UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549





FORM 10-Q





(Mark One)

|x | Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ---------------------------------------------------------------------------------

For the quarterly period ended September 30, 2008



| ̈ | Transition report under Section 13 or l5(d) of the Exchange Act
|- | ---------------------------------------------------------------

For the transition period from  to

Commission file number 000-49736





First Community Financial
Corporation

(Exact name of registrant as specified in its charter)







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

2 N. Main St., Mifflintown, PA 17059

(Address of Principal Executive Offices)

(717) 436-2144

(Registrants telephone number, including area code)





Indicate by check mark whether the issuer
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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.    x  Yes     ̈  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                                |  | Accelerated filer         |  |  ̈
|                        |  |                                                  | 
|Non-accelerated filer   |  |  ̈  (Do not check if a smaller reporting company) |  | Smaller reporting company |  | x

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange
Act.)     ̈  Yes    x  No

Indicate the number of shares outstanding of each class of issuers classes of common stock, as of the last practicable date:



|                              |  |                                
|----------------------------- |  | -------------------------------
|Class                         |  | Outstanding at October 31, 2008
|Common Stock, par value $5.00 |  | 1,400,348 Shares               









---

PART I  FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------



FIRST COMMUNITY FINANCIAL CORPORATION

CONSOLIDATED BALANCE SHEETS (Unaudited)

(Dollars In Thousands, Except Share Data)



|                                                                   |  |                    |         |   |                   |   |        
|------------------------------------------------------------------ |  | ------------------ | ------- | - | ----------------- | - | -------
|                                                                   |  | September 30, 2008 |         |   | December 31, 2007
|ASSETS                                                             |  |                    |         |   |                   |   |        
|Cash & due from banks                                              |  | $                  | 7,775   |   |                   | $ | 8,624  
|Interest bearing deposits with banks                               |  |                    | 413     |   |                   |   | 501    
|Federal funds sold                                                 |  |                    |        |   |                   |   | 957    
|                                                                   |  |                    |         |   |                   |   |        
|Cash & cash equivalents                                            |  |                    | 8,188   |   |                   |   | 10,082 
|Time certificates of deposit                                       |  |                    | 594     |   |                   |   | 594    
|Securities available for sale                                      |  |                    | 69,194  |   |                   |   | 63,340 
|Securities held to maturity, fair value 2008 $21,097; 2007 $21,174 |  |                    | 22,939  |   |                   |   | 21,229 
|Loans - net of allowance for loan losses 2008 $1,439; 2007 $1,249  |  |                    | 210,615 |   |                   |   | 191,225
|Premises & equipment, net                                          |  |                    | 6,573   |   |                   |   | 6,770  
|Restricted investment in bank stocks                               |  |                    | 2,601   |   |                   |   | 1,965  
|Investment in life insurance                                       |  |                    | 4,889   |   |                   |   | 4,765  
|Other assets                                                       |  |                    | 3,137   |   |                   |   | 2,325  
|                                                                   |  |                    |         |   |                   |   |        
|TOTAL ASSETS                                                       |  | $                  | 328,730 |   |                   | $ | 302,295
|                                                                   |  |                    |         |   |                   |   |        
|LIABILITIES                                                        |  |                    |         |   |                   |   |        
|Deposits:                                                          |  |                    |         |   |                   |   |        
|Non-interest bearing                                               |  | $                  | 28,476  |   |                   | $ | 26,142 
|Interest bearing                                                   |  |                    | 231,810 |   |                   |   | 218,904
|                                                                   |  |                    |         |   |                   |   |        
|Total deposits                                                     |  |                    | 260,286 |   |                   |   | 245,046
|Short-term borrowings                                              |  |                    | 15,865  |   |                   |   | 10,320 
|Long-term borrowings                                               |  |                    | 22,000  |   |                   |   | 18,000 
|Junior subordinated debt                                           |  |                    | 5,155   |   |                   |   | 5,155  
|Other liabilities                                                  |  |                    | 2,720   |   |                   |   | 2,241  
|                                                                   |  |                    |         |   |                   |   |        
|TOTAL LIABILITIES                                                  |  |                    | 306,026 |   |                   |   | 280,762
|                                                                   |  |                    |         |   |                   |   |        
|SHAREHOLDERS EQUITY                                               |  |                    |         |   |                   |   |        
|Preferred stock, without par value;                                |  |                    |         |   |                   |   |        
|10,000,000 shares authorized and unissued                          |  |                    |        |   |                   |   |       
|Common stock, $5.00 par value;                                     |  |                    |         |   |                   |   |        
|10,000,000 shares authorized;                                      |  |                    |         |   |                   |   |        
|Shares issued, 2008 - 1,401,348; 2007 - 1,400,000                  |  |                    | 7,007   |   |                   |   | 7,000  
|Shares outstanding, 2008 - 1,400,348; 2007 - 1,400,000             |  |                    |         |   |                   |   |        
|Capital in excess of par value                                     |  |                    | 279     |   |                   |   | 245    
|Retained earnings                                                  |  |                    | 15,093  |   |                   |   | 13,993 
|Treasury stock, at cost 2008 - 1,000 shares                        |  |                    | (31     | ) |                   |   |       
|Accumulated other comprehensive income                             |  |                    | 356     |   |                   |   | 295    
|                                                                   |  |                    |         |   |                   |   |        
|TOTAL SHAREHOLDERS EQUITY                                         |  |                    | 22,704  |   |                   |   | 21,533 
|                                                                   |  |                    |         |   |                   |   |        
|TOTAL LIABILITIES & SHAREHOLDERS EQUITY                           |  | $                  | 328,730 |   |                   | $ | 302,295
|                                                                   |  |                    |         |   |                   |   |        

See accompanying notes.



