Bank of Florida was set up as three separate lenders operating under the same corporate flag, with headquarters in Tampa, Naples and Fort Lauderdale.
State regulators repeatedly questioned the banks about insider deals, asking whether the institutions could have saved money by looking elsewhere for office space, new furniture and computers.
Those questions often went unanswered.
Though not illegal, the insider deals and loans created a culture in which the needs of directors — many of whom were powerful real estate developers — outweighed those of the bank.
"Historically, the largest single cause of bank failures has been loans to directors," said Jeff Fiedler, who conducted a 2009 study that first showed the extent of insider loans at Bank of Florida. "Anything over 10 percent of total capital is supposed to make regulators nervous."
By June 2009, the three banks had lent $110 million to officers and directors — 65 percent of their capital.
Court records show that companies controlled by Donald R. Barber, a Naples commercial contractor, received more than $9 million from the banks from 2005 to 2009. He was followed by Fort Lauderdale developer Terry W. Stiles, with nearly $9 million; Naples real estate developer Bradford G. Douglas, with $7 million; and Tampa real estate investor R. Searing Merrill, with $5.5 million.
Joe B. Cox, a Naples attorney and Bank of Florida board member, said loans to directors were among the best the banks made.
"I wish all of them had been insider loans," Cox said. "None of them went bad."
But regulators also questioned a string of contracts with directors and wondered whether these deals benefited Bank of Florida or the people who ran it.
In Naples, a company controlled by Barber and two other directors leased a 10,000-square-foot office building to the bank for $34,000 a month in 2002.
By 2006, the rent had jumped to $94,000 per month.
Barber's company collected a total of $4.8 million in rent from 2002 through 2008. When the real estate market started deteriorating, Barber and his partners sold the building — and Bank of Florida-Southwest lent the buyer $9.2 million to complete the sale.
Other directors benefited, too.
A company controlled by Ramon Rodriguez collected $6.2 million by providing computer network support to the banks. Companies controlled by Stiles, a developer, earned $4.4 million by leasing out space to the bank in buildings he owned. Records show that Fort Lauderdale architect Jorge H. Garcia also earned an unspecified amount by providing architectural services.
In the deals with Garcia, regulators said, Bank of Florida-Southeast was unable to provide a written analysis showing that the transactions were reasonable, and was only able to find minutes that partially disclosed the transactions to the board.
State examiners also found that a questionnaire filled out by bank officers had been "erroneously completed," and that Bank of Florida had failed to tell regulators about all its insider deals.
"The bank has entered into various business transactions with some members of the board," regulators said in their 2006 report on Bank of Florida-Southeast. "In most cases, bank management and the directors failed to comply with Florida statutes."
Insider dealing was so rampant by October 2007 that the bank holding company was reprimanded by the Nasdaq stock exchange for not having at least three independent directors on its board with no economic ties to the bank.
"Our noncompliance was wholly inadvertent," the bank's chief executive, Michael L. McMullan, said in a press release at the time.
"In fact, Nasdaq specifically stated 'that the failure does not appear to have been the result of a deliberate intent to avoid compliance and, further, the company acted promptly to cure the deficiency.'"
Cox said the bank did studies to show that it was not paying more to directors than would have been paid to outsiders.
The bank may have been slow in responding to requests from regulators for information about the propriety of insider deals, but in the end Bank of Florida complied with every request, Cox said.
"You can delay and take time," he said. "Sometimes there's miscommunication. But they don't let go. They get your attention and they keep coming back."
What killed Bank of Florida, Cox said, was the downturn in the real estate market, not mismanagement or insider dealings.
"If you look at Southwest Florida from Sarasota on down to Naples, you'll see there is not a lot of industries to loan to, and the big banks already have them as customers," he said. "That leaves community banks with loans to developers."