<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 March 31, 2000
Commission File Number 0-15540
FRONTIER FINANCIAL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Washington 91-1223535
- ------------------------------- ----------------------------
(State or Other Jurisdiction of (IRS Employer Identification
Incorporation of Organization) Number)
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 17,458,225 shares
outstanding as of March 31, 2000.
<PAGE> 2
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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
INDEX TO QUARTERLY REPORT ON FORM 10-Q
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<TABLE>
<CAPTION>
PART I - Financial Information Page
- ------------------------------ ----
<S> <C>
Item 1. Financial Statements
Independent Accountant's Report 1
Condensed Consolidated Balance Sheet - March 31, 2000,
and December 31, 1999 2
Condensed Consolidated Statement of Income - Three Months
Ended March 31, 2000 and 1999 3
Condensed Consolidated Statement of Cash Flows - Three Months
Ended March 31, 2000 and 1999 4-5
Notes to Condensed Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 9-18
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 18
PART 11 - 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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<PAGE> 3
INDEPENDENT ACCOUNTANT'S REPORT
Board of Directors and Shareowners
Frontier Financial Corporation
We have reviewed the accompanying condensed consolidated balance sheet of
Frontier Financial Corporation and subsidiaries as of March 31, 2000, and the
related condensed consolidated statements of income and cash flows for the three
months ended March 31, 2000. These financial statements are the responsibility
of Frontier Financial Corporation's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Frontier Financial Corporation and
subsidiaries as of December 31, 1999, and the related consolidated statements of
income, shareowners' equity and cash flows for the year then ended (which are
not presented herein), and in our report dated January 18, 2000, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying condensed consolidated balance
sheet as of December 31, 1999, is fairly presented, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
/s/ Moss Adams LLP
Everett, Washington
May 3, 2000
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<PAGE> 4
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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
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CONDENSED CONSOLIDATED BALANCE SHEET
- --------------------------------------------------------------------------------
(In thousands, except shares)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 2000 1999
------------ ------------
<S> <C> <C>
Cash & Balances Due from Depository Institutions $ 49,455 $ 44,858
Securities:
Available for Sale-Market Value 104,146 103,467
Held to Maturity-Amortized Cost
(Fair Value 3-31-00: $28,195; 12-31-99: $28,408) 27,951 28,047
------------ ------------
Total Securities 132,097 131,514
Federal Funds Sold 42,280 --
Loans:
Loans, Net of Unearned Income 1,141,121 1,053,214
Less: Allowance for Loan Losses (19,892) (19,651)
------------ ------------
Net Loans 1,121,229 1,033,563
Premises & Equipment, Net 18,331 18,290
Other Real Estate Owned 519 736
Intangible Assets 1,232 1,264
Other Assets 17,802 15,391
------------ ------------
TOTAL ASSETS $ 1,382,945 $ 1,245,616
============ ============
LIABILITIES
Deposits:
Non-Interest Bearing $ 154,008 $ 145,565
Interest Bearing 906,267 821,215
------------ ------------
Total Deposits 1,060,275 966,780
Federal funds Purchased 4,265 6,660
Securities sold under repurchase agreements 29,542 21,892
Federal Home Loan Bank advances 125,182 95,189
Other Liabilities 12,663 7,726
------------ ------------
TOTAL LIABILITIES 1,231,927 1,098,247
============ ============
SHAREOWNERS' EQUITY
Common Stock 91,320 91,302
Retained Earnings 63,296 59,360
Accumulated other comprehensive income (loss),
net of tax effect (3,598) (3,293)
------------ ------------
TOTAL SHAREOWNERS' EQUITY 151,018 147,369
------------ ------------
TOTAL LIABILITIES AND SHAREOWNERS' EQUITY $ 1,382,945 $ 1,245,616
============ ============
Shares outstanding at the end of the period 17,458,225 17,545,587
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 5
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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
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CONDENSED CONSOLIDATED STATEMENT OF INCOME
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(In Thousands, Except for Per Share Amounts) Three Months Ended
-------------------------------
March 31, March 31,
