FRONTIER FINANCIAL CORPORATION                                                                                                                                
332 SW Everett Mall Way
Everett, Washington 98204         
 
Contact:
John J. Dickson
Frontier Financial Corporation
President and CEO
425-514-0700                                                                                                            
 
Lyle E. Ryan
Frontier Bank
President and CBO
425-514-0700

 
NEWS RELEASE

For release July 22, 2008, 5:30 A.M. PDT


FRONTIER FINANCIAL CORPORATION ANNOUNCES
SECOND QUARTER 2008 RESULTS


EVERETT, WASHINGTON – July 22, 2008 – Frontier Financial Corporation (NASDAQ: FTBK) today announced earnings for the three and six months ended June 30, 2008.  For the three months ended June 30, 2008, net income totaled $2.1 million, a decrease of $16.1 million, or 88.6%, compared to net income of $18.2 million for the three months ended June 30, 2007.  For the three months ended June 30, 2008, the provision for loan losses totaled $24.5 million, compared to $1.9 million for the three months ended June 30, 2007, an increase of $22.6 million. On a diluted per share basis, second quarter 2008 net income was $0.04 per share, compared to $0.40 per share for the second quarter 2007.

For the six months ended June 30, 2008, net income totaled $17.6 million, compared to net income of $35.7 million for the six months ended June 30, 2007, a decrease of $18.1 million, or 50.8%.  The decrease in net income is primarily attributable to the $30.2 million increase in the provision for loan losses.  On a diluted per share basis, net income for the six months ended June 30, 2008, was $0.37 per share, compared to $0.78 per share for the six months ended June 30, 2007.

John J. Dickson, President and CEO of Frontier Financial Corporation said, “In the 30 year history of the Bank, we have had to work through some very tough business cycles.  And I’m sure we’ll look back at this cycle as one of the most daunting.  With that said, we have a team of seasoned bankers with the expertise, and work ethic, we’ll need to successfully navigate through these challenging times.”


 
 

 

Overview

For the quarter ended June 30, 2008:

·  
Second quarter 2008 earnings of $2.1 million, or $0.04 per diluted share
·  
Provision for loan losses of $24.5 million
·  
Efficiency ratio of 43%

For the six months ended June 30, 2008:

·  
Earnings of $17.6 million, or $0.37 per diluted share, for the first six months of 2008
·  
Provision for loan losses of $33.5 million
·  
Allowance for loan losses as a percentage of total loans of 2.07% at June 30, 2008, compared to 1.49% at December 31, 2007, and 1.34% at June 30, 2007
·  
Book value of $9.83 at June 30, 2008, compared to $9.79 at December 31, 2007, and $8.67 at June 30, 2007
·  
Total risk-based capital ratio of 11.22%, which exceeds the regulatory minimum for “well capitalized” purposes of 10.00%
·  
Efficiency ratio of 42%

Review of Financial Condition

General

At June 30, 2008, total assets were $4.16 billion and deposits totaled $3.30 billion.  This compares to total assets of $4.00 billion and deposits of $2.94 billion at December 31, 2007, and total assets of $3.58 billion and deposits of $2.83 billion at June 30, 2007.  Net loans of $3.73 billion at June 30, 2008, reflect an increase of 4.8% from December 31, 2007, and an increase of 18.3% from June 30, 2007.
 
Loans
 
At June 30, 2008, total loans, including loans held for resale, were $3.81 billion, compared to $3.61 billion at December 31, 2007, and $3.19 billion at June 30, 2007.

For the six months ended June 30, 2008, new loan originations totaled $583.7 million, compared to $901.0 million for the six months ended June 30, 2007, a decrease of 35.2%.  New loan originations for the second quarter 2008, were $296.6 million, compared to $642.7 million for the second quarter 2007, representing a 53.8% decrease.

Lyle E. Ryan, President of Frontier Bank stated, “Despite the slower construction and land development loan originations, we were once again pleased with the loan growth in our other loan products.”


