FIRST COMMUNITY CAPITAL CORP - 10-Q Quarterly Report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2005

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

Commission File Number 000-32609

FIRST COMMUNITY CAPITAL CORPORATION

(Exact name of registrant as specified in its charter)


Texas		76-0676739
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

14200 Gulf Freeway

Houston, Texas 77034

(Address of principal executive offices, including zip code)

(281) 996-1000

(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 Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨.

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

As of May 12, 2005, there were 3,184,619 shares of the registrant’s Common Stock, par value $0.01 per share, outstanding.

FIRST COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES

INDEX TO FORM 10-Q


		Page
PART I - FINANCIAL INFORMATION

Item 1. Unaudited Interim Consolidated Financial Statements
Consolidated Statements of Condition as of March 31, 2005 (unaudited) and December 31, 2004		3
Consolidated Statements of Earnings for the Three Months Ended March 31, 2005 and 2004 (unaudited)		4
Consolidated Statements of Comprehensive (Loss) Income for the Three Months Ended March 31, 2005 and 2004 (unaudited)		5
Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2005 and 2004 (unaudited)		6
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2005 and 2004 (unaudited)		7
Notes to Unaudited Interim Consolidated Financial Statements March 31, 2005 and 2004 (unaudited)		8

Item 2. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations		11

Item 3. Quantitative and Qualitative Disclosures About Market Risk		28

Item 4. Controls and Procedures		29

PART II - OTHER INFORMATION

Item 1. Legal Proceedings		29

Item 2. Changes In Securities, Use Of Proceeds and Issuer Repurchases of Equity Securities		29

Item 3. Defaults Upon Senior Securities		29

Item 4. Submission Of Matters To A Vote Of Security Holders		29

Item 5. Other Information		29

Item 6. Exhibits And Reports On Form 8-K		30

PART I - FINANCIAL INFORMATION

ITEM 1. UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FIRST COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CONDITION

MARCH 31, 2005 (UNAUDITED) AND DECEMBER 31, 2004


	March 31, 2005			December 31, 2004
ASSETS
Cash and non-interesting bearing due from banks	$	26,708,773		$	26,993,725
Federal funds sold		5,000,000			1,900,000

Total cash and cash equivalents		31,708,773			28,893,725
Securities available for sale		88,448,480			93,797,865
Interest-bearing deposits in financial institutions		3,723,242			3,601,402
Other investments		2,961,709			2,999,515
Loans and leases, net of unearned fees		427,788,289			423,351,988
Less allowance for possible credit losses		(4,126,376	)		(3,929,612	)

Loans and leases, net		423,661,913			419,422,376
Bank premises and equipment, net		13,433,285			12,950,728
Accrued interest receivable		2,191,250			2,287,332
Federal Home Loan Bank stock		4,737,100			3,504,400
Federal Reserve Bank stock		1,392,000			1,392,000
Bank owned life insurance		9,670,416			9,514,099
Other real estate owned		2,164,221			2,164,221
Goodwill		13,872,690			13,872,690
Core deposit intangible		1,973,289			2,103,369
Other assets		3,614,707			2,784,206

Total	$	603,553,075		$	599,287,928

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Deposits:
Noninterest-bearing	$	138,594,001		$	146,056,008
Interest-bearing		318,494,360			332,583,347

Total Deposits		457,088,361			478,639,355
Federal Home Loan Bank borrowings		83,839,570			58,739,570
Accrued interest payable and other liabilities		2,534,118			1,914,350
Junior subordinated debentures		18,558,000			18,558,000

Total Liabilities		562,020,049			557,851,275

Stockholders’ Equity
Preferred stock, Series A-$0.01 par value, 2,000,000 shares authorized: 384,999 shares outstanding at March 31, 2005 and December 31, 2004		3,850			3,850
Preferred stock, Series B-$0.01 par value, 666,667 shares authorized: 375,654 shares outstanding at March 31, 2005 and December 31, 2004		3,757			3,757
Common stock-$0.01 par value, 5,000,000 shares authorized; 3,196,467 and 3,167,467 shares issued and 3,183,619 and 3,154,619 shares outstanding at March 31, 2005 and December 31, 2004, respectively.		31,965			31,675
Treasury stock, at par; 12,848 shares		(128	)		(128	)
Capital surplus		37,643,680			37,308,720
Retained earnings		5,350,760			4,768,464
Accumulated other comprehensive loss		(1,500,858	)		(679,685	)

Total Stockholders’ Equity		41,533,026			41,436,653

Total	$	603,553,075		$	599,287,928

See accompanying notes.

FIRST COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004 (UNAUDITED)


	Three Months Ended March 31,
	2005			2004
INTEREST INCOME
Interest and fees on loans and leases	$	7,059,343		$	5,526,339
Securities available for sale		906,912			1,140,175
Other investments		60,993			26,526
Federal funds sold		19,775			16,984

Total Interest Income		8,047,023			6,710,024

INTEREST EXPENSE
Deposits		1,783,693			1,290,003
Subordinated debentures		318,476			265,773
Other borrowed funds		484,881			225,401

Total Interest Expense		2,587,050			1,781,177

NET INTEREST INCOME		5,459,973			4,928,847

PROVISION FOR POSSIBLE CREDIT LOSSES		(650,000	)		(475,001	)

NET INTEREST INCOME AFTER PROVISION FOR POSSIBLE CREDIT LOSSES		4,809,973			4,453,846

NON-INTEREST INCOME
Service charges		910,499			1,020,843
Gain on sales of securities		744			66,361
Other		639,229			136,640

Total Non-Interest Income		1,550,472			1,223,844

NON-INTEREST EXPENSE
Salaries and employee benefits		2,932,745			2,454,503
Net occupancy and equipment expense		1,124,505			979,160
Professional and outside service fees		650,730			618,718
Office expenses		336,277			337,838
Other		824,398			897,244

Total Non-Interest Expense		5,868,655			5,287,463

EARNINGS BEFORE INCOME TAXES		491,790			390,227

INCOME TAX (BENEFIT) EXPENSE		(90,506	)		44,291

NET EARNINGS	$	582,296		$	345,936

NET EARNINGS AVAILABLE TO COMMON SHAREHOLDERS	$	494,708		$	258,348

BASIC EARNINGS PER COMMON SHARE	$	0.16		$	0.09

DILUTED EARNINGS PER COMMON SHARE	$	0.14		$	0.08

See accompanying notes.

FIRST COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004 (UNAUDITED)


	Three Months Ended March 31,
	2005			2004
NET EARNINGS	$	582,296		$	345,936

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
Unrealized gain (loss) on available for sale securities		(821,173	)		697,445

COMPREHENSIVE (LOSS) INCOME	$	(238,877	)	$	1,043,381

See accompanying notes.

FIRST COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004 (UNAUDITED)


	March 31, 2005
	Preferred Stock Series A		Preferred Stock Series B		Common Stock		Treasury Stock			Capital Surplus		Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Total
Balance - December 31, 2004	$	3,850	$	3,757	$	31,675	$	(128	)	$	37,308,720	$	4,768,464	$	(679,685	)	$	41,436,653
Issuance of Common Stock (29,000 shares)		—		—		290		—			334,960		—		—			335,250
Net Earnings		—		—		—		—			—		582,296		—			582,296
Unrealized Loss on Securities		—		—		—		—			—		—		(821,173	)		(821,173	)

Total Comprehensive Loss		—		—		—		—			—		—		—			(238,877	)

Balance - March 31, 2005	$	3,850	$	3,757	$	31,965	$	(128	)	$	37,643,680	$	5,350,760	$	(1,500,858	)	$	41,533,026

	March 31, 2004 (Unaudited)
	Preferred Stock Series A		Preferred Stock Series B		Common Stock		Treasury Stock			Capital Surplus		Retained Earnings		Other Accumulated Comprehensive Income (Loss)			Total
Balance - December 31, 2003	$	3,850	$	3,757	$	28,900	$	(128	)	$	34,576,191	$	4,426,212	$	(585,945	)	$	38,452,837
Issuance of Common Stock (3,320 shares)		—		—		33		—			48,531		—		—			48,564
Net Earnings		—		—		—		—			—		345,936		—			345,936
Unrealized Gain on Securities		—		—		—		—			—		—		697,445			697,445

Total Comprehensive Income		—		—		—		—			—		—		—			1,043,381

Balance - March 31, 2004	$	3,850	$	3,757	$	28,933	$	(128	)	$	34,624,722	$	4,772,148	$	111,500		$	39,544,782

See accompanying notes.

