<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(mark one)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended JUNE 30, 2000
OR
[ ] TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from ________ to ________
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)
Registrant's telephone number: (360) 459-1100
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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
--- ---
Indicate the number of shares outstanding in each of the issuer's classes of
common stock, as of the latest practicable date.
Title of class Outstanding at June 30, 2000
----------------------------- ----------------------------
Common Stock, $2.50 par value 2,159,638
<PAGE>
FIRST COMMUNITY FINANCIAL GROUP, INC.
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1 Financial Statements
Condensed Consolidated Balance Sheets...................................... 3
Condensed Consolidated Statements of Income and Comprehensive Income....... 4
Condensed Consolidated Statement 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 4 Submission of Matters to Vote of Security Holders.......................... 13
Item 6 Exhibits and Reports on Form 8-K........................................... 13
SIGNATURES......................................................................... 14
</TABLE>
2
<PAGE>
FIRST COMMUNITY FINANCIAL GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
-----------------------------------------------------------------------------------------------
June 30 December 31
2000 1999
-----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 13,418 $ 10,349
Interest bearing deposits in banks 172 136
Federal funds sold 420 0
Securities available for sale 27,428 28,439
Securities held to maturity 677 677
Loans held for sale 3,428 2,951
Loans 255,194 232,825
Allowance for credit losses 6,149 5,825
NET LOANS 249,045 227,000
Premises and equipment 9,555 9,187
Foreclosed real estate 1,322 1,890
Accrued interest receivable 1,685 1,226
Cash value of life insurance 3,072 3,014
Goodwill 6,881 7,085
Other assets 1,851 1,819
TOTAL ASSETS $ 318,954 $ 293,773
LIABILITIES
Deposits:
Non-interest bearing $ 46,198 $ 42,481
Savings and interest bearing demand 96,349 105,519
Interest bearing 132,986 97,527
TOTAL DEPOSITS 275,533 245,527
Federal funds purchased 3,300 3,200
Short term borrowing 3,800 10,335
Long term debt 1,942 2,030
Accrued interest payable 344 299
Other liabilities 2,458 1,764
TOTAL LIABILITIES 287,377 263,155
STOCKHOLDERS' EQUITY
Common stock, par value $2.50 per share; 5,399 5,443
10,000,000 shares authorized, 2,159,638 shares issued
in 2000, and 2,108,560 shares issued in 1999
Surplus 22,800 23,428
Retained earnings 4,458 2,855
Accumulated other comprehensive loss (788) (728)
Debt related to KSOP (292) (380)
TOTAL STOCKHOLDERS' EQUITY 31,577 30,618
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 318,954 $ 293,773
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE>
FIRST COMMUNITY FINANCIAL GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited)
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
-------------------------------------------------------------------------------------------------------------------
Three months ended Six months ended
June 30 June 30
2000 1999 2000 1999
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans $ 6,194 $ 5,048 $ 12,389 $ 9,785
Federal funds sold and deposits in banks 78 28 82 74
Investments 445 493 899 1,010
TOTAL INTEREST INCOME 6,717 5,569 13,370 10,869
INTEREST EXPENSE
Deposits 2,458 1,744 4,369 3,448
Other 237 64 533 109
TOTAL INTEREST EXPENSE 2,695 1,808 4,902 3,557
NET INTEREST INCOME 4,022 3,761 8,468 7,312
PROVISION FOR CREDIT LOSSES 120 120 290 240
NET INTEREST INCOME AFTER PROVISION
FOR CREDIT LOSSES 3,902 3,641 8,178 7,072
NON-INTEREST INCOME
Service charges on deposit accounts 503 493 962 952
Origination fees on mortgage loans sold 206 291 441 589
Other income 459 381 1,041 694
TOTAL NON-INTEREST INCOME 1,168 1,165 2,444 2,235
NON-INTEREST EXPENSE
Salaries and employee benefits 2,052 2,047 4,181 4,013
Occupancy and equipment 537 524 1,094 1,094
Other expense 1,131 1,102 2,261 2,068
TOTAL NON-INTEREST EXPENSE 3,720 3,673 7,536 7,175
OPERATING INCOME BEFORE INCOME TAXES 1,350 1,133 3,086 2,132
Income Taxes 451 364 1,048 689
NET INCOME $ 899 $ 769 $ 2,038 $ 1,443
OTHER COMPREHENSIVE INCOME, NET OF TAX
Unrealized holding losses on securities (40) (199) (60) (137)
arising during the period
COMPREHENSIVE INCOME $ 859 $ 570 $ 1,978 $ 1,306
EARNINGS PER SHARE DATA
BASIC EARNINGS PER SHARE $ 0.42 $ 0.36 $ 0.95 $ 0.68
DILUTED EARNINGS PER SHARE $ 0.40 $ 0.34 $ 0.91 $ 0.65
