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.
The Issue Whether or not Petitioner's application for registration as an associated person of Brauer & Associates, Inc., and as an investment adviser of G.G. Brauer & Associates, Inc. should be approved.
Findings Of Fact Respondent, Department of Banking and Finance, is the state agency charged with the administration and enforcement of Chapter 517, Florida Statutes, The Florida Securities and Investor Protection Act and the administrative rules promulgated thereunder. On or about October 30, 1990, Petitioner submitted a Form U-4, Uniform Application for Securities Industry Registration or Transfer, seeking transfer as an associated person of Brauer & Associates, Inc., and as an investment adviser of G.G. Brauer, Inc. On or about January 25, 1991, Respondent denied Petitioner's application for registration based upon its determination that Petitioner had filed a form U-4, which contained material misstatements and had demonstrated prima facie evidence of unworthiness by engaging in prohibited business practices. Petitioner was previously registered as an associated person with the St. Petersburg, Florida branch office of Smith Barney from March 1987 until July 25, 1990, when he was permitted to resign from the firm for ordering securities from the "over the counter" desk without prior client orders. Petitioner was also registered with the NASD and is charged with knowledge of their Rules of Fair Practice. On or about May 9 1990, Ronald Padgett filed a written complaint with Respondent alleging that Petitioner was engaging in unauthorized trading in his account and that the account was trading on margin without a signed margin agreement. Mr. Padgett also alleged that the signed margin agreement on file with Smith Barney was a forgery. After receiving Mr. Padgett's complaint, Respondent commenced its investigation in Petitioner's activities and requested that Smith Barney provide it with information regarding Padgett's complaint. Respondent also requested and was provided with copies of all other customer complaints that had been filed against Petitioner with Smith Barney. Smith Barney provided Respondent with copies of customer complaints that had been filed against Petitioner by Dorothy Juranko, Wayne Schmidt, Mark Madison, Michael Russo, Gloria Fallon, Patricia Schoenberg and William & Verna Bankhead. All of these individuals were investor clients of Petitioner. Prior to his employment with Smith Barney, Petitioner had not been the subject of a customer complaint or industry disciplinary proceeding or licensure revocation, suspension, or denial. Wayne Schmidt Sr. the owner of Suncoast Chrysler-Plymouth (Suncoast) opened his account at Smith Barney in 1985. Initially, the account executive assigned to Schmidt's account at Smith Barney was Steve Ellis. Schmidt maintained two accounts with Smith Barney and Steve Ellis, namely, a profit- sharing account for Suncoast Chrysler-Plymouth and a joint account with his wife. Schmidt exercised no control of the Suncoast account, but rather allowed his associate, Gloria Fallon to initially monitor the transactions in that account. Afterwards, Schmidt started overseeing the trading activities in the Suncoast account. Schmidt had no knowledge of any unauthorized transactions in the Suncoast account after he began monitoring it. Gloria Fallon did not testify at the proceeding. In connection with the maintenance of his joint account at Smith Barney, Schmidt executed a "Securities Account Agreement." During the time Schmidt maintained his account at Smith Barney, the Securities Account Agreement was utilized by Smith Barney as a margin contract. The Securities Account Agreement qualifies as a margin account agreement/margin contract as to form, and is consistent with industry standards, custom and usage. Although Florida Statutes proscribes certain procedures relative to margin agreements, neither the Florida Securities Act nor the rules promulgated thereunder require a broker/dealer to characterize a margin contract as a "margin agreement." The gravamen of Schmidt's complaint against Petitioner was that certain shares of stock were not liquidated from the joint account maintained by him in contravention of his directions to Petitioner. There was no proof submitted to support any conclusion that Petitioner failed to place an order for the liquidation of such securities for Schmidt's account. Likewise, there was no evidence of any unauthorized trading in the Schmidt's joint account. While Petitioner was assigned as account executive to the Schmidts joint account, a profit of approximately $10,000.00 was generated for that account in 1988 and in 1989, a net gain of approximately $15,000.00 was generated. Schmidt conceded at hearing that Petitioner probably did a better job handling his account than his prior broker, Steve Ellis. During the year 1988, Smith Barney generated and sent to Schmidt, monthly statements and confirmation statements regarding every transaction in his joint account. The monthly statements sent to Schmidt for the joint account contained entries regarding margin interest being charged to the account. For the year 1989, Smith Barney also generated and sent to Schmidt, monthly statements and confirms regarding every transaction in his joint account. The 1989 monthly statements sent to Schmidt also showed margin interest. For the years 1988 and 1989, Schmidt deducted from his individual tax returns, the margin interest charged to his account. Also, during 1988 and 1989, Schmidt did not complain to Petitioner or Smith Barney that the use of margin account was unauthorized. During his tenure at Smith Barney, Petitioner was the account executive assigned to the account of Michael Russo (Russo). Petitioner was assigned to the Russo account in approximately May of 1990, an account which was formerly serviced by an account executive whose last name is Dudenhaver. Michael Russo matriculated at City College of New York where he received a Bachelor of Business Administration degree and was a certified public accountant for approximately 30 years. Russo has been in the accounting business for approximately 40 years and during this time period, he operated his own accounting practice. Russo maintained three (3) accounts at Smith Barney which included an account with his wife, an individual account and an IRA account. Russo opened his first brokerage account in the early 1980s with Merrill Lynch, Pierce, Fenner & Smith. Russo has a history is investing in real estate and by mid 1990, he had accumulated a net worth of approximately $750,000.00. On or about July 13, 1990, Russo presented Petitioner a check in the amount of $26,000.00 which was to be deposited into Russo's accounts. The $26,000.00 check was deposited by Petitioner into Russo's accounts but were returned for non-sufficient funds (NSF). Russo then replaced the NSF check with a $22,000.00 check. The funds derived from the $26,000.00 of Russo originated from an interest-bearing money market account from the Fidelity- Spartan Mutual Funds Family. During the period July 13-20, 1990, Russo was on vacation and was away from his home visiting relatives in the Melbourne, Florida area. During that week, Russo spoke by telephone with Petitioner regarding his account on more than one occasion. Russo specifically recalls speaking with Petitioner on July 15, 1990, regarding his account. During that week, Russo spoke with Respondent about selling certain shares of stock in his account and his specific recall is that one of those conversations occurred on July 15, 1990. The shares were to be sold "at market." Russo again spoke with Petitioner on July 21, 1990, regarding transactions in his account. On July 24, 1990, Russo told Larry Youhn, the branch manager at Smith Barney, that he was very happy with Petitioner as his broker. The July 1990 month-end statement for the Russo account indicate that funds were deposited into the Russo accounts in an amount sufficient to satisfy security purchases made in his account during July 1990. Although these transactions appear at month-end in a type-2 margin account, a review of such statements indicate that the transactions initially occurred in a cash account and were mistakenly journaled to the margin account by Smith Barney as a result of an NSF check presented by Russo as payment for the purchase transactions. The individual account of Russo reflects the purchase of 500 shares of Wiley Laboratories on July 16, 1990, for $7,702.00. On that same day, $10,500.00 from the $26,000.00 NSF check was received into the account. The July 1990 monthly statement for Russo's individual account reflected that there would have been a $2,800.00 net credit in the account if Russo had not presented the NSF check. During his tenure at Smith Barney, Petitioner also served as the registered representative for an account maintained by Nicholas and Dorothy Juranko (Juranko). The Jurankos have a substantial history of business experience, having currently owned a service station in the Ohio area and Mrs. Juranko currently owns her own drapery shop and manages eight (8) apartment/rental units that they jointly own. The Jurankos opened their first securities brokerage account in approximately 1962. They have held accounts at several brokerage firms including Merrill Lynch, Blinder-Robinson and First Jersey Securities prior to opening their account at Smith Barney. At Blinder-Robinson, the Jurankos engaged in the purchase of several "Penny" stocks and fully realized that they were speculating. The Blinder- Robinson account was opened by the Jurankos so that Mr. Juranko would "have something to do." The Jurankos maintained a securities brokerage account at First Jersey Securities prior to Petitioner's employment with First Jersey. Petitioner was assigned as account executive for the Juranko account at First Jersey in approximately 1985. When the Jurankos opened their account at Smith Barney, their net worth was approximately $220,250.00. Although Mrs. Juranko maintains that unauthorized trades occurred in her account during the month of December 1987, when asked to identify which trade which unauthorized, she could not do so. This was so, despite an effort to refresh her recollection by presenting her the December 1987 monthly account statement which depicted all securities holdings and transactions generated in their account. Mrs. Juranko also alleged that she was losing money and did not want to deposit any additional funds into her account. However, Mrs. Juranko wanted to have profits generated from the funds that were then existing into her account as of year-end December, 1987. Respecting the December 1987 trades, the Jurankos received confirms for every transaction that occurred during the month. Through December 1987, while Petitioner was assigned to manage the Juranko account, the account generated a net profit. Also, continuing through January 1988, Petitioner had effected trades which produced a net profit for the Juranko account. As testified by Mrs. Juranko, "All I could see...greed, all I could see was $14,200.00 some dollars and $9,900.00 some dollars, and I thought, wow... I thought "wow", he's making me money." Although Mrs. Juranko complained that she was losing money, an analysis of the account revealed that during the two years that Petitioner was assigned her account, it made a net profit. Notwithstanding the documentary evidence to the contrary, Mrs. Juranko admitted that she was upset and complained to Smith Barney's compliance officer, a Mr. Singer, because of her unfounded belief that she had lost money. Mrs. Juranko identified anger as the basis for her inability to understand a letter which was sent by Larry Youhn, Smith Barney's branch manager, which show the activity that had been generated into her account. Notwithstanding the clear language of that letter, Mrs. Juranko maintained that she did not understand it. This is so, despite the fact that Mrs. Juranko did not telephone Smith Barney to complain because she "didn't want to get [Petitioner] in trouble." 