Exhibit 13

FIRST COMMUNITY

FINANCIAL CORPORATION

2005

Annual Report

Observing more than 140 years as a full-service financial institution, The First National Bank of Mifflintown, together with its employees, continues a strong
tradition of reaching out to support community organizations and programs in Juniata and Perry Counties and beyond.



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TABLE OF CONTENTS



|                                                                                              |  |      
|--------------------------------------------------------------------------------------------- |  | -----
|                                                                                              |  | Page 
|Managements Letter to Shareholders                                                           |  | 2    
|                                                                                              | 
|Partners in Bank and Community Leadership                                                     |  | 3    
|                                                                                              | 
|A Tradition: First National Bank and Its Employees Reaching Out to the Community              |  | 4-5  
|                                                                                              | 
|Report of Independent Registered Public Accounting Firm                                       |  | 6    
|                                                                                              | 
|December 31, 2005 and 2004 Consolidated Balance Sheets:                                       |  | 7    
|                                                                                              | 
|Years ended December 31, 2005, 2004 and 2003 Consolidated Statements of Income:               |  | 8    
|                                                                                              | 
|Years ended December 31, 2005, 2004 and 2003 Consolidated Statements of Shareholders Equity: |  | 9    
|                                                                                              | 
|Years ended December 31, 2005, 2004 and 2003 Consolidated Statements of Cash Flows:           |  | 10   
|                                                                                              | 
|Notes to Consolidated Financial Statements                                                    |  | 11-33
|                                                                                              | 
|Managements Discussion and Analysis of Financial Condition and Results of Operations         |  | 34-49
|                                                                                              | 
|Board of Directors:                                                                           |  |      
|First Community Financial Corporation                                                         |  | 50   
|                                                                                              | 
|Officers:                                                                                     |  |      
|First Community Financial Corporation                                                         |  | 51   
|                                                                                              | 
|Officers:                                                                                     |  |      
|The First National Bank of Mifflintown                                                        |  | 52   
|                                                                                              | 
|Directors Emeriti and Advisory Boards                                                         |  | 53   
|                                                                                              | 
|Bank Locations in Juniata County and Perry County                                             |  | 54   
|                                                                                              | 
|Stock and Dividend Information                                                                |  | 55   



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MANAGEMENTS LETTER TO SHAREHOLDERS

Dear Shareholders:

We are pleased to report to you another year of progress, underscoring continuing growth and expansion
of your Bank and sound financial management beneficial to you, our shareholders.

Two significant management actions by the Board of Directors of the First
Community Financial Corporation, the holding company of the First National Bank of Mifflintown, highlighted the year 2005.

On October 12, the Board
accepted James R. McLaughlins decision to retire as President and Chief Executive Officer of the Corporation, effective January 3, 2006. His retirement follows 25 years of distinguished service to our Corporation and Bank. He had been
serving as Chairman, President and Chief Executive of the Corporation. Mr. McLaughlin will continue to serve as a Director and Chairman of the Board of Directors of both the Corporation and the Bank.

On that date, the Corporations Board of Directors first appointed Jody D. Graybill as Executive Vice President and Trust and Financial Services Division Manager.
The Board then appointed Mr. Graybill as President of both the Corporation and the Bank, effective January 4, 2006. He also continues to serve as Trust Officer of the Bank.

Impressive areas of growth and expansion also were notable in 2005.

The Banks newest office, located in Bloomfield
Borough, continued to show strong growth during the year. In addition, the Banks free checking program attracted many new deposits. The Bank continued to expand its ECorp, the electronic technology service for business and cash management
accounts.

Financial highlights for 2005 include:



| |  |  | Bank assets grew $19.5 million, or 8 percent
| | - |  | --------------------------------------------



| |  |  | Loans increased by $14.3 million, or 10 percent
| | - |  | -----------------------------------------------



| |  |  | Bank deposits increased $8.8 million, or 4 percent;
| | - |  | ---------------------------------------------------



| |  |  | Trust assets grew $6 million, an 11 percent increase.
| | - |  | -----------------------------------------------------

We continue to be
optimistic that The First National Bank of Mifflintown will register positive growth in a wide range of financial activities and initiatives in future years, while continuing our involvement in the communities which we serve.



|                        |  |                     
|----------------------- |  | --------------------
|/s/ James R. McLaughlin |  | /s/ Jody D. Graybill
|James R. McLaughlin     |  | Jody D. Graybill    
|Chairman                |  | President           



2



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PARTNERS IN BANK AND COMMUNITY LEADERSHIP

[PHOTO APPEARS HERE]

JAMES R. McLAUGHLIN, seated, is Chairman of the Board of Directors of First Community Financial
Corporation and First National Bank of Mifflintown, and JODY D. GRAYBILL is President of both the Corporation and the Bank, while also continuing to serve as Trust Officer of the Bank.

Both men have impressive careers in banking and finance. Mr. McLaughlin joined First National Bank in 1980 as Vice President and Trust Officer and was named to the
Banks Board of Directors that same year. He has served as Chief Executive Officer of the Corporation and the Bank since 1985 and as President and Chief Executive Officer of the Corporation and the Bank since 1989.

Mr. Graybill joined First National Bank in 1987 and has served as Vice President and Trust and Financial Services Division Manager since 1995. Following
Mr. McLaughlins retirement as the Corporations President and Chief Executive Officer, the Corporations Board of Directors appointed Mr. Graybill as President of the Corporation and the Bank, effective January 4,
2006.

Both men are recognized for their outstanding leadership roles in numerous countywide and regional organizations. Mr. Graybill has been
President and a member of the Board of Directors of the Juniata County Library, President and Treasurer of the Mifflin Mifflintown Lions Club and a Board member of the Juniata Valley Area Chamber of Commerce. He also has been President and Board
member of the Juniata Valley Estate Planning Council and has served on the Membership Committee of the Pennsylvania Association of Community Bankers. In addition, he is an active United Way volunteer and has coached softball, youth football and T
-ball teams. Mr. Graybill is a life-long resident of Juniata County.

Mr. McLaughlin, also a native-born Juniata Countian, has been an active
member of several regional health care organizations for many years. He currently serves on the Board of Directors of Capital Blue Cross and was a charter member and past chairman of its Consumer Advisory Council. He also serves on the Board of
Directors of the Mountain View Community Medical Association and was a member of the Board of Directors and Treasurer of Lewistown Hospital for many years. He has been a past Chairman of the Pennsylvania Association of Community Bankers, the Mifflin
Juniata United Way and the Mifflintown Rotary Club where he also served as Chairman of the Rotary Student Exchange Program. In addition, Mr. McLaughlin is President of the Board of the Paul W. DeLauter Youth Center which provides a wide range
of activities for young people in the Mifflintown area. He also serves on the Board of Directors of the PerryCounty Community Foundation which supports numerous countywide charitable programs.



3



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A TRADITION: FIRST NATIONAL BANK AND ITS

In the far-reaching world of banking, The First National Bank of Mifflintown is officially known as a community bankwith membership in the Pennsylvania Association of Community Bankers and the Independent Community Bankers of
America. But the Banks identity is more direct and meaningful with residents of Juniata and Perry Counties and beyond who recognize the strong presence of the 142 year old financial institution through its support of a wide range of
community organizations and programs. The positive impact of that support is realized through schools, churches, agricultural and health care organizations, athletic programs, service clubs and numerous charities and benefits.

For years, the Bank has been a traditional sponsor of numerous programs and events familiar to residents and their families and friends. In 2000, for example, the Bank
initiated a unique cooperative program with the high schools of Juniata and PerryCounties that selects outstanding artwork by students to be featured in the Banks annual calendars. East Juniata,Greenwood, Juniata, Newport,
West Perry and Juniata Mennonite High School and Tuscarora junior High School are the participating schools in the student art competition.

To
underscore its support of programs beneficial to area farmers and farms, the Bank has sponsored for the ninth year an Agricultural Outlook event in cooperation with the Penn State Cooperative Extension in Juniata and PerryCounties.
Similarly, the Bank has been a long-time sponsor of the 4-H Clubs in the two counties.

Co-sponsorship by First National Bank of a free concert by the
Harrisburg Symphony in Juniata County attracted a large, appreciative audience in 2005. It was the first appearance of the Symphony in Juniata County and because of popular response, a second free concert, also to be co-sponsored bythe Bank, is planned for 2006.

The Bank is a major sponsor and its employees are volunteer participants in the annual Relay
ForLife, a24-hour team effort held in Juniata and Perry Counties to raise funds for the American Cancer Society.

The
Bank was an initial financial supporter for the opening of a unique Lions Den facility in McAlisterville. The popular complex features indoor space for track and soccer and an exercise roomwith equipment designed to encourage physical
fitness and health and wellness for area residents.

Numerous other organizations traditionally benefit each year from financial support and sponsorship by
First National Bank. These include the annual fairs of the Juniata County and Perry County Agricultural Societies; Volunteer Fire and Ambulance Companiesin both Juniata andPerry Counties, as well as fund-raising projects by Area
Sportsmen Associations.Significant contributions also are given to 15 Athletic Fields and Complexes inthe region, including high school, Little League and soccer playing fields.

The Lewistown Hospital has received financial support from theBank for many years and the annual Mifflin-Juniata Arts Festivalbenefits fromBank sponsorship.

In addition to the support which First National Bank provides to thenumerous organizations described above, the
impressive range of volunteer services given to a wide range of community organizations by Bank employees also should be highlighted. These employees from the Banks eleven offices located throughout Juniata and Perry Counties give many hours
of their valuable time dedicated to support programs and projects in their respective communities. The seven employees featured in the following pages are representative of the many employees of First National Bank who help to uphold the Banks
proud tradition of reaching out in support of organizations which are benefiting thousands of area residents.

[PHOTO HERE]

Through love of singing at their church, the First Baptist Church of Mifflintown, Bethany, above left, and Jennifer decided to form a unique
singing quartet called 4-Given. Together with Bethanys and Jennifers sisters, the group reaches out to other area churches to offer a variety of musical styles, with an emphasis on contemporary country and Christian music. The 4-Given
concerts also are attracting requests from other audiences, including weddings, fairs, reunions,andradio programs.



4



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EMPLOYEES REACHING OUT TO
THE COMMUNITY

[Photo Here of Roy A. Leister, Jr., Assistant Vice President and Community Office Manager, Delaware
Office]

Ive always had a strong commitment to help meet the needs of our communities, says Roy. He saw an opportunity to improve
housing conditions for area residents through the Juniata County Habitat forHumanity. He has been affiliated with the organization for five years, serving on its Family Selection Committee which determines eligibility criteria for those who
will benefit from the nationally recognized program. Roy also has been active for 20 years with the Fayette Area Lions Club. He is currently the clubs Third Vice President and also a Board member of the Lions Den. In addition, he is Treasurer
of the Juniata County Cooperative Extension.

[Photo Here of Patti L. McLaughlin, Assistant Vice President and Community Office Manager, Bloomfield
Borough, New Bloomfield and Shermans Dale Offices]

Patti manages a diversity of banking responsibilities for three different First National Bank
offices in Perry County. At the same time, she contributes an enormous amount of time and talent to countywide organizations promoting agricultural and economic development, as well as advancing the health care and literacy needs of the areas
youth and adults.

For the past six years, she has been Vice President of the Perry County Economic Development Authority, is serving on the Grant
Committee of the newly formed Carlisle Area Health and Wellness Foundation and is a Board member of the Perry County Literacy Council. Since 1984 she has been Treasurer of the Perry County Dairy Promotion Committee. This group has a special personal
interest to Patti since she and her husband operate a dairy farm.

[Photo Here of Bradley D. Sherman, Assistant Vice President and Community Office
Manager, West Perry and Ickesburg Offices]

Brad has been able to combine his personal love of the outdoors and sports that, in turn, results in an
impressive range of community services to Perry County residents. He says the commitment to serve was instilled in him as a young man when he earned the highest-ranking Eagle Scout recognition with the Boy Scouts of America. He served as a Director
of the Board for the Greenwood School District for eight years. For the past 15 years, he has been Treasurer of the Ickesburg Sportsmen Association. And he has been coach for six years for the Millerstown Youth Baseball and Midget Soccer teams with
a full season of regular games as well as tournament competition.

[Photo Here of Peggy Love, Part-Time Teller, East Waterford Office and Brenda E.
Snyder, Customer Service Representative/Head Teller]

Brenda and Peggy both wanted to participate in the 2004 Tuscarora Valley Heritage Days in a way
that would support the events charity projects. They decided to apply their quilting skills to design and hand stitch a patriotic wall hanging which later would be auctioned to the highest bidder. They first collected photographs and calendars
dating front the 1800s and through computer technology transferred the images to quilting materials. It was a successful undertaking, with the wall hanging bringing $300 at a Heritage Days auction.



5



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REPORT OF INDEPENDENT REGISTERED

PUBLIC
ACCOUNTING FIRM

To the Board of Directors and Shareholders

First Community Financial Corporation

Mifflintown, Pennsylvania

We have audited the accompanying consolidated balance sheets of First Community Financial Corporation and subsidiaries as of December 31, 2005 and
2004, and the related consolidated statements of income, shareholders equity and cash flows for each of the three years in the period ended December 31, 2005. These consolidated financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the companys internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of First Community Financial Corporation and subsidiaries as of
December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of
America.

/s/ Beard Miller Company LLP

Beard Miller Company LLP

Harrisburg, Pennsylvania

January 13, 2006



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FIRST COMMUNITY FINANCIAL CORPORATION

CONSOLIDATED BALANCE SHEETS



|                                                                                                  |  |                                   |         |   |      |   |        
|------------------------------------------------------------------------------------------------- |  | --------------------------------- | ------- | - | ---- | - | -------
|                                                                                                  |  | December 31,                     
|                                                                                                  |  | 2005                              |         |   | 2004
|                                                                                                  |  | (In Thousands, Except Share Data)
|ASSETS                                                                                            |  |                                   |         |   |      |   |        
|Cash and due from banks                                                                           |  | $                                 | 7648    |   |      | $ | 6,830  
|Interest-bearing demand deposits                                                                  |  |                                   | 502     |   |      |   | 1,276  
|                                                                                                  |  |                                   |         |   |      |   |        
|Cash and Cash Equivalents                                                                         |  |                                   | 8,150   |   |      |   | 8,106  
|Time certificates of deposit                                                                      |  |                                   | 2,972   |   |      |   | 1,785  
|Securities available for sale                                                                     |  |                                   | 52,140  |   |      |   | 51,120 
|Securities held to maturity, fair value 2005 $24,810; 2004 $23,560                                |  |                                   | 24,824  |   |      |   | 23,327 
|Loans, net of allowance for loan losses 2005 $1,264; 2004 $1,264                                  |  |                                   | 161,800 |   |      |   | 147,518
|Premises and equipment                                                                            |  |                                   | 7,625   |   |      |   | 7,442  
|Restricted investment in bank stocks                                                              |  |                                   | 2,012   |   |      |   | 1,902  
|Investment in life insurance                                                                      |  |                                   | 4,514   |   |      |   | 4,362  
|Other assets                                                                                      |  |                                   | 3,120   |   |      |   | 2,093  
|                                                                                                  |  |                                   |         |   |      |   |        
|Total Assets                                                                                      |  | $                                 | 267,157 |   |      | $ | 247,655
|                                                                                                  |  |                                   |         |   |      |   |        
|LIABILITIES AND SHAREHOLDERS EQUITY                                                              |  |                                   |         |   |      |   |        
|LIABILITIES                                                                                       |  |                                   |         |   |      |   |        
|Deposits:                                                                                         |  |                                   |         |   |      |   |        
|Non-interest bearing                                                                              |  | $                                 | 25,508  |   |      | $ | 23,495 
|Interest-bearing                                                                                  |  |                                   | 186,436 |   |      |   | 179,635
|                                                                                                  |  |                                   |         |   |      |   |        
|Total Deposits                                                                                    |  |                                   | 211,944 |   |      |   | 203,130
|Short-term borrowings                                                                             |  |                                   | 8,937   |   |      |   | 4,449  
|Long-term borrowings                                                                              |  |                                   | 21,000  |   |      |   | 16,000 
|Junior subordinated debt                                                                          |  |                                   | 5,155   |   |      |   | 5,155  
|Other liabilities                                                                                 |  |                                   | 1,789   |   |      |   | 1,513  
|                                                                                                  |  |                                   |         |   |      |   |        
|Total Liabilities                                                                                 |  |                                   | 248,825 |   |      |   | 230,247
|                                                                                                  |  |                                   |         |   |      |   |        
|SHAREHOLDERS EQUITY                                                                              |  |                                   |         |   |      |   |        
|Preferred stock, without par value; 10,000,000 shares authorized and unissued                     |  |                                   |        |   |      |   |       
|Common stock, $5 par value; 10,000,000 shares authorized; issued and outstanding 1,400,000 shares |  |                                   | 7,000   |   |      |   | 7,000  
|Capital in excess of par value                                                                    |  |                                   | 245     |   |      |   | 245    
|Retained earnings                                                                                 |  |                                   | 11,492  |   |      |   | 9,967  
|Accumulated other comprehensive (loss) income                                                     |  |                                   | (405    | ) |      |   | 196    
|                                                                                                  |  |                                   |         |   |      |   |        
|Total Shareholders Equity                                                                        |  |                                   | 18,332  |   |      |   | 17,408 
|                                                                                                  |  |                                   |         |   |      |   |        
|Total Liabilities and Shareholders Equity                                                        |  | $                                 | 267,157 |   |      | $ | 247,655
|                                                                                                  |  |                                   |         |   |      |   |        



7



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FIRST COMMUNITY FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME



|                                                    |  |                                       |        |      |   |        |  |   |       
|--------------------------------------------------- |  | ------------------------------------- | ------ | ---- | - | ------ |  | - | ------
|                                                    |  | Years Ended December 31,             
|                                                    |  | 2005                                  |        | 2004 |   | 2003  
|                                                    |  | (In Thousands, Except per Share Data)
|INTEREST INCOME                                     |  |                                       |        |      |   |        |  |   |       
|Loans, including fees                               |  | $                                     | 10,110 |      | $ | 9,827  |  | $ | 9,514 
|Securities:                                         |  |                                       |        |      |   |        |  |   |       
|Taxable                                             |  |                                       | 2,023  |      |   | 1,661  |  |   | 1,489 
|Tax exempt                                          |  |                                       | 851    |      |   | 749    |  |   | 675   
|Other                                               |  |                                       | 216    |      |   | 98     |  |   | 103   
|                                                    |  |                                       |        |      |   |        |  |   |       
|Total Interest Income                               |  |                                       | 13,200 |      |   | 12,335 |  |   | 11,781
|                                                    |  |                                       |        |      |   |        |  |   |       
|INTEREST EXPENSE                                    |  |                                       |        |      |   |        |  |   |       
|Deposits                                            |  |                                       | 4,984  |      |   | 4,396  |  |   | 4,652 
|Short-term borrowings                               |  |                                       | 136    |      |   | 60     |  |   | 29    
|Long-term debt                                      |  |                                       | 1,102  |      |   | 885    |  |   | 489   
|                                                    |  |                                       |        |      |   |        |  |   |       
|Total Interest Expense                              |  |                                       | 6,222  |      |   | 5,341  |  |   | 5,170 
|                                                    |  |                                       |        |      |   |        |  |   |       
|Net Interest Income                                 |  |                                       | 6,978  |      |   | 6,994  |  |   | 6,611 
|PROVISION FOR LOAN LOSSES                           |  |                                       | 30     |      |   | 121    |  |   | 120   
|                                                    |  |                                       |        |      |   |        |  |   |       
|Net Interest Income after Provision for Loan Losses |  |                                       | 6,948  |      |   | 6,873  |  |   | 6,491 
|                                                    |  |                                       |        |      |   |        |  |   |       
|OTHER INCOME                                        |  |                                       |        |      |   |        |  |   |       
|Service charges on deposits                         |  |                                       | 594    |      |   | 492    |  |   | 467   
|Fiduciary activities                                |  |                                       | 331    |      |   | 346    |  |   | 226   
|Earnings on investment in life insurance            |  |                                       | 189    |      |   | 187    |  |   | 206   
|ATM and debit card fees                             |  |                                       | 379    |      |   | 318    |  |   | 278   
|Realized gains on sales of securities               |  |                                       | 299    |      |   | 133    |  |   | 123   
|Realized gain on sale of foreclosed real estate     |  |                                       |       |      |   |       |  |   | 124   
|Other                                               |  |                                       | 170    |      |   | 154    |  |   | 108   
|                                                    |  |                                       |        |      |   |        |  |   |       
|Total Other Income                                  |  |                                       | 1,962  |      |   | 1,630  |  |   | 1,532 
|                                                    |  |                                       |        |      |   |        |  |   |       
|OTHER EXPENSES                                      |  |                                       |        |      |   |        |  |   |       
|Employee compensation and benefits                  |  |                                       | 3,330  |      |   | 3,058  |  |   | 2,716 
|Net occupancy and equipment                         |  |                                       | 972    |      |   | 929    |  |   | 913   
|Professional and regulatory                         |  |                                       | 266    |      |   | 198    |  |   | 279   
|Director and advisory boards compensation           |  |                                       | 261    |      |   | 309    |  |   | 219   
|ATM expenses                                        |  |                                       | 270    |      |   | 233    |  |   | 197   
|Supplies and postage                                |  |                                       | 231    |      |   | 232    |  |   | 225   
|Pennsylvania bank shares tax                        |  |                                       | 157    |      |   | 121    |  |   | 121   
|Other operating                                     |  |                                       | 799    |      |   | 681    |  |   | 633   
|                                                    |  |                                       |        |      |   |        |  |   |       
|Total Other Expenses                                |  |                                       | 6,286  |      |   | 5,761  |  |   | 5,303 
|                                                    |  |                                       |        |      |   |        |  |   |       
|Income before Income Taxes                          |  |                                       | 2,624  |      |   | 2,742  |  |   | 2,720 
|PROVISION FOR INCOME TAXES                          |  |                                       | 553    |      |   | 619    |  |   | 652   
|                                                    |  |                                       |        |      |   |        |  |   |       
|Net Income                                          |  | $                                     | 2,071  |      | $ | 2,123  |  | $ | 2,068 
|                                                    |  |                                       |        |      |   |        |  |   |       
|EARNINGS PER SHARE                                  |  |                                       |        |      |   |        |  |   |       
|Basic                                               |  |                                       | 1.48   |      | $ | 1.52   |  | $ | 1.48  
|                                                    |  |                                       |        |      |   |        |  |   |       
|DIVIDENDS PER SHARE                                 |  | $                                     | 0.390  |      | $ | 0.350  |  | $ | 0.315 
|                                                    |  |                                       |        |      |   |        |  |   |       