2



---

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 EndedSeptember 30, |       | Nine Months EndedSeptember 30,
|                                                    |  | 2008                            |       | 2007                           |   | 2008  |  | 2007
|INTEREST INCOME                                     |  |                                 |       |                                |   |       |  |      |        |  |   |       
|Interest & fees on loans                            |  | $                               | 3,581 |                                | $ | 3,273 |  | $    | 10,373 |  | $ | 9,457 
|Interest on taxable securities                      |  |                                 | 880   |                                |   | 721   |  |      | 2,575  |  |   | 1,970 
|Interest on tax-exempt securities                   |  |                                 | 217   |                                |   | 192   |  |      | 630    |  |   | 578   
|Other interest & dividends                          |  |                                 | 33    |                                |   | 80    |  |      | 158    |  |   | 303   
|                                                    |  |                                 |       |                                |   |       |  |      |        |  |   |       
|TOTAL INTEREST INCOME                               |  |                                 | 4,711 |                                |   | 4,266 |  |      | 13,736 |  |   | 12,308
|                                                    |  |                                 |       |                                |   |       |  |      |        |  |   |       
|INTEREST EXPENSE                                    |  |                                 |       |                                |   |       |  |      |        |  |   |       
|Interest on deposits                                |  |                                 | 1,910 |                                |   | 1,943 |  |      | 5,989  |  |   | 5,635 
|Interest on short term borrowings                   |  |                                 | 41    |                                |   | 93    |  |      | 135    |  |   | 267   
|Interest on long term borrowings                    |  |                                 | 337   |                                |   | 341   |  |      | 1,021  |  |   | 989   
|                                                    |  |                                 |       |                                |   |       |  |      |        |  |   |       
|TOTAL INTEREST EXPENSE                              |  |                                 | 2,288 |                                |   | 2,377 |  |      | 7,145  |  |   | 6,891 
|                                                    |  |                                 |       |                                |   |       |  |      |        |  |   |       
|NET INTEREST INCOME                                 |  |                                 | 2,423 |                                |   | 1,889 |  |      | 6,591  |  |   | 5,417 
|Provision for loan losses                           |  |                                 | 93    |                                |   | 30    |  |      | 168    |  |   | 30    
|                                                    |  |                                 |       |                                |   |       |  |      |        |  |   |       
|NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES |  |                                 | 2,330 |                                |   | 1,859 |  |      | 6,423  |  |   | 5,387 
|                                                    |  |                                 |       |                               
|NON-INTEREST INCOME                                 |  |                                 |       |                                |   |       |  |      |        |  |   |       
|Service charges on deposits                         |  |                                 | 227   |                                |   | 182   |  |      | 640    |  |   | 547   
|Fiduciary activities                                |  |                                 | 99    |                                |   | 110   |  |      | 299    |  |   | 285   
|Earnings on investment in life insurance            |  |                                 | 52    |                                |   | 51    |  |      | 155    |  |   | 154   
|ATM card fees                                       |  |                                 | 145   |                                |   | 131   |  |      | 411    |  |   | 368   
|Realized gain on sale of foreclosed real estate     |  |                                 |      |                                |   |      |  |      |       |  |   | 21    
|Other income                                        |  |                                 | 60    |                                |   | 66    |  |      | 179    |  |   | 173   
|                                                    |  |                                 |       |                                |   |       |  |      |        |  |   |       
|TOTAL OTHER INCOME                                  |  |                                 | 583   |                                |   | 540   |  |      | 1,684  |  |   | 1,548 
|                                                    |  |                                 |       |                                |   |       |  |      |        |  |   |       
|NON-INTEREST EXPENSES                               |  |                                 |       |                                |   |       |  |      |        |  |   |       
|Employee compensation & benefits                    |  |                                 | 1,037 |                                |   | 840   |  |      | 2,942  |  |   | 2,539 
|Net occupancy & equipment                           |  |                                 | 289   |                                |   | 293   |  |      | 867    |  |   | 869   
|ATM expense                                         |  |                                 | 94    |                                |   | 11    |  |      | 271    |  |   | 182   
|Professional & regulatory fees                      |  |                                 | 51    |                                |   | 80    |  |      | 233    |  |   | 266   
|Director & advisory boards compensation             |  |                                 | 94    |                                |   | 72    |  |      | 268    |  |   | 220   
|Supplies & postage                                  |  |                                 | 68    |                                |   | 79    |  |      | 207    |  |   | 202   
|Other non-interest expenses                         |  |                                 | 341   |                                |   | 251   |  |      | 973    |  |   | 765   
|                                                    |  |                                 |       |                                |   |       |  |      |        |  |   |       
|TOTAL NON-INTEREST EXPENSES                         |  |                                 | 1,974 |                                |   | 1,626 |  |      | 5,761  |  |   | 5,043 
|                                                    |  |                                 |       |                                |   |       |  |      |        |  |   |       
|Income before income taxes                          |  |                                 | 939   |                                |   | 773   |  |      | 2,346  |  |   | 1,892 
|Income tax expense                                  |  |                                 | 220   |                                |   | 170   |  |      | 512    |  |   | 386   
|                                                    |  |                                 |       |                                |   |       |  |      |        |  |   |       
|NET INCOME                                          |  | $                               | 719   |                                | $ | 603   |  | $    | 1,834  |  | $ | 1,506 
|                                                    |  |                                 |       |                                |   |       |  |      |        |  |   |       
|Basic earnings per share                            |  | $                               | 0.51  |                                | $ | 0.43  |  | $    | 1.31   |  | $ | 1.08  
|                                                    |  |                                 |       |                                |   |       |  |      |        |  |   |       
|Dividends per share                                 |  | $                               | 0.135 |                                | $ | 0.120 |  | $    | 0.385  |  | $ | 0.350 
|                                                    |  |                                 |       |                                |   |       |  |      |        |  |   |       

See accompanying notes.



