SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
(Amendment
No. _____)
Filed by
the Registrant
þ
Filed by
a Party other than the Registrant
o
Check the
appropriate box:
o
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Preliminary
Proxy Statement
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o
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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þ
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Definitive
Proxy Statement
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o
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Definitive
Additional Materials
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o
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Soliciting
Material Pursuant to §240.14a-11(c) or
§240.14a-12
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FRONTIER FINANCIAL
CORPORATION
(Name of
Registrant as Specified In Its Charter)
Payment
of Filing Fee (Check the appropriate box):
o
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Fee
computed on table below per Exchange Act Rules 14a6(i)(4) and
0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction
applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was
determined):
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(4)
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Proposed
maximum aggregate value of
transaction:
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o
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Fee
paid previously with preliminary
materials.
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o
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Check
box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its
filing.
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(1)
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Amount
Previous Paid:
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(2)
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Form,
Schedule or Registration Statement
No.:
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FRONTIER
FINANCIAL CORPORATION
332
S.W. Everett Mall Way
P.
O. Box 2215
Everett,
Washington 98213
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
The 2009
Annual Meeting of Shareholders of Frontier Financial Corporation will be held at
Frontier Bank, 332 S.W. Everett Mall Way, Everett, Washington, on Wednesday,
April 15, 2009, at 7:30 p.m. for the following purposes:
1.
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To
elect three (3) directors to serve three-year
terms;
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2.
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To
ratify the appointment of Moss Adams LLP as Frontier Financial
Corporation’s independent registered public accounting firm;
and
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3.
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To
act on such other business as may properly come before the Annual Meeting
and any adjournment thereof.
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Only
shareholders of record at the close of business on March 2, 2009, are entitled
to notice of and to vote at the meeting and/or any adjournment
thereof.
We
encourage you to sign up for electronic delivery of future proxy materials in
order to conserve natural resources and to help us reduce printing costs and
postage fees. For more information, please see “Other Information – Electronic
Delivery of Future Proxy Materials.”
All
shareholders are cordially invited to attend the Annual Meeting. However, to
assure your representation at the meeting, we ask that you please mark, sign,
date and return the enclosed proxy as promptly as possible in the enclosed
postage-prepaid envelope. Any shareholder attending the meeting may vote in
person even if he or she returned a proxy.
By Order
of the Board of Directors,
Carol E.
Wheeler
Secretary
Everett,
Washington
March 13,
2009
Important Notice Regarding the
Availability of Proxy Materials for the Annual Meeting of Shareholders to Be
Held on April 15, 2009.
This Proxy Statement and Frontier Financial
Corporation’s Annual Report to Shareholders on Form 10-K for fiscal 2008 are
available electronically at www.frontierbank.com.
Whether
or Not You Plan to Attend the Meeting,
Please
Complete, Sign, Date and Return the Accompanying Proxy
In
the Enclosed Self-Addressed
Envelope.
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PROXY
STATEMENT
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FRONTIER
FINANCIAL CORPORATION
332
S.W. Everett Mall Way
P.
O. Box 2215
Everett,
Washington 98213
PROXY
STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
To
Be Held on April 15, 2009
This
Proxy Statement is furnished by the Board of Directors of Frontier Financial
Corporation (the “Board”) to the owners of common stock of Frontier Financial
Corporation (“Common Stock”) in connection with the solicitation of proxies by
the Board of Directors for use at the Annual Meeting of Shareholders of Frontier
Financial Corporation (the “Corporation”) to be held on Wednesday, April 15,
2009 at 7:30 p.m. at Frontier Bank, 332 S. W. Everett Mall Way, Everett,
Washington, and any adjournment thereof. These proxy materials, together with
the 2008 Annual Report, are being mailed to shareholders on or about March 13,
2009, and will be available electronically at
www.frontierbank.com
by that date as well.
Voting
Rights and Outstanding Shares
Only
owners of common stock of record at the close of business on March 2, 2009 (the
“record date”) will be entitled to notice of and to vote at the Annual Meeting.
At the close of business on the record date, the Corporation had outstanding and
entitled to vote 47,131,853 shares of common stock. Each holder of record of
common stock on the record date will be entitled to one vote for each share held
on all matters to be voted upon. If no choice is indicated on the proxy, the
shares will be voted in favor of Proposals 1 and 2.
All votes
will be counted by inspectors of election appointed for the meeting, who will
separately tabulate affirmative and negative votes, abstentions and broker
nonvotes.
Broker
Nonvotes
A broker
nonvote occurs when a broker submits a proxy card with respect to shares of
common stock held in a fiduciary capacity (typically referred to as being held
in “street name”), but declines to vote on a particular matter because the
broker has not received voting instructions from the beneficial owner. Under the
rules that govern brokers who are voting with respect to shares held in street
name, brokers have the discretion to vote those shares on routine matters, but
not on nonroutine matters. Routine matters include the election of directors and
ratification of independent accountants. Nonroutine matters include actions on
stock plans and most amendments to the articles of incorporation.
Revocability
of Proxies
Any
person giving a proxy pursuant to this solicitation has the power to revoke it
at any time before it is voted. It may be revoked by filing with the Corporate
Secretary of the Corporation at the Corporation’s principal executive offices,
332 S.W. Everett Mall Way, Everett, Washington 98204, a written notice of
revocation or a duly executed proxy bearing a later date, or it may be revoked
by attending the meeting and voting in person. Attendance at the meeting will
not, by itself, revoke a proxy.
Solicitation
Costs
The
Corporation will bear the entire cost of solicitation of proxies including
preparation, assembly, printing and mailing of this proxy statement, the proxy
card and any additional information furnished to shareholders. Copies of
solicitation materials will be furnished to banks, brokerage houses, fiduciaries
and custodians holding in their names shares of common stock beneficially owned
by others to forward to such beneficial owners. The Corporation may reimburse
persons representing beneficial owners of common stock for their costs of
forwarding solicitation materials to such beneficial owners. Solicitation of
proxies by mail may be supplemented by telephone, telegram or personal
solicitation by directors, officers or other regular employees of the
Corporation. No additional compensation will be paid to directors, officers or
other regular employees for such services.
Voting
Confidentiality
Proxies,
ballots and voting tabulations are handled on a confidential basis to protect
your voting privacy. This information will not be disclosed, except as required
by law.
Voting
Results
The
Corporation intends to announce preliminary voting results at the Annual Meeting
and will publish final results in its quarterly report on Form 10-Q for the
second quarter of fiscal 2009, which ends on June 30, 2009.
Pursuant
to the Corporation’s Articles of Incorporation, the Board of Directors has set
the number of directors at 9.
The
directors are divided into three classes, with each class as nearly equal in
number as possible. The members of each class serve three-year terms with one
class elected annually. A director appointed to fill a vacancy or fill a
position that was created by increasing the number of directors must stand for
election at the next shareholders’ meeting at which directors are
elected.
If a
quorum is present, the directors will be elected by a plurality of the votes of
the shares present in person or represented by proxy at the meeting and entitled
to vote on the election of directors. Abstentions and broker nonvotes have no
effect on the vote. The three candidates receiving the highest number of
affirmative votes of the shares of common stock entitled to be voted for such
directors will be elected directors of the Corporation. Shares of common stock
represented by executed proxies will be voted, if authority to do so is not
withheld, for the election of the three nominees named below. In the event that
any nominee should be unavailable for election as a result of an unexpected
occurrence, such shares of common stock will be voted for the election of such
substitute nominee as the Board may propose. Each person nominated for election
has agreed to serve, if elected, and the Board has no reason to believe that any
nominee will be unable to serve.
Set forth
below are the names of each nominee for director, the nominee’s age, the year in
which the nominee became a director, the nominee’s principal occupation and
business experience for the past 5 years and the names of other publicly held
companies for which the nominee serves as a director. The same information is
provided thereafter for each director whose term of office does not expire until
a later date. The mailing address for all of the nominees and incumbent
directors is c/o Frontier Financial Corporation, 332 S.W. Everett Mall Way, P.
O. Box 2215, Everett, WA, 98213.
Name
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Age
|
Year
first became a Director of Corporation
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Year
first became a Director of Bank
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Principal
Occupation
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Lucy
DeYoung
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59
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1997
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1997
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President,
Simpson Hawley Properties (real estate investment and
management)
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Edward
C. Rubatino
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78
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1983
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1978
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President,
Rubatino Refuse Removal, Inc.
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John
J. Dickson
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48
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2003
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2003
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President,
Frontier Bank (December 2008 to present); President and Chief Executive
Officer, Frontier Financial Corporation (January 2006 to December 2008),
Chief Executive Officer, Frontier Bank, (May 2003 to December 2008),
(Senior Vice President of Frontier Bank (1993 to May
2003).
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Name
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Age
|
Year
first became a Director of Corporation
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Year
first became a Director of Bank
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Principal
Occupation
|
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Michael
J. Clementz
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65
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2000
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2000
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CEO,
Frontier Bank (December 2008 to present), President, Frontier Financial
Corporation (December 2008 to present), President, FFP Inc. (January 2006
to December 2008); President and Chief Executive Officer of Frontier
Financial Corporation (April 2003 to December 2005); Executive Vice
President of Frontier Bank and Frontier Financial Corporation (July 2000
to December 2008).
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David
M. Cuthill
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48
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2006
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2006
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Vice
President – Development, General Growth Properties (2007 to present) (a
real estate investment trust); Director, Opus Northwest, LLC (2002 to
2006) (full-service real estate developer).
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Mark
O. Zenger
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54
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2005
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2005
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President,
First Western Investments, Inc. (hospitality, retail and other real estate
investments).
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Name
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Age
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Year
first became a Director of Corporation
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Year
first became a Director of Bank
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Principal
Occupation
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Patrick
M. Fahey
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66
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2006
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2006
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Chairman
of the Board and CEO, Frontier Financial Corporation (December 2008 to
present), Chairman of the Board, Frontier Bank, (December 2008 to
present), Retired Chairman of Regional Banking, Wells Fargo Bank (2003 to
2004); Chairman, President and Chief Executive Officer of Pacific
Northwest Bank (1988 to 2003).
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Edward
D. Hansen
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69
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1983
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1978
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Retired
General Manager, Snohomish County PUD (July 2002 to 2006); Mayor, City of
Everett (January 1994 to July 2002) and President, Golf
N.W.
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Darrell
J. Storkson
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65
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1997
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1997
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Owner,
Evergreen Lanes.
