SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549FORM 10-K/A (Mark one) x Annual Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (fee required)
For the Fiscal year ended December 31, 2000
ORo Transition Report
Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
(No fee required)
For the Transition period from ________ to ________ Commission File Number0-24024 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 St. S.E.,
  P.O. Box 3800, Lacey, WA 98509(Address of principal
  executive offices)
 Registrants telephone number:              (360) 459-1100 Securities registered
pursuant to Section 12(b) of the Act: None Securities registered
pursuant to Section 12(g) of the Act: Common Stock, $2.50 par
  value(Title of Class)
 Check 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.  Yesx No o Check if there is no
disclosure of delinquent filers in response to Item 405 of Regulation S-K is
not contained in this form, and no disclosure will be contained, to the best of
registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this form 10-Kx State the issuers
revenues for its most recent fiscal year:  
$31,939,000 State the aggregate
market value of the voting stock held by non-affiliates computed by reference
to the price at which the stock was sold, or the average bid and asked prices
of such stock, as of a specified date within the past 60 days: at January
31, 2001 - $49,030,867 Number of shares of
common stock outstanding as of January 31, 2001:  2,184,003 DOCUMENTS INCORPORATED BY REFERENCE Portions of the
definitive proxy statement (the Proxy Statement) for use in connection with
the annual meeting of shareholders to be held on May 3, 2001, are incorporated
by reference into Parts III of this annual report.   ITEM 7
- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

Management's discussion and analysis of
the Company should be read in conjunction with the accompanying consolidated
financial statements.  This analysis
compares 2000 results and financial position with that of 1999 and 1998.

Forward-Looking
Information

Statements appearing in this report which
are not historical in nature, including the discussions of the adequacy of the
Company's capital resources and allowance for credit losses, are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 (PLSRA). 
Forward-looking statements are subject to the risks and uncertainties
that may cause actual future results to differ materially.  Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
of this Proxy Statement.  FCFG does not
undertake any obligation to publicly release any revisions to forward-looking
statements contained in this Proxy Statement, with respect to events or
circumstances after the date of this Proxy Statement, or to reflect the
occurrence of unanticipated events.

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, and the
availability of and costs associated with sources of liquidity.

PERFORMANCE
OVERVIEW

In 2000, the Companys total assets grew
10%, or $30,462,000 to $324,235,000. 
Deposits increased $25,850,000, or 11% to $271,377,000.  Total loans, net of allowance for credit
losses, also increased by $25,850,000, and represented an 11% growth rate.  Capital increased $3,755,000, primarily as a
result of the earnings realized for the year less the $867,000 in cash dividends
paid to shareholders.  Increased market
valuation of the investment portfolio also improved the capital position.

Basic earnings per share for 2000 was
$2.02 per share as compared to $0.64 per share for 1999 and $1.74 per share for
1998.  The 2000 earnings represent the
highest annual earnings in the Companys history.  The 1999 earnings and rates of return were significantly impacted
by a special loss provision related to a particular borrower, which is
discussed further under Allowance for
Credit Losses.

On November 1, 2000, the Bank entered
into a Marketing and Servicing Agreement with Advance America.  Advance America is a Delaware company formed
in 1997 and is comprised of a group of parent-subsidiary companies whose
function is to develop, own, acquire and manage cash advance centers throughout
the United States.  Under this
agreement, the Bank offers short-term consumer loans (commonly known as payday
loans) to customers in the state of Alabama. 
Advance America acts as the Banks agent in marketing and collecting
these loans.  The agreement has a term
of three years and may be terminated without cause upon six months notice, and
is immediately terminable in the event that any bank regulatory agency with
jurisdiction over the Bank or the Company determines that the Banks performance
of the agreement is unlawful or is unsafe or unsound practice.  The net revenues generated under the
agreement amounted to $220,000 in 2000. 
After allocation of associated expenses, pre-tax net income was
approximately $145,000.

The following table sets forth certain
operating and capital ratios for the Company at December 31:

2000
  1999
  1998
  1997
  1996Return on Average
  Assets
  1.40%
  0.48%
  1.26%
  .29%
  1.08%Return on Average
  Equity
  13.62%
  4.26%
  12.61%
  2.76%
  9.30%Average Equity to
  Average Assets Ratio
  10.25%
  11.32%
  9.96%
  10.40%
  11.58%Dividend Payout Ratio
  19.88%
  92.79%
  -
  -
  -
  -
  -
  -RESULTS
OF OPERATIONS

Net
Interest Income

Net interest income in 2000 increased by
$1,476,000, or 10%, from 1999 and $1,827,000, or 12%, over 1998.  The rising rate environment, coupled with
the increased balances of loans and deposits caused gross interest income and
expense to increase over the levels of the previous years.  During 2000, interest income increased
$4,394,000, or 19%, compared to 1999 and $3,552,000, or 15%, compared to
1998.  Interest expense increased
$2,918,000, or 39%, over 1999 and $1,725,000, or 20%, over 1998.  During 
the year the net interest margin decreased 22 basis points from 6.06% in
1999 to 5.84% in 2000.

Total interest income on loans increased
by $4,592,000.  Of this amount,
$3,934,000 resulted from an increase in the average volume of loans during the
year.  The rest of the increased loan
interest was a result of the increase in the average interest rate which was
earned on the loans, which increased to 9.89% over the 9.59% earned in
1999.  Offsetting the increase in total
loan interest, was a decline in the interest earned on investment securities
and overnight investments, which decreased $184,000.  An increase in the average yield on the portfolio to 6.25% from
6.00% in 1999 added $78,000 in earnings. 
However, decreases in the portfolio and funds available for overnight
investment reduced the balances on which interest could be earned and caused a
decrease of $262,000.  The trend toward
a greater percentage of assets in loans continued in 2000, as loans represented
90% of the earning assets, up from 86% in 1999.  Thus, a greater percentage of the Companys assets are invested
in higher yielding assets.

Interest expense on deposits increased
33% or $2,349,000 over 1999.  Of this
increase, $1,649,000 resulted from an increase in the volume of deposits,
particularly higher costing time deposits, and $700,000 resulted from an
increase in the average rate paid on deposits.

Interest expense on other borrowings
increased by $569,000, the result of an increase in both the volume of
borrowing, as well as an increase in the average rate paid on those balances.

Overall, the average cost of interest
bearing deposit funding and borrowed funds increased from 3.71% in 1999 to
4.49% in 2000 as the bank relied more on higher cost time deposits and borrowed
funds to meet a rapid increase in loan demand early in the year.  As time deposits incurred in 2000 mature and
renew in 2001, given the current lower rate environment, the Banks cost of
funds is expected to decline in the current year.

An analysis of the change in net interest
income is as follows (thousands):

2000 compared to 1999
  Increase (decrease) due to
  1999 compared to 1998
  Increase (decrease) due toVolume
  Rate
  Net
  Volume
  Rate
  NetInterest
  earned on:Loans
  $3,934
  $658
  $4,592
  $1,735
  $(1,028)
  $707Federal funds sold and deposits in banks
  (38)
  24
  (14)
  (358)
  (62)
  (420)Investment securities
  (262)
  78
  (184)
  (947)
  (182)
  (1,129)Total interest income
  3,634
  760
  4,394
  429
  (1,271)
  (842)Interest
  paid on:Savings, NOW and MMA
  (271)
  (144)
  (415)
  (55)
  (234)
  (289)Time deposits
  1,920
  844
  2,764
  (586)
  (473)
  (1,059)Other borrowings
  527
  42
  569
  166
  (11)
  155Total Interest expense
  2,176
  742
  2,918
  (475)
  (718)
  (1,193)Net interest income
  $1,458
  $18
  $1,476
  $904
  $(553)
  $351The
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.

Average consolidated statements of
financial position and analysis of net interest spread were as follows (dollars
in thousands):

2000
  1999
  1998Average
  Balance
  Interest
  Income
  (Expense)
  Average
  Rates
  Average
  Balance
  Interest
  Income
  (Expense)
  Average
  Rates
  Average
  Balance
  Interest
  Income
  (Expense)
  Average
  RatesEarning
  Assets:Loans(1)
  $253,963
  $25,110
  9.89%
  $213,997
  $20,518
  9.59%
  $194,016
  $19,811
  10.21%Federal funds sold and interest bearing
  deposits in banks
  1,618
  98
  6.06%
  2,307
  112
  4.85%
  9,529
  532
  5.58%Investment securities
  28,118
  1,756
  6.25%
  32,318
  1,940
  6.00%
  47,930
  3,069
  6.40%Total
  earning assets and interest income
  283,699
  26,964
  9.50%
  248,622
  22,570
  9.08%
  251,475
  23,412
  9.31%Other
  Assets:Cash and due from banks
  11,667
  
  
  13,208
  
  
  12,178Bank premises and equipment
  9,540
  
  
  9,583
  
  
  10,312Other assets
  13,655
  
  
  13,513
  
  
  15,329Allowance for credit losses
  (6,066)
  
  
  (2,471)
  
  
  (2,276)Total
  Assets
  $312,495
  
  
  $282,455
  
  
  $287,018Liabilities
  and Stockholders' EquityInterest
  bearing liabilities:Deposits:Savings, NOW, and Money Market Deposits
  $99,656
  $(2,387)
  2.40%
  $110,746
  $(2,802)
  2.53%
  $112,779
  (3,091)
  2.74%Time deposits
  118,085
  (7,004)
  5.93%
  84,154
  (4,240)
  5.04%
  95,273
  (5,299)
  5.56%Total
  interest bearing deposits
  217,741
  (9,391)
  4.31%
  194,900
  (7,042)
  3.61%
  208,052
  (8,390)
  4.03%Other
  borrowings
  14,147
  (1,019)
  7.20%
  6,788
  (450)
  6.63%
  4,269
  (295)
  6.91%Total
  interest bearing liabilities and interest expense
  231,888
  (10,410)
  4.49%
  201,688
  (7,492)
  3.71%
  212,321
  (8,685)
  4.09%Non-interest
  bearing deposits
  45,857
  
  
  46,541
  
  
  44,468Other
  liabilities
  2,722
  
  
  2,264
  
  
  1,640Stockholders equity
  32,028
  
  
  31,962
  
  
  28,589Total
  liabilities, stockholders' equity and net interest income
  $312,495
  $16,554
  
  $282,455
  $15,078
  
  $287,018
  $14,727Net
  interest income as an average of earnings assets:Interest Income
  
  
  9.50%
  
  
  9.08%
  
  
  9.31%Interest Expense
  
  
  3.67%
  
  
  3.01%
  
  
  3.45%Net
  Interest Income
  
  
  5.84%
  
  
  6.06%
  
  
  5.86%




(1)         For purposes of these computations,
non-accrual loans are included in the average loan balance outstanding.  Loan fees and late charges of $1,933,000,
$1,859,000 and $1,902,000 are included in interest income in 2000, 1999 and
1998, respectively.

