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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended March 31, 2004

OR

For the transition period from                               to                              

Commission File Number: 00-30747

FIRST COMMUNITY BANCORP
(Exact name of registrant as specified in its charter)

(858) 756-3023
(Registrant's telephone number, including area code)

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ý    No o

        As of May 4, 2004 there were 15,459,737 shares of the registrant's common stock outstanding, excluding 522,000 shares of restricted stock.

TABLE OF CONTENTS

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PART I—FINANCIAL INFORMATION

ITEM 1. Consolidated Financial Statements (Unaudited)

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

See "Notes to Unaudited Condensed Consolidated Financial Statements."

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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

See "Notes to Unaudited Condensed Consolidated Financial Statements."

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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

See "Notes to Unaudited Condensed Consolidated Financial Statements."

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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

See "Notes to Unaudited Condensed Consolidated Financial Statements."

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2004

NOTE 1—BASIS OF PRESENTATION

        We are a bank holding company registered under the Bank Holding Company Act of 1956, as amended. Our principal business is to serve as a holding company for our banking subsidiaries. As of March 31, 2004, those subsidiaries were First National Bank, which we refer to as First National, and Pacific Western National Bank, or Pacific Western. We refer to Pacific Western and First National herein as the "Banks" and when we say "we", "our" or the "Company", we mean the Company on a consolidated basis with the Banks. When we refer to "First Community" or to the holding company, we are referring to the parent company on a stand-alone basis.

        We completed twelve acquisitions from May 2000 through March 31, 2004. This includes the merger whereby the former Rancho Santa Fe National Bank and First Community Bank of the Desert became wholly-owned subsidiaries of the Company in a pooling-of-interests transaction. The other acquisitions have been accounted for using the purchase method of accounting and, accordingly, their operating results have been included in the consolidated financial statements from their respective dates of acquisition. We completed Professional Bancorp and First Charter Bank during 2001, Pacific Western National Bank, W.H.E.C., Inc., Upland Bank, Marathon Bancorp and First National Bank during 2002, and Bank of Coronado and Verdugo Banking Company during 2003. On March 1, 2004, we acquired First Community Financial Corporation, which we refer to as FC Financial, using the purchase method of accounting. On April 16, 2004, we completed the acquisition of Harbor National Bank, or Harbor National, and merged Harbor National into Pacific Western. Discussions about the Company and the Banks as of and for the quarter ended March 31, 2004 do not include Harbor National.

(a) Basis of Presentation

        The accounting and reporting policies of the Company are in accordance with accounting principles generally accepted in the United States of America. All significant intercompany balances and transactions have been eliminated.

        Our financial statements reflect all adjustments which are, in the opinion of management, necessary to present a fair statement of the results for the interim periods presented. Certain information and note disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The interim operating results are not necessarily indicative of operating results for the full year.

        Prior to December 31, 2003, the Company issued $58 million of trust preferred securities. Pursuant to FASB Interpretation No. 46R ("FIN 46R"), Consolidation of Variable Interest Entities, issued in December 2003, we deconsolidated our trust preferred entities at December 31, 2003. The overall effect of the deconsolidation on our financial position and operating results was not material.

(b) Use of Estimates

        Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period to prepare these consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those

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estimates. Material estimates subject to change in the near term include, among other items, the allowance for loan losses, the carrying values of intangible assets and the realization of deferred tax assets.

(c) Reclassifications

        Certain prior year amounts have been reclassified to conform to the current year's presentation.

NOTE 2—ACQUISITIONS

        We completed the following acquisitions during the time period of January 1, 2003 to March 31, 2004, using the purchase method of accounting, and accordingly, the operating results of the acquired entities have been included in the consolidated financial statements from their respective dates of acquisition:

Bank of Coronado Acquisition.

        On January 9, 2003, we acquired Bank of Coronado. We paid $11.6 million in cash in exchange for all of the outstanding common shares and options of Bank of Coronado. At the time of the merger, Bank of Coronado was merged into First National.

Verdugo Banking Company Acquisition.

        On August 22, 2003, we acquired Verdugo Banking Company. We paid approximately $34.3 million in cash for all outstanding shares of common stock and options. At the time of the merger, Verdugo Banking Company was merged into Pacific Western.

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First Community Financial Corporation.

        On March 1, 2004, we acquired FC Financial, a privately-held commercial finance company based in Phoenix, Arizona. We paid $40.0 million in cash for all of the outstanding common stock and options of FC Financial. At the time of the acquisition FC Financial became a wholly-owned subsidiary of First National.

Merger Related Liabilities.

