Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: On July 31, 1973, petitioner submitted to respondent its application to organize and operate a new banking facility in St. Cloud, Osceola County, Florida. A filing date of August 20, 1973, was assigned by respondent. Accompanying the application was a long and detailed Economic Survey dated June, 1973, containing economic information and statistics pertaining to the City of St. Cloud and its environs. By letter dated October 26, 1973, the management of the Sun Bank of St. Cloud, the only bank existing in St. Cloud, opposed the establishment of petitioner's proposed bank, citing as grounds therefore the present economic conditions and the limited economic growth prospects for the St. Cloud area. By letter dated February 20, 1974, The First National Bank of Kissimmee protested the granting of a charter for any new bank in Osceola County, contending that "additional banks could only dilute the deposits of the existing banks, and this would not be in the areas' interest." An investigation of petitioner's application was conducted by Frank C. Dobson, a state bank examiner for respondent, on February 19, 1974. By a report dated February 22, 1974, Mr. Dobson recommended disapproval of the application on the ground that three of the five factors were considered unfavorable. Mr. Dobson considered the factor of "financial history, condition of the bank, and fixed assets" to be favorable, as well as the factor of "adeqeacy of capital." Considered unfavorable were future earnings prospects," "general character of management" and "convenience and needs of the community." In contrast to the petitioner's original estimate of total deposits in the amount of $10,000,000.00 at the end of its third year of operation, Examiner Dobson projected deposits of only $6,000,000.00 at the end of the third year and therefore concluded that petitioner would not achieve a profitable position. Based upon his observation that the originally proposed chief executive officer, Mr. John J. Jenkins, might possibly he unable to await favorable action on petitioner's application and that the proposed Vice President and Cashier, Mr. Robert J. McTeer, would need supervision and guidance, Mr. Dobson considered the factor of "general character of management" unfavorable. After a brief resume of each of the proposed directors and officers, Dobson concluded that each was considered "satisfactory" with the exception of McTeer, who was considered only "fair." The unfavorable rating on the factor of "convenience and needs of the community" was based upon Dobson's opinion that the proposed site did not appear conducive to convenient service, the existing bank in St. Cloud was completing a new facility which would provide adequate service for its customers and a national bank application was pending. On October 16, 1974, Fred O. Dickinson, Jr., then State Commissioner of Banking, issued his conditional approval order on petitioner's application. This order indicates that a change in location of petitioner's proposed bank was made and that M. Raymond Daniel was designated as president. Mr. Daniel accepted the conditions on October 18, 1974. In January of 1975, present Comptroller Gerald A. Lewis revoked the conditional approval of Mr. Dickinson. An updated economic survey dated April of 1975 was submitted to respondent on behalf of petitioner. An update investigation was conducted by State Bank Examiner Fred H. Brannen, Jr. on May 21, 1975. Mr. Brannen reviewed the file and found as favorable the factors of "financial history, condition of the bank and fixed assets" and "adequacy of capital." Listed as "borderline-favorable" was the factor of "general character of management." Brannen agreed with the projected figures of the original examiner, Mr. Dobson, and thus reported the factor of "future earnings prospects" as unfavorable. Mr. Brannen found the factor of "convenience and needs of the community" to be unfavorable, noting that the proposed site appeared to be somewhat removed from the existing businesses, Sun Bank of St. Cloud had completed its new facility and planned to use its old building as a remote facility and that the proposed national bank was rejected by regulatory authorities. Based upon his examination, Mr. Brannen concurred with the original recommendation of disapproval. On April 1, 1975, the Sun Bank of St. Cloud filed with respondent its application for authority to open a remote facility at 1001 New York Avenue in St. Cloud. A Comptroller's Conference was held in regard to this application on August 8, 1975, and respondent granted approval for the remote facility on or about September 25, 1975. On June 10, 1975, a Comptroller's Conference was held for the purpose of updating and culminating the investigation of petitioner's application. By a supplement dated June, 1975, petitioner presented additional data concerning existing financial institutions in Osceola County and in six other counties with similar populations as Osceola County. No protestants of the application appeared at this conference. On June 20, 1975, respondent received from the Sun Bank of St. Cloud a 37-page booklet containing comments relating to petitioner's application. It was Sun Bank's conclusion that public convenience and advantage would not be promoted by the establishment of petitioner's bank and that local conditions did not assure reasonable promise of successful operation for petitioner and those banks already established in the community. It appears that petitioner has changed the proposed location of its bank several times since submitting its original application. At the Comptroller's Conference on June 10th, the proposed site was described to be at the intersection of New York Avenue with U.S. Highway 192/441 In its Comments regarding petitioner's application, Sun Bank describes the location formerly proposed the intersection of Neptune Road and U.S. Highway 192/441. This is also the site discussed in the reports of both examiners. 13.. In August of 1975, petitioner presented to respondent a Supplemental Summary relevant to petitioner's application versus the Sun Bank's application for authority to open a remote facility in St. Cloud. On November 17, 1975, Comptroller Lewis concluded that petitioner's proposal did not meet the requirements of F.S. s659. 03(2). As grounds therefore, the Comptroller cited the following: ... The primary service area had a 1970 population of 10,000; the applicants estimate that the service area has a current population of 16,000. The proposed bank's site is approximately .4 of a mile from the existing bank in St. Cloud. The proposed bank would not appear to be any more convenient for the residents of St. Cloud than the existing bank. The applicants have made some showing that the proposed bank would have some pro-competitive advantage for the residents of St. Cloud. However, the banks in Kissimmee are accessible by some of the St. Cloud residents. For this reason, the issue of a monopoly in the existing St. Cloud bank is not as compelling as it might otherwise be. On balance, it appears that the public convenience and advantage would be promoted to some extent by the establishment of the proposed bank, although the case is not an overwhelming one. As shown above, the population base of the service area is fairly small and future growth is not expected to be significant. The population of St. Cloud increased by less than 1,000 persons between 1960 and 1970. The existing bank in St. Cloud had total deposits, as of June 30, 1975, of less than $20 million and its total deposits during the last two calendar years increased by less than $4 million. It appears that local conditions do not assure reasonable promise of successful operation of the proposed bank and the existing banks. On the basis of the foregoing, the Comptroller has concluded that, while the first criterion may be met in this case, the second criterion is not met. Therefore, the application is denied. Since the conclusion renders the other four criteria moot, the Comptroller has not reached any conclusions with respect to those other four criteria." Four banks, all members of various statewide holding companies, presently exist in Osceola County. There is one bank, the intervenor herein, in St. Cloud, which bank also has a remote facility in St. Cloud, and there are three banks in Kissimmee, which is eight to ten miles west of St. Cloud. Petitioner's proposed primary service area is defined to be the City of St. Cloud and its environs. Its general service area is defined to be all of Osceola County. Population estimates by witnesses for petitioner and for the intervenor differed. Petitioner estimated the present population of the general service or trade area to be slightly in excess of 41,000, while figures contained in the booklet entitled "Florida Estimates of Population" show Osceola County to have an estimated population of 36,668 as of July 1, 1975. The petitioner estimates the primary service area population to be in excess of 16,000, and this figure was not disputed by the intervenor. In fact, in its application for a remote facility, the intervenor stated that the "Osceola Planning Commission is projecting that the population of the St. Cloud trade area will increase to approximately 45,000 by 1990." As of the 1975 year end, the intervenor Sun Bank, the existing bank In St. Cloud, had total deposits of $21,210,955.50. During the first quarter of 1976, total deposits increased by over $1,600,000.00 at Sun Bank. Over the past five years, deposits at Sun Bank have doubled. The three Kissimmee banks have a combined total of over $40,000,000.00 in deposits. Net profits at the end of 1975 for the existing four banks in the County were as follows: approximately $286,000.00 for the First National Bank of Kissimmee; $216,198.87 for Sun Bank of St. Cloud; $22,359.66 for the Exchange Bank of Osceola; and a figure of minus $56,231.32 for the Flagship Bank of Kissimmee. The Flagship Bank opened in 1974 in a modular unit and moved into a new facility in its second year Using twenty-four factors to measure the economic growth rating of Osceola County, Mr. William C. Payne, a bank marketing consultant, rated said County along with six other counties of similar size. Osceola was rated second, preceded only by Citrus County. The Comparative Figures Report for December 31 1975, as compared with December 31, 1974, shows the following percentages for Osceola County and statewide: OSCEOLA STATEWIDE TOTAL LOANS 12.8+ 4.7- TOTAL TIME DEPOSITS 20.1+ 7.5+ TOTAL DEMAND DEPOSITS 0.4- 2.0- TOTAL DEPOSITS 10.1+ 3.3+ The presidents of three of the four existing banks appeared and testified as protestants to petitioner's application. The presidents of Flagship and First National in Kissimmee felt that a new bank in St. Cloud would have an adverse effect upon them because they each have a number of customers who are residents of St. Cloud. First National estimates that it has 200 customers from St. Cloud representing approximately $500,000.00 in deposits. Sun Bank recognized than most of petitioner's customers would be derived from Sun's bank, and estimated that probably one million dollars in deposits would be lost to petitioner, thus reducing Sun's profit figures. Sun opened its remote facility in St. Cloud in December of 1975 and First National submitted its application for a remote or branch facility in St. Cloud in January of 1976. Due to financial backing and management expertise and assistance, all three presidents felt that a holding company bank, as opposed to an independent bank, would have a better chance of success in St. Cloud. Flagship pays over $14,000.00 per year as a member of a holding company, while Sun and First National each pay approximately $90,000.00 per year. Sun Bank felt that a certain bank could exist in St. Cloud and that it would, in fact, promote competition. All three presidents noted that 1974 and 1975 were lean years for banking, but that loan demands and total deposits were now increasing. As noted above, petitioner's proposed new bank is to be independently owned and operated at the corner of U.S. Highway 192/441 and New York Avenue in St. Cloud. This downtown intersection provides the only permanent stop light on the main thoroughfare through St. Cloud, and the site provides easy access from either the east/west direction of the main highway or the north/south direction of New York Avenue. It should be noted again that this proposed site is not the same site reviewed by the two state bank examiners in their reports nor by the Sun Bank in its Comments submitted to respondent in June 1975. There was no evidence that the proposed name of petitioner's new bank -- Public Bank of St. Cloud -- would create any conflict or confusion with the name of any other existing bank. There is no evidence in the record that petitioner's proposed capital structure is other than adequate. Its total capitalization is proposed to be $1,000,000.00 and its deposits are estimated to be $7,000,000.00 at the end of the third year of operation. Mr. Payne's updated June, 1976, survey (Exhibit 13) contains drawings and details of petitioner's proposed banking house quarters. The physical structure will promote convenience to customers and the proposed costs are sufficient and reasonable. Security and Federal Deposit Insurance Corporation requirements have been met. Petitioner's proposed Board of Directors consists of ten men. Included therein are attorneys, bankers, cattlemen, a physician, a pharmacist, a University of Florida athletic director and those engaged in real estate development and sales. While some directors do not reside in St. Cloud, others have lived there for years, with one director claiming to have some 1,200 blood relatives in the area. Two of the proposed directors, one of which is the proposed chief executive office, has previously been involved with newly chartered banks. At least three of the proposed directors presently serve as directors of other banks in Florida. The proposed president, Mr. Raymond Daniel, will move to St. Cloud and will devote all his time to his duties as president and director. Two of the proposed directors, one of which is the largest shareholder and the other of which is the proposed vice president and cashier, have suits pending against them for considerable amounts of money. One has a judgment against him in the amount of approximately $40,000.00, and the presidents of two banks in Osceola County testified that his reputation in the community as a businessman was not good.
Recommendation Based upon the findings of fact and conclusions of law recited above, it is recommended that respondent disapprove petitioner's application to organize and operate a state banking facility in St. Cloud for the reason that petitioner, while showing that it satisfies all other criteria, has failed to illustrate that all its officers and directors possess sufficient ability and standing to assure a reasonable promise of successful operation. It is further recommended that such disapproval be without prejudice to petitioner to file with the respondent, if it so desires, within fifteen days of respondent's final order, an amended list of directors and/or officers and that respondent render a decision upon this criterion within twenty days from the filing thereof. Respectfully submitted and entered this 30th day of July, 1976, in Tallahassee, Florida. DIANE D. TREMOR Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Honorable Gerald A. Lewis Comptroller State of Florida The Capitol Tallahassee, Florida 32304 Mr. Clyde M. Taylor TAYLOR, BRION, BUKER & GREENE, P.A. P.O. Box 1796 Tallahassee, Florida 32302 Attorney for Petitioner Mr. Nicholas Yonclas AKERMAN, SENTERFITT & EIDSON Box 231 Orlando, Florida 32802 Attorney for Intervenor Mr. Earl Archer The Comptroller's Office State of Florida The Capitol Tallahassee, Florida 32304 Attorney for Respondent ================================================================= AGENCY FINAL ORDER ================================================================= STATE OF FLORIDA DEPARTMENT OF BANKING AND FINANCE DIVISION OF BANKING PUBLIC BANK OF ST. CLOUD (proposed new bank), Petitioner. vs. CASE NO. 76-088 STATE OF FLORIDA, DIVISION OF BANKING, Respondent, SUN BANK OF ST. CLOUD, Intervenor. /
Findings Of Fact All parties submitted proposed findings of fact. The Applicant's proposed findings 1-5 and 7-14 are hereby accepted except where they might specifically conflict with the findings stated in this Final Order or where they constitute conclusions of law. The Applicant's proposed finding 6 is accepted, with the exception of fourth sentence which is not supported by competent substantial evidence in the record. Proposed findings 1-6 of the Protestant, First Federal, are accepted except where they might specifically conflict with the findings stated in this Final Order or where they constitute conclusions of law. Proposed findings 7 through 9 of Protestant, First Federal, are rejected in that they constitute conclusions of law. Proposed findings 1, 2, 4, and 5 of the Protestant, United, are accepted except where they might specifically conflict with the findings stated in this Final Order. Its proposed finding 3 is accepted with the exception that the record showed that the primary market area is served by four savings and loan association offices. Its proposed finding 6 and 7 are rejected as not supported by competent substantial evidence in the record adduced at the hearing. The Department's proposed findings 1 through 9 and 11 through 13 are accepted except where they might specifically conflict with the findings stated in this Final Order. The Department's proposed finding 10 is accepted except for the finding as to net income which is not supported by competent substantial evidence in the record and conflicts with the findings stated in finding 11.