1/ The use of margin in the Jurankos account was discussed because Mrs. Juranko believed the account was losing money; she wanted to do whatever was necessary over a period of time to make up for the losses and she refused to deposit additional funds into the account to generate profits in trading the account. In connection with the maintenance of the Juranko account at Smith Barney, Petitioner instructed his sales assistant to send a margin agreement to Mr. and Mrs. Juranko for execution. The use of margin was discussed with the Jurankos in approximately November 1987. Petitioner relied upon the Smith Barney infrastructure to maintain the necessary paperwork for margin accounts, including the Jurankos. This is a customary practice in the securities industry and is utilized by most large brokerage houses. Juranko first complained to Petitioner about the use of margin in January 1988, when she received her monthly account statement which contained an entry for margin interest. Mrs. Juranko explained that she thought the margin charges were too much and that she wanted to reduce the margin charges by liquidating securities from the account. Mrs. Juranko thereafter became uncooperative and it became difficult for Petitioner to transact business in the account consistent with Mrs. Juranko's desired objectives. As a result, in March 1988, Petitioner determined that the only thing he could do for the account was to liquidate positions at or near break-even points. Thereafter, Petitioner never made any other purchase recommendations to the Jurankos. Petitioner also serviced the account of Mark D. Madison while employed at Smith Barney. Madison is a marketing, advertising and management consultant who owns his own business. Madison maintained two (2) accounts at Smith Barney's St. Petersburg branch office, including an individual account and an account in the name of his mother, Mary Jean Madison. Mark Madison was a fiduciary for and conducted all transactions in his mother's account. Prior to Petitioner's assignment as broker to Madison's fiduciary account, it was assigned to broker Steve Ellis. The fiduciary account was maintained as a margin account since its opening in 1984. Commencing on February 13, 1986, broker Ellis and Madison executed several margin transactions in the fiduciary account. Through the period ending October 31, 1987, roughly 95% of the transactions in the fiduciary account were executed on margin. As of year-end 1987, the Madison fiduciary account and Mark Madison's personal account historically traded over-the-counter securities. During this period while Ellis was the broker, margin transactions were executed in both Madison accounts. During this period, broker Ellis actively traded both accounts and generated both profits and losses in the accounts. Mark Madison was familiar with the active trading in both accounts as well as the profit/loss picture. Madison estimated losses in the fiduciary account to be over $20,000.00 while the account was handled by Ellis. These losses all occurred while he was the fiduciary on the account and was in charge of approving trading in the account. When the fiduciary account was transferred from Ellis to Petitioner, Madison expressed his concern about the losses that his mother's fiduciary account had sustained as well as his responsibility for such losses. During his initial conversations with Petitioner, Madison explained his mother's displeasure at the approximately $30,000.00 in losses that had been generated while Ellis was assigned as broker. Madison also explained to Petitioner that his brother had made references to conversations with his mother about suing him as the fiduciary because of the losses generated. During the time that the fiduciary account was handled by Ellis, there were differences in the execution prices of transactions in the same securities which occurred in both the fiduciary account and his (Mark Madison's) personal account. When Petitioner was assigned the account, it became apparent to him that Madison consistently obtained higher prices on liquidating transactions than his mother was obtaining in the fiduciary account for the same securities. Petitioner was concerned with the type of trading in which Madison wanted to engage in for the fiduciary account and brought this trading strategy to the attention of branch manager, Youhn, who explained to Petitioner that it was the fiduciary who had ultimate responsibility for trading the account. In addition to discussing the trading strategy with Youhn, a review of the account history was conducted by Petitioner. Petitioner's review revealed that the account had lost approximately 40% in equity during the time it was handled by account executive Ellis and Mark Madison as fiduciary. As a result of the losses generated, Madison expressed his desire to Petitioner to recoup losses in the account by taking advantage of 2-3 point swings in certain over-the-counter securities. During the months of January through March 1988, Madison, despite his allegations to the contrary, authorized the purchase of a specified number of shares of certain securities and later maintained that certain additional shares of those securities were purchased without his authorization. Throughout this period, Madison maintained continuous telephone conversations with Petitioner regarding such securities. Throughout the period, Madison did not instruct Petitioner to cancel the trades, but rather instructed him that he wanted out of those positions as near as possible to "break even." The Department conducted an investigation of the allegations made by Petitioner's former clients in connection with the denial of his registrations as an associated person an investment advisor. In connection with the investigation, the Department, through its investigative employee, Carol Irizarry (Irizarry), spoke with individuals who had submitted written complaints against Petitioner. In furtherance of her investigation, Irizarry visited the office of William Lyman, Esquire, who represented several of the former customer/complainants, and reviewed the information that Lyman had relative to such complaints. Ms. Irizarry did not testify during the formal hearing herein. Dennis Farrar (Farrar), area financial manager, Division of Securities, Department of Banking and Finance, supervised the writing of the report completed by Irizarry. Farrar's first direct contact with the investors/complainants in this case occurred approximately one (1) week prior to the commencement of the hearing herein. Following Ellis' separation from employment with Smith Barney, several Smith Barney brokers and clients of Petitioner advised him that broker Ellis was out to get him and urged them to file complaints against Petitioner. Specifically, Petitioner received a telephone call from Gloria Fallon, an associate of Wayne Schmidt, who warned Petitioner that Ellis was "trying to stir up trouble for him." In connection with the initial customer complaint received by the Department, a request for information responsive to the complaint was sent to Smith Barney. Among the documents received by the Department was a securities account agreement which contained language normally contained in a margin contract. The securities account agreement is the document utilized by Smith Barney as its margin contract at all time material hereto. A Form U-4, Uniform Application for Securities Industry Registration for Transfer, is a document generated by the National Association of Securities Dealers (NASD) and the North American Securities Administrators Association (NASAA). The Form U-5, Uniform Termination Notice, also is generated by the above entities. The disclosure section of a Form U-4 requires an applicant to respond to the best of his ability. An intentional falsification of information on a Form U-4 will give rise to a violation of Section 517.161, Florida Statutes. It is customary in the securities industry for a registered representative to rely upon his current broker/dealer employer to determine which complaints, if any, are disclosable on the Form U-4. It is customary in the industry for a representative to rely on the Form U-5, termination notice for completion of his U-4 and usually the information on both forms track each other. Also, the prospective applicant filling out his U-4 usually consults with the firm that he separated from to ensure that both Forms U-4 and U-5 are consistent. Petitioner's completion of the Form U-4 on August 30, 1990 in connection with his employment at Brauer & Associates contained a disclosure of customer complaints consistent with the disclosures made by Smith Barney on its amended Form U-5 Termination Notice dated August 17, 1990. Petitioner's reliance on the information contained in his files and that provided by his employers was reasonable and there was no evidence that Petitioner intentionally falsified his Form U-4 application.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that Respondent enter a Final Order granting Petitioner's application for registrations as an associated person or broker/dealer of Brauer & Associates, Inc. and investment adviser to G.G. Brauer, Inc. RECOMMENDED this 13TH day of August, 1991, in Tallahassee, Leon County, Florida. JAMES E. BRADWELL 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 13th day of August, 1991.
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: On September 5, 1978, the Applicant submitted to the Department its application pursuant to Sections 665.031 and 665.704(2), Florida Statutes, for authority to organize a corporation for the purpose of conducting a savings and loan association business to be located at the intersection of Kanner Highway (Colorado Avenue) and Monterey Road, Martin County, Florida. Notice of receipt of the application was published in a Florida Administrative Weekly on September 8, 1978. After receipt of the application, the Department requested additional information after receipt of which the application was deemed complete and assigned a filing date of December 7, 1978. The application as originally filed proposed the name AMERICAN SAVINGS AND LOAN ASSOCIATION OF MARTIN COUNTY for the proposed association. On September 22, 1978, Applicant amended the Petition to change the name of the proposed corporation to CENTRAL SAVINGS AND LOAN ASSOCIATION OF FLORIDA. This change was noticed in the Florida Administrative Weekly on October 6, 1978. As set forth above, the site of the proposed savings and loan association is at the intersection of Kanner Highway and Monterey Road, Martin County, Florida. The organizers of the Applicant obtained an option to purchase the property for the proposed site for $175,000. The option to purchase was obtained from Mr. Richard Geisinger, one of the proposed directors, with full disclosure to the other proposed directors. An MAI appraiser appraised the fair market value of the property for the proposed site at $210,000. The proposed site is directly on the corner of the subject intersection and represents 175 front feet on Kanner Highway and 300 front feet on Monterey Road. The applicants intend to build a freestanding building of approximately 6,400 square feet with two drive-in teller facilities. The total cost of land and building is projected at approximately $481,000 with an additional $85,514 to be spent for the purchase of fixtures and furniture. The applicant proposes to be capitalized at $1,000,000, with $500,000 of the total capital being held as paid in surplus. The capital will be raised from the issuance of 100,000 shares of common stock with a par value of $5.00 per share, selling at a price of $10.00 per share with a collection of an additional $.50 per share for an organizational expense fund. For the purposes of the application, 100 percent of the stock of the proposed association was subscribed to by the organizers. However, it is their intent to offer for sale approximately 46 percent of the stock of the association to the public prior to the opening of the proposed savings and loan association. Applicant's primary service area (PSA) incorporates most of the Northeast section of Martin County and includes the City of Stuart, Town of Sewalls Point and the communities of Palm City and Port Salerno. It is bounded on the north by the Martin-St. Lucie County line, on the west by the Sunshine State Parkway, on the south by the northern boundary of the Gomez Grant, and on the east by the Indian River. The PSA, as proposed, is the most densely populated area of Martin County, having approximately 38,400 residents. The per capita income for the residents of the PSA is above the state average. Both construction and sales of residential units within the PSA are increasing, with adequate room for future development. There is a high level of commercial activity in the PSA and the vacancy rate is low. The PSA contains the Monterey Shopping Plaza, which is directly opposite the proposed site, which shopping plaza opened for business in 1972, and which has expanded to over 100,000 square feet of gross leasable space. Within the PSA and directly across the street from the proposed site to the East, a 26 acre shopping mall is being developed. Downtown Stuart is less than one-half mile from the proposed site and in the PSA. The population of Martin County and the primary service area is a matter of dispute. The Martin County Planning and Zoning Department estimates the county's population at 61,692 residents. The University of Florida, Bureau of Economic and Business Research estimated the county population at 53,895 as of July 1, 1978. No annual estimates relating to census tracts or parts thereof are available from official U.S. or State of Florida sources in order to determine the population of the PSA. However, the trends of population changes in Martin County, Stuart, Sewalls point, Jupiter Island and Ocean Breeze Park and in the unincorporated areas of the county, which comprise much of the designated PSA should apply to the PSA. Relevant population data of these areas, compiled by the University of Florida, Division of Population Studies, are as follows: Martin 1970 County 28,035 1975 47,726 1976 48,496 1977 50,341 1973 53,895 1980 54,700 to 61,800 (projected) Stuart 4,280 8,787 8,479 8,520 8,942 NA Sewalls Point 298 741 791 829 1,025 Jupiter Island 295 349 352 353 355 Ocean Breeze Park 714 813 1,080 1,080 1,065 Unincorporated 21,908 36,936 37,794 39,559 42,468 NA Martin County population has risen dramatically since 1970, and that growth is expected to continue, essentially from in-migration. Since 1970 there has been a negative natural increase in population. The median age of the county population of 1977 was 45 years of age, with 26 percent of its residents 65 years or older. This is fairly representative of the PSA which includes the majority of the county's population. Within five miles of the site, there are four major shopping centers including Stuart Shopping Center with approximately 103,000 square feet, K-Mart Plaza with approximately 100,000 square feet, East Ocean Mall with approximately 100,000 square feet and Monterey Shopping Plaza referred to above. From 1971 to 1978, 17,088 housing units were built in Martin County. Permit activity in the county shows that there were $81,726,000 in permits issued in 1978. The proposed site is along a line of travel for a large number