FIRST COMMUNITY CAPITAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004 (UNAUDITED)


	March 31, 2005			March 31, 2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$	582,296		$	345,936

Adjustments to reconcile net earnings to net cash provided by operating activities:
Provision for possible credit losses		650,000			475,001
Provision for depreciation		413,014			316,853
Amortization of core deposits		130,080			109,842
Amortization and accretion of premiums and discounts on investment securities, net		146,967			195,419
Gain (Loss) on sale of investment securities, net		(744	)		(66,361	)
Change in operating assets and liabilities:
Accrued interest receivable		96,082			138,491
Other real estate owned		—			(651,315	)
Other assets		(830,501	)		(319,765	)
Accrued interest payable and other liabilities		619,768			941,970

Total adjustments		1,224,666			1,140,135

Net cash provided by operating activities		1,806,962			1,486,071

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities and sales of investment securities		6,158,992			21,318,598
Purchases of investment securities		(1,739,197	)		(19,121,706	)
Decrease in deposits in financial institutions		(121,840	)		4,533,975
Purchase of other investments		—			(2,710,000	)
Net increase in loans		(4,889,537	)		(17,600,075	)
Purchases of bank premises and equipment		(895,571	)		(164,019	)
Purchase of Federal Home Loan Bank stock		(1,232,700	)		(323,600	)
Purchased of Federal Reserve Bank stock		—			(369,600	)
Community State Bank acquisition		—			(9,812,338	)
Cash from acquisition of Community State Bank		—			12,583,756
Change in cash surrender value of life insurance		(156,317	)		(60,000	)

Net cash used by investing activities		(2,876,170	)		(11,725,009	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Federal Home Loan Bank borrowings		25,100,000			(1,500,000	)
Proceeds from sale of common stock		335,250			48,564
Net increase (decrease) in noninterest-bearing deposits		(7,462,007	)		10,449,084
Net increase in interest-bearing deposits		(14,088,987	)		12,043,623

Net cash provided by financing activities		3,884,256			21,041,271

NET INCREASE IN CASH AND CASH EQUIVALENTS		2,815,048			10,802,333

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		28,893,725			24,304,702

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	31,708,773		$	35,107,035

See accompanying notes.

FIRST COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2005 AND 2004 (UNAUDITED)

NOTE A BASIS OF PRESENTATION

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the rules and regulations adopted by the United States Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair presentation have been included. Operating results for the three-month period ended March 31, 2005 are not necessarily indicative of the results that may be expected for the entire year or any interim period. For further information, refer to the financial statements and notes thereto included in the annual report on Form 10-K of First Community Capital Corporation for the year ended December 31, 2004.

STOCK OPTIONS

Statement of Financial Accounting Standards No. 148 (“Statement 148”) “Accounting for Stock-Based Compensation-Transition and Disclosure” was issued in December 2002. Statement 148 amends FASB No. 123 “Accounting for Stock-Based Compensation” (“Statement 123”) to provide alternative methods of transition for voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, Statement 148 amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. First Community Capital Corporation has adopted only the disclosure provisions included in Statement 148, which are included in the notes to the consolidated financial statements for the three months ending March 31, 2005 and 2004.

As provided in Statement 123, the Company accounts for its stock compensation programs in accordance with the provisions of Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. Under this method no stock-based compensation expense is reflected in net income, as all options granted had an exercise price equal to or greater than the market value of the underlying common stock on the date of the grant. The following table illustrates the effect on net income and earnings per share as if the Company had applied the fair value recognition provisions of Statement 123 as amended by Statement 148.


	Three Months Ended March 31,
	2005			2004
Net Earnings, as reported	$	582,296		$	345,936
Deduct: Total stock-based employee compensation determined under fair value based method for all awards, net of all tax effects		(31,726	)		(36,865	)

Undeclared Dividends on Preferred Stock, Series A		(87,588	)		(87,588	)

Pro Forma Net Earnings Available to Common Stockholders	$	462,982		$	221,483

Earnings Per Share:
Basic-as reported less undeclared dividends on preferred stock	$	0.16		$	0.09
Basic-pro forma	$	0.15		$	0.08
Diluted-as reported less undeclared dividends on preferred stock	$	0.14		$	0.08
Diluted-pro forma	$	0.13		$	0.07

Weighted Average Shares Used to Compute EPS:
Basic		3,103,464			2,879,342
Diluted		3,492,989			3,361,908

FIRST COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2005 AND 2004 (UNAUDITED)

Statement of Financial Accounting Standards No. 123 (“SFAS 123R”) - “Share-Based Payment (Revised 2004)” establishes standards for the accounting for transactions in which an entity (i) exchanges its equity instruments for goods or services, or (ii) incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of the equity instruments. SFAS 123R eliminates the ability to account for stock-based compensation using APB 25 and requires that such transactions be recognized as compensation cost in the income statement based on their fair values on the date of the grant. The Company will implement SFAS 123R effective July 1, 2005, the effect of which is not anticipated to have a material effect on the Company’s results of operations.

NOTE B EARNINGS PER COMMON SHARE

Earnings per common share (“EPS”) were computed as follows:


	Three Months Ended March 31,
	2005					2004
	Amount			Per Share		Amount			Per Share
Net Earnings	$	582,296				$	345,936

Less undeclared dividends on preferred stock, Series A		(87,588	)				(87,588	)

Net earnings available to common shareholders	$	494,708				$	258,348

Basic
Weighted Average Shares outstanding		3,103,464		$	0.16		2,879,342		$	0.09

Diluted
Add incremental shares for:
Conversion of dilutive stock options		13,871					406,612
Conversion of preferred stock, series B		375,654					375,654

		3,492,989		$	0.14		3,361,908		$	0.08

NOTE C STATEMENTS OF CASH FLOWS

Interest payments of $2.5 million and $1.7 million were made during the three-month periods ended March 31, 2005 and 2004, respectively. The Company made no federal income tax payments of during the three-month periods ended March 31, 2005 and 2004, respectively.

NOTE D ACQUISITIONS

On January 6, 2004, the Company acquired Grimes County Capital Corporation, a Texas corporation and the parent company of Community State Bank, for aggregate consideration of $9.5 million in cash. In addition, the Company paid a net tax liability of $1.7 million in the fourth quarter 2004 as a result of this transaction. The Company will ultimately realize a tax savings of this amount as goodwill is deducted for tax purposes in future years. The acquisition of Grimes County resulted in the recognition of $7,294,265 in goodwill and $898,000 in a core deposit intangible. Under Statement of Financial Accounting Standards No. 142, the goodwill recorded as a result of the Community State Bank acquisition will be periodically tested for impairment and written down to fair value if considered impaired. The core deposit intangible will be amortized based upon a calculated attrition rate over ten years. On May 10, 2004 the Company completed its conversion of Community State Bank to a national bank and began operating it as a separate subsidiary of the Delaware Company, headquartered in San Antonio, Texas. As part of this process, First Community Bank - Houston purchased substantially all the assets and assumed the liabilities of Community State Bank and transferred the deposits and assets associated with the Bank’s San Antonio branch office to the new subsidiary, First Community Bank San Antonio.

FIRST COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2005 AND 2004 (UNAUDITED)

The results of operations of Grimes County are effectively reflected in the March 31, 2004 consolidated statement of earnings for the entire period presented due to the early January 2004 date of acquisition and therefore no supplemental pro forma information is presented for the period ending March 31, 2004.

NOTE E SALE OF COMPANY

The Company and Wells Fargo & Company, a Delaware corporation (“Wells Fargo”), entered into an Agreement and Plan of Reorganization dated as of September 1, 2004 (the “Merger Agreement”) whereby a wholly owned subsidiary of Wells Fargo will merge with and into the Company (the “Merger”). The Merger Agreement provides, among other things, for the conversion of the shares of common stock and Series A Preferred Stock and Series B Preferred Stock of the Company outstanding immediately prior to the time the Merger becomes effective, in accordance with the provisions of the Merger Agreement, into the right to receive shares of common stock of Wells Fargo valued at an aggregate of $123,655,000. At the time the sale closes all outstanding stock options will become fully vested and exercisable. It is expected that the proposed acquisition will exclude First Community Bank San Antonio, N.A. with $31.4 million in assets and four locations. A management led investor group has proposed to acquire the San Antonio operation for cash prior to the closing of the Wells Fargo transaction. The merger, which will require the approval of the Federal Reserve Board and the Company’s Shareholders, is expected to be completed in the second quarter of 2005.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Special Cautionary Notice Regarding Forward-Looking Statements

Statements and financial discussion and analysis contained in this quarterly report on Form 10-Q of First Community Capital Corporation (the “Company”) that are not historical facts are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements describe the Company’s future plans, strategies and expectations, are based on assumptions and involve a number of risks and uncertainties, many of which are beyond the Company’s control. The important factors that could cause actual results to differ materially from the forward-looking statements include, without limitation:

•

changes in interest rates and market prices, which could reduce the Company’s net interest margins, asset valuations and expense expectations;

•

changes in the levels of loan prepayments and the resulting effects on the value of the Company’s loan portfolio;

•

changes in local economic and business conditions which adversely affect the Company’s customers and their ability to transact profitable business with the Company, including the ability of the Company’s borrowers to repay their loans according to their terms or a change in the value of the related collateral;

•

increased competition for deposits and loans adversely affecting rates and terms;

•

the timing, impact and other uncertainties of the Company’s ability to enter new markets successfully and capitalize on growth opportunities;

•

increased credit risk in the Company’s assets and increased operating risk caused by a material change in commercial, consumer and/or real estate loans as a percentage of the total loan portfolio;

•

the failure of assumptions underlying the establishment of and provisions made to the allowance for possible credit losses;

•

changes in the availability of funds resulting in increased costs or reduced liquidity;

•

increased asset levels and changes in the composition of assets and the resulting impact on the Company’s capital levels and regulatory capital ratios;

•

the Company’s ability to acquire, operate and maintain cost effective and efficient systems without incurring unexpectedly difficult or expensive but necessary technological changes;

•

the loss of senior management or operating personnel and the potential inability to hire qualified personnel at reasonable compensation levels; and

•

changes in statutes and government regulations or their interpretations applicable to banks and the Company’s present and future subsidiaries, including changes in tax requirements and tax rates.

The Company undertakes no obligation to publicly update or otherwise revise any forward-looking statements, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the applicable cautionary statements.

General Overview

First Community Capital Corporation (the “Company”) was incorporated as a business corporation under the laws of the State of Texas in January 2001 to serve as a bank holding company for First Community Bank, N.A. (the “Bank”). In January 2004, the Company acquired Grimes County Capital Corporation and its wholly-owned subsidiary, Community State Bank located in Houston, Texas. On May 10, 2004 the Company completed its plans to convert Community State Bank to a national bank and operate it as a separate subsidiary of the Company headquartered in San Antonio, Texas, known as First Community Bank San Antonio, N.A. (the “San Antonio Bank”). The Company owns the Bank and the San Antonio Bank (together, the “Banks”), through its wholly owned Delaware subsidiary, First Community Capital Corporation of Delaware, Inc. (the “Delaware Company”). The Company, through the Banks, provides a diversified range of commercial banking products and services to small and medium-sized businesses, public and governmental organizations and consumers through 17-full-service banking locations in or near Houston, Texas and 4-full-service banking locations in San Antonio, Texas. The Company’s headquarters are located in Houston, Texas. The Company has grown through a combination of internal growth, including the opening of two de novo branches and the acquisition of Grimes County Capital Corporation. The Company’s headquarters are located at 14200 Gulf Freeway, Houston, Texas 77034, and its telephone number at that location is (281) 996-1000.

On September 1, 2004, the Company and Wells Fargo & Company, a Delaware corporation (“Wells Fargo”), entered into an Agreement and Plan of Reorganization (the “Merger Agreement”) whereby a wholly owned subsidiary of Wells Fargo will merge with and into the Company (the “Merger”). The Merger Agreement provides, among other things, for the conversion of the shares of Common Stock and Series A Preferred Stock and Series B Preferred Stock of the Company outstanding immediately prior to the time the Merger becomes effective, in accordance with the provisions of the Merger Agreement, into the right to receive shares of common stock of Wells Fargo valued at an aggregate of $123,655,000. It is expected that the proposed acquisition will exclude the San Antonio Bank, with $31.4 million in assets and four locations. A management led investor group has proposed to acquire the San Antonio Bank for cash prior to the closing of the Wells Fargo transaction. The merger, which will require the approval of the Federal Reserve Board and the Company’s shareholders, is expected to be completed in the second quarter of 2005.

For the three months ended March 31, 2005 net earnings were $582.3 thousand, a $236.4 thousand or 68.3% increase compared with net earnings of $345.9 thousand for the three months ended March 31, 2004. The increase in earnings was primarily the result of proceeds received from a bank owned key man life insurance policy and proceeds received due to the merger of Discover and Pulse.

Total assets were $603.6 million at March 31, 2005 compared with $599.3 million at December 31, 2004, an increase of $4.3 million or 0.7%. Total loans and leases, net of unearned discount and fees and allowance for possible credit losses, increased to $423.7 million at March 31, 2005 from $419.4 million at December 31, 2004, an increase of $4.3 million or 1.0%. Total deposits were $457.1 million at March 31, 2005 compared with $478.6 million at December 31, 2004, a decrease of $21.5 million or 4.5%. The decrease is the result of normal deposit transactions during the first quarter of the year. Stockholders’ equity increased approximately $100 thousand during the three month period ended March 31, 2005 compared with year-end 2004, primarily the result of current year earnings and issuance of common stock through the exercise of options which was partially offset by an increase in the unrealized losses on the Company’s available for sale investment securities portfolio.

Critical Accounting Policies

The Company’s accounting policies are integral to understanding the results reported. Accounting policies are disclosed in Note A of the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

The Company follows financial accounting and reporting policies that are in accordance with generally accepted accounting principles as more fully discussed in its Form 10-K for the year ended December 31, 2004. Not all significant accounting policies require management to make difficult, subjective or complex judgments. However, the policies noted below could be deemed to meet the SEC’s definition of critical accounting policies.

Allowance for Possible Credit Losses - The allowance for possible credit losses is a reserve established through charges to earnings in the form of a provision for possible credit losses. Management has established an allowance for possible credit losses, which it believes is adequate for estimated losses in the Company’s loan and lease portfolio. Based on an evaluation of the loan and lease portfolio, management presents a quarterly review of the allowance for possible credit losses to the Company’s Board of Directors, indicating any change in the allowance since the last review and any recommendations as to adjustments in the allowance. In making its evaluation, management considers factors such as historical loan loss experience, industry diversification of the Company’s commercial loan portfolio, the amount of non-performing assets and related collateral, the volume, growth and composition of the Company’s loan and lease portfolio, current economic changes that may affect the borrower’s ability to pay and the value of collateral, the evaluation of the Company’s loan and lease portfolio through its internal and external loan review process and other relevant factors. Charge-offs occur when loans are deemed to be un-collectible.

Stock–based Compensation – The Company accounts for stock-based employee compensation plans using the intrinsic value-based method. Because the exercise price of the Company’s employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized on options granted. Pro forma disclosures of net income and earnings per share assuming the fair value-based accounting method are set forth in Note A to the Company’s interim unaudited Consolidated Financial Statements included herein for the period ended March 31, 2005.

Statement of Financial Accounting Standards No 123, Share-Based Payment (“SFAS No 123R”) requires that stock-based compensation be recognized as compensation expense in the income statement based on their fair values on the date of the grant. The provisions of this statement become effective for all equity awards granted after July 1, 2005.

The Company established deferred compensation plans (the “Plans”) whereby eligible executive officers and directors of the Banks and/or Company (the “Participants”) earn retirement benefits during their tenure as employees or directors of the Banks and/or Company, subject to certain provisions contained in the Plans. Benefits are provided over future periods of time subsequent to the Participants’ termination of employment from the Banks or at such time that the Participants are no longer directors of the Company as defined by the Plans. The Plan benefits are indexed to earnings generated by single premium Bank Owned Life Insurance (BOLI). This insurance provides cash values, earnings and death benefits of varying amounts as defined in the insurance policies.

Goodwill and Other Intangible Assets

The Banks have recorded goodwill that is not subject to amortization in accordance with SFAS NO. 12 in the amount of $13.9 million at March 31, 2005. The changes in the carrying amount of core deposit intangibles and goodwill for the years ended December 31, 2002, 2003 and 2004 and the three months ended March 31, 2005 are as follows:


	Core Deposit Intangibles			Goodwill		Total
	(dollars in thousands)
Balance, May 10, 2002	$	2,369		$	6,578	$	8,947
Amortization		(260	)		—		(260	)

Balance, December 31, 2002		2,109			6,578		8,687
Amortization		(389	)		—		(389	)

Balance, December 31, 2003	$	1,720		$	6,578	$	8,298

Intangibles resulting from acquisition (1)		898			7,295		8,193
Amortization		(514	)		—		(514	)

Balance December 31, 2004	$	2,104		$	13,873	$	15,977
Amortization		(130	)		—		(130	)

Balance, March 31, 2005		1,974			13,873		15,847

(1)	Core deposit intangibles and goodwill resulting from the acquisition of Community State Bank on January 6, 2004.