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The
Corporation’s Board of Directors also serves as the Board of Directors of
Frontier Bank, a wholly owned subsidiary of the Corporation.
Required
Vote and Board Recommendation
A quorum,
which is a majority of the outstanding shares entitled to vote as of the record
date, March 2, 2009, must be present in person or by proxy in order to hold the
meeting and to conduct business. If a quorum is present and voting, the three
nominees for director receiving the highest number of votes will be elected as
directors. Abstentions and broker nonvotes will each be counted as present for
purposes of determining the presence of a quorum, but will not have any effect
on the outcome of the vote.
THE
BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE
INDIVIDUALS NOMINATED FOR ELECTION AS A DIRECTOR.
The Audit
Committee of the Board has appointed Moss Adams LLP as the Corporation’s
independent registered public accounting firm for the fiscal year ending
December 31, 2009. Services provided to the Corporation and its subsidiaries by
Moss Adams LLP in fiscal 2008 and 2007 are described under
“Independent Registered Public
Accounting Firm”
on page 24.
Representatives
of Moss Adams LLP will be present at the Annual Meeting to respond to
appropriate questions and to make such statements as they may
desire.
Required
Vote and Board Recommendation
The
affirmative vote of a majority of the votes cast at the meeting, at which a
quorum is present, either in person or by proxy, is required to approve this
proposal. Abstentions and broker nonvotes will each be counted as present for
purposes of determining the presence of a quorum but will not have any effect on
the outcome of the proposal.
THE
BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE SELECTION OF
MOSS ADAMS LLP AS THE CORPORATION’S INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR
ENDING DECEMBER 31, 2009.
Other
Matters
Except
for the election of three directors and the ratification of the appointment of
Moss Adams LLP as our independent registered public accounting firm for the
current fiscal year, the Board of Directors does not intend to bring any other
matters to be voted on at the meeting. The Board is not currently aware of any
other matters that will be presented by others for action at the
meeting.
The Board
of Directors of the Corporation held 21 meetings in 2008. The Board of Directors
of the Corporation and the Board of Directors of Frontier Bank are comprised of
identical Board members, and at each meeting, the Directors conduct a formal
Board meeting for each entity. The Board of Directors has established certain
standing committees, including the Executive, Audit, Credit and Finance,
Personnel and Compensation and Corporate Governance Committees. The following
table summarizes the current membership of the Board and each of its committees,
as well as the number of times each committee met during fiscal
2008.
Name
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Board
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Executive
Committee
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Credit/
Finance
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Audit
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Personnel/
Compensation
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Corporate
Governance
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Michael
J. Clementz
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X
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Chair
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|
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David
M. Cuthill
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X
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X
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X
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X
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Lucy
DeYoung
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X
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X
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X
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X
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X
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Chair
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John
J. Dickson
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X
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X
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Patrick
M. Fahey
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Chair
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Chair
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X
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Edward
D. Hansen
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X
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X
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X
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X
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Edward
C. Rubatino
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X
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X
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Alternate
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X
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Darrell
J. Storkson
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X
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Alternate
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X
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Mark
O. Zenger
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X
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X
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Chair
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Chair
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X
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Number
of meetings
held
in 2008
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21
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1
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23
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15
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2
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1
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Each
member of the Board of Directors attended at least 75 percent of the Board and
committee meetings of which they were a member.
All
Directors are considered independent under the applicable NASDAQ rules except
for Patrick Fahey, Michael Clementz and John Dickson, each of whom is employed
by the Corporation.
Although
the Corporation does not have a formal policy regarding attendance by a member
of the Board of Directors at the Corporation’s Annual Meeting of Shareholders,
the Corporation has always encouraged its Directors to attend and expects to
continue its policy. In 2008, all of the Directors attended the Annual Meeting
of Shareholders.
Shareholder Communication with the
Board of Directors.
Any shareholder wishing to communicate with members
of the Board of Directors may do so by mailing a letter addressed to the
individual member of the Board, to the full Board, or to a particular committee
of the Board, at the following address: c/o Secretary of the Corporation,
Frontier Financial Corporation, 332 S.W. Everett Mall Way, P. O. Box 2215,
Everett, Washington 98213.
Audit Committee.
The Board of
Directors has adopted a charter governing the duties and responsibilities of the
Audit Committee. The Audit Committee’s Charter can be viewed at
www.frontierbank.com. Pursuant to the charter, the functions of the Audit
Committee include:
·
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Serve
as an independent and objective party to monitor the Corporation’s
financial reporting process, system of disclosure controls and internal
control system;
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·
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Review
and appraise the audit efforts of the Corporation’s independent
accountants and internal auditing
department;
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·
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Monitor
the compliance by the Corporation with legal and regulatory requirements
and with the Corporation's Corporate Governance Guidelines and Code of
Ethics;
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·
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Provide
an open avenue of communication among the independent accountants,
financial and senior management, the internal auditing department, credit
review department and the Board of Directors;
and
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·
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Prepare
the Committee report required by the SEC rules to be included in the
Corporation's annual proxy
statement.
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The Board
has determined that each member of the Audit Committee is “independent” within
the meaning of NASDAQ rules. Mr. Zenger and Mr. Cuthill are “audit committee
financial experts” as that term is defined in SEC rules implementing
requirements of the Sarbanes-Oxley Act of 2002.
Personnel and Compensation
Committee
. The Board of Directors has adopted a charter governing the
duties and responsibilities of the Personnel and Compensation Committee, which
is available on the Corporation’s website at www.frontierbank.com.
The
purposes of the Personnel and Compensation Committee are to carry out the
responsibilities of the Board of Directors relating to personnel decisions and
compensation of the Corporation’s executive officers, including the Named
Executive Officers; to recommend compensation policies, practices and programs
for the Corporation and its affiliates; and to produce its Report on Executive
Compensation (which is included on page 21 of this proxy statement). The duties
and responsibilities of the Committee are to:
·
|
Recommend
to the full Board for approval any new executive incentive compensation
plans including equity-based plans and any significant amendments to
existing plans.
|
·
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Recommend
to the full Board for approval other compensation plans and programs
applicable to the Corporation’s executive officers and other senior
management.
|
·
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Recommend
to the full Board for approval of compensation (including employment,
change in control and other compensation agreements) for the Corporation’s
executive officers and nonemployee
directors.
|
·
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Recommend
to the full Board for approval all compensation of senior management,
including senior vice president and above, and all other employees with a
salary of $100,000 or greater. In determining the compensation for a
particular executive or senior officer, the Committee is guided by the
following objectives:
|
§
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Attract
and retain highly qualified officers by maintaining competitive
compensation packages for officers;
|
§
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Motivate
those officers to achieve and maintain superior performance
levels;
|
§
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Maintain
compensation packages that are equitable relative to efforts, skills and
other responsibilities of the officer when compared to other positions in
the Corporation;
|
§
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Make
a portion of each officer's total compensation package and a specific part
of each named executive’s total compensation package at risk and dependent
on corporate performance and creation of long-term shareholder
value;
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§
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Make
total compensation for executive and senior officers sufficiently
competitive with compensation paid by financial institutions of similar
size, with lines of business, geographic dispersion and marketplace
position similar to Frontier Bank, so that the Corporation can attract and
retain highly qualified officers who will contribute to Frontier Financial
Corporation’s and Frontier Bank’s long term success;
and
|
§
|
Evaluate
the Chief Executive Officer’s performance relative to the performance of
the Corporation and consistent with the approved goals and objectives for
the Corporation and the Chief Executive Officer and recommend the
compensation of the Chief Executive Officer based on this evaluation to
the full Board of Directors.
|
Personnel and Compensation Committee
Interlocks and Insider Participation
. The Personnel and Compensation
Committee consists of nonemployee directors appointed by the Board who meet the
independence requirements of the NASDAQ. No director may serve on the Personnel
and Compensation Committee unless he or she is a “nonemployee director” for
purposes of Rule 16b-3 under the Securities Exchange Act of 1934 and satisfies
the requirements of an outside director for purposes of Section 162(m) of the
Internal Revenue Code. None of the Corporation’s executive officers have served
as a member of a compensation committee or board of directors of any other
entity, which has an executive officer serving as a member of the Corporation’s
Board of Directors. Personnel and Compensation Committee members may be removed
at any time by a majority of the Board and the Board fills vacancies on the
Personnel and Compensation Committee as needed.
Corporate Governance Committee.
The function of the Corporate Governance Committee is to develop and
recommend to the Board of Directors a set of corporate governance principles
applicable to the Corporation. A copy of the Committee’s charter can be viewed
at www.frontierbank.com.
This
Committee recommends to the Board of Directors the slate of director nominees
for election to the Board, recommends an individual to be appointed Chairman of
the Board and identifies and recommends candidates to be added to the Board
between annual shareholder meetings as vacancies occur or otherwise as directed
by the Board.
The
Committee will consider nominations from shareholders, provided that such
nominations are received by the Corporation’s Secretary in accordance with the
Corporation’s Articles of Incorporation and the Bylaws. The Committee considers
candidates for the Board based upon criteria that includes their business and
professional skills, concern for the long-term interests of shareholders,
personal integrity and judgment. At least a majority of directors on the Board
must be “independent,” not only as that term may be legally defined, but also
without the appearance of any conflict in serving as a director.
In the
case of incumbent directors whose terms of office are set to expire, the
Committee reviews such directors’ overall service to the Corporation during
their term, including the number of meetings attended, level of participation
and quality of performance. In the case of new director candidates, the members
of the Committee will be polled for suggestions as to potential candidates that
may meet the criteria above and will discuss candidates suggested by Corporation
shareholders. The Committee then selects nominees by majority vote. All of this
year’s nominees for election to the Board of Directors served as Board members
in the prior year. There were no nominations received from
shareholders.
Director Compensation.
On the
first day of the calendar year each Director of the Corporation is paid an
annual retainer determined by the value of a given number of shares of our
common stock. Each Director has a choice to be paid in the common stock of the
Corporation, or to receive the equivalent fair market value of the stock in
cash, or a combination of stock and cash. The retainer for 2007 and 2008 was set
at 3,600 shares of the Corporation’s common stock, the fair market value of a
share of our common stock on each of the grant dates was $29.83 and $18.76,
respectively, and therefore, the retainer paid had a value of $107,388 and
$67,536, respectively.
