FRONTIER FINANCIAL CORPORATION                                                                                                                                

332 SW Everett Mall Way

Everett, Washington 98204                

Contact:

John J. Dickson

Frontier Financial Corporation

President and CEO

425-514-0700

Lyle E. Ryan

Frontier Bank

President and CBO

425-514-0700

NEWS RELEASE

For release October 23, 2008, 5:30 A.M. PDT

FRONTIER FINANCIAL CORPORATION ANNOUNCES

THIRD QUARTER 2008 RESULTS

EVERETT, WASHINGTON – October 23, 2008 – Frontier Financial Corporation (NASDAQ: FTBK) today announced results for the three and nine months ended September 30, 2008.  For the three months ended September 30, 2008, the Corporation reported a net loss of $17.8 million.  Contributing to this loss was a $42.1 million provision for loan losses, a $6.4 million loss on other than temporarily impaired securities and a $1.0 million loss on the sale of a security.  On a diluted per share basis, the third quarter 2008 net loss was ($0.38) per share, compared to $0.46 per share for the third quarter 2007.

For the nine months ended September 30, 2008, net loss totaled $221 thousand, compared to net income of $55.9 million for the nine months ended September 30, 2007.  The decrease in net income is primarily attributable to the $70.2 million increase in the provision for loan losses for the period.  On a diluted per share basis, net loss for the nine months ended September 30, 2008, was ($0.00) per share, compared to $1.23 per share for the nine months ended September 30, 2007.

John J. Dickson, President and CEO of Frontier Financial Corporation, said, “The uncertainties in the economy and the housing market in the Pacific Northwest have created some challenging times for Frontier Bank and our borrowers.  Although the economy in our area remains in better shape than other parts of the country, we continued to build our reserves for future loan losses based on this uncertainty, resulting in a total reserve (including reserves for undisbursed loans) of $109.5 million or 2.86% of total loans.   At the end of September, Frontier remained well capitalized for regulatory capital purposes and maintained strong liquidity.  In addition, we were pleased with our strong growth in deposits and noninterest income.”

Due to the downturn in the economy and the net losses sustained for the three and nine months ended September 30, 2008, the company is focusing its near term strategies on improving asset quality, capital preservation, expense reductions and deposit growth.  During the quarter, we have expanded our special assets group from 5 to 22 individuals, all from within the company, to focus on reducing nonperforming assets.  We are considering all of our options to maintain and grow our capital ratios.  We will continue to focus on deposit growth to add to our already strong liquidity base.  In addition, certain expense reduction measures will take effect immediately.  For the year ending December 31, 2008, discretionary bonuses will not be paid to executive management.  As a group, the executives’ total compensation for 2008 will be reduced by approximately 34% from 2007 total compensation.   The Board of Directors of Frontier Bank will also forego their director meeting fees indefinitely beginning in the fourth quarter.  Effective January 1, 2009, John J. Dickson, President and CEO of Frontier Financial Corporation, will take a 10% reduction in his base salary, with the remaining executive officers taking a 5% reduction.   These and other strategies in the personnel and other noninterest expense areas are expected to result in the elimination of over $8.5 million of expenses on an annualized basis.

Review of Financial Condition

General

At September 30, 2008, total assets were $4.24 billion and deposits totaled $3.40 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 $2.82 billion at September 30, 2007.  Net loans of $3.73 billion at September 30, 2008, reflect an increase of 4.7% from December 31, 2007, and an increase of 13.8% from September 30, 2007.  However, net loans decreased by $3.1 million since June 30, 2008.

Loans

At September 30, 2008, total loans, including loans held for resale, were $3.83 billion, compared to $3.61 billion at December 31, 2007, and $3.32 billion at September 30, 2007.

Despite the increase in total loans, new loan originations for the nine months ended September 30, 2008, totaled $759.3 million, compared to $1.50 billion for the nine months ended September 30, 2007, a decrease of $740.7 million, or 49.3%.  New loan originations for the third quarter 2008, were $175.6 million, compared to $364.3 million for the third quarter 2007, representing a decrease of $188.7 million, or 51.8%.

At September 30, 2008, total undisbursed commitments to lend were $650.8 million, compared to $873.2 million at December 31, 2007, and $997.4 million at September 30, 2007.

