Frontier Financial Corp. said today it is appealing a federal order branding the bank as “critically undercapitalized.”
Bank officials contend that Frontier’s future isn’t nearly as bleak as the picture painted by regulators.
Under order from the Federal Deposit Insurance Corp, the parent company of Frontier Bank adjusted its fourth-quarter losses to $70.2 million, more than doubling the figure released earlier this year. That brought the bank’s total losses for 2009 up to $295 million instead of $259 million.
The FDIC also told Frontier to revise its totals for real-estate holdings, saying the bank has about $3.5 million less in foreclosures than reported earlier this year.
The adjustment stemmed form an FDIC review conducted after Frontier released its own assessment of 2009’s losses. And though the bank revised its totals Tuesday to comply with the FDIC’s findings, there’s still contention over just how much Frontier lost last year.
“We’re not in agreement with those results,” Frontier CEO Pat Fahey said today. “We reported our earnings with generally accepted accounting principles and a review by our outside auditors.”
The bank has filed an appeal asking regulators to take a second look at the numbers. Fahey said the Puget Sound region’s economic climate is less severe than other regions’ climates, and that the bank should be judged in that context.
Fahey said the bank’s relationship with regulators is good, but that he’s requesting a second review in light of Frontier’s assessment of losses and bank-held property values.
“They’re entitled to their opinion,” Fahey said. “We can respectfully disagree.”
Frontier’s status as “critically undercapitalized” makes it more likely that the government will take control of the bank. The institution could be placed into “conservatorship or receivership” after 90 days, unless the FDIC determines another action is warranted.
“If Frontier Bank is placed into conservatorship or receivership, the corporation would suffer a complete loss of the value of its ownership interest in Frontier Bank,” according to a statement released by Frontier Tuesday.
If that happened, the transition to a new bank would be seamless for depositors, Fahey said.
The FDIC has 30 days to respond to this appeal. Depending on the agency’s response, another appeal could be issued at that point.
“The FDIC has the hammer,” Fahey said. “But I’m not giving up.”
Frontier is still seeking a white-knight investor to inject capital into its portfolio to help compensate for bad real estate loans made before the housing market slumped in 2008.
A blank-check acquisitions company based in New York tried to acquire the bank last year, but plans were called off when regulators didn’t approve the deal in time for deadlines.
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