<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, 1998

                                       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, 1998
     --------------                       ----------------------------
     Common Stock, $2.50 par value               2,108,560

<PAGE>

                      FIRST COMMUNITY FINANCIAL GROUP, INC.

                                Table of Contents

PART I - FINANCIAL INFORMATION

<TABLE>
<CAPTION>

                                                                           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 . . . . . . . . . . . . . . . . . . 9


PART II - OTHER INFORMATION

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
                                                                             1998            1997
---------------------------------------------------------------------------------------------------------
<S>                                                                        <C>            <C>
ASSETS
Cash and due from banks                                                    $ 14,949       $ 11,620
Interest bearing deposits in banks                                            5,946          5,648
Federal funds sold                                                           24,000         11,000
Securities available for sale                                                49,415         41,658
Securities held to maturity                                                     908            959
Loans held for sale                                                           4,330          4,304

Loans                                                                       190,101        194,861
Less allowance for credit losses                                              2,362          2,122
  NET LOANS                                                                 187,739        192,739

Premises and equipment                                                       10,338         10,683
Intangible assets                                                             7,697          7,884
Other assets                                                                  8,711          7,979

  TOTAL ASSETS                                                             $314,033       $294,474


LIABILITIES
Deposits:
  Non-interest bearing                                                     $ 46,012       $ 43,245
  Interest bearing                                                          234,952        219,876
TOTAL DEPOSITS                                                              280,964        263,121


Long term debt                                                                3,682          3,818
Other liabilities                                                             1,678          1,370
TOTAL LIABILITIES                                                           286,324        268,309

STOCKHOLDERS' EQUITY
Common stock, par value $2.50 per share;                                      5,271          4,988
  10,000,000 shares authorized, 2,108,560 shares issued
  in 1998, and 1,978,886 shares issued in 1997                                                    
Surplus                                                                      22,664         20,459
Retained earnings                                                               619          1,596
Accumulated other comprehensive income                                           12             68
Guaranteed KSOP obligation                                                     (857)          (946)
  TOTAL STOCKHOLDERS' EQUITY                                                 27,709         26,165

  TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                               $314,033       $294,474

</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
                                                            1998        1997           1998         1997
------------------------------------------------------------------------------------------------------------------------
<S>                                                        <C>         <C>            <C>          <C>
INTEREST INCOME 
 Interest and fees on loans                                $4,973      $4,774         $9,870       $8,873
 Federal funds sold and deposits in banks                     168          84            371          238
 Investments                                                  745         243          1,532          459
 TOTAL INTEREST INCOME                                      5,886       5,101         11,773        9,570

INTEREST EXPENSE
 Deposits                                                   2,200       1,807          4,508        3,408
 Other                                                         57          35            113           61
 TOTAL INTEREST EXPENSE                                     2,257       1,842          4,621        3,469

 NET INTEREST INCOME                                        3,629       3,259          7,152        6,101
PROVISION FOR CREDIT LOSSES                                   130         190            260          250

 NET INTEREST INCOME AFTER PROVISION
    FOR CREDIT LOSSES                                       3,499       3,069          6,892        5,851

NON-INTEREST INCOME
 Service charges on deposit accounts                          492         366            971          685
 Origination fees on mortgage loans sold                      344         197            645          315
 Other income                                                 386         186            696          218
 TOTAL NON-INTEREST INCOME                                  1,222         749          2,312        1,218

NON-INTEREST EXPENSE                                             
 Salaries and employee benefits                             2,021       1,848          3,986        3,277
 Occupancy and equipment                                      543         474          1,114          898
 Other expense                                              1,110       1,154          2,021        2,002
 TOTAL NON-INTEREST EXPENSE                                 3,674       3,476          7,121        6,177

OPERATING INCOME BEFORE INCOME TAXES                        1,047         342          2,083          892

Income Taxes                                                  295          94            615          263

NET INCOME                                                  $ 752       $ 248        $ 1,468        $ 629

OTHER COMPREHENSIVE INCOME, NET OF TAX                           
 Unrealized holding gains (losses) on securities              (43)         26            (56)          (9)
   arising during the period

COMPREHENSIVE INCOME                                        $ 709       $ 274        $ 1,412        $ 620

EARNINGS PER SHARE DATA 
 BASIC EARNINGS PER SHARE                                   $0.37       $0.12          $0.72        $0.32
 DILUTED EARNINGS PER SHARE                                 $0.34       $0.12          $0.67        $0.30