Each
Director also receives a fee of $2,800 for each Bank Board meeting attended,
except for Patrick M. Fahey, Michael J. Clementz and John J. Dickson. The Chair
of the Audit Committee receives an additional fee of $400 for each Board meeting
attended. The Secretary of the Board receives an additional fee of $200 for each
Board meeting attended. Directors do not receive any fees for attendance at
Committee meetings. The following table shows the fees to our Directors in 2008
for the first three quarters, excluding Patrick M. Fahey, Michael J. Clementz
and John J. Dickson whose information is included on the Summary Compensation
Table. Bank director fees were suspended by the Board in the fourth quarter of
2008.
DIRECTOR
COMPENSATION
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Change
in
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Non-
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in
Pension
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Equity
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Value
and
|
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Incentive
|
Nonqualified
|
|
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Fees
|
|
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Plan
|
Deferred
|
All
other
|
|
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Earned
|
Stock
|
Option
|
Compen-
|
Compen-
|
Compen-
|
|
|
or
Paid in
|
Awards
|
Awards
|
sation
|
sation
|
sation
|
Total
|
Name
|
Cash($)
|
($)
|
($)
|
($)
|
Earnings
|
($)
|
($)
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
David
M. Cuthill
|
$36,400
|
$67,536
|
|
|
|
|
$103,936
|
Lucy
DeYoung
|
41,600
|
67,536
|
|
|
|
|
109,936
|
Edward
D. Hansen
|
36,400
|
67,536
|
|
|
|
|
103,936
|
Edward
C. Rubatino
|
33,600
|
67,536
|
|
|
|
|
101,136
|
Darrell
J. Storkson
|
36,400
|
67,536
|
|
|
|
|
103,936
|
Mark
O. Zenger
|
36,400
|
67,536
|
|
|
|
|
103,936
|
The
following table shows the name of each executive officer of the Corporation
(including Named Executive Officers) who is not also a director or nominee for
director of the Corporation, their age and the offices held with the Corporation
and Frontier Bank. All offices are held at the discretion of the Board of
Directors.
Name
|
Age
|
Office
and Year Assumed Office
|
Carol
E. Wheeler
|
52
|
Chief
Financial Officer of the Corporation (2003 to present) and FFP, Inc. (2003
to December 2008)
|
The
following table sets forth information, as of March 2, 2009, as to the shares of
common stock beneficially owned by (i) those persons who we know to beneficially
own more than 5% of our outstanding common stock, (ii) our current Directors and
nominees, (iii) the Named Executive Officers of the Corporation who are the
Chief Executive Officer, the Chief Financial Officer and the three other highest
paid executive officers during the year ended December 31, 2008, listed in the
Summary Compensation Table on page 16, and (iv) all Named Executive Officers and
Directors of the Corporation as a group. Information provided for Barclays
Global Investors and State Street Bank and Trust Company is based on the latest
Schedule 13G report that they filed with the SEC as of the record date of March
2, 2009. Except as otherwise indicated by footnote, the address of
all listed shareholder is c/o Frontier Financial Corporation, 332 S.W. Everett
Mall Way, Everett, Washington 98204.
Name
of Beneficial Owner
|
Amount
and Nature of Beneficial Ownership
(1)
|
Percentage of
Outstanding
Shares
(2)
|
Directors
|
|
|
David
M. Cuthill
|
19,700
|
*
|
Lucy
DeYoung
|
41,564
|
*
|
Edward
D. Hansen
|
449,994
(3)
|
*
|
Edward
C. Rubatino
|
592,013
(4)
|
1.26%
|
Darrell
J. Storkson
|
585,057
|
1.24%
|
Mark
O. Zenger
|
82,675
(5)
|
*
|
Named
Executive Officers
|
|
|
Patrick
M. Fahey**
|
32,750
(6)
|
*
|
Michael
J. Clementz**
|
135,737
(7)
|
*
|
John
J. Dickson**
|
893,902
(8)
|
1.90%
|
Lyle
E. Ryan
|
104,799
(9)
|
*
|
Carol
E. Wheeler
|
79,233
(10)
|
*
|
All
Directors and Executive Officers as a group (16 persons)
|
3,420,109
(11)
|
7.21%
|
5%
Shareholders
|
|
|
Barclays
Global Investors
|
2,991,528
(12)
|
6.35%
|
State
Street Bank and Trust Company
|
2,543,288
(13)
|
5.40%
|
*
Less than 1%.
**
Also
serves as a Director of the Corporation.
(1)
|
In
determining beneficial ownership, a beneficial owner of a security
includes any person who, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise has or shares: (1)
voting power which includes the power to vote, or to direct the voting of,
such securities and/or (2) investment power which includes the power to
dispose, or to direct the disposition, of such security. In addition, for
the purposes of this chart, a person is deemed to be the beneficial owner
of a security if that person has the right to acquire beneficial ownership
of such security within 60 days, including, but not limited to, any right
to acquire: (a) through exercise of an option, warrant, or right; (b)
through the conversion of security; (c) pursuant to the power to revoke a
trust, discretionary account or similar arrangement; or (d) pursuant to
the automatic termination of a trust, discretionary account or similar
arrangement.
|
(2)
|
Any
securities not outstanding but which are subject to options, warrants,
rights or conversion privileges exercisable within 60 days are deemed to
be outstanding for the purpose of computing the percentage of outstanding
securities of the class owned by such person, but not for the purpose of
computing the percentage of the class by any other
person.
|
(3)
|
Includes
9,090 shares held by Mr. Hansen’s spouse who has voting and dispositive
power, 60,744 shares held by Mr. Hansen or Mr. Hansen’s spouse in custody
for children or grandchildren, 20,821 shares held in a charitable trust of
which Mr. Hansen is trustee and has voting and dispositive power and
144,997 shares held in an investment capacity of which Mr. Hansen has
voting and dispositive power.
|
(4)
|
Includes
267,826 shares held in a trust of which Mr. Rubatino is trustee and has
voting and dispositive power.
|
(5)
|
Includes
13,750 shares held in a trust in which Mr. Zenger has voting and
dispositive powers and 2,048 shares held by a business partner with
respect to which Mr. Zenger disclaims beneficial
ownership.
|
(6)
|
Includes
6,750 shares which Mr. Fahey has the right to acquire through the exercise
of stock options.
|
(7)
|
Includes
27,000 shares which Mr. Clementz has the right to acquire through the
exercise of stock options.
|
(8)
|
Includes
40,290 shares which Mr. John Dickson has the right to acquire through the
exercise of stock options, 34,615 shares by Mr. Dickson or Mr. Dickson’s
spouse in custody for children, 15,243 shares held in trust of which Mr.
Dickson has voting and dispositive power and includes 688,432 shares held
by the family limited partnership as a result of Mr. Dickson’s beneficial
interest as General Partner of the family limited
partnership.
|
(9)
|
Includes
43,081 shares which Mr. Ryan has the right to acquire through the exercise
of stock options.
|
(10)
|
Includes
23,133 shares which Ms. Wheeler has the right to acquire through the
exercise of stock options, 423 shares held in custody for children and
6,750 shares by Ms. Wheeler’s spouse and his
mother.
|
(11)
|
Includes
140,254 shares which Named Executive Officers and Directors listed in the
table have the right to acquire through the exercise of stock options and
268,016 shares and options to purchase 135,069 shares held by officers not
listed or reflected elsewhere in the
table.
|
(12)
|
Barclays
Global Investors stated in its Schedule 13G filing on February 6, 2009,
that, of the 2,991,528 shares beneficially own, it (a) has sole voting
power with respect to 2,351,423 shares, (b) has shared voting power with
respect to no shares and (c) has sole dispositive power with respect to
all 2,991,528 shares. According to the Schedule 13G filing, the
address of Barclays Global Investors is Apianstrasse 6, D-85774,
Unterfohring, Germany.
|
(13)
|
State
Street Bank and Trust Company stated in its Schedule 13G filing on
February 13, 2009, that, of the 2,543,288 shares beneficially own, it (a)
has sole voting power with respect to 2,543,288 shares, (b) has shared
voting power with respect to no shares, and (c) has sole dispositive power
with respect to no shares. According to the Schedule 13G
filing, the address of State Street Bank and Trust Company is State Street
Financial Center, One Lincoln Street, Boston, Massachusetts
02111.
|
The
following Compensation Discussion and Analysis describes the material elements
of compensation for the Frontier Financial Corporation executive officers
identified in the Summary Compensation Table (“Named Executive Officers”). As
more fully described below, the Personnel and Compensation Committee of the
Board (the “Committee”) makes all decisions for the total compensation—that is,
the base salary, bonuses and incentives and stock options and restricted
stock—of the Corporation’s executive officers, including the Named Executive
Officers. The Committee’s recommendations for the total direct compensation of
the Corporation’s Chief Executive Officer are subject to approval of the Board
of Directors.
The
day-to-day design and administration of retirement, savings, health, welfare and
paid time-off plans and policies applicable to employees in general are handled
by Human Resources employees. The Committee (or Board) remains responsible for
certain fundamental changes outside the day-to-day requirements necessary to
maintain these plans and policies.
Role
of the Personnel and Compensation Committee
Purpose.
The Committee of the
Board (the “Committee”) assists the Board in fulfilling its responsibilities for
administering the Corporation’s compensation program offered to the
Corporation’s officers and directors.
Outside Consultants And
Advisors.
The Committee has the authority to retain and terminate any
independent, third-party compensation consultant and to obtain independent
advice and assistance from internal and external legal, accounting and other
advisors.
Compensation
Philosophy
The goals
of the Corporation’s compensation program are to: (1) enable the Corporation to
attract, retain and motivate the most qualified, talented employees who
contribute to the long-term success of the Corporation; (2) align compensation
with business objectives and performance; and (3) align incentives for executive
officers with the interests of shareholders to maximize shareholder value. The
Corporation emphasizes performance-based compensation that is reasonable and
competitive in the marketplace and reviews its compensation practices annually,
including comparing them with competitors. Compensation reflects the competition
for executive talent and the unique challenges and opportunities facing the
Corporation in the financial services market.
The
Corporation’s compensation program for all employees generally includes both
cash and equity-based factors. Consistent with competitive practices, the
Corporation also utilizes cash bonuses and incentive plans based on achievements
of financial performance objectives.
