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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------



FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2005



or



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



FOR THE TRANSITION PERIOD FROM
 to



Commission file number: 000-49736



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FIRST COMMUNITY FINANCIAL CORPORATION

(Exact name of small business issuer as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|PENNSYLVANIA                                                   |  | 23-2321079                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



|                                                 |  |           
|------------------------------------------------ |  | ----------
|TWO NORTH MAIN STREET, MIFFLINTOWN, PENNSYLVANIA |  | 17059     
|(Address of principal executive offices)         |  | (Zip Code)



(717) 436-2144

(Issuers telephone number, including area code)



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



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



Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date: COMMON STOCK, Par Value $5.00 per share 1,400,000 shares outstanding as of July 31, 2005



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PART I  FINANCIAL INFORMATION

Item 1. Financial Statements



FIRST COMMUNITY FINANCIAL CORPORATION

CONSOLIDATED BALANCE SHEETS

(Dollars In Thousands, Except Per Share Data)



|                                                                                                 |  |              |         |                  |   |        
|------------------------------------------------------------------------------------------------ |  | ------------ | ------- | ---------------- | - | -------
|                                                                                                 |  | (unaudited)  |         |                 
|                                                                                                 |  | June 30,2005 |         | December 31,2004
|ASSETS                                                                                           |  |              |         |                  |   |        
|Cash & Due from Banks                                                                            |  | $            | 5,623   |                  | $ | 6,830  
|Interest Bearing Deposits with Banks                                                             |  |              | 770     |                  |   | 1,276  
|Federal Funds Sold                                                                               |  |              | 1,613   |                  |   |       
|                                                                                                 |  |              |         |                  |   |        
|Cash & Cash Equivalents                                                                          |  |              | 8,006   |                  |   | 8,106  
|Time Certificates of Deposit                                                                     |  |              | 1,785   |                  |   | 1,785  
|Securities available for sale                                                                    |  |              | 55,903  |                  |   | 51,120 
|Securities held to maturity, fair value 2005 $ 25,776; 2004 $ 23,560                             |  |              | 25,607  |                  |   | 23,327 
|Loans - Net of allowance for loan losses 2005 $ 1,259; 2004 $ 1,264                              |  |              | 149,472 |                  |   | 147,518
|Premises and Equipment                                                                           |  |              | 7,534   |                  |   | 7,442  
|Restricted investment in bank stocks                                                             |  |              | 1,894   |                  |   | 1,902  
|Investment in life insurance                                                                     |  |              | 4,438   |                  |   | 4,362  
|Other Assets                                                                                     |  |              | 2,572   |                  |   | 2,093  
|                                                                                                 |  |              |         |                  |   |        
|TOTAL ASSETS                                                                                     |  | $            | 257,211 |                  | $ | 247,655
|                                                                                                 |  |              |         |                  |   |        
|LIABILITIES                                                                                      |  |              |         |                  |   |        
|Deposits:                                                                                        |  |              |         |                  |   |        
|Non-Interest Bearing                                                                             |  | $            | 22,999  |                  | $ | 23,495 
|Interest Bearing                                                                                 |  |              | 185,014 |                  |   | 179,635
|                                                                                                 |  |              |         |                  |   |        
|Total Deposits                                                                                   |  |              | 208,013 |                  |   | 203,130
|Short-Term Borrowings                                                                            |  |              | 3,739   |                  |   | 4,449  
|Long-Term Borrowings                                                                             |  |              | 21,000  |                  |   | 16,000 
|Junior Subordinated Debt                                                                         |  |              | 5,155   |                  |   | 5,155  
|Other Liabilities                                                                                |  |              | 1,375   |                  |   | 1,513  
|                                                                                                 |  |              |         |                  |   |        
|TOTAL LIABILITIES                                                                                |  |              | 239,282 |                  |   | 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; 1,400,000 shares issued & outstanding |  |              | 7,000   |                  |   | 7,000  
|Capital in Excess of Par Value                                                                   |  |              | 245     |                  |   | 245    
|Retained Earnings                                                                                |  |              | 10,642  |                  |   | 9,967  
|Accumulated Other Comprehensive Income                                                           |  |              | 42      |                  |   | 196    
|                                                                                                 |  |              |         |                  |   |        
|TOTAL SHAREHOLDERS EQUITY                                                                       |  |              | 17,929  |                  |   | 17,408 
|                                                                                                 |  |              |         |                  |   |        
|TOTAL LIABILITIES & SHAREHOLDERS EQUITY                                                         |  | $            | 257,211 |                  | $ | 247,655
|                                                                                                 |  |              |         |                  |   |        



See accompanying notes.



