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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(mark one)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-24024
First Community Financial Group, Inc.
(Exact name of registrant as specified in its charter)
Washington 91 -1277503
(State or other jurisdiction (IRS Employer Identification Number)
of incorporation or organization)
721 College Street. SE, P.O. Box 3800, Lacey, WA 98509
(Address of principal executive offices)
Issuer's telephone number: (360) 459-1100
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 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
--- ---
Number of shares of common stock outstanding as of September
30, 1996: 1,696,507
Transitional Small Business Disclosure Format (Check one) Yes No X
--- ---
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FIRST COMMUNITY FINANCIAL GROUP, INC.
Table of Contents
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PART I - FINANCIAL INFORMATION Page
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Item 1 Financial Statements
Condensed Consolidated Balance Sheets....................................................... 3
Condensed Consolidated Statements of Income................................................. 4
Condensed Consolidated Statements of Stockholders' Equity................................... 5
Condensed Consolidated Statements of Cash Flows............................................. 6
Notes to Condensed Consolidated Financial Statements........................................ 7
Item 2 Management's Discussion of Financial Condition and
Analysis or Plan of Operations.............................................................. 8
PART II - OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K........................................................... 11
SIGNATURES ........................................................................................... 12
</TABLE>
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FIRST COMMUNITY FINANCIAL GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
<TABLE>
<CAPTION>
(Dollars in thousands)
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September 30 December 31
1996 1995
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<S> <C> <C>
ASSETS
Cash and due from banks $ 9,777 $ 15,024
Interest bearing deposits in banks 6,836 11,982
Federal funds sold 4,617 2,750
Securities available for sale 6,821 7,143
Securities held to maturity 4,563 7,262
Loans held for sale 852 1,478
Loans 131,181 126,154
Less allowance for possible credit losses 1,402 1,376
NET LOANS 129,779 124,778
Premises and equipment 7,696 7,840
Other assets 5,690 4,640
TOTAL ASSETS $176,631 $182,897
LIABILITIES
Deposits:
Non-interest bearing $ 25,567 $ 34,440
Interest bearing 128,540 126,796
TOTAL DEPOSITS 154,107 161,236
Long term debt 1,337 1,237
Other liabilities 773 1,184
TOTAL LIABILITIES 156,217 163,657
STOCKHOLDERS' EQUITY
Common stock, par value $2.50 per share; 4,241 4,031
10,000,000 shares authorized, 1,696,507 shares issued
in 1996, and 1,612,472 shares issued in 1995
Surplus 13,719 12,311
Retained earnings 2,783 2,940
Unrealized loss on securities available for sale (64) (42)
Guaranteed KSOP Obligation (265) - -
TOTAL STOCKHOLDERS' EQUITY 20,414 19,240
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $176,631 $182,897
</TABLE>
See notes to condensed consolidated financial statements
3
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FIRST COMMUNITY FINANCIAL GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income (Unaudited)
<TABLE>
<CAPTION>
(Dollars in thousands, except per share amounts)
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Three months ended Nine months ended
September 30 September 30
1996 1995 1996 1995
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<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 3,525 $ 3,400 $ 10,560 $ 9,917
Federal funds sold and deposits in banks 170 317 337 686
Investments 173 234 550 642
TOTAL INTEREST INCOME 3,868 3,951 11,447 11,245
INTEREST EXPENSE
Deposits 1,418 1,492 4,124 3,959
Other 25 29 85 93
TOTAL INTEREST EXPENSE 1,443 1,521 4,209 4,052
NET INTEREST INCOME 2,425 2,430 7,238 7,193
PROVISION FOR POSSIBLE CREDIT LOSSES 85 41 221 112
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE CREDIT LOSSES 2,340 2,389 7,017 7,081
NON-INTEREST INCOME
Service charges on deposit accounts 277 261 823 746
Origination fees on mortgage loans sold 73 77 351 191
Other income 47 116 296 255
TOTAL NON-INTEREST INCOME 397 454 1,470 1,192
NON-INTEREST EXPENSE
Salaries and employee benefits 1,129 1,372 3,464 3,887
Occupancy and equipment 323 314 1,045 945
Other expense 666 603 1,995 1,919
TOTAL NON-INTEREST EXPENSE 2,118 2,289 6,504 6,751
OPERATING INCOME BEFORE INCOME TAXES 619 554 1,983 1,522
Income Taxes 169 179 535 483
NET INCOME $ 450 $ 375 $ 1,448 $ 1,039
EARNINGS PER COMMON SHARE AND COMMON
EQUIVALENT SHARE $ .24 $ .21 $ .80 $ .58
Average number of common
and equivalent shares outstanding 1,837,230 1,815,758 1,817,491 1,814,597
EARNINGS PER COMMON SHARE
ASSUMING FULL DILUTION $ .24 $ .21 $ .79 $ .57
Average number of common and equivalent
shares outstanding-assuming full dilution 1,837,757 1,821,637 1,836,904 1,816,270
</TABLE>
See notes to condensed consolidated financial statements
4
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FIRST COMMUNITY FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in Thousands)
<TABLE>
<CAPTION>
Net Unrealized
Depreciation on Guaranteed
Common Retained Available-for- KSOP
Stock Surplus Earnings Sale Securities Obligation Total
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1994 $ 3,823 $ 10,170 $ 4,093 ($100) -- $ 17,986
Net income -- -- 920 -- -- 920
Common stock issued 5 15 -- -- -- 20
Stock options exercised 80 181 -- -- -- 261
5% stock dividend 123 763 (891) -- -- (5)
Transfer from retained earnings -- 1,182 (1,182) -- -- --
Change in unrealized
depreciation on available-
for-sale securities, net of tax -- -- -- 58 -- 58
BALANCE, DECEMBER 31, 1995 $ 4,031 $ 12,311 $ 2,940 ($ 42) -- $ 19,240
Net income -- -- 1,448 -- -- 1,448
Stock options exercised 9 15 -- -- -- 24
5% stock dividend 201 1,393 (1,605) -- -- (11)
Guarantee of KSOP obligation -- -- -- -- (265) (265)
Change in unrealized
depreciation on available-
for-sale securities, net of tax -- -- -- (22) -- (22)
BALANCE, SEPTEMBER 30, 1996 $ 4,241 $ 13,719 $ 2,783 ($ 64) ($265) $ 20,414
</TABLE>
See notes to condensed consolidated financial statements
5
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FIRST COMMUNITY FINANCIAL GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
(Dollars in thousands)
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Nine months ended
September 30
1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 1,448 $ 1,039
Adjustments to reconcile net income to net cash provided (used)
by operating activities:
Provision for possible credit losses 221 112
Depreciation and amortization 584 409
Gain on sale of loans -- 50
Other-net (1,524) 470
Originations of loans held for sale (16,478) (7,256)
Proceeds from sales of loans held for sale 17,104 6,451
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 1,355 1,275
CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease in interest bearing deposits in banks 5,146 (9,635)
Net (increase) decrease in Federal funds sold (1,867) 1,725
Proceeds from sales of available-for-sale securities 1,765 800
Purchase of available-for-sale securities (1,317) (500)
Proceeds from maturities of held-to-maturity securities 2,670 1,200
Purchase of held-to-maturity securities (18) (2,517)
Net increase in loans (5,262) (5,914)
Additions to premises and equipment (440) (2,765)
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 677 (17,606)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits (7,129) 16,997
Net (increase) decrease in short-term borrowings -- (500)
Sale of common stock 24 203
Long term borrowing -- 200
Repayment of long-term borrowings (165) (62)
Payment for fractional shares (9) (5)
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (7,279) 16,833
NET CHANGE IN CASH AND DUE FROM BANKS (5,247) 502
CASH AND DUE FROM BANKS:
Beginning of period 15,024 7,059
END OF PERIOD $ 9,777 $ 7,561
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
CASH PAYMENTS FOR:
Interest $ 4,328 $ 4,042
Taxes 665 474
SUPPLIMENTAL DISCLOSURES OF NON-CASH INVESTING ACTIVITIES:
Other real estate acquired in settlement of loans 1,625 919
Increase (decrease) in depreciation of available for sale securities (18) (111)
Increase (decrease) in guarantee of KSOP obligation 265 --
</TABLE>
See notes to consolidated financial statements
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FIRST COMMUNITY FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principals for interim
financial information and with instructions to Form 10-KSB and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, adjustments considered
necessary for a fair presentation have been included. Operating results for the
three months and nine months ended September 30, 1996 are not necessarily
indicative of the results anticipated for the year ended December 31, 1996.
