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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

                 Annual Report Pursuant to Section 13 or 15(d)
                     Of the Securities Exchange Act of 1934

                   For the Fiscal Year Ended December 31, 1999

                         Commission File Number 0-15540

                         FRONTIER FINANCIAL CORPORATION
             (Exact Name of Registrant as Specified in its Charter)

             Washington                                     91-1223535
 (State or Other Jurisdiction of                   (IRS Employer Identification
  Incorporation or Organization)                              Number)

                            332 S.W. Everett Mall Way
                                 P.O. Box 2215
                            Everett, Washington 98203
               (Address of Principal Executive Office) (Zip Code)
                                 (425-514-0700)
              (Registrant's Telephone Number, Including Area Code)

           Securities Registered Pursuant to Section 12(g) of the Act:

                           Common Stock (No Par Value)
                                (Title of Class)

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 short 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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of the registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]

The aggregate market value of common stock held by nonaffiliates at January 31,
2000 was $303,715,475 based on the average high/low price at January 31, 2000.

The issuer has one class of common stock (no par value) with 17,545,587 shares
outstanding as of December 31, 1999, and 17,552,193 outstanding as of January
31, 2000.

Documents Incorporated by Reference

Portions of Annual Report to Shareholders for the year ended:

December 31, 1999..................Part I
2000 Proxy Statement...............Part II


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                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                          Annual
                                                       Shareholders'     Proxy
                                            Form 10-K     Report       Statement
Item Number                                   Page         Page          Page
-----------                                 ---------  -------------   ---------
<S>                                         <C>        <C>             <C>
PART I

   1    Business                              1-9

        Statistical Disclosure Index           10

   2    Properties                             20

   3    Legal Proceedings                      20

   4    Submission of Matters to
        a vote of Shareowners                  20

PART II

   5    Market for Registrant's Common
        Equity and Related Shareowner
        Matters                                              39

   6    Selected Financial Data                 21

   7    Management's Discussion and
        Analysis of Financial Condition
        and Results of Operations                         27-41

   7a   Quantitative and Qualitative
        Disclosures about Market Risk                     36-38

   8    Financial Statements and
        Supplementary Data                      22

   9    Changes in and Disagreements with
        Accountants on Accounting and
        Financial Disclosure                    22

PART III

  10    Directors and Executive
        Officers of Frontier
        Financial Corporation                                             2-8

  11    Executive Compensation                                            7-9

  12    Security Ownership of Certain
        Beneficial Owners and
        Management                                                        5-6

  13    Certain Relationships and
        Related Transactions                    25           21            11

PART IV

  14    Exhibits, Financial Statement
        Schedules, and Reports on Form 8-K      24

        Signatures                              27
</TABLE>


                                        i


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PART I

ITEM 1 - BUSINESS

Frontier Financial Corporation ("FFC" or "the Corporation") is a Washington
corporation which was incorporated in 1983 and is registered as a bank holding
company under the Bank Holding Company Act of 1956. As part of a plan of
reorganization consummated following the close of business September 30, 1983,
FFC acquired all of the stock of Frontier Bank (the "Bank"), issuing its common
stock in an exchange for the Bank's common stock on a share-for-share basis. FFC
has two subsidiaries: the Bank, which is engaged in a general banking business
and in businesses related to banking, and FFP, Inc., a nonbank corporation which
leases property to the Bank.

The Bank

The Bank is a state-chartered banking association with its headquarters located
in Everett, Snohomish County, Washington. It was founded in September, 1978 by
Robert J. Dickson and local business persons. The Bank is an "insured bank" as
defined in the Federal Deposit Insurance Act.

The Bank engages in general banking business, including the acceptance of
demand, time and savings deposits and the making of loans. As of December 31,
1999, the Bank conducted its business operations out of 25 offices located in
Snohomish, Pierce, King, Skagit and Whatcom counties, which is the bank's
principal market area. Four offices are located in Everett, one office each is
located in Arlington, Snohomish, Smokey Point, Lake Stevens, Marysville,
Lynnwood, Mill Creek, Mount Vernon, Edmonds, Stanwood, Bothell, Woodinville,
Monroe, Lake City (Seattle), Redmond, Burlington, Bellingham and four offices
located in Pierce county in the cities of Sumner, Puyallup, Orting and Buckley.

Banking Services

The Bank provides a full range of consumer banking services including savings
accounts, checking accounts, installments and commercial lending, safe deposit
facilities, time deposits and other consumer and business related financial
services. In addition to consumer oriented activities, the Bank maintains a
strong commercial lending program, servicing businesses headquartered in the
Bank's principal market area. At the end of 1983, the Bank began to offer a
discount brokerage service to its customers. In September of 1984, the Bank
opened its Real Estate Division, offering a broad range of home, construction
and commercial long-term financing. The Trust Department opened for business in
March of 1985. This department offers a full array of trust services to its
customers. In May 1988, the Bank opened a Private Banking Office to give
personal service to upscale customers. In August 1989, the Bank acquired,
through a merger, three banking offices of Citizens Bank of Snohomish County,
and a real estate origination department. In January 1991, the Bank opened an
office in Mill Creek, providing a full range of consumer banking services.

In March 1991, the Bank opened an Insurance and Investment Center which markets
annuities, life insurance products, and mutual funds to Bank customers and the
general public. In July 1992, the Bank opened its Stanwood Office. In November
1992, the Bank acquired through merger, Edmonds National Bank, which had one
office. In July 1993, the Bank acquired through merger, The Bank of Northshore,
which had two offices located in Bothell and Woodinville, King County,
Washington. This merger marked the first time the Bank branched outside of
Snohomish County. In October 1993, FFP, Inc. a bank premises holding company
subsidiary, purchased land for construction of the Administrative offices which
were relocated from the Evergreen Way Office. This building was placed in
service in 1995. In June 1995, the Bank opened an office in Monroe, providing a
full range of consumer banking services. In August 1996, the Bank opened the
Lake City Office, (North Seattle) and in December 1996 opened its first office
in Skagit County, in Burlington. In May 1997, the Bank opened an office in
Redmond, Washington. This is the Bank's first office in eastern King County.



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In December 1998, the Bank acquired, through merger, the Bank of Sumner, with
four offices, and a real estate origination department. These offices provide a
full range of consumer and commercial banking services. In July 1999, opened its
Bellingham office, which is the Bank's first office in Whatcom County. In
September 1999, the Bank opened its Mount Vernon office which is the Bank's
second office in Skagit County. In December 1999, FFP Inc., purchased property
and a building two miles south of the current Administrative Building for the
Bank's Operations Center which will begin occupancy in the second quarter of
2000.

Employees

At December 31, 1999, the Bank had 410 full time equivalent employees. The Bank
considers its relations with employees to be very good.

Competition

All phases of the Bank's activities are highly competitive. The Bank competes
actively with national and state banks, mutual savings banks, savings and loan
associations, finance companies, credit unions, brokerage houses, and other
financial institutions operating in its service area. Some of these financial
institutions have greater resources than those of the Bank. On December 31,
1999, the Bank had total assets of $1.246 billion and deposits of $966.8
million.

Pending Merger

On March 15, 2000, FFC entered into a definitive agreement to acquire Liberty
Bay Financial Corporation ("Liberty") of Poulsbo, Washington. Liberty's
commercial banking subsidiary, North Sound Bank, operates eight banking offices
on the Olympic Peninsula in Washington State. As of December 31, 1999, Liberty
had total consolidated assets of $180 million, and shareowners' equity of 14%.
Under the terms of the agreement, shareowners of Liberty will receive 10.5
shares of FFC common stock for each share of Liberty Stock outstanding. It is
anticipated that the acquisition will be completed during 2000, following
approval of applicable regulatory authorities and the shareowners of Liberty. It
is expected that the transaction will be accounted for using the
pooling-of-interests method.

Supervision and Regulation

The following refers to certain statutes and regulations affecting the banking
industry. These references are only intended to provide brief summaries and
therefore are not complete and are qualified by the statutes and regulations
referenced. In addition, due to the numerous statutes and regulations which
apply to and regulate the operation of the banking industry, many are not
referenced below.




