UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2008

or

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period

Commission File Number 000-15540

FRONTIER FINANCIAL CORPORATION

(Exact Name of Registrant as Specified in its Charter)

Washington	91-1223535
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

332 SW Everett Mall Way

P.O. Box 2215

Everett, Washington 98213

(Address of Principal Executive Offices) (Zip Code)

(425) 514-0700

(Registrant’s Telephone Number, Including Area Code)

(Former name, former address and former fiscal year, if changed since last report)

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 [   ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [X] Accelerated filer [   ] Non-accelerated filer [   ] Smaller reporting company [   ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES [   ] NO [X]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common stock outstanding: 47,010,131 shares at July 28, 2008

FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS

REPORT ON FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2008

		Page
PART I.	FINANCIAL INFORMATION
ITEM 1.	Financial Statements		1
	Consolidated Balance Sheets (Unaudited)
	June 30, 2008 and December 31, 2007		1
	Consolidated Statements of Income (Unaudited)
	Three and Six Months Ended June 30, 2008 and 2007		2
	Consolidated Statements of Cash Flows (Unaudited)
	Six Months Ended June 30, 2008 and 2007		3
	Notes to the Consolidated Financial Statements (Unaudited)		5
ITEM 2.	Management's Discussion and Analysis of Financial
	Condition and Results of Operations		12
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk		25
ITEM 4.	Controls and Procedures		25
PART II.	OTHER INFORMATION		26
ITEM 1.	Legal Proceedings		26
ITEM 1A.	Risk Factors		26
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds		26
ITEM 3.	Defaults Upon Senior Securities		26
ITEM 4.	Submission of Matters to a Vote of Security Holders		26
ITEM 5.	Other Information		26
ITEM 6.	Exhibits		27
Signatures			28

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except for number of shares)

(Unaudited)
 

	June 30, 2008			December 31, 2007
ASSETS
Cash and due from banks	$	68,161		$	99,102
Federal funds sold		18,265			5
Securities
Available for sale, at fair value		108,796			131,378
Held to maturity, at amortized cost		3,740			3,743
Total securities		112,536			135,121
Loans held for resale		3,793			6,227
Loans		3,803,485			3,605,895
Allowance for loan losses		(78,722	)		(53,995
Net loans		3,728,556			3,558,127
Premises and equipment, net		52,212			47,293
Intangible assets		78,009			78,150
Federal Home Loan Bank (FHLB) stock		21,698			18,738
Bank owned life insurance		24,236			23,734
Other real estate owned		3,681			367
Other assets		49,367			35,052
Total assets	$	4,156,721		$	3,995,689
LIABILITIES
Deposits
Noninterest bearing	$	389,275		$	390,526
Interest bearing		2,907,051			2,552,710
Total deposits		3,296,326			2,943,236
Federal funds purchased and
securities sold under repurchase agreements		38,005			258,145
Federal Home Loan Bank advances		330,249			298,636
Junior subordinated debentures		5,156			5,156
Other liabilities		24,773			30,904
Total liabilities		3,694,509			3,536,077
SHAREOWNERS' EQUITY
Preferred stock, no par value; 10,000,000 shares authorized		-			-
Common stock, no par value; 100,000,000 shares authorized; 47,010,131
and 46,950,878 shares issued and outstanding at June 30, 2008
and December 31, 2007		254,703			252,292
Retained earnings		208,221			202,453
Accumulated other comprehensive income (loss), net of tax		(712	)		4,867
Total shareowners' equity		462,212			459,612
Total liabilities and shareowners' equity	$	4,156,721		$	3,995,689

The accompanying notes are an integral part of these financial statements.

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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except for number of shares and per share amounts)

(Unaudited)

	Three Months Ended					Six Months Ended
	June 30,		June 30,			June 30,		June 30,
	2008		2007			2008		2007
INTEREST INCOME
Interest and fees on loans	$	70,970	$	72,612		$	146,888	$	140,174
Interest on investments		1,372		1,385			2,954		2,346
Total interest income		72,342		73,997			149,842		142,520
INTEREST EXPENSE
Interest on deposits		23,261		23,848			48,986		45,572
Interest on borrowed funds		4,190		3,940			8,567		8,020
Total interest expense		27,451		27,788			57,553		53,592
Net interest income		44,891		46,209			92,289		88,928
PROVISION FOR LOAN LOSSES		24,500		1,850			33,500		3,300
Net interest income after provision for loan losses		20,391		44,359			58,789		85,628
NONINTEREST INCOME
Gain (loss) on sale of securities		144		(937	)		2,468		(937	)
Gain on sale of secondary mortgage loans		377		396			766		871
Gain on sale of other real estate owned		-		-			12		-
Service charges on deposit accounts		1,421		1,089			2,746		2,164
Other noninterest income		2,256		2,014			4,509		3,871
Total noninterest income		4,198		2,562			10,501		5,969
NONINTEREST EXPENSE
Salaries and employee benefits		12,592		11,461			26,585		23,202
Occupancy expense		2,991		2,313			5,581		4,959
State business taxes		594		491			1,145		991
FHLB prepayment penalty		-		1,534			-		1,534
Other noninterest expense		5,356		3,707			9,767		6,967
Total noninterest expense		21,533		19,506			43,078		37,653
INCOME BEFORE PROVISION FOR INCOME TAXES		3,056		27,415			26,212		53,944
PROVISION FOR INCOME TAXES		982		9,244			8,637		18,250
NET INCOME	$	2,074	$	18,171		$	17,575	$	35,694
Weighted average number of
shares outstanding for the period		47,006,729		44,635,972			47,296,849		45,103,883
Basic earnings per share	$	0.04	$	0.41		$	0.37	$	0.79
Weighted average number of diluted shares
outstanding for period		47,069,136		44,991,139			47,385,620		45,510,255
Diluted earnings per share	$	0.04	$	0.40		$	0.37	$	0.78

The accompanying notes are an integral part of these financial statements.

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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six Months Ended
	June 30, 2008			June 30, 2007
Cash flows from operating activities
Net income	$	17,575		$	35,694
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation		1,497			1,344
Amortization		98			39
Intangible amortization		141			126
Provision for loan losses		33,500			3,300
(Gain) loss on sale of securities		(2,468	)		937
Gain on sale of premises and equipment		-			(22	)
Gain on sale of other real estate owned		(12	)		-
Gain on sale of secondary mortgage loans		(766	)		(871	)
Proceeds from sale of mortgage loans		55,699			84,302
Origination of mortgage loans held for sale		(52,499	)		(83,646	)
Stock-based compensation plan expense		1,478			856
Excess tax benefits associated with equity-based compensation		(20	)		(183	)
Increase in surrender value of bank owned life insurance		(502	)		(462	)
Other operating activities		452			(758	)
Changes in operating assets and liabilities
Income taxes payable		(11,200	)		1,322
Interest receivable		1,360			(1,176	)
Interest payable		(1,659	)		2,258
Net cash provided by operating activities		42,674			43,060
Cash flows from investing activities
Net federal funds sold		(18,260	)		(72,828	)
Purchase of securities available for sale		(58,230	)		(53,771	)
Proceeds from sale of available for sale securities		16,600			48,039
Proceeds from maturities of available for sale securities		58,000			15,430
Proceeds from the sale of other real estate owned		379			-
Net cash flows from loan activities		(210,786	)		(285,299	)
Purchase of Federal Home Loan Bank stock		(2,960	)
Purchases of premises and equipment		(6,416	)		(7,076	)
Proceeds from sale of premise and equipment		-			22
Other investing activities		-			(224	)
Net cash used in investing activities		(221,673	)		(355,707	)

(Continued on next page)

The accompanying notes are an integral part of these financial statements.

