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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, 2000

                         Commission File Number 0-15540

                         FRONTIER FINANCIAL CORPORATION

             (Exact Name of Registrant as Specified in its Charter)

<TABLE>
<S>                                              <C>
          Washington                                     91-1223535
-------------------------------                  ----------------------------
(State or Other Jurisdiction of                  (IRS Employer Identification
  Incorporated or Organization)                   Number)
</TABLE>

                            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 February 28,
2001 was $394,481,712 based on the average high/low price at February 28, 2001.

The issuer has one class of common stock (no par value) with 19,767,897 shares
outstanding as of December 31, 2000, and 20,515,503 outstanding as of February
28, 2001.

Documents Incorporated by Reference

Annual Report to Shareowners for the year ended December 31, 2000
Proxy Statement dated March 12, 2001



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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                                1-11

         Statistical Disclosure Index             12

    2    Properties                               21

    3    Legal Proceedings                        22

    4    Submission of Matters to
         a vote of Shareowners                    22

PART II
    5    Market for Registrant's Common
         Equity and Related Shareowner
         Matters                                                   40

    6    Selected Financial Data                  23

    7    Management's Discussion and
         Analysis of Financial Condition
         and Results of Operations                               28-41

    7a   Quantitative and Qualitative
         Disclosures about Market Risk                           36-39

    8    Financial Statements and
         Supplementary Data                       24

    9    Changes in and Disagreements with
         Accountants on Accounting and
         Financial Disclosure                     24

PART III

   10    Directors and Executive
         Officers of Frontier
         Financial Corporation                    25                                     2-10

   11    Executive Compensation                                                          7-9

   12    Security Ownership of Certain            25
         Beneficial Owners and
         Management                                                                      5-6

   13    Certain Relationships and
         Related Transactions                     25               21                    12

PART IV

  14     Exhibits, Financial Statement
         Schedules, and Reports on Form 8-K       26

         Signatures                               29
</TABLE>



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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 in the State of Washington,
including the acceptance of demand, time and savings deposits and the making of
loans. As of December 31, 2000, the Bank conducted its business operations out
of 34 offices located in Clallam, Jefferson, King, Kitsap, Pierce, Skagit,
Snohomish, 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),
Kent, Redmond, Burlington, Bellingham and four offices located in Pierce county
in the cities of Sumner, Puyallup, Orting and Buckley. Acquired in the merger
with Liberty Bay Financial Corporation (North Sound Bank) which was consummated
in July 2000, were eight branches located in Clallam, Jefferson and Kitsap
counties. Two branches are located in Poulsbo, and one each is located in
Bainbridge Island, Port Angeles, Port Hadlock, Port Townsend, Sequim and
Silverdale.

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




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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.

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 began use in the second quarter of 2000. In May
2000, the Bank opened an office in Kent, Washington, which is south of Seattle.
In July 2000, the Bank acquired, through merger, North Sound Bank, with eight
offices, a real estate origination department and a financial services company.
These offices provide a full range of consumer and commercial banking services.

Employees

At December 31, 2000, the Bank had 511 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. Management believes
that the principal competitive factors affecting the Corporation's markets
include interest rates paid on deposits and charged on loans, the range of
banking products available, and customer service and support. 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,
2000, the Bank had total assets of $1.691 billion and deposits of $1.375
billion.

Subsequent Merger

On February 2, 2001, the merger with Inter Bank was consummated. In this merger,
the Bank acquired two branch offices located in Duvall and Kirkland, Washington.
Additionally, the Bank acquired an approved but not yet opened office in Totem
Lake. This office is schedule to be opened in the second quarter of 2001. At the
time of the merger, Inter Bank had total assets of $72.8 million; total loans of
$54.2 million; total deposits of $65.8 million and capital of $6.2 million.

REGULATION AND SUPERVISION

To the extent that the following information describes statutory and regulatory
provisions, it is qualified in its entirety by reference to the full text of
those provisions. Also, such statutes, regulations and policies are continually
under review by Congress and state legislatures and federal and state regulatory
agencies. A change in statutes, regulations or regulatory policies applicable to
FFC could have a material effect on the business of FFC.



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Introduction

FFC, its banking and nonbanking subsidiaries, are subject to extensive
regulation by federal and state agencies. The regulation of bank holding
companies and their subsidiaries is intended primarily for the protection of
depositors, federal deposit insurance funds and the banking system as a whole
and not for the protection of security holders.

As discussed in more detail below, this regulatory environment, among other
things, may restrict FFC's ability to diversify into certain areas of financial
services and pay dividends on its capital stock. It may also require FFC to
provide financial support to its banking subsidiary, maintain capital balances
in excess of those desired by management and pay higher deposit insurance
premiums as a result of the deterioration in the financial condition of
depository institutions in general.

Holding Company Structure

FFC 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 (the "Bank
Holding Company Act"). As part of a plan of reorganization consummated following
the close of business on 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. Effective October 28, 2000, FFC became a financial holding company.

Source of Strength Doctrine. Under current FRB policy, FFC is expected to act as
a source of financial and managerial strength to its subsidiary bank and, under
appropriate circumstances, to commit resources to support such subsidiary bank.