Results of Operations

Earnings

For the three months ended March 31, 2005, the Company earned $582.3 thousand, or $0.16 per weighted average common share ($0.14 per common share on a fully diluted basis), compared with $345.9 thousand for the three months ended March 31, 2004, or $.09 per weighted average common share ($.08 per common share on a fully diluted basis). The increase in earnings was primarily the result of proceeds received from a bank owned key man life insurance policy and proceeds received due to the merger of Discover and Pulse.

Net Interest Income

Net interest income represents the amount by which interest income on interest-earning assets, including investment securities and loans and leases, exceeds interest expense incurred on interest-bearing liabilities, including deposits and other borrowed funds. Net interest income is the principal source of the Company’s earnings. Interest rate fluctuations, as well as changes in the amount and type of earning assets and liabilities, combine to affect net interest income. The Company’s net interest income is affected by changes in the amount and mix of interest-earning assets and interest-bearing liabilities, referred to as a “volume change.” It is also affected by changes in yields earned on interest-earning assets and rates paid on interest-bearing deposits, trust preferred securities and other borrowed funds, referred to as a “rate change.”

Net interest income increased $531 thousand or 10.8% to $5.5 million for the three months ended March 31, 2005 compared with $4.9 million for the three months ended March 31, 2004. The increase is primarily attributable to loan growth during the last three quarters of 2004.

The Company has an asset and liability management strategy designed to provide a proper balance between rate sensitive assets and rate sensitive liabilities, in an attempt to maximize interest margins and to provide adequate liquidity for anticipated needs. Approximately 30.3% of the Company’s deposits consists of non-interest bearing deposits and approximately 30.7% are in low cost savings deposits, as compared to higher cost certificates of deposits. These lower cost deposits have contributed to both a lower cost of funds and the Company’s ability to maintain a strong net interest margin in the low interest rate environment of the last two years.

For the three months ended March 31, 2005, the net interest margin was 4.17% compared to 4.30% for the three months ended March 31, 2004.

The following table presents for the periods indicated an analysis of net interest income by each major category of interest-earning assets and interest-bearing liabilities, the average amounts outstanding and the interest earned or paid on such amounts. The table also sets forth the average rate earned on interest-earning assets, the average rate paid on interest-bearing liabilities and the net interest margin on average total interest-earnings assets for the same periods. No tax-equivalent adjustments were made and all average balances are yearly average balances. Non-accruing loans and leases have been included in the table as loans and leases carrying a zero yield.


	For the Three Months Ended March 31,
	2005							2004
	Average Outstanding Balance			Interest Earned/ Paid		Average Yield/Rate		Average Outstanding Balance			Interest Earned/ Paid		Average Yield/Rate
	(Dollars in thousands)
Assets
Interest-earning assets:
Loans and leases	$	429,191		$	7,059	6.67	%	$	329,590		$	5,526	6.72	%
Taxable securities		80,268			793	4.01			104,483			1,010	3.88
Tax-exempt securities		11,883			114	3.89			12,985			130	4.02
Federal funds sold and other temporary investments		10,043			81	3.27			12,620			44	1.40

Total interest-earning assets		531,385			8,047	6.14	%		459,678			6,710	5.85	%

Less allowance for possible credit losses		(4,151	)						(3,395	)

Total interest-earning assets, net of allowance for possible credit losses		527,234							456,283
Non-interest-earning assets		74,187							75,754

Total assets	$	601,421						$	532,037

Liabilities and stockholders’ equity
Interest-bearing liabilities:
Interest-bearing demand deposits	$	35,334		$	108	1.24	%	$	36,935		$	166	1.80	%
Saving and money market accounts		112,428			308	1.11			124,681			225	0.72
Time deposits		177,017			1,368	3.13			147,931			899	2.44
Jr. subordinated debentures		18,558			318	6.95			18,000			266	5.93
Federal funds purchased & other borrowings		77,603			485	2.53			44,753			225	2.02

Total interest-bearing liabilities		420,940			2,587	2.49	%		372,300			1,781	1.92	%

Non-interest-bearing liabilities:
Non-interest-bearing demand deposits		138,194							116,600
Other liabilities		802							4,072

Total liabilities		559,936							492,972

Stockholders’ equity		41,485							39,065

Total liabilities and stockholders’ equity	$	601,421						$	532,037

Net interest income				$	5,460						$	4,929

Net interest spread						3.65	%						3.93	%
Net interest margin⁽¹⁾						4.17	%						4.30	%

(1)	The net interest margin is equal to net interest income divided by average interest-earning assets.

The following table compares the dollar amount of changes in interest income and interest expense for the major components of interest-earning assets and interest-bearing liabilities and distinguishes between the increase (decrease) related to higher outstanding balances and the volatility of interest rates. For purposes of these tables, changes attributable to both rate and volume, which cannot be segregated, have been allocated to rate.


	Three Months Ended March 31, 2005 vs. 2004
	Increase (Decrease) due to
	Amount			Rate			Total
	(Dollars in thousands)
Interest-earning assets:
Loans and leases, including fees	$	1,619		$	(86	)	$	1,533
Investment securities		(247	)		14			(233	)
Federal funds sold and other investments		(9	)		46			37

Total increase (decrease) in interest income		1,363			(26	)		1,337

Interest-bearing liabilities:
Deposits other than time		(35	)		60			25
Time, $100,000 and over		64			83			147
Time under $100,000		179			143			322
Trust preferred Jr. subordinated debentures		9			43			52
Federal funds purchased and other borrowings		205			55			260

Total increase (decrease) in interest expense		422			384			806

Increase (decrease) in net interest income	$	941		$	(410	)	$	531

Provision for Possible Credit Losses

The provision for possible credit losses is established through charges to earnings in the form of a provision in order to bring the Company’s allowance for possible credit losses to a level deemed appropriate by management based on the factors discussed under “Financial Condition - Allowance for Possible Credit Losses.” The Company performs an analysis of its allowance for possible credit losses on a quarterly basis. For the three months ended March 31, 2005, the provision for possible credit losses increased by $175.0 thousand to $650.0 thousand compared with $475.0 thousand for the three months ended March 31, 2004. The increase in loan loss reserve was due to loan growth and an increase in the portfolio of non-performing loans.

Non-Interest Income and Non-Interest Expense

The Company’s primary source of non-interest income is service charges on deposit accounts. The remaining non-interest income sources include wire transfer fees, collection and cashier’s check fees, safe deposit box rentals, credit card income, rental income and credit life sales income. Also included in this category are net gains or losses realized on the sale of investment securities.

The major component of non-interest expense is employee compensation and benefits. The Company’s non-interest expenses also include day-to-day operating expenses, such as professional fees, advertising, supplies, occupancy expense, depreciation and amortization of building, leasehold improvements, furniture and equipment. The Bank has focused on building a de novo branch network through the employment of experienced lenders and staff in each of its designated market areas. The additional expenses related to the de novo branch expansion will reduce earnings until branch growth is sufficient to cover those expenses. The Company has also made selective bank acquisitions; cost associated with the acquisitions and integration of the acquired banks into the Company also increased non-interest expense.

The following table compares the various components of the change in non-interest income and non-interest expense information for the periods indicated:


	Three Months Ended March 31,
	2005		2004		Increase (Decrease)			Percent Change
	(Dollars in thousands)
Non-interest income:
Service charges on deposit accounts	$	910	$	1,021	$	(111	)	(10.9	)%
Other operating income		639		137		502		366.4	%
Gain on sale of securities		1		66		(65	)	(98.5	)%

Total non-interest income	$	1,550	$	1,224	$	326		26.6	%

Non-interest expense:
Employee compensation and benefits	$	2,933	$	2,454	$	479		19.5	%
Non-staff expenses:
Occupancy expense and equipment		1,125		979		146		14.9	%
Professional and outside service fees		651		619		32		5.2	%
Office expenses		336		338		(2	)	(0.6	)%
Other		824		897		(73	)	(8.1	)%

Total non-staff expenses		2,936		2,833		103

Total non-interest expense	$	5,869	$	5,287	$	582		11.0	%

For the three months ended March 31, 2005, the Company earned $910 thousand in income from service charges, a decrease of $111 thousand or 10.9% in income from service charges compared with income from service charges of $1.0 million for the three months ended March 31, 2004. Total non-interest income increased this period by $326 thousand or 26.6% compared with the same period in 2004. The increase in earnings was primarily the result of proceeds received from a bank owned key man life insurance policy and proceeds received due to the merger of Pulse and Discover.

Non-interest expense for the three months ended March 31, 2005 increased $582 thousand or 11.0% to $5.9 million compared with non-interest expense of $5.3 million for the three months ended March 31, 2004. The increase during the period is mainly the result of increased salary and employee benefit expenses and occupancy expenses connected with the San Antonio expansion and internal growth.

