<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the Quarter Ended September 30, 2000
Commission File Number 0-15540
FRONTIER FINANCIAL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
Washington 91-1223535
--------------------------------- ----------------------------------
(State or Other Jurisdiction of (IRS Employer Identification
Incorporation of Organization) Number)
</TABLE>
332 SW Everett Mall Way
P.O. Box 2215
Everett, Washington 98203
(Address of Principal Administrative Offices) (Zip Code)
(425)-514-0700
(Registrants Telephone Number, Including Area Code)
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock (No Par Value)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
This issuer has one class of common stock (no par value) with 19,725,457 shares
outstanding as of September 30, 2000.
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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
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INDEX TO QUARTERLY REPORT ON FORM 10-Q
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<TABLE>
<CAPTION>
Page
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<S> <C>
PART I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheet - September 30, 2000,
and December 31, 1999 1
Consolidated Statement of Income - Three and Nine Months
Ended September 30, 2000 and 1999 2
Consolidated Statement of Cash Flows - Nine Months
Ended September 30, 2000 and 1999 3-4
Notes to Consolidated Financial Statements 5-8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8-18
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 18
PART II - Other Information
Item 1. Legal Proceedings 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 20
</TABLE>
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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEET
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<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------ ------------
(In thousands, except shares)
<S> <C> <C>
ASSETS
Cash & Balances Due from Depository Institutions $ 58,085 $ 53,098
Securities:
Available for Sale - Market Value 119,072 122,872
Held to Maturity - Amortized Cost
(Fair Value 9-30-00: $31,203; 12-31-99: $31,629) 30,672 32,162
------------ ------------
Total Securities 149,744 155,034
Federal Funds Sold 13,195 5,145
Loans:
Loans, Net of Unearned Income 1,378,555 1,187,291
Less: Allowance for Loan Losses (22,293) (21,007)
------------ ------------
Net Loans 1,356,262 1,166,284
Premises & Equipment, Net 26,783 26,584
Other Real Estate Owned 507 821
Intangible Assets 1,295 1,410
Other Assets 19,342 17,035
------------ ------------
TOTAL ASSETS $ 1,625,213 $ 1,425,411
============ ============
LIABILITIES
Deposits:
Non-Interest Bearing $ 189,747 $ 172,602
Interest Bearing 1,106,343 951,114
------------ ------------
Total Deposits 1,296,090 1,123,716
Federal funds Purchased and
Securities sold under repurchase agreements 63,499 29,192
Federal Home Loan Bank advances 65,169 95,189
Other Liabilities 14,876 9,054
------------ ------------
TOTAL LIABILITIES 1,439,634 1,257,151
------------ ------------
SHAREOWNERS' EQUITY
Common Stock 93,600 93,420
Surplus 7,375 6,966
Retained Earnings 87,746 71,396
Accumulated other comprehensive income (loss),
net of tax effect (3,142) (3,522)
------------ ------------
TOTAL SHAREOWNERS' EQUITY 185,579 168,260
------------ ------------
TOTAL LIABILITIES AND SHAREOWNERS' EQUITY $ 1,625,213 $ 1,425,411
============ ============
Shares outstanding at the end of the period 19,725,457 19,797,277
</TABLE>
The accompanying notes are an integral part of
these financial statements.
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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
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CONSOLIDATED STATEMENT OF INCOME
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<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------- -------------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
------------ ------------ ------------ ------------
(In Thousands, Except for Per Share Amounts)
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest & Fees on Loans $ 34,559 $ 27,450 $ 97,405 $ 77,763
Interest on Investments 2,712 2,880 8,201 9,290
------------ ------------ ------------ ------------
Total Interest Income 37,271 30,330 105,606 87,053
------------ ------------ ------------ ------------
INTEREST EXPENSE
Interest on Deposits 14,449 10,078 39,029 29,543
Interest on Borrowed Funds 2,227 1,406 6,536 3,751
------------ ------------ ------------ ------------
Total Interest Expense 16,676 11,484 45,565 33,294
------------ ------------ ------------ ------------
Net Interest Income 20,595 18,846 60,041 53,759
------------ ------------ ------------ ------------
PROVISION FOR LOAN LOSSES (345) (1,151) (907) (1,739)
------------ ------------ ------------ ------------
NONINTEREST INCOME
Securities Gains (Losses) -- -- -- --
Service Charges on Deposit Accounts 662 703 1,970 2,011
Other Noninterest Income 1,526 1,805 3,534 4,188
------------ ------------ ------------ ------------
Total Noninterest Income 2,188 2,508 5,504 6,199
------------ ------------ ------------ ------------
NONINTEREST EXPENSE
Salaries & Employee Benefits 5,505 5,424 16,317 15,346
Occupancy Expense 1,486 1,263 4,172 3,700
Other Noninterest Expense 2,567 2,360 7,471 7,171
------------ ------------ ------------ ------------
Total Noninterest Expense 9,558 9,047 27,960 26,217
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAX 12,880 11,156 36,678 32,002
PROVISION FOR INCOME TAX (4,477) (3,703) (12,470) (10,871)
------------ ------------ ------------ ------------
NET INCOME $ 8,403 $ 7,453 $ 24,208 $ 21,131
============ ============ ============ ============
Average Number of Shares Outstanding
for the Period 19,719,073 19,784,892 19,734,397 19,776,306
Basic earnings per share $ 0.43 $ 0.38 $ 1.23 $ 1.07
============ ============ ============ ============
Diluted shares 19,808,960 19,941,168 19,824,284 19,932,582
Diluted earnings per share $ 0.42 $ 0.37 $ 1.22 $ 1.06
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of
these financial statements.