Weighted average number of common shares 2,147,098 2,137,615 2,153,320 2,119,646
Weighted average number of common shares
- including dilutive stock options 2,239,807 2,251,490 2,246,030 2,233,521
Return on average assets 1.12% 1.10% 1.32% 1.05%
Dividends per share $ 0.10 $ 0.40 $ 0.20 $ 0.40
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
FIRST COMMUNITY FINANCIAL GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders' Equity (Unaudited)
Six Months Ended June 30, 1999 and 2000
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
-----------------------------------------------------------------------------------------------------------
Accumulated
Other Guaranteed
Common Retained Comprehensive KSOP
Stock Surplus Earnings Income (Loss) Obligation Total
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1998 $ 5,315 $ 22,849 $ 2,757 $ 28 $ (608) $ 30,341
Net income -- -- 1,443 -- -- 1,443
Stock options exercised 124 391 -- -- -- 515
Cash dividend ($0.40 per share) -- -- (871) -- -- (871)
Other comprehensive income -- -- -- (137) -- (137)
Net decrease in debt related
to KSOP -- -- -- -- 139 139
BALANCE, JUNE 30, 1999 5,439 23,240 3,329 (109) (469) 31,430
Net income -- -- 2,038 -- -- 2,038
Stock options exercised 56 206 -- -- -- 262
Cash dividend ($0.20 per share) -- -- (434) -- -- (434)
Stock repurchased (100) (834) -- -- -- (934)
Other comprehensive income -- -- -- (60) -- (60)
Net decrease in debt related
to KSOP -- -- -- -- 89 89
BALANCE, JUNE 30, 2000 $ 5,399 $ 22,800 $ 4,458 ($ 788) ($ 292) $ 31,577
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE>
FIRST COMMUNITY FINANCIAL GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
-------------------------------------------------------------------------------------------------------------------
Six months ended
June 30
2000 1999
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 2,038 $ 1,443
Adjustments to reconcile net income to net cash provided by (used in)
Operating activities:
Provision for credit losses 290 240
Depreciation and amortization 538 547
Amortization of intangible assets 204 204
Other - net (471) (30)
Originations of loans held for sale (21,220) (22,608)
Proceeds from sales of loans held for sale 20,743 23,794
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,122 3,590
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in interest bearing deposits in banks (36) 19
Net increase in Federal funds sold (420) (1,085)
Proceeds from maturities of available-for-sale securities 937 16,668
Purchase of available-for-sale securities 0 (13,783)
Net increase in loans (21,725) (19,600)
Proceeds from sale of other real estate 1,331 0
Loans on sale of other real estate (610) 0
Additions to premises and equipment (906) (804)
NET CASH USED BY INVESTING ACTIVITIES (21,429) (18,585)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 30,006 17,385
Net increase (decrease) in short-term borrowings (6,435) 2,350
Sale of common stock 262 515
Repurchase of common stock (934) 0
Repayment of long-term borrowings (89) (139)
Payment of dividends (434) (871)
NET CASH PROVIDED BY FINANCING ACTIVITIES 22,376 19,240
NET CHANGE IN CASH AND DUE FROM BANKS 3,069 4,245
CASH AND DUE FROM BANKS:
Beginning of period 10,349 12,315
END OF PERIOD $ 13,418 $ 16,560
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
CASH PAYMENTS FOR:
Interest $ 4,857 $ 3,596
Taxes 985 840
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING ACTIVITIES:
Other real estate acquired in settlement of loans 647 334
Decrease in guarantee of KSOP obligation (88) (139)
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6
<PAGE>
FIRST COMMUNITY FINANCIAL GROUP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with instructions to Form 10-Q 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 (consisting of normally recurring accruals)
have been included. Operating results for the six months ended June 30, 2000 are
not necessarily indicative of the results anticipated for the year ending
December 31, 2000.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. BASIC AND DILUTED EARNINGS PER SHARE
Basic earnings per share are calculated by dividing net income by the
weighted average number of common shares outstanding during the periods
presented. Diluted earnings per share assumes that all dilutive stock options
outstanding are issued such that their dilutive effect is maximized.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This discussion contains certain forward-looking statements within the meaning
of the federal securities laws. Actual results and the timing of certain events
could differ materially from those projected in the forward-looking statements
due to a number of factors.
