Findings Of Fact The Petitioners have filed an application with the Respondent to organize a new bank in Ocala, Marion County, Florida. The name of the proposed bank would be the Citizens First Bank of Ocala. The Petitioners are the organizers and proposed directors of the bank. Each of the Petitioners is of good moral character, and each enjoys an outstanding reputation. None of the Petitioners have been convicted of any crimes involving breach of trust, and none have filed for bankruptcy, or have any history of being bad credit risks. Together the Petitioners constitute a diverse group with very broad and successful business experiences. The Petitioner William R. Kidd is a registered professional engineer and realtor who has lived and worked in Ocala since 1950. Mr. Kidd has broad experience in evaluating various aspects of real estate transactions, and he has extensive experience in arranging financing of construction projects. Mr. Kidd owns a pollution control company which has a net worth of approximately $25,000 and a real estate business with sales since 1975 in excess of $10,000,000. He also manages and operates a successful consulting engineering firm. Mr. Kidd plans to invest $40,000 in the new bank, and he has sufficient funds readily availably to make that investment. Mr. Kidd is willing to invest more money in the enterprise if additional capitalization is required. Mr. Kidd is interested in working with the bank, particularly in relation to financing of real estate transactions, and construction projects. The Petitioner Ralph Murphy was born in Marion County and has spent most of his life there. Mr. Murphy owns a linen service company which does approximately $18,500 to $19,000 in business weekly. The linen service, which Mr. Murphy has managed since it was a small entity doing less than $2,500 in business weekly, has a net worth of approximately $900,000. Mr. Murphy serves on the Boards of Directors of several other corporations. Mr. Murphy intends to purchase $40,000 of stock in the proposed new bank, and he has funds readily available with which he can do that. Mr. Murphy is willing to devote as much time as is necessary to organize the bank. The Petitioner Milton L. Copeland manages an insurance firm which writes commercial insurance policies for businesses in Florida and in Georgia. His company has offices in Ocala and Jacksonville. The Ocala office writes approximately $2,000,000 in insurance policies annually. The Jacksonville office writes approximately $15,000 in policies weekly. Mr. Copeland has a personal net worth of approximately $800,000. Mr. Copeland intends to buy $40,000 worth of stock in the proposed new bank, and he has funds readily available for that purpose. Mr. Copeland wishes to take an active part in soliciting new accounts for the bank, and he could devote as much as two full days per week to bank activities. If further capitalization of the proposed bank were considered necessary, Mr. Copeland is willing to increase his investment in the bank. The Petitioner James Cunningham owns and operates a funeral home business in Ocala. He has lived in Ocala most of his life. The dollar volume of Mr. Cunningham's business during 1976 was approximately $250,000. Mr. Cunningham is a City Councilman in Ocala. He is a black man. It has only been in recent years that blacks have even been employed at local banks, and no blacks presently serve on the Boards of Directors of any banks operating in Ocala or Marion County. Mr. Cunningham intends to purchase $40,000 worth of stock in the new bank. He will need to borrow no more than 25 percent of that amount in order to make the investment. Mr. Cunningham desires to take an active part in soliciting accounts and customers for the new bank, and he is willing to devote whatever time would be required for that purpose. The Petitioner Marjorie Renfroe owns and operates a boat, motor and trailer sales and service business in Marion County. Her business had gross sales during 1976 of approximately $350,000. Ms. Renfroe serves on the Board of Directors of the United Way in Marion County, and on the Board of Directors of the Central Florida Community College. Ms. Renfroe plans to buy $40,000 worth of stock in the new bank, and if further capitalization were found necessary, she is willing to increase her investment, and is able to do so. Ms. Renfroe is willing to devote as much time as necessary to managing the new bank, and she is particularly interested in providing services to employees and students of the local community college, especially instructional sorts of courses for students. No women presently serve on the Boards of Directors of any banks in Marion County. One woman serves on the Board of Directors of a savings and loan institution in Marion County. The Petitioner Van G. Staton manages a Belk-Lindsey Department Store in Ocala, Florida. He has lived in Ocala and managed the department store since 1956. The store employs 48 persons and had gross sales during 1976 of approximately $3,000,000. The annual payroll of the store is $400,000 to $500,000. The Petitioner serves on the Board of Directors of a local automobile sales and service corporation, and from 1970 through 1975 he served on the Marion County School Board. Mr. Staton plans to purchase $40,000 of stock in the new bank, and he would not need to borrow more than 50 percent of that amount. Mr. Staton would favor additional capitalization, and would be willing to increase his investment. Mr. Staton is particularly interested in having extended business hours in the new bank beyond the hours presently served by banks operating in Marion County, and Saturday openings. He is willing to spend as much time as is necessary with banking activities. The Petitioner Owen C. Shelton owns and manages two corporations which operate fifteen convenience stores. The total sales for the two corporations was approximately $17,000,000 during 1976. Mr. Shelton has lived in Ocala for 15 years. His personal net worth is in excess of $1,000,000. Mr. Shelton has been in the grocery business for twenty-five years. He started with one small store. His corporations employ approximately 185 persons. Mr. Shelton plans to purchase $40,000 worth of stock in the new bank, and he is willing to increase his investment if further capitalization is required. The Petitioner Terry Trexler is President and Chairman of the Board of Nobility Homes, a mobile home manufacturing business. The company does business in 29 states, and does from 5.1 to 5.2 million dollars worth of business on a quarterly basis. Mr. Trexler has lived in Ocala for 15 years. Mr. Trexler plans to invest $40,000 in purchasing stock in the new bank, and he intends to be active in soliciting new accounts and customers for the bank. The Petitioner Sam Kinlaw is a resident of Orlando, Florida. He has a Bachelor's Degree in Business Administration from the University of Florida, and attended the Banking School of the South at Louisiana State University. Mr. Kinlaw has been active in the banking business, or in similar financial businesses since approximately 1958. He has served as the head of installment loan departments and commercial lending departments of banks in Florida. Beginning in 1972, he became the Chief Executive Officer of the Semoran Bank, which was a new Federally chartered bank. He was responsible for setting up the bank, hiring personnel, establishing policies, and carrying on the day-to-day operations of the bank. He served in that capacity from near the end of 1972 until September, 1975. He has not been involved in the banking business since then. Mr. Kinlaw intends to purchase a "qualifying share" of stock in the bank. He intends to serve on the Board of Directors during the time that the bank is being organized, until other persons with direct banking experience are named to the Board of Directors. The Petitioner Braxton Jones owns and operates several convenience stores and two supermarkets. He has lived in Ocala nearly all of his life. He is prepared to purchase between $20,000 and $30,000 of stock in the new bank, and he is willing to devote whatever time would be necessary to organize and operate the bank. The Petitioner Clarence Woodrow Hicks has lived in Marion County for approximately 30 years. He formerly owned and operated Hicks News Agency, which was involved in the wholesale distribution of magazines, books, postcards and sundry items. He also owned two retail book stores. Mr. Hicks has sold his business and is now semi-retired. He serves as a consultant to the new owners of his business. During the time that he operated the businesses, they did approximately three million dollars of business per year. Mr. Hicks' net worth is in excess of one million dollars. Mr. Hicks has time available to devote to the new bank. The proposed Citizens First Bank of Ocala would, if the instant application were granted, be located at the northwest corner of the intersection of State Road 200 and Southwest 16th Avenue in Ocala. The location is approximately one mile west of Pine Street (Federal Highways 441, 27, and 301), which is the primary north/south artery through Ocala. The proposed bank would be located just over three miles east of Interstate Highway 75. State Road 200 is presently a four lane highway which serves as one of the primary routes from the Interstate Highway into Ocala. Southwest 16th Avenue is presently two- laned, but all right of ways have been acquired and construction will shortly commence to four-lane the road. All of the banks and the savings and loans associations which presently operate in the Ocala area are located east of Pine Street. There are no banking facilities in the Ocala area which are located to the west of Pine Street. Location of a banking facility to the west of Pine Street would serve the convenience of persons in Ocala who live or work on the west side of Pine Street. Pine Street is a very busy highway, which has not been properly designed so that it can be easily crossed. Furthermore, a railroad track runs parallel to Pine Street to the West, and presents an additional barrier. While it is not impossible for persons who live or work on the west side of Pine Street to bank on the east side, the testimony is unrebutted that it is inconvenient to do so due to traffic congestion, and the railroad. There are many persons who reside on the west side, of Pine Street. The area to the north of the proposed bank site is a residential area. There are many low income residences, and trailer park type residential facilities in that area. There are also many moderate income residences to the south and the west of the proposed site all on the west side of Pine Street. The total population of the primary service area, which is designated to be west of Pine Street, is estimated to be 14,300, as of July, 1977. This represents more than a 35 percent increase from 1970 population figures. Many more residences are planned in the area. Over 1,200 new homes have recently been completed, and more than 500 are under construction. Larger residential developments are in the planning stages. There is considerable commercial activity in the areas surrounding the proposed site. The Ocala Industrial Park is located immediately across State Road 200 from the proposed site, and the South 40 Industrial Park is also nearby. Thirty-eight firms presently occupy space in the Ocala Industrial Park, employing more than 1,500 persons and occupying more than one million square feet of building space. Fourteen firms are presently located at the South 40 Industrial Park, employing nearly 350 persons and utilizing more than 300,000 square feet of building space. Both Industrial Parks have experienced steady growth. Many businesses, including several automobile sales and service businesses, have located on State Road 200. Construction is scheduled to begin on a major shopping mall in January, 1978, by the Edward J. DeBartolo Corporation. The mall will be located on State Road 200 just east of Interstate Highway 75. Construction will take approximately 12 months. More than 900 persons will be employed at the mall. In addition, most of the horse farms which surround the Ocala area are located west of Pine Street. There are six banking institutions located in Marion County. The two banks located out of the Ocala area have no particular relevance to this matter. Four banks are located in Ocala. Only one of these banks is an independent bank. The others are parts of larger bank holding companies which are not centered in Ocala. Total bank deposits in Marion County have increased steadily from a total of $176,586,000 in 1973 to $236,336,000 in June, 1977. Although estimates vary, it is evident that the population of Marion County has increased from a 1970 total of approximately 69,000 to