69U-105.206. Regulatory Standards for Evaluating Applications

(1) When an application for authority to organize and operate a new state financial institution is filed, it is the applicant’s responsibility to prove that the statutory criteria warranting the grant of authority are met. OFR shall conduct an investigation pursuant to Section 658.20, F.S. If, in the opinion of OFR, any one of the criteria as set forth in Section 658.21, F.S., has not been met and cannot be remedied by the applicant, OFR cannot approve the application. In addition to the statutory and regulatory criteria which relate specifically to the criteria for approval of an application to establish a state financial institution, OFR must also be guided by the broader purposes of the financial institutions codes, including the maintenance of public confidence in financial institutions and the protection of the interests of the public in the safety and soundness and the preservation of the financial institution system in this state. (Sections 655.001(2)(c) and (d), F.S.) The statutory criteria for approval of a state financial institution are set forth in six separate subsections of the statute. However, it is the opinion of OFR that each individual criterion forms but one aspect of the review of the application in its entirety. Any reasonable and realistic decision on an application must take all of these factors into account in relation to each other in addition to reviewing them as distinct elements of the framework for decision on the application.

(2) Standards. In making its determination OFR shall consider the following statutory criteria:

(a) Conditions indicate a reasonable promise of a successful operation.

1. Essential to the concept of banking opportunity is that there does and will exist a significant volume of business for which the state financial institution can realistically compete. The public interest is best served by a financial institution system in which new 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.

2. The business plan submitted by the applicant establishes the purpose, objectives, and business philosophy of the state financial institution, and is considered by OFR to be a representation of plans and expectations genuinely believed by the applicant to be attainable. OFR will review the viability of the plan in light of current conditions within the primary service area, the metropolitan statistical area or county, or target market, and in the financial institution industry in general, as well as the ability of the proposed board and management of the state financial institution to implement the business plan as outlined. It is the responsibility of the Board of Directors to conceive, develop, review, and approve the business plan. The submission of the plan to OFR constitutes a representation that the members of the board are familiar with the plan and understand its provisions. Any finding to the contrary may be grounds for a conclusion by OFR that the board lacks the business experience and ability necessary to indicate a reasonable promise of a successful operation.

3. When the existing level of competition is great, the reasonable promise of success of the proposed new state financial institution is diminished unless other factors, such as a particularly strong organizing group with a demonstrably broad base of support within the community or target market can serve to overcome the difficulties which stem from a highly competitive environment.

4. Where the proposed board of directors has not made a significant personal investment in the stock of the state financial institution, the offering of the stock to the target market or residents of the community have met with a diminished response and, in several cases, the efforts to organize the state financial institution have been abandoned as a result. The proposed board of directors, in the aggregate, must subscribe to at least twenty-five percent (25%) of the initial shares of stock for OFR to determine that the state financial institution will have a reasonable promise of a successful operation.

(b) Capital structure.

1. Capital should be adequate to enable the new state financial institution to provide necessary services for state financial institutions, including loans of sufficient size, to meet the needs of prospective customers.

2. Capital should be sufficient to purchase, build, or lease a suitable permanent facility complete with equipment.

3. The initial capital accounts, at opening, for a new bank or association shall not be less than $8.0 million. OFR may determine that higher amounts are necessary based on local market conditions or the operating plans of the organizing group. A higher amount may not be required where the applicant is proposed as a subsidiary of a registered financial institution holding company upon a finding by OFR that the financial institution holding company and its affiliated financial institutions have demonstrated satisfactory performance records of meeting OFR requirements.

4. The initial capital accounts, at opening, for a new trust company shall not be less than $3.0 million.

5. The capital referred to above shall be allocated among capital stock, paid-in surplus, and undivided profits in the ratios set forth in subsection (3) of Section 658.21, F.S.

6. With respect to all classes and series of voting stock, the voting rights, right to receive payment of dividends, right to receive payment in the event of liquidation, and any other rights or benefits of ownership shall be proportional to the amount of capital contributed in exchange for such shares.

(c) Proposed executive officers and directors.

1. The proposed directors shall generally have reputations evidencing honesty and integrity and similar reputations within target market or the local community where the proposed state financial institution is to be located. They shall have employment and business histories demonstrating their responsibility in financial affairs. The fact that a proposed director has been adjudicated bankrupt or has petitioned for relief under chapter 7 or 13 of title 11 of the United States Code shall be considered a material factor in the evaluation of his responsibility in financial affairs.