 
 

 

Allowance for Loan Losses

The total allowance for loan losses was $78.7 million, or 2.07%, of total loans outstanding at June 30, 2008, compared to $54.0 million, or 1.49%, at December 31, 2007, and $42.8 million, or 1.34%, at June 30, 2007. The allowance for loan losses, including the reclassified allocation for undisbursed loans of $2.9 million, would amount to a total allowance of $81.6 million, or 2.14%, of total loans outstanding as of June 30, 2008.  For the quarter ended June 30, 2008, net loan charge-offs were $6.5 million, or 0.16%, of average quarterly loans.  This compares to net loan charge-offs of $593 thousand, or 0.02%, of average loans for the quarter ended December 31, 2007, and $285 thousand, or 0.01%, of average loans for the quarter ended June 30, 2007.  “With total reserves for loan losses of $81.6 million, including the reserve for undisbursed, and tangible capital of over $380 million, we have over $460 million to absorb any losses that may arise due to market uncertainties,” said Rob Robinson, Chief Credit Officer of Frontier Bank.

Credit Quality

At June 30, 2008, nonperforming assets were 2.97% of total assets, compared to 0.97% at March 31, 2008, 0.53% at December 31, 2007, and 0.31% at June 30, 2007.  Nonaccruing loans were $119.9 million at June 30, 2008, up from $38.8 million at March 31, 2008, $20.9 million at December 31, 2007, and $11.0 million at June 30, 2007.

Nonperforming assets are summarized as follows (in thousands):
 
   
June 30, 2008
   
March 31, 2008
   
December 31, 2007
   
June 30, 2007
 
Commercial and industrial
  $ 394     $ 18     $ 159     $ -  
Real estate:
                               
Commercial
    -       -       -       -  
Construction
    96,526       24,950       19,842       1,285  
Land development
    13,450       10,594       -       7,143  
Completed lots
    7,872       2,525       804       -  
Residential 1-4 family
    1,010       666       93       2,386  
Installment and other
    684       14       10       170  
Total nonaccruing loans
    119,936       38,767       20,908       10,984  
Other real estate owned
    3,681       633       367       -  
Total nonperforming assets
  $ 123,617     $ 39,400     $ 21,275     $ 10,984  
                                 
Restructured loans
    -       -       -       -  
                                 
Total loans at end of period (1)
  $ 3,807,278     $ 3,716,950     $ 3,612,122     $ 3,193,516  
Total assets at end of period
  $ 4,156,721     $ 4,062,825     $ 3,995,689     $ 3,578,969  
                                 
Total nonaccruing loans to total loans
    3.15 %     1.04 %     0.58 %     0.34 %
Total nonaccruing loans to total assets
    2.89 %     0.95 %     0.52 %     0.31 %
                                 
Total nonperforming assets to total loans
    3.25 %     1.06 %     0.59 %     0.34 %
Total nonperforming assets to total assets
    2.97 %     0.97 %     0.53 %     0.31 %
                                 
(1) Includes loans held for resale.
                               

 

 

The ratio of loans past due over 30 days was 3.21% of total loans at June 30, 2008, compared to 1.67% at March 31, 2008, 0.91% at December 31, 2007, and 0.45% at June 30, 2007.

Results of Operations

Net Interest Income

Net interest income for the quarter ended June 30, 2008, was $44.9 million, a decrease of $1.3 million, or 2.9%, compared to $46.2 million for the quarter ended June 30, 2007.  On a linked quarter basis, net interest income decreased $2.5 million, or 5.3%.
 
For the six months ended June 30, 2008, net interest income was $92.3 million, compared to $88.9 million for six months ended June 30, 2007.
 
Our annualized tax equivalent net interest margin was 4.63% for the quarter ended June 30, 2008, compared to 5.01% for the quarter ended March 31, 2008, and 5.76% for the quarter ended June 30, 2007.  The yield on earning assets decreased 175 basis points to 7.48% for the second quarter 2008, compared to 9.23% for the second quarter 2007.  For the same period, the cost of funds decreased 86 basis points to 3.44% from 4.30%.
 
Our annualized tax equivalent net interest margin was 4.82% for the six months ended June 30, 2008, compared to 5.67% for the six months ended June 30, 2007.  The yield on earning assets decreased 129 basis points to 7.84% for the six months ended June 30, 2008, compared to 9.13% for the six months ended June 30, 2007.  For the same period, the cost of funds decreased 64 basis points to 3.65% from 4.29%.
 