a 1977 total of from 104,000 to 127,000. It appears that existing banks in Marion County are in a healthy financial position and are experiencing steady growth. There are many interlocking relationships on the Boards of Directors of the existing banks. None of the Petitioners presently serve on the Boards of any of the existing banks, and this can only promote more lively competition among the banks. Petitioners have proposed to keep their bank open for longer hours than existing banks, and for additional banking days. Petitioners propose to provide specialized counselling for new business people, and education courses for students who attend the nearby Central Florida Community College. It appears that local banks have frequently acted adversely on loan applications from local developers, who have been able to borrow money at favorable rates outside of Marion County. The presently existing banks have not adequately served the very large and active horse farming industry that is located in Ocala, and several horse farmers have needed to go to Gainesville to obtain adequate farm businesses. Banks in Marion County have shown a deposit gain of nearly sixteen percent during the year 1976, as compared to a State of Florida average of approximately 7.4 percent. Of the sixteen counties in which new bank charters were granted in the period from January, 1975, through March, 1977, only two counties had a total deposit growth greater than was experienced in Marion County. A savings and loan association was chartered and opened in Marion County in January, 1975. The association has achieved very good success, and has not proved harmful to other financial institutions, which have also shown steady growth during this same period. Petitioners have projected a net profit at the end of the third year of their operation of $163,300 based on deposits of $10,000,000. A more conservative estimate of a net profit of $61,350, based on $8,000,000 in deposits after three years was estimated by Examiner Howze, a bank examiner who conducted an investigation of the instant application for the Respondent. George Lewis, II, the former Director of the Division of Banking, prepared a proposed budget which showed that the bank would be operating at a loss after three years. George Lewis' estimates are not credible. He estimated that the return on commercial loans would be at a rate of from 7 and 1/4 to 8 percent during the first, second and third years. Nine percent is a more realistic figure, and is itself conservative. The Respondent approved the charter of the Shores Bank of Lake Wier in Marion County which indicated a nine percent return on loans. George Lewis furthermore showed a three percent cost on all demand deposits. This cost is not justified by any factors currently accepted in the banking business. George Lewis apparently based the additional cost on his feeling that the legislature may pass a law requiring banks to pay such a return on all demand deposits. Such speculation has not been shown to be justifiable, and cannot serve as a reasonable factor to be used in predicting a proposed bank's profits. Petitioners propose to issue capital stock in the amount of $1,000,000, and thus to capitalize the new bank in that amount. This is adequate capital to serve the needs of the proposed bank during the first three years of its operation. George Lewis, II, testified that additional, capitalization would be required, but he gave no reason for his opinion. To the extent that additional capital is required, the Petitioners are in a position to raise it, and are willing to do so. Only one of the Petitioners who would serve on the first Board of Directors of the proposed bank has any direct banking experience. All of the Petitioners have engaged in considerable banking activities, but only Sam Kinlaw has served in an active capacity with a bank. The Petitioners propose to hire experienced persons to serve as the bank's Chief Executive Officer and Chief Operations Officer. These persons would also serve on the Board of Directors. The Petitioners do represent a good cross-section of successful business people. Their varied business experiences within Marion County would be very helpful to the new bank. In order to properly operate the bank, however, they will require experienced officers. Consistent with the Respondent's policy, the Petitioners have not yet named their officers. To do so, the Petitioners would place the persons they propose to hire in an untenable position in their present capacities. The Respondent has, in the past, approved bank charter applications for further processing under similar circumstances, so as to allow applicants an opportunity to recruit acceptable, experienced individuals to serve as officers. The Board of the proposed bank, as presently constituted, does not have adequate banking experience so as to assure a reasonable prospect of success. If, however, experienced, competent officers, who will also serve on the Board, are hired, the Board would be such as to assure a reasonable promise of success. The parties have stipulated that the name of the proposed bank, the Citizens First Bank of Ocala, is not so similar to any existing bank as to cause confusion with the name of the existing bank. The property which the Petitioners have obtained for the proposed bank is an excellent location. Petitioners plan to utilize a structure which is already on the land to commence operations. The structure has approximately 3,000 square feet of floor space, is aesthetically appropriate, and can be fairly easily modified to serve as a banking facility. The structure, when modified to increase the size of the lobby and to provide appropriate security measures, should prove adequate during the first three years of the bank's operation. There is sufficient land for additions to be made, and the structure is physically sound so that a second floor could be added. The Petitioners are prepared to increase the size of the facility as required.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is: RECOMMENDED: That the Petitioners' application for authority to organize and operate the Citizens First Bank of Ocala be approved for further processing, and that the application be finally approved when the Petitioners have satisfied the Respondent that they have retained appropriate individuals to serve as the bank's principal officers, and that these persons will also serve on the Board of Directors. RECOMMENDED this 30th day of December, 1977, in Tallahassee, Florida. G. STEVEN PFEIFFER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 30th day of December, 1977. COPIES FURNISHED: C. Gary Williams, Esquire AUSLEY, McMULLEN, McGEHEE, CAROTHERS & PROCTOR Post Office Box 391 Tallahassee, Florida 32302 S. Craig Kiser, Esquire Assistant General Counsel Office of the Comptroller Legal Annex Tallahassee, Florida 32304 Joseph C. Jacobs, Esquire Post Office Box 1170 Tallahassee, Florida 32302 Willard Ayres, Esquire Post Office Box 1148 Ocala, Florida 32670 Appendix
The Issue 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 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.
The Issue The issue for determination in this proceeding is the fair market value as of October 15, 1998, of common stock of Citizens Bank of Wakulla held by Petitioners, dissenting minority shareholders.
Findings Of Fact Petitioners are stockholders of approximately 36% of the outstanding 150,000 shares of stock of Citizens Bank of Wakulla (CBW). Danny Ray Metcalf, Sr. is president of Metcalf Crab Company, Inc., a seafood processing plant in Wakulla County. Marshall Spears is owner and president of RMS Marine Supply in Wakulla County. Donald L. Tucker is a practicing attorney and former legislator in Tallahassee, Florida. CBW was chartered in 1987 largely through the efforts of Tommy Rowell, prior chairman of the board of the only other bank in the county, Wakulla Bank. With the exception of Mr. Rowell and another banker, CBW's first board was "very green," comprised primarily of businessmen in the community, including Mr. Metcalf. The bank lost money for the first few years. By 1991 when Mr. Rowell resigned as president, the bank's book value had decreased from its initial price of $10 a share to $8 a share. After CBW hired another president it prospered and grew to approximately $18 million. In spite of some financial success the bank's board felt its president's involvement in the community did not adequately enhance the bank's image so that individual left. Skip Young, owner and operator of Harvey Young Funeral Home in Crawfordville, Wakulla County, Florida, became president and chief executive officer of CBW in mid-1994. Mr. Young had been an active director of the bank since its inception. At Mr. Young's insistence the bank hired an experienced financial person, Jack Davis, as executive vice-president and chief financial officer. Both Mr. Young and Mr. Davis remain in their positions. The bank's assets have grown to approximately $35 million and the bank has been profitable since 1993 or 1994. CBW has only paid a single $.15 dividend to its shareholders. In 1997, CBW's board voted in favor of forming a holding company and the bank retained a law firm to set up the company. After the necessary documents were prepared and the issue was presented to the stockholders, Petitioners were concerned that the increased number of authorized shares and broad grant of authority to the board of directors would dilute the stockholders' control. Petitioners therefore dissented from the majority decision to form the holding company. After necessary regulatory approval Citizens Bankshares, Inc., became the holding company of CBW by trading one share of holding company stock for one share of bank stock. Because they did not want shares in the holding company the dissenting shareholders were offered $18 a share, slightly over the October 15, 1998, book value of $17.54, and an amount the board anticipated the stock could bring in the local market. The dissenters declined, and when the parties were unable to agree on a value, it became necessary to select individual appraisers pursuant to Section 658.44, Florida Statutes. CBW's appraiser, Dr. Douglas Austin, issued a report appraising the stock for $19.78; the dissenting shareholders' appraiser, Richard Knight, established the value at $39.60 a share. When the two appraisers could not agree on a third to resolve the disparity, the Florida Department of Banking and Finance (DBF) as required, selected the third independent appraiser, the firm of Sheldrick, McGehee, and Kohler, Inc. (SMK). On June 23, 1999, SMK issued its appraisal establishing a value of $18.55 per share for CBW common stock, effective the date of the merger: October 15, 1998. CBW's offer of that price was rejected by the dissenters and the Petitioners filed a timely request for a formal evidentiary hearing. Their petition resulted in this proceeding. As distilled from the testimony of the several experts in this proceeding and from scant available case law, the valuation or appraisal process requires the a combination of standard formulaic procedures and the appraisers' professional judgement. It is not an entirely mechanical process, and to assess the validity of the process requires scrutiny of the individual experts' background and experience. The individual appraisers who testified were candid and credible professionals. In no instance did it appear that any one appraiser was bent on deriving a pre-determined value. Nonetheless, the values were widely disparate. The task therefore is to probe the methodologies utilized, weigh the experts' evidence, and determine the appropriate value. Richard A. Knight's Opinion Richard Knight was qualified as an expert in the valuation of stock in this case over the objection of CBW. Mr. Knight has extensive background and experience in banking and finance and little experience in actual appraisals. Mr. Knight considered population growth of Wakulla County of 66.58% from 1990 (11,202) to 1997 (18,660). He also considered the growth rate of the bank which was substantially higher than the state average (275.48% compared to 171.3% from 1989-1996; and 16% versus 5% for the 12-month period ending June 30, 1998). Mr. Knight considered recent stock transfers of $18 per share to be unreliable as a measure of value since the bank is a non-publicly traded, stockholder-owned community bank. Mr. Knight looked at reported return on asset and net operating income per share. Mr. Knight selected a multiple of 18 times net operating income per share applied for the year ending 1997, ($2.20) for a value per share of $39.60. Mr. Knight also opined that a fair value of the bank's shares would be 2.25 times book value, translated to $39.04 at the end of August 1998. Although the