of commuters as well as shoppers who come to that area as a destination point. The latest unemployment data for Martin County shows an unemployment rate of 5.4 percent for November, 1978 (revised), and a 5.5 percent rate for December, 1978 (preliminary). This compares to a state average of 6.2 percent and 6.4 percent respectively. The per capita personal income for the county increased from $5,735 in 1975 to $6,156 in 1976. This was a 7.3 percent increase which was somewhat slower than the 7.6 percent state average. However, the county's absolute averages remained above the state average of $5,596 and $6,021 respectively for the same years. Commercial activity in Martin County is strong. There are presently eleven existing or approved savings and loan association offices within the proposed PSA. One of these is a main office and ten of these are branches or limited facilities. There are also four additional savings and loan association offices located outside the PSA, but within Martin County. There are nine commercial bank offices, including four main banking offices and five branches, within the PSA and another six hank and branch offices located outside the PSA, but within Martin County. There have been significant increases in savings deposits in Martin County. Significant factors in this increase is the in-migration of new residents and inflation. A continuation of this pattern will maintain the growth experience in recent years. The county summary for nine savings and loan offices indicates an increase of 27.1 percent in deposits between March 31, 1977 and March 31, 1978. This continues a similar growth rate achieved during 1976- 1977. A similar growth trend is being experienced by the commercial banks in the area. Savings and loan associations doing business in Martin County have total aggregate savings as of September 30, 1978 of $235,416,000. Commercial banks doing business in Martin County show total assets of $297,774,000 as of the same date. Only one savings and loan doing business in Martin County is headquartered in Martin County. All other savings and loans in Martin County are branches of institutions with headquarters outside Martin County. The Applicant expects to be competitive with the existing savings and loan offices in the PSA with regard to interest rates and breadth of services. Some of the services that the Applicant intends to offer to the community include the following: a mobile facility to serve the elderly and disabled, direct deposit of Social Security and other government checks, retirement plans such as IRA and KEOUGH, electronic funds transfer, Christmas Club and educational savings programs, certificate plans, and Saturday and extended Friday hours. With the exception of the mobile facility and Saturday hours, these services are currently offered by existing associations. The Applicant has not designated a chief managing officer. An informal offer and acceptance of employment exists with a capable individual having savings and loan experience. This individual did not assist in preparation of the pending application. The proposed Board of Directors is composed of nine members, all of whom are residents of the State of Florida and U.S. citizens. Although all of the proposed directors appear to be successful businessmen, none of them have any savings and loan experience. Six of the nine organizers are presently commercial bank directors and one is a former bank director. Mr. J. M. Brown is Director and Chief Executive Officer of American Bank of Martin County; Mr. Richard K. Carroll is a director of Jensen Beach Bank; Mr. John A. Darlson is a director of the American Bank of Martin County; Mr. Richard Geisinger is Chairman of the Board of Directors of American Bank of Martin County; Mr. Terry N. Keathley is a director of American Bank of Martin County; and Mr. Lawrence J. Timon is a director of American Bank of Martin County. Mr. Brown and Mr. Darlson do not intend to become directors of the proposed savings and loan association but do intend to held their stock in the proposed association. Those remaining proposed directors who also serve the Board of American Bank, Messrs. Geisinger, Keathley and Timen, have indicated their intent to resign their directorates in American Bank to serve on the Board of Directors of the proposed association in keeping with the requirements of the Financial Institutions Regulatory Act. The remaining proposed directors are Mr. Rockford H. Ern, Mr. Armando Farina, and Mr. John M. Fort. Mr. Brown, Mr. Carroll, Mr. Darlson, Mr. Geisinger, Mr. Keathley and Mr. Timon have each subscribed to more than 5 percent of the stock of the proposed savings and loan association and also presently own stock in a commercial bank in the PSA. All intend to retain that stock as well as their stock in the proposed savings and loan association. The Applicant has projected savings deposits at the end of the first, second and third years of operation to be $5,000,000, $10,000,000 end $15,000,000 respectively. The Applicant has presented a revised budget which projected net profit for the first three years of operation to be $55,000, $131,000, and $188,000 respectively. The Applicant has proposed that the new association bear the name CENTRAL SAVINGS AND LOAN ASSOCIATION OF FLORIDA. No evidence was presented to show this name was confusing or misleading to the public. In accordance with the provisions of Section 120.57 (1)(a)(12), Florida Statutes, Conclusions of Law and a Recommendation are not included in this REPORT. Respectfully submitted and entered this 25th day of October, 1979, in Tallahassee, Florida. CHRIS H. BENTLEY, Director Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: Karlyn Anne Loucks, Esquire Assistant General Counsel Office of the Comptroller The Capitol, Room 1302 Tallahassee, Florida 32301 Barry E. Chapnick, Esquire 1666 Kennedy Causeway, Suite 700 Miami, Florida 33141 C. R. McDonald, Jr., Esquire Suite 200, Citizens Federal Bldg. 1600 South Federal Highway Ft. Pierce, Florida 33450 Frank Fee, III, Esquire Post Office Box 100 Ft. Pierce, Florida 33450 Richard J. Dungey, Esquire Post Office Box 288 Stuart, Florida 33494
Findings Of Fact Petitioner Tarpon Financial Corporation is a federal banking corporation engaged in general banking services in the State of Florida, with its principal place of business in Tarpon Springs, Florida. Petitioners are not subsidiaries of, or associated with, either First National Bank of Florida, Inc., or First Florida Banks, Inc. On or about June 16, 1987, Petitioners submitted to and requested approval from Respondent of the name "First National Bank" as a service mark. Respondent denied registration of this service mark on June 29, 1987 by letter stating, "(W)e have a mark registered under the same or similar name and class." On August 6, 1987, Petitioners requested reconsideration citing the Rand McNally Banker's Directory, a nationally issued banking directory, to support its position that the same or similar service mark it seeks to register is not already in use in the State of Florida. The Respondent again denied the request on August 14, 1987 by letter stating, "Our records indicate 'First National Bank of Florida' is an active Florida corporation. We have no record of any name change." Petitioners sought reconsideration again on August 27, 1987, and requested that the matter be reviewed by Respondent's trademark committee. After review by that committee, Petitioners' application was denied for a third time on September 8, 1987. The service mark, "First National Bank of Florida," was registered with Respondent on June 16, 1982, and given mark number 927091. The owner of this mark is First National Bank of Florida, Inc., Tampa, Florida, and annual reports have been filed with Respondent in June of each year, including June 8, 1988, thereby indicating the mark has not been abandoned. The Respondent's records indicate that "First National Bank of Florida" is an actively registered service mark. The fact that it does not appear in the Rand McNally Banker's Directory does not establish that it is not an active mark registered with Respondent. The period of registration for service marks is ten years, and therefore the registration of "First National Bank of Florida" expires June 16, 1992, subject to renewal. The Respondent cannot register marks unless they are distinguishable from service marks already registered. Competent substantial evidence was not presented to support Petitioner's claim that "First National Bank," the mark it seeks to register, is distinguishable from "First National Bank of Florida," which is already registered. The absence of the phrase "of Florida" from the mark Petitioner seeks to register does not distinguish it from the mark already registered
Recommendation Based on the foregoing, it is recommended that Respondent enter a Final Order denying Petitioners' application to register the service mark, "First National Bank." DONE and ENTERED this 1st day of August, 1988, in Tallahassee, Florida. DONALD D. CONN 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 1st day of August, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NO. 88-1250 Rulings on Petitioners' Proposed Findings of Fact: Adopted in Finding of Fact 3, but otherwise Rejected in Finding of Fact 5 and as irrelevant. Rejected as irrelevant and unnecessary. 3-4. Rejected in Finding of Fact 7 and Rejected as unsupported in the record. Rejected as irrelevant. Rejected in Finding of Fact 7. Rejected as irrelevant and unsupported in the record. Rejected as unsupported in the record. Rulings on Respondent's Proposed Findings of Fact: 1-2. Adopted in Finding of Fact 5. Adopted in Finding of Fact 2. Adopted in Finding of Fact 1. Adopted in Finding of Fact 2. 6-7. Adopted in Finding of Fact 3. 8-9. Adopted in Finding of Fact 4. 10. Rejected as unnecessary. COPIES FURNISHED: Donald R. Hall, Esquire Suite 402, Corporate Square 2900 U.S. Highway 19, North Clearwater, Florida 34621 Henri C. Cawthon, Esquire Department of State The Capitol, Room LL-10 Tallahassee, Florida 32399-0250 Honorable Jim Smith Secretary of State The Capitol Tallahassee, Florida 32399-0250
Findings Of Fact On January 18, 1991, the Department of Banking and Finance (Department) received an application to acquire control of Grovegate Bank of Miami by Interbank Holding Corporation, a Florida corporation, whose principals are, for purposes of these proceedings, Jorge Ortega Trujillo, Jaime Ortega Trujillo, Fabian Ortega Trujillo, Gustavo Ortega Trujillo, Leonidas Ortega Trujillo, and Luis Alberto Ortega Trujillo, each of whom is a citizen of Ecuador. By notice published February 1, 1991, and correction published February 8, 1991, in the Florida Administrative Weekly, the Department complied with the provisions of Section 120.60)(5)(a), Florida Statutes, by giving notice of the filing of the subject application and according any person the right to request a hearing by filing a petition with the Department within 21 days of publication of the notice. No request for such a hearing was filed with the Department; however, since the subject application involved the acquisition of control of a bank by foreign nationals, the Department did, on March 12, 1991, forward the matter to the Division of Administrative Hearings to conduct a public hearing as mandated by Section 120.60(5)(d), Florida Statutes. On April 4, 1991, the applicant duly published notice in The Miami Herald, a newspaper of general circulation in Dade County, Florida (the community in which the applicant purposes to engage in business), that a public hearing would be held on the subject application on April 18, 1991. The hearing was held as scheduled, but no member of the public appeared or otherwise indicated any desire to present evidence or to otherwise comment on the pending application. The Public Hearing Each of the principals in `the proposed acquisition, Jorge Ortega Trujillo, Jaime Ortega Trujillo, Fabian Ortega Trujillo, Gustavo Ortega Trujillo, Leonidas Ortega Trujillo, and Luis Alberto Ortega Trujillo, appeared at the public hearing. The principals are brothers and members of the Ortega Trujillo family of Guayaquil, Ecuador, and each is an attorney. Through their family holding company, the brothers and their mother, with each holding an equal interest, own Banco Continental, S.A., one of the largest banks in Ecuador. Banco Continental was founded by the family in 1975, and initially licensed as a savings and loan bank. Approximately two years later, desiring to expand the activities of the bank, the family was successful in securing licensure of Banco Continental as a commercial bank. Initial start-up capital for Banco Continental was derived from family resources, and its current capitalization is a product of retained earnings through years of successful operations. Currently, Banco Continental is ones of the two largest banks in Ecuador when measured in terms of capital or net worth, and sixth in size when measured in terms of assets. Its current assets total approximately 100 million dollars, and its current capital approximately 11 million dollars. The bank maintains its main office in Guayaquil, with 39 branches in nine other cities, and serves the commercial and private needs of the community. Overall, through the family's successful operation of the bank, it has come to enjoy an excellent reputation as a sound and well-managed institution, both locally and within the international banking community. Leonidas Ortega Trujillo (Leonidas) is presently the chief executive officer of Banco Continental and previously served, until attaining such position last year, as its general manager. Leonidas enjoys an excellent reputation as an ethical and knowledgeable banker, and has, through the operation of his own bank, as well as his past service as president of the Ecuadorian Association of Banks and the Federation of Latin American Banks, been active in national and regional banking affairs. Luis Alberto Ortega Trujillo (Luis) is presently the manager/director of Banco Continental's overseas operations, and will assume a position as one of the directors of Grovegate Bank of Miami if the subject application is approved. Luis has demonstrated, through his education and experience, that he is a responsible businessman, who can be reasonably expected to provide a positive influence on Grovegate Bank's operations. But for the addition of Luis as a director of Grovegate Bank, no immediate changes in the management of that bank are contemplated. In addition to their legal, business, and banking activities, the Ortega Trujillo family has, for generations, been active in their community. In this regard, the proof demonstrates that their father founded the Catholic University of Guayaquil, that Gustavo Ortega Trujillo is currently a director of the University of Guayaquil Law School, that Luis is currently the vice- president of the Red Cross of Guayaquil, and that through their family foundation the Ortega Trujillo family supports five public libraries, four public schools, and one night technological school for the less privileged residents of Guayaquil. In all, the proof demonstrates that all of the applicants enjoy a reputation, among those who know of them, as being impeccably honest, and to possess the requisite experience and financial responsibility to control and manage the affairs of Grovegate Bank in a legal and proper manner. The proof further demonstrates that the interests of other stockholders, as well as the interests of the depositors and creditors of the bank and the interests of the public generally will not be jeopardized by the proposed change in ownership, controlling interest, or management. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 7th day of May 1991. WILLIAM J. KENDRICK Hearing Officer Division of Administrative Hearings The DeSoto 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 7th day of May 1991. COPIES FURNISHED: Albert T. Gimbel, Esquire Chief Banking Counsel Office of the Comptroller The Capitol, Suite 1302 Tallahassee, Florida 32399-0350 Rene V. Murai, Esquire 900 Ingraham Building 25 S.E. 2nd Avenue Miami, Florida 33131 The Honorable Gerald Lewis Comptroller, State of Florida The Capitol, Plaza Level Tallahassee, Florida 32399-0350 William C. Reeves, Esquire General Counsel Office of the Comptroller The Capitol Plaza Level, Room 1302 Tallahassee, Florida 32399-0350 =================================================================
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: The applicant's proposed banking facility is to be located at the intersection of Southeast First Street and Federal Highway in Boca Raton, Palm Beach County, Florida. The designated primary service area (hereinafter referred to as PSA) encompasses the southern portion of Palm Beach County, including all of the City of Boca Raton, a portion of the town of Highland Beach and unincorporated areas west of Boca Raton. The applicant's PSA was determined and identified by considering traffic patterns, shopping, retail, professional services, business industries, geographical barriers and competitive financial institutions. The PSA is bounded on the north by the C-15 Canal, on the south by the Palm Beach/Broward County line, on the east by the Atlantic Ocean and on the west by the Florida Turnpike. The east/west boundaries are located 6.2 air miles apart, and the north/south boundaries are 7.1 air miles apart. The proposed site is located 5.2 air miles from the northern boundary of the designated PSA, 1.9 air miles from the southern boundary, 1.1 air miles from the eastern boundary and 5.1 air miles from the western boundary. According to one source, the entire PSA is within an average twelve minute driving time distance. One witness conducted a survey travelling on main traffic arteries from different points within the PSA to the proposed site. This experiment was conducted on February 4, 1980, during the winter tourist season, and involved some lunch time traffic. The driving times from nine different sites ranged from four minutes to nineteen minutes. The center of the downtown Boca Raton area is located approximately two blocks from the applicant's proposed site. The PSA contains six north/south traffic arteries and six east/west traffic arteries. Interstate 95 (I-95) separates the PSA approximately in half. The area east of I-95 is densely populated with limited vacant land available for development. The area west of I-95 is significantly less populated than the area east of I-95, with substantial vacant land available for future growth. Most new construction is taking place in the area west of I-95. This includes several large residential developments, a regional mall and office plazas. According to the applicant, there are 334 commercial establishments within one- half mile of the proposed site. The largest of the 86 light industries in Boca Raton is IBM, with approximately 3,600 employees. The IBM plant is located approximately 4 1/2 miles from the applicant's proposed site. According to data obtained from the Area Planning Board of Palm Beach County, the applicant estimates the 1979 population of the PSA to be 56,178. It is projected that this figure will be increased by 77.9 percent over the next seven-year period and that the population of the PSA will reach almost 94,000 by the year 1985. In mid-1978, there were 18 residential projects underway within the PSA with plans to add 30,662 new dwelling units to the area. As of September, 1979, according to the applicant, 4,967 single-family dwellings and condominium units had been completed and another 2,187 were presently under construction. The majority of the units are located west of I-95. Gulfstream's economic expert was of the opinion that I-95 would be a barrier beyond which persons residing or working west of I-95 would not cross to do their banking business. Two of the protesting banks located very close to the proposed site of the applicant have the same southern and eastern PSA boundaries, but smaller northern and western boundaries. These PSAs were designated in 1959 and 1971, at a time when there was little activity west of I- 95. According to data compiled by the Bureau of Economics and Business Research, Division of Population Studies at the University of Florida, the population of Palm Beach County as of April 1, 1979, was 564,447. This represents an annual average growth rate of 6.6 percent between 1970 and 1976, 3.6 percent between 1976 and 1977, 5.7 percent between 1977 and 1978, and 5.6 percent between 1978 and 1979. The same source shows Boca Raton's population of 49,744 to represent average annual growth rates of 8.5 percent between 1970 and 1976, 4.7 percent between 1976 and 1977, 4.2 percent between 1977 and 1978, and 2.4 percent between 1978 and 1979. The population of the unincorporated areas of the county showed similar patterns of growth rates -- a high growth rate between 1970 and 1976, a drop to almost half between 1976 and 1977, an upward trend between 1977 and 1978 and another drop between 1978 and 1979. The average annual growth rates in the population of Highland Beach for the same four periods of time were 34.2, 26.4, 9.8 and 2.2 percent. The growth in the County's population results almost exclusively from net migration, which is favorable to a new banking institution. Net migration accounted for 99.08 percent of the population growth in 1978, and for 99.21 percent in 1979, leaving only .79 percent due to natural increase. The labor group (ages 15 through 64) constitutes some 59 percent of the County's population, and retirees (older than 65) comprise some 20 percent of the population. The average annual unemployment rate declined from 9.1 to 7.1 percent between 1977 and 1978. These figures are somewhat higher than the State averages. Since 1969, the per capita personal income figures for West Palm Beach and Boca Raton have been consistently higher than the state averages. The median family incomes for the PSA have, since 1969, exceeded both the county and the state median family income figures. Approximately ten commercial banking facilities presently exist within the applicant's designated PSA with about six more having been approved, but unopened. Three of the existing facilities are main offices and they are the petitioners herein. The main office of Gulfstream is located 0.2 miles northeast of the proposed site. The main office of the Boca Raton National Bank is located 0.5 miles south of the proposed site and the main office of Citizens National Bank is located 1.0 mile northeast of the proposed site. The branch office of the intervenor is located 1.7 miles northeast of the proposed site. There are also over twenty existing and/or approved but unopened savings and loan offices within the applicant's PSA. There are presently no state chartered independent banks within the PSA. The petitioners Citizens National and Boca Raton National Banks are independent national banks affiliated through common ownership of stock. As of June, 1979, the total deposits of all existing commercial banking facilities located within the PSA increased from the previous year. The total deposits of the individual savings and loan institutions within the PSA ranged from $3.5 million to $118.5 million in March of 1978, to $4.7 million to $127 million in March of 1979. Of the 36 reporting banks in Palm Beach County, between June of 1978 and June of 1979, the following increases were noted: a 20.7 percent increase in loans, a 12.7 percent increase in time deposits, a 3.2 percent increase in demand deposits and an 8.5 percent increase in total deposits, which total deposits amounted to $2,253,491,000. The most recently opened full service bank located nearest to the applicant, though outside the applicant's PSA, experienced large increases in loans and total deposits. This bank, the Florida Coast Bank of Palm Beach County, opened in May of 1978 and grew by 286 percent in loans over a year's period and had total deposits in the amount of $11.8 million by November 30, 1979. It is proposed that the new bank will be capitalized with a total of $1.5 million, composed of $750,000.00 common capital, $450,000.00 surplus and $300,000.00 in undivided profits. There will be 150,000 shares of stock sold. As of the date of the application, 117,500 shares had been sold to 45 individual purchasers. Some 83 percent of the subscribers are residents of Palm Beach County. Of this figure, approximately 78 percent are residents of Boca Raton and reside within the PSA. Saul Slossberg, an organizer and proposed director, has subscribed to ten percent of the stock. In addition, he holds the remaining unsubscribed stock as trustee. It is intended that these shares held in trust will be distributed to the public. The proposed board of directors is composed of six members. Only one of the six, Charles A. Heeg, has been a bank officer, and that was in the trust department of another local bank. The applicant does not intend to offer trust services. Two other proposed directors have served as directors of other financial institutions. Norman I. Stone, who is presently in the brokerage business, served as a member of the board of directors of a New York bank for seven or eight years in the 1950's. Sy Reece, a real estate broker and warehouse developer, presently serves as a director of a savings and loan institution in Miami and is on the advisory board of the First American Bank of North Palm Beach. The principal organizer, Saul A. Slossberg, is a developer and general contractor with no prior direct banking experience. The other two proposed directors are Karl Enselberg, a medical doctor, and Melvin Schwartz, an attorney who has been involved in corporate banking matters. The organizers have not yet made a determination as to the identity of any of the key officers of the proposed bank. The chief executive officer will not be anyone from the organizing group. The proposed banking quarters will consist of a 4,000 square foot single-story building with twenty-three parking spaces and drive-in teller facilities. Both the land and the building are owned by Saul Slossberg, a proposed director. Initially, the bank will be housed in 3,000 square feet at an annual rental of $36,000.00. After the first year, the bank will have an option to lease the additional 1,000 square feet for an added annual fee of $12,000.00. Utility costs will be paid by the lessor. The bank will have a ten year lease, with an option to purchase. An appraisal from an MAI appraiser indicates that the market value of the land and the building will be $400,000.00. All of the proposed directors have been informed that Mr. Slossberg is the lessor for the proposed banking quarters, and Mr. Slossberg intends to make a full disclosure of the transaction terms to all subscribers of stock. If the lease or rental terms are unacceptable to the Department, Mr. Slossberg is willing to change it or to sell the property to a third party. While the interior layout has not been determined yet, it is anticipated that there will be four teller stations, with room to expand to eight. Citizens National Bank is presently operating in a 4,000 square foot building and services some $14 million in accounts. Citizens does utilize some off-site services, such as electronic data processing. Mr. Slossberg has also purchased a strip of land containing 6,800 square feet adjacent to the proposed site for the express purpose