2. EARNINGS PER COMMON AND EQUIVALENT SHARE
Earnings per common and equivalent share is calculated by dividing net income by
the weighted average number of common shares and common share equivalents
outstanding during the periods presented. Fully diluted earnings per share
assumes that all dilutive stock options outstanding are issued such their
dilutive effect is maximized.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
FINANCIAL CONDITION
Overview
The Company's consolidated total assets at September 30, 1996 of $176,631,000
represent a 3.4% decrease over December 31, 1995 assets of $182,897,000. This is
the result of a 4.4% decline in deposits totaling $7,129,000 during the year.
During the first two quarters of 1996, deposits declined as a result of two
factors. The Bank typically experiences a deposit increase at year-end which
runs off during January and February. Additionally, much of the deposit base
gained in the acquisition of Northwest Community Bank in November 1995 consisted
of high cost time deposits from customers who had no other relationship with the
bank. Management has elected to not renew certain of these high rate time
deposits. This caused deposits to decline to a low of $145 million at June 30,
1996. By September 30, 1996, deposits have risen to $154 million, regaining
approximately $9 million since June.
Loan demand in the Company's market area was moderate during the period. Total
loans, including loans held for sale, increased 3.5%, or $4,401,000 during the
period, over the December 31, 1995 balance of $127,632,000. The ratio of loans
to deposits increased from 79.16% at December 31, 1995 to 85.68% by the end of
the second quarter as the Bank experienced a growth in loans and a decline in
deposits. The balances of cash and due from banks, interest bearing deposits in
banks, Federal funds sold and investment securities decreased $11,547,000 from
$44,161,000 to fund the loan growth and deposit decline.
The allowance for possible credit losses reflects management's current estimate
of the amount required to absorb losses on existing loans and commitments to
extend credit. Determination of the appropriate level of the allowance is based
on an analysis of various factors including historical loss experience based on
volumes and types of loans; volumes and trends in delinquencies and non-accrual
loans; trends in portfolio volume; results of internal and independent external
credit reviews; and anticipated economic conditions. An analysis of the adequacy
of the allowance is subject to quarterly review by the Board of Directors. Based
on this analysis, management considers the allowance for possible credit losses
to be adequate.
The allowance for possible credit losses increased $26,000 during the first
three quarters to $1,402,000 at September 30, 1996 over the December 31, 1995
balance of $1,376,000. This increase consisted of provisions totaling $221,000,
which were net of charge offs of $195,000. The allowance for possible credit
losses represents a ratio of 1.06% and 1.08% of total loans at September 30,
1996 and December 31, 1995, respectively. Non-accrual loans decreased from
$1,427,000 at December 31, 1995 to $387,000 at September 30, 1996. These loans
represent loans that are well secured, and on which material losses are not
presently expected.
Liquidity and Rate Sensitivity
The Company's assets and liabilities are managed to maximize long-term
shareholder returns by optimizing net interest income within the constraints of
maintaining high credit quality, conservative interest rate risk disciplines and
prudent levels of liquidity. The Asset/Liability Committee meets regularly to
monitor the composition of the balance sheet, to assess current and projected
interest rate trends, and to formulate strategies consistent with established
objectives for liquidity, interest rate risk and capital adequacy.
Liquidity management involves the ability to meet cash flow requirements of
customers who may be either depositors wanting to withdraw funds or borrowers
needing assurance that sufficient funds will be available to meet their credit
needs. Liquidity is generated from both internal and external sources. Internal
sources are those assets that can be converted to cash with little or no risk of
loss. These include overnight investments in federal funds sold and investment
securities, particularly those of shorter maturity, and are the principal source
of asset liquidity. At September 30, 1996, cash, Federal funds sold and
securities available for sale totaled $28,051,000. External sources refer to the
ability to attract new liabilities and capital. They include increasing savings
and demand deposits, federal funds purchased, and the issuance of capital and
debt securities. At September 30, 1996, federal funds borrowing lines of credit
totaled $2,000,000 and were unused during the first quarter of 1996. The Bank
also has preestablished borrowing lines available with the Federal Home Loan
Bank of approximately $9,300,000. This credit facility has remained unused
during 1996.
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Management believes the Bank's liquidity position at September 30, 1996, was
adequate to meet its short term funding requirements.
Interest rate sensitivity is closely related to liquidity, as each is directly
affected by the maturity of assets and liabilities. The Company's net interest
margin is affected by changes in the level of market interest rates.
Management's objectives are to monitor and control interest rate risk and ensure
predictable and consistent growth in net interest income.
Management considers any asset or liability which matures, or is subject to
repricing within one year to be interest sensitive, although continual
monitoring is performed for other time intervals as well. The difference between
interest sensitive assets and liabilities for a defined period of time is known
as the interest sensitivity "gap", and may be either positive or negative. If
positive, more assets reprice before liabilities. If negative, the reverse is
true. Gap analysis provides a general measure of interest rate risk but does not
address complexities such as prepayment risk, interest rate floors and ceilings
imposed on financial instruments, interest rate dynamics and customers' response
to interest rate changes. Currently the Banks' interest sensitivity gap is
negative within one year. Assuming that general market interest rate changes
affected the repricing of assets and liabilities in equal magnitudes, this
indicates that the effects of rising interest rates on the Company would be a
decrease in the net interest margin, whereas falling interest rates would cause
a corresponding increase in the margin.
Capital
Capital serves two basic purposes. First, it provides a reserve for unforeseen
operating losses, and second, it provides a foundation for future growth.
Consolidated capital of FCFG increased $1,174,000 during the first three
quarters of 1996, primarily through retained earnings.
There are regulatory constraints placed upon capital adequacy, and it is
necessary to maintain an appropriate ratio between capital and assets.
Regulations require banks and holding companies to maintain a minimum "leverage"
ratio (primary capital ratio) of total assets. For the most highly rated holding
companies this ratio must be at least 3%, and for others it must be 4 to 5%. At
September 30, 1996, the Company's leverage ratio was 11.57%, compared to 10.54%
at year-end 1995. In addition, holding companies are required to meet minimum
risk-based capital guidelines under which risk percentages are assigned to
various categories of assets and off-balance-sheet items to calculate a
risk-adjusted capital ratio. Tier I capital generally consists of common
stockholders' equity, less goodwill, while Tier II capital includes the
allowance for possible loan losses, subject to 1.25% limitation of risk-
adjusted assets. The rules require Tier II capital of 4% of risk-adjusted assets
and total capital (combined Tier I and Tier II) of 8%. At September 30, 1996,
the Tier I capital ratio was 14.70%, and total capital was 15.32%.
RESULTS OF OPERATIONS
General
Net income is largely dependent upon the difference between the interest
received on earning assets and the interest paid on interest bearing liabilities
and is defined as net interest income. Net income is also affected by the
provision for loan losses, other non-interest income and other non-interest
expense.
Net income for the three months ended September 30, 1996 was $450,000, compared
to $375,000 for the three months ended September 30, 1995. This 20% increase is
due to a $171,000 reduction in non-interest expense, and a $10,000 decrease in
income tax expense. This was partially offset by a $5,000 decrease in net
interest income, an increase in the provision for possible credit losses of
$44,000 and a $57,000 decline in non-interest income.