        The activity in our merger-related liability for the three months ended March 31, 2004 is as follows:

(1)

Included in other are investment banking and professional fees.

NOTE 3—GOODWILL AND OTHER INTANGIBLE ASSETS

        We adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, or SFAS No. 142, on January 1, 2002. Goodwill and intangible assets arise from purchase business combinations and SFAS No. 142 requires all business combinations to be accounted for under the purchase method of accounting. SFAS No. 142 addresses the initial recognition and measurement of goodwill and other intangible assets acquired as a result of a business combination and the recognition and measurement of those assets subsequent to acquisition. Under SFAS No. 142, goodwill and other intangible assets deemed to have indefinite lives are no longer amortized, but instead are tested for impairment annually, or more frequently, whenever certain events occur. We performed our annual test for impairment as of June 30, 2003, and concluded that there was no impairment in our goodwill at that time.

        SFAS No. 142 also requires intangible assets with definite lives to be amortized over their respective estimated useful lives to their estimated residual values and reviewed for impairment in accordance with SFAS No. 144, Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. We recorded the aggregate values of the core deposit and customer relationship intangibles separate from goodwill and are amortizing them over their estimated useful lives of 10 years and 55 months, respectively. The customer relationship intangible for the FC Financial acquisition is based on a preliminary estimate of value. Accordingly, the amount of this asset and its useful life are subject to change.

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        The changes in the carrying amounts of goodwill and other intangible assets for the three months ended March 31, 2004 are as follows:

NOTE 4—NET EARNINGS PER SHARE

        The following is a summary of the calculation of basic and diluted net earnings per share for the three months ended March 31, 2004 and 2003:

        Diluted earnings per share does not include all potentially dilutive shares that may result from outstanding stock options and restricted and performance stock awards which may eventually vest. As of March 31, 2004 and 2003, the number of stock options and shares of restricted and performance stock which were outstanding but not included in the calculation of diluted net earnings per share were 987,714 and 755,169.

NOTE 5—STOCK COMPENSATION

Stock Options.

        The Company adopted the fair value method of accounting for stock options effective January 1, 2003, using the prospective method of transition specified in Statement of Financial Accounting Standard ("SFAS") No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure—an amendment of FASB Statement No. 123. The cost of all stock options granted on or after January 1, 2003, is based on their fair value and is included as a component of salaries and employee benefits expense over the vesting period for such options. The effect of adoption had no material effect on either the Company's financial condition or results of operations. For stock options granted prior to January 1, 2003, the Company continues to apply the intrinsic value-based method of accounting under Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, under which

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compensation cost is recognized only when the option exercise price is less than the fair market value of the underlying stock on the date of grant.

        Had we determined compensation expense based on the fair value at the grant date for all of our stock options granted, our net earnings and related earnings per share would have been reduced to the pro forma amounts indicated in the table below:

Restricted Stock.

        During the second half of 2003, and during the first three months of 2004, the Compensation, Nominating and Governance ("CNG") Committee of the Company's Board of Directors awarded aggregate grants of 214,000 shares of restricted common stock and 255,000 shares of performance common stock to officers of the Company and its subsidiaries, pursuant to the Company's 2003 Stock Incentive Plan (the "Plan"). The granted shares of restricted common stock will vest over a service period of three to four years. The granted shares of performance common stock will vest in full or in part on the date the CNG Committee, as Administrator of the Plan, determines that the Company achieved certain financial goals established by the CNG Committee and set forth in the grant documents. The granted shares of performance common stock expire seven years from the date of grant. Prior to vesting of the restricted common stock or performance common stock, each grant recipient is entitled to dividend rights with respect to the shares of granted stock, subject to termination of such rights under the terms of the Plan. Only vested shares of restricted common stock or performance stock may be voted by the grant recipient. Both restricted common stock and performance common stock vest immediately upon a change in control.

        At the time the shares of restricted and performance common stock were granted, the fair market value of the common stock was approximately $15.1 million. Such amount was recorded within shareholders' equity by increasing common stock and recording unearned equity compensation. The unearned equity compensation is being amortized to compensation expense over the vesting periods by use of the straight-line method. Performance stock vesting could be over a shorter period if related financial targets are met earlier than anticipated. Compensation expense related to the restricted and performance stock awards approximated $654,000 during the three months ended March 31, 2004, and is included in salaries and employee benefits expense in the accompanying consolidated statements of earnings.

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NOTE 6—SUBORDINATED DEBENTURES

        In December 2003, the FASB modified and reissued Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46R). The original Interpretation 46 issued in January 2003 was adopted by us in the first quarter of 2003 and had no effect on our financial position or operating results. FIN 46R requires the deconsolidation of trust preferred entities, and we adopted this pronouncement on December 31, 2003. As a result of adoption, we deconsolidated our trust preferred entities at December 31, 2003. Based on our current operations and structure, FIN 46R is not expected to have any further effect on our financial position and operating results.

