FRONTIER FINANCIAL CORPORATION                                                                                                           

332 SW Everett Mall Way

Everett, Washington 98204                    

Contact: Patrick M. Fahey

Frontier Financial Corporation

Chairman and CEO

425-423-7250

John J. Dickson

Frontier Bank

President

425-514-0700

NEWS RELEASE

For release January 29, 2010, 5:30 A.M. PDT

FRONTIER FINANCIAL CORPORATION ANNOUNCES IMPROVED OPERATING

RESULTS FOR THE FOURTH QUARTER 2009

EVERETT, WASHINGTON – January 29, 2010 – Frontier Financial Corporation (NASDAQ: FTBK) today announced results for the quarter and year ended December 31, 2009.  For the three months ended December 31, 2009, the Corporation reported a net loss of $33.9 million, or ($7.19) per diluted share, compared to a net loss of $141.1 million, or ($29.93) per diluted share, for the three months ended September 30, 2009, and net loss of $89.5 million, or ($19.03) per diluted share, for the three months ended December 31, 2008.  For the year ended December 31, 2009, the Corporation reported a net loss of $258.8 million, or ($54.91) per diluted share, compared to a net loss of $89.7, or ($19.10) per diluted share, a year ago.  All results reflect the one-for-ten reverse stock split, which was effective November 24, 2009.

Highlights for the fourth quarter and year ended December 31, 2009 include:

·   Net loss decreased $107.2 million, or 76.0%, for the fourth quarter 2009, compared to the previous quarter;

·   Annualized tax equivalent net interest margin increased 26 basis point to 2.30% at December 31, 2009, compared to 2.04% at September 30, 2009;

·   Nonperforming loans decreased $105.3 million, or 13.0%, for the fourth quarter 2009, compared to the previous quarter;

·   Nonperforming assets decreased $34.0 million, or 3.7%, for the fourth quarter 2009, compared to the previous quarter;

·   The ratio of loans past due 30 to 89 days to total loans improved to 4.3% at December 31, 2009, compared to 7.3% at September 30, 2009;

·   Total deposits, excluding brokered deposits, increased $29.1 million for the fourth quarter 2009, compared to the previous quarter; and

·   Total liquidity, as a percentage of total assets, improved to 13.5% at December 31, 2009, compared to 12.1% at September 30, 2009.

The results for the fourth quarter and year ended December 31, 2009, also reflect a $40.4 million and $89.2 million income tax benefit primarily related to newly enacted legislation that allows banks, such as Frontier Bank, that had not received government assistance in the form of TARP, to carryback losses incurred in 2008 or 2009 for a period of five years.  We expect to receive an income tax refund of approximately $82.4 million in 2010.

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Despite these challenging times, the Board of Directors and management continue to take important steps to strengthen the Corporation.  We continue to reduce our concentrations in real estate construction and land development loans and have successfully reduced these portfolios by $1.39 billion, or 57.3%, from June 30, 2008 to December 31, 2009, including undisbursed loan commitments, as defined by the FDIC.

Patrick M. Fahey, Chairman and CEO of Frontier Financial Corporation said, “It is gratifying to see improving trends due to the tremendous efforts and sacrifices of our staff during these very difficult times.  Our progress and improved liquidity are very much a result of the loyalty of our customers and the strong support of the communities we serve, for which we are very grateful.”

Liquidity

We continue to closely monitor and manage our liquidity position, understanding that this is of critical importance in the current economic environment.  At December 31, 2009, total liquidity, as a percentage of assets, was at its highest level for 2009, totaling 13.5%

In an effort to increase on-balance sheet liquidity, we have been focused on restructuring our balance sheet, and in particular, reducing the loan portfolio and increasing core deposits.  As a result, we have increased our federal funds sold balances to $333.8 million at December 31, 2009, an increase of $216.1 million from a year ago, to maintain a strong liquidity position.  For the quarter ended December 31, 2009, total loans decreased $281.5 million, or 8.9%, compared to the previous quarter.  Year-over-year, total loans decreased $909.2 million, or 24.1%.

For the quarter ended December 31, 2009, total deposits decreased $103.1 million to $3.12 billion.  During the quarter, $132.2 million of non-core brokered deposits matured, resulting in a net increase in deposits, excluding brokered deposits, of $29.1 million.  Similarly, since March 31, 2009, we have reduced our brokered deposit balances by $367.3 million, resulting in a net increase in total deposits, excluding brokered deposits, of $136.1 million, over the past nine months.