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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
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CONSOLIDATED STATEMENT OF CASH FLOWS
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<TABLE>
<CAPTION>
SIX MONTHS ENDED
-----------------------------
Sept 30, 2000 Sept 30, 1999
------------- -------------
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 24,208 $ 21,131
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 1,549 1,978
Provision for loan losses 907 1,739
FHLB stock dividends (583) (607)
Deferred taxes 164 --
Increase in income taxes payable 1,837 (475)
Decrease in interest receivable (2,655) (1,966)
Increase in interest payable 2,724 152
Loss on sale of fixed assets 91 70
Loans originated for sale (11,110) (16,998)
Proceeds from sale of loans 11,139 18,621
Other operating activities 1,159 2,797
--------- ---------
Net cash provided by operating activities 29,430 26,442
--------- ---------
CASH FLOWS FROM INVESTMENT ACTIVITIES
Net cash flows from Fed Funds Sold (8,050) 41,629
Proceeds from maturities of AFS & HTM securities 8,950 29,022
Purchase of AFS securities (2,500) (17,914)
Purchase of HTM securities -- (8,536)
Cash dividends paid (5,783) (5,051)
Net cash flows from loan activities (190,491) (157,486)
Purchases of premises and equipment (1,694) (1,475)
Proceeds from the sale of other real estate owned 314 223
Purchase of treasury stock (2,147) (411)
Cash invested in other real estate (49)
Other investing activities -- 24
--------- ---------
Net cash used by investing activities (201,401) (120,024)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in noninterest bearing deposits 25,972 40,083
Net change in interest bearing deposit 146,402 6,538
Proceeds from issuance of stock 694 1,222
Principal payments on long-term debt (310) (445)
Advances from FHLB 246,421 61,600
Repayment of FHLB advances (275,806) (36,591)
Net change in Federal Funds purchased 33,673 29,711
Other financing activities (88) (411)
--------- ---------
Net cash provided by financing activities 176,958 101,707
--------- ---------
</TABLE>
(Continued on next page)
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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
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CONSOLIDATED STATEMENT OF CASH FLOWS
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<TABLE>
<CAPTION>
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND DUE FROM BANKS $ 4,987 $ 8,125
CASH AND DUE FROM BANKS AT BEGINNING
OF YEAR 53,098 52,316
------- -------
CASH AND DUE FROM BANKS AT END
OF PERIOD $58,085 $60,441
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $42,695 $33,146
Cash paid during the period for income taxes 10,326 7,735
Real estate taken as settlement for loan obligations -- 350
</TABLE>
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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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NOTE 1. PRINCIPLES OF CONSOLIDATION - RESULTS OF OPERATIONS
The consolidated financial statements of Frontier Financial Corporation include
the accounts of Frontier Financial Corporation and its subsidiaries (the
"Corporation"). All significant intercompany accounts and transactions have been
eliminated. The consolidated financial statements have not been audited and have
been prepared substantially consistent with the accounting principles applied in
the 1999 Annual Report on Form 10-K for the year ended December 31, 1999. In the
opinion of management, the consolidated financial statements reflect all
adjustments necessary for a fair statement of the results for the interim
periods presented. Operating results for the nine months ended September 30,
2000 are not necessarily indicative of the results that may be expected for
year-end December 31, 2000.
Restatement of 1999 amounts were made in order to conform to
pooling-of-interests accounting, none of which affect previously reported net
income.
The bank subsidiary of Frontier Financial Corporation is Frontier Bank.
NOTE 2. MERGER CONSUMMATED
In July 2000, Liberty Bay Financial Corporation and Subsidiary (LB) was merged
into the Corporation. In connection with this transaction, the Corporation
issued 2,251,690 shares of common stock to the shareowners of LB in an exchange
that gave LB shareowners 10.5 shares of the Corporation's stock for one share of
LB stock. The merger has been accounted for as a pooling-of-interests pursuant
to generally accepted accounting principles. Accordingly, the Corporation's
consolidated financial statements have been restated for all periods prior to
the acquisition to include the financial position, results of operations, and
cash flow of LB. At the date of acquisition, LB had total assets of $182.3
million, revenue of $9.8 million, and net income of $1.6 million. The effects of
the restatement of revenues, net income and shareowner's equity are shown below:
<TABLE>
<CAPTION>
September 30,
In Thousands 1999
------------ ------------
<S> <C>
Revenues
The Corporation (as previously reported) $ 80,673
LB 12,579
--------
As Restated $ 93,252
========
Net Income
The Corporation (as previously reported) $ 19,144
LB 1,987
--------
As Restated $ 21,131
========
Shareowner's Equity
The Corporation (as previously reported) $142,064
LB 20,426
--------
As Restated $162,490
========
</TABLE>
NOTE 3. ACCOUNTING PRONOUNCEMENTS
In June 1999, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 137 entitled Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of SFAS Statement No. 133. The statement amends SFAS No. 133 to defer its
effective date to all fiscal quarters of all fiscal years beginning after June
15, 2000. Management does not believe the adoption of this statement will have a
material effect on its financial condition or results of operations.
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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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NOTE 4. INVESTMENT SECURITIES
The investment portfolio of the Corporation is classified in one of two groups:
1) securities Held-to-Maturity (HTM), and 2) securities Available-For-Sale
(AFS).
Securities that are classified as HTM, are carried at cost, adjusted for
amortization of premiums and accretion of discounts which are recognized as
adjustments to income. With some exceptions, securities classified as HTM may
only be sold within three months of maturity.
Securities that are classified as AFS, are carried at fair value, adjusted for
amortization of premiums and accretion of discounts which are recognized as
adjustments to income. Unrealized gains and losses are excluded from earnings
and reported as a separate component of equity capital. AFS securities may be
sold at any time.
Gains and losses on both HTM and AFS securities that are disposed of prior to
maturity, are based on the net proceeds and the adjusted carrying amount of the
specific security sold.
