<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 September 30, 1999
                                            ------------------
                                    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 September 30, 1999
         --------------                    ---------------------------------
         Common Stock, $2.50 par value              2,175,667


<PAGE>


                 FIRST COMMUNITY FINANCIAL GROUP, INC.

                           Table of Contents

<TABLE>
<CAPTION>

PART I - FINANCIAL INFORMATION                                                                              Page
<S>
                                                                                                         <C>
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

Item 3            Year 2000 Issues                                                                           13

PART II - OTHER INFORMATION

Item 6            Exhibits and Reports on Form 8-K                                                           15

SIGNATURES                                                                                                   16

</TABLE>

                                       2

<PAGE>



                FIRST COMMUNITY FINANCIAL GROUP, INC. AND SUBSIDIARIES
                  Condensed Consolidated Balance Sheets (Unaudited)

<TABLE>
<CAPTION>

(DOLLARS IN THOUSANDS)
-------------------------------------------------------------------------------------------------------------------
                                                                                 September 30       December 31
                                                                                     1999              1998
-------------------------------------------------------------------------------------------------------------------
<S>                                                                              <C>                <C>

ASSETS
Cash and due from banks                                                             $ 10,394         $ 12,315
Interest bearing deposits in banks                                                       139              127
Federal funds sold                                                                     2,600            2,815
Securities available for sale                                                         30,403           35,418
Securities held to maturity                                                              677              677
Loans held for sale                                                                    3,746            4,456

Loans                                                                                219,113          194,361
Less allowance for credit losses                                                       2,535            2,290
     NET LOANS                                                                       216,578          192,071

Premises and equipment                                                                 9,287            9,474
Intangible assets                                                                      7,187            7,493
Other assets                                                                           6,613            6,720

     TOTAL ASSETS                                                                   $287,624         $271,566


LIABILITIES
Deposits:
     Non-interest bearing                                                           $ 45,302         $ 46,538
     Interest bearing                                                                199,436          189,049
TOTAL DEPOSITS                                                                       244,738          235,587


Short term borrowing                                                                   6,676              500
Long term debt                                                                         2,075            2,808
Other liabilities                                                                      2,169            2,330
TOTAL LIABILITIES                                                                    255,658          241,225

STOCKHOLDERS' EQUITY
Common stock, par value $2.50 per share;                                               5,439            5,315
     10,000,000 shares authorized, 2,175,667 shares issued
     in 1999, and 2,108,560 shares issued in 1998
Surplus                                                                               23,240           22,849
Retained earnings                                                                      4,091            2,757
Accumulated other comprehensive income                                                  (379)              28
Guaranteed KSOP obligation                                                              (425)            (608)
     TOTAL STOCKHOLDERS' EQUITY                                                       31,966           30,341

     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                     $287,624         $271,566

</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                   Nine months ended
                                                         September 30                        September 30
                                                      1999            1998                1999             1998
<S>                                                  <C>            <C>                 <C>             <C>

INTEREST INCOME
   Interest and fees on loans                        $5,312         $4,945              $15,097         $14,815
   Federal funds sold and deposits in banks              14             62                   88             433
   Investments                                          478            863                1,488           2,395
   TOTAL INTEREST INCOME                              5,804          5,870               16,673          17,643

INTEREST EXPENSE
   Deposits                                           1,718          2,079                5,166           6,587
   Other                                                188             50                  297             163
   TOTAL INTEREST EXPENSE                             1,906          2,129                5,463           6,750

   NET INTEREST INCOME                                3,898          3,741               11,210          10,893

PROVISION FOR CREDIT LOSSES                             120             65                  360             325

   NET INTEREST INCOME AFTER PROVISION
      FOR CREDIT LOSSES                               3,778          3,676               10,850          10,568

NON-INTEREST INCOME
   Service charges on deposit accounts                  491            477                1,443           1,448
   Origination fees on mortgage loans sold              284            277                  873             922
   Other income                                         412            493                1,106           1,189
   TOTAL NON-INTEREST INCOME                          1,187          1,247                3,422           3,559

