<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 Commission file number 33-9110
ended September 30, 1995 -------
------------------
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 October 31, 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 1- 2
Consolidated Statements of Income 3- 4
Consolidated Statement of Shareholders' Equity 5
Consolidated Statements of Cash Flows 6
Notes to the Consolidated Financial Statements 7-12
PART I, Item 2, Management's Discussion and Analysis of
Financial Condition and Results of Operations 13-22
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- 1
Signatures II- 2
Index to Exhibits II- 3
</TABLE>
<PAGE> 3
1ST COMMUNITY BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
September 30, 1995 and December 31, 1994
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and due from banks $ 2,700,000 $ 2,948,000
Securities available for sale (Note 2) 18,002,000 22,242,000
Securities held to maturity (fair value
of $9,177,000 at September 30, 1995, and
$7,949,000 at December 31, 1994) (Note 2) 8,971,000 8,168,000
Loans (Note 3) 77,515,000 69,410,000
Allowance for loan losses (Note 4) (1,105,000) (1,039,000)
------------ ------------
Net loans 76,410,000 68,371,000
Premises and equipment - net 2,523,000 2,510,000
Accrued interest receivable 1,014,000 851,000
Other assets 763,000 1,047,000
------------ ------------
TOTAL ASSETS $110,383,000 $106,137,000
============ ============
</TABLE>
See accompanying notes to the consolidated financial statements.
1
<PAGE> 4
1ST COMMUNITY BANCORP, INC.
CONSOLIDATED BALANCE SHEETS - Continued
September 30, 1995 and December 31, 1994
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
(Unaudited)
<S> <C> <C>
LIABILITIES
Deposits
Demand $ 9,485,000 $ 10,966,000
Interest-bearing transaction accounts 24,378,000 28,287,000
Savings 9,559,000 10,838,000
Time 48,606,000 41,145,000
------------ ------------
Total deposits 92,028,000 91,236,000
Federal funds purchased 3,800,000 1,000,000
Securities sold under agreements to repurchase 81,000 0
Accrued interest payable 345,000 291,000
Other liabilities 826,000 734,000
------------ ------------
Total liabilities 97,080,000 93,261,000
COMMITMENTS AND CONTINGENCIES (Note 5)
SHAREHOLDERS' EQUITY
Common stock, $10 par value; shares
authorized: 500,000; shares outstanding:
387,436 at September 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 5,995,000 5,266,000
Net unrealized depreciation on securities
available for sale, net of related tax benefit (19,000) (559,000)
Net unrealized depreciation on securities
held to maturity, net of related tax benefit (31,000) 0
------------ ------------
Total shareholders' equity 13,303,000 12,876,000
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $110,383,000 $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 nine months ended September 30,
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
------------------ -----------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest income
Loans, including fees $1,843,000 $1,474,000 $5,171,000 $4,236,000
Securities
Taxable 293,000 312,000 929,000 981,000
Nontaxable 123,000 139,000 396,000 421,000
Other 1,000 12,000 4,000 15,000
---------- ---------- ---------- ----------
Total interest income 2,260,000 1,937,000 6,500,000 5,653,000
Interest expense
Deposits 986,000 799,000 2,778,000 2,306,000
Other 35,000 8,000 89,000 31,000
---------- ---------- ---------- ----------
Total interest expense 1,021,000 807,000 2,867,000 2,337,000
---------- ---------- ---------- ----------
Net interest income 1,239,000 1,130,000 3,633,000 3,316,000
Provision for loan losses 39,000 20,000 99,000 86,000
---------- ---------- ---------- ----------
Net interest income after provision
for loan losses 1,200,000 1,110,000 3,534,000 3,230,000
Other income
Service charges on deposit
accounts 85,000 66,000 233,000 200,000
Other service charges and fees 25,000 24,000 78,000 76,000
Net security gains 0 0 11,000 5,000
Mortgage loan sales and servicing 21,000 22,000 69,000 78,000
Other income 21,000 27,000 96,000 80,000
---------- ---------- ---------- ----------
Total other income 152,000 139,000 487,000 439,000
</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 and nine months
ended September 30,
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
------------------ -----------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Other expenses
Salaries and wages $ 365,000 $ 347,000 $1,078,000 $1,011,000
Pension and other employee
benefits 63,000 61,000 213,000 206,000
Occupancy expense 46,000 50,000 146,000 138,000
Furniture and equipment expense 63,000 69,000 198,000 200,000
Other expenses (Note 6) 300,000 332,000 931,000 933,000
---------- ---------- ---------- ----------
Total other expenses 837,000 859,000 2,566,000 2,488,000
---------- ---------- ---------- ----------
Income before income tax 515,000 390,000 1,455,000 1,181,000
Income tax expense (Note 7) 132,000 77,000 364,000 254,000
---------- ---------- ---------- ----------
NET INCOME $ 383,000 $ 313,000 $1,091,000 $ 927,000
========== ========== ========== ==========
Earnings per share (Note 1) $ .99 $ .77 $ 2.76 $ 2.28
========== ========== ========== ==========
</TABLE>
See accompanying notes to the consolidated financial statements.