The tables below display the characteristics of the AFS and HTM portfolios as of
September 30, 2000:
AGGREGATE FAIR VALUE AND AMORTIZED COST OF INVESTMENTS
(In thousands)
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Aggregate
Cost Gains Losses Fair Value
----------------------------------------------------
<S> <C> <C> <C> <C>
AFS SECURITIES
Equities $ 15,967 $ -- $ (132) $ 15,835
U.S. Treasuries 251 29 -- 280
U.S. Agencies 84,274 4 (4,478) 79,800
Corporate securities 23,359 32 (281) 23,110
Municipal securities 50 (3) 47
----------------------------------------------------
Totals 123,901 65 (4,894) 119,072
----------------------------------------------------
HTM SECURITIES
Municipal securities 28,664 600 (12) 29,252
Corporate Securities 2,008 -- (57) 1,951
----------------------------------------------------
Totals 30,672 600 (69) 31,203
----------------------------------------------------
Totals $154,573 $ 665 $ (4,963) $150,275
====================================================
</TABLE>
MATURITY SCHEDULE OF SECURITIES
<TABLE>
<CAPTION>
Available for Sale Held to Maturity
Amortized Fair Amortized Fair
MATURITY Cost Value Cost Value
-------- ----------------------------------------------------
<S> <C> <C> <C> <C>
0-1 Yr $ 33,187 $ 32,718 $ 1,499 $ 1,488
1-5 Yrs 21,832 21,423 9,286 9,365
5-10 Yrs 62,954 59,137 18,911 19,403
Over 10 Yrs 5,928 5,794 976 947
----------------------------------------------------
$123,901 $119,072 $ 30,672 $ 31,203
====================================================
</TABLE>
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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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NOTE 4 - (Continued)
CHANGES IN AFS AND HTM SECURITIES
<TABLE>
<S> <C>
For the Quarter Ended September 30, 2000
AFS SECURITIES
Proceeds From Sales $ 0
Gross Realized Gains --
Gross Realized Losses --
Gross Gains & Losses Included In Earnings
Transfers To the Trading Category --
Net Change In Unrealized Holding Gains Or
Losses Included In The Separate
Components of Shareowners' Equity $209
HTM SECURITIES
Sale Or Transfers From This Category $ 0
</TABLE>
NOTE 5. LOANS
The following is an analysis of the loan portfolio by major type of loans:
<TABLE>
<CAPTION>
Sept 30, 2000 Dec 31, 1999
------------- ------------
<S> <C> <C>
Commercial $ 286,588 $ 240,470
Real Estate:
Commercial 576,532 508,382
Construction 353,089 290,433
Residential 125,515 115,950
Installment 43,604 38,178
----------- -----------
1,385,328 1,193,413
Unearned Fee Income (6,773) (6,122)
----------- -----------
Total Loans $ 1,378,555 $ 1,187,291
=========== ===========
</TABLE>
NOTE 6. EQUITY
A two-for-one stock split and a $.25 per share, post-split annual cash dividend
was paid on March 19, 1999. Please see Item 5, page 19.
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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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NOTE 7. SUBSEQUENT EVENTS
On October 23, 2000 the Corporation entered into a definitive agreement to merge
with Interbancorp, Inc. of Duvall, Washington, and its wholly-owned subsidiary
Inter Bank. Inter Bank has two offices; Valley Community Bank and Kirkland Bank
of Commerce. Inter Bank has approximately $75 million in assets, $55 million in
loans, $69 million in deposits and $5.3 million in shareowner's equity. The Bank
has recently received regulatory approval to open a third office in Totem Lake.
Frontier will exchange .75 shares of its common stock for each Interbancorp Inc.
share. The transaction will be accounted for using purchase accounting.
--------------------------------------------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
--------------------------------------------------------------------------------
AND RESULTS OF OPERATIONS.
--------------------------------------------------------------------------------
HIGHLIGHTS
Please note that prior years numbers have been restated due to a merger in the
third quarter to comply with pooling of interests method of accounting.
Consolidated net income of Frontier Financial Corporation ("the Corporation")
for the third quarter of 2000 was $8.4 million versus $7.5 million for the third
quarter of 1999, or up 12.7%. The reason for the increase in net income in 2000
was due to an increase in net interest income of $1.7 million, or 9.3% and a
lesser loan loss provision of $.8 million. This marks the sixty-seventh
consecutive quarter in which Frontier's earnings exceeded the prior years'
comparable quarter. In the discussion below, comparison is with the third
quarter of 2000 and 1999, unless otherwise indicated.
Annualized return on average assets (ROA) was 2.08% in 2000 and 2.14% in 1999.
Annualized return on average stockholder's equity (ROE) in 2000 was 18.03%, as
compared to 18.34% in 1999. Diluted earnings per share were $.42 for 2000, and
$.37 for 1999.
FINANCIAL REVIEW
MARKET AREA
Frontier Financial Corporation headquartered in Everett, Washington, is the
parent of Frontier Bank, which operates thirty-four banking offices in Clallam,
Jefferson, King, Kitsap, Pierce, Snohomish, Skagit and Whatcom counties. A
merger between the corporation and Liberty Bay Financial Corporation was
consummated on July 20, 2000, which added eight branch offices to the
Corporation franchise. These eight counties will be considered the market or
service area of the Corporation. The Boeing airplane manufacturing plant for
747's and 777's is located in the city of Everett, as is the headquarters of the
Corporation. Microsoft, the world's largest software company, is located in
Redmond, Washington, 25 miles from Everett. The Bank also has a branch office in
Redmond.
BALANCE SHEET - September 30, 2000/December 31, 1999
During the first nine months of 2000 investment securities decreased $5.3
million, or 3.4%. For the last few years management has been allowing the
securities held by the bank to run off for the purpose of funding loan growth.
Investment securities would have declined more, except that the parent company
has purchased securities in the first half of this year. During the last quarter
it is expected that the investment securities will continue to decline.