2



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PART I  FINANCIAL INFORMATION, CONTINUED

Item 1. Financial Statements, continued



FIRST COMMUNITY FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(Dollars In Thousands,
Except Per Share Data)



|                                         |  |                            |       |                          |   |       |  |      |       |  |   |      
|---------------------------------------- |  | -------------------------- | ----- | ------------------------ | - | ----- |  | ---- | ----- |  | - | -----
|                                         |  | Three Months EndedJune 30, |       | Six Months EndedJune 30,
|                                         |  | 2005                       |       | 2004                     |   | 2005  |  | 2004
|INTEREST INCOME                          |  |                            |       |                          |   |       |  |      |       |  |   |      
|Interest & Fees on Loans                 |  | $                          | 2,461 |                          | $ | 2,430 |  | $    | 4,878 |  | $ | 4,821
|Interest on Taxable Securities           |  |                            | 500   |                          |   | 380   |  |      | 969   |  |   | 827  
|Interest on Tax-Exempt Securities        |  |                            | 217   |                          |   | 172   |  |      | 422   |  |   | 345  
|Other Interest & Dividends               |  |                            | 42    |                          |   | 29    |  |      | 87    |  |   | 37   
|                                         |  |                            |       |                          |   |       |  |      |       |  |   |      
|TOTAL INTEREST INCOME                    |  |                            | 3,220 |                          |   | 3,011 |  |      | 6,356 |  |   | 6,030
|                                         |  |                            |       |                          |   |       |  |      |       |  |   |      
|INTEREST EXPENSE                         |  |                            |       |                          |   |       |  |      |       |  |   |      
|Interest on Deposits                     |  |                            | 1,201 |                          |   | 1,020 |  |      | 2,362 |  |   | 2,151
|Interest on Short Term Borrowings        |  |                            | 31    |                          |   | 10    |  |      | 49    |  |   | 29   
|Interest on Long Term Borrowings         |  |                            | 259   |                          |   | 280   |  |      | 499   |  |   | 419  
|                                         |  |                            |       |                          |   |       |  |      |       |  |   |      
|TOTAL INTEREST EXPENSE                   |  |                            | 1,491 |                          |   | 1,310 |  |      | 2,910 |  |   | 2,599
|                                         |  |                            |       |                          |   |       |  |      |       |  |   |      
|NET INTEREST INCOME                      |  |                            | 1,729 |                          |   | 1,701 |  |      | 3,446 |  |   | 3,431
|Provision for Loan Losses                |  |                            | 5     |                          |   | 30    |  |      | 15    |  |   | 61   
|                                         |  |                            |       |                          |   |       |  |      |       |  |   |      
|NET INTEREST INCOME AFTER                |  |                            |       |                          |   |       |  |      |       |  |   |      
|PROVISION FOR LOAN LOSSES                |  |                            | 1,724 |                          |   | 1,671 |  |      | 3,431 |  |   | 3,370
|                                         |  |                            |       |                         
|NON-INTEREST INCOME                      |  |                            |       |                          |   |       |  |      |       |  |   |      
|Service Charges on Deposits              |  |                            | 142   |                          |   | 127   |  |      | 259   |  |   | 240  
|Fiduciary Activities                     |  |                            | 85    |                          |   | 50    |  |      | 160   |  |   | 105  
|Earnings on Investment in Life Insurance |  |                            | 47    |                          |   | 48    |  |      | 94    |  |   | 96   
|ATM Card Fees                            |  |                            | 91    |                          |   | 80    |  |      | 173   |  |   | 149  
|Realized Gains on Sales of Securities    |  |                            |      |                          |   |      |  |      | 129   |  |   | 47   
|Other Income                             |  |                            | 40    |                          |   | 35    |  |      | 74    |  |   | 74   
|                                         |  |                            |       |                          |   |       |  |      |       |  |   |      
|TOTAL OTHER INCOME                       |  |                            | 405   |                          |   | 340   |  |      | 889   |  |   | 711  
|                                         |  |                            |       |                          |   |       |  |      |       |  |   |      
|NON-INTEREST EXPENSES                    |  |                            |       |                          |   |       |  |      |       |  |   |      
|Employee Compensation & Benefits         |  |                            | 835   |                          |   | 745   |  |      | 1,691 |  |   | 1,478
|Net Occupancy & Equipment                |  |                            | 242   |                          |   | 224   |  |      | 489   |  |   | 462  
|ATM Expense                              |  |                            | 66    |                          |   | 56    |  |      | 130   |  |   | 113  
|Professional & Regulatory Fees           |  |                            | 63    |                          |   | 56    |  |      | 124   |  |   | 125  
|Director & Advisory Boards Compensation  |  |                            | 70    |                          |   | 59    |  |      | 139   |  |   | 113  
|Supplies & Postage                       |  |                            | 63    |                          |   | 66    |  |      | 111   |  |   | 119  
|Other Non-Interest Expenses              |  |                            | 230   |                          |   | 231   |  |      | 459   |  |   | 459  
|                                         |  |                            |       |                          |   |       |  |      |       |  |   |      
|TOTAL NON-INTEREST EXPENSES              |  |                            | 1,569 |                          |   | 1,437 |  |      | 3,143 |  |   | 2,869
|                                         |  |                            |       |                          |   |       |  |      |       |  |   |      
|Income Before Income Taxes               |  |                            | 560   |                          |   | 574   |  |      | 1,177 |  |   | 1,212
|Applicable Income Taxes                  |  |                            | 107   |                          |   | 125   |  |      | 236   |  |   | 272  
|                                         |  |                            |       |                          |   |       |  |      |       |  |   |      
|NET INCOME                               |  | $                          | 453   |                          | $ | 449   |  | $    | 941   |  | $ | 940  
|                                         |  |                            |       |                          |   |       |  |      |       |  |   |      
|Basic Earnings Per Share                 |  | $                          | 0.32  |                          | $ | 0.32  |  | $    | 0.67  |  | $ | 0.67 
|                                         |  |                            |       |                          |   |       |  |      |       |  |   |      
|Dividends Per Share                      |  | $                          | 0.095 |                          | $ | 0.085 |  | $    | 0.19  |  | $ | 0.17 
|                                         |  |                            |       |                          |   |       |  |      |       |  |   |      