4
<PAGE> 7
1ST COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For the nine months ended September 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 $12,876,000
Net income for the period 0 0 1,091,000 0 0 1,091,000
Purchase and retirement of
stock (184,000) (627,000) 0 0 0 (811,000)
Change in net unrealized
appreciation/
(depreciation) on
securities, net of tax 0 0 0 510,000 (1,000) 509,000
Reclassification of
securities from
available for sale
to held to maturity 0 0 0 30,000 (30,000) 0
Cash dividends ($.92 per
common share) 0 0 (362,000) 0 0 (362,000)
---------- ---------- ---------- --------- --------- -----------
Balances at
September 30, 1995 $3,874,000 $3,484,000 $5,995,000 $ (19,000) $ (31,000) $13,303,000
========== ========== ========== ========= ========= ===========
Balances at January 1,
1994 $3,246,000 $4,111,000 $5,304,000 $ 293,000 $ 0 $12,954,000
Net income for the period 0 0 927,000 0 0 927,000
5 for 4 stock split 812,000 0 (812,000) 0 0 0
Change in net unrealized
appreciation/
(depreciation) on
securities, net of tax 0 0 0 (645,000) 0 (645,000)
Cash dividends ($.84 per
common share) 0 0 (339,000) 0 0 (339,000)
---------- ---------- ---------- --------- --------- -----------
Balances at
September 30, 1994 $4,058,000 $4,111,000 $5,080,000 $(352,000) $ 0 $12,897,000
========== ========== ========== ========= ========= ===========
</TABLE>
See accompanying notes to the consolidated financial statements.
5
<PAGE> 8
1ST COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended September 30,
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 1,091,000 $ 927,000
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 105,000 131,000
Loans originated for sale (1,444,000) (2,365,000)
Proceeds from loan sales 1,472,000 1,939,000
Provision for loan losses 99,000 86,000
Depreciation 166,000 174,000
Changes in:
Interest receivable and other assets (141,000) (36,000)
Interest payable and other liabilities 146,000 (27,000)
------------ ------------
Net cash from operating activities 1,483,000 824,000
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 2,586,000 4,969,000
Purchase of securities (587,000) (5,406,000)
Securities held to maturity:
Proceeds from maturities of securities 1,294,000 1,025,000
Purchase of securities (350,000) (1,839,000)
Net customer loan activity (8,711,000) (2,706,000)
Loans sold 655,000 595,000
Loans purchased (110,000) 0
Net expenditures for premises and equipment (179,000) (18,000)
------------ ------------
Net cash from investing activities (4,231,000) (1,891,000)
Cash flows from financing activities
Net increase in deposits 792,000 3,931,000
Increase (decrease) in federal funds purchased 2,800,000 (1,300,000)
Increase in securities sold under agreements
to repurchase 81,000 0
Purchase and retirement of stock (811,000) 0
Cash dividends paid (362,000) (339,000)
------------ ------------
Net cash from financing activities 2,500,000 2,292,000
------------ ------------
Net change in cash and cash equivalents (248,000) 1,225,000
Cash and cash equivalents at beginning of period 2,948,000 2,071,000
------------ ------------
Cash and cash equivalents at end of period $ 2,700,000 $ 3,296,000
============ ============
Supplemental disclosure of cash flow information
Cash paid during the year for:
Interest $ 2,814,000 $ 2,342,000
Income taxes $ 340,000 $ 305,000
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 September 30, 1995
and December 31, 1994, the Consolidated Statements of Income for the nine month
periods ended September 30, 1995, and September 30, 1994, and the Consolidated
Statements of Shareholders' Equity and Cash Flows for the nine month periods
ended September 30, 1995, and September 30, 1994. Operating results for the
nine months ended September 30, 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 387,436 for
the third quarter of 1995; 395,289 for the first nine months of 1995; and
405,670 for the third quarter and first nine 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 and third quarters of 1995 and 405,760 for the cash dividends
paid in the first quarter of 1995 and the first three 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 September 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
September 30, 1995
U.S. Treasuries and
U.S. Government agencies $ 6,054,000 $ 74,000 $ (28,000) $ 6,100,000
Obligations of states and
political subdivisions 5,012,000 24,000 (47,000) 4,989,000
U.S. Government agencies
backed by mortgages 6,081,000 39,000 (87,000) 6,033,000
Other securities 884,000 0 (4,000) 880,000
----------- -------- --------- -----------
Total $18,031,000 $137,000 $(166,000) $18,002,000
=========== ======== ========= ===========
<CAPTION>
December 31, 1994
- -----------------
<S> <C> <C> <C> <C>