Non-Interest
Income

Total non-interest income increased to
$4,975,000, an 8% increase over 1999 and a 2% increase over 1998.  Net service charges and fees on deposit
accounts were comparable, although decreased slightly from the two prior
periods.  Mortgage loan origination fees
continued to be hindered by the rising interest rate environment that prevailed
during 2000.  As a result, these fees decreased
$161,000, or 14% from 1999, and $272,000, or 21%, from 1998.  Other non-interest income increased by
$544,000 from 1999 to $2,054,000, primarily due to a $215,000 increase in the
reported amount of certain equity investments accounted for at fair value, and
a $235,000 increase in the gain on the sale of assets, and $379,000 from 1998.

Non-Interest
Expense

Total non-interest expense increased by
3% and 2% over 1999 and 1998 respectively to total $14,598,000 for 2000.  Salaries and benefits increased $126,000, or
2%, from 1999 and $207,000, or 3%, from 1998 to $8,071,000.  Occupancy expenses increased by 2% from 1999
and 5% from 1998, as some of the newer locations experienced a full year of
operating costs.  Equipment expenses
decreased by an additional 3% from 1999 just as 1999 had decreased from
1998.  This decrease was realized
despite the continued upgrading of the corporate infrastructure, including the
implementation of a new core banking system, check imaging, and peripheral
systems.  Other expenses increased by
10% over 1999 and by 2% over 1998.  The
ratio of non-interest expense as a percent of average total assets for the year
decreased to 4.67% from 4.99% in 1999 and 5.00% in 1998.

FINANCIAL CONDITION

Overview

Consolidated
total assets increased by 10% to $324,235,000 in 2000.  Asset growth was greatest in the loan portfolio.
Total loans, net of allowance for credit losses, increased $25,850,000, or 11%
compared to 1999.  Cash flows from the
securities portfolio, along with increased deposits and borrowings, were used
to fund the loan growth.  Total deposits
and short term borrowings at December 31, 2000 increased from 1999 by
$25,850,000, or 11%, and $466,000, or 3%, respectively.

Investments

The Company's investment portfolio
decreased $1,711,000 to $27,405,000.  
Maturing securities and other cash flows from the portfolio were used to
fund loan growth.  Included in the
portfolio are securities classified as "held-to-maturity", which are
recorded at an amortized cost of $676,000, as well as securities classified as "available-for-sale",
which are recorded at their fair value of $26,729,000.  Because the available-for-sale portfolio is
carried at fair value, its carrying value fluctuates with changes in market
factors, primarily interest rates.

The carrying amount of securities and the
approximate fair values were as follows (dollars in thousands):

Amortized
  Cost
  Gross
  Unrealized
  Gains
  Gross
  Realized
  Losses
  Fair
  ValueAvailable-for-Sale
  SecuritiesDecember
  31, 2000Equity Securities
  $1,890
  $-
  -
  $-
  -
  $1,890U.S. Government and agency securities
  7,899
  17
  316
  7,600Corporate Securities
  4,985
  7
  54
  4,938Mortgage backed securities
  5,053
  18
  32
  5,039State and municipal securities
  7,402
  15
  155
  7,262$27,229
  $57
  $557
  $26,729December
  31, 1999Equity Securities
  $1,774
  $-
  -
  $-
  -
  $1,774U.S. Government and agency securities
  7,731
  -
  -
  530
  7,201Corporate Securities
  5,339
  -
  -
  137
  5,202Mortgage backed securities
  7,154
  10
  137
  7,027State and municipal securities
  7,544
  6
  315
  7,235$29,542
  $16
  $1,119
  $28,439December
  31, 1998Equity securities
  $1,661
  $-
  -
  $-
  -
  $1,661U.S. Government and agency securities
  15,578
  114
  255
  15,437Corporate securities
  1,444
  14
  -
  -
  1,458Mortgage backed securities
  11,144
  63
  7
  11,200State and municipal securities
  5,200
  120
  6
  5,314$35,027
  $311
  $268
  $35,070Held-to-Maturity
  SecuritiesDecember
  31, 2000State and municipal securities
  $676
  $27
  $1
  $702December
  31, 1999State and municipal securities
  $677
  $25
  $1
  $701December
  31, 1998State and municipal securities
  $677
  $58
  $1
  $734The stated maturities of debt securities were as follows (dollars in
thousands):

Held-to-Maturity Securities
  Available-For-Sale SecuritiesAmortized Cost
  Fair Value
  Weighted Average Yield
  Amortized Cost
  Fair Value
  Weighted Average YieldDue in one year or less
  $170
  $173
  9.09%
  $1,230
  $1,226
  5.79%Due after one year through five years
  104
  105
  7.46%
  9,718
  9,604
  6.33%Due after five years through ten years
  402
  424
  9.27%
  6,460
  6,356
  6.82%Due after 10 years
  - -
  - -
  - -%
  7,931
  7,653
  6.82%$676
  $702
  
  $25,339
  $24,839Weighted
average yield is reported on tax-equivalent basis.  Mortgage backed securities are allocated based on their
anticipated principal repayment.

There were no gross realized gains or
gross realized losses on sales of securities available for sale in 2000, 1999,
or 1998.

Gross realized gains and losses on sales
of securities available for sale were $11,000 and $5,000, respectively in 1998.

Loans

Loan
balances of portfolio loans increased by $22,358,000 to $255,183,000 in 2000.

The
composition of the loan portfolio was as follows at December 31 (dollars in
thousands):

2000
  1999
  1998
  1997
  1996Amount
  Percent
  Amount
  Percent
  Amount
  Percent
  Amount
  Percent
  Amount
  PercentCommercial
  $37,989
  14.9%
  $34,981
  15.0%
  $29,446
  15.2%
  $36,995
  19.0%
  $27,353
  20.9%Real estate construction
  39,486
  15.5%
  19,169
  8.2%
  17,390
  8.9%
  24,423
  12.5%
  14,071
  10.8%Real estate mortgage
  167,680
  65.7%
  170,203
  73.1%
  141,120
  72.6%
  124,954
  64.1%
  83,242
  63.7%Consumer
  10,028
  3.9%
  8,472
  3.7%
  6,405
  3.3%
  8,489
  4.4%
  5,966
  4.6%$255,183
  100.0%
  $232,825
  100.0%
  $194,361
  100.0%
  $194,861
  100.0%
  $130,632
  100.0%The
Bank's loan portfolio is concentrated in real estate secured loans.  Real estate mortgage loans primarily consist
of commercial loans secured by real estate.

The following table shows the maturity
analysis of commercial and real estate construction loans outstanding as of
December 31, 2000 (dollars in thousands):

WithinOne
  Year
  After OneBut WithinFive Years
  AfterFive 
  Years
  TotalCommercial
  $21,954
  $13,204
  $2,831
  $37,989Real estate construction
  17,231
  8,178
  14,077
  39,486$39,185
  $21,382
  $16,908
  $77,475Of these loans maturing after one year, $24,894,000 have predetermined or fixed
interest rates and $13,396,000 have floating or adjustable interest rates.

Deposits

Total deposits increased by $25,850,000,
or 11% from 1999 to $271,377,000. 
Non-interest bearing deposits increased by 15% to $48,715,000 in 2000
from $42,481,000 in 1999.  Savings and
interest bearing deposits and time deposits increased by $19,616,000, or 10%,
to $222,662,000.

The Bank's average deposits for the year
ended December 31, 2000 are summarized as follows (dollars in thousands):

2000
  1999
  1998Amount
  %
  Weighted
  Average
  Rate
  Amount
  %
  WeightedAverage
  Rate
  Amount
  %
  WeightedAverageRateDemand Deposits
  $45,857
  17.4
  
  $46,541
  19.3
  
  $44,468
  17.6Interest bearing demand
  75,245
  28.5
  2.47%
  85,008
  35.2
  2.69%
  86,328
  34.2
  2.86%Savings Accounts
  24,411
  9.3
  2.18%
  25,738
  10.7
  2.28%
  26,451
  10.5
  2.37%Other time deposits
  118,085
  44.8
  5.93%
  84,155
  34.8
  5.04%
  95,273
  37.7
  5.56%TOTAL
  $263,598
  100.0
  
  $241,441
  100.0
  
  $252,520
  100.0Time
deposits at December 31, 2000 are scheduled to mature as follows (dollars in
thousands):

Under
  
  $100,000
  $100,000
  
  and over
  Total0-90
  days
  $32,217
  $19,780
  $51,99791-180
  days
  29,176
  4,682
  33,858181-365
  days
  30,190
  3,472
  33,662Over
  1 year
  4,101
  1,008
  5,109$95,684
  $28,942
  $124,626Asset Quality

Nonperforming
assets consist of loans on which interest is no longer accrued, accruing loans
past due 90 days or more and foreclosed real estate and other assets.  Total nonperforming assets increased 90% to
$6,225,000 at December 31, 2000, primarily as a result of foreclosure on the
collateral of one of the Banks large public commercial loan customers, which
accounts for $3,000,000 of this balance. 
This  loan was fully reserved in
1999 and the collateral obtained during the fourth quarter of 2000.  Non-accrual loans decreased by $619,000, or
42% to $857,000.  Accruing loans past
due 90 days or more increased from $28,000 
to $1,264,000.  Any anticipated
losses on these loans have been fully reserved for in the allowance for credit
losses.

Loans
will be placed on nonaccrual using the following guidelines: 1) a loan will be
placed on nonaccrual when collection of all principal or all interest is deemed
unlikely; and 2) a loan will automatically be placed on nonaccrual when
principal or interest is 90 days or more past due unless the loan is both well
secured and in the process of being collected. 
Placing a loan on nonaccrual does not diminish in any way the Banks
claims against the borrower.

Nonperforming
assets were as follows at December 31 (dollars in thousands):

2000
  1999
  1998
  1997
  1996Non-accrual loans
  $857
  $1,476
  $2,492
  $4,381
  $1,898Accruing
  loans past due 90 days or more
  1,264
  28
  471
  319
  1,238Foreclosed
  real estate
  4,097
  1,890
  1,996
  2,105
  1,063Other
  assets
  7
  24
  -
  -
  132
  -
  -$6,225
  $3,276
  $4,959
  $6,937
  $4,199The
gross interest income that would have been recorded in 2000 if the loans had
been current in accordance with their original terms and had been outstanding
throughout the period or since origination, if held for part of the period,
totaled $62,000.  No interest income on
these loans was included in net income in 2000.

The
Company is not aware of any loans continuing to accrue interest at December 31,
2000 that represent or result from trends or uncertainties which management
reasonably expects will materially impact future operating results, liquidity,
or capital resources.  Material credits
about which management is aware of any information which would raise serious
doubts as to the ability of such borrowers to comply with the loan repayment
terms have been fully reserved in the allowance for credit losses.

Allowance for Credit Losses

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.