        The Company had an aggregate of $121.7 million of subordinated debentures outstanding at March 31, 2004. The subordinated debentures were issued in seven separate series. Each issuance has a maturity of thirty years from its date of issue. The subordinated debentures were issued to trusts established by us, which in turn issued trust preferred securities. Within limitations, these securities are presently considered Tier 1 capital for regulatory purposes and the proceeds from the issuance of the securities were used primarily to fund several of our acquisitions. We are permitted to call the debentures in the first five years if the prepayment election relates to one of the following three events: (i) a change in the tax treatment of the debentures stemming from a change in the IRS laws; (ii) a change in the regulatory treatment of the underlying trust preferred securities as Tier 1 capital; and (iii) a requirement to register the underlying trust as a registered investment company. However, redemption in the first five years will be subject to a prepayment penalty. Trust I may not be called for 10 years from the date of issuance unless one of the three events described above has occurred and then a prepayment penalty applies. In addition, there is a prepayment penalty if this debenture is called 10 to 20 years from the date of its issuance and it may be called at par after 20 years. The proceeds of the subordinated debentures were used primarily to fund several of our acquisitions.

        The following table summarizes the terms of each issuance:

NOTE 7—DIVIDEND APPROVAL

       On April 21, 2004, our Board of Directors declared a quarterly cash dividend of $0.22 per common share payable on May 28, 2004 to shareholders of record on May 14, 2004.

NOTE 8—SUBSEQUENT EVENTS

        On April 8, 2004, First National Bank entered into a memorandum of understanding, an informal administrative action, with the Office of the Comptroller of the Currency, which we refer to as the OCC, with respect to First National's compliance with Bank Secrecy Act/Anti-Money Laundering ("BSA/AML") regulations. The memorandum requires us to evaluate and strengthen our BSA/AML program and processes. The memorandum is limited in scope to BSA/AML issues and management believes that it will have no material impact on our operating results or financial condition and that,

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unless we fail to adequately address the concerns of the OCC, the memorandum will not constrain our business. Management is committed to resolving the issues addressed in the memorandum as promptly as possible.

        On April 16, 2004 we acquired Harbor National Bank, or Harbor National, based in Newport Beach, California. We paid $35.5 million in cash for all the outstanding common stock and options of Harbor National. Harbor National had approximately $173 million in assets as of the acquisition date.

        An unaudited summary of our allocation of the Harbor National purchase price follows. The allocation is preliminary and will change as further information is obtained.

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ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Information

        This Quarterly Report on Form 10-Q (the "Quarterly Report") contains certain forward-looking information about the Company and its subsidiaries, which statements are intended to be covered by the safe harbor for "forward-looking statements" provided by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are forward-looking statements. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company. The Company cautions readers that a number of important factors could cause actual results to differ materially from those expressed in, implied or projected by, such forward-looking statements. Risks and uncertainties include, but are not limited to:

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planned acquisitions and related cost savings cannot be realized or realized within the expected time frame;



•

revenues are lower than expected;



•

credit quality deterioration which could cause an increase in the provision for loan losses;



•

competitive pressure among depository institutions increases significantly;



•

the integration of acquired businesses costs more, takes longer or is less successful than expected;



•

the possibility that personnel changes will not proceed as planned;



•

the cost of additional capital is more than expected;



•

a change in the interest rate environment reduces interest margins;



•

asset/liability repricing risks and liquidity risks;



•

general economic conditions, either nationally or in the market areas in which the Company does or anticipates doing business, are less favorable than expected;



•

the economic and regulatory effects of the continuing war on terrorism and other events of war, including the war in Iraq;



•

legislative or regulatory requirements or changes adversely affecting the Company's business;



•

changes in the securities markets;



•

the Company's ability to successfully integrate acquired entities, or to achieve expected synergies and operating efficiencies within expected time-frames or at all; and



•

regulatory approvals for future acquisitions cannot be obtained on the terms expected or on the anticipated schedule.

        If any of these risks or uncertainties materializes, or if any of the assumptions underlying such forward-looking statements proves to be incorrect, our results could differ materially from those expressed in, implied or projected by, such forward-looking statements. The Company assumes no obligation to update such forward-looking statements.