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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(In thousands)

(Unaudited)

	Six Months Ended
	June 30, 2008			June 30, 2007
Cash flows from financing activities
Net change in core deposit accounts		(33,999	)		34,833
Net change in certificates of deposit		387,089			344,630
Net change in federal funds purchased and securities
sold under repurchase agreements		(220,140	)		(66,442	)
Advances from Federal Home Loan Bank		185,000			267,642
Repayment of Federal Home Loan Bank advances		(153,387	)		(239,541	)
Stock options exercised		239			1,384
Excess tax benefits associated with equity-based compensation		20			183
Purchase of common shares		-			(37,109	)
Cash dividends paid		(16,764	)		(14,276	)
Other financing activities		-			9,114
Net cash provided by financing activities		148,058			300,418
Decrease in cash and due from banks		(30,941	)		(12,229	)
Cash and due from banks at beginning of period		99,102			104,222
Cash and due from banks at end of period	$	68,161		$	91,993
Supplemental disclosure of cash flow information
Cash paid during the period for interest	$	59,212		$	51,162
Cash paid during the period for income taxes	$	20,340		$	17,700
Transfer of loans to other real estate owned	$	3,681		$	-

The accompanying notes are an integral part of these financial statements.

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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1:  Principles of Consolidation

The consolidated financial statements of Frontier Financial Corporation (“FFC”, the “Corporation”, “us”, “we” or “our”) include the accounts of Frontier Financial Corporation and our subsidiaries Frontier Bank (the “Bank”) and FFP, Inc., a non-bank corporation which leases property to the Bank.  All material intercompany balances and transactions have been eliminated.  The consolidated financial statements have been prepared substantially consistent with the accounting principles applied in the 2007 Annual Report incorporated by reference on Form 10-K for the year ended December 31, 2007.  In the opinion of management, the consolidated financial statements reflect all adjustments necessary for a fair presentation of the financial condition and results of operation for the interim periods presented.  Operating results for the three and six months ended June 30, 2008, are not necessarily indicative of the results that may be expected for the year ended December 31, 2008.

Certain amounts in the prior years’ financial statements have been reclassified to conform with the 2008 presentation.  These classifications do not have a material effect on previously reported net income, retained earnings or earnings per share.

Note 2:  Recent Accounting Pronouncements

Recently Adopted

In September 2006, the FASB issued Statement No. 157, Fair Value Measurements (“FAS 157”).  This statement defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.  This statement establishes a fair value hierarchy for the assumptions used to measure fair value and clarifies assumptions about risk and the effect of a restriction on the sale or use of an asset.  The standard is effective for fiscal years beginning after November 15, 2007.  In February 2008, the FASB issued FASB Staff Position (“FSP”) No. FAS 157-2, Effective Date of FASB Statement No. 157.  This FSP delays the effective date of FAS 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value on a recurring basis for fiscal years beginning after November 15, 2008, and interim periods within those fiscal years.  We elected a partial deferral of FAS 157 under the provisions of FSP 157-2 related to the measurement of fair value used when evaluating goodwill, other intangible assets and other long-lived assets for impairment.  We are currently evaluating the impact of FSP 157-2 on our financial statements. The impact of partially adopting FAS 157 effective January 1, 2008, was not material to our financial statements.  Please refer to Note 3 for disclosures related to the adoption of FAS 157.

In February 2007, the FASB issued Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“FAS 159”).  The standard permits but does not require us to measure financial instruments and certain other items at fair value.  Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings.  As we did not elect to use the fair value option for any of our financial instruments under the provisions of FAS 159, our adoption of this statement effective January 1, 2008, did not have a material impact on our financial statements.

In September 2006, the EITF reached a final consensus on Issue No. 06-4 (“EITF 06-4”), Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements.  EITF 06-4 requires employers to recognize a liability for future benefits provided through endorsement split-dollar life insurance arrangements that extend into postretirement periods in accordance with SFAS No. 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions or APB No. 12, Omnibus Opinion – 1967.  We adopted the provisions of EITF 06-4 as of January 1, 2008, as a change in accounting principle through a cumulative-effect adjustment to retained earnings in the statement of financial position in the amount of $634 thousand.

Recently Issued

In March 2008, the Financial Accounting Standards Board (“FASB”) issued Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities, an Amendment of FASB Statement No. 133 (“FAS 161”). FAS 161 amends FAS 133, Accounting for Derivative Instruments and Hedging Activities (“FAS 133”), to amend and expand the disclosure requirements of FAS 133 to provide greater transparency about (i) how and why an entity uses derivative instruments, (ii) how derivative instruments and related hedge items are accounted for under FAS 133 and its related interpretations, and (iii) how derivative instruments and related hedged items affect an entity’s financial position, results of operations and cash flows. To meet those objectives, FAS 161 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments and disclosures about credit-risk-related contingent features in derivative agreements. FAS 161 is effective on January 1, 2009, and is not expected to have a material impact on our consolidated financial statements as we currently do not have any derivative instruments.

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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 2:  Recent Accounting Pronouncements (Continued)

In May 2008, the FASB issued Statement No. 162, The Hierarchy of Generally Accepted Accounting Principles (“FAS 162”).  This Statement identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (“GAAP”) in the United States.  Any effect of applying the provisions of this Statement shall be reported as a change in accounting principle in accordance with FASB Statement No. 154, AccountingChanges and Error Corrections (“FAS 154”). An entity shall follow the disclosure requirements of that Statement, and additionally, disclose the accounting principles that were used before and after the application of the provisions of this Statement and the reason why applying this Statement resulted in a change in accounting principle.  FAS 162 is not expected to have a material impact on our consolidated financial statements as our financial statements are already presented in conformity with GAAP.

Note 3:  Fair Value Measurements

As discussed in Note 2, FAS 157 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  FAS 157 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active exchange markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active and other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The following is a description of the valuation methodologies used to measure and report fair value of financial assets and liabilities on a recurring or nonrecurring basis:

Securities

Securities available for sale are recorded at fair value on a recurring basis.  Fair value is determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1) or through the use of alternative approaches, such as matrix or model pricing, when market quotes are not readily available (Level 2).

Loans held for resale

Mortgage loans originated and designated as held for resale are carried at the lower of cost or estimated fair value, as determined by quoted market prices, where applicable, or the prices for other mortgage loans with similar characteristics, in aggregate, and are measured on a nonrecurring basis.  At June 30, 2008, loans held for resale were carried at cost.

Impaired Loans

From time to time, and on a nonrecurring basis, fair value adjustments to collateral dependent loans are recorded to reflect partial write-downs based on the current appraised value of the collateral or internally developed models which contain management’s assumptions.

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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 3:  Fair Value Measurements (Continued)

The following table presents the balances of assets measured at fair value on a recurring basis at June 30, 2008 (in thousands):

	Fair Value at June 30, 2008
	Level 1		Level 2		Level 3		Total
Available for sale securities
Equities	$	9,628	$	4,246	$	-	$	13,874
U.S. Treasuries		7,368		-		-		7,368
U.S. Agencies		-		74,320		-		74,320
Corporate securities		-		10,120		-		10,120
Municipal securities		-		3,114		-		3,114
Total	$	16,996	$	91,800	$	-		108,796

The following table presents the balance of assets measured at fair value on a nonrecurring basis at June 30, 2008, and the total losses resulting from these fair value adjustments for the six months ended June 30, 2008 (in thousands):

	Fair Value at June 30, 2008								Six Months Ended June 30, 2008 (1)
	Level 1		Level 2		Level 3		Total		Total Losses
Impaired loans	$	-	$	-	$	80,088	$	80,088	$	12,776

(1)  The loss represents charge offs or impairments on collateral dependent loans for fair value adjustments based on the fair value of the collateral.

There were no material liabilities carried at fair value, measured on a recurring or nonrecurring basis, at June 30, 2008.