2000 1999
------------ ------------
<S> <C> <C>
INTEREST INCOME
Interest & Fees on Loans $ 26,383 $ 21,599
Interest on Investments 2,540 2,708
------------ ------------
Total Interest Income 28,923 24,307
INTEREST EXPENSE
Interest on Deposits 10,543 8,561
Interest on Borrowed Funds 1,914 1,112
------------ ------------
Total Interest Expense 12,457 9,673
------------ ------------
Net Interest Income 16,466 14,634
------------ ------------
PROVISION FOR LOAN LOSSES (200) (300)
------------ ------------
NONINTEREST INCOME
Service Charges on Deposit Accounts 573 533
Other Noninterest Income 660 711
------------ ------------
Total Noninterest Income 1,233 1,244
------------ ------------
NONINTEREST EXPENSE
Salaries & Employee Benefits 4,326 3,878
Occupancy Expense 847 885
Other Noninterest Expense 1,192 1,539
------------ ------------
Total Noninterest Expense 6,365 6,302
------------ ------------
INCOME BEFORE INCOME TAX 11,134 9,276
PROVISION FOR INCOME TAX (3,796) (3,282)
------------ ------------
NET INCOME $ 7,338 $ 5,994
============ ============
Average Number of Shares Outstanding
for the Period 17,520,243 17,512,183
Basic earnings per share $ 0.42 $ 0.34
============ ============
Diluted shares 17,588,560 17,622,076
Diluted earnings per share $ 0.42 $ 0.34
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 6
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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(In thousands)
THREE MONTHS ENDED
-------------------------
March 31, March 31,
2000 1999
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 7,338 $ 5,994
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 194 263
Provision for loan losses 200 300
FHLB stock dividends (177) --
Deferred taxes -- --
Increase in income taxes payable 3,797 2,981
Decrease in interest receivable (1,766) (1,663)
Increase(Decrease) in interest payable 1,266 (8)
Loss on sale of fixed assets -- 70
Loans originated for sale (3,254) (6,108)
Proceeds from sale of loans 3,254 7,321
Other operating activities (418) (926)
--------- ---------
Net cash provided by operating activities 10,434 8,224
--------- ---------
CASH FLOWS FROM INVESTMENT ACTIVITIES
Net cash flows from Fed Funds Sold (42,280) 14,143
Proceeds from maturities of AFS & HTM securities 623 9,241
Purchase of AFS securities (1,500) (8,820)
Purchase of HTM securities -- (4,750)
Cash dividends paid (1,580) (4,379)
Net cash flows from loan activities (88,162) (44,070)
Purchases of premises and equipment (353) (148)
Proceeds from the sale of ORE 217 --
Purchase of treasury stock (1,841) --
Other investing activities 1 --
--------- ---------
Net cash used by investing activities (134,875) (38,783)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in core deposits 5,455 17,301
Net change in certificates of deposit 88,362 (1,693)
Proceeds form issuance of stock 37 593
Principal payments on long term debt (53) (163)
Advances from FHLB 110,000 10,000
Repayment of FHLB advances (80,006) (6)
Net change in Federal Funds purchased 5,255 4,057
Other financing activities (12) (142)
--------- ---------
Net cash provided by financing activities 129,038 29,947
--------- ---------
</TABLE>
(Continued on next page)
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<PAGE> 7
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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND DUE FROM BANKS $ 4,597 $ (612)
CASH AND DUE FROM BANKS AT BEGINNING
OF YEAR 44,858 44,233
--------- ---------
CASH AND DUE FROM BANKS AT END
OF PERIOD $ 49,455 $ 43,621
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ 11,195 $ 9,686
Cash paid during the year for income taxes -- 300
Real estate taken as settlement for loan obligations -- 310
</TABLE>
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<PAGE> 8
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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. PRINCIPLES OF CONSOLIDATION - RESULTS OF OPERATIONS
The condensed 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 condensed 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
condensed consolidated financial statements reflect all adjustments necessary to
a fair statement of the results for the interim periods presented. Operating
results for the three months ended March 31, 2000 are not necessarily indicative
of the results that may be expected for year-end December 31, 2000.
Certain reclassifications of 1999 amounts were made in order to conform to the
2000 presentation, none of which affect previously reported net income.
The bank subsidiary of Frontier Financial Corporation is Frontier Bank.
NOTE 2. 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 operation.
NOTE 3. 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 as an adjustment to income.