NON-INTEREST EXPENSE
   Salaries and employee benefits                     1,963          1,982                5,976           5,968
   Occupancy and equipment                              573            541                1,667           1,655
   Other expense                                      1,039          1,132                3,107           3,153
   TOTAL NON-INTEREST EXPENSE                         3,575          3,655               10,750          10,776

OPERATING INCOME BEFORE INCOME TAXES                  1,390          1,268                3,522           3,351

Income Taxes                                            434            332                1,123             947

NET INCOME                                            $ 956          $ 936              $ 2,399         $ 2,404

OTHER COMPREHENSIVE INCOME, NET OF TAX
   Unrealized holding gains (losses) on securities     (270)           290                 (407)            234
     arising during the period

COMPREHENSIVE INCOME                                  $ 686        $ 1,226              $ 1,992         $ 2,638

EARNINGS PER SHARE DATA
   BASIC EARNINGS PER SHARE                           $0.44          $0.44                $1.13           $1.17
   DILUTED EARNINGS PER SHARE                         $0.41          $0.41                $1.06           $1.09

Weighted average number of common shares          2,175,667      2,108,560            2,130,239       2,052,890
Weighted average number of common shares
      - including dilutive stock options          2,317,196      2,264,719            2,271,767       2,209,049

Return on average assets                              1.33%          1.31%                1.15%           1.12%

</TABLE>

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                      4

<PAGE>



                  FIRST COMMUNITY FINANCIAL GROUP, INC. AND SUBSIDIARIES
          Condensed Consolidated Statements of Stockholders' Equity (Unaudited)
          Year Ended December 31, 1998 and Nine Months Ended September 30, 1999
<TABLE>
<CAPTION>

(DOLLARS IN THOUSANDS)
------------------------------------------------------------------------------------------------------------------------
                                                                              Accumulated
                                                                              Other                Guaranteed
                                     Common                    Retained       Comprehensive        KSOP
                                     Stock       Surplus       Earnings       Income               Obligation     Total
<S>                                  <C>         <C>           <C>            <C>                 <C>            <C>
BALANCE, DECEMBER 31, 1997           $4,988      $20,459          $1,596           $ 68           $ (946)        $26,165

Net income                              - -          - -           3,605            - -              - -           3,605

Stock options exercised                  89          188             - -            - -              - -             277

5% stock dividend                       248        2,182          (2,444)           - -              - -             (14)

Stock repurchased                       (10)         (70)            - -            - -              - -             (80)

Other comprehensive income              - -          - -             - -            (40)             - -             (40)

Income tax benefit from exercise
    of stock options                    - -           80             - -            - -              - -              80

Compensation expense for
    issuance of stock options           - -           10             - -            - -              - -              10

Net decrease in guaranteed
    KSOP obligation                     - -          - -             - -            - -              338             338

BALANCE DECEMBER 31, 1998             5,315       22,849           2,757             28             (608)         30,341


Net income                              - -          - -           2,399            - -              - -           2,399

Stock options exercised                 124          391             - -            - -              - -             515

Cash dividends                          - -          - -          (1,065)           - -              - -          (1,065)

Other comprehensive income              - -          - -             - -           (407)             - -            (407)

Net decrease in guaranteed
    KSOP obligation                     - -          - -             - -            - -              183             183

    BALANCE, SEPTEMBER 30, 1999      $5,439      $23,240          $4,091          $(379)           ($425)        $31,966

</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)
-------------------------------------------------------------------------------------------------------------------
                                                                                          Nine months ended
                                                                                            September 30
                                                                                        1999            1998
-------------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net Income                                                                       $ 2,399         $ 2,404
     Adjustments to reconcile net income to net cash provided by (used in)
     Operating activities:
         Provision for credit losses                                                      360             325
         Depreciation and amortization                                                    808             949
         Amortization of intangible assets                                                306             289
     Other - net                                                                          176           2,498
     Originations of loans held for sale                                              (37,081)        (33,236)
     Proceeds from sales of loans held for sale                                        37,791          33,407
     NET CASH PROVIDED BY OPERATING ACTIVITIES                                          4,759           6,636