Weighted average number of common shares                2,049,579   2,014,282      2,047,728    1,949,532
Weighted average number of common shares                         
    - including dilutive stock options                  2,205,738   2,141,642      2,203,887    2,076,892

Return on average assets                                    1.04%       0.38%          1.01%        0.58%

</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, 1997 and Six Months Ended June 30, 1998

<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, 1996        $4,246        $13,745         $3,186         $  (13)        $ (245)            $20,919

Net income                           - -            - -            719            - -            - -                 719

Stock options exercised               44            159            - -            - -            - -                 203

5% stock dividend                    234          2,062         (2,309)           - -            - -                 (13)

Stock repurchased                   (306)        (2,206)           - -            - -            - -              (2,512)

Other comprehensive income           - -            - -            - -             81            - -                  81

Stock issued for purchase of
  Prairie Security Bank              770          6,699            - -            - -            - -               7,469

Net increase in guaranteed
  KSOP obligation                    - -            - -            - -            - -           (701)               (701)
          

  BALANCE, DECEMBER 31, 1997       4,988         20,459          1,596             68           (946)             26,165

Net income                           - -            - -          1,468            - -            - -               1,468

Stock options exercised               45             92            - -            - -            - -                 137

5% stock dividend                    248          2,182         (2,445)           - -            - -                 (15)

Stock repurchased                    (10)           (69)           - -            - -            - -                 (79)

Other comprehensive income           - -            - -            - -            (56)           - -                 (56)

Net decrease in guaranteed 
  KSOP obligation                    - -            - -            - -            - -             89                  89

  BALANCE, JUNE 30, 1998          $5,271        $22,664           $619            $12          ($857)            $27,709

</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 
                                                                                          1998             1997
------------------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net Income                                                                            $ 1,468            $ 629
  Adjustments to reconcile net income to net cash provided by (used in)
  Operating activities:
     Provision for credit losses                                                            260              250
     Depreciation and amortization                                                          571              501
     Gain on sale of loans                                                                  - -               40
     Amortization of intangible assets                                                      187               68
     Other - net                                                                            375           (1,332)
  Originations of loans held for sale                                                   (22,562)         (10,520)
  Proceeds from sales of loans held for sale                                             22,536            8,960
  NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES                                        2,835           (1,404)

CASH FLOWS FROM INVESTING ACTIVITIES
  Net (increase) decrease in interest bearing deposits in banks                            (298)           5,054
  Net (increase) decrease in Federal funds sold                                         (13,000)           4,000
  Proceeds from maturities of available-for-sale securities                              19,174              729
  Purchase of available-for-sale securities                                             (27,696)          (6,503)
  Proceeds from maturities of held-to-maturity securities                                    50            1,765
  Purchases of held-to-maturity securities                                                  - -             (500)
  Net (increase) decrease in loans                                                        4,740          (48,622)
  Additions to premises and equipment                                                      (226)          (2,526)
  Increase in intangible assets                                                               0           (5,006)
  NET CASH (USED) BY INVESTING ACTIVITIES                                               (17,256)         (51,609)

CASH FLOWS FROM FINANCING ACTIVITIES
  Net increase in deposits                                                               17,843           48,779
  Net  decrease in short-term borrowings                                                      0            3,000
  Sale of common stock                                                                      137            7,465
  Repurchase of common stock                                                                (79)          (2,511)
  Repayment of long-term borrowings                                                        (136)            (882)
  Payment for stock dividends fractional shares                                             (15)             (13)
  NET CASH PROVIDED BY FINANCING ACTIVITIES                                              17,750           55,838

  NET CHANGE IN CASH AND DUE FROM BANKS                                                   3,329            2,825

CASH AND DUE FROM BANKS:
  Beginning of period                                                                    11,620            8,467

  END OF PERIOD                                                                         $14,949          $11,292

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  CASH PAYMENTS FOR:
     Interest                                                                            $4,682           $1,538
     Taxes                                                                                  640              170

SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING ACTIVITIES:
  Other real estate acquired in settlement of loans                                       1,773              192
  Increase (decrease) in guarantee of KSOP obligation                                       (89)             980

</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 six months ended June 30, 1998 are not necessarily 
indicative of the results anticipated for the year ending December 31, 1998.  