Capital

On January 20, 2010, we held a special shareholder meeting in which shareholders approved an increase in the total number of shares of common stock that we are authorized to issue from 10 million to 200 million shares.  The availability of these additional shares of common stock will allow us the capability and flexibility to issue new shares for a variety of purposes, including raising additional capital and increasing our regulatory capital ratios.

As previously announced, on October 5, 2009, the Corporation and SP Acquisition Holdings, Inc. (“SPAH”) mutually agreed to terminate their Agreement and Plan of Merger, dated as of July 30, 2009, effective immediately,  due to the fact that certain closing conditions contained in the merger agreement could not be met.  Since the termination of the transaction, we have continued to seek out equity investors and have made numerous contacts with potential investors.

Review of Financial Condition

Loans

At December 31, 2009, total loans, including loans held for resale, were $2.87 billion, compared to $3.15 billion at September 30, 2009, and $3.78 billion a year ago.

The decreases in total loans at December 31, 2009, compared to the previous quarter and a year ago, are attributable to decreases in new loan originations, loan pay downs and increased loan charge-offs.  With few exceptions, we have suspended the origination of new real estate construction, land development and completed lot loans.  For the fourth quarter 2009, new loan originations totaled $26.2 million, compared to $22.4 million in the third quarter 2009, and $74.2 million in the fourth quarter 2008.  New loan originations for the twelve months ended December 31, 2009, totaled $126.3 million, compared to $833.5 million for the same period a year ago, a decrease of $707.2 million, or 84.8%.

Management continues to proactively manage credit quality and loan collections and address workout strategies.  Net charge-offs for the three months ended December 31, 2009, totaled $91.0 million, compared to $96.6 million for the three months ended September 30, 2009, and $39.2 for the three months ended December 31, 2008.  Net charge-offs for the twelve months ended December 31, 2009 and 2008, totaled $337.3 million and $63.0 million, respectively.

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Allowance for Loan Losses

The total allowance for loan losses was $121.3 million, or 4.23%, of total loans outstanding at December 31, 2009, compared to $142.2 million, or 4.51%, at September 30, 2009, and $112.6 million, or 2.98%, at December 31, 2008.  The allowance for loan losses, including the reclassified allocation for undisbursed loans of $991 thousand, would amount to a total allowance of $122.3 million, or 4.26%, of total loans outstanding at December 31, 2009.

Asset Quality

Nonperforming assets are summarized as follows (in thousands):

	December 31,			September 30,			June 30,			March 31,			December 31,
	2009			2009			2009			2009			2008
Commercial and industrial	$	31,401		$	29,147		$	27,092		$	12,745		$	12,908
Real estate:
Commercial		89,708			81,870			73,130			14,527			10,937
Construction		192,215			277,146			267,102			286,342			181,905
Land development		234,627			274,959			267,907			217,082			177,139
Completed lots		87,632			85,341			88,072			94,438			34,005
Residential 1-4 family		68,178			60,669			40,433			30,521			17,686
Installment and other		1,432			1,388			822			718			645
Total nonaccruing loans		705,193			810,520			764,558			656,373			435,225
Other real estate owned		173,162			101,805			54,222			18,874			10,803
Total nonperforming assets	$	878,355		$	912,325		$	818,780		$	675,247		$	446,028
Total loans at end of period (1)	$	2,869,498		$	3,151,004		$	3,416,219		$	3,659,510		$	3,778,733
Total assets at end of period	$	3,628,472		$	3,772,109		$	3,987,403		$	4,154,267		$	4,104,445
Total nonaccruing loans to total loans		24.58	%		25.72	%		22.38	%		17.94	%		11.52	%
Total nonperforming assets to
total assets		24.21	%		24.19	%		20.53	%		16.25	%		10.87	%
(1) Includes loans held for resale.

The ratio of loans past due 30 to 89 days was 4.3% of total loans at December 31, 2009, compared to 7.3% at September 30, 2009, 6.2% at June 30, 2009, 9.7% at March 31, 2009 and 5.9% at December 31, 2008.  There were no loans 90 days or more past due and still accruing interest at December 31, 2009.

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Results of Operations

Net interest income

Net interest income for the three months ended December 31, 2009, totaled $20.0 million, compared to $18.9 million for the three months ended September 30, 2009, and $33.9 million for the three months ended December 31, 2008.  Net interest income for the twelve months ended December 31, 2009, totaled $84.1 million, compared to $166.9 million for the same period a year ago.  For all periods, the decrease in net interest income was primarily attributable to increases in net loan charge-offs and nonperforming loans placed on nonaccrual status.