Capital loans from FFC to its subsidiary bank is subordinate in right of payment
to deposits and certain other indebtedness of the subsidiary bank. In the event
of FFC's bankruptcy, any commitment by FFC to a federal bank regulatory agency
to maintain the capital of a subsidiary bank will be assumed by the bankruptcy
trustee and entitled to a priority of payment.

Depositor Preference. The Federal Deposit Insurance Act ("FDI Act") provides
that, in the event of the "liquidation or other resolution" of an insured
depository institution, the claims of depositors of the institution, including
the claims of the FDIC as subrogee of insured depositors, and certain claims for
administrative expenses of the FDIC as a receiver will have priority over other
general unsecured claims against the institution. If an insured depository
institution fails, insured and uninsured depositors, along with the FDIC, will
have priority in payment ahead of unsecured, nondeposit creditors, including
FFC, with respect to any extensions of credit they have made to such insured
depository institution.

Regulatory Agencies

Bank Holding Company. FFC, as a bank holding company, is subject to regulation
under the Bank Holding Company Act and to inspection, examination and
supervision by the Board of Governors of the Federal Reserve System (Federal
Reserve Board) ("FRB") under the Bank Holding Company Act. As of October 28,
2000, FFC became a financial holding company under the Bank Holding Company Act.

Subsidiary Bank. FFC's subsidiary bank is subject to regulation and examination
primarily by the Department of Financial Institutions for the State of
Washington and by the Federal Deposit Insurance Corporation ("FDIC").



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Bank Holding Company Activities

"Financial in Nature" Requirement. As a bank holding company that has elected
also to become a financial holding company pursuant to the Bank Holding Company
Act, FFC may affiliate with securities firms and insurance companies and engage
in other activities that are financial in nature or are incidental or
complementary to activities that are financial in nature. "Financial in nature"
activities include securities underwriting, dealing and market making,
sponsoring mutual funds and investment companies, insurance underwriting and
agency, merchant banking, and activities that the FRB determines from time to
time to be so closely related to banking or managing or controlling banks as to
be a proper incident thereto. A bank holding company that is not also a
financial holding company is limited to engaging in banking and such other
activities as determined by the FRB to be so closely related to banking or
managing or controlling banks as to be a proper incident thereto.

No FRB approval is required for FFC to acquire a company (other than a bank
holding company, bank or savings association) engaged in activities that are
financial in nature or incidental to activities that are financial in nature, as
determined by the FRB. Prior FRB approval is required before FFC may acquire the
beneficial ownership or control of more than 5% of the voting shares or
substantially all of the assets of a bank holding company, bank or savings
association.

If the subsidiary bank of FFC receives a rating under the Community Reinvestment
Act of 1977 of less than satisfactory, FFC will be prohibited from engaging in
new activities or acquiring companies other than bank holding companies, banks
or savings associations.

Interstate Banking. Under the Riegle-Neal Interstate Banking and Branching Act
(Riegle-Neal Act), a bank holding company may acquire banks in states other than
its home state, subject to any state requirement that the bank has been
organized and operating for a minimum period of time, not to exceed five years,
and the requirement that the bank holding company not control, prior to or
following the proposed acquisition, more than 10% of the total amount of
deposits of insured depository institutions nationwide or, unless the
acquisition is the bank holding company's initial entry into the state, more
than 30% of such deposits in the state, or such lesser or greater amount set by
the state.

The Riegle-Neal Act also authorizes banks to merge across state lines, thereby
creating interstate branches. States were permitted for a period of time to opt
out of the interstate merger authority provided by the Riegle-Neal Act and, by
doing so, prohibit interstate mergers in the state. Banks are also permitted to
acquire and to establish de novo branches in other states where authorized under
the laws of those states.

Regulatory Approval. In determining whether to approve a proposed bank
acquisition, federal banking regulators will consider, among other factors, the
effect of the acquisition on competition, the public benefits expected to be
received from the acquisition, the projected capital ratios and levels on a
post-acquisition basis, and the acquiring institution's record of addressing the
credit needs of the communities it serves, including the needs of low and
moderate income neighborhoods, consistent with the safe and sound operation of
the bank, under the Community Reinvestment Act of 1977.

Dividend Restrictions

FFC is a legal entity separate and distinct from its subsidiary bank. Its
principal source of funds to pay dividends on its common stock and debt service
on its debt is dividends from its subsidiary bank. The Bank, by statute, cannot
declare or pay any dividend in an amount greater than its retained earnings
without the approval of the Director of the Division of Banks for the State of
Washington.



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Deposit Insurance Assessments

Through the Bank Insurance Fund (BIF), the FDIC insures the deposits of FFC's
depository institution subsidiaries up to prescribed limits for each depositor.
The amount of FDIC assessments paid by each BIF member institution is based on
its relative risk of default as measured by regulatory capital ratios and other
factors. Specifically, the assessment rate is based on the institution's
capitalization risk category and supervisory subgroup category. An institution's
capitalization risk category is based on the FDIC's determination of whether the
institution is well capitalized, adequately capitalized or less than adequately
capitalized. An institution's supervisory subgroup category is based on the
FDIC's assessment of the financial condition of the institution and the
probability that FDIC intervention or other corrective action will be required.