3



---

|Item 1. | Financial Statements, continued
|------- | -------------------------------





FIRST COMMUNITY FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY

For the Nine Months
Ended September 30, 2008 and 2007

(Unaudited)

(Dollars In Thousands, Except Per Share Data)



|                                                                                      |  |              |       |                             |   |                  |  |   |               |   |  |                                            |     |   |       |   |      |   |  |   |        |  
|------------------------------------------------------------------------------------- |  | ------------ | ----- | --------------------------- | - | ---------------- |  | - | ------------- | - |  | ------------------------------------------ | --- | - | ----- | - | ---- | - |  | - | ------ | -
|                                                                                      |  | Common Stock |       | CapitalIn ExcessofPar Value |   | RetainedEarnings |  |   | TreasuryStock |   |  | AccumulatedOtherComprehensiveIncome (Loss) |     |   | Total |  
|Balance, December 31, 2006                                                            |  | $            | 7,000 |                             | $ | 245              |  | $ | 12,634        |   |  | $                                          | 0   |   |       | $ | (205 | ) |  | $ | 19,674 |  
|                                                                                      |  |              |       |                             |   |                  |  |   |               |   |  |                                            |     |   |       |   |      |   |  |   |        |  
|Comprehensive income:                                                                 |  |              |       |                             |   |                  |  |   |               |   |  |                                            |     |   |       |   |      |   |  |   |        |  
|Net income                                                                            |  |              |       |                             |   |                  |  |   | 1,506         |   |  |                                            |     |   |       |   |      |   |  |   | 1,506  |  
|Net change in unrealized gains on securities available for sale, net of taxes of $109 |  |              |       |                             |   |                  |  |   |               |   |  |                                            |     |   |       |   | 207  |   |  |   | 207    |  
|                                                                                      |  |              |       |                             |   |                  |  |   |               |   |  |                                            |     |   |       |   |      |   |  |   |        |  
|Total comprehensive income                                                            |  |              |       |                             |   |                  |  |   |               |   |  |                                            |     |   |       |   |      |   |  |   | 1,713  |  
|                                                                                      |  |              |       |                             |   |                  |  |   |               |   |  |                                            |     |   |       |   |      |   |  |   |        |  
|Cash dividends, $0.35 per share                                                       |  |              |       |                             |   |                  |  |   | (490          | ) |  |                                            |     |   |       |   |      |   |  |   | (490   | )
|                                                                                      |  |              |       |                             |   |                  |  |   |               |   |  |                                            |     |   |       |   |      |   |  |   |        |  
|Balance, September 30, 2007                                                           |  | $            | 7,000 |                             | $ | 245              |  | $ | 13,650        |   |  | $                                          | 0   |   |       | $ | 2    |   |  | $ | 20,897 |  
|                                                                                      |  |              |       |                             |   |                  |  |   |               |   |  |                                            |     |   |       |   |      |   |  |   |        |  
|Balance, December 31, 2007                                                            |  | $            | 7,000 |                             | $ | 245              |  | $ | 13,993        |   |  | $                                          | 0   |   |       | $ | 295  |   |  | $ | 21,533 |  
|                                                                                      |  |              |       |                             |   |                  |  |   |               |   |  |                                            |     |   |       |   |      |   |  |   |        |  
|Cumulative effect adjustment upon change in accounting principle                      |  |              |       |                             |   |                  |  |   | (195          | ) |  |                                            |     |   |       |   |      |   |  |   | (195   | )
|Comprehensive income:                                                                 |  |              |       |                             |   |                  |  |   |               |   |  |                                            |     |   |       |   |      |   |  |   |        |  
|Net income                                                                            |  |              |       |                             |   |                  |  |   | 1,834         |   |  |                                            |     |   |       |   |      |   |  |   | 1,834  |  
|Net change in unrealized gains on securities available for sale, net of taxes of $30  |  |              |       |                             |   |                  |  |   |               |   |  |                                            |     |   |       |   | 61   |   |  |   | 61     |  
|                                                                                      |  |              |       |                             |   |                  |  |   |               |   |  |                                            |     |   |       |   |      |   |  |   |        |  
|Total comprehensive income                                                            |  |              |       |                             |   |                  |  |   |               |   |  |                                            |     |   |       |   |      |   |  |   | 1,895  |  
|                                                                                      |  |              |       |                             |   |                  |  |   |               |   |  |                                            |     |   |       |   |      |   |  |   |        |  
|Issuance of stock in connection with dividend reinvestment plan 1,348 shares          |  |              | 7     |                             |   | 34               |  |   |               |   |  |                                            |     |   |       |   |      |   |  |   | 41     |  
|Cash dividends, $0.385 per share                                                      |  |              |       |                             |   |                  |  |   | (539          | ) |  |                                            |     |   |       |   |      |   |  |   | (539   | )
|Treasury stock acquired - 1,000 shares                                                |  |              |       |                             |   |                  |  |   |               |   |  |                                            | (31 | ) |       |   |      |   |  |   | (31    | )
|                                                                                      |  |              |       |                             |   |                  |  |   |               |   |  |                                            |     |   |       |   |      |   |  |   |        |  
|Balance, September 30, 2008                                                           |  | $            | 7,007 |                             | $ | 279              |  | $ | 15,093        |   |  | $                                          | (31 | ) |       | $ | 356  |   |  | $ | 22,704 |  
|                                                                                      |  |              |       |                             |   |                  |  |   |               |   |  |                                            |     |   |       |   |      |   |  |   |        |  

See accompanying notes.