8



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FIRST COMMUNITY FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY

Years
Ended December 31, 2005, 2004 and 2003



|                                                                                                                               |  |                                       |       |                              |   |                  |  |   |                                            |   |  |                          |      |   |  |   |        |  
|------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------------------- | ----- | ---------------------------- | - | ---------------- |  | - | ------------------------------------------ | - |  | ------------------------ | ---- | - |  | - | ------ | -
|                                                                                                                               |  | CommonStock                           |       | Capital inExcess ofPar Value |   | RetainedEarnings |  |   | AccumulatedOtherComprehensiveIncome (loss) |   |  | TotalShareholdersEquity |     
|                                                                                                                               |  | (In Thousands, Except per Share Data) |      
|BALANCE - DECEMBER 31, 2002                                                                                                    |  | $                                     | 3,500 |                              | $ | 245              |  | $ | 10,207                                     |   |  | $                        | 741  |   |  | $ | 14,693 |  
|                                                                                                                               |  |                                       |       |                              |   |                  |  |   |                                            |   |  |                          |      |   |  |   |        |  
|Comprehensive income:                                                                                                          |  |                                       |       |                              |   |                  |  |   |                                            |   |  |                          |      |   |  |   |        |  
|Net income                                                                                                                     |  |                                       |      |                              |   |                 |  |   | 2,068                                      |   |  |                          |     |   |  |   | 2,068  |  
|Change in net unrealized gains on securities available for sale, net of reclassification adjustment and deferred income taxes  |  |                                       |      |                              |   |                 |  |   |                                           |   |  |                          | (393 | ) |  |   | (393   | )
|                                                                                                                               |  |                                       |       |                              |   |                  |  |   |                                            |   |  |                          |      |   |  |   |        |  
|Total Comprehensive Income                                                                                                     |  |                                       |       |                              |   |                  |  |   |                                            |   |  |                          |      |   |  |   | 1,675  |  
|                                                                                                                               |  |                                       |       |                              |   |                  |  |   |                                            |   |  |                          |      |   |  |   |        |  
|Cash dividends                                                                                                                 |  |                                       |      |                              |   |                 |  |   | (441                                       | ) |  |                          |     |   |  |   | (441   | )
|                                                                                                                               |  |                                       |       |                              |   |                  |  |   |                                            |   |  |                          |      |   |  |   |        |  
|BALANCE - DECEMBER 31, 2003                                                                                                    |  |                                       | 3,500 |                              |   | 245              |  |   | 11,834                                     |   |  |                          | 348  |   |  |   | 15,927 |  
|2-for-1 stock split                                                                                                            |  |                                       | 3,500 |                              |   |                 |  |   | (3,500                                     | ) |  |                          |     |   |  |   |       |  
|                                                                                                                               |  |                                       |       |                              |   |                  |  |   |                                            |   |  |                          |      |   |  |   |        |  
|Comprehensive income:                                                                                                          |  |                                       |       |                              |   |                  |  |   |                                            |   |  |                          |      |   |  |   |        |  
|Net income                                                                                                                     |  |                                       |      |                              |   |                 |  |   | 2,123                                      |   |  |                          |     |   |  |   | 2,123  |  
|Change in net unrealized gains on securities available for sale, net of reclassification adjustment and deferred income taxes  |  |                                       |      |                              |   |                 |  |   |                                           |   |  |                          | (152 | ) |  |   | (152   | )
|                                                                                                                               |  |                                       |       |                              |   |                  |  |   |                                            |   |  |                          |      |   |  |   |        |  
|Total Comprehensive Income                                                                                                     |  |                                       |       |                              |   |                  |  |   |                                            |   |  |                          |      |   |  |   | 1,971  |  
|                                                                                                                               |  |                                       |       |                              |   |                  |  |   |                                            |   |  |                          |      |   |  |   |        |  
|Cash dividends                                                                                                                 |  |                                       |      |                              |   |                 |  |   | (490                                       | ) |  |                          |     |   |  |   | (490   | )
|                                                                                                                               |  |                                       |       |                              |   |                  |  |   |                                            |   |  |                          |      |   |  |   |        |  
|BALANCE - DECEMBER 31, 2004                                                                                                    |  |                                       | 7,000 |                              |   | 245              |  |   | 9,967                                      |   |  |                          | 196  |   |  |   | 17,408 |  
|Comprehensive income:                                                                                                          |  |                                       |       |                              |   |                  |  |   |                                            |   |  |                          |      |   |  |   |        |  
|Net income                                                                                                                     |  |                                       |      |                              |   |                 |  |   | 2,071                                      |   |  |                          |     |   |  |   | 2,071  |  
|Change in net unrealized losses on securities available for sale, net of reclassification adjustment and deferred income taxes |  |                                       |      |                              |   |                 |  |   |                                           |   |  |                          | (601 | ) |  |   | (601   | )
|                                                                                                                               |  |                                       |       |                              |   |                  |  |   |                                            |   |  |                          |      |   |  |   |        |  
|Total Comprehensive Income                                                                                                     |  |                                       |       |                              |   |                  |  |   |                                            |   |  |                          |      |   |  |   | 1,470  |  
|                                                                                                                               |  |                                       |       |                              |   |                  |  |   |                                            |   |  |                          |      |   |  |   |        |  
|Cash dividends                                                                                                                 |  |                                       |      |                              |   |                 |  |   | (546                                       | ) |  |                          |     |   |  |   | (546   | )
|                                                                                                                               |  |                                       |       |                              |   |                  |  |   |                                            |   |  |                          |      |   |  |   |        |  
|BALANCE - DECEMBER 31, 2005                                                                                                    |  | $                                     | 7,000 |                              | $ | 245              |  | $ | 11,492                                     |   |  |                          | (405 | ) |  | $ | 18,332 |  
|                                                                                                                               |  |                                       |       |                              |   |                  |  |   |                                            |   |  |                          |      |   |  |   |        |  



9



---

FIRST COMMUNITY FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                                  |  |                          |         |   |      |   |         |      |  |   |         |  
|--------------------------------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                  |  | Years Ended December 31, |        
|                                                                                  |  | 2005                     |         |   | 2004 |   |         | 2003 | 
|                                                                                  |  | (In Thousands)           |        
|CASH FLOWS FROM OPERATING ACTIVITIES                                              |  |                          |         |   |      |   |         |      |  |   |         |  
|Net income                                                                        |  | $                        | 2,071   |   |      | $ | 2,123   |      |  | $ | 2,068   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                          |         |   |      |   |         |      |  |   |         |  
|Depreciation of premises and equipment                                            |  |                          | 580     |   |      |   | 538     |      |  |   | 513     |  
|Amortization of intangible assets                                                 |  |                          | 17      |   |      |   | 20      |      |  |   | 28      |  
|Amortization of investment securities                                             |  |                          | 464     |   |      |   | 488     |      |  |   | 423     |  
|Earnings on investment in life insurance                                          |  |                          | (189    | ) |      |   | (187    | )    |  |   | (206    | )
|Realized gains on sales of securities                                             |  |                          | (299    | ) |      |   | (133    | )    |  |   | (123    | )
|Realized gain on sale of foreclosed real estate                                   |  |                          |        |   |      |   |        |      |  |   | (124    | )
|Provision for loan losses                                                         |  |                          | 30      |   |      |   | 121     |      |  |   | 120     |  
|Deferred income taxes                                                             |  |                          | (88     | ) |      |   | (9      | )    |  |   | (65     | )
|(Increase) decrease in accrued interest receivable and other assets               |  |                          | (541    | ) |      |   | 31      |      |  |   | (228    | )
|Increase (decrease) in accrued interest payable and other liabilities             |  |                          | 276     |   |      |   | (12     | )    |  |   | 345     |  
|                                                                                  |  |                          |         |   |      |   |         |      |  |   |         |  
|Net Cash Provided by Operating Activities                                         |  |                          | 2,321   |   |      |   | 2,980   |      |  |   | 2,751   |  
|                                                                                  |  |                          |         |   |      |   |         |      |  |   |         |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                              |  |                          |         |   |      |   |         |      |  |   |         |  
|Securities available for sale:                                                    |  |                          |         |   |      |   |         |      |  |   |         |  
|Proceeds from maturities and principal repayments                                 |  |                          | 9,534   |   |      |   | 15,406  |      |  |   | 17,899  |  
|Proceeds from sales                                                               |  |                          | 336     |   |      |   | 7,468   |      |  |   | 5,531   |  
|Purchases                                                                         |  |                          | (11,736 | ) |      |   | (31,434 | )    |  |   | (27,174 | )
|Securities held to maturity:                                                      |  |                          |         |   |      |   |         |      |  |   |         |  
|Proceeds from maturities and principal repayments                                 |  |                          | 1,941   |   |      |   | 1,793   |      |  |   | 5,039   |  
|Purchases                                                                         |  |                          | (3,686  | ) |      |   | (5,937  | )    |  |   | (9,085  | )
|Net increase in loans                                                             |  |                          | (14,444 | ) |      |   | (7,585  | )    |  |   | (15,728 | )
|Increase in time certificates of deposit                                          |  |                          | (1,187  | ) |      |   | (1,586  | )    |  |   | (199    | )
|Purchases of premises and equipment                                               |  |                          | (763    | ) |      |   | (1,775  | )    |  |   | (301    | )
|Proceeds from sale of foreclosed real estate                                      |  |                          | 82      |   |      |   | 1,096   |      |  |   | 359     |  
|Purchases of restricted investment in bank stocks                                 |  |                          | (110    | ) |      |   | (700    | )    |  |   | (186    | )
|                                                                                  |  |                          |         |   |      |   |         |      |  |   |         |  
|Net Cash Used in Investing Activities                                             |  |                          | (20,033 | ) |      |   | (23,254 | )    |  |   | (23,845 | )
|                                                                                  |  |                          |         |   |      |   |         |      |  |   |         |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                              |  |                          |         |   |      |   |         |      |  |   |         |  
|Net increase in deposits                                                          |  |                          | 8,814   |   |      |   | 15,867  |      |  |   | 13,137  |  
|Net increase (decrease) in short-term borrowings                                  |  |                          | 4,488   |   |      |   | (339    | )    |  |   | 1,178   |  
|Proceeds from issuance of trust capital securities                                |  |                          |        |   |      |   |        |      |  |   | 5,000   |  
|Proceeds from long-term borrowings                                                |  |                          | 5,000   |   |      |   | 8,000   |      |  |   |        |  
|Trust capital securities issuance costs                                           |  |                          |        |   |      |   |        |      |  |   | (140    | )
|Cash dividends paid                                                               |  |                          | (546    | ) |      |   | (490    | )    |  |   | (441    | )
|                                                                                  |  |                          |         |   |      |   |         |      |  |   |         |  
|Net Cash Provided by Financing Activities                                         |  |                          | 17,756  |   |      |   | 23,038  |      |  |   | 18,734  |  
|                                                                                  |  |                          |         |   |      |   |         |      |  |   |         |  
|Net Increase (Decrease) in Cash and Cash Equivalents                              |  |                          | 44      |   |      |   | 2,764   |      |  |   | (2,360  | )
|CASH AND CASH EQUIVALENTS - BEGINNING                                             |  |                          | 8,106   |   |      |   | 5,342   |      |  |   | 7,702   |  
|                                                                                  |  |                          |         |   |      |   |         |      |  |   |         |  
|CASH AND CASH EQUIVALENTS - ENDING                                                |  | $                        | 8,150   |   |      | $ | 8,106   |      |  | $ | 5,342   |  
|                                                                                  |  |                          |         |   |      |   |         |      |  |   |         |  
|SUPPLEMENTARY CASH FLOWS INFORMATION                                              |  |                          |         |   |      |   |         |      |  |   |         |  
|Interest paid                                                                     |  | $                        | 6,156   |   |      | $ | 5,258   |      |  | $ | 5,178   |  
|                                                                                  |  |                          |         |   |      |   |         |      |  |   |         |  
|Income taxes paid                                                                 |  | $                        | 579     |   |      | $ | 672     |      |  | $ | 685     |  
|                                                                                  |  |                          |         |   |      |   |         |      |  |   |         |  



10



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FIRST COMMUNITY FINANCIAL CORPORATION

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SIGNIFICANT
ACCOUNTING POLICIES

First Community Financial Corporation (the Corporation) and its wholly-owned subsidiary, The First
National Bank of Mifflintown (the Bank), provide loan, deposit, trust and other related financial services through eleven full service banking offices in Juniata and Perry Counties of Pennsylvania. The Corporations other subsidiary, First
Community Financial Capital Trust I (the Trust), was established during December 2003 for the purpose of issuing $5,000,000 of trust capital securities. The Corporation is subject to regulation and supervision by the Federal Reserve Bank and
the Bank is subject to regulation and supervision by the Office of the Comptroller of the Currency.

Basis of Presentation

The Corporations consolidated financial statements include the accounts of the Corporation and the Bank. All significant intercompany accounts and
transactions have been eliminated.

The preparation of financial statements in conformity with accounting principles generally accepted in
the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the balance sheet dates, and the reported amounts
of income and expenses for the years then ended. Actual results could differ from those estimates. The material estimates that are particularly susceptible to significant change are the determination of the allowance for loan losses and the
evaluation of other than temporary impairment of securities.

Assets held by the Trust Department in an agency or fiduciary capacity for its
customers are excluded from the financial statements since they do not constitute assets of the Corporation. The market value of assets held by the Trust Department amounted to $67,069,000 and $61,284,000 at December 31, 2005 and 2004,
respectively. Income from fiduciary activities is recognized on the accrual method.

Significant Group Concentrations of Credit Risk

Most of the Corporations activities are with customers located within the Central Pennsylvania region. Note 3 discusses the types of securities that
the Corporation invests in. Note 4 discusses the types of lending that the Corporation engages in. The Corporation does not have any significant concentrations in any one industry or customer.

Cash and Cash Equivalents

Cash and cash equivalents
includes cash and due from banks, interest bearing demand deposits, federal funds sold and investments with an original maturity of 90 days or less. Federal funds are typically purchased and sold for one day periods.

Securities

Management determines the appropriate
classification of debt securities at the time of purchase and re-evaluates such designation as of each balance sheet date. Securities available for sale are those securities that the Corporation intends to hold for an indefinite period of time, but
not necessarily to maturity. Any decision to sell an available for sale security would be based on various factors. These securities are stated at fair value. Unrealized gains (losses) are reported as changes in shareholders equity, net of the
related deferred tax effect. Premiums and discounts are recognized as interest income over the estimated lives of the securities, using the interest method.



11



---

FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)



Securities (Continued)

Securities held to maturity are those securities that the Corporation has the intent and ability to hold to maturity. These securities are stated at cost adjusted for amortization of premiums and accretion of
discounts, which is recognized as interest income over their estimated lives, using the interest method.

Declines in the fair value of held
to maturity and available for sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, management considers (1) the length of
time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Corporation to retain its investment in the issuer for a period
of time sufficient to allow for any anticipated recovery in fair value. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

Time Certificates of Deposit

Time certificates of
deposit have a maturity of greater than one year and are carried at cost, which approximates fair value.

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at their outstanding unpaid
principal balances, net of an allowance for loan losses and any deferred fees or costs. Interest income is accrued on the unpaid principal balance. Loan origination fees are deferred and recognized as an adjustment of the yield (interest income) of
the related loans. The Corporation is generally amortizing these amounts over the contractual life of the loan.

The accrual of interest is
generally discontinued when the contractual payment of principal or interest has become 90 to 120 days past due or management has serious doubts about further collectibility of principal or interest, even though the loan is currently performing. A
loan may remain on accrual status if it is in the process of collection and is either guaranteed or well secured. When a loan is placed on non-accrual status, unpaid interest credited to income in the current year is reversed and unpaid interest
accrued in prior years is charged against the allowance for loan losses. Interest received on non-accrual loans generally is either applied against principal or reported as interest income, according to managements judgment as to the
collectibility of principal. Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time and the ultimate collectibility of the total
contractual principal and interest is no longer in doubt.

Allowance for Loan Losses

The allowance for loan losses is established through provisions for loan losses charged against income. Loans deemed to be uncollectible are charged
against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance.



12



---

FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)



Allowance for Loan Losses (Continued)

The allowance for loan losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. Managements
periodic evaluation of the adequacy of the allowance is based on the Corporations past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrowers ability to repay, the estimated
value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant change,
including the amounts and timing of future cash flows expected to be received on impaired loans.

The allowance consists of specific,
general and unallocated components. The specific component relates to loans that are classified as impaired. For such loans, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired
loan is lower than the carrying value for that loan. The general component covers non-classified loans and is based on historical loss experience adjusted for qualitative factors. An unallocated component is maintained to cover uncertainties that
could affect managements estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in
the portfolio.

A loan is considered impaired when, based on current information and events, it is probable that the Corporation will be
unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the
probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment
delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrowers prior payment record
and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis for commercial, financial and agricultural loans by either the present value of expected future cash flows discounted at
the loans effective interest rate, the loans obtainable market price or the fair value of the collateral if the loan is collateral dependent.

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Corporation does not separately identify individual installment and residential loans for impairment
disclosures unless such loans are the subject of a restructuring agreement.

Restricted Investment in Bank Stocks

Restricted investment in bank stocks includes Federal Reserve, Atlantic Central Bankers Bank and Federal Home Loan Bank (FHLB) stocks. Federal law
requires a member institution of the FHLB to hold stock of its district FHLB according to a predetermined formula. The stock is carried at cost.

Premises and Equipment

Premises and equipment are stated at cost less accumulated depreciation computed on the
straight-line method over the estimated useful lives of the assets. Leasehold improvements are depreciated over the shorter of the estimated useful lives or the lease terms. Maintenance and repairs are expensed when incurred and expenditures for
significant improvements are capitalized.



13



---

FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)



Foreclosed Real Estate

Foreclosed real estate includes assets acquired through foreclosure and loans identified as in-substance foreclosures. A loan is classified as in-substance foreclosure when the Corporation has taken possession of the
collateral regardless of whether formal foreclosure proceedings have taken place. Foreclosed real estate is valued at its estimated fair market value, net of selling costs, at the time of foreclosure. Gains and losses resulting from the sale or
write-down of foreclosed real estate are recorded in other income. Foreclosed real estate, which is included in other assets, amounted to $106,000 and $56,000 at December 31, 2005 and 2004, respectively.

Transfers of Financial Assets

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

Advertising Costs

The Corporation charges the costs of advertising to expense as incurred. Advertising expense was $76,000, $66,000, and $71,000 for the years ended December 31, 2005, 2004, and 2003, respectively.

Income Taxes

Deferred income taxes are provided on
the liability method whereby deferred tax assets are recognized for deductible temporary differences and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported
amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance, when in the opinion of management, it is more likely than not that some portion or all the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted through the provision for income taxes for the effects of changes in tax laws and rates on the date of enactment.

Earnings per Share

The Corporation has a simple capital structure. Basic earnings per share represents net income divided
by the weighted average number of common shares outstanding during the period as adjusted for the 2-for-1 stock split declared in 2004. The weighted average number of common shares outstanding was 1,400,000 in all periods presented.