The BIF assessment rate currently ranges from zero to 27 cents per $100 of
domestic deposits. The FDIC may increase or decrease the assessment rate
schedule on a semi-annual basis. An increase in the BIF assessment rate could
have a material adverse effect on FFC's earnings, depending on the amount of the
increase. The FDIC is authorized to terminate a depository institution's deposit
insurance upon a finding by the FDIC that the institution's financial condition
is unsafe or unsound or that the institution has engaged in unsafe or unsound
practices or has violated any applicable rule, regulation, order or condition
enacted or imposed by the institution's regulatory agency.

All FDIC-insured depository institutions must pay an annual assessment to
provide funds for the payment of interest on bonds issued by the Financing
Corporation, a federal corporation chartered under the authority of the Federal
Housing Finance Board. The bonds, commonly referred to as FICO bonds, were
issued to capitalize the Federal Savings and Loan Insurance Corporation. The
FDIC established the FICO assessment rates effective for the first quarter of
2001 at approximately $.0196 per $100 annually for BIF-assessable deposits. The
FICO assessments are adjusted quarterly to reflect changes in the assessment
bases of the FDIC's insurance funds and do not vary depending on a depository
institution's capitalization or supervisory evaluations.

FDIC-insured depository institutions pay an assessment rate equal to the rate
assessed on deposits insured by the Savings Association Insurance Fund.

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.

Fiscal and Monetary Policies

FFC's business and earnings are affected significantly by the fiscal and
monetary policies of the federal government and its agencies. FFC is
particularly affected by the policies of the FRB, which regulates the supply of
money and credit in the United States. Among the instruments of monetary policy
available to the Federal



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Reserve are (a) conducting open market operations in United States government
securities, (b) changing the discount rates of borrowings of depository
institutions, (c) imposing or changing reserve requirements against depository
institutions' deposits, and (d) imposing or changing reserve requirements
against certain borrowing by banks and their affiliates. These methods are used
in varying degrees and combinations to directly affect the availability of bank
loans and deposits, as well as the interest rates charged on loans and paid on
deposits. For that reason alone, the policies of the FRB have a material effect
on the earnings of FFC.

Privacy Provisions of Gramm-Leach-Bliley Act

Under the Gramm-Leach-Bliley Act ("GLB Act"), federal banking regulators are
required to adopt rules that will limit the ability of banks and other financial
institutions to disclose non-public information about consumers to nonaffiliated
third parties. These limitations will require disclosure of privacy policies to
consumers and, in some circumstances, will allow consumers to prevent disclosure
of certain personal information to a nonaffiliated third party. Federal banking
regulators issued final rules May 10, 2000. The rules are effective November 13,
2000, but compliance is optional until July 1, 2001. The privacy provisions of
the GLB Act will affect how consumer information is transmitted through
diversified financial companies and conveyed to outside vendors. It is not
possible at this time to assess the impact of the privacy provisions on FFC's
financial condition or results of operations.

Future Legislation

Various legislation, including proposals to substantially change the financial
institution regulatory system and to expand or contract the powers of banking
institutions and bank holding companies, is from time to time introduced in the
Congress. This legislation may change banking statutes and the operating
environment of FFC and its subsidiaries in substantial and unpredictable ways.
If enacted, such legislation could increase or decrease the cost of doing
business, limit or expand permissible activities or affect the competitive
balance among banks, savings associations, credit unions, and other financial
institutions. FFC cannot predict whether any of this potential legislation will
be enacted, and if enacted, the effect that it, or any implementing regulations,
would have on the financial condition or results of operations of FFC or any of
its subsidiaries.

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



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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, 2000 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.

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 2000 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.



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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.

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, 2000, the Bank was well
capitalized and maintained a leverage ratio of 11.51 percent, a risk-based Tier
1 capital ratio of 13.23 percent, and a risk-based total capital ratio of 14.49
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



                                       -8-
<PAGE>   11

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.

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.

The agencies recently adopted regulations, under which banks are prohibited from
using their interstate branches primarily for deposit production. The Agencies
have accordingly implemented a loan-to-deposit ratio screen to ensure compliance
with this prohibition.



                                       -9-
<PAGE>   12

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.

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. 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, 2001. 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.



                                      -10-
<PAGE>   13

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 March 2000, the Board of Directors of FFC
discontinued its Stock Repurchase Program until a later date. On January 23,
2001, the Corporation reinstated the Program.

Forward-Looking Statement

Statements contained in the Annual Report which are not historical facts are
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934 as amended. A forward-looking statement may contain words
such as "plans", "hopes", "believes", "estimates", "will continue to be", "will
be", "continued to", "expect to", "anticipate that", "to be", or "can impact".
These forward-looking statements include statements relating to The
Corporation's expectations as to (i) the adequacy of provisions for loan losses,
(ii) the sufficiency of existing cash balances and investments, together with
cash flow from operating activities and available lines of credit to meet the
Corporation's liquidity and capital spending requirements in future years, (iii)
the effects of inflation and changing prices on the Corporation's operations,
(iv) management's assessment of interest rate risks, and (v) The Corporation's
ability to continue to compete effectively with larger enterprises. Management
cautions that forward-looking statements are subject to risk and uncertainties
that could cause the Corporation's actual results to differ materially from
those projected in such forward-looking statements. The Corporation's future
business, financial condition and results of operations could differ materially
from those anticipated by such forward-looking statements and are subject to
risks and uncertainties including the risks set forth below. Moreover, neither
Frontier Financial Corporation nor any other person assumes responsibility for
the accuracy and completeness of the forward-looking statements. Frontier
Financial Corporation is under no duty to update any of the forward-looking
statements after the date of this Annual Report to conform such statements to
actual results or to changes in our expectations.