4



---

PART I  FINANCIAL INFORMATION, CONTINUED



|Item 1. | Financial Statements, continued
|------- | -------------------------------





FIRST COMMUNITY FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars In Thousands)



|                                                                                  |  |                                |         |   |      |   |         |  
|--------------------------------------------------------------------------------- |  | ------------------------------ | ------- | - | ---- | - | ------- | -
|                                                                                  |  | Nine Months EndedSeptember 30, |        
|                                                                                  |  | 2008                           |         |   | 2007 |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                              |  |                                |         |   |      |   |         |  
|Net income                                                                        |  | $                              | 1,834   |   |      | $ | 1,506   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                                |         |   |      |   |         |  
|Provision for loan losses                                                         |  |                                | 168     |   |      |   | 30      |  
|Depreciation and amortization                                                     |  |                                | 409     |   |      |   | 424     |  
|Net accretion of securities premium                                               |  |                                | (203    | ) |      |   | (45     | )
|Net realized gain on sale of foreclosed real estate                               |  |                                |        |   |      |   | (21     | )
|Earnings on investment in life insurance                                          |  |                                | (155    | ) |      |   | (154    | )
|Increase in other assets                                                          |  |                                | (811    | ) |      |   | (865    | )
|Increase in other liabilities                                                     |  |                                | 284     |   |      |   | 454     |  
|                                                                                  |  |                                |         |   |      |   |         |  
|Net cash provided by operating activities                                         |  |                                | 1,526   |   |      |   | 1,329   |  
|                                                                                  |  |                                |         |   |      |   |         |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                              |  |                                |         |   |      |   |         |  
|Securities held to maturity:                                                      |  |                                |         |   |      |   |         |  
|Maturities, calls and principal repayments                                        |  |                                | 2,371   |   |      |   | 3,888   |  
|Purchases                                                                         |  |                                | (3,864  | ) |      |   | (3,883  | )
|Securities available for sale:                                                    |  |                                |         |   |      |   |         |  
|Maturities, calls and principal repayments                                        |  |                                | 14,809  |   |      |   | 11,949  |  
|Purchases                                                                         |  |                                | (20,586 | ) |      |   | (22,112 | )
|Proceeds from sales                                                               |  |                                |        |   |      |   | 26      |  
|Net increase in loans receivable                                                  |  |                                | (19,558 | ) |      |   | (11,608 | )
|Net decrease (increase) in restricted investment in bank stocks                   |  |                                | (636    | ) |      |   | 151     |  
|Purchases of premises and equipment                                               |  |                                | (212    | ) |      |   | (94     | )
|Proceeds from life insurance                                                      |  |                                |        |   |      |   | 71      |  
|Net maturities of interest bearing time deposits                                  |  |                                |        |   |      |   | 594     |  
|Proceeds from sale of foreclosed real estate                                      |  |                                |        |   |      |   | 284     |  
|                                                                                  |  |                                |         |   |      |   |         |  
|Net cash used in investing activities                                             |  |                                | (27,676 | ) |      |   | (20,734 | )
|                                                                                  |  |                                |         |   |      |   |         |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                              |  |                                |         |   |      |   |         |  
|Net increase in non-interest bearing demand and savings deposits                  |  |                                | 2,334   |   |      |   | 1,989   |  
|Net increase in time deposits                                                     |  |                                | 12,906  |   |      |   | 17,309  |  
|Net increase in short-term borrowings                                             |  |                                | 5,545   |   |      |   | 1,737   |  
|Proceeds from long-term borrowings                                                |  |                                | 5,000   |   |      |   | 10,000  |  
|Repayment of long-term borrowings                                                 |  |                                | (1,000  | ) |      |   | (14,000 | )
|Proceeds from dividend reinvestment plan                                          |  |                                | 41      |   |      |   |        |  
|Acquisition of treasury stock                                                     |  |                                | (31     | ) |      |   |        |  
|Dividends paid                                                                    |  |                                | (539    | ) |      |   | (490    | )
|                                                                                  |  |                                |         |   |      |   |         |  
|Net cash provided by financing activities                                         |  |                                | 24,256  |   |      |   | 16,545  |  
|                                                                                  |  |                                |         |   |      |   |         |  
|Net decrease in cash and cash equivalents                                         |  |                                | (1,894  | ) |      |   | (2,860  | )
|Cash and cash equivalents:                                                        |  |                                |         |   |      |   |         |  
|Beginning of year                                                                 |  |                                | 10,082  |   |      |   | 12,432  |  
|                                                                                  |  |                                |         |   |      |   |         |  
|End of period                                                                     |  | $                              | 8,188   |   |      | $ | 9,572   |  
|                                                                                  |  |                                |         |   |      |   |         |  
|SUPPLEMENTAL DISCLOSURES:                                                         |  |                                |         |   |      |   |         |  
|Cash payments for interest                                                        |  | $                              | 7,176   |   |      | $ | 6,867   |  
|                                                                                  |  |                                |         |   |      |   |         |  
|Cash payments for income taxes                                                    |  | $                              | 582     |   |      | $ | 424     |  
|                                                                                  |  |                                |         |   |      |   |         |  
|NON CASH INVESTING:                                                               |  |                                |         |   |      |   |         |  
|Transfer of loans to foreclosed real estate                                       |  | $                              |        |   |      | $ | 8       |  
|                                                                                  |  |                                |         |   |      |   |         |  

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)

September 30, 2008

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 nine months ended September 30, 2008, are not necessarily indicative of the results that may be expected for the year ending December 31, 2008.