During the second quarter of 2008, we had $1.5 million of interest accruals reversed as a result of loans being placed in a nonaccrual status which lowered the tax equivalent net interest margin by 15 basis points.  Total interest accruals reversed during the first six months of 2008 were $2.1 million, which lowered the year-to-date tax equivalent net interest margin by 11 basis points.
 
Noninterest Income
 
Total noninterest income for the second quarter 2008, increased $1.6 million, or 63.9%, to $4.2 million compared to $2.6 million for the second quarter 2007.  Of this increase, $1.1 million related to the change in gain (loss) on sale of securities.  For the second quarter 2008, we recognized a gain on sale of securities of $144 thousand, compared to a loss of $937 thousand for the second quarter 2007.  During the second quarter 2007, we completed a balance sheet restructure in which we sold lower yielding available for sale securities at a pre-tax loss of $937 thousand and replaced them with higher yielding securities.  Also contributing to the increase in noninterest income was a $332 thousand increase in services charges, primarily account analysis service charges and overdraft fees.
 
On a linked quarter basis, total noninterest income decreased $2.1 million, or 33.4%.  The decrease is primarily attributable to the $2.2 million decrease in gain on sale of securities. During the quarter ended March 31, 2008, we recognized a total gain of $2.3 million related to the sale of our interest in Skagit State Bank stock and a one time gain related to the required liquidation in our stake in Visa, Inc.
 

 
 

 

For the six months ended June 30, 2008, noninterest income increased $4.5 million, or 75.9%, to $10.5 million, compared to $6.0 million for the six months ended June 30, 2007.  For the six months ended June 30, 2008, we recognized $2.5 million in gain on sale of securities, compared to a $937 thousand loss during the six months ended June 30, 2007.  For the period, service charges increased $582 thousand, or 26.9%, and other noninterest income increased $638 thousand, or 16.5%.  The increase in service charges is primarily attributable to an increase in account analysis fees and overdraft fees.  Increases in debit card and ATM fees contributed to the increase in other noninterest income.
 
Noninterest Expense
 
Total noninterest expense was $21.5 million for the second quarter 2008, compared to $19.5 million for the second quarter 2007.  During the second half of 2007, we added six branches and one loan production office, including three branches acquired in the Bank of Salem merger.  The $2.0 million, or 10.4% increase, is mainly attributable to the addition of these offices, with increases in salaries and employee benefits and occupancy expense.  For the period, salaries and employee benefits increased $1.1 million, including an additional $299 thousand related to FAS 123(R) stock based compensation expense.  At June 30, 2008, full time equivalent (FTE) employees totaled 855, up 10.8%, from 772 at June 30, 2007.
 
Total noninterest expense increased $5.4 million, or 14.4%, to $43.1 million for the six months ended June 30, 2008, compared to $37.7 million for the six months ended June 30, 2007.  The majority of the increase is attributable to increases in salaries and employee benefits and occupancy expense, consistent with the quarter-over-quarter change, as noted above.
 
On a linked quarter basis, total noninterest expense remained consistent at $21.5 million.
 
Liquidity
 
Liquidity management involves the ability to meet the cash flow requirements of customers who may be either depositors wanting to withdraw funds, or customers who have credit needs.  Management has the ability to access many sources of liquidity, such as the sale of AFS securities, additional borrowings from the FHLB, and borrowings from the Federal Reserve Bank, brokered deposits or additional borrowings at correspondent banks.  At June 30, 2008, we had $737.0 million of total liquidity available.  We have a policy that liquidity to total assets of 12.5% be maintained as a minimum.  At June 30, 2008, liquidity to total assets was 18.3%.
 
Subsequent to June 30, 2008, the Bank obtained approval from the Federal Reserve Bank to access additional borrowings, secured by valid residential construction loans as collateral, through their Borrower-in-Custody (“BIC”) Program.  This brings available liquidity, including borrowings, to over $1.0 billion.
 

 
 

 

Capital
 
Management constantly monitors the level of capital, considering, among other things, our present and anticipated needs, current market conditions and other relevant factors, including regulatory requirements, which may necessitate changes in the level of capital.  Total capital at June 30, 2008, was $462.2 million, compared to $459.6 million at December 31, 2007, and $381.7 million at June 30, 2007. 
 
