First Bank of Jacksonville was minuscule when two real estate developers bought the institution in January 2004.
The bank had just $15 million in loans on its books — and no footprint to speak of in the real estate market.
William Mock and Harry Trevett changed all that.
By lending to themselves and other developers, they more than quadrupled the bank's loans in just two years.
At least 27 borrowers received $1 million or more to build everything from single-family homes to medical office buildings.
Mock and Trevett received a total of $5 million.
One of Mock's companies borrowed $1.2 million in May 2005 to buy a luxury condominium in Fernandina Beach. Trevett borrowed $1.25 million in November 2006 after buying a waterfront home in Atlantic Beach, and two of his companies borrowed $1.9 million the following month to build a community shopping center.
"When we bought the bank in 2004, the real estate market was blowing and going," Trevett said. "We fell in lock-step with the lending trends in the area."
Commercial real estate lending was basically the only game in town, Trevett said. The business of making car loans was too competitive, while lending to manufacturers required more expertise than First Bank of Jacksonville had at that time.
Trevett said he unintentionally borrowed more money than state law allows because he did not realize that a chairman is considered an officer of the bank and has lower borrowing limits than a director. As soon as he understood the rules, he complied with them.
Regulators said overhead and personnel expenses were higher at the Jacksonville bank than at other institutions of its size.
The most efficient community banks spend about 60 cents of every dollar earned on salaries and overhead. But First Bank was spending more than 80 cents on the dollar.
These expenses shot up in late 2007 after turnover among its executives and a botched plan to sell the bank's headquarters.
Mock and Trevett bought the bank's only branch for $2.95 million in July 2006.
They received a loan from another bank and leased the building back to First Bank of Jacksonville. Such sale-lease deals are common in banking and other businesses. In this case, Mock and Trevett reconsidered 14 months later and sold the building back to the bank.
"Costs associated with the reversal of the sale lease-back of the bank's main office, expenses related to the restructuring of management and increased professional fees have impacted overhead," regulators wrote.
Trevett said when he and his partner bought the bank, they spent a lot of money to upgrade infrastructure and attract experienced executives.
"Executive bank managers were at an all-time premium in 2004," Trevett said. "It was very competitive to try to find talented people."
He added that the sale-lease arrangement was a creative way to raise capital.
"But there was something about it that the regulators could not get comfortable with, so we backed out," Trevett said.
As for the bank's eventual failure, Trevett blamed the economy.
"We should have been able to raise more capital, but that's when the market fell off the cliff," he said.