of making expansion possible, should it be needed. This space could be used to provide 15 to 18 additional parking spaces. The applicant intends to offer the prevailing banking services, prices, interest rates and hours of business as other banks in the area. It intends to be competitive in basic and ancillary services. It will not have a trust department. It is intended that the proposed new bank will offer more personalized services and will cater primarily to individuals and small and medium-sized businesses. The applicant expects to make primarily smaller loans under $50,000.00, for which it feels there is a demand. The loan portfolio of the Boca Raton National Bank indicates that as of September 28, 1979, 1,102 out of its 1,108 loans were loans under $50,000.00. Other banks in the downtown area do not have on-site drive-in teller facilities. The applicant projects total deposits of $4 million, $7 million and $10 million for the first, second and third years of operation. It also projects a loss of $69,834.00 during the first year of operation, a loss of $11,289.00 during the second year and a profit of $78,170.00 during the third year of operation. Due to higher income and expense figures occurring since the date of its application, these loss and profit estimates may need to be adjusted. The name of the proposed new bank is Royal Palm Bank. This name was selected because the words "Royal Palm" appear in a nearby street, a shopping center, a yacht club, and a dinner theatre and it was felt by the organizers that people could easily relate to the proposed name and it tends to express an affiliation with the City of Boca Raton. The applicant did not consult with any expert or studies regarding bank names. No expenses have been incurred with respect to the proposed name, and there would be no economic hardship to the organizers if they are required to select a different name for the bank. The intervenor Royal Trust Bank of Palm Beach, N.A. is a branch office and member of the Royal Trust Bank Corporation. It is located 1.7 miles northeast of the proposed site. The Royal Trust Bank Corporation has a registered service mark which has been in use since 1976, and the intervenor utilizes this trade mark. The service mark contains a palm tree. The Royal Trust Bank Corporation also publishes a periodical entitled the "Royal Palm News." For the years 1977, 1978, and 1979, the statewide advertising campaign of the Royal Trust Banks resulted in an expenditure of $1,080,000.00. Of this figure, $803,005.00 was expended in Dade, Broward and Palm Beach Counties. In Palm Beach County, the intervenor has engaged in television, radio, magazine and newspaper advertising activities. Other advertising materials utilized by the intervenor such as matches, service literature and things of that nature, also include the logo containing the palm tree. The intervenor intends to continue the use of the name Royal Trust Bank and the logo containing a palm tree. It is felt that the palm tree in connection with the registered service mark plays an important part in the identification of the intervenor and Royal Trust Banks. 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 13th day of March, 1980, in Tallahassee, Florida. DIANE D. TREMOR Hearing Officer Division of Administrative Hearings 101 Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: Gerald A. Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32301 Robert I. MacLaren, II, Esquire Osborne and Hankins Suite 200, Weir Plaza Bldg. 855 South Federal Highway Post Office Drawer 40 Boca Raton, Florida 33432 David B. Van Kleeck, Esquire Buchanan, Ingersoll and Van Kleeck Suite C, Plaza II Bldg. 301 West Camino Gardens Blvd. Boca Raton, Florida 33432 Walter A. Engdahl, Esquire 140 East Palmetto Park Road Boca Raton, Florida 33432 Karlyn Ann Loucks Assistant General Counsel Office of the Comptroller The Capitol Tallahassee, Florida 32301 Robert Paul Paul, Landy and Beiley Penthouse, Peninsula Federal Bldg. 200 South East 1st Street Miami, Florida 33131 Mark E. Pollack and Edward A. Stern Pollot, Stern and Pollock, P.A. 627 South West 27th Avenue - Suite 300 Miami, Florida 33135 =================================================================
Conclusions As set forth in Rule 3C-10.051, Florida Administrative Code, when an application for authority to organize and operate a new state bank is filed, it is the applicant's responsibility to prove that the statutory criteria warranting the grant of authority are met. The Department of Banking and Finance (hereinafter referred to as the Department) shall conduct an investigation pursuant to Subsection 659.03(1), Florida Statutes, which was done in this case, and then approve or deny the application in its discretion. This discretion is neither absolute nor unqualified, but is instead conditioned by a consideration of the criteria listed in Subsection 659.03(2), Florida Statutes, and wherein it is provided that: The department shall approve or disapprove the application, in its discretion, but it shall not approve such application until, in its opinion: Public convenience and advantage will be promoted by the establishment of the proposed bank or trust company. Local conditions assure reasonable promise of successful operation for the proposed bank or the principal office of the proposed trust company and those banks or trust companies already established in the community. The proposed capital structure is adequate. The proposed officers and directors have sufficient banking and trust experience, ability and standing to assure reasonable promise of successful operation. The name of the proposed bank or trust company is not so similar as to cause confusion with the mane of an existing bank. Provision has been made for suitable banking house quarters in the area specified in the application. If, in the opinion of the Department, any one of the six foregoing criteria has not been met, and cannot be remedied by the applicant, it cannot approve the application. An applicant, can, however, take corrective action in most circumstances, to meet the criteria set forth in Subsections 659.03(2)(c), (d), (e), or (f), Florida Statutes, if any one of these is found to be lacking. For example, if all other statutory criteria are met, the applicant may increase capital, or make certain changes in the board of directors, or change the name, or alter the provisions for suitable banking house quarters, because these factors are, at least to some degree, within its control. It is the Department's policy to allow applicants to make certain changes to meet these criteria if all other criteria are met; to do otherwise would be to subject applicants to unnecessary red tape. However, it is the Department's position that there is little, if anything, that an applicant can do to alter its ability to meet the criteria set forth in Subsections 659.03(2)(a) and (b), Florida Statutes, since applicants CANNOT easily change the economic and demographic characteristics of an area. Therefore, if either one or both of these criteria are not met, the Department cannot approve the application. For purposes of applications for authority to organize and operate a new bank, Rule 3C-10.051(1), Florida Administrative Code, defines the primary service area (PSA), as "the smallest area from which the proposed bank expects to draw approximately 75 percent of its deposits. It should be drawn around a natural customer base and should not be unrealistically delineated to exclude competing banks or to include areas of concentrated population." Based upon man-made traffic barriers, population concentrations, commercial activity, traffic patterns and the location of existing offices of financial institutions in the area, the Department concludes that the Applicant's designated PSA is unrealistically delineated. The Applicant extended the western boundary of its designated PSA to the Florida Turnpike to include an area of high growth potential west of Interstate 95 (I-95), a limited-access highway. In conjunction with the residential and commercial development of this area, numerous offices of financial institutions have located or have been approved to be located nearby. It is unrealistic to expect the population living west of I-95 to drive past these financial institutions, cross I-95 (at the limited number of available crossings) and drive to the other side of Boca Raton to bank at the downtown location of the Applicant's proposed site, especially when no new services are being offered by the bank. Likewise, residents north of 40th Street, N.W. (Spanish River Boulevard) generally would not drive past the numerous financial institutions located there, cross two heavily traveled east-west arteries, and travel through Boca Raton to the downtown location of the proposed bank. By including these areas, Applicant's designated PSA is not drawn around a natural customer base which can reasonably be expected to bank at a financial institution located at the Applicant's proposed site. The Department concludes that based on traffic patterns, man-made barriers and location of other financial institutions, the northern and western boundaries of a realistic PSA of the Applicant's proposed site are 40th Street, N.EW. (Spanish River Boulevard), and I-95, respectively. It is the opinion and conclusion of the Department that public convenience and advantage will not be promoted by the establishment of the proposed bank in this case. Therefore, the criterion in Subsection 659.03(2)(a), Florida Statutes, is NOT met. As set forth in Rule 3C-10.51(2)(a), Florida Administrative Code, the location and services offered by existing banking and financial institutions in the service area are considered as indicative of the competitive climate of the market. The traffic patterns in the area, as well as the area's general economic and demographic characteristics are also considered in evaluating this statutory criterion. Because it is recognized that the establishment of a new bank ANYWHERE would promote convenience and advantage for at least a few people, SUBSTANTIAL convenience and advantage for a SIGNIFICANT number of people must be shown; otherwise, a new bank could be justified for every street corner in the state. Clearly, such a result was not the legislative intent in regulating entry into the banking industry, nor is it in the public interest. The record indicates that access to the proposed site is inconvenient due to difficult ingress and egress caused by a heavy and continuous flow of traffic on South Federal Highway and the lack of a traffic light to regulate the traffic for the benefit of users of the proposed site; that the proposed site is located in downtown Boca Raton east of I-95, a mature area housing mainly offices and relatively small retail trade establishments; that there is only limited room for growth in its vicinity without major reconstruction and rehabilitation projects; that the Applicant's designated PSA already has ten commercial banking offices and thirteen savings and loan offices serving it; that the more realistic PSA, as delineated by the Department, still has nine banking offices serving it, of which three are main offices, two are branches which were formerly full-service banks, and fourteen savings and loan offices; that five of these banking offices and eight of the savings and loan offices are located in proximity to the proposed site and are more conveniently accessible from the main centers of commercial activity within the realistic PSA; that of the three bank main offices within the realistic PSA two are located within 0.5 of a mile from the proposed site and the third is within one mile from it, and, that in addition, there are three branch offices of three other banks located within a 1.7 mile radius of the proposed site; and that the proposed new bank would not offer any new services or improve on existing services. Due to the number of existing banking and savings and loan offices in or near the realistic PSA, their locational distribution, and the fact that the record does not reflect inadequate or an insufficient variety of financial services, it appears that the banking needs of the PSA's resident and working populations are being conveniently and adequately served at this time and that competition in the realistic PSA would not be significantly enhanced by the establishment of the proposed new bank, which will not offer any new services. Located within the central portion of the realistic PSA, the proposed site could offer some convenience for businesses and residents situated nearby, but the existing banking and savings and loan offices, which are presently serving most of them, are more easily accessible and more conveniently located for most of the PSA residents and businesses. Furthermore, because of the population density within the realistic PSA and the fact that it is a mature area with little room for expansion, rapid population growth is unlikely. In view of the above, the Department concludes that the criterion in Subsection 659.03(2)(a), Florida Statutes, is not met. It is the opinion and conclusion of the Department that local conditions do not assure reasonable promise of successful operation for the proposed bank and those banks already established in the community. Therefore, the criterion in Subsection 659.03(2)(b), Florida Statutes, IS NOT met. As set forth in Rule 3C-10.051(2)(b), Florida Administrative Code, current economic conditions and, to a lesser extent, the growth potential of the area in which the new bank proposes to locate are important considerations in determining the bank's probable success. Essential to the concept of banking opportunity is that there does and will exist a significant