Net Income for the nine months ended September 30, 1996 increased 39% to
$1,448,000 over the September 30, 1995 earnings of $1,039,000. This was the
result of a $45,000 increase in net interest income, a $278,000 increase in the
level of non-interest income, and a $247,000 decrease in non-interest expense.
These were only partially offset by an increase in the provision for possible
credit losses of $109,000 and an increase in income tax expense of $52,000.
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Net Interest Income
Net interest income for the nine months ended September 30, 1996 increased
$45,000 over the comparable period in 1995. The net interest margin decreased
slightly, moving 5 basis points from 6.37% to 6.32%.
Interest income for the nine months ended September 30, 1996 increased $202,000
over the nine months ended September 30, 1995. Of this increase, approximately
$156,000 is attributed to an increase in the average volume of earning assets,
and approximately $46,000 is the result of a 4 basis point increase in the
aggregate yield on earning assets.
Total interest expense for the nine months ended September 30, 1996 increased
over the comparable period of the prior year by $157,000. Of this increase,
approximately $86,000 was due to an increase in the average volume of interest
bearing liabilities, and $71,000 was due to a 7 basis point increase in the
aggregate cost of funds. Time deposits as a percent of total deposits increased
from 47% at September 30, 1995 to 52% at September 30, 1996.
Non-Interest Income
Total non-interest income for the quarter ended September 30, 1996 decreased
12.6% or $57,000 from the comparable quarter of 1995. Of this amount, $69,000 is
due to a decrease in other income, which is partially offset by a $16,000
increase on service charges on deposit accounts.
For the nine months ended September 30, 1996, non-interest income increased
$278,000 over the nine months ended September 30, 1995. Of this increase,
$77,000 is attributable to an increase in service charge income, $160,000 is due
to increased mortgage loan originations, and $41,000 is the result of an
increase in other non-interest income.
Non-interest Expense
Total non-interest expense for the quarter ended September 30, 1996 decreased
$171,000, or 7.5% over the third quarter of 1995. Of this net decrease in the
level of non-interest expense, $243,000 represents a decrease in the level of
salaries and employee benefits, as staffing efficiencies are realized from the
acquisition of Northwest Community Bank which occured in the fourth quarter of
1995. Occupancy and equipment increased $9,000 as the result of two new branches
that were opened after the second quarter of 1995, and other expense increased
$63,000.
Non-interest expense for the nine months ended September 30, 1996 decreased
$247,000 or 3.7% over the nine months ended September 30, 1995. Salaries and
benefits were down $423,000 or 10.9% from the comparable period of 1995 due to
staffing efficiencies are realized from the acquisition of Northwest Community
Bank in the fourth quarter of 1995. Occupancy and equipment increased $100,000
as the result of two new branches that were opened after the second quarter of
1995, and other expense increased $76,000.
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FIRST COMMUNITY FINANCIAL GROUP, INC.
PART II - OTHER INFORMATION
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(3) a. Restated articles of incorporation
(10) a. Employment agreement of Ken F. Parsons
(10) j. Employee stock option and restricted stock award plan
award to Ken Parsons
(10)k. Employee stock option and restricted stock award plan
award to Ken Parsons
(b) Reports on Form 8-K None
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FIRST COMMUNITY FINANCIAL GROUP, INC.
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.
FIRST COMMUNITY FINANCIAL GROUP, INC.
(Registrant)
Date: October 31, 1996 By: /s/ Ken F. Parsons
---------------------------------
Ken F. Parsons
President, Chief Executive Officer
By: /s/ James F. Arneson
---------------------------------
James F. Arneson
Executive Vice President,
Chief Financial Officer
(Principal Accounting Officer)
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EXHIBIT (3) a.
RESTATED
ARTICLES OF INCORPORATION
OF
FIRST COMMUNITY FINANCIAL GROUP, INC.
*****************************************************
ARTICLE 1.
NAME
The name of the corporation shall be FIRST COMMUNITY FINANCIAL GROUP,
INC.
ARTICLE 2.
DURATION
The corporation's period of duration shall be perpetual.
ARTICLE 3.
PURPOSES
The purposes for which the corporation is organized are:
Section 3.1: To engage in business as a bank holding company.
Section 3.2: To carry on any lawful business whatsoever in connection
with the foregoing for which corporations may be incorporated under the
Washington Business Corporation Act, including any amendments thereto or
successor statutes that may hereinafter be enacted.
ARTICLE 4.
CAPITAL
The aggregate number of shares which the Corporation shall have
authority to issue is Ten Million (10,000,000) shares, all of which shall be
common shares with a par value of Two Dollars Fifty Cents ($2.50) each, and Two
Hundred Thousand (200,000) shares of preferred stock with no par value, with
such rights and preferences as may be determined by resolution of the Board of
Directors.
ARTICLE 5.
NO PRE-EMPTIVE RIGHTS
No shareholder shall have the pre-emptive right to acquire unissued
shares of the corporation, or securities convertible into shares of any class
whatsoever, whether now or hereafter authorized, and whether issued for cash,
property, services or otherwise.
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ARTICLE 6.
NO CUMULATIVE VOTING
Each shareholder entitled to vote at any election for directors shall
have the right to vote, in person or by proxy, the number of shares owned by
him/her for as many persons as there are directors to be elected and for whose
election he/she has a right to vote, and no shareholder shall be entitled to
cumulate his/her votes.
ARTICLE 7.
POWER TO AMEND BYLAWS
The Board of Directors shall have full power to adopt, alter, amend or
repeal the Bylaws or adopt new Bylaws. Nothing herein, however, shall deny the
concurrent power of the shareholders to adopt, alter, amend or repeal the
Bylaws.
ARTICLE 8.
RIGHT TO AMEND
The corporation reserves the right to amend, alter, change or repeal
any provision of its Articles of Incorporation to the extent permitted by the
laws of the State of Washington. All rights of shareholders are granted subject
to this reservation.
ARTICLE 9.
REGISTERED OFFICE AND AGENT
The address of the initial registered office of the corporation is 721
College Street S.E., P.O. Box 3800, Lacey, Washington 98509-3800. The name of
its initial registered agent at that address is Ken F. Parsons.
ARTICLE 10.
CONTRACTS
The corporation may enter into a contract and otherwise transact
business as vendor, purchaser or otherwise, with its directors, officers and
shareholders, and with corporations, associations, firms and entities in which
they are or may become interested as directors, officers, shareholders, members
or otherwise, as freely as though such adverse interest did not exist, even
though the vote, action or presence of such director, officer or shareholder may
be necessary to obligate the corporation upon such contract or transaction; and
in the absence of fraud, no such contract or transaction shall be avoided and no
such director, officer or shareholder shall be held liable to account to the
corporation, by reason of such adverse interest or any fiduciary relationship to
the corporation arising out of such office or stock ownership, for any profit or
benefit realized by him/her through any such contract or transaction; provided
that the nature of the interest of such director, officer or shareholder though
not necessarily the details or extent thereof, be disclosed or known to the
Board of Directors or shareholders of the corporation, at the meeting thereof at
which such contract or transaction is authorized or confirmed. A general notice
that a director, officer or shareholder of the corporation is interested in any
corporation, association, firm or entity shall be
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sufficient disclosure as to such director, officer or shareholder with respect
to all contracts and transactions with that corporation, association, firm or
entity.
ARTICLE 11.
CAPITAL SURPLUS
The corporation may use its unreserved and unrestricted capital surplus
to purchase its own shares and may, from time to time, distribute to its
shareholders, cash or property out of its capital surplus.
ARTICLE 12.
