The biggest problem regulators had with Premier American Bank was sloppy underwriting.
In every report from January 2003
through May 2009
, regulators criticized the Miami bank's executives and directors for failing to collect important financial information on borrowers, for lending out more money than bank policy allowed and for not obtaining adequate real estate appraisals.
"Loan files are not centralized and are generally disorganized," regulators wrote in 2003.
Specifically, regulators said that Premier American violated federal lending rules in extending $3 million to a Miami company managed by Jorge G. Ramos and Juan C. Reyes in August 2005 without getting enough information to support the bank's decision.
The company borrowed the money to build a large office warehouse and showroom complex. But it ran through the funds faster than expected because of major construction changes and inadequate budgeting, regulators said.
The bank initially responded by letting the company run up $115,000 in overdrafts. Later, the company's bouncing of another 14 checks totaling $240,000 didn't stop Premier American from letting Reyes and Ramos borrow an additional $2.9 million.
"Management has not obtained an appraisal that reasonably supports the value of this property to this date, even though the loan has been increased twice," regulators wrote in 2007.
Ramos said the real problem was that Premier American's officers had little experience dealing with a loan of that size.
"They were taking forever to release the funds," Ramos said.
After the real estate market started to slump, Premier American made a $9.2 million loan to a group of developers headed by Javier Siu, who bought 37 acres in Port St. Lucie.
Regulators said bank officials did not collect sufficient financial details about the borrowers and the collateral. The regulators also objected
to an appraisal that put the value of the property at $24.3 million in December 2006, just 15 months after the borrowers had paid only $11.3 million.
Regulators found that the bank's own policy manual said these types of loans were "undesirable."
The borrowers defaulted in March 2009.
"You can pick individual loans and find fault with them," said Rene Murai, a Miami attorney and former Premier American director. "No bank is perfect."
Besides shoddy underwriting, regulators pointed out that two bank directors had benefited from financial relationships with the bank.
One of the two, Luis Machado, leased a branch in Hialeah Gardens to Premier American, while Murai earned more than $125,000 in legal fees in return for preparing bank documents and closing large loans from 2005 through 2007.
"If you want to fault us, fault us for not realizing we were in a bubble," Murai said. "We did what we thought was best at the time."