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
September 30, 1995
Nontaxable obligations of
states and political
subdivisions $ 8,971,000 $245,000 $ (39,000) $ 9,177,000
=========== ======== ========= ===========
</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 nine
months ended September 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 nine months ended September 30, 1995, the change in net unrealized
holding gain or loss on securities available for sale was an increase of
$818,000. There were no sales or transfers of securities classified as held to
maturity.
Securities with a book value of approximately $336,000 and $258,000 were
pledged as collateral for public deposits and securities sold under agreements
to repurchase at September 30, 1995, and December 31, 1994, respectively.
NOTE 3 - LOANS
Loans at September 30, 1995, and December 31, 1994, were classified as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
<S> <C> <C>
Commercial $22,321,000 $17,936,000
Agricultural 9,071,000 8,994,000
Real estate mortgage - construction 470,000 237,000
Real estate mortgage - residential 28,265,000 27,489,000
Consumer 17,388,000 14,754,000
----------- -----------
Total $77,515,000 $69,410,000
=========== ===========
</TABLE>
Loans held for sale included $190,000 of residential real estate mortgages and
$913,000 of consumer loans as of September 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 4 - ALLOWANCE FOR LOAN LOSSES
An analysis of changes in the allowance for loan losses for the nine months
ended September 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 99,000 86,000
Recoveries credited to the allowance 38,000 24,000
Loans charged-off (71,000) (71,000)
---------- ----------
Balance at end of period $1,105,000 $1,039,000
========== ==========
</TABLE>
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 September 30, 1995, was as follows:
<TABLE>
<S> <C>
Loans classified as impaired $721,000
Less impaired loans for which no allowance for
credit losses has been established 721,000
--------
Impaired loans for which an allowance for credit
losses has been determined $ 0
========
Allowance determined for above impaired loans $ 0
========
</TABLE>
Information regarding impaired loans for the nine months ended September 30,
1995, was as follows:
<TABLE>
<S> <C>
Average balance of impaired loans $453,000
Interest income recognized on impaired loans 36,000
Interest income recognized on a cash-basis on
impaired loans 36,000
</TABLE>
NOTE 5 - COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS OF CREDIT RISK
Noninterest-bearing deposits totaling approximately $1,674,000 were held at NBD
Bank at September 30, 1995.
As of September 30, 1995, the Registrant had outstanding commitments to make
loans totaling $7,611,000, the majority of which have variable interest rates.
The Registrant had approximately $2,038,000 of unused lines of credit and
$25,000 in letters of credit at September 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 nine months ended September 30, follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Legal and professional $146,000 $119,000
Computer processing 116,000 119,000
Supplies and postage 114,000 92,000
FDIC insurance 97,000 151,000
Other 458,000 452,000
-------- --------
Total $931,000 $933,000
======== ========
</TABLE>
NOTE 7 - INCOME TAX EXPENSE
The components of income tax expense for the nine months ended September 30,
were as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Current income tax expense $372,000 $278,000
Deferred income tax expense/(benefit) (8,000) (24,000)
-------- --------
Income tax expense $364,000 $254,000
======== ========
</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 September 30, 1995,
and December 31, 1994, were as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------ ------------
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses $274,000 $249,000
Postretirement benefits obligation 94,000 91,000
Deferred loan fees 59,000 83,000
Deferred compensation 52,000 47,000
Unrealized depreciation on securities available
for sale 10,000 288,000
Other 60,000 45,000
-------- --------
Total deferred tax assets 549,000 803,000
</TABLE>
11
<PAGE> 14
1ST COMMUNITY BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)
NOTE 7 - INCOME TAX EXPENSE - CONTINUED
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------ ------------
<S> <C> <C>
Deferred tax liabilities:
Depreciation $177,000 $175,000
Pension fund asset 90,000 96,000
Other 14,000 9,000
-------- --------
Total deferred tax liabilities 281,000 280,000
-------- --------
Net deferred tax asset $268,000 $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 September 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.