BOARD NOMINATIONS
Nominations for election to the Board of Directors may be made by the
Board of Directors or by any shareholder of any outstanding class of stock of
the corporation entitled to vote for the election of directors. Nominations,
other than those made by the Board of Directors, shall be made in writing and
shall be delivered or mailed, U.S. mail, postage prepaid, to the Chairman of the
corporation not less than fourteen (14) days nor more than fifty (50) days prior
to any meeting of shareholders called for the election of directors; provided,
however, that if less than twenty-one (21) days' notice of the meeting is given
to shareholders, such nomination shall be delivered or mailed, U.S. mail,
postage prepaid, to the Chairman of the corporation not later than the close of
business on the seventh (7th) day following the day on which the notice of
meeting was mailed. Such notification shall contain the following information to
the extent known to the notifying shareholder:
(a) The name and address of each proposed nominee;
(b) The principal occupation of each proposed nominee;
(c) The total number of shares of stock of the corporation that will
be voted for each proposed nominee;
(d) The name and address of the notifying shareholder; and
(e) The number of shares of common stock of the corporation owned by
the notifying shareholder.
Nominations not made in accordance herewith may, in his/her discretion, be
disregarded by the Chairman of the meeting, and upon his/her instructions, the
vote teller may disregard all votes cast for such nominee.
ARTICLE 13.
INDEMNIFICATION
The corporation shall provide indemnification, including advances of
expenses, to any person made a party to any proceeding, including a proceeding
by or in the right of the corporation, by reason of the fact that such person is
or was a director, officer, trustee, employee, agent or partner of another
corporation, partnership, joint venture, trust, employee benefit plan (including
a voluntary employee's beneficiary association) or other enterprise, against
judgments, penalties, fines, settlements and reasonable expenses, including
attorney's fees, actually incurred by such person in
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connection with such proceeding to the extent permitted by and in accordance
with the Washington Business Corporation Act; provided, that the corporation
shall not indemnify such person if the person shall have been adjudged to be
liable to the corporation, or such other enterprise, on the basis that personal
benefit was improperly received by the person seeking indemnification, unless a
court of competent jurisdiction shall determine that it would be unfair, under
the circumstances, to deny indemnification to such person.
ARTICLE 14.
DIRECTORS
The board of directors shall be divided into three classes: Class 1,
Class 2, and Class 3, which shall be nearly equal in number as possible. Each
director shall serve for a term ending on the date of the third annual meeting
of the shareholders following the annual meeting at which such director was
elected; provided, however, that each initial director in Class 1 shall hold
office until the annual meeting of shareholders in 1988, each initial director
in Class 2 shall hold office until the annual meeting of shareholders in 1989;
and each initial director in Class 3 shall hold office until the annual meeting
of shareholders in 1990.
ARTICLE 15.
INCORPORATOR
The name and address of the incorporator is George W. Bowen, 3033
Carpenter Loop S.E., Lacey, Washington 98503.
ARTICLE 16.
EVALUATING OFFERS
The Board of Directors of the corporation, when evaluating any offer of
another party to (a) make a tender or exchange offer for any equity security of
the corporation, (b) merge or consolidate the corporation with another
corporation, or (c) purchase or otherwise acquire all or substantially all of
the properties and assets of the corporation, shall, in connection with the
exercise of its judgment in determining what is in the best interests of the
corporation and its stockholders, give due consideration to all relevant
factors, including without limitation the social and economic effects on the
community, employees, customers, and other constituents of the corporation and
its subsidiary.
ARTICLE 17.
FAIR PRICE PROVISION
Section 17.1 In addition to the requirements of any applicable statute,
and notwithstanding any other provisions of any other articles of these Articles
of Incorporation, the affirmative vote of not less than 90% of the total shares
which are entitled to be voted in an election of directors shall be required for
the approval of any Business Combination (as defined below).
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Section 17.2 The approval requirements of Section 17.1 shall not apply if
either:
(a)The Business Combination is approved by at least 66 2/3% of
the Directors of the Corporation; or
(a) Both of the following conditions are satisfied:
(i)The cash or fair market value of the property,
securities or other consideration to be received per share in the Business
Combination by holders of the common stock of the corporation is not less than
the highest price per share (including brokerage commissions, soliciting
dealers' fees and dealer-management compensation) paid by such offeror in
acquiring any of its holdings of the corporation's common stock; and
(i)A proxy statement responsive to the requirements
of the Securities Exchange Act of 1934, whether or not the corporation is then
subject to such requirements, shall be mailed to the stockholders of the
corporation for the purpose of soliciting stockholder approval of such Business
Combination.
Section 17.3 For the purposes of this Article 17:
(a)The term "Business Combination" shall mean (i) any merger
or consolidation of the corporation, (ii) any sale, lease, exchange, transfer or
other disposition, including without limitation a mortgage or any other security
device, of all or any Substantial Part (as defined below) of the assets of the
corporation (including without limitation any voting securities of a subsidiary)
or of a subsidiary, (iii) any merger or consolidation with or into a corporation
or its subsidiary, (iv) the issuance of any securities of the corporation or a
subsidiary of the corporation to any person or entity, or (v) any agreement,
contract or other arrangement providing for any of the transactions described in
this definition of Business Combination;
(a)The term "Substantial Part" shall mean more than 10% of the
total assets of the corporation in question, as of the end of its most recent
fiscal year prior to the time determination is being made;
(a)Without limitation, any shares of common stock of the
corporation which any person has the right to acquire at any time pursuant to
any agreement, or upon exercise of conversion right, warrants or options, or
otherwise, shall be deemed outstanding and beneficially owned by such person for
purposes of this Article 17; and
(b)For the purposes of Section 17.2(b)(i) of this Article, the
phrase "other consideration to be received" shall include, without limitation,
common stock of the corporation retained by its existing stockholders in the
event of a Business Combination in which the corporation is the surviving
corporation.
Section 17.4 For the purposes of this Article 17, a majority of the
Directors shall have the power and duty to determine on the basis of information
known to them (a) whether a proposed transaction is subject to the provisions of
this Article 17, (b) the amount of shares of the corporation
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<PAGE> 6
Beneficially Owned by any person, (c) whether a person is an Affiliate or
Associate of another, and (d) such other matters as to which a determination may
be required by the provisions of this Article 17.
Section 17.5 The provisions set forth in this Article 17 may not be
repealed or amended in any respect or in any manner including any merger or
consolidation of the corporation with any other corporation unless the surviving
corporation's Articles of Incorporation contain an article to the same effect as
this Article 17, except by the affirmative vote of the holders of not less than
90% of the outstanding shares of common stock of the corporation.
DATED this 17th day of October, 1996.
FIRST COMMUNITY FINANCIAL GROUP, INC.
/s/ Ken F. Parsons
------------------------------------
Ken F. Parsons, President and C.E.O.
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<PAGE> 1
EXHIBIT (10) a.
FIRST COMMUNITY FINANCIAL GROUP
EMPLOYMENT AGREEMENT
Ken F. Parsons, Sr.
This AGREEMENT is made and entered into to be effective as of September
1, 1996, by and between FIRST COMMUNITY FINANCIAL GROUP, a Washington
Corporation, and FIRST COMMUNITY BANK, a Washington Corporation, (the
"Company"); and KEN F. PARSONS ("Parsons"), WITNESSETH:
WHEREAS, Parsons was a founder of the Company; it's primary subsidiary,
First Community Bank, and other subsidiaries, and he has played an important
role in the growth and success of those entities, having served as a director of
them since their inception and having served as President and Chief Executive
Officer of the Company since 1990; and
WHEREAS, the Company desires to have Parsons serve as its President and
Chief Executive Officer and to serve in a similar capacity and/or as
Chairman/Chief Executive Officer with one or more of the Company's subsidiaries,
and Parsons desires to serve in such capacities; and
WHEREAS, the Company desires to have Parsons continue his service as a
Director on the Company's and subsidiaries' Boards of Directors;
NOW, THEREFORE, in consideration of the covenants and undertakings
herein contained and the mutual benefits to be derived herefrom, the parties
hereto agree as follows:
1. Employment. Parsons agrees to serve the Company and it's
subsidiaries as President, Chief Executive Officer, Chairman, and Director.