Segment Reporting

Management does not separately
allocate expenses, including the cost of funding loan demand, between the commercial, retail, trust and other operations of the Corporation. As such, discrete financial information is not available and segment reporting would not be meaningful.

Comprehensive Income

Accounting
principles generally accepted in the United States of America generally require that recognized revenue, expenses, gains and losses be included in net income. Changes in certain assets and liabilities, such as unrealized gains (losses) on securities
available for sale, are reported as a separate component of the equity section of the balance sheet. Such items, along with net income, are components of comprehensive income.



14



---

FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)



Comprehensive Income (Continued)

The components of other comprehensive income and the related tax effects are as follows:



|                                                             |  |                          |      |   |      |   |      |      |  |   |      |  
|------------------------------------------------------------ |  | ------------------------ | ---- | - | ---- | - | ---- | ---- |  | - | ---- | -
|                                                             |  | Years Ended December 31, |     
|                                                             |  | 2005                     |      |   | 2004 |   |      | 2003 | 
|                                                             |  | (In Thousands)           |     
|Unrealized holding losses on available for sale securities   |  | $                        | (630 | ) |      | $ | (93  | )    |  | $ | (465 | )
|Reclassification adjustment for gains realized in net income |  |                          | (299 | ) |      |   | (133 | )    |  |   | (123 | )
|                                                             |  |                          |      |   |      |   |      |      |  |   |      |  
|Net Unrealized Losses                                        |  |                          | (929 | ) |      |   | (226 | )    |  |   | (588 | )
|Tax effect                                                   |  |                          | 328  |   |      |   | 74   |      |  |   | 195  |  
|                                                             |  |                          |      |   |      |   |      |      |  |   |      |  
|Net of Tax Amount                                            |  | $                        | (601 | ) |      | $ | (152 | )    |  | $ | (393 | )
|                                                             |  |                          |      |   |      |   |      |      |  |   |      |  

Off Balance Sheet Financial Instruments

In the ordinary course of business, the Corporation has entered into off balance sheet financial instruments consisting of commitments to extend credit
and standby letters of credit. Such financial instruments are recorded in the financial statements when they become payable.

New Accounting Standards

In March 2004, the EITF reached a consensus on Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments. EITF 03-1 provides guidance on other-than-temporary impairment models for marketable debt and equity securities accounted for under SFAS 115 and non-marketable equity securities accounted for under the cost
method. The EITF developed a basic three-step model to evaluate whether an investment is other-than-temporarily impaired. In November 2005, the FASB approved the issuance of FASB Staff Position FAS No. 115-1 and FAS 124-1, The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments. The FSP addresses when an investment is considered impaired, whether the impairment is other-than-temporary and the measurement of an impairment loss. The FSP also
includes accounting considerations subsequent to the recognition of an other-than-temporary impairment and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary. The FSP is effective for reporting
periods beginning after December 15, 2005 with earlier application permitted. For the Corporation, the effective date will be the 1stquarter of fiscal 2006. The adoption of this accounting principle is not expected to have a significant impact on our financial position or results of operations.



15



---

FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 2 - RESTRICTIONS ON CASH AND
DUE FROM BANKS

In return for services obtained through correspondent banks, the
Corporation is required to maintain non-interest bearing cash balances in those correspondent banks. At December 31, 2005 and 2004, compensating balances approximated $476,000 and $455,000, respectively. During 2005 and 2004, average required
balances totaled $466,000 and $460,000, respectively.

NOTE 3 - SECURITIES

Amortized cost and fair value at December 31 were as follows:



|                               |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|------------------------------ |  | -------------- | ------ | -------------------- | - | --------------------- |  | - | --------- | - |  | - | ------
|                               |  | AmortizedCost  |        | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | FairValue
|                               |  | (In Thousands)
|SECURITIES AVAILABLE FOR SALE: |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|December 31, 2005:             |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|U.S. agencies securities       |  | $              | 10,241 |                      | $ | 2                     |  | $ | (92       | ) |  | $ | 10,151
|Mortgage-backed securities     |  |                | 41,966 |                      |   | 3                     |  |   | (989      | ) |  |   | 40,980
|Equity securities              |  |                | 500    |                      |   | 509                   |  |   |          |   |  |   | 1,009 
|                               |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|                               |  | $              | 52,707 |                      | $ | 514                   |  | $ | (1,081    | ) |  | $ | 52,140
|                               |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|December 31, 2004:             |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|U.S. agencies securities       |  | $              | 4,755  |                      | $ | 6                     |  | $ | (19       | ) |  | $ | 4,742 
|Mortgage-backed securities     |  |                | 45,466 |                      |   | 43                    |  |   | (381      | ) |  |   | 45,128
|Equity securities              |  |                | 537    |                      |   | 713                   |  |   |          |   |  |   | 1,250 
|                               |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|                               |  | $              | 50,758 |                      | $ | 762                   |  | $ | (400      | ) |  | $ | 51,120
|                               |  |                |        |                      |   |                       |  |   |           |   |  |   |       



16



---

FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 3 - SECURITIES (CONTINUED)



|                               |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|------------------------------ |  | -------------- | ------ | -------------------- | - | --------------------- |  | - | --------- | - |  | - | ------
|                               |  | AmortizedCost  |        | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | FairValue
|                               |  | (In Thousands)
|SECURITIES HELD TO MATURITY:   |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|December 31, 2005:             |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|U.S. agencies securities       |  | $              | 1,698  |                      | $ |                      |  | $ | (30       | ) |  | $ | 1,668 
|State and municipal securities |  |                | 23,126 |                      |   | 133                   |  |   | (117      | ) |  |   | 23,142
|                               |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|                               |  | $              | 24,824 |                      | $ | 133                   |  | $ | (147      | ) |  | $ | 24,810
|                               |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|December 31, 2004:             |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|U.S. agencies securities       |  | $              | 1,248  |                      | $ |                      |  | $ | (25       | ) |  | $ | 1,223 
|State and municipal securities |  |                | 22,079 |                      |   | 344                   |  |   | (86       | ) |  |   | 22,337
|                               |  |                |        |                      |   |                       |  |   |           |   |  |   |       
|                               |  | $              | 23,327 |                      | $ | 344                   |  | $ | (111      | ) |  | $ | 23,560
|                               |  |                |        |                      |   |                       |  |   |           |   |  |   |       

The following table shows the Corporations investments gross unrealized losses and fair value,
aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2005 and 2004:



|                               |  |                     |        |                   |   |           |  |                  |        |           |   |                  |  |   |        |  |   |      
|------------------------------ |  | ------------------- | ------ | ----------------- | - | --------- |  | ---------------- | ------ | --------- | - | ---------------- |  | - | ------ |  | - | -----
|                               |  | Less than 12 Months |        | 12 Months or More |   | Total    
|                               |  | FairValue           |        | UnrealizedLosses  |   | FairValue |  | UnrealizedLosses |        | FairValue |   | UnrealizedLosses
|                               |  | (In Thousands)     
|DECEMBER 31, 2005              |  |                     |        |                   |   |           |  |                  |        |           |   |                  |  |   |        |  |   |      
|SECURITIES AVAILABLE FOR SALE: |  |                     |        |                   |   |           |  |                  |        |           |   |                  |  |   |        |  |   |      
|U.S. agencies securities       |  | $                   | 5,366  |                   | $ | 57        |  | $                | 3,285  |           | $ | 35               |  | $ | 8,651  |  | $ | 92   
|Mortgage-backed securities     |  |                     | 17,145 |                   |   | 260       |  |                  | 22,761 |           |   | 729              |  |   | 39,906 |  |   | 989  
|                               |  |                     |        |                   |   |           |  |                  |        |           |   |                  |  |   |        |  |   |      
|                               |  |                     | 22,511 |                   |   | 317       |  |                  | 26,046 |           |   | 764              |  |   | 48,557 |  |   | 1,081
|                               |  |                     |        |                   |   |           |  |                  |        |           |   |                  |  |   |        |  |   |      
|SECURITIES HELD TO MATURITY:   |  |                     |        |                   |   |           |  |                  |        |           |   |                  |  |   |        |  |   |      
|U.S. agencies securities       |  | $                   | 444    |                   | $ | 5         |  | $                | 1,224  |           | $ | 25               |  | $ | 1,668  |  | $ | 30   
|State and municipal securities |  |                     | 4,626  |                   |   | 29        |  |                  | 6,220  |           |   | 88               |  |   | 10,846 |  |   | 117  
|                               |  |                     |        |                   |   |           |  |                  |        |           |   |                  |  |   |        |  |   |      
|                               |  |                     | 5,070  |                   |   | 34        |  |                  | 7,444  |           |   | 113              |  |   | 12,514 |  |   | 147  
|                               |  |                     |        |                   |   |           |  |                  |        |           |   |                  |  |   |        |  |   |      
|Total                          |  | $                   | 27,581 |                   | $ | 351       |  | $                | 33,490 |           | $ | 877              |  | $ | 61,071 |  | $ | 1,228
|                               |  |                     |        |                   |   |           |  |                  |        |           |   |                  |  |   |        |  |   |      



17



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FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 3 - SECURITIES (CONTINUED)



|                               |  |                     |        |                   |   |           |  |                  |        |           |   |                  |  |   |        |  |   |    
|------------------------------ |  | ------------------- | ------ | ----------------- | - | --------- |  | ---------------- | ------ | --------- | - | ---------------- |  | - | ------ |  | - | ---
|                               |  | Less than 12 Months |        | 12 Months or More |   | Total    
|                               |  | FairValue           |        | UnrealizedLosses  |   | FairValue |  | UnrealizedLosses |        | FairValue |   | UnrealizedLosses
|                               |  | (In Thousands)     
|DECEMBER 31, 2004              |  |                     |        |                   |   |           |  |                  |        |           |   |                  |  |   |        |  |   |    
|SECURITIES AVAILABLE FOR SALE: |  |                     |        |                   |   |           |  |                  |        |           |   |                  |  |   |        |  |   |    
|U.S. agencies securities       |  | $                   | 3,587  |                   | $ | 19        |  | $                |       |           | $ |                 |  | $ | 3,587  |  | $ | 19 
|Mortgage-backed securities     |  |                     | 25,147 |                   |   | 232       |  |                  | 7,416  |           |   | 149              |  |   | 32,563 |  |   | 381
|                               |  |                     |        |                   |   |           |  |                  |        |           |   |                  |  |   |        |  |   |    
|                               |  | $                   | 28,734 |                   | $ | 251       |  | $                | 7,416  |           | $ | 149              |  | $ | 36,150 |  | $ | 400
|                               |  |                     |        |                   |   |           |  |                  |        |           |   |                  |  |   |        |  |   |    
|SECURITIES HELD TO MATURITY:   |  |                     |        |                   |   |           |  |                  |        |           |   |                  |  |   |        |  |   |    
|U.S. agencies securities       |  | $                   | 977    |                   | $ | 21        |  | $                | 246    |           | $ | 4                |  | $ | 1,223  |  | $ | 25 
|State and municipal securities |  |                     | 3,669  |                   |   | 18        |  |                  | 3,310  |           |   | 68               |  |   | 6,979  |  |   | 86 
|                               |  |                     |        |                   |   |           |  |                  |        |           |   |                  |  |   |        |  |   |    
|                               |  |                     | 4,646  |                   |   | 39        |  |                  | 3,556  |           |   | 72               |  |   | 8,202  |  |   | 111
|                               |  |                     |        |                   |   |           |  |                  |        |           |   |                  |  |   |        |  |   |    
|Total                          |  | $                   | 33,380 |                   | $ | 290       |  | $                | 10,972 |           | $ | 221              |  | $ | 44,352 |  | $ | 511
|                               |  |                     |        |                   |   |           |  |                  |        |           |   |                  |  |   |        |  |   |    



18



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FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 3 - SECURITIES (CONTINUED)

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such
evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the
Corporation to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

At
December 31, 2005, 82 mortgage-backed and U.S. agency securities have unrealized losses. The aggregate depreciation from the Corporations amortized cost basis on these securities is 2.2%. These unrealized losses relate to changes in
interest rates.

At December 31, 2005, 37 state and municipal securities have unrealized losses with aggregate depreciation of 1.1% from the
Corporations amortized cost basis. In managements opinion, these unrealized losses relate primarily to changes in interest rates. In analyzing the issuers financial condition, management considers the issuers bond rating as
well as the financial performance of the respective municipality.

As management has the ability and intent to hold debt securities until recovery, or for
the foreseeable future if classified as available for sale, no declines are deemed to be other than temporary.

Amortized cost and fair value at
December 31, 2005 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay with or without penalties.



|                              |  |                    |        |                  |   |               |  |           |        |  |   |       
|----------------------------- |  | ------------------ | ------ | ---------------- | - | ------------- |  | --------- | ------ |  | - | ------
|                              |  | Available for Sale |        | Held to Maturity
|                              |  | AmortizedCost      |        | FairValue        |   | AmortizedCost |  | FairValue
|                              |  | (In Thousands)    
|1 year or less                |  | $                  | 2,497  |                  | $ | 2,472         |  | $         | 1,099  |  | $ | 1,079 
|Over 1 year through 5 years   |  |                    | 6,548  |                  |   | 6,500         |  |           | 932    |  |   | 913   
|Over 5 years through 10 years |  |                    | 1,196  |                  |   | 1,179         |  |           | 3,944  |  |   | 3,913 
|Over 10 years                 |  |                    |       |                  |   |              |  |           | 18,849 |  |   | 18,905
|Mortgage-backed securities    |  |                    | 41,966 |                  |   | 40,980        |  |           |       |  |   |      
|Equity securities             |  |                    | 500    |                  |   | 1,009         |  |           |       |  |   |      
|                              |  |                    |        |                  |   |               |  |           |        |  |   |       
|                              |  | $                  | 52,707 |                  | $ | 52,140        |  | $         | 24,824 |  | $ | 24,810
|                              |  |                    |        |                  |   |               |  |           |        |  |   |       

During 2005, the Corporation realized gross gains of $299,000 and no gross losses on sales of securities. During
2004, the Corporation realized gross gains of $189,000 and gross losses of $56,000 on sales of securities. During 2003, the Corporation realized gross gains of $135,000 and gross losses of $12,000 on sales of securities available for sale.

At December 31, 2005 and 2004, securities with fair value of $15,609,000 and $13,706,000, respectively, were pledged as collateral as required by law
on public deposits and for other purposes.



19



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FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 4 - LOANS

Loans at December 31 were as follows:



|                                       |  |                |         |   |      |   |         |  
|-------------------------------------- |  | -------------- | ------- | - | ---- | - | ------- | -
|                                       |  | 2005           |         |   | 2004 |  
|                                       |  | (In Thousands) |        
|Commercial, financial and agricultural |  | $              | 14,562  |   |      | $ | 12,918  |  
|Real estate:                           |  |                |         |   |      |   |         |  
|Commercial                             |  |                | 33,622  |   |      |   | 31,578  |  
|Construction                           |  |                | 34      |   |      |   | 99      |  
|Residential                            |  |                | 110,256 |   |      |   | 100,043 |  
|Installment                            |  |                | 5,008   |   |      |   | 4,527   |  
|                                       |  |                |         |   |      |   |         |  
|Total                                  |  |                | 163,482 |   |      |   | 149,165 |  
|Allowance for loan losses              |  |                | (1,264  | ) |      |   | (1,264  | )
|Deferred loan fees and costs, net      |  |                | (418    | ) |      |   | (383    | )
|                                       |  |                |         |   |      |   |         |  
|Loans                                  |  | $              | 161,800 |   |      | $ | 147,518 |  
|                                       |  |                |         |   |      |   |         |  

The Bank grants commercial, residential and consumer loans to customers primarily within Juniata and Perry
Counties of Pennsylvania and the surrounding area. A large portion of the loan portfolio is secured by real estate. Although the Bank has a diversified loan portfolio, its debtors ability to honor their contracts is influenced by the
regions economy.

The Corporation, in the ordinary course of business, has loan, deposit and other routine transactions with its officers, directors
and principal shareholders and entities in which they have principal ownership. Loans are made to such customers at the same credit terms as other borrowers and do not represent more than the usual risk of collection. Changes during 2005 in these
related party loans were as follows (in thousands):



|                   |  |   |        |  
|------------------ |  | - | ------ | -
|Balance, beginning |  | $ | 713    |  
|Advances           |  |   | 1,366  |  
|Repayments         |  |   | (1,446 | )
|                   |  |   |        |  
|Balance, ending    |  | $ | 633    |  
|                   |  |   |        |  

Changes in the allowance for loan losses were as follows:



|                                |  |                |       |   |      |   |       |      |  |   |       |  
|------------------------------- |  | -------------- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | -
|                                |  | 2005           |       |   | 2004 |   |       | 2003 | 
|                                |  | (In Thousands) |      
|Balance, beginning              |  | $              | 1,264 |   |      | $ | 1,212 |      |  | $ | 1,111 |  
|Provision charged to operations |  |                | 30    |   |      |   | 121   |      |  |   | 120   |  
|Recoveries on charged off loans |  |                | 2     |   |      |   | 3     |      |  |   | 15    |  
|Loans charged off               |  |                | (32   | ) |      |   | (72   | )    |  |   | (34   | )
|                                |  |                |       |   |      |   |       |      |  |   |       |  
|Balance, ending                 |  | $              | 1,264 |   |      | $ | 1,264 |      |  | $ | 1,212 |  
|                                |  |                |       |   |      |   |       |      |  |   |       |  



20



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FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 4 - LOANS (CONTINUED)

The following is a summary of information pertaining to impaired and nonaccrual loans:



|                                              |  |                |       |      |   |      
|--------------------------------------------- |  | -------------- | ----- | ---- | - | -----
|                                              |  | December 31,  
|                                              |  | 2005           |       | 2004
|                                              |  | (In Thousands)
|Impaired loans without a valuation allowance  |  | $              |      |      | $ | 348  
|Impaired loans with a valuation allowance     |  |                | 1,336 |      |   | 1,616
|                                              |  |                |       |      |   |      
|Total Impaired Loans                          |  | $              | 1,336 |      | $ | 1,964
|                                              |  |                |       |      |   |      
|Valuation allowance related to impaired loans |  | $              | 141   |      | $ | 185  
|                                              |  |                |       |      |   |      
|Total nonaccrual loans                        |  | $              | 1,131 |      | $ | 504  
|                                              |  |                |       |      |   |      



|                                                    |  |                          |       |      |   |       |  |   |      
|--------------------------------------------------- |  | ------------------------ | ----- | ---- | - | ----- |  | - | -----
|                                                    |  | Years Ended December 31,
|                                                    |  | 2005                     |       | 2004 |   | 2003 
|                                                    |  | (In Thousands)          
|Average investment in impaired loans                |  | $                        | 1,736 |      | $ | 1,996 |  | $ | 1,836
|                                                    |  |                          |       |      |   |       |  |   |      
|Interest income recognized on impaired loans        |  | $                        | 138   |      | $ | 133   |  | $ | 89   
|                                                    |  |                          |       |      |   |       |  |   |      
|Interest earned but not accrued on nonaccrual loans |  | $                        | 33    |      | $ | 13    |  | $ | 73   
|                                                    |  |                          |       |      |   |       |  |   |      

No additional funds are committed to be advanced in connection with impaired loans.