NOTE 9 - ACCOUNTING PRONOUNCEMENTS
1st Community will implement Statement of Financial Accounting Standards No.
107, "Disclosures About Fair Value of Financial Instruments", on December 31,
1995. Statement No. 107 requires that estimated fair values of financial
instruments be disclosed, which will be disclosed as a footnote to 1st
Community's financial statements.
1st Community will implement Statement of Financial Accounting Standards No.
122, "Accounting for Mortgage Servicing Rights", on January 1, 1996. This
statement will change the accounting for mortgage servicing rights which are
retained by the loan originator. Upon implementation, 1st Community will
allocate the total cost of sold mortgage loans between the loan and the
servicing rights, based on their relative fair values. This is in contrast to
the current practice of assigning all costs to the mortgage loan. The cost
allocated to the retained servicing rights will be recorded as a separate asset
and will be amortized over the life of the loan. Implementation of Statement
No. 122 will not have a material effect on 1st Community's financial
statements.
12
<PAGE> 15
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion presents a review of the financial condition and
results of operations of 1st Community Bancorp, Inc. ("1st Community") 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
1st Community's net income increased $70,000 or 22% in the third quarter of
1995 compared to 1994 and has risen $164,000 or 18% in the first nine months of
1995 compared to the prior year. The improvement in both the third quarter and
first nine months of 1995 resulted from higher net interest income. 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 return on average assets was 1.37% for the first nine months of 1995,
compared to 1.18% for 1994. The return on average shareholders' equity was
11.14% for the first three quarters of 1995, compared to 9.59% in the prior
year.
Cash and Stock Dividends
Cash dividends declared in the third quarter of 1995 were $124,000 or $.32 per
common share, which represents a $.02 per share or 7% increase compared to the
dividend paid in the same period in the prior year. The cash dividends paid in
the first nine months of 1995 were $362,000 or $.92 per share, which was $.08
per share or 10% more than the dividend paid in the same period in 1994. The
cash dividend payout percentage in the first three quarters of 1995 was 33.15%,
compared to 36.60% in 1994.
As was noted in Footnote 1 to the Consolidated Financial Statements, 1st
Community'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 nine month periods ended
September 30, 1995, and September 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 nine months ended September 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) $ 72,322 $5,196 9.58% $ 67,511 $4,249 8.39%
Taxable securities (2) 19,303 929 6.33 22,035 981 5.94
Nontaxable securities (1)(2) 9,500 600 8.38 9,319 638 9.13
Other 110 4 4.85 502 16 4.25
-------- ------ -------- ------
Interest earning assets 101,235 6,729 8.86 99,367 5,884 7.90
------ ------
Non interest earning assets 6,102 5,795
-------- --------
Total assets $107,337 $105,162
======== ========
Liabilities and Shareholders' Equity
Interest-bearing transaction
accounts $ 25,897 699 3.60 $ 30,009 673 2.99
Savings deposits 10,011 178 2.37 11,877 215 2.41
Time deposits 45,138 1,901 5.62 39,130 1,418 4.83
Other 1,939 89 6.12 1,014 31 4.08
-------- ------ ------- ------
Interest-bearing liabilities 82,985 2,867 4.61 82,030 2,337 3.80
------ ----- ------ -----
Non interest-bearing liabilities 11,262 10,208
Shareholders' equity 13,090 12,924
-------- --------
Total liabilities and
shareholders' equity $107,337 $105,162
======== ========
Net interest income (tax-equivalent
basis) - interest spread 3,862 4.25% 3,547 4.10%
===== =====
Tax equivalent adjustment (1) (229) (231)
------ ------
Net interest income $3,633 $3,316
====== ======
Net interest income as a percentage
of earning assets (tax-equivalent
basis) 5.09% 4.76%
===== =====
</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 nine months ended September 30,
---------------------------------------
1995 Over 1994
--------------
Total Volume Rate
----- ------ ------
(Dollars in thousands)
<S> <C> <C> <C>
Increase (decrease) in interest income (1)
Loans (2) $ 947 $ 317 $ 630
Taxable securities (52) (114) 62
Nontaxable securities (2) (38) 15 (53)
Other (12) (14) 2
------ ----- -----
Net change in tax-equivalent income 845 204 641
Increase (decrease) in interest expense (1)
Interest-bearing transaction accounts 26 (100) 126
Savings deposits (37) (34) (3)
Time deposits 483 235 248
Other 58 37 21
----- ----- -----
Net change in interest expense 530 138 392
----- ----- -----
Net change in tax-equivalent