Parsons also agrees to serve in other additionally associated capacities as may
be assigned by the Company's Board of Directors ("Board"), the duties of which
are consistent with those normally performed by a President, Chief Executive
Officer, Chairman or Director. The Board will appoint/elect Parsons to serve as
President, Chief Executive Officer, and a member of the Executive Committee of
the Company. The Company will nominate Parsons as a director of FCFG and use
their best efforts to have him appointed/elected. The Board will appoint/elect
Parsons to serve as Chairman, Chief Executive Officer, and a member of the
Executive Committee of First Community Bank. Parsons' shall remain in these
positions until his retirement or until terminated as provided herein.
2. Duties. Parsons shall have all executive powers normally incident to
the positions of President, Chief Executive Officer, Chairman, and Director
which are reasonably required to enable Parsons to efficiently discharge his
duties in such capacity.
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3. Compensation. The Company shall pay Parsons, as compensation for his
full- time services during the term of employment:
A. A base compensation annual salary of one hundred forty thousand
dollars ($140,000) for the remainder of 1996. Commencing on January 1, 1997, the
Company shall pay Parsons a base compensation salary of not less than one
hundred sixty thousand dollars ($160,000) per annum, which salary shall be
payable in equal installments, at least monthly, as set forth in the Company's
Policy Manual and subject to review and adjustment annually. Parsons will
receive a minimum salary increase of 10% to be effective January 1, 1998. After
January 1, 1998, Parsons will be entitled to annual raises at least commensurate
with raises granted other executive officers and in no event will Parsons'
salary be reduced.
B. Parsons shall be entitled to paid vacation and sick leave, all as
more fully specified in the Company's Policy Manual and modified from time to
time. Parsons' annual paid vacation accrual shall not be less then six (6)
weeks.
C. The Company may provide additional stock option opportunities to
Parsons, from time to time, at the discretion of the Board of Directors. All
unexpired options granted under the Company's Employee Stock Option and
Restricted Stock Award Plan "Plan" will vest in the event of a Change of Control
or upon termination of Parsons without Cause.
All Return on Asset ("ROA") performance stock options shall be adjusted for
extraordinary income and expense items which may or may not have been included
within the annual budget. Special investment sales, sales of unused assets and
expansion or acquisition costs shall always be removed when calculating ROA. The
determination of what other items constitute extraordinary income and expense
items shall be made by a majority vote of the Company's Executive Committee and
approved by a majority vote of the Board.
D. In addition to the Base Compensation provided hereinabove, Parsons
will participate in an Incentive Program and shall be paid an annual bonus at a
level or pursuant to a formula determined by the Company from time to time based
on factors including, but not limited to, the quality of Parsons's performance
of his assigned duties and the pre-tax profits of the Company and it's
subsidiaries; Provided, however, each such bonus shall be greater than the bonus
paid for the same time period to any other executive of the Company and it's
subsidiaries.
The ROA performance scale for incentive bonus compensation shall be adjusted for
extraordinary income and expense items which may or may not have been included
within the annual budget. Special investment sales, sales of unused assets and
expansion or acquisition costs shall always be removed when calculating ROA. The
determination of what other items constitute extraordinary income and expense
items shall be made by a majority vote of the Company's Executive Committee and
approved by a majority vote of the Board.
4. Other benefits. Parsons is entitled to receive all employee benefits
the Company generally provides to it's senior executives along with the
following benefits:
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<PAGE> 3
A. Medical, Dental, Vision, Life Insurance and Long-Term
Disability insurance as provided to regular full-time employees of the Company.
The Long-Term Disability insurance shall provide Parsons with at least sixty
percent (60%) of his then current base compensation should Parsons become
totally disabled;
B. Voluntary Life Insurance as available to regular full-time
employees of the Company;
C. KSOP Program as provided to regular full-time employees of the
Company;
D. Other benefits as outlined in the Personnel Manual.
5. Reimbursable Expenses. Parsons is authorized to incur reasonable
expenses in performing his duties and in promoting the business of the Company.
The Company will reimburse Parsons for all such expenses, specifically
including, without limitation, the dues for Parsons' membership in the Olympia
Country & Golf Club and the Rotary Club. The Company acknowledges and agrees
that it may be advisable for Parsons to join other clubs and/or professional
organizations and for the Company to pay the membership fees therefore, all as
may hereafter be determined appropriate by the Executive Committee based on
proposals therefore submitted by Parsons.
6. Working Conditions. Parsons shall be furnished with such working
facilities and equipment that are reasonably required by Parsons to perform his
duties as President, Chief Executive Officer, Chairman, and Director of the
Company, specifically including, but not limited to, secretarial and support
staff , an office and an automobile allowance of at least $600.00 per month,
which allowance shall be reviewed and adjusted annually by the Executive
Committee.
7. Retirement. The Company shall enter into an updated Executive
Supplemental Income ("ESI") Agreement with Parsons, a copy of which is attached
hereto as Exhibit A. The ESI Agreement provides for a pre-age 65 Death Benefit
(as defined in the ESI Agreement) payable to Parsons' designated beneficiary in
the amount of $180,000 for the first 12 month period after Parsons' death;
$135,000 per year for the second throught fifth years following Parsons' death;
and $90,000 per year for the sixth through fifteenth years following Parsons'
death. The ESI Agreement also provides that should Parsons live to age 65 the
Company will pay an Annual Compensation (as defined in the Addendum to the ESI
Agreement) to Parsons in the amount of $125,000 per year (or the actuarially
reduced amount should Parsons select either a lump sum or a joint and survivor
payment option) for a period of fifteen years. Parsons is vested at all times in
the Benefit Accrual (as defined in the ESI Agreement). Parsons shall have a
nonforfeitable right to the Annual Compensation or the Death Benefit, at all
times while employed with the Company, or after August 31, 2004, or a Change in
Control (as defined in the ESI Agreement), or termination without Cause (as
defined in the ESI Agreement).
8. Stock Redemption. The Company agrees that at least $1,000,000 of the
proceeds received from life insurance placed on the life of Parsons by the
Company may be used to redeem shares of Company common stock held by either the
estate of Parsons, a designated beneficiary of Parsons, or a trust or entity
created by Parsons.
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9. Consulting Services. Upon termination of Parsons' services to the
Company; or, upon diagnosis of a condition deemed terminal within two years, to
be confirmed by his treating physician; or, Termination as provided in Paragraph
10 hereof, and if such Termination is not for cause as defined in Paragraph 11
hereof, the Company agrees to retain Parsons' services following such
termination as a consultant and not as an employee, for a period equal to one
year for each three years Parsons served as an employee (partial years to be
prorated); provided such consultant services period shall not exceed 5 years
(the "Consulting Period"). During such Consulting Period, at all reasonable
times and to the extent his physical and mental condition permit, Parsons shall
be available to consult with and advise the Company's officers, directors and
other representatives, not to exceed an average of 20 hours per month. During
such Consulting Period, Parsons shall be entitled to receive for such consulting
services, a monthly amount calculated by adding the total cash compensation paid
to Parsons during the three years of his highest compensation, dividing that sum
by three and then determining a percentage of that quotient equal to one percent
(1%) for each year of employment under the terms of this Agreement. The
resulting figure will be divided by 12 to produce the monthly amount. For
example, if Parsons received $140,000, $150,000 and $160,000 as his three years
of highest compensation and worked for 12 years, the amount would be computed by
adding the three years of total compensation and dividing that amount by three
to arrive at $150,000; then multiply that amount ($150,000) by 1% for each year
worked (1% x 12 = 12%); then dividing that product (12% x 150,000 = $18,000) by
twelve months to arrive at $1,500 per month. The monthly payment determined as
provided in this Paragraph 9 shall commence 30 days after Parsons last received
compensation as President and Chief Executive Officer of the Company unless
Parsons chooses to defer commencement of the Consulting Period which may be
deferred for a period of up to five years in Parsons' sole discretion. Parsons
may arrange for availability through telephone communications acceptable to the
then President of the Company, and in such event, he shall be considered to be
in compliance with the requirement of this paragraph.