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.  Certain prior period 
amounts have been reclassified to conform to 1998 presentation.

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.

The Company adopted SFAS No. 128, "Earnings per Share", effective in the 
fourth quarter of 1997. As a result, the Company's earnings per share for all 
periods have been restated.  The following table reconciles the numerator and 
denominator of the basic and diluted earnings per share computations:

<TABLE>
<CAPTION>

                                                  Weighted
                                   Net            Average             Per Share
                                   Income         Shares              Amount

                                   Three months ended June 30, 1998
                                   --------------------------------
<S>                                <C>           <C>                 <C>
Basic earnings per share           $  752,000    2,049,579            $0.37
Stock options                                      156,159
Diluted earnings per share         $  752,000    2,205,738            $0.34

                                   Three months ended June 30, 1997
                                   --------------------------------
Basic earnings per share           $  248,000    2,014,282            $0.12
Stock options                                      127,360
Diluted earnings per share         $  248,000    2,141,642            $0.12

                                   Six months ended June 30, 1998
                                   --------------------------------
Basic earnings per share           $1,468,000    2,047,728            $0.72
Stock options                                      156,159
Diluted earnings per share         $1,468,000    2,203,887            $0.67

                                   Six months ended June 30, 1997
                                   --------------------------------
Basic earnings per share           $  629,000    1,949,532            $0.32
Stock options                                      127,360
Diluted earnings per share         $  629,000    2,076,892            $0.30

</TABLE>

                                       7





3.   ACCOUNTING CHANGE

In the quarter ended March 31, 1998, the Company adopted Statement of 
Financial Accounting Standards No. 130, REPORTING COMPREHENSIVE INCOME (SFAS 
No. 130), which was effective for years beginning after December 15, 1997.  
SFAS No. 130 requires that an entity report and display comprehensive income 
with the same prominence as other financial statements.  Comprehensive income 
is defined as the change in equity of a business enterprise during a period 
from transactions and other events and circumstances from nonowner sources.  
It includes all changes in equity during a period except those resulting from 
investments by owners and distributions to owners.  With regard to the 
Company, currently the only items of comprehensive income are changes in the 
fair value of the available for sale securities portfolio.  Accordingly, 
changes in the value of that portfolio during the period, net of tax, are 
reported as "Other Comprehensive Income" in the accompanying Consolidated 
Statement of Income and Comprehensive Income.  Changes in the fair value of 
the available for sale securities portfolio for the year ended December 31, 
1997, which were previously reported in the Consolidated Statement of 
Shareholders' Equity, have been reclassified and retroactively reported as 
Other Comprehensive Income.  The cumulative adjustment, net of tax, to record 
the available for sale securities portfolio at fair value at period end was 
previously reported as "Net unrealized gain (loss) on securities available 
for sale, net of tax" in the Company's consolidated balance sheets.  That 
cumulative adjustment is now termed "Accumulated other comprehensive income". 
There was no effect on previously reported net income as a result of this 
reporting change.

In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS No. 
131, "Disclosure about Segments of an Enterprise and Related Information".  
SFAS 131 requires public companies to report financial and descriptive 
information about their operating segments.  Operating segments are 
components of a business about which separate financial information is 
available that is evaluated regularly by the chief operating decision-maker 
in deciding how to allocate resources and in addressing performance.  The 
adoption of SFAS 131 is required for fiscal years beginning after December 
15, 1997.  Thus it will be effective for the year ending December 31, 1998, 
although interim presentations in the year of adopting are not required.

                                       8

<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 June 30, 1998 of $314,033,000 
represents a 6.6% increase over December 31, 1997 assets of $294,474,000.  
The increased assets are a reflection of the 6.8% increase in total deposits. 
The deposits at June 30, 1998 reflected a large temporary deposit.  Over the 
last several days of June, 1998, the deposit balances of a large 
transactional depositor increased by nearly $29,500,000, most of which left 
the Bank shortly thereafter.  Total average assets for the first half of 1998 
were $291,385,000, 7.2% less than the June 30, 1998 balance of $314,033,000.  
Average deposits for the first half of 1998 were $259,400,000, 7.7% less than 
the June 30, 1998 balance of $280,964,000.