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, 2007, included in the Corporations Form 10-K filed with the Securities and Exchange Commission on March 5, 2008.

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

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 EndedSeptember 30, |     |   | Nine Months EndedSeptember 30, |  
|                                                        |  | 2008                            |     |   | 2007                           |   |      | 2008 |  |   | 2007 |  
|                                                        |  | (Dollars in Thousands)          |    
|Unrealized holding gains arising during the period      |  | $                               | 105 |   |                                | $ | 475  |      |  | $ | 91   |   |  | $ | 316  |  
|Income tax effect                                       |  |                                 | (36 | ) |                                |   | (160 | )    |  |   | (30  | ) |  |   | (109 | )
|                                                        |  |                                 |     |   |                                |   |      |      |  |   |      |   |  |   |      |  
|Change in accumulated other comprehensive income (loss) |  | $                               | 69  |   |                                | $ | 315  |      |  | $ | 61   |   |  | $ | 207  |  
|                                                        |  |                                 |     |   |                                |   |      |      |  |   |      |   |  |   |      |  

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. The weighted average number of common shares
outstanding were 1,399,912 for the nine months ended September 30, 2008 and 1,399,718 for the three months ended September 30, 2008. For both the three and nine months ended September 30, 2007 the weighted average number of shares
outstanding were 1,400,000.

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 $231,000 of standby letters of credit as of September 30, 2008. 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 September 30, 2008 for guarantees under standby letters of credit issued is not material.

Note F  Fair Value Measurements

In September 2006, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 157, Fair Value Measurements(SFAS
157), which defines fair value, establishes a framework for measuring fair value under GAAP, and expands disclosures about fair value measurements. SFAS 157 applies to other accounting pronouncements that require or permit fair value
measurements. The new guidance is effective for the Corporation on January 1, 2008, including interim financial statements, with the exception of non-financial



7



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assets and non-financial liabilities that are not recognized or disclosed at fair value on a recurring basis. In February 2008, the FASB issued Staff
Position 157-2, Effective Date of FASB Statement No. 157, that permits a one-year deferral in applying the measurement provisions of SFAS 157 to non-financial assets and non-financial liabilities. The impact of the adoption of the
new standard was not material to the Corporations results of operations or financial condition.

In October 2008, the FASB issued FSP
SFAS No. 157-3, Determining the Fair Value of a Financial Asset When The Market for That Asset Is Not Active(FSP 157-3), to clarify the application of the provisions of SFAS 157 in an inactive market and how
an entity would determine fair value in an inactive market. FSP 157-3 is effective immediately and applies to our September 30, 2008 financial statements. The application of the provisions of FSP 157-3 did not materially affect our
results of operations or financial condition as of and for the periods ended September 30, 2008.

The primary effect of SFAS 157 on the Corporation
was to expand the required disclosures pertaining to the methods used to determine fair values.

SFAS 157 establishes a fair value hierarchy about
assumptions used to measure fair values and clarifies assumptions about risk and the effect of a restriction on the sale or use of an asset. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets
or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under SFAS 157 are as follows:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2: Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the
full term of the asset or liability.

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair
value measurement and unobservable (i.e. supported with little or no market activity).

An asset or liabilitys level within the fair value hierarchy
is based on the lowest level of input that is significant to the fair value measurement.



8



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For financial assets measured at fair value on a recurring basis, the fair value measurements by level within the fair
value hierarchy used at September 30, 2008 are as follows (in thousands):



|                              |  |                   |        |                                                            |   |                                            |  |                                        |        |  |   |    
|----------------------------- |  | ----------------- | ------ | ---------------------------------------------------------- | - | ------------------------------------------ |  | -------------------------------------- | ------ |  | - | ---
|Description                   |  | September 30,2008 |        | (Level 1)Quoted Prices inActive Marketsfor IdenticalAssets |   | (Level 2)Significant OtherObservableInputs |  | (Level 3)SignificantUnobservableInputs
|Securities available for sale |  | $                 | 69,194 |                                                            | $ | 525                                        |  | $                                      | 68,244 |  | $ | 425
|                              |  |                   |        |                                                            |   |                                            |  |                                        |        |  |   |    

The Corporation used the following methods and assumptions to estimate fair value:

Securities: The fair value of securities available for sale are determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1), or
matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities relationship to
other benchmark quoted prices. For certain securities which are not traded in active markets or are subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or non-transferability, and such adjustments are generally based
on available market evidence (Level 3). The Corporation has one level 3 security, which is a local, closely held, community bank equity security with limited trading activity.