Consulting services and payment for consulting services shall follow any
severance compensation periods. Under the circumstances entitling Parsons to
receive consulting service payments, the Company shall provide medical benefits
for Parsons, if possible, or pay the equivalency directly to Parsons if medical
benefits cannot be obtained through the Company, during the Consulting Period at
the same level being provided to other executive employees of the Company. This
consulting medical benefit provision shall not exceed $500.00 per month.
10. Term of Employment.
A. The initial term of this Agreement shall be for ninty-six
(96) months of employment from effective date. Additionally, this Agreement will
automatically renew and have a continual (perpetual) term of employment of
thirty-six (36) months, unless Parsons is terminated for Cause as defined in
Section 11 of this Agreement. Any amendment, alteration or change to this
Agreement must be agreed to and approved in writing by both Parsons and the
Company;
B. This subparagraph was deleted prior to Agreement approval;
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<PAGE> 5
C. If this Agreement is terminated (i) by the Company without
"cause" (as defined in Section 11, below), or (ii) by Parsons for "good reason"
(as defined in paragraph 10.D below),or (iii) by Parsons for any reason and a
Change of Control has occurred within last twelve (12) months, Parsons will be
entitled to receive the following:
(i) Base Compensation (as defined in Section 3.A) and Other
Benefits (as defined in Section 4) until the seventy-second
(72nd) month after September 1, 1996, or for thirty-six
(36) months (whichever is longer),
(ii) fully vested rights to all stock options granted or
awarded under the Plan, (all options will expire if not
exercised within six (6) months of termination or such
longer period as may be provided under the terms of the
Plan or amendments to the Plan), and a nonforfeitable fully
vested rights to fully funded benefits under the ESI
Agreement;
D. Parsons has "good reason" to terminate this Agreement if
action taken by the Company's Board of Directors effectively withdraws from
Parsons the authority and responsibility customarily associated with the
position of President and Chief Executive Officer;
E. All severance compensation paid to Parsons shall be paid on
normal payroll cycles. The Company can pay lump sum payment or payments only if
Parsons has provided written acceptance of lump sum payments;
F. In no event will Parsons be entitled to any payments under
this Agreement that would violate any applicable banking regulations (including
regulations of the Federal Deposit Insurance Corporation as set forth at 12 CFR
Part 359). Any payments under this Agreement will terminate if Parsons violates
Section 14 of this Agreement.
11. Cause. Notwithstanding any provision of this Agreement, the
benefits payable on termination which are provided in paragraph 9 and paragraph
14.A, shall not be payable if Parsons' employment is terminated for cause. For
the purposes of this Agreement, termination for "cause" means termination
because Parsons' (a) willfully and continually fails to substantially perform
his principal responsibilities with the Company, as outlined in Section 2 (other
than any such failure resulting from Parsons' incapacity due to injury or
illness, or Parsons inability due to the Company's failure to provide Parsons
with the proper authority required to carry out those responsibilities), and
such failures continue for a period of at least sixty (60) days after a written
demand for performance is delivered to Parsons by a duly authorized member or
representative of the Board, which specifically sets forth the manner in which
it is alleged that Parsons has failed to substantially perform his duties, and
the action steps which Parsons must follow to meet the Board's expectations,
followed by a meeting between Parsons and the Board at the end of the sixty (60)
day period in which a majority vote by the Board (not including Parsons) is
required to determine that Cause still exists, or (b) is adjudged guilty of any
crime involving a breach of his fiduciary duties to the Company; is adjudged
guilty of any felony; or willfully (in bad faith without reasonable belief such
action or inaction was in the best interests of the Company) and continually
fails to comply with any law, rule, or regulation pertaining to the Company's
business (other than traffic violations or similar minor offenses); or fails to
comply with any final cease and desist order of any government
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agency having jurisdiction over the Company. For purposes of this Agreement, no
act or failure to act on the part of Parsons shall be considered "willful"
unless done or omitted to be done in bad faith without reasonable belief that
such action or omission was in, or not opposed to, the best interests of the
Company.
12. Compliance. Parsons agrees to provide his best efforts to comply
with all rules and regulations of the Federal Deposit Insurance Corporation, the
Federal Reserve Board, and the State of Washington Department of Financial
Institutions.
13. Confidential Information. Parsons acknowledges that in the course
of his employment, he will have or obtain knowledge of confidential information
and other secrets concerning the Company and its business, actual and
prospective customers, and other matters which are valuable to the Company and
which the Company does not want disclosed. Parsons promises during employment at
the Company and thereafter to maintain all such information on a confidential
basis and not to disclose it to any third party, without the Company's prior
written consent or at the Company's express instruction. This confidentiality
promise of Parsons is intended to and shall apply in the broadest sense possible
to information regarding the Company's business activities and actual and
prospective customers, and is not intended to be limited solely to matters which
might meet the legal definition of "trade secrets" under Washington law. Prior
to termination of his employment with the Company Parsons will return all
records, files, handbooks, manuals, and any other form of documentation related
in any way to the business of the Company. Parsons acknowledges that he shall
not be entitled to retain, copy, utilize, or rely upon all or part of any such
materials. This section shall survive termination of this Agreement. The
existence of any claim or cause of action against the Company, whether
predicated upon this Agreement or otherwise, shall not constitute a defense to
the enforcement by the Company of this Section.
14. Restrictive Covenant.
A. If the Company terminates Parsons employment without "cause", or
Parsons terminates for "good reason" as defined in Section 10.D of this
Agreement, or the Company does not extend an offer for contract renewal for a
minimum term of one year at substantially the same compensation and corporate
standing in effect at the completion of this Agreement; then Parsons shall not,
for a period of thirty-six (36) months after the date of termination (the
"Noncompete Period"), be employed or act in any capacity, either directly or
indirectly, or by or for himself or for any partnership, corporation, trust, or
company, "participate" (as defined below) in any business similar to the type of
business conducted by the Company at the time of termination of employment in
any market area in which the Company or it's affiliates conduct business at the
time of termination. For purposes of this Agreement, the term "participate"
includes, without limitation, any direct or indirect interest in any business,
whether as an officer, director, consultant, employee, partner, sole proprietor,
stockholder, owner, or otherwise, other than by ownership of less than one
percent (1%) of the stock of a publicly held corporation whose stock is traded
on a national securities exchange or on the over-the-counter market. The term
"participate" shall also include participation, planning, or consulting for any
startup financial organization. For the purpose of this Agreement market areas
covered by the bank shall be the service areas as delineated in the Company's
CRA (Community Reinvestment Act) Plan at the time of termination;
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B. If Parsons voluntarily terminates his employment without "good
reason" or the Company terminates Parsons for "cause", then Parsons shall not,
for a period of 12 months that commences on the date of termination (the
"noncompete period"), be employed or act in any capacity, either directly or
indirectly, or by or for himself or for any partnership, corporation, trust, or
company, "participate" (as defined below), in any business similar to the type
of business conducted by the Company at the time of termination of employment in
any market area in which the Company or it's affiliates conduct business at the
time of termination. For purposes of this Agreement, the term "participate"
includes, without limitation, any direct or indirect interest in any business,
whether as an officer, director, consultant, employee, partner, sole proprietor,
stockholder, owner, or otherwise, other than by ownership of less than one
percent (1%) of the stock of a publicly held corporation whose stock is traded
on a national securities exchange or on the over-the-counter market. The term
"participate" shall also include participation, planning, or consulting for any
startup financial organization;
C. In addition, Parsons agrees that for a period of 24 months following
his termination (whether voluntary or not) he will not (a) induce or attempt to
induce any other employee of the Company to leave the employ of the Company, or
in any way interfere with the relationship between the Company and any other
employee of the Company or (b) induce or attempt to induce any customer,
supplier, licensee, or other business relations of the Company to cease doing
business with the Company.