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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
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Management's Discussion and Analysis of Financial Condition and Results of
Operations
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Balance Sheet - (Continued)
--------------------------------------------------------------------------------
Federal funds sold have increased during the year, mainly to either fund growth
of the loan portfolio or to pay down borrowings. The timing or ability to reduce
debt did not occur prior to quarter end.
The loan portfolio has had exceptionally strong growth this year. Loans, net of
unearned income, rose $191.3 million or 16.1%. This compares to a first nine
months growth in loans in 1999 of $156.5 million, or 15.5%. The increase in 2000
is attributable to strong local economy and business development efforts. The
loan-to-deposit ratio at the end of the first nine months of 2000 increased to
106.4% from 105.7% at year-end 1999.
The table below indicates the changes in the mix of the loan portfolio at the
end of the periods shown, net of deferred loan fees:
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
-------------------------- --------------------------
Amount % of total Amount % of total
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Installment $ 43,629 3.2% $ 38,200 3.2%
Commercial 285,965 20.7% 240,058 20.2%
Real estate commercial 575,605 41.8% 507,006 42.7%
Real estate construction 348,953 25.3% 286,478 25.1%
Real estate residential 124,403 9.0% 115,549 9.7%
---------- ---------- ---------- ----------
Total $1,378,555 100.0% $1,187,291 100.0%
========== ========== ========== ==========
</TABLE>
As a percent, commercial loans increased from 20.2% to 20.7%. This increase was
due to management's recognition that commercial loans should receive more
emphasis than the real estate portion of the portfolio. It should be noted that
numerous loans classified as real estate are commercial loans secured by real
estate. Real estate commercial loans declined .9%, offsetting the increase in
commercial loans.
Please see Page 15 of this report for a discussion regarding credit
concentrations.
Funding of asset growth during the first nine months was accomplished by
increased interest bearing deposits of $155.2 million; increased non-interest
bearing deposits of $17.1 million, and increased federal funds purchased and
repurchase agreements of $34.3 million. The cost of funding asset growth reduced
the taxable equivalent (TE) net interest margin (NIM) to 5.46%, a decrease from
5.84% in the same period of 1999. It is expected that the Corporation will
continue to rely on certificates of deposit (cd's) and FHLB advances for the
majority of funding going forward.
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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
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Management's Discussion and Analysis of Financial Condition and Results of
Operations
--------------------------------------------------------------------------------
Balance Sheet - (Continued)
--------------------------------------------------------------------------------
BALANCE SHEET - September 30, 2000/September 30, 1999
Below, are abbreviated balance sheets at the end of the respective quarters
which indicates the changes that have occurred in the major portfolios of the
Corporation over the past year:
<TABLE>
<CAPTION>
At September 30, 2000 1999 $ Change % Change
---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Loans $1,378,555 $1,164,124 $ 214,431 18.4%
Investments 149,744 172,400 $ (22,656) -13.1%
Federal Funds Sold 13,195 29,255 $ (16,060) -54.9%
---------- ---------- ---------- ----------
Total Earning Assets $1,541,494 $1,365,779 $ 175,715 12.9%
========== ========== ========== ==========
Total Assets $1,625,213 $1,449,804 $ 175,409 12.1%
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
At September 30, 2000 1999 $ Change % Change
---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Noninterest bearing deposits $ 189,747 $ 177,061 $ 12,686 7.2%
Interest bearing deposits 1,106,343 962,081 144,262 15.0%
---------- ---------- ---------- ----------
Total deposits 1,296,090 1,139,142 156,948 13.8%
---------- ---------- ---------- ----------
Federal Funds purchased
and Repurchase Agreements 63,499 61,724 1,775 2.9%
FHLB borrowings 65,169 75,195 (10,026) -13.3%
Capital $ 185,579 $ 162,490 $ 23,089 14.2%
</TABLE>
At quarter end 2000, loans were up $214.4 million, or 18.4% over the previous
year. This increase in loans over the last year was due, for the most part, to
the economic growth of the region, expansion by the Corporation and continued
emphasis on loan development. The annualized growth rate for the first nine
months of 2000 versus the same period in 1999, was 21.5% versus 20.7%
respectively.
Investments decreased $22.7 million, or 13.1% for the period. This continuing
trend in the runoff has been planned by management to use maturity cash flows
from the investment portfolio to fund loan portfolio growth. This plan to change
the mix of assets is due to the higher yields available in loans rather than
investments. Federal funds sold increased over the prior period mainly due to
timing and contractual dates of puts/calls.
Noninterest bearing deposits grew at a 7.2% rate to $189.7 million. Interest
bearing deposits increased $144.3 million or 15.0%, with most of the growth
being attributable to time deposits.
At September 30, 2000, NOW, Money Market and Sweep accounts made up 22.7% of
total interest bearing deposits. At September 30, 1999 those deposits made up
23.8%. Savings deposits, a year ago, made up 21.1% of interest bearing deposits,
and 14.7% in 2000. Time deposits were 55.1% of total interest bearing deposits
in 1999, and 62.7% in 2000.
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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
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Management's Discussion and Analysis of Financial Condition and Results of
Operations
--------------------------------------------------------------------------------
Balance Sheet - (Continued)
--------------------------------------------------------------------------------
Over the last year, NOW, Money Market and Sweep deposits increased $21.5
million, or 9.4%; savings deposits decreased $40.8 million, or 20.1%, and time
deposits increased $163.6 million or 30.9%. The reason for the significant
change in the mix over the last year was due mainly to a CD promotion the Bank
had in January of 2000 which increased those type of deposits approximately
$93.0 million; a good majority of which came from other deposit accounts. This
increased the cost of funds for the Corporation, but it is felt that a good
portion of these clients will remain depositors of the Bank. Additionally, the
corporation has introduced a premier treasury money market account and a sweep
account, both of which have been successful.