Income Taxes

Federal income tax is reported as income tax expense and is influenced by the amount of taxable income, the amount of tax-exempt income, the amount of nondeductible interest expense and the amount of other nondeductible expense. Income tax expense decreased $134.7 thousand resulting in a benefit in the amount of $90.5 thousand for the three months ended March 31, 2005 compared with tax expense of $44.2 thousand for the three months ended March 31, 2004. The decrease during this period was partially due to non-taxable income related to the proceeds from bank owned key man life insurance policy and an increase in loan interest income from non-taxable entities.

Financial Condition

Loan and Lease Portfolio

The loan and lease portfolio is the largest category of the Company’s earning assets. The Company is a community banking organization serving consumers, professionals and businesses with interests in and around the Texas counties of Harris, Brazoria, Galveston and Bexar. The Company’s primary strategy is to provide full service commercial banking with experienced loan officers and staff who focus on small to medium-sized businesses with loan requirements between $50.0 thousand and $3.5 million. This strategy includes building strong relationships while providing comprehensive banking services including working capital, fixed asset, real estate and personal loan needs, and lease financing. Additional loan services, such as long-term mortgages and factoring, are also provided through third party providers.

At March 31, 2005, loans and leases, net of unearned discount and fees, had increased $4.3 million or 1.0% to $423.7 million from $419.4 million at December 31, 2004. The increase was due to internal growth.

The following table shows the composition of the Company’s loan and lease portfolio as of March 31, 2005 and December 31, 2005:


	As of March 31, 2005					As of December 31, 2004
	Amount			Percent		Amount			Percent
	(Dollars in thousands)
Commercial, financial and industrial	$	101,050		23.6	%	$	102,487		24.2	%
Construction/land development		49,017		11.5	%		49,981		11.8	%
Real estate:
1-4 Family first lien		20,542		4.8	%		20,908		4.9	%
1-4 Family jr. lien		6,219		1.5	%		6,157		1.5	%
Multi family residential		3,098		0.7	%		3,042		0.7	%
Non farm non-residential		215,971		50.5	%		208,399		49.2	%
Consumer		27,423		6.4	%		26,886		6.4	%
Lease financing		5,865		1.4	%		7,109		1.7	%

Gross loans and leases		429,185		100.3	%		424,969		100.4	%
Less: unearned discount and fees		(1,397	)	(0.3	)%		(1,617	)	(0.4	)%

Total loans and leases	$	427,788		100.0	%	$	423,352		100.0	%

Commercial Loans. The Company’s commercial loans are primarily made within its market area and are underwritten on the basis of the borrower’s ability to service the debt from income. As a general practice, the Company takes as collateral a lien on any available real estate, equipment or other assets owned by the borrower and obtains the personal guaranty of the borrower. In general, commercial loans involve more credit risk than residential mortgage loans and commercial mortgage loans and, therefore, usually yield a higher return. The increased risk in commercial loans is due to the type of collateral securing these loans. The increased risk also derives from the expectation that commercial loans generally will be serviced principally from the operations of the business, and those operations may not be successful. Historical trends have shown these types of loans to have higher delinquencies than mortgage loans. As a result of these additional complexities, variables and risks, commercial loans require more thorough underwriting and servicing than other types of loans.

Construction Loans. The Company makes loans to finance the construction of residential and, to a limited extent, nonresidential properties. Construction loans generally are secured by first liens on real estate and have floating interest rates. The Company conducts periodic inspections, either directly or through an agent, prior to approval of periodic draws on these loans. Underwriting guidelines similar to those described above are also used in the Company’s construction lending activities. Construction loans involve additional risks attributable to the fact that loan funds are advanced upon the security of a project under construction, and the project is of uncertain value prior to its completion. Because of uncertainties inherent in estimating construction costs, the market value of the completed project and the effects of governmental regulation on real property, it can be difficult to accurately evaluate the total funds required to complete a project and the related loan to value ratio. As a result of these uncertainties, construction lending often involves the disbursement of substantial funds with repayment dependent, in part, on the success of the ultimate project rather than the ability of a borrower or guarantor to repay the loan. If the Company is forced to foreclose on a project prior to completion, there is no assurance that it will be able to recover all of the unpaid portion of the loan. In addition, the Company may be required to fund additional amounts to complete a project and may have to hold the property for an indeterminate period of time. While the Company has underwriting procedures designed to identify what it believes to be acceptable levels of risks in construction lending, no assurance can be given that these procedures will prevent losses from the risks described above.

Real Estate. The Company’s real estate loans are generally secured by first liens on real estate, typically have fixed interest rates and amortize over a 10 to 15 year period with balloon payments due at the end of one to seven years. Payments on loans secured by such properties are often dependent on the successful operation or management of the properties. Accordingly, repayment of these loans may be subject to adverse conditions in the real estate market or the economy to a greater extent than other types of loans. The Company seeks to minimize these risks in a variety of ways, including giving careful consideration to the property’s operating history, future operating projections, current and projected occupancy, location and physical condition. The underwriting analysis also includes credit checks, appraisals and a review of the financial condition of the borrower and guarantors.

Consumer Loans. The consumer loans the Company makes include direct “A”-credit automobile loans, recreational vehicle loans, boat loans, home improvement loans, home equity loans, personal loans (collateralized and uncollateralized) and deposit account collateralized loans. The terms of these loans typically range from 12 to 120 months and vary based upon the nature of the collateral and size of the loan. Consumer loans entail greater risk than do residential mortgage loans, particularly in the case of consumer loans that are unsecured or secured by rapidly depreciating assets such as automobiles. In such cases, any repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment for the outstanding loan balance. The remaining deficiency often does not warrant further substantial collection efforts against the borrower beyond obtaining a deficiency judgment. In addition, consumer loan collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy. Furthermore, the application of various federal and state laws may limit the amount which can be recovered on such loans.

Non-performing Assets

The Company had $8.3 million and $5.5 million in non-performing assets for the periods ended March 31, 2005 and December 31, 2004, respectively. Management believes the risks in non-performing assets to be significant as there may be some portion of the principal which will become uncollectible. The increase of $2.8 million was primarily attributable to one relationship totaling $1.7 million that entered into bankruptcy in the first quarter of 2005.

The accrual of interest on a loan or lease is discontinued when, in the opinion of management (based upon such criteria as default in payment, asset deterioration, decline in cash flow, recurring operating loss, declining sales, bankruptcy and other financial conditions which could result in default), the borrower’s financial condition is such that the collection of interest is doubtful. The Company has a general policy of placing past due loans and leases on non-accrual status when such loans and leases are 90 days or more past due or when management believes that the collateral may be insufficient to cover both interest and principal of the loan or lease. As of March 31, 2005, 56 loans and leases in the aggregate amount of $5.9 million were on non-accrual status.

Placing a loan or lease on non-accrual status has a two-fold impact on net interest income. First, it may cause a charge against earnings for the interest, which had been accrued but not yet collected on the loan or lease. Secondly, it eliminates future interest earnings with respect to that particular loan from the Company’s revenues. Interest on such loans or leases is not recognized until the entire principal amount is collected or until the loan or lease is returned to a performing status.

Impaired loans and leases, with the exception of groups of smaller balance homogeneous loans and leases are collectively evaluated for impairment, are defined as loans or leases for which, based on current information and events, it is probable that the Bank will be unable to collect all amounts due, both interest and principal according to the contractual terms of the loan or lease agreement. The allowance for possible credit losses related to impaired loans and leases is determined based on the present value of expected cash flows discounted at the loan’s or lease’s effective interest rate or, as a practical expedient, the loan’s or lease’s observable market price or the fair value of the collateral if the loan or lease is collateral dependent.

The Company may renegotiate the terms of a loan or lease because of deterioration in the financial condition of a borrower. This renegotiation enhances the probability of collection. There were no restructured loans or leases at March 31, 2005 or December 31, 2004. The Company obtains appraisals on loans secured by real estate, as required by applicable regulatory guidelines, and may update such appraisals for loans categorized as nonperforming loans and potential problem loans. In instances where updated appraisals reflect reduced collateral values, an evaluation of the borrower’s overall financial condition is made to determine the need, if any, for possible write downs or appropriate additions to the allowance for possible credit losses. The Company records other real estate at fair value at the time of acquisition, less estimated costs to sell.

Other real estate consists of property owned by the Company as a result of foreclosure on collateral or similar actions. It is recorded at fair value at the time of acquisition, less estimated selling costs. As of March 31, 2005 the Company’s other real estate totaled $2.2 million and consisted of nine commercial properties.