two methods yielded similar results, Mr. Knight felt the multiple of book method was preferable as with a bank the size of CBW earnings are "somewhat variable." The valuation figures proposed by Mr. Knight did not include marketability or minority shareholders discounts. In cross-examination Mr. Knight agreed that 8-10% would be a fairly reasonable range for CBW's capitalization rate. Capitalization rate is the inverse of the price to earnings (P/E) ratio. A capitalization rate of 10 results in a P/E ratio of 10 times earnings; a capitalization rate of 8 $ results in a P/E ratio of 12.5 times earnings. In either case the multiple of 18 times earnings used by Mr. Knight is inconsistent. The rate of 10 or 12.5 times earnings would yield a lower value than the $39.60 suggested by Mr. Knight. Mr. Knight's opinion that 2.25 was a reasonable multiple of book value was basically an educated guess based partially on his experience that no healthy bank in Florida has sold for under two times book. This opinion did not determine the likelihood of a sale of CBW nor was Mr. Knight able to compile a peer group list of banks sold with which he could compare CBW. Dr. Charles Donald Wiggins' Opinion Dr. Wiggins was retained by Petitioners and produced a thorough detailed report dated March 16, 2000. Dr. Wiggins has a doctorate in business administration and is a licensed CPA in the State of Florida, although he is not practicing as a CPA. He is employed by the firm, Business Valuation, Inc., in Jacksonville, Florida. Dr. Wiggins has extensive experience conducting business appraisals, including dissenters' rights appraisals in other types of businesses and in two bank cases, including the present case. Dr. Wiggins described three primary stock appraisal methods: the income or going concern appraisal based on earnings, cash flow, or some other economic measure of return; a market comparable method based on examination of similar businesses sold; and a liquidation method, in the case of a bank, an adjusted book value approach where the appraiser looks at underlying assets and liabilities and adjusts those from book value to market value. Dr. Wiggins considered the various methods and selected the market comparable method, primarily because he had information on comparable sales from S and L Securities, a well- known organization that provides data on bank sales, by region, asset size, and other specific information on the value multiples (such as P/E), the buyer and the seller. The result of Dr. Wiggins' appraisal was a fair market value of 100 $ equity interest in CBW of $38.13 per share, or a minority equity interest of $28.61 per share. Dr. Wiggins obtained information from appraisal reports prepared for CBW by its experts; he also obtained historical financial and economic information from various banking publications and economic reports; he looked up CBW and similar banks on the FDIC web site and used information already in his office on comparable bank sales. He did not use comparable sales of Florida banks because there was only one reported in the relevant asset range for the prior two years. Instead Dr. Wiggins established a criteria of banks in the $30 to $50 million range in the Southeast that sold in the prior two years. This yielded a sample of 9 banks from West Virginia to Mississippi. In his sample he looked at the average and median market-to-book ratio and found them very close: 2.17, and 2.03, or 2.07. This comparison is based on the reported value the bank sold for versus the reported book value. 2.17 means the bank sold for 2.17 times book value. Although he has published numerous articles on discounted cash flow analysis in appraisals and likes that type of appraisal, Dr. Wiggins did not do that analysis in this case as he did not have the necessary information or time. Nor did Dr. Wiggins examine information with respect to his comparables' net income, equity, market size, market share, and competition. He did not talk with management, and for that and other reasons he designated his appraisal as a "limited scope appraisal." Dr. Wiggins' report discusses the factors listed in U.S. Internal Revenue Services' Rule 59-60 provided by the IRS for guidance to appraisers of closely held businesses. Dr. Wiggins' approach favored a larger over a smaller sample of "comparable" banks but the basic problem of his approach is that it is not possible to determine how valid it is to compare his bank sample to CBW without considering the other factors he felt would limit the sample size. In other words, a single close comparable would have been more valid than the disparate multiple comparables utilized by Dr. Wiggins. The two of the banks in Dr. Wiggins' sample that were closest to CBW in value of deposits, rural market location, and market competition, sold in their entirety for an average of P/B of 1.6 and P/E of 14.43. Those two banks also had substantially better earnings than CBW for the first 3 quarters of 1998. Richard Kohler's Opinion Richard Kohler is principal in the firm, Sheldrick, McGhee, and Kohler (SMK) in Jacksonville, Florida. The firm conducts business appraisals primarily throughout the southeast and has been in operation since 1946. Mr. Kohler's training and experience amply justified his qualification without objection as an expert in valuation of bank stock. In performing his appraisal at the request of the DBF Mr. Kohler and SMK's senior appraiser, Jess Wright, gathered information from CBW and other relevant sources, including a letter from counsel for the dissenter shareholders. Of the three basic methodologies (income, market, and cost or asset approach) they determined the best methodology would be the income or earnings approach, which is most appropriate in any appraisal where the company is making money. Mr. Kohler built a model based on return expectations at different levels of risk in the markets and derived a P/E multiple of 10.7; to that he applied the average of CBW's prior five years earnings, which with ups and downs came close to the anticipated earnings in 1998. The average was $260,000. Multiplying the average earnings times the P/E multiple of 10.7 resulted in a finding of $2,782,000, or $18.55 per share as of October 15, 1998. After that exercise, Mr. Kohler and his colleague applied various reasonableness tests to determine whether their core finding was appropriate. They looked at public companies and using guideline models discounted from their values. They also looked at actual stock transfers at each bank and found they had all been at basically book value. In developing his P/E multiple and capitalization rate the 10% growth selected by Mr. Kohler was very conservative. That is, he erred, if at all, to the benefit of the Petitioners. When he conducted his reasonableness test Mr. Kohler took a 50 $ discount from the value of public companies. Companies that were publicly traded were at approximately 19 or 20 times earnings and about 2 to 2.3 times book value. These companies were much larger than CBW and further, CBW had only paid a one-time token dividend. Mr. Kohler did not apply a minority discount to his valuation. The value he derived from his methodology is a per share value of the entire bank; it is neither a majority nor minority value. If a 51$ interest or other controlling block were to be valued it might have a slight premium. Dr. Douglas V. Austin's Opinion Dr. Douglas V. Austin is a professor Emeritus Finance, at the University of Toledo, Ohio. Prior experience after graduate school included teaching at the College of Business at the University of Michigan and working on mergers and acquisitions for the Federal Reserve Bank of Cleveland. When he began to lose his eyesight in 1967, Dr. Austin returned to academia and at the time of his retirement in 1989 had been a full professor and department chairman for approximately 20 years. Since 1989 Dr. Austin teaches one semester a year and runs his own consulting firm full-time. He is also an attorney licensed to practice in Michigan and Ohio. Dr. Austin has written numerous books and articles on banking-related topics, including bank stock valuation and dissenters' stock appraisals. Without objection Dr. Austin was qualified as an expert in bank stock valuation. In the words of another witness, if bank valuations were rock and roll, Dr. Austin would be Elvis Presley. Dr. Austin is now fully blind and the work done by his firm is under his supervision. Steve Byers, the firm's vice- president, physically prepared the appraisal report in this case. Dr. Austin is fully familiar with the report and directed and reviewed the work. Assured that it was his work product, Dr. Austin signed the report. Dr. Austin's report was by far the most in-depth analysis that was conducted of the bank. He attempted all three methods of business valuation. Dr. Austin appraised the value of 100% of CBW at $23.76 per share and the minority interest held by the dissenters at $19.78 per share. As a result of a computer data entry error, these values were overstated by about $.50, but this is not material. The first action Dr. Austin took in preparing his valuation was to send CBW a 17-page information request for financial statements and information like non-accrual and substandard and doubtful loans, yields on loans, yields on deposits, quality of the loans, and securities. He always looks at the bank. In valuing small financial institutions which are not publicly traded and which have a small number of shareholders, there are no public data to compare it with so you must look at the financial institution itself. Dr. Austin familiarized himself with the balance sheet, the income statement, all the historic bank ratios of this particular bank for five years; he did a peer group analysis, and compared this bank to other banks in the industry. He also gathered data concerning the economy, national, state and local, because growth in deposits and growth in population are figured into economic projections. CBW underperformed in terms of a rate of return on assets. Four out of the previous five years, it was below the 1% rate of return on assets which was standard for the industry. Only in 1997 was the rate above 1%. From a peer group standpoint, CBW had not performed equal to the average of the previous five years of banking history of banks of its size. The bank had a lower return on equity than did other banks. It had a lower capital to asset ratio than did other banks of the same size. It was marginally capitalized in that it had less than 8% capital. Its loan-to-deposit and loan-to-asset ratios were higher than other banks that were competing in the county and other peer group banks in Florida. CBW was suffering some losses which were higher than peer group banks. A discount rate was applied by Dr. Austin from the capital asset pricing model. This is an accepted financial model for determining discount rates and capitalization rates indirectly. Cash flows are a combination of earnings plus available capital minus capital expenditures plus depreciation for each year. Dr. Austin utilized different growth rates in different stages of his valuation. For the first five years, he utilized the growth rate of 8.25%. This was slightly lower than the 9% growth rate of the bank for the past three years. The growth of earnings was predicted to be 2% after the fifth year into the future. In the previous five years, the bank's earnings had fluctuated wildly and it had only one good year of earnings -- 1997. The earnings for 1998 were going to be less than 1997. Looking five years into the future, Wakulla County was going to mature and so was the bank. Therefore, Dr. Austin thought five years into the future the earnings growth of 2% was a logical growth. In the long term, economic growth will remain at approximately 2.0% to 2.4%, barring any exogenous shocks to the economy such as oil embargoes, military conflicts, or political upheavals. Analysts expect annual compound population growth rates of approximately 5.9% for 1997-2000, and approximately 2.0% to 2.5% thereafter. The second valuation method that was used by Dr. Austin was adjusted book value. It was used as a confirmation and as an alternative technique. This technique marks all of the assets and liabilities of the bank's institution from cost to market for a picture of what the bank is worth in terms of market at a point in time. Dr. Austin did not use market comparables because he could not come up with a database which allowed him to identify comparables that traded in the same size level as Citizens Bank. Nor did he do bank sales comparables. It is only appropriate to use bank sales comparables if the dissenters were dissenting from a merger or a holding company acquisition and did not like the price that the acquirers were giving to