-6-
<PAGE> 9
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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 3 - (Continued)
The tables below display the characteristics of the AFS and HTM portfolios as of
March 31, 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 $ 14,698 $ -- $ (132) $ 14,566
U.S. Treasuries 252 20 -- 272
U.S. Agencies 70,595 10 (4,998) 65,607
Corporate securities 24,087 34 (466) 23,655
Municipal securities 50 (4) 46
---------------------------------------------------
Totals 109,682 64 (5,600) 104,146
---------------------------------------------------
HTM SECURITIES
Municipal securities 27,451 327 (83) 27,695
Corporate Securities 500 -- -- 500
---------------------------------------------------
Totals 27,951 327 (83) 28,195
---------------------------------------------------
Totals $137,633 $ 391 $ (5,683) $132,341
===================================================
</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 $ 18,213 $ 18,094 $ 155 $ 156
1-5 Yrs 22,524 21,973 7,118 7,218
5-10 Yrs 63,011 58,346 19,637 19,791
Over 10 Yrs 5,934 5,733 1,041 1,030
--------------------------------------------------------
$109,682 $104,146 $ 27,951 $ 28,195
========================================================
</TABLE>
-7-
<PAGE> 10
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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 3 - (Continued)
CHANGES IN AFS AND HTM SECURITIES
For the Quarter Ended March 31, 2000
<TABLE>
<S> <C>
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 ($305)
HTM SECURITIES
Sale Or Transfers From This Category $ 0
</TABLE>
NOTE 4. LOANS
The following is an analysis of the loan portfolio by major type of
loans:
<TABLE>
<CAPTION>
March 31, Dec 31,
2000 1999
----------- -----------
<S> <C> <C>
Commercial $ 233,162 $ 210,327
Real Estate:
Commercial 458,794 445,009
Construction 310,742 266,969
Residential 110,884 103,661
Installment 34,164 33,370
----------- -----------
1,147,746 1,059,336
Unearned Fee Income (6,625) (6,122)
----------- -----------
Total Loans $ 1,141,121 $ 1,053,214
=========== ===========
</TABLE>
NOTE 5. In 2000 the Board of Directors declared a first quarter cash dividend of
$.09 per share payable on February 11, 2000, and a second quarter cash dividend
of $.10 per share payable on May 15, 2000. 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.
On March 15, 2000 the Corporation entered into a definitive agreement to acquire
Liberty Bay Financial Corporation (Liberty) where the Corporation will be the
resultant entity. The transaction is expected to be accounted for under the
pooling-of-interests method and is subject to several conditions, including
regulatory approval. At December 31, 1999, Liberty had consolidated assets of
$180 million and shareowners' equity of $20.9 million. Approximately 2.4 million
shares of the Corporation's common stock is expected to be issued to complete
the transaction.
-8-
<PAGE> 11
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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS.
- --------------------------------------------------------------------------------
HIGHLIGHTS
Consolidated net income of Frontier Financial Corporation ("the Corporation")
for the first quarter of 2000 was $7.3 million versus $6.0 million for the first
quarter of 1999, or up 22.4%. The reason for the increase in net income in 2000
was due to an increase in net interest income of $1.8 million, or 12.5%. This
marks the sixty-fifth consecutive quarter in which Frontier's earnings exceeded
the prior years' comparable quarter. In the discussion below, comparison is with
the first quarter of 1999, unless otherwise stated.
Annualized return on average assets (ROA) was 2.21% in 2000 and 2.07% in 1999.
Annualized return on average stockholder's equity (ROE) in 2000 was 19.01%, as
compared to 18.29% in 1999. Diluted earnings per share were $.42 for 2000, and
$.34 for 1999.
FINANCIAL REVIEW - MARKET AREA AND ECONOMIC ENVIRONMENT
Frontier Financial Corporation headquartered in Everett, Washington, is the
parent of Frontier Bank, which operates twenty-five banking offices in King,
Pierce, Snohomish, Skagit and Whatcom counties. A new office has been approved
for the city of Kent in King County, and will open May 1, 2000. These five
counties would 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.
Since the publication of the Corporation's 1999 Annual Report, there has been
little, of any, noticeable change in the local economy. Boeing has announced
that there will be continued reductions in the work force of 8,000 to 10,000,
however, there has not been a noticeable decrease in loan demand. During the
first quarter of 1999, average loans increased $51.5 million, or 5.9%, as
compared to the first quarter 2000 which had a loan growth of $60.3 million, or
5.8%. However, management remains cautiously optimistic.