For the fourth quarter 2009, net interest income increased $1.1 million, or 5.9%, compared to the previous quarter.  For the period, changes in average earning assets and liabilities decreased net interest income by $1.1 million, whereas changes in interest rates increased net interest income by $2.2 million. For the period, the average quarterly yield on earning assets increased 12 basis points to 4.57% and the average cost of funds decreased 24 basis points to 2.52%.

For the three months ended December 31, 2009, net interest income decreased $13.9 million, or 41.0%, compared to the same period a year ago.  For the period, changes in average earning assets and average interest bearing liabilities decreased net interest income by $9.2 million and changes in interest rates decreased net interest income by $4.7 million.  For the quarter ended December 31, 2009, average net earning assets (average earning assets less average interest bearing liabilities) totaled $359.9 million, compared to $710.8 million a year ago, a decrease of $350.9 million, or 49.4%.  The average yield on earning assets was 4.57% for the fourth quarter 2009, down 147 basis points from 6.04% for the fourth quarter 2008.  The average cost on interest bearing liabilities was down 69 basis points for the period.

For the twelve months ended December 31, 2009, net interest income decreased $82.8 million, or 49.6%, compared to the same period a year ago.  For the period, changes in average earning assets and average interest bearing liabilities decreased net interest income by $30.3 million and changes in interest rates decreased net interest income by $52.6 million.  For the period, average net earning assets decreased $168.4 million, or 24.0%.  Year-over-year, the average yield on earning assets and average cost of funds decreased 243 basis points and 62 basis points, respectively.

The annualized tax equivalent net interest margin increased 26 basis points for the three months ended December 31, 2009, compared to the previous quarter.  The increase in the annualized tax equivalent net interest margin was primarily attributable to a decrease in the amount of interest income reversed as the result of loans going into nonaccrual status.  For the three months ended December 31, 2009, we reversed $1.7 million of interest income, compared to $3.5 million for the three months ended September 30, 2009.

The annualized tax equivalent net interest margin was 2.30% for the three months ended December 31 2009, compared to 3.42% for the same period a year ago, a decrease of 112 basis points.  Of that decrease the reversal of $1.7 million of interest accruals lowered the tax equivalent net interest margin by approximately 19 basis points.  The remainder of the decrease in net interest margin can be attributed to the increase in total nonaccruing loans, lower loan fees as a result of reduced loan originations and a reduction of average outstanding loan balances.

The annualized tax equivalent net interest margin was 2.23% for the twelve months ended December 31, 2009, compared to 4.26% for the twelve months ended December 31, 2008, a decrease of 203 basis points.  For the twelve months ended December 31, 2009, the reversal of $17.0 million of interest income on nonaccrual loans lowered the tax equivalent net interest margin by approximately 43 basis points.  The year-over-year decrease in the tax equivalent net interest margin can also be attributed to the increase in total nonaccruing loans and a decrease in new loan originations.  For the year ended December 31, 2009, new loan originations decreased 84.8%, compared to the same period a year ago, resulting in lower loan fees.

Also contributing to the decrease in the annualized tax equivalent net interest margin for the three and twelve months ended December 31, 2009, compared to the same periods in 2008, was the change in mix of earning assets. As previously mentioned, in an effort to increase on-balance sheet liquidity, we have increased federal funds sold balances.  For the fourth quarter of 2009, average federal funds sold accounted for approximately 9.8% of total average earning assets, compared to 1.1% for the fourth quarter of 2008.  For the years ended December 31, 2009 and 2008, average federal funds sold accounted for approximately 7.8% and 0.7% of total average earning assets, respectively.  Typically, federal funds sold are a lower earning asset and currently yield a rate of 0.25%.

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Noninterest income

For the three months ended December 31, 2009, total noninterest income was $1.9 million, compared to $2.9 million for the three months ended September 30, 2009, and $7.5 million for the three months ended December 31, 2008.  For the twelve months ended December 31, 2009, total noninterest income was $12.7 million, compared to $14.8 million for the same period a year ago.

Total noninterest income decreased $977 thousand, or 33.9%, for the three months ended December 31, 2009, compared to the previous quarter, and was primarily attributable to the increase in net loss on sale of other real estate owned.  During the fourth quarter 2009, we recognized a net loss of $2.0 million, as the result of a $1.6 million valuation adjustment and a loss on sale of $476 thousand.  Comparatively, for the third quarter 2009, we recognized a net loss of $1.1 million related to other real estate owned, resulting from an $820 thousand valuation adjustment and a $248 thousand loss on sale.  The valuation adjustments on other real estate owned, for the third and fourth quarters of 2009, were the result of declines in the estimated market value of these properties subsequent to foreclosure.

