A focus on loans to developers of office buildings, shopping plazas and housing projects killed Central Florida State Bank.
Chief executive Gene Phinney estimated that 40 percent of the bank's loans were made to commercial real estate developers, according to the Ocala Star-Banner.
The bank was so enamored of these types of loans that Phinney once used money from a 2004 stock offering to buy portions of loans made by other banks. He later told regulators
that he was surprised by the drastic decline in the value of the real estate that was used as collateral in the deals.
Central Florida State also was generous when it came to handing loans to its officers and directors. In June 2005, the bank had $8.2 million in insider loans on its books, representing nearly 12 percent of its portfolio.
In May 2011, just prior to being shut down, Phinney told the Star-Banner that the FDIC's unforgiving accounting rules were forcing community banks to lower the value of collateral.
"This is beyond a recession," Phinney told the newspaper. "We have a depression in commercial real estate values.
"Never in my wildest dreams did I ever believe we'd face something like this. How do you finance the growth of the community if you can't finance the growth of commercial real estate?"
In a recent conversation, Phinney told the Herald-Tribune he regrets the day he got into banking. But he does not believe Central Florida State's failure was due to mismanagement.
He blames Congress — Republicans and Democrats alike — for encouraging banks to make loans to home buyers who could not afford the payments.
"We stayed away from making those loans," Phinney said. "But they destroyed the market. Once it goes from blowing hot steam to zero, there's nothing you can do."