EVERETT — The parent company of Frontier Bank, which has three branches on the North Olympic Peninsula, announced a $141.1 million third-quarter loss Thursday, up from a net loss of $50 million in the second quarter of this year.
Everett-based Frontier Financial Corp. has lost $224.9 million so far this year and has been plagued by plummeting stock prices, defaulting loans and regulatory censure since the first signs of recession paralyzed the construction industry.
$98 million charge-off
Frontier charged off $98 million in bad loans during the quarter and set aside $140 million more to buffer against bad loans.
The bank has been operating under a cease-and-desist order from federal and state regulators since early this year and received notice of possible delisting from the NASDAQ.
The bank’s nonperforming assets — one measure of bad loans — increased during the quarter to about 24 percent of all its assets, or $912 million.
Its capital levels are also slipping, with one key capital ratio decreasing to 3.4 percent from 6.7 percent during the quarter — below what regulators deem a “well-capitalized” institution.
Frontier was counting on millions of dollars in capital from a potential merger with SP Acquisition Holdings, a New York blank check company, to help boost its capital levels.
That deal fell apart this month after the bank was unable to get regulatory approval fast enough.
“While we were disappointed our merger with SPAH was terminated, the number of banks able to raise capital since we entered into the agreement with SPAH has increased dramatically,” Frontier executive Pat Fahey said Thursday.
Last week, Frontier announced a new team of executives to oversee lending, part of an ongoing restructuring attempt aimed at fortifying the bank’s shaky footing.
The bank’s strategy includes an added emphasis on commercial and retail banking along with private client services.
Frontier operates branches in Port Angeles, Port Townsend and Sequim as well as 48 other locations in Western Washington.
Sterling Savings Bank
In addition to Frontier, Spokane-based Sterling Savings Bank, which has branches in Port Angeles and Forks, is also operating under a federal cease-and-desist order.
Four consecutive quarters of losses totaling $879 million prompted the order Oct. 9.
It has resulted in a management shakeup and an agreement with the Federal Deposit Insurance Corp. and state Department of Financial Institutions that requires Sterling to improve its lending procedures, increase board oversight and raise $300 million by Dec. 15 to buffer against a pileup of bad commercial real estate loans.