See accompanying notes.



3



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PART I  FINANCIAL INFORMATION, CONTINUED

Item 1. Financial Statements, continued



FIRST COMMUNITY FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY

For the Six Months Ended June 30, 2004

(Unaudited)

(Dollars In Thousands, Except Per Share Data)



|                                                                                       |  |             |       |                              |   |                  |  |   |                                            |   |  |       |      |   |  |   |        |  
|-------------------------------------------------------------------------------------- |  | ----------- | ----- | ---------------------------- | - | ---------------- |  | - | ------------------------------------------ | - |  | ----- | ---- | - |  | - | ------ | -
|                                                                                       |  | CommonStock |       | CapitalIn Excessof Par Value |   | RetainedEarnings |  |   | AccumulatedOtherComprehensiveIncome (Loss) |   |  | Total |     
|Balance December 31, 2003                                                              |  | $           | 3,500 |                              | $ | 245              |  | $ | 11,834                                     |   |  | $     | 348  |   |  | $ | 15,927 |  
|Comprehensive income:                                                                  |  |             |       |                              |   |                  |  |   |                                            |   |  |       |      |   |  |   |        |  
|Net Income                                                                             |  |             |       |                              |   |                  |  |   | 940                                        |   |  |       |      |   |  |   | 940    |  
|Net change in unrealized gains (losses) on securities available for sale, net of taxes |  |             |       |                              |   |                  |  |   |                                            |   |  |       | (400 | ) |  |   | (400   | )
|                                                                                       |  |             |       |                              |   |                  |  |   |                                            |   |  |       |      |   |  |   |        |  
|Total comprehensive income                                                             |  |             |       |                              |   |                  |  |   |                                            |   |  |       |      |   |  |   | 540    |  
|                                                                                       |  |             |       |                              |  
|Cash dividends, $.17 per share                                                         |  |             |       |                              |   |                  |  |   | (238                                       | ) |  |       |      |   |  |   | (238   | )
|                                                                                       |  |             |       |                              |   |                  |  |   |                                            |   |  |       |      |   |  |   |        |  
|Balance June 30, 2004                                                                  |  | $           | 3,500 |                              | $ | 245              |  | $ | 12,536                                     |   |  | $     | (52  | ) |  | $ | 16,229 |  
|                                                                                       |  |             |       |                              |   |                  |  |   |                                            |   |  |       |      |   |  |   |        |  



FIRST COMMUNITY
FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY

For the Six Months Ended June 30, 2005

(Unaudited)