During the first six months of 2008, we paid cash dividends totaling $16.8 million, compared to $14.3 million for the first six months of 2007.  In a previously announced press release, the Board of Directors declared a $0.06 per share third quarter cash dividend to shareowners of record as of July 8, 2008, and payable on July 22, 2008.  This was the first time in 34 consecutive quarters that the cash dividend was not increased.  The decision to reduce the quarterly cash dividend came as a result of our concern over the continuing deterioration in the housing market and the impact on many of our borrowers.  In addition, capital preservation was also a contributing factor in reducing the quarterly cash dividend.
 
Regulatory capital ratios as of June 30, 2008, were as follows:
 

   
Tier I
   
Tier 2
   
Leverage
 
   
(Core) Capital
   
(Total) Capital
   
Capital
 
                   
Actual at June 30, 2008
    9.96 %     11.22 %     9.69 %
                         
Regulatory minimum ratio for "well capitalized" purposes
    6.00 %     10.00 %     5.00 %

 
It is our policy that capital be maintained above the point where, for regulatory purposes, it would continue to be classified as “well capitalized.”  As of June 30, 2008, we are in compliance with that policy.
 

 
 

 

Merger Activity
 
 
Washington Banking Company
 
 
As previously announced, on May 29, 2008, we received a notice from Washington Banking Company (“WBCO”) purporting to terminate our merger agreement dated September 26, 2007. For the second quarter 2008, $627 thousand, pre-tax, of costs and expenses incurred in connection with the transaction were expensed.
 
Bank of Salem
 
On November 30, 2007, we closed our merger with Bank of Salem. At the time of closing, Bank of Salem had approximately $199.8 million in loans, $169.5 million in deposits and $27.0 million in capital.  The annual growth comparisons include the impact of the Bank of Salem merger.
 

 
Certain amounts in prior years’ financial statements have been reclassified to conform to the 2008 presentation.  These classifications have not had an effect on previously reported income or total equity.
 
Frontier Financial Corporation is a Washington-based financial holding company providing financial services through its commercial bank subsidiary, Frontier Bank.  Frontier Bank offers a wide range of financial services to businesses and individuals in its market area, including investment and insurance products.
 
CERTAIN FORWARD-LOOKING INFORMATION -- This press release contains certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA"). This statement is included for the express purpose of availing Frontier of the protections of the safe harbor provisions of the PSLRA. The forward-looking statements contained herein are subject to factors, risks and uncertainties that may cause actual results to differ materially from those projected.  The following items are among the factors that could cause actual results to differ materially from the forward-looking statements: general economic conditions, including their impact on capital expenditures; business conditions in the banking industry; recent world events and their impact on interest rates, businesses and customers; the regulatory environment; new legislation; vendor quality and efficiency; employee retention factors; rapidly changing technology and evolving banking industry standards; competitive standards; competitive factors, including increased competition with community, regional and national financial institutions; fluctuating interest rate environments; higher than expected loan delinquencies; and similar matters. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only at the date of this release.
 
Frontier undertakes no obligation to publicly revise or update these forward-looking statements to reflect events or circumstances that arise after the date of this release. Readers should carefully review the risk factors described in this and other documents Frontier files from time to time with the Securities and Exchange Commission, including Frontier’s 2007 Form 10-K.
 

 
 

 

FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except for shares and per share amounts)


   
(Unaudited)
 
   
Three Months Ended
 
   
June 30, 2008
   
March 31, 2008
   
June 30, 2007
 
INTEREST INCOME
                 
Interest and fees on loans
  $ 70,970     $ 75,918     $ 72,612  
Interest on federal funds sold
    10       93       206  
Interest on investments
    1,362       1,489       1,179  
Total interest income
    72,342       77,500       73,997  
INTEREST EXPENSE
                       
Interest on deposits
    23,261       25,725       23,848  
Interest on borrowed funds
    4,190       4,377       3,940  
Total interest expense
    27,451       30,102       27,788  
Net interest income
    44,891       47,398       46,209  
PROVISION FOR LOAN LOSSES
    24,500       9,000       1,850  
Net interest income after provison for loan losses
    20,391       38,398       44,359  
                         