Note 4: Earnings per Share

The following table reconciles basic to diluted weighted average shares outstanding used to calculate earnings per share data and provides a summary of the calculation of both basic and diluted earnings per share (in thousands, except per share amounts):

	Three Months Ended				Six Months Ended
	June 30, 2008		June 30, 2007		June 30, 2008		June 30, 2007
Net Income	$	2,074	$	18,171	$	17,575	$	35,694
Average basic shares outstanding		47,007		44,636		47,297		45,104
Dilutive shares		62		355		89		406
Average diluted shares outstanding		47,069		44,991		47,386		45,510
Basic earnings per share	$	0.04	$	0.41	$	0.37	$	0.79
Diluted earnings per share	$	0.04	$	0.40	$	0.37	$	0.78

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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 5: Share-Based Compensation Plans

Stock Incentive Plan

In 2006, shareowners approved a Stock Incentive Plan (the “Plan”) to promote the best interest of the Corporation, our subsidiaries and our shareowners, by providing an incentive to those key employees who contribute to our success.  The Plan allows for incentive stock options, stock grants and stock appreciation rights to be awarded.  The maximum number of shares that may be issued under the Plan is 5,250,000 common shares.  At June 30, 2008, 4,678,910 common shares were available for grant.  Shares issued and outstanding are adjusted to reflect common stock dividends, splits, recapitalization, or reorganization.  Options are granted at fair market value, generally vest over three years, and expire ten years from the date of grant.  Dividends are paid on stock grants but not paid on incentive stock options.  Certain options provide for accelerated vesting if there is a change in control.

The following table presents the activity related to options for the six months ended June 30, 2008:

	Options Outstanding			Weighted Average Exercise Price		Weighted Average Contractual Terms (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding, January 1, 2008		1,331,490		$	18.24
Granted		-			-
Exercised		(17,359	)		13.74
Forfeited/expired		(18,474	)		21.01
Balance, June 30, 2008		1,295,657		$	18.25		6.5	$	24
Exercisable, June 30, 2008		1,049,036		$	16.93		5.9	$	24

No options were granted during the six months ended June 30, 2008 and 2007.  The total intrinsic value, amount by which the fair value of the underlying stock exceeded the exercise price of an option on exercise date, of options exercised for the six months ended June 30, 2008 and 2007, was $76 thousand and $1.3 million, respectively.

The following table presents the activity related to nonvested shares under the Plan for the six months ended June 30, 2008:

	Shares			Weighted Average Grant Date Fair Value
Nonvested at January 1, 2008		231,799		$	22.64
Awarded		36,000			18.76
Vested		(42,175	)		19.15
Forfeited		(5,234	)		22.69
Nonvested at June 30, 2008		220,390		$	22.63

The total fair value of shares and options vested and recognized as compensation expense under this Plan for the three and six months ended June 30, 2008, was $708 thousand and $1.5 million, respectively, compared to $421 thousand and $842 thousand for the three and six months ended June 30, 2007, respectively.  As of June 30, 2008, there were 467,011 nonvested shares and options outstanding and there was $5.2 million of total unrecognized compensation cost related to these nonvested shares and options.  The cost is expected to be recognized monthly on a straight-line basis, over the vesting period, through December, 2010.

Cash received from options exercised for the six months ended June 30, 2008 and 2007, was $239 thousand and $1.4 million, respectively.  The actual tax benefit realized for the tax deductions from options exercised totaled $20 thousand and $145 thousand, respectively, for the six months ended June 30, 2008 and 2007.

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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 5: Share-Based Compensation Plans (Continued)

1999 Employee Stock Award Plan

We adopted a 1999 Employee Stock Award Plan to recognize, motivate, and reward eligible employees for longstanding performance.  Employees eligible to receive stock awards under this Plan must have been employees for at least 20 years, or some other tenure as determined from time to time by the Board of Directors.  The maximum number of shares that may be issued is 45,000 and is adjusted to reflect future common stock dividends, splits, recapitalization or reorganization.  The stock awards vest immediately when granted.  The Plan is effective for ten years from adoption.  There were no shares issued from this Plan during the three months ended June 30, 2008 and 2007.  For the six months ended June 30, 2008, and 2007, there were 1,470 and 564 shares issued from this Plan, respectively.  The total fair value of shares vested and recognized as compensation expense for the six months ended June 30, 2008 and 2007, was $25 thousand and $15 thousand, respectively.  There are currently 35,744 shares issuable under this Plan.

Note 6: Securities

Our investment portfolio is classified into two groups: 1) securities available for sale (“AFS”) and 2) securities held to maturity (“HTM”).  Securities that are classified as AFS are carried at fair value.  Unrealized gains and losses for AFS securities are excluded from earnings and reported as a separate component of equity capital, net of tax.  AFS securities may be sold at any time.  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.  Gains and losses on both AFS and HTM 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 following table displays the aggregate fair value and amortized cost of AFS and HTM securities as of June 30, 2008 (in thousands):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses (less than 12 months)			Gross Unrealized Losses (12 months or more)			Aggregate Fair Value
AFS Securities
Equities	$	14,642	$	3,352	$	(3,830	)	$	(290	)	$	13,874
U.S. Treasuries		7,345		53		(30	)		-			7,368
U.S. Agencies		74,658		430		(768	)		-			74,320
Corporate securities		10,536		57		(473	)		-			10,120
Municipal securities		3,030		86		(2	)		-			3,114
		110,211		3,978		(5,103	)		(290	)		108,796
HTM Securities
Corporate securities		1,525		-		(39	)		-			1,486
Municipal securities		2,215		36		-			-			2,251
		3,740		36		(39	)		-			3,737
Total	$	113,951	$	4,014	$	(5,142	)	$	(290	)	$	112,533

-9-

FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 6: Securities (Continued)

The following table displays the maturity schedule of AFS and HTM securities as of June 30, 2008 (in thousand):

	Available for Sale				Held to Maturity
Maturity	Amortized Cost		Fair Value		Amortized Cost		Fair Value
0 - 1 years	$	4,662	$	4,666	$	650	$	656
1 - 5 years		60,782		59,847		1,565		1,595
5 - 10 years		26,632		26,831		-		-
Over 10 years		18,135		17,452		1,525		1,486
	$	110,211	$	108,796	$	3,740	$	3,737

Declines in the fair value of held to maturity and available for sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses.  In estimating other-than-temporary impairment losses, management considers, among other things: (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, and (iii) our intent and ability to retain our investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

Management has the ability and intent to hold securities classified as held to maturity until they mature, at which time we expect to receive full value for the securities.  Furthermore, management also has the ability and intent to hold the securities classified as available for sale for a period of time sufficient for a recovery of cost.  The unrealized losses are largely due to increases in market interest rates over the yield available at the time the underlying securities were purchased.  The fair value is expected to recover as the securities approach their maturity date or repricing date or if market yields for securities for such investments decline.  Management does not believe any of the securities are impaired due to reasons of credit quality.  Accordingly, as of June 30, 2008, management believes the impairments detailed in the table above are temporary and no impairment loss has been realized in our consolidated income statement.

Note 7: Loans and Allowance for Loan Losses

The following is a summary of the loan portfolio by major type of loans, including held for sale (in thousands):

	June 30, 2008			December 31, 2007
Commercial and industrial	$	449,474		$	403,511
Real Estate:
Commercial		1,051,924			1,007,152
Construction		1,052,832			1,068,196
Land development		601,170			540,419
Completed lots		236,978			250,738
Residential 1-4 family		358,745			289,697
Installment and other loans		69,488			67,460
		3,820,611			3,627,173
Unearned fee income		(13,333	)		(15,051	)
Total loans	$	3,807,278		$	3,612,122

-10-

FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 7: Loans and Allowance for Loan Losses (Continued)

The following table presents the activity related to the allowance for loan losses (in thousands):

	Six Months Ended June 30, 2008			Twelve Months Ended December 31, 2007
Beginning balance	$	57,658		$	44,195
Provision for loan losses		33,500			11,400
Charge offs		(9,762	)		(1,906	)
Recoveries		247			986
Merger		-			2,983
Balance before portion identified for undisbursed loans		81,643			57,658
Portion of reserve identified for undisbursed
loans and reclassified as a liability		(2,921	)		(3,663	)
Balance at end of period	$	78,722		$	53,995

Impaired Loans

Nonaccrual loans increased $99.0 million, to $119.9 million at June 30, 2008, compared to $20.9 million at December 31, 2007.  The ratio of nonaccrual loans to total assets at June 30, 2008, was 2.89% compared to 0.52% at December 31, 2007.  At June 30, 2008, loans on nonaccrual status range in balances from $1 thousand to $15.5 million. The allowance for loan losses related to these loans was approximately $5.2 million at June 30, 2008, and $1.6 million at December 31, 2007.  Efforts are continuing to collect these loans with several involving some measure of legal action.