Role
of Executive Officers and Management in Compensation Decisions
The
Personnel and Compensation Committee may invite members of management to attend
its meetings and did so for portions of the Committee’s meetings during fiscal
2008. The Committee also meets on occasion with the Corporation’s Chief
Executive Officer, Patrick M. Fahey, and/or other executives, including Chief
Financial Officer, Carol E. Wheeler, President, John J. Dickson and Executive
Vice President Human Resources, Connie Pachek, to obtain recommendations with
respect to compensation programs for other corporate executives, employees and
nonemployee directors. Mr. Fahey is closely involved in assessing the
performance of our executive officers (other than himself) and making
recommendations to the Committee regarding base salary, bonus targets and equity
compensation for these executive officers.
The
Committee also regularly holds executive sessions not attended by any members of
management or by nonindependent directors. The Committee discusses Mr. Fahey’s
compensation package with him and then makes decisions with respect to Mr.
Fahey’s compensation in a Committee only meeting. The Personnel and
Compensation Committee evaluates the Chief Executive Officer’s performance
annually relative to the performance of the Corporation and consistent with the
approved goals and objectives of the Corporation and the Chief Executive
Officer. The Personnel and Compensation Committee then recommends the
compensation of the Chief Executive Officer, based on this evaluation, to the
full Board of Directors for approval.
Management
makes recommendations to the Committee regarding base salary, bonus targets and
equity compensation for each of our executive officers other than Mr. Fahey. The
Committee is not obligated to accept management’s recommendations with respect
to executive compensation.
In
formulating its recommendations for executive compensation for fiscal 2008,
management used competitive compensation data it gathered from other publicly
available sources, as well as compensation data provided by Equilar, Inc.
Management complied the data and formulated the recommendations regarding
executive compensation that it presented to the Committee. Based on discussions
between management and the Board in September 2008, executive management salary
compensation for fiscal 2009 was reduced by 5% except for President, John J.
Dickson’s compensation which was reduced by 10% due to the Corporation’s and
Bank’s 2008 financial performance. In addition, discretionary bonuses
for 2008 were not awarded.
The Chief
Executive Officer evaluates the performance of each of the other Named Executive
Officers performance annually relative to the performance of the Corporation and
consistent with the approved goals and objectives of the Corporation and the
Named Executive Officer. The Chief Executive Officer submits this evaluation to
the Personnel and Compensation Committee for review and, collectively, the Chief
Executive Officer and the Personnel and Compensation Committee then recommend
the compensation of the Named Executive Officers to the full Board of Directors
for approval.
Compensation
decisions for employees who are not Named Executive Officers are made at the
appropriate levels within the Corporation with review and oversight provided by
the executive officers of the Corporation.
Setting
Executive Compensation
Based on
the compensation discussion set forth above, the Personnel and Compensation
Committee has structured the Corporation’s annual and long-term incentive-based
cash and noncash executive compensation to motivate our executives to achieve
our business goals and to reward our executives for achieving those
goals.
In making
compensation decisions, the Committee compares each element of total
compensation against a peer group of publicly-traded banks, with assets ranging
from $1 billion to $10 billion in Washington, Oregon, Idaho and Montana. The
peer group, which is periodically reviewed and updated by the Committee,
consists of banks similar in size and business to us and which we compete
against. The banks comprising the peer group are:
Bank
Name
|
Ticker
Symbol
|
AmericanWest
Bancorporation
|
AWBC
|
Banner
Corporation
|
BANR
|
Cascade
Bancorp Inc.
|
CACB
|
Cascade
Financial Corporation
|
CASB
|
Columbia
Banking System
|
COLB
|
Glacier
Bancorp Inc.
|
GBCI
|
Horizon
Financial Corporation
|
HRZB
|
Umpqua
Holdings Corporation
|
UMPQ
|
West
Coast Bancorp
|
WCBO
|
Due to
variances in size among the peer group, the Committee informally analyzes the
compensation data for differences in assets and income when making comparisons.
We compete with many banks for top level executive talent and as such, set
executive compensation at a level comparable to similar peer group executives to
enable us to attract, retain and compensate executives to ensure superior
results for the Corporation. Variations within these objectives may occur due to
the experience level or performance of the individual executive or other market
factors.
Data on
the compensation practices of our peer group is generally gathered through
searches of publicly available information, including publicly available
databases. As publicly available information does not typically include
information regarding target cash compensation, the Corporation periodically
relies upon compensation surveys to provide benchmark target compensation levels
for our peer group. Peer group data includes base salary, targeted cash
compensation and equity awards, including equity compensation. It usually does
not include deferred compensation benefits or generally available benefits, such
as 401(k) plans or health care coverage. For fiscal 2008, we obtained sufficient
market base salary information for Mr. Fahey, Mr. Clementz, Mr. Dickson, Mr.
Ryan and Ms. Wheeler, from public information (for example, proxy statements),
which was the Corporation’s primary source. Due to the limited availability of
salary information in proxy statements for positions other than these Named
Executive Officers, the Committee relied on a combination of public information
and survey sources for other executives. The use of compensation surveys to
benchmark compensation for the Named Executive Officers was limited to
information from our peer group.
There is
no pre-established policy or target for the allocation between either cash and
noncash or short-term and long-term incentive compensation. Rather, the
Committee reviews the available information to establish an appropriate and
competitive level and mix of incentive compensation. Income from such incentive
compensation is realized based on the performance of the Corporation and the
individual compared to established goals. Historically, and in fiscal 2008 as
well, the Committee recommended a majority of total compensation to our
executive officers in the form of cash compensation.
2008
Executive Compensation Components
For the
fiscal year ended December 31, 2008, the principal components of
compensation for the Named Executive Officer were:
·
|
equity
compensation program
|
·
|
incentive
compensation and profit sharing
|
·
|
401(k)
savings and profit sharing
|
·
|
health
care and other benefits
|
Base
Salary
The
Corporation sets a base salary for each executive officer, including the Chief
Executive Officer, by reviewing the base salary for comparable positions of the
peer group. Individual salaries for each executive officer are set relative to
this target group based on certain individual performance and contribution to
the Corporation’s results. As part of the annual performance review
process, an executive’s base salary is typically considered for adjustment. The
executive’s performance and current compensation are considered at this
time. For fiscal year 2009, due to economic conditions and the
Corporation’s performance, base salaries were reduced by 5% for executive
management except for Mr. Dickson, which was reduced by 10%.
Cash
Bonuses
Named
Executive Officers and other employees are eligible to participate in our cash
incentive and bonus plans. Our cash bonuses compensate employees for attaining
annual financial performance goals for the Corporation’s return on assets, or
ROA and return on equity, or ROE. Named Executive Officers, other than the Chief
Executive Officer, propose annual goals which are reviewed and approved by the
Chief Executive Officer. The Chief Executive Officer’s goals are established in
conjunction with the Committee and agreement by the
Board. Bonus payouts for Named Executive Officers are
determined at the end of the year by the Committee in its discretion, without
any specific formula, based on goal attainment, individual performance and
Corporation profitability. No bonuses were awarded in 2008 to any of
the Named Executive Officers due to the financial performance of the
Corporation.
The
Corporation does not undertake a detailed analysis of how difficult it would be
for the Corporation and the Named Executive Officers to achieve the target
levels of performance for each performance measure. Rather, both the Committee
and management considered the likelihood of the achievement of target levels of
performance when recommending and approving the performance measures and target
bonuses. At the time the performance measures were set, the Committee believed
that the goals would be challenging, but achievable with significant effort and
skill.
Stock
Option and Restricted Stock Program
We
granted stock options and restricted stock awards to Named Executive Officers
and other employees, to encourage participants to focus on long-term performance
and maximization of shareholder value. These forms of equity compensation help
align the long-term interests of the executive officers with those of our
shareholders, provide an opportunity for equity ownership, increase retention
and help maintain a competitive total compensation package.
Stock
options provide the opportunity to purchase our common stock at a price fixed on
the grant date. A stock option becomes valuable only if our common stock price
increases above the option exercise price and the holder of the option remains
employed during the period required for the option to “vest.” Thus,
stock options provide an incentive for an option holder to remain employed with
the Corporation and links a portion of the option holder’s compensation with
shareholders’ interests by providing an incentive that encourages long-term
Corporation profitability, which increases the market price of our
stock.
The
exercise price of stock options is set at fair market value on grant date. Under
the shareholder approved Stock Option Plan, the Corporation may not grant stock
options at a discount to fair market value or reduce the exercise price of
outstanding stock options except in the case of a stock split or other similar
event. The Corporation does not grant stock options with a so-called “reload”
feature, nor does it loan funds to employees to enable them to exercise stock
options. The Corporation’s long-term performance ultimately determines the value
of stock options, because gains from exercised stock options are entirely
dependent on long-term appreciation in the Corporation’s stock
price.
The
granting of incentive stock options and stock awards to directors, executive
officers, senior officers and employees are made under the Frontier Financial
Corporation 2006 Stock Incentive Plan which was approved by the shareholders at
the 2006 Annual Meeting of Shareholders. The 2006 Plan authorizes the grant of
stock options, which may include stock appreciation rights, or “SARs,” and
restricted stock awards. No SARs or nonqualified stock options have been granted
under the Stock Option Plan to date. The Personnel and Compensation Committee is
responsible for overall administration of the stock option process and
recommends approval of all grants, including those to executive officers. Daily
administration of the 2006 Stock Incentive Plan is maintained by the
Corporation, under the supervision of the Personnel and Compensation Committee.
The Chief Financial Officer has established procedures that provide for
consistency and
accuracy
in determining the fair market value of options and the expense regarding the
stock option grants in compliance with FAS 123(R), which the Corporation
implemented at the beginning of 2006.
In
general, each incentive stock option permits the option holder to purchase in
the future a specified number of shares of our common stock from the Corporation
at the exercise price, which is the average of the high and low price of the
stock on the date of the grant. The incentive stock options generally cliff vest
after three years and have a term of ten years from the date of grant. For
Messrs. Dickson and Ryan and Ms. Wheeler the incentive stock options granted in
2008 all had cliff vesting of three years from the date of grant, meaning that
the executive had to remain employed by the Corporation for three full years to
exercise any option granted to our Named Executive Officers. For Messrs. Fahey
and Clementz, the incentive stock options granted in 2008 vested immediately and
have a term of ten years. Prior to the exercise of an incentive stock
option, the holder has no rights as a shareholder with respect to the shares
subject to such option, including no voting rights and no right to receive
dividends.