FINANCIAL CONDITION
OVERVIEW
The Company's consolidated total assets at June 30, 2000 of $318,954,000
represents an 8.6% increase over December 31, 1999 assets of $293,773,000. The
growth in assets was primarily made up of growth in loan demand. Loan balances,
net of allowance for credit losses, increased $22,522,000, or 9.8%, in the first
half to $252,473,000 from $229,951,000 at December 31, 1999. Loan quality, as
measured by the level of nonperforming assets detailed below, has improved over
prior year.
Nonperforming assets were as follows (dollars in thousands):
<TABLE>
<CAPTION>
June 30 December 31
2000 1999
------- -----------
<S> <C> <C>
Non-accrual loans $ 520 $1,476
Accruing loans past due 90 days or more 1,126 28
Foreclosed real estate 1,322 1,890
Other assets 0 24
$2,968 $3,418
</TABLE>
The amount of non-accrual loans and foreclosed real estate has been reduced by
$1,524,000, or 45.3%. Offsetting this decrease is an increase in loans accruing
interest that are past due by 90 or more days. These loans are monitored and
may be reclassified as non-accrual as conditions warrant.
The allowance for 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 credit losses to be
adequate.
The allowance for credit losses increased $324,000 in the first half of 2000.
The ratio of allowance for credit losses to total loans decreased to 2.41% from
2.50% at December 31, 1999. The dollar value change in the allowance consisted
of $290,000 of provision and $34,000 in net recoveries on previously charged off
loans. The current allowance for credit losses and its associated ratio remains
historically high due to the special allowance made on a specific loan in the
fourth quarter of 1999. That loan is being monitored closely and was 70 days
past due at June 30, 2000. Management believes, based on available data, that
any losses which may be realized on this loan will not exceed the special
allowance provided.
Investment securities decreased by $1,011,000, or 3.5% during the first half to
total $28,105,000. Securities have continued to decease due to maturities or
prepayments made on asset-backed securities. No additional securities purchases
have been made during the year due to loan growth. Portfolio balances are
managed in conjunction with the remainder of the balance sheet and support the
lending and depository functions of the Bank. Balances will increase and
decrease to meet liquidity demands.
Total deposits increased $30,006,000, or 12.2% in the first half to
$275,533,000. Non-interest bearing demand increased by 8.7%, but the majority of
the increase was in time deposits. Time deposits have increased by $35,459, or
36.4% during the first half of 2000. The primary reason for this was a
promotional campaign directed at time deposit consumers. This promotion, as
intended, provided funding for the loan growth and improved liquidity by
reducing the reliance on external debt financing. Short term borrowing was
consequently reduced by $6,535,000 from the balances at December 31, 1999.
8
<PAGE>
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 June 30, 2000, cash, deposits in banks, Federal funds
sold and securities available for sale totaled $41,438,000. 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 June 30, 2000, borrowing lines of
credit totaled $37,995,000. These credit facilities are being used regularly as
a source of funds as a result of loan growth. $7,100,000 was being borrowed
against these lines of credit in the form of federal funds purchased and term
advances as of June 30, 2000.
Management believes the Bank's liquidity position at June 30, 2000, 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.
<TABLE>
<CAPTION>
INTEREST RATE GAP ANALYSIS
JUNE 30, 2000
After One
Within But Within After
(DOLLARS IN THOUSANDS) One Year Five Years Five Years Total
<S> <C> <C> <C> <C>
Loans $ 96,886 $ 132,892 $ 28,844 $ 258,622
Securities:
Available for sale 2,877 13,370 10,207 26,454
Held to maturity -- 270 407 677
Interest bearing deposits with banks 172 -- -- 172
Federal funds sold 420 -- -- 420
Total Earning assets $ 100,355 $ 146,532 $ 39,458 $ 286,345
Deposits:
Savings, now and money market $ 96,349 -- -- $ 96,349
Time deposits 128,065 $ 4,921 -- 132,986
Short-term borrowings 7,100 -- -- 7,100
Long-term debt 1,942 -- -- 1,942
Total interest bearing liabilities $ 233,456 $ 4,921 -- $ 238,377
Net Interest Rate Sensitivity Gap $ (133,101) $ 141,611 $ 39,458 $ 47,968
</TABLE>
9
<PAGE>
The Company's market risk is impacted by changes in interest rates. Other types
of market risk, such as foreign currency exchange rate risk and commodity price
risk, do not arise in the normal course of the Company's business.