                                      -11-
<PAGE>   14

                          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>

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

      A.  Consolidated Average Balance
            Sheets/Interest Income and
            Expense/Rates                                                                  42
      B.  Changes in Net Interest Income
            and Expense due to Rate and
            Volume                                                                         43

 II.  Investment Portfolio
      A.  Analysis of Investment Securities
          at Year-end                                     13                             11 & 12
      B.  Maturity Distribution of Investment
          Securities                                      13                               12

III. Loan Portfolio

      A.  Types of Loans                                  14                               13
      B.  Loan Maturities and Sensitivity to
          Changes in Interest Rates                       14                          13, 37 & 39
      C.  Risk Elements                                   15
      D.  Credit Concentrations                           19

IV. Summary of Loan Loss Experience
      A.  Analysis                                        17
      B.  Allocation of Allowance for Possible
          Loan Losses                                     18

 V.  Deposits

       Average Interest and Noninterest
       Bearing Deposit Balances                                                            42

VI.  Return on Equity and Assets

        Selected Financial Ratios                         21

VII.  Short-term Borrowings                               21
</TABLE>



                                      -12-
<PAGE>   15

Analysis of Investment Securities

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

<TABLE>
<CAPTION>
                                              2000          1999          1998
(In thousands)                           Amortized     Amortized     Amortized
                                              Cost          Cost          Cost
                                         ---------     ---------     ---------
<S>                                       <C>           <C>           <C>
U.S. Treasuries                           $    251      $    252      $ 13,750
U.S. Agencies                               78,562        90,312        89,333
Municipal Bonds                             26,084        29,317        29,926
Corporate Bonds                             24,045        25,124        27,598
Equities                                    16,165        15,394        13,003
Certificates of Deposit                          0             0         4,750
                                          --------      --------      --------
                              Totals      $145,107      $160,399      $178,360
                                          ========      ========      ========

</TABLE>

Maturity Distribution of Investment Securities

The following table sets forth the maturities of investment securities at
December 31, 2000. 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         $  251       $    251
                                     0.00%          0.00%          0.00%          7.16%          7.16%

U.S. Agencies                       7,000         10,716         60,478            368         78,562
                                     5.15%          5.69%          6.30%          5.87%          6.11%

Municipal Bonds                       881         11,317         13,603            283         26,084
                                     7.38%          8.39%          8.20%          8.72%          8.26%

Corporate Bonds                     4,310         17,235            500          2,000         24,045
                                     7.30%          6.69%          9.19%         10.82%          7.18%

Equities                           16,165              0              0              0         16,165
                                     5.49%          0.00%          0.00%          0.00%          5.49%
                                  -------        -------        -------         ------       --------
         TOTALS                   $28,356        $39,268        $74,581         $2,902       $145,107
                                  =======        =======        =======         ======       ========
                                     5.74%          7.27%          6.66%          9.39%          6.61%
                                  =======        =======        =======         ======       ========
</TABLE>



                                      -13-
<PAGE>   16

Types of Loans

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

<TABLE>
<CAPTION>
(In thousands)                   2000            1999            1998            1997            1996
                              ----------      ----------      ----------      ----------      ----------
<S>                           <C>             <C>             <C>             <C>             <C>
Commercial                    $  283,287      $  240,058      $  231,666      $  190,493      $  162,230
Real Estate Commercial           585,283         507,006         427,322         337,285         292,032
Real Estate Construction         335,667         277,126         190,477         166,576         159,356
Real Estate Mortgage             126,657         124,901         120,207         126,471         123,608
Installment                       47,221          38,200          37,982          33,794          29,956
                              ----------      ----------      ----------      ----------      ----------
            TOTAL             $1,378,115      $1,187,291      $1,007,654      $  854,619      $  767,182
                              ==========      ==========      ==========      ==========      ==========
</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, 2000. 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                    $  162,933      $  110,946      $    9,409      $  283,288
Real Estate Commercial            75,296         379,435         130,552         585,283
Real Estate Construction         252,343          81,139           2,184         335,666
Real Estate Mortgage              26,053          89,684          10,920         126,657
Installment                       13,180          19,491          14,550          47,221
                              ----------------------------------------------------------
              TOTAL           $  529,805      $  680,695      $  167,615      $1,378,115
                              ==========      ==========      ==========      ==========
</TABLE>

Loans maturing after one year with:

<TABLE>
<CAPTION>
                      1 - 5         After
                      Years        5 Years
                    ----------------------
<S>                 <C>           <C>
Fixed Rates         $562,484      $114,926
Variable Rates       118,211        52,689
                    ----------------------
    TOTAL           $680,695      $167,615
                    ========      ========
</TABLE>