FHLB borrowings decreased over the year as the Corporation has concentrated on
reducing these high cost borrowings. $15 million of the FHLB borrowings have
options whereby the FHLB can request return of the funds at any time on
pre-determined put dates. Such contingencies have been planned for by
management.
Capital has grown $23.1 million over the past year, or 14.2%. Over the last five
years management has been aware that the capital of the Corporation has been
larger than necessary. As part of a plan to better manage capital growth, on
March 19, 1999 the Corporation paid its first annual cash dividend of $.25 per
share. Unrelated to capital management, but designed to create interest in the
stock, the Board of Directors concurrently declared a two-for-one stock split.
In the first quarter of 2000, the Corporation paid its first quarterly dividend
of $.09 per share. Also during the first quarter of 2000, the Corporation began
a stock repurchase program, purchasing 94,400 shares in the public market at a
cost of more than $1.8 million. The program was suspended when the Corporation
announced that an agreement to merge with Liberty Bay Financial Corporation had
been signed. In the second quarter the Corporation declared a $.10 per share
dividend. In July of 2000, the Corporation declared an $.11 per share dividend
to shareowners of record July 31, 2000 and payable on August 14, 2000. In
September, the corporation declared a $.12 per share dividend to shareowners of
record October 2, 2000 and payable October 23, 2000. During 2000, the total
reduction of capital by dividends and the repurchase program was $7.6 million.
Management will continue to review options for the best use of capital.
NET INTEREST INCOME
Net interest income is the difference between total interest income and total
interest expense. Several factors contribute to changes in net interest income.
These include the effects of changes in average balances, changes in rates on
earning assets and rates paid for interest bearing liabilities, the level of
noninterest bearing deposits, stockholder's equity, and the level of nonaccrual
loans.
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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
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Management's Discussion and Analysis of Financial Condition and Results of
Operations
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Net Interest Income - (Continued)
--------------------------------------------------------------------------------
The earnings from certain assets are exempt from federal income tax, and it is
customary in the financial services industry to analyze changes in net interest
income on a "tax equivalent" (TE) or fully taxable basis. Under this method,
nontaxable income from loans and investments is adjusted to an amount which
would have been earned if such income were subject to federal income tax. The
discussion below presents an analysis based on "taxable equivalent" amounts at a
35% tax rate. (However, there are no tax equivalent additions to interest
expense or noninterest income and expense amounts discussed below.) Abbreviated
quarterly average balance sheets and net interest income data for the periods
are shown below:
<TABLE>
<CAPTION>
For quarter ended September 30, 2000 1999 $ Change % Change
------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Loans $1,363,624 $1,123,225 $ 240,399 21.4%
Investments(*) 155,082 178,273 (23,191) -13.0%
Federal funds sold 20,348 15,323 5,025 32.8%
---------- ---------- ---------- ----------
Total earning assets 1,539,054 1,316,821 222,233 16.9%
========== ========== ========== ==========
Total assets(*) 1,618,446 1,391,686 226,760 16.3%
========== ========== ========== ==========
Noninterest bearing deposits $ 189,147 $ 178,599 $ 10,548 5.9%
Interest bearing deposits 1,087,827 930,187 157,640 16.9%
---------- ---------- ---------- ----------
Total deposits $1,276,974 $1,108,786 $ 168,188 15.2%
========== ========== ========== ==========
Federal funds purchased
and repurchase agreements $ 33,299 $ 37,999 $ (4,700) -12.4%
FHLB borrowings 106,729 70,416 36,313 51.6%
---------- ---------- ---------- ----------
Capital(*) 186,471 162,595 23,876 14.7%
========== ========== ========== ==========
Total interest income (TE) $ 37,677 $ 30,695 6,982 22.7%
Total interest expense 16,676 11,460 5,216 45.5%
========== ========== ========== ==========
Net interest income $ 21,001 $ 19,235 1,766 9.2%
========== ========== ========== ==========
</TABLE>
(*) Shown at amortized cost, or adjusted for unrealized gain/(loss).
In 2000, average total earning assets as a percent of average total assets were
95.1%, and 94.6% in 1999. This ratio indicates how efficiently assets are being
utilized. Average loans were 84.3% and 80.7%, respectively and investments were
9.6% and 12.8%, for the same periods. Average federal funds sold were 1.3% and
1.1% over the period. Average total deposits to loans were 93.6% and 98.7%. Not
shown in the table above are the components of interest bearing deposits.
Average NOW and Money Market accounts increased $25.0 million or 12.6%; savings
accounts decreased $38.3 million, or 18.8%, and time cd's increased $170.9
million or, 32.4%. Average FHLB borrowings increased $36.3 million, or 51.6%,
indicating greater use of this funding source than in the past. TE net interest
income increase $1.8 million, or 9.2%.
Earning Assets
Using a 365 day base (previous reports used a 360 day base), the yield on total
earning assets increased .46% in the third quarter 2000 to 9.71% from 9.25%.
This was due to an increase in loan yields as the result of four Prime lending
rate increases over the period. The cost of total interest bearing liabilities
increased 1.01%, from 4.38% in 1999 to 5.39% in 2000. At the end of current
quarter, the TE NIM dropped to 5.46% from 5.84% a year earlier. The TE NIM
dropped .10% from the second quarter to the third quarter of 2000. Management
has expected this decline in the net interest margin which is due to competitive
factors.
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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
--------------------------------------------------------------------------------
Management's Discussion of Financial Condition and Results of Operations
--------------------------------------------------------------------------------
Noninterest Income and Expense
--------------------------------------------------------------------------------
On a TE basis, net interest income was $21.0 million in 2000, versus $19.2
million in 1999, for an increase in net interest income of $1.8 million. Total
interest income increased $7.0 million, and total interest expense increased
$5.2 million, for an increase in net interest income of $1.8 million.