Note 8: Income Taxes

The January 1, 2007 adoption of the Financial Accounting Standards Board (“FASB”) Interpretation 48, Accounting for Income Taxes (“FIN 48”), did not affect our financial position.  We file federal (U.S.) income tax returns and Washington and Oregon state business and occupation tax returns.  We are no longer subject to U.S. federal income tax examinations by tax authorities for tax years before 2005.  Our accounting policy with respect to interest and penalties arising from income tax settlements is to recognize them as noninterest expense.

Washington State is currently examining our business and occupation tax returns for 2001, 2002, 2003, 2004 and 2005 due to amended returns we initiated seeking a refund.  It is anticipated that this process will be complete sometime during the current year; however, we do not expect the examination to result in any adjustments that would have a significant impact on our financial statements.

-11-

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes appearing elsewhere in this report.  In addition to historical information, this report contains forward-looking statements.  These forward-looking statements are made in reliance upon the safe harbor provision of the Private Securities Litigation Reform Act of 1995.  The words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “forecast,” “project,” “should” and similar expressions are intended to identify such forward-looking statements.  Forward-looking statements include, among other, statements about our future performance, the continuation of historical trends, the sufficiency of our sources of capital for future needs, pending regulatory matters, adequacy of allowances for loan losses and controls and the expected impact of recently issued accounting pronouncements.  These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements.  Factors that might cause such a difference include, but are not limited to, those discussed in the section entitled “Risk Factors” on Form 10-K filed with the Securities and Exchange Commission for the fiscal year ended December 31, 2007.  Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s opinions only as of the date hereof.  We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements.

Financial Review

Highlights

Consolidated net income for the second quarter of 2008, was $2.1 million, compared to $18.2 million for the second quarter of 2007, a decrease of $16.1 million, or 88.6%.  For the three months ended June 30, 2008, the provision for loan losses totaled $24.5 million, compared to $1.9 million for the three months ended June 30, 2007, an increase of $22.6 million. On a diluted per share basis, second quarter 2008 net income was $0.04 per share, compared to $0.40 per share for the second quarter 2007.

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

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

At June 30, 2008, shareowners’ equity totaled $462.2 billion, compared to $459.6 million at December 31, 2007, and $381.7 million at June 30, 2007.  At June 30, 2008, we remain “well capitalized” per regulatory guidelines.

Market Area

Headquartered in Everett, Washington, Frontier Financial Corporation is the parent company of Frontier Bank.  We have forty-eight banking offices in Clallam, Jefferson, Kitsap, King, Pierce, Snohomish, Skagit, Thurston and Whatcom counties of Washington state and three banking offices in Marion, Multnomah and Washington counties of Oregon.

Business Combinations

As previously announced, on May 29, 2008, we received a notice from Washington Banking Company (“WBCO”) purporting to terminate our merger agreement dated September 26, 2007. In the second quarter 2008, $627 thousand (pre-tax) of costs and expenses incurred in connection with this transaction were expensed.

On November 30, 2007, we closed our merger with Bank of Salem. At the time of closing, Bank of Salem had approximately $199.8 million in loans, $169.5 million in deposits and $27.0 million in capital.  The results of operations and growth comparisons include the impact of the Bank of Salem merger from the date of acquisition.

-12-

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Balance Sheet – June 30, 2008/December 31, 2007

Loans

Net loans, including loans held for resale and net of allowance for loan losses, increased $170.4 million, or 4.8%, to a balance of $3.73 billion at June 30, 2008, compared to $3.56 billion at December 31, 2007.  Despite the increase in net loans, new loan originations decreased $35.3 million, or 5.7%, for the six months ended June 30, 2008, compared to the six months ended December 31, 2007.  The decrease in loan originations is primarily attributable to the decline in the Puget Sound Region real estate market, which began showing signs of slowing during the third quarter 2007.

The following table represents the loan portfolio by type, including loans held for resale and net of unearned income for the periods ended June 30, 2008 and December 31, 2007 (in thousands):

	June 30, 2008					December 31, 2007
	Amount		% of total			Amount		% of total
Commercial and industrial	$	448,360		11.8	%	$	402,569		11.1	%
Real estate loans:
Commercial		1,048,321		27.5	%		1,003,916		27.8	%
Construction		1,048,552		27.6	%		1,062,662		29.4	%
Land development		598,931		15.7	%		537,410		14.9	%
Completed lots		236,004		6.2	%		249,573		6.9	%
Residential 1-4 family		357,650		9.4	%		288,571		8.0	%
Installment and other		69,460		1.8	%		67,421		1.9	%
Total	$	3,807,278		100.0	%	$	3,612,122		100.0	%

Securities

Total securities decreased $22.6 million, or 16.7%, to a balance of $112.5 million at June 30, 2008, compared to $135.1 million at December 31, 2007.  During the first quarter of 2008, we sold our investment in Skagit State Bank stock for $15.3 million and recorded a gain of $2.0 million.

Deposits

Total deposits increased $353.1 million, or 12.0%, to $3.30 billion at June 30, 2008, compared to $2.94 billion at December 31, 2007.  Noninterest bearing deposits decreased $1.3 million, or 0.3%, and interest bearing deposits increased $354.3 million, or 13.9%, for the same period.

The following table represents the major classifications of interest bearing deposits at June 30, 2008 and December 31, 2007 (in thousands):

	June 30, 2008					December 31, 2007
	Amount		% of total			Amount		% of total
Money market, sweep and NOW accounts	$	600,023		20.6	%	$	745,780		29.2	%
Savings		367,731		12.7	%		254,722		10.0	%
Time deposits		1,939,297		66.7	%		1,552,208		60.8	%
Total	$	2,907,051		100.0	%	$	2,552,710		100.0	%

-13-

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Borrowings

Federal funds purchased and securities sold under repurchase agreements decreased $220.1 million, or 85.3%, to a balance of $38.0 million at June 30, 2008, compared to $258.1 million at December 31, 2007.  Federal funds purchased are short term borrowings that tend to fluctuate on a daily basis.

Federal Home Loan Bank (“FHLB”) advances increased $31.6 million, or 10.6%, to $330.2 million at June 30, 2008, compared to $298.6 million at December 31, 2007.

Balance Sheet – June 30, 2008/June 30, 2007

Abbreviated balance sheets at June 30, 2008 and 2007, including changes that have occurred over the past year, are shown below (in thousands):

	June 30,		June 30,
	2008		2007		$ Change			% Change
ASSETS
Loans (net of unearned fee income):
Commercial and industrial	$	448,360	$	370,851	$	77,509			20.9	%
Real Estate:
Commercial		1,048,321		927,391		120,930			13.0	%
Construction		1,048,552		908,701		139,851			15.4	%
Land development		598,931		459,688		139,243			30.3	%
Completed lots		236,004		203,392		32,612			16.0	%
Residential 1-4 family		357,650		259,621		98,029			37.8	%
Installment and other loans		69,460		63,872		5,588			8.7	%
Total loans		3,807,278		3,193,516		613,762			19.2	%
Securities		112,536		102,511		10,025			9.8	%
FHLB stock		21,698		15,030		6,668			44.4	%
Federal funds sold		18,265		91,501		(73,236	)		-80.0	%
Total earning assets		3,959,777		3,402,558		557,219			16.4	%
Total assets	$	4,156,721	$	3,578,969	$	577,752			16.1	%
LIABILITIES
Noninterest bearing deposits	$	389,275	$	391,591	$	(2,316	)		-0.6	%
Interest bearing deposits:
NOW, money market and sweep accounts		600,023		763,691		(163,668	)		-21.4	%
Savings accounts		367,731		275,789		91,942			33.3	%
Time certificates		1,939,297		1,402,024		537,273			38.3	%
Total interest bearing deposits		2,907,051		2,441,504		465,547			19.1	%
Total deposits		3,296,326		2,833,095		463,231			16.4	%
Federal funds purchased and securities
sold under repurchase agreements		38,005		15,231		22,774			149.5	%
FHLB advances		330,249		310,118		20,131			6.5	%
Junior subordinated debt		5,156		5,156		-			0.0	%
Total interest bearing liabilities		3,280,461		2,772,009		508,452			18.3	%
Shareowners' equity		462,212		381,666		80,546			21.1	%
Total liabilities and shareowners' equity	$	4,156,721	$	3,578,969	$	577,752			16.1	%