The Company has market risk in the form of interest rate risk on its financial
assets. In an effort to understand the relative impact of this risk on the
Company's current financial situation, a process known as a rate shock is
applied to the current financial assets.
Rate shock is a process wherein the characteristics of the financial assets of
the Company are reviewed in the event they are subjected to an instantaneous and
complete adjustment in the market rate of interest. These results are modeled to
determine the effects on interest rate margin for the succeeding twelve months
from the repricing of variable rate assets and liabilities where applicable. The
level of impact on the various assets and liabilities are also estimated for
their sensitivity to pricing changes of such a market interest rate change.
According to this model and its assumptions, the change in net interest margin
in the event market interest rates were to immediately rise or fall by 100 basis
points is estimated to be $311,000.
CAPITAL
Consolidated capital of FCFG increased $959,000 during the first half of
2000. Increases come primarily from net income, the exercising of stock
options and payments made on the debt related to the Company's KSOP plan.
Reductions to capital were the result of a repurchase and retirement of stock
for $934,000 and cash dividends paid of $434,000. Market value adjustments
also reduced the amount of capital reported.
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) to 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
June 30, 2000, the Company's leverage ratio was 8.65%, compared to 8.47% at
year-end 1999. In addition, banks and 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 total capital includes the allowance
for possible credit losses, subject to 1.25% limitation of risk-adjusted assets.
The rules require Tier I capital of 4% of risk-adjusted assets and total capital
of 8%. At June 30, 2000, the Tier I capital ratio was 8.34%, and total capital
was 9.60%. At December 31, 1999 the Tier I capital ratio was 8.94% and the total
capital ratio was 10.21%.
RESULTS OF OPERATIONS
GENERAL
Net income for the six months ended June 30, 2000 was $2,038,000, compared to
$1,443,000 for the same period in 1999. This represents a 41.2% increase over
the prior year. Net income for the three months ended June 30, 2000 was
$899,000, compared to $769,000 for the three months ended June 30, 1999. This
represents a 16.9% increase in net income for the period.
Net interest income increased $1,156,000, an increase of 15.8% for the six
months ended June 30, 2000 over the same period for 1999. Net interest income
increased $261,000 for the three months ended June 30, 2000. This represents an
increase of 6.9% over the prior year period. Increased balances and rates have
contributed to the increases in both interest income and interest expense. These
items are discussed in more detail in the following discussion.
Interest income for the six months ended June 30, 2000 increased $2,501,000 over
the six months ended June 30, 1999. Of this increase, approximately $2,093,000
is attributed to an increase in the average volume of earning assets. Average
earning assets for the first six months of 2000 are $39,171,000, or 16%, higher
than 1999. The average rate earned on assets, which went to 9.63% from 9.13% for
the six month period, increased interest income by $408,000. The percentage of
average loans to total average earning assets continued to increase over the
prior year. The percentage of average loans to total average earning assets has
increased to 89.2% from 84.6% in the first half of 1999. The average rate of
return on assets increased 50 basis points as rate increases were realized in
each earning asset class. Interest income for the three months ended June 30,
2000 was $1,148,000 higher than the same period in the previous year.
10
<PAGE>
Total interest expense for the six months ended June 30, 2000 increased
$1,345,000, or 37.8%, from the comparable period of the prior year. Of the
total increase in interest expense, $1,164,000 was related to the increased
volumes of average interest bearing liabilities (primarily time deposits),
which increased $34,016,000 to $229,763,000. The average cost of funds
increased on most products as well with the exception of savings, NOW and
money market funds. The average rate of expense for deposits and borrowings
in the first half of 2000 increased from 3.66% in 1999 to 4.29%, an increase
of 63 basis points. Total interest expense for the three months ended
June 30, 2000 were $887,000 higher than the second quarter of 1999.
Net interest margin, defined as net interest income as a percentage of average
earning assets, decreased by 6 basis points to 6.08% from 6.14% in the first
half of 1999.