Transactions
in the allowance for credit losses for the five years ended December 31, 2000
are as follows (dollars in thousands):

2000
  1999
  1998
  1997
  1996Balance
  at beginning of year
  $5,825
  $2,290
  $2,122
  $1,420
  $1,376Provision
  for credit losses
  450
  3,730
  425
  1,015
  261Transfer
  to allowance for possiblelosses
  on foreclosed real estate
  (500)
  -
  -
  -
  -
  -
  -
  -
  -Transfer
  from Prairie Security Bank
  -
  -
  -
  -
  -
  -
  469
  -
  -Charge
  offs:Commercial
  (2,217)
  (116)
  (219)
  (627)
  (34)Real
  Estate Mortgage
  (77)
  (65)
  (98)
  (69)
  (116)Consumer
  (57)
  (66)
  (94)
  (111)
  (77)(2,351)
  (247)
  (411)
  (807)
  (227)Recoveries
  79
  52
  154
  25
  10Net
  charge-offs
  (2,272)
  (195)
  (257)
  (782)
  (217)Balance
  at end of year
  $3,503
  $5,825
  $2,290
  $2,122
  $1,420Ratio
  of net charge-offs toaverage
  loans outstanding
  .89%
  .09%
  .13%
  .44%
  .17%The
allowance for credit losses decreased $2,322,000 in 2000.  Of this decrease, $2,043,000 was the
charge-off of a loan to one of the Banks large public commercial loan
customers, which had been specially provided for in 1999 when its financial
condition deteriorated.

In May 1993, the Financial Accounting
Standards Board (FASB) issued SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan" and in October 1996, issued SFAS No. 118,
"Accounting by Creditors for Impairment of a LoanIncome Recognition
Disclosures, an amendment to SFAS No. 114".  The Company measures impaired loans based on the present value of
expected future cash flows discounted at the loan's effective interest rate or,
as a practical expedient, at the loan's observable market price or the fair
market value of the collateral if the loan is collateral dependent.  The Company excludes loans that are
currently measured at fair value or at the lower of cost or fair value, and
certain large groups of smaller balance homogeneous loans that are collectively
measured for impairment.  The following
table summarizes the Banks impaired loans at December 31:

2000
  1999
  1998
  1997
  1996Total
  Impaired Loans
  $857,000
  $4,726,000
  $2,492,000
  $4,381,000
  $1,898,000Total
  Impaired Loans with Valuation Allowance
  $817,000
  $3,680,000
  $362,000
  $992,000
  $1,493,000Allocation
  of Allowance for Credit Losses
  $308,000
  $3,347,000
  $227,000
  $139,000
  $132,000No
allocation of the allowance for credit losses was considered necessary for the
remaining impaired loans.  The balance
of the allowance for credit losses in excess of these specific reserves is
available to absorb losses from all loans.

It is the Company's policy to charge-off
any loan or portion of a loan that is deemed uncollectible in the ordinary course
of business.  The entire allowance for
credit losses is available to absorb such charge-offs.  The Company 
allocates its allowance for credit losses primarily on the basis of
historical data.  Based on certain
characteristics of the portfolio, losses can be anticipated for major loan
categories.

In the following table, the allowance for
credit losses at December 31, 2000, 1999, 1998, 1997 and 1996 has been
allocated among major loan categories based on a number of factors including
quality, volume, economic outlook and other business considerations (dollars in
thousands):

2000
  1999
  1998
  1997
  1996Amount
  % of
  TotalLoans
  Amount
  % of
  TotalLoans
  Amount
  % of
  TotalLoans
  Amount
  % of
  TotalLoans
  Amount
  % of
  TotalLoansCommercial
  $1,626
  14.9%
  $3,616
  15.0%
  $576
  15.2%
  $678
  19.0%
  $412
  29.0%Real Estate
  1,800
  81.2%
  2,112
  81.3%
  1,633
  81.5%
  1,200
  76.6%
  887
  62.5%Consumer
  77
  3.9%
  97
  3.7%
  81
  3.3%
  244
  4.4%
  121
  8.5%Total
  $3,503
  100.0%
  $5,825
  100.0%
  $2,290
  100.0%
  $2,122
  100.0%
  $1,420
  100.0%Capital

Consolidated
capital of FCFG increased $3,755,000 during 2000.  In addition to net earnings of $4,361,000, the exercise of stock
options added $515,000, increases in the market value of available for sale
securities, net of tax, amounted to $396,000, tax benefits associated with the
exercise of stock options provided $107,000 and payments by the KSOP on the
debt related to the Companys KSOP amounted to $177,000.  Decreases to capital came from the
repurchase of Company common stock, which used $934,000 of Company capital and
the payment of cash dividends of $0.40 per share, or $867,000.  Cash dividends totaling $0.58 per share were
paid in 1999.  No cash dividends were
paid in 1998,  1997 or 1996.

There
are regulatory constraints placed upon capital adequacy, however 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 December 31, 2000, the
Company's leverage ratio was 8.97%, compared to 8.47% at year-end 1999.  For regulatory purposes, any goodwill and
core deposit premium is treated as a reduction of capital.  In addition, holding companies are required
to meet minimum risk-based capital guidelines under which risk percentages are
assigned to various categories of assets and off-balance-sheet items to
calculate a risk-adjusted capital ratio. 
Tier I capital generally consists of common stockholders' equity, less
goodwill and other intangible assets, while Tier II capital includes the
allowance for 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 December 31, 2000,
our Tier I capital ratio was 9.24%, and total capital was 10.39%.  The similar ratios at December 31, 1999 were
a Tier I capital ratio of 8.94% and a total capital ratio of 10.21%.

Information
concerning short-term borrowings is summarized as follows:

Average
  balance during the year
  $14,050
  $6,002Average
  interest rate during the year
  6.4%
  5.0%Maximum
  month-end balance during the year
  $20,148
  $12,131Weighted
  average rate at December 31, 2000
  6.8%
  4.6%Supplementary
Data

(Dollars in
  thousands, except per share amounts)Dec
  2000
  Sept
  2000
  June
  2000
  March
  2000
  Dec
  1999
  Sept
  1999
  June
  1999
  March
  1999Interest income
  $6,690
  $6,904
  $6,717
  $6,653
  $5,897
  $5,804
  $5,569
  $5,300Interest expense
  2,768
  2,740
  2,695
  2,207
  2,029
  1,906
  1,808
  1,749Net
  interest income
  3,922
  4,164
  4,022
  4,446
  3,868
  3,898
  3,761
  3,551Provision for credit losses
  40
  120
  120
  170
  3,370
  120
  120
  120Non-interest income
  1,133
  1,398
  1,168
  1,276
  1,197
  1,187
  1,165
  1,070Non-interest expense
  3,263
  3,799
  3,720
  3,816
  3,359
  3,575
  3,673
  3,502Income taxes (benefit)
  521
  551
  451
  597
  (625)
  434
  364
  325Net income (loss)
  $1,231
  $1,092
  $899
  $1,139
  $(1,039)
  $956
  $769
  $674Basic earnings per share
  $0.56
  $0.51
  $0.42
  $0.53
  $(0.48)
  $0.44
  $0.36
  $0.32ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

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 withdrawing 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
include 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 available for sale,
particularly those of shorter maturity, and are the principal source of asset
liquidity.  At December 31, 2000, cash,
deposits in banks, interest bearing deposits in banks and securities available
for sale totaled $39,541,000.  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 December 31, 2000,
overnight and federal funds lines of credit totaled $38,524,000.  These credit lines were accessed regularly
as a source of funding during 2000 and amounted to $12,652,000 at December 31,
2000.

Management
believes the Bank's liquidity position at December 31, 2000, was adequate to
meet its short term funding requirements.

Interest
rate sensitivity is closely related to liquidity, as each is directly affected
by the maturity of assets and liabilities. 
The Company's net interest margin is affected by changes in the level of
market interest rates.  Management's
objectives are to monitor and control interest rate risk and ensure predictable
and consistent growth in net interest income.

Management
considers any asset or liability which matures, or is subject to repricing
within one year to be interest sensitive, although continual monitoring is
performed for other time intervals as well. 
The difference between interest sensitive assets and liabilities for a
defined period of time is known as the interest sensitivity "gap",
and may be either positive or negative. 
If positive, more assets reprice before liabilities.  If negative, the reverse is true.  Gap analysis provides a general measure of
interest rate risk but does not address complexities such as prepayment risk,
interest rate floors and ceilings imposed on financial instruments, interest
rate dynamics and customers' response to interest rate changes.  Currently the Banks interest sensitivity
gap is negative within one year. 
Assuming that general market interest rate changes affect the repricing
of assets and liabilities in equal magnitudes, the effect 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.

Interest
Rate Gap Analysis
December 31, 2000

(dollars in thousands)
  Within 
  One Year
  After One 
  But Within 
  Five Years
  After 
  Five Years
  TotalLoans
  $86,074
  $129,325
  $39,784
  $255,183Securities:Available for sale
  1,226
  9,604
  14,009
  24,839Held to maturity
  170
  104
  402
  676Interest bearing deposits with banks
  172
  - -
  - -
  172Total Earning Assets
  $87,642
  $139,033
  $54,195
  $280,870Deposits:Savings, NOW and money market
  $98,036
  $- -
  - -
  $98,036Time deposits
  119,517
  5,109
  - -
  124,626Short-term borrowings
  14,001
  - -
  - -
  14,001Long-term debt
  730
  573
  - -
  1,303Total Interest Bearing Liabilities
  $232,284
  $5,682
  - -
  $237,966Net
  Interest Rate Sensitivity Gap
  ($144,642)
  $133,351
  $54,195
  $42,904The
Companys market risk is impacted by changes in interest rates.  Other types of market risk, such as foreign
currency exchange rate risk and commodity price risk, do not arise in the
normal course of the Companys business.

The
Company has market risk in the form of interest rate risk on its financial
assets.  In an effort to understand the
relative impact of this risk on the Companys current financial situation, a
process known as a rate shock is applied to the current financial assets.

Rate
shock is a process wherein the characteristics of the financial assets of the
Company are reviewed in the event they are subjected to an instantaneous and
complete adjustment in the market rate of interest.  These results are modeled to determine the effects on interest
rate margin for the succeeding twelve months from the repricing of variable
rate assets and liabilities where applicable. 
The level of impact on the various assets and liabilities are also
estimated for their sensitivity to pricing changes of such a market interest
rate change.

According
to this model and its assumptions, the change in net interest margin in the
event market interest rates were to immediately rise or fall by 100 basis
points is estimated to be $399,000. 
This amount represents approximately 2.4% of the 2000 net interest
income.