the sellers and the whole bank was going to disappear. Dr. Austin has done that kind of dissenters' appraisal and used bank sales comparables. In determining the adjusted book value, the first thing that Dr. Austin did was to determine the market value of the CBW's securities portfolio. He then took the yields on various loans and compared them to the Uniform Bank Performance Report for September 30, 1998. He next modified the value of the loans up or down, based on the yield differentials. The loan portfolio was then further adjusted based upon an analysis of the quality of the portfolio. The next thing Dr. Austin did was determine a core deposit value. Because they are perceived as "hot money" (moved from bank to bank based on small changes in interest rates) Dr. Austin disregarded all certificates of deposit (CDs), both above and below $100,000, from core deposits. Dr. Austin's discounted cash flow analysis produced a value of $22.76. The net adjusted asset value came to $23.45. Dr. Austin averaged those two numbers and adjusted the average by adding 11% for control premiums (enterprise value or value ascribed to control of the enterprise) and reduced that number by 25% for a minority discount (considering the dissenters' minority share of the total holdings). Dr. Austin's formula resulted in a value of $19.78 per share. Establishing the Fair Value Certain issues emerged in this proceeding as central to analysis and application of the experts' methodologies. These issues include how to characterize and whether to consider discussions and correspondence with FirsTrust regarding purchase of CBW. The issues also include whether to consider CDs among core assets and whether marketability or minority discounts are appropriate. FirsTrust FirsTrust is a banking business; it owns controlling interest in two banks in Louisiana, has a company that provides automated technology machines (ATMs) all over the country, and owns an insurance company and real estate development business. FirsTrust's assets range between $300 and $600 million. Joseph Canizaro is chairman of the board. From 1996 through mid-1998, Randy Lovitt was employed by FirsTrust as executive vice-president and chief operating officer. He was Mr. Canzaro's right-hand person, managing the banks and operations of all the companies. Sometime around early 1997, FirsTrust was looking to expand into several states in the Southeast. It was looking for potential candidates for merger or purchase rather than starting new banks. Someone told Mr. Lovitt about CBW. Throughout 1997, Mr. Lovitt corresponded with and, on two occasions, visited with Skip Young, Mr. Metcalf, and other CBW board members. The parties executed an exclusivity and confidentiality agreement. On July 23, 1997, Joseph Canizaro sent a non-binding letter of intent to Danny Metcalf as chairman of the board of CBW. The letter included the proposal that FirsTrust would infuse extra capital into CBW in an amount of 50% of its approximate $2,260,000. Then FirsTrust would acquire enough additional stock to give it 80% ownership, paying 2.25 times the adjusted book value. The infusion of capital would have required authorization of additional stock (75,000 shares -- 50% more than the already authorized and issued 150,000 shares) which FirsTrust would purchase at book value. As explained in Randy Lovitt's clarification letter of August 6, 1997, to Danny Metcalf, the intent of the proposal was to reduce FirsTrust's overall costs and provide needed capital for future growth. The letter of intent stated on its face that it was non-binding and was further subject to a satisfactory due diligence analysis being conducted by the purchaser. The letter of intent was never executed as acceptable to CBW. There is some evidence that there were discussions that CBW's board wanted 3 times, rather than 2.25 times adjusted book value. On September 2, 1997, Randy Lovitt sent a letter to "Mr. Metcalf and Board Members" confirming the understanding that the proposal to purchase 70% of outstanding shares at 2.25 times book and plan for additional capital did not meet the CBW's approval and any higher price would make the transaction too expensive for FirsTrust. By May 1998, Danny Metcalf was no longer on the board but continued to pursue a sale of his and other CBW stockholders' shares to FirsTrust for 51% control. Viewing this as a hostile effort, Mr. Young told him to stop. Mr. Young also wrote to FirsTrust's Randy Lovitt on May 5, 1998, explaining that CBW wished to remain independent and . . . to be the best little bank in town, which provides outstanding service and products to small and medium-size business within our community. (Petitioner's Exhibit 47) From the evidence it is apparent that FirsTrust's communications were serious "feelers," rather more significant than earlier casual buy/sell conversations between various Tallahassee bankers and CBW board members over a mullet lunch in Wakulla County. Still, the exercise never reached fruition and if the FirsTrust correspondence could be considered a firm "offer," the proposal remained speculative. The negotiations are worthy of some consideration, but little weight in fixing the value of Petitioners' stock on October 15, 1998, more than a year after the written proposal by FirsTrust, and a substantially smaller percentage of the stock. Discounts Petitioners argue that a minority discount is inappropriate because it would result in a "windfall" to the purchasers, either a majority shareholder or the corporation itself. There is evidence and argument on both sides of this issue, but the most reasonable approach is that of Dr. Austin who applied both a premium and a discount in his valuation process in order to convert the mere numerical calculations into a comparable market price for thinly traded shares. The studies cited in his valuation report suggest that Dr. Austin's methodology was conservative and fair. Certificates of Deposit The third significant issue is whether CD's should be considered among the core deposits of the bank. The current trend among valuation experts is to exclude those CD's as "hot money." Because people are less willing to tie up their assets in a longer term deposit, the period of CD's has decreased in recent years. Those CD's are moved from bank-to-bank as competitive interest rates change from bank-to-bank. While Petitioners suggest that CD depositors in small community banks such as CBW tend to leave their money in their community bank, they presented no evidence of that practice at CBW. Intuitively as valid as Petitioners' argument is the notion that such depositors could be quickly seduced by more advantageous rates offered in the competitive banking environment in Tallahassee, where numerous and larger banks are found. No single shareholder of CBW is a majority shareholder. In order to purchase the dissenting shareholders' stock the holding company has to borrow to replenish its capital. It intends to pay off the loan by offering the stock on a pro rata basis to existing shareholders before offering it in the community. Current book value of CBW stock is between $20 and $21. The limited number of stock sales since CBW's inception have been around book value and Skip Young does not anticipate being able to sell the dissenters' stock for more than book value. Dr. Austin's approach yielded a fair value per share at 112.8% of CBW's book value as of October 15, 1998. Dr. Austin's approach was most thorough, reasonable and consistent with prevailing valuation practices, including Revenue Ruling 59-60 and the guidance of the U.S. Comptroller of the Currency. In summary, it is found that $19.78 is the fair value per share of the dissenters' shares of CBW.
Recommendation Based on the foregoing, it is hereby RECOMMENDED: That the Office of the Florida Comptroller enter its final order setting the October 15, 1998, fair market value of Petitioners' stock at $19.78 per share. DONE AND ENTERED this 19th day of September, 2000, in Tallahassee, Leon County, Florida. MARY CLARK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 19th day of September, 2000.
The Issue The purpose of the mandatory public hearing was to afford public comment on the application for authority to acquire Intercontinental Bank, West Miami, Florida (Intercontinental Bank). The hearing also allowed the Applicants, Eligio Cedeño and Alvaro Gorrin Ramos, to present evidence that they meet the criteria of Subsection 658.28(1), Florida Statutes, relating to reputation, character, experience, and financial responsibility such that they are qualified to acquire and own Intercontinental Bank in a legal and proper manner without detriment to the interests of the bank's stockholders, depositors, and creditors, or to the general public.
Findings Of Fact On January 12, 2005, OFR received the Application. OFR published notice of receipt of the Application on January 28, 2005, in the Florida Administrative Weekly. OFR has satisfied the notice requirements of Subsection 120.80(3)(a)1.a., Florida Statutes, and Florida Administrative Code Rule 69U-105.103. On February 3, 2005, OFR made a timely request for additional information regarding the Application. The Applicants answered this request in a letter dated May 5, 2005. The Applicants, as required by federal law, have filed a separate application with the Federal Deposit Insurance Corporation. The Applicants are foreign nationals. Mr. Eligio Cedño is proposed to own more than 25 percent of Intercontinental Bank's common stock, and Mr. Alvaro Gorrin Ramos is proposed to own more than 25 percent of Intercontinental Bank's common stock. On September 19, Don Saxon, Commissioner of OFR, issued an Order Granting Office's Petition for Public Hearing on the Application. The public hearing was scheduled for November 18, 2005, and the Applicants published a notice in the November 3, 2005, edition of The Miami Herald, which indicated the date, time, and location of the scheduled public hearing, and which otherwise complied with the requirements of Florida Administrative Code Rule 69U-105.105(1) and satisfied the notice requirement of Subsection 120.80(3)(a)4., Florida Statutes. A public hearing was held as scheduled on November 18, 2005. No member of the public appeared at the hearing, and no person expressed opposition to the Application. Mr. Eligio Cedño, a proposed major shareholder of Intercontinental Bank, has more than 26 years of banking and financial experience. He has experience as a senior officer, director, and major shareholder with various financial institutions, including Bolivar, Banco, C.A. Mr. Cedño appears to be sufficiently qualified by reputation, character, experience, and financial responsibility to control Intercontinental Bank in a legal and proper manner, and the interests of the other stockholders and the depositors and creditors of the bank, and the interests of the public generally will not be jeopardized by the proposed change in ownership. Mr. Gorrin Ramos, a proposed major shareholder of Intercontinental Bank, is a businessman with a variety of business interests throughout the United States and Venezuela. He has prior financial institution experience with Banco Canarias. Mr. Ramos appears to be sufficiently qualified by reputation, character, experience, and financial responsibility to control Intercontinental Bank in a legal and proper manner, and the interests of the other stockholder and the depositors and creditors of the bank, and the interests of the public generally will not be jeopardized by the proposed changes in ownership. Neither of the Applicants has been convicted of, or pled guilty or nolo contendre to any violation of Section 655.50, Florida Statutes, relating to the Florida Control of Money Laundering in Financial Institutions; Chapter 896, Florida Statutes, relating to offenses related to financial institutions; or any similar state or federal law. OFR conducted a background investigation on the Applicants and discovered no information to preclude the Applicants from acquiring the aforementioned shares of common stock in Intercontinental Bank. The current management and directors of Intercontinental Bank, including its president, Mr. Amadeo Lopez-Castro, Jr., will maintain their positions in the bank and will continue to manage the institution. In addition, Messrs. Carlos J. Fernandez, Alvaro J. Gorrin, and Marcel Rotker will be added to the existing board of directors of the bank. Intercontinental Bank's business plan reflects that the bank will offer full-service banking to individuals and businesses located primarily in the Miami-Dade County community. DONE AND ENTERED this 10th day of January, 2006, in Tallahassee, Leon County, Florida. S SUSAN B. HARRELL Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 10th day of January, 2006.