The increase of $222.2 million in the average balance of earning assets
increased interest income by $5.7 million, and an increase in interest rates
increased interest income by $1.3 million, for a net increase of $7.0 million.
The annualized yield on total loans increased from 9.75% in 1999 to 10.11% in
2000. Commercial loans increased from 9.55% to 10.28%; real estate commercial
loans decreased in yield from 9.12% to 9.10%; real estate construction loans
increased in yield from 11.00% to 11.56%; real estate mortgage loans increased
from 9.79% to 10.17%, and installment loans increased from 9.69% to 10.12%.
The yield on investments increased from 6.47% in 1999 to 6.63% in 2000, and the
yield on federal funds sold increased from 4.99% in 1999 to 6.49% in 2000.
Interest Bearing Liabilities
The increase of $189.3 million in the average balance of total interest bearing
liabilities increased interest expense by $2.5 million, and the rates paid on
interest bearing liabilities increased interest expense $2.7 million for a net
change of $5.2 million.
The cost of NOW and Money Market and Sweep accounts increased from 2.61% in
1999, to 3.29% in 2000. Savings accounts costs were 3.57% in 1999, and 3.75% in
2000. Time cd's increased in cost from 5.22% in 1999 to 6.26% in 2000.
Short-term borrowings increased from 4.67% to 6.20%, and FHLB borrowings
increased from 5.27% in 1999 to 6.34% in 2000.
NONINTEREST INCOME AND EXPENSE - September 30, 2000/September 30, 1999
Total noninterest income decreased $320 thousand in 2000, or 12.8% from a year
ago. Service charges decreased from $703 thousand to $662 thousand, or 5.8%.
Higher average balances are being maintained by clients which reduces income
from this source.
Other income for the period was down by $279 thousand, or 15.5%. There was a
gain on the sale of ORE in 2000 totaling $394 thousand, and a gain in the 1999
period of $732 thousand. Therefore, there was a net gain of $59 thousand for the
current period.
The market value of trust assets at quarter end 2000 was $197.7 million, as
compared to $188.5 million in 1999, an increase of $9.2 million, or 4.9%. Trust
Department income for the third quarter of 2000 was $294 thousand, up $28
thousand, or 10.5%.
Total noninterest expenses increased $511 thousand, or 5.6% for the period.
Salaries and benefits increased $81 thousand, or 1.5%. There were 515 FTE
employees at September 30, 2000. Profit sharing expense was down $170 thousand
for the current period, due to timing and there was a one-time charge of $140
thousand in the third quarter to initiate a reserve for accrued vacation as a
result of the recent merger with Liberty Bay Financial Corporation.
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<PAGE> 16
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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
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Management's Discussion of Financial Condition and Results of Operations
--------------------------------------------------------------------------------
Noninterest Income and Expense (continued)
--------------------------------------------------------------------------------
Total occupancy expense increased $223 thousand, or 17.7%. 33.6% or $499
thousand of occupancy expense was depreciation in 2000, and $381 thousand, or
30.2% was depreciation in 1999. Excluding depreciation, occupancy expense
increased $105 thousand, or 11.9% in 2000. The increase was due to increased
furniture, equipment and maintenance agreement expenses relating to the merger
and scheduled maintenance and repairs. With the closing of the Liberty Bay
Financial Corporation merger, it is expected that higher than normal occupancy
expenses will continue through the remainder of the year.
Other noninterest expense increased $207 thousand, or 8.8%. This increase was
due to a loss on ORE and sale of fixed assets of $90 thousand; increased
consulting fees of $67 thousand; increased taxes of $62 thousand and increased
FDIC insurance premiums of $28 thousand.
Banks and bank holding companies use a computation call the "efficiency ratio"
to measure overhead. This ratio is then compared to others in the industry. The
ratio is computed by dividing total noninterest expense, less intangible
amortization expense and other non-recurring charges, by the sum of net interest
income on a taxable equivalent basis, and other noninterest income, less any
non-recurring items. The lower the number, the more efficient the organization.
The Corporation's efficiency ratio for the third quarter was 41% for 2000 and
43% for 1999. The Corporation's ratio places it among the performance leaders in
the industry.
LOANS
IMPAIRED ASSETS
Impaired assets are summarized as follows:
<TABLE>
<CAPTION>
(In thousands)
Period ended September 30, 2000 1999
-------------------------- ---------- ----------
<S> <C> <C>
Non-accruing loans $ 3,104 $ 3,222
Loans past due 90 days or more and still accruing -- --
Restructured loans(*) -- --
Other real estate owned 556 864
---------- ----------
Total non-performing loans $ 3,660 $ 4,086
========== ==========
Total assets at end of period $1,625,213 $1,449,804
---------- ----------
As a percent of assets outstanding 0.23% 0.28%
========== ==========
</TABLE>
(*) Not included unless past due. The Corporation has only one restructured loan
for under $100,000.
Delinquent and problem loans are a part of any lending enterprise. When a
borrower fails to make payments, the Bank implements collection activities
commencing with simple past due notices. This then progresses to phone calls and
letters, followed by legal activity when and if necessary. At one month past
due, the loan is tracked and reported as a delinquency. No particular trends in
the levels of delinquent loans are noted at this time.
It is the bank's practice to discontinue accruing interest on loans that are
delinquent in excess of 90 days. Some problem loans which are less than 90 days
delinquent are also placed into non-accrual status if the success of collecting
full principal and interest, in a timely manner, is in doubt. No particular
trends in the levels of non-accrual loans or other real estate owned are noted
at this time.
-14-
<PAGE> 17
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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
--------------------------------------------------------------------------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations
--------------------------------------------------------------------------------
Loans - Impaired Assets (continued)
--------------------------------------------------------------------------------
Restructured loans are those loans that had problems in the past, and that have
been restructured in such a way that some forgiveness of debt or other terms
have occurred.