-14-

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Loans

At June 30, 2008, total loans, including loans held for sale, were up $613.8 million, or 19.2%, over the previous year.  Despite the growth in total loans, loan originations for the six months ended June 30, 2008, decreased $317.2 million, or 35.2%, compared to the six months ended June 30, 2007.  For the same period, renewed loans increased $869.9 million, or 57.6%.  The decrease in loan originations and the increase in loan renewals are primarily attributable to the overall decline in the Puget Sound Region real estate market.

Securities

Total securities increased $10.0 million, or 9.8%, from June 30, 2007 to June 30, 2008.  Of this increase, $8.6 million was attributable to the merger with the Bank of Salem during the fourth quarter of 2007.

Deposits

Noninterest bearing deposits decreased $2.3 million, or 0.6%, to $389.3 million at June 30, 2008, from $391.6 million at June 30, 2007.  Total interest bearing deposits increased $465.5 million, or 19.1%, from June 30, 2007 to June 30, 2008.  For the same period, NOW, money market and sweep deposits decreased $163.7 million, or 21.4%; savings deposits increased $91.9 million, or 33.3%; and time deposits increased $537.3 million, or 38.3%.

The following table represents the major classifications of interest bearing deposits at June 30, 2008 and June 30, 2007 (in thousands):

	June 30, 2008					June 30, 2007
	Amount		% of total			Amount		% of total
Money market, sweep and NOW accounts	$	600,023		20.6	%	$	763,691		31.3	%
Savings		367,731		12.7	%		275,789		11.3	%
Time deposits		1,939,297		66.7	%		1,402,024		57.4	%
Total	$	2,907,051		100.0	%	$	2,441,504		100.0	%

The change in the deposit mix over the prior year was mainly due to the relatively higher rates being paid on certificates of deposit as a result of the drop in short term interest rates as well as time deposit promotions in the second quarter of 2008 and 2007.

Borrowings

FHLB borrowings increased $20.1 million, or 6.5% from June 30, 2007 to June 30, 2008. The primary reason for the increase was to fund loan growth.

Shareowners’ equity

Capital increased $80.5 million, or 21.1%, to $462.2 million at June 30, 2008, compared with $381.7 million at June 30, 2007.  This increase was primarily due to common stock increasing $68.6 million, or 36.8%, over the same period.  During the fourth quarter of 2007, we completed our merger with Bank of Salem, in which we issued $61.6 million of common stock.  For the six months ended June 30, 2008, we paid cash dividends totaling $16.8 million, compared to $14.3 million for the six months ended June 30, 2007.

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 factors include: the effects of changes in average balances, changes in rates on earning assets and rates paid for interest bearing liabilities, and the levels of noninterest bearing deposits, shareowners’ equity and 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 was subject to federal income tax.  The discussion below presents an analysis based on TE income amounts using a 35% tax rate.  No tax equivalent adjustments were made to the interest expense or noninterest income and expense amounts.

-15-

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

TE is a non-GAAP performance measurement used by management in operating and analyzing the business, which management believes provides financial statement users with a more accurate picture of net interest margin for comparative purposes.

The following table illustrates the determination of tax equivalent amounts for the three and six months ended June 30, 2008 and 2007 (in thousands):

	Three Months Ended
	June 30,			June 30,
	2008			2007			$ Change			% Change
Total interest income, as reported	$	72,342		$	73,997		$	(1,655	)		-2.2	%
Effect of tax exempt loans and
municipal bonds		374			286			88			30.8	%
TE interest income		72,716			74,283			(1,567	)		-2.1	%
Total interest expense		27,451			27,788			(337	)		-1.2	%
TE net interest income	$	45,265		$	46,495		$	(1,230	)		-2.6	%
Calculation of TE Net Interest Margin
(three months annualized)
TE interest income	$	290,864		$	297,132		$	(6,268	)		-2.1	%
Total interest expense		109,804			111,152			(1,348	)		-1.2	%
TE net interest income		181,060			185,980			(4,920	)		-2.6	%
Average earning assets	$	3,910,481		$	3,228,109		$	682,372			21.1	%
TE Net Interest Margin		4.63	%		5.76	%

	Six Months Ended
	June 30,			June 30,
	2008			2007			$ Change		% Change
Total interest income, as reported	$	149,842		$	142,520		$	7,322		5.1	%
Effect of tax exempt loans and
municipal bonds		751			518			233		45.0	%
TE interest income		150,593			143,038			7,555		5.3	%
Total interest expense		57,553			53,592			3,961		7.4	%
TE net interest income	$	93,040		$	89,446		$	3,594		4.0	%
Calculation of TE Net Interest Margin
(six months annualized)
TE interest income	$	301,186		$	286,076		$	15,110		5.3	%
Total interest expense		115,106			107,184			7,922		7.4	%
TE net interest income		186,080			178,892			7,188		4.0	%
Average earning assets	$	3,864,178		$	3,158,276		$	705,902		22.4	%
TE Net Interest Margin		4.82	%		5.66	%

Tax equivalent net interest income decreased $1.2 million, or 2.6%, for the three months ended June 30, 2008, compared to the same period for 2007.  Volume contributed an $8.7 million increase in net interest income, whereas rate decreased net interest income by $9.9 million.  For the six months ended June 30, 2008, tax equivalent net interest income increased $3.6 million, or 4.0%, compared to the six months ended June 30, 2008.  Of this increase, volume contributed an additional $17.3 million, whereas rate decreased net interest income by $13.7 million.

-16-

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The annualized tax equivalent net interest margin for the three months ended June 30, 2008, decreased 113 basis points (“bps”) to 4.63% from 5.76% for the same period the previous year.  The decrease in the annualized tax equivalent net interest margin was primarily driven by the decrease in yield on average earning assets, offset somewhat by a smaller decrease in cost on interest bearing liabilities.  For the three months ended June 30, 2008, the yield on average earning assets was 7.48%, down 175 bps from 9.23% for the three months ended June 30, 2007.  For the same period, the average yield on real estate construction loans was down 347 bps and the average yield on real estate land development loans was down 268 bps.

For the six months ended June 30, 2008, the annualized tax equivalent net interest margin decreased 84 basis points (“bps”) to 4.82% from 5.66% for the six months ended June 30, 2007.  The decrease in the annualized tax equivalent net interest margin was primarily driven by the decrease in yield on average earning assets.  For the six months ended June 30, 2008, the yield on average earning assets decreased 129 bps, to 7.84%, from 9.13% for the six months ended June 30, 2007.  For the same period, the average yield on loans was down 132 bps.