CASH FLOWS FROM INVESTING ACTIVITIES
     Net (increase) decrease in interest bearing deposits in banks                        (12)          5,604
     Net decrease in Federal funds sold                                                   215           8,700
     Proceeds from maturities of available-for-sale securities                         18,344          25,943
     Purchase of available-for-sale securities                                        (13,783)        (32,522)
     Proceeds from maturities of held-to-maturity securities                                0             150
     Net (increase) decrease in loans                                                 (24,867)          4,102
     Additions to premises and equipment                                                 (621)           (394)
     NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES                                 (20,724)         11,583

CASH FLOWS FROM FINANCING ACTIVITIES
     Net increase (decrease) in deposits                                                9,151         (17,519)
     Net increase in short-term borrowings                                              6,176           3,000
     Sale of common stock                                                                 515             137
     Repurchase of common stock                                                             0             (79)
     Repayment of long-term borrowings                                                   (733)           (806)
     Payment for dividends                                                             (1,065)            (15)
     NET CASH PROVIDED BY FINANCING ACTIVITIES                                         14,044         (15,282)

     NET CHANGE IN CASH AND DUE FROM BANKS                                             (1,921)          2,937

CASH AND DUE FROM BANKS:
     Beginning of period                                                               12,315          11,620

     END OF PERIOD                                                                    $10,394         $14,557

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
     CASH PAYMENTS FOR:
         Interest                                                                      $5,545          $6,846
         Taxes                                                                          1,005             790

SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING ACTIVITIES:
     Other real estate acquired in settlement of loans                                    334           2,279
         Increase (decrease) in guarantee of KSOP obligation                             (183)           (134)

</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 condensed 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
three months and nine months ended September 30, 1999 are not necessarily
indicative of the results anticipated for the year ending December 31, 1999.

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 and diluted 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 exercised 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. Such risks and
uncertainties with respect to the Company include those related to the
economic environment, particularly in the region in which the Company
operates, competitive products and pricing, fiscal and monetary policies of
the federal government, changes in government regulations affecting financial
institutions, including regulatory fees and capital requirements, changes in
prevailing interest rates, acquisitions and the integration of acquired
businesses, credit risk management and asset/liability management, the
financial and securities markets, the availability of and costs associated
with sources of liquidity, and uncertainties associated with the impact of
Year 2000 issues.

FINANCIAL CONDITION

OVERVIEW

The Company's consolidated total assets at September 30, 1999 experienced a
growth 5.9% over December 31, 1998 assets of $271,566,000 to $287,624,000.
Asset growth has been most significant in the loan portfolio. Loan portfolio
growth has exceeded the aggregate asset growth and as such has caused a
reduction in the securities portfolio as these resources are utilized in the
funding of the loan growth. Deposit growth of 3.9%, or $9,151,000, as well as
utilizing short term borrowing of an additional $6,176,000 since December 31,
1998 have also been a source of funding for the loan growth.

Loan portfolio balances have increased by $24,742,000, or 12.7%, to
$219,113,000. The total loan to deposit ratio increased to 91.7% from 84.4% at
December 31, 1998. The average loan to deposit ratio for the nine months ended
September 30, 1999 was 87.7%. The bank is operating in a competitive market and
an environment of, while rising, historically low rates. In spite of these
conditions, loan balances were able to record such sizable increases with
emphasis on maintaining the credit quality of the portfolio and the addition to
the portfolio of loans that satisfy desired rates and terms.

Non-performing assets were as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                                    September 30      December 31
                                                                            1999             1998
<S>                                                                 <C>               <C>
Non-accrual loans                                                         $1,221           $2,492
Accruing loans past due 90 days or more                                      484              471
Foreclosed real estate                                                     1,561            2,096
Other assets                                                                  12                0
                                                                          $3,278           $5,059
</TABLE>

Total non-performing assets were decreased by $1,781,000 or 35.2%. The
reduction in these non-performing assets were most prevalent in non-accrual
loans and the amount of foreclosed real estate. Accruing loans past due 90
days or more number only three but the balance increased in the quarter to a
level similar to December 31, 1998.