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FRONTIER FINANCIAL CORPORATION ("FFC")

GENERAL. FFC is a bank holding company by virtue of its ownership of Frontier
Bank (the "Bank"), and is registered as such with the Federal Reserve Bank
("FRB"). As a bank holding company, FFC is subject to the Bank Holding Company
Act of 1956, as amended ("BHCA"), which governs and subjects FFC to supervision
and examination by the FRB. Under the BHCA, FFC files with the FRB quarterly and
annual reports of its operations and such additional information as the FRB may
require.

BANK HOLDING COMPANY STRUCTURE. In general, the BHCA limits bank holding company
business to owning or controlling banks and engaging in other banking-related
activities. Certain recent legislation designed to expand interstate branching
and relax federal restrictions on interstate banking may expand opportunities
for bank holding companies (see below under "Interstate Banking and Branching").
However, the impact that this legislation may have on FFC and the Bank is
unclear at this time.

FRB REGULATION. Bank holding companies must obtain the FRB's approval before
they: (1) acquire direct or indirect ownership or control of any voting shares
of any bank if, after such acquisition, they would own or control, directly or
indirectly, more than 5 percent of the voting shares of such bank; (2) merge or
consolidate with another bank holding company; and (3) acquire substantially all
of the assets of any additional banks. Subject to certain state laws, such as
age and contingency laws, a bank holding company that is adequately capitalized
and adequately managed may acquire the assets of an out-of-state bank.

CONTROL OF NONBANKS. With certain exceptions the BHCA also prohibits bank
holding companies from acquiring direct or indirect ownership or control of
voting shares in any company other than a bank or a bank holding company unless
the FRB find FFC's business to be incidental to the business of banking. When
making this determination, the FRB in part considers whether allowing a bank
holding company to engage in those activities which would offer advantages to
the public that would outweigh possible adverse effects.

If a holding company is well capitalized and meets other criteria specified by
the FRB, it may engage de novo in certain permissible nonbanking activities.

Acceptable nonbanking activities include: (1) operating an industrial loan
company, mortgage company, finance company, trust company, or credit card
company; (2) performing certain data processing operations; and (3) providing
investment and financial advice. In contrast, prohibited nonbanking activities
include real estate brokerage and syndication, and land development, property
management, and the underwriting of life insurance not related to credit
transactions permissible for bank holding companies.

Under the Financial Services Modernization Act of 1999 (the "Financial Services
Act") which was signed into law on November 12, 1999, a bank holding company may
now engage in a wider variety of financial activities, particularly with respect
to insurance and securities activities.

CONTROL TRANSACTIONS. The Change in Bank Control Act of 1978, as amended,
requires a person or group of persons acquiring "control" of a bank holding
company to provide the FRB with at least 60 days prior written notice of the
proposed acquisition. Following receipt of this notice, the FRB has 60 days to
issue a notice disapproving the proposed acquisition, but the FRB may extend
this time period for up to another 30 days. An acquisition may be completed
before the disapproval period expires if the FRB issues written notice of its
intent not to disapprove the action. Under a rebuttable presumption established
by the FRB, the acquisition of 10 percent or more of a class of voting stock of
a bank holding company with a class of securities registered under Section 12 of
the Exchange Act would under circumstances, set forth in the presumption,
constitute the acquisition of control. In addition, any "company" would be
required to obtain the approval of the FRB under the BHCA before acquiring 25
percent (5 percent if the "company" is a bank holding company) or more of the
outstanding shares of FFC, or otherwise obtain control over FFC.



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TRANSACTIONS WITH AFFILIATES. FFC and the Bank are deemed affiliates within the
meaning of the Federal Reserve Act, and transactions between affiliates are
subject to certain restrictions. These restrictions apply to FFC and the Bank
through the BHCA, which provides that transactions between an insured subsidiary
of a holding company and its affiliates are subject to restrictions applicable
to transactions between banks that are members of the Federal Reserve System and
their affiliates in accordance with Sections 23A and 23B of the Federal Reserve
Act. Generally, Sections 23A and 23B: (1) limit the extent to which the
financial institution or its subsidiaries may engage in "covered transactions"
with an affiliate, as defined, to an amount equal to 10 percent of such
institutions capital and surplus and an aggregate limit on all such transactions
with all affiliates to an amount equal to 20 percent of such capital and
surplus, and (2) require all transactions with an affiliate, whether or not
"covered transactions," to be on terms substantially the same, or at least as
favorable to the institution or subsidiary, as those provided to a
non-affiliate. The term "covered transaction" includes the making of loans,
purchase of assets, issuance of a guarantee and other similar types of
transactions.

REGULATION OF MANAGEMENT. Federal law: (1) sets forth circumstances under which
officers or directors of a financial institution may be removed by the
institution's federal supervisory agency; (2) places restraints on lending by an
institution to its executive officers, directors, principal shareowners, and
their related interests; and (3) prohibits management personnel from serving as
a director or in other management positions of another financial institution
whose assets exceed a specified amount or which has an office within a specified
geographic area.

FIRREA. The Financial Institution Reform, Recovery and Enforcement Act of 1989
("FIRREA") became effective on August 9, 1989. Among other things, this
far-reaching legislation (1) phased in significant increases in the FDIC
insurance premiums paid by commercial banks; (2) created two deposit insurance
pools within the FDIC, one to insure commercial bank and savings bank deposits
and the other to insure savings association deposits; (3) for the first time,
permitted bank holding companies to acquire healthy savings associations; (4)
permitted commercial banks that meet certain housing-related assets requirements
to secure advances and other federal services from their local Federal Home Loan
Banks; and (5) greatly enhanced the regulators' enforcement powers by removing
procedural barriers and sharply increasing the civil and criminal penalties for
violating statutes and regulations.

TIE-IN ARRANGEMENTS. FFC and the Bank, are prohibited from engaging in certain
tie-in arrangements in connection with any extension of credit, sale or lease of
property or furnishing of services. For example, with certain exceptions,
neither FFC, nor the Bank, may condition an extension of credit on either (1) a
requirement that the customer obtain additional services provided by it or (2)
an agreement by the customer to refrain from obtaining other services from a
competitor. Effective April 1997, the FRB has adopted significant amendments to
its anti-tying rules that: (1) remove FRB-imposed anti-tying restrictions on
bank holding companies and their non-bank subsidiaries; (2) create exemptions
from the statutory restriction on bank tying arrangements to allow banks greater
flexibility to package products with their affiliates; and (3) establish a safe
harbor from the tying restrictions for certain foreign transactions. These
amendments are designed to enhance competition in banking and nonbanking
products and allow banks and their affiliates to provide more efficient and
lower-cost services to customers. However, the impact of the amendments on FFC
and the Bank is unclear at this time.

STATE LAW RESTRICTIONS. As a corporation chartered under the laws of the State
of Washington FFC may be subject to certain limitations and restrictions as
provided under applicable Washington corporate laws.



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SECURITIES REGISTRATION AND REPORTING. FFC Common Stock is registered as a class
with the SEC under Section 12(g) of the Securities Exchange Act of 1934 and thus
is subject to the periodic reporting and proxy solicitation requirements and the
insider-trading restrictions of that Act. The periodic reports, proxy
statements, and other information filed by FFC under that Act can be inspected
and copied at or obtained from the SEC's Public Reference Room at 450 Fifth
Street, NW Washington D.C. 20549. The public may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. FFC
is an electronic filer with the SEC and the FFC filings may be obtained at the
SEC website (http://www.sec.gov). In addition, the securities issued by FFC are
subject to the registration requirements of the Securities Act of 1933 and
applicable state securities laws unless exemptions are available.

NASD. FFC Common Stock is traded on The Nasdaq Stock Market under the symbol
FTBK. The National Association of Securities Dealers ("NASD") is the
self-regulatory organization of the Nasdaq Stock Market. FFC is subject to the
rules of the NASD.

THE BANK

GENERAL. Applicable federal and state statutes and regulations governing a
bank's operations relate among other matters, to capital requirements, required
reserves against deposits, investments, loans, legal lending limits, certain
interest rates payable, mergers and consolidations, borrowings, issuance of
securities, payment of dividends (see "Restrictions on Capital Distributions"
below), establishment of branches, and dealings with affiliated persons. The
FDIC has authority to prohibit banks under their supervision from engaging in
what they consider to be an unsafe and unsound practice in conducting their
business.

