46 laid off at Frontier Bank

Published 2:57 pm Friday, June 12, 2009

EVERETT — The parent company of Frontier Bank announced Thursday that 46 bank employees were laid off this week, an attempt to absorb the impact of economic recession.

About 6 percent of the bank’s 760 employees were let go Wednesday, said Patrick Fahey, chairman and CEO of the Everett-based Frontier Financial Corp. The layoffs didn’t target any one area of bank operations and included senior-level managers as well as clerical workers.

“This has been a difficult decision in difficult times, after having taken a number of actions over the past several months to lessen the size of a necessary reduction,” Fahey said.

Frontier’s first-quarter losses for this year totaled $33.8 million, largely due to defaulting loans. The bank’s portfolio has a heavy concentration of residential and commercial real estate loans, and revenue plunged when the Puget Sound region’s construction industry slowed production last year.

In April, Fahey reported that signs of an economic uptick were visible in the bank’s daily dealings, including an increase in sales and purchase agreements.

But the springtime uptick wasn’t enough to stave off layoffs.

Terminated employees will receive severance pay based on their years of service, along with a two-day career planning and job skills seminar. They will also be eligible for 24 months of health care coverage, instead of the typical 18 months.

Ultimately, the reductions will amount to a $360,000 pre-tax charge on the company’s second quarter earnings, Fahey said. But the cuts should save the company about $2.5 million annually, he added.

Bank officials announced in March that Frontier received a federal cease-and-desist order, which came with a list of regulator recommendations attached. Frontier underwent a massive restructuring in the last year, including a change in leadership and reductions in executive-level pay.

The bank has reduced its staffing through attrition for the last year, Fahey said. In May of 2008, the bank had 856 employees, almost 100 more than before the cuts.

“We did that deliberately,” he said. “We knew we were going to have to hunker down. There’s just no choice, really.”

Once it was determined that layoffs were necessary, the goal was to rip the Band-Aid off quickly — and only once. Fahey said he doesn’t anticipate another round of layoffs unless the economy worsens.

“I don’t know that anyone can ever say never,” he said. “Unless we see a severe negative turnaround in what seems to be an improving economy, I would say we don’t anticipate it.”