Frontier Financial Corporation Announces Second Quarter 2008 Results

EVERETT, WA, Jul 22 (MARKET WIRE) --
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, March 31, December June 30,
2008 2008 31, 2007 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, 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, March 31, June 30,
2008 2008 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 non GAAP 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, June 30,
2008 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, March 31, December 31, June 30,
2008 2008 2007 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, March 31, December 31, June 30,
2008 2008 2007 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
--------------------------------------------------
June 30, March 31, December 31, June 30,
Performance Ratios 2008 2008 2007 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, March 31, December June 30,
2008 2008 31, 2007 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

Contact:

John J. Dickson
Frontier Financial Corporation
President and CEO
425-514-0700

Lyle E. Ryan
Frontier Bank
President and CBO
425-514-0700

Copyright 2008, Market Wire, All rights reserved.

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