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: The First Bank of Treasure Island has its main office at 175 Treasure Island Causeway, Treasure Island, Pinellas County, Florida, and was established in 1971. The future growth potential of the main office is limited because Treasure Island has a population of 8,200 and the majority of the population is seasonal. The proposed branch site is situated approximately 25.6 road miles north of the main office. The applicant's liquidity ratio is being maintained at 25 percent or better. It has good established earnings and is presently retaining two-thirds of its dividends for the future expansion of the Bank and its branches. As of November 30, 1978, the applicant's adjusted capital to asset ratio was 11.94 percent. This figure was expected to decrease by a small degree over the following few months. The applicant's main office was staffed with the intention of establishing two branches. The applicant also has an application for another branch ban in mid-county, Pinellas County. This application has been approved by the State of Florida, but is currently awaiting approval by the Federal Deposit Insurance Corporation. The applicant has sixteen directors and non- director senior officers, and its main office is presently overstaffed. Five of its directors and officers have in excess of 14 years of banking experience. The applicant's president and chief executive officer has 23 years of banking experience. The manager of the proposed branch is currently on the applicant's staff, has 12 years of banking experience and has branch banking experience. The owner of the land to be used for the subject proposed branch bank is a member of the applicant's Board of Directors and a 5 percent shareholder. There was a full disclosure of this fact both to the board of Directors and to the State. Two appraisals of the property were obtained, and the applicant's purchase price of the property is less than both appraisals. The site for the proposed branch is located on the West side of U.S. Highway 19, approximately 200 feet north of its intersection with Cypress Drive. The building will be a two-story, 6,000 square foot structure. The branch will initially occupy the first floor and will lease the second floor to professional tenants on a short-term basis. Initially, the proposed branch will have six employees, with two inside teller stations and two drive-in stations. Some fifty parking spaces wilt be provided. The applicant plans to operate the proposed branch as a full service bank. Major decisions will be made on the premises and the branch will only receive bookkeeping support from the main office. In addition to normal banking services, the applicant intends to offer a club plan, a night depository and Saturday morning banking. The applicant projects that the proposed branch will be capable of supporting itself within eight months of operation. Prior to that time, the loss is estimated to be approximately $8,000.00 per month. The estimated volume of total deposits for the proposed branch bank are $2,000,000.00 at the end of the first year, $5,000,000.00 at the end of the second year, and $8,000,000.00 at the end of the third year of operation. The primary service area of the proposed branch, from which it expects to draw 75 percent of its deposit volume, is depicted on the map attached to the application. The primary service area extends 1.1 air miles to the North, 0.6 miles to the East, 2.7 miles to the South and 1.3 miles to the West. This area was chosen by taking into consideration traffic flow, shopping and commercial activity centers in the area and other general characteristics of the area. Within the general trade area of the proposed branch are eight approved or existing commercial banking offices, and six savings and loan association offices. (The map legend was amended at the hearing to delete the black circle with the number 1, as this facility does not exist and has not been approved.) The protestant Palm State Bank is located one-tenth of a mile from the applicant's southern boundary, and 2.6 miles from the proposed branch site. The nearest banking facility to the north is located nine-tenths of a mile from the applicant's northern boundary. The proposed branch will compete in an unincorporated area of Pinellas County. It was the prediction of the applicant's expert witness that the future growth of Pinellas County will occur in the Northern portion where land is available. The 1978 population of the primary service area was 7,200, representing a 300 percent increase from the 1970 population. This population is expected to increase to 10,000 by the year 1980. Nine active or planned housing projects are within the applicant's primary service area. The applicant revised the figures contained on page 20 of its "economic report" to show December, 1978, figures. These figures are 8,517 planned housing units, 1,336 completed units and 806 units under construction. The witness did not know the time frame contemplated for the 8,517 planned units. The name of the proposed branch is to be First Bank of Treasure Island - North County Office. In accordance with the provisions of Florida Statutes, 120.57(1)(a)(12), conclusions of law and a recommendation are not included in this Report. Respectfully submitted and entered this 29th day of January, 1979, in Tallahassee, Florida. DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Frank Weaner, President Palm State Bank 1000 U.S. Highway 19 Post Office Box 840 Palm Harbor, Florida 33563 Kenneth E. Easley 1212 South Highland Avenue Clearwater, Florida 33516 William L. Lyman Assistant General Counsel Office of the Comptroller The Capitol Tallahassee, Florida 32304 A. L. Ellis Chairman of the Board Ellis First National Bank Tarpon Springs, Florida 33589 Comptroller Gerald Lewis State of Florida The Capitol Tallahassee, Florida 32304
The Issue Whether petitioner should impose fines and other administrative sanctions against respondents, and order them "to cease and desist from further violating Florida laws and take appropriate corrective action," for the reasons alleged in the administrative complaint?
Findings Of Fact Credicorp, Incorporated (Credicorp) is a Texas corporation whose principal place of business is located in Dallas, Texas. Credicorp is not licensed pursuant to Chapter 520, Florida Statutes, and never has been. Originally incorporated in 1990 under the name FAFCO, Credicorp began mailing solicitations to Florida in November of 1990. John Rheinfrank was president of Credicorp from November of 1990 until October of 1992. T. at 15. Since then, Stevan Brown, who has been corporate secretary at all pertinent times, has served as president. Credicorp has no employees or agents in Florida, and owns no property in Florida. Credicorp has not registered to do business in Florida and does not collect Florida sales or use taxes. Credicorp mails solicitations, also called invitations, to Florida residents and others. Before the corporate name change, invitations sent to prospects read as follows: TELEGRAM APPROVAL NO: [account number specified] APPROVAL EXPIRATION DATE: [date specified] [Name and address of targeted individual] YOU HAVE BEEN PRE-APPROVED FOR A GOLD CARD WITH A $10,000.00 LINE OF CREDIT. *MAIL YOUR $29.95 ANNUAL FEE BY CHECK OR MONEY ORDER BY (specified date) ALONG WITH THIS SIGNED NOTICE TO ACTIVATE YOUR CREDIT IMMEDIATELY. FAILURE TO DO SO WILL RESULT IN OUR REEVALUATION OF YOUR ELIGIBILITY. PLEASE RETURN THIS TELEGRAM WITH PAYMENT BY (date specified). MAKE CHECK OR MONEY ORDER PAYABLE TO FAFCO GOLD CARD. SINCERELY, ROBERT J. ARMSTRONG, NEW ACCOUNTS MANAGER RESPOND TODAY! Petitioner's Exhibit No. 19. Robert J. Armstrong, the putative accounts manager, does not exist. T. at 121. Recently invitations have included a 60- day money-back guarantee and a disclaimer in small type disclosing Credicorp's lack of affiliation with a financial institution. Petitioner's Exhibit No. 19. The solicitation arrives in an envelope stamped "DATED MATERIAL: YOUR IMMEDIATE REPLY REQUESTED," and the return address is shown as "CREDIT APPROVAL DEPT." Petitioner's Exhibits Nos. 8 and 21; Admission No. 13. Ordinarily the solicitation contains all the information an individual receives before paying money to Credicorp to secure its services. Respondents offer potential customers residing in Florida a "Gold Card" with "a $10,000 line of credit" at a 12 percent annual interest rate, in exchange for a $29.95 fee. Petitioner's Exhibits Nos. 19 and 20; Admission 46. The services Credicorp in fact provides to members are offers to sell merchandise, loans for purchasing the merchandise that Credicorp sells, assorted coupons, and hotel and rental car discounts. Petitioner's Exhibits Nos. 15 and 29, line 23. Not one of these services is clearly identified on the initial solicitation sent to potential members. Petitioner's Exhibit No. 19; T. at 120- 121. After the customer submits a pre-approved application and pays the membership fee, Credicorp mails a "fulfillment package." Petitioner's Exhibit No. 15, p.77, line 22. The customer must pay a $29.95 fee before Credicorp performs any service on the customer's behalf. Petitioner's Exhibit No. 20; Admission No. 47. The fulfillment package contains a letter that states, in part: WELCOME TO CREDICORP, YOUR LINE OF CREDIT IS $10,000 HERE IS YOUR CREDICORP MEMBERSHIP CARD! ACCOUNT # START USING YOUR CREDICORP MEMBERSHIP AND BONUS COUPONS IMMEDIATELY TO PURCHASE NAME BRAND PRODUCTS FROM OUR HOME VALUES AND GIFT CATALOG. ENCLOSED IS OUR GIFT TO YOU, YOUR PREFERRED MEMBER SAVINGS COUPON BOOKLET WORTH UP TO $1,000.00 IN COUPONS REDEEMABLE IN YOUR AREA. ALSO SEE INFORMATION ENCLOSED ABOUT 50 percent DISCOUNTS AT THOUSANDS OF LOCATIONS THROUGH OUT THE U.S. Petitioner's Exhibit No. 6. This letter is the first notice Credicorp gives the "new member" that he or she has joined a catalogue shopping club. The fulfillment package also contains a second letter addressed "Dear New Credicorp Member," a copy of the Credicorp Rules and Regulations, a collection of Home Values and Gifts Bonus Coupons, a booklet of Super Saver coupons, and the Home Values and Gifts catalogue. For the past six months or so, Petitioner's Exhibit No. 16, p.44, the package has contained an application for a "Privilege Card." Petitioner's Exhibits Nos. 1, 2 6, and 15, p. 78 1. 22. A member can purchase merchandise listed in the Home Values and Gifts catalogue by completing order forms contained in the catalogue and mailing them, along with payment, to Credicorp. T. at 108. Credicorp extends members a line of credit of up to $10,000 to purchase this merchandise. T. at 108, 111. The member's "Gold Card" number must be included when ordering products from the catalogue. Petitioner's Exhibit No. 15, p. 83, line 9. A member cannot use the "Gold Card" to purchase goods or services from retail sellers other than Credicorp. T. at 111-114. Members cannot use their "Gold Cards" or their membership to obtain cash from anybody. The Better Business Bureau of Texas received over 34,000 inquiries in 1992 regarding Credicorp's activities. T. at 122-123. Credicorp receives a mark-up on the merchandise it sells members. Petitioner's Exhibit No. 16, p.60, line 5. Members who purchase merchandise on credit must initially submit a specified down payment with the order. Petitioner's Exhibits Nos. 1, 2 and 14. Two prices are available to a Credicorp member, a cash price and a "credit price," which reflects a 12 percent financing fee. Petitioner's Exhibits Nos. 1, 2, 14. Merchandise purchased on credit arrives with an installment coupon book for each item ordered. Petitioner's Exhibit No. 6, Credicorp Rules and Regulations p. 2. The Credicorp Rules and Regulations, the order forms contained in the catalogue, and all other materials Credicorp provides members make no mention of any contingency once the member completes, signs and sends in a form order for merchandise with the amount of money required. Petitioner's Exhibits Nos. 1, 2, 6, 12, 14, 17. Many Florida residents complete and sign these order forms in Florida. Petitioner's Exhibit No. 17. Credicorp has received at least 378 form orders for merchandise from Florida residents. Id. Approximately 1,600,000 individuals have submitted to Credicorp membership applications, each accompanied by $29.95. New members' names and addresses are entered into a computer data base and "batch edit sheets," each listing 100 names of new members, are printed. Petitioner's Exhibits Nos. 4 and 5; Petitioner's Exhibit No. 15, page 73, line 1; T. at 47. Sample batch edit sheets obtained from Credicorp by the Department listed the names of 640 Florida residents who had sent a membership application form and $29.95 to Credicorp to obtain membership. Petitioner's Exhibit Nos. 4, 5, 18. On a single day, June 24, 1992, money and membership application forms from 243 residents of Florida reached Credicorp. Petitioner's Exhibit No. 18.
Recommendation It is, accordingly, RECOMMENDED: That petitioner order respondents Credicorp, John Rheinfrank and Stevan Brown to cease and desist violating Chapter 687, Florida Statutes. That petitioner levy an administrative fine against Credicorp in the amount of three million five hundred seventy-eight thousand dollars ($3,578,000) to be paid within thirty (30) days of entry of the final order. That petitioner levy an administrative fine against respondent John Rheinfrank in the amount of two hundred fifty thousand dollars ($250,000) to be paid within thirty (30) days of entry of the final order. That petitioner levy an administrative fine against respondent Stevan Brown in the amount of two hundred fifty thousand dollars ($250,000) to be paid within thirty (30 days of entry of the final order. DONE AND ENTERED this 4th day of October, 1993, in Tallahassee, Florida. ROBERT T. BENTON, II Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 4th day of October, 1993. APPENDIX TO RECOMMENDED ORDER, CASE NO. 93-911 Petitioner's proposed findings of fact Nos. 1-22, 24-38, 40, 41, 42, and 43 have been adopted, in substance, insofar as material. With respect to petitioner's proposed findings of fact Nos. 23 and 39, extrapolation is problematic. Respondent's proposed findings of fact Nos. 1, 2, 3, 5, 7, 8, 9, 11, 16, 24, 25, 26, and 27 have been adopted, in substance, insofar as material. Respondent's proposed findings of fact Nos. 4 and 21 pertain to matters that are not material to petitioner's allegations. Respondent's proposed findings of fact Nos. 6, 22 and 23 pertain to subordinate matters. With respect to respondent's proposed finding of fact No. 10, it is clear from all the circumstances that it was Credicorp's intent to mislead recipients into believing that there was no such restriction. With respect to respondent's proposed finding of fact No. 12, Credicorp lends money to finance merchandise it sells on credit. With respect to respondent's proposed findings of fact Nos. 13 and 14, it is clear from all the circumstances that Credicorp used the term "Gold Card" to mislead recipients of its solicitations into believing they were being offered a credit card. With respect to respondent's proposed finding of fact No. 15, the evidence did not show that the "Credicorp Gold Card is useful to members as a reminder of their membership." With respect to respondent's proposed finding of fact No. 17, the word card does appear. With respect to respondent's proposed findings of fact Nos. 18 and 19, Credicorp so held itself out. With respect to respondent's proposed finding of fact No. 20, the sales contract comes into existence when the member mails the order and payment. COPIES FURNISHED: Honorable Gerald Lewis Comptroller, State of Florida Department of Banking and Finance The Capitol, Plaza Level Tallahassee, Florida 32399-0350 William G. Reeves, General Counsel Department of Banking and Finance Room 1302, The Capitol Tallahassee, Florida 32399-0350 Bridget L. Ryan, Esquire Department of Banking & Finance Suite 1302, The Capitol Tallahassee, Florida 32399 William E. Williams, Esquire Rex Ware, Esquire 106 East College Avenue Post Office Box 1794 Tallahassee, Florida 32301
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following pertinent facts are found: In the latter part of 1973, petitioner submitted to respondent its application for authority to organize a corporation for the purpose of conducting a general banking business to be located on the west side of U.S. Highway 19 at the intersection of Ridge Road in the City of Port Richie. An investigation of the application was conducted by State Supervising Examiner Bruce L. Hieronymus in April of 1974. The application received conditional approval from the former Comptroller of the State of Florida in December of 1974. In January of 1975, such conditional approval was revoked by the present Comptroller. Mr. Hieronymus conducted an update investigation of petitioner's application in mid-March, 1975, noting in his report that additional field examination time should have been allowed and that his recommendation and report was made without audit or verification of some points that could have a definite bearing on the Comptroller's decision. On April 16, 1975, a Comptroller's Conference was held. On October 15, 1975, Comptroller Gerald A. Lewis notified petitioner that he had denied the application for authority to organize the First Bank of Port Richie. The reasons for denial were set forth in a Statement attached to the Order of denial. While the Comptroller found that petitioner's establishment would promote, to some degree, the public convenience in the area, it was further found that: "Growth in the area has been significant. However, there is nothing in the record to indicate that past growth trends will continue. While four of the seven banks in the western area of Pasco County have recorded impressive gains in deposits from June 1974 through June 1975, the increases have been reflected overwhelmingly in time deposits and the savings and loan offices in the area compete heavily for these deposits. The three banks closest to the proposed bank site have not enjoyed significant deposit growth. While Ellis Security Bank reported a total deposit increase of $3.1 million during the period June 1974 through June 1975, Ellis First National Bank of New Port Richey and Peoples State Bank reported decreases in total deposits for the same period of $1.4 million and $7.5 million, respectively. It appears that local conditions do not assure reasonable promise of successful operation of the proposed bank and the existing banks. On the basis of the foregoing, the Comptroller has concluded that, while the first criterion is met in this case, the second criterion is not met. Therefore, the application is denied. Since this conclusion renders the other four criteria moot, the Comptroller has not reached any conclusions with respect to those other four criteria." Subsequent to the denial, petitioner requested a hearing in accordance with Chapter 120 of the Florida Statutes. Receiving no response from the Comptroller, petitioner filed for a writ of mandamus in the Leon County Circuit Court. That Court found that the parties had agreed to proceed in accordance with the new Administrative Procedure Act and ordered respondent to grant petitioner a formal hearing. The office of the Comptroller forwarded the petition to the Division of Administrative Hearings and the undersigned Hearing Officer was designated to conduct the proceedings. This being a fact-finding adversary hearing under F.S. Sec. 120.57(1) to determine the issue of whether petitioner should be granted authority to organize and operate a general banking business at the proposed location; and considering the long delay between the Comptroller's conference, the Comptroller's order of denial and the date of the present hearing, as well as the fact that the Comptroller declined to reach any conclusion as to four of the six criteria required to be met for a charter, the parties were permitted to present all relevant evidence to date concerning the issues in dispute. As noted above, the proposed bank is to be located on a corner of the Port Richie Shopping Village, a large shopping center at the intersection of Ridge Road and U.S Highway 19, the latter of which is often described as "murderer's row due to its extremely heavy traffic congestion. This is a signal-controlled intersection with turn lanes and turn arrows, and is the only intersection with a traffic control light for several miles along Highway 19. Large residential areas surround the proposed site and a junior college is being built two miles east of the site. The site provides easy ingress and egress and adequate parking space. While the owners of the shopping center are experiencing financial difficulties in connection therewith, the center enjoys an occupancy rate of approximately 93 percent. County, state and federal offices are also located in or near the shopping center. There are two or three savings and loan institutions located in the immediate area of the proposed site. However, the nearest bank to the south of the proposed site is about 2.3 miles and the nearest bank to the north is 3.5 miles. The seven existing banks in the area are closer together than petitioner would be to any other bank, with the possible exception of the second and third banks to the south of petitioner in New Port Richie. The name of the proposed bank is First Bank of Port Richie. While numerous state and national banks and clearing houses utilize the word "first" in their nomenclature, petitioner's name should cause no conflict or confusion with the name of an existing bank. For its housing quarters, petitioner proposes to construct a permanent two-story building containing some 14,000 square feet, the second floor to be only partially finished. The size and layout of the building allow for growth, flexibility and convenience, and necessary security equipment is planned. Estimated construction costs are reasonable. Petitioner intends to temporarily operate in a modular unit located adjacent to the site of the permanent building so as to allow for construction of the building without interference. The temporary unit will be leased and will comply with federal security and bonding requirements. There is nothing in the record to indicate that petitioner's proposed capital structure is less than adequate. State examiner Hieronymus found this factor to be favorable in both his original and updated reports and no witness testified to the contrary. The examiner's original and updated investigations report as unfavorable the general character of management of petitioner. This conclusion appears to be based primarily upon the examiner's opinion at the time he prepared his reports that the petitioner's proposed president and chief executive officer, Mr. Raymond O. MacDonald, Jr., lacked both directorate experience and experience as the head of a bank. However, the evidence Illustrates, and Mr. Hieronymus admits, that at the time he prepared those reports he was unfamiliar with MacDonald's extensive banking experience, both as an executive vice president of a Tampa bank and as a director of a Lakeland bank. Testimony on this point from other witnesses indicates that the proposed officers and directors represent a cross-section of the community, each with prior business experience and three with prior operative banking experience with both new and established banks. The trade area of the proposed bank consists of approximately fourteen square miles. Since the early 1970's, the Pasco County area has been one of the fastest growing areas in the State of Florida. In mid-1973, the estimated population of the trade area was 9,200 residents. Present estimated population of the trade area is over 16,000, using figures obtained from statistics of the U.S. Post Office. The state average is 12,000 people per bank. In the past five years, the area has experienced an increase in deposits of 123 percent. As in most other areas across the nation, the area in question suffered in 1973/74 from the deleterious effects of inflation and recession, with attendant declines in construction and increases in the percentage of unemployed persons. While one opponent of petitioner's new bank charter testified that the banks in Pasco County had had a "rough go of it" in the past few years, this is not borne out by the evidence relating to the deposit growth and net income experienced by the seven existing banks. This same witness further stated that economic conditions in the area were now beginnings to pick up. Also, the two opponents to petitioner's application, both affiliated with banks in Pasco County, are each considering placing a remote facility or a branch office within the petitioner's proposed trade area. All but one of the seven banks in the area experienced a growth in deposits from the 1974 to the 1975 year end. The one bank which reported a decrease in deposits made a profit of some $77,000.00 in 1975, in spite of a loan write-off of about $700,000.00 in 1974 and problems with poor management. The two newest banks in the community, one of which is the closest bank to the north of petitioner, show excellent growth in deposits from 1974 to 1975. The two opponents who appeared at the hearing each testified that, other than normal competition factors, the proposed bank will have no adverse effect upon the successful operation of their existing banks. When Mr. Hieronymus conducted his investigations concerning the petitioner's proposed bank, he did not get the impression that other bankers in the area were concerned & that petitioner's operation would adversely affect their existing operations. The February, 1976, Comparative Figures Report published by the Florida Bankers Association, which is relied upon in part by respondent in determining whether to grant banking charters, shows Pasco County to have an 8.1 percent increase in deposits from 1974 to 1975 year ends. Since January of 1975, respondent has granted bank charters to banks located in Duval County with a deposit growth of minus .1 percent; in Polk County with a deposit growth of 1.5 percent; and in Hillsborough County with a deposit growth of minus 1.5 percent. Newly chartered banks frequently lose money in their first year of operation. Although the petitioner projected earnings indicating a substantial profit in each of the first three years of operation; Mr. Hieronymus concluded in his report that the opportunity for an acceptable return on investment was less than probable and reported the factor of "future earings prospects," to be "unfavorable." Using the approach of a percentage of average total assets rather than percentage of total capital (as used by petitioner in its projections) and taking into account the petitioner's purchase of the land and changes in the sources and costs of money, Mr. Hieronymus projected a net operating income of minus $14,091.00 the first year, plus $28,976.00 the second year and plus $37,023.00the third year. Deposit growth would increase from $2.5 million to $6.5 million to $9.0 million over the first three years, according to the projections of Mr. Hieronymus. These figures would be higher were petitioner located in its permanent facility during its first year. On cross- examination at the hearing, Mr. Hieronymus stated that these projected figures illustrate that local conditions assure reasonable promise of a profit.