During the applicable noncompete period (36 months in sub-paragraph A or 12
months in sub- paragraph B), the Company shall pay Parsons his base salary and
Other benefits, but not the annual incentive bonus. These payments will be made
at normal payroll cycles unless Parsons has provided written acceptance to
accept lump sum payments. The Company's portion of health insurance premiums
shall also continue during this noncompete period. Parsons agrees that in the
event of violation by Parsons of this covenant not to compete, then all payments
to Parsons under this restrictive covenant shall immediately cease and Parsons
shall pay liquidated damages to the Company in the amount of base salary per
month for each month or part of a month that Parsons is in violation of and
continues to violate such agreement.
It is recognized and agreed that damages in such event would be difficult or
impossible to ascertain, though great and irreparable, and that this agreement
with respect to liquidated damages shall in no event disentitle the Company to
injunctive relief;
D. This Restrictive Covenant may be enforced by an action at law for
damages and by an injunction to prohibit the restricted activity. Nothing set
forth herein shall prohibit the Company from pursuing all remedies available to
it. The parties agree that if a trial judge with jurisdictions over a dispute
related to this agreement should determine that any portion of the restrictive
covenants set forth in this section is unreasonably broad, that the parties
authorize said trial judge to narrow same so as to make it reasonable, given all
relevant circumstances, and to enforce same;
E. It is agreed between the parties that this Agreement in its
entirety, and in particular the restraints imposed herein upon Parsons, are
reasonable both as to time and as to area. The parties additionally agree (I)
that the restraints imposed herein upon Parsons are necessary for the protection
of the business and goodwill of the Company; (ii) that the restraints
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imposed herein upon Parsons are not any greater than are reasonably necessary to
secure the business of the Company and the goodwill thereof; and (iii) that the
degree of injury to the public due to the loss of the service and skill of
Parsons upon enforcement of said restraints does not and will not warrant
nonenforcement of said restraints;
F. This section shall survive the termination of this agreement.
15. Change of Control. In the event any person, firm, corporation or
other business entity, at any time, by merger, consolidation, purchase or
otherwise, acquires a majority of the outstanding stock or substantially all of
the assets of the Company or it's subsidiary, First Community Bank, it will be
considered a Change of Control. In the event the Board deems it to be in the
best interests of the Company to consider a Change of Control, or recommendation
of the same to the Company's stockholders, the Board shall first offer Parsons
the opportunity to arrange such an acquisition on behalf of himself or in
conjunction with an investment group. The Board shall not be obligated to grant
a right of first refusal to Parsons. In the event a proposal is made by Parsons
and accepted by the Company, this Agreement shall terminate without further
obligation on the part of the Company upon consummation of that acquisition
transaction.
16. Directorship. The Company agrees to extend it's best efforts to
maintain Parsons as a Director on the Board of the Company and it's
subsidiaries. Parsons shall receive compensation as a Director in accordance
with Company policy. Current Company policy provides that employees of the
Company and it's subsidiaries are not entitled to receive compensation for
service on Board Committees.
17. Proceedings and Attorney's Fees. It is the intention of the
parties hereto that this Agreement, the performance hereunder, and all suits and
special proceedings hereunder be construed in accordance with, under, and
pursuant to the laws of the State of Washington. The substantially prevailing
party in any suits or special proceedings shall be entitled to reasonable
attorney's fees and costs of suit. The parties agree that the venue of any legal
proceedings involving, in whole or in part, any provision of this agreement
shall be in Thurston County, Washington, regardless of which party initiates
such proceedings.
18. Notice. Any notice to be delivered under this Agreement shall be
given in writing and delivered, personally or by certified mail, postage
prepaid, addressed to the Company or to Parsons at their last known addresses.
19. Non-Waiver. No delay or failure by either party to exercise any
right under this Agreement shall constitute a waiver of that or any other right.
20. Severability. If any provision of this Agreement shall be held by a
court of competent jurisdiction to be invalid or unenforceable, the remaining
provisions shall continue to be fully effective.
21. Entire Agreement. This Agreement represents the entire employment
agreement between the parties. This Agreement supersedes any other prior oral or
written employment agreement between the parties on the subject matter hereof.
This Agreement does not supersede
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either the Executive Supplemental Income Agreement or any other incentive
compensation agreement (including stock option agreements) entered into
separately by the parties to this Agreement. This Agreement may be modified,
altered, amended or changed only by a subsequent writing agreed to, and entered
into, by both Parsons and the Company.
22. Binding Effect. It is agreed that all covenants, terms, and
conditions of this Agreement shall extend, apply to, and firmly bind the heirs,
executors, administrators, assigns, and successors in interest of the respective
parties hereto as fully as the respective parties themselves are bound.
IN WITNESS WHEREOF, the parties have signed this Agreement on the day
and year first above written.
/s/ Ken F. Parsons, Sr.
- -----------------------------------------
Ken F. Parsons, Sr.
FIRST COMMUNITY FINANCIAL GROUP
By: /s/ E. Paul DeTray
- -----------------------------------------
E. Paul DeTray, Chairman
9
<PAGE> 1
EXHIBIT (10) j.
FIRST COMMUNITY FINANCIAL GROUP
OPTION AGREEMENT
EMPLOYEE STOCK OPTION AND RESTRICTED STOCK AWARD PLAN
AWARD TO KEN PARSONS
THIS AGREEMENT is made the 30th day of September, 1996, by and between
FIRST COMMUNITY FINANCIAL GROUP, a Washington corporation ("FCFG") and KEN
PARSONS ("Employee").
WHEREAS, Employee serves as President and Chief Executive Officer of
First Community Financial Group and CEO of First Community Bank; and
WHEREAS, FCFG considers it desirable and in its best interests and the
interests of its shareholders that Employee be given an inducement to advance
the interests of FCFG by possessing a proprietary interest; and
WHEREAS, FCFG has committed itself to offer certain stock options to
Employee;
NOW, THEREFORE, it is agreed by and between the parties as follows:
1. Grant of Option: FCFG hereby grants to Employee an option to
purchase up to 40,000 shares of the common stock of FCFG at a price of $20.00
per share, at the times and according to the vesting schedule set forth below.
<TABLE>
<CAPTION>
Purchase
Date Vested # Options Cumulative Requirements
----------- --------- ---------- ------------
<S> <C> <C> <C>
3/1/97 8,000 shares 8,000 shares All shares must be
3/1/98 8,000 shares 16,000 shares purchased within
3/1/99 8,000 shares 24,000 shares 10 years of
3/1/00 8,000 shares 32,000 shares March 1, 1996.
3/1/01 8,000 shares 40,000 shares
</TABLE>
1
<PAGE> 2
In the event of termination of employment for any reason, any options
which have not vested are automatically terminated. Any Option shares which have
vested may be exercised by Employee according to the terms of the Employee Stock
Option and Restricted Stock Award Plan (the "Plan"). Option Shares which have
not been vested shall not be considered to be "options" upon termination.
In each case, an Option that is not exercised within the applicable
time period expires. Options may be exercised at any time after vesting, but no
later than the dates set forth above.
2. Exercise of Option. The Option shall be exercised, in whole or in
part, by written notice delivered to FCFG. Such notice shall state the number of
shares to be purchased and be accompanied by a check in payment of the Option
price and any applicable taxes for the specified shares. If any law or
regulation requires that FCFG take any action with respect to the shares
specified in such notice before the issuance thereof, then the date of delivery
of such shares shall be extended for the period necessary to take such action.
3. Grant of Limited Right. Simultaneously with the grant of the Options
herein, FCFG grants to Employee a Limited Right identical to the number of
Options Shares and with the same vesting schedule, in accordance with Section 3
of the Plan. Any Limited Right which corresponds to a Related Right which has
not vested shall automatically expire upon the expiration of the Related Right.
