SPAN
July 1985-April 2011

HEADQUARTERS
Winter Park

REGULATORS
OCC

TOTAL ASSETS AT FAILURE
$312 million

COST TO FDIC
$42 million

DIRECTORS
Darwin P. Kelly
Susma Patel
Suketu M. Patel
Parimal K. Patel
Bharat Amin
Dennis John King

Federal regulators attributed the demise of First National Bank of Central Florida to an aggressive growth strategy that focused on risky loans to residential builders and speculators.

Regulators also assailed the bank for "lax underwriting" standards and "ineffective board and management oversight."

"Despite repeated criticisms from OCC examiners, First National's board and management failed to improve the bank's credit administration and risk management practices," examiners wrote.

Launched in 1985, First National had a turbulent history.

It limped through the Savings and Loan crisis in the early 1990s and logged heavy losses in 1996, which forced it to be rescued by British investors who pumped in $5.5 million in 1997.

Next came a series of scandals in which First National's chief executive, Martin R. Hartmann, and one of his employees, Joaquin I. Vasquez, were indicted and pleaded guilty to embezzling hundreds of thousands of dollars.

Hartmann was charged in 1997 and later imprisoned for stealing $354,000. News reports and court records show he set up a phony loan to a friend and took kickbacks from bank vendors.

A year later, Vasquez admitted to removing $223,000 from customer accounts and was sentenced to two years in a federal correctional facility.

From 1993 to 2000, First National embarked on a strategy to set up bank offices in Kash n' Karry and other supermarkets throughout Central Florida. The idea was to save on the costs of stand alone branches.

By 2000, First National had 22 supermarket sites.

But the costs of staffing those branches far outweighed the benefits. Federal data show the bank spent about 90 cents out of every dollar earned to cover operating expenses; a well-run institution spends about 60 cents.

Two chief executives — Corey Coughlin and Geoffrey Longstaff — were brought in to change First National's strategy in the late 1990s and early 2000s. Both soon left after clashing with the board of directors.

It was the bank's focus on real estate lending during the housing boom that finally returned First National to profitability. But the very same strategy proved fatal.

Among the largest problems for the bank were nearly $14 million in loans to trusts that were administered on behalf of clients by Altamonte Springs attorney Berry J. Walker Jr.

The trusts ultimately were hit with foreclosure judgments totaling $19 million. But Walker said the bank was not on the hook for that total. He said private lenders, Emmett J. Foster and Robert L. Kosnoski, had put up as much as half of the loan money.

Darwin P. Kelly, a former member of the bank's board of directors, declined to comment.