The Bank is a state-chartered commercial bank subject to extensive regulation
and supervision by the Washington State Department of Financial Institutions
Division of Banks (the "Division"). The Bank is also subject to regulation and
examination by the FDIC which insures the deposits of the Bank to the maximum
extent permitted by law and by requirements established by the FRB. The federal
laws that apply to the Bank regulate, among other things, the scope of its
business, investments, reserves against deposits, the timing of the availability
of deposited funds and the nature and amount of and collateral for loans. The
laws and regulations governing the Bank generally have been promulgated to
protect depositors and not to protect shareowners of such institutions or their
holding companies.

The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
requires federal banking regulators to adopt regulations or guidelines in a
number of areas to ensure bank safety and soundness including: internal
controls, credit underwriting, asset growth, management compensation, ratios of
classified assets to capital, and earnings. FDICIA also contains provisions
which are intended to change independent auditing requirements: restrict the
activities of "undercapitalized banks" to borrow from the FRB's discount window:
and require regulators to perform annual on-site bank examinations and set
standards for real estate lending.

LOANS TO ONE BORROWER. The Bank is subject to limitations on the aggregate
amount of loans that it can make to any one borrower, including related
entities. Applicable regulations generally limit loans-to-one borrower to 15 to
20 percent of unimpaired capital and surplus. As of December 31, 1999 the Bank
was in compliance with applicable loans-to-one borrower requirements.

FDIC INSURANCE. Generally, customer deposit accounts in banks are insured by the
FDIC for up to a maximum amount of $100,000. The FDIC has adopted a risk-based
insurance assessment system under which depository institutions contribute funds
to the Bank Insurance Fund ("BIF"), based on their risk.




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On September 30, 1996, the Deposit Insurance Fund Act of 1996 ("Funds Act") was
enacted. The Funds Act provides, among other things, for the recapitalization of
the SAIF through a special assessment on all depository institutions that hold
SAIF insured deposits. The one-time assessment was designed to place the SAIF at
its 1.25 reserve ratio goal.

The Funds Act, for the three-year period beginning in 1997, subjects BIF insured
deposits to a Financing Corporation ("FICO") premium assessment on domestic
deposits at one-fifth the premium rate (approximately 1.3 basis points) imposed
on SAIF insured deposits (approximately 6.5 basis points).

Beginning in the year 2000, BIF insured institutions will be required to pay the
FICO obligations on a pro-rata basis with all thrift institutions; annual
assessments are expected to equal approximately 2.4 basis points until 2017, to
be phased out completely by 2019.

For the remainder of 1999 and until further action by the FDIC, BIF premiums
will be maintained at their current level.

Banking regulations are empowered under the Funds Act to prohibit insured
institutions and their holding companies from facilitating or encouraging the
shifting of deposits from the SAIF to the BIF in order to avoid higher
assessment rates. It is expected that Congress will continue to address
comprehensive legislation on the merger of the funds and elimination of the
thrift charter.

The FDIC may terminate the deposit insurance of any insured depository
institution if it determined after a hearing that the institution has engaged or
is engaging in unsafe or unsound practices, is in an unsafe or unsound condition
to continue operations, or has violated any applicable law. The insurance may be
terminated permanently, if the institution has no tangible capital. If deposit
insurance is terminated, the accounts at the institution at the time of the
termination, less subsequent withdrawals, will continue to be insured for a
period of six months to two years, as determined by the FDIC.

CAPITAL ADEQUACY REQUIREMENTS. The FRB and the FDIC (collectively, the
"Agencies") have adopted risk-based capital guidelines for banks and bank
holding companies that are designed to make regulatory capital requirements more
sensitive to differences in risk profiles among banks and bank holding companies
and account for off-balance sheet items. The guidelines are minimums, and the
federal regulators have noted that banks and bank holding companies
contemplating significant expansion programs should not allow expansion to
diminish their capital ratios and should maintain ratios in excess of the
minimums. Failure to achieve and maintain adequate capital levels may give rise
to supervisory action through the issuance of a capital directive to ensure the
maintenance of required capital levels.

The current guidelines require all federally-regulated banks to maintain a
minimum risk-based total ratio equal to 8 percent, of which at least 4 percent
must be Tier 1 capital. Tier 1 capital includes common shareowners' equity,
qualifying perpetual preferred stock, and minority interest in equity accounts
of consolidated subsidiaries, but excludes goodwill and most other intangibles,
gains or losses on available for sale securities and the allowance for losses on
loans. Total capital includes the excess of any preferred stock not included in
Tier 1 capital, mandatory convertible securities, hybrid capital instruments,
subordinated debts and intermediate term preferred stock and the allowance for
losses on loans up to 1.25 percent of risk-weighted assets. The Bank has not
received notice indicating that it will be subject to higher capital
requirements.



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Under these guidelines, banks' assets are given risk-weights of 0 percent, 20
percent, 50 percent or 100 percent. In addition, certain off-balance sheet items
are given credit conversion factors to convert them to asset equivalent amounts
to which an appropriate risk-weight will apply. These computations result in the
total risk-weighted assets. Most loans are assigned to the 100 percent risk
category, except for first mortgage loans fully secured by residential property
and, under certain circumstances, residential construction loans (both carry a
50 percent rating).

Most investment securities are assigned to the 20 percent category, except for
municipal or state revenue bonds (which have a 50 percent rating) and direct
obligations of or obligations guaranteed by the United States Treasury or United
States Government Agencies (which have a 0 and 20 percent rating, respectively).

The Agencies have also implemented a leverage ratio, which is equal to Tier 1
capital as a percentage of average total assets less intangibles, to be used as
a supplement to the risk-based guidelines. The principal objective of the
leverage ratio is to limit the maximum degree to which a bank may leverage its
equity capital base. The minimum required leverage ratio for top-rated
institutions is 4 percent, but most institutions are required to maintain an
additional cushion of at least 100 to 200 basis points. Any institution
operating at or near the 4 percent level is expected to have well-diversified
risk, including no undue interest rate risk exposure, excellent asset quality,
high liquidity and good earnings, and in general to be a strong banking
organization without any supervisory, financial or operational weaknesses or
deficiencies. Any institutions experiencing or anticipating significant growth
would be expected to maintain capital ratios, including tangible capital
positions, well above the minimum levels.

PROMPT CORRECTIVE ACTION. Regulations adopted by the Agencies as required by
FDICIA impose even more stringent capital requirements. The regulators require
the FDIC and other Federal Banking Agencies to take certain "prompt corrective
action" when a bank fails to meet certain capital requirements. The regulations
establish and define five capital levels: (1) "well-capitalized" (2) "adequately
capitalized" (3) "undercapitalized" (4) "significantly undercapitalized" and (5)
"critically undercapitalized." To qualify as "well capitalized" an institution
must maintain at least 10 percent total risk-based capital, 6 percent Tier 1
risk-based capital, and a leverage ratio of no less than 5 percent. Increasingly
severe restrictions are imposed on the payment of dividends and management fees,
asset growth and other aspects of the operations of institutions that fall below
the category of being "adequately capitalized" (which requires at least 8
percent total risk-based capital, 4 percent Tier 1 risk-based capital, and a
leverage ratio of at least 4 percent). Undercapitalized institutions are
required to develop and implement capital plans acceptable to the appropriate
federal regulatory agency. Such plans must require that any company that
controls the undercapitalized institution must provide certain guarantees that
the institution will comply with the plan until it is adequately capitalized. As
of December 31, 1999, the Bank was well capitalized and maintained a leverage
ratio of 11.43 percent, a risk-based Tier 1 capital ratio of 13.03 percent, and
a risk-based total capital ratio of 14.29 percent.

In August of 1995, the Federal Banking Agencies adopted a final rule
implementing the portion of Section 305 of FDICIA that requires the banking
agencies to revise their risk-based capital standards to ensure that those
standards take adequate account of interest rate risk. Effective September 1,
1995, when evaluating the capital adequacy of a bank, the Federal Banking
Agencies' examiners will consider exposure to declines in the economic value of
the bank's capital due to changes in interest rates. A bank may be required to
hold additional capital for interest rate risk if it has a significant exposure
or a weak interest rate risk management process.

RESTRICTIONS ON CAPITAL DISTRIBUTIONS. Dividends paid to FFC by the Bank are a
material source of FFC's cash flow. Various federal and state statutory
provisions limit the amount of dividends the Bank is permitted to pay to FFC
without regulatory approval.