NOTE 5 - PREMISES AND EQUIPMENT

Premises and equipment at December 31 were as follows:



|                                  |  |                |        |   |      |   |        |  
|--------------------------------- |  | -------------- | ------ | - | ---- | - | ------ | -
|                                  |  | 2005           |        |   | 2004 |  
|                                  |  | (In Thousands) |       
|Land                              |  | $              | 741    |   |      | $ | 741    |  
|Buildings and improvements        |  |                | 7,558  |   |      |   | 7,265  |  
|Furniture, equipment and software |  |                | 3,931  |   |      |   | 3,462  |  
|                                  |  |                |        |   |      |   |        |  
|                                  |  |                | 12,230 |   |      |   | 11,468 |  
|Accumulated depreciation          |  |                | (4,605 | ) |      |   | (4,026 | )
|                                  |  |                |        |   |      |   |        |  
|                                  |  | $              | 7,625  |   |      | $ | 7,442  |  
|                                  |  |                |        |   |      |   |        |  



21



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FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 6 - DEPOSITS

Deposits were comprised of the following as of December 31:



|                                    |  |                |         |      |   |        
|----------------------------------- |  | -------------- | ------- | ---- | - | -------
|                                    |  | 2005           |         | 2004
|                                    |  | (In Thousands)
|Noninterest bearing demand          |  | $              | 25,508  |      | $ | 23,495 
|Interest bearing demand             |  |                | 22,618  |      |   | 24,159 
|Savings                             |  |                | 26,130  |      |   | 25,712 
|Time deposits less than $100,000    |  |                | 91,406  |      |   | 88,228 
|Time deposits greater than $100,000 |  |                | 46,282  |      |   | 41,536 
|                                    |  |                |         |      |   |        
|                                    |  | $              | 211,944 |      | $ | 203,130
|                                    |  |                |         |      |   |        

Scheduled maturities of time deposits at December 31, 2005 were as follows (in thousands):



|     |  |   |        
|---- |  | - | -------
|2006 |  | $ | 57,182 
|2007 |  |   | 34,019 
|2008 |  |   | 26,301 
|2009 |  |   | 12,804 
|2010 |  |   | 7,382  
|     |  |   |        
|     |  | $ | 137,688
|     |  |   |        

The following table sets forth maturity information on time deposits of $100,000 or more as of December 31,
2005 (in thousands):



|                                   |  |   |       
|---------------------------------- |  | - | ------
|Three months or less               |  | $ | 6,507 
|Over three and through six months  |  |   | 3,470 
|Over six and through twelve months |  |   | 7,500 
|Over twelve months                 |  |   | 28,805
|                                   |  |   |       
|Total                              |  | $ | 46,282
|                                   |  |   |       

NOTE 7 - BORROWINGS

Short-term borrowings at December 31 were as follows:



|                                               |  |                |       |      |   |      
|---------------------------------------------- |  | -------------- | ----- | ---- | - | -----
|                                               |  | 2005           |       | 2004
|                                               |  | (In Thousands)
|Amount outstanding at end of year:             |  |                |       |      |   |      
|Federal funds purchased                        |  | $              | 2,776 |      | $ | 224  
|Securities sold under agreements to repurchase |  |                | 5,068 |      |   | 3,127
|FHLB advance                                   |  |                | 1,000 |      |   | 1,000
|Treasury tax and loan note                     |  |                | 93    |      |   | 98   
|                                               |  |                |       |      |   |      
|                                               |  | $              | 8,937 |      | $ | 4,449
|                                               |  |                |       |      |   |      



22



---

FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 - BORROWINGS (CONTINUED)



Securities sold under agreements to repurchase generally mature within one day from the transaction date. Securities
with a carrying amount of $7,343,000 and $4,252,000 at December 31, 2005 and 2004, respectively, were pledged as collateral for these agreements. The securities underlying the agreements were under the Corporations control.

The FHLB advance at December 31, 2005 matures on March 11, 2006 and had an interest rate of 4.25%.

The Corporations long-term borrowings are comprised of FHLB fixed rate advances totaling $8,000,000 with interest rates ranging from 2.05% to 3.32% and mature in
2006 through 2008 and convertible fixed-rate advances totaling $13,000,000 that mature in 2010, 2011, and 2015 and which allow the FHLB the periodic option to convert to a LIBOR adjustable-rate advance at the three-month LIBOR plus 0.07% to 0.13%.
Options to convert $7,000,000 of the outstanding convertible advances commenced in 2003, options to convert $1,000,000 commence in 2006 and options to convert $5,000,000 commence in 2007. Upon the FHLBs conversion, the Bank has the option to
repay the respective advances in full.

Contractual maturities of these advances are as follows (in thousands):



|           |  |   |       
|---------- |  | - | ------
|2006       |  | $ | 3,000 
|2007       |  |   | 4,000 
|2008       |  |   | 1,000 
|2009       |  |   |      
|2010       |  |   | 6,000 
|Thereafter |  |   | 7,000 
|           |  |   |       
|           |  | $ | 21,000
|           |  |   |       

The Corporation has a maximum borrowing capacity through the Federal Home Loan Bank of approximately $143,000,000,
of which $121,000,000 was available at December 31, 2005. The borrowing capacity is collateralized by security agreements in certain residential real estate backed assets of the Corporation, including loans and investments.

The Corporation has issued floating rate junior subordinated deferrable interest debentures to a non-consolidated subsidiary trust, First Community Financial Capital
Trust I (the Trust). The Corporation owns all of the common equity of the Trust. The debentures held by the trust are the sole assets of the trust.

The
Trust issued $5,155,000 of mandatorily redeemable preferred securities to third-party investors. The Corporations obligations under the debentures and related documents, taken together, constitute a full and unconditional guarantee by the
Corporation of the Trusts obligations under the preferred securities. The junior subordinated debt securities pay interest quarterly at 3-month LIBOR plus 3.00%, subject to a cap of 12.00% through January 7, 2009. The preferred securities
are redeemable by the Corporation at 100% of principal plus accrued interest on or after January 7, 2009. The preferred securities must be redeemed upon maturity of the debentures on January 7, 2034.



23



---

FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 8 - OPERATING LEASES

The Corporation leases its Delaware (Juniata County) and Shermans Dale offices and the land on which its East Waterford office was constructed. The Corporation has an
option through 2010 to purchase the land, for predetermined prices ranging from $105,000 up to $125,000. The Corporation also receives rental income for leasing of available space at its West Perry, Mifflintown and Loysville offices. Net lease
expense was $3,000 in 2005 and $6,000 in 2004 and net lease income was $1,000 in 2003 after deducting rental expense of $60,000, $57,000, and $50,000, respectively.

NOTE 9 - INCOME TAXES

The components of income tax expense for the
years ended December 31, 2005, 2004 and 2003 are as follows:



|         |  |                |     |   |      |   |     |      |  |   |     |  
|-------- |  | -------------- | --- | - | ---- | - | --- | ---- |  | - | --- | -
|         |  | 2005           |     |   | 2004 |   |     | 2003 | 
|         |  | (In Thousands) |    
|Federal: |  |                |     |   |      |   |     |      |  |   |     |  
|Current  |  | $              | 641 |   |      | $ | 628 |      |  | $ | 717 |  
|Deferred |  |                | (88 | ) |      |   | (9  | )    |  |   | (65 | )
|         |  |                |     |   |      |   |     |      |  |   |     |  
|         |  | $              | 553 |   |      | $ | 619 |      |  | $ | 652 |  
|         |  |                |     |   |      |   |     |      |  |   |     |  



24



---

FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 9 - INCOME TAXES (CONTINUED)

Reconciliations of the statutory federal income tax at a rate of 34% to the income tax expense reported in the consolidated statements of income for the years ended
December 31, 2005, 2004 and 2003 are as follows:



|                                         |  |                                         |   |  |      |   |  |      |  
|---------------------------------------- |  | --------------------------------------- | - |  | ---- | - |  | ---- | -
|                                         |  | Percentage of Incomebefore Income Taxes |  
|                                         |  | 2005                                    |   |  | 2004 |   |  | 2003 |  
|Federal income tax at statutory rate     |  | 34.0                                    | % |  | 34.0 | % |  | 34.0 | %
|Tax-exempt income                        |  | (11.0                                   | ) |  | (9.5 | ) |  | (8.0 | )
|Earnings on investment in life insurance |  | (1.9                                    | ) |  | (1.9 | ) |  | (2.0 | )
|                                         |  |                                         |   |  |      |   |  |      |  
|                                         |  | 21.1                                    | % |  | 22.6 | % |  | 24.0 | %
|                                         |  |                                         |   |  |      |   |  |      |  

The provision for federal income taxes includes $102,000, $45,000, and $42,000 of income taxes related to net
gains on sales of securities in 2005, 2004, and 2003, respectively.

Components of deferred tax assets and liabilities at December 31 were as follows:



|                              |  |                |     |      |   |    
|----------------------------- |  | -------------- | --- | ---- | - | ---
|                              |  | 2005           |     | 2004
|                              |  | (In Thousands)
|Deferred tax assets:          |  |                |     |      |   |    
|Allowance for loan losses     |  | $              | 383 |      | $ | 383
|Nonaccrual loans interest     |  |                | 11  |      |   | 4  
|Intangible assets             |  |                | 13  |      |   | 15 
|Available for sale securities |  |                | 162 |      |   |   
|Retirement liabilities        |  |                | 356 |      |   | 301
|                              |  |                |     |      |   |    
|                              |  |                | 925 |      |   | 703
|                              |  |                |     |      |   |    
|Deferred tax liabilities:     |  |                |     |      |   |    
|Accumulated depreciation      |  |                | 316 |      |   | 350
|Available for sale securities |  |                |    |      |   | 166
|Other                         |  |                | 11  |      |   | 5  
|                              |  |                |     |      |   |    
|                              |  |                | 327 |      |   | 521
|                              |  |                |     |      |   |    
|Net Deferred Tax Assets       |  | $              | 598 |      | $ | 182
|                              |  |                |     |      |   |    



25



---

FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 10 - RETIREMENT PLANS

The Corporation maintains a 401(k) plan for the benefit of eligible employees. Employer contributions include matching a portion of employee contributions and a
discretionary contribution determined by the Corporation. Corporation contributions to the Plan were $129,000, $122,000, and $109,000 for 2005, 2004, and 2003, respectively.

The Corporation maintains non-qualified compensation plans for selected employees (supplemental retirement) and directors (deferred fees). The estimated present value of future benefits is accrued over the period from
the effective date of the agreements until the expected retirement dates of the individuals. Expenses include the following amounts for these non-qualified plans:



|                      |  |                |     |      |   |      |  |   |   
|--------------------- |  | -------------- | --- | ---- | - | ---- |  | - | --
|                      |  | 2005           |     | 2004 |   | 2003
|                      |  | (In Thousands)
|Employee compensation |  | $              | 83  |      | $ | 61   |  | $ | 56
|Director compensation |  |                | 102 |      |   | 161  |  |   | 76

The balance accrued for these plans included in other liabilities as of December 31, 2005 and 2004 totaled
$1,062,000 and $884,000, respectively.

To fund the benefits under these plans, the Corporation is the owner of single premium life insurance policies on
participants in the non-qualified retirement plans. At December 31, 2005 and 2004, the cash value of these policies was $4,514,000 and $4,362,000, respectively.

NOTE 11 - REGULATORY MATTERS

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

Quantitative measures established by regulation to ensure capital adequacy require the Corporation
and the Bank to maintain minimum amounts and ratios (set forth below) of Tier 1 capital to average assets and of Tier 1 and total capital (as defined in the regulations) to risk weighted assets. Management believes, as of December 31, 2005,
that the Corporation and the Bank meet all capital adequacy requirements to which they are subject.

As of December 31, 2005, the most recent
notification from the regulators categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the
Banks category.



26



---

FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 - REGULATORY MATTERS (CONTINUED)



The actual and required capital amounts and ratios were as follows:



|                                                          |  |                        |        |       |                             |   |        |                                                               |         |  |      |        |  |       |         |  |       |  
|--------------------------------------------------------- |  | ---------------------- | ------ | ----- | --------------------------- | - | ------ | ------------------------------------------------------------- | ------- |  | ---- | ------ |  | ----- | ------- |  | ----- | -
|                                                          |  | Actual                 |        |       | For CapitalAdequacyPurposes |   |        | To be WellCapitalized underPrompt CorrectiveAction Provisions |        
|                                                          |  | Amount                 |        | Ratio |                             |   | Amount |                                                               | Ratio   |  |      | Amount |  | Ratio |        
|                                                          |  | (Dollars in Thousands) |       
|CORPORATION:                                              |  |                        |        |       |                             |   |        |                                                               |         |  |      |        |  |       |         |  |       |  
|As of December 31, 2005:                                  |  |                        |        |       |                             |   |        |                                                               |         |  |      |        |  |       |         |  |       |  
|Tier 1 leverage ratio (to average assets)                 |  | $                      | 23,639 |       | 8.9                         | % |        | $                                                             | 310,591 |  | 34.0 | %      |  |       | N/A     |  | N/A   |  
|Tier 1 risk-based capital ratio (to risk-weighted assets) |  |                        | 23,639 |       | 16.2                        |   |        |                                                               | 35,832  |  | 34.0 |        |  |       | N/A     |  | N/A   |  
|Total risk-based capital ratio (to risk-weighted assets)  |  |                        | 25,132 |       | 17.2                        |   |        |                                                               | 311,664 |  | 38.0 |        |  |       | N/A     |  | N/A   |  
|                                                          |  |                        |        |       |                             |  
|As of December 31, 2004:                                  |  |                        |        |       |                             |   |        |                                                               |         |  |      |        |  |       |         |  |       |  
|Tier 1 leverage ratio (to average assets)                 |  | $                      | 21,162 |       | 8.6                         | % |        | $                                                             | 39,857  |  | 34.0 | %      |  |       | N/A     |  | N/A   |  
|Tier 1 risk-based capital ratio (to risk-weighted assets) |  |                        | 21,162 |       | 16.1                        |   |        |                                                               | 35,263  |  | 34.0 |        |  |       | N/A     |  | N/A   |  
|Total risk-based capital ratio (to risk-weighted assets)  |  |                        | 22,426 |       | 17.0                        |   |        |                                                               | 310,526 |  | 38.0 |        |  |       | N/A     |  | N/A   |  
|                                                          |  |                        |        |       |                             |  
|BANK:                                                     |  |                        |        |       |                             |   |        |                                                               |         |  |      |        |  |       |         |  |       |  
|As of December 31, 2005:                                  |  |                        |        |       |                             |   |        |                                                               |         |  |      |        |  |       |         |  |       |  
|Tier 1 leverage ratio (to average assets)                 |  | $                      | 22,629 |       | 8.6                         | % |        | $                                                             | 310,532 |  | 34.0 | %      |  | $     | 313,164 |  | 35.0  | %
|Tier 1 risk-based capital ratio (to risk-weighted assets) |  |                        | 22,629 |       | 15.6                        |   |        |                                                               | 35,807  |  | 34.0 |        |  |       | 38,711  |  | 36.0  |  
|Total risk-based capital ratio (to risk-weighted assets)  |  |                        | 23,893 |       | 16.5                        |   |        |                                                               | 311,615 |  | 38.0 |        |  |       | 314,519 |  | 310.0 |  
|                                                          |  |                        |        |       |                             |  
|As of December 31, 2004:                                  |  |                        |        |       |                             |   |        |                                                               |         |  |      |        |  |       |         |  |       |  
|Tier 1 leverage ratio (to average assets)                 |  | $                      | 22,097 |       | 8.2                         | % |        | $                                                             | 310,761 |  | 34.0 | %      |  | $     | 313,452 |  | 35.0  | %
|Tier 1 risk-based capital ratio (to risk-weighted assets) |  |                        | 22,097 |       | 16.7                        |   |        |                                                               | 35,287  |  | 34.0 |        |  |       | 37,930  |  | 36.0  |  
|Total risk-based capital ratio (to risk-weighted assets)  |  |                        | 23,682 |       | 17.9                        |   |        |                                                               | 310,575 |  | 38.0 |        |  |       | 313,218 |  | 310.0 |  

Certain restrictions exist regarding the ability of the Bank to transfer funds to the Corporation in the form of
cash dividends, loans or advances. Regulatory approval is required if the total of all dividends declared by a national bank in any calendar year exceeds net profits (as defined) for that year combined with the retained net profits for the two
preceding calendar years. At December 31, 2005, approximately $4,602,000 of undistributed earnings of the Bank, included in consolidated shareholders equity, was available for distribution to the Corporation as dividends without prior
regulatory approval.



27



---

FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 12 - FINANCIAL INSTRUMENTS WITH
OFF BALANCE SHEET RISK

The Corporation is a party to financial instruments with off balance
sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments consist primarily of commitments to extend credit (typically mortgages and commercial loans) and, to a lesser extent, standby
letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized on the balance sheet.

The Corporations exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the
contractual amount of those instruments. The Corporation uses the same credit policies in making commitments and conditional obligations as it does for on balance sheet instruments. The Corporation does not anticipate any material losses from these
commitments.

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. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Corporation evaluates each customers creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Corporation upon extensions of credit, is based on
managements credit evaluation of the customer. Collateral held varies but may include accounts receivable, inventory, property and equipment and income-producing commercial properties. On loans secured by real estate, the Corporation generally
requires loan to value ratios of no greater than 80%.

Standby letters of credit are conditional commitments issued by the Corporation to guarantee the
performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements and similar transactions. The terms of the letters of credit vary and may have renewal features. The credit risk
involved in using letters of credit is essentially the same as that involved in extending loans to customers. The Corporation holds collateral supporting those commitments for which collateral is deemed necessary. Management believes that the
proceeds obtained through a liquidation of such collateral would be sufficient to cover the maximum potential amount of future payments required under the corresponding guarantees. The current amount of the liability as of December 31, 2005 and
2004 for guarantees under standby letters of credit issued is not material.

The Corporation has not been required to perform on any financial guarantees,
and has not incurred any losses on its commitments, during the past two years.

A summary of the Corporations commitments at December 31 were as
follows:



|                             |  |                |        |      |   |       
|---------------------------- |  | -------------- | ------ | ---- | - | ------
|                             |  | 2005           |        | 2004
|                             |  | (In Thousands)
|Commitments to extend credit |  | $              | 22,171 |      | $ | 16,985
|Standby letters of credit    |  |                | 343    |      |   | 306   



28



---

FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 13 - FAIR VALUE OF FINANCIAL
INSTRUMENTS

Management uses its best judgment in estimating the fair value of the Corporations financial instruments; however,
there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Corporation could have realized in a sales
transaction on the dates indicated. The estimated fair value amounts have been measured as of their respective year ends and have not been re-evaluated or updated for purposes of these consolidated financial statements subsequent to those respective
dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each year end.

The following information should not be interpreted as an estimate of the fair value of the entire Corporation since a fair value calculation is only provided for a limited portion of the Corporations assets and
liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Corporations disclosures and those of other companies may not be meaningful. For the following
financial instruments, the carrying amount is a reasonable estimate of fair value:

Cash and cash equivalents

Time certificates of deposit

Accrued
interest receivable

Restricted investment in bank stocks

Short-term borrowings

Junior subordinated debt

Accrued interest payable

For investment securities, fair
value is based on quoted market prices, where available. If quoted market prices are not available, fair value is based on quoted market prices of comparable securities.

For floating rate loans that reprice frequently and which entail no significant changes in credit risk, the carrying amount is a reasonable estimate of fair value. For fixed rate loans, fair value is estimated using
discounted cash flow analysis, at interest rates currently offered for loans with similar terms to borrowers of similar credit quality.

For demand
deposits, the carrying amount is a reasonable estimate of fair value. For savings and time deposits, fair value is estimated using discounted cash flow analysis, at interest rates currently offered for deposits with similar maturities.

For long-term borrowings, fair value is based on currently available rates for borrowings with similar terms and remaining maturities.

Off balance sheet instruments of the Bank consist of letters of credit, loan commitments and unfunded lines of credit. Fair value is estimated using fees currently
charged for similar agreements, taking into account the remaining terms of the agreements and the counterparties credit standings. Any fees charged are immaterial.



29



---

FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 - FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)



Estimated fair values of financial instruments at December 31 were as follows:



|                                        |  |                |         |            |   |                |  |            |         |  |   |        
|--------------------------------------- |  | -------------- | ------- | ---------- | - | -------------- |  | ---------- | ------- |  | - | -------
|                                        |  | 2005           |         | 2004      
|                                        |  | CarryingAmount |         | Fair Value |   | CarryingAmount |  | Fair Value
|                                        |  | (In Thousands)
|Financial assets:                       |  |                |         |            |   |                |  |            |         |  |   |        
|Cash and cash equivalents               |  | $              | 8,150   |            | $ | 8,150          |  | $          | 8,106   |  | $ | 8,106  
|Time certificates of deposit            |  |                | 2,972   |            |   | 2,972          |  |            | 1,785   |  |   | 1,785  
|Investment securities:                  |  |                |         |            |   |                |  |            |         |  |   |        
|Available for sale                      |  |                | 52,140  |            |   | 52,140         |  |            | 51,120  |  |   | 51,120 
|Held to maturity                        |  |                | 24,824  |            |   | 24,810         |  |            | 23,327  |  |   | 23,560 
|Loans, less allowance for loan losses   |  |                | 161,800 |            |   | 161,657        |  |            | 147,518 |  |   | 148,275
|Accrued interest receivable             |  |                | 1,121   |            |   | 1,121          |  |            | 980     |  |   | 980    
|Restricted investment in bank stocks    |  |                | 2,012   |            |   | 2,012          |  |            | 1,902   |  |   | 1,902  
|Financial liabilities:                  |  |                |         |            |   |                |  |            |         |  |   |        
|Deposits                                |  |                | 211,944 |            |   | 210,577        |  |            | 203,130 |  |   | 203,720
|Short-term borrowings                   |  |                | 8,937   |            |   | 8,937          |  |            | 4,449   |  |   | 4,449  
|Long-term borrowings                    |  |                | 21,000  |            |   | 21,014         |  |            | 16,000  |  |   | 16,492 
|Junior subordinated debt                |  |                | 5,155   |            |   | 5,155          |  |            | 5,155   |  |   | 5,155  
|Accrued interest payable                |  |                | 406     |            |   | 406            |  |            | 340     |  |   | 340    
|Off-balance sheet financial instruments |  |                |        |            |   |               |  |            |        |  |   |       

NOTE 14 - CONTINGENCIES

The Corporation is subject to claims and lawsuits which arise primarily in the ordinary course of business. Based on information presently available and advice received
from legal counsel representing the Corporation in connection with any such claims and lawsuits, it is the opinion of management that the disposition or ultimate determination of any such claims and lawsuits will not have a material adverse effect
on the consolidated financial position, consolidated results of operations or liquidity of the Corporation.