(Dollars In Thousands, Except Per Share Data)



|                                                                                       |  |             |       |                              |   |                  |  |   |                                     |   |  |       |      |   |  |   |        |  
|-------------------------------------------------------------------------------------- |  | ----------- | ----- | ---------------------------- | - | ---------------- |  | - | ----------------------------------- | - |  | ----- | ---- | - |  | - | ------ | -
|                                                                                       |  | CommonStock |       | CapitalIn Excessof Par Value |   | RetainedEarnings |  |   | AccumulatedOtherComprehensiveIncome |   |  | Total |     
|Balance December 31, 2004                                                              |  | $           | 7,000 |                              | $ | 245              |  | $ | 9,967                               |   |  | $     | 196  |   |  | $ | 17,408 |  
|Comprehensive income:                                                                  |  |             |       |                              |   |                  |  |   |                                     |   |  |       |      |   |  |   |        |  
|Net Income                                                                             |  |             |       |                              |   |                  |  |   | 941                                 |   |  |       |      |   |  |   | 941    |  
|Net change in unrealized gains (losses) on securities available for sale, net of taxes |  |             |       |                              |   |                  |  |   |                                     |   |  |       | (154 | ) |  |   | (154   | )
|                                                                                       |  |             |       |                              |   |                  |  |   |                                     |   |  |       |      |   |  |   |        |  
|Total comprehensive income                                                             |  |             |       |                              |   |                  |  |   |                                     |   |  |       |      |   |  |   | 787    |  
|                                                                                       |  |             |       |                              |  
|Cash dividends, $.19 per share                                                         |  |             |       |                              |   |                  |  |   | (266                                | ) |  |       |      |   |  |   | (266   | )
|                                                                                       |  |             |       |                              |   |                  |  |   |                                     |   |  |       |      |   |  |   |        |  
|Balance June 30, 2005                                                                  |  | $           | 7,000 |                              | $ | 245              |  | $ | 10,642                              |   |  | $     | 42   |   |  | $ | 17,929 |  
|                                                                                       |  |             |       |                              |   |                  |  |   |                                     |   |  |       |      |   |  |   |        |  



See accompanying notes.



4



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PART I  FINANCIAL INFORMATION, CONTINUED

Item 1. Financial Statements, continued



FIRST COMMUNITY FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars In Thousands)



|                                                                                  |  |                           |         |   |      |   |         |  
|--------------------------------------------------------------------------------- |  | ------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                  |  | Six Months Ended June 30, |        
|                                                                                  |  | 2005                      |         |   | 2004 |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                              |  |                           |         |   |      |   |         |  
|Net income                                                                        |  | $                         | 941     |   |      | $ | 940     |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                           |         |   |      |   |         |  
|Provision for loan losses                                                         |  |                           | 15      |   |      |   | 61      |  
|Depreciation and amortization                                                     |  |                           | 294     |   |      |   | 267     |  
|Net amortization of securities premium                                            |  |                           | 226     |   |      |   | 247     |  
|Net realized gains on sales of securities                                         |  |                           | (129    | ) |      |   | (47     | )
|Earnings on life insurance                                                        |  |                           | (94     | ) |      |   | (96     | )
|Increase in other assets                                                          |  |                           | (355    | ) |      |   | (289    | )
|Decrease in other liabilities                                                     |  |                           | (138    | ) |      |   | (168    | )
|                                                                                  |  |                           |         |   |      |   |         |  
|Net cash provided by operating activities                                         |  |                           | 760     |   |      |   | 915     |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                              |  |                           |         |   |      |   |         |  
|Securities held to maturity:                                                      |  |                           |         |   |      |   |         |  
|Maturities, calls and principal repayments                                        |  |                           | 1,315   |   |      |   | 871     |  
|Purchases                                                                         |  |                           | (3,723  | ) |      |   | (1,711  | )
|Proceeds from sales                                                               |  |                           |        |   |      |   | 388     |  
|Securities available for sale:                                                    |  |                           |         |   |      |   |         |  
|Maturities, calls and principal repayments                                        |  |                           | 6,117   |   |      |   | 8,412   |  
|Purchases                                                                         |  |                           | (11,256 | ) |      |   | (16,027 | )
|Proceeds from sales                                                               |  |                           | 145     |   |      |   | 3,823   |  
|Net increase in loans receivable                                                  |  |                           | (1,993  | ) |      |   | (7,984  | )
|Net (increase) decrease in restricted investment in bank stocks                   |  |                           | 8       |   |      |   | (789    | )
|Purchases of premises and equipment                                               |  |                           | (386    | ) |      |   | (764    | )
|Purchases of interest bearing time deposits                                       |  |                           |        |   |      |   | (299    | )
|Proceeds from sale of foreclosed real estate                                      |  |                           | 6       |   |      |   | 96      |  
|                                                                                  |  |                           |         |   |      |   |         |  
|Net cash used in investing activities                                             |  |                           | (9,767  | ) |      |   | (13,984 | )
|CASH FLOWS FROM FINANCING ACTIVITIES                                              |  |                           |         |   |      |   |         |  
|Net increase (decrease) in non-interest bearing demand and savings deposits       |  |                           | (496    | ) |      |   | 1,517   |  
|Net increase in time deposits                                                     |  |                           | 5,379   |   |      |   | 4,267   |  
|Net increase (decrease) in short-term borrowings                                  |  |                           | (710    | ) |      |   | 334     |  
|Proceeds from long-term borrowings                                                |  |                           | 5,000   |   |      |   | 8,000   |  
|Dividends paid                                                                    |  |                           | (266    | ) |      |   | (238    | )
|                                                                                  |  |                           |         |   |      |   |         |  
|Net cash provided by financing activities                                         |  |                           | 8,907   |   |      |   | 13,880  |  
|                                                                                  |  |                           |         |   |      |   |         |  
|Net increase (decrease) in cash and cash equivalents                              |  |                           | (100    | ) |      |   | 811     |  
|Cash and cash equivalents:                                                        |  |                           |         |   |      |   |         |  
|Beginning of year                                                                 |  |                           | 8,106   |   |      |   | 5,342   |  
|                                                                                  |  |                           |         |   |      |   |         |  
|End of period                                                                     |  | $                         | 8,006   |   |      | $ | 6,153   |  
|                                                                                  |  |                           |         |   |      |   |         |  
|SUPPLEMENTAL DISCLOSURES:                                                         |  |                           |         |   |      |   |         |  
|Cash payments for interest                                                        |  | $                         | 2,890   |   |      | $ | 3,130   |  
|                                                                                  |  |                           |         |   |      |   |         |  
|Cash payments for income taxes                                                    |  | $                         | 284     |   |      | $ | 351     |  
|                                                                                  |  |                           |         |   |      |   |         |  
|NON CASH INVESTING:                                                               |  |                           |         |   |      |   |         |  
|Transfer of loans to foreclosed real estate                                       |  | $                         | 24      |   |      | $ | 1,032   |  
|                                                                                  |  |                           |         |   |      |   |         |  