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<PAGE>   10

FRB policy further limits the circumstances under which bank holding companies
may declare dividends. For example, a bank holding company should not continue
its existing rate of cash dividends on its common stock unless its net income is
sufficient to fully fund each dividend and its prospective rate of earnings
retention appears consistent with its capital needs, asset quality, and overall
financial condition.

If, in the opinion of the applicable federal banking agency, a depository
institution under its jurisdiction is engaged in or is about to engage in an
unsafe or unsound practice (which depending on the financial condition of the
institution, could include the payment of dividends), the agency may require,
after notice and hearing, that such institution cease and desist from such
practice. In addition, the FRB and the FDIC have issued policy statements which
provide that insured banks and bank holding companies should generally pay
dividends only out of current operating earnings.

According to Washington law, the Bank may not declare or pay a cash dividend in
an amount greater than its retained earnings, without the approval of the
Director of the Division of Financial Institutions.

INTERSTATE BANKING AND BRANCHING. The Riegle-Neal Interstate Banking and
branching Efficiency Act of 1994 ("Interstate Act") generally permits nationwide
interstate banking and branching by relaxing federal law restrictions on
interstate banking and providing general authorization for interstate branching.
Subject to certain state laws, such as age and contingency laws, the Interstate
Act allows adequately capitalized and adequately managed bank holding companies
to purchase the assets of out-of-state banks. Additionally, since June 1, 1997,
the Interstate Act permits interstate bank mergers subject to these state laws,
unless the home state of either merging bank has "opted-out" of these provisions
by enacting "opt-out" legislation. The Interstate Act does allow states to
impose certain conditions on interstate bank mergers within their borders; for
example, states may require that the in-state merging bank exist for up to five
years before the interstate merger. Under the Interstate Act, states may also
"opt-in" to de novo branching, allowing out-of-state banks to establish de novo
branches within the state.

In 1996, Washington enacted "opting-in" legislation authorizing interstate
mergers pursuant to the Interstate Act. Accordingly, as of June 6, 1996, an
out-of-state bank holding company may now acquire more than 5 percent of the
voting shares of a Washington-based bank, regardless of reciprocity, provided
such bank or its predecessor has been doing business for at least five years
prior to the acquisition. Further, an out-of-state bank may engage in banking in
Washington if the requirement of Washington's interstate banking statute are
met, and either: (1) was lawfully engaged in banking in Washington on June 6,
1996, (2) resulted from an interstate combination pursuant to Washington law,
(3) resulted from a relocation of a head office of a state bank or a main office
of a national bank pursuant to federal law, or (4) resulted from the
establishment of a savings bank branch in compliance with applicable Washington
law. Additionally, the Director of the Division of Financial Institutions may
approve interstate combinations if the basis for such approval does not
discriminate against out-of-state banks, out-of-state holding companies, or
their subsidiaries.

REGULATORY IMPROVEMENT. In 1994, Congress enacted the Community Development and
Regulatory Improvement Act ("Regulatory Improvement Act"), with the intent of,
among other things, reducing the regulatory burden on financial institutions.
This Act is intended to streamline certain regulatory procedures and relax
certain regulatory compliance requirements. In addition, the Regulatory
Improvement Act specifically directs each federal banking agency to review and
streamline its regulations and written supervisory policies.



                                      -8-
<PAGE>   11

FINANCIAL MODERNIZATION. In 1999, the Financial Service Act was enacted which:
(1) repealed historical restrictions on preventing banks from affiliating with
securities firms, (2) broadens the activities that may be conducted by national
banks and banking subsidiaries of holding companies, and (3) provides an
enhanced framework for protecting the privacy of consumers' information. In
addition, bank holding companies may be owned, controlled or acquired by any
company engaged in financially related activities, as long as such company meets
regulatory requirements. To the extent that this legislation permits banks to
affiliate with financial services companies, the banking industry may experience
further consolidation, although the impact of this legislation on FFC and the
Bank is unclear at this time.

Effect of Governmental Policies. The Bank is affected not only by general
economic conditions, but also by the monetary and fiscal policies of the United
States Government and various agencies, particularly the Federal Reserve System.
In its role of implementing its monetary policy, the Federal Reserve Board has
the power to regulate the national supply of bank credit through such methods as
open market operations in the United States Government securities markets,
control of the discount rate on member bank borrowings, and establishment of
reserve requirements against bank deposits. These means are used in varying
combinations and have an influence over the growth of bank loans, investments,
and deposits. They may also affect interest rates charged on loans or paid on
deposits. The nature and timing of future changes in monetary policies and their
impact on the Bank are not predictable. As a consequence of extensive regulation
of commercial banking activities in the United States, the Bank's business is
particularly susceptible to being affected by Federal legislation and
regulations which may have the effect of increasing the cost of doing business
or limiting permissible activities.

FFP, Inc.

On April 4, 1988, the Corporation formed a new subsidiary corporation called
FFP, Inc. The purpose of this corporation is to purchase and lease improved real
property to the Bank. The reason for this approach was to preclude placing
nonearning assets on the books of the Bank or the Corporation. As of December
31, 1999, all banking offices have been moved into FFP, except those offices
where the land and/or buildings are leased. For further details, please see page
21 of this Form 10-K Report, "Properties." It is intended that future purchases
of real property will be made by FFP, Inc. At this time, it is not anticipated
that FFP, Inc. will engage in any other type of business.

Washington Banking Company

In April 1996, the Corporation purchased 4.99% of the common stock of Whidbey
Island Bank, located approximately 15 miles west of Everett. Shortly thereafter,
the bank converted to the holding company structure and is now called Washington
Banking Company ("WBC"). Subsequent to the initial investment the Corporation
made application to the Board of Governors of the Federal Reserve System to
purchase up to 9.9% ownership in WBC. Approval was received, and the Corporation
has since purchased a total ownership of 9.2%, as of March 1, 2000. The FRB
approval for further purchases of WBC stock by FFC terminated in December, 1999.
FFC does not anticipate further investment in WBC stock at this time. If FFC
were to seek to increase its ownership in WBC, FRB regulatory approval would
again need to be obtained.

Share Repurchase Program

On September 11, 1999, the FFC Board of Directors adopted a Share Repurchase
Program, authorizing the Corporation to repurchase up to five percent (5%) of
the outstanding shares of its common stock.

The Board of Directors of FFC announced on March 15, 2000, the signing of a
definitive agreement to acquire Liberty Bay Financial Corporation located in
Poulsbo, Washington. The transaction is being accounted for using the
"pooling-of-interests" method. In order to qualify to use that method of
accounting, the Board of Directors of FFC has discontinued is Stock Repurchase
Program.



                                      -9-
<PAGE>   12

                          STATISTICAL DISCLOSURE INDEX

The schedules listed below set forth the statistical information relating to
Frontier Financial Corporation and subsidiaries (unless otherwise stated) in
accordance with Guide 3. This information should be read in conjunction with the
consolidated financial statements.

<TABLE>
<CAPTION>
                                                                      Annual
                                                   Form 10-K          Report
                                                     Page              Page
                                                   ----------         ------
<S>                                                <C>              <C>
   I.  Distribution of Assets, Liabilities
       and Shareowners' Equity; Interest
       Rates and Interest Differential:

       A.  Consolidated Average Balance
           Sheets/Interest Income and
           Expense/Rates                                                40

       B.  Changes in Net Interest Income
           and Expense due to Rate and
           Volume                                                       41

  II.  Investment Portfolio

       A.  Analysis of Investment Securities
           at Year-end                                11                11

       B.  Maturity Distribution of Investment
           Securities                                 11                12

 III.  Loan Portfolio

       A.  Types of Loans                             12              12 & 13

       B.  Loan Maturities and Sensitivity to
           Changes in Interest Rates                  12            13, 36 & 38

       C.  Risk Elements                              13

       D.  Credit Concentrations                      17

  IV.  Summary of Loan Loss Experience

       A.  Analysis                                   15

       B.  Allocation of Allowance for Possible
           Loan Losses                                16

   V.  Deposits

       Average Interest and Noninterest
       Bearing Deposit Balances                                         40

  VI.  Return on Equity and Assets

       Selected Financial Ratios                       19

 VII.  Short-term Borrowings                           19
</TABLE>



                                      -10-
<PAGE>   13

Analysis of Investment Securities

The aggregate amortized recorded values of investment securities at December 31,
are as follows:

<TABLE>
<CAPTION>
                                           1999            1998            1997
(In thousands)                        Amortized       Amortized       Amortized
                                           Cost            Cost            Cost
                                      ---------       ---------       ---------
<S>                                   <C>             <C>             <C>
U.S. Treasuries                        $    252        $    252        $    754
U.S. Agencies                            70,608          74,516          44,039
Municipal Bonds                          27,597          28,144          28,881
Corporate Bonds                          23,602          25,054          28,151
Equities                                 14,521          11,923           9,927
Certificates of Deposit                       0           4,750           3,550
                                       --------        --------        --------
      Totals                           $136,580        $144,639        $115,302
                                       ========        ========        ========
</TABLE>


Maturity Distribution of Investment Securities

The following table sets forth the maturities of investment securities at
December 31, 1999. Taxable equivalent values are used in calculating yields
assuming a tax rate of 35%.


