Findings Of Fact Based upon my observation of the witnesses and their demeanor while testifying, I make the following: The Defendant, Leroy Wilson, is a registered real estate broker with the Commission and during January 1, 1975 to November 5, 1975, Defendant was registered as trading as Overpass Real Estate. On April 27, 1975, Defendant was the owner of residential property located at 291 N.W. 29th Terrace, Ft. Lauderdale, Florida. On April 28, 2/ Robert English and his wife Mazie English in response to a "for sale" sign posted at 291 N.W. 29th Terrace, Ft. Lauderdale, Florida, went to the real estate brokerage office maintained by the Defendant at room 201 Romark Building, 3521 West Broward Boulevard, Ft. Lauderdale, Florida. Defendant and Mr. and Mrs. English discussed and negotiated a deposit receipt contract dated April 28, 1975, between the Englishes as purchasers and Defendant as seller for the purchase and sale of property owned by Defendant located at 291 N.W. 29th Terrace. Mrs. English testified that they put up an earnest money deposit of $300 acknowledged by Defendant, however, Defendant executed the deposit receipt contract reflecting an earnest money deposit of $600. (See FREC Exhibit number 2). Mrs. English testified that part of the terms of the contract was that she would apply for a mortgage loan but when it was determined that her daughter who was to participate with her in the purchase, was not able to stay with her, she and her husband decided not to apply for a mortgage loan. She explained to Defendant and he agreed to return the $300 deposit that she had submitted along with the deposit receipt contract. When the Englishes demanded the return of their deposit, Defendant advised them that "it was the law that the deposit must be kept for 6 weeks, and thereafter, he would have to keep the deposit another ten days." After the expiration of the six week period, the Englishes called the Defendant's office and was advised that he no longer lived there and other efforts by the Englishes to contact the Defendant were fruitless. Thereafter on or about August 20, 1975, the Englishes filed a complaint with the Commission. Approximately two days after the Commission initiated its investigation, the Defendant returned the $300 deposit to the Englishes. (See FREC Exhibit number 3). N.B. Wolf an employee of Gulf Atlantic Mortgage Brokers testified that she was familiar with the document received into evidence as Exhibit number 2 which is the deposit receipt contract entered into by the Defendant and the Englishes. She testified that she did not recall ever having taken a credit application for the Englishes to apply for a mortgage loan. Roy E. Conner, the operations officer for Plantation First National Bank testified that he caused to be gathered the bank records as they relate to the escrow account maintained by the Defendant at that bank. An examination of those bank records revealed that the Defendant's escrow bank account maintained at Plantation First National Bank had a shortage of $5 as of September 16 and that on August 14, his escrow bank account showed a balance of $65 when it should have reflected a balance of $300 in earnest money deposits. See FREC Exhibit number 4 received into evidence. Pruyn investigated Defendant's brokerage office on September 16, at 2951 N.W. Avenue, Ft. Lauderdale, Florida. Based on an official inspection, Pruyn noted a number of inadequacies in that there were no letterheads, no desks, no chairs, no business mail, no diary of witnesses or any official sign as required and set forth in Commission Rule 21V-10.07 and 10.09, Florida Administrative Code and Section 475.22, Florida Statutes. See FREC Exhibit number 5 received into evidence. As previously stated, the Defendant did not appear at the hearing nor did he have a representative present to present any defense to the charges made by the Commission in the administrative complaint.
The Issue The issues under consideration result from the attempt by The Beaches Leader, Inc., (Petitioner) to gain refund of sales tax paid to the State of Florida. That refund is sought from the State of Florida, Office of the Comptroller (Respondent). The theory of the pursuit of the tax claim is set forth in Section 212.08(6), Florida Statutes, in which there is provided an exemption from sales tax associated with the sale of newspapers. In this connection, the question is raised, whether Petitioner is a newspaper within the meaning of Rule 12A-1.08, Florida Administrative Code, in effect at the time that the refund was requested.
Findings Of Fact Petitioner, by this action, seeks a refund from Respondent for the payment of sales tax related to the cost of printing of the publication known as The Mirror. As publisher, Petitioner sought the refund in keeping with Section 215.26, Florida Statutes. The request dates from August 16, 1985. This application for refund is premised upon the Petitioner's belief that it is entitled to refund in that The Mirror is a newspaper within the meaning of Rule 12A-1.08(3), Florida Administrative Code, and as such is exempt from taxation associated with the cost of printing the publication. The statement of law dealing with exemptions from sales tax pertaining to newspapers is set forth in Section 212.08(6), Florida Statutes. Petitioner finds solace in the decision of Campus Communications vs. Dept. of Revenue, 473 So.2d 1290 (Fla. 1985). Petitioner believes the finding in that case in which the Florida Supreme Court upheld the claims of the publication, The Independent Florida Alligator, because it was a newspaper by definition found in the aforementioned rule and entitled to be exempt from sales tax requirements, applies to Petitioner's circumstance. The amount of refund claimed is $6,577.10. Having considered the request for refund, and being mindful of the case of Campus Communications, supra, Respondent denied the refund request upon the expressed belief that The Mirror is not a newspaper within the meaning of Rule 12A-1.08(3), Florida Administrative Code. This statement of denial dates from March 20, 1986. Petitioner made timely application for the tax refund ire question and has sought timely review of the Respondent's intent to deny that refund request. The Mirror is a civilian enterprise publication for the special interests of personnel of the United States Naval Station at Mayport, Florida. However, it does solicit and contain some news items of general interest to the community. The testimony of the witnesses and the documentary evidence, including the issues of The Mirror which were admitted into evidence, establish that The Mirror is published under a contract between Petitioner and the United States Navy. It is distributed free of charge to naval personnel at the Mayport Naval Station, Jacksonville, Florida. In addition to distribution throughout the Mayport Naval Station, it is available and is distributed to civilian employees of the United States Navy both on and off the naval base, and also to military dependents and visitors both on and off the Mayport Naval Station base. The Mirror is delivered to 1,200 off-base residences and distributed at the offices of the Beaches Leader, a newspaper sold to the general public. There, residents of the Duval County, Florida, beaches communities obtain copies of The Mirror. Finally, copies are mailed weekly to paid subscribers in Florida and five other states. The affected community served by and which is the principal audience for The Mirror is the United States Naval Station at Mayport and the surrounding beaches area. This community is composed of naval personnel, their dependents and civilian naval employees. There are other persons who have no direct connection to the Navy but who, as beaches communities residents, are affected by the naval presence in the beaches area and in the Jacksonville metropolitan area as a whole and who use The Mirror as a means of information and dissemination of information. Mr. Paul Henkemeyer, a civilian employee of the United States Navy who is responsible for maintaining and disseminating information concerning the economic and other impacts of the naval installations in the Jacksonville area, testified in the course of the hearing. He pointed out that the Navy has a very substantial economic and social impact upon the residents of metropolitan Jacksonville, Florida. The Navy employs over 37,000 military personnel in the Jacksonville area in addition to over 10,000 civilian employees. Its payroll in the Jacksonville area approaches $1.7 billion. The Navy and its related economic activity account for in excess of 10 per cent of the Jacksonville area economy. The witnesses Mr. Henkemeyer; Mr. Townsend Hawkes, a beaches area real estate broker; Mr. Simon A. Smith, Jr., former Chief Executive of the North Florida Council of the Boy Scouts of America; and Ms. Marion Perry, supervisor of services of the United Way, testified that The Mirror is considered by them to be a "newspaper" of general circulation and interest to the public in the Jacksonville beaches communities. They demonstrated that The Mirror disseminates information about local events, including the Boy Scouts, United Way, and other charitable interests, and religious news. This pertains to the beaches communities and is a routine activity within The Mirror. More specifically, Mr. Hawkes said that he regularly reads The Mirror to follow his interests and involvement with the Sea Cadets, a group of boys and girls from the community interested in sailing and nautical activities. He also promotes the activities of the Kiwanis Club related to a swim marathon sponsored by that club in the publication. He reads the publication in furtherance of his business as a real estate broker to determine current happenings in the beaches communities associated with the Navy as it affects his business interests. He is involved with paid advertisements in The Mirror. He noted several issues which are peculiarly beaches topics about the Navy. He referred to certain road development and transportation matters found in The Mirror. Mr. Smith indicated that he considers The Mirror to be a "newspaper" of general circulation to the beaches communities, because it provides extensive coverage of Boy Scout activities and is viewed by the Boy Scouts of America and other charitable and community institutions as a source of dissemination of news and press releases concerning their present and future activities. Ms. Perry, in her role with the United Way in which her unit serves several north Florida counties including Duval County, testified that The Mirror is considered by her and the United Way to be a "newspaper" of general circulation and public interest for the beaches communities. She indicated that it is included in the mailing lists for press releases by the Florida Press Association and the United Way. She testified that The Mirror is listed as a "newspaper" in the Media Guide prepared by her. She notes that The Mirror includes features and opinions to the editor pages. She explained that The Mirror regularly disseminates information about the activities and fund raising efforts of the United Way throughout Jacksonville and the beaches communities. Generally speaking, Mr. Hawkes, Mr. Smith and Ms. Perry testified that The Mirror is included among the list of newspapers to which information, including press releases is regularly and routinely distributed by the organizations with which they are now or have been affiliated. In summary, those individuals and their community organizations consider The Mirror to be a "newspaper" of general circulation which contains matters of current public interest to the general public, and of current events and news of interest to the general public. The testimony of Mr. Tom Wood, the chief executive officer of The Beaches Leader, Inc., which owns and publishes The Mirror, provided further insight into the operations and function of The Mirror. The publication has a designated employee who serves as editor and news reporter of The Mirror. This employee works on the base at the United States Naval Station Mayport where he collects news items from all sources, including not only those provided by the United States Navy, but also sources from the community at large and throughout Florida in the form of press releases. Mr. Wood's testimony was that The Mirror is a publication whose purpose and function is to disseminate the news. His testimony also established that it is not a "shopper" type of publication, and it is not given over principally to advertisements or personal classified advertisements. The Mirror contains a percentage of advertising which is less than the national average and regularly carries news items of general interest to the public and the beaches communities in particular. Mr. Wood conceded that the publication is decidedly directed to the special interests of the United States Naval Station Mayport, but he pointed out current events and news of current interest to the general public are found in the publication. Wood identified the fact that the Navy informs the publisher where it wishes to have its news items placed and indicates to the publisher which of those items must be placed in a given issue. Beyond this arrangement, the publisher may choose what it wishes to include in an issue based upon remaining available space. In this realm, the number of pages in each issue of the publication, as well as the advertising ratio, is controlled by contract between Petitioner and the Navy. In picking examples of issues of The Mirror presented at hearing, issues were selected which are particularly demonstrative of a broader base of news stories than would relate to the Navy. Wood describes Petitioner's contract with the Navy as allowing the Navy to take back articles that were initially provided for placement in The Mirror. Per the contract, no editorial cartoons can be used. The Navy may request to see the galley or paste-up of an issue of the publication but has yet to do so. As stated, The Mirror is published for the special interest of personnel of the U.S. Naval Air Station, Mayport, Florida. To this end, Mr. Wood explained that, "we do not expect to have readers, substantial number of readers who don't have some connection, interest in the Naval Air Station at Mayport." The Mirror does not contain any news stories gathered from either Associated Press (AP) or United Press International (UPI) wire service material. Mr. Wood indicated that The Mirror does not routinely cover news of the day; however, given that this is not a daily publication, this arrangement is not unexpected. A review of the issues of The Mirror admitted into evidence offered by both the Petitioner and the Respondent, reveals the nature of news of general interest to the public, including weekly religious and recreational columns and feature stories. The issues submitted include news reports about hurricane preparation, athletic events, Halloween safety programs, youth recreational league registration information, matters concerning important historical dates, information concerning the need for volunteers and other assistance in charitable works in the beaches communities, news concerning the public schools, news of Fire Prevention Week, news concerning Native American Week, as well as information pertaining to drug abuse and automobile safety, a recipe column, television information, as well as matters of national interest, including news concerning the disaster of the space shuttle Challenger, together with the efforts of the Navy associated with its recovery. The basic structure of the publication may be seen in Petitioner's Exhibits 1-12 and 17-19 and Respondent's Exhibits 1 and 2 admitted in evidence. Here are some subjects covered in those editions: The Mirror for the week of January 25, 1985, included religious columns, information on preventive dentistry and actions to be taken as precautions to colder weather, a story on African famine relief, reminders concerning taxes and matters pertaining to personal income tax, as well as an extensive classified section concerning both real property and personal property, in addition to the activities of the Boy Scouts in the beaches area. The Mirror issue of February 15, 1985, included feature story on the observation of Black History Month, as well as columns on recreation and religion. The issue of June 14, 1985, included articles on the restoration of the Statue of Liberty and a feature on Father's Day, in addition to the information on recreational activities and religious events. The Mirror issue of June 21, 1985, included coverage of religious activities. The Mirror issue dated June 28, 1985, included special features on the Fourth of July, a recreational feature on cave diving and safety measures, in addition to information on recreational and family activities and a feature on safety precautions concerning fireworks and their use. The September 6, 1985, issues of The Mirror contained features on square dancing, marriage counseling, carnival con-men and the surrender of the Japanese at the conclusion of World War II. The September 27, 1985, issue of The Mirror included a special feature on Native American Week, the dangers of cocaine, automobile safety and recreational and religious activities sections. The November 29, 1985, issue of The Mirror had a feature on toys for tots collections and year-end tax information, as well as the regular features on recreational, charitable and religious activities. The issues of The Mirror admitted in evidence for the dates January 31, 1986, and February 7, 1986, focused upon the disaster of the space shuttle Challenger and the extensive search efforts by the United States Navy and other vessels to locate the wreckage and to assist in determining the cause of the explosion. Extensive coverage of the shuttle disaster and NASA news was contained in those issues of The Mirror as well as in civilian newspapers which were introduced in evidence. The Mirror issue of February 21, 1986, contained a feature on Black Americans. The issue of August 8, 1986, focused upon the change in command of the United States Navy aircraft carrier Saratoga, which news was also the feature story of the local Jacksonville newspapers, The Florida Times Union and Jacksonville Journal, on that day. The issues of The Mirror regularly contain feature stories concerning the United States Navy and matters related to the Naval Station Mayport. The testimony of the witnesses makes it evident that naval happenings, especially as they relate to the activities and events at the Naval Station Mayport and other naval bases in Jacksonville, are news in metropolitan Jacksonville, Florida. Two issues of The Independent Florida Alligator, Petitioner's Joint exhibits 2 and 3, were admitted. A comparison of The Mirror and The Independent Florida Alligator shows in what ways they are similar and dissimilar. Both publications are publications of special interest to a particular community--the University of Florida in the case of The Independent Florida Alligator, and the United States Naval Station Mayport in the case of The Mirror. However, The Independent Florida Alligator has a much broader base in its reporting of news beyond its principal community and offers more extensive editorial comment. In addition, it serves the function of training student journalists in the newspaper business as the court in Campus Communications, supra, referenced in its favorable response to the claim for tax exempt status. No such role is played by The Mirror. The Independent Florida Alligator has a format that is more akin to a general circulation newspaper, whereas The Mirror is in many respects more of a news bulletin. The articles related to the Navy may preempt other news information and the reporting of other news events beyond the Navy's activities is secondary. The Navy exerts influence on the basic design and focus of The Mirror through the contract with its publisher. By contrast, the The Independent Florida Alligator has a wide-ranging set of topics in which there does not appear to be any outside entity predetermining space requirements or which has a say in what news is pursued by the student newspaper.
The Issue The purpose of the mandatory public hearing was to afford public comment on the application for authority to acquire Intercontinental Bank, West Miami, Florida (Intercontinental Bank). The hearing also allowed the Applicants, Eligio Cedeño and Alvaro Gorrin Ramos, to present evidence that they meet the criteria of Subsection 658.28(1), Florida Statutes, relating to reputation, character, experience, and financial responsibility such that they are qualified to acquire and own Intercontinental Bank in a legal and proper manner without detriment to the interests of the bank's stockholders, depositors, and creditors, or to the general public.