Recommendation Based upon the findings of fact and conclusions of law recited above, it is recommended that respondent grant to petitioner authority to organize and operate a general banking business at 800 U.S. Highway 19 North, Port Richie, Florida. Respectfully submitted and entered this 8th day of June, 1976, in Tallahassee, Florida. DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Honorable Gerald A. Lewis Comptroller The Capitol Tallahassee, Florida 32304 Mr. James M. Barclay Assistant General Counsel Office of the Comptroller The Capitol Tallahassee, Florida Mr. Wilbur E. Brewton and Mr. Clyde M. Taylor Taylor, Brion, Buker and Greene, P.A. P.O. Box 1796 Tallahassee, Florida 32302 Mr. John D. Kiernan 307 West Coast Title Building Sixth Street and First Avenue North St. Petersburg, Florida 33701 ================================================================= AGENCY FINAL ORDER ================================================================= STATE OF FLORIDA DEPARTMENT OF BANKING AND FINANCE DIVISION OF BANKING THE FIRST BANK OF PORT RICHEY (proposed new bank) Petitioner, vs. CASE NO. 76-086 STATE OF FLORIDA, DIVISION OF BANKING Respondent. /
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: On September 5, 1978, the Applicant submitted to the Department its application pursuant to Sections 665.031 and 665.704(2), Florida Statutes, for authority to organize a corporation for the purpose of conducting a savings and loan association business to be located at the intersection of Kanner Highway (Colorado Avenue) and Monterey Road, Martin County, Florida. Notice of receipt of the application was published in a Florida Administrative Weekly on September 8, 1978. After receipt of the application, the Department requested additional information after receipt of which the application was deemed complete and assigned a filing date of December 7, 1978. The application as originally filed proposed the name AMERICAN SAVINGS AND LOAN ASSOCIATION OF MARTIN COUNTY for the proposed association. On September 22, 1978, Applicant amended the Petition to change the name of the proposed corporation to CENTRAL SAVINGS AND LOAN ASSOCIATION OF FLORIDA. This change was noticed in the Florida Administrative Weekly on October 6, 1978. As set forth above, the site of the proposed savings and loan association is at the intersection of Kanner Highway and Monterey Road, Martin County, Florida. The organizers of the Applicant obtained an option to purchase the property for the proposed site for $175,000. The option to purchase was obtained from Mr. Richard Geisinger, one of the proposed directors, with full disclosure to the other proposed directors. An MAI appraiser appraised the fair market value of the property for the proposed site at $210,000. The proposed site is directly on the corner of the subject intersection and represents 175 front feet on Kanner Highway and 300 front feet on Monterey Road. The applicants intend to build a freestanding building of approximately 6,400 square feet with two drive-in teller facilities. The total cost of land and building is projected at approximately $481,000 with an additional $85,514 to be spent for the purchase of fixtures and furniture. The applicant proposes to be capitalized at $1,000,000, with $500,000 of the total capital being held as paid in surplus. The capital will be raised from the issuance of 100,000 shares of common stock with a par value of $5.00 per share, selling at a price of $10.00 per share with a collection of an additional $.50 per share for an organizational expense fund. For the purposes of the application, 100 percent of the stock of the proposed association was subscribed to by the organizers. However, it is their intent to offer for sale approximately 46 percent of the stock of the association to the public prior to the opening of the proposed savings and loan association. Applicant's primary service area (PSA) incorporates most of the Northeast section of Martin County and includes the City of Stuart, Town of Sewalls Point and the communities of Palm City and Port Salerno. It is bounded on the north by the Martin-St. Lucie County line, on the west by the Sunshine State Parkway, on the south by the northern boundary of the Gomez Grant, and on the east by the Indian River. The PSA, as proposed, is the most densely populated area of Martin County, having approximately 38,400 residents. The per capita income for the residents of the PSA is above the state average. Both construction and sales of residential units within the PSA are increasing, with adequate room for future development. There is a high level of commercial activity in the PSA and the vacancy rate is low. The PSA contains the Monterey Shopping Plaza, which is directly opposite the proposed site, which shopping plaza opened for business in 1972, and which has expanded to over 100,000 square feet of gross leasable space. Within the PSA and directly across the street from the proposed site to the East, a 26 acre shopping mall is being developed. Downtown Stuart is less than one-half mile from the proposed site and in the PSA. The population of Martin County and the primary service area is a matter of dispute. The Martin County Planning and Zoning Department estimates the county's population at 61,692 residents. The University of Florida, Bureau of Economic and Business Research estimated the county population at 53,895 as of July 1, 1978. No annual estimates relating to census tracts or parts thereof are available from official U.S. or State of Florida sources in order to determine the population of the PSA. However, the trends of population changes in Martin County, Stuart, Sewalls point, Jupiter Island and Ocean Breeze Park and in the unincorporated areas of the county, which comprise much of the designated PSA should apply to the PSA. Relevant population data of these areas, compiled by the University of Florida, Division of Population Studies, are as follows: Martin 1970 County 28,035 1975 47,726 1976 48,496 1977 50,341 1973 53,895 1980 54,700 to 61,800 (projected) Stuart 4,280 8,787 8,479 8,520 8,942 NA Sewalls Point 298 741 791 829 1,025 Jupiter Island 295 349 352 353 355 Ocean Breeze Park 714 813 1,080 1,080 1,065 Unincorporated 21,908 36,936 37,794 39,559 42,468 NA Martin County population has risen dramatically since 1970, and that growth is expected to continue, essentially from in-migration. Since 1970 there has been a negative natural increase in population. The median age of the county population of 1977 was 45 years of age, with 26 percent of its residents 65 years or older. This is fairly representative of the PSA which includes the majority of the county's population. Within five miles of the site, there are four major shopping centers including Stuart Shopping Center with approximately 103,000 square feet, K-Mart Plaza with approximately 100,000 square feet, East Ocean Mall with approximately 100,000 square feet and Monterey Shopping Plaza referred to above. From 1971 to 1978, 17,088 housing units were built in Martin County. Permit activity in the county shows that there were $81,726,000 in permits issued in 1978. The proposed site is along a line of travel for a large number of commuters as well as shoppers who come to that area as a destination point. The latest unemployment data for Martin County shows an unemployment rate of 5.4 percent for November, 1978 (revised), and a 5.5 percent rate for December, 1978 (preliminary). This compares to a state average of 6.2 percent and 6.4 percent respectively. The per capita personal income for the county increased from $5,735 in 1975 to $6,156 in 1976. This was a 7.3 percent increase which was somewhat slower than the 7.6 percent state average. However, the county's absolute averages remained above the state average of $5,596 and $6,021 respectively for the same years. Commercial activity in Martin County is strong. There are presently eleven existing or approved savings and loan association offices within the proposed PSA. One of these is a main office and ten of these are branches or limited facilities. There are also four additional savings and loan association offices located outside the PSA, but within Martin County. There are nine commercial bank offices, including four main banking offices and five branches, within the PSA and another six hank and branch offices located outside the PSA, but within Martin County. There have been significant increases in savings deposits in Martin County. Significant factors in this increase is the in-migration of new residents and inflation. A continuation of this pattern will maintain the growth experience in recent years. The county summary for nine savings and loan offices indicates an increase of 27.1 percent in deposits between March 31, 1977 and March 31, 1978. This continues a similar growth rate achieved during 1976- 1977. A similar growth trend is being experienced by the commercial banks in the area. Savings and loan associations doing business in Martin County have total aggregate savings as of September 30, 1978 of $235,416,000. Commercial banks doing business in Martin County show total assets of $297,774,000 as of the same date. Only one savings and loan doing business in Martin County is headquartered in Martin County. All other savings and loans in Martin County are branches of institutions with headquarters outside Martin County. The Applicant expects to be competitive with the existing savings and loan offices in the PSA with regard to interest rates and breadth of services. Some of the services that the Applicant intends to offer to the community include the following: a mobile facility to serve the elderly and disabled, direct deposit of Social Security and other government checks, retirement plans such as IRA and KEOUGH, electronic funds transfer, Christmas Club and educational savings programs, certificate plans, and Saturday and extended Friday hours. With the exception of the mobile facility and Saturday hours, these services are currently offered by existing associations. The Applicant has not designated a chief managing officer. An informal offer and acceptance of employment exists with a capable individual having savings and loan experience. This individual did not assist in preparation of the pending application. The proposed Board of Directors is composed of nine members, all of whom are residents of the State of Florida and U.S. citizens. Although all of the proposed directors appear to be successful businessmen, none of them have any savings and loan experience. Six of the nine organizers are presently commercial bank directors and one is a former bank director. Mr. J. M. Brown is Director and Chief Executive Officer of American Bank of Martin County; Mr. Richard K. Carroll is a director of Jensen Beach Bank; Mr. John A. Darlson is a director of the American Bank of Martin County; Mr. Richard Geisinger is Chairman of the Board of Directors of American Bank of Martin County; Mr. Terry N. Keathley is a director of American Bank of Martin County; and Mr. Lawrence J. Timon is a director of American Bank of Martin County. Mr. Brown and Mr. Darlson do not intend to become directors of the proposed savings and loan association but do intend to held their stock in the proposed association. Those remaining proposed directors who also serve the Board of American Bank, Messrs. Geisinger, Keathley and Timen, have indicated their intent to resign their directorates in American Bank to serve on the Board of Directors of the proposed association in keeping with the requirements of the Financial Institutions Regulatory Act. The remaining proposed directors are Mr. Rockford H. Ern, Mr. Armando Farina, and Mr. John M. Fort. Mr. Brown, Mr. Carroll, Mr. Darlson, Mr. Geisinger, Mr. Keathley and Mr. Timon have each subscribed to more than 5 percent of the stock of the proposed savings and loan association and also presently own stock in a commercial bank in the PSA. All intend to retain that stock as well as their stock in the proposed savings and loan association. The Applicant has projected savings deposits at the end of the first, second and third years of operation to be $5,000,000, $10,000,000 end $15,000,000 respectively. The Applicant has presented a revised budget which projected net profit for the first three years of operation to be $55,000, $131,000, and $188,000 respectively. The Applicant has proposed that the new association bear the name CENTRAL SAVINGS AND LOAN ASSOCIATION OF FLORIDA. No evidence was presented to show this name was confusing or misleading to the public. In accordance with the provisions of Section 120.57 (1)(a)(12), Florida Statutes, Conclusions of Law and a Recommendation are not included in this REPORT. Respectfully submitted and entered this 25th day of October, 1979, in Tallahassee, Florida. CHRIS H. BENTLEY, Director Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: Karlyn Anne Loucks, Esquire Assistant General Counsel Office of the Comptroller The Capitol, Room 1302 Tallahassee, Florida 32301 Barry E. Chapnick, Esquire 1666 Kennedy Causeway, Suite 700 Miami, Florida 33141 C. R. McDonald, Jr., Esquire Suite 200, Citizens Federal Bldg. 1600 South Federal Highway Ft. Pierce, Florida 33450 Frank Fee, III, Esquire Post Office Box 100 Ft. Pierce, Florida 33450 Richard J. Dungey, Esquire Post Office Box 288 Stuart, Florida 33494
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: The Atlantic Bank of St. Augustine has its main office at 24-28 Cathedral Place, downtown St. Augustine, St. Johns County, Florida, and was established in 1934. It is now a wholly owned subsidiary of the Atlantic Bancorporation. The applicant has one existing remote drive-in facility located approximately one mile from the main office and about nine-tenths of a mile from the proposed branch site. This facility does not offer full services, and, at the time a decision was made to apply for another branch, it was not feasible to expand this existing facility due to insufficient available land. According to the most recent data available, the applicant's adjusted capital to asset ratio was 8.3 percent and its net income to asset ratio was .94 percent for 1978. The applicant's liquidity ratio is in the 40 to 45 percent range. Its asset condition is very good as is its past performance. The applicant has suffered a declining percentage share of the market, decreasing from 50.2 percent in 1970 to 40.2 percent at year end 1978. According to the applicant, this is a result of having only one full service facility which is located in the congested downtown area of St. Augustine. The main purposes of the proposed branch are to provide more convenience for the applicant's existing customers (38 percent of which are estimated to reside in the proposed primary service area) and to protect its market share of bank customers. The applicant's management team is composed of eleven directors and non-director senior officers. Its president and chief executive officer has been with the applicant since 1950 and was born and raised in the City of St. Augustine. Three of its other officers have in excess of twenty-two years of banking experience. The proposed branch manager, Robert George Allen, is currently on the applicant's staff as an assistant vice-president and manager of the installment loan department, and has twelve years of banking experience. The site for the proposed branch is located northwest of the intersection of U.S. Highway No. 1 on State Road 312. The owner of the land for the proposed site is the Craig Funeral Home, which is not directly or indirectly associated with this application. The land will be purchased by the applicant at a cost of $180,000.00. The applicant will construct a 4,930 square foot one- story concrete block building on the site at a cost of approximately $260,000.00. The facility will have 34 parking spaces with three inside and five outside teller stations. The site will contain 200 feet of frontage on U.S. Highway No. 1 and will have both northerly and southerly access off said highway. The applicant intends to offer a full range of services at the proposed branch facility. The primary service area of the proposed branch is depicted on the map attached to the application. It is bounded on the west by Interstate 95, on the east by the Atlantic Ocean, on the south by the St. Johns/Flagler County line and on the north by State Road 16, on the east by the San Sebastian River to Anastasia Island, then the south city limits of St. Augustine and the Atlantic Ocean. Within the applicant's primary service area, there are two remote banking facilities, both of which opened in 1975 and one of which belongs to the applicant, situated 0.9 and 1.2 miles north of the proposed site. Also, the protestant's approved, but unopened, main office is to be located 0.2 miles south of the proposed site. The latter two sites are located on the same, west side of U.S. Highway No. 1 and are separated by a K-Mart store. The protestant is the only independently owned bank in St. Augustine. It has a primary service area which is similar to the applicant's proposed primary service area. On the day prior to the administrative hearing in this cause, the protestant closed the purchase on its land and is now contemplating the opening of a modular facility pending construction of its permanent facility. There are also two savings and loan offices located within the applicant's primary service area. Near the primary service area, there is another branch facility (Barnett) and two main commercial banking offices -- Barnett Bank of St. Johns County and the applicant's bank, located 2.2 and 2.3 miles northeast of the proposed branch site. There are also three more savings and loan offices located near the primary service area. The two existing and operating banks in the area -- Barnett and the applicant -- had, as of December 31, 1978, total deposits of $54.78 and $36.62 million, respectively. Barnett showed a significant increase in loans and demand deposits, while the applicant illustrated a decline in deposits and a smaller percentage increase in loans. The county totals show an increase of 13.5 percent in loans, a decrease in demand deposits of 11 percent, an increase in time deposits of 12.7 percent and an increase in total deposits of 3.3 percent, for a total of $101,446,000.00. The savings and loan offices within and near the proposed primary service area have demonstrated increases in deposits ranging from 7.6 percent to over 100 percent. The applicant estimates the volume of total deposits for the proposed branch to be $1.297 million at the end of the first year, $2.699 million at the end of the second year and $4.171 million at the end of the third year of operation. The applicant estimates a loss of $56,530.00 the first year, a profit of $49,129.00 the second year and a profit in the third year of $156,076.00. The name of the proposed branch is to be Atlantic Bank of St. Augustine - St. Augustine South Branch. The applicant has received no notification that it is not in substantial compliance with the regulatory laws and statutes. Official state population estimates for the primary service area are not available. The applicant, however, estimates the population of the area to be 8,900 in 1974 and 12,792 in 1978. These figures are based primarily on estimates of a population of 12,700 for a slightly smaller area made by the Board of the County Commissioners in May, 1979, for the purpose of a grant assistance application. Based on the same data, the applicant projects the primary service area population for 1980 to be 14,438. The population growth rate for the area between 1974 and 1978 was thus estimated at 43.7 percent, for an average annual growth rate of 10.9 percent. Inasmuch as official estimates for the applicant's primary service area are not available, the Office of the Comptroller considered the trends of population changes in the city, the beaches, the county and the unincorporated areas, as measured by the University of Florida Division of Population. Some of the relevant population data considered was the following: St. Augustine Beach 632 1,131 St. Augustine 12,352 12,611 Unincorporated Area 17,412 31,188 St. Johns County 31,035 44,550 These figures illustrate that the fastest population growth has occurred in the unincorporated areas of the County. The University of Florida projects a population of 47,600 in the County by the year 1980, for an average annual growth rate of 3.4 percent. Almost all of the County's population growth between 1970 and 1978, 94.56 percent, has resulted from net migration, but not necessarily exclusive of retirees. Between 1970 and 1977, there was some increase in the weight of the 65+ age group, but a larger increase occurred in the weight of those ages 15-64, the labor age group. The former increased from 14.1 to 15.5 percent, while the latter increased from 57.9 to 62.0 percent. For the twelve months ending December 1978, the county showed an unemployment rate of 7.7 percent, as compared to the state average of 6.6 percent. Recent monthly data indicates a rise in the rate of unemployment in St. Johns County -- 8.7 percent in March, 1979, as compared with a state average of 5.8 percent. For April, the county figure is 8.4 percent and the state average is 5.3, percent. The per capita personal income for St. Johns County increased from $5,356.00 in 1976 to $5,689.00 in 1977, a 6.6 percent increase. This growth is somewhat slower than the state average of 9.8 percent, and the county's per capita incomes remained below the state averages of $6,101.00 and $6,697.00, respectively, for the same years. In accordance with the provisions of Florida Statutes 120.57(1)(a)(12), conclusions of law and a recommendation are not included in this Report. Respectfully submitted and entered this 15th day of August, 1979, in Tallahassee, Florida. DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings 101 Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED John E. Hankal Hankal and Wolfe Post Office Drawer H-1 St. Augustine, Florida 32084 Roger A. Larson Graham, Hodge, Larson and Hume, P.A. Suite 415, Kilgore Square 2400 West Bay Drive Largo, Florida 33540 Michael A. Gross Assistant General Counsel Office of the Comptroller The Capitol Tallahassee, Florida 32301 Comptroller Gerald A. Lewis State of Florida The Capitol Tallahassee, Florida 32301
