<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1995 Commission file number 33-9110
------------- -------
1st Community Bancorp, Inc.
-------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Michigan 38-2659066
------------------------------- --------------------------------------
(State or other jurisdiction of I.R.S. Employer Identification Number)
incorporation or organization)
109 East Division, Sparta, Michigan 49345 (616)887-7366
----------------------------------------- ---------------------------
(Address of principal executive offices) (Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
----- -----
As of June 30, 1995, the registrant had outstanding 387,436 shares of common
stock having a par value of $10 per share.
<PAGE> 2
INDEX TO FORM 10-QSB
<TABLE>
<CAPTION>
Page #
------
<S> <C>
PART I, Item 1, Financial Statements
Consolidated Balance Sheets (Unudited) 1- 2
Consolidated Statements of Income (Unaudited) 3- 4
Consolidated Statement of Shareholders' Equity (Unaudited) 5
Consolidated Statements of Cash Flows (Unaudited) 6
Notes to the Consolidated Financial Statements (Unaudited) 7-12
PART I, Item 2, Management's Discussion and Analysis of
Financial Condition and Results of Operations 13-21
PART II, Item 1, Legal Proceedings II- 1
PART II, Item 2, Changes in Securities II- 1
PART II, Item 3, Defaults Upon Senior Securities II- 1
PART II, Item 4, Submission of Matters to a Vote of
Security Holders II- 1
PART II, Item 5, Other Information II- 1
PART II, Item 6, Exhibits and Reports on Form 8-K II- 2
Signatures II- 3
Index to Exhibits II- 4
</TABLE>
<PAGE> 3
1ST COMMUNITY BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
June 30, 1995 and December 31, 1994
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and due from banks $ 2,890,000 $ 2,948,000
Securities available for sale (Note 2) 18,979,000 22,242,000
Securities held to maturity (fair value
of $9,358,000 at June 30, 1995, and
$7,949,000 at December 31, 1994) (Note 2) 9,186,000 8,168,000
Loans (Note 3) 75,056,000 69,410,000
Allowance for loan losses (Note 4) (1,088,000) (1,039,000)
------------ ------------
Net loans 73,968,000 68,371,000
Premises and equipment - net 2,524,000 2,510,000
Accrued interest receivable 778,000 851,000
Other assets 852,000 1,047,000
------------ ------------
TOTAL ASSETS $109,177,000 $106,137,000
============ ============
</TABLE>
See accompanying notes to the consolidated financial statements.
1
<PAGE> 4
1ST COMMUNITY BANCORP, INC.
CONSOLIDATED BALANCE SHEETS - Continued
June 30, 1995 and December 31, 1994
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
------------ -------------
(Unaudited)
<S> <C> <C>
LIABILITIES
Deposits
Demand $ 10,044,000 $ 10,966,000
Interest-bearing transaction accounts 25,428,000 28,287,000
Savings 9,696,000 10,838,000
Time 46,890,000 41,145,000
------------ ------------
Total deposits 92,058,000 91,236,000
Federal funds purchased 3,000,000 1,000,000
Accrued interest payable 323,000 291,000
Other liabilities 745,000 734,000
------------ ------------
Total liabilities 96,126,000 93,261,000
COMMITMENTS AND CONTINGENCIES (Note 5)
SHAREHOLDERS' EQUITY
Common stock, $10 par value; shares
authorized: 500,000; shares outstanding:
387,436 at June 30, 1995, and 405,760
at December 31, 1994 (Note 8) 3,874,000 4,058,000
Surplus 3,484,000 4,111,000
Retained earnings 5,736,000 5,266,000
Net unrealized depreciation on securities
available for sale, net of related tax benefit (13,000) (559,000)
Net unrealized depreciation on securities
held to maturity, net of related tax benefit (30,000) 0
------------ ------------
Total shareholders' equity 13,051,000 12,876,000
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $109,177,000 $106,137,000
============ ============
</TABLE>
See accompanying notes to the consolidated financial statements.
2
<PAGE> 5
1ST COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
For the three months and six months ended June 30,
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
----------------------------- -----------------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest income
Loans, including fees $1,746,000 $1,410,000 $3,328,000 $2,762,000
Securities
Taxable 311,000 331,000 636,000 669,000
Nontaxable 131,000 140,000 273,000 282,000
Other 1,000 1,000 3,000 3,000
---------- ---------- ---------- ----------
Total interest income 2,189,000 1,882,000 4,240,000 3,716,000
Interest expense
Deposits 929,000 750,000 1,792,000 1,507,000
Other 40,000 12,000 54,000 23,000
---------- ---------- ---------- ----------
Total interest expense 969,000 762,000 1,846,000 1,530,000
---------- ---------- ---------- ----------
Net interest income 1,220,000 1,120,000 2,394,000 2,186,000
Provision for loan losses 30,000 45,000 60,000 66,000
---------- ---------- ---------- ----------
Net interest income after provision
for loan losses 1,190,000 1,075,000 2,334,000 2,120,000
Other income
Service charges on deposit
accounts 83,000 70,000 148,000 134,000
Other service charges and fees 22,000 24,000 53,000 52,000
Net security gains 11,000 4,000 11,000 5,000
Mortgage loan sales and servicing 25,000 18,000 48,000 56,000
Other income 38,000 27,000 75,000 53,000
---------- ---------- ---------- ----------
Total other income 179,000 143,000 335,000 300,000
</TABLE>
See accompanying notes to the consolidated financial statements.
3
<PAGE> 6
1ST COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME - Continued
For the three months ended March 31,
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
----------------------------- -----------------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Other expenses
Salaries and wages $ 361,000 $ 329,000 $ 713,000 $ 664,000
Pension and other employee
benefits 66,000 68,000 150,000 145,000
Occupancy expense 50,000 45,000 100,000 88,000
Furniture and equipment expense 68,000 68,000 135,000 131,000
Other expenses (Note 6) 335,000 311,000 631,000 601,000
---------- ---------- ---------- ----------
Total other expenses 880,000 821,000 1,729,000 1,629,000
---------- ---------- ---------- ----------
Income before income tax 489,000 397,000 940,000 791,000
Income tax expense (Note 7) 121,000 90,000 232,000 177,000
---------- ---------- ---------- ----------
NET INCOME $ 368,000 $ 307,000 $ 708,000 $ 614,000
========== ========== ========== ==========
Earnings per share (Note 1) $ .94 $ .76 $ 1.77 $ 1.51
========== ========== ========== ==========
</TABLE>
See accompanying notes to the consolidated financial statements.