Findings Of Fact On January 12, 2005, OFR received the Application. OFR published notice of receipt of the Application on January 28, 2005, in the Florida Administrative Weekly. OFR has satisfied the notice requirements of Subsection 120.80(3)(a)1.a., Florida Statutes, and Florida Administrative Code Rule 69U-105.103. On February 3, 2005, OFR made a timely request for additional information regarding the Application. The Applicants answered this request in a letter dated May 5, 2005. The Applicants, as required by federal law, have filed a separate application with the Federal Deposit Insurance Corporation. The Applicants are foreign nationals. Mr. Eligio Cedño is proposed to own more than 25 percent of Intercontinental Bank's common stock, and Mr. Alvaro Gorrin Ramos is proposed to own more than 25 percent of Intercontinental Bank's common stock. On September 19, Don Saxon, Commissioner of OFR, issued an Order Granting Office's Petition for Public Hearing on the Application. The public hearing was scheduled for November 18, 2005, and the Applicants published a notice in the November 3, 2005, edition of The Miami Herald, which indicated the date, time, and location of the scheduled public hearing, and which otherwise complied with the requirements of Florida Administrative Code Rule 69U-105.105(1) and satisfied the notice requirement of Subsection 120.80(3)(a)4., Florida Statutes. A public hearing was held as scheduled on November 18, 2005. No member of the public appeared at the hearing, and no person expressed opposition to the Application. Mr. Eligio Cedño, a proposed major shareholder of Intercontinental Bank, has more than 26 years of banking and financial experience. He has experience as a senior officer, director, and major shareholder with various financial institutions, including Bolivar, Banco, C.A. Mr. Cedño appears to be sufficiently qualified by reputation, character, experience, and financial responsibility to control Intercontinental Bank in a legal and proper manner, and the interests of the other stockholders and the depositors and creditors of the bank, and the interests of the public generally will not be jeopardized by the proposed change in ownership. Mr. Gorrin Ramos, a proposed major shareholder of Intercontinental Bank, is a businessman with a variety of business interests throughout the United States and Venezuela. He has prior financial institution experience with Banco Canarias. Mr. Ramos appears to be sufficiently qualified by reputation, character, experience, and financial responsibility to control Intercontinental Bank in a legal and proper manner, and the interests of the other stockholder and the depositors and creditors of the bank, and the interests of the public generally will not be jeopardized by the proposed changes in ownership. Neither of the Applicants has been convicted of, or pled guilty or nolo contendre to any violation of Section 655.50, Florida Statutes, relating to the Florida Control of Money Laundering in Financial Institutions; Chapter 896, Florida Statutes, relating to offenses related to financial institutions; or any similar state or federal law. OFR conducted a background investigation on the Applicants and discovered no information to preclude the Applicants from acquiring the aforementioned shares of common stock in Intercontinental Bank. The current management and directors of Intercontinental Bank, including its president, Mr. Amadeo Lopez-Castro, Jr., will maintain their positions in the bank and will continue to manage the institution. In addition, Messrs. Carlos J. Fernandez, Alvaro J. Gorrin, and Marcel Rotker will be added to the existing board of directors of the bank. Intercontinental Bank's business plan reflects that the bank will offer full-service banking to individuals and businesses located primarily in the Miami-Dade County community. DONE AND ENTERED this 10th day of January, 2006, in Tallahassee, Leon County, Florida. S SUSAN B. HARRELL 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 10th day of January, 2006.
Findings Of Fact The Petitioners have filed an application with the Respondent to organize a new bank in Ocala, Marion County, Florida. The name of the proposed bank would be the Citizens First Bank of Ocala. The Petitioners are the organizers and proposed directors of the bank. Each of the Petitioners is of good moral character, and each enjoys an outstanding reputation. None of the Petitioners have been convicted of any crimes involving breach of trust, and none have filed for bankruptcy, or have any history of being bad credit risks. Together the Petitioners constitute a diverse group with very broad and successful business experiences. The Petitioner William R. Kidd is a registered professional engineer and realtor who has lived and worked in Ocala since 1950. Mr. Kidd has broad experience in evaluating various aspects of real estate transactions, and he has extensive experience in arranging financing of construction projects. Mr. Kidd owns a pollution control company which has a net worth of approximately $25,000 and a real estate business with sales since 1975 in excess of $10,000,000. He also manages and operates a successful consulting engineering firm. Mr. Kidd plans to invest $40,000 in the new bank, and he has sufficient funds readily availably to make that investment. Mr. Kidd is willing to invest more money in the enterprise if additional capitalization is required. Mr. Kidd is interested in working with the bank, particularly in relation to financing of real estate transactions, and construction projects. The Petitioner Ralph Murphy was born in Marion County and has spent most of his life there. Mr. Murphy owns a linen service company which does approximately $18,500 to $19,000 in business weekly. The linen service, which Mr. Murphy has managed since it was a small entity doing less than $2,500 in business weekly, has a net worth of approximately $900,000. Mr. Murphy serves on the Boards of Directors of several other corporations. Mr. Murphy intends to purchase $40,000 of stock in the proposed new bank, and he has funds readily available with which he can do that. Mr. Murphy is willing to devote as much time as is necessary to organize the bank. The Petitioner Milton L. Copeland manages an insurance firm which writes commercial insurance policies for businesses in Florida and in Georgia. His company has offices in Ocala and Jacksonville. The Ocala office writes approximately $2,000,000 in insurance policies annually. The Jacksonville office writes approximately $15,000 in policies weekly. Mr. Copeland has a personal net worth of approximately $800,000. Mr. Copeland intends to buy $40,000 worth of stock in the proposed new bank, and he has funds readily available for that purpose. Mr. Copeland wishes to take an active part in soliciting new accounts for the bank, and he could devote as much as two full days per week to bank activities. If further capitalization of the proposed bank were considered necessary, Mr. Copeland is willing to increase his investment in the bank. The Petitioner James Cunningham owns and operates a funeral home business in Ocala. He has lived in Ocala most of his life. The dollar volume of Mr. Cunningham's business during 1976 was approximately $250,000. Mr. Cunningham is a City Councilman in Ocala. He is a black man. It has only been in recent years that blacks have even been employed at local banks, and no blacks presently serve on the Boards of Directors of any banks operating in Ocala or Marion County. Mr. Cunningham intends to purchase $40,000 worth of stock in the new bank. He will need to borrow no more than 25 percent of that amount in order to make the investment. Mr. Cunningham desires to take an active part in soliciting accounts and customers for the new bank, and he is willing to devote whatever time would be required for that purpose. The Petitioner Marjorie Renfroe owns and operates a boat, motor and trailer sales and service business in Marion County. Her business had gross sales during 1976 of approximately $350,000. Ms. Renfroe serves on the Board of Directors of the United Way in Marion County, and on the Board of Directors of the Central Florida Community College. Ms. Renfroe plans to buy $40,000 worth of stock in the new bank, and if further capitalization were found necessary, she is willing to increase her investment, and is able to do so. Ms. Renfroe is willing to devote as much time as necessary to managing the new bank, and she is particularly interested in providing services to employees and students of the local community college, especially instructional sorts of courses for students. No women presently serve on the Boards of Directors of any banks in Marion County. One woman serves on the Board of Directors of a savings and loan institution in Marion County. The Petitioner Van G. Staton manages a Belk-Lindsey Department Store in Ocala, Florida. He has lived in Ocala and managed the department store since 1956. The store employs 48 persons and had gross sales during 1976 of approximately $3,000,000. The annual payroll of the store is $400,000 to $500,000. The Petitioner serves on the Board of Directors of a local automobile sales and service corporation, and from 1970 through 1975 he served on the Marion County School Board. Mr. Staton plans to purchase $40,000 of stock in the new bank, and he would not need to borrow more than 50 percent of that amount. Mr. Staton would favor additional capitalization, and would be willing to increase his investment. Mr. Staton is particularly interested in having extended business hours in the new bank beyond the hours presently served by banks operating in Marion County, and Saturday openings. He is willing to spend as much time as is necessary with banking activities. The Petitioner Owen C. Shelton owns and manages two corporations which operate fifteen convenience stores. The total sales for the two corporations was approximately $17,000,000 during 1976. Mr. Shelton has lived in Ocala for 15 years. His personal net worth is in excess of $1,000,000. Mr. Shelton has been in the grocery business for twenty-five years. He started with one small store. His corporations employ approximately 185 persons. Mr. Shelton plans to purchase $40,000 worth of stock in the new bank, and he is willing to increase his investment if further capitalization is required. The Petitioner Terry Trexler is President and Chairman of the Board of Nobility Homes, a mobile home manufacturing business. The company does business in 29 states, and does from 5.1 to 5.2 million dollars worth of business on a quarterly basis. Mr. Trexler has lived in Ocala for 15 years. Mr. Trexler plans to invest $40,000 in purchasing stock in the new bank, and he intends to be active in soliciting new accounts and customers for the bank. The Petitioner Sam Kinlaw is a resident of Orlando, Florida. He has a Bachelor's Degree in Business Administration from the University of Florida, and attended the Banking School of the South at Louisiana State University. Mr. Kinlaw has been active in the banking business, or in similar financial businesses since approximately 1958. He has served as the head of installment loan departments and commercial lending departments of banks in Florida. Beginning in 1972, he became the Chief Executive Officer of the Semoran Bank, which was a new Federally chartered bank. He was responsible for setting up the bank, hiring personnel, establishing policies, and carrying on the day-to-day operations of the bank. He served in that capacity from near the end of 1972 until September, 1975. He has not been involved in the banking business since then. Mr. Kinlaw intends to purchase a "qualifying share" of stock in the bank. He intends to serve on the Board of Directors during the time that the bank is being organized, until other persons with direct banking experience are named to the Board of Directors. The Petitioner Braxton Jones owns and operates several convenience stores and two supermarkets. He has lived in Ocala nearly all of his life. He is prepared to purchase between $20,000 and $30,000 of stock in the new bank, and he is willing to devote whatever time would be necessary to organize and operate the bank. The Petitioner Clarence Woodrow Hicks has lived in Marion County for approximately 30 years. He formerly owned and operated Hicks News Agency, which was involved in the wholesale distribution of magazines, books, postcards and sundry items. He also owned two retail book stores. Mr. Hicks has sold his business and is now semi-retired. He serves as a consultant to the new owners of his business. During the time that he operated the businesses, they did approximately three million dollars of business per year. Mr. Hicks' net worth is in excess of one million dollars. Mr. Hicks has time available to devote to the new bank. The proposed Citizens First Bank of Ocala would, if the instant application were granted, be located at the northwest corner of the intersection of State Road 200 and Southwest 16th Avenue in Ocala. The location is approximately one mile west of Pine Street (Federal Highways 441, 27, and 301), which is the primary north/south artery through Ocala. The proposed bank would be located just over three miles east of Interstate Highway 75. State Road 200 is presently a four lane highway which serves as one of the primary routes from the Interstate Highway into Ocala. Southwest 16th Avenue is presently two- laned, but all right of ways have been acquired and construction will shortly commence to four-lane the road. All of the banks and the savings and loans associations which presently operate in the Ocala area are located east of Pine Street. There are no banking facilities in the Ocala area which are located to the west of Pine Street. Location of a banking facility to the west of Pine Street would serve the convenience of persons in Ocala who live or work on the west side of Pine Street. Pine Street is a very busy highway, which has not been properly designed so that it can be easily crossed. Furthermore, a railroad track runs parallel to Pine Street to the West, and presents an additional barrier. While it is not impossible for persons who live or work on the west side of Pine Street to bank on the east side, the testimony is unrebutted that it is inconvenient to do so due to traffic congestion, and the railroad. There are many persons who reside on the west side, of Pine Street. The area to the north of the proposed bank site is a residential area. There are many low income residences, and trailer park type residential facilities in that area. There are also many moderate income residences to the south and the west of the proposed site all on the west side of Pine Street. The total population of the primary service area, which is designated to be west of Pine Street, is estimated to be 14,300, as of July, 1977. This represents more than a 35 percent increase from 1970 population figures. Many more residences are planned in the area. Over 1,200 new homes have recently been completed, and more than 500 are under construction. Larger residential developments are in the planning stages. There is considerable commercial activity in the areas surrounding the proposed site. The Ocala Industrial Park is located immediately across State Road 200 from the proposed site, and the South 40 Industrial Park is also nearby. Thirty-eight firms presently occupy space in the Ocala Industrial Park, employing more than 1,500 persons and occupying more than one million square feet of building space. Fourteen firms are presently located at the South 40 Industrial Park, employing nearly 350 persons and utilizing more than 300,000 square feet of building space. Both Industrial Parks have experienced steady growth. Many businesses, including several automobile sales and service businesses, have located on State Road 200. Construction is scheduled to begin on a major shopping mall in January, 1978, by the Edward J. DeBartolo Corporation. The mall will be located on State Road 200 just east of Interstate Highway 75. Construction will take approximately 12 months. More than 900 persons will be employed at the mall. In addition, most of the horse farms which surround the Ocala area are located west of Pine Street. There are six banking institutions located in Marion County. The two banks located out of the Ocala area have no particular relevance to this matter. Four banks are located in Ocala. Only one of these banks is an independent bank. The others are parts of larger bank holding companies which are not centered in Ocala. Total bank deposits in Marion County have increased steadily from a total of $176,586,000 in 1973 to $236,336,000 in June, 1977. Although estimates vary, it is evident that the population of Marion County has increased from a 1970 total of approximately 69,000 to a 1977 total of from 104,000 to 127,000. It appears that existing banks in Marion County are in a healthy financial position and are experiencing steady growth. There are many interlocking relationships on the Boards of Directors of the existing banks. None of the Petitioners presently serve on the Boards of any of the existing banks, and this can only promote more lively competition among the banks. Petitioners have proposed to keep their bank open for longer hours than existing banks, and for additional banking days. Petitioners propose to provide specialized counselling for new business people, and education courses for students who attend the nearby Central Florida Community College. It appears that local banks have frequently acted adversely on loan applications from local developers, who have been able to borrow money at favorable rates outside of Marion County. The presently existing banks have not adequately served the very large and active horse farming industry that is located in Ocala, and several horse farmers have needed to go to Gainesville to obtain adequate farm businesses. Banks in Marion County have shown a deposit gain of nearly sixteen percent during the year 1976, as compared to a State of Florida average of approximately 7.4 percent. Of the sixteen counties in which new bank charters were granted in the period from January, 1975, through March, 1977, only two counties had a total deposit growth greater than was experienced in Marion County. A savings and loan association was chartered and opened in Marion County in January, 1975. The association has achieved very good success, and has not proved harmful to other financial institutions, which have also shown steady growth during this same period. Petitioners have projected a net profit at the end of the third year of their operation of $163,300 based on deposits of $10,000,000. A more conservative estimate of a net profit of $61,350, based on $8,000,000 in deposits after three years was estimated by Examiner Howze, a bank examiner who conducted an investigation of the instant application for the Respondent. George Lewis, II, the former Director of the Division of Banking, prepared a proposed budget which showed that the bank would be operating at a loss after three years. George Lewis' estimates are not credible. He estimated that the return on commercial loans would be at a rate of from 7 and 1/4 to 8 percent during the first, second and third years. Nine percent is a more realistic figure, and is itself conservative. The Respondent approved the charter of the Shores Bank of Lake Wier in Marion County which indicated a nine percent return on loans. George Lewis furthermore showed a three percent cost on all demand deposits. This cost is not justified by any factors currently accepted in the banking business. George Lewis apparently based the additional cost on his feeling that the legislature may pass a law requiring banks to pay such a return on all demand deposits. Such speculation has not been shown to be justifiable, and cannot serve as a reasonable factor to be used in predicting a proposed bank's profits. Petitioners propose to issue capital stock in the amount of $1,000,000, and thus to capitalize the new bank in that amount. This is adequate capital to serve the needs of the proposed bank during the first three years of its operation. George Lewis, II, testified that additional, capitalization would be required, but he gave no reason for his opinion. To the extent that additional capital is required, the Petitioners are in a position to raise it, and are willing to do so. Only one of the Petitioners who would serve on the first Board of Directors of the proposed bank has any direct banking experience. All of the Petitioners have engaged in considerable banking activities, but only Sam Kinlaw has served in an active capacity with a bank. The Petitioners propose to hire experienced persons to serve as the bank's Chief Executive Officer and Chief Operations Officer. These persons would also serve on the Board of Directors. The Petitioners do represent a good cross-section of successful business people. Their varied business experiences within Marion County would be very helpful to the new bank. In order to properly operate the bank, however, they will require experienced officers. Consistent with the Respondent's policy, the Petitioners have not yet named their officers. To do so, the Petitioners would place the persons they propose to hire in an untenable position in their present capacities. The Respondent has, in the past, approved bank charter applications for further processing under similar circumstances, so as to allow applicants an opportunity to recruit acceptable, experienced individuals to serve as officers. The Board of the proposed bank, as presently constituted, does not have adequate banking experience so as to assure a reasonable prospect of success. If, however, experienced, competent officers, who will also serve on the Board, are hired, the Board would be such as to assure a reasonable promise of success. The parties have stipulated that the name of the proposed bank, the Citizens First Bank of Ocala, is not so similar to any existing bank as to cause confusion with the name of the existing bank. The property which the Petitioners have obtained for the proposed bank is an excellent location. Petitioners plan to utilize a structure which is already on the land to commence operations. The structure has approximately 3,000 square feet of floor space, is aesthetically appropriate, and can be fairly easily modified to serve as a banking facility. The structure, when modified to increase the size of the lobby and to provide appropriate security measures, should prove adequate during the first three years of the bank's operation. There is sufficient land for additions to be made, and the structure is physically sound so that a second floor could be added. The Petitioners are prepared to increase the size of the facility as required.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is: RECOMMENDED: That the Petitioners' application for authority to organize and operate the Citizens First Bank of Ocala be approved for further processing, and that the application be finally approved when the Petitioners have satisfied the Respondent that they have retained appropriate individuals to serve as the bank's principal officers, and that these persons will also serve on the Board of Directors. RECOMMENDED this 30th day of December, 1977, in Tallahassee, Florida. G. STEVEN PFEIFFER 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 30th day of December, 1977. COPIES FURNISHED: C. Gary Williams, Esquire AUSLEY, McMULLEN, McGEHEE, CAROTHERS & PROCTOR Post Office Box 391 Tallahassee, Florida 32302 S. Craig Kiser, Esquire Assistant General Counsel Office of the Comptroller Legal Annex Tallahassee, Florida 32304 Joseph C. Jacobs, Esquire Post Office Box 1170 Tallahassee, Florida 32302 Willard Ayres, Esquire Post Office Box 1148 Ocala, Florida 32670 Appendix
The Issue The purpose of the public hearing was to review the application to consolidate New River Bank, Oakland Park, Florida, and 1st United Bank, Boca Raton, Florida, in accordance with Florida law.