See accompanying notes.



5



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PART I  FINANCIAL INFORMATION, CONTINUED

Item 1. Financial Statements, continued



FIRST COMMUNITY FINANCIAL CORPORATION

NOTES TO FINANCIAL STATEMENTS

(Unaudited)



June 30, 2005



Note A  Basis
of Presentation



The consolidated financial statements include the
accounts of First Community Financial Corporation (the Corporation) and its wholly-owned subsidiary, The First National Bank of Mifflintown (the Bank). All material inter-company transactions have been eliminated. First
Community Financial Corporation was organized on November 13, 1984 and is subject to regulation by the Board of Governors of the Federal Reserve System.



The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial
information and are presented in accordance with the instructions to Form 10-Q and Rule 10-01 of the Securities and Exchange Commission Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six
months ended June 30, 2005, are not necessarily indicative of the results that may be expected for the year ending December 31, 2005.



The consolidated financial statements presented in this report should be read in conjunction with the audited financial statements and the accompanying notes for the year
ended December 31, 2004, included in the Corporations Form 10-K filed with the Securities and Exchange Commission on March 11, 2005.



Note B  Accounting Policies



The accounting policies of the Corporation as applied in the interim financial statements presented, are substantially the same as those followed on an annual basis as
presented in the Corporations Form 10-K.



6



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Note C  Comprehensive Income (Loss)



The only comprehensive income item that the Corporation presently has is unrealized gains (losses) on securities available for sale. The
components of the change in unrealized gains (losses) are as follows:



|                                                            |  |                            |     |   |                          |   |      |      |  |   |      |   |  |   |      |  
|----------------------------------------------------------- |  | -------------------------- | --- | - | ------------------------ | - | ---- | ---- |  | - | ---- | - |  | - | ---- | -
|                                                            |  | Three Months EndedJune 30, |     |   | Six Months EndedJune 30, |  
|                                                            |  | 2005                       |     |   | 2004                     |   |      | 2005 |  |   | 2004 |  
|                                                            |  | (Dollars in Thousands)     |    
|Unrealized holding gains (losses) arising during the period |  | $                          | 261 |   |                          | $ | (921 | )    |  | $ | (113 | ) |  | $ | (550 | )
|Reclassification of gains realized in net income            |  |                            |    |   |                          |   |     |      |  |   | (129 | ) |  |   | (47  | )
|                                                            |  |                            |     |   |                          |   |      |      |  |   |      |   |  |   |      |  
|                                                            |  |                            | 261 |   |                          |   | (921 | )    |  |   | (242 | ) |  |   | (597 | )
|Deferred income tax effect                                  |  |                            | (90 | ) |                          |   | 310  |      |  |   | 88   |   |  |   | 197  |  
|                                                            |  |                            |     |   |                          |   |      |      |  |   |      |   |  |   |      |  
|Change in accumulated other comprehensive income            |  | $                          | 171 |   |                          | $ | (611 | )    |  | $ | (154 | ) |  | $ | (400 | )
|                                                            |  |                            |     |   |                          |   |      |      |  |   |      |   |  |   |      |  



Note D - 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 2005 and
2004.



Note E - Guarantees



The Corporation does not issue any guarantees that would require liability recognition or
disclosure, other than its standby letters of credit. Standby letters of credit written are conditional commitments issued by the Corporation to guarantee the performance of a customer to a third party. Generally, all letters of credit, when issued,
have expiration dates within one year. The credit risk involved in issuing letters of credit is essentially the same as those that are involved in extending loan facilities to customers. The Corporation, generally, holds collateral and/or personal
guarantees supporting these commitments. The Corporation had $673,000 of standby letters of credit as of June 30, 2005. Management believes that the proceeds obtained through a liquidation of collateral and the enforcement of guarantees would be
sufficient to cover the potential amount of future payment required under the corresponding guarantees. The current amount of the liability as of June 30, 2005 for guarantees under standby letters of credit issued is not material.



7



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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations



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 (iv) other external developments which could materially affect the Corporations
business and operations.



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 for the year ended December 31, 2004). The Corporation believes that of its significant accounting policies, the allowance for loan losses involves a higher
degree of judgment and complexity.



8



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The allowance for loan losses is established through a charge to 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 discussion below about the provision for loan losses under Results of
Operations.



Financial Condition



Total assets of the Corporation increased $9,556,000 or 3.9% during the first six months of
2005. Net loans increased $1,954,000 or 1.3% and securities increased by $7,063,000 or 9.5% from December 31, 2004 to June 30, 2005.



Total deposits increased by $4,883,000 or 2.4% from December 31, 2004 and long-term borrowings increased by $5,000,000 or 31.3% during the same time period. The
Corporations expansion and business development were primarily responsible for the deposit growth during the first six months of 2005.



Results of Operations



Net income for the six months ending June 30, 2005 was $941,000 or $0.67 per share compared to $940,000 or $0.67 per share for the same period in 2004. Annualized return on average equity was 10.98% for the first six
months of 2005 and 11.73% for the same period in 2004. Annualized return on average assets was 0.76% for the first six months of 2005 and 0.80% for the same period in 2004.



Net income for the quarter ending June 30, 2005 was $453,000 or $0.32 per share compared to $449,000 or $0.32 per share for the same period
in 2004. Annualized return on average equity was 10.54% for the second quarter of 2005 and 10.98% for the same period in 2004. Annualized return on average assets for the second quarter was 0.72% compared to 0.76% during the second quarter of 2004.



Net interest income for the first six months of 2005 increased by $15,000 or
0.4% compared to the same period in 2004. This increase is primarily a result of increased volume of interest earning assets. For the first six months of 2005, the net interest margin on a fully tax equivalent (FTE) basis was 3.23% compared to 3.38%
for the same period in 2004. 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 primary driver of the decrease in the net interest margin was the increase in the cost of funds of 0.15% from 2.42% during the first six months of 2004 to 2.57% during the same time period in 2005.



9



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Net interest income for the quarter ended June 30, 2005 increased by $28,000 compared to the same period in 2004. Net
interest margin for the quarter ended June 30, 2005 was 3.20% compared to 3.33% during the same period in 2004. The increase in the yield on earning assets from 5.75% in the first six months of 2004 to 5.78% in 2005 was more than offset by the
increase in the cost of funds from 2.42% during 2004 to 2.58% during 2005.