The Issue In DOAH Case No. 92-2455 the Department of Banking and Finance, Division of Banking (Department) seeks to recover the costs of examination and supervision of Bay Bank and Trust Company (Bay Bank). As reason, Bay Bank is alleged to have engaged in unsafe or unsound practices as discovered in the examination the Department made of Bay Bank on March 31, 1991. In addition, the Department seeks to impose a late payment penalty in the amount of $100.00 per day commencing on November 15, 1991, and an administrative fine of $1000.00 per day commencing on December 16, 1991. See Section 655.045(1), Florida Statutes (1991). In DOAH Case No. 92-3744 the Department seeks entry of a cease and desist order directed to Bay Bank and to John Christo, Jr. (Christo, Jr.) and John Christo, III (Christo, III). See Section 655.033, Florida Statutes (1991). Moreover, the Department seeks to remove Christo, Jr. and Christo, III, as Bay Bank Directors and to prohibit their participation in the affairs of Bay Bank or any other financial institution regulated by the Department. See Section 655.037, Florida Statutes (1991). In particular the Department seeks to impose this discipline based upon alleged unsafe and unsound practices as determined through the Department's March 31, 1991, examination conducted at Bay Bank and the Federal Deposit Insurance Corporation (FDIC) examination conducted at Bay Bank on November 18, 1991; for alleged breaches of the written agreement entered into between Bay Bank and the Department following the March 31, 1991 examination; for alleged violation of the Federal Reserve Act, 12 C.F.R. s. 215.4, known as Regulation O; for alleged violation of Section 23A of the Federal Reserve Act, 12 U.S.C. s. 371(c), and for alleged violation of fiduciary duties associated with the previously described acts by Christo, Jr. and Christo, III.
Findings Of Fact Prehearing Stipulations of Fact The following facts were admitted and required no proof at the final hearing: At all times material hereto, Bay Bank and Trust Company ("Bay Bank") has been a state-chartered, federally insured bank operating under Charter No. 188-T, having a principal place of business at 509 Harrison Avenue, Box 1350, Panama City, Florida, 32402. At all times material hereto, Florida Bay Bank, Inc. ("FBB") has been a Florida corporation operating as a one bank holding company. FBB owns 100 percent of Bay Bank. At all times material hereto, John Christo, Jr. has been chairman of the board of FBB, John Christo, III has been president and Irene Christo has been secretary/treasurer. Until November, 1992, John Christo, Jr. was Chairman of the Board and Chief Executive Officer of Bay Bank. From November, 1992, John Christo Jr. has been Chairman of the Board of Bay Bank. Until July, 1992, John Christo, III was a Director and President of Bay Bank. From July, 1992 until the present, Christo III has been Vice-Chairman of the Board of Bay Bank. At all times material hereto, JCJ Irrevocable Trust ("JCJ Trust") has been a trust, the managing trustee of which has been John Christo, III. Each of the children of John Christo, Jr. has possessed a beneficial interest in JCJ Trust in at least the following amounts: John Christo, III - 40 percent James Phillip Christo - 30 percent Irene L. Christo - 30 percent FBB has two classes of voting securities outstanding, voting preferred stock and common stock. At all times material hereto, John Christo, Jr. owned approximately 97 percent of the preferred stock and JCJ Trust owned more than 65 percent of the common stock of FBB. John Christo, Jr. was Chairman of the Board and owned approximately 32 percent of the outstanding shares of Bay Savings Bank, a state chartered savings and loan association in West Palm Beach. JCJ Trust owned approximately 37 percent of Bay Savings Bank. FBB owned approximately 5 percent of Bay Savings Bank. Bay Savings Bank failed and was placed in receivership by the Resolution Trust Corporation on September 6, 1992. On April 18, 1986, the Board of Directors of Bay Bank voted to approve two irrevocable standby letters of credit in favor of SouthTrust Bank of Alabama, N.A. ("SouthTrust") for the benefit of John Christo, Jr. (LOC #281) and JCJ Trust (LOC #282) respectively. These letters of credit were unsecured. These loans at SouthTrust were originally obtained by the Christos for the purpose of providing the initial capitalization of Bay Savings Bank in West Palm Beach. These letters of credit were subsequently renewed and approved by the Board of Directors of Bay Bank on April 18, 1989 and again on February 15, 1990. These renewal letters of credit, like #281 and #282, were unsecured. On February 19, 1991, the Board of Directors of Bay Bank voted to again renew the irrevocable letters of credit in favor of SouthTrust for the benefit of and to secure the debts of JCJ Trust and John Christo, Jr. to SouthTrust. Christo, Jr. was present at the board meeting when the board voted to approve LOC #509. Christo, III voted with the Board of Directors of Bay Bank to approve LOC #509. On February 25, 1991, Bay Bank issued the irrevocable letter of credit (LOC #509) in favor of SouthTrust in the aggregate amount of $425,000 for the benefit of and to secure a debt owed by JCJ Trust to SouthTrust. The terms of LOC #509 permitted SouthTrust to draw any amounts of funds due and payable to SouthTrust from JCJ Trust that were at least 30 days past due, up to the limit of LOC #509. On September 23, 1991, SouthTrust sent Bay Bank a letter indicating that SouthTrust would draw on LOC #509 because JCJ Trust owed SouthTrust $433,429.17, which amount was past due for more than 30 days. On October 2, 1991, Bay Bank funded a loan in the amount of $425,000 to JCJ Trust to cover LOC #509 as drawn upon by SouthTrust. The note was signed by Christo, III as trustee of JCJ Trust. The note was unsecured. On February 25, 1991, Bay Bank issued the irrevocable letter of credit (LOC #510) in favor of SouthTrust in the aggregate amount of $425,000 for the benefit of and to secure a debt by Christo, Jr. to SouthTrust. The terms of LOC #510 permitted SouthTrust to draw any amount of funds due and payable to SouthTrust from Christo, Jr. that were at least 30 days past due, up to the limit of LOC #510. Christo, Jr. was present at the board meeting when the board voted to approve LOC #510. John Christo, III voted with the Board of Directors to approve LOC #510. On August 26, 1991, SouthTrust notified Bay Bank that it would draw on LOC #510 because Christo, Jr. owed SouthTrust $425,000, which amount was past due for more than 30 days. On September 3, 1991, Bay Bank funded an unsecured loan in the amount of $425,000 to Christo, Jr. to cover LOC #510 as drawn upon by SouthTrust. The note was signed by Christo, Jr. Although bank documents reflect board approval of LOC #509 and #510, there is no bank document relating to LOC #509 or #510 reflecting approval by the Board of Directors, on or about the time of the issuance of LOC #509 and #510, of the terms of any loan to John Christo, Jr. or JCJ Trust that might be made should the letters of credit be drawn upon by SouthTrust. In December, 1990, Bay Bank exchanged a 1986 Ferrari Testarossa with FBB in exchange for a 1984 Ferrari 4001. The Bank booked the value of the 4001 as $35,954 and FBB booked the value of the Testarossa at $110,793. The Testarossa had a market value in excess of that of the 4001. No security was given by FBB in connection with this transaction. Other Facts The State Examination and Findings Pursuant to Section 120.57(1)(b)15, Florida Statutes (1992 Supp.) (Use of Manuals) Consistent with long-standing practices in examining Bay Bank and other financial institutions over which the Department has had jurisdiction, it performed an examination to assess Bay Bank's financial condition and banking practices. This examination took place on March 31, 1991. In performing the examination it employed the use of a manual produced by the FDIC which the Department has used in conducting examinations beginning in 1977, to include examinations of Bay Bank. The Department also utilized its Examination Procedures Manual. Again, this manual had been referred to in the past when conducting examinations of this and other regulated institutions. As had been its custom the Department also utilized a document known as Management Evaluation Guidelines, derived from information gained from the state of Texas. Prior to the March 31, 1991 examination the Department had used the Management Evaluation Guidelines in performing examinations of Bay Bank. The Department has substantially affected the interest of Bay Bank and the Christos by resort to the three manuals in conducting the March 31, 1991 examination. None of these manuals had been adopted as rules when the March 31, 1991 examination was made; however, on August 6, 1993, Respondent noticed its intent to adopt the manuals as rules through incorporation by reference into an existing chapter within the Florida Administrative Code. The FDIC Manual establishes a rating system known as the Camel rating system. That acronym stands for measurements of a bank's condition related to capital, asset quality, management, earnings and liquidity. Out of component scores assigned to those measurements of the bank's condition, but not through averaging, an aggregate score is assigned which identifies the overall health of the institution. An aggregate score of 1 is the highest rating, with aggregate scores of 4 or 5 considered to be substandard. In March, 1991, as in its general experience with prior examinations, the Department equated the assigned aggregate score of 4 with unsafe and unsound practices by Bay Bank. This opinion was held when taking into account the specific conditions within the bank found at the time of examination and as set forth in the post-examination written report. The Camel rating system had its origin with the Federal Financial Institutions Examinations Council and was designed to identify institutions that needed closer supervisory attention. It is a system that had been used in regulation of banks since the 1970s. The FDIC Manual and the state Examination Procedures Manual include definitions of the numerical ratings found within the Camel rating system. The source material for arriving at the Camel ratings are constituted of the lending institution's records and other information gathered during the examination sessions. In assigning the Camel ratings in the March 31, 1991 examination, the Department followed these approaches. In addition to the Camel rating system, the FDIC Manual sets forth criteria related to determining whether a bank violated federal banking statutes and regulations. On this occasion the Department considered the criteria set forth in the FDIC Manual to determine whether Bay Bank violated federal law. The Department's Examination Procedures Manual explains procedural steps that the examiners took in conducting the March 31, 1991 examination. The state Examination Procedures Manual affords latitude to the examiners to deviate from guidelines set forth in the manual if the deviation can be supported in writing. The right to deviate from the guidelines was available upon the occasion of the March 31, 1991 examination. Over and above the possibility that an examiner, in this case an examiner performing the examination on March 31, 1991, would deviate from the guidelines set forth in the state Examination Procedures Manual, the entire examination process draws upon the experience of the examiner in a somewhat subjective manner and in recognition that the activity of bank examination is one that requires flexibility in thinking. Specific guidance to the examiners contained within the state Examination Procedures Manual includes a statement of expected documentation that a bank should have in support of its loans, instructions concerning how to grade the bank, as well as how to proceed with the examination, to include various operational steps to be taken while conducting the examination. The state Examination Procedures Manual also sets forth personnel duties for the examiners. The state Examination Procedures Manual sets forth the need for bankers to adhere to safe and sound banking practices. The Management Evaluation Guidelines sets forth guidance for the examiners, to include their responsibilities in the March 31, 1991 examination, related to assessing bank management. This guidance is in addition to the guidance set forth in the FDIC Manual and the state Examination Procedures Manual. The Management Evaluation Guidelines sets out instructions about its use and provides worksheets to be executed in the assessment process. The rating system contemplated by the Management Evaluation Guidelines ties in with the Camel rating system. Aside from the legal requirements set forth in Chapter 655, Florida Statutes, the Department has not established formal rules which would further define the term "unsafe and unsound" practices as that term describes the circumstances under which the Department would assess a bank for costs of examination and supervision, seek to order a bank or its directors, officers and employees to cease and desist or seek the removal of a bank's officers and directors and to restrict and prohibit those officers and directors from participating in the affairs of that bank or any other financial institution over which the Petitioner has regulatory authority. Other than information gained during an examination, to include the March 31, 1991 examination, concerning perceptions held by the examiners about the Camel ratings for the bank, as reflected in the examination report provided to the bank and through the aforementioned manuals, the Department has made no attempt to specifically describe its use of the Camel ratings. The explanation of the Camel rating as set forth in the three manuals would become codified requirements of law if the rule enactment process is concluded. The contents of those manuals would be specifically disseminated to affected persons with that eventuality; however, such an arrangement would have only prospective utility as a means to specifically notify a regulated entity concerning the imposition of the regulatory terms set forth in the manuals. When the March 31, 1991 report of examination was prepared there were no formal written rules or other written guidance concerning the occasion upon which the Department would seek a written agreement as opposed to an imposition of a cease and desist order in trying to correct problems with a bank discovered through the examination process. Instead, the Department exercised its discretion consistent with findings made during the examination. The three manuals offer assistance in the proper exercise of regulatory discretion concerning corrective action directed to a given institution and had that part to play in the March 31, 1991 examination process as well as the overall decision to pursue the present cases. As far back as 1984 it has not been the Department's policy to provide copies of the state Examination Procedures Manual to institutions being examined under its terms. It was not the policy to provide a copy of the state Examination Procedures Manual to the Bay Bank at the March 31, 1991 examination. On the other hand, there has never been any prohibition against allowing the members of the banking industry in Florida or others to have access to the state manual. Similarly, the Department does not provide copies of the FDIC Manual to the public, nor did it provide a copy of the FDIC Manual to Bay Bank when the March 31, 1991 examination was conducted. The Department does not deem the failure to provide that manual and the state Examination Procedures Manual as an inappropriate oversight. The Department is not conversant with the opportunities which the public, to include Bay Bank, would have to obtain the FDIC Manual from federal officials. The Department makes the assumption that the FDIC Manual is available from the FDIC. Finally, Respondent does not publish the Management Evaluation Guidelines for the benefit of members of the regulated industry, but it would provide a copy of the Management Evaluation Guidelines on request. In particular, it did not provide a copy of the Management Evaluation Guidelines to Bay Bank associated with the March 31, 1991 examination. None of the three manuals discussed are deemed to be confidential. Ultimately, the decision to take administrative action based upon the findings made in the March 31, 1991 examination must be factually supported and legally correct, whatever contribution was made to the regulatory function when the Department chose to make its customary usage of the three manuals in performing the March 31, 1991 examination. Petitioners Exhibit No. 2 is the report of examination for March 31, 1991. It identifies the aggregate Camel rating of 4 and sets forth the reasons for that finding. As set forth in the report of examination there were numerous unsatisfactory conditions found during the March 31, 1991 examination. In particular, the findings in the report of examination identify a number of unsafe or unsound practices, together with other shortcomings in the performance by Bay Bank, its management, employees and directors. In carrying out the examination of March 31, 1991, the examination team was constituted of 14 examiners to include two Area Financial Managers, two Financial