Lyle E. Ryan, President of Frontier Bank stated, “The reduction in loan originations and loan growth in the third quarter reflects our strategy of reducing our exposure to residential construction and limit our loan growth in order to preserve capital.  We will continue to evaluate balance sheet strategies in the fourth quarter in order to maintain our well capitalized status.”

Allowance for Loan Losses

The total allowance for loan losses was $106.6 million, or 2.78%, of total loans outstanding at September 30, 2008, compared to $54.0 million, or 1.49%, at December 31, 2007, and $45.1 million, or 1.36%, at September 30, 2007. The allowance for loan losses, including the reclassified allocation for undisbursed loans of $2.8 million, would amount to a total allowance of $109.5 million, or 2.86%, of total loans outstanding as of September 30, 2008.  For the quarter ended September 30, 2008, net loan charge-offs were $14.3 million, or 0.37%, of average quarterly loans.  This compares to net loan charge-offs of $594 thousand, or 0.02%, of average loans for the quarter ended December 31, 2007, and $326 thousand, or 0.01%, of average loans for the quarter ended September 30, 2007.

Credit Quality

At September 30, 2008, nonperforming assets were 4.92% of total assets, compared to 2.97% at June 30, 2008, 0.53% at December 31, 2007, and 0.35% at September 30, 2007.  Nonaccruing loans were $205.2 million at September 30, 2008, up from $119.9 million at June 30, 2008, $20.9 million at December 31, 2007, and $11.3 million at September 30, 2007.

Nonperforming assets are summarized as follows (in thousands):

	September 30, 2008			June 30, 2008			December 31, 2007			September 30, 2007
Commercial and industrial	$	1,256		$	394		$	159		$	53
Real estate:
Commercial		2,986			-			-			-
Construction		135,419			96,526			19,842			1,268
Land development		40,602			13,450			-			7,774
Completed lots		17,949			7,872			804			864
Residential 1-4 family		6,985			1,010			93			1,316
Installment and other		-			684			10			29
Total nonaccruing loans		205,197			119,936			20,908			11,304
Other real estate owned		3,693			3,681			367			1,145
Total nonperforming assets	$	208,890		$	123,617		$	21,275		$	12,449
Restructured loans		-			-			-			-
Total loans at end of period (1)	$	3,832,052		$	3,807,278		$	3,612,122		$	3,318,236
Total assets at end of period	$	4,244,963		$	4,156,721		$	3,995,689		$	3,584,434
Total nonaccruing loans to total loans		5.35	%		3.15	%		0.58	%		0.34	%
Total nonaccruing loans to total assets		4.83	%		2.89	%		0.52	%		0.32	%
Total nonperforming assets to total loans		5.45	%		3.25	%		0.59	%		0.38	%
Total nonperforming assets to total assets		4.92	%		2.97	%		0.53	%		0.35	%
(1) Includes loans held for resale.

The ratio of loans past due over 30 days was 9.91% of total loans at September 30, 2008, compared to 3.21% at June 30, 2008, 0.91% at December 31, 2007, and 0.46% at September 30, 2007.

Results of Operations

Net Interest Income

Net interest income for the quarter ended September 30, 2008, was $40.7 million, a decrease of $7.5 million, or 15.5%, compared to $48.2 million for the quarter ended September 30, 2007.  On a linked quarter basis, net interest income decreased $4.2 million, or 9.3%.

For the nine months ended September 30, 2008, net interest income was $133.0 million, compared to $137.1 million for nine months ended September 30, 2007, a decrease of $4.1 million, or 3.0%.

Our annualized tax equivalent net interest margin was 4.05% for the quarter ended September 30, 2008, compared to 4.63% for the quarter ended June 30, 2008, and 5.71% for the quarter ended September 30, 2007.  The yield on average earning assets decreased 233 basis points to 6.78% for the third quarter 2008, compared to 9.11% for the third quarter 2007.  For the same period, the cost of funds decreased 99 basis points to 3.33% from 4.32%.

Our annualized tax equivalent net interest margin was 4.55% for the nine months ended September 30, 2008, compared to 5.68% for the nine months ended September 30, 2007.  The yield on earning assets decreased 166 basis points to 7.47% for the nine months ended September 30, 2008, compared to 9.13% for the nine months ended September 30, 2007.  For the same period, the cost of funds decreased 76 basis points to 3.54% from 4.30%.