30



---

FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 15 - CONDENSED FINANCIAL INFORMATION
FOR PARENT COMPANY ONLY

BALANCE SHEETS



|                                           |  |                |        |      |   |       
|------------------------------------------ |  | -------------- | ------ | ---- | - | ------
|                                           |  | December 31,  
|                                           |  | 2005           |        | 2004
|                                           |  | (In Thousands)
|ASSETS                                     |  |                |        |      |   |       
|Cash                                       |  | $              | 474    |      | $ | 323   
|Investment in subsidiaries                 |  |                | 22,172 |      |   | 21,200
|Securities available for sale              |  |                | 1,009  |      |   | 1,250 
|Other assets                               |  |                | 123    |      |   | 137   
|                                           |  |                |        |      |   |       
|Total Assets                               |  | $              | 23,778 |      | $ | 22,910
|                                           |  |                |        |      |   |       
|LIABILITIES AND SHAREHOLDERS EQUITY       |  |                |        |      |   |       
|Liabilities                                |  | $              | 291    |      | $ | 347   
|Junior subordinated debt                   |  |                | 5,155  |      |   | 5,155 
|Shareholders equity                       |  |                | 18,332 |      |   | 17,408
|                                           |  |                |        |      |   |       
|Total Liabilities and Shareholders Equity |  | $              | 23,778 |      | $ | 22,910
|                                           |  |                |        |      |   |       

STATEMENTS OF INCOME



|                                                    |  |                          |       |      |   |       |  |   |      
|--------------------------------------------------- |  | ------------------------ | ----- | ---- | - | ----- |  | - | -----
|                                                    |  | Years Ended December 31,
|                                                    |  | 2005                     |       | 2004 |   | 2003 
|                                                    |  | (In Thousands)          
|Dividends from bank subsidiary                      |  | $                        | 646   |      | $ | 690   |  | $ | 486  
|Other dividends                                     |  |                          | 47    |      |   | 42    |  |   | 24   
|Realized gain on sale of securities                 |  |                          | 299   |      |   | 84    |  |   |     
|                                                    |  |                          |       |      |   |       |  |   |      
|                                                    |  |                          | 992   |      |   | 816   |  |   | 510  
|Expenses                                            |  |                          | 371   |      |   | 269   |  |   | 18   
|                                                    |  |                          |       |      |   |       |  |   |      
|                                                    |  |                          | 621   |      |   | 547   |  |   | 492  
|Equity in undistributed earnings in bank subsidiary |  |                          | 1,450 |      |   | 1,576 |  |   | 1,576
|                                                    |  |                          |       |      |   |       |  |   |      
|Net Income                                          |  | $                        | 2,071 |      | $ | 2,123 |  | $ | 2,068
|                                                    |  |                          |       |      |   |       |  |   |      



31



---

FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 15 - CONDENSED FINANCIAL INFORMATION
FOR PARENT COMPANY ONLY (CONTINUED)

STATEMENTS
OF CASH FLOWS



|                                                    |  |                          |        |   |      |   |        |      |  |   |        |  
|--------------------------------------------------- |  | ------------------------ | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                    |  | Years Ended December 31, |       
|                                                    |  | 2005                     |        |   | 2004 |   |        | 2003 | 
|                                                    |  | (In Thousands)           |       
|CASH FLOWS FROM OPERATING ACTIVITIES                |  |                          |        |   |      |   |        |      |  |   |        |  
|Net income                                          |  | $                        | 2,071  |   |      | $ | 2,123  |      |  | $ | 2,068  |  
|Equity in undistributed earnings of bank subsidiary |  |                          | (1,450 | ) |      |   | (1,576 | )    |  |   | (1,576 | )
|Realized gain on sale of securities                 |  |                          | (299   | ) |      |   | (84    | )    |  |   |       |  
|(Increase) decrease in other assets                 |  |                          | 14     |   |      |   | 2      |      |  |   | (139   | )
|Increase in other liabilities                       |  |                          | 25     |   |      |   | 52     |      |  |   | 10     |  
|                                                    |  |                          |        |   |      |   |        |      |  |   |        |  
|Net Cash Provided by Operating Activities           |  |                          | 361    |   |      |   | 517    |      |  |   | 363    |  
|                                                    |  |                          |        |   |      |   |        |      |  |   |        |  
|CASH FLOWS FROM INVESTING ACTIVITIES                |  |                          |        |   |      |   |        |      |  |   |        |  
|Securities available for sale:                      |  |                          |        |   |      |   |        |      |  |   |        |  
|Proceeds from sales                                 |  |                          | 336    |   |      |   | 94     |      |  |   |       |  
|Purchases                                           |  |                          |       |   |      |   | (265   | )    |  |   |       |  
|Investment in subsidiaries                          |  |                          |       |   |      |   |       |      |  |   | (4,655 | )
|                                                    |  |                          |        |   |      |   |        |      |  |   |        |  
|Net Cash Provided by (Used in) Investing Activities |  |                          | 336    |   |      |   | (171   | )    |  |   | (4,655 | )
|                                                    |  |                          |        |   |      |   |        |      |  |   |        |  
|CASH FLOWS FROM FINANCING ACTIVITIES                |  |                          |        |   |      |   |        |      |  |   |        |  
|Proceeds from long-term borrowings                  |  |                          |       |   |      |   |       |      |  |   | 5,155  |  
|Cash dividends paid                                 |  |                          | (546   | ) |      |   | (490   | )    |  |   | (441   | )
|                                                    |  |                          |        |   |      |   |        |      |  |   |        |  
|Net Cash Provided by (Used in) Financing Activities |  |                          | (546   | ) |      |   | (490   | )    |  |   | 4,714  |  
|                                                    |  |                          |        |   |      |   |        |      |  |   |        |  
|Net Increase (Decrease) in Cash                     |  |                          | 151    |   |      |   | (144   | )    |  |   | 422    |  
|CASH - BEGINNING                                    |  |                          | 323    |   |      |   | 467    |      |  |   | 45     |  
|                                                    |  |                          |        |   |      |   |        |      |  |   |        |  
|CASH - ENDING                                       |  | $                        | 474    |   |      | $ | 323    |      |  | $ | 467    |  
|                                                    |  |                          |        |   |      |   |        |      |  |   |        |  



32



---

FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 16 - QUARTERLY FINANCIAL DATA
(UNAUDITED)

The following represents summarized unaudited quarterly financial data of the Corporation which in the opinion of
management, reflects adjustments (comprising only normal recurring accruals) necessary for fair presentation:



|                                   |  |                                          |       |              |   |         |  |          |  |   |       |  | 
|---------------------------------- |  | ---------------------------------------- | ----- | ------------ | - | ------- |  | -------- |  | - | ----- |  | 
|                                   |  | Three Months Ended                      
|                                   |  | December 31                              |       | September 30 |   | June 30 |  | March 31
|                                   |  | (In Thousands, Except per Share Amounts)
|2005:                              |  |                                          |       |              |   |         |  |          |  |   |      
|Interest income                    |  | $                                        | 3,489 |              | $ | 3,355   |  | $3,220   |  | $ | 3,136
|Interest expense                   |  |                                          | 1,692 |              |   | 1,620   |  | 1,491    |  |   | 1,419
|Net interest income                |  |                                          | 1,797 |              |   | 1,735   |  | 1,729    |  |   | 1,717
|Provision for loan losses          |  |                                          | 15    |              |   |        |  | 5        |  |   | 10   
|Gains on sales of securities       |  |                                          | 170   |              |   |        |  |         |  |   | 129  
|Provision for federal income taxes |  |                                          | 200   |              |   | 117     |  | 107      |  |   | 129  
|Net income                         |  |                                          | 655   |              |   | 475     |  | 453      |  |   | 488  
|Net income per share, basic        |  |                                          | 0.47  |              |   | 0.34    |  | 0.32     |  |   | 0.35 
|                                   |  |                                          |       |             
|2004:                              |  |                                          |       |              |   |         |  |          |  |   |      
|Interest income                    |  | $                                        | 3,223 |              | $ | 3,082   |  | $3,011   |  | $ | 3,019
|Interest expense                   |  |                                          | 1,399 |              |   | 1,343   |  | 1,310    |  |   | 1,289
|Net interest income                |  |                                          | 1,824 |              |   | 1,739   |  | 1,701    |  |   | 1,730
|Provision for loan losses          |  |                                          | 30    |              |   | 30      |  | 30       |  |   | 31   
|Gains on sales of securities       |  |                                          | 84    |              |   | 2       |  |         |  |   | 47   
|Provision for federal income taxes |  |                                          | 193   |              |   | 154     |  | 125      |  |   | 147  
|Net income                         |  |                                          | 665   |              |   | 518     |  | 449      |  |   | 491  
|Net income per share, basic        |  |                                          | 0.48  |              |   | 0.37    |  | 0.32     |  |   | 0.35 



33



---

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following discussion represents managements analysis of the financial
condition and results of operations of First Community Financial Corporation (the Corporation) and should be read in conjunction with the accompanying financial statements and other financial data included elsewhere in this report.

FORWARD-LOOKING STATEMENTS

Except for historical information, this report may be deemed to contain forward-looking statements regarding the Corporation. Examples of forward-looking statements include, but are not limited to, (a) projections or
statements regarding future earnings, expenses, net interest income, other income, earnings or loss per share, asset mix and quality, growth prospects, capital structure and other financial terms, (b) statements of plans and objectives of
management or the board of directors, and (c) statements of assumptions, such as economic conditions in the Corporations market areas. Such forward-looking statements can be identified by the use of forward-looking terminology such as
believes, expects, may, intends, will, should, anticipates, or the negative of any of the foregoing or other variations thereon or comparable terminology, or by
discussion of strategy.

No assurance can be given that the future results covered by forward-looking statements will be achieved. Such statements are
subject to risks, uncertainties, and other factors that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Important factors that could impact the Corporations operating
results include, but are not limited to, (i) the effects of changing economic conditions in the Corporations market areas and nationally, (ii) credit risks of commercial, real estate, consumer and other lending activities,
(iii) significant changes in interest rates, (iv) changes in federal and state banking laws and regulations which could impact the Corporations operations, (v) funding costs and (vi) other external developments which could
materially affect the Corporations business and operations.



34



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EXECUTIVE SUMMARY

The Corporations results are primarily determined by the results of operations of its principal subsidiary, The First National Bank of Mifflintown (the Bank). The Bank is a traditional community bank which
operates branches in two rural counties of central Pennsylvania. The Banks earnings are largely driven by its net interest income.

CRITICAL ACCOUNTING POLICIES

The consolidated financial statements include the Corporation and
its wholly-owned subsidiary, The First National Bank of Mifflintown (the Bank). All significant intercompany accounts and transactions have been eliminated.

The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, which require the Corporation to make estimates and assumptions (see footnote 1 to the
financial statements). The Corporation believes that of its significant accounting policies, the allowance for loan losses may involve a higher degree of judgment and complexity.

The allowance for loan losses is established through a charge to earnings for the provision for loan losses. In determining the balance in the allowance for loan losses, consideration is given to a variety of factors
in establishing this estimate. In estimating the allowance for loan losses, management considers current economic conditions, diversification of the loan portfolio, delinquency statistics, results of internal loan reviews, borrowers perceived
financial and managerial strengths, the adequacy of the underlying collateral, if collateral dependent, or present value of future cash flows and other relevant factors. The use of different estimates or assumptions could produce different
provisions for loan losses. Additional information is provided in the Provision for Loan Losses and Allowance for Loan Losses sections.

OVERVIEW

In 2005, the Corporation recorded net income of $2,071,000, a decrease of $52,000 or 2.4%, from net income of
$2,123,000 in 2004.

The decrease in net income during 2005 as compared to 2004 is primarily a result of the following:



| |  |  | Decrease in net interest income of $16,000
| | - |  | ------------------------------------------



| |  |  | Increase in total other operating income of $332,000.
| | - |  | -----------------------------------------------------



| |  |  | Increase in total other operating expense of $525,000.
| | - |  | ------------------------------------------------------

Basic earnings
per share were $1.48 in 2005 compared to $1.52 in 2004. Return on average equity for 2005 was 11.59% compared to 12.77% in 2004. Return on average assets was 0.81% for 2005 compared with 0.89% in 2004.

RESULTS OF OPERATIONS

NET INTEREST INCOME AND NET INTEREST MARGIN

Net interest income is the difference between interest income earned on investments and loans, and interest expense incurred on deposits and other liabilities. For analysis purposes, net interest income is evaluated
on a fully tax equivalent (FTE) basis. The FTE basis is calculated by grossing up the yield on tax-exempt securities and loans by the Federal tax rate of 34%, in order that the yield on tax-exempt assets may be comparable to interest earned on
taxable assets. The factors that affect net interest income include changes in interest rates and changes in average balances of interest-earning assets and interest-bearing liabilities. Net interest income on an FTE basis increased to $7,437,000 in
2005 from $7,430,000 in 2004 and $7,010,000 in 2003.



35



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NET INTEREST INCOME AND NET
INTEREST MARGIN (CONTINUED)

The following table includes average balances, rates and interest income and
expense adjusted to an FTE basis, the interest rate spread and the net interest margin:

Average Balances, Rates and Interest Income and
Expense

(Dollars in Thousands)



|                                           |  |                |         |          |      |            |  |      |                |  |          |         |            |   |        |                |      |          |  |            |         |  |   |        |  |      |  
|------------------------------------------ |  | -------------- | ------- | -------- | ---- | ---------- |  | ---- | -------------- |  | -------- | ------- | ---------- | - | ------ | -------------- | ---- | -------- |  | ---------- | ------- |  | - | ------ |  | ---- | -
|                                           |  | 2005           |         |          | 2004 |            |  | 2003 |               
|                                           |  | AverageBalance |         | Interest |      | Yield/Rate |  |      | AverageBalance |  | Interest |         | Yield/Rate |   |        | AverageBalance |      | Interest |  | Yield/Rate |        
|ASSETS                                     |  |                |         |          |      |            |  |      |                |  |          |         |            |   |        |                |      |          |  |            |         |  |   |        |  |      |  
|INTEREST EARNING ASSETS                    |  |                |         |          |      |            |  |      |                |  |          |         |            |   |        |                |      |          |  |            |         |  |   |        |  |      |  
|Securities:                                |  |                |         |          |      |            |  |      |                |  |          |         |            |   |        |                |      |          |  |            |         |  |   |        |  |      |  
|Taxable                                    |  | $              | 54,280  |          | $    | 2,023      |  | 3.73 | %              |  | $        | 49,059  |            | $ | 1,661  |                | 3.39 | %        |  | $          | 39,502  |  | $ | 1,489  |  | 3.77 | %
|Tax-exempt                                 |  |                | 23,319  |          |      | 1,289      |  | 5.53 | %              |  |          | 19,954  |            |   | 1,135  |                | 5.69 | %        |  |            | 15,909  |  |   | 1,023  |  | 6.43 | %
|                                           |  |                |         |          |      |            |  |      |                |  |          |         |            |   |        |                |      |          |  |            |         |  |   |        |  |      |  
|Total Securities                           |  |                | 77,599  |          |      | 3,312      |  | 4.26 | %              |  |          | 69,013  |            |   | 2,796  |                | 4.05 | %        |  |            | 55,411  |  |   | 2,512  |  | 4.53 | %
|Other                                      |  |                | 5,769   |          |      | 216        |  | 3.74 | %              |  |          | 3,856   |            |   | 98     |                | 2.54 | %        |  |            | 4,567   |  |   | 103    |  | 2.26 | %
|Loans:                                     |  |                |         |          |      |            |  |      |                |  |          |         |            |   |        |                |      |          |  |            |         |  |   |        |  |      |  
|Taxable                                    |  |                | 150,497 |          |      | 10,070     |  | 6.69 | %              |  |          | 145,010 |            |   | 9,729  |                | 6.71 | %        |  |            | 131,336 |  |   | 9,414  |  | 7.17 | %
|Tax-exempt                                 |  |                | 919     |          |      | 61         |  | 6.64 | %              |  |          | 2,315   |            |   | 148    |                | 6.39 | %        |  |            | 2,410   |  |   | 152    |  | 6.31 | %
|                                           |  |                |         |          |      |            |  |      |                |  |          |         |            |   |        |                |      |          |  |            |         |  |   |        |  |      |  
|Total Loans                                |  |                | 151,416 |          |      | 10,131     |  | 6.69 | %              |  |          | 147,325 |            |   | 9,877  |                | 6.70 | %        |  |            | 133,746 |  |   | 9,566  |  | 7.15 | %
|                                           |  |                |         |          |      |            |  |      |                |  |          |         |            |   |        |                |      |          |  |            |         |  |   |        |  |      |  
|Total Interest Earning Assets              |  |                | 234,784 |          |      | 13,659     |  | 5.82 | %              |  |          | 220,194 |            |   | 12,771 |                | 5.80 | %        |  |            | 193,724 |  |   | 12,181 |  | 6.29 | %
|                                           |  |                |         |          |      |            |  |      |                |  |          |         |            |   |        |                |      |          |  |            |         |  |   |        |  |      |  
|Non-interest earnings assets               |  |                | 21,311  |          |      |            |  |      |                |  |          | 19,655  |            |   |        |                |      |          |  |            | 17,113  |  |   |        |  |      |  
|                                           |  |                |         |          |      |            |  |      |                |  |          |         |            |   |        |                |      |          |  |            |         |  |   |        |  |      |  
|Total Assets                               |  | $              | 256,095 |          |      |            |  |      |                |  | $        | 239,849 |            |   |        |                |      |          |  | $          | 210,837 |  |   |        |  |      |  
|                                           |  |                |         |          |      |            |  |      |                |  |          |         |            |   |        |                |      |          |  |            |         |  |   |        |  |      |  
|LIABILITIES AND SHAREHOLDERS EQUITY       |  |                |         |          |      |            |  |      |                |  |          |         |            |   |        |                |      |          |  |            |         |  |   |        |  |      |  
|INTEREST BEARING LIABILITIES               |  |                |         |          |      |            |  |      |                |  |          |         |            |   |        |                |      |          |  |            |         |  |   |        |  |      |  
|Demand deposits, interest bearing          |  | $              | 24,019  |          |      | 129        |  | 0.54 | %              |  | $        | 22,516  |            | $ | 119    |                | 0.53 | %        |  | $          | 19,038  |  | $ | 167    |  | 0.88 | %
|Savings deposits                           |  |                | 27,120  |          |      | 210        |  | 0.77 | %              |  |          | 25,357  |            |   | 258    |                | 1.02 | %        |  |            | 21,174  |  |   | 237    |  | 1.12 | %
|Time deposits                              |  |                | 134,204 |          |      | 4,645      |  | 3.46 | %              |  |          | 126,346 |            |   | 4,019  |                | 3.18 | %        |  |            | 124,225 |  |   | 4,248  |  | 3.42 | %
|                                           |  |                |         |          |      |            |  |      |                |  |          |         |            |   |        |                |      |          |  |            |         |  |   |        |  |      |  
|Total Interest Bearing Deposits            |  |                | 185,343 |          |      | 4,984      |  | 2.69 | %              |  |          | 174,219 |            |   | 4,396  |                | 2.52 | %        |  |            | 164,437 |  |   | 4,652  |  | 2.83 | %
|Short-term borrowings                      |  |                | 4,714   |          |      | 136        |  | 2.89 | %              |  |          | 4,231   |            |   | 60     |                | 1.42 | %        |  |            | 3,479   |  |   | 29     |  | 0.83 | %
|Long-term borrowings                       |  |                | 24,114  |          |      | 1,102      |  | 4.57 | %              |  |          | 21,923  |            |   | 885    |                | 4.04 | %        |  |            | 8,219   |  |   | 489    |  | 5.95 | %
|                                           |  |                |         |          |      |            |  |      |                |  |          |         |            |   |        |                |      |          |  |            |         |  |   |        |  |      |  
|Total Interest Bearing Liabilities         |  |                | 214,171 |          |      | 6,222      |  | 2.91 | %              |  |          | 200,373 |            |   | 5,341  |                | 2.67 | %        |  |            | 176,135 |  |   | 5,170  |  | 2.94 | %
|                                           |  |                |         |          |      |            |  |      |                |  |          |         |            |   |        |                |      |          |  |            |         |  |   |        |  |      |  
|Demand deposits, non-interest bearing      |  |                | 22,583  |          |      |            |  |      |                |  |          | 21,476  |            |   |        |                |      |          |  |            | 17,838  |  |   |        |  |      |  
|Other liabilities                          |  |                | 1,467   |          |      |            |  |      |                |  |          | 1,372   |            |   |        |                |      |          |  |            | 1,428   |  |   |        |  |      |  
|Shareholders equity                       |  |                | 17,874  |          |      |            |  |      |                |  |          | 16,628  |            |   |        |                |      |          |  |            | 15,436  |  |   |        |  |      |  
|                                           |  |                |         |          |      |            |  |      |                |  |          |         |            |   |        |                |      |          |  |            |         |  |   |        |  |      |  
|Total Liabilities and Shareholders Equity |  | $              | 256,095 |          |      |            |  |      |                |  | $        | 239,849 |            |   |        |                |      |          |  | $          | 210,837 |  |   |        |  |      |  
|                                           |  |                |         |          |      |            |  |      |                |  |          |         |            |   |        |                |      |          |  |            |         |  |   |        |  |      |  
|NET INTEREST INCOME                        |  |                |         |          | $    | 7,437      |  |      |                |  |          |         |            | $ | 7,430  |                |      |          |  |            |         |  | $ | 7,011  |  |      |  
|                                           |  |                |         |          |      |            |  |      |                |  |          |         |            |   |        |                |      |          |  |            |         |  |   |        |  |      |  
|INTEREST RATE SPREAD                       |  |                |         |          |      |            |  | 2.91 | %              |  |          |         |            |   |        |                | 3.13 | %        |  |            |         |  |   |        |  | 3.35 | %
|                                           |  |                |         |          |      |            |  |      |                |  |          |         |            |   |        |                |      |          |  |            |         |  |   |        |  |      |  
|NET INTEREST MARGIN                        |  |                |         |          |      |            |  | 3.17 | %              |  |          |         |            |   |        |                | 3.37 | %        |  |            |         |  |   |        |  | 3.62 | %
|                                           |  |                |         |          |      |            |  |      |                |  |          |         |            |   |        |                |      |          |  |            |         |  |   |        |  |      |  

Yields on tax-exempt assets have been computed on a fully tax equivalent basis assuming a tax rate of 34%.