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 $245,000 in the first three
quarters of 1999. The ratio of allowance for credit losses to total loans was
decreased from 1.18% to 1.16% on September 30, 1999 due to loan growth and
improvements in non-performing assets. The dollar value change in the
allowance consisted of $360,000 of provisions, offset by $115,000 in net
chargeoffs.

Investment securities have decreased by $5,015,000, or 13.9% during the first
three quarters of 1999 to total $31,080,000. Portfolio balances have
decreased as a result of the maturity of securities in the portfolio and
principal payments on mortgage backed and related issues. 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 as resource demands and liquidity dictates. The
securities are highly marketable and are a primary source of liquidity for
the Company.

                                      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 September 30, 1999, cash,
deposits in banks, Federal funds sold and securities available for sale
totaled $43,536,000. 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, 1999, federal funds borrowing lines of credit totaled
$19,546,000. The Bank also has preestablished borrowing lines available with
the Federal Home Loan Bank of approximately $13,546,000 (5% of total assets).
These credit facilities have been used regularly as a source of funds in 1999
as a result of loan balance growth.

Management believes the Bank's liquidity position at September 30, 1999, 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

Consolidated capital of FCFG increased $1,625,000 during the first three
quarters of 1999. This increase primarily resulted from year-to-date net
income of $2,399,000. The exercising of stock options and payments on the
KSOP obligation, which is guaranteed by the Company, contributed $515,000 and
$183,000, respectively, to the increased capital. Two items reduced the
capital accounts. Cash dividend payments amounted to $1,065,000. Other
comprehensive income, which consists of the after-tax market value adjustment
to available for sale securities, decreased the consolidated capital by
$407,000 during the first three quarters of 1999. This unrealized adjustment
to the securities portfolio is a reflection of the increase in market
interest rates experienced in the second and third quarters, and will not be
realized if securities are not sold prior to maturity.

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, 1999, the Company's leverage ratio was
8.75%, compared to 8.59% at December 31, 1998. For regulatory purposes,
certain intangible assets are treated as a reduction of capital. 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 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 September
30, 1999, the Tier I capital ratio was 9.65%, and total capital was 10.62%.
The comparable ratios at December 31, 1998 were a Tier I capital ratio of
10.60% and a total capital ratio of 11.64%.

                                      9

<PAGE>


RESULTS OF OPERATIONS

GENERAL

Net income for the nine months ended September 30, 1999 was $2,399,000,
compared to $2,404,000 for the same period in 1998. Pre-tax operating income,
however, increased by 5% to $3,522,000. The income tax expense increase of
19% created the difference between the increased pre-tax income and after-tax
decrease to net income.

Net income for the three months ended September 30, 1999 was $956,000,
compared to $936,000 for the three months ended September 30, 1998. This
represents a 2% increase in net income for the two periods. Pre-tax operating
income for the three month period also increased over the three months ended
September 30, 1998. Pre-tax income in the third quarter increased by 10% to
$1,390,000. Income taxes increased by 31% compared to 1998 to partially
offset this operational increase. Income tax expense was reduced in 1998 due
to tax advantages realized on the exercise of certain stock options in 1998.
Another factor that has affected the increased tax rate has been the higher
level of provision for credit losses and the lower level of actual writeoffs,
both of which provide less tax advantage over the previous period.

Net interest income increased $317,000 for the nine months ended September
30, 1999 over the same period for 1998. This represents a 3% increase from
prior year. Interest rates realized on assets and liabilities were lower
during the first nine months of 1999 than 1998, although the interest rate
trend on new activity has been increasing. This had an effect of reducing
both the income generated as well as reducing the interest expense paid on
deposits and other liabilities. Despite the comparative reduction in interest
rates realized between these time periods, increasing loan balances, and
their greater balance as a percentage of assets, enabled the net interest
margin to increase to 6.13% from 5.78%. The three months ended September 30,
1999 provided $157,000 of the year-to-date increase in net interest income
and was 4% more than was earned in the same period in 1998.