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

First

Community

Financial

Group

Inc.

and

Subsidiary



Consolidated

Financial

Report



December
31

2000

Contents




Independent Auditors Report

Consolidated Financial Statements

Consolidated Balance Sheets

Consolidated Statements
of Income

Consolidated
Statements of Stockholders Equity

Consolidated
Statements of Cash Flows

Notes to
Consolidated Financial Statements

Independent Auditors'
Report

Board
of DirectorsFirst Community
Financial Group, Inc.Lacey, Washington

We
have audited the accompanying consolidated balance sheets of First Community Financial Group, Inc. and Subsidiary
as of December 31, 2000 and 1999, and the related consolidated statements of
income, stockholders' equity and cash flows for each of the three years in the
period ended December 31, 2000.  These
consolidated financial statements are the responsibility of the Company's
management.  Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.

We
conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement.  An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.  We believe that our audits provide a
reasonable basis for our opinion.

In
our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of First Community Financial Group, Inc. and Subsidiary
as of December 31, 2000 and 1999, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 2000,
in conformity with generally accepted accounting principles.



KNIGHT
VALE & GREGORY PLLCJanuary 12, 2001Tacoma, Washington

Consolidated
Balance Sheets



(Dollars
in Thousands)

First
Community Financial Group, Inc. and SubsidiaryDecember 31, 2000 and 1999

2000
  1999AssetsCash and due from banks
  $12,640
  $10,349Interest bearing deposits in banks
  172
  136Securities available for sale
  26,729
  28,439Securities held to maturity (market
  value:  2000 - $702; 1999 - $701)
  676
  677Loans held for sale
  4,121
  2,951Loans
  255,183
  232,825Allowance for credit losses
  (3,503)
  (5,825)Net loans
  251,680
  227,000Premises and equipment
  10,067
  9,187Foreclosed real estate
  4,097
  1,890Accrued interest receivable
  1,817
  1,226Cash value of life insurance
  3,110
  3,014Goodwill
  6,677
  7,085Other assets
  2,449
  1,819Total assets
  $324,235
  $293,773LiabilitiesDeposits:Demand
  $48,715
  $42,481Savings and interest-bearing
  demand
  98,036
  105,519Time
  124,626
  97,527Total
  deposits
  271,377
  245,527Federal funds purchased
  2
  3,200Short-term borrowings
  13,999
  10,335Long-term debt
  1,303
  2,030Accrued interest payable
  450
  299Other liabilities
  2,731
  1,764Total
  liabilities
  289,862
  263,155Commitments and Contingent Liabilities
  - -
  - -Stockholders' EquityPreferred stock (no par value);
  200,000 shares authorized, none issued
  - -
  - -Common stock (par value:  $2.50); 10,000,000 shares authorized, shares
  issued:  2000 - 2,184,003; 1999 -
  2,177,167
  5,460
  5,443Surplus
  23,099
  23,428Retained earnings
  6,349
  2,855Accumulated other comprehensive loss
  (332)
  (728)Unearned KSOP shares
  (203)
  (380)Total
  stockholders' equity
  34,373
  30,618Total
  liabilities and stockholders' equity
  $324,235
  $293,773See notes to consolidated financial statements.

Consolidated Statements
of Income



(Dollars
in Thousands, Except Per Share Data)

First
Community Financial Group, Inc. and Subsidiary
Years Ended December 31, 2000, 1999 and 1998

2000
  1999
  1998Interest IncomeLoans
  $25,110
  $20,518
  $19,811Federal funds sold and deposits in
  banks
  98
  112
  532Investment securities:Taxable
  1,369
  1,560
  2,799Non-taxable
  387
  380
  270Total
  interest income
  26,964
  22,570
  23,412Interest ExpenseDeposits
  9,391
  7,042
  8,390Other
  1,019
  450
  295Total
  interest expense
  10,410
  7,492
  8,685Net interest
  income
  16,554
  15,078
  14,727Provision for Credit Losses
  450
  3,730
  425Net interest
  income after provision for credit losses
  16,104
  11,348
  14,302Non-Interest IncomeService charges on deposit accounts
  1,922
  1,949
  1,931Origination fees and gains on sales
  of loans
  999
  1,160
  1,271Gain on sale of securities available
  for sale
  - -
  - -
  6Other operating income
  2,054
  1,510
  1,675Total
  non-interest income
  4,975
  4,619
  4,883Non-Interest ExpensesSalaries
  6,645
  6,325
  6,446Employee benefits
  1,426
  1,620
  1,418Occupancy
  1,023
  1,003
  978Equipment
  1,163
  1,200
  1,239Other
  4,341
  3,961
  4,258Total
  non-interest expenses
  14,598
  14,109
  14,339Income
  before income taxes
  6,481
  1,858
  4,846Income Taxes
  2,120
  498
  1,241Net income
  $4,361
  $1,360
  $3,605Earnings
  Per ShareBasic
  $2.02
  $.64
  $1.74Diluted
  1.96
  .60
  1.62See notes
to consolidated financial statements.



Consolidated
Statements of Stockholders Equity




(Dollars
in Thousands)

First
Community Financial Group, Inc. and SubsidiaryYears Ended December 31, 2000, 1999 and 1998

Shares ofCommon
  Stock
  Common
  Stock
  Surplus
  Retained
  Earnings
  Accumulated OtherComprehensive Income
  (Loss)
  UnearnedKSOP Shares
  TotalBalance,
  January 1, 1998
  1,995,426
  $4,988
  $20,459
  $1,596
  $68
  ($946)
  $26,165Comprehensive
  income:Net income
  - -
  - -
  - -
  3,605
  -
  - -
  3,605Other comprehensive loss, net of
  tax:Change in fair value of
  securities available for sale
  - -
  - -
  - -
  - -
  (40)
  - -
  (40)Comprehensive income
  
  
  
  
  
  
  3,565Stock
  options exercised
  35,680
  89
  188
  - -
  - -
  - -
  2775%
  stock dividend
  99,187
  248
  2,182
  (2,444)
  - -
  - -
  (14)Stock
  repurchased
  (4,146)
  (10)
  (70)
  - -
  - -
  - -
  (80)Income
  tax benefit from exercise of stock options
  - -
  - -
  80
  - -
  - -
  - -
  80Compensation
  expense for issuance of stock options
  - -
  - -
  10
  - -
  - -
  - -
  10Net
  decrease in unearned KSOP shares
  - -
  - -
  - -
  - -
  - -
  338
  338Balance, December 31, 1998
  2,126,147
  5,315
  22,849
  2,757
  28
  (608)
  30,341Comprehensive
  income:Net income
  - -
  - -
  - -
  1,360
  - -
  - -
  1,360Other comprehensive loss, net of
  tax:Change in fair value of
  securities available for sale
  - -
  - -
  - -
  - -
  (756)
  - -
  (756)Comprehensive income
  
  
  
  
  
  
  604Stock
  options exercised
  51,020
  128
  402
  - -
  - -
  - -
  530Cash
  dividends declared ($.58 per share)
  - -
  - -
  - -
  (1,262)
  - -
  - -
  (1,262)Income
  tax benefit from exercise of stock options
  - -
  - -
  177
  - -
  - -
  - -
  177Net
  decrease in unearned KSOP shares
  - -
  - -
  - -
  - -
  - -
  228
  228Balance, December 31, 1999
  2,177,167
  5,443
  23,428
  2,855
  (728)
  (380)
  30,618Balance,
  December 31, 1999
  2,177,167
  $5,443
  $23,428
  $2,855
  ($728)
  ($380)
  $30,618Comprehensive
  income:Net income
  - -
  - -
  - -
  4,361
  - -
  - -
  4,361Other comprehensive loss, net of
  tax:Change in fair value of
  securities available for sale
  - -
  - -
  - -
  - -
  396
  - -
  396Comprehensive income
  
  
  
  
  
  
  4,757Stock
  options exercised
  46,834
  117
  398
  - -
  - -
  - -
  515Stock
  repurchased
  (39,998)
  (100)
  (834)
  - -
  - -
  - -
  (934)Cash
  dividends declared ($.40 per share)
  - -
  - -
  - -
  (867)
  - -
  - -
  (867)Income
  tax benefit from exercise of stock options
  - -
  - -
  107
  - -
  - -
  - -
  107Net
  decrease in unearned KSOP shares
  - -
  - -
  - -
  - -
  - -
  177
  177Balance, December 31, 2000
  2,184,003
  $5,460
  $23,099
  $6,349
  ($332)
  ($203)
  $34,373See notes to consolidated financial statements



Consolidated Statements of Cash Flows




(Dollars
in Thousands)

First
Community Financial Group, Inc. and SubsidiaryYears Ended December 31, 2000, 1999 and 1998

2000
  1999
  1998Cash Flows from Operating ActivitiesNet income
  $4,361
  $1,360
  $3,605Adjustments to reconcile net income
  to net cash provided by operating activities:Provision for credit losses
  450
  3,730
  425Depreciation and amortization
  1,085
  1,096
  1,296Deferred income taxes
  (benefit)
  942
  (1,119)
  327Stock dividends received
  (115)
  (122)
  (129)Amortization of goodwill
  408
  408
  391Origination of loans held for
  sale
  (44,119)
  (48,753)
  (55,868)Proceeds from sales of loans
  held for sale
  43,154
  50,258
  55,716(Increase) decrease in cash
  value of life insurance
  (96)
  (7)
  200Gain on sales of foreclosed
  real estate
  (48)
  (11)
  (431)Gain on sale of premises and
  equipment
  (198)
  - -
  - -(Increase) decrease in accrued
  interest receivable
  (591)
  (106)
  371Increase (decrease) in accrued
  interest payable
  151
  2
  (106)Other - net
  (1,010)
  432
  956Net cash
  provided by operating activities
  4,374
  7,168
  6,753Cash Flows from Investing ActivitiesNet (increase) decrease in interest
  bearing deposits in banks
  (36)
  (9)
  5,521Net decrease in federal funds sold
  - -
  2,815
  8,185Activity in securities available for
  sale:Sales
  - -
  - -
  4,416Maturities, prepayments and
  calls
  2,602
  19,507
  39,698Purchases
  - -
  (13,764)
  (37,246)Activity in securities held to
  maturity:Maturities, prepayments and
  calls
  - -
  - -
  280Net increase in loans
  (28,167)
  (39,345)
  (2,176)Proceeds from sales of foreclosed
  assets
  817
  753
  2,745Additions to premises and equipment
  (2,175)
  (1,228)
  (771)Proceeds from sales of premises and
  equipment
  408
  444
  746Other - net
  (12)
  - -
  (55)Net cash
  provided by (used in) investing activities
  (26,563)
  (30,827)
  21,343Cash Flows from Financing ActivitiesNet increase (decrease) in deposits
  $25,850
  $9,940
  ($27,534)Net increase in short-term
  borrowings
  466
  13,035
  500Proceeds from exercise of stock options
  515
  530
  277Repayment of long-term debt
  (550)
  (550)
  (550)Repurchase of common stock
  (934)
  - -
  (80)Payment for fractional shares
  - -
  - -
  (14)Payment of cash dividends
  (867)
  (1,262)
  - -Net cash
  provided by (used in) financing activities
  24,480
  21,693
  (27,401)Net increase
  (decrease) in cash and due from banks
  2,291
  (1,966)
  695Cash and Due from BanksBeginning of year
  10,349
  12,315
  11,620End of year
  $12,640
  $10,349
  $12,315Supplemental Disclosures of Cash Flow InformationCash payments for:Interest
  $10,259
  $7,490
  $8,791Income taxes
  2,127
  1,105
  865Supplemental Disclosures of Non-Cash Investing and Financing
  ActivitiesForeclosed real estate acquired in
  settlement of loans
  $4,147
  $822
  $2,318Financed sale of foreclosed real
  estate
  610
  136
  53Stock dividends
  - -
  - -
  2,430Compensation expense for issuance of
  stock options
  - -
  - -
  10Fair value adjustment of securities
  available for sale, net
  396
  (756)
  (40)Net decrease in unearned KSOP shares
  (177)
  (228)
  (338)Income tax benefit from exercise of
  stock options
  107
  177
  80Transfer of allowance for credit
  losses to allowance forpossible
  losses on foreclosed assets
  500
  - -
  - -See notes to consolidated financial statements.