A
restricted stock award entitles the executive officer to receive a specified
number of our common stock from the Corporation. Stock awards are recommended by
the Personnel and Compensation Committee of the Board of Directors, in
conjunction with the recommendation of incentive stock options, as part of the
overall equity compensation program. Upon granting of a stock award, the holder
has full voting rights and the right to receive dividends on shares. The stock
awards granted in 2008 vest ratably over three years.
Incentive
stock option and restricted stock award levels are determined by the Personnel
and Compensation Committee based on an overall review of the total compensation
package and the competitive analysis discussed in the section on
“Setting Executive
Compensation”
on page 11, vary among participants based on their
positions and have historically been granted in December of each year.
Additional information on these grants, including the number of shares subject
to each grant, is also shown in the Grants of Plan-Based Awards Table. Our
outside directors have not historically participated in our stock option
program.
No Backdating or Spring
Loading
. Frontier Financial Corporation does not backdate options or
grant options or stock awards retroactively. The Corporation’s awards or options
are generally granted on a fixed date or event each year (historically the
scheduled board meeting before fiscal year end), with all required approvals
obtained on or before the actual grant date. All grants to all employees require
the approval of the Board of Directors.
Fair
market value for options and stock awards is determined as the average of the
high and low price of our common stock on the grant date. In order to ensure
that its exercise price fairly reflects all material information—without regard
to whether the information seems positive or negative—every grant is contingent
upon an assurance by the Corporation’s legal counsel that the Corporation is not
in possession of material undisclosed information. If the Corporation is in
possession of such information, grants are suspended until the second business
day after public dissemination of the information.
Lack of Grant Date Coordination with
the Release of Material NonPublic Information
. The grant date for awards
to employees is the date the Board of Directors approves the awards based upon
the recommendation of the Personnel and Compensation Committee. The Corporation
engages in a consistent and predetermined practice for granting annual awards to
all employees. The Committee establishes the meeting and grant dates in
accordance with the Corporation’s policy and does not schedule these dates based
on knowledge of material nonpublic information or in response to the
Corporation’s stock price.
Grants
are made at Board of Director meetings scheduled in advance to meet appropriate
deadlines for compensation related decisions. The exercise price for every stock
option and the valuation of each restricted stock award is based on the average
of the high and low price for our common stock on the date of the grant, using
price information from the NASDAQ Stock Market, which represents the fair market
value of the shares on the date of grant.
There is
a limited term in which stock options can be exercised, known as the “option
term.” The option term for executive officers is generally ten years from the
date of grant. At the end of the option term, the right to exercise any
unexercised options expires. Vesting and exercise rights for stock options and
stock awards cease upon termination of employment, except in the case of death
or disability.
Our
equity compensation program is an important piece of our overall compensation
philosophy and helps motivate and retain the executives who lead the growth and
success of our Corporation. It provides real incentives for our employees to
sustain and enhance our long-term performance and shareholder value. Both our
executive officers and the Personnel and Compensation Committee believe that the
superior performance of these individuals will contribute significantly to our
ongoing and future success.
401(k)
Profit Sharing Plan and Trust
The
401(k) Profit Sharing Plan and Trust is a tax-qualified retirement savings plan
in which all employees, including the Named Executive Officers, are eligible to
participate. Frontier Financial Corporation’s qualified 401(k) Plan allows
highly compensated employees to contribute up to 15 percent of their base
salary, up to the limits imposed by the Internal Revenue Code—$15,000 for
2008—on a pre- or after-tax basis. Participants that are 50 years or older can
also make “catch-up” contributions which in 2008 may be up to an additional
$5,000 above the statutory limit under the Plan. Each employee is fully vested
in his or her deferred salary contributions when made. We match 100% of the
first 4% of pay that employees contribute to the Plan; these matching
contributions are mandatory and vest immediately. In addition to
matching employee contributions into the Plan, we may make discretionary
contributions of a portion of our income to the Plan each year. We did not make
a profit sharing contribution for 2008 due to the impact of the economic
downturn or the Corporation’s financial results.
Participants
choose to invest their account balances from an array of investment options as
selected by plan fiduciaries from time to time. The 401(k) Plan is designed to
provide for distributions in a lump sum, rollovers or monthly distributions
after termination of service. However, loans and in-service distributions under
certain circumstances such as a hardship, attainment of age 59 ½, or
disabilities are permitted.
Split
Dollar Insurance Agreements
Neither
the Corporation nor Frontier Bank maintains a defined benefit pension plan or
nonqualified deferred compensation plan to fund retirement benefits for its
Named Executive Officers or other executives. However, in December 2001,
Frontier Bank purchased insurance policies on the lives of 53 of its employees,
including Messrs. Dickson and Ryan and Ms. Wheeler and entered into Split Dollar
Insurance Agreements with each of these executives. These split dollar
arrangements were adopted by Frontier Bank to substitute coverage from its
previous group-term life insurance program for its employees. The premium
amounts paid are the property of Frontier Bank and provide the Bank with a tax
equivalent yield which exceeds comparable short-term investment alternatives.
Frontier Bank expects to recover in full the premiums paid by it from the Bank’s
portion of the policies’ death benefits. Under the Split Dollar Insurance
Agreements, when the employee dies, his or her designated beneficiary will be
entitled to receive from the insurance proceeds an employee death benefit equal
to two times the executive’s base salary, less $50,000, up to a maximum of
$250,000. In addition, $50,000 of group term life insurance is provided by the
Bank to the executive for a total maximum benefit of $300,000, if the executive
dies while employed by the Bank. If the executive’s employment with the Bank
terminates by reason of his or her total disability, early or regular retirement
from Frontier Bank, the employee death benefit continues, but is reduced to one
time the executive’s base salary, up to a maximum of $150,000. Frontier Bank is
entitled to receive all insurance proceeds in excess of the employee death
benefit. These Split Dollar Insurance Agreements are subject to termination
prior to the death of the executive, if: (i) the Bank cancels the insurance
policy, becomes bankrupt, dissolves or discontinues its business; or (ii) by
written notice by either party; or (iii) the executive’s employment terminates
for any reason other than total disability, early or regular
retirement.
Compensation
of Chief Executive Officer
Mr.
Fahey’s base salary and equity compensation for fiscal 2008 were determined in
accordance with the compensation philosophy and process described above,
including the policy of targeting our compensation within the peer group and
paying for performance. In setting Mr. Fahey’s salary and equity compensation,
the Committee relied on market-competitive peer group pay data and the strong
belief that the Chief Executive Officer significantly and directly influences
the Corporation’s overall performance.
Change
of Control Arrangements
The
Corporation has entered into change of control agreements with eight of its key
employees, including the Named Executive Officers Messrs. Dickson and Ryan and
Ms. Wheeler. The change of control agreements are designed to
promote
stability
and continuity of senior management. Information regarding applicable payments
under such agreements for the Named Executive Officers is provided under the
heading “Severance and Change of Control Arrangements” on page 20.
Benefits
and Perquisites
As
salaried employees, the Named Executive Officers participate in a variety of
retirement, health and welfare and paid time-off benefits designed to enable the
Corporation to attract and retain its workforce in a competitive marketplace.
Health and welfare and paid time-off benefits help ensure that the Corporation
has a productive and focused workforce through reliable and competitive health
and other benefits. Savings plans help employees, especially long-service
employees, save and prepare financially for retirement. The costs of these
benefits are included in column (i) of the Summary Compensation Table at page
16.
Frontier
Financial Corporation promotes an egalitarian culture — the Corporation does not
provide its officers or other senior-level executives with preferential parking,
separate dining facilities or similar perquisites. The Corporation’s officers,
nonofficer executives and other senior-level employees are eligible for certain
additional benefit programs, all of which are quantified in the Summary
Compensation Table and available to all eligible employees. The Corporation does
not provide loans to executive officers, except in the ordinary course of its
banking business as permitted by the rules of the FDIC and the SEC.
Tax
Implications of Executive Compensation
Deductibility
of Executive Compensation
As part
of its role, the Personnel and Compensation Committee reviews and considers the
deductibility of executive compensation under Section 162(m) of the
Internal Revenue Code, which provides that the Corporation may not deduct
compensation of more than $1,000,000 that is paid to certain individuals. The
Corporation believes that compensation paid under the Corporation’s Stock Option
Plans and other executive compensation plans and arrangements are generally
fully deductible for federal income tax purposes. However, in certain
situations, the Committee may approve compensation that will not meet these
requirements in order to ensure competitive levels of total compensation for its
executive officers.
Accounting
for Stock-Based Compensation
Beginning
on January 1, 2006, the Corporation began accounting for stock-based
payments including its Stock Option Plan in accordance with the requirements of
FASB Statement 123(R).
The table
below summarizes the total compensation paid or earned by each of the Named
Executive Officers for the fiscal year ended December 31, 2008. We have also
entered into change of control agreements with eight of our executive officers,
including three of the Named Executive Officers, which are discussed on page 20
of this proxy statement. When setting total annual compensation for each of the
Named Executive Officers, the executive’s current compensation, including equity
and nonequity based compensation, in considered relative to the executive’s
overall performance and the competitive market factors, the company’s financial
performance, peer group information and compensation history. The
Committee reviews the factors it considers to be the most relevant for the
current fiscal year to set compensation at a reasonable, competitive
level.