NONINTEREST INCOME
                       
Gain (loss) on sale of securities
    144       2,324       (937 )
Gain on sale of secondary mortgage loans
    377       389       396  
Gain on sale of other real estate owned
    -       12       -  
Service charges on deposit accounts
    1,421       1,325       1,089  
Other noninterest income
    2,256       2,253       2,014  
Total noninterest income
    4,198       6,303       2,562  
                         
NONINTEREST EXPENSE
                       
Salaries and employee benefits
    12,592       13,993       11,461  
Occupancy expense
    2,991       2,590       2,313  
State business taxes
    594       551       491  
FHLB prepayment penalty
    -       -       1,534  
Other noninterest expense
    5,356       4,411       3,707  
Total noninterest expense
    21,533       21,545       19,506  
INCOME BEFORE PROVISION
                       
    FOR INCOME TAXES
    3,056       23,156       27,415  
PROVISION FOR INCOME TAXES
    982       7,655       9,244  
NET INCOME
  $ 2,074     $ 15,501     $ 18,171  
Weighted average number of
                       
shares outstanding for the period
    47,524,543       46,985,320       44,635,972  
Basic earnings per share
  $ 0.04     $ 0.33     $ 0.41  
Weighted average number of diluted shares
                       
outstanding for period
    47,586,950       47,098,645       44,991,139  
Diluted earnings per share
  $ 0.04     $ 0.33     $ 0.40  
                         
Efficiency ratio
    43 %     42 %     35 %
Return on average assets (annualized)
    0.20 %     1.55 %     2.14 %
Return on average equity (annualized)
    1.75 %     13.36 %     18.84 %
Net interest margin (annualized)
    4.59 %     4.98 %     5.72 %
TE Effect
    0.04 %     0.03 %     0.04 %
*TE Net interest margin (annualized)
    4.63 %     5.01 %     5.76 %

*Tax equivalent is a nonGAAP performance measurement used by management in operating the business. Management believes this provides investors with a more accurate picture of the net interest margin for comparative purposes.

 
 

 

FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (Continued)
(In thousands, except for shares and per share amounts)


   
(Unaudited)
 
   
Six Months Ended
 
   
June 30, 2008
   
June 30, 2007
 
INTEREST INCOME
           
Interest and fees on loans
  $ 146,888     $ 140,174  
Interest on federal funds sold
    103       257  
Interest on investments
    2,851       2,089  
Total interest income
    149,842       142,520  
INTEREST EXPENSE
               
Interest on deposits
    48,986       45,572  
Interest on borrowed funds
    8,567       8,020  
Total interest expense
    57,553       53,592  
Net interest income
    92,289       88,928  
PROVISION FOR LOAN LOSSES
    33,500       3,300  
Net interest income after provison for loan losses
    58,789       85,628  
                 
NONINTEREST INCOME
               
Gain (loss) on sale of securities
    2,468       (937 )
Gain on sale of secondary mortgage loans
    766       871  
Gain on sale of other real estate owned
    12       -  
Service charges on deposit accounts
    2,746       2,164  
Other noninterest income
    4,509       3,871  
Total noninterest income
    10,501       5,969  
                 
NONINTEREST EXPENSE
               
Salaries and employee benefits
    26,585       23,202  
Occupancy expense
    5,581       4,959  
State business taxes
    1,145       991  
FHLB prepayment penalty
    -       1,534  
Other noninterest expense
    9,767       6,967  
Total noninterest expense
    43,078       37,653  
INCOME BEFORE PROVISION
               
    FOR INCOME TAXES
    26,212       53,944  
PROVISION FOR INCOME TAXES
    8,637       18,250  
NET INCOME
  $ 17,575     $ 35,694  
Weighted average number of
               
shares outstanding for the period
    47,376,059       45,103,883  
Basic earnings per share
  $ 0.37     $ 0.79  
Weighted average number of diluted shares
               
outstanding for period
    47,464,830       45,510,255  
Diluted earnings per share
  $ 0.37     $ 0.78  
                 
Efficiency ratio
    42 %     36 %
Return on average assets (annualized)
    0.87 %     2.15 %
Return on average equity (annualized)
    7.44 %     18.30 %
Net interest margin (annualized)
    4.78 %     5.63 %
TE Effect
    0.04 %     0.03 %
*TE Net interest margin (annualized)
    4.82 %     5.66 %

 
 

 


FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands, except for shares and per share amounts)


   
(Unaudited)
         