BALANCE SHEET
Below, are abbreviated balance sheets at the end of the respective quarters
which indicated the changes that have occurred in the major portfolios of the
Corporation over the past year:
<TABLE>
<CAPTION>
2000 1999 $ Change % Change
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Loans $1,141,121 $ 941,167 $ 199,954 21.2%
Investments* 137,633 148,967 $ (11,334) -7.6%
Federal Funds Sold 42,280 31,710 $ 10,570 33.3%
---------- ---------- ---------- ----------
Total Earning Assets $1,321,034 $1,121,844 $ 199,190 17.8%
Total Assets $1,382,945 $1,180,348 $ 202,597 17.2%
</TABLE>
* Shown at amortized costs
-9-
<PAGE> 12
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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)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
At March 31, 2000 1999 $ Change % Change
- ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Noninterest bearing deposits $ 154,008 $ 146,831 $ 7,177 4.9%
Interest bearing deposits 906,267 795,460 110,807 13.9%
---------- ---------- ---------- ----------
Total deposits 1,060,275 942,291 117,984 12.5%
Federal Funds purchased
and Repurchase Agreements 33,807 35,915 (2,108) -5.9%
FHLB borrowings 125,182 60,208 64,974 107.9%
Capital* $ 154,616 $ 130,835 $ 23,781 18.2%
</TABLE>
* Adjusted for unrealized gain/(loss)
At quarter end 2000, loans were up $200.0 million, or 21.2% 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 three
months of 2000 versus the same period in 1999, was 23.2% versus 23.6%
respectively.
Investments decreased $11.3 million, or 7.6% 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 liquidity purposes.
Noninterest bearing deposits grew at a 4.9% rate to $154.0 million. Interest
bearing deposits increased $110.8 million or 13.9%, with all of the growth being
attributable to time deposits.
At March 31, 2000, NOW and money Market accounts made up 15.6% of total interest
bearing deposits. At March 31, 1999 those deposits made up 18.7%. Savings
deposits, a year ago, made up 24.0% of interest bearing deposits, and 20.8% in
2000. Time deposits were 57.3% of total interest bearing deposits in 1999, and
63.6% in 2000.
Over the last year, NOW and Money Market deposits decreased $7.0 million, or
4.7%; savings deposit decreased $2.4 million, or 1.3%, and time deposits
increased $120.2 million or 26.4%. The reason for the significant change in the
mix over the last year was due mainly to the rate being paid on the transaction
and savings accounts, and a CD promotion the Bank had in January of 2000 which
increased those deposits approximately $93.0 million. 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.
The decrease of $2.1 million, or 5.9% in federal funds purchased and securities
sold under agreements to repurchase (repo's) for the period, was caused by not
aggressively pursuing this type of funding. FHLB borrowings increased
substantially over the year due to large block borrowing ability. $110 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.
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<PAGE> 13
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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations
- --------------------------------------------------------------------------------
Balance Sheet - (Continued)
- --------------------------------------------------------------------------------
Capital has grown $23.8 million over the past year, or 18.2%. Over the last five
years management has been aware that the capital of the Corporation has been
excessive. 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 it 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. During the past year, the total reduction of capital by dividends and
the repurchase program was $3.4 million. In the second quarter of 2000, the
Corporation declared a $.10 per share dividend to shareowners of record May 1,
2000 and payable on May 15, 2000. Management will continue to review options for
the best use of excessive 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.
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 March 31, 2000 1999 $ Change % Change
- --------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Loans $1,104,015 $ 923,763 $ 180,252 19.5%
Investments* 136,724 149,929 (13,205) -8.8%
Federal Funds Sold 29,769 29,168 601 2.1%
Total Earning Assets 1,270,508 1,102,860 167,648 15.2%
Total Assets 1,330,075 1,159,991 170,084 14.7%
Noninterest bearing deposits 153,534 143,349 10,185 7.1%
Interest bearing deposits 872,284 779,380 92,904 11.9%
---------- ---------- ---------- ----------
Total deposits $1,025,818 $ 922,729 $ 103,089 11.2%
Federal Funds purchased
and repurchase agreements $ 28,624 $ 36,845 $ (8,221) -22.3%
FHLB borrowings 111,449 58,996 52,453 88.9%
Capital* 154,363 131,089 23,274 17.8%
Total interest income (TE) 29,240 24,591 4,649 18.9%
Total interest expense 12,457 9,673 2,784 28.8%
---------- ---------- ---------- ----------
Net Interest Income $ 16,783 $ 14,918 $ 1,865 12.5%
</TABLE>
* Shown at amortized cost, or adjusted for unrealized gain/(loss).