Abbreviated quarterly average balance sheets and net interest income data are shown below (in thousands):

	Quarter Ended		Quarter Ended
	June 30,		June 30,								Current
	2008		2007		$ Change			% Change			Yield/Cost
ASSETS
Loans:
Commercial and industrial	$	437,414	$	391,714	$	45,700			11.7	%		7.51	%
Real estate:
Commercial		1,024,190		904,300		119,890			13.3	%		7.91	%
Construction		1,080,338		864,395		215,943			25.0	%		7.19	%
Land development		578,954		419,607		159,347			38.0	%		7.90	%
Completed lots		241,750		205,063		36,687			17.9	%		7.24	%
Residential 1-4 family		334,155		258,496		75,659			29.3	%		7.79	%
Installment and other loans		67,936		62,261		5,675			9.1	%		8.90	%
Total loans		3,764,737		3,105,836		658,901			21.2	%		7.62	%
Securities		143,750		106,385		37,365			35.1	%		3.93	%
Federal funds sold		1,994		15,692		(13,698	)		-87.3	%		2.02	%
Total earning assets		3,910,481		3,227,913		682,568			21.1	%		7.48	%
Total assets	$	4,087,538	$	3,397,249	$	690,289			20.3	%
LIABILITIES
Noninterest bearing deposits	$	377,131	$	394,096	$	(16,965	)		-4.3	%
Interest bearing deposits:
NOW, money market & sweep		645,409		712,189		(66,780	)		-9.4	%		1.42	%
Savings		345,192		272,971		72,221			26.5	%		2.17	%
Time certificates		1,765,116		1,267,973		497,143			39.2	%		4.36	%
Total interest bearing deposits		2,755,717		2,253,133		502,584			22.3	%		3.39	%
Total deposits		3,132,848		2,647,229		485,619			18.3	%
Federal funds purchased
and repurchase agreements		118,866		35,424		83,442			235.6	%		2.19	%
FHLB advances		332,297		296,963		35,334			11.9	%		4.20	%
Junior subordinated debt		5,156		5,156		-			0.0	%		5.50	%
Total interest bearing liabilities		3,212,036		2,590,676		621,360			24.0	%		3.44	%
Shareowners' equity		473,750		385,766		87,984			22.8	%
Total liabilities and shareowners' equity	$	4,087,538	$	3,397,249	$	690,289			20.3	%

-17-

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

At the end of the second quarter of 2008 and 2007, average total earning assets as a percent of average total assets were 95.7% and 95.0%, respectively.  This ratio indicates how efficiently assets are being utilized.  For the same periods, average loans were 96.3% and 96.2% of average earning assets, respectively.  At June 30, 2008 and 2007, average total loan-to-deposits ratios were 120.2% and 117.3%, respectively.  For the quarter ended June 30, 2008, average NOW, sweep and money market accounts were 20.1% of total interest bearing liabilities (“IBL”), average savings accounts were 10.7% of total IBL and average time certificates were 55.0% of total IBL.  Average FHLB advances were 10.3% of total IBL for the same period.

Earning Assets

For the second quarter of 2008, average earning assets increased $682.6 million, or 21.1%, to $3.91 billion, compared to $3.23 billion for the second quarter of 2007.  The TE yield on total earning assets decreased 175 basis points (bps) in the second quarter of 2008, to 7.48%, compared to 9.23% in the second quarter of 2007.   The $1.6 million decrease in interest income in the current quarter, compared to a year ago, is primarily attributable to rate, which reduced interest income by $17.9 million, whereas volume contributed an additional $16.3 million.

Total loans decreased in yield from 9.41% in the second quarter 2007, to 7.62% in the current quarter, a decrease of 179 bps, or 19.0%.  For the same period, interest income on loans decreased $1.5 million, with volume contributing an additional $16.0 million, offset by a $17.5 million reduction due to rate.

Interest Bearing Liabilities

The $621.4 million, or 24.0%, increase in the average balance of total interest bearing liabilities increased interest expense by $7.6 million and the decrease in rates paid on interest bearing liabilities decreased interest expense by $7.9 million, for a net decrease in interest expense of $337 thousand from the quarter ended June 30, 2007 to the quarter ended June 30, 2008.

The increase in the average balance of interest bearing deposits of $502.6 million, or 22.3%, increased interest expense by $6.1 million, and the rate paid on interest bearing deposits decreased interest expense by $6.7 million, for a net decrease of $587 thousand from the quarter ended June 30, 2007 to June 30, 2008.

Noninterest income and expense – Three Months Ended June 30, 2008 and 2007

Total noninterest income for the three months ended June 30, 2008, increased $1.6 million, or 63.9%, to $4.2 million compared to $2.6 million for the three months ended June 30, 2007.  Of this increase, $1.1 million related to the change in gain (loss) on sale of securities.  For the second quarter 2008, we recognized a gain on sale of securities of $144 thousand, compared to a loss of $937 thousand for the second quarter 2007.  During the second quarter 2007, we completed a balance sheet restructuring in which we sold lower yielding, available for sale securities at a pre-tax loss of $937 thousand, and replaced them with higher yielding securities.  Also contributing to the increase in noninterest income was a $332 thousand increase in services charges, primarily account analysis service charges and overdraft fees.

Total noninterest expense was $21.5 million for the three months ended June 30, 2008, compared to $19.5 million for the three months ended June 30, 2007.  During the second half of 2007, we added six branches and one loan production office, including three branches acquired in the Bank of Salem merger.  The $2.0 million, or 10.4% increase, is mainly attributable to the addition of those offices, together with increases in salaries and employee benefits and occupancy expense.  For the period, salaries and employee benefits increased $1.1 million, including an additional $299 thousand related to FAS 123(R) stock based compensation expense.  At June 30, 2008, full time equivalent (“FTE”) employees totaled 813, up 8.7%, from 748 at June 30, 2007.

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ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Also, as previously announced on May 29, 2008, we received a notice from Washington Banking Company (“WBCO”) purporting to terminate our merger agreement dated September 26, 2007.  In the second quarter 2008, $627 thousand (pre-tax) of costs and expenses incurred in connection with the transaction were expensed.

Banks and bank holding companies use a computation called the “efficiency ratio” to measure the level of overhead expense incurred to generate net interest income.  This ratio is then compared to others in the industry.  The ratio is calculated by dividing total noninterest expense (less intangible amortization expense, certain losses and other nonrecurring charges) by the sum of TE net interest income and other noninterest income (less the same type of non-recurring items).  When evaluating the efficiency ratio, the lower the number, the more efficient the organization.  Our efficiency ratio for the second quarter 2008 was 43% and 35% for the second quarter of 2007, and places us among the industry leaders.

Noninterest income and expense – Six Months Ended June 30, 2008 and 2007

Total noninterest income increased $4.5 million, or 75.9%, to $10.5 million for the six months ended June 30, 2008, compared to $6.0 million for the six months ended June 30, 2007.  The major component of this increase was the $3.4 million increase in gain (loss) on sale of securities.  During the first quarter of 2008, we sold our stock in Skagit State Bank for a gain of $2.0 million.  In addition, we recorded a one-time gain of $274 thousand related to the required liquidation of a portion of our stake of VISA, Inc., which went public in March 2008.

Total noninterest expense increased $5.4 million, or 14.4%, to $43.1 million for the six months ended June 30, 2008, compared to $37.7 million for the six months ended June 30, 2007.  The majority of the increase is attributable to increases in salaries and employee benefits and occupancy expense, consistent with the quarter-over-quarter change, as noted above.

For the six months ended June 30, 2008, $729 thousand (pre-tax) of costs and expenses incurred in connection with the WBCO merger were expensed.

Allowance for Loan Losses

The allowance for loan losses is the amount which, in the opinion of management, is necessary to absorb probable loan losses.  Management’s determination of the level of the provision for loan losses is based on various judgments and assumptions, including general economic conditions, loan portfolio composition, prior loan loss experience, the evaluation of credit risk related to specific credits and market segments and monitoring results from our ongoing internal credit review staff.  Management also reviews the growth and terms of loans so that the allowance can be adjusted for probable losses.  The allowance methodology takes into account that the loan loss reserve will change at different points in time based on economic conditions, credit performance, loan mix and collateral values.

Management and the Board review policies and procedures at least annually, 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 grades of loans are reviewed and loans are assigned a dollar value of the loan loss reserve 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.   This quarterly analysis is then reviewed by the Board of Directors.