4. Terms and Conditions. The provisions of the Plan are incorporated
herein as if fully set forth. A copy of the Plan is attached hereto as an
exhibit. In the event the terms and conditions of this Option Agreement are
inconsistent with the terms and conditions of the Plan, the Plan shall control,
except that any Option Shares which have not been vested shall expire upon
termination of Employee's employment.
5. Investment Purposes. Employee acknowledges that there currently is
no public market for the shares and it is not expected that any public market
will develop. Shareholders may not be readily able to liquidate their investment
in the event of an emergency or otherwise. Therefore, the Employee represents
that the acquisition shall be for long-term investment and not with a view to
resell.
2
<PAGE> 3
6. Termination of Option. In the event Employee ceases to be employed
at FCFG or its subsidiaries, any Options vested at that time may be exercised,
in whole or in part, at any time within three (3) months as provided in Section
III(h)(1) of the Plan, but not thereafter. Options which have not vested at such
cessation of employment shall expire. Employee may not sell or transfer any
shares acquired under the provisions of this paragraph for a period of one (1)
year from exercise of the Option. Notwithstanding the foregoing, Employee hereby
grants to the First Community Financial Group the right of first refusal in the
event Employee elects to sell his shares at any time.
7. Change in Control. In the event of any change in control, each
outstanding Limited Right will be exercisable for a period of sixty (60) days
following the date of such event, as provided in Section III (3) of the Plan.
DATED to be effective the 1st day of March, 1996.
EMPLOYEE: FIRST COMMUNITY FINANCIAL GROUP:
/s/ Ken F. Parsons /s/ E. Paul DeTray
- -------------------------------------------------------------------------------
KEN F. PARSONS E. PAUL DETRAY, CHAIRMAN
3
<PAGE> 1
EXHIBIT (10) k.
FIRST COMMUNITY FINANCIAL GROUP
OPTION AGREEMENT
EMPLOYEE STOCK OPTION AND RESTRICTED STOCK AWARD PLAN
AWARD TO KEN PARSONS
THIS AGREEMENT is made the 30th day of September, 1996, by and between
FIRST COMMUNITY FINANCIAL GROUP, a Washington corporation ("FCFG") and KEN
PARSONS ("Employee").
WHEREAS, Employee serves as President and Chief Executive Officer of
First Community Financial Group and CEO of First Community Bank; and
WHEREAS, FCFG considers it desirable and in its best interests and the
interests of its shareholders that Employee be given an inducement to advance
the interests of FCFG by possessing a proprietary interest; and
WHEREAS, FCFG has committed itself to offer certain stock options to
Employee;
NOW, THEREFORE, it is agreed by and between the parties as follows:
1. Grant of Option: FCFG hereby grants to Employee an option to
purchase up to 60,000 shares of the common stock of FCFG at a price of $20.00
per share, at the times and according to the vesting schedule set forth below.
This vesting will also be subject to option shares availability.
<TABLE>
<CAPTION>
Date Vested # Options Purchase Requirements
<S> <C> <C>
3/1/97 0 to 15,000* All shares must be purchased within
3/1/98 0 to 15,000* 10 years of March 1, 1996.
3/1/99 0 to 15,000*
3/1/00 0 to 15,000*
</TABLE>
*Shares to be vested will be based on "high performance" of First
Community Bank as determined by FCFG executive committee along with
Banking Consultants of America.
1
<PAGE> 2
In the event of termination of employment for any reason, any options
which have not vested are automatically terminated. Any Option shares which have
vested may be exercised by Employee according to the terms of the Employee Stock
Option and Restricted Stock Award Plan (the "Plan"). Option Shares which have
not been vested shall not be considered to be "options" upon termination.
In each case, an Option that is not exercised within the applicable
time period expires. Options may be exercised at any time after vesting, but no
later than the dates set forth above.
2. Exercise of Option. The Option shall be exercised, in whole or in
part, by written notice delivered to FCFG. Such notice shall state the number of
shares to be purchased and be accompanied by a check in payment of the Option
price and any applicable taxes for the specified shares. If any law or
regulation requires that FCFG take any action with respect to the shares
specified in such notice before the issuance thereof, then the date of delivery
of such shares shall be extended for the period necessary to take such action.
3. Grant of Limited Right. Simultaneously with the grant of the Options
herein, FCFG grants to Employee a Limited Right identical to the number of
Options Shares and with the same vesting schedule, in accordance with Section 3
of the Plan. Any Limited Right which corresponds to a Related Right which has
not vested shall automatically expire upon the expiration of the Related Right.
4. Terms and Conditions. The provisions of the Plan are incorporated
herein as if fully set forth. A copy of the Plan is attached hereto as an
exhibit. In the event the terms and conditions of this Option Agreement are
inconsistent with the terms and conditions of the Plan, the Plan shall control,
except that any Option Shares which have not been vested shall expire upon
termination of Employee's employment.
5. Investment Purposes. Employee acknowledges that there currently is
no public market for the shares and it is not expected that any public market
will develop. Shareholders may not be readily able to liquidate their investment
in the event of an emergency or otherwise. Therefore, the Employee represents
that the acquisition shall be for long-term investment and not with a view to
resell.
2
<PAGE> 3
6. Termination of Option. In the event Employee ceases to be employed
at FCFG or its subsidiaries, any Options vested at that time may be exercised,
in whole or in part, at any time within three (3) months as provided in Section
III(h)(1) of the Plan, but not thereafter. Options which have not vested at such
cessation of employment shall expire. Employee may not sell or transfer any
shares acquired under the provisions of this paragraph for a period of one (1)
year from exercise of the Option. Notwithstanding the foregoing, Employee hereby
grants to the First Community Financial Group the right of first refusal in the
event Employee elects to sell his shares at any time.
7. Change in Control. In the event of any change in control, each
outstanding Limited Right will be exercisable for a period of sixty (60) days
following the date of such event, as provided in Section III (3) of the Plan.
DATED to be effective the 1st day of March, 1996.
EMPLOYEE: FIRST COMMUNITY FINANCIAL GROUP:
/s/ Ken F. Parsons /s/ E. Paul DeTray
- ------------------------- -----------------------------------
KEN F. PARSONS E. PAUL DETRAY, CHAIRMAN
3
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 9777
<INT-BEARING-DEPOSITS> 6836
<FED-FUNDS-SOLD> 4617
<TRADING-ASSETS> 852
<INVESTMENTS-HELD-FOR-SALE> 6821
<INVESTMENTS-CARRYING> 4563
<INVESTMENTS-MARKET> 4585
<LOANS> 131181
<ALLOWANCE> 1402
<TOTAL-ASSETS> 176631
<DEPOSITS> 154107
<SHORT-TERM> 0
<LIABILITIES-OTHER> 773
<LONG-TERM> 1337
0
0
<COMMON> 4241
<OTHER-SE> 16173
<TOTAL-LIABILITIES-AND-EQUITY> 176631
<INTEREST-LOAN> 10560
<INTEREST-INVEST> 550
<INTEREST-OTHER> 337
<INTEREST-TOTAL> 11447
<INTEREST-DEPOSIT> 4124
<INTEREST-EXPENSE> 4209
<INTEREST-INCOME-NET> 7238
<LOAN-LOSSES> 221
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 6504
<INCOME-PRETAX> 1983
<INCOME-PRE-EXTRAORDINARY> 1983
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1448
<EPS-PRIMARY> .80
<EPS-DILUTED> .79
<YIELD-ACTUAL> 10.0
<LOANS-NON> 387
<LOANS-PAST> 2156
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1376
<CHARGE-OFFS> 203
<RECOVERIES> 8
<ALLOWANCE-CLOSE> 1402
<ALLOWANCE-DOMESTIC> 1402
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