Interest income for the nine months ended September 30, 1999 decreased
$970,000 over the nine months ended September 30, 1998. Of this decrease,
approximately $29,000 is attributed to a decrease in the average volume of
earning assets. Average earning assets for the first nine months of 1999
amount to $7,415,000 less than 1998. The reduction in the average rate earned
on assets, which went from 9.36% to 9.12% for the nine month period,
decreased interest income by $941,000. The percentage of average loans to
total average earning assets increased to 85% from 77% in the first three
quarters of 1998. The average rate of return on assets decreased 24 basis
points, even though the average loan rate decreased 60 basis points and
investments decreased 57 basis points. The overall rate benefited from a
greater balance of loans, which offer a higher yield than investments.
Interest income for the three months ended September 30, 1999 was $66,000
lower than the same period in the previous year.

Total interest expense for the nine months ended September 30, 1999 decreased
$1,287,000, or 19%, from the comparable period of the prior year. The
reduction in interest expense has been from a combination of interest rate
reductions and a decrease in the volume of interest bearing liabilities. The
reduction in interest rates paid on deposits accounted for $662,000 in
expense reduction while lower average deposit balances, particularly in time
deposits, accounted for an additional $625,000 in reduced expenses. Interest
expense on other borrowings, incurred in the funding of the loan growth,
increased by $134,000 over the first nine months of 1998. The increased
volume of borrowing increased the interest expense by $165,000 while the rate
reduction due to the shorter term borrowing saved $31,000 in interest
expense. The average rate paid on all interest bearing liabilities declined
by 51 basis points to 3.65% from 4.16% in the first three quarters of 1998.
Total interest expense for the three months ended September 30, 1999 were
$223,000 lower than the third quarter of 1998.

Net interest margin, defined as net interest income as a percentage of average
earning assets, increased by 35 basis points to 6.13% from 5.78% in the first
three quarters of 1998.

                                   10

<PAGE>

The yield and cost of funds for earning assets and interest bearing
liabilities were as follows as of and for the nine months ended September 30
(dollars in thousands):

<TABLE>
<CAPTION>
                                                                1999                                        1998
                                                              Interest                                    Interest      Average
                                                 Average       Income         Average        Average       Income        Rates
                                                 Balance      (Expense)        Rates         Balance     (Expense)
     <S>                                         <C>          <C>             <C>            <C>         <C>            <C>

     Earning Assets:
          Loans (Interest and fees)               $209,037      $15,097          9.66%        $193,108     $14,815        10.26%
          Federal funds sold                         2,443           88          4.82%          10,249         433         5.65%
          Investment securities                     33,041        1,488          6.02%          48,579       2,395         6.59%
     Total earning assets
          and interest income                     $244,521      $16,673          9.12%        $251,936     $17,643         9.36%


     Interest bearing liabilities:
          Deposits:
               Savings, NOW, and
                 Money Market Deposits            $111,633     $(2,121)          2.54%        $114,053    $(2,372)         2.78%
               Time deposits                        81,187      (3,045)          5.01%         100,090     (4,215)         5.63%
     Total interest bearing deposits               192,820      (5,166)          3.58%         214,143     (6,587)         4.11%

     Other borrowings                                7,205        (297)          5.51%           2,699       (163)         8.08%

     Total interest bearing liabilities
               and interest expense               $200,025     $(5,463)          3.65%        $216,842    $(6,750)         4.16%

     Net interest income                                        $11,210                                    $10,893
                                                                -------                                    -------
     Net interest margin as a percent
     percentage of average earning assets:                                       6.13%                                     5.78%

</TABLE>

An analysis of the change in net interest income is as follows for the nine
months ended September 30 (dollars in thousands):