4
<PAGE> 7
1ST COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For the six months ended June 30, 1995 and 1994
(Unaudited)
<TABLE>
<CAPTION>
Net Unrealized
Appreciation/
(Depreciation)
--------------------------
Securities Securities
Common Retained Available Held to
Stock Surplus Earnings for Sale Maturity Total
---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balances at January 1,
1995 $4,058,000 $4,111,000 $5,266,000 $(559,000) $ 0 $12,876,000
Net income for the period 0 0 708,000 0 0 708,000
Purchase and retirement of
stock (184,000) (627,000) 0 0 0 (811,000)
Change in net unrealized
appreciation/
(depreciation) on
securities, net of tax 0 0 0 516,000 0 516,000
Reclassification of
securities from
available for sale
to held to maturity 0 0 0 30,000 (30,000) 0
Cash dividends ($.60 per
common share) 0 0 (238,000) 0 0 (238,000)
---------- ---------- ---------- --------- --------- -----------
Balances at June 30, 1995 $3,874,000 $3,484,000 $5,736,000 $ (13,000) $ (30,000) $13,051,000
========== ========== ========== ========= ========= ===========
Balances at January 1,
1994 $3,246,000 $4,111,000 $5,304,000 $ 293,000 $ 0 $12,954,000
Net income for the period 0 0 614,000 0 0 614,000
5 for 4 stock split 812,000 0 (812,000) 0 0 0
Change in net unrealized
appreciation/
(depreciation) on
securities, net of tax 0 0 0 (549,000) 0 (549,000)
Cash dividends ($.54 per
common share) 0 0 (217,000) 0 0 (217,000)
---------- ---------- ---------- --------- --------- -----------
Balances at June 30, 1994 $4,058,000 $4,111,000 $4,889,000 $(256,000) $ 0 $12,802,000
========== ========== ========== ========= ========= ===========
</TABLE>
See accompanying notes to the consolidated financial statements.
5
<PAGE> 8
1ST COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 30,
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Cash flows from operating activities
Net income $ 708,000 $ 614,000
Adjustments to reconcile net income to net cash
from operating activities
Net gain on sale of securities (11,000) (5,000)
Net amortization on securities 76,000 89,000
Loans originated for sale (942,000) (1,781,000)
Proceeds from loan sales 1,000,000 1,615,000
Provision for loan losses 60,000 66,000
Depreciation 111,000 116,000
Changes in:
Interest receivable and other assets 1,000 46,000
Interest payable and other liabilities 43,000 (104,000)
---------- ----------
Net cash from operating activities 1,046,000 656,000
Cash flows from investing activities Securities available for sale:
Proceeds from sales of securities 1,171,000 1,489,000
Proceeds from maturities of securities 1,636,000 3,357,000
Purchase of securities (588,000) (4,038,000)
Securities held to maturity:
Proceeds from maturities of securities 1,094,000 500,000
Purchase of securities (350,000) (795,000)
Net customer loan activity (5,983,000) (2,341,000)
Loans sold 302,000 595,000
Loans purchased (34,000) 0
Net expenditures for premises and equipment (125,000) (16,000)
---------- ----------
Net cash from investing activities (2,877,000) (1,249,000)
Cash flows from financing activities
Net increase in deposits 822,000 865,000
Increase (decrease) in federal funds purchased 2,000,000 50,000
Purchase and retirement of stock (811,000) 0
Cash dividends paid (238,000) (217,000)
---------- ----------
Net cash from financing activities 1,773,000 698,000
---------- ----------
Net change in cash and cash equivalents (58,000) 105,000
Cash and cash equivalents at beginning of period 2,948,000 2,071,000
---------- ----------
Cash and cash equivalents at end of period $2,890,000 $2,176,000
========== ==========
Supplemental disclosure of cash flow information Cash paid during the year for:
Interest $1,815,000 $1,555,000
Income taxes $ 200,000 $ 210,000
Securities with an amortized cost of $1,840,000 and a fair value of
$1,795,000 were reclassified from available for sale to held to maturity on
February 16, 1995.
</TABLE>
See accompanying notes to the consolidated financial statements.
6
<PAGE> 9
1ST COMMUNITY BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of the Registrant and
its wholly-owned subsidiary, Sparta State Bank, after elimination of significant
inter-company transactions and accounts. The statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information, prevailing practices within the banking industry and the
instructions to Form 10-QSB and Article 10 of Regulation S-B. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
The accompanying consolidated financial statements reflect all adjustments
ordinary in nature which are, in the opinion of management, necessary for a fair
presentation of the Consolidated Balance Sheets as of June 30, 1995 and December
31, 1994, the Consolidated Statements of Income for the six month periods ended
June 30, 1995, and June 30, 1994, and the Consolidated Statements of
Shareholders' Equity and Cash Flows for the six month periods ended June 30,
1995, and June 30, 1994. Operating results for the six months ended March 31,
1995, are not necessarily indicative of the results that may be expected for the
year ended December 31, 1995. The balance sheet at December 31, 1994, has been
derived from the audited financial statements at that date.
The accompanying consolidated financial statements should be read in conjunction
with the consolidated financial statements and footnotes thereto included in the
Registrant's annual report on Form 10-KSB for the year ended December 31, 1994.
Stock Transactions and Earnings and Cash Dividends Per Share
On April 28, 1995, the Registrant purchased 18,324 shares of 1st Community
Bancorp, Inc., common stock. The shares were returned to unissued status. On
April 13, 1994, the Registrant's Board of Directors declared a 5 for 4 stock
split which was effective for shareholders of record as of April 28, 1994. The
stock split was paid on May 16, 1994. In accordance with Accounting Research
Bulletin No. 43, the stock split was recorded at the par value of the shares
issued.
Earnings per share are based on the weighted average number of shares
outstanding during the year. The weighted average number of shares has been
adjusted for the 25% stock split in May 1994 and the purchase of 18,324 shares
of stock in April 1995. The weighted average number of shares was 392,873 for
the second quarter of 1995, 399,281 for the first six months of 1995, and
405,670 for the second quarter and first six months of 1994.