volume of business for which the new bank can realistically compete. The growth rate, size, financial strength, and operating characteristics of banks and other financial institutions in the PSA are also import indicators of economic conditions and potential business for a new bank. It is noted that the statutory standard requires that ". . .local conditions ASSURE reasonable PROMISE of successful operation for the proposed bank and those already established in the community. . ." (E.S.), NOT merely that local conditions INDICATE a POSSIBILITY of such success. Banking involves a public trust. Unlike private enterprise establishments generally, banks operate on the public's capital and therefore, the Legislature has vested in the Comptroller the responsibility of protecting that public interest. Furthermore, the failure of a bank, as opposed to private enterprise establishments generally, may have an unsettling effect on the overall economic welfare of the community, and that is why the Florida Legislature and the United States Congress have imposed stringent requirements for the industry. This Department is responsible for enforcing this legislative standard. Public interest is best served by having a banking system whereby competition is encouraged, where appropriate, yet at the same time ensuring that the financial resources of the residents in the community are stable and safe. That was the intent of the Legislature in regulating entry into the banking industry. The record indicates that between June 30, 1978 and June 30, 1979 the rates of growth of the total deposits of the existing offices of commercial banks located within the PSA were uneven, ranging between poor to good, although all of them showed increases. These increases ranged between $1.9 million and $23.4 million. There is no evidence in the record that the performance of these banks can be duplicated by the Applicant. As was already pointed out in the discussion of the criterion of convenience and advantage, both the resident and business populations of the realistic PSA are conveniently and adequately served by this PSA's existing offices of financial institutions. Since the Applicant does not plan to offer any new services, no significant transfer of customers, if any, from existing institutions to the proposed new bank can be expected. This is especially true of those customers with loan or other commitments to one or more of the existing institutions. As to new and uncommitted customers, the realistic PSA is a densely populated mature area in downtown Boca Raton and the Applicant is not likely to benefit to any significant degree in the near future from the population growth in other parts of the City or in Palm Beach County. Although the record also shows that the total deposits and loans of Florida Coast Bank of Palm Beach County, N.A., the most recent bank to open in Palm Beach County (May, 1978) but which is located outside of the Applicant's designated PSA, grew significantly during its first 18 months of operation, this bank serves a different PSA. There was no evidence in the record that the rate of growth of that PSA's population and its demographic and economic characteristics, as well as the number, nature, and competitive climate of the offices of financial institutions serving it are analogous to the Applicant's realistic PSA. It cannot, therefore, be reasonably assumed that the Applicant will be able to duplicate its performance. It should also be noted that this bank is more conveniently located to and accessible from that section of the Florida Turnpike which serves the southern portions of Palm Beach County. Based on the above considerations, the Department is of the opinion that the feasibility of materialization of the Applicant's deposit projections remains inconclusive. In view of the fact that the statutory standard requires that ". . .local conditions ASSURE reasonable PROMISE of successful operation for the proposed new bank. . .", the Department concludes that the criterion in Subsection 659.03(2)(b), Florida Statutes, is not met. It is the opinion and conclusion of the Department that the proposed capital structure of the proposed new bank is adequate. Therefore, the criterion in Subsection 659.03(2)(c), Florida Statutes, IS met. Capital should be adequate to enable the new bank to provide the necessary banking services, including loans of sufficient size, to meet the needs of prospective customers. It should be sufficient to purchase, build or lease a suitable permanent banking facility complete with equipment. Generally, the initial capital for a new nonmember bank should not be less than $1.0 million in nonmetropolitan areas and $1.5 million in metropolitan areas. However, greater capital may be required of a new bank which is a member of the Federal Reserve System because of the more restrictive uses of capital imposed by that body. The capital referred to be allocated among capital stock, paid in surplus, and undivided profits in the ratios set forth in Section 659.04(3), Florida Statutes. The Applicant's proposed capital accounts total $1.5 million and are allocated according to the statutory ratios. Therefore, the criterion in Subsection 659.03(2)(c), Florida statutes, is met. It is the opinion and conclusion of the Department that although the proposed directors have good character, have reputations of financial responsibility, ability and good standing in their community, they do not have sufficient direct commercial banking experience to assure reasonable promise of successful operation for the proposed new bank. Therefore, the criteria in Subsection 659.03(2)(d), Florida Statutes, ARE NOT met. As set forth in Rule 3C-10.051(2)(d), Florida Administrative Code, the organizers, proposed directors, and officers as a group shall have reputations evidencing honesty and integrity. They shall all have employment and business histories demonstrating their responsibility in financial affairs. At least one member of a proposed board of directors, other than the Chief Executive Officer, shall have direct banking experience. In addition, the organizers, proposed directors, and officers shall meet the requirements of Sections 659.11 and 659.54, Florida Statutes. Officers shall have demonstrated abilities and experience commensurate with the position for which proposed. Members of the initial management group, which includes directors and officers, shall require prior approval of the Department. Changes of directors or Chief Executive Officer during the first year of operation shall also require prior approval of the Department. While it is not necessary that the names of proposed officers be submitted with an application to organize a new state bank, the Chief Executive Officer and operations officer must be named and approved at least sixty (60) days prior to the bank's opening. The Department concludes that the proposed directors have, as a group, good character, sufficient financial standing, business experience and responsibility, but the board lacks in-depth experience in commercial banking to assure reasonable promise of successful operation. Were this the only requirement not met, the Department would generally allow the Applicant to correct this deficiency by adding at least one director other than the Chief Executive Officer, with direct commercial banking experience. It should be noted that interlocking directorships involving existing financial institutions competitively near the proposed site of a new institution are discouraged. Such interlocking directorships could possibly restrict competition and create fiduciary problems. In this instance, one of the proposed directors is presently a director of a savings and loan association in Miami which, because of its service area, is not considered a directly competitive financial institution. The Department concludes, therefore, that the interlocking directorship in this instance will not restrict competition or create fiduciary problems. It is the opinion and conclusion of the Department that the name of the proposed new bank, Royal Palm Bank, is so similar as to cause confusion with the name of existing banks. Therefore, the criterion of Subsection 659.03(2)(e), Florida Statutes, IS NOT met. As set forth in Rule 3C-10.051(2)(e), Florida Administrative Code, in determining whether an applicant meets the requirements of this statutory criterion, the Department will consider the names of all existing banks in the state. This provision shall not apply to affiliates of bank holding companies. In addition to the foregoing criterion an applicant shall meet the requirements set forth in Section 607.024, Florida Statutes. The Applicant's proposed name, Royal Palm Bank, begins with the same word as the Royal Trust Bank, which has a branch located 1.7 miles northeast of the proposed site. In addition to the similarity of name, the Royal Trust Bank uses a registered trade mark containing a palm tree in all of its advertising and service literature, which plays an important part in the identification of the Royal Trust Bank. In view of the similarity of the names, the identification of the Royal Trust Bank with a palm tree and the monies expended by the Royal Trust Bank in advertising over the last three years, the Department concludes that the Applicant's proposed name, Royal Palm Bank, is so similar as to cause confusion with the name Royal Trust Bank. It should also be noted that the Applicant did not incur any expenses in the identification and promotion of the proposed name or consult with any expert or perform studies regarding the bank's name. It is the opinion and conclusion of the Department that provision has not been made for suitable banking house quarters in the area specified in the application. Therefore, the criterion of Subsection 659.03(2)(f), Florida Statutes, IS NOT met. As set forth in Rule 3C-l0.051(2)(f), Florida Administrative Code, permission to open in temporary quarters may be granted, generally not to exceed one (1) year. An extension, generally not to exceed six (6) months, may be granted for good cause shown. The permanent structure of a new bank should contain a minimum of 5,000 square feet, unless the applicant satisfactorily shows that smaller quarters are justified due to the performance of certain auxiliary services off the premises. In addition, it shall meet Federal Bank Protection Act requirements and be of a sufficient size to handle the projected business for a reasonable period of time. The facility shall be of a nature to warrant customer confidence in the bank's security, stability, and permanence. Other pertinent factors include availability of adequate parking, an adequate drive-in facility if such is contemplated, and possibilities for expansion. Temporary quarters are not contemplated by the Applicant. The proposed banking quarters consist of a 4,000 square foot single-story building, of which the Applicant intends to initially occupy 3,000 square feet. The record does not indicate that any auxiliary services will be performed off- premises. Therefore, the provisions of Rule 3C-10.051(2)(f), Florida Administrative Code, and the criterion of Subsection 659.03(2)(f), Florida Statutes, are not met. Were this the only requirement that had not been met, the Department would generally allow the Applicant to correct the deficiency. Rule 3C-10.051(3), Florida Administrative Code, relating to stock distribution and financing, provides that To encourage community support, wide distribution of stock ownership is desirable. The majority of the stock should be issued, whenever possible, to local residents of the community, persons with substantial business interests in the community, or others who may reasonably be expected to utilize the services of the bank. Subscribers to 5 percent or more of the stock may not finance more than 50 percent of the purchase price if the extension of credit is predicated in any manner the stock of the new bank, whether or not such stock is pledged. The Department concludes that the initial stock distribution among 45 subscribers, most of whom reside or have businesses in the PSA, is acceptable, although generally a wider distribution is desirable to encourage community support. Rule 3C-10.051(4), Florida Administrative Code, relating to insider transactions requires that Any financial arrangement or transaction involving the proposed bank and its organizers, directors, officers, and shareholders owning 5.0 percent or more of the stock, or their relatives, their associates or interests should ordinarily be avoided. Should there be transactions of this nature they must be fair and reasonable, fully disclosed, and comparable to similar arrangements which could have been made with unrelated parties. The Department concludes that there is an insider transaction involved in the lease of the proposed bank building from Saul Slossberg, a proposed director and subscriber of more than five percent of the stock. The transaction has been disclosed to all of the proposed directors, however, it is not apparent from the record that the transaction has been disclosed to all the subscribers. Information has been submitted to indicate that the terms of the transaction are comparable to similar arrangements which could have been made with unrelated parties. 12. Rule 3C-10.051(5), Florida, Administrative Code, sets forth that In all cases appraisals of land and improvements thereon shall be made by an independent qualified MAI appraiser, and be dated no more than six (6) months prior to the filing date of the application. Based upon comparable information submitted to the Department, the Department concludes that the proposed leasing arrangements are reasonable and competitive.