The following table presents information regarding nonperforming assets as of the dates indicated:


	March 31, 2005			December 31, 2004
	(Dollars in thousands)
Nonaccrual loans and leases	$	5,898		$	2,929
Restructured loans and leases		—			—
Loans and leases which are contractually past due 90 or more days as to interest or principal payments but are not included above		213			394

Total nonperforming loans and leases		6,111			3,323
Other real estate		2,164			2,164

Total nonperforming assets	$	8,275		$	5,487

Ratios:
Nonperforming loans and leases to total loans and leases		1.4	%		0.8	%
Nonperforming assets to total loans and leases plus other real estate		1.9	%		1.3	%

Allowance for Possible Credit Losses

The allowance for possible credit losses is a reserve established through charges to earnings in the form of a provision for possible credit losses. Based on an evaluation of the loan portfolio, management presents a quarterly review of the allowance for possible credit losses to the Banks board of directors, indicating any change in the allowance since the last review and any recommendations as to adjustments in the allowance.

In making its evaluation, management considers factors such as the Company’s historical loan and lease loss experience, the diversification by industry of the commercial loan portfolio, the effect of changes in the local real estate market on collateral values, the results of recent regulatory examinations, the effects on the loan portfolio of current economic indicators and their probable impact on borrowers, the amount of charge-offs for the period, the amount of nonperforming loans and leases and related collateral security, the evaluation of the loan portfolio by the monthly external loan reviews that had been conducted by Temple and Associates for the first three quarters of 2004 and other relevant factors including in house reviews performed for the fourth quarter of 2004 and first quarter of 2005. Charge-offs occur when loans are deemed to be uncollectible.

The allowance for possible credit losses represents management’s estimate of an amount adequate to provide for known and inherent losses in the loan and lease portfolio in the normal course of business. The Company makes specific allowances for each loan based on its type and classification as discussed below. However, there are additional risks of losses that cannot be quantified precisely or attributed to particular loans or categories of loans, including general economic and business conditions and credit quality trends. The Company has established an unallocated portion of the allowance based on its evaluation of these risks, which management believes is prudent and consistent with regulatory requirements. Due to the uncertainty of risks in the loan and lease portfolio, management’s judgment of the amount of the allowance necessary to absorb credit losses is approximate. The allowance is also subject to regulatory examinations and determination by the regulatory agencies as to the adequacy of the allowance.

The Company follows a loan review program to evaluate the credit risk in the loan portfolio. In addition, the Company had contracted with Temple and Associates to perform a monthly loan review through the third quarter of 2004. Due to the pending sale of the Company only in house reviews were conducted for the fourth quarter of 2004

and first quarter of 2005. Through the loan review process, the Company maintains an internally classified loan list which, along with the delinquency list of loans, helps management assess the overall quality of the loan portfolio and the adequacy of the allowance for possible credit losses. Loans internally classified as “substandard” or in the more severe categories of “doubtful” or “loss” are those loans that at a minimum have clear and defined weaknesses such as a highly-leveraged position, unfavorable financial ratios, uncertain repayment sources or poor financial condition, which may jeopardize recoverability of the debt. At March 31, 2005, the Company had $10.0 of loans classified as “substandard”, compared to $8.2 at March 31, 2004.

The internally classified loan list and certain other non-classified, non-criticized loans are maintained on the Bank’s internal “watch list”. Along with the delinquency list, these loans are closely monitored to ensure appropriate steps are taken to ensure collection. Watch list loans show warning elements where the present status portrays one or more deficiencies that require attention in the short term or where pertinent ratios of the loan account have weakened to a point where more frequent monitoring is warranted. These loans do not have all of the characteristics of a classified loan (substandard or doubtful) but do show weakened elements as compared with those of a satisfactory credit. The Company reviews these loans to assist in assessing the adequacy of the allowance for possible credit losses. At March 31, 2005, the Company had $4.0 of such loans.

In originating loans, the Company establishes unallocated allowances recognizing that credit losses will be experienced and the risk of loss will vary with, among other things, general economic conditions, the type of loan being made, the creditworthiness of the borrower over the term of the loan and, in case of a collateralized loan, the quality of the collateral for such loan. In addition to these unallocated allowances, specific allowances are provided for impaired loans which are defined as individual loans whose ultimate collection of principal and interest are considered questionable by management after reviewing the current status of the loans and considering the net realizable value of the collateral and/or the present value of future cash flow.

Loans and leases are charged-off against the allowance for possible credit losses when appropriate. Although management believes it uses the best information available to make determinations with respect to the allowance for possible credit losses, future adjustments may be necessary if economic conditions differ from the assumptions used in making the initial determinations.

The Company charged off a net of $454.0 thousand (0.43% of average net loans and leases) and $1.6 million (0.44% of average loans and leases) in loans and leases during the three-month period ended March 31, 2005 and the year ended December 31, 2004, respectively.

As of March 31, 2005, the Company’s allowance for possible credit losses was $4.1 million or 0.96% of the average net loans and leases compared with $3.9 million or 1.07% of the average net loans and leases as of December 31, 2004. Although additional losses may occur, based on the detailed analysis and evaluation performed, management believes the allowance for possible credit losses to be adequate to absorb probable losses inherent in the loan and lease portfolio at March 31, 2005.

The following table presents, for the periods indicated, an analysis of the allowance for possible credit losses and other related data:


	As of and for the Three Months Ended March 31, 2005			As of and for the Year Ended December 31, 2004
	(Dollars in thousands)
Loans and leases⁽¹⁾:

Average net loans and leases outstanding during period	$	429,191		$	366,867

Gross loans and leases outstanding at end of period	$	427,788		$	423,352

Transactions in Allowance for Possible Credit Losses:

Balance at beginning of period	$	3,930		$	2,930
Balance acquired in the Community State Bank acquisition		—			603
Charge-offs for period:
Commercial and industrial		(444	)		(1,257	)
Real estate		(—	)		(88	)
Leases		(9	)		(210	)
Consumer and other		(15	)		(254	)
Recoveries of loans and leases previously charged off:
Commercial and industrial		9			55
Real estate		—			9
Leases		5			70
Consumer and other		—			47

Net charge offs		(454	)		(1,628	)
Provision for possible credit losses		650			2,025

Allowance for possible credit losses at end of period	$	4,126		$	3,930

Ratios:
Net loan and lease charge-offs (annualized) to average net loans and leases		0.43	%		0.44	%
Net loan and lease charge-offs (annualized) to end of period net loans and leases		0.43	%		0.38	%
Allowance to average net loans and leases		0.96	%		1.07	%
Allowance to end of period net loans and leases		0.96	%		0.93	%
Net loan and lease charge-offs annualized to allowance		44.01	%		41.42	%

(1)	All loan and lease amounts are net of unearned discount.

The following table describes the allocation of the allowance for possible credit losses among various categories of loans and leases and certain other information as of the dates indicated. The allocation is made for analytical purposes and is not necessarily indicative of the categories in which future losses may occur. The total allowance is available to absorb losses from any segment of the loans and leases.


	As of March 31 2005				As of December 31, 2004
	Amount		Percent of Loans to Total Loans and Leases		Amount		Percent of Loans to Total Loans and Leases
	(Dollars in thousands)
Balance of allowance for possible credit losses applicable to:
Commercial, financial and industrial	$	788	23.5	%	$	571	24.1	%
Real estate		933	68.7	%		573	67.9	%
Consumer (net)		62	6.4	%		51	6.3	%
Lease financing		152	1.4	%		183	1.7	%
Unallocated		2,191	—			2,552	—

Total allowance for possible credit losses	$	4,126			$	3,930

Deposits and Liability Management

The Company relies primarily on its deposit base to fund its lending and investment activities. The Company follows a policy of paying interest rates on interest-bearing accounts which are competitive with other commercial banks in its market area. It sells federal funds on an overnight basis and from time to time makes other investments with various maturities. The Company follows a policy of not soliciting or accepting brokered deposits.

The following table presents an analysis of deposits by type at the indicated dates:


	March 31, 2005		December 31, 2004
	Amount		Amount
	(Dollars in thousands)
Noninterest-bearing deposits	$	138,594	$	146,056
Interest-bearing deposits		140,380		151,282
CDs in amounts of less than $100M		87,899		84,465
CDs in amounts of $100M or more		90,215		96,836

Total deposits	$	457,088	$	478,639

The Company’s total deposits decreased from $478.6 million as of December 31, 2004 to $457.1 million as of March 31, 2005, which represented an decrease of $21.5 million or 4.5%. Non-interest-bearing deposits constituted 30.3% of total deposits at March 31, 2005 compared to 30.5% at December 31, 2004.

The amount of deposits in certificates of deposit (“CDs”) including IRAs and public funds in amounts of $100.0 thousand or more was 19.7% of deposits as of March 31, 2005 compared to 20.8% as of December 31, 2004.