Cash dividends per share are based on the number of shares outstanding at the
time the dividend was paid. The shares outstanding has been adjusted for the 25%
stock split in May 1994 and the purchase of 18,324 shares of stock in April
1995. The number of shares outstanding were 387,436 for the cash dividend paid
in the second quarter of 1995 and 405,760 for the cash dividends paid in the
first quarter of 1995 and the first two quarters of 1994.
Impaired Loans
Effective January 1, 1995, the Registrant implemented Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of a
Loan." Statement No. 114 addresses the accounting by creditors for impairment of
a loan by
7
<PAGE> 10
1ST COMMUNITY BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Impaired Loans - Continued
specifying how allowances for credit losses related to certain loans should be
determined. A loan is classified as impaired when, based on the Registrant's
judgment of certain information regarding the loan, it is probable that the
Registrant will be unable to collect all amounts due according to the
contractual terms of the loan agreement. An allowance is allocated to an
impaired loan when the present value of future expected cash flows discounted at
the loan's effective interest rate is less than the recorded loan value.
Interest income on impaired loans is recognized to the extent of cash receipts.
The increase in the present value of the future expected cash flows that is
attributable to the passage of time is recognized as a charge or credit to bad
debt expense.
NOTE 2 - SECURITIES
Securities have been classified in the Consolidated Balance Sheets according to
management's intent. The amortized cost and approximate fair value of securities
at June 30, 1995, and December 31, 1994 were as follows:
<TABLE>
<CAPTION>
Gross Gross Approximate
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Securities Available for Sale
June 30, 1995
U.S. Treasuries and
U.S. Government agencies $ 6,570,000 $ 94,000 $ (24,000) $ 6,640,000
Obligations of states and
political subdivisions 5,265,000 37,000 (47,000) 5,255,000
U.S. Government agencies
backed by mortgages 6,278,000 33,000 (107,000) 6,204,000
Other securities 885,000 0 (5,000) 880,000
----------- -------- --------- -----------
Total $18,998,000 $164,000 $(183,000) $18,979,000
=========== ======== ========= ===========
December 31, 1994
U.S. Treasuries and
U.S. Government agencies $ 6,831,000 $ 4,000 $(213,000) $ 6,622,000
Obligations of states and
political subdivisions 7,613,000 18,000 (244,000) 7,387,000
U.S. Government agencies
backed by mortgages 7,757,000 8,000 (397,000) 7,368,000
Other securities 888,000 0 (23,000) 865,000
----------- -------- --------- -----------
Total $23,089,000 $ 30,000 $(877,000) $22,242,000
=========== ======== ========= ===========
Securities Held to Maturity
June 30, 1995
Nontaxable obligations of
states and political
subdivisions $ 9,186,000 $223,000 $ (51,000) $ 9,358,000
=========== ======== ========= ===========
</TABLE>
8
<PAGE> 11
1ST COMMUNITY BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)
NOTE 2 - SECURITIES - Continued
<TABLE>
<CAPTION>
Gross Gross Approximate
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Securities Held to Maturity - Continued
December 31, 1994
Nontaxable obligations of
states and political
subdivisions $ 8,168,000 $ 87,000 $(306,000) $ 7,949,000
=========== ======== ========= ===========
</TABLE>
Information regarding sales of securities available for sale for the six months
ended March 31, 1995, and 1994, follows.
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Proceeds from sales of securities $1,171,000 $1,489,000
Gross realized gains 11,000 5,000
Gross realized losses 0 0
</TABLE>
For the six months ended June 30, 1995, the change in net unrealized holding
gain or loss on securities available for sale was a increase of $828,000. There
were no sales or transfers of securities classified as held to maturity.
Securities with a book value of approximately $256,000 and $258,000 were pledged
as collateral for public deposits at June 30, 1995, and December 31, 1994,
respectively.
NOTE 3 - LOANS
Loans at June 30, 1995, and December 31, 1994, were classified as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
----------- ------------
<S> <C> <C>
Commercial $21,020,000 $17,936,000
Agricultural 9,094,000 8,994,000
Real estate mortgage - construction 282,000 237,000
Real estate mortgage - residential 28,214,000 27,489,000
Consumer 16,446,000 14,754,000
----------- -----------
Total $75,056,000 $69,410,000
=========== ===========
</TABLE>
Loans held for sale included $157,000 of residential real estate mortgages and
$940,000 of consumer loans as of June 30, 1995. Loans held for sale were
accounted for at the lower of aggregate cost or market.
9
<PAGE> 12
1ST COMMUNITY BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)
NOTE 3 - LOANS - Continued
The Registrant implemented Statement of Financial Accounting Standards No. 114,
"Accounting by Creditors for Impairment of a Loan," on January 1, 1995.
Information regarding impaired loans as of June 30, 1995, and December 31, 1994,
was as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
-------- ------------
<S> <C> <C>
Loans classified as impaired $324,000 $408,000
Less impaired loans for which no allowance for
credit losses has been established 324,000 408,000
-------- --------
Impaired loans for which an allowance for credit
losses has been determined $ 0 $ 0
======== ========
Allowance determined for above impaired loans $ 0 $ 0
======== ========
</TABLE>
Information regarding impaired loans for the six months ended June 30, 1995, was
as follows:
<TABLE>
<S> <C>
Average balance of impaired loans $363,000
Interest income recognized on impaired loans 10,000
Interest income recognized on a cash-basis on impaired loans 10,000
</TABLE>
NOTE 4 - ALLOWANCE FOR LOAN LOSSES
An analysis of changes in the allowance for loan losses for the six months ended
June 30, follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Balance at beginning of period $1,039,000 $1,000,000
Provision charged to operating expense 60,000 66,000
Recoveries credited to the allowance 29,000 15,000
Loans charged-off (40,000) (56,000)
---------- ----------
Balance at end of period $1,088,000 $1,000,000
========== ==========
</TABLE>
NOTE 5 - COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS OF CREDIT RISK
Noninterest-bearing deposits totaling approximately $1,556,000 were held at NBD
Bank at June 30, 1995.