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



                                      -14-
<PAGE>   17

Loan Administration

The Bank provides revolving lines of credit to many of its borrowers. Such lines
are approved by the Directors' 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 the Senior Vice
President/Credit Administrator to senior management and the Directors' 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 adversely 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 .31%, .23%, and .29% for year-end 2000, 1999 and 1998,
respectively. These loans have a variety of situations, some of which may lead
to foreclosure or involve a bankruptcy case and while some of these loans are in
active legal collection processes, others are under active repayment plans and
may continue payment as the borrower's financial situation improves, with $955
thousand (9 loans) 90 days delinquent. At year-end 1998, the number of loans in
nonaccrual was 19, totaling $1.4 million, or .13% of total loans. At year-end
1999, the number of loans in nonaccrual was 25, totaling $1.8 million, or .15%
of total loans. The year-end 2000 balance of $4.0 million was comprised of 30
loans. One loan accounts for $1.3 million of the year-end nonaccrual balances
and another $840 thousand (14 loans) was comprised of loans acquired from the
Bank's most recent merger. The total of impaired assets, at .31% of total loans
is felt to be at a relatively modest level.

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.



                                      -15-
<PAGE>   18

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>
                                    2000           1999            1998            1997            1996
                                ----------      ----------      ----------      ----------      ----------
<S>                             <C>             <C>             <C>             <C>             <C>
Commercial                      $      106      $      380      $      142      $      402      $      627
Agriculture                            386              --              --              --              --
Real Estate                          3,439           1,355           1,170           4,901           4,151
Installment                             95              78              38              29              44
Restructured                            --              --              --             109             121
                                ----------      ----------      ----------      ----------      ----------
Total Non-Performing Loans           4,026           1,813           1,350           5,441           4,943
                                ----------      ----------      ----------      ----------      ----------
Other real estate owned                256             870           1,605           1,989           1,243
                                ----------      ----------      ----------      ----------      ----------
Total Impaired Assets           $    4,282      $    2,683      $    2,955      $    7,430      $    6,186
                                ==========      ==========      ==========      ==========      ==========
Total Loans at end
    of period                   $1,378,115      $1,187,291      $1,007,654      $  854,691      $  767,182
                                ==========      ==========      ==========      ==========      ==========
As a percent of
    total loans                       0.31%           0.23%           0.29%           0.87%           0.81%
                                ==========      ==========      ==========      ==========      ==========
</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,                     2000         1999         1998         1997         1996
---------------                     ----         ----         ----         ----         ----
<S>                                 <C>          <C>          <C>          <C>          <C>
Total interest income which
would have been recorded
during the period under
original terms of loans above        $407         $100          $42        $382         $417

Portion of interest
income included in
net income for the
period                               $284         $161          $41        $384         $264

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

Restructured loans are those loans 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 in its market area.
Total loans as of December 31, 2000, 1999 and 1998 were $1.4 billion, $1.2
billion and $1.0 billion, respectively.



                                      -16-
<PAGE>   19

Other Real Estate Owned

As of December 31, 2000, the Bank had two separate residential lots as other
real estate owned which totaled $256 thousand. This was down from year end 1999
at which time there were ten properties for a total of $870 thousand. No losses
are expected on sales of OREO which are recorded at the lower of cost or fair
value, less estimated cost to sell. The current levels are felt to be nominal,
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)                  2000        1999       1998      1997      1996
                                ----        ----       ----      ----      ----
<S>                             <C>         <C>       <C>       <C>       <C>
Other Real Estate Owned         $256        $870      $1,605    $1,989    $1,243
</TABLE>

Summary of Loan Loss Experience

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

<TABLE>
<CAPTION>
(In thousands)                     2000             1999               1998             1997              1996
                               -----------       -----------       -----------       -----------       -----------
<S>                            <C>               <C>               <C>               <C>               <C>
Balance at beginning
of year                        $    21,007       $    19,288       $    17,040       $    15,163       $    13,618
Provision charged to
operating expense                    1,007             2,266             2,230             2,278             2,358
  Loans charged-off:
       Commercial                     (156)             (797)             (460)             (416)             (639)
       Real Estate                    (461)              (55)           (1,209)           (1,358)           (1,415)
       Installment                    (316)              (71)              (97)             (137)             (116)
                               -----------       -----------       -----------       -----------       -----------
  Total charged-off loans             (933)             (923)           (1,766)           (1,911)           (2,170)
  Less recoveries:
       Commercial                       54               243               653               285               753
       Real Estate                     598               105             1,110             1,175               551
       Installment                     174                28                21                50                53
                               -----------       -----------       -----------       -----------       -----------
  Total recoveries                     826               376             1,784             1,510             1,357
Net charge-offs                       (107)             (547)               18              (401)             (813)
Balance at end of year         $    21,907       $    21,007       $    19,288       $    17,040       $    15,163
                               ===========       ===========       ===========       ===========       ===========
Total loans at
end of period                  $ 1,378,115       $ 1,187,291       $ 1,007,654       $   854,619       $   767,182

Daily average loans            $ 1,327,699       $ 1,095,626       $   927,821       $   814,828       $   708,961
Ratio of net charged-off
loans during period to
average loans outstanding             0.01%             0.05%             0.00%             0.05%             0.11%
                               ===========       ===========       ===========       ===========       ===========
</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.



                                      -17-
<PAGE>   20

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.