During the third quarter of 2008, we had $1.9 million of interest accruals reversed as a result of loans being placed in a nonaccrual status which lowered the tax equivalent net interest margin by 18 basis points.  Total interest accruals reversed during the first nine months of 2008 were $4.0 million, which lowered the year-to-date tax equivalent net interest margin by 13 basis points.  The remainder of the decreases in the net interest margins can be attributed to the decreases in interest rates by the Federal Reserve since September of 2007, and the resulting repricing of loans at lower rates, along with the lower loan fees as a result of reduced loan originations.

Noninterest Income

For the nine months ended September 30, 2008, service charges increased $727 thousand, or 21.4%, and other noninterest income increased $1.2 million, or 20.4%, compared to the nine months ended September 30, 2007.  The increase in service charges is primarily attributable to an increase in account analysis fees and overdraft fees.  Increases in debit card and ATM transactions contributed an additional $770 thousand to other noninterest income.

For the nine months ended September 30, 2008, total noninterest income decreased $2.2 million, or 22.9%, to $7.3 million, compared to $9.5 million for the nine months ended September 30, 2007.  For the nine months ended September 30, 2008, we recognized a $6.4 million pre-tax loss related to other than temporarily impaired investments in Fannie Mae, Freddie Mac and Lehman Brothers.  For the nine months ended September 30, 2008, we recognized $1.4 million in gain on sale of securities, compared to a $937 thousand loss during the nine months ended September 30, 2007.

Total noninterest income for the third quarter 2008, decreased $6.7 million, compared to the third quarter 2007, and $7.4 million on a linked quarter basis. During the third quarter 2008, we recognized a $6.4 million pre-tax loss related to other than temporarily impaired investments in Fannie Mae, Freddie Mac and Lehman Brothers.  We also recognized a $1.0 million loss on the sale of a security.

Noninterest Expense

Total noninterest expense was $22.1 million for the third quarter 2008, compared to $19.1 million for the third quarter 2007.  For the period, occupancy expense increased $707 thousand, of which $282 thousand is related to additional depreciation expense and $190 thousand to furniture and equipment expense.  Late in the second quarter of 2008, we started depreciating a new building located at our Corporate Headquarters in Everett, Washington.  Other noninterest expense increased $2.0 million and primarily related to a $1.6 million increase in FDIC insurance assessments. During 2007, we received a one-time assessment credit from the FDIC of approximately $1.2 million, to offset future assessments as required by the Federal Deposit Insurance Reform Act of 2005.  The remaining increase is attributable to an accrual adjustment in the third quarter.

Total noninterest expense increased $8.3 million, or 14.7%, to $65.1 million for the nine months ended September 30, 2008, compared to $56.8 million for the nine months ended September 30, 2007.  The majority of the increase is attributable to increases in salaries and employee benefits and occupancy expense.  At September 30, 2008, there were 827 full time equivalent (“FTE”) employees, compared to 769 at September 30, 2007, an increase of 7.5%.  For the same period, occupancy expense increased $1.3 million, or 17.9%.  The increase in occupancy expense is primarily attributable to branch expansion, including our fourth quarter 2007 merger with Bank of Salem in which we acquired three branches.

On a linked quarter basis, total noninterest expense remained relatively flat, increasing $524 thousand, or 2.4%.

Liquidity

Liquidity management involves the ability to meet the cash flow requirements of customers who may be either depositors wanting to withdraw funds or customers who have credit needs.  Management has the ability to access many sources of liquidity, such as the sale of available for sale securities, additional borrowings from the FHLB, and borrowings from the Federal Reserve Bank, wholesale deposits or additional borrowings at correspondent banks.  At September 30, 2008, we had $1.17 billion of total liquidity available.  We have a policy that liquidity to total assets of 12.5% be maintained as a minimum.  At September 30, 2008, liquidity to total assets was 27.5%.

Capital

Management constantly monitors the level of capital, considering, among other things, our present and anticipated needs, current market conditions and other relevant factors, including regulatory requirements, which may necessitate changes in the level of capital.  Total capital at September 30, 2008, was $443.7 million, compared to $459.6 million at December 31, 2007, and $398.1 million at September 30, 2007. 

During the first nine months of 2008, we paid cash dividends totaling $19.6 million, compared to $22.6 million for the first nine months of 2007.  In a previously announced press release, the Board of Directors declared a $0.06 per share quarterly cash dividend to shareowners of record as of October 7, 2008, and payable on October 21, 2008.  Last quarter, the decision to reduce the quarterly cash dividend to $0.06 per share came as a result of our concern over the continuing deterioration in the housing market and the need to preserve capital.

