By Bryan Corliss
Herald Writer
More-stable interest rates should lead to better performance at Frontier Financial Corp., the company’s president and chief executive said Wednesday.
The company expects first quarter earnings to increase 25 percent over first quarter 2001’s level of 36 cents a share, CEO Bob Dickson said.
"Balance sheet growth will be a challenge this year," Dickson told investors at a conference in Carlsbad, Calif.
But earnings for the full year "will be substantially better than 2001," he added, although he declined to give a specific full-year forecast given the "fragile economic environment."
The bank is looking to rebound after a difficult 2001.
Frontier’s earnings were hit hard during the first quarter of 2001 by the fast action the Federal Reserve took during the period to lower interest rates. Rates fell 1.5 percentage points in 75 days last year.
That was a problem for Frontier, because about 40 percent of its loan portfolio was in adjustable rate loans, which automatically moved down with each rate cut. That created a short-term margin squeeze, which brought first-quarter earnings down to $7.4 million — about a million dollars below analysts’ projections.
The bank bounced back to post record earnings in the second quarter of $8.4 million.
But Frontier took another hit in the fourth quarter. It was forced to write off $9.3 million in loans to a heavy equipment rental company, which had fraudulently sold off some of the equipment it had used as loan collateral and had used other equipment as collateral for more than one loan.
Frontier staffers uncovered the irregularities, which led to the bank foreclosing on the loan and seizing as much of the assets as it could.
The loss pushed Frontier’s earnings down to $24.5 million in 2001, after it had posted a $32.1 million profit in 2000. It was the first time in the bank’s 24-year history that it hadn’t increased its annual profit.
You can call Herald Writer Bryan Corliss at 425-339-3454
or send e-mail to corliss@heraldnet.com.
Talk to us
> Give us your news tips.
> Send us a letter to the editor.
> More Herald contact information.