Assets measured at fair value on a non-recurring basis are summarized below:



|               |  |                   |     |                                                            |   |                                            |  |                                        |   |  |   |    
|-------------- |  | ----------------- | --- | ---------------------------------------------------------- | - | ------------------------------------------ |  | -------------------------------------- | - |  | - | ---
|Description    |  | September 30,2008 |     | (Level 1)Quoted Prices inActive Marketsfor IdenticalAssets |   | (Level 2)Significant OtherObservableInputs |  | (Level 3)SignificantUnobservableInputs
|Impaired loans |  | $                 | 364 |                                                            | $ |                                           |  | $                                      |  |  | $ | 364
|               |  |                   |     |                                                            |   |                                            |  |                                        |   |  |   |    

Impaired loans, which are measured for impairment using the fair value of the collateral for collateral-dependent
loans, had a carrying amount of $394,000, with a valuation allowance of $30,000, resulting in additional provision for loan losses of $0 for the period.



9



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The table below presents a reconciliation and income statement of gains and losses for available for sale securities
measured at fair value on a recurring basis using significant unobservable inputs (level 3):



|                                                            |  |                                      |     |                                     |   |    
|----------------------------------------------------------- |  | ------------------------------------ | --- | ----------------------------------- | - | ---
|                                                            |  | Three Months EndedSeptember 30,
2008 |     | Nine Months EndedSeptember 30,
2008
|Fair Value, beginning of period                             |  | $                                    | 425 |                                     | $ | 425
|Total gains (losses) included in earnings                   |  |                                      | 0   |                                     |   | 0  
|Total gains (losses) included in other comprehensive income |  |                                      | 0   |                                     |   | 0  
|Purchases, issuances, and settlements                       |  |                                      | 0   |                                     |   | 0  
|Transfers in and/or out of Level 3                          |  |                                      | 0   |                                     |   | 0  
|                                                            |  |                                      |     |                                     |   |    
|Fair Value, end of period                                   |  | $                                    | 425 |                                     | $ | 425
|                                                            |  |                                      |     |                                     |   |    

Note G  Shareholders Equity

The Corporation has implemented a dividend reinvestment plan during 2008. All holders of twenty-five shares or more are eligible to participate in the plan in which reinvested dividends and voluntary cash
contributions of up to $5,000 per quarter may be reinvested in additional common shares at the current fair market value as of the investment date. The Corporation had initially reserved 100,000 shares to be issued in connection with the plan. To
date, 1,348 shares have been issued.

Note H  New and Recently Adopted Accounting Pronouncements

In September 2006, the FASBs Emerging Issues Task Force (EITF) issued EITF Issue No. 06-4, Accounting for Deferred Compensation and Postretirement
Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements (EITF 06-4). EITF 06-4 requires the recognition of a liability related to the postretirement benefits covered by an endorsement split-dollar life insurance
arrangement. The consensus highlights that the employer (who is also the policyholder) has a liability for the benefit it is providing to its employee. As such, if the policyholder has agreed to maintain the insurance policy in force for the
employees benefit during his or her retirement, then the liability recognized during the employees active service period should be based on the future cost of insurance to be incurred during the employees retirement. Alternatively,
if the policy holder has agreed to provide the employee with a death benefit, then the liability for the future death benefit should be recognized by following the guidance in SFAS No. 106 or Accounting Principles Board (APB) Opinion
No. 12, as appropriate. For transition, an entity can choose to apply the guidance using either of the following approaches: (a) a change in accounting principle through retrospective application to all periods presented or (b)



10



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a change in accounting principle through a cumulative-effect adjustment to the balance in retained earnings at the beginning of the year of adoption. The
Corporation adopted EITF 06-04 on January 1, 2008 as a change in accounting principle through a cumulative effect adjustment of retained earnings of $195,000. The expense incurred in the nine months ended September 30, 2008 is not material
to the Corporations consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities-Including an amendment of FASB Statement No. 115 (SFAS 159). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. Unrealized gains and
losses on items for which the fair value option has been elected will be recognized in earnings at each subsequent reporting date. SFAS 159 is effective for our Corporation on January 1, 2008. There was no impact on the consolidated financial
statements of the Corporation as a result of the adoption of SFAS No. 159 during the first six months of 2008 as the Corporation has not elected the fair value option for any eligible items, as defined in SFAS No. 159.

In March 2008, the FASB issued Statement No. 161, Disclosures about Derivative Instruments and Hedging Activitiesan amendment of FASB Statement
No. 133(SFAS 161). SFAS 161 requires entities that utilize derivative instruments to provide qualitative disclosures about their objectives and strategies for using such instruments, as well as any details of
credit-risk-related contingent features contained within derivatives. SFAS 161 also requires entities to disclose additional information about the amounts and location of derivatives located within the financial statements, how the provisions
of SFAS 133 have been applied, and the impact that hedges have on an entitys financial position, financial performance, and cash flows. SFAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008,
with early application encouraged. The Corporation does not expect the adoption of the new pronouncement will have a material impact on its consolidated financial statements.

In February 2008, the FASB issued a FASB Staff Position (FSP) FAS 140-3, Accounting for Transfers of Financial Assets and Repurchase Financing Transactions. This FSP addresses the issue of whether or not
these transactions should be viewed as two separate transactions or as one linked transaction. The FSP includes a rebuttable presumption that presumes linkage of the two transactions unless the presumption can be overcome by
meeting certain criteria. The FSP will be effective for the Corporation beginning January 1, 2009 and will apply only to original transfers made after that date; early adoption will not be allowed. The Corporation does not expect the adoption
of the new pronouncement will have a material impact on its consolidated financial statements.



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In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles. This
Statement identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements. This Statement is effective 60 days following the SECs approval of the Public Company
Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. The Corporation is currently evaluating the potential impact the new pronouncement
will have on its consolidated financial statements.