<TABLE>
<CAPTION>
(In thousands, except percents)
                                 Loan                 Loan                    Loan                      Loan                 Loan
                     2000      Category    1999      Category       1998     Category       1997      Category    1996     Category
                   Reserve     Percent    Reserve    Percent      Reserve    Percent      Reserve     Percent    Reserve    Percent
                   -------     --------   -------    --------     -------    --------     -------     --------   -------   --------
<S>                <C>         <C>        <C>        <C>          <C>        <C>          <C>         <C>        <C>       <C>
Commercial         $11,611      20.6%     $11,134       20.2%     $10,223       23.0%     $ 9,542      22.3%     $ 9,401     21.1%
Real Estate          9,858      76.0%       9,453       76.6%       8,680       73.2%       6,986      73.7%       5,307     75.0%
Installment            438       3.4%         420        3.2%         385        3.8%         512       4.0%         455      3.9%
                   ---------------------------------------------------------------------------------------------------------------
        TOTAL      $21,907     100.0%     $21,007      100.0%     $19,288      100.0%     $17,040     100.0%     $15,163    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 greater amount is specifically allocated to
the reserve.

Setting the level of loan loss reserves includes consideration of subjective
factors in addition to historical loss rates. Actual historical results (over
the past 5 years, which average approximately $370,000 per year net losses)
indicate that Frontier may have an excess of the necessary reserves required.
However, our analysis and calculations take into consideration the inherent
risks of a loan portfolio such as loan types, current and expected economic
conditions, industry data for loan losses within different business cycles as
well as other factors, and management believes that the reserve is adequate
based upon those inherent risks. Loan concentrations, quality, terms and basic
underlying assumptions remained substantially unchanged during the period.

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 and was
phased out in 2000.

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 has declined over the last five years, mainly due to
mergers with institutions which had a lower reserve comparably, and due to loan
portfolio quality.

                                      -18-
<PAGE>   21

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 28 & 29, 2000 Annual
Report to Shareowners), there are other qualitative factors considered when
analyzing the adequacy of the loan loss reserve.

Effects of Changing Interest Rates

The year 2000 saw three increases in the discount rate by the Federal Reserve in
the first half of the year, which brought the total increase to 1.0% in May
2000, (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. In the first quarter of
2001, we now see rates declining due to what is perceived as too rapid an
increase in interest rates which caused too fast a decline in the United States
economy. To date no noticeable adverse effects on loan volumes and borrower's
viability have been noted from these recent rate movements. However, during the
first quarter of 2001, the Corporation has experienced a decline in the net
interest margin brought about by a 150 basis point decline interest rates by the
Federal Reserve. Approximately 40% of the Corporation's loan portfolio consists
of variable rate loans that reprice immediately as interest rates change. Since
much of the loan portfolio funding is provided by cd's and short-term borrowings
that reprice over longer periods of time, interest income has declined while
interest expense will take a longer time to decline to current market rates.

Concentrations of Credit

At year-end 2000, 21.7% of the Bank's loan portfolio was in residential and
commercial construction and land development projects centered in the Bank's
market area. The Bank has experienced strong demand for such loans and the
current percentage represents an increase from 20.8% in 1999. 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 below indicates the amount of those loans, and as a percent of total loans
for the period:

Concentrations of Credit

At year-end 2000, 21.7% of the Bank's loan portfolio was in residential and
commercial construction and land development projects centered in the Bank's
market area. The Bank has experienced strong demand for such loans and the
current percentage represents an increase from 20.8% in 1999. 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 below indicates the amount of those loans, and as a percent of total loans
for the period:

<TABLE>
<CAPTION>
(In Thousands)
At December 31,                      2000            1999            1998            1997             1996
                                  ----------      ----------      ----------      ----------      ----------
<S>                               <C>             <C>             <C>             <C>             <C>
Construction                      $  184,288      $  161,105      $  107,226      $   88,972      $   78,525
Land Development                     108,044          85,430          58,635          45,304          54,335
                                  ----------      ----------      ----------      ----------      ----------
        TOTAL                     $  292,332      $  246,535      $  165,861      $  134,276      $  132,860
                                  ==========      ==========      ==========      ==========      ==========
Total Loans at end of period      $1,378,115      $1,187,291      $1,007,654      $  854,619      $  767,182
                                  ==========      ==========      ==========      ==========      ==========
Construction and Land
Development loans as a
percent of total loans                  21.2%           20.8%           16.5%           15.7%           17.3%
                                  ==========      ==========      ==========      ==========      ==========
</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.



                                      -19-
<PAGE>   22

Levels of, and Trends in, Delinquencies and Nonaccruals

Nonperforming loans and other real estate increased in the fourth quarter of
2000 to $4.0 million, from $3.7 million in the third quarter. 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 trend.

Trends in Volume and Terms of Loans

After growing over 30% in the first nine months of 2000, loans actually declined
slightly in the fourth quarter of 2000 by $506 thousand or .03%. At this time,
no particular significance is placed on this decline except the timing of
several large scheduled construction loan payoffs, and a slight cooling of very
strong local economy. Terms of loans remained generally consistent with prior
years.

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. Based upon actual historical loan loss rates the loan loss
reserve may appear to be somewhat larger than might be necessary, however our
analysis includes subjective factors that cause us to believe the reserve is
adequate, but not unduly conservative.