2. At least one (1) of the proposed directors, who is not also a proposed officer, shall have had substantial direct experience as an executive officer, regulator, or director of a financial institution within 3 years of the date of the application. If in the opinion of OFR the aggregate level of financial institution experience represented by the proposed board of directors is not substantial, OFR shall require the addition of other outside directors to the board who have had previous financial institution experience.

3. At least five (5) directors of a proposed independent bank or association shall demonstrate strong and well-established residency and/or business ties to the target market or to the local community for at least the last five years prior to the date of the application, and shall represent diverse occupation and business interests.

4. Executive officers shall have demonstrated abilities and experience commensurate with the position for which they are proposed. Executive officers must have reputations evidencing honesty and integrity and an employment history demonstrating competent past financial institution experience. It is not necessary that the names of the president, chief executive officer, and senior trust officer be submitted with the application. However, these individuals must be named and have submitted executed Interagency Biographical and Financial Report (Form OFR-U-10) in substantially complete form not later than ninety (90) days prior to applicant’s intended opening date. The applicant may not open for business without prior approval of these executive officers, as applicable, by OFR.

5. Change of a director, chief executive officer, president, or senior trust officer or the addition of any new directors or executive officers through the first two (2) years of operation shall also require prior approval of OFR.

6. OFR shall conduct background investigations on the executive officers, directors, and major shareholders. The investigations shall, as required, include contacts with the FBI, local law enforcement agencies, and other federal and state government agencies. Any misrepresentation or omission of fact in an application by any person shall be cause for OFR to deny that person’s participation in the application and to the extent such misrepresentation or omission of facts reflect upon their honesty and integrity shall be grounds for denial of the entire application.

(d) Quarters. Should temporary quarters be contemplated by an applicant until a permanent facility is completed, permission to open in temporary quarters shall be requested, pursuant to Rule 69U-105.209, F.A.C. The permanent structure of a new state bank or association shall meet the requirements set forth in 12 C.F.R. Part 216 or 12 C.F.R. Part 326, as in effect on July 30, 1994, and be of a sufficient size to handle the projected business for a reasonable period of time. The permanent structure for a new state trust company should be of sufficient size to handle the projected business for a reasonable period of time. The main office of a state financial institution shall be of a nature to warrant customer confidence in the financial institution’s security, stability, and permanence.

(3) Stock Subscriptions, Major Shareholders, and Financing.

(a) The initial offering of subscriptions for the shares of a state financial institution as defined in Section 517.051(5), F.S., is exempt from registration pursuant to the provisions of the Florida Securities and Investor Protection Act, chapter 517, F.S., when: (1) the application for the state financial institution has been deemed by OFR to be substantially complete; and (2) OFR has reviewed the offering circular or memorandum. If the foregoing requirements have not been complied with, then the initial offering may be subject to the registration requirements of Chapter 517, F.S. However, when the aforesaid criteria are met and the exemption applies, then the offering is still subject to the provisions of Sections 517.301 and 517.311, F.S., dealing with fraudulent transactions and false representations. Prior to the initial offering of the right to subscribe for the shares of a state financial institution, the applicant shall file a copy of its subscription agreement and offering circular or memorandum with OFR, which shall be prepared in accordance with Rule 69U-105.210, F.A.C. No such offering shall be commenced until OFR has reviewed the subscription agreement and offering circular or memorandum and determined that the information provided therein is complete, accurate, and consistent with the application to organize the state financial institution. OFR’s review of the offering material does not constitute any determination with respect to the applicability of or compliance with any federal laws or regulations, nor as to the merits of the proposed offering. The applicant is solely responsible for determining that the offering and sale of the shares of the state financial institution are made in compliance with federal securities laws and regulations.

(b) The identity of subscribers during the application process is considered to be public information. However, once the shares of stock have been issued, the names of shareholders are confidential as provided in Section 655.057(6), F.S.

(c) Stock Subscriptions. No later than six months after commencement of corporate existence, and at least thirty (30) days prior to the issuance of stock, the directors shall file with OFR:

1. A final list of subscribers to all the capital stock of applicant. This list should be arranged alphabetically (last name first) and tabular columns provided to include the following information for each subscriber:

a. Name and residence address;

b. Number of shares for each class subscribed;

c. Percentage of total shares subscribed.

2. A copy of the stock subscription agreement executed by each subscriber.

3. Major Shareholders. An executed Form ORF-U-10, Interagency Biographical and Financial Report, incorporated by reference in paragraph 69U-105.102(1)(c), F.A.C., for each major shareholder, if such reports have not already been submitted. These reports must be provided in substantially complete form not later than 90 days prior to applicant’s intended opening date. Major shareholders shall have reputations evidencing honesty and integrity and shall have business histories demonstrating their responsibility in financial affairs. An applicant may not open for business without prior approval of these major shareholders by OFR.