Notes to Consolidated Financial Statements




First
Community Financial Group, Inc. and SubsidiaryDecember 31, 2000 and 1999

Note 1 - Summary of Significant Accounting Policies

Nature of Operations

First
Community Financial Group, Inc. (the Company) provides commercial banking
services in Washington State through 16 offices concentrated in and around
Thurston, Grays Harbor, Pierce and Lewis Counties.  Additionally, the Company provides real estate mortgage lending
services and the sale of non-deposit investment products through its branch
network.The Companys primary source of revenue is providing loans to customers
who are predominately small- and middle-market businesses and middle-income
individuals.

Principles of Consolidation

The
consolidated financial statements include the accounts of the Company and its
wholly owned subsidiary, First Community Bank of Washington (the Bank).  All significant intercompany transactions
and balances have been eliminated.

Consolidated Financial Statement Presentation

The
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles and practices within the banking
industry.  The preparation of
consolidated 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 the disclosure
of contingent assets and liabilities, as of the date of the balance sheet, and
the reported amounts of revenues and expenses during the reporting period.  Actual results could differ significantly
from those estimates.  Material
estimates that are particularly susceptible to significant change in the near
term relate to the determination of the allowance for credit losses and the
valuation of foreclosed real estate and deferred tax assets.

Certain prior
year amounts have been reclassified to conform to the 2000 presentation.  The reclassifications had no effect on net
income or retained earnings as previously reported.  All dollar amounts, except per share information, are stated in
thousands.

Securities Available for Sale

Securities
available for sale consist of debt securities which may be sold to implement
the Banks asset/liability management strategies and in response to changes in
interest rates and similar factors, and certain equity securities.  Securities available for sale are reported
at fair value.  Unrealized gains and
losses, net of the related deferred tax effect, are reported as a net amount in
a separate component of stockholders' equity entitled accumulated other comprehensive
income (loss).  Realized gains and
losses on securities available for sale, determined using the specific
identification method, are included in earnings.  Amortization of premiums and accretion of discounts are
recognized in interest income over the period to maturity.

Securities Held to Maturity

Debt
securities for which the Company has the positive intent and ability to hold to
maturity are reported at cost, adjusted for amortization of premiums and
accretion of discounts, which are recognized in interest income over the period
to maturity.

Declines in the
fair value of individual securities held to maturity and available for sale
below their cost that are other than temporary result in write-downs of the
individual securities to their fair value. 
Such write-downs are included in earnings as realized losses.

Loans Held for Sale

Mortgage
and government guaranteed loans originated for sale in the secondary market are
carried at the lower of cost or estimated market value.  Net unrealized losses are recognized through
a valuation allowance established by charges to income.

Loans

Loans
are stated at the amount of unpaid principal, reduced by an allowance for
credit losses.  Interest on loans is
accrued daily based on the principal amount outstanding.

Generally
the accrual of interest on loans is discontinued when, in managements opinion,
the borrower may be unable to meet payments as they become due or when they are
past due 90 days as to either principal or interest, unless they are well
secured and in the process of collection. 
When interest accrual is discontinued, all unpaid accrued interest is
reversed against current income.  If
management determines that the ultimate collectibility of principal is in
doubt, cash receipts on nonaccrual loans are applied to reduce the principal
balance.

Allowance for Credit Losses

The
allowance for credit losses is maintained at a level considered adequate to
provide for estimated losses based on evaluating known and inherent risks in
the loan portfolio.  The allowance is
reduced by loans charged off, and increased by provisions charged to earnings
and recoveries on loans previously charged off.  The allowance is based on management's periodic evaluation of
factors underlying the quality of the loan portfolio, including changes in the
size and composition of the loan portfolio, the estimated value of any
underlying collateral, actual loan loss experience, current economic
conditions, and detailed analysis of individual loans for which full
collectibility may not be assured.  This
evaluation is inherently subjective as it requires estimates that are
susceptible to significant revision as more information becomes available.

When available
information confirms that specific loans or portions thereof are uncollectible,
these amounts are charged off against the allowance for credit losses.  The existence of some or all of the
following criteria will generally confirm that a loss has been incurred:  the loan is significantly delinquent and the
borrower has not evidenced the ability or intent to bring the loan current; the
Company has no recourse to the borrower, or if it does, the borrower has
insufficient assets to pay the debt; the estimated fair value of the loan
collateral is significantly below the current loan balance, and there is little
or no near-term prospect for improvement.

When management determines that it is probable
that a borrower will be unable to repay all amounts due according to the terms
of the loan agreement, including scheduled interest payments, the loan is
considered impaired.  Factors considered
by management in determining impairment include payment status, collateral
value, and the probability of collecting scheduled principal and interest
payments when due.  Loans that
experience insignificant payment delays and payment shortfalls are generally
not classified as impaired.  Management
determines the significance of payment delays and payment shortfalls on a
case-by-case basis, taking into consideration all of the circumstances
surrounding the loan and the borrower, including the length of the delay, the
reasons for the delay, the borrowers prior payment record, and the amount of
shortfall in relation to the principal and interest owed.  The amount of impairment is measured based
on the present value of expected future cash flows discounted at the loans
effective interest rate or, when the primary source of repayment is provided by
real estate collateral, at the fair value of the collateral less estimated
selling costs.

The ultimate
recovery of all loans is susceptible to future market factors beyond the
Company's control.  These factors may
result in losses or recoveries differing significantly from those provided for
in the consolidated financial statements.

Transfers of Financial Assets

Transfers of financial
assets are accounted for as sales when control over the assets has been
surrendered.  Control over transferred
assets is deemed to be surrendered when (1) the assets have been isolated from
the Bank, (2) the transferee obtains the right (free of conditions that
constrain it from taking advantage of that right) to pledge or exchange the
transferred assets, and (3) the Bank does not maintain effective control over
the transferred assets through an agreement to repurchase them before their
maturity.

Premises and Equipment

Premises and equipment
are stated at cost less accumulated depreciation, which is computed on the
straight-line method over the estimated useful lives of the assets.  Leasehold improvements are amortized over
the term of the lease or the estimated useful life of the improvement,
whichever is less.  Gains or losses on
dispositions are reflected in earnings.

Goodwill

Goodwill represents
costs in excess of net assets acquired, and is amortized on the straight-line
basis over a period of 15 to 25 years. 
The Company periodically evaluates goodwill for impairment.

Foreclosed Real Estate

Real estate properties
acquired through, or in lieu of, foreclosure are initially recorded at the
lower of cost or fair value of the properties less estimated costs of
disposal.  Any write-down to fair value
at the time of transfer to foreclosed real estate is charged to the allowance
for credit losses.  Properties are
evaluated regularly to ensure that the recorded amounts are supported by their
current fair values, and that valuation allowances to reduce the recorded
amounts to fair value less estimated costs to dispose are recorded as
necessary.  Additions to or reductions
from valuation allowances are recorded in income or are transferred from the
allowance for credit losses at the time of foreclosure.

Income Taxes

Deferred tax assets and
liabilities result from differences between the financial statement recorded
amounts and the tax bases of assets and liabilities, and are reflected at
currently enacted income tax rates applicable to the period in which the
deferred tax assets or liabilities are expected to be realized or settled.  The deferred tax provision represents the
difference between the net deferred tax asset/liability at the beginning and
end of the year.  As changes in tax laws
or rates are enacted, deferred tax assets and liabilities are adjusted through
the provision for income taxes.

The Company files a
consolidated income tax return with the Bank. 
The Bank provides for tax on a separate company basis and remits to the
Company amounts currently due.

Stock-Based Compensation

The Company accounts for
stock-based awards to employees and directors using the intrinsic value method,
in accordance with APB No. 25, Accounting
for Stock Issued to Employees. 
Accordingly, no compensation expense has been recognized in the
consolidated financial statements for employee and director stock arrangements
where the grant price is equal to market price.  However, the required pro forma disclosures of the effects of all
options granted on or after January 1, 1995 have been provided in
accordance with SFAS No. 123, Accounting for
Stock-Based Compensation.

Fair Values of Financial Instruments

The following methods
and assumptions were used by the Company in estimating the fair values of
financial instruments disclosed in the consolidated balance sheets:

Cash and Short-Term InstrumentsThe recorded amounts of cash and short-term
instruments approximate their fair value.Securities Available for Sale and Held to MaturityFair values for securities, excluding restricted
equity securities, are based on quoted market prices.  The recorded values of restricted equity securities approximate
fair values.LoansFor variable rate loans that reprice frequently
and have no significant change in credit risk, fair values are based on
recorded values.  Fair values for fixed
rate loans are estimated using discounted cash flow analyses, using interest
rates currently being offered for loans with similar terms to borrowers of
similar credit quality.  Fair values of
loans held for sale are based on their estimated market prices.  Fair values for impaired loans are estimated
using discounted cash flow analyses or underlying collateral values, where
applicable.DepositsThe fair values disclosed for demand deposits
are, by definition, equal to the amount payable on demand at the reporting date
(that is, their recorded amounts).  The
recorded amounts of variable rate, fixed term money market accounts and
certificates of deposit approximate their fair values at the reporting date.  Fair values for fixed rate certificates of
deposit are estimated using a discounted cash flow calculation based on
interest rates currently being offered on similar certificates.Short-Term BorrowingsThe recorded amounts of federal funds purchased
and short-term borrowings maturing within 90 days approximate their fair
values.  Fair values of other short-term
borrowings are estimated using discounted cash flow analyses based on the
Companys current incremental borrowing rates for similar types of borrowing
arrangements.Long-Term DebtThe fair values of the Companys long-term debt
are estimated using discounted cash flow analyses based on the Companys
current incremental borrowing rates for similar types of borrowing
arrangements.  The recorded amounts of
variable rate debt approximate their fair value.

Cash Equivalents

The Company considers
all amounts included in the balance sheets caption Cash and due from banks to
be cash equivalents.