The Issue The parties' Pretrial Stipulation executed herein, limits the issues framed by the Amended Administrative Charges and Complaint for Removal: Do Respondent's acts between January 1, 1980 and May 22, 1981 constitute conduct that is an unsafe or unsound practice as that term is defined in Section 655.005(1)(d), F.S. (1985)? Do Respondent's acts of commission or omission between January 1, 1980 and May 22, 1981 constitute conduct that is a breach of fiduciary duty as utilized and understood under Title XXXVIII, Banks and Banking, F.S. (1985)? Do Respondent's acts between January 1, 1980 and May 22, 1981 constitute a violation of any other law involving fraud or moral turpitude which constitutes a felony, to wit, a violation of Section 517.301(1), F.S. (1985)? BACKGROUND AND PROCEDURE The Prehearing Stipulation was admitted as Hearing Officer Exhibit A. Petitioner presented the oral testimony of Thomas Flood and Gualalupe Prada, and had admitted one exhibit in evidence. Respondent presented the oral testimony of Thomas Flood, Manuel Diner, and Rolando Pozo, and had admitted nine exhibits in evidence. Petitioner filed the transcript. The parties timely submitted posthearing proposed findings of fact and conclusions of law which have been duly considered and which are ruled upon in the appendix hereto pursuant to Section 120.59(2), Florida Statutes.
Findings Of Fact Respondent Rolando Pozo was and is an officer of Capital Bank, Miami, Florida, having held the following positions: Assistant Vice-President, from July 25, 1978 to December 28, 1978; Vice-President and Branch Manager of the Downtown Branch from December 28, 1978 to September 1, 1980; Vice-President, Commercial Loans at the North Bay Village Branch (Main Office) from September 1, 1980 to May 22, 1981; and from February 3, 1986 to the present in the capacity of Vice-President and Branch Manager of the Downtown Branch. Mr. Pozo is fluent in both Spanish and English. The downtown branch offices of Capital Bank are located at 145 East Flagler Street, Miami, Florida. Guadalupe Prada is a female Mexican national with limited command of the English language. Her native language is Spanish. Ms. Prada, the state's chief complaining witness, testified through a qualified interpreter. In making the following findings of fact, it has been necessary to weigh the relative credibility of Mr. Pozo's version of the events and chronology thereof against the narrative of events and chronology of events related by Ms. Prada. Wherever possible, Ms. Prada has been taken at her word and every benefit of doubt that may accrue to her as a result of possible unfamiliarity with the English language has been accorded her. Wherever possible, extrinsic evidence, either documentary or oral by way of other witnesses, has been used to resolve all discrepancies of fact so that all witnesses may be found to speak the truth. However, in some respects, Ms. Prada's testimony is simply not internally or externally consistent and/or credible. Her memory is "convenient" to say the least. Her concept of time and chronology was elastic on direct examination and contradictory on cross- examination. Her version of the "truth" of crucial events and with regard to her finances varies with the circumstances and with the type of legal action in which she has been involved. Most telling to the undersigned is that with regard to every effort at impeachment of her testimony by Respondent's attorney, Ms. Prada either asserted that too many questions confuse her or asserted that her prior contradictory assertions under oath within various lawsuits, including a 1981 divorce, were the result of having been told by a succession of attorneys to perjure herself; then, she claimed that one of her prior attorneys also tried to swindle her. The final impression left by Ms. Prada's testimony is that when events work out to suit her, she considers herself in charge, and when events do not work out to suit her, she considers it everybody's fault but Ms. Prada's. Ms. Prada entered the United States in 1979 and between 1979 and May 1981 was unemployed and actively seeking a job and investment opportunities. She was a customer of the downtown branch of Capital Bank, during the period 1979 to and including May 22, 1981. Guadalupe Prada was and is affluent. Among other personal individual assets, she held certificates of deposit (CDs) issued by Capital Bank during 1979 through and including May 22, 1981 in varying amounts up to and including $90,000. Ms. Prada met Respondent Pozo in 1979 while her then-husband, Frank Prada, was trying to obtain a loan at the Capital Bank, downtown branch. Ms. Prada's husband, with whom she was in business in a jewelry manufacturing company called "Caribe Manufacturing", urged her to come in on the corporate loan which Pozo had agreed to grant, provided a guarantor was found. In the course of loan negotiations with both the Pradas, Pozo candidly explained to Ms. Prada that if she co-signed the loan, she could lose the bulk of her individual assets if her husband/the corporation defaulted on the loan. Therefore, Ms. Prada, on her own initiative, declined to become her husband's guarantor and developed confidence in Pozo's honesty and financial acumen. This confidence was in part due to Pozo's fluency in Spanish. In the course of reviewing Mr. and Mrs. Prada's respective individual financial statements for the loan application, Pozo became familiar with Ms. Prada's 1979 financial arrangements at Capital Bank, including the aforementioned CDs and a small checking account, and with her assets remaining in Mexico. He formed the initial opinion that she was a knowledgeable businesswoman. Thereafter, Ms. Prada would speak to Respondent Pozo from time to time at Capital Bank, however, Ms. Prada's personal banking needs were attended-to either by tellers or by a Capital Bank officer named Margarita Gonzalez. Ms. Prada continued to seek out Mr. Pozo and a personal friendship developed. Mr. Pozo and Ms. Prada met on mixed business/social occasions away from the Capital Bank and they spoke on the telephone on matters wholly unrelated to development of Capital Bank depository accounts. Between 1979 and May 1981, Ms. Prada and Respondent discussed potential investments for Ms. Prada and how she was going to get a job. These discussions were usually initiated by Ms. Prada but Mr. Pozo was a willing participant. In testimony, Ms. Prada named several investment opportunities she says Pozo recommended during this period of time. She also claims he told her to withdraw money from Capital Bank. Contrariwise, Pozo testified that he told her to leave her money in the bank and not to invest in these projects, two restaurants and a boutique, but he admits that he did refer Ms. Prada to a Mr. Savloff for a possible job in an electronics store. Ms. Prada describes the referral to Mr. Savloff as one for investment purposes. Mr. Savloff was also a Capital Bank customer. The disparity of testimony on these contacts is largely immaterial because even if each were an investment opportunity, which is hardly to be believed on the undersigned's assessment of Ms. Prada's overall credibility, each "opportunity" was rejected by Ms. Prada. In each instance, Ms. Prada acted as a knowledgeable investor at least to the extent of controlling her own money and to the extent of choosing when and in which projects she would invest. Neither Ms. Prada's nor Mr. Pozo's testimony gives the slightest hint that he exerted undue pressure to get her invest any of her money from any source or depository in any of these alleged investment ventures. During the time Mr. Pozo was employed at Capital Bank, Ms. Prada never withdrew any of the monies which she had entrusted to Capital Bank. After being transferred to Capital Bank's North Bay Village branch in September, 1980, Mr. Pozo did not maintain an office at, nor did he work out of Capital Bank's downtown branch offices at Flagler street. On or about May 23, 1981, Mr. Pozo commenced employment at Miami National Bank, located at 8101 Biscayne Boulevard, Miami, Florida. Thereafter, Mr. Pozo had no relationship with Capital Bank until he resumed employment at Capital Bank in February, 1986. In June 1981, Respondent Pozo and Ms. Prada became involved together in a business project known as "Hobby Market, Inc." This involvement occurred after Pozo had severed his association with Capital Bank and at a time Ms. Prada was not a customer at Miami National Bank, the Bank with which Pozo was then- associated. Pozo did not at first approach Prada with the investment opportunity. He had arranged with another Capital Bank customer, George Leijtman, to invest 50-50 in this project. Prada overheard Pozo's end of a telephone conversation concerning his arrangement while she was visiting him in his Miami National Bank office in early June 1981. She then urged Pozo to allow her to buy into the Hobby Market project and to help her get a job as a salesperson with the new corporation so that she would have a continuing source of income. At this time, Mr. Pozo knew Ms. Prada to be a qualified salesperson. He also knew she had money and assets in Mexico besides her money at Capital Bank. The record is unclear whether he knew she also had at least a $5,000 checking account at Southeast Bank in Miami, but she did. The agreement ultimately reached involved Ms. Prada, Jorge Lejtman, and Rolando Pozo and is memorialized by letter agreement and by assignment of stock interest executed on June 15, 1981, and June 16, 1981 respectively. Mr. Lejtman invested $10,000 in the business for 2,000 stock shares. In addition to the money, Lejtman's contribution was to be expertise and experience in the toy/hobby business. Lejtman would operate the first store in Omni Mall. The agreement called for Ms. Prada to pay $20,000 to Mr. Pozo in return for 800 shares of the 4000 shares of the company's outstanding stock. Pozo had subscribed to 2,000 shares of Hobby Market stock on June 12, 1981, at $10 per share. Pozo had $15,000 in savings and anticipated borrowing the remaining $5,000 needed to fulfill his subscription. Instead, he raised the necessary $20,000 by selling 800 of his subscribed-to but unpaid-for 2,000 shares to Ms. Prada, not his the $10 per share subscription price, but at $25 per share. The result enabled Pozo to secure 1200 shares free and clear without delving into his savings and without borrowing. Pozo immediately turned the money he received from Prada over to the business. In addition to his money investment, Pozo's contribution to the venture was to be his financial experience and his assistance to Hobby Market in obtaining credit from toy/hobby suppliers. Ms. Prada also agreed to tender $20,000 in loans to the business and to fund another $25,000 in loans in the future. In return, Ms. Prada received two promissory notes for $10,000, each note to bear interest at 18 percent. Ms. Prada ultimately failed to fund the additional $25,000 loan but in return for providing the first $20,000 and promising the additional $25,000, Ms. Prada was also guaranteed a job at a second Hobby Market store to be opened with the additional monies she was going to provide, but did not. Ms. Prada's contribution in expertise was purely as a salesperson. Ms. Prada was eventually paid $7,000 principal and interest on the cash loans. The Hobby Market transaction was conducted at the law offices of attorney Manuel Diner. The documents were drafted by Diner in English. All negotiations were in Spanish. Signature authority for all Hobby Market bank accounts were in Lejtman and Prada jointly. These were opened at Central National Bank located in the Omni Mall where a lease was obtained for the first store. Prada was made corporate Secretary. Prada initialed certain written English changes indicating her assent to various agreements