For yield calculation purposes, non-accruing loans are included in average loan balances.

Interest income on loans includes amortized fees and costs on loans totaling $109,000 in 2005, $161,000 in 2004, and $349,000 in 2003.

Securities available for sale are carried at amortized cost for purposes of calculating the average yield on taxable securities.



36



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NET INTEREST INCOME AND NET
INTEREST MARGIN (CONTINUED)

The following table shows changes in net interest income attributed to changes
in rates and changes in average balances of interest-earning assets and interest-bearing liabilities:

Rate/Volume Analysis

(In Thousands)



|                                  |  |                  |      |   |                  |   |               |  |   |      |   |  |        |      |       |  |   |       |  |   |      |  
|--------------------------------- |  | ---------------- | ---- | - | ---------------- | - | ------------- |  | - | ---- | - |  | ------ | ---- | ----- |  | - | ----- |  | - | ---- | -
|                                  |  | 2005 versus 2004 |      |   | 2004 versus 2003 |  
|                                  |  | Change Due to    |      |   |                  |   | Change Due to |  |   |     
|                                  |  | Rate             |      |   | Volume           |   | Total         |  |   | Rate |   |  | Volume |      | Total | 
|INTEREST EARNING ASSETS           |  |                  |      |   |                  |   |               |  |   |      |   |  |        |      |       |  |   |       |  |   |      |  
|Securities:                       |  |                  |      |   |                  |   |               |  |   |      |   |  |        |      |       |  |   |       |  |   |      |  
|Taxable                           |  | $                | 167  |   |                  | $ | 195           |  | $ | 362  |   |  | $      | (152 | )     |  | $ | 324   |  | $ | 172  |  
|Tax-exempt                        |  |                  | (32  | ) |                  |   | 186           |  |   | 154  |   |  |        | (118 | )     |  |   | 230   |  |   | 112  |  
|Other                             |  |                  | 44   |   |                  |   | 74            |  |   | 118  |   |  |        | (12  | )     |  |   | 7     |  |   | (5   | )
|Total loans                       |  |                  | (20  | ) |                  |   | 274           |  |   | 254  |   |  |        | (600 | )     |  |   | 911   |  |   | 311  |  
|                                  |  |                  |      |   |                  |   |               |  |   |      |   |  |        |      |       |  |   |       |  |   |      |  
|Total                             |  |                  | 159  |   |                  |   | 729           |  |   | 888  |   |  |        | (882 | )     |  |   | 1,472 |  |   | 590  |  
|                                  |  |                  |      |   |                  |   |               |  |   |      |   |  |        |      |       |  |   |       |  |   |      |  
|INTEREST BEARING LIABILITIES      |  |                  |      |   |                  |   |               |  |   |      |   |  |        |      |       |  |   |       |  |   |      |  
|Demand deposits, interest bearing |  |                  | 2    |   |                  |   | 8             |  |   | 10   |   |  |        | (66  | )     |  |   | 18    |  |   | (48  | )
|Savings deposits                  |  |                  | (62  | ) |                  |   | 14            |  |   | (48  | ) |  |        | (22  | )     |  |   | 43    |  |   | 21   |  
|Time deposits                     |  |                  | 354  |   |                  |   | 272           |  |   | 626  |   |  |        | (296 | )     |  |   | 67    |  |   | (229 | )
|Short-term borrowings             |  |                  | 62   |   |                  |   | 14            |  |   | 76   |   |  |        | 19   |       |  |   | 11    |  |   | 30   |  
|Long-term borrowings              |  |                  | 117  |   |                  |   | 100           |  |   | 217  |   |  |        | (156 | )     |  |   | 553   |  |   | 397  |  
|                                  |  |                  |      |   |                  |   |               |  |   |      |   |  |        |      |       |  |   |       |  |   |      |  
|Total                             |  |                  | 473  |   |                  |   | 408           |  |   | 881  |   |  |        | (521 | )     |  |   | 692   |  |   | 171  |  
|                                  |  |                  |      |   |                  |   |               |  |   |      |   |  |        |      |       |  |   |       |  |   |      |  
|Net Interest Income               |  | $                | (312 | ) |                  | $ | 319           |  | $ | 7    |   |  | $      | (361 | )     |  | $ | 780   |  | $ | 419  |  
|                                  |  |                  |      |   |                  |   |               |  |   |      |   |  |        |      |       |  |   |       |  |   |      |  

Interest income is presented on a fully tax equivalent basis, assuming a tax rate of 34%.

The net change attributable to the combination of rate and volume has been allocated to the change due to volume.

2005 VERSUS 2004

During 2005, tax equivalent
interest income increased by $888,000 compared to 2004, fueled mainly by asset growth as rates on earning assets were relatively stable. Average loans increased $4,091,000 positively impacting interest income by $274,000; however, a decline of 0.01%
in the yield on loans lowered interest income by $20,000. Total average securities grew by $8,586,000 and the corresponding yield increased by 0.21%. The growth in securities increased net interest income by $381,000 and the increase in rates
increased the return by $135,000.

Total average interest-bearing liabilities grew by $13,798,000 between 2004 and 2005 increasing interest expense by
$408,000 for 2005, while the average rate paid on interest-bearing liabilities increased by 0.24%, which increased also interest expense by $473,000.

The
net interest margin is the ratio of net interest income to interest-earning assets, reflecting a net yield on earning assets. The 0.20% decrease in the net interest margin during 2005, compared to 2004, resulted primarily from the increase in rates
on interest-bearing liabilities outpacing the growth in earning assets and the increase in rates on interest-earning assets.



37



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NET INTEREST INCOME AND NET
INTEREST MARGIN (CONTINUED)

2004 VERSUS 2003

During 2004, tax equivalent interest income increased by $590,000 compared to 2003, as asset growth more than offset the decline in rates. Average loans increased
$13,579,000 positively impacting interest income by $911,000; however, a decline of 0.45% in the yield on loans lowered interest income by $600,000. Total average securities grew by $13,602,000 but the corresponding yield decreased by 0.48%. The
growth in securities increased net interest income by $554,000 but the decline in rates reduced the return by $270,000.

Total average interest-bearing
liabilities grew by $24,238,000 between 2003 and 2004 increasing interest expense by $692,000 for 2004, which was partially offset by a lower average rate paid on interest-bearing liabilities 0.27%, which decreased interest expense by $521,000.

The net interest margin is the ratio of net interest income to interest-earning assets, reflecting a net yield on earning assets. The 0.25% decrease in
the net interest margin during 2004, compared to 2003, resulted primarily from the decrease in rates on earning assets outpacing the growth in earning assets and the decline in rates on interest-bearing liabilities.

PROVISION FOR LOAN LOSSES

The provision for loan losses and allowance for loan losses are based on managements ongoing assessment of the Corporations credit exposure and consideration of other relevant factors. The allowance for
loan losses is a valuation reserve, which is available to absorb future loan charge-offs. The provision for loan losses is the amount charged to earnings on an annual basis.

The Corporation recorded a $30,000 provision for loan losses in 2005, compared to $121,000 in 2004. Provisions for loan losses are charged to income to bring the allowance for loan losses to a level deemed appropriate
by management based on the factors discussed under the Allowance for Loan Losses section.

OTHER INCOME

2005 VERSUS 2004

Other
income of $1,962,000 during 2005 represented an increase of $332,000 over 2004, primarily as a result of the following:

An increase in
service charges on deposit accounts of $102,000 or 20.7%, which is primarily the result of increased deposit growth and the origination of our overdraft protection program.

An increase in ATM fees of $61,000 or 19.2%, mostly attributable to the added ATM at our Bloomfield Borough Office.

An increase in investment securities gains of $166,000 or 124.8% as the Corporation sold a portion of its investment in a local banks stock.



38



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OTHER INCOME (CONTINUED)

2004 VERSUS 2003

Other income of $1,630,000 during 2004 represented an increase of $98,000 over 2003, primarily as a result of the following:



| |  |  | An increase in income from fiduciary activities of $120,000 or 53.1%. This increase is the result of growth of assets under management and an increase in estate settlement fees.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | An increase in service charges on deposit accounts of $25,000 or 5.4%, which is consistent with the growth in deposit accounts.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



| |  |  | An increase in ATM and debit card fees of $40,000 or 14.4%, which is a result of new customers and increased usage by existing customers.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | An increase in other income of $46,000 due to an increase in commissions received on sales on certain types of insurance products.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------

These increases were partially offset by:



| |  |  | A decrease in earnings on investment in life insurance of $19,000 or 9.2%.
| | - |  | --------------------------------------------------------------------------



| |  |  | A decrease in realized gain on sale of foreclosed real estate of $124,000. There were no gains on sales of foreclosed real estate in 2004.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------

OTHER EXPENSES

2005
VERSUS 2004

Other expenses increased $525,000 or 9.1% to $6,286,000 during 2005 as compared to $5,761,000 during 2004, primarily as
a result of the following:

An increase in employee compensation and benefits of $272,000 or 8.9% to $3,330,000 during 2005 from $3,058,000
during 2004. The increase was related to general merit increases, an increase in the cost of employee benefits of $50,000, and the opening of the Bloomfield Borough Branch in October of 2004 which added 2 full time employees.

An increase in professional fees of $68,000 or 34.3% as the result of outsourcing compliance functions as well as the cost of an executive search firm
utilized to assist in the Corporations search for a new president.

An increase in ATM expense of $37,000 or 15.9%, primarily as a
result of an increase in ATM usage and an increase in interchange fees.

An increase in net occupancy and equipment expense of $43,000 or
4.6% due principally to the cost of the Bloomfield Borough Branch opened late 2004.

These increases were partially offset by a decrease in director and
advisory board compensation because of a decrease in retirement and deferred compensation plan accruals.



39



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OTHER EXPENSES (CONTINUED)

2004 VERSUS 2003

Other expenses increased $458,000 or 8.6% to $5,761,000 during 2004 as compared to $5,303,000 during 2003, primarily as a result of the following:



| |  |  | An increase in employee compensation and benefits of $342,000 or 12.6% to $3,058,000 during 2004 from $2,716,000 during 2003. The increase was related to general merit increases, an
increase in the cost of employee benefits, and the opening of the new Bloomfield Borough Branch in October of 2004.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | An increase in director and advisory boards compensation of $90,000 or 41.1%, primarily as a result of deferred compensation and director retirement plans.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | An increase in ATM expense of $36,000 or 18.3%, primarily as a result of an increase in ATM usage and an increase in interchange fees.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------



| |  |  | An increase in net occupancy and equipment expense of $16,000 or 1.8%.
| | - |  | ----------------------------------------------------------------------

These increases were partially offset by a decrease in professional and regulatory fees of $81,000 or 29.0%. This decrease is the result of the partial recovery of legal fees related to a commercial loan dispute.

INCOME TAXES

Income tax expense was
$553,000 for 2005 compared to $619,000 for 2004 and $652,000 for 2003. Income tax expense as a percentage of income before income taxes was 21.1% for 2005, 22.9% for 2004 and 24.0% for 2003. The Corporations lower effective tax rate in 2005
and 2004 was a result of an increase in the percentage of pre-tax income being derived from tax-exempt investments and loans and tax-exempt income earned on life insurance. Refer to footnote 9 to the consolidated financial statements for
further analysis of income taxes.

FINANCIAL CONDITION

SECURITIES

The securities portfolio is a component of
interest-earning assets and is second in size only to the Corporations loan portfolio. Investment securities not only provide interest income, they provide a source of liquidity, diversify the earning asset portfolio and provide collateral for
public funds and securities sold under agreements to repurchase.

The Corporations securities are classified as either held to maturity or available
for sale. Securities in the held to maturity category are accounted for at amortized cost. Available for sale securities are accounted for at fair value with unrealized gains and losses, net of taxes, reported as a separate component of
comprehensive income.

The Corporation generally intends to hold its investment portfolio until maturity; however, about 67.7% or $52,140,000, of total
securities at December 31, 2005 was classified as available for sale. Net unrealized losses at year-end 2005 were $567,000 compared to a gain of $362,000 at year-end 2004. The net unrealized loss at December 31, 2005 is reflected as
accumulated other comprehensive loss of $405,000 in shareholders equity, net of deferred income taxes. The accumulated other comprehensive income net of taxes at December 31, 2004 totaled $196,000. This decline reflects changes in
interest rates during 2005. Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the
length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Corporation to retain its investment in the issuer for
a period of time sufficient to allow for any anticipated recovery in fair value. As of December 31, 2005, the Corporation has not recognized other-than-temporary impairment on any of its investment securities. For additional information on
unrealized losses by investment type, see footnote 3 to the consolidated financial statements.



40



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SECURITIES (CONTINUED)

Held to maturity securities totaled $24,824,000 at December 31, 2005 compared to $23,327,000 a year ago. The increase was a result of purchases of U.S. Government agency securities and state and municipal
securities partially offset by calls and maturities. A significant portion of this portfolio is comprised of state and municipal securities that provide tax-exempt interest income to the Corporation.

The following tables set forth the composition of the securities portfolio and the securities maturity schedule, including weighted average yield, as of the dates
indicated:

Investment Securities

(In Thousands)



|                                              |  |      |        |      |   |        |  |   |       
|--------------------------------------------- |  | ---- | ------ | ---- | - | ------ |  | - | ------
|                                              |  | 2005 |        | 2004 |   | 2003  
|AVAILABLE FOR SALE SECURITIES AT FAIR
VALUE   |  |      |        |      |   |        |  |   |       
|U.S. Agencies                                 |  | $    | 10,151 |      | $ | 4,742  |  | $ | 3,165 
|Mortgage-backed securities                    |  |      | 40,980 |      |   | 45,128 |  |   | 38,815
|Stock in other banks                          |  |      | 1,009  |      |   | 1,250  |  |   | 951   
|                                              |  |      |        |      |   |        |  |   |       
|                                              |  |      | 52,140 |      |   | 51,120 |  |   | 42,931
|                                              |  |      |        |      |   |        |  |   |       
|HELD TO MATURITY SECURITIES AT AMORTIZED
COST |  |      |        |      |   |        |  |   |       
|U.S. Agencies                                 |  |      | 1,698  |      |   | 1,248  |  |   | 1,247 
|State and municipal                           |  |      | 23,126 |      |   | 22,079 |  |   | 17,744
|Mortgage-backed securities                    |  |      |       |      |   |       |  |   | 402   
|                                              |  |      |        |      |   |        |  |   |       
|                                              |  |      | 24,824 |      |   | 23,327 |  |   | 19,393
|                                              |  |      |        |      |   |        |  |   |       
|                                              |  | $    | 76,964 |      | $ | 74,447 |  | $ | 62,324
|                                              |  |      |        |      |   |        |  |   |       

Securities Maturity Schedule

(Dollars in Thousands)



|                           |  |                |       |       |                |   |        |                 |       |  |                             |        |  |       |       |  |        |   |       |   |        |        |      |       |  |   |        |  |      |  
|-------------------------- |  | -------------- | ----- | ----- | -------------- | - | ------ | --------------- | ----- |  | --------------------------- | ------ |  | ----- | ----- |  | ------ | - | ----- | - | ------ | ------ | ---- | ----- |  | - | ------ |  | ---- | -
|                           |  | 1 Year or Less |       |       | Over 1-5 Years |   |        | Over 5-10 Years |       |  | Over 10 Years orno Maturity |        |  | Total |      
|                           |  | Amount         |       | Yield |                |   | Amount |                 | Yield |  |                             | Amount |  | Yield |       |  | Amount |   | Yield |   |        | Amount |      | Yield | 
|U.S. Agencies              |  | $              | 3,471 |       | 2.39           | % |        | $               | 6,750 |  | 4.17                        | %      |  | $     | 1,628 |  | 4.09   | % |       | $ |       |        |     | %     |  | $ | 11,849 |  | 3.64 | %
|State and municipal        |  |                | 100   |       | 4.05           |   |        |                 | 682   |  | 2.77                        |        |  |       | 3,495 |  | 4.71   |   |       |   | 18,849 |        | 4.72 |       |  |   | 23,126 |  | 4.66 |  
|Mortgage-backed securities |  |                |      |       |               |   |        |                 |      |  |                            |        |  |       |      |  |       |   |       |   | 40,980 |        | 3.92 |       |  |   | 40,980 |  | 3.92 |  
|Equity securities          |  |                |      |       |               |   |        |                 |      |  |                            |        |  |       |      |  |       |   |       |   | 1,009  |        |     |       |  |   | 1,009  |  |     |  
|                           |  |                |       |       |                |   |        |                 |       |  |                             |        |  |       |       |  |        |   |       |   |        |        |      |       |  |   |        |  |      |  
|                           |  | $              | 3,571 |       | 2.44           | % |        | $               | 7,432 |  | 4.04                        | %      |  | $     | 5,123 |  | 4.51   | % |       | $ | 60,838 |        | 4.10 |       |  | $ | 76,964 |  | 4.05 | %
|                           |  |                |       |       |                |   |        |                 |       |  |                             |        |  |       |       |  |        |   |       |   |        |        |      |       |  |   |        |  |      |  

Held to maturity securities are accounted for at amortized cost and available for sale securities are accounted
for at fair value.

Weighted average yields are calculated on a fully tax equivalent basis assuming a tax rate of 34%.



41



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LOANS

Loans at December 31 were as follows:



|                                       |  |                |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|-------------------------------------- |  | -------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------- | -
|                                       |  | 2005           |         |   | 2004 |   |         | 2003 |  |   | 2002    |   |  | 2001 |        
|                                       |  | (In Thousands) |        
|Commercial, financial and agricultural |  | $              | 14,562  |   |      | $ | 12,918  |      |  | $ | 14,347  |   |  | $    | 13,023  |   |  | $ | 10,891  |  
|Real estate:                           |  |                |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Commercial                             |  |                | 33,622  |   |      |   | 31,578  |      |  |   | 27,657  |   |  |      | 20,624  |   |  |   | 19,529  |  
|Construction                           |  |                | 34      |   |      |   | 99      |      |  |   | 37      |   |  |      | 50      |   |  |   | 105     |  
|Residential                            |  |                | 110,256 |   |      |   | 100,043 |      |  |   | 96,215  |   |  |      | 88,448  |   |  |   | 80,262  |  
|Installment                            |  |                | 5,008   |   |      |   | 4,527   |      |  |   | 4,507   |   |  |      | 4,906   |   |  |   | 5,322   |  
|                                       |  |                |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Total                                  |  |                | 163,482 |   |      |   | 149,165 |      |  |   | 142,763 |   |  |      | 127,051 |   |  |   | 116,109 |  
|Allowance for loan losses              |  |                | (1,264  | ) |      |   | (1,264  | )    |  |   | (1,212  | ) |  |      | (1,111  | ) |  |   | (1,038  | )
|Deferred loan fees and costs, net      |  |                | (418    | ) |      |   | (383    | )    |  |   | (345    | ) |  |      | (314    | ) |  |   | (274    | )
|                                       |  |                |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Loans                                  |  | $              | 161,800 |   |      | $ | 147,518 |      |  | $ | 141,206 |   |  | $    | 125,626 |   |  | $ | 114,797 |  
|                                       |  |                |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  

The loan portfolio comprises the major portion of the Corporations earning assets. The increase in loans of
$14,282,000, or 9.7%, during 2005 was primarily in residential real estate which grew by $10,223,000 or 10.2%, and commercial real estate which grew by $2,044,000 or 6.5%.

