Ocala National Bank belonged to the Kay family.
Patriarch Don Kay Jr. was chairman, having founded the bank in 1986. His sons Rance and Kyle later took over and quadrupled the lender's size during the real estate boom.
Together, they owned 92 percent of the bank's stock.
When Ocala National failed in January 2009, Don Kay blamed borrowers for not paying their bills.
"It was the people buying those homes, calling them second homes, which, in reality, were just spec homes," Kay told the Ocala Star-Banner in 2009. "They would not pay. They would not answer the phones."
In a report published eight months after the bank's failure, the FDIC concluded that Ocala National collapsed because it grew too fast by making the riskiest kind of construction loans to real estate speculators.
Regulators also noted that the Kays and other board members used the bank to profit from their own private business dealings.
They paid $3.9 million in dividends in 2007, though Ocala National lost $2.3 million that year. Rance Kay and five other directors got the bank to bail them out when when their private mortgage company ran up $1 million in losses.
The FDIC report was not the first time the Kays were accused of putting their personal interests ahead of the bank.
In October 1997, the federal Office of the Comptroller of the Currency fined Don, Rance and Kyle Kay for improper insider transactions, and brought an enforcement action against the bank for uncontrolled growth and poor management.
Regulators forced Ocala National to hire a new chief executive. But by 2004, the Kays were back in control.
Rance Kay was named CEO. His brother became chief operating officer. The bank took off.
In just two and a half years, Ocala National's loan portfolio grew from $67 million to $263 million.
Many of the loans went to real estate speculators — investors who bought homes under construction, intending to selling them at a profit as soon as they were out of the ground.
Though regulators repeatedly warned that these loans would be the first to go bad in a crisis, the Kays forged ahead.
The strategy provided easy money for the bank and benefited at least two of the board members.
Those directors, John E. Fabian and John Plunkett, owned home building companies that made a habit of selling to speculators. A July 2008 lawsuit
filed by AmTrust Bank in Cleveland says that Fabian and Plunkett sold homes to buyers who were part of an investment club that allowed them to go ahead with purchases without making down payments.
The properties were inflated by 10 to 20 percent at the time of the purchases, according to the AmTrust suit, and loan documents made it appear that borrowers brought their own money to closing. But it was other mortgage companies that gave the borrowers additional money to cover those closing costs.
When it bought 32 loans from Ocala National, AmTrust said it did not know about the relationship with the directors' building companies, nor was it aware that the borrowers had obtained second mortgages.
"These transactions were authorized or ratified by Ocala National Bank's senior officers and directors, many of whom were part of the Kay family or were developers themselves," the lawsuit says.
Rance Kay said he settled the suit by buying the loans back from AmTrust.
Plunkett said his building company never sold houses through a no-money-down arrangement with Ocala National.
"At the time, we were building 380 to 450 homes per year, and at no time did we force buyers to get mortgages through Ocala National," Plunkett said.
Meanwhile, the FDIC's 2009 report shows that Rance Kay and five other Ocala National board members, including Plunkett, started a private mortgage company of their own to provide buyers with second loans to cover down payments.
When the housing market cooled and borrowers stopped making interest payments, Rance Kay's mortgage company saw nearly $1 million of its loans go bad.
But Rance's company did not take the hit. Ocala National did.
Rance Kay ensured this by sending a letter threatening to sue Ocala National — his family's own bank — unless the bank bought his company's bad loans, according to federal regulators.
Five of the nine Ocala National Bank board members voted to approve this deal even though they stood to personally benefit, the FDIC wrote in a
August 2009 report.
Rance Kay now views his decision as a mistake. He and his fellow investors in the mortgage company had expected to sell off the loans on the secondary market. But the secondary market shut down all across the country, and they were left holding soured loans.
Rance Kay said the bank kept making the risky loans because it had no loan losses until the last couple of years. He also said that he never dreamed that real estate values would decline by 40 to 50 percent. He blamed regulators for not making banks aware of perceived problems earlier.
"They never said you guys are growing too fast," Kay said. "We had no delinquencies and no losses from residential lending. They gave us high reviews until the market turned."
Kyle Kay, who served as an Ocala city councilman, had a different take.
"There was too much risk on the bank's balance sheet," he said. "I'm not going to excuse it. The speculative mindset just took over — the crowd mentality. That's what was going in Florida in general and in Marion County, in particular. If I buy something for $1 million today, it's going to be worth $2 million tomorrow. Everyone was asking themselves, 'How can I let an opportunity like this pass me by?'
"But when it collapsed, it was like a fire in a movie theater. Everyone rushed for the exits."