The yield and cost of funds for earning assets and interest bearing liabilities
were as follows as of and for the six months ended June 30 (dollars in
thousands):
<TABLE>
<CAPTION>
2000 1999
Interest Interest
Average Income Average Average Income Average
Rates
Balance (Expense) Balance (Expense) Rates
<S> <C> <C> <C> <C> <C> <C>
Earning Assets:
Loans (Interest and fees) $ 248,208 $ 12,389 10.04% $ 203,221 $ 9,785 9.71%
Federal funds sold 2,573 82 6.41% 3,360 74 4.44%
Investment securities 28,472 899 6.35% 33,498 1,010 6.08%
Total earning assets
and interest income $ 279,253 $ 13,370 9.63% $ 240,079 $ 10,869 9.13%
Interest bearing liabilities:
Deposits:
Savings, NOW, and
Money Market Deposits $ 101,783 $ (1,221) 2.41% $ 111,410 $ (1,418) 2.57%
Time deposits 112,300 (3,148) 5.64% 80,970 (2,030) 5.06%
Total interest bearing deposits $ 214,083 (4,369) 4.10% $ 192,380 (3,448) 3.61%
Other borrowings 15,680 (533) 6.84% 3,367 (109) 6.53%
Total interest bearing liabilities $ 229,763 $ (4,902) 4.29% $ 195,747 $ (3,557) 3.66%
and interest expense
Net interest income $ 8,468 $ 7,312
========== ==========
Net interest margin as a percent
of average earning assets: 6.08% 6.14%
</TABLE>
11
<PAGE>
An analysis of the change in net interest income is as follows for the six
months ended June 30 (dollars in thousands):
<TABLE>
<CAPTION>
2000 compared to 1999
Increase (decrease) due to
Volume Rate Net
<S> <C> <C> <C>
Interest earned on:
Loans $ 2,259 $ 345 $ 2,604
Federal funds sold and deposits in banks (9) 17 8
Investment securities (158) 47 (111)
Total interest income 2,092 409 2,501
Interest paid on:
Savings, NOW and MMA (116) (81) (197)
Time deposits 862 256 1,118
Other borrowings 419 5 424
Total Interest expense 1,165 180 1,345
Net interest income $ 927 $ 229 $ 1,156
</TABLE>
The change in interest due to both rate and volume has been allocated to volume
and rate changes in proportion to the relationship of the absolute dollar
amounts of the change in each.
Non-interest income increased by $209,000, or 9.4%, from the first half of
1999. The primary reasons for the increase are $194,000 increase realized in
gains on sale of assets, $109,000 in additional revenues generated by the
investment products division of the Company and $57,000 from ATM
transactions. Origination fees on mortgage loans sold decreased by $148,000,
or 25.1%, from the prior year. Non-interest income for the three months ended
June 30, 2000 increased over the prior year by $3,000. Increased revenues
amounted to $34,000 income in additional revenues generated by the investment
products division of the Company, $30,000 from ATM transactions and $14,000
increase realized in gains on sale of assets. Origination fees on mortgage
loans sold decreased by $85,000, or 29.2%, from the prior year second quarter.
Non-interest expenses for the first half of 2000 increased by $361,000, or 5.0%,
over the first half of 1999. Total non-interest expenses for the second quarter
of 2000 were very similar to those incurred the prior year. The salary and
benefits expense increase of $168,000 represents a 4.2% increase from the first
half of 1999. Second quarter salary and benefit expense, however, was $5,000, or
0.2% higher than the prior year. The other expenses increase of $193,000
included $41,000 related to ATM data processing and operation, $25,000 in
postage, $25,000 in regulatory agency insurance and assessments, $15,000 in
business & occupation taxes, $14,000 in both public relations as well as market
research expense, and $13,000 in general insurance expense. The ratio of
non-interest expense to average assets decreased to 4.89% for the six months
ended June 30, 2000 from 5.22% in 1999. The ratio of net overhead (non-interest
expense minus non-interest income) divided by average total assets decreased to
3.30% for the six months ended June 30, 2000 from 3.59% for the same period in
1999.
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<PAGE>
FIRST COMMUNITY FINANCIAL GROUP, INC.
PART II - OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
On May 9, 2000, the Company held its 1999 Annual Shareholders' Meeting.
Two members of the Company's Board of Directors were re-elected with
1,729,758 shares being cast. The voting details are as follows:
Patrick L. Martin 1,682,916 FOR 7,491 AGAINST 39,351 ABSTAIN
Ken F. Parsons 1,671,112 FOR 21,258 AGAINST 37,388 ABSTAIN
The terms for these two Directors will expire in 2003. Other continuing
Directors and their terms are:
A. Richard Panowicz Term expires 2001
E. Paul DeTray Term expires 2001
Michael N. Murphy Term expires 2002
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K None
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<PAGE>
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: August 14, 2000 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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