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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
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CURRENT REPORT
Pursuant to Section 13
or 15(d) of the Securities
Exchange Act of 1934
Date of Report (Date of earliest event reported): October 1, 1997
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Doral Financial Corporation
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(Exact name of registrant as specified in Charter)
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<S> <C> <C>
Puerto Rico 0-17224 66-0312162
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(State or other jurisdiction (Commission File No.) (IRS Employer Identification No.)
of incorporation)
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1159 Franklin D. Roosevelt Avenue, San Juan, Puerto Rico 00920
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (787) 749-7100
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ITEM 5. OTHER EVENTS
Effective October 1, 1997, the Company's thrift subsidiary, Doral
Federal Savings Bank, converted its charter from that of a federal savings
association to that of a Puerto Rico commercial bank. As part of the
conversion, Doral Federal Savings Bank changed its name to "Doral Bank."
As a result of the conversion of the Doral Federal into a commercial
bank, the Company became a bank holding company subject to regulation by the
Board of Governors of the Federal Reserve Board (the "Federal Reserve") under
the Bank Holding Company Act of 1956 (the "BHCA"). The BHCA and Federal Reserve
regulations promulgated thereunder generally place limitations on the types of
activities in which a bank holding company and its subsidiaries may engage. In
general, such activities must be banking services or activities so closely
related to the business of banking as to be a proper incident thereto.
Regulation K promulgated by the Federal Reserve, generally grants bank holding
companies and their subsidiaries somewhat broader powers with respect to
activities conducted "outside the United States" than with respect
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to activities conducted within the United States. For purposes of Regulation K,
Puerto Rico is considered to be outside the United States.
In addition to the activity restrictions discussed above, the BHCA also
imposes various other restrictions on bank holding companies and their
subsidiaries. Many of these restrictions are similar to those that were
previously imposed on the Company under the Savings and Loan Holding Company
Act (the "SLHCA"). For example, the BHCA contains change of control provisions
similar to those contained in SLHCA. Sections 23A and 23B of the Federal
Reserve Act governing transactions between depositary institutions and their
affiliates also apply in the same manner to bank holding companies and their
subsidiaries as to savings and loan holding companies.
As a bank holding company, the Company is now subject to certain
additional regulatory restrictions that are not otherwise applicable to savings
and loan holding companies. For example, unlike savings and loan holding
companies, bank holding companies are subject to certain regulatory capital
requirements. Under the Federal Reserve's risk-based capital guidelines, a bank
holding company must maintain a ratio of total capital (the "Total Capital") to
risk-weighted assets (including certain off-balance sheet items, such as standby
letters of credit) equal to 8%. At least half of the Total Capital is to be
comprised of common equity, retained earnings, minority interest in consolidated
subsidiaries, noncumulative perpetual preferred stock and a limited amount of
cumulative perpetual preferred stock, less goodwill and less certain intangible
debt, other preferred stock, certain other instruments, and a limited amount of
loan and lease loss reserves ("Tier 2 capital").
In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio of Tier 1 capital to average quarterly assets of 3% for bank holding
companies that meet certain specified criteria, including that they have the
highest regulatory rating. All other bank holding companies are required to
maintain a leverage ratio of 3% plus an additional cushion of at least 100 to
200 basis points. The guidelines also provide that banking organizations
experiencing internal growth or making acquisitions will be expected to maintain
strong capital positions substantially above the minimum supervisory levels,
without significant reliance on intangible assets. Furthermore, the guidelines
indicate that the Federal Reserve will continue to consider a "tangible Tier 1
leverage ratio" (deducting all intangibles) and other indications of capital
strength in evaluating proposals for expansion or new activities. The tangible
Tier 1 leverage ratio is the ratio of a banking organization's Tier 1 capital,
less all intangibles, to total assets, less all intangibles.
The Federal Reserve has adopted regulations with respect to risk-based and
leverage capital ratios that require most intangibles, including core deposit
intangibles, to be deducted from Tier 1 capital. The regulations, however,
permit the inclusion of a limited amount of intangibles related to mortgage
servicing rights and purchased credit card receivables. The Federal Reserve has
also decided to exclude from regulatory capital the amount of net unrealized
gains and losses on securities available-for-sale, except the net unrealized
losses of equity securities with readily determinable fair values.