Earnings Per Share

Basic earnings per share
exclude dilution and are computed by dividing net income by the weighted
average number of common shares outstanding. 
The diluted earnings per share reflect the potential dilution that could
occur if common shares were issued pursuant to the exercise of options under
the Companys stock option plans.

Comprehensive Income

The Company applies
Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income (SFAS No. 130), which
requires that an entity report and display comprehensive income in a financial
statement that is displayed 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 non-owner 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,
comprehensive income includes the net income reported in the statements of
income and any changes in fair value of securities available for sale, reported
as a component of stockholders equity.

Recent Accounting Pronouncements

In
June 1998, the Financial Accounting Standards Board issued SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities.  This statement
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities.  It requires that an entity recognize all
derivatives as either assets or liabilities in its balance sheet and measure
those instruments at fair value.  Under
this statement, an entity that elects to apply hedge accounting is required to
establish at the inception of the hedge the method it will use for assessing
the effectiveness of the hedging derivative and the measurement approach for
determining the ineffective aspect of the hedge.  Those methods must be consistent with the entitys approach to
managing risk.  This statement is
effective for all fiscal years beginning after June 15, 2000.  The Company had no derivatives as of
December 31, 2000, nor does the Company engage in any hedging activities.  The Company does not anticipate that the
adoption of SFAS No. 133 will have a material effect on its financial position
or results of operations.

Note 2 - Restricted Assets

Federal Reserve Board
regulations require that the Bank maintain certain minimum reserve balances on
deposit with the Federal Reserve Bank. 
The amounts of such balances for the years ended December 31, 2000 and
1999 were approximately $1,944 and $1,240, respectively.

Note 3 - Debt and Equity Securities

Debt and equity
securities have been classified according to management's intent.  The recorded amounts of securities and their
fair value at December 31 were as follows:

Amortized
  Cost
  Gross
  Unrealized
  Gains
  Gross
  Unrealized
  Losses
  Fair
  ValueSecurities Available for SaleDecember 31, 2000U.S. Government and agency securities
  $7,899
  $17
  $316
  $7,600Equity securities
  36
  -
  -
  -
  -
  36Corporate securities
  4,985
  7
  54
  4,938Mortgage backed securities
  5,053
  18
  32
  5,039State and municipal securities
  7,402
  15
  155
  7,262Federal Home Loan Bank stock
  1,854
  - -
  - -
  1,854$27,229
  $57
  $557
  $26,729December 31, 1999U.S. Government and agency
  securities
  $7,731
  $-
  -
  $530
  $7,201Equity securities
  36
  -
  -
  -
  -
  36Corporate securities
  5,339
  -
  -
  137
  5,202Mortgage backed securities
  7,154
  10
  137
  7,027State and municipal securities
  7,544
  6
  315
  7,235Federal Home Loan Bank stock
  1,738
  -
  -
  -
  -
  1,738$29,542
  $16
  $1,119
  $28,439Securities Held to MaturityDecember 31, 2000State and municipal securities
  $676
  $27
  $1
  $702December 31, 1999State and municipal securities
  $677
  $25
  $1
  $701The
contractual maturities of debt securities held to maturity and available for
sale at December 31, 2000 are shown below. 
Expected maturities may differ from contractual maturities because
borrowers may have the right to call or prepay obligations, with or without
call or prepayment penalties.

Held to Maturity
  Available for SaleAmortized
  Cost
  Fair 
  Value
  Amortized
  Cost
  FairValueDue
  in one year or less
  $170
  $173
  $1,230
  $1,226Due
  after one year through five years
  104
  105
  9,718
  9,604Due
  after five years through ten years
  402
  424
  6,460
  6,356Due
  after ten years
  - -
  - -
  7,931
  7,653$676
  $702
  $25,339
  $24,839Securities
recorded at approximately $9,398 at December 31, 2000 and $8,036 at December
31, 1999 were pledged to secure public deposits and for other purposes required
or permitted by law.

Gross realized
gains and losses on sales of securities available for sale were $11 and $5,
respectively, in 1998.  There were no
sales of securities available for sale in 2000 or 1999.

Note 4 - Loans

Loans
at December 31 consist of the following:

2000
  Percent of
  1999
  Percent ofPortfolio
  Portfolio
  Portfolio
  PortfolioCommercial
  $37,989
  14.89%
  $34,981
  15.02%Real estate:Residential 1-4 family
  4,123
  1.62
  23,493
  10.09Commercial
  163,557
  64.09
  146,710
  63.02Construction
  39,486
  15.47
  19,169
  8.23Consumer
  10,028
  3.93
  8,472
  3.64Total loans
  $255,183
  100.00%
  $232,825
  100.00%

Changes
in the allowance for credit losses for the years ended December 31 are as
follows:

2000
  1999
  1998Balance at beginning
  of year
  $5,825
  $2,290
  $2,122Provision charged to
  operations
  450
  3,730
  425Transfer to allowance
  for possible losses on foreclosed real estate
  (500)
  -
  -
  -
  -Charge-offs
  (2,351)
  (247)
  (411)Recoveries
  79
  52
  154Net
  charge-offs
  (2,272)
  (195)
  (257)Balance at
  end of year
  $3,503
  $5,825
  $2,290Ratio
  of net charge-offs to average loans outstanding
  .89%
  .09%
  .13%

Following is a
summary of information pertaining to impaired loans:

2000
  1999
  1998December
  31Impaired loans without a
  valuation allowance
  $40
  $1,046
  $2,130Impaired loans with a
  valuation allowance
  817
  3,680
  362Total impaired loans
  $857
  $4,726
  $2,492Valuation allowance related to
  impaired loans
  $308
  $3,347
  $227Years
  Ended December 31Average investment in impaired
  loans
  $1,623
  $1,495
  $3,544Interest income recognized on
  a cash basis on impaired loans
  - -
  - -
  - -

At
December 31, 2000, there were no commitments to lend additional funds to
borrowers whose loans were impaired. 
Loans over 90 days past due still accruing interest were $1,264 and $28
at December 31, 2000 and 1999, respectively.

Certain
related parties of the Company, principally Bank directors and their
associates, were loan customers of the Bank in the ordinary course of business
during 2000 and 1999.  Total loans
outstanding at December 31, 2000 and 1999 to key officers and directors were
$14,293 and $13,806, respectively. 
During 2000, advances totaled $2,202, and repayments totaled $1,715 on
these loans.

Note 5 - Premises and Equipment

The
components of premises and equipment at December 31 are as follows:

2000
  1999Land
  $1,445
  $1,372Buildings and
  leasehold improvements
  7,684
  7,493Equipment, furniture
  and fixtures
  7,574
  6,379Construction in
  progress
  475
  66Total cost
  17,178
  15,310Less accumulated
  depreciation and amortization
  7,111
  6,123Premises and
  equipment
  $10,067
  $9,187

The
Bank leases premises and equipment under operating leases.  Rental expense of leased premises and
equipment was $365, $309 and $260 for 2000, 1999 and 1998, respectively, which
is included in occupancy expense.

Minimum
net rental commitments under noncancellable leases having an original or
remaining term of more than one year are as follows at December 31, 2000:

2001
  $3242002
  3252003
  2112004
  1232005
  56Thereafter
  934Total
  minimum payments required
  $1,973Certain
leases contain renewal options of five years and escalation clauses based on
increases in property taxes and other costs.

Note 6 - Foreclosed Real Estate

Foreclosed real
estate consisted of the following at December 31:

2000
  1999Real
  estate acquired through foreclosure
  $4,597
  $1,890Allowance
  for possible losses
  (500)
  - -Total foreclosed real estate
  $4,097
  $1,890Changes in the
allowance for possible losses for the year ended December 31, 2000 follows:

Balance,
  beginning of year
  $- -Transfers from
  allowance for credit losses
  500Balance, end
  of year
  $500There
was no allowance for possible losses at December 31, 1999 and 1998.

Note 7 - Deposits

The
aggregate amount of time deposits with balances in excess of one hundred
thousand dollars was approximately $28,942 and $27,773 at December 31, 2000 and
1999, respectively.

Scheduled
maturities of time deposits are as follows for future years ending December 31:

2001
  $119,5162002
  4,4542003
  4592004
  552005
  142Total
  $124,626Note 8 - Federal Funds Purchased and Short-Term Borrowings

Federal funds purchased
generally mature within one to four days from the transaction date.  The balances at December 31, 2000 and 1999
represent advances from a line of credit agreement with KeyBank (agreement had
a limit of $6,100 at December 31, 2000).

Short-term borrowings at
December 31 are as follows:

2000
  1999Demand note issued to
  U. S. Treasury, bearing interest at the federal fundsrate
  less .25% (6.29% and 4.78% at December 31, 2000 and 1999, respectively),due
  on demand, secured by securities pledged to the Federal Reserve Bank ofSan
  Francisco in the amount of $6,255.
  $1,349
  $3,335Note due to the
  Federal Home Loan Bank of Seattle, bearing interest at 6.825%,due
  January 2001.  The Bank has entered
  into an Advances, Security and DepositAgreement
  (Agreement) with the Federal Home Loan Bank of Seattle, which allowsit
  to borrow up to 10% of the Banks assets. 
  Under the Agreement, virtually all theBanks
  assets, not otherwise encumbered, are pledged as collateral for advances.
  12,650
  7,000Total short-term borrowings
  $13,999
  $10,335Information concerning short-term borrowings is summarized as follows:

2000
  1999Average balance during
  the year
  $14,050
  $6,002Average
  interest rate during the year
  6.4%
  5.0%Maximum month-end
  balance during the year
  $20,148
  $12,131Weighted
  average rate at December 31, 2000
  6.8%
  4.6%Note 9 - Long-Term Debt

Long-term
debt at December 31 is as follows:

2000
  1999Note payable on behalf
  of the Companys KSOP, maturing March 2002; due in monthly principal
  installments of $15, plus interest at 90% of prime rate (8.55% and 7.65% at
  December 31, 2000 and 1999, respectively), collateralized by 10,968
  shares of Company stock; guaranteedby
  the Company.
  $203
  $380Note payable to Key
  Bank, maturing July 2002; due in annual installments of $550, plus monthly
  installments of interest at prime rate minus 85 basis points (8.65% and 7.65%
  at December 31, 2000 and 1999, respectively),collateralized
  by investment in First Community Bank.
  1,100
  1,650$1,303
  $2,030Principal
reductions due on the above indebtedness for the years ending December 31 are
as follows:  2001 - $730 and 2002 -
$573.

Under
the terms of the business loan agreement with KeyBank, the Company and the Bank
must maintain certain financial ratios.

Note 10 - Income Taxes

The
Company and its subsidiaries file a consolidated federal income tax return.