Loan portfolio balances have decreased by $4,760,000, or 2.4%, to 
$190,101,000.  The loan to deposit ratio decreased to 69.2% from 75.7% at 
December 31, 1997.  This decrease is a result of the deposit transactions 
previously discussed.  The average loan to deposit ratio for the six months 
ended June 30, 1998 was 74.6%.  The bank is operating in a competitive market 
and an environment of historically low rates.   Loan balances are being 
subjected to increased prepayments or refinancing of existing loans.  The 
Company is actively managing the balance between protecting 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>

                                                  June 30    December 31
                                                     1998           1997
<S>                                              <C>        <C>
Non-accrual loans                                  $3,760         $4,381
Accruing loans past due 90 days or more               214            319
Foreclosed real estate                              3,627          2,105
Other assets                                          107            132
                                                   $7,708         $6,937

</TABLE>

Total non-performing assets increased eleven percent, or $771,000.  This 
includes the effects of a $621,000 decrease in non-accrual loans, and a 
$1,522,000 increase in foreclosed real estate as collateral is repossessed 
and moving toward liquidation.

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 $240,000 in the first half of 1998. 
The ratio of allowance for credit losses to total loans was increased to 
1.24% from 1.09% at December 31, 1997. The dollar value change in the 
allowance consisted of $260,000 of provisions, offset by $20,000 in net 
chargeoffs. 

Investment securities have increased by $7,706,000, or 18.1% during the first 
half to total $50,323,000.  Portfolio management emphasis has been placed on 
acquiring primarily shorter term securities in this environment of 
historically low rates.  While the portfolio is reasonably defensive in the 
sense that maturities, or expected calls, have been kept shorter term, and 
the portfolio 

                                       9

<PAGE>

average life is under two years, the yield has remained stable during the 
first two quarters at 6.46%.  The securities are highly marketable and are a 
primary source of liquidity for the Company.

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, 1998, 
cash, deposits in banks, Federal funds sold and securities available for sale 
totaled $94,310,000.  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, 1998, federal funds borrowing lines of credit 
totaled $19,102,000 (5% of total assets plus $3,400,000) but was not used in 
the second quarter of 1998.  The Bank also has preestablished borrowing lines 
available with the Federal Home Loan Bank of approximately $15,702,000 (5% of 
total assets).  This credit facility has remained unused in 1998.

Management believes the Bank's liquidity position at June 30, 1998, 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 $1,544,000 during the first half of 
1998.  This increase primarily resulted from year-to-date net income of 
$1,468,000 in net income generated.  The exercising of stock options and 
payments on the KSOP obligation, which is guaranteed by the company, also 
contributed to the increased capital.  The repurchase of certain stock, the 
market value adjustment to available for sales securities (other 
comprehensive income) and fractional share cash disbursements related to the 
stock dividend reduced the balance of capital. 

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 June 30, 1998, the Company's leverage ratio was 
6.64%, compared to 6.58% at year-end 1997.  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 Tier II capital includes the allowance for possible 
credit 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 June 30, 1998, the Tier I capital 
ratio was 8.98%, and total capital was 10.00%. The similar ratios at 
December 31, 1997 were a Tier I capital ratio of 8.30% and a total capital 
ratio of 9.22%.

                                      10

<PAGE>

RESULTS OF OPERATIONS

GENERAL

Net income for the six months ended June 30, 1998 was $1,468,000, compared to 
$629,000 for the same period in 1997.  This represents a 133% increase over 
the prior period.  The combination of growth in asset base upon which to 
generate revenue, coupled with the efficiencies generated by the combination 
of the organizations, is producing the desired effect of the strategies 
employed in the acquisitions of 1997.   

Net income for the three months ended June 30, 1998  was $752,000, compared 
to $248,000 for the three months ended June 30, 1997.   This 203% increase is 
due to the growth experienced during 1997.  The second quarter of 1998 
includes the full effect of the assets in connection with the acquisition of 
four Wells Fargo branches during the third quarter of 1997, along with the 
effects of the growth and the efficiencies generated from the 1997 
acquisitions, including Prairie Security Bank in the first quarter of 1997.

Net interest income increased $1,051,000 for the six months ended June 30, 
1998 over the same period for 1997.  This represents a 17% increase from 
prior year.  The net interest margin decreased 82 basis points from 6.49% to 
5.67% over these periods.  The net interest margin decrease has been a factor 
of decreasing rates in both assets and liabilities.  The responsiveness to 
rates has been much more pronounced on loans and investments, as discussed 
below, than on the deposits because interest earned on loans and investments 
is more sensitive to changes in rates than deposits. Net interest income for 
the three months ended June 30, 1998 increased $370,000, or 11% over the 
comparable period in 1997.  