Consolidated regulatory capital ratios as of September 30, 2008, were as follows:

	Tier I			Tier 2			Leverage
	(Core) Capital			(Total) Capital			Capital
Actual at September 30, 2008		9.48	%		10.75	%		8.88	%
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 September 30, 2008, we are in compliance with that policy.

Merger Activity

Washington Banking Company

As previously announced, on May 29, 2008, we received a notice from Washington Banking Company (“WBCO”) purporting to terminate our merger agreement dated September 26, 2007. For the nine months ended September 30, 2008, $729 thousand, pre-tax, of costs and expenses incurred in connection with the transaction were expensed.

Bank of Salem

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

Certain amounts in prior years’ financial statements have been reclassified to conform to the 2008 presentation.  These classifications have not had an effect on previously reported income or total equity.

Frontier Financial Corporation is a Washington-based financial holding company providing financial services through its commercial bank subsidiary, Frontier Bank.  Frontier Bank offers a wide range of financial services to businesses and individuals in its market area, including investment and insurance products.

CERTAIN FORWARD-LOOKING INFORMATION -- This press release contains certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA"). This statement is included for the express purpose of availing Frontier of the protections of the safe harbor provisions of the PSLRA. The forward-looking statements contained herein are subject to factors, risks and uncertainties that may cause actual results to differ materially from those projected.  The following items are among the factors that could cause actual results to differ materially from the forward-looking statements: general economic conditions, including their impact on capital expenditures; business conditions in the banking industry; recent world events and their impact on interest rates, businesses and customers; the regulatory environment; new legislation; vendor quality and efficiency; employee retention factors; rapidly changing technology and evolving banking industry standards; competitive standards; competitive factors, including increased competition with community, regional and national financial institutions; fluctuating interest rate environments; higher than expected loan delinquencies; and similar matters. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only at the date of this release.

Frontier undertakes no obligation to publicly revise or update these forward-looking statements to reflect events or circumstances that arise after the date of this release. Readers should carefully review the risk factors described in this and other documents Frontier files from time to time with the Securities and Exchange Commission, including Frontier’s 2007 Form 10-K.

FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS

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

	(Unaudited)
	Three Months Ended
	September 30, 2008			June 30, 2008		September 30, 2007
INTEREST INCOME
Interest and fees on loans	$	67,161		$	70,970	$	76,011
Interest on investments		1,660			1,372		1,737
Total interest income		68,821			72,342		77,748
INTEREST EXPENSE
Interest on deposits		24,390			23,261		25,907
Interest on borrowed funds		3,705			4,190		3,659
Total interest expense		28,095			27,451		29,566
Net interest income		40,726			44,891		48,182
PROVISION FOR LOAN LOSSES		42,100			24,500		2,100
Net interest income (loss) after
provision for loan losses		(1,374	)		20,391		46,082
NONINTEREST INCOME
Provision for loss on securities		(6,431	)		-		-
Gain (loss) on sale of securities		(1,026	)		144		-
Gain on sale of secondary mortgage loans		308			377		340
Gain on sale of other real estate owned		81			-		-
Service charges on deposit accounts		1,384			1,421		1,239
Other noninterest income		2,511			2,256		1,959
Total noninterest income		(3,173	)		4,198		3,538
NONINTEREST EXPENSE
Salaries and employee benefits		12,420			12,592		12,204
Occupancy expense		3,161			2,991		2,454
State business taxes		498			594		510
Other noninterest expense		5,978			5,356		3,969
Total noninterest expense		22,057			21,533		19,137
INCOME (LOSS) BEFORE PROVISION (BENEFIT)
FOR INCOME TAXES		(26,604	)		3,056		30,483
PROVISION (BENEFIT) FOR INCOME TAXES		(8,808	)		982		10,256
NET INCOME (LOSS)	$	(17,796	)	$	2,074	$	20,227
Weighted average number of
shares outstanding for the period		47,010,944			47,006,729		44,033,951
Basic earnings (losses) per share	$	(0.38	)	$	0.04	$	0.46
Weighted average number of diluted shares
outstanding for period		47,010,944			47,069,136		44,332,276
Diluted earnings (losses) per share	$	(0.38	)	$	0.04	$	0.46

FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS (Continued)