net interest income $ 315 $ 66 $ 249
===== ===== =====
</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
$315,000 in the first nine 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 1st
Community's average rates to be higher in 1995 than in the prior year. The
average prime lending rate in the first three quarters of 1995 was 8.86%,
compared to 6.72% in 1994. This has affected those loans whose rates float
with the Bank's prime rate, which includes most of the commercial and
agricultural loan portfolios and part of the consumer loan portfolio. It has
also caused a rise in rates on fixed rate loans at either loan renewal time or
for new originations. Rates earned on adjustable rate mortgages have risen
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 which
were replaced with securities bearing a lower interest rate.
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 nine months of 1995.
Table 1 documents that the net interest income spread was 4.25% for the first
nine months of 1995, which represented a 15 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 managing the extent to which
rates the Bank paid on deposit accounts were increased. As the increase in
general market rates has slowed in the first quarter of 1995 and was reversed
slightly in the third quarter, the Bank's Asset/Liability Management Committee
has maintained the Bank's net interest spread by (1) emphasizing loan growth
and (2) holding steady or decreasing the rates paid on deposit accounts except
for special time certificate rate promotions. Methods used to stimulate loan
demand have included 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. Short-term rates have been stable since that time.
Management anticipates that short-term interest rates may experience another
small decrease in the fourth quarter of 1995 and be steady or slightly falling
in early 1996. Decreases in short-term interest rates will have a negative
impact on the interest rate yield on loans. The Bank will attempt to maintain
its desired interest rate spread by continuing to emphasize loan growth to
obtain the highest yield on its investable funds and managing interest rates
paid on deposit accounts.
Table 1 shows growth in excess of $4,750,000 in the average loans balance from
1994 to 1995 and a decline of approximately $2,750,000 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
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
$6,000,000, while interest-bearing transaction accounts and savings deposits
declined almost $6,000,000. The transfer of balances into the time deposits
category reflected 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 $66,000 from December 31, 1994, to
September 30, 1995. The allowance was 1.43% of gross loans at September 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 September 30 are listed below. There were no chargeoffs or
recoveries in the agricultural or construction real estate mortgage loan
categories in the first three quarters 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 66,000 32,000 60,000 24,000
-------- ------- -------- -------
$ 71,000 $38,000 $ 71,000 $24,000
======== ======= ======== =======
</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 1st Community's allowance for loan losses.
Securities
Securities available for sale decreased $977,000 in the third quarter of 1995
and have been reduced $4,240,000 in the first nine months of 1995. Securities
held to maturity declined $215,000 in the third quarter of 1995, but have
increased slightly over
17
<PAGE> 20
PART I - Continued
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations - Continued
Securities - Continued
$800,000 in the first three quarters of 1995. The increase in securities held
to maturity and part of the decrease in securities available for sale was due
to a reclassification of approximately $1,800,000 of securities from the
available for sale classification to the held to maturity classification.
Management believed that the reclassification was prudent since management had
both the positive intent and ability to hold the securities to maturity. The
remainder of the balance decline in securities available for sale resulted from
the use of amounts received from maturing securities to fund the Bank's loan
demand.
Management anticipates the balance in both securities categories will decline
in the remainder of 1995 and early 1996. 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. Slightly
declining interest rates in the third quarter of 1995 stopped the trend of
increasing market values for securities; the net unrealized loss grew only by
$10,000 between June 30, 1995, and September 30, 1995. Management anticipates
the unrealized loss will not experience any significant change for the rest of
1995 and early 1996.
