Directors and officers of Marco Community siphoned bank resources into a private company and refused to listen to regulators about investing in the riskiest kind of residential real estate loans,
state bank examinations say.
Regulatory documents also show that the Collier County bank was disorganized and suffered from turnover of senior managers from the start.
The bank operated for eight months without a chief executive; when it finally hired one, he was consigned to lesser roles on the marketing and human resources committees.
In 2004, its senior lender resigned and a loan operations supervisor was fired for their roles in an improper loan.
Marco Community's leadership showed "imprudent judgment" and a "blatant disregard for compliance with governing laws," regulators wrote in a 2007 report.
Regulators focused on two main issues: a large investment about to go bad, and a sister company that seemed to create a conflict of interest for the bank.
The first concern was that Marco Community bought into "loan pools," or collections of mortgages sold to investors. In Marco Community's case, these pools were assembled by Atlantic Capital Associates — a Jacksonville company that specialized in construction loans for low-income housing in need of repairs.
Marco Community invested $14 million in Atlantic Capital's loan pools — a sum that amounted to 98 percent of the bank's capital. (Capital is the money a bank has on hand to protect against losses. It serves as a critical indicator of an institution's health.)
The loan pools were "reckless" and the bank broke the law by providing too much money to a single customer, regulators said.
The bank later sued Atlantic Capital for $20 million in damages, saying in court papers that the loans were based on inflated property values, and on false borrower income and asset information. The case was dismissed in December 2009.
Beyond bad investments, regulators wondered if the bank's loyalties lay with its long-term survival or the success of a private company created by six of its directors.
One year after the bank opened, these directors teamed up with a Naples investor to form Commercial Lending Capital Corp., or CLCC. That company operated out of the bank's headquarters on Marco Island, matching developers who needed loans with lenders willing to extend the cash.
Regulators were critical of the close relationship between Marco Community and CLCC.
CLCC used bank employees to underwrite loans, and didn't reimburse the bank, regulators said. Marco Community ordered and paid for at least seven appraisals for CLCC and provided millions in funding for 18 of the private company's 37 loans.
The bank also signed agreements stating it was to be the last creditor paid if CLCC's loans went bad.
"A conflict of interest exists at the board level regarding the best interest of the bank versus the affiliated mortgage company," regulators wrote.
The driving force behind CLCC was Joseph Hausauer, who worked for a small Naples bank that was sanctioned by the federal Office of the Comptroller of the Currency in 2005. Regulators forced the bank to pay financial penalties for unsafe and unsound practices.
"The timing of these penalties is consistent with Mr. Hausauer and his group moving to CLCC," regulators wrote in their May 2007 report.
CLCC stopped doing business in December 2008. But Hausauer, who died earlier this year, did not join the ranks of the unemployed. He received a monthly consulting fee from Marco Community and acted as sort of a collections agency for the bank — receiving a payout every time he convinced a delinquent borrower to keep paying back a CLCC loan.
Officers and directors of Marco Community did not return calls seeking comment. Hausauer passed away in March.