Examiner Analyst Supervisors, and two Financial Specialists. Two members of the examination team were trainees. The work performed by the trainees was supervised and the examination findings made were not constituted of work performed by the trainees that had not been reviewed. In conducting the examination 2,538 hours were devoted to the task. Additionally, the examiner in charge spent 116 hours planning the examination and writing the report of examination, activities conducted away from the bank. The costs of examination and supervision was $67,494.20. Review was made of the examination report through various department employees. This arrangement was in accordance with normal departmental routine for conducting such review. The only notable change to the report prepared by the Examiner in Charge concerned the component Camel rating for assets wherein the Examiner in Charge had failed to offer a written explanation for assigning a component rating of 4 when written guidelines in the state Examination Procedures Manual called for a 5 for that component. Consequently the component rating was changed by the Bureau Chief for the area where Bay Bank conducts its business. This change for the asset component did not modify the overall Camel rating. Among the unsafe and unsound practices discovered in the March 31, 1991 examination was Bay Bank's failure to establish an adequate loan loss reserve. The management and directors had set aside approximately 1.364 million dollars for loan loss reserve. The methodology utilized by the Department to identify an adequate loan loss reserve revealed the need for 4.05 million dollars to be available for that function. That methodology is accepted. Therefore, the deficiency in the loan loss reserve approximated 2.686 million dollars. This shortfall was brought about by the ineffective methods of risk identification which the bank management and its directors had utilized prior to the March 31, 1991 examination. For a substantial period of time prior to the March 31, 1991 examination Bay Bank had maintained a significantly higher percentage of noncurrent loans and leases than its peers, while maintaining a loan loss reserve comparable to its peers. This contributed to the inadequate loan loss reserve. Bay Bank questioned the formula employed by the Department to establish loan loss reserves wherein it is anticipated that 10 percent losses are contemplated for substandard loans. Bay Bank claimed to have a loss experience for substandard loans in the range of 2 to 4 percent. Nonetheless, the Bay Bank internal loan watch-list estimated the loss of approximately 9.14 percent for each loan that it had designated as substandard, which more closely approximates the formula utilized by the Department in establishing a proper loan loss reserve. The deficiency in the loan loss reserve is high and contrary to standards expected of Bay Bank in maintaining a loan loss reserve, so much so that it constitutes an unsafe and unsound practice. Without providing an adequate reserve the financial health of the banking institution is at risk, in that the management has a false picture of the bank's condition when making decisions about banking activities. The deficiency in the loan loss reserve creates the likelihood of abnormal risk or loss, insolvency, or dissipation of assets or other serious prejudice to the interests of the bank and its depositors. During the March 31, 1991 examination, the examiners found numerous instances where the bank management had failed to establish or enforce internal routines and controls. Included within those findings were: Improper recordation of other real estate (ORE) within the bank's books, contrary to bank loan policies, Failure to obtain and maintain current appraisals on ORE and pending ORE, Failure to establish adequate records to allow reconciliation of income and expenses relating to ORE and to maintain adequate documentation thereof, Failure to comply with the bank's loan policies preventing the continued accrual of interest on loans delinquent 90 days or more, Failure to implement credit risk grades established in loan policies more than a year before the examination period, Disorganized and outdated loan file information, Statutory violations associated with loans that were past due for more than a year and Failure to document secured real estate loans as first liens, a requirement by the bank's loan policy and state law. As the examination report states, Bay Bank's Board of Directors had implemented a corrective plan of action dated January 31, 1989, which responded to material deficiencies that had been reported in the June 30, 1988 FDIC report of examination and the November 30, 1987 Department report of examination. The findings within the March 31, 1991 examination show significant violations of the internal plan for corrective action implemented on January 31, 1989, especially in the area of adequate loan policies and the need to insure compliance with the requirements of law. The failure to establish and enforce internal routines and controls and noncompliance with the January 31, 1989 corrective plan of action point to practices and conduct contrary to proper expectations incumbent upon Bay Bank, its management and directors, thereby constituting unsafe and unsound practices that creates the likelihood of abnormal risk or loss, insolvency, or dissipation of assets or otherwise seriously prejudices the interests of Bay Bank or its depositors. The March 31, 1991 examination revealed violations of laws and regulations governing the bank's activities. Taken together these violations point to an unsafe and unsound practice that creates the likelihood of abnormal risk or loss, insolvency or dissipation of assets or otherwise seriously prejudices the interests of the bank or its depositors. On the occasion of the March 31, 1991 examination it was appropriate for the Department to advise Bay Bank to refrain from paying dividends until asset quality, earnings and capital had improved sufficiently to justify dividend payments. Prior to the examination Bay Bank had paid questionably high dividend amounts in a circumstance in which the bank's capital position was tenuous. The excessive levels of adversely classified loans discovered during the March 31, 1991 examination were somewhat the product of conditions in the local economy. However, the outside influences in the economy did not completely explain the deteriorating loan portfolio and offer a defense to imprudent lending practices and the failure to adequately diversify the loan portfolio. The imprudent lending practices were manifested through inadequate risk identification and lack of proper attention to problem loans. In the final analysis the bank management and directors were responsible for the loan portfolio's substandard condition. The circumstances associated with adversely classified loans as commented on in the March 31, 1991 examination report are indicators of unsafe and unsound practices by bank management and the directors, creating the likelihood of abnormal risk or loss, insolvency, or dissipation of assets or otherwise seriously prejudicing the interests of the bank or its depositors. Costs of Examination, Late Payment Penalty and Administrative Fine On July 26, 1991, the Department transmitted a copy of its March 31, 1991 examination report to Bay Bank. Then on July 31, 1991, the Department began a free-form negotiation process to try and get Bay Bank to honor an invoice in the amount of $67,494.20 which constituted the costs associated with examination and supervision for the March 31, 1991 examination. The theory for claiming those costs was pursuant to Section 655.045, Florida Statutes (1991), which indicates that the Department may recover the costs of the examination and supervision against banks engaging in unsafe and unsound practices as defined at Section 655.005(1)(d), Florida Statutes (1991). The correspondence dated July 31, 1991, asked Bay Bank to remit payment within 30 days of receipt of the invoice setting forth the costs of the examination and supervision. The correspondence reminded Bay Bank that a late payment penalty of up to $100.00 a day might be imposed for overdue examination and supervisory fees. This reminder was as contemplated by Section 655.045, Florida Statutes (1991). A dialogue commenced between the Department and Bay Bank through further correspondence in which Bay Bank was unavailing in its attempt to convince the Department that its practices as revealed through the March 31, 1991 examination were not unsafe and unsound, thereby setting aside the right for the Department to assess the costs of examination and supervision. Rather than apprising Bay Bank that it could contest the preliminary agency decision concerning assessment of costs of examination and supervision related to the March 31, 1991 examination, by resort to procedures set forth in Section 120.57, Florida Statutes, the Department sent another free-form notification on October 2, 1991, stating that the Department continued to assert its claim based upon the belief that the practices found in the March 31, 1991 examination constituted unsafe and unsound practices. Again the October 2, 1991 correspondence instructed Bay Bank to remit $67,494.20 within 30 days of receipt of the letter. Having failed to hear from the bank by virtue of its October 2, 1991 communication, the Department again wrote on November 13, 1991, this time telling Bay Bank that the Department had determined to impose a late payment penalty of $100.00 per day commencing November 5, 1991, and of the possibility of imposing a $1,000.00 per day administrative fines if payment were not received. This November 13, 1991, correspondence was free-form. As with prior correspondence it did not advise Bay Bank of its right to seek relief pursuant to Section 120.57, Florida Statutes. On February 5, 1992, another free-form communication was provided vying for the cost of the examination and supervision related to the March 31, 1991 examination, reminding Bay Bank that the Department was persuaded that it was entitled to a late payment penalty of $100.00 per day commencing November 5, 1991, and informing Bay Bank that as of December 16, 1991, a date upon which the Department surmised Bay Bank had received an earlier communication, that the Department was imposing an administrative fine of $1,000.00 per day. As was the circumstance of prior occasions the February 5, 1992 correspondence was free- form and failed to advise Bay Bank concerning its right to seek administrative relief from the decision by the agency to seek the costs of examination and supervision for alleged unsafe and unsound practices. Finally, the Department issued an administrative complaint to recover the costs of examination and supervision associated with the March 31, 1991 examination. This complaint was dated March 11, 1992, and advised Bay Bank of its right to contest the determination concerning whether the practices by Bay Bank were unsafe and unsound, thus entitling the Department to collect the costs of examination and supervision associated with the March 31, 1991 examination. The administrative complaint also asserted claims for late penalty and administrative fines dating from November 5, 1991 and December 16, 1991 respectively. Bay Bank contested the administrative complaint leading to the formal hearing which this recommended order addresses. Absent a rule describing the occasion upon which the Department would seek to recover costs of examination and supervision for unsafe and unsound practices, the Department has acted rationally and has been acceptably consistent in exercising its discretion to recover the costs of examination and supervision when comparing the Bay Bank experience to other circumstances where the Department had the opportunity to recover costs of examination and supervision based upon unsafe and unsound practices within an institution. Further Administrative Correction: The Written Agreement Based upon the results of the March 31, 1991 examination the Department deemed it necessary to initiate administrative action against Bay Bank and its directors in accordance with Section 655.033, Florida Statutes (1991). That provision allows the Department to impose cease and desist orders for unsafe and unsound practices, violations of laws relating to the operation of the bank, violation of rules of the Department, violation of orders of the Department or breach of any written agreement with the Department. The law contemplates that a complaint shall be drawn stating the facts that support the action and noticing the accused of the opportunity to seek hearing pursuant to Section 120.57, Florida Statutes. The Department did not file the formal administrative complaint. Instead, through negotiations with Bay Bank and its directors it addressed the concerns the Department had about the findings made in the report of examination through entry of a written agreement between the Department and Bay Bank and its directors. In anticipation of the written agreement the directors of Bay Bank passed a resolution in support of the written agreement. The directors took that action on September 17, 1991. Two directors were not immediately available to execute the written agreement as such by signing the document. Their unavailability delayed the submission of the written agreement signed by Bay Bank until October 4, 1991. On that date Bay Bank transmitted the signed written agreement to the Department. In support of the written agreement there was a stipulation between the parties to enter into the written agreement. Given the language of the stipulation to enter the written agreement and the written agreement itself, it was contemplated that both documents be executed simultaneously by the Bay Bank directors and that the Department would sign the stipulation to enter the written agreement at the time that the directors signed the stipulation to enter the written agreement. The signing of the stipulation to enter into the written agreement and the written agreement itself by Bay Bank directors and the signing of the stipulation to enter into the written agreement by the Department would make the written agreement effective upon the date of issuance by the Department subsequent to those activities. The written agreement would be issued after the Comptroller signed it. The stipulation to enter into the written agreement was signed by both parties on October 7, 1991. The language employed with the signing of the stipulation to enter the written agreement stated: WHEREFORE, and it is resolved, that in consideration of the foregoing, the Department and Bay Bank and Trust Co., Panama City, Florida and each of the directors, hereby execute this Stipulation and consent to its terms, this 7th day of October, 1991. The exact language related to the effective date of the written agreement was set forth in the stipulation to enter into the written agreement at Paragraph 6 which stated: Effectiveness. Bay Bank and each of the directors stipulate and agree that the Agreement attached hereto shall be effective on the date of its issuance by the Department. The version of the written agreement upon which the Department has based its actions is dated September 29, 1991, and carries the Comptroller's signature. On October 9, 1991, through correspondence from Department's counsel to counsel for Bay Bank, the Department acknowledged receipt of the written agreement signed by the directors. The October 9, 1991 correspondence from the Department to the bank goes on to describe the notion that when the Comptroller signed the written agreement one of the originals would be forwarded to the bank for its file. This comment makes the meaning of the September 29, 1991, signature by the Comptroller unclear. Further contributing to the confusion, there is a reference in the next paragraph to the October 9, 1991 correspondence, to the effect that some conversation was held between counsel for the Department and a Joel McLamore in the office of counsel for the bank, about an agreement made in the course of that conversation, that the written agreement had an effective date of September 29, 1991. On October 14, 1991 the written agreement was docketed by the Department. On that same date the Department sent the bank a copy of the written agreement as executed by the Comptroller. Again, this correspondences from the Department stated that the written agreement had an effective date of November 29, 1991. On November 12, 1991, further correspondence was directed from the Department to Bay Bank making mention that the Department considered the effective date of the agreement to be September 29, 1991. Before the occasion of the administrative complaint seeking a cease and desist order and removal and prohibition directed to Christo, Jr. and Christo, III there was no dispute concerning the effective date of the written agreement. Now Bay Bank and the Christos assert that the written agreement was effective on October 7, 1991, contrary to the Department's position that the effective date is September 29, 1991. The general purposes which the parties had in mind for entering into the stipulation for entry of the written agreement are set out in Paragraph 1 to that stipulation which states: Consideration. The Department has determined that necessary grounds exist to initiate an administrative proceeding pursuant to Section 655.033, Florida Statutes, against Bay Bank and each of the directors. Bay Bank and each of the directors wish to cooperate with the Department and avoid the initiation of administrative litigation. Accordingly, Bay Bank and each of the directors, hereby stipulate and agree to the following terms in consideration of the Department's forbearance from initiating such administrative litigation through the attached Written Agreement (hereinafter Agreement). This intent by the parties to resolve their differences is brought forth in the written agreement where it states: WHEREAS, in an effort to avoid the consequences of protracted litigation and by virtue of signing the Stipulation, Bay Bank and each of the directors have waived their rights to separately stated Findings of Fact and Conclusions of Law, such findings and conclusions would be taken from and based upon the most recent State Report of Examination, specifically the State's Report of Examination dated March 31, 1991. By the terms of the stipulation for entry into the written agreement Bay Bank and its directors consented had agreed to the entry of the written agreement and to comply with the provisions, without admitting or denying violations of laws or regulations or rules and without admitting or denying that those entities had engaged in any unsafe and unsound practices. There was a section within the stipulation to enter into the written agreement which spoke to the matter of future administrative action by the Department against Bay Bank or its directors where it stated: 7. Future Action. The Stipulation is being entered into without prejudice to the rights of the Department and to take such further action, joint or severally, against Bay Bank and the directors as the Department deems necessary and appropriate to insure compliance with the terms of the Stipulation and the attached Agreement, any other Agreement or order entered against Bay Bank, and/or to prevent any violation of laws relating to financial institutions. The written agreement did not speak to the opportunity for the Department to seek costs of examination and supervision pursuant to Section 655.045, Florida Statutes (1991), and to pursue removal and prohibition actions against Christo, Jr., and Christo, III, as Bay Bank officers pursuant to Section 655.037, Florida Statutes (1991), based upon findings made in the March 31, 1991 examination. Among requirements of the written agreement was found Paragraph 