-11-
<PAGE> 14
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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations
- --------------------------------------------------------------------------------
Net Interest Income - (Continued)
- --------------------------------------------------------------------------------
In 2000, average total earning assets as a percent of average total assets were
95.5%, and 95.1% in 1999. This ratio indicates how efficiently assets are being
utilized. Average loans were 83.0% and 79.6%, respectively and investments were
10.3% and 12.9%, for the same periods. Average federal funds sold were 2.2% and
2.5% over the period. Average total deposits to loans were 92.9% and 99.9%. Not
shown in the table above are the components of interest bearing deposits.
Average NOW and Money Market accounts increased $3.6 million or 2.8%; savings
accounts decreased $5.0 million, or 2.7%, and time cd's increased $94.3 million
or, 20.4%.
Earning Assets
Using a 365 day base (previous reports used a 360 day base), the yield on total
earning assets increased .29% in the first quarter 2000 to 9.23% from 8.94%.
This was due to an increase in loan yields as the result of five Prime lending
rate increases over the period of .25% each. The cost of total interest bearing
liabilities increased .51%, from a 4.43% in 1999 to a 4.94% in 2000. At the end
of current quarter, the net interest margin dropped to 5.28% from 5.41% a year
earlier. Management has expected this decline in the net interest margin which
is due to competitive factors.
On a tax equivalent basis, net interest income was $16.8 million in 2000, versus
$14.9 million in 1999, for an increase in net interest income of $1.9 million.
Total interest income increased $4.7 million, and total interest expense
increased $2.8 million, for an increase in net interest income of $1.9 million.
The increase of $167.6 million in the average balance of earning assets
increased interest income by $4.2 million, and a increase in interest rates
increased interest income by $.5 million, for a net increase of $4.7 million.
The yield on total loans increased from 9.41% in 1999 to 9.63% in 2000. Business
loans increased from 9.25% to 9.60%; real estate commercial loans decreased in
yield from 8.99% to 8.97%; real estate construction loans increased in yield
from 10.45% to 10.83%; real estate mortgage loans decreased from 9.36% to 9.14%,
and installment loans increased from 9.15% to 9.68%.
The yield on investments decreased from 6.89% in 1999 to 6.84% in 2000, and the
yield on federal funds sold increased from 4.80% in 1999 to 5.61% in 2000.
Interest Bearing Liabilities
The increase of $137.1 million in average balance of total interest bearing
liabilities increased interest expense by $1.8 million, and the rates paid on
interest bearing liabilities increased $1.0 million for a net change of $2.8
million.
The cost of NOW and money market accounts increased from 2.35% in 1999, to 2.76%
in 2000. Savings accounts costs were 3.51% in 1999, and 3.73% in 2000. Time cd's
increased in cost from 5.34% in 1999 to 5.71% in 2000. Short-term borrowings
increased from 4.11% to 5.24%, and FHLB borrowings increased from 4.99% in 1999
to 5.54% in 2000.
-12-
<PAGE> 15
- --------------------------------------------------------------------------------
FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Management's Discussion of Financial Condition and Results of Operations
- --------------------------------------------------------------------------------
Noninterest Income and Expense
- --------------------------------------------------------------------------------
NONINTEREST INCOME AND EXPENSE
Total noninterest income decreased $11 thousand in 2000, or .9% from a year ago.
Service charges increased from $533 thousand to $573 thousand, or 7.5%. This is
a change in prior years trend of slight growth in service charges, as compared
to growth in the number of accounts susceptible to service charges. Management
estimates that the merger in December 1998 is, for the most part, responsible
for the increase.
Other income for the period was down by $51 thousand, or 7.2%. There were no
non-recurring gains during either period. Insurance and financial services fees
increased $11 thousand, or 14.1%, and trust department fees increase $35
thousand, or 13.5%. However, loan servicing fees were down by $34.0 thousand, or
46.6% and broker loan fees were down by $60 thousand, or 68.2%. These two fees
are generated by the real estate division of the Bank. Management expected these
activities to decrease due to higher interest rates, and it appears it has
leveled off at $60 thousand per quarter.
The market value of trust assets at quarter end 2000 was $195.2 million, as
compared to $195.9 million in 1999, a decrease of $.7 million, or .4%. This
decrease was due mainly to changing market conditions and normal distributions.
Total noninterest expenses increased $63 thousand, or 1.0% for the period.