Total noninterest income decreased $5.6 million for the three months ended December 31, 2009, compared to the same period in 2008.  During the fourth quarter 2008, we recognized a $3.1 million pre-tax gain on sale of securities.  There were no security sales in the fourth quarter 2009.  Additionally, the net loss on sale of other real estate owned increased $2.1 million for the three months ended December 31, 2009, compared to the same period a year ago.  The continued slowdown in the local housing market, which has adversely affected our real estate construction, land development and completed lot loans, has led to an increase in foreclosures and the movement of real estate properties into OREO.  At December 31, 2009, OREO totaled $173.2 million, compared to $10.8 million at December 31, 2008.  Declines in the market values of these properties after foreclosure resulted in valuation adjustments totaling $1.6 million for the three months ended December 31, 2009.  No valuation adjustments were deemed necessary for the three months ended December 31, 2008.

For the twelve months ended December 31, 2009, total noninterest income decreased $2.1 million, or 14.4%, compared to the same period a year ago.  During the third quarter of 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.  There was no such impairment charge for 2009.  The 2008 impairment charges were partially offset by a net gain on the sale of securities of $4.6 million. Additionally, for the twelve months ended December 31, 2009, we recognized a net loss on sale of other real estate owned of $3.6 million, primarily due to valuation adjustments resulting from declines in the market value of these properties subsequent to foreclosure.  For the same period a year ago, we recognized a $97 thousand net gain on sale of other real estate owned.  Excluding the impact of securities and other real estate owned activities; noninterest income decreased $234 thousand to $16.4 million for 2009, primarily as a result of a decrease in revenues from our Insurance and Investment Center.

Noninterest expense

For the three months ended December 31, 2009, total noninterest expense was $26.2 million, compared to $24.8 million and $94.9 million for the three months ended September 30, 2009 and December 31, 2008, respectively.  For the twelve months ended December 31, 2009, total noninterest expense was $99.7 million, compared to $160.1 million for the same period a year ago.  Included in the quarter ended December 31, 2008 was a $77.1 million charge for the impairment of goodwill.

For the three months ended December 31, 2009, total noninterest expense increased $1.4 million, or 5.8%, compared to the previous quarter.  The increase in total noninterest expense was primarily attributable to the $2.1 million increase in FDIC insurance premiums.  The $539 thousand decrease in other noninterest expense relates to decreases in collection and foreclosure expense, as well as, a decrease in consulting fees.

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Total noninterest expense decreased $68.7 million, or 72.3%, for the three months ended December 31, 2009, compared to the same period a year ago.  Excluding the $77.1 million goodwill impairment charge during the fourth quarter 2008, total noninterest expense increased $8.4 million, or 46.9%, for the period.  The increase in total noninterest expense was attributable to increases in salaries and employee benefits, FDIC insurance and other noninterest expense.  For the period, salaries and employee benefits increased $1.7 million, or 17.7%, and was primarily attributable to the decrease in deferred loan costs resulting from the reduction in new loan originations.  FDIC insurance premiums increased $4.1 million due to an increase in assessments.  The $2.4 million, or 48.6%, increase in other noninterest expense was primarily due to the increase in nonperforming assets for the period, which resulted in a $1.9 million increase in foreclosure expense and a $609 thousand increase in legal expense.

Excluding the fourth quarter 2008 goodwill impairment charge, total noninterest expense increased $16.7 million, or 20.2%, for the twelve months ended December 31, 2009, compared to the same period in 2008.  The increase in total noninterest expense was primarily attributable to the $13.3 million increase in FDIC insurance and the $6.0 million increase in other noninterest expense, partially offset by the $1.4 million decrease in salaries and employee benefits. The decrease in salaries and employee benefits for the twelve months ended December 31, 2009, compared to the same period a year ago, was primarily the result of the elimination of bonus and incentive pay, a reduction in executive compensation, a moratorium on hiring and a reduction in force, partially offset by a reduction in deferred loan costs.  At December 31, 2009, full time equivalent employees totaled 703, down from 799 at December 31, 2008, a decrease of 12.0%.  In addition, the Board of Directors voted to suspend the Corporation’s matching of employee 401(K) Plan contributions, effective May 1, 2009.    Excluding the impact of the lower deferred loan costs in 2009, resulting from lower loan originations, the reduction in salaries and benefits would have been $6.2 million.   The increase in other noninterest expense is primarily attributable to increases in collection expense, foreclosure expense and legal fees resulting from an increase in nonperforming assets for the period.  Despite these increases, however, management has been successful in reducing other targeted noninterest expenses.  Management set a goal of reducing those targeted noninterest expense categories by $8.5 million for 2009.  The cost containment efforts resulted in a reduction of those targeted expense categories by $10.2 million in 2009.  Those categories included salaries and benefits, consulting, marketing, advertising, director fees and expenses related to furniture and equipment.