(d) Financing. Financing arrangements to purchase stock will be considered acceptable only if the borrower financing the stock can clearly demonstrate the ability to service the debt without reliance on dividends or other forms of special compensation from the applicant.

(4) Insider Transactions. Any financial arrangement or transaction involving, directly or indirectly, a financial institution-affiliated party, as defined in Section 655.005(1)(i), F.S., (“insiders”) must be fair and reasonable, fully disclosed to the subscribers, and comparable to similar arrangements which could have been made with unrelated parties.

(a) Whenever any transaction between the proposed state financial institution and an insider involves the purchase of real property, the applicant must submit to OFR appraisals of land and improvements thereon which shall be made by an independent State licensed or certified appraiser, and be dated no earlier than six (6) months from the filing date of the application.

(b) With respect to any lease arrangement between the proposed state financial institution and an insider, evidence reliable to the satisfaction of OFR will include a lease appraisal, dated no earlier than six (6) months from the filing date of the application, which demonstrates clearly that the leasing arrangements are made on substantially the same or better terms as those prevailing at the time for comparable transactions with non-insiders for similar commercial property.

(c) With respect to any other insider transactions which involve expenses of the state financial institution (e.g., construction contracts, architects fees, real estate sales commissions, etc.), evidence of the reasonableness of the costs must be provided to OFR for approval and may include the submission of competitive bids.

(5) Site Designation.

(a) Location. No application for a proposed state financial institution shall be deemed complete until a proposed site has been specifically designated by either a street address or legal description.

(b) Relocation prior to approval. OFR shall be promptly notified of any change in the proposed site referred to in paragraph (a), above. Such notice shall include schedules, as applicable, to amend the information provided in the original application. Any such relocation shall be subject to approval by OFR and cause notice of the application, as amended by the relocation, to be published in the Florida Administrative Register and be processed pursuant to Rules 69U-105.101 through 69U-105.115, F.A.C., but no additional filing fee shall be required. Publication of notice of such relocation within the immediate vicinity of the proposed site shall be waived if OFR determines that no adverse comments were filed relating to the original site.

(c) Relocation of approved, but unopened state financial institutions. OFR shall be promptly notified of any change in the proposed site referred to in paragraph (a), above. Any such relocation shall be subject to approval by OFR and cause notice of the application, as amended by the relocation, to be published in the Florida Administrative Register and be processed pursuant to Rules 69U-105.101 through 69U-105.115, F.A.C., but no additional filing fee shall be required. Publication of notice of such relocation within the immediate vicinity of the proposed site shall be waived if OFR determines that no adverse comments were filed relating to the original site.

(d) The notice of the relocation may be submitted by letter to OFR to demonstrate a satisfactory showing that the criteria listed in Section 658.21, F.S., are still met or can be met. The notice should contain the following minimum information:

1. The exact street address for the proposed site, or the legal description if the street address is not available.

2. The distance and direction of the proposed location from the approved location.

3. Provide new Exhibit D (Main Office Quarters) on appropriate pages from Form OFR-U-1, Application for Authority to Organize a Bank, Savings Bank or Association, incorporated by reference in paragraph 69U-105.102(1)(a), F.A.C., or Form OFR-U-28, Application for Authority to Organize a Trust Company, incorporated by reference in paragraph 69U-105.102(1)(b), F.A.C., as applicable, at the time the relocation request is filed.

4. If the proposed relocation will result in alteration of other facts considered by OFR in its original approval of the application, describe in detail the additional changes and submit relevant documentation utilizing appropriate pages from Form OFR-U-1, Application for Authority to Organize a Bank, Savings Bank or Association, incorporated by reference in paragraph 69U-105.102(1)(a), F.A.C., or Form OFR-U-28, Application for Authority to Organize a Trust Company, incorporated by reference in paragraph 69U-105.102(1)(b), F.A.C., as applicable, at the time the relocation request is filed.

Rulemaking Authority 655.012(2), 658.26(2)(a) FS. Law Implemented 517.051(5), 517.301, 517.311, 655.001(2)(c), (d), 655.0322, 655.037, 655.0385, 655.0386, 655.057(6), 658.19, 658.20, 658.21, 658.25, 658.26, 658.33, 665.013, 667.003 FS. History–New 5-24-78, Amended 6-9-81, Formerly 3C-10.051, Amended 6-20-90, Formerly 3C-10.0051, Amended 8-14-94, 4-15-98, Formerly 3C-105.206, Amended 10-29-12, 2-16-23.