The
Corporation recorded a $15,000 provision for loan losses for the first six months of 2005 compared to $61,000 for the first six months of 2004. As a percentage of loans, the allowance for loan losses was 0.84% at June 30, 2005, compared to 0.86% at
year-end 2004 and 0.81% at June 30, 2004. Provisions for loan losses are charged to income to bring the allowance for loan losses to a level deemed appropriate by management. Management determines the adequacy of the allowance based on on-going
quarterly assessments of the loan portfolio, including such factors as: changes in the nature and volume of the portfolio, effects of concentrations of credit, current and projected economic and business conditions, regulatory and consultant
recommendations, repayment patterns on loans, borrowers financial condition, current charge-offs, trends in volume and severity of past due loans and classified loans, potential problem loans and supporting collateral. Management believes the
allowance is presently adequate to cover the inherent risks associated with the Corporations loan portfolio.



Non-interest income in the first six months of 2005 increased by $178,000 or 25.0% compared to the same period in 2004. Gains on sales of securities increased by $82,000,
income from fiduciary activities increased by $55,000 as a result of an increase in assets under management, and increased activity led to ATM card fees increasing by $24,000 during the first six months of 2005 compared to the same period in 2004.



Non-interest income for the quarter ending June 30, 2005 was $405,000 compared
to $340,000 in 2004. This increase is primarily related to the increase in income from fiduciary activities of $35,000, an increase in service charges on deposit accounts of $15,000, and an increase in ATM card fees of $11,000.



Total non-interest expense increased in the first six months of 2005 by $274,000 compared to
the first six months of 2004. Employee compensation and benefits increased by $213,000 or 14.4% compared to the same period in 2004. Several factors contributed to this increase including payroll increases as a result of normal merit increases,
additions to staff relating to the opening of our Bloomfield Borough Office, and increases in



10



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medical insurance. Additional increases in employee compensation and benefits are anticipated as the Corporation
continues to grow in size and number of locations. Also, net occupancy & equipment expense increased $27,000, director and advisory board compensation increased $26,000, and ATM expense increased $17,000. As the Corporation continues to add new
offices and services, additional operating costs will be generated. Over time it is anticipated these costs will be offset by the additional income generated through the expansion of services to our customers and community and new business
development.



During the quarter ending June 30, 2005, total non-interest
expense increased $132,000 compared to the second quarter of 2004. Employee compensation and benefits increased by $90,000 and net occupancy & equipment expense increased by $18,000. These were the principal reasons for the increase in total
non-interest expense.



Income tax expense was $236,000 for the six month time
period ending June 30, 2005 compared to $272,000 for the same time period in 2004. Income tax expense as a percentage of income before income taxes was 20.1% for the period compared to 22.4% for 2004. The decrease in the Corporations effective
tax rate below the statutory rate of 34.0% is a result of tax-exempt income on loans, securities and bank-owned life insurance.



Liquidity



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. One of the Corporations sources of liquidity is $208,013,000 in deposits at June 30, 2005, which increased $4,883,000 over total deposits of $203,130,000 at December 31, 2004.
Other sources of liquidity at June 30, 2005 are available from the following: (1) investments in interest-bearing deposits with banks and federal funds sold, which totaled $2,383,000, (2) securities and time certificates of deposit maturing in one
year or less, which totaled $3,844,000, and (3) investments in mortgage-backed securities, which supply income and principal cash flow streams on an ongoing basis. In addition, the Corporation has established federal funds lines of credit with
Atlantic Central Bankers Bank and with the Federal Home Loan Bank of Pittsburgh, which can be drawn upon if needed as a source of liquidity. Management is of the opinion that the Corporations liquidity is sufficient to meet its anticipated
needs.



Capital Resources



Total shareholders equity was $17,929,000 as of June 30, 2005, representing a $521,000
increase from December 31, 2004. The growth in capital was a result of net earnings retention of $675,000 partially offset by



11



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a decrease in accumulated other comprehensive income of $154,000. The other comprehensive loss during the period is due
to the change in value of the Corporations available for sale securities. Management does not believe that this decline in value of securities is other than temporary.



At June 30, 2005, the Bank had a leverage ratio of 8.67%, a Tier I capital to risk-based assets ratio of 15.88% and a total capital to
risk-based assets ratio of 16.80%. These ratios indicate the Bank exceeds the federal regulatory minimum requirements for a well capitalized bank. The Corporations ratios are not materially different than those of the Bank.



Item 3. Quantitative and Qualitative Disclosures about Market Risk



There are no material changes in the Corporations interest rate
risk exposure since December 31, 2004. Please refer to the Annual Report on Form 10-K of First Community Financial Corporation, filed with the Securities and Exchange Commission on March 11, 2005.



