On the surface, First Guaranty Bank & Trust of Jacksonville looked like an old-fashioned bank.
Oil paintings of its founders adorned the headquarters and a baby grand piano played in its lobby. The bank was led for years by the Fant family, among the most-respected men in Duval County.
But behind the scenes, First Guaranty made the same mistakes
noted at other failed banks before the financial crisis.
It broke the law, regulators said, by providing too many loans to certain customers. It allowed a director to overdraw his deposit accounts 175 times. And it lent $1.6 million to a man previously arrested on charges of sexual battery, kidnapping, DUI and disorderly intoxication.
First Guaranty was the oldest bank in Jacksonville by the time it failed in January 2012.
Founded by the Fant family just after World War II, First Guaranty was always family-run.
Julian E. "Jay" Fant III, the grandson of the founder, was its last chairman and chief executive. The family was so well-regarded that the Jacksonville Business Journal found it tough finding local bankers to comment on the reasons for its failure.
But it was clear from media reports and a review of the bank's bad loans that First Guaranty had veered from traditionally conservative lending just in time for Florida's real estate boom.
For most of its history, the bank was cautious and grew by no more than 10 percent per year. But in 2003 — the year Jay Fant took over as chief executive — First Guaranty growth accelerated. Its loans increased from $160 million in September 2003 to $440 million by December 2007.
Regulators said many of these loans were poorly underwritten, with most going to commercial developers intent on erecting hotels, shopping centers and office buildings. At least one borrower had a lengthy rap sheet.
Howard S. Shafer and a company he controlled received four loans totaling $1.6 million despite his having had multiple arrests between 1993 and 2008. The most serious of those cases began in 1998, when police charged Shafer with sexual battery and kidnapping. Prosecutors dropped those counts and instead charged Shafer with aggravated battery, a felony for which he was sentenced to four months of house arrest and 44 months' probation.
In 2002, DUI and hit-run charges were dropped.
In February 2008, he was arrested again in connection with his purchase of an Orange Park restaurant and charged with grand theft. Prosecutors later dropped the case.
Shafer's company defaulted on loans from First Guaranty in May 2008 and was hit with judgments — which included attorney's fees and other penalties — totaling $2.5 million.
Shafer did not return messages left with his bankruptcy attorney.
Meanwhile, regulators pointed out that First Guaranty far exceeded its legal lending limits by providing more than $26 million to finance hotel ventures managed by Kantibhai Patel.
The bank attributed the oversight to Bonnie Dennis, a loan officer who handled Patel's account until she left the institution in 2008. Regulatory documents say Dennis did everything she could to accommodate Patel's loan requests. In the process, she failed to collect required documents showing his financial wherewithal and hid the fact that his loans exceeded lending limits.
"Chairman Fant stated that in the loans that he recalls approving, he relied on Ms. Dennis' strong assertions that there were no legal lending-limit issues," regulators wrote in their March 2009 report.
Regulators expressed shock at the cavalier manner in which First Guaranty treated its relationship with Jacksonville attorney Douglas J. Milne, who happened to be a bank directors.
They noted that Milne was late in making loan payments every month between May 2005 and August 2006, overdrawing his deposit accounts 175 times in the same period.
"Bank personnel contact Director Milne when his personal or business accounts have insufficient funds to pay checks presented," regulators wrote in their June 2006 report. "He then comes in and deposits funds to keep the accounts from being overdrawn."
Milne did not return three calls in June from the Herald-Tribune.
As First Guaranty's problems grew with the economic downturn, Fant tried to save the bank by selling seven of its eight branches and its trust division to a South Carolina bank.
The deal did not receive approval from regulators and First Guaranty ultimately failed.
Fant confessed to regulators in 2009 that in hindsight he did not "appreciate the gravity of the concerns raised in prior examinations and perhaps put too much faith in former senior lending officer Bonnie Dennis."
Fant did not return three calls to his home in June. Dennis could not be located.