formalized after oral negotiations in Spanish. With regard to the cash that Ms. Prada turned over to Pozo/Hobby Market Inc., her testimony is that Pozo told her to take it out of Capital Bank and she did. His testimony is that he did not and that he thought she was transferring her Mexican funds. Subsequently, Ms. Prada and Mr. Lejtman had disagreements. Ms. Prada never funded the additional loans and the second Hobby Market store was unable to open. Ultimately, Mr. Lejtman offered to purchase back from Ms. Prada and Mr. Pozo their respective interests in the business. Ms. Prada rejected an offer that would have paid her back the monies she had invested and she later filed a lawsuit against Mr. Pozo, Mr. Lejtman, and the business. In that litigation, Prada v. Lejtman, Pozo, et al., Case No. 82-1370 (Eleventh Circuit Court in and for Dade County, Florida), Ms. Prada received a money judgment against Rolando Pozo. That judgment states in part: . . . considered that it was the Defendant Rolando Pozo who committed the fraud against the Plaintiffs and thereby caused Plaintiffs to suffer the loss of funds due to the conversion of the stock. The case was affirmed on appeal. This judgment, admitted by stipulation, shows that Ms. Prada's son, who apparently had an interest only in her monies still in Mexico in 1981, joined in the lawsuit as a co-plaintiff. His joinder strongly suggests that her Hobby Market investment monies came from her family funds in Mexico, not from her personal funds anywhere in the United States. As to the issue of fraud, the judgment is not binding on the undersigned finder of fact in this de novo proceeding, due to different rules as to the quantum of proof in each case. The classic tort of fraud or deceit requires proof only by a preponderance of the evidence. A license disciplinary case, such as the instant one, requires proof by the "clear and convincing standard." See, Rigot v. Bucci, 245 So.2d 51 (Fla. 1971); and Spayberry v. Sheffield Auto and Truck Service, Inc., 422 So.2d 1073 (Fla. 1st DCA 1982). Rolando Pozo is held in high esteem at Capital Bank, has an excellent and unblemished work record, and has an excellent reputation in that limited "community" for truth and honesty. Capital Bank has never initiated or joined in any complaint against Rolando Pozo relating to Mr. Pozo's association with Ms. Prada. The only evidence of banking standards presented at formal hearing was that presented by Mr. Thomas Flood, Senior Vice-President of Capital Bank, who is personally very supportive of Mr. Pozo. He stated that it is internal policy of Capital Bank, when it deems it to be a prudent decision, to advise persons with whom it has a banking relationship that the bank will sever that banking relationship and will request or require that person to remove his or her deposits from Capital Bank; that such severance of relationship is extraordinary and is a bank decision that would have been transmitted to a bank manager such as Mr. Pozo; that Capital Bank made no such decision with regard to Guadalupe Prada; and that it would be "extraordinary" for a branch manager, which is the position Respondent held from January 1, 1979 through 1980, to tell a depositor to invest elsewhere. At no time did Mr. Flood characterize such a suggestion as a breach of banking standards or ethics.
Recommendation Upon the foregoing findings of fact and conclusions of law it is recommended that the Comptroller enter a Final Order dismissing all charges against Respondent Rolando Pozo. DONE and RECOMMENDED this 14th day of December, 1987, at Tallahassee, Florida. ELLA JANE P. DAVIS, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 14th day of December, 1987. APPENDIX TO RECOMMENDED ORDER The following constitute rulings pursuant to Section 120.59(2), Florida Statutes, upon the parties' respective posthearing proposed findings of fact (PFOF). Petitioner's PFOF: 1-2 Except as subordinate and unnecessary covered in FOF 1-3. Covered in FOF 5 and 7. Covered in FOF 6-9. Covered in FOF 23. Except as unnecessary, covered in FOF 10. Rejected as stated as not supported by the greater weight of the credible evidence as a whole, see FOF 4, 7, 11, 14, and 16. 8-11 Rejected as not supported by the greater weight of the credible evidence as a whole and as largely subordinate and unnecessary, see FOF 16-18. Covered in FOF 20. Rejected as covered in FOF 4. Covered in FOF 21-23. Respondent' PFOF: 1 Covered in FOF 1. 2 Covered in FOF 2. 3 Covered in FOF 12. 4 Covered in FOF 13. 5 Covered in FOF 5. 6 Covered in FOF 6. 7 Covered in FOF 14. 8 Covered in FOF 7. 9 Covered in FOF 9. 10 Covered in FOF 5. 11-13 Covered in FOF 1. 14, 15, and 17 Covered in FOF 13-16. 16, 18, and 24 are of such an ultimate nature as to be conclusions of law and are addressed as such within the Recommended Order. To the extent they constitute PFOF, they are covered in FOF 14-16, and 18. 19-23 Covered in FOF 16. Covered in FOF 20. Covered in FOF 21. Covered in FOF 22. COPIES FURNISHED: GERALD LEWIS, COMPTROLLER DEPARTMENT OF BANKING AND FINANCE THE CAPITOL TALLAHASSEE, FLORIDA 32399-0350 MALCOLM S. GREENFIELD, ESQUIRE OFFICE OF COMPTROLLER THE CAPITOL, SUITE 1302 TALLAHASSEE, FLORIDA 32399 MICHAEL S. PASANO, ESQUIRE 2100 PONCE DE LEON BOULEVARD SUITE 1100 CORAL GABLES, FLORIDA 33134 CHARLES L. STUTTS, ESQUIRE OFFICE OF COMPTROLLER THE CAPITOL, SUITE 1302 TALLAHASSEE, FLORIDA 32399
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 The Department rules on the Proposed Findings of Facts submitted by the parties as follows: APPLICANT'S PROPOSED FINDINGS Applicant's proposed finding as to the net profit to asset ratio is accepted. Applicant's proposed finding as to the adjusted capital to asset ratio is accepted. Applicant's proposed finding as to the boundaries of the PSA are accepted. Applicant's proposed findings as to the population estimates of the PSA and the communities located within the PSA are accepted to the extent they are not inconsistent with the Department's findings adopted herein. Applicant's proposed finding as to net migration into Pinellas County and the age distribution characteristics of Pinellas County are accepted to the extent they are not inconsistent with the Department's findings adopted herein. Applicant's proposed finding that the Bank of Indian Rocks is the only full service bank with its main office operating in the PSA is accepted. Applicant's proposed finding that the Bank of Indian Rocks experienced a 23.3 percent rate of growth for loans and a relatively modest rate of growth for deposits during the last reporting year is accepted. Applicant's proposed findings as to the nature of the proposed branch site are accepted. Applicant's proposed finding as to the banks servicing the PSA is accepted to the extent that said banks have branch offices located in the PSA, but is rejected to the extent that said finding excludes other banks which may service customers in the PSA. Applicant's proposed finding that the PSA community is heavily dominated in terms of bank operations by the Bank of Indian Rocks is rejected as being unsupported by competent substantive evidence in the record. The record indicates that based on a telephone sample survey of 399 persons, 49 percent of the households in the PSA have their primary checking account at the Bank of Indian Rocks. The Applicant's proposed finding does not necessarily follow from the survey. Applicant's proposed finding as to the percentage of people located in the PSA that have a primary checking account in the PSA and bank with the Bank of Indian Rocks is rejected for the reasons previously stated in paragraph 10. Applicant's proposed finding as to the need for an additional full service bank based on the statistical data presented is rejected as constituting a conclusion of law. Applicant's proposed finding as to the savings and loan associations serving the PSA is accepted to the extent that said savings and loan associations have offices located in the PSA, but is rejected to the extent that said finding excludes other savings and loan association offices which may serve customers in the PSA. Applicant's proposed findings as to the nature of the primary service area is accepted, with the exception of the finding as to the amount of land available for future development which is rejected as being unsupported by competent substantial evidence in the record. Applicant's proposed findings that the Applicant's economic capacity will be enhanced by the branch; that the Applicant can support the proposed branch and statements with regard thereto, are rejected as constituting conclusions of law and legal argument, rather than findings of fact. Applicant's proposed findings as to the range of services that will be offered at the proposed branch are accepted. Applicant's proposed finding as to the need for additional banking facilities and the convenience of the proposed bank are rejected as constituting conclusions of law. Applicant's proposed findings as to the substantial experience of the bank staff, and significant assets are accepted; however, Applicant's proposed findings to the capability of the bank to support the branch facilities is rejected as constituting a conclusion of law. Applicant's proposed findings as to the Applicant's return on assets on 1977, 19978 and year to date are accepted. Applicant's proposed findings as to the liquid assets as a percent of total liabilities; condition of assets; classified assets and loan loss ratio are accepted. Applicant's proposed findings as to increased earnings, increased average balances and reduced chargeoffs are accepted. Applicant's proposed finding that there has been no cash operating loss of the Applicant is rejected as being unsupported by competent substantial evidence in the record. Applicant's other statements with regard thereto are rejected as constituting legal argument rather than findings of facts. Applicant's proposed finding that the review of the branch by management of the Applicant and the Atlantic Bancorporation is significant is accepted; however, Applicant's proposed finding as to the judgment of the management as to the success of the proposed branch constitutes a conclusion of law. Applicant's proposed finding that there was no insider transaction involved in the purchase of the land is rejected as being irrelevant and immaterial. Applicant's proposed finding that there was no showing that the lease transaction constitutes an insider transaction is rejected as being unsupported by competent substantial evidence in the record. Applicant's proposed finding that the lease sum represents approximately a 12 percent return on assets is accepted; however, the Applicant's proposed finding that the lease arrangement was not controverted as being unfair or unreasonable is rejected as being irrelevant and immaterial. Applicant's proposed finding that the depth of management is sufficient to operate the branch is rejected as constituting a conclusion of law. Applicant's proposed findings as to the number of years of experience of various officers of the bank is accepted. Applicant's proposed finding as to whether the name of the proposed branch was confusing is rejected as constituting a conclusion of law. Applicant's proposed finding that the Applicant does not have more than four pending branch applications is accepted. Applicant's proposed findings that there was no evidence presented which would indicate that the bank was not in compliance with federal and state regulations and statements of bank offices thereto are accepted. PROTESTANT'S PROPOSED FINDINGS Protestant's proposed findings in Section 1 are accepted, with the exception of the last sentence which is rejected as being a conclusory statement not supported by competent substantial evidence in the record. Protestant's proposed findings in Section 2 are