The Company’s CD rates are competitive with local independent community banks. However, the rates paid on CDs in amounts of $100 thousand or more normally exceed the rates paid by the Company on smaller retail deposits. Because CDs in amounts of $100 thousand or more normally command higher rates than smaller retail deposits in the marketplace, such CDs are subject to being moved to other financial institutions if a higher rate can be obtained by the depositor. Thus, CDs in amounts of $100 thousand or higher may be considered less stable than other deposits. However, because a significant portion of the Company’s CDs in amounts of $100 thousand or more are owned by customers who have a full banking relationship with the Company, management considers these CDs to be more stable than CDs owned by other institutions and owned by customers who do not maintain full banking relationships.

Interest expense on CDs in amounts of $100.0 thousand or more was $643.7 and $533.9 thousand for the three months ended March 31, 2005 and 2004, respectively. This increase in interest expense is primarily the result of increased interest rates in 2005. Interest expense on CDs in amounts of $100.0 thousand or more was $2.8 million for the year ended December 31, 2004. The higher cost of such funds relative to other deposits can have a negative impact on the Company’s net interest margin.

The following table sets forth the amount of the Company’s certificates of deposit that are $100.0 thousand or greater by the time remaining until maturity as of March 31, 2005:


	As of March 31, 2005
	(Dollars in thousands)
Remaining maturity
Three months or less	$	15,879
Over three months through six months		10,683
Over six months through one year		12,932
Over one year		50,721

Total	$	90,215

Borrowings

During the first quarter of 2005, borrowings consisted of Federal Home Loan Bank advances. At March 31, 2005, FHLB borrowings were $83.8 million compared to $58.7 million at December 31, 2004. There were no federal funds purchased at March 31, 2005 or December 31, 2004. The increase in FHLB borrowings were primarily the result of loan growth and a decrease in deposits during the three months ended March 31, 2005. As of March 31, 2005, the Company had $18.6 million of junior subordinated debentures outstanding issued to its subsidiary business trusts.

First Community Capital Trust I (Trust I), First Community Capital Trust II (Trust II) and First Community Capital Trust III (Trust III).


Description	Issue Date	Trust Preferred Securities Outstanding		Interest Rates	Junior Subordinated Debt Owned to Trusts		Final Maturity Date
Trust I	3/28/2001	$	5,000,000	10.18% Fixed	$	5,155,000	6/8/2031
Trust II	11/28/2001		5,000,000	LIBOR Floating +3.75 bp		5,155,000	12/28/2031
Trust III	12/15/2003		8,000,000	LIBOR Floating +2.75 bp		8,248,000	12/28/2033

		$	18,000,000		$	18,558,000

Each of the trusts are statutory business trusts organized for the sole purpose of issuing trust securities and investing the proceeds thereof in junior subordinated debentures of the Company, the sole assets of each trust. The preferred trust securities of each trust represent preferred beneficial interests in the assets of the respective trusts and are subject to mandatory redemption upon payment of the junior subordinated debentures held by the trusts. The Company wholly owns the common securities of each trust. Each trust’s ability to pay amounts due on the trust preferred securities is solely dependent upon the Company making payment on the related junior subordinated debentures. The Company’s obligations under the junior subordinated debentures and other relevant trust agreements, in aggregate, constitute a full and unconditional guarantee by the Company of each respective trust’s obligations under the trust securities issued by each respective trust.

Off-Balance Sheet Risk

The Company is party to various financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the statements of condition. The contract or notional amounts of those instruments reflect the extent of the involvement the Company has in particular classes of financial instruments. The Company’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 notional amount of those instruments. The Company uses the same credit policies in making these commitments and conditional obligations as it does for on-balance-sheet instruments.

At March 31, 2005 and December 31, 2004, the Company had outstanding unfunded standby letters of credit, which are primarily cash secured, totaling $746.0 thousand and $790.6 thousand, respectively, and unfunded loan commitments of $81.7 million and $123.9 million, respectively.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The Company considers approximately 35% to be firm and will be exercised. The Company evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if considered necessary by the Company upon extension of credit, is based on management’s credit evaluation of the customer. Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to its customers.

Correspondent Banks

In the ordinary course of its operations, the Company maintains correspondent bank accounts with various banks, which accounts aggregated approximately $25.7 million as of March 31, 2005. The largest of these accounts is with Federal Reserve Bank of Dallas, which is the principal bank through which the Company clears checks. As of March 31, 2005, the balance in this account was approximately $19.4 million. Each of the correspondent accounts is a demand account and the Company receives from such correspondents the normal services associated with a correspondent banking relationship, including clearing of checks, sales and purchases of participations in loans and sales and purchases of federal funds.

Investment Portfolio

The Company uses its securities portfolio to ensure liquidity for cash requirements, to manage interest rate risk, to provide a source of income, to ensure collateral is available for municipal pledging requirements and to manage asset quality. Securities available for sale totaled $88.4 million at March 31, 2005, a decrease of $5.4 million or 5.8% from $93.8 million at December 31, 2004. The average life of the securities portfolio at March 31, 2005 was 4.8 years compared to 4.6 years at December 31, 2004.

At the date of purchase, the Company is required to classify debt and equity securities into one of three categories: held-to-maturity, trading or available-for-sale. At each reporting date, the appropriateness of the classification is reassessed. Investments in debt securities are classified as held-to-maturity and measured at amortized cost in the financial statements only if management has the positive intent and ability to hold those securities to maturity. Securities that are bought and held principally for the purpose of selling them in the near term are classified as trading and measured at fair value in the financial statements with unrealized gains and losses included in earnings. Investments not classified as either held-to-maturity or trading are classified as available-for-sale and measured at fair value in the financial statements with unrealized gains and losses reported, net of tax, in a separate component of shareholders’ equity until realized. The Company has no securities classified as trading or held to maturity at March 31, 2005.

Contractual maturity of mortgage-backed securities is not a reliable indicator of their expected life because borrowers have the right to prepay their obligations at any time.

Mortgage-backed securities are securities that have been developed by pooling a number of real estate mortgages and which are principally issued by federal agencies such as Fannie Mae and Freddie Mac. These securities are deemed to have high credit ratings, and minimum regular monthly cash flows of principal and interest are guaranteed by the issuing agencies.

Unlike U.S. government agency securities, which have a lump sum payment at maturity, mortgage-backed securities provide cash flows from regular principal and interest payments and principal prepayments throughout the lives of the securities. Mortgage-backed securities which are generally purchased at a premium, will generally suffer decreasing net yields as interest rates drop because homeowners tend to refinance their mortgages. Thus, the premium paid must be amortized over a shorter period. Conversely, mortgage-backed securities purchased at a discount will obtain higher net yields in a decreasing interest rate environment. As interest rates rise, the opposite will generally be true. During a period of increasing interest rates, fixed rate mortgage-backed securities do not tend to experience heavy prepayments of principal, and consequently the average life of this security will be lengthened. If interest rates begin to fall, prepayments will increase.

CMOs are bonds that are backed by pools of mortgages. The pools can be Ginnie Mae, Fannie Mae or Freddie Mac pools or they can be private-label pools. The CMOs are designed so that the mortgage collateral will generate a cash flow sufficient to provide for the timely repayment of the bonds. The mortgage collateral pool can be structured to accommodate various desired bond repayment schedules, provided that the collateral cash flow is adequate to meet scheduled bond payments. This is accomplished by dividing the bonds into classes to which payments on the underlying mortgage pools are allocated in different order. The bond’s cash flow, for example, can be dedicated to one class of bondholders at a time, thereby increasing call protection to bondholders. In private-label CMOs, losses on underlying mortgages are directed to the most junior of all classes and then to the classes above in order of increasing seniority, which means that the senior classes have enough credit protection to be given the highest credit rating by the rating agencies.

It is the policy of the Company to utilize the investment portfolio as a vehicle for investment of excess funds in minimal risk assets, usually securities rated Aa or higher or backed by the full faith and credit of the United States government. Investment policies are made by the Asset Liability and Investment Committee of the Board of Directors. The investment portfolio provides additional liquidity on a short-term basis through the sale or pledging, if necessary, of the portfolio securities.

Capital Resources

Total stockholders’ equity was $41.5 million at March 31, 2005 compared with $41.4 million at December 31, 2004, an increase of $100 thousand or .24%. The increase was due to increased earnings and the exercise of stock options partially offset by an increase in the unrealized losses on the Company’s available for sale investment securities portfolio.