Findings Of Fact 1st United Bancorp (Bancorp) is a Florida bank holding company which maintains its principal place of business at 980 North Federal Highway, Boca Raton, Florida. 1st United is a Florida chartered bank and is a wholly-owned subsidiary of Bancorp and operates full service banking facilities at seven locations in Palm Beach and Martin Counties. New River is a Florida chartered bank which maintains its executive offices at 2901 West Oakland Park Boulevard, Oakland Park, Florida, and operates two banking facilities in Broward County, Florida. The Department is the duly designated state agency vested with the responsibility of processing and approving or disapproving a plan of any financial entity to acquire the assets and assume the liabilities of another financial entity pursuant to Section 655.414, Florida Statutes. On July 13, 1993, Bancorp and New River entered into a Sale and Purchase Agreement which provides that Bancorp will cause 1st United to purchase substantially all of the assets and to assume substantially all of the liabilities of New River, after which New River will be liquidated and dissolved. The agreement noted above was duly adopted by majority vote of the respective Boards of Directors of Bancorp, 1st United and New River. In addition, the respective Boards of Directors of Bancorp, 1st United and New River duly adopted by majority vote a Plan of Acquisition of Assets and Assumption of Liabilities which summarized pertinent portions of the agreement and which includes all of the terms and conditions required by Section 655.414 (1), Florida Statutes. On September 7, 1993, 1st United and New River submitted an application to the Department seeking the Department's approval for the purchase of New River's assets and assumption of its liabilities as set forth in the agreement and as summarized by the plan. Submitted with the application were the requisite filing fee and all of the required documents including copies of the agreement, the plan and certified copies of the authorizing resolutions of the respective boards of directors. On September 17, 1993, the Department caused notice of the receipt of the application to be published in the Florida Administrative Weekly. This published notice met the requirements of Rule 3C-9.003(1), Florida Administrative Code. On September 7, 1993, Warren Orlando, in his capacity as president of 1st United, filed a petition for public hearing and notice of intention to appear on behalf of 1st United. On October 27, 1993, the Department referred the matter to the Division of Administrative Hearings for the purpose of conducting a public hearing pursuant to Section 120.60(5), Florida Statutes, and Rule 3C-9.004, Florida Administrative Code. Notice that a public hearing would be held on the application on December 13, 1993, was duly published in conformity with Rule 3C-9.005, Florida Administrative Code, in the Fort Lauderdale Sun-Sentinel, Palm Beach Post, and Stuart News, newspapers of general circulation in the communities in which 1st United and New River do business. The agreement provides that New River will receive a combination of cash and Bancorp common stock equal to the net asset value, as defined in the plan, of the assets and liabilities of New River being purchased or assumed. The agreement further provides that after the closing of the asset acquisition, New River shall cease operations and commence dissolution and liquidation proceedings. Substantially all of the Bancorp common stock and available cash received by New River from Bancorp will be distributed to New River shareholders, other than dissenting shareholders. New River stockholders will receive a pro rata portion of the Bancorp common stock and cash available for distribution. After the acquisition of the assets and assumption of liabilities as set forth in the agreement and as summarized in the plan, 1st United will have adequate capital structure in relation to its activities and its deposit liabilities. The acquisition of the assets and assumption of liabilities as set forth in the agreement and as summarized in the plan, if consummated, are not contrary to the public interest. The respective boards of directors of Bancorp and New River requested the opinion of Alex Sheshunoff & Co. Investment Banking with regard to the fairness to the respective shareholders of each corporation, from a financial point of view, of the terms and conditions of the agreement. Alex Sheshunoff & Co. Investment Banking is regularly engaged in and is an expert authority in the valuation of bank and bank holding company securities in connection with bank mergers and acquisitions. Thomas Mecredy is an expert in the valuation of bank and bank holding companies in connection with bank mergers and acquisitions. On December 8, 1993, Alex Sheshunoff & Co. Investment Banking through Thomas Mecredy issued its opinion to the respective Boards of Directors of Bancorp and New River that the terms and conditions of the agreement were fair and equitable to the shareholders of each corporation. Pursuant to the agreement, New River's Board of Directors duly adopted a plan of dissolution and complete liquidation for New River. The plan of dissolution provides that after the sale of assets and assumption of liabilities the Board of Directors will reserve a sufficient amount of Bancorp stock and cash for payment of liquidation expenses and payment of liabilities not assumed by 1st United, including contingent liabilities (general reserves). In addition to the general reserves, New River will create a special reserve (special reserve) in an amount which it considers sufficient to defend and satisfy certain potential claims which may be asserted against New River by shareholders of New River in conjunction with the organization and initial offering of common stock of New River. In determining the amounts necessary to establish the general reserves and special reserve, New River's board of directors consulted with the national law firm of Proskauer Rose Goetz and Mendelsohn with respect to both reserves and the Florida law firm of Shutts & Bowen with respect to the special reserve for advice concerning the potential liability on the part of New River in connection with both known claims and potential claims and the amounts, if any, for which New River could be held liable. Shareholder E.D. Hittson noted that the book value of the New River stock is approximately $11.00 per share versus the $4.50 per share value of the 1st United stock. In response, bank officials noted that 1st United has dividend and strong growth potential not available to New River. Shareholder James Weck questioned provisions being made to satisfy outstanding lawsuit liabilities, the future location of the facility, and the effect on New River employees. In response, bank officials stated that the potential lawsuit liability is included in the reserve amounts, that no decision has been made as to the future location of the banking facility but that the needs of the service area will be met, and that it is their intention to draw talent from the New River staff. Shareholder Amine Semaan questioned whether New River would be represented on the Board of Directors at 1st United, whether minority areas would be a priority for the future location of the facility, and whether another buyer would have paid $10.50 per share. In response, bank officials maintained that New River will have one member on the Board of Directors at 1st United, that the needs of the service area will be met, and that no other, more attractive, buyer is available. On January 11, 1994, MaryAnn Cassel, a shareholder who reportedly attended the public hearing on December 13, 1993, filed a motion for leave to become a party. Such motion alleged that the movant, a minority shareholder, will be forced to accept Bancorp common stock in exchange for her New River shares or be forced to accept appraisal rights in lieu of her shares. Further, movant claimed that the plan is not fair to all parties because the shares of New River have been undervalued. Having deemed such motion untimely, and having determined such request does not allege circumstances unknown to movant prior to the December 13, 1993 public hearing, it is denied. DONE AND ENTERED this 24th day of January, 1994, in Tallahassee, Leon County, Florida. Joyous D. Parrish 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 January, 1994. COPIES FURNISHED: Honorable Gerald Lewis Comptroller, State of Florida 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 Donald E. Thompson, II Proskauer Rose Goetz and Mendelsohn One Boca Place, Suite 340 2155 Glades Road Boca Raton, Florida 37431 Michael W. Ford Phillip T. Ridolfo, Jr. Mershon, Sawyer, Johnston, Dunwody & Cole Phillips Point East Tower 777 South Flagler Drive, Suite 900 West Palm Beach, Florida 33401 Jeffrey D. Jones Department of Banking and Finance Division of Banking The Capitol, Suite 1302 Tallahassee, Florida 32399-0350 David S. Zimble Zimble Formoso-Murias, P.A. 1401 Brickell Avenue, Suite 730 Miami, Florida 33131
The Issue Whether respondents' real estate licenses should be revoked, suspended, or otherwise disciplined on charges of false promises, misrepresentation, culpable negligence, and breach of trust in a business transaction.
Findings Of Fact Respondent Terry L. Baker is now and was at all times material to the charges a licensed real estate broker holding license no. 204679. (P-1) He also was president, secretary, and treasurer of respondent Terry L. Baker and Associates, Inc., a licensed real estate brokerage corporation (lic. no. 213974) located at 1418 West Edgewood Avenue, Jacksonville, Florida. There are no other officers, directors, or members of this brokerage corporation; respondent owns 100 percent of the capital stock. (P-1) Respondent was, and continues to be, the active broker for this real estate brokerage corporation. (P-1) On July 21, 1982, respondent assisted in the negotiation and closing of a real estate sales transaction between Dolores B. Hawkins, as seller, and James W. and Patricia L. Dobson, as purchasers. The real estate involved was a residential lot and dwelling unit located at 7065 Bishop Hatcher Drive East, Jacksonville, Florida, and was, at the time, the subject of a mortgage foreclosure proceeding. (Testimony of Hawkins, Baker; P-2, P-6) The real estate sales contract was signed by the seller and buyers on July 21, 1982. At that time, respondent submitted a written estimate of the seller's closing costs. This estimate, signed by both respondent and the seller, showed that the seller would net $1,598.25 from the transaction. It was specifically noted that this net figure did not include an Atlantic Bank payment. This payment was a recognized obligation of the seller and was required to obtain the release of a record judgment lien held by the bank. Ms. Hawkins, the seller, understood that this payment was her obligation and was not included in the $1,598.25 figure. The written estimate also included seller's cost of approximately $2,000 for attorney's fees and back mortgage payments. The attorney's fees were related to the legal costs associated with the mortgage foreclosure proceeding. An existing mortgage balance, to be assumed by the buyers, was listed as approximately $19,000. (Testimony of Hawkins, Baker; P-3) On two separate occasions prior to closing, respondent told seller Hawkins that there had been an increase in the charge for attorney's fees associated with the mortgage foreclosure. (Testimony of Hawkins, respondent) Prior to closing, respondent loaned seller Hawkins $220 to help her pay her apartment rent. They agreed that the loan would be repaid out of the proceeds from the sale of her property. (Testimony of Hawkins, Baker; P-4) At closing on August 17, 1982, respondent presented the seller with a Seller's Closing Statement listing various charges to the seller, including the loan repayment of $220, the payment to Atlantic Bank (for release of lien) of $425, attorney's fees of $638.50, and an assumed mortgage of $19,847.51. The net amount due the seller was $675.82. The buyers paid the balance due at closing and the seller delivered the warranty deed to respondent for recording. A couple of days later, respondent, in turn, wrote a check for $675.82 and delivered it to the seller as net proceeds from the sale. Payment of respondent's commission was shared by the seller and buyers at closing. Respondent received the warranty deed at closing and the parties to the transaction expected him to have it recorded. He accepted this duty and undertook to perform it. However, he did not record the warranty deed on the public records until October 4, 1982--almost three months later--after repeated requests by the mortgage service company for a copy of the recorded deed. The delay was caused by respondent's waiting to receive a release of the Atlantic Bank lien so that he could record the two instruments at the same time. But after repeated requests for a copy of the recorded deed, he finally recorded it even though he had not yet received the release of lien. (Testimony of Baker, Hawkins, Dobson) Contrary to the Department's contention, respondent's delay in recording the deed does not constitute culpable negligence, false promises, misrepresentation, or breach of trust in a business transaction. His lack of diligence in recording the deed is, instead, an act of simple negligence. His carelessness exposed the buyers to unnecessary risk. During this delay of almost three months, the seller, while record titleholder, could have reconveyed the property or subjected it to additional encumbrances. Respondent, in delaying recordation almost three months, failed to exercise that degree of care which a reasonable man, in the same situation and with similar experience, would not have omitted. His failure to exercise due care does not, however, demonstrate willful, wanton, or reckless disregard for the rights of others. The Department also charges that respondent did not have--at time of closing--the lien of Atlantic Bank satisfied. Prior to closing, the respondent- -on behalf of the seller--negotiated the outstanding debt with attorneys for Atlantic Bank: He was told that the bank would accept fifty cents on the dollar, or $425. Thereafter, respondent collected this amount as a charge to the seller at closing. (Testimony of respondent) Respondent, however, did not have an executed release of lien form, or the judgment lien satisfied, at closing. He asserts--without contradiction-- that the bank's attorney at first offered to prepare the release, but later asked respondent to do so. By the time of closing, respondent had been either unable to obtain the release from the attorney, or he had been unable to obtain and complete the form on his own. When asked why he proceeded to close the transaction although the release had not been obtained, he states that both buyers and seller consented to the closing because the property was facing foreclosure. Respondent's assertion that the parties consented to closing, in the absence of a release of lien, is unrefuted and accepted as fact. No evidence was presented that, in light of the parties' consent, closing of the transaction was improper.
Recommendation Based on the foregoing, it is RECOMMENDED: That the administrative complaint, and all charges contained therein, be dismissed for failure of proof. DONE and ENTERED this 23rd day of September, 1983, in Tallahassee, Florida. R. L. CALEEN, JR. Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 23rd day of September, 1983.
Findings Of Fact First Bank of Hollywood Beach is a state-chartered bank duly authorized and empowered under the laws of the State of Florida and of the United States to conduct a general banking business in and from offices in the State of Florida. First Bank's main office is located in Broward County, and it has three authorized branch offices in Broward County. (Hearing Officer's Exhibit 1) American Bank of Hollywood is a state-chartered bank duly authorized and empowered under the laws of the State of Florida and of the United States to conduct a general banking business in and from offices in the State of Florida. (Hearing Officer's Exhibit 1) It conducts business in its main office in Broward County, has a branch office in Broward County, and has applied for a second branch office in Broward County. Gerald A. Lewis is the Comptroller of the State of Florida and, as such, is the head of the Department of Banking and Finance. On August 1, 1980, the Department received request from the First Bank of Hollywood Beach for approval of an amendment to its charter changing its name to First American Bank of Broward County. On August 22, 1980, the department received an objection to the requested name change from American Bank of Hollywood. (Hearing Officer's Exhibit 1) Both banks have engaged in the banking business in Broward County, Florida, for more than eight years using their current corporate names. (Hearing Officer's Exhibit 1) Some of the principals of First Bank of Hollywood Beach, either as directors, officers, or shareholders, are and have been directors, officers, or shareholders of the First American Bank of Palm Beach County, which bank conducts a business through a main office and ten branch offices in Palm Beach County, Florida. Said principals desire to change the name of First Bank of Hollywood Beach to reflect its affiliation with the First American Bank of Palm Beach County. Additionally, substantially the same group of individuals has pending with the Department an application to organize a new bank to be named First American Bank of Broward County, which bank will also conduct its business through its main office in Broward County, Florida. If the de novo charter is approved, the new bank would also function as part of the "group" comprised of the First American Bank of Palm Beach County and the First Bank of Hollywood Beach. (Hearing Officer's Exhibit 1) As of the date of hearing in this cause, banks with the word "American" in their names were located in thirteen different counties within the State of Florida. At that time, within Broward County, the following commercial banks and savings and loan associations used the word "American" in their titles: American Bank of Hollywood + 1 branch (+ 1 branch applied for) Transamerica Bank of Florida + 1 branch Pan American Bank of Broward + 3 branches Great American Bank of Davie Great American Bank of Broward County Gulfstream American Bank & Trust Company + 5 branches AmeriFirst Federal Savings & Loan Associa- tion + 5 branches American Savings & Loon Association + 14 branches The proposed First American Bank of Broward County, together with First Bank's group if its requested name change is approved, would produce five additional locations of banks with "American" in their titles in Broward County. The sole basis for American Bank's objection to First Bank's requested name change is confusion based upon name similarity. No confusion exists between the First American Bank of Palm Beach County and the Pan American Bank of Palm Beach County or between the First American Bank of Palm Beach County and any bank in Broward County with "American" in its name, although the First American Bank of Palm Beach County has a branch within one mile of the Palm Beach/Broward County line. David Starke, an economist who specializes in consulting work with financial institutions, was not tendered as an expert witness and, accordingly, was not accepted as one. However, the surveys of banks with similar names in the State of Florida prepared by him reveal that all banks using the word "American" in their names also use either a first-word adjective and/or a geographic designation to distinguish one from the other. According to those surveys, both the banks and the savings and loam associations in Broward County with "American" in their titles use these two methods of distinguishing themselves. Both methods of distinction would be utilized by the requested one change in this cause. Other than uncorroborated hearsay evidence, American Bank introduced four items of correspondence which David L. Cory personally obtained from mail erroneously received by American Bank on one Saturday. All of the items of correspondence originated from persons outside of Broward County, with two of them originating from outside of the State of Florida. None of the items was addressed to the American Bank of Hollywood; however, three of the four items specifically carried American Bank's mailing address. The 1980 Hollywood (Broward County, Florida) telephone directory contains a listing for a First American Bank of Broward County, a bank formerly known as Executive Bank of Fort Lauderdale and now known as Great American Bank of Broward County. 10 . In March, 1979 the American Bank of Hollywood reserved with the Secretary of State's office the corporate name of American Bank of Broward. Other than reserving the name, American Bank has taken no steps toward using that name. The Department takes no position on the requested name change herein and recommends neither approval nor disapproval.
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is, therefore, RECOMMENDED: That a final order be entered approving the request of First Bank of Hollywood Beach to change its name to First American Bank of Broward County. RECOMMENDED this 13th day of May, 1981, in Tallahassee, Florida. LINDA M. RIGOT, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 13th day of May, 1981. COPIES FURNISHED: Leonard L. Levenstein, Esquire 1500 South Dixie Highway Coral Gables, Florida 33146 Walter W. Wood, Esquire Assistant General Counsel Office of the Comptroller Suite 1302, The Capitol Tallahassee, Florida 32301 Robert B. Butler, Esquire Ellis, Spencer, Butler & Kisslan 1909 Tyler Street Post Office Box 6 Hollywood, Florida 33022 The Honorable Gerald A. Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32301 =================================================================
The Issue The following issues are presented for disposition in this proceeding: The effect, if any, of the repeal of Section 494.05, F.S. prior to the filing of the administrative complaint. Whether Respondent committed the violations of Chapter 494, F.S., with which he is charged. What disciplinary action, if any, should be taken against Respondents mortgage broker's license.
Findings Of Fact Robert F. Potts is a licensed mortgage broker, having been issued license number HB0011700 by the Department of Banking and Finance (Department). At the time of hearing his license was in inactive status. Potts incorporated Florida Mortgage Equity Corporation (FMEC) in December 1983. Prior to that time he had worked as a mortgage broker for several companies, including State Capitol Corporation. When employed by State Capital Corporation Potts solicited investors for "equal dignity mortgages". State Capital's investment program offered eighteen percent interest per annum for a fixed period, generally five years. The Department investigated State Capital Corporation in 1982, and filed suit against the corporation, its officers, directors and several named employees, charging them with violations of the Securities Act and Mortgage Brokerage Act. The case was resolved with stipulations for final judgment, and Final Judgment was entered on April 11, 1983. Potts was not part of the investigation or suit. He left State Capital in late 1983 because he felt uneasy with the company. Around the time he left State Capital and incorporated FMEC, Potts solicited individuals with whom he had dealt at State Capital. /1 He sent a form letter on FMEC stationary, including the notation, "Robert F. Potts Licensed Mortgage Broker", as part of the printed letterhead. The letter informed potential investors of his new venture: * * * As you can see, the company is Florida Mortgage Equity Corporation, address and phone listed below. I [sic] pay you an interest check monthly, based on the rate of 18%. All investments are secured with property which is located in the Central Florida area. The terms of investment and amounts are to be discussed individually along with other pertinent information. (emphasis added) * * * (Petitioner's Exhibit 11) When individuals invested in FMEC, they were given a "Trust Account Deposit Receipt", reflecting the amount of deposit and stating that the deposited funds were to be used for purchase of a bond earning 18% for a fixed term, generally five years. The trust deposit receipt also stated that the investor would receive the following documents in approximately forty-five (45) days: - A copy of the Florida Mortgage Equity Corporation Bond. - Verification of full insurance on all corporate properties. - Copy of Appraisal on all corporate properties. - Copy of Financial Statement on Florida Mortgage Equity Corporation. (Petitioner's Exhibit #12) Approximately thirty investors invested in excess of $381,000 in FMEC. (Admitted in Response to Notice dated September 2, 1987.) With the exception of a Potts family friend and one individual referred by another investor, all FMEC's investors were people with whom Potts had recently had business through his mortgage broker activities at State Capital. Five of the investors testified at the final hearing. None had extensive investment experience and most were elderly retired individuals. None received the documents listed in the trust account deposit receipt except for the bond, but they were unconcerned so long as the monthly interest payments were being sent. When one investor inquired about the documents, he was asked to wait until Potts got a computer and could get up to date. He never asked again. Although the FMEC letterhead and Potts' business cards indicated that he was a licensed mortgage broker, Potts was not actually selling mortgages through that company, in contrast to his activity through State Capital. This distinction was lost on his unsophisticated investors, as the schemes both promised the same high yield for the same fixed period. The term, "mortgage", was a prominent part of the company name. He touted his status as a licensee, and the investors had seen his mortgage license when he visited their homes under the auspices of State Capital. To these individuals, Potts' promises of security were backed by his professional license. Potts' activity with FMEC consisted in soliciting funds from investors. These funds were then invested in a separate corporation, Roundtree Development Corporation. In return for its investments in Roundtree, FMEC received an unsecured corporate bond paying eighteen percent interest. The interest was paid back to FMEC's investors. In addition, Potts received a ten percent commission from Roundtree. Potts met Michael Deriemaecker, the president and sole director of Roundtree, in 1982 or early 1983. He learned that Deriemaecker was successfully involved in condominium conversions. After a series of casual meetings over a period of months, Potts decided to "join forces," in his words, with Deriemaecker. Potts never considered placing his investors' money in another investment. Potts felt that Deriemaecker was honest and successful in his ventures and Potts did not consider himself knowledgeable in real estate. Roundtree purchased the properties and conducted the actual work of development and renovation; hired and paid the contractors and completed the projects. Potts, through FMEC, raised the funds. Potts mentioned Roundtree Development Company to some investors, but did not explain to them the relationship between the two companies. The investors understood that their funds were being used for certain real estate projects. At least one investor, J. Daniel Johnson, thought he was supposed to get a mortgage for his investment. Another investor, Evelyn Foley, did not know the difference between a mortgage and a bond but had a clear understanding that her funds were going to be invested in nursing homes, condominiums and apartment buildings - property that was being liquidated - and that the property would be repaired and sold at a profit. The Department's investigation of Potts and FMEC included a review of subpoenaed bank records. These were incomplete, according to Investigator Alice Hampton, as some of the bank's microfilm was faulty. Ms. Hampton determined from the available bank records that approximately $169,450 was disbursed to Roundtree Development Corporation from investor monies in FMEC's accounts from 1983 to 1986. Bonds supplied to Ms. Hampton by Potts' attorney in response to a subpoena indicated that Roundtree/Deriemaecker received $285,000 from FMEC from September 1983 through October 1984. In an interview with Ms. Hampton, Deriemaecker said that Roundtree received approximately $236,000 from Potts/FMEC. At the hearing, Potts said he did not know exactly how much he loaned Deriemaecher. Michael Deriemaecher did not testify at the hearing. However, the account of his interview on April 14, 1987, found in Ms. Hampton's Report of Investigation (Petitioner's Exhibit #9), is consistent with, and corroborates Potts' testimony with regard to the relationship of the two companies, the use of the funds, and the fact that Roundtree stopped making payments to FMEC in January 1985, when a series of projects failed. By April 1986, all interest payments by FMEC to its investors ceased. No payments have been made since that time on principal or interest. Potts' claim that his investors assumed the risk of a risky venture and they got what they bargained for, both oversimplifies and misconstrues the facts. He was aware of the circumstances of the individuals he solicited; he had been to their homes as an employee of State Capital and knew of their financial status, their ignorance and their demonstrated eagerness to supplement their retirement incomes. He falsely promised that the investments would be secured, when they were not; he withheld material particulars of the relationship between FMEC and Roundtree; and he misused the funds of his investors by his improvident and reckless release of their money to Roundtree.
Recommendation Based on the foregoing, it is, hereby RECOMMENDED: That Robert F. Potts be found guilty of violations of Section 494.05(1)(a), (b), and (c) and 494.05(2), F.S. (1985) and that his mortgage broker's license be revoked. DONE and RECOMMENDED this 21st day of April, 1988, in Tallahassee, Florida. MARY CLARK Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 21st day of April, 1988.
The Issue The general issue to be resolved in this proceeding concerns the entitlement of the organizers of the C&L Bank of Blountstown and the Calhoun State Bank for authorization to organize their respective corporations for the purpose of conducting general banking business in Calhoun County, Florida. See Section 658.19, Florida Statutes. The standards by which the applicants' entitlement to the authority sought is to be measured are set forth in Section 658.21, Florida Statutes, and Chapter 3C-10, Florida Administrative Code.
Findings Of Fact Procedural Background On February 18, 1986, the organizers of the applicant C&L Bank of Blountstown (C&L) submitted to the Department of Banking and Finance (Department) an application, pursuant to Section 658.19, Florida Statutes, for authority to organize a corporation for the purpose of conducting a general banking business in Calhoun County, Florida. On April 11, 1986, the organizers of the Calhoun State Bank (Calhoun State) submitted an application for authority to organize a corporation for the same purpose in Calhoun County, Florida. Notice of receipt of the application of the C&L Bank of Blountstown (C&L) was published in the Florida Administrative Weekly on February 28, 1986, under the name "C&L Bank of Blountstown." Notice of receipt of the application of the Calhoun State Bank (Calhoun) was published in the Florida Administrative Weekly on April 25, 1986, under the name "Calhoun State Bank." A Petition for Leave to Become a Party to the Proceedings was filed by the applicant Calhoun State Bank, on or about May 8, 1986, and an Amended Petition for Leave to Become Party was filed by Calhoun on or about May 14, 1986. The Amended Petition for Calhoun contained a request that the applications of both the Calhoun State Bank and the C&L Bank of Blountstown be considered concurrently by the Department and the Hearing Officer. The Amended Petition contained objections to the granting of the application of the C&L Bank of Blountstown on the following grounds: "The proposed C&L Bank of Blountstown would be viewed in Blountstown as a branch of the existing C&L Bank of Bristol, which is located in Bristol, Florida, and the similarity of manage- ment and directorship of the proposed C&L Bank of Blountstown and the C&L Bank of Bristol, would have an extremely adverse effect on the proposed Calhoun State Bank. The proposed C&L Bank of Blountstown would be in possible violation of laws and regulations, both State and federal, which prohibit and/or discourage inter- locking directorships and officers in certain banks, given the proximity of the C&L Bank of Bristol and the proposed C&L Bank of Blountstown and the similarity of identity of management and directorship of the existing bank and the proposed bank." The proposed directors of the C&L Bank of Blountstown then filed a Petition for Public Hearing and Notice of Intention to Appear on or about May 15, 1986. That petition contained the following objections to the granting of Calhoun State Bank's application: "The current economic conditions and growth potential of the proposed primary service area for the C&L Bank of Blountstown was insufficient to support both the C&L Bank of Blountstown and the proposed Calhoun State Bank. The proposed directors of the Calhoun State Bank were lacking the direct banking experience required by law to ensure successful operation of the Calhoun State Bank." The application of the C&L Bank of Blountstown was deemed substantially complete on or about March 12, 1986, and the application of the Calhoun State Bank was deemed substantially complete on May 27, 1986. It was supplemented by additional information requested by the Department on or about July 1, 1986. On or about March 21, 1986, Ben and Faye Eubanks, shareholders of the C&L Bank of Bristol, filed a Petition for Public Hearing with the Department in opposition to the C&L application and on March 24 filed a "Petition for Leave to Become Party to Proceedings..." directed to the C&L application objecting to it on grounds that a grant of it would adversely affect the financial posture of the C&L Bank of Bristol. A Petition for Public Hearing directed to the Calhoun State Bank application was also filed by the Eubanks on or about May 16, 1986. That petition contained an objection to the granting of the application of Calhoun State Bank on similar grounds. On June 4, 1986, the Hearing Officer granted Calhoun State Bank leave to intervene in the C&L proceeding. On June 18, 1986, the Eubanks filed their Notice of Withdrawal of the application for public hearing in the C&L proceeding. On August 15, 1986, the Hearing Officer consolidated the C&L and Calhoun proceedings for final hearing inasmuch as the applications had been filed within 60 days of each other as envisioned by Rule 3C- 9.02(8), Florida Administrative Code. On or about August 26, 1986, the Eubanks withdrew their Petition for Public Hearing in the Calhoun State Bank proceeding. The C&L proceeding had originally been noticed for hearing to be held on July 14, 1986. On or about July 11, 1986, the parties consented to a Motion for Continuance which was granted. The consolidated proceedings were rescheduled for hearing for September 8 through September 11, 1986, in Tallahassee, Florida. The cause came on for hearing as noticed and the trial proceeded for four days. Notice of the hearing was published by the C&L Bank of Blountstown within the time period prescribed by rule in the Calhoun County Record, a newspaper of general circulation. The applicant Calhoun State Bank failed to effect publication of Notice of Hearing in the Calhoun County Record, so that a supplemental hearing became necessary. The parties agreed to a continued proceeding to give them an opportunity to renotice the hearing so as to obviate Calhoun's failure to publish notice and C&L's technically deficient notice. C&L and Calhoun accordingly republished a combined Notice of Continued Public Hearing in compliance with the rules of the Department in the Calhoun County Record on October 2, 1986, and filed the evidence thereof in these proceedings. On October 20, 1986, the final hearing was reconvened, at which time the complete trial transcript of the previous public hearing was made available for review, comment and testimony by members of the general public. No members of the public appeared at this properly noticed hearing and the hearing was concluded. Demographic, Economic and Financial Service Data Applicable to Both Applications Both applicants have proposed primary service areas for their respective proposed banking institutions encompassing Calhoun County. Population trends for that proposed service area (PSA) and, comparatively, for the State of Florida, are as follows: Area 1970 1980 1984 Average Annual Percent Change 1970-1980/1970-1984 Florida 6,791,418 9,739,992 10,930,389 3.67 3.45 County (Calhoun) 7,624 9,294 9,325 2.00 1.45 Unincorporated County 4,817 6,184 6,186 2.53 1.78 PSA 7,624 9,294 9,325 2.00 1.45 Municipalities Altha 423 478 479 1.23 0.89 Blountstown 2,384 2,632 2,678 0.99 0.83 10. Both the State of Florida at large and Calhoun County are comparable in age grouping, while there is a significant difference at the beginning and end of the age grouping scale between Liberty County and the State, as shown by the following table: Age Grouping Area 0-14 15-24 25-44 45-64 65 and over State of Fla. 2,090,624 1,675,790 3,091,078 2,339,183 2,091,257 Percent of Total: 18. 5 14.8 27.4 20.7 18.5 Calhoun County 2,115 1,566 2,297 1,992 1,536 Percent of Total: 22.2 16.5 24.2 21.0 16.2 Liberty County 1,180 764 1,132 897 557 Percent of Total: 26.0 16.9 25.0 19.8 12.3 The number of households in Calhoun County has increased at a rate comparable to that of the State of Florida at large and per capita personal income trends for Calhoun and Liberty Counties and the State of Florida are listed below: PER CAPITA PERSONAL INCOME Compound Annual 1979 1980 1981 1982 1984 Change County Calhoun $4,768 $5,066 $6,082 $6,362 $ 6,374 8.05 percent State $8,257 $9,245 $10,368 $10,927 $11,593 9.12 percent Liberty County $4,759 $5,339 $6,274 $6,794 $7,289 8.90 percent Calhoun County was demonstrated to have a higher unemployment rate than that of the State of Florida at large while Liberty County has a lower unemployment rate than Calhoun but higher than that of the State as a whole as depicted in the following table: ANNUAL UNEMPLOYMENT RATES 1980 1981 1982 1983 1984 County (Calhoun): 9.4 percent 12.1 percent 17.5 percent 17.6 percent 12.9 percent State: 5.9 percent 6.8 percent 8.2 percent 8.6 percent 6.3 percent Liberty County: 6.3 percent 8.1 percent 9.6 percent 9.9 percent 8.3 percent Thus, the population of Calhoun County stood at 9,294 at the time of the 1980 census and was estimated by the University of Florida, in its data in evidence, to be approximately 9,506 persons in 1985. This represents a 0.45 percent average annual growth rate, in comparison to the average annual growth rate for the State of Florida of 2.98 percent over that same time period. The mid-range projection for Calhoun County population derived from this data for 1990 is 9,800, which represents a 0.63 percent average annual growth rate in comparison to the projected State of Florida average annual growth rate of 2.22 percent. Thus, while the Florida growth rate has declined somewhat as projected for 1990, the Calhoun County growth rate, while small, has increased somewhat in the 1990 projection in evidence. This trend belies the prediction made by Dr. Gaines, Calhoun State Bank's expert witness, to the effect that the Calhoun County population will remain static between the years 1990 and the year 2000. It seems highly unlikely that Calhoun County will experience no population growth in that entire decade and to that extent Dr. Gaines' testimony is not credited. In a similar vein, it is noted that Dr. Gaines found that Calhoun County's population growth from 1970-1980 largely resulted from net migration of persons into the County, to the extent of 73.53 percent of the County's growth during that decade, and that no net migration had occurred during the years 1980-1986. His figures show that 91.97 percent of the State of Florida's population growth in the decade 1970-1980 resulted from migration which rate declined to 88.89 percent for the years 1980-1986. If that be the case, it is difficult to conclude that, although the migration rate may have declined in the last six years into Calhoun County, that, as Dr. Gaines opined, no migration into the County resulted. Thus, to this extent also, Dr. Gaines' findings are not credited and are contrary to the preponderant competent, substantial evidence of record. It can thus be seen that the population of Calhoun County currently is approximately twice that of Liberty County or 9,506 residents, as opposed to 4,530 residents for Liberty County. Per capita personal income in Calhoun County was shown to be $7,023 as opposed to $12,773 for the State of Florida at large. The unemployment rate for Calhoun County at the end of 1985 was 11.4 percent compared to the Statewide average rate of 6 percent. As can be seen from the above data, Liberty County's unemployment rate is somewhat lower than Calhoun's, while higher than the State of Florida average. Calhoun County has not shown a pattern of rapid growth in the past or present, but it has demonstrated a stable, steady and somewhat increasing growth pattern. No projected downturn in growth is expected. These economic indicators, considered in conjunction with the rather large number of deposits enjoyed by the sole commercial bank presently operating in Calhoun County, as compared to other commercial banks in Florida operating in similar market areas, reveal that there is room in Calhoun County for a new financial institution based upon these indicators alone. Calhoun County is presently served by three financial institutions, as well as the Calhoun-Liberty County Credit Union, whose membership is made up of County employees. There are two branch offices of North Carolina National Bank of Florida (NCNB), a wholly-owned subsidiary of North Carolina National Bank, which operates hundreds of branch offices in Florida and the southeastern United States. Those two branch offices are located in Blountstown and Altha, which lies approximately 10 miles to the north of Blountstown in Calhoun County. The other institution is a branch office of First Federal Savings and Loan Association of Marianna. Calhoun County had a population per financial institution office of 3,188 during 1985-86, ranking it 29th among the 67 Florida counties. If one additional financial institution was added in the County, its ranking would drop to 44th out of 67 counties. If two additional banking institutions were added to Calhoun County, its ranking would drop to 56. The NCNB branch office in Blountstown is the only full service banking institution in Calhoun County. This office had $34.4 million in deposits from individuals, partnerships and corporations as of September 30, 1985. This figure represents a decline in deposits of $1.5 million in the one year since September 30, 1984. It is unique for a commercial bank with a deposit base on the order of $34 million to have no direct competitor in its primary service area. NCNB acquired its present office in Blountstown when it acquired the Ellis Bank Corporation in 1984 and with it the former Ellis Bank of Blountstown. After that acquisition, the level of service continued to fall as it had during the last several years of the Ellis Bank's tenure in Blountstown. Despite testimony that the level of service of NCNB has improved somewhat since the initial merger period, it is clear that private and commercial customers of NCNB feel a high level of dissatisfaction with that institution, as evidenced by the survey conducted by Dr. Gaines. Twenty percent of the NCNB residential (noncommercial) customers surveyed in the Blountstown and Bristol areas were unable to name any strengths of that institution in contrast to an eleven percent average of customers for other institutions surveyed in and around the proposed PSA. Seventy percent of NCNB customers surveyed were able to cite specific, unaided examples of weaknesses in the institution, the major one being out-of-town ownership and control. Concerning overall quality of service at NCNB, 50 percent of the residential customers indicated that quality of service had declined since NCNB's acquisition of the Ellis Bank. Only 4 percent felt that quality of service had improved in that time period. Commercial customers of NCNB surveyed were also critical of that institution. Seventeen percent of them were unable to name any strengths. Eighty-four percent were able to name specific examples of weaknesses in NCNB. Sixty-five percent of the commercial customers surveyed felt that quality of service had decreased since the purchase of Ellis Bank by NCNB. Although the financial soundness of the NCNB office in Blountstown (as opposed to profitability) would not be severely affected if deposits were reduced by $20 million with the advent of one or more competing new banks, such a dramatic decrease is not initially projected. Both of the applicants project that they would be profitable at deposit levels substantially less that an aggregate of $20 million. The organizers of the applicant Calhoun State Bank project that they will have deposits of $3,082,000 by the end of their first year of operation, with a before-tax profit of $87,000 during the first year. The C&L Bank of Blountstown applicant projects deposits of approximately $4,250,000 and a before-tax profit of $14,024 by the end of its first year of operation. The C&L Bank of Bristol has a significant customer base in Calhoun County, with approximately $1.5 million in deposits coming from former customers of NCNB. Approximately $2,000,000 of Bristol's time deposits are held by Calhoun County depositors and approximately $3.5 million of its loans are to Calhoun County residential and commercial borrowers. In view of the likely close name identification of the applicant C&L Bank of Blountstown with the present C&L Bank of Bristol, a substantial number of the Blountstown and Calhoun residents who presently bank with C&L of Bristol would likely change their deposits and other banking business to the C&L Bank of Blountstown if it were authorized. Thus, a significant amount of the deposits to be attracted by C&L Bank of Blountstown would come from present Calhoun County customers of the C&L Bank of Bristol. This factor, coupled with the C&L Bank of Blountstown being able to attract a reasonable share of the normal growth of the deposit base in Calhoun County and Blountstown, as would Calhoun State Bank, coupled with the large size of the NCNB branch in Blountstown, indicates that although substantial deposits would be garnered by either of the proposed banks, from NCNB, the safety and soundness of that institution would not be placed at risk by the authorization of a new bank in Calhoun County. Nevertheless the testimony and evidence establish that a significant number of depositors in Calhoun County will switch their deposits from the NCNB branches to any new bank or banks authorized in Calhoun County. The publicly perceived deficiencies in service by NCNB involving its out-of-town management and lack of local control and decision-making are significant. A significant diversion of both future potential depositors and present NCNB depositors will occur with the advent of any new bank. First Federal Savings and Loan Association's branch in Blountstown offers only limited services allowed a savings and loan institution. It does not offer checking accounts or commercial loans. Some of its deposits will transfer to either proposed bank, if authorized, because of customer preference for an institution offering a full range of banking services. The Calhoun- Liberty County Employees' Credit Union is a fairly large institution, but is limited in usage to County employees. Some of these potential bank customers will move their accounts from the Credit Union to either C&L or Calhoun State because of the preference for the full services offered by a bank. This is less likely to occur with the customers of both First Federal Savings & Loan Association and the Credit Union if NCNB remains the only full service commercial banking alternative for the above- mentioned reasons concerning community perception of deficient service at NCNB. Primary Service Areas Both applicants allege that their primary service areas will be Calhoun County. The evidence clearly establishes that any new bank chartered to serve Blountstown and Calhoun County would draw 75 percent of its deposits from that County. Calhoun County is twice as large as Liberty County in population, with 9,506 residents as opposed to 4,530 residents in Liberty County. NCNB, which represents 73 percent of all bank deposits derived from Calhoun County obtains 85 percent of its total deposits from that County. Dr. Gaines, Calhoun State Bank's expert witness, performed a survey of bank customers in Blountstown and Bristol and determined that only 8 percent of the Blountstown population sampled cross over the State Route 20 two-lane road and bridge over the Apalachicola River to bank at the C&L Bank of Bristol. Only 24 percent of NCNB customers actually sampled were residents of Bristol. Although the C&L Bank of Bristol derives approximately 26 percent of its total deposit base from Calhoun County deposits, the vast majority of these deposits were represented by public funds and certificates of deposit or other time deposits greater than $100,000. The C&L Bank of Bristol currently enjoys only about 6 percent of Calhoun County's total deposits and 3-4 percent of that County's core deposits, which in turn represent only 3.5 percent of C&L Bank of Bristol's total core deposits; core deposits being deposits by residential and commercial customers. These factors reveal that, although the more densely populated area of Liberty County of Bristol and its immediate environs might be termed a "secondary service area" that, especially in view of the deposit source experience of NCNB, the primary service area of any bank locating in Blountstown and its vicinity will be Calhoun County, particularly Blountstown and the immediate surrounding area since that is the only significant population center in Calhoun County, which area would include Altha, some ten miles distant. C&L BANK OF BLOUNTSTOWN APPLICATION Reasonable Promise of Successful Operation Calhoun County is a sparsely populated area with residents and businesses engaged primarily in timber and other agricultural operations and the operation of small retail businesses. The County is not growing rapidly, as demonstrated by the above-found indicia of growth, but is expected to enjoy a consistent, steady growth in the reasonably foreseeable future. C&L's deposit base in Calhoun County will primarily consist of household and small business depositors and borrowers. C&L established that it will likely attract some $3,250,000 in deposits captured from existing financial institutions, chiefly NCNB, over a one to three year period after initiation of operations. Additionally, bank deposits in Calhoun County have recently been increasing at a rate of approximately $2.5 million per year and C&L expects to garner approximately $1,000,000 of this deposit growth each year. The deposit projections placed in evidence by C&L were shown to be conservative and reasonable, especially in view of the widespread customer dissatisfaction with NCNB for the reasons found above and which will, for at least the first one to three years of C&L's operation, result in a substantial capture of those present NCNB deposits. The projections of expected expenses and earnings contained in the schedules filed with C&L's application, and in evidence, were shown to be conservative and reasonable and are accepted insofar as they reveal the likely operational experience of C&L in competing with those institutions already operating in the service area. The location of the proposed C&L Bank will offer a greater convenience to potential bank customers in Calhoun County who seek an alternative to the NCNB full service bank, the only other feasible alternative at the present time being the C&L Bank of Bristol. The C&L Bank of Blountstown will likely capture a substantial portion of the small amount of core deposit business of C&L of Bristol originating in Calhoun County because of the convenience to customers of having an additional bank in the primary service area, obviating the necessity of a six mile trip to Bristol for such customers. Dr. Heggestad established moreover, that C&L Bank of Bristol would only lose approximately $250,000 of its deposit base over a three year period to C&L of Blountstown. This diversion of deposits to C&L of Blountstown would in no way jeopardize C&L Bank of Bristol since such a loss of deposits would only reduce potential net profits by approximately $3,750, not a significant amount. Correspondingly, C&L of Bristol's loan volume derived from Calhoun County is approximately the same as its base of "core deposits" and is approximately 3 percent of the Calhoun County loan market. The loan volume of C&L of Bristol would also probably decrease in a rather insignificant amount with the granting of an application to either new bank proposed for Blountstown, based primarily on the convenience factor offered by C&L's being placed in the Blountstown-Calhoun primary service area, as an alternative to the NCNB full service bank and more easily accessible than C&L of Bristol. Capital Structure The capital structure of the C&L Bank of Blountstown is $1,000,000. $800,000 of this amount is stated, paid-in capital. $260,000 is represented by paid-in surplus and $40,000 will be represented by undivided profits. The C&L Bank of Blountstown will issue 100,000 shares of common stock at a par value of $8 per share. Stock ownership will not be widespread, rather approximately 90 percent of the stock will be owned or controlled by members of the Board of Directors and their immediate families in approximately the same ownership pattern prevailing with the C&L Bank of Bristol. The remaining 10 percent of the C&L Bank of Blountstown stock will be initially offered to the shareholders of the bank of Bristol who are not the organizers and/or directors of the C&L Bank of Blountstown. Any stock not so conveyed to the other shareholders of C&L Bank of Bristol will then be offered to the public at large. The proposed capital structure of the C&L Bank of Blountstown satisfies the requirements of Section 658.21(3), Florida Statutes, and Rule 3C-10.051(3)(c), Florida Administrative Code. Banking Site and Quarters The proposed C&L Bank of Blountstown has made arrangements to purchase a parcel of land approximately 191' x 381' located on the corner of Warren and Gaskin Streets in Blountstown, Florida. This location lies at the intersection of Highway 20 and Highway 71, which are the two major transportation arteries into the City of Blountstown. The site fronts on Warren Street, which will give street access on three sides of the property. C&L intends to purchase the land from John Morgan McClellan and has a current option to purchase the site. Mr. McClellan, who is one of the proposed directors, has agreed to sell the site to C&L for $150,000. An independent appraisal attached as Exhibit F to C&L's application establishes the fair market value of the site. The proposed building will contain 2,800 square feet of heated space, consisting of a lobby, two offices and a bookkeeping area. Adequate provision has been made for suitable quarters for the proposed bank which satisfies the requirements of Section 658.21(6), Florida Statutes, and Rule 3C- 10.051(3)(f), Florida Administrative Code, and the site has been specifically designated by street address in satisfaction of the requirement in Rule 3C-10.051(6)(A), Florida Administrative Code. Officers and Directors The proposed directors and officers of C&L Bank of Blountstown all reside or have businesses in or near the PSA except for Jerry M. Smith, who is a native of the Blountstown area. The proposed directors and officers have extensive general business and banking experience in the PSA. The proposed directors have managed the C&L Bank of Bristol since its inception and during their tenure in that capacity that bank has enjoyed a consistent growth in deposits, generally favorable loan to deposit ratios and a steady increase in profitability. Under their management, the C&L Bank of Bristol has enjoyed an increased stock valuation at an average rate of 17 percent per year. The proposed officers and directors of C&L Bank of Blountstown are as follows: A. Gerald Cayson is a lifelong resident of Blountstown and has successfully operated a timber and cattle farming business owned with his father and brother in Calhoun County. He served for twenty years as United States Postmaster for the City of Blountstown. He was an original organizer and a current director and vice-chairman of the C&L Bank of Bristol. He has also served on the Board of Directors of the First National Bank of Alachua since 1971. Douglas R. Davis, Jr. is a lifelong resident of Calhoun County and president and co-owner of a pharmacy and a jewelry store in Blountstown. He was an original organizer of C&L Bank of Bristol and currently serves on its executive and loan committees. Michael R. James, an organizer and proposed director of the C&L Bank of Blountstown is also its proposed Chief Executive Officer. He is a resident of Bristol and currently is the Chief Executive Officer of the C&L Bank of Bristol and has served in that position for a number of years. He is chairman of its loan committee and a member of its executive committee. Previously he was employed as a State banking examiner and as a vice-president and branch manager of another commercial bank. John Morgan McClellan co-owned and operated a building supply business in Blountstown for approximately 21 years and currently is a real estate broker in Calhoun County. He was an original organizer of the C&L Bank of Bristol and currently serves on its Board of Directors. Additionally, he has served on the Board of Directors of the First Federal Savings and Loan Association, Marianna, Florida, for the past ten years. Jerry M. Smith is currently president and chairman of the Board of Directors of the First National Bank of Alachua. He is also chairman of the board of the First Alachua Banking Corporation as well as C&L Bank of Bristol. He was an original organizer of the C&L Bank of Bristol and also serves as chairman of its executive committee. R. Malone Peddie formerly owned and operated a swimming pool construction business in north Florida. He is currently president and chairman of the board of 0PM, Inc. and LBJ, Inc. which are companies engaged in real estate investment. He, too, was an original organizer of the C&L Bank of Bristol and serves as chairman of its audit committee. Gordon P. Revell is a lifelong resident of Bristol and is currently principal of the Bristol Elementary School. He is chairman of the board of directors of Revel and Revell Corporation which owns and operates a 110 bed long-term care facility in Liberty County. He was also an original organizer of the C&L Bank of Bristol and serves on its loan committee. James W. Weaver, Jr. is a lifelong resident of Liberty County and is currently president of Weaver Oil Company in Blountstown. He and his father co-own a convenience food store chain in northern Florida. He was an original organizer of C&L Bank of Bristol and serves on its loan committee. James W. Weaver, Sr. is co-owner of Weaver Oil Company, Inc. and is the former chairman of the board of C&L Bank of Bristol. He served in that capacity from 1975-1979 and currently serves on its audit committee. Mr. Michael James, who is currently president of the C&L Bank of Bristol, is proposed to be the president of the C&L Bank of Blountstown. Sufficient substantial evidence has been presented to establish the qualifications and capabilities of Mr. James to successfully serve the applicant bank in that position. The organizers, proposed directors and officers of the applicant C&L Bank of Blountstown have been established to have reputations in their communities for honesty and integrity. All have significant active business experience so as to establish their capabilities for responsible dealing in financial matters and their abilities to make sound investment and business decisions. They have been demonstrated to have a sufficient understanding of financial affairs. A number of members of the proposed Board of Directors including the Chief Executive Officer have direct banking experience related to establishment of a new bank in the same type of market. Thus, it has been established that the organizers, proposed directors and officers of the proposed C&L Bank of Blountstown meet the requirements of Section 658.21(3), Florida Statutes, and Rule 3C-10.051(3)(c), Florida Administrative Code. Additionally, three of the ten organizers and directors of the proposed C&L Bank of Blountstown are Calhoun County residents and all represent diverse occupational and business interests, in satisfaction of Rule 3C-10.051(3)(D)(4), Florida Administrative Code. Proposed Name The organizers of C&L Bank of Blountstown have proposed two potential names for the new bank, one being "C&L Bank of Blountstown" and the other being "Bank of Blountstown." C&L prefers to use the name "C&L Bank of Blountstown" and no objection to the use of that name is of record. The use of the name C&L Bank of Blountstown will likely cause greater public acceptance of the new bank and enhance to some extent its ability to attract depositors because of the widespread customer satisfaction and name recognition attributable to the C&L Bank of Bristol. Expert Testimony C&L offered Dr. Arnold A. Heggestad as an expert in general banking, bank finance and economics, as well as banking regulation. It was thus established that there are prospects for moderate but steady growth in the economy of the PSA as that relates to population, average income, sales of goods and Services and concomitantly, bank deposits. This moderate growth, coupled with the likely capture of some deposits from NCNB as well as the small percentage of Calhoun County deposits presently enjoyed by the C&L Bank of Bristol, shows that Calhoun County is sufficiently strong economically to support an additional bank. There will be a significant convenience and advantage for the general public in the Calhoun County community served by the entry of C&L into that market. This is especially true in view of the widespread dissatisfaction with NCNB which occupies an essentially monopolistic position in that market and for the further reason that those depositors in Calhoun County now banking at C&L of Bristol will likely show a propensity to move their banking business to C&L of Blountstown for reasons of convenience and its close name identification with the Bristol Bank, which enjoys a high customer satisfaction rating. It was also established through Dr. Heggestad's testimony that the C&L Bank of Blountstown and the C&L Bank of Bristol will not substantially compete with each other since their service areas only overlap in an insignificant way as that is measured by the low percentage of the Bristol bank's core deposits derived from Calhoun County and the fact that Blountstown and Calhoun County residents would be less likely to journey to Bristol to do their banking with the advent of any new bank in Blountstown, to the extent that those customers choose not to bank at NCNB. The overlapping directorships of the C&L Bank of Bristol and the proposed C&L Bank of Blountstown will not serve to significantly restrict competition since, as found above, the two PSAs do not significantly overlap and the Bristol bank is a relatively minor participant in the Calhoun County banking market, especially for core deposits from residential and private commercial customers. The overlapping directorships of these two banks will not create a fiduciary conflict for the directors as to the interests of the respective bodies of shareholders since both institutions will be owned and controlled by the same people in fairly equal amounts. Because of the substantial identity of ownership there would be no incentive for one Board of Directors, in its policies, to do competitive harm to the other bank. The organizers and directors of the C&L Bank of Blountstown do not propose to inaugurate banking policies which would serve to undercut the operations and to d& competitive harm to the C&L Bank of Bristol and in fulfilling their fiduciary duties to shareholders they are unlikely to encounter conflicts of interest in this regard since the two banks will not be competing in any significant way in the same PSA. Dr. Heggestad additionally established that C&L would attract approximately $1,000,000 a year from new deposit growth in the area and over a three year period would attract approximately $3.25 million from existing financial institutions in the market, primarily from NCNB, due to its high level of customer dissatisfaction. C&L can reasonably expect to attract about $8,000,000 in assets based upon the projected deposit growth in the area, together with its capture of a substantial amount of the NCNB deposits, by the end of its third year. In its first year of operation, C&L will show a relatively small after-tax loss. In the second year it should earn a very modest profit and by the third year will earn a profit of approximately $47,000, according to Dr. Heggestad's calculations and projections, which are accepted. In the context of the C&L Bank of Blountstown competing with the NCNB, and the other existing institutions, it has been established that the projection of total deposits at the end of each of the first three years is reasonable and the projected statement of earnings over the three year period, as well as the deposit base, is reasonable. The capital structure of C&L outlined in its application is ample and sufficient to engage successfully in the banking business at the outset of operations and the proposed bank should earn a positive rate of return by its second year of operation and sustain an adequate capital structure. There is a reasonable promise that C&L will be a successful competitor in the Calhoun County market with NCNB and those two banks should be able to sustain themselves at a profitable return on equity. C&L Bank of Blountstown will have success in penetrating the Calhoun County market given the peculiar circumstance of its being occupied to the extent of 73 percent of total deposits by NCNB, the widespread dissatisfaction with NCNB, and the convenience and name recognition factors which will attract present Calhoun customers of C&L of Bristol. Thus, the C&L Bank of Blountstown would be a viable institution if granted a charter. NCNB would remain a stable Calhoun County bank, even though its deposit base will shrink somewhat as the result of the advent of C&L. The deposits and earnings projections of C&L are reasonably based on current economic and demographic conditions and projected growth potential in the PSA. Because it is important to evaluate the ability and experience of a bank's organizers in order to predict its likelihood of success, Dr. Heggestad made an analysis of the past performance of the C&L Bank of Bristol. C&L of Bristol has been in operation approximately eleven years and under the same management which proposes to open and manage the C&L Bank of Blountstown. Dr. Heggestad determined, based upon a comparative analysis of other banking institutions of comparable size in Florida, that the C&L Bank of Bristol has performed quite well in light of the market in which it operates, which is characterized by rather modest growth in the various economic indicators alluded to above. Its costs of doing business, including the amount spent on director's fees, were shown to be well below the average bank in its class. In evaluating the likelihood of successful operation of C&L, Dr. Heggestad also considered the performance of C&L of Bristol as compared to the performance of NCNB, its closest and largest competitor. During the period of time in question, 1978-1984, the performance of NCNB has declined and the performance of C&L of Bristol has improved. The performance of C&L of Bristol surpassed NCNB through the year 1984, thereafter reports for NCNB as an independent bank are no longer available because it became a branch of NCNB of Florida in October of 1985. Dr. George Gaines, testifying as an expert witness for Calhoun State Bank, acknowledged that in his market analysis of all financial institutions located in Blountstown and Bristol he found that the C&L Bank of Bristol had the best rating in the group and that the general satisfaction of residential and commercial customers regarding C&L of Bristol was very high. It is, therefore, reasonable to conclude that the same management group which has operated C&L of Bristol successfully for more than ten years would be successfully able to compete in the Calhoun County banking market by opening the proposed new C&L Bank of Blountstown. This is especially true since it has been established that any new bank opening in Calhoun County would likely attract as much as $1,000,000 of deposits from NCNB the first year of operation due to the customer preference factors mentioned above and this, coupled with the above-referenced name recognition and convenience factors, which will allow it to capture C&L of Bristol deposits from Calhoun County and the successful record of its management group, renders it likely that C&L of Blountstown would be best able to successfully compete in the Calhoun County market. In this connection, it has not been shown that C&L would capture all of the Bristol bank's deposit and loan volume from Calhoun County. In fact, C&L Bank of Bristol would lose only approximately $250,000 of its deposit base over the first three years of operation of C&L of Blountstown, which would result in an insignificant decline in its profitability. Thus, in actuality the C&L Bank of Bristol will not be a substantial competitor with any new bank, or with NCNB, in the PSA. The bulk of the deposits enjoyed by the Bristol bank from the PSA consist of public funds and time deposits of $100,000 or more which are less likely to be shifted to a new bank entering the Calhoun County market because such depositors are less likely to be influenced by the convenience and name recognition factors and loan policy factors discussed above. In summary, it has been demonstrated without question that the C&L Bank of Blountstown would be able to successfully compete with existing institutions in the Calhoun County market. In fact there is a high probability that it would be best able to compete against the existing Calhoun County banking institutions because of the advantages found above. CALHOUN STATE BANK APPLICATION Calhoun has represented in its application and in its evidence at hearing that its primary service area would consist of Calhoun County, Florida. Calhoun's witnesses established that they reasonably expect that any new financial institution in that County could expect to draw 75 percent of its deposit base from Calhoun County residents and businesses. In light of this and the findings made above, it is determined that the Primary Service Area of Calhoun State Bank would be Calhoun County and particularly the immediate vicinity of Blountstown and Altha. See Rule 3C-10.051(12), Florida Administrative Code. Proposed Directors and Officers The proposed directors of Calhoun State Bank are D. Finlay Corbin, Roy H. Golden, M. Brooks Hayes, B. Hayes Leonard, T. Michael Tucker, Jr., J. Max Waldorf and Glenn Terrell Warren. These proposed directors, with the exception of Roy H. Golden and M. Brooks Hayes, have had some direct banking experience. Concerning the business experience of the proposed directors and the diversity of that experience, it has been shown that M. Brooks Hayes has owned and managed timber lands in Calhoun County in excess of 30 years. Glenn T. Warren is engaged in the business of contracting and farming and as a director of the Ellis Bank and NCNB from 1978-1986. B. Hayes Leonard also served as a member of the advisory board of NCNB and as a director of its predecessor, Ellis Bank of Blountstown, from 1978-1986. He is active in the timber production business. D. Finlay Corbin also served as a member of the advisory board of NCNB and a director of the Ellis Bank of Blountstown for the same period of time. Mr. Corbin is a practicing dentist in Blountstown. J. Maxwell Waldorf has served in the same capacity on the board of the Ellis Bank and NCNB. Mr. Waldorf is from Altha, Florida, and owns and operates a hardware store as well as engaging in farming operations. Mr. Roy H. Golden is a pharmacist in Blountstown and has been an active business man in Calhoun County for over 40 years. Mr. T. Michael Tucker also served as a member of the Board of Directors of Ellis Bank and the advisory board of NCNB from 1983 until April 7, 1986. The organizers of Calhoun State Bank expect either Mr. Bowers Sandusky, the current president of the NCNB of Blountstown, or Mr. W. Steven Thames, currently a vice president of the Citizen State Bank of Marianna, to be Calhoun State's president. Both men have significant banking experience. The organizers and proposed directors, as well as the proposed officers of the applicant Calhoun State Bank, have reputations for honesty and integrity. All the organizers and directors have significant experience in business and financial affairs and represent diverse occupational and business interests. At least one member of the proposed Board of Directors, as well as each of the proposed Chief Executive Officers, has direct banking experience. Thus, the proposed directors and officers of Calhoun State Bank meet the minimum requirements of Sections 658.21(4) and 658.33, Florida Statutes, and Rule 3C- 10.051(3)(d), Florida Administrative Code. Corporate Name and Bank Site The corporate name of the proposed "Calhoun State Bank" is reserved with the Department of State, which satisfies the requirements of Subsection 658.21(5), Florida Statutes, and Subsection 3C-10.051(3)(E), Florida Administrative Code. The proposed charter site for the Calhoun State Bank is a parcel of land of approximately 3 acres located at 611 West Central Avenue, Blountstown, Florida. The proposed bank will occupy a building, to be constructed, which will be in excess of 2,500 square feet. The Calhoun State Bank organizers have purchased the lot for $100,000.00. Provision has been made for suitable quarters for the proposed Calhoun State Bank, which satisfies the requirements of Subsection 658.21(6), Florida Statutes, and Subsection 3C- 10.051(3)(F), Florida Administrative Code. The proposed site has been specifically designated by street address, which satisfies Subsection 3C- 10.051(6)(A), Florida Administrative Code. Capital Structure The capital structure of the proposed Calhoun State Bank would total one million dollars as follow: $800,000.00 to stated capital, $160,000.00 to paid up surplus, and $40,000.00 to undivided profits. The Calhoun State Bank intends to issue 100,000 shares of common stock with par value of $8.00 per share and a selling price of $10.00 per share plus a .25 cent per share organizational expense fee. The proposed capital for the Calhoun State Bank will be adequate to enable it to provide necessary services to meet the needs of prospective customers. The proposed capital structure of the Calhoun State Bank satisfies the requirements of Subsection 658.21(3), Florida Statutes, and Subsection 3C-10.051(3)(c), Florida Administrative Code. There will be a wide distribution of stock ownership, all of which will be within the PSA. The organizers have disclosed the anticipated amount of stock each will retain. The Calhoun State Bank has satisfied the requirements of Subsection 3C-10.051(4), Florida Administrative Code, as well. Projected Operating Experience The applicant Calhoun State Bank presented Dr. George Gaines and Mr. Bowers Sandusky, who testified concerning the projected deposits, income, expenses and the likely operational viability of the proposed bank as a competitor to NCNB. It is thus established that Calhoun State Bank is likely to sustain a loss of $26,000 its first year of operation and a profit in the second and third years of operation of $52,000 and $91,000, respectively. The projection of total deposits for the first three years of operation, as well as the earning statement and the projection that Calhoun State Bank would earn a positive rate of return by the end of the third year and could sustain an adequate capital structure, were shown to be reasonable insofar as it postulates Calhoun State Bank's likely operating experience with only NCNB, the Savings and Loan Institution and the Credit Union as its competitors. Calhoun State Bank's three year projections, like C&L Bank of Blountstown's, relate only to the projected advent of one new bank for the Blountstown area as a competitor, primarily with NCNB. The projected operating experience in the above particulars for either applicant bank with the other applicant bank as a likewise chartered competitor, together with NCNB, has not been established in this record, although Dr. Gaines generally opined that he felt that NCNB as well as both applicant banks could survive in the Calhoun County market and could be profitable, although all three banks would be significantly smaller than the present size of NCNB. That opinion is not credited in light of the evidence in support of the findings made below on this subject. Probability of Success Both Dr. Heggestad and Dr. Gaines opined that a new bank in Blountstown, Florida, with prudent, sound banking practices and good management, would have a reasonable probability of being successful in competing with NCNB and could garner a significant share of the Calhoun County market for bank deposits and loans, given the peculiar circumstances of Calhoun County in having only one full service commercial bank in the PSA. The operating experience in terms of expected deposits, deposit growth, profitability and maintenance and growth of capital for either of the applicant banks, under the scenario envisioned by Dr. Gaines of two new banks competing with NCNB, has not been proven, however. Given the small size of the PSA from a demographic standpoint (9,506 population) together with the low growth rate of the PSA banking market, as measured by the above-referenced economic and demographic factors, it has not been proven that all three banks could remain sound depositories and lenders for Calhoun County area customers and remain profitable and otherwise financially viable competing in such a small market over a significant period of time. Accordingly, it must be determined which of the two applicant banks can more successfully penetrate the Calhoun County market in a successfully competitive way and serve the public convenience and advantage by becoming a strong and profitable financial institution alternative to NCNB as a stable depository for residents of the area, while attaining a sufficiently favorable loan to deposit ratio so as to adequately address the financial needs of potential customers in the PSA who may seek an alternative to the NCNB lending services. The above-named expert witnesses for both applicant banks acknowledge that a new bank in Calhoun County can successfully penetrate the market in the PSA involved, provided it possesses a prudent local Board of Directors familiar with sound banking practices and capable of competent day to day management. Thus, it is appropriate to examine the Boards of Directors and organizers of the two applicant banks to determine which is more likely to most successfully manage a new bank in the Blountstown market, so as to offer a safe, sound depository and lending institution which will grow in profitability and asset base so as to be able to accommodate the financing needs of the banking public in the PSA. In this connection, as found above, the proposed Board of Directors of Calhoun State Bank each served on the Board of Directors of the Ellis Bank of Blountstown from 1978 until it was acquired by NCNB in March 1984, with the exception of T. Michael Tucker. Mr. Tucker served as a member of the Ellis Board of Directors from 1983 until 1984 and each of the proposed directors served on the advisory board of NCNB, albeit with little decision-making autonomy, from the acquisition of the Ellis Bank in 1984 by NCNB until they all resigned on April 7, 1986. The Ellis Bank of Blountstown was a member of a bank holding company and not locally owned. During the time the Calhoun State organizers served on its board, there were two other board members from outside Calhoun County. One of these members was a representative of the Ellis Holding Company which owned the bank. This member traveled to Calhoun County to attend Board of Directors' meetings and, in conjunction with the Chief Executive Officer of Ellis Bank of Blountstown, made the investment decisions and decisions regarding pricing of loans for the Ellis Bank of Blountstown as a representative of the holding company. The Calhoun organizers who served on the Ellis Bank Board thereby acquired little expertise in the independent pricing of loans. The pricing of loans is a key element of the experience of a bank officer or director, as loan pricing is one of the most important tools used by a bank in competing with other banks. The Ellis Bank of Blountstown, during the time the Calhoun organizers served on its board, also received its instructions concerning potential investments for the bank directly from the principal shareholder in the Ellis Holding Company. Such decisions were not arrived at by the local Board of Directors. The Ellis Board of Directors did have significant autonomy, however, in making actual lending decisions to customers. This factor is of significance in evaluating the Ellis Bank's performance in Blountstown during the period when all but two of the Calhoun State Bank organizers served on its Board of Directors, because the Board of Directors of a banking institution by and large sets the institution's lending policy and other aspects of its operational philosophy. In evaluating the performance of the Ellis Bank, later the NCNB branch, with a view toward determining whether its former Board of Directors can most successfully manage a new bank in the Calhoun County market, such factors as return on assets, the ratio of net income to total capital, and the loan to deposit ratio should be considered. The return on assets reflects the ability of the bank's management to manage assets of the bank in order to maximize return on equity invested by shareholders and to allow the bank to adequately meet the financial needs of its customers. It was established that a one percent return on assets is considered a favorable operating ratio for a commercial bank. In this context the performance of the Ellis Bank of Blountstown during the period that the Calhoun directors or organizers served on its board exhibited a marked decline. In 1978, when the Calhoun organizers joined the Board of Directors, the Ellis Bank of Blountstown exhibited a quite favorable return on assets in excess of 2.3 percent. By 1984, when the Ellis Bank was acquired by NCNB, that performance had deteriorated to a level of 0.77 percent. From 1980 to 1984, the Ellis Bank's performance steadily declined from the aforementioned 2.3 percent to 1.52 percent in 1981; 1.41 percent in 1982; 0.98 percent in 1983; until the above mentioned level of 0.77 percent was reached in 1984. An additional performance factor which should be considered is the ratio of net income to total capital, which is a reflection of a bank's profitability and the measure of return realized on share holder equity. When the Calhoun organizers became members of the Ellis Bank's Board of Directors in 1978, the Bank exhibited a 30 percent profit after tax on its equity, which is a very favorable return. That performance level dropped sharply, however, so that by 1981 the bank showed a return of 22.3 percent. The ratio of net income to total capital dropped steadily until it stood at the level of approximately 13 percent in 1984. Perhaps the most significant performance factor to employ in evaluating the success of a bank's operations is its loan to deposit ratio. This factor demonstrates how well a bank services the needs of the community in which it operates since the primary business of a bank is to receive deposits and to make loans. The loan to deposit ratio reflects how well a bank is marketing its product in the community in terms of how much money it lends to enable consumers to meet their personal financial needs and to enable businesses to obtain debt capital for operation, expansion and other legitimate purposes, which, in turn, serves to expand the business base of a community upon which a bank depends for its deposit growth. The former Chief Executive Officer of Ellis Bank of Blountstown acknowledged that in a community such as Blountstown it would be normal to expect a loan to deposit ratio for a commercial bank operating in such a circumstance to be in the neighborhood of 70-75 percent. This witness also acknowledged that, as the Chief Executive Officer of the former Ellis Bank, he and the members of the Board of Directors, which included all but two of the present organizers of Calhoun State Bank, established local bank lending policies. Calhoun State Bank demonstrated that expected loan to deposit ratios for the years 1986-1989 will be 50 percent, 62 percent and 63 percent, respectively. These projected loan to deposit ratios, however, do not reflect the actual historical performance of the Ellis Bank of Blountstown experienced under the stewardship of the Calhoun State Bank organizers while they were in charge of its lending policies and decisions. In fact, from 1978- 1984, the Ellis Bank's loan to deposit ratio declined from a quite favorable level of 78.94 percent to a low level of 44.84 percent. The loan to deposit ratios for those years were as follows: 1978 - 78.94 percent; 1979 - 64.54 percent; 1980 - 63.16 percent; 1981 - 51.01 percent; 1982 - 52.70 percent; 1983 - 51.39 percent; and for 1984 a low of 44.84 percent. Thus, the Ellis Bank of Blountstown experienced, with the exception of a slight increase for 1982, a steady decline in this key determinative indicator of how well the bank used its assets in terms of lending out its deposits so as to earn interest income, as that reflects on profitability. The performance record of the Ellis Bank and its successor, NCNB, is reflected in the results of the customer satisfaction survey mentioned herein conducted by the Calhoun organizers. It was thus shown that 20 percent of the current NCNB customers were unable to name any strengths in that bank, and seventy percent of those surveyed named specific weaknesses in the institution, which was the worst performance rating in the survey. This high level of customer dissatisfaction may be reflected in the declining loan to deposit ratio experienced by Ellis and NCNB and to some extent the declining loan to deposit ratio may be a cause of much customer dissatisfaction. In this connection, Dr. Heggestad established that one of the primary reasons for customer dissatisfaction with the performance of NCNB was the low availability of loans. In any event, the banking institutions for which all but two of the Calhoun organizers served as Directors or advisory board members from 1978-1986, and from whence would likely come Calhoun's Chief Executive Officer, received the highest level of public criticism of the financial institutions surveyed in the area, including the Bank of Bristol, from which the organizers of the C&L, the competing applicant, obtained their banking experience and performance record. Mr. Steven Thames, one of the proposed Chief Executive Officers for the Calhoun State Bank, did not testify in this proceeding, however, the evidence of record establishes his qualifications as adequate to serve as Chief Executive Officer of a banking institution. Mr. Thames, however, has not served as the Chief Executive Officer of any financial institution in the past and the evidence did not reflect that he has served in any official capacity with a de novo bank. Mr. Michael James, the proposed Chief Executive Officer for C&L Bank of Blountstown, on the other hand, has served as a Chief Executive Officer for approximately ten years with the C&L Bank of Bristol and further that experience involved the organization and operation of a newly chartered bank from its initial capitalization and opening through approximately ten years of generally consistent improvement in terms of growth of deposits, loan to deposit ratio, return on equity and profitability. Mr. Bowers Sandusky has served as the Chief Executive Officer of Ellis Bank of Blountstown from 1972-1984. In 1984, when that bank was acquired by NCNB, Mr. Sandusky continued to serve as City Executive for NCNB in Blountstown. Up until the 1984 acquisition, Mr. Sandusky and the members of the Board of the Ellis Bank of Blountstown established the investment and lending policies at the Ellis facility. Mr. Sandusky acknowledged that he and the Ellis Board of Directors had a large amount of local autonomy in terms of investment and lending decisions. In conjunction with that circumstance from 1978, at which point the Calhoun organizers joined the management of the Ellis Bank, through 1984, that facility did not perform well in terms of the above found factors regarding banking performance. Additionally, Mr. Sandusky on two occasions has assisted proposed bank charter applicants who sought to establish competing institutions during the time he was serving as Chief Executive Officer of Ellis Bank and the NCNB Branch. Mr. Sandusky acknowledged that NCNB would lose as much as $1,000,000 in deposits by the end of the first year if a new bank is approved for Blountstown, which would affect his profitability significantly. Despite that fact Mr. Sandusky has made no change in his bank's officer call program or other efforts in the face of the potential advent of a new bank in Blountstown in an effort to forestall a continued decline in his bank's financial strength and profitability. This is especially significant in light of the fact that NCNB enjoys as much as 85 percent of the total deposits from Calhoun County which indicates a substantial likelihood that any new bank entering the presently substantially monopolistic market in that County will attract a very substantial percentage of those deposits. The C&L Bank of Bristol, on the other hand, has performed quite well for a bank of its size in the type of banking market involved herein characterized by very modest growth. It has fairly consistently improved its financial strength and profitability in terms of the various indicia of banking performance discussed above with regard to the Ellis Bank and its successor NCNB. Because Dr. Heggestad found that the probable success of a new bank in Calhoun County depended so much upon the skill and banking ability of the proposed management, he did an analysis of the performance of C&L Bank of Bristol as to profitability and overalls financial performance since the inception of C&L Bank of Bristol because its management team would be the same as that of the proposed C&L Bank of Blountstown. This analysis was performed by comparing that bank with all institutions of the same approximate size in the State of Florida, that is, from $10-15,000,000 in assets. It was thus established that the C&L Bank of Bristol's return on assets, which reflects the ability of management, has been consistently favorable. A standard rule of thumb in the banking industry is that a one percent return on assets is a good return. The C&L Bank of Bristol experienced a 1.78 percent return in 1981, 3.55 percent in 1982, declined to 1.06 percent in 1983, and rose again to 1.42 percent in 1985. In terms of comparison with its peers in 1981, it was in the top 20 percent in this indicia of performance, was ranked at 68 percent of all banks in the comparison for 1982, 53 percent for 1983, 75 percent for 1984, and in 1985 ranked in the 84th percentile, performing better than all but 16 percent of the banks in Florida of its approximate size. In terms of return on equity, there has been some fluctuation. The C&L of Bristol has had as high as a 20 percent return and experienced a 15 percent return in 1985, which still puts that bank in the top 20 percent of banks of its size, or better than four out of five banks in its size class. The capital to assets ratio is a reflection of the safety or financial soundness of a banking institution. A 7 percent capital to asset ratio is the safe minimum for banks of this type, according to Dr. Heggestad. In 1985, the Bristol Bank experienced a 10.37 percent capital to assets ratio. The interest spread reflects the difference between the cost of a bank's funds and the amount it charges as interest on those funds when they are lent to customers. The Bristol Bank has averaged about a 5 percent interest spread over the period of its existence which places it in about the 40th percentile of banks in its class, which means it is about average in terms of how much it pays for and "marks up" its lendable funds which, in turn, has a significant effect on profitability. Shareholders, of course, tend to desire a larger interest spread in order to enhance profitability. From the consumer standpoint, however, an interest spread of this magnitude tends to indicate favorable loan prices as that reflects on the ability of the bank to compete in the lending market in its operating area which, in turn, can enhance its loan portfolio and deposit base over time. In terms of non-interest income, the Bristol Bank experienced a very good performance by increasing its ranking with other banks in its class, from the 41st to the 66th percentile over the life of the institution. In terms of the overhead costs to asset ratio, it ranks in the 81st percentile, which means it is considerably below the average bank in its class in terms of overhead costs as related to total assets. The Bristol Bank's loan to deposit ratio has been declining, but still remains at the average for all banks in its class. It experienced a very unfavorable loan to deposit ratio in 1981 and in 1985 it was in the bottom 15 percent of banks in its class, which suggests problems the bank is experiencing in the low per capita income, low growth market it chiefly operates in Liberty, and, to some extent, Calhoun Counties. In the category of net "charge-off" of loans, the Bristol Bank experienced a negative net charge-off in 1981, which means it collected more money on loans previously charged off than had been initially charged off as uncollectable. The bank ranked in the top 10 percent for banks in its class in that category. In 1982 it experienced a significant decline in collecting charged-off loans and was near the bottom of its class. It rose to about an average position in this category in 1983, and in 1984 was again in the top 10 percent, experiencing another significant decline in 1985. It was established, however, that, as compared to all other banks in its class, the Bristol bank and its management team was performing quite well in consideration of the weak economic market in which it operates. Because of the very small demographic size of the Bristol Bank's market, the slow growth of that market, and the low per capita income of the population, the Bristol Bank has operated at a substantial disadvantage compared to other banks in that analysis group, and yet has still performed quite well, as established by Dr. Heggestad. Dr. Heggestad also compared the C&L Bank of Bristol's performance directly with the Ellis/NCNB Bank. Since 1979, shortly after the present Board of Directors/Advisors of Ellis/NCNB began managing that bank, it has consistently deteriorated in its loan activity as measured by its loan to deposit ratio, going from approximately 77 percent down to approximately 45 percent over that time period, while the C&L Bank of Bristol has consistently increased its loan activity relative to deposits each of those years until 1985 when it registered a slight decline. Thus in terms of the basic function of a bank creating loans from its deposits, the C&L Bank of Bristol and its management team have consistently outperformed the Calhoun State Bank organizers at NCNB. Likewise, since 1978, profitability has declined sharply at Ellis/NCNB. It also declined at C&L of Bristol, but the management of C&L of Bristol has reversed that situation since 1983 and is now showing more profitability percentage-wise than the NCNB Bank. In terms of profitability as measured by net income after taxes against total capital, (in the study period) the Ellis Bank initially experienced a very high return on equity which has consistently declined. The C&L of Bristol profit also declined, but this measure of profitability also registered an increase since 1983, surpassing the rate of return to shareholders experienced by NCNB. Thus, in comparing the management of the Bristol Bank to all other financial institutions in its size class as well as directly to Ellis/NCNB, which operates in the same general geographical and economic circumstance, it has been shown that the C&L Bank of Bristol's management performed quite well and significantly better than that of Ellis/NCNB. Finally, over the life of the Bristol bank, although it has experienced both increasing and declining loan to deposit ratios and profitability, the fact remains that it has averaged a 17 percent annual return on share holder investment, which places the Bristol bank near the top of all banks in its class in terms of return to shareholders. Finally, Dr. Heggestad analyzed the possibility of two new banks entering the Calhoun County market. He established that it would be very difficult for two new banks to successfully begin operations at the same time in that County, given the moderate economic and demographic growth indicators which characterize that banking market. The growth simply is not enough to sustain two new banks. If two new bank charters were issued for Calhoun County, both banks would struggle to obtain an adequate market share in competing with NCNB. To some extent this would be in the consumer's best interest because loan rates would likely drop and deposit rates would increase as each bank attempted to obtain sufficient depositors and loan interest income to be successful. Each of the banks would have to purchase deposits, meaning that in order to sustain any growth, they would have to purchase money outside of the Calhoun County market by buying Certificates of Deposit and other funds in other areas. This is an expensive way to increase lendable funds and it would drive the costs of both banks up significantly. Dr. Heggestad established that if that situation occurred, both banks would have to struggle to survive and neither would thrive, which would mean that neither of them would be viable competitors for the large NCNB institution, which in the long run would not serve the interests of the consumer in Calhoun County very well because it would tend to retard ready loan availability which is necessary in order to finance expansion of the economic base of the County which circumstance would come full circle and tend to retard growth of the banks themselves. In short, Dr. Heggestad established that there is not a reasonable promise of successful operations for two new banks in Calhoun County. In summary, it has been established that the public convenience and advantage would best be served by the approval of one new State bank for the Calhoun County PSA delineated herein. It is determined in light of the factors enumerated above that the approval of a single new State bank will best ensure a strong competitor and healthy competition in that banking market, which presently is somewhat monopolistic. It has been established that the advent of two new banking institutions in Calhoun County at this time will result in all three banking institutions having to struggle to survive, and obtain a modicum of growth in deposits, loan to deposit ratio, adequate return on assets and share holder equity and the other indicia of successful banking performance. Such an eventuality would, in effect, restrict healthy competition and likely result in at least two of the three resulting banks failing to thrive and failing to become successful, truly financially sound public depositories and lending and investment institutions. In consideration of all the criteria enumerated in Section 658.21(1-6) Florida Statutes, it is found that the C&L Bank of Blountstown applicant, in light of its organizers', officers' and directors' proven bank management ability and record of success with a de novo bank, and in consideration of the economic and demographic conditions and growth potential of the PSA, will have the most likelihood of success as a new banking institution. It will represent the strongest potential competitor for the primary existing financial institution, NCNB. Its advent in that banking market will result in stronger competition for NCNB chiefly because of the proven superior management ability of its organizers and Chief Executive Officer and the advent of the C&L Bank of Blountstown in the Calhoun County PSA has been demonstrated to not likely result in destructive competitive effects on NCNB and the C&L Bank of Bristol. Both those institutions are likely to remain sound depositories for public and private funds and to remain effective providers of lending and other services for residential and commercial customers. 1/ DONE and ENTERED this 27th day of January, 1987 in Tallahassee, Florida. P. MICHAEL RUFF Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 27th day of January, 1987.
Findings Of Fact Respondent is currently licensed, and as of the date of the Administrative Charges and Complaint, held license No. HB-0008511 as a mortgage broker and was president and principal broker of Bay Area Financial Services, Inc. He has held such license since November 1979. He sold the business in April 1980 and has reapplied within six months for an individual license. The application was received on May 16, 1980. Pursuant to Rule 3D-40.03(3), Florida Administrative Code, Respondent is treated as a current licensee, and as an applicant. From October 25, 1977, until June 12, 1979, Respondent was employed as vice-president and principal mortgage broker by United Companies Mortgage and Investment of St. Petersburg, Inc., hereinafter UCMI, a mortgage brokerage firm. United Companies Financial Corporation, hereinafter UCFC, is a Louisiana corporation, authorized to do business in Florida. The company engages in the business as a mortgage lender. On August 31, 1978, UCMI by and through its broker, Respondent, made a loan to "James G. Anderson" and "Lorraine Anderson, his wife," and accepted a note in the amount of $14,500.00 made by "James G. Anderson and Lorraine Anderson," together with a first mortgage also made by "James G. Anderson and Lorraine Anderson, his wife," as security for the repayment of the loan. The first mortgage purported to encumber Lot 25, Oak Harbor Subdivision, according to the plat thereof as recorded in Plat Book 5, page 94, Public Records of Pinellas County, Florida. On August 31, 1978, UCMI, for value, assigned the note and mortgage to UCFC. The Respondent has no objection as to the authenticity and genuineness of Exhibit 11, a copy of a contract for sale of real estate which, on its fact, was executed by "James G. Anderson and Lorraine Anderson," as purchasers of certain real property from the seller, Linda Carol Querry, a/k/a L. C. Querry. The document reflects that the purchase price be $18,500.00, payable $100.00 in cash as a deposit, $900.00 cash within twenty-four hours, $4,500.00 additional deposit at time of closing, and $13,000.00 mortgage balance. (Exhibit 2). Anderson acknowledged his signature on this document but has no recollection of signing it. On August 31, 1978, a Notice to Customers, required by federal law, was executed by "James G. Anderson and his wife Lorraine," setting forth the disclosure requirements of Regulation Z. The lender is reflected as UCFC and the broker as UCMI of St. Petersburg. Respondent Hughes executed such document as a witness to the signatures of "Mr. and Mrs. Anderson." On August 31, 1978, a promissory note was executed by "James G. Anderson and Lorraine Anderson" promising to pay UCMI the sum of $14,500.00. (Exhibit 3). On August 31, 1978, a document entitled Consummation of Loan Secured by Real Property, was executed by "James G. Anderson and Lorraine Anderson," as the borrowers. (Exhibit 4). On August 31, 1978, a document entitled Notice to Customer Required by Federal Law was executed by "James G. Anderson and Lorraine Anderson," as the borrowers. (Exhibit 5). On August 31, 1978, a document regarding the loan transaction was executed by "James G. Anderson and Lorraine Anderson," acknowledging receipt of the "Good Faith Estimates," and certain other materials. (Exhibit 6). On August 31, 1978, a Notice to Purchaser-Mortgagor was executed by "James G. Anderson and his wife, Lorraine Anderson" acknowledging receipt of such notice. (Exhibit 7). On August 31, 1978, an Owner's Affidavit was executed by "James G. Anderson and his wife, Lorraine." (Exhibit 8). On August 28, 1978, a loan application was executed by "James G. Anderson" for the $14,500.00 to be secured by a first mortgage. Respondent personally handled the application as indicated on the application itself. (Exhibit 1). On August 31, 1978, check No. 15-39091 was executed by Respondent Hughes, as authorized representative of United Companies, Inc., as payor, to James G. Anderson and Title Consultants, as payees, in the amount of $11,014.58. The check was endorsed by "James G. Anderson and Lorraine Anderson." (Exhibit 10). On August 31, 1978, a Warranty Deed was executed by Linda Carol Querry, a/k/a L. C. Querry, as seller of certain real property to "James G. Anderson and Lorraine Anderson, his wife." Respondent Hughes executed the document as a witness to Linda Querry's signature and execution. The property described in the Warranty Deed is the identical property mortgaged by "James G. Anderson and Lorraine Anderson" to secure the loan from UCMI and UCFC. (Exhibit 13). On August 31, 1978, a Mortgage Deed was executed by "James G. Anderson and Lorraine Anderson, his wife," as mortgagors, to UCMI of St. Petersburg, as mortgagee, as security for the repayment of the loan. Respondent Hughes executed the Mortgage Deed as a witness to the signatures of "Mr. and Mrs. Anderson." (Exhibit 9). On August 31, 1978, UCMI, by and through its principal broker and vice president, Respondent Hughes, assigned the Anderson mortgage and note to UCFC. The applicable Florida law governing this matter is Chapter 494, Florida Statutes (1977), and as amended in the 1978 Supplement, and Chapter 3D- 40, administrative rules regulating mortgage brokerage, Florida Administrative Code. In August 1978, James G. Anderson, who worked in the Sanitation Department of the City of St. Petersburg, also worked part-time repainting houses purchased for resale by Vic Vogel, a speculator. While so employed, Anderson had seen Respondent a few times in the company of Vogel, but had never formally met Respondent. Vogel offered to sell one of these houses to Anderson on terms that would require no down payment by Anderson, who would thereafter make monthly payments similar to the rental payments he was then making. Further, there would be no "red tape" and Anderson would be buying a home rather than renting one. Anderson trusted Vogel, who assured Anderson he would take care of all the details. The house Anderson agreed to buy was on 11th Street and 20th Avenue South in St. Petersburg and was one of the houses Anderson had worked on in his part-time job with Vogel. In the contract to purchase signed by Anderson (Exhibit 11) the block for the legal description of the property is blank. The various other spaces on the form now showing the purchase price, down payment, etc., were blank when signed by Anderson. For several years prior to 1977 Anderson had been living with Lorraine Walker but never held her out as his wife. The signature "Lorraine Anderson" on all exhibits except Exhibit 14, the quitclaim deed from Anderson to United Companies Financial Corporation, were signed by someone other than Lorraine Walker. At the instigation of his attorney, Anderson and Lorraine Walker signed Exhibit 14 to clear up foreclosure proceedings that had been instituted against Anderson. The closing of the sale of property to Anderson took place at the offices of United Companies at 300 S. Duncan Street, Clearwater, Florida on 31 August 1978. Anderson was picked up by Vogel and driven to the closing. Accompanying Vogel was Mike Robertson, an associate of Vogel; Linda Querry, Vogel's girl friend, who signed the deed conveying the property to Anderson; and an unidentified black woman. While awaiting Respondent's arrival for the closing, Vogel took the group to lunch. At the closing, Anderson signed numerous documents and other people, including the black woman who obviously signed "Lorraine Anderson," also signed these documents as witnesses and/or notary. Anderson does not recall having seen Verona Krnjaich, who notarized his signature on the documents he signed at the closing and Ms. Krnjaich does not recall a closing at which Anderson was present. However, she testified that her normal practice is to notarize only documents notarized in her presence, and that she follows this practice at all closings. On the other hand, she has good recall of faces seen at closings but does not believe she ever saw Anderson before this hearing. Anderson testified that he trusted Vogel and signed whatever documents Vogel asked him to sign; that all the documents bearing his signature were blank when he signed them; that he did not know the black woman in the room at the closing or that when she signed these documents she did so in the name of Lorraine Anderson; that the closing took place on the second or third floor of a building just off U.S. 19 between Clearwater and St. Petersburg; that he doesn't know the address of this building but could return to it, and in fact, a few months prior to this hearing, took one of Petitioner's agents to the building where the closing took place; that he received no copy of any document signed by him at the closing; that he thought he was buying a house from Vogel; and that he expected Vogel to notify him after the closing when he could move in and how much he would pay each month. Vogel did not again contact Anderson and apparently has left the area. A few months prior to this hearing Anderson accompanied one of Petitioner's agents to show the agent where the closing occurred. The building to which the agent was taken by Anderson is two-storied and occupied by Ellis National Bank. In August 1978 there was no other occupant of this building and the second floor was unfinished but contained restrooms and some offices occupied by bank employees. Anderson made no cash payment before, at, or after the closing on this house; nor did he ever move into it. The legal description on the deed conveying the property to Anderson is for property located at 626-27th Avenue South, St. Petersburg, Florida, and not for the house at 11th Street and 20th Avenue South which Anderson thought he was buying. After Anderson became delinquent on his mortgage payments Respondent went to Anderson's home one Sunday afternoon demanding payment of the delinquent monthly payments owed by Anderson. The latter told Respondent he hadn't bought any house from the lender, owed no money, and wasn't going to pay. Respondent shortly thereafter turned the case over to the United Companies' attorney, who instituted foreclosure proceedings. When served with these papers Anderson took them to his lawyer. After some of the facts surrounding this transaction became apparent, the assignee of the mortgagee accepted a quitclaim deed to the mortgaged property from Anderson. Lorraine Walker accompanied Anderson to the lawyer's office and signed the quitclaim deed "Lorraine Anderson" (Exhibit 14). The deed signed by L. C. Querry conveying Lot 25 to Anderson (Exhibit 13) conveyed the property to "James G. Anderson and Lorraine Anderson, his wife." Respondent had known Vic Vogel for five or six years prior to August 1977 and had been involved in ten or twelve transactions in which Vogel had picked up distressed property, refurbished it and sold it. Anderson had few debts and readily qualified for the mortgage loan without considering the income of Lorraine or his income from his part-time work. He understood he was buying the house without any down payment, and, in fact, Anderson paid nothing down when he signed the contract and he produced no cash at the closing. The only disbursement made at closing was by the mortgagee, whose check for $11,014.58 (Exhibit 10) was payable to Title Consultants and Anderson. The latter endorsed this check and presumably Title Consultants disbursed to the seller. Closing statements for the buyer and seller were not in the files of UCMI or Title Consultants, nor was a contract to purchase in which the description of the property to be bought was shown. Respondent's witness testified that she reviewed all documents prior to a closing; that she recalls the Anderson transaction; doesn't recall who prepared those documents but believes she typed them; that documents were never signed in blank and the blanks subsequently completed; that she did the credit check on Anderson; and that all documents used in the closing were completed in full before the closing at which they were signed by Anderson and the person signing as Lorraine Anderson. A check with the credit bureau should have disclosed Anderson's marital status as not married and this witness was unable to explain the failure to pick this up when Exhibit 1, the loan application, was verified with the credit bureau. Respondent testified that he recalled the Anderson transaction on 31 August 1978 but later in his testimony stated he did not recall this specific transaction. He believes he followed his usual procedure and explained the various documents to Anderson before the latter signed them. Prior to 1978 he had closed many transactions for UCMI without a contract to purchase having been executed. The loan application is mailed to the main office of United Companies in Baton Rouge, Louisiana and telephonic approval is given by Baton Rouge. Accordingly, it was not unusual for Anderson's loan application to be prepared 28 August 1978, the original mailed to Baton Rouge and approval received in time to close the transaction on 31 August 1978. The contract upon which this house was conveyed, and the closing statements of buyer or seller, were not presented at this hearing. Witnesses testified these documents were missing from the files in which they would be expected to keep. Regardless of this, it is uncontradicted that Anderson made no payment at closing and, if any payment was made prior to closing, any such payment would have been accounted for by the escrow agent. It is also evident that no such accounting was made. By signing a note and mortgage for $14,500.00 Anderson purported to purchase a house for slightly more than $11,000.00, which is the amount of the check endorsed by Anderson at closing and which sum presumably went to the seller. Some $3,000.00 was retained by the lender as prepaid finance charges ($1,567.67) and brokerage fee ($1,545.45). (Exhibit 2.) Accordingly, the mortgage of $14,500 represented approximately 130% of the amount paid for this house. This fact was known, or should have been known, to Respondent, who presumably was representing his principal, UCMI, the lender at this closing. Respondent was paid a fixed salary by UCMI and did not receive additional compensation for each transaction he closed. UCMI suffered a financial loss on the repossession of the house from Anderson and filed suit against Industrial Valley Title Insurance Company (Exhibit 15).
Recommendation From the foregoing it is concluded that Respondent was guilty of concealing material facts from UCMI involving the transaction with Anderson at which UCMI was mortgagee, and that, as a result, UCMI suffered injury. It is therefore RECOMMENDED that Robert E. Hughes' license as a mortgage broker be suspended for a period of six (6) months. DONE AND ENTERED this 17th day of October 1980. COPIES FURNISHED: Franklyn J. Wollett, Esquire Assistant General Counsel Office of the Comptroller Room 1302, The Capitol Tallahassee, Florida 32301 George W. Greer, Esquire 302 South Garden Avenue Clearwater, Florida 33516 K. N. AYERS Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 17th day of October 1980.