Salaries and benefits increased $448 thousand, or 11.6%. Salaries themselves
increased $388 thousand, or 13.2%. 6.6% of the increase was due to an increase
in staff, and 6.6% was attributable to merit raises and bonuses. There were 404
FTE employees at March 31, 2000. Benefits increased $60 thousand, or 6.4%. The
increase was due to increased profit sharing reserves of $72 thousand.
Total occupancy expense decreased $38 thousand, or 4.3%. 58.6% or $313 thousand
of occupancy expense was depreciation in 2000, and $370 thousand, or 72.0% was
depreciation in 1999. Excluding depreciation, occupancy expense increased $19
thousand, or 3.7% in 2000. The increase was due to increased rent expense.
Other expense decreased $347 thousand, or 22.5%, to $1.2 million. This decrease
was due to a Y2K reserve provision of $100 thousand in the first quarter of
1999, and the remainder of the decline was attributable to reductions in
numerous other expenses and a non-recurring loss on the sale of a bank asset in
the first quarter of 1999 of $70 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, 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 year-to-date 2000 period was 36%, and 38% for 1999. The Corporation's
ratio places it among the performance leaders in the industry.
-13-
<PAGE> 16
- --------------------------------------------------------------------------------
FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations
- --------------------------------------------------------------------------------
Loans - Impaired Assets
- --------------------------------------------------------------------------------
LOANS
IMPAIRED ASSETS
Impaired assets are summarized as follows:
<TABLE>
<CAPTION>
(In thousands)
Period ended March 31, 2000 1999
---------- ----------
<S> <C> <C>
Non-accruing loans $ 2,650 $ 3,396
Loans past due 90 days or more and still accruing -- --
Restructured loans -- 101
Other real estate owned 519 1,597
---------- ----------
Total non-performing loans $ 3,169 $ 5,094
========== ==========
Total assets at end of period $1,382,945 $1,180,348
---------- ----------
As a percent of assets outstanding 0.23% 0.43%
========== ==========
</TABLE>
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.
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.
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, and are past due.
Management works diligently on the collection or liquidation of non-performing
assets. The overall level of non-accruing loans declined in the first quarter
due to the resolution of some impaired loans. Other real estate owned at the end
of the first quarter of 2000 consisted of four residential lots which are
pending permits, one house which is up for sale and one residential lot which is
for sale. We do not expect any unusual problems liquidating these properties.
CREDIT CONCENTRATIONS
There is a concentration of credit in the loan portfolio comprised of real
estate construction and land development loans. These loans totaled $267.2
million in 2000, or 23.4% of total loans, and $186.2 million in 1999, or 17.7%
of total loans. Many years ago, management established a real estate loan
committee which meets semi-annually 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 is now
enjoying a consistent real estate market, and management is cautiously
optimistic as to the real estate markets prospects in the months ahead.
-14-
<PAGE> 17
- --------------------------------------------------------------------------------
FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations
- --------------------------------------------------------------------------------
Credit Concentrations - (Continued)
- --------------------------------------------------------------------------------
At March 31, 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 quarter ended March 31, 2000, the allowance for possible loan losses
increased to $19.9 million, or 1.74% of total loans, from $18.4 million, or
1.96% of total loans in 1999. Year-to-date net loan losses were net recoveries
of $41 thousand.
The Corporation has fashioned its credit risk management practice after an
analysis of a consolidation of numerous banks by a worldwide management
consulting firm. Management and the Board review policies and procedures
annually, and changes are made to reflect the current operating environment
integrated with regulatory requirements. Out of these policies has evolved an
internal credit risk review process, which has the greatest effect on the
current valuation of the allowance for loan losses. During this process, loans
are quality graded, and assigned a dollar value by degree of risk. This 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.
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.
-15-
<PAGE> 18
- --------------------------------------------------------------------------------
FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations
- --------------------------------------------------------------------------------
Liquidity
- --------------------------------------------------------------------------------
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
March 31, 2000 and 1999. This discussion addresses those periods of time.
Net cash provided by operating activities in 2000 totaled $10.4 million, as
compared to $8.2 million in 1999. The largest component providing net cash was
net income of $7.3 million in 2000 and $6.0 million in 1999. The second largest
component for both periods was income taxes payable.
Net loans originated and sold in the real estate secondary market for the first
quarter of 2000 were 46.7% 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 $88.2 million in 2000, and $44.1 million in 1999.