Certain amounts in prior years’ financial statements have been reclassified to conform to the 2009 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.  Readers should not place undue reliance on forward-looking statements, which reflect management’s views only as of the date hereof.  The words “should,” “anticipate,” “expect,” “will,” “believe,” and words of similar meaning are intended, in part, to help identify forward-looking statements.  Future events are difficult to predict, and the expectations described above are subject to risks and uncertainties that may cause actual results to differ materially.  Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or expected. In addition to discussions about risks and uncertainties set forth from time to time in the Company’s filings with the Securities and Exchange Commission, factors that may cause actual results to differ materially from those contemplated in these forward-looking statements include, among others:  (1) the extent and duration of continued economic and market disruptions and governmental actions to address these disruptions; (2) the risk of new and changing legislation, regulation and/or regulatory actions; (3) pending litigation and regulatory actions; (4) local and national general and economic conditions; (5) changes in interest rates; (6) reductions in loan demand or deposit levels; and (7) changes in loan collectibility, defaults and charge-off rates.

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 2008 Form 10-K and Frontier’s Form 10-Q for the quarter ending September 30, 2009.

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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS

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

(Unaudited)

	Three Months Ended
	December 31,			September 30,			December 31,
	2009			2009			2008
INTEREST INCOME
Interest and fees on loans	$	39,207		$	40,595		$	59,343
Interest on investments		764			895			1,049
Total interest income		39,971			41,490			60,392
INTEREST EXPENSE
Interest on deposits		16,175			18,703			22,715
Interest on borrowed funds		3,806			3,909			3,822
Total interest expense		19,981			22,612			26,537
Net interest income		19,990			18,878			33,855
PROVISION FOR LOAN LOSSES		70,000			140,000			44,400
Net interest loss after provision for loan losses		(50,010	)		(121,122	)		(10,545	)
NONINTEREST INCOME
Gain on sale of securities		-			-			3,129
Gain on sale of secondary mortgage loans		229			232			247
Net gain (loss) on sale of other real estate owned		(2,047	)		(1,068	)		4
Service charges on deposit accounts		1,558			1,611			1,291
Other noninterest income		2,161			2,103			2,831
Total noninterest income		1,901			2,878			7,502
NONINTEREST EXPENSE
Salaries and employee benefits		11,058			11,290			9,398
Occupancy expense		2,689			2,694			2,406
State business taxes		324			239			370
FDIC insurance		4,800			2,682			730
Other noninterest expense		7,370			7,909			4,960
		26,241			24,814			17,864
Goodwill impairment		-			-			77,073
Total noninterest expense		26,241			24,814			94,937
LOSS BEFORE  BENEFIT FOR
INCOME TAXES		(74,350	)		(143,058	)		(97,980	)
BENEFIT FOR INCOME TAXES		(40,425	)		(1,970	)		(8,464	)
NET LOSS	$	(33,925	)	$	(141,088	)	$	(89,516	)
Weighted average number of
shares outstanding for the period		4,715,370			4,713,185			4,703,840
Basic losses per share	$	(7.19	)	$	(29.93	)	$	(19.03	)
Weighted average number of diluted shares
outstanding for period		4,715,370			4,713,185			4,703,840
Diluted losses per share	$	(7.19	)	$	(29.93	)	$	(19.03	)

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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS (Continued)

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

(Unaudited)