As of June 30, 1995, the Registrant had outstanding commitments to make loans
totaling $4,970,000, the majority of which have variable interest rates. The
Registrant had approximately $2,090,000 of unused lines of credit and $10,000 in
letters of credit at June 30, 1995.
10
<PAGE> 13
1ST COMMUNITY BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)
NOTE 6 - OTHER EXPENSES
Other expenses for the six months ended June 30, follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
FDIC insurance $103,000 $101,000
Computer processing 78,000 79,000
Supplies and postage 73,000 58,000
Legal and professional 84,000 83,000
Other 293,000 280,000
-------- --------
Total $631,000 $601,000
======== ========
</TABLE>
NOTE 7 - INCOME TAX EXPENSE
The components of income tax expense for the six months ended June 30, were as
follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Current income tax expense $233,000 $191,000
Deferred income tax expense/(benefit) (1,000) (14,000)
-------- --------
Income tax expense $232,000 $177,000
======== ========
</TABLE>
The difference between the financial statement tax provision and amounts
computed by applying the federal income tax rate to pre-tax income is
principally attributable to tax exempt interest income.
The components of deferred tax assets and liabilities at June 30, 1995, and
December 31, 1994, were as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
-------- ------------
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses $265,000 $249,000
Postretirement benefits obligation 93,000 91,000
Deferred loan fees 64,000 83,000
Deferred compensation 50,000 47,000
Unrealized depreciation on securities available
for sale 7,000 288,000
Other 59,000 45,000
-------- --------
Total deferred tax assets 538,000 803,000
</TABLE>
11
<PAGE> 14
1ST COMMUNITY BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)
NOTE 7 - INCOME TAX EXPENSE - CONTINUED
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
-------- ------------
<S> <C> <C>
Deferred tax liabilities:
Depreciation 177,000 175,000
Pension fund asset 92,000 96,000
Other 11,000 9,000
-------- --------
Total deferred tax liabilities 280,000 280,000
-------- --------
Net deferred tax asset $258,000 $523,000
======== ========
</TABLE>
A valuation allowance related to a deferred tax asset is recognized when it is
considered more likely than not that part or all of the deferred tax benefits
will not be realized. Management has determined that no such allowance was
required at June 30, 1995.
NOTE 8 - STOCK REPURCHASE
The Registrant repurchased 18,324 shares of its stock at $44.25 per share on
April 28, 1995, which left 387,436 shares outstanding after the repurchase. The
total amount paid for the stock was $811,000. The shares repurchased represented
4.5% of the shares outstanding prior to the repurchase.
12
<PAGE> 15
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion is designed to provide a review of the financial
condition and results of operations of 1st Community Bancorp, Inc. (the
"Registrant") and its wholly-owned subsidiary, Sparta State Bank (the "Bank").
This discussion should be read in conjunction with the consolidated financial
statements and related footnotes.
Net Income and Return on Average Assets and Shareholders' Equity
The Registrant's net income increased $61,000 or 20% in the second quarter of
1995 compared to 1994 and is up $94,000 or 15% in the first six months of 1995
compared to the prior year. The improvement in both the second quarter and first
half of 1995 resulted from higher net interest income, the effect of which was
partially offset by growth in other expenses.
The growth in net interest income in 1995 has been caused by a wider spread
between interest rates earned on interest earning assets and interest rates paid
on interest-bearing liabilities than in the prior year. Much of this resulted
from an increase in the balance of the Registrant's loan portfolio. The growth
in total other expenses in 1995 was due to general increases in other expenses.
The return on average assets was 1.35% for the first six months of 1995,
compared to 1.18% for 1994. The return on average shareholders' equity was
10.95% for the first half of 1995, compared to 9.58% in the prior year.
Cash and Stock Dividends
Cash dividends declared in the second quarter of 1995 were $124,000 or $.32 per
common share, which represents a $.04 per share or 14% increase compared to the
dividend paid in the same period in the prior year. The cash dividends paid in
the first six months of 1995 were $238,000 or $.60 per share, which was $.06 per
share or 11% more than the dividend paid in the same period in 1994. The cash
dividend payout percentage in the first half of 1995 was 33.57%, compared to
35.41% in 1994.
As was noted in Footnote 1 to the Consolidated Financial Statements, the
Registrant's Board of Directors declared a 5 for 4 stock split at its April 13,
1994 meeting. The split, payable to shareholders of record as of April 28, 1994,
was paid on May 16, 1994.
Interest Income and Expense
Tables 1 and 2 on the following two pages provide pertinent information
regarding interest income and expense for the six month periods ended June 30,
1995, and June 30, 1994. Table 1 documents average balances and interest income
and expense, as well as the average rates earned or paid on assets and
liabilities. Table 2 documents the effect on interest income and expense of
changes in volume (average balance) and interest rates. These tables will be
referred to in the discussion of interest income, interest expense and net
interest income.
13
<PAGE> 16
PART I - Continued
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations - Continued
Table 1 - Average Balances and Tax Equivalent Interest Rates
<TABLE>
<CAPTION>
For the six months ended June 30,
-------------------------------------------------------------------------------
1995 1994
--------------------------------- ----------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
------- -------- ------- ------- -------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets
Loans (1) $ 70,623 $3,344 9.47% $ 66,906 $2,771 8.28%
Taxable securities (2) 19,691 636 6.30 22,792 669 5.89
Nontaxable securities (1)(2) 9,714 414 8.48 9,286 427 9.28
Other 102 3 5.88 176 3 3.41
-------- ------ -------- ------
Interest earning assets 100,130 4,397 8.78 99,160 3,870 7.81
------ ------
Non interest earning assets 6,194 5,691
-------- --------
Total assets $106,324 $104,851
======== ========
Liabilities and Shareholders' Equity
Interest-bearing transaction
accounts $ 26,572 482 3.63 $ 30,235 436 2.88
Savings deposits 10,206 122 2.39 11,811 142 2.40
Time deposits 43,539 1,188 5.46 38,653 929 4.81
Federal funds purchased 1,656 54 6.52 1,199 23 3.84
-------- ------ -------- ------
Interest-bearing liabilities 81,973 1,846 4.50 81,898 1,530 3.74
------ ----- ------ -----
Non interest-bearing liabilities 11,317 10,025
Shareholders' equity 13,034 12,928
-------- --------
Total liabilities and
shareholders' equity $106,324 $104,851
======== ========
Net interest income (tax-equivalent
basis) - interest spread 2,551 4.28% 2,340 4.07%
===== =====
Tax equivalent adjustment (1) (157) (154)
------ ------
Net interest income $2,394 $2,186
====== ======
Net interest income as a percentage
of earning assets (tax-equivalent
basis) 5.10% 4.72%
===== =====
</TABLE>
(1) Interest on nontaxable securities and loans has been adjusted to a fully
tax-equivalent basis to facilitate comparison to the taxable interest
earning assets. The adjustment uses an incremental tax rate of 34% for the
years presented.