(Unaudited)
 
   
June 30,
   
December 31,
   
June 30,
 
   
2008
   
2007
   
2007
 
ASSETS
                 
Cash and due from banks
  $ 68,161     $ 99,102     $ 91,993  
Federal funds sold
    18,265       5       91,501  
Securities
                       
Available for sale, at fair value
    108,796       131,378       98,912  
Held to maturity, at amortized cost
    3,740       3,743       3,599  
Total securities
    112,536       135,121       102,511  
                         
Loans held for resale
    3,793       6,227       7,435  
Loans
    3,803,485       3,605,895       3,186,081  
Allowance for loan losses
    (78,722 )     (53,995 )     (42,846 )
Net loans
    3,728,556       3,558,127       3,150,670  
                         
Premises and equipment, net
    52,212       47,293       35,756  
Intangible assets
    78,009       78,150       41,101  
Federal Home Loan Bank (FHLB) stock
    21,698       18,738       15,030  
Bank owned life insurance
    24,236       23,734       22,660  
Other real estate owned
    3,681       367       -  
Other assets
    49,367       35,052       27,747  
Total assets
  $ 4,156,721     $ 3,995,689     $ 3,578,969  
                         
LIABILITIES
                       
Deposits
                       
Noninterest bearing
  $ 389,275     $ 390,526     $ 391,591  
Interest bearing
    2,907,051       2,552,710       2,441,504  
Total deposits
    3,296,326       2,943,236       2,833,095  
                         
Federal funds purchased and
                       
  securities sold under repurchase agreements
    38,005       258,145       15,231  
Federal Home Loan Bank advances
    330,249       298,636       310,118  
Junior subordinated debentures
    5,156       5,156       5,156  
Other liabilities
    24,773       30,904       33,703  
Total liabilities
    3,694,509       3,536,077       3,197,303  
                         
SHAREOWNERS' EQUITY
                       
Preferred stock, no par value; 10,000,000 shares authorized
    -       -       -  
Common stock, no par value; 100,000,000 shares authorized
    254,703       252,292       186,127  
Retained earnings
    208,221       202,453       190,354  
Accumulated other comprehensive income (loss), net of tax
    (712 )     4,867       5,185  
Total shareowners' equity
    462,212       459,612       381,666  
Total liabilities and shareowners' equity
  $ 4,156,721     $ 3,995,689     $ 3,578,969  
                         
Shares outstanding at end of period
    47,010,131       46,950,878       44,028,192  
                         
Book value
  $ 9.83     $ 9.79     $ 8.67  
Tangible book value
  $ 8.17     $ 8.12     $ 7.74  


 
 

 

FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
SELECTED OTHER FINANCIAL INFORMATION AND RATIOS
(In thousands)


   
For the Period Ended
 
   
June 30, 2008
   
March 31, 2008
   
December 31, 2007
   
June 30, 2007
 
Loans by Type
                       
Commercial and industrial
  $ 448,360     $ 416,154     $ 402,569     $ 383,930  
Real Estate:
                               
Commercial
    1,048,321       1,025,047       1,003,916       914,312  
Construction
    1,048,552       1,084,264       1,062,662       908,701  
Land development
    598,931       565,690       537,410       459,688  
Completed lots
    236,004       245,500       249,573       203,392  
Residential 1-4 family
    357,650       312,545       288,571       259,621  
Installment and other loans
    69,460       67,750       67,421       63,872  
Total loans
  $ 3,807,278     $ 3,716,950     $ 3,612,122     $ 3,193,516  
                                 
Allowance for Loan Losses
                               
Balance at beginning of period
  $ 57,658     $ 57,658     $ 44,195     $ 44,195  
Provision for loan losses
    33,500       9,000       11,400       3,300  
Loans charged-off
                               
Commercial and industrial
    (381 )     (138 )     (1,183 )     (406 )
Real Estate:
                               
Commercial
    -       -       -       -  
Construction
    (9,275 )     (2,652 )     (201 )     -  
Land development
    -       (250 )     -       -  
Completed lots
    -       (26 )     -       -  
Residential 1-4 family
    -       -       (300 )     -  
Installment and other loans
    (106 )     (24 )     (222 )     (67 )
Total charged-off loans
    (9,762 )     (3,090 )     (1,906 )     (473 )
Recoveries
                               
