Reeling from losses on construction and development loans, Frontier Financial Corp. in Everett, Wash., has overhauled its management team as part of an effort to de-emphasize commercial real estate lending.
The $4.2 billion-asset Frontier said Monday that John J. Dickson has relinquished three of his titles — president and chief executive officer of the holding company and CEO of its Frontier Bank — and that his father, Bob Dickson, is to retire as the chairman of the holding company and the bank on Dec. 31. The younger Mr. Dickson is to remain president of the bank.
One of its directors, Pat Fahey, has been named chairman and CEO of the holding company and chairman of the bank, and another, Mike Clementz, has been named president of the holding company and CEO of the bank.
Mr. Fahey, a longtime local banker with extensive commercial and industrial lending experience, said Monday that the management changes were made to accelerate Frontier's transition from a banking company largely focused on commercial real estate to one that is more diversified. At Sept. 30, roughly 95% of Frontier's loans were backed by real estate, and about half were in residential development, according to Federal Deposit Insurance Corp. data.
With the downturn in the housing sector, "we are refocusing the bank's effort to diversify the portfolio and risk profile, and we will be gearing up more in the business banking area of C&I," Mr. Fahey said. Frontier's business model "is not a recipe for success in this environment."
Mr. Fahey founded Pacific Northwest Bank in Oak Harbor, Wash., and sold it to Wells Fargo & Co. in 2003. He retired from Wells Fargo, where he was chairman of regional banking, before joining Frontier's board in 2006.
Frontier reported a $17.8 million third-quarter loss after increasing its loan-loss provision nineteenfold from a year earlier, to $42.1 million.
The company's shares fell sharply last month after rumors surfaced that it had been denied participation in the Treasury Department's Capital Purchase Program. It put out a news release Nov. 12 saying the rumors were untrue and that its application was still being evaluated.
On Monday, Mr. Fahey said that the application was still pending.
Frontier's shares closed at $2.92 Monday, up 14.5%.