Overview

        We are a bank holding company registered under the Bank Holding Company Act of 1956, as amended. Our principal business is to serve as the holding company for our subsidiary banks, First National Bank and Pacific Western National Bank, which we refer to as the Banks. Through the holding company structure, First Community attempts to create operating efficiencies for the Banks by

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consolidating core administrative, operational and financial functions that serve both of the Banks. The Banks are allocated expenses by the holding company for the services performed on their behalf, pursuant to an expense allocation agreement, which the Company believes are lower than the Banks would incur absent the holding company structure.

        The Banks are full-service community banks offering a broad range of banking products and services including: accepting time and demand deposits, originating commercial loans, including asset-based lending and factoring, real estate and construction loans, Small Business Administration guaranteed loans, or SBA loans, consumer loans, mortgage loans, international loans for trade finance and other business-oriented products. At March 31, 2004, our gross loans totaled $1,721.5 million of which approximately 33% consisted of commercial loans, 64% consisted of commercial real estate loans, including construction loans, and 3% consisted of consumer and other loans. The portfolio's value and credit quality is affected in large part by real estate trends in Southern California. These percentages also include some foreign loans, primarily to individuals or entities with business in Mexico, representing 5% of total loans. Special services and requests beyond the lending limits of the Banks can be arranged through correspondent banks.

        The Banks compete actively for deposits, and we tend to solicit noninterest-bearing deposits. In managing the top line of our business, we focus on loan growth and loan yield, deposit cost, and net interest margin, as net interest income accounts for 87% of our net revenues (net interest income plus noninterest income).

        On March 1, 2004, we acquired First Community Financial Corporation, or FC Financial, and established FC Financial as a wholly-owned operating subsidiary of First National. On April 16, 2004, we completed the acquisition of Harbor National Bank, or Harbor National, and merged Harbor National into Pacific Western. Discussions about the Company and the Banks as of and for the quarter ended March 31, 2004 do not include Harbor National.

Key Performance Indicators

        Among other factors, our operating results depend generally on the following:

The Level of Our Net Interest Income

        Net interest income is the excess of interest earned on our interest-earning assets over the interest paid on our interest-bearing liabilities. Our primary interest-earning assets are loans and investment securities. Our primary interest-bearing liabilities are deposits, borrowings, and subordinated debentures. We attempt to increase our net interest income by maintaining a high level of noninterest-bearing deposits. At March 31, 2004, approximately 43% of our deposits were noninterest-bearing. We further reduce interest expense by limiting our borrowings, and funding our loans through deposits. Although we have borrowing capacity under various credit lines, we have traditionally borrowed funds only for short term liquidity needs such as managing deposit flows and interim acquisition financing. Our general policy is to price our deposits in the bottom half or third-quartile of our competitive peer group, resulting in deposit products that bear interest rates at somewhat lower yields. While our deposit balances will fluctuate depending on deposit holders' perceptions of alternative yields available in the market, we attempt to minimize these variances by attracting a high percentage of noninterest-bearing deposits, which have no expectation of yield.

Loan Growth

        We generally seek new lending opportunities in the $500,000 to $5 million range, try to limit loan maturities for commercial loans to one year, for construction loans up to 18 months, and for commercial real estate loans up to ten years, and price lending products so as to preserve our interest

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spread and net interest margin. We may often encounter strong competition in pursuing lending opportunities such that potential borrowers obtain loans elsewhere at lower rates than those we offer.

The Magnitude of Credit Losses

        We maintain an allowance for loan losses. Loss provisions are charged to operations as and when needed, actual loan losses are charged to the allowance, and recoveries on loans previously charged off are credited to the allowance. We stress credit quality in originating and monitoring the loans we make and measure our success by the level of our nonperforming assets and the corresponding level of our allowance. Through focusing on credit quality, the loan portfolio of the Company is generally better than the quality of the loan portfolios we have acquired. Following acquisitions, we generally work to remove problem loans from the portfolio or allow lower credit quality loans to mature, and seek to replace such loans with obligations from borrowers with higher quality credit. Changes in economic conditions, however, such as increases in the general level of interest rates, could negatively impact our customers and lead to increased provision for loan losses.

The Level of Our Noninterest Expense

        Our noninterest expense includes fixed and controllable overhead, the major components of which are compensation, occupancy, data processing and communications. We measure success in controlling such costs through monitoring of the efficiency ratio. We calculate the efficiency ratio by dividing noninterest expense by the sum of net interest income and noninterest income. The consolidated efficiency ratios have been as follows:

        Additionally, our operating results have been influenced significantly by acquisitions. The ten acquisitions we completed from January 1, 2001 through March 31, 2004, added approximately $2.3 billion in assets. Our assets at March 31, 2004 total approximately $2.5 billion. Our noninterest expenses have increased for all periods presented because of our acquisitions.

