewart and Hirsey, P.A. First National Bank Building
Palm Beach, Florida 33480 (305) 655-1980
H. David Faust
Attorney for Intervenor Bank of Palm Beach and Trust Company
Attorney for Intervenor First Bank and Trust Company of Boca Raton
Burns, Middleton, Farrell and Faust
205 Worth Avenue
Palm Beach, Florida 33480 (305) 655-5311
Robert I. MacLaren, II
Attorney for Intervenor Boca Raton National Bank Osborne and Hankins
Post Office Drawer 40
855 South Federal Highway, Suite 200 Boca Raton, Florida 33432
(305) 395-1000
Ralph J. Blank, Jr.
Attorney for Intervenor First National bank and Trust Company of Riviera Beach
Blank, Will and Benn Post Office Box 2100
West Palm Beach, Florida 33402 (305) 832-2889
John C. Miller, Jr. Attorney for All Intervenors Post Office Box 46
Mobile, Alabama 33601
(205) 432-1414
Phillip G. Newcomm Bowman Brown Arnold L. Berman
Attorneys for Respondent U.S. Trust Company of Florida
1000 Southeast First National Bank Building Miami, Florida 33131
(305) 358-6300
COPIES FURNISHED:
Stephen E. Day Julie H. Kuntz
Attorneys for Respondent Bankers Trust Company of Florida Mathews, Osborne, Ehrlich, McNatt, Gobelman and Cobb
1500 American Heritage Life Building Jacksonville, Florida 32202
(904) 354-0624
John A. Jones Bruce Roberson
Attorneys for DBT Trust Company of Florida
Case No. 79-1228; 79-1234
Holland and Knight
610 North Florida Avenue Tampa, Florida 33601
(813) 223-1621
John Radey
Holland and Knight Post Office Drawer 810
Tallahassee, Florida 32302
J. Thomas Cardwell
Attorney for Petitioner Florida Bankers Association and Intervenor Atlantic National Bank of Palm Beach County Akerman, Senterfit and Eidson
Post Office Box 231
Orlando, Florida 32802 (305) 843-7860)
Bruce Culpepper
Attorney for Petitioner Florida Association of Registered Bank Holding Companies, Inc.
350 East College Avenue Tallahassee, Florida 32301 (904) 222-6071
James G. Pressly, Jr.
Attorney for Intervenor First National Bank in Palm Beach
Attorney for Intervenor Bessmer Trust Company of Florida
Gunster, Yoakley, Criser, Stewart and Hirsey, P.A. First National Bank Building
Palm Beach, Florida 33480 (305) 655-1980
H. David Faust
Attorney for Intervenor Bank of Palm Beach and Trust Company
Attorney for Intervenor First Bank and Trust Company of Boca Raton
Burns, Middleton, Farrell and Faust
205 Worth Avenue
Palm Beach, Florida 33480 (305) 655-5311
Robert I. MacLaren, II
Attorney for Intervenor Boca Baton National Bank Osborne and Hankins
Post Office Drawer 40
855 South Federal Highway Suite 200 Boca Raton, Florida 33432
(305) 395-1000
Ralph J. Blank, Jr.
Attorney for Intervenor First National Dank and Trust Company of Riviera Beach
Blank, Will and Benn Post Office Box 2100
West Palm Beach, Florida 33402 (305) 832-2889
John C. H. Miller, Jr. Attorney for All Intervenors Post Office Box 46
Mobile, Alabama 36601
(205) 432-1414
Eugene Cella and Franklyn J Wollett Attorneys for Respondent Office of the Comptroller
The Capitol, Room 1302 Tallahassee, Florida 32301
(904) 488-9896
Phillip G. Newcomm, Bowman Brown, and Arnold L. Berman
Attorneys for Respondent, U.S. Trust Company of Florida
1000 Southeast First National Bank Building Miami, Florida 33131
(305) 358-6300
| Issue Date | Proceedings |
|---|---|
| Nov. 17, 1981 | Final Order filed. |
| Jan. 08, 1980 | Recommended Order sent out. CASE CLOSED. |
| Issue Date | Document | Summary |
|---|---|---|
| Nov. 12, 1980 | Agency Final Order | |
| Jan. 08, 1980 | Recommended Order | Hearing to create record for Department of Banking and Finance (DBF) in determining whether Applicant should be authorized to form a trust company. |