Interest income for the six months ended June 30, 1998 increased $2,203,000 
over the six months ended June 30, 1997.   Of  this increase, approximately 
$2,912,000 is attributed to an increase in the average volume of earning 
assets, offset by approximately $709,000 as a result of a 85 basis point 
decrease in the aggregate yield on earning assets from 10.18% to 9.33%.  The 
aggregate rate reduction was a factor of the relative mix of the earning 
assets and their rates. During the first half of 1998, a greater percentage 
of the bank's earning assets were invested in marketable securities than in 
previous periods.  The yield earned on these securities is less than that 
earned on the loan portfolio, which has reduced the overall average yield on 
earning assets.  If interest rates remain in this relatively low rate 
environment, it will continue to pressure the portfolio yield as securities 
mature and will be reinvested at generally lower rates.  Conversely, if a 
greater percentage of earning assets are invested in loans, the overall yield 
of earning assets would increase.  The Bank is taking measures to increase 
loan volume. For similar reasons, interest income for the three months ended 
June 30, 1998 increased $785,000 over the three months ended June 30, 1997.   

Total interest expense for the six months ended June 30, 1998 increased over 
the comparable period of the prior year by $1,152,000, or 33%.  Of  this 
increase, approximately $1,265,000 was due to an increase in the average 
volume of interest bearing liabilities, offset by $113,000 resulting from a 
15 basis point decrease in the aggregate cost of funds.  Total interest 
expense for the three months ended June 30, 1998 increased over the 
comparable period of the prior year by $415,000, or 23%.

Non-interest income has expanded by 90% over prior year in the first half of 
1998.  This increase is led by a 105% increase in mortgage loan origination 
fees, due to the expansion of the mortgage department and the current 
refinancing environment.  The growth rate in this area slowed to 75% in the 
comparable three months ending June 30 as the refinance activity began to 
ease.  Service charges on deposit accounts increased 42% for the six months 
and 34% for the three months ended June 30, 1998.  These increases continue 
to reflect the Bank's increased deposit base for the comparable periods.  
Other income grew $478,000 as compared to the first six months of 1997 and 
$200,000 for the three months ended June 30.  The growth is primarily due to 
increased sales of non-deposit investment products, income from introduction 
of the Bank's debit card product and gain on asset sales and increased ATM 
fee income.  

Non-interest expenses for the first half of 1998 increased by $944,000, or 
15% over the first half of 1997.  Similar comparisons of the three months 
ending June 30 shows an increase of only 6% as the infrastructure and 
staffing is more comparable by including the full effects of the Prairie 
Security Bank acquisition in each period.  The 1998 results include the 
expenses incurred from the operation of the branches acquired from Wells 
Fargo while in 1997 they have not yet been incurred.  The ratio of 
non-interest expense to average assets declined 15% from 5.73% for the six 
months ended June 30, 1997, to 4.89% in the current year, reflecting 
increased efficiencies.  The ratio of net overhead (non-interest expense 
minus non-interest income) divided by average total assets decreased 28% from 
4.60% for the six months ended June 30, 1997 to 3.30% for the six months 
ended June 30, 1998.

                                      11

<PAGE>

YEAR 2000
The Company is actively reviewing its systems to insure the Company is able 
to efficiently process in the new millennium.  The review includes a study of 
the Company's hardware and software, a review of the Company's vendors, and 
an analysis of the credit and liquidity risks associated with customers who 
may not be prepared for the conversion.  Based on current information, 
management believes that the Company will be fully compliant to meet all 
operating and regulatory issues well in advance of December 31, 1999.  
Although not completely quantified, costs of Year 2000 compliance are not 
expected to exceed $150,000 and will be largely incurred during 1998 and 
1999.  However, the impact of failure of computer systems of customers, 
certain vendors and others with whom the Company does business is uncertain 
and has not been quantified by the Company.




                                      12

<PAGE>

                      FIRST COMMUNITY FINANCIAL GROUP, INC.

PART II - OTHER INFORMATION


ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits                      None

     (b) Reports on Form 8-K           None





                                      13

<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)

<TABLE>
<S>                             <C>
Date: August 14, 1998           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)

</TABLE>




                                       14