SUMMARY
COMPENSATION TABLE
|
|
|
|
|
|
|
|
Change
in
Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings
(h)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
Incentive
Plan
Compen-
sation
(g)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Awards
(3)
(e)
|
Option
Awards
(4)(5)
(f)
|
All
Other
Compen-
sation
(1)
(i)
|
|
|
|
|
|
|
Name
and
Principal
Position
(a)
|
Year
(b)
|
Salary
(c)
|
Bonus
(d)
|
Total
(j)
|
|
|
|
|
|
|
|
|
|
|
Patrick
M. Fahey
|
2008
|
$29,700
(2)
|
--
|
$67,536
|
$7,090
|
--
|
--
|
$36,900
|
$141,226
|
Chief
Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carol
E. Wheeler
|
2008
|
189,000
|
--
|
3,875
|
17,721
|
--
|
--
|
14,170
|
224,766
|
Chief
Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
J. Clementz
|
2008
|
63,667
(6)
|
--
|
67,536
|
7,090
|
--
|
--
|
39,000
|
177,293
|
President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John
J. Dickson
|
2008
|
367,500
|
--
|
79,943
|
21,287
|
--
|
--
|
22,083
|
490,813
|
President,
Frontier Bank
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lyle
E. Ryan
|
2008
|
265,650
|
--
|
12,407
|
21,287
|
--
|
--
|
14,170
|
313,514
|
EVP,
Frontier Bank
|
|
|
|
|
|
|
|
|
|
(1)
|
The amount
shown in column (i) reflects, for each Named Executive Officer: 401 (k)
Savings and Profit Sharing contributions allocated by the Corporation to
each of the Named Executive Officers pursuant to the plan which is more
fully described on page 20, and the cost of medical, dental, vision, life
and disability insurance provided by the Corporation. The amount
attributable to each such perquisite or benefit for each Named Executive
Officer does not exceed the greater of $25,000 or 10% of the total amount
of perquisites received by such Named Executive Officer, except for
Messrs. Fahey and Clementz, which represent their board meeting fees prior
to their appointment in December 2008 as CEO and President,
respectively.
|
(2)
|
Mr. Patrick
Fahey’s first day of employment was December 4, 2008. His
annual salary was $396,000 as of December 31,
2008.
|
(3)
|
Mr. Patrick
Fahey, Mr. Michael Clementz and Mr. John Dickson also serve as members of
the Board of Directors of the Corporation. In 2008, Messrs. Fahey,
Clementz and Dickson each received a retainer 3,600 shares of our common
stock in January 2008 which had a value at the time of the award of $18.76
per share, or $67,536, which is reflected in column
(e).
|
(4)
|
The amounts
in column (f) reflect the prorated vesting dollar amount recognized for
financial statement reporting purposes for the fiscal year ended
December 31, 2008, in accordance with FAS 123(R). Assumptions used in
the calculation of these amounts are included in Note 15 to the
Corporation’s audited financial statements for the fiscal year ended
December 31, 2008, included in the Corporation’s Annual Report on
Form 10-K filed with the Securities and Exchange Commission on March 5,
2009.
|
(5)
|
On December
17, 2008, Messrs. Dickson and Ryan were granted an incentive stock option
to purchase 6,750 shares and Ms. Wheeler was granted an incentive stock
option to purchase 4,500 shares of our common stock at an exercise price
of $3.02. The options will vest on the third anniversary of the
grant date. The fair market value of each option as determined
in accordance with FAS 123(R) was $1.05. Messrs. Fahey and
Clementz were granted an incentive stock option to purchase 6,750 shares
of our common stock at an exercise price of $3.02 which vest
immediately. The fair value of each option as determined in
accordance with FAS 123(R) was
$1.05.
|
(6)
|
Represents
salary paid to Mr. Michael Clementz as President of FFP, Inc. of $40,000
and $23,667 as CEO of Frontier Bank from December 4, 2008 through December
31, 2008. His annual salary was $360,000 as of December 31,
2008.
|
The
following table provides information on stock options granted to each of the
Corporation’s Named Executive Officers in the fiscal year ended December 31,
2008. There can be no assurance that the Grant Date Fair Value of Stock and
Option Awards will ever be realized. The amount of these awards that was
expensed is shown in the Summary Compensation Table, column (f) on page
16.
GRANTS
OF PLAN-BASED AWARDS
|
|
|
Estimated
Future Payouts Under Nonequity
Incentive
Plan Awards
|
Estimated
Future Payouts Under Equity Incentive
Plan
Awards
|
All
Other Stock Awards: Number of Shares of Stock
or Units
|
All
Other Options Awards: Number of Securities
|
Exercise
or Base Price of Option
|
Grant
Date Fair Value of Stock and
|
Name
(a)
|
Grant
Date
(b)
|
Threshold
($)
(c)
|
Target
($)
(d)
|
Maxi-
mum
($)
(e)
|
Threshold
(#)
(f)
|
Target
(#)
(g)
|
Maxi-
mum
(#)
(h)
|
(#)
(i)
|
Underlying
(#)
(j)
|
Awards
($/Sh)
(k)
|
Option
Awards (l)
|
Patrick
M. Fahey
|
12/17/08
|
--
|
--
|
--
|
6,750
|
6,750
|
6,750
|
--
|
--
|
$3.02
|
$1.05
|
Carol
E. Wheeler
|
12/17/08
|
--
|
--
|
--
|
4,500
|
4,500
|
4,500
|
--
|
--
|
3.02
|
1.05
|
Michael
J. Clementz
|
12/17/08
|
--
|
--
|
--
|
6,750
|
6,750
|
6,750
|
--
|
--
|
3.02
|
1.05
|
John
J. Dickson
|
12/17/08
|
--
|
--
|
--
|
6,750
|
6,750
|
6,750
|
--
|
--
|
3.02
|
1.05
|
Lyle
E. Ryan
|
12/17/08
|
--
|
--
|
--
|
6,750
|
6,750
|
6,750
|
--
|
--
|
3.02
|
1.05
|
(1)
|
Options
allow the grantee to purchase a share of Frontier Financial Corporation
common stock for the fair market value of a share of common stock on the
grant date. Options for Messrs. Fahey and Clementz are immediately
exercisable and have a ten year term. Options for Messrs.
Dickson and Ryan and Ms. Wheeler become exercisable after 3 years and have
ten year terms.
|
|
Column
(l) represents the aggregate FAS 123(R) values of options granted during
the year. The per-option FAS 123(R) grant date value was $1.05 each for
all options. There can be no assurance that the options will
ever be exercised (in which case no value will be realized by the
executive) or that the value on exercise will equal the FAS 123(R)
value.
|
|
|
|
|
Option
Awards
|
|
|
Stock
Awards
|
|
Name
|
Number
of
Securities
Underlying
Unexercised
Options
Exercisable
|
Number
of
Securities
Underlying
Unexercised
Options
Un-
exercisable
|
Equity
Incentive
Plan
Awards
Number
Of
Securities
Underlying
Un-
Exercised
Unearned
Options
|
Option
Exercise
Price
|
Option
Expiration
Date
|
Number
Of
Shares
or
Units
of
Stock
That
Have
Not
Vested
|
Market
Value
Of
Shares
or
Units
of
Stock
That
Have
Not
Vested
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units
or
Other
Rights
That
Have
Not
Vested
|
Equity
Incentive
Plan
Awards:
Market
or
Payout
Value
of
Unearned
Shares
Units
or
Other
Rights
That
Have
Not
Vested
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
|
|
|
|
|
|
|
|
|
|
Patrick
M. Fahey
|
6,750
|
|
|
$3.02
|
12/17/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carol
E. Wheeler
|
1,800
|
|
|
11.55
|
12/18/2012
|
|
|
|
|
|
2,250
|
|
|
14.67
|
12/16/2013
|
|
|
|
|
|
3,375
|
|
|
17.78
|
12/14/2014
|
|
|
|
|
|
3,375
|
|
|
21.50
|
12/20/2015
|
|
|
|
|
|
|
3,333
|
|
29.83
|
12/12/2016
|
|
|
|
|
|
|
4,500
|
|
18.76
|
12/11/2017
|
|
|
|
|
|
|
4,500
|
|
3.02
|
12/17/2018
|
129
|
$246
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
J. Clementz
|
6,750
|
|
|
14.67
|
12/16/2013
|
|
|
|
|
|
1,125
|
|
|
17.78
|
12/14/2014
|
|
|
|
|
|
5,625
|
|
|
17.77
|
12/14/2014
|
|
|
|
|
|
3,720
|
|
|
21.50
|
12/20/2015
|
|
|
|
|
|
3,030
|
|
|
21.50
|
12/20/2015
|
|
|
|
|
|
6,750
|
|
|
3.02
|
12/17/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OUTSTANDING
EQUITY AWARDS AT DECEMBER 31, 2008
|
|
|
|
Option
Awards
|
|
|
Stock
Awards
|
|
Name
|
Number
of
Securities
Underlying
Unexercised
Options
Exercisable
|
Number
of
Securities
Underlying
Unexercised
Options
Un-
exercisable
|
Equity
Incentive
Plan
Awards
Number
Of
Securities
Underlying
Un-
Exercised
Unearned
Options
|
Option
Exercise
Price
|
Option
Expiration
Date
|
Number
Of
Shares
or
Units
of
Stock
That
Have
Not
Vested
|
Market
Value
Of
Shares
or
Units
of
Stock
That
Have
Not
Vested
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units
or
Other
Rights
That
Have
Not
Vested
|
Equity
Incentive
Plan
Awards:
Market
or
Payout
Value
of
Unearned
Shares
Units
or
Other
Rights
That
Have
Not
Vested
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
|
|
|
|
|
|
|
|
|
|
John
J. Dickson
|
1,440
|
|
|
$10.22
|
12/20/2010
|
|
|
|
|
|
1,620
|
|
|
11.55
|
12/19/2011
|
|
|
|
|
|
1,800
|
|
|
11.55
|
12/18/2012
|
|
|
|
|
|
6,750
|
|
|
14.67
|
12/16/2013
|
|
|
|
|
|
5,625
|
|
|
17.77
|
12/14/2014
|
|
|
|
|
|
1,125
|
|
|
17.78
|
12/14/2014
|
|
|
|
|
|
3,030
|
|
|
21.50
|
12/20/2015
|
|
|
|
|
|
3,720
|
|
|
21.50
|
12/20/2015
|
|
|
|
|
|
|
3,333
|
|
29.83
|
12/13/2016
|
|
|
|
|
|
|
5,097
|
|
18.76
|
12/11/2017
|
|
|
|
|
|
|
6,750
|
|
3.02
|
12/17/2018
|
|
|
|
|
|
|
|
|
|
|
746
|
$1,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
788
|
|
|
9.78
|
12/15/2009
|
|
|
|
|
|
788
|
|
|
7.55
|
7/19/2010
|
|
|
|
|
|
1,800
|
|
|
10.22
|
12/20/2010
|
|
|
|
|
|
2,025
|
|
|
11.55
|
12/19/2011
|
|
|
|
|
|
2,250
|
|
|
11.55
|
12/18/2012
|
|
|
|
|
|
6,750
|
|
|
14.67
|
12/16/2013
|
|
|
|
|
|
5,625
|
|
|
17.77
|
12/14/2014
|
|
|
|
|
|
1,125
|
|
|
17.78
|
12/14/2014
|
|
|
|
|
|
3,720
|
|
|
21.50
|
12/20/2015
|
|
|
|
|
|
3,030
|
|
|
21.50
|
12/20/2015
|
|
|
|
|
|
|
3,333
|
|
29.83
|
12/12/2016
|
|
|
|
|
|
|
5,097
|
|
18.76
|
12/11/2017
|
|
|
|
|
|
|
6,750
|
|
3.02
|
12/17/2018
|
|
|
|
|
|
|
|
|
|
|
746
|
1,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
Awards
|
Stock
Awards
|
Name
|
Number
of
Shares
Acquired
on
Exercise
|
Value
Realized
on
Exercise
|
Number
of
Shares
Acquired
On
Vesting
|
Value
Realized
on
Vesting
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
Patrick
M. Fahey
|
--
|
--
|
--
|
--
|
Carol
E. Wheeler
|
--
|
--
|
130
|
$352
|
Michael
J. Clementz
|
--
|
--
|
--
|
--
|
John
J. Dickson
|
--
|
--
|
563
|
1,523
|
Lyle
E. Ryan
|
--
|
--
|
563
|
1,523
|
In
January 2007, we entered into change of control agreements with eight of our key
employees, including Messrs. Dickson and Ryan and Ms. Wheeler. The purpose of
these agreements is to assure continuity of management, to encourage continued
service in the event of a change of control and to ensure continued loyalty to
maximize shareholder value as well as the continued safe and sound operation of
the Corporation and the Bank.
