Whidbey bank cancels planned sale to Frontier Financial

Washington Banking, owner of 19-branch Whidbey Island Bank, called off its planned sale to Everett-based Frontier Financial, blaming the larger company for not winning regulatory approval of a deal announced more than eight months ago.

A statement from Washington Banking on Tuesday said Frontier's inability to obtain the needed approval amounted to "a breach of Frontier's representations and warranties contained in the merger agreement."

Shares of both companies have fallen sharply since the deal was announced in late September.

Frontier Financial, the operator of 47 commercial-banking branches in Western Washington, planned to acquire Oak Harbor-based Washington Banking for about $191 million in cash and stock.

When the deal was announced, Washington Banking's shareholders were slated to get about 5.92 million Frontier shares and $42.9 million in cash, valuing their Oak Harbor-based company at $21.40 a share.

But Frontier stock, above $23 when the deal was announced, has been trading below $15 in recent weeks.

Washington Banking said in regulatory filings that their agreement called for Frontier to raise its payment if the stock it was using as currency declined below a certain threshold. But Frontier did not announce an increased offer.

Washington Banking shares closed today at $12.50, up 15 cents, or 1.2 percent. Frontier Financial closed at $14.54, down 32 cents, or 2.2 percent.