Critical Accounting Policies

        The Company's accounting policies are fundamental to understanding management's discussion and analysis of results of operations and financial condition. The Company has identified several policies as being critical because they require management to make particularly difficult, subjective and/or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions. These policies relate to the allowance for loan losses, the fair value of financial instruments, and the carrying values of goodwill, other intangible assets and deferred tax assets. For further information, refer to our December 31, 2003 annual report on Form 10-K.

Results of Operations

Earnings Performance

        We analyze our performance based on net earnings determined in accordance with accounting principles generally accepted in the United States. The comparability of financial information is affected by our acquisitions. Operating results include the operations of acquired entities from the

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dates of acquisition. The following table presents net earnings and summarizes per share data and key financial ratios:

(1)

Our quarterly results include Bank of Coronado subsequent to January 9, 2003; Verdugo Banking Company subsequent to August 22, 2003; and FC Financial subsequent to March 1, 2004.

        The slight improvement in net earnings resulted from increased net interest income and a high level of credit quality. The increase in interest-earning assets is due, in part, to the assets acquired in the Verdugo and FC Financial acquisitions and organic loan growth. The increase in the efficiency ratio is due to revenue growth not keeping pace with the expense increase.

        The increases in revenues and noninterest expense in the first quarter of 2004 are due to acquisitions and incentive accruals, as well as one-time charges totaling $152,000 after taxes for operational losses and the writedown of a Community Reinvestment Act investment inherited from a 2002 acquisition. During the first quarter we also increased our borrowings to fund our 2004 acquisitions without having the benefit of the acquired entities' earnings for the entire period. The interest expense that was not offset by acquired entities net earnings was approximately $276,000. For further information on our acquisitions, see Note 2 of Notes to Unaudited Condensed Consolidated Financial Statements included elsewhere herein.

        Net Interest Income.    Net interest income, which is one of our principal sources of income, represents the difference between interest earned on assets and interest paid on liabilities. Net interest margin is net interest income expressed as a percentage of average interest-earning assets. Net interest income is affected by changes in both interest rates and the volume of average interest-earning assets and interest-bearing liabilities. The following table presents, for the periods indicated, the distribution

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of average assets, liabilities and shareholders' equity, as well as interest income and yields earned on average interest-earning assets and interest expense on average interest-bearing liabilities.

(1)

Includes nonaccrual loans and loan fees.

(2)

Yields on loans and securities have not been adjusted to a tax-equivalent basis because the impact is not material.

        Net interest income increased during the first quarter of 2004 compared to 2003 due to the Company adding approximately $215 million in average interest-earning assets from a combination of organic loan growth and the acquisitions of Bank of Coronado, Verdugo Banking Company and FC

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Financial. This increase in average interest-earning assets was offset, however, by a decline in yield. Such decline resulted from the low interest rate environment during all of 2003 and extending into 2004. As higher rate assets ran off, they were replaced with assets at then current lower market rates.

        We continued our efforts to reduce the cost of our deposits by pricing down interest-bearing products and by targeting growth of the demand deposit base. The low interest rate environment enabled us to lower our deposit cost to 0.36% for the first quarter of 2004. Our interest expense on other interest-bearing liabilities, which consist of borrowings and subordinated debentures, increased during 2004 compared to 2003 because of the trust preferred securities issuances used to fund our acquisitions.

        Our net interest margin was 5.17% for the first quarter of 2004 compared to 5.06% and 5.41% for the fourth and first quarters of 2003. The decline from the first quarter of 2003 is largely attributable to the low interest rate environment. The increase from the fourth quarter of 2003 is attributable to a combination of organic loan growth of $45.0 million and to the loans from the FC Financial acquisition which by themselves yielded 13.3% for March 2004. We estimated that the FC Financial loan portfolio acquired on March 1, 2004, added 10 basis points to our net interest margin for the quarter.

        Provision for Loan Losses.    There was no provision for loan losses during the first quarter of 2004 compared to $120,000 made in the first quarter of 2003. Based on the credit quality indicators we monitor and our allowance for loan losses methodology, no provision was deemed necessary in this quarter. The allowance for loan losses was $28.1 million at March 31, 2004, and represented 1.64% of loans net of deferred fees and costs. The ratio of the allowance for loan losses to loans net of deferred fees and costs was 1.61% at December 31, 2003, and 1.68% at March 31, 2003. During this quarter, the allowance was increased by $3.3 million, representing the allowance on the loan portfolio acquired in the FC Financial acquisition.

        Noninterest Income.    The following table summarizes noninterest income by category for the periods indicated: