Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: The applicant Gulf State Bank of Franklin County is located in Carrabelle, Florida, and was established in 1971. There are no other banking facilities in Carrabelle and the applicant presently has no branch banking facilities. The applicant's total asset level is 8.1 million dollars, and it has maintained a capital to total assets ratio which has continuously exceeded seven percent. As of December 31, 1978, the capital to total asset ratio was 7.6 percent. With the exception of the first year of operation, the applicant's net earnings to total assets have exceeded the ratio of 0.5 percent. During the last two years, this ratio has exceeded one percent. As of the June 30, 1978, comparative figures report, the applicant had total deposits of $6,555,000.00, showing a decrease of about 5.4 percent from June of 1977. It has been the applicant's established policy to reinvest all earnings rather than paying dividends. The applicant proposes to open two branch banking facilities - one in Apalachicola and one in Eastpoint. Presently, the only banking facility in these areas is the protestant Apalachicola State Bank. This bank has its main office in downtown Apalachicola and it was established in 1906. It is a full service bank, and increased its total deposits by 18.6 percent between 1977 and 1978. On March 15, 1978, the Protestant opened a branch banking facility in Eastpoint, Florida. Although a $5,000.00 profit was projected for the first year of operation, the protestant's branch in Eastpoint is not presently operating at a profit. The protestant's Eastpoint branch has drive-in windows and offers all services with the exception of trust accounts and large loans. Both the main office and the Eastpoint branch of the protestant began offering Saturday morning banking hours approximately five weeks before the hearing in these proceedings. The only other financial institution in the area is a branch office of the Citizens Federal Savings and Loan Association of Port St. Joe, which was expected to begin operations in early March of 1979. As of July 1, 1977, Franklin County had an estimated population of 8,128, increasing only 1,063 above the 1970 population census. The majority of growth occurred in the unincorporated area of the County, which includes Eastpoint. The source of population growth is net migration. Between 1970 and 1977, net migration accounted for 85.32 percent of the County's growth, leaving about 14 percent attributable to natural increase. The percentage of the 15 to 44 year old age group has increased from 33.9 percent in 1960 to 38.9 percent in 1977. The age group of 65 and older has increased from 13 percent in 1960 to 17 percent in 1977. A medium projection for the county's population is 8,600 for the year 1980, 9,200 for 1985 and 10,200 for 1990. While the per capita income level of the County has grown at a higher percentage rate as compared to the state average, the per capita income level for Franklin County is the lowest in the State. In 1975-76, that figure was $3,061.00 as compared to a state average of $6,021.00. The unemployment rate in Franklin County was the highest in the State in September, 1978, sitting at 16.5 percent as compared to the state average of 7.6 percent. Franklin County's figure was down to 12 percent in October, 1978. Residents and business people in the area gave testimony to the effect that there is sufficient employment available in the area, but that it is difficult to find people willing to work. As indicated above, Eastpoint is among the fastest growing areas of Franklin County. Approximately one-third of the 75 businesses located in Eastpoint have come in or relocated to more modern facilities within the past three years. Another area of large growth is St. George Island. Leisure Properties, Inc. has eight approved subdivisions, three of which are presently completely sold. In 1978, that company realized $3,000,000.00 income from land sales on the Island. A 28-unit motel and a condominium is planned for St. George Island, as is a State park. It is estimated that when the State park becomes operational, 5,000 visitors will come to the Island on a daily basis during the 100-day season. It can be expected that such activity and traffic will promote and attract the existence of service facilities and service personnel. Approximately 80 percent of the construction work on St. George Island is performed by local contractors. The value of residential permits on the Island represented $1,021,360.00 in 1978. The proposed Apalachicola branch banking facility is to be located at 73 Avenue E, or on the northeast quadrant of the intersection of U.S. 98-319 (Avenue E) and Sixth Street. This site is presently owned by the applicant and is located 22.5 miles West of the main Carrabelle office and 6.2 miles West of the proposed Eastpoint branch. The applicant proposes to construct a concrete story and a half building with 1500 square feet on the first floor and 540 square feet on the second floor. The applicant plans to utilize three inside teller stations, one walk-up teller station and one drive-in teller window. In December of 1978, 29 percent (or $2,111,000.00) of the applicant's total deposits represented accounts from the proposed Apalachicola service area. A majority of this amount (22.1 percent of the applicant's total deposits) were deposits of public funds by various county departments located in the courthouse in Apalachicola. In addition, the applicant has $576,000.00 (representing 12.22 percent of its total loan portfolio) in loans to individuals and businesses in the Apalachicola service area. It is projected that the total estimated deposits for the proposed Apalachicola branch will be $1,800,000.00 at the end of the first year of operation, $2,700,000.00 at the end of the second year and $3,300,000.00 at the end of the third year of operation. The management for the proposed Apalachicola branch was hired two years in advance of tee anticipated opening date for training and familiarization with the proposed service area. He is a vice president of the applicant bank and a member of its board of directors. Prior to that, he had an auditing and accounting background. At its February, 1979, meeting, the applicant's stockholders voted to authorize the board of directors to name two additional directors during the year. The board intends to name these two new directors from the new Apalachicola service area after approval is obtained. The proposed Eastpoint branch is to be placed on Lot 8, Block 1, of the David Brown Estate Subdivision located on the Northeast quadrant of the intersection of Island Drive and Avenue C. This site is 16.4 miles West of the main Carrabelle office. This branch is considered to be a drive-in facility of the proposed Apalachicola branch, and only a 12 by 12 foot concrete block building with two teller stations is planned. During December of 1978, the applicant had $415,000.00 in deposit accounts (representing 5.7 percent of the applicant's total deposits) in the proposed Eastpoint service area. The applicant also has $788,500.00 in loans to individuals and businesses in the Eastpoint service area, representing 16.7 percent of its total loan portfolio. The applicant projects for the Eastpoint branch total estimated deposits in the amount of $300,000.00 by the end of the first year of operation, $450,000.00 by the end of the second year and $600,000.00 by the end of the third year. The primary service area of the proposed Eastpoint branch includes St. George Island which is connected to Eastpoint by a causeway. The proposed Eastpoint branch will be managed by a supervisor below officer level, but will be under the office management of the proposed Apalachicola branch manager. The Eastpoint branch will have all standard deposit, withdrawal and clearing services. The names of the proposed branches are Gulf State Bank of Franklin County - Apalachicola Branch and Gulf State Bank of Franklin County - Eastpoint Branch. There was no evidence to illustrate that the applicant was not in substantial compliance with all state and federal laws affecting its operations. In accordance with the provisions of Florida Statutes, Section 120.57(1)(a)(12), conclusions of law and a recommendation are not included in this Report. Respectfully submitted and entered this 26th day of March, 1979, in Tallahassee, Florida. DIANE D. TREMOR Hearing Officer Division of Administrative Hearings 530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Alfred O. Shuler Post Office Box 850 Apalachicola, Florida 32320 J. Ben Watkins Watkins and Watkins 41 Commerce Street Apalachicola, Florida 32320 Michael A. Gross Comptroller Gerald A. Lewis Assistant General Counsel State of Florida Office of the Comptroller The Capitol The Capitol Tallahassee, Florida 32304 Tallahassee, Florida 32304
Findings Of Fact Primary Service Area (PSA) The proposed association will be located in the Paddock Plaza adjacent to the Paddock Mall Regional Shopping Center, both of which are currently under construction. The site is in the vicinity of the intersection of Southwest 27th Avenue and State Road 200 in the southwest portion of Marion County. The PSA encompasses the southwestern portion of Marion County, including a part of Ocala which is a concentrated residential community. Beyond the city limits, there are schools, recreational areas, an airport, horse farms, a community college, and light industrial type firms in the surburban area. The proposed site is located in the northeastern part of the PSA. The PSA is in a developmental stage with current plans of residential and commercial development which should make the area the fastest growing sector in Marion County. The home offices of Fidelity Federal Savings and Loan Association and Midstate Federal Savings and Loan Association, and a satellite office of the latter association are located near the northeast boundary of the PSA some three miles from the proposed site. The northern and eastern boundaries of the PSA follow well-defined highways. The southern boundary follows the Marion County line, and the western boundary is drawn due north from the intersection of State Road 200 and the Marion County line. (Testimony of Starke, Exhibit 1) Standards (a) Public convenience and advantage. One commercial banking facility, the main office of Citizens First Bank of Ocala, is located in the northeast corner of the PSA approximately two and one-half miles from the proposed site. It provides full banking services to its customers. Two savings and loan associations have received approval to operate in the PSA. One will be a branch of Midstate Federal Savings and Loan Association which will be located at the Paddock Mall adjacent to the proposed site. The other will be a limited facility of the First Federal Savings and Loan Association of Mid-Florida (Volusia County) which will he situated approximately 11.3 miles south of the proposed site in a residential community. Neither of these approved institutions have commenced operations. The proposed site is readily accessible from all sectors of the market area. State Road 200 is a primary artery for northeast/southwest travel. Southwest 27th Avenue is a primary north/south thoroughfare. There are numerous other feeder streets which connect with those two roads to bring traffic to the new mall and plaza area. In addition, Interstate Highway 75 intersects State Road 200 approximately one mile southwest of the proposed site. An extension to Southwest 17th Street is currently proposed which would provide direct access from the northeast to the proposed site. The location of the proposed association at a large regional shopping center will provide an opportunity for residents of the PSA to combine shopping and financial business. This will be facilitated through the utilization of a drive-in facility at the site. Ample parking will be provided in the plaza area, and the network of roads in and around the shopping center will facilitate use of the applicant's services. It will provide a convenient location to conduct savings and loan business for residents and businessmen in the southwestern portion of the county without the necessity of traveling to the more congested downtown area of Ocala. The fact that the proposed association will be a home office rather than a branch office will tend to attract a greater number of individuals within the PSA than a satellite office, and undoubtedly will induce persons outside the PSA to use the institution's services. In 1960, the City of Ocala had a population of 13,598. It increased 66.1 percent to 22,583 by 1970. The 1978 city population was estimated to be 32,652, a 44.6 percent increase over 1970. An April 1, 1979 estimate placed the population at 34,034. In 1960, Marion County had a population of 51,616. It increased 33.7 percent to 69,030 in 1970 and was estimated at 102,722 in 1978, an increase of 48.8 percent over 1970. The population was estimated to be 106,852 in April 1979 and is scheduled to reach 164,400 by 1990. It is estimated that the population of the PSA was about 7,700 in 1960 and increased to 10,500 or 36.4 percent by 1970. It is now estimated to be some 17,000 and projected to reach over 19,000 by 1982. This projection is based on the area's recent growth history, current housing developments in the area, and projected growth within Marion County. The 45 to 64 year group of the population of Marion County has shown a modest increase since 1960 from 21 percent to 22.6 percent in 1978. At that time, the state percentage was 22 percent. Those 65 years of age and over in Marion County increased from 10.6 percent in 1960 to 15.7 percent in 1978. This was lower than the statewide average of 17.5 percent in that category. It is anticipated that those 45 years and older will continue to show a steady increase in the future due to the fact that most of the county increase in population has been due to continuing in-migration of retirees. These individuals normally bring cash assets which are available for deposit in savings and loan associations, and they ordinarily would have no prior connection with other banks or savings and loan associations in the immediate area. The per capita personal income in Marion County in 1969 was $2,646 and increased to $5,157 in 1977. Per capita personal income in Florida in 1977 was $6,697. In 1969 the mean family income of residents of Ocala was $9,775, as compared with $8,062 in Marion County and $10,120 throughout the State of Florida. It is estimated that the current mean family income in Ocala is approximately $17,506, as compared to $14,438 in the county and $18,123 in the state. The unemployment rate in Marion County in January 1980 was 6 percent whereas the rate in the State of Florida was 5.2 percent. Residential building permits issued in the City of Ocala in 1975 rose from 156 units for a total of 3.5 million dollars to 511 permits in 1979 for a total of 10.7 million dollars. For Marion County, 872 permits were issued in 1975 for a total of 14.3 million dollars and 1,706 in 1979 for a total of 44.5 million dollars. It is currently estimated that the median value of owner occupied housing units in Ocala is $32,775 and $26,173 in Marion County. Local Conditions There are seven commercial banks with approval to operate a total of 18 offices in Marion County. In June 1975, the commercial banks headquartered in Marion County held combined time and savings deposits of some 104 million dollars and by mid-1979, such deposits totaled over 176 million dollars, an increase of about 69.5 percent. From December 1978 to December 1979, time and savings deposits in those banks rose from 161.4 million dollars to 199.8 million dollars, an increase of 23.8 percent. Total deposits in all Marion County Banks increased from 204.8 million dollars in 1975 to 304.9 million in 1979, a 48.9 percent increase. There are currently 16 savings and loan association offices approved for operation in Marion County. Three of the associations have their home office in Ocala. These are Fidelity Federal, Mid-State, and United Federal of Ocala. Fidelity Federal operates a total of five offices within the county, one of which is not yet open. Mid-State Federal has seven offices approved within the county and its office in the PSA is not as yet open. United Federal, an association which opened in January 1979, has its only office within the county. Both First Family Federal (Lake County) and First Florida Federal Savings and Loan Association (Alachua County) have recently received approval to operate branch offices within Marion County. First Federal of Mid-Florida (Volusia County) has received approval to operate an office in the southern part of the PSA but has not yet opened. In 1975, savings and loan associations headquartered in Marion County reported combined savings of $162,177,000. By the end of June 1979, their combined savings totaled $312,508,000, an increase of 92.7 percent. The combined savings accounts of the three Marion County associations totaled $312,508,000 in midyear 1979, as compared to June, 1975 savings of $162,177,000, representing an increase of $150,331,000 or 92.7 percent, during the subject four-year interval. Mid-State Federal, with an office approved at the Paddock Mall, held June, 1979 savings of $207,770,000, and those accounts represented an increase of $96,475,000, or 86.7 percent, over its savings reported June, 1975. First Federal of Mid-Florida, a Volusia County association with an office approved in the PSA, had June, 1975 savings of $199,843,000, and those savings increased by $150,637,000, or 75.4 percent, to reach a total of $350,480,000 in June, 1979. The smallest savings and loan association in Marion County is United Federal, which opened in 1975. In June, 1975, it reported savings of $6,881,000, and its midyear 1979 statement showed savings of $27,830,000. United Federal, operating only one office in Ocala, had growth in savings of $20,949,000, or 304.5 percent, during the stated interval. In the opinion of the applicant's economic consultant, approval of the applicant's application would not have an adverse effect on the other financial institutions in the area due to the steady growth of the community and anticipated growth in the future. He further is of the opinion that the proposed savings and loan association will be able to successfully operate in the PSA in view of the presence of the Paddock Mall and the general growth of population and business establishments in the area. He feels that the current national economic situation will not have a great impact on a new institution which will be able to obtain variable interest rates. He further sees an advantage to the fact that the proposed association will be the first state chartered capital stock form of organization in Marion County, and that it will provide an opportunity for public purchase of shares in the association. During the first three years of operations, the applicant projects its net profits at $75,648 for the first year, $88,335 for the second, and $103,340 for the third. These amounts were arrived at by including known cost items and estimating various income and expense amounts. The applicant anticipates acquiring accounts from new residents of the PSA and those current residents who may wish to transfer savings accounts from commercial banks in the Ocala area due to convenience and the higher rate of interest paid by savings and loan associations. The applicant does not anticipate the acquisition of a significant number of customers from existing savings and loan associations in the area. It also will look to employees at the new shopping mall who may utilize the conveniently located new institution for savings transactions. The applicant intends to compete vigorously for new business with these individuals and from those who presently do not have accounts in any existing associations. The applicant estimates that the institution will attain savings of five million dollars at the end of the first year, $9,500,000 at the end of the second year, and $14,500,000 at the end of the third year of operation. In arriving at those estimates, consideration was given to past experience of existing association offices in the Ocala area, and that of established associations in similar competitive situations. The eight organizers of the proposed association will also serve as the directors. They represent a diversity of occupations, including businessmen, attorneys, real estate broker, a physician, and a dentist. All but three reside in the Ocala area. All have been residents of Florida for over a year and none has been adjudicated a bankrupt or convicted of a criminal offense involving dishonesty or breach of trust. Their employment and business histories show responsibility in the handling of financial affairs. One of the proposed directors has served as an attorney to a large savings and loan association in Miami Beach, and is a member of the board of directors of Barnett Bank of Miami. Another serves as legal counsel for a local bank in Ocala. The proposed officers of the association have not been named as yet. The proposed association will be capitalized at $2,000,000. This capital will be divided into common capital of $1,000,000 in surplus and reserves of $1,000,000. The association intends to issue 200,000 shares of stock with a par value of $5.00 and the selling price of $10.25, plus a $.25 share organizational expense fund contribution. The proposed directors of the association have subscribed to 25,000 shares each. This is a preliminary stockholder list and it is the intention of those individuals to redistribute the stock to a minimum of 400 persons in accordance with FSLIC requirements. It is the organizers' intention to acquire pledges from 700 persons for the deposit of $1,000,000 in withdrawable savings accounts. It is intended that the majority of the stock will be sold to persons residing in Marion County, and the organizers anticipate no difficulty in this respect. (Testimony of Starke, Hastings, Bitzer, Berman, Casse, Hicks, Williams (Deposition - Exhibit 5), Broad (Deposition - Exhibit 6), Carter, Exhibits 1-3) Name As heretofore found above, the applicant amended its application to change the proposed name to Allstate Savings and Loan Association. Although the descriptive word "Allstate" is not used in the corporate name of any other savings and loan association in this state, the Office of the Comptroller received a letter, dated February 22, 1980, from Allstate Savings and Loan Association, Glendale, California, an affiliate of Sears Roebuck and Company, objecting to the use of the word "Allstate" in that the public may be misled to believe that the proposed association is in some way affiliated with Sears Roebuck and Company. (Testimony of Starke, Exhibit 1) Site and Quarters. As heretofore found, it is the organizers intention to locate the proposed association in the Paddock Plaza, adjacent to the Paddock Mall, a new shopping center to be constructed in Ocala. The applicant has an option to lease 5,000 square feet of space for a period of fifteen years for a rental price of $12.00 per square foot for 2,000 square feet and $10.00 per square foot for 3,000 square feet, plus common area maintenance. The option provides that on the fifth year of tenancy, the total annual rental will be increased by the cost of living as determined by the consumer price index. The leased area will include a two-car drive-in facility. There will be adequate parking at the site. The applicant plans to sublease 2,000 square feet of the leased premises on a short-term basis to reduce operating costs in the initial years of operation. An appraisal of the proposed association quarters establishes that the proposed leased premises are suitable for a savings and loan association and that the lease price compares favorable to current leasing arrangements for similar business property. (Testimony of Starke, Exhibit 1) Proposed Findings of Fact filed by the parties have been fully considered and those findings which have not been adopted herein are considered to be either unnecessary, or unsupported in fact and are specifically rejected. Some of the proposed findings state conclusions which properly should be considered by the Comptroller. Pursuant to Section 120.57(1)(b)(12), Florida Statutes, this REPORT does not include conclusions of law and recommendations. DONE and ENTERED this 25 day of April, 1980, in Tallahassee, Florida. THOMAS C. OLDHAM Hearing Officer Division of Administrative Hearings 101 Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: Honorable Gerald A. Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32301 William L. Lyman, Esquire Assistant General Counsel The Capitol Tallahassee, Florida 32301 Daniel Hicks and Randolph Tucker, Esquires Post Office Drawer 1969 Ocala, Florida 32670 Merritt C. Fore, Esquire Post Office Box 1507 Ocala, Florida 32670
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: The Atlantic Bank of St. Augustine has its main office at 24-28 Cathedral Place, downtown St. Augustine, St. Johns County, Florida, and was established in 1934. It is now a wholly owned subsidiary of the Atlantic Bancorporation. The applicant has one existing remote drive-in facility located approximately one mile from the main office and about nine-tenths of a mile from the proposed branch site. This facility does not offer full services, and, at the time a decision was made to apply for another branch, it was not feasible to expand this existing facility due to insufficient available land. According to the most recent data available, the applicant's adjusted capital to asset ratio was 8.3 percent and its net income to asset ratio was .94 percent for 1978. The applicant's liquidity ratio is in the 40 to 45 percent range. Its asset condition is very good as is its past performance. The applicant has suffered a declining percentage share of the market, decreasing from 50.2 percent in 1970 to 40.2 percent at year end 1978. According to the applicant, this is a result of having only one full service facility which is located in the congested downtown area of St. Augustine. The main purposes of the proposed branch are to provide more convenience for the applicant's existing customers (38 percent of which are estimated to reside in the proposed primary service area) and to protect its market share of bank customers. The applicant's management team is composed of eleven directors and non-director senior officers. Its president and chief executive officer has been with the applicant since 1950 and was born and raised in the City of St. Augustine. Three of its other officers have in excess of twenty-two years of banking experience. The proposed branch manager, Robert George Allen, is currently on the applicant's staff as an assistant vice-president and manager of the installment loan department, and has twelve years of banking experience. The site for the proposed branch is located northwest of the intersection of U.S. Highway No. 1 on State Road 312. The owner of the land for the proposed site is the Craig Funeral Home, which is not directly or indirectly associated with this application. The land will be purchased by the applicant at a cost of $180,000.00. The applicant will construct a 4,930 square foot one- story concrete block building on the site at a cost of approximately $260,000.00. The facility will have 34 parking spaces with three inside and five outside teller stations. The site will contain 200 feet of frontage on U.S. Highway No. 1 and will have both northerly and southerly access off said highway. The applicant intends to offer a full range of services at the proposed branch facility. The primary service area of the proposed branch is depicted on the map attached to the application. It is bounded on the west by Interstate 95, on the east by the Atlantic Ocean, on the south by the St. Johns/Flagler County line and on the north by State Road 16, on the east by the San Sebastian River to Anastasia Island, then the south city limits of St. Augustine and the Atlantic Ocean. Within the applicant's primary service area, there are two remote banking facilities, both of which opened in 1975 and one of which belongs to the applicant, situated 0.9 and 1.2 miles north of the proposed site. Also, the protestant's approved, but unopened, main office is to be located 0.2 miles south of the proposed site. The latter two sites are located on the same, west side of U.S. Highway No. 1 and are separated by a K-Mart store. The protestant is the only independently owned bank in St. Augustine. It has a primary service area which is similar to the applicant's proposed primary service area. On the day prior to the administrative hearing in this cause, the protestant closed the purchase on its land and is now contemplating the opening of a modular facility pending construction of its permanent facility. There are also two savings and loan offices located within the applicant's primary service area. Near the primary service area, there is another branch facility (Barnett) and two main commercial banking offices -- Barnett Bank of St. Johns County and the applicant's bank, located 2.2 and 2.3 miles northeast of the proposed branch site. There are also three more savings and loan offices located near the primary service area. The two existing and operating banks in the area -- Barnett and the applicant -- had, as of December 31, 1978, total deposits of $54.78 and $36.62 million, respectively. Barnett showed a significant increase in loans and demand deposits, while the applicant illustrated a decline in deposits and a smaller percentage increase in loans. The county totals show an increase of 13.5 percent in loans, a decrease in demand deposits of 11 percent, an increase in time deposits of 12.7 percent and an increase in total deposits of 3.3 percent, for a total of $101,446,000.00. The savings and loan offices within and near the proposed primary service area have demonstrated increases in deposits ranging from 7.6 percent to over 100 percent. The applicant estimates the volume of total deposits for the proposed branch to be $1.297 million at the end of the first year, $2.699 million at the end of the second year and $4.171 million at the end of the third year of operation. The applicant estimates a loss of $56,530.00 the first year, a profit of $49,129.00 the second year and a profit in the third year of $156,076.00. The name of the proposed branch is to be Atlantic Bank of St. Augustine - St. Augustine South Branch. The applicant has received no notification that it is not in substantial compliance with the regulatory laws and statutes. Official state population estimates for the primary service area are not available. The applicant, however, estimates the population of the area to be 8,900 in 1974 and 12,792 in 1978. These figures are based primarily on estimates of a population of 12,700 for a slightly smaller area made by the Board of the County Commissioners in May, 1979, for the purpose of a grant assistance application. Based on the same data, the applicant projects the primary service area population for 1980 to be 14,438. The population growth rate for the area between 1974 and 1978 was thus estimated at 43.7 percent, for an average annual growth rate of 10.9 percent. Inasmuch as official estimates for the applicant's primary service area are not available, the Office of the Comptroller considered the trends of population changes in the city, the beaches, the county and the unincorporated areas, as measured by the University of Florida Division of Population. Some of the relevant population data considered was the following: St. Augustine Beach 632 1,131 St. Augustine 12,352 12,611 Unincorporated Area 17,412 31,188 St. Johns County 31,035 44,550 These figures illustrate that the fastest population growth has occurred in the unincorporated areas of the County. The University of Florida projects a population of 47,600 in the County by the year 1980, for an average annual growth rate of 3.4 percent. Almost all of the County's population growth between 1970 and 1978, 94.56 percent, has resulted from net migration, but not necessarily exclusive of retirees. Between 1970 and 1977, there was some increase in the weight of the 65+ age group, but a larger increase occurred in the weight of those ages 15-64, the labor age group. The former increased from 14.1 to 15.5 percent, while the latter increased from 57.9 to 62.0 percent. For the twelve months ending December 1978, the county showed an unemployment rate of 7.7 percent, as compared to the state average of 6.6 percent. Recent monthly data indicates a rise in the rate of unemployment in St. Johns County -- 8.7 percent in March, 1979, as compared with a state average of 5.8 percent. For April, the county figure is 8.4 percent and the state average is 5.3, percent. The per capita personal income for St. Johns County increased from $5,356.00 in 1976 to $5,689.00 in 1977, a 6.6 percent increase. This growth is somewhat slower than the state average of 9.8 percent, and the county's per capita incomes remained below the state averages of $6,101.00 and $6,697.00, respectively, for the same years. In accordance with the provisions of Florida Statutes 120.57(1)(a)(12), conclusions of law and a recommendation are not included in this Report. Respectfully submitted and entered this 15th day of August, 1979, in Tallahassee, Florida. DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings 101 Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED John E. Hankal Hankal and Wolfe Post Office Drawer H-1 St. Augustine, Florida 32084 Roger A. Larson Graham, Hodge, Larson and Hume, P.A. Suite 415, Kilgore Square 2400 West Bay Drive Largo, Florida 33540 Michael A. Gross Assistant General Counsel Office of the Comptroller The Capitol Tallahassee, Florida 32301 Comptroller Gerald A. Lewis State of Florida The Capitol Tallahassee, Florida 32301
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: The First Bank of Treasure Island has its main office at 175 Treasure Island Causeway, Treasure Island, Pinellas County, Florida, and was established in 1971. The future growth potential of the main office is limited because Treasure Island has a population of 8,200 and the majority of the population is seasonal. The proposed branch site is situated approximately 25.6 road miles north of the main office. The applicant's liquidity ratio is being maintained at 25 percent or better. It has good established earnings and is presently retaining two-thirds of its dividends for the future expansion of the Bank and its branches. As of November 30, 1978, the applicant's adjusted capital to asset ratio was 11.94 percent. This figure was expected to decrease by a small degree over the following few months. The applicant's main office was staffed with the intention of establishing two branches. The applicant also has an application for another branch ban in mid-county, Pinellas County. This application has been approved by the State of Florida, but is currently awaiting approval by the Federal Deposit Insurance Corporation. The applicant has sixteen directors and non- director senior officers, and its main office is presently overstaffed. Five of its directors and officers have in excess of 14 years of banking experience. The applicant's president and chief executive officer has 23 years of banking experience. The manager of the proposed branch is currently on the applicant's staff, has 12 years of banking experience and has branch banking experience. The owner of the land to be used for the subject proposed branch bank is a member of the applicant's Board of Directors and a 5 percent shareholder. There was a full disclosure of this fact both to the board of Directors and to the State. Two appraisals of the property were obtained, and the applicant's purchase price of the property is less than both appraisals. The site for the proposed branch is located on the West side of U.S. Highway 19, approximately 200 feet north of its intersection with Cypress Drive. The building will be a two-story, 6,000 square foot structure. The branch will initially occupy the first floor and will lease the second floor to professional tenants on a short-term basis. Initially, the proposed branch will have six employees, with two inside teller stations and two drive-in stations. Some fifty parking spaces wilt be provided. The applicant plans to operate the proposed branch as a full service bank. Major decisions will be made on the premises and the branch will only receive bookkeeping support from the main office. In addition to normal banking services, the applicant intends to offer a club plan, a night depository and Saturday morning banking. The applicant projects that the proposed branch will be capable of supporting itself within eight months of operation. Prior to that time, the loss is estimated to be approximately $8,000.00 per month. The estimated volume of total deposits for the proposed branch bank are $2,000,000.00 at the end of the first year, $5,000,000.00 at the end of the second year, and $8,000,000.00 at the end of the third year of operation. The primary service area of the proposed branch, from which it expects to draw 75 percent of its deposit volume, is depicted on the map attached to the application. The primary service area extends 1.1 air miles to the North, 0.6 miles to the East, 2.7 miles to the South and 1.3 miles to the West. This area was chosen by taking into consideration traffic flow, shopping and commercial activity centers in the area and other general characteristics of the area. Within the general trade area of the proposed branch are eight approved or existing commercial banking offices, and six savings and loan association offices. (The map legend was amended at the hearing to delete the black circle with the number 1, as this facility does not exist and has not been approved.) The protestant Palm State Bank is located one-tenth of a mile from the applicant's southern boundary, and 2.6 miles from the proposed branch site. The nearest banking facility to the north is located nine-tenths of a mile from the applicant's northern boundary. The proposed branch will compete in an unincorporated area of Pinellas County. It was the prediction of the applicant's expert witness that the future growth of Pinellas County will occur in the Northern portion where land is available. The 1978 population of the primary service area was 7,200, representing a 300 percent increase from the 1970 population. This population is expected to increase to 10,000 by the year 1980. Nine active or planned housing projects are within the applicant's primary service area. The applicant revised the figures contained on page 20 of its "economic report" to show December, 1978, figures. These figures are 8,517 planned housing units, 1,336 completed units and 806 units under construction. The witness did not know the time frame contemplated for the 8,517 planned units. The name of the proposed branch is to be First Bank of Treasure Island - North County Office. In accordance with the provisions of Florida Statutes, 120.57(1)(a)(12), conclusions of law and a recommendation are not included in this Report. Respectfully submitted and entered this 29th day of January, 1979, in Tallahassee, Florida. DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Frank Weaner, President Palm State Bank 1000 U.S. Highway 19 Post Office Box 840 Palm Harbor, Florida 33563 Kenneth E. Easley 1212 South Highland Avenue Clearwater, Florida 33516 William L. Lyman Assistant General Counsel Office of the Comptroller The Capitol Tallahassee, Florida 32304 A. L. Ellis Chairman of the Board Ellis First National Bank Tarpon Springs, Florida 33589 Comptroller Gerald Lewis State of Florida The Capitol Tallahassee, Florida 32304
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
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: On September 5, 1978, the Applicant submitted to the Department its application pursuant to Sections 665.031 and 665.704(2), Florida Statutes, for authority to organize a corporation for the purpose of conducting a savings and loan association business to be located at the intersection of Kanner Highway (Colorado Avenue) and Monterey Road, Martin County, Florida. Notice of receipt of the application was published in a Florida Administrative Weekly on September 8, 1978. After receipt of the application, the Department requested additional information after receipt of which the application was deemed complete and assigned a filing date of December 7, 1978. The application as originally filed proposed the name AMERICAN SAVINGS AND LOAN ASSOCIATION OF MARTIN COUNTY for the proposed association. On September 22, 1978, Applicant amended the Petition to change the name of the proposed corporation to CENTRAL SAVINGS AND LOAN ASSOCIATION OF FLORIDA. This change was noticed in the Florida Administrative Weekly on October 6, 1978. As set forth above, the site of the proposed savings and loan association is at the intersection of Kanner Highway and Monterey Road, Martin County, Florida. The organizers of the Applicant obtained an option to purchase the property for the proposed site for $175,000. The option to purchase was obtained from Mr. Richard Geisinger, one of the proposed directors, with full disclosure to the other proposed directors. An MAI appraiser appraised the fair market value of the property for the proposed site at $210,000. The proposed site is directly on the corner of the subject intersection and represents 175 front feet on Kanner Highway and 300 front feet on Monterey Road. The applicants intend to build a freestanding building of approximately 6,400 square feet with two drive-in teller facilities. The total cost of land and building is projected at approximately $481,000 with an additional $85,514 to be spent for the purchase of fixtures and furniture. The applicant proposes to be capitalized at $1,000,000, with $500,000 of the total capital being held as paid in surplus. The capital will be raised from the issuance of 100,000 shares of common stock with a par value of $5.00 per share, selling at a price of $10.00 per share with a collection of an additional $.50 per share for an organizational expense fund. For the purposes of the application, 100 percent of the stock of the proposed association was subscribed to by the organizers. However, it is their intent to offer for sale approximately 46 percent of the stock of the association to the public prior to the opening of the proposed savings and loan association. Applicant's primary service area (PSA) incorporates most of the Northeast section of Martin County and includes the City of Stuart, Town of Sewalls Point and the communities of Palm City and Port Salerno. It is bounded on the north by the Martin-St. Lucie County line, on the west by the Sunshine State Parkway, on the south by the northern boundary of the Gomez Grant, and on the east by the Indian River. The PSA, as proposed, is the most densely populated area of Martin County, having approximately 38,400 residents. The per capita income for the residents of the PSA is above the state average. Both construction and sales of residential units within the PSA are increasing, with adequate room for future development. There is a high level of commercial activity in the PSA and the vacancy rate is low. The PSA contains the Monterey Shopping Plaza, which is directly opposite the proposed site, which shopping plaza opened for business in 1972, and which has expanded to over 100,000 square feet of gross leasable space. Within the PSA and directly across the street from the proposed site to the East, a 26 acre shopping mall is being developed. Downtown Stuart is less than one-half mile from the proposed site and in the PSA. The population of Martin County and the primary service area is a matter of dispute. The Martin County Planning and Zoning Department estimates the county's population at 61,692 residents. The University of Florida, Bureau of Economic and Business Research estimated the county population at 53,895 as of July 1, 1978. No annual estimates relating to census tracts or parts thereof are available from official U.S. or State of Florida sources in order to determine the population of the PSA. However, the trends of population changes in Martin County, Stuart, Sewalls point, Jupiter Island and Ocean Breeze Park and in the unincorporated areas of the county, which comprise much of the designated PSA should apply to the PSA. Relevant population data of these areas, compiled by the University of Florida, Division of Population Studies, are as follows: Martin 1970 County 28,035 1975 47,726 1976 48,496 1977 50,341 1973 53,895 1980 54,700 to 61,800 (projected) Stuart 4,280 8,787 8,479 8,520 8,942 NA Sewalls Point 298 741 791 829 1,025 Jupiter Island 295 349 352 353 355 Ocean Breeze Park 714 813 1,080 1,080 1,065 Unincorporated 21,908 36,936 37,794 39,559 42,468 NA Martin County population has risen dramatically since 1970, and that growth is expected to continue, essentially from in-migration. Since 1970 there has been a negative natural increase in population. The median age of the county population of 1977 was 45 years of age, with 26 percent of its residents 65 years or older. This is fairly representative of the PSA which includes the majority of the county's population. Within five miles of the site, there are four major shopping centers including Stuart Shopping Center with approximately 103,000 square feet, K-Mart Plaza with approximately 100,000 square feet, East Ocean Mall with approximately 100,000 square feet and Monterey Shopping Plaza referred to above. From 1971 to 1978, 17,088 housing units were built in Martin County. Permit activity in the county shows that there were $81,726,000 in permits issued in 1978. The proposed site is along a line of travel for a large number of commuters as well as shoppers who come to that area as a destination point. The latest unemployment data for Martin County shows an unemployment rate of 5.4 percent for November, 1978 (revised), and a 5.5 percent rate for December, 1978 (preliminary). This compares to a state average of 6.2 percent and 6.4 percent respectively. The per capita personal income for the county increased from $5,735 in 1975 to $6,156 in 1976. This was a 7.3 percent increase which was somewhat slower than the 7.6 percent state average. However, the county's absolute averages remained above the state average of $5,596 and $6,021 respectively for the same years. Commercial activity in Martin County is strong. There are presently eleven existing or approved savings and loan association offices within the proposed PSA. One of these is a main office and ten of these are branches or limited facilities. There are also four additional savings and loan association offices located outside the PSA, but within Martin County. There are nine commercial bank offices, including four main banking offices and five branches, within the PSA and another six hank and branch offices located outside the PSA, but within Martin County. There have been significant increases in savings deposits in Martin County. Significant factors in this increase is the in-migration of new residents and inflation. A continuation of this pattern will maintain the growth experience in recent years. The county summary for nine savings and loan offices indicates an increase of 27.1 percent in deposits between March 31, 1977 and March 31, 1978. This continues a similar growth rate achieved during 1976- 1977. A similar growth trend is being experienced by the commercial banks in the area. Savings and loan associations doing business in Martin County have total aggregate savings as of September 30, 1978 of $235,416,000. Commercial banks doing business in Martin County show total assets of $297,774,000 as of the same date. Only one savings and loan doing business in Martin County is headquartered in Martin County. All other savings and loans in Martin County are branches of institutions with headquarters outside Martin County. The Applicant expects to be competitive with the existing savings and loan offices in the PSA with regard to interest rates and breadth of services. Some of the services that the Applicant intends to offer to the community include the following: a mobile facility to serve the elderly and disabled, direct deposit of Social Security and other government checks, retirement plans such as IRA and KEOUGH, electronic funds transfer, Christmas Club and educational savings programs, certificate plans, and Saturday and extended Friday hours. With the exception of the mobile facility and Saturday hours, these services are currently offered by existing associations. The Applicant has not designated a chief managing officer. An informal offer and acceptance of employment exists with a capable individual having savings and loan experience. This individual did not assist in preparation of the pending application. The proposed Board of Directors is composed of nine members, all of whom are residents of the State of Florida and U.S. citizens. Although all of the proposed directors appear to be successful businessmen, none of them have any savings and loan experience. Six of the nine organizers are presently commercial bank directors and one is a former bank director. Mr. J. M. Brown is Director and Chief Executive Officer of American Bank of Martin County; Mr. Richard K. Carroll is a director of Jensen Beach Bank; Mr. John A. Darlson is a director of the American Bank of Martin County; Mr. Richard Geisinger is Chairman of the Board of Directors of American Bank of Martin County; Mr. Terry N. Keathley is a director of American Bank of Martin County; and Mr. Lawrence J. Timon is a director of American Bank of Martin County. Mr. Brown and Mr. Darlson do not intend to become directors of the proposed savings and loan association but do intend to held their stock in the proposed association. Those remaining proposed directors who also serve the Board of American Bank, Messrs. Geisinger, Keathley and Timen, have indicated their intent to resign their directorates in American Bank to serve on the Board of Directors of the proposed association in keeping with the requirements of the Financial Institutions Regulatory Act. The remaining proposed directors are Mr. Rockford H. Ern, Mr. Armando Farina, and Mr. John M. Fort. Mr. Brown, Mr. Carroll, Mr. Darlson, Mr. Geisinger, Mr. Keathley and Mr. Timon have each subscribed to more than 5 percent of the stock of the proposed savings and loan association and also presently own stock in a commercial bank in the PSA. All intend to retain that stock as well as their stock in the proposed savings and loan association. The Applicant has projected savings deposits at the end of the first, second and third years of operation to be $5,000,000, $10,000,000 end $15,000,000 respectively. The Applicant has presented a revised budget which projected net profit for the first three years of operation to be $55,000, $131,000, and $188,000 respectively. The Applicant has proposed that the new association bear the name CENTRAL SAVINGS AND LOAN ASSOCIATION OF FLORIDA. No evidence was presented to show this name was confusing or misleading to the public. In accordance with the provisions of Section 120.57 (1)(a)(12), Florida Statutes, Conclusions of Law and a Recommendation are not included in this REPORT. Respectfully submitted and entered this 25th day of October, 1979, in Tallahassee, Florida. CHRIS H. BENTLEY, Director Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: Karlyn Anne Loucks, Esquire Assistant General Counsel Office of the Comptroller The Capitol, Room 1302 Tallahassee, Florida 32301 Barry E. Chapnick, Esquire 1666 Kennedy Causeway, Suite 700 Miami, Florida 33141 C. R. McDonald, Jr., Esquire Suite 200, Citizens Federal Bldg. 1600 South Federal Highway Ft. Pierce, Florida 33450 Frank Fee, III, Esquire Post Office Box 100 Ft. Pierce, Florida 33450 Richard J. Dungey, Esquire Post Office Box 288 Stuart, Florida 33494
Findings Of Fact Caribank, N.A. ("Caribank"), was acquired by J. J. Gonzalez Gorrondona, Jr. ("Gorrondona Jr.") and George Childs, Jr. ("Childs") in May, 1977, and Dania Bank was acquired by these individuals through a tender offer in April, 1978. Caribank Corporation, the Applicant herein, is a bank holding company that now owns more than 99 percent of the stock of Caribank. Gorrondona Jr. owns 90 percent of Caribank Corporation and Childs owns 10 percent. Caribank Corporation was originally named Banconac Shares, Inc. when it was established in November, 1977. Its name was changed to Caribank Corporation on June 5, 1979. Banconac is a name used by many subsidiaries of the Banco National de Descuento ("BND"), a Venezuelan private commercial bank, a majority of the stock of which was formerly owned by Gorrondona Jr. and his father, J. J. Gonzalez Gorrondona, Sr. ("Gorrondona Sr."). It is derived from the name Banco National de Descuento and is used in Venezuela to signify business owned by the BND directly or indirectly. The use of the name Banconac in the Applicant's former name was not explained by the Applicant although Gorrondona Jr.'s testimony established that BND funds were not used to purchase Caribank. Gorrondona Jr. owns approximately 90 percent of Dania Bank and Childs owns approximately 10 percent of the Dania Bank, a state chartered bank. Approximately .3 percent is owned by shareholders who did not surrender their shares. Martin L. Wyneken ("Wyneken") is President and chief executive officer of both the Dania Bank in Broward County and of the Caribank in Coral Gables, Dade County. Childs is Chairman of the Board of the Dania Bank and Caribank, and President, Treasurer and a Director of Caribank Corporation. Policies of Caribank and Dania Bank are established through frequent conferences between Childs and Wyneken. Wyneken has a very close working relationship with Childs. Gorrondona, Jr. has the power to remove Wyneken and Childs. Childs comes to Florida about three times per month to confer with Wyneken. In these above-mentioned discussions, Childs is the spokesman for the "capital." Owning 90 percent of the stock of the Dania Bank provides Gorrondona, Jr. with authority concerning the management and policies of the bank. Directors of the Dania Bank are selected by the shareholders. Gorrondona, Jr. and Childs have not taken any dividends as shareholders of Dania Bank or Caribank, despite the substantial earnings of these banks. Dania Bank and Caribank centralize their operations as much as possible with two separate corporations. Dania Bank and Caribank trade employees back and forth and bill each other through an elaborate accounting system. Thad R. Chamberlain, a director of Caribank Corporation, is executive director of the Banco Suramericano de Desarollo, a Panamanian bank in which Gorrondona, Jr. owns a controlling interest. This is an application pursuant to the Florida Banking Code, Section 658.28, Florida Statutes, for permission to acquire control of Dania Bank by Caribank Corporation. This change in control is sought in order to facilitate a merger of Caribank and Dania Bank. The merger is desired to facilitate the expansion of branch banking, the development of an international department and the development of subsidiaries in such areas as leasing, mortgage financing, and small business investment (S.B.I.C.). The combined capital of Caribank, of approximately $4 million, and the Dania Bank, of $16 million, is expected to facilitate the establishment of subsidiaries. Dania and Caribank are, according to their Chief Executive Officer, Wyneken, "aggressive" banks and there exists a policy of increasing total assets from $265 million at the end of June, 1982, to $500 million by the end of 1985; there is also an aggressive program for subsidiaries. The merged bank plans to spend more on advertising in Dade County. Caribank at its present size cannot justify an increase in advertising expenditures. If this application is approved and a merger subsequently occurs, management expects that there will be benefit on the deposit side since assertedly better use will be able to be made of the money deposited. The Caribank/Dania Bank management has an ambitious program of branch banking. Gorrondona, Jr. and Childs have asked that Dania and Caribank branch into the counties as quickly as possible. Management would like to concentrate branching efforts in Dade County, but their capital at Caribank is so much smaller that it must rely on the Dania Bank for all kinds of assistance. Denial of this application and the failure to merge would restrict expansion in Dade County. The Caribank/Dania Bank management hope that the merged bank will become a large chain bank. The Chief Executive Officer of the two banks testified that to become a large chain bank "[W]e need every bit of help we can get, and that is why we need this consolidation." According to Childs, merger is expected to allow a "substantial increase in the capital base of all the subsidiaries which we have established or intend in the future to establish." A merger is expected to follow immediately upon the granting of the application. If the application were approved and for some reason the merger did not occur, Applicant would seek to change the name of the Dania Bank to Caribank to get the maximum effect out of their advertising dollars. It is further expected that if the application for change in control is granted, the two banks could file a consolidated tax return with an annual tax saving of approximately $64,000. From the above findings, it can reasonably be inferred that this application is made to facilitate a program of rapid expansion and establishment of subsidiaries, and if the application is granted, it can be expected that rapid expansion and development of subsidiaries will be more likely to occur. George Childs, Jr., started Banac Management, Inc. ("Banac") for Gorrondona, Jr. seven and a half years ago and was president of the corporation at the time of the intervention of the BND (discussed below). Banca is a BND subsidiary located in New York City. At the time of the intervention it was acting as a representative of the BND and its subsidiaries to obtain credit lines. Prior to the intervention, Gorrondona, Jr. was involved in the affairs of Banac. He visited Banac in New York six to seven times per year. He was a member of the Banac Board of Directors from 1975 to 1979. The BND was founded in 1954 by Dr. Jose Joaquin Gonzalez Gorrondona, Sr., who is the father of Gonzalez Gorrondona, Jr., the ninety percent (90 percent) owner of the Petitioner, Caribank Corporation, and the subject bank, The Dania Bank. Dr. Gonzalez Gorrondona, Sr. does not now, nor has he ever had any interest in, nor involvement with, Caribank Corporation, The Dania Bank or Caribank, N.A. Since its beginning, the BND had a steady growth until, at the time of the intervention of the bank by the government on December 7, 1978, it was the largest privately owned (nongovernmental) bank in Venezuela with the largest amount of private deposits, 6.3 billion Bolivars (1 Bolivar equals about 0.25 in U.S currency). Gorrondona, Jr. began working at the bank in 1958, worked throughout his early years, and continued to work full-time for the bank after receiving his doctoral degree in economics from the Catholic University in Venezuela with a doctoral thesis in economic planning. During his education, Gorrondona, Jr. studied such subjects as Monetary Theory, History of Financial Institutions, Operation of Financial Institutions, and Public Finance. His interest in economics began early in his life because Dr. Gonzalez Gorrondona, Sr. was the founder of the School of Economics in Venezuela, having been the founder of the Venezuelan Economic Council and the representative of Venezuela at the Bretton Woods meeting in 1943 at which the International Monetary Fund was founded. After graduation, Gorrondona, Jr. continued to study, taking courses in management such as Management by Objective, Computer Science, Systems Analysis, and other courses which would enable him to perform as a manager of a financial institution. Gorrondona, Jr. worked in many phases of the management of the bank, until in 1974, he became president in charge, which means that he was the chief executive officer in the absence of his father. He never drew a salary. By the time of the BND intervention, the stock interest of Gorrondona, Jr. was worth between $350 and $700 million dollars. As an outcome of the intervention, Gorrondona, Jr. lost between $150 and $200 million dollars in the worth of the BND stock which was owned by him. By the time of the intervention, the BND had grown to a bank which included approximately 60 branches, primarily in urban areas of Venezuela. The BND also owned several profitable subsidiaries, including Crenca, a financial society which was able to engage in financial transactions forbidden for commercial banks; Credimatico, which was the owner of a Master Charge franchise in Venezuela which had a market share of twenty-five percent of the credit card sales in the country; Arrendarca, a leasing and factoring company; and Almacendadora Caracas, a bonded warehouse company owning bonded warehouses in several cities in Venezuela. The BND also owned Servimatico, which dealt mainly with consumer credit and financed appliance and other small consumer purchases. Each of these subsidiaries was profitable to the bank and assisted the bank in paying dividends which had been declared each year, since 1973. Beginning prior to 1977, the BND was required to send its minutes of Board meetings to the Superintendent of Banks because there had been detected, as a result of special inspection, a tendency toward concentration of credit. In 1978, BND was the only bank required to send minutes of Board meetings to the Superintendent. At a majority of the meetings of the Board of the Central Bank of Venezuela ("CBV") during the last six months of 1978, there was an agenda item entitled "BND." During this time, employees of the Superintendent and the CBV were at the BND carrying out studies to see in what way or ways the BND's financial soundness could be improved. In August of 1978, the Superintendent of Banks wrote to the Minister of Finance about the situation of the BND. The letter notes that credits of Bs. 2,553.8 million were concentrated in 130 companies, that directors of these companies were in turn, directors of the bank, that there was a disproportion between the amount of these credits and the net worth of the borrower, that renewals were made even after delay in payment and that the credits were extended without analysis of the balance sheet. In September, 1973, the BND was prohibited from distributing dividends by the Superintendent of Banks because it would have adversely affected the liquidity of the BND. In November of 1978, the BND asked the Venezuelan Government for special financial aid in the amount of Bs. 600 million. The BND proposed that it be made the subject of a "private intervention" during the period of time such advance was outstanding. On December 6, 1978, the CBV excluded the BND from the Clearing House effective December 7, 1978, by vote of its Board. The CBV, the equivalent of the U.S. Federal Reserve, is a public institution of the Republic of Venezuela, but is considered independent. Eight members of its Board of Directors and its President are appointed by the government. Six members are appointed on recommendation of the private sector. The CBV, through its credit functions, provides credit assistance to banks and credit institutions in Venezuela. Through its operations, it seeks to safeguard the solvency and liquidity of Venezuela's banking system. A Clearing House to settle accounts between banks is operated by the CBV. When bank customers draw and deposit checks, credits and debits between banks are created that have to be reconciled on a daily basis. Venezuelan banks are required by law to maintain a deposit account at the CBV in order to settle such accounts. If after reconciliation, a bank owes money to other banks, its CBV account is debited to cover the debt. If after reconciliation, a bank is owed money, its account is credited. If a bank does not have enough on deposit to cover its debts, it can present to the CBV cash or checks or payment orders against other banks in sufficient amount. It can also present funds obtained outside the country. Finally, it can obtain funds by rediscounting commercial paper at the CBV. Rediscount consists of endorsing eligible commercial paper to the CBV in return for payment. Eligible paper, for example, must mature within 360 days and be adequately secured so that there is assurance as to its liquidity or self-liquidating nature. Thus, medium or long-term loans do not normally give rise to eligible paper. The decision to exclude the BND from the Clearing House was reached on December 5 and 6, 1978. Prior to this time, BND had had repeated difficulties converting its debts at the Clearing House. On December 5, the CBV Board authorized the exclusion of the BND in principle subject to discussion with the Venezuelan Government. At the time, the BND did not have commercial paper considered eligible by the CBV to receive credit assistance from the CBV. The situation was examined again on December 6 by the CBV to see if there were new elements or new alternatives. On December 6, 1978, the BND was overdrawn at the Clearing House to the extent of being unable to make good in its negative balance of approximately Bs. 100 million. It was decided there were no new elements or alternatives, and accordingly, the President of the CBV wrote to the Venezuelan Minister of Finance to let him know (1) that the BND had a deficit in its legal reserve requirement (see below); and (2) that the CBV Board had decided to exclude the BND from the Clearing House effective December 7, 1978. Prior to the exclusion of the BND from the Clearing House, the CBV Board considered the possibility of extending extraordinary credit assistance to the BND. The Board concluded that such assistance would be in violation of Article 45 of the law governing the CBV. That article provides: "Article 45. - In exceptional cases and with the favorable vote of the six members of its Board of Directors, the Banco Central de Venezuela may, in order to insure the due liquidity of a bank or credit institution in transitory difficulties, provide it with funds for a period not to exceed ninety days, which may be extended for an equal term at the Bank's discretion, secured by other assets of said bank or credit institution, different from those listed in the previous article. "Loans may in no event be made to a bank or credit institution if the trans- itory difficulties it faces are due, in the Board's opinion, after having consulted with the Bank Regulatory Commission, to the poor management or inadequate investment of its resources." In the case of the BND, the CBV Board concluded extraordinary credit assistance would be illegal because BND's liquidity problems were not "transitory" but rather structural, permanent and progressive, because the liquidity problems of the BND were due to improper investment of its resources, and because its funds were invested in operations that were insecure or lacking in guarantees, which reflected bad banking management. Under the rules and regulations of the Clearing House, the exclusion of the BND was mandatory. On the evening of December 6, 1978, a meeting was held at the Presidential Palace attended by the President of Venezuela, the Minister of Finance, other ministers involved in the financial sector, some of the board members of the CBV and the Superintendent of Banks. The stated purpose of the meeting was to inform the President of the Republic about the BND situation. The meeting lasted three hours. There was a discussion as to whether there was any alternative to the one proposed by the CBV. It was concluded that there was no alternative. The President of the Republic instructed the Minister of Finance and the President of CBV to hold a meeting the following morning to inform the banking community that the BND had been excluded from the Clearing House and that the government had decided to intervene the BND. The decision to intervene was unanimous. Two major events which contributed to the liquidity crisis which allowed the government to intervene the BND, were the result of actions by the government itself. The first of these actions was the substantial withdrawal of public funds from the BND. Between November 30 and December 6, over 100 million dollars was withdrawn by the government agencies from the BND. Withdrawals averaged 20 million dollars per day with a high of 30 million dollars on December 6. These daily balances were reported by the Comptroller of the bank to Gorrondona, Jr. on a twice daily basis during these days. No testimony, either from a witness or in the form of an exhibit, was ever introduced to contradict Gorrondona, Jr.'s testimony concerning these substantial withdrawals during the week prior to the intervention. The second action which was taken by the government injurious to the BND was the refusal to accept commercial paper for rediscount. Gorrondona, Jr.'s unrebutted testimony established that the same paper which was denied rediscount by the Central Bank on December 6 was granted rediscount on December 30 and during the period of time after the intervention. Gorrondona, Jr.'s testimony established that it would have been impossible to change the loan portfolio within such a short period of time and therefore of necessity it was the same loan portfolio which was granted rediscount after the intervention which had been denied rediscount during the week prior to the intervention. Gorrondona, Jr. further testified that the December 7, 1978, hand- written balance sheet, contained in Petitioner's Exhibit 70, the Intervenor's January 12, 1979, report, was a consolidated balance sheet including all 60 of the BND's branches. Therefore, the balance sheet was prepared by employees of the intervenor during the period between December 7, 1978 and January 12, 1979. On the issue of loans eligible for rediscount on December 7, Mr. Gabledone, Respondent's witness, using Respondent's Exhibit 70, stated that if the figures in Exhibit 70 were correct, the BND had 3.663 billion Bolivars eligible for rediscount on December 7, and that "the BND would have been able to obtain a large amount of rediscounts, or large amounts that would be eligible for rediscounts." In part, a result of the withdrawal of government funds, the failure of the government to repay its loans and overdrafts, and the denial of rediscount by the Central Bank of BND commercial paper, the BND had a deficit at the Central Clearing House on December 6 of 100 million Bolivars. Article 166 of the General Banking Law of Venezuela provides: "Whenever a bank or credit institute, subject to the Provisions of this Act, faces a preca- rious situation which might entail an eventual detriment to its depositors or creditors, or endanger the banking system in general, or when infringing repeatedly (the provisions of) this Act, or those of the Central Bank of Venezuela Statute or the Regulations of either or both, or any Resolution adopted by the Executive Branch, the Superintendent of Banks or of the Central Bank of Venezuela, then the Executive Branch shall empower the Superintendent of Banks or any other individual it may deem com- petent to place the Bank or Credit Institute in Receivership. The Receiver may agree with the Central Bank of Venezuela on the course of action to be taken for the respective bank's or credit institute's redress, its eventual reorganization or liquidation, which shall become mandatory for the respective financial house. But he shall, without exception, pre- pare, within a period not exceeding thirty days as from the date or resolution decreeing the receivership, a complete and itemized report concerning the legitimacy of the respective intervention and submit it to the Executive Branch. By Resolution 2296 issued December 7, 1978, the Minister of Finance of Venezuela intervened the BND. Intervention is an uncommon occurrence and the law contemplates it will occur only when a financial institution is in danger. The decision to intervene the BND could have been appealed to the Supreme Court of Venezuela. No appeal was taken. Neither Gorrondona, Sr. or Jr. or any other shareholder filed suit to block or overturn the intervention, although they had lawyers in Venezuela and Gorrondona, Sr. was in Venezuela. The BND is still under intervention. On march 31, 1979, the Superintendent of Banks of Venezuela issued its Annual Report for the year 1978 ("Superintendent's Report"). The Report contains an extensive discussion of the BND and the reasons for its intervention. The Superintendent's Report states the following: In 1977 and 1978, a decrease in the rate of growth of the Venezuelan economy together with unbalanced financial management at the BND whose key feature was credit over- expansion, especially as regarded credits to companies connected to the bank, placed the BND in a non-liquidity crisis to be- come increasingly notorious. The BND was the object of special attention by the Bank Regulatory Commission because over the 5 years preceding the intervention several violations of the General Law on Banks and other Credit Institutions had been detected. The BND had repeated insufficiency of the reserve requirement, a problem from which the bank chronically suffered. The BND was twice fined the maximum amount for illegal credits extended (1) to the Banco Suramericano de Desarollo ("BSD"), a Panamanian bank in which Gorrondona Jr. owns 80 percent of the shares, and (2) Crenca, a BND subsidiary, in violation of Article 153 of the Banking Law. Certain credits regarded by the BND as agricultural were not properly classified as agricultural. As of March 31, 1978, Bs. 2,553.8 million of bank loans were concentrated in 130 customers (the "Specially Classified Companies"). Directors of these companies were also bank directors. Credits were granted to these companies easily, then were renewed frequently and even when over- due, balance sheets for some of these credits did not exist and most of the credits were unsecured. The minutes provided by the BND to the Superintendent of Banks were not identical to those recorded in the BND's minute book, including that innumerable credit operations with subsidiaries had been omitted from the provided minutes. BND employees failed to cooperate with the Superintendency in providing requested in- formation. An official memorandum was sent to the BND president about this matter, ordering him to rectify this situation. Irregularities in the BND's legal reserve led to numerous notices to the BND president as well as to the levying of several fines. Until December 12, 1978, the BND received 224 memoranda concerning shortages in the legal reserve requirement and was fined 32 times for such legal reserve requirement deficiencies. The average weekly shortage in the legal reserve requirement through- out 1978 was Bs. 124 million. An audit conducted as of September 30, 1978, showed that the estimated loss on the loans to the Specially Classified Companies was Bs. 632.9 million. The estimated loss on other credits in the bank Portfolio was 35.7 million. The reserve for Portfolio Contin- gencies was Bs. 12 million. On January 12, 1979, the BND Intervenor, Tinco, made a report 1/ to the Minister of Finance pursuant to Article 166 of the General Banking Law of Venezuela. The Report describes the reasons for intervention. The Intervenor's Report states the following: During the first eleven months of 1978 the BND increased its Invested Assets by Bs. 1.0789 billion while in that same period deposits increased only Bs. 183 million. The imbalance was partially covered by rediscounts. By November 30, 1978, the BND had rediscounts of Bs. 485.4 million, which is 32.7 percent of all commercial bank re- discounts for that period. Many of the documents submitted to the Central Bank for rediscounts were rejected by it since they did not comply with the requirements for eligible paper. Credit restrictions were imposed on the BND by other banks. The BND's failure to make timely remittance of funds to correspondents resulted in their not honoring checks and refusing to open let- ters of credit. In 1975-78 the BND had a chronic shortage in its legal reserve requirement. The BND had a shortage in the legal reserve in 38 of 48 weeks during the first 11 months of 1978. The BND's reserve shortage stabilized during the months of September 1978 through November 1978 at over Bs. 100 million and reached Bs. 169 million in the last week of November. Prior to the intervention the BND was twice fined Bs. 30,000 for having granted illegal credits to the BSD, the Panamanian bank owned by Gorrondona Jr., and to Crenca. Even after the fines, the illegality was not corrected. In the case of the BSD the credit at the time of the fine through a time deposit was Bs. 657 million. At the time the BND was inter- vened, this deposit had not been reduced at all. In late November and early December of 1978 the situation grew more serious as the BND's negative balances at the Clearing House in- creased, and the BND had difficulty sub- mitting documents eligible for rediscount by the CBV. Questions from abroad about the BND's situation became more insistent. When the BND was unable to make good on its negative balance at the Clearing House on December 6, the BND was expelled as of December 7 in compliance with Article 11 of the pertinent Rules and Regulations. Thereupon the BND was intervened pursuant to Article 166. There were large withdrawals after the intervention and instructions were given that teller windows would not close as long as there were clients present. As of December 7, 1978 loans placed with affiliates (companies owned totally or partially by the BND) totaled more than Bs. 1.302 billion. Loans placed in 93 companies with which important shareholders, directors or executive officers of either the BND or its affiliates were directly or indirectly associated totaled Bs. 1.739 billion. Other credits were as of the date of the Intervenor's Report are still under study. On October 14, 1976, five vice-presidents of the BND, including the vice-president of Credit, the First Vice- President-Treasurer, the Vice- President-Comptroller, the Vice- President of Branches and Agencies, and Jaime Benitez ("Benitez") Vice-President for Banking Services, wrote a confidential memorandum to Gorrondona, Sr. and Gorrondona, Jr. in order to emphasize deficiencies and problems within the BND and to present recommendations. As summarized by Benitez, who testified at the hearing in this matter on July 16, 1982, the principal problem was a high concentration of credits in a group of businesses. These credits were not paid as they matured. This created a deficiency in cash flow and caused liquidity problems. There were also deficits in the legal reserve requirement. Accounting procedures were not being correctly applied and there was a problem of overdrafts. The memorandum recommended: (1) a change in credit policy even though this would limit the expansion program; (2) affiliated and related companies should start paying their debts; (3) concentration of credit should be eliminated; and (4) internal controls aid internal procedures should be improved. Benitez' testimony established that as a whole, recommedations were not carried out and deficiencies were not eliminated. The Memorandum of October 14, 1976, stated that: "The Office of the First Vice-President for the Treasury has repeatedly voiced to the highest authorities in the institution its opinion regarding the excessive placements with Group Companies and has gone as far as to file a written report with the President and the Acting President. In spite of the fact that, on account of its position, it must authorize almost all of the overdrafts and/or charges to the accounts of Group companies, it acknowledges the need to put an end to this practice. This question has been the subject of repeated discussions with the President and the Acting President, who are the only authorities empowered to put an end to this situation. The Memorandum of October 14, 1976, identified a number of problems then existing at the BND. It stated that there existed problems of: "1. High credit concentration (approximately 60 percent of the entire credit portfolio is placed with 1.4 percent of the total number of clients) in Group companies or companies directly or in- directly tied and/or related to it. We mean by this those companies or natural persons in the organization created by the highest ex- ecutive level or under instructions from it, who are organized with high Group officials, Bank officers or trusted persons, both as regards the holding and representation of their shares and their administrative or Director offices. These companies were expedited by said high levels or under orders from them, given through high Bank officers." "2. Non-payment by said companies due to con- stant renewals, without partial [the translation of "abonos parciales" should be "partial pay- ment" in the sense of "amortization"] or in- terest payments." "3. Credits to Group companies, above the legal limits, which are authorized or ordered by the highest officials." "4. Interest documented as promissory notes that accumulates above and beyond the credits originally granted." "5. Excessive number of permanent overdrafts with the National Government, governmental de- pendencies and especially and in an increasing fashion, with Group companies or companies directly tied or related thereto." "6. Overdrafts and collateral obligations in overseas banks due to the financing com- mitment and ever increasing requirements of Group companies or companies directly or indirectly tied or related thereto, which render the institution vulnerable to possible changes in the financial market." "7. Constant use of the Bank's own credit resources for the financing of Group companies directly or indirectly tied or associated there- to, whether they be already in existence or some of the ones that are constantly being created for expanionist purposes and whose activities represent a medium or long-term investment, at loggerheads with the soundness of commercial banking (Treasury Commission: see the material submitted at the meetings and on the minutes)" "8. Exclusion from the List ratified by the Board of Directors of certain operations of Group's companies and of companies directly or indirectly tied or related thereto, following longstanding instructions from high officers, who, in turn, received them from the highest levels." "9. Credits to companies whose balance sheets do not justify the amounts of said loans, mainly Group companies, and which credits are authorized or ordered by the highest levels." "10. Accounting omission of operations-especially guarantees and bonds-conducted from the Group com- panies under order from the highest levels." "11. Excessive financial burden due to the payment of surtaxes and commissions on deposits." "12. Increase in expenses through outlays that are not compatible with the normal management of the Bank." "13. Insufficient income generation, In relation to portfolio volume, which causes the interest account to be affected by amounts equal to the yield said portfolio should generate. Therefore, an insufficient amount in the account Interest Collected in Advance due to the drain it has been withstanding." "14. Inconsistency in the Reserve Requirements position due to a weak treasury and the continuous negative balances at the Clearing House." "15. Unbridled personnel growth at all levels, which has brought about an evident bueaucratization of Bank functions." "16. Ignorance of normal communication channels and of approved bonus norms and procedures." One of the signers of the memorandum of October 14, 1976, Santiago Rodriquez Marcano, was made an Assistant to the President of BND after the memorandum was sent, but he left after a few months saying that he did not receive the necessary cooperation in his new position. Gorrondona, Jr. testified that in 1978, BND was facing a "serious . . . liquidity crisis" and "had very little liquidity." Gorrondona, Jr.'s testimony established that he made his fortune in real estate. Gonzalez' testimony indicated that in 1978 the BND faced liquidity problems, a "liquidity crisis" which even with government assistance would have continued until the end of 1979. Benitez' testimony indicated that the BND was in serious trouble at the time of intervention and that the primary cause was credit concentration and the lack of payment upon maturity. Romero's testimony indicated that at the time of intervention the BND had the following problems in the area of credits or loans: A substantial part was concentrated in real estate activities. A lot of the business that had received credits from the bank was related indirectly with directors and executives of the bank. Some businesses received credits for amounts that went over what the law allows. The credits were not sufficiently col- lateralized or guaranteed. Some of these credits had a maturity of more than one year which is illegal for a commercial bank. Gabaldon's testimony established that while he has been President of the BND many adjustments had to be made to correct the accounts of the BND as they existed at the time of intervention; that the BND Board had decided to make an appropriate footnote reservation in the BND financial statements calling attention to the possibility of future adjustments which might result from investigations and analyses of the BND's accounts prior to the intervention. Gabaldon's testimony, based on his study of BND records, established that at the time of intervention is some cases the loans to subsidiary companies were paying interest but in a majority of the cases they were not doing so but rather the BND would increase the amount of the debt to cover the amount of the interest due. At the time of intervention, approximately 12 to 15 percent of the BND loan portfolio consisted of loans to these subsidiary companies. Alejandro Guevara Chacin's ("Guevara Chacin") testimony established that the minutes of the BND sent to the Superintendent compared with the minute books of the bank revealed that many operations were omitted. Guevara Chacin supervised the comparison. Juan Ramirez' ("Ramirez"), the present Superintendent of Banks of Venezuela, testimony indicated that there were many reasons for the intervention of the BND and any one of them, if put together with or alongside the others, was enough to support the decision. Benitez' testimony indicated that the basic principle of the banking business is diversification; in other words, to place loans with diverse or different customers. Childs' testimony indicated that renewal of loans without payment of interest is bad banking practice. Childs' testimony indicated that loans to corporations in which directors have an equity interest should be secured and at arms length. Wyneken's testimony indicated that there are reserve requirements in the United States and violation is not a trivial matter. The testimony of Guevara Chacin, Eenitez, Lopez-Romero and Ramirez established that one of the BND's major problems under Gorrondona, Jr. was repeated deficiencies in the BND's legal reserve. After the intervention, there was a run on the BND. Between June 30, 1978, and December 31, 1978, deposits from the public decreased by Bs. 2.1 billion and most of this decrease occurred between December 7, 1978, and December 31, 1978. In the six months following the intervention government deposits at the BND went from Bs. .6 to Bs. 2.7 billion. These deposits permitted the BND to cover withdrawals. Gorrondona, Jr. left Venezuela for a two week period on November 17, 1978, and a detention order was issued on November 24 which would have resulted in arrest had he had been in the country. In Venezuela, the subject of a detention order is immediately arrested and is held without any opportunity for posting bail until the detention order is resolved. The detention order was based upon an allegation that Gorrondona, Jr. had been involved in a company which had committed a security violation more than five years prior to the detention order. Petitioner contends that the charges against him, which resulted in the detention order, were politically motivated. This order kept Gorrondona, Jr. out of the country during the intervention, and was eventually dismissed. The Court, in dismissing the charges, stated: It then follows from the aforesaid, that it would -- clearly result in an injustice to assign any criminal liability to persons who are not even members of the Board when the presumed irregularities may have been committed. The period leading up to the intervention of the BND was also the period immediately prior to the national election which was held on December 3, 1978. In the elections in 1974, Gorrondona, Jr. had contributed 9 million dollars to the unsuccessful opponent of President Perez. In the election of 1978, Gorrondona, Jr. had contributed over 1 million dollars to the opponent of President Perez's party, the Accion Demicratico (AD) party. Venezuelan laws do not restrict the size of campaign contributions. Gorrondona, Jr. returned to Venezuela in June, 1979. At that time Gonzalez recommended to Gorrondona, Jr. that he go to court to prove his innocence. In June, 1979, Gorrondona, Jr. and Sr. initiated a noticia criminis proceeding in a Venezuelan Penal Court of First Instance. There are three ways to initiate a criminal proceeding in Venezuela: denunciation (a person makes a charge that a crime may have been committed), accusation (a person makes a charge that a particular person may have committed a crime), and noticia criminis (the court takes notice that a crime may have been committed). In Venezuela, the courts may call witnesses and thereby take investigative initiative. The noticia criminis proceeding is based on the obligation of a Venezuelan court to investigate a possible crime of which it has notice from whatever source. In the case of the noticia criminis proceeding initiated by Gorrondona, Jr. and Sr., the court was called on to determine if the BND administrators had participated in the commission of any crime while they were serving as such. In other words, the purpose of the noticia criminis proceeding initiated by Gorrondona, Jr. and Sr. was to determine if during the period of time in which they were administering the bank they committed an act that would or could be considered criminal in Venezuela. The word used by Gonzalez in describing the noticia criminis determination was "delito," which the interpreter testified means crime. The decision of the Court of First Instance in the noticia criminis proceeding was to terminate the summary investigation pursuant to Article 206 of the criminal code for criminal trials. The court found there was no evidence of crime. In other words, the determination of the judge in the noticia criminis proceeding was to end the criminal investigation because the facts presented were not of a criminal nature. With regard to the violation of banking laws described in the Superintendent's Report and the Intervenor's Report, the Court said "[a]s is clearly appreciated from these provisions, none establishes penal sanctions and although they constitute a violation of juridical regulations and comprise sanctions, same have no other character than an administrative one. The appellate court said, "this Superior Court considers that lack of maintenance of reserves in such proportion and manner as established in Articles 20, 21, and 163 of the General Act governing Banks and other Credit Institutes, is object of a sanction under Article 170 of the said law consisting of a fine to be applied by the Superintendent of Banks. Efforts to collect the loans made by the BND prior to intervention: On February 28, 1980, the BND entered into an agreement with Gorrondona, Sr. and Gonzalez regarding the loans to certain debtors of the BND ("February 28, 1980 Agreement"). All these loans were made prior to the intervention. The February 28, 1980 Agreement fixed the amount of the debt to the BND of the ap- proximately 180 companies specified therein at Bs. 4.038 billion. It specified that the BND would accept in payment of this debt the amount of Bs. 3.388 billion. It specified that payment would be made within one year. It specified that during that year no actions would be commenced to compel payment of this debt. Gorrondona, Sr. and Gonzalez signed the February 28, 1980 Agreement either as business brokers for the companies specified therein or as representatives of such companies. According to Gorrondona, Jr. all the debtor companies obligated themselves jointly, and any collateral posted by one could be used to satisfy the debts of the other. Paragraph 15 of the February 28, 1980 Agree- ment specifies certain responsibilities assumed by Gorrondona, Sr. and Gonzalez. "We, JOSE JOAQUIN GONZALES GORRONDONA, a Venezuelan citizen, of legal age, of this domicile, the bearer of identity card number 30.580; and DIOGENES Jr. GONZALES HURTADO, a Venezuelan citizen, of legal age, of this domicile, the bearer of identity card number 1.193.753, state that acting as business brokers for THE DEBTORS by virtue of the already noted common interests, personally and jointly and severally in behalf of all of THE DEBTORS undertake to accept and comply with the present agreement in all of its parts. Therefore, and to preserve the fullness of its effects, we undertake to have those debtor companies whose Articles of Incorporation or By-Laws forbid or limit the granting or posting of guarantees or securities, amend them as needed in order to allow for the profferred guarantees; we likewise undertake to have them grant their consent lawfully and execute the present in- strument within the term of thirty (30) days, and to execute any other documents, as re- quired, that may be necessary for the per- formance thereof. As of the present, the loans of the com- panies specified in the February 28, 1980 Agreement have not been paid in full. The amount remaining to be paid, exclusive of interest, is either approximately 2.8 bil- lion B's or 2.1 billion B's depending on whether the loans compromised in the February 28, 1980 Agreement (the difference between Bs. 4.038 billion and Bs. 3.388 billion) are treated as paid. Such unpaid loans as of this time are neither principal nor interest. At this time the BND's total loan portfolio is approximately Bs. 6.2 billion. Whether the figure of Bs. 2.1 or Bs. 2.8 billion is used for the amount of these unpaid loans, these frozen loans from prior to the intervention represent a substantial portion of the BND loan port- folio. These loans to related or Specially Classified Companies are in addition to the approximately Bs. 900 million in loans to subsidiary or affiliated companies that are not paying interest or amortizing principal. There is no evidence that Gorrondona, Sr. or Gonzalez were coerced into signing the February 28, 1980 Agreement. The Agreement was negotiated over an extended period of time. Gonzalez has testified that he signed the February 28, 1980 Agreement in order to assist the rehabilitation of BND and that Gorrondona, Sr. signed in the same spirit. Both men initialed each page when they signed it. Gorrondona, Jr. has testified that it is his position that the agreement is invalid in parts because he did not sign it. The BND has negotiated with Gorrondona, Jr. concerning the performance of the February 28, 1980 Agreement and the debts owed by the Specially Classified Companies. Such negotiations have not been successful. Under the February 28, 1980 Agreement, suits could not be filed for one year. When the agree- ment was not performed, the administration of Borjas pursued negotiations with Gorrondona, Jr. and, when Gabaldon became President of BND in August, 1981, he continued negotiations with Gorrondona, Jr. No suits have been filed against Gorrondona, Sr. or Gonzalez personally on account of the February 28, 1980 Agreement. The BND has very recently started to file suits against some of the debtors. Gorrondona, Sr.'s signing of the Agreement of February 28, 1980, Gorrondona, Jr.'s partici- pation in negotiations with respect to the performance thereof, together with the state- ments made in Memorandum of October 14, 1976 and described above concerning loans made prior to intervention to companies owned directly or indirectly by owners of the BND, corroborates the finding of the Intervenor that prior to intervention a substantial amount of loans were made to companies in which officers and directors of the BND had an interest. The inability to collect these loans corroborates the conclusion of the Superintendent and Intervenor that these loans were not adequately collateralized and were made in amounts in excess of what prudent credit practices would dictate based on the companies' balance sheets. Transfer of ownership of the BND: In the days following the intervention, members of the national government of Venezuela, including the Minister of Finance, met with Gorrondona, Sr. The possible liquidation of the BND and the possible transfer of ownership were discussed. On February 8, 1979, agreements were signed providing for the sale of 65 percent of the BND's shares to the Corporation Venezolana de Fomento ("CVF") . Sixteen shareholders, including Gorrondona, Sr., signed these agreements. They covered the shares owned by both Gorrondona, Sr. and Jr. The February 8, 1979 Agreement set a minimum price of Bs. 1 per share. The Agreement provided that the actual price would be set by the Superintendent of Banks prior to July 31, 1979. The price was to be fixed based on the book value of the BND and its subsidiaries as of December 31, 1978 less the uncollect- ible loans in its portfolio. At the time of intervention the losses on the BND loan portfolio exceeded the capital and reserve of the bank. Under Venezuelan law, when a bank has lost more than 25 per- cent of its capital, the stockholders are required to replace it. Accordingly, had they not sold their shares, the former owners of the BND would have had to make a capital contribution to the BND. As it is, the new owners of the shares have replaced the lost capital of the BND. Gorrondona, Jr., Borjas, the then President of the BND, and the Planning Minister of Venezuela met between June and November, 1979, to discuss the price for the BND shares and repayment of debts owed by the Specially Classified Companies. As a result of this meeting, an agreement was signed on December 21, 1979, regarding the fixing of the price of the stock and the negotiation of the re- payment of loans made to the Specially Clas- sified Companies. In February, 1980, two agreements were signed finalizing the sale of the BND shares to the CVF. One of these agreements (Respondent's Exhibit 82) was with the parties that had signed the February 8, 1979 Agreement. Re- spondent's Exhibit 82 was signed by Gorrondona Sr. and Gonzalez among others. In paragraph First it recites that: "In execution of the agreement reached in the Third clause of the sales contracts for Banco National de Descuento, C.A. shares, sub- scribed between C.V.F. and THE SELLERS and dated February 8, 1979, the Bank Examiner through Official Notices Nos. HSE-200- 3860 and HSE-200-3992, dated July 31 and August 7, 1979, respectively, ad- dressed to the Banco National de Descuento, C.A., determined losses in the Credit Portfolio of said Institution reaching an amount of ONE THOUSAND ONE HUNDRED AND EIGHTY SIX MILLION AND SEVEN [TOS (hundred) omitted in translation] THOUSAND BOLIVARS (Bs. 1,186,700,000.00) and therefore ordered the pertinent adjustments to the BANCO NACIONAL DE DESCUENTO C.A.'s Balance Sheet as of December 31, 1978." In paragraph Second it recites: "Due to the adjustments referred to in the previous Clause, and pursuant