Everett-based bank’s profitability tops in U.S.

Published 11:11 pm Sunday, December 16, 2007

EVERETT — Frontier Financial Corp., parent company of Frontier Bank, may be one of the best-run banks in the nation right now.

That was the conclusion of a survey done for the latest issue of Bank Director magazine.

Remarkably, Frontier ended up at the top of the heap in profitability in the first year the banking company qualified as one of the nation’s 150 largest banks. Frontier moved into that size category by adding about $400 million in loans to its portfolio since mid-2006. The bank’s assets exceeded $3.5 billion as of this summer.

John Dickson, Frontier Financial’s president and chief executive officer, said the ranking is gratifying.

“We’re very proud of the ranking,” Dickson said. “We’re not the biggest bank in the country. We just haven’t had any dramatic shifts lately.”

He added praise for the bank’s board of directors and employees for helping to keep the bank moving in the right direction.

Frontier achieved the top spot based on a scorecard that focused on profitability, adequacy of available capital and the quality of the bank’s assets. Sandler O’Neill &Partners, L.P., a New York investment bank that specializes in bank stocks, helped to develop the ranking system and crunched the numbers for the magazine. The purpose of the ranking is to identify banks that generate good profits without leveraging their balance sheets or taking excessive risks in their lending.

“It’s really well deserved recognition. It’s very objective, based on several fundamental measurements,” said Michael Deller, president and chief executive officer of a fellow local financial institution, the Bank of Everett.

In comments to Bank Director magazine, Dickson said the region’s strong economy has helped Frontier, which has 78 percent of its loan portfolio devoted to construction, land development and commercial real estate.

Importantly, Frontier didn’t get involved in the subprime mortgage lending business. So the bank’s not at risk to the downside of that business, which has hurt other banks, most notably Seattle-based Washington Mutual.

“We’re definitely safe from that, though we’re indirectly affected as a lender to local development companies,” Dickson said.

Bank Director gave special attention to Frontier’s lending practices, efficiency and profit sharing to employees. The bank’s locally minded customer service culture also is mentioned.

Some of those things that set Frontier apart could be tested as the bank continues to grow. Frontier is the largest independent bank in Western Washington and one of Snohomish County’s top three public companies in terms of market value.

At the end of last month, it finished its acquisition of Oregon’s Bank of Salem. Its acquisition of Whidbey Island Bank, expected to be made official in March, will give Frontier 64 branches throughout the Pacific Northwest. But Dickson said the bank’s management works hard to keep the small, family atmosphere of the company.

“It’s always a challenge to stay focused as we get bigger,” he said.

Reporter Eric Fetters: 425-339-3453 or fetters@heraldnet.com.

Frontier Financial

Headquarters: Everett

Founded: 1978

Branches: 51

Assets: More than $3.5 billion

Stock Symbol: FTBK on the Nasdaq market