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ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The allowance for loan losses, loan charge offs and loan recoveries are summarized as follows (in thousands):

	Six Months Ended			Twelve Months Ended
	June 30, 2008			December 31, 2007
Beginning balance	$	57,658		$	44,195
Provision for loan losses		33,500			11,400
Charge offs:
Commercial and industrial		(381	)		(1,183	)
Real estate:
Commercial		-			-
Construction		(9,275	)		(201	)
Land development		-			-
Completed lots		-			-
Residential 1-4 family		-			(300	)
Installment and other		(106	)		(222	)
Total charge offs		(9,762	)		(1,906	)
Recoveries:
Commercial and industrial		226			845
Real estate:
Commercial		-			-
Construction		10			-
Land development		-			-
Completed lots		-			-
Residential 1-4 family		-			-
Installment and other		11			141
Total recoveries		247			986
Net (charge offs) recoveries		(9,515	)		(920	)
Reserve acquired in merger		-			2,983
Balance before portion identified for
undisbursed loans		81,643			57,658
Portion of reserve identified for
undisbursed loans and
reclassified as a liability		(2,921	)		(3,663	)
Balance at end of period	$	78,722		$	53,995
Average loans for the period	$	3,706,433		$	3,185,751
Ratio of net charge offs to average
loans outstanding during the period		0.26	%		0.03	%

At June 30, 2008, the allowance for loan loss totaled $78.7 million, or 2.07% of total loans, as compared to $54.0 million, or 1.49% of total loans at December 31, 2007. Including the allocation for undisbursed loans of $2.9 million would result in a total allowance of $81.6 million, or 2.14% of total loans outstanding at June 30, 2008.  This compares to the undisbursed allocation of $3.7 million, for a total allowance of $57.7 million, or 1.60% of total loans outstanding at December 31, 2007.

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ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Impaired Assets

Loans are considered impaired, based on current information and events, when it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement, including scheduled interest payments.

The assessment of impairment occurs when and while such loans are on nonaccrual status or if the loan has been restructured.  When a loan has been identified as being impaired, we measure the amount of the impairment.  If the value after the impairment measurement is less than the recorded investment in the loan, impairment is recognized by creating or adjusting an existing allocation of the allowance for loan losses.  In cases where a borrower experiences financial difficulties and we make certain concessionary modifications to the contractual terms, the loan is classified as a restructured accruing loan.  Loans restructured at an interest rate equal to or greater than that of a new loan with comparable risk at the time the contract is modified may be excluded from the impairment assessment and may cease to be considered impaired.

Nonperforming assets are summarized as follows (in thousands):

	June 30, 2008			December 31, 2007
Commercial and industrial	$	394		$	159
Real estate:
Commercial		-			-
Construction		96,526			19,842
Land development		13,450			-
Completed lots		7,872			804
Residential 1-4 family		1,010			93
Installment and other		684			10
Total nonaccruing loans		119,936			20,908
Other real estate owned		3,681			367
Total nonperforming assets	$	123,617		$	21,275
Restructured loans		-			-
Total loans at end of period (1)	$	3,807,278		$	3,612,122
Total assets at end of period	$	4,156,721		$	3,995,689
Total nonaccruing loans to total loans		3.15	%		0.58	%
Total nonaccruing loans to total assets		2.89	%		0.52	%
Total nonperforming assets to total loans		3.25	%		0.59	%
Total nonperforming assets to total assets		2.97	%		0.53	%
(1) Includes loans held for resale.

For nonaccrual loans, it is our practice to discontinue accruing interest on virtually all loans that are delinquent in excess of 90 days regardless of risk of loss, collateral, etc.  Some problem loans which are less than 90 days delinquent are also placed into nonaccrual status if the success of collecting full principal and interest in a timely manner is in doubt and some loans will remain in nonaccrual status even after improved performance until a consistent timely payment pattern is exhibited and/or timely performance is considered to be likely.

Nonaccrual loans increased $99.0 million, to $119.9 million at June 30, 2008, compared to $20.9 million at December 31, 2007.  The ratio of nonaccrual loans to total assets at June 30, 2008, was 2.89% compared to 0.52% at December 31, 2007.  At June 30, 2008, loans on nonaccrual status range in balances from $1 thousand to $15.5 million. The allowance for loan losses related to these loans was approximately $5.2 million at June 30, 2008, and $1.6 million at December 31, 2007.  Efforts are continuing to collect these loans with several involving some measure of legal action.

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ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Other Real Estate Owned

Other real estate owned (“OREO”) is carried at the lesser of book value or market value less selling costs.  The costs related to completion, repair, maintenance or other costs of such properties, are generally expensed with any gains or shortfalls from the ultimate sale of OREO being shown as other income or expense.

At June 30, 2008, we had 16 OREO properties, representing four separate borrowers, with a total carrying value of $3.7 million.  At December 31, 2007, we had one OREO property with a carrying value of $367 thousand, which was sold during the first quarter of 2008 for a gain of $12 thousand.

Certain other loans, currently in nonaccrual status are in the process of foreclosure and there is a likelihood these foreclosures will be completed and the loans will then become OREO.  Management views this as an ordinary part of the collection process and efforts are continually maintained to reduce and minimize such nonperforming assets.

Credit Concentrations

The table below indicates the loan portfolio mix as of the dates indicated, including loans held for resale and net of deferred loan fees (in thousands):

	June 30, 2008					December 31, 2007
	Amount		% of total			Amount		% of total
Commercial and industrial	$	448,360		11.8	%	$	402,569		11.1	%
Real estate loans:
Commercial		1,048,321		27.5	%		1,003,916		27.8	%
Construction		1,048,552		27.6	%		1,062,662		29.4	%
Land development		598,931		15.7	%		537,410		14.9	%
Completed lots		236,004		6.2	%		249,573		6.9	%
Residential 1-4 family		357,650		9.4	%		288,571		8.0	%
Installment and other		69,460		1.8	%		67,421		1.9	%
Total	$	3,807,278		100.0	%	$	3,612,122		100.0	%

As shown in the table above, we have emphasized commercial real estate and construction and land development related lending.   The commercial real estate portfolio generally consists of a wide cross-section of retail, small office, warehouse, and industrial type properties.   These loans are principally secured by first deeds of trust with maturities from 3 to 10 years and original loan to value ratios generally from 65% to 75%.  A substantial number of these properties are owner occupied.  While we have significant balances within this lending category, we believe that our lending policies and underwriting standards are sufficient to manage risk, despite slowing in the Puget Sound region real estate market that began in the third quarter of 2007.

Real estate construction and land development loans are generally composed of commitments to customers within our market area for construction purposes. Loans within this category are used for projects ranging from residential and commercial land development to residential and commercial building projects.  They are generally secured by first deeds of trust with well-defined repayment sources following project completion.  Maturities are set to match the time required for project completion, which typically run from 12 to 18 months depending on complexity.

We devote considerable time and attention to the risks associated with the loan portfolio and continually monitor the effects of current and expected market conditions and other factors that may influence the repayment of loans.

At June 30, 2008 and December 31, 2007, we had an immaterial amount of foreign loans.

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ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 customers who have credit needs.

Management has the ability to access many sources of liquidity, such as the sale of AFS securities, additional borrowings from the FHLB, and borrowings from the Federal Reserve Bank, brokered deposits or additional borrowings at correspondent banks.  At June 30, 2008, we had $737.0 million of total liquidity available.  We have a policy that liquidity to total assets of 12.5% be maintained as a minimum.  At June 30, 2008, liquidity to total assets was 17.7%.

Subsequent to June 30, 2008, we obtained approval from the Federal Reserve Bank to access additional borrowings, secured by valid residential construction loans as collateral, through their Borrower-in-Custody (“BIC”) Program.  This brings available liquidity, including borrowings, to over $1.0 billion.

At June 30, 2008, we had outstanding loan commitments totaling $849.9 million, including undisbursed loans in process of $830.2 million.  In the opinion of management, there are adequate resources to fund all outstanding loan commitments.

The statements 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 June 30, 2008 and 2007.

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.