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

	(Unaudited)
	Nine Months Ended
	September 30, 2008			September 30, 2007
INTEREST INCOME
Interest and fees on loans	$	214,049		$	216,185
Interest on investments		4,614			4,083
Total interest income		218,663			220,268
INTEREST EXPENSE
Interest on deposits		73,376			71,479
Interest on borrowed funds		12,272			11,679
Total interest expense		85,648			83,158
Net interest income		133,015			137,110
PROVISION FOR LOAN LOSSES		75,600			5,400
Net interest income after provison for loan losses		57,415			131,710
NONINTEREST INCOME
Provision for loss on securities		(6,431	)		-
Gain (loss) on sale of securities		1,442			(937	)
Gain on sale of secondary mortgage loans		1,074			1,211
Gain on sale of other real estate owned		93			-
Service charges on deposit accounts		4,130			3,403
Other noninterest income		7,020			5,830
Total noninterest income		7,328			9,507
NONINTEREST EXPENSE
Salaries and employee benefits		39,005			35,406
Occupancy expense		8,742			7,413
State business taxes		1,643			1,501
FHLB prepayment penalty		-			1,534
Other noninterest expense		15,745			10,936
Total noninterest expense		65,135			56,790
INCOME (LOSS) BEFORE PROVISION
(BENEFIT) FOR INCOME TAXES		(392	)		84,427
PROVISION (BENEFIT) FOR INCOME TAXES		(171	)		28,506
NET INCOME (LOSS)	$	(221	)	$	55,921
Weighted average number of
shares outstanding for the period		47,297,122			45,105,244
Basic earnings (losses) per share	$	(0.00	)	$	1.24
Weighted average number of diluted shares
outstanding for period		47,297,122			45,481,886
Diluted earnings (losses) per share	$	(0.00	)	$	1.23

FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

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

	(Unaudited)						(Unaudited)
	September 30,			December 31,			September 30,
	2008			2007			2007
ASSETS
Cash and due from banks	$	56,707		$	99,102		$	63,763
Federal funds sold		130,334			5			3
Securities
Available for sale, at fair value		98,095			131,378			99,469
Held to maturity, at amortized cost		3,737			3,743			3,534
Total securities		101,832			135,121			103,003
Loans held for resale		3,104			6,227			4,332
Loans		3,828,948			3,605,895			3,313,904
Allowance for loan losses		(106,635	)		(53,995	)		(45,113	)
Net loans		3,725,417			3,558,127			3,273,123
Premises and equipment, net		51,823			47,293			38,246
Intangible assets		77,938			78,150			41,054
Federal Home Loan Bank (FHLB) stock		15,622			18,738			15,030
Bank owned life insurance		24,056			23,734			22,892
Other real estate owned		3,693			367			1,145
Other assets		57,541			35,052			26,175
Total assets	$	4,244,963		$	3,995,689		$	3,584,434
LIABILITIES
Deposits
Noninterest bearing	$	377,279		$	390,526		$	400,247
Interest bearing		3,026,715			2,552,710			2,417,180
Total deposits		3,403,994			2,943,236			2,817,427
Federal funds purchased and
securities sold under repurchase agreements		34,701			258,145			48,622
Federal Home Loan Bank advances		329,833			298,636			279,375
Junior subordinated debentures		5,156			5,156			5,156
Other liabilities		27,548			30,904			35,717
Total liabilities		3,801,232			3,536,077			3,186,297
SHAREOWNERS' EQUITY
Preferred stock, no par value; 10,000,000 shares authorized		-			-			-
Common stock, no par value; 100,000,000 shares authorized		255,575			252,292			186,420
Retained earnings		187,591			202,453			203,539
Accumulated other comprehensive income, net of tax		565			4,867			8,178
Total shareowners' equity		443,731			459,612			398,137
Total liabilities and shareowners' equity	$	4,244,963		$	3,995,689		$	3,584,434
Shares outstanding at end of period		47,023,716			46,950,878			44,047,950
Book value	$	9.44		$	9.79		$	9.04
Tangible book value	$	7.78		$	8.12		$	8.11

FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES

SELECTED OTHER FINANCIAL INFORMATION AND RATIOS

(In thousands)