(2) The average balance includes the effect of unrealized
appreciation/depreciation on securities, while the average rate was
computed on the average amortized cost of the securities.
14
<PAGE> 17
PART I - Continued
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations - Continued
Table 2 - Changes in Tax Equivalent Net Interest Income
<TABLE>
<CAPTION>
For the six months ended June 30,
---------------------------------
1995 Over 1994
--------------
Total Volume Rate
----- ------ ----
(Dollars in thousands)
<S> <C> <C> <C>
Increase (decrease) in interest income (1)
Loans (2) $ 573 $ 160 $ 413
Taxable securities (33) (84) 51
Nontaxable securities (2) (13) 21 (34)
Other 0 (2) 2
----- ----- -----
Net change in tax-equivalent income 527 95 432
Increase (decrease) in interest expense (1)
Interest-bearing transaction accounts 46 (57) 103
Savings deposits (20) (19) (1)
Time deposits 259 125 134
Federal funds purchased 31 11 20
----- ----- -----
Net change in interest expense 316 60 256
----- ----- -----
Net change in tax-equivalent
net interest income $ 211 $ 35 $ 176
===== ===== =====
</TABLE>
(1) The volume variance is computed as the change in volume (average balance)
multiplied by the previous year's interest rate. The rate variance is computed
as the change in interest rate multiplied by the previous year's volume (average
balance). The change in interest due to both volume and rate has been allocated
to the volume and rate changes in proportion to the relationship of the absolute
dollar amounts of the change in each.
(2) Interest on nontaxable investment securities and loans has been adjusted to
a fully tax-equivalent basis using an incremental tax rate of 34% for the
periods presented.
15
<PAGE> 18
PART I - Continued
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations - Continued
Net Interest Income
As shown in Tables 1 and 2, tax equivalent net interest income increased
$211,000 in the first six months of 1995 compared to 1994. The increase resulted
from growth in the spread between interest rates earned on interest earning
assets and rates paid on interest-bearing liabilities.
The increase in general market interest rates which occurred from the first
quarter of 1994 through the first quarter of 1995 caused almost all of the
Registrant's average rates to be higher in 1995 than in the prior year. The
average prime lending rate in the first half of 1995 was 9.00%, compared to
6.46% in 1994. This has affected those loans whose rates float with the prime
rate, which includes most of the commercial and agricultural loan portfolios and
part of the consumer loan portfolio. Rates earned on adjustable rate mortgages
have been rising significantly over the prior year due to an increased
short-term Treasury Bill rate which serves as their base. The rate earned on
taxable securities rose as a result of the general market increase. The decrease
in the nontaxable securities rate was caused by maturities of higher yielding
securities in the last half of 1994 and the first half of 1995.
The rise in general market interest rates caused increases in all
interest-bearing liability categories in 1995 except for savings deposits. Rates
paid on interest-bearing transaction accounts and time deposits rose as a result
of competitive pressures in the Bank's market area. In spite of the rising trend
in general market rates, rates paid on savings deposits did not increase in the
Bank's market area in the first half of 1995.
Table 1 documents that the net interest income spread was 4.28% for the first
six months of 1995, which represented a 21 basis point increase over the prior
year. As rates earned on loans and securities increased in 1994, management
strengthened the net interest income spread by raising rates paid on deposit
accounts no faster than was necessitated by competition within its market area.
As the increase in general market rates has slowed in the first quarter of 1995
and virtually stopped in the second quarter, management has maintained the net
interest spread by (1) emphasizing loan growth and (2) holding steady the rates
paid on deposit accounts except for special time certificate rate promotions.
Management has attempted to stimulate loan demand through an officer calling
program in the commercial and agricultural loans categories, direct consumer
loan promotions and a new dealer reserve program for indirect loans.
In response to a decrease in short-term interest rates by the Federal Reserve
Bank in early July 1995, the Bank dropped its prime lending rate from 9.00% to
8.75% on July 7, 1995. Management anticipates that short-term interest rates may
experience another small increase in the third quarter of 1995 and be steady in
the fourth quarter. This will have a negative impact on the interest rate yield
on loans. The Bank will attempt to maintain its desired interest rate spread for
the remainder of 1995 in two ways. First, the Bank will continue to emphasize
loan growth to obtain the highest yield on its investable funds. Secondly, the
Bank may decrease interest rates paid on deposit accounts where possible.
Table 1 shows growth over $3,700,000 in the average loans balance from 1994 to
1995 and a $3,100,000 decline in the average balance of taxable securities.
Maturities of taxable securities have been used to fund loan growth since the
Bank has experienced little deposit growth in 1995. The deposit mix changed
significantly from 1994 to 1995 as the average balance of time deposits grew
almost $4,900,000, while interest-bearing transaction accounts and savings
deposits declined just over $5,250,000. The transfer of balances into the time
deposits category reflected
16
<PAGE> 19
PART I - Continued
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations - Continued
Net Interest Income - Continued
depositors' preference for the higher interest rates offered by this type of
account. Part of the transfer was also due to depositor response to special
interest rate promotions on time certificates in the first two quarters of 1995.
Allowance and Provision for Loan Losses
The allowance for loan losses increased $49,000 from December 31, 1994, to June
30, 1995. The allowance was 1.45% of gross loans at June 30, 1995, compared to
1.50% at December 31, 1994. The provision for loan losses was lower in the
second quarter of 1995 than 1994, while the provision for the first half of 1995
was approximately the same as the prior year. Although net chargeoffs in the
first six months of 1995 were less than the prior year, the provision for the
period has remained about the same as 1994 due to an allowance for loan losses
provided for the loan growth experienced in 1995.
