Regulators at the Office of the Comptroller of the Currency were partly to blame for Republic Federal's failure.
In 2004, they persuaded the bank to leave a lucrative business that allowed customers of lenders in Latin America to write checks with Republic's name to conduct business in the United States.
Republic's attempts to replace this business were unsuccessful. The bank lost millions of dollars at the height of the boom, when practically all of its Florida competitors were rolling in profits.
Feeling the need to make up for its earlier decision, OCC regulators let Republic merge with another struggling Miami lender — PineBank — in late 2006.
"The OCC approved the PineBank acquisition believing the purchase would allow Republic to replace its lost earnings with earnings from PineBank's loans and deposits," federal regulators said in
February 2012.
Republic's assets more than doubled to $713 million because of the merger. But the bank quickly became weighed down with risky loans that PineBank had made to foreign condo buyers in Miami and Fort Lauderdale during the boom.
"Key financial information on the borrowers was often not on file," the FDIC reported.
After Republic failed, the FDIC questioned the OCC's decision to approve the PineBank merger because neither bank was healthy at the time.
Indeed, the OCC considered Republic a "troubled" bank until 10 months before finalizing the deal, and PineBank had a low performance rating thanks to high-risk lending and shrinking stockpiles of capital.
"Though the OCC released Republic from the troubled-condition status prior to the PineBank merger, it was not clear what happened to persuade the OCC to make that change," the FDIC wrote in its analysis of Republic's failure.
Chartered in 1979, Republic was originally known as Hemisphere National Bank. It focused primarily on financing international trade deals and loans to Latin American customers.
But like many other South Florida banks, Republic ran afoul of anti-terrorism and anti-laundering legislation after 9/11.
Examiners grew concerned that Republic's check-writing business was assisting money launderers and potential terrorists.
After agreeing to close that business in 2004, Republic raised $50 million through a private stock offering and set out to replace its lost revenues by making mortgages to customers in New York and California.
That venture failed and was halted in 2007.
Republic reported losses of more than $11 million from 2005 through 2007 — a time when most Florida banks were reporting expansive profits. It lost $25 million more in 2008 as bad loans began piling up.
Many of these had originated with PineBank, including one of the largest, made to a company controlled by Palm Beach County developer and gas station owner William L. Knight.
Court records show that PineBank lent $5.6 million to Knight's company just before merging with Republic in September 2006. The bank made that loan despite the fact that Knight had a 1997 bankruptcy on his record and was sued by Amoco and Chevron a year later for "blatant self-dealing."
They said he diverted money to family members that should have gone to paying off his debts.
Knight denied the charges in court and the case was later settled. His company defaulted on its loan from PineBank in March 2008.
Knight did not return a message left with his secretary.
That same year, regulators began complaining that Republic was not writing down its bad loans fast enough. They forced Republic to sign an agreement promising to boost capital and design a plan to deal with its problems.
Ultimately, that plan did not work and Republic failed in December 2009.