In September 2008, the FASB ratified EITF Issue No. 08-5, Issuers Accounting for
Liabilities Measured at Fair Value With a Third-Party Credit Enhancement (EITF 08-5). EITF 08-5 provides guidance for measuring liabilities issued with an attached third-party credit enhancement (such as a guarantee). It clarifies that the
issuer of a liability with a third-party credit enhancement should not include the effect of the credit enhancement in the fair value measurement of the liability. EITF 08-5 is effective for the first reporting period beginning after
December 15, 2008. The Company is currently assessing the impact of EITF 08-5 on its consolidated financial position and results of operations.



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



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Critical Accounting Policies

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 included in form 10-K for the year ended December 31, 2007). The Corporation believes that of its significant accounting estimates, the allowance for loan losses and valuation of its securities may involve a higher degree
of judgement and complexity.

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.

Declines in the fair value of securities 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. No securities were deemed to be
other than temporarily impaired as of September 30, 2008.

Financial Condition

Total assets of the Corporation increased $26,435,000 or 8.7% during the first nine months of 2008. Net loans increased $19,390,000 or 10.1% and securities increased by $7,564,000 or 8.9% from December 31, 2007
to September 30, 2008. The loan growth was principally in the Banks residential and commercial real estate loan portfolios.

Total deposits
increased by $15,240,000 or 6.2% from December 31, 2007, short-term borrowings increased $5,545,000 or 53.7%, and long-term borrowings increased by $4,000,000 or 22.2% during the same time period. The growth in deposits can be attributed to the
Corporations continuing business development endeavors as well as depositors search for a safe and stable return in light of the instability in the financial markets over the past year.



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Results of Operations

Net income for the nine months ending September 30, 2008 was $1,834,000 or $1.31 per share compared to $1,506,000 or $1.08 per share for the same period in 2007. Annualized return on average equity was 11.15% for the first nine months
of 2008 and 10.02% for the same period in 2007. Annualized return on average assets was 0.77% for the first nine months of 2008 and 0.71% for the same period in 2007.

Net income for the quarter ending September 30, 2008 was $719,000 or $0.51 per share compared to $603,000 or $0.43 per share for the same period in 2007. Annualized return on average equity was 12.89% for the
third quarter of 2008 and 11.75% for the same period in 2007. Annualized return on average assets for the third quarter was 0.89% compared to 0.82% during the third quarter of 2007.

Net interest income for the first nine months of 2008 increased by $1,174,000 or 21.7% compared to the same period in 2007. This increase is primarily a result of increased volume of interest earning assets as well as
a decrease in the cost of interest bearing liabilities of 0.28%, offset by a slight decrease in the yield on earning assets of 0.03%. For the first nine months of 2008, the net interest margin on a fully tax equivalent (FTE) basis was 3.15% compared
to 2.92% for the same period in 2007. 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 increase in the net interest margin was the decrease in the cost of funds of 0.26% from 3.49% during the first nine months of 2007 to 3.23% during the same time period in 2008.

Net interest income for the quarter ended September 30, 2008 increased by $534,000 compared to the same period in 2007. Net interest margin for the quarter ended
September 30, 2008 was 3.37% compared to 2.94% during the same period in 2007. The decrease in the yield on earning assets of 0.04% from 6.42% during the third quarter of 2007 to 6.38% during the same period in 2008 was offset by the decrease
in the cost of funds of 0.47% from 3.48% during the third quarter of 2007 to 3.01% during the same time period in 2008.

Provisions for loan losses are
charged to income to bring the allowance for loan losses to a level deemed appropriate by management. The Corporation recorded a $168,000 provision for loan losses for the first nine months of 2008 compared to a $30,000 provision during the same
time period in 2007. The increase in the provision in 2008 compared to 2007 is a result of the growth experienced in the loan portfolio, combined with a slight increase in qualitative reserve factors in light of the slight downturn in local economic
and market



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conditions. As a percentage of loans, the allowance for loan losses was 0.68% at September 30, 2008, compared to 0.65% at year-end 2007 and 0.66% at
September 30, 2007. Impaired loans were $394,000 at September 30, 2008 compared to $1,812,000 at December 31, 2007. Management feels impaired loans are adequately collateralized and loss is not anticipated. 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 nine months of 2008 increased by $136,000 or 8.8% compared to the same period in 2007. The increase in deposit accounts led to service charges on deposit accounts increasing by $93,000 and increased activity
led to an increase in ATM fees of $43,000 during the first nine months of 2008 compared to the same period in 2007.

Non-interest income for the quarter
ending September 30, 2008 was $583,000 compared to $540,000 in 2007. Increases in service charges on deposit accounts and ATM fees of $45,000 and $14,000 respectively, were offset by an $11,000 decrease in income from fiduciary activities.

Total non-interest expense increased in the first nine months of 2008 by $718,000 or 14.2% compared to the first nine months of 2007. Employee
compensation and benefits increased $403,000 in the first 9 months of 2008 compared to 2007. The increase in salaries and wages are the result of merit increases as well as additional staff positions added to support recent loan and deposit growth.
ATM expense increased $89,000 primarily because of a refund of prior expenses in 2007, with no similar refund received in 2008. Director and advisory board compensation increased $48,000, supplies and postage increased $5,000, and other operating
expenses increased $208,000. The increase in other operating expenses is primarily a result of increases of $23,000 in loan collection costs, $39,000 in training costs, $29,000 in shares tax expense, and $58,000 in FDIC and OCC expenses. As the
Corporation continues to add new loan and deposit accounts, as well as new 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.