	Twelve Months Ended
	December 31,			December 31,
	2009			2008
INTEREST INCOME
Interest and fees on loans	$	173,934		$	273,392
Interest on investments		3,599			5,663
Total interest income		177,533			279,055
INTEREST EXPENSE
Interest on deposits		77,661			96,091
Interest on borrowed funds		15,801			16,094
Total interest expense		93,462			112,185
Net interest income		84,071			166,870
PROVISION FOR LOAN LOSSES		345,000			120,000
Net interest income (loss) after
provision for loan losses		(260,929	)		46,870
NONINTEREST INCOME
Provision for loss on securities		-			(6,430	)
Gain (loss) on sale of securities		(102	)		4,570
Gain on sale of secondary mortgage loans		1,675			1,321
Gain on sale of premises and equipment		136			30
Net gain (loss) on sale of other real estate owned		(3,566	)		97
Service charges on deposit accounts		6,154			5,421
Other noninterest income		8,394			9,821
Total noninterest income		12,691			14,830
NONINTEREST EXPENSE
Salaries and employee benefits		46,985			48,403
Occupancy expense		10,953			11,148
State business taxes		1,068			2,013
FDIC insurance		15,962			2,650
Other noninterest expense		24,766			18,785
		99,734			82,999
Goodwill impairment		-			77,073
Total noninterest expense		99,734			160,072
LOSS BEFORE BENEFIT FOR
INCOME TAXES		(347,972	)		(98,372	)
BENEFIT FOR INCOME TAXES		(89,154	)		(8,635	)
NET LOSS	$	(258,818	)	$	(89,737	)
Weighted average number of
shares outstanding for the period		4,713,219			4,699,163
Basic losses per share	$	(54.91	)	$	(19.10	)
Weighted average number of diluted shares
outstanding for period		4,713,219			4,699,163
Diluted losses per share	$	(54.91	)	$	(19.10	)

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FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

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

(Unaudited)

	December 31,			September 30,			December 31,
	2009			2009			2008
ASSETS
Cash and due from banks	$	93,761		$	36,921		$	52,022
Federal funds sold		333,819			363,081			117,740
Securities
Available for sale, at fair value		85,092			73,834			90,606
Held to maturity, at amortized cost		2,102			3,079			3,085
Total securities		87,194			76,913			93,691
Loans held for resale		3,221			3,464			6,678
Loans		2,866,277			3,147,540			3,772,055
Allowance for loan losses		(121,349	)		(142,229	)		(112,556	)
Net loans		2,748,149			3,008,775			3,666,177
Premises and equipment, net		47,704			48,826			51,502
Intangible assets		581			634			794
Federal Home Loan Bank (FHLB) stock		19,885			19,885			19,885
Bank owned life insurance		25,385			25,116			24,321
Other real estate owned		173,162			101,805			10,803
Other assets		98,832			90,153			67,510
Total assets	$	3,628,472		$	3,772,109		$	4,104,445
LIABILITIES
Deposits
Noninterest bearing	$	377,258		$	403,534		$	395,451
Interest bearing		2,745,218			2,822,087			2,879,714
Total deposits		3,122,476			3,225,621			3,275,165
Federal funds purchased and
securities sold under repurchase agreements		11,107			15,584			21,616
Federal Home Loan Bank advances		375,479			375,752			429,417
Junior subordinated debt		5,156			5,156			5,156
Other liabilities		19,280			20,329			21,048
Total liabilities		3,533,498			3,642,442			3,752,402
SHAREOWNERS' EQUITY
Common stock, no par value; 100,000,000 shares authorized		258,202			258,425			256,137
Retained earnings (accumulated deficit)		(160,807	)		(126,873	)		98,020
Accumulated other comprehensive loss, net of tax		(2,421	)		(1,885	)		(2,114	)
Total shareowners' equity		94,974			129,667			352,043
Total liabilities and shareowners' equity	$	3,628,472		$	3,772,109		$	4,104,445
Shares outstanding at end of period		4,725,076			4,713,185			4,709,510
Book value	$	20.10		$	27.51		$	74.75
Tangible book value	$	19.98		$	27.38		$	74.58

-9-

FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES

SELECTED OTHER FINANCIAL INFORMATION AND RATIOS

(In thousands)

(Unaudited)