Capital management consists of providing equity to support both current and future operations. The Company is subject to capital adequacy requirements imposed by the Federal Reserve and the Banks are subject to capital adequacy requirements imposed by the Office of the Comptroller of Currency (“OCC”). Both the Federal Reserve and the OCC have adopted risk-based capital requirements for assessing bank holding company and national bank capital adequacy. These standards define capital and establish minimum capital requirements in relation to assets and off-balance sheet exposure, adjusted for credit risk. The risk-based capital standards currently in effect are designed to make regulatory capital requirements more sensitive to differences in risk profiles among bank holding companies and banks, to account for off-balance sheet exposure and to minimize disincentives for holding liquid assets. Assets and off-balance sheet items are assigned to broad risk categories, each with appropriate relative risk weights. The resulting capital ratios represent capital as a percentage of total risk-weighted assets and off-balance sheet items.

The risk-based capital standards issued by the Federal Reserve require the Company to have “Tier 1 capital” of at least 4.0% and “total risk-based capital” (Tier 1 and Tier 2) of at least 8.0% of total risk-adjusted assets. “Tier 1 capital” generally includes common shareholders’ equity, trust preferred securities, and qualifying perpetual preferred stock together with related surpluses and retained earnings, less deductions for goodwill and various other intangibles. “Tier 2 capital” may consist of a limited amount of intermediate-term preferred stock, a limited amount

of term subordinated debt, certain hybrid capital instruments and other debt securities, perpetual preferred stock not qualifying as Tier 1 capital and a limited amount of the general valuation allowance for loan losses. The sum of Tier 1 capital and Tier 2 capital is “total risk-based capital.”

The Federal Reserve has also adopted guidelines which supplement the risk-based capital guidelines with a minimum ratio of Tier 1 capital to average total consolidated assets (leverage ratio) of 3.0% for institutions with well diversified risk, including no undue interest rate exposure; excellent asset quality; high liquidity; good earnings; and that are generally considered to be strong banking organizations, rated composite 1 under applicable federal guidelines, and that are not experiencing or anticipating significant growth. Other banking organizations are required to maintain a leverage ratio of at least 4.0%. These rules further provide that banking organizations experiencing internal growth or making acquisitions will be expected to maintain capital positions substantially above the minimum supervisory levels and comparable to peer group averages, without significant reliance on intangible assets.

Pursuant to the Federal Deposit Insurance Corporation Improvement Act of 1991, each federal banking agency revised its risk-based capital standards to ensure that those standards take adequate account of interest rate risk, concentration of credit risk and the risks of nontraditional activities, as well as reflect the actual performance and expected risk of loss on multifamily mortgages. The Banks are subject to capital adequacy guidelines of the OCC that are substantially similar to the Federal Reserve’s guidelines. Also pursuant to FDICIA, the OCC has promulgated regulations setting the levels at which an insured institution such as the banks would be considered “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized.” The Banks are classified “well capitalized” for purposes of the OCC’s prompt corrective action regulations.

The following table provides a comparison of the Company’s and the Banks’ leverage and risk-weighted capital ratios as of March 31, 2005 to the minimum and well-capitalized regulatory standards:


	Minimum Required for Capital Adequacy Purposes		To be Well Capitalized under Prompt Corrective Action Provisions		Actual Ratio at March 31, 2005
The Company
Leverage ratio	4.00	%⁽¹⁾	N/A		7.04	%
Tier 1 risk-based capital ratio	4.00		N/A		8.94
Total risk-based capital ratio	8.00		N/A		10.63
First Community Bank, N.A.
Leverage ratio	4.00	%⁽²⁾	5.00	%	7.20	%
Tier 1 risk-based capital ratio	4.00		6.00		9.35
Total risk-based capital ratio	8.00		10.00		10.25
First Community Bank San Antonio, N. A.
Leverage ratio	4.00	%⁽²⁾	5.00	%	11.50	%
Tier 1 risk-based capital ratio	4.00		6.00		10.02
Total risk-based capital ratio	8.00		10.00		10.81

(1)	The Federal Reserve may require the Company to maintain a leverage ratio above the required minimum.

(2)	The OCC may require the Banks to maintain a leverage ratio above the required minimum.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Asset/Liability Management. The Company’s primary earnings source is net interest income; therefore, the Company devotes significant time and has invested in resources to assist in the management of market risk, liquidity risk, capital and asset quality. The Company’s net interest income is affected by changes in market interest rates and by the level and composition of interest-earning assets and interest-bearing liabilities. The Company’s objectives in its asset/liability management are to utilize its capital effectively, to provide adequate liquidity and to enhance net interest income, without taking undue risks or subjecting the Company unduly to interest rate fluctuations. The Company takes a coordinated approach to the management of market risk, liquidity and capital. This risk management process is governed by policies and limits established by senior management which are reviewed and approved by the Asset/Liability Committee (“ALCO”). The ALCO, which is comprised of members of senior management and the Board, meets to review, among other things, economic conditions, interest rates, yield curve, cash flow projections, expected customer actions, liquidity levels, capital ratios and repricing characteristics of assets, liabilities and off-balance sheet financial instruments.

Interest Rate Sensitivity Management. Interest rate sensitivity refers to the relationship between market interest rates and net interest income resulting from the repricing of certain assets and liabilities. Interest rate risk arises when an earning asset matures or when its rate of interest changes in a time frame different from that of the supporting interest-bearing liability. One way to reduce the risk of significant adverse effects on net interest income of market rate fluctuations is to minimize the difference between rate sensitive assets and liabilities, referred to as gap, by maintaining an interest rate sensitivity position within a particular time frame.

Maintaining an equilibrium between rate sensitive assets and liabilities will reduce some of the risk associated with adverse changes in market rates, but it will not guarantee a stable net interest spread because yields and rates may not change simultaneously and may change by different amounts. These changes in market spreads could materially affect the overall net interest spread even if assets and liabilities were perfectly matched. If more assets than liabilities reprice within a given period, an asset sensitive position or “positive gap” is created (rate sensitivity ratio is greater than 100%), which means asset rates respond more quickly when interest rates change. During a positive gap, a decline in market rates will have a negative impact on net interest income. Alternatively, where more liabilities than assets reprice in a given period, a liability sensitive position or “negative gap” is created (rate sensitivity ratio is less than 100%) and a decline in interest rates will have a positive impact on net interest income.

Liquidity. The Company’s asset and liability management policy is intended to maintain adequate liquidity and thereby enhance its ability to raise funds to support asset growth, meet deposit withdrawals and lending needs, maintain reserve requirements and otherwise sustain operations. The Company accomplishes this through management of the maturities of its interest-earning assets and interest-bearing liabilities. To the extent practicable, the Company attempts to match the maturities of its rate sensitive assets and liabilities. Liquidity is monitored daily and overall interest rate risk is assessed through reports showing both sensitivity ratios and existing dollar “gap” data. The Company believes its present position to be adequate to meet its current and future liquidity needs.

The liquidity of the Company is maintained in the form of readily marketable investment securities, demand deposits with commercial banks, the Federal Reserve Bank of Dallas, the Federal Home Loan Bank of Dallas, vault cash and federal funds sold. While the minimum liquidity requirement for banks is determined by federal bank regulatory agencies as a percentage of deposit liabilities, the Company’s management monitors liquidity requirements as warranted by interest rate trends, changes in the economy and the scheduled maturity and interest rate sensitivity of the investment and loan and lease portfolios and deposits. In addition to the liquidity provided by the foregoing, the Company has correspondent relationships with other banks in order to sell loans or purchase overnight funds should additional liquidity be needed. The Company has established a $4.0 million overnight line of credit with TIB – The Independent Bankers Bank, Dallas, Texas, a $3.0 million overnight line of credit with Amegy Bank of Texas, Houston, Texas and a $15 million overnight line of credit for the purchase of Fed Funds with Bank One, N.A. The Company’s securities safekeeping is handled by the Federal Home Loan Bank of Dallas, which allows the Company the capability of borrowing up to the amount of available collateral.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures. As of the end of the period covered by this report the Company carried out an evaluation, under the supervision and with the participation of our management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported to the Company’s management within the time periods specified in the SEC’s rules and forms.

Changes in internal control over financial reporting. There were no changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Not applicable

ITEM 2. CHANGES IN SECURITIES USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES

a. Not applicable

b. Not applicable

c. Not applicable

d. Not applicable

e. Not applicable

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable

ITEM 5. OTHER INFORMATION

Not applicable

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

Exhibits:

The following exhibits are filed with this Quarterly Report on Form 10-Q:


Exhibit Number				Description of Exhibit
31.1				Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.

31.2				Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.

32.1				Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2				Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Reports on Form 8-K

None

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		FIRST COMMUNITY CAPITAL CORPORATION
		(Registrant)

Date: May 16, 2005		/s/ NIGEL J. HARRISON
		Nigel J. Harrison
		President and Chief Executive Officer

Date: May 16, 1005		/s/ JAMES M. MCELRAY
		James M. McElray
		Executive Vice President and Chief Financial Officer

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