The Issue The ultimate issue to be determined in this matter is whether the application filed by Boulevard Bank to establish a branch at Islamorada, Florida, should be approved or denied. The Applicant contends that all of the requirements set out at Section 658.26, Florida Statutes, and Rule 3C-13, Florida Administrative Code, have been met, and that the application should be approved. The Protestant contends that the Applicant has failed to demonstrate that the public convenience and necessity would be served by the proposed branch.
Findings Of Fact The Applicant, Boulevard Bank, is a full-service, commercial banking institution licensed by the Florida Department of Banking and Finance. Its principal offices are located in Key West, Monroe County, Florida. Boulevard Bank has filed an application with the Department of Banking and Finance to establish a branch banking facility at Islamorada, Monroe County, Florida. Boulevard Bank has acquired property for the facility. The property is located on "Old State Road" and is bounded on the north by Matecumbie Street and on the south by Jerome Street. Boulevard Bank has obtained zoning variances that would allow it to construct a branch banking facility on the property. The primary service area of the proposed branch banking facility would be from Mile Marker 87, northeast of the proposed facility, to Channel 5, southwest of the facility. This area is approximately 15 miles long. In keeping with the geography of the Florida Keys, the service area is quite narrow, approximately 0.3 miles at the widest. The service area is characterized by mixed residential and commercial uses. There are approximately 3,000 full-time residents within the service area. There are many people who live in the area on a part-time basis. During the winter months, the population increases dramatically. There are more than 90 stable businesses located within the service area. There are currently two banking institutions located within the service area of the proposed Boulevard Bank branch. The main office of The Islamorada Bank and a branch of the First Federal Savings and Loan Association of the Florida Keys are located within close proximity to the location of the proposed branch. The Islamorada Bank is the only full-service, commercial banking institution in the service area. The public convenience and necessity would be served by the opening of an additional full-service banking facility within the service area in that the public would be the beneficiary of the favorable impacts of competition. The Applicant proposes to provide a full range of banking services at the proposed branch. Applicant proposes to stay open at hours and on days that The Islamorada Bank remains closed. Competition can have a favorable impact upon interest that is paid to the bank's depositors and interest rates that are charged by the bank on loans. There is no evidence from which it could be concluded that the opening of the proposed branch would in any way damage the fiscal integrity of banking facilities already located within the service area. While the public convenience and necessity would be served by the increased number of facilities and by competition, it does not appear that there has been a dramatic increase in the need for banking services within the service area in recent years. The main office of The Islamorada Bank has not experienced an increase in deposits since 1979. It does not appear that existing banking facilities within the service area are providing inadequate service to residential and business customers. The Applicant is proposing to invest $470,000 in fixed assets, including the cost of land, building, and furniture and equipment to support the proposed branch. The building, which has not yet been constructed, would have dimensions of approximately 30 by 50 feet. The facility would include drive-in banking windows and an automatic teller machine. The Applicant has sufficient capital accounts to support the proposed branch. The Applicant's percentage of capital to total assets exceeds 7.5 percent. The ratio was 7.8 percent on December 31, 1981, and 8.6 percent on June 30, 1982. The operation of the proposed branch would pose no threat to depositors, creditors, or shareholders of the Applicant. Even if the branch operated without a single depositor, the losses to Applicant would not be such as to pose a risk to the integrity of the Applicant, nor to substantially reduce the stockholders' dividends. It is extremely unlikely that the branch would operate without any depositors, and it appears that there is a favorable prospect that the branch would be profitable. The Applicant has sufficient earnings and prospects for earnings to support the expenses of the proposed branch. The Applicant's net profits to assets ratio exceeded 0.5 percent during the past calendar year. For 1981, the Applicant's net profit to total assets ratio was 2.5 percent prior to the payment of federal income taxes, and 1.5 percent after taxes were paid. The Applicant's loans to deposits ratio was 63 percent on December 31, 1981. The Applicant appears to have sufficient management depth to operate the proposed branch without affecting its present services. Applicant proposes to assign Rudy D. Aud as chief operations officer. Mr. Aud is a vice president of the Applicant. He assisted in the establishment of the Applicant's Big Pine Key branch and has operated that facility. The name of the proposed branch would be "Islamorada Branch of Boulevard Bank, Islamorada, Florida." The name would reasonably identify the facility as a branch of the Applicant. The proposed name would not confuse the public either as to the nature of the facility or in relation to other banking facilities. The files of the Department of Banking and Finance, including the Department's confidential file, establish that the Applicant has operated in substantial compliance with applicable laws governing its operations. ENTERED this 17th day of December, 1982, in Tallahassee, Florida. G. STEVEN PFEIFFER Assistant Director 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 17th day of December, 1982. COPIES FURNISHED: Robert T. Feldman, Esquire 417 Eaton Street Key West, Florida 33040 Gustave W. Larson, Esquire 9999 Northeast Second Avenue Suite 307, Shoreview Bldg. Miami Shores, Florida 33138 Elsa Lopez Whitehurst, Esquire Office of the Comptroller The Capitol, Suite 1302 Tallahassee, Florida 32301 The Honorable Gerald A. Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32301 ================================================================= AGENCY FINAL ORDER ================================================================= STATE OF FLORIDA DEPARTMENT OF BANKING AND FINANCE DIVISION OF BANKING IN RE: BOULEVARD BANK--Application for authority to establish a branch CASE NO. 82-2623 at Mile Marker 81.4, U.S. Highway 1, Islamorada, Monroe County, Florida. / FINDINGS OF FACT, CONCLUSIONS OF LAW, AND FINAL ORDER Pursuant to notice, a formal administrative hearing was conducted in this matter on November 5, 1982, before G. Steven Pfeiffer, with the Division of Administrative Hearings, in Islamorada, Monroe County, Florida. The purpose of the hearing was to receive evidence concerning the application of Boulevard Bank for authority to open a branch at mile marker 81.4, U.S. Highway 1, Islamorada, Florida. At the hearing, the following appearances were entered: Robert T. Felman, Key West, appeared on behalf of the Applicant, Boulevard Bank; Gustave Larson, Miami Shores, Florida, appeared on behalf of the Protestant, the Islamorada Bank; Elsa Lopez Whitehurst, Tallahassee, Florida, appeared on behalf of the Florida Department of Banking and Finance. No exceptions were filed in this case. Having fully considered the facts and information contained in the record relating to the application of Boulevard Bank for authority to open a branch office at mile marker 81.4, U.S. Highway 1, Islamorada, Monroe County, Florida, The Comptroller of the State of Florida, as Head of the Department of Banking and Finance, hereby renders the following FINDINGS OF FACT, CONCLUSIONS OF LAW, AND FINAL ORDER in the above-styled cause.
Findings Of Fact Based upon consideration of the oral testimony and documentary evidence introduced at the hearing, the following relevant facts are found. In October, 1978, the Applicant filed with the Department of Banking and Finance an application for authority to open a branch bank at the northwest corner of Gunn Highway and Hudson Lane in the northwest section of unincorporated Hillsborough County, Florida. The Applicant presently does not have any branch bank facilities and, by way of this application, seeks the establishment of its first branch bank. The applicant bank was established April 11, 1975, as the Citrus Park Bank and is located at Gunn Highway and Hixon Road in the northwest section of unincorporated Hillsborough County, Florida. The site of the proposed branch is approximately 4.5 miles southeast of the main office. As stated, the site for the proposed branch is the northwest corner of Gunn Highway and Hudson Lane, which provides good access to both roads. The proposed branch office will offer the full extent of customer facilities. The branch bank building will contain approximately 1,500 square feet, housing four interior teller windows and two auto tellers. The seller of the land on which the proposed branch facility will be situated, has no connection with the Applicant. The primary service area for the proposed branch bank is bounded on the north by Erlich Read, on the south by railroad tracks, on the east by a direct line running north from Gunn Highway, Linebaugh Avenue intersection, and on the west by Henderson Road extended to Bellamy Road. Witnesses Bobier and Noto, of Site Selection Consultants, Inc., testified that the primary service area boundaries are realistic, in that they comply with regulatory criteria of being the smallest area within which the proposed bank will garner 75 percent of its deposits. Exhibit 5 of the Applicant's application reveals that there are eight deposit customers within the primary service area with total deposits of $178,783, and eight loan customers with total loans of $13,735. Since the date of its initial application with FDIC 1/, October 15, 1978, from that date to April 18, 1979, Citrus Park Bank has acquired eighty-one new deposit customers for total additional deposits of $186,548. (See Applicant's Exhibit No. 5) There are presently no existing banks within the primary service area for this proposed branch. Within the proposed site for this branch bank, it appears that the population of the primary service area is approximately 6,900 persons. It is projected that by 1985, the population will reach at least 15,000. The people living within the primary service area are of the highest strata when using traditional factors such as income, wealth, housing and occupation. The average population per banking office for the United States as a whole is 4,561, whereas this population figure for-the State of Florida is 8,086 per banking office. The Applicant anticipates total deposits at the end of the first year's operation of the proposed branch to be $1.5 million; at the end of the second year, $3.0 million and at the end of the third year, $4.5 million. At the end of the first year of operating, the Applicant anticipates a net loss of approximately $25,900. At the end of the second year, the Applicant projects a net profit of $41,300; and at the end of the third year, a net profit projection of $85,000 is expected. There are a significant number of new or recently developed subdivisions in the primary service area. There appears to be approximately nine large residential communities within the service area. While there appears to be no large commercial activity and development in the primary service area, current plans for such development appear imminent. According to the applicant bank, it is entitled to have 50 percent of its unimpaired capital and surplus in direct ownership or leasehold improvements of land and building, which eqnals $545,000. As of December 31, 1978, the bank had invested in such assets a total of $285,000. Thus, the Applicant figures that it has available to invest in bank promises an amount of $260,000. The applicant bank has a net investment in land of $20,000 and anticipates spending $150,000 on buildings, which make a total of $170,000 invested in land and buildings. The applicant bank's president, Robert D. Sellas, testified that the Applicant has sufficient capital accounts to support the bank's deposit base and the additional fixed asset proposal for the branch and its operations. Based on the main facility's record of growth, Mr. Sellas testified that the applicant bank has sufficient earnings and earnings prospects to support the anticipated expenses of the proposed branch. The bank's net profit to asset ratio is being maintained at 1.04 percent for the calendar year or better. It has good established earnings and is presently retaining most of its earnings