to the agree- ment between the parties listed in the con- tracts entered into on February 8, 1979, the Book value of the sold shares resulted in an amount less than One Bolivar (Bs. 1.00) per share, wherefore 'THE SELLERS' have, pursuant to the provisions of the Third Clause of the aforementioned contracts, agreed to accept the amount of One Bolivar (Bs. 1.00) per share, as the sale price for the shares sold." In paragraph Third it recites: "Lastly, 'THE SELLERS' state for the record that what they declare herein completely invalidates any statement or claim made by them, their agents, attorneys or represent- ative regarding any questions on the validity of the agreements executed on February 8, 1979, whose contents they are aware of, and which they execute in a final and definite manner through this document." There is no claim made in the record that the signers of Respondent's Exhibit 82 were coerced in their decision to execute that agreement. The other agreement of February 1980 regard- ing the transfer of shares of the BND (Respon- dent's Exhibit 81) was with shareholders who had not signed the February 8, 1979 Agreement. That agreement also fixed the sales price at 1 B per share. As recited therein, it used as the amount of the losses the Bs. 649 million figure established by the Minister of Finance pursuant to the appeal taken November 30, 1979, rather than the Bs. 1.186 billion figure established by the Superinten- dent of Banks prior to the appeal. This established that whether the Bs. 1.186 bil- lion or the Bs. 649 million figure is used for the amount of the losses, the shares of the BND had at most a nominal value of 1 B on December 31, 1978. Property in Venezuela cannot lawfully be taken by the Government without compensation. If it is taken for less than a fair price, the aggrieved person can go to court to seek a fair price. The judiciary in Venezuela is independent. No lawsuit has yet been filed to obtain ad- ditional compensation for the shares of the BND transferred to the new owners. Recently an "administrative letter" was sent regarding additional compensation for the shares. Nothing in Venezuelan law precluded its being sent earlier. The evidence in the record does not support a finding that the government of Venezuela coerced the owners of the BND to sell their shares or that such shares were sold at less than a fair price. As alleged by Petitioner. SUMMARY FINDINGS The decision to intervene the BND was, in part, politically motivated as evidenced by the timing of the intervention, the withdrawal of substantial government deposits immediately prior to intervention and the decision to refuse recognition of previously accepted commercial paper for rediscount. This is not to conclude, however, that the continuing liquidity problems of the BND were caused by the government. The reasons for the liquidity crisis experienced by the BND in 1978 had existed since at least 1976, and were identified in internal memoranda as well as Superintendent of Banks' and Intervenor's reports. The liquidity crisis experienced by the BND in 1978 and the intervention of the BND by the Venezuelan Government have at the present time a somewhat adverse effect on the reputation of Gorrondona, Jr. with respect to his qualifications as a banker. There is no evidence of any deficiency in his character or integrity. The education and business experience of Gorrondona, Jr. tend to establish his qualifications. However, his role as President-in-Charge of the BND during the liquidity crisis and intervention reflects adversely on those qualifications. No witness was called by the Banking Department or the Applicant on the question whether the practices that gave rise to the intervention constitute unsound banking practices. Those practices have been identified in the findings herein and include concentration of credit in the loans to the Specially Classified Companies, the renewal of loans to subsidiary companies though those loans were not paying interest, repeated violation of legal reserve requirements, failure to comply with the laws relating to agricultural loans, and failure to disclose to regulatory authorities that the minutes submitted for review by those authorities were not the same as the minutes in the books of the bank. LEGAL CONCLUSIONS AND RULINGS Subsection 120.57(1)(b) 12, Florida Statutes, provides: In applications for a license or mergers pursuant to title XXXVIII which are referred by the agency to the division for hearing pursuant to this section, the hearing officer shall complete and submit to the agency and to all parties a written report consisting of findings of fact and rulings on evidentiary matters. The agency shall allow each party at least 10 days in which to submit written exceptions to the report. Subsection 120.52(7), Florida Statutes, defines "license" as [a] franchise, permit, certificate, registration, charter, or similar form of authorization required by law, but it does not include a license required pri- marily for revenue purposes when issuance of the license is merely a ministerial act. Subsection 658.28(1), Florida Statutes, provides in part: (1) In any case in which a person or a group of persons, proposes to purchase or acquire a controlling interest in any state bank or state trust company and thereby to change the control of that bank or trust company, each person shall first make ap- plication to the department for a certificate of approval of such proposed change of control of the bank or trust company. . . The above provisions of Chapter 120 establish the Hearing Officer's report procedure for license applications under Florida banking laws. This is an application for a certificate of approval which is a form of license application within the meaning of that term as used and defined in Chapter 120. Therefore, no recommended order will be issued. Subsection 658.28(1), Florida Statutes, provides in part: [T]he department shall issue a certificate of approval only after it has made an investi- gation and determined that the proposed new owner or owners of the interest are qualified by character, experience, and financial responsibility to control and operate the bank and trust company in a legal and proper manner and that the interests of the other stockholders, if any, and the depositors and creditors of the bank or trust company and the interests of the public generally will not be jeopardized by the proposed change in ownership, controlling interest, or management. The above provision necessitates Respondent's investigation of Gorrondona, Jr.'s banking experience. Thus, the history of the BND and his role in the management of that institution are relevant to Respondent's investigation and to this proceeding. Petitioner's objection to such evidence is hereby overruled. FILED this 28th day of December, 1982, in Tallahassee, Florida. R. T. CARPENTER, 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 28th day of December, 1982.
The Issue Consideration of the entitlement of Merchants & Southern Bank of Clay County to be granted permission to organize a corporation for the purpose of conducting general banking business in Clay County, Florida. See Section 658.19, Florida Statutes. ,
Findings Of Fact On April 12, 1985, Applicant 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 Clay County, Florida. See Department's Exhibit No. 1-A. Notice of receipt of the application was published in the Florida Administrative Weekly on April 26, 1985, under the name "Merchants & Southern Bank of Clay County." A Notice of Intention to Appear and Petition for Public Hearing was filed by the Protestant, Keystone State Bank, on or about May 15, 1985. Said Petition contained a request for public hearing and objected to the granting of such application on three grounds: There being no need for additional bank facilities in the primary service area where the proposed bank is to be located. The primary service area would not support the proposed bank and all other existing bank facilities in said service area. Public convenience and advantage would not be promoted by the establishment of the proposed bank. The application was deemed substantially complete on June 13, 1985, following submission of specific information and publication of the second and third choice names in the Florida Administrative Weekly on June 14, 1986. A Notice of Hearing was sent on July 11, 1985, for a hearing to be held October 30, 1985, and October 31, 1985. On August 16, 1985, Protestant filed a motion for continuance. On August 27, 1985, an order was entered granting the motion for continuance and rescheduling the hearing for December 10 and 11, 1985, in the jury room of the Clay County Courthouse. On October 31, 1985, a further Amended Notice of Hearing was prepared amending the location of the hearing to the meeting room in the Green Cove Springs public library. On November 7, 1985, an amendment was filed by the Applicant changing the corresponding director from Hugh E. Shiver to Ronald A. Carpenter. On November 8, 1985, an amendment was filed by Applicant adding Tim W. Kaskey as a proposed director. On November 18, 1985, the Office of the Comptroller acknowledged said amendments and determined they did not constitute material changes as that term is used in Rule 3C-9.02(6), Florida Administrative Code. Mr. Shiver, subsequent to said amendments and prior to hearing, resigned as a director. A hearing on the Petition was held on December 10 and 11, 1985, in the meeting room of the public library in Green Cove Springs, Clay County, Florida. Notice of the hearing was published on November 25 and 26, 1985, in the Florida Times Union and on November 21, 1985, in the Clay County Crescent. See Applicant's Exhibit No. 1. The Applicant's designated PSA (proposed service area) exists entirely within Clay County, Florida. PSA boundaries are as follows: DISTANCE FROM BOUNDARY DESCRIPTION SITE IN MILES north Bull Creek 12 miles south Junction Putnam Co., 6 miles Bradford Co., Alachua Co. & Clay County east Putnam County line 4 miles west Bradford County line 1 mile The PSA is serviced by State Road 21 in a general north- south direction, by State Road 100 in a general east-west direction and by various feeder roads throughout the PSA. See Department's Exhibit 1-A, map filed in response to question $2 of Exhibit A. Although the Applicant has the expectation of success in serving the area described above, testimony reveals that the northwest corner of the PSA, in the Kingsley Lake location, will not provide much business. Moreover, Applicant could be expected to realize as much as 75% of its deposits in an area which is five miles in radius from Keystone Heights, Florida, the location of the proposed bank. This would be consistent with the experience of the Protestant, Keystone State Bank, which obtains 73% of its deposits from that area. The area designated by the Applicant as its PSA, that is, the geographical area from which the proposed bank expects to draw 75% of its deposits, is a less likely eventuality than an area which more or less conforms to the five mile radius where experience of the existing Keystone State Bank has shown deposits approximating 75%. In addition to the difficulty of gaining success in the northwest corner of the designated PSA, due to the distance from the proposed bank location and the preference of those particular customers to bank in Starke, Florida, the balance of the northern one-half of the PSA is sparsely populated. Obviously, this lack of population limits the number of depositors. Likewise, the artificial boundaries at the county lines as set forth in the designated PSA are not realistic. The Applicant can be expected to serve portions of Bradford and Putnam counties as part of the PSA. The Applicant has recognized this overlap into other counties in its designation of a so-called "secondary service area." Protestant's Exhibit 2, a map, delineates the designated PSA in a pink outline and the five mile radius in a yellow circle. Applicant's Exhibit 2 is another map showing this secondary area in cross hatching. The secondary service area described by the Applicant is as follows: DISTANCE FROM BOUNDARY DESCRIPTION SITE IN MILES north same as PSA same as PSA South same as PSA same as PSA east population district 6 miles 444T and northern 1/5 of 442T west enumeration district 5 miles 76, 78T 78U and 78B After considering the Protestant's argument that the PSA for the Applicant is the five mile radius area and the Applicant's designated PSA and secondary service area, the expected PSA is found to be an area basically resembling the five mile radius with the secondary designation by the Applicant and the approximate lower half of the Applicant's designated PSA. The PSA consists primarily of small, commercial, service and professional organizations. See Department's Exhibit No. 1-A. Some of the businesses shown in the application have since gone out of business, while other new businesses have opened. The evidence is inconclusive as to whether there has been a net gain or loss in businesses. Clay Electric is the largest employer in the PSA, and there are no large manufacturing concerns within the contemplated service area. The Applicant proposes to name the bank "Merchants & Southern Bank of Clay County." The proposed charter site is a parcel of land approximately 210 feet x 251 feet located on Highway 21 in the City of Keystone. See Department's Exhibit 1-A, Option to Purchase (Exhibit "A") to Exhibit F "Banking House Quarters." The proposed bank will occupy a single story building to be constructed and will be in excess of 2,500 square feet. The Applicant intends to lease both land and building from Dennis R. O'Neil, a proposed director. The lease arrangement represents an insider transaction. Mr. O'Neil has agreed to enter into a ten year lease with the proposed bank that would call for interest only payments during the bank's first three years of operation, with the rate being two points above prime based on the costs incurred in acquisition of land and construction of the building. "Prime" is defined as the prime rate charged by Citibank, N.A., on the 25th day of each month. The annual rental for year four shall be determined by multiplying thirteen per cent times the value of the premises. Annual rental for years five through ten and the three five-year renewal periods will be determined by multiplying the annual rental for year four by the respective annual adjustment in the Consumer Price Index. There are two financial institutions located within Keystone Heights. One of those is a bank, the Protestant Keystone State Bank. Its main office is located approximately one-half mile from the proposed site of the Applicant bank. The Protestant also has a branch bank which is 7 1/2 miles south of the Applicant bank. That branch bank is nearby Merchants & Southern Bank of Hawthorne which operates a branch bank in Melrose, Florida, some seven miles to the south of Keystone Heights. This operation by Merchants & Southern Bank of Hawthorne is through a corporation with some relationship to the Applicant. That relationship was not shown to be one presenting any inappropriate arrangement by having a Merchants & Southern Bank with a location in Melrose and one in Keystone Heights. Florida Federal Savings and Loan Association also serves customers in Keystone Heights through an office in that location. That office is approximately 5/8 of a mile from the proposed site of the Applicant. Florida Federal Savings and Loan Association has not objected to the creation of a new banking institution in Keystone Heights. In examining the proposed location, there is no indication that the Applicant, in view of the PSA that is found in this report, has made an unrealistic delineation or designation of the service area in an attempt to exclude existing financial institutions. Both existing financial institutions within Keystone Heights have the potential to offer a full array of banking services. In fact, Keystone Heights Bank does offer those services, to include a wide variety of deposit products, loan products and ancillary services. On the other hand, Florida Federal Savings and Loan Association does not have the same variety in installment loans that is typically seen in a commercial bank or the composition of clients or deposits. Population trends for the PSA and other areas are as follows: AVG ANN % CNG TOT CNG AREA 1970 1980 1983 1970-80 FOR PER. Florida 6,791,418 9,746,418 10,591,701 3.67 43.5 County 32,059 67,052 74,524 7.7 109.2 County 21,825 52,446 59,503 9.2 104.3 SA 2,996 6,145 6,965 7.4 105.0 Key. Hts. 800 1,056 1,104 2.8 3.2 G. Cove S. 3,857 4,154 4,099 - 7.7 Org. Pk. 5,019 8,766 9,166 5.7 74.7 Pen. Fms. 561 630 652 1.2 12.3 Unicorp. P Municip: Protestant's demographic evidence shows an overall increase in the projected population within the five mile radius, from 6,930 to 9,783, or a total increase of 2,853 persons for the period 1980 to 1990, or a total increase of 41.2% for the period. This compares to a 105% increase between 1970 and 1980, from 3,024 to 6,930 persons. While the percentage of growth is approximately one-half for the period 1980 to 1990 as compared to 1970-1980, it should be noted that the 1970-1980 population increase was 3,149 persons compared to a "projected" increase of 2,853 persons for the period 1980 to 1990. The 41.2% total increase exceeds the median projection of 29.5% for the state as a whole during the same period. Thus, for all periods considered since 1970 the growth within that area was or is projected to be significantly larger than the population growth of the state. Most of the Clay County and Florida growth during 1970 to 1980 resulted from net migration: NET MIGRATION AS A PER CENT OF TOTAL GROWTH AREA 1970-1980 county 88.32% state 43.5 % The state, county and PSA are comparable in age grouping. 