Deposits

For the average amount of deposits and rates paid on such deposits for years
ended December 31, 2000, 1999, and 1998 please refer to page 42 of 2000 Annual
Report to Shareowners.

Maturities of time certificates of deposit $100,000 and over at year-end 2000
are shown below:

<TABLE>
<CAPTION>
(In thousands)
<S>                                                 <C>
3 months or less                                    $155,243
Over 3 months through 6 months                        54,191
6 months through 12 months                           112,426
Over 12 months                                        42,475
                                                    --------
                         TOTAL                      $364,335
                                                    ========
</TABLE>



                                      -20-
<PAGE>   23

Significant Financial Ratios

Ratios for the years ended December 31, are as follows:

<TABLE>
<CAPTION>
                                         2000          1999          1998
                                        -----         -----         -----
<S>                                     <C>           <C>           <C>
Return on Average Assets                 2.03%         2.06%         1.98%
Return on Average Equity                17.60%        17.76%        17.83%
Dividend payout ratio                    33.1%         17.1%          3.2%
Average Equity to Average Assets        11.52%        11.59%        11.11%
</TABLE>

Borrowings

<TABLE>
<CAPTION>
Short-Term Borrowings                       Weighted            Weighted           Weighted
(In thousands)                               Average             Average            Average
                                            Interest            Interest           Interest
At December 31,                     2000      Rate      1999      Rate      1998     Rate
                                  ---------------------------------------------------------
<S>                               <C>        <C>      <C>        <C>      <C>        <C>
Year-end balance:                 $10,088    5.86%    $29,191    4.56%    $31,984    4.84%

Highest month end
balance during
the period:                       $63,499             $61,724             $31,984
</TABLE>

For information regarding average balances and yields, please refer to page 42
of 2000 Annual Report to Shareowners.

Long-Term Debt

There is no long-term debt for years ended December 31, 2000 and 1999.

ITEM 2 - PROPERTIES

At December 31, 2000 the Bank had 34 offices, including the main office, all of
which are located in the State of Washington. These offices are located in
Arlington, Bainbridge Island, Bellingham, Bothell, Buckley, Burlington, Edmonds,
Everett (4), Kent, Lake City, Lake Stevens, Lynnwood, Marysville, Puyallup, Mill
Creek, Monroe, Mount Vernon, Orting, Port Angeles, Port Hadlock, Port Townsend,
Poulsbo (2), Redmond, Sequim, Silverdale, Smokey Point, Snohomish, Stanwood,
Sumner and Woodinville. 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 2002),
Edmonds (lease expires July 2004), one office in Everett (lease expires October
2014), Lake Stevens (lease expires May 2011), Mill Creek (lease expires November
2030), Puyallup (building is owned, land lease expires 2009), Mount Vernon
(building owned, lease expires March 2023), Kent (lease expires March 2003),
Bainbridge Island (lease expires July 2012) Poulsbo (lease expires on October
2001 on one of the two branches there), Port Angeles (lease expires January
2019), Port Hadlock, (lease expires January 2017), and three branches (Port
Townsend, Poulsbo, and Silverdale) that are owned by Frontier Financial
Corporation, but are currently being transferred to FFP, Inc. FFP, Inc. also
owns the building and land in South Everett where Frontier Bank data processing
and operations departments are located.



                                      -21-
<PAGE>   24

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 2000.



                                      -22-
<PAGE>   25

                                     PART II

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

(a)  Frontier Financial Corporation's common stock is traded on the Nasdaq stock
     market under the symbol FTBK. The table below indicates the high/low
     trading range of Frontier stock over the last eight quarters:

<TABLE>
<CAPTION>
                                                 High              Low
                                                 ----              ---
       <S>                                      <C>               <C>
       1st quarter 1999                         25.125            19.00
       2nd quarter 1999                         25.00             20.50
       3rd quarter 1999                         25.50             20.00
       4th quarter 1999                         26.00             20.00

       1st quarter 2000                         22.375            17.00
       2nd quarter 2000                         19.125            16.25
       3rd quarter 2000                         19.75             17.125
       4th quarter 2000                         26.00             16.5625
</TABLE>

(b)  Frontier Financial Corporation has only one class of stock outstanding,
     which is common stock. At February 28, 2001 there were 20,515,503 shares
     outstanding.

(c)  The table below indicates the cash dividends paid on its common stock over
     the last two years:

<TABLE>
<CAPTION>
        Dividend Declared               Record Date                  Payment Date
        -----------------               -----------                  ------------
        <S>                             <C>                          <C>
              $.25                      March 1, 1999                March 19, 1999

               .09                      January 28, 2000             February 11, 2000
               .10                      May 1, 2000                  May 15, 2000
               .11                      July 31, 2000                August 14, 2000
               .12                      October 2, 2000              October 23, 2000
</TABLE>

     In addition to the annual cash dividend paid in 1999, there was a
pre-dividend two-for-one-split.

ITEM 6 - SELECTED FINANCIAL DATA

Please refer to the 2000 Annual Report to Shareowners.


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

        Please see 2000 Annual Report to Shareowners, page 28 through 43.

ITEM 7a - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        Please see 2000 Annual Report to Shareowners, page 36-39.