<TABLE>
<CAPTION>
(In thousands)                          After 1 Yr   After 5 Yrs                Totals &
(Amortized cost used)        Within     But Within   But Within      After      Weighted
                             1 Year/     5 Years/     10 Years/    10 Years/    Average
                              Yield       Yield         Yield        Yield        Yield
                             -------    ----------   -----------   ---------    --------
<S>                          <C>        <C>          <C>           <C>          <C>
U.S. Treasury                $     0    $     0       $     0       $  252      $    252
                                0.00%      0.00%         0.00%        7.16%         7.16%
U.S. Agencies                  1,006      3,501        61,967        4,134        70,608
                                7.37%      5.84%         6.28%        7.56%         6.35%
Municipal Bonds                  155      7,009        19,842          591        27,597
                                9.45%      9.16%         8.30%        9.21%         8.54%
Corporate Bonds                2,514     18,838         1,750          500        23,602
                                7.47%      6.84%         7.11%        9.88%         6.99%
Equities                      14,521          0             0            0        14,521
                                5.97%      0.00%         0.00%        0.00%         5.97%
                             -------    -------       -------       ------      --------
         TOTALS              $18,196    $29,348       $83,559       $5,477      $136,580
                             =======    =======       =======       ======      ========
                                6.28%      7.27%         6.78%        7.93%         6.86%
</TABLE>



                                      -11-
<PAGE>   14

Types of Loans

Major classifications of loans, net of deferred loan fees, at December 31 are as
follows:

<TABLE>
<CAPTION>
(In thousands)                    1999            1998           1997           1996           1995
                               ----------       --------       --------       --------       --------
<S>                            <C>              <C>            <C>            <C>            <C>
Commercial                     $  209,915       $200,035       $157,319       $129,457       $137,618
Real Estate Commercial            441,882        388,402        293,243        255,807        192,104
Real Estate Construction          265,092        173,217        151,793        144,028        102,426
Real Estate Mortgage              102,932        104,338        106,438        103,810         98,404
Installment                        33,393         32,150         28,153         24,575         21,567
                               ----------       --------       --------       --------       --------
           TOTAL               $1,053,214       $898,142       $736,946       $657,677       $552,119
                               ==========       ========       ========       ========       ========
</TABLE>

Loan Maturities and Sensitivity to Changes in Interest Rates

The following table shows the amounts and maturity analysis of loans outstanding
as of December 31, 1999. Also, the amounts are classified as to fixed and
variable rate sensitivity for amounts due after one year.

<TABLE>
<CAPTION>
                                                   Maturity
                                 ----------------------------------------------
(In thousands)                    Within      1 - 5       After
                                  1 Year      Years      5 Years       Total
                                 --------    --------    --------    ----------
<S>                              <C>         <C>         <C>         <C>
Commercial                       $115,786    $ 81,834    $ 12,295    $  209,915
Real Estate Commercial             31,365     292,369     118,148       441,882
Real Estate Construction          194,111      68,643       2,338       265,092
Real Estate Mortgage               20,315      69,324      13,293       102,932
Installment                         8,423      13,506      11,464        33,393
                                 --------    --------    --------    ----------
             TOTAL               $370,000    $525,676    $157,538    $1,053,214
                                 ========    ========    ========    ==========
</TABLE>

Loans maturing after one year with:

<TABLE>
<CAPTION>
                                     1 - 5          After
                                     Years         5 Years
                                    --------       --------
<S>                                 <C>            <C>
          Fixed Rates               $463,534       $116,938
          Variable Rates              62,142         40,600
                                    --------       --------
                   TOTAL            $525,676       $157,538
                                    ========       ========
</TABLE>

It is not uncommon to rollover loans at the maturity period, provided that that
rate and terms of the loan conform to the current policy.



                                      -12-
<PAGE>   15

Loan Administration

The Bank provides revolving lines of credit to many of its borrowers. Such lines
are approved by the Director's Loan Committee ("Loan Committee") or other
administrative level committee or person if the amount exceeds the lending units
authorized loan limit.

Credit Review personnel, under the direction of the Credit Administrator,
examine the loan portfolio regularly. Reports are made by Credit Review
personnel to senior management and the Loan Committee, and follow-up corrective
action is monitored. Problem loan reports are prepared for management review on
a regular basis.

Certain problem loans are placed on a nonaccrual basis in conformance with
defined policy. The Loan Committee and other administrative personnel regularly
review information reports on classified and delinquent loans. Comparative
summaries of delinquent loans are also provided on a regular basis to senior
management and to the Board of Directors. Management closely monitors the
adequacy of the loan loss reserve and an analysis is performed four times a
year. The allowance is maintained at a level deemed sufficient to meet potential
losses. The reviews, examinations and actions described above are in addition to
the periodic examinations by federal and state regulatory agencies, as well as
the Bank's internal audit department and the Bank's outside public accounting
firm.

Risk Elements - Impaired Assets

Loans are placed in a nonaccrual status when, in the opinion of management, the
collection of additional interest is doubtful, or when the loan becomes ninety
(90) days past due in principal or interest. When a loan is placed in a
nonaccrual status, all interest previously accrued but not collected is reversed
and charged against interest income. Income on nonaccrual loans is then
recognized only to the extent cash is received and where the future collection
of principal is probable. Accruals are resumed only when the loan is brought
current, or when, in the opinion of management, the borrower has demonstrated
the ability to resume payments of principal and interest on a regular basis. As
a consequence, some of these loans are current in their payments at this time.

The dollar amount of loans past due 90 days or more and still accruing,
nonaccrual loans, restructured loans and other real estate owned as a percentage
of total loans was .22%, .26%, and .78% for year-end 1999, 1998 and 1997,
respectively. These loans have a variety of situations, some of which may lead
to foreclosure or involve a bankruptcy case. Others may continue payment as the
borrower's financial situation improves. At year-end 1997, the total represented
21 different loans, 8 out of those 21 were real estate in nature. At year-end
1998, the number of loans in nonaccrual was 15, totaling slightly more than $1
million, or .12% of total loans. At year-end 1999, the number of loans in
nonaccrual increased to 25, totaling slightly more than $1.5 million, or .15% of
total loans. The largest loan in nonaccrual represented less than 2% of the
total amount in nonaccrual.

Management monitors these loans on a frequent basis and conducts aggressive
collection efforts, unless constraints are placed on the Bank by the bankruptcy
courts. These efforts are directed toward the best long-term results for the
Bank, and to the extent reasonable, to the borrower as well. If, in the opinion
of management, it is felt, or if it can be determined, that full collection of
these loans or their payment streams will not occur, then they are charged off
against the loan loss reserve.