The
agreements generally provide that in the event of a termination of employment in
connection with, or within 24 months after, a change of control, for reasons
other than cause, the executive will receive a lump sum payment seven months
after the discontinuance of employment in an amount equal to two times the
executive’s W-2 compensation before salary deferrals over the twelve months
prior to the effective date of the change of control (excluding any gains from
stock-based compensation) less statutory payroll deductions and will continue to
be covered by applicable medical and dental plans for 24 months following
termination of employment. In the event an executive, after attaining age 60,
voluntarily retires within 12 months following a change of control, the
executive shall receive a lump sum payment equal to one times W-2 compensation,
before salary deferrals (excluding any gains from stock-based compensation), and
will continue to be covered by applicable medical and dental plans for 12 months
following termination of employment.
In the
event an executive receives severance benefits under the agreement, the
executive will be restricted by a noncompetition and nonsolicitation period of
two years following termination of employment, all as set forth in the
agreement.
The
vesting of options, restricted stock awards and stock appreciation rights
granted under our 2006 Stock Option Plan will accelerate in the event of a
change of control.
All
Frontier employees, including our Named Executive Officers, are employed “at
will” and do not have employment agreements or rights to severance benefits,
with the exception of the change of control agreements. Frontier does
not have a pre-defined involuntary termination severance plan or policy for
employees, including executives. The Corporation’s practices in such situations
may include: (1) salary continuation dependent on the business reason for the
termination; (2) lump sum payment based on job level and service with the
Corporation; (3) paid health care coverage and COBRA payments for a limited
time; and (4) outplacement services.
The table
below reflects the amount of compensation we estimate would be paid to each of
the Named Executive Officers in the event of termination due to a change of
control assuming the officer was terminated effective as of December 31, 2008.
The actual amounts to be paid out can only be determined at the time of such
executive’s separation.
COMPENSATION
UPON TERMINATION FOLLOWING A CHANGE IN CONTROL
|
|
|
|
Medical
|
Option/
|
|
|
|
|
Dental
|
Awards
|
|
|
|
|
&
Vision
|
Vesting
|
|
|
Salary
|
Bonus
|
Coverage
|
Acceleration
|
Total
|
Name
|
($)
|
($)
|
($)
|
($)
|
($)
|
Carol
E. Wheeler
|
$378,000
|
--
|
$9,941
|
$246
|
$388,187
|
John
J. Dickson
|
735,000
|
--
|
9,941
|
1,425
|
746,366
|
Lyle
E. Ryan
|
531,300
|
--
|
9,941
|
1,425
|
542,666
|
The
Corporation will not provide gross-ups for the Named Executive Officers for any
taxes due under Section 4999 of the Code. The effects of Section 4999 generally
are unpredictable and can have widely divergent and unexpected effects based on
an executive’s personal compensation history. Therefore, to provide an equal
level of benefit across individuals without regard to the effect of the excise
tax, the Corporation determined that 4999 gross up payments are not appropriate
for the Corporation’s most senior level executives.
Frontier
Financial Corporation adopted its 2006 Stock Incentive Plan, (or “Stock Option
Plan”), effective as of January 1, 2006. The 2006 Plan replaced the
Corporation’s 1998 Incentive Stock Option Plan and 2001 Stock Award Plan. All
outstanding options under the prior Plans and current plan, which total
1,374,734 shares, are also included in the option information and tables in this
proxy statement.
The Stock
Option Plan provides that in the event of a change of control of Frontier
Financial Corporation or Frontier Bank, any unexercised options or SARs will
accelerate in connection with a change of control.
The Stock
Option Plan provides for incentive stock options (within the meaning of Section
422 of the Internal Revenue Code) for our employees and nonqualified stock
options for directors. All stock options granted have had an exercise price
equal to the estimated fair market value of our stock as of the date of grant.
No option may have a term of greater than ten years. No options to
Directors have been granted.
All
options granted to our Named Executive Officers are incentive stock options, to
the extent permissible under the Internal Revenue Code of 1986, as amended. The
exercise price per share of each option granted to our Named Executive Officers
was equal to the fair market value of our common stock as determined by our
Board of Directors on the date of the grant.
As of
December 31, 2008, there were options outstanding to purchase a total of
1,374,734 shares of our common stock under the Stock Option Plan and our prior
plans and 4,378,358 shares available for grant under the Stock Option
Plan.
The
Personnel and Compensation Committee of the Corporation has reviewed and
discussed the Compensation Discussion and Analysis required by Item 402(b)
of Regulation S-K with management and, based on such review and discussions, the
Personnel and Compensation Committee recommended to the Board that the
Compensation Discussion and Analysis be included in this Proxy
Statement.
Submitted
by members of the Personnel and Compensation Committee:
|
|
Mark
Zenger, Chair
David
Cuthill
Lucy
DeYoung
|
Edward
D. Hansen
Darrell
J. Storkson
|
The
following is the report of the Audit Committee with respect to Frontier
Financial Corporation’s audited financial statements for the fiscal year ended
December 31, 2008.
The Audit
Committee, comprised of independent directors, met with the independent
registered public accounting firm (the independent auditors), management and
internal auditors to assure that all were carrying out their respective
responsibilities. The Audit Committee discussed with and received a letter from
the independent auditors confirming their independence. Both the independent
auditors and the internal auditors had full access to the Committee, including
regular meetings without management present.
The Audit
Committee has reviewed and discussed the consolidated financial statements with
management and Moss Adams LLP, the Corporation’s independent accountants.
Management is responsible for the preparation, presentation and integrity of
Frontier Financial Corporation’s financial statements; accounting and financial
reporting principles; establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rule 13a-15(e)); establishing and
maintaining internal control over financial reporting (as defined in Exchange
Act Rule 13a-15(f)); evaluating the effectiveness of disclosure controls
and procedures; evaluating the effectiveness of internal control over financial
reporting; and evaluating any change in internal control over financial
reporting that has materially affected, or is reasonably likely to materially
affect, internal control over financial reporting. Moss Adams LLP is responsible
for performing an independent audit of the consolidated financial statements and
expressing an opinion on the conformity of those financial statements with
accounting principles generally accepted in the United States of
America.
Beginning
in fiscal year 2004, management implemented a process of documenting, testing
and evaluating the Corporation’s system of internal controls over financial
reporting in accordance with the requirements of the Sarbanes-Oxley Act of 2002.
The Audit Committee is kept apprised of the progress of the evaluation and
provides oversight and advice to management. In connection with this oversight,
the Audit Committee receives periodic updates provided by management and Moss
Adams LLP at Audit Committee meetings. The Audit Committee also holds regular
private sessions with Moss Adams LLP to discuss their audit plan for the year,
the results of their quarterly reviews and the annual integrated audit. At the
conclusion of the process, management provides the Audit Committee with, and the
Audit Committee reviews, a report on the effectiveness of the Corporation’s
internal control over financial reporting. The Audit Committee also reviewed the
report of management contained in the Corporation’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2008, filed with the SEC, as well as Moss
Adams LLP’s Report of Independent Registered Public Accounting Firm included in
the Corporation’s Annual Report on Form 10-K related to its integrated audit of
Frontier Financial Corporation’s fiscal 2008 consolidated financial statements
and financial statement schedule. The Audit Committee continues to oversee the
Corporation’s efforts related to its internal control over financial reporting
and management’s preparations for the evaluation.
The
Corporation has an Internal Audit and Credit Review Department that reports
directly to the Audit Committee. The Audit Committee reviews and approves the
internal audit plan once a year and receives periodic updates of internal audit
activity in meetings held at least quarterly throughout the year. Updates
include discussion of audit project results, quarterly assessment of internal
controls and risks of fraud.
The Audit
Committee has discussed with Moss Adams LLP the matters required to be discussed
by Statement on Auditing Standards No. 61, as amended, “Communication with
Audit Committees.” In addition, Moss Adams LLP has provided the Audit
Committee with the written disclosures and the letter required by the
Independence Standards Board Standard No. 1, as amended, “Independence
Discussions with Audit Committees,” and the Audit Committee has discussed with
Moss Adams LLP their firm’s independence.
Based on
its review of the consolidated financial statements and discussions with
management and Moss Adams LLP referred to above, the Audit Committee recommended
to the Board that the audited financial statements be included
in
Frontier
Financial Corporation’s Annual Report on Form 10-K for fiscal year 2008, for
filing with the Securities and Exchange Commission.
In
accordance with Audit Committee policy and the requirements of law, the Audit
Committee pre-approves all services to be provided by Frontier Financial
Corporation’s independent registered public accounting firm, Moss Adams LLP.
Pre-approval is required for audit services, audit-related services, tax
services and other services. In some cases, the full Audit Committee provides
pre-approval for up to a year, related to a particular defined task or scope of
work and subject to a specific budget. In other cases, the Chairman of the Audit
Committee has delegated authority from the Audit Committee to pre-approve
additional services, and such pre-approval is later reported to the full Audit
Committee. See “Audit and Nonaudit Fees” for more information regarding fees
paid to Moss Adams LLP for services in fiscal years 2008 and 2007.