5 (a) which states: As of the effective date of this Agreement, the Bank shall not extend, directly or indirectly, any additional credit to or for the benefit of any borrower who has a loan or other extension of credit from the Bank which has been charged-off or classified, in whole or in part, "Loss" or "Doubtful" and is uncollected. The prohibition of this paragraph 5(a) shall not prohibit the Bank from renewing or extending the maturity of any credit, provided that the renewal or extension is approved by the full board and that all interest due at the time of such renewal or extension is collected in cash from the borrower. An additional requirement of the written agreement was set forth in Paragraph 7 where it states: As of the effective date of this Agreement, all new loans or lines of credit (including renewals and extensions of existing loans and lines of credit, but excluding additional advances under existing lines of credit) in an amount of $200,000 or more shall require the prior approval of the Bank's board of directors or the directors' committee designated to approve and review loans, and all such loans or lines of credit shall be supported by a written summary that provides the board of directors or directors' committee with the information sufficient for it to make a prudent decision. The Department seeks to impose discipline based upon alleged violations of the written agreement as set forth in the administrative complaint of May 15, 1992. Specifically, that administrative complaint contains allegations of violation of the written agreement associated with Paragraphs 5(a) and 7 directed to Bay Bank and the Christos for cease and desist and as a means of removal and prohibition against the Christos. Concerning Paragraph 5(a), Bay Bank allowed a customer to post over drafts on his checking account, thus maintaining an overdraft position, commencing September 28, 1991, and ending November 18, 1991. The allegations related to Paragraph 7 are discussed under the section in the recommended order detailing events about the letter of credit and a subsequent loan to JCJ Trust said to be made without board approval and proper documentation. Beyond alleged violations of the compromise of the differences between the Department, Bay Bank and its directors embodied by the written agreement, the May 15, 1992 administrative complaint seeks to impose discipline against the Christos for findings made in the course of the March 31, 1991 examination. Those allegations are associated with the manner in which the Christos conducted themselves as officers and directors of Bay Bank based upon findings made through the examination of March 31, 1991 related to the Christos' fiduciary duties. These latter allegations are grounded upon the contention that the Christos were responsible for the unsafe and unsound practices discovered during the March 31, 1991 examination. In response to problems with the payment of dividends Paragraph 2e of the written agreement stated: 2. (e) During the life of this Agreement, the bank shall not pay any dividends at any time it is in noncompliance with the capital and reserve requirement specified in paragraphs 2.(b), 3., 9., or Section 658.37, Florida Statutes. Prior to declaration of dividends, the board of directors will certify the bank's compliance with the cited sections and provide that certification to the Department. Letters of Credit and Loans On April 18, 1986, Bay Bank issued an unconditional/ irrevocable letter of credit to South Trust Bank of Alabama for JCJ Trust and a similar letter of credit to South Trust Bank of Alabama for Christo, Jr. Both letters of credit were in the amount of $425,000.00. The letters of credit expired on February 25, 1989. South Trust had required letters of credit as preconditions to granting the loans described on the stipulated facts herein. At some point in time unsigned notes and security agreements were placed in the files of Bay Bank associated with the Christo, Jr., and JCJ Trust letters of credit. The terms of the notes and security agreements to address the contingency that South Trust Bank would draw upon the letters of credit were not identified. Also missing was an amount of collateral to secure repayment. Nonetheless, there appeared to be a commitment by Bay Bank to meet the contingency where South Trust Bank drew upon the letters of credit by Bay Bank by then offering to loan money to Christo, Jr. and JCJ Trust at an undisclosed rate. The Bay Bank records merely describe the collateral arrangement for such a contingent liability as "open". Further letters of credit were requested by Christo, Jr. and JCJ Trust and issued by Bay Bank in the amount of $425,000.00 each to favor South Trust. The next letters of credit were issued on April 26, 1989. The duration of those letters of credit was until February 25, 1990. The letters of credit of April 26, 1989, had been approved by action of the Bay Bank directors through a common certification for John Christo, Jr., and JCJ Trust in which Christo, Jr. and Christo, III, abstained from voting and other beneficiaries through the JCJ Trust who were directors to Bay Bank were absent. When the letters of credit were issued on April 26, 1989, the loan line presentation for Christo, Jr. and JCJ Trust revealed that no collateral was required when issuing the letters of credit to favor South Trust Bank. Included with the documents under consideration by the directors when they decided to issue these letters of credit was customer profile information for Christo, Jr., a statement of financial condition dated December 31, 1988 for Christo, Jr., a balance sheet for JCJ Trust from December 31, 1988, a February 28, 1989 portfolio investment review for JCJ Trust, and a review of assets of JCJ Trust as of December 31, 1988. On February 15, 1990, the Bay Bank directors again voted to approve lines of credit to favor South Trust Bank in amounts of $425,000.00 each at the request of Christo, Jr. and JCJ Trust. The common certification of approval shows that Christo, Jr. and Christo, III abstained, while Missey Christo and Phillip Christo beneficiaries under JCJ Trust and directors voted to approve the issuance of the letters of credit. Again the loan line presentations for Christo, Jr. and JCJ Trust reveal that collateral was not required in issuing the two letters of credit. The terms of the duration of the letters of credit issued on February 25, 1990, ended on February 25, 1991. The beginning date for the letters of credit was February 25, 1990. The Bay Bank records reveal a customer profile of John Christo, Jr., as associated with the letter of credit approved on February 15, 1990. The information concerning the customer profile is dated February 13, 1990. On February 19, 1991, the Bay Bank directors were requested to and voted to issue letters of credit to favor South Trust Bank related to Christo, Jr. and JCJ Trust in the amount of $425,000.00 each. The common certification of approval shows that Christo, Jr. abstained from voting. Christo, III, voted in favor of the letters of credit as did Phillip Christo and Missey Christo, other directors and beneficiaries under JCJ Trust. In association with the letters of credit on February 19, 1991, the loan line presentations for Christo, Jr. and JCJ Trust revealed that no collateral was provided. The act of approval involved a customer profile for Christo, Jr. from February 12, 1991. Also included was a balance sheet for JCJ Trust dated December 31, 1989, with notes to the financial statement. The duration of the respective letters of credit was February 25, 1991 through February 25, 1992. A draft or drafts drawn on the respective letters of credit would be honored through March 25, 1992. Each time Bay Bank through its directors voted to approve letters of credit to favor South Trust Bank at the request made by Christo, Jr. and JCJ Trust, the directors exercised distinct acts of discretion. The letters of credit issued in 1986, 1989, 1990 and 1991 did not establish terms that would entitle Christo, Jr. and JCJ Trust to an automatic renewal once a prior letter of credit expired. Each letter of credit had its own identifying number. The common features of the respective letters of credit were that they were irrevocable and transferable. Commencing with the series of the letters of credit issued in 1989 and extending through the series in 1990 and 1991, the basis for drawing on the letters of credit was a statement from South Trust Bank that the amount for which the draft was drawn was representative of amounts due and payable by Christo, Jr. or JCJ Trust to South Trust Bank on loans extended from South Trust Bank to Christo, Jr. and JCJ Trust which were a minimum of 30 days past due. The March 31, 1991 examination did not report that the actions by Christo, Jr., Christo, III, and other beneficiaries that the JCJ Trust who were directors had violated any laws or regulations in their conduct around the time the Bay Bank directors' made their February 19, 1991 decision to approve the letters of credit to favor South Trust Bank. Contentions of violations of laws or regulations concerning the conduct by Christo, Jr. and Christo, III first arose in the May 15, 1992 administrative complaint for cease and desist and removal and prohibition. The administrative complaint concerning inappropriate action by Christo, Jr. and Christo, III in their consideration of the extension of the letters of credit to South Trust Bank through the February 19, 1991 meeting of Bay Bank directors and the consequences of that decision is somewhat premised upon findings made by the FDIC in the November 18, 1991 examination as adopted by the Department, in which the FDIC reported violations of the Federal Reserve Act, 12 C.F.R. 215.4 (Regulation O), and Section 23A of the Federal Reserve Act, 12 U.S.C. s. 371(c). Related allegations about the letters of credit are based upon claims of breaches of fiduciary duties by the Christos. A further discussion of the November 18, 1991, federal examination follows. A notation was made in the March 31, 1991 examination concerning the Christo, Jr. letter of credit issued on February 25, 1991 in the amount of $425,000.00 wherein it is described in the examination report as, "additionally, a contingent liability of an unfunded, unsecured letter of credit to South Trust Bank of Alabama, N.A. to secure a $425,000.00 note there, also exist." As of August 26, 1991, Christo, Jr. was past due on his obligation to South Trust Bank and South Trust Bank drew upon the letter of credit. The draw was in the amount of $425,115.00 which was paid from Bay Bank to South Trust Bank on August 26, 1991. On September 3, 1991, Christo, Jr. signed a term disclosure note and security agreement in the amount of $425,000.00 at an annual interest rate of 10.736 percent. That interest rate was not more favorable than an ordinary customer of Bay Bank could have obtained. No security was required when Bay Bank made its September 3, 1991 loan to Christo, Jr. On September 23, 1991, the JCJ Trust debt to South Trust Bank having been overdue for more than 30 days, South Trust Bank drew upon the letter of credit associated with JCJ Trust. The draw was in the amount of $425,000.00. On October 2, 1991, a loan in the principle amount of $426,479.80 was made from Bay Bank to JCJ Trust, Christo, III as Trustee, to cover the draw that had been made by South Trust Bank against Bay Bank upon the letter of credit. The granting of this loan is alleged to be in violation of paragraph 7 to the written agreement. It is not a violation because the loan predates the effective date of the written agreement. The maturity date on the loan made on October 2, 1991, was October 1, 1992. The annual percentage rate was 10.885, interest terms that were not more favorable to JCJ Trust than would be available to Bay Bank's ordinary customers. In February, 1992, the Bay Bank directors took action to approve the loan that had been made to JCJ Trust on October 2, 1991. No indication is made in the credit file records of Bay Bank concerning the date upon which the Bay Bank directors may have approved the September 3, 1991 loan to Christo, Jr. Prudent lending practices would not have justified the approval of the February 26, 1991, letters of credit requested by Christo, Jr. and JCJ Trust when taking into account credit information made available to the Bay Bank directors, especially when considering that the letters of credit were approved without provision of security from the requesting parties, Christo, Jr. and JCJ Trust. It can be inferred that Christo, Jr., Christo, III, and other directors were aware that the custom and practice within Bay Bank was to not extend letters of credit in excess of $100,000.00 without requiring provision of security in the way of mortgages on real estate, certificates of deposit or a combination of both forms of security. At the time the February 19, 1991 decision was made to approve the letters of credit to South Bay at the request of Christo, Jr. and JCJ Trust, it can be inferred that Christo, Jr. and Christo, III, recognized that terms of credit should not have been granted to those requesting parties because the arrangements did not comport with terms available to other borrowers. This admonition included reference to more beneficial terms to "related interests" and "affiliates." JCJ Trust was a "related interest" and "an affiliate" at the time the decision was reached on February 19, 1991, to approve the letter of credit requested by JCJ Trust through Christo, III. Christo, Jr. and Christo, III, as trustee for JCJ Trust had made no alternative arrangements to make Bay Bank whole in the event South Trust Bank called on the letters of credit issued February 26, 1991. This refers to an arrangement separate and apart from the unsecured notes which were signed by Christo, Jr., and JCJ Trust in the person of Christo, III, following the draws by South Trust against the letters of credit, as a means of protecting Bay Bank at a time when the bank was troubled financially. The February 19, 1991, decision to approve letters of credit requested by Christo, Jr. and JCJ Trust were not adequately supported with an underlying written justification contrary to existing bank policy and prudent banking practice. As with the extension of the line of credit on February 26, 1991, the financial position of Christo, Jr. did not justify the unsecured loan that Bay Bank made to him on September 3, 1991. These arrangements were contrary to prudent banking practice. Moreover, it was violative of the Bay Bank loan policies and constituted more favorable treatment than an ordinary customer would receive. The loan was contrary to the policies in that the unsecured loan was not "supported by satisfactory balance sheet and income statement information with repayment from demonstrated cash flow or reasonably certain conversion of its assets." Similar problems were in evidence concerning the loan made to JCJ trust on October 2, 1991. Prudent bankers would not have extended the credit to JCJ Trust, to include a lack of security, contrary to the credit opportunities a normal customer would have had. The balance sheet available to support the JCJ loan was out of date. Moreover, the availability of funds to repay the loan according to the balance sheet was inadequate. The problems with the Christo, Jr. September 3, 1991 loan concerned heavy debt obligations for notes payable to Bay Bank and South Trust and a questionable position concerning assets that were readily available to meet debt service at the time the decision was being reached to extend the September 3, 1991 credit. These problems were evident in the December 31, 1989 financial statement pertaining to Christo, Jr. The principle asset available to JCJ Trust to meet the debt obligations contemplated by the October 2, 1991 loan were associated with Bay Bank stock. The Bay Savings Bank stock which was shown on the December 31, 1989 balance sheet for JCJ Trust had no value as support for the October 2, 1991 loan in that the savings bank had been declared insolvent by the Department and placed in conservatorship through the Resolution Trust Corporation in September, 1991. The Bay Bank stock was not a liquid asset to meet the loan obligation, there being no apparent market for its disposal as a means to obtain ready cash to meet the debt obligation envisioned by the note issued on October 2, 1991. Nor could dividends be anticipated as a means to meet the debt obligation, Bay Bank having been criticized in the March 31, 1991 examination for paying out dividends in a circumstance in which there was a need to infuse additional capital to bolster the loan loss reserve deficit and in view of the limiting features in the written agreement concerning payment of dividends. In this connection the true value of the Bay Bank stock when considering the methods employed for its valuation is uncertain during the period of time at which the loans were made to JCJ Trust and Christo, Jr., those dates being October 2, 1991 and September 3, 1991 respectively. Although more recent financial statements not found in the credit files associated with the loans made on September 3, 1991, and October 2, 1991, to Christo, Jr. and JCJ Trust respectively was potentially available in making the decisions concerning those loans, those more recent financial statements do not depict a financial position by the borrowers that would justify the loans. Strictly considered, the existence of other financial statements had no pertinence at the time that the loans were made, because the loan and discount committee and the directors made their decisions based upon matters found within the credit file and it is their actions at the moment that warrant criticism. After the letter of credit issued on February 25, 1991 to Christo, Jr. was drawn upon, the September 3, 1991 note for repayment by Christo, Jr., to Bay Bank was one without collateral and for which no payment was due until maturity on September 3, 1992 and about which the source of repayment was questionable. Therefore, it involved more than the normal risk of repayment. After the letter of credit issued on February 25, 1991 to JCJ Trust was drawn upon, the October 2, 1991 note for repayment by JCJ Trust to Bay Bank as one without collateral and for which no payment was due until maturity on October 1, 1992 and about which the source of repayment was questionable. Therefore, it involved more than the normal risk of repayment. Christo, III's claim that when he voted on February 19, 1991 to approve the JCJ Trust letter of credit that he did so through inadvertence is not persuasive. The protocol for considering this letter of credit was the same as had been the case in the past when the directors decided to provide a letter of credit for JCJ Trust. On those prior occasions Christo, III, had abstained from voting on the JCJ Trust on a single voting sheet for JCJ Trust and Christo, Jr. Nothing had changed in the voting sheet format for February 19, 1991. His claim that he was confused and mistakenly voted for the JCJ Trust letter of credit on February 19, 1991, because it also contained a reference to the Christo, Jr. letter of credit is not credible. The idea that his decision was inadvertent based upon some confusion is rejected in favor of the inference that his choice to vote was through negligence or intent. FDIC Examination The circumstances associated with the JCJ Trust February 25, 1991 letter of credit and the ensuing loan of October 2, 1991, that have been described form the basis for the FDIC through the November 18, 1991 report of examination to comment that violations of the Federal Reserve Act, 12 C.F.R., s. 215.4 and Section 23A of the Federal Reserve Act, 12 U.S.C. 371(c) had occurred. In addition, the FDIC in its November 18, 1991 examination rated Bay Bank through the Camel rating