                                      -13-
<PAGE>   16

Loans past due 90 days or more and still accruing, nonaccruing, restructured and
other real estate owned (OREO) on which the accrual of interest has been
discontinued as of December 31st are as follows:

<TABLE>
<CAPTION>
(In thousands)
                                  1999           1998          1997          1996          1995
                                  ----           ----          ----          ----          ----
<S>                            <C>             <C>           <C>           <C>           <C>
Commercial                     $      211      $    112      $    327      $    478      $    175
Real Estate                         1,266           932         4,097         3,144         4,402
Installment                            61            21            17             4            14
Restructured                           --            --           109           121           122
                               ------------------------------------------------------------------
Total Non-Performing Loans          1,538         1,065         4,550         3,747         4,713
                               ------------------------------------------------------------------
Other real estate owned               736         1,287         1,200           444           590
                               ------------------------------------------------------------------
Total Impaired Assets          $    2,274      $  2,352      $  5,750      $  4,191      $  5,303
                               ==================================================================

Total Loans at end
    of period                  $1,053,214      $898,142      $736,946      $657,677      $552,119
                               ==================================================================

As a percent of
    total loans                      0.22%         0.26%         0.78%         0.64%         0.96%
                               ==================================================================
</TABLE>

There are certain amounts of interest collected on the above loans and included
in income, and amounts that have not been accrued which are indicated in the
table below:

<TABLE>
<CAPTION>
(In thousands)
At December 31,                     1999       1998       1997       1996       1995
                                    ----       ----       ----       ----       ----
<S>                                 <C>        <C>        <C>        <C>        <C>
Total interest income which
would have been recorded
during the period under
original terms of loans above       $100        $42       $289       $289       $518

Portion of interest
income included in
net income for the
period                              $161        $41       $384       $264       $378

Commitments for additional
funds related to loans
above                                -0-        -0-        -0-        -0-        -0-
</TABLE>

Restructured loans are those that had problems in the past, and a concession was
made in the interest rate, principal amount, and/or the repayment schedule has
been modified to the extent that there has been tangible impairment of value.
These loans are monitored on a regular basis for performance.

The Bank originates commercial, commercial real estate, real estate
construction, residential mortgage and installment loans primarily in Snohomish,
Pierce, King, Skagit and Whatcom Counties. Total loans as of December 31, 1999,
1998 and 1997 were $1.1 billion, $898.1 million and $736.9 million respectively.


                                      -14-
<PAGE>   17

Other Real Estate Owned

As of December 31, 1999, the Bank had eight parcels of other real estate owned
(OREO) on it books, which totaled $736 thousand. The OREO parcels consist of
five residential lots in two locations, two houses and a small commercial
building. No losses are expected on sales of OREO which are recorded at the
lower of cost or fair value, less estimated costs to sell. The current levels
are felt to be normal, and no particular trends are noted at this time.

The table below shows the carrying value of OREO at December 31st:

<TABLE>
<CAPTION>
(In thousands)                1999       1998        1997       1996      1995
                              ----       ----        ----       ----      ----
<S>                           <C>       <C>         <C>         <C>       <C>
Other Real Estate Owned       $736      $1,287      $1,200      $444      $590
</TABLE>

The following table provides an analysis of net losses by loan type for the last
five years at December 31st.

<TABLE>
<CAPTION>
(In thousands)                    1999          1998        1997         1996         1995
                                  ----          ----        ----         ----         ----
<S>                            <C>            <C>         <C>          <C>          <C>
Balance at beginning
of year                        $   18,098     $ 15,824    $ 14,033     $ 12,601     $ 11,019
Provision charged to
operating expense                   2,050        1,800       2,095        2,133        1,621
  Loans charged-off:
      Commercial                     (796)        (438)       (393)        (621)      (1,257)
      Real Estate                       0         (779)     (1,324)      (1,336)        (875)
      Installment                     (71)         (66)        (81)         (84)         (88)
                               -------------------------------------------------------------
  Total charged-off loans            (867)      (1,283)     (1,798)      (2,041)      (2,220)
  Less recoveries:
      Commercial                      241          653         283          752        1,245
      Real Estate                     101        1,083       1,161          535          902
      Installment                      28           21          50           53           34
                               -------------------------------------------------------------
  Total recoveries                    370        1,757       1,494        1,340        2,181
Net charge-offs                      (497)         474        (304)        (701)         (39)
                               -------------------------------------------------------------
Balance at end of year         $   19,651     $ 18,098    $ 15,824     $ 14,033     $ 12,601
                               =============================================================

Total loans at
end of period                  $1,053,214     $898,142    $736,946     $657,677     $552,119
Daily average loans            $  975,293     $811,866    $703,275     $608,190     $531,297
Ratio of net charged-off
loans during period to
average loans outstanding            0.05%       -0.06%       0.04%        0.12%        0.01%
                               =============================================================
</TABLE>

It is the policy of Frontier Financial Corporation and its subsidiary to
charge-off any loan or portion of a loan that is deemed uncollectible in the
ordinary course of business. The entire allowance for possible loan losses is
available to absorb such charge-offs.



                                      -15-
<PAGE>   18

Allocation of Allowance for Possible Loan Losses

Based on certain characteristics of the portfolio, potential losses can be
anticipated for major loan categories. In the following table, the allowance for
possible loan losses at year-end, for the last five years has been allocated
among major loan categories based primarily on their historical net charge-off
experience, along with consideration of factors such as quality, volume,
anticipated economic conditions and other business considerations.

(In thousands, except percents)

<TABLE>
<CAPTION>
                           Loan               Loan               Loan               Loan               Loan
                  1999    Category   1998    Category   1997    Category   1996    Category   1995    Category
                 Reserve  Percent   Reserve  Percent   Reserve  Percent   Reserve  Percent   Reserve  Percent
                 -------  --------  -------  --------  -------  --------  -------  --------  -------  --------
<S>              <C>        <C>     <C>        <C>     <C>        <C>     <C>        <C>     <C>         <C>
Commercial       $10,439    19.9%   $ 9,592    23.1%   $ 8,920    21.4%   $ 8,702    19.7%   $ 7,758     24.9%
Real Estate        8,842    76.9%     8,144    73.3%     6,485    74.8%     4,976    76.6%     4,283     71.2%
Installment          370     3.2%       362     3.6%       419     3.8%       355     3.7%       560      3.9%
                 ---------------------------------------------------------------------------------------------
       TOTAL     $19,651   100.0%   $18,098   100.0%   $15,824   100.0%   $14,033   100.0%   $12,601    100.0%
                 =======   =====    =======   =====    =======   =====    =======   =====    =======    =====
</TABLE>

Historical net charge-offs are not necessarily accurate indicators of future
losses since net charge-offs vary from period to period due to economic
conditions and other factors that cannot be accurately predicted. Thus, an
evaluation based on historical loss experience of individual loan categories is
only one of many factors considered by management in evaluating the adequacy of
the overall allocation, and in determining the amount of the provision for
possible loan losses.

Determination of the Reserve for Loan Losses - Qualitative Factors

The loan portfolio is separated by quality and then by loan type. Loans of
acceptable quality are evaluated as a group, by loan type, with a specific
reserve percent assigned to the total loans in each type, but unallocated to any
individual loan. Conversely, each adversely classified loan is individually
analyzed, to determine a "worst case" loss. A valuation allowance is also
assigned to these adversely classified loans, but at a higher percent due to the
greater risk of loss. For those loans where the "worse case" loss is greater
than the background percentage, the worse case loss amount is considered
specifically allocated to the reserve.

Based on actual historical results (over the past 6 years, which average
approximately $300 thousand per year net losses), Frontier has an excess of the
necessary reserves required. However, this does not take into consideration the
inherent risks of a loan portfolio, the current or expected local economic
conditions, and still potential Year 2000 losses, so management believes that
the reserve is adequate, based on those inherent risks.

The analysis/formula for computing the allowance for possible loan losses has
not changed significantly for several years. The last substantive change
occurred in 1998 when a specific reserve component regarding potential Y2K
losses was added. That component was consistent during all of 1999.

Loan concentrations, quality, terms and basic underlying assumptions remained
substantially unchanged during the period. The actual loan loss reserve as a
percentage of total loans did not materially change during all of 1999.



                                      -16-
<PAGE>   19

National and Local Economic Trends and Conditions

In addition to the economic discussion in Management's Discussion and Analysis
of Financial Condition and Results of Operations (page 27-29, 1999 Annual Report
to Shareowners), there are other qualitative factors considered when analyzing
the adequacy of the loan loss reserve.

Year 2000 Risk

As part of Year 2000 due diligence, a specific loan loss allowance was
maintained to offset any potential losses incurred due to business failures or
setbacks caused by the millennium change. Although no actual losses have
surfaced yet, we have risk rated our loan portfolio and assigned a specific loan
loss reserve of .1% of the loan balance to the loans assigned a high-risk
rating. As of March 1, 2000, the millennium change has had no known impact on
our customer base. Also, the February 29 leap-year day was also a "non-event",
with business as usual throughout the Bank. Management will continue to closely
monitor the matter going forward for any signs of problems arising from these
potential problems.