Chargeoffs and recoveries for those loan categories with activity in the periods
ended June 30 are listed below. There were no chargeoffs or recoveries in the
agricultural or construction real estate mortgage loan categories in the first
half of 1995 or 1994.
<TABLE>
<CAPTION>
1995 1994
---- ----
Chargeoffs Recoveries Chargeoffs Recoveries
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Commercial $ 2,000 $ 6,000 $ 0 $ 0
Real estate mortgage -
residential 3,000 0 11,000 0
Consumer 35,000 23,000 45,000 15,000
-------- ------- -------- -------
$ 40,000 $29,000 $ 56,000 $15,000
======== ======= ======== =======
</TABLE>
The amount of chargeoffs which the Bank will experience in the remainder of 1995
will be dependent on the extent to which business and consumer borrowers are
affected by the local economy. As chargeoffs, changes in the level of
nonperforming loans, and loan growth occur in the remainder of 1995, the
provision and allowance for loan losses will be reviewed by the Bank's
management and adjusted as believed necessary.
The Registrant implemented Statement of Financial Accounting Standards No. 114,
"Accounting by Creditors for Impairment of a Loan" on January 1, 1995. Statement
No. 114 addresses the accounting by creditors for impairment of a loan by
specifying how allowances for credit losses related to certain loans should be
determined. A loan is classified as impaired when it is believed probable that
all amounts due will not be collected according to the contractual terms of the
loan agreement. An allowance for credit losses is allocated to an impaired loan
when the present value of future expected cash flows discounted at the loan's
effective interest rate is less than the recorded cash value. The implementation
of Statement No. 114 was not material to the Registrant's allowance for loan
losses.
Securities
Securities available for sale decreased $862,000 in the second quarter of 1995
and have been reduced $3,263,000 in the first half of 1995. Securities held to
maturity declined $775,000 in the second quarter of 1995 after growing
$1,793,000 in the first quarter of the year. Part of the decrease in securities
available for sale and the first quarter increase in securities held to maturity
was due to a reclassification of
17
<PAGE> 20
PART I - Continued
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations - Continued
Securities - Continued
$1,795,000 of nontaxable obligations of states and political subdivisions from
the available for sale classification to held to maturity. Management believed
that the reclassification was prudent since management had both the positive
intent and ability to hold the securities to maturity.
Management anticipates the balance in both securities categories will decline in
the remainder of 1995. This is based on the belief that loan growth will
continue to exceed deposit growth and maturing funds from securities will be
used to supplement deposits.
The market value of securities available for sale declined significantly in 1994
as a result of rising general market interest rates. This trend began to reverse
in the first quarter of 1995 and continued in the second quarter as stable
interest rates for securities caused the market values for securities to
increase. The net unrealized loss on securities available for sale decreased
from $843,000 at December 31, 1994, to $19,000 at June 30, 1995. Management
anticipates the unrealized loss will change to an unrealized gain in the second
half of 1995. However, management does not expect a dollar change in the second
half to the extent experienced in the first six months of 1995.
Loans
Total loans grew $4,252,000 in the second quarter of 1995 after experiencing an
increase of $1,394,000 in the first quarter. Commercial, residential real estate
mortgages and consumer loans experienced increases of $2,150,000, $1,151,000 and
$1,347,000, respectively in the second quarter. The growth in commercial loans
resulted from a continued strong local economy which has increased loan demand
and the Bank's officer call program which has concentrated on business
customers. The increase in residential real estate mortgages was due to
declining long-term interest rates, which have stimulated demand in the mortgage
area. The higher consumer loan balance was primarily caused by increased
indirect automobile lending, which has been stimulated by a new dealer reserve
program.
Loan growth in the remainder of 1995 will be affected primarily by interest
rates and by competition within the Bank's local market area. The officer call
program will continue to be used for commercial and agricultural loans to
attempt to continue and stimulate demand. The 25 basis point drop in the Bank's
prime lending rate in early July 1995 may also bolster loan demand. New
marketing strategies are being formulated to enable the Bank to be more
competitive in residential real estate mortgage lending. In the consumer loan
category, loan promotions are being used to stimulate demand for direct loans
while management will continue to emphasize development of its indirect loan
portfolio. The consumer loans balance will be affected by the anticipated sale
of the Bank's student loan portfolio in the third quarter of 1995. The balance
of the student loan portfolio was $940,000 as of June 30, 1995.
The Registrant implemented Statement of Financial Accounting Standards No. 114,
"Accounting by Creditors for Impairment of a Loan," on January 1, 1995. The
statement requires that management review the loan portfolio for possible
impaired loans. In addition to this requirement, management also monitors the
portfolio for nonperforming loans. Nonperforming loans are comprised of (1)
loans accounted for on a non-accrual basis, (2) loans, not included in
non-accrual loans, which are contractually past due 90 days or more as to
interest or principal payments, and (3) loans, not included in non-accrual or
loans past due 90 days or more, which are considered troubled debt
restructurings. The balances of the three nonperforming categories as of June
30,
18
<PAGE> 21
PART I - Continued
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations - Continued
Loans - Continued
1995, and December 31, 1994, were as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
-------- ------------
<S> <C> <C>
Loans accounted for on a non-accrual basis $272,000 $640,000
Loans, not included in non-accrual loans, which are
contractually past due 90 days or more as to
interest or principal payments 69,000 100,000
Loans, not included in non-accrual or loans past due
90 days or more, which are considered troubled
debt restructurings 85,000 87,000
-------- --------
Total $426,000 $827,000
======== ========
</TABLE>
Deposits
Total deposits increased $811,000 in the second quarter of 1995, after
experiencing no growth in the first quarter of 1995. Management believes the
lack of growth continues to be due to a very competitive interest rate
environment for depositors' funds. Although the Bank had special time
certificate interest rate promotions in March and June of 1995, the interest
rates paid by the Bank on its deposit products are lower than some of its
competitors. The Bank's alternative investment products have also affected
deposit growth as funds for some of the products sold by the Bank have come from
customers' deposit accounts.
