Peninsula Daily News staff and news services
For Frontier Bank’s former customers, it will be business as usual today.
Frontier’s three branches on the North Olympic Peninsula — in Port Angeles, Sequim and Port Townsend — and 47 other offices in Washington and Oregon will reopen today as branches of San Francisco-based Union Bank.
After struggling for more than a year with a morass of soured real-estate loans, Frontier was taken over Friday by the state Department of Financial Institutions and turned over to the Federal Deposit Insurance Corp. Agents were in each branch at closing time.
In a prearranged move, the FDIC assigned most of the bank’s deposits and assets to Union Bank.
Union Bank is one of the nation’s largest banks with $85.2 billion in assets and more than 300 offices in four states. But until now only three branches were in Washington — Seattle, Bellevue and Tacoma.
Union Bank’s parent, UnionBanCal, is wholly owned by Bank of Tokyo-Mitsubishi UFJ Ltd., which is part of the $1.8 trillion Mitsubishi UFJ Financial Group Inc. of Tokyo.
All Frontier depositors are now customers of Union Bank, and:
• All deposits are safe and sound, including those over the FDIC’s $250,000 insurance limit.
• Customers can withdraw money from ATMs and make debit-card purchases.
• Checks drawn on Frontier accounts will continue to be honored.
• Loan customers should continue to make their payments as usual.
• Frontier’s Internet banking services continue without interruption.
The former Frontier branches will continue to be staffed for the immediate future by Frontier employees.
They will work with Union Bank supervisors at each branch.
Tim Wennes, chief retail banking officer of Union Bank, would not comment on the bank’s employment plans — but said the bank intends to keep all of Frontier’s branches.
Statement from bank
“Frontier Bank’s branches will be open during their normal business hours and will operate as Union Bank offices moving forward,” Union Bank said in a statement addressed to former Frontier Bank customers.
“Your banking services will not be interrupted in any way, and you should continue to bank the same way you currently do.
“We welcome you to Union Bank and look forward to providing you with the level of service that’s made us a trusted financial partner for nearly 150 years.
“With 346 banking offices in California, Oregon, Washington, and Texas, Union Bank is in a position of strength and stability, and is a committed partner in the communities we serve.”
A Q&A for former Frontier Bank customers will be available at each branch and is online as a PDF that can be accessed at Union Bank’s Web site, http://tinyurl.com/386eb7f.
The state DFI said Frontier, based in Everett and the fifth-largest bank headquartered in Washington state, had “inadequate capital and severe loan losses” associated with the recession-stung construction and real estate markets.
As of the end of 2009, Frontier held more than $1 billion of construction and development loans — and well over half of those loans were listed as past due or “nonaccrual,” meaning the bank either wasn’t receiving any payments at all or less than the original loan terms.
The bank wrote off $337.3 million in bad loans last year, and it had set aside $376.1 million to cover loans expected to go bad in the future.
Regulators started pounding the final nails in Frontier’s coffin earlier this year when it labeled the bank “critically undercapitalized” and told officials to turn things around by April 15 or risk being sold to the highest bidder.
It was the state’s sixth bank failure this year — and the largest state-based bank to fail since Washington Mutual’s collapse in September 2008.
At the end of 2009, Frontier Bank had approximately $3.6 billion in total assets and $3.13 billion in total deposits.
In addition to assuming most of the deposits, Union Bank agreed to purchase essentially all of Frontier’s assets.
However, the FDIC estimates the cost to the Deposit Insurance Fund will be $1.37 billion.
Frontier was one of seven banks that were closed on Friday.
Three were in Puerto Rico, two in Missouri and one in Michigan.
In all, regulators have shuttered 64 banks so far this year — a faster pace than in 2009, during which 140 banks were closed.
Sterling Savings
Frontier was one of two troubled state-based banks with branches on the Peninsula being carefully monitored by government regulators.
The other is Sterling Savings Bank, the second-largest state-based bank.
Sterling has 175 branches, including Port Angeles and Forks.
Last week Spokane-based Sterling announced a $134.7 million investment in the bank by a Boston equity firm.
It is part of the bank’s ongoing “recapitalization and recovery effort” to raise enough money to meet requirements imposed by federal regulators.
While most of the state’s 90-odd banks and thrifts are at least reasonably healthy, more than two dozen, including Frontier and Sterling, have been operating under some degree of enhanced regulatory oversight.
Two other banks with Peninsula branches were closed in the last 12 months — Bainbridge Island-based American Marine Bank, taken over on Jan. 30 by Tacoma-based Columbia Bank, and Bremerton-based Westsound Bank, closed on May 9, 2009.
Westsound’s accounts were assumed by Kitsap Bank,
‘Innovative’ bank
Union Bank is well-respected in its home state, according to Larry Kurmel, former executive director of the California Bankers Association.
“They really are innovative in their approach to the market,” he said Friday.
He said Union Bank has not been known for expanding, and that the purchase of Frontier “would be the first time they have made a major, purposeful increase in their footprint in the consumer market.
“You can’t sit back in this kind of depressed market and do nothing.
“If you have a well-oiled machine, you want to put that to work.”