1980 AGE GROUPINGS AREA 15-64 YRS. 45 YRS OR OLDER 65 YRS. OR OLDER county 65.65% 24.44% 7.35% state 63.40% 38.70% 17.1% PSA 59.10% 41.2 % 22.0% The number of households in Clay County has increased at a significantly greater rate than for the state. HOUSEHOLD DATA PERCENTAGE INCREASE AREA 1970 1980 1970-1980 County 9,396 21,646 130.0% State 234,187 382,209 63.2% Per capita personal income (PPI) trends for Clay County and the state of Florida are listed below: PER CAPITA PERSONAL INCOME AREA 1978 1979 1980 1981 1982 county $ 6,345 6,864 7,680 8,520 9,094 state 7,330 8,202 9,202 10,362 10,907 Data provided by the Florida Department of Labor and Employment Security indicates that Clay County has significantly lower unemployment rates than the state. UNEMPLOYMENT RATES AREA 1979 1980 1981 1982 1983 County 3.8% 3.4% 4.8% 5.5% 6.7% State 6.0% 5.9% 6.8% 8.2% 8.6% 23. A comparison of total deposit growth in the PSA with that of Clay County and Florida yielded the following results: TOTAL BANKING DEPOSITS (June 30 in each year reported) AREA 1983 1984 CHANGE Absolute 1983-1984 Per cent State 55,569,572 60,187,042 4,617,480 8.3 County 158,230 183,806 25,576 16.2 PSA 27,018 35,524 8,306 30.7 The deposits of Protestant have over the past five years had an average annual growth rate of approximately 22% compounded annually, compared to an 8% compounded growth rate in deposits for the state of Florida for the same period. As stated, the banking institutions in the PSA can be described as full service in nature. However, the applicant proposes increased lobby and drive-in hours consistent with financial institutions in neighboring Alachua and Bradford counties and to provide Automatic Teller Machines. (Keystone State Bank does intend to offer Automatic Teller Machines in the future.) The failure to presently provide these additional services constitutes a deficiency in services and these additional services will provide a substantial convenience and advantage for a significant number of people. This deficiency in service is not monumental, but it is significant. Protestant had determined that being open on Saturday until 12:00 did not warrant the extra overhead costs but has not attempted to remain open on Saturday for a period of ten years, a period during which Protestant acknowledged that services provided by banks have expanded. The capital structure of the proposed bank would total $1, 500,OOO as follows: S1,125,OOO to common capital, $300,000 to surplus and 575,000 to undivided profits. The Applicant intends to issue 75,000 shares of common stock with a par value of S25.00 per share and a selling price of S20.00 per share. The Board of Directors are as follows: NAME OCCUPATION # OF SHARES Dennis R. O'Neil president 75,000 Ronald A. Carpenter attorney -0- Tim W. Kaskey CPA -0- Herbert Treweek insurance -0- Charles Blount owner-auto agencies -0- Total: 75,000 One of the proposed directors, Dennis R. O'Neil, owned the High Springs Bank, Leach County, from 1977 to 1984. Mr. O'Neil acquired the Merchants & Southern Bank of Alachua County in November, 1984. He is the sole stockholder of Merchants & Southern Bank of Ocala, a denovo bank granted in mid-1985. In each of said banks, he has served as Chairman of the Board of Directors. Proposed director Ronald A. Carpenter, served on the Board of Directors of High Springs Bank from 1978 through 1983. He presently serves on the Board of Directors of Merchants & Southern Bank of Alachua County and Merchants and Southern Bank of Ocala. Mr. Treweek presently serves on the Board of Directors of Merchants & Southern Bank of Alachua County. Mr. Blount has served on the Board of Directors of Atlantic Bank of Gainesville for seven years, the High Springs Bank for six years, the Barnett Bank of Alachua County for one year, and is presently on the Board of Directors of Merchants & Southern Bank of Alachua County. Mr. Kaskey is presently serving on the Board of Directors of Merchants & Southern Bank of Ocala. Four of the members of the proposed Board of Directors are also members of the Board of Directors of Merchants & Southern Bank of Alachua County. Merchants & Southern Bank of Alachua County has fourteen board members, therefore less than 25% of the board members of Merchants & Southern Bank of Alachua County also serve on the proposed board of directors. The organizers, proposed directors and officers of the Applicant bank have reputations evidencing honesty and integrity. They have sufficient employment experience in businesses to demonstrate responsibility and understanding of financial affairs. At least one member of the proposed board of directors other than the chief executive officer has direct banking experience. All of the organizers and directors of the proposed bank are residents of Alachua County, Florida. Applicant presented Dr. William McCollough, an expert in economics and finance. In that capacity he testified to the following as it relates to projections of deposits, income, expenses and viability of a denovo bank in Keystone Heights: The projection of total deposits at the end of the first year as set forth in the application was reasonable. The applicant's statement of earnings in terms of the result over the three-year period are a reasonable estimation of possible outcome. This perception is based on the witness' understanding that the application shows average loans outstanding with zero loans to start. The estimate of deposit base in years two and three is reasonable. The proposed bank should sustain a positive return by the third year and sustain an adequate capital structure. Keystone State Bank and the denovo bank will be able to sustain themselves at a profitable return on equity. The conclusions set forth in the application indicate that there will be a loss in the first year of $30,569 and a profit in the second and third years in the amount of $16,470 and $35,085, respectively. William Wood was presented by Protestant as an expert in preparing and analyzing bank applications as to format, and in that capacity presented the following testimony as to deposits, income and expenses: In years one and two of operation, the proposed bank would suffer a loss of $589,000 plus, and in year three a profit of $56,000. That the above figures were based upon an assumption that average deposits are shown in the exhibits and not year-end totals for deposits The assumption by Mr. Wood that more than a half million dollar loss assumes no income from Federal funds. Nevertheless, he found the investment income portion of the application attributable to this source should be reduced from $345,600 to $99,000 due to the opinion that the yield on government obligations was overstated. The higher return would be at 17.45%. Keystone State Bank presently receives 9.35%, which is roughly the figure used by Wood in making the estimate. That the capital to deposits ratio at the end of year three, by Mr. Wood's calculations, would be 8.75%, and that generally for a denovo bank, a ratio of 8 to 12 per cent would be reasonable. The criteria used in Mr. Wood's analysis of the application concerning rates of interest and rates for payment on deposits were limited solely to the existing rates shown by Keystone State Bank and not to rates at the time of the application or other banks' historical experience. However, the Keystone experience is valuable in understanding the possible success of the Applicant in competing in this market. Keystone State Bank has commercial loans at a rate of 13.06% and its installment loans are at 11.6%. Interest charges proposed by the Applicant on installment loans are 14%. The Applicant projects that interest to be paid on time deposits is 8%, whereas Keystone State Bank is paying a slightly higher yield on deposits. These differences, according to Wood, point out the difficulty of the Applicant in trying to penetrate the market. Wood does not believe that it is reasonable to expect the Applicant to have success in the market when the loan rates of the existing bank are lower than those proposed by the Applicant, and the Applicant projects an interest payment of less than what the experience has been for the existing bank. This analysis by Wood is realistic. Wood points out that the interest expense of 8% on time deposits is calculated on the assumption that the deposits constitute 60% of the total deposits. The experience of the Protestant bank has been that the time deposits constitute 85% of total deposits. Consequently, the Applicant may have understated its interest expenses. Wood has a concern that the depreciation schedule related to the equipment shows a ten year depreciation for all equipment, which in some instances is inappropriate. This references the Automatic Teller Machines, typewriters, furniture, fixtures and CRTs. When the issues of financial feasibility are considered in view of the remarks of the experts as reported, and in consideration of the documents presented in the application, it is unclear what basis the Applicant had in mind in depicting its financial position within the first three years. The information does not make it clear that either a system of year-end figures or average figures within the year was contemplated. It is evident that the Applicant's projections as to profit and loss within those first three years are not accurate. Such matters as interest expense on time deposits; the ability to be successful in the market place, charging higher rates on installment loans and paying less interest on time deposits than the direct competition; miscalculating the amount of yield on government obligations; misstating the depreciation expenses; and the ambiguity in the formula utilized to establish the estimate of income lead to this factual conclusion. Nonetheless, given the operating margin of $500,000 above the one million dollar requirement for institution of bank operation, there is the necessary flexibility in this proposal to overcome these problems in estimation. The Keystone State Bank has a 55% loan to deposit ratio. It has shown a return on equity in 1984 at 21.3% and a return on assets of 1.38%, ranking it as number one in the twenty-three similar size banks in Florida. Its growth rate in the past five years as compounded annually has been 27%. In that five year period it has earned on the average 18.31% on equity and 1.31% on equity and 1.33% on return on assets, ranking at 14th in 237 banks in the deposit range of 25 million to 49 million dollars within the state of Florida. In summary, as indicated by its president, Jo Reed, who testified in the course of the final hearing, if the proposed bank were granted a charter, Keystone State Bank would still be a stable depository for the residents of the area and would continue as a strong and profitable financial institution. DONE AND ENTERED this 19th day of March, 1986, at Tallahassee, Florida. CHARLES C. ADAMS, 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 19th day of March, 1986.
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following pertinent facts are found: In the latter part of 1973, petitioner submitted to respondent its application for authority to organize a corporation for the purpose of conducting a general banking business to be located on the west side of U.S. Highway 19 at the intersection of Ridge Road in the City of Port Richie. An investigation of the application was conducted by State Supervising Examiner Bruce L. Hieronymus in April of 1974. The application received conditional approval from the former Comptroller of the State of Florida in December of 1974. In January of 1975, such conditional approval was revoked by the present Comptroller. Mr. Hieronymus conducted an update investigation of petitioner's application in mid-March, 1975, noting in his report that additional field examination time should have been allowed and that his recommendation and report was made without audit or verification of some points that could have a definite bearing on the Comptroller's decision. On April 16, 1975, a Comptroller's Conference was held. On October 15, 1975, Comptroller Gerald A. Lewis notified petitioner that he had denied the application for authority to organize the First Bank of Port Richie. The reasons for denial were set forth in a Statement attached to the Order of denial. While the Comptroller found that petitioner's establishment would promote, to some degree, the public convenience in the area, it was further found that: "Growth in the area has been significant. However, there is nothing in the record to indicate that past growth trends will continue. While four of the seven banks in the western area of Pasco County have recorded impressive gains in deposits from June 1974 through June 1975, the increases have been reflected overwhelmingly in time deposits and the savings and loan offices in the area compete heavily for these deposits. The three banks closest to the proposed bank site have not enjoyed significant deposit growth. While Ellis Security Bank reported a total deposit increase of $3.1 million during the period June 1974 through June 1975, Ellis First National Bank of New Port Richey and Peoples State Bank reported decreases in total deposits for the same period of $1.4 million and $7.5 million, respectively. It appears that local conditions do not assure reasonable promise of successful operation of the proposed bank and the existing banks. On the basis of the foregoing, the Comptroller has concluded that, while the first criterion is met in this case, the second criterion is not met. Therefore, the application is denied. Since this conclusion renders the other four criteria moot, the Comptroller has not reached any conclusions with respect to those other four criteria." Subsequent to the denial, petitioner requested a hearing in accordance with Chapter 120 of the Florida Statutes. Receiving no response from the Comptroller, petitioner filed for a writ of mandamus in the Leon County Circuit Court. That Court found that the parties had agreed to proceed in accordance with the new Administrative Procedure Act and ordered respondent to grant petitioner a formal hearing. The office of the Comptroller forwarded the petition to the Division of Administrative Hearings and the undersigned Hearing Officer was designated to conduct the proceedings. This being a fact-finding adversary hearing under F.S. Sec. 120.57(1) to determine the issue of whether petitioner should be granted authority to organize and operate a general banking business at the proposed location; and considering the long delay between the Comptroller's conference, the Comptroller's order of denial and the date of the present hearing, as well as the fact that the Comptroller declined to reach any conclusion as to four of the six criteria required to be met for a charter, the parties were permitted to present all relevant evidence to date concerning the issues in dispute. As noted above, the proposed bank is to be located on a corner of the Port Richie Shopping Village, a large shopping center at the intersection of Ridge Road and U.S Highway 19, the latter of which is often described as "murderer's row due to its extremely heavy traffic congestion. This is a signal-controlled intersection with turn lanes and turn arrows, and is the only intersection with a traffic control light for several miles along Highway 19. Large residential areas surround the proposed site and a junior college is being built two miles east of the site. The site provides easy ingress and egress and adequate parking space. While the owners of the shopping center are experiencing financial difficulties in connection therewith, the center enjoys an occupancy rate of approximately 93 percent. County, state and federal offices are also located in or near the shopping center. There are two or three savings and loan institutions located in the immediate area of the proposed site. However, the nearest bank to the south of the proposed site is about 2.3 miles and the nearest bank to the north is 3.5 miles. The seven existing banks in the area are closer together than petitioner would be to any other bank, with the possible exception of the second and third banks to the south of petitioner in New Port Richie. The name of the proposed bank is First Bank of Port Richie. While numerous state and national banks and clearing houses utilize the word "first" in their nomenclature, petitioner's name should cause no conflict or confusion with the name of an existing bank. For its housing quarters, petitioner proposes to construct a permanent two-story building containing some 14,000 square feet, the second floor to be only partially finished. The size and layout of the building allow for growth, flexibility and convenience, and necessary security equipment is planned. Estimated construction costs are reasonable. Petitioner intends to temporarily operate in a modular unit located adjacent to the site of the permanent building so as to allow for construction of the building without interference. The temporary unit will be leased and will comply with federal security and bonding requirements. There is nothing in the record to indicate that petitioner's proposed capital structure is less than adequate. State examiner Hieronymus found this factor to be favorable in both his original and updated reports and no witness testified to the contrary. The examiner's original and updated investigations report as unfavorable the general character of management of petitioner. This conclusion appears to be based primarily upon the examiner's opinion at the time he prepared his reports that the petitioner's proposed president and chief executive officer, Mr. Raymond O. MacDonald, Jr., lacked both directorate experience and experience as the head of a bank. However, the evidence Illustrates, and Mr. Hieronymus admits, that at the time he prepared those reports he was unfamiliar with MacDonald's extensive banking experience, both as an executive vice president of a Tampa bank and as a director of a Lakeland bank. Testimony on this point from other witnesses indicates that the proposed officers and directors represent a cross-section of the community, each with prior business experience and three with prior operative banking experience with both new and established banks. The trade area of the proposed bank consists of approximately fourteen square miles. Since the early 1970's, the Pasco County area has been one of the fastest growing areas in the State of Florida. In mid-1973, the estimated population of the trade area was 9,200 residents. Present estimated population of the trade area is over 16,000, using figures obtained from statistics of the U.S. Post Office. The state average is 12,000 people per bank. In the past five years, the area has experienced an increase in deposits of 123 percent. As in most other areas across the nation, the area in question suffered in 1973/74 from the deleterious effects of inflation and recession, with attendant declines in construction and increases in the percentage of unemployed persons. While one opponent of petitioner's new bank charter testified that the banks in Pasco County had had a "rough go of it" in the past few years, this is not borne out by the evidence relating to the deposit growth and net income experienced by the seven existing banks. This same witness further stated that economic conditions in the area were now beginnings to pick up. Also, the two opponents to petitioner's application, both affiliated with banks in Pasco County, are each considering placing a remote facility or a branch office within the petitioner's proposed trade area. All but one of the seven banks in the area experienced a growth in deposits from the 1974 to the 1975 year end. The one bank which reported a decrease in deposits made a profit of some $77,000.00 in 1975, in spite of a loan write-off of about $700,000.00 in 1974 and problems with poor management. The two newest banks in the community, one of which is the closest bank to the north of petitioner, show excellent growth in deposits from 1974 to 1975. The two opponents who appeared at the hearing each testified that, other than normal competition factors, the proposed bank will have no adverse effect upon the successful operation of their existing banks. When Mr. Hieronymus conducted his investigations concerning the petitioner's proposed bank, he did not get the impression that other bankers in the area were concerned & that petitioner's operation would adversely affect their existing operations. The February, 1976, Comparative Figures Report published by the Florida Bankers Association, which is relied upon in part by respondent in determining whether to grant banking charters, shows Pasco County to have an 8.1 percent increase in deposits from 1974 to 1975 year ends. Since January of 1975, respondent has granted bank charters to banks located in Duval County with a deposit growth of minus .1 percent; in Polk County with a deposit growth of 1.5 percent; and in Hillsborough County with a deposit growth of minus 1.5 percent. Newly chartered banks frequently lose money in their first year of operation. Although the petitioner projected earnings indicating a substantial profit in each of the first three years of operation; Mr. Hieronymus concluded in his report that the opportunity for an acceptable return on investment was less than probable and reported the factor of "future earings prospects," to be "unfavorable." Using the approach of a percentage of average total assets rather than percentage of total capital (as used by petitioner in its projections) and taking into account the petitioner's purchase of the land and changes in the sources and costs of money, Mr. Hieronymus projected a net operating income of minus $14,091.00 the first year, plus $28,976.00 the second year and plus $37,023.00the third year. Deposit growth would increase from $2.5 million to $6.5 million to $9.0 million over the first three years, according to the projections of Mr. Hieronymus. These figures would be higher were petitioner located in its permanent facility during its first year. On cross- examination at the hearing, Mr. Hieronymus stated that these projected figures illustrate that local conditions assure reasonable promise of a profit.