The following table sets forth information on the contractual maturities for commercial and construction loans as of the dates indicated:

Loan Maturities - Commercial and Construction Loans

(In Thousands)



|                                       |  |                 |       |          |   |             |  |       |        |  |   |       
|-------------------------------------- |  | --------------- | ----- | -------- | - | ----------- |  | ----- | ------ |  | - | ------
|                                       |  | Less than 1Year |       | 1-5Years |   | Over 5Years |  | Total
|Commercial, financial and agricultural |  | $               | 5,923 |          | $ | 4,895       |  | $     | 3,744  |  | $ | 14,562
|Real estate:                           |  |                 |       |          |   |             |  |       |        |  |   |       
|Commercial                             |  |                 | 1,681 |          |   | 1,641       |  |       | 30,300 |  |   | 33,622
|Construction                           |  |                 | 34    |          |   |            |  |       |       |  |   | 34    
|                                       |  |                 |       |          |   |             |  |       |        |  |   |       
|Total                                  |  | $               | 7,638 |          | $ | 6,536       |  | $     | 34,044 |  | $ | 48,218
|                                       |  |                 |       |          |   |             |  |       |        |  |   |       
|Loans with a fixed interest rate       |  | $               | 1,166 |          | $ | 6,124       |  | $     | 14,090 |  | $ | 21,380
|Loans with a variable interest rate    |  |                 | 6,472 |          |   | 412         |  |       | 19,954 |  |   | 26,838
|                                       |  |                 |       |          |   |             |  |       |        |  |   |       
|Total                                  |  | $               | 7,638 |          | $ | 6,536       |  | $     | 34,044 |  | $ | 48,218
|                                       |  |                 |       |          |   |             |  |       |        |  |   |       

The Corporation has a significant concentration of residential and commercial mortgage loans collateralized by
properties located in Juniata and Perry Counties of Pennsylvania and the surrounding area.



42



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NON-PERFORMING ASSETS

Non-performing assets include loans on a non-accrual basis, loans past due more than ninety days and still accruing, troubled debt restructurings and foreclosed real
estate. These groups of assets represent the asset categories posing the greatest risk of loss to the Corporation. Non-accruing loans are loans no longer accruing interest due to apparent financial difficulties of the borrower. The Corporation
generally discontinues accrual of interest when principal or interest becomes doubtful based on prevailing economic conditions and collection efforts. Loans are returned to accrual status only when all factors indicating doubtful collectibility
cease to exist. Troubled debt restructurings result when an economic concession has been made to a borrower taking the form of a reduction or deferral of interest and/or principal. As of December 31, 2005 and 2004, the Corporation had no
troubled debt restructurings. Potential problem loans include impaired loans that are not on non-accrual basis or past due more than 90 days and still accruing. Foreclosed real estate is acquired through foreclosure or in lieu of foreclosure and is
recorded at fair value at the date of foreclosure establishing a new cost basis. Gains on the sale of foreclosed real estate are included in other income, while losses and writedowns resulting from periodic revaluations are included in other
expenses.

The following table sets forth the Corporations non-performing assets as of the dates indicated:

Non-Performing Assets

(Dollars in Thousands)



|                                                                   |  |      |       |   |      |   |       |      |  |   |       |   |  |      |        |   |  |   |        |  
|------------------------------------------------------------------ |  | ---- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | - |  | ---- | ------ | - |  | - | ------ | -
|                                                                   |  | 2005 |       |   | 2004 |   |       | 2003 |  |   | 2002  |   |  | 2001 |       
|Non-accrual loans                                                  |  | $    | 1,131 |   |      | $ | 504   |      |  | $ | 1,411 |   |  | $    | 200    |   |  | $ | 747    |  
|Accruing loans 90 days past due                                    |  |      |      |   |      |   |      |      |  |   |      |   |  |      |       |   |  |   |       |  
|                                                                   |  |      |       |   |      |   |       |      |  |   |       |   |  |      |        |   |  |   |        |  
|Total Non-Performing Loans                                         |  |      | 1,131 |   |      |   | 504   |      |  |   | 1,411 |   |  |      | 200    |   |  |   | 747    |  
|Foreclosed real estate                                             |  |      | 106   |   |      |   | 56    |      |  |   |      |   |  |      | 207    |   |  |   | 60     |  
|                                                                   |  |      |       |   |      |   |       |      |  |   |       |   |  |      |        |   |  |   |        |  
|Total Non-Performing Assets                                        |  | $    | 1,237 |   |      | $ | 560   |      |  | $ | 1,411 |   |  | $    | 407    |   |  | $ | 807    |  
|                                                                   |  |      |       |   |      |   |       |      |  |   |       |   |  |      |        |   |  |   |        |  
|Potential problem loans                                            |  | $    | 1,336 |   |      | $ | 1,964 |      |  | $ | 1,729 |   |  | $    | 1,800  |   |  | $ |       |  
|                                                                   |  |      |       |   |      |   |       |      |  |   |       |   |  |      |        |   |  |   |        |  
|Ratios:                                                            |  |      |       |   |      |   |       |      |  |   |       |   |  |      |        |   |  |   |        |  
|Non-performing loans to total loans                                |  |      | 0.70  | % |      |   | 0.34  | %    |  |   | 1.00  | % |  |      | 0.16   | % |  |   | 0.64   | %
|Non-performing assets to total loans and foreclosed real estate    |  |      | 0.76  | % |      |   | 0.38  | %    |  |   | 1.00  | % |  |      | 0.32   | % |  |   | 0.69   | %
|Non-performing loans to allowance for loan losses                  |  |      | 89.48 | % |      |   | 39.87 | %    |  |   | 85.90 | % |  |      | 555.55 | % |  |   | 139.04 | %
|Non-accrual loans:                                                 |  |      |       |   |      |   |       |      |  |   |       |   |  |      |        |   |  |   |        |  
|Interest income that would have been recorded under original terms |  |      | 129   |   |      |   | 34    |      |  |   | 90    |   |  |      | 65     |   |  |   | 83     |  
|Interest income recorded during the year                           |  |      | 96    |   |      |   | 21    |      |  |   | 17    |   |  |      | 61     |   |  |   | 56     |  

Total non-performing assets at year-end 2005 increased $677,000, primarily as a result of one large residential
mortgage, one mortgage secured by farmland, with no loss anticipated on either of these loans, as well as the increase in foreclosed real estate.



43



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ALLOWANCE FOR LOAN LOSSES

The Bank has established a systematic methodology for the determination of the allowance for loan losses. The methodology is set forth in a formal policy and takes into
consideration the need for an overall general valuation as well as specific allowances that are tied to individual loans.

In originating loans, the Bank
recognizes that losses will be experienced and that the risk of loss will vary with, among other things, the type of loan being made, the creditworthiness of the borrower over the term of the loan, general economic conditions and, in the case of a
secured loan, the quality of the collateral for the loan.

The Banks evaluation of the adequacy of the allowance for loan losses includes a review of
all loans on at least a quarterly basis. For residential mortgage loans and consumer loans, the primary factors used to determine the adequacy of the allowance are delinquency, collateral value, general economic conditions and, where applicable,
individual borrower information that is known to the Bank. For commercial loans and commercial real estate loans, the review includes financial performance of the borrower, payment history, collateral value, general economic conditions and more
specific economic conditions affecting specific industries or business activities of the borrowers within the portfolio agreements.

Management maintains
an allowance for loan losses that it considers adequate based on the evaluation process that it performs on a quarterly basis. As part of this process, management considers it appropriate to maintain a portion of the allowance that is based on
credit quality trends, loan volume, current economic trends and other uncertainties. This portion of the allowance for loan losses is reflected as the unallocated portion in the table below that indicates the distribution of the allowance.

The allowance for loan losses is based on estimates and ultimate losses may vary from current estimates. These estimates are reviewed periodically and, as
adjustments become necessary, they are reported in earnings in the periods in which they become known.

The following tables set forth information on the
analysis of the allowance for loan losses and the allocation of the allowance for loan losses as of the dates indicated:

Analysis of
Allowance for Loan Losses

(Dollars in Thousands)



|                                       |  |                          |       |      |   |       |  |      |       |      |   |       |  |   |      
|-------------------------------------- |  | ------------------------ | ----- | ---- | - | ----- |  | ---- | ----- | ---- | - | ----- |  | - | -----
|                                       |  | Years Ended December 31,
|                                       |  | 2005                     |       | 2004 |   | 2003  |  | 2002 |       | 2001
|Beginning balance                      |  | $                        | 1,264 |      | $ | 1,212 |  | $    | 1,111 |      | $ | 1,038 |  | $ | 966  
|Provision for loan losses              |  |                          | 30    |      |   | 121   |  |      | 120   |      |   | 120   |  |   | 78   
|Loans charged off:                     |  |                          |       |      |   |       |  |      |       |      |   |       |  |   |      
|Commercial, financial and agricultural |  |                          |      |      |   | 50    |  |      |      |      |   | 77    |  |   |     
|Real estate                            |  |                          | 18    |      |   |      |  |      | 16    |      |   |      |  |   |     
|Installment                            |  |                          | 14    |      |   | 22    |  |      | 18    |      |   | 1     |  |   | 18   
|                                       |  |                          |       |      |   |       |  |      |       |      |   |       |  |   |      
|Total Charged-off                      |  |                          | 32    |      |   | 72    |  |      | 34    |      |   | 78    |  |   | 18   
|                                       |  |                          |       |      |   |       |  |      |       |      |   |       |  |   |      
|Recoveries:                            |  |                          |       |      |   |       |  |      |       |      |   |       |  |   |      
|Commercial, financial and agricultural |  |                          |      |      |   |      |  |      |      |      |   |      |  |   | 6    
|Real estate                            |  |                          |      |      |   |      |  |      | 11    |      |   | 29    |  |   |     
|Installment                            |  |                          | 2     |      |   | 3     |  |      | 4     |      |   | 2     |  |   | 6    
|                                       |  |                          |       |      |   |       |  |      |       |      |   |       |  |   |      
|Total Recoveries                       |  |                          | 2     |      |   | 3     |  |      | 15    |      |   | 31    |  |   | 12   
|                                       |  |                          |       |      |   |       |  |      |       |      |   |       |  |   |      
|Net charge-offs                        |  |                          | 30    |      |   | 69    |  |      | 19    |      |   | 47    |  |   | 6    
|                                       |  |                          |       |      |   |       |  |      |       |      |   |       |  |   |      
|Ending balance                         |  | $                        | 1,264 |      | $ | 1,264 |  | $    | 1,212 |      | $ | 1,111 |  | $ | 1,038
|                                       |  |                          |       |      |   |       |  |      |       |      |   |       |  |   |      



44



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ALLOWANCE FOR LOAN LOSSES (CONTINUED)



|                                         |  |                          |   |  |      |   |  |      |   |  |      |   |  |      |  
|---------------------------------------- |  | ------------------------ | - |  | ---- | - |  | ---- | - |  | ---- | - |  | ---- | -
|                                         |  | Years Ended December 31, |  
|                                         |  | 2005                     |   |  | 2004 |   |  | 2003 |   |  | 2002 |   |  | 2001 |  
|Ratios:                                  |  |                          |   |  |      |   |  |      |   |  |      |   |  |      |  
|Net charge-offs to average loans         |  | 0.02                     | % |  | 0.06 | % |  | 0.01 | % |  | 0.04 | % |  | 0.01 | %
|Allowance for loan losses to total loans |  | 0.78                     | % |  | 0.86 | % |  | 0.85 | % |  | 0.88 | % |  | 0.89 | %

Allocation of the Allowance for Loan Losses

(Dollars in Thousands)



|                                       |  |        |       |                                 |        |   |        |      |                                 |  |        |        |  |                                 |       |  |        |   |                                 |   |       |        |        |                                 |  |   |       |  |        |  
|-------------------------------------- |  | ------ | ----- | ------------------------------- | ------ | - | ------ | ---- | ------------------------------- |  | ------ | ------ |  | ------------------------------- | ----- |  | ------ | - | ------------------------------- | - | ----- | ------ | ------ | ------------------------------- |  | - | ----- |  | ------ | -
|                                       |  | 2005   |       |                                 | 2004   |   |        | 2003 |                                 |  | 2002   |        |  | 2001                            |      
|                                       |  | Amount |       | Percent ofLoanType toTotalLoans |        |   | Amount |      | Percent ofLoanType toTotalLoans |  |        | Amount |  | Percent ofLoanType toTotalLoans |       |  | Amount |   | Percent ofLoanType toTotalLoans |   |       | Amount |        | Percent ofLoanType toTotalLoans | 
|Commercial, financial and agricultural |  | $      | 297   |                                 | 8.90   | % |        | $    | 286                             |  | 8.66   | %      |  | $                               | 270   |  | 10.05  | % |                                 | $ | 209   |        | 10.25  | %                               |  | $ | 172   |  | 9.38   | %
|Real estate:                           |  |        |       |                                 |        |   |        |      |                                 |  |        |        |  |                                 |       |  |        |   |                                 |   |       |        |        |                                 |  |   |       |  |        |  
|Commercial                             |  |        | 365   |                                 | 20.57  |   |        |      | 338                             |  | 21.17  |        |  |                                 | 424   |  | 19.37  |   |                                 |   | 401   |        | 16.23  |                                 |  |   | 183   |  | 16.82  |  
|Construction                           |  |        |      |                                 | 0.02   |   |        |      |                                |  | 0.07   |        |  |                                 |      |  | 0.03   |   |                                 |   |      |        | 0.04   |                                 |  |   |      |  | 0.09   |  
|Residential                            |  |        | 224   |                                 | 67.45  |   |        |      | 262                             |  | 67.07  |        |  |                                 | 240   |  | 67.39  |   |                                 |   | 274   |        | 69.62  |                                 |  |   | 249   |  | 69.13  |  
|Installment                            |  |        | 128   |                                 | 3.06   |   |        |      | 26                              |  | 3.03   |        |  |                                 | 26    |  | 3.16   |   |                                 |   | 25    |        | 3.86   |                                 |  |   | 18    |  | 4.58   |  
|Unallocated                            |  |        | 250   |                                 | N/A    |   |        |      | 352                             |  | N/A    |        |  |                                 | 252   |  | N/A    |   |                                 |   | 202   |        | N/A    |                                 |  |   | 416   |  | N/A    |  
|                                       |  |        |       |                                 |        |   |        |      |                                 |  |        |        |  |                                 |       |  |        |   |                                 |   |       |        |        |                                 |  |   |       |  |        |  
|Total                                  |  | $      | 1,264 |                                 | 100.00 | % |        | $    | 1,264                           |  | 100.00 | %      |  | $                               | 1,212 |  | 100.00 | % |                                 | $ | 1,111 |        | 100.00 | %                               |  | $ | 1,038 |  | 100.00 | %
|                                       |  |        |       |                                 |        |   |        |      |                                 |  |        |        |  |                                 |       |  |        |   |                                 |   |       |        |        |                                 |  |   |       |  |        |  

Management believes the allowance for loan losses at December 31, 2005 and 2004 is adequate to absorb losses
inherent in the loan portfolio. Although management believes that it uses the best information available to make such determinations, future adjustments to the allowance for loan losses may be necessary, and the results of operations could be
significantly and adversely affected if circumstances differ substantially from the assumptions used in making the determinations. Furthermore, while the Bank believes it has established its existing allowance for loan losses in accordance with
accounting principles generally accepted in the United States of America, there can be no assurance that the Office of the Comptroller of the Currency or the Board of Governors of the Federal Reserve System, in reviewing our loan portfolio, will not
request us to increase our allowance for loan losses. In addition, because future events affecting borrowers and collateral cannot be predicted with certainty, there can be no assurance that the existing allowance for loan losses is adequate or that
material increases will not be necessary should the quality of loans deteriorate as a result of factors discussed above. Any material increase in the allowance for loan losses may adversely affect the Banks financial condition and results of
operations.

DEPOSITS

Management
believes that the development and retention of deposits is the basis of sound growth and profitability. These deposits provide the primary source of funding for loans and investments. The Corporations continued expansion and business
development within its market area fueled the growth in deposits. As of December 31, 2005, deposits totaled $211,944,000 up $8,814,000 or 4.3%, from year-end 2004. Time deposits contributed most of the growth with a $7,924,000 or 6.1% increase.
Demand deposits and savings deposits followed with growth of $472,000 and $418,000, respectively. The growth in deposits resulted from continuing bank-wide promotions and the opening of our new Bloomfield Borough office.



45



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BORROWINGS

Short-term borrowings at December 31 were as follows:



|                                                        |  |                        |       |   |      |   |        |      |  |   |       |  
|------------------------------------------------------- |  | ---------------------- | ----- | - | ---- | - | ------ | ---- |  | - | ----- | -
|                                                        |  | 2005                   |       |   | 2004 |   |        | 2003 | 
|                                                        |  | (Dollars in Thousands) |      
|Amount outstanding at end of year:                      |  |                        |       |   |      |   |        |      |  |   |       |  
|Federal funds purchased                                 |  | $                      | 2,776 |   |      | $ | 224    |      |  | $ | 673   |  
|Securities sold under agreements to repurchase          |  |                        | 5,068 |   |      |   | 3,127  |      |  |   | 4,018 |  
|Short-term FHLB advances                                |  |                        | 1,000 |   |      |   | 1,000  |      |  |   |      |  
|Treasury tax and loan note                              |  |                        | 93    |   |      |   | 98     |      |  |   | 97    |  
|                                                        |  |                        |       |   |      |   |        |      |  |   |       |  
|                                                        |  | $                      | 8,937 |   |      | $ | 4,449  |      |  | $ | 4,788 |  
|                                                        |  |                        |       |   |      |   |        |      |  |   |       |  
|Weighted average interest rate at end of year           |  |                        | 3.86  | % |      |   | 1.82   | %    |  |   | 0.88  | %
|Maximum amount outstanding at any end of month          |  | $                      | 8,937 |   |      | $ | 10,462 |      |  | $ | 5,941 |  
|Daily average amount outstanding                        |  |                        | 4,714 |   |      |   | 4,231  |      |  |   | 3,479 |  
|Approximate weighted average interest rate for the year |  |                        | 2.89  | % |      |   | 1.42   | %    |  |   | 0.83  | %

Long-term borrowings increased $5,000,000 in 2005 due to the increase in FHLB advances. Additional information on
borrowings is located in footnote 7 to the consolidated financial statements.

AGGREGATE CONTRACTUAL
OBLIGATIONS

The following table represents the Corporations on and off-balance sheet aggregate contractual obligations to make
future payments as of December 31, 2005 (in thousands):



|                 |  |                 |        |            |   |            |  |             |        |       |   |        |  |   |        
|---------------- |  | --------------- | ------ | ---------- | - | ---------- |  | ----------- | ------ | ----- | - | ------ |  | - | -------
|                 |  | Less than1 Year |        | 1 - 3Years |   | 4 - 5Years |  | Over 5Years |        | Total
|Time deposits    |  | $               | 57,182 |            | $ | 60,320     |  | $           | 20,186 |       | $ |       |  | $ | 137,688
|Long-term debt   |  |                 | 3,000  |            |   | 5,000      |  |             | 6,000  |       |   | 12,155 |  |   | 26,155 
|Operating leases |  |                 | 43     |            |   | 52         |  |             | 9      |       |   |       |  |   | 104    
|                 |  |                 |        |            |   |            |  |             |        |       |   |        |  |   |        
|Total            |  | $               | 60,225 |            | $ | 65,372     |  | $           | 26,195 |       | $ | 12,155 |  | $ | 163,947
|                 |  |                 |        |            |   |            |  |             |        |       |   |        |  |   |        

In addition, the Corporation in the conduct of business operations routinely enters into contracts for services.
These contracts may require payment for services to be provided in the future and may also contain penalty clauses for the early termination of the contracts. Management is not aware of any other commitments or contingent liabilities which may have
a material adverse impact on the liquidity or capital resources of the Corporation.

OFF-BALANCE SHEET
ARRANGEMENTS

The Corporation is party to 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, to a lesser extent, standby letters of credit. At December 31, 2005, the Corporation had unfunded outstanding commitments to extend credit
of $22.2 million and outstanding standby letters of credit of $343,000. Because these commitments generally have fixed expiration dates and many will expire without being drawn upon, the total commitment level does not necessarily represent future
cash requirements. Refer to footnote 12 of the consolidated financial statements for a discussion of the nature, business purpose and importance of the Corporations off-balance sheet arrangements.



46



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INTEREST RATE SENSITIVITY

The operations of the Corporation do not subject it to foreign currency risk or commodity price risk. The Corporation does not utilize interest rate swaps, caps or
hedging transactions. In addition, the Corporation has no market risk sensitive instruments entered into for trading purposes. However, the Corporation is subject to interest rate risk and employs several different methods to manage and monitor the
risk.

