By Bryan Corliss
Herald Writer
Two Snohomish County banks reported Tuesday that their profits had slipped.
Frontier Financial Corp.’s year-end profit of $24.5 million was down from 2000’s profit of $32.1 million, largely because the bank company shifted funds to its loan loss account after discovering that a heavy equipment rental business had made fraudulent statements on a loan application, bank officials said.
EverTrust Financial Group reported earnings of $1.3 million for the quarter that ended Dec. 31, which is the third quarter of the bank company’s fiscal year. That compares with earnings of $1.4 million for the same quarter of the previous year.
Per-share earnings, however, climbed for EverTrust, due to a stock buy-back program. Earnings per share went from 19 cents in the same quarter last year to 25 cents in the most recent quarter.
Frontier officials said 2001 marks the first year in the bank’s 24-year history that profits have not grown over previous years.
The bank company ended up writing off a $9.3 million loss due to the one bad loan, which Frontier reported in November.
The loan was made to a heavy equipment rental business, which the bank has not yet identified. The business put up its heavy equipment as collateral, but when bankers looked into irregularities with the account, they found that some of the equipment had been sold and some had been pledged fraudulently as collateral to other lenders as well.
Frontier foreclosed on the loan, seized what equipment it could and sold it at auction. But it still took a big hit on the books. The loss amounted for 95 percent of the $9.8 million total.
The bank ended up putting $13 million into its loan loss fund during the quarter. That was "primarily to cover the specific loss," according to Frontier chief executive Bob Dickson. But the bank also "felt it was prudent to build up the reserve in view of the uncertainty caused by a slowing economy."
EverTrust also is keeping an eye on the economy, chief financial officer Jeffrey Mitchell said.
The banking group wrote off $157,000 in bad loans during the quarter, up from $55,000 a year ago. The total was incorrectly reported. That’s actually closer to historical averages, Mitchell said. "The past several years was unusually low."
But "general economic conditions and indicators in the Puget Sound region, particularly Snohomish County, have deteriorated over the last quarter, and we expect further weakening in the quarters ahead," he added.
Frontier finished 2001 with $1.8 billion in assets, up 6.9 percent. Net loans increased 14 percent, to over $1.5 billion. Net interest income was up 4.2 percent to $83.6 million, and non-interest income increased almost 17 percent, to $8.3 million — a fact Frontier attributes to increased mortgage banking operations and service charges.
EverTrust finished the quarter with $647 million in assets, up from $602 million on March 31, the end of the company’s last fiscal year. Net loans receivable grew from $483.1 million to $556.6 million during the same period, and the bank originated $75.7 million in new loans during the quarter.
Net interest income went from $5.8 million to $6.6 million, comparing the most recent quarter with the same one from the year before.
EverTrust will resume its stock buy-back program on Thursday.
You can call Herald Writer Bryan Corliss at 425-339-3454
or send e-mail to corliss@heraldnet.com.
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