The Federal Deposit Insurance Corp. has issued a prompt corrective action order against Frontier Bank of Everett, Wash., giving it until April 15 to merge with another institution or sell shares or obligations to become at least "adequately capitalized."
The March 16 order came as no surprise to the $3.6 billion-asset bank. Frontier Financial Corp., its parent company, announced last week that a January exam by the FDIC led the company to increase its loan-loss allowance by $30 million as of Dec. 31.
The change, along with a loss on the sale of securities, doubled its fourth-quarter loss to $70 million.
That left Frontier Bank critically undercapitalized, with a leverage ratio of 1.65%.
"As previously indicated, Frontier plans to appeal the results of the regulatory examination that brought this about, while continuing all its efforts to improve the bank's condition," Patrick M. Fahey, the bank's chairman and chief executive, said in a press release Tuesday.
The order reiterated a number of restrictions imposed by regulators, including prohibiting the bank from accepting or renewing brokered deposits, increasing assets, paying dividends, increasing compensation for executives or relocating or opening new offices.
In August the blank-check company SP Acquisition Holdings Inc. tried to buy Frontier, but the deal was called off in October because it did not win regulatory approval in time.
Since the deal's termination, Frontier said it has sought equity investors and has made contacts with potential investors.