accepted. Protestant's proposed findings in Section 3 are accepted, with the exception that the record reflects that the proposed site is located in the vicinity of the northwest quadrant of the intersection of Indian Rocks Road and Walsingham, and does not specify the number of fees west of the intersection. Protestant's proposed findings as to the PSA's boundaries as delineated by the Applicant in Section 4 are accepted. The second and third sentences in Section 4 are rejected as being unsupported by competent substantial evidence in the record. The first sentence in the second paragraph of Section 4 is accepted. The second sentence in the second paragraph of Section 4 is rejected as constituting legal argument rather than a finding of fact. The remaining proposed findings in Section 4 relating to the boundaries of the PSA of the First Bank of Treasure Island are irrelevant for the reason that said PSA is not necessarily applicable to subsequent applications. Protestant's proposed finding in Section 4 as to the population of the PSA is accepted and the proposed findings relating to the population of First Bank of Treasure Island's PSA is rejected as being irrelevant. Protestant's proposed finding in Section 4 as to the residential nature of the PSA is accepted. Protestant's proposed finding as to the limited nature of commercial activity is rejected as being unsupported by competent substantial evidence. The record reflects that although commercial activity in the PSA is in the form of small retail, professional, and service type establishments, these establishments are numerous in number. Protestant's proposed finding as to the considerable greenbelt lands which cannot be used for development is rejected as being unsupported by competent substantial evidence. The record reflects that there are greenbelt areas which cannot be used for development, but does not reflect that the amount of these lands is considerable. Protestant's proposed findings in the first and second sentences in Section 5 are accepted. The third sentence in Section 5 is accepted to the extent that traffic coming from west to east cannot enter the proposed site directly. The remaining findings in the first paragraph of Section 5 are accepted, with the exception of the last phrase of the last sentence which is rejected as speculation and not supported by competent substantial evidence in the record. Protestant's proposed finding in the second paragraph of Section 5 as to the number of Applicant's existing customers in the PSA is accepted, however, the remaining findings in that paragraph are rejected as unsupported by competent substantial evidence in the record. Protestant's proposed finding in the last paragraph of Section 5 is rejected as constituting a conclusion of law. Protestant's proposed finding in the first paragraph of Section 6 are accepted to the extent that said finding represents the number of offices of financial institutions serving the PSA and not the number of financial institutions. Protestant's proposed finding in the first sentence of the second paragraph of Section 6 is rejected as being unsupported by competent substantial evidence in the record. The record reflects that the Applicant offers automatic transfer from savings to checking and not that they contend this service is unique. Protestant's proposed finding in the second sentence of the second paragraph of Section 6 is accepted with the exception that the record does not support the finding that the Bank of Indian Rocks offers automatic transfer accounts. The finding in the last sentence of the second paragraph of Section 6 is rejected as being irrelevant. Protestant's proposed finding in the third paragraph of Section 6 is rejected as being unsupported by competent substantial evidence in the record. The record reflects that some of the questions asked in the Burke survey may have been based on the assumption that automatic transfer accounts were not presently offered in the PSA, however, the entire survey was not based on that assumption. Protestant's proposed finding in the fourth paragraph of Section 6 is accepted. Protestant's proposed finding in the fifth paragraph of Section 6 is rejected as being unsupported by competent substantial evidence in the record, said finding is based on hearsay evidence which is uncorroborated. Protestant's proposed finding in the sixth paragraph as to the number of businesses that the Applicant listed in its application which were not in its PSA is accepted, however, the remaining finding in that paragraph is rejected as irrelevant. Protestant's proposed finding in the last paragraph of Section 6 is rejected as constituting a conclusion of law. Protestant's proposed finding as to the provisions of Rule 3C- 13.041(2)(a), F.A.C. in the first paragraph of Section 7 are accepted. Protestant's proposed finding as to the Applicant's capital to asset ratio in the second paragraph of Section 7 is accepted. Protestant's remaining finding in that paragraph is rejected as constituting legal argument and opinion, rather than a finding of fact. Protestant's proposed findings in the first paragraph of Section 7 are accepted. Protestant's proposed finding in the fourth paragraph of Section 7 is rejected as being unsupported by competent substantial evidence in the record. The record reflects that Mr. Maurer stated that the Applicant probably would not be able to add to capital through earnings based on the projected losses of the unopened branches. Protestant's proposed findings as to the projected deposits of the Applicant's branches in the fifth paragraph of Section 7 are accepted, however, Protestant's proposed finding as to the need for additional capital is rejected as constituting a conclusion of law, opinion and legal argument. The remaining findings in that paragraph and the first sentence of the sixth paragraph are rejected as being legal argument rather than findings of facts based on competent substantial evidence in the record. The finding in the second sentence of the sixth paragraph is accepted. Protestant's proposed finding in the seventh paragraph of Section 7 that the applicant does not have sufficient personnel to staff and manage its new branches is accepted. Protestant's proposed finding that no manager for the proposed branch has been selected is rejected as being unsupported by competent substantial evidence in the record. Although there appears to be conflicting testimony as to this fact, the application contained in the record states that James Arntz had been selected as the branch manager, in addition to testimony on direct examination that Mr. Arntz had been selected as the branch manager and the record supports said finding. Protestant's proposed finding as to the managerial capacity of the Applicant and its impact on the adequacy of capital to asset ratio is rejected as constituting a conclusion of law. Protestant's proposed findings contained in the first two sentences of the eighth paragraph of Section 7 are accepted. Protestant's proposed finding contained in the last sentence is rejected as constituting a conclusion of law. Protestant's proposed finding in the last paragraph of Section 7 is rejected as constituting a conclusion of law. Protestant's proposed finding in the first sentence of the first paragraph of Section 8 is accepted. The remaining findings in that paragraph are rejected as constituting conclusions of law. Protestant's proposed finding in the first sentence of the second paragraph of Section 8 is accepted, and the remaining finding in that paragraph is rejected as constituting a conclusion of law. Protestant's proposed findings in Section 9 are accepted. Protestant's proposed findings in Section 10 are accepted. Protestant's proposed findings in the first two paragraphs and the first, second and fourth sentence of the third paragraph of Section 11 are accepted. The proposed findings in the third and fifth sentences of the third paragraph are rejected as constituting conclusions of law. Protestant's proposed findings in the first two sentences of the fourth paragraph of Section 11 are accepted, the remaining sentence in that paragraph is rejected as constituting a conclusion of law. Protestant's proposed findings in Section 12 are accepted, with the exception that (1) 9 percent represents an average cost of time deposits and to a minimum and (2) the proposed finding in the last sentence constitutes a conclusion of law. Protestant's proposed findings in the first two paragraphs of Section 13 are accepted. The remaining findings of the last paragraph are rejected as constituting conclusions of law. Protestant's proposed findings in the first paragraph of Section 14 are accepted, with the exception that the record reflects that the purchase price of the proposed site was $240,000 and not $200,000. Protestant's proposed findings in the first two sentences of the second paragraph of Section 14 are rejected as being irrelevant. The proposed findings in the third sentence is accepted. The proposed findings in the remaining sentences of that paragraph are rejected as constituting legal argument and conclusions of law. Protestant's proposed findings in Section 15 as to the provisions of Rule 3C-13.041(3) are accepted. The remaining proposed findings are rejected as being irrelevant. Protestant's proposed findings in Section 16 as to the provisions of rule 3c-13.041(2)(c) are accepted. The proposed finding in the second sentence of that section is accepted. The proposed finding in the third sentence is rejected as being unsupported by competent substantial evidence in the record for the reasons stated above in paragraph 53 of this Order. The proposed finding in the last sentence is rejected as constituting a conclusion of law. DEPARTMENT'S PROPOSED FINDINGS The Department's proposed findings contained in paragraph 1, 3, 4 through 10, 12 through 19,22 and 23 are accepted. The Department's proposed findings contained in paragraph 2 are accepted with the exception of the third sentence which is rejected as being unsupported by competent substantial evidence in record for the reasons stated above in paragraph 53 of this Order. The Department's proposed findings contained in paragraph 11 are accepted, with the exception of the figure for the projected deposits for the first year based on 2.2 persons per household which is rejected as being unsupported by competent substantial evidence in the record. The record reflects that this figure is $2,487,000 and not $2,700,000. The Department's proposed findings contained in paragraph 20 are accepted, with the exception of the number of deposit and loan customers residing in the PSA which is rejected as being unsupported by competent substantial evidence. The record reflects that there was conflicting testimony as to the number of existing deposit customers, however, the hearing officer found the number to be 140, and 65 loan customers. The Department's proposed findings contained in paragraph 21 are accepted, with the exception of the amount of square feet of the building to house the proposed branch, which is rejected as being unsupported by competent substantial evidence. Although the application contained in the record stated that the building would contain 3,640 square feet (including the drive-in canopy), the hearing officer found that the building would contain 2,000 square feet. PROTESTANT'S EXCEPTIONS TO THE REPORT AND FINDINGS OF FACT OF HEARING OFFICER The Protestant's exception contained in Section 1, with regard to the Hearing Officer's ruling's on the proposed findings, is accepted to the extent that the better practice would be for the Hearing Officer to specify which proposed findings are rejected as not supported by the evidence, which are irrelevant and which constitute conclusions of law. However, it has been recognized that the hearing officer is