	For the Period Ended (Year-to-Date)
	December 31,			September 30,			June 30,			March 31,			December 31,
	2009			2009			2009			2009			2008
Loans by Type (including loans
held for resale)
Commercial and industrial	$	388,548		$	405,405		$	425,221		$	444,681		$	457,215
Real Estate:
Commercial		965,150			988,004			1,017,204			1,020,530			1,044,833
Construction		448,063			587,594			713,571			870,201			949,909
Land development		319,311			405,400			476,562			512,804			580,453
Completed lots		252,475			257,057			272,824			297,702			249,685
Residential 1-4 family		426,211			436,744			433,884			443,361			431,170
Installment and other loans		69,740			70,800			76,953			70,231			65,468
Total loans	$	2,869,498		$	3,151,004		$	3,416,219		$	3,659,510		$	3,778,733
Allowance for Loan Losses
Balance at beginning of period	$	114,638		$	114,638		$	114,638		$	114,638		$	57,658
Provision for loan losses		345,000			275,000			135,000			58,000			120,000
Loans charged-off
Commercial and industrial		(37,044	)		(26,494	)		(18,891	)		(5,355	)		(3,101	)
Real Estate:
Commercial		(12,477	)		(9,212	)		(1,176	)		(149	)		(1,264	)
Construction		(117,258	)		(90,431	)		(62,036	)		(29,448	)		(31,968	)
Land development		(109,651	)		(74,231	)		(38,015	)		(19,057	)		(12,165	)
Completed lots		(44,031	)		(35,525	)		(19,286	)		(3,504	)		(13,839	)
Residential 1-4 family		(18,708	)		(11,596	)		(10,771	)		(2,127	)		(846	)
Installment and other loans		(2,362	)		(1,795	)		(1,089	)		(205	)		(343	)
Total charged-off loans		(341,531	)		(249,284	)		(151,264	)		(59,845	)		(63,526	)
Recoveries
Commercial and industrial		715			616			496			211			308
Real Estate:
Commercial		2			-			-			-			-
Construction		2,705			2,048			863			51			161
Land development		12			57			57			57			-
Completed lots		665			148			66			16			9
Residential 1-4 family		62			59			27			-			-
Installment and other loans		72			47			4			2			28
Total recoveries		4,233			2,975			1,513			337			506
Net (charge-offs) recoveries		(337,298	)		(246,309	)		(149,751	)		(59,508	)		(63,020	)
Balance before portion identified
for undisbursed loans		122,340			143,329			99,887			113,130			114,638
Portion of reserve identified for
undisbursed loans		(991	)		(1,100	)		(1,304	)		(1,646	)		(2,082	)
Balance at end of period	$	121,349		$	142,229		$	98,583		$	111,484		$	112,556
Allowance for loan losses as a
percentage of total loans,
including loans held for resale		4.23	%		4.51	%		2.89	%		3.05	%		2.98	%

-10-

FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES

SELECTED OTHER FINANCIAL INFORMATION AND RATIOS (Continued)

(In thousands)

(Unaudited)

	For the Period Ended (Year-to-Date)
	December 31,			September 30,			June 30,			March 31,			December 31,
	2009			2009			2009			2009			2008
Nonperforming Assets (NPA)
Nonaccruing loans	$	705,193		$	810,520		$	764,558		$	656,373		$	435,225
Other real estate owned		173,162			101,805			54,222			18,874			10,803
Total nonperforming assets		878,355			912,325			818,780			675,247			446,028
Total nonaccruing loans to
total loans		24.58	%		25.72	%		22.38	%		17.94	%		11.52	%
Total NPA to total assets		24.21	%		24.19	%		20.53	%		16.25	%		10.87	%
Interest Bearing Deposits
Money market, sweep and NOW	$	497,952		$	428,704		$	409,606		$	365,807		$	325,554
Savings		241,261			276,989			285,725			334,076			365,114
Time deposits		2,006,005			2,116,394			2,148,970			2,243,362			2,189,046
Total interest bearing deposits	$	2,745,218		$	2,822,087		$	2,844,301		$	2,943,245		$	2,879,714
Capital Ratios
Tier 1 leverage ratio		2.69	%		3.40	%		6.74	%		7.60	%		8.62	%
Tier 1 risk-based capital ratio		3.42	%		4.33	%		8.15	%		9.13	%		9.64	%
Total risk-based capital ratio		4.70	%		5.62	%		9.42	%		10.40	%		10.91	%

	For the Three Months Ended
	December 31,			September 30,			June 30,			March 31,			December 31,
Performance Ratios	2009			2009			2009			2009			2008
ROA (annualized)		-3.66	%		-14.39	%		-4.92	%		-3.18	%		-8.68	%
ROE (annualized)		-110.87	%		-234.71	%		-63.92	%		-38.70	%		-81.58	%
Average assets	$	3,677,366		$	3,922,015		$	4,061,874		$	4,248,979		$	4,125,319
Average shareholders' equity	$	121,400		$	240,448		$	312,851		$	349,465		$	438,908

	For the Period Ended (Year-to-Date)
	December 31,			September 30,			June 30,			March 31,			December 31,
Performance Ratios		2009			2009			2009			2009			2008
ROA (annualized)		-6.51	%		-7.38	%		-4.03	%		-3.18	%		-2.18	%
ROE (annualized)		-101.36	%		-100.06	%		-50.63	%		-38.70	%		-19.42	%
Average assets	$	3,975,914		$	4,076,476		$	4,154,923		$	4,248,979		$	4,107,571
Average shareholders' equity	$	255,357		$	300,498		$	331,056		$	349,465		$	461,981