	For the Period Ended
	September 30, 2008			June 30, 2008			December 31, 2007			September 30, 2007
Loans by Type
Commercial and industrial	$	452,286		$	448,360		$	402,569		$	383,122
Real Estate:
Commercial		1,049,939			1,048,321			1,003,916			940,899
Construction		1,030,591			1,048,552			1,062,662			952,220
Land development		607,501			598,931			537,410			511,679
Completed lots		242,234			236,004			249,573			206,105
Residential 1-4 family		379,485			357,650			288,571			260,746
Installment and other loans		70,016			69,460			67,421			63,465
Total loans	$	3,832,052		$	3,807,278		$	3,612,122		$	3,318,236
Allowance for Loan Losses
Balance at beginning of period	$	57,658		$	57,658		$	44,195		$	44,195
Provision for loan losses		75,600			33,500			11,400			5,400
Loans charged-off
Commercial and industrial		(1,167	)		(381	)		(1,183	)		(844	)
Real Estate:
Commercial		-			-			-			-
Construction		(17,316	)		(9,275	)		(201	)		-
Land development		(1,050	)		-			-			-
Completed lots		(4,031	)		-			-			-
Residential 1-4 family		(250	)		-			(300	)		(300	)
Installment and other loans		(246	)		(106	)		(222	)		(128	)
Total charged-off loans		(24,060	)		(9,762	)		(1,906	)		(1,272	)
Recoveries
Commercial and industrial		237			226			845			819
Real Estate:
Commercial		-			-			-			-
Construction		9			10			-			-
Land development		-			-			-			-
Completed lots		5			-			-			-
Residential 1-4 family		-			-			-			-
Installment and other loans		23			11			141			127
Total recoveries		274			247			986			946
Net (charge-offs) recoveries		(23,786	)		(9,515	)		(920	)		(326	)
Balance before portion identified
for undisbursed loans		109,472			81,643			54,675			49,269
Reserve acquired in merger		-			-			2,983			-
Portion of reserve identified for
undisbursed loans		(2,837	)		(2,921	)		(3,663	)		(4,156	)
Balance at end of period	$	106,635		$	78,722		$	53,995		$	45,113
Allowance for loan losses as a percentage
of total loans outstanding, including
loans held for resale		2.78	%		2.07	%		1.49	%		1.36	%
Allowance for loan losses as a percentage
of total nonperforming assets		51.05	%		63.68	%		253.80	%		362.38	%

FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES

SELECTED OTHER FINANCIAL INFORMATION AND RATIOS (Continued)

(In thousands)

	For the Period Ended
	September 30, 2008			June 30, 2008			December 31, 2007			September 30, 2007
Nonperforming Assets
Nonaccruing loans	$	205,197		$	119,936		$	20,908		$	11,304
Other real estate owned		3,693			3,681			367			1,145
Total nonperforming assets		208,890			123,617			21,275			12,449
Restructured loans		-			-			-			-
Total impaired assets	$	208,890		$	123,617		$	21,275		$	12,449
Total NPA to total loans		5.45	%		3.25	%		0.59	%		0.38	%
Total NPA to total assets		4.92	%		2.97	%		0.53	%		0.35	%
Total impaired assets to total assets		4.92	%		2.97	%		0.53	%		0.35	%
Interest Bearing Deposits
Money market, sweep and NOW accounts	$	557,323		$	600,023		$	745,780		$	744,489
Savings		418,535			367,731			254,722			253,320
Time deposits		2,050,857			1,939,297			1,552,208			1,419,371
Total interest bearing deposits	$	3,026,715		$	2,907,051		$	2,552,710		$	2,417,180
Capital Ratios
Tier 1 leverage ratio		8.88	%		9.69	%		10.55	%		10.11	%
Tier 1 risk-based capital ratio		9.48	%		9.96	%		10.13	%		10.22	%
Total risk-based capital ratio		10.75	%		11.22	%		11.38	%		11.48	%

	For the Three Months Ended
Performance Ratios	September 30, 2008			June 30, 2008			December 31, 2007			September 30, 2007
Return on average assets *		-1.69	%		0.20	%		1.95	%		2.28	%
Return on average shareowners' equity *		-15.32	%		1.75	%		17.21	%		20.81	%
Efficiency ratio		49	%		43	%		37	%		36	%
Average assets	$	4,221,730		$	4,087,538		$	3,698,795		$	3,540,828
Average shareowners' equity	$	464,500		$	473,750		$	418,696		$	388,758
	For the Period Ended
	September 30, 2008			June 30, 2008			December 31, 2007			September 30, 2007
Return on average assets *		-0.01	%		0.87	%		2.13	%		2.19	%
Return on average shareowners' equity *		-0.06	%		7.44	%		18.76	%		19.14	%
Efficiency ratio		44	%		42	%		37	%		36	%
Average assets	$	4,102,034		$	4,041,808		$	3,470,564		$	3,397,830
Average shareowners' equity	$	469,727		$	472,369		$	394,176		$	389,544
* Annualized

FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES

SELECTED OTHER FINANCIAL INFORMATION AND RATIOS (Continued)

(In thousands)

Quarterly Average Balances
	September 30, 2008			September 30, 2007			$ Change			% Change
Assets
Cash and due from banks	$	53,789		$	53,245		$	544			1.0	%
Federal funds sold		58,168			49,507			8,661			17.5	%
Securities available for sale		137,945			90,458			47,487			52.5	%
Securities held to maturity		3,739			3,556			183			5.1	%
Total securities		141,684			94,014			47,670			50.7	%
Loans held for sale		2,822			4,431			(1,609	)		-36.3	%
Loans
Commercial and industrial		458,330			382,669			75,661			19.8	%
RE commercial		1,055,207			916,331			138,876			15.2	%
Re construction		1,051,884			923,699			128,185			13.9	%
RE land development		602,436			492,156			110,280			22.4	%
RE completed lots		241,036			206,465			34,571			16.7	%
RE mortgage		362,543			253,343			109,200			43.1	%
Installment and other		69,163			63,406			5,757			9.1	%
Total		3,843,421			3,242,500			600,921			18.5	%
Allowance for credit losses		(87,365	)		(44,190	)		(43,175	)		97.7	%
Net loans		3,756,056			3,198,310			557,746			17.4	%
Premises and equipment		52,581			37,128			15,453			41.6	%
Intangible assets		77,977			41,070			36,907			89.9	%
FHLB Stock		17,207			15,030			2,177			14.5	%
BOLI		24,321			22,771			1,550			6.8	%
Other real estate owned		3,179			411			2,768			673.5	%
Other assets		36,768			29,342			7,426			25.3	%
Total assets	$	4,221,730		$	3,540,828		$	680,902			19.2	%
Liabilities
Deposits:
Noninterest bearing	$	386,896		$	403,663		$	(16,767	)		-4.2	%
Interest bearing
MMA, Sweep and NOW		586,319			751,625			(165,306	)		-22.0	%
Savings		392,552			258,733			133,819			51.7	%
Time deposits		2,008,838			1,390,167			618,671			44.5	%
Total interest bearing		2,987,709			2,400,525			587,184			24.5	%
Total deposits		3,374,605			2,804,188			570,417			20.3	%
Fed funds purchased and
repurchase agreements		33,631			21,679			11,952			55.1	%
FHLB Advances		329,985			289,918			40,067			13.8	%
Junior subordinated debt		5,156			5,156			-			0.0	%
Other liabilities		13,853			31,129			(17,276	)		-55.5	%
Total liabilities		3,757,230			3,152,070			605,160			19.2	%
Total stockholders’ equity		464,500			388,758			75,742			19.5	%
Total liabilities and stockholders’ equity	$	4,221,730		$	3,540,828		$	680,902			19.2	%

FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES

SELECTED OTHER FINANCIAL INFORMATION AND RATIOS (Continued)

(In thousands)