Loans
Total loans grew $2,459,000 in the third quarter of 1995, which slowed to
slightly more than half of the increase experienced in the second quarter of
the year. Commercial and consumer loans experienced increases of $1,301,000
and $942,000, respectively in the third quarter. Residential real estate
mortgage loans remained steady after a strong period in the second quarter.
The third quarter 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 higher consumer loan
balance was primarily caused by increased indirect automobile lending, which
continued to be stimulated by a new dealer reserve program.
Loan growth in future months 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. New marketing strategies, such as the hiring of
a mortgage loan originator, have been implemented 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 October 1995. The balance of the
student loan portfolio was $913,000 as of September 30, 1995.
1st Community 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
18
<PAGE> 21
PART I - Continued
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations - Continued
Loans - Continued
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 September 30, 1995, and December 31, 1994, were
as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------ ------------
<S> <C> <C>
Loans accounted for on a non-accrual basis $326,000 $640,000
Loans, not included in non-accrual loans, which are
contractually past due 90 days or more as to
interest or principal payments 265,000 100,000
Loans, not included in non-accrual or loans past due
90 days or more, which are considered troubled
debt restructurings 162,000 87,000
-------- --------
Total $753,000 $827,000
======== ========
</TABLE>
The increase in the past due 90 days or more and the troubled debt
restructurings categories between the end of 1994 and September 30, 1995, were
caused by one loan in each. The Bank believes both loans are well secured.
Deposits
Total deposits were unchanged in the third quarter of 1995 and have increased
less than $800,000 since December 31, 1994. The only quarter in 1995 where
total deposits have experienced growth was the second quarter where they
increased $811,000. Management believes the lack of growth continues to be due
to a very competitive interest rate environment for depositors' funds.
Competition has existed in the form of traditional deposit products as well as
non-deposit accounts such as mutual funds and annuities. A rising stock market
has also taken available funds from those individuals who are willing to assume
the additional risk. With loan growth continuing strong through the end of
1995's third quarter, the Bank's management is concerned about the lack of
deposit growth in 1995 and is investigating its options to gain more deposit
dollars. One option of raising the rates paid on deposit accounts may bring in
more deposit dollars but would have a negative impact on net interest margin.
The balance of time deposits grew $1,716,000 in the third quarter of 1995 which
continued the substantial growth experienced in the first two quarters of the
year. Balances in the other three deposit categories continued to decrease
which 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
in the first two quarters of 1995 also caused some depositors to move funds
from the other deposit categories.
The Bank's Asset/Liability Management Committee (the "Committee") decreased
interest rates paid on some types of deposit accounts in the third quarter of
1995. This helped to maintain the Bank's interest rate spread in response to
the drop in short-term lending rates in early July 1995. However, drops in
rates paid on the Bank's deposit accounts tended to worsen the deposit growth
problem mentioned above. The Committee will attempt to balance the desired
interest rate spread against the need for deposits as it makes its decisions in
the rest of 1995 and into 1996.
19
<PAGE> 22
PART I - Continued
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations - Continued
Shareholders' Equity
Total shareholders' equity increased $252,000 in the third quarter of 1995 and
has grown $427,000 since the end of 1994. The retention of earnings in the
first nine months of 1995 was offset by 1st Community's purchase of its stock
for $811,000 in April 1995. A decrease in net unrealized depreciation on
securities available for sale has also had a positive impact on total equity.
The reduction in net unrealized depreciation was due to steady interest rates
on securities, which allowed securities' market values to increase through the
middle of 1995.
Shareholders' equity as a percentage of assets was 12.05% as of September 30,
1995, compared to 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. 1st Community's
regulatory capital levels as of September 30, 1995, follows:
<TABLE>
<CAPTION>
Capital Capital as % of
amount risk adjusted assets
----------- --------------------
<S> <C> <C>
Leverage capital $13,353,000 12.09%
Tier 1 capital $13,353,000 16.68%
Total risk-based capital (Tier 1 and Tier 2
combined) $14,458,000 18.06%
</TABLE>
Capital Resources
1st Community 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 1st Community 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 will 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 decreased by $190,000 in the third quarter of 1995.
The decrease was due to a lower balance that was due from the Bank's
correspondent banks. 1st Community'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.