<TABLE>
<CAPTION>
                                                        1999 compared to 1998
                                                      Increase (decrease) due to
                                                     Volume      Rate         Net
<S>                                                  <C>         <C>          <C>
Interest earned on:
     Loans                                            $ 974      $(692)       $282
     Federal funds sold and deposits in banks          (289)       (56)       (345)
     Investment securities                             (714)      (193)       (907)
       Total interest income                            (29)      (941)       (970)

Interest paid on:
     Savings, NOW and MMA                               (49)      (202)       (251)
     Time deposits                                     (741)      (429)     (1,170)
     Other borrowings                                   165        (31)        134
       Total Interest expense                          (625)      (662)     (1,287)

       Net interest income                             $596      $(279)       $317
</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.

                                      11

<PAGE>


Non-interest income has decreased by $137,000, or 4%, from the first three
quarters of 1998. The primary reason for this reduction is a decrease of
$225,000 in gains realized on the sale of properties and credit card
portfolio that occurred in 1998. Mortgage refinancing has slowed dramatically
in the industry as a result of the rapid increase in market interest rates
making refinancing less favorable to the consumer. Total origination fees on
mortgage loans have decreased by $49,000 in the first three quarters as
compared to 1998. Despite less favorable market conditions, the three months
ended September 30, 1999 exceeded the prior year by $7,000. Additionally, ATM
network fee income increased by $57,000 due to the implementation of a
convenience fee charged to non-customers for the use of the Bank's ATMs, and
due to a 15% expansion in the number of ATMs deployed. Total non-interest
income for the three months ended September 30, 1999 decreased 5% to
$1,187,0000 from the same period in 1998.

Non-interest expenses for the first three quarters of 1999 decreased by
$26,000 to $10,750,000 from $10,776,000 during the first three quarters of
1998. Total non-interest expense for the third quarter of 1999 accounted for
this positive variance as they were $80,000 less than those of the prior
year. Salary and benefit expenses are $8,000 higher than the first three
quarters of 1998, but third quarter expenses alone were $19,000 less than
prior year. The ratio of non-interest expense to average assets increased to
5.21% for the nine months ended September 30, 1999 from 4.97% in 1998 due to
a reduction in average assets for 1999 as compared to 1998. The ratio of net
overhead (non-interest expense minus non-interest income) divided by average
total assets increased to 3.50% for the nine months ended September 30, 1999
from 3.33% for the same period in 1998, also due to a decline in the balance
of average assets in 1999.

                                      12

<PAGE>

                          YEAR 2000 ISSUES

The century date change for the Year 2000 is a serious issue that may impact
virtually every organization, including FCFG. Many software programs are not
able to recognize the year 2000, since most programs and systems were designed
to store calender years in the 1900s by assuming the "19" and storing only the
last two digits of the year. The problem is especially important to financial
institutions since many transactions, such as interest accruals and payments,
are date sensitive, and because FCFG and the Bank interact with numerous
customers, vendors and third party service providers who must also address the
Year 2000 issue. The problem is not limited to computer systems. Year 2000
issues will also potentially affect every system that has an embedded microchip,
such as automated teller machines, elevators and vaults.

FCFG'S STATE OF READINESS

FCFG and the Bank are committed to addressing Year 2000 issues in a prompt and
responsible manner, and have dedicated resources to do so. Management has
completed an assessment of its automated systems and has implemented a program
consistent with applicable regulatory guidelines, to complete all steps
necessary to resolve identified issues. FCFG's compliance program has several
phases, including (1) project management; (2) assessment; (3) testing; and (4)
remediation and implementation.

PROJECT MANAGEMENT FCFG has formed a Year 2000 compliance committee consisting
of senior management and departmental representatives. Planning for Year 2000
compliance began in 1997, with a formal committee being formed in early 1998. A
Year 2000 compliance plan was developed and regular meetings have been held to
discuss the process, assign tasks, determine priorities and monitor progress.
The committee regularly reports to the Company's Board.

