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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 31, 1998
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Frontier Financial Corporation
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(Exact Name of Registrant as Specified in Charter)
Washington 0-15540 91-1223535
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(State or other jurisdiction (Commission (IRS Employer Identi-
of incorporation) File Number) fication Number)
332 SW Everett Mall Way, Everett, Washington 98204
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(Address of principal executive offices/Zip Code)
Registrant's telephone number, including area code: (425) 514-0719
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ITEM 5. Other Events
On July 31, 1998, Frontier Financial Corporation ("Frontier") and its
wholly-owned subsidiary, Frontier Bank, entered into an Agreement and Plan of
Mergers ("Agreement") with Valley Bancorporation ("Valley") and its wholly-owned
subsidiary, Bank of Sumner, pursuant to which Frontier will acquire all of the
outstanding stock of Valley. The Agreement provides that shareholders of Valley
will receive for each share of Valley common stock (i) 0.8625 shares of Frontier
stock if the Frontier Average Closing Price is equal to or greater than $46 and
less than $56; (ii) the result obtained by dividing 39.6750 by the Frontier
Average Closing Price if the Frontier Average Closing Price is less than $46;
(iii) the result obtained by dividing $48.30 by the Frontier Average Closing
Price if the Frontier Average Closing Price is equal to or greater than $56 and
less than $59.07; or (iv) 0.8177 if the Frontier Average Closing Price is equal
to or greater than $59.07. Frontier will also assume all outstanding Valley
stock options. Frontier anticipates issuing a maximum of 843,868 shares of
common stock in the transaction. The transaction will be accounted for using the
pooling of interests method of accounting.
Consummation of the acquisition is subject to several conditions,
including receipt of applicable regulatory approval, and approval by Valley's
shareholders. For information regarding the proposed
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transaction, reference is made to the press release dated July 31, 1998, which
is attached hereto as Exhibit 99 and incorporated herein by reference.
ITEM 7. Financial Statements, Pro Forma Financial Information And Exhibits
(a) Financial statements - not applicable.
(b) Pro forma financial information - not applicable.
(c) Exhibits:
99 Press Release
SIGNATURES
Pursuant to the requirements of the Security Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: August 5, 1998
FRONTIER FINANCIAL CORPORATION
By: /s/ Robert J. Dickson
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Its: Chief Executive Officer
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FRONTIER FINANCIAL CORPORATION Contact:
332 SW Everett Mall Way Robert J. Dickson
Everett, WA 98204 President & CEO
(425) 514-0700
NEWS RELEASE
For Release July 31, 1998 - 8:00 a.m. PST
FRONTIER FINANCIAL CORPORATION ANNOUNCES DEFINITIVE AGREEMENT
TO MERGE WITH VALLEY BANCORPORATION
EVERETT, WASHINGTON - July 31, 1998 - Frontier Financial Corporation
(NASDAQ: FTBK) today announced it has signed a definitive agreement to merge
with Valley Bancorporation ("Valley") of Sumner, Washington, and its subsidiary
the Bank of Sumner. Upon completion of the transaction, Valley will be merged
into Frontier, and the Bank of Sumner will be merged into Frontier Bank,
Frontier's subsidiary, with all branches of the Bank of Sumner assuming the
Frontier name. This will be the fifth acquisition for Frontier, or Frontier
Bank, since the bank opened twenty years ago in September 1978.
Bank of Sumner was founded in 1975 and is a community bank. At June 30,
1998, assets were approximately $97 million, and equity of approximately $10
million. The Bank of Sumner operates four branches located in the communities of
Sumner, Puyallup, Orting and Buckley. Each office is full-service, and has an
ATM. The Bank of Sumner's lending operations are mainly commercial in nature,
concentrating on business, real estate and consumer loans within Pierce County.
For the period ending June 30, 1998, the Bank of Sumner earned $959
thousand representing a 2.07% return on average assets and a 19.8% return on
equity.
The transaction is structured so that the exchange ratio will be
determined by the average high/low price of Frontier stock from the date of the
Agreement until 10 days prior to consummation of the merger. Depending on the
average price, the exchange ratio could be from .8177 shares of Frontier for one
share of Valley (at an average price of $59.07 or greater), to .9046 shares of
Frontier for one share of Valley (at an average price of $43.86 or less). This
would make the price of the merger from $38.8 million (at a price of $43.86) to
$47.3 million (at a price of $59.07). However, the price could exceed $47.3
million in the event the average price of Frontier stock exceeds $59.07.
At the current price of Frontier stock, the transaction is valued at
$47.3 million, not including the value of outstanding stock options. The
transaction value represents 23 times Valley's estimated earnings for 1998.
Frontier stock closed at $59 per share yesterday and trades at 4.3
times book value and 24 times estimated 1998 earnings. The transaction will be
accretive to the earnings of the combined companies in 1999.
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The transaction has been approved by the Board of Directors of both
companies. The merger is expected to be accounted for as a pooling of interests.
It is anticipated that the merger will be completed by year-end, following the
approval of applicable regulatory authorities and the shareholders of Valley.
"This acquisition reflects Frontier's commitment to further expanding
its presence along the Interstate 5 corridor into Pierce County," said Bob
Dickson, President and CEO of Frontier.
Following the transaction, Linda A. Dryden, the President and Chief
Executive Officer of Valley and the Bank of Sumner, will serve as Senior Vice
President and Manager of the Pierce County Division of Frontier Bank.
"The combination with Frontier is a natural for us. Both companies are
very profitable and focus on customer service and commercial lending. We feel
that our shareowners, customers, employees and the communities we serve all
benefit from this merger," said Ms. Dryden.
This combination will provide customers with expanded technological
advances, including electronic banking, an expanded ATM network, debit and
credit cards, and an expanded branch network.
"The Bank of Sumner merger gives us our first opportunity to serve the
rapidly growing communities in Pierce County," said Mr. Dickson, who has pledged
to the communities in which the Bank of Sumner operates that they will continue
to be served by the same local folks.
The operating results of both Frontier and Valley over the past few
years have been quite similar. Both have had a return on assets (ROA) in the
neighborhood of 2.00%, and both have had a return on equity (ROE) of 18.0% to
20.0% (both of which are considered excellent for the industry). The combination
of these well run companies will further enjoy the cost savings associated with
data processing and marketing combinations, expanded service lines, including
insurance and financial services, and long-term real estate loan originations
and a sizeable lending limit. These factors will make the combination the
largest, community oriented commercial bank headquartered in Western Washington.
Frontier, headquartered in Everett, has 19 branch offices located in
Snohomish, King and Skagit counties. At the end of June 1998, consolidated
assets were $943.9 million, deposits were $773.5 million, and loans were $731.2
million. The reserve for loan losses at $15.6 million represents 2.14% of total
loans, and non-performing assets were $4.5 million, or .61% of total loans. Net
income for the six months ended June 30, 1998 was $9.5 million, an increase of
13.8% over the same period in 1997. At the end of June 1998, Frontier completed
its 58th consecutive quarter in which earnings exceeded the previous years
comparable quarter.
The combined entity will have assets exceeding $1.0 billion and will
have 23 offices covering 4 counties in Western Washington.