-11-

FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES

SELECTED OTHER FINANCIAL INFORMATION AND RATIOS (Continued)

(In thousands)

(Unaudited)

Quarterly Average Balances
	December 31,			September 30,			December 31,
	2009			2009			2008
ASSETS
Cash and due from banks	$	43,592		$	43,317		$	48,279
Federal funds sold		343,273			306,772			44,246
Securities
Available for sale, at fair value		70,297			79,425			97,124
Held to maturity, at amortized cost		2,750			3,076			3,517
Total securities		73,047			82,501			100,641
Loans held for resale		2,840			4,118			2,414
Loans
Commercial and industrial		402,635			423,953			456,594
RE commercial		982,957			1,003,786			1,051,625
RE construction		530,202			661,786			1,022,043
RE land development		382,081			455,623			602,838
RE completed lots		263,499			271,602			249,849
RE residential 1-4 family		430,892			426,531			385,218
Installment and other		70,500			70,868			69,656
Total		3,065,606			3,318,267			3,840,237
Allowance for loan losses		(137,893	)		(108,254	)		(121,289	)
Net loans		2,927,713			3,210,013			3,718,948
Premises and equipment, net		48,501			49,344			51,819
Intangible assets		609			662			77,905
FHLB Stock		19,885			19,885			18,084
Bank owned life insurance		25,240			24,968			24,185
Other real estate owned		120,561			66,843			3,468
Other assets		74,945			117,710			37,744
Total assets	$	3,677,366		$	3,922,015		$	4,125,319
LIABILITIES
Deposits
Noninterest bearing	$	394,358		$	404,988		$	389,127
Interest bearing
MMA, Sweep and NOW		447,971			416,738			407,758
Savings		253,663			282,065			392,845
Time deposits		2,048,046			2,137,770			2,065,873
Total interest bearing		2,749,680			2,836,573			2,866,476
Total deposits		3,144,038			3,241,561			3,255,603
Fed funds purchased and
repurchase agreements		11,484			15,806			61,487
FHLB advances		375,564			397,578			359,296
Junior subordinated debentures		5,156			5,156			5,156
Other liabilities		19,724			21,466			4,869
Total liabilities		3,555,966			3,681,567			3,686,411
Total shareholders’ equity		121,400			240,448			438,908
Total liabilities and shareholders’ equity	$	3,677,366		$	3,922,015		$	4,125,319

-12-

FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES

SELECTED OTHER FINANCIAL INFORMATION AND RATIOS (Continued)

(In thousands)

(Unaudited)

Year-to-Date Average Balances
	December 31,			December 31,
	2009			2008
ASSETS
Cash and due from banks	$	44,680		$	50,410
Federal funds sold		300,617			29,197
Securities
Available for sale, at fair value		78,637			122,499
Held to maturity, at amortized cost		2,997			3,685
Total securities		81,634			126,184
Loans held for resale		5,353			3,391
Loans
Commercial and industrial		429,256			437,481
RE commercial		1,008,493			1,036,171
RE construction		738,100			1,056,159
RE land development		474,046			585,508
RE completed lots		275,010			244,575
RE residential 1-4 family		430,776			342,654
Installment and other		69,851			68,562
Total		3,430,885			3,774,501
Allowance for loan losses		(120,733	)		(82,529	)
Net loans		3,310,152			3,691,972
Premises and equipment, net		49,882			51,214
Intangible assets		688			78,013
FHLB Stock		19,885			18,587
Bank owned life insurance		24,836			24,118
Other real estate owned		57,967			2,301
Other assets		85,573			35,575
Total assets	$	3,975,914		$	4,107,571
LIABILITIES
Deposits
Noninterest bearing	$	397,533		$	379,766
Interest bearing
MMA, Sweep and NOW		396,287			586,943
Savings		298,370			349,318
Time deposits		2,177,546			1,894,455
Total interest bearing		2,872,203			2,830,716
Total deposits		3,269,736			3,210,482
Fed funds purchased and
repurchase agreements		16,226			73,460
FHLB advances		407,015			338,268
Junior subordinated debentures		5,156			5,156
Other liabilities		22,424			18,224
Total liabilities		3,720,557			3,645,590
Total shareholders’ equity		255,357			461,981
Total liabilities and shareholders’ equity	$	3,975,914		$	4,107,571

-13-