The Bank of Bonifay repeatedly broke the rules.
Lending officers did not always obtain legally required appraisals. State regulators found that loan files were disorganized and some loan applications contained nothing more than a borrower's name, address and signature.
Practically every time they visited, state regulators criticized the bank for its low standards, finding that it ignored recommendations for changes and helped insiders enrich themselves at the institution's expense.
Bank of Bonifay collapsed in May 2010, costing the financial system nearly $80 million. Founded in the Florida Panhandle in 1906, it was the oldest of the 68 banks that failed in Florida during the Great Recession.
State examinations show the bank was cited for violations both big and small.
Regulators say directors paid $3.5 million in dividends in 2007 even though Bank of Bonifay recorded a $2.3 million loss that year.
The Herald-Tribune identified at least $12 million in mortgages to directors between 1995 and 2009.
Companies held in part by Rupert Phillips, a former director, obtained $4.8 million in mortgages from Bank of Bonifay in 2006 and 2007 — more than any other board member. He resigned from the board in December 2007.
Phillips is an investor in Halifax Media Group, which owns the Herald-Tribune and other newspapers.
Meanwhile, regulators found four instances in which the bank exceeded limits on loans to a single borrower. One Panhandle developer received a $1.2 million loan without an appraisal, while another received two loans totaling $3.1 million based on bogus financial information, regulators found.
The developer who received the $3.1 million could only keep up with payments for four months, the report said.
"The repayment capacity of the borrower was inflated on the loan application," regulators wrote in their 2008 report. They said the borrower held out that long only because the bank gave him $44,000 to make the interest payments.
Regulators said the bank also evaded loan-to-value requirements by giving borrowers two loans on the same property. The total of the two loans often exceeded 100 percent of the value of the real estate, and executives made no effort to point this out to visiting regulators.
With the end of the real estate boom, Bank of Bonifay's problem loans mushroomed and its losses mounted. But the bank neither wrote down its bad loans as fast as the law requires nor put enough money into loan loss reserves.
When questioned about these delays, James Goodson — then acting as chief executive officer — fought back. He said regulatory provisions were "broad and open to interpretation," and he would not commit to making the accounting changes regulators requested.
"His apparent inability to understand problems in his actions and disagreements with examiner findings is underscored by his comments throughout the open section of this report," regulators wrote in 2009.
Despite its growing problems, the bank continued to make large and risky loans right up to the end. In March 2009, it provided a $2.5 million loan to a company controlled by the directors of another struggling Panhandle institution — Coastal Community Bank.
Within 15 months, both Coastal Community and Bank of Bonifay were out of business.