15



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During the quarter ending September 30, 2008, total non-interest expense increased $348,000 compared to the third
quarter of 2007. The primary reasons for this increase are the increases in employee compensation and benefits of $197,000, an ATM expense increase of $83,000, as explained above, director and advisory board compensation of $22,000, and other
operating expenses of $90,000. These increases were offset by a decrease of $29,000 in professional fees and a decrease of $11,000 in supplies and postage.

Income tax expense was $512,000 for the nine month time period ending September 30, 2008 compared to $386,000 for the same time period in 2007. Income tax expense as a percentage of income before income taxes was 21.8% for the period
compared to 20.4% for 2007. The reason for the increase in the effective tax rate is tax-exempt income as a percentage of income before taxes was lower in 2008 than 2007. 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 $260,286,000 in deposits at September 30, 2008, which increased
$15,240,000 over total deposits of $245,046,000 at December 31, 2007. Other sources of liquidity at September 30, 2008 are available from the following: (1) investments in interest-bearing deposits with banks of $413,000,
(2) securities and time certificates of deposit maturing in one year or less, which totaled $1,303,000, 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 $22,704,000 as of September 30, 2008, representing a $1,171,000 increase from December 31, 2007. The growth in capital was a
result of net earnings retention of $1,295,000, an increase in the accumulated other comprehensive income of $61,000 and an increase in common stock and surplus of $41,000 as a result of the initiation of our dividend reinvestment plan. This
increase was partially offset by a decrease of $195,000 in retained earnings reflecting the cumulative effect adjustment upon adoption of EITF 06-04 and the purchase of treasury stock of $31,000. The other comprehensive income is due to the change
in value of the Corporations available for sale securities.



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At September 30, 2008, the Bank had a leverage ratio of 8.28%, a Tier I capital to risk-based assets ratio of 14.42%
and a total capital to risk-based assets ratio of 15.20%. 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 Disclosure about Market Risk
|------- | ---------------------------------------------------------

There
are no material changes in the Corporations interest rate risk exposure since December 31, 2007. Please refer to the Annual Report on Form 10-K of First Community Financial Corporation, filed with the Securities and Exchange Commission on
March 5, 2008.



|Item 4T. | 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
President (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer) have evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2008. Based upon that evaluation, our President and
Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting management 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 September 30, 2008, 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 1A. | Risk Factors
|-------- | ------------

There are no material changes in the
Corporations risk factors since December 31, 2007. Please refer to the Annual Report on Form 10-K of First Community Financial Corporation, filed with the Securities and Exchange Commission on March 5, 2008.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------



| | (a) | On January 8, 2008, the Board of Directors of the Company authorized a stock repurchase program pursuant to which the Company is authorized to purchase up to 7.1% of its
outstanding shares or 100,000 shares. Share repurchases will be made from time to time and may be effected through open market purchases, block trades, or in privately negotiated transactions.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | (b) | The table below sets forth the information with respect to purchases made by or on behalf of First Community Financial Corporation or any affiliated purchaser as defined in Rule
240-10b-18(a) (3) under Regulation S-K of common stock during the quarter ended September 30, 2008.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                 |  |                               |  |                          |        |                                                                               |       |                                                                            |       
|-------------------------------- |  | ----------------------------- |  | ------------------------ | ------ | ----------------------------------------------------------------------------- | ----- | -------------------------------------------------------------------------- | ------
|                                 |  | TotalNumberof SharesPurchased |  | AveragePricePaidPerShare |        | Total Number ofShares Purchased as Partof a Publicly AnnouncedPlan or Program |       | Maximum Number of SharesThat May Yet be PurchasedUnder the
Plan or Program
|July 1 through July 31           |  | 1,000                         |  | $                        | 30.905 |                                                                               | 1,000 |                                                                            | 99,000
|August 1 through August 31       |  | 0                             |  | $                        | 0.00   |                                                                               | 0     |                                                                            | 99,000
|September 1 through September 31 |  | 0                             |  | $                        | 0.00   |                                                                               | 0     |                                                                            | 99,000



|Item 3. | Defaults Upon Senior Securities
|------- | -------------------------------

Not Applicable



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

Not Applicable



|Item 5. | Other Information
|------- | -----------------

Not Applicable



|Item 6. | Exhibits
|------- | --------

(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.



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|     |  |                                                                                                                                                                 
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
|31.1 |  | Certification of Principal Executive Officer of First Community Financial Corporation Pursuant to Securities and Exchange Commission Rule 13a-14(a) / 15d-14(a).
|     | 
|31.2 |  | Certification of Principal Financial Officer of First Community Financial Corporation Pursuant to Securities and Exchange Commission Rule 13a-14(a) / 15d-14(a).
|     | 
|32.1 |  | Certification of Principal Executive Officer of First Community Financial Corporation Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                
|     | 
|32.2 |  | Certification of Principal Financial Officer of First Community Financial Corporation Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                



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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: November 14, 2008 |  | BY:                                   |  | /s/ Jody D. Graybill         
|                        |  |                                       |  | Jody D. Graybill             
|                        |  |                                       |  | President                    
|                        |  |                                       |  | (Principal Executive Officer)
|                        |  |                                      
|Date: November 14, 2008 |  | BY:                                   |  | /s/ Richard R. Leitzel       
|                        |  |                                       |  | Richard R. Leitzel           
|                        |  |                                       |  | Vice President and           
|                        |  |                                       |  | Chief Financial Officer      
|                        |  |                                       |  | (Principal Financial Officer)



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