Commercial and industrial
    226       94       845       81  
Real Estate:
                               
Commercial
    -       -       -       -  
Construction
    10       7       -       -  
Land development
    -       -       -       -  
Completed lots
    -       -       -       -  
Residential 1-4 family
    -       -       -       -  
Installment and other loans
    11       7       141       74  
Total recoveries
    247       108       986       155  
Net (charge-offs) recoveries
    (9,515 )     (2,982 )     (920 )     (318 )
Balance before portion identified
                               
for undisbursed loans
    81,643       63,676       54,675       47,177  
Reserve acquired in merger
    -       -       2,983       -  
Portion of reserve identified for
                               
undisbursed loans
    (2,921 )     (3,399 )     (3,663 )     (4,331 )
Balance at end of period
  $ 78,722     $ 60,277     $ 53,995     $ 42,846  
                                 
Allowance for loan losses as a percentage
                               
of total loans outstanding, including
                               
loans held for resale
    2.07 %     1.62 %     1.49 %     1.34 %
Allowance for loan losses as a percentage
                               
of total nonperforming assets
    63.68 %     152.99 %     253.80 %     390.08 %

 

 
FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
SELECTED OTHER FINANCIAL INFORMATION AND RATIOS (Continued)
(In thousands)
 
 
   
For the Period Ended
 
   
June 30, 2008
   
March 31, 2008
   
December 31, 2007
   
June 30, 2007
 
Nonperforming Assets
                       
Nonaccruing loans
  $ 119,936     $ 38,767     $ 20,908     $ 10,984  
Other real estate owned
    3,681       633       367       -  
Total nonperforming assets
    123,617       39,400       21,275       10,984  
                                 
Restructured loans
    -       -       -       -  
Total impaired assets
  $ 123,617     $ 39,400     $ 21,275     $ 10,984  
                                 
Total NPA to total loans
    3.25 %     1.06 %     0.59 %     0.34 %
Total NPA to total assets
    2.97 %     0.97 %     0.53 %     0.31 %
Total impaired assets to total assets
    2.97 %     0.97 %     0.53 %     0.31 %
                                 
Interest Bearing Deposits
                               
Money market, sweep and NOW accounts
  $ 600,023     $ 733,551     $ 745,780     $ 763,691  
Savings
    367,731       305,982       254,722       275,789  
Time deposits
    1,939,297       1,750,346       1,552,208       1,402,024  
Total interest bearing deposits
  $ 2,907,051     $ 2,789,879     $ 2,552,710     $ 2,441,504  
                                 
Capital Ratios
                               
Tier 1 leverage ratio
    9.69 %     9.94 %     10.55 %     10.14 %
Tier 1 risk-based capital ratio
    9.96 %     10.13 %     10.13 %     10.07 %
Total risk-based capital ratio
    11.22 %     11.38 %     11.38 %     11.32 %
 

   
For the Three Months Ended
 
Performance Ratios
 
June 30, 2008
   
March 31, 2008
   
December 31, 2007
   
June 30, 2007
 
Return on average assets *
    0.20 %     1.55 %     1.95 %     2.14 %
Return on average shareowners' equity *
    1.75 %     13.36 %     17.21 %     18.84 %
Efficiency ratio
    43 %     42 %     37 %     35 %
                                 
Average assets
  $ 4,087,538     $ 3,989,829     $ 3,698,795     $ 3,397,249  
Average shareowners' equity
  $ 473,750     $ 464,248     $ 418,696     $ 385,766  
 
   
For the Period Ended
 
   
June 30, 2008
   
March 31, 2008
   
December 31, 2007
   
June 30, 2007
 
Return on average assets *
    0.87 %     1.55 %     2.13 %     2.15 %
Return on average shareowners' equity *
    7.44 %     13.36 %     18.76 %     18.30 %
Efficiency ratio
    42 %     42 %     37 %     36 %
                                 
Average assets
  $ 4,041,808     $ 3,989,829     $ 3,470,564     $ 3,325,459  
Average shareowners' equity
  $ 472,369     $ 464,248     $ 394,176     $ 390,087  
                                 
* Annualized
                               



The following information was filed by Frontier Financial Corp on Thursday, July 24, 2008 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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