Scrambling to preserve capital after a $17.8 million third-quarter loss, Frontier Financial Corp. in Everett, Wash., said Thursday that it would slash expenses and curtail loan growth.
The $4.2 billion-asset company said it remains well capitalized despite a sharp spike in nonperforming construction and land development loans.
But the economic downturn calls for a shift in strategy, John J. Dickson, its president and chief executive, said in a press release. "We are considering all of our options to maintain and grow our capital ratios," he said.
Frontier, which earned $20.2 million in the year-earlier period, swung to a loss mainly because its loan-loss provision jumped 19-fold, to $42.1 million. It also had a $7.4 million loss on its investment securities.
Frontier said it expanded a special-assets group from five to 22 people, all from within the company, to focus on reducing nonperforming assets, which jumped to 4.92% of its total in the third quarter, from 2.97% in the second quarter and 0.53% a year earlier.
The company said it expects to cut $8.5 million in expenses, partly by having executives forgo discretionary bonuses this year and take pay cuts next year. Mr. Dickson's pay is to be cut 10% and other executives are to take 5% cuts.
Frontier's shares closed at $7.41 Thursday, down 20.5%.