Item 4. Controls and Procedures



We maintain a system of controls and procedures designed to provide reasonable assurance as
to the reliability of the financial statements and other disclosures included in this report, as well as to safeguard assets from unauthorized use or disposition. The Corporations Chief Executive Officer and Chief Financial Officer have
evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2005. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in
timely alerting them to information required to be included in our periodic Securities and Exchange Commission filings. There was no significant change in our internal control over financial reporting that occurred during the quarter ended June 30,
2005, that materially affected, or is reasonably likely to materially affect, the Corporations internal control over financial reporting.



PART II  OTHER INFORMATION



|        |  |                                                            
|------- |  | -----------------------------------------------------------
|Item 1. |  | Legal Proceedings                                          
|        | 
|        |  | Not Applicable                                             
|        | 
|Item 2. |  | Unregistered Sales of Equity Securities and Use of Proceeds
|        | 
|        |  | Not Applicable                                             
|        | 
|Item 3. |  | Defaults Upon Senior Securities                            
|        | 
|        |  | Not Applicable                                             



12



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Item 4. Submission of Matters to a Vote of Security Holders



At the annual shareholders meeting on April 12, 2005 the following
directors were elected to Class B for a term of three years as follows:



|                      |  |           |  |         |  |                                 
|--------------------- |  | --------- |  | ------- |  | --------------------------------
|                      |  | FOR       |  | AGAINST |  | ABSTENTIONS AND BROKER NON-VOTES
|Joseph E. Barnes, Sr. |  | 1,147,660 |  | 4,126   |  | -0-                             
|Nancy S. Bratton      |  | 1,147,660 |  | 4,126   |  | -0-                             
|Samuel F. Metz        |  | 1,147,460 |  | 4,326   |  | -0-                             
|Charles C. Saner      |  | 1,147,660 |  | 4,126   |  | -0-                             



Item 5. Other Information



Not Applicable



Item 6. Exhibits



(a) Exhibits



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Title                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|3.1     |  | Articles of Incorporation of the Corporation. (Incorporated by reference to Exhibit 2(a) to the Corporations December 31, 2001 Registration Statement on Form 10-SB, as filed with the
Securities and Exchange Commission on April 17, 2002.)                                                                                                                                                                                                                                                 
|        | 
|3.2     |  | Bylaws of the Corporation. (Incorporated by reference to Exhibit 2(b) to the Corporations Registration Statement on Form 10-SB, as filed with the Securities and Exchange Commission on
April 17, 2002.)                                                                                                                                                                                                                                                                                      
|        | 
|4.1     |  | Certain instruments defining the rights of the holders of long-term debt of the Corporation and certain of its Subsidiaries, none of which authorize a total amount of indebtedness in excess
of 10% of the total assets of the Corporation and its Subsidiaries on a consolidated basis, have not been filed as Exhibits in accordance with Item 601(b)(4)(iii) of Regulation S-K. The Corporation hereby agrees to furnish a copy of any of these
instruments to the Commission upon request.
|        | 
|31.1    |  | Certification of Chief Executive Officer of First Community Financial Corporation Pursuant to Securities and Exchange Commission Rule 13a-14(a) / 15d-14(a).                                                                                                                                                                                                                                                                                                                                   
|        | 
|31.2    |  | Certification of Chief Financial Officer of First Community Financial Corporation Pursuant to Securities and Exchange Commission Rule 13a-14(a) / 15d-14(a).                                                                                                                                                                                                                                                                                                                                   
|        | 
|32.1    |  | Certification of Chief Executive Officer of First Community Financial Corporation Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                   
|        | 
|32.2    |  | Certification of Chief Financial Officer of First Community Financial Corporation                                                                                                                                                                                                                                                                                                                                                                                                              
|        |  | Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                     



13



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SIGNATURES



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



|                      |  |                                       |  |              |  |                        
|--------------------- |  | ------------------------------------- |  | ------------ |  | -----------------------
|                      |  | FIRST COMMUNITY FINANCIAL CORPORATION
|                      |  |                                       |  | (Registrant)
|                      |  |                                       | 
|Date: August 10, 2005 |  |                                       |  | BY:          |  | /s/ James R. McLaughlin
|                      |  |                                       |  |              |  | James R. McLaughlin    
|                      |  |                                       |  |              |  | President and          
|                      |  |                                       |  |              |  | Chief Executive Officer
|                      |  |                                       | 
|Date: August 10, 2005 |  |                                       |  | BY:          |  | /s/ Richard R. Leitzel 
|                      |  |                                       |  |              |  | Richard R. Leitzel     
|                      |  |                                       |  |              |  | Vice President and     
|                      |  |                                       |  |              |  | Chief Financial Officer



14