Quarterly Average Balances
	September 30, 2008			June 30, 2008			$ Change			% Change
Assets
Cash and due from banks	$	53,789		$	50,205		$	3,584			7.1	%
Federal funds sold		58,168			1,994			56,174			2817.2	%
Securities available for sale		137,945			119,670			18,275			15.3	%
Securities held to maturity		3,739			3,741			(2	)		-0.1	%
Total securities		141,684			123,411			18,273			14.8	%
Loans held for sale		2,822			3,543			(721	)		-20.3	%
Loans
Commercial and industrial		458,330			437,414			20,916			4.8	%
RE commercial		1,055,207			1,024,190			31,017			3.0	%
Re construction		1,051,884			1,080,338			(28,454	)		-2.6	%
RE land development		602,436			578,954			23,482			4.1	%
RE completed lots		241,036			241,750			(714	)		-0.3	%
RE mortgage		362,543			330,612			31,931			9.7	%
Installment and other		69,163			67,936			1,227			1.8	%
Total		3,843,421			3,764,737			78,684			2.1	%
Allowance for credit losses		(87,365	)		(63,565	)		(23,800	)		37.4	%
Net loans		3,756,056			3,701,172			54,884			1.5	%
Premises and equipment		52,581			51,751			830			1.6	%
Intangible assets		77,977			78,036			(59	)		-0.1	%
FHLB Stock		17,207			20,339			(3,132	)		-15.4	%
BOLI		24,321			24,112			209			0.9	%
Other real estate owned		3,179			1,870			1,309			70.0	%
Other assets		36,768			34,648			2,120			6.1	%
Total assets	$	4,221,730		$	4,087,538		$	134,192			3.3	%
Liabilities
Deposits:
Noninterest bearing	$	386,896		$	377,131		$	9,765			2.6	%
Interest bearing
MMA, Sweep and NOW		586,319			645,409			(59,090	)		-9.2	%
Savings		392,552			345,192			47,360			13.7	%
Time deposits		2,008,838			1,765,116			243,722			13.8	%
Total interest bearing		2,987,709			2,755,717			231,992			8.4	%
Total deposits		3,374,605			3,132,848			241,757			7.7	%
Fed funds purchased and		33,631			118,866			(85,235	)		-71.7	%
repurchase agreements
FHLB Advances		329,985			332,297			(2,312	)		-0.7	%
Junior subordinated debt		5,156			5,156			-			0.0	%
Other liabilities		13,853			24,621			(10,768	)		-43.7	%
Total liabilities		3,757,230			3,613,788			143,442			4.0	%
Total stockholders’ equity		464,500			473,750			(9,250	)		-2.0	%
Total liabilities and stockholders’ equity	$	4,221,730		$	4,087,538		$	134,192			3.3	%

FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES

SELECTED OTHER FINANCIAL INFORMATION AND RATIOS (Continued)

(In thousands)

Year-to-Date Average Balances
	September 30, 2008			September 30, 2007			$ Change			% Change
Assets
Cash and due from banks	$	51,125		$	73,499		$	(22,374	)		-30.4	%
Federal funds sold		24,145			23,215			930			4.0	%
Securities available for sale		131,020			91,453			39,567			43.3	%
Securities held to maturity		3,741			3,576			165			4.6	%
Total securities		134,761			95,029			39,732			41.8	%
Loans held for sale		3,720			4,989			(1,269	)		-25.4	%
Loans
Commercial and industrial		431,062			384,313			46,749			12.2	%
RE commercial		1,031,928			905,223			126,705			14.0	%
Re construction		1,066,762			854,110			212,652			24.9	%
RE land development		579,007			437,877			141,130			32.2	%
RE completed lots		242,741			207,919			34,822			16.7	%
RE mortgage		329,014			249,827			79,187			31.7	%
Installment and other		68,195			62,346			5,849			9.4	%
Total		3,752,429			3,106,604			645,825			20.8	%
Allowance for credit losses		(69,091	)		(42,533	)		(26,558	)		62.4	%
Net loans		3,683,338			3,064,071			619,267			20.2	%
Premises and equipment		51,010			33,875			17,135			50.6	%
Intangible assets		78,050			41,142			36,908			89.7	%
FHLB Stock		18,755			15,030			3,725			24.8	%
BOLI		24,096			22,543			1,553			6.9	%
Other real estate owned		1,909			139			1,770			-
Other assets		34,845			29,287			5,558			19.0	%
Total assets	$	4,102,034		$	3,397,830		$	704,204			20.7	%
Liabilities
Deposits:
Noninterest bearing	$	376,623		$	394,593		$	(17,970	)		-4.6	%
Interest bearing
MMA, Sweep and NOW		647,108			708,757			(61,649	)		-8.7	%
Savings		334,703			274,919			59,784			21.7	%
Time deposits		1,836,898			1,273,679			563,219			44.2	%
Total interest bearing		2,818,709			2,257,355			561,354			24.9	%
Total deposits		3,195,332			2,651,948			543,384			20.5	%
Fed funds purchased and
repurchase agreements		77,480			33,003			44,477			134.8	%
FHLB Advances		331,207			291,574			39,633			13.6	%
Junior subordinated debt		5,156			5,156			-			0.0	%
Other liabilities		23,132			26,605			(3,473	)		-13.1	%
Total liabilities		3,632,307			3,008,286			624,021			20.7	%
Total stockholders’ equity		469,727			389,544			80,183			20.6	%
Total liabilities and stockholders’ equity	$	4,102,034		$	3,397,830		$	704,204			20.7	%