The balance of time deposits grew $2,822,000 in the second quarter of 1995 which
continued the good growth experienced in the previous quarter. The other three
deposit categories decreased from March 31, 1995, to June 30, 1995. This
represents a continuation of the trend which began in 1994. Depositors are
shifting their funds to time deposits to gain the higher rates paid on this type
of account. The Bank's special time certificates interest rate promotions also
caused some depositors to move funds from the other deposit categories.
The Bank's management anticipates that it may decrease interest rates paid on
some types of deposit accounts in the third quarter of 1995. This would help to
maintain its interest rate spread in response to the drop in short-term lending
rates in early July 1995. However, any pressure to decrease rates will be offset
by the Bank's need to secure deposits to fund anticipated loan growth. The
Bank's Asset/Liability Committee will review deposit rates to determine which is
the more desired course of action.
Shareholders' Equity
Total shareholders' equity decreased $308,000 in the second quarter of 1995, in
contrast to an increase of $483,000 in the first quarter. The second quarter
decline resulted from the Registrant's purchase of its stock for $811,000. The
increase in the first quarter of 1995 and an offset to the purchase effect in
the second quarter was the Registrant's retention of earnings and a reduction in
net unrealized depreciation on securities available for sale. The reduction in
the net unrealized depreciation was due to steady interest rates on securities,
which allowed securities' market values to increase.
19
<PAGE> 22
PART I - Continued
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations - Continued
Shareholders' Equity - Continued
Shareholders' equity as a percentage of assets was 11.95% as of June 30, 1995,
which represents a slight decrease from 12.13% as of December 31, 1994. The
minimum regulatory capital percentages are 3% for the leverage ratio, 4% for the
Tier 1 capital ratio and 8% for the total risk-based capital ratio. The
Registrant's regulatory capital levels as of June 30, 1995, follows:
<TABLE>
<CAPTION>
Capital Capital as % of
amount risk adjusted assets
----------- --------------------
<S> <C> <C>
Leverage capital $13,094,000 11.99%
Tier 1 capital $13,094,000 17.43%
Total risk-based capital (Tier 1 and Tier 2
combined) $14,182,000 18.88%
</TABLE>
Capital Resources
The Registrant decreased its capital $811,000 on April 28, 1995, as a result of
the repurchase of 18,324 shares of its stock. In June 1995, the Bank signed a
letter of intent to purchase a local insurance agency. No purchase price has yet
been finalized for the agency. Management is conducting preliminary
investigations into the acquisition of banks and insurance agencies and into
branching. No agreements have been reached as a result of these preliminary
investigations. Management has no other immediate plans for substantial use of
its capital resources. However, management believes that the current level of
capital is adequate to take advantage of potential opportunities that may arise
for the Registrant or the Bank.
As of April 1, 1995, banking laws in the State of Michigan were amended to
permit banks to compete directly with insurance agencies and investment
companies. The Bank has formed a subsidiary to assist in any expansion of
insurance or investment products. The subsidiary may be used in the purchase of
the local insurance agency mentioned in the above paragraph. Management is
continuing to review its opportunities in these new service areas.
Liquidity and Rate Sensitivity
Cash and cash equivalents increased $401,000 in the second quarter of 1995. The
increase was due to a higher balance that was due from the Bank's correspondent
banks. The Registrant's management believes that the current level of liquidity
is sufficient to meet the Bank's normal operating needs. This belief is based
upon the availability of deposit growth, maturities of securities, normal loan
repayments, income retention, federal funds which can be purchased from
correspondent banks and advances available from the Federal Home Loan Bank of
Indianapolis.
Table 3 on page 21 presents the maturity and repricing schedule for the
Registrant's rate-sensitive assets and liabilities for selected time periods.
The Registrant's cumulative rate-sensitive liabilities exceeded its cumulative
rate-sensitive assets by $6,589,000 at the one year repricing point as of June
30, 1995. The negative amount at the end of the second quarter was due primarily
to the classification of all interest-bearing transaction accounts and savings
deposits in the 0 to 3 month repricing category. These rates paid on these
deposit types can be immediately repriced; management will determine the rates
necessary based on competitive rates and the need for deposited funds.
20
<PAGE> 23
PART I - Continued
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations - Continued
Liquidity and Rate Sensitivity - Continued
Table 3 - Maturities and Repricing Schedule
<TABLE>
<CAPTION>
As of June 30, 1995
-------------------
0 - 3 3 - 12 1 - 5 Over
Months Months Years 5 Years Total
-------- -------- ------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Assets
Loans $ 23,461 $ 23,655 $19,249 $ 8,691 $ 75,056
Interest-bearing deposits
with banks 40 0 0 0 40
Taxable securities 615 2,066 9,530 6,768 18,979
Nontaxable securities (1) 200 1,066 3,507 4,413 9,186
-------- -------- ------- ------- --------
Rate-sensitive assets 24,316 26,787 32,286 19,872 103,261
Liabilities
Interest-bearing transaction
accounts 25,428 0 0 0 25,428
Savings deposits 9,696 0 0 0 9,696
Time deposits 7,010 12,558 27,322 0 46,890
Federal funds purchased 3,000 0 0 0 3,000
-------- -------- ------- ------- --------
Rate-sensitive liabilities 45,134 12,558 27,322 0 85,014
-------- -------- ------- ------- --------
Rate-sensitive assets
less rate-sensitive
liabilities
Asset (liability) gap
for the period $(20,818) $ 14,229 $ 4,964 $19,872 $ 18,247
======== ======== ======= ======= ========
Cumulative asset
(liability) gap $(20,818) $ (6,589) $(1,625) $18,247
======== ======== ======= =======
Cumulative rate-
sensitive assets as
a percentage of
cumulative rate-
sensitive
liabilities 53.87% 88.58% 98.09% 121.46%
====== ====== ======= =======
</TABLE>
The Registrant's management is aware of the inherent interest rate risk
associated with gap management. With interest rate fluctuations expected in the
next 3 to 12 months, the relationship between rate-sensitive assets and
liabilities will be monitored by management and changes in the assets and
liabilities will be made when deemed necessary. In the remainder of 1995 where
interest rates are expected to be slightly decreasing in the third quarter and
steady in the fourth quarter, management will attempt to raise the rates paid on
rate-sensitive liabilities more slowly than the rates earned on rate-sensitive
assets.