                                      -23-
<PAGE>   26

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>
Report of Management                                                                                   1

Independent Auditor's Report                                                                           2

Consolidated Balance Sheet at
December 31, 2000 and 1999                                                                             3

Consolidated Statement of Income for the years
Ended December 31, 2000, 1999 and 1998                                                                 4

Consolidated Statement of Changes in
Shareowners' Equity                                                                                    5

Consolidated Statement of Cash Flows for the
Years ended December 31, 2000, 1999 and 1998                                                           6

Condensed Balance Sheet (Parent Only) at
December 31, 2000 and 1999                                                                            25

Condensed Statement of Income (Parent Only) for the
Years Ended December 31, 2000, 1999 and 1998                                                          25

Condensed Statement of Cash Flows (Parent Only)
for Years Ended December 31, 2000, 1999 and 1998                                                      26

Notes to Consolidated Financial Statements                                                          7 - 27
</TABLE>

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

        None.



                                      -24-
<PAGE>   27

PART III

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF FRONTIER FINANCIAL
          CORPORATION

          Please see pages 2-8 of 2001 Proxy Statement.

ITEM 11 - EXECUTIVE COMPENSATION

          Please see pages 7-10 of 2001 Proxy Statement.

ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS MANAGEMENT

          Please see page 5-6 of 2001 Proxy Statement.

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

          Please see page 12 of 2001 Proxy Statement; and,
          Note 14, page 21 of 2000 Annual Report to Shareowners; and,
          Page 27 of this Form 10-K report.



                                      -25-
<PAGE>   28

                                     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 2000 Annual Report to
               Shareowners, attached hereto as an exhibit.


          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 27, 1998 (File No. 333-48805).

            (10)(b) Frontier Financial Corporation 1999 Employee Stock Award
                    Plan, is incorporated herein by reference to Exhibit 99.1 to
                    Registration Statement on Form S-8, filed March 2, 1999
                    (File No. 333-73217).

             (11)   Statement Regarding Computation of Earnings Per Share.

             (13)   Annual Report to Shareowners for the year ended December 31,
                    2000.

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


     (b)  Reports on Form 8-K:

          Form 8-K was filed on October 27, 2000 announcing a merger agreement
          with Interbancorp, Inc.



                                      -26-
<PAGE>   29

                                                                      SCHEDULE I

                 FRONTIER FINANCIAL CORPORATION AND SUBSIDIARIES
                     AMOUNTS RECEIVABLE FROM CERTAIN PERSONS

 (In thousands)


<TABLE>
<CAPTION>
 (In thousands)
                                                                                     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>
       2000             $29,647        $12,552       ($17,440)             $0          $24,759
      Eleven
     Directors
     and two
      Officer

       1999             $22,131        $17,357        ($9,841)             $0          $29,647
      Eleven
     Directors
     and two
     Officers

       1998

     Thirteen            22,211          8,677         (8,757)              0           22,131
     Directors
     and Two
     Officers
</TABLE>



                                      -27-
<PAGE>   30

                                   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.

<TABLE>
<S>                                            <C>
                                               FRONTIER FINANCIAL CORPORATION
March 21, 2001                                 /s/ Robert J. Dickson
-----------------------                        ---------------------
Date                                           Robert J. Dickson
                                               President & Chief Executive Officer

March 21, 2001                                 /s/ James F. Felicetty
-----------------------                        ----------------------
Date                                           James F. Felicetty
                                               Secretary/Treasurer
</TABLE>

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:

<TABLE>
<S>                                            <C>
March 21, 2001                                 /s/Geroge Barber
-----------------------                        ----------------------------------------
                                               George E. Barber, Director

March 21, 2001                                 /s/ Michael Clements
-----------------------                        ----------------------------------------
                                               Michael Clements, Director

-----------------------                        ----------------------------------------
                                               Michael J. Corliss, Director

March 21, 2001                                 /s/ Lucy DeYoung
-----------------------                        ----------------------------------------
                                               Lucy DeYoung, Director

March 21, 2001                                 /s/ Robert J. Dickson
-----------------------                        ----------------------------------------
                                               Robert J. Dickson, Director

March 21, 2001                                 /s/ David A. Dujardin
-----------------------                        ----------------------------------------
                                               David A. Dujardin, Director

March 21, 2001                                 /s/ Edward D. Hansen
-----------------------                        ----------------------------------------
                                               Edward D. Hansen, Secretary of the Board

March 21, 2001                                 /s/ William H. Lucas
-----------------------                        ----------------------------------------
                                               William H. Lucas, Director

March 21, 2001                                 /s/ James H. Mulligan
-----------------------                        ----------------------------------------
                                               James H. Mulligan, Chairman of the Board

March 21, 2001                                 /s/ J. Donald Regan
-----------------------                        ----------------------------------------
                                               J. Donald Regan, Director

March 21, 2001                                 /s/ Roger L. Rice
-----------------------                        ----------------------------------------
                                               Roger L. Rice, Director

March 21, 2001                                 /s/ William J. Robinson
-----------------------                        ----------------------------------------
                                               William J. Robinson, Director

March 21, 2001                                 /s/ Edward C. Rubatino
-----------------------                        ----------------------------------------
                                               Edward C. Rubatino, Director

March 21, 2001                                 /s/ Darrell J. Storkson
-----------------------                        ----------------------------------------
                                               Darrell J. Storkson, Director
</TABLE>



                                      -28-