not required to make explicit rulings on subordinate. commulative, immaterial or unnecessary proposed facts. Forrester v. Career Service Commission, 361 So.2d 220 (1st DCA Fla. 1978). Notwithstanding, the Department has expressly ruled on each proposed finding and stated the reasons therefore. Protestant's exception contained in Section 2 is rejected for the reason that some of the proposed findings contained in Protestant's Proposed Findings of Fact were not based on competent substantial evidence, were irrelevant or constituted conclusions of law, as more fully set forth above in paragraphs 31 through 70. Therefore, it would be improper for either the Hearing Officer or the Department to adopt each and every proposed finding contained in Protestant's Proposed Findings of Fact as requested in the exception. Protestant's exception contained in Section 3 is rejected for the reason that the Hearing Officer's finding that the proposed branch manager is James Arntz is supported by competent substantial evidence in the record. The testimony contained in pages 497 and 498 of the transcript, cited by Protestant in its exception, refers to the Applicant's application for a branch office in northeast St. Petersburg. Although there was conflicting testimony as to this fact (see TR-465 and TR-540), the application contained in the record also identified James Arntz as the proposed branch manager. As such, there was competent substantial evidence in the record to support the Hearing Officer's finding. Protestant's exception contained in Section 4 is accepted for the reason that the Hearing Officer found that the "the greater weight of the evidence indicates that average number of persons per household in Pinellas County is 2.2". As such, Applicant's revised figures based on 2.2 percent per household are accepted which indicate that the proposed branch will not show a profit until the fourth year. The Department's findings of fact have modified the Hearing Officer's findings accordingly. Protestant's exception contained in Section 5 is rejected for the reason that the Hearing Officer's finding is supported by competent substantial evidence in the record. The testimony contained on pages 511 and 512 of the transcript, which is cited by the Protestant, merely states that the Applicant probably would not be able to add to capital through earnings based on the assumption of the projected losses of the Applicant's new branches. As such, the Hearing Officer's finding is accurate. Protestant's exception contained in Section 6 is accepted for the reason that the record reflects that the Applicant's president stated that the branch will probably have Saturday banking hours, but that the exact hours had not been determined. The Department's Findings of Facts have modified the Hearing Officer's findings accordingly. Protestant's exception contained in Section 7 is rejected for the reason that the Hearing Officer's finding is supported by competent substantial evidence in the record. On pages 328 and 329 of the transcript, the witness for the Applicant testified that there was a stacking lane which functionally is in front of the site for traffic hearing west. Protestant's exception contained in Section 8 is rejected for the reasons that the Hearing Officer's finding based on the study was limited and for a limited purpose, and the questions asked in the survey and the procedure appear reasonable. In addition, the Hearing Officer's and Department's reliance on the study is minimal, if at all. Protestant's exception contained in Section 9 is rejected for the reason that the adverse impact of the establishment of a branch on other banks is irrelevant, because it is not a consideration under the statutory and regulatory criteria applicable to branch bank applications. Protestant's exceptions contained in Sections 10 and 19, 21 and 23 are rejected for the reasons that the requested findings are conclusions of law which are not properly included in the Hearing Officer's report pursuant to Section 120.60(3), Florida Statutes. Protestant's exception contained in Section 20 is rejected for the reason that the requested finding as to an appraisal of land and improvements is irrelevant where, as in this case, there is no insider transaction involved in the purchase of the land. Protestant's exception contained in Section 22 is rejected for the reason that the revisions referred to by the Protestant were updated figures based on data unavailable at the time of the application and figures relating to the lease arrangement. Although at the time of the application, the Applicant intended to purchase the proposed site, it later decided to lease the proposed site. The Department does not view this as a material change in the application and fails to see how the Protestant was prejudiced by this change. As to the updated figures, in McDonald v. Department of Banking and Finance, 346 So.2d 569, 584 (Fla. 1st DCA), the court stated that the hearing officer may freely consider relevant evidence of changing economic conditions and other current circumstances external to the application. It should also be noted that the revisions referred to by the Protestant were testified to at the hearing in June, thus giving the Protestant a month's notice to make any changes necessary in the preparation of its case which was later presented at the continuation of the hearing in July. Protestant's exception contained in Section 24 is rejected for the reason that the requested findings are not material to the statutory and regulatory criteria applicable to branch applications.
Findings Of Fact Louis S. Wooten, Sr. is a registered real estate broker holding license No. 0098381. Louis S. Wooten, Sr. did business at the times involved in the administrative complaint as Lou Wooten Realty. Adequate notice of this hearing was given Louis S Wooten, Sr. in the manner required by Chapter 120 and Chapter 475, Florida Statutes. Evidence was received concerning deposits and withdrawals by Louis S. Wooten, Sr. from the Louis S. Wooten, Sr. escrow account in Peoples First National Bank, Miami Shores, Florida, between August 1, 1975 and November 10, 1975, when this account was closed. These records were identified by John Fortnash, vice president of the bank. These records included the ledger for this account from May, 1975 to November, 1975, (Exhibit 1), the ledger from November, 1975, until November 1976, (Exhibit 2), the signature card showing Louis S. Wooten to be the only person authorized to draw on the account, (Exhibit 3), and sixteen (16) individual deposit slips received as Composite Exhibit 4. These records show no activity in the account subsequent to December 23, 1975, when this account had a balance of $22.00. Thereafter, the balance of this account decreased by $2.00 per month, a service charge, until November 10, 1976, when the balance reached zero and the account was closed. Concerning Count 1, Yvard Jeune and Rosita Jeune contracted on or about September 26, 1975, to purchase certain real property from Eddie Silver for $28,500. The Jeunes paid $100 as an initial deposit to Lou Wooten, Sr., and agreed to pay an additional $1,900 for a total deposit of $2,000. This additional $1,900 was paid to Lou Wooten Realty by manager's check on or about September 30, 1975. This manager's check was identified by Barry Eber, chief savings and loan officer for First Savings and Loan of Miami, and received as Exhibit 5. The Jeune contract was contingent upon FHA financing for the Jeunes. FHA financing was not approved, and the Jeunes requested return of their $2,000 in accordance with the terms of the contract. The Jeunes never received their money from Louis S. Wooten, even though they eventually brought suit against Wooten and obtained a judgment against him. The records of Wooten's escrow account do not show the deposit of the $1,900 received from the Jeunes. Regarding Count 2, on or about October 19, 1975, Emma Crockett made an offer to purchase certain real property and paid an earnest money deposit to Lou Wooten Realty in the amount of $1,000 which was receipted for by Mollie Johnson. Mollie Johnson identified the receipt signed by her and testified that this money was duly delivered to Lou Wooten. Subsequently, Crockett's offer of $29,500 was rejected by the seller, and on December 24, 1975, a demand was made for return of the deposit. The cancellation mark on the check, identified by Crockett and received as Exhibit 24, indicates that it was received by Wooten Realty. Crockett's deposit was never returned to her by Wooten. As noted above, the Lou Wooten escrow account was closed with a zero balance. Regarding Count 3, George D. Pratt, Jr. and his wife, Eloise, contracted to purchase certain real property from Gladys P. Smith on or about December 5, 1975. The Pratts paid an initial deposit of $100 to T.F. Chambers and subsequently paid an additional $665 in the form of a manager's check to Lou Wooten Realty. This manager's check was identified by Barry Eber, chief savings and loan officer, First Federal Savings and Loan of Miami, and received as Exhibit 6. Harriet Pooley, an employee of Lou Wooten Realty, identified a receipt to George D. Pratt, Jr. and Eloise in the amount of $665 which was received as Exhibit 18. A review of the ledgers of the Louis S. Wooten, Sr. escrow account indicates no deposits were made to this account subsequent to November 26, 1975. Regarding Count 4, Bettye Green paid Lou Wooten Realty a deposit of $150 on a transaction in which she and her husband offered to purchase real property owned by the Fidlers. The Greens defaulted on the contract, and were advised by their salesman, T.F. Chambers, that their deposit would be forfeited. No evidence was introduced by the Florida Real Estate Commission regarding any demand on the Fidler's behalf for the money. Regarding Count 5, Mary Redfield, a friend and representative of Goldie Brown and Bernard Brown, identified a copy of a manager's check earlier identified by Barry Eber, chief loan officer of First Federal Savings and Loan of Miami and received as Exhibit 7, as a copy of an original check for $1,500 given to her by Goldie Brown which was deposited to Wooten's escrow account. Redfield also identified a contract, Exhibit 16, and a closing statement, Exhibit 17, as documents given to her by Goldie Brown. T.F. Chambers was the salesman who handled this contract. Chambers appeared at closing, after having purchased Lou Wooten Realty from Louis S. Wooten, Sr.Chambers stated that the Wooten escrow account lacked sufficient funds to permit closing the transaction and that he had personally paid for a cashiers check in the amount of $680, the amount necessary to close the purchase. Chambers identified this check which, as a part of Exhibit 21, was received into evidence. Regarding Count 6, Alladar Paczier, counsel for Istvan and Julia Beres, identified a deposit receipt contract for a bar and restaurant (Exhibit 26) and a receipt for a $3,500 deposit signed by Louis Wooten (Exhibit 27). Paczier represented that Wooten failed to produce the deposit money at closing, and that when demand was made by Paczier of Wooten for the deposit, Wooten stated to him that he did not have the money.
Recommendation Based upon the foregoing findings of fact and conclusions of law, the Hearing Officer recommends that the Florida Real Estate Commission revoke the registration of Louis S. Wooten, Sr. DONE and ORDERED this 17th day of January, 1978, in Tallahassee, Florida. STEPHEN F. DEAN Hearing Officer Division of Administrative Hearings Room 530 Carlton Building Tallahassee, Florida 32304 COPIES FURNISHED: Joseph A. Doherty, Esquire Florida Real Estate Commission 400 Robinson Avenue Orlando, Florida 32801 Louis S. Wooten, Sr. 743 Fairlawn Drive Sebring, Florida 33870
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