Effects of Changing Interest Rates

1999 saw three increases in the discount rate by the Federal Reserve in the
second half of the year. A fourth increase in February 2000 brought the total
increase to 1.0%. Subsequently, the Bank's base rate increased the same 1.0%.
Fears of inflation, which have failed to materialize, brought on by what is
considered an overheated economy and tight labor market are the primary causes.
We have seen some signs of slowing in the economy, which we consider healthy.

To date no noticeable adverse effects on loan volumes and borrower's viability
have been noted from these recent rates increases. The Bank, while offering
conventional home mortgage origination services, has not been a high volume
producer in this area, which is considered the most vulnerable to slow downs in
activity levels (and reductions in fee income, etc.) as rates rise. See comments
on interest rate sensitivity for a discussion of effect on yields.

The majority of the bank's loans have short-term maturities of up to five years,
and typically 45% of the loan portfolio reprices within one year, which
decreases the interest rate risk.

Concentrations of Credit

At year-end 1999, 21.6% of the Bank's loan portfolio was in residential and
commercial construction and land development projects centered in Snohomish,
Pierce, King, Skagit and Whatcom Counties. The Bank has experienced strong
demand for such loans and the current percentage represents an increase from
16.8% in 1998. Management has established a Real Estate Review Committee which
meets periodically to monitor local economic conditions and the performance of
borrowers in this industry. The chart on the following page indicates the amount
of those loans, and as a percent of total loans for the period:


                                      -17-
<PAGE>   20

<TABLE>
<CAPTION>
(In Thousands)
At December 31,                       1999        1998       1997       1996       1995
                                   ----------   --------   --------   --------   --------
<S>                                <C>          <C>        <C>        <C>        <C>
Construction                       $  151,623   $ 99,312   $ 80,233   $ 70,201   $ 54,341
Land Development                       76,384     51,902     43,015     52,186     33,946
                                   ------------------------------------------------------
       TOTAL                         $228,007   $151,214   $123,248   $122,387   $ 88,287
                                   ======================================================

Total Loans at end of period       $1,053,214   $898,142   $736,946   $657,677   $552,119
                                   ======================================================

Construction and Land
Development loans as a
percent of total loans                   21.6%      16.8%      16.7%      18.6%      16.0%
                                   ======================================================
</TABLE>

At this time, management considers the loan portfolio reasonably diversified,
providing the proper mix of risk and return. However, the quality of many of the
loans is related to the strength and stability of the real estate values, which
could be affected by several factors.

Levels of, and Trends in, Delinquencies and Nonaccruals

Nonperforming loans and other real estate remained consistent in 1999 at the
same low 1998 level with a modest increase in nonaccrual loans and a decrease in
other real estate owned. No real trends are noted. Management monitors
delinquencies monthly and reports are prepared for the Board of Directors
review. Delinquencies for the commercial, personal, real estate and credit lines
categories are charted separately when presented to the Board. At this time, the
data indicates a generally stable to declining trend.

Trends in Volume and Terms of Loans

The rate of loan growth was consistent in the first, second, and third quarters
of 1999. Total loans increased $16.6 million in the fourth quarter, or 1.6% to
$1.1 billion, a growth rate slower than the previous three quarters. Overall
loan growth was 17.3% for 1999. Following the merger with the former Bank of
Sumner, the Bank was able to accommodate several clients who were previously not
able to be fully accommodated by the Bank of Sumner due to lending limit
capacity. In addition, the opening of new locations and additions of personnel
have fostered growth, as well as the growth of existing portfolios. At this
time, no real trends are noted in the levels of loan activity and growth.
Although some concerns can be expressed over the future impact of recent rate
increases on levels of economic activity.

Conclusion of Qualitative Factors

The allowance for loan losses is the amount which, in the opinion of management,
is necessary to absorb inherent loan losses regardless of source. Management's
evaluation of the adequacy of the allowance is based on the market area served,
local economic conditions, the growth and mix of the portfolio and their related
risk characteristics. The loan loss reserve may be somewhat larger than the
indicated amount based on formulas, however, based on upcoming cutbacks at
Boeing, and an anticipated slowing of the economy, any excess reserve is not
considered by management to be material.


                                      -18-
<PAGE>   21

Deposits

For the average amount of deposits and rates paid on such deposits for years
ended December 31, 1999, 1998, and 1997 please refer to page 40 of 1999 Annual
Report to Shareowners.

Maturities of time certificates of deposit $100,000 and over at year-end 1999,
are shown below:

(In thousands)

<TABLE>
<S>                                  <C>
3 months or less                     $ 94,633
Over 3 months through 6 months         28,697
6 months through 12 months             57,695
Over 12 months                         19,504
                                     --------
                       TOTAL         $200,529
                                     ========
</TABLE>

Significant Financial Ratios

Ratios for the years ended December 31, 1999, 1998 and 1997 are as follows:

<TABLE>
<CAPTION>
                                        1999          1998          1997
                                        -----         -----         -----
<S>                                     <C>           <C>           <C>
Return on Average Assets                 2.15%         2.06%         2.03%
Return on Average Equity                18.43%        18.27%        18.84%
Dividend payout ratio                    17.1%          1.6%          1.5%
Average Equity to Average Assets        11.65%        11.30%        10.78%
</TABLE>

<TABLE>
<CAPTION>
Borrowings
Short-Term Borrowings                  Weighted             Weighted             Weighted
(In thousands)                         Average              Average              Average
                                       Interest             Interest             Interest
At December 31,                1999      Rate      1998       Rate      1997       Rate
                             -------   --------   -------   --------   -------   --------
<S>                          <C>       <C>        <C>       <C>        <C>       <C>
Year-end balance:            $28,552     4.56%    $31,858     4.88%    $17,962     5.01%

Highest month end
balance during
the period:                  $61,569              $31,858              $22,245
</TABLE>

For information regarding average balances and yields, please refer to page 40
of 1999 Annual Report to Shareowners.

Long-Term Debt

There is no long-term debt for years ended December 31, 1999 and 1998.

ITEM 2 - PROPERTIES



                                      -19-
<PAGE>   22

FFC's main office, which is owned by FFP, is located in Everett, Washington. At
December 31, 1999, the Bank had 25 offices, including the main office, all of
which are located in the state of Washington. These offices are located in
Arlington, Bellingham, Bothell, Buckley, Burlington, Edmonds, Everett (4), Lake
City (North Seattle), Lake Stevens, Lynnwood, Marysville, Meridian Place
(Puyallup), Mill Creek, Monroe, Mount Vernon, Orting, Redmond, Smokey Point,
Snohomish, Stanwood, Sumner and Woodinville. FFP also owns the building and land
recently purchased (December 1999) for the Bank's new Operations Center. All of
its branches are located in properties owned by FFP, Inc., a real estate holding
subsidiary, except for the offices located in Bellingham (lease expires May
2004) Burlington (lease expires May 1999), Edmonds, (lease expires July 31,
2004), one office in Everett (lease expires October 2014), Lake Stevens (lease
expires May 2001), Mill Creek (lease expires November 2000), Meridian Place
Office (which lease expires in September 1999) and Mount Vernon (building owned,
lease expires March 2023).

The total net book value of the investment in premises and equipment at December
31, 1999, totaled $18.3 million.

ITEM 3 - LEGAL PROCEEDINGS

        There are no material legal proceedings.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SHAREOWNERS

        No matters were submitted to security holders during the fourth quarter
of 1999.





                                      -20-
<PAGE>   23


                                     PART II

ITEM 5 - MARKET FOR REGISTRANT'S COMMON STOCK AND SHAREOWNER MATTERS

        Please see 1999 Annual Report to Shareowners, page 39.