Rate sensitive assets and rate sensitive liabilities are those whose rates or yields are subject to change within a defined time period, due to
maturity or a floating market rate. The risk to the Corporation results from interest rate fluctuations to the extent that there is a difference between the amount of the Corporations rate sensitive assets and the amount of interest sensitive
liabilities within specified periods. The Corporation monitors its rate sensitivity in order to reduce its vulnerability to interest rate fluctuations while maintaining adequate capital and acceptable levels of liquidity. The Corporations
asset and liability policy, along with monthly financial reports and monthly financial simulations, supplies management with guidelines to evaluate and manage the Corporations rate sensitivity.

Financial simulation presents a picture of the effect interest rate changes have on net interest income. Assumptions and estimates are used in the preparation of the
simulation and actual values may differ from those presented. In addition, these simulations do not portray other actions management might take to changes in market rates. The following is an analysis of possible changes in the Corporations
net interest income, for a +/- 200 basis point rate shock over a one year period compared to a flat or unchanged rate scenario.



|                         |  |                                    |    |  |                                    |   
|------------------------ |  | ---------------------------------- | -- |  | ---------------------------------- | --
|                         |  | 2005                               |    |  | 2004                               |   
|                         |  | PercentChange in NetInterestIncome |    |  | PercentChange in NetInterestIncome |   
|Change in interest rates |  |                                    |    |  |                                    |   
|+200 basis points        |  | 0.31                               | %  |  | 0.51                               | % 
|Flat rate                |  |                                   | %  |  |                                   | % 
|-200 basis points        |  | (0.45                              | )% |  | (1.46                              | )%

The percent change is expressed as the change in net interest income as a percent of the base years net
interest income. The net interest income at risk position is within the guidelines set by the Corporations asset/liability policy. An increase of 200 basis points could result in a 0.31% (or $25,000) increase in net interest income, whereas, a
200 basis point decrease could result in a 0.45% (or $37,000) decline in net interest income.

LIQUIDITY AND
CAPITAL RESOURCES

Liquidity represents the Corporations ability to efficiently manage cash flows to support
customers loan demand, withdrawals by depositors, the payment of operating expenses, as well as the ability to take advantage of business and investment opportunities as they arise. Liquidity is essential to compensate for fluctuations in the
balance sheet and provide funds for growth.

The primary sources of liquidity are the Corporations deposit base and a strong capital position. The
stability of the deposits is reflected in a comparison of year-end balances to yearly averages. Deposits at year-end 2005 totaled $211,944,000 and averaged $207,926,000 for the year, this is consistent with the increase in deposits for the year.
Likewise, year-end 2004 deposits totaled $203,130,000 and averaged $195,695,000 for the year.



47



---

LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

Other sources of liquidity are available from investment securities maturing in one year or less, which totaled $3,571,000 at year-end 2005 and from
investments in mortgage-backed securities, which supply income and principal cash flow streams on an ongoing basis. Mortgage-backed securities represented 54.1% of the total amortized cost of securities as of December 31, 2005. These sources
provide the Corporation with adequate resources to meet its short-term liquidity requirements. Longer term liquidity needs might be met by selling securities available for sale, which had a fair value of $52,140,000 at December 31, 2005,
selling loans or raising additional capital. In addition, the Corporation has established federal funds lines of credit at the Federal Home Loan Bank of Pittsburgh and the Atlantic Central Bankers Bank, which are reliable sources for short and
long-term funds. The maximum borrowing capacity through the Federal Home Loan Bank approximated $143,000,000 at December 31, 2005, of which $121,000,000 or 84.6% was available.

The Corporations loan to deposit ratio, for 2005, was maintained at an average of 72.8% and ended the year at 76.3% compared to an average of 75.4% in 2004 and 72.6% at the end of 2004.

The Corporations financial statements do not reflect various commitments that are made in the normal course of business, which may involve some liquidity risk.
These commitments consist mainly of unfunded loans and letters of credit made under the same standards as on-balance sheet instruments. Commitments to extend credit, at December 31, 2005 totaled $22.2 million and standby letters of credit
totaled $343,000.

The Corporation is not aware of any known trends or any known demands, commitments, events or uncertainties, which would result in the
liquidity increasing or decreasing in a material way.

The greater the capital resources, the more likely the Corporation will be able to meet its cash
obligations and unforeseen expenses. The Corporations strong capital position is related to the Corporations earnings stability. The dividend payout ratio was 26.4% in 2005, compared to 23.1% in 2004. Shareholders equity at the end
of 2005 totaled $18,332,000, an increase of $924,000 or 5.3% over year-end 2004. The increase was a result of net income partially offset by a $601,000 unrealized loss on securities available for sale, net of taxes, and by the dividend payout of
$546,000. Likewise, shareholders equity at the end of 2004 totaled $17,408,000, an increase of $1,481,000 or 9.3% over year-end 2003. The increase was a result of net income partially offset by a $152,000 unrealized loss on securities
available for sale, net of taxes, and by the dividend payout of $490,000.

The table in footnote 11 to the financial statements sets forth the
Corporations and Banks capital ratios as of December 31, 2005 and 2004. These ratios show that the Bank exceeds the federal regulatory minimum requirements for a well capitalized bank. The minimum regulatory requirements
of a well capitalized bank for the leverage ratio, Tier 1 and total risk-based capital ratios are 5.00%, 6.00% and 10.00%, respectively.

The
Corporation is not under any agreement with the regulatory authorities nor is it aware of any current recommendations by the regulatory authorities that, if implemented, would have a material effect on the Corporations capital, liquidity or
its operations.

INFLATION

The impact
of inflation upon banks differs from the impact upon non-banks. The majority of assets and liabilities of a bank are monetary in nature and, therefore, change with movements in interest rates. The exact impact of inflation on the Corporation is
difficult to measure. Inflation may cause operating expenses to increase at a rate not matched by increased earnings. Inflation may also affect the borrowing needs of consumers, thereby affecting growth of the Corporations assets. Inflation
may also affect the general level of interest rates, which could have an effect on the Corporations profitability. However, as discussed previously, the Corporation strives to manage its interest sensitive assets and liabilities offsetting the
effects of inflation.



48



---

Summary of Selected Financial Data

(Dollars in Thousands, Except Per Share Data)



|                                                          |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|--------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------- | -
|                                                          |  | 2005 |         |   | 2004 |   |         | 2003 |  |   | 2002    |   |  | 2001 |        
|Income Statement Data                                     |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net interest income                                       |  | $    | 6,978   |   |      | $ | 6,994   |      |  | $ | 6,611   |   |  | $    | 6,141   |   |  | $ | 4,898   |  
|Provision for loan losses                                 |  |      | 30      |   |      |   | 121     |      |  |   | 120     |   |  |      | 120     |   |  |   | 78      |  
|Gains on sales of securities                              |  |      | 299     |   |      |   | 133     |      |  |   | 123     |   |  |      |        |   |  |   | 77      |  
|Other income                                              |  |      | 1,663   |   |      |   | 1,497   |      |  |   | 1,409   |   |  |      | 1,225   |   |  |   | 1,066   |  
|Other expenses                                            |  |      | 6,286   |   |      |   | 5,761   |      |  |   | 5,303   |   |  |      | 4,988   |   |  |   | 4,365   |  
|                                                          |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Income before Income Taxes                                |  |      | 2,624   |   |      |   | 2,742   |      |  |   | 2,720   |   |  |      | 2,258   |   |  |   | 1,598   |  
|Income tax expense                                        |  |      | 553     |   |      |   | 619     |      |  |   | 652     |   |  |      | 474     |   |  |   | 297     |  
|                                                          |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net Income                                                |  | $    | 2,071   |   |      | $ | 2,123   |      |  | $ | 2,068   |   |  | $    | 1,784   |   |  | $ | 1,301   |  
|                                                          |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Balance Sheet Data (Period End)                           |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Total assets                                              |  | $    | 267,157 |   |      | $ | 247,655 |      |  | $ | 222,503 |   |  | $    | 201,770 |   |  | $ | 182,492 |  
|Loans, net                                                |  |      | 161,800 |   |      |   | 147,518 |      |  |   | 141,206 |   |  |      | 125,626 |   |  |   | 114,797 |  
|Investments:                                              |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Held to maturity                                          |  |      | 24,824  |   |      |   | 23,327  |      |  |   | 19,393  |   |  |      | 15,443  |   |  |   | 16,350  |  
|Available for sale                                        |  |      | 52,140  |   |      |   | 51,120  |      |  |   | 42,931  |   |  |      | 39,979  |   |  |   | 30,792  |  
|Deposits                                                  |  |      | 211,944 |   |      |   | 203,130 |      |  |   | 187,263 |   |  |      | 174,126 |   |  |   | 154,022 |  
|Short-term borrowings                                     |  |      | 8,937   |   |      |   | 4,449   |      |  |   | 4,788   |   |  |      | 3,610   |   |  |   | 6,083   |  
|Long-term borrowings                                      |  |      | 26,155  |   |      |   | 21,155  |      |  |   | 13,000  |   |  |      | 8,000   |   |  |   | 8,200   |  
|Shareholders equity                                      |  |      | 18,332  |   |      |   | 17,408  |      |  |   | 15,927  |   |  |      | 14,693  |   |  |   | 13,059  |  
|Per Share Data                                            |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Basic earnings                                            |  | $    | 1.48    |   |      | $ | 1.52    |      |  | $ | 1.48    |   |  | $    | 1.27    |   |  | $ | 0.93    |  
|Cash dividends declared                                   |  |      | 0.390   |   |      |   | 0.350   |      |  |   | 0.315   |   |  |      | 0.285   |   |  |   | 0.255   |  
|Book value                                                |  |      | 13.09   |   |      |   | 12.43   |      |  |   | 11.38   |   |  |      | 10.50   |   |  |   | 9.33    |  
|Weighted average common shares outstanding                |  |      | 1,400   |   |      |   | 1,400   |      |  |   | 1,400   |   |  |      | 1,400   |   |  |   | 1,400   |  
|Selected Ratios                                           |  |      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Return on average assets                                  |  |      | 0.81    | % |      |   | 0.89    | %    |  |   | 0.98    | % |  |      | 0.93    | % |  |   | 0.78    | %
|Return on average shareholders equity                    |  |      | 11.59   | % |      |   | 12.77   | %    |  |   | 13.4    | % |  |      | 12.90   | % |  |   | 10.36   | %
|Average equity to average assets                          |  |      | 6.98    | % |      |   | 6.93    | %    |  |   | 7.32    | % |  |      | 7.22    | % |  |   | 7.49    | %
|Allowance for loan losses to total loans at end of period |  |      | 0.78    | % |      |   | 0.86    | %    |  |   | 0.85    | % |  |      | 0.88    | % |  |   | 0.89    | %
|Dividend payout ratio                                     |  |      | 26.36   | % |      |   | 23.08   | %    |  |   | 21.32   | % |  |      | 22.37   | % |  |   | 27.42   | %



49



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BOARD OF DIRECTORS

FIRST COMMUNITY FINANCIAL CORPORATION

and

THE FIRST
NATIONAL BANK OF MIFFLINTOWN

JAMES R. McLAUGHLIN

Chairman of the Board of Directors of the Company and the Bank;

Retired President and Chief Executive
Officer of the Company and the Bank

ROGER SHALLENBERGER

Vice Chairman of the Board of Directors of the Company and the Bank;

President of KSM Enterprises

JODY D. GRAYBILL

President of
the Company and the Bank; Trust Officer of the Bank

LOWELL M. SHEARER

Secretary of the Board of Directors of the Company and the

Bank; Self-employed timber,
logs, logging and log hauling

JOSEPH E. BARNES, SR.

Owner/Operator of Barnes Body Shop, Thompsontown, PA

NANCY S. BRATTON

Owner of Bratton Insurance Agency, Millerstown, PA

JOHN P. HENRY, III

Project Manager, former owner and Vice President,

PHE Mechanical Systems, Inc., Mifflintown, PA

SAMUEL G. KINT

Retired businessman

CLAIR E. McMILLEN

Owner/Partner, McMillen Bros., Inc.

CHARLES C. SANER

Dairy Farmer

FRANK L. WRIGHT

Attorney-at-Law, Harrisburg, PA



50



---

OFFICERS

FIRST COMMUNITY FINANCIAL CORPORATION

JAMES R. McLAUGHLIN

Chairman

ROGER SHALLENBERGER

Vice Chairman

JODY D. GRAYBILL

President

LOWELL M. SHEARER

Secretary

RICHARD R. LEITZEL

Treasurer

KATHY S. CLARK

Assistant Secretary



51



---

OFFICERS

THE FIRST NATIONAL BANK OF MIFFLINTOWN

JODY D. GRAYBILL

President and Trust Officer

MARCIE A. BARBER

Senior Vice
President and Credit Services Division Manager

RICHARD R. LEITZEL

Vice President and Chief Financial Officer

TIMOTHY P. STAYER

Vice President and Community Banking Services Division Manager

K. LEE HOPKINS

Vice President and Commercial Loan Officer

DENNIS E. LUCAS

Vice President and Commercial
Loan Officer

FRANCIS W. WOLMAN

Vice President and Commercial Loan Officer

JOANNE D. GOODLING

Assistant Vice President and Community Office Manager, Fermanagh Office

AUDRA L.
HUNTER

Assistant Vice President and Community Office Manager, Loysville Office

ROY A. LEISTER, JR.

Assistant Vice President and Community Office Manager, Delaware
Office

PATTI L. McLAUGHLIN

Assistant Vice President and Community Office Manager, New Bloomfield,

Shermans Dale and Bloomfield Borough Offices

BRADLEY D. SHERMAN

Assistant Vice President
and Community Office Manager, West Perry and Ickesburg Offices

DIANE E. ZEIDERS

Assistant Vice President and Community Office Manager, Tuscarora Valley

and East
Waterford Offices

FLORENCE E. DRESSLER

Community Office Manager, Mifflintown Office

NANETTE W. STAKE

Assistant Vice President and IT Manager and IT Security Officer

TINA J. SMITH

Assistant Vice President and Human Resources Manager

NANCI A. LOUDENSLAGER

Assistant Vice President and Operations Manager/Security and AML Officer

SANDRA Z. WERT

Auditor

SANDRA J. HOLMAN

Assistant Trust Officer and
Assistant Secretary

KATHY S. CLARK

Assistant Secretary



52



---

DIRECTORS EMERITI AND ADVISORY BOARDS

DIRECTORS EMERITI

DONALD Q. ADAMS

DALE BEASTON

HARRY E. CLARK

ELWOOD S. HENCH

RAYMOND T. LONG

SAMUEL F. METZ

JANE B. MARHEFKA

PHYLLIS S. MOHLER

GEORGE L. SETTLEMYER

JOHN A. TETWILER

H. SCOTT WEIBLEY

A. JACK WELLER

RICHARD L. WIBLE

ADVISORY
BOARDS

DELAWARE OFFICE

JOHN M. AUKER

DENNIS L. BASSLER

C. ROBERT HOCKENBROCK

MERVIN J. STRAWSER

FERMANAGH OFFICE

DANIEL B. BROWN

JOHN C. LEIDY

RONALD H. MAST

ALAN E. VARNER

TUSCARORA VALLEY AND EAST WATERFORD OFFICES

WILLIAM A. GILLILAND

NORMAN F. LOVE

JAMES L. McCLURE

JAMES M.
SHEAFFER

BARBARA G. WILSON

NEW BLOOMFIELD, SHERMANS DALE AND BLOOMFIELD BOROUGH OFFICES

WILLIAM R. BUNT

DARWIN L. KITNER

JOHN K. McCLELLAN

FRED E. MORROW

JAMES E. SWENSON

WEST PERRY, ICKESBURG AND LOYSVILLE OFFICES

ROBERT E. SHEAFFER

DAVID L. SWARTZ

TERRY K. URICH

FLOYD H. WEARY



53



---

BANK LOCATIONS

First Community Financial Corporation

and Wholly Owned Subsidiary,

The
First National Bank of Mifflintown

The First National Bank of Mifflintown is a full-service financial institution

serving customers from five locations in Juniata County and six locations in Perry County.

MAIN OFFICE

Two North Main Street

Mifflintown, PA 17059

717-436-2144

BLOOMFIELD BOROUGH OFFICE

216 South
Carlisle Street

New Bloomfield, PA

717-582-3977

DELAWARE OFFICE

1 1/2miles North of Interchange Routes 333 and 22/322

717-535-5158

EAST WATERFORD OFFICE

Route 75, East Waterford, PA

717-734-2400

FERMANAGH OFFICE

Interchange Routes 35 and 22/322

717-436-8968

ICKESBURG OFFICE

Route 17, Ickesburg, PA

717-438-3050

LOYSVILLE OFFICE

Intersection Routes 850 and 274

717-789-2400

NEW BLOOMFIELD OFFICE

Intersection Route 274 West and Cold Storage Road

717-582-7599

SHERMANS DALE OFFICE

Intersection
Routes 34 and 850

717-582-7424

TUSCARORA VALLEY OFFICE

Intersection Routes 75 and Old 22/322

717-436-8947

WEST PERRY OFFICE

Intersection Routes 74 and 274

717-789-4500



54



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Stock and Dividend Information

First Community Financial Corporation has only one class of common stock authorized, issued
and outstanding. Although shares of the Corporations common stock are traded from time to time in private transactions, there is no established public trading market for the stock. The Corporations common stock is not listed on any stock
exchange or automated quotation system and there are no present plans to so list the stock. There can be no assurance that, at any given time, any persons will be interested in acquiring shares of the Corporations common stock. Price
quotations for the Corporations common stock do not appear in any generally recognized investment media.

The Corporation pays dividends on the
outstanding shares of our common stock as determined by the Board of Directors from time to time. It has been the practice of the Board of Directors to declare cash dividends on a quarterly basis. Future dividends will depend upon our earnings,
financial position, cash requirements and such other factors as the Board of Directors may deem relevant. The following table sets forth the cash dividends declared per share of the Corporations common stock and the highest and lowest per
share prices at which the Corporations common stock has actually traded in private transactions during the periods indicated. To the best of managements knowledge, such prices do not include any retail mark-up, mark-down or commission.
Shares may have been sold in transactions, the price and terms of which are not known to the Corporation. Therefore, the per share prices at which the Corporations stock has previously traded may not necessarily be indicative of the true
market value of the shares.



|            |  |                       |       |                         |   |       |  |   |       
|----------- |  | --------------------- | ----- | ----------------------- | - | ----- |  | - | ------
|            |  | Per Share Sales Price |       | Dividends per Share (1)
|Quarter     |  | High                  |       | Low                     |  
|First, 2005 |  | $                     | 27.50 |                         | $ | 26.50 |  | $ | 0.0950
|Second      |  |                       | 29.50 |                         |   | 28.00 |  |   | 0.0950
|Third       |  |                       | 31.50 |                         |   | 29.50 |  |   | 0.1000
|Fourth      |  |                       | 33.00 |                         |   | 30.50 |  |   | 0.1000
|First, 2004 |  | $                     | 24.00 |                         | $ | 24.00 |  | $ | 0.0850
|Second      |  |                       | 25.00 |                         |   | 24.50 |  |   | 0.0850
|Third       |  |                       | 25.00 |                         |   | 25.00 |  |   | 0.0900
|Fourth      |  |                       | 26.00 |                         |   | 25.00 |  |   | 0.0900

(1)Note: Per share data has been restated after giving retroactive recognition to a 2-for-1 stock split effective December 31, 2004.

The authorized common stock of the Corporation consists of 10,000,000 shares of common stock, par value $5.00 per share, of which 1,400,000 shares were outstanding at
December 31, 2005. There were no shares of the Corporations common stock (i) that are subject to outstanding options, warrants or securities convertible into common stock; (ii) that could be sold pursuant to Rule 144 under the
Securities Act or that the Corporation has agreed to register under the Securities Act for sale by security holders; or (iii) that are or have been proposed to be publicly offered by the Corporation. The Corporation had approximately 551
shareholders of record as of December 31, 2005.

Annual Report on Form 10-K

The Corporations Annual Report on Form 10-K, which contains additional information about the Corporation, was filed with the Securities & Exchange Commission and may be obtained without charge, by
writing to:

Mr. Richard R. Leitzel

Vice President & Chief Financial Officer

First Community Financial Corporation

P.O. Box 96

Mifflintown, PA 17059

The Form 10-K is also available on the Securities & Exchange Commissions Internet site at
http://www.sec.gov.

Notice of Annual Meeting

The
Annual Meeting of Shareholders of the Corporation will be held on Tuesday, April 11, 2006, beginning at 10:00 a.m., at: Cedar Grove Brethren in Christ Church, located near the PA Route 75 and U.S. Route 22/322 interchange in Mifflintown,
Pennsylvania. A Notice of the Annual Meeting, Proxy Statement and Proxy are being delivered together with this Annual Report to shareholders entitled to vote at the meeting.



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