Income
taxes are comprised of the following for the years ended December 31:

2000
  1999
  1998Current
  $1,178
  $1,617
  $914Deferred (benefit)
  942
  (1,119)
  327Total income
  taxes
  $2,120
  $498
  $1,241The following
is a reconciliation between the statutory and the effective federal income tax
rate for the years ended December 31:

2000
  
  1999
  
  1998Percent
  
  Percent
  
  Percentof Pretax
  
  of Pretax
  
  of PretaxAmount
  Income
  Amount
  Income
  Amount
  IncomeIncome
  tax based on statutory rate
  $2,204
  34.0%
  $632
  34.0%
  $1,648
  34.0%Adjustments resulting
  from:Tax-exempt income
  (151)
  (2.3)
  (144)
  (7.8)
  (95)
  (2.0)Goodwill amortization
  70
  1.1
  70
  3.8
  65
  1.3Tax credits
  (115)
  (1.2)
  (129)
  (6.9)
  (308)
  (6.3)Other
  112
  1.1
  69
  3.7
  (69)
  (1.4)Total income taxes
  $2,120
  32.7%
  $498
  26.8%
  $1,241
  25.6%The
tax effects of temporary differences that give rise to significant portions of
deferred tax assets and liability at December 31 are:

2000
  1999Deferred Tax AssetsAllowance for credit losses, in
  excess of tax reserves
  $1,093
  $1,864Deferred compensation and incentive
  bonuses
  496
  492Book depreciation taken in excess of
  tax depreciation
  48
  26Unrealized loss on securities available
  for sale
  168
  375Other deferred tax assets
  20
  98Total
  deferred tax assets
  1,825
  2,855Deferred Tax LiabilityDeferred income
  1,831
  1,712Net deferred
  tax assets (liability)
  ($6)
  $1,143Note 11 - Commitments and Contingent Liabilities

The
Bank is party to financial instruments with off-balance-sheet risk in the
normal course of business to meet the financing needs of its customers.  The financial instruments include
commitments to extend credit and standby letters of credit.  These instruments involve, to varying
degrees, elements of credit risk in excess of the amount recognized on the
consolidated balance sheets.

The
Banks exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit and standby
letters of credit is represented by the contractual amount of those
instruments.  The Bank uses the same
credit policies in making commitments and conditional obligations as it does
for on-balance-sheet instruments.  A
summary of the Bank's commitments at December 31 is as follows:

2000
  1999Commitments to extend
  credit:Real estate secured
  $14,749
  $19,105Credit card lines
  1,338
  1,814Other
  23,918
  22,552Total commitments
  to extended credit
  $40,005
  $43,471Standby letters of
  credit
  $334
  $1,060Commitments
to extend credit are agreements to lend to a customer as long as there is no
violation of any condition established in the contract.  Since many of the commitments are expected
to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements.  The Bank's experience has been that approximately 70% of loan
commitments are drawn upon by customers. 
The Bank evaluates each customer's creditworthiness on a case-by-case
basis.  The amount of collateral
obtained, if deemed necessary by the Bank upon extension of credit, is based on
management's credit evaluation of the party. 
Collateral held varies, but may include accounts receivable, inventory,
property and equipment, residential real estate, and income-producing
commercial properties.

Standby
letters of credit are conditional commitments issued by the Bank to guarantee
the performance of a customer to a third party.  Those guarantees are primarily issued to support public and
private borrowing arrangements.  The
credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loan facilities to customers.  Collateral held varies as specified above,
and is required in instances where the Bank deems necessary.

Contingencies

Because
of the nature of its activities, the Company is subject to various pending and
threatened legal actions which arise in the ordinary course of business.  In the opinion of management, liabilities
arising from these claims, if any, will not have a material effect on the
financial position of the Company.

The
Company has entered into contracts with certain of its executives and others,
which provide for contingent payments subject to future events.

Note 12 - Significant Concentrations of Credit Risk

The
Bank has credit risk exposure, including off-balance-sheet credit risk
exposure, related to real estate loans as disclosed in Notes 4 and 11.  The ultimate collectibility of a substantial
portion of the loan portfolio is susceptible to changes in economic and market
conditions in the region.  The Bank
generally requires collateral on all real estate lending arrangements and
typically maintains loan-to-value ratios of no greater than 80%.

Investments
in state and municipal securities generally involve governmental entities
within Washington State.  The Bank, as a
matter of practice, generally does not extend credit to any single borrower or
group of related borrowers in excess of $6,000.

The
contractual amounts of credit-related financial instruments such as commitments
to extend credit, credit-card arrangements, and letters of credit represent the
amounts of potential accounting loss should the contract be fully drawn upon,
the customer defaults, and the value of any existing collateral become
worthless.

Note 13 - Benefit Plans

Employee Stock Ownership Plan

The
Company has a combined employee stock ownership and profit sharing plan with
401(k) provisions (KSOP) which covers substantially all employees who have
completed at least one year of service. 
The Company accounts for the KSOP in accordance with Statement of
Position 93-6, Employers Accounting for
Employee Stock Ownership Plans. 
Accordingly, the balance of the debt of the KSOP is included in
long-term debt on the accompanying consolidated balance sheets, with a
corresponding deduction from stockholders equity.  KSOP shares were pledged as collateral for the debt.  As the debt is repaid, shares are released
based on the proportion of debt paid and allocated to active employees.  As shares are released from collateral, the
Company reports compensation expense equal to the current market price of the
shares less basis in the shares.  Shares
become outstanding for earnings per share computations at the time of
allocation to the active employees.

Eligible
employees may defer up to 15% of their annual compensation in a pre-tax basis
subject to certain IRS limits. The Company contributes to the plan one-half the
employees contributions up to 3% of the employees compensation. Profit
sharing contributions to the plan may also be made at the discretion of the
Board of Directors.  The Company also
makes contributions equal to the amount required to service the plans debt
under the terms of the KSOP note. 
Company contributions to this plan totaled $350, $300 and $334 in 2000,
1999 and 1998, respectively.  Cash
dividends paid on unallocated shares which are collateral for debt are paid to
reduce the principal of the debt. 
Dividends paid on allocated shares are distributed to the employee
account.

The
KSOP shares as of December 31 were as follows:

2000
  1999
  1998Allocated shares
  177,276
  162,844
  143,657Unallocated shares
  10,968
  20,578
  32,893Total KSOP shares
  188,244
  183,422
  176,550Estimated fair value
  of unallocated shares
  $232,419
  $493,872
  $953,897Upon
termination from the plan, a participant may choose to have his account
distributed in Company stock, to the extent of his investment in stock, or in
cash.  Certain participants may also be
eligible to diversify a certain percentage of their accounts.  A distribution of stock in the event of
termination or diversification requires the Company to issue put options to the
participant.  This permits the
participant to sell the stock to the Company at fair value at any time during
the option periods, which can be as long as 18 months.  At December 31, 2000, 1999 and 1998,
outstanding put options were not material.

Incentive Compensation Plan

Incentive
compensation is awarded to officers and qualified employees based on the
financial performance of the Company. 
Awards are payable if the Company and the Bank meet earnings and other
performance objectives and are determined as a percentage of their base
salary.  Fees paid to directors are also
adjusted annually based on the financial performance of the Company.  Awards under the plan for 2000 and 1998
totaled $339 and $262, respectively. 
There were no awards under the plan for 1999.

Executive Supplemental Income Plan

The
Company provides an Executive Supplemental Income (ESI) plan covering a select
group of management personnel.  The
post-retirement benefit provided by the ESI plan is designed to supplement a
participating officer's retirement benefits from social security, in order to
provide the officer with a certain percentage of final average income at
retirement age.  Expenses related to
this plan totaled $94, $409 and $158 in 2000, 1999 and 1998, respectively.

Benefits
to employees are funded by life insurance policies purchased by the Company,
which had cash surrender values of $2,978 and $2,870 at December 31, 2000 and
1999, respectively.  Liabilities to
employees, which are being accrued over their expected time to retirement, were
$1,067 and $1,040 at December 31, 2000 and 1999, respectively.

Director Deferred Income Plan

In
1992 the Board of Directors approved a plan similar to the ESI plan under which
a director may elect to defer director fees until retirement, and to provide a
death benefit.

Benefits
to directors are funded by life insurance policies purchased by the Company,
which had cash surrender values of $132 and $144 at December 31, 2000 and 1999,
respectively.  Accrued liabilities to
directors at December 31, 2000 and 1999 totaled $266 and $216,
respectively.  No expenses associated
with this plan were incurred in 1999. 
Expenses associated with this plan were $82 and $35 in 2000 and 1998,
respectively.

Note 14 - Stock Option Plans

The
Company maintains stock option plans for non-employee members of the Board of
Directors and incentive stock option plans for key employees.  The exercise price of the stock options
under the plans is usually not less than the fair market value of the stock at
the date of grant.  The Company has the
first right of refusal to purchase any shares issued under the plans prior to
their sale on the open market.

The
Company applies APB Opinion No. 25 and related interpretations in accounting
for these plans.  Had compensation cost
for the Companys stock option plans been determined based on the fair value at
the grant dates for awards granted subsequent to December 31, 1994 under these
plans, consistent with the method prescribed by SFAS No. 123, the Companys net
income and earnings per share would have been reduced to these pro forma
amounts for the years ended December 31:

2000
  1999
  1998Net income:As reported
  $4,361
  $1,360
  $3,605Pro forma
  4,107
  1,081
  3,159Earnings per share:Basic:As reported
  $2.02
  $.64
  $1.74Pro forma
  1.90
  .51
  1.53Diluted:As reported
  1.96
  .60
  1.62Pro forma
  1.86
  .49
  1.48The
fair value of each option grant is estimated on the date of grant, based on the
Black-Scholes option pricing model and using the following weighted average
assumptions:

2000
  1999
  1998Dividend
  yield
  1.8%
  1.9%
  - -%Expected life
  8
  years
  10
  years
  10
  yearsRisk-free interest
  rate
  6.7%
  4.7%
  to 5.2%
  4.9%The
weighted average fair value of options granted during 2000, 1999 and 1998 was
$6.44, $6.67 and $11.48, respectively. 
In the opinion of management, the assumptions used in the option pricing
model are subjective and represent only one estimate of possible value, as
there is no active market for Company options granted.

Options
granted during 2000, 1999 and 1998 are 20% vested on each of the five
subsequent anniversaries of the grant date.

Stock
option and per share amounts for current and prior periods have been adjusted
to reflect the effect of stock dividends, and are as follows:

EmployeeOptions
  DirectorOptions
  TotalOptions
  Weighted
  AverageExercisePriceUnder
  option at December 31, 1997
  334,050
  84,743
  418,793
  $14.42Granted
  7,000
  5,000
  12,000
  26.67Exercised
  (35,680)
  -
  -
  (35,680)
  7.77Forfeited/repurchased
  (7,574)
  (2,913)
  (10,487)
  13.91Under option at
  December 31, 1998
  297,796
  86,830
  384,626
  15.43Granted
  26,000
  -
  -
  26,000
  30.00Exercised
  (23,862)
  (27,158)
  (51,020)
  10.37Forfeited/repurchased
  (2,002)
  (2)
  (2,004)
  29.96Under option at December 31, 1999
  297,932
  59,670
  357,602
  17.13Granted
  24,500
  2,000
  26,500
  23.00Exercised
  (24,443)
  (22,391)
  (46,834)
  11.00Forfeited/repurchased
  (10,843)
  (1)
  (10,844)
  21.61Under option at
  December 31, 2000
  287,146
  39,278
  326,424
  18.35Options exercisable at
  December 31, 2000
  214,924
  36,278
  251,202
  16.63Options
becoming exercisable under both stock option plans in future years ending
December 31 are as follows:  2001 -
30,442; 2002 - 20,180; 2003 - 10,100; 2004 - 9,500 and 2005 - 5,000.

