EVERETT — Frontier Financial Corp. lost millions in the fourth quarter of 2009 — $33.9 million, to be exact.
But this is one of those cases when bad news is actually pretty good.
The loss was small compared with the bleeding that happened in previous quarters, and the numbers gave bank officials reason to hope: Maybe the wounds are finally healing.
The final quarter of 2009 brought an end to a tumultuous year for the parent company of Frontier Bank, a year in which losses totaled nearly $259 million.
The bank called the numbers released early Friday “improved operating results.” Third-quarter losses in 2009 totaled $141.1 million, and the fourth quarter of 2008 brought a loss of $89.5 million.
The bank’s stock price dropped nearly 14 percent during trading Friday, ending the day at $4.26.
The bank is operating under the guidelines of a federal reprimand that mandates a reduced concentration in real estate and land development loans. Frontier reported Friday that those loan portfolios were reduced $1.39 billion between June 30 of 2008 and the end of 2009.
For bank CEO Pat Fahey, that’s the most telling set of numbers.
“I think there was skepticism that we could even get it down by $300 or $400 million by the end of last year,” he said.
Frontier will not return to its former strategy of investing heavily in real estate — even after a recovery.
“We will continue to be in that business, but we’ll be in it (at) appropriate levels of concentration,” Fahey said. “That was what brought about the problem in the first place.”
The bank has diversified in accordance with the federal order, bulking up to offer more business lending and private wealth-management services.
Frontier’s fourth-quarter losses were impacted by $40.4 million and $89.2 million income-tax benefits, stemming from legislation that lets some banks receive a refund of back taxes from 2008 or 2009. The bank expects an income tax refund of $82.4 million in 2010.
Frontier is still seeking a white-knight investor that could reverse the long string of quarterly losses. Earlier this year, a planned merger with a New York-based acquisitions company failed to meet federal deadlines and was called off.
For now, the search continues. Fahey said he and other bank executives are meeting with a few interested parties.
“We are a little more optimistic than we were that something can be achieved there,” he said.
Earlier this week, Frontier shareholders approved a plan to increase the number of authorized common shares to 200 million from 10 million, part of a plan to repair the bank’s standing.
Read Amy Rolph’s small-business blog at www.heraldnet.com/TheStorefront. Contact her at 425-339-3029 or arolph@heraldnet.com.
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