Frontier Bank Consents to Cease and Desist Order

Frontier National Bank two weeks ago consented to a regulatory cease and desist order from the comptroller of the currency that calls for the company to increase its net worth ratio and liquidity, reduce its dependency on brokered deposits and develop a profit improvement plan.

Frontier officials acknowledged late Friday that the regulatory order emerged from an examination of company finances last November.

The bank “is complying with the provisions that have been ordered,” according to Donovan Puccio, chairman of Frontier Bancorp, the bank’s holding company.

Specifically, the bank has reduced its dependency on brokered deposits (such as certificates of deposits) from 20% at year-end 1984 to 8% as of June 30, and has increased its liquidity from 9% on Dec. 31 to 19% as of June 30.

In addition, Frontier, with $24 million in assets, has boosted the ratio of its primary capital to its average total assets from 7.6% to 8.35% in the last six months. Primary capital is defined as total shareholders’ equity plus allowance for possible loan losses.

Frontier officials said that they will review the bank’s loan portfolio to “correct loan policies and procedures.” Included in that review will be Frontier’s loan loss provision, accrual policies, portfolio management, collections, pricing and credit underwriting, Puccio said.

Frontier has not yet released its earnings for the first half of 1985, nor has it disclosed the amount of its allowance for possible loan losses. Frontier lost $565,000 last year.

Puccio said that Frontier directors “cannot give assurances that additional action may not be required” to meet the conditions of the cease and desist order consent agreement.

Frontier’s management shakeup up last fall was not tied to the comptroller’s examination, according to Tom Dean, Frontier’s marketing director. Then, E. Jerome Kraffert was fired as president and chief executive, and chairman Charles Quinones resigned.

However, Dean acknowledged that regulators in April approved the hiring of Tom Ferrara, a 20-year banking industry veteran, as Frontier’s president and chief executive.