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 September 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 $ 23,492 $ 23,528 $20,620 $ 9,875 $ 77,515
Interest-bearing deposits
with banks 49 0 0 0 49
Taxable securities 1,994 1,212 7,915 6,881 18,002
Nontaxable securities (1) 885 180 3,497 4,409 8,971
-------- -------- ------- ------- --------
Rate-sensitive assets 26,420 24,920 32,032 21,165 104,537
Liabilities
Interest-bearing transaction
accounts 24,378 0 0 0 24,378
Savings deposits 9,559 0 0 0 9,559
Time deposits 8,147 13,220 27,239 0 48,606
Federal funds purchased 3,800 0 0 0 3,800
Repurchase agreements 81 0 0 0 81
-------- -------- ------- ------- --------
Rate-sensitive liabilities 45,965 13,220 27,239 0 86,424
-------- -------- ------- ------- --------
Rate-sensitive assets
less rate-sensitive
liabilities
Asset (liability) gap
for the period $(19,545) $ 11,700 $ 4,793 $21,165 $ 18,113
======== ======== ======= ======= ========
Cumulative asset
(liability) gap $(19,545) $ (7,845) $(3,052) $18,113
======== ======== ======= =======
Cumulative rate-
sensitive assets as
a percentage of
cumulative rate-
sensitive
liabilities 57.48% 86.75% 96.47% 120.96%
====== ====== ======= =======
</TABLE>
Table 3 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 $7,845,000 at the one year repricing point as of
September 30, 1995. The negative amount at the end of the third 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.
21
<PAGE> 24
PART I - Continued
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations - Continued
Liquidity and Rate Sensitivity - Continued
1st Community'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
management believes that short-term rates may be declining, management will
attempt to manage the rates charged on rate-sensitive assets and rates paid on
rate-sensitive liabilities to maintain its desired net interest margin.
22
<PAGE> 25
PART II
Item 1. Legal Proceedings
There are no pending legal proceedings to which 1st Community 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 1st
Community or its subsidiary as of and for the nine month period ended September
30, 1995.
Item 2. Changes in Securities
During the quarter ended September 30, 1995, there were no changes in 1st
Community's securities which would cause any shareholder's 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
There were no matters submitted to a vote of security holders during the
quarter ended September 30, 1995.
Item 5. Other Information
Sparta State Bank, 1st Community'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 fourth quarter of 1995 and the
purchase is expected to be completed by the end of 1995.
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 September 30,
1995.
II-1
<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 November 2, 1995 /s/ Jae M. Maxfield
---------------- ---------------
President and Chief Executive Officer
Date November 2, 1995 /s/ Thomas L. Lampen
---------------- ---------------
Treasurer
II-2
<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-3
<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 SEPTEMBER 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 2,700
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 18,002
<INVESTMENTS-CARRYING> 8,971
<INVESTMENTS-MARKET> 9,177
<LOANS> 77,515
<ALLOWANCE> 1,105
<TOTAL-ASSETS> 110,383
<DEPOSITS> 92,028
<SHORT-TERM> 3,881
<LIABILITIES-OTHER> 1,171
<LONG-TERM> 0
<COMMON> 3,874
0
0
<OTHER-SE> 9,429
<TOTAL-LIABILITIES-AND-EQUITY> 110,383
<INTEREST-LOAN> 5,171
<INTEREST-INVEST> 1,325
<INTEREST-OTHER> 4
<INTEREST-TOTAL> 6,500
<INTEREST-DEPOSIT> 2,778
<INTEREST-EXPENSE> 2,867
<INTEREST-INCOME-NET> 3,633
<LOAN-LOSSES> 99
<SECURITIES-GAINS> 11
<EXPENSE-OTHER> 2,566
<INCOME-PRETAX> 1,455
<INCOME-PRE-EXTRAORDINARY> 1,091
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,091
<EPS-PRIMARY> 2.76
<EPS-DILUTED> 2.76
<YIELD-ACTUAL> 5.09
<LOANS-NON> 325
<LOANS-PAST> 365
<LOANS-TROUBLED> 166
<LOANS-PROBLEM> 972
<ALLOWANCE-OPEN> 1,039
<CHARGE-OFFS> 71
<RECOVERIES> 38
<ALLOWANCE-CLOSE> 1,105
<ALLOWANCE-DOMESTIC> 1,105
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 443
</TABLE>