We use a simulation model to estimate the impact of changing interest rates on earnings and capital.  The model calculates the change in net interest income and net income under various rate shocks.  As of June 30, 2008, the model predicted that net income would increase if interest rates rise and decline if rates fall.  Over a one-year horizon, if rates increased by 2%, net income is estimated to increase by $2.4 million.  Also, assuming a one-year horizon, if rates declined by 1.5%, net income is estimated to decrease by approximately $4.3 million.  These amounts are embedded with a convexity impact of approximately a negative $682 thousand and a negative $3.6 million, respectively.  Convexity assumptions are those which estimate changes in customer and bank behavior which may occur when interest rates change.  The actual change in earnings will be dependent upon the dynamic changes that occur when rates change.  Many of these changes are predictable, but the exact amount is difficult to predict and actual events may vary substantially from the simulation model results.

Capital – June 30, 2008/December 31, 2007

Consolidated capital for financial statement purposes at June 30, 2008, was $462.2 million, compared to $459.6 million at December 31, 2007, an increase of $2.6 million.  During the first six months of 2008, we paid cash dividends totaling $16.8 million, compared to $14.3 million for the first six months of 2007.

On June 18, 2008, the Board of Directors declared a $0.06 per share quarterly cash dividend to shareowners of record as of July 8, 2008, payable July 22, 2008.  This was the first time in 34 consecutive quarters that the cash dividend was not increased.  The decision to reduce the quarterly cash dividend came as a result of our concern over the continuing deterioration in the housing market and the impact on many of our borrowers.  In addition, capital preservation was a contributing factor in reducing the quarterly cash dividend.

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ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Regulatory capital ratios as of June 30, 2008, were as follows:

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

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

Management constantly monitors the level of capital, considering, among other things, our present and anticipated needs, current market conditions and other relevant factors, including regulatory requirements, which may necessitate changes in the level of capital.

Recent Accounting Pronouncements

See Note 2 of the Consolidated Financial Statements for a discussion of recently issued or proposed accounting pronouncements.

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ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There has been no material change in information regarding quantitative and qualitative disclosures about market risk at June 30, 2008, from the information presented in Item 7A. Quantitative and Qualitative Disclosures about Market Risk on Form 10-K for the fiscal year ended December 31, 2007.

ITEM 4.  DISCLOSURE CONTROLS AND PROCEDURES

Our principal executive and financial officers evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, or Exchange Act) as of June 30, 2008. Based upon that evaluation, they concluded as of June 30, 2008, that our disclosure controls and procedures were effective to ensure that information we are required to disclosure in the reports that we file under the Exchange Act is recorded, processed, summarized and reported within time periods specified in Securities and Exchange Commission rules and forms.  In addition, our principal executive and financial officers concluded as of June 30, 2008, that our disclosure controls and procedures are also effective to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

During the six months ended June 30, 2008, there were no changes in our internal control over financial reporting that materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

There are no material pending legal proceedings, other than ordinary routine litigation incidental to our business, to which we are a party or for which any of our property is the subject.

ITEM 1A.  RISK FACTORS

See the discussion of our risk factors on Form 10-K for the fiscal year ended December 31, 2007, as filed with the SEC on February 29, 2008.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

We did not repurchase any shares during the three and six months ended June 30, 2008.  As of June 30, 2008, a balance of 431,935 shares is authorized to be repurchased under the previously approved program.

On June 18, 2008, the Board of Directors declared a $0.06 per share quarterly cash dividend to shareowners of record as of July 8, 2008, payable July 22, 2008.

Our junior subordinated debt agreement prohibits us from paying dividends if we have deferred payment of interest on outstanding trust preferred securities.  At June 30, 2008, interest on outstanding trust preferred securities was current.  See “Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations –Capital.”

We are a legal entity separate and distinct from Frontier Bank.  Because we are a bank holding company with no significant assets other than Frontier Bank, we are dependent upon dividends from Frontier Bank for cash with which to pay dividends.  For a discussion of the regulatory limitations on Frontier Bank’s ability to pay dividends, see “Regulation and Supervision – Federal and State Regulation of the Bank – Dividends” on Form 10-K for the fiscal year ended December 31, 2007, as filed with the SEC on February 29, 2008.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

At the 2008 Annual Meeting of Shareowners held in Everett, Washington, on April 16, 2008, the shareowners voted on the following:

a.   A proposal to elect five (5) Directors to serve three year terms expiring 2011, as follows:

Director	Votes For		Votes Against/Withheld
Robert J. Dickson		34,744,172		861,895
Patrick M. Fahey		35,033,594		572,473
Edward D. Hansen		35,267,609		338,458
William H. Lucas		33,920,913		1,685,154
Darrell J. Storkson		35,290,169		315,898

b.   A shareowner proposal to consider declassifying the Board of Directors.  The proposal received 9,599,131 votes for and 16,437,612 votes against, with the holders of 1,680,203 shares abstaining and 7,889,121 broker non-votes.

c.   A proposal to ratify the appointment of Moss Adams LLP as our independent registered public accounting firm for 2008.  The proposal received 35,084,261 votes for and 241,379 votes against, with the holders of 280,427 shares abstaining.

ITEM 5.  OTHER INFORMATION

Not applicable.

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ITEM 6.  EXHIBITS

	3	(a)	Articles of Incorporation of Frontier Financial Corporation are incorporated herein by reference to
			Appendix A to the Registrant's definitive Proxy Statement on Schedule 14A filed on March 20, 1998.
			(File No. 000-15540)
	3	(b)	By-Laws of Frontier Financial Corporation are incorporated herein by reference to Exhibit 3.1 to
			Form 8-K, filed on July 23, 2007 (File No. 000-15540).
*	10	(a)	Amended and Restated Frontier Financial Corporation Incentive Stock Option Plan incorporated
			herein by reference to Exhibit 33.1 to Registration Statement on Form S-8, filed March 2, 1999.
			(File No. 333-48805)
*	10	(b)	Frontier Financial Corporation 1999 Employee Stock Award Plan is incorporated herein by
			reference to Exhibit 99.1 to Registration Statement on Form S-8, filed March 2, 1999.
			(File No. 333-73217)
*	10	(c)	Frontier Financial Corporation 2001 Stock Award Plan is incorporated herein by reference
			to Exhibit 99.1 to Registration Statement on Form S-8, filed January 26, 2001.
			(File No. 333-54362)
*	10	(d)	Frontier Financial Corporation Employee Stock Option Plan and Interbancorp, Inc. Director
			Stock Option Plan is incorporated herein by reference to Exhibit 10.1 to Registration
			Statement on Form S-8, filed January 26, 2001 (File No. 333-37242).
*	10	(e)	Interbancorp, Inc. Employee Stock Option Plan and Interbancorp, Inc. Director Stock Option
			Plan is incorporated herein by reference to Exhibit 10.1 to Registration Statement on Form S-8,
			filed February 13, 2001 (File No. 333-50882).
*	10	(f)	Frontier Financial Corporation Employee Stock Option Plan and NorthStar Bank Employee Stock
			Option Plan, NorthStar Bank 1994 Employee Stock Option Plan and NorthStar Bank Director
			Nonqualified Stock Option Plan is incorporated herein by reference to Exhibit 10.1 to Registration
			Statement on Form S-8, filed March 16, 2006 (File No. 333-132487).
*	10	(g)	Frontier Financial Corporation 2006 Stock Incentive Plan is incorporated herein by reference
			to Exhibit 99.1 to Registration Statement on Form S-8, filed August 4, 2006 (File No. 333-136298).
*	10	(h)	Change of Control Agreement with John J. Dickson is incorporated by reference to Exhibit
			10.1 to Current Report on Form 8-K, filed February 28, 2007 (File No. 000-15540).
*	10	(i)	Change of Control Agreement with other Executive Officers is incorporated by reference to
			Exhibit 10(h) to Annual Report on Form 10-K filed February 28, 2007 (File No. 000-15540).
	31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	*		Compensatory plan or arrangement

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SIGNATURES

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

/s/ John J. Dickson

John J. Dickson

President and Chief Executive Officer

August 1, 2008

/s/ Carol E. Wheeler

Carol E. Wheeler

Chief Financial Officer

August 1, 2008

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