system as an aggregate 4. As with the prior rating by the Department, Bay Bank was observed by the FDIC to be engaged in unsafe and unsound practices through acts of commission or omission by its management team and directors. Although some changes can be seen through the findings made in the state examination performed on March 31, 1991 compared to the report of examination by the FDIC on November 18, 1991, Petitioner's Exhibit No. 6, they do not tend to substantially alter the impression about the persistent problems within the institution. In particular, the FDIC directed criticism to the board of directors concerning the need for the directors to ensure that executive management was cognizant of applicable laws and regulations pertaining to the bank's activities and the need to develop a system to affect and monitor compliance with those laws and regulations. This observation was made notwithstanding the recognition that members of the board of directors for Bay Bank would not necessarily be expected to have personal knowledge of those laws and regulations, but would need to make certain that the laws and regulations received high priority attention by the bank's everyday managers. The FDIC also commented on a problem with maintaining an appropriate internal control system and an adequate means of auditing as evidenced by violations found within the November 18, 1991 report. The board was reminded to evaluate the adequacy of the bank's loan watch-list as that device was calculated to assist in determining the proper allowance for loan losses, and from there establish a sufficient loan loss reserve. The loan loss reserve was criticized. The regulators subsequent adjustment to the loan loss reserve calculation following the November 18, 1991 examination still revealed a deficiency in the loan loss reserve. There was a continuing problem with asset quality showing a further deterioration from the March 31, 1991 state examination. This pertains to adversely classified loans in the categories of loss and doubtful loans, when taking into account the need to comply with the written agreement in charging off 100 percent of loss and 50 percent of doubtful. Among the adversely classified loans which were mentioned in the FDIC examination was the October 2, 1991 loan to JCJ Trust. The November 18, 1991 report reminded Bay Bank to dispose of other real estate at the earliest favorable opportunity. The FDIC examination pointed out the weakness in the bank's capital position due to large loan losses. When the examination was conducted on November 18, 1991, the liquidity ratio was found to be unsatisfactory. Fiduciary Duties Generally, Christo, Jr. and Christo, III, were sufficiently apprised of the practices which are complained of and proven here to be held accountable for their respective actions or inactions as bank officers. More specifically, Christo, Jr., and Christo, III, were knowledgeable concerning the respective financial positions of Christo, Jr., and JCJ Trust associated with the letters of credit approved on February 25, 1991, for Christo, Jr., in his personal capacity and Christo, III, as Trustee for JCJ Trust. The Christos knew or should have known about the Bay Bank loan policies for issuing letters of credit on February 25, 1991. The basis for imputing this knowledge or need for knowledge is premised upon the fact that Christo, Jr., was then CEO and Christo, III, was then president of Bay Bank. Given their positions as officers the Christos knew or should have known that the letters of credit that were issued on February 25, 1991, were by terms dissimilar to those afforded the ordinary bank customer when receiving a letter of credit. Similarly, the Christos knew or should have known that the loans that were made to Christo, Jr., and JCJ Trust on September 3, 1991 and October 2, 1991 respectively were pursuant to arrangements that were not otherwise available to an ordinary bank customer. Another reason for holding the Christos to knowledge of relevant requirements for proper practices and conduct in bank affairs is based upon the fact that Christo, Jr., had been a banker, and for the most part, a chief executive of a bank, for a period approximating 30 years at the time the decisions were made concerning the letters of credit and loans once the letters of credit were drawn upon. In a related capacity Christo, III, has been a national bank examiner and has worked in banking for a period of approximately 25 years to include 10 years service with Bay Bank as an executive officer. Notwithstanding their background and knowledge the Christos allowed conditions to arise in association with the issuance of the two letters of credit and the loans that were made following draws, in contravention of internal loan policies, prudent banking practices and laws and regulations. It is to be expected that the Christos should have reminded the other directors that internal bank policies and laws and regulations would not allow more favorable treatment for Christo, Jr., and JCJ Trust concerning the issuance of letters of credit in February of 1991 and loans in September and October, 1991, to pay back the draws, especially when taking into account that security was not required for the transactions in question. The need for the other directors who voted to issue the letters of credit and to approve loans following the draws, to conform to acceptable banking practices in their respective positions as directors, does not excuse the Christos from their affirmative duty to remind the other directors to conform to internal policies and laws and regulations concerning equal treatment of other persons and bank officials when establishing letters of credit and making loans. The Christos failed to properly exercise their fiduciary duties when action was taken concerning the letters of credit and subsequent loans following the draws. It was not enough for Christo, Jr., to abstain from participating in the decision to approve his letter of credit and that for JCJ Trust. It was even more inappropriate for Christo, III, to affirmatively vote in favor of the letters of credit for JCJ Trust and Christo, Jr. The arrangements made for the benefit of Christo, Jr., and JCJ Trust left Bay Bank exposed for $850,000.00 in disbursements without security should the letters of credit be drawn upon and that arrangement continued following the decision to make loans to Christo, Jr., and JCJ Trust in a related amount after the letters of credit were drawn upon. The Christos as the principal managers of the bank when the examinations were conducted were shown through the findings made in the examination reports to have breached their fiduciary duties. By failing to meet their responsibilities concerning the findings made in the two examinations and related to the Christo, Jr., and JCJ Trust letters of credit and loans, the Christos engaged in unsafe and unsound practices whose consequences created the likelihood of abnormal risk or loss, insolvency or dissipation of assets which seriously prejudice the interests of Bay Bank and its depositors when taking into account the overall condition of Bay Bank at the time at which the letters of credit were issued and the loans made following the draws. History of Regulatory Correction The external history of action by the Department to correct problems within Bay Bank is constituted of the written agreement that has been described. Consistent Agency Practices As alluded to before, the treatment given other institutions which the Department regulates when considering the propriety of assessing the costs of examination and supervision does not point out inconsistent agency practices. Having reviewed the evidence concerning inconsistent agency practice in removal and prohibition of individuals from participating in banking in Florida, while the means to affect removal from an institution may not have always been the same, the outcome anticipated by that process is sufficiently consistent and the factual differences between cases do not lead to a finding that the agency has acted inconsistently when comparing its effort to remove the Christos with other removal actions described at hearing.
Recommendation Based upon the findings of facts and the conclusions of law, it is, RECOMMENDED: That a final order be issued which assesses the cost of examination and supervision for the March 31, 1991 examination in the amount $67,494.20; That denies the imposition of a levy for late payment of $100.00 per day commencing November 5, 1991 and beyond; That denies the imposition of an administrative fine for intentional late payment in the amount of $1,000.00 per day commencing December 16, 1991 and beyond; That orders Bay Bank, its officers, directors, or other persons participating in the conduct of the affairs of Bay Bank, to cease and desist from engaging in practices which would allow Christo, Jr., and Christo, III, to obtain credit from Bay Bank in contravention of laws and regulations, and which breach the October 14, 1991 written agreement and Bay Bank internal policies; That prohibits Christo, Jr., from participating in Bay Bank or any other financial institution regulated by the Department as an officer or in a similar position for Bay Bank or any other financial institution or becoming a director in any other financial institution and that restricts Christo, Jr., in his directorship at Bay Bank from participating in any decision to select or dismiss Bay Bank officers or directors; That prohibits Christo, III, from participating in Bay Bank or any other financial institution regulated by the Department as an officer or in a similar position for Bay Bank or any other financial institution or becoming a director in any other financial institution and that restricts Christo, III, in his directorship at Bay Bank from participating in any decision to select or dismiss Bay Bank officers or directors; DONE and ENTERED this 1st day of February, 1994, in Tallahassee, Florida. CHARLES C. ADAMS, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 1st day of February, 1994. APPENDIX TO RECOMMENDED ORDER, CASE NO. 92-2455 and 92-3744 The following discussion is given concerning the proposed facts submitted by the parties: Petitioner's Facts: Paragraphs 1 through 26 are subordinate to facts found. Paragraphs 27 and 28 constitute conclusions of law. Paragraphs 29 through 81 are subordinate to facts found. Paragraph 82 constitutes legal argument. Paragraphs 83 through 85 are subordinate to facts found. Paragraph 86 is not relevant. Paragraphs 87 through 123 are subordinate to facts found. Paragraph 124 is rejected. Paragraphs 125 through 136 are subordinate to facts found. Paragraph 137 constitutes legal argument. Paragraphs 138 through 145 are subordinate to facts found. Paragraph 146 constitutes a conclusion of law. Paragraph 147 is subordinate to facts found. Paragraph 148 constitutes a conclusion of law. Paragraphs 149 through 152 constitute legal argument. Paragraph 153 through 170 are subordinate to facts found. Paragraphs 171 through 181 constitute legal argument. Paragraph 182 through 201 are subordinate to facts found. Respondent's Facts: Paragraphs 4 through 7 with the exception of the latter sentences found within subparagraphs 13 through 15 to paragraph 7 are subordinate to facts found. Those latter sentences within the subparagraphs are not relevant. Paragraphs 8 through 10 are subordinate to facts found. Paragraph 11 is subordinate to facts found with the exception that subparagraph 1 in its suggestion that the Department does not adequately explain its assignment of an aggregate score is rejected, as is the contention at subparagraph 9 that Camel rating may be changed at a "whim" and that a change was made to a component Camel rating in the March 31, 1991 examination without justification for that change. Paragraph 12 is subordinate to facts found. Paragraph 13 is rejected. Paragraph 14 is not relevant. Paragraphs 15 through 30 are subordinate to facts found. Paragraph 31 as it attempts to defend the accusations in the administrative complaint is rejected. Paragraph 32 is subordinate to facts found. Paragraphs 33 through 36 are not relevant. Paragraph 37 is subordinate to facts found. Paragraph 38 is rejected. Paragraph 39 is not relevant. Paragraph 40 is rejected. Paragraph 41 is not relevant. Paragraph 42 is subordinate to facts found. Paragraph 43 is not relevant. Paragraphs 44 through 48 are subordinate to facts found, except that the subparts to Paragraph 48 constitute legal argument. Paragraph 49 is not relevant. The first sentence to Paragraph 50 is not relevant. The second sentence is rejected. Paragraphs 51 and 52 are rejected. Paragraph 53 constitutes legal argument. Paragraphs 51 and 52 are rejected. Paragraph 53 constitutes legal argument. Paragraphs 54 through 56 are not relevant. Paragraphs 57 and 58 are rejected. Paragraph 59 is not relevant. Paragraph 60 does not form a defense to the accusations. Paragraph 61 and 62 are rejected. COPIES FURNISHED: Alan C. Sundberg, Esquire Robert Pass, Esquire E. Kelley Bittick, Jr., Esquire Carlton, Fields, Ward, Emmanuel Smith & Cutler, P.A. 500 Barnett Bank Building 215 South Monroe Street Tallahassee, Florida 32301 William G. Reeves, General Counsel Albert T. Gimble, Chief Banking Counsel Department of Banking and Finance Suite 1302, The Capitol Tallahassee, Florida 32399-0350 William A. Friedlander, Esquire Raymond B. Vickers, Esquire Craig S. Kiser, Esquire 424 West Call Street Tallahassee, Florida 32301 Gerald Lewis, Comptroller Department of Banking and Finance The Capitol, Plaza Level Tallahassee, Florida 32399-0350
Findings Of Fact At no time pertinent to the issues herein was Rebecca Love Henderson licensed by the State of Florida, Department of Banking and Finance as a mortgage broker under the provisions of Chapter 494, Florida Statutes. The Department of Banking and Finance is the state agency responsible for licensing and supervising mortgage brokers and associated persons in this state. In early January, 1987, Ms. Henderson began working for MAC, a mortgage banking concern, at its office located at 4045 Tamiami Trail, Pt. Charlotte, Florida. In March, 1987, Carol May Wilson went to MAC's office to see about getting the adjustable rate mortgage then currently existing on her residence changed to a fixed rate mortgage, because her research indicated that MAC had the best mortgage rates available at the time. Ms. Wilson entered the office without an appointment and spoke to the receptionist who called Ms. Henderson to speak with her. On that visit, Ms. Henderson gave Ms. Wilson a pamphlet which contained the then existing mortgage rates and discussed with her the terms and rates, the amount of payment required both as a down payment and as monthly payments, and similar matters. After that discussion, Ms. Wilson left with the pamphlet without making application. After discussing what she had been told by Ms. Henderson with her husband, Ms. Wilson and her husband went back to MAC's office where they again spoke with Ms. Henderson. In this latter conversation, they again discussed the applicable rates and filled out an application for a mortgage. At that time they also paid a $300.00 fee to cover the cost of an appraisal on their property, and several other costs and fees. At this time, Ms. Henderson helped the Wilsons fill out the form and, in addition, prepared and delivered to them a "Good Faith Estimate", and discussed the appraisal costs, points, and the need for a termite inspection. On this second visit, Ms. Henderson gave the Wilsons a rate option form which they and she signed, which locked in the interest rate at 8 1/2 percent. She also gave them a receipt for the appraisal fee they had paid. Both forms reflect Ms. Henderson as a "loan officer." The Wilsons went to MAC on their own. They had not been solicited by Ms. Henderson or any other employee of the firm but came in on the basis of the firm's advertisements. While in the facility, they noticed a display board which indicated the current rates and points being charged and the rate and points reflected on that board were those charged by Ms. Henderson on behalf of MAC. She did not negotiate, or attempt to negotiate any change to either the rates or the points. During her conversation, Ms. Henderson explained the various types of loans available and the various options available but did not urge one over the other. At least one of the forms, the Good Faith Estimate form, was mailed to the Wilsons sometime after their visit and was sent with a cover letter from another employee of the firm. Neither Mr. nor Mrs. Wilson asked to speak with anyone else during either of their visits to MAC. Consequently, they do not know whether they could have done so had they desired. The documentation they received from Ms. Henderson appeared complete and they were satisfied with the service on their mortgage. At some time in early 1987, Donald R. Mullin, accompanied by his wife, went to MAC to refinance his mortgage and on that visit, spoke with Ms. Henderson. Mr. Mullin had previously filled out a loan application form which he had received from Floyd Henderson, also of MAC. Mr. Mullin was referred to MAC by a friend at work. He was not solicited by Respondent. During this meeting, the Mullins presented the forms they had filled out and paid the various appraisal and other fees required. The receipt given them by Ms. Henderson for these fees reflects her as a loan officer. At this meeting, Ms. Henderson did not indicate whether the loan would be approved or not. The only point for negotiation during the Mullin interview was with regard to the appraisal fee. Mr. Mullin had just had an appraisal done for his newly acquired mortgage and did not feel it necessary to have another one. During their conversation, Ms. Henderson agreed to see if the prior appraisal could be used and if so, the fee would be refunded. In fact it was refunded. The loan did not close because Mr. Mullin was not considered to have sufficient income to support the payments. However, at no time during their discussions, did Ms. Henderson make any commitments on behalf of MAC, nor did she offer to change points or rates. Herbert Roshkind and his wife were referred to MAC by their real estate broker and dealt exclusively with Ms. Henderson in all their dealings with the company. She gave them all the specifics relating to their potential loan, including interest rates. She explained that the rates varied weekly and that they could either lock in or not, as they chose. She also discussed the relevant fees for appraisal, credit report, etc., which she made clear were not refundable, and discussed the difference between a fixed rate and a variable rate mortgage. She also advised them of the various terms a loan could be taken for Their loan was complicated to the extent that Mr. Roshkind was retired. His income came from real estate and other investments which could not easily be verified. As a result, Mr. Roshkind was contacted frequently by Ms. Henderson in the course of preparation of the loan documents, requesting additional information. On one occasion, she came to his home to get additional information and to get his signature on a document just prior to closing. Ms. Henderson did not help the Roshkinds fill out their application. She gave them a package which they took home and filled out themselves. In the package was a list of 19 items which would be required to support the application, and her repeated requests for information related to these items. Mr. Roshkind at no time asked to speak with anyone else. He feels, however, that had he desired to do so, he could have. The rates for mortgages were posted on a board in the office and at no time did Ms. Henderson offer to negotiate either rates or points. Further, from the time the Roshkinds first came in to pick up the application package