Submitted
by members of the Committee:
|
|
Mark
Zenger, Chair
Lucy
DeYoung
|
David
M. Cuthill
Edward
C. Rubatino
|
|
The Board
of Directors has adopted a Code of Ethics for Senior Financial Officers, which
is applicable to the Board of Directors, Chief Executive Officer, Chief
Financial Officer, the other Named Executive Officers and other senior financial
officers designated from time to time by the Chief Executive Officer, in respect
of internal controls and public disclosures of the Corporation, violations of
the securities or other laws, rules or regulations and conflicts of interest.
The Code of Ethics is published on the Corporation’s website at
www.frontierbank.com.
To date,
there have not been any waivers by the Corporation of the Code of Ethics. Any
amendments to, or waivers under, the Code of Ethics which are required to be
disclosed by the rules of the Securities Exchange Commission (“SEC”) will also
be disclosed on the Corporation’s website.
This
proxy statement contains “forward-looking statements” as that term is defined in
the Private Securities Litigation Reform Act of 1995. These statements are based
on management’s current expectations and involve risks and uncertainties, which
may cause results to differ materially from those set forth in the statements.
The forward-looking statements may include statements regarding future
compensation costs or financial performance. Frontier Financial Corporation
undertakes no obligation to publicly update any forward-looking statement,
whether as a result of new information, future events, or otherwise.
Forward-looking statements should be evaluated together with the many
uncertainties that affect the Corporation’s business, particularly those
mentioned in the Risk Factors in Item 1A of the Corporation’s Form 10-K for the
year ended December 31, 2008, and in its periodic reports on Form 10-Q and Form
8-K, all of which the Corporation incorporates herein by reference.
Based
upon a review of reports and written representations furnished to it, the
Corporation believes that during fiscal 2008 all filings with the SEC by its
executive officers and directors complied with requirements for reporting
ownership and changes in ownership of the Corporation’s common stock pursuant to
Section 16(a) of the Securities Exchange Act of 1934.
Some of
our directors and officers and the business organizations with which they are
associated, have been customers of, and have had banking transactions with us,
in the ordinary course of our business, and we expect to have such banking
transactions in the future. All loans and commitments to loan included in such
transactions were made on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions with
other persons of similar creditworthiness and, in our opinion; these
transactions do not involve more than a normal risk of collectibility or present
other unfavorable features.
Policy
and Procedures for Approval of Related Party Transactions
We
recognize that related party transactions can present potential or actual
conflicts of interest and create the appearance that Corporation decisions are
based on considerations other than our best interests and our shareholders.
Therefore, our Board of Directors has adopted a formal, written policy with
respect to related party transactions.
For the
purpose of the policy, a “related party transaction” is a transaction in which
we participate and in which any related party has a direct or indirect material
interest, other than: (1) transactions available to all employees or customers
generally, (2) transactions involving less than $120,000 when aggregated with
all similar transactions or NASDAQ rules, or (3) loans made by Frontier Bank in
the ordinary course of business, made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
loans with persons not related to the lender and not involving more than the
normal risk of collectibility or presenting other unfavorable
features.
Under the
policy, any related party transaction must be reported to the Chief Financial
Officer and may be consummated or may continue only: (i) if the Audit Committee
approves or ratifies such transaction and if the transaction is on terms
comparable to those that could be obtained in arms’-length dealings with an
unrelated third party, (ii) if the transaction involves compensation that has
been approved by our Personnel and Compensation Committee, or (iii) if the
transaction has been approved by the disinterested members of the Board of
Directors. The Audit Committee may approve or ratify the related party
transaction only if the Committee determines that, under all of the
circumstances, the transaction is in the best interests of Frontier Financial
Corporation.
The
current policy was formalized and adopted in March, 2007. All related party
transactions since January 1, 2006 which were required to be reported in this
proxy statement, were approved by either the disinterested members of the Board
of Directors or the Personnel and Compensation Committee.
The
independent registered public accounting firm of Moss Adams LLP audited the
Corporation’s consolidated financial statements for fiscal 2008 and has been
similarly engaged for 2009. Representatives from Moss Adams LLP are expected to
be present at the Annual Meeting of Shareholders and will be given an
opportunity to make a statement and will be available to respond to appropriate
questions.
Audit
and Nonaudit Fees
The
following table presents fees for professional services rendered by Moss Adams
LLP for the audit of the Corporation’s annual financial statements for the
fiscal years ended December 31, 2008 and 2007, and fees billed for other
services rendered by Moss Adams LLP.
|
|
Fiscal
Years Ended
December
31,
|
|
|
|
2008
|
|
|
2007
|
|
Audit
Fees
|
|
$
|
334,500
|
|
|
$
|
284,500
|
|
Audit
Related Fees
|
|
|
72,795
|
|
|
|
42,500
|
|
Total
Audit and Related Fees
|
|
|
407,295
|
|
|
|
327,000
|
|
Tax
Fees
|
|
|
27,110
|
|
|
|
28,295
|
|
All
Other Fees
|
|
|
--
|
|
|
|
--
|
|
Total
Fees
|
|
$
|
434,405
|
|
|
$
|
355,295
|
|
Audit Fees
. Consist of fees
billed to the Corporation for professional services rendered by Moss Adams LLP
in connection with the integrated audit of the Corporation’s financial
statements and review of financial statements included in the Corporation’s
Forms 10-K and 10-Q or services to the Corporation in connection with statutory
or regulatory filings or engagements.
Audit Related Fees.
Consist of
fees relating to the audit of the Corporation’s 401(k) Savings and Profit
Sharing Plan, procedures related to Form S-4 and miscellaneous audit and
accounting matters.
Tax Fees.
Consist of fees
relating to preparation of the Corporation’s federal income tax return, general
tax consultations and miscellaneous tax questions.
All Other Fees
. There were no
other fees for services not included above for fiscal years ended 2008 and
2007.
The Audit
Committee is responsible for pre-approving all auditing services and permitted
nonaudit services to be performed for the Corporation by the independent
registered public accounting firm or any other independent registered public
accounting firm, except as provided in this paragraph. In no event shall the
independent registered public accounting firm perform any nonaudit services for
the Corporation, which are prohibited by Section 10A(g) of the Exchange Act or
of the SEC rules or the Public Corporation Accounting Oversight Board. The
Committee establishes general guidelines for the permissible scope and nature of
any permitted nonaudit services in connection with its annual review of the
audit plan and reviews such guidelines with the full Board. Pre-approval may be
granted by action of the full Committee or, in the absence of such Committee
action, by the Committee Chair whose action shall be considered to be that of
the entire Committee. Pre-approval shall not be required for the provision of
nonaudit services if: (i) the aggregate amount of all such nonaudit services
constitutes no more than 5% of the total amount of revenues paid by the
Corporation to the independent registered public accounting firm during the
fiscal year in which the nonaudit services are provided; (ii) such services were
not recognized by the Corporation at the time of engagement to be nonaudit
services and (iii) such services are promptly brought to the attention of the
Committee and approved prior to the completion of the audit. Approvals of
nonaudit service to be performed by the independent registered public accounting
firm and, if applicable, the guidelines pursuant to which such services were
approved, shall be disclosed when required as promptly as practicable in the
Corporation's quarterly or annual reports required by Section 13(a) of the
Exchange Act.
Any
shareholder wishing to communicate with the Corporation’s Board of Directors
should send its communication to the Secretary of the Corporation at Frontier
Financial Corporation, 332 S.W. Everett Mall Way, P.O. Box 2215, Everett, WA
98213.
Although
the Corporation does not have a formal policy regarding attendance by members of
the Board of Directors at the Corporation’s Annual Meeting of Shareholders, the
Corporation has always encouraged its Directors to attend and expects to
continue its policy. In 2008, all Directors attended the Annual Meeting of
Shareholders.
In order
for shareholder proposals to be included in the 2010 proxy materials and
considered at the 2010 Annual Meeting of Shareholders, proposals must be
received by the Secretary of the Corporation at Frontier Financial Corporation,
332 S.W. Everett Mall Way, P.O. Box 2215, Everett, Washington 98213, no later
than November 15, 2009. Any such proposals shall be subject to the requirements
of the proxy rules adopted by the Securities and Exchange Commission. In
addition, if the Corporation receives notice of a shareholder proposal after
November 10, 2009, the persons named as proxies in such proxy statement and form
of proxy will have discretionary authority to vote on such shareholder
proposal.
Availability
of Annual Report
The 2008
Annual Report of the Corporation was mailed to shareholders with this proxy
statement. The Corporation will furnish to shareholders without charge a copy of
its annual report on Form 10-K for the fiscal year ended December 31, 2008, as
filed with the Securities and Exchange Commission, upon receipt of written
request addressed to Shareholder Services, Frontier Financial Corporation, 332
S.W. Everett Mall Way, P. O. Box 2215, Everett,
WA 98213.
Important Notice Regarding the
Availability of Proxy Materials for the Annual Meeting of Shareholders to Be
Held on April 15, 2009.
This Proxy Statement, and Frontier Financial
Corporation’s Annual Report to Shareholders on Form 10-K for fiscal 2008 are
available electronically at www.frontierbank.com.
We
strongly encourage you to elect to receive future proxy materials electronically
in order to conserve natural resources and to help us reduce printing costs and
postage fees. With electronic delivery, you will be notified via e-mail as soon
as the proxy materials are available on the Internet and you can submit your
votes online. To sign up for electronic delivery:
1. go
to our website at www.frontierbank.com;
2. click
on the box, “Electronic Proxy”; and
3. follow
the directions provided to complete your enrollment.
Once you
enroll for electronic delivery, you will receive proxy materials electronically
as long as your account remains active or until you cancel your
enrollment.
No
Incorporation by Reference
In
Frontier Financial Corporation’s filings with the SEC, information is sometimes
“incorporated by reference.” This means that we are referring you to information
that has previously been filed with the SEC and the information should be
considered as part of the particular filing. As provided under SEC regulations,
the “Audit Committee Report” and the “Personnel and Compensation Committee
Report” contained in this Proxy Statement are not incorporated by reference into
any other filings with the SEC, except to the extent we specifically incorporate
either report by reference into a filing. In addition, this Proxy Statement
includes several website addresses. These website addresses are intended to
provide inactive, textual references only. The information on these websites is
not part of this Proxy Statement.
THE
ENCLOSED PROXY SHOULD BE COMPLETED, DATED, SIGNED AND RETURNED IN THE ENCLOSED
ENVELOPE. PROMPT MAILING OF THE PROXY WILL BE APPRECIATED.
By Order
of the Board of Directors,
Carol E.
Wheeler
Secretary
Frontier Finl Corp Wash (MM) (NASDAQ:FTBK)
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