Recommendation Based upon the findings of fact and conclusions of law recited above, it is recommended that respondent grant to petitioner authority to organize and operate a general banking business at 800 U.S. Highway 19 North, Port Richie, Florida. Respectfully submitted and entered this 8th day of June, 1976, in Tallahassee, Florida. DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Honorable Gerald A. Lewis Comptroller The Capitol Tallahassee, Florida 32304 Mr. James M. Barclay Assistant General Counsel Office of the Comptroller The Capitol Tallahassee, Florida Mr. Wilbur E. Brewton and Mr. Clyde M. Taylor Taylor, Brion, Buker and Greene, P.A. P.O. Box 1796 Tallahassee, Florida 32302 Mr. John D. Kiernan 307 West Coast Title Building Sixth Street and First Avenue North St. Petersburg, Florida 33701 ================================================================= AGENCY FINAL ORDER ================================================================= STATE OF FLORIDA DEPARTMENT OF BANKING AND FINANCE DIVISION OF BANKING THE FIRST BANK OF PORT RICHEY (proposed new bank) Petitioner, vs. CASE NO. 76-086 STATE OF FLORIDA, DIVISION OF BANKING Respondent. /
Findings Of Fact Introduction Petitioners, Herman R. Staudt and L. Justin Jackman, are the owners of 1,900 and 5,600 shares of capital stock, respectively, in Intervenor-Respondent, Bank of Central Florida (Bank). This represents 9.1 percent of the outstanding shares of the Bank. The Bank is a state chartered commercial bank which began business in 1975. Its principal offices are located at 1401 Lee Road, Orlando, Florida. Petitioners were founders and original members of the board of directors of the Bank when it began operating in 1975. On September 9, 1981, the President of the Bank issued a notice of special meeting of shareholders to be held on September 21, 1981, for the purpose of "considering and determining by vote whether an agreement to merge said Bank with and into Second Bank of Central Florida...shall be approved, ratified and confirmed." Under the terms of the merger agreement, each shareholder was entitled to receive substitute shares of stock in the successor bank, or if that was unacceptable, he would receive $25 per share for each share of stock held by him, or he could dissent from the merger. The agreement was ultimately approved by a majority of the shareholders and applications were then filed with Respondent, Department of Banking and Finance, Division of Banking (Department), seeking formal state approval. The applications were approved by the Department on October 7, 1981, and the merger was actually consummated effective January 4, 1982. The Bank continues to operate under the corporate title "Bank of Central Florida". Petitioners initially objected to the plan of merger and requested that the Department conduct a hearing on the merger applications. The request was denied. Petitioners then availed themselves of their rights under Subsection 658.44(5), Florida Statutes, which provides that whenever a bank and its dissenting shareholders cannot agree on a value to be assigned the stock held by the dissenting shareholders, the Comptroller shall select an appraiser to make an "appraisal of such dissenting shares" which shall be final and binding on all parties. On September 7, 1982, the Comptroller selected Blackstock & Company, Inc., a Jacksonville, Florida registered broker-dealer and registered investment adviser, to appraise the value of the dissenting shares. In its letter selecting Blackstock, the director of the Division of Banking gave the following relevant instructions to Blackstock: Your appraisal should include the Bank of Central Florida's earnings history and the history of its stock sale prices. Characteristics of the Bank of Central Florida to be considered in your appraisal are, the stock is not widely traded, and the interest of the shareholders for whom this appraisal has been commissioned constitute a minority interest in Bank of Central Florida. Your appraisal shall include a determination expressed in dollars and cents per share of the-fair compensation to be paid for all outstanding minority shares. That final dollar and cent figure shall be based upon information readily available through public records and records of the bank, but shall not be based upon any con fidential records of the Department of Banking and Finance. According to the letter of engagement, Blackstock was to receive a maximum $2,000 fee for its services to be paid by the Bank. On September 9, 1982, Petitioners filed a complaint in circuit court for Leon County seeking a declaratory judgment concerning the constitutionality of the Department's actions. On November 2, 1982, the circuit court entered its order holding that, if any party was dissatisfied with the independent appraisal, it was entitled to a de novo hearing before the Division of Administrative Hearings pursuant to Subsection 120.57(1), Florida Statutes. On November 11, 1982, Blackstock submitted a report of appraisal to the Comptroller in which it expressed the opinion that the dissenters' stock should be valued at $27.63 per share. After certain communications with the Department, a revised report was prepared by Blackstock and forwarded to the Comptroller on December 30, 1982. On January 5, 1983, the Comptroller issued its notice of intent to adopt the report. That notice prompted the instant proceeding. The Bank's stock has not been traded publicly at any time. All stock exchanges prior to December 31, 1981, were between existing shareholders. Most involved the Bank's present majority shareholder and chairman of the board. The Bank is a closely held family corporation and its stock is not readily marketable. This was openly acknowledged in the plan of merger itself. The Bank paid no dividends from its inception through December 31, 1981. The Bank is considered to be well managed. It has produced excellent financial results, and is considered to be a "high-performing" bank. As of December 31, 1981, its return on equity and return on assets were 19.4 percent and 1.73 percent, respectively, which were higher than any publicly traded bank in the State of Florida. The Blackstock Report William C. Norton, vice-president of Blackstock and a registered securities dealer, assumed the initial responsibility for preparing the report on behalf of Blackstock. Without advising the Department, Norton contacted Terry A. Rodgers, a former co-worker in Orlando and a chartered financial analyst, and requested that Rodgers prepare the report. They agreed to split the $2,000 fee. Neither Norton or Rodgers had previously prepared an appraisal of dissenting shareholders' stock. Norton instructed Rodgers to "gather the financial information", prepare an "analysis" of that data, and then forward his results to Blackstock. Norton also "suggested the types of comparisons (he) felt would be appropriate in looking at it", the financial information Norton believed to be relevant, and "some of the valuation techniques (he) felt would be appropriate." However, it was not disclosed which of the four techniques used by Rodgers was recommended by Norton. Rodgers forwarded his report to Norton on October 18, 1982. After receiving Rodger's report, Norton reviewed the data, proofed the financial information, and rechecked Rodgers' calculations. The two also communicated by telephone on several occasions and once met briefly in Orlando. In all, Norton estimated he spent approximately six or seven days reviewing the data. He also requested that his partner review the data. Norton ultimately accepted the report almost verbatim, signed it, and sent it to the Department on November 11, 1982. After consultation with the Department, Norton made very slight revisions to the report and resubmitted it on December 30, 1982. Rodgers did not appear or testify at the final hearing in this cause. The report has been received in evidence as Respondent's Exhibit 1 and Intervenor's Exhibit 5. Data apparently relied upon by Rodgers, and in turn reviewed by Norton, included (a) all sales of stock of the Bank from its inception through December 31, 1981, (b) all purchases of bank stock by Donald Rogers (its current president) from 1975 through 1979, (c) the Bank's statement of condition as of December 31, 1981, (d) the Bank's Call Reports for the years 1977 through 1981, (e) the notice of special meeting of shareholders given on September 9, 1981, and (f) comparative data from the First Bankers' Corporation of Florida, Jefferson Bancorporation, Atlantic Bancorporation, and Great American Banks, Inc. The latter four banks are publicly traded Florida banks and were considered by Norton to be representative for comparative purposes because, like the Bank, two did not pay dividends one was controlled by a single family, and the remaining bank had undefined operating "characteristics" similar to that of Bank of Central Florida. However, because of the Bank's extremely small size in relation to the four, and the limited marketability of its shares, none were comparable in terms of size, market type or performance. Further, Norton conceded that a part of the 1901 earnings of one of the four (Jefferson) would normally be factored out for comparative purposes because they included extraordinary income. This in turn caused the composite price-earnings ratio to be substantially understated. By a subjective process, four valuation techniques were incorporated into the Blackstock report and were based upon data derived from a five year study period (1977-1981). These included (a) historical stock sale transactions, (b) industry price-earning ratio comparison, (c) industry price to book value ratio comparison, and (d) capitalization of expected future earnings. The four approaches produced the following valuations: $26.49, $30.38, $25.21 and 28.42. The sums were then divided by four to reach the recommended value of the stock, or $27.63 per share. Norton (and presumably Rodgers) did not attempt to assign a relative weight to each technique because such a process would require the use of subjective judgment, the four valuations arrived at were within a relatively narrow range ($25.21 to $30.38), and no single approach yielded a result substantially out of line with the others. Had the weighted average approach been used, Norton would have assigned a greater or lesser value or weight to the results of the various appraisal valuation techniques employed according to relevance. Despite his rejection of this methodology, Norton conceded that the weighted average method is the most applicable and best suited approach for valuing capital stock not having an active and continuous market, and that it is used by the U.S. Comptroller of the Currency in determining the value of dissenters' shares in federal bank merger cases. In this regard, he agreed that had the Bank been federally chartered, he would have used the same approach in valuing its stock. As noted earlier, Norton's industry price-earning ratio comparison was distorted because of the inclusion of a bank with extraordinary income due to the sale of a subsidiary and property. Had this non-recurring income been factored out, the value of the stock under this methodology would have exceeded $50 rather than the $30.38 reflected in the report. The historical sales approach, to which Norton gave equal weight, was also subject to criticism. This approach, which analyzed stock sales between 1977 and 1981, had the inherent weakness of failing to reflect the Bank as a going concern. The Goff Report A second valuation study was performed on behalf of Intervenor by Ronald W. Goff, a research analyst for Allen C. Ewing & Company, an investment banking firm in Tampa, Florida. That report has been received in evidence as Intervenor's Exhibit 9. Although Goff reviewed the Blackstock report and certain other financial information, he relied primarily upon previous stock exchanges as a basis for determining fair market value. In this regard, he used a major stock transaction between a former vice-chairman of the board (J.F. Cooper) and its present chairman of the board (J.E. Muroski) as the primary basis for arriving at his recommended valuation. The sale involved 12,525 shares, was negotiated in the fall of 1980 and consummated on January 6, 1981, and resulted in increasing Muroski's total stock outstanding in the Bank from 45.3 percent to 59.7 percent. The agreed upon price was $27.86 per share, and after "massaging" that number, Goff arrived at a recommended valuation of $27.34 per share. The circumstances underlying the sale included a falling out between Cooper and Muroski in the spring of 1980 and a request by Muroski that Cooper resign his position with the Bank in May of that year. Shortly afterwards, they began negotiations for Muroski to buy the stock, The deal was agreed upon in 1980 but was not consummated until January, 1981 for tax purposes. Although Goff did not consider the exchange to be an insider transaction, nonetheless it is found that it was because (a) no dividends had been paid from the inception of the Bank through 1981, and Cooper was accordingly receiving no return on his stock, (b) Cooper had terminated all involvement in the Bank's operations, (c) the exchange took place between current and former principal officers of the Bank, and (d) Muroski was an insider by definition of the Securities and Exchange Commission. Therefore, the transaction was not a reasonable basis to determine the fair market value of the stock. Goff himself acknowledged that it was an unusual valuation practice in preparing an appraisal of bank stock to determine market value on the basis of one or a very few transactions. The Perkins Report Marc I. Perkins, an investment banker with Raymond, James and Associates in St. Petersburg, Florida, prepared a valuation report for Petitioners. That report has been received in evidence as Petitioners' Exhibit Perkins had previously been engaged on a number of occasions to value bank stock where a dispute over its value had arisen in a proposed merger. Perkins utilized the weighted average methodology which generally employs, where applicable, five categories of analyses, and then requires that the appraiser assign a weight to each category. This method is identical to that used by the U.S. Comptroller of the Currency in valuing dissenting shareholders' stock and is endorsed in an authoritative text entitled "Security Analysis" by Graham and Dodd. The five approaches include (a) book value, (b) adjusted book value, (c) imputed market value, (d) market value, and (e) investment value. However, in the case at bar imputed market value was inapplicable since that method is used only where a subsidiary is merged into a larger holding company. By the same token, the market value criterion was excluded by Perkins since no stock exchanges occurred during the last eleven months of 1981 and those occurring prior to that date were more akin to insider exchanges. Accordingly, Perkins used the three remaining approaches, to wit, book value, adjusted book value and investment value from which he derived valuations of $35.51, $35.44 and $50.30, respectively. After assigning the appropriate relative weights to each sum, he arrived at a recommended valuation of $46.59 per share. Unlike the authors of the Blackstock report, Perkins found no publicly traded Florida banking companies to be comparable to the Bank, and because of this, used as broad a peer group as possible for comparative purposes in order to take in the maximum number of investor decisions. The comparative data was extracted from the Jerry Williams, Inc. report which is a compilation of financial data for twenty-one publicly traded banking institutions in Florida. The use of a broader base is more appropriate than the Blackstock peer group since it is virtually impossible to find other banking companies of the same size, market type and performance as the Bank of Central Florida. Perkins assigned the greatest weight (75 percent) to the results of the investment value approach since that approach is appropriate where market value does not exist or where the market is thin. Moreover, it provides an easy to understand and reasonable estimate of the value to investors of a share in the future earnings of the Bank. Then, too, that approach includes an analysis of price earnings ratios for the average publicly traded Florida bank, and takes into account a number of key factors that go into investors' perceptions about risk and estimated returns. The approach also considers historical earnings per share as a guide to earnings prospects. Perkins assigned only 25 percent weight to the results of the adjusted book value approach since it had less relevance than investment value. He gave no weight to book value since that approach is dependent on historical cost and fails to reflect the investors' perceptions of the value of the bank as a going concern. Perkins' study produces a more reliable and accurate result than the other suggested methodologies because of its well-accepted approaches, the use of relative weights, a broader and more representative peer group and its rejection of irrelevant and improper data. Miscellaneous From December 31, 1981 through July, 1983 the value of money left on deposit in commercial banks in 30-day certificates of deposit and reinvested was 18 percent. The Bank's average prime rate was 16 during 1982 and the average interest rate charged customers by the Bank was 12 percent.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that Petitioners L. Justin Jackman and Herman R. Staudt be paid $46.59 per share for each share of stock held in the Bank of Central Florida, said amount representing the fair market value of such stock as of December 31, 1981. It is further RECOMMENDED that Petitioners' request to receive interest from December 31, 1981 through July, 1983, post order interest, and costs incurred in this proceeding be DENIED. DONE and ENTERED this 23rd day of September, 1983, in Tallahassee, Florida. DONALD R. ALEXANDER 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.