until they returned it to the MAC office filled in, they received no solicitation or any contact at all from Ms. Henderson or MAC. When the loan was finally approved, in May, 1987, they received a commitment form that was signed by George Emery on behalf of MAC but which was delivered by Ms. Henderson. Kimberly Lynn Johnson worked for MAC from May, 1986 to August, 1986 and during that period became familiar with Ms. Henderson and her father, Floyd D. Henderson, one of the principals in the company. During the period she worked there, the office was run by C. F. Cline and Mr. Henderson. Ms. Johnson started work as a secretary-receptionist and progressed up through clerking duties until she was trained to act as a loan processor. At that point, though she was not licensed as a mortgage broker, she began accepting loan applications and dealing with prospective clients just as did Ms. Henderson. When she took loan applications, she would receive the form from the prospective borrower, get the information required, and turn it over to a processor who would send out requests for the verifications required, do or order the credit report, and order an appraisal. At no time during this period was she a licensed mortgage broker nor did she know she had to be such to legally do what she was doing. She found this out only when she began studying for the broker's test approximately a year later. During the period Ms. Johnson worked at MAC, Ms. Henderson was a loan officer and also worked for Monroe Title Company. It was during this period of time, Ms. Johnson observed Ms. Henderson doing much the same type of thing she was doing involving the interviewing of applicants, and discussing with them the application forms, rates, points, fees, and the like, as well. This same type of activity was also done by other loan officers who, as she understood it, were licensed, and who, in addition to their in-office work, also visited builders, realtors, and other possible sources of business for the firm. Ms. Johnson recalls quite clearly that Ms. Henderson was engaged in this outside activity as well. On numerous occasions as she left the office, Ms. Henderson would advise Ms. Johnson where she was going, or her name would appear on the list of builders to be seen by herself and other loan officers. When Ms. Johnson first started with the company, walk-in clients would be referred to a loan officer on a rotating basis. Ms. Henderson and other, licensed, loan officers were on that list for rotation. When she served as a loan officer, Ms. Johnson would stay with her client all the way from application through closing and on almost every occasion, once trained, she would complete the process without any help from a licensed loan officer. The same applied to Ms. Henderson. Ms. Johnson was told by Mr. Cline that it was all right for her to act as a loan officer without a license as a mortgage broker as long as she didn't take a bonus or commission or did not solicit outside the office. Ms. Johnson was paid an hourly wage only. She does not know how Ms. Henderson was paid nor was any evidence admitted to define that. However, considering the fact that Mr. Moulin and Mr. Stillweaa both complained because their income was reduced as a result of Ms. Henderson's grabbing clients and her sharing of Moulin's builder clients, it can be inferred she was, at least in part, paid by commission. Based on representations made by Mr. Cline, Ms. Johnson continued working without question until an inspector from the Department came in for an audit. At this point, she figured that something was wrong and subsequently found that only a loan officer in a commercial bank can take loan applications without being licensed as a mortgage broker. MAC was listed on it's business cards as a mortgage banker. Though Ms. Henderson indicated from time to time she was going out to visit with builders, Ms. Johnson never saw her in negotiations with either builders or realtors. At the time in issue, Ms. Henderson's mother was terminally ill and had to be taken to the hospital and doctor's office on a regular basis. Ms. Johnson agrees it is possible Ms. Henderson could have been performing that service when ostensibly out on a call, but specifically recalls her saying she was, from time to time, going to visit a builder or realtor. She cannot say with certainty what Ms. Henderson did; only what she said she was going to do. Considering the state of the evidence, it is clear that Ms. Henderson did visit builders, and notwithstanding her assertion she may have gone there merely to drop off advertising materials, the likelihood is, and it is so found, she went for the purpose of soliciting business. It also is clear that with the exception of Ms. Henderson and Ms. Johnson, the individuals who processed applications and met with clients were properly licensed as mortgage brokers and were identified as loan officers. Both Mr. Cline and Mr. Henderson were licensed mortgage brokers and supervised, on a routine basis, the files of the other loan officers including Ms. Henderson and Ms. Johnson. In addition, either Mr. Cline or Mr. Henderson was available for consultation if necessary at all times, as was Mr. Gerber, the underwriter. All loans written by the loan officers, licensed or otherwise, had to conform to the same standards. Subsequent to leaving MAC, Ms. Johnson applied for and was, after testing, issued a license as a mortgage broker in Florida by the Department. This occurred after she was identified as operating as an unlicensed broker similar to Ms. Henderson. She, however, was never cited with a Cease and Desist Order. Mr. Kenneth Moulin worked for MAC from December, 1985 through April, 1987 and, along with his family, owned a 20% interest in the stock of the company. He worked in the Pt. Charlotte office along with Ms. Henderson. His primary job as a licensed loan officer and mortgage broker, was to solicit builders and realtors to refer potential customers. Mr. Moulin was licensed as a mortgage broker in February, 1986. Prior to getting his license, he was not allowed to negotiate with clients or to solicit business from builders or realtors. Because he had been previously engaged in the construction business, the majority of his contacts were in the building industry and he had a list of builders he regularly visited. Shortly after Ms. Henderson came to work at MAC, Mr. Cline gave half of the builders on Mr. Moulin's list to her as her source list. This had a negative impact on Moulin's income since at about the same time, his salary was discontinued and his compensation was based solely on commission, doubled in rate at that time. 24 Once half of Moulin's builders list was given to Ms. Henderson, she began calling on them, and he was told by many friends in the building industry, that she was soliciting them for referrals. In March, 1987, Mr. Moulin and Mr. Stillwell, another loan officer, requested of Mr. Cline a different split of the walk-in traffic because Ms. Henderson, whose office was right near the entrance, was pulling in as many of the walk-ins as she could to the exclusion of the other loan officers. After this complaint, Cline arranged a rotating schedule for walk-ins so that each loan officer would get a proportionate share of opportunity. In Mr. Moulin's opinion, based on his observations of Ms. Henderson and her activities, she, though unlicensed, did much the same type of work he did under his license. She solicited business from builders and realtors outside the office and handled walk-in clients from application through closing. He was not allowed to do any of this prior to being licensed, and he stands by this assertion notwithstanding the fact that numerous forms introduced by Ms. Henderson reflect that prior to the date of his license, he was referred to as loan officer. He explains this as occurring when Cline put his name on forms prepared for other people's loans so that he could get credit for them. Considering the nature of the operation as it appears from the general line of testimony, it is found that this did happen. Mr. Moulin initiated the investigation which culminated in this hearing because he felt he was being unfairly treated when cases were taken from him and he did not receive the commissions to which he felt he was entitled. In his letter to the Department, he identified Ms. Henderson as an "unlicensed mortgage solicitor." This appears to be an accurate description. Marcus Combs, testifying for Ms. Henderson, was sent to MAC by a real estate salesman whose broker was reportedly a major owner of the company. As did the others, Mr. Combs observed the rates and points posted on a board in the office lobby and was referred to Ms. Henderson, who he did not previously know, by the receptionist. During their initial interview, Ms. Henderson discussed the items required for the application and gave him a forms package. At this time, Ms. Henderson was in training and there was a man present throughout the meeting as an observer. At no time during their relationship, did Ms. Henderson attempt to negotiate rates or points, nor did she attempt to sell a particular type of loan. At no time did she solicit Mr. Combs to apply for a mortgage and, because he was having difficulty qualifying for a loan, suggested he look elsewhere for the mortgage. She actually referred him to another lending institution from which he ultimately got his mortgage.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that a Final Order be issued by the Department sustaining the Cease and Desist Order entered herein and the denial of Ms. Henderson's application for registration as an associated person with Triple Check Financial Services, Inc. RECOMMENDED this 24th day of October, 1989, in Tallahassee, Florida. ARNOLD H. POLLOCK Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 24th day of October. 1989. APPENDIX TO THE RECOMMENDED ORDER IN CASE NO. 89-3203 and 89-3769 The following constitutes my specific rulings pursuant to S 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the partiesto this case. For the Department: Accepted and incorporated herein. & 3. Accepted and incorporated herein. 4. - 8. Accepted. Accepted and incorporated herein. - 12. Accepted. Accepted and incorporated herein. - 17. Accepted and incorporated herein. Accepted. Accepted and incorporated herein. - 23. Accepted and incorporated herein. Either hearsay evidence or not supported by the record. Accepted. & 27. Accepted and incorporated herein. 28. - 30. Accepted. 31. - 34. Accepted and incorporated herein. 35. - 43. Accepted and incorporated herein. 44. - 52. Accepted and incorporated herein. For Ms. Henderson: Not a Finding of Fact but a statement of legal authority. Not a Finding of Fact, (except as to dates of alleged infractions), but a Conclusion of Law. Not a Finding of Fact. Not a Finding of Fact but a comment on the Department's legal basis for filing. Not a Finding of Fact. 5a. - 5e. Not Findings of Fact but comments on the sufficiency of the evidence. & 7. Not a Finding of Fact but a comment on the sufficiency of the evidence. Accepted and incorporated herein. Not a Finding of Fact but a comment on the state of the Department's evidence. - 12. Accepted and incorporated herein, except to the second sentence of 12 which is unsupported. First and second sentences accepted. Third sentence is rejected as contra to the weight of the evidence. Accepted as to the issue of signing of statements but rejected as to the allegation of inaccuracy. COPIES FURNISHED: Robert K. Good, Esquire Office of the Comptroller 400 W. Robinson Street, Suite 501 Orlando, Florida 32801 Elise M. Greenbaum, Esquire Office of the Comptroller 400 W. Robinson Street, Suite 501 Orlando, Florida 32801 Rebecca Love Henderson 5635 Bryner Drive Jacksonville, Florida 32244 Hon. Gerald Lewis Comptroller State of Florida The Capitol Tallahassee, Florida 32399-0350 Charles L. Stutts, Esquire General Counsel Department of Banking and Finance The Capitol Plaza Level, Room 1302 Tallahassee, Florida 32399 =================================================================
The Issue The purpose of the mandatory public hearing is to afford the public an opportunity to comment on the application from a foreign national for authority to organize Union Credit Bank, a proposed new bank to be located in Miami, Dade County, Florida.
Findings Of Fact On October 18, 1999, the Department received an application (Application) from a foreign national to organize a new bank, Union Credit. The proposed location of Union Credit was Miami, Dade County, Florida. The Department published a notice of receipt of the Application in the October 29, 1999, publication of the Florida Administrative Weekly. The Department has satisfied the notice requirements of Subsection 120.80(3)(a)1.a., Florida Statutes, and Rule 3C-105.103, Florida Administrative Code. By letter dated November 8, 1999, the Department made a timely request for additional information, including additional information from Union Credit's proposed officers and directors (Applicants). The Department did not receive all of the additional information that it had requested from the Applicants until March 1, 2000. On April 3, 2000, the Applicants, as required by federal law, filed a separate application with the Federal Deposit Insurance Corporation ("FDIC"). Identified on the Application are three individuals associated with Union Credit, Oddie Rishmague (O. Rishmague) , Miguel Rishmague (M. Rishmague), and Jorge Luis del Rosal, who are foreign nationals. Mr. O. Rishmague is a proposed director and the proposed sole owner. Mr. M. Rishmague is a proposed director, the proposed chairman of the board of directors, and a proposed officer. Mr. del Rosal is a proposed director. All other proposed officers and directors identified on the Application are citizens of the United States. The other proposed officers and directors are: John H. Blake, Alexander J. Evans, Robert Tamayo, Milton H. Lehr, and Grace V. McGuire. Mr. O. Rishmague, a proposed director and the proposed sole owner of Union Credit has more than 12 years of international banking experience. From 1988 to 1995, he served as Vice-Chairman of Banco Osorno. During his tenure, Banco Osorno grew from a small bank to the second largest bank in Chile. For the past five years, Mr. O. Rishmague has been a member of the board of directors of Corpbanca. In addition to his banking experience, Mr. O. Rishmague served as a director of Provida, a private company that manages $12 billion dollars of pension fund assets. Mr. Tamayo is the proposed president and chief executive officer for Union Credit. He has over 38 years of banking experience in the areas of international and domestic banking. From 1984 to July of 1993, Mr. Tamayo served as a Senior Vice President for Espirito Santos Bank of Florida, a state chartered domestic bank. From July of 1993 to 1999, he served as a Senior Vice President and General Manager of Banco Boliviano Americano’s Miami agency office. Mr. Lehr, a proposed director, has substantial banking experience. From 1976 to 1999 he served as a member of the board of directors of Republic National Bank of Miami. Mr. Blake, a proposed director, has over 13 years of banking experience. From 1986 to 1999 Mr. Blake served as a member of the board of directors of Republic National Bank of Miami. Mr. M. Rishmague, the proposed chairman of the board of directors, served two years as a member of the board of directors of Corpbanca. Ms. McGuire, a proposed director, is a self-employed bank consultant who has worked with numerous domestic and international banks on a variety of complex banking issues. Mr. del Rosal is a retired corporate executive. Mr. Evans is a certified public accountant. No evidence was presented and there is nothing in the record to indicate that the presently identified proposed officers do not have sufficient financial institution experience, ability, standing, and reputation to indicate reasonable promise of successful operation. No evidence was presented and there is nothing in the record to indicate that the proposed directors do not have sufficient business experience, ability, standing, and reputation to indicate reasonable promise of successful operation. None of the proposed officers or directors have been convicted of, or pled guilty or nolo contendere to, any violation of Section 655.50, Florida Statutes, relating to the Florida Control of Money Laundering in Financial Institutions Act; Chapter 896, Florida Statutes, relating to offenses related to financial institutions; or any similar state or federal law. Mr. Blake and Mr. Lehr, proposed directors who are not proposed officers, have had at least one year of direct experience as a director of a financial institution within three years of the date of the Application. Mr. Tamayo, the proposed president and chief executive officer, has had at least one year of direct experience as an executive officer of a financial institution within the last three years. The Applicants seek to organize Union Credit to provide a variety of competitive deposit products and other related banking services, including residential and commercial lending, within the Miami area. Union Credit’s target customers include individual consumers, professionals, and both small and large businesses. The initial gross capital for Union Credit will be $10,000,000.00, and will be classified as follows: $5,000,000.00 of paid-in capital; $4,750,000.00 of paid-in surplus; and $250,000.00 designated as undivided profits. Union Credit is authorized to issue, at opening, 1,000,000 shares of common stock at $10.00 per share. The initial capitalization of Union Credit is adequate in relation to its proposed business activities. However, should Union Credit’s capital fall below $10,000,000.00 within its first three years of operation, Mr. O. Rishmague will immediately contribute, from his own personal assets, the funds necessary to maintain Union Credit’s capital at the level of $10,000,000.00, thus ensuring that Union Credit’s gross capital remains, at a minimum, at $10,000,000.00. Thereafter, Mr. O. Rishmague has committed to infuse additional capital, as may be appropriate, as Union Credit grows in asset size. The local conditions in Miami are favorable to Union Credit’s business plan. Union Credit’s financial plan also appears reasonable and attainable. The Department and Applicants recognize that the corporate name of Union Credit is not, and cannot, be reserved with the Department of State. The Department of State no longer reserves corporate names. Union Credit will have suitable quarters. It will be located at 1150 South Miami Avenue, Miami, Florida. No member of the public appeared at the public hearing or spoke in opposition to the Application. No one testified in opposition to the Application. The Applicants cause notice of the public hearing to be published in the Miami Herald on May 4, 2000. The notice complied with the requirements of Rule 3C-105.106(1), Florida Administrative Code. The Applicants satisfied the notice requirements of Subsection 120.80(3)(a)4, Florida Statutes. DONE AND ENTERED this 3rd day of July, 2000, in Tallahassee, Leon County, Florida. ERROL H. POWELL Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 3rd day of July, 2000. COPIES FURNISHED: Alcides I. Avila, Esquire Patricia M. Hernandez, Esquire Holland & Knight, LLP 701 Brickell Avenue, Suite 3000 Miami, Florida 33131 Robert Alan Fox, Esquire Department of Banking and Finance 101 East Gaines Street Fletcher Building, Suite 526 Tallahassee, Florida 32399-0350 Honorable Robert F. Milligan Office of the Comptroller Department of Banking and Finance The Capitol, Plaza Level 09 Tallahassee, Florida 32399-0350 Harry L. Hooper, General Counsel Department of Banking and Finance Fletcher Building, Suite 526 101 East Gaines Street Tallahassee, Florida 32399-0350