ASSESSMENT All of FCFG's and its subsidiary bank's computer equipment and
mission critical software programs have been identified. This phase is complete.
FCFG's primary software vendors were also assessed during this phase, and
vendors who provide mission critical software have been contacted. FCFG has
obtained written certification from providers of material services that such
providers are, or will be, Year 2000 compliant. Based upon its ongoing
assessment of the readiness of its vendors, suppliers and service providers,
FCFG has developed contingency plans addressing the most likely worst case
scenarios. FCFG will continue to monitor and work with these vendors. FCFG has
also identified the subsidiary bank's significant borrowers and funds providers
and has assessed the extent to which they may be affected by Year 2000 issues.

TESTING Updating and testing of FCFG and the Bank's automated systems has been
completed. All testing of mission critical systems has been completed.

REMEDIATION AND IMPLEMENTATION This phase involves obtaining and implementing
renovated software applications provided by FCFG's vendors. As these
applications are received and implemented, FCFG has tested them for Year 2000
compliance. This phase also involves upgrading and replacing automated systems
where appropriate. This phase is also complete.

ESTIMATED COSTS TO ADDRESS FCFG'S YEAR 2000 ISSUES

The total financial effect that Year 2000 will have on FCFG cannot be predicted
with any certainty at this time. In fact, in spite of all efforts being made to
rectify these problems, the success of FCFG's efforts will not be fully known
until the year 2000 actually arrives. However, based on its initial assessment
to date, FCFG does not believe that expenses related to meeting Year 2000
challenges will have a material effect on the operations or consolidated
financial condition of FCFG. Year 2000 challenges facing vendors of mission
critical software and systems, and facing FCFG's customers, could have a
material effect on the operations or consolidated financial condition of FCFG,
to the extent such parties are materially effected by such challenges.

RISKS RELATED TO YEAR 2000 ISSUES

The year 2000 poses certain risks to FCFG and the Bank and their operations.
Some of these risks are present because FCFG purchases technology and
information systems applications from other parties who face Year 2000
challenges. Other risks are inherent in the business of banking or are risks
faced by many companies. Although it is impossible to identify all possible
risks that FCFG may face moving into the millennium, management has identified
the following significant potential risks:

FCFG lends significant amounts to businesses in its market area, If these
businesses are adversely effected by the Year 2000 problems, their ability to
repay loans could be impaired. This increased credit risk could adversely effect
FCFG's financial performance. During the assessment phase of FCFG's Year 2000
program, each of the Bank's substantial borrowers were identified, and the Bank
is working with such borrowers to ascertain their levels of exposure to Year
2000 problems. To the extent that the Bank is unable to assure itself of the
Year 2000 readiness of such borrowers, it intends to

                                      13

<PAGE>

apply additional risk assessment criteria to the indebtedness of such
borrowers and make any necessary related adjustments to FCFG's provision for
loan losses.

FCFG and the Bank, like many other companies, can be adversely effected by
the Year 2000 triggered failures of other companies upon whom FCFG and the
Bank depend for the functioning of their automated systems. Accordingly,
FCFG's and the Bank's operations could be materially effected if the
operations of mission critical third party service providers are adversely
effected. As described above, FCFG has identified its mission critical
vendors and is monitoring their Year 2000 compliance programs and is
developing contingency plans.

FCFG'S CONTINGENCY PLANS

FCFG has developed specific contingency plans related to Year 2000 issues that
address the most likely "worst case" scenarios. Certain circumstances, as
described above in "RISKS", may occur for which there are no completely
satisfactory contingency plans.



                                      14

<PAGE>



                FIRST COMMUNITY FINANCIAL GROUP, INC.

PART II - OTHER INFORMATION


ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits

         10 j.     Executive Supplemental Income Agreement for Ken F. Parsons

         10 k.     Executive Supplemental Income Agreement for James F. Arneson

         10 l.     Executive Supplemental Income Agreement for Jon M. Jones

         10 m.     Employment Agreement Amendment for Ken F. Parsons

         27        Financial Data Schedule

     (b) Reports on Form 8-K       None


                                      15

<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: November 15, 1999          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)

                                      16