Options
for 50,246 and 19,500 shares remain available to be granted under the director
and employee plans, respectively, at December 31, 2000.

The
following summarizes information about stock options outstanding at December
31, 2000:

Options Outstanding
  
  
  Options ExercisableWeightedAverage
  Weighted
  
  WeightedRange of
  
  Remaining
  Average
  
  AverageExercise
  Number
  Contractual
  Exercise
  Number
  ExercisePrices
  Outstanding
  Life (Years)
  Price
  Exercisable
  PriceUnder $10.00
  11,661
  2.0
  $9.28
  11,661
  $9.28$11.00 to $14.00
  103,796
  3.6
  13.99
  103,796
  13.99$17.28
  104,767
  5.3
  17.28
  95,505
  17.28$20.00 to $24.00
  76,400
  7.6
  22.61
  31,040
  22.32$30.00
  29,800
  8.8
  30.00
  9,200
  30.00326,424
  
  
  251,202Note 15 - Condensed Financial Information - Parent Company
Only

Condensed Balance Sheets - December 31

2000
  1999AssetsCash
  $286
  $258Investment in subsidiary
  34,892
  31,954Other assets
  616
  518Total assets
  $35,794
  $32,730Liabilities and Stockholders' EquityLiabilitiesLong-term debt
  $1,303
  $2,030Other liabilities
  118
  82Total liabilities
  1,421
  2,112Stockholders' Equity
  34,373
  30,618Total liabilities and
  stockholders' equity
  $35,794
  $32,730Condensed
Statements of Income - Years Ended December 31

2000
  1999
  1998Operating IncomeDividends received from subsidiary
  $1,946
  $1,215
  $- -Interest
  3
  4
  3Total operating income
  1,949
  1,219
  3Operating ExpensesInterest
  119
  142
  197Other
  77
  54
  113Total operating expenses
  196
  196
  310Income (loss) before income taxes and equityin
  undistributed income of subsidiary
  1,753
  1,023
  (307)Income Tax Benefit
  (66)
  (49)
  (197)Income (loss) before equity in undistributedincome of subsidiary
  1,819
  1,072
  (504)Equity in Undistributed Income of Subsidiary
  2,542
  288
  4,109Net
  income
  $4,361
  $1,360
  $3,605Condensed Statements of Cash Flows - Years Ended December 31

2000
  1999
  1998Cash Flows from Operating ActivitiesNet income
  $4,361
  $1,360
  $3,605Adjustments to reconcile net income
  to net cashprovided by operating activities:Equity in undistributed income
  of subsidiary
  (2,542)
  (288)
  (4,109)Decrease in due from subsidiary
  -
  -
  -
  -
  130Depreciation
  -
  -
  2
  6Other - net
  45
  34
  746Net cash
  provided by operating activities
  1,864
  1,108
  378Cash Flows from Financing ActivitiesProceeds from exercise of stock options
  515
  530
  277Payment for fractional shares
  -
  -
  -
  -
  (14)Repurchase of common stock
  (934)
  -
  -
  (80)Proceeds from issuance of long-term
  debt
  -
  -
  -
  -
  -
  -Payments on long-term debt
  (550)
  (550)
  (550)Payment of dividends
  (867)
  (1,262)
  -
  -Net cash used
  in financing activities
  (1,836)
  (1,282)
  (367)Net increase
  (decrease) in cash
  28
  (174)
  11CashBeginning of year
  258
  432
  421End of year
  $286
  $258
  $432Note 16 - Regulatory Matters

The
Company and the Bank are subject to various regulatory capital requirements
administered by the federal banking agencies. 
Failure to meet minimum capital requirements can initiate certain
mandatory  and possibly additional discretionary  actions by regulators that,
if undertaken, could have a direct material effect on the Companys
consolidated financial statements. 
Under capital adequacy guidelines on the regulatory framework for prompt
corrective action, the Bank must meet specific capital adequacy guidelines that
involve quantitative measures of the Banks assets, liabilities, and certain
off-balance-sheet items as calculated under regulatory accounting
practices.  The Companys and the Banks
capital classification is also subject to qualitative judgments by the
regulators about components, risk weightings, and other factors.

Quantitative
measures established by regulation to ensure capital adequacy require the
Company and the Bank to maintain minimum amounts and ratios (set forth in the
table below) of Tier 1 capital (as defined in the regulations) to total average
assets (as defined), and minimum ratios of Tier 1 and total capital (as
defined) to risk-weighted assets (as defined).

As
of December 31, 2000, in the opinion of management, the Bank met the well
capitalized criteria under the regulatory framework for prompt corrective
action.  To be categorized as well
capitalized, the Bank must maintain minimum total risk-based, Tier 1
risk-based, Tier 1 leverage ratios as set forth in the table.  There are no conditions or events since that
notification that management believes have changed the institution's category.

The
actual capital amounts and ratios are as follows:

To be Well CapitalizedUnder PromptCapital Adequacy
  Corrective ActionActual
  
  Purposes
  ProvisionsAmount
  Ratio
  Amount
  Ratio
  Amount
  RatioDecember
  31, 2000Tier 1 capital (to average assets):Consolidated
  $28,028
  8.96%
  $12,514
  4.00%
  N/A
  N/AFCB
  28,547
  9.14
  12,493
  4.00
  $15,617
  5.00%Tier 1 capital (to risk-weighted assets):Consolidated
  28,028
  9.24
  12,139
  4.00
  N/A
  N/AFCB
  28,547
  9.43
  12,114
  4.00
  18,171
  6.00Total capital (to risk-weighted assets):Consolidated
  31,531
  10.39
  24,278
  8.00
  N/A
  N/AFCB
  32,050
  10.58
  24,228
  8.00
  30,285
  10.00December
  31, 1999Tier 1 capital (to average assets):Consolidated
  $24,261
  8.47%
  $11,463
  4.00%
  N/A
  N/AFCB
  25,597
  8.95
  11,439
  4.00
  $14,299
  5.00%Tier 1 capital (to risk-weighted assets):Consolidated
  24,261
  8.94
  10,850
  4.00
  N/A
  N/AFCB
  25,597
  9.44
  10,842
  4.00
  16,263
  6.00Total capital (to risk-weighted assets):Consolidated
  27,682
  10.21
  21,700
  8.00
  N/A
  N/AFCB
  29,015
  10.70
  21,684
  8.00
  27,105
  10.00Restrictions on Retained Earnings

The
Bank is subject to certain restrictions on the amount of dividends that it may
declare without prior regulatory approval. 
At December 31, 2000, all of the Banks retained earnings were available
for dividend declaration to its parent company without prior regulatory
approval.

Note 17 - Fair Values of Financial Instruments

The estimated
fair values of the Companys financial instruments at December 31 were as
follows:

2000
  
  1999Recorded
  Fair
  Recorded
  FairAmount
  Value
  Amount
  ValueFinancial AssetsCash and due from banks,interest bearing deposits withbanks, and federal funds sold
  $12,812
  $12,812
  $10,485
  $10,485Securities available for sale
  26,729
  26,729
  28,439
  28,439Securities held to maturity
  676
  702
  677
  701Loans held for sale
  4,121
  4,121
  2,951
  2,951Loans receivable, net
  251,680
  250,778
  227,000
  224,991Financial
  LiabilitiesDeposits
  $271,377
  $271,932
  $245,527
  $246,148Long-term debt
  1,303
  1,303
  2,030
  2,030Federal funds purchased
  2
  2
  3,200
  3,200Short-term borrowings
  13,999
  13,999
  10,335
  10,335Note 18 - Other Operating
Income and Expenses

Other
operating income and expenses include the following amounts which are in excess
of 1% of the total of interest income and non-interest income for the years
ended December 31:

2000
  1999
  1998Other Operating IncomeGain on sale of foreclosed real
  estate
  $21
  $11
  $431Commission on sale of non-deposit
  investment        products
  741
  640
  594Other Operating ExpenseAmortization of goodwill
  $408
  $408
  $391State taxes
  470
  398
  391Telephone
  256
  273
  232Note 19 - Earnings Per Share
Disclosures

Following
is information regarding the calculation of basic and diluted earnings per
share for the years indicated:

Net Income
  Shares
  Per Share(Numerator)
  (Denominator)
  AmountYear
  Ended December 31, 2000Basic earnings per share:Net income
  $4,361
  2,158,693
  $2.02Effect of dilutive securities:Options
  -
  -
  69,210
  (.06)Diluted earnings per share:Net income
  $4,361
  2,227,903
  $1.96Year
  Ended December 31, 1999Basic earnings per share:Net income
  $1,360
  2,136,502
  $.64Effect of dilutive securities:Options
  -
  -
  134,038
  (.04)Diluted earnings per share:Net income
  $1,360
  2,270,540
  $.60Year Ended December 31, 1998Basic earnings per share:Net income
  $3,605
  2,070,491
  $1.74Effect of dilutive securities:Options
  -
  -
  159,769
  (.12)Diluted earnings per share:Net income
  $3,605
  2,230,260
  $1.62The number of
shares shown for options is the number of incremental shares that would
result from exercise of options and use of the proceeds to repurchase shares at
the average market price during the year.

Note 20 - Comprehensive Income

Net unrealized
losses included in other comprehensive income for the years ended December 31
were computed as follows:

Before-Tax
  Tax
  Net-of-TaxAmount
  Benefit
  Amount2000Unrealized holding gains arising
  during the year
  $600
  $204
  $3961999Unrealized holding losses arising
  during the year
  $1,146
  $390
  $7561998Unrealized holding losses arising
  during the year
  $54
  $18
  $36Plus reclassification adjustments
  for gains realized          in net income
  6
  2
  4Net unrealized losses
  $60
  $20
  $40Note 21 - Subsequent Event

Subsequent
to December 31, 2000, the Company declared a dividend in the amount of $.10 per
share to be paid on February 16, 2001 for shareholders of record as of January
31, 2001.


SIGNATURES Pursuant
to the requirements of Section 13 or 15(d) of the securities Exchange Act of
1934, the registrant has duly caused this Amendment to the report to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 5th
day of July, 2001.
  First
  Community Financial Group, Inc.By:
  /s/
  James F. ArnesonEVP/Chief
  Financial Officer