Non-accruing loans consist of 20 loans, the largest being a construction loan in
the amount of $1.4 million which is pending regulatory permits. The second
largest loan is a dairy loan in the amount of $835 thousand, which is in the
process of liquidation. Other real estate owned consists of eight parcels of
real estate. There are five residential building lots, one single-family
residence, and two pieces of residential acreage. All properties will be
actively marketed as soon as permits are obtained.
CREDIT CONCENTRATIONS
There is a concentration of credit in the loan portfolio comprised of real
estate construction and land development loans. These loans totaled $317.0
million in 2000, or 23.0% of total loans, and $248.4 million in 1999, or 21.3%
of total loans. Many years ago, management established a real estate loan
committee which meets periodically to review the economic conditions and
building industry trends. As a result of these and other efforts, there have
been very limited losses on these types of loans. The bank's trade area has
enjoyed a consistent real estate market, and while cognizant of the possible
impacts of higher interest rates, etc. in slowing levels of activity, management
is cautiously optimistic as to the real estate markets prospects in the months
ahead.
At September 30, 2000 and 1999, the Corporation had an immaterial amount of
foreign loans and no loans related to highly leveraged transactions.
ALLOWANCE FOR POSSIBLE LOAN LOSSES - QUALITATIVE FACTORS
For the nine months ending September 30, 2000, the allowance for possible loan
losses increased to $22.3 million, or 1.62% of total loans, from $21.0 million,
or 1.77% of total loans at year end 1999. Year-to-date net loan losses were net
recoveries of $380.0 thousand.
Management and the Board review policies and procedures annually, or more often,
and changes are made to reflect the current operating environment integrated
with regulatory requirements. Partly out of these policies has evolved an
internal credit risk review process. During this process the quality grade of
loans is reviewed and loans are assigned a dollar value of the reserve by degree
of risk. The analysis is performed quarterly and reviewed by senior management
who makes the determination if the risk is reasonable, and if the reserve is
adequate.
Taken into consideration when the analysis is performed is the national and
local economic trends and conditions. The Boeing Company is a strong force in
the local economy, so it is important that this analysis recognizes Boeing's
current and anticipated personnel strength, and the possible effect on Boeing's
suppliers.
The analysis also takes into consideration the level of, or trends in,
delinquencies and nonaccruing loans. Management monitors delinquencies monthly
and reports are prepared for the Board of Directors to review. Delinquencies for
commercial, personal and real estate loans are charted separately.
Another consideration is the volume and terms of loans. Management reviews the
growth and terms of loans so that the allowance can be adjusted for current and
anticipated future needs.
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<PAGE> 18
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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
--------------------------------------------------------------------------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations
--------------------------------------------------------------------------------
Allowance for Possible Loan Losses - (Continued)
--------------------------------------------------------------------------------
Conclusion of Qualitative Factors
The allowance for loan losses is the amount which, in the opinion of management,
is necessary to absorb loan losses. Management's evaluation of the adequacy of
the allowance is based on the market area served, local and national economic
conditions, the growth and composition of the loan portfolio and the related
risk characteristics, by continual review by management of the quality of the
portfolio.
LIQUIDITY AND INTEREST RATE RISK
LIQUIDITY
The primary function of asset/liability management is to ensure adequate
liquidity and maintain an appropriate balance between interest sensitive earning
assets and liabilities. Liquidity management involves the ability to meet the
cash flow requirements of customers who may be either depositors wanting to
withdraw funds, or depositors who have credit needs.
The statement of cash flows on pages 3 and 4 of this report provides information
on the sources and uses of cash for the respective year-to-date periods ending
September 30, 2000 and 1999. This discussion addresses those periods of time.
Net cash provided by operating activities in 2000 totaled $29.4 million, as
compared to $26.4 million in 1999. The largest component providing net cash was
net income of $24.2 million in 2000 and $21.1 million in 1999. Net loans
originated and sold in the real estate secondary market for the third quarter of
2000 were $6.7 million lower than 1999 due to a slowing in refinances. This
slowdown had been expected by management.
Investing activities in 2000 and 1999, were centered in the loan area, which had
a net funding requirement of $190.5 million in 2000, and $157.5 million in 1999.
In 2000, cash flow from financing activities funded investment activities and in
1999 cash flows from fed funds sold also contributed to funding loan portfolio
growth.
For both years, the bulk of the funding was from financing activities. In 2000,
core deposits, time certificates (cd's) and fed funds purchased jointly
contributed $206 million to funding asset growth, while FHLB repayments exceeded
advances. In 1999, core deposit growth, cd's, FHLB advances and fed funds sold
all contributed $102 million to asset growth.
Management has many sources of liquidity, such as the sale of AFS securities,
additional borrowings from the FHLB, participations in the Treasury department's
short-term note program, borrowings from the Federal Reserve Bank, or additional
borrowings at correspondent banks. In addition to AFS securities, treasury and
agency securities in the HTM securities portfolio are also subject to sale under
repurchase agreements. The Corporation has a policy that liquidity of 12.5% of
total assets be maintained as a minimum and has done so.
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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
--------------------------------------------------------------------------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations
--------------------------------------------------------------------------------
Interest Rate Risk
--------------------------------------------------------------------------------
INTEREST RATE RISK
Interest rate risk refers to the exposure of earnings and capital arising from
changes in interest rates. Management's objectives are to control interest rate
risk and to ensure predictable and consistent growth of earnings and capital.
Interest rate risk management focuses on fluctuations in net interest income
identified through computer simulations to evaluate volatility under varying
interest rate, spread and volume assumptions. The risk is quantified and
compared against tolerance levels.
The simulation model used by the Corporation combines the significant factors
that affect interest rate sensitivity into a comprehensive earnings simulation.