for the branch expansion. As of December 31, 1978, the Applicant's adjusted capital to asset ratio was 13.97 percent. This figure is expected to increase over the following few months. An examination of the bank's economic figures indicate that the Applicant is enjoying good liquidity. (See Applicant's Exhibit No. 4) This chart which commences in the month of May, 1976, and continues through March, 1979, indicates that at the end of March, 1979, the bank had a ratio of approximately 76 percent of loans to loanable funds. In determining the bank's liquidity, a figure is utilized to determine the amount of funds it is willing to commit to loans. According to this formula, 80 percent of total deposits excluding public funds plus capital funds exists in excess of the amount invested in fixed assets and is considered available to fund the loan account. According to this formula, President Sellas testified that the bank has sufficient liquidity to support the branch bank expansion. The Applicant's main office is staffed with the intention of establishing an additional branch. The Applicant's managerial capacity, asset condition and past performance are good. President Sellas testified that the Applicant has sufficient depth and quality of management to operate the proposed branch without reducing its current level of services or over-extending its managerial or operational capacity. (See Respondent's Exhibit No. 3) The Applicant has six officers excluding its Chairman of the Board. The average banking experience for the Applicant's officer' is 10.5 years and their average age is 36 years. The individual designated to be the manager for the proposed branch is Dana Chwan. Ms. Chwan has a Bachelor of Science degree from the University of Tampa, has been associated with the Citrus Park Bank since its inception four years ago, and is presently in a loan officers training program. Prior to this program, Ms. Chwan served as the bank's marketing officer. (See Respondent / Applicant's Exhibit No. 3 for personnel data concerning the officers) Mr. Keith White, an expert for the Petitioner, Carrollwood State Dank, testified that there was total available deposits within the primary service area of approximately $104,200,000. He (White) further testified that it is possible that Citrus Park Bank, through its proposed branch, could garner $1.5 million in deposits during its first year in operation. Additionally, President Sellas testified that in his judgment, the prospect for the viability of the proposed branch is good. The applicant bank recently underwent an FDIC examination and at that time the financial-asset condition of the bank was in excellent shape, although the bank wrote off a minor amount of loans. Expert witnesses Bobier and Noto, of Site Selection Consultants, Inc., testified that the public convenience and need would be better served by the establishment of the Citrus Park branch bank at the proposed location and both were optimistic about the future growth in and around the proposed location of this branch bank. The Citrus Park Bank started with an initial capitalization of $1,201,500. The bank has had an excellent past performance record and has been profitable. Over the years the bank has taken a conservative approach toward dividends and has paid five cents per share to its stock-holders per quarter, retaining a substantial sum of its earnings for expansion. The bank's president, Robert D. Sellas, testified that the bank projects a continued increase in earnings and feels that the establishment of this branch will not adversely affect the bank's earnings. The name of the proposed branch is to be "Citrus Park Bank-Gunn Highway Branch Office." In accordance with provisions of Florida Statutes, Subsection 120.57(1)(a)(12), conclusions of law and recommendations are not included in this Report. RESPECTFULLY SUBMITTED AND ENTERED this 21st day of May, 1979, in Tallahassee, Florida. JAMES E. BRADWELL Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: Richard B. Collins, Esquire Michaels, Sheffield, Perkins, Collins and Vickers 2007 Apalachee Parkway Post Office Box 10069 Tallahassee, Florida 32302 J. Riley Davis, Esquire Taylor, Brion, Buker and Greene 32G Barnett Bank Building Post Office Pox 1796 Tallahassee, Florida 32302 Gerald A. Lewis, Comptroller Office of the Comptroller The Capitol Tallahassee, Florida 32301 William S. Lyman, Esquire Assistant General Counsel Office of the Comptroller The Capitol Tallahassee, Florida 32301
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 Whether employees of Production Credit Associations and the Federal Land Bank Associations of Florida may be licensed to sell insurance by the Florida Department of Insurance. (a) Whether the affidavit by C. W. S. Horne offered by Intervenors Production Credit Associations of Florida and Federal Land Bank Associations of Florida is relevant and material to the issues. Whether the Production Credit Associations of Florida and the Federal Land Bank Associations of Florida are financial institutions as defined in Section 636.9_8 of the Florida Statutes. Whether the Department of Insurance, in its licensing proceedings, should consider or must consider the Federal laws, rules and regulations.
Findings Of Fact Facts stipulated by the parties on the record: "The Petitioners, the Florida Association of Insurance Agents, representing the Association and its members individually and collectively, is a representative party in interest for these proceedings and any review thereof. And its members will be effected by any decision of the Department of Insurance in licensing insurance agents to be employed by, retained by, or associated with Production Credit Associations in the State of Florida. For the purposes of this proceeding, and any review thereof, no member of the Association may take a position contrary to or in opposition to that taken herein by the Petitioner. "The Production Credit Associations of Florida and the Federal Land Bank Associations of Florida and the Federal Land Bank Associations of Florida have an interest in the decisions of the Department of Insurance with respect to the licensing of insurance agents to sell insurance on their behalf. And the decisions of the Department in licensing of such insurance agents will substantially effect the interest of the Production Credit Associations and the Federal Land Bank Associations of Florida, and they are therefore proper parties to the Administrative Proceedings. "Florida Farm Bureau Federation, L.A.A., (Limited Agricultural Association) is a non-profit voluntary general farm membership organization comprised of approximately 65,000 member families. The Florida Farm Bureau offers comprehensive insurance services to their members, and if the Department licenses insurance agents to be employed by or associated with the Production Credit Associations of Florida, they will be offering similar services that are already offered by the Florida Farm Bureau. "The Department of Insurance has licensed two insurance agents with type 2-20 general lines insurance licenses, which licenses since their issuance have been utilized by the holders thereof. The Production Credit Associations of Florida and the Federal Land Bank Associations of Florida have retained such licensed agents and have entered into the insurance business through the process of having such agents solicit and sell insurance to persons, including those who borrow from either the Production Credit Associations or the Federal Land Bank Associations of Florida. "The Intervenors, Production Credit Associations of Florida, may offer into evidence an affidavit concerning the operations of the Associations and their affiliates in Florida. The other parties hereto will not object to the form of the evidence, but reserve the right to object to its introduction on the grounds that it is irrelevant and immaterial. ". . .there are Federal rules and regulations under the Farm Credit Administration Act. The Hearing Officer may take judicial knowledge of such rules and regulations and any amendments thereto. ". . .it is stipulated that Mr. Field has witnesses that would testify to these items, and the other parties waive cross examination of such witnesses and agree to these facts without necessarily stipulating that such facts are true. ". . .Mr. Bob Taylor, Vice President for Underwriting of Farm Bureau Insurance Companies, would testify that Farm Bureau, through its related insurance companies and other competitive companies are currently offering cost, qualitatively and availability, similar insurance services to those being sought in rural communities. ". . .Mr. Doug Oswald, President of Sun Bank, Ocala, would testify as to the availability of farm loans during the last 24 years in the Ocala, Marion County, Florida area. He would testify that such loans are currently available through current commercial sources and have been available, and such loans, including both mortgage and production type loans, are presently available in Marion County. And that insurance related services in connection with the farm type loans in his community have been available through the Farm Bureau and other companies during this period of time. ". . .Mr. Bob Taylor, Vice President of Underwriting, Farm Bureau Insurance Companies, would also testify that similar insurance services proposed to be offered to the Production Credit Association and the Land Bank are presently being and have been offered by the Farm Bureau Insurance Companies in the rural communities on a competitive form from both cost, qualitatively and availability. The Hearing Officer further finds: The Production Credit Associations of Florida and the Federal Land Bank Associations of Florida are chartered by the Farm Credit Administration [a federal agency in the executive branch of the government subject to regulation and supervision by the Farm Credit Administration, Title 12, Chapter IV, United States Code] upon application of local persons eligible to borrow money from the Farm Credit System. There are nine (9) Production Credit Associations and seven (7) Federal Land Bank Associations in Florida. Two licenses have been approved by the Respondent for two employees or associates of the Production Credit Association. The following affidavit of C. W. S. Horne, Executive Vice President of Federal Land Banks of Columbia and the Federal Land Bank of Columbia, is admissible for the purpose of describing the operations and functions of the associations and their affiliates in Florida: "PERSONALLY APPEARED BEFORE ME C. W. S. Horne, being duly sworn deposes and says that he is the Executive Vice President of the Federal Land Bank of Columbia, and the Federal Credit Bank of Columbia, and that if called upon to testify in the above captioned matter he would state that according to his knowledge and belief the Farm Credit Act of 1971 does in fact provide in Section 1.4(11) as follows: "Accept deposits of securities or of current funds"; and that neither the Federal Land Bank nor the Federal Intermediate Credit Bank accepts any deposits from members of the general public in any form such as is common with commercial banks and that it accepts no deposits either for time or checking accounts or issue certificates of deposit or other similar evidences of indebtedness; and that pursuant to Section 1.4(11) of the Farm Credit Act of 1971, the Federal Land Bank of Columbia does retain certain funds belonging to Federal land bank Associations and that it issues an advice of indebtedness to the associations and pays interest thereon based upon the cost of money to the Federal Land Bank of Columbia and that in practice these transactions amount to loans by certain associations to the Federal Land Bank of Columbia. Further the deponent sayeth not." The Florida Farm Bureau Federation, a limited agricultural association is a non-profit, voluntary general farm membership organization. Members may, and many do, borrow from the Production Credit Associations and the Federal Land Bank Associations, associations which are a part of the Farm credit Systems. The Florida Farm Bureau offers comprehensive insurance to its members through individual agents licensed by the Respondent Department of Insurance.
Recommendation Deny applications for licensure from the Production credit Associations of Florida and for the federal Land Bank Associations of Florida and revoke any licenses that have been issued. DONE and ORDERED this 16th day of December, 1976 in Tallahassee, Florida. DELPHENE C. STRICKLAND Hearing Officer Division of Administrative Hearings Room 530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 16th day of December, 1976. COPIES FURNISHED: Fred B. Karl, Esquire Post Office Drawer 229 Tallahassee, Florida 32302 Edward L. Kutter, Esquire Room 268 Larson Building Tallahassee, Florida 32304 E. Harper Field, Esquire Post Office Box 1879 Tallahassee, Florida Joseph C. Jacobs, Esquire Post Office Box 1170 Tallahassee, Florida 32302 J. R. Lowry, Esquire Bevin Ritch, Esquire Post Office Box 1025 Gainesville, Florida