The Federal Reserve has issued a policy statement that provides that
insured banks and bank holding companies should generally pay dividends only out
of current operating earnings. In addition, under Federal Reserve policy, a bank
holding company is expected to act as a source of financial strength to each of
its subsidiary banks and to commit resources to support each subsidiary bank.
This support may be required at times, when absent such policy, the bank holding
company might not otherwise provide such support.
The Company believes that it is in compliance with all of the above
regulatory and capital requirements and that the provisions of the BHCA will
not interfere with its ability to continue to conduct its business as presently
conducted.
As a result of the conversion, Doral Bank is now subject to the
supervision and examination by the Office of the Commissioner of Financial
Institutions of Puerto Rico (the "Office of the Commissioner") and to the
provisions of the Puerto Rico Banking Act and the regulations promulgated
thereunder. The Company does not believe that the application of such laws or
regulations will have a material adverse effect on the manner in which Doral
Bank conducts its operations.
Section 12 of the Puerto Rico Banking Act requires the prior approval of
the Office of the Commissioner with respect to a transfer of capital stock of a
bank that results in a change of control of the bank. Under Section 12, a change
of control is presumed to occur if a person or group of persons acting in
concert, directly or indirectly, acquire more than 5% of the outstanding voting
capital stock of the bank. The Office of the Commissioner interprets the
restrictions of Section 12 as applying to acquisitions of voting securities of
entities controlling a bank, such as a bank holding company.
Following the conversion, the deposits of Doral Bank will continue to be
insured by the Federal Deposit Insurance Corporation to the maximum extent
provided by law.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA, FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits
99(a) Press Release dated October 1, 1997
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DORAL FINANCIAL CORPORATION
By: /s/ Ricardo Melendez
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Ricardo Melendez
Vice President and
Chief Accounting Officer
Date: October 9, 1997
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EXHIBIT 99(a)
[DORAL FINANCIAL CORPORATION LETTERHEAD]
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FOR IMMEDIATE RELEASE: DORAL FINANCIAL CORPORATION
Contact: Salomon Levis
Chairman & CEO
Richard F. Bonini
Senior Executive Vice President
and Secretary
Telephone: (212) 508-0343
DORAL BANK COMPLETES BANK CONVERSION
San Juan, Puerto Rico, October 1, 1997 -- Doral Financial Corporation
(NASDAQ:DORL), formerly First Financial Caribbean Corporation, a diversified
financial services company, announced it had received the final regulatory
approval of the conversion of Doral Federal Savings to a commercial bank.
The conversion, which will become effective, October 1, 1997, has been
approved by the Federal Reserve Bank of New York and the Commissioner of
Financial Institutions of Puerto Rico.
The $340 million-asset bank will operate under the name Doral Bank. The
conversion will allow it greater flexibility in the types of products it can
offer, primarily commercial and consumer loans and will permit the bank to
operate more effectively for income tax purposes in Puerto Rico. Doral Bank
operates five retail banking branches in Puerto Rico and engages primarily in
the origination of residential mortgage loans and diversified savings products.
The conversion is a part of our company's strategic plan to increase
the size and market share of Doral Bank", said Salomon Levis, Chairman and CEO
of both the bank and Doral Financial. "For now, Doral Bank will continue
operating and growing in Puerto Rico, where there
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are opportunities for growth. We are also open to opportunities in the
States." There are plans to open several more branches in Puerto Rico in the
near future.
Doral Bank is the fastest growing banking institution in Puerto Rico,
having increased its asset base from just over $10 million in September 1993,
when it was acquired by Doral Financial to $340 million today.
Doral Financial Corporation is a diversified consumer finance company
with assets of $1.3 billion. Doral Financial Corporation, through its HF
Mortgage Bankers Division, Doral Mortgage Corporation and Centro Hipotecario,
is the leading mortgage banker in Puerto Rico. The Company, with 25 retail
lending offices throughout Puerto Rico and two offices in Florida, engages in
the origination, sale and servicing of mortgage loans. The Company also
operates Doral Bank, a commercial bank with five branches and Doral Securities
a NASD licensed broker dealer.