Earning assets and interest-bearing liabilities with longer lives may be subject
to more volatility than those with shorter lives. The model accounts for these
differences in its simulations. At September 30, 2000, the simulation modeled
the impact of assumptions that interest rates would increase or decrease 200
basis points. Results indicated that the Corporation was positioned such that
equity would not drop below that point where the Corporation, for regulatory
purposes, would continue to be classified "well capitalized". It should be
emphasized that the model is static in nature and does not take into
consideration possible management actions to minimize the impact on equity.
Management also matches assets and liabilities on a static "gap" report monthly
to assist in interest rate sensitivity measurements.
MANAGEMENT DOES NOT USE INTEREST RATE RISK MANAGEMENT PRODUCTS SUCH AS INTEREST
RATE SWAPS, OPTIONS, HEDGES, OR DERIVATIVES, NOR DOES MANAGEMENT CURRENTLY HAVE
ANY INTENTION TO USE SUCH PRODUCTS IN THE FUTURE.
CAPITAL
Consolidated capital of the Corporation for financial statement purposes at
third quarter end 2000 was $185.6 million (including unrealized losses on
securities). This amount compares to $168.3 million at December 31, 1999, an
increase of $17.3 million, or 10.3%. Almost all of the increase came from the
retained earnings of the Bank.
Under regulatory capital rules, the minimum "leverage" ratio (primary capital
ratio) of core capital that the most highly rated holding companies must
maintain is 4 percent. At September 30, 2000, the Corporation's leverage ratio
was 11.58%, compared to 11.82% at year end 1999. In addition, regulatory capital
requires a minimum of Tier I capital of 4% of risk-adjusted assets and total
capital (combined Tier I and Tier II) of 8%. The Corporation's Tier I and
combined Tier II capital ratios were 12.94% and 14.20% at September 30, 2000,
and 13.78% and 15.03% at December 31, 1999.
Management constantly monitors the level of capital of the Corporation, and
believes that capital is currently larger than necessary to meet present needs,
considering, among other things, the present and anticipated needs of the
Corporation, current market conditions, and other relevant factors, including
regulatory requirements.
-17-
<PAGE> 20
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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
--------------------------------------------------------------------------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations
--------------------------------------------------------------------------------
Impact on Year 2000 Issues
--------------------------------------------------------------------------------
IMPACT ON YEAR 2000 ISSUES
There were no Corporation Y2K problems that arose during the third quarter of
2000. However, the Corporation continues to be vigilant in monitoring its loan
portfolio and customer base for potential problems.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Management considers interest rate risk to be a market risk that could have a
significant effect on the financial condition of the Corporation. There have
been no material changes in the reported market risks faced by the Corporation
since the end of the most recent fiscal year-end that have not been included in
this discussion.
FORWARD-LOOKING INFORMATION
Except for historical financial information contained herein, the matters
discussed in this quarterly report on Form 10Q may be considered
"forward-looking" statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended and subject to the safe harbor created by the Private Securities
Litigation Reform Act of 1995, and may be identified by the use of such words as
"believe", "expect", "anticipate", "should", "planned", "estimated" or
"potential" to name a few. Forward-looking statements are subject to risks and
uncertainties that may cause actual future results to differ materially. Such
risks and uncertainties with respect to Frontier Financial Corporation include
those related to the economic environment, particularly in the areas in which
Frontier operates, competitive products and pricing, fiscal and monetary
policies of the U.S. government, changes in governmental regulations affecting
financial institutions, including regulatory fees and capital requirements,
changes in prevailing interest rates, acquisitions and the integration of
acquired businesses, credit risk management and asset/liability management, the
financial and securities markets, and the availability of and costs associated
with sources of liquidity.
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<PAGE> 21
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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
--------------------------------------------------------------------------------
PART II - OTHER INFORMATION
--------------------------------------------------------------------------------
Item 1. Legal Proceedings
No material legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of shareowners in the current
quarter.
Item 5. Other Information
(a) On January 20, 2000, the Board of Directors of the Corporation
declared a $.09 per share first quarter cash dividend payable to
shareowners of record of January 28, 2000 and payable February
11, 2000.
(b) On April 20, 2000, the Board of Directors of the Corporation
declared a $.10 per share second quarter cash dividend payable
to shareowners of record as of May 1, 2000, and payable on May
15, 2000.
(c) On July 19, 2000, the Board of Directors of the Corporation
declared an $.11 per share third quarter cash dividend payable
to shareowners of record as of July 31, 2000, and payable on
August 14, 2000.
(d) On September 16, 2000, the Board of Directors of the Corporation
declared $.12 per share fourth quarter dividend to shareowners
of record October 3, 2000 and payable on October 23, 2000.
(e) In October 2000, the Corporation completed its systems
conversion of the Liberty Bay Financial Corporation and the
North Sound Bank files.
Item 6. Exhibits and Reports on Form 8-K
(b)(11) Computation of basic and diluted earnings per share is attached
as Exhibit 11.
(b)(20) On July 27, 2000, Form 8-K was filed announcing that effective
July 20, 2000, the Corporation completed its acquisition of
Liberty Bay Financial Corporation.
On September 13, 2000, Form 8-K was filed disclosing the post
merger revenues and net income for the month of August 2000 for
Frontier Financial Corporation.
(b)(27) Financial Data Schedule - This exhibit is included only in the
electronic EDGAR filing version of this Form 10Q. The financial
data schedule is not a separate financial statement, but a
schedule that summarizes certain standard financial information
extracted directly from the financial statements in this filing.
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<PAGE> 22
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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
--------------------------------------------------------------------------------
SIGNATURE
--------------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FRONTIER FINANCIAL CORPORATION
Date: November 8, 2000
/s/ James F. Felicetty
-----------------------------------
James F. Felicetty
Secretary / Treasurer
-20-
