Article Courtesy of The Wall Street Journal

By Dan Fitzpatrick

Published September 29, 2010

Steve Jonsson is still grappling with what it means to be branded a failure 11 months after the bank he founded went down.

"I basically aspired to be a banker since college," said the 59-year-old. "Now I'm pretty much a marked person. It's a little depressing, I guess is the best way to put it."

Flagship National Bank, the Bradenton, Fla.-based financial institution founded in 1999, is one of 40 Florida financial institutions to fail since 2007. Mr. Jonsson admits to several mistakes before regulators seized Flagship, and amid his reflections is a look at how messy, interconnected and speculative lending became in that state amid a real-estate boom.

Atop his list of regrets are the loans he made to politically connected figures. Mr. Jonsson gave a $1.8 million loan to Florida state Sen. Michael Bennett.

Mr. Bennett's status as an elected official gave Mr. Jonsson "comfort," and he said he never suspected a state senator would let the loan go sour. The senator and a development partner had some land rezoned for medical use, but the building was never built.

Mr. Bennett, a member of the state's Senate Committee on Banking and Insurance, said he offered to buy back the loan, but those discussions ended when the bank failed.

"I don't think I'd ever lend money to a politician again if my life depended on it," Mr. Jonsson said.

A second mistake was providing so many real-estate loans to executives with a particular tennis training complex a mile and half from bank headquarters. A college tennis player, Mr. Jonsson had known many of these executives for decades. But a company restructuring left many of the tennis company employees, who were also Flagship borrowers, without a job.

"We didn't fully appreciate what our exposure was to one particular company," he said.

Mr. Jonsson lost most of life savings when Flagship went down and decided afterward to sell his house.

Larger banks turned him down for jobs, and he said friends told him he didn't get the nod because bank officers concluded "the last thing we need is for him to be identified with us."'

Mr. Jonsson said he is pursuing a new career in real estate.

"There is no place for me in the banking industry," he said, "because I am wearing a scarlet letter."