ITEM 6 - SELECTED FINANCIAL DATA

                              FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
                                                                                                 % Change
AT YEAR-END                       1999          1998         1997        1996        1995        1998-1999
                               ---------------------------------------------------------------------------
<S>                            <C>           <C>           <C>         <C>         <C>           <C>
Total assets                   $1,245,616    $1,147,873    $973,052    $874,946    $ 796,730        8.5%
Net loans                       1,033,563       880,044     721,122     643,644      539,517       17.4%
Deposits                          966,780       926,642     810,348     732,389      694,278        4.3%
Long-term debt                          0             0         695       1,059        1,394         nm
Investment securities             131,514       145,601     115,999     132,340      146,645       -9.7%
Shareowners' equity               147,369       129,249     107,384      88,351       72,214       14.0%

FOR THE YEAR
Interest income                   103,689        93,562      83,324      73,971       68,443       10.8%
Interest expense                   40,737        37,890      34,369      32,062       31,091        7.5%
Securities gains(losses)                0             0           0           0           (4)        nm
Provision for loan losses           2,050         1,800       2,095       2,133        1,621       13.9%
Net income                         25,660        21,649      18,594      16,012       13,837       18.5%
Basic earnings per share       $     1.46    $     1.25    $   1.08    $   0.94    $    0.81       16.8%
Diluted earnings per share     $     1.46    $     1.23    $   1.07    $   0.92    $    0.80       18.7%
Return on Average
  Assets                             2.15%         2.06%       2.03%       1.96%        1.84%
  Equity                            18.43%        18.27%      18.84%      20.15%       21.34%
Avg. equity/avg. assets             11.65%        11.30%      10.78%       9.71%        8.63%
</TABLE>

nm=Not meaningful

(In Thousands, except per share data)

ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

        Please see 1999 Annual Report to Shareowners, page 27 through 41.

ITEM 7a - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        Please see 1999 Annual Report to Shareowners, page 36-38.



                                      -21-
<PAGE>   24


ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                          INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                       Annual
                                                           Form       Report to
                                                           10-K      Shareowners
                                                           Page         Page
                                                           ----      -----------
<S>                                                        <C>       <C>
Independent Auditor's Report                                26

Report of Management                                                     1

Consolidated Balance Sheet at
December 31, 1999 and 1998                                               3

Consolidated Statement of Income for the years
Ended December 31, 1999, 1998 and 1997                                   4

Consolidated Statement of Changes in
Shareowners' Equity                                                      5

Consolidated Statement of Cash Flows for the
Years ended December 31, 1999, 1998 and 1997                             6

Condensed Balance Sheet (Parent Only) at
December 31, 1999 and 1998                                              24

Condensed Statement of Income (Parent Only) for the
Years Ended December 31, 1999, 1998 and 1997                            24

Condensed Statement of Cash Flows (Parent Only)
for Years Ended December 31, 1999, 1998, and 1997                       25

Notes to Consolidated Financial Statements                            7 - 26
</TABLE>

ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

        None.



                                      -22-
<PAGE>   25

PART III

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF FRONTIER FINANCIAL CORPORATION

        Please see pages 2-8 of 2000 Proxy Statement.

ITEM 11 - EXECUTIVE COMPENSATION

        Please see pages 6-8 of 2000 Proxy Statement.

ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS MANAGEMENT

        Please see page 8 of 2000 Proxy Statement.

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        Please see page 11 of 2000 Proxy Statement; and,
        Note 14, page 21 of 1999 Annual Report to Shareowners; and,
        Page 25 of this Form 10-K report.






                                      -23-
<PAGE>   26

                                     PART IV

ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

    (a)   The following documents are filed as part of the report:

          1.  Financial Statements.

              Financial statements required by Item 8 of this report are
              incorporated by reference, from the 1999 Annual Report to
              Shareowners, attached hereto as an exhibit.

          2.  Financial Statement Schedules.

              Financial Statement Schedule is included in the notes to
              consolidated financial statements.

          3.  Exhibits.

               (3)(a)  Articles of Incorporation are incorporated herein by
                       reference to Appendix A to the registrant's definitive
                       Proxy Statement on Schedule 14A filed on March 20, 1998
                       in connection with its 1998 Annual meeting.

               (3)(b)  By-Laws are incorporated herein by reference to Exhibit
                       3(b) to Registration on Form S-14, File No. 2-82420.

              (10)(a)  Amended and Restated Frontier Financial Corporation
                       Incentive Stock Option Plan incorporated by reference to
                       Exhibit 99.1 to Registration Statement on Form S-8, filed
                       March 2, 1999 (File No. 333-73217).

              (11)     Statement Regarding Computation of Earnings Per Share.

              (13)     Annual Report to Shareowners for the year ended December
                       31, 1999.

              (21)     Subsidiaries of Registrant is incorporated by reference
                       from Part I, page 1 through 9 of this report.

The following exhibit is included only in the electronic EDGAR filing version of
this Form 10-K:

              (27)     Financial Data Schedule for fiscal year ended December
                       31, 1999.

    (b)    Reports on Form 8-K:

           Form 8-K was filed on February 3, 1999 reporting consolidated
           operating results for the month of January 1999.




                                      -24-
<PAGE>   27

                                                                      SCHEDULE I


                 FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
                     AMOUNTS RECEIVABLE FROM CERTAIN PERSONS

(In thousands)

<TABLE>
<CAPTION>
                                                                                 Balance at
   Year Ended            Balance at                         Deductions           December 31
   December 31           January 1     Additions    Collections    Write-offs    all current
   -----------           ---------     ---------    -----------    ----------    -----------
<S>                      <C>           <C>          <C>            <C>           <C>
       1999               $22,119       $17,310       ($9,824)         $0          $29,605
       Ten
     Directors
     and one
      Officer

       1998               $21,960       $ 8,630       ($8,471)         $0          $22,119
     Twelve
     Directors
     and two
     Officers

       1997

      Eleven                7,028        22,219        (7,287)          0           21,960
     Directors
     and one
     Officer
</TABLE>




                                      -25-
<PAGE>   28


                          INDEPENDENT AUDITOR'S REPORT


To the Board of Directors and Shareowners
Frontier Financial Corporation

We have audited the consolidated financials statements and related financial
statement schedule of Frontier Financial Corporation and subsidiaries listed in
item 14(a)1 and 2 of the Annual Report on Form 10-K of Frontier Financial
Corporation for the year ended December 31, 1999. These financial statements are
the responsibility of the Corporation's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free from
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Frontier Financial
Corporation and subsidiaries as of December 31, 1999 and 1998, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1999, in conformity with generally accepted accounting
principles. In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly the information required to be included therein.



                                        /s/ Moss Adams LLP


Everett, Washington
January 18, 2000









                                      -26-
<PAGE>   29


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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

March 15, 2000                         /s/ Robert J. Dickson
-------------------                    ----------------------------------------
Date                                   Robert J. Dickson
                                       President & Chief Executive Officer

March 15, 2000                         /s/ James F. Felicetty
-------------------                    ----------------------------------------
Date                                   James F. Felicetty
                                       Secretary/Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:


-------------------                    ----------------------------------------
                                       George E. Barber, Director

March 15, 2000                         /s/ Michael J. Corliss
-------------------                    ----------------------------------------
                                       Michael J. Corliss, Director

March 15, 2000                         /s/ Lucy DeYoung
-------------------                    ----------------------------------------
                                       Lucy DeYoung, Director

March 15, 2000                         /s/ Robert J. Dickson
-------------------                    ----------------------------------------
                                       Robert J. Dickson, Director

March 15, 2000                         /s/ David A. Dujardin
-------------------                    ----------------------------------------
                                        David A. Dujardin, Director

March 15, 2000                         /s/ Edward D. Hansen
-------------------                    ----------------------------------------
                                       Edward D. Hansen, Secretary of the Board

March 15, 2000                         /s/ William H. Lucas
-------------------                    ----------------------------------------
                                       William H. Lucas, Director

March 15, 2000                         /s/ James H. Mulligan
-------------------                    ----------------------------------------
                                       James H. Mulligan, Chairman of the Board

March 15, 2000                         /s/ J. Donald Regan
-------------------                    ----------------------------------------
                                       J. Donald Regan, Director

March 15, 2000                         /s/ Roger L. Rice
-------------------                    ----------------------------------------
                                       Roger L. Rice, Director


-------------------                    ----------------------------------------
                                       William J. Robinson, Director

March 15, 2000                         /s/ Edward C. Rubatino
-------------------                    ----------------------------------------
                                       Edward C. Rubatino, Director

March 15, 2000                         /s/ Darrell J. Storkson
-------------------                    ----------------------------------------
                                       Darrell J. Storkson, Director



                                      -27-