Few investments matured in the first quarter of 2000, and AFS purchases were
$1.5 million. In 1999, proceeds from maturing securities were rolled over. Fed
Fund cash flows grew substantially from the 1999 period, as liquidity has been
necessary due to the growth of the loan portfolio.
Financing the investment activities in 2000 was mainly a combination of cd's of
$88.4 million and $30.0 million in net advances from the FHLB. In 1999,
financing the investment activities was mainly a combination of core deposits
(including NOW, Money Market and Savings accounts) of $17.3 and $10.0 million in
additional advances from the FHLB.
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.
-16-
<PAGE> 19
- --------------------------------------------------------------------------------
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 March 31, 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
first quarter end 2000 was $151.0 million (including unrealized losses on
securities). This amount compares to $130.6 million at March 31, 1999, an
increase of $20.4 million, or 15.6%. 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 March 31, 2000, the Corporation's leverage ratio was
11.53%, compared to 11.17% at quarter 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 12.86% and 14.11% at March 31, 2000, and
12.78% and 14.03% at March 31, 1999.
Management constantly monitors the level of capital of the Corporation, and
believes that capital is excessive 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
- --------------------------------------------------------------------------------
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 first 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 affect of 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.
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.
-18-
<PAGE> 21
- --------------------------------------------------------------------------------
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) In 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.
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 March 17, 2000 Form 8-K was filed announcing an Agreement
and Plan of Mergers dated March 15, 2000 between Frontier
Financial Corporation ("Frontier") and Frontier Bank and
Liberty Bay Financial Corporation and North Sound Bank wherein
Frontier will be the resultant Corporation. The transaction
will be accounted for using the pooling of interests method of
accounting and is subject to several conditions, including
regulatory approval.
(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.
-19-
<PAGE> 22
- --------------------------------------------------------------------------------
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: May 8, 2000 /s/ James F. Felicetty
--------------------------------------
James F. Felicetty
Secretary / Treasurer
-20-
<PAGE> 1
- --------------------------------------------------------------------------------
FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES EXHIBIT 11
- --------------------------------------------------------------------------------
COMPUTATION OF EARNINGS PER SHARE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For Three Months Ended March 31,
2000 1999
------------ ------------
<S> <C> <C>
Net Income $ 7,337,779 $ 5,994,092
Computation of average
shares outstanding
Shares outstanding at
beginning of year 17,545,587 8,697,261
Additional shares deemed
outstanding because of
stock dividends -- --
Additional shares deemed
outstanding because of
stock splits -- 8,758,499
Shares redeemed under stock
repurchase program (31,467) --
Shares issued during the
year times average time
outstanding during the year 6,123 56,423
------------ ------------
Average basic shares outstanding 17,520,243 17,512,183
------------ ------------
Dilutive shares 68,317 109,893
------------ ------------
Average diluted shares outstanding 17,588,560 17,622,076
------------ ------------
Basic earnings per share $ 0.42 $ 0.34
============ ============
Diluted earnings per share $ 0.42 $ 0.34
============ ============
</TABLE>
-21-
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FRONTIER
FINANCIAL CORPORATION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 49,455
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 42,280
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 104,146
<INVESTMENTS-CARRYING> 27,951
<INVESTMENTS-MARKET> 28,195
<LOANS> 1,141,121
<ALLOWANCE> (19,892)
<TOTAL-ASSETS> 1,382,945
<DEPOSITS> 1,060,275
<SHORT-TERM> 33,807
<LIABILITIES-OTHER> 12,663
<LONG-TERM> 125,182
0
0
<COMMON> 91,320
<OTHER-SE> 59,698
<TOTAL-LIABILITIES-AND-EQUITY> 1,382,945
<INTEREST-LOAN> 26,383
<INTEREST-INVEST> 2,540
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 28,923
<INTEREST-DEPOSIT> 10,543
<INTEREST-EXPENSE> 1,914
<INTEREST-INCOME-NET> 16,466
<LOAN-LOSSES> (200)
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 6,365
<INCOME-PRETAX> 11,134
<INCOME-PRE-EXTRAORDINARY> 11,134
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,338
<EPS-BASIC> 0.42
<EPS-DILUTED> 0.42
<YIELD-ACTUAL> 5.28
<LOANS-NON> 2,650
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 19,651
<CHARGE-OFFS> (59)
<RECOVERIES> 100
<ALLOWANCE-CLOSE> 19,892
<ALLOWANCE-DOMESTIC> 19,892
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
