First Peoples Bank picked the wrong time to expand.
From December 2005 to December 2008, it opened two branch offices, a lavish operations center and a residential mortgage unit, while adding four senior level lenders to its staff.
Then the economy soured.
The director, Robert Schweiger, told the Herald-Tribune that Skiles "scrubbed" board minutes to remove evidence of dissent and omitted important information when presenting loans for board approval.
In a final effort to raise capital in November 2010, state regulators say Skiles broke the law by having the bank's holding company borrow $117,000 from First Peoples to cover the cost of a public stock offering.
Banks are not allowed to lend more than $25,000 to an insider or affiliate without collateral.
Skiles said the loan to finance the bank's stock offering was an unintentional mistake. But he "categorically denied" omitting important information from loan presentations and said he never left important information out of board minutes.
Skiles added that every failed Florida bank made loans it shouldn't have OK'd, but the economy — and not mismanagement — was First Peoples' ultimate undoing.
"In my opinion, three-quarters of the banks that were closed in Florida shouldn't have been closed," Skiles said. "I'm still very angry about that. All of us lost so much money. What we needed was a little more time to raise capital, but we didn't get it."
During the property boom and its immediate aftermath, First Peoples grew rapidly. Total loans expanded from $97 million at the end of 2005 to some $184 million by late 2008.
But operating costs spiked, too.
The operations center alone was an extravagance the bank did not need, according to Schweiger.
"It was like the Taj Majal," he said. "Everything had to be designer and it was never more than one-third occupied."
In their June 2006 report, regulators said First Peoples' branch expansion and addition of high-level staff reduced earnings intensified the pressure on management to make more loans and cover the escalating costs.
They later criticized the bank for not keeping track of whether borrowers were contributing enough collateral; for not obtaining adequate appraisals; and for not putting enough into reserves to cover potential loan losses.
Skiles, the CEO, told regulators in 2010 that the bank's problems were exacerbated by the South Florida market, one of the hardest hit by the economic slump.
He tried to save the bank by raising nearly $9 million from shareholders. He also took the rare step of asking taxpayers for help.
The bank received $5.8 million from the federal government's Troubled Assets Relief Fund — the taxpayer bailout known as "TARP" that went mainly to the nation's biggest banks.
"You have to be a pretty darn good bank to be a TARP recipient," Skiles said, adding that he followed the law by lending all of the bailout funds to borrowers.
But even with money from the government and investors, First Peoples was doomed.
Schweiger, who resigned from the board in December 2010, said Skiles could have done a better job of managing costs but didn't listen.
After regulators placed a cease-and-desist on nearby Riverside National Bank, Schweiger sent a letter to fellow board members outlining steps that should be taken to head off a similar fate.
He suggested auctioning off problem loans at deep discounts and selling two of the bank's branches to raise cash. But Skiles told him that selling the branches "would send the wrong message."
"I said: 'Who cares? The bank is hemorrhaging money and we need to stop the bleeding,'" Schweiger told the Herald-Tribune.
Schweiger complained that Skiles would "scrub" board minutes to remove divisive comments.
He also said that Skiles and his executive team would leave out important data before asking the board to approve large loans.
"He didn't present the full picture," Schweiger said. "He treated the board like mushrooms — he kept them in the dark and fed them with crap."
Annoyed that his suggestions seemed to fall on deaf ears, Schweiger sent his resignation letter to the SEC, which published the contents on its website.
Skiles responded by saying that Schweiger "was the biggest thorn" in the bank's side.
He said that the last thing First Peoples needed to do was project an image of weakness and dissension at a time when it needed to raise capital.
"He wanted us to tape our board meetings," Skiles said. "But why should we do that? We report the important parts. The general discussion parts we don't include."
In November 2010, Skiles tried to raise money one last time. In the process, the bank made an illegal, unsecured loan of $117,000 to the bank's holding company to cover the cost of the stock offering.
Skiles told regulators that he expected to pay the money back with funds raised in the offering. But he was unable to persuade shareholders to save the bank.
The stock offering crumbled — and former directors say Schweiger's resignation letter that was published by the SEC was one of the reasons the bank could not raise more money.
"He never had anyone but himself in mind," Skiles said. "The rest of us were concerned area citizens. Through the worst of times, we stuck together. All he wanted to do was cover himself. He didn't want to be blamed."
To read an essay by Skiles on the bank's collapse, click here.