21
<PAGE> 24
PART II
Item 1. Legal Proceedings
There are no pending legal proceedings to which the Registrant or its
subsidiary, Sparta State Bank, is a party or which any of their property is
subject, except for proceedings which have arisen in the ordinary course of
business. In the opinion of management, pending legal proceedings will not have
a material effect on the consolidated financial statements of the Registrant or
its subsidiary as of and for the six month period ended June 30, 1995.
Item 2. Changes in Securities
During the quarter ended June 30, 1995, there were no changes in the
Registrant's securities which would cause any shareholder's rights to be
materially modified, limited or qualified. Note 8 on page 12 documents the
purchase of 18,324 shares of the Registrant's stock on April 28, 1995, which did
not cause any shareholders' rights to be materially modified, limited or
qualified.
Item 3. Defaults Upon Senior Securities
There have been no defaults involving senior securities on the part of the
Registrant.
Item 4. Submission of Matters to a Vote of Security Holders
On April 27, 1995, the annual meeting of the Registrant was held. The following
directors were elected by the shareholders to serve for a three year term to
expire at the 1998 annual meeting:
<TABLE>
<CAPTION>
Votes For Votes Withheld
--------- --------------
<S> <C> <C>
Lawrence D. Bradford 318,568 2,605
Lewis G. Emmons 308,851 8,148
Frank G. Berris 314,394 2,605
Stuart Goodfellow 314,394 2,605
</TABLE>
There were no abstentions in the above voting for directors. Directors Jae M.
Maxfield, Linda R. Pitsch and Jon E. Pike have terms of office that continue
until the 1996 annual meeting. The terms of directors Dr. L. Edmond Eary, Jr.,
Walter Hill, Andrew Zamiara and William F. Cutler, Jr., run through the 1997
annual meeting.
The shareholders also approved Crowe Chizek & Company as the Registrant's
Certifying Accountant for the 1995 calendar year. There were 321,438 votes cast
for the approval. No votes were cast against the approval and there were no
abstentions.
Item 5. Other Information
Sparta State Bank, the Registrant's wholly owned subsidiary, has signed a letter
of intent to purchase Bradford Insurance Centre, Ltd., which is a local
independent insurance agency in Sparta, Michigan. The purchase is contingent on
Sparta State Bank and Bradford Insurance Centre, Ltd., entering into a
definitive acquisition or merger agreement. The acquisition or merger agreement
is expected to be executed in the third quarter of 1995 and the purchase is
expected to be completed by the end of 1995.
II-1
<PAGE> 25
PART II - Continued
Item 6. Exhibits and Reports on Form 8-K
1. Exhibits required by Item 601 of Regulation S-B
See Index to Exhibits
2. Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended June 30, 1995.
II-2
<PAGE> 26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized
1st Community Bancorp, Inc.
Date August 8, 1995 /s/ Jae M. Maxfield
-------------- -------------------
President and Chief Executive Officer
Date August 8, 1995 /s/ Thomas L. Lampen
-------------- --------------------
Treasurer
II-3
<PAGE> 27
INDEX TO EXHIBITS
The following exhibits are filed or incorporated by reference as part of this
report:
<TABLE>
<S> <C>
2 Plan of Purchase, Sale, Reorganization, Arrangement, Liquidation or
Succession - Not applicable
4 Instruments Defining the Rights of Security Holders, Including
Indentures - Not applicable
10 Material Contracts - Not applicable
11 Statement Regarding Computation of Per Share Earnings - See Notes to
the Consolidated Financial Statements, Note #1, Stock Dividend and
Earnings and Cash Dividends Per Share Paragraph
15 Letter on Unaudited Interim Financial Information - Not applicable
18 Letter on Change in Accounting Principles - Not applicable
19 Report Furnished to Security Holders - Not applicable
22 Published Report Regarding Matters Submitted to Vote of Security
Holders - Not applicable
23 Consents of Experts and Counsel - Not applicable
24 Power of Attorney - Not applicable
27 Financial Data Schedule - Filed herewith
</TABLE>
Copies of any exhibits will be furnished to shareholders upon written request.
Request should be directed to Tom Lampen, 1st Community Bancorp, Inc., 109 East
Division, Sparta, Michigan 49345.
II-4
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A)
CONSOLIDATED BALANCE SHEET AND INCOME STATEMENT OF 1ST COMMUNITY BANCORP, INC.,
INCLUDED IN THE JUNE 30, 1995, FORM 10-QSB FILING AND IS QUALIFIED IN ITS
ENTIRETY TO SUCH (B) FORM 10-QSB FILING.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 2,890
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 18,979
<INVESTMENTS-CARRYING> 9,186
<INVESTMENTS-MARKET> 9,358
<LOANS> 75,056
<ALLOWANCE> 1,088
<TOTAL-ASSETS> 109,177
<DEPOSITS> 92,058
<SHORT-TERM> 3,000
<LIABILITIES-OTHER> 1,068
<LONG-TERM> 0
<COMMON> 3,874
0
0
<OTHER-SE> 9,177
<TOTAL-LIABILITIES-AND-EQUITY> 109,177
<INTEREST-LOAN> 3,328
<INTEREST-INVEST> 909
<INTEREST-OTHER> 3
<INTEREST-TOTAL> 4,240
<INTEREST-DEPOSIT> 1,792
<INTEREST-EXPENSE> 1,846
<INTEREST-INCOME-NET> 2,394
<LOAN-LOSSES> 60
<SECURITIES-GAINS> 11
<EXPENSE-OTHER> 1,729
<INCOME-PRETAX> 940
<INCOME-PRE-EXTRAORDINARY> 940
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 708
<EPS-PRIMARY> 1.77
<EPS-DILUTED> 1.77
<YIELD-ACTUAL> 5.10
<LOANS-NON> 272
<LOANS-PAST> 69
<LOANS-TROUBLED> 85
<LOANS-PROBLEM> 793
<ALLOWANCE-OPEN> 1,039
<CHARGE-OFFS> 40
<RECOVERIES> 29
<ALLOWANCE-CLOSE> 1,088
<ALLOWANCE-DOMESTIC> 1,088
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 448
</TABLE>
